Steve Pincus of Tipi Produce,
Evansville, Wis., is a member of Home Grown
Wisconsin, a co-op of certified organix farmers.
Talking about fresh produce at the Sacramento Natural Foods Co-op in California.
Photos courtesy pictured co-ops

Farmers Co-ops and Local Marketing

By Alan Borst
Agricultural Economist
USDA Rural Development

erhaps the world food market won’t be quite as global as some have been saying. Increasing U.S. consumer demand for locally produced foods is growing steadily, the trend being driven by a number of factors. These include: food safety issues and the corresponding increased interest in foods perceived to be more healthful; a greater desire to preserve local cultivars or livestock (some of which may not be suitable for commercial shipping or have the yields necessary to serve distant markets); greater concern for the environment and an increased understanding of the importance of maintaining small, sustainable farms on the fringes of urban environments.

Increasing numbers of farmers are selling their crops through local food marketing outlets. The Food Marketing Institute estimates that 68 percent of consumers now purchase locally grown food at least some of the time.

However, growth in the demand for local food has been limited by supply issues.

From local to international sourcing
Over the past half-century, the scale of U.S. food marketing channels has evolved from mostly local, to regional, to national and, eventually, international suppliers. After decades of concentration and consolidation in the food sector, huge infrastructural gaps have emerged to constrain the potential of local food systems.

Marketing channels and facilities for processing produce, livestock and dairy products used to be more decentralized and local. Now they are controlled by larger and fewer agribusinesses.

Largely because of this infrastructural gap, local food products tend to be more expensive than conventional foods. Under the current agribusiness system, even foods grown in local areas can end up traveling many miles through the transportation network to reach processing plants and distribution centers before returning to retailers in the local area. However, skyrocketing fuel and energy prices have the potential to narrow this price margin.

Traditional local food outlets — such as farmers markets and consumer-owned food co-ops — have seen considerable recent growth. According to USDA, farmers’ markets in the United States have grown from 1,755 in 1994 to 4,385 in 2006. The National Cooperative Business Association estimates there are more than 500 food cooperatives in America, many of which were started in only the past few years.

Food buying clubs — groups of people who place warehouse orders together for supplies — are being formed across the country. United Natural Foods, the largest natural food distributor in the country — serves more than 3,000 buying clubs in 34 states. Farm stands and “pick-your-own” farms are also common direct-to-consumer marketing outlets.

Co-ops leading the way
Food co-ops were at the front of the organic food movement in the 1990s and are again leading the buy-local movement today. The National Cooperative Grocers Association and more than 70 of its members participated in the Eat Local America Challenge this summer, under which consumers were called upon to make 80 percent of their diet local for a set period. The definition of local and the period of time were left to the individual food co-ops.

One service that cooperatives have provided local food growers is certification. As with organics, consumers want to know that foods marketed as local are actually grown locally. The Marquette Food Co-op in Michigan has created its own certification program, called Co-op Preferred, which will involve a farm visit and documentation from the farmer on their production conditions, commitment to the environment and community activities.

The Montana Sustainable Growers Union is operating under a different model. It provides an alternative to formal certification for its producer members by directly promoting relationships and trust between growers and customers.

Scale is another problem that local growers have been able to deal with through cooperation. Restaurants, retailers and other large buyers seeking local foods cannot economically deal with large numbers of small farmers who do not have the predictable and large volumes that they are seeking.

When small growers have organized a cooperative distributor, they have been able to secure access to some of these large and important markets. They have also been able to more effectively negotiate price and terms of sale.

Farmers markets & CSAs
Many farmers markets have long been cooperatively `owned by growers. What is new is cooperation among farmers markets.
Several farmers markets around Ohio recently organized the Farmer’s Market Management Network Inc. Goals include promotion of networking among farmer market members, potential joint marketing ventures, resource sharing and training opportunities.

In addition to these traditional channels, local foods have been increasingly marketed under more recently developed business models, such as community supported agriculture (CSA) farm operations, restaurants and institutional food service, virtual farmers market Websites and even regular supermarkets.

While the farmer is managing crop production, consumermembers support the costs of the farm and share the risk and bounty of variable harvests. CSA membership is based on shares of the harvest. Members subscribe or underwrite the harvest for the season in advance.

Every CSA farm has its own season, crops, level of social activities and share prices. According to the Rodale Institute, the first CSA farms in the nation were started in New England in 1986. Local Harvest, a leading Website of the “buy local” movement, estimates that there are currently about 1,500 CSAs in the nation, of which 1,187 are currently listed in their directory.

Targeting restaurants
Another innovation in local food marketing has been marketing to restaurants, some of which use ingredients from local producers.

A good source for information on restaurants that offer local foods is the Chefs Collaborative, a national network of more than 1,000 members of the food community who promote sustainable cuisine. Founded in 1993, the Chefs Collaborative provides its members with tools for running economically healthy, sustainable food-service businesses and making environmentally sound purchasing decisions.

The collaborative publishes a guide, “The Farmer-Chef Connection,” to promote farmer/restaurant collaboration. Its “Guide to Good Eating” helps diners locate chefs in their network.

Home Grown Wisconsin is a cooperative of certifiedorganic family farms throughout southern Wisconsin. The co-op was founded in 1996 with the mission of delivering local produce to restaurants in Chicago, Madison and Milwaukee. The cooperative has grown steadily, developing strong relationships with local chefs, farmers, schools and food activists.

Since 2003, the co-op has provided a successful and flourishing CSA program for residents of Chicago and its surrounding suburbs. Farmer-members grow fruits and vegetables for weekly delivery to 12 pick-up locations in Chicago.

The Midcoast Fishermen’s Cooperative in Port Clyde, Maine, (see cover story, page 4) formed in April 2006 and has adapted the CSA model for seafood. It is using more environmentally friendly fishing practices and providing the freshest, highest quality groundfish to local restaurants and consumers with its Port Clyde Fresh Catch.

Supermarkets adding local option
Some supermarkets and grocery stores have begun to offer a limited selection of locally grown foods. This has offered consumers a convenient way to purchase local items while doing their regular shopping.

There has also been some active promotion of these local food sections. This has mostly occurred within the past decade.

A good example of farmers organizing a cooperative to establish their own marketing infrastructure recently occurred in Missouri. The Sappington Farmers’ Market is a Missouri farmer-owned supermarket that is owned by Farm to Family Naturally LLC, a Missouri Farmers’ Union Cooperative effort. This supermarket offers food products that are locally grown by farmer-members.

An important innovation for marketing local foods is the “virtual farmers’ market” business model. Local farmers and consumers both pay a fee and join as members. Producer members post what crops they have for sale on the co-op’s Website, and consumer-members place orders for what they want to buy at the Website. Growers then bring the produce to one or more designated distribution centers for consumer pickup.

The Oklahoma Food Cooperative was founded five years ago as the first virtual farmers market. It only sells products grown or made in Oklahoma. It generally has more than 2,600 different items available each month.

As of June 2008, the co-op has nearly 2,000 members, 125 of whom are producers. The co-op is ringing up $61,000 - $65,000 each month in sales.

Variations of this model have been adopted across the country, with similar cooperatives already organized in Nebraska, Texas, Michigan, Idaho and Kansas. Others are being planned in Iowa, Massachusetts and Ontario.

The buy-local food movement is rapidly growing. It is energized by both the family farmers that supply it and the passionate consumers who buy into it. Local food marketing channels have depended upon widespread cooperation among growers and buyers, and it appears certain they will continue to do so in the future.

September/October Table of Contents