Know your market
Farming is not as simple as ploughing a field or raising a couple of head of cattle… it requires in-depth market research to ensure that your products have a readily available channel.
Market analysis, in simple terms, means understanding the market you intend to serve as a farmer. Every farming enterprise starts with the consideration of what to produce and who to serve.
This requires thorough market analysis from the beginning to ensure the success of the farming enterprise.
In general, market analysis entails the assessment of market needs as well as the consideration of start-up factors to establish the viability of the potential enterprise. Agim (2014), in his article on marketing research on the path towards the development of agriculture, argued that in order to successfully transform any business idea into higher capital gains, it is important for farmers to gain a thorough understanding of the market they intend to serve and determine the fair value of their investment.
To this end, regardless of the selected farming enterprise, farmers are advised to conduct thorough market analysis to establish the economic viability of the enterprise and determine the resources required to sustainably operate the enterprise in the targeted market area.
Resources needed
It is imperative for farmers to establish the availability and cost of resources such as inputs, infrastructure, equipment and the like, required to operate the enterprise successfully. Key questions to ask include: Are the resources available locally? How much do they cost? Who are the suppliers and where are they located?
It is also worthwhile for farmers to consider the level of their expertise and skills to operate the business. If a prospective farmer has minimal or no knowledge on the enterprise, capacity building is highly recommended or, alternatively, a skilled farm manager with the appropriate expertise can be hired to manage the enterprise in order to ensure good returns on investment.
Economic feasibility
It is worth noting that most farm enterprises fail because their feasibility was not established from the outset. Consequently, farmers that have not conducted proper market research struggle to sell their produce and experience deterioration in the quality of produce due to prolonged storage. This eventually forces farmers to sell produce below break-even prices to minimise total losses. It is therefore advisable for farmers to identify potential markets and determine the selling prices for the produce prior to establishing the enterprise.
It should be noted that excessively high prices turn away customers and prices below average market prices tend to create suspicion among consumers. The correct pricing of produce is therefore integral to ensure successful sales. Farmers are therefore advised to analyse current market prices for a product they wish to produce and consider the costs required to produce it, in order to determine profitability. Farmers should also investigate the reliability of the potential market and explore opportunities for future growth. In essence, the potential for future growth defines the sustainability of the enterprise.
Finally, the marketing of agricultural produce is a complex and dynamic process that is consistently subject to change due to market forces (for example, changes in consumer preferences and taste), and a range of global phenomena. Thus, farmers should acquaint themselves with market trends to ensure the sustainability and relevance of their farm enterprises. On the other hand, market analysis alone should not be seen as the sole guarantee to success. Farmers are advised to use market research findings to develop appropriate courses of action to ensure satisfactory profits and the sustainability of their farming businesses.
* Emilie Abraham is a technical officer within Agribank's Agri Advisory Services Division
Emilie Abraham
This requires thorough market analysis from the beginning to ensure the success of the farming enterprise.
In general, market analysis entails the assessment of market needs as well as the consideration of start-up factors to establish the viability of the potential enterprise. Agim (2014), in his article on marketing research on the path towards the development of agriculture, argued that in order to successfully transform any business idea into higher capital gains, it is important for farmers to gain a thorough understanding of the market they intend to serve and determine the fair value of their investment.
To this end, regardless of the selected farming enterprise, farmers are advised to conduct thorough market analysis to establish the economic viability of the enterprise and determine the resources required to sustainably operate the enterprise in the targeted market area.
Resources needed
It is imperative for farmers to establish the availability and cost of resources such as inputs, infrastructure, equipment and the like, required to operate the enterprise successfully. Key questions to ask include: Are the resources available locally? How much do they cost? Who are the suppliers and where are they located?
It is also worthwhile for farmers to consider the level of their expertise and skills to operate the business. If a prospective farmer has minimal or no knowledge on the enterprise, capacity building is highly recommended or, alternatively, a skilled farm manager with the appropriate expertise can be hired to manage the enterprise in order to ensure good returns on investment.
Economic feasibility
It is worth noting that most farm enterprises fail because their feasibility was not established from the outset. Consequently, farmers that have not conducted proper market research struggle to sell their produce and experience deterioration in the quality of produce due to prolonged storage. This eventually forces farmers to sell produce below break-even prices to minimise total losses. It is therefore advisable for farmers to identify potential markets and determine the selling prices for the produce prior to establishing the enterprise.
It should be noted that excessively high prices turn away customers and prices below average market prices tend to create suspicion among consumers. The correct pricing of produce is therefore integral to ensure successful sales. Farmers are therefore advised to analyse current market prices for a product they wish to produce and consider the costs required to produce it, in order to determine profitability. Farmers should also investigate the reliability of the potential market and explore opportunities for future growth. In essence, the potential for future growth defines the sustainability of the enterprise.
Finally, the marketing of agricultural produce is a complex and dynamic process that is consistently subject to change due to market forces (for example, changes in consumer preferences and taste), and a range of global phenomena. Thus, farmers should acquaint themselves with market trends to ensure the sustainability and relevance of their farm enterprises. On the other hand, market analysis alone should not be seen as the sole guarantee to success. Farmers are advised to use market research findings to develop appropriate courses of action to ensure satisfactory profits and the sustainability of their farming businesses.
* Emilie Abraham is a technical officer within Agribank's Agri Advisory Services Division
Emilie Abraham
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