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Rethinking the farm economy
Anyone who has taken an ag economics course or attended a marketing seminar will have heard the cliché - “Farmers are price takers not price makers.” In our commodity-based, big business dominated food and fiber system, this is generally true.

There is, however, a new spirit on the move that is challenging this traditional way of thinking and empowering some producers to do things a different way.

In the past, there have been attempts to put farmers in control of the price of their products: the Grange movement of the last century, the collective bargaining movement of the National Farmers Organization, and the attempts by pork producers to build a packing plant. All of these efforts have met with varying degrees of success. Yet, the new entrepreneurial spirit is one that bypasses the middleman and goes directly to the customer.

One of the fastest growing segments of agriculture is the farm direct sector. Producers of all sizes are selling a wide variety of products directly to consumers through farmers’ markets, u-pick locations, agritourism venues, and Internet sites.

Consumers are responding. New farmers’ markets are springing up all over, and traffic on websites like is increasing.

This consumer response has become so significant that big business has taken note, and, wonder of wonders, they want in on the act. Kroger has just opened a new grocery store in the heart of the Brewery District of Columbus, Ohio that specializes in locally grown products. The Ohio Proud logo is displayed prominently around the store. Not only are local fruits and vegetables on display but also locally produced baked goods and fresh meat.

“More and more people want to know where their food comes from,” according to Tom Hultquist of the Food Marketing Institute.

This direct to consumer approach is being taken by the North Dakota Farmers Union. They have partnered with an organization in Washington, D.C. to open a restaurant with an agricultural theme.

Agraria is a 14,000 square foot restaurant located on the fashionable Georgetown harbor. When opened in May, the restaurant will showcase the lives and livelihoods of the family farm. It will also serve food produced in the surrounding counties.

While the business will actually be owned by hundreds of farmers, the establishment will not look like a typical place where farmers eat. The $4 million decorating budget and well-known chef will make this a highly desirable destination in Washington. Who knows, perhaps the next Farm Bill compromise or WTO breakthrough will happen here. In any case, this will be a great place to showcase agriculture to people who often impact farmers but who rarely know any.

This farm direct trend is not limited to consumer-ready products like fruits and vegetables. Even the commodity-oriented corn and soybean industry is moving in this direction. While recently traveling in Central America with a group of Hoosier corn and soybean producers, we saw large livestock farms feeding their animals with very poor quality grain they had purchased from the U.S. It had high foreign matter content and high levels of toxins.

“We produce better quality than this,” one producer told me. Yet, when high quality Midwestern grain gets mixed with lower quality grain at the gulf, the customer suffers.

Faster than you can say “Continental Grain,” the Indiana producers and the Central American feeders were working on details of a plan to ship high quality corn and soy protein directly from Indiana.

Certainly the price would be much higher, but the Hoosiers were willing to prove the value of their high quality product. Plans are currently underway for a feeding trial in Central America using Indiana corn and soybeans. If successful, Indiana farmers will have bypassed the traditional commodity system, found their own customers, set the price and sold the grain.

All these ideas take risk, creativity and hard work, but that should not be anything new to agriculture. While this approach will not work for every farm or every segment of farming, it shows the ag economy is undergoing some dynamic changes. So let’s not just be idea takers but be idea makers, and we just might reshape our industry.

This farm news was published in the March 1, 2006 issue of Farm World.