A Genuine Quandry…
14I recently gave a presentation on marketing, and we talked briefly about the price of eggs. A lot of farmers don’t want to mess with trying to sell eggs because of people who sell them for $2/dozen as some sort of hobby, usually ‘around the neighborhood’ or ‘at the end of their driveway’. In other words, since so many consumers are focusing on price alone, the eggs that a farmer would produce as a part of his or her farm-business can’t compete with hobby farm eggs because a farmer trying to make farming his or her livelihood has to actually account for the costs of production and try to–at the very, most miserable least–break even. It’s not only eggs at the end of hobby farmers’ driveways causing this either. I’ve seen eggs at farmers’ markets going for that price (which is crazy).
Anyway, I was researching the costs of production for conventional (factory) eggs, pastured eggs, and other egg raising methods when I found an interesting article at Mother Jones. The article talks briefly about eggs and then goes on to discuss the pork industry through a similar lens (i.e. price and *all* of the costs). About midway through the article, I read this:
“So we have a genuine quandary here: A farmer who’s just scraping by while doing the right thing by his land and his birds, charging a price that makes the whole concept of alternative food systems seem hopelessly elitist.”
(see the rest of the article here)
Now, the farmer in this story is charging $8/dozen…which is two-to-three times the prices you’ll find at markets in Wisconsin. Is that price actually elitist if what it really means is that a farmer can earn an honest margin for his or her work and–more importantly–keep on doing it? What does a farmer deserve to make? What’s a fair profit margin? Are farmers in Wisconsin charging enough for their eggs?
According to Health & Human Services, the poverty level for 2014 is $23,850 for a family of 4 and $15,730 for a family of 2. If a small family farm has an average profit margin of 20%, the farm would need gross sales of $100,000 to earn $20,000 in net profits. That’s ~$2,000 in sales per week to end up around the poverty line. Our farm charges $3.95/lb for a whole chicken, so that is around 112 chickens per week (5,824 chickens/year) to sell if each chicken weighs 4.5lbs (they don’t). You can buy whole chickens through major wholesale suppliers for as low as $.75/lb. If we could compete with that price, we’d have to sell 591 chickens per week (30,732 chickens/year) to make the same amount of money. Even if we competed with retail prices at a grocery store, Walmart often sells their Tyson chickens for $.99/lb. All situations above remaining the same, that’s 449 chickens per week (23,348 per year).
To give you some context for these numbers, we worked ourselves too hard last year and without hiring or partnering with someone or another farm…we’ll never do last year again. Still, even though we were exhausted in every way at the end of the year, we produced the most birds we’ve ever had on the farm. If you count up *every* bird we raised, we ended up with ~7,000 birds. I don’t even want to talk about how many eggs we’d have to sell each week at $4/dozen in order to achieve the same weekly sales (500 dozen!!). Incidentally, these numbers are highlighting how important it is for small family farms to have a diverse array of correctly priced products.
This also brings me back to $2/dozen eggs.
It should be obvious at this point that $2/dozen is below the costs of production for anyone who doesn’t have hundreds of thousands of birds in giant warehouses. Massive industrial farms had a cost of production of $.65-$.75/dozen in December 2013 (see stats here), and these are heavily subsidized, incredibly vertically integrated farms that have a Death-Star-like ability to destroy planets to leverage the market to achieve the lowest costs possible. After they add their profit margin and a retail store adds theirs, *now* you’ve got $2/dozen eggs.
My problem with all of this is that under-pricing ends up creating an expectation in the marketplace that eggs can be produced on a small farm at that price *and* cover costs and a decent profit. They can’t. Not even close. This leads farmers who want to do right by their land, themselves, their animals (etc.) to opt out of raising eggs in many cases because their price–which should include the cost of production at a bare minimum–turns people off and makes some think of these eggs as elitist or of farmers’ markets as a place full of highfalutin’ snobs and farmers raking in hay bales of profit. This too is far from the truth, but it’s a common enough perception that it has real-world effects on farmers, many of whom are working extremely hard to still find themselves and/or their families earning a salary from their farm that qualifies them to be impoverished.
