2004 Triennial Conference JUNE 16 8:00 A.M. - 9:45 A.M. SESSION A Rural Development Issues

Transcription

1 JUNE 16 8:00 A.M. - 9:45 A.M. SESSION A Rural Development Issues 2004 Triennial Conference Change in Rural America Social and Management Challenges June Four Points Sheraton Hotel Lexington, KY

2 Past the Pumpkin Patch: Market Development Programs at the University of Kentucky s New Crop Opportunities Center 1 Matt Ernst, Extension Associate Tim Woods, Associate Extension Professor University of Kentucky 2 Introduction It is a substantial farm management challenge to replace a high-input, high-value, high-profit crop such as tobacco. Some tobacco producers turn to vegetable and fruit crops as alternatives because the producers are looking for high revenue per acre and often have limited resources to explore other ventures. Many have turned to pumpkins because pumpkins, like tobacco, can be successfully produced with minimal management and marketing. Pumpkins have thus served as a sort of entry-level new crop for tobacco producers attempting diversification. However, producers in Kentucky face a competitive disadvantage for wholesale pumpkin production from nearby states like Ohio, Indiana, and especially Tennessee, where pumpkin acreage has doubled to 4,500 acres since Furthermore, returns from wholesale pumpkin production where marketing time is minimized do not nearly approach the level of return to management from tobacco. It has not been impossible for Kentucky growers to profitably enter into wholesale production of higher-value produce crops. There have been several independent and cooperative marketing successes for C.E. Barnhart Building, Lexington, KY ; (859) Scribner, Bryan. Tennessee increases stature. The Packer, 1 September 2003, C9. Kentucky growers of vegetables like bell peppers and sweet corn in recent years. 4 But whether peppers or pumpkins, no single crop will be the silver bullet that replaces lost tobacco income in the southeastern agricultural economy. 5 This realization has resulted in a widespread search by researchers and producers to find other lower-acreage, higher-profitability crops to help replace lost tobacco income in Kentucky. The search has been aided by various extension initiatives including the University of Kentucky s New Crop Opportunities Center. It has become apparent during the search for new crops and new farm income sources for Kentucky that producers may not be able to rely on a solitary market channel or single marketing method to maximize returns from new crops. Therefore, in combination with production research questions, extension initiatives to address crop diversification in Kentucky have included many questions about marketing and market channels such as: Where are new crops sold? Where are they purchased? 4. Co-ops give farmers strength in numbers. Lexington Herald Leader, 29 July 2002, Gentry, Karen. Southeasterners Pursue Tobacco Alternatives. The Vegetable Growers News, April issue00_04/00_04_tobacco_alter.html 1

