Below is a table of retail price, farm value, and farm value as a percentage of retail value. Building or buying processing and packaging facilities, transportation costs, and marketing costs would make this venture cost prohibitive, not to mention the difficulty of competing in the market place against a well-known brand name product. Farmer owned value-added businesses that choose to compete in one of the products listed below tend to compete in the products that require less processing and packaging. For instance, Farmland's Supreme Beef Alliance has been successful in the beef market. The Farmland Supreme Beef Alliance, however, has the advantage of economies of size in processing.
Economies of size refers to lower costs per unit of output as the firm becomes larger.
Some value-added businesses have succeeded by creating value instead of capturing value. That is, the business organization has directed processing toward niche markets where there is little competition and developed a brand name for the product. For more information about the farm-retail price spread and industry costs and profits see the USDA's Food Cost Review . Beef and lamb were not so fortunate. If you have not used the web site E-answers, then you have been missing out on Extension information from around the country.