Final Report for GNC12-156
Project Information
Introduction:
Context, Background, and Rational
Local foods industries increase the quality of life in rural communities by providing job opportunities, keeping money circulating in the community and increasing access to fresh, healthy foods. By assisting growers with increasing the size of their business and the industry we hope to not only better their lives but also the lives of all residents in their communities. The Leopold Center for Sustainable Agriculture, Ohio State University, and the USDA have all recently published reports recognizing the need for increased production of local foods and identifying lack of infrastructure as a key limitation (Clark et al., 2011; Martines et al., 2010; Pirog et al., 2011). Commercial distributors and retailers require large quantities of produce from few business entities in order to supply consumer demand and simplify business transactions. One way to meet the needs of distributors and retailers is to aggregate produce from multiple farms at a single location for packing, processing, and shipment. These facilities, known as food hubs, act as brokers between farmers and distributors or retailers.
Developing food hubs that utilize current food distribution chains will also open new markets of scale currently unavailable to the majority of growers due to their size. Food hubs allow retailers and distributors to source produce locally to meet consumer demand. This is currently difficult due to the quantity needed by these organizations. Food hubs not only have the capacity to provide effective and efficient means of aggregating and distributing physical product but also communicating information between growers, distributors, consumers, researchers, and government agencies. Food hubs may provide means for better educating growers of Good Agricultural Practices (GAP), state food regulations, business opportunities, and consumer preferences. Food hubs also provide researchers with easy access to producers for collecting evidence of their contribution to state economies, information on production and marketing activities, labor needs, and current capacity.
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Food Hub Benefits to Growers |
Food Hub Benefits to Distributors |
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Collective marketing power |
Single entity for business transactions |
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Reduced direct marketing activities |
Able to source large quantities of produce |
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Shared packing and processing facilities |
Single location for pick up |
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Central location for deliveries |
Increased food safety & quality compliance |
In short, the development of food hubs has the power to create major progress in multiple recommendations from state departments. For example, recommendation 3.1 from the Iowa Food and Farm Plan: Plan and implement a set of four to six innovative and comprehensive local food business projects across the state. We will accomplish this by conducting SWOT analysis, recording strengths, weaknesses, opportunities, and threats to food hub development and the process of developing successful food hubs using two case studies. Then we will make this information available for other groups of organized growers who are interested in forming similar organizations.
Literature Review
Food hubs have been researched as possible ways to increase the amount of local food available to consumers through both traditional and alternative supply chains. Several state governments and the USDA have recommended more research on the social, economic, and environmental impacts of food hubs. They are also calling for increased efforts in growing this sector of the agriculture economy (Clark et al., 2011; Martines et al., 2010; Pirog et al., 2011). Rebecca Jablonski (GNE11-021) researched the impact of government subsidies on increasing the number of food hubs and the impact it would have on local farmers. We intend to use similar survey and interview techniques but are interested in analyzing conditions that promote success such as minimum number of growers, minimum local population, availability of labor, access to highways, etc. By looking at these conditions separately from government assistance we will be able to assist with creating a self-sufficient industry. Brad Masi (LNC02-207) worked to create a food system for Northeast Ohio centered on the university farmstead. They focused on using the program to educate future farmers and at risk children. We aim to develop and record the process these food hubs have undergone as a future food hub resource.
GIS is an appropriate way to analyze favorable conditions for food hub establishment for three reasons: the information is connected to a location and is spatially variable; much of the information is either in GIS or is in a form that is easily converted to GIS; and GIS allows us to view the data through maps, tables, and charts giving us multiple ways to view, analyze, and draw conclusions from the data. We believe that the combination of these data and methods will provide the best products for aiding these food and farming systems. Monika Roth (ONE07-074) addressed institutional buyer’s needs by engaging large producers capable of meeting the needs of larger buyers and informing them of institutional buyer’s requirements. We will address this same issue using spatial analysis of smaller producers and institutions to make recommendations for how producers could aggregate and form cooperatives to fill institution’s needs. June House (CNE08-045) constructed a comprehensive database of local agriculture surrounding Rehoboth, MA and utilized GIS to inform local agencies of agriculture in the area. They were unable to perform all of the GIS analysis they proposed due to constraints with time, collaborators, and privacy issues, and suggest that future GIS analysis of producers would make for an interesting and beneficial future research. Grower organizations and government agencies have databases of local agriculture, infrastructure, population demographics, and natural features that we have access to. This allows us to begin and complete spatial analysis using GIS much earlier in the project. In addition, we will be working with one experienced aggregation group and an emerging aggregation group to ensure the GIS information is relevant to producers. These projects lay an excellent foundation for us and our partners to research the local foods industries in the North Central Region and benefit both our producers and consumers. Our project will differ in that we will be working with Market Maker to obtain much of the raw grower demographic data that other projects had to collect on their own. We will also utilize more in depth GIS analysis than other projects were unable to complete.
