Farm profitability

Reading the September/October issue of Small Farm Canada, p.23 is an article titled "Versatile Farmer Brown" about a woman who runs greenhouses and many other pursuits.

Something struck me. Somewhere she said that she used to give a cut price on people placing large, complicated orders for bedding plants, because of the volume. But then she realized these huge, demanding orders took a whole lot more time and energy and that it made no sense to cut her price for an increased workload. So she decided to charge more. More work, costs more. Her consumers paid and everyone was happy.

HOLD THE PHONE!!

This way of thinking should be as natural as a duck in water. BUt it isn't. Where did the consumer idea come from that if you buy MORE, you should get it for less? Think about it. What a stupid idea.

Walking through the local farmer's market I see many examples of people who use their time and money to create a product and then if you buy 5 or 6, you get it for cheaper. Unless you are grossly overpriced to begin with, this is self defeating. If it takes you X amount of time and raw material to produce a bar of soap, it's not like that time/material cost goes down to you to produce 6 bars of soap. Why should you charge less? WHy should consumers expect to pay less? The cost of soap is the cost of soap whether one bar or 10. Period.

I think the bottom line producer, and this often means the farmer, has to put his foot down and say NO, I will not sell you this meat for less just because you're buying lots. It costs what it costs, I get out of bed early to pull calves, muck barns and tinker with the waterlines and go to bed late after last feeding. No, none of that gets any easier or cheaper just because Joe Consumer buys lots. Worse is if you give Middle Max a good deal for buying lots and he goes away and re-sells, does he pass on the savings? HEll no! He puts that savings in his pocket. You are in actual fact paying Middle Max to be in business by accepting less than you should for your goods. In my humble opinion greedy Middle Max needs a serious axe kicking!

I think a seller has to take care of his buyers, but has to draw the line at paying them to purchase. You work to make something and your time and effort is every bit as valuable as their time and effort. Price fairly and reasonably and give good service and replace faulty product. But draw the line at being a charity disguised as a business.

This idea struck me because it goes against my grain to say, I have made this thing and this is what it's worth! That feels awkward, like I should not think too highly of myself or my efforts. It feels boastful to insist that my time and effort are worth something. I am a giver by nature, and that is fine. But at some point the takers of the world will suck you dry and you have to put your foot down and say no. My price is my price, pay it or move along. And no, no discount for buying 6, because 6 of them took no less time and money for me to make, so pay.

I was struck by the stupidity of undervaluing. I was struck by the hard-nosed business approach of this woman. Plus I like the dirt under her nails as she grasps a bundle of beets. No movie star, but a Canadian business woman who put her foot down.

Good post.

I think the problem with agriculture is you produce a perishable product. If you don't sell it, it can't sit on the shelf until it does sell like other products can. So if you don't sell when it is ready you are SOL. If I have 6 peppers of $1 each (for arguments sake). If someone wants to give me $5.50 for all six to I say no, sell 5 and take the 6th home to throw in the garbage?

Plants are a little different because they have a 'holding' life. Cattle in the feedlot are the same way. When ready, they can't hold for long (some breeds hold better than others though) before they get too fat and don't get the premium price.

It is an interesting though Uno, but many would rather sell, even at a discount than get nothing for a product that is worth nothing if nobody else comes along. Maybe that is the wrong way to think.

Thats how I think Coops  and like your analogy of it with the Peppers
I have sold at a discount many times and still came out ahead in the long run

Maybe that is why I am still poor

I agree with coopslave.
I've had people ask if they can have a discount if they buy, say, 10 pullets, and I say no. However, sometimes at the end of the season I just want to clear them out, and so advertise as "6 for xxx" to move them out fast - and it works.

I think it falls back to human nature to bicker with prices ? back in the day every thing had to be bickered with ? We all think the same way in most cases when we want a deal , we almost expect a discount if we want more  ? It befalls every thing from produce to car sales etc etc .  If you only grew a limited amount then I could see someone sticking to there guns ,but volume has always screamed discounts..........business's way of moving mass quantities and still maintaining a profit margin ....aka the high price of small quantities versus the large volume at a lower price............a Costco farm maybe ?

The thing about farming is that in conventional farming, no one is asking you to grow a crop. You're putting it in the ground in the hopes that after harvest, someone will want to buy it at a price that is higher than what it cost you to grow it.

Essentially, the farmer is making a supply and hoping there will be a demand. This is opposite to most businesses, where someone recognizes the demand for a product, and creates the supply to meet that demand.

