Market ForcesC R E AT I N G J O B S T H R O U G H P U B L I C I N V E S T M E N T     IN LOC AL AND REGIONAL FOOD SYSTEMS
Market ForcesCREATING JOBS THROUGH PUBLIC INVESTMENT   IN LOCAL AND REGIONAL FOOD SYSTEMS              Jeffrey K. O’Hara  ...
ii   UNION OF CONCERNED SCIENTISTS           © 2011 Union of Concerned Scientists           All rights reserved           ...
MARKET FORCES   iiiTable of ContentsFigures and Tables                                                                    ...
iv   UNION OF CONCERNED SCIENTISTS     CHAPTER 4     Local and Regional Food Systems Can Have Positive Social, Health, and...
MARKET FORCES   vAcknowledgments   is report was made possible in part through the generous supportof the David B. Gold Fo...
MARKET FORCES                                1Executive Summary                                                           ...
2   UNION OF CONCERNED SCIENTISTS          The USDA, in its “MyPlate” dietary                          through direct cons...
MARKET FORCES   3                                                                                                         ...
4   UNION OF CONCERNED SCIENTISTS          and rural land to ensure that there is both an adequate                        ...
MARKET FORCES       5Figure ES-1. U.S. Farmers Market Locations, 2010                                                     ...
6   UNION OF CONCERNED SCIENTISTS          CHAPTER 1          Description of Local Food Systems                           ...
MARKET FORCES   7Food sold via direct marketing does not have to be                        • Lack of awareness of the exis...
8   UNION OF CONCERNED SCIENTISTS          Figure 1. Small Farms Account for a Greater                                    ...
MARKET FORCES                   9free” or “pesticide-free,” “natural,” “pasture-raised/free-                Figure 3. Perc...
10   UNION OF CONCERNED SCIENTISTS           Table 1. States with the Greatest Number                             rules re...
MARKET FORCES            11    Second, while farmers markets are well establishedin some rural areas, regional food market...
12     UNION OF CONCERNED SCIENTISTSFigure 5. Marketing Assistance Needs Identi ed                                        ...
MARKET FORCES                               13    Second, the presence of adequate infrastructure is a                    ...
14   UNION OF CONCERNED SCIENTISTS           CHAPTER 2           Supporting Local and Regional Food           Systems Is S...
MARKET FORCES   15involves determining how the shopping habits of localfood consumers di ers from what they would havepurc...
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
Market Forces Report
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Market Forces Report

  1. 1. Market ForcesC R E AT I N G J O B S T H R O U G H P U B L I C I N V E S T M E N T IN LOC AL AND REGIONAL FOOD SYSTEMS
  2. 2. Market ForcesCREATING JOBS THROUGH PUBLIC INVESTMENT IN LOCAL AND REGIONAL FOOD SYSTEMS Jeffrey K. O’Hara AUGUST 2011
  3. 3. ii UNION OF CONCERNED SCIENTISTS © 2011 Union of Concerned Scientists All rights reserved Je rey K. O’Hara is an agricultural economist in the Union of Concerned Scientists Food and Environment Program. e Union of Concerned Scientists (UCS) is the leading science-based nonpro t working for a healthy environment and a safer world. UCS combines independent scienti c research and citizen action to develop innovative practical solutions and to secure responsible changes in government policy, corporate practices, and consumer choices. e goal of the UCS Food and Environment Program is a food system that encourages innovative and environmentally sustainable ways to produce high-quality, safe, and a ordable food while ensuring that citizens have a voice in how their food is grown. More information is available on the UCS website at www.ucsusa.org/ food_and_agriculture. is report is available in PDF format on the UCS website (www.ucsusa.org/publications) or may be obtained from: UCS Publications 2 Brattle Square Cambridge, MA 02238-9105 Or, email pubs@ucsusa.org or call (617) 547-5552. Design: DG Communications, Acton, MA www.Nonpro tDesign.com Cover images: (top left & right) © iStockphoto.com/Bruce Block; (lower left) © iStockphoto.com/Eric Delmar Printed on recycled paper
  4. 4. MARKET FORCES iiiTable of ContentsFigures and Tables ivAcknowledgments vE X E C U T I V E S U M M A RY 1CHAPTER 1Description of Local Food Systems 6Types of Direct Marketing 6Demand for Local Food 7Supply of Local Food 7Farmers Markets 9Community-Supported Agriculture 10Local and Regional Food Systems Have Scalability Challenges 10CHAPTER 2Supporting Local and Regional Food Systems Is Sound Policy 14Objectives of Government 14Local and Regional Food Systems Can Support Public Objectives 14Local and Regional Food Systems and Food Security 15CHAPTER 3Local and Regional Food Systems Provide Positive Regional Economic Impacts 16Quantifying the Economic Impacts of an Industry or Sector 16Direct Marketing Can Foster Regional Economic Development 17Local and Regional Food Systems Can Result in Sector-Specific Economic Growth 18Economic Impacts of Farm-to-School Programs 21Farmers Markets Can Increase Sales at Neighboring Businesses 21Local and Regional Food Systems Can Increase Business Innovation and Entrepreneurship 22Responses to Arguments against Supporting Local-Food-System Development 22
  5. 5. iv UNION OF CONCERNED SCIENTISTS CHAPTER 4 Local and Regional Food Systems Can Have Positive Social, Health, and Environmental Impacts 23 Local Food Systems Can Promote Healthier Food-Product Choices 23 Local Food Systems Can Reduce the Environmental Footprint of Our Overall Food System 25 Local Food Systems Can Promote Community Interaction 26 CHAPTER 5 Investing in Local and Regional Food Systems and Creating Jobs 27 Initial Funding Can Help New Farmers Markets Succeed 27 Programs that Support Local and Regional Food Systems 28 Determining the Economic Implications of Supporting Farmers Markets 30 CHAPTER 6 Conclusions and Policy Recommendations 32 REFERENCES 34 F I G U R E S A N D TA B L E S Figures ES-1. U.S. Farmers Market Locations, 2010 5 1. Small Farms Account for a Greater Proportion of Agricultural Product Sales from Direct Marketing 8 2. Products Sold by Vendors at Farmers Markets 8 3. Percentage of Farmers Markets with Labeled Products 9 4. The Number of Farmers Markets in the United States Has Increased Rapidly 9 5. Marketing Assistance Needs Identified by Farmers Market Vendors 12 6. Food Products Sold at Food Hubs 13 7. U.S. Principal Operator by Age: Farmers Are Aging 16 8. U.S. Agricultural Acreage by Product: Fruits and Vegetables Account for a Small Fraction of Land 19 Tables 1. States with the Greatest Number of Farmers Markets Per Capita 10 2. Economic Impacts of Farmers Markets 18 3. Economic Impacts of Increased Fruit and Vegetable Consumption 20 4. Potential Employment Impacts of Reauthorizing the Federal Farmers Market Promotion Program 31
  6. 6. MARKET FORCES vAcknowledgments is report was made possible in part through the generous supportof the David B. Gold Foundation, the New York Community Trust, theClif Bar Family Foundation, the Tomchin Family Charitable Foundation,the Deer Creek Foundation, and UCS members.For their reviews of the report, the author would like to thank DavidSwenson of Iowa State University, David Hughes of Clemson University,Larry Lev of Oregon State University, and Stacy Miller of the FarmersMarket Coalition. e time involved in reviewing a paper of this lengthis considerable, and their comments and suggestions greatly improved it.At UCS, the author thanks Margaret Mellon and Karen Perry Stillermanfor the many useful suggestions they provided. eir advice, encouragement,and helpful editing in uenced the report’s nal form.We would also like to thank Steven J. Marcus for copyediting the reportand David Gerratt for his design and layout. e opinions and information contained in this report, being the soleresponsibility of the author, do not necessarily re ect those of thefoundations that supported it or the individuals who reviewed andcommented on it.
