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Adding Value to Farm Products: An Overview


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Adding Value to Farm Products: An Overview

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Adding Value to Farm Products: An Overview

  1. 1. Adding Value to Farm Products: ATTRA An Overview A Publication of ATTRA - National Sustainable Agriculture Information Service • 1-800-346-9140 • www.attra.ncat.orgBy Holly Born and This publication discusses the concept of adding value to farm products, the differences between creat-Janet Bachmann ing and capturing value, and the implications for value-added enterprises. It describes some differentNCAT Agriculture approaches to adding value, including starting a food processing business, with a brief look at non-Specialists food products. Resources to learn more about value-added agriculture and planning a value-added©2006 NCAT enterprise are included.ContentsIntroduction ..................... 1Capturing Value andCreating Value ................ 2Starting a FoodBusiness ............................. 3Farm and Food BusinessProfile: Persimmon HillBerry Farm ........................ 6Non-Food Options ........ 7Keys to Success ............... 9References ...................... 10Further Resources ........ 11Resources for Starting aFood Business................ 11 Oats, barley, and some products made from them. Photo by Peggy Greb. Courtesy of USDA/ARS. Introduction Because of the many regulations involved A with food processing, some people may s farmers struggle to find ways to choose to add value in other ways. On a increase farm income, interest in “add- larger scale, producer-controlled process- ing value” to raw agricultural products ing for energy, fiber, and other non-food has grown tremendously. The value of farm uses are options. On a smaller scale, items products can be increased in endless ways: such as flower arrangements, garlic braids, by cleaning and cooling, packaging, process- grapevine wreaths, willow baskets, wheatATTRA — National SustainableAgriculture Information Service ing, distributing, cooking, combining, churn- straw weavings, sheep and goat milk soaps,is managed by the National Cen- ing, culturing, grinding, hulling, extracting, and wool mulch are a few examples. Inter for Appropriate Technology(NCAT) and is funded under a drying, smoking, handcrafting, spinning, addition, ideas for providing entertainment,grant from the United States weaving, labeling, or packaging. (1) Today, information, and other services associatedDepartment of Agriculture’sRural Business-Cooperative Ser- more than ever, adding value means “selling with direct marketing are abundant.vice. Visit the NCAT Web site( the sizzle, not the steak.” The “sizzle” comes Besides offering a higher return, value-html) for more informa-tion on our sustainable from information, education, entertainment, added products can open new markets,agriculture projects. ���� image, and other intangible attributes. create recognition for a farm, expand the
  2. 2. market season, and make a positive con- alliances can offer a way to pool resources tribution to the community. However, and manage risks. In some cases, produc- adding value is not a panacea for all the ers lose marketing or processing facilities problems rural America is facing. It is a when corporate agribusinesses close local long-term approach, not a “quick fix.” It facilities. For example, when Iowa turkey requires the willingness and ability to take farmers lost an Oscar Mayer processing on risk, as well as adequate capital, man- plant and feed mill, the producers formed agement skills, and personal skills—such Iowa Turkey Growers Cooperative and as the ability to interact with the public— purchased the facility in 1996. (5) The to succeed. Iowa Turkey Growers Cooperative contin- ues to produce and market whole and fur- Capturing Value and ther-processed turkey products year round. Research from Purdue University (5) shows Creating Value that producers do stand to benefit from Brees et al. (2) make the distinction between diversifying into a value-added business a strategy to capture value and a strategy related to the producer’s product, when the to create value. This distinction is impor- product is characterized by volatile prices tant to understand, because each strategy at the farm-gate level but relatively steady Direct Marketing offers specific opportunities and risks that Publications from prices at the wholesale or retail level. The influence the success or failure of the value- turkey industry is such an example, and ATTRA added venture. turkey producers benefited from diversify- Direct Marketing For producers, capturing value usually ing into processing. In many cases, such as Farmers’ Markets means capturing some of the value added livestock processing, economies of scale can Community by processing and marketing. For exam- make it impractical for producer alliances Supported ple, the producer’s share of the food dollar to own the entire processing plant, if the Agriculture (CSA) has seen a steady decline since 1900. (3) alliance is not able to support an operation Selling to In 2005, the average farmer’s share of the large enough to achieve those economies. Restaurants food dollar was 22 cents, down from about With a captured-value