“It’s all about the consumer now. We’ve gone from a production-driven market to a consumer-driven market,” Dr. Robin G. Brumfield, Farm Management Specialist, Horticultural Economics, of Rutgers University, said in a recent webinar. “Try to put yourself in the consumer’s shoes when trying to decide what to grow and how much.”
Production planning means asking the hard questions before planting the first seed. The first step is to identify a need that isn’t being adequately addressed in the market. In today’s mature market, finding a niche to fill means doing something new, doing something better, and adding value by offering services.
“What demand problems are you solving with your business? Why buy from you and not anyone else? Find a niche that others can’t fill,” Dr. Brumfield said.
The northeastern states offer plenty of opportunities for niche markets, perfect for the typical small farms of under 100 acres found here, she said. Value-added and horticultural crops offer small farmers the opportunity to differentiate themselves from other growers, and to access regional customers who are able and willing to pay for these type of products.
“It may not make sense to grow generic things. Certain areas are in a mature market.” Dr. Brumfield cautioned.
Establishing a new niche — one that solves an existing problem, and is new and compelling to consumers — offers a lower risk than entering an already-crowded market. But a market analysis is always necessary before embarking on any venture. If there is no one else doing it, ask yourself why, Dr. Brumfield said. Test the market for your product by starting small, and use a resource, such as the Ag Plan tool from the University of Minnesota, www.agplan.umn.edu , to assist with your production plan.
In a weak economy, value is the key issue. Offering something of value to consumers can mean offering a service that saves them time, offers a better quality, or can be done in a more cost-effective manner, and fills a need that isn’t being effectively filled elsewhere.
“It’s amazing to me the amount of neat ideas we’ve seen with growers here, and across the country,” Dr. Brumfield said.
Aside from creating an entirely new concept, look at which products available in the local marketplace are “only mediocre. Find a way to provide excellence,” Dr. Brumfield suggested. An under-filled area, where you can do it better and “with a twist,” is often easier to identify than an entirely new niche.
Don’t compete with low pricing: offer value, convenience and quality instead. Adding services to your existing business, by offering delivery options, becoming more convenient for customers, packing produce in smaller quantities, increasing quality, offering online ordering, or providing education or informational services is another way for your business to excel.
Producing your own inputs for your existing operation can be a way to diversify. Growing your own biofuels to heat the greenhouse or fuel the equipment, growing or milling your own livestock feed, or making your own compost are all examples of reducing the need for off-farm inputs. These enterprises may also provide a new market, by selling extra compost by the bag, for example.
Find your competitors and seek out their strengths and weaknesses. Talk to their customers, and determine what it is that they may be lacking, as well as what it is that they do right. Educate yourself as much as possible about your competition, reviewing their advertisements, their websites and their stores or displays.
It isn’t only your potential competitors and target customer base that you need to research. You also have to research yourself. Take an inventory of your own strengths, your weaknesses, and your likes and dislikes. Don’t forget, too, to inventory your employees, and see who has a hidden talent or skill that is currently underutilized. Think about what may be unique to your farm or your location. Evaluate your own “unique bundle of resources,” as a good first step.
A SWOT analysis measures strengths, weaknesses, opportunities and threats. Soils, facilities, employees, market access, cash flow and other resources are all a part of this planning process. Taking note of existing regulations, and determining the feasibility and cost of meeting the regulations and standards for any new venture is critical. Determine what factors you can’t control — like weather and the economy — and determine how they might impact your business, set goals that will help measure your progress, look at the big picture and do some long-term planning, Dr. Brumfield advised.
By setting goals, identifying obstacles and resources, and measuring progress, production planning helps you to avoid pitfalls, correct issues before they are insurmountable, and help you assess the profitability of your enterprise. A cost analysis, using tools such as those available from Rutgers, can help you determine the costs involved with diversifying your operation.
The crops you are growing, the methods you are using, the specific varieties and harvest dates, equipment and labor needed are all a part of production planning. All of the farm-related activities that occur during the year are a part of a production plan.
Look at your costs of production for each item. While some crops might be loss leaders, not producing them might lead to higher annual overall costs of production, Dr. Brumfield said, as you’d have to spread your fixed costs over fewer crops. By better utilizing resources you already have, your costs of production can be decreased.
Part of production planning is to plan for risks. Life insurance, disability and estate planning, health insurance, crop insurance, lines of credit and other financial tools can reduce the risk you have should something go wrong. Weather, pests, machinery costs, labor, liability, land and infrastructure costs are must be considered.
“Can you self-insure, or are you better off buying crop insurance?” is a question you need to explore, she said.
Finding compatible enterprises, where you can complement your existing production using the resources already on hand is a smart choice. Consider the additional labor, as well as any specialized skills or equipment that will be needed, the growing season and the demands that will occur in relation to your current production schedule, as well as any monetary outlay that will happen each season. Add new crops or services which utilize existing resources, without competing with current farm needs.
Comprehensive production planning includes marketing research, risk management and financial planning, all of which impact what you will plant, and how much of it you’ll grow. The key to successful production planning is to find something that you can produce “at a price that consumers are willing to pay, and still have a profit to you,” Dr. Brumfield said. “We’re hoping that you do a production plan.”