Commercial Small-Scale Food Processing in New York: Value-Adding For Sustainable Agriculture

Final Report for LNE95-060

Project Type: Research and Education
Funds awarded in 1995: $63,881.00
Projected End Date: 12/31/1999
Matching Non-Federal Funds: $15,734.00
Region: Northeast
State: New York
Project Leader:
Gilbert Gillespie
Cornell Univ., Dept of Rural Sociology, Farming Alt. Program
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Project Information

Summary:

The “Commercial Small-Scale Food Processing in New York� project supported ecologically and socially sustainable agriculture by fostering improved economic sustainability for farming households through on-farm value-adding enterprises and better marketing opportunities. The main project components were (1) building an advisory group of small-scale processors; (2) surveying small scale food processors to assess their problems and opportunities; (3) organizing a conference for current and potential small-scale processors for sharing survey results, providing information to processors, and networking among processors; (4) generating policy recommendations for promoting small-scale processing based on the survey and the conference; and (5) organizing an association of small-scale processors.

The project evolved out of collaboration between the New York Sustainable Agriculture Working Group (NYSAWG) and the Cornell Farming Alternatives Program (FAP). Working together, we came to understand that producing ordinary raw agricultural products for regular markets would be a successful strategy mostly for the largest farms because of narrow profit margins. Additionally, tendencies of large processors to buy from large farms did not bode well for the economic sustainability of smaller farms and the rural communities they support. Therefore, we concluded thatincreasing on-farm economic efficiency would be insufficient to maintain farms and communities in the Northeast under a global food system. Moreover, mass-marketed products were not always serving consumers well. Also, some producers of specialty products, including small-scale food processors, were thriving. These realizations led FAP and NYSAWG to seek both the NYS Food Venture Center’s food processing expertise and the New York State Department of Agriculture and Markets’s Direct Marketing Division’s marketing expertise for this project.

Our survey of small-scale food processors showed that government food safety regulation was a serious problem only in some product sectors and that local zoning was overall a more serious problem. Our conference drew more than 235 people who participated in workshops on marketing, processing technical information, and business management. These workshops emphasized successful processors’ experiences with technical experts present to provide support. Through our survey, conference, and site visits we learned that acquiring technical information, getting equipment and supplies at reasonable prices, and developing markets were among the main barriers for processors. Based on interest expressed by conference participants, a working group of volunteers from the conference discussed different ways of serving the needs of small-scale processors and began working to form a statewide organization with regional chapters. These chapters will promote networking among processors and build on regional identities already established for promoting tourism within the state. We now have six regional chapters, an organizing meeting scheduled for the seventh, and contact persons for the three remaining regions. We have developed policy recommendations, assisted food processing incubators, and are working to create a mentoring program in which new entrants into processing would be paired with experienced processors. We have collaborated with the Pennsylvania Association for Sustainable Agriculture in workshops and developing information that will aid current and prospective processors.

Project Objectives:

Research:

1a. Establish a database to track farmers and other entrepreneurs starting and operating small-scale food processing businesses in NY. (FAP)

2a. Develop a classification (typology) of small-scale food processing businesses according to farm-based vs. non-farm-based, different information and assistance needs, income or sales classes, and types of products. (FAP)

3a. Identify the keys to success in small-scale food processing and discern the technical, regulatory, and other barriers. (FAP)

4a. Develop a series of case studies of processors, illustrating how and why they got into business, their successes and failures, their business goals and the barriers they are experiencing. (FAP)

5a. Assess the need for and the interest in a trade association in New York or the Northeast specifically for small-scale processors. Such an organization could provide an issues forum, a newsletter, a products directory, educational programs, and represent members’ interests to government. (NYSAWG)

6a. Develop strategies that communities can use to promote local development through small-scale food processing. (Shared)

Applied:

1b. Organize a statewide conference for small-scale food processors to meet with food scientists, policy makers, and regulators to discuss issues and concerns and to share information with each other. (NYSAWG)

2b. Develop policy and regulatory recommendations for both state and local agencies (e.g., County Departments of Health, New York State Dept. of Agriculture and Markets, USDA, and the Dept. of Environmental Conservation). (NYSAWG)

3b. Facilitate the establishment of either a statewide or a Northeast regional small-scale food processors’ trade association (if research shows this is justified). (NYSAWG)

Cooperators

Click linked name(s) to expand
  • Alison Clarke

Research

Materials and methods:

The site of this study is New York State. The current situation in the state and region provides a context with both many needs in farms and communities and many opportunities for small scale food processing to address these needs. On one hand, New York State has a very high rate of farm loss, losing nearly one-quarter of its farms between 1982 and 1992. Similarly, it has had a high rate of decline in acres in farmland. The state has dropped from 12th to 25th in gross agricultural sales since 1950. New York’s share of capacity for value-added processing has declined over the last 20 years. About 80 percent of the food consumed in the state is imported from other regions of the country and from other countries and, at the same time, farmers’ share of consumer food dollars is small. Loss of farms, lack of farm prosperity, and the changing patterns of agriculture has weakened many rural communities economically and socially. On the other hand, New York farmers are in close proximity to vast markets serving the 53 million people in the Northeast. These people have diverse tastes and interests that are not all served well by mass markets. Serving these markets effectively could generate very substantial new revenues for New York’s farm, agribusiness, and food processing sectors. The farm population of the state contains a wealth of innovative potential, with approximately one farm household out of six now finding creative ways to market and to add value to their products, often through reestablishing the links between consumers and producers that have been lost in the mainstream of our food system. Statewide in the last ten years, more than 40 groups have been organized to strengthen local agriculture through agriculture development. The non-farming public is increasingly appreciative of the value of a robust agriculture for the viability of their local communities and for preserving green space and wildlife habitat. Small-scale food processing enterprises on farms and in communities that use agricultural products produced in the state are potentially key elements for increasing the viability of agriculture.

Research results and discussion:

Findings and Accomplishments

1a. We used a variety of sources (including lists for food processing license holders, agency contact lists, and organizational membership lists) to construct a database of more than 5,000 farmers and other entrepreneurs starting or operating small-scale food processing businesses in NY. We used this database to select a random sample of small-scale processors stratified by 18 product types [see note 1] and for mailing information about our conference on small-scale food processing.

2a. Because small-scale food processors produce a wide range of products under diverse situations, developing a meaningful and useful classification of small-scale food processing businesses proved to be difficult. We grouped processors by product category, production site (home, farm, nonfarm plant), and whether certified organic or not.

3a. Through our survey of small-scale processors, our conference for small-scale processors, and site visits, we have identified some keys to success in small-scale food processing, including ability to work well with regulators and technical experts to produce high quality and safe products. Although we initially expected regulatory requirements and food safety inspectors to be the major barriers for small-scale processors, these proved to be serious barriers only in a few cases. Moreover, strict regulatory requirements actually contributed to some processors’ success. Affording advertising, finding technical information, getting equipment and supplies at reasonable prices, and developing markets were among the main barriers identified by processors and potential processors.

4a. We have developed case studies of several processors and food processing incubators (FPIs). FPIs, which support small processors, are proliferating throughout the U.S. These are published in a publication, “Value-Adding for Sustainability: A Guidebook for Cooperative Extension Agents and Other Agricultural Specialists�(see attachments).

5a. At the “Making it in the Northeast: Small-Scale Food Processing on the Rise� conference (see 1b below and attachments), the sentiment of more than 90 percent of the participants was for pursuing some type of collaboration, such as forming a trade association specifically for small-scale processors in New York.

6a. The concept of community agriculture development (CAD) is being developed as one strategy that communities can use to promote local development through small-scale food processing. CAD focuses on the links between agricultural producers and communities, including more direct connections between farmers, processors, and consumers. CAD includes small-scale food processing enterprises, community supported agriculture farms (CSA), farmers’ markets, direct marketing enterprises, food processing incubators, new generation cooperatives (e.g., farmer-owned processing co-ops), and flexible networks (e.g., the Worker Ownership Resource Center). Food processing is important for CAD because of its potential for value-adding on the farm and because its multiplier for economic benefits for communities tends to be high.

[Note 1: These product categories are: baked goods, ciders, condiments, dairy, fermented beverages, fish, fruit, grain, honey, juices, maple, meats, slaughter houses, spices and salts, vegetable, multiple, and miscellaneous.]

Applied:

1b. NYSAWG, with the support of other project participants, organized a conference for small-scale food processors to meet with food scientists, policy makers, and regulators to discuss issues and concerns and to share information with each other. “The Making it in the Northeast: Small-Scale Food Processing on the Rise� conference, held January 21, 1997 at Syracuse, NY, attracted more than 235 participants on a cold and snowy day. Most of the participants were processors or potential processors from New York State. Other participants were extension agents, government personnel, small business development organization staff and processors from several other states.