strategy, producers 33 cents in the 1970s. (4) The rest of the may face lower production risks, because Bringing Local Food to Local Institutions food dollar goes to processing, distribution, production processes are well known and and marketing. More and more, produc- often linked to traditional agricultural pro- Marketing Strategies ers are attempting to increase their share for Farmers and duction. Even when producers themselves of that food dollar by engaging in activi- are not familiar with processing, expertise Ranchers ties such as direct marketing to consumers, in those areas can be hired. Captured- turning farm products into food products, value ventures face an extremely competi- and joining producer alliances and coop- tive marketing environment, where demand eratives that invest in facilities to process is high, cost and efficiency considerations their farm products on a larger scale. are paramount, and high volumes of prod- Marketing directly to the consumer can ucts must be processed in order to gain effi- be done on a small or large scale and in ciencies of scale. These ventures are often a variety of ways. Options for the pro- turning commodities into different commod- ducer who enjoys direct contact with con- ities and, while value is added, it may not sumers include selling at farmers’ markets actually be captured by the producer. and through community supported agricul- For example, producer-owned coopera- ture systems. Other options include sales tives have attempted to enter the wet corn directly to restaurants and local institutions, milling industry. However, this industry is as well as mail order and Internet sales. extremely concentrated, with the top three Large scale processing through producer firms having more than 80 percent of the alliances, such as agricultural co-ops market share for corn sweetener, one of or limited liability companies, has seen the most important wet milling products, growing interest among producers. These and similar market shares for the other wetPage 2 ATTRA Adding Value to Farm Products: An Overview
  3. 3. milling products. In this case, one com- two different approaches to adding value tomodity, corn, is being turned into another soybeans—a cooperative venture in a crush-commodity, corn sweetener, and the pro- ing plant, using a captured-value strategy,ducer cooperative faces a marketing envi- and producing a new “soy nut” product,ronment in which it is almost impossible to using a created-value strategy. The crush-compete successfully. Indeed, two of the ing plant in their example added about $1most recent producer-owned cooperatives per bushel from the meal and oil produced.that attempted to enter the wet milling mar- The crushing plant faced narrow profitket, American Crystal Sugar’s ProGold facil- margins and stiff competition, commonity and Minnesota Corn Processors, could challenges for captured-value ventures,not compete and ended up being acquired where the processing and marketing risksby the top three firms. (5) For more infor- are relatively low.mation on getting off the commodity tread- Producing soy nuts that retailed for $3.95mill, request Moving Beyond ConventionalCash Cropping from ATTRA. per 9-ounce package, on the other hand, added almost $420 of value per bushel.A created-value strategy, on the other hand, While the markets for soybean meal andrelies on products or services that are oil are very large, the market for soy nuts,unique or different from the mainstream and thus the total amount of value added, is Food Processingequivalent. These often include a real or Publications from very limited. Product and market develop- ATTRAperceived quality attribute such as organic ment and compliance with food safety andcertification, a brand image, identification packaging laws all require time and money. Grain Processing:with a specific geographic region and/or pro- However, for the small-volume producer Adding Value toducer, identity preservation, environmental Farm Products who cannot compete with the large-volumestewardship, and so on. Creating value can producers on price, targeting niche markets Oilseed Processingpose higher production risks than capturing with a created-value strategy offers the high- for Small-Scalevalue. It usually requires learning new pro- est likelihood of success. Producersduction and marketing skills, dealing with Edible Soybeanfood safety, labeling, and other regulations, Many producers combine aspects of both Productionand coping with liability issues and insur- capturing and creating value in their ven- and Marketingance. Demand for the innovative product tures. A producer may create an unusual food product, such as local specialty bread, Food Dehydrationor service must usually be created through Optionsadvertising, promotion, and consumer edu- and sell it at the farmers’ market, capturingcation, and this is a lengthy, expensive pro- more of the food marketing dollar. Food Sorghum Syrupcess. Marketing risks may be lower with processors may use organic or unusual Value-Added Dairya created-value strategy, for if this demand ingredients, and so on. Optionscan be established, there is potential forhigher, stable prices and little direct com- Starting a Food Businesspetition. Contract agreements for iden- The food business is extremely competitivetity-preserved products