Empowering small farms to make big decisions: Examining profitability of local markets in West Virginia

Final Report for ONE12-168

Project Type: Partnership
Funds awarded in 2012: $14,959.00
Projected End Date: 12/31/2013
Region: Northeast
State: West Virginia
Project Leader:
Sigrid Teets
WesMonTy RC&D
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Project Information

Summary:

Empowering Small Farms to Make Big Decisions taught small scale specialty crop producers in North Central West Virginia improved record-keeping methods as a way to improve farm management and sustainability. A partnership between WesMonTy RC&D, WVU Davis College of Agriculture, and five small-scale specialty crop farmers was formed for this recordkeeping project. Farmers kept detailed records that reflect all of the expenses involved with production and marketing via different markets, including the often neglected labor of the farmer. Data on prices and revenues received in the different markets were also recorded to determine net profitability for each of the markets by individual crop. Farmers were provided education and support by project collaborators throughout the project period.

Although the number of farms that kept records was limited, the quality of data was very high. A comparison of most profitable and least profitable crops were made. Winter grown lettuce being the most profitable crop and the least profitable crop being field grown greens. Data indicated that marketing cost primarily associated with labor was the main difference between the two operations. The winter lettuce operation marketed through wholesale outlets, and the field grown greens operation marketed through farmers markets exclusively.

As a result of this project we learned that farmers who participated in the project for more than one year identified areas of their operation that could be more efficient and less costly. These farmers also saw an increase in profit during their second year of production. Although farmers report recordkeeping is time consuming, most report that it is a worthwhile experience and plan to continue to keep farm records.

During this project participating farmers were given the opportunity to share their experience with other farmers. This strategy-sharing among farmers has increased the accessibility of these financial and decision-making practices to more WV farmers, thereby increasing their ability to make important marketing decisions that will enhance the profitability and sustainability of their farms.

Farmers have been given a new skill which has enabled them to make informed economic decisions regarding production and marketing based on their own recordkeeping. Decisions to continue marketing using current methods are being evaluated. Most profitable marketing channels are being considered. This will lead to increased profits while helping farmers meet the growing demand for their products. Furthermore, these farmers are developing strategies to increase the time-efficiency and usefulness of their records.

Introduction:

Farmers in West Virginia are presented with unique challenges in topography and environment that limit the scope and scale of production. Further, few resources that teach producers how to effectively work within these limits are available to small-scale producers. Through two trainings, Empowering Small Farms to Make Big Decisions will teach specialty crop producers in North Central West Virginia improved record-keeping methods as a way to improve farm management and viability. Data from specialty crop farms as small as these in West Virginia is rarely available from other sources, necessitating that this information be gathered directly from representative producers. Using these record-keeping methods, farmers will learn to examine their operational inputs, costs and outputs to improve productivity and profitability. Furthermore this project will share the results with other farmers offering them practical information to help decide which marketing option and specialty crop may work best for their operation.

Project Objectives:

  • Provide two trainings to participating specialty crop farmers:

     

    • record-keeping methods

    • marketing outlets and pricing

       

  • Support to growers:
    • Encourage and remind growers to keep good records of income, production expenses and labor for each specialty crop marketed on their farm
    • Provide individualized recordkeeping assistance to growers as needed

 

  • Quantify and compare the profitability of the different marketing outlets and specialty crops as reported by farmers

 

  • Disseminate project results:

 

    • Farmers share their recordkeeping experience with other farmers during regional workshops
    • Create a poster to present project results during statewide workshops and other events to share with farmers and agricultural professionals.

Cooperators

Click linked name(s) to expand
  • David Ahrend
  • Gary Goetze
  • Mark Hollen
  • Nina Melvin
  • David Proudfoot
  • Lisa Sickler

Research

Materials and methods:

This project was designed to use case studies of six North Central West Virginia farmers to gather detailed data on costs and revenues associated with their operations. These farmers currently grow a variety of specialty crops that they sell in a variety of markets, including farmers markets, community supported agriculture, and to food service and institutional markets.

This project incentivized recordkeeping by offering a stipend to participating farmers in recognition of the time needed to keep detailed records that reflect all of the expenses involved with production and marketing via these different markets, including the often neglected labor of the farmer. Data on prices and revenues received in the different markets were also recorded to determine profitability for each of the markets.

Two workshops were organized for participating farmers by WesMonTy RC&D with technical assistance from agricultural economist Cheryl Brown, Ph.D and her graduate student Mary Oldham from West Virginia University. The first trained the farmers on record keeping methods using the book Organic Farmers Business Handbook by Richard Wiswall (2009).  The training taught the producers to use the materials from the book including spreadsheets and logs. Emphasis was placed on keeping accurate records for the information needed for this project. The second training was on marketing decision-making that will teach producers how to access markets, and the benefits and drawbacks of different marketing options available to them. We discussed the information generated by farmers in their record-keeping efforts as a basis for cost-benefit analysis and decision-making. This training builds producer confidence in their ability to analyze their costs and benefits and make strategic profit-maximizing market channel decisions.