  7. 7. MARKET FORCES 1Executive Summary © iStockphoto.com/Bruce BlockWhen strolling through a local farmers market you may surprising data on their potential to create jobs in thosewell be struck by the many ways in which the food communities. Finally, the report addresses some chal-o ered for sale di ers from typical mass-produced and lenges that local and regional food systems must meet-marketed food products. For starters, healthful pro- if they are to grow further, and it recommends publicduce items dominate the farmers market, and they are policies that could help promote and expand thesetypically fresher and more avorful than supermarket systems in the future.produce. Moreover, the presence of the farmers puts aface on who grew the food and re ects where and how THE RISE OF LOCAL AND REGIONALit was grown. FOOD SYSTEMS Less apparent to the casual shopper, however, are Markets for locally and regionally produced food arethe important economic bene ts that farmers mar- now ubiquitous across the United States. Most of themkets—and the local and regional food systems behind emerged over the last several decades through the tire-them—can provide to rural and urban communities less e orts of entrepreneurs, community organizers,alike. In this report, the Union of Concerned Scientists farmers, and food and farm policy advocates. In par-(UCS) explores the recent remarkable growth of ticular, farmers markets and community-supportedfarmers markets and other manifestations of local and agriculture systems (CSAs)—in which consumersregional food systems, describes key features of these buy shares of local farm harvests in advance and thensystems, evaluates their economic and other impacts routinely reap the bene ts in the form of fresh food—on the communities in which they operate, and o ers have expanded rapidly and are now established as family- Conservative estimates by the U.S. Department of Agriculture (USDA) suggest that more than 136,000 farms are currently selling food products directly to consumers.
  8. 8. 2 UNION OF CONCERNED SCIENTISTS The USDA, in its “MyPlate” dietary through direct consumer marketing channels reached $1.2 billion in 2007. guidelines, recommends that Americans e demand for local food has been driven by eat significantly more fruits and consumers who wish to support local farms and other businesses, to purchase healthful food that is fresh and vegetables; in many regions, local tends to be sustainably produced, to interact with farmers could grow a substantial farmers, and to learn more about the food they grow portion of this additional produce. and that consumers eat. e enthusiasm for local and regional foods has also arisen, at least in part, as a back- lash against the de ciencies of our consolidated food production, processing, and distribution system. shopping venues in many cities and towns. Schools, Local and regional food-product sales often occur restaurants, supermarkets, and other mainstream insti- through direct marketing channels. For example, a tutions are also buying food from local farmers. As a farmer could sell food products either directly to a result, innovative farmers are able to develop and expand consumer, such as at a farmers market, at a roadside businesses that generate income in rural communities. stand, or through a CSA; or directly to a retail institu- Most of these markets were independently conceived tion, such as a restaurant, grocery store, or school. as grassroots initiatives, and as such each of them con- Farmers who sell their food through direct marketing tributes uniquely to its community. ese achievements channels tend to operate smaller farms with a variety have been particularly remarkable in that they have of products, such as fruits and vegetables; engage in been mostly self-su cient—realized without the gov- entrepreneurial activities; and follow environmentally ernment subsidies that the increasingly consolidated sustainable production practices. ese farmers can of- mainstream food system receives. ten earn greater pro ts by selling their products through is report shows that local and regional food sys- local food systems than by selling them to a wholesaler tems could expand further, with the potential for cre- in the consolidated food system. In addition, the op- ating tens of thousands of jobs in rural communities— portunity to interact with consumers provides these many of which are struggling economically—and farmers with rsthand information on the demand in urban communities as well. For example, the U.S. for their products. Department of Agriculture (USDA), in its “MyPlate” dietary guidelines, recommends that Americans eat 2. The economic, environmental, and signi cantly more fruits and vegetables; in many re- health impacts of local and regional food gions, local farmers could grow a substantial portion systems depend on how consumers’ of this additional produce in peak growing season. Re- purchasing decisions are altered. gional food systems could also increase market access ere are a multitude of reasons for seeking local and for regional meat and dairy producers, thereby helping regional alternatives to the current consolidated U.S. to foster competition in markets that have experienced food system. For one thing, that system accounts for signi cant consolidation in recent decades. Overall, the 16 percent of the country’s energy use and is a signi - expansion of local and regional food systems could cant contributor to climate change. For another, the complement the nation’s existing mechanisms for food overconsumption of unhealthful processed foods con- production, distribution, and consumption. Greater tributes to Americans’ increased rates of weight gain investment in local and regional food systems would and obesity, which have considerable health conse- thus be an essential step for agriculture policies that quences and large associated societal costs. seek to support such economic activity. Fresh fruits and vegetables are particularly well suited Among the report’s major ndings are: to distribution through direct marketing because they are mostly unprocessed. Communities could see health 1. Local and regional food systems are an bene ts if patrons of local-food markets consequently expanding part of our food system. ate more of these healthful but underconsumed items. Local and regional food-product markets have grown ere could also be environmental bene ts from re- rapidly in recent years and have become entrenched. duced energy usage if diets shifted to eating unprocessed e number of farmers markets in the United States food as a substitute for heavily processed foods. increased from just 340 in 1970 to more than 7,000 While more research is needed to demonstrate how today, and there are now more than 4,000 CSAs. e consumers’ shopping behavior may be altered as a result USDA reports that the sales of agricultural products of buying foods produced nearby, available evidence
  9. 9. MARKET FORCES 3 © iStockphoto.com/Bruce BlockModest public funding for 100 to labor, have little access to capital, and are nonpro t in- stitutions. Even a small amount of support could help500 otherwise-unsuccessful farmers a farmers market become stabilized through, say, themarkets a year could create as many as hiring of a market manager, the installation of an elec- tronic bene t transfer machine, and outreach e orts.13,500 jobs over a five-year period. For example, modest public funding for 100 to 500 otherwise-unsuccessful farmers markets a year couldsuggests that local and regional food systems could help create as many as 13,500 jobs over a ve-year period.promote the consumption of these products. Local and regional food systems could also lead to job growth through other marketing channels—for3. Local and regional food systems can have example, when greater consumption of fresh fruits andpositive e ects on regional economies. vegetables draws on produce supplied locally or region- e expansion of local and regional food systems sup- ally. Various studies have suggested that this phenom-ports employment, incomes, and output in rural com- enon could lead to thousands more jobs in the Midwestmunities. Direct marketing channels, such