Developing a production function for small-scale farm operations in Central Minnesota

Local food advocates promote direct-to-consumer food sales, arguing that such sales yield a variety of positive effects, including that smaller, direct-to-consumer producers have a greater economic impact compared to larger producers selling via wholesale channels. In this research study, we examine this claim by exploring the relative economic contribution of small-scale, direct-to-consumer vegetable operations versus larger-scale, direct-to-wholesale vegetable operations in Central Minnesota. In this article, we detail the methods used to define the project, gather primary data, and construct the two production functions following the methods developed for the U.S. Department of Agriculture Agricultural Marketing Service’s Economics of Local Foods Systems Toolkit. In our analysis, we constructed two production functions for vegetables. The first was the default production function of vegetable operations from the input-output model IMPLAN. The second production function was constructed from detailed farm financial data on the purchasing patterns of 11 small vegetable operators in a 13-county area of Central Minnesota. Our results illuminate variations in relative impacts, but also in specific aspects of operational expenditures. The production function for the sampled farms predicted a higher per dollar economic impact than the default IMPLAN production function. Our findings indicate that the small-scale, direct-to-consumer vegetable operations may have a greater positive impact on regional businesses than larger-scale, direct-to-wholesale operations, per dollar of output. Our results inform both farm business planning and economic development decision-making in rural regions.