The Guide

The Guide: Common Questions About Farming Risks.

Can I make enough money farming?

How do you manage cash flow without anything resembling a steady paycheck?

Can farming provide financial security for my family?

How can I pay for my family’s health care needs?

What can I do about damage from pests, diseases, and weather?

What if a customer gets hurt while on my farm, or gets sick from eating my farm products?

I need labor to run my farm efficiently, but I have no previous management experience and I am intimidated by the legal and tax implications of having employees. Where do I go for help?

How can I minimize the toll on my body from the physical labor of farming?

I understand that farming is one of the most dangerous occupations in the U.S. What can I do to ensure the safety of my family, my employees, and myself?

How can I prevent my relationships from falling apart from the pressures of farming?

What happens if I suddenly lose a market for my product(s) or the price for my product(s) plummets?

How do I handle all the regulations that may impact my farming operation?

Can I make enough money farming?

Income is by far the most common concern among new and beginning farmers. There is no doubt that farmers as a group are having a difficult time financially. However, there are farmers who run highly profitable operations, even on very small acreages.

Strategies:

  • Determine your financial needs. You may want to develop a personal or family budget to determine how much income you require. See Exploring the Small Farm Dream or Tilling the Soil of Opportunity, listed below, for guidance.
  • Develop or tighten up your farm business plan. Current economic pressures require that farmers pay more attention than ever to the business aspects of farming. Several courses and publications can help. Tilling the Soil of Opportunity is an excellent resource.
  • Consider farming part-time, at least initially, or relying on an off-farm job for yourself or another family or farm team member.  Remember that in any industry, new businesses are unlikely to turn a profit in the first few years. Nationally, more than half of all farm family income comes from off-farm sources.

Resources:

  • Exploring the Small Farm Dream: Is Starting an Agricultural Business Right for You? Course and self-study workbook to help aspiring farmers decide if they want to farm as a business. Contains worksheets to help farmers determine their personal/family budget.
  • Tilling the Soil of Opportunity is an agricultural business planning class and workbook. It is offered every winter in Massachusetts. Whether you are thinking about starting a farm business or need to increase the profitability of an existing one, the Tilling the Soil of Opportunity course is a great investment of your time. At the end of the course you will have a workable business plan to use in managing your business or seeking loans. To find out about upcoming classes, contact Rick Chandler of the Division of Agricultural Resources at (413) 577-0459 or rchandler@umext.umass.edu.
  • If Tilling the Soil of Opportunity is not available at a time or place convenient for you, contact you local Small Business Development Center (SBDC) to find our about non-farm-specific classes in your area. To find your local SBDC, contact (413) 545-6301 or http://msbdc.som.umass.edu/ You may want to supplement these classes by reading Building a Sustainable Business (below).
  • Building a Sustainable Business: A Guide to Developing a Business Plan for Farms and Rural Businesses. This is a self-study guide to farm business planning and is available from the Minnesota Institute for Sustainable Agriculture at (802) 656-0484 or viewable online at: http://www.misa.umn.edu/vd/bizplan.html.
  • The National Agricultural Risk Assessment Library. This website features many publications on business planning and managing the financial risks of farming. http://www.agrisk.umn.edu/
 

How do you manage cash flow without anything resembling a steady paycheck?

Many people make the transition to farming from jobs where they received a steady paycheck. In operations such as vegetable farms, there are high expenses in spring but no income until mid-summer or fall. This can make it difficult to pay the bills!

Strategies:

  • Learn sound financial management. Training in financial management can help you plan ahead and use your money wisely. See the business planning and training resources above.
  • Obtain operating loans. Many farmers rely on loans to provide operating capital to make it through the season.
  • Consider starting a Community Supported Agriculture strategy. This marketing strategy addresses seasonal cash flow difficulties. Customers pay ahead and buy a “share” of produce in winter or early spring, and then pick up their food weekly throughout the growing season. Some innovative farmers are adapting this strategy for meats and other farm products.