as farmers alone, even if land allocated to fruits and vegetablesmarkets, stimulate rural economies because a greater displaced some production of corn and soybeans. esepercentage of the sales revenue is retained locally. Fur- kinds of positive economic results could also occur inther, farmers may purchase equipment and raw mate- other geographic regions or for other food-productrials from local suppliers. Such transactions increase sectors, such as meat and dairy.labor and consequently household incomes, which re-sult in additional spending. An important nding from 4. Local and regional food systems havethe literature is that under various scenarios, further scalability challenges, some of which canexpansion of local and regional food systems has the be addressed through public policy.potential to create tens of thousands of additional jobs. While local and regional food systems have become One approach to increasing local and regional food- more prominent, several challenges remain that couldproduct sales is to support the development of direct hinder further development. ere are geographicmarketing channels. Such support is invaluable because and seasonal limitations—owing to climate variationestablishing a local-food market, such as a farmers mar- and soil attributes—on the extent to which local andket, can be a daunting exercise—many farmers markets regional food systems can be established. ere alsoare community-based and -initiated, rely on volunteer must be an appropriate balance of urban populations
  10. 10. 4 UNION OF CONCERNED SCIENTISTS and rural land to ensure that there is both an adequate that they provide to larger-scale commodity crop demand and su cient supply. Such balance is particu- farmers. More scale-appropriate mechanisms for pro- larly important for meat and dairy products, which viding whole-farm revenue insurance and credit, for may require scale for production. example, would be helpful to many small farmers who Moreover, while direct consumer marketing has been produce food for local and regional consumption. a common method to date for selling locally produced Some of these challenges (among the aforemen- food, it too can have scale limitations. Local institu- tioned and elsewhere) could be addressed through tions, processing infrastructure, or regulations may forward-thinking policies and sound investments re- be inadequate—e.g., lacking su cient capacity—for lated to farms, food, and local development. We now allowing local and regional food systems to prosper. identify such public policy solutions. us the cultivation of additional institutional arrange- ments, which has occurred with schools but could also RECOMMENDATIONS apply to mainstream supermarkets and other sectors, While the number and in uence of local and regional is important. Speci cally, innovations such as “food food systems have grown substantially, many issues hubs”—locations at which farmers can drop o local- must be resolved if they are to continue increasing in ly produced food and distributors and consumers can scale and become more integrated into the existing food pick it up—are promising options. system. Further, future e orts to expand local and re- An additional challenge is that existing USDA pro- gional food systems should aim to complement and grams may be inadequate for providing the same type reinforce—not substitute for—already established of support and assistance to local-food-system farmers local-food-market institutions, such as farmers markets or CSAs. Speci cally, the Union of Concerned Scientists recommends that: Congress and the USDA, in coordination with other relevant agencies, should increase funding for programs that support local and regional food systems. ree types of programs, if funded at increased levels, could foster the continued growth of local and region- al food systems: (1) rural development programs that provide funds for investing in infrastructure to support local and regional food systems; (2) programs that of- fer assistance to farmers market managers, schools, and other local-food-system administrators; and (3) nutri- tion programs that provide nancial assistance to low- income consumers who wish to purchase healthful food at local-food markets. Moreover, among the multiple federal agencies that administer the various programs that support and promote local food systems, continued and improved coordination is critically important. By organizing pro- grams within one title in the federal farm bill, Congress could e ectively bring together these seemingly dis- parate programs while also raising the pro le of local and regional food systems. The USDA, together with academic and other © iStockphoto/Thinkstock policy institutes, should raise the level of research on the impacts of local and regional food systems, particularly regarding their expansion. Funding more research for local and regional food sys- tems is essential for e ective future agricultural policy,
  11. 11. MARKET FORCES 5Figure ES-1. U.S. Farmers Market Locations, 2010 Source: Agricultural Marketing Service 2010.This map shows the distribution of thousands of farmers markets across the country, in all 50 states and the District of Columbia.and obtaining more precise data on marketing channels commodities, would be bene cial. In addition, ensur-for local and regional food sales is especially important. ing that farmers selling through local food systems haveOther research priorities include the study of how the access to a ordable credit, either from Farm Creditinstallation of farmers markets and other local-food System banks or from state nancing authorities, couldoutlets in uences consumers’ shopping habits relative allow these farmers to develop and expand theirto their behavior in the absence of such markets, and businesses. Lastly, cost-share programs that provide as-the e ects on low-income people of nutrition programs sistance to organic farmers in obtaining certi cationthat facilitate patronage of farmers markets. could also help them sell food products in local and In addition, research on the feasibility of establish- regional markets.ing local and regional food systems on a greater scalein speci ed areas would help identify where some of Local governments and community organizationsthe most signi cant economic impacts could be real- should foster local capacity to help implementized. Such research would feature comparisons of the local and regional food-system plans.potential regional supply (based, for example, on soil e establishment of local and regional food systemscharacteristics, land availability, and climate conditions) requires a good deal of local e ort and coordination.with the potential demand (based on population, con- When funding is available, there must be evidence thatsumer preferences, and income). is line of research local capacity is su cient to absorb it and that localcould also illuminate the land-use implications of local food initiatives have reasonable prospects for success.food systems geared to increase production of fruits, In addition, assistance should be provided to prospec-vegetables, or other food products. tive applicants for developing business plans, conduct- ing outreach, and seeking funding opportunities.Congress and the USDA should restructure thesafety net and ensure credit accessibility for Farmers market administrators should supportlocal-food-system farmers. the realization of farmers market certi cationMany attributes of existing agricultural programs are standards.not well suited to supporting farms and other produc- e development of certi cation standards by farmersers that market their food within localized systems. market administrators could help ensure the integrityFor example, insurance focused on single crops, as is of direct-to-consumer marketing systems. Standardstypical, is not convenient for farmers growing a suc- provide con dence to consumers that vendors arecession of vegetables throughout the growing season. involved in the production of the food they sell and us the development of whole-farm revenue insur- are undertaking environmentally sustainable produc-ance, as an alternative to crop insurance for speci ed tion practices.
