Top Farmer Conference: January 10, 2025

As one of the most successful and longest-running management programs specifically crafted for farmers, the Purdue Top Farmer Conference is a one-day event for agricultural producers and agribusiness professionals looking to navigate the complexities of today's agricultural landscape. Participants will have the opportunity to network with peers and hear from farm management experts and agricultural economists from Purdue, Farm Credit Services of America, the University of Illinois Urbana-Champaign and Acres, a land value data analytics company.

September 8, 2015

Buying (Selling) Inputs in the Current Business Climate

Grain farmers are facing significantly lower prices and incomes in 2015 compared to previous years which have resulted in intense pressure to lower costs by aggressive negotiation on land rents and purchased inputs.  Much of this negotiation has focused on price–farmers are asking/expecting price reductions, but suppliers of fertilizer seed and chemicals in particular are hesitant to adjust prices down. In many cases suppliers have laid in inventories at costs that provide little flexibility to reduce prices without dramatically compressing margins.

Certainly price is a critical component of the purchase decision by farmers and the selling strategy of suppliers.  But there is much more to the input purchase decision – information, service, trust, availability for example.

More specifically, critical components of any input purchase decision are:

  1. Product performance – effectiveness of the product in enhancing or protecting output (yield, rate of gain,) and evidence/documentation supporting the performance claims.
  2. Product price – net price including transportation/shipping charges and any service fees.
  3. Quantity/volume discount – any price discounts or service fee reductions that depend on quantity purchased or packaging/ bundling with the purchase of other inputs.
  4. Storage, delivery time and conditions – when and how the product will be delivered, storage arrangements, and penalties and/or back-up if delays occur.
  5. Local contact- name and contact information (cell phone, email, etc) of the specific person to contact if problems occur in fulfilling the purchase agreement or in the efficacy of the product.
  6. Application services – cost and performance specifications including timing of any application or other services.
  7. Financing terms – financing or credit terms offered including cash discounts, interest rates, repayment terms and the approval process.
  8. Warranty – performance guarantees and terms of reimbursement for non-performance including documentation requirements and party responsible for servicing warranty claims.
  9. Technical documentation – product performance documentation and details of product specification including quality characteristics.
  10. Compliant response time/process- procedure for filing complaints concerning product service efficacy or effectiveness including process and time delays in response/resolution.
  11. Technical support – availability of technical support to answer questions concerning product performance and efficacy including process to contact technical support personnel.
  12. Information services- availability and provider of any information or data analysis services including fees charged for such services and contact person.
  13. Brand – specification of manufacturer, performance reliability data, characteristics of substitutes.
  14. Training – training that will be provided to staff, educational materials, support for regulatory compliance.
  15. Proposal response time – required response times for the supplier to provide needed information and format in which the supplier should provide it.
Figure 1. Specification Sheet

Figure 1. Specification Sheet

One way to more systemically think about the critical components of the purchase decision (or selling strategy for suppliers) is to use a specification sheet.  Figure 1 illustrates a Specification Sheet on which a buyer may summarize the information they need to obtain from suppliers on 15 critical components of the buying/selling transaction.

It can be helpful to decide in advance how important each of these 15 components are for the purchase decision.  For example, in financially challenging times, product performance may be far more important than technical documentation.  Some components may be mission critical, while others may have a negligible impact on the decision. By giving a weight to each component of the decision a buyer will have a better basis for comparison.

Each alternative supplier can then be rated on the 15 critical components, and their scores for each component can be tallied. Figure 2 illustrates how a weighted specification analysis tool could be used to evaluate and compare alternative prospective suppliers.

Figure 2. Weighted Specification Analysis Tool

Figure 2. Weighted Specification Analysis Tool

It’s important to remember that solid relationships with suppliers may provide benefits beyond identifiable components of a single purchase.  A strong relationship may open the door for cost savings in other parts of the business.  For example, a supplier may have less bargaining room for a single product than they do if more than one product is purchased.

