Markets before product, or product before markets?

In some recent research into producers commercially growing chickpeas in the Mid-Atlantic states, a common theme in niche marketing materialized: “If I grow it, can I sell it, and how much money will I make?”

An exotic or trendy item becomes popular with consumers, and as a producer you’re tempted to “put in a few acres” and capture the market before the competition. Often the novelty outshines whatever risks pop-up. The question becomes, “Should I jump on it and produce before marketing, or do my marketing research and then adjust production?” Actually, both approaches have worked with recent trendy products (think goji berries, hemp and hops), but do the risks outweigh the rewards?

In general terms, researching the market for a specialty product remains the prudent approach, but getting a jump on market share is tempting too. Many times it falls back on the resources you have and how much you feel willing to risk in the venture.

If you have funding reserves, sufficient labor and stable markets for your primary product, taking a risk on a specialty crop isn’t quite as daunting, but according to Michigan State Extension, “the bottom line for growing any new crop is economics” (Exploring Alternative Field Crops). “Will income generated by the sale of the crop be more than the cost of production?”

When some growers observed the increase in the sales of hummus, they thought about the chickpeas or garbanzo beans used to make the edible and highly popular protein spread, and starting examining the possibility of growing and selling the beans to Mid-Atlantic food processors. Chickpeas grow much like soybeans and develop into a branched plant with pods. And while they can be grown in most areas of the country, they are primarily raised in the Great Plains and West. While the experiment showed the legumes could be grown in the Mid-Atlantic (although with fungal disease concerns), and processors were interested in purchasing locally-grown product, the cost of cleaning and aggregating enough product for the processor ultimately outweighed the potential sales profit.

The Agricultural Marketing Resource Center noted, “The economic viability of a specialty crop such as chickpeas will ultimately depend on several factors such as market development, contract and seed pricing and production capability.”

Producers willing to take a risk on alternative or specialty crops often open up markets for others farmers and provide the research necessary to make a profit. The decision often comes down to a high potential sales value or specialized benefit to the farming system, according to Extension educators.

So, while market research before production often reveals profit and pitfall options, production before marketing is a risk some farmers are willing to take given economic and other farming advantages. In either case, you must carefully analyze your business to decide if the prospect will benefit your operation or if the risk is worth the effort.

The above information is provided for educational purposes and should not be substituted for professional business or legal counseling.

2020-05-27T12:52:00-05:00May 27, 2020|Grower, Grower East, Grower Midwest, Grower West|0 Comments

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