Agri Business

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<p>Introduction Agribusiness industry is one of the main contributors to the nations gross national product of any country and that too especially in less developed countries. In Ethiopia agriculture represents 45 % of the GDP and sustains the livelihood of 85 % of the population. Whereas agricultural commodities (both primary products and value-added products) are the main components of the trade balance in Ethiopia. Agricultural marketing is a key component of rural growth, poverty reduction, enhanced food security and addressing the needs of a growing population in both rural and urban areas. The course on Agribusiness Management is very much significant because it helps in providing future managers the knowledge to understand how to provide food and fiber to the nation in a better way. This course also enables the managers to have a better understanding of the agribusiness system and its various components. And how these different components interact with each other so that the inputs required by the farmers reach to them and the products produced by them reach the consumers through the distributors. This course enables the future managers to think differently and to transform farmers from subsistence farming to enterprise farming so as to provide them higher income and a better standard of living. This course material on Agribusiness Management is oriented towards imparting knowledge of the activities and management concepts and tools relating to non-farm agricultural business firms engaged in input supply, advisory services, processing, marketing and distribution of food and agricultural commodities. The contents of this course material are grouped into two modules covering the important topics of agribusiness operations specifically emphasizing on the marketing operations of agribusiness. The course material has been prepared in an easy and simple language so as to make it easy and interesting to read.</p> <p>1</p> <p>TABLE OF CONTENT Title 1. Page</p> <p>Agribusiness Management: An Overview .................................. 1.1. Definition, Significance, And Scope Of Agribusiness 1.2. The Agribusiness System Self-testing questions 2. The Management And Organization Of Agribusiness 2.1. Distinctive Features Of Agribusiness Management 2.2. Functions Of Management 2.3. The Organization Of Agribusiness Self-testing questions 3. Systems Approach To Agroindustrial Analysis 3.1. Production Chain Linkages 3.2. Macro-Micro Policy Linkages 3.3. Institutional Linkages 3.4. International Linkages Self-testing questions 4. Agroindustrial Analysis Procurement And Processing Factors 4.1. Procurement Factors 4.2. Processing Factors Self-testing questions 5: The Agribusiness Marketing Management 5.1. Agricultural Marketing and The Agribusiness Firm ... 5.2. Commodity Marketing 5. 3. Marketing Program of Agribusiness 5.4. The Marketing Environment of the Agribusiness Firm 5.5 The Marketing Plan . 5.6 Developing a Marketing Strategy 6. The Agribusiness Marketing Mix . 6.1. Agribusiness products: Definition, Features, Product mix decisions, and the Agribusiness Product Lifecycle . 6.2 Promotion of Agribusiness Products .. 6.3. Distribution of Agribusiness products . 6.4. Pricing of Agribusiness Products .</p> <p>7.</p> <p>Government Marketing Services ..7.1. 7.2. 7.3. Market Information Services Assistance to Market Operations ... Market Surveillance ...</p> <p>8.</p> <p>Managing the Market Risk .8.1. Types of Risk 8.2. Common Types of Business Risk .. 8.3. Ways to Reduce Business Risk 8.4. Ways to Manage the Market Risk .</p> <p>9.</p> <p>Operating the Agribusiness ..9.1. Production Planning in the Agribusiness . 9.2. Production Processes . 9.3. Types of Production . 2</p> <p>9.4. Special Problems in Agricultural Production 9.5. Planning Production 9.6. Controlling Production Processes in the Agribusiness ..</p> <p>10.</p> <p>Evaluating the Marketing Program .10.1. Revenue 10.2. Costs 10.3. Financial Planning: Records and Analysis Bibliography ..</p> <p>3</p> <p>I. Agribusiness Management: An Overview This unit could be considered as an introductory unit as it provides the definition, significance, and scope of agribusiness. In addition, this unit also explains the agribusiness system and its components. Unit Objectives Define what an agribusiness is Explain the scope of agribusiness Understand the agribusiness system and its parts Explain the agricultural input sector Explain the farm/production sector Explain the processing/manufacturing sector Explain the service sector 1.1. Definition, Significance, and Scope of Agribusiness</p> <p>Definitions of Agribusiness Agribusiness means the very large or conglomerate businesses within the agricultural industry. But this is a very narrow definition. We need to have a broader definition on agribusiness to have a true picture on agribusiness. The following are some of the broader definitions on agribusiness. According to Davis and Goldberg, agribusiness includes the sum total of all operations involved in the manufacture and distribution of farm supplies; production operations on the farm; and the storage, processing, and distribution of farm commodities and items made from them. According to Downey and Trocke, agribusiness includes the total input-farm-product sectors that supply farm inputs; are involved in production ; and finally handle the processing, distributing, wholesaling, and retailing of the product to the final consumer. According to Long, Oliver, Coale, and Lee, agribusiness management involves the habits and practices of management as they apply to the businesses that are connected with agriculture. A simple modern day definition of agribusiness is agribusiness encompasses the total food production and distribution system. Activity 1.1 Agribusiness includes only very large or conglomerate businesses within the agricultural industry? Discuss upon it. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ____________</p> <p>4</p> <p>Importance/Significance of Agribusiness Agribusiness is an important subject area because it is concerned with society and basic needs. Getting food and fiber to all people in the world in the right form at the right time is an extremely complex process. About 50% of the worlds population is involved in the basic industry of providing food. Many think of USA as a highly industrialized country with agriculture being a relatively small part, but approximately 50% of the total assets of all US corporations and Farms combined is in agribusiness. Also around 17% of US labor force is employed in agribusiness operations and roughly 22% of USA consumer expenditures are for food and clothing made from US Farm products, and it contributes 16% to the nations Gross National Product. Around 85% of Ethiopian population depends on agriculture, and its concerned activities. Agriculture is an integral part of the world food system. Crop and animal production are the foundation of the system. Management is critical to success in agribusiness. The agribusiness sector becomes increasingly important because it is faced with the responsibility of providing not only the right type and amount of purchased inputs to the farm sector but the correct mix of service to products as they move through the food system to the final consumer. Providing quality food and fiber at reasonable prices to all consumers, agribusiness is vital to any nations economy. The Scope of Agribusiness Agriculture or agribusiness is an integral part of the general economic system. The agribusiness sector in todays economic environment combines diverse commercial firms, using a heterogeneous combination of Labor, Materials, Capital, and Technology. The agribusiness sector begins with many varied activities from the farm supply sector, which provides a myriad of production inputs and services to the farm, and then continues through the marketing, processing, and distribution activities necessary to satisfy consumer wants. Agribusiness- related occupations include: 1) Agricultural products and propagation of animals, animal products, plants, plant products, forests, and forest products. 