F.A. Farm

  (Ferndale, Washington)
Postmodern Agriculture - Food With Full Attention
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Robust Pricing Methods

During a discussion on pricing last week, I was attacked for not wanting to pay what I considered a high price for a meat product. Even though I am also poor and do not make an adequate salary for the work I do, I am supposed to pay whatever prices other sustainable farmers charge. The rationale seems to be some sort of fuzzy concept of "solidarity." However, there was a disconnect here in actual pricing policy that is fundamental to all these discussions. Most farmers are certainly not receiving a fair price and we ALL work hard. Even the mainstream farmers riding in an air-conditioned cab for 14 hours at a time - plowing, discing and planting - are being physically drained by their work. So. . . if we are price-takers we just have to take whatever price the stockyards or the elevator or the creamery pays. If we are price-makers, the burden is on us to establish adequate prices. Notice that I did not say "fair" prices. If we just use a simplistic forumula of    feed costs + capital costs + overhead + fair value for labor involved = fair retail price    we will certainly never get a fair price. Thus we can just dismiss it. Nevertheless, I see quite a lot of sustainable agriculturalists stuck in this trap and they are always "on point and ready to argue" in any discussion you fall into with them. Here is a better solution and one that has proven to be robust over the last several years. I take a baseline wholesale price, bump it up 30-40% and then do market-basket comparisons at two local chain stores. I then "triangulate" my retail price in the midst of all three prices. Once I have done that, I tweak the prices based on actual retail experience of the market. For example, I may arrive at $2.89 a pound for beans, but I know I can get $3.25 a pound. This system works well for me and it completely negates the idea of a "fair" price. It is still demand-driven and has more than a little bit of price-taking in it, but it is a step forward. After all, it doesn't make any sense to charge $30 a pound for dry beans when I cannot get it. I certainly have crops that I do not sell because I cannot get a fair price and I don't expect someone to buy from me because of "solidarity." Times are difficult and there are even more difficult times ahead. Valid, systematic ways of doing our pricing may be very helpful in the future.
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Comments:

This is the most cogent discussion of sustainable pricing I have encountered. Thanks once again for raising the bar on the level of discussion. It is critical we all begin thinking differently. Your postings establish new "grooves of thinking" in areas where it is essential to shift the discussion from the habitual to the truly productive. Thanks!

Posted by Toni Lyons on February 16, 2009 at 11:37 AM PST #

I absolutely agree with your pricing strategy. I use something similar in pricing our beef. I am constantly checking out the high end (Whole Foods and HEB Central Market) and the middle (HEBs regular stores). I try to price against similar lines (ie HEBs Natural line), and check on grass fed prices offered by other websites in the Central Texas region. I then price around the middle and maybe just a little higher.
If I can't sell my product, then it doesn't matter how great it is!
I also think that we as a group (natural, organic - meat and produce) must do a better job of reaching out to our customers and potential customers to show how paying a little more really does bring them big dividends in health, quality and taste.
And, most important, we need to appreciate them!

Posted by Pati on February 16, 2009 at 01:33 PM PST #

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