[Market-farming] Wild business scenarios

Steven Rogers singingpigfarm at earthlink.net
Wed Feb 9 22:34:48 EST 2005

The scenario of several days ago of a farmer selling $500 at a farmer's market with costs of $400 
and Pat's scenario of selling tomatoes at break evenprice at a farm stand are pretty wild and 
are in no way representative of reality. After  15 profitable years as a market farmer I know what it
costs to produce vegetables. Anyone who (the first example) is selling vegetables DIRECT at a 
20% gross profit margin is doing some thing very wrong. As for the second scenario of selling at a
break even price, I can't imagine a case where that would ever occur with any vegetable. It doesn't
cost that much to grow them. My production costs for heirloom tomatoes runs $.075/pound. 
 Even if you sell them for $.15/pound you are still running a 50% gross profit margin. I sell on average
20,000 pounds/year at $1.50/pound. At the farmer's markets they sell from $2.50-3.00/pound. 
I can't remember the last time I saw a tomato in a chain grocery for less than $.59/pound that is 
still an 87% gross profit margin. Let me give you a reality based example from my own business.
I am rounding the numbers off for ease of understanding. Today my driver and I delivered $1150 
of vegetables. My total costs for everything including seeding,cultivation,fertilizer, irrigation, harvest
packaging, and delivery including all hired labor, fuel, machinery costs was $350--Gross profit margin
for today=70%! I do not sell at high prices. My price point is just above the produce houses
bringing produce in form Cali/Az/Mexico. No where near the above retail prices prevalent at farmer's
markets. Great volume however.
FYI a 20% gross profit margin is common for produce houses. A close friend and trusted advisor
owns a medium sized produce house selling mostly ro restaurants. He own 15 delivery trucks,
a semi tractor/trailer rig, and employs about 30 people. He runs a 20% gross profit margin plus
$2/case for shipping and warehousing expense. He is very successful and well off even though 
he has 5 kids.  He is doing so well that he expects that he will never have to touch his IRA money 
and that it will all go to his kids. He gets a little teary eyed when he sees my margins.
Loss leaders are for Walmart not for farmers selling direct. If I encounter a chef who throws out
a  low price he says he can get an item for somewhere else, I tell him "That;s a really good price,
you should buy it." I am not going to buy someone's business, there is too much business out there
to have to do that..

Steven Rogers
singingpigfarm at earthlink.net
EarthLink Revolves Around You.
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