MGMT 20 Topic 1 PDF

MGMT 20
Introduction to Agribusiness Management
Chapter 1- Agribusiness in Retrospect
• BY: Hadasha Navarra bongat

Learning Objectives:
 Origin and definition

 Nature and importance of agribusiness
 Agribusiness concepts and principles
 Features of agribusiness
Myths of Agribusiness
 Agribusiness is an agricultural production

through farming
Agribusiness is not equivalent to farming
(e.g. agri-business)
 Agribusiness is big business

 Agribusiness originated from the West where
agribusiness is composed of large farms
 Agribusiness is purely a private sector

undertaking
Agribusiness is not limited to profit-seeking
organizations but applies to rural
development projects by public sectors
What is an AGRIBUSINESS???
What is Agriculture?
Agriculture – the science or art of cultivating the soil, producing

crops and raising livestock and in varying degrees the
preparation of these products for man’s use and their disposal.
WHAT IS AGRIBUSINESS BEFORE?
 same as agriculture, agribusiness indicate plowing a

field, planting seed, harvesting crops or feeding
livestock.
 farmers produced most of the inputs they needed for
production and process this to make their own food
 they consumed or used everything they produced
What is Agribusiness before?
Initially- Easy to become a farmer
but productivity is low
A few agricultural products Produced enough just to feed
made their way into the few people, as a consequence-
export market and were sold farmers were nearly totally self
to buyers is other countries. sufficient.
They produced most of the

The small amount of output inputs they needed for
not consumed on the farm production, such as seed,
was sold for cash. These draft animals, feed and
items were used to feed and simple farm equipment
cloth the minor portion of
the country’s population that
lived in villages and cities.
They consumed or used just about
everything they produced.
What is Agribusiness?
 1957; John Davis and Ray Goldberg

 As a process, Agribusiness is defined
as
What is Agribusiness?
the sum total of all operations involved in the

manufacture and distribution of farm supplies;
production activities in the farm; and the storage,
processing, and distribution of farm commodities
and items made from them (Davis and Goldberg
1975 as cited by Drilon 1977)
- this connotes a whole range of possibilities from

the production of farm inputs until commodities, in
their various forms, until the end consumers.
Illustration of Agribusiness as a “Process”
Processing
Farm Commodities
Distribution
Storage
Concept of Agribusiness
 Manufacture of farm inputs/supplies

 Distribution of farm inputs/supplies
 Production of farm products
 Storage of farm products
 Processing of farm products
 Distribution of farm products
 Distribution of processed (farm) products
Agribusiness includes the total input-farm-

product sectors that supply farm inputs; are
involved in production; and finally handle
processing, distributing, wholesaling, and
retailing of the product to the final customer
(Downey and Trocke 1987)
…taking place as “commodity processing and food manufacturing moved off the
farm”.
The form of most commodities (wheat, rice, milk, livestock and so on) must be
changed to make them more useful and convenient for consumers.
For ex. consumers would rather buy flour than grind the wheat themselves
before backing a cake. They are willing to pay extra for the convenience of
buying the processed commodity (flour) instead of the raw agriculture
commodity (wheat).
Agribusiness is the coordinating science of

supplying agricultural production inputs and
subsequently producing, processing, and
distributing food and fiber (Roy 1977).
Features of ABM
• Tremendous variety in the kinds of businesses in the

agribusiness sector
Basic producers Storage Firms
Shippers Transporters
Brokers Financing institutions
Wholesalers/retailers Food chains
Processors Restaurants
Packages Manufacturers
Features of ABM
•Sheer number of agribusinesses

• Different businesses have evolved to handle the
route from the producer to the retail marketer
Features of ABM
•Infinite variety in size of agribusinesses