such as high-lysine and dominated by a few large companiescorn reduce competition from other pro- that are driven by cost and price consid-ducers, for example. On-farm events and erations. Food is considered a “mature”activities offer a unique setting that cannot industry, which means very little growth inbe copied by other producers. However, demand. Food manufacturing continuesproducers will need to learn new market- to face narrowing margins and decreasinging skills, carefully assess feasibility, and profits. Retailers are wielding more anddevelop marketing plans for created-value more power over food wholesalers and man-products or services without established ufacturers, and requiring manufacturers tomarketing channels. pay more for shelf space (“slotting fees”),The amount of value that can be added is bear more of the product development risk,affected by whether the enterprise is captur- and provide product uniformity and qual-ing or creating value. Brees et al. (2) cite ity. Smaller processors could have ATTRA Page 3
  4. 4. For more information and resources on the Case History: specialty foods industry, visit the National Value-Added Agriculture Association for the Specialty Food Trade’s From Our Future’s on the Table (6) Web site at Radiance Dairy, Francis and Susan Thicke, owners, Fairfield, Iowa Consumers with special dietary needs— both for specific health conditions and the Former Minnesota dairy producers Francis and Susan Thicke have oper- general health concerns of our aging pop- ated Radiance Dairy in Fairfield, Iowa, since 1992. When they took over the herd of Jersey cows—a breed that produces high-butterfat, high- ulation—offer more opportunities for new protein milk that receives a premium price—the Thickes added more products. For example, there are more than value by turning the dairy into an organic operation. two million Americans with life-long, incur- able celiac disease, who must avoid all glu- Today, 99 percent of their organic whole, skim, and two-percent milk, as well as cream, yogurt, and a soft cheese called Panir, are sold under ten (from wheat, rye, and barley) in their the Radiance Dairy label by three local grocery retailers. Chocolate- and diets. Gluten-free foods have been difficult vanilla-flavored soft-serve ice cream is sold in restaurants. Other prod- to find and remain expensive, but for celiac ucts such as new yogurts and cheeses are in development. disease sufferers, they are well worth the What does value-added mean to the Thickes? According to Francis: effort and expense. (9) For more informa- “Value-added products have features that go beyond what is gener- tion on health conditions requiring special ally found in the conventional market. Most people think value-added diets, and the companies supplying these means processing raw materials into a finished product. That’s true, special foods, visit but value-added can be more than that. We believe organic products are value-added because of the extra care that goes into making the Other specialty foods options that have product. Radiance Dairy products really have two value-added features: paid off for producers include produc- they’re organic, and they’ve been processed to deliver additional value tion and marketing of unusually colored to our customers.” or shaped, “heirloom,” and “ethnic” crop varieties (request the ATTRA publication finding outlets for their products, if they Specialty Vegetables for more information). cannot meet scale requirements by the large Livestock can also be marketed as a spe- retail operations that dominate the indus- cialty food, often in conjunction with reli- try. In this mature industry, the only real gious or cultural celebrations and festivals growth is in niche food markets, where pro- or events, to use in traditional recipes. For ducers create value by adding special ser- example, meat goat and sheep produc- vices for consumers, offering quality attri- ers have the options of serving many eth- butes like organic certification, specialized nic markets and providing special products health products, and so on. They are able such as sheep for the Muslim Ramadan to charge prices 30 percent or more over holidays and cabrito (young goat) for the mainline markets. Industry analysts agree Hispanic Easter market. Some produc- that these markets are likely to continue ers even offer buyers facilities on farm to grow. (7) to slaughter according to Halal or other religious requirements. The National Association for the Specialty Some of the main challenges in food pro- Food Trade (NASFT) defines “specialty cessing include developing formulations foods” as follows: and preparation schedules, dealing with Foods, beverages, or confections meant for regulations and regulatory agencies, prod- human use that are of the highest grade, uct coding and labeling, and product liabil- style, and/or quality in their category. Their ity insurance. (10) Researching the market specialty nature derives from a combination potential for food products is a crucial first of some or all of the following qualities: their uniqueness, exotic origin, particular process- step. You will need to have a good idea of ing, design, limited supply, unusual applica- who will buy your product in the amounts tion or use, extraordinary packaging or chan- and prices that will generate a profit for you. nel of distribution, the common denominator For more information on market research, of which is their unusually high quality. (8) v isit 4 ATTRA Adding Value to Farm Products: An Overview
