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.

Recent Reports Explore Regional Food Marketing

Here are two recent reports that shed light on the varying  opportunities and constraints facing the expansion of food sales for New England farmers and food distributors.

“Getting it There”, Farm to Institution New England. This report looks at food distributors in the farm to institution market channel.

“Storage and Distribution Report for the  Northeast Kingdom”, Rosalie J Wilson. Development Services

These organizations are among the many that are working to advance farm to school and farm to institution development.

Food Connects

VT Feed : NOFA VT and Shelburne Farms

Sodexo: VT First

 

Building Brands in a Small Farm Food System

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Fifteen years ago the buzz word was “direct sales”, seven years ago it was “scaling-up” and in 2016 the call is to build brands. Many small farms and their owners can’t manage the “scale-up”. Can food systems entrepreneurs harness the cumulative capacity of small farms to supply market demands both near and far?

Check out this recent article originally published  in Local Banquet (Spring 2016)     
and featured through the Vermont Farm to Plate website: Building Brands in a Small Farm Food System

Eggs out of stock 10-11-11                                    A store with empty shelf space in 2011 for locally produced eggs

Online Farm Planning Resources

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Farm managers have dug into winter business planning projects and by now everyone has identified key questions that require analysis, research and technical information. UVM Farm Viability has filtered the internet universe and posted  the best resources to assist managers with legal decisions, market research and financial records. Visit our Resource Library and open up the Legal Toolbox, Market Toolbox and archive of online recordings.

Spaces Limited for Winter Farm Business Planning

UVM Extension Farm Viability provides individualized business planning support to commercial farm owners in Vermont. We have a small number of spaces left in our program for farms seeking to develop business plans or complete business analysis by Spring 2016. Sign up now or contact the program for more information. Once the winter roster is full we will begin to enroll participating farms on a short term waiting list for next years program cycle. Eligible farms are required to have been in  business for at least 3 years and show gross sales of at least $15,000 in the most recent year.

UVM Extension Farm Viability works with farms to develop business plans, complete enterprise analysis, prepare cash flow budgets/financial analysis and develop farm succession plans. Coming up this winter, our staff will also be providing additional business education programs. Watch our website for the schedule of winter 2016 programs.

 

Using market price reports to crunch numbers

The VT Agency of Agricuture, Food and Markets posts weekly Farmers Market Pricing Reports at this site:  http://agriculture.vermont.gov/localfooddatatracking

These reports provide a nice way to observe the pricing trends for direct market sales. If you are already selling directly, take a look and see how your prices compare to low, high and average prices.

Covering the cost of marketing: Many small farms default to direct markets on the assumption that the higher prices received are enough to compensate for the expenses of serving these markets. The price reports provide data to crunch the numbers to compare current wholesale prices vs. direct market prices to consider your best options.

Here is a partial budget exercise using September white potato prices:

9/13/15 Report:  Organic White Potatoes: $2.50 average per pound

I can currently wholesale ORG white potatoes for $0.90 per pound or $1,800 per ton equivalent. If I were to bring them to farmers market, I could potentially gross $2.50 per pound or $5,000 per ton equivalent. Let’s crunch…

  • Farmers market = 200 pounds per week
    • market days per ton (2,000 lbs /200) = 10 days
    • market labor = 10 days x 6 hours x $12 per hours = $720
    • packaging = $0.25 per pound (labels, carton/bag) = $500 per ton
    • market fee (day fee): $35 x 10 days = $350 per ton
    • Fuel: 30 mile round trip x 10 days (@$0.13 per mile fuel) = $39 per ton
    • packaging product (retail bags): (100 lbs per hour @ $12 per hour)= $0.12 per pound or $240 per ton
    • Gross Sales $5,000 less market expenses of $1,849 = partial net $3,151 per ton
    • $3,151 = 63% of gross sales retained for production and profit
    • Cost to Market: $0.92 per pound
  • Wholesale sales = 750 pound per delivery
    • delivery days per ton (2,000 / 750) = 2.7
    • delivery labor = 2.7 delivery x 3 hours round trip x $12 per hour = $97 per ton
    • packaging = $.70 per bag per 50 lbs = $28 per ton
    • fuel: 90 mile round trip x 2.7 trips (@ $0.13 per mile fuel) = $32 per ton
    • packaging product (from bins to bags): (500 pounds per hour @ $12 per hour) = $0.02 per pound or $40 per ton
    • Gross Sales $1,800 less marketing expense of $197 = partial net $1,603 per ton.
    • $1,603 = 89% of gross sales retained for production and profit
    • Cost to market: $0.10 per pound

There is no right or wrong decision here. The big trade off is time  vs. money… the direct market farm makes much more money but has also invested ~80 hours to prep and market 1 ton of spuds. The wholesale producer earns a smaller margin but has only spent ~12 hours to prep and market 1 ton.

