Activities for Module III Fur, Feathers, and Fins
- Animals in our food
Activities for Section D: The
Economics of Livestock Production
Contents:
Activity
1: What’s it worth to you?
Purpose: Students will learn
about some of the complexity of valuing –
and pricing – products.
Advance preparation: Print out
the article on
grass-finished beef (Adobe Acrobat PDF Document) and make copies. Have
a way to record points from the discussion (flip
chart, board, or overhead).
Estimated time: 20 minutes (5
minutes to read the article and 15 minutes for
class discussion). (50 minutes extra for the optional
activity extension)
Background information: A number
of factors are involved in determining the price
for a product. Production costs and supply are
key factors that are relatively easy to quantify,
though they may change over time and space. Other
important factors such as demand and value are
harder to measure. However, as any economist knows,
demand is critical in setting price, and as any
consumer can tell you, value helps determine willingness
to pay (demand). The problem is that different
people do not always agree on what is valuable,
and also markets do not always do a good job of
giving consumers the information they might seek
to determine value. Moreover, ideas about value
may change, either due to new information or just
in response to advertising or fashions.
- Begin by asking the class what factors would
influence how much they are willing to pay for
meat. List these factors for all to see. Ask
the students which of these factors reflect
value (for example flavor, tenderness, appearance,
fattiness) and which reflect other things (for
example how much money they have, whether it
is cheaper somewhere else, what it costs the
farmer to produce, etc.).
(If you think your students won’t identify
with purchasing meat, you can begin by auctioning
off a few different types of candy bars and
asking what factors influenced their bids.)
- Hand out the article on grass-fed beef and
ask the students to read it.
- After the students have a chance to read the
article, discuss the following questions as
a class:
Are there any values discussed in the
article that could influence how much a person
is willing to pay that were not listed earlier?
(possible answers include how the animals were
raised, environmental benefits, possible health
benefits such as Omega 3 fatty acids, animal welfare,
support of local farmers)
Does the market normally let meat buyers
know about these factors?
Not usually. Recently some stores and certification
programs have emerged that market some of these
values. Or a consumer can find out about these
factors by purchasing directly from a farmer.
But most of the time the conventional market ignores
these factors.
Should consumers be able to know about
these factors? Why or why not?
What does the article say about the flavor
of grass-finished beef? What things can affect
the flavor and quality of grass-finished beef?
Many Americans like it less than grain finished
beef, though some people prefer it, especially
if it is what they are used to. It tends to be
leaner (and therefore less rich-tasting and less
tender). The flavor and texture also depend on
the genetics of the animals, the quality of the
pasture, how the animals are handled at slaughter,
how the meat is aged, and how it is cooked.
How many students would be willing to
pay more for grass-finished beef than conventional,
based on the article? How many students would
not be willing to pay as much for grass-finished
beef as conventional? How many students would
not care?
Optional question: (You might
want to ask students to try to interview a meat
manager for a local grocery about this question
for extra credit. Make sure each grocery is only
contacted once. Or you can just let the students
speculate about what factors influence prices.)
How are meat prices set in the grocery store?
Typically, grocery stores have a standard mark-up
that they add to the cost of the item from their
wholesaler. The manager may decide to sell some
items at a lower than usual mark-up (put them
“on sale”) to attract customers to
the store.
The wholesale price, in turn, is determined by
a variety of factors, including the cost
of processing and distribution, the demand
for meat, and the supply. The
cost farmers pay to produce the meat is only a
factor in that it can affect supply—but
usually with a large time lag, especially for
beef, which takes up to two years to produce.
Big stores can often negotiate lower wholesale
prices than small stores because as important
customers they have more bargaining power.
How should a farmer who is direct-marketing
her beef set her prices?
- They need to consider what their costs
of production, processing, and marketing are
and make sure the price covers those costs,
including the cost of their own labor.
They also need to consider how much people
will be willing to pay. Think
about the factors you listed above that affect
how much people are willing to pay. One key
factor is the prevailing price
for comparable products.
