Business Article - "Agriculture on the Web," Dan Sumner, Agricultural Issues Center, University of California
Updates to www.AgMRC.org
State Profile - SE United States Region - Agritourism Conference
Business Profile - Santa Cruz Farm
Research - Religion and Food
AgMRC Highlight - Wine Templates
Upcoming Events
The AgMRC Action is the official bi-monthly publication of the Agricultural Marketing Resource Center - your source for value-added ag information. The AgMRC is a dynamic collaboration of university research and outreach specialists focused on collecting and interpreting information and creating new research to support value-added agricultural activities. All information contained in this newsletter can be found on the site, www.agmrc.org.
This newsletter features new updates, information and resources available at the Agricultural Marketing Resource Center (AgMRC) to assist producers, service providers, rural development specialists and others with value-added agriculture resources. AgMRC was formed as a national virtual resource center for value-added agricultural groups. AgMRC exists to provide producers and processors with critical information in a one-stop-shop to build successful value-added agricultural enterprises.
The Center's Web site, www.AgMRC.org, contains information on various commodities and products, including many market niches farmers can pursue. There is also information on how to start a business and selecting a business structure. Other topics include how to write feasibility, marketing and business plans.
The site contains links and AgMRC-developed pieces on everything from networks of ethanol cooperatives to organic beef producers to a value-added worm business. Directories list value-added consultants, value-added agriculture businesses and applicable laws specific to each state.
I encourage you to visit the AgMRC web site at www.agmrc.org and take a few minutes to learn some new facts about a commodity, do some research on developing a food business plan or see what is happening in your individual state.
Please let us know your thoughts and suggestions for the newsletter. The center's email is agmrc@iastate.edu or call us toll-free at 866-277-5567.
Sincerely,
Christa Hartsook,
Communications specialist, AgMRC
Rolf A.E. Mueller, Daniel Sumner and Michael Clasen*
A few years ago prognosticators envisioned a world in which the internet would take over and commerce would flow at the speed of light. This transformation would yield increased efficiencies and the withering of “brick and mortar” businesses. Massive investments were poured into Web-based business including e-commerce for agriculture. Oddly, it seemed at the time that the less a start-up could demonstrate a plan for profit the more capital would be available. The Web is still with us, of course, and AgMRC (a Web-based virtual center) is an example of that. But the heady days of the late 1990s are over and the dot-com bubble has burst. Many agricultural e-commerce sites have vanished, and e-commerce has developed only slowly, surprising many of its advocates. Surprises are opportunities for learning. Now is an opportune time to review the current situation of agriculture on the Web and what we can learn from the recent history.
Commercial farmers are computer active and Web ready
According to the most recent data (NASS 2005), 58 percent of U.S. farms have computer access and about half of all farms have Internet access. As expected, computer and Internet access are higher on larger farms: For farms in the U.S. with annual revenue of more than $ 250,000, 79 percent have access to a computer and 72 percent can connect to the Internet. Empirical studies have identified several commonsense factors, in addition to farm size, that significantly affect Internet adoption by farmers. Younger and better-educated farmers are more likely to adopt the Internet. Also, farmers who draw up farm plans and who emphasize management over physical labor activities are more likely to be internet users.
However, farmers are still shy e-commerce users. About 9 percent of farms reported purchasing agricultural inputs over the Internet in the 2005 survey (up from 8 percent in 2003) and 9 percent conduct agricultural marketing activities over the Internet. Again, purchasing and marketing on the Internet is more frequently found on larger farms. About 18 percent of farms with annual revenue of more than $ 250,000 use the Internet for purchasing inputs and 23 percent use it for marketing activities.
Agriculture is information intensive and USDA is a large supplier of reports, but relatively few farms (11 percent) use the Internet to access USDA reports. Again, accessing of USDA reports is more likely on larger farms: 28 percent of farms in the bracket above $ 250,000 of annual revenues download USDA reports.
Options for revenue from agricultural information on the Web
Selling agricultural goods on the web is a challenge that involves distribution of physical products. Selling information solves that problem because information products themselves can be distributed over the internet. The Web is a versatile medium that also allows information suppliers to enhance the value of their products for information users. Recouping costs is, however, a challenge on the Web.
The two basic options for generating revenues online are online sales of information and sales of advertising. We inspected 81 Web sites that provide agricultural information for their capacity to generate revenue. The Web sites were operated by agricultural extension and outreach organization (21 sites), agricultural portals (15 sites), farm magazines (10 sites), farm machinery and input suppliers (12 sites), agricultural market advisory services (12 sites), and other agricultural organizations (11 sites). These were major sites chosen because they had the largest number of visitors in their category.
