2003 Annual Report for LNC01-194
Profit by Planning: Helping Fresh Market Vegetable Growers Meet Financial Goals and Improve their Quality of Life
Summary
Economic data and quality of life indicators were gathered on 19 participating fresh-market produce farms during the 2003 growing season. These farms represented various scales (1-62 acres) and various combinations of marketing strategies (CSA, farmers’ markets, farm stands, and wholesale). Visits to the farms were made to collect detailed background information. A meeting for project participants was held in February, 2004 to collectively discuss results and trends based on the data, which were presented as a series of ratios (gross per acre, net per acre, labor hours per acre, net to gross, etc.). At this meeting, growers engaged in a lively exchange about their farming systems, profitability, and quality of life. The group also evaluated the project’s record keeping systems and ratio analysis tool and evaluated the project.
Objectives/Performance Targets
- Growers and farm-support personnel will increase their knowledge and understanding of the economics of fresh produce farming and direct marketing.
Growers will adopt and maintain successful record-keeping systems.
Growers will adopt new decision-making methods, management approaches, cropping and harvesting systems, technologies, or marketing strategies to make their farms more profitable and improve their quality of life.
Accomplishments/Milestones
1. Growers and farm-support personnel will increase their knowledge and understanding of the economic and quality of life dimensions of fresh produce farming and direct marketing.
Economic data and indicators of quality of life were gathered on 21 participating fresh-market produce farms during the 2002 growing season and 19 farms during the 2003 season. Two of the farms from the 2002 season failed to meet criteria for participation in the project and thus were dropped in 2003. The data on both years has been through an initial analysis by the primary investigator and a summary was presented to participants at a meeting in February, 2004. Participants engaged in a lively discussion about their farming systems, profitability, and quality of life. The growers in the project have developed a strong sense of trust and spoke very openly and frankly about both financial and personal (quality of life) issues. Many of the growers have already used the information from the project to implement changes on their farm while others are using the data to set goals and make changes on their farm in the near future. The growers were unanimous in there sentiment that the project has been invaluable in terms of expanding there knowledge and perspective on the economics of fresh market vegetable farming especially as it relates to scale. Growers also report that the record-keeping exercise associated with the project will help them better understand labor inputs on their farms and get a better understanding of their costs of production.
A testament to the usefulness of the project is the fact that all the participants expressed an eagerness to extend the project for an additional year, even though stipends and travel expenses would likely not be able to be covered. Not only do the growers value the time for exchange with their peers but there is a sense that three years worth of data would be considerably more valuable than two.
Project data and outcomes have already been used at several workshops and conferences (Wisconsin School for Beginning Market Growers, Wisconsin Fruit and Vegetable Conference, Upper Midwest Organic Farming Conference). When formal publications are complete they will provide an invaluable resource for existing growers, beginning growers, and farm support personnel. The publications planned (see below for a description) will fill noticeable gap in the literature by providing a picture of the economic and quality of life dimensions of fresh produce farming and direct marketing.
2. Growers will adopt and maintain successful record-keeping systems.
Participants in the project gathered at an initial informational and training session in March 2002. At this meeting, the group developed a consensus on what information would be recorded, and discussed various record-keeping systems (spread sheets, notebooks or diaries, calendar-based systems, etc.) that would fit for each farm. Sample record-keeping forms were distributed via mail following this meetings as well as a detailed list of data to be collected. At the winter meeting in February 2003, however, it was determined that several of the data points were not well defined and the group proposed and implemented changes. For example, the original definition of net income was too complicated and created inaccuracies across farms. There were also far too many ratios presented at the meeting and the group chose to simplify the project down to the most important and telling labor, acreage, and financial figures. Through year two of the project, most growers reported that their record-keeping systems were improved and less time consuming than in year one. In most cases, farm data was submitted to the primary investigator earlier, with fewer questions, and was more accurate and complete. Interestingly, growers found many different ways to collect and record the data, particularly labor hours. Some utilized computer spreadsheets, others used daily diaries/notebooks, while others used standard calendars. Details of these record keeping systems and sample forms will be included in the project’s final report.
