Unit 1 Introduction to Agribusiness

Materials List:

PowerPoint

Handouts

Notebooks

Activities have materials listed in the context

Objectives:

1.1 The student will be able to define terms relating to an introduction in agribusiness.

1.2 The student will be able to describe the meaning and importance of agribusiness.

1.3 The student will be able to examine the relationship of agribusiness to free enterprise.

1.4 The student will be able to identify and distinguish ways of doing business

Key Terms:

Agribusiness

Agribusiness Sector

Cooperative

Corporation

Economic System

Entrepreneur

Free enterprise

Limited Liability Company (LLC)

Marketing

Partnership

Production

Sole Proprietorship

Reasons to Learn:

To define terms relating to an introduction in agribusiness.

To describe the meaning and importance of agribusiness.

To examine the relationship of agribusiness to free enterprise.

To identify and distinguish ways of doing business

Questions to Answer:

What are the terms relating to an introduction in agribusiness?

What is the meaning and importance of agribusiness?

What is the relationship of agribusiness to free enterprise?

What are the ways of doing business?

Answers to Questions:

What are the terms relating to an introduction in agribusiness?

Objective 1.1 The student will be able to define terms relating to an introduction in agribusiness.

How do you define agribusiness?

Write in your notebook your definition of agribusiness.

Turn to your neighbor and discuss answers. (Write your neighbors name down in your book)

Write two things about your neighbors definition that you did not think about.

Words that might have come to might could include: business, manufacturing, related support, industry, production, systems, linkage, consumers, distribution, education, and training.

The definition we will be using states that agribusiness is all of the economic activity of the agricultural industry in producing food and fiber.

1. Agribusiness - all of the economic activity of the agricultural industry in producing food and fiber 2. Agribusiness Sector - a division or area of economic activity within agribusiness, including production, input, and marketing 3. Cooperative - a not-for-profit business association designed to provide goods and/or services for members 4. Corporation- an artificial entity created under state law to conduct business and owned by shareholders who buy stock 5. Economic System - the way goods and services are owned, created, and exchanged 6. Entrepreneur - a person who organizes and operates a business to meet a market need 7. Free enterprise - an economic system in which individuals make decisions, own property, and establish prices based on market forces 8. Input - a resource that is used to produce a product 9. Limited Liability Company (LLC) - an unincorporated partnership that has limited liability for owners10. Marketing - providing products and services that people want at a time and place they want them 11. Partnership - a type of business owned by two or more individuals 12. Production - creating a product or service that meets a human or business need 13. Sole Proprietorship - a business enterprise owned by one individual

What is the meaning and importance of agribusiness?

Objective 1.2 The student will be able to describe the meaning and importance of agribusiness

1.2.1 Discuss the meaning and importance of agribusiness

1.2.2 List and explain the agribusiness sectors, including production, input, and marketing

1.2.4 List career opportunities in agribusiness in the local community.

How many of you are involved in agriculture everyday? How many of you wear clothes, eat everyday or live in some type of a shelter? Yes, we all do! Because of that fact we are all involved in agriculture on a daily basis, you just may never have realized this before! Agriculture provides the food and fiber for the clothes we wear and the homes we live in. Everyone is affected by agriculture everyday! Keep this in mind that we promote the agriculture industry in everything that we do!

Distribute blank copy paper and crayons, markers etc. and work through the following instructions with the students.

Divide your paper into quarters with your writing utensil. In the top left quarter draw something that represents production agriculture to you.

Students should draw their object.

Label this section of your paper as Production Agriculture. What percentage of the U.S. working population is involved in production agriculture?

While many students will over exaggerate the numbers directly involved in agriculture. Keep students guessing until they eventually get to less than 2%. Have students write 2% in this quarter to remind them of the number of people in this sector of the profession.

What happens after agriculture products are produced? Where do the products go from there?

Get students to discuss that the next step in the production phases is to distribute the product.

In your second quartile, draw an icon that represents distribution next in top right corner and label it distribution.

Discuss the different icons that people drew to represent the distribution sector of the agriculture industry.

After the agriculture product gets distributed, what happens next? Students should hopefully say that the agriculture products are then processed or manufactured somewhere.

