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The CFFO Commentary: Profitability in the Ontario Food Chain Extends to Input Suppliers
By John Clement
June 17, 2011
The Christian Farmers Federation of Ontario has said repeatedly that a sustainable Ontario agriculture needs to be profitable for all those in the food chain. Typically, most people view the food chain as only extending upwards from farmers to processors and retailers. But the reality is that it extends much further than that conception to include both consumers and farm input suppliers.
That reality was spelled out in a recent letter I received from an Ontario farm equipment dealer. Much like farmers themselves, dealers are faced with more competition from international trade, increasingly fickle buyers, fluctuating currency rates and shrinking margins. Here’s an excerpt from the letter I received:
“We find that business is becoming more global; we have had to travel farther and farther to get business, which increases our cost of operation. At the same time, we find that 25 years ago we sold 75 per cent of the quotes we made, today the pattern is reversed: we are selling 25 per cent of quotes we make. In many cases we can spend days compiling a quote; as you can imagine, our cost per quote sold is proportionately higher.
As an example, we spent several hours last week quoting a $20,000 machine to a customer. We had the deal closed on our belief and that evening the customer located a similar machine on the internet at a clearance price in Pennsylvania and cancelled his deal with us.
Our margin on this sale would have been approximately $1,600 out of which we pay a salesman a wage plus a sales commission over and above, supporting management staff, vehicle expenses and advertising. There is a groundswell of support being raised to shop local, maintain jobs in Canada and support Canadian agriculture. Yet we as local dealers who try to support local activities are often undercut by firms that are not local and do not support local endeavors.”
The letter from this farm dealer underlines the importance of profitability for all of those in the Ontario food chain. And while we tend to think of the food chain as only extending upwards to consumers from farmers, we need to keep in mind that it also extends below farmers to suppliers. Accordingly, we at least need to factor in the impact our purchase decisions have on others in rural Ontario, while trying to maximize the profit margins of our own businesses. We all need to make smart purchases and expect excellent products and service, but where we buy merits consideration in maintaining a sustainable Ontario agriculture.
John Clementis the General Manager of the Christian Farmers Federation of Ontario. The CFFO Commentary represents the opinions of the writer and does not necessarily represent CFFO policy. The CFFO Commentary is heard weekly on CFCO Chatham, CKNX Wingham, and UCB Canada radio stations in Chatham, Belleville, Bancroft, Brockville and Kingston. It is also archived on the CFFO website: www.christianfarmers.org. CFFO is supported by 4,200 family farmers across Ontario.
June 17, 2011
The Christian Farmers Federation of Ontario has said repeatedly that a sustainable Ontario agriculture needs to be profitable for all those in the food chain. Typically, most people view the food chain as only extending upwards from farmers to processors and retailers. But the reality is that it extends much further than that conception to include both consumers and farm input suppliers.
That reality was spelled out in a recent letter I received from an Ontario farm equipment dealer. Much like farmers themselves, dealers are faced with more competition from international trade, increasingly fickle buyers, fluctuating currency rates and shrinking margins. Here’s an excerpt from the letter I received:
“We find that business is becoming more global; we have had to travel farther and farther to get business, which increases our cost of operation. At the same time, we find that 25 years ago we sold 75 per cent of the quotes we made, today the pattern is reversed: we are selling 25 per cent of quotes we make. In many cases we can spend days compiling a quote; as you can imagine, our cost per quote sold is proportionately higher.
As an example, we spent several hours last week quoting a $20,000 machine to a customer. We had the deal closed on our belief and that evening the customer located a similar machine on the internet at a clearance price in Pennsylvania and cancelled his deal with us.
Our margin on this sale would have been approximately $1,600 out of which we pay a salesman a wage plus a sales commission over and above, supporting management staff, vehicle expenses and advertising. There is a groundswell of support being raised to shop local, maintain jobs in Canada and support Canadian agriculture. Yet we as local dealers who try to support local activities are often undercut by firms that are not local and do not support local endeavors.”
The letter from this farm dealer underlines the importance of profitability for all of those in the Ontario food chain. And while we tend to think of the food chain as only extending upwards to consumers from farmers, we need to keep in mind that it also extends below farmers to suppliers. Accordingly, we at least need to factor in the impact our purchase decisions have on others in rural Ontario, while trying to maximize the profit margins of our own businesses. We all need to make smart purchases and expect excellent products and service, but where we buy merits consideration in maintaining a sustainable Ontario agriculture.
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