3 2 JUNE 16, 8:00 A.M. - 9:45 A.M./A: RURAL DEVELOPMENT ISSUES Past the Pumpkin Patch: Market Development How are local food consumers different in different regions of the state? How do producers market to these different preferences? The University of Kentucky s New Crop Opportunities Center 6 has sought to integrate these kinds of marketing questions into research and education efforts for farmers who are diversifying production to enhance farm profitability. The Center supports research on specialty crops, offers electronic and printed education materials, and provides on-farm demonstrations of selected crops. The Center s programs have emerged concurrent with the Kentucky State Legislature s commitment to invest 50% of the state s tobacco settlement monies into diversifying Kentucky s agriculture. New Crop Opportunities Center on-farm research in 2004 will include crops like kabocha squash, bitter melon and blueberries intended solely for cost studies and market research projects. This not only represents an effort to couple practical farm management and market research alongside production research questions but, in some cases, focuses onfarm research efforts to solely answer farm management and market research questions. This paper will recount the stories of four farms that have benefited from these kinds of market research programs. Rather than describe in detail specific marketing projects, this paper seeks to evaluate the challenges and service delivery approaches used to respond to needs of individual producers and producer groups. The stories here are true; only the names have been changed to protect the innovators. Four kinds of new crop adopters This paper focuses on the kinds of market research and development programs that have benefited these farm innovators. But we would be remiss not to offer a brief word about the four new crop adopters mentioned here. All of these producers, either literally or figuratively, have moved beyond the pumpkin patch, 6. For a list of the Center s current projects, see adopting direct and wholesale marketing techniques onto their farm. Half of them rely on farming as their primary source of income; half do not. They are also all over 40 years old, which is the reality for most farmers in Kentucky and nationwide. These growers represent a diverse range of farm backgrounds and experience. One is a recent retiree; others are looking to their new crop enterprise for retirement income. Two are full-time farmers, while two are part-time. Two are on farms of less than 50 acres. Two are incorporating younger generations into their operation. All possess nearly a full range of financial management skills and all are deeply enthusiastic about their new enterprises. Many market to varying ethnic groups. Both men and women play a critical role as primary decision makers in these operations. These producers are all successfully adopting new crop enterprises and are utilizing New Crop Opportunities Center research and programs on their farms. In short, they represent as accurate a cross-section of Kentucky s agriculturists as any group might. R&E down on the farm: Will and Nancy Schilling Several recently successful farm entrepreneurs in Kentucky have represented a growing sector of agricultural entrepreneurs: aging or retiring baby boomers seeking a rural enterprise to provide retirement income and lifestyle. These retirees often have a rural or farm heritage and/or experience. In addition, they frequently bring business management, technical, and marketing skills to their farm enterprise from careers in the non-farm sector. Finally, if the entrepreneur is a husband-wife team, one might be a native Kentuckian while the other is not. Will and Nancy Schilling belong to this breed of farm entrepreneurs. Will has led a successful career in manufacturing and Nancy is market-savvy. They have an orchard heritage, having both grown up on fruit farms Nancy in Kentucky and Will further north. They have established a flourishing tree fruit orchard and berry acreage, as well as pumpkin and gourd production, on their farm of over 100 acres. Currently, the farm provides less than 50% of their household income, but they are developing their

4 JUNE 16, 8:00 A.M. - 9:45 A.M./A: RURAL DEVELOPMENT ISSUES Past the Pumpkin Patch: Market Development 3 orchard enterprise for retirement lifestyle and income. On-farm marketing comprises the major part of their revenues. Will and Nancy contacted the New Crop Opportunities Center with a common marketing question during the winter of They wondered if their on-farm price for Pick-Your-Own (PYO) brambles and blueberries was too low or too high. They wondered if it might be possible to raise their price, yet feared negative effects on their consumers. Still, having had to turn berry customers away each year, they wondered if there was room to raise their PYO berry price. Pricing is a common question for direct marketers of new crops. Consumer surveys conducted in Central and Southern Kentucky from sought to quantify the amount that farmers market consumers were willing to pay for local PYO berries (Table 1). Since their farm was located near the survey point in Central Kentucky, Will and Nancy were able to more comfortably raise their PYO price based on the survey responses. Their operation suffered no ill effects from the price raise; as they have increase production, they have had to still occasionally turn a few customers away. This Extension educational success paved the way for on-farm market research at Will and Nancy s farm. During the following season (2003), intercept surveys were conducted of some of their on-farm berry customers. The goal of the research was to compare consumer preferences for berry presentation and packaging at on-farm markets, community farmers markets and grocery stores. Will and Nancy were enthusiastic about including the survey at their farm market. They also were particularly interested in one of the questions on the survey, which asked respondents what zip code they lived in. Tracking where their purchasing customers were from was information that Will and Nancy, who copiously maintain a general mailing list, had never gathered. In addition to learning what kinds of packaging made her berries most attractive to her customers, Nancy was able to make some advertising decisions for their fall festival using this zip code information. Will and Nancy: Lessons and challenges Will and Nancy have taught us several lessons during the course of their involvement in market research at the New Crop Opportunities Center. They are already good marketers. Yet there were some very simple pieces of information that they lacked concerning their customers. They discovered during the course of a simple customer-intercept survey that this information was easily obtainable. The lesson learned here is that on-farm research need not be artificially separate from the operation. With flexibility and creativity, our research goals can contribute to the immediate well-being of our clientele and cooperators. The experience at Will and Nancy s farm is ongoing. They have asked this year for assistance in learning how to better serve a significant segment of their tree fruit customers, the ethnic Asian market. Cross-cultural farm rules and picking guidelines, pricing guidelines, and even utilizing more familiar packaging for ethnic customers are areas where Nancy believes they can improve in growing an important market niche for their operation. The challenge for New Crop Opportunities Center personnel is obtaining or creating adequate educational resources for ethnic markets, as well as providing the cross-cultural sensitivity to assist the Schillings in growing this market. Will and Nancy also belong to the agritourism sector, a sector that has long been part of Table 1. Kentucky blueberry customer PYO interest and willingness to pay n= n=129 Lexington Metcalfe County Lexington Metcalfe County Interested in local PYO 58% 42% 53% 44% Not interested 42% 58% 47% 56% Mean $ /lb. willing to pay for PYO $2.13 $1.24 $2.19 $ Ernst, Matt and Tim Woods. Marketing Highbush Blueberries in Kentucky. Table 4. University of Kentucky Department of Agricultural Economics AEC-EXT

