Community Supported Agriculture what is it and are

Community Supported Agriculture…. what is it and are they viable? Jo Hunt 24 th April 2008

Why assess CSA viability? What sorts of CSAs work…. z Established CSA farms that work z Scale of activity and range of produce z Management set-ups Financial performance of CSAs…. z Do share prices cover all the costs? z Can the farmer live off the wage? z How is the prices worked out? Long term viability of CSA businesses…. z Do CSA businesses keep going? z How do they invest in capital and skills? z How are they planning to grow? "the CSA is not hugely profitable but it is helping us turn the corner…. . and that's a big improvement on what we were doing" CSA orchard manager

What indicates ‘viability’ for a CSA? Short term z Characteristics x. Shares per area of land x. Proportion of income from CSA x. Shares per worker on farm x. Radius of consumers z Financial performance x. Net income per hectare x. Proportion of fixed costs x. Profit per share x. Farmer income x What indicates ‘viability’ for a CSA? "our ideal would be to have the members running the CSA and the growers doing the growing - but we have ended up doing both. Most members are just too busy to give much time and our prices can't reflect the costs of all the time it takes to do it for them" CSA grower Long term z Investment y Borrowing and annual investment y Proportion of depreciation covered z External inputs y Reliance on imported nutrients y Reliance on unpaid labour z Farmer and member rewards y Satisfaction and retention y Future business plans y Investment in people

Three questions…. y. One: is there a gap in the UK market for CSA and will it be viable? y. Two: short term viability performance of CSA farms in the UK y. Three: longevity business issues for new (and existing) CSAs

CSA is viable elsewhere “CSA is a tiny proportion of the market and at present it is walking between the legs of giants” Vermont extension adviser

5, 500 miles …. “I am interested in seeing my consumers face-to-face” Iowan CSA farmer z 18 CSA farms interviewed: 8 in Iowa; 4 in Ohio; 6 in Vermont z 7 farms providing detailed financial information: 2 in Iowa; 2 in Ohio; 3 in Vermont z 18 network organisations interviewed: 4 farmer led groups; 3 campaign organisations; 5 university research groups; 3 extension services; 2 organic inspection teams and 1 Senator z 14 non-CSA farms visited

What is CSA? “we’re not farmers here, we just grow enough food for 50 households” Iowan CSA farmer z What are the key features of CSA? z What makes it different from other forms of direct marketing? z What should the members get out of it? z What should the producers get out of it?

One: is there a gap in the UK market for CSA and will it be viable?

Just one of many market routes to your customer…. z Farmers markets z Farm shops z Gate sales z Local retailer z National small retailer network z Supermarket z Local processor z Co-op contract z Box scheme z Community Supported Agriculture z Mail order z Internet z Restaurants z Hotels z School contract

" food is only one product of this CSA - we also provide training, recreation, a social network and somewhere to go - but food is the only product that people are willing to pay for" CSA farm director geographic What’s different about CSA? community of interest People location Social needs ‘progress’ distance density consumers Decision makers identity communication expertise values employment tastes mobility resources wealth events support views access trust goods training research exchange information feedback money equipment land experience location tradition market rewards working capital family knowledge staff values methods resources motivation agriculture skills farmer

Some market drivers Wider market environment Organic imports Food safety crises biotechnology The community Climate Organic farming advice Tradition of local supply Organic in supermarkets Land class Other CSAs Urban encroaching on farmland Ages Income distribution Land prices Farm size Educational background Management capability Farmers’ motivation family Organic grower Access to land Low debt level Off-farm income Outgoing manner Family ties Pattern of land ownership Educational institutions Staff farming skills Local connections Income levels Farming in area Community activity average incomes Food poverty Educational levels Other enterprise profitability Farm enterprise mix Car ownership Rural policy debate employment levels Local food co-ops Land capability Small land parcels available Environmental impacts Organic regulation Home growing The farm Local FMs Planning regulation Farming policy Small producer regulation Intensification of farms Landscape change "the subscriptions are the most viable part of our business at present" CSA farmer Existing direct markets Parent- school activity Farm incomes Farm subsidies family size Food prices relative to costs ages Population density Charitable giving Strong church Rural/urban area Local identity Current food miles Attitudes to innovation Food culture Loss of community Environmental awareness Population distribution

A gap in the market? z Existing supply models y Supermarkets – easy substitution y Box schemes – high service expectations y FMs and farm shops – shopping experience z CSA – a new market model "the scheme is a bit of an insurance policy in case other markets dry up. It's small scale now but if things got difficult we could expand the community side of the business" CSA farmer z What’s missing? y A very local link y Active involvement y Supporting one producer y A ‘community of consumers y Taking responsibility z CSA – a ‘deep and narrow’ niche

Two: viability performance of CSA farms in the UK

Which models of CSA are proving viable? Types of CSA in UK "only a limited number of people want a box and only a limited number of them are able to pay up front: but it is a good segment to work with and they will stay with you through thick and thin" CSA farmer Scale of CSA businesses in UK z Veg CSAs z Part-time grower CSA z Meat CSAs z Fruit CSAs z Single full-time grower CSA z Multiple grower CSA

"we already owned the land had paid off the mortgage…. we could not have run the CSA at a fair share price if we had to pay the mortgage or a full rent" CSA farmer £ per ha per year Production costs Meat CSAs Fruit CSAs £ 800 £ 4100 Costs other than labour £ 2300 £ 2200 £ 1200 Depreciation £ 400 £ 100 £ 400 Total costs £ 5800 £ 3100 £ 5700 Labour costs Veg CSAs £ 3100

