Value-Added Production: Page 1

Session B: VALUE-ADDED PRODUCTION Goal: The food processing and manufacturing sector will

grow by increasing value-added production and providing

farmers and producers with additional local and regional

markets.

Potential strategies:

Lightly process NEK-grown fruits and vegetables at community

kitchens and processing facilities (e.g., the Vermont Food Venture

Center) for various markets including institutions. Further,

processing facilities can serve as training sites for workforce

development and as a facility to hold canning, cooking, and food

processing classes for the public.

Address the bottleneck in meat slaughter by increasing meat

processing capacity and by helping farmers to stagger their slaughter

dates throughout the year rather than only reserving dates in the

fall. This may require technical assistance, education, and financial

incentives to over-winter animals so more spring and summer

slaughter can occur. Continue to monitor the Northeast Kingdom’s

commercial meat processing capacity. More trained meat cutters to

alleviate the seasonal bottleneck at the slaughterhouse. Further, as

transportation of livestock and livestock products is a challenge for many small and medium sized farmers, cost

effective transportation solutions should be addressed.

Water and wastewater capacity can create roadblocks for value-added processing and slaughter. Assess and

monitor infrastructure capacity in the region and work to connect municipalities with technical assistance and

funding opportunities for addressing capacity issues.

Explore opportunities in the NEK to support additional food processing endeavors, for example, mills along the

Connecticut River and other abandoned or underutilized facilities may be good sites to promote food system

businesses, such as hydroponics, aquaculture, or specialty food businesses.

Continue to monitor the supply and demand for local milk, as well as the capacity for local milk bottling, and for

on-farm micro-processing. Also, micro-dairy processing equipment could be used by some dairy farmers to make

value-added dairy products on-site, such as cheese, or to sell milk on-site.

Expand the practice of sending dairy beef (culled cows) to an NEK

slaughterhouse to be processed into ground beef to sell to public schools

and institutions.

Explore the feasibility of establishing an appropriately scaled efficient cider

press. To be cost efficient the press should have ready highway access and

cold storage capability to serve a large number of orchards.

Work with apple growers and cider processors to improve availability of

locally grown apples at a price processors can afford.

This session is designed for you

to dive deep into facilitated

discussion, assess the changes

in the region, and answer the

following questions:

Can we commit to these goals

and strategies? Are there

other goals or strategies that

we should include?

What actions can WE commit

to today in support of these

goals and strategies?

And…who is WE?

How will we know when we are

successful?

To aid the creative thinking

process, you’ll find highlights of

achievements and significant

developments since 2011.

Value-Added Production: Page 2

What’s happened in value-added processing since 2011…

Growth and development in the region’s agribusiness cluster has already been well documented in national studies and the popular press. The 2011 Economic & Policy Resources study (released just after the 2011 Northeast Kingdom Food System Plan) identified and analyzed key industry clusters for the Northeast Kingdom using an iterative analysis of sector data, including employment concentration, wage performance and stability, growth and change, and supply chain interrelationships. Clusters were ranked as mature, challenge, opportunity, or star. Agribusiness, food processing & technology was ranked as a star cluster for the region’s economy. At the time of this study the cluster represented 75 establishments, employing 654 workers with average wages of $33,270.

The Vermont Food Venture Center, which represented a $3.2 million investment, was completed in 2011. Operation and ownership was assumed by the Center for an Agricultural Economy. To date, between 30 and 50 small food producers have used the facility each year. The VFVC also operates the Farm to Institution program, which produces fresh-cut, minimally processed local fruits and vegetables from area farms for distribution to schools, college, and hospitals. In 2014, the VFVC received a Working Lands Enterprise Capital and Infrastructure Investment with the Mad River Food Hub to establish the Equipment Access Program for value-added producers.

The Northeast Kingdom Tasting Center opened in 2013, in a space formerly occupied by a department store in downtown Newport. Led by Eleanor and Albert Legere of Eden Specialty Ciders and investors, the site features a tasting bar and grill, and features more than 20 NEK producers as well as Vermont producers from outside the region.

