February 5, 2015
On Thursday, January 29, the Economic Research Service (ERS) of the U.S. Department of Agriculture (USDA) released the Trends in U.S. Local and Regional Food Systems: A Report to Congress. Written at the request of Congress as part of the FY 2014 agricultural appropriations bill, the report provides an overview and analysis of the growth, changes, and challenges to local and regional food systems. Additionally, the report provides summaries of current literature on the connections between local and regional food systems and consumers, the environment, and the economy, along with summaries of policies and programs supporting these systems at the national, state, and local levels.
Local and regional food producers and food sales
Acknowledging the complex and disparate definitions of local, the report begins by defining local, not on the basis of geography, but rather, on the basis of marketing channels used – in this case, direct-to-consumer (DTC) marketing channels such as farmers markets, roadside stands, and u-pick and intermediated marketing channels, such as direct-to-restaurants, institutions, or regional food aggregators. Additionally, the report often uses the terms local food systems and regional food systems interchangeably, noting that the distinction between the two terms is unclear.
Since 2006-2007, several local food marketing channels have experienced tremendous growth: farmers markets have grown by 180 percent since 2006, regional food hubs have grown by 288 percent since 2006-2007, and school district participation in farm to school programs has increased by 430 percent since 2006. In 2012, 7.8 percent of U.S. farms (163,675 farms) sold food through local food marketing channels, with the majority (70 percent) selling solely through DTC marketing channels. The other 30 percent used a combination of DTC and intermediated channels or only intermediated channels. DTC sales and farms with intermediated sales in 2012 were the most heavily concentrated in counties in the Northeast, Mid-Atlantic, and the West Coast, which have large, densely populated metropolitan areas (see Figure 4 from the report below).
Using the 2012 Census of Agriculture (2012 Census) to examine DTC marketing, the report highlighted a number of findings on DTC sales and DTC farm participation. While the number of farms with DTC sales increased by 17 percent and DTC sales increased by 32 percent between 2002 and 2007, between 2007 and 2012, the number of farms with DTC sales increased by 5.5 percent, but with no change in total DTC sales. A couple of possible explanations were offered for the discrepancy: (1) DTC outlets may be competing for the same consumer dollar as farmers markets become more popular, while consumer interest may be plateauing, and (2) growing consumer demand for local food may have been met by retailers or food hubs rather than through DTC sales. However, because the Census of Agriculture did not measure the sales of local food marketed through intermediated channels, the report is not able to provide a clearer explanation for the discrepancy. This missing information is one of several instances noted by the report of the need for data and evaluation of local food marketing.
Absent a census estimate of the total value of local food sales in the United States, ERS produced a synthetic estimate of $6.1 billion in local food sales, using a combination of both the 2012 Census and pooled Agricultural Resources Management Survey (ARMS) data.
Again using both ARMS and 2012 Census data, ERS determined that, while local food farms with less than $75,000 in gross cash farm income (GCFI) accounted for 85 percent of all local food farms, these same small farms generated only 13 percent of all local food sales, while the 5 percent of local food farms that have $350,000 or more in GCFI generated 67 percent of the value of total local food sales. Local food farms of all sales classes marketing at least some food through intermediated marketing channels appear to earn disproportionately larger shares of local food sales. See Figure 5 from the report below.
The report highlights the high share of sales from produce farms using local food marketing channels. Produce (vegetable, fruit, and nut) farms accounted for 51 percent of all local food sales and represented 29 percent of all local food farms, while farms selling livestock and their products represent nearly 50 percent of all local food farms. See Figure 6 from the report below.
Produce farms using DTC sales exclusively generated 45 percent of the $1.2 billion in exclusive DTC food sales. Produce farms using DTC and intermediated marketing channels generated 64 percent of the $1.6 billion in total sales by local food farmers using both marketing channels. And produce farms using exclusively intermediated marketing channels earn 46 percent of the $3.3 billion in sales of farms solely using this channel. Among all U.S. produce farms, 34 percent sold food through local food marketing channels.
Food safety and local food marketing
With produce farms playing such an important role in local food sales, the report details changes to food safety for produce farms and suppliers brought on by the Food Safety Modernization Act (FSMA), which has moved from that of a reactionary food safety system responding to food safety incidents to a risk-based preventive one. The report provides an overview of voluntary certification programs, such as Good Agricultural Practices (GAP) and Good Handling Practices (GHP) audits of produce suppliers, and the proposed rules under FSMA. The report shares the potential challenges for produce farmers and suppliers, especially smaller operations serving local markets, under the new rules, such as the costs for compliance and the need for education and training to help farmers understand how to comply. The final FSMA rules from USDA, as well as the implementation of food safety training, will have a significant impact on farms marketing food through local channels and those using sustainable farming practices, a concern noted in two sets of comments submitted by NSAC and its member groups, first in November 2013 and a second set in December 2014.
To a lesser extent, the report provides some insight into food safety regulations and processing of locally marketed meat, which has captured an increasing share of DTC sales between 2007 and 2012. In 2012, livestock farms reported $648 million in earnings from DTC sales, nearly half the value of all DTC sales. However, while the number of livestock farms with DTC sales increased by 1,349 (1.2 percent) between the 2012 Census and the preceding Census in 2007, the number of total U.S. livestock farms declined by 269,833 (18.6 percent) over the same period.
The high average costs of compliance with food safety regulations for small meat processors and the dwindling number of small, federally inspected meat processing plants are identified in the report as two main challenges for producers marketing meat locally, as they are most often served by small meat processors.
