SMALL SCALE FARMS PROFITABILITY

Most people who start homegrown food are doing it out of 3 reasons:

1. To get income from selling the produces
2. To reduce their cost of life (they eat what they grow instead of buying it)
3. To improve their food quality (organic food, etc.)

Today let’s focus on the first reason, which is getting a steady income from the sale of produce. A good approach is to discuss the reality of self-reliance on a small-scale urban farming, and several associated considerations.

The key element we will concentrate on is the involvement of organizations, and how it can greatly improves individual farmers’ capability. “Organization” can be a farmer’s union or a third-party. With the influence an organization brings to the table, key knowledge and information can be shared among individuals that make it possible for them to compete with bigger corporations.

Increasing production is an obvious way to improve farming business profitability. This is usually based on the planting area and productivity per unit.

Planting Space

To visualize how much planting space we need, we can ask ourselves how many people we want to feed. Let’s make a simple calculation, to estimate how much planting space is required to support an adult’s daily needs for vegetables. According to the USDA, an average American consumes about 194 Kg of vegetables (including processed) every year (1). If good practices such as intensive planting method are adopted, approximately 17 Kg vegetables can be produced per square meter in a year (2). At least 12 square meters of planting space are needed to feed one American’s yearly vegetable needs.

Bigger and multiple planting areas often reduce the risk of natural disaster, and contribute to a good harvest’s success. With that in mind, we should try to utilize all the usable space around us. For instance in urban areas, a roof garden are an excellent choice, as it doesn't require additional space and often receives enough sunlight.

Moreover, we don’t necessarily need to own the planting area. With proper communication and shared profit agreement, we may get consent to use a community-based property, or someone else’ property which is not in use.

However, we must acknowledge that not all the vacant land is suitable for planting. We may face situations such as poor soil condition, contamination, flooding area, windy area, etc. By implementing low-cost solutions, such as raised beds, these problems can often have an easy answer.

Yet, land lease and raised beds implementation are not always easily achievable by individual. This is where an organization can help, by bringing leadership, coordination, expertise in legal affairs, credibility and know-how to name a few. It can make it much easier for small-scaled farmers to adapt to the changing environment, and optimize their operation.

Productivity per Unit

Productivity in agriculture depends on natural conditions as well as the farmer’s experience. Natural conditions are not in direct control of the farmer, but can often be minimized or maximized (depending on the need) by their experience and skill. Today more than ever farming remains a complicated end-to-end process.

As part of this process, plant selection, planning and scheduling are paramount to productivity. For example, plant selection should be based on the market demand, as well as natural environment. By planning different “types” of plants (e.g. root, leaf, vine), the cultivable number of plants per given area can be largely increased. An increased productivity depends largely on a farmer’s skills and knowledge, and there are a few methodologies, such as Bio-Intensive Method (3) and SFG(4) that have been considered to be the best practices for small-scale farming. By providing hands-on education, consultancy and trial fields to beginner farmers, the productivity of urban farming can be significantly improved.

Apart from the produce itself, value added products and service is another topic that is worth discussing. In modern society, value added processes are often considered to be more critical than the original product. Here are a few examples that have been implemented in big corporations, but are not common in small scale farming business:

Better Quality Means Better Price

Better quality in taste, shape and nutrition adds more value to the produce. Organic foods are a good example of this. In US, on average, Organic foods are priced 47% more than their non-organic counterparts (5). In Japan, big supermarkets often have their own standard (size, sweetness level) to categorize fruit and vegetable. A “super sweet” melon can be 5 times more expensive than the same-size, average sweet melon.

It however much easier for consumers to identify the value of the quality if a widely recognized-standard exists. With the help of farmer’s associations or third-party organizations, a credible, easy-to-use and low cost standard could be introduced that would benefit both farmers and consumers.

Diversified Distribution Channel

Big companies have multiple distribution channels to target different classes of customer. Small size grocery stores can be set up in the city center to attract office workers. Big supermarkets are often found next to suburban residential areas to fit a family’s needs. Online stores and delivery services target the people who live in remote areas or simply don’t have the time or the inclination to go shopping in a brick-and-mortar store.

As a small scale urban farm, selling the produces to wholesalers is not the only choice. A local farmer’s market not only provides the channel to sell produces, it also gives an opportunity for a direct rapport with the consumer. A face to face discussion is an excellent way to understand the market demand, it is also the best way for the consumer to know and understand what they are buying.

Nowadays, shareholders vegetable box delivery services are becoming popular. This business model engages customers directly as shareholders. They invest in the farm by paying a membership fee. Based on their needs, the farmers work as the customers “employees” and deliver the results of the crops in vegetable boxes on weekly/monthly basis.

Moreover, urban farms can work with local restaurants. By working directly with farmers, restaurants can acquire unusual or specialty produce to create niche markets and unique menus. Short delivery times also guarantees the freshness of the food.

To determine and choose the right distribution channels requires comprehensive market demand analysis and planning. With the help of an organization that provides a distribution platform and shares demand information, small scale farmers can have better results while focusing on their core competencies.

This is actually a symbiotic relationship, as an organization will leverage the available resources to create new market trends, thus not only identifying what area it should focus on but also create demand.

 

Reference:
(1) US Department of Agriculture. Profiling food consumption in America.2010. http://www.usda.gov/factbook
(2) Institute of Rural Reconstruction. Bio-Intensive Approach to Small-Scale Household Food Production. 1993. http://collections.infocollections.org
(3) John Jeavon. http://www.growbiointensive.org
(4) Mel Bartholomew. http://squarefootgardening.org
(5) Consumer Reports. The cost of organic food. 2015. http://www.consumerreports.org/cro/news/2015/03/cost-of-organic-food/index.htm