Swanton Berry Farm owes its existence in large part to the Santa Cruz Community Credit Union. A $35,000.00 loan made to Jim Cochran back in 1985 provided the opportunity for Jim to continue his pursuit of Organic certification and to establish a market for organically grown strawberries.
The Credit Union was established for the purpose of financing small businesses that were unlikely to obtain financing through regular banking channels. It is called a ‘Community Development Credit Union,’ and has lived up to its charter by fostering a thriving community of small businesses, many of which have progressive business ethics. It has become a model with a national reputation for successful innovation. Jim is proud to say that his membership number is 0000051!
The Credit Union currently finances the most risky part of the business, the ‘crop loan.’ They have faith in us—we have always paid back our loans!
Another lender, Diane Feeney of the French American Charitable Trust, showed courage in lending to us a few years ago, helping us to expand our operation. Thanks, Diane!
The profit margin in farming is razor-thin, so it does take courage to lend to a farmer. It takes a long time to build equity when the average profit is 3%. That is only 18 cents on a $3.00 basket of strawberries! Pretty scary….especially when there are years when a farmer loses money!
But our customers have supported us through thick and thin, so they give us courage.
We should note here that we have operated since our inception without the benefit of subsidies. We pay market rates for the land we lease, for the money we borrow, and for the water we use. It is a popular misconception that most farmers are subsidized by the government; this is true for grain, dairy, and some commodity growers. But fruit and vegetable growers, for the most part, operate in a very competitive market. While some growers have access to subsidized water, we coastal farmers are on our own.
But there is a hidden subsidy that taxpayers ultimately pay when they pick up the cost of health care for uninsured farm workers, as well as subsidized housing and other social costs. This is especially true in the case of fruit and vegetable farmers who depend on hired farm labor. We try to pay the full cost of this labor by paying for health insurance, pension, and other benefits, as well as providing low-cost housing (subsidized by the farm, not the government). Most of our competitors do not pay for these costs.
All the more reason to be thankful to our customers for supporting us!
A financially astute reader might ask how we will finance the future obligation of the Company to purchase the shares of departing employees. Good question! The answer is that because the value of the stock will be based on a formula based on profitability, the obligation should remain manageable. Only a small percentage of the stock will be distributed each year, and most of the profits will be retained by the Company to reduce our debt load. By the time there is a substantial re-purchase obligation, we should have sufficient reserves to buy back the stock.