Duration: 10/01/2006 to 09/30/2011

Administrative Advisor(s):

NIFA Reps:

Non-Technical Summary

Statement of Issues and Justification

The Problem and the Opportunity...
The industrialization of the U.S. agricultural and food system has been transforming U. S. society in diverse ways for the past 70 years. (Barkema , 1993). Food has become cheaper, labor has been freed for other uses, and many rural communities have disappeared (See Attachment A.) Looking more closely at the past several decades, American production agriculture has become increasingly dualistic. One end of the spectrum is inhabited mainly by small, often part-time farms that have developed direct marketing relationships with local food customers. The other end of the spectrum has witnessed the emergence of very large farms linked through commodity markets or contracts to consolidated food and fiber agribusinesses that mass market undifferentiated agricultural commodities around the globe. Farms and ranches in the middle are often not in a position to direct market, and are increasingly unable to compete successfully in global commodity markets. (Boehlje, 1999) Not only are farms/ranches-of-the-middle increasingly at risk, but midsize, regional food processors and distributors and even regional supermarket chains are now being bought or squeezed out of business (Harris, et. al., 2002).

Even as farms of the middle are disappearing, exceptional opportunities to redirect and revitalize agriculture-of-the-middle (AOTM) have emerged. The U. S. is experiencing a significant increase in demand for highly differentiated, value-added food productsespecially in the food service industry (Kinsey, 1999, Caswell, 1992). Restaurants, health care facilities, schools, other food service enterprises, and some supermarkets increasingly are demanding foods that: 1) have superior taste, health and nutritional qualities; 2) are associated with unique food stories that identify where the food comes from and how it is produced; and 3) come to them through transparent supply chains built on business relationships they can trust and support (Schnieders, 2004).

Can direct-market farms develop the capacity to supply all of the differentiated, high-quality food products that consumers will demand in the future? Or can undifferentiated commodity market farms provide them? If producers in the middle disappear and those on either end are not up to the challenge, will consumers be deprived of the opportunity to secure the foods they want?

Beyond just looking at the food products produced, what implications will a significant erosion of these farms/ranches of the middle have on existing agriculture-dependent rural communities, the rural landscape, and the character of the U.S. food system? If these farms/ranches continue to disappear, will the contributions that they provide in terms of rural economic activity, land and water stewardship, and community social capital disappear with them?

These new market opportunities arise at a time when solid market theories have been developed emphasizing product differentiation. Michael Porter, Harvard Business School, has articulated sound market strategies for developing competitive enterprises that produce and market products that have unique and superior value (Porter, 1990). Additionally, observers of contemporary business enterprise development point to the power of collaborative business partnerships for success in many 21st Century markets (Handfield and Nichols, 2002.) Known as values-based supply chains (or value chains), these collaborative enterprises are long-term networks of partnering business enterprises working together to maximize value for the partners and for the end customers of a particular product or service. Certain value chains treat farmers/ranchers as strategic partners rather than as interchangeable (and exploitable) input suppliers. Emphasis is placed on inter-organizational trust, shared information (transparency), shared decision-making, and commitment to the welfare of all partners in the value chain, including fair profit margins, fair wages, and business agreements of appropriate extended duration. (See Attachment B.)

These business partnerships are most appropriate for situations in which economies of scale are coupled with complex products or services that differentiate and add value in the marketplace---the very situation that is developing for food products from enterprises of the middle. Mid-tier food value chains are strategic alliances between midsize independent (often cooperative) food production, processing, and distribution/retail enterprises that seek to create and retain more value on the front (farmer/rancher) end of the chain, and effectively operate at regional levels. Industrial agri-food supply chains add most value at the processing and marketing levels and continue to rely on economies of scale from producersthus ever increasingly larger farms/ranches. A national initiative to renew an agriculture-of-the-middle seeks to employ the value chain paradigm to maintain the viability of mid-size farms/ranches, which means that significant value must be created and maintained at the farming/ranching level, not just at the levels of processing, distribution, and marketing.

For the time being, enough farmers/ranchers-of-the-middle still remain in business to supply the growing market demand for differentiated food products of superior value. So for the moment, both the markets and the producers who can supply these markets are in place. What is missing are the research information, the commercial infrastructure, and the public policies to support connecting agricultural producers-of-the-middle to these growing markets, and to do so with new business paradigms that enable farmers/ranchers and other community food entrepreneurs to become full partners and beneficiaries in these business ventures.

