Walter lecturing north field pigs about economics and social systems…
Two days ago in comments Christian said…
Greetings to a fellow pasture-raising-heritage-breed-pig farm! My wife and I love following your blog. It looks like you have your work cut out for you with all of that snow. I recently saw your website and an am amazed at the pork prices you have posted. I was wondering if you would mind sharing how you justify your prices to your customers. I raise pasture raised berkshires and can’t get the prices your ask for. Any info you can share would be greatly appreciated!
Asking “How you justify your prices” is interesting wording. I will assume that you are asking in a genuine manner. If I knew your location I could be of more help but unfortunately your blogger profile is set to private. Without knowing more about your area and situation I can only give you general answers and guesses. Here goes…
Short answer:
I sell our pork based on quality – a free sample to chef’s does wonders – not on price. They rave about the taste, texture, color and quality of the meat. The fact that we produce it free-ranging, sustainably and humanely on pasture are bonus points. I’ve never been asked to justify our prices. Rather, I’ve been repeatedly told by buyers that our prices are great, too low, that we should charge more, that our competition charges more. I try to pick a price point that retains our customers in the long run, covers all of our costs and gives us a living – farming and pastured pork is our livelihood. Customers keep coming back week after week, year after year and we’re able to stay in business and expand so it is working.
Long Answer:
You do need to educate your potential customers as to why your product is better than the low-ball supermarket special. Do you have a brochure, business cards, meat labels and other materials that explain your product? Prices of pork, and virtually everything else, vary tremendously based on what the product is, what the market is like, location and other factors. Basic Economics 101.
Conventional pork on ‘manager special’ will be the rock bottom price so don’t compare with that. People who buy that (like I used to before I raised our own) are not your customer. Do not price your pork to compete with those artificially low prices. Emphasize the quality and freshness of your product. Why should they buy fresh pastured pork from you rather than getting the el-cheapo, almost out-of-date manager’s special factory farmed pork at the mega-plex supermarket? What makes your pork different? Do you grow yours naturally, free-ranging, humanely, raised, etc? Explain to customers what makes your product special.
If you’re in an area overrun with swine Confinement Animal Feeding Operations (CAFOs a.k.a. Factory Farms) your local prices may be so depressed it makes it hard to compete and get a price that pays your costs and wage. Ask yourself though, are you really trying to compete for those same dollars? CAFOs are heavily subsidized by the government so that they can do those low prices and they still lose money. The old joke is they lose money on every pig but make up for it in volume. It doesn’t work without the subsidies. Don’t aim for that market and don’t compete for those buyers. The big guys know how to lose money like you and I can never dream of. Instead, look for people who want a better quality, tastier meat that is humanely raised without hormone additives, antibiotic feeds, etc. Those are people who will be interested in your pastured pork.
Of course, if you don’t have the local market that appreciates artisan products then it won’t sell – wrong product in the market. Not every area will support artisan products of any variety be it pottery or pork. We live in a lower income area. We sell pork cuts primarily to upscale areas where people have the money to buy a better quality, healthier meat. This concept may not be politically correct but it is market reality.
If there is oversupply of pastured meats in your area that will depress prices too. Who is your competition besides the CAFO pork in supermarkets? Are they raising their livestock on grain, pasture, a combination or other? How can you differentiate yourself in the market? What makes your product special?
Reaching the right customers is important. How do you get the word out about your product? Are you advertising? Word of mouth from satisfied customers? Are the people hearing about you the right market for your product? Are they looking for hormone-free, without the use of antibiotic feeds, naturally, humanely raised pastured pork?
The very best way to get the worst possible price for your hard effort is to sell at auction closely followed by selling wholesale at the butcher’s. The best way to increase your share of the sale price is to eliminate the middlemen and sell directly to customers. Every time someone acts as a distributor or middleman they must take a piece of the pork pie to cover their expenses and give them a wage. This means your share decreases. In addition to selling niche pork, discover how to reach your customers directly.