Outcomes
- List of conditions that favor success of food hubs
- Criteria and process to establish a successful food hub
- Increased knowledge and awareness of these conditions and process among organizing local food groups
- Increased knowledge and awareness of how these conditions vary spatially and how the correct location can affect the success or failure of a proposed food hub
Outputs
- Dissertation
- conference abstracts
- Peer reviewed publications (forthcoming)
Cooperators
Research
To complete these objectives we compiled a comprehensive list of food hubs in the 12 state region (Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin). This list was created using online resources including the United States Department of Agriculture (USDA) working list of food hubs (USDA, 2014), state Buy Fresh Buy Local campaigns (Food Routes Network, 2014), market finder websites such as Market Maker (Market Maker, 2014), and food hubs’ websites and social media accounts found through an online search. From these sources we created a database of food hubs in the region, their contact information, and the type of food hub each represented.
We then developed a 57-question mixed mode survey (Dillman, 2000) to food hubs in the Upper Midwest United States. Questions divided by topic included: five agreement to participate and participant demographics, 15 general operations and business demographics, 15 physical and financial resources, and 26 human and information resources. Questions were also divided into three likert (Likert, 1932), 12 open ended, and 42 multiple choice. The survey was reviewed by a survey professional at Iowa State University and piloted with a group of local food professionals. Their feedback was used to revise the survey before administering it to 91 of the 97 food hubs found through our search. Seventy-nine food hubs were surveyed online, 12 through mail, and six were not surveyed due to insufficient contact information or scale outside the scope of this survey. Surveys were originally emailed on May 22, 2012 using Survey Monkey (Palo Alto, CA) with follow up emails on June 8th and June 19th. Hard copies were mailed to Amish produce auctions May 31st and reminder phone calls were made between June 18th and 22nd. Results were analyzed using SPSS (IBM, Armonk, NY) to conduct one-way ANOVA analyses and calculate descriptive statistics.
Maps and geospatial analysis were completed using ArcGIS (ESRI, Redlands, CA). Locations were mapped using food hub address collected while making the survey frame and the U.S. Census Bureau Geocoded (U.S. Census Bureau, 2014). Administrative boundaries and population were collected from the U.S. Census Bureau. A 25 mile radius was selected for calculating food hub market size based on survey results. We then used one-way ANOVA to identify differences between food hub type and gross profit between different population densities.
We found 97 food hubs in the Upper Midwest United States. Ninety-one food hubs were surveyed, six were removed due to insufficient contact information or for having a scale outside the scope of this survey, and 34 food hubs responded to our survey (37%).
Business Demographics
We classified food hubs operating in the region into 14 types of food hubs filling five market segments (Tables 1 and 2). Comparing the population, to those that responded our survey results are biased toward retail food hubs and those that use technology, meaning Amish food hubs are under represented. Respondents’ descriptions of their businesses (Fig. 1) were close to our estimations considering respondents were allowed to select multiple descriptors. Forty-six responses from 21 respondents exemplify how organizations fall into multiple categories making it difficult to classify food hubs.
Ninety percent of food hubs were for profit organizations mainly operating under corporate (47%) or cooperative (38%) business structures (Fig. 2). The average food hub age after removing one outlier that had been in business over 90 years was 16 .5 years. This was in spite of 54% of food hubs having been in business less than 10 years.
We compared gross revenue and net profit between business types, business structures, and age of business. The only significant difference found was that older food hubs had greater gross revenue (Table 3 and Fig. 3); this was corroborated by 59% of food hubs reporting positive growth of their business. This difference is likely due to two factors 1) less successful food hubs leaving the industry and 2) growth of the remaining food hubs.
Location
Food hubs reported both that the greatest distance that produce travels is over 100 miles (41%) and that average distance to their produce growers is 10-25 miles (36%) (Fig. 4), meaning food hubs responding to this survey are most likely stocking both locally produced food and products from more conventional type supply chains.
Proximity to customers was given as the greatest consideration when selecting a site for facilities (Table 4). The greatest response for average distance to consumer was 10-25 miles and was (41%), the second greatest was less then 10 miles (27%) (Fig. 4). Using this information and information from the census bureau we calculated the potential market size within 25 miles of each food hub (Fig. 5). The population within 25 miles of a food hub ranged from 16,001 to 6,009,297 with a mean population of 974,166 and a median population of 394,705. Counties with food hubs populations ranged from 4,357 to 5194,675. We found no statistical differences between population and gross profit, net revenue, or type of food hub, meaning large populations from which to draw customers may not be important in determining successfulness of a food hub using economic measures, and that no one type of food hub is necessarily found correlated with population density.
