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. 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. 

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.

2. 2. Identify supply chain transaction returns, including those returns that satisfy farmers’ non-financial goals, for direct, intermediated, and coordinated FtI supply chains.

2.3.         Develop interview questions, including questions eliciting non-sales related returns to farmers, such as increased access to customers, farm tours, CSA sign-ups, etc.

We developed questions, and added an additional objective to test the survey instrument by conducting a pilot interview.  The pilot interview lasted a little over three hours.  The farmer spent a significant amount of time looking at files (both paper and computer) to find accurate answers to our questions.  The farmer was very generous with his time, and among the helpful outcomes of this pilot was a comprehensive list of documents to suggest that interviewees have on hand for the interview.

For further discussion of the instrument design and design process, see Objective 3.3 below.

3. 3. Identify other causal factors that relate to supply chain transactions, including farmer preferences, farmer socio-demographic characteristics and farm characteristics.

3.3.         Develop interview questions, including questions eliciting social preferences

We designed the survey to meet many goals.  The survey instrument is intended to be compatible with existing USDA and IRS surveys and reports, and additionally include questions that address costs and returns not currently gathered in these existing instruments.  There are multiple purposes for this intention.  Primarily, we will be able to make straightforward comparisons to existing data for those fields that are included in both existing instruments and our instrument.  Farmers will be able to refer to forms that they have already completed in order to answer many of our questions, which will streamline the process and make the interviews go more quickly.  Finally, the questions are designed to complement the existing instruments so that they may be easily inserted into future federal instruments and/ or may serve as a pilot for potential questions, should USDA decide to begin soliciting farm to institution data in future surveys.   

The survey is also designed to be compatible with existing measures of social preferences.  This is more of a challenge, and is the primary reason for requiring a redesign of the first draft of the survey after the completion of the pilot survey.    We originally designed the social preferences section with the intent of using the results to inform a field experiment design.  To achieve this, we reviewed the literature on field experiments, and developed a survey intended to identify a robust Dictator Game to identify farmer social preferences for three social outcomes, as identified in the literature.  In the process of making this design decision, we reviewed and rejected a number of other social preference frameworks.  However, we are no longer intending to use the results of this survey to design an experiment in the near future.  For this reason, we have redesigned this section of the survey to elicit social preferences in a way that is compatible with existing literature.

Accomplishments/Milestones

Accomplishments:

1. 1. Pursued the acquisition of 2011 USDA Cost and Returns data, and determined that the information would likely not yield the hoped for results.

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. Developed survey instrument.

1. 1. Conducted pilot survey and identified weaknesses in survey instrument.

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

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

1. 1. Revisited the transaction costs literature, and revised survey instrument.

The bulk of the proposed work was anticipated to happen in 2014, however we are running behind schedule.  The survey instrument needs to be reviewed by the University of Massachusetts Institutional Review Board.  Interviews are anticipated for early 2015.

Lessons learned so far:

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 are no good resources that 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. The amount of interview time required to complete the interviews may be greater than anticipated, and the number of documents that farmers will be asked to have on hand is larger than expected.

1. 1. Conducting a pilot test of the survey instrument is critical. While the results of the pilot have set us back on the timeline, the information that we collected through this pilot (both in terms of survey data and the interviewing process) has helped us sidestep some potential and serious challenges.   

Impacts and Contributions/Outcomes

1. 1. The beneficiaries of this project will be New England farmers who participate or are interested in participating in the wholesale institutional market as well as other Farm to Institution practitioners, including those administering state and local programs and institution administrators. At this stage, there are not too many 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, “GroundUp Metrics to Assess Impact” was presented at the 2014 Farm to Cafeteria conference in Austin, TX.

1. 1. We still 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 Journal of Extension.

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: