Agriculture Reference
In-Depth Information
is important to toy companies), combined these factors form the distinguishing features of
the food and agribusiness marketplace.
Food as a product . Food is vital to the survival and health of every individual. Food is one
of the most fundamental needs of humans, and provides the foundation for economic
development — nations fi rst worry about feeding their people before turning their atten-
tion to higher order needs. For these reasons, food is considered a critical component of
national security. And, as a result, the food system attracts attention from governments
in ways other industries do not.
Biological nature of production agriculture . Both crops and livestock are biological organ-
isms—living things. The biological nature of crops and livestock makes them particu-
larly susceptible to forces beyond human control. The variances and extremes of
weather, pests, disease, and weeds exemplify factors that greatly impact production.
These factors affecting crop and livestock production require careful management. Yet
in many cases, little can be done to affect them outright. The gestation cycle of a sow or
the climate requirements of wine grapes provide examples.
Seasonal nature of business . Partly as a result of the biological nature of food production,
fi rms in the food and agribusiness markets can face highly seasonal business situations.
Sometimes this seasonality is supply driven—massive amounts of corn and soybeans
are harvested in the fall. Sometimes this seasonality is demand driven—the market for
ice cream has a series of seasonal peaks and valleys, as do the markets for turkey and
cranberries. Such ebbs and fl ows in supply and demand create special problems for food
and agribusiness managers.
Uncertainty of the weather . Food and agribusiness fi rms must deal with the vagaries of
nature. Drought, fl ood, insects, and disease are a constant threat for most agribusinesses.
All market participants, from the banker to the crop production chemical manufacturer
are concerned with the weather. A late spring can create massive logistical problems for
fi rms supplying inputs to the crop sector. Bad weather around a key holiday period can
ruin a food retailer's well-planned promotional event.
Types of fi rms . There is tremendous variety across the types of businesses in the food and
agribusiness sectors. From farmers to transportation fi rms, brokers, wholesalers, proces-
sors, manufacturers, storage fi rms, mining fi rms, fi nancial institutions, retailers, food
chains, and restaurants—the list is almost endless. Following a loaf of bread from the
time it is seed wheat prepared for shipment to the farmer until its placement on the retail
grocer's shelf involves numerous types of business enterprises. The variety in size and
type of agribusinesses, ranging from giants like ConAgra to family farms, shapes the
food and agribusiness environment.
Variety of market conditions . The wide range of fi rm types and the risk characteristics of the
food and agribusiness markets have led to an equally wide range of market structures.
Cotton farmers fi nd themselves in an almost textbook case of the perfectly competitive
market where individual sellers have almost no infl uence over price. At the same time,
Coca-Cola and PepsiCo have a literal duopoly in the soft drink market. Some markets
are global, others local. Some markets are characterized by near equal bargaining power
between buyer and seller, while others may be dramatically out of balance in one direc-
tion or the other.
Rural ties . Many agribusiness fi rms are located in small towns and rural areas. As such, food
and agribusiness are likely the backbone of the rural economy and have a very important
role in rural economic development.
 
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