Value-Added Opportunities for Small Farmers
Alan E. Ware
The Kerr Center
Value-added agriculture is the processing of raw materials in both food and nonfood areas to add further value to a product. Value can be added to products in a variety of ways such as packaging, drying, canning, handcrafting, or juicing. Some incentives associated with value-added agriculture include:
- increasing the monetary value of raw materials
- accessing niche markets
- prolonging product shelf life
- creating a profitable use for seconds or culls
- extending the season
- making handling easier for mid and end users
- providing more convenience for mid and end users
Value-added processing helps farmers receive a larger portion of each food dollar. As seen in the accompanying chart, a farmer receives 22.2 cents of each dollar spent for food in the United States. The labor in the chart represents the processing sector, which converts raw materials into a final product. The goal of value-added agriculture is to move part of the 36.1 cents that currently ends up in the processing sector to the farmer.
Let's look at two examples. In this example, a farmer found a way to drastically increase the value of his compost. Crappy Critters target home-owners who are looking for an attractive and convenient way to fertilize house-plants. Each critter is made of 7 ounces of compost and is shaped like an animal. The product retails for $1.29. Estimated return to the farmer is 39 cents/critter. One ton of compost creates 4560 critters. Estimated return to the farmer is $1,778.40/ton of compost. As a raw product, compost normally sells for about $75/ton.
The other example is less dramatic but still shows how a farmer can increase his returns. A nurseryman was selling flowers for $11/flat. His cost of production was $3.75/flat, leaving a return of $7.25/flat. He now sells flower boxes already planted for $18/box. His cost of production is $7/box, leaving him a return of $11/box.
These farmers found a way to successfully add value to their products. They began by selecting a product that was marketable and complemented their existing farm operation. Producers interested in value-added processing should begin by writing out a plan. Include a budget, a timeframe, and attainable goals. Research available markets and processing requirements and contact local, state, and federal agencies and institutions for information and assistance. Several states have marketing programs that benefit small farmers. Begin on a small scale with plans for future expansion if the venture is a success.
The Southern Sustainable Agriculture Working Group recently published a book, Making it on the Farm: Increasing Sustainability Through Value-added Processing and Marketing, that profiles successful farmers. It also includes some keys to success that were identified by the farmers.
- Choose something you love to do.
- Create a high-quality product.
- Start small and grow naturally.
- Make decisions based on good records.
- Follow demand-driven production.
- Establish a loyal customer base, preferably local.
- Provide more than just food or a product.
- Get the entire family or partners involved.
- Keep informed.
- Plan for the future.
Value-added agriculture does have pitfalls. You must evaluate the cost and returns for developing a value-added product just as you would for producing the raw material. Avoid high overhead through capital investment.
Value-added agriculture can be a benefit to more than just the farmer. David Henneberry of Oklahoma State University believes that value-added food processing means adding an entirely new layer of industry dealing with our own native agricultural commodities. He foresees positive effects at the producer level, but thinks the bigger effects would be on the general level of state employment and the level of the value of exports that leave the state.
NOTE:Making it on the Farm: Increasing Sustainability Through Value-added Processing and Marketing by K. Richards and D. S. Wechsler can be ordered by sending $12.00 to SSAWG, P.O. Box 324, Elkins, AR 72727.
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