Many farmers have felt the pinch of falling food prices over the past year. Some sectors of the ag industry, especially dairy, are in a free fall, with our fellow farm friends hurting badly as low prices, consolidation, and other forces forcing many to sell off operations or even sell their farms. It is difficult days, but as I noted in my earlier article, things haven’t been good for US farmers in quite some time. Smart farmers who want to stay in farming are looking for ways to stay or become profitable.
Yet some farms and farmers are are faring better than others, especially those who have incorporated direct to consumer or value added products into their operations.
“ERS looked at Census of Agriculture data showing that 61 percent of farms with direct-to-consumer (DTC) sales in 2007 were in business under the same operator in 2012, compared with 55 percent of farms without DTC sales. In a comparison of farms across four size categories (defined by annual sales in 2007), farmers with DTC sales had a higher survival rate in each category. The difference in survival rates ranged from 10 percentage points among the smallest farms to about 6 percentage points among the largest.”
Farms that direct market and value add also have greater control over their prices and sometimes, far less competition. So let’s get acquainted with the basics of value adding to what our farms produce.
What are value added products?
“Value-added agriculture entails changing a raw agricultural product into something new through packaging, processing, cooling, drying, extracting or any other type of process that differentiates the product from the original raw commodity.”
Sounds fancy, but it is often quite simple. Perhaps you grow corn. Maybe instead you grow popcorn and wholesale it or direct market it locally or even online. So instead of getting a few dollars a bushel you now get a few dollars a pound on for your corn.
Or maybe you raise beef, and instead of taking your cattle to auction you have some processed into summer sausage at a USDA facility for direct to consumer sales. So instead of getting the going auction rate, you now get $10 or more per pound.
These are not just theoretical examples. These are actual products farmers I know and work with from around the country raise, value add, and sell at a fair profit. They saw their existing operations and looked for promising products that they could diversity into based on current strengths, infrastructure, and equipment. It is a strategy that makes sense - consumers of all type love the convenience of value added products and generally don't mind the additional cost.
But what does it take to get into value added items? Let’s look at just a few of the opportunities and challenges that you can expect to face when going value added.
Legal and Regulatory
The first hurdle for value adding is regulatory - what can and can’t you do on farm, or what infrastructure and improvements would you need to have to pursue an enterprise?
Perhaps you want to make pickles from your cucumbers. Or jellies and jams from your berries. Or artisan breads from your grains. These products can often turn a low value crop into a high value end product, or allow a farmer to make use of excess, unsold, or otherwise compost pile or animal feed destined produce that is still perfectly fine - it just lacks a buyer.
Many farmers may not realize that most states have Cottage Food laws - laws that specifically exempt from most types of licensing and regulation and allow on farm production of particular, generally low risk food products. These laws also stipulate what sales venues are allowed under the laws - usually, wholesale to stores and restaurants is off the table. All types of direct to consumer sales - farmers market,s roadside stands, and the such are allowed.
These laws vary by state and change regularly - for instance, my home state of Kentucky recently greatly expanded their cottage food law just a few weeks ago. A number of national organizations, especially the Institute for Justice, are working hard to expand these laws and opportunities they will create for small businesses, especially farms. So even if your state is somewhat restrictive at the moment, things could be very different in just a few years. Also some heavily regulated states, such as California, have quite liberal cottage food laws. So it may be worth checking out what you can and cannot do in your state instead of just assuming.
To see a summary of your state’s cottage food law, visit can visit
Also, two states in particular are leading the way towards food sovereignty, where farmers are exempted from almost all regulations for direct to consumer sales. Wyoming was the first to adopt such legislation in 2015. After a few years of positive results and no food safety or other issues, they expanded it even further in 2017.
You can read more about it here
Maine also recently passed food freedom legislation, though not without a bit of drama when the USDA threatened to pull the state’s meat inspections unless the legislation was tweaked to not step on their toes. More states have considered or will be considering this legislation in the coming years, and such laws could open opportunities for some farming operations not seen in over a hundred years.
