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 will use USDA Economic Research Service Agriculture and Resource Management 2011 Costs and Returns Report survey data in conjunction with 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 to develop a field experiment designed to uncover a distribution of New England farmers’ FtI-specific transaction costs, and consequently, to assist New England farmers and FtI practitioners in developing FtI supply chains that support farmer profitability.
Project objectives from proposal:
The purpose of the proposed project “Costs and Returns to New England Farmers in the Farm to Institution Supply Chain” is to identify and share supply chain-specific transaction costs and returns associated with sales in the FtI market in New England. The proposed research will inform farmers and FtI practitioners about transaction characteristics of alternative market structures and will support the development of emerging FtI supply chains that explicitly account for the transaction characteristics that impact farmers’ profitability. The objectives of this project are to:
1) Identify farmers’ supply chain transaction costs for direct, intermediated, and coordinated FtI supply chains.
2) Identify supply chain transaction returns, including those returns that satisfy farmers’ non-financial goals, for direct, intermediated, and coordinated FtI supply chains.
3) Identify other causal factors that relate to supply chain transaction costs, including farmer preferences, farmer socio-demographic characteristics and farm characteristics.
4) Develop case studies for each of the three supply chains identified – direct, intermediated, and coordinated.
5) Provide results of this research to farmers, distributors, institutions, and FtI advocates to inform farmers about this potentially profitable enterprise, to support farm viability, and to enhance FtI markets.