The Business of Farming

This article was written by Jennifer Cook, Digital Green Fellow for eXtension. 

For the past nine months, I served as the Digital Green eXtension fellow, interviewing many small and beginning farmers, farm groups, and farm partners from across the US, to understand the challenges small farmers face. Representing Digital Green, a global non-profit development organization, I was looking for gaps in the ways in which farmers are supported by both public and private actors.

A topic that kept coming up in interviews and in my research is the economics of farming. Small farms, defined as those making less than $350,000 gross farm income, are more likely to have an operating profit margin in the red zone, 59-78% of them according to USDA, ERS (2016). It is the passion for farming that drives farmers to continue farming, often not income.

Perhaps it’s this economic challenge that has reduced the number of beginning farmers in the US? In 1982, 38% of farmers were beginning (less than 10 years in operation), in 2012 only 17.2% were beginning farmers (USDA, ERS 2012). We need a new generation of farmers to support local and sustainable food systems, provide jobs, and maintain open space and wildlife habitat in our communities. New farmers and farmland should be encouraged and supported.

Beginning farmer story highlights challenges

Chris and her husband Shawn have always wanted to be farmers. They learned how to grow mushrooms and vegetables and began selling at their local farmers’ market. A few years later they bought some farmland, expanded their production, and diversified to berries, honey, vegetables, and more varieties of mushrooms.

Chris and Shawn’s farm products are now in high demand, but they both work off-farm jobs and can’t afford to quit to be full-time farmers. Finding dependable and proficient farm labor has been a challenge so they continue to do all the work themselves.

They are at a crossroads, having invested a lot in land, equipment, and infrastructure, but still not seeing much profit when they consider all their own labor and transportation inputs. Chris and Shawn need to earn a profit by either cutting costs or increasing revenues. Are there ways that they can find inexpensive and proficient labor? Should they rework their business plan to explore other profit avenues? Should they cut their losses and quit farming or continue to invest in their business?

How can Extension agents support the business of farming?

Small farms, such as Chris and Shawn’s, make up 90% of farms in the US (USDA ERS, 2016). How can farming be more economically sustainable for small and beginning farmers? What solutions (tools, technology, resources) can help mitigate some of the major challenges that beginning and small farmers face in the US?

  • Farmers must be market savvy. What tools and resources, such as enterprise budgets and price points, are available, or could bedeveloped to help farmers make informed business decisions?
  • Farming has a lot of risk. What risks, such as investment of land, water, and equipment could be mitigated to encourage farming? Incubator farms and food hubs are models that have worked.
  • How can farming be more economically sustainable for small and beginning farmers? The solutions are often situation-specific. Options include sharing assets in the community or decision-making based on understanding of individual farm budget and hidden costs of transportation and labor.

How can we as Extension agents guide new farmers toward being more business savvy? In Colorado, we offer a Building Farmers Program where farmers are guided to develop a business plan and understand wholly the economics and business of farming. The program is helping new and beginning farmers assess their ability to start and maintain a new farm or expand and improve an existing one. What programs and types of assistance are working in your state?

References

USDA, ERS. (2016). America’s diverse family farms. Economic Information Bulletin Number 164. Retrieved from https://www.ers.usda.gov/webdocs/publications/81408/eib-164.pdf?v=42709

USDA, ERS (2012). Beginning farmers and age distribution of farmers. Retrieved from https://www.ers.usda.gov/topics/farm-economy/beginning-disadvantaged-farmers/beginning-farmers-and-age-distribution-of-farmers/

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