2) The provision of services associated with agricultural production and the manufacture and distribution of supplies used in agricultural production. 3) Design, installation, repair, operation, servicing of machinery, equipment, and power sources, and construction of structures used in agricultural production. 4) Any activities related to inspection, processing, and marketing of agricultural products and primary by-products. 5) Any aspects of greenhouse, nursery, landscaping, and other ornamental horticultural operations. 6) Conservation, propagation, improvement, and utilization of renewable natural resources. 7) The multiple uses of forest lands and resources. 5</p> <p>Agribusiness is by no means homogeneous industry. Agribusiness is made up of small family firms; large corporate organizations; credit and other input supply firms; marketing and processing firms; transportation networks; wholesalers; restaurants; and food and fiber retailers. Agribusiness industry is composed of a complex series of firms. Agribusiness firms supply inputs to farms, produce farm products, process agricultural products, and market these commodities to the final consumers. No longer do we think of agribusiness/ agriculture as solely the physical and biological production of agricultural commodities. If the United States has a relative advantage in the production of any product at this time, it is in agricultural commodities. Activity 1.2 Is agribusiness is a homogeneous or heterogeneous industry? Explain. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ________________________ 1. 2. The Agribusiness System The agribusiness system consists of all the firms that are involved in supplying inputs or services to production agriculture or that handle, process, or manufacture farm outputs and that distribute, wholesale, or retail these products to the final consumer. The agribusiness system consists of the following four parts: 1. the agricultural input sector 2. the production sector 3. the processing-manufacturing sector, and 4. the service (distribution) sector Each part of the agribusiness system is linked to the other parts of the system for better performance.</p> <p>6</p> <p>Figure 1.1. : The Agribusiness System</p> <p>The Agricultural Input Sector All over the world, farm sector productivity has increased by a significant percentage over the last few decades. A large proportion of this increased efficiency is directly attributed or attributable to the input supply sector. Improved varieties of seed and feed, chemicals, farm machinery and equipment and the facilitating services offered to farmers helped in improving the output-input ratio. Farmers purchase 70-80% of the inputs they use in developed countries. Today, farmers in the developed countries purchase more than two-thirds of all the inputs they use for production. Thus an efficient input sector that is capable of supplying the right products at the right time in the proper amounts to the farm sector is crucial to continuing the increases in production efficiency that has been witnessed in the past and the present. Some of the major input supply industries are discussed specifically below. The brief look of some of the major input supply sectors should give the student an idea of the relative importance of each in terms of total farm outlays. 1) Feeds The largest single out-of-pocket expense item for farmers in recent years in developed countries has been for purchased feed. Feeds are the major farm input in terms of cost in developed countries. In developing countries the farmers meet their feed requirements mostly by growing the feed themselves. Feed includes Grain corn, wheat, barley, etc. Recently, larger feed industry firms that handle the manufacturing, processing, and distribution from start to finish have become predominant in developed countries and particularly in USA. Though these firms are becoming larger, their numbers have not declined significantly. 7</p> <p>The majority of feed inputs, including grain and supplement, come from local elevators. These firms supply many other product inputs, from nutrients to chemicals and pesticides as well as fuel and motor supplies. Coming to Ethiopia, the farmers themselves arrange the feed by themselves to meet their requirements. 2) Fertilizers and Pesticides Agriculture uses many chemicals in the form of fertilizers and pesticides. Between fertilizers and pesticides, fertilizers are used the most. The fertilizer market has expanded rapidly over the decades. About one-third of all crop production can be attributed to the proper use of fertilizer like Urea, DAP, etc. the market for fertilizer products are both national and international. The three key ingredients of fertilizer are nitrogen, potash, and phosphate. The fertilizer industry is linked with that of the petroleum industry because natural gas is a major input in the manufacturing of nitrogen. Farm use of pesticides has increased by a lot over decades. Pesticides improve crop yields and therefore the overall efficiency of the countrys agriculture. As weed and crop disease control becomes more critical in the future, the continued use of farm pesticides will guarantee a plentiful supply of food for world markets. Pesticides consist of three major categories: Herbicides, Insecticides, and Fungicides. Coming to Ethiopia, the usage of fertilizers and pesticides by farmers is very less. Actually in the whole of Africa itself the usage of fertilizers and pesticides is itself very less. Recently there was much promotion of usage of fertilizers and pesticides in Ethiopia so as to increase the farm productivity. Even though the usage of fertilizers and pesticides increases the production of output but they have negative fallout. Its usage will lead to contamination of soil and health problems. 3) Petroleum Farmers spent billions of dollars all over the world for fuels and energy. Fuels used by farm machinery gasoline, diesel fuel, and compressed gas are fuels common to other motors. Therefore, no distinct fuel industry...</p>