Agriculture and Agribusiness

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Agriculture and Agribusiness

• Chapter 1

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Objectives

• Explain agribusiness
• Describe the big picture of agribusiness.
• Explain how agribusiness affects us daily.
• Discuss farming and agriculture before
  agribusiness.
• Discuss the beginning of agribusiness in America.
• Describe the historical development of farm
  machinery and equipment.

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Objectives cont.d

• Describe the Steam Era.
• Discuss the historical development of the
  internal combustion engine.
• Discuss the historical development of farm
  tractors.
• Discuss the success of American agribusiness.

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What is Agribusiness?

• According to Merriam-Websters Collegiate
  Dictionary, agribusiness is and industry engaged
  in the producing operations of a farm the
  manufacture and distribution of farm equipment
  and supplies, and the processing, storage, and
  distribution of farm commodities.

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What is Agribusiness?

• As this definition implies, some people interpret
  the word narrowly to mean only very large
  businesses within the agricultural industry.
  However, John Davis and Ray Goldberg, in their
  early research on agribusiness, defined it as all
  operations involved in the manufacture and
  distribution of farm supplies production
  operations on the farm and the storage,
  processing, and distribution of the resulting
  commodities and items.

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Links in the Agribusiness chain

• Primary production of raw materials
  (commodities), such as unprocessed food, fiber,
  and substrates.
• Tertiary transformation of commodities into
  value-added products where the value is derived
  from the process of transformation.
• Supply of inputs to the primary and tertiary
  sectors.
• Wholesale and retail provision of processed or
  unprocessed foods, fibers, and related products
  to consumers.
• Provision of educational, financial, and
  technical services to all sectors.

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• Therefore, agribusiness encompasses all
  activities from the paddock to the consumer
  that contribute to the eventual production,
  processing (value addition), distribution, and
  retailing of food, fiber, and products based on
  food or fiber.

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• All these definitions agree that agribusiness
  includes all the activities that take place in
  the production, manufacturing, distribution, and
  wholesale and retail sales of agricultural
  commodities.
• Modern agribusiness is a dynamic and growing
  industrial complex that provides Americans with
  the highest-quality, lowest-cost food supply in
  the world.

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Is farming an Agribusiness?

• If we include production agriculture,
  agriscience, and agribusiness under the umbrella
  of the agricultural industry, we must include
  production agriculture industry (farming) within
  the context of this book. We would be mistaken to
  think that farming is not a business.

10

• A typical farmer or production agriculturalist
  manages interest, taxes, repair and replacement
  of equipment, fertilizers, wages, fuel,
  electricity, and many other items. As you can
  see, production agriculturalists must be
  financial and business managers or they will fail.

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Is Agribusiness the same as Agriculture Economics?

• Agricultural economics refers to the monetary and
  physical factors that affect the profitability of
  the agribusiness.
• According to the American Agricultural Economics
  Association, Agricultural economics is the study
  of the economic forces that affect the food and
  fiber industry.

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Specific areas of study in agricultural economics
include

• Community and rural development
• Food safety and nutrition
• International trade
• Natural resource and environmental econ.
• Production economics
• Risk and uncertainty
• Consumer behavior and household econ.
• Analysis of markets and competition
• Agribusiness economics and management

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• Agricultural economists can be found at every
  level of business, government, and education
  around the globe.

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The Big Picture of Agribusiness
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• Agribusiness companies provide input supplies to
  the production agriculturalist (farmer). The
  production agriculturalist produces food and
  fiber (cotton, wool, etc.), and the output is
  taken by agribusiness companies that process,
  market, and distribute the agricultural products.

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• Many services are needed in agriculture, such as
  transportation, storage, refrigeration, credit,
  finance, and insurance.
• Agribusiness manufacturers furnish production
  agriculturalist with the supplies and equipment
  needed to produce, store and transport their
  crops.
• Government agencies inspect and grade
  agricultural products for quality and safety.
• Hundreds of agribusiness trade organizations,
  commodity organizations, committees, and
  conference educate, promote, advertise,
  coordinate, and lobby for their agricultural
  products.

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• Millions of people are employed in agribusiness
  throughout the world, and people throughout the
  world also depend on agribusiness for their food,
  clothing, and shelter. Lets take a look at
  Figure 1-3 (page 7).

