Wednesday, May 13, 2009

Price Maker or Price Taker?

One of the many wonderful benefits of being a member of the Practical Farmers of Iowa is their quarterly publication. The thing about a member driven organization like PFI is that when it comes time to collect articles for their mailings they can turn directly to the membership and use the practical knowledge of our farmers right here in Iowa. That is the case of an article from the Spring issue that really caught my attention. It is titled, "How to Be a Price Maker v. a Price Taker: Ideas for pricing Meat," and it is written by Ryan and Kristine Jepsen who run Grass Run Farm.

This one really hit me between the eyes because I feel like we have started out in the price taker position because I came into farming with the fear of not being able to sell our product. Despite all the reading I have done about the importance of recognizing that farmers deserve a decent pay for the work they put in I have been scared by the cheap products we see in the grocery store. Over and over I have been reminded that if we are going to do this successfully we are going to have to make a profit, and in order to make a profit we are going to have to make a decent return on our time and inputs.

The main thrust of this short article is that you need to know your stuff. You need to collect as much information and data as possible and use that to set your prices and be willing to share it transparently with your customers. Collect receipts, track the time you spend, know your carcass yields, find out how much you need to gross per animal, and learn what your customers are looking for.

I think this sums it up well:
"We've found it most valuable to communicate these uncertainties to our customers and be transparent about how we make our living. It's not easy for the end client to understand that under our worn plaid shirts and (dusty) jeans, we're farmers, salespeople, inventory managers, truck drivers, graphic/website designers, bookkeepers, business analysts, and family members who routinely take work home."
Good stuff to think about this year!

1 comment:

Mike W. said...

It always amazes me that farmers are called livestock producers. So they create a product and then have to take the price offerred?

The miracle of farming is that in all aspects of "production" it is God who provides the increase. Every year you wealth increases as a blessing from God. It is how He established the world of plants and animals.

With this increase, we have to be sure we don't give it away to the lowest common denominator - The Market. What we produce does have value. Most consumers won't appreciate that, but some do. You can be sure the commodity market only sees profits for themselves.


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