  12. 12. 6 UNION OF CONCERNED SCIENTISTS CHAPTER 1 Description of Local Food Systems © iStockphoto.com/Bruce Block As major segments of the U.S. industrialized food sys- TYPES OF DIRECT MARKETING tem have consolidated and become increasingly remote ere are multiple de nitions of local and regional food from consumers, an alternative food system—one that systems. Certain federal programs de ne them as sys- offers locally produced food—has emerged. This tems that market food either less than 400 miles from section describes the various types of such direct mar- its origin or within the state where it was produced. keting mechanisms, why some consumers demand Local food systems are also associated with marketing locally produced food, the kinds of farmers that pro- arrangements whereby farmers sell products directly to duce and sell it, the marketing channels used and the a consumer or retailer without using a wholesale sup- institutions involved, and obstacles that must be over- plier. Although “direct marketing” is often used as a come for local and regional food systems to increase proxy for “local food systems”—because it is easier to their sales and also to become more integrated into the de ne and measure, and also because there is consid- existing food system. erable overlap at present—the two concepts are distinct.
  13. 13. MARKET FORCES 7Food sold via direct marketing does not have to be • Lack of awareness of the existence of local foodlocally produced, and vice versa. markets One type of direct marketing involves a farmer sell- • Inaccessibility, inconvenience, or lack of proximitying food directly to consumers—at a roadside stand, • Higher prices (whether perceived or actual) forU-pick operation, or farmers market, for example, or locally produced foodthrough subscription programs known as community- • Lack of variety of food, or too-small quantitiessupported agriculture (CSA). A New York study foundthat full-time direct marketing farmers used a variety Food retailers have additional challenges associated withof direct marketing channels, while part-time direct purchasing local food, such as in ordering, delivery,marketing farmers reported a greater percentage of sales and reliability. Nonetheless, for retailers and consum-in farmers markets (Lyson, Gillespie, and Hilchey ers alike, the obstacles cited are not associated with the1995). In 2007, 136,817 farms sold agricultural prod- desirability of the food product.ucts directly to individuals for human consumption,with sales totaling $1.2 billion (USDA 2009, Table SUPPLY OF LOCAL FOOD58), although challenges associated with measuring Some farmers can obtain greater revenue by selling fooddirect marketing sales suggest that this number is un- via direct marketing in local markets than by sellingderstated (e.g., Brown 2002). e reported number of food to wholesalers. at is, direct marketing allowsfarms engaged in direct consumer marketing in 2007 local food producers to retain most, if not all, of therepresented a 17 percent increase from 2002. Although revenue from the retail sale of their product; they can6 percent of all farms are involved in direct consumer receive up to seven times greater net revenue on a per-sales, they account for only 0.4 percent of total agri- unit basis from selling locally than in conventionalcultural sales. markets (King et al. 2010). ese advantages can have Instead of selling directly to consumers, farmers important nancial implications for farmers, as mar-could sell food directly to either a retail facility or keting costs accounted for 84 percent of the U.S. retailfood service institution, thus bypassing the wholesale sales value of food products in 2008 (Canning 2011).distribution system. For example, a farmer could sell However, they must also market the product them-products directly to a grocery store, restaurant, hospi- selves, which can incur unpaid labor costs of 13 per-tal, or school. Institutional marketing is generally more cent to 62 percent of the retail price (King et al. 2010).feasible for a group of farmers, which underscores the Some consumers may be willing to pay a higher priceimportance of developing cooperative structures. for locally produced food, although food products will generally need to have other attributes, such as beingDEMAND FOR LOCAL FOOD grown through sustainable production practices, to ere are various reasons why some consumers and re- receive a premium (King et al. 2010). Farmers may alsotailers are purchasing locally produced food. According engage in direct marketing for the opportunity toto a recent literature review (Martinez et al. 2010), socially interact with consumers and retain indepen-these buyers: dence from intermediary purchasers, processors, and• Believe local food is fresher retailers. Finally, a major bene t of direct marketing is• Believe local food is of better quality that farmers can obtain rsthand, real-time feedback• Want to support local businesses and producers about products that customers desire, and then can• Want to know the source of the food adapt their business accordingly.• Want food with greater nutritional value Who are the farmers who supply food to local• Prefer food grown through environmentally food markets? We discuss four characteristics of these sustainable practices (e.g., organic) farmers, using direct consumer marketing as a proxy• Enjoy the shopping experience for local food sales.• Can obtain a greater variety of food• Can pay lower prices Farmers Who Engage in Direct Consumer Marketing Tend to Operate Smaller1 FarmsAs reported by the same researchers, the largest ob- Figure 1 (p. 8) shows that farms of fewer than 50stacles that consumers cite for not buying local food acres account for 29 percent of U.S. direct consumer-include: marketing agricultural sales, but only 2 percent of total1 “Smaller” may apply either to farm revenue or acreage. Starr et al. (2003) and Hunt (2007), in case studies in Colorado and Maine, respectively, found that direct marketing farmers produced their food on small-acreage farms.
