Part II: Niche is Niche for a Reason

If you follow the food world and haven’t heard of the words “Locavore”, “Organic”, or “Naturally raised”, you have been living under a rock. A large rock. In Antarctica.

A very cold place

More than likely under a rock that is under one of these giant ice mountains.

The demand for products that fit these markets is increasing. According to the USDA, organic sales increased $16 billion between 2004 and 2012. Many people assume that this is the golden ticket for small family farms to be more profitable, like the example ranch from the blog post last week. It is common to hear people who prefer these types of food say, “If everybody in agriculture was local/natural/organic then the family farms would do better.”

While for some farmers and ranchers there is an opportunity to increase income through these markets, it doesn’t work out that way for everybody. Every farmer has a different situation, and trying to fit every farm into a certain food system will not work for a variety of reasons. While I can’t list them all here, I’ll take a stab at a few of the basic problems using our ranch in the last scenario as the example.

“Local” is the new favorite in food. If it was produced close to home, it is a preferred product for some people. While this may work great in Massachusetts, with a large population base to feed, South Dakota has more cattle than people. So unless everyone in the state is willing (or capable) of eating two or three entire steers each year, local won’t work for the vast majority of South Dakota cattlemen.

Burger on the Grill

Although I do try to eat three head of cattle each year, because beef is delicious! However, even my valiant efforts fall far short.

Which leads to an older option, organic beef. Organic beef is USDA certified and can be marketed that way across the country. While our example rancher could sell beef as organic, one must keep in mind that making the change from conventional to organic takes years. All the feed (green grass included) that goes into the cattle must be organic feed, and raised as organic for three years before it can be USDA certified organic.

All this transition means this rancher has to raise cattle in the more inefficient organic manner while not capturing the organic premium for years. Without another source of income to support the family through this transition going organic is extremely difficult. In addition, keep in mind that only 3.5% of food is sold in the US as organic, which makes it a small market that has the potential to become oversupplied.

A third option that is popular is beef that is finished on grass, rather than on grain like conventional beef. While this may be a good option in Georgia, in South Dakota the grass doesn’t grow six months out of the year. In addition, keeping the cattle on the ranch until they reach slaughter weight, rather than selling as calves, means that less total cows can be ran on the ranch because grass will be needed to finish cattle. Less cows means less calves to sell, leading to less income.

Finally, using any of these options depends on consumers being willing to pay the increased cost for using a less efficient system. Chipotle, the Mexican food chain, showed they were unwilling to pay American grass-fed beef producers top dollar for their product and sourced their beef from Australia instead. If you are literally going to “bet the farm” on something, this is not a good bet for all ranchers.

So if you are a family farmer, what options are there to increase profitability? If you can make one of these niches work, then go for it. If you would prefer to use the newest technology to make your farm the most efficient, then do that. I know people who are successful in both business models, and people who lost their behind in each. Neither will save a family farm on its own. What will is a lot more basic–don’t spend more money than you make, take steps to mitigate risk, and work hard to make the best product possible for your consumers.

-Jake

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