AN ORIENTATION TO THE OKLAHOMA FARM MANAGEMENT GAME Simulations, Games and Experiential Learning Techniques:, Volume 1, 1974 100 AN ORIENTATION TO THE OKLAHOMA FARM MANAGEMENT GAME Odell L. Walker, Oklahoma State University Vernon R. Eidman, Oklahoma State University The general objectives of farm management instruction are to teach the student (1) to integrate concepts and information from the biological, physical and social sciences in making decisions and (2) to apply modern decision-making procedures to the problems of a farm business. Evolvement of large- scale, business-oriented farm firms has required emphasis on all managerial functions, but particularly planning, implementation and control. Introduction of gaming has increased opportunities for providing students experience in implementation and control, as well as planning. The farm management profession emphasizes the application of the marginal theory of the firm to decision making on farms [2]. Thus, much educational emphasis has been on means of analysis to determine “whether additional revenue is greater than additional costs” for alternative decision choices. Although the term “expected” revenue and costs is used, it is difficult to fully convey the uncertain nature of the environment in which farm management decisions are made. Gaming provides an opportunity to practice decision making in an uncertain setting more like that the eventual farmer- decision maker must face. The risks and uncertainties featured in the Oklahoma Farm Management Game [3] differ from those prominent in non-farm business games. The basic kinds of uncertainty in either decision setting could include (1) economic (e.g. prices), (2) technical (e.g. variation in production coefficients), (3) technological, (4) social (e.g. laws and regulations) and (5) human vagaries. Most business games stress competitive economic situations affecting price, along with some other aspects of change. The farm firm represents an atomistic economic situation. Prices received and paid exhibit seasonal, cyclical, secular and random variation due to a multitude of local and external conditions. Technical variation can be reflected in crop yields, which change from year to year with climatic and other natural conditions. For example, in the geographic area for the Oklahoma Game, dryland wheat yields vary from 0 to 40 bushels and average 15 bushels per acre. Obsolescence of machinery is an example of a technological risk farmers face. Since the 1930’s agriculture has had a wide range of farm programs affecting land use, prices and product sales. A change in program regulations sometimes transforms a cash grain farm into a livestock farm from one year to the next. Or, the value of land assets can be drastically affected by a stroke of the legislative pen. Thus, the “social” sector is a major source of uncertainty and managerial stress in farming. Finally, the typical farm firm has heavy reliance on family labor and is quickly affected by variation in family member status. Changes _________________ *professional Paper No. P-151, Oklahoma Agricultural Experiment Station. Simulations, Games and Experiential Learning Techniques:, Volume 1, 1974 101 in health, attitudes, goals, and family member relationships are not controllable or predictable. The same is true of actions of other individuals with whom the firm does business. It is clear that the Agriculture firm offers rich opportunities to those interested in gaming as a teaching technique. THE GAME SETTING The Oklahoma Farm Management Game assumes that the students are owner operators of a 1920 acre farm in the Oklahoma Panhandle. The farm is “inherited” with a $132,000 note and a .6 net worth ratio. Family labor is used but labor is also hired. Capital for operating and financing intermediate capital purchases (e.g. to replace machinery) can be borrowed at 10 percent per annum and long term capital costs 7 percent. Credit practices in the area are depicted to require a net worth ratio of not less than .35 and a land equity ratio of .4. The farm is bankrupt if short term losses cause those