More Thoughts on Scale and Small Farm Profitability

Earlier this month, I wrote a blog post entitled "Does Small = Sustainable" in response to an article in the New York Times Sunday Review ("Don't Let Your Children Grow Up to Be Farmers").  The author of the original article, Bren Smith, a farmer from East Coast, offers a number of ideas to address what he characterizes as a profitability crisis in small-scale, direct-market farming and ranching.  Other farmers and ranchers (including a number of my friends and colleagues) have disagreed with Mr. Smith's title - many of us (myself included) hope that our children will grow up to take over the family farm or ranch.  While my own experiences in trying to make a living as a small-scale sheep rancher are very similar to the challenges described by Mr. Smith, I can't help but thinking that the solutions for our corner of California might be very different.  And address these challenges we must - if we want to have a local food system that farmers' sons and daughters wish to be a part of!

Both of my daughters are involved in production agriculture.  My oldest, Lara, who is 16, will be showing a lamb at our county fair in two weeks - something she's done every year since she was 9.  She also has a small flock of commercial sheep that are part of our larger flock.  A junior in high school, she's an officer in her Future Farmers of America chapter.  She's also trained Mo, the best border collie we have!  Emma, an eleven-year-old sixth grader, will be showing her second lamb at the fair, along with a breeding ewe.  Like her sister, Emma has her own small commercial flock, and she sells eggs from her own flock of chickens.  In short, we're raising both our girls to have an appreciation for farming - and, perhaps, to become commercial farmers or ranchers themselves.

But given my own struggles to make a living from ranching (which I've documented in this blog), can I really recommend that my girls pursue a career trying to produce food for a local food system?  Is there a future for farming and ranching - as a commercial endeavor - in our part of the Sierra Foothills?  I think there is (all farmers are optimists - as Will Rogers said, "The farmer has to be an optimist or he wouldn't still be a farmer"), but I think we need to make some important decisions about farming as a business.

And fundamentally, farming must be a business.  Sustainable farming rests on three pillars - ecological sustainability, social sustainability and economic sustainability!  In my mind, if a farm can't stay in business (economic sustainability), it can't provide ecological or social benefits - in other words, economic sustainability is the foundation of sustainable farming.  This brings us to the evil "P" word - profit.  Without profit, I can't do simple things - like pay my mortgage, pay for health insurance - or buy the food I don't grow myself.  Profit isn't the reason that I farm, but it allows my farm to exist.

One of the best responses I've seen to "Don't Let Your Children Grow Up to Be Farmers" was written by Cody Reed, a beginning farmer from Plumas County (click here to read Cody's response).  He correctly raises a number of points that all of us - farmers and eaters - need to discuss regarding locally produced food.  Another sheep rancher, Rex Williams, responded to my Facebook link to Cody's blog with the following:

"I have always beat myself up for not being able to make my entire living off of our agricultural endeavors but after doing a little research into some local history a lot of farms of years past have had to have off farm support I have read of plenty of outfits who are successful in the second or third generation, that the patriarch had to work in the woods or milk or something for someone else to get his own farm off the ground.

"This news alone should give all of us hope that maybe, someday we can own a little of the dirt we take care of!"

Rex raises a valid point here - the history of small-scale farming in the United States is full of examples of families who work off-farm or in other trades so that they can continue farming.  In most of the commercial ranching families I know today, at least one family member works off-farm - mostly for the benefits.  While off-farm work can make life busy and stressful at times, I've found that I enjoy the combination - and the economic stability it provides!

Scale, as I've written many times before, enters the equation, too - if I can make a profit on each lamb I raise, I need to raise enough lambs to generate enough total profit to make a living.  The same goes for any other crop.  While I can adjust my standard of living to some extent (living frugally and working off-farm are the strategies I've employed), I think the fundamental issue is one of scale.  How can I grow my farm or ranch to the size necessary to make a living from it?  Conversely, are there some things I can do on the expense side of the equation that will allow me to achieve greater profitability at a smaller scale?

