DETERMINING A PRICE POINT FOR LOCAL FOOD (FOR FARMERS) When you first start growing, you may not have a clear idea of your cost of production for any specific crop. New farmers tend to lump all the crops together, add up their income, subtract their expenses, and then decide whether they made a profit or not. Sometimes you get lucky and make money, but this is a risky way to approach the central issue of your business because you don’t know what crops are making you money and which ones are poor financial investments. If you are a new or seasoned farmer, it is essential that you know your price point for your products. RESTAURANT PRICING: NOT QUITE WHOLESALE, NOT QUITE RETAIL Many restaurants want great product at close to wholesale prices, but farm to table establishments may be willing to pay higher than wholesale prices. However, because of the higher quantities restaurants might commit to ordering, they deserve to pay less than what you would want to get in other direct sales outlets like farmers markets. Pricing is one of the most challenging aspects of farming. Checking regional market prices is a good place to start. Rodale Institute has a good online tool that gives conventional and certified organic prices on many crops based on the terminal markets across the country. Pricing tool: Available at http://rodaleinstitute.org/farm/organic‐price‐report‐tool/ For example: Tomatoes 
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Certified Organic: $21 per 20‐pound box Conventional: $14 per 20‐pound box STEP 1: KNOW YOUR COST PER UNIT OF PRODUCT Ideally, you should know what your costs are to produce a unit of any given crop on your farm. Often, this is called an enterprise budget and can be a good tool to figure out profit centers and costs associated with specific crops. Enterprise budgets are determined by looking at all the inputs to produce a certain crop, including variable costs (seed, soil amendments, labor for planting and weeding, and harvest time) and fixed cost (tools and equipment, irrigation, cost of the land, etc.). 
Cost per unit: Variable Costs + Fixed Costs = Cost/Unit Tomato example: $0.40 (variable costs) + $0.30 (fixed costs) = $0.70/pound of tomatoes Once you know the cost/unit, then you can add a percentage to that cost of production, meaning the amount you will make above your costs. Generally, 20 to 30% is a good percentage for price per unit. This way, you aren't pricing below cost of production and losing money. 
Price per unit = Cost per Unit / 20‐30% Tomato example at 25% percentage: $0.70/(1‐.25) = $0.93/pound of tomatoes Per 20 pounds = $0.93 x 20 = $18.60 per 20‐pound box STEP 2: IF YOU DON’T KNOW THE COST OF YOUR PRODUCT, USE EXISTING MARKETS 1. Go with the Market U.S. Department of Agriculture’s Market News Service. The USDA collects and publishes pricing information for all kinds of produce on a weekly basis. Two of the most useful reports available online are the National Fruit and Vegetable Retail Report, which lists supermarket prices for commodities, and the National Fruit and Vegetable Organic Summary, which lists bulk pricing of organic produce at terminal markets. National Fruit and Vegetable Retail Report: https://www.ams.usda.gov/mnreports/wa_lo100.txt National Fruit and Vegetable Organic Summary: https://www.ams.usda.gov/mnreports/fvworganic.pdf 2. Check prices at local grocery stores You can check local stores, but it isn’t the best method for determining the going price because supermarket prices are cheaper than you might expect. Generally, stores use a low price to attract customers to their higher priced (middle of the store) items. Natural foods superstores markup their products compared to a regular supermarket. A general rule of thumb is that supermarkets mark‐up produce 130 to 140 percent. (Multiply your price by 1.3 to 1.4 to see what the expected retail price might be.) 3. Ask your Chef If you really don’t know what to charge, just ask. This is risky because it makes you a “price taker” versus a “price maker”. If you think the price seems reasonable and you can produce the item for that price, offer to grow it for the chef and keep your price constant throughout the season. That’s a great help to the chef who can put the item on the menu and know exactly how much it’s going to cost. DON’T UNDERCUT YOUR NEIGHBOR You may find this to be an attractive selling point but in the long run you may be making it worse for you and others. This sets a precedent for buyers, which then seek the lowest rates. Generally speaking, if you don’t know your cost of production and you undercut your neighbor then it could be likely that you are not covering the costs to produce your product. Remember that you can always lower your price but once you set it low it is difficult to raise it up. Remember, that you can base your price off of other attributes, such as organic, than just the price alone. RESOURCES FOR FARMERS Pricing tool: Available at http://rodaleinstitute.org/farm/organic‐price‐report‐tool/. Understanding Organic Pricing and Costs of Production. This publication provides resources to compare organic and conventional agricultural prices, discusses organic production costs, and offers tips on how to set organic crop prices. There are also several case studies included that summarize insights gained from successful organic farmers and ranchers. Available at https://attra.ncat.org/attra‐pub/summaries/summary.php?pub=419. ATTRA tip sheet Tips for Selling to Restaurants is a brief but informative publication that highlights the advantages, considerations, and key questions you should ask yourself when considering selling to a restaurant. Available at https://attra.ncat.org/attra‐pub/summaries/summary.php?pub=388. ATTRA online tutorial Scaling Up for Regional Markets. This tutorial provides lessons and information for farmers who have success in smaller and more direct marketing channels and who are interested in expanding their operations to meet a growing demand for local food. Available at https://attra.ncat.org/tutorials/scalingup/.