• From corporate giants to the one-person or one
family organizations; most agribusinesses tend to
be small when compared with other business
industrial segments
Features of ABM
•Agribusinesses are small and compete in a

relatively free market in which there are many
sellers and few buyers
• Difficult differentiation
Features of ABM
•Agribusinesses are likely to be seasonal in

nature
• Intimate relationship and interdependence of
agribusiness and farm producers; nature of planting
and harvesting season
Features of ABM
•Agribusinesses deal with unpredictable change

of nature
• Drought, flood, insects, diseases are a constant
threat for most agribusinesses
Features of ABM
•Government programs and policies have direct

impact on agribusinesses
• Many agricultural products are heavily influenced
by government regulation
Agribusiness as a Structure
•Components
•Related to one another
•Vertical structure of agribusiness
•Agribusiness is market-oriented
Agribusiness as a Structure
•Satisfaction of customers’ needs

•Produce marketable products
•Produce market for products without
market
How do the components of
Agribusiness operate?
•Coordinators
•Managers
•Government officers
•Educators
•Researchers
•Well-informed actors
•Ability and willingness of participants to
interact
Agribusiness as a Sector
Agribusiness
Sector
Commercial/
Industrial
Service
Sector
Sector
Agribusiness as a Sector
• Includes the whole agriculture sector, including fishery
and forestry
• Portion of the industrial sector (manufacturers and
input suppliers)
• Portion of commercial/services sector which provides
transport or distribution, financing, other services
Agribusiness as an Open System
•System - a combination of related parts

organized into a complex whole
•Interrelated parts to function together towards
common goal
•The agribusiness system is composed of the
following interdependent subsystems:
Agribusiness: An Open System
1. Composed of distinct but interdependent parts that function

towards a common goal
2. It is affected by the developments in its external
environment
3. The viability of the whole agribusiness system depends on
the vitality of each subsystem, the synchronized operation of
the subsystems, and its ability to adapt to changes in the
environment.
Agribusiness: Subsystem
•Input subsystem – composed of firms that

provide the farm production sector with feeds,
seeds, fertilizers, machinery, chemicals, and
other inputs; also include human and animal
resources
• Farm production subsystem – consists of individuals and

enterprises engaged in the production and propagation of
• Animals and animal products
• Plant products
• Forest and forest products
• Aquatic products
For direct consumption and/or as intermediate products for
processing
•Processing subsystem – all firms engaged in

the primary and final transformation of the raw
material output
•Marketing subsystem – all individuals and

firms involved in the distribution of agro-based
products
• Assemblers
• Wholesalers
• Retailers
• Exporters
• Importers
• Facilitating/Support subsystem – government, nongovernment

agencies, associations, organizations, institutions that directly
or indirectly affect the agribusiness system
• Logistics Information
• Coordination Policies
• Financing Programs
• Human resources Incentives
• Technology Other Services
Agribusiness: As a Value Chain Network
1. Composed of distinct but interdependent segments

that function towards a common goal (meeting
market requirements)
2. It is affected by the developments in its
external/internal environment
3. The viability of the whole agribusiness VC depends
on the vitality of each segment.
Agribusiness : The Concept
Agribusiness : The Concept
 Agribusiness consists of all industries surrounding food

production, ultimate end-user is the consumer, with
marketing as the driving force behind all profitable
activities.
 Agribusiness deals with commodities that are of short

shelf-life; hence, marketing plays a vital part in moving the
inputs, products, and by-products to the different sectors
and the consumers.
Agribusiness :
The Management Aspect
 Agribusiness is a commercial activity engaged in as a

means of livelihood or profit. As such, like any
commercial enterprise, agribusiness is expected to make
money; otherwise, there is no sense in getting into the
business.
 Management is a built-in function of agribusiness,
therefore, agribusiness management is a dynamic
decision-making process revolving around an agricultural
business enterprise.
Other Agribusiness and
Market Key Concepts
 Self- sufficiency vs. commercial

production
“Produce what you can sell, not sell what you can
produce”.
Many commercial farmers now produce what they have
already sold under forward contract.
Market Key Concepts
 The Agro-industry system

