Create and Capture Value

March 4, 2017 02:36 AM
 
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Consider a value-add or direct-marketing opportunity for your farm

For six weeks each fall, the Raasch family hangs an open sign in front of their farm. They raise corn and soybeans along the Missouri River in western Missouri, but it’s their 80 acres dedicated to a pumpkin patch and farm fun that draws in 250,000 visitors annually.

In 1991, Carolyn Raasch planted pumpkins and cleaned out an old dairy barn on her farm in Liberty, Mo., just outside the Kansas City metro area. She drove to the local Wal-Mart and placed fliers on the windshields of minivans with car seats, inviting them to come out to the farm.

Raasch’s small-scale start has blossomed into a full-fledge operation. The pumpkin patch now features a cook shack selling her signature pumpkin doughnuts and goodies, a farm animal petting zoo, train rides, a corn maze, educational sessions and wine tastings. 

“The pumpkin patch fits in nicely with our operation,” Raasch says, who farms with her children and husband, Buddy. “It is a nice way to expose our farm to the public.”

Like the Raasch family, other farmers can diversify their operation and add value by exploring consumer-driven markets. “Farmers receive about 11.4¢ of every food dollar,” says Ann Wilkinson, Origin Farms, a consulting company that specializes in connecting farmer-owned companies with the food industry. “The rest goes to processing, distribution and other parts of the food value chain.”

Farmers can add value to their farm output in four ways, Wilkinson says. First, they can transform the physical state of commodity into a highly-differentiated product. This includes processing apples into cider or milk into yogurt.

A second option is to produce a crop in a way that enhances its value. This includes producing an organic, non-GMO, pesticide-free crop or livestock product. Farmers might receive a premium price for their products if sold to customers who value these traits.

Another option is producing and marketing products locally to receive a price premium. “Consumer demand for locally produced foods will continue to grow,” Wilkinson says.

Finally, Wilkinson has seen farmers have great success with creating food experiences on the farm, as the Raasch family has done. Pumpkin patches, U-pick orchards, creameries with retail stores, wineries with tasting rooms and on-farm dinners are a few examples of food experiences at the farm. 

To be successful in any value-added venture, Wilkinson says you must manage your risks. “This is a big decision for someone who has been a lifelong grain farmer to take that risk and start learning about something new,” she says.

A business venture of this kind includes five major functions: marketing, sales and distribution, finance and administration, quality assurance, and operations. “If you don’t cover these functions, then it’s a rough ride,” Wilkinson says.

Raasch advises farmers to think big when exploring options, use online resources to do feasibility studies, join direct marketing groups and visit with business owners with similar ventures. Ensure you have all the proper insurance coverage, she adds, and create strict safety protocols.

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