Final report for LNE20-394
Project Information
Problem and Justification:
To achieve profitability despite tight margins, increasingly volatile weather, and rising costs, farmers need to make sound business decisions based on accurate knowledge of their farm businesses. Financial literacy and good financial record-keeping can support those decisions, but many farmers report that even once they create good record-keeping systems and habits, they are not sure how to use that information to improve decision-making. Thre is growing interest in creating financial benchmarks based on the diversified, small-scale farm operations typical of the Northeast, which could help farmers understand how their operation compares to other similar farms, or assess potential areas for growth and improvement. This project builds on work in Pennsylvania and New York, helping to expand the datasets and tools our partners have created to include Massachusetts farms. These benchmarks will help farmers understand their financial information better and help individual farms identify areas of strength and areas in need of improvement.
Solution and Approach:
This project combined benchmarking data collection with technical assistance and peer-to-peer learning on financial literacy, record-keeping and analysis, and business decision-making. Target producers were beef, pork, lamb, and goat operations and diverse vegetable producers in Massachusetts. Data collected through in-depth support for 21 farms contributed to Pasa Sustainable Agriculture's Diversified Vegetable Financial Benchmark Study. The project also supported a revised version of the Cornell Meat Price and Yield Calculator and workshop and one-on-one support for meat producers in collecting production cost data, evaluating market costs, and setting prices. We also convened discussions among other researchers about approaches to collecting benchmarking data. We used the information gained through these methods to inform workshops on financial record-keeping and decision-making for additional farmers. Together, these methods helped farmers gain the skills and information they need to implement data-driven farm decision-making.
Challenges and Outcomes:
Two significant events impacted this project. First, during and following the Covid-19 pandemic, farmers were managing a host of unanticipated challenges, including market, supply chain, and labor disruptions. As a result, some farmers felt that they did not have the time or capacity to take on in-depth financial analysis. Second, we have experienced a string of atypical growing seasons coinciding with this project. In 2020, this was largely due to the market disruptions and high level of consumer demand due to the pandemic. In the two years that followed, extreme weather--prolonged excess rain in 2021 and an extended period of drought in 2022--led to crop losses and increased expenses. Although these extremes may be "the new normal," participating farmers felt that the years for which we provided in-depth financial analysis were not typical ones.
Participants in the vegetable benchmark cohort generally agreed that looking closely at their financial data, and beginning to make comparisons over time, was very useful (and very time-consuming!). They also felt that it was useful to be able to use the benchmark information to compare their businesses to others--one valued "learning where we are in the small farming world instead of floating by ourselves." One summary read, "it was really really helpful -- I can't overstate how helpful that was. The comparison with other farms was really useful to see. Really helpful to see percentages of income people were spending on different areas -- especially on employees. We increased our payroll spending a lot based on what others were doing this past year, and we produced way more and it was really really helpful for us and the farm."
Please see the slides from our "Insights from Vegetable Benchmarking" workshop for more information about what we learned about farm finances. In addition, the "Assessment of Project Approach/Areas of Further Study Needed" section offers valuable information about challenges and areas for further study.
Seventy-five farmers will improve financial record-keeping by tracking key indicators. Fifty farmers will report that improved record-keeping and analysis helped them make better decisions, and thirty-five will report that their participation had a positive impact on farm financial sustainability.
Description of Problem
Margins are tight in farm businesses; costs are rising and market growth is slowing. Inflation-adjusted sales per farm in our three-county region grew less than $6,000 from 2012-2017 and have not returned to late 1990 levels. Small-scale meat producers (634 beef, pig, sheep, and goat) and diversified vegetable operations (394), account for 36% of agricultural sales and struggle to achieve and sustain profitability.
Farmers face challenges related to rising expenses and competitive markets. The Massachusetts minimum wage has risen to $15 in 2023. Following the Covid-19 pandemic, farmers have experienced sharply rising input costs. Weather extremes caused by climate change have caused significant losses for farmers in 2021, 2022, and 2023.
