ABM 105 A

(Introduction to Agricultural Commodity System)

FIRST SEMESTER, SY 2023-2024

HOUSE RULES
1. Attendance will be checked.
4. Cheating is strictly prohibited. Be honest all the time.
5. Once caught cheating, automatically you will be given a failing grade.
6. Put off your cellular phones or it should be in silent mode.

Course Code: ABM 105A

Descriptive Title:
Course Description:
No. of Hrs. per Week:
Credit Units:
Semester Offered:
Prerequisites:
Introduction to Agricultural Commodity System
Interactions of all activities and factors affecting the
Sourcing of inputs, production activities for farm
commodities and other products derived from them,
and their distribution in the global market considering
the socio-cultural, political, economic, environment,
and development landscape of the country.
3 hrs lec
3
First/First Semester
Entrepreneurial Mind
Principles of Agricultural Entrepreneurship and
Enterprise Development

INTRODUCTION TO AGRIBUSINESS

INTRODUCTION

The agricultural sector dominates the Philippine economy and is engaged mainly
in the cultivation of the soil, planting of crops, raising of fish, poultry and livestock, and
growing of fruits and forest products. Generally, the Agricultural Sector is composed of
four major sub-sectors, namely: (1) Crop, (2) Poultry and Livestock, (3) Fishery, and (4)
Forestry.
Agribusiness has been popularized in many countries during the past centuries.
With the proliferation of agri-based enterprises and massive technological
breakthroughs in agriculture, the need to increase the supply of effective agribusiness
managers becomes imperative. With the recent ratification of the Agriculture and
Fishery Modernization Act (AFMA), the Philippines now engages itself with various
programs to professionalize its manpower in agriculture (farmers and industry
stakeholders) to stay competitive; otherwise they will be left behind by its neighboring
countries.
The systems orientation and management capability of agribusiness graduates to
handle agricultural development projects is now being recognized as a specific field of
specialization not only in the world of academe, but also in the country’s overall
agricultural sector as well. As such, this chapter aims to provide some insights regarding
agribusiness as a field of professional discipline.

At the end of Chapter I, you should be able to:

1. Relate what agribusiness is, its nature, purpose, scope and dimension;
2. Discuss the agribusiness systems orientation and its importance as a field of
professional discipline; and
3. Identify new developments, recent trends and prospects in agribusiness.

DEFINITION AND SCOPE OF AGRIBUSINESS

The term “agribusiness” originated and was first used by Prof. John H. Davis of
Harvard University in 1955. This became a buzz word and has gained wide acceptance
all over the world. The term is not only found in internet websites, newspapers,
magazines, professional journals, and textbooks, but it is also widely used by
academicians and businessmen in classroom sessions, seminars and day-to-day
conversation. Although there has been very little consistency in the usage of the term,
the following major interpretations can be considered.

Agribusiness as a Field of Study

Since agribusiness is closely related to the fields of agriculture, business,

management, economics, accountancy and public administration, a uniform definition
of agribusiness is thereby formulated to wit:

The new definition is in accordance with the pertinent provision of Republic Act
(RA) No. 7222 otherwise known as the” Higher Education Act of 1994”, and by virtue of
Resolution No. 091-2007 of the Commission en banc dated February 12, 2007 for the
purpose of rationalizing the agribusiness education in the country and with the end view
of keeping at pace with the demands of global competitiveness. Certain policies and
standards are also set and promulgated by the Commission on Higher Education
(CHED) for adoption and implementation of all private higher education institutions
(HEIs) and State Colleges and Universities (SUCs) offering agribusiness program in the
Philippines.
Based on the above definition of agribusiness, it is therefore the main objective of the
program (Bachelor of Science in Agribusiness) to produce educated well-rounded
professionals in agribusiness capable of meeting the national and global needs for highly
trained managers, academicians, researchers, extentionists and entrepreneurs. Some of
the specific professions, careers, occupation or trades that the graduates of this program
 may go into are the following:(1) Corporate Planners, (2) Entrepreneurs, (3) Project and
Business Consultants, (4) Business Managers, (5) Sales Representatives, (6) Credit
Analysts, (7) Teachers, (8) Researchers, (9) Extension Agents, and (10) others.
What is Agriculture?

Art of cultivating various categories of crops including animal husbandry,

forestry, fishery and other related activities.
Agriculture –the science or art of cultivating the soil,
producingcropsandraisinglivestockandinvaryingdegreesthepreparationoftheseproductsf
or man’s use and their disposal.

What is Agribusiness Before?

 same as agriculture, agribusiness indicate plowing a field, planting seed, harvesting

crops or feeding livestock.
 farmers produced most of the inputs they needed for production and process this to
make their own food
 they consumed or used everything they produced

Initially-Easy to become
a farmer but productivity
is low
Produced enough just They consumed or
to feed few people, as a used just about
consequence-farmers everything they
were nearly totally produced.
self-sufficient.
The small amount of
They produced most of output not consumed
the inputs they needed on the farm was sold
for production, such as for cash.
seed, draft animals, feed
and simple farm
equipment These items were used to feed
and cloth the minor portion of
A few agricultural products the country’s population that
made their way into the lived in villages and cities.
export market and were sold
to buyers is other countries.

