Economics & a Sustainable Regional Food System Jim Bower Blue Planet Partners Planting Seeds for our Future Conference March 26, 2007

Scoping Partners for Regional Food Strategy Project Blue Planet Partners Blue Planet Partners Michael Fields Agricultural Institute Michael Fields Agricultural Institute Center for Integrated Agricultural Systems Center for Integrated Agricultural Systems DATCP DATCP REAP REAP UW – Center for Cooperatives UW – Center for Cooperatives Common Wealth Development, Inc. Common Wealth Development, Inc. UW College of Agriculture UW College of Agriculture Other key food systems leaders Other key food systems leaders Blue Planet Partner

Goal of Regional Food Strategy Project Develop cohesive strategic framework for scaling up this region’s sustainable food system (Madison – Milwaukee – Chicago) Develop cohesive strategic framework for scaling up this region’s sustainable food system (Madison – Milwaukee – Chicago) Strategies nesting both locally and regionally. Strategies nesting both locally and regionally. Goal: “Increase consumption of sustainable, regionally produced and processed food from 2% to 10% in 7 to 10 years.” Goal: “Increase consumption of sustainable, regionally produced and processed food from 2% to 10% in 7 to 10 years.” Blue Planet Partner

Anatomy of a Scaling Up a Sustainable Food System 1. Values (Heart) Local, organic, sustainable, environmentally sound, life giving for communities, healthfulness, freshness, taste, etc. Local, organic, sustainable, environmentally sound, life giving for communities, healthfulness, freshness, taste, etc. 2. Economics (Blood in the bloodstream) Financial viability Financial viability Which is more important? Which is more capable of flexibility? Blue Planet Partner

Regional Food Economies Not working Not working Outflow is greater than inflow Outflow is greater than inflow Northwest MN study (Ken Meter) Northwest MN study (Ken Meter) $851m revenue $851m revenue $1092m cost $1092m cost Losing $200m per year in production costs Losing $200m per year in production costs Blue Planet Partner

Supply Chain Economics Production Production Processing Processing Distribution Distribution Blue Planet Partner

Economics of Distribution Tier 1 – direct from farm to consumer Tier 1 – direct from farm to consumer Tier 2 – local / regional distribution – small scale Tier 2 – local / regional distribution – small scale Tier 3 – regional distribution Tier 3 – regional distribution Forklifts Forklifts Semi-trailer scale minimums Semi-trailer scale minimums Regional warehouses Regional warehouses Just in time delivery Just in time delivery Blue Planet Partner

Punch line We as a society/region have not figured it out yet We as a society/region have not figured it out yet If the economics worked then supply would increase in a proportion to demand at price points that worked If the economics worked then supply would increase in a proportion to demand at price points that worked Blue Planet Partner

Changing Economic Ground Fuel prices Fuel prices Changing consumer demand Changing consumer demand Major market makers redefining landscape (Wal-Mart) Major market makers redefining landscape (Wal-Mart) Current market makers rapidly adjusting (Whole Foods) Current market makers rapidly adjusting (Whole Foods) New institutional buyers beginning to enter the market New institutional buyers beginning to enter the market Public policy – national, state & local Public policy – national, state & local Environmental costs internalized Environmental costs internalized Food security Food security TIPPING POINTS??? Blue Planet Partner

What’s Next Building 100s of viable businesses at all levels of the region’s food system Building 100s of viable businesses at all levels of the region’s food system Driving innovation – new products, new/improved processes Driving innovation – new products, new/improved processes Increasing consumers ready and able to consume a value-laden product at higher price points Increasing consumers ready and able to consume a value-laden product at higher price points Getting more efficient/effective at all levels of the supply chain Getting more efficient/effective at all levels of the supply chain Encouraging the development of market makers Encouraging the development of market makers Building partnerships that can create new market opportunities Building partnerships that can create new market opportunities TIPPING POINTS??? Blue Planet Partner