Every year I post my summary of the past year’s farming financials. 2021 was a rough one, and we were down on the number that matters the most to me, net dollars generated per labor hour. For the last five or six seasons (I’m too lazy to look back at this exact moment) I’ve been farming at Cully Neighborhood Farm and we’ve been trending upward, but with some variation. I’m hoping 2021 was an anomaly.
Here are the basics:
Total Labor Hours: 2265
Farm Gross: $43,083
Non-Labor Expenses: $9,203
Net Dollars per Labor Hour: $14.96
If you follow links back to previous years (here’s the link to 2020) you’ll notice that our gross was actually up by a decent amount, yay! Our non-labor expenses were also up, not by much, but a little. The big difference was that our total labor hours were up, a lot!
That difference in labor hours has a good side – it means we employed people for more hours than in past years. Unfortunately, all that extra labor didn’t translate into enough extra income to make up for the number of hours we added.
The way last year went, none of this was a surprise. I track this monthly, so I knew it was happening at the moment and I was making adjustments as best as I could. Unfortunately for us a number of things all went wrong during the year, some more significant than others, but they also all added up to more labor.
Here are some of the factors that led to higher overall hours. One was that I had folks start working earlier in the year than usual, hoping that would pay off in getting the farm and everyone working in shape and saving us hours later in the season. Unfortunately that coincided with employee turnover – for a positive reason, but still necessitating time hiring and training. At the same time we had a major off farm injury for another employee – not positive at all, but fine in the end. The combination of those two events, which happened close together, made it very difficult to plan labor needs using a completely new crew, and I over compensated a bit which added a bunch of hours early in the year. We never completely recovered from that, cost wise, but we did have a good year, crew wise. I also started spending longer hours at the farm, and that didn’t help as my hours are also accounted for in there, and I probably wasn’t as productive at the end of long days as I would have been with shorter days.
A hard to quantify change to the farm last year was moving all of our propagation of vegetable starts from our original greenhouse just down the street, to a smaller one in my backyard. The biggest change there was probably just in the learning curve that any new system entails, and time spend trying to recreate all the little details of our old system.
The other thing that we dealt with, which took extra time more than anything, were numerous escalating vandalism events through the season. Again, none of that on its own would have made a significant dent, but all together it really added up.
2022 is probably going to be another interesting season. I’ve changed up a number of the fundamentals on the farm – field layout, CSA seasons, and plans for a new wash/pack area layout. I’ll keep track of all of this and I’ll report back here on the results early next year.
In December, once all of the labor, income and expenses were pretty well set for the year, I ran my annual calculation for net dollars generated per labor hour. I have done this for most years I’ve been at Cully Neighborhood Farm, and I started doing it back when I first started Slow Hand Farm as a way to compare year to year in a way that somewhat independent of growth and changes to marketing and growing methods, gives me an idea of how well I did financially for the number of hours worked.
You can follow the crumbs back through the years by following this link. For 2020 here are the basic numbers:
Total Labor Hours: 1987
Farm Gross: $41,000
Non-labor expenses: $8070
Net Dollars per Labor Hour = $16.57
This is slightly higher than last year, which I’m happy to see. It was a very different year to say the least. I’ll attribute the slight increase largely to returning crew members and some excellent day labor contributions at key times of the year. It wasn’t our best year, but considering all of the added expenses and stresses between Covid and the extended hazardous smoke conditions I’m happy we did as well as we did.
One thing that I’ve heard some other experienced farmers say, and that I feel like I’m seeing as well, is that when we’re a little over our labor budget early in the season it’s actually probably a good thing, setting us up for better yields and less weeding labor later. That was the case this year.
I’ve written a more detailed article in Growing For Market that should be out soon on why I think the Net Dollars per Labor Hour is a good metric to track and that should be out soon.
I’ve always been public with the numbers for my farm ventures. You can go back to my report from last year with this link here , and that post links to years prior. I’ve been glad to see more folks, especially folks who are teaching and consulting starting to be more public with numbers, although the most common number I see is total gross income, or gross per something – acres, or square feet, or some other measure.
I’ve always understood gross income to be a poor metric for understanding the success of a farm when it’s not given in relation to expenses and other factors. For the past few years I’ve been gaining more and more insight into measures of health and success for businesses in general, and farms in particular. My partner went and got her MBA after many years of farming, specifically to work on this topic, and I’ve probably been the biggest beneficiary of her degree at this point – absorbing a lot of what she learned through many, many conversations on the topic, and even co-writing the chapter “Manage It” in the new book, “Whole Farm Management ” from Storey Publishing, which was put together by the Oregon State University Center for Small Farms and Community Food Systems .
