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Chapter 1The Global
Agri-Food System
U.S. AgribusinessLeading the World
• Largest Agribusiness Sector in the World• Largest Part of U.S. Economy• One of the Best Integrators of Technology• Biggest User of Biotechnology• Safest Food• Lowest Cost Food• Largest Assortment of Food• 11,000+ New Food Products per Year
Input Suppliers
Farms and Ranches
CommodityProcessors
FoodManufacturers
Food Retailers
FoodConsumers
Food D
istrib
utors
Wha
t Con
sumers
Wan
t
Food Products
Ag Commodities
Product Flowin the Global
Agri-Food System
The Business of Food
• We consume 350 million tons of food each year – about 6 pounds per person per day
• Farmers get 20 cents of each food dollar• Consumers spend 10.4% disposable income on food
~ 6.2% for food at home
~ 4.2% for food away from home• Each farm worker produces enough food for 103
people – 75 in U.S. and 28 abroad• Number of farm workers is greater than the
combined total of workers in the auto, steel, and transportation industries
Dollar Value of Agri-Food Output by Industry
Farming13%
Alcoholic Beverages
11%
Food at Home45%
Food Away from Home
31%
U.S. Agri-Food Employment
Restaurants47%
Food Processing
10%
Food Stores21%
Food Wholesaling
6%
Farming16%
U.S. Agribusiness
• 47% of the world’s soybeans• 42% of the world’s corn• 28% of the world’s cheese• 19% of the world’s milk• 16% of the world’s cotton• 12% of the world’s wheat
With less than 7% of the world’s land and 5% of the world’s population
We Produce 12% of World Agricultural Output
We Export 27% of U.S. Production
Farm Productivity and People Fed/Farm Worker
15.3
25.6
45.3
61.6
86.4
103
4152
5868
93
109
0
20
40
60
80
100
120
1950 1960 1970 1980 1990 1998People Fed/Farm WorkerProductivity of Farming Index 1992 = 100
Percent of Disposable IncomeSpent on Food over Time
26.2 25.122.5
20.2 19.5 18.917.6
15.1 14.8 13.9
10.5 10.4
0
5
10
15
20
25
30
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 1998 1999
Percent of Income Spent on Foodby Country
10 11 1217 17
26
39 40
52
0
10
20
30
40
50
60
U.S.
Canad
a
United K
ingd
om
France
Japan
Hunga
ry
Ken
ya
Ivor
y Coa
st
India
Per
cen
t of
In
com
e
People Buy Food fora Hierarchy of Reasons
Status and Causes
Living Well
Promoting Health
Convenience
Tastes Good and Variety
Nutritious, Safe, and Affordable
Agribusiness Management:The Integrator of the Disciplines
• “Science remains in the laboratory unless there is incentive to adopt the knowledge. This is the difference between science and technology. {Agribusiness Management} is the integrator.”
– Source: The Agricultural Revolution of the 20th Century, Paarlberg and Paarlberg, p. 59.
The Agricultural Revolution of the Twentieth Century – I
• “If a farmer from Old Testament times could have visited an American farm in year 1900, he would have recognized—and had the skill to use—most of the tools he saw: the hoe, the plow, the harrow the rake. If he were to visit an American farm today, he might think he was on a different planet.”
• Source: Paarlberg and Paarlberg, p. xiii.
The Agricultural Revolutionof the Twentieth Century – II
• “The changes that occurred in American agriculture during the 20th century exceed in magnitude all the changes that occurred during the 10,000 years since human beings first converted themselves from hunters and gatherers to herdsmen and cultivators.”
• Source: Paarlberg and Paarlberg, p. xiii.