Broiler Chicken Demand Research Report

Download the full report here:

[PDF] Broiler Demand at Small Grocers 2012-2013, FBRR-011

In the fall of 2012 University of Vermont Extension distributed a survey to a group of small  grocers  asking about chicken and egg demand in their stores with a focus on regionally-produced products. Follow-up phone interviews were conducted through the fall of 2013 to get additional feedback from the buyers in these stores. The goal of this work is to understand the demand for local poultry products and to also provide guidance for poultry farmers preparing to conduct their own market research.

Broiler AttributesThe reports provides details about which attributes consumers are looking for in poultry products and also the specific service expectations that small grocers have for farms selling them them poultry.

Click here to view or download the full report:

[PDF] Broiler Demand at Small Grocers 2012-2013, FBRR-011

 

$30,000 Prize for Rural Entrepreneurship

The American Farm Bureau Federation and Georgetown University have launched a challenge program to support entrepreneurship throughout the rural United States. They will award a $30,000 prize to the winner.

Do you have a creative business or business idea? Check out the details for this challenge and imagine what $30,000 would do to get your idea launched.

Rural Entrepreneurship Challenge

Investing Time in Market Research

On May 15th  the Vermont Farm and Forest Viability Program organized a meeting of statewide farm business specialists for a training session on farm marketing plans. Participants included service provider organizations,independent consultants and a guest presentation by Myrna Greenfield (Good Egg Marketing). Here is a summary of the conversation when advisers were asked, “How much time should a business owner spend to develop a marketing plan?”

Adviser A: One  successful business spent up to two years completing the market research and developing a plan before they began farming. They researched the population demographics and competition in various regions in order to select a location to farm and a strategy to sell their products.They grew a vegetable business to $250,000 in sales in five years.

Adviser B: It depends how much is at stake. Owners that can afford to lose all their investment might take their vision, launch the business and try to develop a plan on-the-fly. This happens more than we realize and most times the business will fail. If you can’t afford to take that risk you need to determine an overall break even level for the entire farm first. Before you start the business you need to complete the market research and confirm you can generate the needed sales to reach break even. A smart manager can then adapt a new plan once you have passed the break-even target.

Adviser C: That all sounds great but many farms are already in operation and they want to launch new enterprises. I advise them to try things out on a small scale. Run a test year to produce and sell the goods. You’ll need to set aside part of the “farming” day to initiate relationships and learn how to sell the product.  Identify how much risk you are willing to take and test out the idea at a scale where you can sustain the losses if it fails but also get enough information to understand if it is feasible to continue.

Adviser D: A farm owner needs to calculate cost of production on the farm in order to set accurate prices and production targets. That information is needed to identify the most appropriate buyers (either direct or wholesale) for your products. Cost-based pricing is essential to developing a feasible marketing plan.

Milking Pigs: An Emerging Market

This was posted as an April Fools joke on April 1, 2014.

We are not aware of any activity that resembles the post written below but we had quite a bit of fun exploring the possibilities. Enjoy.

Here in Vermont we have a small number pig milk start-ups that are combining new research and some good-old creativity to find a niche.Farm business adviser Sam Smith at the Intervale Center says, “I see pig milk and the related products as the next big opportunity for our producers here in Vermont.  We have a couple of farmers who have been experimenting and their success has led me to think this is going to be a very lucrative market.  If you look at it purely from the perspective of the number of teats per animal, you have three times the amount of teats than a cow, which means three times the profitability!”

What are the reasons for pigs milk? First is the potential to ramp up production quickly.  Pig breeding cycles are relatively short making it easy for a farmer to build a herd of milking pigs quickly.  Smith says “This is another game changer when compared to cow or goat dairies.  You can have a pig dairy online in under six months with a lower capital investment, a great option for beginning farmers. And when you need replacement pigs you have plenty to choose from.” 

 Pigs, like humans, are a mono gastric species that digests  food with one stomach. With a diet closer to humans than cows, pigs milk is also more similar to human breast milk. This amounts to a more digestible and less allergy prone-product.  Artisan cheese makers have also been experimenting with the milk as a potential way to further diversify their offerings.  Alison Lancet, who operates the farmstead cheese operation magnolia dairy said “We have produced some wonderful blooming rind cheeses with pig’s milk, and plan to have them for sale within the next three months.” Pigs milk is high in fat and is considered ideal for new products like restorative health products. These are part food and part medicine to assist in treating nutritional problems and skin conditions.

Locavore groups nationally have noted that many regulations placed on direct on-farm milk sales are specific to cow or goats milk. Pigs milk is seen as a way to promote community access to farm based products without conflicting with current regulations.

Industry leaders have quietly been evaluating other products too. Many people don’t know that the once iconic 100% pig-skin football has been replaced with mix of natural and synthetic materials to improve it’s grip. Recent pig breeding programs focused on improvements to meat yields had the trade-off of leaner animals which impacted the texture of pig skin. Since 2002 a partnership between American football companies and several in Australian have been evaluating pig skin trials from heritage pig breeds. These are the same breeds being evaluated for dairy production! What a great fit for high school sports programs re-evaluating ways to integrate sustainability into student learning!