© 2009 Delmar, Cengage Learning Chapter 3 The Size and Importance of Agribusiness.

© 2009 Delmar, Cengage Learning

Chapter 3

The Size and Importance of Agribusiness


Essential Questions

• What is the importance of production agriculture?

• How does U.S. agriculture impact the global economy?

• What are three sectors of agribusiness? • How does energy use of the agribusiness

affect the environment?


Size of Production Agriculture

• The United States has approximately 2.3 billion acres of land:– 21% is used for crops– 25% for livestock– 30% for forest production

• The average American farm is 469 acres with a trend toward fewer and larger farms.

• As technology has increased, the number of farms has (and probably will continue) decreased.


Key Terms• Economist – People who specialize in the

study & application of economics & describing/analyzing the production, distribution, & consumption of goods & services.

• Enterprises – Projects on a farm, such as the production of any crop or livestock.

• GDP – (Gross Domestic Product) Total value of goods and services produced in a country in a given year.


Importance of Production Agriculture

• The agricultural industry accounts for 17% of the gross domestic product and provides more than 20% of all jobs.

• This industry includes all firms/people that sell goods and services to the production agriculturalists and other related industries (including textile mills, tanneries, ice cream makers, etc.).

• The total value of this industry (as of 2002) was $936 billion (enough to feed the entire U.S. population for five years).


Leading Enterprises (in the United States)

• The animal enterprises have the greatest value of production and include the following:– Beef cattle and calves, dairy cattle, hogs and poultry

• Plants are also an essential part of U.S. production and leading enterprises include the following:– Corn, soybeans, wheat, and cotton– Grapes, oranges, and apples


Percent of Food Dollar to the Production Agriculturalist


http://www.ers.usda.gov/amber-waves/2013-july/ers-food-dollar-series-allows-an-indepth-look-at-farm-level-components-of-the-us-food-dollar.aspx





Efficiency of U.S. Agriculture

• With less than 0.3% of the world’s production agriculturalists, the United States produces a major percentage of the world’s total food supply.

• Production efficiency has increased tremendously; the average farm worker can supply more than 150 people with food and fiber (compared to 20 in 1955 and 15 in 1945).

• Production agriculturalists produce an average of about 108,000 lbs of food (or 54 tons!).


Efficiency of U.S. Agriculture (continued)

• U.S. farm output has increased by more than 60% since 1950 (inputs have stayed the same).

• In the last 20 years, agricultural productivity has increased more than three times faster than industrial productivity.

• One production agriculturalist creates six agribusiness jobs.

• More efficiency equals cheaper goods and services as well:– Americans spend less than 9% of the family income on food

(some countries spend 60–70%)


Why is Efficiency so Important?

• Increased efficiency of production agriculture releases manpower for other work and for increasing industrialization.

• Industrialization – the process of becoming mechanical or industrial.

• Greater industrialization leads to a healthier economy and a higher standard of living for all people.


U.S. Agriculture and the Global Economy

• On a worldwide basis, more people are involved in agriculture than in all other occupations combined.

• The United States produces more food than any other nation.

• Export revenues account for 25–30% of U.S. farm cash receipts (nearly one-third of all crops).

• Today, six of its ten best customers are developing nations with three-fourths going to Asia and the Americas.


Global Issues Affecting U.S. Agriculture

• International business climate• Worldwide consumer need• Application of technology:

– Biotechnology– Plant-breeding innovations– Better pest resistance


Magnitude of U.S. Agriculture

• 50 years ago, the U.S. was the largest agricultural exporter in the word, with $3 billion in sales per year.

• Best customers – mainly developed countries in Western Europe, China, & Japan. Only developing countries – India.

• Today’s customers – ¾ go to Asia/Americas and 6/10 best customers developing countries.


Events Shaping the Global Market

• Three events have transformed the global agricultural market:– Formation of the European Community and its

Common Agricultural Policy– The Collapse of many of the socialist economies,

particularly those in the former Soviet Union– Developing countries takeover of the 80-plus million

tons of grain imports that were no longer needed in traditional markets


World Trade

• GATT – General Agreement on Tariffs Trade world trade agreement established baseline trade positions and protectionism levels for each signatory country.

Negative: no noticeable reductions in protection

Positive: set-up principles to build on• North American Free Trade Agreement –

better positioned to enhance trade.


Sectors of Agribusiness

• Apart from production agriculturalists, agribusiness is divided into sectors, including the following: – Input Sector: supplier of inputs for farm products such as feed,

seed, fuel, fertilizer, machinery, and credit– Output Sector: includes all agribusinesses and individuals that

handle agricultural products from farm to consumer including buying, transporting, storing, grading, packing, selling, advertising, etc.

– Agriservices Sector: concerned with both research for better methods as well as customizing serves for all other phases of agriculture. This sector is divided into public (government-sponsored) and private services


Agriservices• Public Agriservices – Food & Drug

Administration, the Department of the Interior (National Park Service), etc.

• Private Agriservices – Production agriculturalists pay >$1 billion/year.– Financial Services: Lend money to all three sectors (input,

production, & output)– Trade Associations: Members pay dues to receive benefits &

producers may pay a check-off from sale of product– Agricultural Cooperatives: Market ag products & furnish the

ag industry with production supplies & services. (>1/4 ALL agricultural products are marketed by cooperatives.)


Agribusiness & Foreign Trade

• Currently, the U.S. is the leading participant in international trade of agricultural products.

• Large quantities are imported from Latin America, Asia, & Europe.

• Exports account for 1/3 of U.S. agricultural production.


Agribusiness and Energy

• The agricultural industry (in the United States) accounts for between 10% and 20% of the nation’s energy.

• Today, agriculture is also becoming a producer of energy through direct burning, ethanol production, biodiesel, and methane gas production.


Energy Sources

• Direct Burning: recent resurgence of wood burning.

• Ethanol: taken from the distillation of grains, when combined with gas is suitable for powering cars and other equipment.

• Biodiesel: a fuel made from soybeans and can be used pure, but, as a 50/50 blend with diesel, it can be used in current vehicles.

• Methane gas: produced as the result of the decomposition of materials that would otherwise require disposal (e.g. manure).


Agribusiness and the Environment

• During the twentieth century, the environment took a backseat to industry (and profit).

• Today, concern grows over both previous damage and continuing damage.

• Environmentalists (once known as ecologists) have joined efforts to reduce pollution in all its forms by stressing conservation and responsibility.

• The EPA (Environmental Protection Agency) and NOAA (National Oceanic and Atmosphere Administration) were established in 1970 due to growing environmental concerns.

© 2009 Delmar, Cengage Learning Chapter 3 The Size and Importance of Agribusiness.

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