Competition is tightening in direct and wholesale markets. The number of community supported agriculture farms in our region rose from 7 in 2001 to 60 in 2016; shareholder retention rates have dropped and fewer shareholders pay in full at sign-up. Similarly, farmers report slowing sales growth at farmers’ markets. In winter 2019, wholesale growers reported reduced average prices (when accounting for inflation) and decreased buyer loyalty. These reports are corroborated by others in the business, such as the distributor Red Tomato, which lost their largest account in 2018 after being underbid by $.01 per pound.
Farmers cannot change the minimum wage or price of propane, but they can make smart management decisions that help to minimize costs and maximize returns. One important strategy for improving farm decision making and profitability is analyzing farm financial records, which can help farmers understand where they are making money and where they are losing money. CISA has been helping farmers improve their financial record keeping for over 20 years; we’ve learned that even once farmers set up and maintain good record-keeping systems, two things can make it hard for them to use those records effectively. First, they are often not sure how to evaluate this information and use it to inform decision making, and second, they don’t know how their numbers relate to those from other farms.
Solution and Benefits
This project expanded an existing farm financial dataset for diversified vegetable farmers and supported a revised pricing calculator for meat producers based on farm financial and marketing data. We offered farmer training on using these tools and approaches to make sound decisions and implement strategies for success. Farm businesses used the new skills and information they gained to improve financial record-keeping; during the period of this project they were less certain about the impacts on business decision-making and financial sustainability. This project provides a model for making information gained through benchmarking studies available to farmers who cannot participate in a benchmarking cohort.
Developing accurate farm benchmarks is challenging for a number of reasons. The diverse farms of the Northeast vary across a wide number of variables, making comparison difficult. Farm record-keeping can be spotty, making it hard to obtain accurate data, and researchers must balance the need for accuracy with the ability to collect data from a large enough group of farms.
In planning our work, we implemented a number of strategies to address these challenges, including:
- Adding to data already collected by researchers and service providers in nearby states, rather than starting from scratch. The development of these robust regional datasets can provide key lessons to improve farm financial management decisions and guide advocacy efforts. The Cornell Meat Price and Yield Calculator collects information on marketing costs, trucking, delivery, hanging weights, kill fees, cut and wrap fees, marketing labor, sales prices, gross income by animal, cost of production, and production profit. PASA’s Diversified Vegetable Financial Benchmark Study collects gross vegetable revenues, net income, rate of return on assets, rate of return on family labor, and labor payroll, operating expenses, and net income to revenue ratios.
- Coupling data collection with training and networking opportunities, so that farmers see immediate benefits from sharing their financial information and know how to use this information when making decisions.
- Convening conversations between researchers and service providers who are building farm benchmarks in order to compare methodologies and lessons learned.
- Using the information we gather through these varied approaches to inform training in financial record-keeping, analysis, and decision-making for farmers who cannot participate in a multi-year benchmarking cohort, but still need to make sound business decisions.
We found that all of these strategies were valuable. Nonetheless, our experience confirmed the challenges in conducting benchmarking research that we had identified at the outset.
Cooperators
- (Educator)
- (Educator)
- (Educator)
Research
Education
Education of farmers took place in two ways. First, participants in the benchmarking cohorts received training and support in collecting and understanding the financial information needed for sound decision-making. Vegetable farmers met online with CISA and Pasa staff to begin to complete the benchmarking data collection survey and for training in financial literacy and decision-making. We provided individualized follow up support to help farmers compile additional numbers and complete the survey. Getting surveys fully completed was more time-consuming for both CISA staff and for farmers than we had anticipated.
Participating farmers received individual benchmarking reports each year, and then attended one or more group meetings to review and discuss the benchmarking measures and what can be learned from the reports. These meetings were structured to encourage farmer-to-farmer learning about how to address areas of weakness and build on strengths. Discussion at these meetings was lively and farmers were able to focus on the topics of most interest to them. One challenge was presenting enough detailed information to the group while preserving participant confidentiality.
