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Farm Transactions

Farm Transactions. AG BM 102. Farm Inputs. 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. Wenger Feeds.

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Farm Transactions

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  1. Farm Transactions AG BM 102

  2. Farm Inputs

  3. 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

  4. 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

  5. Wenger Feeds • Limited storage space – need to schedule corn and other raw material deliveries well – five days of corn at Rheems mill • Rail or truck? – railroad hard to work with • New mill locations – minimize distance to customer

  6. 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

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

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

  9. Integration • Contracts tie inputs to outputs • Chickens, hogs, vegetables • Food safety requirements for drugs, sprays, etc. • Very specific rules about practices

  10. 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

  11. 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

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

  13. Farm Outputs

  14. 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

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

  16. Ayrshire Auction

  17. 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

  18. 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?

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

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

  21. 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

  22. 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

  23. TOG • Plan production – deliver to staging point • Cooperative sells in Washington and Baltimore– develops market • Members keep traditional clients & markets • Cooperative broadens customer base and lowers marketing costs

  24. Market Access in Serbia

  25. Milk Collection in rural Ukraine

  26. 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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