Progress report for LNE20-394
Problem and Justification:
To achieve profitability despite tight margins, increasing competition, 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. Existing agricultural benchmarking projects often do not apply to the diversified, small-scale operations typical of the Northeast, limiting farmers’ ability to understand how their operation compares to other similar farms, or to assess potential areas for growth and improvement. Researchers and service providers in Pennsylvania and New York have started building datasets to create benchmarks that will be relevant to Massachusetts’ farms, and this project will help expand those datasets 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 will combine benchmarking data collection with technical assistance and peer-to-peer learning on financial literacy, record-keeping and analysis, and business decision-making. Target producers are beef, pork, lamb, and goat operations and diverse vegetable producers in Massachusetts. Data collected through in-depth support for 40 farms will contribute to two existing datasets, the Pennsylvania Sustainable Agriculture Association (PASA)’s Diversified Vegetable Financial Benchmark Study, and Cornell Cooperative Extension’s Cornell Meat Price and Yield Calculator. In addition, we will assess and synthesize existing benchmarking studies and convene benchmarking researchers for two video conferences. We will use the information gained through these methods to inform workshops on financial record-keeping and decision-making for additional farmers. Together, these methods will help farmers gain the skills and information they need to implement data-driven farm decision-making and improve farm financial sustainability.
Milestones and Performance Target:
Forty livestock and vegetable farmers will participate in benchmarking cohorts. One hundred additional farmers will participate in workshops on financial record-keeping and decision-making, using lessons learned from the work with benchmarking cohorts and our benchmarking research review. From these two groups (benchmarking cohort participants and workshop participants), 90 farmers (unduplicated) will increase understanding of financial record-keeping and decision-making. 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.
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 is rising a dollar each year until it reaches $15 in 2023. The Massachusetts Supreme Judicial Court recently clarified the state agricultural overtime exemption, indicating that it applies only to growing and harvesting, not to preparing crops for market. Costs for land and fuel are rising.
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 decisionmaking 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 recordkeeping 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 will expand farm financial datasets in two sectors; assess, synthesize, and provide information on other benchmarking studies; and implement farmer training on using these tools to make sound decisions and implement strategies for success. Farm businesses will use the new skills and information they gain to improve decision-making and will report an improvement in financial sustainability. In addition, 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.
CISA’s “Useful Benchmarks” project addresses these challenges in several ways. First, we are not starting from scratch in developing benchmarks for our region, but instead adding to data already collected by researchers and service providers in nearby states. 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.
Second, we are 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. Third, we will convene researchers and service providers who are building farm benchmarks for two video conferences in order to compare methodologies and lessons learned. Fourth, we will review and summarize relevant benchmarking studies that are available for public use. Lastly, we’ll use 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.
Education of farmers will take place in two ways. First, participants in the benchmarking cohorts will receive training and support in collecting and understanding the financial information needed for sound decision-making. Vegetable farmers will meet in the winter with Franklin Egan and CISA staff to begin to complete the benchmarking data collection survey and for training in financial literacy and decision-making. This meeting will
be followed by individual communication to help farmers compile any additional numbers and complete the survey. In the fall, participating farmers will receive individual benchmarking reports and attend a group meeting to review and discuss the benchmarking measures and what can be learned from the reports. This meeting will be structured to encourage farmer-to-farmer learning about how to address areas of weakness and
build on strengths.
Matt LeRoux’s work is focused 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 will pair 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 will help 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 will provide training in marketing techniques that can help farmers succeed in market outlets that provide high enough prices to achieve profitability.
In both cases, we will provide 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 is designed to provide the lessons learned from our own benchmarking cohorts, those conducted by our partners in their home states, and from studies conducted in other regions to a wider group of growers. Trainings will include 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. Again, there will be a focus on using the information gained through these three approaches to improve decision-making in order to impact farm financial sustainability. One hundred farmers will participate in 5 farmer trainings held in years two and three of the project. Participants will gain skills in record-keeping, financial literacy, and business decision-making, and will benefit from in-depth conversation with peers and experts about business assessment and planning, marketing, and management approaches.
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.
Outreach for these activities is in progress.
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
This workshop is scheduled for January 19th.
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)
These workshops are scheduled for February and March.
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.
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). See attached sample individual benchmarking report from PASA in curriculum uploads.
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.
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
We planned to do these workshops beginning in winter 2022. We decided to hold one workshop early 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 particularl 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.
Activity: Third benchmarking cohort meetings for vegetable and meat 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)
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.
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.
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. Some farmers may attend more than one workshop over two years.
Milestone Activities and Participation Summary
Performance Target Outcomes
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.
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.
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 in CISA's annual survey of technical assistance participants.