The challenge for small farmers to compete with big box grocers is similar to the challenges that small grocers have. If Wall Mart and other discount food sellers are in your area it could be a challenge. The low cost of produce from subsidized US farms and from low cost sources in Mexico and overseas makes it necessary to find a niche when it comes to making a profit.
Certainly a local farmer has an advantage when growers have high visibility, organic and when buyers are educated to food quality and importance of buying local.
“A good example of changes in a niche market is the salad greens industry. Fifteen years ago, leaf lettuce was almost impossible to find. When leaf lettuces were introduced to the general public, few people accepted them. When chefs in finer restaurants began using them, more affluent people began asking for them in markets. The under supply led to extremely high prices; as much as $16 per pound was not uncommon. More and more small growers began producing salad greens, but it wasn’t until large growers entered the market that the price per pound went down significantly (to $6-10 a pound). Many growers can still get $4-6 a pound for greens, but as more large growers enter the market, this price will continue to drop. Long before the market has bottomed out is when small growers need to diversify and find ways to add value to their crops, like offering pre-cut, washed and ready-to-eat mixed lettuces. “
Labor and energy are the two greatest overhead costs to a small organic farmer. If you operate a greenhouse, use a tractor or grow in an illuminated indoor garden or warehouse, the cost of fuel can be a show stopper.