CHAPTER 1: AGRICULTURE AND AGRIBUSINESS Agriculture is technology-oriented industry that includes production, agriscience, and agribusiness. What is Agribusiness?

*John Davis and Ray Goldberg su total o! all operations involved in the anu!acture and distribution o! !ar supplies" production operations on the !ar " and the storage, processing, and distribution o! the resulting !ar co odities and ite s. #t is also de!ined as any pro!it- otivated enterprise that involves providing agricultural supplies and$or the processing, ar%eting, transporting, and distributing o! agricultural aterials and consu er products. *&'ell Roy the coordinating science o! supplying agricultural production inputs and subse(uently producing, processing, and distributing !ood and !iber. *Merriam-Webster Collegiate Dictionary- an industry engaged in the producing operations o! a !ar , the anu!acture and distribution o! !ar e(uip ent and supplies, and the processing, storage, and distribution o! !ar co odities. * Australian Depart ent o! Agriculture, )isheries and )orestry *DA))+ a chain o! industries directly or indirectly involved in the production, trans!or ation, or provision o! !ood, !iber, che ical and phar aceutical substrates. ,in%s in the agribusiness chain include. /ri ary production o! ra' aterials *co odities+, such as unprocessed !ood, !iber, and substrates . 0ertiary trans!or ation o! co odities into value-added products 'here the value is derived !ro the process o! trans!or ation . 1upply o! inputs to the pri ary and tertiary sectors . 2holesale and retail provision o! processed and unprocessed !oods, !ibers, and related products to consu er . /rovision o! educational, !inancial, and technical services to all sectors 0here!ore, agribusiness enco passes all activities !ro the paddoc% to the consu er that contribute to the eventual production, processing *value-addition+, distribution, retailing o! !ood, !iber, and products based on !ood or !iber.

Is Agribusiness the Sa e as Agri!u"tura" E!#n# i!s? Agricultural &cono ics re!ers to the onetary and physical !actors that a!!ect the pro!itability o! agribusiness. According to the A erican Agricultural &cono ics Association, Agricultural &cono ics is the study o! the econo ic !orces that a!!ect the !ood and !iber industry. 1peci!ic areas o! study in agricultural econo ics include. co unity and rural develop ent . !ood sa!ety and nutrition . international trade . natural resource and environ ental econo ics . production econo ics . ris% and uncertainty . consu er behaviour and household econo ics . analysis o! ar%ets and co petition . agribusiness econo ics and anage ent Agricultural econo ist can be !ound at every level o! business, govern ent, and education around the globe.

The Big Pi!ture #$ Agribusiness Agribusiness co panies provide in%ut supplies to the production agriculturist *!ar er+. 0he production agriculturist produces !ood and !iber and the #ut%ut is ta%en by agribusiness co panies that process, ar%et, and distributes the agricultural products. */lease re!er to )igure 3-3.+
)igure 3 - 3

AGR#45,05RA, #6D510R7
AGRIBUSINESS INPUT SUPPLIES )eed 1eed # ports 8achinery and &(uip ent )inancial$ 4redit 0ransportation )ertili9ers Ani al :ealth /esticides 2holesalers &nergy 4ontainers 4he icals #nsurance Research 1cience &ngineering &ducation 8any others PRODUCTION AGRICULTURIST (FARMERS) Dairy ,ivestoc% /oultry Alternative ani als 4rops )orestry 6ursery )ruits and ;egetables Alternative 4rops 8any others Agricultural byproducts, oil, eal, bran, distiller>s dried grain AGRIBUSINESS OUTPUT COMPANIES 8ar%eting 0ransportation /rocessed !oods 6onprocessed !oods <everages &=ports 0e=tiles 2ood and /aper 2holesalers and retailers )ood bro%ers Groceries )ast !ood and other restaurants

/rocessing

Agribusiness A$$e!ts Us Dai"& 4onsider a cheeseburger, 'hat is involved in asse bling a cheeseburger 'ith all the tri INGREDIENTS . to ato . eat . ustard . pic%le . cheese * il% being produced and processed+ . onion . lettuce . sesa e seeds . %etchup *vinegar" to atoes or banana" condi ents+ . ayonnaise *eggs" vegetable oil, le on @uice" salt" condi ents+ . bun *'heat+ ings?

