So You Want to be a Farmer: an in-depth look at starting a commercially viable produce farm.
SO YOU WANT TO BE A FARMER: an in-depth look at starting a commercially viable produce farm John (Johnny) ParkerFollow Us on Twitter:@backtothefarm@edibleearthfarm A look back at year one of Edible Earth Farm
BEFORE WE BEGIN• Please place mobile devices on vibrate or mute.• Feel free to Tweet or blog this session. Twitter hashtag: #pasa20.• Please hold your questions till the end of the presentation. I have a lot to cover. I allotted time for a Q&A discussion.• Session website:http://edibleearthfarm.com/starting-a-farm.html A look back at year one of Edible Earth Farm
Session Overview This session attempts to look at starting a produce farm from a business perspective The first half of the session is a pictorial journey of year on at Edible Earth Farm The second half we’ll talk about the specifics Beware: Lots of eye candy This session will not broach issues like plant varieties, soil fertility or plant health. That’s not to say these items are not important. Horticulture and farming experience is an important component in starting a farm. Note the discrepancy in session description: we will not be talking about crop selection. Admittedly, this presentation takes advantage of the promotional opportunity I have here today, speaking to you. I’ll indicate where it is not obvious. Important skill as an aspiring farmer: never miss an opportunity to promote your farm, your product or yourself. Not a SPIN farming session
Session Details Who am I What is Edible Earth Farm Year One How we started What we did Our lessons So You Wanna Farm? Scale Skills Infrastructure & Equipment Revenue Streams Pricing CSA Resources Marketing your Farm Financing a Farm Diversification Farming Resources
Who Am I What qualifies me to speak here today? Very little! I hold an off-farm job at Carnegie Mellon University and I work as a sales rep for Woodward Crossings Worked on an organic farm and at a French restaurant as a teenager Moved to Pittsburgh to go to culinary school Dropped out of culinary school to open a vintage clothing boutique in Pittsburgh’s Southside Eventually, I returned to school and studied computer science and software engineering I’m determined to build a financially viable produce farm Started Edible Earth Farm with my wife I try to apply software engineering principles to farming (e.g. risk management, systems optimization, formal processes)
Edible Earth Farm A produce growing business started by John and April Parker Established initially as a micro-farm to: Limit risk Minimize initial investment Jumpstart a larger, commercially viable operation Use the opportunity to gather and analyze data Begin to build efficiencies Understand the market Do we still enjoy it after the first year? In 2010 it was managed full-time by April. I worked on weekends and during paid time off from my day job. We had lots of help from friends and family.
Distance Makes the Heart Grow Fonder 2.25 hours 110 miles
Year One Objectives Grow on 1+ acre using intensive cropping techniques Build important infrastructure Start an 18 week CSA w/ ~20 members Participate in weekly farmers’ market Develop processes Provide a high quality product Market the farm Learn Start small. Don’t fail!
The Immediate Tasks Drill water well and run irrigation lines Build produce cooler Build mobile hoophouse Purchase a delivery truck Purchase supplies Find someone to start seeds Build sorting/washing/packing station Find a market to sell at Cultivate The list goes on ……………..
Lesson: Weeds Employ a strategy that’s proven Stay on top of them Be able to identify weeds Understand how to manage them Diamond Scuffle Hoe S-tine Sweep Backpack FlamerWheel HoebyValley Oak Tool Company Composting Mulch Cultivation Buckwheat Crop Rotation Hay and Straw Hand Weeding Stale Seedbed Technique
Lesson: CSA the First Year? CSA in first year is not recommended Time consuming to organize and market Cost prohibitive at less than 40 shares For us, we were selling at prices less than we could command at a market Constant product supply including variety is required Worked for us because we may have quit had we not cashed their checks We received lots of encouragement from our CSA customers A CSA is certainly something that should be considered for subsequent years In the initial year, use farmers’ markets to build interest in a CSA
Lesson: Pests and Disease Seek knowledge from experienced farmers Learn to identify early signs Scout often Employ a proven crop rotation strategy Understand the lifecycle of the pest or disease
Lesson: Farm Finances Don’t overspend Prepare for a substantial initial investment Purchase equipment only when necessary or when you can determine that it would greatly reduce costs or resources Prepare to operate at a loss for at least two years Know your input costs Be frugal but not cheap Weigh the cost of a product or service with the potential value of a long-term relationship with a vendor Borrowing money is an unfortunate reality Constantly evaluate financial risks Learn to manage financial stress in a healthy and constructive way
So You Wanna Farm? How big? Start small but not too small Don’t under commit Initial capital and risk comfort will most often dictate initial size Be sure you have the necessary startup capital. It’s very easy to underestimate. Don’t start without necessary equipment and infrastructure Let your budget drive your size and don’t overspend There are economies of scale. However, they require experience to harness. Be sure to develop a 5 year plan for growth that takes data from revenue projections. Revise yearly. Don’t jump in too early Prepare to operate for several years with minimal or no profit