This scenario plays out over and over again. It’s either $2/dozen eggs…$2 bags of delicate greens in the middle of the harshest winter we’ve had in recent memory (on top of astronomical LP prices, which many greenhouses are heated with)…products that are purchased on the cheap at stores or food auctions and re-sold at a market…or products that are purchased from other farms at a pittance and then up-charged so that the end consumer isn’t paying the farmer who produced the product but only the person who brought it to market—they should both be paid of course, but fairly and in proportion to the work they’ve done.
These cheaper products might sell well, but ultimately they are working against small farms. In the long run, they’re a dead-end for whoever is selling them too, unless that person has another income stream to exist on…and the reality for most small farmers is that they cannot easily exist, especially in the beginning, without off-farm jobs. Those jobs take away from a person’s time on the farm, which tends to slow or limit the farm’s growth, but they also allow the person to keep on farming and trying to find a way to make the farm their livelihood. While some of this will be unavoidable for some time, making farming your livelihood shouldn’t come across like a radical proposition…right?
What we end up with is a lot of small farms charging cheaper prices for what they *do* produce and these products are only priced as low as they are because a farmer is scared-to-death of pricing it to reflect the costs of production *and* an honest profit margin. This expands the quandry up above to one where not only do small farms have to combat the idea that they, their products or their customers are elitist, they also have to navigate a market that is far outside of their control due to the major, global influences of industrial food systems while simultaneously finding ways to not be undermined by hobby farms or unethical farmers and/or vendors who are eroding farmers’ livelihoods out from underneath them with irrational pricing and unethical practices. Compounding all of this is how taboo it is for people to discuss their numbers (i.e. costs of production, profit margins, earnings, etc). A lot of farmers are likely charging too little because they simply don’t realize that they’re selling themselves out of business, and a short conversation about accounting could help change that overnight.
So what do we do? Can we ask people to not purchase those cheaper products because of their effects on small farming in general? Can we ask producers who are selling those items to increase their prices so that they make a better margin–even if they didn’t do anything to produce it in the first place? Can we ask them to do that without being considered criminals who are conspiring on price? Even telling the truth about a particular farm or vendor could get someone into legal trouble if they’re not careful. Is it even possible to have farmers’ markets that can really enforce strict rules without taking even more time out of market managers’ lives?
I don’t know the answers to these questions, but I’m very optimistic about our ability to find ways to resolve these issues. Some would argue that our society isn’t ready to believe in or support what small farms can do, or that the odds are stacked so heavily against small farms given the nature of our dominant food systems. I believe that it’s just a matter of misplaced trust. People like cheap food, but many people also like to think that they’re not being manipulated, lied to or fed by unhealthy, unsustainable, unethical and destructive food systems. Education is part of the solution, so talking about this with your friends, family and farmers is a good start. The more conversations that we have, the more likely it is that we can arrive to long-term solutions that work out well for everyone…and I mean everyone, even the ‘big guys’. So, yeah, I’m very interested in what you are thinking and what you have to say. If you feel comfortable enough to share your own thoughts, I’d love to read them. Thanks! :)
Chris,
I think it begins with the subsidizing we do with “conventional” agriculture. We parley to whomever donates the most to whom.
I also feel it needs to change in our current food programs for schools, etc. Lisa cannot purchase organic or even natural produce as it is not even covered under the current government (again subsidized) food program. The world may end if she was to purchase 2500 chickens from you to feed the children. She can however purchase all of the factory farm chicken, grain, and even vegetables produced. How does that even happen? More still, How does that even make sense? Lisa brought up Farm to School at a food show recently and was basically ignored. “If you do that you are asking for a lawsuit if someones child gets sick.” She was told. Yet, this same “vendor” will not even think twice about selling beef soon to be recalled.
When we were farming I charged $5.00 a lb for our birds which were free range and supplemented with local organically grown grain. We charged $3.50-$4.00 a dozen for the eggs….and we squeaked by. Our rabbits were $6.00 lb. The point is, even at those prices we both still worked off our little farm. We set our sights eventually (or settled) on producing enough of our own food to slash our grocery bill by 60%. There was not really any profit in the sales portion of it.