1. The product chain
input supply chain for the “downward” or “backward” linkages from
the farmer back to the input retailer, the transporter/importer and
the producer of inputs such as fertilizers, seeds, etc.
value chain or “market chain” for the “forward” linkages that link
the farmer to the consumer, via the “middle-man”, processor,
supermarket, etc.
Agro-industry system cont...
2. Value Addition
-Each link in the value chain adds value to the basic
product.
-The different prices reflect value added by the processes
of transformation and commercialization.
Agro-industry System Illustration
Market Key Concepts
 Comparative Advantage
- This is conferred by favourable factors like cheap or
available raw materials, suitable soils or climate, lower labour
costs, etc.
- Yet, such view has recently been questioned for the factor
advantages are easily been imitated; maintaining low labor
rates does not help the overall development of a country;
and there are already over-reliance on these advantages.
Comparative Advantage
Strategy
Factor Demand
Conditions Conditions
Related Industry
Comparative Advantage cont...
 Factor conditions : it is the created “specialized factors” of skilled labor,

capital and infrastructure that are important.
 Demand conditions: the more demanding the customers are, the more
innovation is promoted.
 Strategy: it is the competition between firms that promotes innovation
and improvement.
 Related supporting industries: good linkages – through closer physical
location or through good communication - between firms, their
upstream suppliers, downstream marketing channels and service
suppliers encourages innovation.
Market Key Concepts
 Marketing Strategies
- Marketing is driven by the 4P’s
Product Quality, quantity, packaging and design

Price Including price guarantees under contract
Place geographical location, type of market outlet,

market segment
Promotion Advertising, customer relations

Agribusiness as a system
• Agribusiness is a system of interrelated and closely knit stages in the life cycle
of an agricultural consumer product.
• There are five major subsystems making up the whole Agribusiness System.
Agribusiness as a system
 As cited by Gallegos, these subsystems are very much

interrelated in such a way that one subsystem can not be
taken independently from the other.
 The success of any agribusiness venture depends on how
well coordinated and complementary these are.
Agribusiness : A Field Study
 Agribusiness is both an art and a science of managing an agricultural

business enterprise.
-The programs for the study of agribusiness provide an in-depth
understanding of the industries that produce, process, and distribute
agricultural products. It studies the different sectors starting from the
production unit (e.g. farms) to the ultimate consumer.
 An Art: Agribusiness puts together the various skills of an individual or
organization, in running a profitable venture.
 A science: Risk-taking is backed up by an objective gathering and
analysis of data and information.
Vertical Structure of Agribusiness
CONSUMERS
RETAILERS
COORDINATORS
WHOLESALERS •Gov’t Officers
•Managers
•Educators
PROCESSORS •Researchers
FARMERS
FARM
SUPPLIERS
Scope of Agribusiness
 Scope for secondary and tertiary processing of agricultural

commodities.
 Scope for production of marine and inland fish and ornamental fish
culture.
 Scope for production of meat, milk and milk products, poultry
products, etc.
 Organic farming
 Opportunities for employment in marketing, credit, insurance and
logistic support services.
SELECTED CONTRACT FARMING PROFILES
1. AYALA AGRICULTURAL DEVELOPMENT CORPORATION
Mother Company: Ayala Corporation

Product: Pioneer Hybrid Corn Seeds
Project Site: South Cotabato province
Plant Capacity: 5,000 tons of hybrid (Fl) seeds per year
Production: 1,000-1,500 tons of seeds per year
No. of growers: 100 on 320 hectares
Year started: 1983
Services provided by the company:
Technical services
Farm inputs
CALIFORNIA MANUFACTURING COMPANY

Product: Pickled Cucumber
Project Site: Central Luzon and Southern Luzon regions
Year started: 1961
Services provided:
• Technical assistance
• Seeds
• Middlemen provide farm inputs and land preparation assistance.
EAST WEST SEED COMPANY

Product: Vegetable seeds
Research station site: Lipa City, Batangas
Project sites: Benguet, Cagayan, Ilocos Norte, Isabela,
La Union and Occidental Mindoro province
Year started: 1984
Services Provided:
• Technical services
• Seeds
• Farm inputs
GENERAL MILLING COMPANY

