Traceability in Specialty Crop Production and Supply Chains: Distilling a Research and Extension Agenda

Final Report for LS10-236

Project Type: Research and Education
Funds awarded in 2010: $33,000.00
Projected End Date: 12/31/2012
Region: Southern
State: Texas
Principal Investigator:
Kathryn Boys
Virginia Tech
Co-Investigators:
Kathryn Boys
Clemson University
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Project Information

Abstract:

Despite significant public interest in “local” food procurement, logistic and food safety considerations and constraints limit the ability of small and medium scale (SMS) specialty crops producers to serve as direct suppliers to institutional foodservices (schools, hospitals etc.). General barriers to this marketing channel, and those specifically related to proposed traceability requirements, were explored. Recommendations regarding implementing traceability programs both in SMS diversified specialty crops operations, and institutional foodservice operations, were collected and refined. In addition, several important recommendations for future research and extension initiatives were identified; these will be pursued through future initiatives.

Project Objectives:

The objectives of this study are:
1. To examine and document the relevant issues, research questions and extension needs of small-medium scale (SMS) specialty crop producers with regard to traceability practices;
2. To examine and document the relevant issues, research questions and information needs of institutional food purchasers to document traceability throughout food-service;
3. To assess the extent to which there exist similarities and/or conflict between the traceability information and logistic needs of small-medium scale producers, and institutional food providers;
4. To collect, document, and integrate suggestions regarding best-practices for traceability in the operations of small-medium scale specialty crop producers and institutional food services.

Introduction:

The centralized nature of the US food production, processing, and distribution system effectively excludes specialty crop producers, particularly those with small-scale operations, from serving as suppliers to institutional food service operations (schools, acute care facilities etc.). Due to age, economic, and/or health status, it is often the clients of these food services who would most benefit from an increase in their consumption of specialty crops. Institutions, however, are often limited in their resources and lack the market-based incentives to incorporate these foods into their menu planning.

Legislation in the FDA Food Safety Modernization Act (FSMA, 2011) further complicate this marketing channel. Provisions in this law (Public Law 111-353) institute food traceability requirements so that sources of tainted foods can be more easily identified. This law, however will not be uniformly applied. The Tester-Hagan Amendment exempts small and medium-sized farms (those with 3-year average annual gross sales under $500,000) who sell more than half of their output directly to consumers, restaurants, or retailers within a 275 mile radius, from this legislation. These exempted farms will instead continue to be regulated at the state and local level.

Even with this exemption, however, this does not mean that these small and medium sized operators could still not be required to implement traceability programs. Although it is unlikely that it would be successfully instituted, it is possible that individual states and/or localities could require some form of traceability. Further, and more likely, is the potential for traceability requirements to be imposed by individual produce buyers. Firms operating at all points along the produce marketing channel may potentially be liable in food safety incidents. Regardless of federal legislation then, it would be quite reasonable for food wholesalers or institutional food services to require the same food safety practice standards of all of their suppliers. As such in the future implementing traceability practices may become a required “passport” for small and medium sized produce farmers to enter the supply chain for institutional foodservice establishments.

This Planning Grant project proceeded from the premise that, despite the federal exemption, small and medium scale produce farmers may still need to implement traceability practices. 1 Anticipating this requirement, this project sought to improve understanding of the barriers (institutional, logistic etc.) which limit the ability of smaller scale specialty crop producers to serve as suppliers to institutional food services. This project was conducted in two phases. During Phase I, focus groups with specialty crops producers and institutional foodservice managers examined the key challenges confronting these groups. Surveys were also conducted to provide quantitative nuance of these results. In Phase II, producers, food-service managers, government officials, and other stakeholders and market facilitators were invited to a large stakeholder meeting in which issues regarding traceability protocols were explored. Results from Phase I were used as an input into Phase II; issues identified by producers and/or institutional managers as constraints to a supplier relationship between these groups (Phase I), were focused upon in the larger stakeholder meeting (Phase II).

1 When this project was proposed, the FDA FSMA had not yet been passed. At the time it appeared that traceability requirements would be required of all produce farms, regardless of size. With the inclusion of the Tester-Hagen Amendment, the scope of the project was slightly adjusted to reflect hypothetical buyer requirements rather than federally legislated ones.

