Author: Larry Lev, Department of Applied Economics, Oregon State University
Publish Date: Fall 2013
Small and mid-sized farms struggle mightily to stay in business and, as this figure shows, many in recent years have exited agriculture.
In general, small and mid-sized farms have difficulty in competing in the increasingly globalized agricultural markets for generic commodities. While some of these farms have found success by selling through local and direct markets, many others produce too much, raise unsuitable products, or are located too far from these direct marketing opportunities.
A set of nine case studies (http://www.cias.wisc.edu/aotm-case-studies/) presents “values-based food supply chains” as additional alternative strategies for small and medium-sized farms to consider. Figuring out how to work together with other producers and with supply chain partners is not simple, but some have succeeded. Each case study is provided in both a two-page and long version and provides insights on the opportunities, requirements, and challenges of these diverse examples.
Values-based food supply chains are business alliances formed between small and midsize farms/ ranches and their supply chain partners to distribute significant volumes of high-quality, differentiated food products and share the rewards equitably. Farmers and ranchers function as strategic partners rather than easily replaced input suppliers. All participants in these alliances recognize that their success requires significant interdependence, collaboration and mutual support. These supply chains attach importance to both the values embedded in the production of the food products AND the values that characterize the business relationships.
The cases demonstrate that there is no one-size fits all approach to values-based food supply chain construction. There are, however commonalities. One key element in each of these cases is that the farmers are able to obtain higher and more stable prices by marketing differentiated, high-quality food produced with an authentic farming story, delivered through transparent supply chains that customers can trust. Regional supermarkets, restaurants, public and private institutional buyers and individual consumers have demonstrated an eagerness to buy these distinctive products. A second common element is that all of the supply chains rely on business models and organizational structures that achieve the necessary volumes of high-quality, differentiated food by aggregating product from multiple farms or ranches. That is, scale is achieved through collective action rather than by increasing the size of individual farms.
The cases
Country Natural Beef - www.countrynaturalbeef.com A cooperative of more than 80 ranch families centered in the Northwest that produces and markets natural beef products.
Organic Valley - www.organicvalley.coop
A national farmer cooperative with more than 1,600 member farms that produces and distributes dairy and other products.
Red Tomato - redtomato.org
A dual-purpose, non-profit organization that markets sustainably grown fruits and vegetables from around 40 farms in the Northeast and consults on regional food system development across the country.
Shepherd’s Grain - www.shepherdsgrain.com
A limited liability company in the Northwest that markets high-end wheat flour grown sustainably by more than 40 Columbia Plateau producers.
Co-op Partners Warehouse - www.cooppartners.coop
A certified organic wholesale produce distribution warehouse, owned by a consumer cooperative, that buys products from small and midsize farms and serves 160 retail stores, food service businesses and buying clubs throughout the Upper Midwest.
Full Circle Farm - www.fullcirclefarm.com
A farm-to-table delivery service in the Northwest that produces and aggregates organic produce from around 100 West Coast farmer partners and delivers food boxes to over 15,500 households located from California to Alaska.
Good Earth Farms - www.goodearthfarms.com A multi-farm, internet sales enterprise that aggregates organic, pasture-raised meat products from six Wisconsin farms and delivers frozen meat to customers throughout the U.S. via overnight delivery.
Home Grown Wisconsin -
A cooperative, multi-farm food marketing enterprise that sourced fruits and vegetables from more than 20 organic farms for restaurant and CSA customers in the Chicago metropolitan area. (Home Grown Wisconsin closed its business operations in 2009; the case study highlights the difficult challenges that often must be overcome by values-based food supply chains).
Idaho’s Bounty - www. idahosbounty.org
A producer and consumer cooperative serving over 80 farms that provides distribution and marketing services for sales to retail outlets and individual consumers.
Challenges in developing values-based food supply chains: As documented in the case studies, the significant challenges that must be addressed and overcome include:
- Finding appropriate partners and developing mechanisms for supply chain decision-making, transparency and trust;
- Determining effective strategies for product differentiation, branding and regional identity;
- Defining appropriate methods for pricing products based on understanding the costs of production and other factors;
- Developing, monitoring and documenting consistent environmental standards throughout the supply chain;
- Maintaining original farm identity and/or brand throughout the supply chain;
- Surviving and thriving in diverse economic and climatic conditions;
- Developing new leaders to take over when the founders step down.