FOOD INFRASTRUCTURE AND DISTRIBUTION:
Let’s Not Reinvent the Wheel
Farmers and ranchers have a unique opportunity to meet consumer demand for sustainably produced food. But they need to start working together to develop regional brands and to identify ways to use existing food infrastructure.
BY WARREN KING, WELLSPRING MANAGEMENT
Read the newspapers or turn on the radio or TV and you’ll hear that the world’s economies are in bad shape. Jobs aren’t being created fast enough, banks aren’t lending money to small businesses and we are all under a mountain of debt. State and local governments are struggling to pay their bills, and Washington politicians bicker over the best way to create a lasting recovery while also paying for our future obligations.
Yet even in this business and economic environment, small to mid-sized farmers and ranchers are developing new products, entering new markets and getting the attention of major retailers across the country. So how is this possible?
Well, it starts with a consumer who has woken up to the fact that they don’t know what is in their food, they don’t know how it’s produced and, apart from a country of origin label, they don’t know where it actually came from.
When enough consumers demand change, and are willing to pay for it, then someone along the supply chain usually takes notice. In the food system, the leaders and innovators of change have generally been the farmers and ranchers. Farmers have been helped by retailers and restaurants that are looking for locally and regionally produced foods that their shoppers and diners are asking for. Nevertheless, it has been largely left to farmers and ranchers to figure out how to get their products to these new, local markets— often meaning higher distribution costs.
Where we see farmers and ranchers successfully getting new products to market they are (in most cases) using the existing infrastructure in the present food system. They are pooling their production capacity to take advantage of processing, transportation and marketing opportunities that exist in the marketplace today.
People are also increasingly concerned about how much money is spent locally and regionally on food, and how little actually stays in their communities. Over the last decade a number of studies have looked at how current food systems affect local economies. Two recent studies are particularly noteworthy.
First, Ken Meter of the Crossroads Resource Center completed a study in March 2011 on the Ohio food economy, entitled Ohio’s Food System: Farms at the Heart of It All (see www. crcworks.org). Meter found that $30 billion flows away from Ohio because of the way that the food and farm economy is structured. His study highlights the clusters of local food businesses that are forming across Ohio, as residents find innovative ways to provide healthier food options and bring farmers into more direct contact with consumers, built on a relationship of mutual trust.
Second, a 2010 study by the Leopold Center at Iowa State University, entitled Selected Measures of the Economic Values of Increased Fruit and Vegetable Production and Consumption in the Midwest, examined the potential state and regional economic impact of increasing fruit and vegetable production in a six-state region (IA, IL, IN, MI, MN, WI). The researchers found that increasing the local production of 28 key fruits and vegetables to meet consumer demand in regional cities with populations in excess of 250,000 people in and near the six-state region could have a huge impact on the local economy.
MORE JOBS AND INCOME
The researchers found that the 28 metropolitan markets would require 195,669 fruit and vegetable acres, generating $637.44 million in new farm-level sales. This new farm-level production would also support 6,694 jobs, generating over $284 million in labor income in the six-state area. Finally, they found that the 875 fruit and vegetable markets required to distribute these crops (using the producer-retailers in the metropolitan areas that are actually within the region) would support 6,021 urban jobs and over $180 million in labor income. The researchers pointed out that the same area of farm land today currently produces commodity crops such as corn and soybean, generating just 1,892 farm jobs, an income of $42.5 million and no urban jobs or income.
It is interesting to note that while Ken Meter’s study reveals that Ohio’s emerging new food economy is creating hundreds of new businesses, thousands of jobs and millions of dollars in economic activity, the researchers also found that the prevailing food system is actually in decline. Meter calls on the state to fund the development of new infrastructure for this emerging Ohio food economy.
I support calls for changes in state, local and federal government policies to ensure that regional food production is not hampered. However, I would argue that in times of austerity we don’t really want governments to spend limited funds on new food infrastructure, particularly when there are already examples of groups of farmers and ranchers who are making effective use of existing capacity in the marketplace.
HIGHLIGHTING BEST PRACTICE
The Grassfed Livestock Alliance (GLA), based in Texas, consists of about 20 AWA ranchers who have networked their production capacity to deliver a consistent supply of high-welfare grassfed beef to all 22 stores in the Whole Foods Market’s Southwest region.
The GLA developed this arrangement without building new processing facilities, purchasing delivery trucks, or employing new staff to stock the shelves. They contracted local haulers to get cattle to approved slaughtering facilities, worked with processors to make local meat deliveries, and utilized their customers’ infrastructure to get product to stores. A single business manager, Don Davis, takes care of scheduling, invoicing and payments. This model lowers the overhead costs and limits the capital exposure risk for GLA members and uses excess capacity within the supply chain (www. GrassfedLivestockAlliance.com).
Steve Stevenson of the University of Wisconsin has profiled a number of such farmer and rancher alliances (see http://www.AgOfTheMiddle.org). Stevenson examined how smaller farmers and ranchers are competing with “the big boys” by developing regional brands, forming cooperatives, hiring professional supply chain managers and using existing transportation, processing and distribution to get their products into wholesale and retail markets. By working within current food systems, not outside of them, and developing strategic alliances, they can deliver the humanely raised and regionally produced foods that are in demand.
Market demand is a funny thing. If you don’t figure out a way to fill it, either someone else will or consumers will look for alternatives. Small farmers and ranchers have a momentous opportunity to meet the burgeoning demand for high-welfare, sustainably produced meat and livestock products. From an infrastructure perspective, there isn’t the time or money to build a new food system. If we are going to rapidly increase the numbers of farmers and ranchers who are producing food with integrity, then we must work together to figure out innovative ways of using the excess capacity that’s out there. Countless farmers and ranchers are already responding; we just need to learn from them and to build on their ideas.
Warren King is the principal of WellSpring Management. Visit www.wellspringltd.com