Agribusiness Management, its meaning, nature and scope, types

Of management tasks and responsibilities

What is agribusiness :
The word agriculture indicates plowing a field, planting seed, harvesting a crop, milking cows, or
feeding livestock. Agriculture has evolved in to agribusiness and has become a vast and complex
system that reaches for beyond the farm to include all those who are involved in bringing food
and fiber to consumers. Agribusiness include not only those that farm the land but also the
people and firms that provide the inputs (for ex. Seed, chemicals, credit etc.), process the output
(for ex. Milk, grain, meat etc.), manufacture the food products (for ex. ice cream, bread,
breakfast cereals etc.), and transport and sell the food products to consumers (for ex. restaurants,
supermarkets).
Initially agriculture being the major venture it was easy to become a farmer, but
productivity was low. Average farmer produced enough food to feed just four people. As a
consequence most farmers were nearly totally self-sufficient. They produced most of the inputs
they needed for production, such as seed, draft animals, feed and simple farm equipment. Farm
families processed the commodities they grew to make their own food and clothing. They
consumed or used just about everything they produced. The small amount of output not
consumed on the farm was sold for cash. These items were used to feed and cloth the minor
portion of the country’s population that lived in villages and cities. A few agricultural products
made their way into the export market and were sold to buyers is other countries.
Farmers found it increasingly profitable to concentrate on production and began to purchase
inputs they formerly made themselves. This trend enabled others to build business that focused
on meeting the need for inputs used in production agriculture such as seed, Fencing, machinery
and so on. These farms involved into the industries that make up the “agricultural inputs sector”.
Input farms are major part of agribusiness and produce variety of technologically based products
that account for approximately 75 per cent of all the inputs used in production agriculture.
At the same time the agriculture input sector was evolving, a similar evaluation was taking place
a commodity processing and food manufacturing moved off the farm. The form of most
commodities (wheat, rice, milk, livestock and so on) must be changed to make them more useful
and convenient for consumers. For ex. consumers would rather buy flour than grind the wheat
themselves before backing a cake. They are willing to pay extra for the convenience of buying
the processed commodity (flour) instead of the raw agriculture commodity (wheat).
During the same period technological advance were being made in food preservation method.
Up until this time the perishable nature of most agriculture commodities meant that they were
available only at harvest. Advance in food processing have made it possible to get those
commodities all throughout the year. Today even most farm families’ use purchased food and
fiber products rather than doing the processing themselves. The farms that meet the consumers
demand for greater processing and convenience also constitute a major part of agribusiness and
are referred to as the processing manufacturing sector.
 The term agribusiness was first introduced by Davis and Goldberg in 1957. it represents three
part system made up of (1) the agricultural input sector (2) the production sector and (3) the
processing-manufacturing sector.

What is management :
“Management is a distinct process consisting of planning, organizing actuating and controlling
performance to determine and accomplish the objectives by the use of people and resources”.
Nature of successful agribusiness :
Today the business has become very competitive and complex. This is mainly due to changing
taste and fashion of the consumers on the one hand, and introduction of substitute and cheaper
and better competitive goods, on the other. The old dictum “produce and sells has changed
overtime into “produce only what customers want”. In fact, knowing what customers want is
never simple. Nevertheless, a farmer operator/farmer manager has to give proper thought to this
consideration in order to make his business a successful one. The important requisites for success
in a modern business are:
1. Clean objectives: Determination of objectives is one of the most essential pre requisite for the
success of business. The objectives set forth should be realistic and clearly defined.
2. Planning : In simple words, planning is a pre-determined line of action. The accomplishment of
objectives set, to a great extent, depends upon planning itself. It is an analysis of a problem and
finding out the solutions to solve them with reference to the objective of the farm.
3. Sound organization: An organization is the art or science of building up systematical whole by a
number of but related parts. Just as human frame is build up by various parts like heart, lever,
brain, legs etc.Organization is, thus such a systematic combination of various related parts for
achieving a defined objective in an effective manner.
4. Research: “Consumers” behavuiour is influenced by variety of factors like cultural, social,
personal and psychological factors. The business needs to know and appreciate these factors and
then function accordingly. The knowledge of these factors is acquired through market research.
Research is a systematic search for new knowledge. Market research enable a business in finding
out new methods of production, improving the quality of product and developing new products
as per the changing tastes and wants if the consumers.
5. Finance: Finance is said to be the life-blood of business enterprise. It brings together the land,
labour, machine and raw materials into production. Agribusiness should estimate its financial
requirements adequately so that it may keep the business wheel on moving.
6. Proper plant location, layout and size : The success of agribusiness depends to a great extent on
the location. Where it is set up. Location of the business should be convenient from various
points of view such as availability of required infrastructure facilities, availability of inputs like
raw materials, skill labour, nearer to the market etc.

