Regenerative agriculture must scale to be economically competitive
Photo credit: Kent Wuthrich
I has always boggled my mind that ten thousand or more farmers are individually driving to a farmers market somewhere in the US every weekend. I participated in several farmer’s markets for over a decade, so I can’t knock them too hard. It helped us build our brand and get in front of the consumer. For a company with a marketing budget of little to nothing farmer’s markets are fantastic. What a tremendous waste of resources - time, capital and fossil fuels to include a few. This mentality and way of conducting business lends itself to very high consumer prices. The products are simply too expensive for the vast majority of consumers. But is there a better way? My first thought is the farmers cooperative model. It separates the sales side of the business from the farm production, which are in fact two very different businesses. It also lends a much greater presence and ability within the marketplace. The beauty of a farmer cooperative model is the dividends are redistributed to the farmers (it’s farmer owned). The cooperative can afford to hire a manager, marketing, warehouse personnel and so on. This allows the farmers to do what they do best - manage their farm business. The most successful farmers cooperative example I can think of is Organic Valley, founded in 1988. It started with just a few farmers in Wisconsin and has grown to over 1800 farmers throughout the US as of today. The cooperative employees about 950 people and has a revenue over $1.1 billion dollars. That is how individual farmers achieve power in the marketplace!
The reality is that most farms in the US are small in size. According to the most recent 2019 farm census the average farm size in the US is 444 acres, up from 418 acres in 2007. Interestingly as the average size increases by about 2 acres per year since 2012, the number of farms is decreasing. This tells me conglomeration is occurring and that’s not necessarily a good thing. In fact, a recent study by the Land Coalition found that 1% of farmers own 70% of the world’s total farm land. The reality is farm profitability often hinges on achieving economies of scale. You must have enough gross margin from your enterprises to cover your overheads. Thus, the other side of the economic scale equation is the farm (real estate) and production. I live in an area where most of the farms range in size from 100 acres to a few thousand. Everyone of those farms has it’s own cattle trailer, tractor, skidsteer and piles of other equipment. They all purchase their feed by the single bag, parts and so on. The point is they pay retail price for all of their inputs. These folks will never be able to bring down their direct costs and overheads until they learn to use their collective buying power.
To put it simply regenerative agriculture must be able to scale to be economically competitive and bring down the price of it’s goods. It’s easier said than done. Getting farmers to work together towards a common goal is like herding cats. I’ve tried and failed miserably many times in my decade plus journey in regenerative agriculture. That’s not to say it can’t be done, because it has been done successfully by folks like Organic Valley. It takes putting our egos aside and working together towards a common goal. There are surely other solutions out there, but I see farmers cooperatives as the low hanging fruit. With small, family farm sizes ever diminishing and large corporations increasing by the day it’s the logical solution to achieve scale.
It’s a complicated subject with complex answers. What are your thoughts on scaling regenerative agriculture? Questions or comments please feel free to post below or send me an email to: travis@grazinglands.com
,Travis Krause
CEO & Founder at Grazing Lands