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Agribusiness affects us daily

• Consider one of the best-selling fast-food items,
  the cheeseburger. To get an idea of how
  agribusiness affects our daily lives, imagine
  what is involved in assembling a cheeseburger
  with all the trimmings. (Figure 1-4, p. 8)
• As you can see, agribusiness is an essential part
  of our daily lives and crucial to the economy of
  the United States.

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Farming and Agriculture before Agribusiness

• People have searched for ways to feed themselves
  since prehistoric time.
• If people did not eat one day, they would hardly
  have enough energy to find food the next day.
• Thus, nearly all their waking time was spent
  searching for food by hunting or gathering nuts
  and other naturally grown foods.

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Lets think about life before Agriculture..
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The Bronze Age (around 3000 B.C.)

• During the Bronze Age, wooden implements were
  made sharper and more durable by using metal.
  This allowed people to cultivate larger areas of
  land faster. Agriculture spread throughout the
  world and became a way of life for most people.

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Some of the developments during the Bronze age
included

• Bronze tools and plows made for easier and faster
  farming.
• The Nile river was used by Egyptians to irrigate
  crops.
• The wheel was discovered, making the transport of
  crops possible.
• World population rose from 3 million before the
  invention of agriculture to nearly 100 million.

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The Iron Age

• The year 1000 B.C. was the dawn of the Iron Age.
  The use of iron gave people the ability to
  produce even more crops. When people could not
  use all the crops themselves, they had to do
  something with them, and trade among people
  developed as a result.

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Other developments of the Iron Age were

• Iron hand tools and plows were created, some of
  which are similar to those used today.
• Money was developed because of the need to trade
  excess crops.
• Leaving land fallow face the soil a chance to
  rebuild and store moisture.

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The Middle Ages(A.D. 400-1500)

• The Middle Ages ranged from A.D. 400 to A.D.
  1500. The fall of the Roman Empire slowed the
  growth of agriculture. Farming was still a way of
  life, but only a few important developments
  occurred. These included crop rotation, a new
  harness for plowing, and selective breeding of
  livestock.

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The Middle Ages cont.d

• Farmers in the Middle Ages began to understand
  the importance of conserving soil moisture and
  nutrients. They accomplished this by dividing
  their fields and leaving parts bare during
  certain years. This innovation led to the
  development of fences to mark separate fields.
• Near the end of the Middle Ages, Columbus
  discovered America, and people began to travel to
  the New World. Until this time, most
  agricultural developments had come from Europe
  and Asia. Now there was an opportunity to develop
  American agriculture.

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• Many developments in agriculture during the 17th
  and 18th centuries eventually led to the way we
  farm today. Some of the other important
  developments included
• The practice of putting dead fish into the ground
  along with corn seed led to the development of
  organic fertilizer.
• Rice, the worlds most popular grain, was first
  grown in the United States.
• George Washington created one of the first
  experimental farms.
• Thomas Jefferson experimented with seeds and
  livestock, invented farm implements, and was
  active in establishing a local agricultural
  society.

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• After the American Revolution, more people moved
  to the United States, spreading out and using
  more land. People went west and developed new
  ways to produce food. Some new developments were
• Surveying of land was used to separate property.
• The cotton gin was invented by Eli Whitney in
  1793.
• Edward Jenner discovered vaccines to prevent
  diseases.
• The fist one-piece, cast-iron plow was invented
  in 1819 by Jethro Wood.
• Interchangeable parts were developed so that
  people could fix their equipment.

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The Agricultural and Industrial Revolution

• During the 1840s and 1850s, the Industrial
  Revolution created much change and spurred the
  growth of production agriculture and
  agribusiness. During these important years of
  rapid evolution, many technological advances made
  a huge impact on the world and in the agriculture
  industry, including the steam engine, railroads,
  the sewing machine, and the powered loom for
  weaving cloth, among many others.

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Cont.d

• A by-product of the Industrial Revolution was
  large-scale movement from farms to the cities.
  The new and productive machinery required much
  manpower, leaving many farms vacant as the men
  worked in factories. This allowed those still
  farming for a living to increase production for
  those who no longer did so. This important era in
  agriculture marked the shift from animal power to
  mechanical power.

