- Author: Molly Nakahara
We like to get farmers and ranchers together and ask them this question: What could go wrong? Preferably after they've had a good night's sleep and a filling breakfast and at a time of year when their farms and ranches are relatively quiet. It is not the happiest of conversations, to say the least. But we feel that talking about farm and ranch risks, and hopefully, taking steps to create resilience in the face of these challenges, is critical to the success of agricultural businesses. Having a plan of action in the face of unforeseen crisis can be the difference between making it and losing it all.
Here are a few topics that came out of recent Risk Management discussions held during our Farm Business Planning short course and Farmer-to-Farmer Networking Breakfasts (for info on both of these events, visit our Foothill Farming website.)
Human Risk – What happens if you get hurt or sick?
This is not a fun topic. Knock on wood, you will be fit as a fiddle into a ripe old age. But what if? You need to buy health insurance. Period. You don't have the money or time to deal with being uninsured when you need health care. Take it from a gal who's racked up hundreds of thousands of dollars in medical bills, health insurance is well worth the investment.
You also need to have an Operations Manual. Do it right now! Write down each enterprise that your business relies on and the basics of keeping it functioning from day to day. It can be rough but should be enough information that a person could read the thing and keep everybody/thing alive. Print it out and keep it in an obvious place, like a binder that says “Operations Manual.” Tah Dah! Your business just became more resilient.
Now you need a designated person/persons who can read the Operations Manual and run your farm in your absence. Employees are a good place to start as they probably have a good idea already. How about a neighbor or good friend? Have them over for a cup of tea and show them where the operations manual is kept. Maybe walk through a typical feeding of the animals or watering the greenhouse. How about a farm buddy system? I'll be your emergency farmer if you'll be mine.
Marketing Risk – What if there is a sudden change to your sales outlets?
Marketing risk is a much tougher nut to crack and prepare for. We build our businesses around projected sales to retail outlets, restaurants, and farmers' markets. What if one of those outlets suddenly became unavailable? You've produced the product and may not have another buyer lined up, so what options do you have?
Jim Muck of Jim's Produce has a good strategy. He tries to always have three potential outlets for a farm product, e.g. Restaurant A, Restaurant B, and Grocery Store X. While he may have made a commitment to Restaurant A for the season, he knows that if Restaurant A were to go out of business both Restaurant B and Grocery Store X would likely be interested in the product he was supposed to sell to Restaurant A.
So what are your options? Would your wholesaler buy more? Do you have a relationship with a Farmers' Market Association that will allow you to attend a market at the last minute? How about a place that will always take a bulk order to make jam or salsa? As Paul Muller of Full Belly Farm says, a successful farmer must spend her time “100% farming and 100% marketing.” Take a moment to identify your most risky marketing outlet and create a back-up plan for that product.
Legal Risks – Are you above board with your employees?
If you aren't filing payroll tax and covering workers with workers compensation insurance, you're walking on thin ice (and technically, breaking the law.) While talk of the costs may have dissuaded you from hiring employees the right way, it's time to make the switch. And if you think you can't afford minor costs like payroll tax and insurance, you may have bigger problems in your production plans than you realize. These costs are insignificant enough that you should be able to pay for them if you can afford hired labor. The risk of getting busted for violating labor laws is significant and fines could very well put your farm or ranch out of business. Time to read up on how to follow the law (getting legal?.
Financial Risks – How well do you understand your Cash flow?
It is likely that your farm and ranch business goes through ups and downs in your cash flow cycle. Our work is largely dependent on the seasons and cycles of animals and therefore there are times when we have a lot of cash coming into the business and there are times when there is not a lot coming in. For many of us, when we have the least amount of cash coming is also when we have a lot of cash going out! Create a cash flow budget for your farm that shows the months across the top and different categories of income and expense along the side. You can then go through and project income and expense by month. This will help you plan for when cash is short, and budget more stringently when income is strong. Another strategy to weather a lopsided cash flow is to move major bills and payments to times of the year when you have income. For example, pay for liability insurance in August instead of February.
Production Risk – Do you have a plan for wildfire?
