Small Farm, Real Profit: Mother Earth News

(A few goodies from our garden at Lillie House.)

Add up 1 part impending ecological catastrophe WITH 1 notoriously unhealthy food system PLUS 2 decades of declining economic opportunity, and you're sure to get a crazed North American obsession for finding meaningful work on the land.

With real incomes declining since the 70s, unpaid work hours sky-rocketing while paid work hours per capita decline, it's no wonder that more and more people are looking at their back yards as a way to make an income, while simultaneously providing healthier food for their communities and fighting the lead cause of climate change: our industrial food system. 

This is a fantastic trend! In fact, it's possibly one of the most positive, hopeful and impactful developments I've seen in recent years.

And to support all these would-be back-yard growers, a whole industry has arisen to provide information, models, training and consultation. Many of these are fantastic as well. 

But as someone who would like to see this trend, and the growers who've joined it, truly prosper and thrive, I like to look into these programs and their numbers to provide some additional perspective and realistic expectations for those who want to get started. 

In the most recent issue of Mother Earth News, Josh Volk published one of the best recent articles on the economics of market farming, Small Farm, Real Profit  This article gives us a very helpful accounting of inputs, costs, and gross and net profit from Cully Neighborhood Farm, what it calls a "successful urban farm" (I'd say a VERY successful farm) on half an acre in Portland. What's truly fantastic about this article is that most "systems," classes, and models available online don't go into half as much detail on their numbers, so we never really have a full accounting to give us an accurate expectation. 

I think anyone looking at growing for cash or creating a land-based income should take a look at this article and dig into the numbers.

However, as a grower myself, and an advisor to others looking to grow professionally, I have a slightly different perspective and a slightly different set of numbers I like to look at. Often, I think we can get misled by looking myopically at "the bottom line" when for most of us, there are actually way more important considerations. So l'd like to take a look at the numbers from Cully Farm and fill them out a bit to give a good impression of what they'll mean to the prospective grower. (You can click the link to the article to view the numbers in a raw chart.)

Profit VS. Hourly Profit

THE BOTTOM LINE! It's the big thing most of us focus on: what kind of ROI will we get for our investment! How much money will I be able to brag to my friends about? 

But for most of us, hourly pay is a much better indicator of quality of life, economic sustainability and the value of our "work." I always like to point to the panel discussion from the 2015 MIFMA (Michigan Farmers Market Association) conference in which some of the star growers all agreed that - when a full accounting of their time and costs was done - made about $3/hour for their work. And while rewarding, make no mistake, it was very hard work. Looking at the few University studies on farming, that $3/hour seems a pretty reasonable baseline expectation for most growers in our area. (I've discussed many of these previously on this blog, for example, here: http://lilliehouse.blogspot.com/2017/01/spin-permaculture.html) 

Looking at the numbers out of  Cully Farm, his profit was: $13,852. And he claims to have worked an average of 20-30 hours during the season (6 months) and 10 - 20 during the off season (6 months) so lets give an average of 20 hours/week. 

So Matt's yearly hourly rate was about $14/hour. That's spectacularly high, given the numbers from other studies. But this number is very sensitive to hours/week, so if the yearly average time was closer to 30/week, the rate falls below $10. Clearly, labor time is usually the single most important factor in small farm hourly rates, while it has little impact on "profit!" 

Hourly Wage

Matt also hired workers during the season at a cost of $8,000. According to the article there were typically 3-4 people/work day during the season, and occasional help during the off season. Given the Cully Farm numbers, Matt's hours, and university research on wage hours per acre, it's safe to assume around 20 hours/week paid labor. Total labor costs, then were:

$8018 Wages

$500 payroll

$140 workers comp

$13,852 Matt's "wages"

$22,500 TOTAL LABOR COMPENSATION

At a very reasonable 40 hours/week total labor (which is very low) this is an hourly rate of:

$11/hour. 

If Matt's compensation was $14/hour, then the real paid labor rate was around:

$8/hour. 

Economic Notes:

I'll get into more detail in the conclusion, but in my opinion, this model should be seen as a best-case scenario for several reasons. First, it's clear that Matt really knew what he was doing, had a great market, and a great year in a climate with a lot of positives. It's also clear that these numbers are in keeping with those published by other modern "farm business plans," models and programs. 

There are some very important numbers missing from the article. One of those is volunteer hours. Many such small urban farms rely on volunteer hours, and to give a fair and accurate hourly rate, those should be accounted for, too. It also does not document full initial expenses or the previous two years of profitability. Nor does it detail any major losses, so I assume this was a very good year. Both of these figures would give us a more realistic expectation of average yearly profit, which is a VERY important consideration, but one that is rarely discussed in various online "models." Eventually, even the best farm businesses face bad years and crop losses and bad years. They also require a few years to build profitability. 

Sustainability

Another important feature of the article is the emphasis on sustainability. Everyone wants to grow sustainably! For many, it's one of the major reasons to get into farming.  

It's clear from the article that Cully Farm cares about sustainability and, given the practices used there, I get the impression they're a very sustainable operation, relatively speaking. Though there are still some important numbers missing, and sustainability is very complicated. 