Product: Broiler chickens
Processing site: Metro Manila and Cebu
Project sites: Batangas, Pampanga, Rizal and Cebu provinces
No. of growers: 120 averaging about 20,000 birds each
Year started: 1981
Services provided:
• Chicks
• Feeds and veterinary medicines
• Collection of chickens from the farm
Growers provide aside from land and labour:
• Buildings
• Expenses for labor, water and power
• Collateral
KENRAM PHILIPPINES
Products: Palm oil and ralm kernel
Project site: Sultan Kudarat province
Factory capacity: 18 tons FFB per hour
Nucleus area: 1,600 ha
No. of growers: 35 on 4,500 hectares
Year started; 1972
Services provided:
MERALCO CORPORATE FARM MANAGEMENT,INC.
Mother Company: Manila Electric Company

Product: Rice Project site: Isabela province
No. of growers: about 2,000 on 4,000 hectares
Year started: 1976
Services Provided:
• Technique.*and management services
• Seeds
Other Agencies involved:

Land Bank: credit to farmers via the cooperatives
National Irrigation Administration: formation of irrigators' association and irrigation
water
NESTLE PHILIPINES, INC.
Mother Company: Nestle Switzerland

Product: Soybeans
Project Site: South Cotabato province (main), and five
other provinces
Year started: 1979
Services provided:
• seeds and pesticides
Farmers provide, aside from land and labor: Fertilizers

Credit is provided by Land Bank
Selected Contract Farming Profiles
NORTHERN FOOD CORPORATION

Mother Company: Livelihood Corporation, a government
controlled corporation
Product: Tomato paste
Project Site: Ilocos Norte province
Factory Capacity: 37,000 tons of raw tomatoes per year
No of growers: 6,000 on 1,200 hectares
Year started: 1984
Services provided:
• Seeds
• All farm inputs
HIGH GRAINS FARM, INC
Mother Company: Gamboa Hermanos, Inc.
Product: Pepper (Piper Nigrum)
Project site: Negros Occidental province
Nucleus size: 46 hectares
Number of growers: about 100 on 70 hectares to expand by 50 ha per year
during the next five years
Year started: 1983 Services provided to farmers:

 Technical services
 Seedlings at cost
Other Agents:
Farmers' cooperatives (2)
Land Bank: provides long term credit
Management Association of the Phil: provides the project manager to assist
cooperatives for the next two years
Department of Agriculture: for project packaging assistance
J.F. Ledesma Foundation and Philippine Business for Social Progress, both NGO
jointly provide institution building seminars to farmers
MARINE COLLOIDS, PHILIPPINES
Product: Carrageenan from seaweeds

Factory site: Mandaue City, Cebu province
Factory Capacity: 2,000 tons of crude carrageenan and 500 tons of refined
carrageenan per year
Project sites: Tawi Tawi and Bohol provinces

No. of growers: 500-600
Year started: 1973
Services provided:
• Inputs such as nylon nets
PHILIP MORRIS (ASIA),INC

Product: Burley Tobacco
Project site: Isabela province
No. of contract growers: 280 on 150 hectares
Year started : 1981
Services provided:
• All farm inputs
PHILIPPINE FRUITS AND VEGETABLE INDUSTRIES, INC.(PFVII)

Mother Company: National Agribusiness Corporation, a government-
controlled company
Product: Tomato paste
Project site: Pangasinan province
Factory capacity: not known
No.of growers: 400 on 500 hectares
Year Started: 1984
Services provided:
Technical services
Seeds and farm inputs
PUREFOODS CORPORATION
Mother Company: Ayala Corporation

Product: Broiler chicken
Factory site: Metro Manila
Factory capacity: about 50,000 birds a day
Project sites: Laguna, Cavite, Bulacan, Rizal and Quezon
provinces
No. of growers: about 100 averaging 30,000 birds each Year
started: 1982
Services provided:
- Chicks - Feeds, vaccines, and other supplies
Growers provide, aside from land and labor:

Buildings and equipment's
Power, light and water
Surety bond or real estate mortgage or bank Guarantee/deposit
SARANGANI AGRICULTURAL COMPANY, INC

Product: Cattle
Project site: South Cotabato province
Nucleus: Cattle breeding farm
No. of growers: about 300 farmers
Year started: 1974
Services provided:
• Feeder cattle( sale or credit)
Farmers provide aside from land and labor:

Veterinary medicines
Feeds
SAN MIGUEL CORPORATION

Product: Broiler chicken
Factory site: Laguna province
Factory capacity: 120,000 birds per day
No of growers: about 150
Year started: 1970
Services provided:
• Chicks
• Feeds and vaccines
• Collection of broilers from the farm
Grower provides, aside from land and labor:

Building and poultry equipment's
Power, light and water
Skilled staff

Product: Frozen Shrimps
Factories: Negros Occidental(2) and Pampanga (1) provinces
Combined Capacity: 3,600 tons per year
No. of Growers: 200
Year started: 1983
Services provided:
• Technical Assistance
• Feeds and other inputs
Grower provides, aside from land and labour:

Infrastructure
Product: Passion fruit puree
Factory site: Pampanga province
Factory capacity: 1.5 tons per hour of aseptic packaged puree
Project site: Quezon province
Year Started: 1989
No of growers: 100 on about 100 hectares organized into a
cooperative
Services provided:
Other agents:
Land Bank for credit
Department of Agriculture for project preparation
Management Association of the Philippines for project management
SHEMBERG MARKETING CORPORATION
Product: Carrageenan from seaweeds
Factory Capacity: 3,000 tons of crude carrageenan and 800 tons of
refined carrageenan per year
No. of growers: 2000 +
Year started: Early 1970s
Services provided through middlemen:

• Seedlings and credit
UNIMER EXPORT CORPORATION
Product: Okra for export
Mother company: Philippine Investments and Management Consultants
Project sites: Bulacan, Laguna, Nueva Ecija and Cagayan
provinces
Year started: 1984
Services provided through mediator:

• Seeds, fertilizers and packing materials
RFM CORPORATION
Product: Broiler Chicken
Factory sites: Metro Manila plus 6 provinces
Combined factory capacity: about 50,000 birds per day
Project sites: 13 provinces.
No. of growers: c. 250 averaging about 20-30,000 birds
Year started: early 1970s
Services provided:
• Chicks
• Feeds
• Vaccines
Grower provides aside from land and labor:
• Buildings
• Poultry equipment's
• Power, light and water
• Cash bond or surety bond
PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES(PICOP)
Product: Pulpwood; albizzia falcataria

Factory: Integrated pulp and paper mill
Factory site: Surigao del Sur province
Nucleus size: 183,000 ha of forest concessions
No of growers: 4,765 on 16,000 hectares
Year started: 1968
Services provided:
• Seedlings
Other agents:
Development Bank of the Philippines provided long-term credit
STANDARD FRUIT CORPORATION
Product: Cavendish bananas

Mother Company: Dole Philippines
Project sites: Davao del Norte and South Cotabato provinces
No. of growers: three firms and 380 small growers on 3,100 hectares
Year started: early 1970s
Services provided:
• Farm inputs
• Crop collection
Agribusiness
Vision of the Industry
The vision is to transform and upgrade the agriculture sector from traditional
farming to agribusiness or industrial clusters to take advantage of opportunities in
rubber, coconut, mangoes, bananas, coffee, palm oil, cacao, and other emerging
high value crops.
Agribusiness
Goals and Strategies
Short-run (2014-2017) Goals:

 Improve productivity of high
value crops where regional
comparative advantage lies
 Strengthen our capacity in

emerging high value crops
Agribusiness
Medium-run (2018-2021) Goals:  Strengthen agro-processing and

the linkages between production
(agriculture) and processing
(manufacturing)
 Strengthen supply chains and

commodity clusters
Agribusiness
Long-run (2022-2025) Goals:  Deepen participation in global

