Magazine March 2019

To Market, To Market

market

By Eric J. Francis

Farming is, increasingly, also marketing. As Arkansas growers seek to meet the evolving tastes and expectations of consumers, they are exploring distribution methods outside of traditional channels.

When Chris Isbell’s father grew the first crop of rice on the family’s Humnoke farm in the late 1940s, getting the crop to market meant doing what most other Arkansas farmers did: joining a co-op (in his case, a nascent Riceland Foods), delivering his rice there and sharing in the profits after it had been processed, packaged and sold.

Then, about a decade later, the family bought a neighboring farm that had some on-site storage for rice, providing Isbell Farms the ability to market some of their rice to mills themselves. Since then, the farm has expanded its on-site storage and drying capacity, but Isbell acknowledges that there are trade-offs between doing it yourself and selling through a co-op.

“Most people tell you that [with on-site storage] you have the advantage of selling into the market after the glut of harvest is over,” says Isbell, who has passed management of the family’s rice operation to his son, Mark. “The mills have their markets — grocery stores, wholesalers — lined up; they have their monthly requirements. So, at harvest time, the mills have plenty of rice with no reason to increase the price to the farmer.”

Being able to sell out of that cycle, or to have rice on hand when other producers have mediocre harvests, means you can respond to demand and maybe get a higher price, he says. But on the other hand, the co-op model offers a guaranteed market even if the return to the farmer is smaller.

And those two models, Isbell says, are pretty stable — he doesn’t anticipate anything changing them. That’s why, when it comes to finding new ways to market rice, he’s turning instead to specialized varieties that will end up on the table but not necessarily the dinner plate.

“We have the Japanese rice, the sake rice,” Isbell explains.

While farming may seem timeless and unchanging to the outsider, the methods by which farmers get their products to market and identify new potential markets are currently in a state of flux, driven not so much by advances in logistics or technology but by changes in consumers’ tastes and expectations. With rising consumer demand for organic foods and for transparency in how those foods are produced, farmers are adapting how they market their products and, in some cases, taking upon themselves responsibilities that have traditionally been the role of processors, distributors and co-ops.

Ron Rainey, an extension economist focusing on marketing and risk management at the University of Arkansas Cooperative Extension Service in Little Rock, says social change is one of the main factors driving this. 

“Consumers are at, what I would say is, an unprecedented level of seeking information — the interest in food-labeling laws, how was this grown, where does this come from, hormones, antibiotics, GMOs,” he says. “As consumers seek that info, you see an additional growth or need of transparency in that marketing space.”

One response to this has been farms that market their products directly to consumers, either at farmers markets or via their own labels. This is attractive, Rainey says, because farmers see it as a way to make more money. He cites a 2016 study finding that only 15 cents of each dollar spent on food makes its way back to the farmer. The rest is consumed by transportation, processing, marketing and the like.

“We’ve seen a solid, increasing trend of growth — though it’s still a small segment — in direct-to-consumer and direct-to-institution [sales],” Rainey says. “Consumers are demanding it, and farmers are trying to increase their margins.”

Farmers are also taking an entrepreneurial approach through methods like consumer supported agriculture (CSA) programs, where one or more farms sell subscriptions to customers and make regular deliveries of meat and produce, as well as through agritourism — inviting consumers to visit their farms and see how their animals and crops are raised. Rainey calls this “relationship marketing.”

“We live in an experiential society,” he says. “People want to experience stuff and have that experience when they’re eating, as well. [Agritourism] is an opportunity to build that relationship.”

That can lead to changes in the way you farm, as Michael Lee has experienced. He’s the farm manager of Flying C Ranch between Conway and Vilonia, where he started working in 2001 while still in high school. Originally a cow-calf operation that sold its cattle at 7 to 8 months of age to a stocker, four years ago the farm started marketing some of its beef directly to consumers and offering more transparency to their customers.

“When we set up at farmers markets, we’d tell consumers to come to the farm, come to see us,” Lee says. “The number-one thing we got when people came out here was, ‘Where is the water source?’”

