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Concentration has been on a steady rise for several decades. Productivity increases have been significant. Producers are adopting larger pieces of equipment and more sophisticated technologies. Some estimate the time to plant and harvest the crop, two of the most time consuming operations, has been cut in half in the last decade, allowing producers to effectively manage more acres within one operation Table 1.
Crop agriculture is clearly no stranger to change.
This article examines the key forces affecting change in U. Through this discussion, we describe how major crop production businesses are adapting to a changing competitive landscape. We begin with an overview of the drivers of change for the industry and then discuss the factors influencing profitability and the implications for the future.
Drivers of Change for the Industry There are several key factors shaping the economic conditions of the crop agriculture Market forces demands and supply. Each in isolation, and also in combination, has implications for the structure of crop production, including farm size, the business models used, and relationships to other parts of the industry.
Growing and Diversified Demand The food, feed, and fiber industries are being challenged to meet a growing and diversified demand. In addition to growing demands for food, feed and fiber, industrial applications for agricultural production are emerging as well.
The energy, polymers, chemicals, and pharmaceuticals industries are increasingly looking to the agricultural sector to supply renewable raw materials for their processes.
Technology Monitoring and information technology, biotechnology, and a variety of other technologies are converging in agriculture to fundamentally change the way crops are grown.
Today, yield monitors and GPS, global information systems GISsatellite or aerial photography and imagery, weather monitoring and measuring systems, and plant and soil sensing systems are commonly used tools. Biotechnology applications shorten the cycle time to develop new hybrids and varieties with higher yield potential and stronger resistance to pests and environmental conditions.
By combining biotechnology with mechanical and other technologies to control the growth environment—moisture, pest and disease infestation, etc. Resource Availability The availability and cost of natural resources for the agricultural sector has a significant impact on its capacity to respond to growing demand.
In some cases, higher prices will be required to bring additional supplies onto the market or to use existing resources more intensively. This is the case for resources such as land, fertilizer, and irrigation.
In contrast, supplies of phosphorus and potash are nonrenewable. As agricultural product demand increases, the owners of land, water, and fertilizer resources will benefit. Likewise, societal concerns over the use of genetically modified organisms have shown that public opinion can significantly influence the ability of agricultural operations to utilize new technologies in crop production.
Agribusinesses that rely heavily on natural resources cannot ignore the environmental and social issues that are prevalent today. Faced with increasing government regulations and strengthening public opinions, businesses are ever more accountable for their impacts on society and more transparent in their corporate social responsibility activities.
The potential profitability of farmers is influenced in part by the economic characteristics of the industry.
Porter posits that the key economic features of an industry can be identified by examining how suppliers, buyers, rivalry, substitution, and barriers to entry affect it.
We use this framework to analyze the economic characteristics of crop production agriculture. Nonfamily labor on farms is becoming a more important input as well. However, in general, producers are able to substitute capital equipment for labor. The substantial investment required to develop new genetics, crop protection chemicals, and automated equipment necessitates that the firms competing in this sector must achieve substantial economies of scale.
The investments required to breed and engineer new crop varieties and traits require significant time and substantial costs for regulatory approval. In the short run, intellectual property rights may allow some firms to capture a significant amount of the value created by their technologies.
However, the similarity of many competing seed traits and chemistries allows producers to switch products at relatively low costs, thus reducing the bargaining power of input suppliers.
Recent large price increases have drawn attention to consolidation in the fertilizer industries. In particular, the potash market has relatively few raw input suppliers.
In the longer-term, there are alternatives that have the potential to reduce this supplier control. However, those crop producers without access to these alternatives will likely continue to face pressure from volatile fertilizer markets. Capital is a critical input to modern agricultural production.
The establishment of the Farm Credit System was a strategic response to the competitive situation in agricultural lending. Today, agricultural credit is widely available to creditworthy producers. The first key customers are grain merchants and handlers that aggregate farm output into meaningful quantities that can be delivered to end users and processors.
These customers also have the key role of storing a crop that is harvested in a few months and consumed over the course of a year. These firms are typically private companies and traditional farmer cooperatives. Today, there is substantial concentration among the private grain handling and merchandising companies.Nike Inc.
enjoys a top position in the global athletic shoes, equipment and apparel market. A Five Forces Analysis, based on Michael Porter’s model, points out that competition, customers and substitutes are the most important external forces in Nike’s industry environment.
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The Market Forces Of Supply And Demand. Print Reference this. Published: 23rd March, Last Edited: (changes in the size of the market, income for the average consumer, population size, the prices and availability of related goods, consumer preferences) are directly related to consumers.
If more producers enter a market, the supply. Supply and demand are perhaps the most fundamental concepts of economics, and it is the backbone of a market economy.
Demand refers to how much (or what quantity) of a product or service is. In microeconomics, supply and demand is an economic model of price determination in a market.
It postulates that, holding all else equal, In both classical and Keynesian economics, the money market is analyzed as a supply-and-demand system with interest rates being the price. Learning how these major factors shape trends over the long term can provide insight into how future trends may occur.
Here are the four major factors: If government spending increases or.