Big Business Farm- From Agriculture to Agrobusiness

This process of industrialization of the agricultural sector has reached developing counties. Large farms, in which capital, knowledge and modern technologies are invested, managed by large commercial companies, can be found side by side with traditional farms, which often operate at a subsistence level. Commercial farms can be found today in Chile, Brazil, Argentina, Thailand, India, Kenya, Zimbabwe, South Africa and other developing countries. In Israel, industrialization and rural tourism were introduced into the kibbutz (collective farming communities) some years ago, and today more than 60% of the kibbutz's income comes from a variety of industries. A similar process can be observed in the moshav (cooperative farming settlements). There we find specialization in specific and unique crops, either for the local or export markets, operated on a basis of agrobusiness.

The Annual Meeting of the Inter-American Development Bank (IDB) was held in Jerusalem at the beginning of April, 1995, attended by some 2,000 representatives, among them heads of state, ministers, bank governors and other high ranking personnel, all involved with the IDB's activities in Latin America. Within the framework of the annual IDB meeting in Jerusalem, a 5-day Workshop on Agrobusiness was organized following the joint initiative of the Bank of Israel, IDB and CINADCO. A total of 37 participants from 29 Latin America and the Caribbean attended. The main purpose of the workshop was to introduce advanced development in agriculture and to promote the idea of entrepreneurship and agrobusiness for single farmers or farmers'groups. Among the participants, 26 were representatives from the public sector: general managers of agricultural ministries, heads of divisions, agronomists, directors of research and training centres, regional managers; all of them high level decision makers. Representing the private sector were 11 participants: entrepreneurs, managers of export and import companies and industrial managers experienced in business projects in the agricultural sector.

What is an Agrobusiness?

The family farm, the basic unit in the agricultural production process, which at its highest stage of development produces quality products either for the local or export market, can take a further step and become an enterprise, managed in the same way an industry or any other type of business is managed. This means an industry for agricultural products, with high added value, that can effectively compete either on the local or export market, generating for the owner higher income than the average farm.

What Characterizes an Agrobusiness?

• Entrepreneurship expressed by way of an original idea and the willingness and talent to turn this idea into a reality.

• Financial resources for the investment needed to operate the production and marketing process at the highest level of technology.

• High level management - high level technological, economic and production management to overcome uncertainty and unexpected obstacles.

• Quality - the final product is a quality product, able to compete in the local and export markets.

• Product development - constant technological development of the product or even of additional products to avoid stagnation, and to be positioned up front in the market with new quality products.

• Skill - development of technologies and know-how or utilization of research results to improve the product, reduce production costs and gain advantage over potential competitors.

• Uniqueness - regarding quality and characteristics to prevail against producers competition.

• Direct contact with the market - via the media, to achieve daily contact with market and buyers, to monitor the product's behaviour in the market, buyers' complaints, price fluctuations, potential competitors, future development possibilities, etc.

Marketing plays a major role in a successful running of the agrobusiness. This includes:

• Information and direct contact with the market - achieved by modern tools such as computers, fax and electronic communication, to monitor the product's behaviour on the market, buyers' complaints and potential buyers, potential competitors, prices and price fluctuations, market developments, etc.

• Effective and efficient marketing by devising attractive packaging and exploiting marketing channels that will ensure that the product will arrive in good shape, retain its excellent quality, and reach the market and the end users at the highest possible speed.

• Advertising and promoting sales by using the media to reach additional markets and potential buyers.

• Market research to discover new segments, new markets and continuous development of the quality of existing products or introduction of new products, to ensure an up front position in the market.

Agrobusiness in Israel

A wide range of agricultural enterprises exist in Israel. It should be noted that no agricultural farm in Israel includes all the characteristics that define an agrobusiness, but quite a number include many of the characteristics. Following are a few examples:

• Specialized sheep farm - a moshav that specializes in producing lamb meat. They devised a feeding system that utilizes herbal residue, unique maintenance and veterinary care. The meat is marketed locally.

