IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v12y2020i2p708-d310362.html
   My bibliography  Save this article

Financial Viability of an On-Farm Processing and Retail Enterprise: A Case Study of Value-Added Agriculture in Rural Kentucky (USA)

Author

Listed:
  • Sean Clark

    (Department of Agriculture and Natural Resources, Berea College, Berea, KY 40404, USA)

Abstract

Value-added processing and direct marketing are commonly recommended strategies for increasing income and improving the economic viability of small farms. This case study uses partial budgeting to examine the performance of an on-farm store in Kentucky (USA) over a six-year period (2014–2019), intended for adding value to raw farm ingredients through processing and direct sales to consumers. Three primary product supply chains were aggregated, stored, processed, and sold through the farm store: livestock (meats), grains (flours and meals), and fresh produce (fruits, vegetables, and herbs). In addition, prepared foods were made largely from the farm’s ingredients and sold as ready-to-eat meals. Whole-farm income increased substantially as a result of the farm-store enterprise but the costs of operation exceeded the added income in every year of the study, illustrating the challenges to small farms in achieving a sufficient economy of scale in value-added enterprises. By the final two years of the study period, the enterprise was approaching break-even status. Ready-to-eat items, initially accounting for a small fraction total sales, were the most important product category by the end of the study period. This study highlights the importance of adaptability in the survival and growth of a value-adding enterprise as well as the critical role of subsidies in establishing similar enterprises, particularly in low-income, rural areas.

