In a recent Newsletter of The Dairy Site (thedairysite.com) editor Michael Priestley makes interesting observations about the overriding factors on prices of farm products. While Mr. Priestley’s post is focused on dairy products and meat it is interesting to look at the similarities and differences between dairy products and meat and Fetal Bovine Serum prices. Here is what we read in the Newsletter:
“Supermarkets have influence in trading terms but the critical factor in farmgate price is supply and demand.”
Same as with Fetal Bovine Serum and some other animal derived products supply and demand can drive prices up and down although production costs remain unchanged.
Further in the Newsletter we read:
“The value of wheat in a loaf of bread is only about 10 per cent of its total retail price,” said (Agricultural economist) John Nix. “At the other end of the scale is beef where the farmer receives around 50 per cent of the total retail price.”
Milk and eggs have both secured around 30 per cent of retail values in recent years, well adrift of beef but ahead of wheat at ten per cent.”
Food market laws can only do that much to control prices and guarantee manufacturers a fair payment for their costs. The demand for a specific product and its availability has the strongest influence on what producers can sell their goods for. On the other end of the supply chain consumers have very little knowledge about the structure of the prices they pay.
US Fetal Bovine Blood prices have varied over the past 10 years from $ 100 down to $ 2.50 and back to $ 150 per liter. So did vary the prices of Fetal Bovine Serum. Collection labor, transportation and other production related costs have only slowly increased and this change was not greatly reflected in the FBS price end users pay. Taking into consideration that Fetal Bovine Serum is used for research, diagnostics and vaccine manufacturing the strong fluctuation of FBS price has an indirect but serious influence on the human and animal healthcare costs. Not surprisingly, some big pharmaceutical manufacturers are calling for greater raw material pricing transparency.
Back to the Newsletter:
“Spanish and UK dairy farmers …pointed to retail prices often not being reflective of production costs.
The National Farmers Union has called for the whole supply chain to work together, in which farmers can play their part by being as efficient as possible and keeping tabs on production costs.
“Farmers have got to make sure their cost of production is right and if they can do that they can produce milk efficiently and for the right price, that’s important,” said Mr Dickinson.
“We then need to make sure the processors are paying a fair price.”
He praised supermarkets using the cost price plus models, which see farmgate prices sympathetic of production costs, and called for more of this work in the future.”
Following the model of the food industry a transparent price structure for Fetal Bovine Serum may be the best way towards fairness in the whole Supply Chain. Structured prices, not mainly dependent on the supply and demand interaction, can lead to a win-win situation for all business partners. With a cost price plus model there will be no one big winner making maximum profits but no losing party either. Instead, a structured and transparent price policy can create a market of partnering manufacturers, processors and end users who equally benefit from a sustainable and stable business.
Can you imagine a Fetal Bovine Serum Supply cost price plus model following the example of the British supermarkets? Your opinion is greatly appreciated.
Contact us and let us have a discussion!
