Describe the nature of Agribusiness as a service industry

Agricultural services provide information, consulting, equipment, and supplies to the

agricultural industry. Examples include government agricultural extensions, crop brokers and
shippers, meat packers, produce distributors and wholesalers, and veterinarians.
Equipment Services
Equipment repair and parts: Fixes broken equipment, or sources parts for self-service.
Equipment sourcing and sales: Provides farmers access to essential machinery.
Equipment rental: Leases equipment for predetermined jobs or intervals.
Equipment shares: Splits ownership of common, but less-used equipment amongst a
cooperative.
Equipment contractors: Machinery owners perform tasks on a single job basis.

 Market Services

 Marketing: An organization develops advertising and publicity strategies for AG

products.
 Packaging: Products are processed to prevent contamination, easy transportability,
and identify ingredients and notations.
 Brokers: Facilitate the sale and purchase of all AG related commodities, including
real estate.
 Shipping and distributing: An enterprise that specializes in AG logistics. Dedicated
equipment, such as livestock or frozen trailers, is often required.
 Wholesalers: Wholesalers buy AG commodities in bulk to distribute them via retail
channels.
 Slaughter and butchering: Kill livestock and process meat for wholesale purposes.

Regulatory Services

These services are regulated by the Agricultural Marketing Service, a division of the United
States Department of Agriculture.

Quality grading: Grade marks are frequently implemented on meat, poultry, butter, dairy,
eggs, cotton and tobacco. Grades are relied on in trade to denote the quality of product. On
meat products these marks represent the flavor and quality of cut. Grading is the
responsibility of the United States Department of Agriculture.

Auditing and accreditation: Evaluates agricultural suppliers based on ISO 19011:2011 to

assure customers of consistent quality products and services. This is another responsibility of
the USDA.
  Organic accreditation: Private, foreign, and government entities are authorized to
market their products as organic. Violations result in penalties, including fines and
loss of licensure.

Import/export certification: Standardizes perishable fruits, vegetables, and egg shells that
are entering the United States, as well as U.S.-produced agricultural goods destined for other
nations. AMS also maintains a database of this info for quick access.

Lab testing and approval: Scientific analysis by AMS provides chemical, microbiological,
and bio-molecular testing. AMS also accredits certain labs to perform this work.

Market research and analysis: Provides neutral market insight that helps AG businesses
identify trends and opportunities.

Market and facility design: Provides technical assistance, design, and support for the
construction of new AG facilities, such as wholesale markets, famers markets, public
markets, and food hubs. Support is provided throughout all phases of development, including
zoning, building codes, site selection and preparation, concept design, financial analysis, and
building studies.

Transportation research and analysis: Studies trends and opportunities for AG product
transportation.

Seed testing and clearance: Ensures efficient marketing of seeds and assists developing
new or expanding markets. Many international markets require this process.

