Can you make money farming? aka When the Homesteading Honeymoon is over

A few years ago on Facebook, several of my friends and fellow “livestock/agriculturalists” have been sharing an article called “Quitting Season: Why Farmers Walk Away From Their farms”. It is a very well done article about the economic realities that drive individuals out of smallholder farming for profit. It is one of the few articles or blog posts that even touch on the stark brutality of smallholder farming economics.

Farming for Profit is a Business, while Homesteading might not be

It is important at this point for me to clarify my definitions of the difference between, farming for profit, subsistence farming, and hobby farming.
Please understand these are my definitions and you may disagree with them.

  • Farming for profit is a conscious decision to provide the bulk (or at least a major portion of) your income from livestock or some form of agriculture. It is an agribusiness model most likely smack dab in the middle of the US food supply chain. Whether that be raising breeding stock, meat, milk,  eggs, or homegrown plant products for animal feed or human consumption. 
  • Subsistence farming is an all-out attempt to grow the maximum percentage of your nutritional needs. This was our starting goal which you can read about here Investment in the Homestead LifestyleThis can be health, dietary or agenda driven. It requires a conscious realization that whatever your goals that your life requires an income not based on your property(day job, investments, etc). Although in the ideal scenario there are cash flows to offset the cost. Your net feed /grocery store bill goal is that it is at, or under, your pre-farm grocery bill level. 
  • Hobby farming is just that. You may want a few vegetables or meat sources or a great “lifestyle” environment for you and your family. Very often it is an agenda driven moment where the hobby farmer can declare revolutionary independence from the decadence of the food supply chain in between boxes of pasta or Chinese take out. 
farming for profit

Today, unfortunately, all three are blended into a “club” that is growing in popularity, social acceptance call the “Homesteading Movement”.  And in some cases, the siren song of “Homesteading” is a scam being perpetrated on the idealistic optimism of would be new small business people by a conglomeration of feel-good magazines and bloggers.
Look I am not trying to be judgmental here. My point is only that before you can know your limitations, you need to know who you are. And knowing why you are who you are is the best way to recognize potential bad decisions based on your own emotionalism.

Farming for Profit IS a Business and the same rules apply

 But returning to the subject article. At the end of what I think is a very good article up to that point the author comes to the following conclusion “When farmers call it quits it is not because they have failed—it is because our archaic food and agriculture system has failed them. One thing remains for sure: if, as a society, we don’t prioritize the health, well being, and financial solvency of our farmers, we will lose them by the droves—along with all of their precious resources, talent, and skill—and the kinds of food only a farmer who loves his work can provide.” 
It is at this point that the author drops the ball in my opinion. I am sorry but the failure of any business can usually be traced to the preparation, skills, and resources of who stares the owners in the mirror every morning. Notice I said small business. Not small farmers. Because for some reason when you use the term farmer some people think the rules of small business are magically dissipated by some Norman Rockwell image of a “food and agriculture system” that is duty bound to support inefficient or noncompetitive business models.

 For the past 29 years, I have been self-employed in a series of small entrepreneurial start-ups. In each case, I founded or co-founded startup entities. Those businesses include a recreational boat dealership, an event marketing business, a used car dealership/ asset value recovery firm and today our little 38-acre subsistence farm which eventually led to a small farm Meishan Pig Business.

farming for profit

Know Your Competition

Some businesses I ran were mildly successful, and some were successful for a period of time. But some just existed in a constant state of an extended terminal disease! I am not a business genius. I am just a small business survivor.

So how does this relate to the article? It’s quite simple. If you are going to walk into a bar and take a swing at the biggest worst dude in the joint you better be ready to get your butt whipped. That is unless you have a weapon, skill or secret invulnerability he doesn’t have. Another way to paraphrase this is to suggest that you better make a pretty good sandwich if you are going to open a sandwich shop in between a Panera bread and a Subway. Its gonna take more than Mommy’s old world mayonnaise. Because in small business the only unforgivable sin is to run out of money. And your competitors will be more unmerciful than a Mongol hoard when you stumble. As I said earlier the smallholder agricultural model in many cases(including those in the cited article) are within the US food supply chain.
Our U.S. food supply chain is a multi-billion dollar supply chain dominated by very large and very powerful competitors. And they got that way because they supplied the public with EXACTLY what they demanded. Which is:

  1. That is food that is convenient.
  2. Uniform in appearance
  3. Targeted at the lowest common denominator pallet 
  4. Most of all the majority of the public wants low-cost food in relation to the products supplied by smallholders. 

Sad but true… We have “Big Ag” because we demanded “Big Ag”. We have “Big Ag” so we can spend more time and money on our I-phone than we do in the kitchen.

