Welcome Back the Middleman

SPIN farmers understand they need to focus not only on the production of local food, but also the business of it. They use farmers markets to sell direct to consumers because it puts more money in their pockets by reducing the number of participants in the food supply chain to two. It’s simple cash-on-the barrel economics.

This direct marketing business model is as old as the hills. It’s been revived by a different way of farming and more consumers seeking fresher, more nutritious food and a cause to support. It also includes CSA’s, farm-to-table chefs, neighborhood eateries, online stores, phone texts and social media. Its defining feature is eliminating the middleman. It’s been successful, by getting more cash flowing to more farmers in more communities.

This success, along with growing consumer demand, has inspired efforts to figure out how to help small farmers do even better, without sacrificing their unique appeal or profitability. Over the last 15 years, locally-oriented sales channels have been built that mimic the large-scale efficiencies of the conventional food supply chain by selling, aggregating and distributing products from multiple farms and selling them to larger numbers of people, While still maintaining a short distance from plot to plate, it requires selling via a middleman.

Intermediary sales channels are as old as the hills, too. Traditionally farmers got the short end. These newer variations were created from the ground up, to provide both significant income to small farmers and satisfy consumers’ desire for a more direct connection to the source of their food. They include:
>> food hubs
>> farm grocery stores
>> buying clubs
>> produce auctions
>> multi-farmer CSA’s

They vary in their financial terms, organizational type, management, logistics and the customers they serve. Some sell to consumers in a broad geographical area. Others serve institutional buyers like schools, prisons, hospitals, universities. Others sell to restaurants, food processors and retailers. Still others sell to non-profit service agencies and food banks.

So now in addition to selling direct, SPIN farmers can also sell via middlemen. Serving more and different kinds of customers via these new sales channels means larger size farms and more detailed profitability calculations, which makes SPIN-Farming concepts like land base allocation, standard units of production, cropping intensity and benchmarking even more important.

Profitability calculations sometimes reveal this surprise: 2/3 of revenue comes from 1/4 of the total growing space. The specific numbers can vary, but experienced SPIN farmers understand well the general principle: small plots worked intensively can be more lucrative than large plots worked less intensively.

These new sales channels also require broader working relationships off the farm. This is at odds with the image of the farmer as the self-reliant loner, but that’s always been more myth than reality. Farmers markets are the simple, low-risk way to launch and operate a business, but they are still a group effort involving other farmers and the market manager. Farmers also have a long history of working together in mutually beneficial ways through co-operatives. Being part of a system means more coordination and communication, and a bureaucratic approach to food safety. But being part of a well-run larger supply chain can be simpler logistically and less stressful than trying to work in a small badly-run one.

The bottom line is this: to generate income from farming, you need to realize that being in business for yourself doesn’t mean you can be in business alone. It’s a collaborative endeavor. It is up to each SPIN farmer to determine their business model and optimal farm size, based on their revenue target and personal ambitions. The big difference now is there is an increasing number of ways to make money, and more than one business model that prioritizes bringing a majority of profits back to the producer.