ALFALFA MARKETING PLAN

Marketing involves being customer oriented, listening to buyers, and understanding their wants and needs. Effective marketing begins before production.   

A useful tool for alfalfa growers is a written marketing plan to help make better marketing decisions. Once a marketing plan is put in written form it can be reviewed periodically and revised if necessary. A written marketing plan can also be used as a record of past marketing decisions, thus assisting growers in making future marketing decisions. A grower may want a separate marketing plan for each cutting of alfalfa.   

The following are some considerations in developing your marketing plan.   

What is your target market for alfalfa? The target market depends on the quality of alfalfa hay produced and the bale size and type chosen for harvesting alfalfa. For example, dairymen usually want alfalfa with a high relative feed value, while horse raisers want alfalfa free of blister beetles. Beef cattle and sheep producers may be more willing to use lower quality hay. Many dairymen want alfalfa in large square or small rectangular bales, while horse raisers prefer small rectangular bales. Beef cattle and sheep producers may prefer round bales or small rectangular bales. The quality of alfalfa you produce and the harvesting package affects the amount buyers will pay for alfalfa.   

When do you plan to market alfalfa? Your answer also affects what price you can expect to receive for alfalfa and the costs you must consider after harvesting alfalfa. The July issue of the Oklahoma Alfalfa Hay and Seed NEWS contained an article on seasonal prices for alfalfa hay which you may wish to reread.   

What are your marketing alternatives? Growers can market alfalfa from the field or from storage. Growers can price the hay at the time it is delivered or in advance of delivery. Therefore, alfalfa growers have four basic alternatives:   

* From the field - cash price;   
* From the field - forward contract price;   
* From storage - cash price; and   
* From storage - forward contract price.   

You may prefer one or more alternatives and may rule out one or more alternatives.   

What are your costs beyond harvesting? Your costs may differ somewhat according to the marketing alternatives you are willing to consider. Who pays for moving hay to the side of a field, stacking hay, placing it into storage, or loading it onto trucks? If hay is stored, remember weight loss due to shrinkage, often assumed to be 10 percent. Also, if hay is stored, remember the opportunity cost or interest cost of having money tied up in the hay for the storage period. What about advertising costs? How are you locating potential buyers?    

Thinking about the price outlook for alfalfa based on expected supply and demand conditions is a necessary part of developing a marketing plan. Even if no formal price projections are made or obtained, price expectations are included in the decision. The only reason not to sell alfalfa from the field via cash or forward contract is because prices are expected to increase more than post-harvest storage and interest costs.   

What is the expected supply picture? What is the expected demand picture? What is the price outlook? Your answers to the supply and demand questions will determine your answer to the price question. The following may be a useful guide. 

Price Outlook Possibilities  

 
Based on your best guess regarding prices, what price do you expect at the time you plan to market alfalfa? How does your expected price compare with what the market is offering currently? If your best guess price is above the current market price, you may wish to do nothing currently and continue monitoring the market. If your best guess price is below the current market, you may want to market some or all alfalfa currently or attempt to obtain additional information to verify your expectations.   

You may not be able to afford the luxury of storing alfalfa and waiting for higher prices. If you cannot afford lower prices, then your financial situation may dictate that you sell alfalfa as soon as possible, probably from the field or by forward contract. If you are more concerned about not having the opportunity to sell at a higher price, then you may want to store alfalfa and wait for higher prices.   

Based on the above, you can formulate your written marketing plan. Jot down answers to the above questions. Then you can write your marketing plan:   

I will sell   

__________ (tons or % of cutting)   
__________ (from field or from storage)   
__________ (for cash or by forward contract)   
at an expected price of $__________/ton.   

How frequently will you review and possibly revise this plan? How did your marketing results compare with your marketing plan? What did you learn for next year?