Future of small farms
At a recent question and answer session during a producer conference, one participant from Pennsylvania asked, “What is the future of the small family farm in Pennsylvania and across the U.S.?”
First of all, it is important to remember that farm and ranch businesses of all sizes are feeling the stress of today’s economic cycle. This “grinder” of an economic cycle comes in sharp contrast to abrupt market declines. And the elongated erosion of cash flow and balance sheet equity tends to place more pressure on the business operations, flexibility, and sustainability.
With that said, my general observation is that some small farms and ranches are profitable and maintaining cash flow well. Often, these farms are diversified with two or three enterprises, and in some cases, supplemented by off farm income.
Other small family farms have tapped into the value-added and niche markets particularly in areas that are close to satellite cities, or those that are tied to a larger metropolis in growth mode. I have also observed that these farms are very astute in marketing their products and are constantly developing ways to connect with consumers.
Still others small farms are very modest in their lifestyles and personal withdrawals from the business. Another individual at the conference showed me her family budget using Quicken software, which allowed her to easily track expenses and income each month.
Another small producer entered into agreement with a nonfamily member, who was gradually phasing out of his business. The young producer organized their agreement to allow his use of the older producer’s equipment, while running a separate enterprise. This arrangement also gave him an opportunity to learn how to be a good manager with mitigated risk and on-site experience. This small producer developed a plan of production, operations, marketing, finance, and lending through the young farmer program. By the time this young producer purchased the entire business from the non-family member, he had experienced every facet of running the business.
In today’s world, the consolidation of the agriculture industry certainly appears to be the trend. However, as several small farms have shown, entrepreneurial individuals who think outside the box are still viable if they manage and execute their business strategy. And specifically in regards to Pennsylvania, I see a bright future for small farms. Approximately 30 percent of U.S. consumers with income levels to buy products are within 10 hours of the state. Even if Pennsylvania is not perceived to be the local point of origin, “food with a face” could still be a differential edge.