2 weeks ago
Thursday, October 28, 2010
Another farm bites the dust: postmortem
The blog honestmeat.com has announced that after 6 years of operation they're closing their farm operation, named TLC Ranch . A postmortem is an examination of a situation to see what you can learn from it. I was introduced to this sort of examination while I was working at a big company; failed projects, and successful ones too, got postmortems. Personally I found the discussions around failed projects to be the most interesting.
First, to be clear, Rebecca, one of the farmers at honestmeat, and I have not had the best of relations; but this is not personal in any way. I hate to see someone who clearly wants to farm and has spent 6 years doing it close the doors. Rebecca and I most recently 'conversed' in the comments section of this blog post in the end of May of this year.
Here's my (no so hidden) agenda:
The audience that I write for is mostly other producers, particularly those folks who are producing animals. Anyone is welcome to read it, but what I'm writing is mostly aimed at other farmers or people who are thinking about farming. I write about the nitty-gritty stuff that is farming, and I do so with the following goals in mind:
1) Save farmers time and effort by talking about stuff I do, including stuff that doesn't work well.
2) Emphasize practices that are in my belief the most likely to work for people, and;
3) Be skeptical about things that I see as not workable or not likely to succeed.
4) Encouraging farmers to make a profit*
Lets talk about TLC ranch, the business name of the honestmeat.com blog.
Jim and Rebecca appear to have a long-term interest in farming; Jim did a stint in the Marine Corps and started a delivery service for vegetables, and Rebecca spent some time earning a degree and then apprenticed on several farms. I'm pretty clear that both of these folks know about hard work and dedication, and they started this venture with their eyes open. They have a little girl, born 4 years ago.
their website lists several products that they sold at the end of their farming life: pork, eggs, lamb and beef. It appears that they would buy the hens, pigs and lambs from other farmers and raise them to laying age or market weight. They would also resell beef from a neighboring farmer. they apparently did not sell any sort of vegetables or fruit (see land and facilities)
Land and facilities:
They rent a house and 48 acres, and state that "For all 48 acres we rent, we pay about 10 times the going rate for pasture".
TLC sold products into the San Francisco bay area, which is one of the highest priced markets in the country. Their prices are high by most standards. Representative pork prices: Tenderloin $17/lb. Bacon: $15/lb, fresh sausage links: $9/lb. Beef prices: Filet Mignon $19/lb, flat iron steak, $15/lb, etc. Eggs are $8-9/dozen.
Feed & Husbandry:
Quite a bit of discussion on their site about organic feed, how the animals are slaughtered, and how they're handled; taken at face value, these folks spent a lot of time managing their animals. This is reflected in the comment that Rebecca made in her announcement of closing their farm that they were working 80 hours a week.
This venture was difficult to begin with, but complicated by several factors. The price of the land that they were renting was one; difficulties with labor was another, and finally the lack of sales. I'll add to that list insufficient capital. Their pricing was sufficiently rich that they had sufficient margins, but in pricing at that level I'm guessing they also significantly limited their market. There is very little discussion of traditional business planning; revenue projections, milestones, critical path items... that may have been done, but it's not obvious from the blog or website.
Stated reasons for closing:
"1. LAND ACCESS: We rent land in North Monterey County, California. Half the land we rent is in an active floodplain and is under water for half the year. The other half of land we rent is a steep, overgrazed, parched hillside with no water to help bring it back to life. For all 48 acres we rent, we pay about 10 times the going rate for pasture. The best grazing lands in this region are locked up by a handful of long-time cattle ranchers, the fertile bottomland locked up by capital-intensive berry farming, so we are left with the dregs. To top off the over-priced land, our leases are too short to build a long-term business, the landlords too inflexible, and ultimately, we are building no equity for all the effort we put into the land. What can you do to help solve the land problem for farmers? Make sure your city and county planners don't pave over any more good farmland in your county and don't let them rezone farmland for things like rural "ranchettes" and other developments that carve up viable farmland. If you or your family own farmland, consider offering a low-priced, long-term lease to a good farmer to help them build their business. "
The best farm land in all parts of the USA are always occupied by farms that can turn a profit and are sufficiently capitalized. As a new farm, you will always find the marginal land anywhere you go to be the most available. My farm is located on the flood plain. Welcome to the new farmer club, chums!
The discussion of equity is interesting. The equity that I would expect them to be building is in the TLC ranch brand name. With a strong brand you can move your location around and still be in business. Land ownership and building a farm are not connected. Many successful farmers are using leased land. If you are in that sort of situation, develop a farm plan that allows you to move when you need to; either for natural reasons (floods) or for business reasons (loss of lease). None of this should have been a surprise to these folks.
"...offer a low-priced long-term lease to a good farmer..." A good farmer is one who manages their farm business in a sustainable way, and I'd like to promote and support people who don't need a subsidy to farm. I'd disagree with this.
"2. MEAT PROCESSING: This topic warrants a much longer post, but basically California has only a handful of USDA-inspected slaughter and butcher facilities. Because there are only a few, it is hard to even get an appointment to bring your animals in (one place we called had a 7 month waiting list!). Also, because these abattoirs don't have much competition, they don't have to provide high-quality customer service to ranchers. They can charge what they want, they can choose not to follow your detailed butchering instructions (for example, put nitrates in the hams that you asked for "nitrate-free", cut all the fat off your pork chops when you asked for 2 inches of fat on them, etc.). These abattoirs charge you by the carcass weight of your animal and then sometime they won't even give you the whole animal back that you paid for, such as taking the head, the organ meats, the feet, etc. So we work our butt off to raise this amazing animal and then the butchers devalue your hard work. Having zero control over our processing is extremely frustrating and costly. To top it off, the rules for ranchers processing their own meat are different than those for small custom butcher shops. They can take their meat products to farmers markets without a USDA-inspection but we cannot (Corralitos Meat Market is an example of this). This is a double standard that most customers are oblivious too."