All of these are forces on your market price. The above is basic economics. Without knowing more about where you are and your market it’s hard for me to be more specific. I do hope that gives you food for thought and helps.
I set our prices by surveying the local and national prices for both artisan and commodity pork. Then I picked a price point that put us slightly above the the highest commodity pork and at the 75th percentile of the artisan pork. This covers our costs and gives us a living without driving down the local market for other producers or overpricing to buyers. Customers like our product and prices so they return for repeat sales.
There is also a large difference between commercial cuts pricing vs whole pig pricing. From live weight to hanging weight you lose about 30%. Then there is also a significant loss, about another 33%, from hanging weight to final commercial cuts weight that people typically see in the stores. From live weight to cuts is a loss of about 52%. Thus, for example, a pig that sells for $2/lb live weight needs to cost about $4/lb for cuts plus the cost of getting it from farm to fork – all the processing, transport, etc. The butcher charges a lot to do his work and that accounts for about another $2/lb. The stores have rent, utility bills, labor, etc adding about 50% more or about another $3 to the price per pound. If wholesale distributors came into play they add another 25% or so to the cost, or take it out of the farmer’s cut. Someone pays for every step in the process.
That is based on all cuts averaging, it gets more expensive when we look at the fact that some cuts are in high demands and others aren’t. All this must be covered in the pricing of the prime cuts. Virtually everyone wants loin, bacon, smoked hams and butt shoulder but that still leaves half a pig of meat to sell, cuts that go at a significantly lower price. Do you have a market for the oddments, the ears, tail, head, trotters, hocks, jowls, liver, kidneys, heart, lard, rind, bones, etc. When pricing cuts you’ll need to take that into account. This is why the prime cuts sell for prime prices. Unfortunately, we can’t produce eight hammed pigs with ten foot long loins and bacons. Would that I could! But pigs also need to have feet, heads, picnic shoulders, bones organs and other associated support systems to be viable life forms. Reality can be messy. This is true whether you’re raising beets, pumpkins or pigs. I do continue to work at breeding longer pigs which does make for more loin.
When figuring out your cuts pricing, be sure to account for the costs of processing. The transport, slaughter, butchering, smoking, storage and delivery cost us about a half of our income. We have to pay the processor when we pickup the meat before we start our delivery route. That right there is a large portion of the price and it doesn’t stay in our pocket.
Be very careful and complete with your cost analysis – it’s a business plan. Don’t forget your infra-structure, buildings, land, taxes, fencing, insurance, marketing and more. After a few years experience you start realizing there are more things on that list than you guessed. Allow a margin of error. If you underprice yourself, like with any product, you will be your own worst enemy, driving yourself into the ground and out of business. Farming is a business. Small farmers like us, unlike Big Ag, don’t get government handouts or subsidies. We must make enough money to pay all costs, taxes and have enough left over to pay ourselves.
Remember that you need to earn something beyond that so that you can improve your farm. A classic business pricing error is to fail to do this. If you can’t charge enough then it isn’t the right product in the right market despite how marketers would like to claim they can sell anything to anyone.
So how do the commodity pork producers, the CAFOs, produce pork chops at such low prices that we see in the supermarket? In a word, subsidies. The government subsidizes the cost of fuel, fertilizer, grains, feed and more. They further lower their prices by using illegal immigrant labor, paying minimum wage or less, not paying their share of the social taxes, benefits and such. Then there are the environmental costs of the pollution from the factory farms. In the end, consumers pay for this one way or another, either through their taxes or at the checkout and through degradation of society and the environment. That is the cost of cheap food. But then you already know that since you are choosing to go for the alternative. The good news is there are a growing number of consumers who understand this and are looking for high quality food.
