Agribusiness

What is agribusiness?

• Sector of the industry that combines agricultural production and business decisions.

• Important to farmers because this is how they buy and sell their products and purchase necessary inputs and services.

The Role of Consumers

• Consumer preferences have a major impact on agricultural production because consumers dictate markets.

• Supply: amount of a product available at a specific time and price.

• Demand: willingness of consumers to buy something, greatly influenced by price.

Agricultural Inputs & Outputs

• Inputs– Feed– Seed– Machinery & Equipment– Fertilizers & Chemicals– Insurance– Credit– Animal Medications

• Outputs– Crops– Market & Breeding

Animals– Milk– Eggs– Timber

Important Financial Concepts

• Cash Flow– Income & Expenses – usually on a monthly or

annual basis• Net Worth (Balance Sheet)– Assets & Liabilities

• Budgets– Income & Expenses – helps with projecting future

• Income Statements (Profit/Loss)– Reflects profitability of business

Cash Flow Terms

• Income/Receipts– Wages, gifts, government payments

• Expenses– Personal: food, fuel, insurance, clothing, utilities,

taxes, recreation, medical, child care, school, loan payments (mortgage, auto, etc.)

– Business: seed, feed, chemicals, payroll, equipment, insurance, taxes, loan payments

Balance Sheet Terms

• Assets (things a person owns)– Short term: projected life of

less than 1 year• Cash, checking, savings, crops

for sale, market animals, accounts receivable

– Intermediate term: projected life of 1-10 years• Vehicles, machinery,

equipment, breeding animals

– Long term: projected life of 10+ years• Real estate and

improvements, houses

• Liabilities (things a person owes money on)– Short term

• Operating loans, credit cards, accounts payable

– Intermediate term• Auto/equipment loan,

loan to purchase breeding animals

– Long term• Mortgage, real estate

loan

Financial Calculations

• Net Worth: difference between total assets and total liabilities– Net Worth = Total Assets – Total Liabilities

• Liquidity: ability to pay debts as they come due– Liquidity = Short term Assets – Short Term

Liabilities• Solvency: ability to convert all assets to cash

if needed to pay all debts at once

Important Financial Terms

• Interest: charge for borrowing money from a bank or individual– Typically based on term of loan and repayment ability

of consumer (based on customer history and credit score)

• Variable cost: expenses that change regularly– Fuel, food

• Fixed cost: expenses that stay the same each month– Insurance, mortgage payment

Careers in Agriculture

• Choose a career in agriculture – ONE DIFFERENT CAREER PER PERSON

• Make a poster with the following information:– Job Title– Job Description– Education Requirements– Work Schedule– Salary– Personal Characteristics