We farm in a part of California with a particularly high threat of wildfire. Now is a great time to get your wildfire plan written down and understood by all involved. Do all of your properties have at least two exits? What will happen to your livestock if you happen to be out of the area when a fire threatens your farm? Did you know that Cal Fire does not want you to leave sprinklers on when you evacuate and would rather you place buckets of water around structures? Do you maintain 100 feet of defensible space around all outbuildings? There are a lot of great resources available online to help you get started creating a plan. Start off by reading this Foothill Farming blog post on wildfire planning: http://ucanr.edu/sites/placernevadasmallfarms/blog/?blogpost=19003&blogasset=24945
One of the most important parts of managing risk on your farm is preparing yourself for the emotional toll that accompanies all of these scenarios. By taking a moment to think through a list of potential risks and what actions you'll take in the face of these risks, you are making yourself more resilient. Understandably, an initial reaction to these scary situations is to avoid thinking about them altogether. By looking at these risks as hypothetical situations, we are training ourselves and our businesses to react effectively if and when we need to.
For more information on the types of risk your farm or ranch needs to prepare for, visit the Risk Management section of our Foothill Farming website: http://ucanr.edu/sites/placernevadasmallfarms/Farm_Business_Planning-_new_2/FBP_Risk_Management/Risk_Management/
- Author: Molly Nakahara
- Author: James Muck
As we farmers and ranchers determinedly pace the rows of trees, as we tread upon the fields of foliage and flowers, and herd our stock across green and brown pastures, an underworld of microbiology and geology hums beneath our feet. Hold a handful of soil in your hands and you hold billions of micro-organisms. More importantly, you hold the cornerstone of productivity on your farm. With all of the work required by the production of food and fodder, it is easy to overlook the significance of soil. It is also easy to postpone the improvements to the soil that can greatly impact the yields and health of farm plants and animals. It is vital for all farmers, ranchers, and orchardists to incorporate soil building into our annual routines.
The first and most important step in improving your farm and ranch soil is to understand the make-up of your soil and create an action plan for improvement. To do this, you will need to take a soil sample for analysis. To accurately take a soil sample for analysis by a professional laboratory, a very specific protocol must be followed. Please watch our recently published video on soil sampling for more information (https://youtu.be/eo2pS9mSZi8) We also have a publication on taking a soil sample for analysis available on our Foothill Farming website (http://ucanr.edu/sites/placernevadasmallfarms/files/142586.pdf).
Once you have your results from your soil test, you will need to spend some time interpreting the information. This is often a sticking point for farmers- all of that chemistry and so little time to understand what to do. Soil is a complicated living system and making a mistake in what and how much you add to your soil can have dire consequences for your crops. That sounds scary, so no wonder farmers are intimidated.
The good news is that you can ask the soil lab that analyzed your samples to give you recommendations for soil amendments and application rates. If your farm is organic be sure to tell the lab that you want organic advice, otherwise you will get conventional farming suggestions. The soil lab, at a minimum, should be able to tell you how much nitrogen, phosphorous, and potassium, you will need to apply in order to achieve good yields. Depending on the lab and the tests you requested you can also get recommendations for how much and what kind of lime to apply; if you need trace minerals like boron, sulfur, or zinc; and how many tons of compost you should add. Different soil labs use different test methods so it is a good idea to use the same lab to test your soil each year. In other words, once you get going on a soil fertility plan from one lab, stick with it. Soil building takes years so you must be patient and consistent in both your testing and following of the lab's recommendations.
You do not have to get recommendations from a soil lab. You can learn how to read your soil test results and then develop your own soil building plan. To learn how to read soil lab test results start by taking one of the interpreting soil test results workshops offered by the UC Cooperative Extension. Be sure to keep an eye on the event calendar on the Foothill Farming website for the next workshop.
- Author: Molly Nakahara
70% of all purchases are made with plastic!
Did you know that cash is used at only 25% of point of sale purchases? Predictions are that cash will be used even less as more alternative payment methods become available. Debit and credit cards are used for over 70% of purchases. Customers enjoy the flexibility and ease of using plastic to pay for purchases. And research shows that consumers spend differently with credit cards than they do with cash! "Mental accounting” is the idea that people treat money differently based on a number of factors: where the money came from (salary vs. gift), the size of a transaction, and the form the money is in when a purchase is made. That last one is important – people tend to spend more money paying by card than paying with cash; i.e. when they don't actually see those dollars and cents leaving their hands. You should not use a credit card reader because it is a stealthy way to dupe your customers into purchasing more of your gorgeous veggies. But it is undeniable that accepting cash only sales severely limits the number of potential customers you may have at a farmers' market.
