|"If anyone is interested in exploring opportunities to farm in Northern Ontario you can check out Crop Up North and their snazzy video, or FarmNorth for all there is to know about setting a farm up in the North." - Ryan|
Field Good Farms is less than one kilometre from the northern edge of Lake Nipissing and almost centered between North Bay and Sudbury. For those who are unfamiliar with this area, we are about 4.5 hours due north of Toronto. To our friends in Thunder Bay, we do admit that we are less “north” than you are, but we digress.
Despite certain challenges we love farming up here. This blog will speak to what we have found to be pros and cons of farming in our region and how we have adapted our farming and ourselves.
In terms of plant hardiness we are in zone 3b. Roughly speaking, our last frost is late May or early June and our first frost is mid-September. This means we have, assuming a normal year, about 105 frost free days to work with. Right away this means that we need to be careful in terms of what we try to grow. Variety selection is paramount. For example, when we buy butternut squash seed we will purchase the more expensive Tiana F1 (95 day) instead of Waltham Butternut (105 day). The added cost is outweighed by the risk of pushing the limits of our season. Instead, we seek out either shorter season varieties or cold hardy crops when garden planning.
Choosing the right varieties meant that we’ve had good squash yields
In addition to variety selection, we use season extension equipment. We have experimented with many row covering techniques and are using both high tunnels and caterpillar tunnels to extend our season. However, since we do not use supplemental heat, we need to be careful as our mid-September night temperatures can be down to minus five or minus six for four to five consecutive days.
Early season Pac Choy in one of our caterpillar tunnels
Through experience, sweet peppers, for example, will not withstand these temperatures in a caterpillar tunnel even with secondary row cover. Without the use of supplementary heat we need to choose the hardiest crops even when using season extension equipment. These include, but are not limited to, kale, spinach, cilantro, kohlrabi, and mizuna. We do an earlier batch of these vegetables in the caterpillar tunnels followed by a later batch in the hoop house. This year, albeit an abnormally warm year, our last harvest of spinach, cilantro and kale from the hoop house was January 9th. The interior of our hoop house also gets covered in its entirety by a 30g row cover that is suspended four feet off the ground by aircraft cable. We continue to trial season extension equipment combinations alongside cold hardy varieties to have non-storage crops available well beyond our regular season.
30g row cover in our unheated 96’ hoop house
Beyond the realities of the weather, another issue in our area is marketing. There just aren’t that many people in the North. We are committed to ecological growing and providing a wide variety of high quality crops to our local communities. This is potentially problematic in terms of having a large enough market for our niche products. However, to date, we have always met our sales targets. Our CSA has been our mainstay. We actually operate North Bay’s largest CSA program with 110 members. To our knowledge, we also run the North’s only fall/winter CSA program. All to say, despite a small population, there aren’t a huge number of farmers doing what we do even at the relatively small scale at which we operate.
This has both advantages and disadvantages. It is nice to sell our CSAs out each year and to have virtually no waste due to oversupply in the market. However, there aren’t a lot of similar- minded farmers around and those who are here are actually quite far apart. In short, the market is good but the social life of the ecologically-minded farmer is slightly lonely. On the upside, this has driven us to sign up for numerous local boards and committees to ward off getting too lonely on the farm.
Another downside to the market of the North is that the number of restaurants interested in high quality or specialty products is not great. We currently supply two restaurants with a reasonable amount of produce but when I look at a town like Stratford, Ontario where my family lives, the opportunities for restaurant sales are huge despite having a smaller population than North Bay.
Beyond marketing, another tricky issue is our distance from suppliers. If I need organic seed potato, for example, I have to drive at least 6 hours (one way) to get it. That takes both time and money to do. This is the case for many of our supplies: greenhouse flats, irrigation equipment, packaging, cover crops, season extension equipment, and the list goes on. This adds extra trucking costs to our expense lines which, when added to an already shorter growing season, has us tighten our belts a little bit.
Another downside to our location is the distance from relevant agricultural events. The EFAO has all kinds of great Kitchen Table Meetings, farms tours, and training events but we are usually a day’s drive both ways from these gatherings. We’ve always wanted to take Ken Laing’s training with Suffolk Punch horses but are so far that it has yet to be possible.
Distance from the South can also be a good thing. I don’t have any experience farming in the South but we often read through OMAF emails about pests and disease moving their way into southern Ontario and creeping northward. To date, knock on wood, we haven’t seen these types of problems reach our farm in any dramatic way. The only troublesome pests we’ve encountered lately are leafhoppers after the hay is cut and the swede midge due to a lot of canola growers in our region. But by and large, our pest pressures are not devastating.
Finally, a major advantage in the North are land prices. Currently, tiled land prices in our region range from $2,000-3,000 per acre. I haven’t been looking for land down South but my gut feeling is that land up here is substantially cheaper by comparison.
Finally, beyond economics and farm specific pros and cons, we have to consider the idea of place. Despite a few difficulties by comparison to the South the ruggedness and access to wildlife in the north has our hearts. This year on our property alone we saw four moose, many coyotes, Sandhill cranes by the hundreds, bobolinks, blue herons and in the area we saw a bald eagle, a snowy owl, a marten and a timber wolf. Sundays are our day off so I try to get out pike fishing on the lake.
Our friend Mike with a Pike on a Sunday outing with Ryan a 7 minute drive from the farm
Wild blueberries dot the jagged rock outcroppings typical to our farmland and cranberries grow wild in the shallows of the lake. We feel that the North is a beautiful farming area and to paraphrase Wendell Berry it feels very much like the perfect mix of wild and domestic.0 Comments
|The last of Brenda's posts about managing finances on Black Sheep Farm, in Grey County, this one covers decision making for big capital expenses. Thank you Brenda for sharing all this useful info with us this winter! We have been referring to Brenda's blog posts in our Farm Viability Course, held in Guelph - you can still join us for Sessions 2 and 3 in Jan and Feb 2016.|
Throughout the year, there’s probably a running list of things you want to improve at the farm. At the end of the season, after your numbers are analyzed for the year, you should get that list onto paper/computer screen and take a good look. What do I want for my farm? A tractor and various tractor implements, page wire perimeter fencing with sheep proof gates for laneways, a hoop house for more reliable production of some hot crops and extended season harvests, and more fruit and nut trees and shrubs.