What is Business?

An economic unit, aims to sell goods and services to customers, at prices that will
provide an adequate return to its owners, commercialization of many enterprise.
What is Agribusiness?

 Agribusiness is the sum total of all operations involved in the manufacture and
distribution production activities on the farm and the storage, processing and
distribution of farm commodities from them (Goldberg and Davis, 1957; Davis,
1956)).
 They believed that the concept of agribusiness as industry had already existed over
150 years
 A typical family would not only grow and raise food but also produce and use
means for the production-draft animals, tools, fertilizers, processing and retailing

Ex.
Agri Chemicals Companies, Veterinary Supply Companies, Livestock Supply
Companies, Biotechnology Firms, etc.

It encompasses of all enterprises that take place inside and outside:

 The farm gate

 Bringing products from the field to the consumers
 Consist not only of production but includes other process such as generation of
or acquisition of production of inputs, processing and trading of farm products

Agriculture vs. Agribusiness: As fields of study

Agriculture

Agriculture is essentially concerned with food production.

As broad a field as it is, agriculture is split up in to diverse interests such as study

on the life processes of plants, animals and microorganisms in order produce food for
humans and animals. It includes specific studies and specializations on soil science
(including soil nutrients and conservation), plant and animal protection from diseases,
irrigation and water management, dairy and meat production, and related fields of
study such as horticulture, agronomy and farming systems. However, not everything is
biology. Agriculture includes an understanding of interrelationships of infrastructures,
machines, new technology and systems that facilitate food production.
At present, there is great emphasis placed on sustainable agriculture and
environment friendly methods of production. This is due to the realization that natural
resources are limited and finite. A great concern is being placed on conservation and
wise utilization of resources so that human needs could be supported for all future
generations, without sacrificing quality and food safety.

Agribusiness
 As a field of study, agribusiness is both an art and a science of managing an
agricultural business enterprise. The programs for the study of agribusiness provide an
in-depth understanding of the industries that produce, process, and distribute
agricultural products. It studies the different sectors starting from the production unit
(e.g. farms) to the ultimate consumer. Interrelationships of the different sectors
involved in the production of agricultural commodities are studied; including regional,
national, and international interdependencies of the agricultural sector.
Agribusiness, integrates business management principles with the technical
knowledge of the managerial challenges of the agricultural sector from actual
production to consumer acceptances.

An art: Agribusiness puts together the various skills of an individual or organization, in

running a profitable venture. It is a creative undertaking that plays along with
the rapid changing economic environment putting to test the risk-taking ability
of an individual or an organization that engages in an agribusiness enterprise

A science: Risk-taking is backed up by an objective gathering and analysis of data and

information. Current trends, production and marketing issues, human resources
management and financing and accounting are logically converted into strategic
business plans.

Students in the field of agribusiness are exposed to various situations (both real
and hypothetical), through “case studies”, which allow them to gain knowledge and
skills that set them apart from the basic sciences of agriculture and the broad scope of
management.

At the Central Luzon State University, the Agribusiness Program includes

coursework on different fields, that sufficiently prepare students for an agribusiness
undertaking. The following are the major areas of emphasis in the Agribusiness field of
study:

a. agricultural economics and marketing

b. analysis of agribusiness enterprises/agribusiness management/project
development and management
c. agricultural finance and quantitative methods in business
d. agribusiness laws and policies
e. agricultural business organizations (e.g. cooperatives)

Management aspect of Agribusiness

Agribusiness is a commercial activity engaged in as a means of livelihood or

profit. As such, like any commercial enterprise, agribusiness is expected to make money,
or create desired impact; otherwise, there is no sense in getting into the business.
Management is a built-in function of agribusiness. Management is essentially a
decision-making process based on information and experience, in order to achieve
desired goals and objectives. Agribusiness management therefore is a dynamic decision-
making process revolving around an agricultural business enterprise.
 Whether the business is a farm family operation or an enterprise with hundreds
of employees, agribusiness takes into consideration an individual’s or organization’s
ability to receive and process information in order to devise competitive strategies that
lead to a profitable and sustainable undertaking, amidst the rapid changes in the
economic environment.
The many considerations of agribusiness management includes technology know-
how, sources of inputs and raw materials, financing, local and international awareness
of trends in agricultural market and marketing, agricultural products and by-products
trends and innovations, and a degree of knowledge of policy climate that affect the
agricultural sector. With the current developments and trends in agribusiness (please
refer to the next section), agribusiness employs sophisticated management techniques
to survive a tightly competitive business world. These techniques includes, but not
limited to, the following:

1. Off-shore sourcing of raw materials, products, and by-products

2. Improvements in packaging, postharvest handling and distribution systems
3. Horizontal and vertical market integration
4. Tightly integrated agribusiness sub-systems, where agribusiness enterprises are
consumer-driven; strategic involvement of customers from the initial steps of
product development to the final utilization of the consumer product.
5. Use of E-commerce format (e.g. use of the world wide web in input procurement,
establishment of supply chains, commodity marketing, communication, and
information gathering)

The Concept of Agribusiness

Agribusiness includes the total input-farm-product sectors that supply farm inputs;
are involved in production; and finally handle processing, distributing,
wholesaling, and retailing of the product to the final customer (Downey and
Trocke1987)
Agribusiness encompasses many aspects the economy, including agricultural
producers (farmers and livestock raisers); businesses that provide supplies and
services to the producers, businesses that “add value” to agricultural products
(processors), and those that facilitate the marketing of agricultural products
Agribusiness deals with commodities that are of “short shelf-life”; hence,
marketing plays a vital part in moving the inputs, products and by-products to the
different sectors and the consumers.

