WHY IS MARKETING SO DIFFICULT?
by Roy Smith, farmer, experienced educator, market researcher, writer and farm broadcaster


As I travel and communicate with farmers, I find a high level of frustration concerning their lack of success in marketing. Sometimes it is only a perception that they are not good marketers. Sometimes the perception is reality.
There are two main reasons most farmers find marketing difficult. The first is that there is no body of information that a farmer can use to make marketing decisions that will produce a highly predictable outcome. Many aspects of production management are clear cut and produce reliable results. Farmers in Canada grow maturity group 0 or 1 beans to beat the short growing season and early frost. Farmers in Nebraska grow group 2 or 3 beans to take advantage of warmer climate and spread out the risk of dry summer weather. Farmers in the Arkansas grow group 4 or 5 beans because of their longer growing season.
There is a high degree of certainty that the maturity group of beans we choose will match our climate and growing season and produce the best possible crop. With marketing there is nothing as certain as the agronomic principles that govern most of our production decisions. The market builds in risk premium ahead of the growing season in anticipation that something might go wrong and reduce yields. In most years farmers can sell ahead and take advantage of this premium. However, in about three years out of ten, something happens to reduce the crop and prices go higher throughout the summer. Those who have forward priced get a lower price than those who sell at harvest. This is an especially painful experience for those who sold aggressively and then suffer a crop failure.
If an individual has this experience early in his or her marketing career, it is likely to stay with them forever. This makes it extremely difficult emotionally to implement other strategies that might end up achieving negative results.
Where agronomic principles can result in 99% predictability, the best marketing principles have a reliability of 70%. Such a low ability to predict outcomes causes many economists to assume that marketing is totally random. Their theory is that it is impossible to improve on the price for commodities farmers have to sell. Unfortunately, there is no way a farmer can stay in business without making selling decisions. This means that they must make those economic decisions without the benefit of good research to guide them.
The second factor that makes marketing so difficult is that the psychological factors that make farmers good producers may also make them poor marketers. As production managers, most farmers are very structured and organized. They are used to working with the seasons, taking everything in order. Planning for the new crop takes place in the winter. In the spring, fertilizer is applied and the crop planted. Herbicides are applied at planting time and again after the crop is out of the ground. The crop is tended during the summer and harvested in the fall. The sequence seems perfect. Each step is timely and makes perfect sense.
Good marketing sometimes requires a sequence that is not so logical. In the majority of years the best time to sell a crop is before it is planted. Sometimes this may mean selling before the previous year's crop is harvested. That does not fit a farmer's concept of proper order. However, research and experience show that forward pricing a crop, for which the yield is yet to be known, is usually a profitable practice.
Adding to the frustration of marketing is the fact that many market moves appear to be illogical. Price moves take place before the factors that cause them are known to the farming public. A farmer may make a marketing decision only to have the decision proved to be wrong the next day because of a change in the weather, purchase by a foreign nation, disease infestation or some other factor that changes overnight. What appeared to be a good decision one day may prove to be disastrous and irreversible the next.
A farmer's logical nature makes these pitfalls especially difficult to tolerate. Dealing with them may take numerous forms. Some will hire an advisory service to make their decisions. This is only successful if an advisor can be found who correctly understands the farmer's risk tolerance and profit goals. Some will try to solve the problem by continually studying each new supply and demand factor. This approach may result in "paralysis by analysis," delaying a decision until it is too late. Some will just give up. They will probably just keep making the same mistakes over and over.
Striking a balance in marketing is one of the most challenging aspects of profitable farm management. To learn more about accomplishing this difficult task, attend one of the workshops entitled "Personalities and Profits" sponsored by the three groups, Ontario Corn Producers' Association, Ontario Soybean Growers and Ontario Wheat Producers' Marketing Board, January 4, 6, 7 & 8.