AGB112 INTRODUCTION TO

AGRIBUSINESS MANAGEMENT
Name: EM Syampaku

Cell: 097 8 523576/0965354043

Email: esyampaku@yahoo.com
 CONCEPT OF AGRI-BUSINESS MANAGEMENT
• "any business organization that supplies farm
inputs or services, or that produces, or that
processes, distributes or wholesales
agricultural products, or retails them to
consumers“ modified from (Downey and
Erickson, 1987).
• The agribusiness sector comprises various
commercial enterprises that provide inputs to
the farming sector, produce and supply
agricultural products, markets, processes,
distributes agricultural products, and those that
provide services for the smooth operation of
the agribusiness activities
• Thus, the sector is divided into four economically
interdependent sub-sectors:
• (a) Input supply for farm production:
(i) includes seed, fertilizer, chemicals, labour,
machinery, etc.
(ii) development of this sub-sector determines the
seasonal sizes of the farm production sub-sector.

• (b) farm production:

(i) includes production of raw crops, horticultural
products, meat and dairy products, fish, etc
(ii) largest sub-sector, and forms the pivot of the entire
agribusiness sector.
(iii) Size of this sub-sector depends on the input supply
sub-sector as well as the seasonal weather
conditions
(c) output sub-sector:
(i) comprises the marketers, processors,
wholesalers, retailers, etc.
(ii) provides demand for the farm products,
and maintains the viability of the farm
production by providing the form, place,
time and possession utilities of farm products.
(iii) usually the second largest sub-sector in
many countries.

(d) agri-service sub-sector:

