What’s the Right Price for your Product?
Linda Landrum, Regional
Specialized Marketing Agent
Proper pricing of agricultural products is one of the keys to long-term financial success. If you price too low, you can slowly go broke even though you are selling all your product. If your prices are too high, no one will buy resulting in business failure. So, just how do you know how to determine a fair yet profitable price?
utility bills, equipment and repair, marketing activities and debt service.
Postharvest and marketing records which describe your observations on specific crops, trials on harvesting and storage as well as your success or failures at various marketing venues.
Prices are often set by what’s prevalent in the market but they really should be based on your farm’s cost of production. Consider using a combination of prevalent market prices and your costs to determine the appropriate price for long-term business survival.
In order to determine your cost of production, you must keep good records. Try to set up a simple system as your time is usually limited for this activity. The types of records to keep are:
Cultural, which include variety selections, planting dates, spacing, pest problems and other production activities.
Once you develop good records, determining your break-even point for your business is straight forward. Break-even is simply the total cost (direct and indirect) of what it takes to produce, harvest and market a product divided by the number of units to be sold resulting in the break-even price for that product. Now you need to decide how much profit you wish to make, add that on and then begin to compare your price with competitors. If your price is significantly higher, you can cut production and/or indirect costs, reduce profit margin or convince your customers that your product is worth the extra money. By using this pricing strategy, this will help you remain profitable.
Environmentally-related events such as weather, temperature, labor to cold protect crops, irrigation frequency and costs.
Production activities such as the quantity of product produced and the quality of that product, etc.
Remember, you will need to calculate break-even price frequently as we live in a quickly changing world where staying competitive is a never ending task. So get started today with your record keeping activities so you can accurately determine what you real cost are so that you can price your product for profit.
Financial records include all expenses both direct inputs such as fertilizer, seeds, replacement stock and
hidden‖ or indirect costs like insurance, labor (both field and office including yourself) depreciation,
Please contact Linda Landrum at the North Florida Research and Education Center- Suwannee Valley at 386-362-1725 ext.105 or LLandrum@ufl.edu