Resources:

  • First Pioneer Farm Credit Offer operating capital, asset, and real estate loans for Massachusetts farmers. https://www.firstpioneer.com
  • Farm Service Agency FSA provides government loans for farmers who are unable to obtain credit from commercial lenders. FSA has targeted funds for loans to beginning farmers.  http://www.fsa.usda.gov/
 

Can farming provide financial security for my family?

Financial security means different things to different people. In addition to basic income, it may include savings, retirement planning, and life insurance.

Strategies:

  • Determine what financial security means for you and your family and/or farm team. You can’t know if farming could provide it unless you know what you need!
  • Make sure your business plan addresses retirement and other savings needs. See the business planning resources above.
  • Agree that a family member will hold an off-farm job. You may find that farming part-time or having some family members continue with off-farm jobs provides important stability to offset the uncertainties of farming.
  • Develop an estate plan to provide for the long-term security of your family, and the future of your farm business.

Resources:

How can I pay for my family’s health care needs?

Providing adequate health care coverage is one of the most serious concerns for self-employed farmers.  Many farmers do not carry health insurance and try not to think about it. However, there are a number of strategies that will allow you to cover health care costs.

Strategies:

  • Obtain affordable health insurance through a group plan (see resources below).
  • Hold a non-farm job that provides health insurance.
  • Rely on your spouse’s job to provide family health insurance.
  • Self-insure by establishing a fund to pay for your own health care costs. When considering this option, assess your health history and lifestyle.
  • Take advantage of IRS provisions that allow deductions for health savings accounts and health insurance premiums (see below).

Resources:

  • Mass Health. Mass Health is a state-funded program that can cover some medical costs for eligible individuals and families. http://www.mahealthconnector.org/portal/site/connector/
  • Massachusetts Insurance Partnership. The Massachusetts Insurance Partnership offers assistance for eligible self-employed people by reimbursing some of the cost of health insurance. They also work with small businesses to reimburse some of the cost of providing insurance to their employees. http://insurancepartnership.org/who/index.asp
  • Massachusetts Farm Bureau. Membership provides access to good rates for health insurance through Farm Family Insurance. Farm Bureau also offers reduced rates for dental care. http://www.massfarmbureau.com/.
  • Chambers of Commerce. Contact your local Chamber of Commerce using the web address above or look them up in the phone book. Health insurance at group rates is usually a service offered to Chamber of Commerce members. .http://www.2chambers.com/massachu2.htm
  • Community Health Centers. Community health centers can set fees on a sliding scale basis, provide free care when necessary, and help you identify programs for which you may be eligible.
  • Health Savings Accounts. You can set money aside in a health savings account that is tax-free if the money is spent in the same year. State Farm Bank now offers health savings accounts in conjunction with a high-deductible health insurance policy for self-insured people. Contact a State Farm agent for details. http://www.statefarm.com/
  • Tax Deductions. Take advantage of the fact that self-employed individuals may be eligible to deduct 100% of their health insurance premiums to reduce their taxable income.  See IRS Publication 535 for details. http://www.irs.ustreas.gov/
 

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What can I do about damage from pests, diseases, and weather?

Bad weather or outbreaks of pests and diseases are among the “riskiest” of all farm risks. A hailstorm or pest infestation can seriously affect your livelihood. While you can’t make Massachusetts have stable, friendly weather year-round, there are some management strategies to minimize the negative impacts from weather events, pests, or disease incidences.

Consider insuring your farm revenue or crops:

Some forms of insurance can protect you from some losses caused by pests, diseases, and bad weather.

  • Traditional crop insurance covers certain commodities such as apples, sweet and field corn, peaches, cranberries, potatoes, tobacco, winter squash, cultivated clams, and nursery crops.
  • The Adjusted Gross Revenue (AGR) program insures your overall farm revenue and can be used regardless of the mix of crops on your farm. A similar product, known as AGR-Lite will also cover operations that include some livestock.
  • The Noninsured Crop Disaster Assistance Program (NAP) provides coverage for crops that are not covered by ordinary crop insurance. NAP is available through the Farm Service Agency. Resources:
  • Risk Management Agency. RMA can provide you with information about crop insurance, AGR and AGR-Lite insurance, as well as provide information about insurers that offer appropriate policies in Massachusetts. http://www.rma.usda.gov/
  • The National Agricultural Risk Assessment Library has many documents on crop insurance options. http://www.agrisk.umn.edu/
  • The Farm Service Agency offers NAP coverage. See http://disaster.fsa.usda.gov/nap.htm for more information.

