By Jason Roehrig
"The Farmer's Guide to Development of New Farm Enterprises."
Content includes Earning More for Farm Crops, Identifying New Farm Opportunities, On-farm Processing, Selling Your Products and more.
The Farmer's Guide to Development of New Farm Enterprises
In 1997, RAFI-USA created a cost-share grant program to help farmers replace lost tobaccoincome by putting their own ideas to work. This program began as a four county pilot and hasexpanded with support from the North Carolina Tobacco Trust Fund Commission to serve all100 counties in the state. Since it began, the Tobacco Communities Reinvestment Fund has as-sisted hundreds of North Carolina farmers to implement innovative strategies redirecting scarcefarm resources into viable, sustainable farm enterprises.The farmers who have participated in the Tobacco Communities Reinvestment Fund are verycreative in finding solutions that enable them to continue farming and contributing to the ruraleconomy. The following pages tell the stories of past Tobacco Communities Reinvestment Fundparticipants and illustrate the process of evaluating and developing new farm enterprises fromidea to implementation. These farmers serve as models of how modest-scale farming operationscan survive the transition from commodity dependency to profitability in other types of agricul-ture. As North Carolina considers the future of its farmers and rural communities, it is farmerslike these described in this document who provide the blueprint for success.contents1. A Transition to What?2. Earning More for Farm Crops3. Just Two Ways to Make a Living?4. Identifying New Farm Opportunities5. Doing What You Love6. The Pecan Trees Always Provide7. On-farm Processing9. Selling Your Products/Marketing10. Differentiating Agricultural Products11. Know Your Customers12. Bringing the Customer to the Product13. Listen to What They Tell You14. The Bottom Line15. Evaluating an Enterprise16. Conclusion17. Resources—Where to go for helpTobacco Communities Reinvestment FundRAFI-USA Cost-Share Grant Program for North Carolina Farmers
1a transition to what?The Farmer’s Guide to Development of New Farm EnterprisesNorth Carolina was built on income from tobacco and other commodity crops. But for North Carolina’s modest-scale, family farmers and ruralcommunities, these crops are no longer paying the bills. Boarded up warehouses, neglected business districts, and farmers who must leavethe farm to pay the bills are symptoms of how changes in the tobacco industry have affected our farms and rural communities.In 1997, the average North Carolina flue-cured tobacco grower raised about27 acres of tobacco. While actual profitability varied from farm to farm andfrom season to season, it was well accepted that a flue-cured tobacco growerwho owned his quota could expect to net about $1,000 per acre under the oldfederal tobacco program. That is around $27,000 per year of net income on avery small piece of land.Most other agricultural commodities do not pay anywhere near $1,000 peracre profit. That is why the loss of tobacco as an income opportunity formost North Carolina farmers has been of such significance to the state’s farmeconomy. As per acre profitability for tobacco has declined and productionhas consolidated, North Carolina farmers either have to farm a lot more landto make the same amount of money or earn more per acre than other agricul-tural commodities will pay.North Carolina farmers face volatile weather, high fuel costs, fierce globalcompetition, dramatically increased fertilizer prices, development pressure,high land costs, and labor shortages. The risks associated with farming haveincreased proportionate to the costs. It is in this environment that farmers arefaced with making a change.Land is expensive. Opportunities to expand production onto larger acreage are difficult to obtain. However, opportunities abound to make moremoney per acre for crops through innovative production, processing, and marketing strategies. North Carolina farms are in transition. The ques-tion for many is, “A transition to what?”0 200 400 600 800 1000 1200Corn, Coastal PlainCotton, strip tillPeanutsSoybeansWheat, conventionalTobacco (1997)Dollars per acre (2008)Source: www.ag-econ.ncsu.edu/extension/agbudgets.htmlProfitability per acre ofcommon NC commodities
A bushel of corn weighs 56 pounds,according to James Worley ofSwamp Fox Mill. Like generationsof his family before him, Worleygrows corn and other crops on hisfarm near Cerro Gordo in ColumbusCounty. By far the most commonmethod of marketing corn is tosell the corn into the commoditymarket through a broker or thelocal grain elevator. Corn from onefarm joins corn from neighboringfarms and neighboring regions, andfrom around the world in a hugeanonymous pool of commodity corn.Once the corn is in the pool there isvirtually no way to link it back to thefarm where it was grown. This corneventually finds its way into the ani-mal feed supply and processed foodproducts that we buy in the grocerystore. Worley has found a differentway to market his crop.Profit from CornmealInstead of selling the corn grown onhis farm on the commodity market,Worley uses an old stone mill andan 1880’s era grits sorter to mill hiscorn into cornmeal and grits. He gets$3 for a five-pound bag of cornmealand $2 for a two-pound bag of grits.At the time that Worley began mill-ing, corn prices were around $2 perbushel. Even in a market environ-ment of high commodity corn prices,the $40 per bushel he now gets forhis corn is significantly better thanthe going rate. In fact, the differencebetween what Worley gets for his 56pounds of milled corn and what hegets for the same 56 pounds on thecommodity market is the differencebetween profitability and going inthe hole.$40 per BushelThere is no doubt that it takes moreeffort to sell corn this way. Worleyputs a lot of time into processingand packaging the corn. It takesabout six hours to grind 500 poundsof product (or roughly an acre’sworth of corn). To ensure foodsafety and cleanliness, the mill andsorter are cleaned before every use.That adds another two hours; plusadditional expenses for bags and la-bels. Still, the $40 per bushel beatsthe commodity price every time.Holiday Season PurchasesWorley began milling corn in 2003.While it took a few trials to get itright, Worley is now an expert inthe milling of cornmeal and grits. Itis important to get the mill settingsright, so that he produces the rightproportions of fine particles (cornmeal) and coarse particles (grits).Earning more for farm crops—James WorleyGrits and Cornmeal—Columbus CountyMoisture content of the raw cornis also critical. The milling processwill not work if the corn is too wetor too dry. “Good cornmeal shouldstick together like a mud pie,” saysWorley. Even growing the corn re-quired some adjustments in order toensure that the final product meetsstandards for human consumption.After harvest, Worley puts his corninto a humidity controlled grainbin, so that the corn can dry a little.Most of the milling is done afterharvest in September and beforeChristmas. Many of his customersenjoy purchasing the product forChristmas presents, so he stocks upfor the holiday season.Bottom LineWorley gets more satisfaction fromthe connection to the customer andthe fact that people enjoy his prod-uct than from selling his corn in ananonymous commodity market. Hecan get a better price for a productthat he, his family, and his neighborscan eat. Of course, the real benefit isto the bottom line. Commodity cornproduction cannot keep a small-scale North Carolina farmer in busi-ness, but the higher returns fromcornmeal and grits just might.2
