AJP defines a fair price as one that covers the farm’s “full costs of production, plus a fair margin for profit and investment and the ability to pay fair wages and other benefits for themselves, their families and workers.” To achieve a fair price, farmers must be skillful at calculating their full costs and they must have the confidence to negotiate with buyers. In many markets, buyers are not willing to negotiate – their attitude toward the farmer is take it or leave it. Historically in the United States, farmers have been price takers, subject to the prevailing policy of cheap food.
On contracts: The Farmers Legal Action Group (FLAG) has developed extensive materials to guide farmers in writing contracts.
On bargaining power: In the face of corporate buyers with vastly more market power, farmers may need to form associations or cooperatives to attain the bargaining power necessary for negotiations on a more level plain. The Rural Development Division of the US Department of Agriculture has a Cooperative Service Program which offers technical assistance and materials on how to form a farmer cooperative. The University of Wisconsin’s Center for Cooperatives also offers a guide to starting a co-op.
Resources on Calculating Costs of Production #
How do you know your pricing is right? Calculating production costs and fair pricing. Video workshop by Robert Hadad, Cornell Cooperative Extension. 70min.
Use Your Numbers to Assess Profitability and Full Cost of Production. Video workshop by Ellen Polishuk, Plant to Profit. 60 + 90 min.
Excerpt: Annotated Budgeting Resource List for Farmers, by Jonell Michael.. Extensive resource list, great especially if you’re looking for more in-depth learning on specific topics.
True Sustainability, Chapter 1 from Richard Wiswall’s Organic Farmer’s Business Handbook: A Complete Guide to Managing Finances, Crops, and Staff—And Making a Profit.
Cost of Production Spreadsheet Calculator. Spreadsheet calculator from Richard Wiswall’s book with modifications by Robert Hadad.
Farmer Spreadsheet Academy by Dan Brisebois of Tourne-Sol Cooperative Farm.