Cooperators

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  • Dr. Angela Fraser
  • David Hughes
  • Olga Isengildina-Massa
  • Dr. Beth Kunkel
  • Dr. David Lamie
  • Dr. Geoff Zhender

Research

Materials and methods:
Objectives 1 & 2. To examine and document the relevant issues, research questions and information needs of SMS producers and institutional food purchasers with regard to traceability practices

To gain an in-depth understanding of food traceability challenges in this marketing channel, two series of focus group meetings were conducted: one series which explored these issues from the perspective of small and medium scale (SMS) specialty crop producers, and a second which explored these constraints from the perspective of institutional food-service managers. Meetings were organized by stakeholder group (among these individuals with similar supply chain roles) to permit common challenges and experiences to be more easily identified.

While producers will face some common traceability challenges, many of their constraints were anticipated to be specific to the crops which they produce and the scale of their operation. To reflect these considerations, producer focus groups were held at varied low-country, midlands, and up-state locations throughout the geographic region of focus (NC, SC, GA). Traceability challenges experienced by institutional food-services were anticipated to vary by the type of institution and the extent of their operational autonomy. As such, effort was made to reflect a diverse range of institutional foodservice buyers in the composition of each focus group in this series.

Complementing this qualitative research, surveys of the region’s specialty crop producers and institutions were also conducted regarding their specialty crops production/purchasing practices, procurement requirements, and traceability practices. Results of these surveys provided quantitative detail to the information gathered through the focus group meetings. Surveys of producers were administered electronically through distribution lists constructed from membership lists of producer NGOs, online databases of local food providers, and other similar sources. To the extent possible, surveys of producers and institutional food buyers (schools, hospitals) were conducted electronically. As response experience has taught that school foodservice buyers do not frequently respond to electronic surveys, surveys were mailed to these stakeholders.

Both the focus group and surveys were conducted according to standard producers. Specifically, focus group meeting organization, participant recruitment, discussion guide development, and meeting administration were conducted following the protocols outlined by Morgan and Krueger (1998). Meetings were recorded, transcribed, and the transcriptions later reviewed and cleaned. Data was coded as per recommendations by Saldana (2009), and was compiled and coded using NVivo. Meetings were held at public sites (usually university extension offices) and times which were mutually convenient for the participants. Surveys were developed, pretested, and disseminated using practices recommended by Dillman et al. (2009) for electronic and hard copy surveys. The region of geographic focus for this study was NC, SC, and GA.

Objective 3: To assess the extent to which there exist similarities and/or conflict between the traceability information and logistic needs of small-medium scale producers, and institutional food providers

Details of the traceability practices currently used by SMS specialty crops producers and institutional foodservice buyers were explored, in-depth, in the course of the focus group meetings held with each of these groups. Further, during the large stakeholder meeting (Phase II), sessions were held both within and across these (and other) stakeholder groups to further examine this issue. Specifically explored were the: (1) the extent of similarity and/or conflict in the traceability requirements of producers and institutional food-service operations; (2) the mechanisms by which the identified points of conflict could be overcome; and (3) what informational and resource needs would be required to facilitate this.

Both within and across stakeholder group sessions held in the course of the large-group meeting (Phase II) were developed and conducted as focus groups using the same practices as is noted for Objectives 1 and 2.

Similarities and/or points of conflict between the traceability information and logistic needs of the producer and buyers were identified both by participants of the focus group meetings (Phase I, II), and through conducting a careful review and modified gap analysis of the information collected during these meetings.

Objective 4. To collect, document, and integrate suggestions regarding best-practices for traceability in the operations of small-medium scale specialty crop producers and institutional food services

In the course of focus groups, surveys, and large group meeting activities, information was collected regarding successful approaches used to implement traceability practices. Collected information was reviewed to identify key recommendations for implementing traceability in production operations, foodservice establishments, and in the supplier relationship between these supply chain partners.

