UNIQUE DIMENSIONS OF THE FOOD AND AGRIBUSINESS
MARKETS
It may be easy to argue that management theory and principles at the same for any
type of business enterprise. The largest business in the country such as General Electric
and Wal-Mart and the smallest one-person agribusiness are guided by many of the same
general principles. And, in many cases, good management is good management,
regardless of the type of firm, or the market it is operating in.
Yet key differences between large and small businesses or between agribusinesses
and other types of firms arise in the specific business environment facing the
organization. While there are similarities, the markets facing General Electric’s wide
range of businesses differ substantially. The automotive industry is different from the
retail industry. Likewise, the unique characteristics of the food production and marketing
system cause management practices to differ for agribusiness firms. Our job is to better
understand the similarities and differences in the functions and tasks of a food and
agribusiness manager compared to other managers.
As a professional, the manager might be compared to a physician. The knowledge
and principles of medicine are the same, but patients differ in such vital details as age,
gender, body mass index, and general health. The physician’s skill is to apply general
medical principles to the specific individual to create the optimal outcome for the patient
given the unique set of circumstances at hand. The manager, utilizing specific tools of
marketing, financial, supply chain management, and human resource management,
must attempt to solve the problem at hand and create the best outcome for the firm’s
long-term profitability.
Food and agribusiness markets differ from other markets in at least eight keyways,
influencing the business situation that food and agribusiness managers must practice.
While one can find examples of other industries where each point is important (for
example, seasonality is important to toy companies), combined these factors form the
distinguishing features of the food and agribusiness marketplace.
Food as a product
Food is a vital to the survival and health of every individual. Food is one of the most
fundamental needs of humans and provides the foundation for economic
development—nations first worry about feeding their people before turning their
attention to higher order needs. For these reasons, food is considered a critical
component of national security. And, as a result, the food system attracts attention from
governments in ways other industries do not.
Biological nature of production agriculture
Both crops and livestock are biological organisms—living things, the biological
nature of crops and livestock makes them particularly susceptible to forces beyond
human control. The variances and extremes of weather, pests, disease, and weeds
exemplify factors that greatly impact production. These factors affecting crop and
livestock production require careful management. Yet in many cases, little can be done
to affect them outright. The gestation cycle of a sow or the climate requirements of wine
grapes provide examples.
Seasonal nature of business
Partly as a result of the biological nature of food production, firms in the food and
agribusiness markets can face highly seasonal business situations. Sometimes this
seasonality is supply driven—massive amounts of corn and soybeans are harvested in
the fall. Sometimes this seasonality is demand driven—the market for ice cream has a
series of seasonal peaks and valleys, as do the markets for turkey and cranberries. Such
ebbs and flows in supply and demand create special problems for food and agribusiness
managers.
Types of firms
There is tremendous variety across the types of businesses in the food and
agribusiness sectors. From farmers to transportation firms, brokers, wholesalers,
processors, manufacturers, storage firms, mining firms, financial institutions, retailers,
food chains, and restaurants—the list is almost endless. Following a load of bread from
the time it is seed wheat prepared for shipment to the farmer until its placement on the
retail grocer’s shelf involves numerous types of business enterprises. The variety in size
and type of agribusinesses, ranging from giants like ConAgra to family farms, shapes the
food and agribusiness environment.
Variety of market conditions
The wide range of firm types and the risk characteristics of the food and
agribusiness markets have led to an equally wide range of market structures. Cottons
farmers find themselves in an almost textbook case of the perfectly competitive market
where individual sellers have almost no influence over price. At the same time, Coca-
Cola and PepsiCo have a literal duopoly in the soft drink market. Some markets are
global, others local. Some markets are characterized by near equal bargaining power
between buyer and seller, while others may be dramatically out of balance in one
direction or the other
Rural ties
Many agribusiness firms are in small towns and rural areas. As such, food and
agribusiness are likely the backbone of the rural economy and have a very important role
in rural economic and development.
Government involvement
Due to almost every factor raised above, the government has a fundamental role in
food and agribusiness. Some government programs influence commodity prices and
farm income. Others are intended to protect the health of consumer through safe food
and better nutrition information. Still other policies regulate the use of crop protection
chemicals and affect how livestock producers handle animal waste. Tariffs and quotas
impact international trade. School lunch programs and food stamps help shape food
demand. The government, through policies and regulations, has a pervasive impact on
the job of the food and agribusiness manager.
Each of these special features of the food production and marketing system affects
the environment where an agribusiness manager practices their craft. Agribusiness
unique and thus, requires unique abilities and skills of those involved with this sector of
the U.S. economy.
