How Much Money Can A Small Farm Make? Let's Talk Numbers
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- Опубліковано 25 сер 2024
- In this week's episode, JM Fortier talks about a subject that is not discussed enough: farm economics and what is the goal of profit per acre.
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Dans l'épisode de cette semaine, Jean-Martin Fortier aborde un sujet dont on ne parle pas assez : les aspects économiques d'une ferme et les objectifs de profit par acre cultivé.
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$26K/acre here. That’s perhaps very low to many of you, but I’m happy as a pig-in-mud. I have all my needs met and have a strong sense of well being, so I’m not seeking more.
If I get up to $26k/acre, I think my wife and I will be happy.
We aren't looking to replace our income, but use it to supplement and just generally use it to improve the property (I work full-time, she'll be in the farm full-time).
Profit or revenue? JM is talking revenue. By the 1/3 ratio, $150k would translate to $50k/acre for the farmer.
❤sounds good
We’re at $250K per acre mainly because we have a very long season in Hawaii
If I was in the states this $150K per acre model would be exactly where I think we would be and we do currently have this profit to labor to expense ratio almost exactly. Thanks for the wise words JM
You are in the states, whether you like it or not.
This sounds great - and, woth all due respect, it's clear JM has found success with this model, as have quite a few who devloped similar businesses.
But, now having been full-time at our farm for 5 years (1.5 acres, ~110k/year), and been connected to larger and smaller farmers in the area (Charlotte, NC) for much longer. ...I just haven't seen the >$100k/acre and 1/1/1 ratio play out anywhere outside of UA-cam, *minus a couple niche microfarms.
Personally, I would be very hesitant to recommend any new farmer to take a $100k loan on a bet that their venture will cover its expenses, earn them a livable profit, and pay back that money with interest on even a 10-year agreement. Honestly, if someone's done that, I would love to hear your story.
In reality, less than half of farms survive to year 3. What's been true of most small farms in our area that are stable has been a bootstrap beginning, plus some volunteer help from the community, run by a couple or family who put in 50-60+ hrs. a week each. And those farmers are wearing a dozen hats, with minimal additional labor -- often college students or older folks helping with deliveries/packing/market stands. Though some have reached a point where they can scale back and delegate specific duties.
But beyond that - with the hope that small farms will continue to grow in number, many started by the low-paid interns and apprentices which accept knowledge as a part of compensation today - what happens when the number of farms outstrips the labor pool of passionate farmers-to-be that can afford to work for less than a monthly mortgage payment? Is it really sustainable to just cycle through every upcoming generation of prospective farmers that will then leave within 1-2 years?
I don't pretned to know it all, but I would love to hear more accounts of farms who've achieved the model JM speaks about - and how. So I can learn
I think he is talking in CAD not USD.
@@JackHoskinsReal That's possible, though I don't believe so. Just the same, the exchange is usually 1.3-1.4:1. Which means $150k CAD = ~110k USD. And JM put his old mill project at $300k/acre. Whatever currency, that's very impressive.
Taking nothing away from his accomplishments, or his valid points that efficiency, mental health, and a resilient financial plan are key to being a 'sustainable' farm. I still have concerns about new farmers making large financial bets on this level of expected success. And the sustainability of the labor model in general.
I think the 300k/1.5acre was referring to his home farm. Le Grenilette - which has been running near on 20 years I think.
@@adamjackson8994 unfortunately, many prospective farmers see the end-state of beginning a farming operation, and base their model off of that kind of cashflow (including the loans), not realizing everything that went into getting there (including several rocky years to start with where it was all hanging on by a thread), so then they crumble under the economic pressure to produce, which they generally can't as a new farmer on a new location. Even within groups of people who are more knowledgeable, there still is the cloud of reductionist thought, where farming is as "simple as putting a seed in the ground and raking in money"; when it's definitely not that simple.
