Any farming business should aim to maximise income from its marketing efforts. Fresh produce farmers have at least seven different marketing options at their disposal, and it depends on each individual whether to pursue one or more of them, writes Mike Cordes.
The marketing option you choose for your fresh produce can influence your profitability. Your degree of success depends on how decent a marketing job you do, plus the quality of your produce and having sufficient volumes.
The marketing options available are:
farm gate sales,
supplying local shops and traders,
contracting a processing factory,
supplying fresh produce markets,
supplying supermarket chains and other bulk buyers such as wholesalers,
adding value to the product on the farm by processing,
exporting.
A small farmer would probably opt for one of the first two because he needs to keep both marketing risks and costs as low as possible. A large, well-established operation might support all seven channels. Such a farmer will be maximising income according to quality, volume, season, risk and marketing costs. It doesn’t help for a small farmer to rush off to a large supermarket chain full of hope and promises when he can’t sustain either the required production or the quality standard. In the end, he’ll probably lose more than he makes.
If he lowers his sights (and costs) and starts by marketing off the farm, he’ll minimise those risks and optimise income. He can go a step further and supply businesses in his local town. This keeps packaging and transport costs down while still providing a steady cash flow.
A large farmer could go the factory route, which is not a bad option. It means tying into a supply contract with a factory that pays a fixed price. Production costs are generally lower and the factory usually takes everything, so marketing costs are non-existent. Overall income might be lower, but so are the risks and the costs.
Playing in the big league
When a farmer starts supplying a fresh produce market, he should understand this is a different league. Serious marketing is required and a lack of understanding of how markets function is probably one of the main reasons some farmers become disillusioned. A fresh produce market is a highly competitive place with producers from all over the country sending in their produce. Supply and demand fluctuate according to many factors, while quality reigns supreme. A farmer supplying markets is in for the long haul and if he doesn’t understand this, he’s doomed.
The producer who really makes money understands that on markets the average price is what counts, and that consistent good quality will get you just that.
Adding value to your farm produce can take many forms, but it’s dependent on quality (in most cases) and sufficient volume. Adding value can be as simple as packing top class fruit into a 1kg Netlon bag with an attractive label and you’ve already increased the value per kilogram.
Exporting: only for the brave
The last option of exporting is the most challenging. Sometimes it’s the riskiest and certainly the most costly, but it also holds out the possibility of top prices and good income. But exporting requires high-quality standards, not only for the product, but throughout the production and marketing chain. Exporting is also about the long haul. Competition is fierce on the world fresh produce stage, and only the very best survive.
A balancing act
Successful fresh produce farmers grasp the essentials of both production and marketing. They’ve either found a balance between the seven options or use those that give the best returns. You can’t fight the “big four” of supply, demand, quality and continuity. Understand and apply these four requirements and fresh produce will give you an excellent return on your effort. |fw
