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!

References:

https://www.javelinstrategy.com/brochure/251

http://elearning2.uniroma1.it/pluginfile.php/101759/mod_resource/content/1/Thaler1999.pdf

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.

Experimentation

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!

As part of our Specialty Crop Block Grant here at the Placer-Nevada office of UC Cooperative Extension, we've been surveying local consumers about purchasing locally grown fruits and vegetables.  One of the most important questions we've been asking (at least in my opinion) is, “What keeps you from buying more locally-grown fruits and veggies?” A plurality of the responses - more than 38 percent of the people we've asked (over 1,600 people so far) indicate that lack of convenience is the most significant barrier.  By my interpretation, this response means that people would purchase more from local farmers and ranchers if locally grown products were available 7 days a week (like in a grocery store).  Indeed, some survey respondents have indicated in conversation that they would buy more locally grown produce if there were a farmers market each day of the week!  While many shoppers enjoy going to the farmers market, modern shopping habits have evolved to the point where most people don't buy all of their groceries one day per week.  Furthermore, shoppers can't make ALL of their food purchases at the farmers' market – our local markets don't have things like milk, flour, and other staples.  In other words, there are many factors wrapped up in the idea of convenience from a consumer perspective.

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.”[1]

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.”[2]

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!

 

[1] “Making the Invisible Visible: Looking Back at Fifteen Years of Local Food Distribution Solutions (October 2014), p. 5.

[2] Ibid., p. 3.

Earlier this month, I wrote a blog post entitled "Does Small = Sustainable" in response to an article in the New York Times Sunday Review ("Don't Let Your Children Grow Up to Be Farmers").  The author of the original article, Bren Smith, a farmer from East Coast, offers a number of ideas to address what he characterizes as a profitability crisis in small-scale, direct-market farming and ranching.  Other farmers and ranchers (including a number of my friends and colleagues) have disagreed with Mr. Smith's title - many of us (myself included) hope that our children will grow up to take over the family farm or ranch.  While my own experiences in trying to make a living as a small-scale sheep rancher are very similar to the challenges described by Mr. Smith, I can't help but thinking that the solutions for our corner of California might be very different.  And address these challenges we must - if we want to have a local food system that farmers' sons and daughters wish to be a part of!

 

Both of my daughters are involved in production agriculture.  My oldest, Lara, who is 16, will be showing a lamb at our county fair in two weeks - something she's done every year since she was 9.  She also has a small flock of commercial sheep that are part of our larger flock.  A junior in high school, she's an officer in her Future Farmers of America chapter.  She's also trained Mo, the best border collie we have!  Emma, an eleven-year-old sixth grader, will be showing her second lamb at the fair, along with a breeding ewe.  Like her sister, Emma has her own small commercial flock, and she sells eggs from her own flock of chickens.  In short, we're raising both our girls to have an appreciation for farming - and, perhaps, to become commercial farmers or ranchers themselves.

But given my own struggles to make a living from ranching (which I've documented in this blog), can I really recommend that my girls pursue a career trying to produce food for a local food system?  Is there a future for farming and ranching - as a commercial endeavor - in our part of the Sierra Foothills?  I think there is (all farmers are optimists - as Will Rogers said, "The farmer has to be an optimist or he wouldn't still be a farmer"), but I think we need to make some important decisions about farming as a business.

And fundamentally, farming must be a business.  Sustainable farming rests on three pillars - ecological sustainability, social sustainability and economic sustainability!  In my mind, if a farm can't stay in business (economic sustainability), it can't provide ecological or social benefits - in other words, economic sustainability is the foundation of sustainable farming.  This brings us to the evil "P" word - profit.  Without profit, I can't do simple things - like pay my mortgage, pay for health insurance - or buy the food I don't grow myself.  Profit isn't the reason that I farm, but it allows my farm to exist.

One of the best responses I've seen to "Don't Let Your Children Grow Up to Be Farmers" was written by Cody Reed, a beginning farmer from Plumas County (click here to read Cody's response).  He correctly raises a number of points that all of us - farmers and eaters - need to discuss regarding locally produced food.  Another sheep rancher, Rex Williams, responded to my Facebook link to Cody's blog with the following:

"I have always beat myself up for not being able to make my entire living off of our agricultural endeavors but after doing a little research into some local history a lot of farms of years past have had to have off farm support I have read of plenty of outfits who are successful in the second or third generation, that the patriarch had to work in the woods or milk or something for someone else to get his own farm off the ground.

"This news alone should give all of us hope that maybe, someday we can own a little of the dirt we take care of!"

