Knowing whether a crop is
profitable is a crucial piece of information for farm management.
Yet for diversified vegetable farms, some growing hundreds of different
crops or varieties, measuring this can be a daunting task. Many prominent
organic farmers in the Northeast use and advocate the use of a simple
rule of thumb: “the $30 per pick-pack hour rule.” This
rule states for that every hour spent harvesting and packing produce
by the farmers and their crew, it ought to result in at least $30
in revenue. For example, if three workers spend two hours picking
and one hour washing and packaging in a given crop (a total of nine
person hours: (3*2) + (3*1)), this product should bring at least $270
(9*$30) in sales.
Using this rule is much easier than tracking all costs (inputs and
labor, plus indirect and overhead costs) associated with growing a
crop. However data collected over two growing seasons – 2002
and 2003 – from seven organic vegetable farms in the Northeast
cast doubt on the usefulness of this rule. This rule is based on two
main arguments:
1. $30/ hour may not cover the total cost of
production; and
2. A key underlying assumption of this rule, that all production costs
associated with raising a crop are roughly equal for all crops, is
violated.
The production costs were gathered on seven organic vegetable farms
in five Northeast states. They are participating in the Northeast
Organic Network project and were identified as being exemplary farms.
While these farms do not represent a random, or even a typical sample,
the results of the following analyses should provide a caution against
relying too much on this shortcut measure of crop profitability.
Break-even analysis
The first analysis measures the break even revenue per pick- and pack-labor
hour. It is calculated by taking the total production costs (direct
variable costs like labor and inputs, plus overhead and indirect variable
costs, including land and machinery, maintenance, marketing and so
on) and dividing by the total number of person-hours spent harvesting
and packing. Farms that achieve this dollar-per hour figure will exactly
break even. A farm that fails to bring in this amount of revenue per
hour will lose money; an amount greater than this figure indicates
profit. The table shows the maximum, minimum and average break-even
revenue figures for each of 10 crops. Some crops have only two observations
(data from only one farm over two years); others have up to eight.
Not that, on average, only four crops – beet, carrot, onion
and strawberry – would actually make money if the farmer only
makes $30 per pick-pack hour. Five crops – Asian greens, lettuce,
string beans, tomatoes and winter squash – would need, on average,
to produce more than $50 per hour to break even.
Production costs before harvest
The $30 per hour rule assumes that the costs up to harvest are roughly
equal on all crops; date from these seven farms call this assumption
into question as well. For each crop on each farm, the harvest and
packing labor costs were subtracted from production costs (inputs
plus labor). The results were then compared across farms and across
crops.
Looking at data from different crops over two years for the same farm,
the differences in production costs before harvest are quite large.
The costs differ from a minimum factor of 2.71 on one farm to a maximum
factor of 10.89 on another. Clearly, costs before harvest are not
roughly equal, even on the same farm. Looking at similar crops over
different farms and years, the differences are much less pronounced.
Four crops – beets, carrots, onions and string beans –
vary by a factor of 1.2 or less. It is important to note, however,
that analysis of each of these crops used data from only a single
farm; these factors reflect the difference between two consecutive
crop years on the same farm. Four crops – garlic, lettuce, tomato
and squash – vary by a factor of 2.5 or more; these data all
come from multiple farms.
Implications
Certainly, the $30 per hour rule has some value. Proponents claim
that it may help growers gauge how fast and efficiently the crew is
working, as well as providing information on the prices they received.
It may also work better for growers who do much of the on-farm labor
themselves and have less out-of-pocket labor expenses. This analysis
does suggest caution in relying too heavily on this rule. While this
analysis uses data from a small number of crops and farms, the fact
that so few would make a profit at $30 per pick-pack hour is cause
for concern. Furthermore, the key assumption of roughly equal costs
for all crops before harvest is also questionable.
It is a daunting task to measure all costs across all crops on a diversified
farm. However, reliance on quick – but rough – rules of
thumb may lead to poor crop choices. Clearly, a measure in between
these two extremes is in order. Here are some suggestions:
Measure all costs for a handful of crops: perhaps
select one you believe is a sure money-maker and one you think may
be less profitable;
Given that costs for a single crop on a single farm changed little
over the two years, do a few in- depth measurements on different crops
each year;
Calculate the break-even revenue for the whole farm (total farm expenses
divided by total pick- pack hours),measure this figure for a few select
crops and compare;
Use, with some caution, published enterprise budgets from other sources.
Full budgets from the NEON project will be available in a book to
be published shortly. Vern Grubinger’s Sustainable Vegetable
Production from Start-up to Market contains budgets fro several crops;
they were compiled several years ago, so some price adjustment may
be needed. Organic vegetable budgets from Rutgers and North Carolina
State University are also available.
Forms to guide the measurement of small fruit and vegetable crops
are also available from Dr. Wen-fei Uva at Cornell University.
Summary of Break-even Revenues ($/hour)
| Crop |
Maximum |
Minimum |
Average |
| Asian Greens |
75 |
35 |
55 |
| Beet |
21 |
17 |
19 |
| Carrot |
23 |
23 |
23 |
| Garlic |
38 |
28 |
32 |
| Lettuce |
75 |
15 |
54 |
| Onion |
27 |
23 |
25 |
| Parsnip |
53 |
29 |
41 |
| Strawberry |
17 |
13 |
15 |
| String Bean |
100 |
78 |
89 |
| Tomato |
195 |
24 |
85 |
| Winter Squash |
90 |
27 |
65 |
