Market Development and Business Analysis for Chili Peppers

Project Background
Mr. Story grew up on a small farming operation in rural South Georgia next to the Okefenokee swamp. Farming crops and raising livestock in this area took many interesting turns and decisions on production methods had to be changed often.

Mr. Story currently owns 30 acres just east of Edgar Springs, Missouri. Before this project, Mr. Story’s farming operation dealt mostly with backgrounding steers.

As the environmental and agriculture project director for Missouri Enterprise, Mr. Story has worked with numerous producers , cooperatives and companies dealing with feasibility studies , marketing strategies, business plans , and other endeavors.

Project description and results:
The objectives of this project were:
a) To evaluate the yield and quality of chili peppers grown in Missouri.
b) To compare organic and conventional nitrogen sources for producing the peppers.
c) To analyze the profit potential of peppers under Missouri conditions.

The steps that were taken to achieve these objectives are as follow:
1. Visited successful chili pepper farm in New Mexico to learn the key components of growing chili peppers.
Mr. Terrazas went to Tularosa, New Mexico to visit Mr. Ron Bookout who has over 37 years of experience in growing chilies. Through the onsite visit, Mr. Terrazas was able to learn the industry’s key essentials in growing chili peppers and brought back seeds for the project. Some key components were:
i. Seed selection
• Use certified seeds, cross pollination and diseases will affect the quality and harvest
ii. Planting
• Good drainage
• Plant in blocks of row to create moisture
• Plant a minimum of 100 yards to prevent cross pollination
• Limited water can “stress” the plants causing them to become hotter.
iii. Weeds/diseases/insects
• Rotate the fields every year to prevent disease and insect infestation
• The plants can get root rot if there is standing water
• Leafhopper is an issue - the tiny microscopic insects attack the plant root
iv. Harvesting
• Green chilies are more profitable than red
• Certain commercial dryers for red chili had a tendency to make the peppers bitter

2. Established seedlings for planting
The seed selection is a very important step in growing chilies. It is best to purchase certified seeds. This helps in controlling diseases and in keeping the integrity of the variety. The best chili pepper variety to use is either Big Jim or Joe Parker (mild variety). Stressing the plants, limited water can cause the plants to become hotter. Straw was used in plot B to help control weeds between rows, but was soon removed so that the project could produce through a more normal environment.

3. Tested soil and prepared plots (one with commercial and one with organic fertilizer) The University of Missouri Outreach and Extension tested soil samples from both plots. Plot A was prepared with commercial fertilizers and plot B was prepared with an all natural Early BirdTM soil enhancer /amendment/fertilizer product.

Central Missouri Poultry Producers Association developed Early BirdTM . It was formed to take advantage of a composting operation to eliminate poultry litter as a waste product and turn it into a viable enterprise. All in all the project results were comparable with a better yield in plot B taking into consideration the two week lag in planting due to rainy weather.

4. Planted and grew chili peppers
It is best to plant in a square block of rows instead of a single row. This helps the plants in creating their own moisture. If planting different varieties ,it is better to plant a minimum of 100 yards to prevent cross pollination. The peppers needed very little watering due to an above average wet weather season. Commercial insecticides were used to control insects. Cutworms were a minimal problem, probably due to the fact that there were a few tomato bushes nearby on plot B.

5. Record harvest of peppers
Plot A was planted on April 1st , 2004 and plot B was planted two weeks later due to inclement weather. The harvesting started on plot A on July 18th and on July 24th for plot B. The Early BirdTM fertilizer had a significant higher yield on plot B than the commercial fertilizer on plot A.
Harvest results by variety:
(Variety, plotA lbs, plotB lbs, total lbs, % yield difference)
Arizona, 16.25, 24.25, 40.5, 33%
Sandia, 11.00, 15.00, 26.0, 27%
Big Jim, 8.25, 10.00, 18.25, 18%
Diablo, 8.75, 10.50, 19.25, 17%
Total, 44.25, 59.75, 104.0, 16%

6. Compared peppers to that grown in the southwest to include taste and the effects of differences in fertilizers used.
According to Mr. Bookout, the chilies had good flavor. The Diablo and sandia varieties should have had more “bite”. The chilies should have been larger in size; we should have left them on the plants a little longer.

7. Performed market development and business analysis for chilli peppers
The taste testing results were all positive:
“We found all to be excellent, in quality, texture, taste and temperature. The peppers were fresh , large and cooked up very well. Peppers of this quality are extremely difficult to find in the mid-Missouri market.” –Kathy, Columbia

“All the peppers were excellent. They froze up very nicely. I would like to put my order in for the next year’s crop.”- Robert, Newberg

“Being of Indian descent, I love my food with a little bite. These peppers had a good flavor and bite considering that they were of the mid family.” Merwan, Rolla

Area pricing per pound

Walmart $2.48 price/pound ($)
Gerbes $1.99 price/pound ($)
Schnucks $2.99 price/pound ($)
Local farmers Market $2.00 price/pound ($)
Average $2.37 price/pound ($)

The chili peppers were very successful at the farmer’s market. In most cases it was an item that wasn’t ever offered before. The peppers from the market became a favorite of Missourians who produce their own salsa every year.

Research found that several Missouri farmers were already successfully growing chili peppers. A taste of the Kingdom, a company located in Callaway county has been very successful in the past five years of adding value to chili pepper crops and buys the peppers needed for ingredients from these Missouri farmers.

Project Impacts
According to an article in the May 2004 “Rural Missouri” magazine, A Taste of Kingdom “sponsored a University of Missouri Agriculture school study of the potential to grow peppers in Missouri and found that if markets were developed, there could be a $60 million industry in the state. According to the study an acre of peppers potentially could produce $6,300 in revenue when sold at current wholesale prices.” (Joiner, Jeff. “Cooking Up Something Hot”, Rural Missouri,2004, pp 15-16)

This feasibility study concluded “the fresh market and the companies employing fresh peppers can take essentially any amount of peppers from central Missouri. This is because pepper farmers in central Missouri have a lower total delivered cost for peppers than producers from New Mexico (or Mexico) in essentially all markets east of the Mississippi river , the Midwest and in portions of the great plains. And this cost advantage means that pepper farmers in central Missouri can “shut out” pepper farmers in New Mexico in participating in the market for fresh peppers and processed peppers… the minimum scale of a farming operation necessary to achieve this condition is only nine acres.” (Kenker & Associates, “Feasibility Study for A Taste of the Kingdom”, 1992)

Economic data from the feasibility study by Kenker & Associates states the following:
“Total fresh pepper and processed pepper market
• $ 150 million annually
• $37.5 million for fresh pepper
• $ 112.5 million for processed pepper

Approximately 40 percent of total market for Missouri:
• $ 60 million annually with 9,500 acres
• $ 15 million for fresh peppers with 2,300 acres
• $ 45 million for processed peppers with 7,200 acres

Further note that this intensive agricultural production generates in excess of $6,300 per acre in revenue (at wholesale prices) and an attractive level of profit- substantially in excess of many of the new row crops currently cultivated in central Missouri.”

Outreach
Family and friends were used for the taste testing along with feedback from local farmer’s market. Presentations were made to Show-Me Livestock Coop, Flickseed and the Adult Agricultural Education Program. A copy of the results will be made available to the Missouri Agricultural Small Business Development Authority Director, Tony Stafford.