“Buy Local:” Challenging cooperatives and producer groups to lead this opportunity

by Bill Lipinski, president and CEO

Major supermarket chains and packaged foods marketers seem to have discovered “buy local.” For example, my supermarket displays overhead banners in the produce department with pictures of local growers, many of them First Pioneer customers. The dairy department has another banner selling “local milk.” A major national fluid milk processor prominently announces “local milk” on the sides of its over-the-road trailers. And several news magazines feature “buy local” on their covers nationwide.

“Buy local” ought to be a good thing for Northeast agriculture. For years, it’s been an article of faith for our industry, finding nearness to market and millions of consumers in our backyard as major competitive advantages. Many have turned that advantage into value-added in the cash register at the farm market.

For wholesale producers, however, it was far more difficult to turn nearness to market into tangible value-added for bottom-line profit. Indeed, in marketing wholesale produce, poultry, meats and even milk, lower production costs in distant parts of the United States or offshore often became the standard of competition for local producers to match.

A healthy Northeast agriculture needs a market premium to sustain itself. We know that average farm real estate values here are well above national averages, and Northeast farmers often have the option to sell land out of agriculture at an attractive price. First Pioneer’s Knowledge Exchange recently reported on farm labor availability, citing government statistics that show our Northeast states have among the highest average wage rates in the country, against which farm employers must compete. Studies on the cost of doing business by state consistently rank five of our Northeast states among the most expensive locations to do business, which affects farmers as well as the businesses that serve them.

I wonder what the “rules of the game” are for claiming that a product is local. Who enforces those rules? Having watched the debacle of labeling packaged milk as “rbST free,” I’m convinced that virtually all of the “value-added” went to supermarkets and processors, not to farm producers whose cost of production is impacted by whether or not they use rbST.

“Leadership and collaboration is vital for the Northeast to make the most of this exciting marketing opportunity.””

What does “locally produced” actually mean on a carton of milk and who ultimately benefits from this marketing claim? Just supermarkets and processors, which seem to have been the winners in rbST-free labeling and pricing? Do “local” dairy farmers (dedicated and stubborn enough to still farm in the Northeast) get their fair share of any premium? And what exactly is “locally produced” milk? Similar to bottled water, can any milk go into a carton labeled “local,” with the processor and supermarket pocketing the advantage?

“Buy local” is certainly worthy of identifying real value-added opportunities for Northeast agriculture. I know some groups are already considering how to make the most of this opportunity. For example, Community Involved in Sustaining Agriculture (CISA), a western Massachusetts group, is actively pursuing a coalition of food buyers, a local supermarket chain, agribusinesses and, of course, local farmers to develop an infrastructure in which to seize the “buy local” market.

Leadership and collaboration is vital for the Northeast to make the most of this exciting marketing opportunity. It’s time for innovation and fresh thinking about partnering in nontraditional ways. I hope that cooperatives and producer groups will be at the forefront, rather than letting supermarket chains and national processors capture all of the value-added. And I hope that government will take a fair, but tough, approach to enforcing truth-in-labeling regulations so “locally produced” claims can retain the credibility and value they deserve.

We, at First Pioneer, are excited about the opportunities for “locally produced” in the Northeast regardless of how individual businesses may pursue it. Our First Pioneer team is eager to assist you — individually or as groups — to make the most of the “buy local” movement.

This letter appeared in the Spring 2008 issue of Financial Partner (F.P.) magazine, First Pioneer's customer publication. Click here if you would like to start receiving FP magazine in the mail.

Read the rest of the issue which includes:

• Nanotechnology - Agriculture's Next "Industrial" Revolution
• Association Update - 2008 Director Candidates
• Young Entrepreneur Profile
• Washington Update
• Community Support
  

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