Due DiligenceFarm entrepreneurs must answera few basic questions for themselvesprior to embarking on a new enterprise:1. What are the opportunities andhow does my farm fit?2. How do I produce somethingthat meets the market demands?3. How do I let consumers knowabout my product?4. Will I make money?“Get big or get out.” The traditional theory is that to compete, farmers must distribute fixed costsover a large number of acres. To survive on tight margins, farmers must grow more—a vicious cyclewhere the lower the price, the more a farmer must sell. Farm expansion is a survival strategy that hasworked for some farmers in the competitive world of commodity agriculture. But the expansion ofone farm almost always occurs at the expense of another. North Carolina farmland is too scarce andtoo expensive to support expansion strategies for many farmers. The era when modest-scale opera-tions could survive by growing more of the same crops in the same way as their neighbors is gone.There is no recipe for success in non-traditional, high-margin farm enterprises. Unlike the past, whenenterprise budgets and production sheets often provided all the information a farmer needed tobe successful, most new innovations and ideas must be researched, evaluated, and tested individu-ally. Traditional agricultural service providers can provide critical information to get an enterprisestarted. However, data may not be available to completely evaluate a new market opportunity. Dueto the nature of the enterprises that show potential for success today, farmers must do their own duediligence to determine if an idea will work.The marketplace rewards for innovation can be great. However, the more unusual the idea, the morework it will take to gather the information needed to be successful. It is a lot of work to plan andcarry out a new idea. The viability of North Carolina’s small farms depends on farmers being willingto put in that work and adapt to the changing farm economy.Just two ways to make a living?New Opportunities in Farming are Different“Opportunity is missed by most people because it is dressed in overalls andlooks like work.” ~Thomas Edison3
In January of 2004, Alan Souther of Rocking SFarms approached RAFI about a new farm enter-prise he had in mind. His idea was to raise certi-fied organic vegetable transplants to sell to neigh-boring farmers who grow organic vegetables.According to USDA organicregulations, certified organicfarmers must use organicallyproduced transplants, but localfarmers were not able to getthese in the quantity or qualitythey needed. Souther realizedthat organic transplants werea market opportunity that wasnot being filled. He received a grant from RAFI in2004 for the project and has gone on to make thebusiness a success.New EnterprisesAt one time, Souther’s Alleghany County farmwas a lot like that of his neighbors. He producedhay, corn, cattle, and burley tobacco. However, inan environment of changing tobacco programsand tight commodity prices, finding other farmincome sources was important. Souther wantedenterprises that would pay enough to support hisfamily on his mountain farm.Souther did not stop with the organic trans-plants. Rocking S Farms has a cow-calf operation,finishes beef on grass, raises lambs, sells hay, andproduces certified organic peppers and cherrytomatoes. Greenhouse lettuce, organic and con-ventional tobacco are also grown on the farm andin 2008, Souther added strawberries. Southeralso raises pumpkins for the conventional marketon land that he is transitioning to organic produc-tion.Souther’s StrategySouther explains his strategy for identifying newopportunities this way, “I look at what everybodyisn’t doing. Once everybody’sdoing it, the market is full.”Souther grows kohlrabi, anunusual vegetable anywhere,but a real novelty in rural Al-leghany County. “People wouldstop their cars along the roadand try to figure out what itwas,” Souther says. So he offerssamples to curious onlookers, and sells the cropthrough an organic vegetable distributor.New opportunities do not just appear out ofnowhere. Souther is very active in his searchfor new farm income ideas. As a part time cropinsurance adjuster Souther learns a lot from thefarmers he serves. He started one of the firststrawberry operations in the county, in partbecause a farmer he worked with mentioned thepotential for profitability. He also keeps up withwhat other farmers are trying by participatingin farm organizations such as local marketingco-ops. Souther responds when local extensionpersonnel or researchers are looking for produc-ers to try a new crop. Souther stays in the loop,so he knows what crops the researchers believehave potential.Persistence Pays OffPersistence pays off. Souther contacts potentialbuyers and keeps in contact. If a potential buyerdoes not have a need for hisproduct right away, there mightbe a need a few years downthe road. The internet is alsoa resource for new ideas andmarkets. For example, whenSouther was scanning the in-ternet to determine the currentmarket price for finished beef,he came across an advertisement looking for beefproducers.What Souther does so well is look beyond thefarm publications and the local diner for newideas. By going outside of the normal farm net-works, Souther gives himself a chance to discovernew opportunities. In the past, it was enough tomimic successful neighbors. However, given thenature of global competition, opportunities thatarise are increasingly different for every regionand every farm. Souther’s strategy is to keeplooking so that he will be there when opportunityknocks.Identifying New Farm Opportunities—Alan SoutherRocking S Farms—Alleghany County“I look at what everybody isn’tdoing,” explains Souther4
