It’s that time of year again on the farm… not the fun seed ordering, first greenhouse planting, getting little chicks in the barn time. No. It’s TAX time. A time to reflect on how hard you worked over the year and how much of that hard work goes to Federal and State entities that don’t represent your needs or your beliefs in the least. Good times. Nevertheless, it’s also a time to reflect on what worked and didn’t from a sustainability standpoint. As I have said many times before, the desire to lessen your carbon footprint, get back to the land and produce more for yourself and the local community may be “sustainable” on (recycled) paper, but if you can’t AFFORD to do it then you are living a dream that’s destined to become a failed nightmare.
So how did we do this year? While I’ll share graphs and thoughts (and we will talk about this in great detail on the CoopCast in episode 059) the bottom line is - we lost money this year farming. Not a lot… but a little. And if we didn’t have our off farm jobs to sustain us, this page might be blank, as the internet is unforgiving… when bills aren’t paid, the lights go off. Note: Regarding the overall profitibilty of the farm, had we not had the large one-time expesne of the livestock trailer this year we would have “broken even” between expenses and income.
In this discussion, I chose not to share specific numbers, mainly because scale isn’t really an issue for some of these enterprises. Sure you can add more people to a CSA and have nominal impact on the expenses to support it - to a point… then there are only so many hours in a day and your only option to “get more hours” is to hire more hands… and that’s another increase in expenses. With that, let’s take a look at where we spent money across the farm in 2012 broken down into the categories that we are reporting on our Schedule F (the farm schedule for the Federal 1040 tax return).
Even if you are color blind there are 3 items that clearly consumed the lion’s share of our 2012 operating expenses… Feed, “Other” and Supplies.
- Feed - Hands down the biggest expense we faced in 2012, as did many other farmers. With the drought and sky rocketing corn costs, there’s very little you can do to offset this value when you are at our scale. The expense to purchase equipment to till, plant, harvest and store our own feed is not an option… and animals need to eat. The biggest consumer of the feed were the pigs (#1) and the broiler chickens (#2) with the egg layers (#3) right there with the broilers. We pasture all our animals, we give them MORE than typical per animal space on the pastures for grazing and they STILL consume a LOT of feed. Could we look for other sources or cheaper sources? Sure… but cheaper feed and cutting corners in balanced rations will very likely lead to inferior meat products. There’s no such thing as a “free lunch”.
- “Other” - These are things that don’t necessarily fall into a specific category… like the livestock trailer we had to purchase to run our pigs to the butcher and some related expenses in that space. Maybe these items could fall into supplies but we thought they were just different enough that they shouldn’t.
- Supplies - Here’s the meat of “growing” the farm. Fencing, hog feeder, water lines, hoses, stainless tables for processing poultry… the list here is just about every “Honey, I’m running to the tractor store” purchase over the 2012 season. We use Tractor Supply for most of this and at the end of the year they send you are WONDERFUL itemized listing of all your purchases over the year - and on this line the #1 expense was the backbone fencing project… and it’s nowhere near complete.
The rest of our expenses are labeled, and although fractional, still add up. When you are losing money like we did in 2012, every penny becomes eligible for scrutiny. Every expense should be lined up against income, so let’s do that next.
I guess the one nice thing about reporting on income from a farm is it’s simple. I work with lots of accrual based companies and how and when and where they recognize revenue is always a bit of magic to me. With a farm, it’s a simple cash-based system. Someone takes a dozen eggs from a cooler and leaves you $4 cash in that cooler. You recognize that $4 in income then and there. So we actually just line up our deposits by category over the year and click “sum” in Excel to get the totals by category.
- HOLY COW PIG! - almost 50% of our income for the year came from our pigs. We KNEW that pork was easier in terms of the overall labor on a day to day basis, but looking at the numbers, I don’t think either one of us realized how critically important pork became to our farm. This was without any retail pork cut selling either (which have a larger margin on them). Still, it’s not all sunshine and roses in this picture. Remember we LOST money this year and when you overlay the feed expenses with the income from pigs… they made money, yes… but we are not retiring on pork, that’s for sure!
- Chickens. Broilers. They are a lot of work but they also make money for a small farm. The more streamlined you can make your operation (minimize time and losses), the more profitable they can be. Still they are very input intensive. If you accounted for hours of effort, I can think of no other enterprise that requires as much dedicated time on a daily basis (feed, water, moving pens and processing) - so again - no free lunch on the income side.
2012 Farm Financial Evaluation
Where does that leave us for 2013? Honestly, a little confused. We know we have “scaled up” in the pork department, given we have two mommies ready for farrowing in May this year, BUT we seemed to hit a bit of a wall last Fall in terms of customers willing to purchase 1/2 a pig. It’s not a trivial cash outlay and consumers are a finicky lot. We have some ideas on how to help build some confidence in the idea for first timers, but those ideas are unproven. We also have some folks who are very interested in buying some of our weaned piglets. That’s great and we will be selling some so our feed expense for those piglets sold will be less… but so will the income of a full sized pig be gone from the ledger.
We have already said we are cutting back a little bit on the number of broilers because of their labor requirements so the income number there will drop simply by virtue of volume. Is that a wise idea? Sell fewer of the product that you KNOW people are willing to pay for? Sell less of an item where you KNOW demand outstrips supply 10-1?
If we were Chicken Inc - the answer is a simple “NO” - as the CEO Kelli would say “grow more chickens”. And herein lies the central challenge to small scale, sustainable, natural and honest farming. I ask myself this simple question - do I always give the chickens in the second batch on pasture the same quality of life as the first batch when faced with late summer burnout? The answer is no. I mean, they have a great life, are highly respected, well cared for… like let’s not suggest I treat them poorly. But, do I have the same spring in my step and vigor to move their pens as I do the very first group? No way. Does that impact their lives? Likely. I mean, think about yourself… when confronted with a task you are not looking forward to - do you ALWAYS do your best every time, 2-3 times a day for 4 weeks? If you honestly do, you are a better person than me.
So with chickens, for us, there’s a conflict of interest in chasing the income dollars. It challenges our central reasons for farming this way. It puts in jeopardy the very tenants we believe in around how animals should be treated with respect and allowed to be the animals they are. As soon as we start talking about chasing that last dollar, it’s challenging. (And let me be PERFECTLY clear. I am all for profit. I’m all for corporate responsibility and I don’t think we need regulations in place to manage this. I think the market can take care of itself.)
Here’s a shocker - farming is a LOT of really, really hard work and it’s VERY difficult to make a decent living at it. Because farming is a process where you are brokering in nature’s graces and raw materials, the fact of the matter is there is very little slack or compression space to “work the numbers” to “do more with less”. Every mouth you need to feed on a farm requires additional inputs. Every plant requires tending and water. The land requires mowing, maintenance and reclamation after being rooted by pigs. Fencing costs to install and it costs to repair. All the while, consumers are offered exceedingly cheaper and cheaper options swaddled in the convenience of the grocery stores that are marketed DIRECTLY into the space that a small farm like ours resides. When we started with pastured pork two years ago, there were very few options. Now our major grocery chain has “Organic” Pork you Feel Good About… from who knows where… grown in who knows what manner… treated in a way I’m sure is less than how we treat, hug and handle our swine… and it’s several dollars a pound LESS than what we could even consider producing ours for.
Then again, nobody ever said farming would make you rich. We are just busy figuring out how farming this way can sustain itself.