I’m still convinced that the best all-around metric for comparing how my farm did from year to year – and for that matter, comparing it to other farms of any scale – is to use the dollars per hour generated after non-labor expenses, or maybe it should be called the net dollars per labor hour.
I calculate this number using three numbers: total gross income, total labor hours, total non-labor expenses.
Total gross income is the easiest and clearest number for me to calculate. It’s simply all of the cash income the farm generates during the year. The only thing that’s not included that might be significant in some way are non-cash benefits. These would be things like the extra food produced that all of us who work on the farm take home each week, or little thank yous like the chocolate bars one of our CSA members brings us regularly, or the flower bouquets another makes us.
Total labor hours is also relatively easy as all of the employees on the farm are paid hourly and I track my own labor hours as if I was paid hourly. In some sense I actually do pay myself at an hourly rate, although as the owner I also take home any additional profits. For farmers who are resistant to tracking their hours, or just don’t do it, you’d have to take a really good guess and based on tracking my own hours I’d guess that many folks are vastly overestimating the number of hours they actually work on the farm (I try to use labor laws as my guide for what an hour of my work is, even though as a business owner I’m not bound by employee labor law and I can work as many hours as I like, whenever I like). For the total hours I’m adding up everything that everyone worked with direct benefit to the farm regardless of their skill level or payrate.
Total non-labor expenses are the trickiest of the three numbers to be consistent with. I immediately take out any payroll expenses as those are labor expenses. For large equipment or infrastructure purchases I’ll try to reasonably estimate their useful life and do a straight-line depreciation (there are more accurate ways to do this, but I think straight-line is close enough considering how many of these I have). Some expenses are a little questionable as to whether they are really necessary, or maybe as to whether they should be in the labor category. An expense that I question including sometimes is a tool or piece of infrastructure that isn’t one that is absolutely necessary for production, but that simply makes our work nicer in some ways. For example if I were to buy a sound system for the barn so that folks could enjoy music while they work I’m not sure I’d include it (not a purchase that I’ve made, but a good example I think). I also bought a nice seeder we didn’t need but that I wanted to try last year. It was relatively expensive and I wasn’t sure I should include it, another example. Any expenses for employee benefits, like end of the year celebration dinners, or even buying the crew their own personal harvest tools are always a bit fuzzy for me as well – are they labor expenses or non-labor expenses? Generally these are small enough that I don’t worry too much about which category I put them in as they won’t ultimately make a big difference in the final number.
This year the total gross of the farm was $41,226 The total labor hours were 2088 The total non-labor expenses were $7,064
This brings the net dollars per labor hour to about $16.36
This is lower than in 2019 but it’s actually not as much lower as I feared it might be. I’ve also talked to a number of long time, very successful farmers over the years that have told me that over decades they see a lot of ups and downs from year to year. Here are the factors I think contributed to the lower number this year: weather, a completely new crew, and pest pressure.
The weather wasn’t actually too bad this season. It was a colder start to the year and a rather abrupt end to summer, so those worked against us in some ways. Slower growth in the spring and early summer meant the crops were less competitive with weeds which increased our labor needs there and might have increased our harvest labor a bit in some of the roots – smaller roots take longer to harvest. The abrupt end to summer had mixed results for costs. In some ways it is actually a short-term benefit in our situation. CSA members pay up front and absorb some of the shortfalls when crops yield less than we hope or fail all together – there can be a labor savings when we don’t harvest. In other ways it makes us have to scrape a little harder to give full shares every week and that increases the labor costs for what we are harvesting. As an example, we were uncharacteristically short on kale and collards in the fall and really had to spend a lot of time sorting through damaged leaves to get decent bunches – that cost us.
That sorting through the kale might have been partly due to weather but it was actually mostly due to pest pressure. Pests also cost us a lot of extra labor dealing with holes in drip lines this year – it was the worst year for chewing on irrigation lines I’ve ever seen by far! Pests also took out our initial planting of corn and winter squash which had cascading effects, resulting in a lot of extra labor weeding and very low yields without much harvest labor savings.
Last year we had a couple of folks on the crew who were new to the farm, but there were three of us in the core crew that had at least three seasons on the farm, and two of the “new” crew members had worked with us a little in the past. It turns out it makes a big difference when the crew is experienced and knows what to expect. It takes a lot less time to explain what tasks need to be done, and it takes the crew a lot less time to make transitions from one task to another. It’s also a big difference if only one or two people are new and they have multiple other folks to take cues from. In 2019 I was the only one who knew any of Cully Neighborhood Farm’s specific systems. The crew this year was a great group of folks (and I hope they come back to work with me again), but even though they all had some farm experience in other places, none had worked on this farm and so things just took longer. You can see that reflected in the total labor hour numbers between 2018 and 2019.
