The Rural Voice, 1983-04, Page 19Nothing for free
In a speech prepared for the Huron County Soil & Crop Improve-
ment Association's "Crop Marketing Outlook 1983" Conference,
Glenn Hayter comments on the art of buying and selling in the
agricultural industry.
by Glenn Hayter
I am astounded, and sometimes ap-
palled at the tactics that are employed
by farmers and also by agri-business
during the 'buy and sell' process.
One of the present myths that needs
to be dissolved is the notion of "some-
thing for free". There is nothing, but
absolutely nothing, given away for free.
Jackets and hats are given away for
the sake of mobile advertisement. Free
jackets, free vests, free hats, free pen
knives and free pens are all advertising
expenses included in the cost of a bag
of seed grain. If we paid to buy our own
clothes then maybe the cost of seed
grain, insecticide and other inputs
would be less.
When you participate in test plots to
get your free vest, you are really selling
your time. renting your land and leasing
your equipment to the seed company.
Think about it! How much time did
you spend cleaning out the planter
boxes and changing varieties. How
much time did it take to weight the
plots and keep the information sepa-
rate? How much land did you waste if
the variety was a flop? How long did it
take to compile the information for the
company to use in their advertising?
For those hours of work, you get paid
a piece of clothing valued at something
less than $40. A piece of clothing that
has a distinct color scheme and usually
a logo on the shoulder. I support test
plots but if you are going to do them,
then sell the results for more than a
piece of advertising.
The second instance of "something
for free" is the grain business. Take the
1982 white bean harvest. The premiums
(delivery incentives) ranged from
$22./tonne to $42./tonne paid back to
the growers. Let's look at this rebate.
Let's assume beans have a selling
price of $25./cwt. Therefore: $1./cwt =
$1./cwt=$22./tonne=4% of $25./cwt
$2. /cwt =$44./tonne= 8% of $25. /cwt
Example #1 - 4% rebate
1982 - no pick allowed - 2% loss in
weight - drying -invisible shrink -
1-3% loss in weight - pick
removal charge - .4-1.6% loss in
weight - drying charges - 2-4.5%
loss in weight (including drying)
Total = 5.4% - 11.1% loss in weight
Dockage ?
If the selling price of beans became
$40./cwt. then the rebates. as a percen-
tage of the value of the beans, becomes
even lower. The value of the weight
reduction through pick and moisture
become even higher.
There is nothing given away for free -
ever!
In the supply industry there is a
situation now where one company is
saying they will match the lowest price
of any other competitors! What price
would this company charge if it did not
have any other competitors? Does it
know what price it needs or does it
price according to "what the market will
bear"? There is nothing more dangerous
than a pricing policy done to whatever
the market will tolerate. It has no
relation to costs. efficiencies. or geog-
raphy.
Another trick that is gathering atten-
tion is the 'prepayment trick.' An ex-
ample of this is as follows:
Prepayment on March 15 -get 5°%° off
Interest on the money to May 15 = 2°i0
Cash payment discount on May 15= 2%
Net balance saved = 1°0
If your fertilizer and chemical bill
totaled $20,000. then you saved $200.
However. what was the final price of
the inputs? Was the fertilizer one per
cent more expensive? Was it convenient
or did you have to drive 25 miles
everytime you needed a pail of chemi-
cal? Did they have fertilizer equipment
when you needed it? Sometimes a
bargain is truly a bargain but there are
very, very, few bargains.
When you are buying machinery, take
a hard look at tendering your require-
ments. Select the colour that you want
and then ask your nearby dealers for
sealed bids on the same machine with
the same options. Make sure tire sizes.
radios, motors and other options are
similar so you can have accurate com-
parisons. Be strict about the time frame
and answer all questions honestly
about the machine.
Be an honourable businessman and
never use one man's bid against ano-
ther bid to get a reduction in price. That
is highly unethical and you will have a
hard time going this route again.
Geographical location is worth some-
thing but not much. If your local dealer
does not have the parts that you need,
then the fact you bought the machine
from him does not matter a bit. If you
need service personnel but they are all
out on other jobs, then where you
bought the combine is irrelevant.
Any supplier, who will snub a cus-
tomer because he lost a fair deal, will
soon be out of business. Loyalty to
suppliers is going the same route as
loyalty to banks. This year. I have found
variations of 10-15 per cent on tender
bids for a total of $13,550. saved. A
competitive bidding situation is truly
the best provided that all participants
behave honourably.
Sharpen your buying and selling
habits. It is a tough hard-nosed world
now and that is what you will have to
be in order to survive.
Where
Hopper
goes,
the
water
flows
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W.D. HOPPER
& SONS
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SINCE 1915
R.R. 2 Seaforth
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THE PORAL VOICE APRIL 198; PG 1/