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Wednesday, June 24, 2009

Local Foods: A Balanced Approach is Needed

Over the past couple of years, I have become increasingly involved with different projects that involve some aspect of local food system development. Given my interest and expertise, most of the focus has been on differentiating products by promoting the fact that they were produced locally. That is, consumer demand for locally-produced goods creates an opportunity for agricultural and food producers to realize higher margins. How big is this market, though? How much are consumers really willing and able to pay for local foods? Do consumers perceive "local" as being synonymous with other notions such as "small, family farms?"

Recently, I attended the National Value-Added Agriculture Conference. The keynote speaker was Gary Zimmer, a farmer, consultant, speaker, marketer... Gary owns and operates Midwest Bio-Ag, with offices in the upper Midwest. He is an organic farmer who markets a great deal of products in his local region. However, he presented a pragmatic, balanced view on the topic of local foods. What follows is a bit of Gary's thoughts with some of my own mixed in. I'll not presume that Gary would support everything below, so I'll take full responsibility for it. One word of caution: do not infer anything other than what I have written.

It's difficult to argue that there are not very real economic motivations behind how most food is grown and distributed in this country. The US climate is diverse and some things just naturally grow better in some areas than they do in others. We also have distinct growing seasons in most regions. This has led to large-scale production in areas where specific foods can be produced at low cost. That production can also be transported relatively quickly and efficiently to just about anywhere else in the country because of our distribution system. This has led to low-cost food at the retail level, an important objective in this country.

Because the low cost objective has been a key driver of how our food system works today, then it's almost by definition that, in most cases, locally produced foods are not going to be cheaper than if they were grown elsewhere. Scale economies, which lead to lower unit costs, are real. So, from a production cost standpoint, bigger is better. Local foods, in many cases, have been purchased primarily by those with relatively high incomes. They are somewhat of a luxury good, embodying not only freshness but support for local economies, etc. This begs the question, if locally produced foods are healthier and fresher, how can they be produced in a way that makes them accessible by everyone, even those with relatively low incomes?

We can't really expect the government to make this happen, can we? Is it the government's role to provide the BEST food or food that is GOOD ENOUGH? If the role is not for government to fill, then will the market make it happen? The market rewards production and marketing efficiency. The market got us to where we are. It's tough to fight the market! Consumers vote with their dollars. While many would love to buy food locally, many just can't afford it. Unless costs are lowered, they will continue to buy primarily from large-scale retail outlets. Many argue that we Americans spend less on food than consumers in most other developed countries, and that's somehow not what should be. We also seem to love to spend on our homes, cars, vacations, entertainment, and other items. Getting most people to shift expenses from other things toward food is an uphill fight.

Here's my bottom line: I strongly believe that locally-produced foods are demanded by most consumers. We have a long way to go before we'll be able to have a variety of local foods available to everyone who wants them at prices they can afford. To get there will take an approach that balances market fundamentals (like scale economies, transportation costs, consumer sovereignty) to make it happen.

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