more ? on value adding

[wmoebis]

We all know the price we get for our raw product. We all know the price consumers pay at store. Where is the break down of each value added?

How much profit could to be made if we were to deliver only cleaned grains, How about if we were to sell, say semolina instead of durum.

Who profits the most on our product, from field to plate? At what point could we maximise our returns on our farms?

[liberty]

"How much profit could to be made if we were to deliver only cleaned grains, How about if we were to sell, say semolina instead of durum."

How much profit could be made depends on how much capital you want to put at risk; i.e. how much you want to invest in plant and equipment to add value to your raw material. Often, the investment will run into tens or hundreds of millions of dollars. Running such facilities usually requires highly specialized skill sets that most farmers don't readily possess. Learning those skills takes vast amounts of time. At some point, you will probably have to choose between running your farm and running an industrial enterprise. If your processing facility grows beyond a "mom and pop" size, it is nearly impossible to do both.

"Who profits the most on our product, from field to plate?"

Usually, the person who puts the most capital at risk. The downside is that the price to pay for a wrong business decision is proportionately that much higher. Food processors, large and small, go broke on a regular basis like any other business.

Most food processors enjoy very slim margins when you compare profits to invested capital. It's not a gravy train in any sense of the word. You need to be careful what you wish for.

[bduke]

Kodiak.... seems the problem is not so much the
law, as the lawlessness!

This story reflects the reality of taking for granted
our North American adoption of British laws,
education, and electoral systems when we venture
into many developing countries.

Little wonder they are older countries still
"developing"!

Bill

[ado089]

I actualy think that the companies servicing producers and processors make the best money. Transporters, plastic bag manufacturers, marketing agencies. As far as the biggest capital extracting the greatest rewards that is true too an extent but no investor in their right mind would invest in a canadian farm operation (except sprott I guess and I don't think thats working to well). Our return on investment is disgustingly low and risk is absurdly high. I'm actualy shocked that anyone even extends credit to primary agriculture producers.

[samhill]

I'm not informed about slim margins by food
processors, and will try to do some research, but
Nestle's quite likely makes enough to buy a small farm
on a semi load of bottled water.

[jrkfarms]

If producers want to know margins just visit a bakery either large or small for the prices on wheat flour. A typical mill will get on average 70% flour return on a bushel of wheat this is than divided into the different grades of flour from first patent clear(highest quality) to red dog (all purpose in grocery stores. The mill will charge the bakery the price at the coast and than add cost for the milling and transportation. As producers do we have to think of huge multinationals and huge output? I have developed a profitable flour mill by focusing on small bakeries who are basically ignored by the large mills, I have skipped all the middlemen by marketing myself. The cost of equipment is less than the purchase of a quarter of land here in AB and the returns are much better than trying to grow and produce a crop.

[ianben]

I would say the one who manages risk the best, could even be the farmer.

In all sectors up and down the chain some will prosper some will fail.

We run a local hay for horses business where we are "the chain" and perhaps get a better idea of each individual risk.

Our biggest risk is running out of product because then the customer rings someone else and we have lost a customer.

When we started we thought the biggest risk would be making good hay as we live in a wet area.

We found there is a customer for most grades but he aways knows what that is not us.

Any shortfalls in our own supply both quantity and quality we just buy elsewhere and it has been easy to achieve in practice if not quite as profitable.

This is working quite well but only if we supply the right product to the right customer.

This is what I would like to do with grain but not get involved in the chain.

My skill is in growing not milling malting etc, but I would like to find a way to contact the customer who wants my grain.