RD15 - Annual Report on the Virginia Farmers Market System 2012 Report and 2013 Plan

Executive Summary:
The Virginia Farmers Market System includes four shipping point farmers markets, each operating under a contract between the Commonwealth of Virginia and private sector and/or county government organizations:

• The Southwest Virginia Farmers Market (SWVFM), Hillsville, is operated by the County of Carroll.

• The Eastern Shore of Virginia Farmers Market (ESVFM), Melfa, is operated by the Eastern Shore Marketing Cooperative, Inc.

• The Northern Neck of Virginia Farmers Market (NNVFM), Oak Grove, is operated by the Northern Neck Vegetable Growers Association.

• The Southeast Virginia Farmers Market (SEVFM), Courtland, is operated by Farmers Market, L.L.C.

All four markets within the system sell a large portion of their produce to retail chain stores. Food safety is a priority for the chain store buyers, and many retailers now require growers and packing facilities to be certified under the Global Food Safety Initiative (GFSI) program or other similar food safety programs. GFSI requirements cover the growing, harvesting and packaging of produce. In order to pass GFSI audits, packing facilities such as the farmers markets are under pressure to make capital investments to improve packing lines, cooling facilities, and ice machines, as well as purchasing/updating software and other equipment related to product traceability. It is clear that each market will eventually require capital improvements to meet modern food safety compliance standards being required by the produce industry.

For the second consecutive year the Virginia Farmers Market System in 2012 recorded over 40 million dollars in sales, with gross value reaching nearly $42.3 million dollars. Though the gross value was slightly below the 2011 level of $42.8 million, it still represents an 86 percent increase over the past five years. The number of farmers using the Market System in 2012 increased by 4.8 percent over 2011 and produce acreage rose slightly more than 11.8 percent in the past year. The numerical breakdown is as follows:

• 219 producers marketed product and/or used market services at the four markets (combined), compared to 209 producers in 2011.

• Gross value of products marketed was $42.3 million, representing 3.07 million product units; compared to $42.8 million in 2011, representing 2.9 million product units.

• The markets served 8,640 acres of production in 2012, compared to 7,726 acres in 2011.

• The system served 34 brokers and 663 major retail stores and institutional buyers, compared to 17 brokers and 638 retail stores and institutional buyers in 2011.

Factors that had a positive effect upon production and marketing volumes for the past year, as cited by the market operators in 2012, were:

• The 11.8 percent increase in production acreage served by the market system offset the yield reductions due to the high temperatures and drought in some regions and the wet weather conditions impacting eastern Virginia in late summer and early fall.

• Production meetings and grower educational sessions were held in all regions served by markets during the winter months to educate growers on market demand and the latest production recommendations and techniques.

• The “Virginia Grown” and “Buy Fresh Buy Local” movement continues to generate greater produce marketing opportunities thereby resulting in increased production of fresh produce by Virginia farmers.

• The ESVFM seafood facility opened in June of 2012 and had three freezers and three bays leased by the end of the year. The Seafood Market generated over $600,000 in revenue in just 6 months of operations during 2012. The opening of the seafood processing facility further expands the ESVFM into a full agricultural industry service center. The market also provides scale services for the vegetable and grain trucks leaving the Shore and dry storage, whenever possible, for boxes etc. for vegetable producers.

• The ESVFM is leasing four bays and two coolers to a large tomato agribusiness firm and one bay to a broker who buys a significant amount of product from local growers. The facility also has two coolers available to local growers for spot leasing by independent local producers. This allows the market to meet the needs of both the small grower with lower production and acreage and the larger corporate producer, whose acreage has been increasing.

• The SWVFM continues to increase business opportunities by packing and shipping produce directly to the region’s chain stores and to businesses that supply the stores. This has resulted in increased volumes and a greater diversity of produce being grown, handled and marketed in the region.

• The SWVFM made significant investments in building infrastructure to expand the retail business and in loading, shipping and cooling equipment to improve wholesale operations. These improvements coupled with the previous investments in 2010 for forced air coolers, five-ton capacity ice machines and hydro-coolers have proven to be instrumental in opening up sales opportunities and fostering greater production of sweet corn and broccoli.

• The NNVFM utilized produce contracts as a key marketing and risk management strategy to provide stabilization of prices, thereby reducing the price impact of a weak market and over-supply in peak production periods.

• The SEVFM weekly produce auction continues to be successful for participating producers and buyers, and is expected to be a positive opportunity for expansion of produce volume. In 2012 the auction served over 80 producers and 450 buyers with sales approximating $130,000.

• The SEVFM continues to forge collaborative business opportunities with public and private sector partners to increase volume, market demand and economic opportunities for the market and the market’s farmer base. Such partnerships include expanding produce business opportunities with the Department of Corrections (DOC) and the NNVFM.

• All four state farmers markets have obtained “Good Agricultural Practice” (GAP) Certification which provides a quality assurance standard for produce industry buyers and shippers.

Factors that negatively affected production and marketing volumes for the past year, as cited by the market operators in 2012, were:

• Produce production and quality was severely impacted by extreme weather conditions with winter and early spring high temperatures, late spring freezes, and extended heat and drought conditions in many areas through late summer. In some areas these conditions were followed immediately by excessive rainfall in late summer through early fall.

• Migrant labor costs and issues continue to negatively impact production viability and economic sustainability of the produce business. The vast majority of produce growers are dependent on migrant labor because of the lack of a local labor force. Much of this migrant labor force is employed under the H2A Federal Program which requires growers to pay transportation and housing in addition to wages for the migrant workers. Total cost often exceeds $13.00 per hour, making labor the highest variable production cost in the business. Further labor regulations and mandatory wage increases are major issues of concern.

• The Eastern Shore and eastern Virginia regions have experienced a production shift by many growers from vegetables to an increased acreage of corn, soybeans, wheat and, to a lesser extent, cotton, resulting in declining vegetable acreage being planted. Due to cheaper labor costs and high commodity prices, such grain crops often provide greater net return and reduced regulatory burden for producers.

• The condition of the economy in some of the market regions is worse than the national economy.