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Farm Transactions

Farm Transactions. AG BM 102. Coffee Market. Article in NY Times Farm price – 24 cents per pound Retail price - $3.60 per pound Processors – Kraft, Sara Lee, Proctor & Gamble, Nestle – have half of market Annual exports have fallen $4 bil. since 1997, since end of coffee agreements. Coffee.

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Farm Transactions

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  1. Farm Transactions AG BM 102

  2. Coffee Market • Article in NY Times • Farm price – 24 cents per pound • Retail price - $3.60 per pound • Processors – Kraft, Sara Lee, Proctor & Gamble, Nestle – have half of market • Annual exports have fallen $4 bil. since 1997, since end of coffee agreements

  3. Coffee • 660 mil. lbs of low quality beans in storage • Estimated destroying these would increase farm revenues by $750 million • Big firms not interested & don’t want International Coffee Organization (exporting group) to interfere

  4. Farm Inputs

  5. Introduction • Modern agriculture involves lots of purchased inputs • Machinery, equipment, fertilizer, chemicals, fuel, seed, semen, feed, credit • The input industry is part of the system • Often a very integrated part

  6. Wenger Feeds • Sells feed for broilers, eggs, and hogs • Thousands of formulations • Works with producer to solve problems – shell strength • Big customer base – lots of deliveries – 24 hours per day • Can’t let anyone run out of feed

  7. Wenger Feeds • Limited storage space – need to schedule corn and other raw material deliveries well – a couple days of corn • Rail or truck? • New sites

  8. In General, Input supplier • Works with farmer to help farmer succeed • Provides advice • Lots of service • Not like supermarket – choose, buy, & leave • Tries to have flow of business

  9. Employs PSU Grads • Fertilizer • Pesticides • Feed • Pharmaceutical products • Credit • Lots more

  10. Need College Grads • Technical issues • Integration of lots of factors • Need to be able to understand company’s research • Work within system

  11. Integration • Contracts tie inputs to outputs • Chickens, hogs, vegetables • Food safety requirements for drugs, sprays, etc.

  12. Coops in Farm Supply • Long history • Spatial monopoly • Some have done well • Others struggled • Agway, Farmland • Very competitive – success requires good management & efficient operation • Usually ease of entry

  13. Other Comments About Input Markets • Quality of output related to use of inputs • Quality, timing, appropriateness • Advice can be a big factor here • Farm services – milk testing, feed testing • No farmer stands alone! • Also, without farmers no input industry – can’t pursue strategy of getting rich at farmer’s expense

  14. Other Comments About Input Markets • Small farmers at a disadvantage here • However, most farmers small compared to seller • Higher input costs make it harder to compete • Doing a good job here can really help profitability

  15. Farm Outputs

  16. Introduction • You have produced the product – now what? • How much is it worth? • How can you get the most for it? • What are your choices? • I hope you have thought about this before

  17. How much is it worth? • How do you get the price? • Lancaster Farming • Internet • Calling known markets • Talk to your neighbors • Futures markets

  18. Ayrshire Auction

  19. What is your quality? • All corn, milk, cattle, and apples are not alike • Some get premiums, some get discounts • How much are the premiums and discounts? • How can you move up a step? • What will it cost you? • Is it worth it? Premium vs. costs

  20. How can you get the most for it? • Consider several alternatives • Work out math – hauling fees, charges & commissions, time • Is a bit more worth souring a relationship?

  21. What are your choices? • Locally • In general area • Neighboring states

  22. Plan Ahead • Should have a market in mind when decision to produce is made – and have talked to them • Can change mind • Is a contract possible? Worthwhile? Essential? • Market identification essential for unusual things – Agriculture Alternatives

  23. Marketing for small farms • Market access a particular problem • Also costs per unit are higher – less than truckload lots • Often need to go through auctions – prices may be lower • Pool with neighbors if others raise the same thing

  24. Leola Produce Auction

  25. Direct Marketing

  26. Tuscarora Organic Growers • Jim Crawford – southern Huntingdon County – Organic vegetables • Sold at site in Baltimore – marketing was taking a lot of time – limit to what market could absorb • Joined forces with other growers • Formed cooperative

  27. TOG • Plan production – deliver to staging point • Cooperative sells in Washington – develops market • Members keep traditional clients & markets • Cooperative broadens customer base

  28. Market Access in Serbia

  29. Farmer Transactions • Often few choices • Usually no market power • Direct sales to consumer rarely feasible • Information essential • Planning ahead important • Understand your alternatives

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