  5. 5. startingbusiness/marketresearch.htm, and will give you an opportunity to revise andsee the Business Planning Resources adjust your formula so that your final prod-section below. uct is exactly the way you want it. Most pri- vate-label manufacturers can also provideOnce you have an idea for a food product formulation assistance. The county healththat you believe will appeal to consumers department may be able to help you within the marketplace, you need to develop a information about such facilities located indetailed description of your product. This your county.description should include where you willget all ingredients, a formulation (recipe), A key point to remember is that addinga method of preparation, processing pro- value by processing food products increases Acedures, and packaging. Revealing the safety risks. Therefore, rules and regula- dding valueamount of each ingredient or the spices in tions are established to protect the publicyour formulation is not necessary. This health. Each state has its own regulations by process-should remain secret and be revealed only about processing kitchens, and some local ing foodto federal or state regulatory agencies. governments have building codes that also products increasesReliable suppliers for equipment, ingredi- apply. If there is any possibility that you safety risks.ents, and other supplies are critical to the will be selling your food out of state, youoperation of a successful food processing must also comply with the federal regula-business. Identification of reliable suppli- tions as stated in the Federal Food, Drug,ers is an important step prior to beginning and Cosmetic Act and enforced by the Foodyour business. and Drug Administration (FDA). The FDA has what it calls Good Manufacturing Prac-If you are uncertain about any of the details tices (GMP), upon which state regulationsneeded in this plan, check with your county are based. GMPs include requirementsExtension office to see whether you can get that walls, floors, and ceilings be wash-help from your land-grant university. Most able, and the kitchen must be ventilatedhave a department of food science or food so that drip or condensation from ceilingtechnology, with staff who can help you in or fixtures won’t fall into food. Food con-the initial stages of product development. If tact surfaces, tools, and equipment mustyou work with a food technologist to develop be resistant to corrosion and made of non-your product or process, you will be asked toxic materials. Seams on surfaces mustfor your complete formula. This informa- be smoothly bonded to prevent accumu-tion will remain confidential. lation of food particles, dirt, etc. TheBring as many details about your product as room must be screened to keep out birds,you have, including a sample. The product insects, and other pests. You must havewill be evaluated and classified regarding a bathroom, i f you have employ-the type of processing needed. This classi- ees. You must have a hand-wash-fication will be based on the product’s acid ing sink separate from sinks for wash-and water contents. ing, rinsing, and sanitizing equipment and utensils. Water must be from anTransferring recipes for food products made approved small batches or in a home kitchen tocommercial-size formulas that can be manu- If your food product contains more thanfactured in larger batches using commercial five percent meat, you must have a USDAequipment is not an easy task. Frequently, Food Safety and Inspection Service inspec-simply multiplying ingredient amounts to get tor present during processing. You mustlarger-size batches does not result in a prod- also comply with USDA regulations,uct comparable to that made with smaller whether the product is sold in-state only orrecipes. Plan on contracting with a state- out of state. The full description of GMPsapproved facility, such as a private-label is printed in the Code of Federal Regula-manufacturer, to manufacture a fairly large tions 21 CFR, Part 110, available on-line atquantity of your best formulation(s). This ATTRA Page 5
  6. 6. All products need to include a product code costly, product liability insurance is a must. that shows where the product was packed, Many farmers’ markets and most retail out- the date and year packed, and the prod- lets will require a minimum level (normally uct and batch number. Individual con- $1 to 2 million) of product liability cover- tainers and cases should be coded. The age before you can sell your products in codes should be kept in records pertain- their markets. There are no standard rates ing to the product and should be written on for liability coverage for food products, your invoices to identify distribution. The because the premium depends on the spe- codes provide a means of tracking a prod- cific characteristics of the product, the man- uct, should there be complaints or a recall ufacturing process, and marketing plan. be necessary. Organic processing involves Most insurance companies require a great additional record-keeping and other deal of information—including submission regulatory requirements. of production, distribution, and