Against the Grain—The Value-Added of Small and Medium-Size Farmers

Against the Grain—The Value-Added of Small and Medium-Size Farmers

Farmers with hundreds rather than thousands of acres are considered medium-sized producers.¹ For these farmers, and for small-scale producers who farm less than 100 acres, the challenge is to figure out how to succeed in a system geared to larger producers.

Tim Nissen is considered a medium-sized producer. A decade ago, he was farming 700 acres of conventional corn and soybeans in eastern Nebraska. In Bread for the World Institute’s 2007 report, Healthy Food, Farms and Families, Nissen explained why he got out of farming these crops. Without government support, he was barely able to survive. Nissen wanted to be more entrepreneurial, and he found farming conventional corn and soybeans too constraining. Once he was no longer forced to follow the rules required for recipients of government payments, he diversified his farm operation by adding fruits and vegetables, including grapes to establish a winery. At the time we met, the winery was about a year away from beginning production.

The winery is now producing. Through the Nebraska Department of Tourism, Nissen has arranged for the wines to be publicized along the 231-mile Outlaw Trail, a scenic byway that promotes the state’s natural resources, history, and culture. He sells to wholesalers, liquor stores, and restaurants across Nebraska. But his most financially successful venture so far comes not from buyers of his wine, but from people willing to pay him for bottling wine. Many people produce wine as a hobby but would rather let someone else do the bottling. Once Nissen learned the necessary skills, he began operating a mobile bottling facility. For several weeks of the year, he travels across much of the Midwest. In one four-state region, Nissen offers the only such mobile service, so he has this niche market all to himself.

By diversifying his operation, Nissen is managing risk the way farmers used to, before farm policy turned risk management upside down and made it reasonable for farmers to grow just two crops. In addition to fruits and vegetables, he raises organic feed grains for niche livestock markets.

US Organic Food Sales

Nissen is regarded as an oddity by his neighbors. When we last spoke with him in 2011, the price of corn had climbed to the highest level in decades. Many of his neighbors have cashed in on the ethanol boom ever since the mid-2000s, when Congress mandated dramatic increases in biofuel production. Would he have stuck with growing conventional corn if he’d known the ethanol boom was coming? He says definitely not. “Corn is going to be replaced by other feedstocks,” he says, “and when that happens, the boom will turn to bust.” He thinks the future is much brighter for organic producers. In the last decade, sales of organically produced foods grew by double digits every year, and there’s little sign that this trend is waning.² (See Figure 1.4)

Nissen isn’t opposed to using government support as a matter of principle; he receives support from U.S. conservation programs to improve his stewardship of water and soil quality. He also got a “value-added producer” grant to assist his transition to organic production. Establishing the winery is an example of adding value to the production of grapes. The grant program gives priority to small and medium-sized producers as well as to beginning and/or disadvantaged farmers and ranchers,³ and is designed to help them succeed in niche markets. For small and medium-sized producers, the truth may be that adding value is their best chance to survive in a system that favors large producers.

Profitability doesn’t always require that farmers own lots of acres. Alex and Betsy Hitt, owners of Peregrine Farm, earn $27,000-$28,000 an acre on the five acres they farm outside Chapel Hill, North Carolina.⁴ They’ve grown many different crops, depending on the season, the profitability of the crops, their personal preferences, and the markets available to them. Like Nissen, diversification is a fundamental part of the Hitts’ business strategy, as is direct sales to consumers.

USDA reports that for every dollar spent on food, the farm’s share averages 15.8 cents; the rest goes to marketing.⁵ When farmers take on more of the marketing and selling of their products, they earn a larger share of these dollars. But most don’t market or sell their products. Farmers generally prefer to do what they know how to do best: farm.