But what about the fees?!
All credit card processing companies do charge a service fee, usually around 2.75%. It may be a good idea to set a minimum for card purchases – $10. You can also feel comfortable passing the processing fee to customers by charging a convenience fee per swipe (consumers do this all of the time- think about the fees for pumping gas or withdrawing money from an ATM.) In my personal experience as a farmers' market vendor, customers often forget to grab their cash or hit the bank before a market and are relieved that they don't have to limit their market purchases. They enthusiastically whip out their plastic and are tickled by the user-friendly technology they get to use. Writing a signature across the screen of a smartphone is fun! Remember: you can always let people know that you prefer cash but having your credit card reader will help you build your customer base and make shopping at your market booth more convenient. It will probably also increase your sales.
How do I get started?
It is very simple to set up and use a smartphone credit card reader. You must have a smartphone that has a data plan (i.e. access to the Internet through a network.) Next step- set up an account with a smartphone credit card reading company. Square Up is the most used card reader available currently, though Intuit and Paypal both have similar products. I recommend Square. It is free, simple, used at many retail locations and customers are familiar with it. Once you have an account set up, you will receive a free credit card reader in the mail.It plugs into the headphone jack of your phone. You will also need to download the free app that accompanies the card reader. If you are feeling intimidated, ask a fellow market vendor for a quick tutorial.
Great sales tracking!
Once you have an account with Square, you can customize your account to track your sales. You can create “items” with specific prices or leave prices blank to fill in at check-out (in the case of items that you sell by weight.) A few quick taps of the finger and instead of a $30 payment without any details, you can record transaction details: 1 bouquet, 3 baskets of berries, and 2 pounds of tomatoes.
Another great tracking and management tool is the ability to set up employee profiles. Your employees can access your square account using a password that you assign. You are able to specify what each employee is able to do; ie accept payments, access sales records, etc.
A few tips
- You will need to update your card reader every year or so to keep up with the changing technology and improvements that Square makes. This is free to do and you will receive a reminder email. You can have as many card readers as you like- always good to have a back-up on hand.
- Square will save the personal information a customer enters to receive a receipt (either as a text message or email.) You can skip the receipt- I remind people that they will see the charge on their credit card or bank statement.
- The money you accept through Square is deposited to your specified bank account the next business day. For weekend farmers markets, this means you won't see the money until Monday. Don't forget to include these sales in your farmers' market accounting.
- Be sure to make a big sign for the farmers' market letting customers know that you accept plastic! Square will provide you with a small window decal, but you need a sign that catches the eye from across the market!
Using this technology is simple and many of you already possess the tools needed (i.e. a smartphone) to offer this simple service to your customers. Get started today!
- Author: Dan Macon
Like any small business, small farms undergo a series of transformations during the course of their lives - from youthful exuberance to middle-age crisis to confident maturity (hopefully). Looking at the history of my own farming endeavors, I see that we've traversed at least four evolutionary stages – and we're hopefully headed for a fifth!
The Romance Phase
In the mid-1990s, we raised a handful of cows and feeder lambs. I read many of the key books in the small farm movement (from authors like Joel Salatin, Elliot Coleman and Gene Logsdon). We sold calves when we weaned them in the springtime, and we raised enough feeder lambs for friends and family that we could put a lamb (or two) in our freezer each fall at no cost to us. I served on the board of a relatively new local food organization (PlacerGROWN), and we started raising laying hens and growing vegetables. With a growing family and a dream of creating our own small farm, we purchased 3 acres with 2 barns and a home in Auburn. In the autumn of 2002, I took our first crop (pumpkins and popcorn) to the Auburn Farmers' Market. We also purchased 10 meat goats and more feeder lambs to manage the blackberries and weeds in our pasture. We were on our way!
Looking back, I realize that I didn't know enough to realize that the books I was reading were long on production systems and short on business reality. In many ways, I drank the cool-aid, as my friend and fellow farmer Jim Muck says. Micro farms, like the one I'd just started, were going to save the world from industrial food production. I had no concept about the importance of scale to the future viability of my business.
