Plot And Profit

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The U.S. produce market is operating under increased pressure with narrower margins than we have seen in many years. It is easy to see the pressure brought on by our current economic and government spending issues. 2008 brought the U.S. into a recession that left many unemployed, which threatens the underlying demand for many of our commodities. The U.S. economy is threatened with a double-dip recession, something that previously occurred in 1980 and 1982. The U.S. budget crisis calls for major reforms in how our country operates. A stalemate by our policymakers could lead us into a double-dip recession. The European debt crisis also could lead the world into another recession.

A second threat to our industry is the increasing cost of supplying fresh fruit and vegetables to consumers, causing a decline in demand even in the face of the obesity crisis widely recognized to exist in the U.S. What was a growth industry from 1980 to 2000 is now an industry threatened with declining consumption and shrinking profit margins.

Steps To Success

How do we make money in this kind of challenging environment? Making money in any environment starts with planning and organization. Here are nine steps that can improve your chances to make money in this difficult market.

1. Get organized and be efficient. While the produce industry is not a true commodity business, it is still important to operate as efficiently as possible. This starts with being organized in all tasks you undertake in your business.

2. Keep detailed records. The only way you can know where you can improve your operation is to know the costs and returns to those operations.

3. Analyze the competition. There are two things you can learn from your competition. First, how do you stack up to the competition in competing on a cost basis. Second, what can you learn from your competition that points to areas of improvement that you must make to compete with your product.

4. Understand the risks and returns. You have to understand that high returns generally involve higher risk. Low risk is usually associated with low returns. Know the risks and returns to investments on your farm and have a good understanding of what risk you can live with.

5. Be creative and remain open to new ideas. The old adage is “the only certainties in life are death and taxes.” You can add failure without innovation.

6. Stay focused. Focus on your core business. Keep your eyes open to new opportunities but do not lose sight of your core business. Stay organized and efficient.

7. Prepare to make sacrifices. Change often requires sacrifice. That often requires self-improvement so that the organization can move forward.

8. Provide great service: Take care of your customers. Your customers face the same crises that you face. You can maintain your customer base only if you take care of their needs as the market changes.

9. Be consistent: Help your customers manage their risk. Risk is related to uncertainty. Your customers can help you manage your risk if you help them to manage theirs.

Get Your Head In The Game

Fruit and vegetable growers are losing market share in the food chain at a time when U.S. policymakers are driven to improve the health and welfare of our citizens — especially our children. Without cost containment, the future of U.S. vegetable growers is at risk. They are operating with higher costs and at greater risk. Individual producers must think about defensive risk management at this point. Like football, there are times for offense and times for defense. In challenging markets, you play defense. Any points scored are a bonus, and can make the difference between winning and losing.

John VanSickle is a professor in the Food and Resource Economics Department at the University of Florida in Gainesville.

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One comment on “Plot And Profit

  1. Vivian

    You are so right one must be ever vigilant in this game. I believe that all farmers especially have to learn to play both offense and defense and sometimes both at the same time. Its not easy but must be done. www.womenfarmers.org