Farm managers can instantly tell you — to the penny — their cost of production. But just try asking us how much it costs to market our production and you’re likely to be met with a blank stare.
Then, if you want to stump a farm adviser or marketing specialist, simply ask them how much a farmer should budget for their marketing costs and for the time they put into it.
Or, if you really want to make agricultural economists sweat, ask them what the benchmarks are for marketing expenses on the average farm.
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Marketing has become the holy grail of agriculture. Every farmer is on a quest to become a better marketer. But few take the time to see what the net economic benefit is to their operation of utilizing marketing alternatives.
In fact, even though most farmers believe marketing is very important, when you ask them how much they are spending on marketing, the answer you’ll almost always get is, “very little.”
This belief that marketing doesn’t cost much may stem from the fact that in spite of all the marketing growers do, for the most part farmers remain price takers, says Dr. Jim Untershultz, ag economist at the University of Alberta.
Untershultz says the marketing done by the vast majority of growers is simply for price establishment and risk management. This can and is achieved by most growers with little cash outlay. They may subscribe to some type of market information service, they make some phone calls to some grain companies and local grain brokers, and a few farmers have hired marketing consultants, but the total of these costs are relatively minor compared to cash production costs on most farms.
Untershultz says a farmer’s time spent marketing is by far the biggest marketing cost to the operation, yet he knows of no farmer who charges their farm operation an hourly fee for the time spent marketing.
Untershultz also expects there is a wide range between farms in the amount of time they spend on marketing activities, from next to none to hours a day.
Ag economist Jared Carlberg at the University of Manitoba, agrees: “Some producers spend an incredible amount of time seeking better prices and opportunities, but none of them would likely be able to tell you the percentage of their gross income which is spent on marketing their grain.”
Carlberg was also unable to provide any benchmarks for the amount of time and the level of investment that a producer would need to make in order to do a good job of marketing.
“I don’t know of any studies done to establish any sort of benchmarks for marketing expenditures on farms,” Carlberg says. “You can check with some of the large universities in the mid-west grain-growing areas of the U. S., but I bet you will not find any answers to your questions of costs of marketing.”
As Carlberg predicted, I couldn’t find anyone in the U. S. who could answer my questions on farm-marketing costs. All I ended up with were more questions.
Indeed, Bill Wilson, ag business professor at North Dakota State, suggested such benchmarks don’t exist because “marketing,” and what it entails on each farm, is so variable.
Information and time are just two factors, Wilson points out. Marketing also includes costs of storage, cleaning, transportation, elevation, identifying new buyers and any follow-up with current customers.
If anyone should be able to answer my questions, I thought it would be Ed Usset, grain-marketing specialist at the University of Minnesota and the coordinator of Minnesota Master Marketer Program, as well as the author of the book Grain Marketing is Simple (It’s Just Not Easy).
