Trusting someone else with your livelihood isn't easy, but that's exactly what you have to do in order to participate in a marketing group.
There are many reasons why a producer may chose to join a marketing group today. You may feel that your operation is too small to negotiate prices with a packer, so you're looking to gain a volume advantage when marketing your hogs. Other reasons involve taking the hassle out of marketing or gaining access to information. Or perhaps a marketing group offers access to a packer contract.
The 2001 Pork Industry Structure Study shows that 15 percent of the farms and 17 percent of the hogs in 2000 were sold through a marketing group. According to John Lawrence, Iowa State University agricultural economist, the figures for marketing networks have held steady since 1998. Meanwhile, interest in some other types of networks has declined in the past three years.
Joining a network was a popular thing to do in the 1990s. Since then, some producers have expanded their operations to the point where they could practice some of the same " group" business tactics on their own.
Most marketing groups hire a professional to market the members' hogs and make sure that those hogs meet carcass quality and performance standards.
As with anything, there are both pros and cons to marketing groups and working with professional marketers, says Gene Tinker, University of Minnesota Extension swine business management educator.
ere Tinker offers a look at both sides of the coin.
There are many people and companies setting up marketing groups who have years of marketing experience, but have never sold a hog, notes Lawrence. Keep this in mind when you're investigating different group options.
Along with these points, find out what type of role the professional marketer will play with your group. Is this person service-oriented or provide only minimal service? Either way may be acceptable, but make sure it fits your needs. Some networks hire a professional to broker a relationship between buyers and sellers, while others take a more adversarial role and try to play one buyer off another.
You must trust that the other participants in the group and the professional marketer have your best interests at heart. " Without trust, the group won't survive," says Tinker.
Lawrence doesn't expect to see much growth in marketing groups. He predicts that more producers may venture back out on their own, especially as new marketing contracts become available.
Either way, it's essential to do your homework before joining a marketing group or leaving one to venture out on your own. There are pros and cons for each scenario.
Marketing group Pros- You can concentrate on raising pork and let someone else concentrate on the marketing.
- Professional marketers focus on watching the markets and packer programs. They tend to make fact-based decisions on when and where to sell hogs. - You may be able to increase the price you receive for your hogs.
- A marketing professional is more likely to develop a long-term marketing plan.
- You can learn from other pork producer members and evaluate how your pigs compare to others produced in the group.
- The group also may be able to purchase inputs jointly, thus lowering costs. The same approach may apply to adopting new technologies.
Marketing group Cons- You must follow someone else's guidelines in order to join and stay in the group. This is especially true if the group wants all pigs standardized by weight, genetics and quality.
- Sometimes a company – say a feed or genetics supplier – coordinates the group and you may be required to use the company's product.
- It costs money to have someone market hogs for you – they won't do it for free – so there will be an added charge.
- All group members must have similar goals.
- It takes time to coordinate marketing schedules from different operations and provide the marketer with all of the necessary information to negotiate the best price.
- You will have to commit to and meet specific schedules with your market hog pig flow.