marketing The label is the means by which consum- plans—even to provide a rate quote. ers identify your product, so time and Product design and marketing tips thought should be given to developing your are covered in more detail in Fresh to Contact the FDA by label. Both the state and the FDA have Processed: Adding Value for Specialty mail, telephone, or very specific regulations concerning label- Markets. (11) Created as a training and Internet: ing requirements. Contact the appropri- resource tool for value-added processors, Food and Drug ate agency regarding information you must with funding from the North Central Region Administration include on the product label. The FDA requires nutritional labeling if you do more SARE program, Fresh to Processed: Adding 5600 Fishers Lane Rockville, MD 20857 than $50,000 in business annually. The Value for Specialty Markets provides an over- 1-888-INFO-FDA regulations for nutritional labeling are quite view of the main aspects of starting a food (1-888-463-6332) extensive, with very specific requirements business. Contact ATTRA for a copy of about information to include and the for- this resource. mat for presenting this information. Details of these requirements can be obtained Farm and Food Business from any FDA office or the FDA Small Profile: Persimmon Hill Business representative. Berry Farm If you plan to sell your product through retail The story of Earnie and Martha Bohner’s stores, you should plan to display a Uniform Persimmon Hill Berry Farm shows what Product Code (UPC) on the label. This bar can happen when creative and persistent code provides a means for automated iden- farmers team up with supporters from the tification of your product. Brokers, whole- state university, state department of agricul- salers, and retail buyers will not handle a ture, and many others. product without a UPC. It is your responsi- bility to obtain a UPC for each product you Although both Earnie and Martha trained produce. Contact the Uniform Code Coun- and worked in other professions, the small- cil to apply for a UPC assignment. The fee farm lifestyle of the southern Missouri for assignment is based on the size of your Ozarks appealed to them, and in 1983— business. Contact: starting with no buildings, no electric- ity, and no running water—the Bohners Uniform Code Council began developing their pastured hill land. 937-435-3870 They chose the name Persimmon Hill 937-435-7317 FAX because the farm was covered with young persimmon trees. Within 10 years they were cultivating three acres of blueberries, an ean_ucc_system/index.cfm acre of blackberries, 2,000 hardwood logs While it can be difficult to find a liability for growing shiitake mushrooms, and 120 insurance provider, and insurance may be apple trees. (12)Page 6 ATTRA Adding Value to Farm Products: An Overview
  7. 7. The berries were initially marketed to pick- muffins carry the farm through the unprof-your-own customers. The added value is itable winter months. (13)the experience of a day on a farm with a Direct marketing is another way to addfriendly and helpful host. “We create a value. In addition to U-pick and farm standplace where people can enjoy themselves,” sales, the Bohners have created a ChristmasEarnie says. Clean restrooms, a picnic gift mail-order market. Previous custom-table, and shade trees provide for the com- ers and gift recipients receive a mail-orderfort of visitors to the farm. Keeping the folder describing packages that will be sentfield edges mowed and trimmed contributes directly to them. The cover of the flyerto the clean image needed to attract visitors. features the farm’s black Labs shown watch-“People don’t come all the way out here to ing St. Nick’s sleigh heading off into theget cheap food. They come because it’s fun, Ozark night.and the berries are absolutely fresh. Asmuch as we can, we give them contact with Business planning has been critical to‘the farmers.’ The more we can do that, the the development of Persimmon Hill Berry “Pmore people go away with that memory.” Farm. Earnie tries to reorganize each Jan- eople uary, after he reviews production and mar- don’tIn 1986 the Bohners began adding value keting records for the previous season. He comethrough processing. “After considerable adjusts long-range plans, sets goals for thestudy, we decided to turn ripe berries into all the way out here next 12 months, and then breaks downfull-fruit jams, although it would take more to get cheap food. jobs by two-week periods. Earnie says,work than the U-pick operation and spread They come because “In an ideal situation, I would look at theseour management thinner,” says Martha. goals monthly. On a daily basis, I have a it’s fun.”