doing what you love—Sandra Garner and Genell PridgenRainbow Meadow Farms Pasture Pure Meats—Greene CountyEvery opportunity does not fit every farm. Themost successful enterprises are those thatmatch a personal interest, or a unique skill-set,with a market opportunity and the resourcesto carry out the enterprise. Rainbow MeadowFarms, a seventh-generation farming operationin Greene County, is a diversified livestock oper-ation marketing lamb, chicken, turkey, pork, andbeef directly to consumers and to restaurantsand groceries in the eastern half of the state.Pridgen’s PassionFarmer Sandra Garner laughs when she remem-bers the story of her daughter Genell Pridgen’ssenior trip to England. Pridgen had shownan interest in livestock from the time she wasa child. On the class trip, Pridgen noticed alivestock auction taking place when her tour busdrove into a rural town. When the bus stoppedand the rest of the class was being shuffled to amonument for a history lesson, Pridgen took theopportunity to sneak away to the auction. It washours before the chaperones caught up with her,deep in discussion with the local farmers aboutMatching Skills and ResourcesDiscovering and evaluating new opportunities is a job in itself. Farmers in search of new income sources on the farmmust be willing to dedicate significant time and thought to the process of identifying new enterprises. In a world ofniche markets, it is no longer enough simply to mimic other successful farmers.the merits of the different breeds of cattle.Down the road, when it came time for Pridgento step up and run the family farm, of coursethe opportunities that were most appealinghad to do with livestock. Pridgen converted herparents’ tobacco farm to a pasture-based systemthat allows her animals the opportunity to growand thrive according to their natures, and shewas right on time to take advantage of a bur-geoning demand for healthy, free-range meat.Successful EntrepreneursThe success of Rainbow Meadow Farms hasnot been based on market opportunity alone.Pridgen’s passion for livestock is a critical partof the equation. Passion for an enterprise maynot be on every business planning checklist,but passion makes the whole process easier. Allsuccessful entrepreneurs work long hours, spilla little blood, and shed more than a few tears.Believing in and enjoying the work is just asimportant to making a plan succeed as properlybalanced financials.5
“Nine times out of ten, the first question out of a customer’s mouth is, ‘Isthat this year’s crop?’” Rossie Ward explained on a recent visit to his Colum-bus County pecan operation. Older pecans can get rancid. A fresh productis what customers want. The most fundamental principle of marketing is tohave a product that people want.Freshness, Variety and Customer ServiceRossie and his brother, William, got into the pecan business in 1959 whentheir parents moved to the Columbus County farm where Rossie still resides.As boys, Rossie and William harvested and hand cleaned nuts that their fa-ther sold to people who dropped by. The brothers learned about freshness,variety and customer service, while the extra income defrayed the cost oftheir father’s commute to his shipyard job in Newport News, Virginia.Specialty ProductsThe pecan trees always provided. Over the years, the Wards started takingtheir pecans to a custom sheller and selling from the farm. In 2001, theybought their own shelling and cleaning equipment. Now, they sell fourdifferent pecan products: whole in-shell pecans, cracked pecans, cleanedraw pecans, and, their premium product, cinnamon or honey roasted (withhoney from bees that they keep on the farm).The roasted pecans are a real specialty product. The Wards test out recipesfor roasted nuts on themselves, then hand out samples to customers to getfeedback. If all goes well, they will add the new recipes to their product line.Repeat CustomersThe brothers crack and clean pecans for other growers as well. Their equip-ment does a good job of cleaning the nuts, so they get a lot of repeat custom-ers. Rossie estimates that they crack pecans for more than 200 growers in ayear. As Rossie puts it, “If people like what they get, they keep coming back.”The Pecan Trees Always Provide—Rossie WardWard’s Nuts and Honey—Columbus County“If people likewhat they get,they keepcoming back.”~ Rossie Ward6
Ricky and Janice Smith own and operate Moon-creek Farm, an organic produce operationin Caswell County. Initially, the produce wasintended as a supplement to his tobacco and rowcrop operation. However, as tobacco became lessprofitable, the vegetables became a bigger partof his income. When Smith quit growing tobacco,he began looking for ways to add value to hisvegetable operation.The Smiths had always canned foods for them-selves. “I knew we could put a good product ina jar,” said Ricky. He also knew that he could sellthe product to his customers at the Piedmont-Triad Farmers’ Market.Ricky Loves to CookThe Smiths initially believed they would be ableto process in their home kitchen. After a con-versation with the North Carolina Departmentof Agriculture (NCDA), they quickly realized thattheir home kitchen would not work for what theywanted to do. In order to meet food safety stan-dards, they would need a separate facility. Rickyloves to cook and the idea of having a commercialkitchen on the farm appealed to him. However,building a new facility also meant a considerableexpense.On-farm processing—Ricky and Janice SmithMooncreek Farm—Caswell CountyThe Smiths did their research. Janice Smith tookthe food safety course required of North Carolinaprocessors who sell acidified foods like tomatosauces, salsas and pickles. The Smiths got adesign for a processing facility from a NCDA de-signer. They went to the local building inspectorto inquire about building codes, and they beganpricing commercial kitchen equipment.Acidified Food ProcessingThe Smiths broke ground on their new facility in2005, with a cost share grant from RAFI’s TobaccoCommunities Reinvestment Fund. Even withyears of research under their belts, they still hadsome surprises. The largest unexpected expensewas that their existing farm septic system wasinadequate to handle the waste water from theprocessing facility. But there were other smallersurprises, too. It took longer than the Smithsanticipated to navigate the various bureaucraciesthat regulate food processing and sales. All ofthe agencies, from the local building inspector tothe Food and Drug Administration, have specificsafety concerns that must be incorporated in thebuilding structure and the product manufactur-ing process. Sometimes it would take weeks ormonths of phone calls before the Smiths wereclear on how to proceed.Sometimes changing how we do things means working with a whole new set of production and regulationchallenges, as Ricky and Janice Smith discovered when they set out to do value-added processing on their farm.7
Classroom topicsComplete amandatory classoffered by NCSUFood Science DeptAcidified FoodsProcessing andPackagingGood ManufacturingPracticesProcessing FormulationsPreventing SpoilageContainers & Labeling,Record Keeping & FDARegistration RequirementsAll facilities must be inspected and approved by: Health Department - for water supply andwaste disposal system. Building Inspector - for new construction orremodeling. NCDA - Final approval- NCDA is yourregulating authority.Read NCDA Food &Drug Protection RegulationsCFR Title 21 Part 110 and Part 114Researchfacility coderequirements inyour communityFinal step:Develop a sanitation plan& product recall plan for your facilityToday, the Smiths produce a variety of safe, healthy products with ingredients thatare grown on their farm. Because they only use organic ingredients and theirown high-quality produce, pricing has to be a little different than what you mightfind on the grocery store shelf. They keep careful records and their pricing isbased on their expenses. “We try to ignore our competitors’ prices,” Ricky said.