Enhancing the long-term sustainability and profitability of small, limited resource farmers in the Black Belt South through marketing research - education

Final Report for LS08-207

Project Type: Research and Education
Funds awarded in 2008: $122,000.00
Projected End Date: 12/31/2011
Region: Southern
State: Alabama
Principal Investigator:
Dr. Tasha Hargrove
Tuskegee University
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Project Information

Abstract:

The overall goal of this project was to explore how the long-term sustainability and profitability of small, limited-resource farmers could be enhanced through collaborative marketing. This study analyzed the marketing potential of small farmers at the local, state, and regional levels. Data was collected through semi-structured interviews, participant observations, and focus groups. In addition, an aggressive outreach plan to increase the marketing potential of small farmers in the Black Belt region was implemented. This project expanded the knowledge base of small farmers and assisted them in making informed decisions regarding the marketing of their products.

Project Objectives:

1. To provide an analysis of the vegetable produce market structure on small, limited resource farmers in the Black Belt region and how this structure influences their sustainability and profitability;

2. To identify existing and potential collaborative marketing opportunities for small, limited resource farmers in the Black Belt region; and

3. To develop and implement an outreach and technical assistance program that will enhance awareness of various marketing opportunities and ultimately enhance the marketing potential of small farmers.

Introduction:

The purpose of this project was to explore how the long-term sustainability and profitability of small, limited-resource farmers in the Black Belt region could be enhanced through marketing research and education. Small, limited-resource farmers in the United States face a number of challenges in sustaining and profiting from their farming businesses. A major challenge that small farmers face is competition from large corporate farms that produce on large scales. Larger producers with greater production and access to capital can invest in new techniques to make their products “market ready”. Small, limited-resource farms generally do not have the production volume needed to utilize advance packing and handling techniques and find it difficult to access mass markets (Bragg, n.d.).

Due to their small scale of production, small, limited-resource farmers are unable to realize the low production and transportation costs that large farmers achieve through large-scale production. In addition, small farmers are often not able to produce crops of uniform quality, which is demanded by higher-paying produce consumers, including supermarkets and food processors. Combined higher costs, relative lower quality levels, and low quantity levels prevent small farmers from effectively competing with large farms. Specifically, non-uniform quality and low quantity do not allow small farmers to negotiate for the higher prices obtained by large farms (Black Belt Family Farm Fruit and Vegetable Marketing Center Business Plan, 2006).

In order for small, limited-resource farmers to survive and thrive, they must develop mechanism to reach larger scale and quality in order to tap into more lucrative markets. The key to reaching a larger-scale and better quality is pooling resources and production with other small farmers in order to compete with larger farmers. Small farmers must also develop nontraditional marketing mechanisms for their products including producing alternative crops, participating in cooperative farming and marketing and engaging in value-added processing (Black Belt Family Farm Fruit and Vegetable Marketing Center Business Plan, 2006). In addition, to competing with larger farmers, small, limited-resource farmers also faces challenges in obtaining access to more profitable markets and they struggle with successfully negotiating and competiting in these markets.

Access to profitable markets is perhaps the single most influential factor in determining the future economic viability of small, limited-resource farmers. Studies have shown that small farm enterprises face difficulties in accessing profitable markets because they lack the capacity to produce the quantity and quality demanded as individual farmers, are unable to meet the requirements of institutional and corporate buyers, and are unable to coordinate their production efforts (Bragg, n.d., Cottingham, Hovland,Lenon, Roper, & Techtmann, 2000; Gregoire &Strohbehn, 2002; Zabawa,Siaway, & Baharanyi, 1990). The long-term prosperity and competitiveness of small farmers is dependent on small farmers working collaboratively, coordinating their marketing efforts, engaging in value-added activities, incorporating specialty enterprises into their farming operation and basing their marketing decisions on reliable, up to date marketing information that targets them. Through cooperative marketing, small, limited-resource farmers can generate substantially greater incomes from their relatively small landholdings than is currently possible for them as individuals. Market research that targets small farm enterprises is needed to assist small farmers in making informed decisions that can strengthen their competitiveness and long-term sustainability.

