More Thoughts about Profitable Farms

Last summer, I wrote a blog entry entitled "Is Profit a Dirty Word."  This week, I was reminded of the conflict I feel about profitability and farming by a discussion during a local farm business planning class that I'm helping to teach.  The word "profit," it seems, comes with lots of baggage!

Profit is a difficult thing for many of us small farmers to get our arms around.  In some ways, we’ve chosen farming as a rejection of the “normal” American aspiration for material wealth.  Profit, as such, is part of this rejection – we farm because we value good food, good land and strong communities more than monetary gain.

Once we begin the work of farming, however, profit takes on a different meaning.  Without profit, we can’t produce food over the long term.  Without profit, we can’t keep our land in farming.  Without profit, our families cannot be contributing members of our communities.

Someone asked whether it is legitimate for a family with other sources of income to "subsidize" their love of farming with their off-farm income.  I struggle with this - certainly our family has needed off-farm income to support our farming habit from time to time.  I've come to the conclusion, however, that a profit motive is critical to our farm's place in our local agricultural community.  Here's why:

If a business makes a profit (or a loss, for that matter), we can assume that some economic analysis has occurred - we can assume that the business knows how much money it's taken in and how much money has gone out in the way of expenses.  After all, profit is the positive difference between income and expenses (both direct expenses and overhead).  As a small-scale farmer who markets most of my production directly to consumers, I base my pricing decisions on these economic factors - my prices reflect my need for my farm production to pay my family's basic needs (like groceries, health care, college savings, our mortgage, our retirement, etc.).

I bristle when I hear someone say, "I just planted these trees so that the grandkids can learn about growing fruit - I don't really need to make money from my 'farm'."  Without going through a rigorous economic analysis (and without determining what is required to make a profit), these "farmers" have a profound impact in my ability to make a living.  If farm products are priced at a level that results in a loss (or even at a break-even), I feel pressure to reduce my own prices.

Profit has both an economic and a cultural meaning (as I've written before).  The cultural definition of profit is problematic for me - I farm largely because I've rejected our culture's obsession with material wealth.  In an economic sense, however, profit is vital to my existence as a small farmer - and to the existence of my fellow farmers.