CASE STUDY
Jeff Spud from ‘Spud’s Farm’ is your client and is a medium sized potato farmer on the north-west coast of Tasmania.
You are asked to give him financial and business advice on how his business can survive the problems he is facing from powerful buyers of his produce and with competition from other local, interstate and overseas producers.
His previous contracts for his potato crop have been from McCain, a global company. Previously he was able to form a collective with other farmers in the region to negotiate the price to be paid by McCain per tonne. He understands there is some legal issue on negotiating price as a collective and requests advice on this.
Jeff has explained that he can produce 50 tonnes of potatoes per hectare and the contract price per tonne he has been given is $248. He has potentially 45 hectares of farm he can use for potatoes. He has provided you with the estimated fixed and variable costs for each farmed hectare.
Below are some snippets from recent news about the potato industry and from agricultural research publications.
- What is the type of market that Spuds Farm operates in -- is Jeff Spud a price taker or price maker?
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