Introduction to Ag Bus Mgt

Agriculture Business Management

LESSON 1: INTRODUCTION TO AGRIBUSINESS MANAGEMENT

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What is agribusiness and how does it affect our society?

• Agribusiness includes all the activities of the agricultural food and natural resource industry involved in the production of food and fiber. Individual agribusinesses may

sell items to farmers for production; provide services to other agricultural businesses; or be engaged in the marketing, transportation, processing, and distribution of agricultural products.



• Agriservice is activities of value to the user or buyer. The activities are an intangible

product.

• Marketing is providing the products and services that people want when and where they want them.


What are the careers that make up agribusiness?

Federal Occupational Groups: 9 groups relating to the food & fiber system

Business and industry Physical Science Natural Resource Mgt &

Biological Science Education

Annual Available Graduates and Employment Opportunities: 52,000 opportunities 49,300 filled by Food & Ag grads/“Allied” grads

• Quality Assurance, Inspection, & Grading

• Education• Engineering & Architecture• Investigation

% of all Ag Cluster Opportunities Openings/Qualified Grads1. Scientists Engineers, 32% 18,583/ 18,878 & Related Specialists2. Managers & Financial 13% 7311/ 5644 Specialists3. Marketing, Merchandising, 28% 15,946/ 14,650 & Sales Reps4. Communication & Education 11% 6397/ 6223 Specialists5. Social Services 9% 5358/ 6570 Professionals6. Agriculture Production 7% 4235/ 5210 Specialists

How employable are agricultural graduates?


• A. Agribusinesses process inputs into outputs. • An input is a resource used in production, and an

output is the result of the production process. • Production is the act of making products, such as

goods and services.• 1. Without production agriculture, agribusiness would

not exist. – Production agriculture is the use of land to produce goods. • There are approximately 2.3 billion acres of land in the United

States. • Of that land, 21 percent is used for crops, 25 percent is used for

livestock production, and 30 percent is used for forestry purposes.



• 2. As a result of the advancements made in agriculture over the years, the American farmer now produces enough to feed and clothe 150 people. According to the USDA, expenditures

on food (as a share of disposable personal income) have decreased from a high of 25.2 percent in 1933 to a low of 9.7 percent in 2004.

Those figures grew slightly to 9.8 percent during 2005, 2006, and 2007.



• Agribusiness provides people with food, clothing, and shelter.

• It also provides jobs for millions of people.

• These jobs are in science, research, engineering, education, advertisement, government agencies, trade organizations, and commodity organizations.



• Agribusiness pertains to the public and private sectors. The public sector is the

economic and administrative functions of dealing with the delivery of goods and services by and for the government.

The private sector is the part of the economy associated with private profit and is not controlled by government.


What are the scope and the economic impact of the agriculture industry at

the local, state, national, and international levels?

• It has been said many times that agriculture is the foundation of civilization.

• Domestication of plants and animals for agricultural purposes allowed humans to settle in villages.

• As societies have developed, agriculture has remained important on the local, state, national, and international levels.




• A. Agriculture is a substantial contributor to local economies. Economic output and value-added economic impacts can

be substantial. Important non-traditional economic impacts of local

agriculture are created through tourism, wildlife viewing, fisheries, hunting, and recreation.

Many people are engaged in full-time employment tied directly or indirectly to agricultural activities.

Agricultural land and agribusinesses provide taxes to support government services.




• B. Agriculture is one of the largest industries in many states. The agriculture industry

generates large cash receipts within most states and provides many jobs.

$300 billion of farm purchased

inputs were reported in 2007. That is 30% of all the inputs purchased in 2007.

In addition, agriculture has a large economic multiplier effect, so it contributes positively to other sectors of the economy.




• C. U.S. agribusinesses produce a variety of exports (agricultural commodities shipped outside of the United States). – Grains, tobacco, cotton, and

vegetables are examples of agricultural exports.

– According to the USDA, the United States exported 115.45 billion dollars of agricultural products in 2008.




