Trying to Make the Marketing Picture Less Fuzzy
The long-term plan for developing Kentucky agriculture pivots on the concept of developing better markets for Kentucky agricultural products. This message has come clearly from farmers all across the Commonwealth looking for either better prices for their existing products or for markets for newly emerging enterprises.
I want to offer a few remarks that are intended to help us all have a better understanding of what markets are and what they can do to help farm income.
Markets are places where buyers and sellers come together to exchange goods and services. We can use the term "place" somewhat loosely, because it's no longer always necessary to bring buyers and sellers together physically. A recent survey estimated that Kentuckians spent over $320 million in internet purchases during the past year. Video auctions for cattle and horses are well established and several internet sites feature the sale of Kentucky-grown or manufactured products to consumers all around the world.
Markets are everywhere. Markets exist anywhere buyers are shopping for something of value to them among sellers who are competing with other sellers to offer the best value. This is true for traditional market settings, such as farm markets, tobacco auctions, stockyards, or the supermarket. Markets actually work best when there are lots of buyers and sellers, although there are distinct advantages to being one of only a few sellers in a newly established market.
Markets can also be thought of as the links between firms in a value-adding process. Products are changed and distributed throughout a market system, adding more and more value as the product moves from link to link. Fertilizer and seed companies sell to farmers. Farmers sell to various processors. Processors sell to manufacturers or to retailers such as food stores or restaurants. They, in turn, sell to consumers.
Now what about the point of developing markets to increase farm income? Not all markets are equally accessible to farmers. In many cases there is a missing "value-added" link that allows the product to be developed to a point where it is attractive to certain buyers. We have many producers, for example, that have been selling a niche product, like freshwater shrimp, to their local community through pond-side sales. But what about getting into the high-dollar live market on the east or west coast?
Local markets can quickly be overwhelmed by expanded local production. This can be happening at the same time as profitable opportunities are open in more distant markets. Good opportunities can also appear in nearby markets that demand certain forms or volume of the product, but there is often a missing link.
The link may be missing for a number of reasons. Technology may not yet be developed or perhaps applied in the market context. In some cases, the opportunity is so new that buyers don't know the seller exists. Many markets function on long-standing buyer-seller relationships. But where these relationships don't exist, seller's have to more aggressively communicate what products they have. The targeted buyers may be processors, wholesalers, retailers, restaurants, or final consumers. It may be that farmers have to cooperatively develop the processing or distribution in order to make them collectively more attractive to certain buyers. Developing and keeping those early buyers may be difficult work, but it needs to be viewed as an essential step to creating a sustainable market channel.
For More Information
For additional information, please contact, Tim Woods.