How do I make all this happen in the next few years? Plan, plan and plan some more. And prioritize. What are the approximate costs for these things? Are there creative ways to accomplish the various tasks? Which capital outlay will be the most profitable in the long run? What could help increase income and decrease costs so there might be more disposable income to take care of the other items on the list?
For my farm, the top of the big purchase list is the tractor. In hindsight, I probably should have bought a tractor instead of a rototiller (costing around $3,000) back in 2009. But I have an unreasonable fear of large motorized machines, am the opposite of a grease monkey, and romantically thought I might learn horse farming. I have since accepted that I am much too allergic to horses to really consider working with them in the absence of total fossil fuel collapse during my farming lifetime. If I get a diesel tractor, there’s always biodiesel! And after over six years of living in the country, I’ve finally accepted that the maintenance of a farm property overall, really does need a tractor.
At its most basic, the tractor for the farm needs to take care of field work (via disking, rototilling, and harrowing implements), snow clearing (snow blower) and compost/manure moving (bucket). How big would this tractor need to be, both in size and horsepower? How much would it be new versus used? What implements could I borrow or rent instead of buying? What kind of technical know-how do I need to learn and/or who’s a reliable tractor/implement repair person in my area? I was told by one farmer that to own a tractor, you need to be a welder. Luckily, my partner seems interested in taking on that responsibility. Let’s say what I would need would cost between $8,000 and $10,000 used, with $500 per year in maintenance/diesel costs.
Now take a look at your farm financials for the past few years and find out your yearly custom work costs. For my farm, the 6 year total since 2010 (when I first started having these costs) has been $6,326. That averages to about $1,000/year. Would a used tractor and implements even be worth buying considering it would take 8-10 years to just pay for itself given historical costs? My penny pinching self would say, “Absolutely not!” A used tractor couldn’t possibly last that long (says my non-mechanical self), so it’s absolutely not worth it considering the reliable custom work available in my area and the additional repair/fuel costs. But considering my future self, and the presence of a less machine fearing partner than me, I must reconsider. I’m getting older, which means there will be more tasks that I shouldn’t be doing manually (moving compost by shovel and wheelbarrow). The sheep flock is increasing, which means more barn cleanout, compost pile management and fencing needs. Custom rates are likely to increase from year to year. Having my own tractor gives me more flexibility on timing and also opens up the possibility of other tasks being done that I don’t even consider right now (fence post pounding, moving of heavy objects). And my field work costs have been increasing from year to year as I’ve put more fields into production or started new enterprises (like grain growing or a new hay field). Winter snow volume seems to be completely unpredictable now, which means so are the snow clearing costs. Realistically, the yearly custom work costs would probably be greater than $1,000 per year going forward, and having such a valuable tool at my daily disposal would change the way work is done.
So now I’m shopping for a used tractor with a bucket and snow blower. If you don’t have enough funds saved for the purchase, you need to consider loans (bank, family, friends, in that order of desperation), and/or creative fundraising. You could consider asking loyal CSA members to prepay for X years of CSA shares so that you’ll have your capital now, when you need it, and your farm members reap the rewards into the future. Or you could find yourself an angel investor via social media or fundraising platforms. You could also spend the next few years aggressively scaling back costs (living leanly) and increasing income (selling more CSA shares) to budget in additional savings of $2,500 to $5,000 per year to put towards the cost of the tractor. Given how immediately owning a tractor would start paying for itself, I would recommend getting a loan and buying the tractor sooner rather than later.
An example of a cost that I would rather save for over the years than borrow to buy now, would be perimeter fencing for the farm. While it would be nice to know that my sheep could not make it off the property if they got loose from their pens, it is not necessary. A good solar fencer and proper movable electric fence management are the absolute necessities to keep the sheep contained. I will install a tractor road gate in the spring though, to discourage trespassers from driving ATVs onto the property and spooking my sheep (yes, this happened in October).
Another project that should probably be prioritized would be buying and planting more fruit and nut trees/shrubs, given the years needed until they’re in real production. However, if you don’t have the capacity to take care of them in the early years really well (weed control, mulching, pruning, winter protection from rodents/deer), you’ll just be throwing your money away. I’ve figured out from experience that I can maybe deal with 4-5 new trees in one year, on top of other farm enterprises, so unless some wonderful grant shows up to pay for putting in a lot of fruit trees at once, I’m going to stick with the slow and steady approach.
As for the hoop house, I’m still undecided on this. Adding greenhouse production is adding a whole new enterprise with additional tasks to manage. And do I really want to increase the length of my growing season for income generating purposes? Is it that important to my CSA members to reliably get eggplant and peppers from my farm? As a single person farm operation, realistically, extending my farming and vegetable deliveries into the winter would be a disaster for work/life balance. This would only be feasible with plans to increase overall production, and thus income, significantly enough to pay for a lot more outside help.
There are few purchases you can’t make in the long run with a good plan. It’s the planning itself that is important, as it shows you what it will take to get there, so you can actually decide if you want to do it. By setting budgets, keeping track of your spending, and analyzing what is or isn’t profitable, you control where your money goes, instead of wondering why it’s not around.0 Comments
In this "episode" of how to manage your finances with Brenda of Black Sheep Farm, we learn how to figure out what you're actually paying yourself. For more on this, you can join our Farm Viability Course - there are still 2 sessions left in Guelph and you can sign up on a pro-rated basis! Our Farm Viability Webinars are another option if you're not in Ontario.
Now that you’ve gone to all the trouble of making a budget and tracking your expenses, what do you do with all this information? It’s time to evaluate your finances! First of all, schedule some time for this, make yourself a strong coffee/tea, and have a snack prepared. And try to stay off the internet. It can be easy to get distracted, which will waste all your record keeping time!