When doing your pricing, remember, you’re producing a premium product, I would hope, so don’t underprice it. You should be charging more than factory farmed pork because your pork is better. There are people who appreciate that quality and are willing to pay the price to get it. Educate them as to why your pork is better. This makes sure that you are there next year and the year after to continue suppling them. Don’t try to compete with the commodity markets on price. They’ll win and both of you will lose money on every sale. Focus on quality and sell to customers who appreciate the artisan pastured pork you produce.
By the way, in the photo above I wasn’t lecturing the pigs on pastured pork prices. We were discussing Leninism vs Marxism vs Stalinism, both the social and economic systems. I don’t think the pigs bought it. They are devout capitalists with self-interest libertarian leanings. Still, they were polite enough to listen so long as I was providing free eats. Keep this in mind when attending sponsored lectures…
Update 20140227: The photo from this article appeared on a magazine cover in February of 2014 as mentioned on the post Walter’s Lectures in Economics Makes Magazine Cover. A bit of fun and fleeting fame…
Addendum 20160418: There is a certain amount of comparative pricing between cuts and levels of sales categories (whole pig, retail, wholesale, etc). Not the absolute number, the dollars and cents, but rather the relative price points. I’ve done a lot of work on the mathematics of pricing and surveys over the decades of pricing from various types of vendors in our state and nationally. You can see the results of this in the price sheets on my literature page. The set point for someone in a different region will be different – e.g., the dollars per pound for whole pig, processing costs, delivery cost – but after you find that set point the rest of it flows in a very comparable manner.
We have: (in pricing order)
- Retail cuts pricing.
- Box prices that offer a small discount.
- CSAs boxes – multiple boxes over a season or year.
- Half pig pricing which is again better.
- Wholesale pricing for stores and restaurants with weekly standing orders. That weekly standing order for resale is key. That is 25% to 50% off of the retail price.
- Whole pig pricing which is the best price and the same for retail or wholesale. This gives the floor pricing based on $4/lb Hanging Weight + Processing + Delivery in 2016
Oddments tend to be exceptions to the rules.
Outdoors: 15°F/4°F Sunny and windy
Farm House: 43°F/37°F
Tiny Cottage: 63°F/60°F
Walter Jeffries Tinker, Tailor… A bit eclectic & a tad eccentric, polymath, quantum mechanic & Farmer. Also lucky at cards.
Long time reader, seldom commenter! I’m in North Mississippi, which is not a hotbed of artisanal pastured livestock. Down here, if you want a ham or a half pig or whatnot, the best way to get it is to ask all your friends if they know somebody who’s raising a hog.
Anyway, I’ve checked prices online for many parts of the country. Yours are entirely fair, and if I lived nearby I’d no doubt buy a half pig.
This is a great article, and part of the discussion I and my business partner and my wife have been having. How much is too much? How little is too cheap? Is it better to produce enough to go to the grocery stores, or is it better to stick with direct to consumer models? Thanks for the article!
Very interesting a not a little intimidating for those considering starting an agri related business in the future. So much to consider!
I wish I lived nearer so I could try your capitalist with libertarian self interest pork. I do love my port butt pulled pork recipe.
By the way, your pigs are adorable and having once had a pet one who was ever so smart and funny, I still have a hard time looking my pork in the face. :)
Walter, I love your writing. It’s so informational, polite, and funny too.
We bought 3 piglets from you last spring. The male we had butchered on the farm about a month ago and sold it as a 1/2 pig, and 1/4 pig to friends. We are really floundering about how to market our meat and piglets. This article was very helpful. Thank you.
Here in Southeast VA, your prices are a little on the low side but there are not too many folks selling by the half. A family near us, now sells by the 40 lb box and they are asking and getting $6.00/lb with much higher prices for cuts.
This is such a great post, Walter, thanks.
We live in a rural area of East Tennessee. I can’t even cover my costs for producing eggs. I’d have to drive 1-2 hours away to do that. People here still think eggs should cost $1/dozen and milk, $2/gallon. Of course, there’s a reason this area is in the Heart Attach/Stroke/Diabetes Belt.
