Kimberly L. Morgan (firstname.lastname@example.org), Extension Economist, Department of Agricultural and Applied Economics, Virginia Tech
As reported in the USDA’s 2007 Census of Agriculture, a total of 12,549 U.S. farms indicated they had marketing products through Community Supported Agriculture (CSA) arrangements, of which 334 were located in Virginia. As of today, there are 176 Virginian CSA farm listings on the Local Harvest (www.localharvest.org ) portal, and another 42 listed on the Eat Well Guide (www.eatwellguide.org) site. As one of many forms of direct-to-consumer marketing opportunities available to Virginia’s producers, the CSA model allows growers and buyers to share in the management of risks inherent to agricultural production. In general, CSA contracts are developed by the grower that outline the product varieties, volumes and formats s/he intends to plant and process, expected availability, pickup days and locations, pricing structures, and contingency plans in case of weather events, missed deliveries, and other unexpected situations. CSA buyers sign the contract and pay the fee at the beginning of the planting period, in return for a weekly delivery of a basket of goods which may feature fresh produce, baked goods, pasta, sauces, jams, meats, etc., and tends to vary based on the CSA’s farm harvest schedule. In a 2009 survey of 205 CSA producers located in nine states conducted by Woods et al., average CSA respondents were 45 years old, had operated for about four seasons, and 25 percent had had no farming experience prior to starting their CSA business. Another 25% indicated that their CSA operation represented their first horticultural direct-to-consumer marketing experience. The intent of this report is to provide guidance on the opportunities represented by a CSA direct-to consumer operation and, to provide resources available to Virginia producers.
A key component to sustainable success in the CSA business model is to understand that direct-to-consumer sales are market driven. This fact underscores the importance of finding out as much about any potential customers BEFORE the first seed and soil tests are ordered. CSAs are a model of risk-sharing between grower and consumer, which means customers need to be involved in the upfront planning process of what to plant, and when, and how much, and whether any value-added or baked goods are desired. Expending time and energy in this get-to-know-each-other stage of the CSA partnerships will result in producer’s knowing there is a buyer for what is grown once the season is under way. The Local Harvest portal is a great resource to find out about existing CSA businesses and their offerings located in Virginia and nearby states. To establish an online presence and reach audiences who are searching for CSA partnerships, spend time exploring this site and register your farm, filling out as many farm, product, and marketing details as possible.
Because CSAs are geographically constrained to a limited number of miles between producer and consumers to facilitate timely delivery of fresh products, targeting your potential market is highly recommended. A first step in identifying potential customers can be accomplished by investing time in constructing a business and marketing plan, in writing. A great resource to help guide producers through this process is the AgPlan (https://www.agplan.umn.edu/) software, a totally free and fully customizable business plan resource. Using step-by-step guidance, producers receive instruction to enter details about the farm family, mission and vision statements, operation details, legal and insurance requirements, marketing materials and market development, and financial data and reporting. All of this information is organized by the software and the result is professionally formatted plan that can be shared with bankers, customers, etc. Feedback from successful direct-to-consumer producers strongly emphasize the importance of the farm story in attracting and retaining buyers, making it well worth the time spent developing a CSA farm’s unique aspects into a recognized brand focused on sustaining long term profitability.
Of major importance to establishing a profitable CSA business is accurate calculation of your selling price. The key to developing a pricing strategy is to know and document all of the fixed and variable costs of production, marketing, transporting, storing and people-hours involved for each item sold. Fixed costs include all ownership costs, and include depreciation, interest, repairs, taxes, and insurance, and variable costs include all operating costs such as seed, fertilizer, fuel, labor, veterinary services, etc. CSA managers can use total costs and a desired gross margin percentage to arrive at a selling price for the CSA basket, using the following formula:
Selling price = (cost of goods sold)/(100% – percent of gross margin desired).
For example, if the CSA manager wants to earn a 40% gross margin on each CSA basket, and the total costs of goods included in that basket is $12.35, the selling price would be $12.35/(100%-40%) = $20.58 per basket.
Regarding rules and required regulations and inspections for farm facilities, produce and livestock processing, and value-added food and food products, check in with the Virginia Department of Agriculture & Consumer Services (VDACS) personnel (http://www.vdacs.virginia.gov/about/directory-mkt.shtml). The marketing and regulatory and inspection departments offer valuable, timely resources, offering clarification as to the latest in food safety requirements, access to and costs of inspection services, and connections to potential customers via a web presence and numerous marketing materials. Another website to bookmark is the National Agricultural Law Library at the University of Arkansas, which offers a comprehensive clearinghouse of legal definitions, guidelines and research on issues (http://nationalaglawcenter.org/) specific to of Virginia and Southeastern U.S. Depending on the size, scope and reach of the CSA business, there may not be a lot of required policies and procedures in place; HOWEVER, with food safety concerns at an all-time high, producers are strongly encouraged to be aware of, and adopt, current best handling practices. At a minimum, CSA operators should document, in writing and supported by photo and video evidence, each step along the way from seed to customer, to provide evidence that every effort was made to produce safe, clean, wholesome foods to buyers. Several of the regulations are based on “common sense” rules of thumb followed by the majority of producers, and the added step of documenting these efforts demonstrates awareness of the latest requirements. The major goal of CSA partnerships is an equal investment in a long-term relationship based on communication and trust, resulting in sustainable profitability for a grower and buyer access to convenient, high-quality food and food products from a known and trusted source.
Aside from do’s and don’ts, a few additional observations of successfully marketed CSA operations are worth noting. Today’s food consumers are mobile-device and social media-connected creatures, representing a unique and relatively low-cost promotional opportunity. CSAs owners with established Facebook business pages are able connect with their current customers, and by extension the friends and connections of those customers, all throughout and even beyond the production season. This constant access to the eyes and ears of CSA members serves to build awareness and stimulate interest among current and future clients, and also serves to educate buyers about the everyday realities of farm production and marketing responsibilities and activities. Finally, producers who are considering the development of a CSA operation are encouraged to reach out to current CSAs for advice and guidance. A strategic feature of CSA operations is that no two are alike, so with less “threat” of competition other growers are very willing to talk and share ideas, once the season has ended of course.
Woods, T., M. Ernst, S. Ernst, and N. Wright. 2009. “2009 Survey of Community Supported Agriculture Producers.” Agricultural Economics Extension Series 2009-11, University of Kentucky Cooperative Extension Service (Link: http://www.uky.edu/Ag/NewCrops/csareport.pdf)
Local Harvest portal listing Virginia CSA operation locations, websites, contact information, etc.: http://www.localharvest.org/search.jsp?st=49&ty=6&nm=
Eat Well Guide portal listing Virginia CSA operation locations, contact information, etc.: http://www.eatwellguide.org/search/results/?device=iframe&iframe=11
National Agricultural Statistics Service, United States Department of Agriculture. 2009. “2007 Census of Agriculture, Volume 1, U.S. Summary and State Reports, Table 44.” (Link: http://www.agcensus.usda.gov/Publications/2007/Full_Report/Volume_1,_Chapter_2_US_State_Level/st99_2_044_044.pdf)
- AgPlan software: https://www.agplan.umn.edu/
- Community Supported Agriculture, Agricultural Marketing Resource Center: http://www.agmrc.org/markets__industries/food/community_supported_agriculture.cfm
- USDA National Agricultural Library, Community Supported Agriculture: http://www.nal.usda.gov/afsic/pubs/csa/csa.shtml
- The National Agricultural Law Center, University of Arkansas: http://nationalaglawcenter.org/
- Virginia Department of Agriculture and Consumer Services: http://www.vdacs.virginia.gov/index.shtml.