Identifying the Determinants of Direct Marketing Decisions by Small Farms
Cristina Connolly
A transition to industrial farming and centralized distribution has restricted the ability of small farms to compete profitably. However, direct marketing, where farmers bypass intermediaries and sell directly to consumers, has recently been championed as having the potential to allow small farms to remain competitive. Given the increasing popularity and changing structure of direct marketing mechanisms there has been little formal research on the factors that influence a farmer’s decision to employ one or more direct marketing operations.
A preliminary study analyzed Community Supported Agriculture (CSA) operations, where consumers pre-purchase a share of a farm’s output and during the harvest season they receive a weekly basket of goods. The CSA data was manually collected through a website Local Harvest, an independent database of U.S. farms where operators enter the information themselves and I used a Poisson model to analyze the number of CSAs in Ohio and Pensylvania on a county level. I found that total agricultural tourism in a county, as well as the total volume of vegetable sales, increased the probability of observing a CSA. Significant demand variables included average consumer income and household size, as well as total population.
This study will extend that analysis to include all direct marketing farms, including pick-your-own operations and roadside stands, and employ a mixed logit discrete choice model. A significant determinant of marketing channel decisions by farmers is likely to be the local landscape, including land available for farming, pre-existing farming practices such as organic production, and average farm size and productivity. If consumers substitute between farmers markets and farm-specific operations (such as CSA’s, pick-your-own operations and roadside stands) then direct marketing enterprises compete with each other. It is equally feasible that there are knowledge spillovers, and that the presence of one direct marketing outlet will lead to more. Simultaneously, consumers will choose goods that maximize their well-being, commonly termed utility. Characteristics that have been shown to affect demand for local or direct-marketed products include income, education and family size.