Before you can start farming jellies you need to be able to travel to Karate Downtown Bikini Bottom.



Work your way through this level until you reach the three brick walls. Instead of going over the brick walls, go to the right to find a dumpster.



Attacking the dumpster rewards you with two jellies and seems to be repeatable.



Note: This isn't the only dumpster that this can be done at. There one at the checkpoint called Backlot and is to the left of where you spawn.