Agriculture – Industry Analysis
Trends in the Agriculture Industry
We are an ever expanding world adding new mouths to feed every hour. The total world population will reach 7 billion by the time you read this – it will add another billion people in less than 30 years. The US makes up only 5% of the total population with the Asian continent accounting for the largest population mass. Most of the best production land has already been pressed into service. Some areas in developing countries are still being cleared, but the loss of rain forest or natural areas is a concern for many. In the US many acres of high production Ag land now is dotted with homes. Agricultural areas will be under added pressure to increase production and efficiency to feed a hungry world. The cost of energy is a serious issue at all levels of Ag production and processing. Getting food from the production area to processor to the retail store and to the ultimate consumer is being challenged by the amount of energy expended in the exchange. We have seen recent increases in nearly every agriculture product in the local grocery store. These are trends that are not likely to change.
Your business plan will focus in on a specific slice of that industry. Contain your analysis to statistics that will be of value to your reader in understanding the trends that will directly affect you. Start with broad statistics, but quickly get down to realistic facts. The world may be made up of a lot of people, but only a small segment of this total population will want what you have to offer.
The typical consumer is demanding more processed and ready-to-eat agriculture products. Parents work and families are in a hurry to find something to eat before they head off to the next activity. Eating for many families has become a grab-on-the-go process. Children seldom sit down at the table to eat a balance meal today. They pick and choose what they want and they often prefer processed food that is similar to the fast food restaurants they are familiar with.
Your business plan will more readily accepted if you can show that you are offering exactly what the target markets wants, when they want it and at a price that is acceptable for long-range growth. You seldom operate in a vacuum. Your competitors are inundating your potential customers with messages that encourage the prospect to choose them over all other options. As the consumer gets bombarded with advertising and promotion they will be swayed into believing the messages they hear. Consumer preferences are often dictated by the messages they receive. If you want to compete in this marketplace you have to be able to gain and hold your share of the consumers. If your message is too far out of the main stream you may be missing the body of the market. If you are offering a “me too” product you are competing with larger, better financed competitors.
The reader of the business plan will want to know that you are offering the correct product or service for the marketplace and that you can efficiently and effectively reach that market with the funds available for advertising and promotion.
Outlook for the Future of Agriculture
Changes in technology
Technology is rapidly changing Ag operations. Planting, harvesting, processing and retailing have all had a tremendous influx of technology advancements. Much of this is due to the high price of fuel and labor. These two costs have changed agriculture in every imaginable way. Every Ag producer or processor is trying to automate the process with bigger and more efficient machines.
Many of the changes try to alleviate growing, shipping and selling losses. A tomato made into canned tomato sauce is much more shelf stable than a fresh, vine-ripe tomato awaiting someone to purchase it. That fresh tomato, for example, must reach the grocer’s display case in near perfect condition. Any dent, ding or damage will render it unsalable. It has a very short shelf life and the grocer has little option but to throw it away if it doesn’t sell. The consumer may chop or slice that tomato for the family to eat, but that is an added labor that often doesn’t get done. Brining that same tomato to the market in a frozen, microwaveable spaghetti dinner is more convenient for the consumer and more cost effective for everyone in the production line. We will see more and more processing of food before the consumer gets it because it saves time, labor, shipping, and lowers outdated or spoilage losses.
Agriculture enterprises face local, regional and worldwide competition. A recent stop at a rural fruit and vegetable stand in a small town in northern Florida is an example. The oranges were from South Africa, the grapes were from Chile, and the sweet potatoes were from Brazil. When asked about local produce the store manager said that it was all out of season and that nothing in the store was local. In fact, this was in the heart of peanut country and the raw peanuts were from New Mexico.
This globalization of agriculture products can work both ways however. If you are a producer or processor the market for your production is not limited to the local community. The United States is still one of the largest exporters of agriculture products in the world. We have an efficient transportation system that can speed products from one area to another. As mentioned before however, fuel and labor are expensive inputs into the process that sometimes makes the US grown products more expensive. We have effectively offset some of the labor costs with machinery and automation.
Rules, regulations and legislation
Agriculture at all phases of production and processing are facing increased pressure from the public for safe, environmentally friendly, sustainable Ag products. Products grown on or in the dirt are normally exposed to common bacteria. If someone gets sick eating at a restaurant, tracing the product all the way back to the producer is becoming more commonplace.
Agriculture is being blamed for pollution due to insecticides, herbicides, chemicals, and livestock manure. Measures to control runoff and groundwater contamination are being legislated at the local, state and national level. As people move farther out from the city core they often find themselves downwind of a livestock enterprise. In many communities operations have been forced to close because of the odor.
The agriculture business plan has to take into consideration a number of issues that would not be found in a typical retail or service business plan. These many variables add increased risk to the enterprise that will concern anyone reading your plan. You need to address these issues in a straight forward manner acknowledging that you are aware of the issues and have developed reasonable contingencies to minimize them. Agriculture business is a huge industry and you would be foolish to try to convince the reader that you are an expert in every dimension. Focus on the part of the industry that affects your business the most.