“Your uniqueness is the only source of profitability that cannot be competed away, and thus, is the only source of sustainable profits.” –John Ikerd 1
Value-added agriculture entails changing a raw agricultural product into something new through packaging, processing, cooling, drying, extracting or any other type of process that differentiates the product from the original raw commodity. Examples of value added agricultural products include garlic braids, bagged salad mix, artisan bread, lavender soaps and sausages. Adding value to agricultural products is a worthwhile endeavor because of the higher returns that come with the investment, the opportunity to open new markets and extend the producer’s marketing season as well as the ability to create new recognition for the farm. Increasingly, value-added products are hitting the local market as producers take advantage of high-demand product niches. This is the key to success in value added agriculture—niche markets are where smaller producers can be most successful in creating value and establishing a profitable business.
A study of fourteen farmers in the Southern US conducted by ATTRA and the Southern Sustainable Agriculture Working Group identified ten keys to success when pursuing a value-added business. These include: starting small and growing naturally; making decisions based on good records; creating a high-quality product; following demand-driven production; getting the whole family or partners involved; keeping informed; planning for the future; continuing evaluation; persevering and having adequate capitalization. 1 Take these recommendations into mind when you are designing your product and business plan.
Value added agriculture is not without its challenges to farmers. One of the largest hurdles to overcome is that of food business and safety regulations. For example, if you are interested in taking your organic blueberries and turning them into a high quality jam that you can sell at the local farmers’ market, you must be a licensed commercial kitchen in order to produce that product and sell to local consumers. You will also need to carry liability insurance if you are selling at the farmers’ market to cover any sort of illness or other food safety issues that may arise. The Oregon Department of Agriculture’s Food Safety department handles the licensing of food businesses in the state of Oregon. These regulation challenges make it difficult to get started in the value added business, but with a solid business plan in place, producers can be successful in overcoming obstacles to their food business dream.
Another example of a significant challenge for starting a value-added business is putting together your recipes or formulations for the product you are developing. For instance, making soap from your lavender flowers requires time and effort in finding the right recipe for high-quality soap. You will also want to research the market potential for your product in order to define your customer profile, so that you are not wasting your time in formulating a product that will not sell. The Food Innovation Center is an excellent resource for small business owners interested in starting a value-added business. They can assist with formulation, education etc.
Starting a value-added agricultural business is an exciting opportunity for the small farmer interested in diversifying and exploring new markets, but starting small and finding your niche is key to your long-term success. Evaluate the risks associated with the business and have a solid plan in place to keep you on the right track.