first chapter topic ( Introduction to Agribusiness)

1. AGBUS 02
(INTRODUCTION TO
AGRIBUSINESS)
IRVING T. FAJARITO,JR.
University of Southern Mindanao

2. Get a piece of Paper….
Instruction: You are required to
DRAW A CARABAO……

3. I. OVERVIEW OF
AGRIBUSINESS

4. Chapter Objectives:
• Define agribusiness.
• Discuss the different misconceptions of
agribusiness
• Explain Agribusiness as a system.
• Give examples of participants in each
subsystem.

5. HOW AGRIBUSINESS
AFFECTS US DAILY?

6. How Agribusiness Affects Us Daily

7. HISTORY OF AGRIBUSINESS
 AGRIBUSINESS- as a concept was born in Harvard
University in 1957 with a book “Conception of
Agribusiness” by J. Davis and R. Goldberg
 Philippines- 1966 UP offered Agribusiness program in
undergrad level
 1969- 4 leading institutions (Asian Institutte of
Management, Ateneo de Manila University, De La
Salle College and University of the Philippines)
spsonsored the First Advanced Agribusiness Mgt.
Seminar in Manila

8. MISCONCPETIONS/ FRAGMENTED VIEWS OF AGRIBUSINESS
 1. Agricultural Production/ Farming
 2. Big Business
 3. Purely Private Undertaking

9.  4. Marketing
 5. Preparation of Feasibility Study

10. I.What is agribusiness?
 It encompasses all activities from the paddock to the
consumer that contribute to the eventual production,
processing (value-addition), distribution, and retailing
of food, fiber, and products based on food or fiber.
 sum total of all operations involve in the manufacture
and distribution of farm supplies production activities
in the farm storage, processing and distribution of
farm commodities and items made from them

11. AGRIBUSINESS SECTOR – all
of agriculture + portion of
industrial sector + portion of
commercial sector

12. The Big Picture of Agribusiness

13. SUBSYSTEMS OF AGRIBUSINESS
1. INPUT SUBSYSTEM- producers,
importers, distributors of inputs to
other susbsystem

14. 2. PRODUCTION SUBSYSTEM- all
farmers who produce products for
direct consumption or intermediate
products for processing

15. 3. PROCESSING SUSYSTEM- both
primary and final processors who
transforms and or store products of
the production subsystem

16. 4. MARKETING SUBSYSTEM-
marketers, assemblers, wholesalers,
retailers, exporters, importers of
both raw and processed products
directly linked to final consumers

17. 5. SUPPORT SUBSYSTEM-
government associations, financing,
educational and research
institutions

18. AGRIBUSINESS AS A SYSTEM –
broad and all encompassing

19. AGRIBUSINESS
 “sunshine sector” program presented
by the Phil. Government to the WB
Consultative Group of Creditor- calls
for strategy to maximize exports and
minimize imports through
diversification and promotion of
commercial export crops.

20. FEATURES OF AGRIBUSINESS
1. Multi-faceted point of view
2. Successful decision making
3. Viability of the industry is traceable to
viability of firms that form part of the
industry
4. Market-oriented

21. WHY AGRIBUSINESS PROGRAMS/ PROJECTS FAIL
 MASAGANA 99- low payment,
unprofitable pricing schemes, production
oriented
 Very low prices at harvest/selling time
 No market for the produce
 No buyers
 Untimely release of loan

22. Considerations in Agribusiness Decisions
 What business should the enterprise engage in?
 How should it be formed? Should it be a corporation,
partnership or single proprietorship?
 Where should it be located?
 How should the land be?
 Should the land be rented or owned?
 How much starting capital should be raised?
 How about the factors of production such as labor and
entrepreneurship? Should the labor be contractual or
regularly hired?

23.  What and how big is the market for the produce
and how are the products be marketed and where?
 What is the recovery period of the capital?
 Is diversification necessary?
 What government regulations and policies govern
the enterprise and the individual venturing in this
field?

