Progress report for FNE22-006
Project Information
The purpose of our project is to create a digestible, timely and thorough guide to value-adding. Our research is still ongoing and scheduled to continue throughout the 2024 farm season, however in 2023, we made progress in the following ways:
- Researching Rules and Regulations: We have had several meetings with agents from the NY Department of Ag & Markets resulting in a clear understanding of the rules and regulations for operating with a 20-C kitchen license.
- Value Added Product Development: We have trialed several value-added enterprises, including vegetable dumplings, pork tamales, chicken pot pies, chicken liver pate, pork bone broth, chicken bone broth, soy-glaze eggs and vegetable quiches - the successes and failures of which will be detailed in our final report.
- Event Food Trials: Using our 20-C kitchen license, in conjunction with temporary food service permits, we hosted 5 on farm events and participated in one off farm event where we sold hot food made from our farm products. We have collected data including COGS, event attendance, sales revenue, labor requirements that we will compile and share in our final report.
After discovering a number of things that might prevent a farm from doing their own value-adding, including time, staffing and affordable access to a 20-C licensable kitchen, we began researching ways for farmers to outsource their value adding needs, which led us to both USDA and non-USDA co-packing. We have since outsourced some of our own value-adding and are excited to share what we have learned about the process in our final report.
We seek the opportunity to create a novel, inclusive resource for farmers interested in creating value-added enterprises. Our intention is to close the information gaps and equip farmers with all of the information necessary to create legal, profitable value-added enterprises.
We envision a ~10,000 word PDF guide titled An Illustrated Guide to Value-Adding: Rules, Regs & Good Ideas that:
- Demonstrates using real case studies just how much value-adding can increase profitability for farmers
- Curates all of the relevant rules from the various regulatory agencies involved and lays them out in a single clear and easy to read publication
- Includes complete, detailed budgets for five tried and tested value-added products - one each for the most popular farm products: vegetables, beef, poultry, eggs and pork
We plan to disseminate this guide to the masses by sharing it with farm educators and posting it on popular agricultural resource sharing platforms.
If there’s one thing we love at Letterbox Farm, it’s a good spreadsheet. Why? Because over the years, we’ve found there is no better decision making tool than your own data. Years of record keeping has allowed us to track trends and changes for each of our enterprises. This means we have all the information we need to identify how we’ve improved over the years and what we can tweak to do better.
Typically, our data-driven decisions result in modest improvements - the kind that only begin to add up over a number of years. But once in a while, we hit on something that makes a big difference, fast. For example, should you take a look at our pastured-poultry data from 2019, you’d see that we were getting an average price of $21.97 per bird. Click on the Excel tab for 2021 and that number would skyrocket to $31.66 - an increase of almost $10 per bird! Even when we note an additional production cost of $4.16 per bird, that’s still a net increase of almost $6 per chicken compared to just 2 years prior. Multiply that $6 by the ~3,000 birds we raise annually and that’s a huge difference in the bottom line. The catalyst for this dynamic increase? Chicken pot pies.
Last year, we began experimenting with turning some of our chickens into heat-and-eat pot pies and bone broths. These products proved not only to be much more valuable than their unprocessed origins, but they were also much easier to sell, allowing us to cut our wholesale and redirect 100% of our poultry production to retail. This streamlined our marketing, sales and admin work, saving us tons of time all while netting a higher margin. After years of taking a “more for more” approach to agriculture, in which we assumed the only way to earn more money was to grow and raise food at a larger scale, we’ve since shifted our strategy to first trying out “less for the same” or “the same for more” approaches. Based on our experience, value-adding is an integral piece of getting the most out of what we grow and we believe this would hold true for many farmers in our region and beyond.
Our proposed project will not only demonstrate the opportunities we see in farm value-adding, but also fix the problems we have found most cumbersome throughout our own journey. So far, the biggest pain points we’ve discovered include:
- Understanding the regulations: There are multiple agencies that regulate and enforce food processing, storage and sales, such as the Department of Health, the Department of Ag & Markets, the Department of Weights & Measures and the USDA. Locating and deciphering the relevant regulations from each of these agencies so that we can operate in full compliance has been incredibly difficult. Likewise, we’ve had many conversations with other farmers that suggest many of us are inadvertently operating in legal gray areas simply because we do not have access to a resource that clearly states what the rules are.
- Identifying good opportunities for value-adding: At Letterbox, we have experimented with several value-added products and have found that not all of them are profitable. In fact, most have been flops. Identifying products with good margins and high marketability can take a great deal of trial and error, which is time consuming and costly.
Our proposed solution to these problems is to spend a year creating a comprehensive compilation of the rules and regulations for the categories of value-adding most relevant to farmers (such as pickling, canning, baked goods, charcuterie, etc.) to include:
- Licensing and permitting - which ones does a farm need, if any, and how/where do they obtain them?
- Kitchen certification - what type of facility is required to produce this product and how can one build or rent one?
- Food handling - how must certain products be handled?