Suggested Citation

  • Sean Clark, 2020. "Financial Viability of an On-Farm Processing and Retail Enterprise: A Case Study of Value-Added Agriculture in Rural Kentucky (USA)," Sustainability, MDPI, vol. 12(2), pages 1-16, January.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:2:p:708-:d:310362
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/12/2/708/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/12/2/708/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. McBride, William D. & Greene, Catherine & Foreman, Linda & Ali, Mir, 2015. "The Profit Potential of Certified Organic Field Crop Production," Economic Research Report 262208, United States Department of Agriculture, Economic Research Service.
    2. Sumner, Daniel A. & Matthews, William A. & Thurman, Walter N. & Hayes, Dermot J. & Gow, Harnish & Norwood, Bailey, 2010. "Economic and Market Issues on the Sustainability of Egg Production in the United States: Analysis of Alternative Production Systems," Staff General Research Papers Archive 31542, Iowa State University, Department of Economics.
    3. Camenisch, Amy & Bastin, Sandra & Hege, Amanda, 2016. "Entrepreneurship on the Farm: Kentucky Grower Perceptions of Benefits and Barriers," Sustainable Agriculture Research, Canadian Center of Science and Education, vol. 5(1).
    4. Saksena, Michelle J. & Okrent, Abigail M. & Anekwe, Tobenna D. & Cho, Clare & Dicken, Christopher & Effland, Anne & Elitzak, Howard & Guthrie, Joanne & Hamrick, Karen S. & Hyman, Jeffrey & Jo, Young &, 2018. "America’s Eating Habits:Food Away From Home," Economic Information Bulletin 281119, United States Department of Agriculture, Economic Research Service.
    5. Rylea Johnson & Evan D. G. Fraser & Roberta Hawkins, 2016. "Overcoming Barriers to Scaling Up Sustainable Alternative Food Systems: A Comparative Case Study of Two Ontario-Based Wholesale Produce Auctions," Sustainability, MDPI, vol. 8(4), pages 1-16, April.
    6. Matthew Freedman & Annemarie Kuhns, 2018. "Supply-side subsidies to improve food access and dietary outcomes: Evidence from the New Markets Tax Credit," Urban Studies, Urban Studies Journal Limited, vol. 55(14), pages 3234-3251, November.
    7. Uematsu, Hiroki & Mishra, Ashok K., 2012. "Organic farmers or conventional farmers: Where's the money?," Ecological Economics, Elsevier, vol. 78(C), pages 55-62.
    8. Heimlich, Ralph E., 2000. "Farm Resource Regions," Agricultural Information Bulletins 33625, United States Department of Agriculture, Economic Research Service.
    9. Hoppe, Robert A. & MacDonald, James M., 2013. "Updating the ERS Farm Typology," Economic Information Bulletin 147120, United States Department of Agriculture, Economic Research Service.
    10. Ryan E. Galt, 2013. "The Moral Economy Is a Double-edged Sword: Explaining Farmers’ Earnings and Self-exploitation in Community-Supported Agriculture," Economic Geography, Taylor & Francis Journals, vol. 89(4), pages 341-365, October.
    11. Dettmann, Rachael L., 2008. "Organic Produce: Who's Eating it? A Demographic Profile of Organic Produce Consumers," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6446, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Ryan E. Galt, 2013. "The Moral Economy Is a Double-edged Sword: Explaining Farmers’ Earnings and Self-exploitation in Community-Supported Agriculture," Economic Geography, Clark University, vol. 89(4), pages 341-365, October.
    13. Woods, Timothy & Ernst, Matthew & Tropp, Debra, 2017. "Community Supported Agriculture: New Models for Changing Markets," Research Reports 316239, United States Department of Agriculture, Agricultural Marketing Service, Transportation and Marketing Program.
    14. Lu, Ruoxi & Dudensing, Rebekka, 2015. "What Do We Mean by Value-added Agriculture?," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 30(4), pages 1-8, December.
    15. Hoppe, Robert A., 2014. "Structure and Finances of U.S. Farms: Family Farm Report, 2014 Edition," Economic Information Bulletin 262118, United States Department of Agriculture, Economic Research Service.
    16. Duffy, Michael, 2009. "Economies of Size in Production Agriculture," Staff General Research Papers Archive 31282, Iowa State University, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jan Vávra & Zdeňka Smutná & Vladan Hruška, 2021. "Why I Would Want to Live in the Village If I Was Not Interested in Cultivating the Plot? A Study of Home Gardening in Rural Czechia," Sustainability, MDPI, vol. 13(2), pages 1-21, January.
    2. Claudia Vaderna & Robert Home & Paola Migliorini & Dirk Roep, 2022. "Overcoming divergence: managing expectations from organisers and members in community supported agriculture in Switzerland," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-12, December.
    3. Bingjie Song & Guy M. Robinson & Douglas K. Bardsley, 2020. "Measuring Multifunctional Agricultural Landscapes," Land, MDPI, vol. 9(8), pages 1-30, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marilyn Sitaker & Jared T. McGuirt & Weiwei Wang & Jane Kolodinsky & Rebecca A. Seguin, 2019. "Spatial Considerations for Implementing Two Direct-to-Consumer Food Models in Two States," Sustainability, MDPI, vol. 11(7), pages 1-23, April.
    2. Monica Allaby & Graham K. MacDonald & Sarah Turner, 2021. "Growing pains: Small-scale farmer responses to an urban rooftop farming and online marketplace enterprise in Montréal, Canada," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 38(3), pages 677-692, September.
    3. Sara A. L. Smaal & Joost Dessein & Barend J. Wind & Elke Rogge, 2021. "Social justice-oriented narratives in European urban food strategies: Bringing forward redistribution, recognition and representation," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 38(3), pages 709-727, September.
    4. Leslie Gray & Laureen Elgert & Antoinette WinklerPrins, 2020. "Theorizing urban agriculture: north–south convergence," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 37(3), pages 869-883, September.
    5. Enthoven, Laura & Van den Broeck, Goedele, 2021. "Local food systems: Reviewing two decades of research," Agricultural Systems, Elsevier, vol. 193(C).
    6. Rossi, Jairus & Woods, Tim, 2020. "Understanding Shareholder Satisfaction and Retention in CSA Incentive Programs," Journal of Food Distribution Research, Food Distribution Research Society, vol. 51(3), November.
    7. Carlson, Andrea & Greene, Catherine & Raszap Skorbiansky, Sharon & Hitaj, Claudia & Ha, Kim & Cavigelli, Michel & Ferrier, Peyton & McBride, William, 2023. "U.S. Organic Production, Markets, Consumers, and Policy, 2000-21," USDA Miscellaneous 333551, United States Department of Agriculture.
    8. Pierre Chiaverina & Sophie Drogué & Florence Jacquet & Larry Lev & Robert King, 2023. "Does short food supply chain participation improve farm economic performance? A meta‐analysis," Agricultural Economics, International Association of Agricultural Economists, vol. 54(3), pages 400-413, May.
    9. Arnaud Z. Dragicevic, 2021. "Emergence and Dynamics of Short Food Supply Chains," Networks and Spatial Economics, Springer, vol. 21(1), pages 31-55, March.
    10. Emily H. Morgan & Michelle M. Severs & Karla L. Hanson & Jared McGuirt & Florence Becot & Weiwei Wang & Jane Kolodinsky & Marilyn Sitaker & Stephanie B. Jilcott Pitts & Alice Ammerman & Rebecca A. Seg, 2018. "Gaining and Maintaining a Competitive Edge: Evidence from CSA Members and Farmers on Local Food Marketing Strategies," Sustainability, MDPI, vol. 10(7), pages 1-21, June.
    11. Horst, Megan & Gwin, Lauren, 2018. "Land access for direct market food farmers in Oregon, USA," Land Use Policy, Elsevier, vol. 75(C), pages 594-611.
    12. Rachel Soper, 2020. "How wage structure and crop size negatively impact farmworker livelihoods in monocrop organic production: interviews with strawberry harvesters in California," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 37(2), pages 325-336, June.
    13. Claudio Vitari & Erin Whittingham, 2018. "Tackling Conventional Agriculture: The Institutionalization of Community Supported Agriculture's (CSA) Principles," Post-Print halshs-01923789, HAL.
    14. Felix Zoll & Caitlin K. Kirby & Kathrin Specht & Rosemarie Siebert, 2023. "Exploring member trust in German community-supported agriculture: a multiple regression analysis," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 40(2), pages 709-724, June.
    15. Durant, Jennie L. & Asprooth, Lauren & Galt, Ryan E. & Schmulevich, Sasha Pesci & Manser, Gwyneth M. & Pinzón, Natalia, 2023. "Farm resilience during the COVID-19 pandemic: The case of California direct market farmers," Agricultural Systems, Elsevier, vol. 204(C).
    16. Catherine Brinkley & Gwyneth M. Manser & Sasha Pesci, 2021. "Growing pains in local food systems: a longitudinal social network analysis on local food marketing in Baltimore County, Maryland and Chester County, Pennsylvania," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 38(4), pages 911-927, December.
    17. Filip Hampl, 2020. "A statistical analysis of the financial performance of organic and conventional farms in the Czech Republic with respect to their size," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(1), pages 1-9.
    18. Tezcan Mert-Cakal & Mara Miele, 2020. "‘Workable utopias’ for social change through inclusion and empowerment? Community supported agriculture (CSA) in Wales as social innovation," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 37(4), pages 1241-1260, December.
    19. Volkov, Artiom & Morkunas, Mangirdas & Balezentis, Tomas & Streimikiene, Dalia, 2022. "Are agricultural sustainability and resilience complementary notions? Evidence from the North European agriculture," Land Use Policy, Elsevier, vol. 112(C).
    20. Stevens Azima & Patrick Mundler, 2022. "Does direct farm marketing fulfill its promises? analyzing job satisfaction among direct-market farmers in Canada," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 39(2), pages 791-807, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:12:y:2020:i:2:p:708-:d:310362. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.