Friday, January 1, 2016

Making a living farming

I was reading a long essay from a young and hopeful vegetable farmer who was walking the walk; selling vegetables to people, and, honestly, trying to figure out what she was doing wrong because she wasn't making any money.  It's an interesting read; you'll find it here.   UPDATE:  As pointed out in the comments here, the author and partner have closed their farm and moved on to other things.  A link to the farms facebook page at the bottom of this piece.

As I read through it, one comment she made, that a trip to the dentist was a desired luxury item, struck me as pretty terrible.  Lots of folks think about a new car as being a desired luxury; but having a tooth filled?  To me, that seems like it's a basic neccesity of life.  I'm sure that you can agree with me if you've ever had a toothache.  

I've started and operated several businesses; I've been self employed now for around 20 years; I have a pretty good handle on what it takes to make a business profitable; and even with that experience, farming has its particular challenges in that regard.  But it's not much different than any other business, too.  

Here's the bottom line:  If you can't figure out how to make a profit on a spreadsheet, you will not ever make a profit.  Even sometimes when you do figure out how to make a profit on a spreadsheet - you figure out something that looks like it will work, well, sometimes that doens't work out.  But at least you have some hope.  

If I weren't able to have reasonable confidence that I can have positive cash flow from my farm - I'm producing more money than I'm spending and have a choice about where it goes - that's the day when I stop producing food for other folks.  It would be a lot easier to grow homestead-quantities of food; and I wouldn't need the tools and infrastructure that I use now to keep my 500 pigs and 50 cows and 200 chickens and all of the other critters that I have at this point.  I could get by with a couple of cows (one for beef, one for milk) a few pigs (a boar and 3 sows) and 20 chickens - because I like eggs.    

When I read this essay from this vegetable farmer I don't think that she ever did a spreadsheet, and I'm pretty sure that she's living a lifestyle that most of her customers wouldn't even consider.  Is that really the kind of farm that you want to run?   In her essay she's having fundamental doubts about it herself -- but that's something that I think she should have worked out years ago - before she turned over her first shovelful of dirt.  

Sustainable to me means that the people working on the farm earn enough money that they can move themselves ahead, make their own progress.  That's the goal I work towards in my farming.  

14 comments:

Bill Gauch said...

According to their facebook page, they both threw in the towel on their farming venture as of Nov. Looks like her existential crisis is over. Don't worry, though. I'm sure she will be writing a book about her experiences soon.

Hostetter said...

Bruce,

I have continued reading your blog because you are realistic. I have been reading your blog for years now and when you started I was a bit younger and more idealistic. I believed that I wanted what the author described in the article and what the organic producers are selling as a lifestyle. I have looked at a number of different farming operations from fruit to vegetables to hog to chicken, taken processing classes etc. trying to figure out how others are making money farming. With that experience I realized that no one was making money farming. In my determination most farmers I met were able to survive due to one of 3 things. 1. They made their money in another industry and used it to live and operate the farm. 2. They had family money. There was either an inheritance or likelihood of one and 3. Their family owned the land or farm for generations.

There was an exception of two but those individuals grew the business slow but worked an amazing number of hours to do so. They all had jobs outside of the farm.

I have determined that 10 acres a couple pigs, cows and chickens for my family is all I am looking for and will continue the search while I keep the day job.

All the best in the new year. Hope the rain holds and the river stays in the banks.

J



grasspunk said...

There was a great BBC series where some guy called Monty Don visited small farms with financial problems to see how to make them profitable. Within two episodes you could see the pattern of the problem - buy small farm, live the dream, make some product, find out it doesn't pay enough and now has no idea how to make it scale but still feel that the world owes you a living.

They nearly always had properties that were big on lifestyle - nice house, pretty trees - but low on productive land.

Monty Don's answer was something along the lines of focusing on the business after production and buying the missing production from other farms. Use the farm as a pretty flagship location since it doesn't have the land to produce enough for a viable business. So if the farmer was making natural wool quilts then buying enough wool from other farms to go into larger scale production and getting larger buyers interested.

IIRC all the folks wouldn't do that. They didn't want to work to succeed at their business, they wanted to do their small-scale farm thing and have the world pay them.

grasspunk said...

OMG I am reading her story now - that's insane!

She's investing all this effort in making the soil better, buying equipment that depreciates and she's got a tiny farm and doesn't even own the ten acres? Wow.






Bruce King said...

Bill: Thank you for the update; i've edited the entry and put a link to their facebook page with farm closure announcement at the bottom. That's an interesting followup to this article -- and makes it a little more honest, too. She was wondering if she would continue. I guess she made her choice.

Bruce King said...

Hostetter: I appreciate your recognizing what I do here and appreciating it. Sometimes being realistic isn't popular, but honestly, I'd rather someone go into this with their eyes open and with the best information I can get 'em than with the rose-colored glasses that are so popular in farm books and presentations.

I agree with you that inherited land, money from another industry that they earned, or family money are how most people get into farming. The money-from-another-industry is the direction that I point people to when they ask me how they can start farming, and I've written about that in two blog entries here -- http://ebeyfarm.blogspot.com/2013/11/you-wont-get-this-by-working-for-me.html and in this entry http://ebeyfarm.blogspot.com/2012/10/the-myth-of-young-farmers.html

For me, I came up with an idea, put it on a spreadsheet and looked at it carefully, and th en made course corrections over the years until I got something that worked, but it took 5 years to get to the point where I had a system that worked pretty well; and during that time it was my off-farm income that gave me the support to continue until I got to where I wanted to be. If I had tried it solely on farm income I wouldn't have made it.