The
Production
Sector
The
Input
Sector
The
Processing-
Manufacturing
Sector
Farm Productivity
0
20
40
60
80
100
120
140
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
1998
Inde
x 19
92 =
100
InputOutputProductivity
Farm Inputs
0
50
100
150
200
250
300
350
400
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 1998
Inde
x 19
92 =
100
Labor Mechanical Taxes/Interest Chemicals
Hours of Farm WorkPer Acre Planted
55
4539
34
2722
19 17 17 18 17
0
10
20
30
40
50
60
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 1998
Hours/Acre
Crop and Animal Yields
020406080
100120140160180
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 1998
Bush
els/A
cre;
Milk
CW
T/co
w
Milk Corn Soybeans Wheat
The Production Sector
Net Farm Income
58.8 66.2 70.9 72.3 75.6 74.689.2 81.3 77.3 82.3 81.1
41.2 33.8 29.1 27.7 24.4 25.410.8 17.7 22.6 17.7 18.9
0%10%20%30%40%50%60%70%80%90%
100%
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 1998
Total Production Expenses Net Farm Income
Number of Farms and Dollar Salesby Annual Sales
74.4
9.1 10.1
4 2.6
11 9.1
19.1
44.9
15.9
0
10
20
30
40
50
60
70
80
<$50,000 $50,000-99,999 $100-249,999 $250-499,999 $500,000 andover
Annual Sales
Per
cen
t
Percent of Farms Percent of $ Sales
Changes in U.S. Land Use, 1945 vs. 1997
660 578
602553
451455
14385
15 64
0200400600800
100012001400160018002000
1945 1997
Mil
lion
Acr
es
Pasture and Range Forest Cropland Other Special Urban
U.S. Agriculture in World Trade
43.7
20.3
40.0
27.627.4
70.5
56.6
18.2
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Wheat Corn Soybeans Cotton
% Exported % World Trade
Impact of Agricultural Exports
0
5
10
15
20
25
30
35
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
1998
Per
cen
t
Percent of Farm Receipts Percent of U.S. Exports
Agricultural Exports in 1975
Wheat25%
Feed Grains24%Oil Seeds
20%
Soybeans13%
Fruits and Vegetables
4%
Other14%
Agricultural Exports in 1998
Wheat7%
Feed Grains10%
Oil Seeds20%
Soybeans11%
Fruits and Vegetables
15%
Other37%
Trading Partners – 1975
Canada6%
Mexico4%
Asia22%
Rest of Latin America
7%
All Others26%
Europe35%
Trading Partners – 1998
Mexico11%
Rest of Latin America
10%Europe
17%
Asia18%
All Others31%
Canada13%
The Commodity Processing-Food Manufacturing Sector
Transforming Commoditiesto Food Products
What a Dollar of Food Pays For
Other4%
Labor49%
Transportation5%
Energy4%
Packaging11%
Profits5%
Farmers' Share22%
Agribusiness is BIG Business112 Agribusiness Firms in the Fortune 500
19 Food Consumer Products Companies—H J Heinz, Hershey
12 Food Production Companies—Tyson Foods, Gold Kist
9 Beverage Companies—Coca-Cola, Pepsico
11 Food Service Companies—McDonalds, Starbucks
19 Food and Drug Stores—Kroger, Safeway
19 Forest and Paper Products—Weyerhaeuser, Mead
7 Textile Companies—Westpoint Stevens
5 Tobacco Companies—Philip Morris
11 Food and Grocery Wholesalers—Supervalu,Sysco
The TrendsFarming to Food Factories
• Fewer but larger facilities
• Fewer but better educated employees
• A high tech business
Discussion Questions1. List and briefly describe the six parts of the global
agri-food system.2. Define and describe each word in the term agri-food
system.3. Why was agriculture a prime market for the adoption
of production-enhancing and labor-saving devices during the industrial revolution?
4. How have Americans’ perceptions of food changed in recent years? What does this mean for firms in the agri-food system?
5. What is the difference between science and technology?
6. What is the role of business management in the success of the agri-food system?
Discussion Questions7. Identify the three major sectors of the agri-food
system. Describe the evolution of agriculture into the agri-food system.
8. Describe the role of export markets and how they have changed in the past 25 years.
9. Describe the production sector’s environmental record.
10. Describe what you see as the future of the agri-food system in meeting the food needs of the world’s population and as a place to work.
11. Explain why you are optimistic or pessimistic about the agri-food system’s ability to produce enough food to feed a hungry world. What are the biggest challenges it will face in achieving this crucial goal?
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