CCD-FS-2
Authors: Tim Woods and Matt Ernst
Overview
This publication poses questions and checklists to help Kentucky specialty crop growers evaluate a new produce enterprise before planting. It is intended for long-time commercial farmers, diversifying tobacco producers, and newer farmers alike. The publication focuses on six areas: market options by size and scale of production, conducting basic market research, certifications, insurance and risk management, management and labor needs, and resources needed beyond the field or garden.
Commercial fruit and vegetable production in Kentucky increased from $15 million in farm sales in 1997 to more than $30 million in 2011, and then to almost $37 million in 2016. Growth in Kentucky’s commercial produce industry was driven in part by the transition away from tobacco and by continued crop diversification, as well as growing demand for local foods.
Specialty crops attract interest from established and newer Kentucky farmers, including those seeking retirement income from their land, income from certified organic production, and opportunities in local food and urban farming markets.
Market Options by Size and Scale of Production
Kentucky’s produce growers range from those tending a small market garden for a neighborhood farmers market to those harvesting dozens of acres of produce with mechanization. Size and scale of production help determine where producers should focus their marketing efforts. Smaller growers typically emphasize direct farm marketing, while larger growers are more likely to pursue wholesale channels.
Farmers markets are the most common direct-market outlet for fruits and vegetables in Kentucky, with more than 150 markets across the state. Other direct market channels include roadside stands, on-farm stands, community supported agriculture (CSA), and Pick Your Own (PYO). Wholesale-oriented channels include local wholesale sales to restaurants, groceries, and institutions; produce auctions; regional wholesalers and brokers; chain store distribution centers; and processors.
Figure 1. Marketing Options for Kentucky Produce Growers by Farm Size and Scale
| Relative Size/Scale | Market Channel |
|---|---|
| Smallest size/scale | Farmers market |
| Roadside stand | |
| Produce auction | |
| Community Supported Agriculture (CSA) | |
| Local wholesale (restaurant, grocery, institution) | |
| U-Pick | |
| On-farm stand | |
| Regional wholesalers, brokers | |
| Chain store distribution centers | |
| Largest size/scale | Processors |
Producer Checklist for Size and Scale
After selecting a number for each statement below, add the values of your answers. Low scores (less than 20) could indicate greater suitability for larger-scale, wholesale enterprises. Higher scores (30 to 40) generally indicate suitability for smaller-scale, direct marketing enterprises.
| Statement | No, not so much | 1 | 2 | 3 | Yes, very much so |
|---|---|---|---|---|---|
| I want to have a personal connection with the consumers who will be eating the food I am growing. | 0 | 1 | 2 | 3 | 4 |
| I am willing to spend a large amount of time in marketing my crop: connecting with customers personally or via farm communications. | 0 | 1 | 2 | 3 | 4 |
| I derive a large part of my income from employment off the farm. | 0 | 1 | 2 | 3 | 4 |
| My farm does not have any livestock, tobacco or row crop (corn, soybean, etc.) production. | 0 | 1 | 2 | 3 | 4 |
| I do not have access to packing and/or cool storage facilities. | 0 | 1 | 2 | 3 | 4 |
| I have much excess time to devote to developing a produce or new crop enterprise. | 0 | 1 | 2 | 3 | 4 |
| I lack access to financial capital for establishing a new enterprise. | 0 | 1 | 2 | 3 | 4 |
| I have little experience selling products that can fluctuate in prices. | 0 | 1 | 2 | 3 | 4 |
| I would prefer to focus on producing small quantities of high-quality food crops. | 0 | 1 | 2 | 3 | 4 |
| I want to establish close personal relationships with my end consumers/users. | 0 | 1 | 2 | 3 | 4 |
Conducting Basic Market Research
Whether a producer plans to sell a few vegetables at a local farmers market or establish many acres of fruit for wholesale production, basic market research is essential. Market research helps identify who the customers will be and how much they are likely to pay. Good marketing plans start with the customer and work backward to production. Potential growers should first determine exactly what buyers want, how they want it, and when they want it; then they should determine how the crops should be grown. Even variety selection and planting times are basic marketing decisions.
Basic Market Research Questions
| Question |
|---|
| Who will my customer be, and what are the preferences and characteristics of that customer? |
| What product will I be producing? |
| What market channel will I be selling through? |
| What price can I expect to obtain? |
Customer Preferences
Successful marketers start by identifying their potential customers. Buyers may not simply want “a tomato”; they may want a specific kind of tomato, a certain quantity, or a certain delivery window. For example, a farmers market customer may want a vine-ripened heirloom tomato, while a wholesale buyer may want thousands of boxes ready to ship several hundred miles. Buyers may also want a crop early or late in the season, which can affect varieties selected and production methods used.
Packaging and presentation also matter. Research at Kentucky farmers markets found that some customers were hesitant to buy locally grown blueberries packaged in standard plastic clamshells because the packaging did not “feel” local, while local supermarkets preferred those same industry-standard packages. Farmers market and CSA customers may also care about crop mix and complementary products.
