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Selling Farm Products at Farmers Markets - PDF by nuk13113

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									    University of Kentucky                                         College of Agriculture                                           New Crop Opportunities Center




  Selling Farm Products
  at Farmers Markets
  IntroductIon
  Farmers markets are used by Kentucky growers
  of all farm sizes and scales. “Market gardeners”
  often tend less than an acre of land for selling
  strictly at the local farmers market. On the other
  hand, some of Kentucky’s largest orchards use
  local farmers markets as a retail outlet during the
  fall to command a premium price for their crop.                                            offered grants for capital improvements to local
                                                                                             and regional farmers markets.
  The number of farmers markets in the United
  States increased from 1,755 to more than 3,700                                             This publication is intended as an introductory
  (111% increase) from 1994 to 2004.1 The number                                             marketing reference for producers considering
  of markets in Kentucky more than tripled during                                            new involvement in a local farmers market. The
  this same period (from 30 to over 90 markets) as                                           subject matter is divided into the “Three P’s” of
  more producers and consumers became interested                                             retail marketing: Product, Price, and Promotion.
  in locally grown food. This trend continued                                                Producers considering involvement in a farmers
  during the 2000s with an estimated 5,274 farmers                                           market should contact their county’s Cooperative
  markets nationwide in 2009.1 The upwards trend                                             Extension office for guidelines on how to enter
  in farmers markets has also continued in Kentucky,                                         their local market.
  where there were 137 farmers markets registered
  with the Kentucky Department of Agriculture                                                Product
  (KDA) in 2009, representing 2,274 vendors.2                                                The most common reason that customers give
                                                                                             for shopping at community farmers markets is
  The rise in the number and popularity of farmers                                           the quality of produce. Consumers are more
  markets in Kentucky has resulted in considerable                                           frequently looking for tastes that can only be
  support from the KDA and other state agencies.                                             grown locally — produce that is picked at its
  Legislation, such as House Bill 391, has allowed                                           peak and sold at its most desirable stage.
  the sale of some home processed value-added
  products at farmers markets. More than 400                                                 The potential farmers market vendor must
  Kentucky producers registered                                                                             carefully plan to offer a range
  for this program in 2008.                                                                                 of products. Growers should
  The Kentucky Agricultural                                                                                 have a core product offering of
  Development Board has also                                                                                reliable varieties that produce

Agriculture & Natural Resources • Family & Consumer Sciences • 4-H/Youth Development • Community & Economic Development

        Educational programs of the Kentucky Cooperative Extension Service serve all people regardless of race, color, age, sex, religion, disability, or national origin.
well in their area. These should include varieties   Some noticeable trends in the diversity of plant
with which local consumers are familiar and          product selections at Kentucky farmers markets
prefer. Suitable varieties can be determined by      include:
consulting with local Extension agents, area            • Non-edibles, such as cut flowers and gourds
growers, and potential customers.                       • Sheltered/greenhouse production, including
                                                        flowers, bedding plants, vegetable plants,
                                                        greenhouse vegetables, and early/late
                                                        vegetables grown using season extension
                                                        techniques
                                                        • Heirloom varieties
                                                        • Jams, jellies, sorghum syrups, baked goods,
                                                        and other value-added items
                                                        • Ethnic vegetables, especially Asian and
                                                        Latin American
                                                        • Dried herbs, nuts, fruits, and vegetables
                                                        • Organic products
                                                        • Forest products, for example, wood, greens,
                                                        ornamentals, and mushrooms
                                                        • Lettuce mixes (as opposed to single lettuce
                                                        varieties or single heads)

                                                     PrIce
Production concerns are critical to maintaining      One of the most common questions asked by
product quality. Soil fertility, pest management,    farmers market vendors is, “How do I set prices
and post-harvest handling all greatly affect a       for my products?” Generally, prices at farmers
farmers market vendor’s ability to sell their        markets are set locally and are often higher than
product. Production and marketing go hand            similar products available at local grocery stores.
in hand — good production requires good              Farmers market advocates suggest this disparity
marketing to be successful, and good marketing       is crucial to differentiate the farmers market
skills require good production for success.          product from wholesale produce.