Matt LeRoux’s work focuses on helping farmers to understand the costs and benefits of different marketing options for meat and to develop marketing plans that allow them to achieve profitability. In response to farmer requests, we paired Matt’s training on assessing markets and prices with a training about how to track and analyze the costs of production to be conducted by Lee Menius from NC Choices. Matt helped farmers assess and understand the costs of marketing through different outlets, using the farmers’ calculated costs of production and the Cornell Meat Price and Yield Calculator to compare different options. In addition, Matt provided training in marketing techniques that can help farmers succeed in market outlets that provide high enough prices to achieve profitability. Matt also offered a workshop on using data from point of sales systems to inform decision-making.
For both meat and vegetable producers, we provided support and training in understanding financial information that can be used to analyze and improve farm businesses, with a focus on using this information to support sound decision-making, and opportunities for networking and peer-to-peer learning.
The second educational component of this project was designed to provide the lessons learned from our own benchmarking cohorts, those conducted by our partners, and from studies in other regions to a wider group of growers. Trainings included three elements: 1) skill-building and support for improved record-keeping; 2) review of lessons learned from benchmarking data; 3) opportunities for participants to strategize with each other and with workshop leaders about how to address farm challenges revealed through this process. We used other funding to support one-on-one consulting with workshop presenters following some workshops. This was an efficient use of time and resources and allowed farmers to share financial information one-on-one with the consultant and receive specific assistance and troubleshooting with their record-keeping systems.
Participants gained skills in record-keeping, financial literacy, and business decision-making, and benefited from in-depth conversation with peers and experts about business assessment and planning, marketing, and management approaches.
Milestones
Activity: Outreach and recruitment/ Knowledge or skill gained: Learn about vegetable and meat benchmarking cohorts and the responsibilities and benefits of participation; agree to participate.
45
2
365
January 15, 2023
Completed
March 27, 2023
We recruited participants for both the meat and vegetable cohorts and for attendance at workshops. 365 is the number of farmers to whom we reached out individually about these activities via phone or email; we also included information about these activities in our newsletters.
Activity: Training meeting for livestock cohort participants on assessing costs of production/ Knowledge or skill gained: How to track numbers necessary to assess costs of production
20
2
17
1
January 31, 2021
Completed
January 19, 2021
"Basic Farm Financials for Successful Pricing," taught by Lee Menius from NC Choices. NC Choices, a program of the Center for Environmental Farming Systems in collaboration with North Carolina Cooperative Extension, supports local, niche, and pasture-based meat producers and supply chain businesses in North Carolina. We scheduled this workshop because previous participants in workshops on pricing had told us that they needed more information about how to track production costs and other financial information in order to be able to generate cost of production information needed for calculating prices. Eleven of the 18 attendees completed an evaluation form. All 11 reported that they intended to make improvements to their financial record-keeping systems as a result of the workshop.
Activity: First benchmarking cohort meetings for vegetable and meat producers/ Knowledge or skill gained: How to measure, collect, understand and use key numbers; pricing, marketing and market planning skills (livestock group)
40
4
54
March 31, 2021
Completed
March 19, 2021
Meat: We held a "Profitable Meat Pricing" workshop with Matt LeRoux from Cornell University on March 18, 2021. At the workshop, Matt provided training on using cost of production and cost of marketing information to set meat prices for different markets, and introduced participants to his updated Cornell Meat Price and Yield Calculator. There were 36 attendees, including 34 farmers and 2 service provider participants, at the workshop.
Vegetables: We held three sessions for vegetable producers to introduce them to the benchmarking project, discuss the key numbers to be collected, and support them in finding and refining the needed information. Twenty farmers participated in these sessions, and 15 completed the full benchmarking survey.
Activity: One-on-one follow up support for vegetable and meat cohort participants/ Knowledge or skill gained: Improved understanding of key measures and how to track them.
40
2
17
May 31, 2021
Completed
January 15, 2022
Matt LeRoux has provided in-depth follow-up assistance to five farms. This work has included discussion of marketing, analysis and proposed changes to pricing, and analysis of sales data.