Timing and delivery are critical. A chef depending on farm-fresh produce for an evening menu does not want to learn that delivery will not arrive. Growers should understand when customers expect delivery, meet that expectation, and communicate clearly when delays occur. Many buyers report that failure to deliver as promised is a frequent mistake among beginning produce growers.
Product Considerations
All fruits and vegetables are not created equal. Product differentiation refers to characteristics and marketing efforts that distinguish one product from another. Producers choosing a market channel should consider product attributes such as local variety preference, ease of picking, storage attributes of varieties, and whether the crop will be grown using conventional, sustainable, or certified organic systems.
Price Information Sources
It is important to understand the prices a producer can reasonably expect before deciding to grow a crop. Useful sources include USDA Agricultural Marketing Service fruit and vegetable market news, Kentucky produce auction price reports, and Kentucky farmers market price reports. These sources can help estimate crop price potential across different market channels and regions.
Market Channels Used by Kentucky Producers to Sell Fruits and Vegetables
| Column 1 | Column 2 | Column 3 |
|---|---|---|
| Farmers Markets | Restaurants | Schools and Institutions |
| Wholesale | Grower Cooperatives (Co-ops) | Pick Your Own |
| Roadside Stands | On-farm Stands/Roadside Markets | Produce Auctions |
| Community Supported Agriculture (CSAs) | Internet | Produce Brokers |
Selected Characteristics of Produce Packaging and Product Mix by Market Channel
The table below summarizes produce packaging and product mix by market channel. Product mix refers to the different types of products sold at or through a given channel. Packaging is one of the most overlooked costs for new produce growers. In retail channels, attractive presentation is often important; in wholesale channels, packaging is more functional and standardized. Labeling for traceability and branding has also become increasingly important.
Table 1. Selected Characteristics of Produce Packaging and Mix by Market Channel, Kentucky
| Market Channel | Product Mix | Packaging | Grading and Quality Assurance |
|---|---|---|---|
| Farmers market | Important | “Farm” feel | May be flexible |
| Roadside stand | Important | Convenience | May be flexible |
| Produce auction | Single products | Auction standards | High grade/quality rewarded by price |
| Community Supported Agriculture (CSA) | Products in shares/baskets complement each other | Convenience, attractiveness of presentation | May be flexible—some may prefer 3rd party audit |
| Local wholesale (restaurant, grocery, institution) | Chef or buyer specifications | May be defined by industry standard and/or convenience | Uniform quality essential |
| U-Pick | Determined by ease of harvest, local and farm preferences | Bulk containers or customers may provide some packaging | Customers select preferred products; producer directs to ripe crops |
| On-farm stand | What customers want | Convenience; packages may help build farm brand | Price breaks may be given for lower grades |
| Regional wholesalers, brokers | Specified by buyer | Commercial produce standards | Uniform quality is essential |
| Chain store distribution centers | Specified by buyer and/or contract | Chain standards | Uniform quality is essential — consider 3rd party audit |
| Processors | Specified by buyer and/or contract | Bulk packaging for shipment common | May involve less stringent grading |
The publication notes that packaging items such as bags, cartons, and boxes tend to be much less expensive per unit when purchased in bulk. Reusable plastic containers may cost more upfront but can save money over time. Producers should determine customers’ packaging preferences before investing in a particular packaging system.
Certifications
Certifications allow produce growers to market products under a particular labeling or program name. Common certifications in Kentucky produce marketing include Kentucky Proud, Kentucky Farm Bureau Certified Roadside Farm Markets, and USDA Certified Organic. Eco-labels such as certified sustainable or naturally grown programs may also be used, though most require certification and/or inspection.
Common Certifications
| Certification | Description | Information Source |
|---|---|---|
| Kentucky Proud | Produce sold by a farm enrolled in the Kentucky Department of Agriculture’s Kentucky Proud program | www.kyagr.com |
| Kentucky Farm Bureau Certified Roadside Farm Markets | Program administered by the Kentucky Farm Bureau Federation | www.kyfb.com |
| USDA Certified Organic | Produce grown under inspection and certification in the USDA National Organic Program, administered within the Agricultural Marketing Service | www.ams.usda.gov |
| Eco-labels | Labels that communicate environmental production attributes, including some “certified sustainable” or “naturally grown” programs | Varies by program |
Certification Guidance
| Recommendation |
|---|
| Maintain extensive files documenting and supporting any claims made and participation in programs allowing those claims. |
| Avoid making improper health claims relating to proven or perceived benefits of certain products. |
The publication also notes that local certifications may be necessary or optional for some marketing activities, and that producers should work with the agencies or organizations administering those programs to avoid making unsubstantiated claims.
Insurance and Risk Management
Agricultural businesses face both production risks and liability risks. Production risks include weather, insects, and disease. Producers can manage some of these risks through practices such as staggered planting dates, row covers, and varietal selection. Liability risks refer to the danger of being sued or otherwise becoming financially liable for accidents or faulty products. Producers should not assume their existing farm liability policy automatically covers a new produce enterprise.
