By Rick Mooney
Editor, eHay Weekly
Adopting the mindset of marketers rather than sellers can go a long way in helping hay growers improve the profitability and sustainability of their businesses, says Curt Lacy, University of Georgia Extension livestock economist.
Sellers focus on convenience, Lacy notes. “They produce what is easiest to sell, sell at the most convenient time and most convenient place. As a result, they often find themselves being price-takers.”
Marketers, on the other hand, are focused on profits. They use the following concepts as guidelines in developing marketing strategies:
- Produce what the market wants. Successful marketers understand there are many kinds of hay and hay markets. They strive to match the hay they produce with the needs/wants of individual markets. For example, while horse owners typically want medium- to high-quality hay products, beef owners will be looking for low- to high-quality hay depending on the nutritional needs of their livestock at a given point of time. Homeowners and gardeners looking for mulch are generally willing to accept low-quality hay. Bale type can play a role, too. “Horse owners typically want small square bales because they’re easier to handle,” Lacy notes. Depending on operation size, beef producers may or may not have the equipment to handle large round bales.
- Market at the most profitable time. “Selling your product out of the field immediately after harvest might be convenient for you as a grower,” says Lacy. “But you need to ask yourself how much value could you add by storing the hay on-farm and waiting to sell until demand picked up during the winter months.”
- Market at the most profitable place. “Setting up a delivery option for customers will involve additional costs, time and aggravation, but it might be worth it if it allows you to expand your customer base,” says Lacy. To determine if offering delivery makes sense for you, consider operational costs (fuel, repairs, tires, etc.) and fixed costs (depreciation, insurance, licensing tags, other taxes, etc.) of trucks/trailers, as well as labor costs associated with loading, hauling and unloading into a buyer’s barn.
- Take some control over price. Knowing your cost of production and general price trends for hay in a given area are starting points. “If the four- or five-year average price for a round bale is $40 but your breakeven cost is $65, you’re going to have to make some adjustments (i.e., find ways to reduce costs or develop strategies for adding value),” says Lacy. “On the other hand, if your breakeven cost is $50 and the going price is $70, you’ll have the option of marketing at a lower price in order to move more product.”