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Farm Economics: Lacking a Guiding Light

12/15/2012

6 Comments

 
We've got some big news coming very soon, but before we get to that, I wanted to write a bit on something that has frustrated me over the last few years: my failure to find excellent role models of farmers who are providing a non-impoverished lifestyle for themselves solely from producing food. I have attempted to share everything about the economics of our operation here, and as we move closer to a year end reflection, some of the news will be sobering. To make it as a farmer, one needs to not just make money, but make enough money.

There is of course one particularly famous farm model out there: Polyface Farm, the creation of Joel Salatin. Joel seems to have become the de facto spokesperson for small-medium scale farming (he's featured in the Omnivore's Dilemma, Food Inc, etc) and in many ways, he is a good one. Joel built a very successful farm from the ground up, starting with only his ingenuity and the land he inherited from his father. If you've read You Can Farm (and I highly recommend it. It's a great book) you can understand that he spend years living in poverty conditions before the farm business really took off to the point where it was making a reasonable amount of money. Now, he gets a lot of income from speaking fees, but the farm seems to be going strong. The hardest part of using Joel as your farming model is that is next to impossible to emulate Joel Salatin: he has a knack for marketing that most of us introverted farm types will never develop, and as I mentioned above, he started with land that he owned AND worked many years living in poverty. Lastly, when you dig deeper into some of his farming practices, it is easy to find things that one may not agree with (using  Cornish Cross chickens, for instance, or trucking in huge amounts of feed). Nonetheless, he is a great model, but he doesn't share the nitty gritty of his farm economics (although he sort of does in his books).


There are also lots of local farms in the Northwest that have been around for a seemingly long time. The larger ones are so far removed from the kind of farming I'm interested in that it's not very helpful to look at them as a model. I have no interest in running a huge business that takes me completely out of the fields. A lot of dairies are smaller, but the co-op model that most dairies use is a bit of a special case, and I have no interest in milking cows, so I push them off to the side. That leaves us with farms that do most of all our their sales through direct marketing. These are the farms that go to farmers markets, or have a CSA, or have a website based distribution hub. Most of the farms that I am aware of our predominantly "mixed vegetable" farms, meaning that they grow a wide variety of vegetables and sell them fresh to people through CSAs, farmers markets, roadside stands, and to restaurants. There seem to be some larger operations in Eastern Washington that seem fairly successful, but those economics are so different from here that it's not a very useful model. There are a few big operations in Western Washington too. I'm most familiar with Full Circle (no longer Full Circle Farm) which is based in Carnation. I've been to that farm a few times now, and I have a good idea of the operation. It's big. And it has now branched out to being more than a farm--now distributing food grown locally with food from all over the world. Mixed vegetable farming is very labor intensive, so most of the bigger farms presumably use cheap migrant labor, and the smaller ones either use an army of apprentices (which is really the same thing) coupled with a very overworked farmer/owner. There seem to be quite a few of these smaller mixed vegetable farms in the area, but I'm not convinced that the economics are such that one can stay small, make enough money, and not get burnt out in very short order.

There are also quite a few small-medium farms that concentrate on direct marketed meat production. These farms tend to be similar to Polyface. I don't have insight into their economics, so I can't really use them as a model. With animals, land prices become a big limiting factor because you simply can't produce as much revenue in a small space as you can with mixed vegetables (unless you run a CAFO, but let's not even go there).

There are also quite a few farms that do a combination of food production and agri-tourism. I have a few bits of insight into these types of models, and from what I have gleaned, the agri-tourism part tends to be the dominant source of income. I've been focused in on making a living from food production only (at least to start), so I can't use these farms as models either.


Plenty of small farms utilize a second source of income from a part-time job or spouse that works full time (like mine, at the moment!) Clearly, this is not a model for farm-based economic independence. It may turn out to be the only viable way of having a small farm and a comfortable lifestyle. If the time commitment is small enough that the farmer is not overwhelmed (or the spouse doesn't become , then it might be worth it.

If you're reading this and you feel that you have a farm that can serve as a model for a economically viable small farm, please share your experience in the comments!


6 Comments
bruce king link
12/15/2012 06:41:34 pm

This is a question and topic that a lot of people who are interested in farming ask. It's a bit like asking about the best suggestion to losing weight. The simplest suggestion, eat less, is something that most people don't want to accept -- there has to be an easier way -- and, honestly, there isn't.

When i look at people who make their living off of farms, the ones that i see with the most success are those that start working in some industry that pays well, save their money for years, buy some land, usually related to where they live, and then slowly over a period of years transition their income onto the farm.
There are several things that a farm has a hard time providing -- like health insurance. For married couples, this usually means that one spouse has the "town" job and one has the farm job, and the town job provides the health insurance and a steady income while you work out the farm income or times when the farm income isn't around. Having a steady income stream makes your farm much more stable in a business that is prone to instability.

You'd like to have a business that produces food of some sort with a big enough profit margin that it funds itself and gives you a salary that would allow you to not work any other job.

That's actually the basic description of what every small business owner wants, and you face the same problem. WIth any business, once you get big enough you end up not doing the work directly, and your business becomes the management of people who do the actual work. If you get bigger than that your job becomes the management of the managers of the people who do the work.

When you put it into that context, we're back to the weight loss question,and lots of folks think that farming should be somehow different than any other business. It isn't.

Start with an idea. make a business plan. Do a proof of concept. Visit similar businesses and study them, particularly those that fail, because they will often teach you valuable lessons. Rewrite your business plan with TMR (Tangible, measurable results) and milestones. Consider using a resource like SCORE (http://www.score.org/). Find or save the capital you need. Execute your business plan and track your results.

