CULTIVATING QUESTIONS

Concerning the Bio-Extensive Market Garden

by Anne & Eric Nordell of Trout Run, PA

A Peasant Economy

One of the participants at our annual Columbus Day small group tour^[1] asked us to elaborate on a key statement in our “Weed the Soil” DVD.^[2] Summarizing a segment on how the bio-extensive rotation reduced hand weeding to four hours in a half-acre of Stuttgart onions, Anne emphasized that “our goal is not to maximize yields but to minimize the costs of production.”

Another way of saying this is that reducing risk is more important to us than achieving a high income. Although our low-input, land-extensive system has maintained surprisingly consistent production over the past 26 years, we can rest assured that a complete crop failure would not result in a major financial setback. In this respect, our bio-extensive mindset is more closely aligned with a peasant economy than modern day capitalism.

This peasant sentiment grew out of our original goals^[3] for the farm as described in the introduction to the video: “One of the first things we decided when we started farming together in 1982 was that we wanted to keep our farm a two-person operation. This was partly to avoid the headaches and expenses of hired labor, but mainly because we really love working together. You could say this was more of a quality-of-life goal than a rational business decision. In terms of overall farm sustainability, we thought it would be a good idea to rely on the internal resources of the farm as much as possible rather than depend on a lot of off-farm inputs. As for a financial goal, we made it our highest priority to stay out of debt because we thought that would be the best way to minimize stress and maximize creativity.” Although these original farm goals limited the size of our business and income, they seemed like the best guarantee of an enjoyable and rewarding farm life given our private, risk-adverse personalities.

Needless to say, our goals are as out of step with the rest of the world as our old world farm practices. Most growers we know are very comfortable managing inputs, debt and paid labor. These “tools” seem to enhance rather than diminish their creativity and personal satisfaction while removing the ceiling on production and profits. These growers also have a much more up-to-date approach to risk management: instead of taking the sting out of crop failure by minimizing their farm investments, they reduce the possibility of crop loss by purchasing crop protection in the form of high fertility, irrigation and plastic mulch.

One of the consequences of our miserly attitude toward inputs, employees and capital improvement is that we end up subsidizing the business with our own labor. This became very clear to us when putting together the preliminary NEON enterprise budgets we shared in the Summer 2003 CQ column.^[4] The variable costs of our 2002 crops of carrots and garlic, which included all the labor and inputs for cover cropping, bare fallowing, seedbed preparation, fertilizing, compost making, planting, weeding, marketing, harvesting, and prepping and packing for market, came to $4,763 and $10,474 when extrapolated to a per acre basis – not exactly a peasant economy! However, when we subtracted our labor from the variable costs (including the labor portion of the horse care and compost making budget) and then deducted other non-cash costs (like the value of our seed garlic) production expenses dropped to a much more modest $560/acre for the carrots and $540/acre for the garlic. That seemed like an acceptable risk to us peasants.

The NEON enterprise budgets made us realize that we should reword the summary statement in the DVD: our goal is not to maximize yields, but to minimize out-of-pockets expenses. This change in semantics was reinforced when the economist for the NEON project, David Connor, sent us a copy of his about-to-be published article comparing budgets for three crops on our farm with the budgets of three different crops on Spiral Path Farm, a much larger organic market garden in central Pennsylvania.

Average cash costs per acre, including fixed costs, marketing, and all variable costs except labor, were remarkably similar: $4,817 for Spiral Path and $4,517 for our Beech Grove Farm. Average total costs per acre, which included labor – an out-of-pocket expense of $7.50/hour for Spiral Path at the time of the study and a $10/hour opportunity cost assigned to our two-person operation – came to $7,402 and $9,793. The almost $2,400 difference underscored the labor-intensive nature of our peasant economy.

