Farmers' Markets: A Real Opportunity for Michigan Fruit and Vegetable Growers

Final Report for LNC06-267

Project Type: Research and Education
Funds awarded in 2006: $76,600.00
Projected End Date: 12/31/2009
Region: North Central
State: Michigan
Project Coordinator:
Dr. Jim Bingen
Michigan State University
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Project Information

Summary:

This project identified the constraints on, and opportunities for mid-size Michigan fruit and vegetable growers to become successful farmers market vendors. Data related to management strategies and records on farmers’ costs and returns for each farmers market were collected for one marketing season from fourteen participating farmer-vendors. Given the important differences in farmers’ earnings among markets, another survey focused on the structure and organization, including the sales policies and governance structure, in which the farmers participated was undertaken. These data help to identify the market factors that affect the attractiveness of different markets to different farmers.

Introduction:

Consistent with their growing national popularity, the number of farmers markets in Michigan has more than doubled from 2001 to over 200 in 2009. But almost one-half of the farmer-vendors have farms of 20 acres or less, and farmers market managers consistently report their need to attract more farmer-vendors.

Given this demand for farmer-vendors, this project sought to identify why mid-size Michigan fruit and vegetable growers seemed to staying away from farmers’ markets. The project asked “what it would take to sell successfully in a farmers market” and it sought to identify the “economics” of selling in a farmers market.

Beginning in late 2002 the PI initiated a series of roundtable discussions with organic and small-scale farmers related to their famers’ market experiences. These discussions led to a 2004 survey of farmers’ market vendors. The results of this survey were shared with vendors and market managers in a series of roundtable discussions during the Winter 2005. In turn, these led to several “rapid market assessments” during the 2005 market season. The experience with these assessments in turn created a greater awareness of the need to learn more about the production/marketing practices and strategies of fruit and vegetable vendors. It also highlighted the need for information to help market managers recruit more mid-size farmers into markets and thereby strengthen farmers’ markets.

The literal explosion of farmers markets across the US is now well-documented. First, with the phenomenal increase in the number of farmers’ markets in Michigan, most market managers report a need for more farmer-vendors to meet growing consumer demand. Second, findings from the rapid market assessments confirmed the strong consumer demand for fresh and local produce.

The roundtable discussions with managers and vendors indicate that the growth of farmers’ markets in Michigan contributes in several ways to local economic vitality. Moreover, previous work identified numerous ways which farmers’ markets were creating their own, and creative, food re-distribution programs, as well as helping to revitalize community and neighborhood life through a wide range of musical and “food events” and festivals, promotions by local community groups, and numerous adult and youth volunteer opportunities.
A handful of studies have documented the contribution of farmers markets to local or regional economic development (see Lev and Stephenson, 1998; Hilchey, 1995; and Otto, et. al. 2005).

Some previous SARE-funded projects confirmed the need for research that offers farmers opportunities to consider alternative marketing strategies. Of particular importance, one comparative study found that the ways in which farmers’ markets helped to incubate farm businesses varied significantly by the size of the farm operation (Feenstra et al. 2003). In part this confirms the need for market managers to orient their recruitment and retention strategies to the business orientation and needs of different size vendors. The findings of these and similar studies also confirmed the heed to identify all of the costs associated with selling in a farmers market as a basis for attracting new farmer-vendors.

Project Objectives:

As presented in the project proposal, this project sought to achieve the following objectives:
Short-term:
• Develop easily accessible marketing and farm management strategy information, and,
• Offer information-gathering opportunities for mid-size fruit and vegetable farmers to learn about, and use to develop their own more diversified marketing strategies that include farmers’ markets.
• Offer farmers’ market boards and managers information that would help them establish farmers’ market policies and procedures to attract more mid-size fruit and vegetable growers as vendors.

Intermediate:
• Find that more mid-size fruit and vegetable growers will participate as vendors in Michigan farmers’ markets.
• Offer more information about making farmers’ markets a successful marketing strategy by means of a “how-to” manual that could also be used to support agricultural entrepreneurial training.
Long-term: As more mid-size fruit and vegetable growers are attracted to, and selling in farmers’ markets, it was expected to identify the ways in which:
• these markets would become one way for these farmers to remain in business;
• farmers’ markets could find it easier to attract more Michigan farmer-vendors; and,
• consumers would have more opportunities to purchase fresh and local fruit and vegetables.

An additional objective was approved during an extension of the project: to identify and understand the differences in how markets are organized and operate with respect to farmer involvement in market governance; and, to identify specific measures taken by markets to recruit and retain farmers as vendors.

