Unit 1 Introduction to Agribusiness

Materials List:  

- PowerPoint- Handouts-  Notebooks- Activities have materials listed in the context

Objectives:

1.1 The student will be able to define terms relating to an introduction in agribusiness. 1.2 The student will be able to describe the meaning and importance of agribusiness. 1.3 The student will be able to examine the relationship of agribusiness to free enterprise. 1.4 The student will be able to identify and distinguish ways of doing business

Key Terms:

Agribusiness Agribusiness Sector Cooperative Corporation Economic System Entrepreneur Free enterprise Limited Liability Company (LLC) Marketing Partnership Production Sole Proprietorship

Reasons to Learn:

To define terms relating to an introduction in agribusiness. To describe the meaning and importance of agribusiness. To examine the relationship of agribusiness to free enterprise. To identify and distinguish ways of doing business

Questions to Answer:

What are the terms relating to an introduction in agribusiness? What is the meaning and importance of agribusiness? What is the relationship of agribusiness to free enterprise? What are the ways of doing business?

Answers to Questions:

What are the terms relating to an introduction in agribusiness? - Objective 1.1 The student will be able to define terms relating to an introduction

in agribusiness.

How do you define agribusiness?”

Write in your notebook your definition of agribusiness. Turn to your neighbor and discuss answers. (Write your neighbors name down in your

book) Write two things about your neighbor’s definition that you did not think about. Words that might have come to might could include: business, manufacturing, related

support, industry, production, systems, linkage, consumers, distribution, education, and training.

The definition we will be using states that agribusiness is all of the economic activity of the agricultural industry in producing food and fiber.

1. Agribusiness - all of the economic activity of the agricultural industry in producing food and fiber 2. Agribusiness Sector - a division or area of economic activity within agribusiness, including production, input, and marketing 3. Cooperative - a not-for-profit business association designed to provide goods and/or services for members 4. Corporation- an artificial entity created under state law to conduct business and owned by shareholders who buy stock 5. Economic System - the way goods and services are owned, created, and exchanged 6. Entrepreneur - a person who organizes and operates a business to meet a market need 7. Free enterprise - an economic system in which individuals make decisions, own property, and establish prices based on market forces 8. Input - a resource that is used to produce a product 9. Limited Liability Company (LLC) - an unincorporated partnership that has limited liability for owners10. Marketing - providing products and services that people want at a time and place they want them 11. Partnership - a type of business owned by two or more individuals 12. Production - creating a product or service that meets a human or business need 13. Sole Proprietorship - a business enterprise owned by one individual

What is the meaning and importance of agribusiness?- Objective 1.2 The student will be able to describe the meaning and importance of

agribusiness

1.2.1 Discuss the meaning and importance of agribusiness

1.2.2 List and explain the agribusiness sectors, including production, input, and marketing

1.2.4 List career opportunities in agribusiness in the local community.

- How many of you are involved in agriculture everyday? How many of you wear clothes, eat everyday or live in some type of a shelter? Yes, we all do! Because of that fact we are all involved in agriculture on a daily basis, you just may never have realized this before! Agriculture provides the food and fiber for the clothes we wear and the homes we live in. Everyone is affected by agriculture everyday! Keep this in mind that we promote the agriculture industry in everything that we do!

- Distribute blank copy paper and crayons, markers etc. and work through the following instructions with the students.

- Divide your paper into quarters with your writing utensil. In the top left quarter draw something that represents production agriculture to you.

- Students should draw their object.

- Label this section of your paper as ‘Production Agriculture.’ What percentage of the U.S. working population is involved in production agriculture?

- While many students will over exaggerate the numbers directly involved in agriculture. Keep students guessing until they eventually get to less than 2%. Have students write 2% in this quarter to remind them of the number of people in this sector of the profession.

- What happens after agriculture products are produced? Where do the products go from there?

- Get students to discuss that the next step in the production phases is to distribute the product.

- In your second quartile, draw an icon that represents distribution next in top right corner and label it ‘distribution.’

- Discuss the different icons that people drew to represent the distribution sector of the agriculture industry.

- After the agriculture product gets distributed, what happens next? Students should hopefully say that the agriculture products are then processed or manufactured somewhere.

