Scale Up?  Whoa Nellie!

Scale up? Whoa Nellie!

by Michael Foley (farmer, educator & founding member of the School of Adaptive Agriculture)

For the last hundred years, farm advisers have been telling farmers they have to scale up. Many farmers agreed, thinking an increase in production would equal an increase in revenue and hence (!) profit. While American farms have indeed scaled up, however, the survivors (just one percent of the population and declining, at last count) have done so at the expense of the millions who went under. (Those who want to know more of this dreadful history can read my article “A Short, Unhappy History of Business Advice to Farmers,” in the latest edition of the New Farmers Almanac.)

Despite this sorry record, the stubborn mule of an exhortation gallops on, now occupying the discourse of advocates for the local food movement. We hear it locally at each Farmers Convergence here in Mendocino County. We hear it from Michael Brownlee, author of The Local Food Revolution. And it’s understandable why those who support local food should want farmers to scale up: there’s just not enough of us producing local food to meet demand or prove that local can feed the world.

But what’s good for the local food movement isn’t necessarily good for the farmers who cater to it. Scaling up remains attractive to farmers as a means of increasing revenue, but will it increase profits? Will it keep us in business to feed the local food movement whose advocates want to see grow? Or will scaling up pull us under as it has so many farmers before us? Everything depends upon the answers to a number of questions that advocates of scaling up rarely pose, most importantly, I suspect, because they are not farmers.

The most comprehensive of those questions is a simple economic assessment: will the increase in costs entailed in scaling up be matched by a corresponding increase in profit? “Costs” here should include costs in the farmer’s time as well as purely monetary expenses, but we’ll stick to the monetary costs for the moment. What might those be? Scaling up as it is usually understood includes more equipment and more land in cultivation. Besides up front costs of equipment, we should factor in continuing payments on loans, the cost of fuel, and the cost of upkeep in calculating the increased cost of a bigger operation. If land must be acquired to scale up, those costs have to be included. So does the annual cost of working more land.

Larger volume of production also incurs higher harvest and processing costs. If more labor is involved, there will also be training costs. And if scaling up means hiring labor for the first time, then the cost not just of wages but of workmen’s compensation insurance and payroll taxes have to be part of the calculation, adding at least 20% to the wage bill.

All the new costs have to be weighed against the anticipated increase in revenues from scaling up. And it is by no means self-evident that the balance will be in favor of a larger operation. In agriculture, all the evidence shows, “economies of scale” at some point are the opposite those of industry: the smaller the scale, the more productive the farming operation. (See Chris Smaje, “Three Stories, Many Variables.”)

Other considerations make the balance of those cost calculations more doubtful for the case for scaling up. For one thing if you are scaling up with the aim of moving more of your production into wholesale markets, then the lower price per item or acre has to be taken into account; and that difference between wholesale and retail is quite substantial. It’s not enough to declare that you are tired of going to farmers market and you’ll probably save the cost of doing so by selling wholesale. You need to do the math. The wholesale market, moreover, increases waste: that bunch of somewhat gnarly carrots that farmers market buyers will appreciatively spend $3 for won’t cut it in the packing house or on the supermarket shelf. You’ll have to set it aside. How will you recover the cost of producing it?

Scaling up generally means simplifying your production – blocks of carrots, beans, potatoes, onions, and fewer varieties instead of the diverse, mixed row-by-row production that organic production has traditionally advised. That decrease in diversity and larger-scale production is likely to increase pest pressure and make maintenance of soil fertility harder. At the new scale, is on-farm fertility part of the program, or do you add purchased compost and fertilizer to the expense schedule? Will pesticides suddenly become part of your annual expense package? And how do you compensate for the decrease in diversity? Among the grain farmers profiled in Laura Lengnick’s recent Resilient Agriculture, many have adopted complex cover cropping schemes to restore soil fertility and address pest pressures. Many have adopted no til techniques as well. Scaling up will require taking account of such considerations and spending the money to address them.

Finally, scaling up will probably mean more work and almost certainly more responsibility for the farmer. Will the increase in time spent and anxiety incurred be adequately compensated by expected gains in income? And do you want to spend more time and energy on the farm? Your welfare, after all, has to be part of the “value equation.”

It is quite possible, as Ben Hartmann points out in The Lean Farm, to “scale down” and increase both revenue and profit. His farm increased revenue and leisure for the farmers while scaling down from three acres to less than one. How to do it? By working smarter, not harder. By cutting costs and paying attention to just what provides the most value to your customers. And we’re not just talking about vegetable production. Holistic grazing practices can build up the quality of pastures, and thus stocking rates, growing revenues without acquiring more land or more headaches. And producing grass-fed beef on those pastures, or pastured pork or chickens, provides the increased revenues and profits that can keep farms and farmers prospering.

Scaling up is not a panacea to low profits. It has often been a trap for the unwary, and the decline of the farm population is testimony to its disastrous potential. Farmers shouldn’t take the prevailing wisdom without a large grain of salt. If you’re thinking about scaling up, you should be thinking hard about what it means for you, your farm, and your way of life. And for those of us who want to see local food grow, there’s one sort of “scaling up” we can all agree upon: we need to get more farmers farming for local markets.

 

The School of Adaptive Agriculture is currently accepting applications for their 2018 Spring and Summer terms.

Are you seeking hands on experience with sustainable, community driven agriculture? Are you curious and inspired to learn about the science, art, and business of food production? The School of Adaptive Agriculture is located on a diverse working ranch that is fertile ground for innovative, creative, and productive projects. Every year the SAA hosts two 3 month residential programs in which we provide comprehensive training in animal husbandry, vegetable production, orchard management, and grain and seed production. As we understand that a farmer must be as self-sufficient as possible in order to succeed, we also provide instruction in small engine repair, carpentry, electricity and plumbing, as well as business and financial planning. Field trips to dozens of outstanding farms in this rich agricultural area and practice in community dynamics round out this intensive, exhilarating, and unique training experience. The 2018 Spring term starts in April and the Summer term in August. Apply today!