Executive Summary – Agriculture Business

Agriculture Business

Agriculture related businesses really come in three flavors:

  1. The first is the business of production agriculture – your typical farm. These range from a few acres to thousands.
    1. Within this category we can further break these down into:
      1. Farms that sell commodities – those agriculture products that are actively traded on the exchanges. This encompasses many if not most farms making up the largest dollar volume of production and having the greatest impact on the economy. Farms that produce corn, wheat, cotton, peanuts, fat cattle, hogs and even honey. These products are sold on the commodity exchanges in common lots with quality standards into future contracts. If you take cotton to the gin, the price is known by everyone because the daily price is fixed by a global marketplace. A global market is made in these products every day and prices are published on the news and reporting services. All daily and futures are traded on the Chicago Mercantile Exchange in the US.
      2. Farms that sell products that are less often traded on the public exchanges, or products that are branded, processed beyond the raw stage, or specialty. This would include small farms that produce too small a quantity to sell on the global exchanges, or production that is of quality that cannot be sold with traditional channels. It often describes farms that produce vegetables, fruits, flowers and special livestock that do not conform to standard grades. It would also include specialized trade, such as breeding livestock, green or unprocessed nuts, or farms that sell at a local stand or pick-your-own.
        1. You can find a published price for some vegetables and fruits at http://www.ams.usda.gov/AMSv1.0/ . These prices are determined by a review from a number of outlets and include enough references to make a fairly accurate market price on the more common products.
        2. The USDA also publishes prices for livestock and poultry from this same site. Prices for standard slaughter and feeder livestock is widely published.
  2. The next is value-added agriculture. These are the production processes that take the raw material at harvest and then do something to make the product more sellable to the consumer. This can include storage, cleaning, washing, polishing, roasting, cooking, packaging, transportation, or anything else that facilitates the transfer of use of the crop or livestock. Where and how this value-added processing takes place will vary greatly. Some can be done on the farm or as a supporting farm enterprise.
  3. Ag supporting enterprises. These are the companies that are directly or closely linked to agriculture but are not always exclusively an agriculture service.
    1. A rural bulk distributor may supply both service stations and on-farm storage. A vehicle mechanic could work on both ag related vehicles as well as trucks that haul non-ag related products.
    2. The supporting enterprises are often a very important component of agriculture because they commonly live and work in the rural communities in and around farms and ranches.