What’s in the Center of Your Local Economy?

A local economy delivers needs such as food, water, energy, housing, etc., to those who reside within a specific neighborhood, community, or rural area. Like any social system, its function is predicated on what or who is in the center.

In the diagram below, those who produce goods and services are in the center. From there, the system distributes output across stages of processing, preparation, and retail into a market where people choose to purchase what is delivered from multiple competitive options. Such a design opens up the possibility to purchase needs delivered by providers in the global economy and far removed from the transactional boundaries of the local economy. With such choices comes a reduction in local business revenue, outsourcing of paid work, and leakage of expenditures to provisioners outside the area. Basically, this is the way the current global economy works. It is the antithesis to the intent of a sustainable local economy.

Production-Centered Local Economies

In contrast, people placed in the center of a local economy invite a very different dynamic as suggested in the graphic below. Members of the social system meet their needs as close to the point of consumption as possible. The retail “ring” represents the transactional space wherein people take delivery of a needed product or service after completing its value-added cycle.

People-Centered Local Economies

Since people within a given locality share the same basic needs, they, collectively, define a steady market. This stabile and consistent demand invites an interdependence among businesses in the locally-oriented preparation, processing, and production “rings”.

A local economy is, by definition, a needs economy (see At the Bottom of the Pyramid, It’s Looking Up!). The survival and sustainability of people as a social unit depend on whether they can meet their basic needs without interruption. This imperative places people at the center of their local economy. This gives them access to the assets and resources within their purview and grants them license to deploy those means in ways that assure their continuity and reasonable quality of life.

To have production in the center invites those who are not invested in the sustainability of the local system to have control over its destiny. That is not an enviable situation in which to be. What’s in the center of your local economy?

Originally posted to Sustainable Local Economic Development on Tumbler by Steve Bosserman on August 20, 2010

Don’t Mix Apples and Oranges When Designing a Local Food System

On Monday, 24 November 2008, I attended a Poultry Processing Working Group meeting convened by Megan Schoenfelt at the Ohio Agricultural Research and Development Center (OARDC) in Wooster, OH with a video link to the main campus for The Ohio State University in Columbus, OH. Over 20 interested individuals and key representatives from various agencies, institutions, and businesses gave thoughtful consideration to the feasibility of designing, developing, manufacturing, operating, and maintaining mobile poultry processing units, e.g., slaughterhouse or abattoir, in support of small to medium sized poultry production enterprises throughout Ohio. At the conclusion, commitments were made by several to develop plans further, put them into action, and move the concept forward. Megan’s minutes will provide you with an excellent overview of the session.

Although the meeting achieved its objectives and assured progress to goals, one topic that surfaced frequently during the session concerned the design criteria for local food systems versus those for a global food system. The difficulty arises when elements of a global food system are mixed into the specification for a local / regional food system. The two systems have unique organizing principles. The business model / value proposition for one is fundamentally different than the other. For this reason, comparing the two haphazardly or indiscriminately blending elements from both into a hybrid is the equivalent of mixing apples and oranges — doing so puts subsequent plans at risk for unsuccessful implementation.

So what are the main characteristics of a global food system versus a local food system?

Characteristics of a Global Food System

Below is a diagram that illustrates the flow of food from production to consumption in a global food system. Key points include the following:

  • Producers have a narrow portfolio often consisting of a near monoculture of crops, e.g., corn and soybeans, animals for meat, e.g., cattle and hogs, or dairy and poultry. Their objective is to produce as much as possible of one item for the least unit cost.
  • Aggregators and distributors span significant geographic distances in support of the overall system as it relentlessly pursues lowest cost labor, easiest access to natural resources, and highest performance of technology wherever that may be in the world. Their objective is to optimize transportation payloads from one value-add stage to another.
  • Value-add processors and packagers make major investments in capital equipment and facilities to increase capacity and automate operations. Their objective is to appropriate technological innovation that facilitates economies of scale in their operations, amortizes investments across high volume runs, provides consumers with an array of choices within discrete product groups and reduces dependency on human labor.

To quickly summarize, global food systems prompt producers to focus on growing / raising a limited portfolio, logistics and distribution become big ticket items due to the global reach of the system, and value-add processors centralize their operations to command as much margin as possible.

Characteristics of a Local Food System

The diagram below depicts the flow of food from production to consumption in a local food system. The main elements include the following:

  • Producers have a diverse portfolio of crops grown and animals raised. Many of the entries in such a portfolio are indigenous, have mixed use applications, and are interspersed / intercropped. The objective is to optimize the portfolio to include as wide a selection of offerings as possible and effectively leverage assets. This combination provides a hedge to protect revenue and cap costs despite unexpected swings in supply and demand for particular products or failures due to unexpected conditions.
  • Food processing, preparation, and retail occur within a contained geographic space – 1-100 mile radius – so that as food is produced it travels a short distance for just-in-time delivery to the next step in the value chain. The objective is to place the sale of fresh food in close proximity to food preparation and processing so that quality, taste, freshness, ripeness, and appearance are maximized and waste and spoilage are minimized. What doesn’t get sold as retail or is used in preparation moves immediately to value-add processing. This type of highly-integrated stacking of functions assures the highest return on investment of time and resources.
  • The dynamics of a local / regional market create a situation where the community or cluster of communities participating in the local / regional food system impart a “brand” on the food produced, processed, prepared, and sold within it while consumers enjoy a wide variety of locally-produced foodstuffs. The objective is to draw upon the virtues of economies of scope, leverage brand recognition within the community, and establish sufficient market participation due to ample selection to drive the emergence of a local economy. And as widespread participation persists, the local economy is sustained and the community is stabilized.

As a recap, local food systems encourage participants to diversify their portfolios, leverage investments, take advantage of integrated food processing, preparation, and retail operations within a 10 – 100 mile radius, and utilize economies of scope to lay the groundwork for local economies to be established.

Beware Mixing Global and Local Food Systems

As is obvious by their definitions, the differences in organizing principles and business models between global and local food systems are significant. While both certainly can and must co-exist within the total food system, an indiscriminate mix of one with the other almost always disadvantages the local food system. In many instances it will prevent such a system from forming or becoming sustainable.

So, what about that mobile poultry processing unit? How would a local food system work with poultry?

  1. Diversify the production portfolio by including as many different kinds of domesticated birds, waterfowl, game birds, and exotic / specialty species as possible distributed across a wide range of small-scale producers.
  2. Keep the processing unit in close proximity to clusters of food retail, preparation, and value-add processing facilities to assure quality, timeliness, variety, and price advantages in local markets.
  3. Develop a strong brand identity in the local / regional market for the complete package of locally produced, processed, and prepared poultry products which obviously includes the mobile poultry processing unit.

Of course, attempting to operate as a global food system would be fraught with danger. Three actions to avoid:

  1. Limit producers’ portfolios to one of two kinds of birds. Worse yet, consolidate the number of producers into one or two large-scale producers.
  2. Distance the mobile poultry processing unit from the producers or those in downstream food preparation and value-add processing.
  3. Target consumer markets that are far afield from the point of production and processing so that local branding is difficult. Worse yet is to limit the range of product offerings so severely that sustainability is at risk due to lack of market exposure and penetration.

While this example of sorting through local and global food systems characteristics concerns poultry operations, it applies to all other food products. Perhaps you will find this checklist a useful guide when developing such food systems.

Originally posted to Local Food Systems by Steve Bosserman on Saturday, November 29, 2008 09:59

Integrated Agricultural Economies

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Confessions of a Chocoholic — It’s All in the Bean

A couple of weeks ago I was visiting friends and noticed a Christmas catalogue from a German chocolatier on the table. Thumbing through it my mouth watered with the turn of every page. This visual distraction was converted into a topic of conversation. Soon, the only recourse was to raid the pantry of its Belgian chocolates and indulge our chocolate fetish. Wow!

Beyond the selection of finely-crafted chocolates featured in the catalogue, there was a section on the history of the company, some tidbits about chocolate-making and general comments about the source of chocolate – the cacao bean. I decided to research chocolate a bit further. This turned out to be quite a learning experience.

Information about chocolate is easy to find. Google has 66,500,000 hits on “chocolate” and 3,410,000 on “cacao.”

