Below is a story that was recently in the Raleigh News and Observer. The points are valid and worth taking a few moments to look them over. Even with a growing "Local Food" sentiment in the country and all the reasons that this should continue, it is extremely difficult for small farmers to survive. If they market the product themselves, they must consideer if they have sufficent markets to survive and if the decide to enter into agreements with big-time retailers, they end up competing with themselves.
From the Raleigh News & Observer ---
Picking markets: Some local farmers discover hidden costs of selling wholesale
By MARIA PANARITIS - The Philadelphia Inquirer
PHILADELPHIA Say you're a produce farmer near Philadelphia. You don't have Nebraska-size land, so instead of making money on high volume, you grow enough tomatoes, sweet corn, or apples to sell at your own farm store, or to swap with other local farmers who, like you, also run a retail shop.
Then supermarkets come to your door. The same ones that, for years, had stopped buying local produce because they simply stocked whatever their distributors sent from faraway warehouses. Now, they say, their customers want local. They offer to buy your crops in bulk and sell them with a "local" label, alongside the rest.
Easy money, you might think. A way, even, to unload extra produce at peak harvest that otherwise might have gone rotten.
But what may seem like an alluring opportunity is, in reality, a double-edged sword, say some growers with farm stands popular in their communities, who have come to realize that they are paying a hidden price for even modest deals with deep-pocketed supermarkets.
One farmer, Pete Flynn, eliminated his wholesale business entirely this year. His own produce was selling at a nearby Wegmans, under his farm's name, but at prices below what he was charging in his own little store.
The well-heeled customers driving into his Westtown Township, Pa., farm market in Land Rovers and BMWs asked time and again: "Why should I buy here when I see your stuff a few miles away for less?"
Flynn, who works 200 acres for his Pete's Produce Farm, sized up supermarket deals this way: "They're really good for the local farmers who don't retail in their market."
His business is not the only one wrestling with the costs and benefits of the growing interest in local produce among supermarket chains.
Linvilla Orchards in Delaware County has business relationships with a few supermarkets, but it is wary of the industry's penchant for "loss-leading," in which markets sell certain highly marketable items at prices lower than what they pay wholesale. They take a loss on apples but make up for it by attracting customers who will buy other stuff, too, once they come through the door.
"That's not great," said Ron Ferber, senior manager of the 110-acre Linvilla farm and retail store in Media, Pa., which is wholesaling more this year to Giant supermarkets.
Loss-leading is always in the back of a farmer's mind: "It's certainly a strong consideration. ... We're not excited about that," Ferber said.
For those farmers whose business is heavily focused on retailing what they grow, it's a calculation being done with greater frequency, as consumers ask for more and more local produce, and supermarkets respond by making wholesale-buying decisions that reflect it.
Ferdinand Wirth, an associate professor of food marketing at St. Joseph's University with a focus on agriculture, said the swell in shoppers' demand for local produce seemed to begin after the Sept. 11, 2001, attacks, as perceptions about safety became a bigger part of people's lives.
Surveys have pointed to two forces driving the consumer clamor for locally grown food, Wirth said.
"They believe they want to support local businesses, support the local community, keep their money there, help their neighbor out, that kind of thing," he said. Also, a spate of food-contamination problems in recent years fueled a perception "that locally grown foods are fresher and of higher quality."
Consumer demand for local goods further intensified as a result of federal country-of-origin laws, which require major retailers of perishable products to identify where their products come from. The law became mandatory for seafood in April 2005 and for produce in September 2008, Wirth said.
Some might expect the resultant rise in demand from supermarkets, with their vast buying power and customer reach, would be greeted as good news by small farmers, whose struggles are well-known.
Farms have dwindled in number as residential and commercial development has extended deeper into the suburbs of dense metropolises such as Philadelphia.
Flynn, for example, only got into produce farming after difficult years as a dairy farmer, when one farm after another where he worked disappeared. Produce, by contrast, seemed to have retail-market value.
That is what he discovered by planting produce as side crops on a Chester County dairy farm and selling it at reliably good prices each day to Westtown community shoppers. That dairy farm went idle about a decade ago to make room for a new high school in the affluent, vastly expanding community.
So in 2000, Flynn planted new stakes down the road - but as a full-time produce farmer with a retail store. He leases what had been long-standing farmland from Westtown School, a centuries-old Quaker boarding school. He tills one-third of the 600 acres that trustees have refused to divest, despite development pressures.
"Keeping the land open, keeping it in agriculture, keeping it open for future generations of students, keeping the farming experience close to the school, all were more important and trumped the money that we would have gotten from a onetime influx (of cash) from selling the land," said David Jones, a Westtown alumnus and board member, who recently helped reach a new 10-year lease with Flynn.
In that regard, Pete's Produce Farm is a utopian bubble, buffered from the raw real estate market forces that might otherwise have made his farm unsustainable as a business in Westtown. He even has the good fortune of being surrounded by the higher-income households that retailers covet.
And yet, with all those advantages, Flynn still needs to be able to charge premium prices for his corn, tomatoes, zucchini, squash, and beans, because 90 percent of his income comes from retail sales at his own store.
When Flynn first began supplying Wegmans in nearby Downingtown, Pa. about six years ago, business was strong all around. Even with the competition, his farm stand's business was holding up well.
But sales fell 20 percent between 2008 and 2009 and have been flat ever since, thanks to the poor economy. It's more important than ever to keep retail margins healthy. That means saying no to supermarkets.
"We were approached by Giant," Flynn said, "and we were approached by Whole Foods" - just last spring, an offer he declined, knowing the chain would be opening a store in nearby Glen Eagle, Pa.
For several decades, Wegmans has made an effort to stock fresh-picked produce because it's a customer draw and helps support farmers in the communities where it has stores. Despite its sometimes-aggressive pricing, the Rochester, N.Y., chain has not run into trouble keeping up a steady supply, said Dave Corsi, vice president of produce and floral.
"We've been operating this program for over 25 years," Corsi said, "and we've had over 500 growers partnering with us for a long period of time now, and we haven't found it challenging for too many growers."
At Linvilla Orchards, one thing that makes supermarket wholesaling attractive is that it provides a ready market for higher-than-expected yields - and on balance, that seems to be more of a good thing than a bad one.
"Overall, I think it's good to promote local produce no matter who's selling, because hopefully it keeps farmers in business," said Linvilla's Ferber.
Still, Flynn remains confident in his own unique retailing model. He sells corn picked that same morning and is equally vigilant about the freshness of other produce sold at his store.
He is not fearful even of the eventual arrival in his territory of Austin, Texas-based Whole Foods.
"Nobody can do what we do," he said.
Martha Glass
Manager, Agritourism Office
Marketing Division, NCDA&CS
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