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Agribusiness scholarship emphasizes an integrated view of the food system that extends from research
and input supply through production, processing, and distribution to retail outlets and the consumer.
This article traces development of agribusiness scholarship over the past century by describing nine
significant areas of contribution by our profession:(1) economics of cooperative marketing and manage-
ment, (2) design and development of credit market institutions, (3) organizational design, (4) market
structure and performance analysis, (5) supply chain management and design, (6) optimization of
operational efficiency, (7) development of data and analysis for financial management, (8) strategic
management, and (9) agribusiness education.
In January 1956 John H. Davis, director reviews in ten journals, ranging from the Jour-
of the program in agriculture and business nal of Farm Economics and the American Eco-
at the Harvard Business School, published nomic Review to Agricultural History and the
“From Agriculture to Agribusiness” in the Journal of Marketing.
Harvard Business Review (Davis 1956). The The key insight articulated by Davis and
following year Davis and Ray A. Goldberg Goldberg was that the food system needs
published A Concept of Agribusiness. These to be viewed as an integrated system. Man-
two publications introduced and defined the agement strategies and public policy initia-
term “agribusiness” as tives designed to address problems in the
food system would be doomed to failure if
the sum total of all operations they focused on only one portion or segment
involved in the manufacture and dis- of that integrated system. Their work stim-
tribution of farm supplies; produc- ulated new interest in the linkages between
tion operations on the farm; and segments of the food system, in coordination
the storage, processing, and distribu- across segments, in systemwide performance,
tion of farm commodities and items and in strategy formulation in a context of
made from them. Thus, agribusiness interdependence.As Cook and Chaddad (2000,
essentially encompasses today the pp. 209–210) note:
functions which the term agriculture
denoted 150 years ago. [A]gribusiness research evolved
(Davis and Goldberg 1957, p. 2) along two parallel levels of anal-
ysis: the study of coordination
By the end of 1959, the term had appeared between vertical and horizontal
in at least forty published articles and book participants within the food chain,
known as agribusiness economics,
and the study of decision-making
Robert King is a professor of Applied Economics, University of
within the alternative food chain
Minnesota; Michael Boehlje is the Distinguished Professor of Agri- governance structures, known as
cultural Economics, Purdue University; Michael L. Cook is the agribusiness management.
Robert D. Partridge Chair in Agricultural Economics, Univer-
sity of Missouri; and Steven T. Sonka is a professor in Agricul-
tural and Consumer Economics and Interim Vice Chancellor of In 1956 our association was approach-
Public Engagement, University of Illinois. Authorship is equally
shared.Preparation of this manuscript was coordinated by Robert ing its fiftieth anniversary. Though the term
King. “agribusiness” had not been used prior to that
© The Author (2010). Published by Oxford University Press on behalf of the Agricultural and Applied Economics
Association. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org
King et al. Agribusiness Economics and Management 555
time, agricultural economists had been making of the North Central Regional Project 117
significant contributions on issues related to (NC-117), “Organization and Control of
agribusiness for many years. As early as 1913, the U.S. Food Production and Distribution
Charles J. Brand (1913, pp. 85–86) noted that System.”
the farmer needed “suitable and convenient The 1980s also was a time for questioning
arrangements for securing credit” and “assis- the place of agribusiness scholarship within
tance in the establishment of a marketing sys- the agricultural economics profession. The
tem which will return him the true value of first issue of a new journal, Agribusiness,
the particular qualities of the various crops appeared in 1985. Sonka and Hudson (1989)
that he produces, minus reasonable charges subsequently provided a conceptual assess-
for handling, transportation and the legiti- ment of the need for agribusiness scholarship
mate profits of middlemen.” These concerns from both academic and industry perspectives.
led to significant work on farm credit and The interplay emanating from the cultural,
cooperative marketing in the 1920s, as well biological, and political aspects of food and the
approaches such as agency theory, behavioral with the 1916 Federal Farm Loan Act and
theories of the firm, incomplete contract the- eventually culminating in the Farm Credit Act
ory, transaction cost economics, and property of 1933 formed the base for the current Farm
rights approaches allowed for more detailed Credit System (FCS), which today is a major
investigation between inter- and intra-firm supplier of credit to farmers, farmer coopera-
coordination decision making. tives, and rural homeowners.
