NC1036: Research and Education Support for the Renewal of an Agriculture of the Middle
Statement of Issues and Justification
The Problem and the Opportunity... The industrialization of the U.S. agricultural and food system has been transforming U. S. society in diverse ways for the past 70 years. (Barkema , 1993). Food has become cheaper, labor has been freed for other uses, and many rural communities have disappeared (See Attachment A.) Looking more closely at the past several decades, American production agriculture has become increasingly dualistic. One end of the spectrum is inhabited mainly by small, often part-time farms that have developed direct marketing relationships with local food customers. The other end of the spectrum has witnessed the emergence of very large farms linked through commodity markets or contracts to consolidated food and fiber agribusinesses that mass market undifferentiated agricultural commodities around the globe. Farms and ranches in the middle are often not in a position to direct market, and are increasingly unable to compete successfully in global commodity markets. (Boehlje, 1999) Not only are farms/ranches-of-the-middle increasingly at risk, but midsize, regional food processors and distributors and even regional supermarket chains are now being bought or squeezed out of business (Harris, et. al., 2002).Even as farms of the middle are disappearing, exceptional opportunities to redirect and revitalize agriculture-of-the-middle (AOTM) have emerged. The U. S. is experiencing a significant increase in demand for highly differentiated, value-added food productsespecially in the food service industry (Kinsey, 1999, Caswell, 1992). Restaurants, health care facilities, schools, other food service enterprises, and some supermarkets increasingly are demanding foods that: 1) have superior taste, health and nutritional qualities; 2) are associated with unique food stories that identify where the food comes from and how it is produced; and 3) come to them through transparent supply chains built on business relationships they can trust and support (Schnieders, 2004).
Can direct-market farms develop the capacity to supply all of the differentiated, high-quality food products that consumers will demand in the future? Or can undifferentiated commodity market farms provide them? If producers in the middle disappear and those on either end are not up to the challenge, will consumers be deprived of the opportunity to secure the foods they want?
Beyond just looking at the food products produced, what implications will a significant erosion of these farms/ranches of the middle have on existing agriculture-dependent rural communities, the rural landscape, and the character of the U.S. food system? If these farms/ranches continue to disappear, will the contributions that they provide in terms of rural economic activity, land and water stewardship, and community social capital disappear with them?
These new market opportunities arise at a time when solid market theories have been developed emphasizing product differentiation. Michael Porter, Harvard Business School, has articulated sound market strategies for developing competitive enterprises that produce and market products that have unique and superior value (Porter, 1990). Additionally, observers of contemporary business enterprise development point to the power of collaborative business partnerships for success in many 21st Century markets (Handfield and Nichols, 2002.) Known as values-based supply chains (or value chains), these collaborative enterprises are long-term networks of partnering business enterprises working together to maximize value for the partners and for the end customers of a particular product or service. Certain value chains treat farmers/ranchers as strategic partners rather than as interchangeable (and exploitable) input suppliers. Emphasis is placed on inter-organizational trust, shared information (transparency), shared decision-making, and commitment to the welfare of all partners in the value chain, including fair profit margins, fair wages, and business agreements of appropriate extended duration. (See Attachment B.) These business partnerships are most appropriate for situations in which economies of scale are coupled with complex products or services that differentiate and add value in the marketplace---the very situation that is developing for food products from enterprises of the middle. Mid-tier food value chains are strategic alliances between midsize independent (often cooperative) food production, processing, and distribution/retail enterprises that seek to create and retain more value on the front (farmer/rancher) end of the chain, and effectively operate at regional levels. Industrial agri-food supply chains add most value at the processing and marketing levels and continue to rely on economies of scale from producersthus ever increasingly larger farms/ranches. A national initiative to renew an agriculture-of-the-middle seeks to employ the value chain paradigm to maintain the viability of mid-size farms/ranches, which means that significant value must be created and maintained at the farming/ranching level, not just at the levels of processing, distribution, and marketing.
For the time being, enough farmers/ranchers-of-the-middle still remain in business to supply the growing market demand for differentiated food products of superior value. So for the moment, both the markets and the producers who can supply these markets are in place. What is missing are the research information, the commercial infrastructure, and the public policies to support connecting agricultural producers-of-the-middle to these growing markets, and to do so with new business paradigms that enable farmers/ranchers and other community food entrepreneurs to become full partners and beneficiaries in these business ventures.
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