“We can only control our costs so much.” So far their strategy has worked. Theirproducts are selling well.Taste Makes a DifferenceOf course, the strategy of ignoring competitors’ prices only works if your productis seen as being unique by the consumer. The fact that Smith uses all local andorganic ingredients in his products appeals to some of his customers. Very fewproducers of processed foods can make that claim. However, Smith believes thattaste is the real reason he can charge more. The fresh, locally grown ingredientstaste better in the products that Smith makes.A recent sampling of products from the Smith’s kitchen included pepper jelly,salsa, canned tomatoes, pickled jalapeno peppers, and cocktail sauce. The Smithsselect recipes that use ingredients that can be grown on their farm and that canbe safely produced.With new products, the Smiths start out with small batches. This allows themto develop their process and improve their efficiency, as well as giving them achance to test market the product. They wait for repeat customers for a productbefore accepting a new product into their regular product line.Extended Production SeasonHaving the processing kitchen has allowed the Smiths to expand their vegetableproduction in scale and variety. It has also allowed them to extend their produc-tion season. The kitchen provides an outlet for late fall crops and winter green-house production when farmers market sales are not as brisk.Selling processed goods is different from selling raw vegetables. The risk ofharmful contamination increases. Ricky cautions that it is important to followcertain procedures. “We follow the scheduled process. We make sure everythinggets processed at 180 degrees and that the pH is below 4.6.”It took the Smiths almost two years to get it there, but now the kitchen is servingits purpose. Ricky likes the work, and the increased income has created an op-portunity for their son to work on the farm.Flowchart for Building an AcidifiedFood Processing Facility8
Marketing is everything a farmer does, fromvariety selection and planting, to the actualexchange of money for a finished product.According to Dr. John O’Sullivan, a marketingspecialist with North Carolina A&T State Uni-versity, “The key to successful market planningis making sure that you have covered the fourP’s of marketing (product, placement, pricingand promotion).”Cut Out the MiddlemenIn commodity agriculture, emphasis is placedon product and price. If corn meets a minimumset of quality standards and is priced appro-priately for the market, then it sells. If it doesnot meet those standards or the price is toohigh, then the corn does not sell. Commod-ity producers have not had to think as muchabout promoting their products to potentialconsumers or distributing their products toSELLING YOUR PRODUCTS/MARKETINGAfter identifying a market opportunity, the next step is figuring out how to get a product to the actual consumerFour P’s of MarketingProduct:The characteristics of what yousellPlacement:How the product gets to the con-sumer through distribution anddisplayPricing:How much the product costsPromotion:How customers are told aboutthe product9places where consumers will find them. Thoseactivities have largely been accomplished bymiddlemen.New opportunities in farming are generallynot served by such middlemen, requiring thatfarmers now take on the additional burdenof promoting and distributing their products.While direct-to-consumer and more direct-wholesale sales earn the farmer the mostmoney, they are also the most time consum-ing method of selling products and requirethe farmer to be a salesperson in addition to agrower.The strategies for getting products to consum-ers vary. North Carolina farmers have found adiversity of ways to match their products withconsumers, so that the farmer can earn moreand make a living on the farm.
One marketing strategy is to create a brand identity.A soybean grown in North Carolina is the same tothe global market as a soybean grown in Missouri, orCanada, or Brazil. The same is true with watermelons.Producers grow many of the same varieties of water-melons across different regions. In the grocery store,consumers probably can’t tell the difference betweena melon grown in Texas, Georgia, or North Carolina.Unless, that is, the watermelon was grown in the BogueSound region of eastern North Carolina.BrandingThe members of the Bogue Sound Watermelon GrowersAssociation are farmers from the three counties thatmake up the Bogue Sound drainage, an area renownedfor juicy, flavorful watermelons.For generations, area farmers havebeen producing this sweet sum-mer fruit. For the first half of the20th century, Bogue Sound farm-ers shipped watermelons by train and boats to destina-tions all over the east coast. Billie Guthrie of GuthrieFarms remembers four or five tractor trailer loads ata time being loaded from the area in the 1940’s and50’s. So when area farmers were forced out of tobaccoin the early part of this century, watermelons were alogical choice as an alternative. The challenge for thewatermelon growers was getting their product recog-nized in a market already saturated by watermelonsfrom all over the world, and getting the price necessaryto replace the high returns from tobacco. The BogueSound Watermelon Growers decided to use the histori-cal reputation of their area for watermelons to createa brand identity for the watermelons and to capture ashare of the market.Working CollaborativelyCreating a brand identity and getting products on theshelf is not an easy task, and it costs money. The farm-ers in the Bogue Sound drainage could see a definiteadvantage in working collaboratively to share the costof marketing their melons. The growers formed a co-op,designed a logo, and began selling their melons underthe Bogue Sound Watermelons name. The local coop-erative extension office and economic developmentcenter played a big role in moving the project forward.In 2006, the state of North Carolina issued a trademarkfor the name, Bogue Sound Watermelons. That sameyear, the group received a $30,000 marketing grantfrom RAFI that was critical to enabling the group to testmarket their product.Consumer AwarenessIn the supermarket, produce items are usually com-pletely anonymous. Fruit and vegetable labeling is mini-mal and generally does not tell the consumer anythingabout who grew the product or where. Consumersgenerally have no way of differentiating between itemsgrown on different farms or different regions or evendifferent countries. By labeling their melons, the BogueSound Watermelon Growers are taking advantage ofincreased consumer awareness of food origins, foodsafety concerns, and a reputation for quality to promotetheir product.Differentiating Agricultural ProductsBogue Sound Watermelons—Carteret, Jones, and Onslow Counties10500% Increasein SalesThe marketing effort is work-ing. In 2006, the growersshipped about 19 tractor trail-er loads of Bogue Sound Wa-termelons. In 2007, the co-op shipped 44 tractor trailerloads. By 2008, the co-op hadorders for 100 tractor trailerloads of Bogue Sound Wa-termelons, a 500% increase insales in just three years. TheBogue Sound label gives con-sumers a choice, and they arechoosing Bogue Sound Wa-termelons.
