This publication, referred to as the Planner, is a specialized guide to assist farmers, ranchers and food business owners (new or experienced, small- or large-scale) interested in exploring transition strategies prior to becoming certified organic. The Planner will prove most useful if applied before beginning transition. However, you will certainly benefit from using the Planner if you are in the midst of transitioning or have already become certified. The Planner addresses organic certification requirementsas they pertain to or affect business planning; however, the Planner is not a comprehensive guide to becoming certified organic.
If you are new to organic management, we suggest you do the following before beginning
to plan:
- Review the organic management basics listed in Text Box IT.1: The National
Organic Program and Certification Basics - Take a tour of the National Organic Program (NOP) website
- Explore “USDA Organic 101”, which provides an overview of
organic farming principles, USDA labeling and USDA resources - Explore the Cooperative Extension Service’s organic resource site, called eOrganic
You will also benefit from additional research and conversations with certified farmers, ranchers, certifiers and educators about what it means to become certified.
The Planner can be used alone or in conjunction with the more comprehensive business planning publication Building a Sustainable Business: A Guide to Developing a Business Plan for Farms and Rural Businesses.
Like the Guide, the Planner is divided into five planning tasks:
- Planning Task One: Values
- Planning Task Two: History and Current Situation
- Planning Task Three: Vision, Mission and Goals
- Planning Task Four: Strategic Planning and Evaluation
- Planning Task Five: Presenting, Implementing and Monitoring Your Plan
To facilitate easy movement between publications, the planning tasks used in this Planner correspond to planning tasks outlined in the Guide. Each planning task begins with an introduction to key business planning concepts, such as mission statements or strategic planning. Four management areas—operations, marketing, human resources and finances—are discussed, and we provide references to NOP regulations specific to each area. The Planner is not a guide to organic certification. However, NOP rules are referenced throughout as they impact your business strategies, decisions and planning.
Text Box IT.1
The National Organic Program and Certification Basics
The following overview of certification requirements comes from What Is Organic Food and Why Should I Care? See the Resources section at the end of this introduction for more information, including USDA publications outlining NOP rules. Organic is a labeling term regulated by the USDA NOP that “indicates that the food or other agricultural product has been produced through approved methods that integrate cultural, bio-logical, and mechanical practices that foster cycling of resources, promote ecological balance, and conserve biodiversity.” Basic requirements include that all operations must:
In simplified terms, NOP regulations for crops allow or require
- 36 months with no application of prohibited materials (no syn-thetic fertilizers, pesticides or GMOs) prior to the first harvest of organic crops
- Buffer zones to prevent contamination from adjoining land uses
- Implementation of an Organic System Plan (OSP), including proactive management systems to conserve and enhance bio-diversity, build soil health and ensure environmentally sound fertility-, weed-, disease- and insect-management practices
- Use of natural inputs or approved synthetic substances on the National List of Allowed and Prohibited Substances, which are allowed only if proactive measures are insufficient
- No use of GMOs, sewage sludge or irradiation
- Use of organic seeds and planting stock when commercially available and use of organic seedlings for annual crops
- Use of raw manure and compost must follow specific guide-lines to safeguard human and environmental health
- Use of practices, such as crop rotations, to maintain or improve the physical, chemical and biological condition of the soil, and minimize soil erosion
- Fertility management that does not contaminate crops, soil or water with plant nutrients, pathogens, heavy metals or prohibited substances
- No field burning to dispose of crop residues (may only burn to suppress disease, stimulate seed germination or control weeds)
NOP regulations for livestock allow or require
- Use of 100 percent organic feed for all organic animals
- Organic management from last third of gestation for slaughter livestock or second day after hatching for poultry
- A one-time transition of a conventional dairy herd is allowed. One year of organic management is required prior to the production of organic milk. Transitioned animals cannot be sold as organic.
- Mandatory year-round outdoor access for all species when weather is suitable
- Mandatory grazing on pastures for ruminants during the grazing season with a minimum of 120 days. At least 30% dry matter intake (DMI) must come from pastures during the grazing season.
