April 2, 2012
The Emergence of Retail AgricultureBy Gary Matteson
Consumer trends such as personal electronics technology, women’s fashion or even popular vegetable varieties start with a good product idea that is amplified by the buzz of media, advertising, and social networks. Trends that stick create reliable, mature markets that are engines of economic demand, stimulating additional new products and market opportunities.
Many farmers and ranchers have benefitted from the trend in local foods, finding ways to sell direct-to-retail and capture a higher profit margin. Young, beginning and small farmers in particular have been able to enter into farming at the smaller scale of direct-to-consumer sales in the local foods marketplace, like farmers’ markets, roadside stands and through community supported agriculture (CSAs).
If the evolution of this trend in consumer demand for farm products stopped at local farmers’ markets, it would be easy to dismiss. However, the impact of this trend – if recognized, described, and labeled properly – shows that it is economically significant, commonly practiced and geographically widespread.
None would argue that $7 billion in sales of cotton and rice are insignificant, yet in the same Ag Census year of 2007, organic, direct-to-retail and local foods sales conservatively added up to $8 billion. Perhaps those of us in agriculture missed that comparison because it is so difficult to extract such statistics from USDA data sources, which are based on counting commodity products rather than following marketing channels. If the direct-to-consumer marketing channel were counted as if it were a commodity product, then it would be the fifth most common farm activity by number of farms. As for geographic distribution, CSA farms were present in nearly 2,100 counties according to the 2007 Ag Census. If you raise cattle, you are in good company with the ag sector that is most likely to sell direct-to-retail; three out of five cattle producers use that marketing channel. If you don’t see some kind of consumer demand-based agriculture, you’re not looking, or maybe you see it and don’t know it.
That illustrates a big part of the problem – we don’t have a name to call this trend of interrelated agricultural marketing channels that centers on the emergence of retail consumer demand as a driving factor. More farmers and ranchers are getting closer to their customers, and finding that they can capture a higher margin when they grow vegetable or meat products with a specific consumer market segment in mind. Whether they sell direct-to-retail or through wholesale channels, if it is sold with special product attributes such as being local, organic or small farm-raised, then a significant portion of the value is based on retail consumer demand. Let’s name it “Retail Agriculture.”
Retail Agriculture is analogous to “Small Business,” which is also a term that describes a wide variety of very different businesses in order to allow effective policy discussion. We can talk about “the role of Small Business in new job formation” and nobody blinks an eye at the idea of lumping sole proprietors with corporations of 500 employees – both fitting into the generalized definition.
Gary Matteson is a guest contributor to Focus on Agriculture. He is vice president of Young, Beginning, Small Farmer Programs and Outreach at the Farm Credit Council, a trade association of the Farm Credit System. Read more on “The Emergence of Retail Agriculture: Its Outlook, Capital Needs, and Role in Supporting Young, Beginning, and Small Farmers,” by Alan R. Hunt and Gary Matteson at (http://fccouncil.com/ybs/).