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The Economics of the Farmers’ Market

public market, farmer's marketKingston’s Public Market is an important fixture in the downtown core. As the oldest public market in Ontario and a bustling attraction to locals and visitors alike, summer in the Square would not be the same without it. On top of the Public Market, we also have the new Memorial Centre Farmers’ Market operating Sundays. It’s not news that Kingstonians support local food and farmers, as they support the local economy, foster community and create connections with the producers of our food. Though it is hard to disagree with these benefits, at the end of the day, farmers are running a business. With the high costs of small-scale food production and low per-item margins, are their businesses and the markets at which they sell economically viable? In trying to answer this question, I looked into other, lesser-talked-about benefits for the producer, the city and the consumer, and what challenges they face across the board.

Selling at a market is very different than selling retail or wholesale, and there are benefits and drawbacks to both. Selling at a farmers’ market affords the farmer higher margins, while selling to retailers and wholesalers requires a higher quantity for a discounted price. The retailer also needs to mark up the product, meaning that farmer makes less. The stability gained from consistent sales to retailers are not hugely beneficial for small scale, organic or handmade products, as it is very difficult for producers to benefit from the economies of scale normally afforded by selling retail.

Given that many of the sellers we meet in the Market are smaller, family run companies, competition is fierce against the ‘bigger guys’ in stores. In retail, shelving preference is given to companies with more bargaining power, and this often means companies with a larger number of SKUs or items. Alternatively, the vendors we meet in the Market will often do one or two products really well, which only results in a couple of SKUs and little pull against their competition.

Furthermore, in stores, the retailer is never going to take the loss. Perishable products that don’t move in the grocery store are at the cost of the producer. At least at a market, you have control over the look of your product, the sales pitch and can hold your own against competitors. Matt, the owner of Upon the Earth, who sells handmade organic granola, hummus and baked goods in the Market maintains that the kinds of products he has do better with direct selling. Having the person behind the table to explain the unique selling proposition that the company offers is more effective than trying to communicate that through labels. Often, specialized products have a hard time selling themselves on store shelves without significant investment in marketing and communication.

That’s not to say that retail isn’t a good place for locally produced products – there are many stores – like Tara Natural Foods or Common Market – that give priority to the little guy. But there is certainly something to be said about ‘cutting out the middle man’.

From the perspective of the city, there are also important tangential benefits for the economic area around the Farmers’ Market. Markets tend to pull people into the area – in our case to the downtown core. Although for many, browsing the Market is more of a spectator’s sport, the fact of being in the downtown area makes it more likely that they will spend money – maybe for lunch at a restaurant or just a coffee.

Local restaurants also tend to have an important relationship with nearby public markets.

Relationships between local restaurants and farmers often start in the market, but can expand to higher-volume sales on certain products. This offers the producer more stability in their business since they can guarantee to sell a large portion of certain crops to restaurants.

An inspired restaurant menu can also be the result of proximity to a farmers’ market. Chef Derek MacGregor from Le Chien Noir Bistro finds that a lot of his ideas for menu items and ingredients come from his strolls through the Market across the street. Although he may not pick up everything he needs on the spot, seeing the seasonal products in person is a lot more inspiring than reading items off a vendor list.

From the consumer’s perspective, markets are often synonymous with quality products and healthful options. Of course, a common qualm is that although many people would love to do their shopping at a farmers’ market, it comes at a higher cost. Due to the cost structure of small businesses like these, farmers’ market prices are unlikely to match retail anytime soon. As a result, average expenditure per person in the market is nowhere near what is spent in a grocery store for similar items. So then how do markets and vendors run a business?

Many would argue that farmers’ markets and public markets are not, by nature, an economically viable structure. It often takes time and careful planning for a new market to operate without a deficit. Vendors say that the main criteria needed for the effective operation of a farmers’ market are location foot traffic, good weather, and a wide enough variety of products. None of these things are inherent to a market itself, and are often entirely uncontrollable.

Wholesalers at markets often get flack for trying to seem like farmers despite not having grown their own produce. However, wholesalers arguably serve the purpose of filling out the product offer (often selling fruits and veggies that are not available in our climate) and helping sustainability of the institution as a whole. We can see this in our own Public Market with wholesalers, fish and seafood vendors, and craftpersons.

Of course for many producers, farming and selling this way is a labour of love, and for consumers, the experience and community that goes along with spending time in the public market makes it worthwhile. Nancy of Wolfe Island Bakery, which has been a vendor for 25 years at the Kingston Public Market, says that working at a farmers’ market as opposed to other conventional forms of selling puts producers in a much more pleasant environment. They are surrounded by other small businesses, interact with happy customers, and can watch the growth of their peers over the years.