One on one follow-up for vegetable producers was extensive and time-consuming; follow up from the first year was completed in January 2022. Fifteen vegetable producers completed the data collection, and 12 received follow-up support with this task.
Activity: Vegetable farmers receive individual benchmark report/ Knowledge or skill gained: Farmers understand their operation in relation to other operations in the MA cohort, as well as in comparison to the combined data collected in MA and PA (in previous cohorts conducted by Franklin Egan).
20
2
15
September 30, 2021
Completed
January 27, 2022
We finalized the first year's individual reports for each vegetable producer and sent them to producers in January 2022.
Two significant events impacted this project. First, as a result of the Covid-19 pandemic, farmers were managing a host of unanticipated challenges, including market, supply chain, and labor disruptions. As a result, some farmers felt that they did not have the time or capacity to take on in-depth financial analysis. Second, we have experienced a string of atypical growing seasons coinciding with this project. In 2020, this was largely due to the market disruptions and high level of consumer demand due to the pandemic. In the two years that followed, extreme weather--prolonged excess rain in 2021 and an extended period of drought in 2022--led to crop losses and increased expenses. Although these extremes may be "the new normal," participating farmers feel that the years for which we are providing in-depth financial analysis are not typical ones.
Activity: Second benchmarking cohort meetings for vegetable and meat producers/ Knowledge or skill gained: How to understand/interpret benchmarking reports; peer-to-peer learning with farms with different numbers; strategizing about how to address weaknesses and build on strengths.
40
2
22
3
March 31, 2022
Completed
March 17, 2022
We held a second workshop/pricing calculator introduction for meat producers on October 5, 2021. The workshop was held on a dairy farm; Matt LeRoux introduced the meat pricing calculator and one of the dairy farmers talked about their experience using it. There were nine attendees; seven were farmers and two were service providers.
Vegetable benchmarking participants met twice in winter 2022. We added a second meeting because participants were eager for more time for conversation and discussion of results. CISA staffer Kristen Wilmer and Elaine Lemmon of Kitchen Table Consultants facilitated these meetings.
Four participants also received one-on-one follow up consulting with Elaine Lemmon. Elaine's time for one-on-one consulting was funded through another grant.
Activity: Financial record-keeping and decision-making workshops (3)/ Knowledge or skill gained: Financial record-keeping basics; lessons learned from benchmarking cohorts and researcher meeting; how to use this information to improve decision-making
40
3
59
7
March 31, 2022
Completed
February 24, 2022
We planned to do these workshops beginning in winter 2022. We decided to hold one workshop early--in fall 2020--for two reasons. First, we realized that a number of regional organizations had recognized the need for more training on financial record-keeping and decision-making. Since all workshops are currently happening online, producers have more options to choose from. We had an opportunity to offer a workshop focused on a particular kind of record-keeping, use of data from point-of-sale systems, a topic that was not being widely offered by other organizations. We also used this workshop as an opportunity to promote our winter benchmarking cohorts and trainings. This workshop was held on November 19, 2020.
In February 2022, we held a 3-part series of workshops focused on farm financial record-keeping and decision-making. Elaine Lemmon from Kitchen Table Consultants was the presenter. One workshop was funded through other sources and we have not included the participants in that workshop in the numbers above. Farmers in our region who attended all three sessions were eligible for additional one-on-one consulting with Lemmon; 11 farmers participated in one-on-one consulting, which was funded through another grant.
Sixty-seven percent of attendees completed an evaluation; of those, high percentages reported that the workshop was helpful (97%) and that they increased their knowledge as a result of their attendance (98%). Attendees identified a wide range of improvements to their financial record-keeping systems that they intended to make in order to gain better information.
Workshop descriptions were as follows:
Farm financial management: taking it to the next level
Hone your skills for monitoring the health of your business, improving its profitability, and managing cash flow.
This three-session series is geared towards experienced farm managers and QuickBooks users in Massachusetts and surrounding states who are looking to step up their farm financial management game. The series will be taught by Elaine Lemmon of Kitchen Table Consultants.
