How to Manage Agribusiness Operations Effectively

In the last article, it was learned that the various definitions provided by individual authors do not address all the possible types of agribusinesses, and a more encompassing definition was noted. Agribusiness is a large and diverse sector that encompasses economic activities including culturing, processing, extracting, and distribution.

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Sectors of Agribusiness

Ebong (2007), in his review of the scope of agribusiness, perceived agricultural business as having three independent sectors, which are the Input Sector, the Farm Production Sector, and the Output (Product) Sector. These sectors are discussed as follows.

1. Input Sector: This sector deals with the conceptualization, design, production, and distribution of all resources that serve as building units required to service a transformation process in order to achieve one or more products.

The farm firm business covers such areas as agrochemical input supplies (e.g., fuel, fertilizer, pesticides, herbicides, and veterinary products), feed, machinery, and equipment supplies (e.g., tractor, wheelbarrow, spade, matches, tyres), agricultural financing from formal and non-formal sources, and labor supplies (both skilled and unskilled). The input sector supplies agribusiness production with the needed inputs for the production process.

The cost of acquiring inputs has an influence on the financial health of the input sector, which directly impacts the well-being of the production sector.

As input prices increase while farm income remains relatively stable, producers reduce their utilization of the more expensive inputs and substitute other resources. This is termed the production substitution effect.

For instance, if the more expensive inputs are machinery, farm firms will use less of it and substitute manual labor. This explains the downward-sloping nature of the demand curve for tractors in agricultural production.

2. Farm Production Sector: The farm production sector of agribusiness covers areas such as aquaculture, forestry, crop production, and livestock, where the physical transformation of farm inputs to outputs takes place.

As this sector grows in size, output, and efficiency, the other sectors of agribusiness are affected. The success of this sector has a vital and direct impact on the financial standing of the input supply and product sectors of agribusiness.

An increase in the scale of production leads to more output being available to the product sector for processing and distribution. As farm prices remain fairly stable and expenses increase, pressure is exerted on farms and ranchers to improve efficiency.

Today, the cost-price squeeze is so serious that producers are unable to cut costs or improve production efficiency to the extent necessary to deal with the problem. This explains why small farms continue to cut down production while larger farms become larger.

3. Output Sector: This sector includes diverse economic activities that could be directly identified within the agriculture domain or related fields, often referred to as the agro-allied sector.

The output sector, also known as the product sector, is the final sector in the agribusiness production and distribution system. It is the largest of the agribusiness sectors, with functions ranging from product processing to marketing and distribution of these products to various consumers, either as raw materials for further production or final consumption.

Notable examples of product processing include food processing (garri, bread, cornflakes, tomato, foo-foo, beef, custard, semovita, cerelac), beverage manufacturing (cocoa drinks, soft drinks, beer, Nescafe), confectioneries (sugar, chocolate, cake, biscuits, sweets), food packaging and canning (tomato, canned beef, canned beans, and other quality foods), tobacco processing (snuff, treated leafs, cigarettes), wood processing and furniture making, cotton processing into textiles, and hide and skin processing (e.g., smoked, canned, and frozen fish).

Another important function of the product sector is the marketing and distribution of outputs from the production sector and processed products to final consumers.

This function is performed by middlemen, who include wholesalers, producers/processors/manufacturers, retailers, and commodity boards and cooperatives agents. Even when food is abundant, faulty handling and distribution can make it unavailable to consumers, leading to food and nutritional insecurity.

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Agribusiness Employment Opportunities

The different sectors of agribusiness present an array of opportunities for employment generation. The USDA specifically outlined the types of agribusiness employment (skills and knowledge utilized by those employed in agribusiness) as follows:

1. Agricultural production and propagation of animals, animal products, plant products, forests, and forest products.
2. The provision of services associated with agricultural production and the manufacture and distribution of supplies used in agricultural production.
3. The design, installation, repair, operation, and servicing of machinery, equipment, and power sources, and the construction of structures used in agricultural production.
4. Any activities related to the inspection, processing, and marketing of agricultural products and primary by-products.
5. Any aspects of greenhouse, nursery, landscaping, and ornamental horticultural operations.
6. The conservation, propagation, improvement, and utilization of renewable natural resources.
7. The multiple uses of forest lands and resources.

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Frequently Asked Questions

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