Download Your Output Market

Your Output Market
AG BM 460
Chuck Mothersbaugh
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Small vegetable grower
Sells at two farmer’s markets
Started in Oriental Vegetables
Then more conventional vegetables
Now more flowers
How do you decide what to grow?
– How much?
– What weeks?
Introduction
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This is what you sell
If you do a bad job here, you are finished
Lots of factors – not all equally important
Need to figure out the big ones and
concentrate on them
Meyer’s Dairy
• Your cows produce X cwt. of milk today.
• What do you produce? Whole, skim, 2%,
chocolate
• You have ice cream mix – what flavors do
you make
Initial Questions
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How much can you sell?
Can you produce that much?
Is your production more than you can sell?
What will the price be?
How does this compare with your costs?
Who is your customer?
How will you access the customer?
Demand
• Your firm faces a demand curve – what
does it look like?
• Farm?
• Restaurant?
• Feed mill?
• Meat packer?
• Bakery?
Beef Demand
6
D
P
4
2
0
0
20
40
60
Q
80
100
Determinants of Demand
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Price
Income
Other prices
Tastes and preferences
Demand
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Quantity per unit time
Subject to outside factors
Elasticity – what does it mean?
Industry demand vs. firm’s demand
Your Competitive Environment
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Who is your competition?
Do you have any market power?
Do the buyers have market power?
How competitive are you on costs?
How about on quality?
Is your product a commodity product?
Is it branded?
Other factors
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What are your costs of production?
Are you growing?
Can you grow?
Can you afford not to grow?
How much can you produce?
How much should you produce?
How much control do you have over price?
Growing
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Usually must grow to keep the same profit
Can you grow in present market?
Do you need a new market?
New place?
New product?
New customers?
New country?
Entering a New Market
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What are the barriers to entry?
Do you have the knowledge required?
Who is the competition?
Do you have the money?
Can you be big enough to compete?
Concluding Comments
• Lots of questions
• Number 1 issue – “Say’s Law” isn’t true –
Supply does not create its own demand!
• You need to understand your output
market – your competition will
• Once you understand it, you need to try to
manage accordingly. Produce for the
customer – not just to be producing
Harner Farms
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Local apple grower
Started in 1946, grandfather
Now son and grandson running business
Stand on West College
State College Farmer’s Market
Used to sell to Weis Markets – price wasn’t good
enough
• Would prefer to sell everything through two
major outlets
Harner farms (continued)
• Stand starts year with plants
• Ice cream parlor
• Variety of produce – mostly theirs, but not
all – sweet corn
• Corn maze
Harner farms
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Who shops at a Farmer’s Market?
Why?
What can you charge?
How much can you sell?
What surprises can occur?