A Tool for Success
"Failing to plan is planning to fail" is a popular saying. Unfortunately, many tradition-bound farmers in Ukraine have never paid much attention to planning. In the past they have sold what grows well and what stores well, but the modern market proves the necessity to grow a broader diversity of the best-selling products, such as high value fruit and vegetables, some of which may require more sophisticated handling to get it to market. Agricultural business follows the same entrepreneurial laws as any other business, and one of the objectives of the Agricultural Marketing Project (AMP) in Ukraine is to teach agricultural producers how to maximize profit.
In addition to other methods used to stimulate the planning of agricultural production, AMP introduced the "Farm Business Model". This is a planning and analytical-informational tool designed to help agricultural producers make better management and planning decisions. The model works both on the farm and industry levels due to the accumulation of individual records in the overall database. Based on these findings the Model can help farmers plan their next year’s production and they can decide whether there is need to expand, shrink or diversify their crops. Agricultural producers can also organize revenues and expenses in a clear unified format and design sales options through different marketing channels. When supplying raw materials to processing enterprises and negotiating on prices, farmers will be interested to know how he/she compares relative to other farmers and the Model can help with this information. Though it is predominantly interesting for farmers, the Farm Business Model will be of use to others in the sector including processors, credit institutions, researchers, and policy makers.
AMP has recently started assisting farmers to obtain loans at Ukrainian banks. The unified and clear data, which is presented in the Farm Business Model, helps the farmer be more credible when applying for a bank loan. In fact, some farmers that have used the model have been able to complete their plans and take them to a bank and get a loan in a few days when normally it can take up to two to three months for a farmer to obtain a loan.
The AMP Farm Business Model is an exclusive tool as it provides those in the agricultural market with necessary start-up (benchmark) information. AMP client farmers involved in the process, submit budget information that is added up to a database, which is updated on a regular basis. Thus, the Model can serve as an Industry Overview, Production Plan and/or Marketing Plan. It can provide a means that permits farmers to compare their results with those of others; thus, giving them a basis for judging how well they perform. Having a useful decision-making tool, AMP clients can also get consultations from industry experts and all of this is presented in a user-friendly (Excel) format, so even a novice computer user can feel comfortable.
|Inna Ponomarenko, AMP Marketing Specialist, consult clients on farm business planning
Oleksandr Kravchenko of the AKRA farm, located in the Cherkasy oblast, managed 45 hectares of tomatoes, cucumbers, cabbage, and carrots in 2005. "I use the model practically every day. Thanks to it I can make the decision whether to undertake this or that challenge in my business. Working with the model, I can analyze the production cost for a specific crop and find out how to reduce. I also like to compare my results with that those of other farmers".
Vasiliy Voloshyn, from the VOLOSHYN farm in Zakarpattya oblast says, "I applied for a bank loan to purchase an irrigation system for my cucumber production. Bank specialists considered the information from the Farm Business Model, used by my farm with the assistance of AMP specialists, to be sufficient enough for them to give me a loan without any other documents. I am really glad that the AMP model helped me save time and effort".
Vitaliy Bilan, of BILAN private enterprise (BILAN trademark for lettuce and vegetables) in Odesa oblast says, "Each agricultural producer keeps track of his farm’s performance (production and sales), but not everyone is able to calculate economic data professionally. For several years we have been using dozens of methods only for vegetable crops. In 2004, we started to use the AMP Farm Business Model, which not only assembles all the expenses for production and sales, but also includes all the crops we produce. As a result, the profitability of our farm increased 5% due to the ability to choose the optimal sales channels for each crop and to produce more cost-efficient vegetables. Now we can analyze the performance of our farm fully and qualitatively".