What does the price crystal ball say?

by Katie Navarra
If pricing were as simple as looking into a crystal ball farmers could rest easy knowing they were selling their crops at a price that is sustainable for the farm and what the market could bear.
“Small and mid-size producers are often shooting from their hip (when setting prices),” said Bob Weybright, Business Agricultural Economic Development Specialist with Cornell Cooperative Extension of Eastern New York Commercial Horticulture Program.
Looking at historical pricing data, watching the weather, following competitive markets and using sound pricing strategies can help any farm in determining a pricing schedule.
“I went back and looked at what the monthly retail price was for selected fruit and vegetable crops. I calculated what the six year monthly average price was for each of these crops. Then I compared those averages to the average monthly price for 2014. In each case, the average monthly price in 2014 is higher than the six year average,” said Stephen Hadcock, Beginning Farmer and Market Development Educator with Cornell Cooperative Extension in the Capital Area Agricultural and Horticultural Program.
Multiple resources make finding historical pricing data easy to find. The USDA Agricultural Marketing Service is a reliable and up-to-date source of fruit and vegetable prices. Current wholesale and retail market data for the whole U.S. or Northeast Region is available on their website at www.marketnews.usda.gov/portal/fv
The Custom Average Tool (http://marketnews.usda.gov/portal/fv/fvmnewfeatures ) and the USDA Agriculture Refrigerated Truck Quarterly provide historical data as well. “Hunt’s Point in the Bronx does their own daily pricing breakdown and is another good resource,” Weybright noted.
“Farmers should look at trends in how the price is moving from month to month when using this factor to determine prices for their own products. Looking at this data can, in part, add validity to other information one might receive about prices. It also helps us remember, in part, what has happened in the past,” Hadcock added.
Historical pricing is only one piece of the pricing puzzle. “It is important to note a variety of factors (production of fruits and vegetables in a particular region, trucking, disasters, etc.) can have significant impact on prices for any given month,” said Hadcock.
Natural disasters or droughts significantly impact production in other areas of the country that require farmers to reevaluate the pricing on the crops they are able to grow and sell when outside those geographic areas. “There were early indicators that pricing could be shifting or moving up because of the drought in the Southeast and California,” Weybright commented, “they were predicting 500,000 less acres in production and now it appears it will only be 410,000 less acres in production which will have an impact on pricing.”
Trucking can also affect crop availability and pricing. “Trucking Quarterly released that there was a shortage of trucks to get blueberries out of New Jersey,” Weybright said, “if you’re growing blueberries and you see that you might be able to get an extra $0.05 or $0.10 a pound that week.”
Determining an effective pricing schedule includes understanding different pricing models and choosing a model that will work for your farm. “Pricing models track labor and other costs so that farmers know their true cost,” Weybright explained, “some pricing methods include break-even point pricing, markup pricing and gross margin pricing.”
Peak growing and harvest season is a difficult time to adjust one’s pricing season. “To change their pricing strategy may be unrealistic,” Hadcock noted, “but in the quieter time of the year, a farmer should determine how well they did the previous year, examine costs for producing various fruits and vegetables and then think about their pricing strategy for the next growing season with a new plan in mind.”
Farmers can also ask for assistance with pricing structures from their local Cooperative Extension teams. “We can’t tell farmers where their prices should go, but we can show farmers the variety of resources available and we can show them how to look at data to make decisions on pricing,” Weybright concluded.