diately opened up his businessto an additional market segment.Livingston is an entrepreneur andhe knows that he needs to make aprofit. He bases his prices on whatmakes economic sense for his busi-ness and the market competition.Livingston also gets creative to helpcustomers afford his product. Hedoes specialty pricing for custom-ers who pre-order products.Dannie Livingston’s custom-ers come from all over and fromall walks of life to his farm storelocated just off of Interstate 95 inrural Robeson County. Livingstonis active in the community. Cus-tomers find out about him fromchurch groups, civic groups, andword-of-mouth.Know Your CustomersLivingston’s goal is to make every-one who comes into the store feelcomfortable. He tries to becomefamiliar with his customer’s indi-vidual needs. He says, “They knowwe appreciate their business.”Livingston also tries to keep pricesreasonable. In 2004, he added anEBT card reader so that he couldaccept food stamps. This imme-Know Your Customers—Dannie LivingstonTomboy’s Meats and Vegetables—Robeson County“The high-margin enterprises that have the greatest potential to provide a livelihood on the types of farms thatwe have in North Carolina are high-margin either because they are new and not yet widely adopted or becausethe enterprise is insulated in some way from global competition.”Farmer and Lender Strategy Report, RAFI-USA 200611The Hogs Eat WellThe draw that gets people into thestore is Dannie Livingston’s sig-nature product, Tomboy’s BlessedSausage, which is made from hogsthat Livingston raises on his farm.The secret to the popularity of thesausage? “It is what the hogs eat,”Livingston reports. Start with agood diet for the hogs and you endup with good sausage. Livingstonalso carries a number of specialtycuts that consumers cannot findin the grocery store, because as heputs it, “The customers will alwaysdictate what we sell.”In 2004, Livingston addedan EBT card reader sothat he could accept foodstamps.
Thomas and Tina Hall began growingstrawberries on their Caswell Countyfarm in 1998. They had studied straw-berry production for two years andwere ready to make the rather sizableinvestment required to start a straw-berry operation. They fixed up an oldtobacco barn to use as a market stand,added irrigation capacity and coldstorage, planted some strawberriesand were ready for business.Road Signs“The very first thing is I put that bigsign up by the road,” Thomas Hall ex-plains. “We sold eggs off the farm andI talked to those customers, too.” TheHalls also spread the word throughtheir community. Newspaper adshelped, but the real key to bringingpeople in was putting up a series ofreal estate sized road signs. The Hallsdistributed those signs throughout thecounty on busy roads where peoplewould see them.“To keep customers coming back,nothing works better than sweet ber-ries,” Thomas explains. Making it con-venient to pick from a clean, attractivestrawberry patch also helps. In thebeginning, the Halls sent each custom-er home with a business card stapledto the box, so that when customers ranBringing the Customer to the Product—Thomas and Tina HallHall’s Berry Farm—Caswell Countyout of berries they would know whereto call.BlackberriesA few years ago, the Halls started anew enterprise. They added blackber-ries that they produced throughoutthe summer. The blackberries startedproducing in 2007, and the 2008 sea-son began with a two page waiting listof customers who wanted the prod-uct. Tina explains that when they getblackberries, they immediately e-mailpeople on the waiting list. In the Halls’case, the loyal strawberry customerbase that they built up over the yearswas the perfect target market forblackberries.The Halls’ business is promotedlargely by word-of-mouth. Customerscome back year after year, and newcustomers come from farther away.Loyal, repeat customers are importantbecause the Halls live in a rural com-munity. This makes it unrealistic tocontinuously attract large numbers ofnew clients.The Right Place“If you build it, they will come,” somesay. That is true…if you build it in theright place. Adding the blackberryoperation to an existing, successfulstrawberry operation certainly mademore sense than starting a new enter-prise from scratch.There is no magic formula to deter-mine the right location for a newbusiness. It takes some commonsense reckoning to evaluate a loca-tion for marketing an agriculturalproduct. How many people will seethe product? Do you need a steadysupply of new customers, or are a fewloyal customers sufficient? How manypeople are within driving distance ofthe location? There are a lot of factorsto consider, but putting the right busi-ness in the right place can make a bigdifference in your profit.A business cannot be successful unlesscustomers know about it. Getting yourmessage across to consumers is a chal-lenge, yet some farmers, like the Halls,have managed to do it.12
Show up to the Durham Farmers’ Market earlyon any given Saturday in the summer and you arelikely to see a line weaving through the crowd andending at Doreathy Booth’s market stand. Booth’sbaked goods have become a staple of Saturdaymornings for regular market customers, and youhave to show up early in order to get the bestselection of her offerings. Loaves of bread, sweetand savory empanadas, raisins, and individualserving size cakes are all proudly featured atBooth’s market stand.Trial and ErrorBooth learned to bake by trial and error—a lot ofboth. When faced with the prospect of earning aliving solely from her Granville County farm, Boothknew that baking had to be part of the equation.She joined the Durham Farmers’ Market in 2006and her popularity was immediate. There wereother bakers at the market, but Booth’s productsListen to What They Tell You—Doreathy BoothCreating Value-added Products—Granville CountyBooth’s next offering. She listens to customers tofind out what products to work on next.That’s not to say that figuring out what custom-ers want is easy. In deciding what to grow onthe farm Booth considers input costs, time, andwhat she can put in her baked goods or otherwisepreserve. Sometimes what makes sense from herperspective on the tractor doesn’t always fly at thefarmer’s market. “Large amounts or sizes of farmproducts don’t always work in farmer’s markets.Smaller sizes in baked goods and foods seemto sell better” she says. “But of course, do yourresearch. I research everything before puttingmoney into a venture. I do my homework. Then it’sabout being brave and taking a chance.” When shedecides something is going to work, she investsin the equipment to make her operation efficient.