This research provided marketing research and educational training to small, limited-resource farmers in the Black Belt region of America. The Black Belt is a region in the American South originally named for a soil type conducive for cotton production, but now represents a socio-demographic area known for its low quality of life (Hollingsworth, 1993). The Black Belt region extends north through Virginia and as far west as Louisiana and Arkansas. Historically, this area has sustained itself economically through agriculture. Most of the nation’s Black farmers and Black owned land is located in this region. Farmers in this region need an innovative and nontraditional approach for increasing their farm incomes and enhancing their economic potential. This can be accomplished by working within a regional marketing system that is designed to identify appropriate sale channels, including corporate and institutional buyers, and offer larger quantities and value-added produce than any individual farm family could offer. In order to achieve this, research providing valuable marketing information to assist farmers in making informed decisions needs to be accomplished and shared with targeted farmers. Historically, farmers in this region has had limited access to data of this caliber. This project will provide valuable marketing information that will greatly enhance the target farmer’s marketing potential and close the informational gap.

Cooperators

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  • Arthur Siaway
  • Robert Zabawa

Research

Materials and methods:

Objective 1: For completion of objective one a comprehensive literature review was completed. Research articles from a variety of sources was collected, compiled, and analyzed. The purpose of this comprehensive literature review was to determine what research data existed in the current literature as it pertains to small, limited resource farmers and what gaps existed. Data was collected on the vegetable produce market structure, enhancing the marketing potential of farmers, increasing small farmers’ profitability and, penetrating commercial/wholesale/grocery store markets.

In addition, Michael Porter’s Competitive Force Model was used as a guide in addressing objective one. The five forces competitive force model has been used to examine the attractiveness of an industry structure and to determine a business or firm’s market strategy. The five force model allows a business to identify those strategic innovations that would improve the industry and its own profitability. This model directs business owner’s creativity towards aspects of the industry that are most important to long-run profitability. In essence this evaluates a firm’s strategic position. In the case of this research study, the five forces model was used to evaluate the strategic position of small, limited-resource farmers marketing fruits and vegetables collaboratively in the Black Belt region. The competitive forces analysis is completed by the identification of five competitive forces:
a. Entry of Competitors: (How easy or difficult is it for farmers to market collaboratively in more lucrative markets? What barriers and opportunities exist in the industry? What are the capital/investment requirements? What is their access to distribution channels? What is the likelihood of retaliation from exiting industry players? Who is their competition?)

b. Threat of substitutes (How can our farmers market their products differently? How can their products be substitute from the current product on the market?)

c. Bargaining power of buyers: The buyers in this study were the individuals purchasing fruits and vegetables from our farmers. What are their requirements?

d. Bargaining Power of suppliers: The suppliers are the farmers producers the product. How many are participating in the project. Do many potential suppliers exist? How strong is the position of the supplier?

e. Rivalry among the existing players: This section will examine farmers competing independently as well within marketing cooperatives. It will address questions such as does a strong competition between the existing players exist? Is one player very dominant or are all equal in strength and size?

Objective 2: A comprehensive list of potential produce markets was developed within a 200 miles radius of the Black Belt Family Farm Fruit and Vegetable Marketing and Innovation Center (BBIC) was developed. BBIC is a 18,000 sq ft new marketing facility that is planned for small, limited-resource farmers in the Alabama Black Belt region. Farmers will be able to wash, cool, grade, package, and market their produce in this facility.

The list that was compiled included grocery stores, farmers markets, schools, universities, and military installations. In additions, the point of contacts for each institution was also included. We also included the point of contacts for other organizations that are actively engaged in identifying markets for small farmers such as Market Maker and the Alabama Market Authority. We were able to successfully build a relationship with three major grocery store chains during this project period: (1) Walmart, (2) Whole Foods, and (3) Sodexo.

In addition, data in support of objective two was collected via interviews, focus groups, small group discussions, conference calls, panel discussions, and workshops with buyers that are interested in purchasing from small, limited-resource farmers.

Objective 3: A very aggressive outreach and training program was implemented. The goal of the outreach program was to provide training to small farmers that would enhance their knowledge of potential markets and their abilities to work collaboratively to pursue these markets.

Research results and discussion:

This particular project was focused on enhancing the long-term sustainability and profitability of small, limited resource farmers in the Black Belt South through marketing research and education. We were able to accomplish that by aggressively pursuing nontraditional markets from our small, limited-resource farmers and documenting this process through: (a) interviews with potential buyers and farmers; (b) participant observations, (c) group discussions, (d) focus groups and small group meetings with all major stakeholders. Our major results/ milestones included:

(1) Completing the conceptual drawing for the Black Belt Family Farm Fruit and Vegetable Marketing and Innovation Center. (BBIC) and hosting the ground breaking ceremony in 2011. This center will be an 18,000 square feet facility where farmers will be able to bring their produce in wash, cool, grade, package, and market their produce. This facility will also serve as a research facility for the three land-grant institutions in the State of Alabama. This center came into fruition as a result of a strong collaboration with several farmer cooperatives/association throughout the grant period. We were able to travel to several processing facilities throughout the country and work closely with a team of architects to design the BBIC facility. It is anticipated that the BBIC should be opening in 2012.

