Risk vs. Reward

August 2, 2010 at 6:59 pm Leave a comment

Value-added agriculture is often touted as a means toward economic development in rural areas. And who couldn’t use a few extra coins in their pocket?

But the concept, while widely endorsed, isn’t always widely practiced.

A recent Iowa Farm and Rural Life Poll shows that many farmers, or at least those that responded to the survey, are reluctant to add a new business venture like a farmstead cheese plant to their dairy or a custom-raised meat enterprise to their livestock operation. A mere 9 percent of respondents were involved in a value-added ag business.

Seventy percent of participants agreed that many farmers would rather take an off-farm job rather than start a value-added enterprise, and 67 percent agreed that many farmers just don’t want to start something new.

There’s more:
• Sixty-six percent of participants reported that markets for products other than unprocessed major commodities are limited in their area.
• Sixty-two percent agreed that demand for alternative agricultural products is uncertain.
• Sixty percent of participants agreed that many farmers would feel uncomfortable trying to market products directly to customers.
• Fifty-eight percent concurred that many farmers do not have sufficient business development experience.
• Half agreed that farmers are just not aware of opportunities to start value-added businesses.

These are all valid points, but there’s more lurking behind these numbers. Agriculture is an inherently risky business, so risk should be nothing new to farmers. But it’s a bigger issue that one would think when it comes it value-added ventures. In fact, perceived risk appears to be a major impediment to participation in value-added ag enterprises, say experts at Iowa State University.

The road to success is littered with failures and false-starts, so learn everything you can from those who have gone before you. But I contend that someone will find success; why can’t it be you?

Value-added agriculture’s potential lies in creating long-term solutions rather than short-term fixes, says Don Hofstrand, Iowa State University extension agricultural economist and co-director of the Ag Marketing Resource Center.

“It contains the elements for solving many of the problems facing farmers and rural America over the coming decades,” he adds. “It allows you to move away from the “Pac Man” growth strategy so common in farming in recent decades. This is a growth strategy where farmers gobble-up neighboring farms. This results in fewer farmers and smaller rural communities.”

Furthermore, value-added agriculture provides an alternative growth strategy that allows you the opportunity to expand by moving upward in the food chain (that’s integrating with or without you) rather than expanding horizontally. At the very least, it’s worth looking into.

“By moving aggressively, farmers have the opportunity to play a role in the development of this new integrated system,” says Hofstrand. “This opportunity will provide farmers a greater role in the ownership and control of the new system.”

Doesn’t that seem like you take some of the risk out of your future?

Source: Shannon Linderoth, associate editor, Dairy Herd Management



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