VALUE-ADDED AGRICULTURE
Value added model Value-added products are defined by USDA as follows:
A change in the physical state or form of the product (such as milling wheat into flour or making strawberries into jam).
As a result of the change in physical state or the manner in which the agricultural commodity or product is produced and segregated, the customer base for the commodity or product is expanded and a greater portion of revenue derived from the marketing, processing or physical segregation is made available to the producer of the commodity or product (USDA).
In US farming communities are heavily influenced by cooperative farming. While the benefits of coop farming are staggering the coop farming contributes to lack of creativity, red tape and no difficult decision making process. The coop should be involved in production of a raw commodity but also takes part in processing, and distribution of the product. Value-added processing and marketing is a comparatively new concept to many traditional coop, and required capital, teamwork, experience and integration of diverse segments of the food industry. Doing more of the processing and marketing activities takes time skill and experience.
Sustainable Profitability Depleting grain prices, lower farm subsidies, changing consumer habits and intense competition for ag commodities have created a immediate need to explore alternative production and marketing strategies. The establishment of farmer owned, value added processing cooperatives in the Pulses industry would provide farmers with opportunities to enhance sustainable profit. Only valued-added agriculture model ensures farmers progress up the food chain. The farmers and coop no longer disconnect from the end users of their products. It is sad that middleman still harnessed more profit than the real owner of the produce. As a result the farmers receive only 2-3% return on their investment.
If the farmers can move up the food chain by getting involved in processing and direct marketing, rather than just selling their raw commodities to a trader or middlemen, then they would realize much higher returns on their investment. Clearly there are higher profits to be made between the time a raw product is produced on the farm and it is converted in highly valued finished food product ready to be consumed.
Today's food consumers want taste, nutrition, freshness, variety, and convenience. Ethnic populations are growing and niche markets are becoming available. By engaging in value added agriculture farmers are expecting to increase their net farm profits that would otherwise go to the middlemen in the food chain. The value added concept transforms growers from 'price takers' to 'price makers'.
Value added coop's control processing steps and achieve greater product quality control, brand loyalty and volume. Members receive a much greater ROI for their products. Coop’s reduce threat coupled with new enterprises, keep jobs in the rural communities, and strengthen the local economics hub.
In the absence of value-added farming the benefits never reach to local communities. Only a group of famers modestly benefit from the sale of raw products. When you add value-added formula to the agriculture it creates ripple effect on the entire community. Farmers, truck drivers, motels, restaurant, markets and end users all benefits from it. In the Pulses industry there are over 350 value-added products are available mostly in pulses consuming countries. In United States the pulses industry is processing less than 3 of those bi-products. The farmers are giving away their raw gold to Canada and India, where the US pulses get processed and value-added and then re-export to many parts of the world including United States. Not only the process increases the carbon footprint but also the consumer ended up paying a much higher price.
Challenges
The value-added farming is not as easy as it sounds. There few challenges that coop must overcome in order to produce value added agriculture? Value-added processing requires sound marketing savvy team. Getting a new product into the highly competitive retail market is not an easy task. The research shows that two third of new products fails after their introduction mainly due to consumer appeal. Failure to do market research and the lack of a sound business plan are leading reasons for failure. There are many factors that should be considered when planning value-added processing. For instance, business plan, technology, food safety, packaging material, branding, trade names, copyrights, regulations, market research and liability are just few.
The research shows that almost all value added ventures have a project champion who is a leader and a visionary, and who is able to bring together agreement and teamwork. He should be able to influence others to join and take reasonable risks.
The farmers can no longer ignore the ground realities of global changes. The world has shrunk, increasingly peoples and nations have grown dependent on one another. No one can any longer act entirely in his own interest. Producers will need to look at creating value-chains from the field to the plate if they are going to have sustainable profitability. Farmers, coop and producers across the North America are putting together strategic alliances with existing agribusiness companies, forming marketing cooperatives or developing new ventures to meet the needs of the changing ag industry.
It is clear that coop farming needs value-added business ideas that will help farmers raise profits by diversifying their incomes
Mat Chaudhry PhD (c)