“From the first, we were committed to qual- list that I carry with me that supports theity, and quality entails a lot of time and overall plan.” He is always looking forcost. Our recipe is simple: fresh, ripe fruit; ideas for new products, niches, and ser-sugar; natural pectin; a bit of lemon juice, vices. In regard to finding help for busi-and nothing else. We want our product to ness planning, Earnie says, “SCORE hashave a distinctive, berry taste.” Earnie been really helpful.” (SCORE, the Ser-and Martha worked with a chef to perfect vice Corps of Retired Executives, is a Smallrecipes for other products such as shiitake Business Administration program. Formushroom sauce. The first products were more information on SCORE, request theprepared in rented kitchens, a good way ATTRA publication Agricultural Businessto make the step without the cost of build- Planning Templates and Resources.) “Weing your own kitchen. The Bohners now also have had graduate students from a uni-have their own processing kitchen on the versity business department out here. It isfarm, just a few steps from the blueberry a useful experience for them, and they canpatch. The business office and storage give a business owner another are in the same two-story building. And we get lots of ideas from Ron Macher’sProcessed products (their famous blue- Small Farm Today magazine.” Beyond theberry Thunder Muffins, a range of jams, financial aspects of the business, a visit toshiitake mushroom sauce, blueberry and the farm will show anyone that a vision forother barbecue sauces, dried shiitake spe- a beautiful place in the country and love forcialties, a refreshing blueberry slush, and a life are driving forces. To pay a virtual visitcookbook) now account for a large share of to the farm, visit farm’s gross income. Processing fruitsand shiitake mushrooms allows them to useproduce that isn’t sold fresh, to extend the Non-Food Optionsmarketing season and to diversify their The difficulty of coping with regula-marketing outlets. The Bohners have sold tory requirements, as well as the highlyas many as 1,400 Thunder Muffins in a competitive nature and the relativelysingle day, and Martha Bohner says the low margins of the food industry, ATTRA Page 7
  8. 8. led many producers to consider non- Fiber food options for adding value to their farm Organic cotton fiber is enjoying a develop- products. Some of these non-food options ing market (14); however, these markets are discussed below. Your options for add- are still limited and subject to competi- ing value with non-food products and ser- tion from imported cotton. For more infor- vices are limited only by your resources mation on organic cotton, request Organic and your imagination. Cotton Production from ATTRA. There are also small niche markets for natu- Energy rally colored cotton. The increasing con- Energy production from agricultural prod- sumer interest in hand spinning, knitting, ucts is on the rise. It includes producing and weaving has led to increased mar- biofuels, such as ethanol and biodiesel, and keting opportunities for sheep and goat electricity from crops, wastes, and wind. producers for organic, naturally colored, hand-made wool, yarns, and other products, Producers may be interested only in reduc- as well as finished goods such as blankets ing on-farm fuel costs by producing biofuels and clothing. for their own use. Many producer groups, on the other hand, have invested in biofu- Wood els manufacturing as a way to add value Woodlot enterprises, both timber and non- to agricultural products such as corn and timber, may offer another option. Request soybeans. The viability of many of these a copy of Woodlot Enterprises from ATTRA investments, such as corn producers invest- for more information. Another good place ing in ethanol production, depends on gov- to start investigating woodlot enterprises ernment subsidies and programs. (5) The is the WoodWeb at Agricultural Utilization Research Institute’s KnowledgeBase/KBIndex.html. Center for Producer-Owned Energy offers useful information on many biofuels options Personal Care Products on their Web site at The Adding value to products such as milk, ATTRA publication Biodiesel: a Primer honey, and wax by producing soaps, not only describes the process of making lotions, and other personal care products is biodiesel on-farm but also provides further a popular option. The market for “natural” resources on many aspects of renewable personal care products reached $5 billion energy. For more information on energy in 2004, increasing by more than 50 per- and agriculture, visit ATTRA’S Energy cent since 2000, and should continue to and Agriculture section at grow. (15) Learn more about natural per- energy.html. sonal care products at Farm EntertainmentMany farm machines at According to Agriculture SpecialistARS’ Beltsville Agricul- Katherine Adam, in Entertainment Farm-tural Research Center ing and Agri-Tourism, “While the popular-run on a mixture of die- ity of specific enterprises—such as pump-sel fuel and biodiesel,which is made from soy- kin patches or U-pick orchards—may ebbbean oil. and flow, the public’s desire for a ‘farmPhoto by Bob Nichols. experience’ remains.”Courtesy of USDA/ARS. Small diversified farms are ideally suited to agri-entertainment. Unlike the mega-hog facility or a corn/soybean operation producing bulk commodities, the small farm can recre- ate an earlier, simpler, human-scale vision ofPage 8 ATTRA Adding Value to Farm Products: An Overview
