June 26, 2012

How food production is going local

by LeAnne Philips, Entira

The author of Who Moved My Cheese? used a parable about mice and men hunting cheese to illustrate his points about anticipating, monitoring and adapting to change. How does this relate to ag? Unnoticed by many, the location of food production is beginning a change, albeit a still-small change. As the local food movement gains momentum and media coverage, it is also gaining economic power, and the farmers who produce food for local distribution are changing.

So, what does this movement mean to agrimarketers, and for our customers and companies? Is this just a niche market trend, or will it drive long-term change in the way Americans buy and produce food? Are there opportunities to better serve our customers, or to find a new market niche for ourselves?

A locavore is defined as one who tries to eat only locally grown or produced food. That is simply not practical in a strict interpretation – as a mother in Iowa I’m still going to feed my kids fresh fruits in the winter, and I’m sure they won’t be local. But if you look at the spirit of the idea – paying attention to where food comes from and trying to eat locally grown when possible – it is definitely gaining ground, and it could have interesting implications for us in agriculture. Especially when you consider that on average U.S. produce travels an estimated 1,500 miles to reach consumers.

For local food production, a “perfect storm” of consumer, regulatory, and policy factors have come together recently to drive interest and demand.

  • Consumer Awareness. The terms “locavore” and “local food movement” have become common terms in conversation and media over the past few years. In 2007, Oxford English Dictionary named “locavore” the word of the year, and the movement topped a number of magazine “trend” lists in 2007 and 2008, including TIME Magazine and Restaurant News.

    Awareness is driven by both food safety concerns as well as recognition of the environmental impact of food production and transportation for mainstream food production. An internet search for “locavore” will turn up hundreds of thousands of sites with information, resources and local organizations dedicated to promoting local food production. A locavore iPhone app can even tell you the nearest farmers’ market and what produce is freshest for your season/location.
  • Labeling Regulations. The implementation of Country of Origin Labeling, or COOL, in retail stores means that consumers can now see the country or countries where their fruit, vegetable and meat were produced.
  • Increased Availability. The number of places where consumers can purchase locally grown food is skyrocketing. The USDA reported more than 4,600 farmers’ markets in the U.S. in August 2008, up more than 3,000 from when the department started tracking farmers’ markets in 1994. Community Supported Agriculture (CSA) programs where a farmer sells “shares” of a season’s produce to customers are also growing. The number of CSAs in the United States was estimated at 50 in 1990. For the first time, the census asked questions about Community Supported Agriculture marketing. More than 12,000 farms in the U.S. reported marketing products through CSA arrangements. You don’t even have to go to a farmers’ market or participate in CSA to buy locally grown produce. Major grocery chains are increasingly selling locally grown produce, and make concerted efforts to increase in-store promotion and education about locally grown produce.
  • Stronger Government Support. The 2008 Farm Bill included several provisions that will provide additional support to specialty and organic producers. There is a $1 billion expansion of the fresh fruit and vegetable snack program to all 50 states. The specialty block grant program will be expanded by $466 million over 10 years to provide grants to support projects in research, marketing, education, many of which are used to support local food production or marketing programs. Finally, additional funds for specialty crop research and expansion of the program to defray organic certification costs for new producers will be a direct benefit.

The Leopold Center for Sustainable Agriculture in Ames, Iowa, has been researching and supporting local food production programs since 1995. Rich Pirog, associate director, has watched the recent boom in demand for local food and how the farmers producing food to supply those markets are changing as well.

Some of the trend may be evident in the USDA’s 2007 Ag Census. The 2007 Census counted 2,204,792 farms in the United States, a net increase of 75,810 farms. Nearly 300,000 new farms have begun operation since the last census in 2002. Compared to all farms nationwide, these new farms tend to have more diversified production, fewer acres, lower sales and younger operators who also work off-farm.

“We are seeing more growers interested in local food production and distribution,” said Pirog. “These range from small farmers looking to scale up, traditional commodity farmers looking to expand into produce production, even existing ornamental plant businesses looking to get into vegetable production.”

Some commodity and livestock family farm operations are looking into an expansion into specialty crop production to provide another income source that will allow the next generation of family members to join the operation.

Rural Development grant and loan programs in the new farm bill provide incentives for growers who are considering scaling up. The specialty block grant and other programs can also provide support for establishing networks and distribution groups with other growers.

Opportunities for marketing locally-grown food also continue to grow. “A lot of people think that local food production is just at the CSA or farmers market level,” said Pirog. “However, there is tremendous growth in K-12 school programs, university and college programs, corporate cafeterias, foodservice programs for retirement homes, hospitals, and with regional foodservice and supermarket chains.”

Traditionally, sales to K-12 school programs would be low margin opportunities for growers, said Pirog. However, the increased federal funding for fresh fruit and healthy snack programs are providing additional resources to schools.

As the local food movement evolves from a niche market to a stronger economic force, players throughout the food chain will need to work together to address challenges and build new distribution system.

“The key to success for local food production and marketing will be to see the kind of partnership between federal government, state government, universities, private industry and farmers that developed to make the Midwest strong in corn and soybean production,” said Pirog. “If we can apply the same level of good thinking and focus to production and distribution of local food, we can scale up and create good opportunities across the chain.”

So … back to the question we started with … what does this mean to your business and your customers? Just as many traditional commodity farmers are taking a closer look at markets for locally-grown produce, you should also ask a few questions to see if there is an opportunity for your business.

  • Are any of your customers considering switching a portion of their production to crops or produce to serve farmers’ markets? How much time and attention will it take from their current operation to start or expand a direct-to-consumer market?
  • How can you better serve farmer-customers who are going direct to consumers? Will they need additional support with agronomic information, new products, recordkeeping, etc?
  • Are your growers considering a switch to organic production to meet consumer demands? What will that do to their current rotation and agronomic practices?
  • Can you make yourself a more attractive supplier by focusing on your own “local” characteristics?

Regardless of how you answer these questions, one thing is certain and that is change. If you would like to talk more about how you can move with the cheese – or tomato, as the case may be – contact Entira at info@entira.net.

This article appeared in the June 2009 issue of Strategic Agribusiness Review.