Rating the Chances of Success for a 1st-Generation Farmer or Rancher

"Based on your experience, what are the chances of a first generation farmer/rancher succeeding? I keep hearing people say that I am likely to fail within the first year."

That question came in an email. I began with my usual reply: "Congratulations on considering a farm! There are many opportunities in farming now for people with dedication and vision."

Then I delivered a short version of my opinion: Can a new farmer be successful? Of course! But a new farmer has to work hard with both hands and head to create success. Plan first before spending money; don't try to keep up with neighbors' spending; grow for market; learn from others; seek out those who encourage and challenge you; and use wisely your time, energy and creativity.

But, I added, if you realize a few other things, it will boost your chance of success. And then came my long-version reply. Farming is like many businesses: success depends on preparation and a hint of luck. And luck favors the prepared.

Many businesses fail in the first few years from common shortcomings: undercapitalization, spending money on the wrong things, loss of focus, lack of marketing, interpersonal conflict, internal communication problems, substance abuse. Note those latter risks: they have nothing to do with money or land, but they have everything to do with your capacity to make good decisions and to follow through.

I prefer to focus on the positive approach: design and plan for success. A business plan is the template for identifying opportunities, obstacles, and solutions. A 'finished' plan may not play much of a role in daily operations, but the exercise of thinking through your business is invaluable.

In particular, develop a financial projection that identifies a profit, and understand the elements that influence that profit. That is essential preparation. If you can't project a profit on paper - where there are no surprises - you're dependent on luck to make it happen for real.

You can't create a realistic financial projection (at minimum a budget and monthly cash-flow projection) without some experience. You can find enterprise budgets (such as among the links at Missouri Alternatives Center) to guide your budget. But you need to know which expenses fit your operation and what level is reasonable for your location or specific approach.

Experience is also essential in the production part of your business. Books are inadequate training to care for crops or livestock. And high-value-crop buyers are unlikely to believe you can produce or deliver what you promise if you haven't done so before. Similarly, lenders want proof that you'll repay them; the best indicator of future performance is past performance.

You aren't likely to learn enough on your own to get where you want, when you want. Farming is being recognized as one of the professions best learned through apprenticeship under an experienced guide. Seek out advisors, information resources, and experiences. If you have little experience, it would be of great benefit to have a 'mentor' farmer - someone who can advise you on many aspects of your farm, and who cares about your success.

Look around and ask someone you respect to help with this aspect of your business startup. Most people are flattered to be asked. A benefit of relationships with experienced mentors is that you don't need to own all the experience. A mentor can supplement your judgment and knowledge. Even peers - fellow new farmers - are sources of information. Group learning is more fun, provides emotional support for a largely solitary job, and allows members to make fewer individual mistakes.

A 'business' approach often entails identifying the market first. Most farmers farm because they want to grow things while selling is an afterthought. But 'growing for market' (not coincidentally the title of an excellent newsletter for market gardeners) means just that: producing what you can sell. That's not such a novel thought, but the ability to identify what you can sell at a profit is the key to all business.

For farmers, that means being able to grow crops or livestock at costs that are less than the selling price. Farm profits are infamously at the mercy of markets and weather. But controlling costs, accessing high value or stable markets, or building in weather resilience /are/ under a farmer's control.

I mentioned high value crops. Whatever their markets, beginning farmers and ranchers need high-margin enterprises to start off with. They have smaller operations, less available cash and credit, and less room for error than established farmers. (Just being aware of these limitations can help avoid related problems.) High margins or profits can come from reducing costs, replacing purchases with labor, and selling high value products. Several options for these fit with beginners.

Cutting costs works best combined with the other approaches. Reducing purchased inputs or using natural systems can cut the need for cash. Farming systems like 'organic' both reduce purchases of synthetic inputs and use natural and preventive fertility/pest/weed control systems to grow acceptable crops. Using grass and forages for livestock feed instead of harvested/purchased feeds can greatly reduce equipment and facilities costs. Avoiding debt also reduces interest costs.

Beginners can use management and labor to replace purchases. Management-intensive grazing uses knowledge and labor to increase productivity of forage and livestock, resulting in more forage per acre, better use of existing forage, and more meat/milk/fiber per acre. Management skills and labor can replace expensive facilities. Hogs raised in deep-bedded hoop houses yield the same profit as hogs in controlled-environment houses; hoops cost 2/3 less, but labor makes up the difference. That labor is the farmer paying himself.  

Beware of just doing the high-labor activities like calving or farrowing. It's easy to do lots of work only to sell animals into a low-value market, so be sure to add more value to the animals in some way.

High value products don't have to be high-input. The products can be the crops themselves or added-value processed products from those crops. "Natural" meats are worth 5-20% more than commodity meat. Certified organic produce and grains are worth 20-300% more than commodity crops. Milk is a value-added product to the feed and the cow. Organic milk is worth 40-80% more than commodity milk. Grass-based milk is worth another 10-50%. You can name your price for grass-based butter, yogurt and ice cream.

The highest margin enterprises that seem to work well for beginners are direct-marketed produce, certified organic field crops, grass-based dairy and beef, and hoop-house hog farrowing and finishing. It's possible to start small with all of these, although the dairy option requires more facilities. Be sure to run the numbers before getting too tied into a production system. USDA SARE has several good books on natural beef operations and sustainable businesses that might help. ATTRA.org likewise has many publications on production and marketing of crops and livestock.

If you're not familiar with these types of operations, you can learn a lot from visiting others to see how they run their operations and market their crops. ATTRA lists organizations that sponsor farm tours and conferences where you can meet farmers, see what works, and meet others doing what you want to do. Be sure to search out the /successful/ farmers doing what you want. Seek out successful and optimistic advisors and companions; a positive attitude fuels persistence, which is a requirement for overcoming the endless challenges in farming.

So I repeat, Can a new farmer be successful? Of course! But I would say that a new farmer has to work hard with both hands and head to create success. Plan first before spending money; don't try to keep up with neighbors' spending; grow for market; learn from others; seek out those who encourage and challenge you; and use wisely your time, energy and creativity.