I think you also have to factor in the new uncertainty that climate change brings. I was talking to someone I know that raises cattle, and it's been so dry that they have to import feed. Bringing hay from Washington State is not cheap, so they're selling a lot of cows that they'd originally planned on keeping. On the flip side, because there are fewer cattle, he said he'll get $3 to $3.50 (Canadian) per lb for each cow, on the hoof (ie not the hung weight, the live weight).
We are in the Pacific North West, and between May 1st, and the end of August, we've had less than 2 inches of rain. That's a very dry summer and it's reduced our production (we're small - 1/5th of an acre) quite a bit.
Very insightful. Thanks for sharing.
I think your ratios vary from country to country! Very interesting talk particularly your profits
On cash money sales, the off the books kind. Keep it to a minimum. Best to be able to show, on paper, and in bank accounts, something closer to true cash flow in order to maximize the amount of money you can borrow.
Not maximize as in over-leverage yourself, but not to hold yourself back because you cant quite get the loan you need, or the better interest rate you could have gotten if the bank could see lower risk in your operation.
9:05 I appreciate the clarity, and I think that's the number 1 reason why we should stop talking about organic small scale farming like a viable alternative system to be adopted. It is not feasible, and there is nothing wrong with it. But people should be aware of this.
Do you think we have to large scale regenerative agriculture then? If not small scale organic farming, then what should the conversation be about? Is there anyone you'd recommend working in this space? Is there a possibility that we can turn the titanic economic system over a period of 10-30 years so that small scale farms work?
Jean Martin liked everything you said and I can hear my est brother in law in your words.Enjoying your talk
I remember when generational farmers who were debt free were encouraged to take out loans to buy exorbitantly expensive specialized tractors and equipment by being told they would be so much more productive and be able to expand so much that everything would be paid off so quickly. It turned into a nightmare and how many of those farmers who started out owning their farms free and clear ended up losing them in the 60's and 70's because they had listened to people who told them it was good to borrow?
Borrowing might be a good plan for some, just remember, in most cases it isn't.
Betty, thanks for commenting your experience, it is quite valuable. I would recommend you continue to watch some more videos on "bio-intensive farming" or "small scale organic market gardening" to get a better idea of their goals and differences to "conventional" or "industrial" farming. What you are describing is 100% valid, but as you mention in your comment, that incredibly expensive equipment was a necessity when your goal is to expand into 1,000's of acres. The goal of bio-intensive farming is not to increase profits by just expanding your operation, but to grow food on a small(er) scale in a profitable way that reduces input costs and is healthier for people and the environment at large. Staying on the topic of costs, the equipment for this type of bio-intensive market gardening can be around ~$40k (see JM Fortier's book for a more detailed example) assuming you already have some suitable land and perhaps a van for transporting crops to market. For some that ~$40k loan may be a lot of money, but it is a far cry from the six-figure or more amounts needed for massive specialized tractors and equipment such as what you would need to start a large industrial corn farm. Best wishes
@@Daniel-bs8vb 9% - 23% interest is no joke, even on small loans to get started in small-scale farming. I had very good credit, even.
Joel Salatin says the same thing. Buy cheap stuff, keep your costs down, avoid debt where ever possible.
This video has been great. Have you ever grown/sold celery? Labor is a hard one, do you have year round employees and are they full time?
also do you ever sell winter squash? Locally winter squash is 2.20/lb here
JM talked about long crop vs short one yet, he said you can make more money with 2-3 harvest in the same space versus only 1 like squash.. in a limited land acces of course.
Thanks JM.
Good info. More advertisements than any 15 minute video I’ve seen in years.
Really good into to the subject
Cash money is interesting and not enough talked about, but what I would like to hear you talk about is bartering. I have veggies you have eggs. I have veggies, you have meat etc, etc… the hidden value of being able to operate outside of the system. This is very interesting to all of us right??
Money is used for a reason. Just don’t use fiat. Get some gold and silver.
great content; thank you!
Weed beats carrots all-day in income😊 or at least saves my income this year.
How do you establish who you sell to? Talk to local grocery stores?
Thanks guys for the discussion!
Legend.
