Intermediated markets account for two-thirds of local sales and are slowly gaining more attention. These marketing channels generally include all opportunities in the local supply chain that are not direct-to-consumer transactions, including sales to grocery stores, restaurants, regional aggregators such as food hubs, as well as schools, universities, hospitals and other institutions. The marketing chains are often regionally based and are shorter than the typical conventional food supply chain. These markets, like all other marketing opportunities, have their advantages and challenges for farmers. A set of nine papers in this themed issue explores a range of aspects of intermediated market channels, with some papers taking a broad view and others examining how farmers navigate specific markets. Together, the papers point to the potential that intermediated markets offer farmers interested in marketing their products locally and regionally, as well as reveal the entrepreneurial spirit that some of these market channels embody. While growth has been substantial and some successes evident, the papers also point to the challenges facing farmers who are trying to improve the economic situation of their farms.

Intermediated markets are relatively new market channels that have the potential to expand local and regional food systems while increasing the viability of small- and medium-sized farms. The intermediated channels comprise a short supply chain linking farmers with consumers through the use of intermediary such as a distributor or supermarket. In many instances, these supply chains embed social or environmental values, such as supporting local farming. In this paper, we examine the current state of knowledge about the intermediated market channel. The first source of knowledge consists of data from federal and private sources. Next, we review a selection of the published literature focusing on farmer use of intermediated market channels in the USA. The main intermediated channels include direct to institutions, such as schools and hospitals; food hubs; and direct to retail. The paper finishes by raising questions about future of intermediated markets, based on the findings of the literature review and data.

In recent years, the growth in local food marketing channels has been significant. Most of the research in this field examining the economic implication of these trends has focused post-farmgate including supply chain analysis (e.g., Hardesty et al., 2014; King et al., 2010), regional economic impacts (e.g., Brown et al., 2014; Hughes et al., 2008; Jablonski et al., 2016) and consumer values and motivations that have driven demand (e.g., Costanigro, 2014; Lusk and Briggeman, 2009). To date, with the exception of a few case studies examining expenses and sales by channel assessment (LeRoux et al., 2010; Hardesty and Leff, 2010; Jablonski and Schmit, 2016) there has been little research that examines the impact on financial viability among farms selling through these markets. The goal of this paper is twofold: first, to identify the factors that have the greatest influence on the efficiency of farmers and ranchers that participate in local food systems, and second, to estimate the relationship between marketing strategy and farm financial efficiency, with a particular focus on variations across farm size. Our estimation of the stochastic production frontier suggests that scale, production enterprise specialty, market outlet choices, land ownership, and management of expenses have the greatest influence on producer financial efficiency. Our model suggests that scale has the largest impact on financial efficiency, providing evidence that, all else constant, the most important factor in the efficiency of direct market producers is scale. When profit is defined as operating profit, results indicate that marketing channel is not an important indicator of efficiency. But when profit is defined as return on assets, marketing channel is an important indicator of efficiency, albeit less than is scale. Results from this analysis indicate there are economies of scale associated with farms and ranches that sell through local and regional markets, and that scale rather than marketing channel has the largest influence on efficiency.

The 2015 Farm to School Census reports that during the 2013–2014 school year there were over 5200 farm to school (FTS) programs in the USA that involved 39,000 schools and 24.1 million children. These FTS programs are intended, in part, to increase market access and therefore the viability of farms and ranches. Accordingly, the majority of FTS programs involve local food procurement directly from farmers, from non-traditional suppliers that market locally branded food products such as ‘food hubs’, or from traditional suppliers such distributors and food service management companies. Yet, there is reason to believe that transaction costs vary based on the supply chain that schools use to procure local food. Moreover, that the supply chain that schools use to procure local food has a relationship with school's expenditures on local food. We use the 2015 Farm to School Census to estimate the relationship between school district's local food expenditures per student and supply chain structure. We analyzed data using ordinary least squares regressions, controlling for the region of the USA, the type of local food products purchased, and other school-specific characteristics. Importantly, we find a negative and significant relationship between school district's non-milk local food expenditure per student, and purchases directly from the farm and from non-traditional suppliers. This implies that schools that purchase local food from traditional distributors are likely to have higher on average expenditures per student compared with schools that purchase local food directly from farmers or non-traditional distributors. Results point to the need for additional research in determining the efficacy of policies to support direct and non-traditional FTS marketing arrangements.

The implementation of farm to school programs and the use of local foods in US school meals have increased dramatically since the 1990s. However, supply constraints are often cited by school districts as an impediment to purchasing local foods. In this paper, we estimate the responsiveness of local food sourcing by schools in response to changes in local agricultural production. We test several hypotheses by merging data from the nationally administered 2015 Farm to School Census, which solicits information about local food sourcing from school districts, with Census of Agriculture data and other socio-economic data. We test whether local agricultural conditions influence the probability that a school district sources local foods, as well as the level of such purchases among the subset of school districts that are buying locally. We examine two types of local food purchases: local fluid milk purchases, which is the predominate food product that is locally sourced by schools, and local non-milk food purchases. We test the extent to which local purchases are influenced by local dairy production in the former case and local direct-to-consumer (DTC) agricultural production in the latter case. We find that the dairy and DTC agricultural production had a positive, although modest, impact on local milk and local non-milk purchases, respectively.

We find that county-level average income and the percentage of residents in poverty, when statistically significant, had positive and negative, respectively, impacts on local sourcing. Interpreting the coefficients on some of our other control variables involves greater nuance. For instance, while the percentage of students eligible for free and reduced-price meals decreases the predicted probability of a school making local non-milk purchases, it has a positive impact on the level of expenditures. We also find that the number of students in a school district has a positive impact on local food expenditures. However, while county-level population has a positive impact on local food expenditures, it has a negative impact on the predicted probability that a school district sources local non-milk products.

