Extension Communications
3614 Administrative Services Building
Ames, Iowa 50011-3614
(515) 294-9915
1/25/2000
Contacts:
Mark Edelman, Extension Economics, (515) 294-3000, x1edelma@exnet.iastate.edu
Del Marks, Extension Communication Systems, (515) 294-9807,
dkmarks@iastate.edu
PLAIN ECONOMIC SENSE, Column 396
For release Jan. 25, 2000
Supporting Iowa Farms in the New Industrial Agriculture
By Mark A. Edelman
Extension Public Policy Economist
Iowa State University Extension to Communities
(Third in a series)
The last column in this series examined future roles for family farms in the evolving industrial agricultural system. This column examines the differing keys of success for each farm type. Not surprisingly, the policy tools for supporting each farm type are becoming quite different.
What can be done to support commodity farms selling on shrinking open markets? The ability to hang in there during periods of low profitability -- by relying on production efficiency, accumulated wealth, other ag enterprises and off farm sources -- will be a key to success. Maintaining access to new production technologies and superior genetics will be important. Assuring fair marketing practices in the open market will be important. Access to alternative bidders, prevention of price collusion (anti trust) and access to accurate market information are examples. Some policy makers are proposing moratoriums on mergers and requiring that a share of commodity production be sold via open markets.
Some farmers are requesting assurance that customer preferences are accurately transmitted through commodity/open market pricing incentives and farm product evaluation standards. Access to effective public/private sector programs and/or experts in risk management for crop and livestock producers may allow these operations to weather longer-term periods of low profitability and low cash flows. Continued efforts to assist beginning farmers and experienced managers in honing their marketing, finance, production and business planning skills will be factors in their success.
What can be done to support supply chain farms under contract? Evaluating and choosing a supply chain and contract are keys to success. Assuring access to information on industry contracting standards and supply chain track records is important. Policymakers can set minimum contract standards and assure ability to monitor complaints. Contracts imposing exclusive buy back and bundling requirements for generic inputs can be prohibited. Assurance that contract disputes will be adjudicated in local courts is important for farmers who contract with out-of-state firms.
Some universities are examining public/private research partnerships that preserve proprietary information but create unique research and education opportunities for meeting the needs of the supply chain stakeholders. Supply chains are more likely to flourish under policies that do not arbitrarily assure protection of open markets but that do require reporting of market information. Given the stormy relations that can develop between franchisees and franchisors, supply chain farms operating under contract may periodically need assistance to iron out differences and problems that develop with supply chain managers.
What can be done to support ownership integrated supply chain farms? Expertise for evaluating contracts still will be key, similar to other supply chain farms under contract. However, access to technical assistance and capital are perhaps more important for farmer groups working through a process of creating their own startup venture. These startups can take on a variety of types such as value added enterprises, new co-ops, limited liability companies and joint venture partnerships with other existing agribusinesses and entrepreneurs with unique industry expertise.
Business development and technology assistance, entrepreneurial mentoring networks -- such as ISU Extension's Value-Added Agriculture Initiative -- venture capital tax credits and community seed capital funds are potentially important tools for assisting in the formation of new supply chain networks and alliances. These entities also have needs for research and information similar to other supply chain networks, and farmers who participate will still have a periodic need for mechanisms to iron out management issues.
What can be done to support direct marketing/speciality farms? Development of community food systems and fresh produce farmer market networks can be key for various types of farms that sell directly to consumers. Development of effective organic and/or ethnic food standards and labeling can be important as long as they reflect factors that are of concern to consumers. While proximity to metropolitan areas has often been sited as a success factor, there are examples of direct marketing specialty farms out in the hinterland that also have developed a loyal base of repeat customers.
In addition, E markets and overnight delivery systems have created newly emerging national and international venues of commerce. Developing more client-driven partnerships like the Leopold Center to do customer/retailer research and client-driven training programs on direct marketing, managerial skills, management information systems and industry expertise could be an important method of supporting these farms. Tax incentives for venture capital and community seed capital funds can be important as well as business development and technology assistance, entrepreneurial mentoring and assistance in organizing direct marketing networks and alliances.
What can be done to support the growing numbers of part time farms? In the current environment, it is key for some family farms to recognize that their long-term household income goals may not be reached by full-time farming. ISU Extension's Farm Financial Planning Program is designed to provide a financial assessment to determine if long term family goals are realistic given farm earnings and cash flow projections. With record low unemployment and a strong overall economy, additional programs to assess employable skills of family members and skill training for jobs available in the commuting region may be a key for transition. Companies are reaching out further into the hinterland to find skilled workers, so programs to match companies within commuting distance with under employed farm household members can help rural families in transition, rural communities and the Iowa economy all at the same time.
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