Food Hubs: Heart of Local Food Movement

These hubs help facilitate local food transactions by connecting links in supply chain

By BRIDGET MACDONALD/ecoRI News contributor

BOSTON, Mass. — The growth of the local food movement over the past several years is no subject to debate. Farmers markets are an oft-cited indicator, and Massachusetts is a poster child for the trend. According to the state’s Department of Agricultural Resources, the total number of markets rose 36 percent between 2005 and 2012.

Yet despite encouraging data, proponents of the movement have been troubled by a lingering allegation.

“For a really long time, when you would talk about local food, people would argue: ‘You can’t feed a country this way,’” said Kate Petcosky, food access coordinator for the Lowell-based New Entry Sustainable Farming Project. “I think food hubs are changing the conversation.”

A “food hub,” according to the U.S. Department of Agriculture (USDA), is an entity that combines production, aggregation, distribution and marketing of local produce in order to help small and mid-sized farmers reach markets that would be logistically difficult, if not impossible, for them to access on their own.

In other words, food hubs help facilitate local food transactions by connecting the links in the supply chain — inputs, farmers, processors, aggregators, distributors, outlets, consumers and scrap.

Some are private businesses, others are nonprofits, many are grounded in a social or environmental mission, and all are expanding the frontiers for small producers that might otherwise be marginalized by the size limits that make their products desirable.

Petcosky explained that food hubs are helping to challenge assumptions about volume that have plagued the local food movement. “They can scale up the amount of local food available in markets by collaborating with multiple producers in new and interesting ways,” she said. “A single small farm operating alone wouldn’t have this capacity, but when farms work together, there is exponentially greater potential.”

The federal government has recognized this potential as well. In 2001, the USDA established the Value-Added Producer Grants program to provide financial support to agricultural producers hoping to break into the profitable value-added market through processing raw commodities to create new products, changing practices to meet standards such as organic and free range, and expanding marketing opportunities.

Eugene Kim, a policy specialist with the National Sustainable Agriculture Coalition (NSAC), explained that the 2008 farm bill introduced a new category of projects that would be eligible for the grant funding: mid-tier value chains, which are networks of individual producers linked with other businesses that help process and market their goods. For example, a cooperative of dairy farms that aggregate and sell milk under one label, such as Rhody Fresh.

As a kind of broker for local produce, food hubs fall under the mid-tier value chain category, and thus have been eligible for funding through this grant program since 2008. But this year, the USDA specifically singled out food hubs in its request for proposals, placing added emphasis on these projects.

“It sounds like they are going to give these applicants higher funding priority,” Kim said, noting that the agency is trying to send the message that there is enthusiasm for the movement. It’s a message that has been an increasing priority under Secretary of Agriculture Tom Vilsack, who has set aside staff and offices to focus on food hubs.

“If you look on the USDA website, there is more information than ever,” Kim said.

Growing demand

While this added emphasis is an expression of the growing demand for local food, it also indicates a commitment to sustaining supply by addressing the practical needs of small and mid-sized producers. It’s an acknowledgement that these systems foster meaningful economic transactions.

“Food hubs are important not just for helping farmers increase their incomes, but for attracting more producers into farming because they can see it as a viable job,” Kim said.

The New Entry Sustainable Farming Project is a case in point. A partnership between Tufts University’s Friedman School of Nutrition Science and Policy and Community Teamwork Inc., New Entry provides an inroad to agriculture for immigrants and refugees living in Massachusetts.

Petcosky noted that the Incubator Farm Program helps break down financial and cultural barriers for people who come from farming backgrounds but don’t have access to the necessary capital to break ground in a new country.

After completing an intensive course in farm business planning, participants are eligible to lease affordable land from the project for up to three years, and access training workshops and resources, such as tractors.

The food-hub aspect of New Entry is realized through World PEAS, a farmer cooperative established to aggregate and distribute produce among shareholders in a 450-member CSA.

“At this point, we are aggregating from 30 different refugee or immigrant beginning farmers, and moving about $160,000 worth of produce,” Petcosky said.