8any ite s had to be brought together to create a cheeseburger, such as land, labor, seeds, !ertili9er, che icals, achinery, credit, transportation, and ar%eting and etc. #n addition, agribusiness plants had to be built to process the !ood products that go into the cheeseburger !ro their ra' aterial state. 8any engineering and technological syste s 'ere used to obtain the needed (uality and standardi9ation. 2hen that various ingredients that go into a%ing the cheeseburger le!t the processing plants, they 'ere transported by air, ground or 'ater, re(uiring airplanes and run'ays, truc%s and roads, railroads and trac%s, barges and 'ater'ays, and co unications and e ployees. As these !ood products arrived in your co unity, 'holesalers and distributors needed receiving ter inals, depots, or 'arehouses to store the products !or distribution in s aller (uantities to retail !ood stores and restaurants. As you can see, agribusiness is an essential part o! our lives and crucial to the econo y o! the /hilippines and o! the 'orld.

FARMING AND AGRICULTURE BEFORE AGRIBUSINESS 'A(ERICA)

/eriod ,i!e be!ore !ar ing and agriculture &arly agricultural develop ent

<ron9e Age *around ABBB <.4.+

#ron Age *around 3BBB <.4.+

8iddle Ages *!ro 3DBB+

A.D. CBB to A.D.

3E3A *;irginia colonist John Rol!e+

3Fth and 3Gth 4entury

Agricultural and #ndustrial Revolution

&ra a!ter A erican Revolution

3st hal! o! IBth 4entury

,atter /art o! IBth 4entury

4ontributions *hunts 'ild ani als and insects and gathers vegetables+ - had little %no'ledge on planting so e seeds but had proble s 'ith gro'ing it - began to raise crops and do esticate ani als - invented the sic%le - bron9e tools and plo's ade !or easier and !aster !ar ing - 6ile River 'as used by &gyptians to irrigate crops - the 'heel 'as discovered, a%ing the transport o! crops possible - 'orld population rose !ro A8 be!ore the invention o! agriculture to nearly 3BB8 - iron hand tools and plo's 'ere prepared, so e o! 'hich are si ilar to those used today - oney 'as developed because o! the need to trade e=cess crops - leaving land !allo' gave the soil a chance to rebuild and store oisture - crop rotation, ne' harness !or plo'ing, and selective breeding !or livestoc% - o=en 'ere the ain dra!t ani als - shipped tobacco to &ngland - e=port ar%ets !or rice and indigo, as 'ell as tobacco *develop ent o! A erican agriculture+ - shipped !urs, ti bers, and grain to &ngland and southern &urope - organic !ertili9er 'as !irst developed by putting dead !ish into the ground along 'ith corn seed - rice, the 'orld>s ost popular grain, 'as 3st gro'n in 5nited 1tates - George 2ashington created one o! the !irst e=peri ental !ar s - 0ho as Je!!erson e=peri ented 'ith seeds and livestoc%, invented !ar i ple ents, and 'as active in establishing a local agricultural society. - :enry )ord developed the auto obile - crop rotation 'as pro oted by 4harles 0o'nsend - advances in livestoc% breeding 'as achieved by Robert <a%e'ell - the 3st 'or%able seed drill 'as invented by Jethro 0ull - a stationary grain threshing achine 'as developed to separate grain !ro 'aste - John Deere designed a better, one-piece, steel plo' - bared 'ire 'as invented to %eep livestoc% a'ay !ro cropland - the 3st gasoline tractor 'as built in 3GHI - seed and plant genetics 'ere being developed by Gregor 8endell - surveying o! land 'as used to separate property - cotton gin 'as invented by &li 2hitney in 3FHA - &d'ard Jenner discovered vaccines to prevent diseases - 3st one piece, cast-iron plo' 'as invented in 3G3H by Jethro 2ood - interchangeable parts 'ere developed so that people could !i= their e(uip ent - vaccine 'as developed !or hog cholera - )ederal ,and <an%s 'ere established to give credit to !ar ers - :ybrid plant seed 'as developed !or better-(uality, higher-producing crops - arti!icial inse ination 'as ore 'idely used in the livestoc% industry - productivity increased due to ne' technology - !ar ers began to use electric !ences - disc plo's 'ere 'idely used - che ical !ertili9ers and pesticides 'ere 'ildly used - !uture trading 'as used to control ris% - co puters beca e popular as agricultural anage ent tools