The USDA slaughter situation has been this way for at least a decade. None of this should have been a surprise to these folks. Many farmers have trouble finding people who can correctly cut and wrap their meat (myself included). If another farm has a competitive advantage in getting to market, consider seriously doing what they do. You've had 6 years, folks. that's longer than most. If it is a crucial aspect of your business, maybe you should have looked at carralitos meat market carefully and done that yourself. I can't speak specifically to the laws of the State of California, but this is a common, reoccurring problem when raising animals for food.
"3. THE ECONOMY & CONSUMERS: We certainly have some amazing customers, some who have been with us since the beginning, others who have loaned us money, and many who put faith in us when purchasing an egg share. We get the occasional compliment like "your eggs changed my life" or "I feel comfortable eating meat again when it is from you". Yet we have other customers who want our products to be cheaper, for us to stop using organic feed, or for us to lower our standards in other ways. There are people who want us to use a soy-free feed, but yet are not willing to pay the added price that a non soy feed will cost (it takes longer to grow out an animal without soy and laying hens produce fewer eggs when not on soy). Many customers, in fact, will choose to get eggs from several states away from a farm they have never seen in order to get a soy-free egg or they will buy bacon or sausage that is sugar-free but happens to come from some nameless farmer in Iowa. Many people prioritize their personal dietary preferences du jour (I say "du jour" because these preferences change often over time) over supporting an actual local farmer or perhaps over humane animal care, environmental sustainability, etc. I encourage you all to look at the bigger picture and think about what values you want to support. Added to this, the bleak economy is encouraging many of our former customers to pinch pennies and discard their values for food that are organic, local, environmentally sustainable, etc. While I understand the need to be budget-minded (we haven't seen a movie in over a year), I don't think people should skimp on the food they put into their bodies and the kind of planet they want to see. If we want local farmers to stay on the landscape, we must support them over the long term. When we shop around, try to save a few pennies, or preference our dietary fads over the realities of local livestock production, we are taking away that vital support that keeps local farmers around. "
Customers ask for things you don't produce. Check. Customers complain about prices. Check. Customers like your product: Check. Customers make choices on who they buy from based on factors other than you being more righteous than other farmers. Check. Customer preferences change. Yep.
You should buy from me because I am entitled to your business. Um. Nope. Sorry.
This is a pretty classic marketing problem. If customers aren't buying your story (and your product) change it. I'm sure that there are lots of dollars flowing to local farmers from the bay area. Its your job to figure out how to get more of them; and that's the bottom line: Starting a business is all about customers, and nothing else. If you don't have enough customers to support your operation, right-size your operation.
"4. QUALITY OF LIFE: We both used to be avid mountain bikers, backpackers, rock climbers, all around adventure-lovers. Since starting a farm, we have had almost no time to do anything fun. Our daughter's only 'fun' time is when all three of us are washing and packing eggs to music at night. We live next to a highway because that was the only land we could find to rent that also had a house for us to live in. We farm in an area rife with criminal activity and had 300 of our laying hens stolen in the spring, but it is the only place we could find that would rent us land. To top that off, we can't find any good employees that would enable us to work less than 80 hours a week and have some semblance of a life. So unlike the beautiful, joyous life that many romanticize for farmers, we don't have that. We need a better life. "
A small farm IS your life. A small business IS your life. If you are not able to do the things that you wanted to do, maybe it's not the business for you. I think it's unreasonable to think that your lifestyle will not make a drastic change if you go from being an academic to a full-time farmer -- you are making a drastic change. Since you are self-employed, design a job you like, not one that oppresses you. In fact, that's my version of hell: Self employed at a job I hate. I have no one to blame but myself since I created the position.
Summary and conclusion:
A house and 48 acres is something that looks good on paper, but isn't really necessary for the operation that they described. They could have produced much the same product on a 2 to 3 acre parcel. It wouldn't have been as pretty, but sometimes you start small. Feed the same organic feed to your chickens and pigs, rotate the chickens over an acre of grass, accept a dry lot as your pigpen. Instead of living in the trailer now, you should have been doing that 5 years ago, on the 2 acre plot. Once you've got a good system in place, and are selling product, expand. Lease another 2 acres and double your operation. I'm sure that they could have found a 2 or 3 acre parcel to lease, maybe even closer to their markets. And being that close to the animals solves the theft problem, and the commute problem.
They also seemed to have missed a revenue opportunity: they had 100 people attend an event where they slaughtered a small pig. Classes on the basics of farming are a great source of funds and are interesting and useful to the participants, too. If each of those 100 people had paid $100 for the class, the resulting $10,000 would have probably been pretty darned welcome revenue. Do one of those per quarter and you've got a new tractor. three years of that and you can put $100,000 down on that land you had your eye on.
Spend less time worrying about certification and organic, and more time worrying about customers and markets. Ask for help before you fail. Accept help. Learn how to hire and retain good employees.
Trailbreaking sucks. Study and emulate farms that are succeeding unless you have a lot of money for the inevitable mistakes you'll make trailblazing.
You'll find the final post on honestmeat.com here.