Two important types of liability are general liability and product liability. On-farm marketing activities such as roadside stands or Pick Your Own operations can increase general liability exposure. Product liability insurance is especially important in the current food safety and regulatory environment, and many wholesale, institutional, and restaurant buyers require certain levels of coverage. The publication also advises growers to be aware of the Food Safety Modernization Act (FSMA), Kentucky’s Produce Best Practices Training, and Third-Party GAP requirements that some buyers may require.
Risk Management Overview
| Type of Risk | Description | Examples/Considerations |
|---|---|---|
| Production risk | Uncertainty associated with agricultural production | Weather, frost, insects, disease, varietal choice, staggered planting dates |
| General liability | Liability associated with on-farm activities and customer presence | Pick Your Own, roadside stands, on-farm traffic |
| Product liability | Liability resulting from faulty products sold by a grower | Buyer insurance requirements, food safety concerns |
| Regulatory risk | Risk associated with changing food safety and market requirements | FSMA, Produce Best Practices, Third-Party GAP |
Management and Labor Needs
Different crops require different levels of management and labor. Successful produce growers routinely manage part-time harvest labor, conduct economic and market analysis, and prepare detailed marketing and business plans. Before planting a new crop, producers should review information on production and labor requirements. The University of Kentucky Center for Crop Diversification maintains crop profiles that include labor needs for production and harvest. Producers may also benefit from training and support available through organizations such as the Small Business Development Center, the Kentucky Center for Agricultural and Rural Development, and Cooperative Extension.
Summary: Resources Needed Beyond the Field or Garden
The main idea conveyed in this publication is that profitably producing a fruit or vegetable crop involves much more than simply growing the crop successfully. Developing a clear plan for marketing the crop, while also minimizing production and liability risks, is essential for increasing the likelihood of success. The earlier a producer develops these plans and considers these variables before planting, the better positioned that producer will be as a marketer.
The publication encourages producers to build their own library of reliable information tailored to their specific situation. Key resources identified include the University of Kentucky Center for Crop Diversification, the University of Tennessee Center for Profitable Agriculture, and Penn State Ag Alternatives.
Selected Resources
| Resource | Link |
|---|---|
| University of Kentucky Center for Crop Diversification | www.uky.edu/CCD |
| Center for Profitable Agriculture (University of Tennessee) | http://cpa.utk.edu |
| Penn State Ag Alternatives | http://extension.psu.edu/ag-alternatives |
Marketing Channel Options for Kentucky Produce
The publication closes with a comparative table adapted from ID-134, Marketing Options for Commercial Vegetable Growers that summarizes production and marketing challenges, investments of time and money, and income and potential across major market channels.
Marketing Channel Options for Kentucky Produce
| Considerations | Direct: Roadside stand, Farmers Market, CSA | Direct: U-Pick, on-farm | Produce Auctions | Local Wholesalers, Grocers, Restaurants | Regional Wholesalers, Chain Store Distribution Centers, Brokers | Processors or Fresh-Cut |
|---|---|---|---|---|---|---|
| Production and Marketing Challenges | ||||||
| Difficulty getting into the market | Low | Low-medium | Low | Medium | High | Medium-high |
| Marketing time required | High | Medium-high | Low | Medium | High | Medium |
| Compatible with off-farm employment | Yes | Yes | Somewhat | Somewhat | Difficult | Yes |
| Compatible with row crop, tobacco, livestock production | Yes | Yes | Yes | Somewhat | Difficult during planting, harvest | Yes |
| Importance of product quality and shelf life | Medium-high | Medium | High | High | High | Medium |
| Investments: Time and Money | ||||||
| Initial commitment level required | Low-high | Low | Medium | High | High | Low-medium |
| Management level required | Low-high | Medium | Medium | High | High | Low |
| Initial capital investments required | Low | Low-medium | Medium | Medium-high | High | Variable |
| Postharvest equipment and facilities investment required | Low | Low | Low | Medium | High | Variable |
| Income and Potential | ||||||
| Prices | High | Medium-high | Medium-low | Medium-high | Medium | Low |
| Price stability | High | High | Medium-low | Medium-high | Medium | High |
| Product volume required | Low | Low | Medium | Medium | High | Medium |
| Market/sales volume potential | Low-medium | Low-medium | High-medium | Medium | High | Low |
| Likely further development potential in Kentucky | Excellent | Good-Excellent | Good | Good-Excellent | Fair-good | Low-fair |
Reviewed by
Brent Rowell, Extension Specialist, International and Sustainable Horticulture, University of Kentucky, and Brett Wolff, Extension Specialist, University of Kentucky Center for Crop Diversification.
Suggested Citation
Woods, T., and M. Ernst. (2018). What to Think About Before You Plant: Marketing Considerations for Kentucky Specialty Crop Growers. CCD-FS-2. Lexington, KY: Center for Crop Diversification, University of Kentucky College of Agriculture, Food and Environment. Available: http://www.uky.edu/ccd/sites/www.uky.edu.ccd/files/Before_You_Plant.pdf