agb 101 final

total sales value of California agriculture
$47 billion
largest ag county in CA
Tulare
percent of jobs related to ag in CA & US
in CA: 1 out of 10; in US 8.5%
top 10 commodities
dairy, almonds, strawberries, lettuce, tomatoes, cattle, hay, grapes, walnuts, poultry
two main water projects in CA
central valley project
state water project
central valley project
federally funded
farmers in central valley
state water project
So Cal urban users
Unique aspects of agribusiness
food is vital
many different areas of agribusiness
variety of market structures
items perishable
weather
reliance on biological/natural forces
percent of income spend on food in US
13%
food marketing bill – farm vs. marketing share
farm: 17.2%
marketing: 82.8%
3 segments of the food system
production
input
food
production sector
75% total ag production comes from 300,000 farms
food sector
each farmer feeds about 155 people
supermarket
15,000 items; 10 – 25,000 sq ft
superstore
25,000 items; 40,000 sq ft (Winco)
Warehouse Club
6,000-12,000 items; membership based (Costco)
Super Center
170,000 sq feet (Walmart)
top 4 grocery retailers in 2013
1. walmart
2. kroger
3. albertsons
4. publix supermakerts
top supermarket chain
kroger
basic steps in ag marketing channel
farm
first handler
wholesaler, retailer, food service
types of transportation & costs
barge .72 cents/ton-mile
rail 2.7 cents/ton-mile
truck 26 cents/ton-mile
air dollars/ton-mile
vertical integration
when company owns more than one segment in marketing channel
benefits of international trade
increased sales to rest of world
global brand recognition
expand variety/seasons
lower costs risk
diversify, lower risks
CA’s top 5 export countries
1. European Union
2. Canada
3. China/Hong Kong
4. Japan
5. Mexico
CA’s 5 export products
almonds, walnuts, wine, dairy, pistachios
US Agriculture trade strengths
TRADE SURPLUS
economics
science of how to allocate scare resources to maximize satisfaction over unlimited consumer wants and needs
opportunity cost
what you give up to get something else
law of demand
as the price increases the quantity demand decreases
law of supply
as price increases the quantity supplied increases
factors that shift the demand curve
health issues
taste preferences
income changes
advertising
future expectations
complementary good
difference between a change in demand & change in quantity demanded
change in quantity demanded is based on price & quantity
factors that shift the supply curve
technological innovation
weather
change in production cost
government subsidies/regulations
# of suppliers
disease
fixed costs
Depreciation
Interest
Repairs
Taxes
Insurance
variable costs
costs that change as production changes
perfect competition
many sellers
no barriers to entry
same product
no one producer can effect market
price takers
monopolistic competition
less sellers than perfect competition
brand name
small/low barriers to entry
some influence on price
oligopoly
huge companies
few sellers
advertising
huge influence on price
monopolistic
one producer
high barrier to entry
government regulates
price makers
marketing cooperative
guarantee place to sell product, allows farmer to brand name product
helps eliminate price risk by pooling
bargaining cooperative
negotiate price w/ processors, increases small farmers’ bargaining power
low overhead
supply cooperative
provide inputs to farmers at low costs like feed, fuel, fertilizer, seeds, chemicals
service cooperative
offer 1 very specific service – usually started as result of rural areas being underserved
what does a marketing order do for growers
assist in marketing their products
steps in starting a marketing order
1. producers go to USDA or CDFA
2. producers & USDA/CDFA come up with a plan
3. hold hearings
4. hold referendum (vote)
5. if vote passed w/ 2/3 vote, MO is established
6. becomes law
collateral
have assets to repay debt
shown on balance sheet
capital
net worth
shown on balance sheet
capacity
make enough income to borrow $$
shown on income statement
character
willingness to pay back loan
conditions
what type of loan & terms