“Don’t be afraid to invest in commercial-scaleequipment,” she advises.In 2007, Booth received a demonstration awardfrom RAFI to add a dehydrator to her diversifiedfarming operation. She had planted several acresof table grapes, becoming the first table grape pro-ducer in the Durham Market, and she planned touse the dehydrator to make raisins and other farmproducts to use in her baked goods. The dehydra-tor has helped Booth capture the value of excessfarm produce and extend her marketing season.Weekly NewsletterBooth is a constant promoter of her products. Shekeeps customers informed via a weekly newslet-ter and email. She also has a bulletin board thatshe displays at the farmer’s market, informingpeople about what she’s doing, and giving infor-mation about future products. “I try to keep aheadof things and stay current. I want to make surepeople know to expect something new and innova-tive from me at any time.”were a real hit with the flavor savvy clientele.The demand by consumers for direct-from-the-farmer products has skyrocketed. Nationwide, thenumber of farmer’s markets increased by 167%from 1994 to 2008 (USDA Ag Marketing Service,www.ams.usda.gov/farmersmarkets/facts).Consumers want more information about quality,origins, and authenticity of their food. Concernsabout food safety have created an opportunity forlocal farmers to meet the needs of consumers witha safe and secure food supply.Booth Pays AttentionBooth’s success is no accident. A combination ofsimple, professional packaging and display andgreat product draws customers in and keeps them.She pays attention to what her customers want.Booth’s customers are excited by new products.They are always interested in what is growing onthe farm and how that is going to work its way into13
Will the enterprise make money? It’s an obvious question, but that does not makethe answer obvious. A good market opportunity, well researched production plan,and strong marketing strategy are steps in the right direction but do not guaranteeprofitability. Putting pen to paper and actually calculating how income and ex-penses balance is the only way to know if a potential business idea will pay whatyou need to make a living. The numbers do not take care of themselves. Entrepre-neurs must devote a lot of attention before, during and after embarking on a newenterprise.Farms are Complicated BusinessesCrop enterprise budgets adequately addressed the question of profitability formost commodity crops in the past, when all a farmer might have to do was adjust abudget for current input prices. Those budgets aggregate costs from a large num-ber of producers to arrive at average expense data – but they exist only for com-mon enterprise. The nature of farm enterprises that provide returns adequate tosupport small-acreage producers is that they are uncommon, and these resist beinglumped together to determine average costs.The burden falls to the farm entrepreneur to identify costs and project revenues onan individual case basis. The entrepreneur must determine how much capital isnecessary to cover start-up costs and operational expenses. Farms are complicatedbusinesses, and it can take sophisticated analysis to evaluate how they are doing. Itis often wise to seek assistance in understanding the monetary ebbs and flows ofyour business.THE BOTTOM LINE14There is a tendency among farmers who operate a diverse set of enterprises on their farms to lump themall together instead of evaluating them one-by-one.
more money than goes out. The most importantquestion a farmer needs to answer for any cropis, “How much do I need to make?” It may seema simple question, but it is not always simple toanswer—especially in a diversified operation.Farmers are notorious for “shoe box” accountingsystems and for not counting their own labor asa cost. But knowing how much to charge for aspecific product requires knowing all of the costsassociated with the product. Keeping track ofall of the various input costs in farming can getcomplicated.When the Twin Rivers Farm Cooperative startedevaluating their market opportunities, the firstthing they needed was to get their record keepingin order so they could accurately gauge expenses.They hired a certified public accountant to assistthem with setting up expense tracking systemsthat were appropriate to each individual mem-ber’s farm. The Twin Rivers Farm Cooperativehelped all of its members take advantage of therecord keeping assistance through workshopsand individual consultations.Ann Wright, proprietor with her husband ofHappy Land Farms, is a part of the Twin RiversFarm Cooperative from Bladen County and shetook part in the record keeping exercises. HappyLand Farm is a very diverse operation. The farmproduces pastured pork, beef, and chicken andgrows and sells strawberries, squash, cabbage,onions, zucchini, okra, butterbeans and peas. Ad-ditionally, the Wrights and their children operatea daycare center and a trucking business.The Twin Rivers Farm Cooperative formed in2002 primarily to assist members in reducingcosts through shared equipment use, but also tohelp members identify new markets, integrateoperations to increase efficiency, and educatemembers about programs and opportunities.The co-op serves farmers from Bladen, Duplin,Pender, Sampson and Wayne counties and hasbeen successful in helping the member farmersmeet their goals. The co-op collaboratively ownsa manure spreader and a no-till drill. Cooperativemarketing efforts have enabled producers to getspecialty products into new markets. The co-opalso has monthly meetings that provide educa-tion about USDA farm programs, available grants,farming practices, marketing opportunities, andfarm financial health.Shoe Box AccountingSuccess in business is as simple as taking inEvaluating an Enterprise—Ann WrightTwin Rivers Farm Cooperative—Southeastern North CarolinaAfter working with the CPA, the Wrights are ableto separate income and expenses for each of theirenterprises. Ann Wright explains that they alwaysget a receipt and that expenses are categorizedand recorded as theycome in—no morereceipts languishingin a shoe box until theend of the year. TheWrights evaluate theirexpense informationon a monthly basis tosee if they are where they thought they would be.If not, the information they get from record keep-ing can help them to make corrections. Has re-cord keeping made the Wrights more profitable?Not by itself, but, “At least now we know how eachenterprise is doing,” Wright explains.Changes in the Market PlaceGood record keeping prepared the Wrights andother co-op members for upcoming changes inthe marketplace. The Wrights, like many TwinRivers members, were selling hogs to NimanRanch. By tracking each enterprise individually,the co-op members were able to determine actualcosts and income from their hog operations.When Niman Ranch stopped buying, Twin Riversmembers were in a strong position to negotiatewith other buyers, because they knew exactlywhat was needed to keep their operations afloat.Many members of the Twin Rivers Farm Coopera-tive were able to stay in business because of thework they had done in advance.15
