Why Mid-Scale Farming Is Important in Vermont
Written onMay 23 , 2014
Vermont’s vibrant farm economy is made up of all sizes, scales, and types of farms—something that’s beneficial, because a high diversity of scale and business model is critical to improving the sustainability and resiliency of our food system. Yet within Vermont (and outside Vermont) there is a particular fondness for the smallest scale farms—especially the ones that sell at farmers’ markets, through CSA’s and farm stands, and whose numbers are on the rise. Medium-scale farms are far less prevalent than these small farms, yet they play a highly critical, if under-appreciated, role in our food system.
According to the 2007 Census of Agriculture (details of the 2012 census are not available yet), the percentage of farms that are medium-size in Vermont dropped from 16 to 11.3 percent since 1997. While small and micro-size farm numbers are steadily increasing across the nation, as are the numbers of very large farms, mid-scale farms are dwindling. Nationally, this happens in part because mid-scale farms tend to be too large to best utilize direct markets (which are highly labor-intense), and too small to compete in commodity markets (although we certainly find mid-scale farms in Vermont selling to a range of markets and often selling direct to consumers). Additionally, mid-scale farms are often family operations that don’t allow time to earn off-farm income, which many smaller family farms rely on to cover household expenses.
In Vermont, mid-scale farms—such as Pete’s Greens in Hardwick and River Berry Farm in Fairfax—are essential to our food economy because their scale and efficiency can make them more likely than small and micro-scale farms to have the ability to provide consistency and volume for larger local markets such as retailers (co-ops and grocery stores) and institutions (such as hospitals and schools). And they play a critical role in helping to create a large number of sustainable and livable wage jobs in the farming sector, as well as the food processing and manufacturing sector. For example, a mid-scale farm focused on poultry, such as Misty Knoll in New Haven or Stonewood Farm in Orwell, can supply most co-ops in the state with a set amount of product year-round, making it simple and streamlined for those stores to offer local poultry consistently to their customers.
We feel it’s necessary for Vermonters to be aware of our state’s mid-scale farms, and to understand why not every farmer wants to stay small.
First, we should explain our definition of “mid-scale farm.” Various federal agencies have different definitions based on gross sales (the money that comes into the farm from everything made and sold, before accounting for any expenses or labor), but we’re using a slightly different definition that better fits the kinds of farms we see here in Vermont. For the purposes of this article, a mid-size or mid-scale farm has between 5 and 20 employees and between $250,000 to a few million dollars in gross sales. Even some of the largest operations in Vermont, such as Champlain Orchards, Westminster Organics, or our larger dairy farms, are relatively small compared to farms in the Midwest and California.
The Vermont Farm & Forest Viability Program, which we run, has worked with more than 450 farmers in Vermont to analyze their businesses. We provide all kinds of services, from helping people improve their production management to assisting with marketing, from helping transfer farms to the next generation to assisting farmers to access new farmland. The primary goal of our program is for business owners to enhance their business management skills and be better able to meet their own business goals.
There are many reasons that some farmers choose to operate at a mid-size scale. They may want to increase efficiency, generate more profits, pay themselves and their workers livable wages and benefits, access additional, higher volume markets, or have a larger scale impact on local and regional food systems. While small and micro-size farms have real and tangible benefits for their owners, their communities, and the land, their size limits the scale of their impact on the community, their land base, and the economy as a whole. Additionally, there is significant anecdotal evidence that direct markets (farmers’ markets and CSAs, which are dominated by small farms) are saturated in certain parts of Vermont. The number of new farmers entering these marketplaces is outpacing consumer demand for their products in these cases.
What’s more, not everyone passionate about farming has both the depth and breadth of skills needed to successfully operate a small farm where they must act as the manager, herdsman or grower, bookkeeper, promoter, and more. They may be more comfortable or satisfied specializing in a certain task, while working within a team of individuals highly skilled in their own areas of expertise.
