How do I go about pricing my lamb?
Answer: All pricing for a profit begins with costs. You must know yours. At the outset, you might assume that if you are selling your premium product to a local market for a premium price, you must be making money. Unfortunately, you could be very mistaken. This was our case. Until we entered the weight of each cut and its associated price from every lamb on a spreadsheet, we did not know we were actually losing money on lambs that finished less than 110 pounds. This was rather eye opening. ATTRA has developed a simple lamb cut-yield calculator that can help calculate net profit.
Profit points are unique to each farm. Position your pricing to ensure that you make a return. You can find more information in the ATTRA publication Planning for Profit in Sustainable Farming and the online tutorial Farm Business Planning & Marketing for Beginners.
Once you know your production and marketing costs, you can then investigate the current market. A good beginning resource is the USDA Ag Marketing Service’s (AMS) boxed-lamb cut pricing report, which averages the last five days of boxed-lamb pricing on the open market.
In the meat trade, all cuts have a numbered code, and the AMS report mentioned above requires some familiarity with these codes. An illustrated guide to the coded cuts is available in the North American Meat Institute’s The Meat Buyers Guide. The printed guide can also be sourced from Amazon.
Your butcher will also be valuable in helping you understand the many variations of cuts. The AMS pricing report can be used as your base price. To this, you must add margin percentages to arrive at your wholesale and retail prices. For example, let’s say that fresh boneless leg, trotter off is trading for $6.09 a pound. To this base price, you might add margins of 20% and 30% respectively to determine your wholesale ($7.30 per pound) and retail ($9.50 per pound) pricing. The AMS report is a good way to keep up with market changes.
AMS also has a monthly Grassfed Lamb and Goat Meat Report with a more generalized description of cuts. This report is very useful for the direct marketer, even if he does not sell a grassfed product. For example, a percentage of the grassfed price may be used to determine your pricing. This is a quick and easy way to set an initial price for your lamb cuts.
Once you have established your cut pricing, you must be sure that you are: 1) making a profit; and 2) competitive. The lamb cut-yield calculator mentioned above will help you assure profitability. You can confirm your competitiveness by selling your product at farmers markets, where you can easily interact with your customers, and by talking to restaurants and store managers. Farmers markets are a great place for price discovery. Recognition of the added value of your lamb is easy to ascertain. If there are not a significant number of people that tell you your lamb is absolutely the very best they have ever tasted, it may be wise to graciously exit the direct-market business. Selling to the demanding consumer is too much of a gamble and outright work to try to sell a mediocre product. On the other hand, rising sales and positive feedback create consumer trust in your lamb. This supports a price that is profitable.
Finally, research your competitors. Understanding how they produce and market their product can give you insight into how you can stand out by being different. Perhaps you can differentiate yourself from them through alternative production practices, such as organic or grass-based, or a specialized accreditation, such as Animal Welfare Approved. Special year-long pricing or consistently offering a certain cut at an attractive price can also contribute to distinction. Similarly, first-class service, such as personal delivery to customers, can be used to set your company apart from others. Be sure your buyer understands how your unique style of business is of value to him.
Ready to learn more? Check out the ATTRA publication Direct Marketing Lamb: A Pathway. It describes an alternative to marketing lamb other than as a commodity—and capturing the economic benefits. Successful marketing techniques are described, beginning with the finished lamb and continuing through the processing, pricing, and sale of whole and boxed lamb to today’s eager local foods customer.