Sunday, January 13, 2013

Distance, time and markets

Got this in email today:

"G'day Bruce,
I'm a long time follower of your blog and I've got a question that I'd be be ever so grateful for your opinion on.
For a number of years I've been planning to start a farm of my own raising cattle / pigs / poultry for meat here in Australia, selling direct to the consumer. I feel that the environment in my country is on-the-whole fairly similar to that in the US for small-scale farmers.

My question is this: If you were going to buy some farm land to do something like this, which of these two options would you go for?

1. I can buy land 1.5 hours drive/50 miles from a city of 2 million people.

2. For much the same money I could buy similar land 20 minutes from a city of 30,000 people, that number increasing to 100,000 if you include all the people scattered within a 45 minute drive/40 miles of the property (in a number of towns and villages).

Both have access meat processing facilities within 30 minutes drive.

Many thanks in advance!


When I was deciding where to put my farm I decided that I'd be within a 60 minute drive from the largest market that I could find, which in my case was Seattle.  So I took a map and drew a one-hour circle around the city.  It wasn't really a circle -- seattle has ocean and lakes which compress it, and the big interstate freeways stretch it out, but you get the idea. 
Within that area I looked, in my case for two years, for land that was suitable for what I wanted to do.  I was looking during the height of the housing boom, and it took a while.  I ended up on a parcel of land that I overpaid $6k an acre for.  I say overpaid relative to the land price now, but it was relatively cheap.  I paid $72k for 12 acres, of which about 9 acres was usable.   I wouldn't fully grasp the joys of flood-plain farming for a couple of years. 
Being close to the population center for me has been important for the very small percentage of people who actually want to visit the farm.  But that small percentage are also people who tend to be very influential about... in my case, bloggers and authors and folks involved in the local media.  I attribute most of my early sales to my location... but not so much to the location within 60 miles of Seattle, but my location next to a major freeway.   The 55,000 cars that pass over my farm every day actually meant that for me I didn't need to have much, if any, advertising budget.  I think I spent $300 a year, but then found that most of my business came off the farm-and-garden classification of  craigslist or various media coverage that I got by thinking up odd things to do -- like the kill your own turkey class.   In the last 3 years I  haven't spent anything on marketing, unless you count the time I spend on this blog, which is mostly a labor of love, and, sometimes, doesn't help me sell products.  That article I wrote about horses made people mad and I'm pretty sure that some of those folks will never, ever, buy a pig from me.   
A lot of people think that the hard part of farming is the farming, and I can tell you it's not.  The hard part is finding a market and selling your production, particularly if you are good at producing quantities.  If I were in a more remote area, or not located next to a highway I would have had to work much harder at finding my customer base and selling my production. 
Another thing that I am still struggling with is that my farm and my house are not at the same place; I have to drive for 20 minutes to get to my farm, and 20 minutes back, and I cannot tell you the number of times that I've been almost home and gotten a call that my cows or sheep or pigs or whatever were out, and had to turn around and fix that.  If I were to do this again, particularly with an animal-based endeavor, I would not have a farm that was more than a few minutes from my house, and ideally, I would have my house at the farm.  Having a commute takes 40 minutes minimum out of my work day, every day, 7 days a week.  So I lose what amounts to a whole work day every week, 52 weeks a year. 
The problem with smaller rural areas, at least around here, is that many of them raise small quantities of whatever it is that they prefer to eat.  Not uncommon for people in rural areas to own a pig or two, or chickens, or geese or whatever the locals like.  Cities tend to be a place where people who want what you produce cannot produce it and, from a sales point of view, are a better bet.   1.5 hours drive is bigger than the circle that I drew when I was looking, but Australia is a big place, like the USA, and "local" gets stretched a lot.  "local" around here is 250 miles, when you consider the distances that farmers drive to sell at one of the urban markets in Seattle.    It's the ability to produce things that the city folks desired but could not produce themselves that really drove my decision. 
You may have quality-of-life issues at one location, vs the other, or the quality of schools, or other reasons that make one location more attractive.   Figure out what you want to sell, and see if you can sell it before you even buy your first animal in the areas you're looking at.  Here's a question and my answer from another forum, from a guy who was thinking about raising 40 pigs: 
"pigs.... any money to be made?
Let me preface this by saying I have no experience with pigs other than helping the neighbor cut his and move them around when I was a kid.

Over the last couple of months I have been considering buying a pig and turning it into sausage/pork burger. During this time I have seen young (10-20lb) pigs sell for what i consider decent money. We have an old feeder floor on the farm that I have looked over a couple times and seems to be in good shape and from conversations I"ve had with my father in law its big enough to feed out roughly 40head.

Now... Here is my question. Roughly what is the cost to feed a pig out to 200-250lbs? How long should it take to get them there? 6mos?

Is there enough money to be made on 40 head to justify that it would cost to raise them? Im am in a position where I have all the time in the world during the summer months and Im more or less looking for another project. Any thoughts?

Jim "
My answer: 
"Sell them before you buy them.

Call all of the custom slaughter guys in your areas, small meat shops or other places that use pigs, and see how many you can sell to them. If you can sell all 40, get them to front you the money for the pig purchase, and possibly the feed. If you get 40, don't sell 40. Sell 37. The other three are in case you have mortality or want a few pigs for friends and family.

If you can't sell them, don't buy them. I sell pigs full time, similar sort of business to Walters. Since he doesn't feed commercial feed to his pigs, he's probably using my numbers in his estimates -- they're good. 800lbs per pig. Hog feed in this area is $540 a ton, so that ends up being about $170 a pig to bring it to market weight. If you can secure cheaper feed -- we pick up and feed 10 to 20 tons of produce a week to feed to my 500 pigs - that will really lower your costs.

You cannot raise pigs cheaper than folks sell them at the auction, you cannot beat a confinement operation on price. Don't try. Sell local, hand-raised, husbandry and quality. "
So why not try a market test?    I do this on craigslist from time to time.  I'll post ad that is something I'm thinking about, and collect the responses from interested parties.  If there's enough interest, I'll use that mailing list as sales leads, and then collect deposits on my new project.  I'll then use the deposit money to buy the materials, and basically, if the customer backs out of the purchase, I'm out no money.  Otherwise the items produced are pre-sold before I even buy them. 
I did this with guinea fowl -- I got enough interest that I was able to raise a deposit which covered the cost of buying the keets (guinea fowl chicks are called 'keets') and the feed, and I raised a batch of 150 of them and sold them to folks.  No investment of money on my part, entirely financed by the customers, who in turn received their guinea fowl when they reached maturity. 
You could apply this to just about anything you might produce.   If you cannot pre-sell them, could you sell them?  Generally speaking, I know people are serious when they put some money up. 
I hope that this discussion wasn't too long-winded, but I felt like giving you the background might help more than just saying "stick with the big city is what I'd do". 
You'll find the context for the 2nd question here

1 comment:

Joanne said...

Great article. And I like your approach to marketing and locating markets. It's true, the best markets are in the cities, where people want lots of the types of foods we can grow, but can't grow them themselves. And they're used to paying retail prices as well. If you can aquire market share, it's always best to sell at retail (or as close as possible to it) than wholesale.

Good points also about the pigs. Especially about not trying to compete against the confinement growers. Especially since they're still loosing $18-$20 a head. Although there's hope that they'll start breaking even again by mid to late 2013.