Ongoing support from the project manager and project partners will ensure that accurate data is being recorded, including several farm visits and discussions at monthly Tygart Valley Growers Association (TVGA) meetings. The farm visits are an opportunity for the project manager to check in on the producers and ensure that they are keeping accurate records as well as work out any issues that may arise during the project. The visits at the TVGA meetings allow the producers to ask any questions they have and work on resolving any issues between farm visits.

Methods to disseminate results to other farmers were accomplished in two ways. First the farmers and project collaborators create presentations to share their project experience during the WVU Small Farm Conference after the second growing season. The farmers simply discuss the work done so far, issues encountered and how other farmers can adopt this method. Any farmers that adopt record keeping will be encouraged to follow up with the project managers to facilitate training later on. The data gathered from the case studies were used to create spreadsheets that can be used as decision-making templates. These operation budgets are based on the identified possible marketing strategies and include the time and out-of-pocket expenses involved, as well as the potential revenues from each market. Sensitivity analysis will determine which factors are key to profitability in each market. Farmers not part of the case studies will then be able to adjust these factors for their own unique situations in order to examine profit potential for different markets in their regions. For example, farmers will be able to input their own travel times to different markets along with prices received for various products to determine profit potential for each market. A poster documenting project methods and results will be used to share project results beyond the project period.

Research results and discussion:

Workshops:

 

The first workshop took place during May 14, 2012. It began with introducing the project to participating farmers and identified what was expected from the participating farmers. The workshop provided each farmer with Wiswall’s book, Organic Farmers Business Handbook to read at their leisure. Examples of crop journals and crop budget were presented and discussed. Techniques were presented for collecting and recording data. A spreadsheet created by Dr. Brown was sent by email after the workshop that can be used by the farmer to calculate net profit or loss.

 

The second workshop took place January 10, 2014. Dr. Brown presented information to the group comparing marketing outlets, completing the recordkeeping spreadsheets, and setting prices. Mary Oldham reported results from her survey which identifies obstacles WV farmers encounter while attempting to expand their farming operations. A discussion of possible solutions followed.

 

Collecting Data:

The project evolved over time. Our original goal of the project was for farmers to collect income, labor and operating expenses for all crops on their farm by crop. We learned that many of the farmers are marketing so many different crops growing on their farms that they felt this was too overwhelming. As a result, we decided to modify our expectations from farmers. We asked farmers during their second growing season in 2013 to pick two or three crops that they wanted to learn the most about and found that we had much better participation during the second year of the project.

 

Six farmers volunteered initially. Despite the $250 farmer stipend incentive for submitting records, only two farmers did report records for the 2012 growing season. Two more farmers were invited to participate one recommitted for the 2013 growing season. As a result, we ended up with five farmers that kept records in 2013. Of the five farmers, two used the spreadsheets created by Cheryl Brown adopted from Wiswall’s book referenced above, the others used their own methods to calculate their net profit or loss. Nonetheless, the quality of the data gathered was high, and thus useful as a basis for other farmers who find themselves making marketing decisions in similar situations.

 

The farmers picked a variety of specialty crops to keep records for. Crops such as field grown greens, winter high tunnel lettuce production, tomatoes, pumpkins, cucumbers, high tunnel raspberries, potted mums, and sweet corn. At the end of each season I met with any farmers needing assistance transferring their records into the spreadsheets which were useful and quite comprehensive for determining all farm related expenses. I also assisted a few to determine income generated from different market outlets and by specialty crop. Others chose to do this on their own.

 

 

Net Profitability:

 

Some of the farmer collected data indicated a net gain in the operation including: pumpkins, winter lettuce, potted flowers, raspberries, tomatoes, and cucumbers. The operations resulting in a net loss include: sweet corn, tomatoes, pumpkins, and field grown greens The most profitable operation was the high tunnel winter lettuce production which netted $2,724.44/ac and the least profitable operation was the field grown greens which netted -$12,437.83/ac.

 

Tomatoes are on both the profit and loss list because two different farmers reported records for tomatoes. It is noteworthy to mention that the farmer who found the tomatoes and cucumbers profitable included self-provisioning in his calculation. The rest of the farmers did not do this. Also, I should mention why pumpkins were located both lists as well. This was because one farmer had a complete crop loss during their second growing season.

 

The most profitable crop that data was collected for was the high tunnel winter lettuce. Although the farmer did not grow an entire acre. Its value was approximately $2,700/ac. The least profitable enterprise also growing less than an acre was the field grown greens which lost approximately $12,000/ac. The difference between the two operations was that the one was grown in the off-season and the other was not, and their marketing strategies were different. I will go into more detail in my next slides about their marketing practices.

