Larger Machinery: Is Farm/agribusiness Management Changing??
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AgEcon 278 - Farm & Agribusiness Management Dr. Makus
Larger Machinery
Is Farm/Agribusiness Management Changing?? 1
TODAY’S DETAILS (8/27/08)
• Check on those not here last time or new this time. • Questions on course syllabus or outline? • If want Wall Street Journal, let me know. • The first lab is this evening at 6:30 (Section 3), and then Sections 1 and 2 are tomorrow at 12:30 and 3:30. 2
Changes in Farm and Agribusiness Management (Chapter 1)
3
The
The
The
Input
Production
Processing-
Sector
Sector
Manufacturin g Sector
4
Agribusiness is BIG Business 112 Agribusiness Firms Fortune 500 89 262
Beverage Companies — Coca-Cola, Pepsico Food Consumer Products Companies — H J Heinz, Hershey 80 Food Production Companies — Tyson Foods, Gold Kist 109 Food Service Companies — McDonalds, Starbucks 21
Food and Drug Stores — Kroger, Safeway 322 20 68
Forest and Paper Products — Meadwestvaco Tobacco Companies — Altria Group, Inc. Food & Grocery Wholesalers — Sysco 5
Objectives • Discuss some changes in agribusiness that will affect you as a farm, ranch, or agribusiness manager. • Identify skills that you may need for responding to changes in agribusiness management.
6
Strategic Planning • Setting goals as a business family: – Personal values – Individual skills & interests – Financial & physical resources – Economic & social conditions
7
Tools for Making Decisions • • • • • •
Economic principles Budgets Enterprise record summaries Investment analysis Financial statements Various other management techniques 8
What Kinds of Decisions? • Input/Output levels and combinations. • When and how to acquire additional resources. • Analyze risk and returns of new technology. • New capital investments. • Adjusting farm size. • Changing enterprises. 9
Modern Management Decisions • Same types of decisions – but information has changed. • Technology provides new inputs and products. • More accurate & timely information. • Competition for land, labor, & capital resources. • Good managers will adapt to changes – and spread their skills over larger units of production. 10
Number of Farms in the U.S.
11
Size of Farms in the U.S.
12
Farm Numbers & Sales by Annual Sales 44.9
Annual Sales
$500,000 and over
2.6
% Of $ Sales % Of Farms
15.9
$250-499,999
4 19.1
$100-249,999
10.1
$50,000-99,999
9.1 9.1 11
<$50,000 0
10
74.4 20
30
40
50
60
70
80
Percent 13
Structure of Farms & Ranches • • • • •
Larger machinery. Automated equipment. Confined livestock facilities. Outside employment opportunities. Labor cost up faster than cost of capital: – Substitute capital for labor. 14
Structure of Farms & Ranches • Want a higher standard of living? => increase size. – For example, consider a “200 cow” cow/calf operation??
• New technology is available only in a minimum size or scale: => expand production to spread out fixed costs. 15
Future Structure of Farms and Ranches • Enterprises that have difficulty concentrating production: • Crop production • Grazing
– Management and operation by family units will continue.
• Enterprises that are easy to centralize: • Feedlots • Hog and poultry production
– Large-scale agribusiness entities. 16
Information Age • Rapid changes in: - Data collection - Data analysis - Interpretation
computers, GPS
• Whole farm data. • Individual unit data. 17
Financial Management • Compete with non-agricultural businesses for capital: – Financial markets are becoming larger and more closely integrated. – Need more detailed documentation of financial performance and credit needs. – GAAP & Standard Performance Measures.