Design your farm operation to minimize the potential effects of weather, pests, and diseases.

Management choices such as enterprise selection, diversification, and using good cultural practices can also minimize the effects of damage.

  • Enterprise selection. Wherever possible, choose crops and livestock that are suited to your climate and resistant to pests and diseases.
  • Diversification. Diversifying your farm enterprises can minimize damage; if one crop is destroyed, another may survive.
  • Using good cultural practices often protects your crops and livestock in spite of potential difficulties. For example, crop rotation can help minimize the effects of many soil-borne diseases.

Resources:

  • The UMass Extension Agriculture and Landscape Program can help you develop farm management practices that will minimize potential damage from pests, diseases, and weather. www.umass.edu/agland
  • ATTRA is a national information service that offers publications about a wide range of cultural topics including diversification, pest and disease management, season extension, and other practices to protect your crops and livestock from pests, diseases, and weather. http://www.attra.org/
 

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What if a customer gets hurt while on my farm, or gets sick from eating my farm products?

This is a legitimate concern on many farms, particularly those that welcome customers onto the farm and those that market directly.  There are some very practical and successful ways to minimize these risks.

Acquire the insurance you need to protect yourself.

Several kinds of insurance may be appropriate, depending on your operation.

  • Farmers Comprehensive Liability Insurance covers on-farm accidents affecting farmers, employees, guests, and customers. It does not replace Worker’s Compensation Insurance and only covers activities considered “farming.”  This is usually defined to include production and farm stand operations but not other forms of marketing.
  • Commercial Business Insurance may be necessary if your activities are not considered “agricultural.” This insurance is appropriate if you sell at farmers’ markets or even farm stands if you sell more than a certain percentage of products that originated off your farm.
  • Owners of small operations may be able to expand their homeowners policy to cover farm and marketing activities.
  • Product Liability Insurance. The policies mentioned above are unlikely to protect you if customers are injured as a result of eating your farm products. You may want a product liability insurance policy that will protect you against this sort of liability.

Resources:

  • The Legal Guide to Direct Farm Marketing. This guide discusses recommended insurance coverage for direct market farmers, including product liability, as well as covering operations that run a farm stand, pick your own operation, CSA, or other marketing venture. This is available at http://www.smallfarm.org/bookstore/index.htm.

Make sure your farm and farm products are safe for customers.

Strategies:

  • Make sure that all farm areas that customers visit are safe and posted with cautionary signs where appropriate.
  • Learn about farm product safety, particularly for value-added products.

Resources:

Consider organizing your farm business as a corporation to limit liability.

Strategies:

  • Incorporating your farm can protect you, your family, and your farm team from many types of liability. You can learn how and why you might form a farm corporation through any of the business planning resources listed below.

Resources:

  • Planning the Financial/Organizational Structure of Farms and Agribusiness Firms: What Are the Options? This guide focuses specifically on farm organizational structure and discusses how to set up a farm corporation. Available from http://www.mwpshq.org/.
  • Tilling the Soil of Opportunity is an agricultural business planning class and workbook. It is offered every winter in Massachusetts. The curriculum includes information on choosing a legal structure for the farm. To find out about upcoming classes, contact Rick Chandler of the Division of Agricultural Resources at (413) 577-0459 or rchandler@umext.umass.edu.
  • Your local Small Business Development Center (SBDC) has information about appropriate classes as well as written materials that discuss various legal structures. To find your local SBDC, contact (413) 545-6301 or http://www.msbdc.som.umass.edu/.
  • Building a Sustainable Business: A Guide to Developing a Business Plan for Farms and Rural Businesses. This self-study guide to farm business planning includes a discussion of choosing an appropriate legal structure. Available from the Minnesota Institute for Sustainable Agriculture at (802) 656-0484 or viewable online at: www.misa.umn.edu/publications/bizplan.html.
  • The National Agricultural Risk Assessment Library. This website features many publications on business planning and managing the financial risks of farming. http://www.agrisk.umn.edu/
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I need labor to run my farm efficiently, but I have no previous management experience and I am intimidated by the legal and tax implications of having employees. Where do I go for help?

