Value Chain Hat – Local Food Economics

I would say that one of the biggest goals for us right now is growth. We have to grow the organization for multiple reasons - for the mission, for our internal ecosystem - and given the external landscape out there in the marketplace, it is becoming more and more challenging.

– Angel Mendez, Red Tomato

You’ve established your niche. You’ve stood up your fledgling hub and piloted your operations. Congratulations! All those early learnings now inform the work that starts when you or your teammates put on the – Supply Chain Builder Hat. In this phase of operation, you’ll expand and strengthen your networks, you’ll innovate and iterate on those early pilots and start to establish more permanent operations. Along the way, you’ll be building out your team and leaning on the partnerships developed under the Founder role.

Organizational Growth

Food Safety is Essential

Managers must develop and implement food safety plans that are appropriate to their operation and reflect compliance with local and federal regulation and customer requirements.

Note: Regulations and customer requirements should be approached differently. Regulations like the Food Safety Modernization Act PC Rule, are mandatory while customer requirements (certifications and other approved vendor criteria) can vary widely and are voluntary.

A hub’s food safety plan details a staffing plan, practices and processes throughout any physical infrastructure, and traceability and recall procedures.⁴³ They must also ensure that the value chain(s) that they manage are compliant with customer requirements from the farm, processing, and any third-party logistics partners. Food hub operators track any impacts to their operations, or those of their partners due to any new compliance dates⁴⁴ for the rules within the Food Safety Modernization Act implementation.⁴⁵ The Food Hub Food Safety Compliance Guide by the Center for Agriculture & Food Systems at Vermont Law & Graduate School is a useful overview to get started.⁴⁶ See examples of Food Safety Plans from our advisors in the Resources section of this toolkit.

Food safety management systems are codified by various certification standards such as USDA GAP,⁴⁷ Harmonized GAP,⁴⁸ Global GAP,⁴⁹ Hazard Analysis Critical Control Points (HACCP),⁵⁰ and Primus GFS,⁵¹ to name a few, and these are listed in Table 3. Once a hub has determined which certification(s) best support their operation, and staff have been trained and standard practices established, the operation can seek certification (farm, hub, processing facility, etc…) by hiring an auditor. Auditors may be within the same organization as the standard owner, such as USDA⁵² for GAP, or they may be an independent body such as SCS Global,⁵³ FSSC,⁵⁴or CCI.⁵⁵

Food hubs were instrumental in piloting the Group GAP Food Safety Program, launched in 2016, for growers in geographic and like-product or related-customer clusters.⁶³ Understanding How Group GAP Works and considering implementation across a hub grower network may help address barriers to the wholesale market for farmers without food safety certifications.⁶⁴ Other resources for consideration can be found in the Resources section of this toolkit.

Hubs working with farmers who are new to food safety certification requirements may need to develop technical assistance programming or partner with organizations already conducting producer-facing technical assistance. Various academic articles show that this can be the most impactful strategy to increasing the capacity of individual farms and a sourcing network as a whole. This article Development and Assessment of a Food Safety Training Program for Farmers’ Market Vendors, is one of several that delves into the details of the important of food safety training for producers. Agricultural Extension offices, state departments of agriculture, the FSPCA’s Produce Safety Technical Assistance Network,⁶⁵ and recipients of funding through the National Institute for Food and Agriculture’s Food Safety Outreach Grant Program⁶⁶ can be useful resources to support on-farm food safety capacity building. The On-Farm Readiness Review from the National Association of State Departments of Agriculture (NASDA) Foundation is a state-by-state resource to help assess individual operations for certification readiness.⁶⁷ Growers can also apply for financial support to cover costs related to certification through the Food Safety Certification For Specialty Crops Program at USDA Farm Service Agency.⁶⁸

Professional development for food hub staff is critical to high quality food safety programs. Some certifications may require staff to complete specific training programs or seminars as part of the overall verification process. These trainings are usually paid courses, some facilitated by standard owners or certification bodies, as well as independent organizations. They may be specific to a certain certification or focus on the larger management system that the certification falls within. Engaging in a professional community of practice, such as the Wallace Center’s Food Safety and Quality Community of Practice, may also be a useful strategy to increase a hub’s overall capacity and acumen with regards to food safety.⁶⁹

Also see A Guide to Food Safety Certification for Food Hubs and Food Facilities⁷⁰ by University of California Davis and partners, the National Association for State Departments of Agriculture (NASDA) Foundation’s GAP Certification Programs Toolkit,⁷¹ and the following Food Safety Training Videos for Farmer Support Organizations from the Wallace Center.⁷²

We have a very long list of food safety SOPs, and sometime in everyone’s first week they have to sit down in front of the computer and read them. And it takes hours and it’s very boring and we make everyone do that because we need that, we need everyone to have their eyes on all of those food safety SOPs. We take it really seriously.

