Is Community Supported Agriculture Viable for UK Farms

Viability of Community Supported Agriculture in the UK

(Report by Jo Hunt March 2003)

Policy

The Soil Association promotes Community Supported Agriculture (CSA) as a partnership between farmers and consumers where the responsibilities and rewards of farming are shared. CSA develops where the relationship between customers and farmers goes beyond just paying for food, and offers mutual support between loyal customers and local growers.

Summary

This information sheet looks at how farms in the UK are performing when they adopt a Community Supported Agriculture (CSA) approach. Using the experience of CSAs already up-and-running it the UK, it examines how theyare set-up; if they work financially, and whether they can keep going and grow long term.

Based on recent research carried out for the Soil Association, all the indications are that CSA is a successful ‘breakeven’ business strategy for small farms and market gardens. Groups of customers are willing to give a year’s commitment to pay a local grower a price that covers the annual costs of production. Consumer members receive good quality and vegetables, meat or fruit, and the grower receives an income that is quite low, but still above the national average for small farms.

In the longer term, there are several issues that CSAs need to tackle to make sure that they can stay viable, and these include:

• renewing their capital by including the costs of depreciation in members ‘share’ prices
• rewarding growers by charging prices that can offer a fair wage
• sustaining interest by involving new members in running the CSA and offering training for new seasonal and full-time growers.

CSA has to work as a viable business if it is to succeed at supplying good food locally, and we offer pointers to help new CSAs think about how they can do both.

Introduction

CSA farming is a novel way of delivering good local food based on a partnership between food producers and consumers that shares some of the risks and responsibilities of the farm. CSA businesses include market gardens, city allotments, mixed farms and fruit orchards. The CSA concept has been operating successfully for over 20 years in post –industrial economies, enabling small farms to keep going by supplying food to a local membership of supporting families. CSA is a distinctive market model that is as identifiable and popular as Farmers’ Markets are in the UK.

There is keen interest in greatly expanding the number of CSA farms in the UK. But before more farms change over to CSA, how viable are the ones already operating? This information sheet tries to answer this question by looking at UK CSAs in three different ways:

• What models of CSA are working in the UK?: looking at the CSA businesses that are already successfully established in the UK tells us about the types of farm, scale of activity and management set-ups that are proven to work.
• How do these CSAs perform financially?:– looking at the annual financial cycle of existing CSA businesses indicates whether they can generate enough income to meet all their cost, and offer CSA farmers a reasonable wage
• How do CSAs keep going in the long term? – looking at a range of long term indicators, the experience of CSA growers and their plans for the future development of their businesses, shows us whether CSAs are here to stay and how they generate the capital and skills needed to grow.

1What models of CSA are working in the UK?

All CSAs share some common characteristics: consumers sign-up for a season’s production; there is direct contact between the farmer and locally based members, and low intensity production methods are used. Most CSAs provide a regular ’share’ of fresh produce - weekly for vegetables or seasonally for fruit. Many offer several different shares to suit different households – ‘standard’ shares to feed two people and larger shares for families of four or more.

1.13 distinct types of CSA

Beyond the basic common characteristics, every CSA is different, depending on the land available, skills of the grower and what the members want. Whilst individual CSAs vary greatly, there are currently three distinct types that have emerged in the UK:

• Veg CSAs: Small in area, averaging 2.5ha, intensively cultivated as a market garden. Average of 70 members living within 10-15 miles of the CSA. Veg CSAs usually operate as a small separate business: either a smallholding run exclusively to produce for the CSA, or a small CSA growing business within a larger mixed farm. 30 or more types of vegetable are grown and delivered through a weekly box of seasonal vegetables, either collected from the farm by members, or delivered to their homes. Most Veg CSAs use organic growing methods and over half are certified by the Soil Association.
• Meat CSAs: Large in area, averaging over 100 ha, extensively managed for grazing livestock. Over 400 supporter families living within 20-30 miles of the CSA. Meat CSAs usually involve an entire livestock farm producing a range of chicken, lamb, pork and beef for their members. Key to offering fresh meat is a butchery facility on or near the farm and processing to produce sausages, pies etc. Members like to choose their meat each week and therefore Meat CSAs deliver either a choice of different shares, or operate a small on-farm butcher’s shop. Meat CSAs operate and are certified as organic, and have to meet all the hygiene regulations for supplying fresh meat.
• Fruit CSAs: Small in area, averaging only 1 ha, usually forming one small part of an existing specialist fruit farm. Fruit CSAs have an average 30 members drawn mostly from within 50 miles of the farm, who form only one of several marketing routes for selling produce. Fruit CSAs specialise in either top fruit (mostly apples), or vines and wines. There is only one harvest each year and members collect their bulk boxes of fruit or cases of juice and wine. Soft fruit does not form a regular part of either Veg or Fruit CSAs, due mostly to the high cost of fruit picking, but it is possible to run a ‘berry patch’ on a pick-your-own basis. Fruit CSAs are generally low input, but not organic, due to technical constraints of controlling mildew without resort to chemical sprays.

