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The Future of Ag (Business Models)

David Obermiller

Description

In this class we will be looking at the difference between micro and macro farms, whole sale, mono cropping, CSA, and pros and cons of each scale. What is the upfront capital expense to get started? What is the average start up time frame? From market gardens to mono cropping, what is the future of agriculture? 

Presenter

David Obermiller

Farm manager at Fresno Adventist Academy.

Sponsor

Recorded

  • January 27, 2017
    10:45 AM
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Brad Johnson is my name and it's my wife Judy and we're going to and this is David over Miller. He's going to be talking today too so we're going to be presenting about to see is a Zen micro macro farms wholesale monochrome ping was a cost to get into it even though we're not real great on everything. We'll we're going to try to give you an overview of what we do so here we go. So I kind of went through this already. So my. Kind of my general view is start with what you have start with that learn what fits your market and abilities and purpose. Generally I think small to economical. I say I think Start small find your markets and ability within your experience in economic capacity. Obviously if you grow your growing grain and rather large crops that may be different. Just the sheer scale of economics for some crops requires a lot of land and equipment we farm wheat on occasion but it's not a main main part of our crop it's just a fill and we use it for rotation because we don't have the land. The expanse of land that takes really be economical for we what we do in terms. Say we take it out of tree crop and we're put in something else will put in a crop of wheat or safflower or hay. Of some type or rotation and in this case I put this is this. Well talk about the slice here little bit but you get my thing for you here. So in the mid seventies. I started with a small patch of tomatoes. And I sold those at local stores fruit stands roadside out of a pick up at our own house carport on a dead end street in the country off the main road and painted road signs and arrows. To direct traffic out to our house where we were selling we were growing stuff we were we sold anywhere we could no refrigeration. We were packing tomatoes on a ping pong table. So these are some hand tools. These are some my favorite hand tools. You can get a lot done with some simple tools and I enjoy time spinning with these as far as the. You know as far as low tech stuff you can do a lot with this particular tool on the left and on the right top right is made by a guy used to work for me. He lives about thirty miles away and now he's going to the manufacturing these up in Chico California and it's a really nice tool you can adapt different pieces to it and for cultivating or for weeding and then on the right lower inside those are just my some simple garden tools like I use a lot of the shovel is for I want to have my favorite tools do a lot with a shovel. And then I got the rake that they use for us with an off dead zone and that little. That's that thing on the right there. I built out of some a couple of potato forks. Spades that were were had broken their handles so I just made a welder Mondo bar and then put the my operates on there for loosen him up my beds and I really like this. The planner there's all kinds of planners but that platen a lot of seed quick. This is more technique maybe that first of all forms small farming I like these tools and that you can put in you know lots of different kind of feeders at a plant simply and very fast. You know so I use that a lot for my corn or my beans. You know stuff I'm planted on the field. Complex for the quickly. So it's true you can do more with less weed. Through nursery and row crops. Hay and grain between trees while our orchards trees were young. In fact we designed some of our tree spacing with our harvesting and cultivating for row crops in mind. So in other words we planted the or we spaced our trees orchard out between trees knowing we're going to come back and we were going to be putting vegetables between our tree trees while they were young. So we here you can see a roadway right here. So we're run through here with a conveyor belt. So I can pick our eggplant So this is a class make the beds between the trees harvesting on one side. So we just have Rose eggplant between our trees were tell they get big this is when they were little. So this is the next year and when they're little then we put in we were just we put in hay crop in here. So we've planted hay between there and then we're just trying to maximize our our ground while they get bigger. And I started with Kiwi nursery because I could produce a lot of income on a small area and do a lot of a lot of the work myself I took seed from from Kiwi Fruit was a certain type of kiwi fruit separated the seed. And when Kiwi was was of up and coming we we grew from seed you could transplant so then we grafted them. You could grow us six thousand plants to an acre and I could sell plants at that time for about seven dollars apiece. So on an acre. I could as a one just for myself. Do most of the work and and make you know a pretty good bunch of money on on a small piece of ground. So you can prove a lot of you can produce a lot on a small piece of