Challenges Facing the Entrepreneurs in the Agriculture Market

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By Ron Benjamin

Here are a few factoids to ponder.

  1. Before World War I, nearly 50% of the American work force was engaged in agricultural work.
  2. Today, that number is fewer than 5%.
  3. By the year 2050, the global food production system will need to feed an additional 2 billion people.
  4. The average size of commodity-producing farms is getting larger.
  5. Large-scale farming is extremely capital-intensive.
  6. Today there are many thousands of students studying agriculture in America’s universities.
  7. In developed countries there is growing interest in the provenance and quality of the food consumed.

What conclusions can be drawn from this list of observations? Clearly, the global food production industry will need to grow in the next few decades just to meet current levels of human nutrition. However, due to increases in the scale of commodity-producing farms and ever-improving automation, there may be little job growth in the commodity food-production system. Given that most of the food consumed now and in the future will likely come from such commodity-producing farms and plantations, it is not likely that the increased tonnage of commodity food will result in a proportionate increase in the farm-labor market.

If that is the case, then what is to become of those students currently in the educational pipeline heading toward a career in agriculture? Some of them may find work in the growing agriculture technology and biotechnology fields that will need to expand in order to continue increasing productivity and reducing waste in food production. Some of them will go on to manage family farms, but as farms consolidate and grow in size there will be fewer and fewer such opportunities. Certainly, managers and middle managers will be needed for some of the large corporate farms that are increasing their market share. However, the competitive advantage of these mega-farms is based on economies of scale and increased productivity achieved through technology, which will severely limit the number of such positons becoming available. Due to the very high capital requirements for starting a commodity farm, there will be few opportunities for start-up farmers to enter that phase of the business.

However, in developed countries, a growing percentage of the populations are demanding to know what is in their food and where it comes from. These people are becoming increasingly dissatisfied with the products of commodity agriculture and are often willing to forgo some convenience and pay a higher price to obtain the food items they want. Realizing this, the USDA is supporting local and regional food systems with educational and marketing programs. In the United States alone there are over 160,000 farmers and ranchers tapping into this growing demand for locally grown, organic or “natural” food.

This growing sub-section of the agricultural market is often situated on smaller farms or acreages and workers devote their efforts to filling specialized niches in the food production system. These operations are significantly less capital-intensive than the large commodity farms, which had been dominating the industry and still provide the bulk of the commodities that go into processed foods or into the export market.

The growing trend toward locally-grown, non-commoditized food items offers attractive start-up opportunities for persons interested in making their living through agriculture, even though they may not have the capital necessary to break into the commoditized portion of the industry. Even though land prices can be daunting, the reduced need for high technology equipment in operations of this type often makes it feasible for properly prepared and experienced individuals to break into this business, running their own operations and developing their own marketing schemes.

In order to be successful in this portion of the agriculture industry, the individuals involved have to exhibit a number of traits. They have to exhibit passion for the industry and be willing to endure all of the uncertainties of weather, markets and crop and animal diseases. They must be aware of the fact that their hours will be long and irregular, and that working conditions can often be extremely trying. None of this should be a surprise to anyone. However, some enthusiastic and idealistic individuals feel they can succeed in this type of enterprise because of their enthusiasm for growing plants and/or animals and their commitment to making premium, healthy and high quality food available to a population increasingly demanding it. But there are other requirements that are often overlooked by persons starting in this field and by those that are asked to provide them with the needed financial support. People in this kind of enterprise are true entrepreneurs. They must start, develop and run their own operations. They must operate in the world of the self-employed. They will have to live with, learn from and survive their mistakes. They cannot expect a regular paycheck and a full benefits package.

Those contemplating starting their own specialized agricultural enterprise would be well-advised to study the literature, talk with potential customers and explore land prices and the support infrastructure before committing to this kind of investment. But perhaps of greatest importance they must confront the question of whether or not they truly possess the entrepreneurial mind set, and be willing to confront the demands that face those starting out in any industry, be it technology, retail marketing or non-commodity agriculture.

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