Scope, scale and the start-up urban farmer
Can an urban farm generate enough income to be financially sustainable?
While the definition of sustainability as it relates to agriculture is unique to the individual, I would like to focus on the financial aspects of sustainability. Of course, even as we discuss financial sustainability, I grant that the other aspects of sustainability affect the bottom line and are important in the management of the urban farm.
Each and every farm and farm family must earn money to be sustainable. In fact, the U.S. Department of Agriculture definition of a farm is an operation that earns $1,000 per year or would be expected to earn $1,000 in a year not affected by adversity. If an urban farm does not make an adequate return, can the farm continue operations over the long haul? All farms face the question of continuing operations and must make a decision if cash flow is inadequate.
Michigan State University Extension has studied the potential earnings for farmers starting up a hoop house based farming operation. In a study of 12 startup operations, the average income of a hoop house was $7,654 and on average required 1,096 hours of labor to operate. This is slightly more than a one-half of the equivalent of a full-time job. On average a full-time operator might be able to manage two hoop houses and earn approximately $15,000 per year.
The median income in the 12 Michigan counties where the examined hoop house farmers were located is $47,257 per year. In the study, there was a substantial deficit between the earnings potential of the hoop house and median income of the area. With earnings, each farm family must pay principal and interest on debts, recapitalize, cover adversity and provide for family living. Because of the scope and scale, it appears that the hoop house-based urban farm will have difficulty meeting the financial needs of the farm and farm family.
How does the farming operation and the farm family make ends meet? In short, other streams of income are necessary to meet all the needs of the farm. Typically, off-farm income includes income from a different job, services provided to other farm operations, value added operations and other business interests.
The urban farm and the hoop house also provide intrinsic value, including excellent food source for the farm family and a desired quality of life, which are important considerations. While the urban farm and the hoop house can add extra income, the best potential for financial sustainability of the urban farm would be to have additional sources of revenue to cover all of the financial needs of the farm family.
MSU Extension educators and innovation counselors at the MSU Product Center Food-Ag-Bio are ready to assist food processors in the development of the products. The MSU Product Center provides food safety testing and assistance to help Michigan entrepreneurs develop and commercialize high-value, consumer–responsive products and businesses in the value-added agriculture, food, and natural resources sectors.