UNIT 1

Notes by: Dr. Sadhana Ghimire

Agribusiness management
Agribusiness management is the sum total of all activities involved in the
manufacture and distribution of farm supplies, production activities on the farm,
and the storage, processing and distribution of farm commodities and items made
from them (David and Ray).
It can also be defined as the branch of agricultural economics which co-ordinates
among the farm input suppliers, producers, processors, distributors and storing of
farm commodity.
Agribusiness management is managerial economics in agricultural sector applied
in the analysis of agricultural business problems and decision making.

Importance of agribusiness management

1. Improve resource use efficiency of farms
In developing countries, entrepreneurs in agriculture often do ten deadly mistakes
in business due to which performance of the firms are often poor and not
competitive.
These mistakes are:
o Management mistakes
o Involve in business without specific experience and exposure
o Poor financial control
o Weak marketing efforts
o Failure to develop a strategic plan
o Uncontrolled growth
o Locate business in inappropriate place
o Improper inventory control
o Incorrect pricing, and
o Inability to make the entrepreneurial transition
o ABM supports to correct these mistakes and increase the performances as well as
efficiency of scarce resources use

2. Provide food and fiber

o The daily requirements of food and fiber products at desired place at required form
and time come from the activities such as input supplies, farm and food production
and marketing of the products (i.e. from agribusiness)
o This entire system in brief is called agribusiness

3. Agribusiness provides crucial backward and forward linkages.

Backward linkage---supply of inputs, credit, production technologies and farm
services etc.
Forward linkage---storage, processing, transportation and marketing of farm
products and items made from them

4. Agribusiness promotion leads to the strengthening of industrial facilities in certain

area,
expansion of credit, raw materials, supply agencies, adoption of modern technology in
production and marketing of agricultural products
• It adds value to the product and thereby increases net profits
• It generates potential employment opportunities
• It contributes significant part of national economy as in developing and least
developed nations

5. Agribusiness focuses on commercialization, diversification, economies of scale,

optimum utilization of resources, minimum wastage etc

6. It focuses on creation of utility (form, place, time, possession)

7. Agribusiness is related to demand driven business approach focusing on market

aspects of products.

8. In overall it helps in economic development of country through, optimum resource

utilization, employment creation, industrial development, trade and commerce

Scope of agribusiness management

It can be expressed as:

Whole agricultural sector (including fishery and forestry)

Portion of industrial sector which is composed of manufacturers or suppliers of inputs
and processors of products.

Portion of commercial or service sector which provides transportation or distribution,

financing or other services.

• Nepal is endowed with varied agro climate facilitating production of temperate, sub-
tropical and tropical agricultural commodities.

• There is growing demand of agricultural inputs like feed and fodder, inorganic
fertilizers, bio-fertilizers owing to commercialization of agricultural sectors.
• At present processing is done at primary level and the rising living standard creates
opportunities for secondary and tertiary processing of agricultural commodities (milk
to curd simply but to cheese, butter, bakery products etc. a bit complex)
• Being agribusiness a dynamic sector, this sector has been used continuously to
meet the current demand of consumers in domestic and foreign market.
• The different farming enterprises such as bee-keeping, sericulture, poultry
enterprises etc. can be taken on large scale in Nepal due to high production
potentialities and growing market.
• Large number of agricultural products such as cereals, pulses, oilseeds, spices and
condiments, fruits, vegetables, flowers, medicinal plants, meat, milk, milk products, fish
and fish products, forest byproducts both in raw and processed form can be
taken as exportable commodities by trading to other nations being Nepal, a signatory
of WTO.
• Vegetables and flowers enterprises produced under the green house or shade net
house (production technology) can be done to promote and produce exportable and
qualitative agricultural commodities.
• There is wide scope for the production and promotion of bio-pesticides, bio-control
agents for the protection of crops.
• As agribusiness is related to enhanced agricultural production it creates open
opportunities for employment in marketing, transportation, cold storage and ware
housing facilities, credit, insurance and logistic support services.
• In summary, scope of agribusiness management is wide and ever increasing,
reasons are:
• Nepal as an agrarian country – major occupation
• Business content introduced in agricultural business – but not much profitable
• Modern techniques are used in agricultural production – teach to select and
adopt suitable technology
• Agro based industries are increasing
• Agri-products are major exportable commodity of Nepal
• Foreign trade and globalization – Nepal is participating

Problems and Prospects of Agribusiness in Nepal

Major constraints/ problems

1. Production Input:
•Insufficient input service providers
•Lack of proper distribution and extension channel
•Lack of knowledge
•Inadequate and inefficient firm –production quality,
•Competition

2. Enabling Environment:
•Lack of good infrastructure- storage facilities, market center
•Roads, telecommunication and irrigation networks
•Policy constraints,
•Weak governance

3. Production (throughput)
•Scattered and small production units
•Obsolete and inefficient technology
•Lack of farm managerial skills
•Difficulty in accessing financing support
•Lack of different business services
•Inadequate linkage and coordination
•Fragmented land, small land size
•Policy level constraints
•Lack of information services

4. Marketing:
•Farm market is close to perfectly competitive while marketing firms are
oligopolistic or monopolistic –less bargaining power of farmers
•Poor marketing facilities and sales networking
•High transportation and distribution loss
•Inadequate marketing infrastructure
•Inadequate market information system

5. Processing:
•Limited supplies of raw materials in terms of quality and quantity
•Inadequate technology
•Quality standardization
•Access to finance
•High competition due to import of cheap products
•Frequent load shedding
•Labor disputes

Opportunities of agribusiness is Nepal

• Demand of quality food will be much stronger as the middle income group grows-
the agro-industry sector is expected to expand further.
• Differing socio-economic development and the effect of globalization- diversified
lifestyles and food preferences- demand for processed food
• Export structure change from raw material to processed industrial goods
• Introducing modern technology and management system from developed countries.
• Opportunity to establish joint ventures with foreign companies
• Growth of financial institute in Nepal
• Government’s priority area
• Diversified agro climate and resource base
• Technology adaption –technical potential to increase yield
• Organic products