Ideally, you should find the time, 2-3 times a year, to evaluate how your spending has been going, but this is pretty rare. Depending on when the busy periods of your farming season are, you should schedule in some financial evaluation time as soon as things calm down. For me, this is in early December, after I’ve finished the vegetable CSA season (end of October) and making cedar wreaths (end of November). I would also recommend doing this before making any large out-of-budget expenditures, so you know exactly what financial position you’re in.
Open your Budget and Expenses spreadsheets. In the sample Budget from blog post #2, I titled a column ‘Actual’. This is the column in which you’ll be entering the actual numbers for the year. Depending on how you set up your Expenses spreadsheet, this can be some simple copying and pasting of dollar amounts (if you’re copying cells that have equations, remember to paste value only). If you don’t like to flip back and forth between windows, you can print out just the ‘Balance Sheet totals’ section of your Expenses sheet and then enter them into your ‘Actual’ column.
You can even set up links between the Budget and Expenses spreadsheets so the ‘Actual’ column updates automatically with the latest totals from Expenses (though this can be problematic if you move files around and/or share them with numerous people who make changes, as links may be broken). If you choose to go the static (non-linking) route, note the date to which your Expenses are up to date.
Now that you have ‘Actual’ costs right beside your ‘Budget’ costs, you can see how close or far you are from your expectations. Adding a ‘Difference’ (‘Budget’ minus ‘Actual’) column shows you the exact amount. And depending on what time of year you’re doing your evaluation, you can see if you’ve got more or less money to play with for the rest of the year.
To make it easier to see if various enterprises are making money or not, I add some more columns beside the ‘Income’ section: ‘Budget Expense total’, ‘Actual Expense total’, ‘Net Budget’, and ‘Net Actual’. For the totals per farm income source, I put ‘whole farm’ expenses, like vehicles, equipment, marketing and labour, all under the main farm income source, the vegetable CSA. If another area is a significant user of these things, you may want to parse it out to get a more precise picture of how much it costs to earn income from that farm product. For example, maybe vegetables take 70% of the vehicle expenses and the various meats each take 10%. You may not even attribute both vehicle expenses to the farm, but only one of them if, for example, your partner uses the other to commute to his/her off-farm job.
As noted in a previous blog post, a penny saved is a penny earned! For this sample farm, some big ticket items, like a chicken tractor, cost a lot less than budgeted because it was built from mostly found materials. “Found materials” you say? There are so many places you can find building materials that aren’t necessarily a hardware store or lumber yard. Find out where your local dump and scrap yards are. Repurpose items around the farm that aren’t being used to their full potential. Habitat ReStores are a good source of items. Also, look through online postings to see if anyone’s offering materials for the price of pick up or tear down. Talk to farmers in your area who may have leftovers or older equipment that they’re willing to sell or give away. Go to farm auctions and estate sales, but do your research first and know your price limits or the pace of an auction may get you in trouble! And consider the many uses of pallets.
Essentially, the net amounts, budgeted and actual, are your take home pay. You can add another couple columns: % Budget and % Actual. Here, you can calculate what percent of that farm product’s income is your pay. In this farm example, less than 10% of pork sales are earnings, while laying hens (income from both eggs and meat) are almost at 50%! This is where you start evaluating if you want to keep, grow, or decrease, a particular farm enterprise. Perhaps you can cut back on costs, or increase production for economies of scale (don’t assume this is always a good thing). Or maybe it’s perfectly ok that one enterprise isn’t as financially efficient because you really love doing it. It’s just good to know exactly where everything stands.
You can also calculate your hourly wage now. It can be hard to determine exactly how many hours you work in a year, but you could say an average of 40 hours/week over 50 weeks of the year, which totals 2000 hours of work. That gives you a budgeted hourly wage of $2.24 or an actual wage of $5.36. If your farming is super seasonal in nature, giving you 3-4 months for off-farm work, then maybe your total hours are 50 hours/week over 36 weeks, which totals 1800 hours. Perhaps after seeing these hourly wages, you realize that you need to price your products completely differently. Start with the hourly wage that seems reasonable (perhaps $17/hour) and add that in as your labour expense. For 2000 hours, that’s $34,000. Then come up with a really good marketing idea to sell your farm products at a price where they can pay a real wage...0 Comments
Chris Knight of Clear Creek Farms produces certified organic Angus beef on grass. He’s passionate about knowing what his numbers look like as well as managing pasture. Chris will be teaching FarmStart’s Farm Viability Course in Chatham in January and February. Check out the books he found most helpful in getting his head around managing his farm finances - you can buy them both on the Tool Shed.
Farmers, and especially young ones, who are balancing fieldwork, families and finances often feel overwhelmed. After a long day outside and then a few precious minutes with your children at dinner, the last thing you want to look at are invoices, crop and livestock records. Worse yet, spreadsheets with all this data in tiny cells that make your eyes squint at 10 o’clock at night can be nauseating. And yet, as cold as it may sound, it’s exactly this financial information, which determines whether you succeed or fail in the business of farming. Raising animals and crops is a relatively easy task. Pricing items properly, controlling costs, keeping up on bookkeeping and accounting tasks are often where we as farmers struggle. I knew this from my own experience. However, I also knew excellent farmers with a very healthy bottom line who could tell you exactly to the nickel their cost of production on crops and livestock. Somehow, I had to get to that level of confidence with accounting. I went looking for books and these are the best two that I have found so far:
This is a non-farming specific accounting book and it is excellent. The “Yah butters” will say farming is different – no it isn’t. It’s a business. The book’s goal is to make the owners money to live, pay off a mortgage, keep accounts up to date and deliver products to customers. This book is very easy to read and reinforces the simple messages of accounting over and over again.
