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Risk Management Issues for Small Farms within Local Food Systems

Kenesha Reynolds-Allie, Deacue Fields, and Ronald Rainey

Summary

Recently, there has been substantial growth in the United States’ local food system (LFS). Data from the 2002 and 2007 Census of Agriculture indicated a 15% increase in the number of farms selling directly to consumers, from 116,733 to 136,817 (U.S. Department of Agriculture (USDA) National Agricultural Statistics Service (NASS), 2007). Nationally, small farms—defined as those with less than $250,000 in annual sales—accounted for 57% of direct-to-consumer sales. Based on the 2007 census, farms with less than 100 acres accounted for approximately 44%–$528 million—of direct-to-consumer sales. This suggests smaller producers are actively participating in local food systems, and it raises questions about potential growth opportunities for small farms in those systems. To successfully capitalize on these opportunities, farmers must first fully understand the types of risks—production, marketing, financial, legal, and human— that threaten their farming operations in order to implement the appropriate strategies to mitigate risks’ impacts. This article focuses on relatively small operations in the LFS primarily because of their limited adoption and implementation of existing risk management strategies given the challenges they face to be profitable. Because smaller farms account for a significant portion of total farms involved in the local food system, it is essential to address their risk management needs to strengthen the system. The purpose of this article is to highlight and provide an overview of risks faced by small farmers, and discuss some of the most successful strategies available to manage risks among those interested and engaged in serving LFS.

Details

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