Fruits of our Neighbors: What is the true cost of small-scale food production?

Tuesday, March 31, 2009

What is the true cost of small-scale food production?

I just read an article on Ethicurian questioning the high costs of sustainable, organic, local and ethical foods. And one section in particular struck me:

What I do not believe is that farmers should get to this income level by charging extortionate prices. The small-scale local farming model should be based on a maximum average profit margin of 30%, not 130%! Which, as far as businesses go, is a very good profit margin. I know a lot of businesses that would love to have such a margin.

My mini-CSA program this year is less than half the price of any other CSA in Portland, and is over $500 less than the most expensive CSA. This is for two reasons. One is that this is my first year, so subscribers should expect an occasional hiccup, along with an intentionally limited selection of produce (no corn, eggplants, peppers, cabbage, broc, cauliflower, etc). But the second, and possibly more sustainable reason is that I believe most CSAs charge artificially high prices.

Many CSA and SOLE food (sustainable, organic, local and ethical) consumers expect high prices. We acknowledge that SOLE producers have higher costs than industrial producers, but how much of this is rightly attributed by having no "hidden costs" via pollution and subsidies, and how much is improperly attributed to artificially-small economies of scale. Is it fair to assume that every farmer, no matter how much land they use, no matter what their volume is, is it fair that they make a good living? Or are some operations too small to make economic sense?

Obviously, it's too much to expect that I could replace the full-time income I made as a 10-year veteran software developer by working 1/10th of an acre for a few hours a week. But at what point am I entitled to "make a living" as opposed to doing it for a hobby, or just to recoup my costs? Is it really "better" to buy more-expensive produce from a CSA as opposed to regional and organic at New Seasons Market?

Picture by Manjith Kainickara, Creative Commons

4 comments:

Walter JeffriesApr 1, 2009 05:41 PM
Hmm... A few hours a week. So pro-rate it to a living wage which the papers around here seem to be calling about $20/hr ($40K/yr). If you're working 5 hours then that would come to 40/4*20*50=$8K/yr.

I guess one question is do you really expect to make as much per year working just a few hours a week as you did working full time as a software developer?

The reality is $40K is a lot of money. Our family lives well on a small fraction of that so in addition you can look at what to do to keep your expenses down. Of course, you get loads of free food since you eat all the seconds. :) That helps save money too.

By the way, I have done the software thing and now farm. I love it! But farming / homesteading and being with my family was always my goal. Software development and other stuff was just a means to an end. Much like having a second job but instead of doing it now in parallel I did it before we had kids.

What ever you do, make sure you are really covering all your costs plus. Do a business plan. No joke.
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Walter JeffriesApr 1, 2009 05:41 PM
Oops, typo, I meant 40/5*20*50=$8K/yr.
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Nat WestApr 1, 2009 10:26 PM
Hi Walter, thanks for stopping by and for the comments.

I think that both I and the original post's author (Bob Comis) are not trying to defend the dollars-and-cents of small-scale food production costs. Instead I (at least) am questioning the rationale behind widespread acceptance of artificially-high prices.

In nearly all businesses, especially product businesses, whether it's software development, auto repair, dog breeding or raising pigs, volume means money. What I am in agreement about with Bob is questioning the public's intentionally blind desire to pay a small-scale premium, with no regard to efficiencies of scale. All else being equal, a high-volume production can have lower true costs than a low-volume production.

To encourage widespread SOLE-food consumption, shouldn't producers "get big" enough to put prices into line with what most consumers are willing to pay? What good are we doing by selling our products to the elite upper-middle class and pricing it too high for working-class families? Shouldn't we strive to provide food for people in more income brackets?

And thanks for the adive about covering all my costs. I'm truly a hobby farmer, but I am keeping a close eye on my expenses, as well as carefully tracking my labor time. (But I'm not tracking blogging hours!)
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BlakeryJul 13, 2009 01:12 AM
I think you are entitled to "make a living," as in full time pay, once you work over 35 or so hours a week. Over 15ish I would say would be part time, less than that a hobby. And the amount you earn, in my opinion, unless you're terribly efficient or productive, should be right around what an average middle class, white collar salary would be for that amount of work. But like i said, that's averaging. If, say you were very efficent with your time or otherwise skillful, you could expect to earn more, less so would be less.
I personally think the price of SOLE food, so long as you stay away from the botique type stuff, is pretty reasonable. Sometimes it's outlandishly cheap. I currently pay $4/lb for beef and $4.50 for pork, hanging weight. I think those are very reasonably priced; just about right. I wouldn't want to pay much more, but niether would I expect to pay less. Chicken's I pay 3.80/lb for broilers, $9/each for stewing chickens. I think of those as also about right, maybe slightly on the higher side for broilers, but not enough to complain about, especially with land prices in the northeast. Now, where I think I am paying too much is for my milk, but that's because producers are scared of the raw milk regulations. I don't blame my farmer, I blame the government. Same with the price for pork. I'm pre-buying the beef for an on the farm slaughter, but the pork farmer doesn't offer that (scared of USDA regs). So, thank you USDA. For veggies with me, it's a mix. I get the majority of it through a CSA type thing, where I pay at the beggining, but can instead of recieving a box, go and shop with "farm bucks," at a discount. At farmers markets, I pay a sizeable amount more, but I think 2.50/bunch for greens, $6/quart for the strawberries and the like still falls within the range of "true cost of the food."

Bottom line? Consumers need to get used to higher food bills (we're not getting out of this any other way), view expensive items, like rasberries someone else has picked for you, an occasional TREAT, and relearn the skills of trift (using all parts of an animal, full utilization of all food, less waste, foraging for wild greens, etc.). Of course people say "o but what about the poor?" Well, it's not any cheaper for the government to subsidize happy meals than it is for them to subsidize real food. Besides, I don't think food is the best place to save money.
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