 

Figure 1 shows data that was collected comparing the most and least profitable crops. It documents the farmer’s summary of expenses and income for the most profitable and least profitable crop. First we should note that the field size in the second operation (the field greens) is almost twice as large as the first operation. Which is equal to about the size of a 30X90 high tunnel. You’ll notice that the winter lettuce turns a profit while the field green operation nets a loss. The field green operation makes nearly three times the income as the winter lettuce operation but when comparing expenses the field green operation is much higher. More than twice as much as the winter lettuce operation. Labor costs included everything related to the operation from time spent preparing the seedbed through harvesting and marketing. The time spent growing and harvesting their crops were not terribly different. The most noticeable difference in their labor cost are associated with marketing.

 

The winter lettuce operation traveled less often and spent less time at the market (only about 10 minutes per trip). The field green operation traveled to 70 markets spending up to two hours delivering per marketing and up to 5 hours marketing not including the set up and tear down of their stand. The total time spent marketing was over 1300 hours. Clearly this farmer did make enough to cover the cost of her machinery such as the use of their rototiller and delivery truck and products such as seed and mulch, however did not come close to covering their labor cost. In order to cover the cost of the labor and traveling, the farmer growing the field greens in this situation would have to sell her product at more than twice what she was asking for. That would be over $4/head for lettuce, $6/bunch for greens, and $10/bag of mixed greens.

 

 

Figure 1. Comparison of most and least profitable operations. (see attached file)

 

Figure 2 compares the two farmers marketing outlets for their operations. The most profitable being the winter lettuce and least profitable being the field greens. I should point out that both farms are located in Barbour County. The farm which produced the winter lettuce in the high tunnel used direct marketing once and the local garden market six times to sell their lettuce. This product was later marketed wholesale to local schools through the Garden Market. The Garden Market in Philippi is set up like a consignment shop. The farmer will drop off their crops and the garden market will sell them for you for a fee. In this case they charged a 10% fee.

I also noted the distances that these two farmers traveled to each of their marketing location. The farmer marketing the summer greens traveled to distant farmers markets a total of 70 times to sell their product. I have listed them in order of the most profitable for their operation. The Bridgeport Farmers Market and Morgantown Hospital Market were most profitable. The Buckhannon market was the least profitable for them. They actually did not continue marketing in Buckhannon past mid-August because they weren’t’ selling the volume that they needed to continue marketing there. The distance to their market was between 20 and 45 miles one way.

 

 

Figure 2. Comparison of marketing outlets for the most and least profitable operations. (see attached file)

Research conclusions:

As a result of this project we learned that:

  • Farmers who participated in the project for more than one year identified areas of their operation that could be more efficient and less costly.

  • The farmers that kept records for two consecutive years saw an increase in profit during their second year of production.

Participation Summary

Education & Outreach Activities and Participation Summary

Participation Summary

Education/outreach description:

Farmer Presentation:

Four project participants, project leader, and agricultural economist presented their experience with this recordkeeping project during the annual Small Farm Conference which took place on March 1, 2014. Dr. Brown presented project background information and shared how recordkeeping can be used by farmers to improve their operation’s net profitability. The project leader shared a power point presentation of project case study results and outcomes with the audience. The project participants took a few minutes each to share their recordkeeping style, lessons learned, tips for farmers wanting to start recordkeeping, and anything else that they wanted to share with other farmers about their experience. The session was well attended and the audience was engaged asking several questions.

Poster Presentation:

A poster presentation was created by project collaborators to share with farmers and agricultural professionals. When a representative from WesMonTy RC&D travels to workshops and other events to set up a display to share what the organization has been working on, we bring this poster with us. Farmers and agricultural professionals have the opportunity to ask questions and interact with the representative about the project during their interaction.

Project Outcomes

Project outcomes:

Please refer to the results section of this report for economic analysis data.

Farmer Adoption

All farmers participating in this project shared with the project leader that they felt that recordkeeping is a time consuming yet worthwhile experience. Comments from all farmers indicate that some form of recordkeeping will continue on their farms. One farmer asked if the project was going to be extended for another year which makes one think that they would like to continue. Another farmer has registered on AgSquared.com to help them keep track of their farm recordkeeping this growing season.

Assessment of Project Approach and Areas of Further Study:

Areas needing additional study

 

This project focused on individual specialty crop profitability and also compared profitability of different marketing outlets as experienced by five West Virginia farmers. I think that additional investigation into the operations that we’ve identified as profitable and the operations that were identified as unprofitable which examines other variables which might be influencing their bottom line such as experience level of the farmer and other socio-economic factors not examined in this project to see if there are any correlations to be made between these other variables and net profitability.

 

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.