24. WHY STUDY AGRIBUSINESS?
Regardless of where you end
up, understanding agricultural
sector is useful
Employment opportunities

25. Nature of successful agribusiness
1. Clean objectives
2. Planning
3. Sound organization
4. Research

26. 5. Finance
6. Proper Plant location, layout and
size
7. Efficient management
8. Harmonious relations with the
workers

27. The Concept of Economics to Agribusiness
 Scarcity
 Resources
 Wants vs. Needs
 Three Basic economic Questions
 Economic System

28. The Agribusiness Economy
 The Agribusiness Input Sector – provides production
agriculturist with feeds, seeds, fertilizer, credit, machinery,
fuel, chemicals, etc.
 The Agribusiness Output Sector – includes individuals that
handle agricultural products from the farm to the
consumers (buying, transporting, storing, warehousing,
grading, sorting, processing, assembling, packing,selling,
etc)
 Processing and Manufacturing Sector - meat processing
industry, dairy processing, baking industry, canned, cured and
frozen foods industry, cotton/textile industry

29. OTHER FACTS
 US Agriculture- largest (private sector) employer in
US
 US Agriculture- 1800’s- 50% of US workforce in
ag. Prod.
 1990’s- 3% of US workforce in ag. Prod.

30. INPUT SECTOR
 Farm productivity- risen 50% since
1967
 Due in large part to improved seed,
feed, fertilizer chemicals and
equipment
 Farmers purchase 70-80% of the
inputs they used

31. FEEDS
 Grain- corn, wheat, barley, etc.
 Complete feeds- 14% dairy or hog
 Concentrates/ supplements- 38%
dairy or 45% beef
 Premixes- vitamin/ mineral mixes

32. MAJOR PLAYERS
Purina Mills (owned by Koch
Industries)
Nutrenena (Cargill)
B-meg
Saranay Feeds

33. SEEDS
 Pioneer
 Dekalb
 Asgrow
 Cargill seeds
 Empire
 Globe

34. FERTILIZERS
Mc Gregor
Wilbur Ellis
Soil Builders

35. Chemical
 Monsanto
 Ciba
 Cyanamid
 Mobay
 Dow-Elanco

36. Petroleum
Exxon
Texaco
Shell Oil
British Petroleum

37. Farm Machinery and Equipment
John Deere
AGCO
Caterpillar
Ford/New Holland

38. FARM PRODUCTION
 Changes in this sector affect input and output sectors.
 Farms numbers
 1955- 4.7 million
 1985- 2.2 million
 1992- 1.9 million
 Fewer and larger input suppliers
 Fewer and larger processors
 Biotechnology

39. OUTPUT SECTOR
 Food processing
 Distribution- wholesalers, retailers,
restaurants
 For every $1 consumer spends- 30%-
farmer and 70%- processing,
distribution and marketing

40. FOOD PROCESSING
 Heinz
 Kraft
 Proctor and Gamble
 Nabisco
 Campbell Soup
 General Mills
 PepsiCo
 Kelloggs
 Iowa Beef Processors

41. Retailing, Distribution, Restaurants
 McDonalds
 Pizza Hut
 KFC
 Safeway
 Kroger
 Giant
 Albertsons

42. SUMMARY
If you eat..... you are involved in
agribusiness!!!
Agribusiness is quite diverse—
spans numerous industries
Future: rise in population, rise in
demand for food

43. AGRICULTURAL INPUT INDUSTRIES
• The ability to apply new technology has
been shown by industries that make up the
agricultural input
• Agricultural input industries sell feeds,
seeds, equipment, chemicals and many other
inputs
• Machine and chemicals have replaced
labor on the farm

44. FARM EQUIPMENT INDUSTRIES
 Tasks like sowing, tilling and reaping were
performed by farmer and family
 JOHN DEERE-steel plow used to plow tough sod
 CYRUS MCCORMICK- mechanical grain reaper
 World War I- US began the process of replacing
their horse drawn equipment with gasoline powered
tractors

