Topics

1. Marketing is personal relationships
2. Facilitating diversification
3. Facilitation is mentoring farmers
4. Natural born salesman
5. Lessons for farmers

Marketing is personal relationships

Paul grew up in the produce business. His "folks are in produce and have done all sorts, from growing, to packing and delivery). This included buying from other farmers and reselling it to "suppliers." At six he was already growing crops. He notes that his father, Jack Teague, brought up Paul and his brother to learn the family business, involving them in the farm's operations early and continuously throughout their lives. He strongly urged and supported the children to attend college, and Paul not only attended University of Arkansas, but went on to get a Ph.D. in Agricultural Economics at Texas A&M.

In college, Paul met his wife to be, Tina, and together they would move to the Rio Grande Valley, "where produce happens in Texas", partially because Paul wanted to stay in touch with the produce industry. Tina was and still is a plant scientist.

In 1988, a number of farmers had contacted Arkansas State University asking for help in marketing their produce. Somewhat independently, the farmers had identified this as their greatest hurdle. The Dean of Ag responded by writing a four-year grant to establish a produce-brokerage (Delta Fresh) to help Arkansas farmers sell their crops. The brokerage was to become an independent company after the grant term.

One of the farmers involved in the grant met Tina in Texas when he was doing some research there and word got to Paul. Within a year, Paul and Tina were both working for Arkansas State and Paul was overseeing the grant and developing "Delta Fresh" into a brokerage firm. Paul's initial clients were the farmers who had initially contacted the university, including one cooperative (Great River Road). Paul started attending conventions and conferences as often as he could, making contacts with other farmers and suppliers. He soon rediscovered old connections with a number of the suppliers. "I was selling to the sons of families that my family had been working well with." He noted that he a number of "cold calls" to people he didn't have history with were also successful.

As the grant progressed, some of the farmers were not able to produce the quantity or the quality that he needed in order to sell to suppliers. He notes that this made him seek out other growers and to nurture those farmers expressing an interest in growing a new crop. Some of the trends at this time; "farmer could see the writing on the wall, the money in cotton w as getting less each year and the price for soybeans was also getting low. It was just a matter of time." Farmers actively interested in growing alternative crops than rice, cotton and soybeans became Paul's bread and butter.

When Delta Fresh began, all the farmers were already producing at some level versus just thinking of it.

He sold their crops for a good price, working with them to grow a quality crop. Paul notes that his experience in growing produce h as been priceless in his ability to help the farmers get started. It is also essential to his ability to sell the crop to the appropriate entity. For instance, fresh market spinach to fresh market dealers and lesser quality spinach to canners, where appearance is not as important.

In 1989, Paul could see that Great River Road Co-op not going to make it, due "incompetence". They couldn't grow enough and couldn't pack it efficiently enough to compete.

June 92 to June 93, the grant was extended for another year (5th yr). Paul had a falling out with the board and Paul is seeing little of interest and no future in academia. Since he already developing watermelon business in May 93 he got started and incorporated himself taking the secretary with him. Closing one office and opening the other the next day. Couldn't do any of this without his secretary, Debbie.

Arkansas State University permitted and encouraged Paul begin his own part-time marketing and to recruit new growers. This permitted him to build the business to the point he could it was self-supporting.

Buyers began asking for Delta Fresh (and it represented Arkansas produce nationally).

One of the growers Paul recruited was Steve Parks in 1989. Steve was growing spinach for canner. Paul had experience growing fresh market spinach in Texas -- and wanted to grow for (Paul is happy to talk and confident - and really appreciates his family experience)

Once Paul sold his first loads of watermelon, other watermelon growers were finding Paul. His reputation as a good representative was spreading around and helping to attract growers. In 1991-2 he was known as the "watermelon man", joining the Missouri Watermelon Assn (where most of his growers were at that time). Paul became active in the Texas and National Watermelon associations.

In 1993 he had 300 acres of watermelon and "went out on my own" and made a bunch of money, what with working half the year for the unversity.

In 1994, Paul bought watermelon packing shed and hired another salesman -- a former student/pupil and had a total of 450 acreas.

1995 and 1996 were bad years, but things turned around in 1997 and 1998. By 1998 he had realized that he needed just 3 growers for a total of 300 acres. He's looking to spread out his growers geographically. He's supporting two farmers in southern central Arkansas to take up watermelons for 2000 season.