Taking your farm financial recordkeeping to the next level
This session will help you optimize your chart of accounts setup, tease apart which parts of your farm are and aren’t making money, and use your financial statements for more strategic farm decision making. Learn how to draw key information from your farm’s profit and loss statement and balance sheet to help you monitor the health of your business and improve its profitability.
Finding cash in your farm business: profitability vs. cash flow
Just because you have $40K in net profit doesn’t mean you have $40K in the bank. These two ideas get confused very often, but net income and cash flow are each important — and distinct — measures of success. Learn the best ways to track where your cash is going, control your cash flow, and identify your options when cash gets tight.
Budgeting tools to keep your farm on track
Learn why budgets are an incredibly powerful — though underutilized — tool for farm business management. This session will equip you with a flexible budgeting tool that you can use year after year for your farm. You’ll get expert advice on how to identify past trends, methodically forecast sales, and plan for contingencies, plus practical tips for using your budget to steer mid-season decision making.
Activity: Third benchmarking cohort meetings for vegetable producers. We expect that most participants will continue for a second year, but experience in NY and PA demonstrates that adding some additional growers at this stage is also effective./ Knowledge or skill gained: How to measure, collect, understand and use key numbers; pricing, marketing and market planning skills (livestock group)
40
4
19
March 31, 2022
Completed
March 17, 2022
We held four working sessions for vegetable producers to discuss the key numbers to be collected and support them in finding and refining the needed information. The large number of working sessions are time-consuming to schedule and support but provide support that many farmers need to understand the numbers needed for the benchmarking survey.
Activity: Vegetable farmers receive individual benchmark report (second year)/ Knowledge or skill gained: Farmers understand their operation in relation to other operations in the MA cohort, as well as in comparison to the combined data collected in MA and PA, and in comparison to their own farm in the previous year, if they have participated for two years.
20
2
16
September 30, 2022
Completed
February 15, 2023
Reports were completed in February 2023.
Activity: Fourth benchmarking cohort meeting for vegetable and meat producers/ Knowledge or skill gained: How to understand/interpret benchmarking reports; peer-to-peer learning with farms with different numbers; strategizing about how to address weaknesses and build on strengths.
40
2
28
November 30, 2022
Completed
March 20, 2023
The vegetable cohort met on 3/20/23 with CISA staffer Kristen Wilmer and Pasa staffers Sarah Bay Nawa, Shelly Oswald, and Sarah Isbell. We also held a meat producers networking session in February 2023 that included a break-out group focused on pricing.
Activity: Financial record-keeping and decision-making workshops (2)/ Knowledge or skill gained: Financial record-keeping basics; lessons learned from benchmarking cohorts and researcher meeting; how to use this information to improve decision-making. Some farmers may attend more than one workshop over two years.
60
3
24
March 31, 2023
Completed
April 04, 2023
Milestone Activities and Participation Summary
Educational activities:
Participation Summary:
Learning Outcomes
Farmers participated in this project both by attending workshops, sometimes with follow-up one-on-one assistance that was often funded through other sources, and by participating in one or two years of in-depth financial data collection, analysis, and review. Although all of the workshops concerned financial record-keeping, analysis, and decision-making, they had different specific foci. Some were fairly broad--for example, a three-workshop series on financial record-keeping and analysis--and some were more specific, including a workshop focused on using data from point-of-sale systems in farm business decision making, and another focused on managing farm labor costs. As expected, participants' learning and takeaways varied as well.
It was clear that in-depth, one-on-one support is very valuable. Farmers that worked on meat pricing with Matt LeRoux often commented that they changed their meat pricing as result of the analysis and consulting. Farmers who attended the three-part financial management series and then had follow-up consulting with Elaine Lemmon of Kitchen Table Consultants reported that they changed their chart of accounts, improved use of QuickBooks classifications, or improved cash flow projections, for example. Several people commented that their QuickBooks reports are now more useful. One said, for example, that they "can now see how operating expenses fluctuate with sales, versus expenses that don't fluctuate with sales."
