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Center for Rural Affairs, www.cfra.org Stratgey #3 Niche Markets One of the most promising ways to increase family farm and ranch viability is to tap into high -value niche markets. The farm and ranch share of profit in the food systems is falling. But there is an opportunity to turn that around. The "mass market" is breaking up in market segments — groups of consumers seeking unique prod- ucts with specific attributes. Some are willing to pay premiums for those attributes. For example, the nation- wide Hartman survey found that over half of consumers would pay a premium for food produced in a more healthful and environmentally sound manner. That offers an opportunity for farmers to go beyond producing cheap, undifferentiated commodities to adding value and earning premiums by delivering unique products that are highly valued by different groups of con- sumers. That may be food that tastes better. Perhaps it is locally produced and fresher or is produced in a way that improves its flavor. It may be food that is healthier or perceived as consistent with a healthier lifestyle — such as products raised without pesticide, hormones, and antibiotics. Or it could include products that are healthier because of what they have in them such as the beneficial fats in flax and grass fed beef. There is also a growing group of consumers who will vote with their dollars for alternatives to industrial agri- culture. For example, consumer surveys and panels find that about two- thirds of consumers say they would pay premiums for pork produced humanely, on environmentally responsible farms or on family farms. There is opportunity for family farmers and ranchers in these markets, but it is important to keep some basic principles and strategies. Markets with more Difficult Standards Offer Higher Premiums — Farmers will earn and sustain higher incomes by serving niche markets only to the extent it requires more from them — more management and more skilled labor than the conventional market. Premiums for organic crops and unconfined natural pork have generally remained higher because they require more intensive management and more skilled labor in the field and barn than conventional production. In contrast, the premiums for specialty corns — high oil corn, etc. are much smaller because they require a little extra effort, but not enough to force buyers to pay larger premiums. The companies buying it can find enough farmers willing to produce it for only a small premium. Similarly, the premiums for natural beef will be less if they require only withholding hormone use than if they also require meeting standards for family farm, humane, and environmentally sound production. Sometimes our first instinct in agriculture is to tell wary consumers that there is nothing wrong with the way food is produced in this country. But a more profitable approach might be to ask them how they want it pro- duced and what they will pay to get it. Page 7 fa r• r. i U