Investment Insights | Part 2

EDITOR’S NOTE

Good morning!

It’s Monday, and we’re back with another edition.

Last edition, we started with a simple idea: start with the market, not the farm.

But what does that actually mean when you have land, you’re ready to plant, and you’re trying to decide what to produce?

This week, we take that idea a little further. We look at what it really means to understand your market before you put your money into production, and why finding a buyer after harvest may already be too late.

Let’s get into it.

In Part 1, we introduced the idea of starting with the market, not the farm. But what does that actually mean in practice? It does not simply mean finding a buyer after harvest. It means understanding demand before production begins and allowing the market to influence what you produce, how much you produce, when you produce it, and ultimately whether the enterprise makes business sense in the first place. 

I learned this from Pawpaw.

For the telephone farmers, during COVID, when movement was restricted and when we were stuck in Nairobi, the worker on our farm had this brilliant idea: to plant pawpaw seedlings. The land was there, the water was available, and the farm needed something to be farmed. Pawpaws generally do very well on that farm, as we came to discover later. The trees grew so well, the fruits came in, and after a few years we had several tonnes of pawpaw approaching maturity.

That was when we discovered the difference between producing a crop and building a business around it.

Pawpaw is highly perishable, and we had put very little thought into the market. The land was available, there were seedlings, and so we produced. When the fruit was ready, we started looking for buyers. By then, our options were limited. For most farmers, the usual option would be to turn to brokers, and that leaves you with little or no bargaining power because the crop cannot simply sit on the farm while you wait or search for a better price. We ate so much pawpaw during that period that eventually we could hardly stand the sight of it.

The crop had done well. The business planning had not.

What quality do they require, what happens to prices during periods of high supply, and what does it cost to harvest, package, and transport the fruit to the buyer? Most importantly, how much could we realistically sell before putting all that produce into the ground?

This is also why I think we sometimes make the mistake of treating market information as something complicated and expensive. At the farm level, useful information can begin with very ordinary things: speaking to several buyers instead of relying on one person's opinion, visiting markets, recording prices over time, understanding when demand rises or falls, keeping proper production costs, and asking customers what they actually want.

There are also platforms such as KAMIS, the Kenya Agricultural Market Information System, which provides access to real-time and historical market data on agricultural commodities, including price trends and market information.

Because the price of produce is only one part of the equation. A farmer can have a high-yielding crop and still lose money if production costs are too high, if transport eats into the margin, if post-harvest losses are significant or if the crop reaches the market when everyone else is harvesting the same thing. A farming business therefore needs to understand not only what it can produce but also what it can produce profitably and consistently.

There is another part of this that we often overlook: marketing should begin while we are still producing.

Think about a farmer growing sukuma wiki . If the first harvest is expected in about four weeks, waiting until harvest day to start looking for customers already puts the farmer on the back foot. The market journey should have started on the first day the seedlings were bought. This is where the power of social media comes in. Show the seedlings at the nursery, share the planting, take people along as you transplant, weed, and watch the crop grow. Make some noise about what you are producing and let people follow the journey with you.

At the same time, you can be speaking to existing customers, approaching nearby hotels and shops, understanding how much they can take and learning what they expect from their suppliers. Do not wait for the produce to be ready before you start selling it. Walk the journey with your market so that when harvest comes, selling is part of a process that has already begun rather than an emergency.

This does not mean every farmer needs a large contract or one big buyer. In fact, a small farmer may build a stronger business by developing several reliable customers who buy regularly. A household buying every week, a restaurant taking a consistent quantity, a shop supplied regularly and another farmer buying seedlings can collectively create a dependable market.

That is also why starting small is not a sign that you are thinking small. It can be one of the best ways to learn. Instead of committing all your land and capital to an enterprise you have never tested, you can begin with a manageable quantity, observe what the market does, understand your costs and improve your approach before scaling.

And sometimes, after doing this work, you may discover that the opportunity is not in producing more yourself. It could be in aggregating from other farmers, providing storage, improving transport, processing the product, or connecting producers to buyers. The market can reveal opportunities beyond the farm gate.

This is what makes farming a business.

Production knowledge will tell you how to grow a crop or rear an animal, but running the farm as a business requires much more. You need to understand your customer, know your costs, keep records, monitor sales, understand timing and seasons, and do the numbers before committing your money. Good farming requires the mindset of a student: willing to learn from every season, question your assumptions, and make better decisions with what you have learned.

Before asking, “What can I grow on this land?" Perhaps we should ask, "What does the market need, how much can I realistically supply, what will it cost me to produce, and can I build a profitable business around it?”

The answer may change what we plant, how much we plant, when we plant it, or even whether we should plant it at all.

And that is how we move from farming for production to farming for profit.