The State of the Agribusiness Industry

Most people do not realize that the agribusiness is one of the largest and most diverse industries in the United States. Not only are farmers producing agricultural products, they are also transforming them into consumable goods. The industry ranges from grain wholesales to meat processors, agricultural machinery, and numerous types of farmers. Since the agribusiness is one of the largest in the US, it’s income tends to be dependent on the economy. During the most recent economic recession the agricultural business revenue declined because the prices of goods dropped as well as the demand. In the past 5 years, the industry’s revenue has increased as the economy recovered at an annual rate of .5% to $2.5 trillion. The IBISWorld estimates that despite the decrease by 1.0% in 2016, the revenue will continue to increase by 1.0% over the next 5 years.

Factors Influencing the Agribusiness Industry

The agribusiness’s performance is dependent on the economy along with other factors. The performance over the past 5 years has quickly increased due to a major growth in the number of free-trade agreements, the search for alternative energy sources through biofuels, along with the interest in genetically modified seeds. Weather also has an influence on performance; when there is a nationwide drought, the crop prices shoot up. On the other hand, when farmers have a surplus in crops the prices tend to drop and decrease revenue. It is predicted that the agricultural industry will benefit from more corporate involvement because they will provide more resources for the farmers and producers. As the worldwide economy recovers from the economic slump, it is anticipated that revenue from exports will reach high and stable levels. Other factors that increase performance include agricultural price index, natural disaster index, the trade-weighted index, the GDP, and the population.

How the Agribusiness Industry Can Take Advantage of Agricultural Lease Agreements

Another popular way farmers make money is by land leasing. Land leasing is a legal agreement between a tenant and the land owner that allows the tenant to build structures (like a billboard) on the land for an extended period of time. This is beneficial to the tenant because they do not have to pay property taxes on the land they are leasing, they only pay taxes on the structure they have built or any changes they have made themselves to the land. Land that is closer to a bigger highway has higher property taxes and that is usually where tenants want to put their structures. They get a tax deduction off their income taxes if they make any changes that are energy efficient or they have any expenses due to the business pursuit. This arrangement also benefits the landowner because when they sell land they have to report it as income and the land is not being sold so they do not have to report the revenue as capital gains, instead they report the rent as normal income which has a much lower tax rate. These taxes are deductible to both the landowner and the tenant.

Industry Revenue is Mostly Driven by Locations in the “Plains” Regions

Across North America different states produce a variety of agricultural products. The cropping areas of the “Plain” regions of the US are the focal point for most agribusiness, it makes up one-fourth to one-third of the industry’s revenue. Outside of that, other agribusiness occurs in the populated areas spread across the nation. The two major states for agribusiness are Texas as well as California and they are drastically different in terms of agribusiness strengths. Texas is large provider in cattle and meat processing. California is strong in their crop-based agribusiness, crop support services, and they are a “hot spot” for dairy farms providing fresh milk and other dairy products. The dairy business is set to expand because dairy is a higher value product and there has been a rising demand for it in emerging economies with disposable incomes. One of these economies being the emerging middle class in China, their diets continue to change as they consume more western-style food. Three other major states that have a greater impact on agribusiness are North Carolina, Illinois, and Florida. North Carolina’s agricultural business is in chicken farms and poultry processors, Illinois produces corn as well as soybeans, and Florida produces citrus fruit.

Agribusiness is constantly expanding and providing new business opportunities locally, nationally, and globally. The agricultural industry is a staple to all creature and humans.