Most small businesses fail. My first two businesses did. I didn't make one go until my third. My fourth and fifth succeeded. My mother told me I was crazy to quit my microsoft job and that I would never get a job as good as that ever again. It hurts when your mother says that. People don't like it when you succeed, and for me, it's meant that I changed my entire circle of friends when it happened, which was completely unexpected.

So I don't have a perfect example of a farm that you should emulate. I'm suggesting that there is a basic set of techniques which people who make small businesses work use,and that they are learnable and teachable, and that farming is no different than any other business.

Reply
George
12/15/2012 08:54:27 pm

The biggest issues I've come up against with running a small farm (1-2 acres of veg, pastured poultry/turkeys etc, is affordable access to land. The income from the farm is enough to pay me a livable wage, cover operating costs etc, however it is NOT enough to pay the mortgage or rent of a property. If I forgo a wage, then the farm can cover rent/mortgage.. we do have off farm, PT jobs, mainly to pay for anything big that comes up (we save pretty much all the paychecks) like major vehicle issues, yearly health insurance premiums etc.

So far, I think we're in the same boat as most small farms, looking for ways to maximize our profits and marketing. In the next couple years we'll be transitioning to new property again and I'll be looking heavily into large plantings of garlic and herbs, certified organic to sell to the co-op and other niche seed garlic retailers. Honestly, a diverse vegetable farm over a few acres is TOO much work for one person to maintain. Like you, I also despise the over use of interns/apprentices as the guise of "learning" when in fact it is just underpaid labor.

Reply
bob
12/26/2012 06:56:38 am

I just found your site by it being mentioned in a “Coop Cast”. This is a subject the I am very interested in, which seems to be taboo. I have access to a retired dairy farmer’s farm. He is of the age where every thing looks hard. So when I mention an interest is an agricultural pursuits he is sure it will not work. I have proved him wrong on hoop houses and small changes. I am always asking others to show me the “spread sheet”, it’s as though I ask about their sex life. I would like to start with some small pasture live stock, but need facts and numbers. Thanks for bringing this up.

Reply
AlbertaFarmer
12/27/2012 01:21:05 pm

We have a small farm, two quarters, in southern Alberta. We primarily do beef cow/calf, small scale poultry and sell commercial horse hay. I work off farm full time doing construction 12 hours a day. My wife has a consulting business from home and does much of the day to day chores with the animals, while I do the fencing, bailing, hauling, fixing, buying and selling. We were both raised on a farm but we did not start farming ourselves until we were in our mid 40's. We have been farming for 7 years and have evolved to a business model that is working so far. We are not trying to make a farm profit until 2020. That is the year we will begin to farm full time. Until then, we are doing two things:
1. Paying off the land mortgage at an accelerated rate, so that we can become debt free by 2020. At the same time, we have produced a capital acquisition plan that is focused on building the infrastructure and acquiring the equipment by 2020 that will allow us to farm after 2020 with no major capital investments such as a new tractor, etc. Basically, we're pumping money into the farm right now, preparing for later.
2. Acquiring skills. We are trying the full range of possibilities; cows, chickens, pigs, goats, direct marketing, etc now when making a profit is secondary. We learn from our mistakes, keep the good, profitable practices and abandon the ones that don't pay off. With the off farm income, this brings the stress way down and allows us to just slide right past the big failures without a massive financial hit and long recovery time. Slowly, we’re finding more and more profitable ways to use our land sustainably and the farm income is coming up as a result..

Reply
bruce king link
12/30/2012 04:21:06 pm

AlbertaFarmer is doing exactly what I've seen others do, and is describing exactly what I've heard others say. Take a look at my post with its outline of farming, and AlbertaFarmers.

You asked about a guiding light.

Reply
AlbertaFarmer
1/2/2013 03:14:39 am

You're right Bruce, that's partly why I did my post. It puts into real context the business principals you suggest as a model. All I can add is a few words on management. There is the management of others, but we have found that the management of ourselves is important as well. There are those idealic folks out there that dream of sustainable, healthy, etc farm and think that this entails getting up in the morning and feeding the chickens, stoking the woodstove and canning a few garden vegies as the secret to sucess. That is true, but farming is HARD WORK and will never be anything but that. We have found for both my wife and I that the limit of hours worked is right around 3500 hrs a year. More than that and it will become distructive to relationships and your health. Less than that and you run a high risk of failing. To put it in context, the average "rat race" worker invests about 1800 hours a year in that job that they despirately want to excape for the simple life. Working off farm is pretty well a given, but keep that 3500 hrs per person well managed or it will cause problems.

The second is financial management. Everything you do financially should be part of a plan, no impulse decisions allowed! Even that big emergency decision like tractor meltdown right in the middle of haying must be addressed logically. Rent, fix, replace, borrow, beg, abandon the crop, they all have to be weighed and evaluated (we abandoned the crop. Buy what you need, not what you want. If it deosn't work out, get rid of it and get what will work. Compromize. Accept some rust around the fender wells. :-)

Research helps you with your planning, but expect to fail in your attempts to adopt what has worked for others to your particular plot of land. For instance, we were going great guns on field feeding of hay, until we had a hard winter and 200 head of elk showed up out of the mountains behind our farm. Twelve tons of hay consumed in two days! Profit jumps to $0 in the most unexpected ways.

With lots hard work, an adaptive attitude and good financial planning in the beginning, you will realize one day that you are indeed living the simple life.




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