  14. 14. 8 UNION OF CONCERNED SCIENTISTS Figure 1. Small Farms Account for a Greater farmers accounted for 57 percent of the value of direct Proportion of Agricultural Product Sales consumer marketing sales (USDA 2009). from Direct Marketing 100% Farmers Who Engage in Direct Consumer Mar- 90% keting Tend to be Fruit and Vegetable Producers 80% Fruits and vegetables are well suited to direct market- 70% ing because they require little processing. Vegetable/ melon and fruit/tree-nut producers each account for 60% 28 percent of the value of all agricultural products sold 50% via direct consumer marketing (USDA 2009). Forty- 40% four percent of all vegetable and melon producers sell 30% directly to consumers, as do 17 percent of fruit and nut 20% producers, but only 7 percent of livestock producers 10% and 2 percent of those growing non-fruit-or-vegetable 0% crops (grains, for example) seek direct consumer sales Direct Marketing Total Sales (Martinez et al. 2010). Figure 2 shows that 92 percent 1,000 acres or more 50 to 999 acres 1 to 49 acres of farmers markets have vendors who sell fresh fruits Source: USDA 2009. and vegetables, while 45 percent of vendors at farmers markets sell fresh fruits and vegetables. agricultural sales, and these percentages are respec- tively 62 percent and 30 percent for farms of 50 to 999 Farmers Who Engage in Direct Consumer acres. Similarly, according to the USDA’s 2007 Cen- Marketing Tend to Engage in Environmentally sus of Agriculture, farmers with less than $250,000 in Sustainable Production Practices2 annual sales represented 96 percent of the farms that Figure 3 shows that common product labels at farmers engaged in direct consumer marketing, and those markets include “locally grown,” “organic,” “chemical- Figure 2. Products Sold by Vendors at Farmers Markets 100% 90% % of U.S. farmers markets 80% selling selected products 70% % of U.S. vendors selling selected products at farmers markets 60% 50% 40% 30% 20% 10% 0% es s es s g y ds ds y d r bl er rv od kin ltr o o air fo o he et a ow es e go or po u fo fo d ea Ot d d d or s ve g nd pr ke dw to r re se ilk or a d Ba oo ep a es M nd bs an rw ea Pr oc Fis h a r s, M Pr its He ut ts o fru ,n af h ey Cr es n Fr Ho Source: Ragland and Tropp 2009. 2 See also Starr et al. 2003 and Hunt 2007.
  15. 15. MARKET FORCES 9free” or “pesticide-free,” “natural,” “pasture-raised/free- Figure 3. Percentage of Farmers Marketsrange,” and “hormone-free” or “antibiotic-free.” ese with Labeled Productslabels are intended for education and marketing pur- 70%poses, as consumers use this information to decidewhether to purchase food. 60% Local food markets are particularly important for 50%organic producers. More than 17 percent of USDA- 40%organic products are sold through direct consumer and 30%retail marketing (USDA 2010; USDA 2009). Organ-ic direct-marketing farmers earned 75 percent on aver- 20%age more than their nonorganic counterparts, and they 10%sold a larger quantity of commodities than organic 0%farmers who did not engage in direct marketing y e/ d/ / r all n ic al ee he oc ow an re l-f free ur ise -fr free Ot(Martinez et al. 2010). In any case, organic farming L r rg at ra e O ica e- N e- e on ic-has important implications for supporting more food g emticid st ur rang r m iotproduction: 78 percent of organic farmers stated in Ch es Pa ree- Ho ntib p f a2008 that they intended to maintain or expand their Source: Ragland and Tropp 2009.organic operations over the next ve years.3 Figure 4. The Number of Farmers Markets inFarmers Who Engage in Direct Consumer the United States Has Increased RapidlyMarketing Tend to Operate Diverse Farms and 8,000Undertake Entrepreneurial ActivitiesSmall farms with direct sales often grow multiple prod- 7,000 Number of U.S. Farmers’ Marketsucts (Starr et al. 2003). Farms that engage in direct 6,000marketing with no additional on-farm entrepreneurialactivities earn $6,844 in average direct sales per farm, 5,000but farms that engage in three additional on-farm en- 4,000trepreneurial activities earn $28,651 (Martinez et al.2010). Small farms involved in direct marketing con- 3,000stitute 28 percent of farmers that produce on-farmvalue-added goods such as processed products; such 2,000farms also constitute 33 percent of participants in CSAs 1,000and 49 percent of organic producers (Martinez et al.2010). Farmers market vendors have expanded exist- 0ing product lines, begun additional processing, devel- 94 96 98 00 02 04 06 08 09 10 11 19 19 19 20 20 20 20 20 20 20 20oped mailing lists, made new business contacts, and Source: USDA 2011b.sharpened their customer relations, merchandising, andpricing skills (Feenstra et al. 2003). designed to allow farmers to directly sell their products to consumers.FARMERS MARKETS Farmers markets once constituted a conventionalWe examine farmers markets in more detail in this sec- channel for selling fresh food in the United States,tion because of their role as a potential keystone of particularly in cities. roughout the early and middleemerging local food systems (Gillespie et al. 2007), parts of the twentieth century, the number of farmerstheir unique role in facilitating direct marketing—sales markets decreased as the food system consolidated, in-at farmers markets exceeded $1 billion in 2005 (Rag- terstate highways were developed, and large irriga-land and Tropp 2009)—and the superior data about tion projects allowed produce to be grown far awayfarmers markets in comparison to other local food mar- from consumers. By 1970, only 340 farmers marketskets. While no consistent legal de nition of farmers were left in the country (Brown 2001). is trend hasmarkets yet exists (Briggs et al. 2010), they are gen- reversed itself in recent decades, however. Figure 4erally conceptualized as structured market settings indicates that the number of farmers markets in the3 Online at www.agcensus.usda.gov/Publications/2007/Online_Highlights/Fact_Sheets/organics.pdf, accessed July 2, 2011.
