CHAPTER 3

The Size and Importance of Agribusiness

Objectives~

Discuss the size and importance of production agriculture.

Analyze the efficiency of production agriculture.

Discuss the impact of U.S. agriculture on the global economy.

Discuss the agribusiness economy.

Describe the agriservice sector of the agricultural industry.

Explain the importance of agribusiness and foreign trade.

Describe the relationship between agribusiness and energy.

Describe the relationship between agribusiness and the

environment.

Importance of Production Agriculture

No agribusiness without production agriculture

Starts with the land

Goods come from the land, farms and hard work of

production agriculturalists

Role of American production agriculturalists grows

in importance each day

More and more people become dependent on them

each day

Land~

Land is the major resource in modern farming

Especially interested in amount available and

usage

2.3 billion acres in United States

21% used for crops

25% for livestock

30% for forestry products

Remaining 24% for non-agricultural purposes

Products~

GDP – Gross Domestic Product - value of goods and

services that America produces in a year

Agricultural industry accounts for 17% of the GDP

Provides more than 20% of all the jobs in the

country

2% from firms that sell goods and services to

production agriculturalists

13% from related industries

Related Industries?

Purchase food and fiber from production agriculturalists

Process and package it so they will have a value-added

product to sell to consumers Ice cream makers

Textile mills

Flour mills

Tanneries

Breakfast food makers

Many more

Figure 3-1

Efficiency of Production Agriculture~

Tremendous increase in production efficiency

American agriculture efficiency is second to none

Less than 0.3% of the world’s production

agriculturalists

US produces a major percentage of the world’s

total food supply

Figure 3-3

American Farmers~

Unique ability to continually increase output while

inputs remain relatively constant

In the past 20 years, agricultural productivity has increased

more than 3 times faster than industrial productivity per hour

worked

One hour of farm labor today produces 16 times as much food

and fiber as it did 60 years ago

One production agriculturalist creates 6 agribusiness jobs

Figure 3-4

Why is Efficiency So Important?

Releases manpower for other work

Increases industrialization

Leads to a healthier economy

Gradual elevation of the standard of living of

all people

US Agriculture and the Global Economy

Agriculture is one of the world’s largest industries

More people are in some way involved in

agriculture than in all other occupations combined

The U.S. produces more food than any other nation

in the world

Export revenues account for 25 – 30% of U.S.

farm cash receipts and are a key factor in

determining gains in net farm income

Global Agriculture Market

Three events transformed the global agricultural

market:

formation of the European Community and its

Common Agricultural Policy (CAP)

collapse of many Socialist economies (Soviet

Union)

developing countries takeover of excess grain

imports

World Trade

World trade is the common thread in these

changes

General Agreement on Tariffs and Trade

(GATT)

established baseline trade positions and protectionism

levels for each signatory country

The Agribusiness Input Sector

Most neglected area is agribusiness input sector

Input suppliers play a major role in the production of food and fiber

Sector is currently recognized as a major phase of agribusiness

Agricultural input provides:

feed

seed

fertilizer

credit

machinery

fuel

chemicals

The Agribusiness Output Sector

Includes all agribusinesses and individuals that handle agricultural products from the farm to the final consumer buying * packing transporting * selling storing * merchandising warehousing * insuring grading * regulating sorting * inspecting processing * communicating assembling * advertising

Agriservice~

Research new and better ways to produce and

market food

Protect food producers and consumers

Provide special, customized services to all other

phases of agriculture

Public agencies dominant in agriservice area

Private agencies rapidly increasing their offerings of

farm services

Public Agriservice

Provides special services at federal, state, and local levels

Major areas of emphasis include: research education communication regulation

United States Department of Agriculture (USDA) more than 100,000 employees 12,000 in Washington D.C.

Private Agriservice

More than 30,000 firms provide agricultural services

Production agriculturalists pay more than $1 billion

yearly for private agriservices such as:

veterinary care

feed grinding and mixing

machine harvesting

contract labor

spraying

Agribusiness and Foreign Trade

US is leading participant in international trade of ag. products

5 major farm commodities sold in world markets in 1994: Feed grains and feed grain products Soybean and soybean products Wheat and wheat products Live animals Meat and meat products Vegetables

Imports and Exports~

United States is major exporter Total export value in 1966 was only $6 million Almost every country purchases US ag products today

United States is major importer as well annual farm imports increased from $4.45 billion to

$10.5 billion in ten years (136%) imports come from every continent except Antarctica largest quantities from Latin American, Asia, and

Europe

US trade surplus was $18.9 billion in the 1990s

Agribusiness and Energy

Agriculture is both a producer and a user of energy

Consumes 10-20% of the nation’s energy 1/3 of the energy is used by production agriculturalists

Remaining 2/3 is used by agribusinesses

Agriculture is becoming a larger producer of energy Direct Burning

Ethanol production

Biodiesel

Methane gas production

Sun and Water

Vehicles CAN run off of water only!!

Researchers at MTSU developed a process A 10-kilowatt solar unit is used to produce electricity from the sun.

The electrical energy is stored in the local power company’s grid; in

essence, the electricity used is measured and taken from the bank.

A solid polymer electrolysis unit separates the hydrogen from water.

The electrolysis unit is powered by stored (banked) electricity.

The hydrogen produced is stored and used to run an internal

combustion engine that powers the vehicle.

Agribusiness and the Environment

Environment is becoming more important to the business

of agriculture

Environment took a back seat to production and profit for

most of the 20th century

Quality of air and water was deteriorating

Citizens and scientists began to speak out about pollution considered radicals and alarmist in the beginning

many Americans joined the effort in the 1960s

Rachel Carson’s “Silent Spring”

Sierra Club

Environmentalists in Agribusiness

Those involved in the use of soil for growing crops are environmentalists

fruit, vegetable, and grain producers

First research on soil and water conservation conducted by M.F. Miller and F.L. Daley at the University of Missouri

National Resource Conservation Service “Provide leadership and administer programs to help landowners

and land users to conserve, improve, and sustain our natural resources and the environment, while enabling the United States to continue as the world’s preeminent producer of food and fiber.”

Can you name some traditional soil and water conservation practices that protect the environment?