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Thursday, June 20, 2013

Cost of Production (COP), or a COP-out?

A debate is occurring on Better Farming website about Cost Of Production ("COP") and whether Small Flock Poultry Farming could possibly influence the price of chicken in the marketplace, or offer a cost-competitive product comparable to the mega chicken factories.

In a previous Blog posting, we discussed the plans of Chicken Farmer's of Ontario to revamp their method of calculating their COP.

There are many ways to determine a "fair price".  Wikipedia lists a total of 22 different pricing strategies.  I suggest all of them may be appropriate; open to be chosen depending on the seller's many purposes and goals.

Some choose to base their sale price on what competitor's are charging; then going plus, minus, or equal to that competitive price.  They assume competitors know what they are doing, or that is the best price that the market will bear; neither of which is necessarily true.

Some take the approach of pricing based on their immediate, out-of-pocket costs.  This is similar to those who drive a car and think the cost is limited to the gas consumed.  They forget or ignore the oil changes, tires worn out, wear & tear on the vehicle, dropping resale value as a higher km gets recorded on the odometer, depreciation, insurance, etc.  For a car, this is the difference between $0.10/km for gasoline alone vs. $0.50/km for the all-in cost; 5 times more than gasoline alone.

Some choose to price based on the next-best alternative.  It matters not what the actual cost is when you have a better "mouse trap". For example, a CD has the similar cost of production, whether it contains family photos of interest to a select few, music, or specialized software programs worth millions $.

Some Small Flockers see their eggs and meat production as their way of giving back to their community, just the same as being a volunteer at one of the many community groups.  Volunteers changing a "fair price" for their efforts is an oxymoron.

I challenge anybody to dismiss the volunteers in their local community as naive dupes, or to suggest they shouldn't be taken seriously just because they freely give away their time to a cause they feel is important.

Small Flock Poultry Farmers of Canada recognize this "calling" of being a Small Flocker, when we drafted Principle #13:

"Unlike the over-riding priority for maximum efficiency and profit sought by quota-based poultry farming, small flock farming is also about participation in the circle of life, an expression of life and participation in it, a spiritual practice that transcends the acts themselves; part of a higher purpose."

In the end, Small Flockers suggest that it isn't all about money.

"Not everything that counts can be counted, and not everything that can be counted counts."
                                                                                                William Bruce Cameron, 1963.

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