Agribusiness – a system of systems

 (A system of interrelated and closely knit stages in the life cycle of an consumer
product)
According to Custodio:
Agribusiness encompasses all operations involved in the production of farm inputs,
the use of the farm inputs in the cultivation of crops of raising of livestock, the
various handling and processing of agricultural commodities, and the transfer of
these commodities to the end users
And thus, 1957 Goldberg and Davis defined agribusiness as
“The sum total of all operations involved in the manufacture and the distribution of
farm supplies; production operations in the farm; and the storage, processing and
distribution of farm commodities and items made for them”
Agribusiness includes the total input-farm-product sectors that supply farm inputs;
are involved in production; and finally handle processing, distributing,
wholesaling, and retailing of the product to the final customer (Downey and
Trocke1987) taking place as “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).
Concept of Agribusiness

Objectives of Agribusiness

 Develop a competitive and sustainable private sector led agribusiness sector

 Increase productivity / reduce yield gaps
 Commercialization of Agriculture
 Advance high potential sectors: horticulture, livestock and fisheries
 Use of modern technologies
 Reducing cost of production
 Value addition
 Export agriculture

History of Agribusiness

 What is agricultures to most people? Farming, ranching, fishing?

 This was true until the early 160s when “agribusiness” evolved into a complex
system reaching well beyond the farm
 The big picture included all things needed to bring food to consumer.
 As it turned out aquaculture shares similarities to traditional agribusiness.
 The agribusiness system includes many facets:

o Not only production (eg., farmers, hatchery managers), also

o Organizations which provide inputs (e.g., fry, chemicals, feed)
 Processors the output (e.g., processing plants)
  Manufacturers (e.g., shrimp – microwavable products)
 Transporters/sellers/brokers (e.g., retail grocery stores, seafood
wholesalers, etc.)

The Philippine Agribusiness History

 Dates back in the Spanish era late 1800’s: encouraging cash crops for exports to
Europe and Latin America under the free-trade agreement between Phil and
Spain!
 Then wars broke out!! Trigers increased produce & prices, stimulating more
production (Recall: demand and supply). War was profitable even back then!
 Mechanization was developed largely due to labor shortages.
 Crop production became a focus of farmers. (They started purchasing inputs; this
is where aquaculture is today!)
 Much of the agribusiness activities was under an “encomienda system”.
 As population increased, preservation of raw products was also improved.
 This made food more convenient to consumers.
 The free trade between Phil and Spain was made possible through the Royal
Company of the Philippines (RCP) created in 1785 by Charles III.
 In 1875, Manila was declared open to World trade even with the abolition of RCP.
That started the influx of other traders to enter into the Philippines
 The principal exports then were abaca, tobacco, copra and sugar

Abaca:

 In 1825, marks the first recorded export of abaca from Manila. It was in Cebu
where manila hemp(Abaca) was already widespread even before Magellan came.
 Abaca was virtually a Philippine monopoly in the world market until the
1920, when Ecuador started growing abaca.
 Even until now, Philippines control about 85% of the world market and has
the largest Abaca Pulp Processing Plant in the whole world.

Tobacco:

 The industry was established by the Spaniards in1782 to finance the defense
against Muslim warriors in the South.
 In 1898, tobacco was the second export earner of the Philippines, next to Abaca.
 The major player of this industry is PMPMI (Philip Morris), who came to the
Philippines in 1955.Eleven years later Lucio Tan put up the Fortune which
merged with PMPMI in 2010 to become the PMFTC, controlling about 90% of the
market

Sugar:
  The industry was actually started by the Ayala’s and Roxas through the
establishment of a small distillery in order to give more value-addition to
sugarcane.
 Sugar was first exported by the Philippines in 1856. The most radical part of
development was in 1909 when St. Louis Oriental Factory was set up in
Panggasinan as sugar refinery using British tech. Shortly after that, sugar mills
were established in the Visayas and some parts in Mindanao.
 The industry benefited from the Laurel-Langley agreement, in the 1960’s, were
Ph sugar enjoyed apreferential captive market in the US in exchange for the
growing American influence in the Philippines.
 That was the darkest part of the industry for it resulted to the downhill path of
the industry. It has not recovered since then.
 The bio-fuel industry made a push for the sugar industry in 1987, LTDI merged
with SMC to become GSMI.

Coconut:

Since its entry in the export market before the 1900’s, it remained as still one
of the major exports of the Philippines even until today.
By 1940, it occupied at number 6 in the export share and in 1970 coconut oil
became the major export valued at USD96M. In 2010, coconut product export was one
of the top 5 exports with a value reaching close to USD1.3B
P&G is still the major player in the CNO buyer in the local market.

There are other agribusiness winners

 Pineapple
 Banana
 Flour
 Rubber
 Oil Palm
 Processed Meat
 Fishery and aquaculture
 Beverages
 Others

How large is it??