Even with the drop in net-dollars per hour generated I’m pretty happy with what we were able to do in 2019. I’m especially happy that the number comes in above $15/hour (the target for minimum wage in Portland over the next few years), although probably not enough above $15/hour to cover the “loaded” hourly rate. The loaded rate has to cover the business’s payroll taxes as well as the hourly rate. In addition, it doesn’t leave much room for anyone to make much over minimum wage.
Time for my annual accounting where I try to create a single number that says something meaningful about how the farm did financially. This year, more than the past few, I feel like it’s obvious that numbers in accounting are malleable and really don’t tell the full story without a lot of context.
The single number I like to put out each year is the dollars generated by the farm, per hour worked, after (non-labor) expenses. You can look back at last year, and years before that, by going to the blog post on 2017 Numbers. Here are the basic numbers for 2018:
Gross income – $39,712
Non-labor expenses – $8,247
Total hours worked – 1850
The basic math gives a net, pre-labor income of $31,465 for 1850 hours worked, which works out to $17.01 per hour.
That hourly number is before any payroll taxes, so if you’re trying to compare it to an actual hourly wage you need to lop off a chunk. Even so, we’re probably close to the $15/hr range, which feels pretty good, and actually gets us to the target minimum wage for this part of the country. Unfortunately, that still means that folks at the bottom of the pay scale are below that. We’re relatively flat in our pay structure and this year I was able to pay bonuses at the end of the season that made it even flatter.
These are very ball-park numbers even though they look exact. The gross income and hours worked are actually pretty exact, but it gets a little fuzzier when we look at expenses.
I’ve included some non-cash expenses in the expenses – essentially depreciation on equipment like the walk behind tractor and implements, and other structures. I’m pretty consistent about this in my own calculations, and it helps to even out the picture in years that have drastically different investment levels in tools and infrastructure. Beware that if you’re comparing to your numbers our methods might not match.
This year looks better than the past few and here are my best guesses on the reasons why. The primary reason is luck. A lot of things lined up for us this year: the weather was pretty good, we had great folks working with us who were available at the right times, and we were able to sell most of what we produced with very little waste. Certainly we set ourselves up to take advantage of those kinds of conditions, but even with experience (and partly because of experience) I know that there was an element of luck that certainly helped and we won’t have that every year.
Another factor that’s making the 2018 number look better than previous years is that we went really lean on expenses this year – something that probably isn’t sustainable. We weren’t sure if it was going to be our last year on the property (turns out it looks like we’ll get another year, maybe more) so we relied heavily on the tools, seeds and supplies we had on hand and didn’t have to spend much on non-labor expenses. I actually invested in a few tools for 2019 right at the end of the year but I didn’t put those expenses into the above numbers. If I had they would drive the non-labor expenses up by almost $2000. That changes the hourly number to $15.93. With luck, those investments in tools will improve our efficiency enough to pay back at least a portion of that $2000, and they should probably also be depreciated as they will mostly all last numerous years.
A few final pieces of context here. You can go to cullyneighborhoodfarm.com to get a better sense of the scale and practices of the farm. We’re growing on a lot that’s just under an acre, with just over ½ an acre in production. We’re not pushing our production particularly hard relative to many compact farms. Nearly all of income comes from CSA shares, but do make a little on top of that from some mid-season farmers market sales, by selling extras straight from the farm.
I’d love to see this same basic analysis from other farms and I welcome ideas for improvements to my method.
Every year I take a look back at the previous year to see how we did and what I want to do better in the following year. Part of the analysis I’ve been doing is to add up the gross income and then subtract out the non-labor expenses. This gives me a net for all of the hours of work that went into the farm. Then I add up all of the hours worked and divide. This gives me a net per labor hour.
You can look back at my write up from last year to get a more detailed explanation of how I’ve been doing this over the years (and links to more write ups from years past). Instead of making this a long post I’ll just refer you back there for the explanation.
In 2017 I worked with Matt Gordon at Cully Neighborhood Farm again. We grew for 60-ish CSA members, and sold a little excess produce through the Cully Neighborhood Farmers Market. We grossed about $36,500 on about 1/2 acre so roughly $73,000 per acre, down very slightly from 2016. The non-labor expenses was about $10,000. Adding in the depreciated BCS expense brings that number up to about $10,940, a little under 30% of gross so we were able to keep the expenses down this year, despite making some infrastructure improvements that really improved ergonomics on the farm. The total hours worked on the farm, including marketing and administration, field work and everything else, was about 1910 hours, so we cut that back a little as well. That gives a (pre-tax) dollar per hour number of around $13.40 across the farm, up almost 4% from last year, which was better than inflation so I think we’re making progress.
