Pricing for Profit

Craig A. Chase, Farm & Ag. Business Management Field Specialist, Northeast Area

Problem:

Pricing products that do not have an established market can be difficult.  Produce, like many other types of products, can be priced a variety of ways.  Making the pricing process even more difficult is that each product has multiple customers, competitive markets, and costs.   Because of the number of outlets available and non-established commodity prices, vegetable producers find it difficult to price their products at levels that allow them to reach a desired profit goal.

Response:

A publication (soon to be released as an extension bulletin) and a presentation were developed and shown to two fruit and vegetable grower workshops in Wisconsin (approximately 100 attendees).  The presentation highlighted three specific methods of pricing products; based on consumers, competition, and costs.  The educational program and materials stressed that although customers and competition are important factors in pricing, if the price of the product is not above the cost of production and marketing, the business will not be sustainable.  Therefore, budgeting tools to allow producers to determine their own cost of production and marketing were illustrated and discussed.

 
Impact:

It is too early to tell whether the information and tools received will impact behavioral change in how producers actually price their products.  However, initial comments from producers attending the workshops have been extremely positive.  Several producers approached me right after the workshop session with specific questions on how to allocate certain costs and how to interpret the results they obtain.  Requests for Extension bulletin Iowa Vegetable Production Budgets (PM 2017) were frequent.  Specific questions on using budgets to determine production changes, product mix, and specific pricing comments indicated awareness and knowledge of key pricing concepts.  Additionally, there were follow-up emails requesting additional information on the concepts covered in the workshops.  Interestingly, information requests from the Seattle Farmers Market and a Louisiana farmers market also occurred requesting this information noting they had heard about a recent publication through a farmers market grapevine.

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 (cchase@iastate.edu).

April 11, 2008
127  Alternative enterprises or value retained
 

Page last updated: April 15, 2008
Page maintained by Linda Schultz, lschultz@iastate.edu