  9. 9. farming. The chief qualification for the rural end up adding value to your farm products, landowner who expects to make a living from these principles apply. the land through agri-tourism is the desire and the ability to cater to tourists and meet • Start small and grow naturally. their expectations of a farm visit. • Make decisions based on goodRequest a copy of Entertainment Farm- and Agri-Tourism from ATTR A • Create a high-quality product.for more information on many dif- • Follow demand-driven production.ferent options to add entertainmentand educational value to your farm and • Get the whole family or partnersfarm products. involved. • Keep informed.Keys to Success • Plan for the future.Although no simple blueprint for success • Evaluate continuously.exists when you’re trying to add value to • Persevere.your farm products, a few general prac-tices emerge from interviews with a number • Capitalize adequately.of southern farmers. No matter how you • Focus. Business Planning Resources A comprehensive business plan that includes marketing and finances can help determine the feasibility of a value-added enterprise. Developing your business and marketing plan helps you define your business, creates a road map to operate the business, sets the goals you will aim for, and satisfies outsiders’ requests for a written explanation. The basics of a business plan include the following. What? Describe your product or service. Why? Describe the need for your product or service. Who? Describe the customer. When? Draw a timeline and list all the tasks that need to be accomplished. Where? Describe the location of your business. Building a Sustainable Business: a Guide to Developing a Business Plan for Farms and Rural Businesses helps alternative and sus- tainable agriculture entrepreneurs develop profitable enterprises. Sample worksheets illustrate how real farm families set goals, researched processing alternatives, determined potential markets, and evaluated financing options. Blank worksheets help producers develop detailed, lender-ready business plans and map out strategies to take advantage of new opportuni- ties. It is available at no charge on the Internet at Print copies are available for $14 (plus $3.95 shipping and handling charge). To order copies, contact: Sustainable Agriculture Publications 210 Hills Building University of Vermont Burlington, VT 05405-0082 802-656-0484 802-656-9091 FAX Useful resources from ATTRA include: Agricultural Business Planning Templates and Resources Sources of agricultural business planning templates and other resources. Enterprise Budgets and Production Costs for Organic Production Sources of information on costs and returns of organic ATTRA Page 9
  10. 10. • Establish a loyal customer base. 5. Fulton, Joan. Value-Added Business Ventures • Choose something you love to do and something Through Producer Alliances. 2003. Purdue that fits your personality and goals. University Cooperative Extension Service Pub- lication ID-318.These points are described in detail in the ATTRA Keys to Success in Value-Added Agriculture.Call ATTRA to request a copy. The publication also 6. Our Future’s on the Table.provides farmer profiles and information about the The Web site of an Iowa consortium seekingresources that they found useful. to increase the value of Iowa farm products includes links to a number of case histories.Adding value to your farm products can be a great way Contact can also be made through the addressto increase farm income, diversify production, and enter markets. Understanding the risks and rewards ofdifferent approaches to adding value, investigating the Ag Initiative 2000 Consortiumwide range of options for adding value, and thoughtful 200 East Grand Avebusiness planning are all important to success. Des Moines, IA 50309 515-242-4805References 515-242-4832 FAX1. Richards, Keith, and Deborah S. Wechsler. 7. Sparks Companies, Inc. 2003. Top-Down Com- 1996. Making It On the Farm: Increasing petition in the Food Industry: Trends and Sustainability Through Value-added Process- Implications. Strategic Forum Discussion ing and Marketing. Southern Sustainable Paper. Sept. 23. 46 p. Agriculture Working Group. 40 p. Compiled from interviews with southern farm- topdown.pdf ers and ranchers who are adding value to their products, it describes some of their practices, dis- 8. Food Industry Resources & Worksheets. Prod- cusses 10 keys to success, and includes a list of uct Development: Identifying Your Market Seg- resources. Available for $12 (includes shipping ment. Appalachian Center for Economic Net- and handling) from: works (ACEnet) Food Ventures Web site. Southern SAWG Publications framesfoodventures.htm P.O. Box 324 9. Choi, Candice. 2005. Gluten-Free Market Goes Elkins, AR 72727 Mainstream. Associated Press. July 27. 501-587-0888 10. Brady, Pamela, et al. 1997. Starting a Food Business. Institute of Food Science and Engi-2. Brees, Melvin, Joe Parcell, and Nancy Giddens. neering. University of Arkansas, Fayetteville, No date. Capturing vs. Creating Value. MU AR. 6 p. Agricultural Guide, University of Missouri Cooperative Extension. 11. Durham, Deni. 1996. Fresh to Processed: Adding Value for Specialty Markets. Missouri capturingvscreatingvalue.htm Organic Association, Ashland, MO. 33 p.3. Smith, Stewart. 1991. Is There Farming in 12. Bohner, Earnie. 1998. Personal communication Agriculture’s Future? Presentation to College with Janet Bachmann. of Agriculture and Life Sciences. University of 13. Anon. 2003. True blue: Loyal berry fans line Vermont. November 14. up across Missouri to get a taste of summer’s4. Anon. 2005. Retail Food Prices Rise Slightly. sweetest treat. Columbia (MO) Daily Tribune. Pork magazine. April 4. June 29. directories.asp?pgID=678&ed_id=3305 20030629feat004.aspPage 10 ATTRA Adding Value to Farm Products: An Overview
