what is agribusiness? how did agribusiness evolve?

Historically speaking, agriculture has been treated as a single, unified sector in which existing market mechanisms (most commonly government intervention) enabled the coordination of production and distribution. This approach failed to account for the activities engaged in by private entities, e.g. farmers or industries working with farmers.

The common understanding of agriculture as a sector changed dramatically following Davis and Golberg’s release of A Concept of Agribusiness in 1957. Their work offered a new approach to viewing and working with the agricultural sector and laid the foundation for the modern understanding of agribusiness. From that point, the sector became viewed as the combination of many different actors and organizations working together to produce and manufacture food and fibers, i.e. it’s an integrated system.

It was an important moment in the development of agricultural sector because it highlighted the importance of adopting a more system-based approach to development, i.e. farming is not one-dimensional and focusing exclusively on one-dimension will not produce the results needed to sustain an already rapidly growing population [with problems caused by industrial agriculture, e.g. eutrophication, not yet being considered].

Following the introduction of this revolutionary approach to analyzing and understanding the agricultural sector, it became more common to treat a farm like a typical business. With a typical business, a multi-faceted approach and strong business connections are key to long-term success.

Likewise, the notion of management and governance moved to the forefront of agriculture-related conversations. At the same time, the introduction of new institutional economics highlighted the need to examine the role of institutions in overcoming common economic problems.

A common solution was the development of value chains and subsequent vertical integration of the various components of a farm production system. As this happened, it became more and more difficult for smaller farms to remain competitive, resulting in the consolidation of many farms. The industrialization of the farming sector coupled with the widespread adoption of Green Revolution production practices catalyzed these changes.

As farms and farm industries consolidated, so did the economic power of fewer and fewer entities. With an expansion of their power, came an ability to influence industry standards and the means to further acquire and integrate entities from other sectors.

With the industrialization of agriculture being technologically-based, this has led technology to play an ever-expanding role in our everyday lives. This is particularly true in agricultural production environments where labor has been replaced with technology causing the concept of agribusiness to become synonymous with many of the current criticisms of the agricultural sector.

While many of the criticisms are accurate, the intrinsic value of understanding and developing the various interconnected parts of agriculture should not be underestimated. Likewise, farms should be treated like businesses if they are going to succeed and remain competitive in a rapidly evolving world. Even further, many of the original advocates for industrial systems are exiting the field opening up the possibilities of embracing the intelligent aspects of agribusiness and offering solutions to the incumbent problems.

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