Overall, relatively few agricultural Web sites are designed to generate revenue from selling information. Only 19 percent of the Web sites offered priced contents and 36 percent were equipped to sell information products, such as magazines or printed reports. Between categories, however, about 83 percent of Web sites of market advisory service firms offer priced content but only 5 percent of the extension and outreach web sites offer priced content, even though 48 percent of extension and outreach Web sites support online sales of their printed information products.
About one third of the 81 agricultural information Web sites carried advertisements. Again, there are significant differences between Web site categories: No extension and outreach Web site and no Web site by a farm machinery and input supplier contained third-party advertisements, but all Web sites of farm magazines carried advertisements.
We have no data on revenue from advertisements. However, given the small number of visitors and the low click-through rates, revenues from advertisements are likely to be small and may be outweighed by their costs in terms of user distraction and user annoyance.
Agricultural Marketplaces: A Tough business, but some survive
Web-based marketing in agriculture began when six agribusiness market places went online in 1996. Clasen (2005) studied 233 agribusiness market places that were on the web from 2000 through 2003. The number of active market places peaked in March 2001, when 208 marketplaces were actively trading. After that a few entered and many left. At the beginning of the year 2003, only 113 market places had been maintained during the previous twelve months and the rest were inactive. By July 2003, there were 177 agricultural market places on the web. Overall, the differences in business activity at the markets were huge: a very small number of markets had many visitors whereas most had few, and about one third of the markets showed no signs of activity.
A Web market must allow sellers to post offers and buyers to post their bids. The market must allow sellers to describe their products and allow buyers to assess the descriptions. For this purpose 91 percent of all market places featured a product catalogue at their Web site. The Web market must also specify how communication is conducted between buyers and sellers. One third of the Web markets used auctions. Few markets assisted traders in making and assuring payment (17 percent), and even fewer provided product guarantees (11 percent) or reputation information (6 percent) on buyers or sellers.
Three points summarize what we garnered from the study of 233 agribusiness market places on the Web: (i) Being an established business that does not try to collect fees from traders is conducive to market liquidity and success. (ii) Features such as auctions, information services and advanced inter-organization communication systems do not foster success, and may be detrimental. (iii) Agricultural machinery sells on the Web but livestock and other farm inputs or outputs have not sold well on the Web.
Lessons for e-commerce in agriculture
What have we learned from our review of the current situation for e-commerce? First, commercial farmers are ready for Web-based commerce and are willing to participate. Second, for commercial value, technological sophistication is not the key. The site must have a clear purpose that fits the business. Third success requires experiment and learning. Farms and agribusinesses can learn from each other and from information suppliers outside agriculture. Finally, e-commerce is not itself a winning niche; firms must have a sound business reason to use the Web and a product that is Web compatible.
References
Clasen, M. (2005): Erfolgsfaktoren digitaler Marktplätze. In: Weissenberger-Eibl (Hrsg.): Gestaltung von Innovationssystemen, Cactus Group Verlag, Kassel 2005,
Mueller, R.A.E. 2000. Emergent E-commerce in Agriculture. AIC Issues Brief No. 14, Agricultural Issues Center, University of California, Davis, CA.
National Agricultural Statistics Service (NASS) 2005. Farm computer usage and ownership. Washington, DC: Agricultural Statistics Board, U.S. Department of Agriculture. Washington. DC. Released July 29, 2005. http://usda.mannlib.cornell.edu/reports/nassr/other/computer/
* Mueller is Professor of Agricultural Economics at University of Kiel in Germany. Sumner is director of the University of California Agricultural Issues Center and the Frank H. Buck, Jr. Professor in the Department of Agricultural and Resource Economics at UC Davis. Clasen did his Ph.D. on Web market places at University of Kiel. This article was written while Mueller was a visitor at the UC Agricultural Issues Center. The authors thank Omid Rowhani for research assistance.
Commodities & Products
The following pages were updated: agritourism, biodiesel, branded/certified beef, commodity poultry, eggs, ethanol, floriculture, game birds, natural beef, pumpkins, wind energy and Midwestern wine.
The following new materials were added: interactive spreadsheets and videos on the wine industry are now online at AgMRC. The financial feasibility spreadsheets are included in two workbooks and the Total Wine Package videos, all available on the AgMRC Web site at http://www.agmrc.org/agmrc/commodity/fruits/ wine/wineryfeasibility.htm.
Business Development
During the last few months, the amount of information available on the Web site that focuses on business development has expanded.