Bi#te!hn#"#g& is no' part o! our lives, 'ith advances in gene splicing, cloning and gene apping. All these advances allo' !ar ers and scientists to 'or% together to create the ost desirable, pro!itable product possible.

*Agribusiness no' includes )ar achinery dealerships 4o odity bro%ers Arti!icial breeding services Agricultural che ical co panies Research consulting !ir s J veterinary supply co panies J livestoc% supply co panies J ani al !eed co panies J biotechnology !ir s J e=port co panies

+AR( (ACHINER, AND E-UIP(ENT Kne o! the ost signi!icant develop ents o! the agricultural revolution 'as the shi!ting !ro ani al po'er to a highly echani9ed agriculture. 0his po'er shi!t began in the later hal! o! the 3Hth century and 3st hal! o! the IBth century. 0he shi!t !ro hu an and ani al po'er to echanical po'er originated in the industrial revolution, 'hich begun in the 3Gth century in &ngland 'ith the discovery o! the stea engine. #t 'as !irst used !or pu ping 'ater out o! coal ines, and by 3GBB stea engines 'ere used to po'er sa' ills, te=tile ills, and nu erous other industrial !ir s. 0hrough echani9ation, ani als such as horses, ules and o=en 'ere replaced by the po'er o! achines. As a result, the hours o! hu an labor re(uired in production agriculture has been reduced greatly. <e!ore 3GAB, it too% nearly DE hours o! hu an labor to produce one acre o! 'heat. <ut today, it only ta%e a !e' hours o! hu an labor are needed to produce that sa e acre.