value chains
Agribusiness
Strategic Action
 Strengthen coordination mechanism among stakeholders
 Address supply chain gaps and other coordination issues
 Provide support to small farmers especially access to technologies,
technical knowledge and production issues as well as access to finance
 Promote green and climate resilient products
 Investment in rural infrastructure
 Investment in innovation and R&D
 Strengthen regulatory and certification system
 Property rights regime
Economic Contribution and Growth Performance
Growth Performance
 The agricultural sector, as a whole, has only grown by an average of 1.1%
in the last five years in terms of value added
 At the sub-sector level, the fishery sector has registered the fastest
growth of the three components, with an average value added growth of
9.2% from 2009 to 2013.
 It is followed by the agriculture (crops, livestock and poultry) sub-sector,
with an average value added growth of 1.4%.
 In this sub-sector, the cassava and poultry segments, which have
registered average value added growth rates of more or less 4%, are the
top performers.
 The forestry sector contracted, on the average, by 0.3% during the same
period.
Table 1. Agriculture Value Added Contribution (in percent) (BAS)
Year 2009 2010 2011 2012 2013 2009-2013
TOTAL INDUSTRY -0.7 -0.2 2.6 2.8 1.1 1.1
AGRICULTURE -1.6 0.2 4.2 3.6 0.9 1.4
Palay -1.2 -2.4 5.9 8.0 2.2 2.5
Corn 1.4 -8.9 9.5 6.3 -0.4 1.6
Coconut with Copra 2.1 -0.6 -2.2 4.2 -3.5 0.0
Sugarcane -6.3 -15.7 59.7 -8.9 -6.9 4.4
Banana 4.2 0.6 0.7 0.7 -6.3 0.0
Mango -12.5 6.9 -4.6 -2.6 6.2 -1.3
Pineapple -1.1 -0.3 3.2 7.1 2.8 2.3
Coffee -1.2 -2.0 -6.8 1.4 -11.6 -4.1
Cassava 3.2 4.8 5.1 1.1 6.3 4.1
Rubber -5.1 1.3 7.8 4.0 0.4 1.7
Other Crops -0.5 2.7 -3.2 1.5 0.2 0.2
Livestock -1.0 0.6 2.0 1.1 1.8 0.9
Poultry -2.0 7.7 4.4 4.6 4.2 3.8
Agricultural Service -8.6 3.3 3.0 2.1 0.6 0.1
FORESTRY 3.0 -0.5 -4.3 -0.4 0.7 -0.3
FISHERY -2.0 -31.3 40.5 2.3 36.7 9.2
Economic Contribution and Growth Performance
Employment Contribution
 The agriculture sector, as a whole, has been the second biggest
employment contributor to total employment since 2008, with an
average share of 33.65% from 2008 to 2013.
 The top contributor for the same period is the services sector, with an
average share of more than 50%.
 In the sub-sector level, the agriculture (crops, livestock and poultry),
hunting and forestry segment, with an average employment share of
30%, has the bigger share than the fishery segment with only a 4%
average contribution to total employment for 2008 to 2013.
Employment Contribution of Agriculture (in percent)
Employment Contribution
Year 2008 2009 2010 2011 2012 2013 2008-2013

TOTAL AGRICULTURE 35.1 35.3 34.3 33.0 32.2 31.1 33.5
Agriculture, Hunting 30.8 31.1 30.2 29.0 28.4 27.4 29.5

and Forestry
Fishery 4.3 4.2 4.2 3.9 3.8 3.7 4.0
Industry 15.3 14.8 14.5 14.9 15.3 15.6 15.1
Services 49.6 49.9 51.1 52.1 52.6 53.4 51.5
The Philippine
Agribusiness System
History
What is agriculture to most people? Farming, ranching,

fishing??
This was true until the early 1960s when “agribusiness”

evolved into a complex system reaching well beyond
the farm
The big picture included all things needed to bring food

to the consumer.
As it turned out aquaculture shares many similarities to

traditional agribusiness.
Agribusiness History
• The agribusiness system includes many facets:

• Not only production (e.g., farmers, hatchery
managers), also
• Organizations which provide inputs (e.g., fry,
chemicals, feed)
• Processors the output (e.g., processing plants)
• Manufacturers (e.g., shrimp  microwavable
products)
• Transporters/Sellers/Brokers (e.g., retail grocery
stores, seafood wholesalers, etc.)
The Philippine Agribusiness History
• Dates back in the Spanish era late 1800’s:

encouraging cash crops for exports to Europe
and Latin America under the free-trade
agreement between Phil and Spain!
• Then wars broke out!! Trigers increased
produce & prices, stimulating more production
(Recall: demand and supply). War was
profitable even back then!
• Mechanization was developed largely due to
labor shortages.
• Crop production became a focus of farmers.

