Last week I sat down with a young woman who was about to attend her first ever farmers market with meats she had raised as a fourth-generation farmer on her family farm. I had met her the previous year at my USDA processor. She lamented that for what she was making from selling her livestock at the local auction barn she’d never be able to pay her bills on farming alone. Turns out that she was raising her pigs on pasture, her cows were grass-fed, her chickens were free-ranging, she used no chemicals, hormones or antibiotics and she was still getting commodity meat prices, a pittance, at auction.
“You should go to market one week to see what it’s like,” suggested my butcher who is a co-packer for many small-scale farmers who sell direct through farmers markets and restaurants. A few weeks later, she was at Bethesda Central Farm Market with me to see what it was all about.
Her eyes grew wide with the number of vendors, the diversity of customers, the array of products and yes, the prices. For her, purchasing direct from the farm had always meant a steep discount. That may be so in remote, rural counties, but the clincher was when I explained that for many of the vendors farming was our sole source of income; we farmed for a living. The prices she was seeing were what they must be to list farming as an occupation; not a footnote, not a hobby.
I shared with her that when I first began going to farmers markets as a vendor, the most difficult aspect for me to overcome was having a customer complain about the prices of my products. It was devastating knowing how much investment of money as well as work went into raising the food I was trying to sell. I netted $11.15 from my very first market. In utter defeat, I limped back to my office job for several more years.
We went through the checklist of everything she needed. She handed me her product list and I whipped out my pen crossing off her prices, changing them to enough to cover her production costs and add in a profit. She gasped, “I can’t charge these prices!”
I explained that the changes I made reflected the true cost of production – not just the feed and processing. There are so many other factors that go into pricing products – insurances, market fees, tents, coolers, tables, signs, certifications, licenses, credit card transaction fees, vehicle costs – it adds up quickly.
Similarly, setting prices below production costs hurts other farmers with similar products. The fastest way to earn the ire of fellow vendors at a market is to undercut them by a wide margin. This usually results in harsh words and hurt feelings. Over the years, I’ve been on both sides of that table. As with everything else in life, it’s a learning experience.
According to the Farmers Market Coalition, “In 2017, American farmers receive only 14.8 cents of every dollar Americans spent on food. At farmers markets, farmers head home with upwards of 90 cents on the dollar.” Additionally, the USDA puts off-farm costs including marketing, processing, wholesaling, distribution and retailing (they forgot to mention profit) at more than 80 cents of every food dollar spent in the United States.
Currently, the United States is hemorrhaging small to mid-sized family dairy farms on a scale never seen. Why? The farms are simply not paid enough to cover the costs of production of their raw milk. When farmers choose to process, market and distribute their own dairy products, as Dishing the Dirt discussed earlier this year, the farmers are able to capture the majority of profits that otherwise would go to the processor, thus they are able to remain in business.
Business. I think one of the hardest reasons farmers have effectively pricing their products for direct-marketing is they don’t look at farming as a business first, but as a way of life, a passion, a calling. When working with young farmers, especially those who are the youngest of a multi-generation commodity farm, these are a few bullet points I give them when it comes to setting their prices.
- Track ALL of your costs. From the cost per mile of operating a vehicle to the bags of ice needed each week, it’s the little things that add up. Understanding the true cost of getting your product to market is a must.
- Know the comparative products’ prices both at the farmers market AND at local retailers.
- Coming down in price is discretionary, going up is not.
This past spring a customer informed me that a local retailer had leg-of-lamb on sale for the holidays. As part of my regular reconnaissance I had been to that particular store the week prior. Yes, the leg was on sale, but the price of whole racks was double what mine was. “There’s only so much profit to be made from an animal,” I explained. In the commodity arena, it boils down to quantity versus quality.
The buzzword that has been bandied about for the last twenty years has been sustainability. Yes, there are many aspects to sustainability in agriculture such as soil health, conservation, animal welfare, genetic diversity, environmental responsibility, carbon sequestration, etc. What it really boils down to is customers who are willing to pay a fair price that keep the farmers in business.
After the success of my young farming friend’s first day at a new market, I foresee her forging a new path for her family’s farm so her infant son can grow up to be a fifth-generation farmer.
Sandra will not be at Bethesda Central this Sunday but will return next week.