Imagine a farmer growing a crop specially selected, produced and milled for a bakery, with a price negotiated at the time the crop is planted.
It happens on rare occassions now, but Al Mussell, a research associate with the think-tank George Morris Centre in Guelph, Ont., wants farmers to consider such innovative concepts more often when pricing value-added specialty products such as wine, jam and prepared meat.
While there is an opportunity for negotiated prices in niche markets, Mussell said it has not happened because most producers are in a commodity marketing mindset where prices are based on what a commodity costs to produce plus a margin.
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Specialty and differentiated products are lumped into an agricultural marketing system that “commoditize” products, he said.
“They tended to deal with the extra costs of producing differentiated products rather than what the value of the farm product was.”
Mussell said that pricing system does not give farmers incentives to get into special marketplaces.
In an ongoing study, he looked for ways to involve every player in the value chain, from cattle producers to feedlot operators to packers, so they consider themselves part of the same team. The goal is to share information to produce the desired product as well as share the rewards.
Under the current system, Mussell said someone has to lose money for someone else to make it.
“We want to try to prevent adversarial relationships.”
He believes there is a need to develop pricing for niche market products as distinct from commodities.
“Maybe that could be the encouragement that would help more people to step up to the plate to develop markets for differentiated farm products that could be made into differentiated food products,” he said.
In the study, Mussell looked at examples of value food chains in Europe where the emphasis is on transferring value back to the farm.
“It was not just an issue of compensating people for additional costs but also sharing back some of the value,” he said.
The predominant North American system compensates growers for their costs of production.
The George Morris Centre is presenting its findings to producer groups across Canada but plans more research to refine pricing models.
“How many other industries would be success stories if we had a model and that knowledge to apply,” Mussell said.
