Financing A Sustainable Food System in New England

by Lisa Sebesta

How can we finance a sustainable food system in New England? In late January, 125 people gathered for a one-day session to tackle this question. Obviously, it’s difficult, if not impossible, to answer this in a single day. But after hearing from some of the leading players, I left the conference with a better understanding of the key issues to guide us forward.

How can New England farms compete against the larger farms in the Midwest?

Massachusetts has some of most expensive farmland in the country, according to MDAR Commissioner Greg Watson, putting the New England farmer at a price disadvantage before she’s even touched the soil.  With high cost and limited available land, land access remains a big barrier. Nonetheless, a few undaunted entrepreneurs are unearthing opportunities to farm, by looking in the cities. Glynn Lloyd, for example, spoke about how City Growers transforms unused plots of land in Boston into urban farms; others, like Higher Ground Farm, are using roof tops for their growing potential. Still, operating costs are much higher than in the Midwest. Chuck Lacy of Hardwick Beef in VT noted that NE farmers need to differentiate themselves from large production farms: they need to sell something special. Good luck if you’re raising “just” a pig, he observed: specialize in heirloom pork finished on acorns, and now you’re talking. Just being local is not enough to entice the general consumer to pay the higher price.

Getting Consumers to Embrace Local Foods

Despite the proliferation of farmers markets and CSAs across New England, we only grow somewhere between 5-10% of our food. Watson says MDAR’s goal is 50%. Fortunately, Massachusetts and New England produce many specialty crops (basically anything other than corn, wheat and soy) along with value-added products. These command better margins, and there is clearly a good market for these here. So if that’s your game, New England is not a bad place to be. Otherwise, the competition is stiff.

Distribution Challenges

Small producers often run into difficulty fitting into the distribution chain of large grocery chains. Direct-to-consumer models, like farmers’ markets, have been effective.  But can we manage our region’s many small suppliers to feed a large urban population?

The American trend toward consolidation edges out small farmers, particularly in regions such as New England (to learn more about this, check out this article). This American model has worked remarkably well, if your goal is to make food as cheap as possible. According to the USDA, Americans now spend less than 10% of their income on food, including groceries and meals eaten out. That’s the lowest in the world, and it’s been steadily declining for the past 80 years, from over 20% in the 1930s.

Malini Ram Moraghan of Wholesome Wave commented that distributors in countries such as India and China have crafted systems to manage large numbers of small farmers supplying large urban centers.  We need to look to their models for innovations that can be applied here.

What can New England food entrepreneurs do?

The first approach I see is to change consumer attitudes about food expenditures. Americans have become accustomed to cheap food, whether fast food or groceries. But we know this comes at a cost to our personal health as well as the environment. There are plenty of options for those who are able to afford really good food, like locally grown, organic, or artisanal products. But the higher cost of local/organic/artisanal is still unaffordable for many Americans.

The second approach is to lower costs associated with many small transactions. Jared Auerbach, owner of Red’s Best Seafood, has figured out a way to do just that. He’s developed software that aggregates data on how much fish was caught, by whom, and out of what port, to streamline his procurement, sales, and payment processes — and add traceability to his product. He consolidates many small fishermen’s catch, gives them a fair price for their product, and pays them within a short time frame. Just as technological advances gave rise to the industrialization of food production away from New England, technology can help us bring it back. We don’t want to shun innovation: we just need it focused on the right problems.

Thanks to Federal Street Advisors and Goodwin Proctor for hosting this conference!

Lisa Sebesta, founder of Sage Impact Investment, is focused on evaluating local food related businesses for the Fair Food Fund Northeast, Slow Money Boston, and Sprout Lenders.  She can be reached at lisa@sageimpactinvestment.com. 

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