- No use of antibiotics, growth hormones, GMOs or feeding of animal by-products
- Implementation of preventative health care practices (vaccines are allowed)
- Parasiticides prohibited for slaughter stock and tightly regulat-ed for dairy and breeder stock
- No withholding of treatment in order to preserve an animal’s organic status
- Management of manure to prevent contamination of crops, water and soil, and to optimize recycling of nutrients
- Poultry and hog operations must comply with new indoor and outdoor space requirements
- Poultry barns must comply with new requirements for outdoor access, providing at least 1 linear foot of exit area for every 360 birds, unless an alternative is proposed by the certifier
- Poultry barn operators must ensure ammonia levels do not exceed 20 ppm
NOP regulations for processing operations allow or require:
- Use of mechanical or biological processing methods
- No commingling or contamination of organic products during processing or storage
- No use of GMOs, irradiation, artificial dyes, solvents or preservatives
- Use of proactive sanitation and facility pest management practices to prevent pest infestations
- Must take steps to protect organic products and packaging from contamination
Farmers and ranchers seeking organic certification must prepare an OSP annually. It is reviewed by third party certifiers for compliance with NOP regulations.
Worksheets are included at the end of each planning task to help you explore concepts by answering important business questions. The worksheets are intended to help you develop and test your ideas through the planning process, before you finalize them as part of a business plan.
Material in each planning task is augmented with real-life examples and excerpts from worksheets completed by transitioning and recently certified farmers. You can read about these farmers—a dairy producer, a grain producer and a beginning vegetable processor. Examples from their plans are offset as “story panels” throughout the text. A symbol representing each of their operations accompanies each story panel, making it easy to follow the same farmer throughout the Planner:
These farmers’ complete business plans also are included in the Appendix.
Most worksheets in the Planner should be completed individually by you and, in some cases, by other planning team members (i.e., those involved in your business’ brainstorm- ing and decision-making—see Organize a Planning Team in the following section). Blank worksheets are provided at the beginning of each task. We recommend photocopying enough worksheets for each member of your planning team before beginning to use them.
A section called Dig Deeper follows the discussion of questions, activities and worksheets in some planning tasks. This section includes suggestions for further planning should you find yourself wanting to explore a particular concept in more detail. Additional worksheets from the Guide are referenced in the Dig Deeper section, so it is a good idea to have that publication on hand as you begin your business planning.
Each task in the Planner also includes a section called Put it in Writing. This section summarizes information that should be included in your business plan and provides tips for using the recommended software, AgPlan. AgPlan, designed to be used like a word processing program, is a simple tool for drafting your business plan either at the end of planning or as you work through ideas. AgPlan contains an organic transition outline that corresponds to the text and worksheets provided in the Planner. The software also includes a built-in tool that allows you to easily share your plan with others (e.g., advisors, business partners and lenders) and obtain their feedback as you test strategies. Note that if you decide to draft a plan gradually—upon completion of each planning task—you may find the writing sequence is different than what is outlined in the AgPlan software. For example, though the Executive Summary appears first in the AgPlan outline, it is one of the last pieces that you will write if you follow the Planner. There is nothing wrong with this—just be aware that you will likely need to skip sections in AgPlan and return to them when ready. At the end of each planning task is a list of additional resources that may help with plan development.
Meet the farmers: Nat and Angie Walter Transitioning Dairy, Minnesota
Nate and Angie Walter operate a 100-cow dairy in Villard, Minn. They have two young children whom they hope will take over the farm someday or join the business with new enterprises. Nate grew up on the Villard farm but left after high school to work off-farm. He returned home in 2002 after marrying Angie and purchased the farm business at full market value from his father: 160 acres of pasture/cropland, 80 cows, 80 young stock, equipment and buildings. Assets were financed through a long-term loan guaranteed by the USDA Farm Service Agency.
Decision to Transition. Nate and Angie had been considering organic certification for five years prior to making the decision to switch in October 2010. “We went to an organic field
day in 2005,” recalls Angie. “I was really excited about it but Nate wasn’t so sure.” So they waited until 2009 when their farm business management instructor ran some numbers showing them that the farm would have grossed another $180,000 that year if they had been organic. That extra money would have helped the Walters reach their goal of becoming debt free. Going organic “was a way for us to remain a family farm,” says Angie. “Otherwise we were considering growing the farm [conventionally]; getting bigger in hopes of paying off our debt,” explains Nate. “We knew that might be a losing proposition.”
