ESSENTIAL ELEMENTS OF A RAW MATERIAL PRICING SYSTEM

• The price paid to smallholders must cover their production costs including the value of their labour
• The profit realized must be competitive with the profit smallholders can earn from other enterprises
• The remaining revenue must be enough to cover the company's processing and marketing costs plus sufficient profit margin for the company to continue in business
• The price to be paid must be announced at the start of the growing season, and if any change has to be made it must be explained clearly to smallholders
• Smallholders must be paid promptly according to an agreed schedule

Related Information: Desirable and optional elements of a pricing system, Sample smallholder price formula