Respondents were asked about the strategies they utilized to manage the risk inherent in their farm business operation. As reported in Figure 3, membership in a cooperative was the most commonly reported activity, followed by using contracts and the futures and options markets to forward price their outputs and inputs. Crop producers were more likely to use forward pricing as compared with livestock producers.
What do the survey results mean for managing your business?
The results of the 2008 Large Commercial Producer survey from Purdue University’s Center for Food and Agricultural Business can provide important insights for you and your grain and feed business. While we all know everyone cares about price, the survey reveals price is not the only thing that matters. Performance and convenience are also important. If you are in a position such that you cannot compete on price, you may be able to highlight the convenience you provide for your customers when they purchase locally. Keep in mind that convenience means different things to different customers, including: providing the right information, providing the right services, and most likely providing the appropriate mix of products to enable your customers to practice sole sourcing. As you consider the mix of services you are offering, pay particular attention to your key target customers and ensure that you are not over or under delivering when it comes to services. Your product/service mix can also be thought of as your “branding” strategy, and needs to be communicated through the right channels (those channels that are viewed as most credible) to your target customers. In addition, are you thinking ahead? How satisfied are your younger target customers with your “brand”? Be sure and remember that over 60% of your producers reported they were willing to pay more to purchase locally — so examine your customer base and, when appropriate, highlight the local aspect of your business. Keep in mind that one-third or fewer producers felt branded products provide higher levels of performance so once again, attention to your target customers is vital. For those customers who prefer branded products, you want to promote the branded products you carry, while for the other customers, focus on the generic products you carry. Take out a pencil and piece of paper and jot down some answers to these questions as they relate to your business. Then write down the two or three aspects of your product/service mix that fit the needs of your target customers and that you can provide profitably. This is the foundation you can use as you continue the ongoing planning for your business.