AgEcon 278 - Farm & Agribusiness Management

Dr. Makus
Larger Machinery

Is Farm/Agribusiness Management Changing??

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 TODAY’S DETAILS
(8/27/08)

• Check on those not here last time or new

this time.
• Questions on course syllabus or outline?
• If want Wall Street Journal, let me know.
• The first lab is this evening at 6:30
(Section 3), and then Sections 1 and 2 are
tomorrow at 12:30 and 3:30.
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 Changes in Farm and
Agribusiness Management
(Chapter 1)

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 The The
The
Production Processing-
Input
Sector Manufacturin
Sector g
Sector

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 Agribusiness is BIG Business
112 Agribusiness Firms Fortune 500

89 Beverage Companies — Coca-Cola, Pepsico

262 Food Consumer Products Companies — H J Heinz, Hershey

80 Food Production Companies — Tyson Foods, Gold Kist

109 Food Service Companies — McDonalds, Starbucks

21 Food and Drug Stores — Kroger, Safeway

322 Forest and Paper Products — Meadwestvaco

20 Tobacco Companies — Altria Group, Inc.

68 Food & Grocery Wholesalers — Sysco

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 Objectives
• Discuss some changes in agribusiness
that will affect you as a farm, ranch, or
agribusiness manager.
• Identify skills that you may need for
responding to changes in agribusiness
management.

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 Strategic Planning
• Setting goals as a business family:
– Personal values
– Individual skills & interests
– Financial & physical resources
– Economic & social conditions

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 Tools for
Making Decisions
• Economic principles
• Budgets
• Enterprise record summaries
• Investment analysis
• Financial statements
• Various other management techniques
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What Kinds of Decisions?
• Input/Output levels and combinations.
• When and how to acquire additional
resources.
• Analyze risk and returns of new
technology.
• New capital investments.
• Adjusting farm size.
• Changing enterprises.
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 Modern Management
Decisions
• Same types of decisions – but information has
changed.
• Technology provides new inputs and products.
• More accurate & timely information.
• Competition for land, labor, & capital
resources.
• Good managers will adapt to changes – and
spread their skills over larger units of
production.

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Number of Farms in the U.S.

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Size of Farms in the U.S.

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 Farm Numbers & Sales
by Annual Sales
44.9
$500,000 and over
2.6
% Of $ Sales
15.9
% Of Farms
Annual Sales

$250-499,999
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19.1
$100-249,999 10.1

9.1
$50,000-99,999 9.1

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<$50,000 74.4

0 10 20 30 40 50 60 70 80

Percent
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 Structure of
Farms & Ranches
• Larger machinery.
• Automated equipment.
• Confined livestock facilities.
• Outside employment opportunities.
• Labor cost up faster than cost of capital:
– Substitute capital for labor.

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Structure of Farms & Ranches
• Want a higher standard of living?
=> increase size.
– For example, consider a “200 cow” cow/calf
operation??
• New technology is available only in a
minimum size or scale:
=> expand production to spread out fixed
costs.
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 Future Structure
of Farms and Ranches
• Enterprises that have • Enterprises that are
difficulty concen- easy to centralize:
trating production: • Feedlots
• Crop production • Hog and poultry
• Grazing production

– Management and – Large-scale

operation by agribusiness
family units will entities.
continue.
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Information Age
• Rapid changes in:
- Data collection
- Data analysis computers, GPS
- Interpretation
• Whole farm data.
• Individual unit data.

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 Financial Management
• Compete with non-agricultural
businesses for capital:
– Financial markets are becoming larger and
more closely integrated.
– Need more detailed documentation of
financial performance and credit needs.
– GAAP & Standard Performance Measures.

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 Human Resources
• Agribusinesses will need to offer similar:
• Wages, benefits, working conditions
• More regulations for worker safety:
• Chemicals, equipment
• Fewer employees=>specialized responsibilities.
• Paid consultants and advisors:
• Diagnosing animal & plant diseases
• Developing legal contracts
• Commodity pricing strategies
• Formulating rations
• Crop fertility programs
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 Producing to
Meet Consumer Demands
• Past - Undifferentiated products.
• Now – Specific characteristics:
– Biotechnology
– Niche markets
– International markets

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 Environmental &
Health Concerns
• Adequate quantity of food becomes more
and more taken for granted.

• More concerns for food quality, food

safety, soil conditions, water, air.
• More people moving to rural areas:
– Odors, dust, crop chemicals
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 New Technology
• Biotechnology
– Increases production efficiency
• Livestock genetics
• Growth stimulants
• GPS
• Challenge => Should this new technology
be adopted?
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 Summary
Same Decisions - Different Circumstances
– Farm Structure
– More Information
– Financial Competition
– Human Resources
– Consumer Demands
– Environmental & Health Concerns
– Technology
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