>From "A Time to Act, The Report of the USDA National Commission on Small
>Farms," page 28 -- "the average farm with annual gross sales between $50,000
>and $250,000 has a net cash income of only $23,159. Over 80 percent of a
>farmer's gross sales are absorbed by farming expenses."
>I also spoke with an ag economist at UNL who tracks farm profits in
>Nebraska. He said that for eastern Nebraska, average net farm income is 5%
>to 15% of gross income. And the trend is downward.
>This is why so many farms are not making it, and why we need alternative
>farming systems that can survive without constantly getting bigger (while
>driving others out of business).
Alex, whose farm is making 75% net, is doing a whoooole lot of things
right. Alex is also very tired right now, and the question of burnout from
excess stress and fatigue must be considered (Lion, are you listening?).
Statistics are excellent guideposts, but they don't reveal the entire
story. My farm runs right at the national average, I guess. About $125,000
gross, $25,000 net. Folks, let's remember that depreciation can mask a lot
of net (not much on this farm), but a farm cannot long live on depreciation.
We do better than Nebraska, but I'd bet those Nebraskans are selling on the
commodities market. We sell direct to the customer, like Alex, but on a
larger scale.
Labor alone, on this farm, accounts for about 40% of gross income. Not just
the wages, which range from minimum wage to all of $5.80/hr., but also
Social Security, Medicare and workmen's comp (8.9% of base pay, higher than
SS). Minus outside labor, the farm would do much better. But an intensively
cultivated veggie farm needs a LOT of labor.
This farm does better now, on a gross vs. net basis, that it did when it
was a part-time venture and supported by off-farm income. But now we have
no reliable off-farm income, and the money for any investment in the farm
must be generated by the farm. When I had a steady paycheck, a small, 24-HP
tractor ($15,000 with rotovator) seemed like a bargain. Now we need a
bigger tractor, capable of doing more than that little tractor can do, and
the $20,000 price tag for a good, used one with the features we need is
prohibitive.
If I buy another tractor, and maybe also sink and rig another irrigation
well, so that we can move production to another part of the farm and let
the main production fields rest, I'm thinking of a $30,000 investment
minimum. Payments on such would seriously reduce my gross-to-net ratio, to
the point where I'd worry about meeting payments and living expenses should
we have a bad year.
Among direct marketers there is a rule of thumb that every dime the farm
makes until Labor Day or thereabouts goes to paying the bills. If fall
sales are good, there will be a profit. That means the peas, strawberries,
rhubarb, tomatoes, peppers, melons, sweet corn, cucumbers, squash, and
beans aren't mine. I live on broccoli, cabbage, kale, rutabaga, parsnips
and turnips.
Cass Peterson
cpete@nb.net
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