Soil: The article states that the farm uses a minimum of 1/4 inch of compost in each bed. According to Grow BioIntensive, this is not a sufficient amount to insure sustainability. The addition of other materials, such as Azomite, may not be sustainable. 

Fertility Source: I agree with the Grow BioIntensive organization that the best real measure of sustainability is where a farm grows its own fertility on site. This is often a very difficult and advanced endeavor, and certainly cuts into the potential profitability. It is also the only safe source of fertility since the use of off-site compost is risky, as persistent herbicides have made it into the consumer market and has been known to harm farms. But what  remains true is that if fertility is being imported, it MAY be sustainable on farm, but at the expense of soils (and soil carbon!) elsewhere. 

Tilling: The article mentions that Cully Farm avoids the use of a rototiller to enhance sustainability, instead relying on forking, tilling with a rotary plow and a 30-inch horrow. It is true, tilling is one of the great causes of farm unsustainability! However, researchers and experts say there is no difference between these: they are both tilling. There's nothing inherently wrong with a rototiller, in fact, they may be more energy efficient. 

Plastics: Cully farm appears to make heavy use of plastics, including irrigation, poly tunnels, a high tunnel, row covers, silage tarps, etc. It's no wonder that agriculture (as pointed out in our recent blog posts) has become the fastest growing cause of plastics pollution. In addition, many of these uses (especially plastic hoop houses and soil solarizing) have been linked to plastics contamination in the food system. 

Market

It should be kept in mind that Portland is probably a very good market for vegetables, the grower is advertising as being "sustainable," and he has a built-in market in the neighborhood and with the church. While $550/share is a fairly low price even in Michigan, the wild card with CSAs is what the custoer gets. Some CSAs deliver well over the value that a customer would get at the local grocer, while I've seen others that really skimp. Here, we don't know what the price/unit is on the produce, but I'm surprised to see 52 shares from a 1/2 acre farm, while other systems suggest to aim for 30 families/acre. 

Conclusions

Very inspiring article about a very inspiring small farm! I think it shows that it really is possible to take your life back and grow your living on your land.

And for me, the most important and inspiring element is the land-sharing arrangement with the church. I can't stress how absolutely vital it is to start using such large plots of urban land to use creating economic opportunity for urban farmers while providing good quality food with a lower carbon footprint.  

But we should also look at it with realistic expectations. The truth is, there's a very lop-sided economic curve for farm work, with a very, very low median (probably just above $3/hour) and a steep spike away from that. That means, from what Cully Farm's numbers look like to me, with a total/labor/hour rate of $11/hour, this is well above the average! At a profit rate for the farm manager, Matt, $14/hour is very high, compared to what I've seen in the research literature or online forums, and is very sensitive to hours worked. If Matt had just 10 hours/week of untracked labor (meeting with customers, commuting, staying late to fix an irrigation system or repair a hoop house) then his hourly rate would be below $10/hour.  

Realistic expectation - that means that if you have great soil, access to large amounts of compost, access to water, low-cost or free labor, a good market and some luck, and you do everything right like Matt, you could expect to make between $10 - $15/hour. 

But at the same time, top performers may do even better. Some of Matt's expenses were for one year, and many other expenses like tilling, seed, compost, fuel, and water could be designed out of the system using Permaculture (for a savings of $4,900 to use MEN numbers.) Figuring that in, Matt could reasonably make $19-20/hour (using Matt's numbers and budget for this calculation.) And while it appears that Cully's market rate on produce was probably fairly high to begin with (given the numbers of members and market prices in Portland,) there are crops which are far more profitable on half/acre than a CSA, with some crops routinely earning $50-60k/half acre. With perennials to reduce labor, high value specialty crops and a well-developed market, the income rate/hour could realistically go up, possibly to $25/hour or very much more. Others will reduce production and increase value added products, as recommended by Grow BioIntensive. Still others will get that kind of hourly rate by exploiting free or very low paid labor, but that generally requires much more land and I personally consider it (usually) exploitive (but not always.) I've actually seen a couple of small garden businesses making that kind of hourly rate a reality, but that isn't realistic for most, requires a great deal of experience, marketing savvy, connections and probably luck. 

For those who consider ecological and social sustainability important, I think this model would require some additional considerations. As more farmers start naming their tiller "George" so they can claim "I don't till my fields, I George them!" I think the consumer criticism of small farms will continue to grow, which will eventually become an economic issue for those claiming to be "sustainable." Already, economists and environmentalists are beginning to question the honest societal value of small farms, if they're going to engage in practices that are less ethical or sustainable than industrial Ag. To me, the most sustainable farms will grow most of their own fertility, leave a functioning ecosystem in tact, pay a living wage for labor, avoid tilling, avoid spraying, minimize transportation distances, and minimize plastics. But, beyond the Grow BioIntensive models, I haven't seen a one-sized-fits-all farm business plan that I'd consider honestly sustainable, yet. That still requires legitimate experience, deep familiarity with the land, good soil, understanding of the market, plant geekery and good old fashioned horticultural knowledge.