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The value-added path can lead to greater agricultural profits

By Mary Ridder

(Tuesday, April 15, 2003 -- CropChoice guest commentary) -- It may seem an odd time to discuss hardships in production agriculture when America is in a head-on conflict in the Middle East. But such an unsettled time, when people are concerned about the safety of their military family members and their jobs and future, is a good backdrop for discussing the uncertain future of agriculture and that of the family farmers and ranchers who invest everything in their jobs at such risk.

Now comes "value-added agriculture," the taking of a food or fiber product and adding value to it in order to move that item further up the distribution chain to the end user and thus closer to the profit end of the business. While value-added is not a new concept, its converts are growing in today's agricultural landscape.

Value is added to wheat by grinding it and marketing it to a wholesaler or directly to a consumer. Grouping together livestock producers to process and market their meats also adds value, as do a lumber enterprise, a hay-marketing group and the current 41 farmers' markets and hundreds or perhaps thousands of producers selling food products directly to their customers in this state.

To the agricultural producer who has at stake a very large and personal capital investment, value-added may be the last shot at survival in an agricultural marketplace that resembles a textbook example of a oligopoly where having one or two buyers of any given commodity is the norm.

It's interesting to note that where producers began centuries ago is where many are heading today. Agricultural producers once carried their livestock, grain, vegetable and fruit products into the nearby village and marketed to their customers in open-air markets.

Then food systems developed whereby larger quantities could be raised utilizing steam and then internal-combustion engines. Roads improved, transportation moved from the trusty oxen and cart to a team of horses and a wagon and then to the railroad, truck lines, highways, ships and airplanes of today.

Producers now raise field corn that is shipped hundreds or thousands of miles away. Beef and pork and poultry are raised and sold as commodities by the pound or by the head. Downward pressure is maintained on prices paid to the producer, although the standard quip is that supply and demand set the price.

Anyone who has sold steers or hogs, corn or soybeans or wheat in the past 15 years knows that supply and demand play a supporting role in the pricing systems farmers and ranchers operate under today. The starring role goes to the few processors, wholesalers, distributors and brokers who command the stage. Producers fight to make their operations' cash flow in this crazy play.

Thus value-added agriculture is burgeoning in Nebraska, convincing disgusted Sand Hills ranchers to develop their lakes into yellow perch farms, encouraging financially trampled pork producers to band together to build a processing plant or a direct-marketing chain and prodding struggling small-town business owners and farmers to plant grapes and develop a winery, since their state and national governments are doing far less than possible in economic-development work.

Value-added should not be considered a last resort. Instead, it is the model of choice. Somewhere between carting produce to town and shipping it throughout the world, producers gave up financial control of their businesses. Along the way, producers have moved closer to being the serfs of their ancestors' times, and their consumers have in turn received less choice and - in many cases in recent years - lower-quality food products.

It's easy to raise ag products and ship them off. It's unfortunate that this model doesn't provide enough cash to operate family farms and ranches.

Nebraska and national legislators need to push up their sleeves and wade into building value in agriculture. The time is now to sweep out the old idea that throwing money at large businesses through tax breaks and incentives will somehow magically trickle down to the people of our state. It didn't work in the 1980s, and it isn't working now.

Instead we must build value-added relationships through resources such as technical assistance and adequate grants that develop our state - one farm, one ranch and one small community at a time. Then you would see that a healthy community and rural area will become a healthy region, and so on throughout the state.

Or Nebraska could continue the downward spiral that our agricultural producers are caught up in with little hope of exiting: cheaper commodity prices, fewer buyers, little economic-development assistance or value-added resources and our youths abandoning production agricultural and rural communities as fast as they can graduate.

The author is a writer and with her husband operates a purebred Hereford ranch near Callaway, Neb.