The following twenty years saw advances uti- William I. Myers’ role in the development of
lizing new institutional economic approaches the FCS in its formative years is legendary; he
by Fulton (2001), Cook (1995), Hendrikse and served as governor of the Farm Credit Admin-
Veerman (2001), and Hendrikse and Bijman istration from 1933 to 1938. At the annual
(2002), among others. Additionally, advances meetings of the American Farm Economic
in neoclassical frameworks increased under- Association, he emphasized the cooperative
standing of the role of cooperatives not only nature of the system and that “generally speak-
in remaining as a competitive yardstick but ing the Farm Credit System is not lending
debt service problems by the mid-80s. Jolly Contribution #3: Agribusiness scholars
et al. (1985, p. 1114) indicated that based on utilizing interdisciplinary approaches and new
data from the USDA Farm Costs and Returns economic frameworks have become
Survey, “about 50% of farm operators and instrumental in diagnosing and understanding
assets did not have a positive cash flow and the incentives/disincentives embedded in
that 64% of debt was not fully serviced in agribusiness organizational architecture and
1984.” Much of the early debate about the complementary networks
appropriate response focused on how lend-
ing institutions and their farmer-borrowers A graph of our profession’s interest in orga-
might resolve debt-servicing problems and pre- nizational design of agribusiness enterprises
vent foreclosures or bankruptcy filings. But as might look like a U-shaped curve. In the early
evidence began to mount that the problems days of the profession, agricultural economists
were more serious than originally thought, the offered many thoughtful observations about
debate turned to the appropriate public sec- the recommended or optimal form that agri-
Food System (Marion and NC-117 Commit- American Agricultural Economics Associa-
tee 1986), and Food Processing (Connor 1988). tion (AAEA) in 1987 and 1995, respectively,
This work has been the foundation for more but agricultural and applied economists were
recent research on antitrust issues (e.g.,Connor doing significant work on the economics of
2001), pricing policies (e.g., Cotterill, Putsis, supply chains long beforehand by posing ques-
and Dhar 2000), and generic advertising (e.g., tions that have advanced the study of supply
Kaiser et al. 2005). chains well beyond the simple description of
During the latter twenty years of the linked production–distribution activities and
twentieth-century globalization, industrializa- processes.
tion and consolidations accelerated changes One fundamental concern in supply chain
in the horizontal and vertical relationships research is how flows of product, informa-
between participants of the global food tion, and financial resources through the chain
and fiber system. Many of the organiza- can best be governed. Building on transac-
tional and transactional arrangements that tion cost concepts developed by Coase (1937)
later Gardner (1975) developed a model of Contribution #6: Agricultural economists have
simultaneous equilibrium in the markets for created robust methods and tools that foster
retail food, farm products, and marketing more efficient operations within the
services. That model motivated later work agribusiness sector
on price transmission by Wohlgenant (1989)
and others—research that can have impor- Transforming agricultural commodities into
tant implications for supply chain design. More food products typically requires conversion of
recently, in a very different analytical frame- large amounts of lower-value materials into
work, Hendrikse and Bijman (2002) showed more valuable products and transport (of agri-
how the allocation of ownership of essential cultural inputs and food product outputs) over
assets affects the distribution of returns across considerable distances. To address this eco-
the chain and investments that affect overall nomic challenge, managers need to be able
productivity. to assess both cost of production alternatives
Finally, members of our profession have also within a single production facility as well as
manufacturing firms are likely to have several tomato processing plant efficiency adopted
production facilities, the firm’s managers need a novel approach to estimation of response
to be able to optimize a system of facilities. surface identification. A cost-function meta-
One of the first rigorous efforts to address model is successfully applied to estimated
this challenge was detailed in Stollsteimer’s factor-demand equations, resulting in reduced
(1963) article focused on assessing plant num- specification error. A bootstrapping regres-
bers, size, and location for pear produc- sion approach was employed by Schroeder
tion and processing in California. He devel- (1992) to separately identify the extent of scale
oped a modeling specification consistent with and scope economies for a sample of sup-
the challenge of minimizing the combined ply and marketing cooperatives. Distinguish-
cost of assembling and processing agricul- ing between these types of potential economies
tural commodities. Essentially an extension provides relevant decision-making informa-
of the basic linear programming transporta- tion for agribusiness managers. These studies
tion model, Stollsteimer’s work included plant demonstrate the continuing commitment of
During the 1970s the structural changes in recent times, additional data on the financial
the financial markets and the pressures for and resource characteristics of the farm fam-
consolidation of the institutions in both the ily, including labor allocation, nonfarm income,
commercial banking sector and the FCS stim- and investments and family expenditures, have
ulated work on the cost and efficiency of been collected as part of this survey. As with
the consolidated/restructured financial institu- the earlier survey work of the Federal Reserve
tions, and the effectiveness and commitment Banks, the ARMS data set has been used
of these generally larger and less locally con- extensively by the USDA and Land Grant
trolled/owned institutions to serve the farm agricultural economists in their research pro-
sector and rural communities. Such work grams. The extensive financial data collected
is summarized by Ellinger, Hartarska, and and the numerous analyses that these data have
Wilson (2005) and Gustafson, Pederson, and supported document that although the agri-
Gloy (2005). Beginning in the 1990s, atten- cultural sector and farm businesses were char-
tion shifted to issues of capital structure, loan acterized by low incomes and weak financial
Agribusiness Seminar he has led also has focused on the future structure of the
been a powerfully effective means of educating sector.
