Tool Building Part 2

In my last post, I wrote about building an excel-based tool that helps farmers assess costs of production, taking into account direct and overhead costs.  I initially took on this project because, up until November, I had not come across any tool that effectively helped a farmer to assess costs of production for a particular crop.  In the past month, I have come across two resources that aim to do just this: the Veggie Compass, and Richard Wiswall’s enterprise analysis spreadsheets.  I think both of these resources are great, but not without some challenges.  I highly encourage any farmer to spend some time with these resources, particularly Richard Wiswall’s spreadsheets.  Very soon, my own crop-planning, and crop-assessment tools will be available.  I believe they are effective, farmer friendly, and comprehensive, such that a farmer may obtain accurate costs of production metrics.

I was happy to find that other Ag Extensions and farmers had spent some time on this subject.  Too often, I have heard that, since small-scale diversified farming is so complex, it was of little use to try to analyze individual crops, because it would be too hard to parse out the necessary information for each one.  I understand that line of thought, but I believe the answer involves more detailed record-keeping.  Instead of just claiming it is too hard to keep these records, I challenge farmers to try to do so.  A farmer, growing 30 crops, will invariably have crops that are not profitable, and those crops challenge the economic viability of the farm.  The farmer can keep his or her head in the sand, and continue to repeat standard refrains such as, “it’s so hard to compete with the big guys”, “my employees quit just when I really needed them”, or “next year will be better”; I propose something different: the farmer can analyze her enterprises, figure out what makes money, and either figure out how to make all crops profitable (not as likely), or focus on those that are profitable.

I spent some time as a farmer and farm owner, and I know how hard it can be to analyze what you are doing.  It can be scary or difficult to imagine changing your marketing scheme, and financing plan.  I understand all of that.  I also understand that it is even harder to farm when you don’t achieve your salary goals.  I think a lot of farmers can identify with that sentiment.  So, what happens when you don’t achieve your goals for several years in a row, or even decades?  I suppose that’s when a farmer becomes a bit jaded; “this system is rigged!”; “we need to eliminate crop subsidies – that will even out the playing field!”  In my experience, there’s always something to blame for the paltry tide of money flowing into a farmer’s bank account.  Invariably though, the answer is the same – analyze your enterprises, focus on those that make you money, eliminate the rest.  I see a lot of smart farmers doing just this, and becoming more and more successful in the process.  That is very exciting for me to see. 

A farmer friend of mine recently told me something to the effect of “we will start trimming our crop load down soon – we just need to work up to it.  I know we’re not reaching our salary goals right now, but it’s so hard to change our sales model.  Plus, we know we have crops that lose money, but we feel that we have to grow them.”  I would never advocate that a farmer change the operation drastically in one fell swoop – that could bring about a host of unintended consequences that could spell the demise of the farm.  Yet, if the farm is not making money, perhaps a large change is in order – and it is easiest to change when you are not making money.  One more thought about all of this – there is no crop that a farmer “has to grow”.  If a crop doesn’t make you money, figure out how it can, or throw it out of your scheme.

So, where do we start?  Some farmers never plan.  The process looks like this: “I have 10 acres, I like growing these crops, I will plant what I can and sell it to whomever.”  This, of course, is not an effective course of action.  Here’s something better:

1. Step one – figure out what you will grow, and what the potential sales are for these crops at your markets.
2. Step two – figure out how this fits into your farm’s parameters.  How many beds/acres will you need to plant to fulfill your markets?  Remember to be conservative on your yield estimates per bed when looking into this step.
3. Steps three and four – figure out the labor requirements and material requirements for this crop.  Many crops are very different in this respect.  For instance, carrots need far more weeding time than do tomatoes, but tomatoes need to be trellised for optimal yields.  Or, sweet corn has much higher nitrogen requirements than do tomatoes.  Not only do these costs need to be taken into account, but so do the time requirements – ie, will you have enough labor to accomplish all of your goals at any given time?  Will you have too much labor?  These are very important questions to answer.
4. Steps five and six – incorporate your overheads into the crop analysis.  How much do overheads account for the overall cost of production?  It is helpful to scrutinize both your annual overheads and capital investments to make sure that you aren’t spending too much. 
5. Step seven – make your assessments.  Is this crop worth your time and money?

This is, essentially, the process involved in the crop-planning tool that I have created.  It is an easy, seven-step program for farmers struggling with addiction to growing too many unprofitable crops.  If that sounds like you, take solace, friend, for you are not alone.

Does this process make sense to you?  Or, does it feel quite foreign?  Do you have records to support this type of planning? If you don’t, are you willing to try?  When you embark on the crop-planning voyage, you need records.  The more detailed they are, the more accurate your assessment will be.  If you don’t know where to start, ask some farmer friends what systems they use for record-keeping.  You could ask: “How the heck do you keep track of how long it takes to harvest 100 bunches of kale?” Or even: “How do I know what my yields are per bed or per acre?”  Don’t be afraid to reach out to people for help.  Knowledge-sharing is a tremendous asset to small-scale farmers, and most farmers are willing to help out when they can.  Plus, there are Ag extensions all over the country, and so many online resources to help you with this step.

The bottom line is, it all comes down to record-keeping.  Here in Northern California, it’s getting dry and warm enough to think about planting.  Plan for record-keeping now, and it will pay dividends in the future.

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