Introduction to Small Scale Agriculture

Numerous agriculture enterprises are adaptable to small acreage tracts. Both livestock and specialized crops can be compatible on land from five to 160 acres. There are several reasons to create an agriculture enterprise even if you are a novice with crops or livestock.

Why Become Involved in Agriculture?

• Maintain a more desirable tax classification for agriculture versus residential classification (see Agriculture Production and Tax Classification section).
• Many people enjoy “farming” or “ranching” as a satisfying hobby. Social activities associated with these activities can provide a great personal satisfaction.
• Careful attention to the costs of agriculture hobbies can produce a positive financial return. Usually these returns are small on an investment basis (less than 5%). However, specialty livestock and crops can occasionally have a significant return on investment if a niche market is found.
• Livestock (sheep and cattle) are good collateral for loans. They are fairly liquid investments and can be used as a form of qualified expenses to savings.
• Taxable income may be reduced by qualified expenses to agricultural enterprises that would not be considered tax deductible without the agricultural enterprise. Check IRS rules as they have extensive definitions of what a “farm” is versus a “hobby.”

Drawbacks to Small-Scale Agriculture Enterprises

• The economy of scale can make marketing of crops and livestock less economical than larger producers. Direct expenses (i.e., feed, marketing, veterinary supplies, etc.) can be higher for smaller quantity purchases, which can harm the profitability of the enterprise.
• Most small-scale agriculture enterprises require various forms of equipment that are not utilized to their potential; thus capital equipment expenditures (i.e., tractors) may be over-purchased.
• Custom hire of farm work (i.e., plowing, hay harvesting, etc.) usually costs the small farmer more as the custom farmer cannot afford to charge usual and customary rates on small parcels.
• Agriculture, particularly livestock, can be highly labor intensive at certain times of the year. This demand for labor competes with individual recreational and off-farm employment demands.
• Most small-scale agriculture does not have the economy of scale to minimize risk. For instance, a hail storm, livestock disease, or death can be extremely damaging to the enterprise. There is not enough size and scale to spread the normal risk of agriculture enterprises.

Typical Small-Scale Agriculture Enterprises

Beef

There are several beef enterprises to choose from. They range from the relatively low risk cow-calf operation to yearling “grass steer” operations. The cow-calf operation has a 400-500 pound feeder calf as its saleable product and a potential net cash income range of $0 to $300 per cow. Yearling “grass steer” operators buy 500-600 pound feeders in the spring, put them on pasture for five to six months, then sell them as heavy (700-900 pound) feeders in the fall. Potential net cash income range for this type of enterprise is -$80 to $50 per animal.

In general, beef enterprises have relatively low labor requirements and can make use of family labor. Chore time is flexible, too. Capital investment can be kept low per unit if the farmer is careful. Most beef enterprises can make extensive use of home-raised forage, which reduces cash expenses. The yearling “grass steer” has an additional advantage because the producer’s money is tied up in the animals for only a short time (5-6 months).

Unfortunately, beef enterprises usually have a relatively low net return per unit. They also require fairly large acreages of pasture to be feasible.

Swine

Swine enterprises can be operated by part-time farmers. A herd of sows can be bred to produce two litters per year. The baby pigs can be sold as feeders at 30-50 pounds or finished out to 220-260 pound market hogs. Farrowing enterprises are usually not profitable in the Intermountain West because of locally grown feed and cold winter weather. Purchasing 30-50 pound feeder pigs and feeding them out to 220-260 pound market hogs during the summer can be profitable as there is strong local demand for locally raised pork. Swine are not considered livestock for Agriculture Property Classification.

Sheep

Sheep require very little labor except at lambing time. Farm-produced forage is a major source of feed. The biggest investment is not in buildings or equipment, but fencing costs, which is about 22 to 35 cents per foot for material (a 10 acre pasture will take a minimum of 2,500 feet). Profit per ewe can range from $0 to $80. Five ewes have the same forage requirements as one cow. Profit potential is variable because of high predator losses and marketing methods. Lambs can be marketed directly to consumers for the highest potential return.

Game Birds

Game birds are an enterprise that a few people with fairly large acreages in remote areas are trying as a farm business. They have a potentially higher return than meat birds, but adverse weather conditions, predators, or poor management can turn the potential profit into a loss in a short time. Markets or outlets should be explored before considering game birds. Potential net cash returns range from $50-$200 per 10 birds.

Exotic Livestock

Elk, buffalo, deer and llamas are all possible livestock enterprises in the intermountain region of Colorado. These types of livestock offer perhaps the greatest return for small acreage landowners. Many of these exotics are still building numbers in the United States, thus supplying breeding stock to others can be very profitable. Returns on investments can be as high as 25%. However, this breeding market eventually matures and the exotic livestock raiser needs to be fully aware of the post-breeding animal values. Exotics also require much higher initial investments than traditional livestock.

Field Crops

The usual field crops produced in Routt County are hay, pasture, and small grains (wheat, barley, oats). In general, potential cash returns for field crops are lower per acre than for other, more intensively grown crops. However, because of lower labor requirements, less need for irrigation, and lower cash outlay, a farmer can usually handle more acres of field crops than vegetable or fruit crops. There is a strong demand for forage and certain types can yield a premium grass hay net return from $20-$60 per ton.

Vegetables and Flowers

Vegetable producers in Colorado have two distinct markets: fresh produce and processing. The fresh produce market usually provides higher returns per unit, is more receptive to high quality products, and is more available to small growers. The processing market, which is less affected by over-production and daily price fluctuations (because of local supply and demand relations), can handle larger quantities of a standard grade, and can provide a more stable price.

Fresh market vegetable producers can specialize if they have a market for one crop, or they can produce several types of crops, which provides income over a longer period of time. All cool season crops can be grown in Routt County and sold at the local farmers market. Common vegetables grown include spinach, lettuce, and potatoes, although other vegetables can grow here, too. Landscape flowers can also be a cash crop. Strong local demand, particularly for native flowers, can turn a reasonable profit by supplying a local landscape company with these specialty items.

Alternative Agricultural Enterprises