UF/IFAS professor: Producers should base their prices on their costs
Instead of accepting whatever the broker or retailer is willing to pay, small and medium-sized farmers who sell directly to consumers should keep an eye on costs, determine what they want to earn and set their own prices for the products, advise experts at the University of Florida. (Photos by Jessica Ryals, UF/IFAS)
GAINESVILLE, Fla. — Instead of accepting whatever the broker or retailer is willing to pay, small and medium-sized farmers who sell directly to consumers should keep an eye on costs, determine what they want to earn and set their own prices for produce, advise experts at the University of Florida.
Producers should base their prices on their costs, said Kim MorganAssociate Professor at UF/IFAS for Food and resource economics.
“They need to know what they are spending to know what they need to charge to cover costs and make a profit,” said Morgan, a faculty member at Southwest Florida Research and Education Center.
In a new AskIFAS document Morgan and co-author Jessica Ryalsthe agriculture and sustainable food systems officer at UF/IFAS Extension Collier County, offers strategies for farmers who sell directly to customers.
Retailers, for example, are developing strategies about what products to offer and when – a tactic that farmers can emulate, Morgan says.
A small to medium-sized producer can respond to the requirements of niche markets and product diversification much more flexibly than a large one and can therefore react more quickly in this market.
As farmers respond to changing consumer tastes and preferences, Morgan says they should change their product offerings. They might grow new varieties of peppers or add herbs in the next season’s production cycle. They might even partner with livestock producers to offer complete food baskets at the following week’s farmers market.
Producers who sell directly to customers probably know some of these well.
“Farmers have a closer relationship with the people who actually eat their food, so they can suggest new menus and cooking styles. That’s really important considering how interested people are in trying new things, eating healthier and learning to cook,” Morgan said.
Another tip: Producers should ask themselves why customers make their purchases, say the UF/IFAS experts. For example, why do we eat turkey mainly on Thanksgiving and Christmas?
“How about a home-cooked ‘Christmas in July’ meal, similar to the summer sales at clothing retailers?” said Morgan.
Many of the experts’ suggestions boil down to marketing, which requires practice, especially if you’re new to it.
“For example, would a local TV ad get a lot of people’s attention? Sure, but at what cost? And if all those people came to buy, would you even have enough money to sell them anything?” Morgan said.
Instead, Morgan and Ryals urge producers who sell directly to consumers to maximize the time and effort they put into selling at farmers markets by asking their customers:
- Leave your business cards so the breeder can build a customer list.
- With a loyalty card, you receive a stamp with every purchase and a discount after a certain number of purchases.
- Rate the breeder on Google or Facebook.
- Recommend it to your friends to receive a special offer when both make a purchase.
- Follow them on social media where the producer can promote products and services.
The business strategies of UF/IFAS producers can be applied to all farmers, Morgan said.
For example, a large grower may sell most of his crop to a broker but also sell some of it locally.
“It’s about diversifying distribution channels so you can move volume at different price points while minimizing your risk of a downturn in any one of those channels,” Morgan said. “Generally speaking, people want to buy a basket of goods, just like they do in retail. So the farmer who can grow that basket and put it together with a personal touch wins.”
–Brad Buck, UF/IFAS