Hist#ri!a" De.e"#% ent #$ (#/ern +ar E0ui% ent 0he develop ent o! odern !ar e(uip ent began be!ore tractors ade their i pact. Kne o! the !irst agricultural achines that had a signi!icant i pact on !ar ing 'as the cotton gin, invented in 3FGC by &li 2hitney. 0hree years later the cast-iron plo' 'as patented by Jethro 2ood. 0his plo' 'or%ed very 'ell in &astern soils but not the hard soils o! the 8id'est. #n 3GAF, John Deere, !ounder o! John Deere 0ractor 4o pany, ade the !irst success!ul steel plo' !ro a sa' blade, and by 3GCE he 'as building 3, BBB steel plo's per year. 0he steel did not 'ear out as !ast as the cast iron, and the soil did not stic% to the ne' plo' as it did 'ith the old one, so !ar ers 'ere very happy 'ith. 5ntil about 3GDB production agriculture changed very little !ro !a ily to !a ily. 8ost !ar @obs, including so'ing, tilling and harvesting, 'ere per!or ed using hu an uscle po'er. Agriculture practices 'ere handed do'n !ro !ather to son and !ro other to daughter. Beginning #$ Change 0he 3Hth century brought the beginnings o! change. 0he century began 'ith the ,ouisiana /urchase in 3GBF and the opening o! the !ar land 'est o! the Allegheny 8ountains. 0he !irst cotton planter 'as patented in 3GID, and a corn planter 'as developed three years later. #n 3GA3, 4yrus 8c4or ic% 'as one o! the !ounders o! success!ul grain reaper. Although this 'as not the !irst reaper invented, it 'as !irst to achieve 'ide acceptance, and by 3GEB, IB, BBB reapers 'ere being sold each year. 0he reaper not only cut labor ti e and cost, it also reduced the ris% o! 'eather da age by ore than DBL by reducing harvesting ti e. #n 3GGD over IDB, BBB harvesting achine 'ere produced and sold. 0he earlier !ar achines 'ere built !or horsepo'er rather than tractors, but they ad@usted very (uic%ly 'hen the source o! po'er changed. <et'een 3GDB and 3GGB the a ount o! land devoted to !ar s increase GIL, to DAE illion acres !ro IHC illion acres, 'hile the nu ber o! !ar s rose 3EFL, to C8. 0he rise o! the industrial age near the iddle o! the century brought about shortages o! !ar 'or%ers as they !loc%ed to northern industrial cities. 0he 4ivil 2ar brought increased interest in the develop ent o! labor-saving tillage and harvesting tools by si ultaneously raising !ar co odity prices and reducing the supply o! !ar laborers. +r# (an%#1er t# H#rse%#1er At the end o! the century, only DBL o! A ericans lived on !ar s and the transaction !ro anpo'er to horsepo'er 'as nearly co plete. /roduction agriculturists 'ere still largely sel!-su!!icient, but they had raised their productivity to a level 'here they could a!!ord to purchase so e horse-dra'n !ar e(uip ent and a !e' inputs produced o!! the !ar . The STEA( Era Although stea po'er had its a@or i pact on the industrial sector o! the econo y, it also played a a@or role on the !ar bet'een 3GDB and 3HBB, 'hich is generally called the 1tea &ra. #t is esti ated that over FB, BBB stea engines 'ere produce !or !ar use. 0he !irst stea engines 'ere stationary. 0he second phase

produced a portable stea engine, 'hich 'as pulled to the !ields !or speci!ic @obs such as po'ering 'heat threshing achines or sa' ills. 0he third types o! !ar stea engines 'ere called traction engines and 'ere uch ore use!ul as a source o! !ar po'er. 0hey pulled the selves as 'ell as large e(uip ent. 0he !irst stea traction engine !or !ar use 'as ade in 3GEH by J.#. 4ase 4o pany. 0he stea traction engine ushered in a ne' era in agriculture by providing an alternate obile source o! po'er on the !ar . :o'ever, stea engines had nu erous proble s, and it 'as obvious that they 'ere not the ideal source o! po'er that !ar ers needed. 0he engines 'ere e=tre ely heavy, bul%y, dangerous, e=pensive, and adaptable to very !e' chores. Interna" C# busti#n Engine 0he develop ent o! this engine occurred in stages si ilar to that o! the stea engine. )irst, s all, stationary one-cylindrical engines 'ere ade !or s all @obs around the ho e and on the !ar . 0hen, larger, t'ocylindrical otors 'ere ounted on 'heels or sleds and ta%en to the !ields, shops, or 'herever they 'ere needed. )inally, t'o-cylindrical engines 'ere ounted on !ra ed 'ith 'heels and a trans ission so they could pull the selves as 'ell as so e type o! e(uip ent. +ue" Use/ A 'ide variety o! !uels 'ere used in the early internal co bustion engines. 1o e o! the a@or types 'ere gun po'der, turpentine, coal dust, and %erosene, 'hich 'ere co only called as coil oil. &ven though early tractors 'ere called gasoline tractors, the a@or source o! !uel 'as %erosene. 8ost early tractors 'ere ade 'ith a s all tan% !or gasoline and a large one !or %erosene. 0he !ar ers started the engine 'ith gasoline and then s'itched to %erosene since it 'as cheaper and ore e!!icient to use.