• D. The United States also imports a variety of agricultural products. – Imports are agricultural products brought into the

United States from other countries. – In 2008, the nation imported

79.32 billion dollars of agricultural products.


What is the importance of the agriculture industry to society at the

local, state, national, and international levels?

• Agriculture accounts for 17 percent of the U.S. economic output, making it the largest industry.

• Globally, agribusiness employs approximately half of the earth’s population.




• A. The gross domestic product is the value of goods and services our nation produces in a year. • Agriculture accounts for 17 percent of the gross domestic

product. • Of this 17 percent, 13 percent comes from agriculture-

related industries.

• Examples of agriculture-related industries include feed mills and biotechnology firms.

• These industries create value-added products (products improved through processing or manufacturing) from raw agricultural products.




• B. Production efficiency is optimum output from an input.

• The production efficiency of U.S. production agriculture, as compared to other countries, is enormous.

• There are a number of ways to measure this efficiency.

• The most common method of measuring efficiency is to determine the number of people supplied with the farm products.




• 1. The average farm worker supplies 150 people with agricultural products. – In the early 1950s, one farm

worker supplied less than 20 people with agricultural products.

• 2. An increase in production efficiency has also helped the overall U.S. economy.– Improved efficiency has allowed

more people to leave the farm and find work in other industries.




• C. Agribusiness can be divided into sectors. The major sectors are agribusiness input, agribusiness

output, and agriservices.

• 1. The agribusiness input sector includes all resources involved in producing farm commodities. Examples of the agribusiness input sector include seed,

fertilizer, machinery, fuel, and credit. Production efficiency can also be linked to

improvements in these agricultural inputs.




• 2. The agribusiness output sector includes any agribusiness that affects an agricultural commodity between production and the consumer. Examples include

transporting, selling, storing, and inspecting.

Approximately 20 million people are employed in this sector.




• 3. The agriservices sector includes people who research new ways of producing and marketing food, protect food producers, and provide specialized services to all areas of agriculture. – Both public and private agencies are responsible for the

actions of the agriservices sector.– a. Public agriservices are agricultural groups that provide

services at the federal, state, and local levels. • Public agriservices specialize in education, research,

communication, and regulation. • The United States Department of Agriculture, Food and Drug

Administration, and the Department of Commerce are examples.




b. Private agriservices are agriservices not governed at the federal, state, or local level. The three areas of private agriservices are financial services,

trade associations, and agricultural cooperatives. Examples of private agriservices are the Farm Service

Agency and the American Seed Trade Association.




• E. For much of the world’s population, agriculture is a subsistence activity. – Roughly 90 percent of the food produced in the world is

consumed in the country producing it.

• 1. Trade of agricultural goods on a global basis has grown. – Trade lowers costs of agricultural goods and widens choices.

• 2. Trade, along with aid and technology, can enlarge agriculture’s role in the global economy. – An enlarged role of agriculture in the global economy results

in greater food security, economic development, and environmental sustainability.


What are the characteristics of a non-farm agribusiness?

Most are small Not unionized They know their customers Are located in rural/small towns Usually have a working manager Have an average sales of around $2 million/year

What are the Resources needed to Produce Agricultural Goods?

Land: defined: soil, trees, minerals... value can often be changed

quantity/type for farms vs. agribusiness trends: avg. farm size = 450 acres number of farms =

_________ Labor:

physical energy skills productivity (skills/motivation)

• Capital:• defined: wealth($)..man-made

items ..trend toward higher % of total (technology, etc)

• factors affecting higher costs of production expenses:

a) inflation b) larger farms/ firms c) capital intensive d) more "services" hired

• Management:• definition: art & science of combining

resources and ideas to achieve the firm's goals.

• Examples in History: a) earliest recorded: Mosesb) Alexander the Great

c) Julius Caesar

What are the Resources needed to Produce Agricultural Goods?

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interchangeable parts: Eli Whitney automatic conveyor: Oliver (1873) division of labor: Eli Root (for Sam Colt) scientific management: Frederick Taylor (father of scientific study)

What are the Advancements in Agriculture Technology that impacted Management?

technical: ability to perform specific tasks and have certain knowledge, math, accounting, etc.