 Agribusiness is largest employer in the Philippine. economy: 33% of GDP,

employs 66% of the labor force
 Production systems occupy half of the 30M hectares in the Philippines
 Aside from food production, why does this matter?
 Self-sufficiency: (science, government, education); separates developed from
developing economies
  Point of interest: processing is the promising sub-sector! (Preservation of goods
perfected??)

Agribusiness: Evolution

 Late 1800’s: self-sufficient farms!

 Then wars increases produce prices, stimulating more production (recall: demand
and supply). War was profitable even back then!
 Mechanization was developed largely due to labor shortages
 Crop production became a focus of farmers. (they started purchasing inputs; this is
where aquaculture is today!)
 Much of the manufacturing and processing was relocated off the farm to become
business themselves
 Preservation of raw products was also improved
 This made food more convenient to consumers.

Agribusiness: New Developments and Trends

The new millennium can be described as a communications technology age. As

such, agriculture is faced with a climate of unprecedented change, both in
communication needs and in the technology within which this communication takes
place (hardware and applications, biotechnology, global information and business
network).

Each sector in agriculture (producers, agribusiness, environmental

organizations/public institutions), is a developer, a communicator and a user of
information, which creates a new, open, multi-directional information environment.

As such, agribusiness keeps abreast with the new modalities in carrying out a
business venture. An example is a computer-based agribusiness, where products and
ideas are exchanged through interactive electronic transactions. One innovative
agribusiness company has come up with a trendy name, patterned after e-commerce.
This is known as “e-Agribiz” (short for e- Agribusiness), where transactions can be
undertaken through its world wide web at http://www.agribusiness.org/eagribiz.htm.

With these developments in the communications technology, the world is fast

becoming a one big marketplace where agribusiness plays a major role in the economies
of third world agricultural countries.

The important developments in agribusiness include the following:

1. trade barriers
2. food safety specifications
3. good agricultural practices (social and environmental sustainability)
4. Genetically Modified Organisms (biotechnology)
5. organic products
6. evolution of imports and exports for agricultural and food products
7. productivity evolution
8. comparative costs
9. changing demographics and population growth
10.changing demands in diet, wardrobes, etc.
11.changing technological and regulatory settings
12.increasing international competition

The Agribusiness System

Agribusiness as a Sector

Includes the whole agriculture sector, including fishery and forestry

Portion of the industrial sector (manufacturers and input suppliers)
Portion of commercial/services sector which provides transport or distribution,
financing, other services

Input Sector

This sector includes those firms that supply feed, seed, equipment, credit,
insurance, chemicals, and a whole host of other inputs that farmers use to produce crops
and livestock.

 It provides producers with the feed, seed, credit, machinery, fuel, chemicals, hey
need to operate.
 This sector provides 75% of the input used in production agriculture.
  Improvements in the quality of purchased inputs have been a large source of
efficiency gains for the entire system

3 areas:

1. Manufacturing
2. Distribution
3. Services and financing

 If labor costs increases, you typically see a shift towards increased purchase of
inputs has varied greatly.
 Purchase of more inputs actually facilities more production.
 Use/efficiency of energy usage has also changed
 Relatively few input businesses compared to production or processing (look at feed
manufacturing vs. the number of farms!)
 Why is this trend observed?

Production Sector

 It aims at producing crops, livestock and other products.

 The agricultural production sector has been the cause of much of the change in
agribusiness. They, in turn, have been changed by development in other areas of
agribusiness, particularly in technology.
 Larger farms in all areas (including aqua-)
 Corporate farms
 New technologies have resulted in increased specialization of production
o Genetically altered animals
o Specific pathogen-free stocks (big deal in aqua-)
 What does this mean?
 Stability in that aquaculture production is becoming more diversified
 Specialization also allows for increased production efficiency (telltale sign:
increased production in face of decreased or constant levels of inputs)
 Another blast from the past: production economics
o Production costs increase every year due to increase input cost
o But cost of inputs is not related to commodity prices (e.g., shrimp)
o When commodity prices drop, gross farm income falls, but amount spent
on inputs doesn’t (the great squeeze!)

 Two size of farms: (large (economics of scale) and small (no economy of scale)
 Large farms: new technologies (aeration, telemetry, genetically-improved strains)
 Small farms can also, however: sell something that commands a high price! (16
dollars’/lbs. shrimp)

Processing/manufacturing Sector
 These sectors turn raw agricultural commodities either into ingredients for further
processing or final consumer products.

 Employs millions of people in a variety of business ranging from grain elevators

to fruit and vegetable-processing plants to supermarkets to fast restaurants.
 The business in this sector acquire raw agricultural commodities from producers
and then process them into food products that are sold at times, at places, and in
forms that are desired by consumers.

 In aquaculture, mostly done by processors

 Also include packaging, distribution, and sales, places and forms desired by
consumers (marketing bill)
 Marketing Bill represents 70% of total amount spent by consumers on food
 Firms in this sector are very large (again, gathering economies of scale); very
responsive to consumer tastes/preferences

The Marketing Bill: What are you paying for?