(They started purchasing inputs; this is where
aquaculture is today!)
• Much of the agribusiness activities was under an
“encomienda system”.
• As population increased, preservation of raw
products was also improved.
• This made food more convenient to consumers.
• The free trade between Phil and Spain was

made possible through the Royal Company of
the Philippines (RCP) created in 1785 by
Charles III.
• In 1875, Manila was declared open to World
trade even with the abolition of RCP. That
started the influx of other traders to enter into the
Philippines
• The principal exports then were abaca, tobacco,
copra and sugar
Abaca:
• In 1825, marks the first recorded export of abaca
from Manila. It was in Cebu where manila hemp
(Abaca) was already widespread even before
Magellan came.
• Abaca was virtually a Philippine monopoly in the
world market until the 1920, when Ecuador
started growing abaca.
• Even until now, Philippines control about 85% of
the world market and has the largest Abaca Pulp
Processing Plant in the whole world.
Tobacco:
• The industry was established by the Spaniards in
1782 to finance the defense against Muslim
warriors in the South.
• In 1898, tobacco was the second export earner of
the Philippines, next to Abaca.
• The major player of this industry is PMPMI (Philip
Morris), who came to the Philippines in 1955.
Eleven years later Lucio Tan put up the Fortune
which merged with PMPMI in 2010 to become the
PMFTC, controlling about 90% of the market
Sugar:
• The industry was actually started by the Ayala’s and
Roxas through the establishment of a small distillery in
order to give more value-addition to sugarcane.
• Sugar was first exported by the Philippines in 1856. The
most radical part of development was in 1909 when St.
Louis Oriental Factory was set up in Panggasinan as
sugar refinery using British tech. Shortly after that, sugar
mills were established in the Visayas and some parts in
Mindanao.
Sugar:
• The industry benefited from the Laurel-Langley
agreement, in the 1960’s, were Ph sugar enjoyed a
preferential captive market in the US in exchange for
the growing American influence in the Philippines.
• That was the darkest part of the industry for it
resulted to the downhill path of the industry. It has not
recovered since then.
• The bio-fuel industry made a push for the sugar
industry in 1987, LTDI merged with SMC to become
GSMI.
Coconut:
• Since its entry in the export market before the
1900’s, it remained as still one of the major exports
of the Philippines even until today.
• By 1940, it occupied at number 6 in the export share
and in 1970 coconut oil became the major export
valued at USD96M. In 2010, coconut product export
was one of the top 5 exports with a value reaching
close to USD1.3B
• P&G is still the major player in the CNO buyer in the
local market.
There are other Agribusiness winners:

• Pineapple
• Banana
• Flour
• Rubber
• Oil Palm
• Processed Meat
• Fishery and aquaculture
• Beverages
• Others
The Agribusiness System
Processing-
Aquaculture Production Manufactoring
Input Sector Sector Sector
Agribusiness System
Note: the success of each part depends upon the proper

functioning of the other two!
How large is it??
•Agribusiness is largest employer in

the Philippine. economy: 33% of
GDP, employs 66% of the labor force
•Production systems occupy half of
the 30M hectares in the
Philippines
How large is it??
• Aside from food production, why does this

matter?
• Self sufficiency: (science, government,
education); separates developed from
developing economies
• Point of interest: processing is the promising
sub-sector! (Preservation of goods
perfected??)
The Input Subsector
• Provides farmers with all things needed for

production: feed, fry, credit, equipment, fuel,
chemicals
• Total level of inputs remains stagnant since WWII;
but, type of inputs has varied greatly.
• If labor costs increase, you typically see a shift
towards increased purchase of inputs (agriculture still
remains dependent on manual labor.)
• Purchase of more inputs actually facilitates more
production.
The Production Subsector
• Small and fragmented farms is predominant in

all areas (to some extent aqua-)!
• Corporate farms
• New technologies have resulted in increased
specialization of production among large farms
• genetically altered animals
• specific pathogen-free stocks (big deal in aqua-)
•What does this mean?

