Melvin Brees
Farm Management Specialist
University of Missouri Extension




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Please send your comments and send suggestions to Melvin Brees, Farm Management Specialist, University of Missouri Extension, #1 Courthouse Square,  Fayette, MO 65248, call 660-248-2272, or send messages by e-mail to:
October 6, 2000


You won't find "decommoditification" in the dictionary and my word processor's spell-check doesn't recognize it either. It is a term I heard recently to describe what is occurring in agriculture. The speaker described "decommodification of agriculture" as the process of moving away from producing bulk commodities.

Most of our agriculture production has been commodity based--corn, soybeans, wheat, cattle, hogs, etc. An individual farmer's production is not differentiated and can be mixed with others; a bushel of corn is essentially the same whether it's produced in Missouri, Iowa or anywhere else. Product characteristics are defined by standards such as #2 corn or choice grade cattle. Commodities are priced based on these standards.

Commodities are transportable in bulk and can be sold in central markets that are described as being transparent. Central markets allow easy price discovery, by open bidding, and market information reporting. Anyone can get current price and market information by listening to or obtaining daily market reports.

"Decommodification" suggests farmers will move away from independent production and marketing of bulk commodities to an interdependent role in production or product chains. These chains will consist of input supply, production, processing and marketing of products to consumers or retailers. Farmers may become subcontractors in this production chain or they may organize added value businesses to participate in part or all of the product chain.

This could lead to entirely different methods of marketing production. Already many grain and livestock producers are involved in added value marketing. Identity-preserved grain contracts have provided premiums and livestock have been sold on grids to gain premiums over base commodity prices. However, the move away from a commodity-based agriculture could result in a less transparent market. For example, the low percentage of hogs currently sold in cash markets suggests that this market may not represent the "real market" and basing a contract on it may not result in a "fair market price." Among suggested alternatives is a "cost plus" contract for a price that offers a return above the cost of production. A similar pricing situation occurs when producers organize added value production cooperatives or businesses. The farm production becomes an integrated part of the total consumer product process and a cost item to be recovered instead of a product to be sold.

Knowing the cost of production has always been important to commodity marketing, "decommodification" would make it essential! Whether negotiating a contract or adding value to produce an end user product, you might no longer make decisions based on what the central markets offered. It will be necessary to negotiate or determine a price that will recover cost and offer profits while meeting consumer demand. This represents big changes in the way we manage and market farm production. "Decommodification," something to think about as you spend the remaining long harvest days sitting in the combine cab. --Melvin

University of Missouri ExtensionDecisive Marketing - October 6, 2000 -- Revised: April 20, 2004