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Direct-marketing Farms have Double the Regional Economic Impact

August 3, 2016


Photo credit: Karin Higgins/UC Davis.

Photo credit: Karin Higgins/UC Davis.

Editor’s Note: In honor of the upcoming National Farmers Market Week, the National Sustainable Agriculture Coalition (NSAC) is proud to present this guest blog from Dr. Shermain Hardesty, Small Farm Program Leader the University of California (UC) Small Farm Program and Cooperative Extension Economist in the Department of Agricultural & Resource Economics at UC Davis.

 

Next week (August 7-13) is National Farmers Market week, a time to celebrate all the hard-working farmers and ranchers who sell at farmers markets. The direct-market farmers and ranchers in the Sacramento, California-area also have reason to celebrate: they generate twice as much regional economic impact per dollar of output as do other area food producers who don’t engage in direct-marketing, according to reports from the University of California (UC) Davis and UC Cooperative Extension.

The newly released study looked at the four Sacramento Region counties of El Dorado, Placer, Sacramento and Yolo, and found that direct-marketing food producers had a regional output multiplier of 1.86, compared to just 1.42 for producers not involved in direct-marketing. This means that for every dollar of output produced by a direct-marketing producer, there was an additional $0.86 of economic activity generated in the region. This local economic multiplier is created chiefly from:

  1. Farming and other business inputs purchased locally and/or regionally by the direct-market farmers and producers.
  2. Expanded spending on household goods and services by the farmers/producers, as well as by those who supply goods and services to them.

In addition to farmers markets, direct-marketing channels can also include roadside farm stands and community-supported agriculture (CSA) programs that provide consumers with regular deliveries of farm products. Farmers markets, however, are the most common entry point for beginning farmers and food producers.

“The direct-marketers make up a relatively small part of the Sacramento region’s agricultural sector (4 percent), but this study demonstrates that these food producers generate both economic and qualitative benefits for the region,” said study leader Shermain Hardesty, a Cooperative Extension agricultural economist at the UC Davis Department of Agricultural and Resource Economics.

“It’s important that the economic contributions of direct-marketing farmers and ranchers be taken into consideration so that regional policies can be enhanced to support and nurture the growth of these food producers,” Hardesty said.

The fact that direct-marketing farm operations tend to be smaller and more labor-intensive also provides an economic benefit to the community. In the Sacramento area study, one out of every five food producers is involved in direct marketing. These producers purchased 89 percent of their supplies within the region, which provided benefits to seed and irrigation equipment sellers and other suppliers in the area.

The UC study was based on economic information gathered from 88 local farmers and ranchers, including 31 vegetable farmers, 48 orchard or vineyard growers and nine livestock producers, each of whom generated at least $1,000 in annual sales from marketing directly to consumers.

Some of the major findings from the report included that:

  • Sacramento Region direct-market producers averaged $164,631 in one year of sales compared to $568,105 for those not engaged in direct marketing.
  • Seventy-three percent of the direct marketers also sold through wholesale channels.
  • Overall, the direct-market producers generated 44 percent of their total revenues through direct marketing channels, 55 percent through wholesale channels, and one percent through commodity markets.
  • For every $1 million of output, the direct-market producers generated a total of 31.8 jobs in the Sacramento region while the nondirect-market producers generated only 10.5 jobs.

After the data were collected, they were incorporated into an economic modeling program to estimate the economic impacts of producers engaged in direct marketing. The researchers tested a hypothetical situation: What would happen if grocery stores in the Sacramento area switched their purchasing habits a little, buying more from farmers who also sell directly to consumers and less from those who only wholesale? Grocery stores in Sacramento currently buy about $4.6 million worth of product from these direct-selling farmers; what if that was shifted to, say, $5.6 million? The study found that this kind of shift would infuse $1.3 million into the local economy and create about 22 jobs!

Hardesty collaborated on the study with Libby Christensen, Erin McGuire, and Gail Feenstra, all of UC Davis; and Chuck Ingels, Jim Muck, Julia Boorinakis-Harper, Cindy Fake and Scott Oneto, all with the UC Cooperative Extension.

Funding for the study was provided by the University of California Division of Agriculture and Natural Resources Competitive Grants Program.

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Categories: Local & Regional Food Systems, Research, Education & Extension


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