- Agriculture products are further processed. Who can give me an example of this? Draw a representation of processing next in the bottom left corner and label it ‘Agriculture Processing.’

- We are still missing one gigantic sector of the agriculture industry that supports production, distribution and processing of our agriculture products. What are we leaving out that is integral in every other sector? What do producers need to be successful? What do

distributors; processors and consumers need to be successful? What do producers need to grow their crops or raise their livestock? Can you imagine what this is?

- Try leading questions if necessary to get students to say that they we are missing a key component called Ag Businesses.

- From an equipment dealer to seed salesman to a mechanic to and a banker to finance equipment purchases, all of these are important Ag Businesses. Draw a representation of an ag business in the last quadrant.

- Is the number of employees in agriculture increasing above 2% yet? Of course it is and we aren’t done yet! Don’t forget distribution happens many times in this chain. We are now going to return to the drawings and list all of the possible agriculture business that impacts these sectors of the agriculture industry. When I say go take 5 minutes and come up with as many agriculture businesses as you can in each sector and write them on your drawing. Any questions? Go.

- When they are finished have them, proceed around the room and have students share what they came up with. Have students record any they don’t have until they are all recorded on their drawings. .

- What percent of the workforce do you think works in agriculture now? 1 out of every 5 workers is employed in an agricultural field. One in five! This is a huge impact! This is exactly what the FFA Creed says when they discuss ‘other agriculture pursuits!’Based upon your knowledge of the sectors of agriculture, do you feel that the production sector any less important than it was 100 years ago?

- While you may get several different responses from students, remind them that without production agriculture, all other sectors, and even our societies, as we know it would cease to exist. Production agriculture is more important today than ever before.

- Using what you know now, partner up and write a clear definition that encompasses all areas of agriculture. You have about 2 minutes to complete this task. This definition should be recorded in your notebooks. Go!

- Make sure everyone has the definition recorded in the notebooks. Since we are focusing on ag business emphasize the majority of agriculture jobs are in the ag business industry.

- We know now that agriculture has a lot of components. If you could be involved in any phase of the agriculture business industry, which would it be?

- To illustrate the point, we are going to focus on the product of agriculture – FOOD! If you had to choose and aspect of food, other than eating, that you might be interested in pursuing as a career, what would it be? Would it be production, management, processing, marketing or even a support area like distribution?

- Let’s take a look at a food item that all of you know and love! The item of food I want you to think about is a Big Mac from McDonald’s. That burger has two all beef patties, special sauce, lettuce, cheese, pickles, onions, and a sesame seed bun. In your group of three identify as many different processes that must occur for each item on a Big Mac to make it from the farm to the consumer. Complete this assignment in two sections. First, brainstorm a list of processes for each item before it gets to the consumer. Second, use your poster paper and markers to draw a visual for one of the items.

- Teacher Says: You have ten minutes to complete this task and one member of your group will need to share an overview of your poster. Any questions? Go. Take this opportunity to remind students of any processes that they have left out.

- After students have completed their posters, have them share with the group. After they are done, have students select which of the sectors they are most interested in.

- Now that you thoroughly understand the phases of the agriculture business, which would you most likely take a part in? Is it production? Distribution? Processing? Another type of agriculture business that supports these industries? Record which one you would like to participate in and list why in your student notebook.

o Write down the answers to the following questions in your notebook.

- What are the four sectors of agriculture? - Why is agriculture business a good career choice?- So is it true that people say only 2% of our population is involved in agriculture? Yes or

no? Why? Remember – agriculture businesses have huge impacts on the agriculture industry.

- If you want to be involved in agriculture, there is a supporting agriculture business for each phase of the production cycle. Great job today! We are going to have a quick evaluation assessment to test your knowledge of these four sectors of the agriculture industry.

What is the relationship of agribusiness to free enterprise? - Objective 1.3 Examine the relationship of agribusiness to free enterprise

1.3.1 List and distinguish kinds of economic systems.

- DEFINING ECONOMICS Preparation:

- 7 large markers- 7 large pieces of different colored paper (approximately poster size) taped equal distances

apart around the room with the following phrases (all part of the definition of economics) written and hung in the order below (one phrase per piece of paper).

- The papers are folded up from the bottom and taped so the words are not revealed at first.

