Transitioning to a direct-market farm business is challenging but possible
“Scale up, reduce costs, increase production, centralize processes, etc.”
We have all heard the general theme to radical bottom line growth in the agricultural industry. These themes in agriculture have helped boost quarterly earnings for mega food corporations for the past 100 years. Conversely, the farmer has seen a decreasing trend in earned profit per dollar of food produced. Precisely 15 cents of every retail dollar spent on food returns to the farmer or rancher; they earned 31 cents per retail dollar in 1980. This is a 50 percent reduction over 40 years.
In addition, farms in the United States have seen an increase in inflation for the on-farm inputs necessary to grow conventional commodity crops. In recent years, this surge in costs has outpaced the average inflation rate. In an industry that relies on farmers to buy and sell commodities, this becomes increasingly stressful for farm owners.
Where do we go from here? What strategies can a farmer pursue? How can we avoid the harsh economic reality of commodity agriculture?
There are many strategies a farmer or farm business can pursue to unlock new angles within their enterprise. This may include diversifying their target market, adding farm enterprises, partnerships with local processing, or even investment into vertical integration.
In the late 1990s and early 2000s, Edwin Shank, who farms in Chambersburg, Pennsylvania, found himself in the position of needing to incorporate some of these practices.
The farm was buying and selling conventional commodities through grain and milk enterprises. Edwin made many crucial decisions during those years that allowed the farm to grow into what it is today — a thriving certified organic and regeneratively managed farm business that has boosted the local economy, produced high-quality food and shifted consumer behavior to buying local.
The farm began pursuing USDA organic certification in 2005, shifting to management-intensive grazing with a Jersey cattle herd. The transition unlocked new certified organic markets with higher price premiums. The management decisions aligned well with the Shanks’ philosophy of farming: no chemicals, natural livestock habitat and a positive impact on the land.
This was a step in the right direction; however, it did not solve the economic challenges. Feed prices had nearly doubled in 2007-2008. Organic price premiums were achievable; however, the farm was now in the business of buying and selling organic commodities.
The next step in the evolution of the Shanks’ farm happened when they learned about Mark McAfee of Organic Pastures Dairy in Fresno, California. Mark is a pioneer of grass-fed raw milk production at scale in a safe and sanitary manner. He started the Raw Milk Institute to convey the art of small-batch testing to ensure the safety of raw milk. McAfee’s work inspired the Shanks to start a grass-fed raw milk enterprise and to sell the milk directly on their farm. They created a business called The Family Cow to market their farm products. They initially sold raw milk in their farm store to patrons in and around the community (Pennsylvania is one of the few states where this is legal). The feedback was positive and led to interest from families that were traveling hours to obtain the Shanks’ highly nutritious milk products.
The next stage in their evolution was inspired by Joel Salatin of Polyface Farm. He created a model to increase distribution through a “buying club program.” This program was a way to bolster the overall regional complexity of the direct-market farm supply chain. Instead of using external transportation companies to deliver product directly to the consumer’s home, the buying club model employs a small fleet of in-house trucks to deliver products to specified drop-off spots. Customers order online and meet the transporter at the dedicated location on the specified day to pick up their weekly order. This inspiration was adopted by The Family Cow in 2009.
The next year, in addition to their direct-market efforts, tThe Family Cow began selling their raw milk to a national retailer. This partnership expanded demand in the consumer market, especially in Philadelphia. The increase in demand helped the farm grow and retain its customer base. When the national retailer decided to stop all national raw milk sales, The Family Cow retained its customer base by increasing the number of drop-off locations within their distribution network across Pennsylvania.
The Family Cow now sells regeneratively raised meat, dairy and value-added products to weekly drop-off points in 50-plus locations, with seven delivery trucks across Pennsylvania, year-round.
The evolution of the Family Cow has proven that real food can be produced at a regional scale. The shift from conventional commodity production to certified organic production to direct marketing and distribution allowed them to own the relationship with their customers and to reduce the number of external intermediaries. The direct-to-consumer model empowers farmers and can allow them to unlock a niche market that truly seeks high-integrity food production.
The Family Cow is a great farm business model; however, the Shanks believe they’re simply farming the way it was designed to be. “God designed it, we respect it; that explains it.”
Direct marketing has become an increasingly popular evolution among family farms in recent years. The desire for higher profit margins, fewer middlemen and more control of the farm business can seem like an easy decision.
However, the nature of this business model does create the need for additional skills, such as marketing, supply chain management and customer service, to name just a few. These additional responsibilities typically do not fall in the job description of “farmer.” But when the farmer knows their strengths and weaknesses and can allow other members into the organization to own these responsibilities, the direct-market farm business can thrive.
The process of shifting into a direct-market farm business begins with a change in mindset and a goal to develop a regional customer base. There are many strategies involved in doing this. A farm can own the relationship with their customer and connect with their community on a deeper level than the average national retailer. This, along with the trend in buying local, is the advantage that the local family farm can pursue to find their place in the market.
The Family Cow is one of many great examples of a farm that has made pivots — both successes and failures — in their farm business. Their humble approach to learning from others, trying new strategies and understanding their customer demand has helped them adapt into a successful direct-market farm.
Ryan Siwinski is an organic livestock and dairy specialist at the Rodale Institute. If you’re interested in organic and regenerative certification for your livestock business, contact him at ryan.siwinski@rodaleinstitute.org or 484-209-2653.