Recognizing a need to diversify, World PEAS has started selling to restaurants and Tufts Dining Services, in addition to distributing through the CSA. “Our farmers can’t be at farmers markets every day,” Petcosky said. “So we are taking over the direct consumer relationships.”

Local opportunity costs

In March 2012, the USDA published “Moving Food Along the Value Chain,” an extensive report comprising eight case studies on regional food distribution entities such as cooperatives and food hubs.

In September 2013, the Center for Regional Food Systems at Michigan State University and the nonprofit Wallace Center at Winrock International released findings from a national survey of food hubs that included 125 respondents.

The January/February 2014 issue of the USDA’s Rural Cooperatives magazine featured two in-depth articles on food hubs. And of course, there is the special emphasis on food-hub applicants in the Value-Added Producer Grants program, which is open until Feb. 24.

Food hubs are gaining credibility and attention, but according to Todd Schmit, an associate professor at Cornell University’s Charles H. Dyson School of Applied Economics and Management. “We haven’t really seen much attention paid to how you actually evaluate these activities.”

Schmit and two colleagues from Cornell decided to take a closer look, and in December they published “Assessing the Economic Impacts of Regional Food Hubs”, a case study evaluating the economic impacts of a food hub in western New York state.

“We were able to get financial information from the food hub, and data from farmers, suppliers and customers — information that is difficult to come by, but necessary for this kind of analysis,” he said.

The good news: “We were able to show that on average, participating farms were spending more money in the local economy than in the trade-commodity-oriented economy,” Schmit said. As a result, they could estimate a higher multiplier — or positive economic ripple effect — in sectors like transportation and storage. “So that’s a plus toward saying food hubs support economic development.”

In examining the producer side of the system, they found that, on average, participation in a food hub increased a farm’s overall marketing, and improved the bottom line, but not uniformly across producer types. Schmit said in their study area, mid-size producers relied much more on the food hub than small or large producers.

In order to get a snapshot of demand, they also surveyed 300 food-hub buyers, ranging from individuals to businesses, to understand how the food hub affected purchasing behavior. Schmit said it was important to ascertain whether customers were offsetting purchases from other sources by buying from the food hub. He explained that if there is a one-to-one substitution going on between local sources, the economic benefits are nil.

“We were able to get an estimate that for every $1 increase in food-hub spending, another 11 cents was offset in other sectors,” he said. So even with a net positive, there was an opportunity cost associated with purchasing from the food hub.

Importantly, each food hub is a unique system, so the formula devised from the entity in New York state isn’t necessarily applicable to one in Massachusetts. But the larger lesson is universal: Even in a local food economy, opportunity costs will always be a factor. The challenge is to figure out if the availability of local produce is already sufficient to meet local demand.

But even if the long-term economic impacts remain to be seen, Schmit praised policy shifts that support food hubs. “Typically, programs like the Value-Added Producer Grants would be supporting individual farms, but here is a way to support multiple producers,” he said. “It’s a good thing.”

Kim of the NSAC reasoned that food hubs play a complementary role in the local food economy. Whereas outlets such as farmers markets provide a direct-to-consumer model, food hubs offer another means of reaching customers. “A more scaled-up way,” she said, noting that food hubs can connect farmers with new customers because they are operating at a regional level.

“I think there are many folks who go to farmers markets in their neighborhoods,” she said. “But with the food-hub model, you are dealing with larger distances, so you are accessing customers in the same state as producers, but who are not necessarily living near a farmers market.”

Or even near a grocery store. In one of the articles focusing on food hubs in the USDA’s Rural Cooperatives magazine, authors James Matson, Jessica Shaw and Jeremiah Thayer wrote, “One area where foods hubs have the potential to significantly impact communities is by addressing the needs of ‘food deserts’ ... low income communities, in which residents do not live in close proximity to retailers offering healthy, affordable food.”

With this potential in mind, the increasing focus on food hubs suggests that the local food movement is evolving. Beyond just consuming local food, it’s about enabling broader access to sustainable food sources.

“We are excited to see food hubs expanding,” said Petcosky, noting that some food hubs are building infrastructure to store food year-round. “It creates an actual alternative, a response to the question: ‘How can we feed a nation without big agriculture?’”