Remember that the same cut of meat in the
grocery store is not necessarily comparable
if the farmer’s product has special
attributes (e.g., no antibiotics, grass-finished,
locally grown, etc.)
For more information on pricing strategies see
pages 121 to 124 of Building a Sustainable
Business: A Guide To Developing A Business Plan
for Farms and Rural Businesses developed
by the Minnesota Institute for Sustainable Agriculture,
http://www.sare.org/publications/index.htm.
Optional activity extension:
Design an advertisement (50 minutes)
Divide students into small groups. Have each
group design an ad intended to convince people
to pay more for grassfed, locally raised beef.
The ad can be designed for use on a billboard
or in print (magazine or newspaper), or students
can create a script and perform an ad meant for
television or radio.
Give each group two minutes to present their
ad and 3 to 5 minutes to follow up with class
comments and discussion.
Divide students into small groups. Have each
group design an ad intended to convince people
to pay more for grassfed, locally raised beef.
The ad can be designed for use on a billboard
or in print (magazine or newspaper), or students
can create a script and perform an ad meant for
television or radio.
Give each group two minutes to present their
ad and 3 to 5 minutes to follow up with class
comments and discussion.
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Activity
2: You’re planning what?
Purpose: Students will learn
about the steps involved in developing a business
plan and will understand why getting financing
can be especially difficult for sustainable enterprises.
Advance preparation: Decide
what scenarios you will use for the sustainable
and the conventional enterprise.
If you do this activity as a classroom discussion,
print out the table of contents for the business
plan (pages 6-8 of the on-line pdf at http://www.sare.org/publications/business/business.pdf
) and the questions and make copies or create
a copy you can project for all students to see.
If you do this activity as a written assignment
for small groups or individuals select the business
plan task(s) they should discuss ahead of time
and create worksheets with the tasks and questions
on them.
Estimated time: 15 minutes
Background information:
One of the special economic challenges that sustainable
farmers face is that it is difficult to get a
banker to finance innovative enterprises. This
reluctance is not because bankers are opposed
to sustainability, nor is it because sustainable
farmers are financially incompetent. In large
part it is because the projects sustainable farmers
propose are so often different than the norm,
and therefore less is known about them. And to
a banker, lack of information looks like risk.
To overcome this lack of information, sustainable
agricultural enterprises seeking financing need
to create very detailed and comprehensive business
plans. One planning guide is Building a Sustainable
Business: A Guide To Developing A Business Plan
for Farms and Rural Businesses developed by the
Minnesota Institute for Sustainable Agriculture
(see http://www.sare.org/publications/index.htm)
Use the table of contents from this guide to
compare the work a farmer would have to go through
to get a loan for an innovative sustainable agriculture
enterprise versus an established agricultural
practice. For example, one of the case studies
in this business guide is seeking a loan to help
them set up a business processing and delivering
milk from their sustainable dairy operation to
customers’ homes. (see page 269 of http://www.sare.org/publications/business/business.pdf).
Contrast this enterprise with a farmer seeking
a loan to build a free stall barn to expand his
milking herd. Or develop your own two scenarios.
You can run this activity as a classroom discussion
or as an assignment for individuals or small groups.
Classroom discussion:
Project a copy of the table of contents for all
students to see and ask the students to answer
the following questions for planning tasks 2 and
4 (depending on how much time you wish to devote
to this activity, you can choose how many of the
items listed in the table of contents to discuss)
- Why would a banker want to have this information?
- Would a lender ask this question of someone
seeking a loan for a conventional enterprise?
- Would the lender or Extension be able to
help the farmer answer this question?
Written exercise for small groups or individuals:
Select one or several questions from tasks 2
and 4 from the table of contents and ask the students
to answer the questions in writing. You can create
worksheets with the task written at the top and
the questions with space for the answers below.
Business
Planning Worksheet (MS Word Document)
Key to Business Planning
Worksheet (MS Word Document)
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