There are currently no CSAs in the UK that offer a veg, meat and fruit share all produced on the same farm. Several CSAs do offer their members access to organic meat from local producers, but not as a ‘share option’. Several UK CSAs are working towards offering a full range food supply to their members, through a combination of expanding the farm and cooperation with other producers.

1.23 different scales of CSA

The size of a CSA business depends largely on how many growers it employs and, interestingly,the different sized CSAs tend to be set up in different ways. Three distinctly different scales of operation that UK farmers have found to be effective for CSA can be characterised as:

• Part time grower CSA:typically one producer supplying to a local group of 20-40 members. Usually based on a smallholding owned by the producer, with the producer doing most of the organising as well as the growing, and boosting their income from work off-farm.
• Single grower CSA: one full-time producer often supplies to a network of 60-80 local members. Either a consumer-led CSA, where the farm business is organised by a committee made up of members and employing the grower on contract, or a producer led CSA where the farmer organises produce shares as one part of their farm operation. The CSA may rent the land from an existing mixed farm, or approach a farmer who already owns their own farm.
• Multiple grower CSA:often a team of two to five producers with different expertise serving a network of 150-600 members. Larger CSAs may be set up as a charitable company which may also own the farm where food is grown. The company can be managed by a committee that brings together member representatives and the growers.

1.3CSA is not for everyone

There are two distinct routes into CSA: a farmer wanting to develop a very local market, or a group of consumers looking for a supply of local produce. CSA producers and consumers share a common interest in making good food available locally in their community. However, the producer also needs to make a living out of CSA. Many producers enter CSA because their existing farm business is struggling, often facing falling wholesale prices on a small farm with few economies of scale. They see CSA as a way to restructure their business through diversification and look forward to getting to know their customers for the first time in years.

CSA farm businesses include many privately owned family farms, some farms owned by a small charity run by the members, and some CSAs on rented land within private farms or on land rented from a public body such as a Local Authority. These different business structures provide different balances between the sharing of risk and responsibility, between the grower and the members. Many small private farms going into CSA find it difficult to get used to sharing farm decision making with members - those farmers that are able to make the transition to shared responsibility, reap the benefits of genuinely shared risk, and the cooperation of enthusiastic volunteers. Not every farm has a farmer and members who are able to make this work.

Successful CSAs find real, practical benefits from being able to rely on their members when things get tough. For instance, several farm businesses have only survived because their members saw them through a poor production year. In other cases, the farm continued despite long term illness in the farming family, due to the work of members. And many CSAs have found their members to be a better source of long term finance than their bank.

2How do CSAs perform financially?

The short term viability of a CSA farm is best seen by looking at its accounts and financial performance for the year. The farm will need to generate sufficient income to cover its day to day running costs. One of the major advantages of CSA is knowing what the farm’s income will be at the beginning of the year, and being able to budget accordingly. In order to compare a wide range of different CSA farm businesses, it is most useful to look at the financial performance per hectare for the three different types of CSA – veg, meat and fruit.

2.1Income generated by CSA

The typical turnover of a veg CSA is around £17,000 per year, and this is sufficient to support one full time grower. Larger meat CSAs tend to operate with a much larger turnover of around £300,000 per year, due to their need to support several meat enterprises and a specialist butcher shop. Meanwhile, fruit CSAs tend to be much smaller, with a turnover typically of £3,000 per year, as their membership is only one of several outlets.