•Remains import dependent and high
production cost/unit
•Highly vulnerable to climatic and
weather factors
•Specialization also allows for

increased production efficiency
(telltale sign: increased production
in face of decreased or constant
levels of input)
• Monsoon and climatic changes causing

instability
• every year due to increase input cost
• when commodity prices drop, gross farm income
falls, but amount spent on inputs doesn’t (the great
squeeze!)
• Creating distribution problem of products
The Processing-Manufacturing Subsector
• Includes all business that turn raw materials into

finished (or partially-finished) products
• In aquaculture, mostly done by processors
• Also includes packaging, distribution, and sales,
places and forms desired by consumers (Marketing
bill?)
• Marketing bill represents 70% of total amount spent
by consumers on food!!!
The Processing-Manufacturing
Subsector
• Firms in this sector Packaging

Transportation
are very large (again, Before-tax profits
gathering economies Fuel and power

Depreciation
of scale); very Advertising
responsive to Rent
Net interest
consumer tastes/ Repairs
preferences Other
Labor
The Marketing Bill: What are you paying for?

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MGMT 20

Introduction to Agribusiness Management

Chapter 1- Agribusiness in Retrospect

• BY: Hadasha Navarra bongat

 Origin and definition

 Agribusiness is an agricultural production

 Agribusiness is big business

 Agribusiness is purely a private sector

Agriculture – the science or art of cultivating the soil, producing

 same as agriculture, agribusiness indicate plowing a

They produced most of the

 1957; John Davis and Ray Goldberg

the sum total of all operations involved in the

- this connotes a whole range of possibilities from

 Manufacture of farm inputs/supplies

Agribusiness includes the total input-farm-

Agribusiness is the coordinating science of

• Tremendous variety in the kinds of businesses in the

•Sheer number of agribusinesses

•Infinite variety in size of agribusinesses

•Agribusinesses are small and compete in a

•Agribusinesses are likely to be seasonal in

•Agribusinesses deal with unpredictable change

•Government programs and policies have direct

•Satisfaction of customers’ needs

•System - a combination of related parts

1. Composed of distinct but interdependent parts that function

•Input subsystem – composed of firms that

• Farm production subsystem – consists of individuals and

•Processing subsystem – all firms engaged in

•Marketing subsystem – all individuals and

• Facilitating/Support subsystem – government, nongovernment

1. Composed of distinct but interdependent segments

 Agribusiness consists of all industries surrounding food

 Agribusiness deals with commodities that are of short

 Agribusiness is a commercial activity engaged in as a

 Self- sufficiency vs. commercial

 The Agro-industry system

 Factor conditions : it is the created “specialized factors” of skilled labor,

Product Quality, quantity, packaging and design

Place geographical location, type of market outlet,

Promotion Advertising, customer relations

 As cited by Gallegos, these subsystems are very much

 Agribusiness is both an art and a science of managing an agricultural

 Scope for secondary and tertiary processing of agricultural

1. AYALA AGRICULTURAL DEVELOPMENT CORPORATION

Mother Company: Ayala Corporation

CALIFORNIA MANUFACTURING COMPANY

EAST WEST SEED COMPANY

GENERAL MILLING COMPANY

MERALCO CORPORATE FARM MANAGEMENT,INC.

Mother Company: Manila Electric Company

Other Agencies involved:

NESTLE PHILIPINES, INC.

Mother Company: Nestle Switzerland

Farmers provide, aside from land and labor: Fertilizers

NORTHERN FOOD CORPORATION

Year started: 1983 Services provided to farmers:

MARINE COLLOIDS, PHILIPPINES

Product: Carrageenan from seaweeds

Project sites: Tawi Tawi and Bohol provinces

PHILIP MORRIS (ASIA),INC

PHILIPPINE FRUITS AND VEGETABLE INDUSTRIES, INC.(PFVII)