Transition Strategies. The Walters began transitioning all of their land in spring 2011. At that time they added 20 cows and another 80 acres to support forage needs for the herd. They began transitioning their cows in fall 2012 with an October 2013 target date for certifying their land and animals. Since transitioning, the Walters have not had to make many changes in the way they manage, particularly when it comes to the dairy enterprise. “We were always doing 85 percent of the organic work and just not getting paid for it,” explains Angie. “We’ve never believed in hormones and had rarely used antibiotics.”
Transition Challenges. In March 2012 the Walters grew approximately 60 percent of the herd’s feed. They supplemented with additional grain, protein and straw purchased nearby. The need to purchase inputs posed one of the Walters’ greatest transition challenges. “We’re nervous about having to buy all this organic feed [during transition],” said Nate at the time, echoing the concerns of many transitioning farmers. Organic corn and soybean prices per bushel averaged $10.72 and $21.63, respectively, in 2011 compared to $5.67 and $11.41 per bushel for conventional corn and soybeans, according to the Minnesota Farm Business Management Program annual financial reports.
Business Planning Need. The Walters drafted a business plan during their second year of transition when realizing that organic feed costs exceeded their income from conventional milk sales. Their business plan was written primarily to support their request for a short-term loan that would help pay for organic feed required during the transition, bedding and new equipment. With a loan in hand to bridge cash-flow shortfalls, the Walters will be able to make it through transition to certification, when income from organic premiums will allow them to comfortably afford needed inputs.
Meet the Farmers: Bryan and Theresa Keraert Transitioning Grains, Minnesota
It is hard to find a more enterprising, determined couple than Bryan and Theresa Kerkaert. They have been giving organics everything they’ve got since beginning to farm row crops in 2007 on a collection of scattered parcels. By 2013 Bryan and Theresa were transitioning approximately 500 acres of rented land. Much of the land was former
Conservation Reserve Program (CRP) acreage, while other parcels were what Bryan calls “low- to no-input” organic ground. All of the Kerkaert’s rented acreage is located up to 20 miles away from their seven-acre farmstead and varies by soil type and topography. Bryan and Theresa find themselves regularly needing to fine-tune land management strategies as they continue to learn about farming and organic crop production. They also are forced to simultaneously rework cash flow plans as lease arrangements and market prices fluctuate.
Decision to Transition. When asked why they decided to go organic, Bryan responds, “Organic opens up opportunities. When we farm conventionally, our opportunities are the same as that for 99 percent of the other farmers. But we’re in the one-per-cent category when we grow organically and that opens up a lot more opportunities.” In 2007 Bryan signed his first rental agreement, borrowed equipment from a friend and began farming organically.
Transition Strategies. By fall 2013 Bryan and Theresa had transitioned approximately 40 percent of the land they farmed (parcels under long-term lease). While he would love to farm everything organically, Bryan explained that he is unable to plan crop rotations on land under 12-month leases. “I don’t know if I’ll have that land next year, let alone five years from now,” Bryan says.
Transition Challenges. The Kerkaerts have overcome several finance- and production-related challenges, including the management of widely dispersed rental acreage. Their greatest challenge, however, has been the cost and uncertainty associated with renting land. Land prices in their area have gone up by 25 percent annually over the past few years. This has become a significant cash-flow issue for the Kerkaerts. Their solution: negotiate long-term leases and eventually find a farm of their own to purchase.
Business Planning Need. The Kerkaerts fully intend to continue farming organically but say this will only be feasible under long-term lease agreements or, ideally, on farm land of their own. “Five years ago, we had to learn the agronomics of how to farm organically,” says Bryan. “Now we need some land security. We’d like to buy a farm and pay for it before we retire.” The Kerkaerts developed a business plan to secure stable, continuous access to land in 2016 through a five-year lease with the right of first refusal to purchase the land at the end of the lease. Their plan is written for a potential landlord to demonstrate that they have the knowledge, skills and equipment to successfully transition and farm more than 500 acres of land.