Farm survival rates, growth, and direct-to-consumer marketing
Despite the challenges posed by food safety regulations and other developments, farmers using DTC marketing channels had a higher survival rate (i.e., reported positive sales in consecutive censuses) than those who marketed through traditional channels. Examining data from the Census of Agriculture for the years 2007 and 2012, ERS also found that the increased survival rate for farmers using DTC marketing applied to beginning farmers. Possible explanations for this trend range from lower debt-to-asset ratios for farmers engaged in DTC marketing to lower farm income risk for DTC farmers. On the other hand, DTC farms expand at a slower rate, possibly because of the labor-intensive nature of DTC marketing. Farms that market through traditional channels require less labor, and can grow before additional labor must be hired.
Economic impact assessments of local food and pricing
The remainder of the report focuses on summarizing current literature on the connections between local and regional food systems and the environment, economy, and consumers. The report also devotes considerable attention to the federal, and to a lesser extent state and local, policies and programs supporting the development of local and regional food systems.
As local food systems and markets have grown in recent years, assessments of the economic impacts of these activities have lagged and are still in their infancy. A lack of data and studies is the main challenge, as noted in other sections of the report. Additionally, most assessments of economic impacts have narrow geographic and market scopes, looking at particular states or regions and at specific marketing channels, such as farm to school, food hubs, agritourism, and farmers markets. The report also notes the problems plaguing the existing body of research, such as the exclusion of opportunity costs and misguided assumptions about the spending patterns of local food participants. The report states that making general conclusions about local food systems’ contributions to the economy is difficult, and encourages additional research in this area.
Policies and programs supporting local and regional food systems
ERS recognizes the increased support for local and regional food systems, including their connections to low-income communities of need, through new, expanded, and strengthened policies and programs at the federal, state, and local levels in recent years. With an emphasis on the 2014 Farm Bill, the report describes programs that have or can directly benefit local and regional food systems, such as the Farmers Market and Local Food Promotion Program, Specialty Crop Block Grant Program, Value Added Producer Grant Program, Farm Storage Facility Loan Program, Community Food Projects Grant Program, the Food Insecurity and Nutrition Incentives Program, the Local and Regional Food Enterprise Account within the Business and Industry Guaranteed Loan Program, National Organic Certification Cost-Share Program, Rural Business Development Grant Program, Microloans, and the Farm to School Grant Program. The report features the same programs and investment highlights which NSAC featured on its blog post from February 2014 in its deeper dive into the Farm Bill. The report also notes the role of the Know Your Farmer, Know Your Food Initiative in supporting local food systems and highlights state programs increasing access to local food and state support for farmers markets, local food infrastructure, urban farms and community gardens, along with local policies and programs.
As government investment in the development of local and regional food systems grows, data collection and program evaluation will be crucial to understanding the strengths and weaknesses of policies and programs and how to improve them. One program authorized by the 2014 Farm Bill, but which was not provided with mandatory farm bill funding is the Local Food Production and Program Evaluation Initiative. This initiative would help establish a price history for local producers, an important component to obtaining both loans and crop insurance. Additionally, the initiative requires USDA to collect data on local food production and marketing, to facilitate data sharing, and to monitor the effectiveness of programs designed to promote local food systems. Given the gaps in local food data and assessments, as mentioned by ERS in its report, it will be crucial for the new Congress to provide funding for the initiative in this year’s appropriations process.
Farm to School
The report also briefly discusses studies examining institutional consumers of local food, such as restaurants, hospitals, and schools, and includes a section on the USDA Farm to School Census, which was first released in the Fall of 2013 and re-launched in the Summer of 2014. The Farm to School Census found that farm to school programs exist in more than 4 out of 10 school districts across the country. Of school districts with farm to school activities, 83 percent served at least some local food in school meals in school year 2011-2012. Distributors play an important role in helping schools obtain local food for their school meals, with nearly two-thirds of school districts that participate in farm to school activities purchasing local foods through a distributor (see Figure 9 from the report below). More than 4 in 10 districts with farm to school activities (44 percent) obtained food directly from producers. Local food expenditures totaled over $385 million in the 2011-12 school year. For those school districts that were able to provide the data, they represented on average 13 percent of reported school district expenditures on food. Additionally, the value of local food donated by USDA through the DOD Fresh program was an additional $8 million.
Improving Farm to School through the Child Nutrition Act Reauthorization
As demonstrated in the F2S Census, with the participation in farm to school activities growing at schools around the country, the National Sustainable Agriculture Coalition (NSAC) is taking steps now to ensure that the next CNR strengthens farm to school and local food sourcing at schools and other educational and child care settings across the country. The expectation of growth in farm to school activities in the coming years, together with a high demand for the Farm to School Grant Program, means more funding is needed for the program.
The upcoming Child Nutrition Act Reauthorization (CNR) provides an opportunity to strengthen and increase funding for the program. In 2009, NSAC, in partnership with the NFSN and other organizations, helped win a total of $40 million in mandatory funding for the Farm to School Grant Program in the 2010 Child Nutrition Act Reauthorization, also known as the Healthy, Hunger-Free Kids Act of 2010. With the funding levels for the Farm to School Grant Program being oversubscribed five to one, it is clear that the next CNR must address this need for increased funding.
For CNR 2015, NSAC plans to again partner with NFSN to campaign for the Farm to School Grant Program – this time to provide increased funding levels and to improve and expand the program. Details of the NSAC-NFSN partnership to strengthen the Farm to School Grant Program in the next CNR will be available in the coming weeks. To learn more, please see NSAC’s CNR Campaign page and sign up to receive alerts about our CNR Campaign for 2015 on the Stay Connected section of our home page.