When the consumer wins and the farmer wins!

When the consumer wins and the farmer wins!

A 2014 National Grocery Association consumer survey pretty much tells it all. “More locally grown foods” is the second most desired improvement  among surveyed grocery shoppers. It was second to “Price/cost savings.” That sounds like we want our food to be grown locally, but it must be cheap.

Price Rules?

AandPIn his book, The Great A&P and the Struggle for Small Business in America, historian Marc Levinson tells the story of an epic struggle between small business and big business. A&P was the first large grocery chain in the U.S. Before the A&P stores, most food was local. Some was purchased at outdoor markets, like Lexington Market in Baltimore City, that supplied fruits and vegetables from the region. Mom and Pop stores supplied more shelf-stable foods such as canned and dried goods sourced from small and mid-sized industries. Butcher shops supplied meats.

According to Levinson, A&P developed a new business model for grocery stores. It manufactured its own store brands, ran its own warehousing and transportation systems and priced its products well below competitors. In the 1940s the federal government sued the company under antitrust laws, fearing that it would become a monopoly. Ultimately, the federal government won the case and the company owners were fined.

However, consumers liked the lower prices and eventually the sentiment moved toward acceptance of the grocery chain model. Tens of thousands of local groceries stores closed down in the next few decades, but they were not the only losers. As chains grew larger, they began to aggregate food from greater distances, seeking the lowest prices for their consumers. California, with its temperate climate and irrigation systems became the fruit and vegetable baskets of the nation. Farmers everywhere had to scale up or get out. The farmers who survived became less diversified and the small food operations that processed and supplied local cheese, milk, meats, and canned goods disappeared.

Global Competition

By the 1970s, U.S. agriculture set its sites on global markets and in 1992, the U.S. entered in a North American Fair Trade Agreement. It may come as no surprise that labor is the greatest cost associated with the production of fruits and vegetables. Production moved to where labor costs were the cheapest. According to USDA data, since the signing of the North American Free Trade Agreement (NAFTA) in 1994, Mexican imports of vegetables have risen 306%.

In January 2014, Renee’ Johnson, Specialist in Agricultural Policy for the Congressional Research Service, issued a report entitled “The U.S. Trade Situation for Fruit and Vegetable Products.” She noted that over the last decade (e.g. after the phase out of tariffs) there has been a growing U.S. trade deficit in fresh and processed fruits and vegetables such that there is a $11.2 billion gap between imports and exports. She added that the U.S. has gone from being a net exporter to net importer of fresh and processed fruits and vegetables. Between 1990 and 2010, the import share of fresh fruit has grown from 34.9% to 48.8% and the import share of fresh vegetables has grown from 10.3% to 24.5%.

Life is not rosy on the other side of the border either. Small farms in Mexico are being

Los Angeles Times
Los Angeles Times

replaced by multinational corporations which operate under limited labor standards. In December, National Public Radio reported on a story entitled Mexican Megafarms Supplying U.S. Market Are Rife With Labor Abuses. The Los Angeles Times’ Richard Marosi had completed an 18-month investigation into labor abuses at megafarms in Mexico that produce tomatoes, peppers and other vegetables for U.S. markets. Marosi called the workers at these labor camps the “invisible people”, making $8 to $12 a day in appalling labor conditions. In one case, workers were held captive and forced to work. Those goods are winding up on grocery shelves at many of the largest chain grocery stores, according to the report.

Back to the Future?

How can Maryland  farmers compete? A 2013  survey by A. T. Kearney reported that 66% market.4.9are choosing to buy local food because it helps local economies. Also, they trust the local farmers and 70% are willing to pay more for local food. Once again, consumers are choosing to buy local produce, meats, dairy products, beer, and wine. They notice the quality, taste and variety.

The internet is a great asset for farmers. Social media has allowed farmers to tell their stories and to market their products. Customers like to visit farms and discuss growing practices at farmers markets.

Local and state food processing regulations are being scaled to fit small operations (though more can be done here). Food aggregation systems (e.g. food hubs and co-ops) are being established to help farms reach schools, colleges, hospitals and other food service facilities.

Finally, USDA reported earlier this year that locally-sourced food is price competitive with national chains. Perhaps we are reaching a place where the customer wins and the farmer wins!

 

 

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