- Go for Value
A product which is profitable one year can became a loss maker the next. For example in 2013, the world’s largest maize producer, Brazil, had a record crop and pushed down the crop’s price by 42%. (Reuters)
As a result, many farmers switched to soya bean, which has a higher value and yield.
The reason why prices of most major crops fluctuate heavily is because they are commodities, which means anyone can produce them. There is little differentiation between a commodity coming from one producer to a commodity coming from another. There is no brand value attachable to the product.
To make serious money from agriculture, you have to choose from one of two routes. The first one is to go for large scale commercial farming. You make money from sheer volumes, even when margins are small. This is feasible if you have the land, machinery and inputs necessary, which require a substantial capital investment.
The second route, which can be carried out with modest capital, is small to medium scale high value crop production.
You could start producing horticultural crops, such as lettuce, peppers, chilies, green beans and peas, granadillas, mushrooms, sprouts, fruits, herbs and flowers.
The trick is to study the market and see which produce is in high demand most of the time and is being under-supplied.
The best farmers in horticulture have learned how to propagate plants and cultivate them with the aim of improving growth, yields, quantity, nutritional value and resistance to disease and insects.
It is therefore possible to develop a brand and make your products unique. Your uniqueness is the only source of profitability that cannot be competed away, and thus, is the only source of sustainable profits.
You can add value to your produce by innovating, as you will see in the next section.
- Always be innovating
Innovation is the application of better solutions to new or existing market needs. To succeed in your farming business you need to be always seeking new solutions to add value and make more profit.
Here are some ways that you can be innovative:
Preserving produce through dehydrating, drying, pickling, freezing. This gives you an all round marketing season and reduces wastage of excess that might have to be thrown away when it is no longer fresh.
Processing fruit into extracts, jams, concentrates and juices. This gets you an extended market for your produce.
Fruit can be processed into juices to create more value
Packaging fresh produce into salad mixes, or mixed vegetables. Value is added in the form of customer convenience and presentation.
Selling your fresh produce to the export market. This offers significantly higher prices as demand will be high and supplies low due to seasonal differences.
Exports market can be highly valuable to producers
All these are ways of avoiding the commodities market, in which you have no control over prices. When you have added value and created new products, you set your price and create new markets.