Agriculture products are further processed. Who can give me an example of this? Draw a representation of processing next in the bottom left corner and label it Agriculture Processing.

We are still missing one gigantic sector of the agriculture industry that supports production, distribution and processing of our agriculture products. What are we leaving out that is integral in every other sector? What do producers need to be successful? What do distributors; processors and consumers need to be successful? What do producers need to grow their crops or raise their livestock? Can you imagine what this is?

Try leading questions if necessary to get students to say that they we are missing a key component called Ag Businesses.

From an equipment dealer to seed salesman to a mechanic to and a banker to finance equipment purchases, all of these are important Ag Businesses. Draw a representation of an ag business in the last quadrant.

Is the number of employees in agriculture increasing above 2% yet? Of course it is and we arent done yet! Dont forget distribution happens many times in this chain. We are now going to return to the drawings and list all of the possible agriculture business that impacts these sectors of the agriculture industry. When I say go take 5 minutes and come up with as many agriculture businesses as you can in each sector and write them on your drawing. Any questions? Go.

When they are finished have them, proceed around the room and have students share what they came up with. Have students record any they dont have until they are all recorded on their drawings. .

What percent of the workforce do you think works in agriculture now? 1 out of every 5 workers is employed in an agricultural field. One in five! This is a huge impact! This is exactly what the FFA Creed says when they discuss other agriculture pursuits!Based upon your knowledge of the sectors of agriculture, do you feel that the production sector any less important than it was 100 years ago?

While you may get several different responses from students, remind them that without production agriculture, all other sectors, and even our societies, as we know it would cease to exist. Production agriculture is more important today than ever before.

Using what you know now, partner up and write a clear definition that encompasses all areas of agriculture. You have about 2 minutes to complete this task. This definition should be recorded in your notebooks. Go!

Make sure everyone has the definition recorded in the notebooks. Since we are focusing on ag business emphasize the majority of agriculture jobs are in the ag business industry.

We know now that agriculture has a lot of components. If you could be involved in any phase of the agriculture business industry, which would it be?

To illustrate the point, we are going to focus on the product of agriculture FOOD! If you had to choose and aspect of food, other than eating, that you might be interested in pursuing as a career, what would it be? Would it be production, management, processing, marketing or even a support area like distribution?

Lets take a look at a food item that all of you know and love! The item of food I want you to think about is a Big Mac from McDonalds. That burger has two all beef patties, special sauce, lettuce, cheese, pickles, onions, and a sesame seed bun. In your group of three identify as many different processes that must occur for each item on a Big Mac to make it from the farm to the consumer. Complete this assignment in two sections. First, brainstorm a list of processes for each item before it gets to the consumer. Second, use your poster paper and markers to draw a visual for one of the items.

Teacher Says: You have ten minutes to complete this task and one member of your group will need to share an overview of your poster. Any questions? Go. Take this opportunity to remind students of any processes that they have left out.

After students have completed their posters, have them share with the group. After they are done, have students select which of the sectors they are most interested in.

Now that you thoroughly understand the phases of the agriculture business, which would you most likely take a part in? Is it production? Distribution? Processing? Another type of agriculture business that supports these industries? Record which one you would like to participate in and list why in your student notebook.

Write down the answers to the following questions in your notebook.

What are the four sectors of agriculture?

Why is agriculture business a good career choice?

So is it true that people say only 2% of our population is involved in agriculture? Yes or no? Why? Remember agriculture businesses have huge impacts on the agriculture industry.

If you want to be involved in agriculture, there is a supporting agriculture business for each phase of the production cycle. Great job today! We are going to have a quick evaluation assessment to test your knowledge of these four sectors of the agriculture industry.

What is the relationship of agribusiness to free enterprise?

Objective 1.3 Examine the relationship of agribusiness to free enterprise

1.3.1 List and distinguish kinds of economic systems.

DEFINING ECONOMICS

Preparation:

7 large markers

7 large pieces of different colored paper (approximately poster size) taped equal distances apart around the room with the following phrases (all part of the definition of economics) written and hung in the order below (one phrase per piece of paper).

The papers are folded up from the bottom and taped so the words are not revealed at first.

