AGRIBUSINESS COMMODITY SYSTEM
Lesson 3
The Agribusiness Processing Subsystem
Objectives:
• Explain the factors to consider in managing a processing undertaking;
• Categorize agribusiness processing operations;
• Describe the important functions of a packaging; and
• Identify challenges in the agribusiness processing sector.
The Agribusiness Processing Subsystem- What is it?
• It is strategic because it provides competitive advantage to an otherwise raw
and undifferentiated agricultural product.
• Processing makes the product palatable, portable and preservable.
• Processing must be seen as provider of better alternative that would satisfy the
customer’s wants and needs better than that of competitors.
Basic Processing Factors
• There are six basic factors to be considered in agribusiness processing
subsystem. It includes processing technology, plant location, inventory
management, packaging, programming and control, and by-products.
• The technology to be used must meet the requirements or preferences of the
market. The most effective technology must be selected while considering the
cost of technology.
The level of mechanization one adopts does not only depend on the nature of the
production process, but also, on the cost of labor in the site. Capacity utilization of the
processing equipment is need to be considered because of the seasonality of
agricultural products.
Drying
Sorting Cutting
Conditioning
Fermenting
Curing Freezing
Stabilizing
Distillation
Vacuum Heating
Concentrating
Pelletizing
Blending Agitation
Mixing
Agro-Processing Operations
The location of the processing plant is critical due to its implication on the quality and
cost of raw materials and so with the product. In choosing plant site, one must think
through about the cost of the land, infrastructure, availability of required labor and
provisions of basic utilities (electricity and water). Products that need immediate
processing, requires processing plants to be located near to the source of raw
materials.
Packaging of the product performs three important functions. It protects the product’s
quality, facilitates the product’s transportability and enhances the product’s identity
and adds value through differentiation.
Once the processing of agricultural product begins, an agribusiness manager has to
anticipate the required steps to ensure the orderly flow of materials (supplies, goods
in process, finished products) and implement the anticipated tasks to meet the desired
outcomes. In the programming and control, take note of the following;
• The quantities and delivery dates of raw materials in relation to processing
requirements must be foreseen to have less work in process, reduced stock
inventories, and faster turn over.
• Production shifts must be planned and coordinated so that the firm can deliver
the buyer’s supply orders and avoid additional expense in storage or penalties
due to delayed deliveries.
The quality of the product is another concern for monitoring and control. Globalization
of markets has put greater pressure on upgrading food safety regulation. It is not only
socially responsible but also cost effective for processing firms to ensure that their
operations do not produce emissions and waste that are damaging to the environment
as part of their increasing concern for environmental protection.
The nature of agro-processing which it uses a lot of biological materials, managers
need to be concerned not only about the environmental effect of its byproducts, but
also the economic opportunities that can be derived from such “wastes”.
Challenges in the Food Processing Sector
The food processing industry in most parts of Southeast Asia are seen as contributing
to employment generation, valuing of agricultural products, mobilization of savings in
rural areas, and eventually facilitating the development of advanced food processing
industries. The main problems of small-scale food processing industries are the
following:
INSUFFICIENT SUPPLY OF
QUALITY RAW MATERIALS LOW LEVEL OF LACK OF RD AT
TECHNOLOGY FACTORY LEVEL
COMPETITIVE
INCONSISTENCY IN POOR ACCESS TO
MARKET
PRODUCT QUALITY FINANCING
INSTITUTION
LACK COOPERATIVE
INABILITY TO MEET
EFFORTS OF SMALL— INADEQUATE
PACKAGING
SCALE PROCESSOR
REQUIREMENTS
MANAGEMENT
SKILLS