– Rachel Bair, ValleyHUB

Communication is Key

Effective communication is extremely important to developing and maintaining productive relationships with farm partners, buyers, or consumers. When first connecting with partners, note how they communicate. Some people may prefer a phone call, text, or email, while others would rather have a face-to-face conversation. In the long run, this will make regular communications timelier and more beneficial for both parties. Hubs that we spoke to also noted general rules for effective communication, including being clear with language, translating complicated jargon, being flexible, showing compassion, and being patient.

Kitchen Sync
One strategy that Kitchen Sync employs when communicating with potential buyers, especially large institutions, is persistence. When an organization initially brushes them off, they continue to communicate with individuals higher and higher up the chain of command, explaining the benefits of working with a food hub. This strategy is considered more “hardball” but tends to be effective when communicating with highly consolidated institutions and industries.

Red Tomato
When working with buyers, Red Tomato notes that it is especially important to be proactive rather than reactive. If a problem comes to light, they notify buyers immediately to let them know the issue. For example, if an external weather pattern is going to impact a crop season later in the year, being transparent and communicating this early will allow the buyer to adjust their expectations. They also believe that constant communication, even in the slower season, is a great way to maintain a good relationship with their buyers.

Share Farm
Share Farm prioritizes building trust and alignment with farmers rather than simply offering them an opportunity. They recognize that farms are more likely to engage in a food hub model when their specific needs, operational constraints, and market opportunities are understood. Their approach involves ongoing communication, data-driven insights, and pre-season commitments to help farmers make informed business decisions.

Kalamazoo Valley Community College
KVCC understands that communication with farm partners often goes further than just speaking to them on a regular basis. They work to support the efforts of the farm by assisting them with various procedures that they may not understand or that are extremely time-confusing. They ask producers to maintain their inventory on their online platform, but they are still willing to help with this process if it is a barrier to success for the farms.

Prioritizing Long-Term Relationships

All our food hub advisors expressed that the most effective way to build financial resilience and support their growers is through the development of long-term relationships with supply chain partners. Many of our advisors’ hubs have supply chain partners that have been with them since the beginning of their venture. You can find some inspiration on good communication and forging strong relationships with farmers in Episode II of The Food Hub Podcast.

One of the biggest goals of most food hubs is to build a financially sustainable future for small and mid-sized farmers. Securing forward contracts and purchase orders from long-term buyers is a great way to do this. Haile Johnston at The Common Market explained that, “right now, almost all the risk is on the shoulders of the of the farmers, and it’s also kind of one of the reasons why many of them end up failing.” The Common Market purposefully looks for buyers that are interested in making an advance purchase order so that they can share this information with growers, who can plan accordingly for the coming growing season. This builds a certain level of consistency and financial stability, which is especially important for a small-scale farmer. The Common Market also has a loan program where farmers receive no-cost capital and 50% of the value of the long-term purchase agreements upfront, allowing the farmer to invest in their operations and other costs. You can find an example of a forward contract in the Resources section of the toolkit.

Foodshed also works to develop long-term partnerships with buyers who have consistency in their orders. Kristin Kvernland noted that it is much trickier for them to process orders with smaller wholesalers who don’t want much product and request specific delivery days. This makes the logistics for a small-scale farm more difficult to meet fluctuating demands. A long-term partner making consistent and larger orders is preferred by both food hubs and farmers.

Building long-term partnerships with both buyers and producers has brought immense benefits to hubs. These partnerships also bring more immediate benefits like a sense of trust and greater access to producers, which increases the ability to solve problems when there are inevitably bumps in the road. Elliott Smith from Kitchen Sync sums up this idea noting that, “to say relationships are key for resilience, feels a little silly, but like, yeah, that’s how it shakes out.”

Growth in the Value Chain

As you develop and expand your grower network, you may identify suppliers that are an ideal fit but may not be wholesale ready or otherwise require technical assistance. As producers expand from direct to intermediated markets, they face increased demands and regulation around post-harvest handling, food safety, packing and grading. Developing resources, education, and partnership as services your hub provides, can play a role in strengthening farmer engagement and sales and in return, increase amount, diversity and quality of product hub has available.