I have a friend here in Kansas City who raised pigs, but on a very small level, and he always gets much higher than market price for his pork. He tells me its the conditions he raises them in. The smaller the operation, the better the conditions (generally) and so the better the market forces consider the quality to be, at least for my friend.
Walt I just absolutly luv the pix of you lecturing the pigs!!!!!! That is so great! Animal farm on the farm! :>
Your so right about all this. It may not be polite or politicaly correc to admit it but not everyone can afford to buy the unsubsidy food. As u said it is reality. The good stuff cost more. I buy it as when I can. Yor prices are actually vary reasonable much more so than what I have seen and paid.
It was realy interesting reading this becuse I had not thought about all the costs and things that go into the food. To get it to me there are a lot of steps and people involved. It passes thro a lot of hands. Everyones got to make a living. Makes sense.
Thank you for this great read and for doing all that you do. You inspire even us city people.
we just raised two pigs cause we like pork. the cost isn’t the issue. what they eat is the real issue. no assurances of quality can be bought locally.
i read somewhere “you are what you eat eats” that really struck home for me. whether it’s the animals or plants we feed them and like to know that it’s nothing artificial or poison.
getting a product with assurance of quality is always worth more money than the processed-high-fructose-petrol most of the u.s. eats.
your model of pricing is what the entire economy should be nurturing–eat local and stop eating price-club-crap.
First, I really have to know if you or whoever is in the picture is really wearing shorts out in that snow!
Second, while your prices for a whole hog are higher than what I pay here in central Illinois for organic pork from a local farmer, it probably still works to be cheaper than buying individual cuts.
As you say, there is no way to compete with subsidized factory farms on price; the difference has to be quality, and there will always be a small market that appreciates it and is willing to pay for it.
On my blog, I posted a Meat Manifesto outlining all the things that go into (and stay out of) good meat. The inescapable conclusion is that our meat should cost more (than it does at the supermarket), and we should eat less of it.
Aye, Larbo, that is I, Walter, in my normal winter attire. I bow to the season by putting on a hat and another shirt. Winter’s cold you know. :) Seriously though, if it gets to bitter I have a full body work suit and even a face mask to protect me from the wind chill which can get into the deep negatives. Without much wind, I’m comfortable to about 20째F below. But if the wind pickups up, and especially if it is driving snow, then that can get a bit nasty on exposed skin! Of course, don’t ever touch metal with bare skin. Not unless you want to keep it stuck on.
A most excelent post! Thankyou thankyou thankyou. I dont farm or sell pork or anything else but youve given me a lot of insight into how this all works. I really appreciate it!
I am going to have to ask these questions. Are you wearing shorts in the snow. My family gets me for wearing sandals all year but I would never wear shorts in the snow. And second I want to know how you got the pigs to listen that long. Ours do not listen to anything but the sounds of the slop bucket. And last how do you find a market for fresh pork in the middle of nowhere. We have no good resturants or people willing to pay for quailty meat.
“Are you wearing shorts in the snow.”
Aye, but I have a hat on.
“I want to know how you got the pigs to listen that long. Ours do not listen to anything but the sounds of the slop bucket.”
I’m a very interesting lecturer. :) Okay, well, it may have been the eats. Free donuts and coffee tend to pack a speaker’s hall.
“How do you find a market for fresh pork in the middle of nowhere. We have no good resturants or people willing to pay for quailty meat.”
We sell in about a 60 mile radius of our farm to stores and restaurants. Most of the areas are more affluent – places we couldn’t afford real estate for farming. That is fairly common since farming takes a lot of land and where the fancy houses are the real estate taxes and land prices tend to be a lot higher. When we bought our land back in the 1980’s I picked the location by drawing circles on the map to figure out this sort of thing. I don’t want to drive too far. As it is, the delivery route takes a full day each week.
Cheers,
-Walter
Seems many are amazed by your bare legs…lol. We’re pretty cold in southern Ontario, Canada too but we do bring out the shorts in winter. The kids have been wearing them a lot lately; maybe they think it will convince spring to show up early? ;} Actually though it’s usually because we are off to gymnastics or something. Although hubby has always been one of those in sandals and shorts throughout winter!
