Meet the New Strategic Farmer

The quality of farming has massively improved around the world over the last few decades. Not only have farms become bigger and gained more market power, but they also produce products of far higher quality, be it consistency or food safety. This is particularly true for animal products. Never in history have meat, milk and eggs in general met the quality level they do today. This development is possible because today’s farmers are better educated and communicate more.

Although some people like to say “everything was better in the old days,” the quality of life on farms has also improved — and dramatically. Farmers have access to education, communication, medical supplies, cultural developments, finance and consumer goods. Farmers have also left the isolation of the agricultural world and have a wider network of friends and business partners across all disciplines. Farmers, by nature, are familiar with taking risks; they have strong self-motivation and have not lost their ability to listen. In the wider world farmers live in today, they have observed and taken home two specifi c business strategies that will give farming a new face in the future: value-added business and specialized diversifi cation.

While conventional farming focused on food production, with enterprises mainly following the typical cost-reduction and production-expansion pattern, the new entrepreneurs choose different strategies.

The value-added strategy involves working with direct sales, product branding, further processing and different models of product specialization or vertical integration. With grain prices going up and retail prices for animal products going down, farmers can take control of their destiny.  Here, they meet the consumer’s desire for traceability and authenticity in one strike. Going this route, the farmer does not produce an anonymous product for an anonymous market but exactly what the customer wants. Owned processing steps create a stronger bond between front-end inputs and the fi nal product. The advantage of the value-added strategy: There is no need for physical growth. Growth is gained through specialization and added value, which means more margin.

The diversifying strategy mainly involves developing businesses mainstays that are not directly connected with food production but are based on the core competencies of the farmer. These models include tourism, agricultural and non-agricultural contracting, investment and, most recently, consulting. The World Health Organization and other organizations are showing an increasing interest in the use of experienced farmers as advisers in development projects. Obviously, farmers speak the language of farmers.

The advantage of the diversifying strategy: All assets are fully exploited, without depending on one market alone. It took awhile for the feed industry to understand these shifts in strategy. Farmers can no longer be categorized as a uniform mass of customers who receive commoditized goods and services. Although farms have always been individual business entities that show individual needs and make individual decisions, it used to be a major hurdle to gain market power, but today, farmers are transforming this threat into an opportunity. They find strength in their specialization and individual niches and now expect to be recognized as business partners of the industry — at eye level.

Excerpts from FeedStuffs Magazine USA 7-21-08