Dairy

The NEK has established a strong reputation for producing award-winning cow, sheep, and goat milk cheese. At the time of the 2011 Food System Plan’s release, Butterworks Farm was the only producer of yogurt, yogurt products, and heavy cream. Since then, investments – often made possible through a combination of funding sources, such as Working Lands Enterprise Grants, the Vermont Farm Fund, and USDA Rural Development programs – allowed for expanded value-added dairy opportunities like Sweet Rowen Farmstead, Bonnieview Farm, and Kingdom Creamery (Clair-a-den). (See inset.)

Meat

The New England Beef-to-Institution Marketing Study (2011) indicates that more than half of New England’s instititions are interested in purchasing local products, with local being the key attribute, if it came from their existing distributor. Once a market is established, business assistance would need to be provided to farmers. The NEK could serve as a pilot site for the state, as there are already some farmers selling dairy beef to schools. The dependence of slaughterhouses and meat processing cannot be overstated – they are essential to the viability of livestock farmers. There are two slaughterhouses serving the region. Brault’s Market in Troy is a state-inspected facility serving individuals and commercial entities. A 2010 Farm Viability grant helped to established an attractive storefront and retail space. In 2014, Northeast Kingdom Processing, a state-of-the art USDA-certified slaughter and processing facility opened in the St. Johnsbury-Lyndon Industrial Park. Northeast Kingdom Processing is also certified organic and operates a retail store.

Examples of Value-Added Expansion

in the NEK

Kingdom Brewery: This Newport-based brewer uses locally sourced ingredients such as maple, spruce tips, and pumpkins to create craft beers. Spent grains are also fed to Angus cattle on the farm.

Burke Mountain Confectionery: Started in 2013 these handcrafted truffles also include local ingredients like maple syrup and Eden Ice Cider.

Vermont Chevon: This Danville-based business was created in 2011 to capitalize on a value-added market for surplus kids. The company will contract with contract with “finishing” farms to raise the goats, giving farmers an opportunity to diversify their production.

Sweet Rowen Farmstead: On-farm creamery operations opened in West Glover in 2012.

Bonnieview Farm, Albany, VT: Built a cheese-aging cave for sheep and cow milk cheeses.

Cate Hill Orchard, Greensboro: Added coolers for apples, cider, cheese, and cheese-making capacity.

Clair-a-Den Dairy: This East Hardwick dairy diversified in 2011 by constructing an ice cream and yogurt production facility on the property.

VT99 Meats: A collaboration between Jasper Hill Farm and Pete's Greens makes quality pork products. Pasture raised pigs are raised on waste whey and vegetables from the two producers.

Value-Added Production: Page 3

Resources for Processing and Sourcing

In 2014 Northern Communities Investment Corporation commissioned an exhaustive study of opportunities to further food system development in the Northern Tier (Vermont, New Hampshire, and Maine). The study identified an overarching need for technical assistance to grow or make products of optimum quality and consistency and to meet USDA regulations, while being profitable. Technical assistance needs included livestock and dairy production, cured meats, value added products, grain production, and business planning. Participants in the study also emphasized a need for expanded aggregation facilities, transportation, and distribution networks. However this study fell short of green-lighting construction of additional processing facilities. Rather it cited recent experiences with several food and product aggregators or processors and raised significant questions about the efficacy of these operations. The authors of the study voiced serious reservations of establishing a processing facility, especially a regional one, as it was felt that such an enterprise would not in and of itself be commercially feasible. Rather a food hub with various services including storage and freezing, may be a potential opportunity for private-public partnership to support the growth of agricultural industry in the region.1 In short, building smart – and strategically – will be critical to sustaining the region’s value-added processing infrastructure and not creating expensive redundancies.

Sourcing continues to present a variety of challenges. The opening of the Vermont Food Venture Center and the expansion of Green Mountain Farm Direct leverages a regional advantage of connecting processors with local ingredients. Nevertheless the region can benefit from a more concerted matchmaking effort to 1) find local food producers to grow and sell specific quantities of items to be processed, and 2) broker relationships between these processed foods and institutions. Cider processors, for example, continue to face a lack of locally-sourced apples, which presents an opportunity for growers to expand and diversify.