Other considerations include the urgency of the immediate need, the importance of price transparency, and future needs.  The need for a quick response may limit the ability to compare multiple suppliers, because takes time to gather information, answer questions, and make comparisons.  A buyer may want to consider how wide the potential list of suppliers should be.  Sometimes it’s helpful to have a frank discussion with suppliers to understand the cost structure behind an offer. This conversation may lead to creative methods for reducing supplier cost that could be translated into savings for the buyer.  Direct delivery to a convenient site could be an example of this.  Finally, a buyer should consider their own future needs.  A purchase that drives margins so low that the supplier can’t survive could lead to less flexibility and more expensive purchases in the future.​

TAGS:

TEAM LINKS:

RELATED RESOURCES

Farmer Sentiment Following the U.S. Election Reaches Highest Levels Since May 2021

December 3, 2024

Farmer sentiment jumped again in November, with the Purdue University/CME Group Ag Economy Barometer climbing 30 points to a reading of 145. This marked the highest level of farmer optimism since May 2021. Purdue ag economists James Mintert and Michael Langemeier share some insight into the results of the November 2024 Ag Economy Barometer survey, conducted Nov. 11-15, 2024, the week following the U.S. presidential election.

READ MORE

Crop Budget Spreadsheet

November 12, 2024

This spreadsheet can be used along with the Purdue Crop Cost & Return Guide to examine gross revenue, costs, and earnings for crop enterprises.  The user can evaluate up to three full-season crops, and the wheat double-crop soybean system. Updated November 2024.

READ MORE

2025 Crop Cost and Return Guide

November 12, 2024

The Purdue Crop Cost and Return Guide offers farmers a resource to project financials for the coming cropping year. These are the November 2024 crop budget estimations for 2025.

READ MORE

UPCOMING EVENTS

Top Farmer Conference 2025

January 10, 2025

A management programs geared specifically for farmers. Surrounded by farm management, farm policy, agricultural finance and marketing experts, and a group of your peers, the conference will stimulate your thinking about agriculture’s future and how you can position your farm to be successful in the years ahead.

Read More

Purdue Income Tax School: Ag Tax Webinar

December 19, 2024

The 2024 Ag Tax Webinar, part of the Purdue Income Tax School, will provide in-depth coverage of selected agricultural and farm income tax issues to supplement material provided at the two-day in-person or virtual tax schools. The 2024 webinar will be taught by Guido Van Der Hoeven, an expert on agricultural tax issues and one of the authors of the 2024 Agricultural Tax Issues book, on Monday, December 19, 2024, starting at 9:00 am ET.

Read More

(Part 1) 2024 Indiana Farmland Values & Market Trends

September 11, 2024

Interested in the latest trends and insights on U.S. & Indiana farmland values? This AgCast episode shares insights from the Farm Sector Balance Sheet, USDA data collection methods, regional variations in land values, and the influences of factors such as interest rates and development pressures on farmland prices. Gain an in-depth understanding of trends, market dynamics, and future expectations for farmland values.

READ MORE

August 2024 PAER issue: Farmland Prices Increase Despite Downward Pressure

August 9, 2024

Indiana farmland prices have continued the trend of record highs in 2024, according to the latest Purdue Farmland Value and Cash Rent Survey. The average price of top-quality farmland reached $14,392 per acre, a 4.8% increase from June 2023. Average and poor-quality farmland also saw gains, with prices increasing 3.7% and 4.4% to $11,630 and $9,071 per acre, respectively.

READ MORE

Comparing Net Returns for Alternative Leasing Arrangements

August 7, 2024

Obtaining control of land through leasing has a long history in the United States. Leases on agricultural land are strongly influenced by local custom and tradition. However, in most areas, landowners and operators can choose from several types of lease arrangements. Flexible cash lease arrangements provide a base cash rent plus a bonus which typically represents a share of gross revenue in excess of a certain base value or threshold.

READ MORE