• Specialized flower farm - a high quality rose farm, growing flowers in greenhouses utilizing all the newest advanced technology. The farm produces directly for the Dutch Flower Exchange and is in direct contact with individual buyers, to whom it supplies goods upon demand. The farm receives updated information directly from the market and the buyers and makes immediate marketing decisions accordingly.

• Kibbutz farm developing a unique industrial enterprise - the industry manufactures irrigation equipment and specializes in drip irrigation, while continuing research and development in production, marketing and market development and offering professional services to buyers while encouraging direct sales abroad. It exists as a result of agricultural technology development.

• Plant nursery specializing in the production of unique and high quality propagation material - for example, banana suckers. The production is from germ-free tissue culture. Propagation is done on massive scale in a short period, in monitored greenhouses. Most of the production is to defined markets, mainly to Latin America.

• Moshav farm producing quality cheese from goat milk - goats are fed mostly by grazing. The farm specializes in breeding goat stocks suitable for grazing conditions, with high milk yield, the milking being done mechanically twice a day.

• Vegetables greenhouses - such as greenhouses for growing tomatoes that achieve high quality peak yields off season, or greenhouses with complete monitoring of all production elements - nutrients, soil, radiation, temperature, humidity, ventilation. The crops yield more than 300 tons per hectare, most of which is produced during the cold season.

• Moshav farms which specialize in quality production of fish, utilizing marginal resources such as geothermal or cold water sources. Farms that utilize geothermal water (around 500C) for fish breeding are able to shorten the time needed to achieve final growth. The farm also utilizes geothermal water to grow vegetables in greenhouses and feed for dairy cattle.

The Workshop: Symposiums and Study Tours

During the workshop, the participants heard lectures on various subjects: agricultural development policies in Israel, principles of regional research and development, insurance against natural disasters, private and public enterprises in the agricultural sector, development of agricultural products geared for export. Field trips included visits to agrobusiness enterprises based on management, production and export principles.

At the closing session, the participants discussed similarities and differences prevailing in their respective countries as compared to Israel, outlining what can be learned from the experience they gained in the workshop and their future requests from the IDB. In many Latin American countries, one can find both large farms specializing in produce with a high economic potential, and many small farmers barely surviving through subsistence farming. Lately, political changes have taken place on this continent, and most countries have shifted towards democratic regimes. The GATT Agreements recently signed and the reduced supplies from developed countries are creating important opportunities for production for the coming years. More than 400 million people inhabit the continent, which is showing progress in the field of agricultural production.

What the Participants Think

• Sustainability: The participants noted that the Israeli approach and systems are directed at utilizing production means in an ecologically conscious way, to ensure long-term utilization avoiding environmental damage.

• Long-term government policies: Economic and agricultural governmental policies in Israel are made for the long term, allowing planning, development and production without risking economic adversity.

• Expanded regional R&D, geared to finding solutions in Israel, allows the export of technologies and know-how that directly answer the production problems of the farmer in the region.

• Information existing in many fields, especially from the market to the producer, allows marketing manoeuvering and creates optimization in this area.

• Supporting systems: The regional and national systems that deal with inputs, research, training, delivery, supply of packaging materials, regional organization and export systems, are effective and support production.

• High level farmers: Farmers working in the above-mentioned projects are highly skilled from an educational and empirical point of view.

• Credit sources: Due to their economic success and accessibility to credit sources, the projects mentioned are effective and efficient.

• Marketing chain: regarding selection, packaging, delivery, produce shipment via air and sea, refrigeration, etc., already exist in Israel and are very accessible. The participants mentioned favourably the services provided by AGREXCO (Agricultural Export Company - a parastatal commercial company) and CAL (cargo airlines for the import/export of agricultural products) for these purposes.

• Regional and national organization: The agricultural producers' organization is strong and serves as supporting factor in their relation with government bodies.

The participants requested that the IDB assist the Latin American countries in the following areas:

• Providing loans for projects connected with restoration and preservation of agricultural ecology.

• Facilitating credit to "small" farmers, even when they cannot provide return guarantees.

• Assistance in establishing information exchange systems regarding agricultural marketing and production technologies.

• Assistance in market research and marketing systems.