The Beginning #$ Interna" C# busti#n Engines 0he e=act date 'hen internal co bustion engines 'ere !irst ade is not clear. :o'ever, so e engines have been traced to the later part o! 3Fth century. 0he !irst practical po'er unit 'as developed in 3GFE by t'o Ger an inventors, 6.A. Ktto and &ugene ,angen. 0his engine 'as very popular and beca e %no'n as the Ktto engine. #n 3GHH there 'ere over 3BB !ir s a%ing internal co bustion engines in 51, not counting auto obile engines, and by 3H3C there 'ere over DBB co panies in operation. 1 all engines continued to be a popular source o! po'er through the 3HCB>s. 4urrently, these s all engines are e=periencing a co ebac% through restoration o! public collectors. :o'ever, they are used !or !un, not !or 'or%. +ar Tra!t#rs 0he record 'as not clear as to 'hen the !irst tractor 'as ade and 'ho ade it. :o'ever, historian R.<. Gray reports that the 4harter Gas &ngine 4o pany built si= gasoline tractors in 3GGH and that in 3GHB George 0aylor applies !or a patent on a 'al%ing-type otor plo'. The +irst Gas#"ine P#1ere/ Tra!t#r #n 3GHI John )roehlich built 'hat is so eti es called the !irst success!ul gasoline-po'ered tractor. 0he )roehlich tractor 'as the !orerunner o! the 2aterloo <oy and the odern John Deere line o! tractors. 0he 4ase 0hreshing 8achine 4o pany and the Dissinger and <ros. 4o pany also built tractors in 3GHI but they 'ere e=peri ental in nature and 'ere not put in practical use until several years later. 1everal other co panies began e=peri enting 'ith gasoline tractors in the late 3GHB>s, but the s'itch !ro horsepo'er and stea po'er to tractor occurred pri arily during the !irst AB years o! the IBth century. 0he ter tractor 'as !irst coined in 3HBE by a sales an !or the :art-/arr 0ractor 4o pany *a predecessor o! Kliver, 2hite )ar &(uip ent 4o pany and today>s AG4K+. /reviously, they 'ere called gasoline traction engines. Although tractors have been around !or nearly 3BB years, ules are still needed !or certain @obs. E$$e!t #$ W#r"/ War I #n Tra!t#r Pr#/u!ti#n 0ractor production e=panded rapidly in the early 3HBBs. #n 3H3B, 3D tractor co panies sold C, BBB tractors. 0he onset o! 2orld 2ar # ar%ed another turning point o! the develop ent o! agriculture and caused a rapid increase o! tractor production, and in 3HIB, 3EE tractor co panies sold over IBB, BBB tractors. 1purred by higher inco es !ro !eeding 'ar-ravaged &urope, 5.1. production agriculturist began the process o! replacing their horsedra'n e(uip ent 'ith gasoline po'ered tractors and the larger tillage i ple ents that they could pull. &!!ect o! the Depression 7ears on 0ractor /roduction A!ter 3HI3, the nu ber o! tractor co panies decreased about as !ast as they had increased. 0his 'as due to the Depression o! the 3HIBs. #n 3HI3, 3GE co panies sold only EG, BBB tractors, and by 3HID only DG co panies had survived, although the nu ber o! tractors sold increased. #n 3HAD, IB co panies sold over 3 8 tractors 'ith