- “Social science”, “concerned with the way society chooses”, “to employ its limited resources”, “which have alternative uses”, “to produce goods and services”, “for present and future”“consumption”

- Pass out the markers to students and ask students to get in seven equally divided small groups (or have them number off).

- Each group chooses one of the posters and stands by it.- Ask each group of students to unfold their poster in turn and read it. - Explain they are each looking at a “part” of the definition of economics. - Ask them to brainstorm what their word or phrase means and how it relates to what they

know about the word “economics.” Ask one student to act as “scribe” and record the group’s ideas on the poster under the word/phrase. Assign a set number of minutes to accomplish this task.

- When the students are done brainstorming explain that when you say “rotate” they should move to the next poster.

- Have them brainstorm again and add any comments to those already written on the poster. (Walk around and monitor to help jump-start groups that appear stumped.)

- After a few minutes announce “rotate” and have the students do another brainstorm. Repeat this process until all groups have been to every poster.

- Next ask the class to gather around the “Social Science” poster. - Discuss students’ ideas written on the poster. Ask them to explain their ideas.- Discussion might center on how “hard” sciences, such as physics or chemistry, differ

from “soft” sciences, such as sociology or economics. The “hard sciences” tend to deal with the structure and behavior of inanimate objects, while the “soft sciences” involve the observation of the behavior of human beings.

- Write definitions on the board of unfamiliar words they will encounter or that you plan to use and discuss these definitions with students before beginning the lesson.

- Move through the remaining posters, asking students to gather around each poster as it is being discussed. Review students’ topics first and then steer the discussion to the ideas that follow for each word or phrase.

o “concerned with the way society chooses” – Center discussion on the word “chooses.” Explain how economics and the economy do not operate by natural forces, like the weather. There are choices to be made in how the economy operates People make these choices.

o “to employ its limited resources” – Ask students to name resources. Coal, oil, etc., are often named by students. Discuss how “people” are resources and how labor is a resource. You can also touch on unemployment here.

o “which have alternative uses” – Ask students for examples of how resources can be used wisely or unwisely. Examples: clear-cutting versus selective cutting of trees, throwing away paper versus recycling paper, and turning off the water when you brush your teeth. Remind them that there are many examples they may have learned as early as elementary school.

o “to produce goods and services” – Ask students for examples of “goods” (shoes, cars, houses, clothes) and examples of “services” (waiting on a table at a restaurant, teaching, performing surgery, and giving legal advice).

o “for present and future” – Ask students how we can continue to use resources to produce the goods and services we need now and still plan wisely for the future.

o “consumption” – Ask students, What do you think it mean to consume? To use? To devour or absorb; to waste; to spend; to destroy? How would you define a consumer? How are we all consumers? Ask students for examples of how they consume. Examples: we all buy clothes, shoes to wear, buy food, use gas in cars to go see friends. Other examples?

- DEFINITION OF ECONOMY SYSTEMo the way goods and services are owned, created, and exchanged

- TYPES OF ECONOMIC SYSTEMS

- Traditional Systemo A pure traditional economy answers the basic economic questions

according to tradition. Things are done as they were in the past based on tradition, customs, and beliefs (religious).Examples: Certain areas in developing countries

- Command System:o The individual has little influence over how the economic questions are

answered in a pure command system. The government controls the factors of production and makes all decisions. This could be one person, a small group, or central planners who decide what resources to use at each step of production and the distribution of goods and services. The government even decides the role everyone will play. It guides people into certain jobs.Examples: North Korea, Cuba

- Market or Capitalist System:o Capitalism is a pure market economy. In this system the government does

not intervene. Individuals own the factors of production and they decide the answers of the basic economic questions. The market is the freely chosen activities between buyers and sellers of goods and services.Examples: the underground economy, 19th century Britain

- Mixed Economic System:o Many economists doubt that “pure” economic systems ever existed. A

mixed economic system contains elements of the market and command systems, with elements of traditional as well. For example, there is some private ownership in the Peoples’ Republic of China. Some private ownership also existed in the former Soviet Union.Examples: United States, most other nations

1.3.2 List and explain the characteristics of free enterprise as related to agribusiness

- Ask students to make a list of things they purchased in the last month with money they earned. Discuss how it felt to have the freedom to make choices of how to spend that money.

