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Abm 103 - Introduction To Agribusiness Management





ABM 103 – Introduction to Agribusiness Management sustainable orchestration of food, fiber and natural resources (Edwards and Shultz II, 2005) Misconceptions on Agribusiness    Merely agricultural production through farming Only big business Purely private sector undertaking What is Agribusiness?  Traditional Definition (productionoriented)  Agribusiness is the sum total of all operations involved in the manufacture and distribution of farm supplies; production activities on the farm; and the storage, processing and distribution of farm commodities and items made from them. (John Davis and Ray Goldberg, 1957)   Agribusiness includes the total input-farm-product sectors that supply farm inputs; involved in production; and finally, handle the processing, distributing, wholesaling and retailing of the product to the final customer (Downey & Tracke, 1987) Reframed Definition (marketoriented)  Agribusiness is a dynamic and systemic endeavor that serves consumers globally and locally through innovation and management of multiple value chains that deliver valued goods and services derived from DNFVelasco Introduction to Agribusiness ManagementPage 1 From Farm Centric to Market Centric  Boundaries were pushed from farm-centered production to customer-centered activities  Today’s agribusiness focus on:  Value chains as systems and as consisting of several stakeholders  Application of new technologies  Globalization  Natural/Scare resources management  Sustainable differential advantages Reasons for Reframing Agribusiness  More demanding consumers  Pressure agribusiness companies to produce high quality products at lower cost  Demand innovative products that are environmentfriendly  Pressure agribusiness firms to be more ecologically sensitive  Entry of niche and non-traditional players producing innovative products ABM 103 – Introduction to Agribusiness Management      Trend towards health and wellness which is also related to increased demand by consumers Time allocation and pressures – fast delivery of goods and services within the value chain Morphing enterprises and business extensions – other businesses going into agribusiness Distribution and retailing clout – proliferation of institutional large retailers Information Technology – text books, media and the internet as sources of information      Distinctive Features of Agribusiness            Tremendous variety in the kinds of businesses in the agribusiness sector Sheer number of agribusinesses Infinite variety in size of agribusinesses Small and compete in a relatively free market Agribusiness firms tend to be family-oriented Agribusiness tends to be community-oriented Many agribusiness workers exhibit a traditional philosophy of life The way in which basic agribusiness is built around several million farm producers Highly seasonal in nature Deal with the vagaries of nature Government programs and policies have direct impact on agribusiness Characteristics of Reframed Agribusiness (Edwards and Shultz, 2005)  Potential Effects of Key Resources on Agribusiness    Natural Increased need for energy, land and water Pollution control and ecology preservation More rational use of resource  Green/renewable power  Use of grey water (water recycling)  Use of biodegradable and recyclable products  Planting of drought and salttolerant plants Agribusiness vs. Business Agricultural Economics  DNFVelasco Introduction to Agribusiness ManagementPage 2 Larger – due to aggregation and expansion of farms to achieve economies of scale Diversified – inclusion of portfolio of related business which may also be due to acquisition/aggregation Complex – due to new requirements for accounting, financial controls and marketing relationships Strategic – long-term thinking about the effects of agribusiness to the natural environment and sustainability Multinational – agribusiness products such as grains, processed food and fiber are important export commodities Political – agribusiness companies become politically active due to pressures in zoning, quality, ecology, access to power and water, and environmental conservation vs. Agribusiness: if a business enterprise moves nearer to ABM 103 – Introduction to Agribusiness Management   agriculture and mainly uses agricultural raw materials Business: if a business enterprise moves farther from agriculture, making use of non-agricultural raw materials Agricultural Economics: refers to the monetary and physical factors that affect the profitability of the agribusiness  The Agribusinessman   A person who works in or manages an agribusiness Characteristics of a good agribusinessman  Opportunity seeker (Actionoriented )  Entrepreneurial – responsive to the developments in the environment  Techno-managerially oriented  Dedicated to his work – taking farming as a business and not as a way of life Consisting of on-farm and off-farm business units  Selling of inputs (fertilizers, agrochemicals)  On-farm production of crops and livestock, forest trees, fish  Off-farm business activities like leather tanning, woodworks  Provision of agroservices (financing, market information, technology, education, warehousing) Agribusiness Sectors  Agribusiness encompasses the whole of the Agriculture sector plus a portion of the industrial and service sectors Agribusiness as a Field of Study    Integrative and multi-disciplinary in nature Multidisciplinary areas:  Economics: economics of agriculture  Agricultural sciences: animal, crops, fishery, forestry  Management: production, marketing, personnel, finance  Human behavior: leadership, motivation, rewards Management in orientation Agribusiness as an Economic Sector DNFVelasco Introduction to Agribusiness ManagementPage 3 Economic Sectors of Agribusiness   Agriculture  Crops  Livestock  Fishery  Forestry Agriculture: Economic Contribution ABM 103 – Introduction to Agribusiness Management             Food provider of the economy Employs a large part of the developing economy’s labor force (around 30% of the total workforce is directly and indirectly employed in agriculture, 2014) Contributes around 11.2% to the GDP (CIA World Factbook, 2015) Important source of exports of developing countries (9.6% of total export earnings or $5B, 2012) Agroindustries: Food Industries  Processed Meat and fish products  Processed fruits and vegetables  Milk and Dairy Products  Cereals  Bakery products  Beverages (coffee, tea and chocolate)  Condiments and flavoring extracts Agroindustries: Non-Food Industries  Leather and leather products  Wood, woodworks and cork products  Rubber and rubber products  Textile fiber products manufacturers  Paper and paper products Financing Physical distribution services (transportation and warehousing) Market research and market information dissemination Market matching Research and development Technical Assistance DNFVelasco Introduction to Agribusiness ManagementPage 4 Vertical Structure and Coordinators Agribusiness Subsystems: Input        Fertilizer Industry Feeds Industry Seed Industry Agrochemical Industry Agricultural Machinery and Irrigation Equipment Veterinary Products Animal Resources: breeding and hatchery Agribusiness Farm/Production   Subsystems: Direct on-farm production activities Livestock, crops, fishery, and forestry Agribusiness Processing Subsystems: ABM 103 – Introduction to Agribusiness Management     Primary, intermediate and final processors Prolongs the shelf life of agricultural products – minimizes the adverse effects of seasonality and perishability Opens up more markets (domestic and foreign) Food and non-food agroindustries Agribusiness as an Open System    Agribusiness Subsystems: Marketing   For physical distribution and transfer of products Traders, sales agents, brokers, assemblers, wholesalers, retailers, importers, exporters and other intermediaries Characteristics Systems   Agribusiness Subsystems: Support  Providers of agroservices Cuts across the subsystems    Composed of distinct but interdependent parts that function towards a common goal Affected by the developments in its external environment The viability of the whole agribusiness system depends on the viability of each subsystem, the synchronized operation of the subsystems, and the ability to adapt to the changes in the environment different  of Agribusiness Market-oriented Subsystems are interrelated and interdependent Presence of different coordinating mechanisms Dependent on natural production conditions Clustered around many small producers (in developing countries) Agribusiness System References:     DNFVelasco Introduction to Agribusiness ManagementPage 5 SL.AGR.EMPL.ZS ines/ ml L.E. Mojica, G.N. Baticados, M.B. Cruz, J.J.S. Cabardo Lecture Notes Ricketts, C and Ricketts K.G., 2013