7. Efficient management: One of the reasons for failure of business often attributed to as their poor
management or inefficient management. The one man, i.e. the proprietor may not be equally
 good in all areas of the business. Efficient businessman can make proper use of available
resources for achieving the objectives set for the business.
8. Harmonious relations with the workers: For successful operation of business, there should be
cordial and harmonious relations maintained with the workers/labours to get their full
cooperation in achieving business activities.

Scope of agribusiness:
It was already indicated that agribusiness is a complex, system of input sector, production sector,
processing manufacturing sector and transport and marketing sector. Therefore, it is directly
related to industry, commence and trade, Industry is concerned with the production of
commodities and materials while commerce and trade are concerned with their distribution.
Industry :
Industry refers to the processes of extraction and production of goods meant for final
consumption or use by individual or by another industry for its production. Thus goods used by
the final or ultimate consumers are called “consumer goods” such as edible oils, fruit jams,
papaya, pickles etc.
Types of industries :
According to nature, the industries are broadly classified into following types.
1) Extractive industries : These industries are concerned with the extraction ;and utilization of
natural resources. Example – fishing, fruit gathering, agro-based industries, forestation.
2) Genetic Industries : These industries include breeding of plants, seeds, cattle breeding farm, fish
hatcheries, poultry farms. Of course, factors like nature, climate and environment play a
dominant role in these industries, yet human skill involved in their production cannot be ignored.
For example intensive agriculture is possible with greater amount of capital and larger number of
workers.
3) Manufacturing Industries : These industries are engaged in the conversion of raw material or
semi finished goods produced in the extractive industries. Some prominent examples are – cotton
textile industry, spinning and weaving mills etc. Manufacturing industries can further be
classified into five types : (i) Analytical industry (ii) Processing industry (iii) Synthetic industry,
(iv) Service industry (v) Assembly industry.
Commerce:
Commerce is the major component of agribusiness. It includes all those activities which are
necessary to bring goods and services from the place of their production to the place of their
consumption. Thus, it includes the buying and selling of goods and service and all those
activities which facilitate trade such as storing, grading, packaging, financing, insurance and
transportation. In simple words, commerce includes trade and aid to trade. The principal function
of trade (commerce) are to remove the hindrance of person, place, time exchange, knowledge
etc. and ensure a free and smooth flow of goods from the producers to the consumers.
 Agriculture in India
Agriculture in India is one of the most important sectors of its economy. It is the means of
livelihood of almost two thirds of the work force in the country and according to the economic
data for the financial year 2006-07, agriculture accounts for 18% of India's GDP. About 43 % of
India's geographical area is used for agricultural activity. Though the share of Indian agriculture
in the GDP has steadily declined, it is still the single largest contributor to the GDP and plays a
vital role in the overall socio-economic development of India. 

One of the biggest success stories of independent India is the rapid strides made in the field of
agriculture. From a nation dependent on food imports to feed its population, India today is not
only self-sufficient in grain production but also has substantial reserves. Dependence of India on
agricultural imports and the crises of food shortage encountered in 1960s convinced planners that
India's growing population, as well as concerns about national independence, security, and
political stability, required self-sufficiency in food production. This perception led to a program
of agricultural improvement called the Green Revolution. It involved bringing additional area
under cultivation, extension of irrigation facilities, the use of improved high-yielding variety of
seeds, better techniques evolved through
agricultural research, water management, and plant protection through judicious use of
fertilizers, pesticides and cropping practices. All these measures had a salutary effect and the
production of wheat and rice witnessed quantum leap. 

