Growing for wholesale accounts creates efficiencies for small-scale vegetable farm
By Dana Jokela, Sogn Valley Farm
When starting a vegetable farm, farmers first need to consider where they intend to sell their produce. Most new farmers set their sights on direct-to-consumer markets—such as community supported agriculture (CSA) programs and farmers markets—as their primary sales outlets.
There are plenty of good reasons to start with direct markets, rather than wholesale accounts such as restaurants, grocery stores, and distributors. Many new farmers are attracted to direct markets because the farmer usually gets a better price for the product, keeping the whole “food dollar” rather than splitting the price with at least one intermediary, such as a retail store. Additionally, direct markets are often more accessible to new farmers who may lack the credibility desired by a wholesale buyer. Farmers markets provide an ideal outlet to build this reputation, since customers only buy produce when it has been successfully grown and brought to market. Lastly, direct markets are better suited to the small scale typical of new farms.
Ariel Pressman, owner of Seed to Seed Farm, started out just like that. In 2012, while working part-time at Foxtail Farm in Osceola, Wis., he started his own farm and sold the produce at a farmers market. The next year, he moved his operation to Balsam Lake, Wis., where he started a CSA, attended farmers markets, and sold to restaurants. But after two years running a CSA, he noticed two things: First, he was having a hard time managing 50 crops, and second, he was noticing some inefficiencies from mixing the high-diversity nature of CSA and market farming with the high-volume/low-price reality of wholesale production.
“I don’t wholesale green beans, but you can’t go to a farmers market without green beans,” Pressman said. “To service some of these markets, I was growing small amounts of stuff that was disproportionately taking up a huge amount of time. And the whole idea with wholesale is you should be able to be more efficient. At the time, we were getting the lower price from wholesale, but all the inefficiency of growing all the crops that you need for a CSA or farmers market.”
Pressman dropped his CSA program after two years and made a big push to pick up new wholesale customers, which provided an increasingly large proportion of his annual sales. He dropped farmers markets in 2017—five years after he started his farm—and now grows 14-acres of produce exclusively for wholesale markets. Pressman grows 8-10 crops, rather than 50, which he feels allows him to do a better job of managing his crops (and staying sane).
“I always found with the CSA that I couldn’t keep an eye on everything. With [a wholesale] model, I’ve been able to get really familiar with my crops,” he explained. “There are just things you’re going to see when you’re growing 13,000 Brussels sprouts plants every year that you’re probably not going to see if you’re only growing a bed of it for the end of the season for your CSA.” But Pressman clarified that it’s not only about the farmers’ attention; it’s a scale thing. You simply get to observe a lot more plants when you’re growing a crop on a larger scale.
He feels the wholesale model also affords him the ability to take advantage of some tools and systems that aren’t as easily justifiable for the smaller, more diversified farmer. He has purchased some equipment to streamline aspects of production, such as a brush washer for post-harvest cleaning of cucumbers, peppers, and other crops, and a “veg-veyor”—a conveyor belt mounted to a flatbed wagon that is pulled slowly down the field perpendicular to the beds, allowing harvesters to place produce on the belt for it to be carried out of the field.
He has hired out his delivery to a trucking company that picks up his produce at the farm in a refrigerated truck and makes deliveries to his Twin Cities wholesale customers. Since the company charges per stop, this model would only make financial sense when each customer is buying a large volume. While this may seem like an expensive delivery option—he admits that it is a large line item in his budget—he makes two compelling arguments in favor of contracted delivery services: First, it allows for expansion and contraction of production—if he increases in scale and can no longer fit all orders in one truck, they just send a second truck; second, and perhaps more importantly, it improves his quality of life.
“If there’s stuff other people can do better, within reason, why not let them do it?” he added. “It’s the same reason I have an accountant… It frees me up to pay attention to the details on the farm that need me to be there. I don’t need to be the truck driver…but I do need to be the guy that’s doing the quality control in the pack shed, and scouting for pests and disease in the field.”
