Mary Shelman coordinates Harvard Business School’s premier Agribusiness Seminar attended annually by more than 200 CEOs and top managers from global firms. Her experience bridges academia, as an author and teacher of dozens of case studies on strategic change and challenges in global agribusiness firms, with industry experience. She served as Chairman of the Board of RiceTec, Inc., owned by the Prince of Liechtenstein, and has served on boards of various international companies and industry associations including IAMA. She achieved an MBA with Distinction from the Harvard Business School and was awarded a Dean’s Doctoral Fellowship for research in economics and marketing. Ms. Shelman can be contacted at: mshelman@hbs.edu
Harvard has been involved in agribusiness for some time and you did start with this concept of supply chains. Tell us a little bit about that and how that relates to the total picture of agriculture.
A lot of people are surprised when they hear that Harvard Business School has an agribusiness program. Boston is not exactly a hot bed of agricultural activity. But the very term “agribusiness” was created by two HBS professors back in the 1950s: Ray Goldberg, who is known throughout the world for his tremendous contribution to the field, and John Davis, a former Assistant Secretary of Agriculture. They coined the term agribusiness to describe the flow of goods from the farm all the way to the consumer. In 1958, they published a book called A Concept of Agribusiness which became the seminal work in the field. Professor Goldberg went on to write hundreds of cases on agribusiness firms and to teach thousands of executives, and he is still writing and teaching. Ray was also one of the founders of IAMA.
Goldberg and Davis used a “commodity system approach” to look at the supply chain and that is something that we still use today. It is a very important way to think about where value is created within the chain, where value is captured across the chain and how the individual players in that chain react to each other. In today’s complicated environment, the framework takes into account government policies, resource constraints, consumer demand factors and a lot of different issues. It is still very powerful.
Let’s jump ahead to today and talk about what is happening related to that. One of the things is the increasing demand for food around the world which is in part responsible for the prices that we have today. On the other side is the productivity of agriculture. In the work that you have done, in the case studies you put together, how does that worked out?
It’s a very interesting time. My father was a farmer equipment dealer and also a farmer, so I have been involved in agriculture all my life. What we are seeing reminds me of the 1970s when there was a big run up in agricultural prices built on demand coming out of the Soviet Union. Producers, spurred on by aggressive lenders, bought more land and equipment—all high priced. Then the embargo was put in place and commodity prices collapsed. Many farmers went out of business and many rural communities were destroyed. So one of the questions that we ask today is whether the current run up in prices will mirror what happened in the 1970s. Is this a bubble that will come apart, or is there a fundamental change? Looking around the world, I see a number of factors that are driving up prices in the short term: biofuels, weather shocks, high oil prices, speculation. However, in the long term demand itself is permanently moving up, spurred by rising populations and incomes in the Asian countries, as well as in Brazil and other emerging
A lot of people are surprised when they hear that Harvard Business School has an agribusiness program. Boston is not exactly a hot bed of agricultural activity. But the very term “agribusiness” was created by two HBS professors back in the 1950s: Ray Goldberg, who is known throughout the world for his tremendous contribution to the field, and John Davis, a former Assistant Secretary of Agriculture. They coined the term agribusiness to describe the flow of goods from the farm all the way to the consumer. In 1958, they published a book called A Concept of Agribusiness which became the seminal work in the field. Professor Goldberg went on to write hundreds of cases on agribusiness firms and to teach thousands of executives, and he is still writing and teaching. Ray was also one of the founders of IAMA.
Goldberg and Davis used a “commodity system approach” to look at the supply chain and that is something that we still use today. It is a very important way to think about where value is created within the chain, where value is captured across the chain and how the individual players in that chain react to each other. In today’s complicated environment, the framework takes into account government policies, resource constraints, consumer demand factors and a lot of different issues. It is still very powerful.
Let’s jump ahead to today and talk about what is happening related to that. One of the things is the increasing demand for food around the world which is in part responsible for the prices that we have today. On the other side is the productivity of agriculture. In the work that you have done, in the case studies you put together, how does that worked out?
It’s a very interesting time. My father was a farmer equipment dealer and also a farmer, so I have been involved in agriculture all my life. What we are seeing reminds me of the 1970s when there was a big run up in agricultural prices built on demand coming out of the Soviet Union. Producers, spurred on by aggressive lenders, bought more land and equipment—all high priced. Then the embargo was put in place and commodity prices collapsed. Many farmers went out of business and many rural communities were destroyed. So one of the questions that we ask today is whether the current run up in prices will mirror what happened in the 1970s. Is this a bubble that will come apart, or is there a fundamental change? Looking around the world, I see a number of factors that are driving up prices in the short term: biofuels, weather shocks, high oil prices, speculation. However, in the long term demand itself is permanently moving up, spurred by rising populations and incomes in the Asian countries, as well as in Brazil and other emerging
More people will be eating protein-based diets that are less efficient in terms of the resources required to produce a calorie for human consumption. And if you look at the other side of that equation—supply—we are beginning to see a gap. Historically, the majority of investments in ag research were directed towards improvements in productivity. Today, there is a greater emphasis on “luxury” aspects: resource efficiency, environmental factors, efficient water use, functional foods and other value-added attributes. Increases in basic yields are not keeping up with increases in demand. In the long term, the way I see it, prices will never go back to the level of two-dollar [per bushel] corn.
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Source IFAMA
Argentina situation arises in an year when world stocks started at the lowest ratio in 30 years and export origin supplies are 43% below the last 10 year average. In addition and despite world financial crisis, demand is expected to increase another 8 to 10% this year to a record 122 M tons.
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