To carry improved technologies to farmers and to replicate the success achieved in the
production of wheat and rice a National Pulse Development Program , covering 13 states, was
launched in 1986. Similarly, a Technology Mission on Oilseeds was launched in 1986 to increase
production of oilseeds in the country and attain self-sufficiency. Pulses were brought under the
Technology Mission in 1990. After the setting up of the Technology Mission, there has been
consistent improvement in the production of oilseeds. A new seeds policy has been adopted to
provide access to high-quality seeds and plant material for vegetables, fruit, flowers, oilseeds and
pulses, without in any way compromising quarantine conditions. To give fillip to the agriculture
and make it more profitable, Ministry of Food Processing Industries was set up in July 1988.
Government has also taken initiatives to encourage private sector investment in the food
processing industry. 

Indian agriculture is heavily dependent on monsoons. The monsoons play a critical role in
determining whether the harvest will be rich, average, or poor. The structural weaknesses of the
agriculture sector are reflected in the low level of public investment, exhaustion of the yield
potential of new high yielding varieties of wheat and rice, unbalanced fertilizer use, low seeds
replacement rate, an inadequate incentive system and post harvest value addition. 

There is an urgent need for second green revolution in Indian agriculture and taking it to a higher
trajectory of 4 per cent annual growth. Following steps need to be taken to achieve this objective:
 Doubling the rate of growth of irrigated area;
 Reclaiming degraded land and focusing on soil quality;
 Improving water management, rain water harvesting and watershed development;
 Bridging the knowledge gap through effective extension services;
 Diversifying into high value outputs, fruits, vegetables, flowers, herbs and spices,
medicinal plants, bamboo, bio-diesel, but with adequate measures to ensure food security;
 Providing easy access to credit at affordable rates.
Institutional Support for Agriculture
The incentive created by a demand backed by purchasing power results in the modernization of
agriculture on the basis of the existing technological innovations. In this manner, a slow but
steady increase in agricultural production has taken place over the centuries. If- as today all over
the world- rapid development is the goal, it is not enough to leave this process to itself. Instead, it
is necessary to intervene in this process by forming and promoting it. In order to do so, a number
of service and support institutions are necessary.
The new technologies that are needed in order to modernize agriculture will only evolve and be
developed to the extent needed if the agricultural research facilities are adequately developed.
Traditionally, research has mainly been concerned with the problems of large farms and crops
for export. The tasks and goals will have to be changed. In addition to central research facilities,
an infrastructure of experiment stations that study the applicability of the innovations under local
conditions is also necessary. The system character of agricultural production takes it necessary
for agricultural research to not only study single smaller problems, but also to deal with the
combination of individual results into applicable procedures that can be employed for practical
purposes.
The more intensively new technologies are presented to the farmers, the sooner they are accepted
in practical agriculture. Agricultural extension services are the indispensable tool real for this
purpose. Their organization and methods have to be adapted to the type of farm. Their content
should not remain limited to the agricultural production aspects, but should also include
economic and management questions- as the farmer keeps the entire farm in mind. The more
formal education the farmers already have, the easier the extension service personnel's job will
be. School education accelerates the learning process, especially if it is relevant to development.
New technologies cost money. Industrially fabricated inputs that have to be bought play a role
frequently. This creates a financial problem. The speed at which they are accepted and applied
depends on how much credit is available to solve the financial problems and how easy it is to
receive credit as well as whether the conditions of the loan meet the farmers' needs, especially
regarding the important short term credit loans. Credit, though, can only accelerate the process if
the goods that have to be financed are available in the market.
Thus we come to the market for inputs and agricultural products. The existence of marketing
and supply facilities; a system that allows mediation between producer and consumer; and an
unproblematic, trustworthy market not only animates the farmers to take advantage of the
potential in modern agriculture. Efficient distribution channels have an indirect effect on the
prices and, thus, on the incentive to develop beyond the stage of traditional agriculture.
In view of the large number of fairly small producers and buyers in agriculture, group
activities are frequently necessary. At the least they present a good opportunity to offer services
less expensively. Internationally, therefore, the various types of cooperatives have a good
reputation. The more help in organization, management, financing, and technical aid granted to
activities without the help being dictated from above or having a paralyzing effect on initiative,
the sooner the joint activities will be accepted.
The form the support institutions take is in each case specific to a particular culture and
dependent upon the historical development. The extent to which this support is given has an
important influence on farming. The promotional institutions make up, therefore, an essential
element in the agrarian structure.
Land Reforms in India and Their Implications