Participants in the vegetable benchmark cohort generally agreed that looking very closely at their financial data, and beginning to make comparisons over time, was very useful (and very time-consuming!). They also felt that it was useful to be able to use the benchmark information to compare their businesses to others--one valued "learning where we are in the small farming world instead of floating by ourselves." One summary read, "it was really really helpful -- I can't overstate how helpful that was. The comparison with other farms was really useful to see. Really helpful to see percentages of income people were spending on different areas -- especially on employees. We increased our payroll spending a lot based on what others were doing this past year, and we produced way more and it was really really helpful for us and the farm." Managing labor expenses was one of the most-discussed topics in the Vegetable Cohort meetings, and led us to include a workshop on this topic.
In addition to these areas of overlap, veggie cohort participants often gave very specific answers to questions about the value of the knowledge they gained. For example, one said "this helped me make a budget I feel confident about," and another noted "I'm getting a good grasp of some of the unique qualities of our business which help me assess and set goals."
Farmers who participated only in workshops had a variety of comments on what they learned and what changes they hoped to make as a result, depending on the workshop topic. Participants in the winter 2022 three-workshop series on financial management felt that the information about budgeting, setting (and evaluating) sales goals, and improving the chart of accounts for improved reporting was very useful.
These comments are based on evaluations completed at the end of workshops and one-on-one consulting, year-end evaluations completed by farmers who received services from CISA, and an evaluation of the vegetable benchmarking component of the project. At the end of the project, we emailed an evaluation to participants from whom we had not yet received any evaluations.
Performance Target Outcomes
Target #1
75
Improve financial record-keeping by tracking key indicators.
Based on the average size of farms in our region, we estimate that this change will impact production on 6450 acres.
Participating farmers will report that they have implemented improved record-keeping systems in CISA's annual survey of technical assistance participants.
30
Improve financial record-keeping by tracking key indicators.
Based on the average size of farms in our region, we estimate that this change impacted production on 2580 acres.
Improve financial record-keeping by tracking key indicators and/or improving record-keeping in other ways, such as improving their chart of accounts, budgets, or cash flow projections.
Target #2
50
Improved record-keeping and analysis contribute to improved farm business decision-making.
Based on the average size of farms in our region, we estimate that this change will impact production on 4300 acres.
Participating farmers will report that improved record-keeping systems and the training they received have contributed to improved decision-making.
18
Improved record-keeping and analysis contribute to improved farm business decision-making.
Based on the average size of farms in our region, we estimate that this change impacted production on 1550 acres.
Participating farmers reported that improved record-keeping systems and the training they received contributed to improved decision-making.
Target #3
35
Improved decision-making had a positive impact on farm financial sustainability.
Based on the average size of farms in our region, we estimate that this change will impact production on 3010 acres.
Participating farmers will report that improved decision-making has led to a positive impact on farm financial sustainability.
18
Improved decision-making had a positive impact on farm financial sustainability.
Based on the average size of farms in our region, we estimate that this change impacted production on 1550 acres.
Participating farmers reported that improved decision-making led to a positive impact on farm financial sustainability.
It's clear from the answers above that our written evaluations did not confirm that this project met its performance targets. We think there are three reasons for this result:
- Farmers participated in several different activities with different levels of intensity, and some of those activities were more likely to drive on-farm changes than others.
- In order to assess whether farmers made a change and saw an impact, we needed to survey them well after the activity was completed, but we found that it was difficult to get responses after that delay, especially from people who participated in less-intensive activities (i.e. workshops). We have not yet done these follow-up surveys for participants in our winter 2023 workshops since not enough time has passed.
- Many factors impact farmers' ability to improve decision-making and to improve or achieve financial sustainability. Financial record-keeping and analysis systems and skills are factors in decision-making and financial sustainability, but may be small relative to other factors. Decision-making, for example, is also impacted by farmers' levels of stress and available time. Financial sustainability is impacted by many other factors, most of them largely or entirely out of farmers' control: weather, input and labor costs, market price for farmers' products, and market volatility. This project coincided with several challenging years, beginning with the Covid-19 pandemic and extending through two years of extreme and damaging weather, supply chain disruptions, and high labor and input costs.
