Increasing agricultural profits

A consumer-driven trend in the global food industry has opened opportunities for agricultural producers to get some control of their profits, says a food industry consultant.
The new model, called value chains, will give producers, processors, distributors and retailers better profit margins, says Terence Ackerman of CBI Marketing of Guelph, Ont.
"Value chains will allow you to take a holiday when you want instead of hanging on by your nails," he told a Saskatchewan Agriculture workshop in Moose Jaw Tuesday.
The value chain is a network of businesses from producer to retailer working together, sharing risks and benefits with the common goal of a profitable product consumers want, he said.
Opportunities for producers arise from global concerns for food safety, health, nutrition, yet retaining flavour, he said.
Large companies such as Kellogg's and Wal-Mart are reformulating 10,000 products annually in the U.S. simply to meet consumer demands on food safety, nutrition, and environmentally sustainable practices.
Products need to differentiate themselves from the competition to get a market advantage, Ackerman said.
Europe is way ahead of North America in value chains because of the 1990s BSE scare, he said.
The product code on European eggs in a carton, when punched into a computer, will download pictures and information about the farm each egg came from.
"We have home court advantage in Canada. Surveys show Canadian consumers trust food produced in Canada." Instead of looking south, he said, try the Greater Toronto Area market, fourth largest in North America
Opportunities exist in locovares (locally sourced food), organic, kosher and halal certified foods as well as with food retailers needing new products.
Advantages of the network include knowing what each operator needs to make a profit and in reducing costs by working together.
If more eyeballs review your processes they can see different ways of doing things to reduce costs, improve quality and consistency.
The value chain works backwards from the end product and price to the raw material producer. "Everybody in the chain has to be profitable for it to work."
Sharing information on costs and margins all the way through the chain is key to success, but requires "giving up some independence."
Trust is the value chain glue, but Ackerman recommends non-disclosure agreements among value chain partners.
Producers in a value chain will have more control over profits than by merely taking the commodity market price, he said.
Establishing a value chain requires commitment of time, resources and patience, taking about five years to build.
"Once you're in, you get to know about new opportunities. You're no longer a silo (by itself)."

Ron Walter can be reached at 691-1264.