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Competition is a beautiful thing.
At least, it is in the marketplace. Competition is what allows farmers to shop around and find the best deals.
Since farmers are buyers of a lot of expensive inputs, shopping around is crucial. I talk to so many farmers who buy from the same supplier and use the same custom harvester every year.
While I don’t think they need a cutthroat attitude, I do think they should understand that they’re in business to make money. They should price check and negotiate with their supplier. It’s nothing personal; it’s just business.
For you farmers out there, there are ways to conduct yourself to ensure an outcome that’s best for you and your suppliers. In other words, you can secure a win-win, and who doesn’t love that?
Here are four steps for making a win-win deal in farming.
1) Know All Your Local Suppliers and the Products They Offer
Unless you’re farming in the middle of nowhere, you should have multiple suppliers to buy chemicals and seed from.
It’s important to form a relationship with each individual, to constantly chat with them and keep the relationship strong. That way when negotiation time comes, you won’t just be some stranger asking for a deal.
I try to go out for lunch, dinner, or coffee with a rep at each of our local suppliers. During that time, I ask for their advice on various parts of my operation—which is a great compliment to their expertise. I aim to do this at least twice a year.
2) Have a Solid Estimate of the Amounts of Each Product You Will Need for the Season
At the time of this writing, farmers are done with their 2015 crops and planning for 2016. That planning can play a big role in the year’s negotiations.
Meet with your seed advisor or agronomist. Figure out how many acres you’ll have of whatever you’re farming, then try to put together a chemical plan and a fertilizer plan.
Then you can produce a sum of exactly what you need (e.g., 500 gallons of Roundup) to suppliers.
Another way of putting is, you’ve got to know what you need to know what you need. <Click to Tweet>
3) Get the First Quote for the Volume You Need
I say “the first quote” because you’re going to get multiple quotes. Or at least you should try—that’s the wisest strategy for getting the best price.
Tell your supplier what type of chemical, seed, or whatever it is you need.
Then the next step is really important: don’t mention volume at first. When they give you a price, you always want to sweeten the deal, which leads us into number 4.
4) Negotiate Like Hell
This last step works as a series of mini-steps. Follow them carefully, and I guarantee you’ll get the most out of negotiation.
Your suppliers are going to want to work with you—it’s to their benefit.
Let’s say you go in and ask for their best price for Roundup and they tell you “$18/gallon”; that’s your first quote. Then you can reveal your volume, to sweeten the deal. In this example, you say you need 1,000 gallons. You ask if you can get a better price if you buy all of that with them.
They lower it to $17.50; that’s your second quote. You should get a few more quotes, though.
You’ve got storage, so you say, “What if I take the delivery price away?” and the supplier knocks a bit more off (down to $17.30). There’s your third quote.
You’ve financed the purchase, so you say, “What if I pay you today?” and the supplier shaves it down further, to $16.75 or $17. We’ve arrived at a final quote. All around, the deal has been good for both of you.
Keep in mind that it may take a month or so to play out a few of these scenarios and get the best deals. If you feel as if you might get better prices in the spring, you can let suppliers know you’re going to wait, too.
If you absolutely want to stay with the same co-op, use the other ones to make sure you’re getting the best deal. Of course, if you pay a little extra for someone you like using, it’s not a huge deal. Just don’t miss out on saving opportunities.
Conclusion
Only the strong survive the competitive marketplace. Don't get complacent and comfortable doing the same old program with the same old supplier, or you’re gonna watch your wealth walk out the door.
I know a farmer who overpays for custom harvesting by over $20/acre. He farms 7,000 acres, which means he could basically buy a Ferrari every year with what he’s overpaying!
You may love your co-ops, but if you can get the same quality for cheaper by negotiating elsewhere, why not do it?
Supplies aren’t the only thing you’ll need to negotiate. You can become a master at negotiating land rent, too.
As seen on Farm Futures
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