Facilitating diversification

Paul notes that its "hard to sell deals when I'm not there to see them. What if harvest crew says four PO and ends up being three -- what do you do?"

He has also taken to arranging for ("lining up and handling") harvest crews for his farmers. Working with the harvest crew leader, he learns "what is out there" from the leader and can sell it knowing what it is.

Easiest, more efficient and most sensible to work with a single-commodity line. This versus selling several vegetables "lines" for one farmer/coop. Always conflict between crops for equipment and labor at some time during the season.

GRR coop was not successful, because board of directors had no financial investment in it. The Tomato coop in southern Arkansas is quite successful. It consists of a small, highly-selected group of growers who can deliver on quality and quantity. Each grower has a considerable investment of at least one share at 20K per. The managers are also excellent salesmen and invited Paul in if he would be able to help them get into one of the most successful produce suppliers in the nation, Capital City (Des Moines, IA). As salesmen they are successful in "sniffing out opportunities and are ready to move on a deal. They will take on some of the risk themselves. (they are now doing 10% of their business through Capital City, which will handle the hard stuff, like number twos and smaller sized tomatos.)

Diversifying away from just handling one crop works when there are some supporting relationships, being effective person to person, to be friends and partners.

Trials of Delta facilitation

Being isolated from major produce areas has benefits in lack of competition for growers. But "when only game in town can't cover half loads -- isolated -- and sell local for whatever.

Understanding rhythms and expectations of the business is tough for new growers. When the market is good, one will be "overbooked" (over-produced) and finding ways of fulfilling contracts.

One can "'add-value' by packing, cleaning and icing. This will turn $100/tonne spinach into $1,000/ton. Just need to make sure your costs are less than what you charge."

There's a saying that "if you don't go near broke three times in the produce business, then you'll never get there ("and I've been there twice already")"

"Produce is a very person-oriented deal." Works with farmers who are already producing at some level, a lthough maybe not the crop they intend to sell. Looking for a farmer who's got the commitment to grow a crop well a nd who's come to trust Paul to be a fair partner. Paul has found that farmers who are just "thinking about it" are not the persons he wants to work with. They need to have a commitment to do research, research and more research and really start to understand what is needed to produce a particular produce crop. "Worse kind of guy to work with is one is desperate and broke, like a cotton farmer."

Facilitation is mentoring farmers

In meeting a farmer for the first time who has already demonstrated that he has some commitment and done his research in production, harvest and selling (fetching prices). Paul assures them that they are going to get paid. This is aided in large part by his reputation among other farmers, and very likely that the farmer he is talking to has talked or even friendly with a farmer that Paul has worked with already. Paul then acts like a production consultant and discusses the varieties he needs to sell before they get planted. ("In southern Arkansas, I am giving them all the start-up materials, including the irrigation tape and the transplants, so that I get what I need.")

When recruiting farmers:

Depends what crop they are looking to grow and their experience. If they are starting in produce, then watermelon is the easiest crop to grow. It doesn't need much input and requires no special equipment for growing, harvesting and packing. It has the least processing of any produce after harvest.

Cash flow requirements are essential to his decision. While Paul has good credit with the bank that allows him to advance payments to processors, packers, growers, and trucking -- the farmer needs to have funds for these as well.

Growers have to be able to trust Paul. Paul is extremely up-front with the farmers laying out what they can expect from him and what he expects from them. "Farmers working with past businesses have been treated poorly, sometimes not getting paid or being charged extra fees after the crop has been harvested. Now the farmer is looking for someone who won't stiff them as others have in the past." -- ("if you can't trust me then let's not talk anymore")

Paul needs to know that the famer realizes the level of risk and that he has done (doing) his homework before new venture.

The tomato coop: the coop allows farmers to pool their harvests together, particularly important when the crop can vary considerably in quality and size. Selling in volume keeps the coop in business -- by allowing them access to markets that would otherwise be unavailable to smaller volumes and the income keeps the farmer in business. More volume also means that they can sell to several suppliers which is good policy if one supplier finds itself in a position not being able to buy. It gives sellers some negotiating room with the suppliers. The writing is on the wall. The tomato auction -- for decades a way for 1-2 acre farmers to sell their tomatos -- is on the way out. It hasn't been offering decent margins in last few years.

Auction buyers are finding famers from past auctions and becoming brokers. When the auction is through, the 2-5 acre growers will be out-of-business. 40 years ago when plots were smaller, the auction was one of the most efficient marketing mechanisms. Todays it's not -- the chain-store groceries and and fast-food chains are requiring higher volumes, consistency and grade.

