Exam 1 Study Guide - Decision Making in Agri-Food | ABM 100, Study notes of Agricultural engineering

Download Exam 1 Study Guide - Decision Making in Agri-Food | ABM 100 and more Study notes Agricultural engineering in PDF only on Docsity! Overview of Food Systems Producers: Firms who produce raw food and agricultural products Assemblers: Firms who buy raw commodities from producers in order to sell to others (Store & Transport - Don't Change It!) Trend: Merger of commodity processing and assembly• Initial Processors: Process the raw commodities into food ingredients Trend: Merge some of the processing and manufacturing functions to become "processor/manufacturer" or "food product processor" • Food Manufacturer: Buys the food ingredients and turns them into final product Marketers is too general a term! Wholesalers: Firms who buy final products in order to sell to others (not directly to consumer) HRI Industry: Hotel, Restaurants and Institutions Trend: Big retailers serve as their own wholesaler, therefore the term W-R in 2012, stopped ranking wholesalers and retailers separately • Grocery Wholesalers: Primary customers are food retailers Retail Food Stores• Food Service Retailers• Specialty Retailers• Firms where consumers buy food: Consumers spend nearly $1.6 trillion on food and alcohol Consumers spend about 1/2 of food cost on food away from home Consumers waste about 1/3 of food Feed - Kent Feeds,○ Fertilizer - ADM○ Equipment - John Deer○ Financial - Greenstone Farm Credit○ Ag Input Supplier• Ranchers & Farmers○ Nursery & Greenhouse Owners○ Producer• Assembler• ADM○ Cargill○ Initial Processors• Campbell's○ Kraft○ Food Manufacturer• HRI's• Examples: Exam #1 Notes Wednesday, February 25, 2015 7:13 PM Exam 1 Page 1 Sysco○ US Foods○ Gordon Food Service (GFS)○ HRI's• SpartanNash○ Supervalu○ Grocery Wholesalers• Wal-Mart (#1)○ Kroger (#2)○ Costco (#3)○ Target (#4)○ Meijer (#5)○ Retailers• Intro to Food Marketing & Value Added Marketing is a value adding process Each level is an economic stage and involves a value-adding process Time: Value created by storage Place: Value created by transport from A to B Form: Value created by change in physical form Possession: Value created by exchange between buyers & sellers Assembler• Wholesaler• Producers• Storage Assembler• Wholesaler• Transportation Manufacturer• Processor• Producer• Food Retailer• Form ALL PLAYERS• Possession Value Added Measured Economic Research Service (ERS) tracks the cost of getting food from farm to table ERS collects data from grocery stores and eating establishments to build data series (takes 2 years) Trend: INCREASING• With alcohol: $5,100• Without alcohol: $4,500• Food Bill: Value of total food and alcohol expenditures in a year Exam 1 Page 2 20-22% crops○ 25-28% grassland, pasture, rangelands○ Environmentally• Agricultural Production: Technology Impact Changes in Farm Structure• Increased Specialization• Increased Globalization• Tighter Coordination• Increased Concentration• Impacts of Increased Productivity and Technological Advances Farmers account for less than 2% of the populations Approximately 2 million farms in the U.S. A farm is defined by sales of $1,000 or more in agricultural products (crops and livestock) 97-98% of U.S. farms are owned and operated by a family member Only about 2% of all farms are nonfamily farms Corporate farming is a LLC Nonfamily farm: A farm not owned by a family (majority share) 90% of farms• 2/3 of all farm assets• 16% of agricultural output• Small Scale Farms: Sales less than $250,000 12% of farms• 80% of farm production• Trend: Increased farm size• Large Scale Farms: Sales more than $250,000 Specialization not diversity China• Canada• Mexico• Japan• Export Destinations Canada• Mexico• EU-28• China• Import Destinations Geographic Concentration: Production and allied industries locating in close proximity to one another Market Concentration: Smaller number of firms or players in the industry Market Power: Ability to influence price CR4 is a red flag but not a smoking gun CR4 = (Total money/approx. sales) x 100 Exam 1 Page 5 Supply & Demand Lower prices makes quantity demanded increase Demand curve ALWAYS slopes down Supply curve ALWAYS slopes up As the willingness to pay more increases, the willingness to make more increases Supply: What sellers are willing & able to offer at a series of various prices Quantity Supplied: A point on the supply curve Market Equilibrium: Point where supply & demand intersect; everyone is happy Input Price Changes• Technology Changes• Biological & Climate Factors• Information & Expectations• Number of Suppliers• Change in Market Supply Bad thing = Decrease in supply (inward shift - up) Good thing = Increase in supply (outward shift - down) When increasing demand there's an increase in quantity & price Increase in Demand - Outward shift Decrease in Demand - Inward Shift Change in price/quantity of substitutes• Change in price/quantity of complements• Income• Taste & Preference• Information & Expectations• Number of consumers• Change in Market Demand Problem Sets & In-Class Assignments Institutional wholesalers typically do sell to University cafeterias A primary customer of the food manufacturer is the wholesaler HRI is a common acronym used in the agri-food system to describe hospitals, restaurants and industries Total expenditures on food and alcohol in the U.S. has been increasing over the last 20 years Players in the agri-food system add time value by storing Increasing incomes are leading to more emphasis placed on food quality and less on product price Most agricultural commodities cannot be grown anywhere in the world Approximately, 1/3 of all meals are consumed away from home As the baby boomers age they will be less likely to eat out than younger Americans Due to biological nature of food production, agricultural firms unable to quickly contract or expand in order to adjust to price signals in the market Exam 1 Page 6