In their evaluations, most vegetable benchmark cohort participants indicated that this process was both time-consuming and very helpful. Sixty-eight percent of the members of the vegetable benchmarking cohort who completed evaluations said that they had improved their financial record-keeping following the project, about the same as the percentage among all participants in the project (70%). Evaluation respondents in both the vegetable cohort group and all project participants were uncertain about the project's impact on farm business decision-making and financial sustainability, with many opting not to answer that question or to indicate that they were unsure.
Please see the slides from our "Insights from Vegetable Benchmarking" workshop for more information about what we learned about farm finances. In addition, the "Assessment of Project Approach/Areas of Further Study Needed" section offers more information about our assessment of the value of this work and the support that farmers need in order to sustain in-depth and accurate financial record-keeping and analysis over time.
All 136 farmers who participated in this project received verification requests. Those who participated in several parts of the program received (and some completed) several evaluations. Thirty-seven participants completed evaluations addressing the performance targets, although, as noted, many chose not to answer the questions about decision-making and financial sustainability, or indicated that they weren't sure of the impacts on these measures. We received a total of 120 evaluations from participants in project activities. In addition to some cases in which we received multiple evaluations from the same farmer, many of these evaluations were completed immediately following an activity, allowing us to evaluate learning and intended action, but not implementation. Information from those evaluations is summarized in the Learning Outcomes section.
Additional Project Outcomes
We convened a Zoom meeting in winter 2021 with Franklin Egan of Pasa and Seth Wilner and Michael Sciabarrasi of UNH Extension to share information about our respective vegetable farm financial benchmark programs. The discussion addressed each group's data collection methodologies, ways of managing and presenting financial benchmark data (including how to account for COVID-related idiosyncrasies ), and strengths and weaknesses of each team's approach. In spring 2023, we had a similar conversation with Jennifer Hashley of the New Entry Sustainable Farming Project. New Entry is coordinating a benchmarking project with very small farmers operating on farm incubator sites. Both of these conversations were useful and productive.
CISA staffer Kristen Wilmer and Pasa Sustainable Agriculture staffer Sarah Bay Nawa gave a presentation about this project at 2022 Northeast Organic Farming Association Summer Conference.
Collaborator Matt LeRoux gave presentations about the Meat Price Calculator at the National Conference on Next-Generation Sustainable Technologies for Small-scale Producers in September 2022 ("The Meat Price & Yield Calculator Tool: Pricing for Profit") and at the Western Meat School (online) hosted by NMPAN and Oregon State University.
Participants in the vegetable benchmark cohort were all diverse vegetable farmers with significant direct-to-consumer sales. There was cluster of very small farms and second cluster of mid-size farms.
Some themes emerged in the comments from participants in this cohort.
Farmers commented on the value of the work to farms at different stages, and the value of having sufficient data for farms of similar sizes:
- “I'm really interested in the comparisons between farms, or ranges for farm size. What does it look like when a business is 'going bad?' What are some parameters to show when the business is teetering on failure?”
- It was valuable to “be... able to compare yourself to other farms in this area of the same scale and similar models. Being newer in this industry and being able to look at farms that have been in business a little longer kind of felt reassuring. [I] thought it was very interesting to be able to relate scales of farms to each other. This was one of the first ways [I’ve had] to be able to see how a 20-acre farm relates to another 20-acre farm.
- “Since we have been farming for 40 years, we are somewhat set in where we are headed, but a young relative is working with us and I think the information in the report will be very helpful to him.”
Discussion often centered on the cost of labor.
- “My biggest dearth of knowledge is how to know how much labor FTE is reasonable for gross sales or total vegetable production.”
- One farming appreciated “getting a sense of employee costs at other farms--benchmarks like revenue per FTE, labor payroll/revenue”
- Another urged us to help farmers track and compare “hours, and where they are dedicated during the season.”