Love your book and I enjoy your videos. But I do think these numbers vary GREATLY from region to region. I live in Belgium (Europe) where the cost of labor is wildly expensive. For us, I think probably half of your revenue will be labor cost, then another 25% for operational cost at least. However, 150k/acre (Canadian dollars I presume) translates to about 250k euro per hectare. This, I think, is unheard of for any farm in western europe, whether they are organic, conventional, CSA, or otherwise...
I would be very interested to converse with other farmers from Europe who have reached these numbers indeed.
Cheers!
You mean per Acer real bed surface? Or With ways? Greetings From Germany
Great information , as always thanks for sharing!!
about to reread your book
You missed out on one very important number. How much does that farm cost per acre that can produce revenue 150K per acre, with a 50K net profit? Also how many man hours go into it per year per acre?
He didn't miss anything you just didn't pay close attention
@@ricko2301no, redneck. Net profit and man hours is all that matters and he didn’t mention it
startup capital is not an operating expense. your expense would be the loss of value of the property you buy, which in the case of land it's usually 0 or a gain. especially if you are improving the land and soil by farming it well. you can consider your interest payment and fees as an actual expense
How does one go about selling produce in more rural areas away from metro areas? To hit those types of profit targets I would need to do over 6k/week during the growing/market season...
sell to restaurants
I don't think you can make those numbers on rural small acreage, hours away from consumers. You can still do alright but not those numbers.
I think there are two paths for farmers: 1) direct consumer sales on small acreage (1-5 ac) near customers, or 2) commodity/wholesale on big rural acreage selling wholesale/commodity.
Of course rural farmland prices are insanely high right now in the US, so maybe the second option isn't very possible right now for new farmers but that will probably change given time.
Closer to wealthy consumers you have less land access but can sell at higher prices and sell directly to customers because they're all local and not several states away.
Also it can take several years to build a customer base and access the right markets or groups, even if right next door. That's about building your brand and that's a slow grind.
@@govus5555 you might be right. While rural farmland may be expensive, farming access and land leasing is still quite cheap as there are lots of home owners with land that are not really interested in doing the farming themselves...
How on EARTH you pulling those kind of numbers or even relatively close to those numbers I would love to know what type of crops or schedule that can produce that I have 27 acres at my disposal.
You have to have the market. You need buyers and people who are willing to pay. If you don't live next to a city full of potential customers it could be very hard.
Only borrow money that makes you money.
Hi Jean, I would love to know how much he sells 1kg of carrots? So we can compare.
I have a 0.5 acre with very good soil and warm weather and water how much K can i make?
I would only finance if you're already having success on small scale. You better be able to plant grow harvest sell, do book keeping... financing is a risk. I think one of the best ways if a person can manage it is maintain a day job while you dip your toe into the ide of growing foods to sell. You may find there's not a market in your area for what you want to sell.. you may find you suck at farming and need to practice.. I'd probably use a day job to build up capitalto get started before jumping in feet first...
Hey am from Caribbean and I am new to farming.. I am on a 1 acre would love some help
Are these Canadian dollars?
How do you keep rabbits out?
Could have a 25lb ratter dog guard from inside an electric net
A 3rd of a 3rd of a 3rd. When A shop buys something like Comics to maybe electronics they offer you a 3rd of a 3rd of a 3rd of what They think they can sell it for. Same cost, Except the seed is Product storage. 😊
Is he talking in CAD or USD. Big difference.
Canadian dollars ;)
J.M., such a good video on farming 101. I have 10 acres of prime river bottom farmland in O.K. usa. Please recommend me a link to young farmers needing land, it's a mutual benefit program like old sharecroppers did.
I want to find someone like you in Australia - generous spirit!!
From the title, I thought you wanted to answer the question specifically in numbers. And not a glorification about how much guests admire your place.
What are you talking about? Guests admiring his place? 99% of what he talks about is financial literacy and high level financial planning. The details can easily be found online or in a farm finance book. JM is talking about the farmer context.
This 150k per acre is per year presumably?
Yep!