  16. 16. 10 UNION OF CONCERNED SCIENTISTS Table 1. States with the Greatest Number rules requiring that vendors sell products that they of Farmers Markets Per Capita produce themselves (Ragland and Tropp 2009). # of Farmers COMMUNITY SUPPORTED AGRICULTURE Rank State Markets A CSA system is traditionally an arrangement whereby 1 Vermont 84 a consumer purchases a “share” of on-farm produce from a farmer early in the year and receives a weekly 2 North Dakota 56 delivery of fresh produce throughout the growing sea- 3 Iowa 232 son (e.g., UCS 2009; Brown and Miller 2008). Fruits and vegetables typically predominate, though other 4 New Hampshire 90 farm products can be included as well. e bene ts to 5 Hawaii 83 farmers are that they receive payment for their prod- ucts earlier in the calendar year before harvest, they can 6 Maine 77 mitigate the e ects of price or production risks that 7 Wyoming 30 could occur during the growing season, and by having completed their marketing before growing season they 8 Montana 48 can focus exclusively on production. Consumers may 9 Washington, DC 28 prefer this approach because it enables them to support local farmers, obtain food that may be fresher than 10 Idaho 65 store-bought, and learn more information from farm- ers about how the food is grown. CSA models have evolved over time, and some now do not require that consumers buy a share in advance or allow customized United States grew to 1,755 by 1994 and reached 6,132 ordering. One directory estimates that there are cur- by 2010, and there are currently 7,146 operating farm- rently over 4,000 CSAs in the United States.5 ers markets. Table 1 shows the states with the greatest number LOCAL AND REGIONAL FOOD SYSTEMS of farmers markets on a per-capita basis and demon- HAVE SCALABILITY CHALLENGES strates that farmers markets can occur in regions of the While local and regional food systems are experiencing country that do not have large urban centers. Many of growing sales volume, barriers exist to increasing their these states are located in the Midwest (Iowa, North scale. In this section we discuss some of the most Dakota), northern New England (Maine, New Hamp- serious barriers: challenges pertaining to geographic shire, and Vermont), and the Rocky Mountain West limitations; impediments to the e ectiveness of direct (Idaho, Montana, and Wyoming). is nonurban- marketing; inadequate institutions, infrastructure, and occurrence phenomenon also holds at the county regulations for facilitating local and regional food level, as rural areas have a greater density of farmers systems; and inadequate agricultural programs for markets on a per-capita basis than do urban areas.4 assisting local-food-system farmers. However, these ndings do not imply that there are higher per-capita purchases of local food in rural areas. Geographic Limitations A farmers market can be administered by some Geographic limitations suggest that food systems could other organization or else become its own organization. be more e ective at regional levels than at exclusively e level and sophistication of a farmers market bureau- local levels (e.g., Clancy and Ruhf 2010). First, region- cracy is generally proportional to its size (Stephenson, al systems can expand product availability throughout Lev, and Brewer 2007). Forty to 45 percent of member the year as a result of varying growing seasons within associations in the Farmers Market Coalition are reg- a region. is local variation can also help mitigate istered as 501(c)(3) nonpro t organizations (Briggs et seasonal bottlenecks at processing facilities by having al. 2010). Most farmers markets are operated on a utilization occur over a longer period. Seasonal uc- seasonal basis (consistent with the growing season), tuations in demand for particular products may exist tend to be in an outdoor public location, and establish as well. 4 See map online at www.ers.usda.gov/AmberWaves/December10/Indicators/On eMap.htm, accessed July 2, 2011. 5 Online at www.localharvest.org/csa, accessed July 3, 2011.
  17. 17. MARKET FORCES 11 Second, while farmers markets are well establishedin some rural areas, regional food markets may be bet-ter for products that require scale for production. Inparticular, the construction of processing facilities, suchas slaughterhouses and dairy bottling plants, incur xedcosts that require a su cient customer base to ensurethey are economical—and rural areas may have too fewconsumers to purchase the resulting products. On theother hand, in localities that are predominately urbanthere may be insu cient land to grow food becauseagriculture may not be pro table on land that is rela-tively expensive. e solution appears to lie between these two ex-tremes. Local and regional food systems may have theirgreatest opportunity for scale in regions that have ur-ban population centers with close proximity to ruralareas boasting available farmland (Timmons and Wang2010). Eighty-four percent of the farms that engagein direct marketing are in metropolitan counties or inrural counties adjacent to metro counties, and direct-sales revenue per farm increases as farms become closerto metro regions (Martinez et al. 2010). Research that identi ed regions with the greatestscope for local and regional food systems could be in-valuable in supporting regional economic development.Such research is needed to identify regions that haveboth the capability to supply local food (i.e., they havethe appropriate climate and available farmland withthe needed soil characteristics) and su cient demand © Claire Bloomberg/Bloomberg Photographyto support local food purchases (i.e., metropolitan the net number of farmers markets in Oregon increasedareas with su cient population, income, and con- by 30, with 62 new markets opening and 32 marketssumer preferences). e undertaking of such research closing (Stephenson, Lev, and Brewer 2008).projects is a priority. Such turnover is not surprising, as establishing a farmers market can be a daunting task. Critical deci-Challenges Associated with Direct Marketing sions involve market viability; vendor standards;Direct consumer marketing has grown over the past market administration; risk management associated15 years and may continue to grow in the near future, with insurance, liability, permitting, taxes, and regula-though limitations exist on the extent to which the tion; marketing and outreach; and market infrastruc-numbers of farmers markets and other direct consumer ture investments.6 Other direct consumer marketingmarketing channels can increase (e.g., Ragland and barriers include meeting food safety and processingTropp 2009). ese limitations arise because the de- regulations, facilitating payments for low-income pa-centralized and uncoordinated nature of local food trons with coupons, and understanding local zoningmarkets sometimes presents logistical, awareness, and rules and business permit requirements (Tropp andaccessibility challenges to consumers. Barham 2008). Figure 5 (p. 12) summarizes challenges that farmers market vendors have identi ed with respectFarmers markets to the administration of markets once they are es-While the net number of farmers markets has increased tablished. ese challenges include advertising anddramatically over the past 20 years, there can be con- publicity, local-food promotion campaigns, consumersiderable ux, with markets opening and closing on a targeting, displays, information on customer prefer-continuing basis. For example, between 1998 and 2005 ences and demographics, and business plan development.6 Online at farmersmarketcoalition.org/managerfaqs/#marketingsta , accessed July 3, 2011.