Wikipedia

The theobroma cacao, which means “food of the gods,” is an evergreen tree, native to the tropical regions of South America. Each tree has 6,000 flowers that produce maybe 20 pods. Each pod contains 20 – 60 beans. It takes 300 – 600 seeds to produce 1 kg of cocoa paste.

Field Museum

There are 592,000 Google hits on cacao production. Like most agricultural products, there is a general production process for cacao that is millennia in the making yet heavily influenced by scientific and technological developments over the past two hundred years. The pods are harvested, cut open, fermented (sweating), dried (cured), and packed in the first phase of processing. Then, the seeds are sorted, cleaned, roasted, cracked, fanned, and winnowed to separate nibs from shells in the second phase. In the third phase, nibs are ground into chocolate liquor (cocoa paste). Then, some of the liquor is pressed to render fat (cocoa butter) and the coarse leftovers are dried and ground into cocoa powder. The remainder of the un-pressed liquor is mixed with condensed milk, sugar, and extra cocoa butter form a crumb which is refined, conched, tempered, and molded into chocolates.

Much of the first phase of processing – harvesting, opening the pods, fermenting, drying, and packing – is done the same way it has been for centuries. It remains labor intensive since mechanization is not possible and several steps can only be done by hand. In addition to the physical work there is considerable human judgment involved in deciding which pods are ready to be harvested, monitoring fermentation, and controlling drying so that the result – the bean – captures the full richness of flavor and quality possible. This requires considerable skill and experience on the parts of those who are involved in this phase.

Designer Traveler

Because the cacao bean, the key raw ingredient required for making chocolate, can only be grown in certain tropical regions around the world, it’s price per pound is exceptionally high. That price is driven up by overseas buyers from Europe and North America who process the cacao but cannot grow it themselves. This is the reason cacao-growing countries like Ecuador don’t have a strong chocolate-making culture despite having the perfect cacao-growing conditions. The cost of the raw ingredients is just simply too high for the local consumption.

The cacao “Nacional” is sold in Europe as an elitist gourmet-product and gets prices up to 50 Euros per kilogram, whereas at the beginning of the production one kilogram costs only 0,58 Eurocents.”1

The post-harvest phases are highly mechanized thereby substantially reducing operating costs and improving consistency of quality and output. Considering a nearly 100:1 ratio of finished chocolate to packed cacao beans, this concentrates revenue AND profits in the later phases. It leaves very little for skilled labor conducting first phase work.

Because of high labor content, keeping the cost for labor low is an imperative. It can lead to abuse of the workforce without respect for the value and criticality of their knowledge. The most severe form of this abuse is slavery.

Food Empowerment Project2

There are 940,000 Google hits on slave labor chocolate industry. Slavery is not a new problem. Still, it challenges one’s sense of assumed social, economic, and political progress to think that the institution persists.

Dissident Voice

There are 6 hits on Google News about slave labor in the chocolate industry. There is nothing available that shows the current situation in real-time – a ground truth benchmark – but indications suggest the practice continues. It is, as it turns out, an engrained part of a colonial system setup centuries ago to facilitate exploitation. That system will not change easily because it pays-off.

TransFair USA

There are 1,330,000 hits on Google for fair trade certified chocolate. It suggests that if a sufficient number of people buy from stores or sources that sport the Fair Trade Certified label the system will change because the pay-off changes. That means changing the buying patterns of people. This means informing them about critical factors they need to take into consideration when they buy certain products, making the process of buying the products they need and want through alternative channels as easy, or easier, than conventional channels, and assuring availability with competitive prices. A tough call.

Ithaca Fine Chocolates

Equal Exchange

There are 7,900,000 hits for chocolate bars on Google. Two weeks ago I would have taken any of them. Now, I’m keeping time to a different drummer. A system changes one conversation at a time. In this case, it is one chocolate bar at a time!

Originally posted to New Media Explorer by Steve Bosserman on Friday, November 25, 2005

  1. http://www.ecuadorline.com/ecuador/newsletter/Newsletter200501.htm Original article quoted no longer available
  2. http://www.showmenews.com/2005/Feb/20050214Busi010.asp Original article no longer available