Social science, concerned with the way society chooses, to employ its limited resources, which have alternative uses, to produce goods and services, for present and futureconsumption

Pass out the markers to students and ask students to get in seven equally divided small groups (or have them number off).

Each group chooses one of the posters and stands by it.

Ask each group of students to unfold their poster in turn and read it.

Explain they are each looking at a part of the definition of economics.

Ask them to brainstorm what their word or phrase means and how it relates to what they know about the word economics. Ask one student to act as scribe and record the groups ideas on the poster under the word/phrase. Assign a set number of minutes to accomplish this task.

When the students are done brainstorming explain that when you say rotate they should move to the next poster.

Have them brainstorm again and add any comments to those already written on the poster. (Walk around and monitor to help jump-start groups that appear stumped.)

After a few minutes announce rotate and have the students do another brainstorm. Repeat this process until all groups have been to every poster.

Next ask the class to gather around the Social Science poster.

Discuss students ideas written on the poster. Ask them to explain their ideas.

Discussion might center on how hard sciences, such as physics or chemistry, differ from soft sciences, such as sociology or economics. The hard sciences tend to deal with the structure and behavior of inanimate objects, while the soft sciences involve the observation of the behavior of human beings.

Write definitions on the board of unfamiliar words they will encounter or that you plan to use and discuss these definitions with students before beginning the lesson.

Move through the remaining posters, asking students to gather around each poster as it is being discussed. Review students topics first and then steer the discussion to the ideas that follow for each word or phrase.

concerned with the way society chooses Center discussion on the word chooses. Explain how economics and the economy do not operate by natural forces, like the weather. There are choices to be made in how the economy operates People make these choices.

to employ its limited resources Ask students to name resources. Coal, oil, etc., are often named by students. Discuss how people are resources and how labor is a resource. You can also touch on unemployment here.

which have alternative uses Ask students for examples of how resources can be used wisely or unwisely. Examples: clear-cutting versus selective cutting of trees, throwing away paper versus recycling paper, and turning off the water when you brush your teeth. Remind them that there are many examples they may have learned as early as elementary school.

to produce goods and services Ask students for examples of goods (shoes, cars, houses, clothes) and examples of services (waiting on a table at a restaurant, teaching, performing surgery, and giving legal advice).

for present and future Ask students how we can continue to use resources to produce the goods and services we need now and still plan wisely for the future.

consumption Ask students, What do you think it mean to consume? To use? To devour or absorb; to waste; to spend; to destroy? How would you define a consumer? How are we all consumers? Ask students for examples of how they consume. Examples: we all buy clothes, shoes to wear, buy food, use gas in cars to go see friends. Other examples?

DEFINITION OF ECONOMY SYSTEM

the way goods and services are owned, created, and exchanged

TYPES OF ECONOMIC SYSTEMS

Traditional System

A pure traditional economy answers the basic economic questions according to tradition. Things are done as they were in the past based on tradition, customs, and beliefs (religious).

Examples: Certain areas in developing countries

Command System:

The individual has little influence over how the economic questions are answered in a pure command system. The government controls the factors of production and makes all decisions. This could be one person, a small group, or central planners who decide what resources to use at each step of production and the distribution of goods and services. The government even decides the role everyone will play. It guides people into certain jobs.

Examples: North Korea, Cuba

Market or Capitalist System:

Capitalism is a pure market economy. In this system the government does not intervene. Individuals own the factors of production and they decide the answers of the basic economic questions. The market is the freely chosen activities between buyers and sellers of goods and services.

Examples: the underground economy, 19th century Britain

Mixed Economic System:

Many economists doubt that pure economic systems ever existed. A mixed economic system contains elements of the market and command systems, with elements of traditional as well. For example, there is some private ownership in the Peoples Republic of China. Some private ownership also existed in the former Soviet Union.

Examples: United States, most other nations

1.3.2 List and explain the characteristics of free enterprise as related to agribusiness

Ask students to make a list of things they purchased in the last month with money they earned. Discuss how it felt to have the freedom to make choices of how to spend that money.

Freedom is the principle on which the United States was founded. More than 200 years later, freedom serves as the nation's political foundation.

