Agribusiness Management

Freddie L. Barnard, John Foltz, Elizabeth Yeager, Brady Brewer

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000227895
• Edition: 6
• Topic: Volkswirtschaftslehre
• Subtopic: Wirtschaftstheorie

This sixth edition of Agribusiness Management provides students and managers with a fundamental understanding of the key concepts needed to successfully manage agribusinesses in a rapidly changing, high-tech, consumer-oriented, and uncertain world.

The text uses four specific approaches to help readers develop and enhance their capabilities as agribusiness managers. First, it offers a contemporary focus that reflects the issues that agribusiness managers face today and are likely to face tomorrow. Second, the book presents conceptual material in a pragmatic way with illustrations and examples that will help the reader understand how a specific concept works in practice. Third, the book has a decision-making emphasis, providing contemporary tools that readers will find useful when making decisions in the contemporary business environment. Finally, Agribusiness Management offers a pertinent set of discussion questions and case studies that will allow the reader to apply the material covered in real-world situations. This edition has been updated throughout with new examples and data, as well as additional material on succession planning and managing human resources.

This book is an ideal text for all courses on management in the agribusiness industry.

Part 1

Agribusiness management

Scope, functions, and tasks

PHOTO PART 1 Productive, diverse, efficient: this section explores today’s food, production agriculture, and input supply sectors. Photo courtesy of USDA.

CHAPTER 1

The business of agribusiness

Objectives

• Describe management’s role in agribusiness
• Provide an overview of the functional responsibilities of management
• Describe the unique characteristics of the food and agribusiness industries
• Describe the size, scope, and importance of the food production and marketing system
• Understand the farm-food marketing bill and what it means to producers and consumers
• Provide an overview of the food sector, the production agriculture sector, and the input supply sector
• Outline trends in home and away-from-home food consumption, and trends among the types of firms that serve these markets
• Explore the production agriculture sector, and some of the key changes occurring on U.S. farms
• Outline the major inputs used by the production agriculture sector and key trends in input use
• Understand the types of firms involved in producing and distributing inputs to production agriculture

Introduction

It is exciting and diverse. It is changing quickly. It relies on the weather, uses an incredible array of technology, is tied in every way to our natural resources, and embraces the world. If you eat, you are involved in it as a consumer of its final products. If you farm, you are involved in it as a producer of the raw materials that ultimately make their way to the end consumer. It is the extremely efficient, very complex, global, food and fiber production and marketing system.

This system is vast and it is fascinating: the next time you walk through your local grocery store, think about the number and type of diverse activities involved in growing, harvesting, transporting, processing, and distributing food throughout the 50 states in the United States, and, more broadly, our world. The process by which a 260-pound hog moves from Carroll County, Indiana to a suburban superstore in Los Angeles (now in the form of a hot dog in a pre-packaged children’s meal) is very complex, yet it occurs every day in the food production and marketing system.

This food production and marketing system is made up of thousands of businesses, ranging from the small cow-calf producer in western Kentucky, to some of the largest corporations in the world. And, it is management that drives and directs the firms, farms, and food companies that come together in the food production and marketing system. A retail supermarket, a major corn processor, the local farm supply store, and a family farmer each have a person or a group of people responsible for making sure that things get done. These are the managers. Their titles range from chief executive officer to president to foreman to son or daughter or spouse. However, wherever they are found within an organization, managers are responsible for ensuring successful completion of the functions, tasks, and activities that will determine an organization’s success.

This book, Agribusiness Management, focuses on the management of food, fiber, and agribusiness firms. We will take a careful look at food and agricultural business management and our definition of food and agricultural businesses is quite broad. So, when we use the term agribusiness management in the text, remember that we are talking about the management of any firm involved in the food and fiber production and marketing system. Our discussion of agribusiness management in this book provides information, concepts, processes, ideas, and experiences that can contribute to your effectiveness in performing the functions and tasks of agribusiness management.

This chapter will first introduce you to the key functions of agribusiness management. Then, we will explore some of the characteristics that make the food and agribusiness markets unique places to practice the art and science of management. The ever-changing food and agribusiness industries are then discussed. We will look at firms that (1) move final products through the food and fiber system to the ultimate consumer, (2) transform raw agricultural products into the final products desired by consumers, (3) produce raw food and fiber products, and (4) supply inputs to the farm or production sector.

The key functions of management in agribusiness

As you can imagine, the responsibilities of managers in agribusiness are highly varied and can range from ordering inputs for the year ahead, to hiring and firing individuals, to making the decision to sell a multi-billion-dollar international subsidiary. A chief executive officer, for instance, is responsible for the overall activities of a large, diversified food or agribusiness firm. In such firms, teams of managers are likely responsible for specialized areas within the firm. In a smaller farm business, one individual may assume roles ranging from chief executive officer, to manager, to laborer, managing multiple projects at different levels simultaneously.

To better understand the form and process by which managers perform the tasks that are required to create and sustain a viable business, the practice of management can be broken down into four key functions:

• Marketing management
• Financial management
• Supply chain management
• Human resource management

Ultimately, no matter how large or small the firm, managers have responsibilities in each of these areas. These four functions of management are explored in some detail in this book. However, it is important to have a basic understanding of each area as we develop our understanding of agribusiness management.

Marketing management

Marketing, in a broad sense, is focused on the process by which products flow through the U.S. food system from producer to final consumer. It involves the physical and economic activities performed in moving products from the initial producer through intermediaries to the final consumer. Marketing management involves understanding customer needs and effectively positioning and selling products and services in the marketplace. In agribusiness, marketing management is a key function within each of the sectors of agribusiness: the food sector, the production agriculture sector, and the input supply sector. Marketing management represents an integration of several different activities: selling, advertising, web page design, promotions, marketing research, new-product development, customer service, and pricing—all focused on customer needs, wants, and, ultimately, the quest for customer satisfaction.

It is this function of management that is most closely focused on the end-user, or the consumer/customer of the product or service produced. It is often argued that without satisfied customers effectively reached through marketing and sales, no business could successfully operate. Thus, marketing management plays a fundamentally important role in most food and agribusiness firms. Marketing management is focused on careful and planned execution of how, why, where, and when to sell a product or service, who sells it, and to whom it is sold. Decisions here include what products to produce, what services to offer, what information to provide, what price to charge, how to promote the product, and how to distribute the product.

This management function is closely tied to the customer’s decision processes, and buyers differ widely in the food production marketing system—from teenagers for a food manufacturing firm, to a soybean processor for a farmer, to a large integrated swine business for an animal health firm. The ways in which agribusiness buyers—all of the buyers just mentioned and many more—make a purchase decision continue to evolve and change.

Financial management

Profit is the driver for agribusinesses as they work to generate the greatest possible returns from their resources. Successful achievement of this objective means making good decisions, and it means carefully managing the financial resources of the firm. Financial management is involved in these areas and includes generating the data needed to make good decisions, using the tools of finance to make effective decisions, and managing the assets, liabilities, and owner’s investment in the firm.

Financial information allows managers to understand the current “health” of the firm as well as to determine what actions the business might take to improve or grow. Balance sheets and income statements can provide a wealth of information useful in making decisions. Financial analysis provides agribusiness managers with insights upon which to better base decisions. The tools of finance such as budgeting, ratio analysis, financial fo...