What is Agribusiness?

Agribusiness is the business sector encompassing farming and farming-related commercial activities. The business involves all the steps required to send an agricultural good to market: production, processing and distribution. It is an important component of the economy in countries with arable land, since agricultural products can be exported.

Understanding Agribusiness

Agribusiness treats the different aspects of raising agricultural products as an integrated system. Farmers raise animals and harvest fruits and vegetables with the help of sophisticated harvesting techniques, including the use of GPS to direct harvesting operations. Manufacturers develop increasingly efficient machines that can drive themselves. Processing plants determine the best way to clean and package livestock for shipping. While each subset of the industry is unlikely to interact directly with the consumer, each is focused on operating efficiently in order to keep prices reasonable.

Market forces have a significant impact on the agribusiness sector. Changes in consumer taste alter what products are grown and raised. For example, a shift in consumer tastes away from red meat may cause demand — and therefore prices — for beef to fall, while increased demand for produce may shift the mix of fruits and vegetables that farmers raise. Businesses unable to rapidly change in accordance with domestic demand may look to export their products abroad, but if that fails they may not be able to compete and remain in business.

Key Takeaways

  • Agribusiness is a combination of the words "agriculture" and "business" and refers to any business related to agricultural production.
  • Companies in this industry encompass all aspects of food production.
  • Climate change has placed intensifying pressure on many companies in the agribusiness industry.

Countries with farming industries face consistent pressures from global competition. Products such as wheat, corn and soybeans tend to be similar in different locations, making them commodities. Remaining competitive requires agribusinesses to operate more efficiently, which can require investments in new technologies, new ways of fertilizing and watering crops and new ways of connecting to the global market. Global prices of agricultural products may change rapidly, making production planning a complicated activity. Farmers may also face a reduction in usable land as suburban and urban areas expand into their regions.

Use of New Technology in Agribusiness

The use of new technology is vital to remain competitive in the global agribusiness sector. Farmers need to reduce crop costs and increase yield per square acre to remain competitive. New drone technology is at the cutting edge of the industry. An article published in 2016 by the Massachusetts Institute of Technology (MIT) identified Six Ways Drones Are Revolutionizing Agriculture. These techniques, including soil and field analysis, planting and crop monitoring, will be key to improving crop yields and moving the agribusiness sector forward. Key areas of concern for the use of drone technology remain safety of drone operations, privacy issues and insurance-coverage questions.

Examples of Agribusiness

Because agribusiness is a broad industry, it incorporates a wide range of different companies and operations. Agribusinesses include small family farms and food producers up to multinational conglomerates involved in the production of food on a national scale.

Some examples of agribusinesses include farm machinery producers like Deere & Company (DE), seed and agrichemical manufacturers like Monsanto, food processing companies like Archer Daniels Midland Company (ADM), as well as farmer's cooperatives, agritourism companies, and makers of biofuels, animal feeds and other related products.