A project funded by the W.K. Kellogg Foundation and the USDA s Sustainable Agriculture Research and Education Program

Transcription

1 A project funded by the W.K. Kellogg Foundation and the USDA s Sustainable Agriculture Research and Education Program

2 Task Force Leaders Convening Chair: Fred Kirschenmann, philosopher, Leopold Center for Sustainable Agriculture, Iowa State University Administrative Chair: Steve Stevenson, sociologist, Center for Integrated Agricultural Systems, University of Wisconsin-Madison Agriculture of the Middle (AOTM) web site:

3 The bifurcation of the American food system Small-scale enterprises selling to direct markets or Mega-farms selling commodities to huge, consolidated food and fiber firms Resulting in the disappearance of the ag of the middle usually family- operated farms

4 The declining middle Percent Change in Iowa Farms Based on Sales Category, 1997 to % 25% 24% 20% 17% 15% 10% 5% 0% -5% < $5,000 $5,000 to $25,000 $25 to $49,999 $50 to $99,999 $100 to $499,999 > $500,000-10% -15% -20% -25% -15% -15% -18% -19%

5 What do we lose if the midsize farms disappear? The ability to produce sufficient volumes of foods with highly specialized attributes Many conservation and environmental advantages (air, water, soil, wildlife habitat) Taxes will increase because residential areas require more public services than farmland Face of rural America altered to contain very small farms surrounding urban areas and mega-farms occupying rural areas

6 Ag of the middle farms can thrive! Niches for highly differentiated products Michael Porter -- Two ways to be competitive: 1. being the lowest cost supplier of an undifferentiated commodity or 2. providing the market with a unique and superior value in terms of product quality, special features or after-sales service Ag of the middle farmers can be competitive using a functional value chain structure to connect these farmers to the markets.

7 What is a value chain? A value chain is a long-term network of partnering businesses working together to maximize value for the partners and for the end customers of a particular product. Input Suppliers Market Farmers DELIVERY Packer (Primal cuts) DELIVERY Fabrication (Portion Cuts) DELIVERY Food Service Distributor Market Vet Services Value chain farmer as partner Supply chain farmer as input supplier Market

8 Value chains How do farmers participate? Farmer does the marketing (direct) Farmer relies on other entity to do the marketing (co-ops, ops, networks) Farmer influences or has ownership in other parts of the chain (processing) Midsize farmers more likely to participate in co-op op or networks so they do not have to market their product

9 Key characteristics of value chains Link economies of scale with differentiated products Combine cooperation with competition Promote high levels of performance and trust Require shared vision, information, and decision-making

10 Value chain economics based on three components Partner rewards based on agreed upon formulas Target or cost-based pricing Contracts for long-term partnerships Three-fold value built into product marketed through the chain quality of the product, food story, trusting relationship

11 Challenges for mid-tier value chains Strategies for product differentiation and pricing Achieving sufficient volume and quality Adequate capitalization and competent management Consistent standards and certification mechanisms

12 What are we learning from existing regional value chain efforts? Producer groups involved in highly differentiated markets benefit from engagement in working groups that facilitate comprehensive assistance to address their challenges; Land grant universities can cooperate with NGO, agency, and business partners to establish and operate value chain working groups that address technical, production, policy, and market challenges; Value chain relationships can be designed to reward partners fairly based on contribution and risk; Economic, ecological, and social benefits can be successfully incorporated into the planning process for value chains;

13 What are we learning from existing regional value chain efforts? Farmers will not increase production, to supply the growing demand for highly differentiated and sustainably produced foods, unless there are appropriate incentives that provide adequate premiums and structure so the risks of increasing supply are shared; Mutual interest in the success of other partners within a value chain creates greater opportunity for success among all partners; Value of the product can be increased with a food story farmers and farm workers fairly compensated, animals treated well, good environmental stewardship, etc.

14 Food Industry Breakdown (In Billions) Foodservice $438 Retail $446 Total Food Industry Market $ Historical Foodservice vs. Retail Spending % of each food dollar to Foodservice % of each food dollar to Retail 50.4% 49.6% Source: Technomic

15 Renewing an Agriculture-of-the-Middle (AOTM): A Three-Phase National Initiative 1. An initial task force phase (completed summer 2003) in which strategic frameworks and principles were formulated; 2. A developmental phase (fall ) in which capacity is developed for a three-fold approach involving new business and marketing strategies, public policy changes, and research and education support; and 3. An operational phase, in which major marketing, policy, and research/education activities are institutionalized within existing agri-food system industries and organizations.

16 Strategic framework for AOTM 1. New business & marketing strategies 2. Public policy changes 3. Research and education support

17 Activities - AOTM developmental phase Organizational Structure Develop a clear statement of vision, rationale, and goals Create an organizational and administrative framework to support the Phase II work

18 Activities - AOTM developmental phase Policy and Research Collaborate with other organizations and agencies to enact meaningful public policy changes Develop and engage the initiative s research and education capacity

19 Activities --AOTM developmental phase Business and Marketing Infrastructure Develop standards and a certification system Develop value chain partnerships Develop a tool kit of resources Develop corporate sponsorship of the AOTM food system

20 For more information on AOM contact: Steve Stevenson CIAS or Fred Kirschenmann Leopold Center Or visit the web site: /