No question small-scale farms can be sustainably profitable, have very high efficiencies, and be an effective way to feed our immediate communities. However, many farmers struggle to make farms financially viable at this scale. According to preliminary results from the 2012 Census of Agriculture, the number of farms in Vermont has increased by 5 percent since 2007, the agricultural land base has increased by 1 percent (an additional 18,400 acres), and the overall market value of Vermont’s agricultural products sold has grown by a more impressive 15 percent. This is all good news, but, as Mari Omland of Green Mountain Girls Farm pointed out in her article “The Thorny Issue of Farmer Pay” in Local Banquet’s spring issue, these numbers—and the increased visibility and connectivity the public has to small- and micro-size farmers—don’t tell the whole story.
Mari’s article tells a compelling and beautiful story of a very small farm struggling to assess their own profitability. The farm creates a myriad of social and environmental goods, but the farmers struggle to charge enough to make a livable wage and to be profitable, two essential elements of a sustainable business. In our work at the Vermont Farm & Forest Viability Program, we support farmers such as Mari as they explore how to best grow and sustain their small businesses. We also work with small-scale farmers who want to scale up to operate a mid-size farm.
Let’s explore the basics of farm profitability for a moment. Take a hypothetical young couple with a vegetable farming operation. They would like to take home a combined income of $50,000 from their business to pay for family living expenses and reinvestments in the farm each year. Typical margins for profitable and well-managed mid-size vegetable farms (whether conventional or organic) are typically in the 20–25 percent range , meaning that they have 20–25 percent of the amount they sell (gross income) after they pay for their expenses. These net profits are often used to pay for owner withdrawals if the owners aren’t on salary, the principle on any debt, and capital improvements and investments in the farm. We will work backward to determine how big that farm needs to be to make this much money.
Let’s presume the gross margin is 20 percent for this farm, and then find what the total sales must be for this farm to end up with $50,000 a year in profits. For this farm and these assumptions, sales would have to be a minimum of $250,000 in order to make a net income of $50,000 ($50,000 net income / .20 gross margin = gross sales of $250,000). They still haven’t paid their own salary, nor their taxes, mortgage payments, or capital investments related to the business. This all comes out of their take-home profits from the business.
And then what if these farmers are less efficient than others in their field? If their gross margin is 15 percent instead of 20 percent, then their sales have to be at least $333,000 to make a net income of $50,000. If they’re operating a much smaller farm, with an acreage that doesn’t allow mid-scale production, grossing perhaps $120,000, this will leave them with considerably less income, unless they can achieve significantly greater efficiencies or higher prices for their products than the average farmer.
What if they want to pay their workers a higher wage, or provide more consistent year-round positions to help attract longer-term, higher-skilled employees? Employee turnover can be a serious issue for small farms that have hired labor, as there may not be enough production to warrant work year-round, often leading to a new crew every year. If a farm wants to offer higher salaries for year-round employees, they may be paying around $30,000 a year per person, with additional insurance costs on top of that. If a farm has four year-round employees, direct labor costs alone would be $120,000.
According to the 2007 Census of Agriculture, out of all the farms in Vermont that make more than $10,000 annually, 27 percent gross between $100,000 to $499,999, and another 10 percent make more than $500,000 per year. The other 63 percent—the vast majority of farms in Vermont—are making less than $100,000 on the agricultural products they sell each year. (There is an additional large number of property owners who make less than $10,000 on the farm and are included in the agricultural census, but we are not including those here, as most are not considered commercial farms.)
As a state that leads the country in local food consumption, it is important to consider what the effects may be of having few mid-size producers. A robust and sustainable food system requires that there be a healthy variety and diversity of sizes and types of farms in order to deliver food to various markets and maintain the agricultural support systems in place in Vermont, including financing institutions, agricultural mechanics, feed and equipment suppliers, veterinarians, and more. It also requires that farmers make enough profit to stay in farming and meet their social as well as financial goals—that they are able to live secure, comfortable lives, just like the rest of us.
So keep buying at a local farm stand or farmers’ market or from your neighbor. But also encourage your grocery store to consider local, seasonal suppliers. Be involved in helping your local schools, senior meal sites, or other institutions source local food—and not just certain products from small-scale farmers, but also a wider variety of products from a mid-scale farm or a local distributor that places importance on sourcing locally and regionally when possible. Expanding your awareness and increasing local food purchasing beyond your local farm stand and farmers’ market can help support the diversity of farm scales that ensures our food system becomes more viable and resilient long into our future.
Photo by Caroline Abels