Up to that point, Flying C’s cows had been using ponds and creeks to get their water — and to cool off when it was hot, meaning that when nature called… well, there was “all sorts of stuff” going into those water supplies, Lee says.

“That doesn’t look good,” he says. “So, we installed 13 water tanks, got the cows out of the ponds and started clean water sources. That does good for nature, too — it lets those ponds and creeks recover.”

And it’s just one example of how marketing directly to consumers has made Flying C more efficient at farming, Lee says. 

“We have implemented rotational grazing, installed electric fence systems, we’re getting more out of our forage base and land,” he says. “Before, we used 2,000 round bales [of hay] a year; it takes $20 to $30 at least to produce that bale. What we’re doing with foraging has cut our hay bales down to 1,000. That’s money right off the top, and that’s huge for me.”

Flying C is still selling some calves through the traditional stocker/feedlot channel, and Lee says there are pros and cons to both systems. When they sell to the stocker, their calves are younger so they invest less money raising them. But, of course, the stocker and feedlot each add value that is passed on to the consumers, so Flying C’s return on each calf is smaller. On the other hand, the calves they use for their direct-to-consumer beef are kept longer, which means a higher expense for food, but Flying C also gets more money from the end product. Also, their herd is smaller these days — down from 300 “momma cows” to about 150, which they breed with Angus bulls — and they are focusing on genetics, in consultation with the University of Arkansas Cooperative Extension Service. 

“They’re producing the calf I want,” Lee says, “the calf that will produce exactly what I want to sell to the consumer.”

Farmers markets and private labels are not the only avenues for organic crops. There’s a growing demand for them within the more traditional distribution models, as well.

Shawn Peebles, of Peebles Organics in Augusta, sells to large organic processors. Photo by Keith Sutton, Arkansas Farm Bureau.

Shawn Peebles owns Peebles Organics in Augusta, which produces sweet potatoes, edamame, green beans and pumpkins. Everything he plants has already been sold in advance — not to the public through a CSA, but to processors behind national brands.

“We don’t raise a crop that’s not forward contracted — we have a home for it,” says Peebles. “We are here to fill the niche of an organic product for large processors who are trying to put that in the store.”

If Gerber or Seneca Foods or Del Monte calls up and needs 400 acres of a specific variety of green bean grown organically, his farm can do that. But it’s likely that consumers will never know they’re eating Peebles Organics produce since, as he notes, “we’re the people behind the people” whose names are on the label. 

While some of the processors he deals with are Arkansas-based, such as American Vegetable Soybean & Edamame in Mulberry and Matthews Ridgeview Farms in Wynne, Peebles says it isn’t likely that much of his produce is winding up on the plates of Arkansas consumers.

“What’s driving our market is Millennials,” he says. “We sell very little product in Arkansas. We’re a rural state, for the most part; our products are sold on the East Coast, West Coast — large metropolitan areas where people are more health-conscious and have a higher education.”

Organic products are currently one of the most active retail markets, Peebles says, and in 2016, the U.S. Department of Agriculture reported a 13 percent growth in certified organic farms and businesses. But while the segment is growing every year, price points are down.

“The reason is you’re seeing Walmart and companies like that carrying organics now,” he says. “They’re not going to pay a high price for organics; they want to see a competitive price. Ten years ago, [organic] soybeans were $30 a bushel; now I’m selling them for $18.”

Peebles Organics markets some of his soy beans through American Vegetable Soybean & Edamame in Mulberry

But the falling prices are, to a degree, counterbalanced by the increase in demand, Peebles says, and as a result “we’ve leveled out today.”

It helps that he’s been able to identify niches, both regarding demand and in processing capacity.

“What we’re looking for every year is the crop that nobody else is growing. There’s only a handful of organic sweet potato farms in the U.S., probably fewer than 10 to 15. That was a good market for us. And American Vegetable and Soybean is the only solely edamame production plant in the U.S. We’ve got a foothold here in Arkansas but are always looking for the next niche.”

And Peebles already knows what niche market he intends to fill next.

“We’re looking at CBD,” he says, referring to cannabidiol, a marijuana plant extract that won’t make you high but has medical applications. “Hemp production — that’s where we’re going.” 

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