Growth Strategy: Year-Round Sales for Farm and Food Businesses

The following article has been adapted from a workshop series by Penn State Extension Business Management Team called Strategies for Successful Selling and is the last of a 3-part article reflecting the series. 

As a small farm or food business owner, you likely have direct experience with seasonality playing a major role in your business plan as well as the need to adjust your sales strategy throughout the year to continue bringing in income while meeting your customers' needs. When running a highly seasonal business, the process of developing a business plan that continues to bring in income throughout the year can require some creative thinking! To this end, finding ways to diversify your income or extend your farming season can be an essential ingredient in ensuring that your business continues to thrive and be sustainable year after year.

Diversification and season extension can protect farmers against downside risk and cash flow problems while enhancing business operations by making better use of land, labor, and capital. Furthermore, data from the USDA Economic Research Service highlights the unfortunate reality that increasingly, small-to-medium sized farms are relying on income diversification (specifically off-farm work) to keep their businesses afloat.

Figure 1. Median household income of principal farm operators by source and sales class, 2018
Note: Sales class reflects annual gross cash farm income before expenses (the sum of the farm's crop and livestock sales, Government payments, and other cash farm-related income).
Source: USDA, Economic Research Service and National Agricultural Statistics Service, Agricultural Resource Management Survey and US Census Bureau, Current Population Reports. Data as of November 27, 2019.

When it comes to diversifying your farm's income, there are several strategies available to you. We have highlighted five major approaches towards achieving year-round sales at your farm or food business: Season Extension, Crop Diversification, Value-Added Products, Agritourism, and Responding to Economic Relief Opportunities.

Season Extension

In addition to allowing you to extend your growing season, high tunnel production furthers your ability to create a controlled and uniform growing environment, leading to increased production and improved crop quality. There are many programs in place that can help you with purchasing and installing a high tunnel on your farm.

The Natural Resources Conservation Service (NRCS) offers a financial assistance program to farms that agree to adopt certain conservation practices on their land. Applications for this program are accepted on a continuous basis. The financial assistance program includes several different grants including Agricultural Management Assistance, Conservation Assistance, Environmental Quality Incentives Program (EQIP), and easements.

NRCS also provides support to farmers through agricultural easements. Agricultural Land Easements protect the long-term viability of the nation's food supply by preventing conversion of productive working lands to non-agricultural uses.  Land protected by agricultural land easements provides additional public benefits, including environmental quality, historic preservation, wildlife habitat and protection of open space. NRCS provides financial assistance to eligible partners for purchasing Agricultural Land Easements that protect the agricultural use and conservation values of eligible land. In the case of working farms, the program helps farmers and ranchers keep their land in agriculture.

Under the Agricultural Land component, NRCS may contribute up to 50 percent of the fair market value of the agricultural land easement.  Where NRCS determines that grasslands of special environmental significance will be protected, NRCS may contribute up to 75 percent of the fair market value of the agricultural land easement. You would apply for easement through your county agricultural easement program, usually defined as a conservation district and/or farmland preservation program.

Crop Diversification

Farmers who implement crop diversification can experience several benefits such as breaking pest cycles (including plant diseases, insects, and weed infestation), reducing erosion, improving soil structure, and conserving soil moisture. Furthermore, being strategic about how you diversify your crops can help you extend your season in a way that boosts your profits significantly. Take the time to learn about which crops have a growing market demand, such as the following:

Lavender: Able to grow in a variety of climates, lavender is a slam dunk for several reasons, not least of which because it fetches a nice price (a quarter-acre produces around $18,000, when sold in bunches). Lavender grows quickly, is resistant to disease, and propagates easily.

Ginseng: This crop grows best in forests, mostly in eastern and northern America. While still viable as an open-field crop, ginseng is most potent and valuable when grown under the canopy of trees. The extra effort is well worth it, though: this "wild-simulated" ginseng can sell for anywhere between $300 and $700 a pound.

Hops: Michigan and New York are now in the top 5, hop-producing states. With 800 acres and 400 acres respectively in production, and most sales in both states occurring in-state or in-region. This demand is coming from craft beer producers who are willing to pay the premium difference. Brewers paid an average of $12.83/lb. for craft hops.

Hemp: The global industrial hemp market is projected to grow from USD 4.6 billion in 2019 to USD 26.6 billion by 2025, recording a CAGR of 34%. In addition, the USDA made crop insurance available to hemp growers that produce hemp for fiber, flower, or seeds for the 2020 season.

Mushrooms: For gourmet mushrooms like shiitake, maitake, and oyster, 2017-18 saw a record high at $1.23 billion in total sales. US mushroom crop totaled 917 million pounds and the average reported price was $1.34/lb., up 3 cents from the previous year's price.

Vermicompost: There are two products that "grow" from vermicomposting, the worm population and the compost. Stemming from a relatively inexpensive startup cost (worms, crop residue, repeat), you can produce vermicompost for use on your farm or gardens, or you can sell it for $400 to $1,300 per cubic yard. Markets include greenhouses, vineyards, farms, nurseries, golf courses, turf fields, landscapers, and homeowners. The worms are also a product, depending on variety to sell wholesale to other producers, home composters or into the fishing industry.

Honey: Honey value ranges depending on variety, but has an average commodity price of $1.86/lb. However, the locally produced honey market can and does yield prices between $7-$10/lb. In addition, cultivating honeybee hives is a valuable market, at $815M in sales in 2018.

Value-Added Products

Considering value-added, when coupled with an up-to-date understanding of consumer demand and trending sales in the food marketplace, can increase the value of your products tremendously. The list of value-added products includes a wide range of products from cheese, cider, spreads, sauces, and snacks to candles, crafts, dried flowers, soaps, and even furniture.

It's a good idea to keep abreast of the latest research in terms of food and flavor trends to give you a starting point for some potential directions in which you could take your value-added products. For example, 2020 is seeing a boom in:

• Botanical-infused non-alcoholic bottled drinks
• Easy-to-serve and ethically raised charcuterie and cheese
• Unique, brightly colored vegetables
• Prepared nutritious snacks such as hard-boiled eggs, vegetable and fruit infused fresh nutrition bars, or pickled vegetables

As more consumers begin to care about the sustainability of the products they choose, demand is increasing for local food from markets and local farms. Even some restaurants like Shake Shack and Chipotle have begun incorporating locally grown foods into their menus.

Agritourism

If adding more crops to your operation isn't in the cards, consider tourism-based diversification in agriculture, which can include seasonal offerings such as corn mazes and pumpkin patches, farm-to-fork dinners, and/or petting zoos.

Agritourism has a major economic impact in Pennsylvania. In PA, the average annual income from agritourism per operation in 2017 was $38,261. Total agritourism sales in 2017 in PA were $27 million. Lancaster County led in agritourism operations at 77, followed by Chester County, Bucks County, and Butler County.

Figure 2. Number of Agritourism operations in each county of Pennsylvania (2017). Source: Penn State Extension

When deciding whether or not to establish an agritourism element in your farm business, it is important to ask yourself three questions:

• How is my land currently zoned?
• What insurance might I need?
• How will this affect the operations of my existing farm business?

The USDA Risk Management Checklist is a tool designed specifically to help you think through the answers to these questions (and many more) in preparation of starting your agritourism operation. See the Extension article Using the USDA Risk Management Checklist User's Guide to get started in the process of determining what type of agritourism might be the best fit for your current farm businesses!