It�s the market, stupid!

�Farmers are production animals � but while this is a vital factor for success, most businesses crash because of problems in the markets.�
Issue date: 14 March 2008

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‘Farmers are production animals … but while this is a vital factor for success, most businesses crash because of problems in the markets.’

I was recently privileged to share a weekend’s trout fishing with two farmers, let’s call them Roy and Andy, who between them have close to 100 years farming experience. The state of agriculture and the dispirited demeanour of many farmers were analysed in detail. It was pretty depressing stuff. At the end of it I asked, “Okay, we’ve been through the problems. They’re reality and part of the business environment – but what do you think I should be writing about?” After a few moments thought, we agreed that perhaps it’s time to get back to basics, a series of articles on the fundamental management requirements of running a good business. But a series needs a beginning, middle and end. Where to start?

Roy felt it should kick off with managing people. Andy thought it should be about conservation and building sustainable soil fertility. I thought it might be about the financial aspects of the business – but when I discussed it with my business-school-trained son, he quite rudely said, “It’s the market, stupid!” Of course, he’s absolutely right. We get so bogged down in labour, soil fertility and financial issues, that we forget that all business begins and ends in the market. Unless a product is sold for more than its production cost, all the management skills in the world won’t save the business. This lesson hit home during a recent visit I took to central Mozambique, where two outstanding entrepreneurs are establishing a beautiful macadamia nut plantation. It’s a remote location, with no other macadamias for thousands of kilometres, but it’s perfect macadamia country.

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I’m sure they’ll produce great macs, but when I asked about marketing, they were pretty clueless and suggested I talk to the processor who had promised to take their nuts. This is typical of farmers. We are production animals. judge ourselves by yields, total production, hectares planted and percentage of Grade 1 product, and while these are vital factors for success, the horrible truth is that most businesses crash because of problems in the markets. Stand around a braai with a couple of farmers and take note of the conversation. Land claims, security, Telkom, Eskom, minimum wages. Sit at a co-op meeting and see how much informed input you get when the manager asks for funding to develop an advertising or market-research campaign. But, raise the topic of replacement farming equipment, and everyone’s an expert. Look at the tertiary qualifications farmers hold. Agricultural diplomas and BSc Agrics by the score, but marketing qualifications – few and far between.

The control boards of the past compounded the problem by insulating farmers from marketing. With the demise of regulation, we have to make our own marketing decisions. Not that we have to be experts, but at the very least we need to understand the final market for our product, what competition it faces and how this may change over time. R emember, products are pulled through supply pipelines by the final buyer in the value chain, not pumped through by the seller. Your buyer is not the processor, as the Mozambican farmers had assumed. It’s not the transporter picking up product at the packhouse, or the market agent. customer is the person who buys, prepares and places it on the dinner table. This is the person who holds all the cards, and the one we need to understand above all others. A s farmers, our line of sight to these people is often blurred. The middlemen in the chain distance us from them and block our view. Shrink that distance by getting as close to your buyers as you can. If possible meet them, one by one, face to face. – Peter Hughes ([email protected] or call (013) 745 7303).