Related, Current and Previous Work

Related, Current, and Previous Work
During the years 2003 and 2004, with financial support from the W.K. Kellogg Foundation, the Johnson Foundation, and the USDA Sustainable Agriculture Research and Education (SARE) program, the Leopold Center at the Iowa State University and the Center for Integrated Agricultural Systems at the University of Wisconsin facilitated a Task Force on renewing an agriculture-of-the-middle. (See www.agofthemiddle.org.) The strategic approach developed by the Task Force consists of three action components that : 1) Develop business and market infrastructure that connects AOTM farmers/ranchers to other market players through values-based agri-food supply chains (value chains), 2) Identify and promote public policy changes that assist the transition to these alternative food networks, and 3) Identify and conduct research and education that provide AOTM partners with information critical to the development and evaluation of new food value chains and new agri-food policies. Points 1 and 2 should be viewed as advocacy. Point 3 represents the objective research base necessary to justify the overall approach and is the key element to be provided by the proposed multi-state project.

Building on the base of land-grant scientists who were members of the AOTM Task Force, a multi-state USDA/CSREES Development Committee (NCDC 207) administered from the University of Wisconsin and the University of Nebraska was instituted in 2004, under the name Research and Education Support for the Renewal of an Agriculture of the Middle. This development committee provided the formal organizational mechanism to recruit additional scientists and to develop the foundations for this proposed multi-state research project of the same name, to succeed NCDC207 in October, 2006. NCDC207 held its inaugural meeting in St. Louis, MO, November 2-4, 2005. At this meeting it was decided that the research and education to be conducted by the proposed multi-state project will be expressly designed to generate information that will be strategic to the evaluation of new mid-tier, agri-food value chains and new agri-food public policies which may support the stabilization and renewal of the agriculture-of-the-middle. More specifically, the proposed research and education will engage the following major dimensions: 1) a mixture of short term, medium term, and long term investigations, 2) an interaction of bio-physical and socio-economic scientists, and 3) synchronized research across value chains and across public policy campaigns, and 4) outreach materials and programs for producers and service professionals.

Objectives

1. Estimate and evaluate the consumer demand for differentiated agricultural products that can most effectively be provided by the food supply chains described above.
   
2. Conduct research to identify biological production approaches, and assess their profitability in alternative farming/ranching systems that produce differentiated food, fiber, and other products suited for marketing through mid-tier, values-based business approaches (value chains).
   
3. Identify and conduct research to evaluate the functioning of alternative marketing systems that link the producers with consumers.
   
4. Identify and conduct research to evaluate alternative public policies that will have an impact on #1-3.
   

Methods

Methods for Objective #1 will include: " Analyses of consumer food preferences and dynamics using focus groups, survey research methods, experimental economics procedures and data bases purchased from proprietary sources. Methods for Objective #2 will include: " Analyses of production and transaction costs associated with mid-tier, food value chains, " Randomized, replicated experiments at university-based research stations and/or laboratories, " On-farm/ranch initiation and/or validation studies related to the university-based research, and " Analyses of food product quality and differentiation. Methods for Objective #3 will include: " Analyses of the market structure, conduct and performance characteristics including the distribution of consumer and producer welfare " Evaluative case studies of existing successful mid-tier, agri-food value chains using targeted interviews, organizational documents, and round-table discussion approaches, " Analyses of emerging mid-tier, agri-food value chains using targeted interviews, organizational documents, and round-table discussion approaches. Methods for Objective #4 will include: " Analyses of targeted national and state legislation and regulations, " Communication to bio-physical and socio-economic scientists of information/research needed to support new legislation and/or regulations, and " Analyses of the political forces likely to be supportive or oppositional to new legislation and/or regulations.

Measurement of Progress and Results

Outputs

• Peer-reviewed academic publications.
• Presentations at professional and/or academic conferences/meetings.
• An integrated series of publications for farmers/ranchers interested in mid-tier, agri-food value chains.
• An integrated series of publications for regional food processors, distributors, and retailers interested in mid-tier, agri-food value chains.
• Technical bulletins and workshops for targeted service professionals, e.g. Cooperative Extension personnel, NRCS personnel, RC&D coordinators.

Outcomes or Projected Impacts

• Increased information and opportunities for mid-scale farmers/ranchers---and regional food processors, distributors, and retailers---to evaluate the applicability for their enterprises of mid-tier, agri-food (MTAF) value chains.
• Increased number of regionally-based mid-tier, agri-food value chains that will provide farmers/ranchers greater economic rewards and food consumers greater information and choice regarding their food purchases.
• Increased number of existing, conventional agri-food supply chains that will adopt characteristics of regionally-based, MTAF value chains,
• Increased contribution by regionally-based, MTAF value chains to the long-term stabilization and renewal of an agriculture-of-the-middle,
• Increased contribution by regionally-based, MTAF value chains to the long-term stabilization and renewal of agriculturally-dependent rural areas,

Milestones

(2006): Organize the technical committee according to research clusters and regional groupings; create and explore capacity for short-term research (turn-around time of 6 months or less) in dialogue with the business development and pubic policy partners of the national agriculture-of-the-middle initiative. Begin exploration of funding for medium and long term research projects.

