When those in the agriculture industry speak of “marketing”, they aren’t referring to computer-generated geckos hawking insurance or bikini-clad models posing with a low-calorie beer.
They mean using information, technology and infrastructure to ultimately make their operation as profitable as possible.
Dr. Lanny Ashlock of the Arkansas Soybean Promotion Board noted that in the past true marketing efforts were virtually non-existent.
“You took your crop to the elevator, and you took what you could get,” he said. “Now, they can hold it and actually carry out a marketing plan. … I still think that many farmers are more comfortable growing crops than marketing them, but they are getting more savvy.”
Commodity marketing might be something as seemingly simple as grain bin storage that lets a row-crop farmer hold onto his corn crop through the winter months until spring when the market price is higher. Or, it might be as complex as farmers pooling their resources to form a consortium of sorts that lifts all fiscal boats.
Whatever the form, the ability to market commodities as efficiently as possible has become as important as the equipment that plants and harvests the crop.
Take on-farm crop storage, for example.
“Growth in that area has allowed farmers to be a little more sophisticated in how they market their grains,” said Andrew Grobmyer, executive vice president of the Agricultural Council of Arkansas.
Capital investments must make fiscal sense, though.
“There are incentives out there for farmers to make those investments, not just for marketing, but there are real financing incentives to build that infrastructure,” Grobmyer said. “It is a risk-mitigation tool that allows them to market throughout the year. Hopefully those incentives will continue to stay in place. With prices going down, it makes it more difficult to make those investments, but there are some low interest rate options out there.”
To that end, a group of the state’s producers have formed Southern Growers Marketing Inc., allowing them to pool their crops and, thereby, get a better price for them.
“Southern Growers Marketing, Inc. was the result of the efforts of a group of corn producers who came together in 2013 to seek a means for more efficient marketing of their crop by doing so collectively,” said member Jeff Rutledge of Newport. “The cooperative structure was quickly chosen and we enlisted the help of Matt Willard of the Funding Farm for direction and Cal McCastlain for legal advice. We currently have a 10-member board of directors out of the roughly 22 original participants, with more members currently in the process of signing up.”
Rutledge said the group has expanded its efforts to include pooling soybeans. The group has also brought on some high-powered help.
“We have entered a unique merchandising agreement with FCStone, which is a Fortune 100 grain marketing and financial firm. This unique agreement allows us, as a cooperative, to share in the marketing gains realized on our crops,” he said.
The difference between Southern Growers and other cooperatives, such as Riceland Foods, is that the group doesn’t have a central holding location. Instead, the members use their own individual storage until time to move the crop for sale.
“The cooperative will use storage its members have already invested in on their own farms, eliminating capital expenses. With no infrastructure to build and maintain and very little overhead, returns to the membership in patronage can be maximized,” Rutledge said. “While prices have been good in recent years, the period of ever-decreasing returns with the drop in commodity prices make a venture such as this even more important. Producers have always been innovators, especially during hard times. ”
Another marketing concept recently announced is Grainster.
An online platform that directly matches buyers and sellers, Grainster aims to serve large and small sellers and large and small buyers. For example, a small pork producer who needs a few dozen tons of corn per year might not be able to get the attention of too many large cooperatives, but that pork producer could link up with a corn grower in Grainster and work out a mutually beneficial deal. There is a $500 membership fee to join the platform.
The website, Grainster.com, spells out options for those looking to buy or sell grain: “When posting a new listing, you determine price, payment terms, transport, delivery period, grade, storage and even required moisture. You can also search listings by grain type, date and location.”
Such micro-cooperatives can serve untapped seller-buyer opportunities, Ashlock said. He pointed to a Batesville poultry company, Ozark Mountain Poultry, that is working toward reaching a “high-value niche” market with poultry raised on non-genetically modified grain. Large cooperatives usually do not segregate grain, and thus couldn’t serve Ozark’s market. However, individual producers and small marketing groups can.
“They can make contracts with people who want specified products,” Ashlock said.
Innovative projects aren’t without their risks, though.
Last fall, Turner Grain, a grain marketing outfit in Brinkley, collapsed into bankruptcy, taking with it some $50 million in grain that farmers had delivered but not been paid for. What happened to the grain is unclear.
Farmers who haven’t been paid for their crop have been given more time to repay loans, and lawsuits regarding the situation abound. The state’s congressional delegation officially asked the Commodity Credit Corporation to take further action to help those affected by the situation.
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