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Horizontal Integration

by Achim Dobermann

Horizontal integration in agriculture refers to the expansion of a farming or agricultural business by acquiring or merging with other similar operations. This type of integration allows farmers and agricultural companies to gain greater control over the production and distribution of their products, as well as to increase their economies of scale.

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Historically, horizontal integration in agriculture has been driven by a variety of factors, including the need to increase efficiency, to diversify crop and livestock production, and to gain greater control over the marketing and distribution of agricultural products. In the United States, for example, the growth of large-scale commercial farming in the late 19th and early 20th centuries was driven in part by the need to feed a rapidly growing population. In other countries, such as Japan, horizontal integration in agriculture was driven by government policies aimed at increasing self-sufficiency in food production.

Today, horizontal integration in agriculture is a global phenomenon, with large-scale farming operations found in countries around the world, including the United States, Canada, Australia, Brazil, and many countries in Europe. In many developed countries, a small number of large agricultural companies control a significant share of the market, and in developing countries, there is often a concentration of land ownership in the hands of a small number of large landowners.

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Despite the many benefits that horizontal integration can bring to the agricultural sector, there are also a number of concerns related to this trend. For example, some critics argue that large-scale farming operations can lead to a reduction in the number of small and medium-sized farms, which can have a negative impact on rural communities and economies. Additionally, large-scale agriculture can also have negative environmental impacts, such as increased use of pesticides and fertilizers, and increased soil and water degradation.

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Despite these concerns, many experts believe that horizontal integration in agriculture is likely to continue in the future. However, there are a number of steps that can be taken to mitigate the negative impacts of this trend, such as regulations to encourage sustainable farming practices and policies to support small and medium-sized farmers.

There are several types of horizontal integration in agriculture, one is Conglomeration integration where companies have many different farming operations and another is known as Market integration where companies have several similar operations but in different market. Some of the key factors to success in horizontally integrating in agriculture include having a clear strategic plan, access to capital, and the ability to manage and integrate the operations of the newly acquired or merged farms.

In terms of management of horizontal integration, effective communication, coordination, and cooperation between the different parts of the newly integrated operation are essential. Furthermore, it is important to have a dedicated management team in place to oversee the transition and integration process, as well as to provide ongoing support and direction to the newly acquired or merged farms.

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In conclusion, horizontal integration in agriculture can bring many benefits to farmers and agricultural companies, including increased efficiency and control over the production and distribution of agricultural products. However, it is important to be aware of the potential negative impacts of this trend, such as the reduction of small and medium-sized farms and negative environmental impacts. By taking steps to mitigate these impacts, such as through sustainable farming practices and policies to support small farmers, the agricultural sector can continue to grow and thrive.

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