(2007): Evaluate,seek funding for, and begin medium and long term research related to mid-tier, agri-food value chain development, and farming/ranching systems that produce differentiated food products.

(2011): Continue relevant short, medium, and long term research; report research findings to users; identify next steps.

Projected Participation

View Appendix E: Participation

Outreach Plan

In addition to the outreach products described above under Outputs, this research effort will collaborate closely with the business development arm of the national AOTM initiative, the Association for Family Farms (AFF) (www.associationoffamilyfarms.org). A primary function of the AFF is the development of mid-tier, agri-food value chains in regions across the country. These development activities will be significantly informed by research coordinated under the auspices of this proposed multi-state research committee.

Organization/Governance

This multi-state research/education committee will be organized nationally with opportunities for working groups to emerge along content and/or geographic lines. Research areas will be defined and scientists will self-select into clusters of interest, with each cluster selecting a facilitator. Outreach will be conducted on state, regional, and national levels. The committee will meet annually at different locations around the country, and between-meeting communication will be achieved through email list-serves and teleconferences. Clusters may seek to meet in conjunction with other professional meetings/conferences which most members attend. The national committee will be facilitated by a chair, vice-chair, and secretary elected for up to three year terms. The administrative advisor for the proposed multi-state committee will be Alan Baquet from the University of Nebraska.

Literature Cited

The progressive erosion of mid-scale farms/ranches has been the focus of attention of rural sociologists and agricultural economists for the past several decades (Buttel, 1999; Buttel and LaRamee, 1991; Galeski and Wilkening (eds), 1987; Lyson, 2004). Standing behind many of these investigations has been the connection between farm structure and community vitality in agriculturally dependent rural areas, a theme framed as early as the 1940s by the social anthropologist, Walter Goldschmidt, in his study of two California rural communities situated in differing agricultural contexts (Goldschmidt, 1978). The community surrounded by mid-scale, family farms exhibited considerably richer and more diverse community institutions than did the community surrounded by larger, agribusiness-owned farms. The Goldschmidt hypothesis has been the focus of attention and debate until the present (Strange, 1989; Welsch and Lyson, 2001, Lyson, 2004). Interestingly, the notion of the disappearing middle is now being used to frame the progressive erosion since the 1950s of a middle class in the larger U.S. society (Krugman, 2002).

The CRIS search revealed a related project W-1177 Enhancing competitiveness of U.S. Meats. This project focuses on collaborations among researchers and educators related to designing meat products that are tender, safe, nutritious and convenient, and on measuring consumer acceptance and willingness to pay for new products and different product attributes. It is the latter aspect of W-1177 that relates to the work being proposed in NCDC 207. Consumer acceptance of product attributes relates not only to the physical attributes of the products, but potentially to the manner in which they were produced and distributed through the food production chain. While W-1177 relates to beef production, NCDC 207 applies to the broader agri-food production and distribution process.

There is a growing literature in the area of assessing consumer acceptance of various food traits. In addition to the survey methods that have historically been used to assess consumer acceptance, experimental economics techniques are being used to determine consumer preferences in laboratory type settings. These techniques have been used to assess consumer preferences regarding alternative beef traits. (Sitz, et al, 2005, Feuz, et al, 2004)

The literature on value chains as a business model is a growing one. As indicated in the introduction of this proposal, Michael Porter, Harvard Business School, has articulated business strategies for developing competitive enterprises that produce and market products that have unique and superior value, strategies that differ qualitatively from those employed to produce and market undifferentiated commodities (Porter, 1990). Additionally, observers of contemporary business enterprise development point to the power of collaborative business partnerships for success in many 21st Century Markets (Handfield and Nichols, 2002). The literature indicates that the economic sectors where value chains have proven most successful tend to be higher-volume, complex-product industries like automobile/truck (Dyer, 2000), high-end apparel (Whalen, 2001), and consumer electronics (Kumar, 1996). Value chains are less advantage-giving in industries where mass commodification strategies predominate like petro-chemicals and bulk pharmaceuticals (Dyer, 2000). When conceived as learning supply chains (Peterson, 2002), value chains are particularly powerful at reducing the costs of product development, production, and procurement transactions as well as increasing speed-to-market and overall product quality (Whalen, 2001; Kumar, 1996; Handfield and Nichols, 2002). In these senses, value chains are smart from a business perspective.

