Agribusiness

What is Agribusiness?

Agribusiness is the complete value chain in agriculture, from the raw materials and resources necessary to create biological products to distributors and retailers that get products to end consumers.

It can be separated into four links: input providers, producers, processors, and other service providers (such as marketers, distributors, etc.). Each link adds value to the output of the previous link until the biological material is consumed or used by the end consumer.

According to the United Nations, global agriculture value-add is worth over $3.5 trillion annually, 4% of the world’s GDP, and 27% of the total workforce[1]. 

What is the Purpose of Agribusiness?

The purpose of agribusiness is to create and supply agricultural products for end-consumption. Agricultural products are naturally produced resources for human consumption or other uses.

The products require a variety of sectors and industries to support the producers, which are central in this value chain. Each link adds value to the agricultural product.

Input Providers

Input providers supply the necessities for natural resource production. A significant portion is related to direct and indirect forms of energy.

• Providers of fuels, electricity, and feed are directly used by crops, animals, and equipment necessary to produce natural products. The feed may be produced on local land or a mixture of commodities not available locally.
• Providers of fertilizers, chemicals, and animal health products leverage energy produced elsewhere to enhance production efficiency. Some examples of large input providers include Nutrien, Yara International, BASF, Corteva, and Bayer.

Besides energy, input providers also include the starting materials, labor, and material necessary for production.

• Providers of seeds, plantlets, young animals, and bees supply inputs that are the root of agricultural products. These may be locally sourced or from large businesses.
• Providers of labor and machinery support the manual and mechanized efforts required to develop raw inputs into raw materials. Examples of labor include farmers, ranchers, and seasonal workers. Machinery providers include John Deere, Caterpillar, AGCO, CNH, and Kubota.

Producers

Agriculture production occurs wherever you see land or buildings dedicated to crops or animals. It varies worldwide, depending on the suitability of the local climate and geography.

Some producers are land-based, while others are landless, concentrated inside buildings as intensive operations. Examples of producers span from small sustenance farms to industrial-scale operations.

Based on worldwide agriculture production value, there are two main production systems: crop production and livestock production. Other systems include aquatic and forestry production.

• Crop production involves providers who convert inputs into crops on land or in greenhouses. Some inputs are naturally occurring (daylight, water), while others are sourced from input providers.
• Animal production involves producers who take feed and other inputs and convert animals into meat, milk, eggs, and other animal products.

Processors

Once the raw agricultural product is produced and collected, it may undergo further refinement.

Two main processing steps are the initial conversion of raw materials to commodities, then secondary processing into more refined goods.

• Primary processing can be as simple as cleaning and packaging, with minor changes to the original form. Examples include pasteurizing milk, raw cotton to cotton fibers, and meat packers.
• Secondary processing converts, mixes, and further refines agriculture products. Examples include processing cheese from milk, conversion of corn into biofuels, and manufacturing consumable meat products for humans and animals.

Nestle and ADM are examples of multinational processors.

Other Service Providers

A number of sectors span the three links. These include middlemen such as wholesale marketers, distributors, and retailers. The sectors support the movement of products between the links and deliver final products to the consumer for consumption.

Related Resources

Thank you for reading CFI’s guide on Agribusiness. To keep learning and developing your knowledge base, please explore the additional relevant resources below:

• Basic Materials Sector
• Commodities
• Supply Chain
• Value Chain
• See all commercial lending resources