General Session III

USDA-Agricultural Marketing Service

Washington, DC

These comments address some of the programs in the U.S. Department of Agriculture (USDA), and particularly those in the Agricultural Marketing Service (AMS), designed to improve market access for small farmers. Improving market access for the small to medium sized farmer is of paramount importance. Larger producers with greater production and access to capital can invest in new techniques to make their products "market ready". Smaller producers, however, generally do not have the production volume needed to utilize advanced packing and handling techniques and find it difficult to access mass markets. The importance of a strategic marketing plan is therefore essential to the survival of the small limited resource producer.

The mission of the Agricultural Marketing Service is to facilitate the strategic marketing of agricultural products in domestic and international markets while ensuring fair trading practices and promoting a competitive and efficient marketplace for the benefit of producers and consumers. This mission is carried out through eight broad activities that encompass a wide range of programs.

Those eight activities include:

(1) Market News

(2) Standardization, Grading, and Shell Egg Surveillance

(3) Market Protection and Promotion

(4) Wholesale Market Development

(5) Transportation Services

(6) Strengthening Agricultural Markets and Producers' Income (Section 32 Program)

(7) Payments to States and Possessions and

(8) The Perishable Agricultural Commodities Act (PACA). These activities are structured to promote a strategic marketing perspective that adapts product and marketing decisions to consumer demands and changing domestic and international marketing practices and technologies.

Most of my comments will focus on the Wholesale and Alternative Market (W&AM), one of four program areas in the Transportation & Marketing Division of AMS. I will also describe some of the other programs in the Division and the Agency and how they impact marketing strategies for small farmers.

The mission of the Wholesale and Alternative Markets program is to promote regional economic development and improve market access for the small to medium sized farmer, thereby enhancing the overall effectiveness of the food marketing system and providing better quality products to the consumer at a reasonable cost. To accomplish this mission, the W&AM program conducts research and provides technical assistance to State Departments of Agriculture, municipalities and other non-profit organizations that are interested in expanding market potential and creating or upgrading facilities to enhance the overall marketing, handling and distribution of agricultural products. The program also analyzes potential delivery systems to allow customers, particularly the under-served inner city residents, greater access to a variety of fresh fruit and vegetables and specialty crops that might not be available in mass markets.

The W&AM program mission is accomplished through three functional areas:

(1) Farmers’ Markets

(2) Public Markets, and

(3) Wholesale and Collection, or Assembly Markets.

Farmer Markets

The term "farmers" markets" has been used to describe several different types of marketing facilities. We define farmers’ markets as a common facility or area where several farmers or growers gather on a regular, recurring basis to sell a variety of fresh fruits and vegetables and other farm products directly to consumers. Farmers’ markets give consumers direct access to fresh fruits and vegetables and other farm products and provide small farmers with a profitable sales outlet for their production.

Research shows that the additional income from sales at farmers’ markets is sometimes the factor that enables smaller growers to farm profitably. The popularity and growth of farmers’ markets has resulted in a major upswing in the number of markets operating throughout the country. The 1994 Farmers’ Market Directory identified 1,755 farmers' markets operating in the U.S. Our 1996 Farmers' Market Directory identified over 2,400 farmers’ markets operating in the U.S. during the 1995 season, a 37% increase over those listed in the initial directory.

Farmers’ markets are dynamic enterprises that also contribute to community development, economic development and nutrition delivery, generate additional tax revenues, and build community spirit and empowerment. They make significant contributions to rural areas in close proximity to cities. In a recent study commissioned for the Dane County Farmers’ Market in Madison, Wisconsin, it is estimated that the market contributed nearly $5 million to the local economy. In smaller markets such as Sante Fe, New Mexico, estimates are that the market contributes over three-quarters of a million dollars to the surrounding farm economy. The "Greenmarkets" in New York City estimate their markets generate over $20 million sales to regional growers.

A recent Cornell University study that examined the entrepreneurial business incubation capabilities of farmers’ markets identified three major benefits to farmers.

(1) They enhance business opportunities by promoting business start-up and development, facilitating product development and diversification, creating opportunities to add value to products, enhancing the customer base, and expanding sales and income.

(2) They foster the development of business skills and entrepreneur-ship.

(3) They have positive effects on the vendors' families.

An increasing source of income for farmers at farmers’ markets are the Women, Infants and Children (WIC) farmers’ market nutrition coupons. I am sure most of you know how this program operates. Qualified WIC recipients receive coupons or checks to purchase fresh fruit and vegetables at authorized farmers' markets from bonafide farmers. Slightly more than $9 million in coupons were redeemed by 8,047 farmers at 1,143 farmers’ markets in 1995. Opportunities exist for small farmers to tap into this market, particularly when they are positioned to sell products in communities where these coupons are issued.

A major objective of this study was to measure farmer and consumer participation at those farmers’ markets that engage in direct sales to consumers. Of particular interest were the number of participating farmers, the number of sales' days on a national basis, and the distance both consumers and farmers traveled to the markets. Included in the survey were questions suggested by those actively involved in market management and questions on participation in the WIC Farmers’ Market Nutrition program, participation of tourists, and identification of various market rules that affect grower participation.

During September 1994, 1,755 surveys were mailed to farmers’ markets as listed in the 1994 Farmers’ Market Directory. Market managers completed and returned 772 responses relating to direct sales. Here are a few highlights of the survey: 20,496 farmers use farmers’ markets to sell directly to consumers, 6,648 farmers are reported to use farmers’ markets as their sole marketing outlet, 772 farmers’ market managers report a total of 915,774 customer visits per week, and validation of previous studies that estimate direct marketing sales as over $1 billion nationally.

Wholesale & Alternative Markets program has initiated several other projects.

The 1996 Farmers’ Market Directory catalogued over 2400 farmers’ markets operating in the U.S. This directory lists market locations, contacts and phone numbers where available, and type of operation (seasonal, year-round). The Delaware Consumer Survey assessed consumer needs and opinions of direct market operations in the state of Delaware. The California Web Site developed a World Wide Web site for California farmers’ markets. A Madison, Wisconsin, study assessed the feasibility of relocating successful farmers’ market from the downtown area. A Toledo, Ohio, study examined the feasibility of establishing fresh food market adjacent to successful outdoor farmers’ market. A study on farmers’ market tourism assessed the impact of tourism on farmers' market sales. A study in Columbia, Missouri, examined facility layout and design for market to serve farmers in central Missouri. In Little Rock, Arkansas, business plan and operational enhancements for a new farmers' market were studied.

W&AM’s future projects will include:

(1) Conducting a generalized, national survey every 2 years, measuring market and farmer activities;

(2) Tracking market development, developing consumer profiles of most likely users, and attempting to establish parameters that indicate a market’s potential success;

(3) Collecting site-specific data, emphasizing consumer surveys to establish activities at individual markets, and developing a set of predictable variables that will accurately predict the potential of a market expansion;

(4) Continuing efforts to estimate national sales' figures for farmers’ markets to more accurately measure their impact on small- to medium-sized farmers.

Public Markets

Public markets are defined as a group of locally owned, primarily owner-operated, private retail businesses leasing or renting space in a shared facility on a permanent basis with an emphasis on the sale of fresh foods. Located in inner-city urban areas, public markets provide a vehicle for delivery of fresh agricultural products in areas where the mass merchandisers have disappeared. Independent businesses operating in these markets may include produce, meats, poultry, fish and seafood, eggs and cheeses, baked goods, fresh cut flowers, ready to eat foods and other related items and services. Often a combination of government and private funds are used to construct or renovate a market facility. Market administration and management is generally performed by non-profit organizations which generate the operating capital necessary for continued market maintenance.

Besides expanding market access for local growers and producers, public markets also provide urban consumers with a much needed supply of fresh fruits and vegetables. Today, more people are realizing the importance of good nutrition in maintaining their health.

However, many Americans’ efforts to eat more farm fresh products are hampered by factors beyond their control. Residents of low-income communities in many larger cities generally do not have adequate access to fresh farm products. Their access is limited by the scarcity of chain stores in inner cities and older stores that have inadequate facilities, limited storage space, and outdated equipment.

The benefits of public markets are diverse. They promote small scale farming and they provide local farmers' access to a large number of consumers in a direct marketing environment. For producers of varietal products that have an ethnic appeal, those who grow organically, those who cannot produce enough to interest large scale buyers and growers who are transitioning crops, public markets - and their adjunct in-season farmers’ markets - have a direct benefit. They also support nutrition programs and healthful consumption of fresh agricultural products by providing inner city residents with access to reasonably priced fruit and vegetables and other fresh food products.

The 1996 Public Market Conference convened industry leaders, planners, developers, market operators, and city and state officials to develop strategy for planning and expansion of public markets.

Wholesale Assembly Markets

Projects in Asheville, North Carolina; Boston, Massachusetts; North Market, Columbus, Ohio; Findlay Market, Cincinnati, Ohio, involved facility and/or business planning for development of public markets to serve inner-city communities. In Baltimore, Maryland, an entrepreneurial training and merchant development program for refurbishment and expansion of public market was conducted. A study in the Reading Public Market, Philadelphia, Pennsylvania, examined the feasibility of establishing satellite markets in low income communi-ties. A Sea Islands, South Carolina, study identified a public market and/or alternative retail marketing facility for minority farmers.

By definition, Collection, Assembly or Shipping Point Markets are facilities where small growers can collectively assemble sufficient product volumes to attract buyers for subsequent shipment to population centers. These types of operations are usually in an area of commercial production. When located near towns or cities, markets of this type may also serve as a source of direct supply for local grocers and food service operators. Research findings indicate that the heavier concentration of these types of markets are located east of the Mississippi River in the Atlantic seaboard states.

Of the approximate 100 markets operating in the 1950s, over one-third were located in Georgia and Florida. Although once a popular form of marketing, fewer of these types of markets exist today. Several factors contribute to the decline, including shifts in demand, modes of transportation, cultural practices, declining production, and changes in wholesale and retail marketing services caused by supermarkets. Although the number of markets have declined, the functions performed by the operations - packing, cooling, sorting, grading -for small farmers remains a critical process in the continued survival of the small-to-medium sized farmers to access the mass marketers.

In Thomasville, Georgia, a state-owned market serves primarily as an auction facility for small farmers in south Georgia. A study in the Mid-Hudson Valley, New York, examined the feasibility of consolidating a marketing facility for growers in region that is only 50 to 100 miles from New York City. In southwest Virginia, a study assessed the feasibility of establishing a shipping-point market to serve producers. These producers are primarily tomato and green pepper growers.

Other AMS Small Farm-Related Initiatives

Shore-to-Store Produce Marketing Program

This program is basically a campaign that encourages supermarkets in Maryland, Delaware and Virginia to stock their produce departments with locally grown items. The program has shown a great deal of success with sales in 1989 of $302, 508 that rose to $937,802 in 1995, a tripling of sales in six years. It is intended to help both the supermarkets by providing fresh, high-quality produce and the growers by offering them a profitable outlet for their production. Shore-to-Store combines point-of-purchase display materials such as posters, banners, and price labels with television, billboard, radio and store window advertising. The goal is to encourage customers to request local produce. The program also provides directories of participating supermarket produce buyers to growers and directories of growers to buyers. Research projects continue in an effort to improve this program with a recent survey of participating producers. Results taken from this study generated many new recommendations that would enhance future Shore-to-Store operations. They include an initial information package, USDA grading standards, growers' and buyers' meetings, local grower organizations, and newsletters.

The Opportunities for Limited-Resource Producers to Supply a School Lunch Program with Local Agricultural Products Pilot Project is a cooperative project with the Georgia Department of Agriculture and Fort Valley State University to develop a pilot project in which a school lunch program operates for a school year with local agricultural products supplied by limited-resource producers.

The Agricultural Export Transportation Seminars' initiative is administrated through the Shipper Exporter Assistance program of TMD. Participants learn the basics of export transportation. Informa-tion covered in these seminars includes: definition of appropriate terms; how to select a freight forwarder; freight forward-ers' role; shippers role; documentation; ocean cargo rates and service for containerized shipments and less-than-containerloads, air cargo rates and services; how to select the right transportation; export payment options; proper procedures for stowing cargo; how to facilitate customs clearance; insurance options; USDA services; potential pitfalls and how to avoid them. The seminar and program materials are designed for individuals who are producing or marketing high value or value added agricultural products; considering exporting; and/or new to exporting; a new employee in marketing, distribution, or export divisions. USDA responsibilities facilitate the coordination of these seminars with workbooks, speakers, program guidelines, and other assistance as needed. The seminars are taught by industry experts, including international freight forwarders, international bankers, carrier representatives, experienced exporters, USDA, and participants from the sponsoring organization. This program may offer strategic opportunities for emerging farm groups or organizations that may have the potential to amass sufficient quantities and/or varieties of products to access a foreign market.

The National Organic Standards' Program through the Organic Foods Production Act of 1990 mandated the Secretary of Agriculture to establish an organic certification program for producers and handlers of agricultural products who use organic methods. The Organic Foods Production Act has three purposes:

(1) to establish national standards governing the marketing of certain agricultural products as organically produced

(2) to assure consumers that organically produced food meet a consistent standard

(3) to facilitate interstate commerce in fresh and processed food that is organically produced. The process of developing the national Organic Program has been a public /private partnership with the organic industry. With help from consumers and representatives of the organic industry, the USDA has been working to develop standards, rules and regulations that will ensure that organically labeled products purchased in the marketplace meet consistent nationwide standards. The process of developing these standards has been very complicated because they will apply to all agricultural production -- fiber, produce, livestock, poultry and processed foods. Once these standards are developed, the Agricultural Marketing Service will accredit State and private organizations or persons to become "Certifying Agents" to certify that production and handling practices are met.

Developing and certifying a national organic program is a complex and far-reaching process, however, substantial progress has been made. The 14-member National Organic Standards' Board, first formed in 1992, has delivered recommendations on the major issues to the Secretary of Agriculture which will form the basis of the regulations and a policy guidelines' manual that will be used to implement and operate the program. Beyond the regulatory and enforcement issues associated with the adoption of these standards, this program will open international markets for organic products and expand consumer confidence and ultimate purchases of organic products. This would create a niche market for small farmers to pursue as they explore alternative production strategies.

The Federal-State Marketing Improvement Program (FSMIP) is a matching funds program which supports State marketing projects. This fund is designed to support State Departments of Agriculture in:

(1) identifying and evaluating new uses, markets, and marketing systems for agricultural produce, both domestically and internationally

(2) improving the efficiency of marketing processes and systems to enhance competitiveness and profitability

(3) improving or maintaining the quality and marketability of agricultural products through new handling, processing and distribution techniques

(4) assessing opportunities for alternative crops, direct marketing, and farmers’ markets to enhance income and market access for small or limited resource farmers. Twenty-one projects received funding during the 1996 fiscal year. Examples of projects that were awarded grants include:

• Kentucky

Assess the existing diversification and marketing activities underway in fifteen "tobacco dependent" counties; develop a coordinated, multi-county approach to improve these programs; and document diversification successes for use in future educational and training activities.

• Minnesota

Identify marketing opportunities and strategies for small scale producers and processors by increasing the scale of direct marketing of meat, fish, fowl and by developing niche retail and food service markets for value-added products.

• New Jersey

Form a farmers’ market coalition, document characteristics and examine efficiency of farmers’ market operations, and examine characteristics and demographics associated with farmers’ market customers.

Market News

The primary objective of the AMS Market News Programs is to provide timely, accurate, and unbiased market information to buyers and sellers of agricultural commodities. Market News' reports reflect current conditions on supply, demand, price, trend, movement, and any other information pertinent to trading. This market information aids producers in production planning and is reported in uniform terminology that places the producer and buyer on a more equal bargaining basis. Timely and accurate information is particularly important for small farmers as farm profitability depend heavily upon their ability to get products to market at optimum periods for sale. The Agency is aggressively working to enhance its market databases via the INTERNET and other electronic media in a continuing effort to make this information accessible to a wider group of users.

Commodity Procurement

The primary objectives of the Section 32 - Commodity Purchase programs are to remove excess supplies of agricultural commodities from the markets, to provide a dependable supply of agricultural commodities for the Department’s domestic feeding programs, and to encourage the domestic consumption of American agricultural products.

A majority of these purchases are for the school lunch program. The program buys food from farmers who have wholesome, high-quality (fresh or processed) products to sell. A requirement of this program, however, is that a farmer must commit a truck load of products for sale. A truck load is equivalent to 45,000 pounds. Opportunities exist for small farmers to access this market for their products.

For additional information concerning the Wholesale and Alternative Market Program or other information cited in this presentation, you may contact Errol R. Bragg at USDA, AMS, TMD, W&AM, P.O. Box 96456, Room 2642 South Building, Washington, DC 20090, Phone: (202) 720-8317 or Fax (202) 690-0031.

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