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!
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.
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.
On the same day that the Mercury News printed this graphic, the UC Davis Center for Watershed Sciences released its “Economic Analysis of the 2014 Drought for California Agriculture.” Lest there be any doubt that California is in the midst of a severe drought that is having profound impacts on farmers and ranchers, here are a few of the study's key findings:
- California is enduring its third driest year on record as agricultural, urban and environmental demands for water are at an all-time high. In other words, this year has been one of the driest in our history – and California's population has never been higher.
- The 2014 drought is responsible for the greatest absolute reduction to water availability for agriculture ever seen, given the high agricultural demands and low streamflows and reservoir levels. Surface water availability is expected to be reduced by about one-third.
- The 2014 drought will result in a 6.6 million acre-feet reduction in surface water available to agriculture. This loss of surface water will be partially replaced by increasing groundwater pumping by 5 million acre-feet.
- The net water shortage of 1.6 million acre-feet will cause losses of $810 million in crop revenue and $203 million in dairy and other livestock value, plus additional ground water pumping costs of $454 million. These direct costs to agriculture total $1.5 billion.
- The total statewide economic cost of the 2014 drought is $2.2 billion, with a total loss of 17,100 seasonal and part-time jobs.
- California farmers will fallow approximately 428,000 acres of farmland in 2014 (other reports put this estimate as high as 800,000 acres). Most of the fallowed land is estimated to be feed and other annual crops, including pasture. At the individual farm level, fallowing land creates significant cash-flow challenges. Some farms may not survive economically; some may be forced to sell land for development. These farms and ranches grow food for all of us! Each fallowed acre reduces the amount of food and fiber available for all Californians!
- In the Central Valley, high-value crops including vegetables, non-tree fruits and permanent crops represent less than 13 percent of total fallowing as growers direct scarce water to the highest value use. Scarce water supplies are being used to keep almond, pistachio and walnut trees alive, rather than to grow annual field crops. These orchard crops represent significant capital expenditures; farmers can't simply fallow an orchard one year and resume production the next.
- Alfalfa hay prices have increased 40 percent since January 2014. This impacts the cost of production for dairy farmers, and to a lesser extent, for other livestock producers. Many foothill ranchers have already felt the impacts of this price increase; they had to purchase hay to make it through the exceptionally dry winter. Ranchers who market directly to consumers have had to raise their meat prices.
- The California drought, especially the lack of rain in the winter of 2013-2014 reduced pasture quality and the number of cattle [and other rangeland livestock] per acre substantially during the crucial winter and spring period of calving and raising feeder cattle on pasture. Once the grass started to grow in March and April, many ranchers did not have enough animals to fully utilize the forage, creating fuel-loading problems on many ranches. Several wildfires this summer have impacted ranches that were forced to de-stock during the winter.
- The combined socioeconomic (reduced production, job losses, economic losses, etc.) effects of the 2014 drought are up to 50 percent more severe than in 2009.
But what happens if the drought continues? According to the report, “Statistically, the drought is likely to continue through 2015 – regardless of El Nino conditions.”
- Failure to replenish groundwater in wet years will continue to reduce groundwater availability to sustain agriculture – particularly more profitable permanent crops – during California's frequent droughts. The recent plantings of almond and walnut orchards on the edges of the Valley are at risk.
- If the drought continues for two additional years, groundwater substitution will remain the primary response to surface water shortage, with decreases in groundwater pumping capabilities and increasing costs due to declining water levels.
- A continued drought also increases the vulnerability of agriculture, as urban users with largely adequate supplies in 2014 would likely buy water from agricultural areas. This means more land will be fallowed and more farms will go out of business.
Obviously, rural communities are especially vulnerable to the drought. Communities that depend on farming and ranching as their economic base are already suffering from the loss of jobs and farming income. Drought-induced reductions in food production (and related increases in production costs) will ultimately lead to higher food prices – at the supermarket as well as at the farmers' market. As the housing market recovers, many farm and ranch families may decide to sell their land for development.
So what can we do? We can't make it rain – believe me, I've tried everything I can think of! As farmers and ranchers, we must continue to hope for the best but prepare for the worst. We need to develop drought plans – what will we do if the drought continues? For my family's sheep operation, this means keeping a careful eye on our carrying capacity and stocking rates. For foothill fruit growers, this may mean deciding which trees to save and which to let die.
