What’s the biggest reason farmers don’t get better deals on crop inputs? “SALY” – Same As Last Year.
That’s what Austin Duerfeldt discovered as he helps farmers become better negotiators for their farm operations.
“More often than not, if I’ve bought fertilizer from company X for the last 20 years, that’s what I’m going to do this time, no matter what other options exist,” says the University of Nebraska ag economist. “There’s not a lot of guys who are comfortable with ‘the ask.’ They just want to know the price and move on with life.”
Ah yes – the ask. It’s short for, ‘Are you willing to ask for a lower price?’ it’s one of three keys to shaving costs and getting better deals for your hard earned spend on crop inputs.
But we’re getting ahead of ourselves.
To start negotiating from a position of strength, do your research. Determine what it is you are willing to do to change your cost structure.
That may mean shopping for a specific price for a specific kind of herbicide or seed. Or it may mean changing your cropping methods altogether. If an intensive herbicide treatment to bust specific weed outbreaks is simply beyond your budget, consider a change in rotation, or cover crops that eventually pave the way toward less dependence on chemical weed control.
You need to be willing to take those steps even if means upgrading your management skill, learning new techniques, and committing some upfront dollars to the process.
If you’re sticking with your normal crop plan and price shopping, do your homework. That includes local outlets as well as online, which has grown significantly in recent years.
“In my area a lot of guys are checking propane contracts for fall corn drying, where you might see a difference of five or 10 cents per gallon,” says Duerfeldt. “When you’re lowering input costs there won’t be a silver bullet -- it’s more a lot of nickels and dimes that matter.”
Indeed, studies consistently show that the best operators are those who pay attention to the nickels. A Nebraska Farm Business study showed that the top 10% of producers routinely make more money than others not from marketing skills but from lower costs, year in and year out.
“You need to take a multi-input strategic approach to getting costs down,” says Duerfeldt. “It may be doing smaller applications of fertilizer two or three times or using different modes of action to reduce the need for more intensive spraying, for example.”
Once you’ve done your homework, start with a specific retailer you wish to work with. Knowing what you know about the various price options available to you, approach this chosen retailer with a specific request providing full disclosure of the options available to you.
“This is the uncomfortable part,” says Duerfeldt. “You need to know what you want, and you have to ask – that’s what everyone struggles with.”
Retailers are trained to work with customers, with the goal to make a sale. With Wal-Mart, for example, it’s the company’s ‘price matching guarantee.’
“Applying this to what we’re doing in farming, if you’re going to the fertilizer dealer five miles down the road but the price is $2 per acre more expensive than the guy 30 miles away, go ahead and ask – there is no harm in asking and you haven’t lost a thing,” says Duerfeldt. “This is a simplified example of course, but you can always provide information about what is available to you. It’s having the gumption to bring that into the conversation that most people don’t feel comfortable with.”
The secret sauce
The secret sauce to negotiation is knowing the wants and needs of the other side. Understanding non-monetary values can help you cement a deal that goes beyond just dollars.
“There’s a lightbulb moment that clicks with some people when they grasp that they need to know what the other side really needs,” says Duerfeldt.
With cash rent, for example, you may have the low bid if you’re just looking at land itself. But maybe the land in question includes 30,000 bu. of storage. If adding that storage to your operation reduces your grain elevator storage costs, you can calculate a higher land bid. In another example, an elderly landowner may be happy to accept a lower price if you’re willing to mow lawns and keep the homeplace looking nice for his family visits.
“Understanding what to look for not only for you, but also for the other side, can be a struggle,” admits Duerfeldt. “When you’re talking about something value-based, or personal, trying to figure out the monetary equivalent takes investigation on your part.”
For crop inputs, you can help retailers give you a better deal if you focus on three areas: time of payment, time of order, and volume.
Early orders help seed companies manage the supply chain. If you’re willing to order next year’s seed this October, you may get a break. Likewise, retailers might give you discounts with cash or early payments.
There’s not much new in the volume discount discussion. What does seem surprising is that studies show farmers are still unwilling to work with neighbors on several levels to lower costs.
Even so, if you only need seed for 500 or so acres it would be wise to team up with other nearby farmers to capture volume price discounts.
“There’s power in numbers,” says Duerfeldt. “Pool together when you can. If you and your neighbor know you need lime this year, it’s better to contract together.
“Then you’re looking at a situation where you need to communicate not only with the supplier but also to be aware of your neighbors who are farming nearby. It might be beneficial to get together rather than work alone.”