The major sections for Business Development are:
- Getting Started
- Starting a Business
- Operating a Business
- Strategy and Analysis
Currently there are more than 100 categories (separate subject matter sections) of business development information spread across these major sections.
Three major sections were added: Stakeholder Issues, Interviews & Presentations, and Business Workbench.
Staff added three interviews with video, audio, as well as transcriptions of interviews.
Thirty-four major sub-sections were added and 781 article links were added.
Markets & Industries
The following pages were updated: market trends, direct marketing, industry structure, traceability and vertical coordination.
Additionally, the ethnic foods section was pulled out of market trends and expanded to its own page with current resources and its own industry overview.
State Profile - SE United States Region
A group of more thirty professional agritourism service providers, several agritourism farmers, and others interested tourism industry from universities and tourism-related industries met in Tifton, Georgia in late June to begin the organizational process for the Southeast Region Agritourism Networking Association. The three-day meeting came to a successful conclusion with a commitment to meet in Raleigh, North Carolina in February 2006 to continue the organizational process and begin membership recruitment.
Kent Wolfe, Marketing Specialist at the Center for Agribusiness and Economic Development, and Martha Glass, manager of the Agritourism Office in the Marketing Division of the North Carolina Department of Agriculture and Consumer Services, initiated the idea of the regional organization early in 2005, and Wolfe arranged to host the first meeting at the University of Georgia Tifton Campus Conference Center.
Georgia Governor Sonny Purdue, who has a special agritourism committee in his office, was represented at the meeting, and North Carolina Commissioner or Agriculture Steve Troxler sent a letter of support.
Representatives from North Carolina, South Carolina, Georgia, Tennessee, Kentucky, Virginia, Florida, Arkansas and Mississippi attended. The group came together quickly and agreed and strongly supported the efforts of the meeting - to support the growth of agritourism farms as a part of the growing rural tourism industry, and share information and training opportunities to help agritourism farmers succeed.
Much discussion centered on the use of the term ‘agritourism’ and its limits, agreeing that the public as a whole is not familiar with the term. When a tourist wants to find a farm for fun, the word ‘agritourism’ is a difficult one to know or remember or even spell. Another question the group will continue to discuss is the degree to which this group will focus on rural tourism as a broad umbrella under which agritourism falls.
North Carolina also shared information on new liability insurance legislation that favors lower premiums, and another law which requires new health regulations on animal exhibits at county fairs and the North Carolina State Fair. This information is being distributed to agritourism farmers with barnyard animal exhibits since the public is increasingly aware of the responsibility both visitors and farmers should take for a safe and healthy farm visit.
Advocating for agritourism farmers on the local, state and national level is a future goal of the group.
Discussion about the term ‘petting zoo’ also came up. We agreed that using ‘barnyard corrals’ or ‘barnyard animals’ or ‘petting paddocks’ are terms which do away with the impression carried by using the word "zoo" since the public wants to see our cows, goats, chickens, sheep, llamas, horses, donkeys, alpacas and other farm animals.
At the meeting in February, a larger attendance is expected. Final plans will be put in place to enable farmers who already have agritourism farm activities as well as those who don’t to belong, to an organization which will support their efforts to improve their family farms and increase their income through networking, training and sharing best practices.
Santa Cruz Farm: Merging Traditional Production with Modern Technology
Combining traditional agricultural production methods with modern technology and marketing techniques isn’t easy. Just ask Don Bustos, of the Santa Cruz Farm in New Mexico. Santa Cruz Farm grows 76 different varieties of crops the entire 12 months of the year and bases their entire farm profitability on direct farm marketing, including local farmers’ markets, a Community Supported Agriculture (CSA) program and wholesale accounts.
“We farm according to the moon cycles and the sun's energy and with a little help from modern technology, we can extend the growing season in order to bring an ever-widening variety of fresh, locally grown food to the community all year long,” Bustos said. “Our traditional practices combined with our modern hoop houses and greenhouses allow us to grow certain foods twelve months a year. In this way, we maintain our traditional lifestyle, as we continue to play a valuable role in our community.”
Santa Cruz Farm is a family-owned and operated certified organic farm, located in the Espanola Valley in northern New Mexico. The farm encompasses three and a half acres of land and 10,000 square feet of greenhouse and cold frames.
It has been part of the Bustos family since the late 1600s. The farm began growing organic crops 10 years ago and established a summer and winter CSA program nine years ago. The farm produces traditional and regional crops grown in New Mexico, but also specialty crops not typically found in the Southwest.