Employees bring risks and responsibilities to a farm operation. However, effective management skills make labor a resource instead of an additional problem. With some training and assistance, you can navigate through the associated legal issues.

Learn to become a more effective manager.

Strategies:

  • Take a course in employee management.
  • Read books or online resources on farm management.

Resources:

  • Ag Help Wanted: Guidelines for Managing Agricultural Labor. This publication is an excellent manual for farm employers. Find it online at http://www.aghelpwanted.org/ or order it in hard copy from the same website.
  • Contact your local Small Business Development Center (SBDC) at (413) 545-6301 or http://msbdc.som.umass.edu/ to find out if there are courses for employers near you. Note that these classes will not focus specifically on agriculture; you can supplement them with Ag Help Wanted: Guidelines for Managing Agricultural Labor or other resources.
  • The Risk Management Education Library features many resources on labor management. http://www.agrisk.umn.edu/.

Educate yourself about the legal issues faced by farm employers.

Strategies:

  • Research your legal responsibilities as a farm employer by taking a course or using the resources listed below.
  • Make sure your farm is in compliance with relevant regulations.

Resources:

  • Summary of Federal Laws and Regulations Affecting Agricultural Employers. This is a guide to legal farm labor issues and includes information on exemptions for smaller operations. Find it online at www.ers.usda.gov/publications/ah719.
  • Gemplers’ Labor Law Compliance: A Working Guide for Ag/Hort Employers summarizes legal issues for farm employers. http://www.gemplers.com/.
  • The Risk Management Education Library features many resources about labor issues for farm employers. http://www.agrisk.umn.edu/.
 

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How can I minimize the toll on my body from the physical labor of farming?

The physical stresses of farming concern all farmers, particularly those who are no longer in their twenties.  Career changers who come to farming later in life, often from office or non-physical jobs, are particularly concerned about potential physical damage. There’s no reason to stop farming as you age, however.  By carefully managing your body and adjusting your farming practices you can keep farming!

Strategies:

  • Hire labor with stronger backs.
  • Custom hire certain farm tasks.
  • Switch enterprises to those that are less physically demanding, e.g., from squash and potatoes to culinary herbs or from cattle to sheep.
  • Acquire equipment that lightens the physical load on your body.
  • Think about transitioning the farm operation to the next generation – a family member or non-family partner who can be the brawn to your brains – and who could eventually take over the farm when you retire.
  • Attend to your personal health: engage in stretching, yoga, or other stress-reducing and body enhancing practices.

Resources:

  • The New York Center for Agricultural Medicine and Health, which serves Massachusetts as well, offers many resources about farm safety and best practices for taking care of your body as you farm. http://www.nycamh.com/.
  • Mechanizing Your Small Farm is an online tool that can help you decide what kinds of equipment are appropriate for your operation. Available at www.smallfarm.org/mechanization.
  • New England Land Link can help you locate young farmers who might take on a role as junior partner or manager. Click here for NELL.
 

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I understand that farming is one of the most dangerous occupations in the U.S. What can I do to ensure the safety of my family, my employees, and myself?

I understand that farming is one of the most dangerous occupations in the U.S. What can I do to ensure the safety of my family, my employees, and myself?

There are certainly many hazards in farming. However, you can avoid many by planning well and adopting safe practices.

Strategies:

  • Select relatively safe enterprises, infrastructure, and equipment. Manure lagoons, augers, and silos are particularly dangerous. Learn about the safety of your current and proposed practices and avoid dangerous options where possible.
  • Implement safe practices and safety training. Learn recommended safe practices for your type of operation and require that all farm workers and family members receive relevant safety trainings. For example, you can prevent many serious injuries by properly shielding all PTO shafts.