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• During the lath 19th century, it became evident
  that the Industrial Revolution had had a great
  impact on the way farmers would operate. The
  switch from animals to machines began with the
  development of the steam engine in England. It
  was first used for pumping water out of coal
  mines, and later to power sawmills, textile
  mills, and many other industrial machines.
• Before 1830, it took nearly 56 hours of human
  labor to produce just one acre of wheat. Today,
  according to the USDA, with the modern farm
  machinery that has roots in the Industrial
  Revolution and the switch to mechanical power,
  less than two hours produce that same acre.

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The Agricultural and Industrial Revolution also
brought us the following developments

• Henry Ford developed the automobile.
• Crop rotation was promoted by Charles Townsend.
• Advances in livestock breeding were achieved by
  Robert Bakewell.
• The first workable seed drill was invented by
  Jethro Tull
• Cyrus McCormick invented a mechanical reaper to
  reduce hand labor in the harvest of grain.
• A stationary grain threshing machine was
  developed to separate grain from waste.

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• John Deere designed a better one-piece, steel
  plow.
• Barbed wire was invested to keep livestock away
  from crop land.
• The first gasoline-powered tractor was built in
  1892.
• Seed and plant genetics were developed by Gregor
  Mendel.

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• By the end of the 1800s, farming had become the
  worlds most important industry. Many things had
  been done to make agriculture a better, more
  rewarding way of life.

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• Around the year 1900, things began to improve
  for the American farmer. New machines made farm
  work much easier, and better transportation was
  developed, which meant that farmers were able to
  market their products to many more people. Farm
  prices were high, and farmers were making a good
  living. The extra money made allowed people to
  pay for the research and development of new ways
  to farm.

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Some of these new developments were

• The U.S. government established the Bureau of
  Forestry.
• A vaccine was developed for hog cholera.
• The Panama Canal opened for shipping.
• The Smith-Hughes Act established vocational
  agriculture in high schools.
• The U.S. government established the Cooperative
  Extension Service.

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• Federal Land Banks were established to give
  farmers credit.
• Hybrid plant seed was developed for better
  quality, higher-producing crops.
• Many agricultural scientists, such as George
  Washington Carver, were developing new products.

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• Bad times occurred after World War I, when
  farmers could not sell as much food overseas.
• There were not as many soldiers in foreign
  countries, and thus there was not as much need
  for American-grown food overseas.
• Farm prices began to drop, and many farmers were
  forced out of business.
• A terrible drought in the mid-western states also
  caused farmers to go broke. Those days were
  called the Dust Bowl days.

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• As farmers made less and less money, the whole
  country began to lose money. In 1929, the stock
  marker crashed and the United States entered
  the Great Depression. Something had to be done to
  pull America out of this hole. Many agricultural
  developments helped get the United States back on
  track.

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Some of these developments were

• The U.S. government began to pay farmers for
  using soil conservation practices.
• The Soil Conservation Service (SCS) was
  established in 1935 to keep the Dust Bowl from
  reoccurring.
• The Future Farmers of America
• (FFA) organization was started
• in 1928.

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• Higher crop yields resulted from better
  management practices.
• The U.S. government began to pay for more
  research and education in agriculture.
• Antibiotics were first used to treat animals.
• The Dairy Herd Improvement Association (DHIA) was
  organized to monitor dairy herds.
• Groves of trees were planted along the edges of
  farmsteads to prevent wind erosion.

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• The United States came out of the Depression
  after which World War II (1941-1945) caused an
  increase in farm prices. This trend got people
  stated on developing more advanced farming
  methods. Many advances were made in the areas of
  production, marketing, and agricultural
  mechanics.
• Artificial insemination was more widely used in
  the livestock industry.
• Use of new technology increased productivity.
• Farmers began to use electric fences.

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• Disc plows came into widespread use.
• Chemical fertilizers and pesticides were widely
  used.
• Futures trading was used to control risk.
• Computers became popular as agricultural
  management tools.

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• Biotechnology is now a vital part of agriculture
  as well, with advances in gene splicing, cloning,
  and gene mapping. All these advances allow
  farmers and scientists to work together to create
  the most desirable, profitable product possible.

