Veggie Compass Helps Growers Make Data-Driven Decisions (CIAS Research Brief #97)
Posted September 2016
Fresh market vegetable growers with multiple crops and markets make numerous complex production and marketing decisions. Which crops are the most profitable? How quickly would a labor-saving tool pay for itself? Which markets make the most economic sense for a crop? Do prices cover production costs? The Veggie Compass farm management tool was developed to help farmers answer these questions and more, based on data gleaned from their farm operations.
Veggie Compass began as a partnership between the University of Wisconsin-Madison and Jim Munsch, a Wisconsin organic farmer and farm business consultant. In 2006, after working with fresh market vegetable growers on a cost analysis spreadsheet, Munsch joined forces with UW-Madison researchers Paul Mitchell and Erin Silva, as well as John Hendrickson of CIAS, to secure a USDA Risk Management Agency grant. The grant funded the development of a profitability management tool for diversified, fresh market vegetable operations.
Veggie Compass is now used by growers throughout the U.S. and beyond. Groups of growers can use Veggie Compass as a comparative tool to help them understand the norms for production and profit in specific regions. An expanded version of the tool, made available in 2014, includes instructional videos produced by the Southern Sustainable Agriculture Working Group (SSAWG), and an online video explains how to use a Google Doc form to collect labor data. Workshops on using Veggie Compass have been offered across the U.S., primarily in collaboration with SSAWG.
How does Veggie Compass work?
The overarching goal of Veggie Compass is to provide diversified fresh market vegetable growers with tools and know-how to optimally manage their farm operations. Veggie Compass is a Microsoft Excel spreadsheet in which growers enter their expenses and sales information, and then allocate detailed expenses, including production labor hours, to each crop (see Table 1, below). The spreadsheet uses this data to calculate each crop’s cost of production per pound (or other unit), net profit by market channel, and gross margin by market channel.
The financial data needed for the tool can come from accounting programs, checkbooks, receipts and invoices. Sales data can be gathered from sales receipts, harvest logs and weekly sales charts. Labor data needs to be recorded by crop and activity throughout the growing season, and growers typically enter their labor totals into the spreadsheet at the end of the season. The Veggie Compass website at www.veggiecompass.com has recommendations and sample forms for recording sales and labor data.
How does Veggie Compass help growers make decisions?
In 2014, Eric Bietila and John Hendrickson of CIAS interviewed five growers about their experience in using Veggie Compass, as well as recommendations for improvement. These growers represent farms with diverse crops, markets, years of experience and employee numbers. Four out of five are located in the Midwest and the fifth is in the Southeast. All sell their produce through community supported agriculture (CSA) and/or wholesale markets, in addition to other market channels. The following insights about Veggie Compass were gleaned from those interviews.
Veggie Compass provides detailed cost-of-production information to help growers make decisions about pricing individual crops in each of their markets. Some growers base their prices on what other growers charge, and this may not result in a profit. One of the interviewed farmers used Veggie Compass to negotiate a better price from a buyer. He said that, “… having the Veggie Compass data added more weight to the conversation because we had real, substantive information to show buyers.”
Many of the interviewed growers sell produce through multiple market channels. Veggie Compass showed one grower that several of his wholesale crops were either losing money or just breaking even. After seeing which crops were the most profitable for wholesale, he shifted his crop mix to expand production of his most profitable crops for both wholesale and CSA while restricting less profitable crops to his CSA market.
Interviewees reported that Veggie Compass helped them see labor in a new light. One grower said that he shifted his thinking on wholesale marketing after seeing that lower labor costs could increase the profitability of this market channel. Another grower talked about the labor costs of harvesting low yields over a large area. “Sometimes we leave a harvestable crop behind because it’s so spread out that we can’t efficiently pay for people to get it.” She added that a well-trained crew can make all the difference in the profitability of a crop.
Growers can use Veggie Compass to assess different scenarios. One grower was interested in purchasing a carrot harvester to reduce labor costs, but Veggie Compass showed that this investment might not improve profitability. “…I tried changing the labor numbers by as much as a half, and the numbers did not get substantially better. We’ve determined that the main challenge on carrots is the wholesale price.”