Perhaps most importantly, market demand keeps growing. Willingness to shop at and enthusiasm for public markets from consumers helps to push the industry forward. If consumers continue to ‘vote’ with their dollars for quality local food and sustainable practices, it is certainly possible that the economic viability of public markets will become more stable across the board.

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7 thoughts on “The Economics of the Farmers’ Market

  • May 17, 2013 at 9:06 pm
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    Thanks for the article. I would love to know more about the realized financial benefits of farmer's markets on cities, particularly cities the size of Kingston (sounds like a project for an urban planning student like myself). Also I would be curious to know how much of a typical seller's business the market model supplies versus retail or the direct sale/online/direct delivery models. How much do they rely on market sales? Either way I love these markets and do as much shopping as I can at them. No comparable product in taste or quality can be found in a supermarket.

    • May 25, 2013 at 8:42 am
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      That would be a very interesting thing to look into. Although I don't know for sure, I think that on the farmer's level, the profits are relatively positive (or else why would they do it?) but in general the markets do not bring in much direct profit for the city. In Kingston, the city leases the market space to the vendors, but the rate each vendors pays is quite low comparison to other markets in Canada/North America. I think it is something like $36/ day. This is of course good for the vendors, bu the financial benefits for the city are more peripheral – drawing people downtown, adding vibrancy to the downtown area, reinforcing community values of supporting local businessness etc.

      Regarding how much the vendor sells in a market totally depends on the vendor and product – some products have naturally higher margins, and some can be scale up to sell in high quantities while others can't. It would be easy enough to ask some vendors what is the breakdown of their sales and why. I think in general, selling direct to customers and progressing into local wholesale (ie selling to restaurants nearby) cuts down their overhead costs dramatically compared to retail and traditional delivery methods.

  • May 18, 2013 at 6:10 pm
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    I've always been perplexed by the availability of mangoes and bananas in some farmers' stalls at the Kingston market. I've even seen a vendor pouring a Driscoll's plastic container of raspberries into a styrofoam cup, presumably to make them appear locally grown.

    Is there not some kind of expectation that the produce sold at the market actually be local?

    • May 19, 2013 at 11:45 am
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      Those would be the wholesalers as mentioned in the article. Unfortunate about the deception, I would guess most would be in favour of rules about labelling products as "local" or "farm fresh". Also I'm pretty sure the Memorial Centre market is 100% produced by the vendors.

    • May 20, 2013 at 9:07 am
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      I've never witnessed someone doing this out in the open at one of our markets, but often wondered how vendors can offer certain types of produce out of season. After discussing this comment with fellow market-goers, it seems to be a common observation. That's disappointing, but perhaps forgivable if the vendor is up front about it. Some vendors clearly label their produce so that there can be no mistake about it being from other regions (ie Niagara, Ottawa Valley etc…). Being up front about what is and is not local is the best policy and we should encourage more vendors to follow suit. At the very least, that gives customers information to make an informed purchasing decision, without risk of being duped. Same thing could be said for labeling produce as organic.

      • May 25, 2013 at 8:51 am
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        I definitely think that having things like bananas, mangoes and other out of season/climate offerings can be a plus to the market. I was speaking with Derek, the chef from Le Chien Noir who said that he likes having non-local fruit options at the market because it makes it more of a one-stop shop. I would agree though that the problem lies in the misleading information or pure omission of information. It would seem that since so many people are surprised or confused by some of the out of season offerings that some wholesalers are capitalizing on the fact that they may appear to be farmers. Apparently if you want to know if someone is a farmer you should look for dirt under their nails!

  • June 8, 2013 at 11:33 am
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    I love nothing more than trying out new jams, jellies, mustards, and pickled items (mmmm kimchi) from local producers. but be forwarned… Just a note on canned goods: check the seal by pushing down on the lid. There should be no give or 'pop'.

    Unfortunately I discovered dozens of unsealed jarred jams, jellies and pickles at one farmer's market stall on more than one occasion. These jars are no longer sterile and have a much greater risk of harbouring harmful contagions.
    I politely and discreetly informed the staff (on two separate occasions) and was told that "the product is fine and that the seal is fine, it is just the heat of the sun'. It was an alarming disregard for public safety and I haven't shopped at this stall since. If I see any unsealed jars this year I will be contacting the health department as the vendor refused to take responsibility after being informed more than once.

    I hate to do this but if anyone immunocompromised eats these goods the result could be devastating.

    If you are a vendor reading this, please double-check your canned goods…I would hate to see someone lose their licence or receive a fine. Thanks. On a positive note, I can't wait to nibble this year's crop of pickled asparagus and garlic scrapes, strawberry rhubarb jam and wine jelly!

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