Bruce King said...

Grasspunk; I think i got the series you were talking about; check the links at the bottom of the article and see if that's the one.

I agree; she was investing far too much time and effort into land that wasn't hers. And the land itself was already subsidized; it was leased from a non-profit. If anyone was going to make a go of it on that land she had a good chance, but clearly hard work alone wasn't the answer. Plus with a new baby on the way...

grasspunk said...

Bruce: that's the right show.

Hostetter: I'm from a farming family (in NZ) and I started farming out of high school working for another farmer. It took a few months to figure out I was never going to make enough money working for someone else to buy a farm of my own. That's when I quit and went to university.


Bill said...

We're looking hard at the financial realities and may have to return to homesteading instead of trying to make it as full-time farmers. The reality is that there are now VERY FEW full-time farmers left. The reality is that unless you are an industrial-scale farm operator it is extremely difficult to make a living as a farmer these days. The median farm income in the U.S. is negative 869 dollars. Almost all farms in the U.S. require off-farm income to stay alive. Even on what the USDA calls “commercial” farms ($350,000 and up in gross receipts), nearly 25% of the farm income comes from off-farm jobs. And below the “commercial” scale farm income is almost always zero or below, so all the income those families receive comes from off-farm. It is the norm for one or both spouses to work off-farm to earn the money (and get the “benefits”) needed to keep the farm going. No wonder you don’t hear much about the financial side of “sustainable” farming (it should be obvious why sustainable is in quotes). There are lots of people going into this business with unrealistic expectations.

We do use spreadsheets. We carefully calculate our cost of production and the revenue we'll need in order to turn a profit. There is a limit to how much we can "scale up" due to our limited local market, the labor demands and our desire not to compromise our values. Increasing our scale in most enterprises would just increase our loss.

As best I can tell, here's the bottom line. Americans pay less for food now than any culture in the history of the world. We pay, on average, less than 10% of our income for food. For food consumed at home, it's less than half that. We've prioritized other things with the other 95% of our income. Just 30 years ago Americans spent 17% of our income on food, and in 1950 we spent over 30%. It we could triple our prices (thus bringing them in line with what Americans paid a generation ago) we could make a modest living. In 1950 the average profit margin on farm was 35% and today it's less than 9%. When I was growing up it was possible for a farm family farming 150 acres or even less to provide the needs of the family and live a decent life. Now most farms must be much larger. To generate the same income today as it did in 1950 a farm must be four times larger.

Having said all that, there are some excellent farmers who have figured out how to make a good living on "small" farms. They write the books, give the speeches and are the inspiration for the rest of us. But they are not the norm.

Thanks for shining a light on this issue. It is vitally important I think to the future of food production in our country. All best wishes for a happy and successful 2016!

Jeff said...

Pretty much agree on all points. I would add that it is pretty much essential to have a steady source of income when trying to start a farm from scratch AND to have a large chunk of liquid capital to work to cover the many years of running at a loss.

Gold Forest Grains said...

Bruce...your farm and ours have basically mirrored each other in strategy. It is working for us I imagine in the same way that it is working for you. We work as full-time farmers (now), but the first few years were very tough and stressful trying to balance a full-time career, family and a part-time business of farming. A solid game plan was necessary and a willingness to do without. I always had it in my mind that it would be 5 years of hardship before we became profitable...that was actually pretty damn close. We're profitable now, but we'll never be wealthy doing what we do.

Our strategy all along was to capture as many profit centres as we could along the entire food chain. In every possible way, we thought of how we could, efficiently, add value to our raw products and how we could distribute directly to the consumer. The more profit centres captured, the more likely it is that a farm will maximize it's profitability. I think Bruce's key point was to figure out if that maximum profitability is actually enough to achieve your life budget. Hard questions will definitely need to be answered honestly.

Another thought always comes to mind for me...why do you think those farmers are writing books and giving lectures? It certainly isn't an activity they pursue for free. Perhaps those farms aren't as profitable as we would like to believe? Lot's of great points in the comment section. All food for thought. Thanks for the blog post!

Bruce King said...

Gold Forest Grains (John) - I've appreciated your own blog for many years, I found it by reading an entry where you were talking about pig rations and growing feed. It was actually your suggestion that I buy a combine made a couple of years ago that brought that idea up and I thought about it for a couple of years before buying the combine that I own now - thanks!

Slow growth is where I'm at, and my timeline was around 5 years, too, for the stuff that is profitable. I'm still looking for ideas, and the combine opens up a lot of different avenues now, but I'm very happy with my pig operation, and I'm looking forward to the dairy at the end of this year. That 3 year wait for organic certification has been the major roadblock.

Whenever I see one of those lecture-farmers I'm pretty clear on the profitability of the farm they're talking about. I'm sure you are, too :)

Bruce King said...

Jeff: I've enjoyed your economic breakdowns of your operations for years on your blog, and I think you provide a really good resource for small farmers in providing an example of how to do the math and directions to think about in your operations.

You'll find Jeff's blog as "thoughful food farms" in the "blogs I read" section at the upper right of this blog.

Gold Forest Grains said...

Bruce...one thing that's happening up here in Canada is some new crops being considered for approval. Poppies for instance...for the pharmaceutical industry. Canary seed for human consumption also. Just food for thought for that new combine of yours! Congrats on the corn harvest also! We'll be growing corn this year for grain.