Wholesaling and Retailing Sector

Wholesaling consists of assembling, storing, and transporting goods to retailers, food

service operators, other wholesalers, government, and other types of businesses.

3 basic categories of wholesalers:

1. Merchant wholesalers
2. Manufacturer’s sales offices and sales branches (MSBQs)
 3. Wholesale agents and brokers

Food Service Sector

Food services outlets are facilities that serve meals and snacks for immediate
consumption on site (food away from home). Commercial food service establishments
accounted for the bulk of food-away-from-home expenditures. (USDA Economic
Research Services, n.d.)

Categories

1. Full-service restaurants
2. Fast food/quick services
3. Institutional food services (e.g. hotels, school, corporate eating establishments)

Important Features of Agribusiness

 Agribusiness is a multifaceted point of view, complex vertical structure, largely

depend and partly independent.
 Successful decision making at firm level is the basis for development in future.
 Viability of an industry is traceable to the viability of the firms.
 Agribusiness is market oriented

Major Areas of Agribusiness

 Farm supplies
 Production
 Processing
 Marketing
 Research & Extension
 Government policies & Programmers

Scope of Agribusiness

 India is endowed with varied agro-climate, which facilities production of

temperate, sub-tropical and tropical agricultural commodities
 There is a growing demand for agricultural inputs like
(Feed and fodder, inorganic fertilizers, bio-fertilizers)
 Biotechnology applications in agriculture have vast scope in production of seed,
bio-control agents, industrial harnessing of microbes for bakery products
  Export can be harnessed as a source of economic growth.
 Scope for production of marine and inland fish and ornamental fish culture.
 Scope for production of meat, milk and milk products, poultry etc.
 Mushroom production for domestic consumption and export.
 Organic farming.
 Production and promotion of bio-pesticides and bio-control agents.
 Seeds-hybrid and genetically modified crops
 Micro-irrigation systems and labor saving farm equipments
 Production of vegetables and flowers (Export market)
 Opportunities for employment in marketing, credit, insurance and logistic
support services.

Importance of Agribusiness

 Single most important contributor to worlds economy.

 It represents approximately ¼ of total world production.
 Provides employment for nearly ½ the population of the planet.
 Play an important role in the economic development of most countries.
 Maturing of production sector gives to other sectors.
 Released workers

Nature of Successful agribusiness

Today’s business is very competitive and complex, 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.

Produce and Produce only

Sells what customers
want

1. Clean objectives
- Objectives are destination points
- Should be realistic and clearly defined

2. Planning
- A pre-determined plan of action
- Planning is a proposal based on past experience and present trends for future
actions

3. Sound organization
- Organization of business is a harmonies combination of men, machine material,
money management
4. Research
- Research is a systematic search for new knowledge
- Consumer behavior

5. Finance
- Estimates its financial requirements

6. Proper plant location, layout and size

7. Efficient management
8. Harmonious relations with the workers
II. COMMODITY SYSTEM ANALYSIS (Supply Chain Analysis)

Input
Sub-System

Production
Sub-System

Coordination
Financing Government agencies
Manpower Private institutions
Processing Technology industry associations
Information financing institutions
Sub-System Infrastructure education and
Policies/programs research institutions
Other services

Marketing
Sub-System

Consumers
 Figure 1. The Agribusiness System

Agribusiness deals with commodities that are of short shelf-life; hence, marketing
plays a vital part in moving the inputs, products, and by-product to the different sectors
and the consumers.

Agribusiness: A System of systems

Agribusiness is a system of interrelated and closely knit stages in the life cycle of
an agricultural consumer product. As stated by Custodio 3 agribusiness encompasses all
operations involved in the production of farm inputs, the use of these farm inputs in the
cultivation of the crops or raising of livestock, the various handling and processing of
commodities, and the transfer of these commodities to the end users. Interspersed
among these operations are the various support services that provide “logistics,
coordination, financing, manpower, technology, information, policies and programs,
incentives and other services” that lead to the achievement of a successful agricultural
business enterprise.
Cited earlier are the five manor areas that are also subsystems making up the
whole agribusiness system.

The Input Sub-System: This is the first subsystem from which all other agribusiness
subsystems emanate. Here, all inputs (e.g. fertilizers, seeds, machineries,
etc) are manufactured, imported or distributed.

The Production Sub-System: Inputs are directly used for the production of an
agricultural commodity as end-product in itself or as a raw material for
the production of others products.

The Processing Sub-System: The commodities form the production subsystem are
transformed into various products. The levels of transformation depend
upon the level of processing, which can be as simple as washing and
grading to as complex as chemical alteration.

The Marketing Sub-System: This subsystem concerned with the transfer of goods from
source to end-user. It includes all handling procedures and
infrastructures that move the commodities from one point to another.
The marketing subsystem may take the following routes:
 1. Transfer of agricultural inputs form manufacturers to farm input
users
2. Transfer of commodities from production site to processing site
3. Transfer of commodities from processing site to end-consumers

The Support Sub-System: Consist of all the key players that provide services, however,
optional, but crucial to the success of an agribusiness venture. The
services are provided by institutions such as government agencies,
commercial associations, credit and financing, research organizations
and cooperatives.
The government plays an important role in providing a policy environment that is
favorable to agribusiness enterprises such as policies on prices, imports, exports and
general trading.