Value chains are also right from an ethical perspective. With an emphasis on inter-organizational trust, shared information (transparency), shared decision-making, fair profit margins, fair wages, and business agreements of appropriate length, the value chain business model closely resembles the fair trade business model that is proving increasingly successful in the international trade of such products as bananas, coffee, and cocoa (Jaffee, et.al, 2004; Raynolds, 2000). Framed as a domestic fair trade initiative, the agriculture-of-the-middle effort is banking heavily on the combined business wisdom and ethical substance of the values-based value chain model for engaging a growing segment of U.S. food consumers, those that are increasingly concerned about the taste and nutritional qualities of their food, and the nature and business relationships of the enterprises supplying it.

The value chain model has only recently been applied to this countrys agri-food sector (Boehlje, et.al., 1999; Feurne, et.al., 2001). A part of this literature has focused on the differences between value chains and more traditional food supply chains (Van Donkergoed, 2003; Stevenson and Pirog, forthcoming). Several food sectors have been analyzed in value chain terms, e.g., poultry (Stevenson and Born, forthcoming; Westgren, 1999) and perishable vegetables (Schotzko and Hinson, 2000; Zuurbier, 1999). Most good examples of successful mid-tier, agri-food value chains have not been yet analyzed in the academic literature. However, a beginning set of case studies has been assembled and are available on the agriculture-of-the-middle website: www.agofthemiddle.org. Websites of these and other cases are available for reading and assessing. The following are particularly good examples on the production end of value chains: beef (www.oregoncountrybeef; www.olaurasleanbeef ), pork (www.nimanranch.com), dairy (www.organivalley.com), grains (www.shepherdsgrain.com), and hops (www.yakimachief.com). Good examples of enterprises further down the chains include: distribution and food service (Schneiders, 2004; Callimic, 2004) and retail (www.newseasons.market.com, www.burgerville.com, www.hotlipspizza.com).

References

Alan Barkema, Mark Drabenstott and Mike Cook. 1993. "The Industrialization of
the U.S. Food System." Chapter 1 in Food and Agricultural Marketing Issues
for the 21st Century. D. Padberg, ed., FAMC 93-1, Texas A&M University, 1993

Boehlje, Michael, S. Hofing, and R. Schroeder. 1999. Value Chains in the Agricultural Industries. Staff Paper #99-10. Department of Agricultural Economics, Purdue University. West Lafayette, IN.

Boehlje, Michael. 1999. "Structural Changes in the Agricultural Industries: How Do We Measure, Analyze, and Understand Them?" American Journal of Agricultural Economics 81, No. 5:1028-1041.

Buttel, Frederick and P. LaRamee. 1991. The Disappearing Middle: A Sociological Perspective. In Towards a New Political Economy of Agriculture. William Friedland, L. Busch, F. Buttel and A. Rudy (eds.) Westview Special Studies in Agricultural Science and Policy: Westview Press.

Buttel, Frederick. 1999. Wisconsin Agriculture in the 1990s: Perspectives from the 1997 Census of Agriculture. Program on Agricultural Technology Studies, Madison, WI: University of Wisconsin.

Callimich, Rukini. 2004. Caterer turns the tables (www.registerguard.com/news/2004/08/10/b1.bz.bonappetit.0810.html)

Caswell., Julie A. 1992. "Using Industrial Organization and Demand Models for
Agribusiness Research." Agribusiness 8, no. 6 (1992): 537-48.

Dyer, Jeffrey. 2000. Collaborative Advantage: Winning Through Extended Enterprise Supplier Networks. New York, NY: Oxford University Press.

Fearne, A., Hughes, D. and Duffy, R. 2001. Concepts of Collaboration  Supply Chain Management in a Global Food Industry. Food and Drink Supply Chain Management  Isssues for the Hospitality and Retail Sectors. Eastham, Sharples, and Ball, editors. Butterworth and Heinemann (London), pp 55-89. ISBN 0-7506-4762-0.

Feuz, D.M., W.J. Umberger, C.R. Calulkins and B. Stitz, 2004. U.S. Consumers Willingness to Pay for Flavor and Tenderness in Steaks as Determined with and Experimental Auction. Journal of Agricultural and Resource Economics, 29:3, 501-516.

Galeski, Boguslaw and E. Wilkening (eds.). 1987. Family Farming in Europe and America. The Rural Studies Series of the Rural Sociological Society. Boulder, C): Westview Press.

