The Size and Importance of Agribusiness

1. The Size and Importance of Agribusiness Chapter 3

2. 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.

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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.

17. 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

18. 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

19. 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

20. 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

21. 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.

22. 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

23. 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?