The Farm Business
Finances
Farm Income Overview
| Adam and Laura’s gross farm income has increased each year since they began, as shown in Table 8. There was a large jump from the first to second year of farming, when they switched to an emphasis on direct sales. They also increased production a bit in their second year, but more importantly they became much more efficient. There was another substantial increase in 2009, when their direct-market sales nearly doubled. This was almost entirely due to an increase in CSA shares with the move to the new farm. Their expenses increased as well from 2005 to 2009, but overall their net farm income has grown annually. The exception was from 2007 to 2008, when net farm income dropped slightly. This drop was due to their purchase of the farm in 2008. Adam and Laura decided to buy everything they knew they would need on the new farm (such as seeds and two additional tractors) using their 2008 income, because Adam still had off-farm employment at that time. Adam and Laura’s sales per acre are difficult to interpret because they have been in such a growth state, but it is worth noting that their high gross sales per acre is what allows them to earn a living at their small scale. | Farmer’s Perspective: Lessons Learned Expect the Unexpected From the earliest days when the number of zeroes behind certain expenditures left them dazed, Adam and Laura have learned to prepare for both large and unexpected expenses. They budget at least $5,000 to $10,000 more for expenses than they think they will need to account for contingencies. Proceed with Caution Adam and Laura have learned to budget carefully in order to make income from CSA payments last all year. They distinguish between urgent needs and those expenses that can wait until year’s end. Sales from the farmers market and wholesale accounts also help provide cash flow during a larger window of time than when CSA payments are collected. |
Laura and Adam analyze their financial picture each winter. In addition to assessing the standard items such as income and expenses, they look at how their projections from the past winter (as shown in gray for 2009 in Table 8) compare to their actual numbers for the year. In 2009, Laura and Adam had a higher gross income than expected (mainly due to the sale of “preserving shares” in the fall, as discussed under Marketing Models), but they netted less. Their net income was lower than expected in part due to some unforeseen expenses such as a new van. They also spent several more thousand dollars than anticipated on the electric upgrade for the farm outbuildings, and they were still accumulating a lot of basic supplies and materials to run their own farm. Overall, Laura and Adam have been surprised at how well the actual data have tracked their projections, given the number of uncertainties and their recent transition. They expect their gross income to increase gradually as sales increase each year and for expenses to level off by 2011. They anticipate their 2010 net income will increase to $25,000-$30,000, and they are approaching a profit margin in their target range of 30 to 50 percent.