I have written often about the amount of money Omaha and Kansas City area residents spend on imported (non-local) organic foods and food products. Using Organic Trade Association and USDA data, my ballpark estimate for both areas combined is 290 million dollars per year. So why can’t more of these foods be grown and processed in the Missouri Valley? There is nothing wrong with our climate, soils, farmers and workers. So what’s the problem?
The Commodity Mentality
Based on recent discussions with nationally recognized farm managers, area ag lenders and USDA officials, it is clear that the conventional ag financing and commodity marketing systems are not designed for sustainable food production and processing. As it is now, the organic production base in the Missouri Valley depends almost entirely on exporting relatively small amounts of organic commodities like alfalfa and corn. Because of the small production base and the absence of efficient local and regional processing, there is not enough free cash at the farm level to start new organic (sustainable) farms, ranches and gardens.
Pickups vs Semi Trucks
Sustainable food systems will continue as attractive dreams in the Missouri Valley as long as farmers, investors and lenders limit themselves to small volume CSA’s, farmers markets and restaurants. The real money in the food business originates in big city grocery stores, especially the upscale retailers like Whole Foods and Trader Joes, etc. Over-the-road diesels pulling 40 foot refrigerated trailers supply their stores.
These trailers may look empty when they pull out of town, but in effect, they are loaded with our money – money that we could use to build efficient local food systems that compete with the imports. As an aside, our tax-funded schools, universities, hospitals and military bases are also part of this same problem. I will write about local food purchasing requirements in the near future.
None of this will change until farmers, landowners and investors team up to build farmer-controlled food brands that can compete in up-scale grocery stores. This requires new business models for sustainable agriculture.
New Business Models
In our view, these models should: 1) Allow sustainable producers to control their own food brands and cash flows, 2) Support demand-driven marketing, production and processing systems that supply a wide variety of shelf-stable products, and 3) Allow for a systematic transition to pasture-based production systems. These systems must include enough hay and grain to support efficient meat, dairy and fresh produce production and processing in close proximity to big cities.
If you are not yet convinced, ask yourself a very basic question. Why do Organic Valley and Horizon ship milk to Kansas City? Answer; there is no competition. The same question and answer works just as well for meat, poultry, fruit and vegetables.
The absence of effective competition in the Missouri Valley has left the door wide open for Big Food. According to the New York Times, “organic food has become a wildly lucrative business for Big Food and a premium-price-means-premium-profit section of the grocery store.” The high profit margins explain why big companies like Walmart and Whole Foods Market have been buying organic food manufacturers and/or contracting with big organic growers and manufacturers as fast as they can.
Although strong consumer demand is in place, investors and lenders still think of conventional and organic agriculture as commodity businesses. This strategic industry failure represents an important business opportunity for farmers, landowners, investors and lenders who can work together to build new business models.
We believe the best sustainable food business models will combine: 1) Organic and Biodynamic production methods, 2) Professional marketing for high-value, farmer-controlled local and regional food brands, and 3) First-rate market information and financial reporting services for qualified local investors and financial advisors. We are organizing the Raised Free Investment Group to meet this need.
We plan to start in Omaha since we own two farms in that area. These farms will serve as demonstration sites for innovative, farmer-managed “brand partnerships”.
To learn more, please go to www.RaisedFree.org and then contact me to arrange a meeting for your civic group, church, business organization or economic development agency.