Yearly production costs

Examples of yearly production costs:

· Buying selected varieties of seed

To get bigger harvests, the farmer must buy each year selected varieties of cotton, or groundnuts, or rice. This expense has to be met each year.

· Buying pesticides

To prevent his plants from becoming diseased, the farmer has to buy pesticides every year to protect cotton or groundnuts, to protect cocoa trees or coffee trees.

· Buying fertilizers

To increase the yield of his crops, the farmer has to buy chemical fertilizers every year to apply to the crops that earn money. The farmer must think carefully before deciding to apply fertilizers. He must be sure that all the other farming jobs have been well done,. for example, that sowing was done at the right time, that weeding has been done often enough, that pesticides have been used. Otherwise, it is useless to spend money on fertilizers.

· Expenses of paying labour

· There are also expenses that do not come- every year.

These expenses have to be met only from time to time. They are expenses for improving the farm business. These expenses increase the farm's productive capacity. Spending money to increase productive capacity is making an investment.

To make an investment means spending money to increase the farm's productive capacity.