As cited by Gallegos, these subsystems are very much interrelated in such a way
that one subsystem cannot be taken independently from the other. The success of any
agribusiness venture depends on how ell coordinated and complementary these are.
For example, an individual contemplating on establishment of a wholesale and
retail distribution of agricultural supplies should consider the existing agricultural
production enterprises in the area. This implies a careful consideration of the users of
farm inputs (the farmers), existing marketing services and practices (cooperatives,
credit and financing) and the movement of inputs from sources to users.

Agribusiness: As a Value Chain Network

1.Composed of distinct but interdependent segments that function towards a common

goal (meeting market requirements)
2.It is affected by the developments in its external/internal environment
3.The viability of the whole agribusiness VC depends on the vitality of each segment.
Agribusiness: The Concept

 Agribusiness consists of all industries surrounding food production, ultimate end-

user is the consumer, with marketing as the driving force behind all profitable
activities.
 Agribusiness deals with commodities that are of short shelf-life; hence, marketing
plays a vital part in moving the inputs, products, and by-products to the different
sectors and the consumers.

Agribusiness: The Management Aspect

 Agribusiness is a commercial activity engaged in as a means of livelihood or profit.

As such, like any commercial enterprise, agribusiness is expected to make money;
otherwise, there is no sense in getting into the business.
 Management is a built – in function of agribusiness, therefore, agribusiness
management is a dynamic decision - making process revolving around an
agricultural business enterprise.

Other Agribusiness and Market Key Concepts

 Self-sufficiency vs. commercial production

“Produce what you can sell, not sell what you can produce”. Many commercial
farmers now produce what they have already sold under forward contract.

Market Key Concepts

The Agro-industry system

1. The product chain

Input supply chain

For the “downward” or “backward” Linkages from the farmer back to the input
retailer, the transporter/importer and the producer of inputs such as fertilizers, seeds,
etc.
Value chain or “market chain” for the “forward” linkages that link the farmer to
the consumer, via the “middle - man”, processor, supermarket, etc.

2. Value Addition

-Each link in the value chain adds value to the basic product.
-The different prices reflect value added by the processes of transformation
and commercialization.
Other Agribusiness and Market Key Concepts

 Comparative Advantage

- This is conferred by favorable factors like cheap or available raw materials,

suitable soils or climate, lower labor costs, etc.
- Yet, such view has recently been questioned for the factor advantages are
easily been imitated; maintaining low labor rates does not help the overall
development of a country; and there are already over-reliance on
these advantages.

- Factor conditions: it is the created “specialized factors” of skilled labor, capital

and infrastructure that are important.
- Demand conditions: the more demanding the customers are, the more
innovation is promoted.
- Strategy: it is the competition between firms that promotes innovation
and improvement.
- Related supporting industries: good linkages – through closer physical location
or through good communication -between firms, their upstream suppliers,
downstream marketing channels and service suppliers encourages innovation.

 Marketing Strategies

- Marketing is driven by the

Agricultural Production Value chain

What Value Chain all about?

  A ‘value chain’ in agriculture describes the range of activities and set of actors that
bring agricultural product from production in the field to final consumption,
wherein at each stage value is added to the product.
 The production stages entail a combination of physical transformation and the
participation of various producers and services up to product’s disposal after use.

A Simple Value Chain

What is value chain Analysis?

 It is an approach that analysis production unit or process in a market chain - from

input suppliers to final buyers – and the relationships among them.
 It analyzes the factors influencing performance, including access to and the
requirements of end markets; the legal, regulatory and policy environment;
coordination between firms in the industry; and the level and quality of support
services.

Usefulness of Value chain analyses

 Value chain analysis is a useful analytical tool that helps understand overall trends
of industrial reorganization and identify change agents and leverage points for
policy and technical interventions.
 It breaks the value chain into its constituent parts in order to better understand its
structure and functioning.
 It identifies chain actors at each stage and discerning their functions and
relationships; determine the chain governance, or leadership, to facilitate chain
formation and strengthening
  It identifies value adding activities in the chain and assign costs and added value to
each of those activities.
 It identifies the flow of goods, information and finance through the various stages
of the chain
 Evaluate each stage in order to detect problems or identify opportunities to
improve the contribution of specific actors and the overall performance of the
chain

Tools used in value chain analysis

 There are no fixed rules as to how value chain analysis should be carried out
 A range of qualitative and/or quantitative research tools are available
o Participant observation
o Semi-structured interviews
o Focus group meetings
o Structured Questionnaire
o Market Mapping

Steps used in Value chain analysis

 Activity Analysis
 Value Analysis
 Evaluation and Planning

Step 1 – Activity Analysis

– Brainstorm the activities that you, your team or your company undertakes that in
some way contribute towards your customer's experience.
– Identify step-by-step flow of work that you or your team carry out

Step 2 – Value Analysis

– For each activity you've identified, list the "Value Factors" – the things that your
customers' value in the way that each activity is conducted
– Write down these Value Factors.
– Write down what needs to be done or changed to provide great value for each
Value Factor.