Research results and discussion:
Summary of Key Results

Results revealed that the barriers to farm-to-institution marketing are numerous. Price received for produce, and the often long delays in receiving payment from institutions were identified as serious concerns. Seasonality was also a large concern, especially with schools, due to conflicts between the standard growing season of the Southeastern producer and the academic calendar. Quantity and specific product attribute concerns were also prevalent among producers; institutions require large quantities and often require that products be relatively homogeneous in their size, shape, color and/or ripeness. Producing such large quantities of a single product for delivery at a specific point in time to a single customer is logistically difficult (if not impossible) for many SMS producers, and adds significant production and marketing risk. This study also identified marketing challenges that were either not previously reported and/or are unique to the Southeast region. Key among these are food product liability insurance requirements, and a localized aversion marketing cooperatives.

Food safety requirements and, in particular, those related to product traceability were specifically examined. First, from the perspective of farmers, producers report that presently their primary motivation to implement traceability systems was to reduce their risk and limit their liability. For SMS farmers, however, this is not without challenges. The financial outlay and time required to develop, implement, and maintain a traceability system were frequently cited as barriers to adopting these practices. Many producers also expressed concern that implementation would require costly reorganization of their production activities and/or technology upgrades. Many producers reported that these barriers were substantial enough that they would adjust the channels that they marketed through rather than implementing traceability programs.

Producers suggested several possible remedies to the noted challenges. In many cases these suggestions would require significant capital and/or public infrastructure and, as such, are unlikely to be made available in the near-term. For several others of the noted challenges, however, information and/or tools to offset these barriers are already available through various extension systems. In the Southeast region, additional effort is needed to advertise the availability of these resources. Further there is an obvious role for extension services to help develop a traceability program and documentation system that has low technology requirements, is cost effective, and would be suitable for small and medium scale mixed output operations.

Institutional foodservice buyers indicated significant interest in purchasing specialty crops directly from local farmers. Improved public relations and satisfying demand from their customers were the main factors motivating them to consider this alternative source of produce. Many constraints, however, were identified which limit their ability to source through this supply channel. The perceived lack of product consistency and inadequate quantities, perceived challenges in ordering and delivery logistics, and the perceived relative unit price of locally sourced produce as compared to that available through their usual supplier network were noted as the primary concerns.

Interestingly, while a majority of buyers noted these and other similar concerns, in practice, relatively few of the responding institutions (<25%) had actually purchased or attempted to purchase products from local farmers. Indeed, in many instances, the concerns noted by buyers did not reflect local supply conditions and/or were challenges which could have been overcome with a relatively minimal amount of market coordination between famers and buyers. Right or wrong, however, perceptions of the challenges of procuring through the direct marketing channel, and lack of individual buyer incentive to do so, are limiting the willingness of intuitional foodservice establishments to source from these farmers.

Supplier contractual and food safety requirements varied across and within institutional type (i.e. schools, hospitals, long-term care facilities). Due to their relative buyers’ participation rates, a majority of collected information detailed school foodservice procurement practices. For these institutions purchasing requirements were established by the state departments of agriculture, or school districts, rather than the schools themselves. Information regarding product traceability is collected when provided by suppliers, but is maintained only on documentation provided by suppliers. Once products enter school food storage systems (i.e. refrigerators), it may be comingled and/or transferred to other containers; in either circumstance the ability to directly use farm-level traceability information is thus lost.

At present no institutions have considered implementing a traceability system beyond their food storage systems. The benefits of implementing a traceability system through food preparation and service operations were clear to buyers. In considering the prospect of implementing such a system, buyers and managers were initially quite resistant due to the perceived time and resource expenses. Brainstorming the steps and related expenses which would be required to develop and implement a foodservice traceability system, however, was a very useful exercise that demonstrated that the resource requirements of introducing and maintaining such a system would be significantly less onerous than originally anticipated.

Participation Summary

Educational & Outreach Activities

Participation Summary

Education/outreach description:
Derived in Whole or in Part from this Initiative

Academic publications

Westray, L. 2012. Serving as Suppliers to Institutional Foodservices: Supply Chain Consideration of Small and Medium Scale Specialty Crop Producers. M.S. Thesis, Department of Applied Economics and Statistics, Clemson University.