5 4 JUNE 16, 8:00 A.M. - 9:45 A.M./A: RURAL DEVELOPMENT ISSUES Past the Pumpkin Patch: Market Development Kentucky s horse industry but has expanded into other areas of agriculture. They have requested assistance in helping identify why people attend their farm festival days research that can be duplicated at other sites in Kentucky. With such requests, Will and Nancy have helped push us beyond traditional produce supply chains into helping quantify characteristics of the many types of Kentucky produce consumers. Educating the company they keep: Justin Miller Justin Miller is one of over 40 percent of Kentucky farmers who both market produce commercially in Kentucky and grow tobacco. 8 He derives all of his household income from farming and is a fairly recent entrant into the produce industry with less than seven years of produce growing experience. He is a member of one of Kentucky s produce marketing cooperatives and has chosen to continue to expand his produce acreage in spite of breaking even or losing money in two of the five years that he has grown produce. Justin is a member of the demographic of produce growers most likely to have consulted the New Crop Opportunities Center for resources in 2003: commercial growers marketing produce through a co-op or farmers market. It seems odd, at first glance, that Justin would benefit from marketing research programs. His needs are most immediately met by some of the Horticulture Extension Associates funded by the New Crop Opportunities Center who provide technical assistance and on-farm demonstrations to co-op growers. Justin has benefited as a member of a marketing co-op which has drawn on the print and electronic resources developed by the center. Last year, the co-op added new crops to its marketing mix during certain market windows during summer and fall season. Its managers requested regional price data on specific commodities before completing this marketing diversification. This data was collected through some of the ongoing projects at the Center. 8. Ernst, Matt and Tim Woods Kentucky Produce Planting and Marketing Intentions Outlook. Justin: Lessons and challenges Justin is probably one of the Center s clientele that neither wants nor needs personal marketing assistance. He is more interested in refining his production practices. Yet the marketing association with which he is affiliated does benefit from data collection and demand analysis for certain crops. The Center achieves a more holistic educational goal by responding both to the needs of Justin and his marketing association or group. This is nothing new. Extension has been responding to the needs of producer groups, like co-ops, since its inception. The challenge, as evidenced with Justin and other growers, is how we respond to closely related client groups with diverse interests. Justin demonstrated this point in 2003 when the market for one of his vegetable crops experienced an extraordinary price dive due to national weather conditions. The Center received requests from both producers and co-op management to help explain the market downturn. Rather than responding in-depth to the varied individuals, the decision was made to disseminate market information at co-op member meetings and through traditional Extension education channels. The challenge of educating diverse client groups including agribusiness, producer, and policy groups is one that even Extension research efforts near or on the farm will continue to address. The strategy for providing market information to Justin and the staff and members of his co-op allowed information that might have been spun differently by different members of the supply chain to be presented objectively to all members. The continuing challenge is to assist diverse, yet related, groups with marketing new products. These groups can bring differing philosophical commitments or business commitments to the table. As the next producers demonstrate, deepproducer commitment to grassroots organizations and entrepreneurship can potentially place Extension educators in something of a dilemma. Extension outreach for the evangelists: Tommy and Sharon Linscomb and Eric Milton Tommy and Sharon Linscomb bring several new characteristics to the traditional picture of Kentucky crop farmer. They are non-native Kentuckians who

