Estimating costs and benefits on crop production: a simplified guide for small holder farmers in Ethiopia

With changes in the living standard of the rural population, no single household is able toproduce everything it needs from its own farm. That is why marketing has become animportant component of farm management. Farmers need to market their surplus produceand buy what they want and need for improving their lives. In doing so, they want to knowwhich crop will bring the most profit or which will take less of their valuable resources butstill provide good return.A number of factors influence what decisions smallholder farmers make about theirproduction. Household goals and objectives are in the forefront. A typical decision thefarmer must make is whether to produce for home consumption or for the market, orboth. Fluctuations and seasonal variability of input and output prices affect farm profitability.It is therefore difficult for the farmer to predict produce prices. The uncertainty of weatheralways makes farming a business of risk. Therefore, the farmer must use inputs judicially,time farm activities properly and manage the farm efficiently. Most farmers have only alimited amount of such resources as capital, land, labour and technology. Whether theseproduction factors are well used or not will likely determine farm profitability

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