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The objective of the article was to analyze how farmers’ management capacity contributes to profitability of farming. A structural equation model of management capacity and financial performance was applied on survey data combined with book keeping data from 117 dairy farms. The model explained one fourth of the variation of profitability of sample farms. The results indicate that the managerial aspects of farmer are connected to farm profitability but the effectiveness of management process is not. It was concluded that essential for a relatively good performance is that the farmer has a clear vision of the development of farming with business and investment plans. Successful farmers also have a firm confidence on managerial skills, a strong emphasis on the instrumental and intrinsic values, and high appreciation of farming as an occupation. They also see the farm as an entrepreneurial business unit with the intention to follow the corresponding principles of management.

Farmers’ managerial thinking and management process effectiveness as factors of financial success on Finnish dairy farms