Most markets have rules guiding how they are         The two most important factors in setting your
operated. These rules may restrict the types of      prices are
product offerings. Some farmers markets allow           • Knowing your cost of production
vendors to re-sell a certain amount of produce          • Knowing what your product is selling for at
that they have not grown themselves, while other        other local retail outlets
markets require the seller to grow all the produce
they sell. Clearly understanding your market’s       Knowing Your Cost of Production
rules will help you plan your product offerings.     For smaller producers, knowing your cost of
Knowing and abiding by these rules will help         production may be as simple as this:
you plan and market your product successfully.         “Once a year, add up all your production and
                                                       marketing expenses (don’t forget a decent
Finally, farmers markets are the market of choice      wage for your labor) and divide them by your
for new and different produce items to be tested       production area in some unit of measurement
in the marketplace. Successful farmers market          that makes sense to you (acres, beds, square
vendors are often experimenting with produce           feet). Divide that number by the pounds of
variety, packaging, and presentation.                  marketable produce you harvest from each
  of your units, and you’ll have at least a crude      Pricing for Profit
  version of your cost of production per pound.” 3     Every retailer should be pricing for profit. As
                                                       a farmers market vendor, your task in pricing
Larger growers should be able to identify              for profit is a bit more complex than a grocer or
production costs for different crops and fields,       restaurateur who is purchasing and reselling their
and then divide those costs by the total marketable    product. The challenge for farmers market sellers
yield. Remember: the most common error in              is to determine how much it costs to grow and
calculating production costs by both large and         deliver the product to market. Once you know
small growers is to discount the value of the          your cost of production and delivery to market,
time spent producing the crop. Always assume a         you can accurately determine the price you need
reasonable wage and realistic time estimates for       to receive to cover your costs.
your labor.

Knowing the Price of Similar Products
Elsewhere
Farmers market vendors should be sure to avoid
undervaluing their produce. Knowing what your
product is selling for at other local retail outlets
means that you have an idea of what your crops
sell for in the local groceries. Producers located
near produce auctions may find that auction
prices can also affect market pricing.

