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Lessons learned from retail ag may help farms produce better
Ohio Correspondent

INDIANAPOLIS, Ind. — For small-scale or beginning farmers, selling products directly to customers makes sense and puts more dollars in their pockets, according to a study by the USDA’s National Agricultural Statistics Service (NASS).

Gary Matteson said a 2007 survey showed sales for organic, direct and local foods totaled $8 billion. More recently, the USDA Economic Research Service pegged the value of local foods, both retail and wholesale, at $4.8 billion.

Matteson is the vice president of Young, Beginning and Small Farmer Outreach for The Farm Credit Council. “Retail agriculture is a business structure centered around a direct relationship to consumers,” he said. “Often, the products are marketed directly to the consumer or through marketing channels with a significant retail influence.”

Growing vegetable or meat products with a specific consumer market in mind means a higher margin for farmers, according to Summer Goldman, a regional vice president with Farm Credit.
“The emergence of retail consumer demand is a driving factor in the trend of farmers selling through interrelated agricultural marketing channels,” she said. “Whether they sell direct-to-retail or through wholesale channels, if it is sold with special product attributes such as being local, organic or small farm-raised, then a significant portion of the value is based on retail consumer demand. That is what we call retail agriculture.”

Goldman said it is difficult to measure how much farmers benefit from retail sales, simply because that information is lacking in the Agricultural Census. From an industry perspective, retail agriculture puts a face on farming.

“Farmers who sell at retail are the face of agriculture as far as the public is concerned,” she explained. “If there are negative attitudes about farming, those in retail agriculture have the best chance to correct those misimpressions.

The face of agriculture?

“Large-scale agriculture may not be as effective as the friendly farmers’ market vendor in a one-on-one conversation with a suburban mom. Conventional agriculture needs to pay attention to retail agriculture and realize that we are all in this together.”
Matteson cited a recent survey, noting that consumers identify vendors at farmers’ markets as their No. 1 resource for information about commercial agriculture. “It is important to the future of the industry that both retail and commercial folks engage with each other for the common good,” he said.

He said retail agriculture could apply to all levels of farming; it is especially appealing to small-scale, young or beginning farmers who are attracted to the relatively low startup costs, low overhead and small land base needs, in addition to interaction with the end user.

“Beginning farmers are often drawn to retail agriculture in the form of selling at farmers’ markets,” said Goldman. “It is also becoming more common for conventional farms, particularly those with the next generation returning to the farm, to look for new retail agriculture marketing channels.

“Retail agriculture is more easily seen as a market access strategy than as a defining characteristic of any one size or type of farmer.” She said meat, vegetables and fruit with marketing characteristics such as local, sustainable or organic are among the most common products sold via retail.

“Retail agriculture is pervasive throughout the U.S.; probably eight of 10 counties in the U.S. have between one and 10 community supported agriculture operations,” said Matteson. “But retail agriculture has been established longer in the Northeast and on the West Coast.”

He said the main benefit to the producer is startup costs are relatively low, but profit potential is much higher compared to traditional wholesale marketing channels. Goldman added that there is also a flow of market intelligence from consumer to farmer, helping to bring new products into the marketplace, first from retail agriculture and then from conventional ag.

“Producers benefit from having access to as many marketing channels as possible in order to avoid concentration of risk in selling to just a few customers,” she said. “Retail agriculture is based on responsiveness to consumer demand, which is a blueprint for extracting the highest value from any given product by delivering it to the market segment willing to pay the highest price.”
Goldman added retail agriculture is beneficial to society as a whole, because it has the ability to listen to and learn from consumers. “The emphasis on the value of local food produced by local farmers brings value in the economic as well as community development arenas,” she said.

“The more local food is consumed locally, the more economic benefits circulate in the community. When produce is produce shipped at great distance, the local effect is accumulated in wholesale and retail margins, but not through any of the inputs and income from production on the farm.”

“Retail agriculture is gaining momentum because of the demand for local food products from consumers and the opportunities for diversification within agriculture,” said Matteson.
More focus on retail ag

He said one of the challenges facing retail agriculture is that food policies in the United States are generally geared towards commercial agriculture. He thinks legislators need to be educated about the emerging trend of retail agriculture.

In addition, farm advocacy and support organizations typically viewed as focusing on commercial producers need to rethink their offerings to include operations more diverse.

Finally, there is a lack of good data about the scope and scale of retail agriculture. Goldman said historically, ag statistics have been collected in silos by the commodity produced.

“Now we can see that it is vitally important for agriculture to collect data based on marketing channel, to better understand the opportunities through responding to consumer demand,” she said.
“For all types of agriculture to continue as a natural resource-based land use, farmers and the institutions of agriculture need to recognize the ultimate power of consumers to stop whatever farm practices they deem inappropriate or harmful. That could include how food is grown, how water is kept clean, or farming’s impact on other environmental goods such as wildlife habitat. 

“Consumers will always have their say, both in the context of economic exchange as well as in restrictions spoken through public policy,” she added.