Farming Services

 Soil fertility and composting services: Assists farmers to address soil fertility issues
to increase crop quality and yield.
 Land management services: Helps optimize AG land usage by improving tilling,
draining, excavating, clearing, rotating, fertilizing, irrigation, and harvesting
techniques.
 Veterinary services: Provides medical attention for AG animals, such as working
animals and livestock. This includes emergency care, diagnostics, treatment, and
hospitalization. Common procedures include reproductive care, ultrasounds, x-rays,
vaccinations, and milk services.
 Fencing: Companies erect fences or barriers to establish perimeters and retain
animals.
 Biocide services: Apply or supply herbicides and pesticides to farmlands; this
includes cropdusting services.
 Biotechnology: Companies provide genetically-modified organisms, develop
vaccines, provide bioanalytic services, and clone crops.
 Grooming services: Maintain animal appearances via bathing, shearing, and trimming
processes.
The factors affecting supply and demand of Agro products?
The demand of a product is influenced by a number of factors.
An organization should properly understand the relationship between the demand and its
each determinant to analyze and estimate the individual and market demand of a product.
The demand for a product is influenced by various factors, such as price, consumer’s
income, and growth of population.
For example, the demand for apparel changes with change in fashion and tastes and
preferences of consumers. The extent to which these factors influence demand depends on
the nature of a product.
An organization, while analyzing the effect of one particular determinant on demand, needs
to assume other determinants to be constant. This is due to the fact that if all the
determinants are allowed to differ simultaneously, then it would be difficult to estimate the
extent of change in demand.
Following are the determinants of demand for a product:
i. Price of a Product or Service:
Affects the demand of a product to a large extent. There is an inverse relationship between
the price of a product and quantity demanded. The demand for a product decreases with
increase in its price, while other factors are constant, and vice versa.
For example, consumers prefer to purchase a product in a large quantity when the price of
the product is less. The price-demand relationship marks a significant contribution in
oligopolistic market where the success of an organization depends on the result of price war
between the organization and its competitors.
ii. Income:
Constitutes one of the important determinants of demand. The income of a consumer affects
his/her purchasing power, which, in turn, influences the demand for a product. Increase in
the income of a consumer would automatically increase the demand for products by him/her,
while other factors are at constant, and vice versa.
For example, if the salary of Mr. X increases, then he may increase the pocket money of his
children and buy luxury items for his family. This would increase the demand of different
products from a single family. The income-demand relationship can be analyzed by grouping
goods into four categories, namely, essential consumer goods, inferior goods, normal goods,
and luxury goods.
The relationship between the income of a consumer and each of these goods is
explained as follows:
a. Essential or Basic Consumer Goods:
Refer to goods that are consumed by all the people in the society. For example, food grains,
soaps, oil, cooking fuel, and clothes. The quantity demanded for basic consumer goods
increases with increase in the income of a consumer, but up to a fixed limit, while other
factors are constant.
b. Normal Goods:
Refer to goods whose demand increases with increase in the consumer’s income. For
example, goods, such as clothing, vehicles, and food items, are demanded in relatively
increasing quantity with increase in consumer’s income. The demand for normal goods
varies due to .different rate of increase in consumers’ income.
c. Inferior Goods:
Refer to goods whose demand decreases with increase in the income of consumers. For
example, a consumer would prefer to purchase wheat and rice instead of millet and cooking
gas instead of kerosene, with increase in his/her income. In such a case, millet and kerosene
are inferior goods for the consumer.
However, these two goods can be normal goods for people having lower level of income.
Therefore, we can say that goods are not always inferior or normal; it is the level of income
of consumers and their perception about the need of goods.
d. Luxury Goods:
Refer to goods whose demand increases with increase in consumer’s income. Luxury goods
are used for the pleasure and esteem of consumers. For example, expensive jewellery items,
luxury cars, antique paintings and wines, and air travelling.
iii. Tastes and Preferences of Consumers:
Play a major role in influencing the individual and market demand of a product. The tastes
and preferences of consumers are affected due to various factors, such as life styles, customs,
common habits, and change in fashion, standard of living, religious values, age, and sex.
A change in any of these factors leads to change in the tastes and preferences of consumers.
Consequently, consumers reduce the consumption of old products and add new products for
their consumption. For example, if there is change in fashion, consumers would prefer new
and advanced products over old- fashioned products, provided differences in prices are
proportionate to their income.
Apart from this, demand is also influenced by the habits of consumers. For instance, most of
the South Indians are non-vegetarian; therefore, the demand for non- vegetarian products is
higher in Southern India. In addition, sex ratio has a relative impact on the demand for many
products.
For instance, if females are large in number as compared to males in a particular area, then
the demand for feminine products, such as make-up kits and cosmetics, would be high in that
area.
iv. Price of Related Goods:
Refer to the fact that the demand for a specific product is influenced by the price of related
goods to a greater extent.
Related goods can be of two types, namely, substitutes and complementary goods,
which are explained as follows:
a. Substitutes:
Refer to goods that satisfy the same need of consumers but at a different price. For example,
tea and coffee, jowar and bajra, and groundnut oil and sunflower oil are substitute to each
other. The increase in the price of a good results in increase in the demand of its substitute
with low price. Therefore, consumers usually prefer to purchase a substitute, if the price of a
particular good gets increased.
b. Complementary Goods:
Refer to goods that are consumed simultaneously or in combination. In other words,
complementary goods are consumed together. For example, pen and ink, car and petrol, and
tea and sugar are used together. Therefore, the demand for complementary goods changes
simultaneously. The complementary goods are inversely related to each other. For example,
increase in the prices of petrol would decrease the demand of cars.
v. Expectations of Consumers:
Imply that expectations of consumers about future changes in the price of a product affect
the demand for that product in the short run. For example, if consumers expect that the prices
of petrol would rise in the next week, then the demand of petrol would increase in the
present.
On the other hand, consumers would delay the purchase of products whose prices are
expected to be decreased in future, especially in case of non-essential products. Apart from
this, if consumers anticipate an increase in their income, this would result in increase in
demand for certain products. Moreover, the scarcity of specific products in future would also
lead to increase in their demand in present.
vi. Effect of Advertisements:
Refers to one of the important factors of determining the demand for a product. Effective
advertisements are helpful in many ways, such as catching the attention of consumers,
informing them about the availability of a product, demonstrating the features of the product
to potential consumers, and persuading them to purchase the product. Consumers are highly
sensitive about advertisements as sometimes they get attached to advertisements endorsed by
their favourite celebrities. This results in the increase demand for a product.
vii. Distribution of Income in the Society:
Influences the demand for a product in the market to a large extent. If income is equally
distributed among people in the society, the demand for products would be higher than in
case of unequal distribution of income. However, the distribution of income in the society
varies widely.
This leads to the high or low consumption of a product by different segments of the society.
For example, the high income segment of the society would prefer luxury goods, while the
low income segment would prefer necessary goods. In such a scenario, demand for luxury
goods would increase in the high income segment, whereas demand for necessity goods
would increase in the low income segment.
viii. Growth of Population:
Acts as a crucial factor that affect the market demand of a product. If the number of
consumers increases in the market, the consumption capacity of consumers would also
increase. Therefore, high growth of population would result in the increase in the demand for
different products.
ix. Government Policy:
Refers to one of the major factors that affect the demand for a product. For example, if a
product has high tax rate, this would increase the price of the product. This would result in
the decrease in demand for a product. Similarly, the credit policies of a country also induce
the demand for a product. For example, if sufficient amount of credit is available to
consumers, this would increase the demand for products.
x. Climatic Conditions:
Affect the demand of a product to a greater extent. For example, the demand of ice-creams
and cold drinks increases in summer, while tea and coffee are preferred in winter. Some
products have a stronger demand in hilly areas than in plains. Therefore, individuals demand
different products in different climatic conditions.

