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If ol’ MacDonald had a specialty farm

August 23, 2012


Ron Wirtz Editor, fedgazette
If ol’ MacDonald had a specialty farm

In the summertime, farmers markets often brim with locally grown fruits and vegetables, along with the consumers who crave them. Even if you pay a little more for fresh produce than at the grocery store (though that’s not always the case), you figure it puts a little money in the pockets of local farmers, right?

But the profitability of many so-called specialty crops—which in the Midwest includes most any fruit or vegetable—varies considerably, according to an August report by the Minnesota Department of Agriculture. The report uses actual farm records from 2008 to 2011 from in-state producers to find out average financial performance for nine crops. At least five farms had to have grown the crop for it to be included in the analysis.

Just as strawberries are often the first crop out of the field, so too are they first in financial returns after direct expenses and overhead are paid, followed by assorted vegetables (see Chart 1). In some cases, they didn’t have much competition; four of the nine categories did not recover their basic costs or merely broke even.

Farm specialty crops Chart 1 -- 8-23-12

The difference in profitability appears to be due to a couple of factors. First, the most profitable crops had a clear edge in average revenue per acre (see Chart 2). Four other crops have medium-sized revenues—$4,000 to $6000 per acre—but only raspberries and cantaloupe were consistently profitable, thanks to lower costs. Three other crops had low costs, but also low revenues, and basically broke even after direct expenses (like seed, fertilizer and machinery use) as well as overhead (hired labor, taxes) were paid. These figures are fairly generous in their calculation of farm profits, the report pointed out, as they “do not cover full compensation to the owner for labor and management.”

Farm specialty crops Chart 2 -- 8-23-12

Ron Wirtz
Editor, fedgazette

Ron Wirtz is a Minneapolis Fed regional outreach director. Ron tracks current business conditions, with a focus on employment and wages, construction, real estate, consumer spending, and tourism. In this role, he networks with businesses in the Bank’s six-state region and gives frequent speeches on economic conditions. Follow him on Twitter @RonWirtz.