1. Your Output Market AG BM 460

2. Chuck Mothersbaugh Small vegetable grower Sells at two farmer’s markets Started in Oriental Vegetables Then more conventional vegetables Now more flowers How do you decide what to grow? –How much? –What weeks?

3. Introduction This is what you sell If you do a bad job here, you are finished Lots of factors – not all equally important Need to figure out the big ones and concentrate on them

4. Meyer’s Dairy Your cows produce X cwt. of milk today. What do you produce? Whole, skim, 2%, chocolate You have ice cream mix – what flavors do you make

5. Initial Questions How much can you sell? Can you produce that much? Is your production more than you can sell? What will the price be? How does this compare with your costs? Who is your customer? How will you access the customer?

6. Demand Your firm faces a demand curve – what does it look like? Farm? Restaurant? Feed mill? Meat packer? Bakery?

8. Determinants of Demand Price Income Other prices Tastes and preferences

9. Demand Quantity per unit time Subject to outside factors Elasticity – what does it mean? Industry demand vs. firm’s demand

10. Your Competitive Environment Who is your competition? Do you have any market power? Do the buyers have market power? How competitive are you on costs? How about on quality? Is your product a commodity product? Is it branded?

11. Other factors What are your costs of production? Are you growing? Can you grow? Can you afford not to grow? How much can you produce? How much should you produce? How much control do you have over price?

12. Growing Usually must grow to keep the same profit Can you grow in present market? Do you need a new market? New place? New product? New customers? New country?

13. Entering a New Market What are the barriers to entry? Do you have the knowledge required? Who is the competition? Do you have the money? Can you be big enough to compete?

14. Concluding Comments Lots of questions Number 1 issue – “Say’s Law” isn’t true – Supply does not create its own demand! You need to understand your output market – your competition will Once you understand it, you need to try to manage accordingly. Produce for the customer – not just to be producing

15. Harner Farms Local apple grower Started in 1946, grandfather Now son and grandson running business Stand on West College State College Farmer’s Market Used to sell to Weis Markets – price wasn’t good enough Would prefer to sell everything through two major outlets

16. Harner farms (continued) Stand starts year with plants Ice cream parlor Variety of produce – mostly theirs, but not all – sweet corn Corn maze

17. Harner farms Who shops at a Farmer’s Market? Why? What can you charge? How much can you sell? What surprises can occur?