Posted by Walter @ 09:24 AM PST [ Comments  ]
Postmodern Agriculture - Food With Full Attention[ Member listing ]
16 Feb · Mon 2009
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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