Intro_to_AGBS_Chapter_1

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					Agriculture and
 Agribusiness


    Chapter 1
               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.
         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.
     What is Agribusiness?

   According to Merriam-Webster’s 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.
     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.
           “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.
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.
   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.
            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.
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.
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.”
   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
Agricultural economists can be found
at every level of business,
government, and education around
the globe.
The Big Picture of
  Agribusiness
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.
   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.
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. Let’s take a look
at Figure 1-3 (page 7).
    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.
     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.
Let’s think about life
        before
Agriculture…………..
           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.
  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.
              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.
    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.
            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.
    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.
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 world’s 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.
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.
         The Agricultural and
         Industrial Revolution
   During the 1840’s and 1850’s, 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.
               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.
   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.
     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.
   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.
By the end of the 1800’s, farming had
become the world’s most important
industry. Many things had been done
to make agriculture a better, more
rewarding way of life.
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.
           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.
   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.
   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.
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.
    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.
   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.
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.
   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.
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.
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
                Cont.’d

   Agricultural (ag) chemical companies
   Veterinary supply companies
   Livestock supply companies
   Animal feed companies
   Biotechnology firms
   Export companies
      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.
   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.
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.
      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.
   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.
    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 1800’s, the transition from manpower to
horsepower had been mostly completed.
        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.
      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.
                Cont.’d

   The farmers started the engine with
    gasoline and then switched to
    kerosene because it was cheaper and
    more efficient.
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.
             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 today’s AGCO).
      Previously, they were called “gasoline traction
      engines.” Although tractors have been around
      for nearly 100 years, mules are still needed for
      certain jobs.
    Effect of World War I on
       tractor production
   Tractor production expanded rapidly in the early
    1900’s. 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.
 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 1920’s. 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.
          The nine major
           companies:
1.   International Harvester
2.   John Deere
3.   J.I. Case
4.   Massey-Harris
5.   Oliver
6.   Minneapolis Moline
7.   Allis Chalmers
8.   Cleveland Tractor Company
9.   Caterpillar Tractor Company
   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.
      The shift from animal power to
     tractor power affected American
        farmers in two major ways.
1.    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.
2.    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.
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.
   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.
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.
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.
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.
        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.
   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 world’s needs for
    food, clothing, and shelter.
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.

				
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