HBL o! sales co ing !ro H a@or co panies- #nternational :arvester, John Deere, J.#. 4ase, 8assey-:arris, Kliver, 8inneapolis 8oline, Allis 4hal ers, 4leveland 0ractor 4o pany, and 4aterpillar 0ractor 4o pany. Henr& +#r/ an/ the Tra!t#r 0he !irst gasoline po'ered tractors had the sa e proble s as the stea engines- they 'ere e=pensive, big, bul%y, hard to drive, and very li ited in their application. 0ractor co panies soon began e=peri enting 'ith s aller tractors that 'ere ore suitable !or s all !ar and less e=pensive. Kne o! the ost success!ul s all tractors 'as the )ordson tractor ade by :enry )ord. #t 'as also the !irst ass-produced tractor on the ar%et. 0he )ordson accounted !or about FBL o! the total tractor ar%et by 3HID. P#1er Ta2e34$$ Units5 Tri!&!"e3t&%e Tra!t#rs5 an/ Rubber3tire/ Tra!t#rs #n 3H3G #nternational harvester announced a po'er-ta%e o!! */0K+ unit, 'hich allo'ed the operator to control and dra'n e(uip ent 'ith the tractor>s engine. 0he tricycle-type tractor 'as introduced by #nternational :arvester in 3HIC and 'as very popular !or cultivating as 'ell as plo'ing. #n 3HAI Allis 4hal ers, in cooperation 'ith )irestone Rubber 4o pany, introduced a pneu atic rubber-tired tractor, 'hich co pleted the basic design o! a light, versatile tractor that could handle ost !ar @obs. 0his !inali9ed the basic transition !ro horses and ules to tractors 'ith internal co bustion engines. Ani als 'ere no longer needed as a a@or source o! po'er although any s aller !ar ers continued to use horses and ules through the 3HDBs. E$$e!t #$ the Shi$t $r# Ani a" P#1er t# Tra!t#r P#1er 0he shi!t o! ani al po'er to tractor po'er a!!ected the A erican !ar ing in t'o

a@or 'ays.

De!rease/ De an/ $#r Ani a" +ee/. A large portion o! the land that had been used to produce ani al !eed 'as shi!ted to !ood production. #t is esti ated that i! horses 'ere still the a@or source o! po'er on the !ar , they 'ould consu e the output o! appro=i ately IDL o! grain acreage. 0his 'ould be a a@or drain on !ood production capabilities. 0he conversion to echanical po'er not only increased !ar ers> productivity but also increased the a ount o! !ood available !or hu an consu ption by lessening the a ount o! !eed output needed by 'or% ani als. Re/u!e Lab#r Ti e an/ C#st. #n 3HAE, the #o'a 1tate 5niversity &=peri ent 1tation reported that production agriculturists 'ith rubber-tired, t'o-plo' tractors 'ere producing 3BB acres o! corn 'ith D3 days o! !ield'or%. 0he sa e operation 'ith horses re(uired 3C3 days. A/.ent #$ 6ari#us +ue"s 8achine po'er continued to change and i prove. #n 3HA3, 4aterpillar 0ractor 4o pany developed a diesel-po'ered, cra'ler-type !ar tractor. 0he cra'ler-type tractor did not !it ost !ar needs, but the diesel engine had a a@or i pact a !e' years later. 0he gasoline engine itsel! has been i proved through the develop ent o! high co pression engines. Also, in 3HC3 li(ue!ied petroleu *,/+ gas tractors 'ere introduced by the 8inneapolis 8oline 4o pany. 0his ade it possible !or !ar ers to use clean-burning, lo' cost butane and propane !uels, especially in areas near these energy sources. (#/ern Tra!t#r A!!ess#ries 0oday, hydraulic li!ts, tor(ue a pli!ication, hydrostatic trans ission, po'er steering, turbo chargers, heated and air conditioned cabs, and any other !eatures provide an e!!icient and co !ortable po'er unit !or odern production agriculturists. 0he production agriculturist o! today operating a 3BB-horsepo'er tractor can do the 'or% o! over 3, BBB 'or%ers 'ithout achine or ani al po'er. #t is no 'onder that the average A erican !ar er produced enough !or over 3A3 people. In!rease/ Si7e an/ +#ur3Whee" Dri.e During the decades o! 3HEBs and 3HFBs the a@or changes included the shi!t to diesel as the a@or !uel, an increase in horsepo'er, and a shi!t to !our-'heel drive po'er. 4urrently, over GBL o! !ar tractors use diesel and ost a@or tractor co panies o!!er tractors 'ith a horsepo'er rating o! IBB or ore. 0he a@or changes in 3HFBs 'ere the shi!t to !our-'heel drive. 0he ore advantages o! !our-'heel drive include the ability to use ore po'er e!!iciently, better traction and !lotation 'ith less soil co paction, and increased sa!ety. )our-'heel drive is no' standard on e=tre ely large odels and optional on ediu and s all odels. (ar2et Stru!ture )ar achinery co panies aybe classi!ied into three types based on the type and variety o! e(uip ent sold- !ull line, long line, and short line. )ull line co panies produce and sell tractors as a 'ide variety o! e(uip ent. ,ong line co panies produce and sell a 'ide variety o! general !ar e(uip ent, including sel!-propelled co bines, but no tractors. 1hort line co panies produce highly speciali9ed e(uip ent, such as planters and cultivators, !orage e(uip ent, and il%ing achines.