While wholesale can provide production and logistics advantages compared with direct markets—CSA, in particular—it does exacerbate the challenges many farmers have with cash flow and risks due to extreme weather. Most CSA farmers would probably agree that one of the most attractive attributes of the CSA model is that farmers receive payment at the beginning of the year. CSA members are also usually asked to sign a member agreement, which acknowledges that they are sharing in the risk of farming and will not be refunded their initial investment if crops fail due to unforeseen circumstances such as extreme weather. This means that cash from CSA sales is guaranteed income.
Agreements with wholesale buyers provide no such benefits. “There’s not a single wholesale market on the planet that’s going to pay you for a piece of produce that you don’t have because of disease or hail,” Pressman said. And, most farmers won’t receive payment until 30 days after the product is delivered, meaning the farmer has invested all the costs of production long before being compensated for it.
To provide early season cash flow, Pressman takes out an annual operating loan through the Farm Service Agency, a practice he expects to continue for the foreseeable future. Since Pressman’s farm is fairly well established, he has reason to trust his pre-season crop production and sales projections. He doesn’t lose sleep over taking on debt each season. But he does acknowledge that some people are very debt-averse. “If having a $100,000 operating loan is going to make you miserable, then that’s real. That’s a real reason to think about not doing [wholesale].”
Pressman wishes there were crop insurance options available to help small, specialty crop growers manage risk. But after much research, he concludes that current options—whole farm revenue insurance, Noninsured Crop Disaster Assistance Program (NAP) insurance—simply don’t make sense for diversified growers selling to local markets, particularly for farms experiencing rapid year-to-year growth in sales.
Having no crop insurance, he manages risk by:
1. Growing a diversity of crops (compared with the average Midwestern crop farm). So a disease or ill-timed weather event may damage one crop, but likely not all of them.
2. Over-planting his crops to ensure he has enough to fulfill customer orders in a bad year, accepting that he may only harvest half the field in an exceptionally good growing season.
3. Using unheated high tunnels for tomato production, decreasing disease pressure and protecting the high-value crop from severe weather.
While wholesale production does bring its own set of challenges—cash flow and risk mitigation, in particular—Pressman shows that there are ways to mitigate these on a small-scale wholesale farm.
For direct-market farmers interested in getting into wholesale, Pressman had some advice for finding, and keeping, customers. When looking for potential wholesale customers, it’s always ideal to have an “in.” When making cold calls, Pressman advised being prepared with a concise “elevator pitch,” a price list, and a calendar for setting up an in-person visit. For example, “I run Seed to Seed Farm. I’m a first-generation farmer, growing five acres of certified organic produce. My heirloom tomatoes are top notch. I’m going to have them ready in a couple of weeks—maybe I could come in and chat with you?” The in-person meeting will be much more memorable for the buyer, and gives the farmer an opportunity to provide samples to the buyer.
He recommends starting with restaurants. Orders are generally small, giving the farmer a better chance of successfully fulfilling the orders. “You don’t want to hop into markets that are too big for where you’re at,” he advised. “If that market has a bad experience with you, they may not be available in three years when you are ready to sell to them.”
Chefs also are generally more willing to give feedback if something isn’t up to their quality or grading standards. And it’s crucial to calibrate grading standards for wholesale markets, as they’re typically higher and more stringent than the standards for produce sold through CSAs and farmers markets.
Pressman strongly emphasized the importance of maintaining relationships with wholesale customers. “A small farm can’t afford to have a customer relationship. A small farm needs to have an actual relationship. A relationship means give and take. It means two people are helping each other.” He advises going the extra mile to meet customers’ needs—it’ll pay dividends when the farmer needs flexibility in a bad year or a referral to another potential customer when crops are abundant.
Farmers markets and CSA programs are great options for many farmers, but Pressman’s story illustrates that wholesale shouldn’t be overlooked as a viable option for small farmers. “When I first started, I wanted to look and feel like my friends’ farms and the farms I used to work on,” Pressman added. “Farms can, and should, change.”
Dana Jokela owns and operates Sogn Valley Farm, a 22-acre certified organic farm near Cannon Falls, Minn.
From the May | June 2018 Issue