Important Skills Time management Including the ability to quickly reschedule around changing weather conditions Knowing when good enough is better than perfect Developing efficiencies through process optimization Learn to leverage economies of scale but also beware of the point where there are diminishing returns Mechanical knowhow People management Risk management Stress management Computer and web skills Industry knowledge Customer relations
Large Equipment Needs Tractor If farming more than 3 acres, a tractor is a must Buy large, buy newer. 40HP-50HP w/front end loader and pallet forks. A skid loader and a tractor are an ideal setup. Tractors are not designed to do a lot of FEL activities. Hard on tractor transmission and clutch. Tiller Can often buy two used for less than the price of one new. While BCS tillers are nice, Troy-Bilt Horse tillers will do the job. Shop for good used equipment. If you can’t tell the difference, buy new instead. Consider the cost of a new piece of equipment and average its cost over the life of the product. Oftentimes, new equipment wins out when you factor in repair costs and downtime. Mist Blower/Sprayer Use to spray crops. Mix spraying agent with a sticker. Delivery truck, Pickup truck, Trailer Shop for fuel efficiency
Large Equipment Needs Contd.. PTO Driven Tiller If farming more than 3 acres, a PTO driven tiller is advised Can find many on the used market but you don’t know how they were cared for Mulch Layer Worth its weight in gold! Purchase one that will produce raised beds Heat up the roots of the plant better and helps keep roots dry Buy a good quality layer Propane Flamer Used in controlling weeds Pre-emergence flaming helps give plants a head start. Heat will burst the cells in the small weeds killing them.
Large Equipment Needs Contd.. Jang Seeders Jang JP series Seed singulation Reduces seed cost Reduces need to thin Dense planting Great for intensive cropping operations Does very well with small seed Can singulate lettuce and carrot seed Combine with pre-emergence flaming for great results. Particularly with slow to germinate seed. NOTE: Does not seed large non-spherical shaped seedSpecs: JP-3 12” outside row 3 seed heads JP-6 22” outside row 3,4,5,6 seed heads JP-6W 36” outside row 3,4,5,6 seed heads Not cheap. Very well engineered. WoodwardCrossings.com Or contact me: firstname.lastname@example.org
Revenue Sources CSA Farmers’ Markets Local Farm Alliance On-site Market Wholesale RestaurantsThe more sources you choose, the less risk exposure youhave to significant loss. However, taking on additionalrevenue sources comes at a price in time and resources andcan oftentimes impact the quality of the product. Startsmall and try to limit risk. Expand as you becomecomfortable.
Revenue Source — CSAPotential: Not uncommon for 1000+ CSA member operations on 30acresCost prohibitive at < 40 membersPros: Potential revenue stream early in the year. Although, increasingly, members expect payment plans which increases the costs to manage and diminishes an early revenue stream. Predictability. Unlike growing for market, it’s much easier to plan how much to grow. Flexibility with product and varietiesCons: Extensive amount of effort to plan, organize and manage (especially if it’s your first year) Marketing costs Less of a connection to customers compared to other direct-to- consumer sources Increasingly competitive due to its popularity among produce farmers
Revenue Sources – Farmers’ MarketsPotential: $5000-$10,000 max first season. Varies by market.Being certified organic often will open doors to markets thatwould otherwise not accept additional produce farmers. Harder tofind good markets because of the increasing number of smallerlocal markets.Pros: A great way to move product that hasn’t been used in CSAs, sold to restaurants or wholesaled Great way to meet and interact face to face with your customers Immediate and honest feedbackCons: Good markets are often difficult to get into Revenue variability -- You’ll have bad weeks Can be very political Location at the market matters Tenured vendors almost always have better spots at market
Revenue Sources – Local Farm AlliancePotential: Varies depending on your status in the allianceStructure of co-ops/alliances vary greatly. Oftentimes, there will be buy-in fees and yearly dues.Pros: Allows growers to focus on growing Harness the experience of alliance employees to pack and distribute CSA shares, recruit new members and market the service Price is better than wholesale Less emphasis on product uniformity compared to wholesalingCons: Impacts a farms ability to build a brand insofar as the marketing is done under the name of the alliance Selling for less than you could command in other retail channels With a large alliance, demand for product from any given grower is reduced. It becomes imperative for a grower to partner with an alliance that has few growers and a commitment to growth
Revenue Sources – On-site MarketPotential: Very difficult to projectRevenue is largely dependent on location, local demographics, nearbycompetition, having quality traffic, complementary products, productavailability and product selectionPros: Minimal start-up costs Minimal risk Little or no transportation costs Minimal labor costs to staff, if you can limit the time the market is open to a day or twoCons: If the farm is located in a low-traffic area, getting customers can be difficult and will require advertising costs Margins may be slim in areas where people expect better priced products Much like a farmers’ market, you will likely experience revenue variability Takes away from farming time – be sure to limit hours