2b. We have prepared a set of policy and regulatory recommendations for federal, state, and local governments (e.g., County Departments of Health, New York State Dept. of Agriculture and Markets, USDA, and the Department of Environmental Conservation). These recommendations are discussed below in subsection B of section 5, “Farmer Adoption and Direct Impact.� Project collaborators continue to work in the policy arena to further our goals of (1) promoting locally processed products to institutions and consumers; (2) eliminating barriers to and promoting opportunities for marketing regional products; and (3) working with regulators, experts, and processors to fine-tune food safety regulations so that small-scale processors are not unduly burdened while ensuring safe, high-quality products. Except for certain USDA-mandated “hazard analysis at critical control points� requirements for small meat processing facilities, however, we have discovered much less need for food safety regulatory reform than we had anticipated.

3b. Based on support for continued collaborative efforts from the “Making It in the Northeast� conference and the ideas generated at the conference, we formed a working group of processors. Subsequent meetings of this committee led to the idea of forming an association with regional chapters, each representing one tourist region of New York State and capitalizing on the already established identity of that region. We currently have six regional chapters initiated and contacts for four additional regional chapters. [See note 2.] Work on this objective will continue after the project ends because we think the model can be extended to other Northeastern states as it has in Pennsylvania where we have collaborated with the Pennsylvania Association for Sustainable Agriculture (PASA).

[Note 2: Current chapters are: 1000 Islands/St. Lawrence River Valley, Adirondacks, Capital/Saratoga, Catskills, Central Leatherstocking, and Finger Lakes. The organizing meeting for the Niagara/Chautauqua/Alleghany region is scheduled for January 1999. Contact persons are established for the Hudson Valley, Long Island, and New York City regions.]

Participation Summary

Education

Educational approach:

The main avenue for disseminating the findings of the survey to date has been “The Making it in the Northeast: Small-Scale Food Processing on the Rise� conference, held January 21, 1997 at Syracuse, NY. The goals of this conference were to bring processors and potential processors together to network, share information, and learn something about the results of our survey. We devised a conference format that grouped processors by experience level and offered them a series of workshops on business management, technical topics, and marketing. Two successful and experienced processors opened each workshop discussing a topic important to their enterprises and then the session was opened up to discussion. The moderators encouraged audience participants to share their experiences. We also had people with relevant expertise to the workshop topic in the audience to help with technical questions. We have also presented results at the meetings for organizing the regional chapters and at other fora.

As a spin-off of the project, NYSAWG is developing a mentoring program for pairing entrants into small-scale processing with successful, experienced processors. It continues to seek resources for this initiative.

We have collaborated with PASA on developing resources to help potential processors and participated for two years in workshops at their annual meeting. We presented a workshop for current and potential processors to about 60 people at the 1997 PASA Farming for the Future Conference, “Cooperating for a Change� at Penn State University in February of 1997, in collaboration with small-scale food processors from Pennsylvania. We also presented a “training the trainer� workshop for extension field staff and other agricultural professionals at the PASA Conference in February of 1998. This workshop focused on effectively supporting small-scale food processing. Finally, we used data from our survey in another SARE-funded project to both outline our publication, “Adding Value for Sustainability,� and to suggest key issues on which to focus.

Applied Publication

Markley, Kristen, and Duncan Hilchey. 1998. Adding Value for Sustainability: A Guidebook for Extension Agents and Other Agricultural Professionals. Ithaca, NY: Cornell University Farming Alternatives Program.

Project Outcomes

Impacts of Results/Outcomes

Facilitating small-scale food processing on farms and in communities has substantial potential for positive economic, social, and environmental impacts. In the context of low returns to producing common raw agricultural products, small-scale processing on the farm has the potential to increase the incomes of farming households by using labor and farm resources to add value to agricultural products. Small-scale processing by non-farming entrepreneurs also potentially benefits local farms by providing marketing opportunities for fresh products and other specialty products needed by the processors. Small-scale processing enterprises provide job opportunities to farm households and other households in communities. These jobs provide not only monetary income to the holders; but they also help to generate self-esteem and a sense of being important to a community. The multiplier effect of small scale food processing enterprises varies across product categories, but tends to be high compared to other types of businesses (e.g., dairy processing has a multiplier of about 3.5), so the economic benefits to communities can far exceed the gross and net incomes of the processing businesses themselves. This economic activity may be very important to rural communities seeking to maintain viable commercial centers. The opportunities generated by small-scale processing may have positive environmental effects as well to the extent to which it helps to keep land in farming and out of residential development. Additionally, many products produced by small-scale food processing enterprises appeal to consumers who are concerned about environmental issues and, therefore, give farmers and processors incentives to use ecologically-sound practices.

