Costs and returns to New England farmers in the farm-to-institution supply chain

Costs and returns to New England farmers in the farm-to-institution supply chain

Summary

As Farm to Institution (FtI) programs in New England expand, new supply chains are being developed to handle the increased flow of regionally-produced goods to regional institutions. While some supply chains deliver product directly to institutions, using no aggregators, distributors, or processors, other supply chains rely upon these additional supply chain actors. These are referred to as “direct” and “intermediated” supply chains, respectively. Each time an additional supply chain actor is added, the costs incurred to perform the supply chain task for which the actor is responsible must be covered. The actor may also charge an additional fee. On the other hand, in the absence of these additional supply chain actors, farmers must absorb the costs associated with performing the supply chain tasks. This research project is developing farmer interviews to identify the transaction characteristics associated with New England farmers’ sales to the institutional market in direct, traditional-intermediated, and coordinated-intermediated supply chain structures. The outcomes of this research will be shared with farmers and FtI practitioners in New England to develop emerging FtI supply chains that explicitly account for transaction characteristics that impact farmers’ profitability. Outcomes will also be used in future research in which a field experiment designed to uncover the transactions costs associated with the various supply chains.  The results from this current research will be important to determining the  distribution of New England farmers’ FtI-specific transaction costs.  The results of the current research and the future experimental work will  assist New England farmers and FtI practitioners in developing FtI supply chains that support farmer profitability.

Objectives/Performance Targets

The objectives and methods of this project that have been accomplished to date:

1. 1. Identify farmers’ supply chain transaction costs for direct, intermediated, and coordinated FtI supply chains.

1.1  Share ongoing results and solicit feedback on research methods and strategies with FINE (Farm to Institution New England) partners during FINE Metrics Team conference calls and bi-annual FINE gatherings.

Collaboration with FINE is ongoing – in addition to continuing to share and solicit feedback though FINE Metrics team work, Ms. Fitzsimmons was a member of the FINE Metrics Coordinator hiring committee, and has been assisting the FINE Leadership Team in their strategic planning.  Ms. Fitzsimmons has shared results with and solicited and incorporated feedback from FINE in these roles.  Ms. Fitzsimmons participated in FINE’s two-day metrics retreat with Yellowwood Associates, the FINE leadership team’s retreat review, and FINE’s annual November gathering.

1.2.         ARMS Data – purchase USDA ARMS (Agricultural Resource Management Survey) 2011 Cost And Returns report data.

It was determined that while the USDA ARMS 2011 Cost and Returns Survey did include a separate question that asked producers to report their sales to institutional purchasers; however, the results of this report will not be useful for our research.  The ARMS Cost and Returns Surveys are designed to elicit detailed information on large commodity growers’ costs and returns.  This has several implications.  The survey sample is weighted towards “commodities” states, or states that produce the nation’s bulk of wheat, corn, cotton, sugar beets, soybeans, etc., and hog, cattle, poultry production.  More farmers in these states are included in the sample.  No New England, or even northeastern, states are large scale producers of the commodities of interest, so these states are included in the sample according to a decreased weight. 

Related to this weighted sampling method, there were so few producers reporting any sales to institutions that ERS is unable to provide anonymous results to us because of the small sample size and reliability of the estimates.  Further, even if we did have access to a sufficiently large set of anonymous results, questions have been raised as to whether the results from a sample weighted towards large scale commodity producing states will be valuable in drawing inferences about our population of producers in New England.  Of course, we cannot test this last concern without data.

1.3.         Interviews- Work with FINE to identify farmers to be interviewed.

The team has been working on identifying potential farmers to interview and the appropriate means of conducting those interviews.  Several unanticipated questions came up during the process of identifying potential farmer interviewees, particularly the issue of how to include FINE in collecting farmer information in a way that satisfies the University of Massachusetts’ Internal Review Board (IRB) requirements for confidentiality.  The end result of the concerns about confidentiality involve the process of identifying farmers, the different stages at which different people have access to information that has been collected, and how the final list of farmers will be determined.

In coordination with the metrics team, it was  determined that Ms. Fitzsimmons and Mr. Allison would identify key FINE leaders, Ms. Fitzsimmons would speak directly with these individuals to build a list of potential farmer interviewees, and then the metrics team and  Ms. Fitzsimmons, and Dr. Lass would review this list to determine the farmers to prioritize.  This list of potential interviewees would include all farmers that leaders identified, and would include farmers from a range of farm size, products, location, marketing channel, etc.

Ms. Fitzsimmons and Mr. Allison identified key individuals from the FINE leadership team and individual FINE members.   Ms. Fitzsimmons wrote an email request and two attachments (one brief, one detailed) to describe the nature of the request and proposed outcomes, and Mr. Allison sent out the email request to this group.  Ms. Fitzsimmons followed up with individuals.  To date, the list of  potential farmer interviewees in New Hampshire, Massachusetts, and Vermont has been developed.  Currently, there are relatively few names on our lists from Maine, Rhode Island, and Connecticut.  Phone calls are scheduled for January with FINE contacts in Connecticut and Rhode Island and additional contacts have been identified to be contacted in January.

The list of potential farmer interviewees will be available to the FINE metrics team, but once the list has been narrowed to those identified to be interviewed, the list and raw interview results will only be accessible to Ms. Fitzsimmons and Dr. Lass.  Interviewees will be called during the week of January 20 to schedule interviews for February.