CONCLUSIONThe successful farmers described here all havethree things in common: they took the time tomatch market opportunities with their skillsand resources, determined how, why and wherecustomers would buy their products, and did themath to figure out where the money comes from.In short, these successful farmers planned forsuccess.Twenty MonthsSuccessful farming ventures do not happenspontaneously. It takes a lot of hard work andplanning to raise the seed of an idea into a profit-able fruit. In a survey of North Carolina tobaccofarmers who have attempted on-farm incomediversification initiatives, farmers told RAFI thatit takes an average of 20 months of planning fromthe time an idea begins to form until the begin-ning of implementation. That is 20 months ofresearching, investigating, evaluating, and think-“Good fortune is what happens when opportunity meets planning.”~ Thomas Edisoning. Those 20 months are used to determine howmuch a new enterprise is going to cost, whereto get the inputs, how to sell the product, andwhat the bottom line will be. Far from being idletime, the planning phase of any project can be themost intensive period. For many enterprises thequality of work that goes into those 20 months ofplanning is the difference between success andfailure. Sixty percent of new businesses in theU.S. fail (NC REAL). When entrepreneurs takethe time to do a formal planning process, the oddschange dramatically. Sixty percent of businessesthat complete a business plan succeed. There areno guarantees, but a well researched plan is a stepin the right direction towards success.FundingRAFI believes that farm entrepreneurs should besupported in their efforts to transition the NorthCarolina farm economy. RAFI’s Tobacco Com-munities Reinvestment Fund provides assistanceto farm entrepreneurs that helps them make thatinitial investment. By providing grant funds forinnovative farm enterprises, RAFI is sharing therisk of developing new ideas with farmers. Fund-ing from the North Carolina Tobacco Trust FundCommission allows RAFI to support the work ofinnovative farmers across North Carolina who areleading the way to more viable and sustainablefarming operations.North Carolina farmers face huge challenges inmaking their businesses successful. Tight mar-gins for commodity production, high input prices,uncooperative weather, consolidation…. decidingto make a transition can be tough. The exampleof other successful farmers can make the decisioneasier. Spending the time to find and evaluate theright opportunity for your farm is a worthwhileinvestment.16
Where to Go for HelpAs governmental farm supports decrease, farm en-terprises are relying more and more on the sameinfrastructure that supports other small businesses.However, the world of small business assistanceand training is still adapting to the changing needsof farmers and small agri-business professionals.While there is no single place you can go to for allyour assistance needs, there are many resourcesavailable to a determined farm entrepreneur. Re-member, persistence is the key to getting the re-sources you need to be successful!resources:Cooperative Extension Early in your planning,check with your local Cooperative Extensionoffice. Sometimes Cooperative Extension of-fers extraordinarily valuable training opportunities.Your local agents may also be familiar with otherlocal resources that may be of use to you. Everycounty is served by a Cooperative Extension office.North Carolina Department of Agricultureand Consumer Services (NCDA) may beable to help you with new enterprise de-velopment in a number of ways. They may be ableto provide information and consultation on agricul-tural production, processing (including regulatoryrequirements), and marketing. NCDA is a largeorganization with responsibilities spread out overa number of different entities. Finding the personwho can answer your specific question requirespersistence.NC Department of Agriculture &Consumer Services1001 Mail Service CenterRaleigh, NC 27699-1001919-733-7125Information is available online at www.ncagr.com.Small Business Administration (SBA) is alsoa good source for information on businessplanning. It provides interactive tools andfree on-line courses to help you learn small busi-ness planning. SBA may also refer you to other ser-vice providers who can better assist you. In NorthCarolina, SBA works with three groups (describedbelow): SBTDC, SCORE, and SBCN at the state’scommunity colleges.Contact: North Carolina District Office6302 Fairview Road, Suite 300Charlotte, NC 28210-2227704-344-6563Information is available online at www.sba.gov.The North Carolina Small Business and Tech-nology Development Center (SBTDC) is de-signed for small business owners and thoseinterested in starting a small business. SBTDC’sgoal is to help entrepreneurs meet the challengesof the modern business environment, successfullymanage fast-paced changes, and plan for the fu-ture of their business. SBTDC provides manage-ment counseling and educational services through17 offices located at colleges or universities acrossNC. All services are confidential and most are freeof charge.Contact: Small Business and Technology Develop-ment Center5 West Hargett Street, Suite 600Raleigh, NC 27601-1348919-715-7272800-258-0862 (in North Carolina only)E-mail questions to: firstname.lastname@example.orgInformation is available online at www.sbtdc.org.Service Corps of Retired Executives (SCORE)is a national nonprofit volunteer associa-tion of skilled and talented retirees. Volun-teers share their wisdom and lessons learned inbusiness. In this way they encourage the forma-tion, growth, and success of small business. Thenational organization’s website, www.score.org,17
has useful information and you can locate your lo-cal SCORE chapter through the following weblink:www.sba.gov/gopher/Local-Information/Service-Corps-Of-Retired-Executives/sconc.txtSmall Business Center Network (SBCN) —The objective of the SBCN is to increase thesuccess rate and the number of viable smallbusinesses in North Carolina by providing high qual-ity, readily accessible assistance to prospective andexisting small business owners and their employ-ees. Each Small Business Center is a communitybased provider of education and training, counsel-ing, information and referral. There is a SBCN officelocated at all 58 of the state’s community colleges.Services include business seminars and workshops;free confidential business counseling and access tovital resources and information. They can put youin touch with business and community leaders, aswell as local, state and federal agencies who sharethe goal of making your business a success. Youcan find more information at www.sbcn.nc.gov.Creating Business Opportunities (CBO) is apartnership between North Carolina StateUniversity, the North Carolina Departmentof Agriculture and Consumer Services, the NorthCarolina Farm Bureau, and the Rural Center. Thepartnership is to support the development of an ar-ray of agricultural business opportunities in NorthCarolina. The project has developed a website withlinks to a variety of useful information sources onthe topic of business development at www.ces.ncsu.edu/cbo.Economic Development Commissions (EDC)are state, regional, and local organizationsthat attempt to stimulate business growthand development through business recruitmentand technical assistance. EDC staff members aregenerally knowledgeable about many aspects ofbusiness development including business plandevelopment and financing. Many farmers havefound their local EDC staff to be helpful in projectdevelopment. The best place to look for your