Exploring Value-Added Agriculture

“Your uniqueness is the only source of profitability that cannot be competed away, and thus, is the only source of sustainable profits.” –John Ikerd

Introduction
The quote above by John Ikerd cannot more aptly portray the prospect value addition holds for agricultural growth.

Briefly put, value-added agriculture entails changing a raw agricultural product into something new through packaging, processing, cooling, drying, extracting or any other type of process that differentiates the product from the original raw commodity. Examples of value added agricultural products include cassava flour, bagged salad mix, cassava bread, black soaps and sausages.



Definition
This definition of value-added agriculture is from the U.S. Department of Agriculture, Rural Business Development.

Value-added products are defined as follows:

• A change in the physical state or form of the product (such as milling wheat into flour or making strawberries into jam).

• The production of a product in a manner that enhances its value, as demonstrated through a business plan (such as organically produced products).

• The physical segregation of an agricultural commodity or product in a manner that results in the enhancement of the value of that commodity or product (such as an identity preserved marketing system).

As a result of the change in physical state or the manner in which the agricultural commodity or product is produced and segregated, the customer base for the commodity or product is expanded and a greater portion of revenue derived from the marketing, processing or physical segregation is made available to the producer of the commodity or product.

Adding value to agricultural products is a worthwhile endeavor because of the higher returns that come with the investment, the opportunity to open new markets and extend the producer’s marketing season as well as the ability to create new recognition for the farm. Increasingly, value-added products are hitting the local market as producers take advantage of high-demand product niches. This is the key to success in value added agriculture—niche markets are where smaller producers can be most successful in creating value and establishing a profitable business.

The Process
A study of fourteen farmers in the Southern US conducted by ATTRA ( Appropriate Technology Transfer for Rural Areas)  identified ten keys to success when pursuing a value-added business. These include:

- starting small and growing naturally;
- making decisions based on good records;
- creating a high-quality product;
- following demand-driven production;
- getting the whole family or partners involved;
- keeping informed;
- planning for the future;
- continuing evaluation;
- persevering and having adequate capitalization.

The Challenges
Value added agriculture is not without its challenges to farmers. One of the largest hurdles to overcome is that of food business and safety regulations.
Another example of a significant challenge for starting a value-added business is putting together your recipes or formulations for the product you are developing. For instance, making soap from your lavender flowers requires time and effort in finding the right recipe for high-quality soap. You will also want to research the market potential for your product in order to define your customer profile, so that you are not wasting your time in formulating a product that will not sell.

goat milk based value added product. 

Conclusion
Starting a value-added agricultural business is an exciting opportunity for the small farmer interested in diversifying and exploring new markets, but starting small and finding your niche is key to your long-term success. Evaluate the risks associated with the business and have a solid plan in place to keep you on the right track.