The centralized nature of the United States food production, processing and distribution system makes it difficult for small fruit and vegetable farmers to serve as suppliers to institutional foodservice operations (IFOs), such as schools and hospitals. Due to age, economic and/or health status, it is often the clients of these foodservice operations who would benefit from increasing their consumption of locally grown fruits and vegetables. Unfortunately, institutions are often limited in their resources and food preparation infrastructure, and lack market-based incentives to incorporate locally grown foods into their menus. This study identifies and suggests solutions to barriers that limit the ability of small fruit and vegetable farmers to serve as suppliers to IFOs. Data were collected through an extensive series of focus group meetings held with small-scale fruit and vegetable farmers in three South-Atlantic states. From these meetings, practical marketing considerations, such as payment terms, and processing, packaging and delivery requirements of supplying institutional foodservice buyers, were identified as obstacles to the efficient function of this market channel. Food safety challenges, including the related issues of obtaining (food) products liability insurance and food safety certifications, were also acknowledged among top concerns. A majority of the identified challenges were similar to those reported in other studies, but several were complicated by characteristics of farm production, limited food system infrastructure and marketing experiences in the study region. Several practical solutions to overcoming some of these marketing constraints are offered.

As small- and medium-sized farms struggle to remain viable in a competitive global economy, the expanding specialty food industry provides a potential marketing opportunity. These farms raise many of the farm products that can become the key ingredients in value-added foods. Little research exists about processed specialty foods made from locally/regionally sourced ingredients produced by small- and medium-sized farms. This study investigates the benefits, barriers and challenges for small- and medium-sized farmers who want to sell products to specialty food manufacturers (SFMs). This paper analyzes 240 survey responses from dairy, meat, fruit/vegetable/nuts and grain specialty manufacturers and 60 in-depth interviews of these manufacturers and farmers in California, Minnesota, Wisconsin, Washington and Oregon. We found that almost half of the manufacturers surveyed source primary ingredients directly from farms or from their own farm. More than half of the farms that supply these key ingredients are small or medium-sized, indicating that many farms in this category are already successfully supplying SFMs with key ingredients. The key benefits manufacturers receive from working with these farms included quality assurance, trust, and traceability. Key obstacles to such farmer/manufacturer transactions are: cost, inability to meet volume requirements, unreliable supply and lack of year-round supply. The nature of relationships between manufacturers and farmers emerged as a theme that influences the success of small- and medium-sized farms as ingredient suppliers. Whether they were large or small, most manufacturers purchased their key ingredients from multiple suppliers in order to reduce their risk. Overall, we find evidence that the specialty food industry is an emerging market channel for small- and medium-sized farms. We also find that to be successful suppliers of SFMs, farmers need to have processes in place to ensure the quality of their products; provide the specific attributes the manufacturer requires for its ingredients and be willing to communicate frequently with the manufacturer.

The volume of food purchased by the American military makes it perhaps the single largest intermediated market for food in the USA. Consequently, it is not surprising that those seeking to enhance the economic viability of small and mid-scale farms may view military bases as a promising market for locally produced foods. This is a challenging prospect, however, due to the centralized structure of military command, the nature of the military procurement system and federal mandates to obtain products that maximize value at the lowest available cost. This paper describes the US military food procurement system and the work of a 3-yr initiative to increase the amount of locally produced, source-identified products used at a North Carolina military installation. Our experiences serve as a cautionary tale, with this paper designed as both a primer on ‘how it works’ for food procurement at the federal and base level, and a description of our largely unsuccessful attempts to increase the volume of local food products from small-/mid-scale producers moving through the supply chain into base dining halls and restaurants. Based on our experiences, we also make recommendations on possible entry points for local food and farm advocates to work within the existing system to localize food procurement.

Produce auctions are local aggregation points that facilitate access for small-scale fruit, flower and vegetable farmers to wholesale buyers from a broader geography. Buyers purchase lots from multiple farmers to fulfill wholesale demand and then retail the product to the consumers. Sales are held multiple times per week to create a consistent supply for buyers and a regular market for the farmers. With over 70 produce auctions located in eastern North America, this is a growing trend of intermediated markets. Currently, there are six active produce auctions in New York State, with two more in planning stages. Produce auctions have a positive economic impact on the communities in which they are located, as well as on those who sell and/or buy at the auction. Community values inherent to these populations contribute to the success of produce auctions as an intermediated market. As the auction market channel continues to grow, buyer and consumer education on the benefits of local auctions is important. As these auctions are based in horse-and-buggy communities, extension education needs to be tailored to Amish and Mennonite populations. Auction houses, as well as farmers, will need to stay current with federal food safety regulations and market-based requirements to remain competitive.

Short food supply chains, such as those of fruit and vegetable farmers delivering fresh product directly to restaurants, promise potentially higher returns to primary producers by avoiding the expense of intermediary distributors. Direct farm-to-chef supply chains also present a lower barrier to entry for small and beginning farmers, who are often scaled-out of the restaurant market by the volume requirements of food service distributors. High transactions costs for direct exchange, however, impede growth in this type of market channel. This From the Field paper describes an ongoing initiative by a regional food service distributor to play an active and collaborative role in the farm to food service supply chain, acting as a value chain partner to identify produce items desired by chefs, supply this market intelligence to growers and to garner commitments from farmers to grow and chefs to buy these products in upcoming seasons. By the eighth month of the effort, the distributor had assigned one of its produce buyers to act as a local specialist, working directly with chefs and local growers; and had initiated a series of mini local food shows to provide chefs and growers opportunities for face-to-face communication. The ultimate objective—to garner product-specific commitments from chefs and from growers—remains a work in progress.