When you say sell at farmer's markets, do you mean set up shop to sell cooked-on-site or prepared foods? If so then I should probably look into this! I'm in NYC and there are so many restrictions and laws on food businesses and licenses you need to obtain...
I'm a personal chef that does the farmers markets out on Long Island. I mainly do the Whole Foods markets because that's where my niche tends to be (I do a ton of vegan/vegetarian food), I also do the various "holistic" fairs they have out here.
Since I'm primarily a personal chef/caterer I developed a small line of vegan (egg, dairy free) desserts and a few gluten free ones as well, and that's what I sell there.
The gentlman above is absolutely correct: I just shoot for making back cost, and the rest is a ton of free advertising. I've gotten 2 of my permanent clients from there as well as several bridal breakfasts, a very large wedding party, and a few other nice catering jobs. I don't think it's anyway to make a "living" but the exposure is great!
Better than that, and something you may want to consider: The costs and permits are somewhat more relaxed out here than in NYC.
I've been in the proposal process of joining my local farmers market. It has been great reading your experiences and responses. I'd most likely me doing some value added stuff, working with farmers, and maybe some samples. I've done the cooking contests at the market for the last few years and those have been great for generating interest. I know my local market has some pretty intense entry requirements. What have any of you had to do to join yours?