PESTEL analysis of the agriculture industry
This is a detailed PESTEL analysis of the agriculture industry. It aims to explore several macro factors that influence this industry globally by drawing examples particularly from UK, USA, India, and China. Agriculture has been practiced for thousands of years and is still an important part of the world’s economy today. It involves cultivation of land, breeding and raising of livestock, and harvesting of crops.
Political factors affecting the agriculture industry
Government policies affect the acquisition, production, and pricing of agricultural products and raw materials. For example, the United States has passed laws that require the labeling of products that contain genetically modified organisms (GMOs).
Top agriculture producing countries in the world are China, USA, Brazil, India, Russia, France, Mexico, Japan, Germany, and Turkey. Surely, political philosophies adopted in these countries are different; however, one thing common about all of them is the internal political stability. However, it should be mentioned that the crisis in Ukraine has increased the costs of fertiliser, animal feed, and fuel resulting in increases in food prices (Johnson, 2022).
Agriculture affects the lives of a large portion of the human population in the world, and political decisions can greatly affect this. Governmental policies such as subsidies for farmers or tariffs on imports are often enacted to help increase domestic production levels. Buchholz (2021) reports that agricultural subsidies and support programs are very high in countries such as the Philippines, Indonesia, China, and India, however, very low in Argentina and Vietnam. It is worth noting that too much subsidy is not helpful for competition in the global market.
Economic factors affecting the agriculture industry
Analysis of the economic environment is an important part in this PESTEL analysis of the agriculture industry. Agriculture is one of the biggest industries in the world. Many developing economies heavily depend on their agriculture industry to meet the domestic demands. Likewise, they often need to import items as well as domestic supply does not meet the demands.
However, developed nations such as USA Germany, and some other EU nations also import agricultural products heavily. It is worth mentioning that China is the world’s largest agricultural importer.
Economic factors that affect the agriculture industry include consumer demand, world food production, and world export demand. These factors determine the price of agricultural products and are influenced by world prices, consumer demand, and government policies. Other factors that affect the industry include the availability of specific raw materials, such as water, fuel, fertilizers, and pesticides.
Social factors affecting the agriculture industry
It is estimated that over one billion people work in the global agriculture industry. Certainly, many social factors impact on this industry. For instance, rice is very popular in countries such as China, India, Indonesia, Vietnam, and Bangladesh for cultural reasons. In fact, people in China consume more rice than any other country in the world.
In many countries, people have unique historical and cultural legacies concerning their engagement with the agriculture industry. Farming has been passed on the current generation from many generations before them.
However, it should be mentioned that most millennials are not interested in agriculture as they are more interested in tech and service economy. This has contributed to a global stigma i.e. agricultural professions are for disadvantaged people only. Therefore, both public and private endeavors are required to change this damaging attitude to the agriculture industry.
Technological factors affecting the agriculture industry
Technological environment is the next component of this PESTEL analysis of agriculture industry. The technological factors that affect the industry include the state of technology which influence the breeding and selection of new varieties of seeds, the design of farming and agro-industrial equipment and structures, and the application of scientific knowledge to the management of soils and water resources. For example, the Green Revolution revolutionized agriculture by dramatically increasing the yields of key crops such as rice, corn, and wheat. Newer technologies such as biotechnologies are also giving rise to new and exciting farm innovations.
The use of chemical fertilizers, improved technologies for harvesting and storage, and other innovations have made possible the large-scale production of agricultural products that could not be produced before. These technological advances have also made it possible to expand production in other ways, such as through the use of improved tillage and harvesting techniques.
However, it is worth mentioning that many farmers in developing nations do not have access to basic technologies such as tractors let alone advanced ones such as artificial intelligence, and data analytics which are deemed to revolutionize the industry in the future by increasing the production rate and improving the process efficiency.
Environmental factors affecting the agriculture industry
Weather plays a big role in the agriculture industry. For instance, rice must be grown in a field flooded with several inches of water (Shahbandeh, 2022). For that to happen, enough rain is required as sourcing water via other means is costly.
Environmental challenges such as flood, and drought damage the agriculture industry in many countries. For instance, floods damage crops (that could yield thousands of tons of rice) in Bangladesh every year. Similarly, severe drought conditions have damaged the industry in some African countries.
Legal factors affecting the agriculture industry
The last component of this PESTEL analysis of the agriculture industry is the legal environment. The legal factors that affect the industry include domestic and international trade agreements, including those between countries and regions; government regulation; property rights, and product labeling.
It must be noted that all countries have their rules and regulations that govern the agriculture industry. However, the application varies from one country to another. Likewise, new rules may antagonize the farmers as seen in India and USA in recent years.
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Last update: 05 April 2022
Buchholz, K. (2021) Where agriculture is most subsidized, available at: https://www.statista.com/chart/24416/agricultural-subsidies/ (accessed 02 April 2022)
Johnson, B. (2022) Ukraine war: Increases in food prices ‘inevitable’ as conflict hits production costs, available at: https://news.sky.com/story/ukraine-war-increases-in-food-prices-inevitable-as-conflict-hits-production-costs-12569861 (accessed 03 April 2022)
Shahbandeh, M. (2022) Global rice consumption 2021/22 by country, available at: https://www.statista.com/statistics/255971/top-countries-based-on-rice-consumption-2012-2013/ (accessed 03 April 2022)
Author: M Rahman
M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.