Farm Transactions AG BM 102

Coffee Market Article in NY Times Farm price – 24 cents per pound Retail price - $3.60 per pound Processors – Kraft, Sara Lee, Proctor & Gamble, Nestle – have half of market Annual exports have fallen $4 bil. since 1997, since end of coffee agreements

Coffee 660 mil. lbs of low quality beans in storage Estimated destroying these would increase farm revenues by $750 million Big firms not interested & don’t want International Coffee Organization (exporting group) to interfere

Farm Inputs

Introduction Modern agriculture involves lots of purchased inputs Machinery, equipment, fertilizer, chemicals, fuel, seed, semen, feed, credit The input industry is part of the system Often a very integrated part

Wenger Feeds Sells feed for broilers, eggs, and hogs Thousands of formulations Works with producer to solve problems – shell strength Big customer base – lots of deliveries – 24 hours per day Can’t let anyone run out of feed

Wenger Feeds Limited storage space – need to schedule corn and other raw material deliveries well – a couple days of corn Rail or truck? New sites

In General, Input supplier Works with farmer to help farmer succeed Provides advice Lots of service Not like supermarket – choose, buy, & leave Tries to have flow of business

Employs PSU Grads Fertilizer Pesticides Feed Pharmaceutical products Credit Lots more

Need College Grads Technical issues Integration of lots of factors Need to be able to understand company’s research Work within system

Integration Contracts tie inputs to outputs Chickens, hogs, vegetables Food safety requirements for drugs, sprays, etc.

Coops in Farm Supply Long history Spatial monopoly Some have done well Others struggled Agway, Farmland Very competitive – success requires good management & efficient operation Usually ease of entry

Other Comments About Input Markets Quality of output related to use of inputs Quality, timing, appropriateness Advice can be a big factor here Farm services – milk testing, feed testing No farmer stands alone! Also, without farmers no input industry – can’t pursue strategy of getting rich at farmer’s expense

Other Comments About Input Markets Small farmers at a disadvantage here However, most farmers small compared to seller Higher input costs make it harder to compete Doing a good job here can really help profitability

Farm Outputs

Introduction You have produced the product – now what? How much is it worth? How can you get the most for it? What are your choices? I hope you have thought about this before

How much is it worth? How do you get the price? Lancaster Farming Internet Calling known markets Talk to your neighbors Futures markets

Ayrshire Auction

What is your quality? All corn, milk, cattle, and apples are not alike Some get premiums, some get discounts How much are the premiums and discounts? How can you move up a step? What will it cost you? Is it worth it? Premium vs. costs

How can you get the most for it? Consider several alternatives Work out math – hauling fees, charges & commissions, time Is a bit more worth souring a relationship?

What are your choices? Locally In general area Neighboring states

Plan Ahead Should have a market in mind when decision to produce is made – and have talked to them Can change mind Is a contract possible? Worthwhile? Essential? Market identification essential for unusual things – Agriculture Alternatives

Marketing for small farms Market access a particular problem Also costs per unit are higher – less than truckload lots Often need to go through auctions – prices may be lower Pool with neighbors if others raise the same thing

Leola Produce Auction

Direct Marketing

Tuscarora Organic Growers Jim Crawford – southern Huntingdon County – Organic vegetables Sold at site in Baltimore – marketing was taking a lot of time – limit to what market could absorb Joined forces with other growers Formed cooperative

TOG Plan production – deliver to staging point Cooperative sells in Washington – develops market Members keep traditional clients & markets Cooperative broadens customer base

Market Access in Serbia

Farmer Transactions Often few choices Usually no market power Direct sales to consumer rarely feasible Information essential Planning ahead important Understand your alternatives