Identifying the retail prices set at other Kentucky
farmers markets can also help provide growers
with pricing suggestions. One way to obtain            There are numerous tools available to help
this information is through the UK New Crop            you determine your cost of production. The
Opportunities Center farmers market pricing            University of Kentucky has developed a number
reports.    These reports are posted weekly            of vegetable and fruit budgets that can serve as
throughout the growing season; past reports are        guides for developing your own estimates. In
also available on this site. Prices are gathered       addition, production budgets developed by other
from selected markets scattered over the state;        universities can prove useful. Computer users
small county markets as well as larger urban           familiar with spreadsheet software will find many
ones are represented. The reports summarize the        spreadsheet budgets available online. There are
selling prices of a number of in-season products,      links to budgets for most major produce crops at
which can include fresh fruits and vegetables,         the New Crop Opportunities Center Web site.
ornamentals, specialty crops, and value-added
products.                                              Knowing your entire cost of production—
                                                       including delivery costs and the value of your
Pricing Strategies                                     own labor used in growing and selling—is the
When you have a specific idea of the value of          most important part of setting a price for your
your products and at least a rough idea of how         product in a farmers market or any other retail
much your goods cost to produce, you are ready         setting.
to refine your pricing strategy. There are three
kinds of pricing approaches used by farmers            Pricing for Value
market vendors: pricing for profit, pricing for        Pricing for value refers to a strategy used to sell
value, and pricing against competition.                more quantity by giving price breaks when more
product is purchased. For example, pumpkins          PromotIon
might be priced at “$4 each or 3 for $10.”           Properly managed farmers markets are attractive
                                                     destinations for customers wanting to purchase
Pricing for value most often occurs in situations    the finest local produce available. There are many
when the vendor wants to “move” more product         ways to enhance customer traffic at the entire
by offering quantity discounts. However, the         farmers market. Consult the KDA’s Kentucky
seller must know their cost of production to         Farmers Market Manual or your county’s
effectively price for value. If it costs $3.50 to    Cooperative Extension office for guidelines
grow each pumpkin and you are offering “3 for        and ideas for proper market management and
$10” to sell more, you are actually losing money     promotion.
on each of those pumpkins!
                                                     One of the best promotions for your product is
Value pricing is often used by farmers market
                                                     an attractive, tidy, and well-managed market
vendors who sell larger volumes to restaurants or
                                                     stand. In addition, contrasting colors and
other regular customers. Value pricing can also
                                                     product display heights help add depth to a
be used at the end of the market day if the vendor
                                                     farmers market display. A well-designed booth
does not wish to return home with produce.
                                                     not only attracts customers to your display, but
                                                     it also helps to keep shoppers flowing through
Pricing Against Competition
                                                     your stand. For example, placing bags or signage
Many farmers markets discourage vendors from
                                                     where your customers should start moving along
purposefully undercutting each other on prices.
                                                     your display will prevent a bottleneck around the
This is especially relevant to markets that allow
                                                     cash register or cashbox.
reselling — a vendor might be able to buy bulk
wholesale produce at a cost lower than what the
                                                     Your product is your best promotion, and there
produce can be grown locally. Differentiating
your product from your competition can help          are many ways to promote your produce at the
address this problem. Furthermore, the reputation    market. Good signage will help your products
you develop for offering quality packaging,          stand out on a busy market day. Use signs to
presentation, and high-quality products will allow   communicate information about your farm,
you to maintain a higher                                                  prices, and interesting
price. The best strategy                                                  information about your
for pricing against                                                       products.
your competition is
to know your cost of                                                       You may also be able
production.                                                                to offer samples of new
                                                                           or unusual products and
Loss Leaders                                                               commodities. Kentucky
Products     that    are                                                   guidelines for sampling
purposefully      priced                                                   are available from the
below their cost of                                                        KDA; a link to this
production or purchase                                                     information is listed at the
value are referred to                                                      end of this publication.
as ‘loss leaders.’ You                                                     You might also ask a chef
might choose to offer certain products as loss       or local Extension employee to do a cooking
leaders when those products attract customers        demonstration using some of your crops.
to your stand, especially if the customer is then    Customers who are able to taste or see your
led to also purchase other, higher profit items.     product used in food preparation are more likely
to purchase it. Be sure to comply with all local               • Product Sampling at Farmers Markets
health department requirements before cooking                  (Kentucky Department of Agriculture)
on-site.                                                       http://www.kyagr.com/marketing/farmmarket/
                                                               sample.htm
“Point of purchase” materials are items that                   • Direct Marketing (ATTRA, 2007)
you provide customers at sale time to educate                  http://attra.ncat.org/attra-pub/summaries/
them about their purchase. Recipes are some                    directmkt.html
of the best promotional materials around. Some                 • Direct Marketing Guide for Producers of
farms choose to provide newsletters or other                   Fruits, Vegetables, and Other Specialty Products
information detailing how their produce was                    (University of Tennessee, 2002)
grown. Regardless of how you choose to promote                 http://www.utextension.utk.edu/publications/
your product, it is doubtful that you can offer your           pbfiles/PB1711.pdf
customers too much information. Many farmers                   • Farmers Market Manager Training Manual
market customers are not only interested in the                (Farmers Market Federation of New York, 2009)
product itself, but also the product story—where               http://www.nyfarmersmarket.com/
it came from, who grew it, how it was grown.                   • Farmers Markets (USDA Agricultural
The more information you provide customers                     Marketing Service)
wanting to connect with where their food comes                 http://www.ams.usda.gov/farmersmarkets/
from, the more likely they are to return for more              • Farmers’ Markets: Marketing and Business
purchases.                                                     Guide (ATTRA, 2009)
                                                               http://www.attra.org/attra-pub/summaries/
Selected reSourceS                                             farmmarket.html
• Crop Budgets (University of Kentucky New                     • Farmers’ Market Coalition
Crop Opportunities Center)                                     http://farmersmarketcoalition.org/
http://www.uky.edu/Ag/NewCrops/budgets.html                    • Farmers’ Markets: Rules, Regulations and
• Kentucky Farmers’ Market Manual (89 pp.)                     Opportunities (National Center for Agricultural
(Kentucky Department of Agriculture)                           Law Research, University of Arkansas, 2002)
http://www.kyagr.com/marketing/                                http://www.law.drake.edu/centers/docs/
farmmarket/documents/                                          farmersMarkets.pdf
20102011KyFarmersMarketManualwCover.pdf
• Kentucky Farmers’ Market Association
                                                               1
                                                                 USDA-AMS. Farmers Market Facts and Statistics/
                                                               Farmers Market Growth: 1994-2009.
http://kentuckyfarmersmarket.org
                                                               http://www.ams.usda.gov/AMSv1.0/FarmersMarkets
• Kentucky Farmers Market Program                              2
                                                                 Kentucky Department of Agriculture Office of Agriculture
(Kentucky Department of Agriculture)                           Marketing and Product Promotion. 2010-2011 Kentucky
http://www.kyagr.com/marketing/farmmarket/                     Farmers Market Manual. p. 3.
index.htm                                                      http://www.kyagr.com/marketing/farmmarket/documents/
                                                               20102011KyFarmersMarketManualwCover.pdf
• Kentucky Farmers Market Report (University                   3
                                                                 Byczynski, Lynn. 2009. “Setting Prices: A Balancing
of Kentucky New Crop Opportunities Center)                     Act,” Selling at Farmers Markets-Ideas and Information to
http://www.uky.edu/Ag/NewCrops/                                Make Your Venture a Success. Growing for Market. p. 11.
farmersmarket.html                                             http://www.growingformarket.com/categories/20071227

Photos courtesy of Matt Ernst, University of Kentucky (p. 2);                                            Issued 2005
Matt Barton, UK Agricultural Communications Services (pp. 1 & 3);                                Revised March 2010
and Kentucky Department of Agriculture (p. 4)
   Prepared by: Matt Ernst and Tim Woods (tawoods@uky.edu) University of Kentucky Department of Agricultural Economics
          400 Charles E. Barnhart Building  Lexington, KY, 40546-0276     Phone 859-257-5762 Fax 859-323-1913
                                           http://www.ca.uky.edu/agecon/index.php

								
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