1. Introduction to Agribusiness
Agricultural Business
Unit 1:The Meaning and Importance of Agribusiness

2. What Does Agribusiness Mean To You?
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 neighbor’s definition that you did not think about.

3. Agribusiness
“The sum total of all business activities involved in the production processing and distribution of agricultural products for the consumer”

4. What Agribusiness Is… daily operation decision making planning
evaluating
must understand all aspects of the business
maximize profit

5. Introduction to Agribusiness
Agricultural Business
Unit1: Agribusiness Sectors

6. Agribusiness Sectors Production Input Marketing
Agriculture Business 1.2.2

7. Introduction to Agribusiness
Agricultural Business
Unit1: Goal Setting, Decision Making and their Importance

8. Characteristics of Decisions
Importance: meet goals
Frequency: daily, yearly
Imminence: how soon
Revocability: can it be reversed?
Available Alternatives: choices

9. Strategies for Decision Making
reduce number of daily decisions
collect data for alternatives
establish priorities

10. What are the steps in the Decision Making Process?
1) define the problem (own or rent machinery or land)
2) gather information about alternative solutions
3) Evaluate alternative solutions

11. What are the steps in the Decision Making Process?
4) make decisions consistent with goals and objectives 5) take action 6) evaluate and accept consequences of your decision

12. What are Goals?
broad statements that show where you want to be after some period of time
make a profit every year
increase grain sales by 12% over 5 years

13. What are Objectives?
the steps that must be taken in order to attain goals
Some examples:
- increase wheat production by 30% next year
- keep accurate records

14. What are the advantages of setting goals?
Provides “road map”
Distinguishes between goals & objectives
Makes it easier to get where you are going
Prepares you to meet the future

15. What are the advantages of setting goals?
You see the big picture & focus on critical relationships
Gives you purpose and direction
Frees you from worries and uncertainties about where you are headed

16. Guidelines for Setting Goals
Your own your goals
Goals in writing
Realistic and attainable
Target dates, time limits
Goals should be compatible
Remember SMART!

17. What are the types of Goals?
Short Term Goals:
attainable in less than 1 year
Intermediate Term Goals:
1 to 10 years
Long Term Goals:
more than 10 years

18. Priorities of Goals
Dollar Value
Time
Orderly Sequence

19. How Do you Reach your Goals?
Review goals
Use time and effort wisely
Organize
Check for slow moving goals
Modify goals

20. Introduction to Agribusiness
Agricultural Business
Unit 1: Economic Systems

21. Three Economic Questions
What goods and services will be produced?
What do we have?
How will they be produced?
Hand > machine > elsewhere
Who gets the stuff?

22. 3 Economic Systems
Economic system (economy) – an organized way of providing for the wants and needs of people.
1). Command
2). Market
3). Traditional

23. Command Economies
Economic activity is planned out by the government, with people having little influence.
Examples:
Cuba
North Korea
Former Soviet Union

24. Command Economies - Pros
Allows an economy to change direction very quickly.
After Stalin’s first two Five Year Plans, Russia moved from a rural agricultural economy to an industrial economy.

25. Command Economies - Pros
Little uncertainty as to who will do what.
No unemployment because the government gives everyone a job (whether it is needed or not).

26. Command Economies - Cons
Not designed to meet the wants of consumers.
Stalin’s Five Year Plan directed resources away from both agriculture and consumer goods.
Provides strange incentives
Do just enough to meet quotas.

27. Command Economies - Cons
No rewards for individual performance.
No flexibility to handle problems.
Great Depression disrupted the USSR’s First Five Year Plan
Requires a large decision making agency.
Stalin’s Five Year Plans governed all economic activity in Russia…that’s a lot of paperwork!

28. Market Economies
People and businesses act in their own best interests to answer the three basic economic questions.

29. Market Economies – How they work
Lure of personal and financial gain leads consumers and businesses to interact in various markets.
Each person acts as they see fit in order to advance their own interests.

30. The First Economist – Adam Smith
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” – Wealth of Nations, 1776

31. Market Economies - Pros
Economy can adjust to change over time
Businesses can adapt to changing consumer tastes by creating new/different products.
High degree of individual freedom
Businesses and individuals are free to do what they want.

32. Market Economies – More Pros
Small degree of government interference (Mixed Economy)
Economic decisions are made by all, not limited to government officials.
Seemingly unlimited variety of goods and services available to consumers

33. Market Economies - Cons
Does not provide for the basic needs of everyone.
Elderly, disabled and other groups would be unable to survive in a market economy without governmental assistance.

34. Market Economies – More Cons
Does not provide certain services that people value.
National Defense & Education.
High degree of uncertainty
Jobs going overseas
Market Failures

35. Traditional Economies
Economic activity is based on tradition with roles determined by previous generations.
Examples:
Medieval Europe
Various hunting tribes in Africa and northern Canada

36. Traditional Economies – Pros
Everyone knows what their role is.
Life is generally predictable and stable.

37. Traditional Economies - Cons
Discourages new ideas and new ways of doing things.
Lack of progress leads to a lower standard of living.