Cooperators

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  • Jim Bingen

Research

Materials and methods:

The approach followed the principles of “cooperative inquiry” in which all those involved in the research are both co-researchers – generating ideas about the focus, design and management, and conclusions – and also co-subjects in the sense of participating with awareness in the activity that is being researched. This built upon the responsive and collaborative relationships established to support and improve Michigan farmers’ markets since 2003. Two simple principles guided this approach: 1) designing applied research methods that responded directly to manager and vendor ideas and concerns; and, 2) sharing the results through roundtables and meetings in order to promote open conversations and thereby generate additional learning, insights and ideas for continued supportive research.

Consistent with these principles, during the first three months of the project, two separate presentations/discussions of the project and the conditions for participation were held. Seventeen farmer-vendors expressed an interest in participating. These meetings offered the opportunity to: 1) describe the project need and the short-term objectives; 2) present a description of data to be collected: farm case studies; costs & sales per market; farmers market profiles; and an identification of each participant’s views of market issues and their marketing concerns; and 3) discuss the project approach including issues such as confidentiality, respect for each participant’s time, the options for collecting cost data, and the organization of the process for collecting data.

Based on these meetings, farm visits and early market visits were scheduled. Each farm visit was used to prepare a short description of the farm; learn about each farmer’s farming and marketing history; discuss each farm’s current production-marketing strategy and practices; and discuss the farmer’s outlook on the farm’s future as well as acquire any marketing advice for others. Farm photos were taken. Over 30 market visits were made during the market season of the first project year. In addition to noting observations, photos of the participating farmer’s stand and the market were taken. (Two farmers sold in 5 markets, one in 4 markets, and, four in 3 markets; the others sold either in 1 or 2 markets.

Throughout this period, gross sales per market were collected weekly. Following the market season, cost data continued to be collected and discussions with farmers helped to clarify outstanding questions related to the data.

These conversations identified the need to document key differences among markets with respect to the type of organization, level of farmer involvement in market governance and specific measures taken by markets to recruit and retain farmers in the market. In collaboration with the Michigan Farmers Market Association, MIFMA, structured interviews with the managers of 64 markets were undertaken. The interviews/discussions with these managers focused on: market structure; management practices; and farmer-vendors, and customers. These interviews were generally conducted by telephone, although some market managers emailed or mailed their responses. Phone interviews were transcribed during the interview. Interview transcripts were uploaded and analyzed with Nvivo, a qualitative analysis program. (The survey instrument for these follow-up conversations is available from the principal investigator. In addition, the market managers shared their market guidelines or rules, and in some cases market mission statement. These were also analyzed for themes with Nvivo..

Research results and discussion:

Selling in Farmers Markets – Cost and Returns
Preliminary reports on the market net returns (reported market sales minus fixed and variable costs), the effective family hourly rate, and the sales pattern by market were prepared and shared with each participating farmer-vendor. Farmers reported that the sales data by market over the season were quite helpful in at least two ways. First, these data allowed farmers to review and/reconsider their continued participation in different markets. Second, some farmers decided to adapt our costs and returns accounting to set-up their own accounting system to track (for the first time) the costs and returns associated with each of their markets.

However, family-related exigencies, critical health issues, and some unexpected changes in the availability of student assistance delayed further and more detailed analysis of the data during the life of the project.

Michigan Farmers Markets
Looking at markets by size (micro, small, medium, and large) was found to be a useful way for analyzing the management structure of the markets in this study. Examining markets by size and the management tools that managers employ, offers one indicator of market sustainability and a basis for recommendations for markets that are struggling or at critical growth periods.

More specifically, it appears that smaller, but growing markets could benefit from adding selected market management tools such as market guidelines. These include: a mission statement, bylaws, and a board of directors. In some cases, that “growing markets” find it useful to move from volunteer to a paid manager.

In this study there were 32 new markets in their first through fourth seasons. There were 17 relatively established markets in their fifth through tenth seasons.There were 15 established markets. The high numbers of new farmers market in Michigan suggest that this is a critical time.

Twenty-five percent of the micro markets paid a manager; 72 percent of small markets paid a manager; and 90 percent of medium and large markets paid a manager. Markets that are small may charge low fees, and their small size can make it difficult to generate enough revenue to pay a manager after meeting other market expenses. Nevertheless, nearly three quarters of the small markets in the study have the funds to pay a manager.

