Wednesday, 11 September 2013

Industry Insight : Agriculture

Agriculture dates back nearly 10,000 years. The agriculture industry is made up of Individuals, companies and corporations that are involved in the production of food or crops for consumption purposes. This includes both firms that specialize in raising animals as well as enterprises that specialize in growing crops. The animal production segment is not limited to traditional beef, dairy, chicken, or pork farms, but also apiaries (bee farms) and aquacultures (fish and seafood farms). 

Similarly, plant production comprises food crops, greenhouses, nurseries, and field crops such as tobacco and cotton. Agriculture is both an old and new industry; it has been in practice for thousands of years, but the forms of production have been under constant evolution. However, despite all of the evolution in the industry, the basics remain the same; to sow and harvest crops for consumption or use by humans. The agriculture industry also includes the agriculture support businesses that produce the seeds, farm equipment, and other goods and services that have helped the agriculture industry become more efficient and productive over the years.
The vast majority of farms and ranches are small family-owned affairs, but corporate farms, which account for only 10 percent of the total number of firms, produce over 75 percent of the agricultural output. Certain sections of the industry may be concentrated, but on the whole, the industry is very fragmented. Major corporations on the crop growing side of the industry include the Dole Food Company and Del Monte Fresh Produce; on the animal raising side, CargillTyson Foods, and Smithfield Foods are better known. Nestle is the largest food conglomerate by measure of sales and is involved in many facets of the industry.


The Agriculture industry is Fragmented. The production in this industry is divided among a few different companies, however, no single firm has large enough share of the market to be able to influence the industry's direction or price levels. It is moderate labour intensive with high capital intensity. The primary demand drivers of the industry include domestic federal agricultural policy programs, domestic food consumption trends and accessibility of export markets while the profitability drivers include maximizing crop yield and minimizing pest damage and disease risk.

The fact that the rapid growth of the world’s population has caused an increase in demand for food production has become an issue with many problem. The negative environmental impacts of large-scale cultivation, such as soil salination, the loss of ecosystems as they are turned into arable land, air pollution from burning fossil fuels for farm machinery and from the vast numbers of livestock, land pollution from fertilizers, and the reduction of diverse biomasses to a select few species of flora and fauna that the industry has deemed profitable. As the interest in biofuels continues to grow, expect the price of the crops used to produce these fuels to increase as well. Finally, there are concerns about the increased usage of genetically modified organisms (GMOs).

In spite of all the concerns raised, the future of the agriculture industry is strong, as it will always be. In many countries, this industry is subsidized by the home government to make up for tight margins, but no matter how agriculture is accomplished, the world population is growing and this industry must grow in proportion with it. People will always need something to eat, and that is why this industry is the backbone for nearly every economy.
 
For those investors who are interested in understudying the industry, considering the following resources among others would not be a wasted effort.
·         AgricultureIndustry Today
·         AgricultureLaw
·         Agriculture.com




Over recent years, the agricultural industry has experienced high price volatility. High prices defined the previous five years but a rebound in supplies of major crops has helped restore market balances

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