(2) We held several workshops and meetings with potential buyers who are were interested in purchasing from farmers in the Alabama Black Belt region. In collaboration with the farmers, a decision was made to participate in the Walmart Heritage Agriculture Program. Our first initial meeting with representatives from Walmart and CH Robinson was held during the winter of 2011. During the summer of 2011, we sold both watermelons and purple hull peas through this program. Nine farmers sold 18 truckload of watermelons during this period and five farmers sold 250 cases of purple hull peas. Each farmer was able to increase their profit level during this period of time, by working collaboratively.

Participation Summary

Educational & Outreach Activities

Participation Summary

Education/outreach description:

During the project period, a myriad of outreach activities were completed. A summary of selected outreach activities is listed below:

1. Successful Marketing Opportunities for Historically Disadvantaged Farmers Conference at Tuskegee University in 2011.

This two day conference attracted over 250 farmers from six different states. The purpose of this conference was to discuss new marketing opportunities for small, limited-resource farmers in the Black Belt region. Three potential markets were targeted: Walmart, Sodexo, and Whole Foods. Special emphasis were placed on the following topics:

(a) Pricing, Grading, Irrigating, Packaging, Transporting Producing for Commercial Markets: Small Farmer, Universities, and CBO Perspectives;

(b) Opportunities and Requirements for Selling Produce to Commercial Markets: Food Industry Perspectives

(c) Minimizing Your Risk on the Farm: Farm Certification, Quality Control, Crop Insurance and Food Safety Issues

2. Tour of the Walmart Distribution Center:

Six farmers, four extension agents, and two researchers were able to tour the Walmart distribution center in Opelika, AL. The purpose of this tour was to provide an opportunity for small farmers in Alabama to observe the distribution phase of selling their produce to a large commercial market. The farmers were able to observe: (1) the trucks delivering produce to the distribution center, (2) unloading the produce, (3) storing the produce, (4) packaging the produce for shipment to the individual grocery stores, (5) labeling the produce for shipment to the individual grocery stores, and (6) the produce being shipped out.

3. California Value-Added Marketing Tour

For this particular grant, our outreach activities were not limited to the classroom or to a conference setting. It was our belief that sometimes learning occurs best in a field environment. We had the greatest impact for one of our outreach activities during an educational tour that occurred in the Spring of 2011. We had the opportunity to sponsor six farmers on a California Value-Added Marketing Tour. The purpose of the tour was to: (1) evaluate how we could penetrate new markets, (2) add value to our existing produce, (3) research existing marketing and processing produce facilities. The farms that we visited included: Chiala Farms, Agriculture and Land-Based Training Association (ALBA) Farms, Phil Foster’s Ranch: Pinnacle Farms, Coke Farms, and Cal Pacific Specialty Foods.
4. 119th Annual Farmers Conference

The 119th Annual Farmers Conference was held at Tuskegee University. This conference provided outreach training to farmers in the areas of marketing, financial management, production, and forestry. The theme for the 119th Farmers Conference was “Best Practices and Cultural Changes in Program Delivery for Underserved Farmers and Rural Communities”.

5. Small Farmers, Universities, Government and the Private Sector: Finding Common Ground Meeting

This meeting was held in Feb 2011. The attendees included representatives from Walmart, CH Robinson, Tuskegee University and small farmers. This meeting was an introduction to the Walmart Agriculture Heritage Project. It also provided an opportunity for CH Robinson to highlight the services that they could offer to small farmers. This meeting set the stage for a successful collaboration between Tuskegee University, Walmart, CH Robinson, and small farmers in the Alabama Black Belt region.

6. SARE Preliminary Project Results & AgDiscovery Presentations
Preliminary project results for this project was presented during the summer of 2011. A summary of the activities that were accomplished and the impact that the project has had on targeted farmers were highlighted. Mrs. Rhonda Benton, Rhema Ranch discussed the impact that this project has had on her farming operation. Mr. John Brown, President, Selma/Dallas County Small Farmers Association also had an opportunity to discuss the role that this project has had on his ability to expand his markets, participate in the Walmart project, and enhance his marketing portfolio.