Market managers employ a variety of management tools, including: a board of directors; bylaws; a strategic system for laying out market vendors and/or a map; a mission statement; market rules or guidelines; a committee with farmer-vendors; additional employees; and a paid market manager. The most common market management tools used by the markets in this study include: a mapping system; market guidelines; and paying a market manager. About one half of the markets had a board of directors; a mission statement; and market employees in addition to the market manager. Less than one-half had bylaws and a committee with farmer-vendors.

Market managers indicated if their markets had space to add more vendors or in general room to expand and grow. The four “micro” markets all desired to grow. Sixty-two percent of the “small” markets had space to add vendors. Nearly 60 percent of medium markets and 50 percent of large markets also had room to grow.

Slightly more than one third of the markets were sponsored by nonprofits or community organizations and one third were sponsored by the Downtown Development Authority (DDA) or the Chamber of Commerce. Another 23 percent were sponsored by local governments. The remaining eight percent were sponsored in other ways including MSU Extension, a co-op, a hospital, and a corporation.

Farmer-vendors are at the core of the overall study, so market managers were asked how they make the farmer-vendors more successful within the market. Managers were also asked if they highlight or promote individual farmer-vendors. Most market managers believe that advertising—of the market, of all vendors, of individual vendors or of their products—is the way they are making their vendors successful.

Closely related to the primary objective of this research, market managers were asked if they collected sales information from vendors, and how they doing this. Conversations with vendors indicated that sales information can be useful in their decision to open in a market. Such information can be useful when a market applies for grants or EBT (Electronic Benefits Transfer) for SNAP (Supplemental Nutrition Assistance Program, or Food Stamps). Less than 20 percent of the markets collected vendor sales information. At the same time, many market managers reported that while this information would be of interest, they were unsure how to collect it, especially since they felt that most vendors would not reveal their market sales data.

References
Feenstra, Gail W., Christopher C. Lewis, C. Clare Hinrichs, Jr. Gilbert W. Gillespie, and Duncan Hilchey. 2003. “Entrepreneurial Outcomes and Enterprise Size in US Retail Farmers’ Markets.” American Journal of Alternative Agriculture 18:46-55.
Hilchey, Duncan, Thomas Lyson, and Jr. Gilbert W. Gillespie. 1995. “Farmers’ Markets and Rural Economic Development. Entrepreneurship, Business Incubation, and Job Creation in the Northeast.” Farming Alternatives Program, Department of Rural Sociology, Cornell University, Ithaca, NY.
Lev, Larry and Garry Stephenson. 1998. “Analyzing Three Farmers’ Markets in Corvallis and Albany, Oregon.” Oregon State University Extension Service, Small Farms Working Group, Corvallis, OR
Otto, Daniel. 2005. “Consumers, Vendors, and the Economic Importance of Iowa Farmers’ Markets: An Economic Impact Survey Analysis.” Iowa State University, Ames, IA.

Research conclusions:

Even though a more specific analysis of farmer costs and returns was not possible during the life of the project (for reasons related to the health condition of the principal investigator), preliminary discussions with participating vendors indicated that the project activities did contribute to the improved record keeping on the part of some farmers. More specifically, the summary data reports lead some farmers to re-evaluate the reasons for participating in numerous markets. Finally, as a member of the Board of the national Farmers Market Coalition, the project investigator shared the approach used in this project and some of the preliminary findings with other FMC Board members. The experience gained in this project is being used in a nationwide discussion of the continued growth in demand for farmer-vendors in farmers markets.

Economic Analysis

Unfortunately, for the reasons give above, the more detailed analysis of each farmer’s costs and returns was not possible. This will be done following the formal completion of the project.

Farmer Adoption

If is of some importance that based on their participation in this project, several farmers (including many friends of many project participants) began more systematic accounting of the costs associated with their participation in different farmers markets. In addition, as a result of this work, and in collaboration with the Michigan Farmers Market Association, there is a more open discussion among farmer-vendors and market managers about a wide range of issues related to market operations and thinking about the market as a business for farmers.

Participation Summary

Educational & Outreach Activities

Participation Summary

Education/outreach description:

There where no publications produced during the life of the project.

Project Outcomes

Recommendations:

Areas needing additional study

Without question, the key question that stimulated this study – are farmers markets profitable for farmers – remains open.

Second, it continues to be important to understand more about the broader, or community-wide benefits of farmers markets. What contributions do they make to small community (urban and rural) and to regional and rural development?
Finally, it continues to be important to improve our understanding of market governance and administration. What role do farmer committees play in market governance? Similarly, what is the contribution of different forms of market management to market “success” or sustainability?

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.