agribusiness: doing agriculture as a business

www.iita.org A member of CGIAR consortium

Agribusiness- Doing agriculture as a Business.

Debo Akande

On behalf of AgResults Aflasafe Team

Ibadan May 2015


Outline

Introduction

Background to Agribusiness

Components of Agribusiness

Conclusion


Introduction

Agriculture is the most important sector in the Nigerian economy.

It employs 60% of Nigerians, including many rural women, and contributes up to 35% of the country’s GDP.

As in many other African countries, agriculture in Nigeria is largely focused on food crops for the domestic market, given the Nigerian population estimated at 150 million people.

39.6 m hectares of arable land in Nigeria, of which 60% is under cultivation.

In spite of this reality, Nigeria remains a net importer of food with an annual import bill of USD 3b. (FAO MAFAP Country profile 2012)


Intro About 5% of Nigerian smallholders use improved seeds because there are significant problems with seed availability, quality and pricing.

The fertilizer application rate is approximately 7 kg per hectare of arable land in Nigeria, a small fraction of the global average of 100 kg/ha.

Only 18% of farmers receive extension services.

Traditional thinking and Subsistence Farming .

Maize & Poultry Growth

• Nigerian maize production has grown from 4 million metric tons in 2000 to a 7.3 million metric tons in 2010

• Nigerian poultry production has grown from 113 Million birds in 2000 to 192 million birds in 2010

• Each sector has grown on average 5% per year.

• Poultry feed is approximately 60% maize.

• Annual demand for maize: 1 million tons

Nigerian Govt Bans Poultry Imports

Index of growth in production for maize and poultry relative to Nigeria’s production in 1961* Measure: Relative growth in production

Poultry Industry… Key Driver of Domestic Maize Production


What is Agribusiness

“The chain of services, value adding and transformation of commodities that stretches from the production of raw food and fibre, through to the delivery of food, fibre and associated products to consumers’” The Australian Agribusiness Association (AAA).

Agribusiness : Interdependency of agriculture process from planting to market.


Components of Agribusiness

Planning

Production

Processing

Marketing


Planning

Non- Financial

Legal and Ownership (Sole ownership, Partnerships; Cooperative; Limited Liability Company)

Organisation Management: Who will manage the organization? Who is who? (Organogram) What will the structure look like?

Organisation Capacity : Resources needed (human etc)

Organisation Culture: Same mind/ Same ethics

Succession plan


Planning

Financial Plan Financial goal: What is your goal for the finance?

Start-up capital: What is the start- up capital vrs business goal?

Source of fund: Where is it coming from? Bank, Other lenders, Family source etc

Planning Horizon: What timeframe is the finance for?

Forecasts and Projections :What are the net income projections ? How does this projection change when certain prices change? What is the break-even point for farmers producing the crop? What is the cost of the added value vrs profit at short and long term.

Bookkeeping: Record of financial transactions as part of the accounting system.

Revaluation and revise of the financial plan:


Component of Business plan

Business Description: Mission statements, business overview and product service.

Market Analysis: Market characterizes, Customer targets

Competitors Assessments: Who are or will you be competing with ? market share, relationship with customer, price, distribution, financial strength etc

Marketing Plan: Promotional and Advertisement plan.

Operation Plan : Human resources need.

Financial Plan: Expenditure Vrs profit projection, break even.


Production

Product : Quantity that is going to be produced? What standard of quality? What market are we targeting? Buyers knowledge of the value addition?

Technically efficient ( maximum output/units of output

Economically efficient (maximum profit)

Operation: the production of the crop, the processing facility (including labour requirements), storage and transport resources required. What are the risks, plans to mitigate the risk.

Profitability: How will this lead to profit.


Processing

Value Addition Branding/Labeling- Nutritional contents.

Grading/categorization.

Cleaning/separation.

Bagging.

Certification where and when required.

Standards from buyers. (Local and International Market specific) Shoprite etc.

Processing to secondary products. Maize flour Tuwo,Kenke etc.


Marketing

The management process through which goods and services move from concept to the customer. It includes the coordination of four elements called the 4 P’s of marketing:

(1) identification, selection and development of a product,

(2) determination of its price,

(3) selection of a distribution channel to reach the customer’s place and

(4) development and implementation of a promotional strategy


Market strategies Which way to go?

Direct Sales? Open market.

Contract Farming? what would a contract conceivably look like - quantity, quality, duration?

Agro Processing? Cooperation among smallholder farmers to turn primary agricultural products into other commodities for market .


Summary

Opportunities for Agribusiness

Business plan before business start up

Financial and non-financial planning.

Quantity and Quality production vrs profit .

Value addition in processing.

Marketing strategies.

Return on investment.


Conclusion

Where is my business plan?

agribusiness: doing agriculture as a business

Science

nigerian poultry production

nigerias production

production of raw food

poultry relative

poultry feed

nigerian smallholders

nigerian population

nigerian economy