minimums to be reached. Family living expenses must average $8,000 per year and cannot receive an allowance of less than $6,000. Yields of the 7 crop alternatives are variable from year to year.1 Prices of crops are fixed, unless changed periodically by the game administrator. In contrast, technical relationships for livestock are not stochastic but prices vary with predetermined trends, cycles and seasonal variation and with constrained random shocks. No technological change is explicitly recognized in the game. Government programs are not changed between years and human uncertainty is not incorporated at this time. The financial situation on the farm is dynamic. Items in the machinery complement depreciate and are replaced automatically. Annual capital requirements vary with farming plans chosen. Frequently, the farmer experiences short term losses which must be financed by borrowing. Payments must be made on land and machinery according to normal credit arrangements. Part of the managerial responsibility is to handle financial affairs of the farm. GAME PLAY Two-person student teams take over operation of the “inherited” farm early in the semester, usually during the second hour of class time. The major role of the game in a senior level farm management course is to provide managerial experiences in applying concepts and using data developed in the course. The gaming experience serves as a reference point and provides illustrations for applying analytical techniques. For example, students use enterprise budgets, cash flow analysis and partial budgeting or linear programming in making decisions in the game farm. They implement 1 lnternally, the crop yields are randomly chosen from 30 sets of yields by means of a random number subroutine. Simulations, Games and Experiential Learning Techniques:, Volume 1, 1974 102 the decisions in a subsequent year of the farm’s operation. Analysis of the results and adjustments of later plans constitute the control phase of management. Student teams must evaluate the profitability of crop and livestock enterprises and develop a farm plan each year. The objective is to maximize income to owned resources, while assuring survival of the farm business in the face of uncertainty. The decision sheet (Table 1) submitted for each play of the game contains two kinds of decisions. First, the preceding year is closed out by making land and machinery payments and planning for family living for the next year. If land purchase is allowed as an alternative, the number of units of land purchased and the price are entered on the decision sheet. The land purchase alternative involves competition between teams in bidding for available land. Then, the crop and livestock plan for the succeeding year is recorded. In a normal sequence, students make decisions on Monday and receive results on Wednesday. Results of each year of game play are provided as illustrated by Tables 2, 3 and 4. Table 2 shows enterprise decisions, (the acreage of each crop and number of head of each type of livestock), prices, yields, sales and costs. The amount of annual capital, hay and hired labor required by the plan are also listed in Table 2. The annual summary of cash income and cash expenses is presented in the farm financial summary (Table 3). Receipts are distributed to expense items, interest and income tax and the cash balance available to pay land and machinery loans and start a new year is calculated. Table 4 contains balance sheet information and a record of decisions and transactions across years. It can be used for analysis of the firm’s performance and progress. GAME CRITIQUE Classroom experiences at Oklahoma State University over a six-year period suggest that the use of gaming as a central focus for the course has the following benefits: (1) Gaming motivates the students to learn techniques such as partial budgeting and linear programming because they have an immediate need for them. It also encourages students to use these concepts throughout the semester rather than only on the exercise(s) assigned. (2) The game farm is an invaluable source of