Providing Farmers the Tools to Manage Risk in Value-Added VENTURES

1. National Risk Management Education Conference St Louis MO, April 12-13, 2011 Winifred McGee, Senior Educator, County Extension Director, Penn State Extension Lynn Kime, Senior Extension Associate, Penn State Extension Providing Farmers the Tools to Manage Risk in Value-Added VENTURES

2. Agenda • Expansion of Local/Regional Foods • Consumer Expectations/Confidence in Food Safety • Tools and Strategies for Food Risk Management • Building the Curriculum • Reinforcement and Impact through the Participant Workbook • Challenges and benefits of the project

3. Local Foods Preference Increases • Demand for fresher, more nutritious foods • Desire to support local economies and local farmers • Desire for better food security • Safe growing and processing practices • Enough food for all citizens • Concern about environmental effects of food transportation Source: Measuring and Understanding Local Foods: The Case of Vermont, David S. Timmons, University of Vermont (May 2006)

4. Advancement of Local Foods • Initially, organic foods movement • Increasing interest in “foods connected to a particular place,” due to: • Widely publicized food safety incidents • Growing mistrust in standardized/mass food production • Ethical and environmental concerns • How and where food is produced • How food is transported SOURCE: Consumer Support for Local and Organic Foods in Ohio M. K. Bean, The Ohio State University (2008)

5. Indicators of Interest in Local Food • Farmers’ markets • Community-supported agriculture (CSA) • Local food policy councils and coalitions • Community gardening • New emphasis on food security Source: The restructuring of food systems: trends, research, and policy issues M. Koc and K. Dahlberg. Agriculture and Human Values 16 (1999)

6. Increased State Buy-local Programs • Connecticut Grown • Get Real, Get Maine • Massgrown • New Hampshire’s Own, A Product of Yankee Pride • Jersey Fresh • Pride of New York • Pennsylvania Preferred • Rhode Island-grown • Vermont Buy Local, it's just that simple

7. Statistical Support for Growth • 136,817 farms (in 2007) selling agricultural products directly for human consumption • An 17.2 % increase from 2002 statistics • $1.21 billion in direct sales nationwide • Small farms (sales <$250,000) generated 56.7% of the total value of agricultural products sold directly to consumers • 93.3% of farms selling directly were family farms (limited resource, P/T and lifestyle) Source: 2007 Census of Agriculture USDA NASS

8. Consumers in a “Risk Society” • Public questioning about modern life outcomes/private concerns about risk • Consumers handle food risks by modifying consumption practices • Demand for organic foods • Demand for foods produced locally • Psychological regaining of control over the risks by knowing how/where food is made SOURCE: Consumer Support for Local and Organic Foods in Ohio M. K. Bean, The Ohio State University (2008)

9. What We Know… • Consumers place high importance on: • food safety • freshness (harvest date) • pesticide use on fresh produce • They place somewhat lower importance on: • whether the produce was locally grown • whether the respondent could contact the farmer who grew it SOURCE: Leopold Center’s Marketing and Food Systems Initiative, IA State University

10. Consumers’ Believe that Food is Safe Dependence on: • Government regulations and oversight (traditional inspections) • Good business practices* (farmers/food entrepreneurs’ practices) • Fellow consumers • Media quiet • Personal Experience Source: W.K. Kellogg Foundation, Survey Conducted by Cultural Logic (June 2005)

11. Consumer Expectations Primary responsibility for food supply safety (n=524) • Government such as FDA, USDA, etc. 40.8% • Producer/Grower/Farmer 31.9% • Processor/Packager 9.2% • Supplier such as restaurant/supermarket 4.6% • Consumer 1.5% • Everyone 3.2% • Others 5.2% • Don't know/Not sure 3.6% Source: Missouri Department of Agriculture/University of Missouri - Columbia

12. Translation of a Trend • Farmers see direct marketing of fresh and value-added products as • Source of additional income (diversifying) • Low cost, low risk(?) entry into agriculture • Consumers see local foods as • Regaining a feeling of “safe food” • Opportunity to support the community • Reducing the “carbon footprint” How to mesh the opportunities and threats?

