Consider the Source
In modern agriculture, there is a big difference in the quality of the advice farmers receive, depending on the source.
Large-scale commercial farms are big users of outside expertise, and tend to act on the advice they receive from product and service providers. In most cases, it comes from individuals with a vested interest in the farmer making a certain choice.
In legal terms, this is called a conflict of interest. As Sarah Nolet pointed out this week, it’s not recognized as iffy professional behaviour in agriculture, in the way that conflicts of interest normally are, outside of the commodity business.
It can be hard to recognize the risk of acting on conflicted advice without having suffered the cost before. Once a person has been through that, they can see even well-meaning professional advisors acting in conflict of interest much clearer.
Farming is a series of decisions needing to be made, in all different areas, from land and equipment, to agronomy to grain marketing… with work-life balance considerations constantly at the forefront. In each case, there is a range of options to choose from, each with a different value and predicted outcome.
Farmer Mental Health
It gets overwhelming and exhausting, which is why studies are finding farmers to be 2-5x more vulnerable to suicide than the general public. Farmer mental health is having a moment these days, with many new groups working to provide needed support in communities dealing with enormous stress, unaccustomed to talking about feelings.
To cope, farmers have become overly reliant on the advice of product and service providers. Each purchase and sale decision has big-dollar impacts on the bottom line, which brings uncertainty, fear, greed, ego and pride into the ultimate choice.
Understandably, it seems easier to let an outsider who sounds like they know what they’re talking about make decisions instead. As a bonus, if it doesn’t turn out well, the farmer has someone else to blame.
Let’s look at a few examples of where conflicted advice is built into the typical decision-making process in producing commodity crops. Note, these are inter-related in a way that compounds the risks and the costs, to individual farms, and broader society through negative environmental externalities.
Case Study #1: Independent vs. Sales Agronomists
Sales agronomists typically conduct soil tests across representative fields in the broad geography where the network of crop input retail stores are located. This data can be aggregated and analyzed into area-average rates of fertilizer for the crop to achieve a target yield.
There are more modern and precise methods for formulating fertilizer application rates based on soil tests, but this ‘extract-and-replace’ method is the predominant one used by the crop input companies that advise and sell fertilizer to farmers. The recommended rate offered for NPK, for example, is generally the same for all farmers in the region, who can then purchase that blend from the store, and custom application of the product for an additional fee.
Terminology sidebar: NPK stands for nitrogen, phosphorous and potassium, the three macronutrients required for crop development. Traditional agronomists recommend to ignore trace minerals and focus on the macro’s because that’s where farmers get the most bang for their buck, i.e. yield per pound of fertilizer applied.
Independent agronomists typically don’t earn a margin on product sales. Technically, they would earn only professional fees from their farmer customers to provide services like soil testing and analysis, scouting and ongoing advice on what product applications fields need to manage yield, disease, pests and weeds.
Case Study #2: Grain Buyers vs. Marketing Advisors
If you think about it, every day is a good day for an elevator agent to buy grain. They profit from handling margins and their salaries are typically tied to volumes or earnings.
Grain companies are also selling grain every day. Farmers, on the contrary only ‘buy’ one harvest every year, and they sell it on just a handful of days over the course of the following months.
This puts pressure on grain buyers to be considered when farmers are making those unpredictable marketing decisions, so they inundate the community with a constant stream of market and pricing information. ‘Specials’, ‘target pricing recommendations’, and a big mess of regular bids for every crop and every month’s delivery window, come through via text to farmers, a couple of times every day, from every company they’re signed up to as a customer with.
99.9% of that information is useless or irrelevant, but it still makes the phone ping and the farmer worry that they might be missing out on a good deal. Currently due to extreme market volatility and painful contract disputes in recent years, there is a total lack of trust and unprecedented tension between farmers and grain elevator agents.
Independent grain marketing advisors earn professional fees from farmer customers to manage sales according to the farm’s needs, namely cash flow and cost of production. By definition, they do not buy and sell grain themselves, in order to remain unbiased in their assessment of the market outlook, and in providing sell recommendations.
Case Study #3: Companies that do both
It should be obvious to everyone, but sadly it is not, that a company who buys grain and sells crop inputs is providing seriously conflicted advice to farmers. Yet, farmers who don’t want to pay for independent advice, or do the research themselves, act on advice from these actors all the time.
Conclusion
Marketing advice from grain buyers is often purposely misleading, laced with half-truths, and delivered with pressure in hopes of enticing a farm to make a selling decision that otherwise wasn’t on the table. Independent grain marketing advisors aren’t perfect either, but at least they hold some accountability in the risk of losing customers if their advice to farmers doesn’t turn out well.
When farmers follow the advice of a sales agronomist, they can avoid analyzing soil samples from their own fields, and cut out most of the decisions around crop inputs. When it’s ‘fungicide season’ (right now at peak vegetative growth amidst high humidity) for example, the product reps together with the sales agronomists make sure all the farmers know the best timing and application rates to control crop diseases like fusarium.
From the seller’s perspective, this works to maximize sales of applied crop inputs. From the farmer’s perspective, this results in significant waste and pollution - a delicate topic that communities try to avoid because farmer mental anguish is alleviated when decision-making is reduced.