In some cases it`s not so much paying someone to take your product so much as paying them to save you hassle. I followed an ad and went to check out some chicks once. I was going to get around 10. The guy offered me a deal if I took all 18, so I did. Good deal for me, and he didn`t have the hassle of trying and sell the last 8.

But I also see what you mean. You see places offering student discounts, senior discounts, volume discounts, etc. Makes me wonder if the discount is the real price and I`m just paying a `not part of a certain group`tax.

I see a theme. It's one thing (as the seller) to give the buyer a 'deal' to get the last 6 peppers off your hands. It's another thing if every transaction you make has to offer the buyer a 'deal' if he takes 10 objects instead of 2 objects. In that case, as Fowler put it, you are taxing your customer for buying 2.

There is a huge difference between one-of or sale end discounts, and the ongoing idea that buying in bulk somehow brings down the cost of production.

Food producers have been notoriously underpaid for their services and goods. Perhaps it's due to an old mindset. I see it floating around here. Don't take that the wrong way, I have that same old mind set which is why the article struck me, because it was OPPOSITE of how I have always thought. If you as the seller need to offer a deal for your own convenience, go ahead. But if your entire crop (or what have you) is discounted just to move it..you are doing something wrong.

I guess it falls onto the individual as to what margin of profit they are looking at achieving ? You buy bulk seeds to increase your produce availability , thus getting a volume discount on the seeds ? Then you get a bumper crop if all goes as according to plan and you set your prices according to quantity ? ( I haven't ever sold produce .......I just give it away ) .......or according to individual items ? In the case of limited quantities you have a far greater control of price .I still think that the discount part will always be there , it's a marketing scheme that took off with great results ( as I mentioned Costco is a great example ) and it now is in every aspect of every day life ..............including the corner garden stand ? To bicker with prices ,or to offer a discount based on volume is here to stay ,so limited quantities would be the way to go ??

I wonder if that is one of the reasons the traditional mixed farm worked better in the past. If you have veggies that are about to go bad, instead of selling at a discount, you feed it to your animals, which in turn then gives the meat. Have extra meat? Chickens love it. Have extra milk? Pigs are great. It is, or can be, a cycle where things arent thrown out. The value at which a product is sold should be the value you hold in it. Say I have veggies that I sell for $1 each. I have 12 and only sell 10. I wont take .50 for the other two just to sell them. I would rather give them to the chickens. Chickens then give me eggs. More scraps, more eggs. So I have just transfered the value of the veggie into the eggs. Left over eggs, which has yet to happen, can go to the pigs. There is always something else in a mixed farm you can transfer that value to, rather then taking it at less of a value. So maybe people should look at how to transfer the value of their product rather then lowering the value to sell it.

Fantastic point, PFarms. That's how to hold the value of what we produce. I'd rather use it myself than under-sell and create an expectation to pay less than its worth.

PFarms...we call that "recycling" around here. Yes, I agree with your post too. IT is better to use it myself than to bring down the real cost and give up any profit. That's how we do things.

This has been interesting, the different thoughts on this topic.

My mind just goes to the old saying, poop runs downhill. If we produce something that we then sell at a discount, either we take the hit, or the people we hire take the hit. Every time you get a 'deal' on something, I think it's a safe bet that some worker in a third world country labours under conditions that we outlawed 100 years ago. And that is how sellers can afford to give you a deal, by taking it out of the hide of someone else.

But that's not exactly the topic here (as I hijack my own thread, wouldn't be the first time!)

I keep seeing this scenario: you hire yourself out at $10 an hour to do something. Someone hires you at those terms. When your hours are finished, there is still more work to do so the buyer of your time says, "well, there is more work to do and how about I pay you $5 an hour to do this extra few hours of work? " Do you take a pay in cut, devalue your time and effort, just for the money? The person who gets your time gets the full benefit of it, but you don't. You get half the benefit. To me, that is plain crazy. It breeds and encourages consumers who want more for less. None of us deserve more for less. We are not that entitled.

Back to the article, I just thought it was a new take for this plant grower to realize that big, specific orders take more time and effort and thus should NOT get a better deal but should in fact pay for the time and effort they want.

It's one thing to cheaply offload the last 6 petunias you have. It's another to ALWAYS discount bulk purchases, it sets up a bad mindset in a consumer who already thinks their time at the office is worth so much more than your time in the garden. WRONG!

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I like the *idea* of continually recycling vegetables/meat/milk/eggs from animal to animal, but the reality is that most farms don't keep enough species to make that really feasible.

I am in complete agreement with you Higgins! I would rather give my product to someone who needs it than sell it to someone who thinks I owe them a 'deal'.

I think this boils down to personal philosophy. I think. I am often confused about what I think.