6 JUNE 16, 8:00 A.M. - 9:45 A.M./A: RURAL DEVELOPMENT ISSUES Past the Pumpkin Patch: Market Development 5 moved to Kentucky to begin a farming enterprise. They have become strong advocates for a particular farm product and grassroots leaders for cooperative production and marketing activities. They are not hesitant to use new or emerging marketing mechanisms including Internet-intensive advertising, farm produce auctions and supplying locally appropriate inventory for local grocery produce sections. A commitment to their ideal of free-market entrepreneurship and grassroots marketing efforts has sometime placed Tommy and Sharon in conflict with advice offered by numerous agriculture development agencies and researchers. However, they have been enthusiastic participants in several marketing projects conducted through the New Crop Opportunities Center, including projects that tracked wholesale and retail prices for some of their produce across the state. Eric Milton also represents a different sort of producer. Independently wealthy and owning large amounts of land, he does not directly depend on agriculture for a significant portion of his income. Yet he is enthusiastic about a certain commodity and has recruited numerous producers and industry members to promote this crop. He also cooperated in a marketing project that incorporated extensive cross-disciplinary work between agricultural economics and family and consumer sciences to tout the nutritional benefits of Eric s crop as a marketing advantage for prospective agricultural entrepreneurs. Tommy and Sharon and Eric: Lessons and challenges Tommy, Sharon and Eric have directly benefited from the educational activities of the New Crop Opportunities Center from the Center s efforts in crop-specific regional education activities and price discovery research. Some produce crops, such as those which these producers earnestly espouse, lend themselves well to creative marketing and interdisciplinary efforts. At the same time, as any slightly experienced Extension field employee discovers, the relationship between champions of products and Extension educators can be a tenuous one. Producers like Tommy and Sharon are sometimes hesitant to engage in cooperative marketing efforts because, no matter how much enthusiasm prevails, they are concerned about their bottom line. Champions of new products also can have a reluctance to relinquish their perceived control and ownership over a particular commodity or association even when their actual control is much less than perceived. Meanwhile, a champion like Eric who does not rely on his crop for his primary income can create other dilemmas for Extension educators. He can develop a crusader-like mentality, wanting to convert other producers and commodity growers to his favorite (and, in all fairness, viable) enterprise. Continual demands for educational and market support resources before they are actually needed in the development of a new crop can drain valuable time and resources from other products and regions. These are substantial challenges for educators with limited resources. A lesson (and challenge) from these two situations involved realizing an exit strategy from the situations. Marketing projects can easily be completed in a season, and the completion of these projects provided a natural exit from situations that could become potentially draining on both personnel and resources. The products were not abandoned; in fact, substantial on-farm research continues with both the Linscomb and Milton enterprises. But the primary, educational role of extension was emphasized in each circumstance. It is ultimately the producer s job to use information to help expand his or her own market. Educating the educators: Mack Combs Mack Combs has lived in the same county all his life. In many ways, he is a typical Kentucky farmer: over 50, deriving just more than half his income from farming (his wife works away), a heritage of growing tobacco and other crops. His farm is small, less than 50 acres, but he has worked hard and experimented with many different crops and production systems. In other ways, he is unlike the majority of Kentucky farmers. He has effectively adopted direct marketing to increase his profit margins from fruit and vegetable crops, marketing at several farmers markets and planning to test on-farm marketing in the future. Many traditional tobacco farmers lack either the

