Agricultire of the middle

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A project funded by the W.K. Kellogg Foundation
and the USDAs Sustainable Agriculture Research
and Education Program
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Task Force Leaders

• Convening Chair
• Fred Kirschenmann, leopold1_at_iastate.edu
• philosopher, Leopold Center for Sustainable
• Agriculture, Iowa State University
• Administrative Chair
• Steve Stevenson, gwsteven_at_wisc.edu
• sociologist, Center for Integrated Agricultural
  Systems, University of Wisconsin-Madison
• Agriculture of the Middle (AOTM) web site
  http//www.agofthemiddle.org/index.html

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The bifurcation of the American food system

• 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
  middleusually family-operated farms

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The declining middle
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What do we lose if the midsize farms disappear?

• 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

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Ag of the middle farms can thrive!

• Niches for highly differentiated products
• Michael Porter -- Two ways to be competitive
• being the lowest cost supplier of an
  undifferentiated commodity or
• 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.

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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
Packer (Primal cuts)
Fabrication (Portion Cuts)
Food Service Distributor
DELIVERY
DELIVERY
Market
Vet Services
Market
Value chain farmer as partner Supply chain
farmer as input supplier
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Value chains How do farmers participate?

• 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

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Key characteristics of value chains

• 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

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Value chain economics based on three components

• 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 chainquality of the product, food
  story, trusting relationship

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Challenges for mid-tier value chains

• Strategies for product differentiation and
  pricing
• Achieving sufficient volume and quality
• Adequate capitalization and competent management
• Consistent standards and certification mechanisms

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What are we learning from existing regional value
chain efforts?

• 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

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What are we learning from existing regional value
chain efforts?

• 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
  storyfarmers and farm workers fairly
  compensated, animals treated well, good
  environmental stewardship, etc.

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Food Industry Breakdown
Historical Foodservice vs. Retail Spending
50.4
49.6
Source Technomic
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• Renewing an Agriculture-of-the-Middle (AOTM)
• A Three-Phase National Initiative
• An initial task force phase (completed summer
  2003) in which strategic frameworks and
  principles were formulated
• 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
• An operational phase, in which major marketing,
  policy, and research/education activities are
  institutionalized within existing agri-food
  system industries and organizations.

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• Strategic framework for AOTM
• New business marketing strategies
• Public policy changes
• Research and education support

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Activities - AOTM developmental phase

• Organizational Structure
• Develop a clear statement of vision, rationale,
  and goals
• Create an organizational and administrative
  framework to support the Phase II work

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Activities - AOTM developmental phase

• Policy and Research
• Collaborate with other organizations and agencies
  to enact meaningful public policy changes
• Develop and engage the initiatives research and
  education capacity

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Activities --AOTM developmental phase

• Business and Marketing Infrastructure
• Develop standards and a certification system
• Develop value chain partnerships
• Develop a tool kit of resources
• Develop corporate sponsorship of the AOTM food
  system

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For more information on AOM contact

• Steve Stevenson CIAS
• gwsteven_at_wisc.edu
• or
• Fred Kirschenmann Leopold Center
• leopold1_at_iastate.edu
• Or visit the web site
• http//www.agofthemiddle.org/