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• The establishment of agribusiness performed
  functions that farmers had previously been
  required to do. Before, the farmer would handle
  all operations required to get the product from
  the farm to the table. Agribusiness enterprises
  also supply the equipment and machinery required
  for these jobs. Agribusinesses now include
• Farm machinery dealerships
• Commodity (futures) brokers
• Artificial breeding services
• Research consulting firms

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Cont.d

• Agricultural (ag) chemical companies
• Veterinary supply companies
• Livestock supply companies
• Animal feed companies
• Biotechnology firms
• Export companies

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Historical development of Modern farm equipment

• The development of modern farm equipment began
  before tractors came on the scene. One of the
  first agricultural machines that had significant
  impact on farming was the cotton gin, invented in
  1784 by Eli Whitney.
• Three years later the cast iron plow was patented
  by Jethro Wood. This plow worked very well in
  eastern soils but not the hard soils of the
  Midwest.

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• In 1837 John Deere, founder of John Deere Tractor
  Company, made the first successful steel plow
  from a saw blade, and by 1846 he was building
  1,000 steel plows per year. The steel did not
  wear out as fast as cast iron and the soil did
  not stick to the new plow as it did with the old
  one, so farmers were very happy with it.

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• As late as 1800, it is estimated that almost 90
  percent of the U.S. population still lived on
  farms. These Americans were agriculturists so
  they could feed, clothe, and shelter their
  families. Even those who farmed only to feed
  their families had a difficult time producing
  enough to stay comfortable. Understandably, there
  was little to no surplus production left to
  exchange.

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Beginning of Change

• The 19th century brought the beginnings of
  change.
• The century began with the Louisiana Purchase in
  1807 and the opening of the farmland west of the
  Allegheny Mountains.
• The first cotton planter was patented in 1825,
  and a corn planter was developed three years
  later.

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• Between 1850 and 1880, the amount of land used
  for farming increased 82 percent, from 294
  million acres to 536 million acres, and the
  number of farms rose 167 percent to 4 million.

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From manpower to horsepower

• In contrast to the early 19th century, only 50
  percent of Americans lived on farms. In addition,
  production agriculturalists were not only
  self-sufficient, but had raised their
  productivity to allow for extra income to be used
  to purchase horse-drawn farm equipment and other
  tools. By the end of the 1800s, the transition
  from manpower to horsepower had been mostly
  completed.

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The Steam Era

• Although steam power had its major impact on the
  industrial sector of the economy, it also played
  a major role on the farm between 1850 and 1900,
  which is generally called the Steam Era. It is
  estimated that more than 70,000 steam engines
  were produced for farm use. The steam traction
  engine ushered in a new era in agriculture by
  providing and alternate mobile source of power on
  the farm.

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Internal Combustion Engine

• A wide variety of fuels were used in the early
  internal combustion engines. Some of the major
  types were gun powder, turpentine, coal dust, and
  kerosene, which was commonly called coal oil.
• Even though early tractors were called gasoline
  tractors, the major source of fuel was kerosene.
• Most early tractors were made with small tank for
  gasoline and a large one for kerosene.

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Cont.d

• The farmers started the engine with gasoline and
  then switched to kerosene because it was cheaper
  and more efficient.

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• In 1899 there were more than 100 firms making
  internal combustion engines in the United States,
  not counting automobile engines, and by 1911 more
  than 500 companies were in operation. Small
  engines continued to be a popular source of power
  through the 1940s. Currently, these small engines
  are experiencing a comeback through restoration
  by private collectors.

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Farm Tractors

• The first gasoline-powered tractor
• In 1892 John Froelich build what is sometime
  called the first successful gasoline-powered
  tractor. The Froelich tractor was the forerunner
  of the Waterloo Boy and the modern John Deere
  line of tractors. The term tractor was first
  coined in 1906 by a salesman for the Hart-Parr
  Tractor Company ( a predecessor of Oliver, White
  Farm Equipment Company and todays AGCO).
  Previously, they were called gasoline traction
  engines. Although tractors have been around for
  nearly 100 years, mules are still needed for
  certain jobs.

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Effect of World War I on tractor production

• Tractor production expanded rapidly in the early
  1900s. In 1910, 15 tractor companies sold 4,000
  tractors. The onset of World War I marked another
  turning point in the development of agriculture
  and cause a rapid increase in tractor production,
  and in 1920, 166 tractor companies sold more than
  200,000 tractors.
• Spurred by higher income from feeding war ravaged
  Europe, U.S. production agriculturalists began
  the process of replacing their horse-drawn
  equipment with gasoline-powered tractors and the
  larger tillage implements that those tractors
  could pull.