Financial health £ per ha per year Veg CSAs Gross income from CSA £ 6700 Meat CSAs £ 3200 Fruit CSAs £ 5400 Net income from CSA £ 1300 £ 200 £ 1900 Annual investment £ 1900 £ 300 £ 1100 Net cashflow -£ 1200 -£ 200 +£ 500 Profit/loss £ £ 1100 90 £ 80

Long term viability "A small grant would have gone a long way - we didn't know where to go for one and we wanted to get started straight away" CSA member and organiser z Investment y No overdraft: share prepayments provide working capital y Average annual investment £ 8000 y Varies widely: small CSAs invest less per hectare y Only 1 in 3 CSA are pricing for depreciation y 1 in 3 have reserves for future y Only larger CSAs plan, budget and account for future investment

Long term viability "we are working towards being self-sufficient in nutrients, but that means more livestock and that will entail all the processing and paperwork needed to get a small amount of meat to a large number of people…. we want to do it but it is daunting" CSA farmer z Reliance on external inputs y 9 out of 10 generate all their own income y Low reliance on subsidies y Half receive capital grants y 3 out of 4 rely on imported nutrients from conventional farms y 20% of labour is voluntary

Long term viability "you need to really share control to get an effective sharing of the responsibility: if you aint willing to let these people decide what is done on the farm and how it gets done then you really can't expect them to take on some of the financial risk and hard graft of making it work. . not everyone will want to let their customers help run the business" CSA farmer z Farmer and member involvement y 3 out of 4 CSA farmers are satisfied with performance y Like independence y Dislike low pay y 70% of members retained y Longest running CSAs keep members longer y Lower than expected participation

Three: some business issues for new (and existing) CSAs

CSA is not for everyone “despite having a strong management committee, a lot rests on one person’s shoulders: the grower” CSA grower z. Four drivers for CSA development that need to coincide: y Farm capability: climate, resources, land, skills, farmer aspirations, open to change y Receptive community: size of population, existing social networks, affluence and poverty, education and ‘college town’ y Wider market traits: small farm tradition, planning gain, supermarket organics, support mechanisms, policy antagonism y YOU: a producer with skills, enthusiasm, ability to share decision making, 3 years commitment to start-up

Is CSA of benefit to your business? z Can you maximise the extra benefits? y No overdraft y Public investment (capital but not revenue) y Members skills y Low capital start-up z Business planning "The RDA and local council really wanted this to work, so they had to get their chequebooks out. …. if the public sector can support the capital start-up costs then this community can support the revenue running costs that' s the deal" CSA farmer z Can your market bear the true costs? y Access to low cost land y Price-in a real wage y Price-in full people costs y Price-in capital costs z Market research

"people get a lot more than just apples for their money, but the bottom line what they would pay £/lb - in the supermarket. They receive many intangibles, but pricing and charging for them is more difficult" CSA grower Share price and farmer income £ per year Veg CSAs Meat CSAs Fruit CSAs Annual share Average weekly price £ 335 £ 7. 50 £ 9400 £ 100+ £ 635 £ 14. 50 £ 3700 £ 250 £ 5. 00 £ 11100 2002 farmer income from CSA

Setting the share price “like any small business, we didn’t expect to make money at it in year 1” CSA orchard manager z All CSAs are significantly under-pricing y Benchmark pricing strategy y ‘Shared cost’ pricing strategy y Several market routes: CSA at the ‘top’ y charge full value to filter access y Enable access to social markets by subsidising the consumer

“the bank did not think CSA is a good opportunity” CSA member and director A fair trade income from CSA Share price to reach… Veg Meat Fruit 2002 farmer income from CSA £ 9400 £ 3700 £ 11100 2002 average share price £ 335 £ 725 £ 250 Price to pa £ 10 K + full costs £ 480 £ 960 £ 200 Price to pa £ 15 K + full costs £ 650 £ 1130 £ 275 Price to pa £ 20 K + full costs £ 830 £ 1340 £ 315 Price to pa £ 25 K + full costs £ 1007 £ 1550 £ 355

So how viable are CSAs in the UK? z CSA is a ‘deep and narrow’ niche y A separate market model y Suiting certain producers y Serving selective communities z Most CSAs are viable in the short term y most CSA farmers earn more than the majority of small farmers y Most are independent and debt free z Long term viability possible when 3 key issues addressed y Able to renew capital year-on-year y Able to reward people for their skills y Able to sustain interest and attract new people “it’s a break-even business venture – and don’t forget, we’re also having a lot of fun here!” CSA farmer

Where next for existing CSAs? "After 9 years of successful CSA operation we face two challenges: handing over the operation to a new team of growers and organisers, and finding a permanent farm site that is our own. If we can successfully introduce fresh blood and find a permanent home then we really will be able say that this CSA is viable in the long term" CSA grower z 3 out of 4 CSAs plan to grow y Size: most set to expand range and have only modest membership growth y Price: Half aim to reach full cost recovery within 3 years y Land access: several planning to purchase their own permanent site y New markets: several looking to supply schools and local small businesses as well members, but still within CSA y Widen product range: meat shares; on-farm processing and grow more of the produce they currently buy-in y Developing new growers: need for more staff and less reliance on one grower, demand for intern programme z All existing CSAs think more new CSAs will help make it

Is it for you? “we’re not farmers here, we just grow enough food for 50 households” Iowan CSA farmer z Does CSA suit your community? z Does CSA suit your growing business? z What does long term viability mean for you?

"the CSA and the people involved in it are wonderful: if offers good value fresh food grown by people you know…. . there should be a CSA like this in every town" CSA consumer member