Producing or Marketing: Why Not Both?
American farmers along with the companies that provide inputs, equipment and research on practices have been highly successful on the production side of their operations. Gains in quality, yield and efficiency have been remarkable over the past century and more. From 1948 to 2017 total US total “factor productivity growth” for agriculture has tripled while land in production dropped by 28% and labor dropped by 76%. Total inputs have remained flat. Farmers have excelled in production growth! The main driving factor has centered around economics. Farm profits will improve as we become more efficient. Key drivers have improved including seed varieties, genetic enhancements in livestock and advanced machinery utilizing technology. Public and private investments in research have been key factors in this progress.
While we have been busy increasing production, many farmers have left the marketing side to the markets. Some attention has been paid to improving our prices through forward contracting, delaying delivery with on farm grain storage and grouping livestock for full load or other preferred treatment. Until quite recently, very few producing farmers have sold directly to consumers. The middleman was taking a significant portion of the profits.
Let’s take a look at the value of corn and Kellog’s Corn Flakes to see if it makes sense to put some effort towards marketing. Historical corn prices range from about $1 / bushel in 1960 to $4 in 2014.
Corn flakes were $0.27 for 18 oz in 1960 and $4.19 for 18 oz in 2014. This reflects 400% gain in farm delivered corn and 1552% gain in corn flakes.
1552% gain from 1960 to 2014. Prices are based on a 12oz box.
I noticed that the corn flakes box size changed numerous times over that period, making it harder to price shop and compare by the consumer.
Yes, they have some expenses with processing and packaging, but they had those all along. With a 400% increase in corn over 54 years versus 1552% tells me we should see how to keep some of the increase. That’s 388% higher increase! I’m pretty sure I could operate and grow my farm on something less.
There are many ways to market your products including going direct to the consumer. They all have associated costs and take management effort. My main point here is that if farmers spent a portion of their time focusing on marketing it would likely help margins. Can you differentiate the products you sell from others that would create some value? Perceived or real depends on the buyers. Build yourself a brand. Is my brand better or different because _X_? Large corporations spend billions of dollars building their brands.
Top 10 Companies for Advertising budgets, with rank of brand value in ( ).
Pampers - $8.3bn (Ranked 50th most valuable brand)
Gillette - $8.3bn (28th)
L’Oreal - $8.2bn (34th)
Chevrolet - $5.1bn (59th)
Louis Vuitton - $4.4bn (19th)
Ford - $4.3bn (35th)
Coca-Cola - $4bn (4th)
Amazon - $3.8bn (12th)
Sony - $3.7bn (76th)
AT&T - $3.6bn (13th)
Whole Foods charges about 15% more than typical grocery store chains. Do they have better products, or is it an image or perception they are trying to portray? When I googled the most expensive brands, the majority were geared toward female buyers. Could that be a factor in your plan? It might just be packaged differently or a unique size. Many retailers continue to change container size or grouping. Less ice cream same price. Do we really need a 15 pack of beer? Slimmer cans for female hands, really? I’ve sold beef quarters and halves for years. With smaller families, now I sell 50- and 25-pound bundles. Yes, I charge more per pound for the extra time it takes to sort and box them. Part of your plan could be finding a different use or application for what you are selling. I have a friend selling sweet corn in Rhode Island. Most years he made more money selling the stalks for fall decorations than he did selling the sweet corn to eat. Pick the brains of your management team and employees. Spend some time marketing your products. Remember to take off your farmer hat! Consumers do not often think logically in my book. I hope you are pleasantly surprised at what develops!
ABOUT THE AUTHOR
Pete is the marketing manager for Michigan Valley Irrigation, having joined the company in 2016. He was raised on a dairy farm in western New York and graduated from Cornell University with a B.S. in agricultural economics. His entire working career of over 37 years has been involved in agriculture. A farmer helping farmers. When away from Michigan Valley he operates, Joyful Noise Farm, a small livestock and produce farm and spends time with his family.