(i) facilitates the smooth functioning of the
input supply, farm production and output
sub-sectors.
(ii) It provides consultancy, extension,
research, finance, brokerage, etc.
(b) Management is defined in terms of functions
performed: planning, organizing, motivating, and
controlling resources.
(i) planning: thinking ahead and formulating
objectives and goals of the organization, and
preparing how to meet them.
(ii) organizing: determining activities and
allocating responsibilities for the achievement of
objectives and goals, and coordinating these
activities and responsibilities into an appropriate
structure.
(iii) motivating: meeting the social and
psychological needs of employees in the fulfilment
of organizational objectives and goals. It is
sometimes referred to as leading or directing.
(iv) controlling: monitoring and evaluating
activities, and providing corrective mechanisms for
any deviations
Distinguishing features of agribusiness enterprises (products)
• (a) ability to be transformed in a variety of ways: this feature
attracts a tremendous variety of business activities between producer
and consumer for investors who want to earn a living through value
adding activities like basic production, shipping, brokering,
wholesaling, processing, storage, financing, etc. Thus, many
agribusiness managers must be qualified in various business
activities for the success of the sector. This feature of agribusiness
products is the basis for creation of forward and backward linkages,
and gives the potential for economic development.
• (b) many processing firms are either built around centres of raw
materials and farm supply or centres of high demand to minimise
costs: firms deal directly or indirectly with farmers, suppliers and
consumers. Interpersonal relationships are very important for the
success of any agribusiness especially if socio-cultural factors are
very strong.
• (c) agri-firms tend to be small in size (although large firms have evolved over time),
and tend to be family oriented: the small nature leads to low marketing volumes that
usually make it difficult to break even and make substantial profits; relatively high pricing
in some cases; creates a low negotiating power for managers in negotiating for prices of
either inputs or outputs. Thus, agribusiness managers need to work with a minimum
scales of the business for success. The family orientation of agri-firms puts managers
usually under close supervision of family members. Job insecurity is common in such
firms.
• (d) agribusinesses compete in a relatively free market environment with many sellers
and few buyers or fewer sellers and many buyers: this creates a low negotiating power for
those in the minority. The competition involved pushes down the rate of return of the
industry towards the competitive floor or zero profit level. This creates low industry
profitability and, eventually, low wages for the sector in many cases. Product and service
differentiation is difficult to undertake, and is usually easy to imitate by other firms in the
industry. Thus, differentiation is not an effective barrier of entry into this industry.
• (e) traditional philosophy of life sometimes makes agri-firms more conservative than
other businesses: for example, consumers are usually suspicious on how food staffs are
processed. Moslems and Seventh Day Adventists do not eat pork or strangled meats.
Europeans may only import food staffs processed by their subsidiary firms or well
inspected firms. Thus, managers must be aware of such philosophies when planning
location of processing plants or marketing products.
(f) agri-firms are affected by seasonal variations: in some cases, production is done
in one season and consumption in another. This creates several challenges:
• (i) storage problems usually occur since products have to be kept for the
whole year or two as in the case of maize.
• (ii) quality tends to change with storage duration.
• (iii) need for preservation arises due to problems of storage pests and
diseases. Enzymatic reactions also tend to cause deterioration as in the case of
fruits and vegetables.
• (iv) costing and pricing tends to be affected with season like in the case of
fertilizers.
• (v) business receipts are affected by season. Cash-flows normally show
distinct periods of surplus and deficits. In some cases, deficit periods are longer
than surplus periods.
• Moreover, droughts, floods, pest outbreaks, etc, constantly threaten
agribusinesses. Droughts may also cause relative shortages which also raise
output prices for grains and lower output prices for beef animals in rural set ups.
In Zambia, drought often causes depreciation of the kwacha due to increased
demand for imported foods which creates pressure on foreign exchange
reserves.
(g) agribusiness products have a short life span: agribusiness products
are generally perishable. Thus, they require special handling and
processing techniques. Moreover, products must be disposed off
within a short period of time. Selling techniques are very important for
quick disposals, for example, credit sales, contract arrangements, etc.
Expiry dates also need to be shown on products in many countries.
(h) agribusiness products tend to be bulky in nature: this creates high
fixed (storage) and transport costs, ultimately, a high breakeven point.
Thus, marketable volumes must be determined well in advance
before production commences to have reasonable profits.
(i) government intervention is normally high: price and market controls
are common for political stability. For example, export permits are
limited in the maize subsector in Zambia and Zimbabwe. Food relief
operations also tend to threaten pricing of products. Input and output
price and marketing institutional policies are common in agriculture.
Thus, forecast profits may change with government intervention.
• Importance of the agribusiness sector:
Normally an important sector in an economy because it directly supports
the livelihood of citizens.; accounts for at least 20% of GDP in order to
support citizens. Thus, in many developing countries, is very
important because it:
(a) is the largest single sector employing over 50% of the labour force. It
has many forward and backward linkages that enable it create several
enterprises between the points of production and consumption. For
example, raw materials are supplied to the manufacturing sector:
maize to millers, cotton to textile firms, etc, and ploughs, fertilizers,
etc, are supplied to farmers. It contributes the largest component of
GDP in many countries.
(b) acts as a market for non-agri-business products such as radios, cars,
etc. Farmers normally thrive by selling farm commodities, and using
the revenues from such sales they are able to buy second hand trucks
from Japan. Some weekend farmers who might be civil servants also
tend to acquire such heavy assets by engaging in farming.
(c)is a source of foreign currency earnings such as sugar in Zambia
and Swaziland, tobacco in Zimbabwe, flowers in Kenya, etc. But it
can lead to foreign currency outflow through food imports if the
sector is poorly managed.
(d) is a source of income to many rural households. Rural
incomes come mostly from agriculture. Agribusinesses involved in
buying farm produce directly transfer incomes to rural households.
(e) supplies good nutrition to citizens. Marketing and
processing normally blend many agricultural products into high
nutrition products that improve livelihood of many families. No
single farmer produces products that meet all his/her nutritional
requirements. Thus, trade and processing are important.
(f) can motivate the development of non-agribusiness sectors. For
example, source or market of agribusiness products can lead to
construction of better roads.
GOODBYE