Harmony at the farm: rediscovering the 'community' in community supported agriculture.

• Author: Kaltsas, Christopher

TABLE OF CONTENTS INTRODUCTION I. HISTORY AND GOALS OF THE CSA MOVEMENT A. Historical Perspectives on the CSA Movement B. The Early Modern American CSA Movement and the Failure of the Community Farming Model II. ANALYSIS OF THE CURRENT DOMINANT BUSINESS ENTITY CHOICES FOR CSA FARMS A. Sole Proprietorship Dominance B. Counterarguments in Favor of Sole Proprietorship Dominance C. Other Business Entity Types and the "Core Group" Problem in the Modern CSA III. REORGANIZING CSA FARMS AS NONPROFITS: ANALYZING COSTS AND BENEFITS A. The Incorporation and Chartering Process for CSA Nonprofits B. Profitability of the Nonprofit CSA C. Utilizing Nonprofits for CSA Patron Base Integration 1. The Social and Economic Benefits of Incorporation for Patron Maximization 2. Addressing Counterarguments to Operating CSAs as 501(c)(3)s 3. The Cost of Nonprofits and Other Like Entities as a Nonissue IV. REORGANIZING CSA FARMS AS COOPERATIVES: ANALYZING COSTS AND BENEFITS A. Distinguishing Features of Cooperatives B. Cooperatives as Social Enterprises C. Economic Benefits and Profitability of Cooperatives 1. Taxation of Cooperatives 2. Utilizing Cooperatives for CSA Patron Base Integration and Informational Exchange CONCLUSION INTRODUCTION

The United States is undergoing a "food revolution" that is changing consumers' approach to buying and preparing food. (1) Cultural critics characterize this "revolution" as an ongoing phenomenon in which consumers have started seriously considering the environmental and economic ramifications of their food purchases and eating choices. (2) Food consumers in this movement, referred to in this Note as the "sustainable agriculture movement," have started to appreciate the impacts that their individual food purchases have had on the global agricultural economy, and have responded in kind by buying more local and "environmentally friendly" foods, such as local or organic food products. (3) Consumers might choose to purchase such foods for a variety of reasons, including the high quality of the food products, the environmentally sustainable natures of local or organic food systems, and the creation of a local food "community." The community would gather to learn about food and attempt to learn where their food comes from, as well as whom in their community shares similar concerns about food and health. (4)

A farm that uses the Community Supported Agriculture (CSA) model is a farm that caters directly to a local or regional food system, and typically serves consumers interested in purchasing such food products. (5) It operates as a direct marketing tool for small farms, allowing farmers to sell products to individual consumers face-to-face rather than selling products to an intermediary such as a grocery store. (6) A farm's patrons--also known as the farm's "shareholders"--provide capital for the farm at the beginning of a growing season and the farm distributes its harvest to shareholders throughout the growing season. (7) This capital includes a salary for the farmers that take care of the farm, enabling the farmer to survive throughout the year regardless of the success of the growing season itself. (8) Many CSAs are small, local enterprises with few shareholders relative to the number of agriculture consumers nationwide; despite the small nature of individual CSAs, however, CSAs across the country have enrolled thousands of shareholders in their food distribution programs. (9)

One explanation for the meteoric rise of the CSA farm format is that it attracts environmentally conscious consumers. (10) CSAs purportedly provide valuable solutions to some of the environmental sustainability problems associated with conventional global food and agricultural systems, (11) precisely because of the local nature of the enterprise. (12) CSAs, unlike larger agricultural farming operations, do not require worldwide transportation to ensure that their products are sold; transactions take place at a farm or a local meeting place. (13) CSAs are also intrinsically local in nature. Because CSAs serve a community, such as a single city or town, CSAs are more likely to attract consumers by word of mouth and by the promise of a community centered on obtaining local, organic foods. (14) The CSA model is accordingly a prime vehicle for reforming the American food economy. The CSA has already demonstrated its potential for success. Indeed, in comparison to conventional agricultural operations, CSAs have experienced astronomical economic success in recent years. (15)