  18. 18. 12 UNION OF CONCERNED SCIENTISTSFigure 5. Marketing Assistance Needs Identi ed larly critical institutional channel to fostering greaterby Farmers Market Vendors product sales is through mainstream supermarkets90% (King, Gomez, and DiGiacomo 2010). e lack of nancial support, time, and infrastructure are the most80% common barriers that farmers face in direct marketing70% to institutions, implying that farmer co-ops or other60% such groups may be essential to addressing these chal-50% lenges (Martinez et al. 2010; Vogt and Kaiser 2008).40% However, aggregation of food from di erent farmers30% can lead to obstacles in identifying the source of the20% food, should that be necessary (Martinez et al. 2010).10% Food hubs 0% d n g g g s A food hub is a drop-o point for farmers and a pick- an y io s tin rs sin tin ch es g g licit ot ign ge me di ke ear sin nin up location for distributors and customers. It permits in om pa r n ar Bu lan tis ub Pr am Ta nsu ha M res the purchase of source-identi ed local and regional ver p c co e rc pAd M food, coordinates supply-chain logistics, and is a facil- ity for food to be stored, lightly processed, and pack-Source: Ragland and Tropp 2009. aged so that it can be sold under the hub’s regional label. As such, food hubs contribute to the expansion Farmers market organizers or institutions may of local and regional food markets. charge vendor fees to cover the costs associated with e USDA has identi ed more than 100 food hubs market administration, but breaking even on costs can (USDA 2011a), many of which are legally organized be challenging, particularly in the early years of estab- by nonpro t groups or public-sector entities. Sixty per- lishment. Most farmers markets operate on shoestring cent of these food hubs have been operating less than budgets, with the median annual operating budget ve years and on average they have 13 employees each. being about $2,000. As a consequence, 59 percent of Food hub customers include restaurants, grocery stores, farmers markets rely exclusively on volunteer workers, colleges or universities, food cooperatives, distributors, and 39 percent have a paid manager with no other school food-service providers, and multi-farm CSAs. employees (Ragland and Tropp 2009). In some loca- Figure 6 shows that while fresh produce is the most tions, extension-service personnel ll the management frequent product sold at food hubs, at least 60 percent function at no charge. Nevertheless, having a paid also sell eggs, dairy, poultry, and meat. Innovative mar- manager is an important sign that the farmers market keting arrangements could be encouraged as food hubs is nancially viable, as mean sales at markets with expand. For example, virtual supermarkets could allow paid managers are ve times higher than at those with consumers to order food products online from a local unpaid managers (Ragland and Tropp 2009). farmer and pick them up the following day. Meat and poultry also have unique direct consumer marketing challenges. Consumers may have food safe- Local Capacity to Support Local and ty concerns about meat in an open-air market or may Regional Food Systems lack a cooler for transporting frozen meat products (Lev ree types of capacity must be fostered to ensure that and Gwin 2010). Also, operating a meat processing sales of local and regional food products are increased. and distribution facility requires specialized skills that First, appropriate expertise and technical assistance are di er from those of farming; this fact can make prob- key assets for developing local food markets (Martinez lematic the successful implementation of a farmer- et al. 2010). For example, given the extensive outreach owned slaughterhouse cooperative. e ort that local and regional food systems must under- take, some regions have developed food plans that doc- Facilitating institutional sales ument the constituent networks, relationships, and Farm-to-school initiatives help schools invest in infra- coordination mechanisms required. Innovative pro- structure and capacity building to position themselves posals such as those outlined in the Iowa Local Food to buy healthful food from local farmers. Analogous & Farm Plan, the Local Food Assessment for Northern opportunities for local food systems could be explored Virginia, and a northeast Ohio report, e 25% Shift, in collaboration with other institutions, such as the address the capacities needed to help ensure the military, prisons, food banks, and hospitals. A particu- successful implementation of such plans.
  19. 19. MARKET FORCES 13 Second, the presence of adequate infrastructure is a Figure 6. Food Products Sold at Food Hubsbasic need for local-food-system development (Marti- 100%nez et al. 2010). A challenge to integrating local pro- 90%cessing facilities, such as local slaughterhouses and dairy 80%bottling plants, into direct marketing is the fact thatmany have been closed in recent decades because of 70%consolidation trends (Martinez 2007). In some areas, 60%operating e ciencies could be low at existing facilities 50%because of seasonal bottlenecks (NGFN 2011). 40% ird, food safety regulations must ensure that 30%local and regional food systems can be supported. e 20%2010 Food Safety Modernization Act allows small farms 10%engaged in direct marketing to be exempt from fed- 0%eral requirements, and states are currently developing uc sh ne s/ gs iry try t ns ea ho rve e yguidelines on the products and production scales that od re ai Eg Da ul M Gr pr F Po e esallow smaller food producers to use their own kitchens Prrather than a certi ed commercial kitchen.7 However, Source: USDA 2011a.because not all states have developed regulations, theremay be some confusion among the direct marketing local food markets. First, because these farmers oftenvendors who must ascertain the jurisdictions, require- produce multiple types of food products on their farms,ments, and enforcement procedures that apply to them insurance that is o ered only for a select number of(Tropp and Barham 2008). A recent positive regula- commodity crops may be inadequate. Insurancetory development for local and regional food systems based on whole-farm revenue would be a far moreis a new USDA rule that allows state-inspected meat appropriate safety net for these types of producers.and poultry meeting federal guidelines to be shipped Second, diversified farmers on smaller farms mayacross state lines. have inadequate access to credit, particularly if Farm Credit System banks or regional nancing authoritiesInadequate Support for Local-Food-System are not oriented to providing smaller loans.8 And third,Farmers having organic certi cation can be an important mar- e focus of U.S. agricultural policy is to promote keting attribute for producers who engage in directthe production of select commodity crops. In many marketing, but it can be expensive to obtain. Organicrespects, programs that support commodity crop pro- cost-share programs could be very helpful to farmersducers are not conducive for farmers who sell through in this regard. © iStockphoto.com/ Leonsbox7 Online at farmersmarketcoalition.org/states-advocate-for-legislation-and-regulation-to-support-home-based-micro-processing/, accessed July 3, 2011.8 Online at sustainableagriculture.net/blog/farm-credit-hearing/, accessed July 3, 2011.
