February 2020 - 24

Controlling the profit side of profit and loss
A man of great
experience once said,
" Among the best things
UNITED POTATO
GROWERS OF
AMERICA
Buzz Shahan
Chief Operating
Officer
that can happen to a
person is to grow up
thinking you're not
smart later to find out
that you are. "
For example, maybe
you grew up thinking
you're a potato farmer
with little control over
your crop's value
later, only to find out
that you're actually in the potato-supply
business with plenty of control over your
crop's value. The difference between facing
an uncertain financial future and knowing
that you have a secure one is huge - almost
incomprehensible! Who in any business gets
to set the P side of its P&L statement?
Growing potatoes is a supply business.
And the wonderful thing about supply
businesses compared to farming businesses
is that by administering supply, price (value)
can not only be managed but stabilized as
well. Farming is not like that.
As the 2019 growing and harvest
seasons pointed out, weather can be, and
is, a significant determinant in a crop's yield
outcome. And weather is only one of many
forces that influence a crop: What about
fungal threats? Plant pathologists estimate
that 60% of a crop's yield potential depends
on the degree of fungal threats.
What about pesky insects? While not
as threating as fungi, bugs such as virusspreading
aphids and psyllids, chewing
worms like nematodes and plant-eating
bugs like Colorado potato beetles threaten
yield. When comparing administering
supply to fighting weather's vagaries
combined with nature's unrelenting army
of pests, supply administration seems
quite doable.
Since United Potato Growers of
America's inception, it has remained close
to similar farmer organizations. Each and
every one of these brother organizations'
entire focus is market stabilization. The
success of these organizations lies in a
market-tracking data system supported by
a member base that understands that they
are actually suppliers of a commodity and
not just farmers. Notably, too, not every
producer must collaborate in supplying
the market to make supply collaboration
successful; there are always takers anxious
to profit from the efforts of doers. Such
is human nature, but what these takers
don't acknowledge is the weakness of
negotiating alone compared to the strength
of negotiating as many.
Take the citrus business, for example -
they know how this works. When citrus price
falls below costs, harvest suspends until
fair-return pricing reasserts, and that's how
they stay in business. When fishermen were
sued by fish salesmen and fish processors
for not supplying them with fish at an
unprofitable price, a jury decided that fish
salesmen and fish processors could not
force fishermen to fish regardless of price.
Fishermen were declared to be independent
fish suppliers guided by their own interests
and not by the interests of people happy to
profit at their expense.
SOUND FAMILIAR?
Be it fish, oranges, lettuce, tomatoes,
dairy products, potatoes or a myriad of other
consumer goods, to assure reliable and fair
returns which translate to fair and reliable
consumer supplies, those in the supply
chain must follow the rules of good supply
administration or be willing to accept random
and chaotic results.
24
Spudman.com
http://www.Spudman.com
February 2020

Table of Contents for the Digital Edition of February 2020