There is something fundamentally wrong with a society in which an average family of 4 or 5 can eat totally processed, factory farmed, trucked in from thousands of miles away cheaper than they can eat from the farmer down the road. Someone at some time decided it was better to support someone other than the local farmer. Does this mean our local farms are charging too much? Not likely. It means instead of supporting local, fresh, and family raised at some point we decided to support far away, old, factory farmed.
As far as the market is concerned I shop at exactly 3 vendors. They are all local, all small, and yes they all charge more than the booth down the hall. Why would I pay more? Because it comes down to trust. I trust YOU to raise the chicken and duck I feed my family. I trust YOU to raise my pork. I know all of them are being given a good life and treated with respect and raised how they should be. You can actually taste that in the products you produce. The vast majority of Americans are used to paying a pittance for factory raised products, products brought in from sometimes thousands miles away, and products heavily subsidized by our government. The same people scream bloody murder when milk tops $5.00 a gallon, yet have no concept of what that gallon of milk should cost. Is Education the Answer?
At times I feel there is hope in all of this. The local food movement is growing. Small farmers are figuring out by working together they can accomplish some things. I just wish there were a way products such as yours could be fed in schools, could be made available to all, and could be put far above those we bring in from thousands of miles away. Maybe it is time as a country (government) to look at making it easier for that to happen.
There is no easy answer. I can say you should be charging more for your birds. You should be making a living doing what your doing. The reality is we have been there and understand your dilemma all to well.
All you can do is what you do. All I can do is push local and small farm raised on every single person we share our meals with. Hopefully, someday, SOON, it will all come to fruition.
Hey guys!
In short, yes. We’d love to talk more about your farming experiences too, and I’m glad you can still find some hope in it all. It’s hard for me to not indulge my inner cynic, but I’ve been fighting that off for a while now and a lot more recently. It just doesn’t help, haha. Anyway, thanks for your great comments up there!!
Chris
Ugggg- it is so hard! As the new generation of farmers, we have to ignore the existing “cheap” food paradigm, and work to create our own honest and real food prices and exceptionally healthy and ecologically beneficial products. There are so many people who are now understanding that cheap food comes at a cost beyond the ticket, and that they can vote to change this by purchasing from farmers directly, farmers who will price their products according to the actual costs involved. It is much more labor intensive to be small scale, and I think communicating this as you guys are, is so important. Keep on the good path, keep being honest- so many are hungry for truth and honesty, and good real food.
Hi Khaiti!
I like the idea of ignoring the cheap food paradigm and focusing on our own work. There’s something to be said for being the answer to the question when people ask us something like, “Change to what?”. I agree that more and more people are finding out that their trust has been betrayed, and I’ll definitely keep writing about it. You guys are doing such great work over there too, it’s a lot of fun seeing it all unfold…even if only via FB.
If you’re headed to MOSES we’ll keep an eye out for you.
Chris
Thank you so much for this really thoughtful post. We run a small farm in Rhode Island and although I often reassure myself that we are “holding our own”, I always remember that those were the last words heard on the radio from the captain of the Edmund Fitzgerald –
I wonder what it is that holds us back from charging enough to cover a reasonable profit margin. I know our produce is first-rate – if it isn’t, then it goes to our own freezer or the compost piles. I know it’s responsibly grown. And I’ve done the labor calculations for planting, cultivating, and harvesting 100-foot strips of vegetables, so I know the associated costs. It’s almost as if we’re embarrassed to tell someone what it actually costs.
I agree with Al & Lisa that the environment is changing, but interestingly, it’s changing at the level of the responsible retailer and restaurants over the home consumer. I’m going to choose to view this as encouraging, and hope that the “trickle-down” effect continues to affect the psychology of the consumer. What I wrestle with is the overall inequality of the system, where the “haves” can eat well and the “have nots” load up on frozen pizza and Juicy Juice. The buy-in of local government would be an enormous benefit, bit I’m not counting on it, especially when the Senate can’t even restore EUC to 1.8 million people left in the lurch by the expiration of unemployment benefits.
So I certainly don’t have any answers, but this post makes me think we should be charging more and working new angles. It’s an uphill battle, but one that seems vital to our survival as a (kind of) democracy. Thanks again for the food for thought.
