PRICING FOR PROFIT Brian Moyer

Program Assistant

Penn State Extension – Lehigh

610-391-9840

bfm3@psu.edu

Product Place Price Promotion

Customer perception

13%

35%

31%

21%

World of Sustainability | 89% of US consumers participate

Segmentation reflects the

intensity of consumer

involvement in the World of Sustainability

Segmentation is based on respondent behavior regarding: animal testing, packaging, community issues, supporting companies helping the local

community, recycling, and price. Base: n=1982.

The world of sustainability | Purchase criteria varies according to consumer segment

Hidden costs

• Small production – labor intensive • Being “producer” and “marketer” adds

labor, transportation, time, and storage costs

• Food safety protocols • Genetics/breeds (rare or heritage)

Barriers to Direct Marketing

• Consumers’ lack of trust in unknown sources • Expect pasture-raised products will cost

more-customers will expect more • Concerns about taste of grass-fed products • Convenience – access • Resistance to buying in larger volumes

Cost of Production • Depend on breed • Production methods (grain-fed, grass-fed) • What kind of animal is it? (beef, pork, lamb)

Determining the Carcass Weight

The average dressing

percentage for hogs is

about 70-72%.

• Example:

• Live weight = 245 lbs.

• Actual DP = 72%

• Carcass wt. = 176 lbs.

Determining the Carcass Weight

The average dressing

percentage for cattle is about 60-62%.

• Example:

• Live weight = 1312 lbs.

• Actual DP = 60%

• Carcass wt. = 787 lbs.

Determining the Carcass Weight

The average dressing percentage for sheep is about 50%.

• Example:

• Live weight = 127 lbs.

• Actual DP = 52%

• Carcass wt. = 66 lbs.

Our Steer? • Grass-fed Angus steer • Hanging carcass weight of

58% of live weight

Finding your break even price

1. Cost of the live animal = $1.35 per pound of live weight

2. $1.35 divided by 58% = $2.33 per pound hanging cost

3. $2.33 + $.65 per pound processing fee = $2.98 per pound

4. $2.98 divided by 65% = $4.58 per pound (loss creating cuts can be 65 – 70%)

Break even = $4.58 per pound

PROFIT!! Determine how much profit your business needs to make

We need to make 25% profit margin on our steer • $4.58 divided by 75% = $6.11

$6.11 per pound will give us a 25% profit margin

PRICING FOR PROFIT Brian Moyer

Program Assistant

Penn State Extension – Lehigh

610-391-9840

bfm3@psu.edu