Articles
ALTERNATIVE FINANCING IN AGRICULTURE: A CASE FOR THE CSA METHOD
The CSAFM provides the Farmer with a source of non-farm equity capital and an element of risk reduction which are supplied by each Member/Investor (M/I). By receiving cash up-front (from selling shares of the harvest) several months prior to seeding, costs of inputs are covered and financing costs on operating capital eliminated.
Moreover, the Farmer is guaranteed a market and price for his harvested produce.
M/I benefits include receiving organic produce at a discount to retail market prices.
A case study of a Canadian CSA operation is presented to show the impact of the share price on the farm budget and M/I returns.
A detailed budget analysis demonstrates the benefits of CSA marketing versus marketing through an organic wholesaler, and CSA financing versus line of credit or loan financing.
Although it was discovered that the share price was not calculated from a total budget, the Farmer was still better off as the CSAFM increased revenues by 34.0%, eliminated financing costs equal to 1.1% to 3.4% of total revenues, and yielded a net balance three times greater than traditional techniques.
For the Member/Investor, data were collected during the 12 week contract period to value each weekly CSA delivery against both a non-organic market value (NOMV) and an organic market value (OMV). The M/I’s (OMV) return on the $180 share price was 38.9%.
Given the results of the study, the CSAFM qualifies as an alternative financing method in agriculture, displaying a win-win relationship for both Producer and Consumer.