ABM 103 – Introduction to Agribusiness Management sustainable orchestration of food, fiber and natural resources (Edwards and Shultz II, 2005)
Misconceptions on Agribusiness
Merely agricultural production through farming Only big business Purely private sector undertaking
What is Agribusiness?
Traditional Definition (productionoriented) Agribusiness is the sum total of all operations involved in the manufacture and distribution of farm supplies; production activities on the farm; and the storage, processing and distribution of farm commodities and items made from them. (John Davis and Ray Goldberg, 1957)
Agribusiness includes the total input-farm-product sectors that supply farm inputs; involved in production; and finally, handle the processing, distributing, wholesaling and retailing of the product to the final customer (Downey & Tracke, 1987)
Reframed Definition (marketoriented) Agribusiness is a dynamic and systemic endeavor that serves consumers globally and locally through innovation and management of multiple value chains that deliver valued goods and services derived from
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From Farm Centric to Market Centric
Boundaries were pushed from farm-centered production to customer-centered activities
Today’s agribusiness focus on: Value chains as systems and as consisting of several stakeholders Application of new technologies Globalization Natural/Scare resources management Sustainable differential advantages
Reasons for Reframing Agribusiness
More demanding consumers Pressure agribusiness companies to produce high quality products at lower cost Demand innovative products that are environmentfriendly Pressure agribusiness firms to be more ecologically sensitive
Entry of niche and non-traditional players producing innovative products
ABM 103 – Introduction to Agribusiness Management
Trend towards health and wellness which is also related to increased demand by consumers Time allocation and pressures – fast delivery of goods and services within the value chain Morphing enterprises and business extensions – other businesses going into agribusiness Distribution and retailing clout – proliferation of institutional large retailers Information Technology – text books, media and the internet as sources of information
Distinctive Features of Agribusiness
Tremendous variety in the kinds of businesses in the agribusiness sector Sheer number of agribusinesses Infinite variety in size of agribusinesses Small and compete in a relatively free market Agribusiness firms tend to be family-oriented Agribusiness tends to be community-oriented Many agribusiness workers exhibit a traditional philosophy of life The way in which basic agribusiness is built around several million farm producers Highly seasonal in nature Deal with the vagaries of nature Government programs and policies have direct impact on agribusiness
Characteristics of Reframed Agribusiness (Edwards and Shultz, 2005)
Potential Effects of Key Resources on Agribusiness
Natural
Increased need for energy, land and water Pollution control and ecology preservation More rational use of resource Green/renewable power Use of grey water (water recycling) Use of biodegradable and recyclable products Planting of drought and salttolerant plants
Agribusiness vs. Business Agricultural Economics
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Larger – due to aggregation and expansion of farms to achieve economies of scale Diversified – inclusion of portfolio of related business which may also be due to acquisition/aggregation Complex – due to new requirements for accounting, financial controls and marketing relationships Strategic – long-term thinking about the effects of agribusiness to the natural environment and sustainability Multinational – agribusiness products such as grains, processed food and fiber are important export commodities Political – agribusiness companies become politically active due to pressures in zoning, quality, ecology, access to power and water, and environmental conservation
vs.
Agribusiness: if a business enterprise moves nearer to
ABM 103 – Introduction to Agribusiness Management
agriculture and mainly uses agricultural raw materials Business: if a business enterprise moves farther from agriculture, making use of non-agricultural raw materials Agricultural Economics: refers to the monetary and physical factors that affect the profitability of the agribusiness
The Agribusinessman
A person who works in or manages an agribusiness Characteristics of a good agribusinessman Opportunity seeker (Actionoriented ) Entrepreneurial – responsive to the developments in the environment Techno-managerially oriented Dedicated to his work – taking farming as a business and not as a way of life
Consisting of on-farm and off-farm business units Selling of inputs (fertilizers, agrochemicals) On-farm production of crops and livestock, forest trees, fish Off-farm business activities like leather tanning, woodworks Provision of agroservices (financing, market information, technology, education, warehousing)
Agribusiness Sectors
Agribusiness encompasses the whole of the Agriculture sector plus a portion of the industrial and service sectors
Agribusiness as a Field of Study
Integrative and multi-disciplinary in nature Multidisciplinary areas: Economics: economics of agriculture Agricultural sciences: animal, crops, fishery, forestry Management: production, marketing, personnel, finance Human behavior: leadership, motivation, rewards Management in orientation
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Economic Sectors of Agribusiness
Agriculture Crops Livestock Fishery Forestry Agriculture: Economic Contribution
ABM 103 – Introduction to Agribusiness Management
Food provider of the economy Employs a large part of the developing economy’s labor force (around 30% of the total workforce is directly and indirectly employed in agriculture, 2014) Contributes around 11.2% to the GDP (CIA World Factbook, 2015) Important source of exports of developing countries (9.6% of total export earnings or $5B, 2012)
Agroindustries: Food Industries Processed Meat and fish products Processed fruits and vegetables Milk and Dairy Products Cereals Bakery products Beverages (coffee, tea and chocolate) Condiments and flavoring extracts Agroindustries: Non-Food Industries Leather and leather products Wood, woodworks and cork products Rubber and rubber products Textile fiber products manufacturers Paper and paper products Financing Physical distribution services (transportation and warehousing) Market research and market information dissemination Market matching Research and development Technical Assistance
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Vertical Structure and Coordinators
Agribusiness Subsystems: Input
Fertilizer Industry Feeds Industry Seed Industry Agrochemical Industry Agricultural Machinery and Irrigation Equipment Veterinary Products Animal Resources: breeding and hatchery
Agribusiness Farm/Production
Subsystems:
Direct on-farm production activities Livestock, crops, fishery, and forestry
Agribusiness Processing
Subsystems:
ABM 103 – Introduction to Agribusiness Management
Primary, intermediate and final processors Prolongs the shelf life of agricultural products – minimizes the adverse effects of seasonality and perishability Opens up more markets (domestic and foreign) Food and non-food agroindustries
Agribusiness as an Open System
Agribusiness Subsystems: Marketing
For physical distribution and transfer of products Traders, sales agents, brokers, assemblers, wholesalers, retailers, importers, exporters and other intermediaries
Characteristics Systems
Agribusiness Subsystems: Support
Providers of agroservices Cuts across the subsystems
Composed of distinct but interdependent parts that function towards a common goal Affected by the developments in its external environment The viability of the whole agribusiness system depends on the viability of each subsystem, the synchronized operation of the subsystems, and the ability to adapt to the changes in the environment
different
of
Agribusiness
Market-oriented Subsystems are interrelated and interdependent Presence of different coordinating mechanisms Dependent on natural production conditions Clustered around many small producers (in developing countries)
Agribusiness System References:
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http://data.worldbank.org/indicator/ SL.AGR.EMPL.ZS http://www.indexmundi.com/philipp ines/gdp_composition_by_sector.ht ml L.E. Mojica, G.N. Baticados, M.B. Cruz, J.J.S. Cabardo Lecture Notes Ricketts, C and Ricketts K.G., 2013
