We have seen new business models emerge over the last decade for dozens of industries including travel, advertising, and publishing—all relying heavily on technology-based improvements in productivity and changes in distribution associated with the Internet.
Now we may be seeing the emergence of a new business model for small farms, which have lagged the transformation of other industries and continued to rely heavily on commodity pricing and middlemen distributors.
At the forefront of this revolution is the 10-employee, $700,000-a-year Polyface Farm, a 550-acre producer of beef, chickens, and pork in Virginia's Shenandoah Valley. A family farm run by its second generation owner, Joel Salatin, Polyface is thriving thanks to a combination of innovative use of technology to encourage livestock mobility, and streamlined distribution to bypass middlemen and instead sell products directly to consumers.
A New Way of Farming
Salatin's unusual techniques for making his small farm financially viable have become so popular that he offers two weekend seminars each year in which he teaches 30 farmers and wannabes all his tricks, "including dressing chickens, grazing management, handling egg layers, composting, and soil management," he says. The sessions, at $550 a person (excluding transportation and lodging), are sold out two months in advance. "You wouldn't believe how many people come here who are desperate to exit their 'Dilbert' cubicles," he says.
What these student-farmers learn is an approach to farming that is much different from what many of the 400,000 to 500,000 family farms still in existence use today (see BusinessWeek.com, 3/19/07, "Choosing the Family Farm").
On the production side, Salatin eschews the commonly used confinement techniques and grain feeding of animals in favor of keeping his cattle, chicken, and pigs grazing outdoors, within small pastures enclosed by light, high-tech, electrified fencing and portable chicken coops that are easily moved daily by one or two people to ensure the animals always have fresh grass. Chickens are fed grains as well, but only those produced by neighboring farms, and without the antibiotics typically mixed in with animal feed.
"With this technology, you can feed the world," says Salatin, watching a group of 1,200 Rhode Island Red chickens grazing in a small enclosed area of pasture on a recent morning. The mobile technology, he says, allows the animals' manure systematically to fertilize the pastures, enabling Polyface Farm to have about four times as many cattle grazing its lands as on a conventional farm—and thus save on feed costs.
Salatin combines conventional and innovative approaches to lower the farm's costs, especially energy costs. The pastures, barn, and farmhouse are situated on land below a nearby pond that "feeds the farm" using 15 miles of piping, says Salatin. He also methodically harvests the 450 acres of woodlands, using the lumber to construct farm buildings.
The pasture-based feeding of the animals leads to better tasting meat and eggs than is possible with enclosed, grain-based feedlots, he argues. And the grass helps produce meat that is lower in saturated fats and higher in polyunsaturated fats than conventional meat.
Half a Steer at a Time
He credits the high quality with enabling him to build a loyal following of consumer and restaurant customers (see BusinessWeek.com, 12/20/06, "Whole Foods and the Celebrity Farmer"). His e-mail-based "metropolitan buying clubs" have grown to 900 families within a 100-mile radius, from just 200 families two years ago. Polyface Farm delivers meat eight times a year to specific drop points in the region, where members pick it up.
"The bugaboo in direct-farm-marketing is coming in from the garden and taking care of your customers," he says. "The beauty of this is it is e-mail-based and there is no middleman." In addition, the farm continues to sell to about 400 families that prefer to trek out to Polyface Farm and make their purchases directly, often buying a quarter or half a steer at a time. "These are our most militantly loyal diehards," says Salatin.
If It's Long Distance, Don't Bother Calling
The growing demand from legions of direct customers has led Polyface to lease an additional 700 acres of pasture over the last three years. Salatin says the profits from the weekend-farmer seminars as well as sales from instructional books he's written "are allowing us to make the investment without having to resort to loans," which are another bugaboo of traditional farming.
One thing Salatin won't do as part of its growth kick is to accept orders for shipping to areas outside his Virginia community (see BusinessWeek.com, 7/18/07, "Buy Local—With Town Currency"). "We want [prospective customers] to find farms in their areas and keep the money in their own community," he says. "We think there is strength in decentralization and spreading out rather than in being concentrated and centralized."
(See our slide show for more on Polyface Farm's innovative production methods.)