- Another wants “more information on how much people spend on employee compensation -- what are the industry standards. Especially benefits other than wages.”
Farmers noted that tracking and compiling this information is time-consuming, and appreciated having support in doing it:
- “This is a great exercise but a lot of extra work for farmers. Getting 1x1 consulting help to get through [completing] the survey is very helpful.”
- “I like doing the paperwork with the advisors on hand.”
- Labor-related benchmarks -- like 'FTE per acre' and 'payroll cost to gross revenue' ratios -- were of particular interest to participating vegetable benchmark farmers, and farmers found these labor benchmarks to be particularly valuable in helping them make strategic shifts in their business management. This is not surprising, given that labor is often overwhelmingly the single greatest expense for diversified vegetable operations -- for example, larger farms participating in our project spend one third to one half of their gross revenue on payroll. Focusing on collecting a larger dataset for farms of each size -- and helping farms keep more accurate records -- relating to these particular benchmarks could be a valuable area of focus for further benchmark work.
- The rapid change and unprecedented volatility of farm production, markets, and labor supply during the project years (especially due to the pandemic and multiple extreme weather events) meant that key farm financial ratios were more variable between years than would otherwise have been expected (both for individual farms and the groups as a whole). Such year-over-year volatility is an enormous challenge for farms to plan for and manage financially, and it is increasing due to climate change and other factors. The farm financial benchmark reports provided in this project helped many farms make more strategic management decisions, but are also inherently limited in their ability to help farms predict the future in a time of such rapid change. Participating farms spoke about the necessity of "planning for extremes" and yet were invariably confused about how to go about doing so. There are no silver bullet solutions to planning for these inherently unpredictable extremes, especially given the tight profit margins that most farms operate on, which limit savings. However, farms could use additional assistance to realistically evaluate such risks and assess their options to buffer these risks.
- Vegetable farms were motivated to participate in this project primarily by a desire to see how their farm financial numbers compared to those of other similar farms. This opportunity provided a helpful entry point for participating farms. It can also provide significant value: even though no one (or few) benchmarks give any clear answers in isolation, considering a combination of benchmarks can provide a great deal of food for thought in understanding the interlocking puzzle pieces of any given farm business and how they relate to farmers' goals. However, given the great variability between different vegetable operations, diversified vegetable farms frequently stand to gain even more benefit from analyzing their own financial records over time than they do from comparing any individual financial indicator to that of other farms. That said, our experience from this project is that many farms of all sizes struggle to do such financial analysis -- especially using consistent financial accounting methods -- without support. Thus, many farms could benefit from sustained in-depth technical assistance helping them analyze and compare their farm financials across three or more years.
- For vegetable farms with multiple enterprises, the most difficult aspect of completing our annual farm financial benchmark survey was estimating the percentage of each farm expense that was attributable to the vegetable enterprise. These estimates strongly impact any given farm's vegetable financial benchmark indicators, but farms had limited records enabling them to make precise estimates in many cases. Working with farms over time to more carefully break down their expenses by enterprise would improve the accuracy and value of vegetable farm financial benchmark indicators.
- Overall, across participating diversified vegetable farms, the net income from the farm business as a whole was substantially higher than the net income from just the vegetable enterprise -- in other words, the vegetable enterprises in isolation were significantly less profitable than farm businesses as a whole (considering all enterprises). For the 21 participating Massachusetts-area farms, the median percentage of net income coming from the vegetable enterprise was only 45% in 2020, and 48% in 2021 (these percentages decrease to 44% and 37% respectively if grant/COVID relief income is included). The median vegetable net income per FTE was only $7,400 in 2020 and $17,600 in 2021. Clearly, local vegetable farm profitability in many cases hinges upon other farm enterprises like resale, agritourism, etc.
- Off-farm income is also clearly critical to the financial sustainability of local vegetable farms. Most farm households participating in this project had off-farm income -- including both smaller and larger farms. On participating farms, the median total household income was about 70% higher than the median farm net income.