Author: slowhandfarm

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.

Time for my annual accounting where I try to create a single number that says something meaningful about how the farm did financially. This year, more than the past few, I feel like it’s obvious that numbers in accounting are malleable and really don’t tell the full story without a lot of context.

The single number I like to put out each year is the dollars generated by the farm, per hour worked, after (non-labor) expenses. You can look back at last year, and years before that, by going to the blog post on 2017 Numbers. Here are the basic numbers for 2018:

• Gross income – $39,712
• Non-labor expenses – $8,247
• Total hours worked – 1850

The basic math gives a net, pre-labor income of $31,465 for 1850 hours worked, which works out to $17.01 per hour.

That hourly number is before any payroll taxes, so if you’re trying to compare it to an actual hourly wage you need to lop off a chunk. Even so, we’re probably close to the $15/hr range, which feels pretty good, and actually gets us to the target minimum wage for this part of the country. Unfortunately, that still means that folks at the bottom of the pay scale are below that. We’re relatively flat in our pay structure and this year I was able to pay bonuses at the end of the season that made it even flatter.

These are very ball-park numbers even though they look exact. The gross income and hours worked are actually pretty exact, but it gets a little fuzzier when we look at expenses.

I’ve included some non-cash expenses in the expenses – essentially depreciation on equipment like the walk behind tractor and implements, and other structures. I’m pretty consistent about this in my own calculations, and it helps to even out the picture in years that have drastically different investment levels in tools and infrastructure. Beware that if you’re comparing to your numbers our methods might not match.

This year looks better than the past few and here are my best guesses on the reasons why. The primary reason is luck. A lot of things lined up for us this year: the weather was pretty good, we had great folks working with us who were available at the right times, and we were able to sell most of what we produced with very little waste. Certainly we set ourselves up to take advantage of those kinds of conditions, but even with experience (and partly because of experience) I know that there was an element of luck that certainly helped and we won’t have that every year.

Another factor that’s making the 2018 number look better than previous years is that we went really lean on expenses this year – something that probably isn’t sustainable. We weren’t sure if it was going to be our last year on the property (turns out it looks like we’ll get another year, maybe more) so we relied heavily on the tools, seeds and supplies we had on hand and didn’t have to spend much on non-labor expenses. I actually invested in a few tools for 2019 right at the end of the year but I didn’t put those expenses into the above numbers. If I had they would drive the non-labor expenses up by almost $2000. That changes the hourly number to $15.93. With luck, those investments in tools will improve our efficiency enough to pay back at least a portion of that $2000, and they should probably also be depreciated as they will mostly all last numerous years.

A few final pieces of context here. You can go to cullyneighborhoodfarm.com to get a better sense of the scale and practices of the farm. We’re growing on a lot that’s just under an acre, with just over ½ an acre in production. We’re not pushing our production particularly hard relative to many compact farms. Nearly all of income comes from CSA shares, but do make a little on top of that from some mid-season farmers market sales, by selling extras straight from the farm.

I’d love to see this same basic analysis from other farms and I welcome ideas for improvements to my method.

Every year I take a look back at the previous year to see how we did and what I want to do better in the following year. Part of the analysis I’ve been doing is to add up the gross income and then subtract out the non-labor expenses. This gives me a net for all of the hours of work that went into the farm. Then I add up all of the hours worked and divide. This gives me a net per labor hour.

You can look back at my write up from last year to get a more detailed explanation of how I’ve been doing this over the years (and links to more write ups from years past). Instead of making this a long post I’ll just refer you back there for the explanation.

In 2017 I worked with Matt Gordon at Cully Neighborhood Farm again. We grew for 60-ish CSA members, and sold a little excess produce through the Cully Neighborhood Farmers Market. We grossed about $36,500 on about 1/2 acre so roughly $73,000 per acre, down very slightly from 2016. The non-labor expenses was about $10,000. Adding in the depreciated BCS expense brings that number up to about $10,940, a little under 30% of gross so we were able to keep the expenses down this year, despite making some infrastructure improvements that really improved ergonomics on the farm. The total hours worked on the farm, including marketing and administration, field work and everything else, was about 1910 hours, so we cut that back a little as well. That gives a (pre-tax) dollar per hour number of around $13.40 across the farm, up almost 4% from last year, which was better than inflation so I think we’re making progress.

For those with an eagle eye, you’ll probably notice that we’re right around Oregon’s minimum wage when you adjust for a “loaded” hourly wage (one that includes payroll taxes). Still, the bottom line is that for now I’m happy with that number for 2017 and we’ll take that information, along with the rest of the numbers we’ve collected and see if we can continue to improve in 2018.