+u""3"ine C# %anies 0he !ar achinery industry is si ilar to the auto obile industry in ter s o! ar%et concentration. According to *3HHF+ Agricultural Dealer 1urveys !our !ull-line co panies account !or over HBL o! total !ar achinery sales in 5.1. Deere #nc., 'hich is the largest producer, accounts !or over 3$A o! total sales. 6e' :olland is second, !ollo'ed by 4ase and Agco. )ull-line co panies constitute the a@or basis o! the !ar e(uip ent industry. 0hey are the s allest in nu ber, but they have the largest sales volu e and are in international in scope, 'ith anu!acturing plants and distribution centers throughout the 'orld. L#ng3"ine C# %anies 0he second a@or group is the long-line co panies. 0hey are larger in nu ber, but they have less dollar volu e than !ull-line co panies. 8ost long-line co panies operate on a national ar%et. 0he a@or long-line co panies include Gehl and ;er eer. 1everal previous long-line co panies have e=panded or erged into !ullline co panies. Sh#rt3"ine C# %anies 0hey have the least a ount o! i pact in the industry due to the lo'er volu es sold. 8ost co panies are regional in scope. 0hey typically produce !or !ull-line co panies under so e type o! production agree ent. )ull-line co panies ac(uire parts and asse bled achines !ro short-line co panies, !oreign based subsidiaries, and !oreign ar%ets. Si7e #$ the +ar (a!hiner& an/ E0ui% ent (ar2et 0here are around 3, DBB !ir s involved in producing !ar achinery in the 5. 1. 0hese !ir s sell their products through appro=i ately F, BBB retail outlets, 'hich are !ranchised by a@or anu!acturers. /resently, production agriculturists spend about MC.E < each year on !ar achinery and e(uip ent. Average production e=penditures !or !ar achinery in 3HHA 'ere @ust over MF, BBB per !ar . 0ractors and sel!-propelled vehicles account !or about ABL o! total achinery and e(uip ent sales. #n any cases, a retail dealer ay hold a !ranchise o! ore than one type o! tractor or other types o! e(uip ent. 0his is a trend that has e erged as a result o! the consolidation the !ar e(uip ent industry e=perienced throughout the 3HGBs. <y having t'o three !ranchises, su!!icient volu e is available to aintain !ull service and parts operation and to provide ade(uate inco e !or the dealer. An average !ull-line dealer is re(uired to have a ini u net 'orth o! MIDB, BBB to MDBB, BBB be!ore a !ranchise is a'arded. Appro=i ately I$A o! the business volu e co es !ro the sale o! ne' and used e(uip ent, 'ith the re ainder co ing !ro parts, services, and s all !ar supply ite s. Di.ersi$i!ati#n #$ +ar a!hiner& an/ E0ui% ent C# %anies 0he a@or !ar e(uip ent co panies are highly diversi!ied and do not li it their products to !ar e(uip ent. A a@or portion o! recent e=pansion has been ade in non !ar product lines. )or e=a ple, J.#. 4ase is a a@or producer o! bac%hoes and other industrial e(uip ent" Deut9-Allis, purchased by Agco, 'as a a@or producer o! electric generators" and 2hite 8otor 4o pany, also purchased by Agco, 'as a a@or producer o! industrial truc%s. #n the early stage o! develop ent, 4ase and #nternational :arvester ade auto obiles, but they discontinued production soon a!ter they began. )ord is still a a@or producer o! !ar pic%up truc%s and cars. 0he )ord tractor 'as brought by the )iat 4o pany in #taly and is no' sold under 6e' :olland na e. 8ost o! the !ull-line co panies have e=panded their consu er line to attract urban ho e o'ners. 0he ost attractive consu er line is riding-la'n o'ers and garden e(uip ent, but any other consu er products are o!!ered, !ro chain sa's and sno' obiles to bicycles. 0his phase o! the industry is e=pected to e=pand even ore as the urban population increases and the nu ber o! !ar er>s decreases. +#reign Tra/e Due to the changes ade in the !ar achinery and e(uip ent industry in the 3HGBs, it 'ent !ro pri arily do estic to beco ing co petitive internationally. ,arge type o! !ar e(uip ent and achinery 'ere ar%eted pri arily in the 51 and 4anada. )oreign countries 'ere interested pri arily in s aller pieces o! e(uip ent and achinery. 0here!ore, anu!acturers in the 51 and 4anada !irst produced large achinery and e(uip ent, but due to a gro'ing ar%et !or s aller tractors in 2estern &urope and, eventually, the 51, !ar achinery producers entered into agree ents !or the s aller tractors to be produced by !oreign !ir s under do estic producer na eplates. E8%#rts 1ince ost tractor anu!acturers are no' international in scope, !oreign trade plays a a@or role in the econo ic success o! the !ar achinery and e(uip ent industry. )or 3HFI to 3HG3, the value o! 51 !ar e(uip ent e=ports increased at an annual rate o! ICL. :o'ever, according to K ri Ra'lins in his boo% #ntroduction to Agribusiness *3HHH+ the e=port ar%et pea%ed in 3HG3 and has declined by about GL every year