Anyway, thanks for another great post!
I luv yor little philosophy bend at the end!
Great article. Your humor cracks me up! Keep it up!
What do you do to keep your cost down. Especially fencing and feed. I have a infancy steg 14 ACRE farm and raise pigs and chickens. I sell mainly feeders and a few butchers and am developing more of a demand for pastured pork. I have pigs in 16' x 80' runs and am looking to expand to 5 acre pasture. I currently buy cor/soy mix feed from a local dairy farmer and supplement out of the garden. I reseed runs with a pasture mix of clover, alfalfa, rape and prairy/orchard grass. Does this sound about right? What do you do to supplement feed costs? Any ideas you could give I would dearly appreciate.
Scott
Scott,
You're doing the right things. Feed is the biggest cost. Getting a grip on that is key. Feed also dramatically affects the taste and quality of the pork so you want to feed what is going to produce a top quality, tasty pastured pork that your customers will come back for time and again.
We don't feed corn/soy or commercial feeds. Instead we feed about 90% pasture/hay, about 7% dairy[1, 2] and the rest is apples, pumpkins, turnips, beets, cole crops and other things. These are not absolute numbers to be taken on a daily basis but rather averages over time. It varies with the season and year. For example, this year (2009) was a total failure for our pumpkin crop but the beets, turnips and mangels did well. We grow as much as we can because that keeps our costs down. I have the goal of growing enough of these to take us through the late fall and winter but so far we have not gotten there, in part because we've been gradually expanding our herds and my planting isn't keeping up and in part due to crop failures like the pumpkins this year.
The dairy we feed provides calories and lysine which is a limiting protein that is low on a pasture/hay diet. Lack of calories results in extra lean meat and low back fat. Lack of lysine or protein in general causes slower growth rates. Learning to observe the body condition of the pigs is key to feeding alternative varied diets rather than commercial grower mixes and formulations.
Corn is an example of something I'm not good at growing so we don't feed it much. If I could grow it I would feed it. Out of the last five years our corn crop has been meager or failed four years.
Something that we do quite differently than you is our pigs our out on pasture doing rotational grazing. This works for us because we have the land. Paddocks are about one to two acres each. How big you want to make your paddocks will vary with how many pigs you have and how lush the pasture is. Ideally you want to rotate them in three days to a week or so, no more than two weeks. Fencing large areas is more cost effective than fencing small areas. We use electric fencing – a perimeter vs area math problem.
Another thing to keep in mind is that pigs of different sizes graze differently and have different dietary needs. The bigger pigs graze better than the little ones. As such we tend to feed things like boiled barley from making beer to the growers since it is high in accessible protein and they also get more cream and cheese. The weaners get more cottage cheese. When we have large amounts then the big pigs get more. There are also seasonal adjustments to make – in the winter the pigs need more calories to keep warm.
Since we have the land we cleared an additional 40 acres for pastures and hay fields this summer. This will cut our winter hay costs in five to ten years. It also provides more space to plant crops for fall and winter feeds.
What your exact mix of management and diet will of course depend on your local resources – don't lock yourself into a way just because someone else does something one way. The key is to keep adjusting things and making it better every month and every year. It's a process.
Cheers,
-Walter
What a fantastic article. You have really opened my eyes to the whole pricing issues and about how what we see in the super market is but a shadow of all that happens. I had not realized just how little of a pig is the prime parts that everyone including me wants. I hope you don’t mind me commenting on an old article. This is a goldie!
Thanks. I have wondered about how this worked.
This might seem like a strange thing to say but you are not charging enough. I am too far away to buy (LA) but prices here are several times what you charge. When you start shipping from your butcher shop I am quite interested.
We do ship frozen pork – check out the By-the-Box section of the order form for details and let me know if you have any questions.