land to be more efficient. We share labor routine different entities in our operation we share Quitman and labor within our family farm relationships or. Sometimes other forms of share we share labor from from other farms that are doing pruning and maybe they're finished. We have several entities within our farming operation my brother has some we have some together. We have our own and so we share within that group we men I have enough labor for everybody. As a single unit but as a whole unit we can we can keep people working full time. So we share people between those operations. So it's the same thing with our safer for labor for our peaches. We kind of calculate our vegetable harvest I'm Chinks sharing more technique but we will more or plan our vegetable operation. We try to get out of our vegetable harvest when our peaches and prune start. So we're done with vegetables. We're moving into prunes and then Peaches So the labor we're using in vegetables can move into the next crop that we're starting next coming up. So so we work our art is you get our vet get an eventual end and we're out see it we start to pick it in May. We're out in in the first part of August and we start our pros and then we move into our peaches the last part of the end of September and then we have to go in the pistachios and after that. In through October and then we're done with our harvest with that. Now we have walnuts so we're doing those instead. So we have a relatively diverse plan for production of crops. It adds to the workload but it's helped spread the risk. But we had to curb our enthusiasm as them to grow stuff in order to make money. So my point is there are sometimes you want to grow too many things and you won't make any money at it. So one of the things I think is if you don't know if you don't know about something grow it in your garden. If you want to try it if you can't sell it or eat it then what it could be costing you money or in in that case some of what we do is we trade services. As for produce. Our hairdresser or doctor. We trade produce for their services or our neighbors for goodwill. The vegetable business. So as a smaller unit investable business. It seems to gather more interest and romance. So here you can see you know it's mortgage interest generated for retail many people come to visit family friends businesses. So it's something to consider if you want to work with people we have schools who come out to our place that we give tours to and this is a couple they come every year this group and then this is bottom picture is a group of people that come that acts we sell produce to they come every year they want to see our farm. They're some of our buyers. And you know. So that's just if you want to get involved with more people. The veteran was it seems to be a little more as a small farm happy unit versus a model cropping or just one crop that we do in some cases some or other stuff. So do you do it all. Do you grow your own transplants. Or do you buy from the local store. I say Don't kill yourself trying to do it all at once. It's your I grow my transplants. It's something I've developed for my farmer over time but for a personal garden it's not always the most efficient. It's quicker and in many times less expensive to go buy a few dozen of something. At the store if you haven't the place skill or planned ahead. I say do what's practical and effective. Unless you're tied to some specific market rules of growing and work toward improving your skills and growing practices and a Billy abilities and soil over time. Ours is a farm that has developed and evolved over time but if you can see what you want to accomplish first and upfront start there. Then you can work with more. Vision see and accomplish what you want quicker. So that's not the way we do it but if you know what you want to do first. I'd say draw that picture first and head that way. So what size and what fit. Again what you have to work with one size does not fit all the principles may be the same but each individual situation is unique. Whether you are large or small create efficiencies. Large farming efficiencies. How about this for large farming efficiency. Here you have it done in one pass harvest processing distribution and planting. It really doesn't work that way. But what an idea. You've got distribution. Talk about farm fresh. That farm fresh right there or this one. This is the real one and amazing. I know you can't see what's really going on here that well but here's a contrast this is a farm we have worked on for many years. Contract harvesting they have some somewhere around one hundred to one hundred fifty square miles of orchard they are efficient and well managed it is very repetitive work. The benefit a model cropping is a fish unsee. Spreading out your investment and learning in one area. The downside is having all your eggs in a few baskets for the risk of crop failure or bad pricing in that one crop and problems can be huge as well. I'm not advocate advocating for this. I think society and our economy would be better off with more farmers and people farming the land. But this is amazing to see and experience. Such a well run place. And work with such good people who run this ranch. But it also makes me thing. Of this quote from fundamentals of Christian education three hundred sixty two the earth has its concealed tracers and the Lord would have thousands and tens of thousands working upon the soil who are crowded into the cities. This is not a sales yard but shakers used for harvesting on one ranch somewhere Horace crew getting ready for harvest. One advantage. You can get a lot done quickly and efficiently to downsize downside it comes with its own set of headaches working with a quick meant a lot of equipment and a lot of people. So this is some are our own efficiencies are there an orchard work because we've invested in equipment for that being much of our land has improved production. And our local farm community has the support system for dryers and processors. Close by the capacity to harvest with some of these machines is incredible. Today trees a minute. Depending on conditions. If you met a missed it this morning we kind of switched our program we showed this thing an operation on another presentation I had so you can see how we run this this machine and this is a slower of of the types that we use. But when you have a lot of trees like that ranch I showed you before we're trying to harvest a lot of ground quickly on a on an evening. One day we could we could on a really good day you could maybe pick twenty five acres a day with one of these machines. You know we might or we might average you know maybe fifteen. But you know it's it's really going and you're going fast and doing a lot of work and it's efficient works really well. So that's what was been developed in agriculture. In some of these ranches. We hire some harvesting. On our farm because it is not cost effective. For us to own or to own some expensive equipment for a couple days out of the year such as for walnuts and that we showed some of our wont to her reserve your butt for veggie and handpicking we can compete on some crops because everyone in certain crops needs to hand-pick for example eggplant zucchini heirloom tomatoes versus carrots which are mass produced for large food chains by the square mile. And all mechanical production. Here you can see this large care Harvester digging in loading into trucks for processing you can't really see it that well but this thing is digging in the carrots and out of the ground and running in a conveyor right into the truck and then they take them in and process them. This is me. So we were there. We're harvesting down right next to him on pistachios But but we just happen to you know down there. There's just mile after mile of production. So we just went over to watch these guys harvest and I they had left a few carrots in the field and and this is some of my little stuff and I decided and I can't. And if I compete on price. You know so. If you can develop an economical market that will buy carrots from you at a price that pays for digging in marching on a small scale that could work so I am not discouraging that but know your cost and market in my opinion you are not going to compete with the large farms and stores on price. So the added value would be customers who want to have a local food supply or a flavor or type of freshness that they want a good place for Farmer's Market C.S.A. retail or restaurants. We have a mix of micro and and small to mid not market macro. I think the future is developing to make it harder for small and mid range farms to stay in business but the need is for more small in mid range farms for the. Development of our society at least if more people are to use farming as a living in development for families keep this in mind if you are involved in decisions which affect the life and viability of smaller family farms. If it is gardening you're thinking about that should be happening anyway. In my opinion no matter what size of entity you or. He who taught Adam and Eve in Eden how to tin the garden would instruct men today there is wisdom for him who holds the plough and plants and sows the seed the earth has its concealed traders and the Lord would have thousands and tens of thousands working upon the soil who are crowded into the cities. This may not be the forum to express some of my deeper frustrations regarding the squeeze of our size of any or any form operation but perhaps sometime when and when and if appropriate. I would rather mind my own business but doing so is becoming increasingly difficult. So now David O. Russell is going to share something with you by his startup and what he's been doing in forming our I want to run harvest fields organic farm and present California and give you a little virtual farm too or see you know. Kind of what we have our personal Brad asked me to talk about some things today it like start up expenses and when I get to that section. It's relevant for you to know that we're a nonprofit farm and. You'll have to use your own discernment to decide what's relevant to you. And what's not. But we're nonprofit hard on campus friends and out of us that got into we have thirteen total acres everything being certified organic We're certified received Jews are curious. For greenhouses soup pits are here actually two of these are greenhouses two of them are high tunnels the two on the left are heated. Propane and then the two on the right are on heated structures. This is on the north end of the old football field at the school which said in use anymore. This is the old track. We've actually. Extended the field out on the track is no longer there either. Obviously the football field is not inside the greenhouse or growing tomatoes and cucumbers and the other one I didn't take a picture of that this is a cover crop we had in the other greenhouse just so it wasn't sitting barren during the summer months. We just wanted to keep the soil worked up a little bit so hard now we don't have cooling in the greenhouses at the moment so hard to grow anything in the summer but we didn't want the ground to be barren like you said we're planting in the areas if I go back you know you come and help us deal with it. We grow in between all the sections of the sections in between the greenhouses three in between and then one on each and. That picture there is from the north end of the tunnels section of a plant that we grew. And going off to the south. This is a summertime picture obviously this is the old football field. We have four acres of navel oranges that's or doing right now picking and selling oranges. We do it. Mostly direct to retail and then obviously through our C.S.A. and we do some work with local admin a school zone provided them as a fundraiser result of them at a wholesale price and then they sell it to their constituents and they use it to raise a little bit of money. The schools we sell to will probably make couple thousand dollars a year just reselling our arms. Eight acres of mixed crops MOL fruits vegetables an acre table grapes that shows in the pictures here this is melons back in the summer and will open honey do some lot of this the doing some sweet alyssum we're doing how to describe it. So our field here we have forty eight rows per block and every twelve throws a beneficial insect Rhodes dedicated that to Habitat diversification using sunflowers sweet alyssum blended mixes just trying to cultivate habitat for the beneficial insects that's a lot as decided I think that that's corn growing over years too fuzzy and we're planting onions over here on the laps of some of the students from the school that actually was a home school field trip that day but these are students from the school in the middle here looking at potatoes that we had planted that you're some of the grapes. So we're we've selling our stuff to. We're doing two things are trying to have a diverse customer base not putting all my eggs in one basket. So we have a sixteen member while we have more members in this we're doing about sixty boxes a week in our C.S.A. right now and then we're doing direct to retail the terminology is a little bit confusing. I think in the industry but if you guys are truly doing wholesale stuff where they're going through our broker distributor type system. We're doing direct to retail that means we're selling it right to the back door of the restaurant. There's no middleman between us and them and they're selling it to the consumer retail. So restaurants and local grocers sell the local food that runs a C.S.A. as well. So one of the things Brad asked me to talk about is the do. Differences between C S A's and for us to write to retail I think he can discuss the wholesale side better side does that end up saying about that but some differences for us and between the C.S.A. in the direct to retail customers we have is obviously. Number one as price the C.S.A. customer and this would be the same thing if you're doing a roadside stand or a farmer's market. You're going to hire sale price you can get full price for the product. Maybe you can discount it a little bit below what people would pay for it in the store but we tend to shop the local grocery stores pretty regularly. Specially since we're delivering to some of them anyway. Like the nose around the produce department and see what they're selling them for by the way I am one of the delivery drivers on the farm. I have another gentleman the does them but I deliver to my customers personally. And I can't do that all the time because I have stuff to do but I want to do that song because I want to be connected with the customer. I want to look in their produce department I want to see what's on their shelf. I want to see what it looks like what the quantity is you know what the prices I want to know exactly what they have going on in their store and I want to hear their feedback directly to him. So one advantage to both of these since we're not going through a broker distributor is that I have direct communication with the person that's buying it from me whether that's the C.S.A. member or the produce manager or the restaurant owner of the store but the C.S.A. am going to get the highest price. The grocery stores got to make money on it. So they're going to pay you about half roughly speaking about half of what they're going to sell it for so it's a pretty big drop in the price the C.S.A. members require high crop diversity because when people go to grocery store they buy a wide variety of things you have to grow a wide variety of things to keep your C.S.A. members happy. We do supplement what we grow with produce from other local farms. So that we can have the. Things like I don't have stone fruit so we buy organic stone fruit from another local farmer and other things like that that we aren't interested in growing or don't have the right land to grow or just aren't able to grow at this point for one reason or another. So this really magnifies the amount of skill you need and magnifies the opportunities you have messed something up. You have to spend a lot more time knowing what you're doing and making sure that you know what you do to keep the customer happy and keep your supply happy and system so that meant a nice thing about working with the grocery store is that they'll be happy. Buying a couple things from you if you have it consistently in quantity. I don't need to grow seventy different things to sell the local grocery store. They'll be happy if I have four or five or six or maybe the last of the know what it is customers that only buy from us when we have oranges. I sell up in the Sacramento. Three and a half hour drive for me to get there but every time I go up. I'm taking twenty five hundred dollars worth of oranges and that's all they're going to buy from me and they're quite OK with that and they're only going to get it for four months of the year and they're OK with that because we have good oranges that good flavor and that reduces the headache of of having to monitor whole bunch of different crops but again you get paid less for it. So in that same scenario you're going to grow high diversity going to grow lower quantities. So I might grow fifty different things but I'm only going to grow enough for the C.S.A. customers to eat on a weekly basis. Whereas our grocery store like some of our good grocery stores they go through a case of romaine lettuce a day and that's on the organic side and some of the grocery stores bigger go through more than that kale and some of these other things they move a lot of tomatoes all the same the overthrow. Whole bunch of it. So you need higher quantities on the retail side direct retail side and lower on the C.S.A. side. Well there is one of the nice things about this is if you grow too much of something and this is your only customer outlet you're going to be stuck with it and it's going to rot your direct to retail customers like a grocery store they have a greater capacity to absorb extras from you. And on the flip side of that is that if you don't have enough of something one week. Most of our customers are pretty flexible and they're going to order from their distributer who they'd be ordering from anyway if you didn't have it locally. So let's say the guy who goes through a case of Romain a day in this week. I only have five cases not a big deal. I tell him what I have and then he orders the rest from he always called it the house plenty and each by the way. Each produce manager is way different one from another these guys are guys that are really really good. And know how to take care of their stuff and they've been in business in that business for many years and I got other guys that couldn't keep bezel from turning brown of their life depended upon it. They'll put it in the well put it in the cooler the wrong temple put it on the rack underneath the sprinkler thing that comes on it once it gets wet turns black and they call and complain and say hey you're holding out weld it says on the package fifty five degrees stored what you put in the cooler but so there's a wide variety of people in that industry. So it's really ironic in my case of a grocery store that sells only organic but he's the worst at taking care of stuff and the other guy who sells organic and conventional is in a higher a neighborhood of Fresno and his produce market's absolutely pristine and the guys on top of everything is exactly what to do and there's some differences there C.S.A. customers. Farmers market customers to a degree too but definitely your C.S.A. customers take a lot more customer service answer emails take phone calls people call you how do I sign up for I'm on your website I can't figure it out and even though everything's described on the website Wait what. How many different types of boxes do you have been and do I pay in advance or do I pay you when I pay you when you deliver the box. You know you can answer all these questions and I think about the direct to retail side as a call the guy once a week you'll tell him what he has a place in or you deliver it and he's out of your life. And then go on about your stuff. One of the reasons why we're nonprofit is because I have a very strong mission. Component to the farm and we want to be connected with people so I want to endure the customer service because I want to build a relationship with them and yes I can build a relationship with the guy in the produce department too but there's only five or six of those people that I'm selling to Whereas you know we have you know one hundred ish members in our C.S.A. that we have contact with. And I can invite these people to events and other things and again that's part of our mission side not strictly business. C.S.A. customers are a little more tolerant of imperfections they know they're ordering from a local farm. They know it's not going to be perfect. They want that relationship they want local They want fresh and their little bit more tolerant. Their grocery stores are not tolerant of that nearly so much. If you don't have high quality stuff they're going to send it back to you. Doesn't mean you can give your C.S.A. customers junk. We try not to do that to them but we know they're more tolerant I mean I wouldn't throw away it's a major That's scarred but a grocery store probably would. And our customers realize that you know good food doesn't always look the way it looks in a grocery store. Although depends on where they're buying and