Similarly, changes in consumer demand and purchasing patterns also affect a producer's ability to compete and make money. While agriculture is dynamic in the sense that it is always changing, it is also constant in at least two ways:
It is necessary for the farm to operate as a business where long-term profits are made.
To make a profit, farmers must identify what they are good at doing, that is, they must find their comparative advantage.

In general, a farmer is always comparatively better at one activity than another. It is important to remember that finding your comparative advantage is not the same as finding an activity that you are always better at doing than everyone else. Inst ead, it is a relative comparison which indicates that you do this activity or set of activities better than you do another set of activities. Identifying your comparative advantage increases the likelihood that your farm will be profitable. A specific w ay to determine your competitive strengths and identify your comparative advantage will be discussed after consideration of the types of marketing strategies.

For most food and fiber products, your profits can be increased by following one or more of the following strategies:

• Be a low-cost producer who manages resources better than the average grower. Typically, a lowcost farmer identifies a traditional commodity that is wanted by a large number of buyers. In most cases, there are established market outlets, brokers, buy ers, and intermediate handlers that are available in the area;
  
• Identify and provide products for special markets with relatively few suppliers where a supplier could capture a sufficient market share to earn a profit. Buyers and handlers are usually much harder to locate than for mass market products; or
  
• Produce either a traditional or nontraditional enterprise but offer added value to the buyer, such as better service, higher quality, or a mix of products.
  

An example of the first strategy may be the decision to grow corn or soybeans. Large quantities of these commodities are used in the United States and in the rest of the world, and the market for these crops is well established. Success is frequently measured by the producer's long-term ability to grow a crop at a cost that is lower than the established market price and that is sufficient to allow the farmer to remain in business. In this sense, the business survives because of the producer's better management of resources.

A second strategy targets a particular market or commodity, such as the organic consumer or shiitake mushroom market, where fewer suppliers compete and the total size of the market is smaller. Production and marketing efficiencies are also required w ith this market strategy, and price information, production practices, and marketing procedures are much more uncertain. With this strategy, the farm business survives because of the innovative skills of the farmer.

Finally, a third strategy may be to differentiate your product from other competitive products through added services desired by buyers. With adoption of this strategy, a farmer is trying to move beyond the sale of a "commodity" to the sale of a comm odity and its associated services. Packing higher quality products and precooling perishable commodities are examples of value added notions frequently used by growers that use this strategy.

In addition, all growers should examine income enhancement and risk reduction opportunities associated with participation in government programs, conservation reserve, and crop insurance policies. Successful farmers have already found their competiti ve advantage, that is, they have identified what they are efficient at doing and it is important that every farrner evaluate his or her "business" with this idea in mind.

How can you identify what you are good at doing? Four specific actions can help you identify your strengths.

First, you must have an accurate measure of inputs needed and used, as well as the output produced. Inputs are the basic factors of production, such as land, fertilizer, chemicals, labor, management, and capital equipment. Outputs include bushels of a commodity, pounds of meat, or gallons of milk. The ratio of output produced to the quantity of inputs used for each enterprise provides a measure of technical efficiency.

Second, you need to compute the difference between the value of the resources to be used (estimated cost) and the expected price to be received for each unit sold. This measure provides one estimate of the potential profit from each activity.

Third, you must develop a sound farm business management plan which takes into consideration financing, marketing, production, labor availability, and technology. Insufficient access to money or markets may limit possible profits. In planning, exami ne new or innovative production systems which could expand current yields or the addition of crops which are not grown currently. Pay particular attention to the marketing element of this plan, since it influences what and when you sell, and whether a pr ofit can be realized.

Finally, you should compare your activities and enterprises with those of your neighbors and competitors to see how you rate in terms of quality produced, technology used, costs per unit of output, and prices received.

However, it is important to realize that completing all four planning activities will not ensure a profit - it only increases your likelihood of a profit. For your farm to remain viable, you must realize a profit. This means that you also need to de termine your comparative advantage in those activities.

Comparative advantage can be thought of as consisting of two related parts:

1. an internal, on-farm element which tells you how proficient you are at using your resources to produce one enterprise relative to another enterprise; and
   
2. an external farm measure of your performance as judged by the marketplace.