While most residential water users are used to having their water metered, much of the irrigation water in the foothills is delivered through a network of canals by the miner's inch (a vestige of our Gold Rush heritage, a miner's inch is equal to 11.22 gallons per minute). As an irrigator, I have two options for conserving water: I can purchase less water from my irrigation district, or I can invest in technology and management systems that allow me to irrigate more acreage with my full allotment of water. On several of our leased pastures, we've opted to make our water go further. If the Nevada Irrigation District (NID) is forced to reduce deliveries next year by a fourth consecutive dry year, we'll have to get by with less – and reduce our flock accordingly. We simply don't have the ability to replace our NID water with groundwater.
What can we do at home? We've always turned off the tap while brushing our teeth and shaving. This year, we're putting a bucket in the shower while waiting for the water to get hot – and we're using this water for plants and for drinking water for our pets. We've also limited the amount of landscaping irrigation that we're doing – our lawn is drier than normal, and we're using some of our yard space to grow food instead of ornamental plants. If the drought continues, we'll consider tearing out more lawn.
Drought has always been a fact of life for California. I've seen evidence that the last half of the 20th Century were wetter than normal for our state – perhaps drought is more ordinary than we realize. And while many farms and ranches have learned to get by on less water, the map at the beginning of this article suggests that many of our urban neighbors are not aware that we're in a drought. If our current dry spell persists, however, we'll all be forced to make some difficult decisions.
Here's the bottom line: no matter how we define “locally grown,” if the drought persists, we'll all have difficulty finding locally grown food!
- Author: Molly Nakahara
Winter, my friends, is upon us. Does it always come so quickly? Though my mind spins with the ‘what ifs?’ of this closing season, I love the optimism and potential that December and January seem to always bring. With more hours of darkness in the evening, not only am I getting more sleep, I am also finding more time to dream of my “next year” farm. Oh, the “next year” farm, that beautiful beacon of financial stability and production perfection. There is not a weed in the field, the market tables are piled high with a huge selection of quality products, the animals are behind their fences, I am rested and look beautiful, and the bank account is busting at the seams. I always say (or heard said once and now repeat often), “To be a farmer you must be an optimist.” We learn from our mistakes and build upon failure, year after year after hopeful year.
How, exactly, do you learn from your mistakes? The qualitative data often seems undeniable. I remember not selling those bunches of X at market. I remember how long it took to harvest and process Y. But what of the real numbers? Perhaps the crop that in my mind seems a waste of time is actually making money due to low production costs and high sticker price. Maybe my market stand-by, the crop I always sell out of, is actually losing money because of the cost of labor at harvest. As farm business owners, we need to capture this data in order to make truly informed decisions about what we should produce. You, of course, have to grow what you love, but you also need to grow what makes you money if you want to continue farming as a profession. For those of us that sell at Farmers’ Markets, the market load list is an important tool that we should all be taking advantage of.
A load list is a way to document which crops you bring to market, the quantity you bring, the unit you sell each crop by (bunches, pounds), the price per unit, and the amount leftover at the end of market. Most farmers’ markets require you to fill out a load list for their own records though they do not take price into account. A well-kept load list will help you to figure out which crops are making money and which may be losing money. It will also help you understand sales trends (beginning vs. the end of the month; seasonal fluctuations) and help you understand the most efficient quantity of product to bring to market (not too much, not too little, but just right.)
It can be a challenge to implement a load list. I suggest thinking about a system that will work for you and your farm. Is no one filling out the harvest notes making it tough to know what quantity of which crop is loaded in the market truck? Maybe a label on each box with quantity is all you need. Then, whoever sells at the farmers’ market can quickly fill-in a load list. Is the load list kept in a tucked away location in the farmers’ market supplies and always forgotten? Try keeping it in the cash box. There is no reason to re-invent the wheel- ask for two copies of the load list required by your market and take one home. And yes, if you are on top of your game, you will enter these sales numbers into your spreadsheets, etc., when you get home and count your cash, but don’t worry if you would prefer to file them away until later to look at. If you have done the latter, now is the time to pull them out and determine which crops are making and losing money. With smart decision making based on actual sales data, your “next year” dream farm might actually come true!
Here is a sample load list spreadsheet created by the USDA: