I’ve always been public with the numbers for my farm ventures. You can go back to my report from last year with this link here , and that post links to years prior. I’ve been glad to see more folks, especially folks who are teaching and consulting starting to be more public with numbers, although the most common number I see is total gross income, or gross per something – acres, or square feet, or some other measure.
I’ve always understood gross income to be a poor metric for understanding the success of a farm when it’s not given in relation to expenses and other factors. For the past few years I’ve been gaining more and more insight into measures of health and success for businesses in general, and farms in particular. My partner went and got her MBA after many years of farming, specifically to work on this topic, and I’ve probably been the biggest beneficiary of her degree at this point – absorbing a lot of what she learned through many, many conversations on the topic, and even co-writing the chapter “Manage It” in the new book, “Whole Farm Management ” from Storey Publishing, which was put together by the Oregon State University Center for Small Farms and Community Food Systems .
I’m still convinced that the best all-around metric for comparing how my farm did from year to year – and for that matter, comparing it to other farms of any scale – is to use the dollars per hour generated after non-labor expenses, or maybe it should be called the net dollars per labor hour.
I calculate this number using three numbers: total gross income, total labor hours, total non-labor expenses.
Total gross income is the easiest and clearest number for me to calculate. It’s simply all of the cash income the farm generates during the year. The only thing that’s not included that might be significant in some way are non-cash benefits. These would be things like the extra food produced that all of us who work on the farm take home each week, or little thank yous like the chocolate bars one of our CSA members brings us regularly, or the flower bouquets another makes us.
Total labor hours is also relatively easy as all of the employees on the farm are paid hourly and I track my own labor hours as if I was paid hourly. In some sense I actually do pay myself at an hourly rate, although as the owner I also take home any additional profits. For farmers who are resistant to tracking their hours, or just don’t do it, you’d have to take a really good guess and based on tracking my own hours I’d guess that many folks are vastly overestimating the number of hours they actually work on the farm (I try to use labor laws as my guide for what an hour of my work is, even though as a business owner I’m not bound by employee labor law and I can work as many hours as I like, whenever I like). For the total hours I’m adding up everything that everyone worked with direct benefit to the farm regardless of their skill level or payrate.
Total non-labor expenses are the trickiest of the three numbers to be consistent with. I immediately take out any payroll expenses as those are labor expenses. For large equipment or infrastructure purchases I’ll try to reasonably estimate their useful life and do a straight-line depreciation (there are more accurate ways to do this, but I think straight-line is close enough considering how many of these I have). Some expenses are a little questionable as to whether they are really necessary, or maybe as to whether they should be in the labor category. An expense that I question including sometimes is a tool or piece of infrastructure that isn’t one that is absolutely necessary for production, but that simply makes our work nicer in some ways. For example if I were to buy a sound system for the barn so that folks could enjoy music while they work I’m not sure I’d include it (not a purchase that I’ve made, but a good example I think). I also bought a nice seeder we didn’t need but that I wanted to try last year. It was relatively expensive and I wasn’t sure I should include it, another example. Any expenses for employee benefits, like end of the year celebration dinners, or even buying the crew their own personal harvest tools are always a bit fuzzy for me as well – are they labor expenses or non-labor expenses? Generally these are small enough that I don’t worry too much about which category I put them in as they won’t ultimately make a big difference in the final number.
This year the total gross of the farm was $41,226
The total labor hours were 2088
The total non-labor expenses were $7,064
This brings the net dollars per labor hour to about $16.36
This is lower than in 2019 but it’s actually not as much lower as I feared it might be. I’ve also talked to a number of long time, very successful farmers over the years that have told me that over decades they see a lot of ups and downs from year to year. Here are the factors I think contributed to the lower number this year: weather, a completely new crew, and pest pressure.
The weather wasn’t actually too bad this season. It was a colder start to the year and a rather abrupt end to summer, so those worked against us in some ways. Slower growth in the spring and early summer meant the crops were less competitive with weeds which increased our labor needs there and might have increased our harvest labor a bit in some of the roots – smaller roots take longer to harvest. The abrupt end to summer had mixed results for costs. In some ways it is actually a short-term benefit in our situation. CSA members pay up front and absorb some of the shortfalls when crops yield less than we hope or fail all together – there can be a labor savings when we don’t harvest. In other ways it makes us have to scrape a little harder to give full shares every week and that increases the labor costs for what we are harvesting. As an example, we were uncharacteristically short on kale and collards in the fall and really had to spend a lot of time sorting through damaged leaves to get decent bunches – that cost us.
That sorting through the kale might have been partly due to weather but it was actually mostly due to pest pressure. Pests also cost us a lot of extra labor dealing with holes in drip lines this year – it was the worst year for chewing on irrigation lines I’ve ever seen by far! Pests also took out our initial planting of corn and winter squash which had cascading effects, resulting in a lot of extra labor weeding and very low yields without much harvest labor savings.
Last year we had a couple of folks on the crew who were new to the farm, but there were three of us in the core crew that had at least three seasons on the farm, and two of the “new” crew members had worked with us a little in the past. It turns out it makes a big difference when the crew is experienced and knows what to expect. It takes a lot less time to explain what tasks need to be done, and it takes the crew a lot less time to make transitions from one task to another. It’s also a big difference if only one or two people are new and they have multiple other folks to take cues from. In 2019 I was the only one who knew any of Cully Neighborhood Farm’s specific systems. The crew this year was a great group of folks (and I hope they come back to work with me again), but even though they all had some farm experience in other places, none had worked on this farm and so things just took longer. You can see that reflected in the total labor hour numbers between 2018 and 2019.
Even with the drop in net-dollars per hour generated I’m pretty happy with what we were able to do in 2019. I’m especially happy that the number comes in above $15/hour (the target for minimum wage in Portland over the next few years), although probably not enough above $15/hour to cover the “loaded” hourly rate. The loaded rate has to cover the business’s payroll taxes as well as the hourly rate. In addition, it doesn’t leave much room for anyone to make much over minimum wage.