Running a profitable, small-scale farm operation is complicated. It is more complicated than running a traditional, large-scale farming operation. Don’t get it wrong. Farming is complicated and risky no matter how you look at it, but making a small piece of land profitable is, shall we say, quirky and quite often hit and miss. It requires a different mindset than traditional farming.
A decade ago we purchased a productive, rain fed, mango orchard intercropped with coconut, citrus, giant bamboo, and forage for animals. All 10,000 square meters were under some form of cultivation with no permanent housing on the property. The mangoes were suitable as immature green mango, all the same variety and harvested in one operation.
Operating this “traditional” farm for one year, we estimated previous total revenue around US$500 per year. This represented total income of about US$.05 per square meter per year, not unusual for traditional absentee farming in the area.
We converted this mango orchard into MoCa Family Farm over the next few years and the Farm became certified for agri-tourism by the Philippine Department of Tourism in 2013. Having a basic plan in mind prior to 2013, we invested in permanent structures and hardscape; house, farm structures, guest quarters, a separate test kitchen and classroom, driveway and pathways that initially costs us US$30,000. That amount is growing as we continue with our small family farm development.
Altogether these improvements and our housing occupied about 3,500 square meters reducing the size of our farm to 6,500 square meters. This space excludes land that can also create revenue such as guest quarters, test kitchen and farm structures totaling about 1,000 square meters.
To make it an economically sustainable farm, we knew from previous recordkeeping that we needed to generate 100 fold increase per month in revenue to cover basic farm expenses and earn decent profit. Sometimes it is difficult to separate personal expenses from farm expenses when the farm output and expenses tend to blend into the farm lifestyle. However, we felt this was the minimum required to make MoCa family farm economically sustainable including a reasonable family income.
This means our breakeven is about US$4.80 per square meter per year on 7,500 square meters, a 100 fold increase over the income generated on 10,000 square meters. How can we bump revenue from $.05 a square meter to US$5 a square meter? We did it through a combination of growing crops more intensively, selecting products which have a higher market value, direct marketing, exploring value-added and niche markets and generating income off the farm as well as on the farm.
We should approach this problem by thinking in non-traditional ways. As part of our blueprint, MoCa Family Farm must operate several small-scale business operations running at the same time; farm operations (specialty meat, vegetables, and herbs), value added farm product development (specialty, niche market and branded products developed in our test kitchen), farm product sales (mostly off farm), farm accessory item sales (on farm and off farm) as well as hospitality and entertainment events (on and off farm).
One of my favorite sayings to small-scale farmers is, “Stop competing for the lowest possible dollar you can earn. Compete for the maximum.” Traditional farming operations rely heavily on historical market prices and compete for market space in an already competitive market. Basically, they compete with other producers who are producing the same thing, harvest and sell in large volumes to reduce labor cost and postharvest expenses.
The market for farm with a single commodity produced in large volumes is dominated by supply and demand. To get windfall profits you need to enter the market early or pray for some sort of partial market failure (maybe a typhoon that misses your farm). Every farmer realizes if they can enter a market early when prices are high they will make more money than entering the market when everybody else does.
Prices can be manipulated by a producer if an economic market is, or can be, segmented. This can be done by identifying the needs and wants of consumers in that market that have not been met. In other words, identify or create new consumer demands. Consumers will pay more for a product because of:
Obviously consumers will not pay more if they cannot afford to do so. However, some consumers will adjust their budget if they perceive a product carries extra value. This leads to the second piece of advice I give my farmers; “Your job as a small-scale farmer is to cater to the needs of consumers who can afford and are willing to pay a higher price for products.”
When marketing farm products, don’t assume one-size-fits-all. I frequently speak to farmers who now own or lease property that previously belonged to the former Soviet Union. I role-play with these farmers and exhibit how capitalists think when conducting business in a small-scale farming community. I generally receive two different types of comments; one group asks the question, “Why aren’t we doing these things?”, while the other group asks, “Why are you so mean to your neighbors?” Not everyone is cut out to be a capitalist when it comes to farming.
I remember discussing farm production with a Member of Parliament in the newly formed government of Armenia back in 1993. We were walking in a farmer’s field when he asked me, “What is the maximum yield of wheat you can produce in the United States?” I turned to him and replied, “We don’t maximize yield. We maximize profits.”
This concept is just as important in small-scale farming as it is for conventional farmers. What can we do to maximize our profits from each square meter under production, whether were producing it from the soil, producing it from a test kitchen, farm structure or housing for guests?
If I were to identify one theme that runs through a profitable small-scale farm it is Diversity. A diversity of crops spreads out the labor and harvest periods. It reduces pest problems and can provide a steady stream of income most of the year. A diversity of crops can be difficult to manage because there are so many things going on at the same time. Start a farm calendar and record activities on this database. In a few seasons you will be running it like a pro.
Diversify products coming from the farm and explore value-added and niche market possibilities. A good place to do this is at a farmers market where you can get to know the people who are buying your products.
Diversify your sources of revenue. Farm guests are not for everyone but we open our farm only at certain times of the year and farm tours are by appointment only! We do get people who drop by unannounced occasionally but we discourage it!
What is MoCa Family Farm doing next to generate income? We are turning to the virtual world of the Internet and adding a third economic dimension to our family farm where square meters don’t matter. In 2016, we will launch RLearning Center, which expands the farm experientially through the Internet.