Wholesale Readiness for Your Network

Rachel Bair from ValleyHUB proudly declared that “education is our number one crop.” ValleyHUB is not alone: education (or technical assistance) is a major facet of many hubs. Food hubs use technical assistance in several ways to further their mission including staff competencies, farmer network competencies, and consumer education. An aspect of education for these varied audiences can be delivered internally, through staff hires, or externally by partnered organizations such as your state department of agriculture, cooperative extension office, or other producer-facing support organization. There are several guides available to help you explore the best way to support your expanding network, and one in particular provides you with a wholesale readiness assessment, which may be a good starting tool to provide to your producer network to jumpstart the conversation around readiness. Find the Global Growers Wholesale Readiness assessment here.⁷³ You can find a list of additional wholesale readiness resources at the end of this toolkit.⁷⁴

In addition, consumer education is another type of education that can support the success of your hub by ensuring the public knows you, understands what a regional food hub is, and finds ways to connect with your hub even when much of the public are not direct buyers. Two of Vermont’s food hubs, Food Connects and Green Mountain Farm to School, provide farm to school education in addition to facilitating local food purchases. Hubs that work with School Food Authorities (SFA) and or school districts, may find it valuable to employ youth and consumer education through a curriculum similar to the FoodPrints.⁷⁵

Purchase Commitments
In conventional food systems, producers absorb most of the risk: they grow, raise, and harvest what they think they can sell, and when their products are ready, they take the price they can get. Many food hubs work to shift some of this risk away from producers, either by absorbing it themselves or asking their buyers to take some of it on.

One way to reduce risk for producers is to work ahead to cooperatively plan production and make either formal or informal purchase commitments. This way, producers know they have a guaranteed—and often large-volume—sale before they put seeds in the ground, breed livestock, or cast fishing nets. Purchase commitments also carry security for the buyer. If food availability or price changes due to weather, pests, or, say, a global pandemic, the buyer already has a price locked in and producers are obligated to prioritize those buyers they are committed to. In addition to these direct economic benefits, purchase commitments can also build trust between producers, hubs, and buyers, and facilitate strong network growth over time. Learn more about how The Common Market does this in this report on their work in Georgia, called Building Resilient Agriculture Through Forward Purchasing Commitments and Direct Farmer Financial Investment.⁷⁶

Growth in Operations

When thinking about building your team for hub growth, it’s helpful to drill down into the organizational actions underneath the core operator hats and consider what other roles you need to fill to ensure good service to your producers and buyers. The organizational actions can lead you to understand your hiring needs and support the creation of a hiring plan and timeline. Figure 2 below provides a basic example of hiring buckets that may fulfill organizational actions of your hub.

Under these hiring buckets, specific functions start to unfold (see the “Labor Roles” section of Running a Food Hub, Volume II, starting on page 40).⁷⁷ Prioritizing the functions within your hub, at a point in time, helps to inform you of the positions needed to be hired and in what order. Research shows that food hubs at breakeven sales levels on average employ 3.67 full time equivalents (FTE), whereas at the point of viability they might employ up to 6.27 (see Table 3: Hourly Labor Calculations on page 21 of Running a Food Hub, Volume III).⁷⁸

Given that labor roles and functions will be distributed across staff dynamically as the food hub grows and matures, cross training is vital to operational efficiency, continuity, and growth opportunities for staff development. Food hub operators should ensure that staff are sufficiently familiar with the labor functions within their primary operational category, as well as those closely related, to provide coverage when the lead is unable. For example, an office manager may be primarily responsible for staff oversight, tabulating sales, and tracking order fulfillment. Cross training⁷⁹ should enable that person to step into related roles within sales and customer service, order processing, as well as a general knowledge of logistics, delivery, and supply coordination. Effective cross-training will also enable the hub to hire from within as sales grow and roles become more specialized with an increase in FTE over time. (see Running a Food Hub, Volume II sections on Labor Roles (40-43), Labor Positions (44-46), Appendix A: Sample Staff Descriptions/Qualifications (67-70)).⁸⁰

While you are staffing up, it’s also a good to plan for the future. A proactive staffing plan must consider how roles and functions will shift and expand with the needs and capacity of the hub. In early development stages, with minimal full-time staff, founding staff will have to perform a variety of labor roles and functions to ensure the baseline operations of the hub are covered. As revenues increase to support expanded personnel budgets, staff will have the opportunity to grow into more specialized roles across a more distributed staffing model.

Another strong consideration in meeting your cross-training and personnel planning for your hub, is to develop Standard Operating Procedures (SOPs) for all functional areas of your food hub. Read more about SOPs in the Resilience Advisor Hat chapter of this toolkit and find templates in the Resources section. In all scenarios, the labor roles and functions span multiple functional areas of your hub. Understanding functions, roles, cross- training, staffing plans, and SOP development, as the hub grows, will be essential.⁸¹

That’s been a growing and learning process. I would say a lot of us in the beginning were driving and packing and farming and doing this. And so, there’s been growth in having positions that only do one thing and then needing to write SOPs or revise SOPs so that the training is clear. This is the first year that we’ve had sort of a lead in each department and that’s helped facilitate some of the training.