Recently, a massive rally of almost twenty five thousand persons including tribals, dalits
and landless farmers from 18 states marched towards the capital city. They demanded the rights
to land and livelihood and overhauling of land policies and reforms. They also emphasized
setting up of national land authority which would make recommendations on land policies,
judicial reforms and speedier disposal of court cases related to land disputes. In India, a
whopping more than 20 million farmers are facing an acute shortage of water. Other issues are
related to ceiling of land holdings, distribution of land to eligible persons, including landless and
homestead landless and for ensuring their possession, speedier disposal of land related court
cases and necessary mechanisms. What does all this imply? Are the already existing land
policies making poorer more miserable?
Land reforms have been a national agenda of rural reconstruction since independence. The major
objectives of land reforms have been:
(1).Reordering of agrarian relations in order to achieve an democratic social structure
(2).Elimination of exploitation in land relations and enlarging the land base of the rural poor
(3).Increasing agricultural productivity and infusing an element of equality in local institutions.
Land reforms are an attempt by the Government to achieve social equality and optimum
utilization of land by redistributing the land holdings. These reforms are intended to eliminate
exploitation and social injustice within the agrarian system, to provide security for the tiller of
the soil and to remove obstacles arising from the agrarian structure that has been inherited from
the past.
Kerala is one of the few states which took brave step of land reforms in early years, where the
landless agricultural workers were provided land to settle down; the result was highest public
health and distribution of basic educational facilities and least slum dwelling. Bihar had least
bothered for land reforms, the state has the highest rate of illiteracy and lack of healthcare
administration and highest slum dwellers in the country are from Bihar.

Tenancy reforms are one of the major aspects of the land reforms. Tenancy reforms relate to the
rights and conditions of holding land. They aim at the abolishing intermediaries and bringing the
actual tiller in direct contact with the State, regulation of rent, security of tenure for tenants and
providing ownership on them. It also focuses on land ceiling and land holdings. Land reforms
include redistribution of land ownership in favor of the cultivating classes so as to provide
them a sense of participation in rural life, improving the size of farms, providing security of
tenure to them. The purpose of land reform and thus the tenancy reform is twofold.

On one hand, it aims to optimum utilization of land by affecting conditions of holdings,

imposing ceilings and floors on holdings so that cultivation can be done without any waste of
labour and capital. On the other hand, it is a means of redistributing agricultural land in the favor
of less privileged classes of tillers and cultivators, and of improving the terms and conditions on
which the land is held for cultivation by the actual tillers, with a view to end exploitation.
Implications:
The slums of metros like New Delhi and Mumbai thrive with countless landless labourers who
have flocked to the city in search of livelihood. Many among the migrants are from Uttar
Pradesh and Bihar - states which have a terrible record in land reform.
State of Karnataka in southern India tried to grant occupancy rights to tenants. Many state
governments have banned agricultural tenancy but concealed tenancy still exists. Many of the
affluent states like Punjab and Haryana show a growing tendency towards 'reverse tenancy' in
which large farmers lease land from small and marginal ones.
Land reforms are the responsibility of individual states. Therefore the degree of success in
implementing land reforms has varied considerably from state to state with the agenda remaining
unfinished in most states.
Today, land reform in rural India is at a turning point. Despite the inequity, the constituency
advocating land reform is weakening day by day and the number of people pushing for a
revocation of land ceilings is increasing.
The land reforms have not put an end to absentee ownership of land nor has it led to the
disappearance of tenancies. Although the contribution of tenancy reforms could not be totally
neglected but the programs including these reforms did not lead into any significant
redistribution of land, or the removal of all the obstacles to increasing agricultural production.