Goldschmidt, Walter. 1978. As You Sow: Three Studies in the Social Consequences of Agribusiness. Montclair, NJ: Allanheld, Osmun. (Originally published in 1947.)

Handfield, Robert and E. Nichols, Jr. 2002. Supply Chain Redesign: Transforming Supply Chains into Integrated Value Systems. Upper Saddle River, NJ: Prentice Hall.

Harris, J. Michael, P. Kaufman, S. Martinez, and C. Price. 2002. The U.S. Food Marketing System, Agriculture Economic Report No. AER811, August.

Jafee, Daniel, J. Kloppenburg, Jr., and M. Monroy. 2004. Bringing the moral charge home: fair trade within the north and within the south. Rural Sociology, Vol. 69, #2: 169-197.

Kirschenmann, Frederick. 2004. Are we about to lose the agriculture of the middle? Juliens Journal. July.

Kinsey, Jean D. The Big Shift from a Food Supply to a Food Demand Chain. Minnesota
Agricultural Economist no. 698 (Fall, 1999). (2)

Krugman, Paul. 2002. The Disappearing Middle at http://geography.berkeley.edu/ProgramCourses/CoursePagesFA2005/GeogC110/forricher.pdf.

Kumar, Nirmalya. 1996. The power of trust in manufacturer-retail relationships. Harvard Business Review, Vol. 74, Issue 6: 92-107.

Lyson, Thomas. 2004. Civic Agriculture: Reconnecting Farm, Food, and Community. Medford, MA: Tufts University Press.

Person, H. Christopher. 2002. The learning supply chain: pipeline or pipedream? American Journal of Agricultural Economics, Vol. 84, No. 5: 1329-1336.

Pirog, R., T. Van Pelt, K. Enshayan, and E. Cook. 2001. Food, Fuel, and Freeways: An Iowa perspective on how far food travels, fuel usage, and greenhouse gas emissions. Leopold Center for Sustainable Agriculture, Ames, Iowa.

Raynolds, Laura. 2000. Re-embedded global agriculture: the international organic and fair trade movements. Agriculture and Human Values, Vol. 17: 297-309.

Schnieders, Richard. 2004. Presentation to the Georgetown University Law School. See www.agofthemiddle.org.

Schotzko, R. Thomas and R. Hinson. 2000. Supply chain management in perishables: a produce application. Journal of Food Distribution Research. July.

Sitz, B.M., C. R. Calkins, D.M. Feuz, W.J. Umberger and K. M. Eskridge, 2005, Consumer Sensory Acceptance and value of domestic, Canadian and Australian grass-fed beef steaks, Journal of Animal Science, In Press
Stevenson, G.W. and H. Born. forthcoming. The red label poultry system in France: lessons for renewing an agriculture-of-the-middle in the U.S. in C. Hinrichs and T. Lyson, eds., Remaking the North American Food System. Lincoln, NE: University of Nebraska Press.

Stevenson, G.W. and R. Pirog. forthcoming. Values-Based Supply Chains: Strategies for Agrifood Enterprises of the Middle. In T. Lyson, G. Stevenson, and R. Welsch, eds., Renewing an Agriculture-of-the-Middle: Situation and Strategy for the Center of the U.S. Food System (in negotiations with the Penn State Press).

Strange, Marty. 1989. Family Farming: A New Economic Vision. Lincoln, NE: University of Nebraska Press.

Van Donkersgoed, Elbert. 2003. Value Chains Versus Supply Chains. See www.christianfarmers.org/commentary/cornerpost.htm. (June 23, 2003).

Welsch, Rick and T. Lyson, 2001. Anti-Corporate Farming Laws, the Goldschmidt Hypothesis, and Rural Community Welfare, Paper presented at the Rural Sociological Society, Albuquerque, NM, August.

Westgren, Randall. 1999. Delivering food safety, food quality, and sustainable production practices: the label rouge poultry system in France. American Journal of Economics, Vol. 81: 1107-1111.

Whalen, Charles. 2001. The Featherbone Principle: A Declaration of Interdependence. Gainsville, FL: Matthews Printing Company.

www.valuechains.org/valuechain.html.

Zuurbier, P.J. 1999. Supply chain management in the fresh produce industry: a mile to go? Journal of Food Distribution Research. March.

Attachments

Land Grant Participating States/Institutions

AL, CA, CO, IA, ID, KS, KY, ME, MI, MN, MS, NC, NE, NY, OR, PA, WA, WI

Non Land Grant Participating States/Institutions

Ohio University, University of Kentucky, USDA