Freedom is also the cornerstone of the American economic system. It is often called the free enterprise system because of the freedoms of the marketplace.

In this system, individuals must make economic choices in an effort to satisfy their needs and wants. Nations, too, must make and set goals. The lesson will present two main points of free enterprise: Features of Free Enterprise and Goals of Free Enterprise.

FEATURES OF FREE ENTERPRISE

Owning private property is one of the most basic freedoms of the free enterprise system.

Individuals and businesses in the United States (US) are free to enter into contracts. Whether written or oral, contracts are legally binding agreements to buy and sell goods.

Individuals in the US are free to make personal choices and communicate those choices through the price system. As shoppers, consumers cast "dollar votes" which help producers determine what products to buy.

Individuals in the US are free to engage in free enterprise and competition. That is, they are free to choose where they will work, to open their own business, if they so desire, and to choose the type and quantity of goods or services they will produce.

According to famous economist, Adam Smith, self-interest is the force that directs the actions of individuals and businesses. In the US, individuals are free to look after their own self-interest.

The American economic system is relatively free from government interference

GOALS OF FREE ENTERPRISE

A major goal of the American economic system is to maintain economic freedom.

Another goal of the free enterprise system is efficiency--to make the best use of scarce resources.

A sense of justice for all is part of America's heritage, and in economic terms this goal is known as economic equity. Government tries to ensure that all people share in the benefits of the free enterprise system.

To operate smoothly, the goal of economic stability must be set to maintain employment and stable prices.

Economic security is another goal the government works toward. Individuals can help protect themselves against the unexpected by buying insurance.

The last aim of the free enterprise system is economic growth; that is, to increase the amount of goods and services that each worker in the economy can produce.

What are the ways of doing business?

Objective 1.4 The student will be able to identify and distinguish ways of doing business

1.4.2 List advantages and disadvantages of sole proprietorships, partnerships, corporations, LLCs, and cooperatives.

A business should be:

Be simple

Provide access to sufficient resources such as capital, land, labor

Encourage planning ahead for as many years as possible

Increase efficiency

- land

- labor

- capital

- machinery

Distribute benefits fairly on the basis of contributions to the business

Factors to Consider

Who owns the business organization

Ability to acquire resources

Life of organization

What is the Liability of the owners

Who makes Management Decisions?

How to transfer ownership

Problems for tax planning?

Problems for estate planning?

TYPES OF AGRICULTURE BUSINESS ORGANIZATIONS

Sole Proprietorship

Partnership

Corporation

LLC

Cooperatives

SOLE PROPRIETORSHIP

Most business use this

85.7% of US farms

Easiest to form

Few government restrictions

Sole management decisions

May quickly expand or contract bus.

Receive all the profit, thus more work incentive

No disagreements with partners

Raising capital may be difficult

May not have time to make careful management decisions

Must like to make decisions

Responsible for all debts

May be physically unable to continue an enterprise

Raising Capital under Sole Proprietorship

Lease rather than own

Owner/Manager does all the work

Parents may cosign loans

Rent parents equipment

Off-farm income

PARTNERSHIP

An association of two or more co-owners

Death dissolves the partnership unless other arrangements made

Each member liable for all debts

Property may be owned by partnership or individual owners

Profit/loss divided according to specific agreements

Goals of all partners should be same

Must respect opinion of partners

Business large enough to support all partners

Complete records, sound management, common sense with $

Written agreement

Pooling of capital and knowledge

Share management and labor

Each partner is liable for the others wrong doings

Unlimited liability of each partner may restrict credit use

Partnership Agreement

Written document

Transfer of ownership at the termination of the partnership

Machinery lease

Life insurance to help buy out partner upon death

Purchase Liability Insurance

Who makes management decisions

Who does records

How are partners paid

based on contributions to partnership

Partnerships fail because of misunderstandings

Limited Partnership

One or more partners liable for debts and obligations

Limited partner can not participate in the management of business

Limited partners name can not appear in the partnership name

In writing

Specifically indicate share of profit

Consult an attorney

Silent Partner

COPERATIONS

Advantages

Possible access to more capital

Pool money together

Separation of ownership and management

Ex: One or two children can manage the farm, while all the siblings share in the ownership

Ease of continuing in business

Upon death of a stock owner, only the stock is subject to probate, not the assets

Easily transferred ownership

Sell or give away stock in the bus.