Really, the discrepancy in labor costs did not surprise us. We actually thought it might be greater given the degree of mechanization and harvest efficiency at Spiral Path. What did surprise was the similarity in the cash cost figures for the two farms despite the significant difference in scale (three vs. sixty acres in produce); crop intensity (extensive vs. intensive), mechanization (horse vs. tractor), moisture and weed management (minimum-till dryland vs. plasticulture with drip irrigation), inputs (farm produced compost vs. purchased mushroom compost), work force (primarily owner-operator vs. fourteen seasonal Hispanic field workers and ten local employees for packing), markets (farmers market/restaurants vs. organic growers coop/1,000 plus member CSA/farmers markets), and farm history/objectives:

Mike and Terra Brownback set out to prove that organic farming could be just as productive as conventional agriculture while at the same time improving the health of the land. Some of their intensively cropped vegetable fields now test over 5% in organic matter! Having achieved their original objective, they have shifted their focus to generating as much fertility on the farm as possible.

By contrast, we started out with the image of the farm as a self-contained organism. We never completely realized this idealized vision. In fact, our focus has drifted over the years to enhancing crop quality and nutrient density by importing extra straw mulch and rock minerals.

The similarity in cash costs per acre may be a complete coincidence, but we can’t help thinking that it illustrates how radically different approaches to sustainable agriculture can lead to the same results. Although Spiral Path’s fixed costs (including land, taxes, interest, office supplies, utilities, and equipment amortized over the expected years of service) averaged 60% higher than ours, their marketing costs (comprised of mileage to and from market, market stall fees, tables, display plus labor for driving, loading and unloading trucks, setup and selling) were less than half. No wonder the sum of marketing and fixed costs, as computed in David’s article, were almost the same for the two market gardens; $2,748/acre of Spiral Path and $2,832/acre for Beech grove. “This was only a 3% difference between the farms despite different crops and acreages.”

One reason for the small difference may be that the farms share a common goal, namely, being debt-free. Although Mike and Terra have taken on shortterm debt on a few occasions for major infrastructure improvements, such as the hydrology work required to irrigate sixty acres, or building a state-of-theart, GAP certified packing facility, they have made a point of paying it off quickly. The scale of their operation may actually be advantageous for fast debt repayment. Likewise, spreading their investments in equipment, vehicles and buildings over a substantial number of acres is key to keeping their fixed costs in line.

At the other extreme, our minimalist attitude toward investing in equipment and infrastructure has been an absolute necessity for keeping our fixed costs^[5] at a low level and to offset the higher labor costs of direct marketing.^[6] A midsized market garden might have to use both farms’ investment strategies to keep fixed costs and marketing in the same range.

Realizing that SFJers would prefer to draw their own conclusions from the financial comparison, we end this column with some of the numbers from David Connor’s “Production Costs of Organic Vegetable Farms: Two Case Studies from Pennsylvania,” which was co-authored by Anu Rangarajan and slated for publication in the January ’09 issue of the academic journal, HortTechnology. The four charts include production costs for three crops on each farm plus a traditional break-even analysis which determines the minimum price required to cover all costs (labor, inputs, fixed costs and marketing) based on actual yields during the hot, dry year of 2002 and the cool, wet growing season of 2003.

The fourth chart shows the break-even prices necessary to achieve a $40,000 income, roughly equivalent to the median household income for Pennsylvania at the time of the study. For this scenario, our labor was counted as profit and therefore not included in the costs for determining the breakeven figures for a $40,000 income at Beech Grove. Even so, the numbers show the tremendous advantage of a larger acreage for generating net income. Our three acres in vegetables must net $13,333/acre just to meet the $40,000 median income while Spiral Path only needs to net $667/acre over its sixty acres. Clearly, retail prices are essential for the financial viability of a small operation like ours. The Brownbacks, on the other hand, can realize a good income either wholesaling or direct marketing.

The two types of break-even analysis reminded us of an interview we did with David Tait, the founder of Tait Farm Foods, a value-added family business outside of State College, Pennsylvania. When asking David about his new educational endeavor coaching beginning farmers through The Small Business Association, he emphasized the importance of teaching growers how to put together a break-even graph. He was a firm believer in predicting the profitability of a crop before going to the trouble and expense of growing it.

