Saturday, February 19, 2011

Pricing ...

When the first pigs were ready on the farm pricing was a big deal and something that was difficult to figure out. Then when the first individual cuts were ready for sale pricing became even more confusing ... at least trying to figure out what price to give each cut was confusing. Pricing is an interesting thing though because when the first prices were made my custom pig ration was running about $3.50 on average per 50 lb. bag. Now here I am over a year later (corn is now over $7 a bushel soybeans are over $13 per bushel) and the same feed is running around $8 plus per bag (unfortunately the bags are still 50 lbs.). Obviously that means that it will cost twice as much to finish a pig on the farm and that doesn't even include the rising prices of other things (fuel, materials, etc.).

One of the major upsides of direct marketing (besides getting to know the consumers) is that you can become a price maker instead of a price taker. One of the major downsides of direct marketing is that being a price maker means that sometimes I need to raise my prices to make the farm financially sustainable. Right now the live hog market seems to generally be trending up with feed prices (I realize that always/usually isn't the case), but I haven't raised my prices.

I understand that price change ... an upward price change ... might be hard to handle for some customers. With my current job changes and situations, farm mortgage, and the inputs it takes to run the farm I'm acutely aware of the fact that we need to watch every penny and squeeze them even tighter. But, on the flip side if I don't work to make the farm financially sustainable then there will be no farm for consumers like ours to visit and purchase from

I feel very strongly about the importance of farms like Crooked Gap Farm. I believe it is important to be able to get great, clean, healthy meat from your own area. I know that we need strong local business (including farms) to help sustain a community. I'm very passionate about the farm and what it's all about ... but, I hate the idea of raising prices ... even if it's what needs to happen.


Yeoman said...

I have always had a very hard time with this myself, although not on agricultural products. Here, we generally do not do much direct marketing, given the nature of our markets.

But on legal matters, even though people believe lawyers are heartless, pricing things is one of the hardest things I do. I just hate to raise prices, particularly for average people, and have to steel myself to do it. I know many others are not this way, but some are. Indeed, one of my partners agonizes over this.

You are, of course, entitled to a fair wage for your work. So am I. But the fact that we agonize over it probably is to our credit. But on the other hand, we do need to do it. Another thing I've found is that if you undersell yourself, at least in the professions, people believe your product has no value. I don't want to say that's applicable to agriculture, however, as I don't know if that's true or not. People watch the dollar value of their food bill much closer than other things, it seems to me, and are often ready to cut it when they should not.

Donna OShaughnessy said...

We recently raised our prices on our "per piece" organic meats, beef and pork. It was done with much research (we compared our prices to those of similar farm businesses within a 50 mile radius), we looked at the costs of raising our animals, we did an internet comparison and then the hardest part of all, we put a VALUE on our time. Our customer base has not decreased, and they in fact wondered out loud why we had not done it before. People really want good meat and will tighten their own belts somewhere else in order to keep farms like yours and ours "Sustainable"

Walter Jeffries said...

Figuring out pricing is very tricky. What I did was to survey our local competition, national competition and the supermarket. Of course, don't compare to the manager's special - that's a false come-on loss-leader price. The meat counter is a better indicator but bottom line.

We find that we tend to not have our price high enough. In part that is because I am slow to raise prices - last time was two years ago for the entire price chart. We could be higher and we would still sell out. We just raised our prices a lot this winter and none of our customers made a peep. In fact, they had told us our prices were overly low.

We sell primarily (~90%) to stores and restaurants delivering fresh weekly. When we made the price increase we were worried it would be a problem but nobody deceased their orders and we still can't keep up. Some increased their orders. I don't think it had anything to do with the pricing one way or the other - more of a seasonal thing and expansion on their part.

Wholesale customers get their discount by buying regularly in volume - most have weekly standing orders. This helps us plan how many pigs go to the butcher each week, how many sows to have breeding, how many piglets to sell as weaners vs keep for raising, etc. These accounts are our stable basis.

Retail sales are gravy. We do our retail pricing at about 140% of our wholesale pricing. This makes it so we are not really competing with our store accounts. We do sell direct to individuals but if we must spend the time handling the sales we charge accordingly to pay for that time for those small orders.

Of course, we sell whole animals direct at a lower price. That is the way for a customer to a volume discount. Anyone, wholesale or retail, can get those whole animal prices.

Along the lines of what Donna said it is important to know what everything costs you. I keep careful track of all our expenses. This is a business. From that I can derive what it costs me to produce a pound of pastured pork. This gives me basis for pricing. There are a few things that I actually charge lower than that - things that don't sell out. I consistently make my money on the higher selling things and then if I can sell the ears I get a little bonus.

Check out:

to see the prices we have and how we structure our order form. For the most part you can figure the wholesale prices out from that retail price sheet using the 140% formula.

Do avoid underselling yourself. If you don't make enough you won't stay in business in the long run and that does nobody any favors.


Sugar Mountain Farm
in Vermont

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