Vegetable farms that sell their produce through farmers markets, CSA programs, on-farm stores, and other direct-market channels are the foundation of local food movements everywhere. Yet there is surprisingly little information available to help answer a basic question: Can farmers make a middle-class income selling vegetables through direct-market outlets?
We launched our ongoing Financial Benchmarks Study in 2017 to help fill this critical gap in information and provide insights that could help vegetable farmers start and grow their businesses. Partners that have contributed to this project include Carolina Farm Stewardship Association, Community Involved in Sustaining Agriculture, Kitchen Table Consultants, and the University of Wisconsin.
Our study offers the most comprehensive review of direct-market vegetable farm finances to date.
Our Financial Benchmarks Study was initially made possible with investments from Lady Moon Farms, the Jerry Brunetti family, the Shon Seeley family, and more than 120 private donors committed to strengthening local and regional food systems. Additional support was provided by a Pennsylvania Department of Agriculture Specialty Crop Block Grant and a Pennsylvania Department of Agriculture Research Grant.
Our report distills our major insights and explains our community-based approach to analyzing farm finances.
Participating farms had a median net income of $18,500, which approximates the 2020 poverty rate in Pennsylvania for a two-person household. Further, the net incomes of more than 70% of the farms in our study were less than half the median net income for all Pennsylvania farms, which include among others dairy, row crop, and wholesale vegetable operations.
We did find some farms bucking the trend. A quarter of study participants had earned net incomes greater than the Pennsylvania median household annual income of $57,000. These farms tended to be larger in scale than many market-garden-style farms—typically, ten acres or more in vegetable production—and often capitalized on diversifying their revenue streams, with reselling products produced by other local farms proving to be one of the more profitable added enterprises.
Notably, however, many of the owners of these high-performing farms partially attributed their success to good fortune, such as access to especially lucrative markets or reliable farmland arrangements.
Interestingly, no single direct-market channel consistently outperformed all others. We found that all of the major sales channels utilized by farms in the study—farmers markets, CSAs, and direct wholesale—had a mix of higher and lower income cases. For farmers wondering whether or not to focus on selling their produce through particular direct-market channels, this finding indicates there isn’t a one-size-fits-all business model for financial success.
We found that farms steadily increased income and equity over time, generally becoming more profitable the longer they were in business. Most farms’ net incomes exceeded the Pennsylvania median household income within 12 years of business, while accumulating equity in land, buildings, and equipment in the meantime.
Farms in our study were growing vegetables across a wide range of scales, from approximately half an acre to 90 acres (with a median of four acres). We did not see a consistent correlation between the number of acres in vegetable production and the vegetable enterprise net income to revenue ratio.
The lack of a clear correlation suggests that farmers can achieve similar profit margins across a range of production scales. In other words, smaller farmers are not consistently more or less “efficient” at earning income than larger farmers.
At the same time, there is a clear correlation between the number of vegetable acres in production and vegetable enterprise net income. While scaling up acres in vegetable production is rarely easy and not always desirable, these data do suggest that bigger scales can lead to higher incomes for farmers.
Do farms that primarily focus on growing vegetables make more or less money than farms that diversify into other enterprises? We found that farms with a high degree of focus in vegetable production tended to be more profitable in their vegetable enterprise. Although we found significant variation, farms with 90% or more of their revenue coming from vegetables grown on their farm showed some of the highest vegetable enterprise net income to revenue ratios in our cohort. This trend suggests that farmers who focus on growing vegetables can build efficiencies in their operations that farm businesses with more diverse revenue streams may be less likely to develop.
At the same time, we found several examples of profitable farms that earned a significant percentage of their revenue through enterprises other than vegetables. While the relationship is not statistically significant, some of the most profitable farms in our study made more than 20% of their revenue from other enterprises. The most common enterprise other than vegetables in our cohort was reselling products grown or raised on other local farms. This suggests that reselling can be a valuable strategy for increasing farm business net income.
By offering a greater range of livestock products, fruit, and vegetables grown or raised on other local and sustainable farms, reselling can help attract and retain customers. Collaborating with partner farms that are more efficient producers of supplementary products can also often help farmers capture a higher margin with resale items than comparable items grown on their own farm.
Other profitable enterprises among participating farms included nursery and ornamental plants; on-farm events and agritourism; and pastured livestock, including sheep, pigs, and poultry.
We identified three primary pathways for improving direct-market incomes: (1) increasing the number of acres in vegetable production; (2) growing more and higher-value crops per acre; and (3) developing more efficient production systems. Still, the land, labor, and capital needed to pursue these strategies may be out of reach for farmers who are operating at a loss or aren’t earning enough to invest in these improvements.