This is a far cry from the days when a farmer’s only decision was which market to supply. Today, these eight options compete with one other for the farmer’s business. They are: farm-gate sales, local area sales, factory contracts, fresh produce markets, direct sales (supermarkets), farm-gate exchange, value-adding and exports. Many farmers use a combination of these, spreading their marketing risk while enhancing their returns.
Reward vs risk
The choice of marketing option requires careful consideration, because at the heart of it lies the crucial balance of risk and reward. Using a ‘cheap’ option, such as farm-gate sales, might not always pay off, because if the risks are low, the returns are invariably low too. On the other hand, those unfamiliar with export requirements could lose badly. Returns can be high – although not always – but so are the risks.
Many new farmers are confident that they can easily land and service a lucrative supply contract from a supermarket. What they frequently fail to realise is that this will come with tough requirements. Supermarkets have their standards, and suppliers have to conform, which requires a well-run farming operation.
The other popular option is supplying a market agent on a fresh produce market. Again, this is a great option, but beware of the pitfalls. You’re entering the big league of tough competition and top quality. This is where the ‘market’ – the buyers – either rewards a farmer with good prices or punishes him with low prices. All this can be a steep learning curve for a farmer, but when he gets it right, it becomes a very attractive option.
Benefits and pitfalls
All eight marketing options offer benefits, as well as costs and risks. The key for a farmer is to weigh up the different options in relation to his circumstances. He needs to choose one or more options that will eventually give him a good return on investment – in other words, value for his money.