The farm’s rich history begins with its name. The Santa Cruz Farm was named after the church and the Santa Cruz del la Canada land grant. The land grants in New Mexico were given by the king of Spain in the 1500s and 1600s to encourage people to travel to the new world and establish claims for Spain. Families were given a large piece of land, some to individuals and typically to communities. The Santa Cruz land grant consisted of 44 thousand acres and was established as a communal grant for 15 families. The original grant was lost, but lobbyists in New Mexico are working to establish original land grants as a division of state government, much like a department, to purchase land part of the original land grant and foster economic development within the area.
Water for the farm is also part of its history and supplied by a traditional system known as acequias. Acequias are 400-year-old systems and based on the premise that everyone is equal and should receive a fair share of water to grow crops, water livestock and to drink. Acequias are governed by a commission, which establishes release times, water rights, disputes and cleaning times. Santa Cruz Farm uses a drip system to help conserve this water when irrigating crops.
Production on the farm begins in cold frame structures to create a protected climate zone with layers of cloth and plastic, much like an igloo effect. Plastic mulches keep the soil warm and prevent the root zone from freezing. This allows the farm to produce spinach, swiss chard, lettuce mix, arugula and kale during the winter months.
In the spring, production begins 30 days earlier than normal. Plastic mulches again heat the soil and cold winter crops are moved outdoors. The cold frames are then free to start warm weather crops such as basil, tomatoes and cucumbers. This allows Santa Cruz Farm to get to farmers’ markets early with locally produced crops.
By April, all major crops are outside and field crops such as chile, squash, cucumbers and beans are seeded. Harvest then begins on asparagus and strawberries. The farm recently expanded to raspberries and blackberries.
Summer brings the harvest of squash, cucumbers and green chile. By early fall, the majority of production is moved back inside the greenhouses and cold frames and the cycle begins again.
Produce is marketed at farmers’ markets, a steady CSA subscription and wholesale accounts. The majority of the farm income is supplies through the farmers’ markets. Wholesale accounts have generally been the least profitable, but Bustos hopes that trend is reversing.
“A business consultant was hired to help area farmers approach their farm as a small business,” Bustos said. “I was fortunate enough to participate in the classes. Out of the program, I developed the three-prong marketing plan much like a milk stool; if one leg is a little weak, you can still balance on the other two.”
Santa Cruz Farm travels to three farmers’ markets on four days, making 70 percent of their income in direct sales to consumers. Green chile is the best summer crop and is now grown on approximately one full acre of the farm.
“Another very popular item is our strawberries, which are the only strawberries currently being grown in the region,” Bustos said. “Due to their rare status, these delicious organic berries are snapped up fast and bring a high price at the farmers’ markets.”
The CSA began after a church group visit to the farm in winter. The group was impressed with the cold frame production and the green produce ready for sale, originally grown for wholesale accounts.
“The only problem (with the wholesale accounts) was that I was at the mercy of the market value set by large, sometimes international corporations and receiving prices that were only making a small return on my capital investment,” Bustos said. “Establishing a CSA allowed me to charge full farmers’ market price and have capital early in the spring for the farm, without a loan from the bank.”
Summer membership in the CSA is around 35 members and costs $425 for fresh vegetables weekly. Summer shares include asparagus, beets, bell peppers, bok choy, broccoli, cabbage, carrots, chile, cucumbers, eggplant, green beans, herbs, okra, onions, peas, potatoes, radishes, raspberries, salad greens, spinach, strawberries and tomatoes.
Participating in the CSA supports local food systems in the local economy and supports environmentally friendly and sustainable organic production, according to Bustos.
Winter membership is capped at 35 members and includes many fresh green products.
Wholesale accounts mean competition on a bigger scale for market share in stores and restaurants. Government has been encouraging schools to buy direct from small farmers. Santa Cruz Farm was selected to supply Santa Fe school district with salad greens through this Farm to School program.
“The greatest result is that young children are now eating healthy, locally grown food produced by their neighbors on farms in their region,” Bustos said. “Thus, we are helping save the environment, addressing social issues, land and water issues and supporting the local economy.”
Modern technology is still benefiting this traditional farm. Santa Cruz Farm is researching solar heating processes, allowing the farm to grow more heat sensitive crops longer into the winter and earlier in the spring. In this process, water is heated and moved underneath the beds to heat the soil and trap warmer air.
“Thanks to modern advances and the increasing support for locally grown food, Santa Cruz Farm is able to function dependably while helping fill the needs of more and more members of the community through methods best suited to each one,” Bustos said. “In this way, we maintain our traditional lifestyle while evolving to suit the needs of our environment and of our community.”