Over the 12 years in which we've tried to farm commercially, one of the most significant barriers to expansion has been affordable access to and long-term tenure on agricultural land - especially irrigated pasture, in my case. Farmland in most of California is valued far beyond its productive capacity - in other words, we've found that we can't purchase farmland based on the agricultural revenue it will produce.  Consequently, banks won't make loans for real estate purchased based on agricultural income.  As a result, we've always leased land (sometimes for cash payment, other times for an exchange of services - like fire protection).  While I think a written lease is important, not every landowner wants to put terms in writing.  Most of our landlords have preferred a year-to-year arrangement - which makes it difficult for us to justify making improvements to the land.  In several cases, we've been outbid by other producers for leases - in most instances, these other producers have given up the lease once they realized they paid too much.

Another barrier to scale is access to affordable capital - not just for land purchases.  As a sheep producer, most of my capital is tied up in breeding animals - currently, a commercial yearling ewe costs roughly $150.  To purchase a flock of 600 ewes (which I think is the minimum flock size needed to provide one person with a full-time wage), I'd need $90,000.  Other capital expenses include fencing, equipment (truck and trailer), livestock guardian dogs and border collies, and handling systems.  Being financially conservative by nature, most small-scale farmers (myself included) balk at taking on this much debt.

Finally, as I've written on numerous occasions, direct marketing in a community the size of Auburn may be inherently inefficient.  To sell enough lambs (700-800) each year to make my living from sheep production, I'd need to attend 4-5 markets each week the size of the Saturday Auburn farmers' market on a year-round basis.  This means hiring someone to attend the market (since I have always sold more than my employees and interns at markets, this would likely drop my sales volume) or hiring someone to do my farm chores on market days.  And I've decided that it's more important to me to go to my kids' soccer games and horseshows on Saturdays! Scale, in other words, is as important in marketing as it is in production.

And so I continue to search for answers (as most of us do).  For Bren Smith, the answers include transitioning USDA programs away from commodity crop supports and towards supports and grants for small-scale farmers.  Personally, I don't think this addresses the underlying issues I've outlined above.  Here are the ideas I'd like to see our community discuss:

• Access to Land: local government and non-governmental organizations in Placer County are focused on land conservation, including farm- and ranchland conservation.  In some cases, these entities have purchased or accepted conservation easements on agricultural land, which at least ensures these lands won't be subdivided.  In other cases, lands have been purchased outright.  I think we need to go a step further - we need a program through which the community purchases large-scale farms and ranches from willing sellers.  These lands could be made available to commercial farmers at an affordable lease rate.  We could even create a local, modern version of the Homestead Act - a long term (20+ year) lease or life estate on the farm- and ranchlands owned by agencies or NGOs could be provided to families who agree to make agricultural improvements on these lands.  In any case, we need to end the fallacy that splitting a working farm or ranch into 5 acre ranchettes keeps the land in agriculture!
• Access to Capital: commercial lending institutions (and to a large extent, USDA credit programs) are geared towards large-scale loans rather than towards meeting the needs of small-scale farming.  For example, I talked to an agricultural loan officer in my bank who told me they didn't generally make agricultural loans of less than $250,000.  The business lending officer wasn't comfortable with the risks inherent in farming - so a smaller loan would have cost me substantially more in interest.  I think crowd-funding and community lending pools might be the answer.  Finding a way to make capital affordable - and a way to give the community some direct financial involvement in its own food system, might help small growers invest in their businesses.
• Collaborative Marketing: personally, I like the term "cooperative," but the failure of several California marketing cooperatives (Tri-Valley Growers, for example) in the last 20 years makes it a dirty word in some farming circles.  That said, I think we need more collaboration.  Consumers consistently tell us that convenience is a real barrier to eating locally grown food - some folks simply can't get to the farmers' market.  On the flip side, I don't know of any small-scale farmer who wants to go to more farmers' markets each week - especially without some guarantee of sufficient sales volume.  Perhaps we need to look at other collaborative marketing models - art galleries or antique malls come to mind. 

As a rancher in my extremely middle forties (I'm 47), I've realized that solutions to difficult problems like this one are never simple.  I'm certain that there are ramifications to the ideas I've presented that I don't comprehend at this point.  I am certain, however, that we need to talk about these (and other) ideas as a community.  This post is just a start - I hope that others will offer ideas - as well as criticism of my own ideas.  Let's begin this conversation!  Let's make small-scale farming and ranching something our kids aspire to do as adults!