Price

Price is a lower-risk factor in organic agriculture, according to the vast majority of farmers interviewed. For most field crops, market prices and organic premiums have remained stable over the past few years and are, in most cases, twice the conventional price. Value-chain price structures, direct marketing, loyal customer bases, and increasing demand contribute to organic price stability. Risk is present and can be attributed to:

• No markets for transitional crops–farmers in transition are sometimes required to follow organic farming practices resulting in decreased yields with no ability to capture organic price premiums.
• Increasing supply in certain markets–some large-scale conventional potato producers have introduced a certified organic line in local markets, thus driving the price premiums down.
• Price variability and confusion–for the most part, organic pricing follows no established standard or benchmark. This lack of consistency can lead to widely varying prices for products in the same market. Some products garner twice the conventional price, some follow Ontario markets, while others employ value-chain pricing. This is a way of determining the price or value of a product that takes into account the costs and profit margin of all stakeholders beginning with the farmer. Rather than the retailer dictating the selling price and leaving all other parties to divide up the margin, the farmer adds an initial percentage above cost and an increment is added at each step along the chain resulting in a “fair’ market price.

A significant risk is that good prices and the “premium” are not substitute for understanding costs. Rather than ‘how good the price might sound’ to everyone else, is it a good price for you?

The following strategies and tactics can be employed to manage the risks associated with Price:

• Calculating Costs
• Assessing the Impact of Transition
• Business Planning
• Verify Customer Demand
• Examine Historical Trends
• Value Your Time
• Don’t Quit Your Day Job
• Pricing
• Diversification
• Contracts
• Marketing Strategies
• Backup Plans