Gifts of stock do not have to be recorded with the county clerk (more private)

Opportunity for tax savings

Some benefits (insurance, profit sharing plans) are tax deductible

Limited Liability

Shareholders liability limited to the amount of their contribution

Disadvantages

Complicated and costly to organize

Filing fees

Articles of incorporation

Initial legal and accounting expenses

Continuing costs to maintain a corporation

May be difficulty in obtaining credit

lenders may be unfamiliar with the corporation

more complicated borrowing procedures

May be no freedom of action

Corporation money can not be spent on personal things

Management decisions must be made in accordance with corporation policies, bylaws

Lawsuits

If personal items are transferred to the corporation, they may be taken as assets of the corporation if sued

Minority stockholder problems

Second generation stockholders may not be satisfied with dividends and rights

S-Corporation

Mostly the same as a regular corporation

Is not taxed as a separate entity

All the tax items are passed on to the stockholders much like a partnership

COOPERATIVES

Not intended to make a profit

Owned and controlled by the member-patrons

Profits are returned to the members based on patronage

Kinds of Cooperatives

Marketing Coops-grain elevators, dairy products, orange juice

Purchasing Coops-feed, fuel, fertilizer, supplies

Service Coops-food buying, feeder pigs, electricity

Processing Coops

Credit Coops-PCA, Federal Land Bank, Bank of Cooperatives

Purposes of Cooperatives

Improve economic well-being of farmers

Securing higher market prices

Securing more favorable input prices

Provide new or improved services

Provide credit

Become involved in processing

Characteristics of Cooperatives

Owned by members who use them

Member control

each member has voice in business affairs

each member helps select board of directors

Non-profit basis

Mutual interest and needs of members

Members share risk in proportion to amount of business they do

Members select board of directors

responsible for management, policy, insuring that coop is managed according to the wishes of the majority of members

Financing a Cooperative

Sell stock in the Co-Op

stock can not appreciate in value

Use Co-Op funds to finance and invest in long-term assets

Summary/Review: Review of the Notebook assignments.

Evaluation: Various quizzes. Final evaluation will be based on tic-tac-toe assessment.

Introduction to Agriculture Business CareersUnit 1 Introduction to Agriculture Business

Match the following terms (letters may be used more than once):

__________1. Nursery Grower

A. Producer

__________2. Clothing Retailer

B. Distributor

__________3. Chemical Sales

C. Processor

__________4. Hog Farmer

D. Supporting Ag Business

__________5. Veterinarian

__________6. Crop Advisor

__________7. Insurance Adjustor

__________8. Fuel Tanker Operator

__________9. Crop Elevator

__________10. Embryo Transfer Technician

Introduction to Agriculture Business CareersUnit 1 Introduction to Agriculture Business Answers

1. A

2. D

3. D

4. A

5. D

6. D

7. D

8. B

9. B or D

10. D

Economic Systems Comparison Chart

Traditional System

Command System

Market System

What To Produce?

How to Produce?

For Whom To Produce?

Economic Systems Comparison Chart

Traditional System

Command System

Market System

What To Produce?

By custom whatever

was produced in the past

The government decides

what should be produced

The government owns most

of the means of production

Consumer choices dictate

the success of

goods/services

How to Produce?

By custom however

items were produced in

the past

The government does the

planning for production:

factory locations, the

occupations of workers and

their salaries

Business leaders choose

the means of production

Their goal is the most

efficient and profitable

methods

For Whom To Produce?

By custom whoever

usually received

products will again

receive them

The government controls the

distribution system for

goods/services: housing,

transportation, consumer

items and sets prices

The consumers income

determines who receives

which goods/services

Business Organizational Structures

Features Compared

Individual

Partnership

Corporation

General

Limited

Regular

Subchapter

Cooperative

Who owns the business?

Who votes and how is voting done?

Who makes the policy decisions?

Who is financially liable?

Who receives the profit?

How are they taxed?