Meet the Farmers: Vitaly Brunkhman Organic Processing, New Jersey
Vitaly Brukhman embodies the spirit of a true entrepreneur—full of energy, ideas and enthusiasm for his start-up organic processing business called Bubbly Jen’s Farm, or BJF (named after his daughter). Brukhman’s goal is to develop a line of naturally fermented, locally produced, organic foods and specialty beverages targeted at ethnic consumer markets. His passion for organic food stems from a bout with thyroid cancer. His desire to master natural fermentation originates from the recipes he enjoyed as a child growing up in Moldova. His affinity for all things local comes from the New Jersey countryside, where he lives in a recently purchased century-old farmhouse.
Brukhman left his information technology job in 2012 to grow and market organic fruits and vegetables on the two acres of land adjoining his farm-house. His long-term goal was to process the produce that he grew into naturally fermented products. Since 2012, however, his ideas have evolved, as has his knowledge of organic production. In 2013 Brukhman graduated from a beginning farmer program sponsored by the National Organic Farm-ing Association. In 2014 he participated in several online courses through the Organic Processing Institute and met with two dozen restaurant chefs, retail grocers, processors, farmers and potential consumers to network and learn as much as he could.
Decision to Transition. Brukhman anticipated that the transition to organic would be fairly easy, since the land he purchased had not been farmed for several years. He planted his first crop of radishes, garlic and mustard greens in 2013. When meeting with a certifier in 2014, however, Brukhman was told that he had violated several organic rules—because he had planted conventional garlic—and therefore his land no longer qualified for immediate certification; he would have to make the three-year transition. “At that point, I decided that I might be better off purchasing organic crops to process while transitioning my own land,” Brukhman says. The processing idea was moved to the front burner.
Transition Strategies. During the winter of 2014-2015, Brukhman planned to continue honing his processing skills and recipes by renting kitchen space, and completing the Food Safety Manager Program (required for food handling). He then plans to purchase needed inputs and distribute the products for taste testing and sampling to potential buyers. By spring of 2015, Brukhman hopes to have secured organ-ic kitchen space and organic handler certification. If all goes well, he expects to begin processing naturally fermented sauerkraut, pickles and tomatoes by fall 2015 and secure marketing agreements for up to 2,500 pints.
Transition Challenges. Most beginning processors find it a bit daunting to navigate required paperwork and food safety training. Brukhman, however, is comfortable keeping records and learning new skills. It is the access to capital—needed to launch and grow the business—that he finds challenging.
Business Planning Need. Brukhman developed his business plan for BJF to explore opportunities for financial investment and business growth. A former IT colleague has expressed interest in investing in BJF. The business plan will help Brukhman determine if the business can support the financial goals of both owner and investor.
As you begin, remember that business planning is a fluid process, as shown in Figure IT.1: Business Planning Process. It involves brainstorming, analysis and monitoring. For example, you may need to revise strategies you identified during the brainstorming phase after you have done some analysis to test their feasibility. Your plan, too, will be a dynamic roadmap changing over time as new challenges or opportunities appear. Business planning can be done anytime, but it can be particularly useful when completed before beginning transition. It is a process that can help you decide whether and when to transi-tion your farm business. Business planning can be helpful at other times—when working through a significant challenge, exploring an opportunity or testing an alternative idea when business or personal goals change.
BEFORE YOU BEGIN: WHAT IS YOUR PLANNING ISSUE?
Planning usually begins with a problem or an opportunity, or both. Transition may require that you make significant changes in the way you farm, but it also brings the promise of marketing opportunities and potential health, conservation or financial rewards.
Identify Your Planning Issue and Motivation for Transitioning
Given the challenges associated with organic transition, it is important to carefully consider why you are transitioning—to be clear about your reasoning. Nate and Angie Walter, for example, are transitioning to improve long-term farm profitability and consequently to generate income for family and hired labor. See the story panel from Nate and Angie Walter.
It is also important to identify other structural changes that you would like to make to the farm business as you plan your transition to organic, such as changes in labor and management or the addition or elimination of enterprises. We call these motivators “critical planning issues.” Use Worksheet IT.1: Why Transition? to briefly document your critical planning issues, your reason(s) for making the transition to organic production and other changes that you would like to make to the farm business. Begin by asking yourself why it is important to you to farm organically.