The first half of the book outlines key financial statements a company should have at its disposal such as the Income Statement and Balance Sheet. It explains all the categories that go into the making of these statements. There are no massive pages of small print, only clear and concise definitions and examples. The end of the first part has an excellent series of financial statements that lets you track transactions and their influence on different key statements. You can actually see the impact as money flows through and from a business. The second half of the book deals with real life and applicable transactions of a hypothetical company. Many of these transactions will be similar to agricultural decisions made by farmers.
The last sections of the book deal with using the information you learned how to organize in the first half of the book. There are sections on ratios, using journals and ledgers and an important section on “Cooking the books”. Following this, the author does an excellent job of outlining how to use financial statements to make decisions regarding expanding your business.
All told, this is an excellent starting point if you want the basics or if you think you know the basics and want to refresh your memory. I would recommend this book to anyone in agriculture.
For those of you who want a book written by farmers for farmers, this is it. Written by a team of well-respected organic and sustainable farmers from the Midwestern United States, there is lots of great information in these pages. Analogies, personal stories and reflection abound in each chapter. The topics covered are very similar to the above reviewed Financial Statements. However, Fearless Farm Finances (FFF) is more about the story and analogy whereas Financial Statements will serve you in the future as a quick reference manual. Both books belong on your shelf. FFF even has a chapter titled “Should I buy that tractor” so you can see that this book is very specific to those in agriculture.
Additional chapters that may be of assistance to those with ambitions in agriculture are also provided. They include chapters on marketing, pricing and dealing with lenders. All are excellent and again, as is the general theme, include real world analogy and commentary.
I own both of these books. Both are dog-eared and have lots of sticky notes attached to the pages. That has always been a sign of a good book for me. Get yourself one or both of these great resources; you will begin to see your business in a whole new light. If you take the messages the authors provide to heart, that lump in your throat around tax season will start to fade away.
|In this post, Ryan Spence of Field Good Farms in Cache Bay, Ontario goes through how he and Isabelle analyze their farm's numbers to make profitable and sanity-saving decisions. They are champions of Richard Wiswall's The Organic Farmer's Business Handbook, which you can purchase from the Tool Shed! Other opportunities to glean Richard's knowledge can be found in his blog post on the Farmer Review blog or from his Agriwebinar presentation, Planning for Profit (you will have to register for a free account on Agriwebinar before watching). FarmStart is inviting Richard for a new webinar, Mind Your Business! Financial Literacy, on December 8th 2015.|
The 2012 season was our first year of full-time farming. Naturally, I (Ryan) wanted to grow anything that I possibly could. We had head lettuce that toted a delicious centre core if barbequed like asparagus, broccoli leaves, and parsley root. Although these are in fact delicious, it turned out that the market for them was quite small and that we were spreading ourselves thin.
By the end of 2012 we were tired. Really tired. Going into the 2013 season I somehow managed to convince Isabelle of another season of interesting but less marketable items. Again, we got through the season but didn’t do much better financially and we were both still exhausted. During the off-season I read Richard Wiswall’s The Organic Farmer’s Business Handbook and began to understand key concepts that make small, sustainable farming lucrative.
We immediately realized that we had to focus our energies and be smart about operations. This began with asking key questions: what was profitable on our farm? How could we identify this? It’s easy to go on a hunch about the profitability of a “crop enterprise,” as Wiswall would call it, but that doesn’t mean that it is actually worth the time. When it comes down to it, hunches are nothing more than hunches.
With faint memories of tired bones, we decided that 2014 would be the season that would help identify which crop enterprises were in fact profitable. We continued to grow a wide variety of crops, 51 to be exact, to provide a fair comparison. To track each crop we created what we called “task sheets.”
These were to be filled out by everyone who worked or volunteered on the farm and the tasks had to correspond to the categories on Wiswall’s Crop Enterprise Budget spreadsheets which can be found on the Companion CD which comes with the book:
The Crop Enterprise Budget Spreadsheet using Arugula as a Crop Enterprise (from the Organic Farmer's Business Handbook's accompanying CD)
Two things happened. While the task sheets gave us very real data about our operations, we realized that we also had to think about our processes on the farm. When you start tracking how you spend your time in a day, you automatically start thinking about how you can do things more efficiently.
Isabelle took all of the 2014 task sheets and created crop-by-crop summaries in order to tally the hours spent on all tasks. I then took this information and put it into Wiswall’s spreadsheets.
This lead to a few surprises. Cherry tomatoes topped our list at 439% profit. Sweet corn came in last place at -$26.08/dozen (we were selling it at $10/dozen). This means that it was costing us $36.08 to produce a dozen corn!
This information made it very easy to cut out the things that were bogging down the farm. This is the magic of Wiswall’s tool for cost of production analysis; it allows you to make accurate decisions based on your production methods.
Mixed greens are a great example of how these decisions helped change attitudes about daily tasks. Prior to capturing production information and doing a crop enterprise analysis I would have gone out to the greens patch and harvested 10lbs in 2.5 hours, struggling to sort out the many weeds that had magically appeared in the crop. With good decision making tools in hand I now see two things: 1) as difficult as it is to admit, it is not worth the time to harvest, and, 2) that we need to look at how we can improve bed preparation and weed management in order to make this crop profitable. By identifying time sinks we also start to identify areas that need adjusting.
At the North Bay Farmers' Market
Since nothing exists in a void, it is also important to consider market availability. Just looking at our numbers would lead us to believe that we should grow many cherry tomatoes and no corn. However, when we looked at our farmers’ market sales records we realized that cherry tomatoes weren’t that easy to sell compared to other products. The balance lies in identifying crops that are both profitable and marketable. Keeping track of all sales, be it through our CSA, the farmers’ market or wholesale, is an important part of the puzzle.
With this in mind, let’s discuss potatoes. Conventional potatoes are notorious for pesticide use. In organic systems, they often require many hours of labour spent picking Colorado potato beetles. It therefore came as no surprise when this crop enterprise demonstrated a loss.