CSAs, of course, are businesses that aim to produce profits for CSA farmers by providing quality food products to consumers. The CSA farming model has contributed to the success of both veteran farmers and those just beginning their farming careers, serving as both a stand-alone farming model and a contributor to existing farming operations. (16) They act as "incubators" for farming operations because the CSA model, riding on the CSA movement, (17) provides farmers with numerous opportunities to add consumers and to complement preexisting farming operations. (18) By comparison, small conventional farming operations without using the CSA as such an "incubator" have declined in record numbers over the past several decades. (19)

The CSA, as an institutional farming format, thus has two competing goals: the business-oriented profit production beneficial for farmers, and the larger environmental goals that the founders of the CSA movement ascribed to the institution. (20) This Note proposes that CSAs can, and should, achieve both of these goals to become more successful than they could be by focusing on either goal individually. For CSAs to assume their roles as business incubators and catalysts for environmental and agricultural reform, CSAs must rely on community efforts and fully realize their potential as social institutions. (21) Community building is an important aspect of the CSA because a large community base helps broaden the culture of local food purchasing, making the regionalized food system more visible. (22) CSAs should thus serve as a locus for environmentally conscious consumers to engage in networking and activities that focus on safe, environmentally conscious food production.

The creation of such a community was vitally important in the initial stages of the American CSA, and the communitarian aspect of the CSA enterprise is vital to its existence today. The CSA should serve as a unit to effectively organize and educate consumers about the environmental and economic impacts of their food choices, enabling CSAs to affect consumer behavior enough to fundamentally alter the American food economy. (23) As such, this Note proposes that CSAs utilize existing corporate and tax law to enact communitarian, environmental, and economic changes to the American food economy.

Business entity choice is critical in helping the CSA farm succeed as a social and economic institution. For CSAs to succeed as business enterprises, the CSA must be legally structured in a way as to enable it to meet its social, economic, and environmental goals. Although a CSA's business entity choice might not seem important when considering the CSA's role in the sustainable agriculture movement, a CSA's business structure impacts how a CSA meets its economic (and complementary noneconomic) goals. (24) Implicit in this argument is that business entities are not merely practical legal devices, but are also tools that American lawmakers have purposefully designed to reinforce social movements like the agricultural revolution.

Existing literature scantly discusses CSAs in the business structure context. Most articles concerning CSAs discuss farming regulations, zoning regulations, or CSAs in the larger context of the "sharing economy." (25) Understanding business formation is nevertheless important; such an understanding better helps farmers and lawyers work together to structure a CSA in a way that contributes significantly to its social, economic, and environmentalist goals. This Note will focus on business formation and entity choice for CSAs, as well as the interplay between the economic and noneconomic (social and environmental) aspects of business entity law that help CSAs attain each of their goals.

Part I will briefly recount the history of the CSA movement in the United States and abroad. This history is important in framing the economic and noneconomic goals of the CSA institution, and how current business entity choices fail to fulfill those goals. Part II will explain the predominant business structures CSA farms currently employ, and how these structures contribute to both the economic failures of small farms and the distancing of CSAs from their original role as community centers. This Part will also explain how the idea of "shared risk" (26) may help CSAs survive, but also how it prevents CSAs from becoming larger fixtures in the American food system without structures to offset potential harms to consumers. Parts III and IV examine how restructuring CSAs benefits both the CSA movement and the farmers who are leading the movement. Restructuring CSAs as nonprofits or cooperatives will balance the original goals of the CSA, which are critically linked to the mission of the sustainable agriculture movement, and the long-term economic survival of the small American farm.

1. HISTORY AND GOALS OF THE CSA MOVEMENT

   1. Historical Perspectives on the CSA Movement

      The contemporary CSA movement began in Japan as the Seikyou/Teikei cooperative movement in the 1960s and 1970s. (27) The movement arose from increasing concerns over the growing usage of pesticides in modern farming practice, as well as widespread skepticism over the introduction of genetically modified foods in the global food economy. (28) The tenet holding these communities together was the notion of Teikei, which translates to "contract" in English; members of the movement voluntarily worked together to produce...