What, Pray Tell, are Intermediated Markets?

Small Farmers, Scaling Up

Food Hubs are a growing market for local food and allow farmers to move more product. Photo courtesy of Intervale Food Hub.

Imagine a Pioneer Valley farmer just down the road from our New Hampshire office. She’s been in business for a while now and she cultivates five acres of her fifteen acre property. She’s been selling on the side of the road and at farmers markets for years and she’s pretty regularly bringing in $150,000 a year, before expenses. She’s hitting a wall, though. She’s not the only farm stand and folks just aren’t coming to farmers markets like they used to. This is where intermediated markets come in.

Intermediated Markets

The vast majority of farms in the United States are small farms and have a gross profit of less than $250,000 per year, according to the last USDA Agriculture Census in 2012. Small farms make up 91% of the market – but, of course, they make only a fraction of the money to be made in farming. (Most of those small farms make less than $10,000 a year!) Farm size mimics the ever-increasing divide between rich and poor in the United States: large farms keep getting larger while small farms get smaller and the mid-range is disappearing.

Intermediated markets provide an opportunity to restore the “middle-class” of farms. These marketing channels, according to the USDA, are: “sales directly to restaurants, grocers, schools, universities, and other institutions, as well as sales to distributors, brokers, and other aggregators dedicated to local foods sourcing.” In other words:

  • Restaurants,
  • Small Groceries,
  • Institutions (schools, universities, hospitals, etc.), and
  • Food Hubs.

Selling into an intermediated market means that a farmer can move a much greater volume of product, but, unlike selling wholesale, the farmer keeps the product locally or regionally based.

Why Intermediated Markets?

There are plenty of reasons for a farmer to sell into an intermediated market:

  • Not everyone has the time and energy to market their product. Selling through an intermediated means that the food hub, restaurant, institution, or grocery is taking on more of the marketing load.
  • Some farmers don’t have the time or desire to interact directly with customers at farmers markets or farm stands. Again, in an intermediated market, the intermediary takes care of that role.
  • For farmers who are tired of driving from farmers market to farmers market, selling into intermediated markets can be a way to bring larger amounts of product to fewer customers. For example, imagine selling to a couple of downtown restaurants or to a large hospital instead of running a circuit of four or five farmers markets.
  • Finally, selling into an intermediated market is a great way to diversify the customer base and bring in a variety of income streams. More sources of income make for a more resilient farm business, more capable of weathering changes in the market.
Slide from a recent NCAT webinar on Intermediated Markets showing market growth over the last decade.

These markets are growing and quickly, too, as the market for local food increases. One USDA study tracked the local food market from 2006 to 2015. In that time, the number of farmers markets increased by 180%, and the number of food hubs increased by almost 300%. But the winner was the number of farms that started selling into school systems: a whopping 430% increase!

Barriers to Intermediated Markets

That being said, it’s not easy to break into these markets. In a national survey that NCAT partnered on during 2017 with Syracuse University, New York University, and Penn State University, farmers reported three major barriers:

  • Seasonality of product is an issue.
    Institutions and groceries always want summer squash, even in the winter. They have a demand for product year round even if the farmer can’t grow it.
  • Scaling up Food Safety is an issue.
    Selling into an intermediated market almost always requires that the farmer invest more in food safety infrastructure, especially in product tracking.
  • Keeping a high price per unit is an issue.
    Because these intermediated markets deal in volume, farmers aren’t bringing in the same price per unit that they can get when they sell directly to the consumer. Farmers need to be careful that the increased volume they can sell outweighs the lower prices.

Daniel and Andy have been working with Tammy Howard, an ATTRA Ag Specialist in Butte, Montana, to develop a series of online tutorials that get into the details of intermediated markets. For example, what are the differences that a farmer needs to consider when selling to a restaurant as opposed to selling to a grocery? In addition, they’ve started holding webinars and in-person trainings that will happen all over the country from Texas to Mississippi, Arkansas, Montana, and New Hampshire.

Stay tuned for more opportunities to learn about how NCAT is helping to boost the middle-class of farms and help small farms scale up their operations.

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