Potatoes as a Crop Enterprise - the bottom portion of the cost of production spreadsheet (from the Organic Farmer's Business Handbook's accompanying CD)
To provide context, we run a 110 member CSA in northern Ontario and, as such, we felt that there was no way we could cut potatoes from our crop list. In fact, a survey to our members suggested that they wanted even more potatoes! We looked at other local farms to see if we could partner up and have them provide potatoes for our CSA. With no organic growers around we had no choice but to go back to the crop enterprise numbers to try to see where we were going wrong. The culprit: poor production methods resulting in low yields.
Essentially, we weren’t hilling our potatoes or doing a good job of keeping the weeds out. With the amount of production necessary to fill our CSA shares we needed tools that would help us to be efficient. We found a 1948 International Harvester Cub for $1000. We already had hilling disks at the farm that could be mounted on to the implement bars. With this purchase we could now hill ¾ acre of potatoes in 1 hour and 20 minutes. At the same time the Cub took care of most of the weeds during the hilling process. Effectively, our yields went way up and the time we spent weeding went way down. This created a new problem, too many potatoes! Finding the right balance will take time, and this is a good problem to have.
Our "brand-new", time saving 1948 International Harvester Cub
When we think of tools we often think of production tools such as a hoe, a wagon, or a rototiller. Good decision making tools can be far less expensive, and are often overlooked. They are the kinds of tools that can and should be used during the off-season, when the mind is fresh and looking to the future. There are many examples on the farm of how this new “tool” helped us to make more informed decisions. Numbers aren’t everything, of course, and we still need to operate within our missions and values. We also need to consider our market.
At the very least we now have solid data of what crops are either not worth producing or need to be improved upon. We continue to capture this information as we hope to highlight trends and improvements on the farm from year to year. We would highly recommend this book and budgeting method to anyone who is seeking to make accurate decisions in regards to crop choices.
Making a living out of farming can be hard at times, let’s make it easier on ourselves by really knowing what is worth producing.
In their upcoming series of three blog posts, Isabelle and Ryan of Field Good Farms in Cache Bay, Ontario will be sharing their experiences of farming in Northern Ontario and how they analyze their farm's numbers to make operating decisions. They are champions of Richard Wiswall's The Organic Farmer's Business Handbook, which you can purchase here. Other opportunities to glean Richard's knowledge can be found in his blog post on this blog or at this Agriwebinar presentation, Planning for Profit (you will have to register for a free account on Agriwebinar before watching). FarmStart is inviting Richard for a new webinar, Mind Your Business! Financial Literacy, on December 8th 2015 - register here. There are a few spaces left so you can still sign up until Dec 4th.
If you feel you'd absorb how to work through costs of production best by sitting down with someone knowledgeable, and you are near Guelph or Chatham, Ontario, check out our Farm Viability Course starting December 14th (Guelph) and in January in Chatham. Experienced farmers will coach you through cost of production analysis among other financial tools.
Thanks for sharing Ryan and Isabelle!
Looking back at the last few years, we are amazed to see how natural farming has become. It’s easy to forget that while we both grew up in rural areas, we followed the cohort trend and left to pursue higher education in other fields (no pun intended). It was only while living in Montreal that we took a keen interest in all things food related. We sought out local options, artisanal foods, and ecological production. Before long we found ourselves in a movie theatre watching Food, Inc. Hearing Joel Salatin rant about our broken food system was a turning point. We started scrolling through job postings on Good Work Canada looking for opportunities that would enable us to better understand the underlying issues at the source.
We completed a six-month internship at a farm in Northeastern Ontario that was part of the Collaborative Regional Alliance for Farmer Training (CRAFT). We learned everything from vegetable production and animal husbandry to health unit regulations and food policy. It was amazing, exhausting, overwhelming, and grounding. The seed had sprouted and five months later Isabelle and Ryan were in the process of creating Field Good Farms.
As it turns out, farming had become a way for us to live out our desire to make a small change in the food industry. More specifically, we aimed for greater regional food security, ecological farming and building community involvement around food and agriculture.
Luckily, access to land wasn’t a huge issue for us since Isabelle’s family farm was being rented out for hay. Isabelle’s parents agreed to rent us ten acres to try our hand at our own operation. Isabelle spent nine months developing a business plan while Ryan worked to raise some capital to start investing in the farm. With no background in business, Isabelle recruited the help of the local business centre to learn how to build a business plan, which funding opportunities were available, how to comply with government regulations, the best marketing strategies for limited budgets, and how to do our own bookkeeping. Our business partnership was officially established in 2011.
We now have a five-acre market garden that supplies food to a one-hundred and ten member regular season CSA, a twenty-seven member fall/winter CSA, two local restaurants, a co-operative local food hub and grocer and a Saturday farmers’ market. In 2015, we grew forty-six different types of vegetables.
We have always followed organic practices, and almost went through with an application last year, but found that our local market was indifferent, if not wary, of certification. We hope to help develop a peer-to-peer organic certification in our area in the near future.
Since the farm is our only source of income we have had to focus our efforts on effective productions methods so that we can be both ecological and profitable.
Has it been easy? Certainly not. Unforeseen challenges have sometimes left us physically and mentally exhausted. We’ve found that the hardest part about farming is making informed decisions in a timely manner. How and when do we spend money? When do we increase production? Or, when do we stop growing a specific vegetable because it just isn’t worth it any more?
Having an honest and clear set of missions and values is key. We think that this is a big reason why we have been successful at running a small scale farm. While these elements may evolve, they are consistently guiding our decisions. They have allowed us to shape and visualize the farm and focus our energies. Because we both wanted to continue working full-time on the farm while maintaining our mission and values, we saw the need for a yearly cost of production analysis.
We implemented our cost of production analysis at the farm in 2014 after reading Richard Wiswall’s book, The Organic Farmers’ Business Handbook. This went much further than our business plan since it helped to us to clearly see which crops were profitable and which were being sold at a loss. Rather than going on a hunch, we were making decisions based on solid numbers and our farm’s reality. Our second blog post will focus on how we have implemented Wiswall’s techniques and what we have learned from our experience.