Hi Jim,
It sounds like you guys are doing great, all things considered. That’s commendable given how hard it is to do. I think that charging more is almost always reasonable considering how little we tend to pay ourselves for our labor. The trick, as always, is figuring out how much isn’t too much. Granted, people want to say that we should include our lifestyle as some sort of added monetary benefit. That’s great, and the lifestyle is too, but I’m not sure that many people would consider the amount of required work on a farm to be a ‘benefit’ along these lines. Sure, we get to see the sunset and the sunrise because we’re outside, but any romantic sentiments I had about farming have been filed away under “Mother Nature”, hahaha. Seriously though, I understand where people are coming from when they say that they want to farm (etc), and I think that they’re very sincere too. For all I know, they could all be excellent farmers. We certainly need more of us too!
Anyway, it is an uphill battle and it’s hard to avoid being cynical. I think that there’s a degree of inevitability to the trend of local food too. That is, a lot of models out there are not viable for long, and people are going to have to buy local because it will become cost prohibitive to ship everything. That might not happen in my lifetime, but I think that laying the groundwork for that moment/era is very worth my time even if it’s not compensated well at this point. I’m also not a purist, and by that I mean that ‘Big Ag’ and industry can inform small farm operations a LOT, and many of the big farms we have around us were once smaller farms like our own. There’s a big opportunity there, and I’m going to try and figure out how to take advantage of it so that when we talk about ‘community’ it’s more meaningful. Just one path I’m pursuing among many.
Thanks for your comments,
Chris
Chris, I agree with most of what you say. It is so hard to balance the desire for good wholesome food and how much families have to spend. My one issue is the word ‘profit’. I may have a business that grosses $100,000 per year but makes zero profit, but I as owner/employee may have a salary or wage of $50,000 per year. Thanks for the article.
Hi Alec,
It is hard to strike the balance you’re speaking about there, but I do think that it will be a little easier to achieve as food costs increase. That increase may not be good in the short-term, but it does end up making good, wholesome food more approachable (plus there are so many more benefits to it that make it a net positive in comparison).
As for “profit”, you’re right. Someone could make the argument that the make zero profit and include their own salary in that. I can only speak from my experience, which I think is generally representative based on other farms I’m familiar with. When I run through calculations like this, I’m talking about what’s left over before anyone is getting paid. In my $100K example, my costs would be $80K, so I’m left with $20K in net profit. If I applied this to our farm, then that would be split in two with $10K going to me and $10K going to Maria. Granted, this is affected somewhat by how a business is structured (i.e. a LLC Partnership). The business does ‘owe’ us money because of our personal contributions early on as we were building the farm up to a point where it paid for itself. We haven’t done it yet, but we could add $20K to our farm’s costs by paying ourselves that money before we calculate our net profit. If we did that, then I’m still not sure it’s a salary or wage. We’re merely being paid back for money we put in. A dividend of sorts, but at zero percent interest, haha. So, the farm would make good on our loan to it, we’d net profit $0 and that would mean that we can’t pay ourselves as owner-operators. Other systems where the company’s profits or losses aren’t passing through to our personal taxes via the K-1 form would have us as listed as employees more explicitly. That brings us to the question of what we would pay ourselves. If we only have that $20K to pay ourselves with and we’ve worked an average of 50 hours per week for the year, that’s $10K each divided into 2600 hours, which leaves us getting paid $3.85/hour. We could pay ourselves more of course, say $5 an hour, and then we’d end up with a loss at the end of the year (~$6K if we paid ourselves $5/hr). That’s not necessarily a bad thing. In fact, our accountant was *shocked* that our farm actually made a profit last year. In her words, “Most people farm because they have another business that they need to lose money for, so the farm is purposefully operated at a loss each year and the bigger the loss…the better”.
Anyway, sorry for kind of blathering on there. This stuff is all very fascinating to me, and ultimately your point is a very good one.
Thanks,
Chris
Thanks for article, Chris. You captured the quandary well. There aren’t any easy answers for all the reasons mentioned, and more. The eater side of this has to do with who can afford “full priced” food. With real wages essentially stagnant over the past 30 + years while production costs at the scale of the family farm have increased, we’ve created a situation in which many people can’t afford real, full priced food. That’s a ridiculous and, I’d say, dangerous situation to be in.