In 2013, the Northeast Kingdom established a Foreign Trade Zone. The zone was expanded in 2015 to include Lamoille County businesses. Legally, a Foreign Trade Zone (FTZ) is an area within the United States that the federal government considers outside the country, or at least, outside of the U.S. Customs territory. Certain types of merchandise can be imported into a Zone without going through formal Customs entry procedures or paying import duties. Some of the benefits of operating within an FTZ are obvious. At the very least an FTZ can help a business defer paying duties. How the FTZ can benefit regional processors will likely depend on the ability to aggregate demand. For example, area distillers and maple producers import bottles from Italy, but none currently import enough to save money through the FTZ. There may be untapped potential for an import operator to achieve cost-efficiency.

Selected Benchmarks from 2011

The 2011 NEK Food System Plan established a baseline target for increasing the number of food manufacturing establishments in the NEK by 5% per year.

“Covered” establishments are employers who are subject to unemployment compensation laws and consist mostly of for-profit enterprises with one or more employees. The region hasn’t seen an increase in the number of establishments in the food manufacturing sector (311) or beverage sector (312) in the past five years. However, the total number of establishments between the two sectors has increased by more than 40% since 2001. “Non-employers” (such as self-employeds and sole proprietors) continue to comprise an important part of the region’s economy. The most recent data available on non-employers (2013) show that there are 85 non-employers in food manufacturing with collective annual receipts of $1.65 million.

1 Rosalie Wilson and Jeffrey Roberts, “Action Plan for Agriculture and Food System Development - Creating Job Growth in Agriculture and Food Production: Opportunities and Realities” July 2014

Table 1: Covered Establishments, 2001-2014

Sector description 2001 2006 2009 2011 2014

311 food manufacturing 15 14 17 21 21

Caledonia 8 6 9 11 12

Orleans 6 8 8 10 9

Essex 1 0 0 0 0

312 Beverage & Tobacco Products

1 2 2 6 6

Caledonia 0 2 2 4 4

Orleans 1 0 0 2 2

Source: Vermont Labor Market Information

Value-Added Production: Page 4

The 2011 NEK Food System Plan also aimed to double the number of food manufacturing jobs in the NEK by 2020.

Covered employment in the food manufacturing sector increased by 13% over the past five years – and by 127% since 2001. This figure does not include the 25 covered employees in Caledonia County in the beverage production sector (312), up from 13 in 2011. Data suppression makes regional analysis of this sector difficult. Average annual wage for the 311

sector in Caledonia is $41,298, which is 11% higher than the overall county wage. In Orleans, the average wage for 311 sector is $47,061, which is 37% higher than the county average for all job sectors.

The 2011 NEK Food System Plan established a baseline target to double the percent of farms producing and selling value-added commodities by 2017.

Vermont and the Northeast Kingdom have traditionally seen a higher degree of value-added production among farmers than nationwide, with the exception of Essex County.

Census of Agriculture data already indicate the region is close to reaching this target. Even though Essex County continues to see less value-added activity than the rest of the state, the county has experienced a substantial increase nevertheless.

The 2011 NEK Food System Plan established a baseline of serving at least 10 NEK clients annually through the VFVC.

Since the VFVC has opened, it has worked with farmers and food businesses on various programs; providing technical assistance, production space, or the farm to institution program. A few of the NEK based clients include Snug Valley in Hardwick; Sawmill Brook Farm and Wood’s Edge Farm in Greensboro; Burke Mountain Confectionery, Riverside Farm in Hardwick, Peaselee’s Potatoes in Guildhall, Badger Brook Meats in Danville, and Heartwood Farm in Albany.

Table 2: Covered Employment, 2001-2014

Sector description 2001 2006 2009 2011 2014

311 food manufacturing 132 211 177 264 299

Caledonia 33 101 37 115 118

Orleans 97 110 140 149 181

Essex 2 0 0 0 0

Source: Vermont Labor Market Information

7.5%

1.1%

7.6% 7.1% 9.1%

3.6%

14.5%

4.3%

13.3% 13.2% 13.8%

4.5%

0.0%

5.0%

10.0%

15.0%

20.0%

Figure 1: % of Farms Producing and Selling Value-Added Commodities

2007

2012

Source: U.S. Census of Agriculture, 2007 and 2012