agribusiness managers. More recently, the methods of agricultural
Key empirical work, especially from the economists have advanced along with the gen-
1950s to the 1980s, focused on providing an eral management literature and the nature of
enhanced, quantitative understanding of the change in the sector. As a result, the scholarly
evolving production agriculture sector. These capabilities of agricultural economists have
developments were critically important as been directly applied to decision-making issues
the size and scope of input supply and commod- within agribusinesses. These efforts have nec-
ity marketing firms are inherently connected to essarily required explicit consideration of the
the regional nature of agricultural production. manager as more than only a strictly rational,
As the underlying technologies supporting pro- economic being (Mintzberg 1978).
duction agriculture evolved, the dynamics of An article by Fisher, Sonka, and Westgren
regional production underwent considerable (2004) sets a standard for work that contributes
by John Davis and Ray Goldberg, reported on budget restraints. There was great diversity in
findings from a survey of the profession on the the structure of agribusiness programs at that
role of economics in undergraduate curricula. time, reflecting historical and contextual differ-
Black (1953) concluded that ences as well as the recognition that there was
value in experimenting with new models.
Graduate and professional programs in
departments of agricultural eco-
agribusiness were somewhat slower to develop.
nomics in the larger colleges at least
Litzenberg, Gorman, and Schneider (1983)
should consider offering three cur-
identified four existing professional graduate
ricula, one of the general-agriculture
programs and two under development. In 1989
type to serve especially the needs of
the National Agribusiness Education Commis-
future farmers and extension work-
sion was organized “(a) to develop guidelines
ers, one in agricultural business to
for a masters degree in agribusiness manage-
serve the needs of young men looking
ment, (b) to suggest strategies for continuing
Agricultural Policy Research Institute at the patterns due to climate change, there are
University of Missouri–Columbia and at Iowa likely to be large shifts in relative prices
State University, and the Graduate Institute over the next quarter century. This could
of Cooperative Leadership at the University trigger an unpredictable, radical restruc-
of Missouri–Columbia. These and other pro- turing of the food system and critical
grams have been exemplary in their ability strategic positioning issues for agribusi-
to integrate research scholarship and outreach ness firms.
to advance strategic decision making in the
agribusiness sector. Understanding and anticipating the dynam-
ics of the global agribusiness environment
will be increasingly critical. These challenges—
Opportunities and Challenges for the Future along with advances in theoretical frameworks,
diagnostic tools, and empirical techniques
Our association’s first century was a period of
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Finance. Journal of Farm Economics 12: trial Powerhouse in Transition. Lexington,
248–256. MA: Lexington Books.
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College Curricula. Journal of Farm Eco- Customers Are the Enemy. Norwell, MA:
nomics 35: 484–495. Kluwer Academic Publishers.
Boehlje, M. 1999. Structural Changes in the Connor, J. M., R. T. Rogers, B. W. Marion,
Agricultural Industries: How Do We Mea- and W. F. Mueller. 1985. The Food Man-
sure, Analyze, and Understand Them? ufacturing Industries: Structure, Strategies,
American Journal of Agricultural Eco- Performance, and Policies. Lexington, MA:
nomics 81: 1028–1041. Lexington Books.
Boehlje, M. D., and L. M. Eisgruber. 1972. Connor, L. J. 1973. Michigan State’s Cur-
Strategies for the Creation and Transfer of ricula in Agricultural Economics. Ameri-
Weakness. Journal of Farm Economics, 6: Hendrikse, G., and J. Bijman. 2002. Owner-
106–116. ship Structure in Agrifood Chains: The
Erdman, H. E. 1927. The Cooperative Market- Marketing Cooperative. American Journal
ing Association as a Factor in Adjusting of Agricultural Economics 84: 104–119.
Production to Demand. Journal of Farm Hendrikse, G. W. J., and C. P. Veerman. 2001.
Economics 7: 73–81. Marketing Cooperatives: An Incomplete
———. 1950. Trends in Cooperative Expan- Contracting Perspective. Journal of Agri-
sion. Journal of Farm Economics 32: 1019– cultural Economics 52: 53–64.
1030. Herr, W. M. 1969. The Role of FHA’s Farm
Farm Financial Standards Council. 1991. Operating and Ownership Loan Programs
Financial Guidelines for Agricultural as Indicated by Borrower Characteristics.
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Bankers Association. Hind, A. M. 1994. Cooperatives— Under-
Fisher, D. K., S. T. Sonka, and R. E. West-
Stollsteimer, J. F. 1963. A Working Model for Wills, W. J. 1973. SIU’s Curriculum in Agri-
Plant Numbers and Locations. Journal of cultural Economics. American Journal of
Farm Economics 45: 631–645. Agricultural Economics 55: 750–751.
Tostlebe, A. S. 1957. Capital in Agricul- Wohlgenant, M. K. 1989. Demand for Farm
ture: Its Formation and Financing since Output in a Complete System of Demand
1870. Princeton, NJ: Princeton University Functions. American Journal of Agricul-
Press. tural Economics 71: 241–252.
U.S. Congress, Office of Technology Assess- Wood, G. B. 1947. Training Agricultural Eco-
ment. 1986. Technology, Public Policy and nomic Majors for Business Careers. Jour-
the Changing Structure of American Agri- nal of Farm Economics 29: 1341–1354.
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