Working in tandem with the knowledge gained through Wiswall’s book, implementing lean principles to our farm processes have helped us to evaluate where we could gain a bit of time and energy by working intelligently. At the time, Ryan started reading a book on creating a lean culture which helped us to make small changes to maximize efficiency (there is now a book that focuses on lean farming titled The Lean Farm: How to Minimize Waste, Increase Efficiency, and Maximize Value and Profits with Less Work and while we have yet to read it, this book is receiving rave reviews by none other than Richard Wiswall, and is on our reading list for this winter).
After our blog on cost of production, our third blog will discuss farming in Northern Ontario. Our regional reality offers us certain advantages and disadvantages.
In terms of advantages, land prices are still affordable for a start up operation. There are fewer small scale ecological growers than in the south which equates to less competition. We are also separated from southern Ontario by a nice band of trees in the Muskoka area, which means that we tend to have less disease and pest pressure. A nice cold spell will also reduce the ability of certain exotic pests to overwinter.
We do, however, have a shorter growing season, more expensive inputs due to shipping costs, and a small population that is only now starting to support locally and/or ecologically produced food. Far from being insurmountable, these challenges offer the opportunity to be creative. With new technologies being made available, there is ample opportunity to make the most out of our farming season.
Our winter growing 96’ greenhouse houses spinach, mild mustard greens, kohlrabi and kale.
Our little girl is due in November which means that time and energy will be more precious than ever. We will need to rely on our most effective tool on the farm, our ability to make informed decisions. This will allow for greater profitability while remaining small and equates to more family time and an ability to follow our mission and values.0 Comments
If you have ever been frustrated by a flurry of last year's receipts at tax time, you should read this post. Brenda of Black Sheep Farm in Grey County puts us straight on how and why to track expenses. See Brenda’s introduction post for details on why she's so passionate about spreadsheets.
For more intensive sessions on tracking your own farm’s numbers check out our Farm Viability Workshops in Guelph and Chatham starting Nov 28th and Farm Viability Webinars starting Dec 8th. Plus coming soon to the Tool Shed - the best books on farm finance!
Tracking expenses is probably the least favourite record keeping task of pretty much everyone I know. I happen to love doing it as it involves data entry into my spreadsheets and filing away my receipts, which cleans up my office and keeps me sane. Ideally, I like to do it once a week so I can remember and record any purchases I may have made that don't have receipts. The general rule though is that you should get a receipt for everything or it didn't happen. And you need to be ready to keep everything for seven years before shredding/burning anything.
First of all, ask for and keep all your receipts! Put them into a box, envelope, or file folder as soon as you get home. An accordion folder marked with the months is handy as you can just throw your receipt into the corresponding fold and deal with it later. Receipts need to have the date, the vendor, and a description of what you bought, with the cost and applicable HST. Each of these pieces of information will be recorded and having a running HST total will make calculating your Input Tax Credits (ITCs) easy at year end. This is provided you have an HST number, otherwise, there's no need to keep track of your HST paid. But if you are running a farm business, it is in your best interest to have an HST number, even if your gross sales are under $30,000 a year. As a farm, most of your products are 'zero-rated goods and services' (HST = 0%), which means that you can claim all the HST you paid on expenses as ITCs, and don't have to charge any HST on your produce that you then have to collect for the government. Even for a small farm operation like mine, this comes to around $1,000 that I claim back each year, minus any HST I owe to the government (such as on cedar wreaths, or other HST taxable craft goods I might sell). You can see which of your products are 'zero-rated goods and services' here. If you don't file for HST, then you don't get back the HST you paid on items.
The key to tracking your expenses is to label them correctly. Each label can be a more detailed section within an account. You can do this whether you're using a bookkeeping program like QuickBooks, or using your own custom spreadsheets. And if you want to make tax time a whole lot easier, you should consider using the same labels as the Canada Revenue Agency (CRA) uses on tax forms. That said, when I first filed my farm taxes years ago, I was shocked at how simplistic the expense lines were on the Statement of Farming Activities, T2042 form, and felt like my kind of farming wasn't recognized by the government (but that's a whole political rant for another time). In the end, I've settled on having a set of my own labels that correspond with my budget, and I add up my various labels to correspond to tax form lines.
Having a ledger (for tracking expenses by hand), QuickBooks, or your own spreadsheet is still useless if you don't enter your information regularly. For discipline and to not get too far behind, I recommend entering all your expenses at least once a month. It's worth hiring someone else to do this for you if you really can't bring yourself to do it. The better kept your records are, the less time it will take you to do your own taxes at year end, or the less it should cost you at your accountant's. This way, you can also catch yourself if you're starting to spend out of budget on a regular item and adjust accordingly, or see if you're saving enough money on certain items that merits spending those savings on something else.
For every expense item, I have columns for the following:
I keep track of all my expenses, whether business related, or personal. If you're tracking 'whole farm' spending, you'll need to record both. You can either keep two different spreadsheets/books, or you can keep all your expenses in one long list and add another column labelling that expense item as 'Business' or 'Personal'. You can use different formulas to add up one versus the other for you. I prefer to keep my business and personal expenses spreadsheets as separate files, as HST paid on personal expenses will not qualify as ITCs, so it's not even recorded at a personal level. And having separate files makes it easier to pass your numbers on to an accountant at tax time.
This is where things can get confusing, especially in farming where the work is so intertwined with your personal life. For tax purposes, you need to separate out business expenses, but for whole farm planning/running, you need to keep track of the entire picture. When it comes to how much of your property costs can be claimed as business expenses, or what large one-time expenses need to be classified as capital investments (anything that counts as depreciable property) and dealt with under Capital Cost Allowance instead of as a straight expense, you really need to read the various tax guides and/or consult with an accountant. Once you have that sorted out (for example, claiming 10% of all home expenses as business because you've determined 10% of your home is used for the business), you likely won't have to rethink it for future years.
