Make Food Not Waste: Strategies to Reduce Loss and Grow Profits on the Farm
Agriculture is a low margin, high operating leverage business, where being just a little bit more efficient in all areas can have an outsized effect on profits.
Farmers are in the business to make food not waste, but even so, an inevitable 88.7 million tons of food went unsold or uneaten in the United States in 2022, roughly 38 percent of our nation’s total food supply. The majority of food waste occurs on a consumer level—in homes, restaurants, and grocery stores. But for farmers, reducing food waste is a top priority because it’s their livelihood. While only 16 percent of food waste occurs on the farm level, farmers are perpetual innovators and strive to close this gap even further. They understand the value of every crop, not just for feeding families but also for sustaining our planet.
In this article, we’ll explore innovative strategies farmers are adopting to make food, reduce waste, and optimize profitability.
Why does food waste happen on the farm?
Before we dive into the strategies farmers are implementing, let’s review the main factors contributing to food waste at the farm level.
Price Volatility
Agricultural commodities do not have stable prices and often fluctuate as supply and demand changes. When prices soar due to factors like high transportation costs, drought, or supply chain issues, consumers may stay away from expensive products, leading to a drop in demand. When this happens, distributors and retailers may cancel orders or delay shipments, leaving excess perishable goods stranded in warehouses or fields.
Labor Cost and Availability
In the field, food may go to waste because farmers often lack access to affordable and reliable farm labor for harvesting.
“We have documented cases where farmers have lost entire crops, because they simply could not find the people to do the work. We can import labor, or we can import our food.”
Will Rodger, the director of policy communications at the American Farm Bureau.
Even when farm labor can be sourced, it’s increasingly expensive. This has led to a trend of farmers switching from more labor-intensive crops to crops that can be harvested by machine. This affects our supply chain and commodity pricing, leading to an increasingly volatile market.
Insufficient Cold Storage
Factors like inflation, transportation delays, labor scarcities, and aging infrastructure has depleted America’s cold storage. As of 2023, the USDA reported a total refrigerated storage capacity of 3.7 billion cubic feet, of which 81 percent was used for agriculture. Despite this, there are assertions that the U.S. currently faces a 40 percent deficit in cold storage capacity, necessitating the replacement of approximately 90 percent of the existing facilities.
Quality-Based Contracts
Many retailers, restaurants, and food distributors require farmers to participate in quality-based contracts. These contracts specify standards for the size, color, ripeness, freshness, and other attributes that agricultural products must meet to be accepted and paid for. As a result, perfectly edible but visually imperfect or non-standard produce may be rejected by retailers.
Strategies for Farmers to Reduce Food Waste and Increase Profit
As a nationwide land lender, AgAmerica has had the opportunity to meet farmers throughout the U.S. who are making big strides in optimizing their operations to reduce food waste and increase profitability. Here are just a few examples.
Leverage the “Ugly” Food Market
As many as 58 percent of consumers said they would opt for “ugly” produce if it was offered at a discount, according to a 2021 survey. The ugly food market has challenged the idea that consumers only want perfect-looking produce. An increasing number of farmers work with these businesses to sell and distribute goods that would otherwise be left to rot by grocery stores.
One business, Imperfect Foods, has partnered with more than 200 farmers to sell produce that would be rejected by other grocers. As much as 78 percent of all their produce comes from family farms and cooperatives.
Sell Directly to Consumers
Roadside produce stands and farmers markets help some farms, particularly smaller operations, reduce food waste by cutting out transportation issues and overbearing grocer requirements. While helpful, these methods may not be good solutions for everyone, especially for farmers producing large quantities of crops.
Many farmers have begun to sell directly to schools, summer meal programs, childcare facilities, and hospitals. This could be a solution for large-scale farmers who couldn’t possibly sell everything they grow at their local market.
“Farm to school is really easy,” said Sunny Baker, senior director of programs and policy at the National Farm to School Network. “We call it a triple win. It’s a win for kids. It’s a win for farmers, it’s a win for school and the community.” In 2019, more than 60,000 schools were participating in the program.
Invest in Technology
Many farmers are increasingly integrating smart farming technology into their operations to cut costs and waste. One example is an AgAmerica client based in the Southeast that used a loan to invest in new technology for their vertically integrated family farm.
This technology ultimately allowed the farmer to launch new business lines and reduce food waste by 20 percent. A large part of the technology investment went toward value-added processing, which allowed the farm to diversify its customer base.
Incorporate Value-Added Processing
A 2023 study found that even consumers purposefully seeking to reduce food waste valued prettier-looking food more. Customers are willing to pay more for food that looks nice—but that doesn’t mean lumpy tomatoes are doomed to be less valuable.
The study found that highly transformed products (like tomato puree) are perceived as more valuable than something with less transformation (like chunky sauce). Farmers can use value-added processing to remove physical imperfections and raise the value of their crops.
Supporting Farmers on the Field and on the Balance Sheet
Farmers are responsible for feeding the nation, yet they are constantly being asked to do more with less. At AgAmerica, we work with farmers every day to provide them with holistic financial support designed to increase their operation’s longevity, production, and profit.
If you’re looking for ways to increase profitability on your farm but you need counsel and capital to get started, contact us today.
