The Art Of Being Profitable

The Art Of Being Profitable

Contrary to what some people say, the world’s oldest profession is probably farming. Historically, many growers found themselves in a profession that had been passed down from generation to generation, capturing the skills and knowledge that has been part of a long family tradition. However, sometimes the next generation in a farm family chooses to change an agricultural operation. They may choose to grow a different crop, change they way they market their crops, or change the way they approach their farming system. Many newcomers to farming, as well as conventional growers, are choosing to enter the organic marketplace. 

Today’s organic industry is a relative newcomer to the overall farming sector and the mainstream grocery market shelves. Over the past 50 years or so, the concept of growing and marketing an agricultural product based on a set of principles or standards has evolved from a grassroots movement, offering an alternative to conventional agricultural production, to a USDA-regulated program. According to the USDA’s Economic Research Service (ERS), the U.S. had under a million acres of certified organic farmland when Congress passed the Organic Foods Production Act of 1990. By the time USDA implemented national organic standards in 2002, certified organic farmland had doubled, and doubled again between 2002 and 2005.

Adoption Of Organic Farming

There appears to be a great interest among new and existing growers in the organic marketplace. Dr. Danielle Treadwell, assistant professor in horticultural sciences at the University of Florida, estimates that approximately half of the stakeholders that she works with are interested in either starting new organic operations or transitioning all or part of their operation to organic production. 

She recommends that growers establish a market for their products before they begin production. Treadwell encourages them to do their homework by understanding the organic regulations, the organic marketplace, and determining what crops make sense for their operation based on their starting capital, labor availability, and other important resources, such as land and machinery.  

According to USDA, while adoption of organic farming systems showed strong gains between 1992 and 2005, and the adoption rate remains high, the overall adoption level is still low — only about 0.5% of all U.S. cropland and 0.5% of all U.S. pasture were certified organic in 2005. Obstacles to adoption by growers outlined by USDA include high managerial costs and risks of shifting to a new way of farming, limited awareness of organic farming systems, lack of marketing and infrastructure, and inability to capture marketing economies. Still, many U.S. producers are embracing organic farming in order to lower input costs, conserve non-renewable resources, capture high-value markets, and boost farm income.

Are Operations Profitable?

 

Whether a farming operation is profitable depends on many variables, some of which are under the full control of producers and others, such as weather, are not. The price that a grower is able to get for his crops is an important determinate in whether a farm makes a profit. If a grower is selling his products to the wholesale market, he typically has little or no control over price. The USDA-ERS provides limited organic produce price data.  

For many of the crops posted, the organically produced crops were two to three times higher in price compared to conventional crops for the same week. The higher price of organic produce is due to the high demand for the product relative to the supply. How long this favorable price situation will last will depend on the future relationship between consumer demand for organic produce and the supply.  

However, higher prices do not mean that organic farming is profitable. The costs to grow organic produce will determine for the individual grower whether he is making money. Additionally, the marketable yield per acre will be a factor in profitability. The growers’ approach to organic crop production, the methods they use to control weeds and diseases, and how they achieve optimum soil fertility varies from operation to operation. 

In general, organic farming systems require increased management skills, cultural and mechanical methods for controlling pests and weeds, and natural forms of nutrients, such as composts, manures, and cover crops. These components add increased labor requirements on the farm, which can increase the costs of production. There is a need for production cost data for organic systems so growers can analyze different production methods and determine which ones to implement to reduce their costs. There also is a need for research that will help growers optimize their production. 

Factoring Yield, Costs, And Sales

 

Many small scale organic producers are marketing direct to consumers through farmers markets, cooperatives, chefs, and Community Supported Agriculture enterprises. Andres Mejides of Homestead, FL, grows approximately 100 crops and tropical fruits on his 5-acre farm. He employs five full-time workers and three full-time family members. His market is high-end chefs throughout the country who are seeking high-quality organic produce. When asked if his operation is profitable he states “we make payroll every week and we have been in business for 15 years.”  

Debbie Roos, Organic and Sustainable Agriculture Agent for North Carolina Cooperative Extension, states that “in the past couple of years there has been an incredible increase in local farmers markets in our area. Consumers want to buy local and they are seeking out both organic and sustainably raised products at the markets.” 

Growers who market direct to consumers have the advantage of increased control of their prices and receiving a retail price premium. However, whether they make a profit will be determined largely on the yield of produce, their production costs, and ability to sell what they produce.

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