Thursday, October 11, 2012

Building Unity Farm - the Economics

My wife Kathy and I ran a winery from 1986-1993 while I was in medical school and graduate school.   We grew, harvested, and crushed all Rhone varietals.   At the time Kathy raised Chow Chows and we named them after grape varietals, explaining that their purple tongues came from sampling the products of the vineyard.   After 7 years in the wine business, we discovered that you can make a small fortune running a vineyard, as long as you start with a large fortune.

The economics of agriculture are challenging.

At Unity Farm, what can we expect to earn for our efforts?

Alpaca - Alpaca fiber is the softest animal fiber available.  It's in high demand by fiber artists and weavers.   A spring alpaca shearing may bring $200 for the fiber from each animal.   I've calculated our cost of feeding and healthcare for the animals.  It's about $200 per year - breakeven at best.   Alpaca cost anywhere from $500 to $50,000 per animal, although most are in the $1000-$2000 range.   Breeding alpaca might be more profitable that fiber harvesting, but we are not planning an alpaca breeding program at this time.   There have been various tax deduction schemes associated with alpaca farms, but we have no interest in those.   About the most we'll do is investigate options for property tax reduction given that we now have a working agricultural property.

Chickens - Chickens raised for meat live 14 weeks.   Chickens raised for eggs live 2 to 3 years before they are "retired".   As vegans (my wife is a vegetarian and eats eggs), we do not plan to slaughter our chickens.   Each has a name, a personality, and unique place in the ecosystem of our barnyard family.   Our chickens will live 10-14 YEARS, not weeks.  During the peak of egg laying, we'll get an egg from each chicken every 25 hours (such as the brightly colored eggs pictured above laid by our Ameraucanas).   We can sell a dozen eggs for $3.50 and given the 8 month egg laying season (chickens do not lay during the dark of winter or when they are molting), we can earn about $70 per chicken per year.   The cost of raising a chicken for us is about $50/year.     The economics might work if the chickens lived 2-3 years, but with a 10 year lifespan and 5-6 egg laying years, they are likely a loss.

Dogs - Great Pyrenees are wonderful livestock guardian dogs.   They cost between $500-$2000 with a mean of about $800.    However, we do not plan to run a dog breeding program.

Thus, for the animals of Unity Farm, raised in a free range/long life environment, the likely income is related to tax credits or property tax reduction.

Fruits, vegetables, and flowers are another potential income source.  This fall we're planting an apple orchard and 400 high bush blueberry plants.  

Apples will not be ready for 5-10 years and although we could charge up to $25 per peck, profitability is very dependent on weather conditions and competition since there are many apple sellers in Massachusetts

Blueberries can fetch $2.50 a pound at a U-pick.  We might be able to generate $10,000 per year for 400 plants after 10 years, but that will require significant up front capital investment and labor.

We're also creating a 30x72 foot hoophouse - hoophouses, high tunnels and cold frames will be featured in another post about extending the growing season for our vegetables.    What kind of prices can you realize for such crops (per Growing for Market by Lynn Byczynski)?

Arugula $1.31 per square foot
Cilantro $.95
Cucumbers $1.34
Tomatoes $3.55
Leeks $1.10

Given the labor and initial capital for the raised beds/hoophouse, you can see that growing 2000 square feet of vegetables will not generate much.

So, what are the economics of running a small farm?

Since I began my morning and evening tasks on the farm in April 2012, I've lost 10 pounds, but gained upper body strength.   My gray hair has disappeared.   My optimism and equanimity are peaking higher than every before.    I'm guessing the benefits from healthcare cost avoidance (mental and physical) could be substantial over a decade.

The seasonal expectations of pressing your own cider, picking crisp vegetables for every meal (lettuces and kale grow in the hoophouse in winter), and waking up every morning knowing that 50 animals depend on you for their survival - priceless.

Farming at small scale is truly a labor of love. If you believe in losing a dollar on every tomato, but making it up with joy, you'll understand why we created Unity Farm.


Jim Thompson MD said...

Your "small fortune" joke, which I loved, reminds me of the Illinois farmer who, after winning the lottery, was asked what he'd do next.
"Well," he replied, "I reckon I'll just keep farming until it's all used up."

Anyway, the economics don't work, although you might be able to bump up the prices using the Halamka brand as a value-add. That's one advantage you have over an ordinary joe.

Anonymous said...

Your explanation of the economics of farm life are like the economics of us owning a pure-bred Basset. It was a free dog, but has upkeep costs. It is fixed, so it will not produce puppies. It is dumber than dirt. Yet, when I look at it I laugh and feel better about life in general. It then looks back at me with absolute love and the upkeep costs don't seem so bad after all. There is a lot to be said for things that just make us happier. If they lose money, we call them hobbies, or pets, or whatever.

Unknown said...

Why do you think the gray hair went away? (Or was that metaphoric?)

Has there been a substantive physiological change that comes with the labor/food/environment?

Or purely a mental one?

Just curious. That statement jumped out at me and I don't know why.

Thanks for the wonderful Blog, John. I try to read every day.

Scott Troiano

Anonymous said...

"You can make a small fortune running a vineyard, as long as you start with a large fortune."

Is that what they mean by economies of scale?

Peggy Polaneczky, MD said...

Joining in with Scott wondering if your grey hair really went away and how that might have happened. It's something I've never heard before.

Thanks for this post - I've been reading along with much envy and delight at what you are building, and wondering about the economics of it.

You might enjoy this lecture by an organic farmer discussing the realities of creating a sustainable farm.


Unknown said...

Thanks for this publish, I have been studying along with much covet and pleasure at what you are developing, and thinking about the business economics of it. You might appreciate this session by an natural cultivator talking about the facts of developing a maintainable farm. Your description of the business economics of farm lifestyle are like the economics of us having a pure-bred Basset. It was a no cost dog, but has maintenance expenses. It is set, so it will not generate pet dogs. It is dumber than dust. Market Analysis