Agribusiness system concept
Agriculture has developed into agribusiness and has become a vast and complex system that reaches far beyond the farm to include all those who are involved in bringing food and fiber to consumers. agribusiness includes not only those the farmland but also the people and firms that provide the inputs (for example, seed, chemicals, credit), process the outputs (for example, milk, grain, meat), manufacture the food products (for example, ice cream, bread, breakfast cereals), and transport and sell the food products to consumers, for example, restaurants, supermarkets). The traditional system has undergone rapid transportation as new industries have developed and the traditional farming operations have grown larger and more specialized. The transportation did not happen overnight but came slowly as a response to a variety of forces. Knowing something about how agribusiness came and makes it easier to understand how this system operates today and how it is likely to change in the future.
Background of the agribusiness system
Agriculture was the major industry in most developed countries. It was easy for a farmer, but productivity was low. As late as 1850 the average American farmer produced enough food to feed just for the people. As a consequence, most farmers were nearly totally self-sufficient. They produced most of the inputs they needed for production, such as seed, ‘draft horses, feed, and simple farm equipment. Farm families processed the commodities they grew to make their own food and clothing. They consumed or used everything they produced. The small amount of output not consumed on the farm was sold for cash. These items were used to feed and clothed the minor portion of the country’s population that lived in villages and cities.
A few agricultural products made their way into the export market and were sold to buyers in other countries. The land was abundant and relatively inexpensive, but labor was scarce. Each time a war occurred farmers saw the prices of farm products rise dramatically. This encouraged them to produce more but was also forced many young farm’ workers out of the fields and the workers became more expensive to hire. In response to this situation, farmers were increasingly interested in adopting newly invented labor-saving manufactured inputs. Farmers found it increasingly profitable to concentrate on production and began to purchase inputs they formally made themselves. This trend enabled others to build a business that focused on meeting the need for inputs used in agricultural production such as seed, fencing, machinery, and so on. These firms developed into the industries that make up the agricultural input sector. Input farms are a major part of agribusiness and produce a variety of technologically based products that account for about 75 percent of all the inputs used in agricultural production.
At the same time the agricultural input sector was developing, a similar evolution was taking place for commodity processing and food manufacturing farms. The form of the most commodities (wheat, corn, milk, livestock and so on) must be changed to make them more useful and convenient for consumers. For example, consumers would rather buy flour than grind the wheat for baking a pie. They are willing to pay extra for the convenience of buying the processed commodity (flour) instead of the raw agricultural commodity (wheat). During the same period, technological advances were being made in food preservation methods. The perishable nature of most agricultural commodities is available only during the harvest period. Many people tried to have the availability of products through home canning. Advance in the technology of canning and later freezing led to the formation of food processing firms.
Advances in food processing have enabled consumers to make the product any time of the year for less cost and effort. In fact, the process has reached the point where many consumers prefer to purchase a ready product at a supermarket or a place of a restaurant rather than make their own. Today even most farm families use purchased food and fiber products rather than doing the processing themselves. The firms that meet the consumers’ demand for greater processing and convenience also constitute a major part of agribusiness and are referred to as the processing-manufacturing sector.
Farmers rely on the input industries to provide the products and services they need to produce agricultural commodities. They also rely on commodity processors, food manufacturers, and ultimately food distributors and retailers to purchase their raw agricultural commodities and to process and deliver them to the consumers for final sale.