localEDC is in the phone book or through your chamberof commerce. Some of North Carolina’s EDCs arelisted on this website: www.ecodevdirectory.com/north_carolina.htm.North Carolina Rural Entrepreneurshipthrough Action Learning (NC REAL) offerstraining and other assistance to small busi-nesses, including farmers. NC REAL offers businesseducational modules through its internet website,www.ncreal.org, or through participating commu-nity colleges. These self-guided audio-visual train-ing modules require a small fee.The North Carolina Farm Transition Network(NCFTN) provides information about farmasset and business transition from one oper-ator to the next. NCFTN assists farmers with plan-ning for the future that eases the hardship involvedwith changes in personnel.Contact: NC Farm Transition NetworkP.O. Box 443Hillsborough, NC email@example.comThe North Carolina Rural Economic Develop-ment Center (Rural Center) has a searchableonline database that is useful in gatheringdemographic data for market analysis. Addition-ally, the Rural Center offers a micro-enterprise loanfund that is specifically intended to assist NorthCarolina entrepreneurs to overcome capital accessbarriers.Contact: NC Rural Economic Development Center4021 Carya DriveRaleigh, NC firstname.lastname@example.orgBusiness Resources Directory lists businessassistance available in North Carolina’s 100counties; produced by The Rural Center. Itprovides entrepreneurs with current informationon resources for financial and technical assistance.Available in hard copy (232 pages) or online atwww.ncruralcenter.orgDirectory website: www.ncruralcenter.org/entre-preneurship/brd.asp)North Carolina Institute of Minority Eco-nomic Development is a statewide non-profit organization representing the inter-est of underdeveloped and underutilized sectorsof the state’s economy. The Institute’s businessdevelopment resources work to assist minority en-trepreneurs to access affordable capital, expandedmarket opportunities and stable internal manage-ment and control systems. Through direct, one-on-one technical assistance and small group educationand training, businesses are positioned for growthand expansion.Contact: North Carolina Institute of MinorityEconomic Development114 W. Parrish St, Durham, NC email@example.comResources, continued
Farm Service Agency (FSA): While com-monly known as the “lender of last resort,”FSA is also a source of many opportunities.Because of its work in overseeing loan programs,disaster assistance, conservation programs, pricesupports and commodities programs, FSA can bea great help to you in shaping your farm enter-prise.Contact: United States Department of AgricultureNorth Carolina State FSA Office4407 Bland Road, Suite 175Raleigh, NC 27609(919) 875 - 4800www.fsa.usda.govTheNorthCarolinaDepartmentofCommerceoffers consultations to new businesses, iden-tifying all the licenses, permits, regulations,and/or other approvals required for the plannedbusiness activity. Farm enterprises which aspire todo on-farm processing or other value-added activi-ties may require such assistance. Meat processing,dairy, and agri-tourism activities are examples ofbusinesses that require such assistance.Contact: NC Department of Commerce4301 Mail Service CenterRaleigh, NC 27699-4301919-715-4151www.nccommerce.com/servicenter/blioAdditional resources:Building a Sustainable Business: A Guide toDeveloping a Business Plan for Farms andRural Businesses.” The single best sourcewe’ve found to guide you through writing a busi-ness plan for your farm is this highly detailed guidewhich takes you through all the steps in the pro-cess, in workbook fashion. It is available in print-edition or downloadable through the USDA’s SAREwebsite: www.sare.org/publications/business.htmUniversity of Illinois offers free tools tohelp you make better decisions with user-friendly computer programs. FAST (FarmAnalysis Solution Tools) are very easy to use, andwould be helpful to North Carolina farmers in fi-nancial statement preparation, cash flow budget-ing, assessing the financial performance of a farmoperation, understanding various loan decisionsand products, and helping with decisions to man-age risk exposure.Go to www.farmdoc.uiuc.edu and click on FASTTools. There is also good information at the “Fi-nance” link.Greater Hickory Metro Business Develop-ment Network. An informative websiteput together by an affiliation of businessservice providers. (www.growyourownbiz.com)“If opportunity doesn’t knock, build a door”~ Milton Berle19Your local colleges and universities. A fewenterprising farmers have received valuableassistance with business planning, marketresearch and brand development, by contactingtheir local schools of business, marketing, or otheracademic departments at colleges and universitiesin their area. Students often need hands-on experi-ence in these topics, and faculty often have talentsand expertise to share.Rural Advancement Foundation Internation-al-USA (RAFI-USA) has two programs ofspecial interest to farmers developing newenterprises. The Tobacco Communities Reinvest-ment Fund provides cost-share grants to farmersto assist them to develop new income generatingenterprises on the farm. Also, the Farm Sustain-ability Program offers financial counseling servicesto farmers to increase the economic sustainabilityof farm families in financial and disaster related cri-sis.Contact: Rural Advancement Foundation Interna-tional-USA (RAFI-USA)P.O. Box 640, Pittsboro, NC 27312919-542-1396www.rafiusa.org.
ACKNOWLEDGEMENTSThe project was funded by the North Carolina Tobacco Trust Fund Commission.RAFI-USA would like to thank the North Carolina Tobacco Trust Fund Commission for its continuingsupport of North Carolina’s farmers. Any opinion, finding, conclusion, or recommendation expressedin this publication is that of RAFI-USA and does not necessarily reflect the view or policies of theNorth Carolina Tobacco Trust Fund Commission.AUTHORJason Roehrig, RAFI-USA, Program DirectorCONTRIBUTORSRAFI would like to thank the farmers whose stories are includedin this publication for their time and willingness to share their experiences.EDITORLinda Shaw, RAFI-USA, Executive DirectorPHOTOGRAPHSRAFI-USA StaffPRODUCTIONJacqueline Murphy Miller, Program Assistant_____________________________________________________________________________This publication can be viewed at http://www.rafiusa.org/pubs/puboverview.html
RAFI-USARURAL ADVANCEMENT FOUNDATION INTERNATIONAL-USA The Rural Advancement Foundation International-USA is a nonprofit,non-governmental organization which promotes sustainability, equity anddiversity in agriculture through policy changes, practical assistance, marketopportunities, and access to resources. We trace our roots back to the 1930’sand we continue to address issues in agriculture from the local to the globallevels. RAFI-USA plays a leadership role in responding to major agriculturaltrends and creating a movement of farm, environmental, and consumer groupsto strengthen family farms and rural communities.PO Box 640274 Pittsboro Elementary School RoadPittsboro, NC 27312www.rafiusa.org919-542-1396