Profitability in Agribusiness

Profitability in agribusiness depends on the best possible way in which the harvested produce can be monetized. Agribusiness is a term that signifies all about profit and loss in Agriculture. The prime objective of Agribusiness revolves around the profitability.

Agribusiness – A potential tool for doubling farmer’s income
Agribusiness – A potential tool for doubling farmer’s income

Doubling the farmers income (DFI)

Doubling the farmer’s income (DFI) is the main focus of Indian Prime minister Shri Narendra Modi. In this series, the 2018 Krishi unnati mela organized at IARI, Pusa with the main motto of doubling the farmer’s income (DFI) by 2022. No doubt the profitable Agribusiness is the potential weapon that can better   address the doubling the farmer’s income (DFI).

Supply chain management and market linkages

Supply chain management and market linkages are important in Agribusiness. While making a supply chain management and market linkages, in most of the case the farmers are willing to sale their produce to the buyer offering the higher price for achieving profitability in Agribusiness.

However, the agribusiness strategy should be planned in such a way that even if a buyer, because of some or other reasons steps out of existing supply chain, the farmer (seller) should have alternate options to sell the harvested produce with the same profit for achieving profitability in Agribusiness .

The alternate options should be an effective substitute for the existing buyer. This way the farmer can have available options for supply chain management and market linkages for the harvested produce.

Retailers an important link in Supply chain
Retailers an important link in Supply chain

Hence, it is advisable to make more number of market linkages than to be dependent on single buyer offering a higher price.

Sale price

Sale Price is an important factor for Profitability in Agribusiness. Higher the sale price more will be the profitability. However the sale price doesn’t give true picture of the profitability. In Agribusiness, it is important to consider the sustainability factor. Many a time agribusiness intervention shows better results in short run but as the agribusiness intervention moves further and enter in to long run the agribusiness fails to show the same convincing result.

Sale value

Sale Value is infact the significant factor for judging the Profitability. The profitability in Agribusiness can better be accessed by the sale value and not just with sale price. It is important to understand the difference between sale value and sale price. The sale value is the sale price multiplied by the quantum of produce sold.

Sale value =Sale price x Quantum of harvested produce

So, it is not that farmers can realize better sale value just through high sale price. Even if the sale price is less but if the quantity sold by the farmer to buyer is more than in such situation also farmers can have better producer price realization.

Market player in long run

To be a Market player in long run should be the objective of the farmer. Better understanding of agribusiness offers an opportunity to widen its approach to the market and sell the harvested produce to different types of buyer.

doubling farmers income
Doubling farmers’ incomes needs a strategy

Some of them willing to purchase the harvested produce in lower price but more in quantity and vice versa. This offers a substantial opportunity to the farmers for more number of market linkages with different types of buyers and help the farmer to be a successful market player in long run .This ensures sustainability in Agribusiness and widens the scope for doubling the income.   

Investment in Agriculture for entrepreneurship

Investment in Agriculture for entrepreneurship development is important. It helps in widening the scope of Agribusiness. The farmers should consider more of quantum of produce then just to focus on the market price.  Agribusiness is all about making a strong base /platform on which a building of profitability can be built .The most important requirement is investment in Agriculture. More the investment more will be the possibility of harvesting more quantum of produce. The profitability margin through any agribusiness intervention should be reinvested to expand the business. That’s how a farmer can be entrepreneur and develops entrepreneurship.