The main reason why I have such detailed labels for my expense items, is so I can then keep a running total of each of these expense types by using a simple 'sumif' formula. Any time I want to see how much I've spent so far on chicken feed, I can just look at that total (see 'Balance Sheet totals' columns in sample expenses spreadsheet). If the proper time is spent setting up your labels at the beginning, you save a lot of time later. I prefer more subdivisions, because I can always add similar totals together (for example, all animal feed), but splitting it out to each underlying type because I just labelled them together, would take more time. My year end budget/balance sheet updates will now be a simple task!0 Comments
Have you ever asked yourself “how do other farmers budget and track their finances”? In this blog post, Brenda Hsueh of Black Sheep Farm in Grey County generously shares how she lays out her farm budget. From someone who’s worked successfully in the financial industry and in farming (see Brenda’s introduction post for more details) this is such a valuable window into how budgeting works! For more intensive sessions on tracking your own farm’s numbers check out our Farm Viability Workshops in Guelph and Chatham starting Nov 28th and Farm Viability Webinars starting Dec 8th.
Whether you're dreaming about farming or have been running a farm for years, your first financial step each year should be making a budget. This is not set in stone as circumstances certainly change, but without knowing what income you can generate versus how much you can spend, spending can get out of control very quickly, or you might hold yourself back from spending too much and miss an opportunity. I like to start my budget with everything I can dream of, including the kitchen sink. Things will be taken out in the final evaluation, but planning for everything you could want can be a fun exercise, and more possible than you think!
A budget is really just lists of items that are either Income or an Expense. How much you choose to break up each section depends on the complexity of your operation and how detailed you like to see the breakdown of your operation. I personally like lots of detail, so I list out my income by enterprise (vegetables, poultry, lamb, greenhouse products, etc.) and have corresponding sections under expenses. That way, I can compare income versus expense for each enterprise to easily see if I'm under-earning/overspending in any one operation. This is not to say that each enterprise has to cover its own costs...you should just know for yourself if you're running losses that are being covered by other enterprises.
You can set up a budget on paper, or in a spreadsheet. I like using spreadsheets because they're essentially grids with math capabilities. You make a list of items in one column, put corresponding numbers in the other column, and then you can add, subtract, multiply, divide as needed. Each cell is an item of data you can manipulate later. You can certainly get extremely complex in your math, but really, budgets mostly require adding and subtracting. Spreadsheets are also not limited to Microsoft Excel. There is also free spreadsheet software out there, like in Libre Office. Whatever you use, the first thing you'll do is set up the format of your budget by making lists.
In this section, you will list out all your sources of income. This would include farm income, off-farm income (for all relevant members of the household, such as a spouse or partner), grants, donations/gifts, tax benefits (though be careful with these as they can be hard to predict), rental income, etc. Make a different line for each source of income in the same column. Essentially, you're answering the question, “What money will be coming in for the year, and from where?” You should also decide at this point what your fiscal year will be. The simplest choice is to choose the calendar year (January 1 to December 31), but for various reasons, you may choose a different period (like April 1 to March 31). You just need to remain consistent from year to year. In the next column, enter the dollar amount you expect from each income source. You can choose the whole column and set your cell format to 'currency' in whatever format you prefer (Cdn $, with 2 decimal points, rounded to the nearest dollar, etc.). The last line of this income list would be 'Total'. This is where you would add up all the previous cells, either using the '=sum(xx:xx)' formula, or just adding each cell '=b1+b2+b3...'
In this section, you should have a sub heading for each line of income you made above. Under each sub heading, you would list out every expense for that operation. For farm vegetable income, this could include seeds, compost, row cover, small tools, harvest packaging, etc. For poultry income, this could include feed, minerals, abattoir fees, egg cartons, etc. For off-farm income, this could include commuting mileage, estimated income tax for the year, union dues, yearly professional accreditation/registration, etc. For grants, this could include consulting fees if you've hired a consultant to apply for your grants, printing costs, mailing costs, etc. There should be a sub-total at the end of each of these sections.
There will also be many expenses that are really 'whole farm', as opposed to for one specific enterprise. I include these under the sub heading 'Property'. These could include electricity, heating, internet, phone, building maintenance/repair. I also have another sub heading 'Vehicles' and list out the expenses per vehicle (truck gas, car gas, truck maintenance, car maintenance, truck insurance, car insurance, etc.) For the purposes of this budget, we won't get into what percentage of these various farm/home/vehicle costs are allowed as 'business expenses' for tax purposes. This budget can help you do your taxes at the end of the year, but the specifics of where and how to report everything on tax forms should be discussed with a tax professional, or you need to be prepared to read through the Canada Revenue Agency tax guides for Farming Income, Business Income and Small Business Income, very carefully. These are actually a fascinating read for some, but generally, it's torture for most people.
Depending on how much direct marketing you do, you may want to break out your marketing expenses under each income generator, or you can just have one marketing sub heading and include everything there. This area could include market fees, equipment, office expenses, etc.
You should also have a section for personal expenses, such as clothing, entertainment, household items (like toilet paper, cleaning supplies, new dishes, etc.), prescriptions, gifts, alcohol and food. If you have any hobbies that require purchasing supplies, add them in here too. Now you'll finally know how much it actually costs to be addicted to knitting! Also, depending on how much you like to have a nest egg for a rainy day, you could also consider putting in a yearly savings amount. Planning to save is the only way to actually do it. Same goes for investing in an RRSP or other retirement savings option.
Essentially, how you organize your sections, depends on how you think about your whole enterprise. These lists, first and foremost, need to make sense to you. Sometimes coming up with your format will help you to organize how you actually think about your whole farm. How you list out each expense will also play in to how you label your expenses when you record them (part of the next blog post). If you set up consistent labelling, year end evaluations will be a breeze!