13. Case for Food Venture Risk Management • U.S. customers depend on safety of food • Traditional viewpoint is that most food is produced in “factories,” and quality/safety ensured through: • Periodic plant inspections • Sample testing • Today’s consumers are more apt to scrutinize • Where their food is grown/produced • How their food is grown/produced

14. Reply to Consumer Expectations • Determine appropriate tools to manage food processes • Identify their application to the ventures of • Farmers adding value • Local food producers • Provide appropriate training to these business owners for proactive response

15. Food Risk Education for Farmers Address Five Key Risk Management Strategies: • Good Agricultural Practices (GAP)/Good Handling Practices (GHP) • Hazard Analysis Critical Control Points (HACCP) • Adequate/correct Insurance Coverage • Allergen notification • Pro-active recall planning

16. Developing the Class • On-line research of land-grant resources • Selection of applicable printed and video materials • Focus group meetings – Extension team with • Insurance broker collaborators • Farmers successful in adding value • Local food entrepreneurs

17. The Workshop Structure • Designed as an “Annie’s Project II” class • Interactive environment • Discussion-based learning • Learning facets include • Video case study • Panel discussion • Turning point enabled participation • Group breakouts (hands-on activity) • Applied case study

18. Class Introduction • The case for food risk management • How food businesses are different • Customer expectations • Producer obligations • The benefits of food risk management • Protect the farm/business assets • Agility in emergency response • Peace of mind

19. GAPs/GHPs Case study via video: Closing the GAPs: Utilizing Good Agricultural Practices New Mexico State University Addresses: • Worker hygiene in the field • Proper maintenance of storage/work areas • Safe use of crop protection agents • Land history • Transportation methods

20. HACCP • Overview of HACCP (what, why and how) • Discussion – application of HACCP • Application of concept to participants’ situations • Panel of Speakers • Food safety instructor (Extension Educator) • Co-packer • Food entrepreneur

21. Business Insurance 101 • Overview of food business insurance • Prepared by collaborating insurance professionals • Definition of liability terms: negligence, strict liability, breach of warranty and various consumer protection claims • Turning point incorporated – Participants “select” the court finding for scenarios (practice the concepts)

22. Allergens • Identification of 8 food allergen categories • Discussion of why notification is important • When allergens are ingredients • When allergens are present in the kitchen • Ways to assess allergens present • Methods of consumer notification • Small group activity – sample food products critiqued about effectiveness of warnings

23. Proactive Recall Plan • Rationale for recalls/for planning ahead • Overview of food recalls • Initiating incidents • Roles of personnel • Steps to be taken • Costs (with and without this plan) • Case study – two scenarios – course participants complete the recall flowchart

24. Reinforcement/On-going Impact • Take-home materials land-grant generated fact sheets and publications • Acting on “teachable moments”  referrals to in-depth classes/workshops • Individual application beyond-the-course workbook • Consider how a strategy applies/does not apply • Commitment to action steps • Risks and strategies matched

25. Current Challenges • Course launch to public in December 2010 • Five sites identified and classes marketed • All five workshops were not held • Two workshops, no registrants • Three workshops, limited registrants • Identified problems • Federal/state food safety tightening is “too new” • New on-line registration system malfunctions

26. Future Plans • Biggest work (designing the course) is already accomplished • Focus redirected to create “urgency” for proactive food business risk management • Capitalize on large “Food for Profit” enrollments (as follow-on education) • Train the local facilitators in one-to-one marketing of program

27. Future Benefits • Greater sustainability of farmers who diversify through adding value • Opportunity to offer insurance cost breaks for “graduates” of this program • Tangible ways for small-scale food processors to compete successfully to supply to grocery chains, restaurants, etc. • Greater food safety for the general public

28. Discussion/Questions