We're all still in this produce business because it's still got possibilities to "hit the big lick". "Can't do it with row crops." The top market for cotton and soybeans won't give the margins to make it big without planting thousands of acres. But the trick is to survive to make it to the "big year" or until the "produce falls out of the market."

On the same acreage, tomatos could bring in 30K, watermelon 4K, and cotton at the best price would be 1.5K -- conservative estimates of how produce brings a bigger buck, but it's accompanied with more risk in production.

"Sell it or smell it"- Produce is a very time-sensitive business. It's days or even hours depending on the weather conditions (to destroy a crop, prevent harvesting) to get the produce in the truck -- and then need to get it to the supplier right away. Delay can mean added costs and less net income. Sell the crop at a price before it is delivered -- either before harvest (just before -- no real futures market with produce) and just afterwards. "Just-in-time" inventory. Establishing new markets

In the brokerage business, Paul says there are some things he has learned (that he doesn't mind sharing):

1) single-line produce is best grown over a large geographical area to spread out risk of weather damage (hail, drought, flood, temperature). It is better to have fewer growers with about the same acreage per farmer, so that the risk is spread out and the trucking costs are kept to a minimum yet able to fill a truck.
2) produce business would do fine without us, not getting into something we've got production disadvantage. We get good yield and have the best marketing window. Means assessing other producers across the nation and the world. Who's in the business now.
3) Niche markets: Vidalia onions, 25 million to convince consumers that they are best in the world and then they legislated the name to a geographical area.
4) Freight advantage to suppliers reduces the cost of doing business and delivers a fresher product. As Paul sees it, when you grow in a region, you are best situated to serve that area and areas to the north -- not necessarily to the west and east, where others are in the same growing regime/zone as you.
5) technological changes are coming. Suppliers are demanding that growers/shippers provide their safety requirements, and this is where associations are being helpful. They post these safety requirements and then Paul's website will be linked to it there.
6) Broker's relationships with producers and with suppliers become rather personal and protective of each other. There forms an informal cooperative and for Paul, the broker-supplier relationship takes care of each other through seasonal swings and swing seasons.

Natural Born Salesman

Paul says he is a natural born salesman and he only hires people who are. He knew his student was from some student selling project. He knows he's a natural salesman.

Best way to get into the business is to just work for an existing produce broker. In this way to start to build up relationships with farmers and suppliers. Story of guy in Michigan that worked for a national broker. He built up a very successful watermelon business, but the brokerage didn't want him to do watermelon, but some other produce -- well, he had to quit. He had put his name and reputation on the line to establish this line and to dump them the next year would put his name in jeopardy (word travels fast), and go against his integrity.

"One of the ways that a farmer can protect himself from crooks in the produce business is to vertically integrate" The more the farmer processing, even packing/delivering, the less opportunity for the farmer to be cheated. (Dad used to say that "not every broker is a crook, but every crook is in the produce business")

Lessons for farmers

How change people's perspectives on production from Commodity producer to grower. And example from Tiptonville, TN -- Steve Parks. He was a conventional cotton and soybean grower. Had tried growing tomatos and was "burnt bad". He was working with exporters and had not grown the appropriate tomato. Steve had attended an Acres conference in Kansas City and there learned about "balanced biological farming" and about organic edible soybeans, including the premium they can fetch. It's there that he met some exporters that offered to sell his soybeans. And he started to rent land for organic cotton. The exporters were "young" and felt that the market was "unlimited". Steve had even bought into the company and rented 1000 acres in Louisiana to produce the edible soybean varieties.

Steve Parks is excited by new ideas and is willing to do some initial investment. He does his research. He's willing to go the extra mile and it has come to serve him well, but it has been huge time demands -- "he's strapped."

Steve has a new project to grow organic feed for the organic dairy coming into Northern Tennessee.

He is currently collaborating with Paul to ask for funding for a spinach processing plant. It means diversification and added-value for both Steve and Paul. With the canning plant nearby it means shorter delivery distance, and another outlet for his spinach growers. One of the worst things that could happen is that we get the funding -- "if we get it, we won't know what we're going to do".

Paul's take home lesson for farmers:
Few farmers-few people for that matter--are natural born salesmen. Marketing agents who can help farmers diversify will be:

Natural born salesmen who can integrate production and marketing.
There won't be too many of them.