Step 3 – Evaluate Changes and Plan for Action

– Pick out the quick, easy, cheap wins

– Screen the more difficult changes
– Prioritize the remaining tasks and plan to tackle them in an achievable way

Activities: Pre-Production
  Set of activities carried out by other practitioners outside the farmers that
contribute to effective production of agricultural commodities.
– Research
– Extension
– Land policies
– Infrastructures
– Etc.

Activities: Transportation

 All the activities of the farmers that lead to effective cultivation of crops, husbandry
of livestock to yield the different commodities.
– Tillage
– Planting
– Agronomic /husbandry practices
– Harvesting
– Post harvest practices
o Factors Affecting Production efficiencies.
o How can balanced value be accorded to the primary producer in the agricultural
value chain?
 A facility consisting of the means and equipment necessary for the movement of
passengers or goods.
 Effect of transportation efficiencies on agricultural production.

Activities: Processing / Value addition

 Local and Industrial transformation of raw agricultural commodities semi fished or

finished product.
– How do we secure true value addition from processing and balanced reward
among stakeholders.

Activities: Marketing

 Agricultural marketing covers the services involved in moving an agricultural

product from the farm to the consumer.
 Numerous interconnected activities are involved in doing this, such as planning
production, grading, packing, transport, storage, agro- and food processing,
distribution, advertising and sale.
 Is market truly available for agricultural product?
 How do we ensure competitive marketing?
 Are middle-men truly evil in agriculture value chain?

Value Chain Concept

Value chain is defined as a network of horizontally and vertically-related businesses
(and other organizations) that jointly aims at working together towards providing
products and services to a market (Trienekens, 2011).

Horizontal coordination refers to inter-firm coordination of activities between

competitors to produce or deliver a particular product or service.

Vertical coordination is the synchronization of successive stages of production and

marketing by a group of firms that is led or facilitated by a dominant player.

Marketing

Encompasses all business activities that help satisfy consumer needs by coordination
the flow of goods and services from producers to consumers and users.

Role of Marketing

 Helps bridge the gap between the needs of the producers and consumers
 Helps the producers better understand the needs of the consumers so they can do
a better job meeting them.
 Helps producers decide what to produce and when to produce

Utilities of Marketing

Form utility involves processing the product into a form desired by the consumer or
user.

Time utility involves storing the product until the time it is desired by the consumer or
user

Place utility involves transporting the product to a location desired by the consumer or
user.

meat packers wet market in key cities

 Supermarket

meat processors nearby

Possession Utility

Involves allowing consumers to gain ownership of the product so they can use it.

Flexible Payment Options – 3 easy ways to Pay

1. Customer self-service: One-time payment or set up automatic payments using

Customer self-service.
2. Autopay: complete and submit this form to set up automatic payments.
3. Phone: one-time payment by phone
 Installment loan or lease
 Revolving plan account

APPROACHES TO THE STUDY OF MARKETING

Commodity Approach

Product-oriented. Focuses on a single commodity from the time it leaves the farm until
it loses its identity.
Institutional Approach

Answers the “who” in the marketing process

It considers the nature and character of various middlemen and related agencies and
also the arrangement and organization of marketing machinery.

Functional Approach

Answers the “what” in the query “who does what?”

Emphasizes that marketing is a series of nine interrelated functions namely:

Buying-ownership separation
Exchange function
Selling-ownership separation
Storage-time separation
Physical function Transportation-space separation
Processing-value separation
Grades and standards-info separation
Financing-value separation
Facilitating functions
Risk-taking-time separation
Market-info-info- separation

Exchange function

Buying function

Involves seeking out the sources of supply, assembling the products, and the activities
associated with purchase

Selling function

Covers all the various activities which sometimes are called merchandising
PHYSICAL FUNCTION

Transportation function

Receiving the product from where it is produced to where the consumer is willing to
purchase it.

Storage function

Maintaining the product in good condition between production and final sale.

Processing function

Transforming the commodity is a form that had has a greater value to the costumer.

FACILITATING FUNCTIONS
Helps the market system to operate more smoothly

Market information function

Involves wide dissemination of information on prices, inventory levels, or anything else

that could influence the buying and selling of products.

Grades and standards function

Involves the development of uniform descriptions of commodities and products

Risk-taking function

Involves assuming the risk of loss between the time of purchase and sale

Financing function

Involves providing the funds necessary to pay for the production and marketing of a
product before the money is received from its sale.

REFERENCE

https://www.coursehero.com/file/110937867/AGBUS1100-Chapter1-Agribusiness-in-
Retrospectpdf/
https://www.slideshare.net/MrinalKantiRoy3/agribusiness-82212264
https://www.slideshare.net/MDSALMANANJUM/introduction-to-agribusiness-
management
https://www.apo-tokyo.org/wp-content/uploads/2014/07/agr-09-dae.pdf
Reference
https://slideplayer.com/slide/4391906/
https://www.slideshare.net/afaas/agricultural-value-chain-analysis

INDUSTRY SITUATIONER/INDUSTRY CASE STUDIES

A. Guideline in Conducting a case study analysis

What is a case study analysis?

A case study analysis requires to investigate a business problem, examine the

alternative solutions, and propose the most effective solution using supporting
evidence.

What is a case study?

