It’s great to see sustainable farming groups finally turning their attention to the 3rd “p” in the triple bottom line – profit. A current example is from the Pennsylvania Association for Sustainable Agriculture (PASA). Its study covered 39 farms: 64% were 3 – 12 acres; 15% were greater than 12 acres; 21% were less than 3 acres.
It’s press release on the study leads with this question: Can direct-market vegetable farmers make a middle-class income? No, is their answer. Links to their press release and study are below.
PASA’s findings are not revelatory, based as they are on the traditional “countrified” model of owning or having access to multiple acres of land. It identifies the challenges that have been known to farmers for over half a century.
Here are some study highlights issued by PASA, along with our comments:
>> We found that the majority of direct-market vegetable farms were not earning a middle-class income. Participating farms had a median net income of $18,500, which approximates the 2020 poverty rate in Pennsylvania for a two-person household.
COMMENT: Defining financial success as making a “middle class” income is irrelevant to those using and building alternative farming systems that give farmers options for defining financial success on their own terms, based on a different value system that has meaning to them. For those willing to look beyond arbitrary labels and old-school concepts for what defines a farm, SPIN is a viable alternative.
>> A quarter of study participants had earned net incomes greater than the Pennsylvania median household annual income of $57,000. These farms tended to be larger in scale than many market-garden-style farms—typically, ten acres or more in vegetable production—and often capitalized on diversifying their revenue streams, with reselling products produced by other local farms proving to be one of the more profitable added enterprises.
COMMENTS: SPIN’s financial benchmarks use gross income because it is simpler to measure and more widely applicable. Net introduces a highly individual variable of how good each farmer is at managing money and budgeting, how disciplined they choose to be about it, as well as how good their accountant is at reducing their farm income using legal loopholes.
SPIN”s gross income benchmark, which has been met or exceeded by those in many different contexts and using a variety of business models is $50k per 20,000 sq. ft. (about a half acre). Our rule of thumb on operating expenses is 10% – 20% of gross which puts the expenses in the $5k to $10k range.
Median income comes from a value system that many don’t find all that attractive anymore, and don’t consider a useful measurement of success.
Claiming larger scale farms (10 acres) are needed to achieve higher income is old-school thinking that SPIN farmers have been disproving for a while now. The advantage of SPIN-Farming is that it turns market gardening into a source of significant income. It can generate as much or more income as a multi-acre operation, with a lot less overhead and a lot more control over the operation.
Direct marketing has been an important concept in SPIN-Farming’ since its 2006 launch and has offered an assortment of ways to diversify revenue streams using a variety of business models and sales channels, some well-established ad some created on the fly by pioneering SPIN farmers, including farmers markets and CSA’s (subscription services), buying clubs, pop-up farm stands, mobile markets, and partnerships with cottage-industry scale food processors. And now that the number of SPIN farmers is growing, they are finding ways to resell each other’s products.
>> Many of the owners of high-performing farms partially attributed their success to good fortune—such as access to especially lucrative markets or reliable farmland arrangements.
COMMENT: SPIN farmers acknowledge luck, but they rely on strategy. Their farm design and growing practices give them the flexibility to make rapid-fire in-season adjustments to respond to changing markets and circumstances. That’s an important competitive advantage over larger growers
>> No single direct-market channel consistently outperformed all others. Researchers found that all of the major sales channels utilized by farms in the study—farmers markets, CSAs, and direct wholesale—had a mix of higher and lower income cases.
COMMENT: Ah yes, many answers to farming’s great mysteries lead to “It depends.”
>> There isn’t a one-size-fits-all business model for financial success.
COMMENT: That’s for sure, which is why SPIN has so many varieties of them. And here’s an important point to add: farmers sometimes have to change them from year to year, and SPIN’s scale makes it very easy to do that.
>> There are three primary pathways for improving direct-market incomes: increasing the number of acres in vegetable production, growing more and higher-value crops per acre, and developing more efficient production systems. Still, the land, labor, and capital needed to pursue these strategies are often out of reach for farmers who are operating at a loss or aren’t earning a living wage.
COMMENT: # 2 and # 3 they got right. # 1 is old-school thinking that leads many a beginning farmer down the path to ruin. This is what set Wally Satzewich on a different one to SPIN 30+ years ago.
>> The financial benchmarks identified by our study are consistent with structural challenges that negatively impact small- and medium-scale farms in a highly consolidated agriculture industry
COMMENT: New and seasoned farmers alike will get further identifying and capitalizing on the advantages of the growing demand for local food instead of complaining about Big Ag.
OUR BOTTOM LINE:
Some traditional growing practices can still make a lot of sense. Old-school farming visions and business models need an update.
For a more positive findings on the income potential of SPIN farms, see a 2007 economic feasibility study funded by the Pennsylvania Department of Community and Economic Development. Free download here.
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