Homesteaders and small-scale farmers face unique challenges trying to make money off their land from food and animal production. On the one side, most distribution channels, such as farmers markets, offer decent prices but substantial risks and large amounts of work. It is not uncommon for a farmers market day to be a 12-hour one on top of farming chores, full of packing, loading, driving, selling and more, not to mention paperwork and fees that the market, county and state may impose. Stores and restaurants offer less risk and more stability, but lower margins and their own rules and requirements, often including very costly product liability insurance.
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Cow To Truck Ratio
How low are the margins most farmers receive for their fare? The USDA tracks how much of the consumer dollar gets back to the average farmer, and the last number was 11.8 cents. So, about one-tenth of the consumer dollar gets back to the grower’s pocket. Another way to see just how poorly paid farmers are compared to the ever-increasing cost of everything is the so-called “cow to truck ratio” that I first heard about from a speaker at a Slow Money conference.
My great grandfather would have only needed to sell about seven cull cows to buy a new truck. In 2010, I would have had to sell 70 cows or more! That means, relative to the price of other products, food has fallen in value as much as 90 percent, though as farmers and homesteaders know, the cost of production has not. This measurement has improved somewhat over the past two years with increasing prices for beef and other meats, along with some upward pressure on produce because of the California drought, but no one knows if these higher prices are here to stay or a temporary blip on the radar of food price suppression and fair price oppression.
So, farmers are getting only a small portion of the consumer’s dollar for products with significantly less real economic value than that of their peers’ products and services, and we wonder why farmers are a dying breed and food production is handled by a few mega corporations.
Small-scale farmers and homesteaders need to seek out alternative distribution models that are time efficient, price-point effective and regulatory friendly to secure a fair price for their products. Buying clubs may offer you just that opportunity.
Local Buying Clubs
Before I was a homesteader and farmer, I was a buying club founder and member. My journey started there, trying to find an efficient, affordable and enjoyable way to access local foods and ensure that the growers were paid fairly for their work and wares.
A club differs from other food distribution models by being producer-centric. At our club, our yearly goal is that 80 percent of the dollars spent by members get back to the producers. This makes the conventional system look like a killing field for farmers compared to getting into a local system that is cost- and scale-efficient, and effective. We don’t have wide palatial paths in our pickup location and thousand-dollar display racks ribbed with mahogany stained hardwoods, but we have farmers and homesteaders who are fairly compensated for their work and a more affordable food system for our members.
A buying club is also somewhat size neutral for producers. While a typical homesteader in our area could never supply Whole Foods or some other store, he or she could find a great and profitable niche market supplying particular items to our club, such as locally grown elderberries, mushrooms, duck eggs and more. Such size neutrality can turn small and niche products into profitable items for a homestead or small farm, while allowing people to start small and grow along with the club.
Helping connect farm and fork doesn’t require a fistful of dollars or aa head full of financial facts. Anyone with a humble heart, willing hands and his head on straight who enjoys hard work can help make it happen.
Three P’s & Three M’s
Buying clubs are pretty simple. They have three parts—people who want food, producers who produce that food and a place to do the swapping. A buying club is held together by three simple pieces: money, a member agreement and good management.
Let’s look at each of these briefly. A buying club involves people. Often clubs start from already existing social networks, like a church. Over time, a healthy club will attract and retain people from all sorts of groups, and in my experience, this diversity, is important to overall health and success if it can be managed well.
Second, those people are looking for products, so the club will need producers. These can be a mix of local, regional and national, depending on what the club’s members want and what can feasibly be sourced and offered. Some clubs will stick with offering locally sourced items, sometimes only from farms. Some clubs give members access to millions of items.
Last, a club needs a place. Many start in people’s garages or other low- to no-cost community spaces. When we started our club, our living room would often become a beef storage locker, with our furniture piled in one corner, the drapes drawn tightly closed and two or more head of rock-hard frozen beef stacked along an interior wall of the room, and the thermostat dropped to 55 degrees (have I mentioned what a wonderful and patient wife I have?).
If you are running a club from home, be very aware of how it impacts your neighbors and neighborhood. A great way to get a visit from the police, zoning or health department is to upset your neighbors. For a small club, operating from home generally is best if the traffic and parking won’t upset people, but for larger groups a community space or an appropriate rented space is crucial to avoid trouble.
A club needs three things to operate. The member agreement provides the ground rules by which all parties play the game. This is more important than you realize. With a member agreement, what could have turned personal becomes impartial. “Susan, you agreed to pick up your items during this window unless there was an emergency. Your nail appointment is not an emergency.” A good member agreement also goes a long way to weeding out potential problems (and problem members) before they get established. For those managing the club, the member agreement establishes important boundaries (like, “No you can’t come by at 2:00 a.m. to return your milk bottles, and no, because you forgot to pick up, you can’t interrupt our Sunday…).
Second, you need money. A buying club is not a business. You are not selling stuff to the members to make a profit. Rather, you are collecting and managing the members’ money and using it to place orders on their behalf. Thus, you want their money before you place orders. For our club, we have a $150 floating balance requirement for all members. This has numerous legal advantages and one crucial practical advantage—no one can stiff the club with an order and not show up for it, or even worse show up, grab it and walk away without paying. Prepayment provides fraud protection and also helps people feel invested and connected with the club.
Build A Team
Last, a club needs good management. Management has two parts—a management team and management technology. When we started our club, there were many skills I did not have that my administrative team developed naturally as the club grew. And we were a team of one. I learned very quickly and offer people doing clubs this advice: Don’t do it alone! If your club is meeting weekly and only one person is in charge, what do you do for vacation? If you get sick? When a family member is ill or dies? Two are better than one, and a threefold cord is not quickly broken. Start with a team of two.
Initially, management and staff are compensated for their time with food, but if the club gets big enough, food alone no longer makes sense. Some of our team get just food, but our senior administrative team receives payment in both food and dollars. You have to be careful with operating costs. We are super good at controlling costs. Our non-staff costs run about 2 to 3 percent of total dollar volume.
Utilizing technology is the second aspect of good management. There are now many options available to simplify the administrative side of running a buying club. Our club uses foodclub.org to keep track of member order history, member account balances, automated order submission to vendors, splitting cases, and more. With 300-plus members/families ordering each year, and 200 each month, we don’t know how we would keep track of all the paperwork or keep up with all the grunt work without a computer doing a whole lot of it for us.
Editor’s Note: To learn more about organizing a food buying club, get John Moody’s Food Club and Co-op Handbook, available from Farm To Consumer (farmtoconsumer.net) and his website, foodclubsandcoops.com.
This article was originally published in the NEW PIONEER ™ Summer 2015 issue. Subscription is available in print and digital editions here.