45. SEEDS AND FERTILIZER INDUSTRIES
• Most farms were self-sufficient
• 1930’s- hybrid or special seeds
were first made
• World War II- tremendous
increase in the demand for nitrogen
for explosives

46. AGRICULTURAL CHEMICAL INDUSTRY
 Geigy Chemical Co. discovered
insecticidal properties of Dichlorodiphenyl
tricloroetahne (DDT) – kill insects
 2,4 Dichlorophenoxyaceticns acid
(2,4 D)- kill broadleaf weeds but did not
kill grasses- used in 1950’s and 1960’s

47. PESTICIDE INDUSTRY
 firms that produce chemicals used for the control of organisms
or living things that are considered pests- insecticides,
herbicides fungicides
3 MAJOR GROUPS OF THE INDUSTRY
1. MANUFACTURERS- few large chemical, petroleum and
drug comapny
2. DISTRIBUTORS- take an ownership position in pesticides,
warehouse the products, distributes them to the retailers and
provide the dealers with training and technical assistance
3. RETAILERS- sell products to farmers, warehousing, product
distribution, technical advice and extend credit

48. SEED INDUSTRY
• Seed company first sold their
product through a local farm supply
stores
• DEKALB- farmer-dealer
representative to sell to other farmers

49. PRODUCTION AGRICULTURE
 • Includes also fishermen and forester
 • Farmers and ranchers
 • Agribusiness products suffered excess supply,
fierce competition and low market price

50. PROBLEMS OF FARMERS
1. Money receive from marketing
their crops and livestock
2. Comparison of farm income
and non-farm income
3. Unstable farm commodities
prices

51. DIFFERENT MARKETING ALTERNATIVES
1. Sell in cash market at harvest
time
2. Store at harvest and sell later
3. Contract growing scheme
4. Market grain as livestock feeds
5. Sell to the government

52. COMMODITY AND FOOD PROCESSING AND FOOD MANUFACTURING
INDUSTRIES

Commodity processing and food
manufacturing industries came into
being as a result of changes in
technology

53.  MARKETING CHANNELS- paths of a food product
follows from the farm gate to the consumer
 MARKET CHANNEL FOR MOST FOOD PRODUCTS
 PRODUCERS ----ASSEMBLER/PROCURER---
PROCESSOR/MAUFACTURER----WHOLESALER/FO
OD BROKER---FOOD RETAILER/FOOD
SERVICE----CONSUMER

54.  ASSEMBLERS—assemble many smaller sized
amounts or lots of commodities produced by
individual farmers into large sized amounts needed
by processors—buying livestock and crops by
contract
 PROCESSORS—first one to alter the form of the
raw agricultural commodity

55.  FOOD MANUFACTURERS—continue the job started by
processor by further processing crop and livestock
products- raise the level of preservation, convenience and
quality
 FOOD WHOLESALERS—buy large quanitities of food
products for delivery to their warehouse, break to smaller
units for shipment to individual food retailers of food
serviceestablishment
• Take title to their products and resell them to customers

56.  FOOD BROKERS—used as link between
manufacturer/processors and retailers of some products- sales
representative
 - Paid on commission, no tiltle to the products they sell
 - Perform activities such as helping in promotional
campaigns, introducing new products and collecting out of date
or damaged products
 FOOD RETAILERS/ FOOD SERVICE OPERATORS- includes
grocery stores as well as hotel, restaurants and trade institution

57. EXPECTED OUTPUT 1
LIST OF SPECIFIC PARTICIPANTS/FIRMS/ENTITY IN
EACH AGRIBUSINESS SUBSYSTEM
INPUT SUBSYSTEM
PRODUCTION SUBSYSTEM
PROCESSING SUBSYSTEM
MARKETING SUBSYSTEM
SUPPORT SUBSYSTEM