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Evaluating Value-Added Options
Value-Added Agriculture is a term applied to a wide range of activities that enhance the value of farm produced commodities. Raw agriculture commodities typically represent only a small fraction of the total value of consumer products. Value-added agriculture involves capturing some of the gain in value that occurs when raw commodities are converted to a consumer product or creating new products and services that increase the value of agriculture production.
Capturing value may be accomplished by producing a differentiated product or assuming more of the production processes. Producing high oil corn, food grade soybeans or identity preserved commodities are examples of capturing added value with products that are more valuable to the buyer. Backgrounding calves or retained ownership demonstrates capturing value-added by assuming more of the production process. Some producers have successfully captured all of the value-added by processing the raw commodities into a finished consumer product and marketing it directly to the customer.
Providing a recreational family experience as a part of a farm visit to a u-pick berry operation is one example of creating added -value for which the customer will pay more to receive. This "creates" value-added above the normal consumer market value for the berries themselves.
Value-added agriculture usually requires new management and production skills. New skills may only require preserving the identity of a commodity and meeting a production contract obligation or it may involve a completely separate processing and marketing business in addition to the existing farming operation.
Producing a finished consumer food product subjects the producer to a number of health and safety regulations. USDA (United States Department of Agriculture) usually regulates fresh meat and vegetables. Processed meats and vegetables are regulated by the Food and Drug Administration (FDA).
Department of Health regulations cover food-processing activities. Food products sold to consumers cannot be produced in the home kitchen. They must be processed in a separate kitchen facility which meets the Department of Health regulations. Label laws and bar coding requirements cover what should be on packages. Food processing or retail business activities have additional labor and personnel regulations not required of farming operations.
Marketing and advertising can be major management challenges. The product's market must be identified. The target consumers must be made aware of the value-added product before they will purchase it. Wholesale and retail marketing require new skills along with a great deal of time and effort.
Learning new production processes also requires time and effort. Whether it is producing a specialty crop or developing a complete manufacturing process for a consumer product, new skills must be learned and mistakes can be costly. These all take time and resources away from the farming operation itself.
It is important to understand that, while value-added agriculture can enhance profitability, it may not overcome inefficient or unprofitable farm production practices. High cost farm production reduces your value-added opportunities. If you can buy the raw product cheaper than you can produce it just buy it!
Many of the business management skills and practices necessary to succeed in capturing or creating value-added are also required for a successful farming operation. If these management practices aren't being used in the farm business, will they be used for value-added? Will sloppy farm production practices carry over into sloppy processing practices?
In spite of the challenges, value-added agriculture offers many opportunities. Missouri producers have already demonstrated that adding value to their farm produced commodities can increase profits. Some farmers have even developed new business enterprises that returned financial and personal rewards far beyond what they were able to accomplish on the farm alone.
For more information about value-added agriculture, contact your local University of Missouri Extension Center or call the Office of Value-Added Outreach at 1-877-VALU-ADD.
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Its Impact for Missouri
The Food Quality Protection Act (FQPA) became law in August 1996 and it will profoundly affect the way pesticide tolerances are set by EPA. It established a new standard of safety for pesticide residues in food with an emphasis on protecting the health of infants and children. Under this legislation, all pesticide exposures from food, drinking water, and home and garden use must be considered when determining allowable levels of pesticide residues in food. In reassessing tolerances, EPA must conclude with "reasonable certainty" that "no harm" will come to infants and children or other sensitive individuals exposed to pesticides.
