Wednesday, November 17, 2010

Profit vs Altruism at the Farmers' Market

 A farmer friend of mine, let's call him Henry, has been selling lettuce mix at a price of $4 for an 8 ounce bag at a farmers' market in Toronto. On 20 bags his gross for the day is $80. Whole Circle Farm and another farmer I know charge $7 per 8 ounce bag. Another farm, The New Farm, charges almost double this price. Why is he charging such a low price?

Henry wants to provide some of his produce to customers who’re in a lower income bracket, hence the lower price. It fits with the philosophy of many farmers, that everyone should have access to healthy food. The challenge is, how to pursue this worthy objective and also get a fair price for their produce.  Henry claims that other vendors at his market also charge $4 per 8 ounce bag, making it difficult for him to change his price even if he wanted to.

This got me to thinking about what Henry or any market vendor could do to make sure they  fetch a fair price. Here are a few ideas:

  • Know Your Costs: The most important thing is to understand the cost to produce your products. Two good resources for this are "Organic Farmers Business Handbook, by Richard Wiswall. It explains how to do cost analysis. Another great book, Crop Planning for Organic Vegetable Growers, by Daniel Brisebois, explains how to break down production cost to bed foot per crop;
  • Set Price Based on The Value of Your Product: Don't necessarily set price solely on what other farmers or vendors at your market are charging or, on the price charged by supermarkets. Perhaps the other farmers are following each other's lead, a likely scenario, since many farmers are price followers and takers, not price makers.  Henry could consider discussing price with the other vendors. However, discussing price with your competition may be contrary to the Ontario Business Practices Act. So I can't officially encourage anyone to do that. Henry could simply point out to his fellow vendors that their market is priced well below other farmers’ markets;
  • Sell Your Products and Yourself: Do a good job of explaining to customers the value they are getting: organic, local, freshly harvested. Whatever it is, talk it up. Having good signage on your table is important. Giving away samples of your  vegetables is a good idea. Our Hakurai Turnip sold like cupcakes after customers had a sample from our market table.
Henry has the additional challenge of wanting to provide discounted lettuce for his lower income customers while at the same time charging a higher but fair price for the other customers.

An option for Henry would be to set a two tier price: If he brings 20 bags of lettuce mix to the market he could sell 15 bags x $7 bag = $105 gross. For low income customers he can offer them at a $3 discount. In other words, 5 bags at $4 each = $20. Henry’s gross for the day would be $125, $45 more than what he earns with his current pricing.

How would he know which customers to charge the $4 price?  He likely knows them, and can offer the discount to them. However, that could be tricky if nearby customers see that they’re not getting a discount. Another solution would be to charge $7 for all bags sold at the market, and at the end of the day, give away 5 bags through a food bank. Other deserving families will get lettuce, and Henry, bless his charitable heart, will have more revenue at the end of a long day at the market. On 15 bags at $7 each his gross would be $105, $25 more than he currently earns, and $550 more for the season.

Here’s a summary of some possible pricing scenarios Henry could follow while still being true to his philosophy of providing food for everyone regardless of their income:


Suggested Pricing Scenarios

Price Charged per bag of Lettuce (20 bags weighing 7 oz each)
Gross Sales per Week
Gross Sales Increase per Week over the Current Pricing
Total Gross Sales in a 22 week Season
Current Pricing
$4 each bag
$80
n/a

$1,760
Two Tier Price
15 bags x $7 ea  and 5 bags x $4 ea
$125
$45
$2,750
One Price
15 bags x $7 ea and 5 bags donated at end of the day
$105
$25
$2,310

 Whatever Henry does, it would be easier to implement any changes before the new season starts.



Tuesday, November 16, 2010

Distribution Models

One of the most important things for farmers to consider is their distribution model. Who is going to eat your vegetables, beef, pork, chickens, mushrooms, strawberries, preserves, yoghurt, etc etc.

Some Distribution Models:
Consumer Supported Agriculture (CSA) - Community Supported Agriculture (CSA) has become a popular way for consumers to buy local, seasonal food direct from a farmer. The consumer pays the farmer at the beginning of the season and then receives a basket of food once a week throughout the growing season. The farmer has the security of knowing who his customers are before the crops are planted, and the consumer is assured of getting fresh local food through the season, weather permitting. At the core of the CSA model is the relationship between the farmer and each customer, and the "story" behind the farm. At Whole Circle Farm, for example, virtually all the 200 CSA customers know Abhi, the garden manager. And many are aware of the ebb and flow of the farm either through our newsletters or, through conversations with Abhi, Johann, Maggie, or the farm interns.

As part of their relationship with the farm it's important that CSA customers understand the complexities of growing food. They'll be more understanding if there is a bad crop or, if the carrots are not perfect shaped or have a little dirt on them. It would help if prospective customers are screened before being accepted. They'll want ever more to be your customer when they find out that joining the CSA is not simply a matter of mailing a check.

Advantages: Get paid in advance, demand is guaranteed, so you know how much to grow. customers share in the bounty, and accept if there is a less bountiful season.

Disadvantages: Lots of responsibility. Consistent hard work every week during the CSA schedule. Problematic if the soil is susceptible to compaction say, when it rains, and harvest has to be done in time for the CSA delivery. It's best to avoid trudging through wet fields.

Farmgate - Farms situated on a busy road can do well through selling at an on-farm store. Ideally the store would have a weigh and pay honour system, where customers leave their money in a jar.

Advantages: Low maintenance and labour cost. A great way for customers to get familiar with your farm.

Disadvantages: People coming to your farm means you need parking, and have to be mindful of kids running around.

Farmers' Markets
- They're great, if you can find a good one. The problem is that there are more farmers than there are farmers' markets. Good farmers' markets have a waiting list of vegetable and other produce vendors. I'd not want to start a farm based solely on the assumption that I'll sell my produce at a farmers' market.

Advantages: Can be great source of income. Inspiring to see people excited about your food.
Opportunity to see what other vendors are selling.

Disadvantages: Getting up early on a weekend. Long drive. Weather dependent. Unsold food may spoil.

Wholesale - This seems to be potentially the most price sensitive model. it includes selling to retail stores and large supermarkets with organic produce departments. Based on feedback from some farmers I've talked to, some of them with hundreds of acres in production, and some of whome are growers, distributors and wholesalers of organic produce, the purchasing departments of the major supermarkets are focussed mainly on price.
Whatever claims they make about supporting Ontario or Canadian local agriculture are not necessarily confirmed by their purchasing departments. Protective Covenants.

Advantages: Can sell large volumes.

Disadvantages: Fickle, manipulative buyers. Might require large storage facility. Possibly low price per item. No chance for face-to-face contact with end consumers.

Some combination of all these models is possible. And there are many other scenarios which build on these models, such as farmer coops which combine produce into one CSA product.

Monday, November 15, 2010

Impressions of the Season

I did it.
Eight months
five million weeds
five miles of bed
18 tons of cow shit
2,000 gallons of maple syrup

Or something like that. The only thing I know for certain is the time spent at the farm.
As time goes on my farm stories will take on Bunyon-like proportions

What I liked the least: milking. The cows at Whole Circle are magnificent. But there was something about milking those hairy beasts that disturbed my psyche.

What I liked the most: Meetings in the common room, running after escaped cows, feeding the pigs, using the farmall (to weed), managing the harvest (when I was left to my own devices), eating ice cream at the Acton market, transplanting, building stuff with Johann, watching the chickens come out of the back of the bus at 6 am.