Now that all your items are entered and totalled, you should be comparing the Income grand total against your Expenses grand total (total of all the different section sub-totals). If Income is less than Expenses, then you need to make decisions about decreasing Expenses, increasing Income, or getting a loan. This is where other planning tools come into play, such as a business plan, cash flow, and loan calculations (principal, interest, loan term, monthly payment amount, etc.).
Once you've finalized your budget, you actually need to keep it in mind when spending during the year. If you've budgeted $1,500 for produce seeds, you should try and remain within that budget. If your expected income is less than planned, you should see which expenses you can cut out or decrease. Every dollar you come in under budget, is almost like a dollar earned! Throughout the year, you can update an additional column called 'Actual Costs, Year-to-Date'. This way you can evaluate how on track you are and change your budget accordingly, but that's the topic for a future blog post.0 Comments
My name is Brenda Hsueh and I am the owner and farmer of Black Sheep Farm. My farm is located in beautiful Grey County, in the southwest corner of the Township of Chatsworth, right on Grey Road 3. The property is around 40 acres in size, with about five acres of pine bush, 10+ acres of rolling hills, five acres of pond and wetlands/grasslands, six acres of hay field and a five acre vegetable plot (with one acre plots in a four year rotation). I've been here since 2009 and wouldn't dream of leaving!
Brenda and her then-puppy, Luna, in 2014
My life before farming was spent in Edmonton, Alberta (born and raised there), then Mississauga/Toronto in Ontario. After graduating from the Arts & Science programme at McMaster University in Hamilton, I started work at an entry level position in the financial industry in Toronto. I worked in bilingual customer service for a mutual fund company, where I took the Canadian Securities Course and learned about various investment products. From there, I went to a bond rating agency where I worked on databases and collected and corrected a lot of financial data. That's where I learned the beauty and power of spreadsheets and I haven't looked back since.
Over the 11 years that I worked in Toronto, I bought a pre-construction condo, moved into it, and when I exited the financial industry to go into agriculture, I sold that condo to buy my farm. In the years that I owned the condo, I prioritized paying off the mortgage, so that I could be as debt free as possible when I could finally realize my farm dream.
I didn't know at first that I had a farm dream. I just knew that global agriculture was broken, that the environment needed to be saved, and that I loved to eat. When I left the financial industry, I wasn't sure if I should enter the world of food security NGOs, or actually become a producer of food. After a growing season spent at Everdale Environmental Learning Centre, working in the fields, at farmers' markets, and with their community outreach programs, I knew that food production was where I wanted to be. So I bought a farm and named it Black Sheep Farm.
This growing season is my seventh at Black Sheep Farm. My first growing season in 2009 was noted by the locals as the wettest and coldest year on record...until 2014 came along. Before that, 2012 was the year of drought where I cried over lost vegetable production for the first time. It turned out that the cold and wet of 2014 was even worse for vegetable production, but by then, I didn't cry over the weather any more. I feel a bit like the Star Trek movie series, where the even/odd movies suck (depending on personal preference)...one good growing year, then a bad one, and back to good again.
My original farm plan for 2009 involved a farm business partner, a vegetable CSA, raising pigs and sheep on pasture, and a series of long-term projects involving permaculture plantings. That all fell apart when my farm business partner decided in early March not to join me in the venture. So the business plan was re-written and I hoped for the best. Well, as I said, 2009 had a cold and wet growing season, so there wasn't much harvest volume until September. I sold whatever I could scrounge at local markets for most of the season, but over six abundant weeks from September to October that year, I sold vegetable packages into Toronto. By the end of the season, I squeaked by with just over $7,000 in gross farm product sales, so I could apply for my farm business registration number. In the years since then, I have worked both with a farm partner and on my own, and am currently enjoying sole management, with part-time field help, to grow one acre of vegetables for a 30 member equivalent CSA. There are certainly many ups and downs to farm life, but I'm staying out of debt and managing financially with around $24,000 per year in gross farm sales, and between $1,000 and $10,000 in off-farm contract work (depending on the year and what contract work is available).
I like keeping track of numbers. When I entered the world of farming, it was partly as a challenge to find out if there really was such a thing as sustainable farming. To me, this means sustainable ecologically (and not just maintaining the status quo, but working to improve soil health and increase biodiversity), socially/psychologically (no burning out!) and financially (no need for off-farm work). The challenge is ongoing, but results could never be measured without record keeping and regular evaluation.
Over the next few months, I will be writing for FarmStart’s Farmer Review Blog on farm financial management. I'll start with whole farm budgeting (farm enterprise costs, as well as household costs); how/when to track expenses; annual income versus expense evaluations and; how to use all this information to plan for the future, whether that be the next year or five years later. Without a really good picture of your farm finances, it can be hard to tell if you're economically sustainable or not. It's a lot more obvious when farm income is your only income, but can be really surprising if you do have off-farm income to pull you through. Knowing your numbers can help you decide on buying new equipment, whether you should apply for loans, or even if you can cut back on production for a better work/life balance. I hope you'll enjoy reading about how to manage farm (and life!) finances over the next little while and will be encouraged by how easy (and satisfying!) it can be to track your own numbers.
For more information and support on dealing with farm finances, and time with farmers who have walked the path of figuring out their numbers, check out FarmStart's Farm Viability Series. New this year, the series will be made up of in-person sessions in Guelph and Chatham-Kent and webinars that can be accessed across Canada. Get the nitty-gritty on how to make confident and effective financial decisions on your current or future farm.0 Comments
Finally we have come to the last stage in our crop planning series. So far we set our objectives, decided what to grow, and then figured out how much we need to grow in order to meet our financial goals. We plugged all this information into our crop calendar, so that we know when to plant, and have notes on details we don’t want to forget about during the hectic growing season. Now we need to fit everything into the actual garden, to make sure we know where things will be planted, when they will come out, and when to plant the next succession. This is our Garden Plan!
You can learn more about crop planning methods at Jean-Martins micro-farm Les Jardins de la Grelinette by purchasing his book The Market Gardener. He also recommends Crop Planning for Organic Vegetable Growers, both available for sale here.View full article → 0 Comments