I'm not sure there's a clear delineation for most small farms between the romance and experimentation phases. For Flying Mule Farm, part of the romance and excitement about starting our farm was the opportunity to experiment with new crops and new livestock. Part of our experimentation was driven by the mistaken belief that we needed to grow everything our customers wanted to buy (and everything we wanted to eat). Specialization and focus was the downfall of industrial agriculture, in my perspective. Diversity was the key – every successful small farm needed multiple crops and several species of livestock. During this phase, we grew spring, summer and fall vegetables (at the peak of our vegetable experiment, we grew on about a quarter acre at home and on another acre of rented land nearby). We started experimenting with greater numbers of sheep, buying 12 Barbados lambs to graze on brush on a friend's timberland. We added meat birds to our chicken flock (our oldest daughter, Lara, reminds us that we butchered chickens – with her help! – on her first day of kindergarten). We sold most of our own brush goats but eventually bought breeding ewes. We leased (and lost – and regained) pasture land in Grass Valley, Lincoln and Auburn during this stage. We tried cutting firewood and milling lumber commercially. And we experimented with the use of draft animals as an alternative to tractors.
In many ways, I loved the experimental phase of our business – especially the outdoor work and our time at the farmers' market. Since we were only at the market seasonally, I still had some Saturdays off. And since our oldest child wasn't yet playing sports on Saturdays, I wasn't conflicted about missing family activities - more on this later!
Wow – this is costing us a fortune! Maybe we need to treat it as a business!
As our knowledge and skill levels improved, we began to see that we needed to treat our farm as a business. We couldn't simply keep growing and raising things without understanding what each crop or type of livestock meant to our economic and financial well-being. The books I'd read didn't seem to emphasize this aspect of farming. And in the back of my head, I began to realize that there were biological limits to the amount of income an acre of vegetables or 100 acres of unirrigated pasture would produce. I started to suspect that we needed to get bigger.
During this stage in our evolution, I participated in the first Farm Business Planning Short Course offered by our local extension office (I've since helped teach this class – now in its eighth year). While I examined all of our enterprises (looking at my economic analysis spreadsheets from that time, I see that we had vegetable, sheep, custom grazing, goats, firewood and other forest products, laying hens and meat chickens). While I was still working part-time, I started thinking seriously about the hourly return to my labor from each of these enterprises. I realized I didn't care for raising meat chickens in large numbers (we raised 500 birds one summer). I also realized that a quarter acre of mixed vegetables (as many as 20 different “crops”) was a large garden rather than an economically viable farm. And I realized that I most enjoyed working with sheep. With this new sense of focus, I decided to quit my “day” job and try to raise sheep as a full time occupation. In addition to leasing pasture around Auburn, we expanded our targeted grazing service (where we'd provide vegetation management services for other landowners). At our peak, we attended 4-5 farmers markets each week – selling grassfed lamb, goat and beef, as well as wool products and firewood on occasion.
As my daughters grew older and wanted to play sports (as I had as a kid), I found it more and more difficult to be at the farmers market on Saturday mornings. On the other hand, we often worked together as a family, which brought tremendous nonfinancial rewards. And we ate well – we traded meat for fruits and vegetables at farmers markets, produced eggs from our own laying hens, raised our own meat birds. But the economics were challenging to say the least.
Why am I still farming? Can I continue?
For me, these questions define the evolutionary stage in which I find Flying Mule Farm today. Several years ago, we came to the conclusion that the farm was taking full-time work on my part, but was paying less than a part-time wage. We exhausted our ability to expand (which had mostly to do with lack of capital and lack of land). I went back to work, and we downsized our sheep operation to fit the time I had available. We started selling whole and half lambs rather than individual cuts – and eventually phased out of the farmers market altogether. I gradually noticed that my motivation for farming was derived not from a desire to feed my community but from my love for working outdoors with livestock. My skills and knowledge base improved to the point where I was confident I could manage the 600-800 ewes necessary to make the ranch a full-time job at full-time pay – but my bank account didn't keep pace. And so today I find myself at a critical juncture – can (and should) I continue farming? I'm struggling with how to answer this question.
Economic Viability = Sustainability
A sustainable farm must be environmentally, socially and economically sustainable. As Flying Mule Farm has evolved, I've begun to think that economic sustainability is the key to the other two elements – a farm that can't stay in business can't provide environmental or social benefits. Based on my experience over the last 20 years, I think that economic viability depends on focused production, appropriate scale, and efficient marketing. I'm still working to get there – on a part-time basis at the moment.