- Labeling - what must be included on the label for certain types of products?
- Storage - how and where may different products be stored before sale and at the point of sale?
- Sales and marketing - where may different types of value-added products be sold?
Likewise, we will do the time consuming work of developing one value-added product for each of the following common farm enterprises: vegetables, beef, poultry, eggs and pork.
This research will culminate in an illustrated, guide to value-adding that includes all of the regulatory information mentioned above as well as complete budgets for each of the value-added products we develop.
Nichki Carangelo is a partner and founding member of Letterbox Farm, a commercial farm in Hudson, NY since 2014. While originally a fully diversified farm, over the years Letterbox began to specialize in pastured poultry, hogs, herbs and you-pick flowers. Our farm is 64 acres, 30 of which is woodlot and ravine. In 2023 our gross sales were $325,000, which was earned via our 3-season on-farm CSA, 2 farmers markets and a small amount of local wholesale. For 2024, our farm will be staffed by 3 full-time, year-round owner/operators, 1 seasonal full-time employee and 1 seasonal part-time employee.
Cooperators
- - Technical Advisor (Educator)
Research
Our objective for this project is two fold. Firstly, we wish to execute thorough research on the rules and regulations regarding the most common types of value-added products. Secondly, we intend to develop 5 sample value-added ventures - one each for vegetables, beef, pork, poultry and eggs - that are demonstrably profitable and realistic to replicated. When our research is complete, we wish to compile our findings into a single, comprehensive reference for farmers that includes all of the information they need to start a legal, successful value-added enterprise of their own. In order to accomplish this, several accompanying steps will be taken:
Researching the Rules & Regulations. The various types of food processing are regulated and governed by different, and sometimes multiple, agencies. In order to create a complete resource for farmers, we will need to mine each one for the relevant information and compile it in a single place. The regulatory agencies we will be working with include: the Department of Health, the Department of Ag and Markets, the Department of Weights and Measures and the USDA. The value-added processes we will be researching the regulations for include: pickled and canned vegetarian products, cured and dehydrated meat products, dehydrated fruit and vegetable products, vegetable and animal broths, vegetarian baked goods, vegetarian and meat/egg-inclusive ready-to-eat foods that are served hot, heat-and-eat vegetarian products that are sold refrigerated or frozen and heat-and-eat products that contain meat products that are sold refrigerated or frozen. For each category, we intend to learn:
- Where it can be legally produced, as some value-added products can be made in a home kitchen, while others require producers to use a state or even USDA inspected commercial kitchen or facility.
- What permits, licensing or certifications are required, if any, as some products and distribution methods require the producer and/or person serving the food, if ready to eat, to have specific training and permissions.
- How products should be labeled, as the required information is often product specific and can include things like the ingredients, the weight or volume, storage or heating instructions and more.
- Where and how products may be stored, including but not limited to at what temperature and in what type of facility (for example, some products may be stored on farm while for others a facility with the proper warehouse license is required)
- How products may be sold, as this can vary depending on the category (for example, value-added products with a certain percentage of meat in them that are not made in a USDA kitchen are not permitted for wholesale and may only be sold direct to consumer).
On-site Research: In order to demonstrate the impact adding value to existing farm products can have on a business, we will use our own farm as a case study by tracking the economic trends in our business as we expand existing value-added enterprises and add in additional ones. The data we collect will be summarized in the final resource and will include:
- The income per unit (pounds of vegetables, individual chicken, pound of pork or beef, dozen eggs) we average selling the item as is, without any value-adding
- The income per unit we average when a value-added product has been added to the enterprise
- The cost per unit (to include labor) we average when producing the product as is, without any value-adding
- The cost per unit (to include labor) we average when a value-added produced added to the enterprise
- The gross margin of each enterprise with and without value-added products
Enterprise Development: We plan to develop and pilot 5 value-added products, each with a focus on profitability and replicability. There will be one product each intended to increase value to the following common farm products: vegetables, poultry, eggs, beef and pork. These products will be sold throughout our existing markets which include a CSA, on farm stand and two farmers markets. All production and sales data will be tracked and a complete start-to-finish enterprise budget for each product will be generated.
Resource Development: After all of the above mentioned research and development is complete we will compile everything we’ve learned into An Illustrated Guide to Value-Adding: Rules, Regs & Good Ideas. This roughly 10,000 word resource will be structured with its audience in mind and it will be written and designed with an emphasis on information inclusivity, clarity and readability.
As of now, our project is on track with no major changes from our original methods. We are still in the research and data collection stage, so we do not yet have any results to share or discuss however we look forward to completing our final publication by the end of 2023.
Education & Outreach Activities and Participation Summary
Participation Summary:
Because our research is still in process, we have not done any education and outreach as of year end. However, we are on track to have our final written and illustrated resource available to share by the end of 2023.
Learning Outcomes
Project Outcomes
Our research is still ongoing and scheduled to continue through 2024 so there are currently no definitive project outcomes to share.