Rex raises a valid point here - the history of small-scale farming in the United States is full of examples of families who work off-farm or in other trades so that they can continue farming.  In most of the commercial ranching families I know today, at least one family member works off-farm - mostly for the benefits.  While off-farm work can make life busy and stressful at times, I've found that I enjoy the combination - and the economic stability it provides!

Scale, as I've written many times before, enters the equation, too - if I can make a profit on each lamb I raise, I need to raise enough lambs to generate enough total profit to make a living.  The same goes for any other crop.  While I can adjust my standard of living to some extent (living frugally and working off-farm are the strategies I've employed), I think the fundamental issue is one of scale.  How can I grow my farm or ranch to the size necessary to make a living from it?  Conversely, are there some things I can do on the expense side of the equation that will allow me to achieve greater profitability at a smaller scale?

Over the 12 years in which we've tried to farm commercially, one of the most significant barriers to expansion has been affordable access and long-term tenure to agricultural land - especially irrigated pasture, in my case. Farmland in most of California is valued far beyond it's productive capacity - in other words, we've found that we can't purchase farmland based on the agricultural revenue it will produce.  Consequently, banks won't make loans for real estate purchased based on agricultural income.  As a result, we've always leased land (sometimes for cash payment, other times for an exchange of services - like fire protection).  While I think a written lease is important, not every landowner wants to put terms in writing.  Most of our landlords have preferred a year-to-year arrangement - which makes it difficult for us to justify making improvements to the land.  In several cases, we've been outbid by other producers for leases - in most instances, these other producers have given up the lease once they realized they paid too much.

Another barrier to scale is access to affordable capital - not just for land purchases.  As a sheep producer, most of my capital is tied up in breeding animals - currently, a commercial yearling ewe costs roughly $150.  To purchase a flock of 600 ewes (which I think is the minimum flock size needed to provide one person with a full-time wage), I'd need $90,000.  Other capital expenses include fencing, equipment (truck and trailer), livestock guardian dogs and border collies, and handling systems.  Being financially conservative by nature, most small-scale farmers (myself included) balk at taking on this much debt.

Finally, as I've written on numerous occasions, direct marketing in a community the size of Auburn may be inherently inefficient.  To sell enough lambs (700-800) each year to make my living from sheep production, I'd need to attend 4-5 markets each week the size of the Saturday Auburn farmers' market on a year-round basis.  This means hiring someone to attend the market (since I have always sold more than my employees and interns at markets, this would likely drop my sales volume) or hiring someone to do my farm chores on market days.  And I've decided that it's more important to me to go to my kids' soccer games and horseshows on Saturdays! Scale, in other words, is as important in marketing as it is in production.

And so I continue to search for answers (as most of us do).  For Bren Smith, the answers include transitioning USDA programs away from commodity crop supports and towards supports and grants for small-scale farmers.  Personally, I don't think this addresses the underlying issues I've outlined above.  Here are the ideas I'd like to see our community discuss:

• Access to Land: local government and non-governmental organizations in Placer County are focused on land conservation, including farm- and ranchland conservation.  In some cases, these entities have purchased or accepted conservation easements on agricultural land, which at least ensures these lands won't be subdivided.  In other cases, lands have been purchased outright.  I think we need to go a step further - we need a program through which the community purchases large-scale farms and ranches from willing sellers.  These lands could be made available to commercial farmers at an affordable lease rate.  We could even create a local, modern version of the Homestead Act - a long term (20+ year) lease or life estate on the farm- and ranchlands owned by agencies or NGOs could be provided to families who agree to make agricultural improvements on these lands.  In any case, we need to end the fallacy that splitting a working farm or ranch into 5 acre ranchettes keeps the land in agriculture!
• Access to Capital: commercial lending institutions (and to a large extent, USDA credit programs) are geared towards large-scale loans rather than towards meeting the needs of small-scale farming.  For example, I talked to an agricultural loan officer in my bank who told me they didn't generally make agricultural loans of less than $250,000.  The business lending officer wasn't comfortable with the risks inherent in farming - so a smaller loan would have cost me substantially more in interest.  I think crowd-funding and community lending pools might be the answer.  Finding a way to make capital affordable - and a way to give the community some direct financial involvement in its own food system, might help small growers invest in their businesses.
• Collaborative Marketing: personally, I like the term "cooperative," but the failure of several California marketing cooperatives (Tri-Valley Growers, for example) in the last 20 years makes it a dirty word in some farming circles.  That said, I think we need more collaboration.  Consumers consistently tell us that convenience is a real barrier to eating locally grown food - some folks simply can't get to the farmers' market.  On the flip side, I don't know of any small-scale farmer who wants to go to more farmers' markets each week - especially without some guarantee of sufficient sales volume.  Perhaps we need to look at other collaborative marketing models - art galleries or antique malls come to mind.