Transcript Slide 1

A project funded by the W.K. Kellogg Foundation and
the USDA’s Sustainable Agriculture Research and Education Program
Task Force Leaders
Convening Chair:
Fred Kirschenmann, [email protected]
philosopher, Leopold Center for Sustainable
Agriculture, Iowa State University
Administrative Chair:
Steve Stevenson, [email protected]
sociologist, Center for Integrated Agricultural Systems,
University of Wisconsin-Madison
Agriculture of the Middle (AOTM) web site:
http://www.agofthemiddle.org/index.html
The bifurcation of the
American food system
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Small-scale enterprises selling to
direct markets or
Mega-farms selling commodities to
huge, consolidated food and fiber
firms
Resulting in the disappearance of the
“ag of the middle”—usually familyoperated farms
The declining middle
Percent Change in Iowa Farms Based on Sales Category, 1997 to 2002
30%
25%
24%
20%
17%
15%
10%
5%
0%
< $5,000
$5,000 to $25,000
$25 to $49,999
-15%
-15%
$50 to $99,999
$100 to $499,999
-18%
-19%
-5%
-10%
-15%
-20%
-25%
> $500,000
What do we lose if the midsize
farms disappear?
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The ability to produce sufficient volumes
of foods with highly specialized attributes
Many conservation and environmental
advantages (air, water, soil, wildlife
habitat)
Taxes will increase because residential
areas require more public services than
farmland
Face of rural America altered to contain
very small farms surrounding urban areas
and mega-farms occupying rural areas
“Ag of the middle” farms
can thrive!
Niches for highly differentiated products
Michael Porter -- Two ways to be competitive:
1. being the lowest cost supplier of an
undifferentiated commodity or
2. providing the market with a unique and superior
value in terms of product quality, special features
or after-sales service
“Ag of the middle” farmers can be competitive using
a functional value chain structure to connect these
farmers to the markets.
What is a value chain?
A value chain is a long-term network of
partnering businesses working together to
maximize value for the partners and for the
end customers of a particular product.
Market
Input Suppliers
Farmers
DELIVERY
Packer
(Primal
cuts)
DELIVERY
Fabrication
(Portion
Cuts)
DELIVERY
Food
Service
Distributor
Market
Vet Services
Market
Value chain – farmer as partner
Supply chain – farmer as input supplier
Value chains
How do farmers participate?
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Farmer does the marketing (direct)
Farmer relies on other entity to do the
marketing (co-ops, networks)
Farmer influences or has ownership in
other parts of the chain (processing)
Midsize farmers more likely to participate
in co-op or networks so they do not have
to market their product
Key characteristics of value chains
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Link economies of scale with
differentiated products
Combine cooperation with
competition
Promote high levels of performance
and trust
Require shared vision, information,
and decision-making
Value chain economics based on
three components
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Partner rewards based on agreed upon
formulas
Target or cost-based pricing
Contracts for long-term partnerships
Three-fold value built into product marketed
through the chain—quality of the product,
food story, trusting relationship
Challenges for mid-tier value chains
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Strategies for product differentiation
and pricing
Achieving sufficient volume and
quality
Adequate capitalization and
competent management
Consistent standards and
certification mechanisms
What are we learning from existing
regional value chain efforts?
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Producer groups involved in highly differentiated markets
benefit from engagement in working groups that facilitate
comprehensive assistance to address their challenges;
Land grant universities can cooperate with NGO, agency,
and business partners to establish and operate value chain
working groups that address technical, production, policy,
and market challenges;
Value chain relationships can be designed to reward
partners fairly based on contribution and risk;
Economic, ecological, and social benefits can be
successfully incorporated into the planning process for
value chains;
What are we learning from existing
regional value chain efforts?
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Farmers will not increase production, to supply the growing
demand for highly differentiated and sustainably produced
foods, unless there are appropriate incentives that provide
adequate premiums and structure so the risks of increasing
supply are shared;
Mutual interest in the success of other partners within a
value chain creates greater opportunity for success among
all partners;
Value of the product can be increased with a food story—
farmers and farm workers fairly compensated, animals
treated well, good environmental stewardship, etc.
Food Industry Breakdown
(In Billions)
Foodservice
Retail
Total Food Industry Market
65
$438
$446
$884
Historical Foodservice vs. Retail Spending
60
55
50
% of each food dollar to Foodservice
% of each food dollar to Retail
45
40
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
35
50.4%
49.6%
Renewing an Agriculture-of-the-Middle (AOTM):
A Three-Phase National Initiative
1. An initial task force phase (completed summer
2003) in which strategic frameworks and principles
were formulated;
2. A developmental phase (fall 2004-2006) in which
capacity is developed for a three-fold approach
involving new business and marketing strategies,
public policy changes, and research and education
support; and
3. An operational phase, in which major marketing,
policy, and research/education activities are
institutionalized within existing agri-food system
industries and organizations.
Strategic framework for AOTM
1. New business & marketing
strategies
2. Public policy changes
3. Research and education support
Activities - AOTM developmental phase
Organizational Structure
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Develop a clear statement of
vision, rationale, and goals
Create an organizational and
administrative framework to
support the Phase II work
Activities - AOTM developmental phase
Policy and Research
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Collaborate with other
organizations and agencies to
enact meaningful public policy
changes
Develop and engage the
initiative’s research and
education capacity
Activities --AOTM developmental phase
Business and Marketing
Infrastructure
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Develop standards and a
certification system
Develop value chain partnerships
Develop a tool kit of resources
Develop corporate sponsorship of
the AOTM food system
For more information on AOM contact:
Steve Stevenson – CIAS
[email protected]
or
Fred Kirschenmann – Leopold
Center
[email protected]
Or visit the web site:
http://www.agofthemiddle.org
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