PART 1 OF 3
by Sarah Vacek
Editor's Note: The spring of 1998 found Purdue University experts researching large commercial producers. With the support of sponsors (ADA/Moorman’s Inc., Deere & Company, Novartis Crop Protection Inc., Pioneer Hi-Bred International Inc, and Terra Industries Inc.) and an associate sponsor (Farm Journal Inc., publisher of Top Producer magazine), the Center for Agricultural Business at Purdue University collected data from more than 1,700 operators. This Commercial Producer Project commenced with the goal of providing insight into the rapidly evolving group of large commercial producers because this group accounts for the majority of agricultural inputs purchased. The study identified the attitudes and buying behaviors that affect input purchases by commercial producers and explored changes these producers plan to make in the next five years. What follows are highlights from the research, presented in a three-part series. The first part reports information about how the respondents operate their farms. The second part will explore these producers’ buying behaviors, and the final part will look at market segments. To order a complete copy of the study, contact Sandy Leuck at the Center for Lifelong Learning by phone at 765/494-2748, or via e-mail at email@example.com. Book price is $49.95.
The commercial producers surveyed in the Commercial Producer Project were broken into three main groups: 1) mid-sized producers ($100,000 to $499,999 1997 gross sales); 2) typical large producers (85 percent of the respondents with gross sales exceeding $500,000); and 3) extra-large producers (top 15 percent of the respondents with gross sales exceeding $500,000).
Of all the respondents, 98 percent were male and 35 percent were 45 to 54 years old. About 27 percent of respondents were under 45, with 8 percent of those under 35 years old. Thirty-eight percent were 55 or older, with 15 percent being more than 65 years old. A full 37 percent of large producers participating in the study were college graduates. Producers under 35 years old were the most likely to be college graduates.
GOALS AND ATTITUDES
As might be expected, the large producers tended to describe farming more as a business than as a way of life. However, nearly 60 percent of large producers said farming was equally a business and a way of life, while 66 percent of mid-sized producers perceived the same.
More than half the respondents planned to grow their businesses by 2003. Large corn/soybean producers planned to grow by more than 500 acres in five years, while large wheat/barley producers planned to grow by more than 800 acres in that same time frame. Hog producers expected to finish 3,400 head more hogs by 2003, and beef producers expected 800 head more cattle. The under-35 age group projected the greatest growth.
Top farm goals were to maximize profitability, return-on-investment and production per unit of input, while reducing risk and minimizing debt. The top three personal goals were farm succession, financial success and more free time.
The surveyed commercial producers tended to perceive themselves as confident, successful and achieving goals. More than half reported they were asked for advice from other producers. As a group, producers were optimistic about farming and felt farming was the best job on earth. Satisfaction with family income was mixed and was lowest among producers younger than 35 years old.
Farm size and producer age played a role in how respondents perceived their own adoption rate of new technologies. The percentage of commercial producers who rated themselves as innovators was about twice the percentage in the general farming population. More than 80 percent of extra-large producers said they were innovators or early adopters. The group to rate themselves the most innovative were the 35- to 44-year-olds.
ENVIRONMENTAL AND FOOD SAFETY ISSUES
In most cases, there were no real differences of opinion between mid-size and large producers on any of the environmental issues. Differences did surface among the different types of enterprises. Results showed that environmental issues had a higher profile among swine producers and corn/soybean producers.
Ninety-one percent of respondents agreed with the statement: "Environmental regulations will have a major effect on future farm costs." Meanwhile, 41 percent of the large producers agreed with the statement: "Environmental regulations have slowed the growth of our farm business."
Most producers were concerned about the interaction between farming and the environment. Yet, nearly three-quarters of the large producers disagreed with the statement: "Farming is a major contributor to environmental problems." Cotton producers were the most negative about environmental regulations.
Two-thirds of the producers surveyed said environmental regulations have impacted their input purchase decisions. When making farming decisions, most producers considered environmental policies, even if they increased costs. Here, 69 percent of livestock producers agreed or strongly agreed that environmental issues were taken into account when making farming decisions vs. 57 percent of crop producers.
Environmental concerns extended into choosing a supplier. Half of the producers said environmental policies were important when choosing a supplier, with corn/soybean producers in strongest agreement with that statement. Further, environmental regulations and policies had more impact on the purchasing behavior of older producers than on younger producers.
Almost 60 percent of respondents also were concerned about the effect of farming practices on food safety. Here, livestock producers reported food safety regulations have had more of an impact on their buying behavior compared to crop producers. Yet at the time of this survey, the GMO debate had not surfaced significantly.
Producers felt that food safety regulations had less impact on farm growth than environmental regulations. Beef producers felt most strongly that food safety had an impact on their farm growth, while the other producers had mixed opinions, neither strongly agreeing nor disagreeing with the statement.
MANAGEMENT TOOLS AND RESOURCES
The size of operation, age and level of education of respondents had a great impact on producer use of management tools and resources such as consultants, precision agriculture and communication technologies.
In all cases, more large producers than mid-size producers made use of management tools such as written financial/cash flow plans, management seminars, technical seminars, risk management plans, written marketing and business plans, written long-term goals, and written ownership and management succession. In addition, more extra-large producers made use of all these tools, except for written financial/cash flow plans, which where used between the two large-size classes about the same.
In respect to age, 74 percent of surveyed producers 35 to 44 years old used written financial/cash flow plans, compared with 41 percent of producers more than 65 years old. The use of the top four management tools - written financial/cash flow plans, attending management seminars, attending technical seminars and using an active risk management plan - increased in almost every instance with the level of education completed by the respondent.
Overall, the larger the producers, the more likely they were to have independent consultants. Age also played a role in the use of independent consultants. Producers under 45 years old were the highest users of consultants, while those over 65 years old were the least likely to use a consultant.
Among the crop producers, 58 percent said they used a consultant in 1998. By 2003, 75 percent said they expected to use at least one consultant. In general, livestock producers were heavier users of independent, paid consultants than were crop producers.
Soil sampling with GPS was the most common precision practice being used, with 21 percent of the large producers and 16 percent of the mid-size producers using this practice. Satellite imagery was the least likely technology to be used. The use of precision technologies was highest among corn/soybean producers while almost non-existent among wheat/barley producers.
The use of many communications technologies in the farming business is reaching the point of saturation - especially among the extra-large producers. More than 80 percent of extra-large producers used cellular phones, computers and fax machines. Younger producers were much heavier users of most communication technologies, except market news services. AM
Sarah Vacek is a communications consultant in St. Louis.