Our farm has been in the midst of its mid-life crisis for several years. I still appreciate the numerous non-monetary rewards of farming – from the gift of new life during lambing season to the opportunity to work side-by-side with my wife and girls. I love the work like nothing else I've ever done. As we enter this new phase in the evolution of Flying Mule Farm, I'll be aiming towards greater profitability. While profit is not the purpose of our farm, it is, after all, necessary for its continued existence. Stay tuned….
Note: Paul Mueller one of the founders and owners of Full Belly Farm, will be joining us for our Farmer-to-Farmer Breakfast on December 3! He'll be talking about how Full Belly Farm has evolved - I can't wait to hear what he has to say! Click here for more information!
- Author: Dan Macon
As a rancher, marketing convenience has a very different meaning for me. A convenient market, for me, means a place where I can sell a high volume of product, at retail prices (or close to it), with minimal time commitment on my part. Convenience, by my definition, has a great deal to do with efficiency. As a rancher, I can't afford to go to more than one or two farmers markets per week – let alone seven!
In many parts of the country, communities have turned to the concept of a food hub as a way to increase marketing efficiency for producers and convenience for consumers. In the food hub model, producers can sell higher volumes and close-to-retail prices to the food hub. The hub then distributes the produce to chefs, retailers, and even directly to consumers. The Community Alliance with Family Farmers (CAFF) says,
“Many stakeholders in local food systems work have looked to the emergence of food hubs as the missing infrastructural link that will enable greater access to markets for small farmers and greater access to fresh, local food for communities. The USDA definition of a food hub is a “business or organization that actively manages the aggregation, distribution, and marketing of source-identified food products primarily from local and regional producers to strengthen their ability to satisfy wholesale, retail, and institutional demand.”
From my perspective, a food hub operates like a locally-focused produce distributor – like a middleman that facilitates the sale of locally grown fruits, vegetables, meats, etc. within a community or region.
Food hubs differ from conventional distribution middlemen, in my opinion, primarily by lack of a profit motive. Food hubs – at least those with which I'm familiar – are motivated by a desire to serve community needs (e.g., access to healthy, local food and increased viability of local small farms), rather than by a desire to generate profit. Like many farmers, however, food hubs often discover that profit is vital to their survival – without profit, a food hub can't pay overhead expenses, let alone the farmers and ranchers it supposed to serve. At the other end of the supply chain, food hubs can't serve community customers if they aren't economically sustainable.
CAFF puts it like this:
“As a result of our efforts over the last decade, CAFF concludes that new, stand-alone facilities and aggregation hubs, unless farmer owned and operated, are not viable enterprises in California. These third party food hubs add on an extra layer of costs to the supply chain, duplicate existing efforts/infrastructure, and struggle financially without subsidy. In our view, a more effective strategy for local food system development is achieved not by establishing a stand-alone food hub as described above, but rather by working collaboratively to modify existing infrastructure and fostering supply chain values among a broad set of food system stakeholders while also educating the community about local food and engaging them in the movement. Ultimately, CAFF hopes that our findings and experience will help advance the theory and practice of local food system development and inform future decision-making processes around the need for new food hubs in California.”
Food hubs can be subsidized in various ways. Growers can donate time and facilities to these hubs, or they can take lower prices or deferred payments. Similarly customers can pay higher prices, or likewise donate time and facilities. In the long run, however, such subsidies are not sustainable.
What's the answer, then, to this conundrum? How do we match the needs of local consumers (for markets that are time- and location-convenient) with the needs of farmers and ranchers (for markets that are efficient and fair in terms of price and volume)? As CAFF suggests, perhaps we need to work within the existing aggregation and distribution infrastructure. In this scenario, consumer demand for locally grown food would carry back through the supply chain, from the retailer to the distributor to the producer. At the same time, a small family farm's need for higher prices could carry through this same set of middlemen to the retailer (and ultimately to the consumer). For me, the key to these issues is that we need to discuss our local food system as a community. Too often, farmers talk amongst themselves without including the rest of the food system. Sometimes (believe it or not!), we even complain that profiteering in the processing, distribution or retail sectors comes at our expense as farmers! Similarly, local food advocates often leave the idea of profit (within any segment of the system) out of their discussions. It's time we all talked together!
 “Making the Invisible Visible: Looking Back at Fifteen Years of Local Food Distribution Solutions (October 2014), p. 5.
 Ibid., p. 3.