Resources:

  • The New York Center for Agricultural Medicine and Health, which serves Massachusetts as well, offers many resources about safety training and safe practices. http://www.nycamh.com/.
  • The farm supply company, Gemplers, offers several relevant publications. How to Save Lives and Money with your Safety Program gives information about on-farm safety programs. Use Gemplers’ Tailgate Training Tip Sheets as aids when giving your employees safety training. http://www.gemplers.com/.
 

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How can I prevent my relationships from falling apart from the pressures of farming?

There’s no denying that farming can strain a marriage or business partnership. This is one of the most frightening risks associated with a farming career. But there are things you can do to minimize the risk and protect your relationships.

Strategies:

  • Try to be clear from the beginning about your personal and family goals and visions. Get on the “same page.”
  • Make sure that your farm business fits with your family’s lifestyle.
  • Learn about work and communications styles and develop your communication skills.
  • Read books and/or take classes about managing relationships.
  • Develop positive habits such as regular family or business meetings.

Resources:

  • Purdue’s Farm and Family Connections series has a number of relevant publications, including: Communication in the Family; Balancing Work and Family; Recognizing and Managing Stress; and Involving the Family in Goal Setting and Decision Making. You can view each of these online at www.agecon.purdue.edu/extension/programs/fbm21/connections.htm
  • Holistic Management (R) helps families and farm partners clarify their goals and develop an improved decision-making process. http://www.holisticmanagement.org/
  • NESFI’s Exploring the Small Farm Dream workbook and course encourages aspiring farmers to discuss their goals and values. Some course participants have said–only slightly tongue-in-cheek–that it was the best marriage counseling they ever had. 
 

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What happens if I suddenly lose a market for my product(s) or the price for my product(s) plummets?

Often, farmers are more concerned with the risks associated with legal or production aspects of farming, but the market is risky, too! There are several ways to address the risks associated with marketing your product.

Strategies:

  • Diversify your marketing strategy. If one market falls through, you can rely on others.
  • Purchase AGR crop insurance; it provides a level of guaranteed income against market losses.
  • Some forms of commodity crop insurance protect against falling prices.
  • As a damage-control solution, consider turning your crop or livestock product into a value-added product. For example, turn tomatoes into salsa. Remember to comply with food safety guidelines (see the Massachusetts Food Processors Resource Manual, above).
  • Consider a marketing strategy that provides you with a guaranteed income. Investigate production contracts, producer cooperatives, CSA, and other marketing strategies.

Resources:

  • Risk Management Agency. RMA can provide information about crop insurance, AGR and AGR-Lite insurance, and insurers that offer appropriate policies in Massachusetts. http://www.rma.usda.gov/
  • The National Agricultural Risk Assessment Library has many documents about marketing issues. http://www.agrisk.umn.edu/
  • ATTRA is a national information service with publications about a wide range of topics, including a range of publications about marketing strategies and market diversification. http://www.attra.org/
 

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How do I handle all the regulations that may impact my farming operation?

Research legal issues before you start a farm or make changes to your farm operation to save a lot of trouble.

Strategies:

  • Research the legal issues that may affect your operation.
  • Make sure your farm is in compliance with relevant regulations.

Resources:

  • The Legal Guide for Direct Farm Marketing addresses legal concerns of direct-market operations. It also covers selling on-farm or at farmers’ markets; organizational structure, licenses, and taxation; financial issues; labeling and advertising; land use and property law; labor law; insurance and liability; and regulations relevant to on-farm processing and sales of meat and other livestock products.  It is available from the bookstore.
  • The National Agricultural Risk Assessment Library
  • The Risk Assessment Library offers many documents about negotiating legal terrain. http://www.agrisk.umn.edu/
  • Gemplers’ Labor Law Compliance: A Working Guide for Ag/Hort Employers summarizes legal issues for farm employers. http://www.gemplers.com/
  • Summary of Federal Laws and Regulations Affecting Agricultural Employers. This guide to legal farm labor issues, including information on exemptions for smaller operations, is Available online at www.ers.usda.gov/publications/ah719.
 

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