A case study is an account of an activity, event or problem that contains a real or

hypothetical situation and includes the complexities one would encounter in the
workplace.
Case studies are used to understand how the complexities of real life, influence
decisions.
To learn from a case study analysis one should be “analyzing applying knowledge,
reasoning and drawing conclusions” (Kardos & Smith 1979).
Features of a case study:

According to Kardos and Smith (1979) a good case has the following features:

It is taken real life (true identities may be concealed) and is believable for
reader.
It consists of many parts and each part usually ends with problems and points
for discussion. There may not be a clear cut off point to situation
It includes sufficient information for the reader to treat problems and issues.

Types of case scenario:

Factual Case Scenarios

Lot of details on real solutions and outcomes.
Students learn on:
a) Did the manager/leader solve the problems &
b) Did the solutions work out and why?

Fictional Case Scenarios

Solution may or may not be applicable for a given situation.

Approaches to Case Studies:

The Analytical Approach

The case study is examined in order to try and understand what has happened and
why. It is not necessary to identify problems or suggest solutions.

The Problem-oriented Method

The case study is analyzed to identify the major problems that exist and to suggest
solutions to these problems.

The Case study should:

 Relate the theory to a practical situation; for example, apply the idea and
knowledge discussed in the coursework to the practical situation at hand in the
case study.
 Identify the problems
 Select the major problems in the case
 Suggest solutions to these major problems

Preparing the Case

Before you begin writing, follow these guidelines to help you prepare and understand
the case study:
 1. Read and examine the case thoroughly
 Take notes, highlight relevant facts, underline key problems
2. Focus your analysis
 Identify two to five key problems
 Why do they exist?
 How do they impact the organization?
 Who is responsible for them?
3. Uncover possible solutions
 Review course readings, discussions, outside research, your experience.
4. Select the best solution
 Consider strong supporting evidence, pros, and cons: is this solution
realistic?

Drafting the Case

Once you have gathered the necessary information, a draft of your analysis should
include these sections:

1. Introduction
 Identify the key problems and issues in the case study.
 Formulate and include a thesis statement, summarizing the outcome of
your analysis in 1-2 sentences
2. Background
 Set the scene: background information, relevant facts, and the most
important issues
 Demonstrate that you have researched the problems in this case study
3. Alternatives
 Outline possible alternatives (not necessarily all of them)
 Explain why alternatives were rejected
 Constraints/reasons
 Why are alternatives not possible at this time?
4. Propose solution
 Provide one specific and realistic solution
 Explain why this solution was chosen
 Support this solution with solid evidence
 Concepts from class (text readings, discussions, lectures)
 Outside research
 Personal experience (anecdotes)
5. Recommendations
 Determine and discuss specific strategies for accomplishing the proposed
solution.
 If applicable, recommend further action to resolve some of the issues
 What should be done and who should do it?

Finalizing the case

After you have composed the first draft of your case study analysis, read through it to
check for any gaps or is any component from the analysis missing.

Tips for Writing a Case Study Analysis Step by Step

How to define the MBA case study?

Mba case study analysis is a statement of a company, which includes analysis, strategies,
and purposes etc. It is a great opportunity to know about the manager job.

When you are writing such a statement, you have to analyze the work of the company
and offer some ways to improve the brand, suggest solutions on how to avoid some crisis
issues.

Some tips on how to write an effective case study

 Try to know all the important information about

the company
 Do a deep research
 Identify the strong and weak sides
 Understand business strategy
 Evaluate the corporate level
 Analyze
 Create recommendations

Working in the business field, your task is to understand the environment and all the
things that affect your brand. So, it is important to do marketing case study analysis.
22% of the companies are successful with the conversion rates, said the marketing
statistic 2018.
70 % of the customers hate the mobile ads.

Being involved in business, you have to know all trends and customers demands. The
case study analysis will help you to feel the market and protect your business.

Do you know that 61% of the customers want to be contacted by companies by email?
71% of the users complained about irritated ads, said the Inside Intercom.

The case study analysis is a good tool to identify the main points of the company,
perspectives, and effectiveness. Having such data, you can develop and improve your
brand.

Companies give the 51% of their budget to the ads, and it is important to understand
which ads are really effective for the company, said the Hubspot statistics.

When you are writing a case study analysis, be attentive to your target audience and
make sure that you know their interests and wishes. Do not forget to identify all risks
and threatens for your brand.

Here are some hints for your case study:

1. Introduction (highlight the main problems)

2. Background (provide analysis of the information)
3. Options (explain why you can’t use these tools now)
4. Suggestions (how to improve the work)
5. Conclusion (finish with general recommendations)

Why is it important to do case study analysis?

It allows tracing the dynamics of the company, both positive and negative.

Having such an analysis, you can find out the most effective methods for the
development. Write the strategy plan and highlight the weakest sides. You can find more
about the case study analysis in this book.

Nowadays, all brands must be aware of the trends and stay convenient. The case study
analysis paper provides complete image of the brand.
According to the analytical data, the team can see their results and optimize the working
process and use innovative ideas to increase the productivity.

If you have never heard about the case study, you have to look through some samples. It
is important to write a report according to the outline and provide just real facts.

A case study is a specific paper, it requires analytical skills. You can find a lot of useful
tips in this book. Some students have no clue how to start their research, which data to
use. If it is your first case study, ask professionals for the help.