18
Human Resources • Agribusinesses will need to offer similar: • Wages, benefits, working conditions
• More regulations for worker safety: • Chemicals, equipment
• Fewer employees=>specialized responsibilities. • Paid consultants and advisors: • • • • •
Diagnosing animal & plant diseases Developing legal contracts Commodity pricing strategies Formulating rations Crop fertility programs 19
Producing to Meet Consumer Demands • Past - Undifferentiated products. • Now – Specific characteristics: – Biotechnology – Niche markets – International markets
20
Environmental & Health Concerns • Adequate quantity of food becomes more and more taken for granted. • More concerns for food quality, food safety, soil conditions, water, air. • More people moving to rural areas: – Odors, dust, crop chemicals 21
New Technology • Biotechnology – Increases production efficiency
• • • •
Livestock genetics Growth stimulants GPS Challenge => Should this new technology be adopted? 22
Summary Same Decisions - Different Circumstances – Farm Structure – More Information – Financial Competition – Human Resources – Consumer Demands – Environmental & Health Concerns – Technology 23
Larger Machinery
Is Farm/Agribusiness Management Changing?? 1
TODAY’S DETAILS (8/27/08)
• Check on those not here last time or new this time. • Questions on course syllabus or outline? • If want Wall Street Journal, let me know. • The first lab is this evening at 6:30 (Section 3), and then Sections 1 and 2 are tomorrow at 12:30 and 3:30. 2
Changes in Farm and Agribusiness Management (Chapter 1)
3
The
The
The
Input
Production
Processing-
Sector
Sector
Manufacturin g Sector
4
Agribusiness is BIG Business 112 Agribusiness Firms Fortune 500 89 262
Beverage Companies — Coca-Cola, Pepsico Food Consumer Products Companies — H J Heinz, Hershey 80 Food Production Companies — Tyson Foods, Gold Kist 109 Food Service Companies — McDonalds, Starbucks 21
Food and Drug Stores — Kroger, Safeway 322 20 68
Forest and Paper Products — Meadwestvaco Tobacco Companies — Altria Group, Inc. Food & Grocery Wholesalers — Sysco 5
Objectives • Discuss some changes in agribusiness that will affect you as a farm, ranch, or agribusiness manager. • Identify skills that you may need for responding to changes in agribusiness management.
6
Strategic Planning • Setting goals as a business family: – Personal values – Individual skills & interests – Financial & physical resources – Economic & social conditions
7
Tools for Making Decisions • • • • • •
Economic principles Budgets Enterprise record summaries Investment analysis Financial statements Various other management techniques 8
What Kinds of Decisions? • Input/Output levels and combinations. • When and how to acquire additional resources. • Analyze risk and returns of new technology. • New capital investments. • Adjusting farm size. • Changing enterprises. 9
Modern Management Decisions • Same types of decisions – but information has changed. • Technology provides new inputs and products. • More accurate & timely information. • Competition for land, labor, & capital resources. • Good managers will adapt to changes – and spread their skills over larger units of production. 10
Number of Farms in the U.S.
11
Size of Farms in the U.S.
12
Farm Numbers & Sales by Annual Sales 44.9
Annual Sales
$500,000 and over
2.6
% Of $ Sales % Of Farms
15.9
$250-499,999
4 19.1
$100-249,999
10.1
$50,000-99,999
9.1 9.1 11
<$50,000 0
10
74.4 20
30
40
50
60
70
80
Percent 13
Structure of Farms & Ranches • • • • •
Larger machinery. Automated equipment. Confined livestock facilities. Outside employment opportunities. Labor cost up faster than cost of capital: – Substitute capital for labor. 14
Structure of Farms & Ranches • Want a higher standard of living? => increase size. – For example, consider a “200 cow” cow/calf operation??
• New technology is available only in a minimum size or scale: => expand production to spread out fixed costs. 15
Future Structure of Farms and Ranches • Enterprises that have difficulty concentrating production: • Crop production • Grazing
– Management and operation by family units will continue.
• Enterprises that are easy to centralize: • Feedlots • Hog and poultry production
– Large-scale agribusiness entities. 16
Information Age • Rapid changes in: - Data collection - Data analysis - Interpretation
computers, GPS
• Whole farm data. • Individual unit data. 17
Financial Management • Compete with non-agricultural businesses for capital: – Financial markets are becoming larger and more closely integrated. – Need more detailed documentation of financial performance and credit needs. – GAAP & Standard Performance Measures.
18
Human Resources • Agribusinesses will need to offer similar: • Wages, benefits, working conditions
• More regulations for worker safety: • Chemicals, equipment
• Fewer employees=>specialized responsibilities. • Paid consultants and advisors: • • • • •
Diagnosing animal & plant diseases Developing legal contracts Commodity pricing strategies Formulating rations Crop fertility programs 19
Producing to Meet Consumer Demands • Past - Undifferentiated products. • Now – Specific characteristics: – Biotechnology – Niche markets – International markets
20
Environmental & Health Concerns • Adequate quantity of food becomes more and more taken for granted. • More concerns for food quality, food safety, soil conditions, water, air. • More people moving to rural areas: – Odors, dust, crop chemicals 21
New Technology • Biotechnology – Increases production efficiency
• • • •
Livestock genetics Growth stimulants GPS Challenge => Should this new technology be adopted? 22
Summary Same Decisions - Different Circumstances – Farm Structure – More Information – Financial Competition – Human Resources – Consumer Demands – Environmental & Health Concerns – Technology 23
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