The Little Known Local Foods Supply Chain

Despite increasing consumer and policymaker interest in locally grown and processed foods, relatively little is known about the supply chains that move local foods from farms to consumers. Understanding the operation and performance of local foods supply chains is an initial step towards gauging how the food system might incorporate local foods in the future.

To learn more about this process, researchers conducted a coordinated series of case studies in five metropolitan areas stretching from Portland, OR to Washington, DC. Three supply chain types (mainstream supermarket, direct market from producer to consumer, and sale of a local product through a retail intermediary) were studied for each of the five product-place combinations. The case studies made it possible for researchers to compare the structure, size and performance of local food supply chains to mainstream supply chains.

Findings from the study, that began in late 2008, concluded:

• Local food products move through a variety of specialized and mainstream supply chains, but they currently account for a small percentage of consumer demand.

• Producers in local supply chains receive a greater share of retail prices than do producers in mainstream chains, but higher farm prices in local chains are sometimes offset by high marketing costs.

• Almost all economic activity in the local supply chains accrues locally, but mainstream food supply chains also make significant contributions to local economies.

• Products in local food supply chains travel fewer miles from farms to consumers, but fuel use per unit of product can be greater than in the corresponding mainstream chains due to logistical efficiencies that outweigh longer distances.

• Stable relationships with processors and internal investments in processing, packing, and distribution capabilities reduce market access constraints for local products, but per unit costs for these services are higher in local supply chains than in mainstream chains.

• Local supply chains often do not use infrastructure developed for mainstream channels or other local supply chains, but this may present an opportunity to increase product volumes and reduce per unit costs in response to growing demand for local food products.

This research was funded by the USDA's Economic Research Service. For a complete report on the study, see: Comparing the Structure, Size, and Performance of Local and Mainstream Food Supply Chains, USDA, Economic Research Service, ERR-99.

Extended versions of the case studies are also available on The Food Industry Center website.