Agribusiness

Question 1

Overview and define agribusiness.

Answer 1

Agribusiness:
Various definitions that have changed over the past 50 years
Sometimes assumed to be ‘corporate farming’
Can incorporate-
- Mass production
- The input sector
- The production sector
- The processing-manufacturing sector
A generic term referring to various business involved in food and fibre production

• Agribusinesses deal in low-margin commodities where competitive market forces typically result in the cost of production being close to the value created (thus leaving thin profit margins)

Question 2

Demonstrate the importance and breadth of agribusiness in the UK.

Answer 2

• The agri-food sector contributed to 6.3% to the national Gross Value Added and employs 13.4% of national employment
• Small/Medium Enterprises (SME) accounted for 97% of businesses in the food sector

Hot issues in agribusiness:
- Animal disease control and on-farm animal welfare
- Food security
- Biosecurity
- Food safety
- Healthy diets
- Agricultural wages & labour availability
- Optimising land use
- Basic Payment Scheme & BREXIT - subsidies to keep costs down
- Waste management (throughout supply chain) & recycling
- Farmer work/life balance > technology
- Trust
- Climate change
- Inflation and energy crisis (Ukraine war)
- COVID

How inflation affects farmers and agribusinesses:
- Increase cost of borrowing = unstable to invest or improve
- Existing debt becomes more expensive = reduction in profits
- Increase cost of inputs, transport and labour = reduction of profits
- Renegotiation of prices

Question 3

Define and analyse agri-food chains and their role in creating value for UK farmers.

Answer 3

Supply chains:
The physical flow of good that are required for raw materials to be transformed into finished products
Agribusiness supply chains issues-
- Food safety
- Food security
- Fluctuating changes in supply
- Fluctuating changes in consumer demand

Value chains:
- A group of companies working together
- Creating value at each link in the chain to achieve sustainable competitive advantage for the business in the chain
- Some breeds are of more value in comparison to others

Question 4

Discuss the complexities of adding value to agricultural foods.

Answer 4

Creating and sustaining value:
A product produced in one area but imported locally/globally will be consistent throughout
This creates trust between the producer and consumer - reliability
This also increases and/or maintains the profitability for the industry

Value chains:
Why do we create value?
- Comparative advantage
- Increase profits and sales
- Generate trust
Challenges to create value?
- Technology
- Financial
- Organisation
- Research
- Marketing
- Infrastructure

Question 5

Acknowledge the role of stakeholders in agribusiness.

Answer 5

Agri-chains:
- Farmers cannot produce to the public on their own, therefore require stakeholders as an intermediate
- It is important to understand agri-chains so points of competitive advantage can be identified (especially when margins are so small)
- Businesses do not exist in isolation, but operate within chains that reflect their relevant industry
- Agribusinesses facilitate domestic and/or international relationships to maximise competitive advantage
- Agri-chains can be classified as supply chains or value chains

Question 6

List the core drivers of business in the context of business analysis.

Answer 6

• The Theory of the Firm (existence, boundaries, organisational structure, heterogeneity of firm actions)
• Maximising profitability & minimising costs
• Value propositions and customer satisfaction
• Resource allocation
• Supply chain optimisation
• Cost management
• Commercial relationships