The requirements under FQPA that will affect the reassessment of pesticide tolerances may have significant effects on the availability of pesticides for many Missouri crops. The Inter-regional committee (IR-4) of the National Agricultural Program is charged with aiding the development of pest management technologies in minor crops. The IR-4 program has listed 25 insecticide/nematicide (see table), nine fungicide, and four herbicide tolerances considered at risk. Minor crop registrations for these at-risk pesticides are numerous and include their uses in various fruit, vegetable and nursery commodities. (See table)
Because EPA will reassess tolerances for the organophosphate (OP) and carbamate insecticides first, the impact of the loss of either class of insecticide in Missouri was assessed based on use data and the percentage of crop acreage treated with each insecticide class (MU IPM Unit). Total use of OP and carbamate insecticides is estimated at 703,410 and 332,000 pounds of active ingredients, respectively. Three crops: corn, alfalfa, and cotton account for 85% of OP and 76% of carbamate insecticides applied to 16 crops in Missouri. Corn, alfalfa, and cotton account for 45%, 21%, and 16% of OP use and 27%, 22%, and 27% of carbamate use, respectively.
Some major crops grown in Missouri (soybean, corn, wheat) may be largely unaffected by FQPA actions. This is due in part to the availability of other effective pesticides or non-pesticide alternatives.
However, loss of the OP insecticides would have a large economic impact on several major crops, including alfalfa, cotton, and wheat. Missouris minor crops: apples, peaches, tobacco, grapes, and nursery crops would be crippled by the loss of the OP insecticides.
Loss of carbamate insecticides would have a major economic impact on cotton, rice, and sorghum. Missouris minor crops: cucurbits, fresh beans, and tomato crops would be crippled by the loss of the carbamate insecticides.
The 1998 Missouri Corn Crop Performance data is now available on the web. The books are also available. Contact your local University Extension Center. Supplies are limited.
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Herbicide Resistant Corn
Will herbicide resistant corn fit into your current or future cropping systems?
There are a number of considerations. Here are the basic differences between herbicide tolerant soybeans and corn:
1. Soybeans are typically planted later than corn allowing more problem weeds to emerge and emerge faster.
2. Soybeans can tolerate 4 to 6 weeks of weed competition while corn is more susceptible to early season competition.
3. Soybeans form a more complete canopy of leaves than corn and can be planted in narrow rows or drilled giving faster canopying to shade weeds.
4. Young soybeans are more resilient than corn to damage occurring during post emergence herbicide applications.
5. Soybeans are a shorter crop than corn allowing more typical farm application machinery across fields instead of having to use aerial or highboy application
6. Herbicide resistant soybeans should be less likely than corn to need additional residual herbicides to completely control weeds. Still, herbicide resistant corn is a viable crop with management opportunities similar to herbicide resistant soybeans that can aid with farming operations. It will be the farmers themselves who will make the final decision whether herbicide resistant corn will be as popular.
Another consideration in this type of weed control system is herbicide resistant weeds. The application of the same or similar herbicides to the two main rotated crops should be an easy way to create herbicide resistant weeds. To avoid herbicide resistant weeds, scout fields for the weed species, coverage and growth stage occurring. Evaluate the economics to justify a herbicide application. Consider alternatives to reduce use or make the herbicide applications more effective like adjusting tillage practices, advancing or delaying planting and changing rotations. Remain flexible in herbicide usage in relation to varying mode of action, mixtures, chemical families, and application timing. Finally, scout fields after herbicide applications and harvest to check on herbicide effectiveness, weeds that escaped, and any new species.
Author: Jim Jarman, Agronomy Specialist
"Prepare to evaluate your business!!"
|[This Month in Ag Connection] [Ag
Connection - Other Issues Online]What Is
Your Farm's Financial Health?
For a farm business to be successful over a long period of time, farm revenue must:
Prepare to evaluate your business!! Cash basis income tax returns do not do an adequate job of measuring the financial well-being of a business. A farm business can have high taxable income and still be going broke. How? By selling net worth and future productive capacity. Whole farm financial and production analysis is necessary. Some of the tools to accomplish this are:
A record system that combines the financial and production analysis is necessary to analyze the farm business. Among systems that will accomplish this are the Management Information Records (MIR) system and Missouri Farm Business Analysis (MFBA). For more information on analyzing farm records, contact your regional University of Missouri Extension Farm Management Specialist.
Ag Connection - December 1998