Nunnelley, A. 2012. Procuring And Tracing Produce From Small- And Medium- Scale Farmers For Use In Institutional Foodservice Operations In NC, SC And GA. M.S. Thesis, Department of Food, Nutrition, and Packaging Sciences, Clemson University.

DuBreil, K. 2013. Exploring Potential Innovative Marketing Approaches for US Agribusinesses. M.S. Thesis, Department of Agricultural and Applied Economics, Virginia Tech.

Conference papers/presentations

K.A. Boys, L. Westray, and A. Fraser. “Serving as Suppliers to Institutional Foodservices: Supply Chain Considerations of Small- and Medium-scale Specialty Crop Producers.” Poster presented at the Annual Meeting of the American Agricultural and Applied Economics Association, Seattle WA, August 12-14, 2012.

Outreach

Outreach workshops organized
Linking Specialty Crop Producers and Institutional Food Services – Food Safety Concerns and Considerations, Florence, SC March 16, 2011

Outreach presentations
Boys, K. 2011. “Logistic Landmines: Developing a Research &amp; Extension Agenda in Support of Localized Foodsystems” Presented To: “Farm to School and Beyond…” Workshop hosted by the South Carolina Department of Agriculture, April 28, 2011, Columbia, SC

Manuscripts Under Review*

Boys, K. “Food Product Liability Insurance: Implications for the Marketing of Specialty Crops”. Under Review.

* Publication and outreach efforts are ongoing. Additional manuscripts for peer-reviewed publications, and outreach publications are in preparation.

Project Outcomes

Project outcomes:

This planning grant intended to collect preliminary information needed to guide future research and extension activities, and grant seeking efforts. At this stage, the primary impacts have been generated by the more than 100 farmers, institutional foodservice buyers, and other stakeholders who directly participated in the project’s data collection and program efforts. Farmers reported improved understanding of the opportunities and potential benefits of marketing their specialty crops to institutions. Institutional buyers reported better understanding the production and logistic constraints faced by producers. Stakeholders from both groups expressed their appreciation of an opportunity to speak with and learn about the operations of potential supply chain partners.

As findings from this study will serve as the basis for future research and extension programs, it is anticipated that the main impacts of this work will be accrued following the implementation of these project extensions. In the long run, it is anticipated that there will be increased participation and sales volume of specialty crops in the small- and medium- farmer to institutional foodservices marketing channel.

Economic Analysis

Economic analysis was not intended to be part of this project. This work however, has generated guidance regarding information and resources needed to develop and support a direct farm-to-institution marketing channel. Once established, future work could examine the economic impacts of this enhanced marketing channel.

Recommendations:

Areas needing additional study

Several areas needing additional study were identified in the course of this project. Key among these are the following topics:
• Marketing approaches/barriers for small and medium, diversified produce farmers:
Small producers have a large variety of tools and potential channels through which they can market their goods. The price premia available to producers through these channels and the relative risk of closing sales through each of these channels, however, varies considerably and many producers are unclear as to which channels they can most profitably make use of.
• Producer costs and challenges of implementing and maintaining GAP/GHP: Producers are reluctant to implement GAP/GHP due to the perceived costs. At present, insufficient information is available regarding the ‘average’ costs of remedial actions, operational adjustments, and bookkeeping undertaken by farmers to become and maintain GAP/GHP compliance.
• The expanding local foods system has attracted new producers, NGOs, and other industry stakeholders – many of whom have no personal experience or family legacy in agricultural production. Research is needed to identify, characterize and make recommendations as how extension services, government and NGO programs can best reach and serve these ‘new food entrepreneurs’.
• Better understanding of the intra-organizational characteristics and dynamics needed for successful and mutually beneficial produce marketing instances where there are (usually) considerable differences in the relative size and market power of buyers and sellers.
• Food product liability insurance: Increasingly producers are being required by middlemen to buy liability insurance. Preliminary evidence indicates that the amount of insurance required by middlemen, even when supplying similar customers, varies considerably. Also of concern, the actual premia charged for this insurance varies considerably across producers and is deemed by some producers to be a constraint to ability to continue to successfully operate.

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.