Chapter 1 [The Agribusiness System]

BUSINESS MANAGEMENT

What is Agribusiness?

Definition

Includes all activities that take place in the production, manufacturing, distribution, wholesale and retail sales of agriculture commodities.

Agribusiness Evolution
Farm grew larger & more specialized Began to purchase input (fertilizer) Processing and marketing firms growing.

Agribusiness Systems
Input Sector Agribusiness Sector Production Sector Processing & manufacturing Retail & Wholesale

Input Sector

Components required at the initial stage of production including input materials, distribution, financial services, R&D, etc.

Input Sector
Supplying feed, seed, fertilizer & credit to farms Less labor but more purchased inputs Up to 75% of inputs are purchased Farmers become more efficient in input use ;- produce more output for less cost.

Input Sector

Production Sector
Includes the farms and ranches that produce the crop and livestock products. These farms are the customers of the firms that make up input supply sector.

Production Sector - cont

The average farm size is generally small. Only 20% of agricultural land is used for food commodities (80% is for industrial commodities). Employment in the agricultural sector is approximately 1,408,000 people.

Production Sector

Processing & Manufacturing

Services & facilities needed at processing stage including integration, training, farmer information, etc.

Processing & Manufacturing

The supply of raw materials for processing is scarce as the growers prefer to sell as fresh produce to fetch a higher price. Lack of quality and inconsistent supply of raw materials. Approximately 70% of raw materials for processing are imported as local supply is not able to meet the demand for the processing sector.

Processing & Manufacturing

Major Components

Commodity Processors
Firms

buying raw agric commodities (raw milk, live cattle, wheat) from farms & process into a form more acceptable to consumers & food manufactures (pasteurized milk, flour, boxed beef etc).

Processing & Manufacturing

Food Manufacturers
Firms

that mix raw agric commodities & processed products to make a manufactured food products bakery turning flour cheese, tomato sauce, into bread or pizza.

Wholesale & Retail

Services required to market produce including promotion, branding, selling, etc.

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