How are Share Prices Determined?
How do farmers place value on their production?
This is an age old issue. Please read the following to get a sense of the financial decision making at littleGrasse. It’s lengthy and informative.
For a large grower specializing on one or two crops, the math is relatively straightforward in regards to cost of production. For our diversified CSA, production is geared towards feeding people, not selling on the open market. Contrary to the specialized/mono culture farm, the diversified farm grows a wide variety of foodstuffs (veggies, livestock, herbs, flowers and fruit). Without going into great detail, the diversified CSA farm offers many safe guards to both the grower and shareholder. The ecological balance created by diversification helps with overall risk management on the farm. Issues such as weeds, pests, crop failure, and soil improvements are all addressed in a diversified operation. A holistic approach if you will.
With that said, how do we set the price for our share?
Honestly, it has not been easy. Until now we've looked at prevailing local prices for individual items (how these are set is another topic altogether), then set a baseline quantity of a given item that we would like to give out per share. Applying this formula to each vegetable helps us come up with an overall share price. However, we all know farming is not done on paper but in a world full of natural challenges.
A fundamental component of CSA is "shared risk - shared bounty". Our gardens are planned such that in the event of a crop failure, there are other crops planted to assure no one goes hungry. This strategy allows for folks to still be fed in a rough year, and hopefully realize extra in a good year. We saw this in the fall when our planting of Asian greens faltered, but the potatoes and cabbage were abundant. Thus, the food distributed will vary slightly from year to year. Although we had setbacks in 2011 (poor onions and slicing tomatoes for instance), we still distributed an incredible amount of food.
We went through our distribution log to total up what each shareholder received. We did not include some crops (herbs, apples, ground cherries, rhubarb, edamame, peanuts) in the equation. We figured out the total pounds for most of the items you were offered. It's worth mentioning the "as you like" items such as kale were reduced to a standard single bunch. From there we were looking to apply a dollar amount per item. We questioned using the local going rates, as our colleagues struggle with the same issue of pricing. Although, the conventional local supermarket has long been used as a pricing baseline for small scale producers, this is something we strongly disagree with for hopefully obvious reasons.
Wanting to take a fresh look at pricing we turned to our progressive friends at MOFGA (Maine Organic Farmers and Gardeners Assoc.). Monthly throughout the season they compile the going rate from all of their farms in the region. These reports cover the lowest pricing inland to the higher pricing in the more affluent areas along the coast. These reports offer a real look at what other farms are charging for their items. http://www.mofga.org/Portals/2/Reports/2011%20RETAIL%20Summary%20Organic%20Price%20Report.pdf
The production costs for Maine are not that different from that of the North Country, so we applied the average price rate per item to the total amount distributed. The numbers added up fast! For instance: a fresh share that cost $350, received a minimum of$560 worth of produce, as well as the items mentioned above. The year round shares received that $560 in addition to over $400 in items to preserve/store.
We don’t intend to make up this entire gap but we'd like to close it a bit, while still offering an abundant season of vegetables. The local growers we spoke to were also surprised to find out how much retail produce prices have risen. Whether you farm in the North Country or in Maine, production costs like seed, feed, fuel, land, building materials, taxes etc... are going up.
With these figures in hand we are examining how we plan our gardens, the amount of produce we offer per share and share pricing for the 2012 season. Details coming soon!