3. Growers will adopt new decision-making methods, management approaches, cropping and harvesting systems, technologies, or marketing strategies to make their farms more profitable and improve their quality of life.
This last outcome was projected to be the focus of year two of the project (2003 growing season). One of the main objectives of the 2-day project meeting in February 2003 was to have growers discuss ways that they can improve their farms’ financial outlook and their quality of life by using the data from year one to suggest improvements in year two. As noted above, much of this meeting ended up being used to “redefine” some of the data points in the project (such as net income) and focus the project on a narrower set of key economic ratios. Due to the length of this discussion, there was not adequate time for a conversation about ways to use the data to make improvements for 2003 on individual farms. At the meeting in 2004, however, there was time for growers to report about ways they used information from the project to implement changes on their farms during the 2003 season. The following examples demonstrate ways the data from this project can be used by growers.
One farm in the study observed that, in comparison to other farms in their scale range, they had very low external labor inputs. Thus, they made the decision to hire more part-time labor in 2003. Because this farm operates as a community supported agriculture farm, they communicated with their membership about this change and increased their share price in order to cover the increase in employee payroll. The end result was one of the best years on their farm in terms of their quality of life (lower stress) and the farm was also financially very solid.
Another farm used the labor hour record-keeping system to better determine their labor needs as well as make changes to product pricing based on labor inputs and expenses.
Still another farm has recognized that they are undercapitalized in terms of equipment in their scale range and are thus making plans to purchase some machinery and tools that will allow them to work more efficiently and increase the amount they produce.
While these examples provide proof that the project can and will have impacts on many of the participating farms and other farms that utilize the ratio analysis system, it became apparent that it simply takes more than two years for some farms to observe trends and lessons from the data and actually implement changes and witness improvements in quality of life and financial health. A small number of growers indicated that they did not think that the ratios alone provided a tool for decision-making. These growers remain committed to the project and appreciate the perspective that the ratios offer, but have other systems and tools for decision-making.
Impacts and Contributions/Outcomes
The impacts and outcomes of this project will become clearer in the future as participating growers have time to glean lessons from the data and implement changes and witness improvements in quality of life and financial health. Participating growers have been extremely thankful for the project and its goals. There is strong interest from other growers and farm support personnel in the project and many are eager to learn more about the project via final publications, workshops, and other outreach activities. Clearly, profitability and quality of life are major concerns for fresh market produce growers. This project will fill a void recognized by existing and beginning produce growers: while there are many resources dealing with production issues, far too little information exists on the economics of growing and marketing fresh produce. A set of three publications will be produced that describe the profile and characteristics of fresh market vegetable farms by scale of enterprise: the market garden, the small market farm, and the large vegetable farm. These publications will include sample budgets, equipment lists, economic profiles (gross and net income per acre, labor needs, net-to-gross ratios, etc.), entry strategies, special challenges, keys to success, and case studies. Each publication will also include a synopsis of the ratio analysis tool and record keeping requirements. These publications will be useful for existing growers as they will provide “guideposts” to compare their farm or provide information helpful when considering expansion. Beginning growers will benefit from having a clearer picture of start-up costs, operating budgets, and realistic income expectations.
This project confirms that fresh market vegetable farming can achieve impressive gross and net incomes per acre. Average gross income for the different farm scales ranged from $8,000 to over $12,000 per acre. Net incomes averaged around 42 percent of net, although there was significant variability. Average net income for the different farm scales ranged between $3,000 and $8,000 per acre. These impressive returns are tempered by the long, hard hours involved in planning, production, and marketing. Translating net income into an hourly wage was sobering for some growers. Fresh market vegetable farming also requires an extensive set of skills and not insignificant capital investment. The project’s final report will include a more complete discussion of the economic ratios and the financial characteristics of different scales of fresh market vegetable production.
The growers in the project have expressed their gratitude for a project that specifically addresses smaller-scale, fresh-produce farms—a somewhat neglected group of agricultural producers in terms of Land Grant University research and outreach. Thus, this project serves as a relationship-building and capacity-building effort as it will help develop a stronger connection between growers and the University of Wisconsin.