Market Mondays: New Agricultural Markets
Welcome to the 1st installation of Market Mondays. Market Mondays’ articles will cover topics that include new opportunities in the market and different facets that impact the selling environment for farmers. This week’s topic is on selling into new agricultural markets.
New Agricultural Market
A New Agricultural Market occurs when a certain crop is grown in a specific region or country where production previously did not occur.
Entering a new agricultural market paves the way for the creation of a new selling market or the expansion of an existing one. The possibilities of entering new agricultural markets, has been a popular topic since legislation was passed on industrial hemp production in the 2018 Farm Bill. Agronomists and economists have been researching the viability of industrial hemp production since the provision for industrial hemp research in the 2014 Farm Bill. Whether you’re considering hemp or entering another market it’s important to not only evaluate the production requirements but also the selling environment for the crop. Here are four criteria for evaluating a new agricultural market regardless of the crop.
The most important criterion is getting an overview of the market. It’s critical to know the size of the market, or the potential market size before considering production. The size of the available market for the crop can be evaluated with the total dollar value of sales for the commodity and the total dollar value of sales for value added products made from the crop. An overview of the market will show where the crop is currently being grown and what farms have the largest share of production. The overview should also include information on the types of customers (B2B & B2C) that typically purchase and the average purchase price for the crop.
Opportunities & Challenges
Find out what the opportunities and challenges are for the new market. What is the potential for market growth over the next 5-10 years? Are there any threats to expansion in the market? The key to considering investing into growing a new crop is the potential for market growth. If projections of the market show stagnation in the next few years it may not be worth investing in. When evaluating existing challenges in the market, identify what stage of production it is tied to. The challenges may be related to: pre-production, acquiring what is needed to produce the crop including material costs and availability. Or it could be related to production, specifically the labor requirements for planting and harvesting. Lastly, the challenge could be related to post harvest needs, such as access or availability of processors and distributors. Narrowing down the stage of the challenge will help with figuring out the resources necessary to meet those challenges.
State & County Support
State and county support for production of a crop in a new agricultural market is key. The Department of Agriculture for your state and the cooperative extension sites are an essential resource for planning to enter new agricultural markets. Through state and county level support you may be able to access all of the aforementioned criteria. Some state level resources may have available funding for beginning production. If your local offices don’t readily have the information available for the new market, be open to working with them as they gather more information. If you are the first to approach them about a specific market you may become a subject matter expert for other farmers that follow in your region.
The time it will take from pre-production to harvest of a viable crop that can be sold is important to know before moving forward. Data on this time frame helps to understand when you should expect to see a monetary return on your investment. Though results may differ because current production does not take place in your region it serves as a gauge for financial planning.
There may not be enough available information on the crop for each facet of new market consideration. If there isn’t enough research, find data on similar crops. Are there crops in a similar genetic family that can you reviewed? Find out, and use that data as a benchmark for the potential market size and opportunities. Specialists at your local cooperative extension can typically assist you with finding this information. Finally, connect with current growers and processors of the crop in the areas where the crop is currently being produced. It’s important to gather first hand perspectives on crop production in a new agricultural market where possible.