since that ti e. 8ost o! the decrease 'as due to declining and sel!-propelled co bines.

ar%et o! high priced

achinery such as large tractors

I %#rts <ecause o! in!lationary pressures in the !ar achinery and e(uip ent industry during the 3HFBs, A erican !ar ers beca e increasingly interested in the tractors ade and i ported !ro other countries. # ported tractor tends to be 3B to IBL cheaper, depending on the si9e. 0he a@or !oreign tractors available to A erican !ar ers included the !or er Deut9-Allis *Ger any+, ,ong *Ro ania+, 1atra <elarus *Russia+, 1a e *#taly+, and nu erous s all to ediu tractors !ro Japan such as Nubota and 1atoh. 2hile e=ports have declined since 3HG3, i ports have continued to increase. 0he sharp increase in the de and o! s all tractors !or non-agricultural uses has increase in the ar%et !or s all tractor i ports. ,o'-po'er *under CB horsepo'er+ tractors account !or about ABL o! all !ar achinery i ports. 0he value o! all tractors and parts i ported a ount to over 3< dollars. 0he 51 i ports about DE, BBB tractors under CB horsepo'er, and about HBL o! these co e !ro Japan. 0he a@or areas purchasing !ar achinery !ro the 51 are 4anada, 2estern &urope, and 4entral A erica. 0he a@or areas selling !ar achinery to the 51 are 4anada, Japan, 5N, and 2est Ger any. Japan and Ger any account !or al ost GBL o! all !oreign tractors sold in the 51. Tren/s in the +ar (a!hiner& an/ E0ui% ent In/ustr& 0he !ar e(uip ent industry 'as the !irst resource group to e=perience the e!!ect o! the !ar !inancial crisis o! the 3HGBs. As inco es declined, !ar ers responded by repairing older !ar e(uip ent instead o! buying ne', thus reducing do estic de and. #n addition, the increasing value o! dollar relative to other currencies reduced !oreign de and. #ncreasing i ports reduced de and even ore !or !ar achinery ade in 51.