Craig A. Chase, Field Specialist-Farm & Ag. Business Management, Northeast Area
Interest is increasing in Iowa vegetable production, which is a low volume, high profit margin business. Profit margins, however, vary a great deal among producers based on what produce is grown (i.e., product mix) and how it is priced. In particular, pricing products that do not have an established market such as a Community Supported Agriculture (CSA) Share Box can be difficult and can be the difference between incurring a profit or a loss. A CSA Share Box is priced in advance for the delivery of produce delivered in a box over a season (in this case, 20-weeks).
A research project was initiated in the summer of 2006 with 4 CSA producers tracking the amount of produce contained in weekly share boxes and attaching prices from a local grocery store or other outlet to the products. Weekly amounts and prices were obtained over the 20 week schedule and summarized. A summary report was sent to each of the collaborating producers. An Extension bulletin is under development to help other CSA producers price their share boxes. The information from the publication also will be shared at conferences and workshops this coming year.
Initial comments from the producers involved have been extremely positive. One producer compared what was being provided in the share box and reduced the amount of labor-intensive produce thereby reducing overall production costs. In addition, several add-ons to the share price for herb and ala carte vegetables were provided to those wanting and willing to pay for extra produce. A second producer used the data to help with promotion. By showing the CSA provided people with a similar cost to a grocery store and at the same time provided freshness and variety, the summary report became a nice tool to promote and answer questions. In addition, by comparing themselves to other CSA producers, they found the delivery range, produce amounts, and other attributes of their share box were similar to what others were providing. A third producer raised some of the prices for individual products and feels more confident in the overall share box price being charged.
Producers involved in the study adjusted prices, amounts delivered, and/or used the data for promotional efforts. Comments from producers involved indicate they werent sure what the project would tell them initially, but now acknowledge the various decisions that can be made from a better understanding of how to determine pricing and its affect on overall profitability.
As producers begin to understand price determination with share boxes, they also understand the concepts of pricing for other products as well. Moreover, by understanding what the competition (local grocery store or other outlet) is pricing their products at, producers can develop a marketing message that differentiates their products from the competition.
ISU Extension is looking at the economics of small-scale vegetable farming and the development of materials to help with tough decisions such as pricing. With added information, existing and potential vegetable growers can make informed decisions regarding what vegetable crops should be grown and the prices to charge for the products. If interested in learning more about economics of vegetable production, contact Craig Chase at 319-882-4275 (firstname.lastname@example.org).
July 19, 2007
120 Farm and Business Management
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August 2, 2007
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