Module 1 lesson 1 - Agricultural Commodity System - ETRP 223

Lecture Notes I 2020

bs civil engineering (University of the Visayas)

Scan to open on Studocu

Studocu is not sponsored or endorsed by any college or university

Downloaded by Krisha Silig (cemenejesette@gmail.com)
 Entrep 223 INTRODUCTION TO AGRICULTUAL COMMODITY SYSTEM

Module 1: Introduction to Agricultural Commodity System

Lesson 1: The Agricultural Commodity System Concept and the Value Chain

Learning Outcomes
At the end of this lesson, you will be able define agricultural commodity system and
familiarize activities involved in the commodity system. Also, you will be able to
relate agricultural commodity system and value chain analysis.

Time Frame: 2 hours

Introduction
Good day my dear students! Welcome to our class in Agricultural Commodity
System. This course is designed to deliberate systems approach of undertaking
business in agriculture and highlights the interaction of all activities and factors
affecting the sourcing of inputs, production activities performed on farm commodities
and other product that can be made from them. It also deals with the distribution of
these outputs to the market. To begin with, let us start with our lesson 1 which is the
definition of the agricultural commodity system and how would it relate to value
chain. So, are you ready?

Collect and Share Activity

At this moment, I want you to read the article shared to you on the book review made
by Hollander, 1970 on Agribusiness Coordination: A Systems Approach to the
Wheat, Soybean, and Florida Orange Economies authored by Goldberg, 1968.

Analysis
Based on the definition cited in the article, does it sound familiar to you? Yes, of
course! The participants involved from the production to complete marketing channel
including the government, future markets, and trade associations are components in
the agricultural commodity system. How would this relate to value chain analysis?

Abstraction
The study on commodity systems is limited in the literature as compared with studies
on specific aspects of commodities. According to Goldberg (1968), to be effective in
developing strategies and policies, farm managers should be fully aware of the total
commodity system in which they participate.

Downloaded by Krisha Silig (cemenejesette@gmail.com)

Agriculture Commodity System is defined as all the participants involved in the
production, processing, and marketing of a single product (see Figure 1). This
includes the complete marketing channel as well as the government, future markets,
and trade associations. It is the totality(system) of a commodity analysis. Examples
are the system of producing bread from wheat, margarine from soybeans, and frozen
concentrate from citrus (Goldberg, 1968).

Figure 1. Participants in an agricultural chain

A commodity system analysis is part of the sociology in agriculture.

 It is a significant segment of the new sociology of agriculture (Buttel, et al.,
1990).
 It often utilizes some approaches taken from commodity chain studies.
 Busch (1990) suggest ten rules to guide commodity systems analyses as cited
by Friedland, ud)
1. There is nothing natural about nature;
2. There is nothing natural about society either;
3. Production neither starts nor stops at the farm gate;
4. Commodity chains have values embedded in them;
5. The weakest link in the chain will stop commodity production;
6. Science, technology, and bureaucratic decisions can create and recreate
commodity chains;
7. Commodity chains have histories;
8. Commodity chains have geographies;

Downloaded by Krisha Silig (cemenejesette@gmail.com)

 9. The power relations in commodity chains change when an actor in the
chain attempts to modify it;
10. Commodity chains do not exist (they are conceptual creations).

How do we relate commodity system with the value chain?

Value Chain (VC) refers to the full range of activities that are required to bring a
product or service from conception, through different phases of production,
delivery to final consumers and final disposal after use (Kaplinsky & Morris,
2000).
 The analysis focuses on the dynamics of interlinkages within the productive
sector, especially the way in which firms and countries are globally integrated.
 It goes beyond the firm-specific analysis of much of the innovation literature.
 Michael Porter(1980) was the first to use the term value chain and define it as
the various activities which were performed in particular link in the chain (van
Melle, et al., 2007)
 It is a structure of physical, economic, and social transactions between
individuals and organizations engaged in raw material transformation into end
products (Ahmed, 2007)
 It is defined as the sequence of interlinked agents and markets that transforms
inputs and services into products with attributes that consumers are prepared
to purchase (Devaux, et al., 2017)
 A tool for identifying ways to create more customer value

Figure1. Simple Value Chain (Kaplinsky and Morris, 2000)

Thus, commodity system and value chain are just related in the sense that they both
consider the chain of the product from the production to consumption. They just differ

Downloaded by Krisha Silig (cemenejesette@gmail.com)

in terms of focus. The commodity system is focused on the participants/players/persons
involved while the value chain is focused on the full range of activities along the chain.

Application/ Laboratory Task

1. As you are required to conduct a commodity chain analysis, you need to group
yourselves with four or five members for your laboratory activity output at the end
of the semester. Submit list of members via group chat. You will be working as a
group in conducting a commodity system analysis and concept report.

Closure
Congratulations students for the job well done! You are now familiar what
agricultural commodity system is hence, you are now ready for the next lesson on the
input-output commodity system.

Downloaded by Krisha Silig (cemenejesette@gmail.com)