For most fresh market vegetable growers, earning a reasonable living from their farms is a bigger challenge than growing produce. While growers often share production information freely, they may be reluctant to share financial information. Many growers are looking for ways to collect this information and share it with others without divulging confidential business details.
From 2002 to 2004, the UW-Madison Center for Integrated Agricultural Systems facilitated a grower-led project that used ratios, such as net cash income per acre, as a way to share financial information confidentially. The results of this project are summarized in a new report – Grower to Grower: Creating a Livelihood on a Fresh Market Vegetable Farm.
This project was unique in that the growers chose what data to collect and how to analyze it. They determined how much cash they had at the end of each growing season to provide for their households, and created ratios to share this information with each other. The analysis they developed should be considered alongside traditional financial statements such as balance sheets and income statements.
“This approach is particularly good because it is geared specifically toward a farming operation, unlike some other business tools,” said David Perkins, a grower who participated in this project. “It allows for self-comparison, as well as comparison with other farms. You can use the ratios and other numbers you collect to evaluate your own operation from year to year, and within a year.”
Project participants earned livelihoods from producing and marketing fresh vegetables at a variety of farm scales. They achieved impressive gross sales, with farms under three acres averaging $15,623 in gross sales per acre over the three years of the project. Gross sales figures per acre were lower on larger farms, averaging around $11,000 per acre.
Earning decent net cash income – gross sales minus all operating expenses except depreciation – was a challenge complicated by labor needs and expenses, equipment needs, changing markets and the weather. Three-year average net cash income for the farms in this study was, in some instances, under $2,000 per acre. In other instances, it exceeded $8,000 per acre. Per hour wages were generally low, especially on farms under three acres.
The participants felt that their financial success depended on increasing work efficiency and using techniques and tools to keep expenses low. They also felt that it was important to develop a unique niche in terms of products or marketing. Community Supported Agriculture, or CSA, appeared to help farms achieve higher profits. Because CSA customers pay for a share of produce at the beginning of the season, sales from CSA farms are sheltered from the weather and marketplace changes.
Project participants generally enjoyed their work and felt positive about their quality of life. Most of them wanted more personal time, higher income and access to reasonably priced health insurance. For farms with hired help, employee management issues sometimes reduced their quality of life.
“This approach is a self-evaluation process that lets you look at your own operation and see if you’re happy with your numbers,” said Perkins. “If not, you can look at specific expenditures to see where you’re spending too much, or not spending enough. For us, increasing our labor force was an emphasis that grew out of this project.”
Grower to Grower: Creating a Livelihood on a Fresh Market Vegetable Farm contains abundant information on gross sales per acre, net cash income per acre, labor hours per acre, hourly wages and other financial information collected by the participating growers. It also includes a worksheet to help growers collect data and calculate their own ratios.