Revenue Sources – WholesalePotential: Difficult to projectBeing successful at wholesale requires vast amounts of experience andresourcesPros: Relatively dependable source of revenue Minimal marketing costs Can focus on specializing in products that do well in your area and soilCons: Lots of waste. Distributors demand product uniformity. Packaging costs. Distributors demand product packed to specifications. Margins are slim. Difficult to compete with large California farms that can harness years of experience and economies of scale. Inability to get feedback from customers At the mercy of the distributor
Revenue Sources – RestaurantPotential: Difficult to predict first year revenue. Can reliably use firstyear as baseline for subsequent years.Be realistic about pricing. Distributors add about 20% to thewholesale purchase price. Monitor commodity prices and adjustpricing accordingly.Pros: Can often command prices close to retail for high quality items Outlet for large quantities of product Learn about hot varieties that may also sell well at market Chefs love local products Immediate and honest feedbackCons: Requires significant marketing effort Difficult to predict demand Requires significant time to engage chefs, accept orders and deliver product Some chefs want multiple deliveries per week
Pricing Develop pricing strategies for each revenue source Know your cost to produce a product Know the competition Don’t underprice your product. Yet, know the price customers are willing to pay and use it to your advantage. Consider value-added items to justify higher prices (e.g. certified organic, online ordering, cleaner product) Revisit pricing strategy several times a season Resist the urge to have loss leaders
CSA Numbers CSA shares per acre 1acre – 20-30 shares 4 acre – 100-125 shares CSA pricing: $15-$30 per week/share with the average price being $25 Expect $3000-$5000 net return per acre Expect 20% yearly member attrition 2009 average price and length $540 for 20 weeks
All files included inCSA Resources download with permission from the authorhttp://www.roxburyfarm.com http://www.roxburyfarm.com/content/7211 Greenhouse Schedule Zone 5A
Marketing Your Farm Create markets! They won’t come to you. Farm website Social media Local print and local CSA directories Online communities (e.g. LocalHarvest) If selling at a farmers’ market, use the opportunity to promote other products or locations Use friends and family to spread the word Signage Newsletters Blog
Social Media It’s a slippery slope! Once you start and to be effective, you should be committed to building it. Takes vast amounts of time to manage Exposure to customer feedback that may be difficult to manage given other farm responsibilities Return on time investment is difficult to quantify. Building the network is slow and has minimal benefit early in the process. The power it affords a business should not be discounted Young customers want that level of interaction If you have a good product and service, customers will spread the word Spread the word about specials and new products Gather feedback on what people want
Financing a Farm Debt is an unfortunate reality Build strong relationships with local lenders Manage debt responsibly Save now! Be conscious of opportunities to shift debt to an institution with better terms. This has the potential to save substantial amounts of money over the life of your debt. Do the math. Only borrow when you can show that the positively impact the bottom line. Set aggressive repayment goals
Diversification Farming is a high risk and low profit business Find areas to expand where you can leverage existing skills or equipment Quickly cull operations or efforts that are unprofitable Diversify: flowers, prepared food, fruits, meats, bees, the possibilities are endless……………
Farming Resources – BooksMarket Farming Success – Lynn Byczynski- Complete overview of a market farm operation including: - A look at market potential – $25,000 gross per acre - Identifying ideal farm characteristics - What to grow - Production lifecycle - Planting - Recordkeeping - Flower ISBN: 9780930031756The New Organic Grower – Elliot Coleman- Very detailed look at the full lifecycle of a market farm including: - Land characteristics - Soil Fertility - Deep-organic production methods - Farm labor - Green manures - Pest management ISBN: 093003175X
Farming Resources – Books contd.The Winter Harvest Handbook – Elliot Coleman- One of my favorite books. Explores: - Winter production in unheated greenhouses - Crop rotation - Vertical growing - Overwintering - Soil fertility - Movable greenhouses - Intensive crop production - Hardy plant varieties ISBN: 1603580816The Organic Gardeners Handbook of Natural Pest andDisease Control – Rodale Press- A resource for pest and disease identification. Explores: - Details preventative measures and organic controls - Describes ideal growing environment for 200+ vegetables, fruits, herbs and flowers ISBN: 1605296775
Farming Resources – Books contd. Sustainable Vegetable Production From Start-Up to Market - Highly recommended book for aspiring farmers. Required reading in several Masters of Sustainability programs - Describes recordkeeping strategies, budgets, marketing and equipment to name only a few. - A must for any aspiring farmerWeb Resources ISBN: 093581745X• New England Small Farm Institute• Roxbury Farm – Detailed production information available for download• Penn State Cooperative Extension• Northwest Beginning Farmers ProjectPublications• Growing for Market• Small Farm Journal• Vegetable Grower – Warning!