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Unit 2: Marketing Opportunities and Strategies for Sustainable Farm/Ranch Businesses

Topic 8: Risk Management Strategies

As with any new business idea, farmers and ranchers will be in a better position to make final marketing decisions and avoid costly mistakes if they spend time identifying and managing for risks. Lenders and partners, too, will appreciate that the producer has acknowledged risks and developed a simple risk management or contingency plan (a written statement addressing those risks).

Marketing-related risks can include:

• Changing consumer preferences

• Increased competition

• Downward market pressure on prices

• Buyer default on contracts

• Changing industry regulations regarding value-added processing, packaging, labeling

• Increased marketing and transportation costs

• Failed promotion strategy or incorrect buyer assumptions

• Loss of marketing labor

There is another less obvious marketing risk that most farmers and ranchers fail to anticipate: a possible dislike for marketing. Marketing direct and even through intermediaries such as restaurants and retailers requires an enormous amount of time and communication. It is not uncommon for farmers and ranchers to enter the world of direct marketing only to find they don’t enjoy talking to farmers' market shoppers hours on end, or the constant communication required for doing business with a restaurant chef. Before a farmer or rancher jumps in with both feet, encourage them to talk with other farmers and ranchers who have experience with direct marketing.