Agribusiness Sectors Chapter 1 Ag Business Mrs. Ingalls

I. Agribusiness- all activities of the ag industry involving production of food and fiber. A) Production of plants and animals B) Financing C) Producing supplies and services –1. feed –2. seed –3. fertilizer –4. equipment –5. marketing and processing  Agribusiness system: is a way of showing how various sectors relate to each other. ( Known as food and fiber system.)

II. Agribusiness sectors- 3 Sectors A) Production sector- growing crops and raising animals. –1. “Farming and Ranching” –2. Purpose providing consumers with food, clothing, and shelter. –3. Examples: (Class List) a. Food: b. Clothing: c. shelter:

B) Input Sector- provides the supplies, equipment, and services needed to produce plants and animals. –1. Examples: A. Crop consultants B. veterinarians C. machinery repairs persons D. Custom operations

C) Marketing Sector- moves crops and animals, or their products, from the production sector to the customer. –1. Taking the steps to provide the product in the form that consumers desire. –2. Quite large- many functions A. grading product B. transporting C. processing D. storing E. packaging for convenience and safety All three sectors are needed to meet consumers needs. If one sector has a problem it affects the other sectors and consumer demand may not be met.

III. Changes in Ag Agriculture is always changing. Technology and emergence of agribusiness has made changes possible. Fewer farm workers and more nonfarm workers. The amount of production has increased as the number of workers has decreased. 1890, 43% workers farmed 1995, 1.9% workers were producers Increase globalization (international trade) is more widely used.

IV. Importance of Agribusiness Sizeable employer and producer of economic activity, more than 22 million employed in US. 17% of total workforce in the United States. Contributes $1 trillion to the United States economy each year. Produces more than 13% of gross domestic product (GDP)- total value of all goods and services produced in US.

Chapter 1 Activity Create a chart poster that illustrates the different agribusiness sectors. 1. Define each sector: 10 points 2. Pictures that represent/illustrate each sector. 15 points 3. At least 5 different business list for each sector. 15 points Total:40 points

V. The Free Market Economic System Government provides a way for goods And services to be produced and exchanged. How this is carried out forms an economic system. –A) Economic system: is a way goods and services are owned, created, and exchanged. –B) Economics: study of production, distribution, and consumption of wealth. –C) Differnces between systems is in the ownership and control of what is produced.

D) Socialism: is an economic system in which the government controls the ownership and production of goods and services. All people share in the work and production for the government or state.

E) Capitalism: (known as free market or free enterprise), is a system where the production and distribution of products are privately owned and operated. –Minimum government intervention –Agribusiness in United States operates in a relatively free market. –Government controls assure order and fairness in the exchange of goods and services and sustain the environment. –Price supports are in place to assure a level of productivity needed for a strong nation.

F) Competition: is the condition in which there are many buyers and sellers dealing with the same product. –Agribusiness in United States and globally operates competitively. –Buyers want to buy at the lowest prices. –Sellers want to sell at the highest prices. –Both want uniform product quality. Forms of competition: –Perfect competition –Imperfect –Monopoly –Oligopoly

1. Perfect (Pure) Competition Many buyers and sellers of a product who have no advantage over each other. Many feel this is the most desirable form of competition. Promoting an economy that operates effectively. No single buyer or seller can affect the price. –Examples: List

2. Imperfect competition Particular individuals have advantage over others in the marketplace. Advantage might be in markets, knowledge, style product, other conditions. Examples: List

3. Monopoly Form of noncompetition One individual or organization controls the supply of a product. Federal laws protect against monopolies in United States. Examples: Electric power and telephone utility companies

4. Oligopoly Prevalent in today’s economy Few companies that control supply Examples: Oil companies and ag commodities

Activity 2 Class Discussion Topic 1: Economic systems Topic 2: Competetion

G) Agribusiness Ownership Central part of a capitalist economic system Three basic ways of owning a business: –Sole proprietorship –Partnership –Corporation

1) Sole proprietorship: is an agribusiness that is owned by an individual. –A) Examples: Producers Landscape services Feed and feed suppliers Equipment dealers B) Lack of money for land, animals, and other inputs is a limitation for many people. C) Profits and losses are responsibility of the owner. D) Commitment is required to be effective E) Many in United States

Partnerships Is the ownership of an agribusiness by two or more people. –A) may involve different roles of the owners –B) agreement needed: legal document used to identify partners, how business is to run, who gets the profits, who makes decisions, how liability will be handled. –C) Limited partnership: is a partnership where one or more of the partners may only be financial investor. disadvantage: all partners are liable for decisions the other partner makes.

–D) Limited liability company (LLC): is an unincorporated partnership that has limited liability for owners. Forms must be filed with the appropriate state officials. Form is known as article of organization. LLcs do not have charters, but have regulation agreements similar to corporations.

Corporations Is an artificial legal entity created under state law. Articles of incorporation, are filed with a state official who has the authority to issue a charters. A fee paid Owned by stock holders Exists as a separate entity even if people die or sell out Management is by a board of directors elected by stockholders Interests of stockholders may be sold and transferred to others

Chartering Is an grant by the state for privilege of operating a corporation. –Includes the articles of incorporation, forms and certificates from state. –Certificate of incorporation: is a document prepared by the Secretary of State that is evidence that the corporation exists. Needed to commence business.

Types of Corporations Two basic types: –Individual investor corp. –Cooperative corp. A) Investor corp.- formed by individuals who provide capital (Money or property) to get business started. * Stock holders: individual who owns a share or shares of a corporation.

Board directors elected by stock holders Board sets policy Hire management: responsible for daily operations. Typical management include: President, Secretary, treasure. Top management: CEO- chief executive Written bylaws and meetings with recorded minutes to comply to government law.

Can be small or large –C- Corporations: two kinds of stock-common and preferred, and unlimited number of stockholders Stockholders are only taxed on dividends earned individually.  S corporation: limited to one kind of stock and no more than 35 stock holders.  Profit is taxed on each individuals tax return of stockholders.

Cooperatives (Co-Op) An associate of people who have particular needs or interest that are met by binding together to do business. Similar to investor by the way they are chartered and managed by the government. Two types: supplies and services, and marketing

Supplies and Services: –Formed by people who usually produce agriculture products. Credit Feed Seed Fertilizers Other inputs

Marketing Co-Op –Formed by producers to get higher prices. –Products from several –Farms are pooled –Example: grain elevator, rice haulers Examples of Co-Op are in: *Cotton*Poultry *Dairy *Vegetables *Fruits

Co-Op Limited returns on investments and democratic control over decision making. Where there is a profit, they may pay patronage dividends to the stockholders.

Activity 3 Co-Op Report & Class Presentation –What –Who –When –Where –Why –Other

Supply and Demand Relates the price of a product to how much of the product will be produced. Affects the profits of the business.

Profit in Agribusiness Is the amount of money that remains after all costs of production have been paid.

Supply Is the amount of product for sale in the marketplace. Supply affected by: price of particular product, prices of other products, quality available, environment, and consumer wants. More similar products, prices decrease Fewer products prices go up

Demand Is the amount of product that will be bought at a given price. Affected by: price of product, price of similar products, consumer wants, and available supply. Prices go up, demand goes down fewer people willing to pay higher prices.

Graph Interaction Economists use supply and demand data to explain relationships between prices and quantity produced. Point where the supply and demand curve intersect is where buying and selling occur called the equilibrium.

Success in Agribusiness Personal skills and technology skills needed. Personal skills: List as class –1. –2. –3. –4. –5.

Technology skills New tech every day Must be able to adapt Continued education needed.