1.4.         Mail interview questions to farmers one month in advance. 

The advanced interview questions will begin to be mailed to farmers at the end of January..

1.5.         Send farmers reminder postcard and email two weeks in advance.

Farmers who will be interviewed will be sent reminder postcards two week prior to their interview.  These cards will be sent to coincide with the dates of the interviews.

1.6.         Make a reminder call to farmers one week in advance,

1.9.         Compile and analyze ARMS data and interview data on supply chain costs, using multinomial, conditional and mixed logistic regression models to determine probabilities associated with market choices.

 For the reasons described under objective 1.2 above, we will not be doing this.

Accomplishments/Milestones

1. 1. Pursued the acquisition of 2011 USDA Cost and Returns data, and determined that the information would likely not yield the desired results.  In fact, the USDA ERS does not provide these data when inappropriate inferences will be made.

1. 1. Decided not to purchase the ARMS data.

1. 1. Worked with FINE metrics team to develop protocols to engage FINE partners in identifying and recruiting farmers for farmer interviews.

1. 1. Worked with FINE metrics team to develop protocols to manage sensitive information in a way that follows Internal Review Board requirements for confidentiality.

1. 1. Worked with the FINE metrics and leadership teams to conduct outreach to farm to institution practitioners in New England to identify farmers to be interviewed.

1. 1. Developed outreach materials for farm to institution practitioners.

1. 1. Conducted outreach to farm to institution practitioners.  Discussed the proposed research, received feedback on proposed research.

1. 1. Identified farmers in New Hampshire, Massachusetts, and Vermont to be interviewed.

1. 1. Worked with FINE to further hone the expected costs and returns for farmers who sell to institutions.

The bulk of the proposed work was planned for 2014, including Objectives 3-5.   We now expect the farmer interviews to take place in February and early March, 2014.

1. 1. While it is a little disheartening that the ARMS data is not usable for this study, the process of pursuing that data has confirmed that there appear to be no good resources to identify costs and returns for small to medium sized farms – and none that identify these costs and returns according to marketing channels.  As funders, the USDA, and state departments of agriculture continue to promote regionalization, this kind of information will be very important in determining how or whether regional-scale supply chains can support small and medium sized farm operations in New England. 

1. 1. Practitioners are excited about this research.  In conversations and at FINE events, it is clear that practitioners see a need to have a better idea of how farmers can participate in farm to institution supply chains and remain viable operations.  Practitioner feedback has been very helpful in identifying the anticipated costs and returns that are unique to institutional sales.

1. 1. Feedback from practitioners suggests that most farms that sell to institutions also sell to other marketing channels.  We can use this knowledge to ask questions in interviews that provide us with the comparisons between costs and returns in different marketing channels, in order to supplement the information that we originally anticipated would come from the ARMS data.

1. 1. In states with a single large “lead” organization, it has been fairly straightforward to identify farmers to be interviewed.  However, in other states, like Maine, identifying which practitioners may have a good idea of potential interviewees has been more difficult. 

1. 1. Farm to Institution practitioners keep very disparate sets of information about farmers, and many large regional organizations that work closely with farmers do not keep information about the marketing channels through which farmers sell their products.  In terms of our research, the result of this is that practitioners with relationships and informal knowledge about farmers in their region have been better able to help us identify farmers and provide useful feedback on our research.  

1. 1. It looks possible that we may be able to develop case studies in tandem with a number of other Vermont organizations (Farm to Plate, Vermont Sustainable Jobs Funds, NOFA-VT).  If this works out, their experience will be invaluable in putting together useful materials.

Impacts and Contributions/Outcomes

1. 1. The beneficiaries of this project will be New England farmers who participate or are considering participating in wholesale institutional markets,   other Farm to Institution practitioners, including those administering state and local programs, and institution administrators. At this stage, there are few impacts that this project has made.  However, the proposed outcomes of this project (planning materials, case studies, and publications) are eagerly anticipated by a growing body of practitioners. 

1. 1. A workshop proposal and a poster presentation have been accepted for the 2014 Farm to Cafeteria conference in Austin, TX.

1. 1. We plan on offering the results of this project in printed form through a UMass website and the FINE website. The methodology and the outcomes will be offered to FtI practitioners, including farmers and institutions, via FINE partner organizations. Printed materials that highlight the transaction characteristics of different FtI supply chains will be developed. Tools for practitioners will be developed for download, including a “How to Account for Farmer Transaction Costs in Farm to Institution Supply Chain Development” handbook. Tools for farmers will be developed for download, including a “Getting the Most Out of Farm to Institution Sales” farm business planning module. Academic outputs will be developed for publication in academic journals including the Agricultural and Resource Economics Review.

1. 1. The results will be shared with FINE partners throughout the course of the project. Updates will continue to be shared as individual objectives are met, and FINE partners will be consulted regularly. Updates will be shared at FINE leadership meetings, via emails, and at bi-annual FINE conferences.

1. 1. The methodology, outcomes, and tools will also be shared with farmers and Farm to Institution/ School/ Cafeteria and food systems practitioners via regional and national conferences and workshops. Slide presentations will be offered online. Target conferences include NESAWG Regional Conference (2015, 2016), Northeast Fruit and Vegetable Conference (2015), NOFA VT Winter Conference (2015), biannual Farm To Cafeteria Conference, (2016), Harvest New England conference, (2016).

Collaborators: