Small Business Labs

Reuters on Ag Inflation

Reuters has an excellent special section with extensive coverage of agricultural inflation and global food problems.  The section includes several highly informative interactive maps.  The chart on rice prices - they are up 300% this year - is quite an eye opener.

While agricultural prices have moderated somewhat over the last month they are unlikely to fall anytime soon.  Oil and oil products play a big role in the cost of food and as long as oil prices stay high so will ag products.

As we've pointed out in the past, high prices mean more small farms and more local food production. 

The Global Strategy Institute has a good post on this topic with other links related to the global food crisis. 

Global Food Problem Round Up

Lots of recent press on the impacts of rising food prices.  Recent food price increases are quite impressive:  in 2007 dairy prices were up 80%; grains were up a bit over 40%; cooking oil 50%; corn prices have doubled since 2006; and the price of rice, the food staple for billions around the world, rose over 100% last year.  These price increases are particularly hard on the 1 billion members of the global poor that subsist on less than $1 per day.

But there is one group that benefits from food inflation - farmers.  U.S. farm incomes are up and the price of farm land is rapidly increasing.  While most experts don't expect rapid food price inflation to continue long term, the consensus is higher food prices are going to be with us for a long time.  This long term increase in food prices will continue to help drive the growth of small farms and artisan food producers. 

Recent articles include:

1.  The Silent Tsunami  from the Economist: Is there ever a bad article in the Economist?  Even if you don't care about food inflation and the impact it is having, you should read this. 

2.  The New Economics of Hunger from the Washington Post via MSN:  a solid overview of what is going on in the world food markets.  Key quote:

"The food price shock now roiling world markets is destabilizing governments, igniting street riots and threatening to send a new wave of hunger rippling through the world's poorest nations....At least 14 countries have been racked by food-related violence."

3.  The Environmental Cost of Shipping Grocerys Around the World from the NY Times:  covers the environmental impacts of the globalization of the food supply.  From the article:

"Increasingly efficient global transport networks make it practical to bring food before it spoils from distant places where labor costs are lower..... But the movable feast comes at a cost: pollution — especially carbon dioxide, the main global warming gas — from transporting the food."

4.  Hundreds Protest About Food Prices in Senegal from Reuters:  pretty typical article on the food protests that are happening in many developing nations.

5.  Clean Water's Disappearing Act in the Contra Costa Times: covers the impact of the drought in Australia and other water related issues on the global food supply.

6.  Food Crisis: UN to reveal battle plan from the Times of India:  story on the UN trying to react to rising food prices.  Quote from UN secretary general Ban Ki-moon:

"Ban estimated that around 100 million of the world's poorest who previously did not require help now can not afford to buy food."

7.  Scientists focus on making better soil from the Boston Globe via the IHT.  The good news around rising food prices is it spurs innovation.  Better dirt leads to better crops.

Wall Street Journal on Suburban Farmers

One of the trends we've been tracking for some time is the growth small farms and local food production.  The front page of the Wall Street Journal discusses this in their article "Green Acres II: When Neighbors Become Farmers" (registration required). 

The article covers the growth of hobbyist farmers turning their front and back yards into mini-farms.  From the article:

".... has uprooted his backyard and the front or back yards of eight of his Boulder neighbors, turning them into minifarms growing tomatoes, bok choy, garlic and beets. Between May and September, he gives weekly bagfuls of fresh-picked vegetables and herbs to people here who have bought "shares" of his farming operation. Neighbors who lend their yards to the effort are paid in free produce and yard work."

The article points out that demand is coming from restaurants looking for fresh, locally grown foods such as arugula and kohlrabi as well as consumers.  Since it is a Wall Street Journal article, they cover the financials associated with these mini-farms:

"Start-up costs for a one-eighth-acre farm run about $5,500, says Ms. Christensen of Spin-Farming. That includes a walk-in cooler to wash and store fresh produce, a rotary tiller and a farm-stand display. Annual operating expenses, including seeds and farmers-market stall fees, can add about $2,000. Such a farm can generate $10,000 to $20,000 in annual sales, she says. That's "an entry point into farming to see if they have a talent for it," Ms. Christensen says. "Those that do will eventually be able to expand and increase that income level quite substantially."

The trends towards local food production are quite strong.  The emerging consumer buy local coalition, coupled with increasing food costs and more focus on environment is making small farms increasingly viable. 

More on Local Food and Small Farms

The press around local food and small farms continues to pick up.  The NY Times has an interactive section called "Stewards of the Land".  It focuses on a small farm in NY run by a pair who have fled NY city to become farmers.  Key quote:

"Some young urbanites are starting to put their muscles where their pro-environmental, anti-globalization mouths are."

Related to this, BoomtownUSA (my favorite blog on small towns) has a post on small farms.  Key quote:

"As I'm traveling around the country, I'm seeing a rapid growth in the number of farmstead products being produced all over the USA.  Two of the most prevalent and ones I think have the potential to become the next product like American wine are: specialty cheeses and olive oil."

We've posted several times recently on the trends around small farms and local food.  This trend continues to gain steam.  It is also a trend that crosses borders.  A Guide to Online Ireland has a Google map showing the locations of Irish farmers markets and local food producers. 

Local Harvest and A Growing Trend Towards Local Food

PSFK has a post on Local Harvest, which is a social media and directory site designed to help consumers find farmers' markets, family farms, and other sources of organic and sustainably grown food.  They describe themselves as:

"Local Harvest is America's #1 organic and local food website. We maintain a definitive and reliable "living" public nationwide directory of small farms, farmers markets, and other local food sources. Our search engine helps people find products from family farms, local sources of sustainably grown food, and encourages them to establish direct contact with small farms in their local area. Our online store helps small farms develop markets for some of their products beyond their local area."   

A number of trends are converging around local food.  We've posted in the past on the growth of small farms and farmers markets and the emerging buy local coaltion of consumers - many of whom support local farms and farmers markets.  Social media sites like Local Harvest also make it much easier and more cost effective for small farmers to find and sell to consumers.  Being able to sell directly to consumers cuts distribution costs. 

But the key shift is farm product prices are rising rapidly.  The main driver for this demand from emerging economies like China and India.  Quote from the NY Times article A Global Need For Grain:

"The high growth rate (from emerging economies) means hundreds of millions of people are, for the first time, getting access to the basics of life, including a better diet. That jump in demand is helping to drive up the prices of agricultural commodities."

This is leading to prices increases in most food products and the ability for small farmers to price at a level that makes their business viable.  From the NY Times:

"Wheat prices have doubled in the last six months. Corn is on a tear. Barley, sunflower seeds, canola and soybeans are all up sharply."

When multiple trends converge, it tends to mean the converged trend is moving to the mainstream.  This appears to be happening with local food.

Artisan Cheese Makers

The Boomtown USA blog has an post on the growth of U.S. artisan cheese makers, who make limited amounts of cheese using a high degree of handcrafting.  Quote on the growth of artisan cheese makers:

"In the first year that someone bothered to count these chees producers in 1990 there were 75.  In the count in 2006 there were over 400."

There is even an American Cheese Society promoting aritsan cheese makers. 

We've posted in the past on the growth of small farms, local food and the emerging buy local coalition.  It comes as no surprise given these other trends that small cheese production is also thriving.

Locally Grown Food Sales $5 Billion in 2007

Local farms producing and selling food products locally continues to be a growing market.  According to a recent Packaged Facts study, this market will reach $5 billion in sales this year.  Key quote from the study press release:

"Food safety issues and America’s awakening "green" culture are just a couple of the factors driving the surge in fresh and locally grown food sales, with locally grown foods expected to jump from approximately $4 billion in 2002 to $5 billion in 2007, according to Local and Fresh Foods in the U.S., a new report from market research publisher Packaged Facts."

Wegman's, the innovative northeast grocery store chain, is joining this effort.  They have begun selling produce grown on their own 50-acre organic farm to nearby grocery stores. Key quote from article in Greenbiz.com:

"...the company's CEO, Danny Wegman, said the goal is to use the land not just to grow fresh produce for sale, but to help grow the local food market in the area."

Most of the farms participating in the local foods industry are relatively small, and this is another example of niche small businesses thriving in industries considered the domain of larger enterprises. 

I first saw a reference to this on Iconoculture, which is a good source for trends.

Business Week on The Growth of Small Farms

Business Week has an article on the increasing viability of small farms, and the technology and new farming techniques used by small farmers.  It features a small farmer who has been so successful he holds sold-out weekend seminars on his mehtods.  Key quote:

"You wouldn't believe how many people come here who are desperate to exit their 'Dilbert' cubicles," he says.

I was at dinner recently with a group from a large Silicon Valley tech company and several had part-time farms, and the entire group was very interested in farming.  Given the group and our location this surprised me, but the pull of farming runs deep in our country.    

I posted earlier on the small, local farm trend and the book "Deep Economy".  It has some great statistics on the growth of local farms and local farmers' markets (over 4400 today in the US versus 340 in 1970).  A big part of the small farm movement is selling locally and developing community supported agriculture programs.  The farmer described in the Business Week article only sells locally.  He says:

"We want [prospective customers] to find farms in their areas and keep the money in their own community," he says. "We think there is strength in decentralization and spreading out rather than in being concentrated and centralized."

Small farming is clearly becoming more viable, although cost pressures and low price food imports continue to make it hard to be profitable.  However, local farms have some real competitive advantages.  One is you can go see the farm and see how the crops are grown.  Given the problems with food safety and fake organic produce, it is nice to know where and how your food is being grown.

As someone who grew up in a small farming community, I find the small farm movement and the role technology is playing to make small farms viable fascinating.  I have both fond and not so fond memories of farm work, so I think I will participate in this movement as a customer and let others do the farming.