Animal husbandry in India

A large number of farmers in India depend on animal husbandry for their livelihood. In
addition to supplying milk, meat, eggs, and hides, animals, mainly bullocks, are the major source
of power for both farmers and drayers. Thus, animal husbandry plays an important role in the
rural economy. The gross value of output from this sector was Rs358 billion in FY 1989, an
amount that constituted about 25 percent of the total agricultural output of Rs1.4 trillion.[1]
Production
In FY 1992, India had approximately 25 percent of the world's cattle, with a collective herd of
193 million head. India also had 110 million goats, 75 million water buffalo, 44 million sheep,
and 10 million pigs. Milk production in FY 1990 was estimated to have reached 53.5 million
tons, and eggproduction had reached a level of 23.3 billion eggs. Dairy farming provided
supplementary employment and an additional source of income to many small and marginal
farmers. The National Dairy Development Board was established in 1965 under the auspices of
Operation Flood at Anand, in Gujarat, to promote, plan, and organize dairy development through
cooperatives; to provide consultations; and to set up dairy plants, which were then turned over to
the cooperatives. There were more than 63,000 Anand-style dairy cooperative societies with
some 7.5 million members in the early 1990s. The milk produced and sold by these farmers
brought Rs320 million a day, or more than Rs10 trillion a year. The increase in milk production
permitted India to end imports of powdered milk and milk-related products. In addition, 30,000
tons of powdered milk were exported annually to neighboring countries. There was about 50000
cows in India.[2]
Operation Flood
Operation Flood, the world's largest integrated dairy development program, attempted to
establish linkages between rural milk producers and urban consumers by organizing farmer-
owned and -managed dairy cooperative societies. In the early 1990s, the program was in its third
phase and was receiving financial assistance from the World Bank and commodity assistance
from the European Economic Community. At that time, India had more than 64,000 dairy
cooperative societies, with close to 7.7 million members. These cooperatives established a daily
processing capacity of 15.5 million liters of whole milk and 727 tons of milk powder
AGRICULTURAL CREDIT
The Agricultural Credit Policy essentially lays emphasis on augmenting credit
flow at the ground level through credit planning, adoption of region-specific strategies,
rationalisation of lending policies and procedures and bringing down the cost of
borrowing. Bank credit is available to the farmers in the form of short-term credit for
financing crop production programmes and in the form of medium-term/long–term credit
for financing capital investment in agriculture and allied activities like land development
including purchase of land, minor irrigation, farm mechanisation, dairy development,
poultry, animal husbandry, fisheries, plantation, and horticulture. Loans are also available for
storage, processing and marketing of agricultural produce.
Institutional Arrangements: Agricultural credit is disbursed through a multiagency
network consisting of Commercial Banks (CBs), Regional Rural Banks (RRBs)
and Cooperatives. There are approximately 100,000 village-level Primary Agricultural
Credit Societies (PACS), 368 District Central Cooperative Banks (DCCBs) with 12,858
branches and 30 State Cooperative Banks (SCBs) with 953 branches providing primarily short-
and medium-term agricultural credit in India. The long-term cooperative structure consists of 19
State Cooperative Agricultural and Rural Development Banks
(SCARDBs), with 2609 operational units as on 31 March 2005 comprising 788 branches
and 772 Primary Agricultural and Rural Development Banks (PA&RDBs) with 1049
branches.
Flow of Credit: A comprehensive credit policy was announced by the
Government of India on 18 June 2004, containing measures for doubling agriculture
credit flow in the next three years and providing debt relief to farmers affected by natural
calamities. The following are the highlights of this announcement:
• Credit flow to agriculture sector to increase at the rate of 30 per cent per year.
• Debt restructuring in respect of farmers in distress and farmers in arrears
providing for rescheduling of outstanding loans over a period of five years
including moratorium of two years, thereby making all farmers eligible for fresh
credit.
• Special One-Time Settlement scheme for old and chronic loan accounts of small
and marginal farmers.
• Banks allowed to extend financial assistance for redeeming the loans taken by
farmers from private moneylenders.
• Commercial Banks (CBs) to finance at the rate of 100 farmers/ branch; 50 lakh
new farmers to be financed by the banks in a year.
• New investments in agriculture and allied activities at the rate of two to three
projects per branch.
• Refinements in Kisan Credit Cards (KCCs) and fixation of scale of finance.