Small Farming for Profit can be done!

 So does that mean its a hopeless endeavor? No, but I think the problems with many failed smallholder “farmer” attempts is to ignore the fundamental realities of all small businesses.

The first is you have to be everything. You have to be the CEO, CFO, brand manager, advertising manager, customer service specialist, expediter janitor, laborer and bottle washer. If you are going up against Kroger and Purdue understand they have entire departments to do each function and that function only.  They pay those managers 6 figure plus salaries to do those things. Then give them resources you just can’t imagine.

Unless you are very special they are better at each function than you are. They became better at it while crushing other competitors, much larger and much better funded than you. They are the biggest worst dudes in the bar. If you are going to play in this arena you need a niche so specialized, so new or so small as to remain below their radar. If you are raising the same breed of chicken, hog, beef, or commonly available vegetable as the big guys and expect people to pay double because you are nicer to the animal you better be great at branding (Joel Salatin) or have direct access to a demographic nobody else is servicing.

The broiler chicken that can be slaughtered in 6 weeks was developed for the “Big Ag” guys. If you think raising it in a pasture makes you invincible then just look at how many before you have failed. And before you go reaching for your keyboard and tell me how Joel Salatin does it please research how much land, how much equipment and infrastructure he has! How many employees and interns he has and what his revenue from speaking is! Then tell me how you as a small startup compare.

More Product does not always equal more $

The second fundamental rule of business is that you can’t sell at a loss and make it up in volume. In the cited article one farmer realized (well into the endeavor) that he was losing money selling beef. That his ground beef had to go from $8 a pound to $11 a pound. He tried to make the jump in one week. Failure ensued.

In what business do you even begin without a clear cost analysis/product price analysis? Who waits until they are going broke to calculate these things.? Rookie farmers do! Part of the issue in this segment is that for many it is the first foray into a small self-owned business. I can tell you that there are no manuals or feel good magazine articles that come close to capturing the brutal reality of small business for profit.
And rookies, like I did when I was a small business rookie, find out quickly the complexity of accounting, regulations, waste, cost of goods sold, marketing, branding, etc will humble you. If you are competing against the big guys when the realization hits you are already a dead farm walking.

Worse yet farming and the “make money while living your dream” homestead business fairy tales being overly romanticized by a host of feel-good publications are just not accurate. These BUSINESS’S are focused on increased circulation and not reality. Worse yet they breed a plethora of small startups who flood the market with the product below their costs thinking it will all work out if they are “good stewards’ etc etc.
My advice to any farmer whose cost analysis puts them at $11 for ground beef or pork(when its $4.99 or less at Kroger )would have been to look at value-added functions for their beef or pork. For example, rather than sell ground pork, sell custom sausage. For a few cents in herbs, you can get dollars more in price. Or just quit it. You cant make it up in volume.

Know Your circumstances and Work that Niche!

If you look carefully and research the “successful” smallholder farms you often see a common thread. Their products are very niche oriented. Microgreens not carrots, Heritage red meat pork not the breeds raised more efficiently in confinement. We choose a ‘niche’ business for our farm to be Meishan Pigs. It was a short business for us and it was profitable.
Know that niches can have a definite shelf life. Today’s trendy rare meat can be tomorrows oversupplied commodity. It can be done but you will make a lot less than your day job for a long time before you make more.
And that brings me to the “Homesteader” make money off the land, doing whatever you want myth”. I can’t tell you how many times I have heard this scenario’

“We just bought three acres. Now we are going to raise all of our food and sell livestock so we can quit our jobs and live the good life of an independent farmer.”

Really? Well, be advised that its a tougher gig than you think. In most cases, people woefully underestimate the land required, the livestock or crops suited to their land, the cost structure inherent to their business, and the form of indentured servitude a small business owner must endure is lost on the uninitiated. Worse if you try to warn them because then you are being negative. So be it. The hardest thing about good advice is to know when you are getting it.

One Goal at a Time!

So for us, the first goal was the subsistence model. We have progressed over almost 8 seasons of growing 90% of our own food and nutritional production. Our livestock sales contribute to reducing the cost of growing them. It is our chosen path and while its hard work we accept the stress in exchange for the benefits. We do now have our ‘dream’ homestead! It wasn’t easy but once we knew who we were and set goals we got on the right track. 

Once we had our first goal accomplished we looked to a niche market to move the farm to a small business model while not sacrificing the other gains we have made. Which we accomplished with our Meishan Pigs. And if we had failed it would have been on us. Not because the “food and agriculture system failed us”.

Be blessed. And happy homesteading~ Rico Silvera “The Helpful Husband”