Center For Profitable Agriculture

PROJECT HIGHLIGHTS | PRODUCTS ON THE MARKET

Value-Added Projects — Project Highlights — 2

	Beef Marketing and Risk Management Considerations
	Bio-Diesel Production in Tennessee
	Bottled Water
	Boxed Vegetable Deliveries
	Broiler Waste Compost, A Preliminary Analysis

Beef Marketing and Risk Management Considerations

Population growth, increasing per capita consumption of beef and increasing interest in “natural” or other specialty product characteristics indicate favorable market conditions for value-added beef products in some areas of the state. Identifying a target market and developing an appealing product position is extremely important in gaining consumer attention and focusing marketing messages. Product claims such as “natural” or “no hormones administered” used on labels or in marketing materials must be approved by the USDA Food Safety Inspection Service. Risk management, especially managing against the threat of liability damages, is often a major concern of enterprises producing and selling food products. Risk management strategies for a direct beef marketer may include choosing a beneficial business structure, purchasing food product liability insurance, maintaining a production and delivery log book, providing safe food handling information to customers and recording all complaints, incidents and responses.

Bio-Diesel Production in Tennessee

Farmers and entrepreneurs considering biodiesel production in Tennessee should utilize the results of the recent publication titled, “Economic Feasibility of Producing Biodiesel in Tennessee.” This study was conducted by the Agri-Industry Modeling and Analysis Group of The University of Tennessee Department of Agricultural Economics. According to the report about 20 million gallons of biodiesel were produced in 2001, but U.S. capacity is already projected at 50 million gallons. Projections are that capacity will rise to about 70 million gallons over the next couple of years. A dozen companies have investment in biodiesel production and marketing. Most facilities are located in the Mid-West and in California. Tennessee uses about 1.2 billion gallons of diesel per year. Projections are that 100 to 500 million gallons of biodiesel will be used depending on future policies. Biodiesel prices are projected in the $1.30 to $1.60 range over the next decade. Biodiesel production is most efficient at the level of 10-15 million gallons per year. A 13 million gallon facility would use 12,900,000 gallons of soybean oil. Costs of the project would be about $18.8 million for a stand-alone facility. If an integrated facility were constructed that would incorporate crushing of soybeans into soybean oil, the project costs would be about $37.6 million. About 9,000,000 bushels of soybeans would be required.

Bottled Water

Springs, wells and caves on Tennessee farms often are considered an opportunity for farmers to tap the consumer interest in bottled water. Since the mid 80s, the bottled water market has grown to a $6 billion industry in 2000, with an annual growth rate of 15 to 30 percent and a 9.3 percent increase in sales from 1999 to 2000. Per-capita, bottled water consumption in the US totaled 18.2 gallons in 2000. However, it seems as though a source of water is far from the only limiting factor for a successful bottled-water farm enterprise. Regulatory oversight of the water source and bottling facility require numerous, usually costly, analyses. In addition, the most effective filtering and bottling systems are rather expensive. These costs tend to increase the number of bottles of water that must be sold in order to make a profit. While the national bottled water industry is indeed significant and continues to expand, opportunities for new companies with new products should be carefully planned.

Boxed Vegetable Deliveries

"Community Supported Agriculture" activities and variations thereof, are currently being considered by farmers in Tennessee. Marketing a pre-sold mixed container of seasonal vegetables to affluent suburban consumers is one such variation. Organic products and custom delivery of the boxed vegetables to a pre-determined convenient, location also adds value to the enterprise.

Broiler Waste Compost, A Preliminary Analysis

The total output of a composted broiler waste product may be limited first by the amount of birds available for compost. With a beginning composting recipe of 1 to 1.5 to 0.10 to 0.5 of birds, litter, straw and water, the amount of birds will most often limit the total volume of end compost product while a significant amount of non-composted litter will likely remain. A typical broiler house may yield approximately 1500 to 2200 bags (approximately 25 lb. bags) of compost per year (and about 95 additional tons of litter). The cost of composting and bagging the product may range from $1.50 to $4.50 per bag, depending on efficiencies gained through total volume. While market opportunities exist for the product, sales will be greatly influenced by price, product characteristics, product consistency, packaging, product positioning and product promotion.