Don’t Go On A Hunch: Identifying Profitability On-Farm

By Ryan Spence and Isabelle Legault

Part II of What It Takes To Farm Up North

In this post, Ryan Spence of Field Good Farms in Cache Bay, Ontario goes through how he and Isabelle analyze their farm’s numbers to make profitable and sanity-saving decisions. They are champions of Richard Wiswall’s The Organic Farmer’s Business Handbook. Other opportunities to glean Richard’s knowledge can be found in his blog post on the Farmer Review blog or from his Agriwebinar presentation, Planning for Profit (you will have to register for a free account on Agriwebinar before watching). 

The 2012 season was our first year of full-time farming. Naturally, I (Ryan) wanted to grow anything that I possibly could.  We had head lettuce that toted a delicious centre core if barbequed like asparagus, broccoli leaves, and parsley root.  Although these are in fact delicious, it turned out that the market for them was quite small and that we were spreading ourselves thin.

By the end of 2012 we were tired. Really tired. Going into the 2013 season I somehow managed to convince Isabelle of another season of interesting but less marketable items.  Again, we got through the season but didn’t do much better financially and we were both still exhausted.  During the off-season I read Richard Wiswall’s The Organic Farmer’s Business Handbook and began to understand key concepts that make small, sustainable farming lucrative.

We immediately realized that we had to focus our energies and be smart about operations.  This began with asking key questions: what was profitable on our farm? How could we identify this?  It’s easy to go on a hunch about the profitability of a “crop enterprise,” as Wiswall would call it, but that doesn’t mean that it is actually worth the time. When it comes down to it, hunches are nothing more than hunches.

Turning Point

With faint memories of tired bones, we decided that 2014 would be the season that would help identify which crop enterprises were in fact profitable. We continued to grow a wide variety of crops, 51 to be exact, to provide a fair comparison. To track each crop we created what we called “task sheets.”Hunch_1

These were to be filled out by everyone who worked or volunteered on the farm and the tasks had to correspond to the categories on Wiswall’s Crop Enterprise Budget spreadsheets which can be found on the Companion CD which comes with the book:

The Crop Enterprise Budget Spreadsheet using Arugula as a Crop Enterprise (from the Organic Farmer's Business Handbook's accompanying CD)

The Crop Enterprise Budget Spreadsheet using Arugula as a Crop Enterprise (from the Organic Farmer’s Business Handbook’s accompanying CD)

Two things happened. While the task sheets gave us very real data about our operations, we realized that we also had to think about our processes on the farm. When you start tracking how you spend your time in a day, you automatically start thinking about how you can do things more efficiently.

Isabelle took all of the 2014 task sheets and created crop-by-crop summaries in order to tally the hours spent on all tasks. I then took this information and put it into Wiswall’s spreadsheets.

This lead to a few surprises. Cherry tomatoes topped our list at 439% profit.  Sweet corn came in last place at -$26.08/dozen (we were selling it at $10/dozen). This means that it was costing us $36.08 to produce a dozen corn!

Cost of Production Summary - 2014

Cost of Production Summary – 2014

This information made it very easy to cut out the things that were bogging down the farm. This is the magic of Wiswall’s tool for cost of production analysis; it allows you to make accurate decisions based on your production methods.

Mixed greens are a great example of how these decisions helped change attitudes about daily tasks. Prior to capturing production information and doing a crop enterprise analysis I would have gone out to the greens patch and harvested 10lbs in 2.5 hours, struggling to sort out the many weeds that had magically appeared in the crop. With good decision making tools in hand I now see two things: 1) as difficult as it is to admit, it is not worth the time to harvest, and, 2) that we need to look at how we can improve bed preparation and weed management in order to make this crop profitable. By identifying time sinks we also start to identify areas that need adjusting.

Marketing and Sales
At the North Bay Farmers' Market

At the North Bay Farmers’ Market

Since nothing exists in a void, it is also important to consider market availability. Just looking at our numbers would lead us to believe that we should grow many cherry tomatoes and no corn. However, when we looked at our farmers’ market sales records we realized that cherry tomatoes weren’t that easy to sell compared to other products. The balance lies in identifying crops that are both profitable and marketable. Keeping track of all sales, be it through our CSA, the farmers’ market or wholesale, is an important part of the puzzle.

Hunch_5

Crop Enterprise Example – Potatoes

With this in mind, let’s discuss potatoes. Conventional potatoes are notorious for pesticide use. In organic systems, they often require many hours of labour spent picking Colorado potato beetles. It therefore came as no surprise when this crop enterprise demonstrated a loss.

Potatoes as a Crop Enterprise - the bottom portion of the cost of production spreadsheet (from the Organic Farmer's Business Handbook's accompanying CD)

Potatoes as a Crop Enterprise – the bottom portion of the cost of production spreadsheet (from the Organic Farmer’s Business Handbook’s accompanying CD)

To provide context, we run a 110 member CSA in northern Ontario and, as such, we felt that there was no way we could cut potatoes from our crop list. In fact, a survey to our members suggested that they wanted even more potatoes! We looked at other local farms to see if we could partner up and have them provide potatoes for our CSA.  With no organic growers around we had no choice but to go back to the crop enterprise numbers to try to see where we were going wrong. The culprit: poor production methods resulting in low yields.

Our "brand-new", time saving 1948 International Harvester Cub

Our “brand-new”, time saving 1948 International Harvester Cub

Essentially, we weren’t hilling our potatoes or doing a good job of keeping the weeds out. With the amount of production necessary to fill our CSA shares we needed tools that would help us to be efficient. We found a 1948 International Harvester Cub for $1000.  We already had hilling disks at the farm that could be mounted on to the implement bars.  With this purchase we could now hill ¾ acre of potatoes in 1 hour and 20 minutes.  At the same time the Cub took care of most of the weeds during the hilling process. Effectively, our yields went way up and the time we spent weeding went way down.  This created a new problem, too many potatoes! Finding the right balance will take time, and this is a good problem to have.

When we think of tools we often think of production tools such as a hoe, a wagon, or a rototiller. Good decision making tools can be far less expensive, and are often overlooked. They are the kinds of tools that can and should be used during the off-season, when the mind is fresh and looking to the future. There are many examples on the farm of how this new “tool” helped us to make more informed decisions. Numbers aren’t everything, of course, and we still need to operate within our missions and values. We also need to consider our market.

At the very least we now have solid data of what crops are either not worth producing or need to be improved upon.  We continue to capture this information as we hope to highlight trends and improvements on the farm from year to year.  We would highly recommend this book and budgeting method to anyone who is seeking to make accurate decisions in regards to crop choices.

Making a living out of farming can be hard at times, let’s make it easier on ourselves by really knowing what is worth producing.

Hunch_8

The Organic Farmer’s Business Handbook by Richard Wiswall, 2009. Chelsea Green Publishing.