Overstory #13 - Value-Added Products
Farmers, ranchers and foresters have a history of selling products at the lowest market value. This is not sustainable, as it can force growers to push the land and themselves past a healthy threshold just to survive economically. Sustainable agriculture has to be about more than just how we treat the planet-- it has to create a day to day economic and personal reality that the grower can sustain healthfully.
"Value-added" is simply anything you can do to raise the value of your product in the market, anything you can add to it that enables you to increase your profit margin. Value-added practices often mean the difference between a farm that is economically viable and personally fulfilling, or one hat ultimately cannot be sustained financially or personally. Value-added practices are key to the future of sustainable farming, because they enable growers to advance economically without having to "pump up" the production of raw materials from the land.
Value-added agricultural products range from very intricately processed and packaged, to simple additions or processes that can add to the worth. Let's look at a Kona, Hawaii coffee farm for an example of how value-added works. In the world commodity market the farmer's price for generic coffee is about $0.15/lb. If you were growing coffee in Kona, you wouldn't have to sell in the world commodity market, but can sell your coffee cherry to a Hawaii Island processor at premium prices up to $1.10/lb. If instead you processed your own coffee during the off-season, roasted and packaged it, you could then sell it to retailers at about $8/lb. Finally, by setting up a outlet on your farm, coffee connoisseurs would then pay you directly upwards of $20/lb. You increased your gross income 10-15 times by processing and selling rather than just selling the coffee berries. You may be interested to know that at least 100 Kona farmers are processing their own coffee and selling it as a high-value product. And nobody sells Kona coffee at its lowest value on the world market.
Another example comes from the town of Esperance, Western Australia, a coastal desert town that once had a failing fishing economy. The fishing economy was based on the fishermen selling large tuna fish to a local cannery. Large fish were hard to find, though, and small fish were not accepted by the cannery. However, by doing research and taste-tests, some fishermen discovered that their small "worthless" fish qualified as Grade A Sashimi in Japanese and restaurant markets. Suddenly a resource they had in abundance- smaller fish- could be sold for about 6 times more money than they ever made selling the hard-to-catch big fish to the cannery. Esperance is now rather famous for quality sashimi, as well as some spin-off value-added operations including smoked fish.
Even products such as fruits and vegetables sold in a "raw", fresh state can be more profitable if marketed well.
Ways to Add Market Value to Agricultural Products
- Grow organically (many people happily pay 30-60% more for better taste and health)
- Sell something unusual or hard to find (exotic fruits, medicinal herbs, etc.)
- Have a special farm or estate label, or a recognizable brand
- Assemble produce in special ways (stir-fry bundle, prewashed salad mix, mixed fruit baskets)
- Sell direct and deliver to high-end consumers such as restaurants, who put a premium on freshness
- Focus on produce which is of special quality from your land or climatic niche (sweeter papayas, special varieties of onions, etc.)
Perhaps you already are familiar with some of these practices, but are reluctant to try to charge more than your competitors even though you know your product is worth more. If this is you, remember: it is something of a myth that buyers always want to get the cheapest thing. Most buyers really are looking for the best value for their money, and they know that the cheapest is not always the best. If your product is more expensive than they can get it elsewhere, make sure they understand why. Is it higher quality? Better tasting? A superior variety? Sustainably or organically grown? Crafted by an artist? As long as the value is there, people are glad to get it, and may even choose a higher priced product if they are convinced it is worth it. Building a personal relationship with buyers is also very useful in this process, as is having a recognizable, known farm or estate name.
Value-adding to your products can improve your economic situation, as well as add value to your life. Value-adding to your products gives you room to express yourself more fully, be more creative, to create a personal presence in your products. Marketing more like an entrepreneur than a wholesaler is also a good feeling, as you'll start to feel more in control of your financial life and less at the mercy of the market prices.
Lee, Andrew. 1993. Backyard Market Gardening: The Entrepreneur's Guide to Selling What You Grow. Good Earth Publications, Box 4352, Burlington, VT 05406-4352.
Sirolli, Ernesto. 1995. Ripples in the Zambezi: Passion, Unpredictablility and Economic Development. Institute for Science and Technology Policy, Murdock University, Murdock, WA 6150 Australia
Schumacher, E.F. Small is Beautiful: Economics as if People Mattered. Harper & Row, New York, NY.
About the Authors
Kim M. Wilkinson is the Education Director for Permanent Agriculture Resources and editor of The Overstory. She has B.A. degrees in Anthropology and Ecology from Emory University.
Craig R. Elevitch is an agroforestry specialist with more than ten years of public and private sector experience in tropical agroforest and forest management. He has a M.S. degree in Electrical Engineering (Dynamical Systems) from Cornell University.
Related Editions to The Overstory
- The Overstory #63--Small-Scale Value-Added Enterprises
- The Overstory #62--Marketing Principles
- The Overstory #55--Nontimber Forest Products Part II: NTFP Enterprises