Make the most of the free market

Fresh produce growers often try to plan production to capitalise on high prices.

Because of high demand and low supply, farmers sometimes receive higher prices for hail-damaged produce than they do for good-quality produce when supplies are plentiful.
Photo: Pixabay

It’s easy to see why; fresh produce prices fluctuate dramatically, so it can make a huge difference to your income if you can be in production when prices peak.

An additional benefit is that when produce is scarce and prices rise, the market is less fussy about quality.

Farmers often reflect on the irony of getting high prices for hail-damaged produce whereas, under normal circumstance, they struggle to make a profit with top-quality produce.

Supply and demand
Apart from such severe climatic events, there are the normal price cycles determined by supply and demand. Demand is relatively static for a great many staples, but is influenced to some extent by high prices.

Gambling with volumes or production times is like gambling on the stock market; investors would be able to make a fortune
if they could look into the future.

But because they can’t, they hedge their bets after much research, and never put all their eggs in one basket. Farmers would do well to adopt similar caution.

It is tempting to assume that if the price of a commodity has stayed low, the price will be higher the following year, as the low prices are likely to have frightened many farmers off.

But if enough producers think this will happen and increase plantings, the price could even be worse the following year!

Calculated guessing
Beginners, in particular, like to get market reports in order to find when prices tend to be higher. The catch is that prices are not usually higher at a specific period without good reason.

An extreme case I encountered some years back was with a very large vegetable farmer, who would even bring his accountant to farmers’ days. He would take along a laptop with years of market prices downloaded on it.

He not only adjusted quantities of specific crops according to his calculations, but jumped in and out of certain crops.

He would drop onions for tomatoes, for example, based on the historical data of each crop’s price. This never worked out for him and he eventually sold his farm.

So, what is the solution? It is to determine what crops to grow based on your experience, preferences, climatic suitability, infrastructure required and labour.

As prices will fluctuate from season to season, you need to commit to production and base your anticipated income on at least five years of prices.

You could easily have three years of production with little or no profit and then give up, only to find that, in the fourth year, the prices skyrocket and you could easily have made up for the preceding poor years.

If you really wish to gamble, limit it to the following: increase your output by 10% after a period of bad prices and reduce it by 10% after a period of high prices.

This should help you increase your profit when the market is in your favour, but more importantly, reduce your losses if it is not.

Bill Kerr is a vegetable specialist and breeder.