In economics, supply refers to the quantity of a product available in the market for sale at a
specified price at a given point of time.

Unlike demand, supply refers to the willingness of a seller to sell the specified amount of a
product within a particular price and time.

Supply is always defined in relation to price and time. For example, if a seller agrees to sell
500 kgs of wheat, it cannot be considered as supply of wheat as the price and time factors are
missing.

Similarly, if a seller is ready to sell 500 kgs at a price of Rs. 30 per kg then again it would
not be considered as supply as the time element is missing. Therefore, the statement “a seller
is willing to sell 500 kgs at the price of Rs. 30 per kg in a week” is ideal to understand the
concept of supply as it relates supply with price and time.

Apart from this, the supply also depends on the stock and market price of the product. Stock
of a product refers to quantity of a product available in the market for sale within a specified
point of time.
Both stock and market price of a product affect its supply to a greater extent. If the market
price is more than the cost price, the seller would increase the supply of a product in the
market. However, the decrease in market price as compared to cost price would reduce the
supply of product in the market.

For example Mr. X has 100 kgs of a product. He expects the minimum price to be Rs. 90 per
kg and the market price is Rs. 95 per kg. Therefore he would release certain amount of the
product, say around 50 kgs in the market, but would not release the whole amount. The
reason being he would wait for better rates for his product. In such a case, the supply of his
product would be 50kgs at Rs. 95 per kg.

Determinants of Supply:

Supply can be influenced by a number of factors that are termed as determinants of supply.
Generally, the supply of a product depends on its price and cost of production. In simple
terms, supply is the function of price and cost of production.

Some of the factors that influence the supply of a product are described as follows:

i. Price:

Refers to the main factor that influences the supply of a product to a greater extent. Unlike
demand, there is a direct relationship between the price of a product and its supply. If the
price of a product increases, then the supply of the product also increases and vice versa.
Change in supply with respect to the change in price is termed as the variation in supply of a
product.

Speculation about future price can also affect the supply of a product. If the price of a
product is about to rise in future, the supply of the product would decrease in the present
market because of the profit expected by a seller in future. However, the fall in the price of a
product in future would increase the supply of product in the present market.

ii. Cost of Production:

Implies that the supply of a product would decrease with increase in the cost of production
and vice versa. The supply of a product and cost of production are inversely related to each
other. For example, a seller would supply less quantity of a product in the market, when the
cost of production exceeds the market price of the product.

In such a case the seller would wait for the rise in price in future. The cost of production
rises due to several factors, such as loss of fertility of land, high wage rates of labor, and
increase in the prices of raw material, transport cost, and tax rate.

iii. Natural Conditions:

Implies that climatic conditions directly affect the supply of certain products. For example,
the supply of agricultural products increases when monsoon comes on time. However, the
supply of these products decreases at the time of drought. Some of the crops are climate
specific and their growth purely depends on climatic conditions. For example Kharif crops
are well grown at the time of summer, while Rabi crops are produce well in winter season.

iv. Technology:

Refers to one of the important determinant of supply. A better and advanced technology
increases the production of a product, which results in the increase in the supply of the
product. For example, the production of fertilizers and good quality seeds increases the
production of crops. This further increase the supply of food grains in the market.

v. Transport Conditions:

Refer to the fact that better transport facilities increase the supply of products. Transport is
always a constraint to the supply of products, as the products are not available on time due to
poor transport facilities. Therefore even if the price of a product increases, the supply would
not increase.

In India sellers usually use road transport and the poorly maintained road makes it difficult to
reach the destination on time the products that are manufactured in one part of the city need
to be spread in the whole country through road transport This may result in the damage of
most of the products during the journey, which can cause heavy loss for a seller. In addition
the seller can also lose his/her customers because of the delay in. the delivery of products.

vi. Factor Prices and their Availability:

Act as one of the major determinant of supply. The inputs, such as raw material man,
equipment, and machines, required at the time of production are termed as factors. If the
factors are available in sufficient quantity and at lower price, then there would be increase in
production.

This would increase the supply of a product in the market. For example, availability of cheap
labor and raw material nearby the manufacturing plant of an organization would help in
reducing the labor and transportation costs. Consequently, the production and supply of the
product would increase.

vii. Government’s Policies:

Implies that the different policies of government, such as fiscal policy and industrial policy,
has a greater impact on the supply of a product. For example, increase in tax on excise duties
would decrease the supply of a product. On the other hand, if the tax rate is low, then the
supply of a product would increase.

viii. Prices of Related Goods:

Refer to fact that the prices of substitutes and complementary goods also affect the supply of
a product. For example, if the price of wheat increases, then farmers would tend to grow
more wheat than nee. This would decrease the supply of rice in the market.