- Freedom is the principle on which the United States was founded. More than 200 years later, freedom serves as the nation's political foundation.

- Freedom is also the cornerstone of the American economic system. It is often called the free enterprise system because of the freedoms of the marketplace.

- In this system, individuals must make economic choices in an effort to satisfy their needs and wants. Nations, too, must make and set goals. The lesson will present two main points of free enterprise: Features of Free Enterprise and Goals of Free Enterprise.

- FEATURES OF FREE ENTERPRISEo Owning private property is one of the most basic freedoms of the free

enterprise system.o Individuals and businesses in the United States (US) are free to enter into

contracts. Whether written or oral, contracts are legally binding agreements to buy and sell goods.

o Individuals in the US are free to make personal choices and communicate those choices through the price system. As shoppers, consumers cast "dollar votes" which help producers determine what products to buy.

o Individuals in the US are free to engage in free enterprise and competition. That is, they are free to choose where they will work, to open their own business, if they so desire, and to choose the type and quantity of goods or services they will produce.

o According to famous economist, Adam Smith, self-interest is the force that directs the actions of individuals and businesses. In the US, individuals are free to look after their own self-interest.

o The American economic system is relatively free from government interference

- GOALS OF FREE ENTERPRISE

o A major goal of the American economic system is to maintain economic freedom.

o Another goal of the free enterprise system is efficiency--to make the best use of scarce resources.

o A sense of justice for all is part of America's heritage, and in economic terms this goal is known as economic equity. Government tries to ensure that all people share in the benefits of the free enterprise system.

o To operate smoothly, the goal of economic stability must be set to maintain employment and stable prices.

o Economic security is another goal the government works toward. Individuals can help protect themselves against the unexpected by buying insurance.

o The last aim of the free enterprise system is economic growth; that is, to increase the amount of goods and services that each worker in the economy can produce.

What are the ways of doing business?- Objective 1.4 The student will be able to identify and distinguish ways of doing business

1.4.2 List advantages and disadvantages of sole proprietorships, partnerships, corporations, LLCs, and cooperatives.

- A business should be:o Be simpleo Provide access to sufficient resources such as capital, land, laboro Encourage planning ahead for as many years as possibleo Increase efficiency

- land- labor - capital- machinery

o Distribute benefits fairly on the basis of contributions to the business- Factors to Consider

o Who owns the business organizationo Ability to acquire resourceso Life of organizationo What is the Liability of the owners o Who makes Management Decisions?o How to transfer ownershipo Problems for tax planning?o Problems for estate planning?

- TYPES OF AGRICULTURE BUSINESS ORGANIZATIONSo Sole Proprietorshipo Partnershipo Corporationo LLCo Cooperatives

o SOLE PROPRIETORSHIPo Most business use thiso 85.7% of US farmso Easiest to formo Few government restrictions

o Sole management decisionso May quickly expand or contract bus.o Receive all the profit, thus more work incentiveo No disagreements with partnerso Raising capital may be difficulto May not have time to make careful management decisionso Must like to make decisionso Responsible for all debtso May be physically unable to continue an enterprise

Raising Capital under Sole Proprietorshipo Lease rather than owno Owner/Manager does all the worko Parents may cosign loanso Rent parents equipmento Off-farm income

o PARTNERSHIPo An association of two or more co-ownerso Death dissolves the partnership unless other arrangements madeo Each member liable for all debtso Property may be owned by partnership or individual ownerso Profit/loss divided according to specific agreementso Goals of all partners should be sameo Must respect opinion of partnerso Business large enough to support all partnerso Complete records, sound management, common sense with $o Written agreemento Pooling of capital and knowledgeo Share management and laboro Each partner is liable for the other’s wrong doingso Unlimited liability of each partner may restrict credit use Partnership Agreement

o Written documento Transfer of ownership at the termination of the partnershipo Machinery leaseo Life insurance to help buy out partner upon deatho Purchase Liability Insuranceo Who makes management decisionso Who does records

o How are partners paid o based on contributions to partnershipo Partnerships fail because of misunderstandings

Limited Partnershipo One or more partners liable for debts and obligationso Limited partner can not participate in the management of businesso Limited partners name can not appear in the partnership nameo In writingo Specifically indicate share of profito Consult an attorneyo “Silent Partner”

o COPERATIONS Advantages

o Possible access to more capitalo Pool money togethero Separation of ownership and management

