Marketing Tip : How to fetch the 'right price' for your agri produce
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Venkat (eFarm)
Oct 21, 2013, 10:04:38 AM10/21/13
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Marketing Tip : How to
fetch the 'right price' for your agri produce:
It is a common crib from all farmers that they never get the right price for their produce. But ask them back 'what should be the right price for YOUR product' and you are sure to draw a BLANK.
Most farmers (even the educated ones!) never calculate their costs of production or set their own price. Their excuse ? Ranges from 'it is IMPOSSIBLE to calculate farm produce price' to 'even if we set, how will customer agree to pay etc'. Fact is, they dont 'KNOW' how to do it They EXPECT the government or middlemen to determine this , and never happy either way !
Here's a simple way :
Assume you want to calculate for a short season vegetable crop.
a) Add up all 'working expenses' for the period => EXP
b) Calculate expected yield for your produce (from past experience, from industry standards of yield/acre, or other farmers) => TOTALYIELD (in kgs)
Your break even price (Rs per kg) will be a DIVIDED by b = a/b = EXP / YIELD
If market price is BELOW your break even price then u have a LOSS , else a PROFIT.
How to INCREASE your profit ?
a) By increasing yield (the denominator)
b) By reducing the costs (the numerator)
So even with the SAME MARKET PRICE conditions, different farmers may have different profit/loss margins !
Key points :
a) Labour costs account for over 60% of most cost of production. Calculate this in detail .
b) Most farmers never add THIER OWN salary in labour costs. Since you are the 'manager' of your own farm, do add YOUR salary as well.
c) You can add loan emis other recurring expenses (equated to monthly period) to get more refined expenses.
d) Farms which are more like plantations,or have larger fixed costs can add 'depreciation' of assets over time in the expense.
Summary :
Successful marketing starts with understanding the 4 P's - product , price, place and promotion . Out of which knowing/setting the right price is MOST crucial for financial success.
In next writeup, will be elaborating on how to seek different buyers , get the price you want and how to match your product to different buyer's expectations.
--
Venkat
e: efarm...@gmail.com
It is a common crib from all farmers that they never get the right price for their produce. But ask them back 'what should be the right price for YOUR product' and you are sure to draw a BLANK.
Most farmers (even the educated ones!) never calculate their costs of production or set their own price. Their excuse ? Ranges from 'it is IMPOSSIBLE to calculate farm produce price' to 'even if we set, how will customer agree to pay etc'. Fact is, they dont 'KNOW' how to do it They EXPECT the government or middlemen to determine this , and never happy either way !
Here's a simple way :
Assume you want to calculate for a short season vegetable crop.
a) Add up all 'working expenses' for the period => EXP
b) Calculate expected yield for your produce (from past experience, from industry standards of yield/acre, or other farmers) => TOTALYIELD (in kgs)
Your break even price (Rs per kg) will be a DIVIDED by b = a/b = EXP / YIELD
If market price is BELOW your break even price then u have a LOSS , else a PROFIT.
How to INCREASE your profit ?
a) By increasing yield (the denominator)
b) By reducing the costs (the numerator)
So even with the SAME MARKET PRICE conditions, different farmers may have different profit/loss margins !
Key points :
a) Labour costs account for over 60% of most cost of production. Calculate this in detail .
b) Most farmers never add THIER OWN salary in labour costs. Since you are the 'manager' of your own farm, do add YOUR salary as well.
c) You can add loan emis other recurring expenses (equated to monthly period) to get more refined expenses.
d) Farms which are more like plantations,or have larger fixed costs can add 'depreciation' of assets over time in the expense.
Summary :
Successful marketing starts with understanding the 4 P's - product , price, place and promotion . Out of which knowing/setting the right price is MOST crucial for financial success.
In next writeup, will be elaborating on how to seek different buyers , get the price you want and how to match your product to different buyer's expectations.
--
Venkat
e: efarm...@gmail.com
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