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Creating viable farm income | For-profit | Southern ON
Ken McMullen, Owner/operator (recently retired)
Phone interview June 13, 2011 (Irena Knezevic), site visit August 15, 2011 (Erin Nelson)
* First CSA in Canada
* One-person enterprise that maintained economic sustainability over 20 years of operation
* Winner of the Ontario Premier’s Award for Agri-food Innovation Excellence
* Versatile operation with biodiversity as its main organizing principle
Organization Overview
History
Ken McMullen was at the helm of the Canadian Organic Growers in the 1980s, when he first became involved with plant patenting legislation debates. At the time, he was in management consulting in the area of diversity (working largely with issues of multiculturalism and diversity in the workplace). He made links in his work as he saw the contemporary agricultural practices, including patenting, as posing risks to plant genetic diversity. On the other hand he had also worked on issues of public health and community housing and witnessed the power of community gardens.
“The underlying institutional structure, business model in agriculture, is based on monoculture, and the loss of genetic material, the transportation routes, the use of chemicals are actually bandaids to prop up a system that wasn’t really working, which is monoculture, and therefore there needed to be a business model for farms that were based on diversity rather than uniformity. So, I put all of those things together and designed Spring Arbour Farm to be an integration of a large gene pool, and a customer base that would support the farm.”
The Farm
Spring Arbour was founded as Canada’s first CSA in 1991 with 10 shares, and it operated for two decades with McMullen only retiring earlier this year. In the last year of operation the farm was supplying to 100 families (3 of the original 10 still being shareholders), or approximately 300 people. In 2009 McMullen was a recipient of the Ontario Premier’s Award for Agri-food Innovation Excellence.
Having lived in Toronto, McMullen had personal connections in the city and the vast majority of his CSA customers over the years were Toronto professionals. He credited the loyalty of his customers to the development of personal relationships with them, having an annual open house at the farm and being transparent about his production practices.
Other commercial components were added over time, so that the farm became financially sustainable because “Each crop is expressed five different ways: I sell fertilizer at the beginning of the year, then seed, then transplants, then fresh produce, and then any surplus is used for preserves… taking the same crop and selling it multiple times.” This gives him sales from May through to December. Having the sales spread out over several months and a variety of products allows for the main purpose of the farm to remain the priority and not be compromised for financial reasons – that purpose being building and maintaining diversity, a shift in values from a focus on uniformity and hierarchical control, to diversity based on a network model of organization. The model is such that shareholders would buy shares in the early spring, he would inform them of the ready-for-harvest produce by email, they would place their order and he would harvest and deliver accordingly, all with zero waste. Now that he has retired, the farm production is just for his family and for maintaining biodiversity he has created there.
Context
When McMullen started in Nofolk County in 1991, on his concession there were twelve farmers, each with 50-100 acres of land under cultivation. Now there are two – himself with ten of his fifty acres under production, and one with 3000 acres farmed. In 1991, McMullen was the first farmer in his area to grow something other than tobacco. Much of the Norfolk agriculture has been revived in recent years with the demise of tobacco farming, which combined with more farmers’ markets in and around Norfolk, and the proximity of Toronto with its new, more discerning consumer, has created opportunities for more diverse fruit and vegetable production.
Human Resources
Although Spring Arbour has had apprentices over the years, “it was designed to be a one person operation.” McMullen has a good business mind, and he identifies his lack of formal agricultural training as a an advantage: “I couldn’t have done this with any agricultural training. Agricultural training would have required me to spray the hell out of everything. There was no training in organic farming when I was starting. The only resource at the time was Rodale [Institute].” He thus had to be creative, learn to work around crop losses and come up with a motto that “There is no such thing as a crop failure, there is only a marketing problem.” He learned to assume that he would lose 5-6 crops each season, but growing three dozen crops, that loss would be manageable. He also allowed for slow growth of the operation, expanding by sometimes as little as ¼ acre between years.
Physical Infrastructure
His last year of operating the CSA saw him with a 50-acre property, a tractor, irrigation system, refrigerator, greenhouse, and cisterns. In the early years “it was a lot of bootstrapping” taking out bank loans, and buying much of the equipment second-hand. But he had a sound business model, and was good at marketing.
Natural Resources
McMullen is insistent that the maintenance of a diverse landscape is more valuable to environmental sustainability than every piece of land being put to its “best use” in terms of economic profit. He works with the Nature Conservancy of Canada to protect and restore the natural landscapes of the region. They create diversity on the landscape, which has zero economic value but is invaluable in all other respects.
Financial Resources
The farm consists of “profit centres” and each centre covers the cost of its own particular operation: compost, greenhouse, gardens, and kitchen. For instance, one third of the transplants from the greenhouse are sold to cover the cost of operating that greenhouse. Cash from CSA shares means that the members are essentially the bankers, who “loan” the cash up front to get produce later, which means the CSA is selling trust. There used to be a mortgage on the farm, and also a line of credit. The mortgage is paid off now, but there is still the line of credit. McMullen’s previous training helped him learn how to put together a financial plan that would seem reasonable to a banker, which made it easier to get loans. He has also generally kept his prices at about 30% above market price which is reasonable but also re-assuring to consumers who have learned to associate higher price with quality. He and his spouse both do off-farm work as well – he does staff training and development and management consulting during the winter. The farm itself, however, does not require the off-farm income: “The farm is sustainable, though not profitable.”
Community Resources
The trust of the customers is key in small-scale food production: “A shockingly intimate business is knowing what people eat…It was a dialogue I carried on with people for 20 years, and the trust was the essential element, that I kept building on year after year, but it was also something that could be easily broken. It could be as simple as a rotten tomato.”