Ex: One or two children can manage the farm, while all the siblings share in the ownership

o Ease of continuing in businesso Upon death of a stock owner, only the stock is subject to probate, not the assetso Easily transferred ownershipo Sell or give away stock in the bus.o Gifts of stock do not have to be recorded with the county clerk (more private)o Opportunity for tax savingso Some benefits (insurance, profit sharing plans) are tax deductibleo Limited Liability

Shareholder’s liability limited to the amount of their contribution Disadvantages

o Complicated and costly to organizeo Filing feeso Articles of incorporationo Initial legal and accounting expenseso Continuing costs to maintain a corporationo May be difficulty in obtaining credito lenders may be unfamiliar with the corporation o more complicated borrowing procedureso May be no freedom of actiono Corporation money can not be spent on personal things

o Management decisions must be made in accordance with corporation policies, bylaws

o LawsuitsIf personal items are transferred to the corporation, they may be taken as assets of the corporation if sued

o Minority stockholder problemso Second generation stockholders may not be satisfied with dividends and rights

S-Corporationo Mostly the same as a regular corporationo Is not taxed as a separate entityo All the tax items are passed on to the stockholders much like a partnership

- COOPERATIVESo Not intended to make a profito Owned and controlled by the member-patronso Profits are returned to the members based on patronage Kinds of Cooperativeso Marketing Coops-grain elevators, dairy products, orange juiceo Purchasing Coops-feed, fuel, fertilizer, supplieso Service Coops-food buying, feeder pigs, electricityo Processing Coopso Credit Coops-PCA, Federal Land Bank, Bank of Cooperatives Purposes of Cooperativeso Improve economic well-being of farmerso Securing higher market priceso Securing more favorable input priceso Provide new or improved serviceso Provide credito Become involved in processing Characteristics of Cooperativeso Owned by members who use themo Member controlo each member has voice in business affairso each member helps select board of directorso Non-profit basiso Mutual interest and needs of memberso Members share risk in proportion to amount of business they doo Members select board of directors

o responsible for management, policy, insuring that coop is managed according to the wishes of the majority of members

Financing a Cooperativeo Sell stock in the Co-Opo stock can not appreciate in valueo Use Co-Op funds to finance and invest in long-term assets

Summary/Review: Review of the Notebook assignments.

Evaluation: Various quizzes. Final evaluation will be based on tic-tac-toe assessment.

Introduction to Agriculture Business CareersUnit 1 Introduction to Agriculture Business Match the following terms (letters may be used more than once):

__________1. Nursery Grower A. Producer

__________2. Clothing Retailer B. Distributor

__________3. Chemical Sales C. Processor

__________4. Hog Farmer D. Supporting Ag Business

__________5. Veterinarian

__________6. Crop Advisor

__________7. Insurance Adjustor

__________8. Fuel Tanker Operator

__________9. Crop Elevator

__________10. Embryo Transfer Technician

Introduction to Agriculture Business CareersUnit 1 Introduction to Agriculture Business Answers

1. A

2. D

3. D

4. A

5. D

6. D

7. D

8. B

9. B or D

10. D

Economic Systems Comparison Chart

Traditional System Command System Market System

What To Produce?

How to Produce?

For Whom To Produce?

Economic Systems Comparison Chart

Traditional System Command System Market System

What To Produce?

By custom – whateverwas produced in the

past

The government decides

what should be produced

The government owns most

of the means of production

Consumer choices dictate

the success ofgoods/services

How to Produce?By custom – however

items were produced inthe past

The government does the

planning for production:

factory locations, theoccupations of workers

andtheir salaries

Business leaders choose

the means of production

Their goal is the mostefficient and

profitablemethods

For Whom To Produce?

By custom – whoeverusually received

products will againreceive them

The government controls the

distribution system forgoods/services:

housing,transportation,

consumeritems and sets prices

The consumers’ income

determines who receives

which goods/services

Business Organizational Structures

Features Compared

Individual Partnership Corporation

General Limited Regular Subchapter Cooperative

Who owns the business?

Who votes and how is voting done?

Who makes the policy decisions?

Who is financially liable?

Who receives the profit?

How are they taxed?