Why you make losses from agribusiness

Saturday November 30 2019

An agronomist at NgettaZardi (right) attends to

An agronomist at NgettaZardi (right) attends to farmers during the 17th Seeds of Gold Farm Clinic recently. Photo by Kelvin Atuhaire. 

By Sylvans Ochola

Market research is a critical component of modern commercial agriculture or any agro-enterprise venture.
This is one of the most important but unfortunately the often ignored aspect of a commercial agricultural enterprise.
The advancement of agriculture through mechanisation of farming operations, the availability of pest and disease control chemicals and other agrochemicals in general, and overall availability of farm inputs and services have seen an increase in farm productivity.

However, there remains a crucial component that most farmers have perpetually ignored or assumed that they will always have access to — the market.
There are two main types of farming; the first is subsistence and second, commercial. The former farms purposely for family consumption, and disposes the extra produce at a fee, while the latter is solely for sale with profits in mind.

Since majority of modern farmers and agricultural enthusiasts aspire to make profits from their farming ventures, then they automatically fall in the second category. Commercial farming, agribusiness or whatever you would like to call it is a full-time job. By this I mean before you venture into agribusiness, you should have clear goals or objectives that you intend to achieve. On top of that, you should have a clear plan on how to achieve the goals. One of the things that make many farmers fail in their ventures is the failure to do market research.

I have passively watched as farmers, both young and old, grapple with the issue of marketing their produce. It is unfortunate and discouraging to pump money into a project, do everything right, get good produce but lack the market.

Commercial farming
On numerous occasions, I have seen farmers look for market for their produce on online platforms desperately yet some of their farm products are perishable.
The bottom line is, for commercial farming, the farmer should have a clear idea on where he is going to sell the product. If he is not sure, then certainly the farmer will end up at the mercy of brokers.
The most obvious cause of such a situation is venturing into farming because a friend or a friend of a friend shared how they made big profits farming.

Discussions on profits most of the time make people invest in agribusiness without considering whether that specific market can sustain many farmers, especially those who get wind of the rumours of the profits from a friend of their friend. What this means is that we end up with a string of grumpy farmers, who will continuously complain of the low prices and exploitation.

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Have you ever sat down and asked yourself where the middlemen sell your cheaply acquired produce? And how come that they always seem to have a market for every kind of produce? They don’t just wake up one day and decide that today we are going to Mombasa to buy pigs to resell to abattoirs in Isiolo. That will never happen. The term “market research” here might make the process sound complicated, but in reality, this is a critical component in commercial farming. So, before you venture into that “too lucrative agribusiness venture,” take time and do your market analysis.

Secondary market information
The research should be able to give you reliable information on the market potential in future, sales forecasting and marketing strategies. The survey should be able to provide you with an estimate of the size of the potential market for your product, the projected market share, and the potential competitors. The process involves gathering information on your own through observation and analysis of the key market trends. This can be backed up by secondary market information, especially from other persons in the same venture or those who supply different products to the targeted market.
At the end of the research, you should have clear information on your target customer(s), existing or potential competitors, the market size, the market trends, the actual market potential, and your true production potential.

Otherwise, you might end up being part of the swelling proportion of farmers who produce while targeting lucrative imaginary market, only to end up dumping the produce due to low prices or in worst situations, lack of market.
This simple exercise can be the difference between your big smile all the way to the bank, and serious financial loss and heartache.

Marketing tip
If asked the question, “Who are you marketing your farm product to?” your first instinct might be to say “Anyone who will buy.” But if you put some thought into it you will realise the answer is much more complex. Do women or men buy more frequently from you? Are your customers young, middle-aged or retired? Do they belong to a certain ethnic group? Do your buyers tend to be of a certain income level? Do they live in a particular area or are they geographically dispersed? If your farm already has customers, think of your best ones. Who are they and how would you describe them? If you are just starting out and do not have customers yet, observe your potential competitors and their customer base.

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