class examples to clinch teaching objectives. The student need not wonder for ever what expected values and variances have to do with enterprise budgets and choosing crop and livestock enterprises. (3) Diversification, flexibility, liquidity, insurance, reserves, and “sure” enterprises do not remain abstract words to the students. They can identify use of these strategies and their effects on operation of the game farm. (4) Planning, implementation, and control can all receive meaningful emphasis. For example, the relationship between a planning tool, such as a partial budget, and a control tool, such as a profit and loss statement, becomes clear as the Simulations, Games and Experiential Learning Techniques:, Volume 1, 1974 103 Table 1 Agriculture Economics 4403 Farm Management Game Decision Team Number Year of Play Description of Ending Balance from Previous Year Ending Cash Balance (+ or -) (1) Payment on: Cow Loan (2) Machinery Loan (3) Land Loan (4) Total Payments (2+3+4) (5) Beginning Cash Balance for this (Calculated as (1)-(5)) Decisions for this Year’s Operation Living Allowance Land Purchased (No=0, Yes=1) Number of parcels purchased Purchase Price per acre Team Number 0 Crop Decisions (Acres) and Livestock Decisions (Head): Fallow Wheat Barley Grain Sorghum Small Grain Graze-out Sudan-Sorghum Graze Alfalfa Hay Team Number Sudan Hay Sudan Grazing (set-aside) Buy Cows, Sell all Calves, June Buy Cows, Sell all Steers, September Buy Stockers, November – March Buy Stockers, November – May Buy Stockers, November – May, Feedlot Buy Stockers, April – September Team Number Sell Cows, Sell all Calves, June Sell Cows, Sell Steers, September Sudan Hay, tons to be stored from next summer’s crop Alfalfa Hay, tons to be stored from next summer’s crop Explanation of Decisions (Briefly discuss why you made these decisions) Simulations, Games and Experiential Learning Techniques:, Volume 1, 1974 104 TABLE 2 FINANCIAL SUMMARY OF ENTERPRISE OPERATIONS FOR YEAR 6 TEAM 22 NO OF GROSS CASH COSTS ANNUAL WHEAT GRAIN 830.00 10.64 2.05 18103.95 5511.20 2755.60 GRAZING 830.00 0.20 12.50 2075.00 0.0 0.0 BARLEY GRAIN 0.0 14.15 1.13 0.0 0.0 0.0 GRAZING 0.0 0.20 12.50 0.0 0.0 0.0 GRAIN SORGHUM GRAIN 0.0 4.98 2.34 0.0 0.0 0.0 GRAZING 0.0 0.12 4.00 0.0 0.0 0.0 GRAZE OUT NOV-FEB 295.00 0.40 12.50 1475.00 1849.65 1268.50 MAR-MAY 295.00 0.80 12.50 2950.00 0.0 0.0 SUDAN-SORGHUM GRAZING 0.0 0.53 4.00 0.0 0.0 0.0 ALFALFA HAY JUNE 500.00 0.64 45.00 14363.98 7697.09 8600.00 JULY 500.00 0.35 45.00 7980.00 3606.72 0.0 AUG 500.00 0.24 45.00 5335.71 2908.63 0.0 SUDAN HAY 0.0 0.24 30.00 0.0 0.0 0.0 GRAZING 0.0 0.09 4.00 0.0 0.0 0.0 FALLOWED ACRES 0.0 0.0 12.50 0.0 0.0 0.0 SET ASIDE GRAZING 0.0 0.30 4.00 0.0 0.0 0.0 NATIVE PASTURE 265.00 0.43 4.00 451.14 0.0 0.0 COW-CALF A COW 0.0 9.85 37278 0.0 0.0 0.0 HEIFFER CALF 0.0 4.60 46.51 0.0 0.0 0.0 STEER CALF 0.0 4.85 51.22 0.0 0.0 0.0 COW-CALF B COW 0.0 9.85 37.78 0.0 0.0 0.0 HEIFFER CALF 0.0 4.60 46.51 0.0 0.0 0.0 STOCKER STR 0.0 6.00 49.67 0.0 0.0 0.0 STOCKER NOV-MAR 0.0 5.65 44.87 0.0 0.0 0.0 STOCKER NOV-MAY 320.00 6.70 44.62 94717.81 77870.06 31867.83 STOCKER-FEEDER NOV-MAY-OCT 0.0 10.50 43.36 0.0 0.0 0.0 STOCKER APR-SEPT 0.0 6.00 48.44 0.0 0.0 0.0 FEEDER 0.0 0.0 0.0 0.0 0.0 0.0 HAY PURCHASES 198.71 0.0 0.0 0.0 10768.24 5384.12 PASTURE SURPLUS-DEFICIT: O-M -228.00 0.0 12.5 0.0 0.0 0.0 A-M -148.00 0.0 12.50 0.0 0.0 0.0 NAT -47.22 0.0 4.00 0.0 0.0 0.0 LABOR SURPLUS-DEFICIT: J-M 90.20 0.0 3.00 0.0 0.0 0.0 A-J -251.70 0.0 3.00 0.0 755.10 377.55 J-S -215.00 0.0 3.00 0.0 645.00 322.50 O-O 152.00 0.0 3.00 0.0 0.0 0.0 TOTALS 147452.56 111611.50 50576.09 STOCKER BUYING PRICES NOV 47.54 APR 46.88 Simulations, Games and Experiential Learning Techniques:, Volume 1, 1974 105 TABLE 3 FARM FINANCIAL SUMMARY YEAR 6, TEAM 22 GROSS RECEIPTS $ 147452.56 OPERATING CASH COSTS $ 111611.50 ANNUAL CAPITAL COSTS $ -1540.62 LAND AND EQUIPMENT TAXES $ 1806.02 INTEREST PAYMENTS $ 8790.74 BUILDING AND FENCE EXPENSES $ 120.00 MISCELLANEOUS EXPENSES $ 600.00 CASH AVAILABLE BEFORE TAXES $ 26065.00 INCOME TAXES $ 4605.84 FAMILY LIVING ALLOWANCE $ 8000.00 MACHINERY DEPRECIATION $ 4538.10 BEGINNING CASH DEFICIT $ 0.0 BEGINNING AVAILABLE CASH $ 65982.25 ENDING POSITIVE BALANCE $ 79441.38 ENDING NEGATIVE BALANCE $ 0.0 Simulations, Games and Experiential Learning Techniques:, Volume 1, 1974 106 Table 4 ANNUAL FARM TRANSACTIONS AND ORGANIZATIONS AND NET WORTH STATEMENT, TEAM 22 0 1 2 3 4 5 6 7 8 9 GOVERNMENT PAYMENTS 0.0 0.0 8226.39 1375.92 1375.92 0.0 0.0 HAY STORE: ALF TONS 0.0 0.0 121.67 529.67 750.40 0.0 0.0 HAY STORE: SUDAN TONS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 PASTURE OCT-MAR + - 0.0 385.00 -280.00 -112.00 -4.00 -84.00 -228.00 PASTURE APR-MAY + - 0.0 222.00 -57.00 -128.00 -66.00 -101.00 -148.00 FAMILY LIVING ALLOW 0.0 8000.00 9000.00 7000.00 8000.00 8000.00 8000.00 CASH BALANCE DEFICIT $ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CASH BAL FOR DISTRBTN 2000.00 56330.08 37099.00 30098.69 40020.25 72582.25 79441.38 ANN. OPER. CAPITAL $ 0.0 33100.34 37193.43 36781.58 36556.03 43911.54 50576.09 LIVESTOCK LOANS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 MACHINERY LOANS 0.0 0.0 3825.00 3825.00 7875.00 9600.00 13987.50 LAND MORTGAGE LOANS 132000.00 132000.00 125400.00 118800.00 112200.00 105600.00 105600.00 PAYMENTS: LIVE. LOAN 0.0 0.0 0.0 0.0 0.0 0.0 0.0 PAYMENTS: MACHINERY 0.0 0.0 0.0 0.0 0.0 0.0 0.0 PAYMENTS: LAND MORT. 0.0 0.0 6600.00 6600.00 6600.00 6600.00 6600.00 INTEREST: SHORT-TERM0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 :OPER CAPITAL 0.0 0.3110.030 -1913.69 628.26 1305.73 1049.13 -1540.62 :COW LOAN 0.0 0.0 0.0 0.0 0.0 0.0 0.0 :MACH. LOAN 0.0 0.0 382.50 382.50 787.50 960.00 1398.75 :LAND MORT. 9240.00 9240.00 9240.00 8778.00 8316.00 7854.00 7392.00 REAL ESTATE TAXES 1510.60 1510.47 1510.47 1510.47 1510.47 1510.47 1510.47 WHEAT ACRES 625.00 750.00 750.00 750.00 750.00 750.00 830.00 BARLEY ACRES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 GRAIN SORGHUM ACRES 205.00 210.00 210.00 210.00 210.00 210.00 210.00 GRAZE CUT ACRES 180.00 100.00 100.00 165.00 165.00 165.00 165.00 SUD. SORG. GRAZE ACRES 150.00 0.0 65.00 0.0 0.0 0.0 0.0 FALLOWED ACRES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ALFALFA HAY ACRES 220.00 500.00 500.00 500.00 500.00 500.00 500.00 500 500. 500. SUDAN HAY ACRES 0.0 0.0 0.0 0.0 0.0 0.0 0.0 NATIVE PASTURE ACRES 265.00 265.00 265.00 265.00 265.00 265.00 265.00 SET ASIDE ACRES 245.00 65.00 0.0 0.0 0.0 0.0 0.0 TOTAL LAND VALUE $ 290475.00 290475.00 290475.00 290475.00 290475.00 290475.00 290475.00 INVENTORY VALUE COWS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 INVENTORY VALUE MACH 39057.00 36672.36 36510.27 32523.16 32306.21 29688.22 29555.12 INVENTORY VALUE HAY 0.0 0.0 5475.00 23834.99 33967.94 0.0 0.0 TOTAL ASSETS $ 331532.00 383477.69 362959.25 370331.75 389969.38 386145.44 0.0 LIABILITIES $ 132000.00 132000.00 129224.94 122624.94 120074.94 115199.94 0.0 NET WORTH $ 199532.00 251477.69 233734.31 247706.81 269894.44 270945.50 0.0 NET WORTH RATIO 0.60 0.66 0.64 0.67 0.69 0.70 0.0 LAND EQUITY RATIO 0.55 0.55 0.57 0.59 0.61 0.64 0.0 DOMESTIC WHEAT ALLOT 810.00 810.00 810.00 810.00 810.00 810.00 810.00 FEED GRAIN ALLOTMENT 150.00 150.000 150.00 150.00 150.000 150.00 150.00 NO. COWS-CALF A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 NO. COWS-CALF B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 NO. COWS A SOLD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 NO. COWS B SOLD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Simulations, Games and Experiential Learning Techniques:, Volume 1, 1974 107 student “operates” the farm through time. Additionally, the effects of financial constraints and variable receipts on ability of the farm to survive and grow are illustrated. (5) Students receive the equivalent of elementary farm management experience. Evidence of management experiences is reflected by student discussion in and out of the classroom, by performance on examinations designed to test the student’s reactions to new situations in the game operation. Because the game includes uncontrollable events, the student is not graded on game results. Experience also indicates these benefits can easily be lost if: (1) The game emphasizes computations more than management. Repetitive computations should be computerized. (2) The game is not developed progressively. Additional enterprises, development of irrigation, land rental, and land purchase are successively introduced into the game after a few years of game farm operation to maintain interest and introduce new considerations. (3) The game is unrealistic. Students accept abstractions such as indefinite farm locations, but resist outdated farm programs, prices, and production practices. REFERENC ES 1. Boehije, Michael, Vernon R. Eidman and Odell L. Walker, “An Approach to Farm Management Education,” Am. J. Agri. Econ. 55:192-197, May 1973. 2. Case, H. C. M. and D. B. William, Fifty Years of Farm Management, Urbana: University of Illinois Press, 1957. 3. Eidman, Vernon, H. D. Jose, C. E. Roush and M. D. Boehije, “A Game for Management Instruction: The Oklahoma Panhandle Farm Version,” Oklahoma Agri. Exp. Sta. Research Report P-685, Oklahoma State University, May 1973. Table of Contents Volume 1, 1974 Long Live Your Business Game Marketing In Action In Collegiate Education How to Create Your Own Business Game with Imaginit The Design, Conduct and Evaluation of a Computerized Management Game as a Form of Experiential Learning Experiential Learning: Conceptualization and Definition The Teaching Potential of a Structured Experience The Lecture versus the Game Tracking the Elective: Student-Goal Oriented Education The Use of Internal and External Assignments with a Marketing Simulation Game Constructing Mini-Courses to Supplement Business Simulations A Video-Tape/Computer Learning Experience A Collective Bargaining Negotiation Simulation: Settle or Strike Simulation in Personnel Administration Introduction to Pablum: A public Administration Game Enrichment of a Multi-Functional Game through Dynamic Overlays and Intensive Decision Analysis An Orientation to the Oklahoma Farm Management Game A Description of INTSTRAT: A Game of Investment Strategy DØG: A Decision Mathematics Game The Use of Production Scheduling Simulation in a Production Planning and Control Course Interactive Gaming: A Production Example Marketing Interaction: A Marketing Management Game ADMAG I: An Advertising Management Game Meeting the Decline in College Enrollments Using the Money Game in the Classroom Training Salesmen with The Sales Management Game Smith Management Game (BUSOP) The Business Game: A New Approach to Managerial Accounting Administration: The Key to a Successful Gaming Experience Simulation: A Frustration, A ‘Game’, or a Meaningful Experience Using Complex Simulations in Policy Courses in Institutions with Limited Resources Flexibility in Simulation Design for Continual Student Motivation A Terminal Keyboard Experience in Executive Gaming Application of Theory and of Computerized Grading in Management Simulation The Executive Education Experience Using the Toronto Management Game Experiences with the Harvard Management Game Managing the Dynamic Small Business Via Simulation The Use of Business Game and a Simulated Stock Exchange in a Business Policy Course Managerial Strategy and Systems - An integrative M.B.A. Course SIMQ, A Business Simulation Game for Decision Science Students: Towards a Total Gaming and Teaching Package The Use of Simulation in a Financial Planning Course Simulation as a Supplementary Learning Experience in Marketing Principles Intercollegiate Business Gaming: The State of the Art Intercollegiate Business Gaming from a Participant's Viewpoint Correlates of Satisfaction, Learning and Success in Business Gaming A Student' s View of Leadership Training with a Two-Level Hierarchy, Two Course Simulation Autocratic versus Democratic Decision Making: The Executive Game as an Experiment Identifying Potential Game Participants Assessment Centers Selection Based on Simulation Business Games in the Process of Management Training in Israel and the United States Evolution and Flexibility in Business Gaming Quantitative Applications of Games Growing Emphasis on Implementation Debits and Credits: First National ABSEL Conference