With our market season drawing near, and employees (paid in products) starting soon, this is a good time to discuss how we assess the value of farm products, set prices, and decide what to sell. The easiest way to do this is to follow whatever the going “market” value is, but as we’ve learned, that often has very little to do with the actual production cost of the item, and/or the nutritional or culinary value of the item.
For example, let’s compare potential gross income from sweet corn, tomatoes, and garlic (all yield data from the Johnny’s Selected Seeds catalogue, a respected source), using 100′ rows. For simplicity’s sake, I’m using gross rather than the more accurate net, because calculating net income per product involves more variables than I want to introduce into this discussion.
Tomatoes: 150lb at $2-$3/lb = $300-$450/row
Garlic: 300 heads at $1-$2/head = $300-$600/row
As far as I’m concerned sweet corn around here is criminally underpriced. It may make some economic sense for a farmer with many acres and large-scale equipment to grow a mass batch and make up for the tiny income in economies of scale, but no small grower with other options should touch it when you can make far more per unit area on almost anything else. Don’t expect us to ever grow sweet corn for market, because I don’t think anyone will ever pay the prices it would theoretically take for that to be worth growing in place of other products. Sweet corn is supposed to be one of the greatest delicacies of summer, yet the economic value placed on it by the consumer is somewhere below leftover Brussels sprouts.
Now let’s compare the caloric value of various items as it relates to their price. Organic eggs cost around $4/dozen here, and local organic milk costs $6-$8/gallon. Many folks would consider that pricey. Yet organic tomatoes routinely go for $3/lb (the price ratios for conventional items are similar). Eight dollars could get you two dozen eggs, a gallon of milk, or a handful of large tomatoes. Of those options, the tomatoes have relatively few calories (though they are packed with nutrients), while milk and eggs are far better at filling the stomach. No wonder someone on a tight budget would choose a couple dozen eggs or a gallon of milk over a few high end tomatoes. Thus either tomatoes are way overpriced, or milk & eggs are way under-priced, from a value-cost perspective.
We spend a lot of time paying attention to our production costs and labor inputs, to better understand what products are worth our while to produce & sell, and what a fair price ought to be. This is unabashedly a for-profit farm and we intend to make a decent living at it. In many cases we’ve concluded that the going “market” rate in grocery stores has little relevance to the cost of production around here. I believe this is largely related to government subsidies.
Most fruit & vegetable production for the mass market comes from places like California and Arizona where effective farming is only possible with hugely subsidized water supplies. If those subsidies were removed, and those growers paid the local market rate for their water, their products would skyrocket in price and make ours look like a bargain. (We had a glimpse of this last year when water shortages briefly pushed California lettuce prices up to $16/pound, a price with which we are happy to compete; we charge $8-$10/lb.) These growers also often rely on cheap legal/illegal migrant labor, another effective subsidy that is not available to most small, local growers. We have a pretty good sense of what it costs us to produce a tomato, and we charge accordingly. The store price has our tax dollars beneath it like Atlas under a globe.
With regards to items like milk, eggs, and meat, the situation is similar only this time the subsidy is for cheap grains. Almost no one, not even us, produces these products without some inputs of corn, soybeans, and other commodities, all of which are hugely cheapened by government payouts. Thus generations of consumers have been trained to expect these products to be abnormally cheap. This is why, in the examples above, the milk & eggs appear to cheaply valued compared to the tomatoes. $3/lb tomatoes reflect an unsubsidized value for a product of low caloric content; $4/dozen for eggs reflects a highly subsidized (even for organic) base ration for those hens, thus making their concentrated protein irrationally cheap for their value.
Now, some would make the fair argument that food should be cheap, that it’s a triumph of modern ag policy that we can get such cheap protein and produce, and that farms like ours are a niche anachromism. I have run out of space to deal effectively with this argument, except to note that many of the same people are otherwise deeply opposed to government interventions in the free market. How many Tea Party members would redouble their protests if all government ag subsidies ended and their steak, milk, and eggs tripled in price? Somehow it’s a disaster to have government deeply involved in health care, but it’s a basic human/American right to have food as cheap as possible no matter the cost in taxpayer dollars and loss of farm independence.
So be thankful if you wish for cheap supermarket food, but don’t expect those of us outside the subsidy system to like it. We do our best to price our products to reflect their actual production value and their nutritional/culinary value, and the occasional sticker shock to customers is something we just have to accept.