Farmer Adoption

Changes in Practice

We are seeing a variety of indicators of changes in practice. We have had many contacts from people interested in small-scale food processing in New York. The Pennsylvania Association for Sustainable Agriculture’s (PASA’s) annual Farming for the Future conference included a four-hour workshop on the topic in 1997 and another workshop in 1998. The Cornell Farming Alternatives Program and PASA collaborated on a manual for small-scale food processing. As described previously, we have agricultural producers and other processors working to organize a small-scale processing association in New York, organized around regional chapters, each with its own marketing identity. We also expect that developing these regional marketing identities and instituting cooperative purchases (of, for example, liability insurance or supplies) through the small-scale processors association will make small-scale processing more profitable and, therefore, more attractive. Staff of the NYS Department of Agriculture and Markets who participated in our 1997 conference were impressed enough by the small-scale food processed products displayed there to devote a substantial part of its 1997 and 1998 New York State Fair display to New-York-processed foods, including many by small processors. We expect increasing adoption of small-scale food processing as potential lenders (e.g., banks) and small business advisors (e.g., Small Business Development Center staff) become better informed about small-scale food processing. Though we cannot attribute all these changes to our project, this and the interest in our conference, show that small-scale food processing is an idea whose time has come. In addition, we worked with community organizations across the state that were interested in establishing food processing incubators and willing to invest their effort and resources. Four of these have been established in the state since this project began. As a result, more small-scale food processors will be getting the technical assistance they need to succeed and more will be operating legally, producing products in licensed kitchens.

Operational Recommendations

Since we began working on this project, we have learned much about small-scale food processing and what makes such enterprises successful. The successful entrepreneurs often are those who develop attractive and unique products, devote much attention to detail in producing consistently high quality products, creatively market these products, correctly assess potential markets, have sound business plans, and have good matches between their own characteristics and their businesses. Achieving all of these ingredients for success will challenge most potential and operating small-scale food processors. We, therefore, have identified eight key types of assistance needed by processors:

• Processing technical support for developing procedures for processing high quality, safe foods.
• Regulatory technical support to help them get the needed permits and to comply with regulations.
• Facilities technical support to assist them in finding, installing, operating, and maintaining processing equipment.
• Assistance in finding sources of new or used equipment appropriate for their scale at prices realistic for small and startup enterprises.
• Marketing technical support for developing markets, selling their products at a good price, and creating distinctive and attractive product identities through packaging and advertising.
• Financial support for funding startup, expansion, or modernization, either in loans or in assistance in getting funds from commercial sources.
• Labor technical support, including assistance in managing business and family life and in managing and motivating employees.
• Business support, including assistance on operating a business, getting liability insurance, trademarking, maintaining financial records, and meeting tax and labor regulatory requirements.

To meet the identified needs of small-scale food processors and to better harness the potential small-scale food processing in supporting agriculture in the Northeast, we have developed a set of policy recommendations for local, state, and the federal governments. None of these by itself would substantially advance small-scale food processing, but implementing a variety of these could yield great benefits. The first three were selected as the top priorities at two policy sessions at the Just Food Conference in New York City in November 1998.

• At the state level, hire additional staff in the state department of agriculture (e.g., NYS Department of Agriculture and Markets) to provide marketing assistance to farmers with value-adding enterprises and to document the benefits of small scale food processing, including number of jobs created, opportunities for additional jobs, and economic benefits to communities. Marketing assistance could also include helping to dispel any myths about any inferiority of local produce compared to that from western or southern states.

• At the state level, provide sufficient funds to enable technical support organizations like the NYS Food Venture Center and the New York Extension Enology Program and Vineyard Laboratory to more effectively market their capabilities to startup and potential food processing entrepreneurs and to make many basic services available at low cost. Ideally this would involve creating regional service centers to minimize the distance processors would have to travel to obtain these services. Existing shared-use kitchen incubators would be logical regional service centers. States might also collaborate in extending the ranges of existing core technical support centers.