Physical Resources
Types and amounts of physical resources used varied greatly. We found a wide variance in the amount of physical resources utilized by food hubs. Refrigerated storage space, non-refrigerated storage space, and retail space all ranged from zero to thousands of square feet (Table 5). Food hubs owned and leased these spaces in equal percent’s (35%) and 17% both owned and leased facilities. Food hubs noted sharing facilities with local organizations such as churches, just one creative solution to reducing start up and operating costs.
Financial Resources
Food hubs use multiple sources of financial capital to fund their establishment and expansion (Fig. 6). Food hubs reported that they required relatively little start up capital, 57% less than $25,000. Most food hubs have expended and were able to fund expansion though company profits, bank loans, cooperative members, and investors. Only three food hubs said they had not expended.
Seventy-two percent of food hubs reported gross sales in the hundreds of thousands or millions and both the average and median gross sales were between $100,000 and $500,000. Nine food hubs reported net revenue of less than $25,000. Food hubs consistently ranked labor as their greatest expense, and some even gave examples of how they overcome this challenge using volunteers. Other notable expenses were equipment and energy (Table 6).
Human Resources
When asked about the types of employment provided, 89% of food hubs indicated they employ full time year round employees, 50% full time seasonal, 75% part time year round, and 46% part time seasonal. The number of each type of employee varied greatly between food hubs (Table 7). These employees fill different rolls within the food hub (Table 8). The only category all food hubs reported having was administrative with a minimum of .25 full time equivalents.
Most food hubs that participated in this survey serve individual households (76%). Other customers reported by at least one third of food hubs include restaurants (57%), retail grocery stores (43%), food distributors (33%), and schools (33%) (Fig. 7). The number of customers varied greatly from 8 to over 50,000 (Table 9).
Food hubs are also developing human and social capital by facilitating communication between participants and providing continuing education opportunities. Food hubs facilitate communication most commonly between individual growers and between growers and consumers (Fig. 8). One food hub specifically works with “disease control issues with the help of university pathologists”. Food hubs are also offering continuing education and training opportunities to their employees and growers (Fig. 9). Other opportunities for employees included food-handling certification, web based learning and workshops, regular team meetings, and “classes on organics, GMO foods, and store merchandizing policy”. Additional opportunities for growers included informal consulting on production practices, software use, packaging, and licensing and compliance with government regulations. One food hub even offered a “comprehensive new farmer incubator program over a 3-4 year course program”.
Information Resources
Food hubs described different procedures for managing quality and quantity of inventory. Three grocers (18.8%) used point of sale software to view the current inventory and the quantity sold last week when purchasing local produce. One grocer also stated that local producers are a convenient source of in-season product when inventory falls short and the next shipment is not expected for several days. Two produce auctions (12.5%) responded that the market determined quantity supplied, demand, and price. Most food hubs reported using computer records to manage inventory or flow of product. Only one food hub used mobile devices, and three used bar codes (Fig. 10). Most food hubs responded that inventory management included the food hub taking ownership and possession of produce, 85.7% and 72.7% respectively (Fig. 11).
Most food hubs indicated that they make requests of producers to standardize product, only one (4.8%) said they had no requirements or guidelines (Fig. 12). In addition to these guidelines, four food hubs (19%) have guidelines for organic or natural production practices. Some food hubs follow these guidelines and requirements through their own facilities. Five food hubs reported having employees certified in Good Handling Practices (GHP) and four reported having GHP certified facilities. GHP is an USDA audit verification program used to verify operators’ efforts to minimize risk of contamination of fruits, vegetables, and nuts by microbial pathogens (USDA, 2013). Six food hubs have certified organic facilities.
Educational & Outreach Activities
Participation Summary:
Duerfeldt, Kevin R. 2014. Values-based supply chains: local and regional food systems in the Upper Midwest United States. Graduate Theses and Dissertations. Paper 14146. http://lib.dr.iastate.edu/etd/14146
Duerfeldt, K., C. Haynes, and J. Bousselot. 2014. Resources required by different types of food hubs. HortScience 49(9).
Project Outcomes
The realization that case studies may be a more applicable way to research local and regional food system intermediaries due to the vague working definition of food hubs and their highly variable nature is important to the literature and future research.
In the future this demographic information will assist with longitudinal studies of how local/regional food systems in the Upper Midwest United States have changed.
Farmer Adoption
Currently few farmers have adopted any of our findings. We would recommend that farmers take an active role in forming and managing food hubs so that farmer perspectives and needs are taken into consideration when determining the goals, values, and operating procedures of food hubs.
Areas needing additional study
In depth case studies of how each food hub operate and more importantly and why need to be created. More importantly we need to know why food hubs formed the way they did and what