Over a decade ago, a work colleague of mine was retiring. He’d had a long and storied career working to help build the fruit industry in Alberta. He was involved in lots of the initial research and testing that was required to fill in the gaps for the growers and their new crops. He also worked to support the parts of the industry that were already established as they evolved and adapted to various changes. This fellow provided a lot of guidance to new growers, who needed help sorting through the complexities of an industry that marketed their product predominantly direct to consumers.
One of things that he did annually was to capture some of the price trends for the main crops. This allowed him to communicate any shifts and changes that were occurring in the prices that people were charging. This was useful to new growers, who had no frame of reference to use in their calculations. This was equally useful to established producers. They could compare their pricing to industry averages and then go back to their own costs of production to adjust their prices, if required.
When this colleague retired, he suggested that collecting prices was one of the things that I should do for the industry that I would now have more responsibility to support. I set out to do this work. Over the years, I expanded the price collection to include direct marketed vegetables, in addition to the main fruit crops that I had started with. I continued to collect prices from industry until my time with government ended.
What is included in setting a price?
I’m no economist, but I’ve worked with people that beat certain price-setting principles into my brain over the years.
Ideally, your price should cover all of the costs of production, as well as any other financial obligations, such as paying yourself and the like. I won’t embarrass myself by trying (vainly) to list those things, but I’m sure that you get the idea. You want to make sure that you not only cover what it cost to establish and then produce the crop, but also all of the associated expenses that you’ve invested in getting the crop and your business to that point. You should also be planning for some profit, which can be used against the future.
Where do you start?
If you are setting out on a new venture or are expanding your price offering, you might not know what to charge. That makes sense. There are a lot of different things to factor in. However, there is a process that you can follow.
This is one way that you can set prices. If the new product is an expansion of what you are already offering, you can probably make some educated guesstimates of the price to charge based on the costs and prices of comparable products that you are producing. For example, if you already grow a bush fruit, you can probably use that as a starting point. Then consider the projected yield of the new product (compared to the other crop), expected markets, and any other factors that you consider to be relevant. Then you can make some tweaks. If there are extra or additional activities that are required in the production of the crop, that will move the price upwards a little.
For new ventures or new products, you may have no frame of reference. As a result, you will have to try and piece together the costs of production based on breaking up the different activities. Once you have fleshed out the costs, you should then try and find yield estimates for the crop, preferably for somewhere that is comparable for where you will be producing. At the same time, you could talk to other producers. You can talk to the seed company or propagator, as they might have some yield expectations that you can use as a guideline.
Where do you get price data?
If you are looking for prices to compare your prices to, or to help you get a sense of where to start, you can look in a few different places.
If you want to get a sense of what fruit and vegetable prices are at retail, you can search through a tool from Agriculture and Agri-Food Canada called InfoHort. They have different wholesale to retail price reports for different market locations across Canada. Depending on the market, you can pull daily and weekly wholesale to retail sales prices for various commodities. Some markets have historical data, while others have current and historical data. These prices can be summarized by weekly, monthly, or annual averages, based on the report chosen and the location. It includes both imported and domestic product.
If you want some historic Alberta direct market prices that I collected when I was with the government, some of them can be found on the web if you search through the Open Government Portal for historic editions of my old newsletter “Hort Snacks”. Search for “Hort Snacks”, then select each of the years that are available to find the published editions for that year. Then choose either the April or May edition to find the Alberta Direct Market Fruit and Vegetable Price Survey report in each edition (a quick glance at the Table of Contents should tell you if it was published then or not). There are reports from 2015 to 2018.
https://open.alberta.ca/publications?q=Hort+Snacks&sort=score+desc
This past year, I was hired to do this survey again for Alberta Farm Fresh Producers Association, representing 2020/2021 price averages. If you are an AFFPA member, you should be able to get access to the survey results. It may be posted on their website or you could request it.
Some good resources
As I mentioned, numbers and prices and economics are not areas where I would call home, but I have occasionally camped there. Thankfully, there are some good resources that can help guide you down the price setting pathway. Here are a few that were created by people that I respect a lot.
Methods to price your products
Pricing Horticultural Products
Conclusions
Whatever your method of setting prices, there are a couple of things that I would suggest for you to do. First, gather as much information as you can before and then after you set the prices. Then, be sure to revisit those prices regularly, as your pool of information and data deepens. Prices need to change to reflect many factors.
Great info and links – thanks! One tip I’d like to pass on is to consider your market early on – will it pay what you need or do you need other sales channels 🙂
That is a good point. Doing that sort of research up front is really important, so that you can have options available to you in the future.