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Effect of the Depression years on tractor
production

• After 1921, the number of tractor companies
  decreased about as fast as it had increased. This
  was due to the Depression of the 1920s. In 1921,
  186 companies sold only 68,000 tractors, and by
  1925 only 58 companies had survived, although the
  number of tractors sold increased. By 1935, 20
  companies had sold more than 1 million tractors,
  with 90 percent of sales coming from 9 major
  companies.

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The nine major companies

• International Harvester
• John Deere
• J.I. Case
• Massey-Harris
• Oliver
• Minneapolis Moline
• Allis Chalmers
• Cleveland Tractor Company
• Caterpillar Tractor Company

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• In 1918, International Harvester announced a
  power take-off (PTO) unit, which allowed the
  operator to control mounted and drawn equipment
  with the engine of the tractor.
• In 1932, Allis Chalmers, in cooperation with
  Firestone Rubber Company, introduced pneumatic
  rubber-tired tractor, which completed the basic
  design of a light versatile tractor that could
  handle most farm jobs.
• This essentially finalized the transition from
  horses and mules to tractors with internal
  combustion engines.

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The shift from animal power to tractor power
affected American farmers in two major ways.

• Decreased demand for animal feed a large
  portion of the land that had been used to produce
  animal feed was shifted to the production of
  food.
• Reduced labor time and cost In 1936, the Iowa
  State University Experiment Station reported that
  production agriculturalists with rubber-tired,
  two plow tractors were producing 100 acres of
  corn with 51 days of field work. The same
  operation with horses required 141 days.

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• Machine power continued to change and improve.
  In 1931, Caterpillar Tractor Company developed a
  diesel-powered, crawler-type farm tractor. The
  crawler-type tractor did not fit most farm needs
  but the diesel engine had a major impact a few
  years later.

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• In 1941, liquefied petroleum (LP) gas tractors
  were introduced by the Minneapolis Moline
  Company. This made it possible for farmers to use
  clean-burning, low-cost butane and propane for
  fuels, especially in areas near these energy
  sources.

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Modern Tractor Accessories

• Today, hydraulic lifts, torque amplification,
  hydrostatic transmission, power steering,
  turbochargers, heated and air-conditioned cabs,
  and many other features provide and efficient and
  comfortable power unit for modern production
  agriculturalists.
• The production agriculturalists of today,
  operating a 100-hp tractor, can do the work of
  more than 1,000 workers who are without machine
  or animal power. It is no wonder that the average
  American farmer produced enough for more than 131
  people.

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Increased size and four-wheel drive

• During the decades of the 1960s and 70s, major
  changes included the shift to diesel as the major
  fuel, and increase in horsepower and a shift to
  4-wheel drive power. Currently, more than 80
  percent of farm tractors use diesel, and most
  major tractor companies offer tractors with a hp
  rating of 200 or more. The major change in the
  70s was the shift to 4-wheel drive.

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• The major advantages of 4-wheel drive include
  the ability to use more power efficiently, better
  traction and flotation with less soil compaction,
  and increased safety. 4-wheel drive is now
  standard on extremely large models and optional
  on medium and small models.

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Success in American Agribusiness

• Due to the effectiveness and efficiency of
  agribusiness, one American farmer can now supply
  enough food and fiber more than 150 people.
• Also, Americans spend less of their income of
  food than any other people in the world only 9
  percent of total personal disposable income.

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• No nation has better fed itself and still had the
  ability to contribute heavily to world food
  supplies. U.S. agribusiness supplies each citizen
  with close to 1,500 lbs. of food annually while
  still producing exports of vast amounts of
  grains, vegetable oils and fats, cotton, tobacco,
  and many other products. In fact, production
  agriculture became so efficient that the federal
  government had to establish restrictions of
  various kinds to ensure that the production was
  controlled and prices were maintained. It is
  thought by many, however, that if the
  restrictions were lifted, American agriculture
  would be able to meet the worlds needs for food,
  clothing, and shelter.

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• Because of the success and power of American
  business, it has an enormous responsibility to
  promote world peace and security. At the least,
  it is a major factor. The existence of underfed,
  poorly housed, and badly clothed people in
  different parts of the world represents a threat
  to global peace and security.