Organize a Planning Team
A planning team is an advisory board of sorts—a group of trusted individuals who can help guide you through major changes, such as the transition from conventional to organic production. Planning teams often include family members, business partners, farmer men-tors, entrepreneurs, potential buyers and others who can help you brainstorm strategies, identify challenges, network and generally provide feedback as you work through ideas. See what transitioning dairy farmers Nate and Angie Walter have to say about the value of team building in the story panel.
In many cases, planning team members may serve as more than advisors—they may represent the key decision-makers for your business (e.g., a spouse). If this is the case, encourage them to complete worksheets with you. You can do this together or independently when recommended. For example, try posing questions from Worksheet IT.1: Why Transition? to family members or business partners. Then share your ideas before moving to Planning Task One. You may be surprised to identify differences in your planning objectives!
Contact a Certifier
We encourage you to meet with a certifier early in the transition process or even before be-ginning transition. Certifiers can help you identify resources, answer compliance questions and, in some cases, provide a starter packet.
There are approximately 50 accredited certifying agencies (ACAs) in the United States and another 35 or so agencies located outside the country that are authorized to issue USDA organic certificates and other internationally recognized certificates. When exploring certi-fiers, consider:
- Certification fees
- Certification fee structures
- Agency location
- Educational services or resources offered
- National versus international recognition if exporting
For a complete list of certifiers, visit the USDA NOP website. Most certification agencies will mail a starter pack to help you navigate requirements and plan for certification. The Midwest Organic and Sustainable Education Service (MOSES) also offers a packet for free via download or by contacting the MOSES office. Another good way to connect with certifiers is to visit them at local organic conferences and trade shows. The Organic Trade Association provides information on conferences and other events nationally.
Importance of team building
We rely heavily on our Farm Business Management instructor to guide us through
alternative strategies and to identify information sources. Farm Business Management has been the center spoke for all of our networking. Others who have helped include dairy consultants, experienced organic farmers and Farm Service Agency staff. They all serve as an informal planning team. We could not make the transition without the advice and help of so many people.
Consider How Your Business Plan Will Be Used
Ultimately, the way you intend to use your plan will affect how you write and present it as a document. Will your business plan be used internally—among family—as a tool to guide discussions and make key decisions? Will it serve to communicate about working assets, experience and a long-range vision to lenders when applying for new financing? If you only intend to use your business plan internally, it may not be necessary to formally document your farm history, to describe the people involved in your farm business, or to outline repayment capacity. However, if you will be taking your plan to potential business partners or lenders, you will need a more formal plan to properly introduce readers to your farm, the people involved, the skills they offer and the assets available. See box below: Transition Business Plan Outline for an outline that can be adapted for almost any farm business.
Transition Business Plan Online
Executive Summary
- Business overview
- Mission statement
- Goals
- Transition plan summary
- Capital request
Business Description
- Farm business history
- Land and other resources
- Ownership structure
Operations
- Farm business history
- Production opportunities
- Operations strategy
- Licenses and organic certification
- Resource needs and acquisition
- Operations risk management
Marketing
- Current marketing
- Marketing opportunities
- Marketing strategy
- Licenses and organic certification
- Marketing risk management
Human Resources
- Current HR
- HR opportunities
- Planning and management team
Workforce - Licenses and safety regulations
- HR strategy
- HR risk management
Finances
- Current financial position
- Historical financial performance
- Financial opportunities
- Financial projections
- Financial strategy
- Capital request
- Financial risk management
Appendices
- Implementation to-do list
- Monitoring checkpoints
- OSP and/or OSPH summary
- Marketing contracts
- Tax returns
Thinking now about how you will use your business plan can help focus your research and documentation when you begin the planning process. Do not be afraid to skip some of the worksheets in the Planner if they do not seem necessary for the type of plan you are writing.
Dig Deeper
If you are interested in learning more about identifying business stakeholders or about how to create a planning team, see pages 14-17 in the Guide. A worksheet sample, completed by Dave and Florence Minar of Cedar Summit Farm in Minnesota, is included in this section.
Put it In Writing
Briefly describe your reasons for transitioning. This will serve as the beginning of your transition plan summary as outlined in AgPlan under Executive Summary. Next, list members of your planning team (advisory board) and a board of directors if you have one (often created when incorporating). Briefly note the skills or experience offered by each member of your advisory board. If using AgPlan software, record your advisory board description under Planning and Management Team.