100K to profit and 100K to split between 3 or 4 laborers is too much of a disparity for me to brush off as just the way business works. It's still probably a better ratio than most modern mega corps, but not something I would be proud of if I were trying to tally up my net contributions to humanity, even considering the amount of good food produced for the community.
most typical jobs are lucky to pay 30-35k gross (and they'll work you like a dog for that)... so feeding people and paying the producers something they can survive on on that small of acreage, considering the little amount of hours annually they would have to put in on an acre (if it were split 3-4 ways)... that's pretty good. I manage .66 acres by myself (40-80 hour weeks during the season, which averages out to 20-30 hours annually), and could easily 2.5-3x that (with no substantial increase in hours per person) if I were willing to bring someone else into it (cooperation within efficient systems framework often creates synergy (1+1=3)).
As far as corporations are concerned, there are many who's operating costs (inventory, facilities, interest on notes, taxes and payroll) only run around 50-70% of gross, the rest goes to owners/shareholders; and the people actually making it happen are being worked to death for barely enough to survive on. So it's considerably better. When I was working at a certain corp. that starts with an "A" and ends with a "n", I was working 40-60 hrs a week, walking 17-20 miles a day, in a hot, humid warehouse, and I was barely grossing $35k, same for the job before that (start's with an "F" and ends in "x"), and the one before that (starts with an "H" and ends with an "a", although that place actually took pretty good care of us in exchange for working us like dogs).
Anyone? How much space would be needed to feed a 100 family CSA so that enough food can be provided (large box) to each of them weekly for an entire year (southern california)???
If u really want to FEED people all year round then u need to look at a different type of farm than a fortier farm. You'll need to do enough potatoes to last the winter, and also make a lot less money, and use up more land. We feed about 60 families with about 3/4 acre cultivated land on a 3 acre farm (50 layers on pasture), 30 000€\yr
If u really want to FEED people all year round then u need to look at a different type of farm than a fortier farm. You'll need to do enough potatoes to last the winter, and also make a lot less money, and use up more land. We feed about 60 families with about 3/4 acre cultivated land on a 3 acre farm (50 layers on pasture), 30 000€\yr
You mean 150k per acre per months?
150k, nope
Agree with you, would like to see a formal stat
@@TheStoune many factors, maybe JPM can do, but not many
What number seems more reasonable to you all? Imo I think the most important piece here is to define what we are talking about. Certainly an acre of greenhouse tomatoes would easily make well over 150k/year, you can look up statistics for such farms on the web (the Netherlands are a leader here, check out Wageningen Uni). Point being in this 150k number are we talking about someone growing 30 different crops? Or someone only growing 5-15 crops that have the highest profitability in their growing region/market? Are they planning the farm in a way that maximizes profits?
Like Daniel said, there are SO many variables i.e. crop selection, growing season, local markets etc but as someone who has been farming small scale in an urban setting, I can attest these numbers are attainable if scaled up properly. We just bought a much bigger piece of property in a more competitive area, in a different zone so I guess we're gonna find out. What impresses me is the fact JM and his crew are pulling those numbers in such a short season.
@@hasenafarms6448 150k revenue minus expenses
@themarketgardeners So, you basically admit that your business model depends on exploiting your labor force. That's really disheartening, JM. I thought better of you
exploiting? they get trained by the best and get paid. i call that a win/win
@homermtz the Oxford dictionary definition - (to) benefit unfairly from the work of (someone), typically by overworking or underpaying them.
Like he said, the labor market doesn't support higher wages. He said he is selling veggies to the community. This is a low profit venture. Therefore, if his family wants to eat, everyone gets paid what they're worth as a farm worker (which is not much because veggies are produced in such abundance that they are inexpensive by nature). JM I'm sure is paying them as much as he can afford. You're acting as if he's running a major corporation making billions in profits...
Spoken like someone that has never made a payroll. If employees feel exploited they will leave.
@@erric288 'as much as he can afford' does not change the definition of exploitation, regardless of how you feel. If you can't afford to pay your labor a living wage, it's not a sustainable business, by definition