This article was written by our Managing Consultant, Lucy Coward.
There are some tough negotiators out in the World of business, but some of the toughest will be your farmer suppliers. They live and breathe what they do far more than most people. Perhaps it’s because they live and work in the same place. Perhaps it’s the inherent challenges of agriculture, weather and commodity cycles. Perhaps it’s generations invested in the same goal. Whatever the reason, building relationships that last with your farmer suppliers is paramount to both your success and theirs.
After nearly 25years working in the agri-food sector, I have seen the highs and lows that farming can bring. Some weeks there is too much of a given commodity and the week after not enough.
How can you manage demand plans and budgets in an often volatile environment? Honesty and openness are two very good starts. Long term and open relationships with your farmer suppliers can go a very long way to bridging supply and cost gaps.
Farmers operate in an environment where they are often price takers at the whim of commodity cycles and seasonality. However, the same can be said for buyers of these products to some degree. For the most part people want security, to know volumes, pricing and timings, and to know what will happen in the good and the bad times. Many of them use the signals that you give to plan, expand or even diversify. Be careful with your words and signals, as people’s livelihoods can depend on them.
In many cases there are no historical contracts between buyers and farmers. It’s a handshake at the front gate to seal the deal. It’s hard to put contractual terms around things like pricing and volumes, especially with commodities and the whims of consumer desire. It can be done, but it must be two ways and it must be fair to both sides. Contracts must be in a language that both parties can understand.
Legal-ese is fine for the lawyers but can either party read and understand what the contract says in real terms?? Contracts when done well give both parties a level of security in the good times and the bad.
Choosing your business partners and suppliers is important. You want to do business with the best as do they. Be willing to share your plans and encourage them to do the same. That way you may both reap the rewards of a shared vision instead of pulling against each other.
Be careful with how you communicate with your grower suppliers. Be honest with them, be open, build trust and rapport. There will be a time when they have the cards and a time when you do, but often it’s in that moment that the strongest relationships are born. The decisions that you make in that moment, and how you communicate can see the difference between supply and budgets being met or a vastly different scenario for both parties.
Do you need help with contracting direct from farm or negotiating with your farmer suppliers?
Does your team need coaching or mentoring on how best to build relationships with your farmer suppliers?
If the answer is yes, then contact Rowe Advisory today to start the conversation.
Rowe Advisory is a leading consulting business in Australia. We are strategically placed to be able to lead, manage or advise on preparing your business for Industry 4.0.
Managing Consultant (Melbourne Office) Lucy Coward, at email@example.com