I'm here. More complaints about the quality of stuff in grocery stores too. OK so. This is complicated for us and I'm willing to be pretty honest and transparent with the about this but there's just some basic summary of a start up expenses are really hard for me to give you a specific number on because every farm is different. And there's no way to just throw out a magic number. What it cost. Brad is nowhere near the same as what it cost me and vice versa for everybody here. So the question you have to ask yourself first is how much do you want to make much money and you want to make. Do you want to make maybe I should say how much money do you need to make to survive. You need to make ten grand a year if you live with your mom and. She's paying for your food and she's paying for your phone bill. I'm sure this is like I know twenty year olds that it's all live off their parents' plans it is so how much do you need to make. But do you want to make labor in California is about two thousand dollars a month for US minimum wage is ten dollars an hour for me. As a small it's actually ten dollars and fifty cents an hour in California but as a small business I have a one year exemption on that. That's ten dollars an hour. I actually calculated the two thousand dollars that thirteen dollars an hour because I have my back side expenses. I got to pay part of my employer's Social Security Medicare worker's comp expenses so I calculated that in. A figure there about thirteen dollars an hour is what they really cost. So in addition to yourself How much do you want to make do you have employees and that's about what they have to budget for monthly. For my employees and conferring with run Judy on this number are farmers pretty similar to theirs and the non. Payroll is about seventy percent of the overall total of expenses so fuel for the tractor fuel for the truck insurance for our buildings and fertilizer and seed costs and maintenance and just kind of the list goes on forever and ever. It seems that about seventy percent of the totals on payroll. This is the number that I have heard from most people most consistently that you need to plan on three years minimum before you can start turning around in a really profitable way we are in our third year right now and we are pretty much on course for that I won't tell you what I make personally because it's not much and I don't actually even know what it is a give my paycheck to my wife I never even look at it so but I know this year. I am running maybe ten to twenty grand below where I need to be to breakeven. So that's with. Five employees. To those people being part time. So. I don't have like them I'm willing to be kind of transparent here on this. I don't have an investor or investor meaning a person giving me outside money or in some cases I know people whose investors their wife who's a nurse or that kind of thing where the other spouse is making the money and floating the farm. While the farmer figures it out or what it is about nurses but I know many farmers that are married to nurses and they've covered the farm or Tom really was that way to knock it. So I bought ten grand on my personal credit card. I didn't like banks and the school owns all my equipment which I'm buying back from them so I didn't have any collateral against the loan so I could've got a loan against the farm. If I even wanted to. So I shove that on my own credit card and just try to pay it off and keep it keep it reasonable to keep the farm going. So we're at our most profitable time of the year right now doing able oranges and for us as a farm hope that spring puts us really close to the breakeven point or headed strongly in that direction. I've talked to a lot of farmers about this brand I've had a number of conversations about it as well. Three to five years seems really reasonable one farmer said to me you know depending on how you want to live how you want your range to be in to look like. Then you for sure. Need to have three years of cash before you start your farm talk to some guys. Not too long ago there were three of them that went into business together they all moved into the same house. It was on the farm they shared quarters and made the sacrifice to live together and it's annoying to live with people in close proximity for a long period of time especially once you get married. Especially have children and I know people that have done that to you know full belly farm got a really interesting story. And they lived pretty primitive for the first couple years to get it going. You're familiar with John Martino anybody. John Martine the market gardener. But he calls himself more gardener. He is a French speaking Canadian for the first two years when he and his wife started their farm he lived in a tepee I'm not lying to you live in a T.V. for two years with a white in Quebec Canada with a wife and child one child and they have to remember so that they made they made a. Amenas amount of sacrifice in order to start their farm and I heard so many stories along those lines three years is the minimum and don't be intimidated by the media was brought to you by audio a website dedicated to spreading God's word through free sermon audio and much more if you would like to know more about audio. If you would like to listen to more service Visit W W W dot org.

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