Introduction to Agribusiness

Management

Chapter1
Introduction to Agribusiness
Management
 Management is the sole responsibility for
decision making, and most likely will always
be this.
 Managers use economic principles, budgets,
record summaries, investment analyses,
financial statements.
 Electronic innovations will most likely alter the
types of information available to the manager.
Types of Farming Operations
 Low Volume, High Value Producers – Can’t expand
so they produce higher valued products. Promotion
and marketing become critical.
 High Volume, Low Margin Producers – generic feed
and food grain producers, oil seed. Expand their
production to increase profitability.
 Specialty Product and Service Providers – specialize
in one or two skills and become the best at
performing those services.
 Part-time (Hobby) Operators – One half of
operations, produce 15 percent of total ag sales
The Information Age
 In the past decision making principles and
budgeting tools have been underutilized. Data
collection, analysis and interpretation will be
rapidly changing in coming years. GPS
IPPM
 The amount of information will be
overwhelming in the next few decades, then
decisions will need to be made on what
information to look at and what not.
Financial Management
 Outside capital will be needed to finance large-scale
operations. Funds are starting to come from national
markets due to the vertical integrations of rural
banks.
 Credit is becoming available from non-traditional
sources such as input suppliers and processors.
 Ag producers will continually have to compete for
access to capital with non-farm businesses. This
competition necessitates more detailed
documentation of financial performance and credit
needs and more conformity to GAAP.
 Controlling assets is becoming more important than
owning them.
Human Resources
 Working with other people will become a
more important factor in the success of the
operation.
 Will have to offer competitive wages, benefits
and working conditions
Producing to meet consumer demands
 Old CW – produce homogeneous products
 New CW – to offer more highly specialized
and processed food products to the
consumer. Buyers are beginning to
implement stricter product standards for
producers.
Producing to meet consumer demands
Examples: animals size, leanness, why? Improved
measuring devices and data processing will make it
easier to pay differentials. In crop production protein
and oil content of grain and forages will make pricing
differentials possible.

The niche market will also become important.

Foreign markets will become more important as trade

barriers fall.
Environmental and health concerns
 Food Quality, Food Safety and the present
condition of our soil water and air will
continue to see high priority from the non-
farm population.
New technology
 Why do farmers adopt? What is involved in
that decision making process?