Rate of Interest on Agricultural Loan: In the Union Budget for the year 2006-
07, it was announced that effective from Kharif 2006-07, farmers would receive crop
loans up to a principal amount of Rs 3.00 lakh at 7 per cent rate of interest and that the
Government of India would provide the necessary interest subvention to NABARD for
this purpose. Further, in order to provide relief to the farmers who have availed of crop
loans from CBs, RRBs and PACS for Kharif and Rabi 2005-06, an amount equal to two
percentage points of the borrower’s interest liability on a principal amount up to Rs1.00
lakh has been credited to their bank account before 31 March 2006. The Government has
provided a sum of Rs 1700.00 crore for this purpose in the Union Budget for the year 2006-07.
Simplification of Procedures: The RBI has issued instructions to banks to waive
margin/security requirements for agricultural loans up to Rs 50,000. The introduction of
the KCC scheme has also facilitated the extension of easy credit to the farmers. As the
card is valid for three years, the farmers have been freed from routine documentation
every year. The scope of the KCC has been expanded to include credit for investment
purposes, as well as an element of consumption loan.
Standing Guidelines for Relief due to Natural Calamities: The RBI has issued
standing guidelines to banks for providing relief to farmers in areas affected by natural
calamities. These guidelines have been issued to enable banks to take uniform and
concerted action expeditiously, and particularly to provide financial assistance to farmers
affected by natural calamities.
National Agricultural Insurance Scheme (NAIS): This scheme, with increased
coverage of farmers, crops and risk commitment, was introduced in India from Rabi
1999-2000, replacing the erstwhile Comprehensive Crop Insurance Scheme (CCIS). The main
objective of the scheme is to protect farmers against crop losses suffered on account of natural
calamities, such as drought, flood, hailstorm, cyclone, pests and diseases. The scheme is being
implemented by the Agriculture Insurance Company of India Ltd (AICL).
9.13 The scheme is available to all farmers – both loanee and non-loanee – irrespective
of their size of holding. It envisages coverage of all food crops (cereals, millets and
pulses), oilseeds and annual commercial/horticultural crops, in respect of which past yield data is
available for an adequate number of years. Among the annual
commercial/horticultural crops, sugarcane, potato, cotton, ginger, onion, turmeric, chillies,
pineapple, annual banana, jute, tapioca, coriander, cumin and garlic, have already been covered
under the scheme. All other annual commercial/horticultural crops are stipulated to be insured in
due course of time, subject to availability of past yield data. The scheme is operating on the basis
of ‘area approach’, i.e., defined areas for each notified crop.
9.14 The premium rates are 3.5 per cent (of sum insured) for bajra and oilseeds; 2.5 per
cent for other Kharif crops; 1.5 per cent for wheat, and 2 per cent for other Rabi crops. In the
case of commercial/horticultural crops, actuarial rates are being charged. Small and marginal
farmers are entitled to a subsidy of 50 per cent of the premium charged from them, which will be
shared 50:50 by the central and state governments. The premium subsidy will be phased out over
a period of five years. During 2006-07, a 10 per cent subsidy on the premium is available to
small and marginal farmers.

Central Financial Assistance: In order to strengthen the cooperative credit

structure for meeting the credit requirement of the farmers, central assistance is released to the
state government under the scheme viz. investment in debentures of SLDBs. Under the NAIS,
the Government of India releases the central share towards payment of indemnity claims,
premium subsidy, operational expenses, etc. to the AICL.

With a rich experience of green revolution of 1960s initiated by

technological breakthrough, much was expected from Indian Agriculture in the following years.
Then there was an almost lull period. The New Economic Reforms of 1990s promised a period
of resurgence, with a fast growth of economy in general and agricultural sector in particular. But
on the contrary, the post WTO period has witnessed a sharp decline in agricultural production.
The agricultural sector is facing a crisis. Free trade has not been free from problems. Farming
and farming community are waiting for a fair treatment even as many of them have lost interest
or lives. The whole world knows what Indian farmers desired, deserved and derived from
globalization. There can be no better time than now - the period of second generation reforms -
for a critical study of this vital sector of the Indian economy and for ensuring a second green
revolution in the near future.