– Kristin Kvernland, Foodshed

Hiring, Wage, and Benefits Analysis

The COVID-19 pandemic created new challenges for food hubs to navigate, resulting in changes in hiring, retention, and wage and benefits, which are highlighted in the 2021 Food Hub Survey.⁸² Over 50% of participants noted that they added more positions to their hub in 2020; however, the average number of paid employees (12 employees) at each hub was already lower than hubs reported in previous survey years (2019 FHS reported an average of 17 employees). Those that reported eliminating positions attributed it to layoffs due to COVID-19 and consolidation of part-time positions. Overall, there was an increase in every type of position except full-time positions. Part time employees have increased the most, nearly doubling from 2019 to 2021.

The survey asked several questions regarding hourly and salary wages, and there was a wide range of responses across all categories. The minimum hourly wages for employees ranged from $10.00-$30.00, while the maximum ranged from $12.00-$72.12. Minimum hourly wages for managers varied from $15.00-$31.21 and the maximum from $15.00-$81.28. As for salaries, the minimum range for employees was $17,976-$47,500, and the maximum range was $33,280 -$97,000. Salaried managers had a minimum range of $26,000-$93,000 and a maximum range of $17,000-$169,065. We can infer that the location and size of hub highly affects the wage and salary of employees, and on average food hubs spend 46% of their operational budget on personnel.⁸³

Government Funding as a Bridge

We planned to use LFPA as a stimulus to build our capacity. The LFPA program was introduced as a short-term investment in regional food system infrastructure. The funds are helping us to bring in new growers and increase their sales volume through the hub, and to practice our way into higher-volume logistics. Meanwhile we’re using other grant funds to provide technical assistance to school food service customers so they can increase their purchasing. When, or if, the LFPA funds phase out, we’ll be able to pivot that increased farm supply to meet the higher cafeteria demand.

– Rachel Bair, ValleyHUB

Critical to your hiring plan and investing in your organization is fundraising. Over the past decade, public investment in food hubs, value chain facilitation, and local and regional food systems has expanded significantly. Federal and state governments alike have term-limited grant programs to incentivize local food purchases, and all of the food hubs we interviewed had been recipients or key players in these programs.⁸⁴ Federal programs that are authorized by past farm bills, like the Local Agriculture Market Program,⁸⁵ and the Patrick Leahy Farm to School Grant Program,⁸⁶ have offered annual grant opportunities that can align well with food hub activities. Some time-limited or one-time federal funding opportunities, which are funded through annual appropriations⁸⁷ or other acts of Congress, may also be viable considerations. In addition, state-based funding can have more specific areas or focus directly related to food hubs and food procurement. Check out the Michigan Department of Agriculture and Rural Development as an example of state-based funding opportunities. Find more information about fundraising in the Resources section of this toolkit.

Term-limited and time-limited funding can be challenging to navigate, especially when the grants make up a large portion of a year’s annual income. Hubs often need to hire new staff or invest in infrastructure to meet the aims of these grants and will need to evaluate if they can sustain operations at that level after funding expires. All six of the hubs we interviewed approached short-term funding strategically – they used these large grant programs as a bridge to grow their capacity and build relationships with the goal of sustaining similar levels of activity after the end of the grant.

Growth in Partnerships

Thinking back to the progression of the collaboration continuum, once you’ve done the work to build your networks and start the exchange of information, you are probably ready to start coordinating with your colleagues. This may be a natural juncture to consider engaging in a more formal professional network. Food hub networks are usually made up of hubs in the same state or region who collaborate on sales, facilitate cross-docking, advocate together for policy, and share expertise.

Exploring Food Hub Networks

Rachel Bair from ValleyHUB, has been involved with the Michigan Food Hub Network since before her hub launched.⁸⁸ She testified that “it was a big part of our exploration and understanding how this thing would work….it’s been a great group of folks to troubleshoot with, to plan bigger initiatives and dream about how we might be able to inform policy that would support our hubs and the producers that we work with even better.”

Food hubs also collaborate on the supply side to help growers scale up for larger volume sales. The Common Market had worked with other hubs to support GAP Certification and other food safety and capacity-building efforts for shared growers.

Though building a food hub network is no easy feat, the Northwest Food Hub Network share the successes and challenges that they experienced in their report, Leveraging Technology to Build Resilient Local Food Systems.⁸⁹

List of Regional Food Hub Networks

There are food hub networks across the United States doing a variety of shared actions depending on the needs of the hubs in the network. Take a look at Table 4 and you can consider their location and the types of collaboration they are invested in, as well as find out more about them and how to reach them at the URLs provided.

Coordinate with Your State Department of Agriculture

Whether it’s official or unofficial, state departments of agriculture often play a role in value chain facilitation. As a regulatory authority and funder, making connections between farmers, buyers, and technical assistance providers is part of the work they do. Oftentimes, they lean on external value chain partners to inform new collaborative efforts within the departments too- a great way to learn alongside your public sector leaders. As part of the development of the Mass Commonwealth Quality Program, a food safety certification, the Massachusetts Department of Agriculture facilitated many conversations between growers and wholesale buyers to help build market demand for the certificate.104