“Definitely there’s interest in various sectors.”
– EUGENE WARWARUK, VALUE CHAIN INITIATIVE MANITOBA CO-ORDINATOR
Alberta barley growers produce barley for Japanese Sapporo beer and Shochu liquor. The Warburtons Technical Centre in Brandon contracts with farmers to produce identity-preserved (IP) wheat.
Each are examples of farmers capturing higher prices and delivering a higher-value product through participation in a value chain.
Value chains are still relatively new within the Canadian agriculture and food sectors. Farmers are much more familiar with supply chain relationships. Existing policy, law and structures haven’t pushed business in this direction, nor have farmers given much thought to the concept, according to a 2009 study by the George Morris Centre.
“To put it bluntly, farming has been in the tonnage business, not the value generation business,” says Characterizing the Ideal Model of Value Chain Management and Barriers to its Implementation, released this past summer.
“Changing industry mindsets toward creating value through innovation rather than simply ‘producing more’ is extremely challenging,” it adds.
But more farmers are beginning to think about this, says Eugene Warwaruk with the Manitoba Rural Adaptation Council (MRAC). Warwaruk co-ordinates the Value Chain Manitoba Initiative (VCMI), a provincial initiative funded by Agriculture and Agri-Food Canada and MAFRI to spread the word on value chains.
The approach is starting to interest producers whose businesses are under extreme price pressures, Warwaruk said.
“Definitely there’s interest in various sectors,” he said, noting that, as an example, he’s met with various beef producers in recent months interested in capturing more value for their commodity through value chains. Many sell animals through direct-marketing relationships they’ve built with customers, but think they could achieve greater efficiencies through a value chain approach, Warwaruk said.
“We’re working with some producers to try and determine how we can make the next leap from direct marketing individually to working together and collaborating together so they can realize some efficiencies,” he said.
VCMI helped a group of organic dairy producers link up with processor Notre Dame Creamery to put organic milk on store shelves. The farmers needed a processor to help them expand into an organic milk line, and the creamery needed more cream to keep producing its volumes of butter.
“We basically worked with them to put all the players together,” said Warwaruk, adding that the rural Manitoba creamery had not, until that time, handled organic product or processed fluid milk.
Warwaruk said the Harvest Moon Local Food Initiative is another Manitoba example of the kinds of linkages found between farmers in value chains. Harvest Moon is a producer-owned marketing group, with 10 participating farm families and two processers working to brand farm-family-raised foods.
“They’ve done a good job of getting like-minded producers together and that’s the first step.”
VCMI brought Terry Ackerman, a Guelph, Ont.-based business consultant experienced with value chains, to Manitoba last month to speak on how and why more businesses are using them, and on how to set them up. His talk was broadcast via video conference to GO offices around the province.
VALUE CHAIN MANAGEMENT
Value chains are networks of independent businesses, producers, processors and distributors who recognize their mutual need for one another, said Akerman.
Value chains share information and make management decisions to create value from consumers’ perspective while focusing on increased margin capture among all partners in the chain, Akerman said. Trust between the players is key – and critical, he said.
A supply chain can be comprised of the same players but it is a buy-and-sell relationship, and relationships within it can be adversarial. The majority of value in a supply chain is also captured by a limited number of the partners.
Akerman said more businesses now look to the value chain model, recognizing that the best way to ensure innovation and competitiveness is to move from an adversarial to a more collaborative approach.
Value chains are “replacing short-term transactional relationships with long-term partnerships,” he said.
“I think it’s a model that Manitoba sheep producers should be pursuing,” says Randy Eros, a sheep producer near Ste. Anne. He’s become more interested in value chains since seeing another George Morris Centre study on how value chain management could help producers
and processors capture more value from Canadian lamb.
There are untapped markets for lamb both in Canada and the U. S., yet sheep producers remain in a price-taking position when selling their product, Eros said.
Mike Leslie, CEO of the Alberta Barley Commission, said barley growers set up value chains “because we’ve seen the impact of not having one.
“We’re now working on the feed industry to see if we can do the same thing with some feedlots,” he said. “We’ll start providing superior-nutrition varieties of barley if they’ll share the lower costs per pound of production.”
VCMI staff, including Warwaruk and the MAFRI team of business development specialists, are available to sit down and talk with any producers interested in exploring value chains, Warwaruk said.
MARK THE CALENDAR
VCMI will offer another workshop via videoconference through provincial GO offices on Nov. 19. It will focus on how to identify market opporutunities and position products in value chains. Contact GO offices for more information.
Also, on Feb. 3, 2011, the Canadian Farm Business Management Council (CFBMC) brings a Value Plus workshop on value chains to Roblin. For more information on that workshop, contact MAFRI business development specialist Annette Allen at Roblin at 204-937-7030.