  11. 11. 14. Dimitri, Carolyn, and Catherine Greene. 2002. One great source of innovative, farm-tested ideas for Recent Growth Patterns in the U.S. Organic adding value and generating more income is Foods Market. U.S. Department of Agricul- FARM SHOW magazine. For more ture, Economic Research Service, Market and information, contact: Trade Economics Division and Resource Eco- nomics Division. Agriculture Information Bul- Circulation Department letin Number 777. 42 pp. FARM SHOW P.O. Box 1029 Lakeville, MN 5504415. Anon. 2005. Three Years of Double-Digit 800-834-9665 Growth Powers the Natural Personal Care Mar- 952-469-5575 FAX ket to $5 Billion. Soap Wire Online. June 22. three_years_of _.html Another source of ideas is Small Farm TodayFurther Resources magazine. For more information, contact:General Value-Added Small Farm Today 3903 W Ridge Trail RdThe Ag Marketing Resource Center (AgMRC) Clark, MO 65243-9525 ( is an excellent electronic, 573-687-3525 national resource for producers interested in 573-687-3148 FAX value-added agriculture. This comprehen- 800-633-2535 sive Web site offers information on value-added opportunities for agricultural commodities and products, market and industry trends, learning how to create and operate a business, research USDA Rural Business-Cooperative Services results of value-added markets and businesses, offers two grant programs for value-added proj- and how to locate national, state, and local ect development. The Section 9006 Renewable value-added resources. A comprehensive set Energy System and Energy Efficiency Improve- of directories, including agricultural innova- ment Grants provide grants and guaranteed tion centers, consultants, service providers, and loan funds to farmers, ranchers, and rural value-added businesses that can be contacted by small businesses looking to finance a renewable individuals with similar interests, and specific energy or energy efficiency project. Visit http:// resources for all 50 states, is available at www. for more information. The Value-Added Producer Grant program makes grants available to inde-Hamilton, Neil. 2000. The Legal Guide for Direct pendent producers and producer groups for plan- Farm Marketing. Drake University Law ning activities to establish a viable value-added School. Des Moines, IA. 235 p. marketing opportunity for an agricultural prod- This book is an excellent resource to help you uct or for acquiring working capital to operate a begin the process of learning about the rules and value-added business venture. Visit http:// regulations that may affect you. Prepared under for a grant from the USDA Sustainable Agriculture more information. Research and Education Program, it is available from: Resources for Starting a Food Agricultural Law Center Business Drake University Law School In addition to the directories available at the AgMRC 507 University Ave. Web site mentioned above, there are some other Des Moines, IA 50311 resources that are especially helpful for starting a food ATTRA Page 11
  12. 12. Appalachian Center for Economic Networks Publishing, Chicago. 190 pp. ISBN-0- (ACEnet) runs the Food Ventures program, 926894-34-2. which works with entrepreneurs in their service A good resource to determine whether your food area in the southeastern Ohio area to create product has potential. and grow specialty food businesses. ACEnet Exploring the Potential for New Food Products also offers excellent advice and information on their Web site at p2170.html framesfoodventures.htm for anyone interested in the specialty foods business. Starting a Value Added Farm-Food Business Process Control School (BPC) is required by federal regulations for any supervisors of low-acid food thermal processing systems and container closure operations. It is strongly rec- ommended that anyone involved in any phase of food processing who is not familiar with the principles of food preservation attend this school. Several universities hold a BPC school at vari- ous times during the year. To locate a BPC school near you and learn about the many other training resources available, contact: Food Processors Institute 1350 I Street, NW Suite 300 Washington, DC 20005-3305 202-639-5945 800-355-0983 (toll-free) 202-639-5932 FAX www.fpi-food.orgThe Fooddude’s Food Marketing 101 at htm is an on-line resource designed primarily for potential manufacturers or marketers of specialty food products. The purpose is to pose questions (and provide some answers) for those interested in producing food products for sale. Included is information about retail trade channels; distri- bution channels; product positioning, branding, Adding Value to Farm Products: An Overview By Holly Born and Janet Bachmann packaging, and pricing; packaged food sales; NCAT Agriculture Specialists marketing and promotion; customer service and ©2006 NCAT data use; as well as links to general resources Paul Driscoll, Editor and food industry associations. Cynthia Arnold, ProductionGetting Started in the Food Specialty Business This publication is available on the Web at: New%20Food%20Business%20Packet/ and Getting%20Started%20in%20the%20Food% 20Specialty%20Business.pdf IP141 Slot 136Hall, Stephen F. 1992. From Kitchen to Market: Version 032206 Selling Your Gourmet Food Specialty. UpstartPage 12 ATTRA