Had we taken David Tait’s advice, we would probably have stopped wholesaling the Stuttgart onions a long time ago. It wasn’t until we completed the NEON enterprise budgets almost ten years later that we realized how little profit there was in growing these small, storage onions for organic distributors, coops and bulk sales to individuals. We have since cut back production to just a couple of rows for our stand at the farmers market where we receive prices comparable to what David Connor projected would realize a $40,000 income from our small acreage.

That is not to say that growing the Stuttgarts for the previous 18 years had been a major financial setback for us peasants. According to David Connor’s calculations, a wholesale price in the neighborhood of .43¢/lb would have covered all of our costs, including our labor at $10/hour, for an average marketable yield as represented by the year 2003. Despite the reduced harvest in the dry, hot year of 2002, wholesaling the Stuttgarts would have still covered all of our out-of-pocket expenses (inputs, fixed costs and marketing^[6]) and returned a small profit. We doubt this would have been the case had we gone into debt to purchase expensive equipment for our small acreage, relied heavily on off-farm inputs, or had to hire labor to salvage a weedy crop of onions.

Hoofnotes:

[1] For information about the 2009 informal, small group tour, contact the PASA office: (814) 349-9856, www.pasafarming.org.

[2] We intend to keep copies of the “Weed the Soil” booklet and DVD on hand as long as there is interest. See ad in the “Farmers Marketplace” at the back of the SFJ for prices and ordering information.

[3] As most CQers already know, we have not stayed 100% true to our original, sometimes conflicting, farm goals. For example, the switch from wholesaling storage crops to direct marketing perishables in the late ‘80’s made us too busy in June and July to continue putting up loose hay with the team. Instead of speeding up the hay making process by hiring help or investing in a full line of mechanized hay equipment, we decided to purchase hay from neighboring dairy farmers. In the mid-‘90’s we strayed further from our goal of relying on the internal resources of the farm as much as possible when we started “remineralizing the web of life” as described in the Winter 2005 CQ. And since 2004 we have compromised our twoperson policy by hiring part-time employees to help with washing and packing the produce.

[4] Much to our surprise, we received a lot of favorable response to the “Grace and Beans” essay in the Summer 2003 CQ. It included our philosophical reservations about the whole number crunching process, an introduction to the Northeast Organic Network (www.neon.cornell.edu), and some important background information about the enterprise budgets for our farm, such as an economic analysis of our fallow year management and the compost making process.

[5] The inclusion of fixed costs in the Beech Grove budgets does not sit right with our peasant mindset. Relatively recent vehicle purchases (pickup truck and delivery van) represent half of our fixed costs. Yes, these major investments are real costs of doing business, but since we paid for them out of savings, a complete crop failure would not, in reality, put us $2,000 behind in making payments. The second biggest fixed costs, $1,000 in total farm taxes, is carried entirely by the three acres in vegetable production. In reality, the rest of the 89 acre farm occasionally generates some income (i.e. horse and timber sales) and regularly provides us with significant savings in the form of forage, firewood and building materials. Utilities, the third largest fixed cost, includes a good bit of our domestic energy use. From our peasant perspective, fixed costs may not be all that useful for understanding how a small-scale farmstead economy actually works.

[6] A set marketing cost also seems like a poor fit for our peasant economy. After all, an outright crop failure presumably would result in zero marketing costs. To be more precise, both marketing and harvesting costs (including labor, packing materials, and the value of space occupied in the delivery vehicle and at the market stand) should change substantially with increases and decreases in yield. Fortunately, Brian Caldwell, another member of the NEON research team, is developing a dynamic budgeting tool which takes these sorts of variables into consideration.

Peasant economics aside, our relatively high marketing costs per acre are due to the inefficiencies of making deliveries to small restaurant accounts and the labor-intensive nature of selling at the farmers market. Last year Anne hired six friends just to keep up with demand at our stand!