It’s more complicated that that, though, of course. I think if we begin to look at this holistically, we may be able to create some solutions across the economic spectrum. (Re)skilling is part of this. If people have the skills to raise, preserve and prepare food, then some of the consumer costs get evened out and potentially they can afford full priced food for what they have to buy (that which they don’t produce themselves). And, overall, we Americans over-consume, and generally that overconsumption comes from processed foods. If people reduce their extraneous processed food purchases (assuming they have access to good food), that frees up some budget for good food.
Our current American personal spending paradigm is high volumes of low value goods. If we can switch that around, using the same budget amounts, we get to low volumes of high value goods. If that’s our paradigm, I think many more can actually afford good food.
One last thing I’ll mention: The efforts to (re)create place-based diets are an important part of this. This effort and study for Western Lake Superior is a great example: http://localfoods.umn.edu/wlsrFoodshedResearch
Thanks Jeremy.
“Our current American personal spending paradigm is high volumes of low value goods.”
That definitely seems to be the case, and I understand your point about affordability and re-skilling. I’m not sure where I stand personally, but there are some out there who see re-skilling as a threat to their business. I tend to view the market share of my world as being tiny, so there’s plenty of room. There could be some hiccups along the way though. I don’t know.
I like the idea of a place-based diet. There are similar ideas out there about food, and I’m starting to wonder if they’d be more realistic in steps. That is, are there people talking about, “Hey, let’s eat 25% of our diet from ‘here'”? Then, as you get more accustomed to it all, keep going from there. That might even give local producers the ability to actually pace this sort of movement.
Thanks again,
Chris
This article brings up some real points to consider. On one hand, you don’t want to discourage hobby farmers, because having people with those skills is important. On the other hand, something is very wrong when a stand-alone farm is not an economically safe venture.
In regards to economic and liability issues, collectivizing from the bottom upwards has obvious benefits. A company like Organic Valley is small enough to be ethical, yet large enough to compete with the “big hitters” at the local supermarket. Do we not need lots of little companies of this nature, rather than a few gargantuan ones? Then again, I would imagine that the obstacles to such an approach are numerous.
In terms of the big picture, just plain old valuing human life and one’s community is as crucial as anything. It’s easy to think of many things that are messed up with the current food system, and to feel righteously indignant about it (as I have done from time to time), but it is quite a challenge just to pick one’s niche and cooperate with whomever comes their way. I think that a lot of people are interested in better food — after all, people at work refer to the vending machine as the “Wheel of Death”! Winning over just one person on this issue, whether by appealing to economics, health, good farmers, good soil, or so on, is invaluable.
Hey Guy,
Yeah, I don’t want to discourage hobby farmers…I just want them to value their work and products more than they do. Just because it’s a hobby doesn’t mean you should lose money. Plus, it’s a hobby that has a direct impact on farmers who are actually trying to farm for their livelihood. So, it’s touchy…but I think the best argument here isn’t to say, “Don’t do that!” but to say, “You and your work are worth *more* than that!”
Collectivizing has some benefits, but some farms don’t want to do that and, to be quite honest, it would be nice if that wasn’t a requirement for a small farm to succeed. What kills me with that kind of situation is that the individual farms are lost. They, for all intents and purposes, disappear. Sure, the umbrella brand does well and can compete because it’s big and has the advantages that come with that…but some things can suffer (i.e. quality, consistency, consistency of practices, etc). You see similar issues arise with food hubs, but there is some good movement going on in that area right now. I should add that if a farmer doesn’t care if he or she disappears underneath an umbrella like Organic Valley, then I wouldn’t have an issue with that. It’s their choice.
I agree about valuing life and community. A lot of work to do in those areas and they have a big reach across society. And one person at a time also works for me, though I have a hard time staying patient : )
Chris
So, what a farmer has to do then is call them, “Egg Lands Best”. Stamp them with red initials to prove it, and maybe, just maybe people will buy into the higher price. Great article Chris. I never knew eggs could be so interesting.
Hey John!
Glad you enjoyed it :) This is just eggs, too. I am hoping to do something like this for everything we do eventually so that people have a better idea about all of this stuff. It’s a little easy to write because I also didn’t have an idea until I started farming. Hope all is well!