Value added

Our most recent VALOR excursion landed us in beautiful central Virginia; here we focused on adding value.  We visited numerous operations that were committed to adding VALUE to their products.  Going back to my Ag Econ roots at Virginia Tech, it is well documented that most commodity producers keep very little of the full retail cost of their product on the farm; 17.4% in 2012 according the USDA.  The remaining is siphoned off to marketing, transportation, processing, etc.  Recently however, we have seen a push by producers to capture MORE of their share, and increase the farm share number.  This can be achieved at multiple levels of the food distribution chain – from processing, to transportation, to full retail.  Regardless of how, the important thing is the result, which hopefully will lead to increase PROFIT on the farm.  

Keeping more $$$ on the farm does not come without extra management, labor, creativity, expenses, and especially RISK.  For the producer who is willing to think outside the box, though, and try something new and different the rewards can be great.  As I have matured, I have really come to respect those who are willing to venture outside their comfort zone and try something different/new.  It’s easy to stand in the middle of the herd and feel really safe, laughing at the fool who ventures off into the weeds.  As that fool begins to clear the weeds though, it becomes obvious that the fool is no fool.  Rather the fool has become the leader of a new movement.  

Outside the box thinking has led to the flourishing new markets for craft breweries, ciders, & wineries.  By someone taking the initial leap and investing in developing viticulture and wine in Virginia, we have seen an evolution in perception, and that Virginia wine is a REAL industry.  A few crazy cider enthusiast have given new life to several generation old orchards through the bubbly goodness of hard cider.  

Ag economist Danny Klinefelter explains how you can get a competitive advantage by rejecting the status quo. That’s right…reject the status quo.  Klinefelter says, “The only truly SUSTAINABLE competive advantage today is the ability to learn and adapt faster than your competition.”  Check out his video below, he is SPOT-ON.

Challenging the status quo is exactly what has led to the craft beer, Virginia wine and cider craze.  The often unseen result of capitalizing on a new idea is the auxiliary markets created through someone’s willingness to take a chance.  New jobs are created, and new premiums for otherwise normal items are generated.  Here in Halifax County, we have a receiving station for white oak logs used to make wine barrels; yielding a premium otherwise not realized.  Growers of small grains now have avenues for increased premiums over commodity cash price for growing specialized grains desired in the micro-brew culture.  

This takes me back to the Cycle of growth blog I wrote for the Southwest Virgina trip.  What we are ultimately witnessing in the craft beer and Virginia wine movement is a deference of consumption (of their profits) today by producers like  John and Ruth Saunders at Silver Creek Orchards who have invested in juicing and cider.  They invested their money in an effort to return more $$$ to their operation by adding value to apples they produce at Silver Creek.  The end result is the bubbly goodness of hard cider.   

As I hear pundents and government “leaders” (a term I use loosely) bloviate on about the idea negative interest rates as a tool to increase production I cringe.  Touted by the IMF as a tool to increase investment, this short sighted Keynsian philosophy does not create real growth.  In order to have growth, we must have investment; and in order to have investment, we must have savings.  The savings come before the investment.  By discouraging savings through negative interest rates, we are forgoing future growth for the consumption today.  A policy only encouraged by the short sighted view of politicians and loosely titled “economist” subscribing to the Keynsian theory.  We must continue to encourage savings.  Once the return on investment yields a greater return than the savings, we will witness the outside the box thinkers begin to clear the weeds, tromping down a trail on the road less taken for all those hanging back with the herd to begin copying their success. 

If you follow the crowd and do what everyone else is doing, you will never have a competitive advantage. Dare to be different! Dare to reject the status quo.   

Behold the rain which descends from heaven upon our vineyards, and which incorporates itself with the grapes to be changed into wine; a constant proof that God loves us, and loves to see us happy!

Benjamin Franklin

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s