Breaking Even

On a recent episode of The Beginning Farmer podcast, the topic was whether it is possible to break even raising pigs on a small scale.

The answer to that question is yes, of course, as long as the emphasis stays on the word “possible.”

When we had pigs processed in the fall we didn’t set our prices until we had all the costs identified.  We knew exactly what it had cost to us raise the pigs (exclusive of labor–a farmer’s labor having no value in the marketplace). So we were able to set our prices based on our cost of production.  As long as we sold all the pork, we knew we wouldn’t lose money.

Of course farmers who raise their pigs as we do, on pasture with a GMO-free diet and no growth hormones or antibiotics, can’t compete with the price of industrial pork.  Last year the industrial pork industry had record profits, thanks to lower feed and fuel costs and a booming export market.  Their all-time record profits amounted to $84/pig.  For a small farm like ours, $84/pig won’t get the bills paid.  But if you have hundreds of thousands of pigs, then that’s real money.  Smithfield alone has over 1 million sows, who live their entire adult lives in 7 foot by 22 inch metal crates where they will have an average of 8 litters of piglets before being slaughtered.  There are over 10 piglets per litter in the industrial operations, and a sow will farrow 2.2 times per year.  So that’s a lot of 84-dollars.

For farms like ours to be economically sustainable, we depend upon customers being willing to pay the true cost of humane and natural animal husbandry.

I used to be less careful about pricing that I should have been.  We would set our prices based upon prices at the grocery store.  A farmer/friend told me that when we sell our products for less than the cost of production we are essentially paying people to eat our food, as well as underpricing and thereby hurting the other sustainable farmers who are trying to make a living.  What he said made perfect sense and we’ve tried to be more careful since then.

We had our annual farm retreat last Sunday–meaning Cherie and I spent five hours at a table analyzing and reviewing how things went last year.  We don’t yet have final numbers on pork, since we still have two pigs in the pasture, but the egg results were interesting.

We produced over 600 dozen eggs last year and generated a net profit of $40.51.  I suppose that proves it is possible to break even on egg production too.  But I wouldn’t want to have to try to make a living as an egg farmer.

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18 comments on “Breaking Even

  1. Deb Weyrich-Cody says:

    I figure; when you factor in quality of life, job satisfaction, being your own boss and commute times; the term profit margin in farming has a slightly different focus; )

    Like

  2. nebraskadave says:

    Bill, homestead living can not be compared to corporate job wage earning. Those that have chosen to return to the land are not doing it to get rich. Generations ago homesteading was meant to be a way of life which then was just survival. Today we have been brain washed into believing that unless we earn lots of money so we can buy stuff, we are not successful. I suspect that you never had to buy a single egg last year and yet you ate top quality eggs all year long. I suspect that you never had to buy any meat last year and yet to ate high quality meat either grown on your homestead or harvested from your land. I bet you never had to buy suit to stand before a judge last year either. Homesteaders, in my humble opinion, do what they do for the quality of life and not the money. I admire what you and Cherie are doing. Not only are you trying to inform others of alternative life styles but you two are actually living it. Thank you for sharing your life struggles in the homestead life of modern day survival.

    Have a great breaking even planning day and a successful year.

    Liked by 2 people

    • Bill says:

      You make some great points here Dave. I’m not complaining. I love this life and don’t ever want to go back. If my goal was to make lots of money I would’ve just stayed in my old job–especially since I paid two decades of dues to get the point where I could collect the big bucks.

      You’re right that I didn’t take into account the eggs we ate. We eat the best-tasting most nutritious eggs available anywhere, laid by chickens we know and love. Ditto with the meat I eat. I haven’t bought any meat for at least 10 years.

      We’re able to pay our bills and live a modest but sustainable life on the income from the farm (but only because it’s debt-free, a product of my earlier life). Our income probably puts us below the “poverty” level, but our lifestyle is probably better than 90% of Americans of any income level.

      Liked by 2 people

  3. avwalters says:

    These industrial farms, (CAFOs) also are subsidized by our failure to regulate. They pollute the air, and both the surface water and the ground water. Frequently, local rural communities end up cleaning up, or paying for water that they otherwise could have pumped with their wells. So most Americans eat cheap meat, so they can drink bad water.
    Small producers do not have the advantage of the economies of scale. Our property has tons of ash trees, all doomed by the Emerald Ash Borer. Since we’re building, we looked into the price of salvaging the ash for flooring and trim wood. The costs came out to between 6 and 7 dollars a square foot–well beyond our means. Instead we’ve purchased used flooring on craigslist for less than $2.00 per square foot. At least we’re recycling. It seems a waste, but it looks as though we’ll be burning the dead and dying ash for heat. We could make a little to have someone “log it off,” but I’ve seen the results of letting others cut on your land. It takes a personal commitment to the land to do it well. Similarly, it takes a personal commitment to grow clean food, or humanely raised meat products.
    Western society has never been good at cradle to grave cost analysis. That’s why we have CAFOs and nuclear energy and…and… the list goes on. You’re wise to sit down eat year to take stock and price accordingly.

    Liked by 2 people

    • Bill says:

      You’re right, as always. So many of the costs that go into producing “cheap” meat are externalized, and are typically borne by the poorest people.

      As for flooring, we went through a similar thing here. I wanted to make flooring out of the old heart-pine boards and logs on the old outbuildings here, but had trouble finding anyone who would risk their saws on them, and ultimately it was much cheaper and dependable to just buy the flooring the builder was recommending. Sigh. I often wish I hadn’t caved on that.

      Liked by 1 person

  4. avwalters says:

    More on the topic of economies of scale–and Big Ags abuses in industrial scale, so-called organic farming. http://www.cornucopia.org/2014/12/investigation-factory-farms-producing-massive-quantities-organic-milk-eggs/
    I know farmers who follow organic principles, but cannot afford certification. They have to compete with cheats like these.

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    • Bill says:

      This is why I tell people to favor local over “organic.” The best certification is first-party certification. Know and trust the people who grow your food and don’t worry about certifications. We’re not USDA organic certified and I don’t expect we’ll ever be. A friend who is in the crop insurance business told me that every “organic” farmer he knows (and he insures many of them) is in it for the money, not because they believe in the ethic.

      Liked by 1 person

  5. farmerkhaiti says:

    Thank you for sharing some of your financial thoughts, and it is good to crunch numbers, many just avoid the truth! I does depend on if you are examining this as a homesteader, or if you are aspiring to make a living from the food you produce. I heartily believe It is IMPERATIVE that artisan farmers who produce astounding sustainable meats and food price it according to the level it deserves! Factor in your time in some fashion into your pricing, you just must! We looked at the high end of local pastured pork pricing for really good stuff and bumped it up another dollar per pound. We get a very good price from our customers, and it is worth EVERY PENNY!!! People who buy meat/food from a conscientious farmer are getting so much more than just food and sustenance, it’s as good as if they were raising it themselves. We wouldn’t raise eggs if you we didn’t get the price we need to make it make sense, on a scale of production that gets us there. That’s the other part as you noted about commodity pork. Even for idyllic small farms, there is a sweet spot of scale that needs to be achieved to make it worth it for the farmer. You are awesome!

    Liked by 1 person

    • Bill says:

      According to our numbers, the year before last we lost nearly $2 on every dozen eggs. So we did a lot better this year. 🙂

      We know we’re not making any money on eggs. But we’re not going to eat factory eggs so we’ll always have chickens. We treat our eggs as loss-leaders, as most of our egg customers buy other things as well–and we thing they appreciate the chance to get our eggs, which I’m convinced are the best available.

      I love raising pigs and I think we have figured out how to price the pork appropriately. Our main focus is our vegetables. I know if I put labor into the equation we’d be losing money, but for me it’s a labor of love–so I’m satisfied with computing costs without labor. 🙂

      Liked by 1 person

  6. Cynthia says:

    I pay $ 6 a dozen for local eggs, $9 a gallon for local, raw milk, $9 a pound for grass fed ground beef.. The Thanksgiving turkey was from a local, small farmer and cost around $80. I am so appreciative to have this available to me and nothing is wasted.. Even the bones go back into my garden. There are a lot of us out there who know we are getting a bargain and are very thankful for farmers like you…so much hard work and integrity

    Liked by 3 people

    • Bill says:

      We charged $4/doz for our eggs last year, but we’re planning to raise that to $5 this year. By the way, that profit number was based only on feed. It did not take into account fencing, the cost of the coops, fuel for transporting the feed, and (of course) labor.

      People like you are the only reason this movement survives. You are one of the heroes. Thanks for standing with us.

      Liked by 1 person

  7. Lily Lau says:

    I have no clue about farms, but I’ve always wanted to raise a little pink pig, haha! 🙂

    Like

  8. I’ve been working on a blog post on this too – which I started right after I heard the podcast a few weeks back. Still working on it…

    I agree with Khaiti – you need to put at least some value on your time. I agree that “our” kind of farming is a lifestyle choice as much as anything else, but at the end of the day, you need to have money in your bank account from all of this to buy clothes, have a day off once in a while and maybe put away for retirement. Salatin always advocates for a white collar wage for farmers, not necessarily when they’re starting up, but eventually.

    Economy of scale is a lesson to be learned from big outfits like Smithfield. There is a sweet spot in every production enterprise where it is possible to make more without costiing more and without compromising production values. The trick is to get to that zone and then stay in it.

    Marketing “our” kind of food is a challenge in a price driven marketplace. I can feel this changing. CSA’s are becoming pretty mainstream, and diversified. Food hubs are starting to pick up. Producer co-ops. Online buying clubs. There’s still farmers markets but I think not all of them work for all producers. Maybe that’s true for all marketing avenues. We each have to find what works for us and for our area. I agree with Cynthia though, there are many many people who do get why food like ours has to be priced high compared to a mass produced pork chop and are happy to pay the price. We just have to get very persistent and very creative at getting our information and product in front of them.

    Liked by 1 person

    • Bill says:

      I did not mean for my post to come off as negative. We barely break even on eggs but we knew that going in. Last year we lost money on them. We consider eggs a loss-leader. And we’ve decided to let hens live out their lives here. We could do better if we traded them out every two years.

      On pork we are profitable. We set our prices based on what we think is a fair profit for us per pig and we quickly sell out. No one has ever complained about our pricing and we believe we produce the best-quality best-tasting pork available. As Khaiti says, it is worth every penny.

      Likewise with our vegetables (the biggest part of our business) we are profitable, but only if labor is excluded.

      The friend who gently told me that under-pricing hurts farmers has nine children and is trying to make a living raising cattle (dairy and beef) and pastured poultry chemical-free. They are wonderful people and have a strong group of dedicated customers. I’ve tried to keep his family in mind when we set our prices. If this movement is to succeed it must be economically sustainable as well.

      Liked by 3 people

  9. farmerkhaiti says:

    Even, and especially, if you do it because you love it- you should not be afraid to charge what you need to to make it financially sensible for you. I know one farmer around here who figures a half hog base price as a deposit, and then charges a dollar a day per share, to help make it make sense to the customers. He’s doing the work to raise the pigs as well as they would, if they could. Premium handgrown and truly artisan food is medicine, it is happiness and pleasure, it is priceless. Vegetables and meat and eggs no matter. I think it is very admirable to keep your neighbor in mind as you price though, but perhaps you both should raise prices, especially if you sell out? Great discussion!

    Like

    • Bill says:

      We pay attention to our pricing these days and will adjust it when appropriate. I’ve been nervous about raising prices in the past but whenever we’ve had to do that we’ve had nearly no complaints at all. People know how we farm and why we farm the way we do. They know we aren’t trying to gouge them. We just sent out a confidential survey monkey to our customers and one of the questions was about pricing. Not one person who responded thought our prices were too high. It was good to have that kind of affirmation.

      With eggs it’s never going to make sense for us. Even if we priced them so that we’d have $1/doz profit (and that would be excluding labor, coops, fencing, etc) we’d make $600/year on eggs. We just can’t see it becoming an enterprise that contributes much to the bottom line here. We think having them available helps build loyalty. We like having them to offer, even if there is a limit to how many we can generate here.

      Liked by 1 person

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