TBF 010 :: Setting Prices, Building Pig Fence, and Gambling With Hay

I mentioned in the previous episode that we had to sit down and take a hard look at product prices a few weeks ago. This was something that I knew we needed to do, but I did not want any thing to do with it for a variety of reasons. First of all, I love doing many things on the farm (even some things that aren't especially fun), but I do not love doing the "business" aspects sometimes. And secondly, I am always worried that people will think my prices are to high and that we will lose all of our customers. The reality is though that the farm is a business and if we are going to run it like a business we need to be continually keeping tabs on our pricing, our inputs, our marketing, and all of that business'y stuff.

With all of that in mind, on today's episode of The Beginning Farmer Show I am going to spend some time talking about how we eventually came around to setting our prices (and recently raising them). There was a lot of thought and research that went into setting those prices, but there are also "pricing values" that we follow when it comes to our product prices. Here are a few of the values that we follow ...

• We do not want to have high priced products just because some think that we can.
• We believe that we should receive a decent wage for the work that we do on the farm raising great tasting pork, poultry, lamb, eggs, and beef.
• There is a defined amount that we feel we need to make in profit for each animal.
• We will be "price makers" instead of "price takers", but at the same time if our input costs lower for a sustained amount of time we would like to lower our prices to reflect that (as long as we still make our defined amount per animal).
• Our pricing will be transparent because we are not trying to sneak anything by anyone. Our customers are not just nameless/faceless cogs in a system, they are our friends!

The biggest piece of advice that I can give to anyone though when it comes to setting your prices is to not set them too low! I think the natural tendency for most of us is to undervalue our products because we are fearful of seeming overpriced. The reality is that it costs money to run any business and you must set your prices based on those inputs ... not on what a few people may think! If you do that then you can have a financially sustainable farm.

There is more to this episode though than the big pricing talk (because I do not like only talking about something I don't like). I will also spend some time talking about the latest happenings on Crooked Gap Farm, which this week includes building some new fence through the woods for a pig paddock. Then before the end of the show I share my "Hard Lesson Learned" for the week. This weeks hard lesson has to do with hay and my gamble that the prices would go down over the winter. That was a gamble that cost me big time and I'm already taking action to not let it happen again this year!

As always, I want to thank you so much for listening and supporting the show with your encouragement and reviews on iTunes! I am continually working to produce a better show, and I'm thankful for all of the listeners sticking with me as I learn. If you do enjoy the show, don't forget that you can subscribe on iTunes and leave a five start rating and review (by clicking the link or the image on the right). If you are an Android phone user you can also subscribe on the free Stitcher App. It is so very encouraging to know that people are listening and enjoying the show!

I would love to hear your questions, show ideas, or comments about the show. Feel free to shoot me an e-mail! As always you can follow along with The Beginning Farmer and Crooked Gap Farm by checking out these links ...

• Crooked Gap Farm
• Crooked Gap Farm on Facebook
• Crooked Gap Farm on Twitter

TBF Show 010 :: Play in a New Window | Right Click to Download

(if you are interested in the music in this episode check out my brother's record label, Historic Records)

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.

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!