Know-How Exchange : Customer Behavior

Simy,

Are you referring to marketing of crops or of businesses? You mentioned entrepreneurs not favoring agriculture and then you mention "how to move crops."

If you are trying to promote agriculture as a business to entrepreneurs, I'd say that the "bad press" agriculture has tends to sour entrepreneurs AND investors on the business. It's hard work, long hours, and the products are low in differentiation, and thus low in profit. There are 40 bazillion competitors. To be a "player," you have to have a production edge - meaning you would have to be the largest producer and have the cheapest production price. This is like attracting people to become jelly bean manufacturers. Given this impression, I think most entrepreneurs would seek other avenues, except a few who can form a vision of something special to a special niche.

As far as marketing crops - well, the story is much the same. Crops are commodities with little to no differentiation. To get excited about them, you must be low price or develop differentiators - a niche market strategy. What is it about your crops that make them better than any other crops? To whom? Why? What's the needs they fulfill? How do you plan to get the word out to the niche that you have the answer to their needs?

btw, the answer is the same for ANY product, not just agriculture.

I hope this helps.

Wayde

Several years ago I took on a consulting project in agricultural chemicals, and I spent the better part of 3 months meeting farmers in several Midwestern states and interviewing them about their business, how they make money, what kinds of things impact their purchase decisions, etc.

Many interesting learnings and insights from that experience, but not enough time/space to recount them all here. The short answer to your question (at least in the United States) is that small, family-owned farming is not attractive as a business in normal times. When the yield is good, prices drop; and when the yield is bad, volume is down and you can't make it all up in price. The result: Farming is a job ... without much leverage and no real safety net.

The really successful farmers often make more money by sharp trading in the commodity futures markets than by growing stuff. And you can trade commodity futures without having to borrow money from the local bank for seed/feed, getting up at the crack of dawn and working in the fields all day long, investing in expensive equipment and sweating all the small stuff that can impact your yield (e.g., which herbicide you use, etc.).

My suggestion if you are really interested in a career in agriculture: learn how to trade commodity futures.

Full disclosure: After the project ended, I became an active trader in commodity futures and ultimately co-authored a successful training course on the subject. (It's no longer in print, so this isn't a commercial.) I proved to myself, though, that it's possible to earn 20% per month over an extended period of time if you're a disciplined trader and have the stomach for the lifestyle.

Selling loans is very different from becoming an agriculture entrepreneur, though there is an obvious tie-in between the two. The big risk for the lender is that the crop yield (and the price) will not be adequate to cover the loan once the growing season is over and the loan principal is due. No lender wants to have to foreclose on the land and actually become a farmer.

Once again, commodity futures can help secure the loan ... a kind of insurance for the lender. Some smart lenders will offer a reduced interest rate to farmers who secure their loans with futures contracts, reflecting the reduced risk for the lenders.

In a good year, the crop yield and price at harvest will be more than enough to cover the cost of both the interest, principal and "insurance premium." In not so good years, at least the "insurance" will save the farm and the farmer from economic disaster. (Of course, options can serve the same purpose as futures contracts ... if you can handle the whole concept of dealing in second-level derivatives.)

Simy,

As my esteemed colleague, Dr. Goodman states, selling loans versus selling agriculture to entrepreneurs is a very different problem. However, I believe what you are desiring to do is to educate the customers receive the loans on how to make money in agriculture. And in doing so, the farmers are more successful and perhaps the loans are lower risk. Am I correct? I believe this would be in line with your client's desire to appear in the public and in the government's eyes prudent. In fact, more than prudent, they are doing a great pubic service.

Around here, we have a family-owned privately owned bank that has positioned themselves a family business friendly bank. They have a service called the Family Business Center that offers all kinds of services for family owned businesses. Their main website is: https://www.thebank.com and the website for the Family Business Center is: https://www.familybizcenter.com/.

The Family Business Center concept is they have a few experts in various areas that help business owners with problems. I believe the initial consultation is free, but for more extensive services, the business owners pay. I believe the bank and the providers have an agreement such that the follow-on services are affordable. This model could work for your loan-making client.

So the loan-making client could offer counseling and training to farmers in business techniques such as marketing, sales, managing a business, managing cash, etc.

Wayde