• At the state or local level, provide both financial support in the form of grants or loans for incubator commercial kitchens and technical support for them. To be effective these kitchens need to be both in or near the communities in which the processors they serve are located and led by processors so that they effectively serve processors’ needs.

• At the federal, state, or local levels, provide initial startup funds for revolving loan funds or guarantees for credit unions like Alternatives Federal Credit Union (Ithaca, New York) to create revolving loan funds for starting and expanding small food enterprises. This support needs to be timely and tailored to processors’ needs.

• At the state level, create a state wide liability insurance pool for small processors similar to those for automobile drivers who are commercially uninsurable. This should be coupled with technical assistance support to make the risk low and the premiums affordable. It could be administered by the Small-Scale Food Processors Association.

• At the state and federal levels, provide incentive packages for technical support organizations like the NYS Food Venture Center and Small Business Development Centers (SBDCs) to collaborate in providing integrated packages of technical and business support.

• At the state level, provide additional incentive funds to state and in-state regional tourism bureaus to promote local agriculture and food processing as part of tourism development.

• At the state and federal levels, provide funding for research on scale appropriate marketing and technical topics pertinent to small-scale food processing businesses.

• At the state level, support state-wide and regional food labeling and identities with policies that avoid excessive bureaucratic interference. Such policies would include standards on who could display logos and other aspects of these food- and region-related identities on their products.

• At all levels of government, explicitly include small scale food processing in sustainable economic development programs and emphasize implementing programs that promote small-scale food processing.

• At the state level, create and implement incentive programs for small-scale processing and in-state-produced products by requiring public institutions to purchase from in-state suppliers if they are within a certain percentage of the lowest bid.

• At the state level, fund a state agency (e.g., the New York State Department of Agriculture & Markets) to publish an annual directory of small scale food processors (including information about how to be listed in the next directory in every copy) and maintain an Internet web site to provide current information (may be critical for new businesses). At the federal level, the USDA could serve as a clearinghouse for such information.

• At the federal level, create new intellectual and other property institutions that would provide small businesses with more protection against the appropriation of their ideas and products by large firms. This would help to prevent innovative small scale processors from becoming no cost product development labs for large firms. Such institutions would need scale and geographic allowances so that small processors would not be bogged down with “patent” type searches that would greatly inhibit new entrants and new products.

• At the state or federal levels, create a grant program, patterned after the SARE farmer grants, to provide support for innovators who are interested in doing the kinds of things that others could also do in their communities. This would socialize private costs to individuals and small firms in developing products and processes that may become public goods, since preventing others from appropriating these may be both difficult and socially undesirable.

• Create a national or state health insurance system that would make medical insurance for family and employees of small businesses affordable. This would enable more part-time processors to leave off-farm and out-of-processing-business employment and focus on developing their businesses without the great expense of medical insurance or facing the risks of going without.

Although we make many recommendations about what should be done to promote small-scale food processing, we also have considered what should be avoided and, therefore, make the following recommendations:

• In developing policies and implementing them, we need particular efforts to avoid promoting wholesale adoption of a few particular types of enterprises (e.g., making holiday wreaths) that can lead to overproduction and subsequent severe decline in profitability among the producing firms. The products produced should reflect the skills and interests of the producers and the local ecological and historical niches of the producers’ communities.

• We should avoid focusing on economic efficiency as the main criterion for evaluating local entrepreneurial efforts because most products could be produced elsewhere more cheaply. Producing them elsewhere, however, will not yield for the local community a host of benefits, including giving people access to local specialties, involving local citizens in meaningful work that integrates them into their communities and gives them stakes in their communities, and generating secondary economic activity for supporting other businesses.

Producer Involvement

Approximately 150 growers/producers attended the “Making It in the Northeast� conference, approximately another 40 at the PASA workshop, and another 50 attended the regional meetings for organizing the Small-Scale Processors Association regional chapters. Non-farming processors also attended these events, but are not included in these estimates.

Areas needing additional study

In contrast to our initial hypothesis that regulation would make operating a small-scale food processing enterprise difficult, we now hypothesize that positive, helpful regulation is important for successful food processing businesses, that is, those that produce high quality and safe products. We also hypothesize that developing local and regional direct identities may be more important to success than state-wide marketing campaigns in a large and diverse state like New York (in contrast to smaller and more homogeneous states like Vermont). These hypotheses require further research.

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.