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Marketing options for the independent ag producer

By William Lee-Ashley

The checkout stand of a grocery store hardly seems a likely place for a quiet revolution. On a sunny day this April, undercurrents of this revolution were visible under the fluorescent lights of a Whole Foods grocery store in Boulder, Colorado. Farmers were bagging groceries for the store’s customers.

Some might argue that bagging groceries for hundreds of consumers in a hurry is more work than it is noteworthy. However, placed in the context of agriculture today where food travels an average of 1,300 miles from farm to table and farmers turn their commodities over to a handful of processing and retail conglomerates, without knowing who the end user is, farmers bagging groceries is indeed something of a quiet revolution.

The problems facing agriculture are numerous. The concentration in the processing sector, the lack of open, competitive markets for livestock, and the failures of farm policy all contribute to depressed commodity prices and lower income for farmers and ranchers.

The distance that has developed between the farm and the table is having a direct effect on the price the farmer receives. For a $1.39 loaf of bread, the wheat farmer receives a scant $.05, for a $4.39 sirloin steak, the farmer sees $.68.
Closing the gap

“Producers tend to think that milk from their farm goes on a truck, consumers tend to think that milk comes from the store,” said Bob Mailander, director of the Cooperative Development Center at Rocky Mountain Farmers Union. “The key is creating a relationship between producer and consumer. In the development of this relationship there is opportunity to add value to agricultural commodities.”

Developing the relationship between the producer and the consumer, however, is mired with pitfalls. How does the farmer approach the consumer? How does a producer overcome all the technical problems of getting fresh food to consumers?

Of the several ways to overcome these problems, two systems, buying clubs and community supported agriculture (CSA) have enjoyed particular success. Buying clubs are set up by groups of consumers who coordinate bulk purchases from a farmer or group of farmers. Farmers drop off the products and the consumers divide them up.

CSA, a concept brought to the United States in the mid-1980s, is an unusual attempt to help producers spread risk while increasing income. Before every growing season, the grower collects memberships, which usually cost about $500 from all the consumers participating. This entitles the consumers to a box of fresh vegetables from the farm every week

throughout the growing season. By collecting the memberships before the season begins, the grower has enough capital to buy seeds and inputs. Also, the risk of crop loss is spread around a group of people.

A groundswell

The development of buying clubs and CSAs has been fueled not only by the interest of farmers, but that of consumers as well.

The throng of people shopping at Whole Foods – an upscale, mostly organic grocery store – was proof that many consumers are willing to spend more money on food purchases if they thought the food tasted better and was better for them.

The trend towards supporting local family farmers and ranchers has grown alongside the surge in popularity of these “green grocery stores.” Between the mid-1980s, when the concept of a CSA was introduced in the United States, and today, the number has grown to over 1,000.

“In the beginning there was not a lot of interest,” said Karen Henderson, a Rocky Mountain Farmers Union (RMFU) member who owns a vegetable farm near La Jara, Colo., “As we have come to know more consumers in the area, the farm has become very successful. There is a lot of demand out there for local food produced in a sustainable manner.”

Below is a profile of two members who have adopted buying clubs and CSAs as part of the marketing strategy for their farms.

New Farms & the buying club

For Dan Hobbs, an organic garlic grower in Avondale, Colo., the relationship with consumers takes on a variety of forms. Currently, Hobbs is working on creating a cooperative structure for New Farms, an association of growers in New Mexico and Colorado that markets a variety of products to consumers.

The most prominent among the markets in New Farms’ portfolio is the buying club. In principal, buying clubs are designed to allow consumers to buy direct from producers and permit farmers to command a good price for their product without delivering to every single household.

Typically, buying clubs consist of a group of consumers who get together and send an order to a farmer or group of farmers who then drop off the products at a central location.

For the buying clubs New Farms sells to, Hobbs tries to get consumers to give growers an idea before the season starts approximately what they need to grow. “Having information to do crop planning by March is essential so we deliver enough product throughout the growing season,” said Hobbs.

When it comes to delivering, Hobbs provides consumers with a choice of boxes, containing different combinations of products. The night before delivery, Hobbs assembles the boxes at a central location. “We needed a way to provide consumers with choice and cut down on the amount of time we were spending assembling the boxes,” said Hobbs.

Overcoming delivery problems, consumer attrition, and coordination between producers requires a lot of work. “For a farmer just getting involved in direct marketing, I would probably not mess with a buying club,” stated Hobbs. “Nonetheless, for a group of growers interested in capturing a greater percentage of the food dollar, buying clubs can be an important element in a diverse mix of marketing strategies.”

White Mountain Farm and the CSA

White Mountain Farm, Paul and Ernie New’s sprawling organic potato farm in Mosca, Colo., is a testament to their ability to market potatoes of all shapes, colors, and sizes all over the country. They have, by and large, avoided the commodity potato market by growing an organic crop and aggressively marketing it over the internet to a variety of people from wholesalers and restaurants to consumers.

While their success in marketing potatoes is a story unto itself, their creation of a small CSA on their farm is an important element to a diversified operation. “We basically expanded our existing garden plot,” said Paul New. “Produce we used to take to the farmers market we now sell to roughly 25 families in a modified CSA.”

For the News, the CSA supplements the income from potato farming. “[Our CSA] is a success in so far as it gives us a little extra cash flow and it ties in nicely with our direct marketing of potatoes,” reported New. “For the CSA we plant over 70 items in response to consumer demand, so it is a lot of work.”

“For a commodity farmer who is thinking about starting a CSA, my advice would be to start off small with the equipment he has,” encouraged New. “He also has to know that maintaining a CSA plot requires extra work.”

“We are in a special situation here because we have enough help in the family and we allow consumers to pick their own,” said New. By allowing consumers to pick what they need and not assembling and delivering boxes the News are able to cut down on the time the family spends on the CSA. “Overall, the combination works well for us.”

The bottom line: relationships

With buying clubs, as well as with CSAs, the crucial element is marketing. “It’s all about creating a relationship,” said Henderson. “For me marketing is talking to people, I am always looking for opportunities to sell our vegetables direct.”

According to Hobbs, it is vital for the farmer to have a core group of interested consumers. “This core group is important so the farmer knows what will sell. Folks get awfully sick of kale awfully fast,” Hobbs said. “The core group can also recruit new members into the buying club or CSA.”

A farmer’s effectiveness in marketing through relationships is often what makes or breaks CSAs and buying clubs. “A farmer needs to get his face out there. He is half the reason people are choosing to buy his products. Person-to-person contact, flyers, and press coverage are among the tools a farmer can use to market directly to consumers.”

New echoed the importance of selling produce based on a relationship with consumers. “If you are interested in starting a CSA, make sure you don’t mind working with people. It’s about selling. There is more to it than sitting on the tractor.”

For farmers who have their operations geared towards commodity production, direct marketing to consumers can be a radical departure. Often machinery is geared towards commodity production. There may be a shortage of labor in the family. Relationship building, as a form of marketing, can be difficult for some people.

Farmers tend not to be afraid of hard work, and members of Rocky Mountain Farmers Union tend not to be at a loss for words, so the economic and social benefits of starting a buying club or CSA just might outweigh the extra work and marketing involved.