McMullen also collaborates with the Nature Conservancy of Canada in preservation. Although not directly involved with either, he credits Foodshare and the Toronto Food Policy Council for some positive policy changes. “They have picked up the institutional response to what I tried to start before.” He also identified Slow Food as instrumental in linking him with new CSAs, although many of those are no longer CSAs: “There are easier ways of making money in agriculture. The pull of the monocrop.”
Policy and Program Resources
McMullen pointed to Quebec as the most progressive province in terms of policy: “They tend to put an emphasis on agricultural innovation and small scale.” Ontario, however, has for so long been telling farmers to “get big or get out… their policies reinforced what they saw, and what they saw was a rationalization of the land base in Ontario, whereby small scale farmers were bought out by mid sized farmers who were bought out by large-scale farmers.” There is also a dearth of policies that build social capital in rural areas, and preservation of local expertise.
“At the small end of farming is the CSAs, farmers’ markets, small-scale farmer, there is an intensification at that level… but it’s not centralized and it has no political clout. We have no political representation.” This despite the fact that small farmers outnumber the large-scale ones by 3:1. “The barrier I feel is not policy, but…institutional resistance. The fact that institutions don’t change very easily and very quickly. It’s a crystallization of beliefs, and the belief that is crystallized is that monocropping is the only thing, and large-scale farming is the only profitable way.” This in turn results in taxation system, access to grants, and food processing regulation that are really tailored for large-scale.
Desired Assets
McMullen reiterated the importance of the Quebec results. The government there worked with banks to create a loan portfolio for small-scale farmers, gave grants and subsidies for small-scale farmer start-up, wrote off bad debt, allowed leverage for purchase of equipment. “Where I see most small-scale farmers having difficulty is with the institutional frameworks. It’s the feeling of being on the outside. Many of them are afraid of local bankers.” He was able to navigate the institutional morass more easily because of his past work experience, but suggested that new farmers are always on edge about loans.
He also called for a publicly funded breeding program. “It’s what used to be called the public good, and there is no longer any policy that deals with the public good. There isn’t a budget line I can think of in OMAFRA that is rationalized based on public good.”
Constraints/overcoming them
He is critical of what he identified as excessive and narrow focus on “local” only: “I don’t think local food is the solution…It is the production values that go into the growing of food that give quality, not the distance from the market place.” The development of farmers’ markets has been very beneficial, giving producers another access point to customers without the middle man of grocery giants, but he also indicated that farmers’ markets are a hard way to sell, especially when there is competition from resellers.
McMullen also identified personal expectations as a potential constraint: “My own emotional desire to be successful was one of my biggest constraints, and what it leads to is a panic in the first 3 years of bootstrapping a new business.” That tainted Ken’s first marketing attempts, and also what he considered success on the farm. “As time went on, the feedback from my customers reinforced that I was doing it right, or I adjusted it to make it right.”
The overall system is geared to large scale production so he has to compete with organic produce in large grocery stores. Yet, he always knew that keeping the prices up a bit was important to signal quality. The advantage of a CSA is that he could do his marketing during the winter and sell the CSA shares months before his produce is actually delivered. The advance sales mean that sales take place when produce prices are higher everywhere, and fresh produce less available. Financing a small operation can also be a challenge, the one he overcame mainly because both he and his spouse had off-farm income.
McMullen feels that the declining numbers and ageing demographics of Ontario farmers leave them with little political clout. This, combined with much of the farm labour now being migrant workers who cannot vote, places farming on the political margins. Agricultural policy and programs are still geared towards large-scale monocrop production, and small-scale, particularly organic, growers are under the radar. His successes have been in spite of policy and programs, not because of them. He highlighted that his neighbours provided a lot of support, and the building of those trusting relationships was key: “The best thing I ever did was ask my neighbour for help.”
Successes
Stable clients are McMullen’s most important accomplishment, “a stable client base that is integrated into the farm and feels that the farm is theirs. I just realized, the thing I miss the most [since retiring] is the little kids running to the door and saying ‘Farmer Ken is here’.” He already misses the relationships that were formed, which were the greatest success of his CSA. Consider the following exchange between McMullen, and our researcher Erin Nelson: “I’ve got a generation of kids that knows that food comes from somebody, from some place. Their peers have no idea what food really is, but my kids do.” [Nelson: You think of them as your kids?] “Yeah, that’s right. I do. I think of them as my kids. There’s a piece of me in every one of them, a very large piece in fact. They’ve grown up on my food.”
Relevance
When asked about how his work would be relevant to other producers and other initiatives in other communities he listed a very focused set of lessons he learned and would advise everyone to consider. The first of those lessons is simply “add value” – in the case of his farm the value is in the transparent production on a diverse, organic farm that contributes to health of his customers and of the environment. The second lesson is “spread income opportunities throughout the year and understand that expenses generate income.” Anything he buys for the farm he buys wholesale and resells at retail thus lowering his operating costs. The third bit of advice is to focus on building good customer relations, especially by giving the customer more than they’re expecting.
McMullen also sees his model increasingly viable for Ontario and thinks the direct sales aspect of food production will grow rapidly. “The bigger picture is the squeezing of the middle class. It’s a self-directed opportunity for people who find themselves overeducated and underemployed. I can see it happening already in the urban centres where people are borrowing backyards, or rooftop gardening, inner city greenhousing. I’ve seen quite a few projects emerging around that area, and I call that farming, but OMAFRA wouldn’t, because it’s not taking place in the rural areas. In the rural areas it’s a good opportunity to transition away from monocropping and chemical agriculture, and I’m finding a number of young farmers are willing to try it as a way to stay on the farm.”