Conceptual: ability to see "big picture"..relative to the "parts“

human relations: leadership, motivation, coaching, morale building.....communication!

What are the skills need to be an effective manager?

Business management has five major areas of activity Planning Organizing Staffing Leading controlling.

What are the areas of activity of management?

What are the major planning activities of a manager?

Planning is determining what is to be done in addition to where, how, and when it is to be done. Planning involves the development of mission statements,

objectives, and long-term focus. The values and visions of the agribusiness are exhibited through

the planning process. Management uses the planning function to determine the status

of the business, evaluate proposed actions, state necessary actions and resources, and communicate effectively. The planning function is conducted on a day-to-day, year-to-year,

and long-term basis.

What are the five major areas of business management?

B. Organizing is the grouping together of activities, people, and other resources to establish a framework for the agribusiness.

Organizing provides the agribusiness with structure, defines staff functions, and identifies relationships and authority. 1. An organization structure, if two or more people are involved in a

business, is an internal framework. 2. An organizational structure identifies staff roles and activities

required to accomplish business goals and objectives. The structure or chart should serve as a motivation factor, helping

people reach career and personal goals. It also serves as a communication tool to help identify staff roles and

authority. Without proper organization, it is difficult to carry out the

planning function.



C. Staffing is the activities involved with the recruitment, selection, evaluation, and training of personnel.

The staffing process focuses on finding and keeping the right people to fit into the organizational framework, resulting in a profitable business.

Planning and organizing activities help to determine the human resource needs for the agribusiness.



1. The staffing process involves recruiting, screening, interviewing, selecting, and training new employees. Staffing is a major part of the

agribusiness. 2. Managers need to foresee vacancies

and be prepared to fill job positions. Maintaining employees is also part of the

staffing function. 3. The use of good communication, fair

compensation, and opportunities for success are practices managers should use.



D. Leading (also known as directing or actuating) is providing instruction, guidance, and motivation to employees for job completeness; it requires clear communication. 1. Motivation is the

process of stimulating the behavior of people. It is primarily involved

with the relationship between managers and employees.



E. Controlling is handling all of the activities needed to make sure the business policies are being implemented.

It focuses on actions taken and if they are meeting agribusiness expectations. 1. Managers evaluate the overall

performance of the agribusiness. Then they correct, revise, and/or adjust methods to improve the

results. 2. The controlling segment of business management allows

for managers to achieve the desired results within the agribusiness.


What are the five

major areas of business management?


Owner / shareholder board of directors Employees Customers Society

To whom are Managers Responsible?

economic conditions consumer demands price relationships tax structure developments of other countries legal requirements Technology inflationary pressures availability of resources

What are the Factors that create Changes or Adjustments in management?

Salary Commission Wage (hourly) Fringe benefits:

sick leave maternity leave heath insurance overtime paid vacation company vehicle

How are Managers Compensated for their Time and Efforts?

What are entrepreneurs, and what is their role in the U.S. economy?

Entrepreneurs are people who start, manage, and operate their own business enterprises.

A. Entrepreneurs, sometimes called innovators, have essentially created the U.S. economy by creating products and industries that have sparked franchises and enterprise development all over the world. Entrepreneurs are important for economic growth, which

leads to a higher standard of living.


What is the entrepreneurial process?

The entrepreneurial process involves all the activities, functions, and organizational processes of creating and designing an enterprise based on a perceived need or opportunity. The entrepreneurial process involves several important steps.

A. The first part of the entrepreneurial process is to identify and analyze an opportunity to start or develop a business enterprise.

B. The second step is to develop a business plan, which should include short-, intermediate-, and long-term goals for the business.



C. The third step is to evaluate needed resources and to determine how to obtain necessary resources that could include capital investments of money, equipment, machinery, buildings, land, or other necessary items.



D. The final step in the entrepreneurial process is the actual management of the enterprise that has been created. Once all aspects of the

business are developed and resources are secured, effective and proper management of the enterprise is necessary for any potential future success.


