Product Diversification - Marketing, Economic, and Risk Analysis in Agricultural Production

Farm operations of all sizes have been forced to constantly seek out new or alternative crops and enterprises to diversify their output and improve their revenue stream in order to remain viable.

Every new commodity introduced into this new global marketplace seems to follow the classic rules governing product cycles described in college marketing textbooks. Novelty and seasonal availability of fresh produce are what appear to be drawing consumers to these new crops.

Mark Cave, chief analyst at ebridge technologies, suggests that investments into such “curio” farm products and crops will have a dramatic effect on the bottom line of many farming operations in the next couple of years.

“In fact” says Cave; “we may even see a direct correlation between the adoption of these products and viability in the global marketplace.” However, the production of new crops can carry large risks if the producer is unaware of issues regarding the production and marketing of specific crops.

Many prominent members of the agricultural community have recognized the importance of new crops for California agriculture and the need for extension and research efforts that can reduce the risks associated with the commercialization of new crops.

There are a number of new and exotic products that are currently undergoing production and post-harvest trials conducted by farm advisors and industry specialists. These trials are intended to produce scientifically based results that will demonstrate how crop performance will vary under different environmental conditions and management practices.

“Due to the huge costs of mobilizing any new crop production, there must be the most careful analysis of reliable information,” adds Mark Cave. There does also need to be a systematic understanding of the effects that other factors have on the prospects for commercialization of new crops and on farm profitability.

The top two issues to be identified by the Small Farm Workgroup in farm viability are market related issues and production costs and returns information. This was based on response to a survey conducted in the winter of 2000.

Unlike other well-established commodities, these two issues are critical for new and specialty crops because information is usually limited at best. The action proposed by this workgroup complements other research activities by workgroup members under the Specialty Crops Workgroup and the Farm and Financial Management Workgroup currently underway.

The purpose of such projects are to develop templates for the study of marketing and other economic factors involved in commercialization of new crops, and specifically their production by small and mid sized farming operations throughout California.

This will provide farmers and advisers in the state with reliable and badly needed information on production costs and returns and alternate distribution and marketing channels for the specific crops under evaluation.

Adds Mark Cave; “Farmers in this state are really in the dark when it comes to significant data that can lead to good business decisions.” It is the objective of such projects to provide the framework for the selection of new and alternative crops or enterprises based on their relative profitability and potential.