7. Cultivating Collaborative Marketing Opportunities Conference
Two Cultivating Collaborative Marketing Opportunities and Risk Management Conferences were held. The first conference was held in October 2008 and the second was held in Feb 2010. Each conference provided marketing training to over 200 participants. In February 2010, we distributed, “A Guide to a Successful Marketing Plan for Limited Resource Farmer” to each of the 200 participants. The goal of both conferences was to provide training and informational opportunities that would reduce the business and marketing risk faced by small, limited resource farmers and communities in the Black Belt region. Participants were able to connect with potential buyers and gain the buyers perspective on supperting local farmers.

Some of the publications that were completed included:

1. Anderson, Langston (inprogress). Evaluating the Marketing Potential of Small, Limited- Resource Farmers in the Alabama Black Belt Region. Master Thesis.

2. Baba, A., Jackson, L., Yeobah, D., Hargrove, T. (2009). Expanding Marketing Opportunities for Small Farmers: A Case Study Analysis of the Farm to School (FTS) in Alabama. (Poster presented at Association of Research Directors).

3. Baker, D. and D. Adams (2011). Enhancing Small Farm Income in Alabama Through University Farmers Market: The Case of Tuskegee University ( Student poster)

4. Jackson, L. and T. Hargrove (inprogress). An Analysis of the Farm to School Program in Alabama

5. Smalls, M. (2010). A Case Study of Marketing Strategies Used By Small Farmers in Tuskegee and Montgomery, AL

6. Hargrove, T., Hill, W., and Brown, J. (in progress). A Case Study Analysis of Factors That Impact Small Farmers Participation in Commercial Markets.

7. Hargrove, T., Hill, W., Robinson, M., Brown, J., and England, B. (inprogress). A Case Study Analysis of the Walmart Heritage Program and Its Impact on Small, Limited-Resource Farmers in Alabama.

Project Outcomes

Project outcomes:

This project had the following impact:
1. Enhanced collaboration among small, limited-resource farmers in the Alabama Black Belt Region.

2. Allowed the farmers to collaboratively penetrated two new markets and established connections with Whole Foods and Sodexo.

3. Increased small, limited-resource farmers in the targeted areas understanding of the requirements that are necessary to sell to commercial markets such as Walmart, CH Robinson, and Whole Foods

4. Enhanced small, limited-resource farmers’ knowledge of various valued-added opportunities. We also sponsored a Value-added Tasting Reception in which products from small, limited resource farmers were highlighted.

5. Established a strong relationship and network within the farming community by providing solid, realistic marketing training for small, limit resource farmers that is beneficial and directly related to their individual and cooperative needs

Farmer Adoption

The farmer participating in this project has truly benefited from this project. They have taken advantage of each of the outreach activities and capitalize on each available opportunity. This is evident in their abilities to collaboratively sell their collard greens, watermelons, and purple hull peas to Walmart.

•9 farmers participating in this project were able to collaboratively sell 18 truckloads of watermelons to Walmart Agriculture Heritage Project during summer 2011

•5 farmers participating in this project were able to collaboratively market and sell 250 cases of purple hull peas to Walmart during summer 2011

We have also make connections with Whole Foods and Sodexo. Our plans are to penetrate those markets and to continue to enhance their profits.

Recommendations:

Areas needing additional study

This study was focused on enhancing the long-term sustainability and profitability of small, limited-resource farmers in the Black Belt South. The enhancement of sustainability and profitability can be studied in a variety of different ways. For this particular study, we selected to research it through a comprehensive literature review, interviews with farmers, and participant observations. A myriad of data has been collected; however additional economic analyzes is needed to truly measure profitability. The researchers in this outreach/research study have a long history in working with the targeted clients; however it is extremely difficult to collect financial data from the targeted client.

In addition, assisting additional farmers in becoming certified to sell to commercial and wholesale markets is an area that needs additional attention. Many small farmers also need assistance in forming legal structures within their individual organizations. The farmers do not need a power point presentation describing how to set up a cooperative, but they need assistance in completing the paperwork and setting up a simple financial system. We need to be on the ground working with these farmers and developing the next generation of farmers. Based upon my experience the traditional method of quantitative research for the targeted audience is not the best approach.

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.