The Role of Agribusiness in Developing Agriculture
1. Background. Agribusiness is a system that discusses agricultural business both narrowly and broadly, both directly or indirectly related to agriculture. Agribusiness is essentially part of the economic system. This is based on all activities that involve the creation and distribution of farming facilities; production activities in farming units; storage, processing and distribution of farming commodities and various products made from the production process.
Broadly speaking, all farming activities in agribusiness are based on economics. It follows the nature of agribusiness as part of the economic system. However, agribusiness is not entirely discussed about economics. According information from Egypt Journals, Agribusiness is very much needed in the development of agriculture in Egypt, because the condition of agricultural land in Egypt is very potential, but in reality agriculture in Egypt is still lagging behind other countries’ agriculture whose potential for agricultural land is far below the quality of Egypt. It is therefore necessary to discuss how important agribusiness is in developing agriculture in general agribusiness as an economic system that can boost the progress of Egypt agriculture.
1. Definition of Agribusiness. Agribusiness is narrowly defined as a business in agriculture, but agribusiness is broadly defined as the overall production and distribution activities of agricultural production facilities, farming business activities, as well as storage, processing, distribution of agricultural business commodities, and other activities that make up these products. Agribusiness system is a system that consists of sub-systems that are interrelated with one another. In general, agribusiness can be viewed from two aspects, namely agribusiness as a system and agribusiness as a field of business or agricultural company (Firdaus, 2008).
2. Agribusiness As A System. Basically the system can be defined as a set of elements (subsystems) that are interconnected through various forms of interaction and work together to achieve a certain goal. According to (Sukirno, 1985) Characteristics or characteristics of a system are as follows: Consists of the elements / components / subsystems that form a single unit (totality) system. There is a purpose and interdependence between one subsystem with subsystems that are the other. Interaction between subsystems. It contains mechanisms, sometimes also referred to as transformations (in production systems for example converting inputs into outputs). There is an environment that results in system dynamics (weather, economic environment, socio-cultural, legal and political, technological development, competition, other external forces).
Input forces subsystems for cultivation at the level of soybean farming, for example producers or suppliers of goods in the form of fertilizers, pesticides, soybean seeds, agricultural equipment and machinery, producers or service providers such as trade, credit, labor (HR) and so on. b. Biological cultivation or production subsystem at the farm level as the main subsystem, where all inputs (land, capital and labor) are mixed in a production process to produce soybean seeds as the main product and its associated products such as leaves, roots and stems which, if dried, can be used for fuel or fresh can be used as fodder. c. Post-harvest, agro-processing or agro-industry subsystems, where:
3. Agribusiness as a Business Sector
Furthermore, agribusiness can also be seen as a business field (company). Agribusiness company is an institution or business organization that works in one of the subsystems, several subsystems or totally integrated in the agribusiness system that is managed with good managerial skills for profit, material and moral. (Soekartawi, 1999).
1) Free Market System. The free market system is often called the perfect competition market. In this system the community is given full opportunity and freedom to determine the economic activities they want to do and the government does not interfere at all and does not try to influence the economic activities carried out by the community.
According to (Sastraatmadja, 1984) the characteristics of a free market system (perfect competition market): a. The number of companies is large so that each company has a relatively small role and cannot determine prices. Each company follows the market price (Price Teker), and the profit gained is accounting profit (normal profit). b. The product is homogeneous (homogenous product) and has relatively no specific differences. So each relative seller has no market power to influence the buyer. c. Free to enter or exit the market (Free Entry and Free Exit). This characteristic relates to the normal profits that each seller has in the perfectly competitive market. If within a period of time there is a lot of demand (Boom) there will be economic benefits, and this will stimulate new companies to enter the market. d. Consumers and producers have perfect information about the price of goods and the cost of production factors.
2) Economic Planning System. The economic planning system (socialism) was practiced in Communist countries, such as the Soviet Union (now Russia) and Eastern Europe. This system requires the government to fully determine the pattern of economic activities to be carried out. This system originated from the belief that economic activities regulated by market mechanisms will lead to unemployment and injustice. This system believes that the government will be able to carry out its functions more efficiently than a system that can be run in a free market system. To ensure the smooth running of the business and achieve the targets set in the planning made, capital tools are controlled and owned by the government (Sastraatmadja, 1984).
3) Mixed Economic System. A mixed economic system is an economic system that is controlled and overseen by the government, but the community still has considerable freedom to determine the economic activities they wish to carry out. Market mechanism still plays an important role in determining the pattern of economic activities carried out by the community (Sastraatmadja, 1984).
The main purpose of government intervention is to avoid the unfavorable consequences of a free market economic system. For example, in a free market system, the weak economic group is increasingly oppressed and the stronger economic group will be stronger. Government intervention allows efforts to avoid this.
The Role of Agribusiness in Developing Agriculture