What are some examples of successful past and current

entrepreneurs in the agriculture industry?

There are several important successful past and current entrepreneurs who have been important to the agriculture industry.

A. Some of the most successful agricultural equipment and manufacturing companies were started by John Deere, Cyrus McCormick, and Jon Kinzenbaw.

1. John Deere developed the steel plow in 1837 and began his business, which became an international company. John Deere manufactures everything from small lawn

equipment to construction and farming machinery.




2. Cyrus McCormick invented and developed the reaper in 1831. McCormick’s invention was important

to farmers all over the world. 3. Jon Kinzenbaw is the founder of

Kinze Manufacturing, Inc. Kinzenbaw started his business as a welding shop in

1965. Since then, Kinze Manufacturing, Inc. has been

influential in the creation, modification, and improvement of auger carts and planters for the agriculture industry.




B. Some of the most successful individuals and businesses related to seed and grain production, storage, and manufacturing are Pioneer Hi-Bred International, Inc.; Asgrow and DeKalb Seed; ADM; and Cargill.




1. Henry A. Wallace founded Pioneer Hi-Bred International, Inc. in 1926 because of his desire to improve seed genetics and yields for farmers. Pioneer Hi-Bred International, Inc. is a

worldwide corporation that focuses on producing quality seed.

2. Asgrow and DeKalb Seed was originally known as the Everett B. Clark Seed Company and was founded in 1856. Asgrow and DeKalb strive to improve seed genetic

technology for farmers across the nation and the world.




3. Archer Daniels Midland (ADM) was originally founded in 1902 by George A. Archer and John W. Daniels when they began their linseed-crushing business. In 1923, Archer-Daniels Linseed Company

acquired Midland Linseed Products Company, and the Archer-Daniels-Midland Company was formed.

Since its corporate inception, ADM has added a major profit center to its agribusiness each year.

It is a worldwide company with more than 250 domestic and international plants.




4. Cargill was founded in 1865 by W.W. Cargill as the first grain storage facility in the United States. Cargill has grown to be

one of the largest, privately-owned grain storage and manufacturing companies in the world.




C. There are several successful livestock businesses and entrepreneurs.

A few of those business include King Ranch in Texas and Christensen Family Farms.

1. Captain Richard King was a successful entrepreneur in the steamboat transportation industry before purchasing 15,500 acres of land in Texas for King Ranch. The ranch in Texas is known for creating the Santa Gertrudis

breed of cattle and developing the Santa Cruz composite breed. King Ranch is also involved in the quarter horse industry in

addition to farming operations with pecan and citrus production in Texas and Florida.

They also produce cotton, milo, sod, and sugar cane.




2. Christensen Family Farms was started in 1974 by brothers Bob and Glen Christensen who purchased two bred gilts from a neighbor to start the business. Christensen Farms has operations in Minnesota, Iowa,

Illinois, Nebraska, Colorado, and South Dakota. The company produces enough pork annually to feed 12

million people.




D. Other successful entrepreneurs and businesses include agricultural sales companies. Some of the most successful businesses are Rural King,

Tractor Supply Company, and Blain’s Farm and Fleet. 1. Rural King was founded in 1960 and has its

main headquarters in Mattoon, Illinois. Rural King has 40 stores located throughout Illinois,

Indiana, Kentucky, Tennessee, Ohio, and Michigan.




2. Originally founded by Charles E. Schmidt in 1938 as a mail-order business, Tractor Supply Company (TSC) is the largest retail chain of farm and ranch stores in the United States with more than 430 stores in 30 different states. Its main headquarters is located in Nashville, Tennessee.

3. Blain’s Farm and Fleet was founded in 1955 by brothers W.C. (Claude) Blain and N.B. (Bert) Blain. Blain’s Farm and Fleet has 34 stores located throughout Wisconsin, Illinois, and Iowa.


Introduction to Ag Bus Mgt

Education

Transcript of Introduction to Ag Bus Mgt