A Genuine Quandry…

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I 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).

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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.

DarthChicken2

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.

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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! 🙂