VT Ag Business Today: Produce Cost Studies, Food Safety Grants and more…

The Vermont Farm Viability Service Provider Network met on October 4th. This meeting of consultants and business educators is a place to share current resources to enhance farm business planning in Vermont. Topics of the day:

  • NOFA-VT has produced cost of production benchmarks for carrots, onions, lettuce, winter squash and potatoes. The study has also produced whole farm financial benchmarks. Go to the cost of production benchmarks to see  the sales per acre, costs per acre and net profit per acre for these crops.
  • VT Agency of Agriculture, Food and Markets announced the first round of Vermont Produce Safety Improvement Grants that farmers can apply for to improve on-farm produce safety. Farms can also get support for an On-Farm Readiness Review to have a one on one conversation on how the farm is doing on produce safety in advance of formal inspections.
  • Dairy Industry Overview: discussions continue about how the oversupply of conventional and organic milk is impacting farm gate prices. Stagnant or declining prices paired with regulation/certification driven investments present a difficult situation for dairy business owners to navigate. Farm transfer planning is further complicated as the outlook for many dairies remains uncertain. Back to brass tacks, this group talked about the need to revisit accurate and responsible asset valuation on dairy herds and how to develop pro forma statements that negotiate short term cash flow shocks.
  • Farm to Institution Spending: active research continues to explore possible opportunities to enhance regional institutional spending (schools, colleges, hospitals) on agricultural products. The looming question remains: What will it take for farms or distributors to find solutions that get the right products to the buyers at the right price.

Use Pre-Mortem Analysis to Prevent Project Failure

When you are planning a bold farm diversification or expansion who do you want on your planning team?  An ultra-advocate….”we can do this!” or the devils-advocate… “here is something that  could really go wrong!”.  Consider the premortem analysis process. Don’t wait to complete the  postmortem debrief after the project fails. At that point it is too late. The team can learn from the mistakes but it will be too late to recoup sunk capital, time and possibly relationships that suffer from the failure.The premortem analysis takes an important look at all the factors that can wreck your project. It is a key process to anticipating these risks, fine tuning the plan and building in sufficient contingencies.. Business advisers can facilitate this process or business owners/project leaders can do it within their groups.

Feasibility planning regularly suffers from over-optimism or key leaders that are over-invested in success (at all costs!). The project premortem is an essential step in the planning process. Here is a list of key steps to complete the project premortem

  • Gather key projects members and stakeholders that have already been briefed on the anticipated project goals.
  • Make the announcement “the project has failed”.
  • Team members must  start with the brainstorm first (don’t try to problem solve). Ask participants to list 2-3 the things that caused the failure. Ideally, get people to develop their list independently without group conversation. Create space for all team members to get their perspective into the process.
  • Team leaders and/or the group reviews the premortem symptoms and ranks the highest priority items.
  • Look for ways to strengthen the project plan.

Farming is a risky business and certain farms are challenged to retain profits. At any point in the business planning process it is OK to ask, “is there more evidence pointing to project failure compared to success? Can this be a viable project?”

The premortem perspective will bring your farm planning to a higher level. Forcing projects to fail on paper will improve a manager’s ability to make them work in real life.

 

Farm Viability Network Resources

On February 17, 2017 the VT statewide farm viability business planning network members met to share current research and resources to advance farm business plans.The session included farm business benchmarks, feasibility studies and conservation easements.

The Farm to Plate Viability Indicators Task Force is collecting key benchmarks and indicators for produce, livestock, maple and other ag sectors in VT. Picture the scene, 17 business planners adding notes to a group spreadsheet and punching calculators to document business metrics used to evaluate performance and management: labor expense ratio for produce farms, gain per day for grass-fed beef finishing, debt repayment margins for robotic dairies. The task force will be publishing key benchmarks later in 2017.

Rose Wilson shared recent feasibility projects she has been working on. Right now, enterprise analysis projects for organic enterprises including grass only milk, laying hens and pork is underway. Spoiler…. these enterprise are challenged to break even at the current cost and market price levels. More studies include….

Feasibility Study for a Leased Vegetable Storage Facility, Rose Wilson This reports explores the demand and business  feasibility for a shared-use leased vegetable storage facility.

Northeast Kingdom Agricultural Transportation Feasibility Study, Rose Wilson
This report presents different freight service delivery solutions and includes cost analysis, route mapping and other business considerations.

The meeting concluded with an extended panel featuring the VT Land Trust Farmland Access Program.  A key discussion centered on  on farm labor housing and appraisal considerations relating to collateral values and credit decisions. Conservation easements continue to be an important way to meet conservation goals, facilitate farmer exit planning and provide affordable farmland access for new farm businesses.