These figures indicate that the business strategy of Veg and Meat CSAs is to break even. They put together a budget – and in many CSAs this is worked out by the ‘core group’ and the grower - based on the numbers of shares for the year, and a price that enables them to cover all their costs. These costs usually include wages for the farmer, but usually do not include an allowance for depreciation and reinvestment. However, most CSAs are investing significantly in their business, resulting in a negative net cashflow over the year. This is a very positive sign that the CSAs are expanding to accommodate more members, and are able to source new money for investment, even if this isn’t fully covered in the price of the share.

The business strategy of Fruit CSAs is to keep their orchard or vineyard in operation. CSA is a small part of their total turnover and they usually do not charge for their extra labour costs for the small additional time of running the CSA ‘club’. Instead, the surplus generated by the CSA is being used to invest in the farm, often by planting new trees and widening the variety grown.

2.2Production costs of CSA

Overall, CSAs are successful at covering all their short term production costs, especially where a realistic price is set. However, CSAs put aside very little for investment and this is having an impact on their productivity, and future viability.

Labour costs are a relatively high proportion of the total costs of running a CSA – this is due mostly to the small scale production of a wide variety of fruit and vegetables. It takes on average 55 members of a CSA to support one full time vegetable grower. And on average it takes that grower assisted by casual labour, 1.5 hours per week per member to produce a box of vegetables. For meat CSAs the largest labour input is time spent on meat preparation and counter sales.

The non-labour costs include numerous items such as seed and transplants; animal feed and breeding stock; compost and farm manure. Most of these inputs can only be bought from national suppliers and incur high delivery costs, and very few of the inputs for CSAs are available more locally.

Rent or mortgage forms only a very small proportion of the costs of a typical CSA. In fact, the land on which most CSAs are operating is almost always either owned outright by the farmer, or a charitable trust, or the land is made available at a much reduced rate from a sympathetic landlord, such as a local authority. Many CSA operators think that it is not possible to purchase land, service a large mortgage and run a CSA at the same time. This is borne out in the USA where many CSAs are owned by land trusts, set up to get farmers out of the debt problem of a large mortgage and into local food production.

Generally, CSAs are failing to include the costs of depreciation in the value of capital items. Instead, they rely on one-off purchases of new pieces of equipment when they can, usually financed either by a small grant, their own money from off-farm, and sometimes offset by a ‘soft’ loan from their members. CSAs are generally under-capitalised, with many producers feeling they lack some of the basic machinery that would improve their productivity, butthey are not in a position to put aside money to buy that equipment. This means that improving the CSA businesses is reliant on ‘donations’ rather than planned investment.

2.3Setting the price

CSAs adopt one of two different pricing strategies: either benchmarking their price to equivalent produce, or calculating the price of a share each year by dividing total costs by the number of members. Fruit and meat CSAs use benchmark prices, often taken from other retail outlets for their produce, and therefore find it simpler to price. However, this approach means that the price of these CSA shares are not reflecting the additional value that members place on the ‘social’ part of the product. Consumers value knowing the producer and where their food comes from, as well as being offered a variety of involvement, social events, farm visits and newsletters. These are an integral part of most CSAs, that members really value even more than the produce, but this is rarely reflected in the price.

Some Veg CSAs benchmark their prices against established markets or box schemes operating in the area, and sometimes against the supermarket prices for conventional (not organic) produce. Typically, CSAs set their annual price at 15-20% below these benchmarks.

The other approach to pricing, which is adopted by around half of the Veg CSAs, is ‘shared price setting’: where the core group of members sits down with the growers to plan the year’s production and agree cost estimates. The price per share is then simply determined by dividing the total costs by the number of shares. However, CSAs often adjust the share price downwards to enable access for people on lower incomes, and ignore some of the real costs of running the CSA.

Most CSA shares are significantly under-priced. More realistic prices could be set by adding an additional percentage above benchmark prices, reflecting the value of the ‘intangibles’ as well as the ‘edibles’. For CSAs using ‘shared price setting’, realistic prices per share would be those that include the full costs of capital replacement, management time and a fair farmer wage.