  20. 20. 14 UNION OF CONCERNED SCIENTISTS CHAPTER 2 Supporting Local and Regional Food Systems Is Sound Policy OBJECTIVES OF GOVERNMENT industrial agriculture generates. Annual costs of envi- An important role of government is to attempt to en- ronmental and health externalities in the United States sure that markets operate e ciently so that societal from agricultural production are estimated between welfare is maximized. Although unregulated markets $5.7 billion and $16.9 billion (Tegtmeier and Du y 2004). can maximize aggregate welfare in theory, the condi- Whether local and regional food systems reduce the tions under which they are ine cient may warrant social cost of food depends on their comparison with government intervention. Speci c conditions (e.g., Sti- the private production costs, subsidies, and externali- glitz 2000) that can lead to ine cient markets include: ties of food products in the highly consolidated food 1. Failure of competition. ere must be a large system. Measuring these factors is di cult, and they number of buyers and sellers, with low entry and are likely to vary regionally, seasonally, and by food exit barriers, of a product so that rms cannot product. Not all food can be produced locally in all individually in uence market prices. locations, and consumers may buy some food products 2. Public goods. Goods that are nonrivalrous9 and from local farmers but other food products from nonlo- nonexcludable10 will be underprovided by private cal sources. us a critical research objective is to con- markets, given the potential for “free-riding” sider the implications of integrating local and regional (when someone consumes a good or service food products to a greater extent into our current con- without paying for it). solidated food system. 3. Externality. When a transaction a ects an ere are multiple concepts of a “local or regional individual not involved in the transaction, an food system,” and they are often confounding. A nar- externality has occurred. Pollution is an example row approach to quantifying the net incremental of a negative externality. bene ts of local and regional food systems is to assess 4. Incomplete markets. When a private market the implications of proximity of local consumption and does not provide a good or service that consumers production if there was no change in diet for the are willing to purchase, it is said to be incomplete. consumers who purchased locally produced food. 5. Information failures However, there are attributes of local and regional 6. Unemployment, in ation, and disequilibrium food systems that are not associated with geographic proximity. For example, the food-product mix in local LOCAL AND REGIONAL FOOD SYSTEMS and regional food markets di ers from that of con- CAN SUPPORT PUBLIC OBJECTIVES ventional food markets. Local food-product sales are External costs in the U.S. consolidated food system associated with a greater percentage of fruits and arise from the billions of dollars of taxpayer subsidies— vegetables and the use of sustainable agricultural directed to commodity crop producers, for example— production practices. that are allocated annually to support that system. Calculating the bene ts of integrating local and re- Such costs also include the negative externalities that gional food products into the conventional food system 9 “Nonrivalrous” implies that if one person consumes the good, this does not reduce the ability of other people to consume the good. 10 “Nonexcludable” implies that it is di cult or impossible to prevent someone from consuming the good.
  21. 21. MARKET FORCES 15involves determining how the shopping habits of localfood consumers di ers from what they would havepurchased without access to locally produced food. isis necessary because consumers of local food may endup consuming di erent food products as a consequenceof their patronage. For example, suppose a consumerpurchases a bag of apples at a farmers market. If he orshe had not done so, does this imply that the consum-er would have otherwise purchased nonlocal apples ata supermarket, purchased a di erent food product ata supermarket, eaten a meal at a fast-food restaurant,or made no other purchase? Understanding the impli-cations of this question helps us appreciate the relativebene ts that local food systems provide. e consolidated food system has increased con-sumer access to some fruits and vegetables for high- andmiddle-income people, as it can allow them to buyfood products that may not otherwise be geographi-cally or seasonally available. However, fruits and veg-etables remain underconsumed in the United States(Wells and Buzby 2008). As we evaluate policy designedto increase fruit and vegetable consumption fromeither local or nonlocal sources, it is critical to know © iStockphoto.com/Christopher Futcherwhether local markets generate more of such consump-tion vis-à-vis conventional markets. Regional food sys-tems can also increase market access for regional meatand dairy producers, thereby helping to foster com-petition in markets that have experienced signi cantvertical and horizontal consolidation in recent decades. Research to date indicates that positive regional eco-nomic impacts from local food systems can arise underdi erent scenarios of consumer shopping behavior. Inaddition, while more systematic e orts at examining LOCAL AND REGIONAL FOOD SYSTEMSsuch behavior are under way, available evidence AND FOOD SECURITYsuggests that local and regional food systems can help One possible public benefit of local and regionalpromote the consumption of more healthful food— food systems that we do not thoroughly evaluate, buta step in the right direction for our food system. Based mention for completeness, is food security. A consoli-on the six criteria listed above, we believe that the dated food system implies that food contaminationfollowing aspects of local and regional food systems could be spread quickly and rapidly, while di use localjustify their public support: and regional food systems could o er greater diver-• Local and regional food systems can provide sification against an outbreak (but possibly entail regional employment opportunities for farmers food safety oversight that is more challenging). e and economic development in local communities. extent to which local and regional food systems pro-• Local and regional food systems have the vide greater food security is important to evaluate in potential to reduce the environmental footprint future research. of our overall food system. A second form of food security that local and re-• Local and regional food systems can promote gional food systems could address is adaptability to healthier eating habits—for example, by climate change. Increased temperatures can mean that encouraging greater consumption of fruits regions that produced signi cant quantities of fruits and vegetables. and vegetables in the past may no longer be capable of• Local and regional food systems promote commu- doing so under arid conditions. us promoting a more nity development by fostering greater connections diversi ed agricultural system can contribute to food- among urban and rural populations. security objectives.

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