38. The US Economic System Mixed Economy Capitalism
Based on 4 important principles
Private Property
Freedom of choice
Profit
Competition

39. Economic Goals Economic Freedom Economic Equity Economic Security
Price Stability

40. Economic Freedom
Individuals have freedom to choose their own occupations, employers, and spending habits.
Businesses have freedom to choose how and where to produce goods/services.
Are we meeting this goal?

41. Economic Equity People should receive equal pay for equal work.
People should receive adequate pay for the work they perform.
People should all have the same opportunities to get ahead.
Are we meeting this goal?

42. Economic Security
We should have protection from negative economic events such as layoffs and injuries.
Social Security – federal program that provides disability and retirement benefits.
Everyone should have their basic needs met.
Are we meeting this goal?

43. Price Stability
We should have stable prices that protect against inflation.
Inflation – a rise in the general level of prices.
Are we meeting this goal?

44. When economic goals are not met…
…People get mad!!!!!!!

45. Introduction to Agribusiness
Agricultural Business
Unit1: Free Enterprise

46. Free Enterprise System
Freedom is the principle on which the United States was founded.
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.

47. Free Enterprise System Features
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.

48. Free Enterprise System Features
Individuals in the US are free to make personal choices and communicate those choices through the price system.
Individuals in the US are free to engage in free enterprise and competition.
The American economic system is relatively free from government interference.

49. Goals for Free Enterprise
A major goal of the American economic system is to maintain economic freedom.
Another goal of the free enterprise system is efficiency.

50. Goals for Free Enterprise
A sense of justice for all is part of America's heritage, and in economic terms this goal is known as economic equity.
Economic security is another goal the government works toward.
The last aim of the free enterprise system is economic growth.

51. Introduction to Agribusiness
Agricultural Business
Unit1: Sole Proprietorships, Partnerships, Corporations, LLCs, and Cooperatives

52. A Business Organization Should:
Be simple
Provide access to sufficient resources such as capital, land, labor
Encourage planning ahead for as many years as possible

53. A Business Organization Should:
Increase efficiency
- land
- labor
- capital
- machinery
Distribute benefits fairly on the basis of contributions to the business

54. Factors to Consider Who owns the business organization
Ability to acquire resources
Life of organization
What is the Liability of the owners

55. Factors to Consider Who makes Management Decisions?
How to transfer ownership
Problems for tax planning?
Problems for estate planning?

56. Types of Farm Business Organizations
Sole Proprietorship
Partnership
Corporation
LLC
Cooperatives

57. Sole Proprietorship Most business use this 85.7% of US farms
Easiest to form
Few government restrictions

58. Sole Proprietorship Sole management decisions
May quickly expand or contract bus.
Receive all the profit, thus more work incentive
No disagreements with partners

59. Sole Proprietorship 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

60. 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

61. 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

62. Partnership 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

63. Partnership Share management and labor
Each partner is liable for the other’s wrong doings
Unlimited liability of each partner may restrict credit use

64. Partnership Agreement
Written document
Transfer of ownership at the termination of the partnership
Machinery lease
Life insurance to help buy out partner upon death

65. Partnership Agreement
Purchase Liability Insurance
Who makes management decisions
Who does records
How are partners paid
based on contributions to partnership
Partnerships fail because of misunderstandings

66. 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”

67. Farm Corporations

68. Farm Corporation Advantages
Possible access to more capital
Pool money together

69. Farm Corporation Advantages
Separation of ownership and management
Ex: One or two children can manage the farm, while all the siblings share in the ownership

70. Farm Corporation Advantages
Ease of continuing in business
Upon death of a stock owner, only the stock is subject to probate, not the assets

71. Farm Corporation Advantages
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)

72. Farm Corporation Advantages
Opportunity for tax savings
Some benefits (insurance, profit sharing plans) are tax deductible

73. Farm Corporation Advantages
Limited Liability
Shareholder’s liability limited to the amount of their contribution

74. Farm Corporation Disadvantages
Complicated and costly to organize
Filing fees
Articles of incorporation
Initial legal and accounting expenses

75. Farm Corporation Disadvantages
Continuing costs to maintain a corporation

76. Farm Corporation Disadvantages
May be difficulty in obtaining credit
lenders may be unfamiliar with the corporation
more complicated borrowing procedures

77. Farm Corporation Disadvantages
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

78. Farm Corporation Disadvantages
Lawsuits
If personal items are transferred to the corporation, they may be taken as assets of the corporation if sued

79. Farm Corporation Disadvantages
Minority stockholder problems
Second generation stockholders may not be satisfied with dividends and rights

80. Farm Corporation Disadvantages
Income tax laws are unique

81. Farm Corporation Disadvantages
Corporations may cause complicated and expensive termination
Only incorporate if you intend the business to continue indefinitely

82. 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

83. Cooperatives

84. Cooperatives Not intended to make a profit
Owned and controlled by the member-patrons
Profits are returned to the members based on patronage

85. Kinds of Cooperatives Marketing Coops Purchasing Coops Service 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

86. 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

87. Characteristics of Co-op
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

88. Characteristics of Co-op
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

89. 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