AgMRC Research - Religion, Religiosity, and the Consumption of Timesaving Foods
Abstract
This paper studies the effect of the intensity of religiosity within a specific religious affiliation. Different religions have different ruled regarding to what is allowed to be eaten, husband and wife division of labor inside and outside the household, and the degree of pluralism within the household. The last two: the division of labor and the level of pluralism are part of more general social norms that are dictated by each religion. The intensity of religiosity determines the level of commitment to these norms.
The importance of religiosity within religion goes far beyond the size of the share of devoted individuals, and can be expanded to vegetarianism, environmentalism, and anti-genetically modified foods.
Using data collected in Israel on purchases of four types of poultry, we find that in some cases, preferences for traditional lifestyles dominate immediate economic considerations, and religious, low-income individuals buy fresh products, although frozen meat is more affordable.
Introduction
Previous empirical research on food purchases estimated the effect of prices, income, and quality of food on demand. Becker (1965) introduced the concept of the family production function where a single decision maker allocates income and time resources between work inside and outside the household. This seminal framework added time resources need to convert market goods to products consumed at home to the cost of the goods. This framework was extended to analysis of family choices explicitly incorporated constraints generated by institutional arrangements, such as marriage, divorce, polygamy, and other customs and practices, on resource allocation (Becker's , 1981) His approach has been applied to analyze labor allocation and consumption patterns in the developing world (see Schultz's survey, 2001). Family size, gender, and social customs induce positive subjective costs that affect consumption and labor choices (Strauss and Beegle, 1996).
Akerlof (1980) suggestd that choices of individuals take into account the impact of their activities on family reputation within the context of social norms and codes of behavior. The concept of social norm is found to be an important explanatory variable, which combines with economic and social responsibility considerations in medical choices (Goodmons and Glaudin, 1971; Osterhus 1997). Based on this theory, Kanekar and Merchant (2001) found that religion and gender directly affect choices. However, social norm considerations have not been incorporated in studies of food consumption.
This paper studies the effect of the intensity of religiosity within a specific religion affiliation. Tradition and social customs that are part of every religious society vary between different religions and the level of religiosity determines to what extent these norms are kept. Religious norms specify what is allowed and forbidden to be eaten, the religious ritual, and many aspects that pertain to family daily life. The division of labor inside and outside the household between husband and wife, and the degree of pluralism depend pretty much on value of keeping traditional values, which was found to be common to all religions and increase with level of religiosity. The interpretation what is held to symbolize traditional values vary between religions.
To view the full paper on the AgMRC Web site, visit http://www.agmrc.org/NR/rdonlyres/91773921-BFF8-4E0C-9A20-4A4020198515/0/Religion_3cov4.pdf.
Interactive spreadsheets and videos on the wine industry are now online at the Agricultural Marketing Resource Center (AgMRC) Web site to help producers determine whether a winery or vineyard might be feasible for their operation.
The United States has seen a rebirth in its wine industry, according to experts at Iowa State University Extension. “For example, in July of 2001, Iowa had 13 wineries,” said Craig Tordsen, value-added agriculture specialist. “We currently have 44 wineries within the state. The growth has been tremendous.”
“The renewed interest in wineries in the United States has also prompted interest in vineyards and wineries from other producers,” he added. “These tools give those researching the industry a better understanding of what is involved and what they can expect.”
The financial feasibility spreadsheets are included in two workbooks and the Total Wine Package videos, all available on the AgMRC Web site at http://www.agmrc.org/agmrc/commodity/fruits/ wine/wineryfeasibility.htm. Funding for this project was provided in part by the Leopold Center for Sustainable Agriculture, which has conducted and sponsored several research projects to redevelop Iowa’s grape and wine industry. Additional funds are from the AgMRC and Iowa State University Extension Value Added Agriculture Program.
According to Tordsen, the Ten-Year Winery Financial Planning Workbook can be used for any size winery. The program is flexible when it comes to options for sources of capital, equipment, marketing, staffing, fixed and variable expenses and sales projections. Reports include an asset and depreciation Schedule, a two-year monthly cash flow, a ten-year cash flow, income statements and balance sheets with a percentage analysis.
The Cost to Establish a Vineyard Workbook is designed to report all income and expenses of a one-acre vineyard for up to 13 years. There are three different vineyard workbooks, each for a different trellis style.
Three short videos, The Total Wine Package, explore the opportunity of growing grapes and making wine, a behind-the-scenes look at the science of enology, and selling a total wine experience. The videos have been streamed to download quickly at various connection speeds.
For more information, visit AgMRC online at www.agmrc.org or phone at 866-277-5567 or visit the ISU viticulture Web page at http://viticulture.hort.iastate.edu/.