For those with an eagle eye, you’ll probably notice that we’re right around Oregon’s minimum wage when you adjust for a “loaded” hourly wage (one that includes payroll taxes). Still, the bottom line is that for now I’m happy with that number for 2017 and we’ll take that information, along with the rest of the numbers we’ve collected and see if we can continue to improve in 2018.
Back when Slow Hand Farm was its own tiny CSA I used to post end of year financial reviews to give everyone a look under the hood. It was also a good exercise for me, whether I shared the numbers or not, to summarize them for myself and put them somewhere to (relatively) easily check back with them. The first post was actually on the topic was actually in March of 2011, titled “The Bottom Line”, it summarized the first two seasons of the farm, distilling the numbers down to the dollars per labor hour the farm returned – roughly $9 in 2009 and $7 in 2010. In 2012 I got to the numbers a little earlier and in January I wrote a post titled “Final Numbers for the Year” and added a little more information on dollars per hour, gross per acre and expenses as a percent of gross income. My last post on the topic was in January of 2013, titled “2012 Financials”. 2012 was the last season that the CSA ran under the name Slow Hand Farm and after that I folded it into Our Table and the financials because way too complicated as they were tied in with the start up of a much larger and more complex project, of which the CSA and vegetable production was just a small part. I may have written something in those intervening years on the Our Table blog, but I’ve lost track if I did.
Last year I worked with Matt at Cully Neighborhood Farm where the financials are a little more straight forward. Matt was kind enough to agree to letting me share some actual numbers from our 2016 season (actually he also shared a full sample budget projection in my new book, Compact Farms).
The two numbers I find most interesting when talking to other farms are the dollars per labor hour and the gross per acre. The way I calculate dollars per labor hour is to try to separate out all non-labor expenses and subtract that from the farm’s gross. With any large capital expenses I try to estimate depreciation to spread those out. For example, Matt bought a brand new BCS tractor with several implements last year and we took that purchase and calculated a 10 year straight line depreciation when running the numbers, meaning we only applied 1/10 of the expense to the 2016 season, and he’ll continue to do that for 9 more years (unless he sells it first). I actually didn’t do this with any of the Slow Hand Farm years, but I also never had any truly large purchases (there were a few that could have been spread out a bit in retrospect). If you go back and read those posts you’ll notice that non-labor expenses were quite low, 18-20%.
For labor hours we estimate the total labor hours worked on the farm during the season. This wasn’t too difficult as we keep pretty good track of hours worked with most of the folks working on the farm taking an hourly rate. Matt was the wild card, but he was able to go back and recreate his season fairly accurately – the weekly schedule for a particular season doesn’t vary that much.
This dollars per labor hour calculation is my way of trying to compare farms that have very flat management structure, to ones that have many more workers and a wider range of wage rates. It also gives a better comparison between farms that don’t use hourly wage rates at all and farms that do, or that use a mix of the two.
The gross per acre number is the easiest to calculate. I typically include all of the cultivated space including pathways between beds, but not infrastructure area, or roadways, or unused areas of the property. But it could be calculated with those. For comparison it’s better to at least know which way it was calculated, especially on small, intensive operations.
Neither of the numbers tell the full story of the farm, but I do think they’re an interesting starting point for further discussions on the topic – both farmer to farmer, and farmer to farm customer (or whatever you want to call the people who support the farm but don’t actually work on it).
So, for the 2016 season here’s how the numbers came out. We grossed about $37,000 on about 1/2 acre so roughly $74,000 per acre. The non-labor expenses, including the depreciated BCS expense, was about $13,200, a little more than 37% of gross. The total hours worked on the farm, including marketing and administration, field work and everything else, was a little less than 2000. That gives a (pre-tax) dollar per hour number of around $11.90 across the farm.
Matt used less rounding and ended up with a number of $12.09 per hour, a difference of a little less than 2%, but to me an “exact” number isn’t the point. Our estimate of hours actually worked probably isn’t even that accurate. If you think about working an 8 hour day (480 minutes), being off by 2% means a little more than 9 minutes – how many times did you work 9 minutes more than you actually recorded, or how often did you take 9 minutes of personal calls, or texts over the course of a work day? Not to mention all of the fuzzy areas like posting photos to social media (advertising for the farm, or personal post?) All that to say, I think 2% is a reasonable margin of error.
I was pretty happy with these numbers but I think we can get it up a bit next year, mostly by not over-planting quite as much as we did this year (always a tricky balance), and by continuing to make small changes to streamline most everything we’re doing – especially in terms of weed control and washing and packing. Technically the farm really needs to hit $15 per hour in the next few years as the legal minimum wage in Portland is headed that direction. Stick around and we’ll see how long it takes to get there.