7 6 JUNE 16, 8:00 A.M. - 9:45 A.M./A: RURAL DEVELOPMENT ISSUES Past the Pumpkin Patch: Market Development enthusiasm or skills for direct marketing to consumers. Mack lacks neither. He is a skillful people person and is enthusiastic about local growers diversifying crop production. He sees profitable local markets for his produce crops, which he often markets as part of his Kentucky culture. Mack has benefited from marketing programs affiliated with the New Crop Opportunities Center in a variety of ways. He was a cooperator for some of the consumer surveys conducted at farmers markets. He is also currently participating in an on-farm research project evaluating production costs for a new crop in his area. Mack has enthusiastically recommended the Center s programs to other growers and, as a leader at the markets where he sells, has been a valuable resource for developing relevant educational efforts to affect a greater sphere of new crop producers. Mack: Lessons and challenges Perhaps more than any other cooperator, Mack has demonstrated the importance of consumerfocused research in Extension education efforts. He brings an innate sensitivity to consumer needs, sensitivity half inborn and half learned through years of marketing experience. This sensitivity has helped inform the emphasis placed on learning who direct market consumers of Kentucky produce are. Mack s cooperation with consumer surveys has helped contribute to this success. Mack is also committed to sustainable production methods, as are many in Kentucky s produce industry. Refining conventional budgets and marketing information to reflect sustainable sensitivities continues to be a challenge faced by marketing education efforts in Kentucky and all agriculture. Through our work with Mack, we have been reminded of the universal marketing principle: knowing your consumers. Through his cooperation, Mack has reminded us that the customer is most important. All our production economics are useless without a customer to sell farm products too. There is still much work to do in quantifying differences among consumers of direct marketed farm products in our state. Some of these differences are intuitive; others will take considerable research efforts with cooperators like Mack. Finally, Mack has reminded us that a large segment of producers, especially those in the world of new crops, place a great deal of value on less easily quantified production attributes. The quality of the producer s life and sustainability of a farm s production are just a few of the things that Mack values. Many of his customers also value these and the challenge for research and education is integrating our efforts to reflect the needs of a likeminded producer/consumer base. The pumpkin half: Some conclusions from lessons learned It is an educated, but likely, guess that well over half of Kentucky s produce growers have produced pumpkins commercially at one time or another. Mack Combs, Justin Miller and the Linscombs have produced pumpkins commercially but have moved on to other, more profitable crops. Pumpkins are an entry level new crop for many Kentucky farmers and former tobacco growers; however, unless pumpkins are integrated into a larger marketing plan, they cannot provide the level of income necessary from a high-return crop. The New Crop Opportunities Center marketing education and research activities described here have dealt with a diverse product range: sweet corn, peppers, specialty soybeans, berries, and tree fruit. The sheer diversity in the world of alternative crops makes it necessary that educational efforts are easily adaptable between crops. Marketing peas and paw paws is dramatically different; yet developing and perpetuating sound principles and strategies that apply to drastically different crops is always useful. The principle of attending to all sides of the supply chain in new crop marketing education and research is also learned from each of these situations. In most of these cases, research among consumer and focus groups has helped niche producers refine their marketing efforts and increase net farm incomes. Continued attention to consumer research, and cross-disciplinary efforts with horticulture and family and consumer science, will continue to be a prime part of Extension farm marketing education efforts for new crops in Kentucky.

8 JUNE 16, 8:00 A.M. - 9:45 A.M./A: RURAL DEVELOPMENT ISSUES Past the Pumpkin Patch: Market Development 7 Perhaps the greatest challenge for Extension marketing educators at the University of Kentucky s New Crop Opportunities Center is also been the greatest strength of the Center and the movement toward agricultural diversification in the state: the sheer diversity of potential new markets and products. From sweet corn and soybeans to paw paws and pecans, and everywhere in between, Extension research and education efforts are challenged to address a diverse and unique producer and consumer clientele. The richness of that diversity, combined with the successes and challenges this paper has sought to describe, promises fertile future integration of marketing education efforts with production and economic research at the University of Kentucky s New Crop Opportunities Center. Additional resources Detailed reports of the studies and projects mentioned in this paper can be obtained by contacting the authors or visiting Ag/HortBiz/