Local infrastructure and options
Sometimes, direct to consumer sales or government regulations don’t give us farmers any wiggle room to capture more of the a consumer’s food dollar right on farm. But that doesn’t leave us without options, it just requires that we become more creative.
In some areas, taking advantage of the infrastructure of other businesses can quite literally save the farm. With the demand for local food continuing to grow, many dairy farmers, already seeing the writing on the wall with declining dairy demand and increasing imports, starter to transition to local, value added dairy products. Some had to build the infrastructure to turn their fluid milk into butter, cheese, and yogurt, but many have found local processors to work with, creating their own brands that now command premium prices and give the farmer far more control over their product’s pricing and their farm’s futures. Some operations, such as Trader’s Point Creamery, now are distributed regionally and even nationally. Many smaller operations and brands dot the landscape, filling profitable niches.
Local and regional value added dairy products are doing quite well in spite of the incredibly low current commodity dairy prices.
Photo credit: Jacob Coleman of Sweet grass Dairy
This doesn’t just apply to dairy - local, artisan meats have experienced a resurgence as well, along with many small outfits that now can take various cuts, primals, or even whole animals, and turn them into products that even average consumers want to purchase. Smoking Goose in Indianapolis is just one of hundreds of such operations.
While some areas are already saturated with local beef, pork, produce and many other unprocessed products, many value added items such as butter, sausage, cheese, and so much else is still sometimes under-served. A smart farm that moves into these areas early and does well producing a quality product and connecting with consumers is setting themselves up for future success and far less fear over fluctuating wholesale food prices.
Also, some of these enterprises create opportunities for function stacking. For instance, a farmer making cheese or butter will produce high value whey, a perfect food for hogs. Given that the biggest expense in animal feed is the protein component, a perfect match waits for the farmers who can put the pieces together. A farm could go even further, having the hogs turned into various sausages and other chaucertierie products. These can be paired into various packages and sold to higher end customers in your area or all over the United States. Consumers already purchase such items and do so at a premium price, so there is nothing stopping a farmer from doing so as well.
Experience, Expertise and Resources
While there is a great deal more to discuss regarding going value added, at the end of the day you will be the limiting factor - your skills, experience, expertise, resources, and resourcefulness. But you also may not have to go it alone. In many states, programs now exist to help farmers transition to new products or into value added markets. Such programs may help a farm bridge the gap between their current setup and infrastructure and a new, viable business enterprise for their operation.
Other benefits and challenges to value added
There is a great deal more to discuss about value added products. For instance, for farms in isolated areas or in low population density regions, value added products can open up much larger markets. But doing so requires far more planning - website and online sales, shipping and different approaches to marketing all come into play. Some farms have banded together to reduce the costs and increase their likelihood of success. How does that work? How do you make that happen? Options are endless. Or perhaps a farmer already has a well established value added product, but needs more supply. You could fetch a better price for your products by selling to them, benefiting both parties. Examples of all these arrangements are each worth an article of their own.
Do you do value added? OR have you thought about it? If so, what is holding you back? OR what else would you like to learn about pursuing ways to build upon or diversity what your farm is already doing?
Apr 9, 2018
Value Added Products - The future for farms of all sizes?
Many farmers have felt the pinch of falling food prices over the past year. Some sectors of the ag industry, especially dairy, are in a free fall, with our fellow farm friends hurting badly as low prices, consolidation, and other forces forcing many to...
Read more »
Apr 13, 2018
From an economic analysis stand point, I feel like the value-added business must buy the raw product from the farming business (at least on paper) to determine if value-added makes sense. In other words, as the article correctly outlines, does spending all of the extra expense involved in changing my lambs from livestock to packaged meat actually increase my overall profitability? In our business, we've learned that if we can't raise live lambs profitably, no amount of "value-added" will change this.
Apr 14, 2018
I think there are a number of ways to handle measuring, quantifying, and keeping track of such things. As you point out, what really matters though is that the business does figure out and does quantify the additional income vs. expenses.
Hope you are well and that your operation has a great 2018!
Some individuals may not be listed above if they shared content without first signing in.