Veggie Compass helps farmers make production decisions about what crop, or how much of it, to grow. One interviewee said that Veggie Compass showed narrow profit margins on one of her signature crops. She decided to use her most efficient labor crew on that crop and not to expand its production. Another interviewee said that Veggie Compass revealed that her Asian greens weren’t profitable, because they required row covers and thus more labor. She stopped growing them and substituted a more profitable crop.
What are the challenges of using Veggie Compass?
Interviewees reported that time spent collecting and entering data was the primary challenge in using Veggie Compass. A fresh market vegetable farm is a busy place, and growers don’t typically have a lot of extra time for record keeping. Labor on diversified and small-scale farms is particularly varied, and recording data to the nearest quarter hour most accurately reflects time spent on different tasks. This makes keeping labor records difficult. Small-scale farms, or those without many resources to record data, would likely benefit from initially focusing labor record keeping on two to three crops or specific harvest windows.
One interviewee integrated Veggie Compass data into his CSA inventory system and supplied volume and labor data to the dock manager. At this farm, work team leaders each spent eight minutes per day filling out forms, and an employee spent 50 hours at the end of the season running the crop-by-crop analysis. Another grower mentioned difficulties in getting employees to regularly record labor data needed for Veggie Compass and reported that it was challenging to re-create this missing information at the end of the growing season.
A third interviewee said that on her farm, when a crew finishes a task, they record their work hours together, or on a rotating basis. A fourth interviewee said, “One key for us in successfully collecting labor hour data is tying it to payroll. Workers have to report labor hours in a detailed fashion in order to get paid.”
Veggie Compass may not capture all of the labor required to manage a farm business. One grower expressed the need to account for managerial tasks, such as bookkeeping and writing a CSA newsletter, that are not tied to a specific crop.
Several growers suggested that electronic time cards could help facilitate employees’ labor data collection, as workers would be required to record specific labor information in order to be paid. Another grower suggested creating an app so workers can enter data directly into a smartphone or tablet, saving the time required to collect and enter this information.
Some interviewees proposed improvements in how Veggie Compass analyzes data. For instance, one grower said that his greenhouse costs vary significantly from crop to crop, but the cost allocation system in Veggie Compass is based on the number of plants that move through the greenhouse. He would like to be able to assign greenhouse costs to specific crops.
Implementation on different types of farms
Recording labor data for Veggie Compass can be challenging on farms of all scales. On larger farms with many employees, it is harder to ensure that each worker keeps up with the necessary record keeping. However, some larger farms have an easier time capturing labor data because a manager is responsible for tracking hours worked. In contrast, on a small farm with few or no employees, the farm owner is doing almost all production and marketing work and may not have time to record labor hours.
Some CSA farmers reported that they are not interested in a crop-by-crop profitability analysis because they do not sell individual vegetables by the pound or bunch; they provide weekly shares to CSA customers. For farms that only sell to CSA customers, a whole-farm profit and loss statement may be enough. However, for CSA farms that also sell wholesale or at farmers’ markets, Veggie Compass is a valuable tool.
Given the time required for keeping records, it might seem that Veggie Compass would be challenging for a beginning grower to manage. However, Veggie Compass can help new growers by teaching them to keep detailed records from the start, and they can train their workers to keep track of labor hours from day one. With Veggie Compass to organize and analyze information they’ve collected, experienced and beginning growers will find that its benefits can outweigh the costs of collecting detailed information.
Where is the project headed?
The Veggie Compass project team continues to encourage and train growers to use Veggie Compass and actively manage their farms to earn a profit—or at least a livable wage—and to account for continued capitalization, health insurance needs and retirement savings.
To address the challenges of tracking labor on highly diversified vegetable farms, the project team is collecting labor data and creating benchmark figures to incorporate into Veggie Compass. This will allow growers to start using this tool right away, without complete information on their own labor costs. And growers keeping track of labor on three or fewer crops can quickly see how their numbers compare to the benchmarks on those crops. Still, Hendrickson cautions, “There is a danger in using labor benchmarks, however, as research to date strongly suggests that labor inputs vary widely from farm to farm.”
In response to requests from farmers, the Veggie Compass team is building additional spreadsheet tools, with plans for a Dairy Compass, a Livestock Compass and a Fruit and Nut Compass.
For more information, contact John Hendrickson at email@example.com
Authors: John Hendrickson, Eric Bietila, Erin Silva, Paul Mitchell, Jim Munsch and Ruth McNair