Wednesday, November 14, 2007

Scalability in Farming

Allan Nation's editorial in the November, 2007 issue of The Stockman Grass Farmer was rather interesting. The article dealt with the issue of "scalability", something I have never heard of, regarding business and farms ... or the business of farming. In the beginning of the article Mr. Nation says, "Currently, in the USA the top one percent of income earners earn almost 70% of the total taxable income." I found that statistic very interesting. Not that I'm opposed to it, I think it is just the way things work out, but it was interesting nonetheless. He goes on to write that, "the difference between the top and the rest is that the high income people are all in "scalable" professions.

Basically, with all of the technological and social advances we have had you can reach masses of people with no more effort than it takes to reach a smaller amount (Mr. Nation draws this example from Nassim Nicholas Taleb who wrote, "The Black Swan"). That is what scalable can look like ... reaching masses with the same work of reaching less than masses, but more money involved. I believe the idea of scalability really got going with technology companies because they are all about reaching the masses. But, according to Mr. Nation's editorial most of those technology companies only last 10 years because of the intense competition they face. You may come up with an idea, but that doesn't mean you will be the one to profit most from it. Just take my beloved iPod from Apple ... they weren't the first on the scene with an MP3 players, but they are the ones who are profiting.

Okay, so that is the gist of scalable business (or at least as much as I can comprehend and explain without making my brain work on overload at this time). But, what does scalability have to do with farming and why in the world is Allan Nation writing about it in "The Stockman Grassfarmer"? Well, he took this concept and compared it to farming, specifically he compared it to Management Intensive Grazing (MiG).

MiG has been bouncing around the agricultural circles for many years (Mr. Nation says for over 25 years in fact), yet has never really found broad acceptance. According to Michael Porter, a Harvard professor, businesses that have long profit runs (like MiG examples have) are often the most difficult to get into but very easy to get out of. Mr. Nation believes that the thing that makes it so difficult to get into MiG isn't the cost of land or the cost of cattle or the cost of anything ... in reality it is the negativity associated with trying new ideas!

He mentions a survey by the University of Missouri that states that most farmers agree with the soundness of MiG in principle, but they can't change the way that they are already doing things. I believe it is just human nature because you see that in every profession ... even in the church.

Mr. Nation proposes that we should be developing farms that are, "a 'hybrid' production model that will allow us to minimize labor per unit of production (be scalable) while remaining in a non-scalable industry (minimal competition)". He brings up a great example from an article by Joel Salatin in the September issue of the magazine. Mr. Salatin wrote about expanding his grassfed beef and pastured pork operations because they were more "scalable" than his pastured poultry side of the farm. Think about it, it takes only a little more time to move 100 steers through a gate than it does to move 10 through the same gate ... but each carton of eggs he sells takes the same amount of time to package regardless of whether it is 10 dozen or 10,000 dozen eggs.

So, according to Mr. Nation what does this look like in a practical sense to someone running, or thinking about running, a MiG system. First of all, make the animals do the work for you. Let them self-harvest the forage and have them self-feed throughout the year (see post below). Secondly, manage as few herds as possible. Try to get your cattle in to one or two places so your time isn't used moving from place to place or setting up fence in multiple pastures. Make your time work in your favor. And finally, as Mr. Nation puts it, "stop buying Band-aids"! Fly problems, pinkeye, worm susceptibility can be eliminated through genetic selection according to Mr. Nation, so do that instead of spending all of your time running cattle through the head gate.

He concludes with a few other thoughts from the business world that I found interesting, but I think I'll save those for another post.

What about you readers? What do you think of this scalability issue? Any business folks out there that would like to speak to this, because it is obvious that business is not my strong suit...


Steven said...

I remember reading some about scalability in "Salad Bar Beef". Joel was saying how you could make x amount of dollars on 2 steers and can just slide up the scale as you add more animals. Making a similar profit per animal no matter how many you had. You don't have to have 400 steers to make it worth buying that silo and conveyor system for feeding.. etc. etc. etc.

As a side note, have you all ever watched "Little People Big World"? They have an "alternative farm" they raise some fruits but mostly pumpkins and do agri-tourism. They are in no way organic, but at lest they are trying new things.
It doesn't hurt to have a show on TLC to promote your farm!

Ethan Book said...

Scalability is a big thing when it comes to some animals. One of the reasons that we went from 2 Dexters to 13 Dexters in short order is because we had the fence, pasture, and hay ... so it wasn't that much more work to have more possible profit.

I haven't seen the show (no cable), but I have heard of it. Sounds interesting.

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