Web Extra: Local food production and how clusters could help

How can Iowa and its upper Midwest neighbors expand its fruit and vegetable industry? What do Iowa farmers need to be competitive in these markets? Where are the opportunities for related businesses?

These are some of the key questions that Leopold Center graduate research assistant Jonah Brown-Joel and German visiting scholar Bettina Riedel are addressing in a new project with associate director Rich Pirog. They are applying the concept of an “industry cluster” to the produce industry to shed light on the feasibility of creating a more vibrant local produce industry in the Midwest.

An industry cluster is a concentration of interconnected businesses, suppliers and supporting institutions that make up a value chain within an industry. The concept was popularized by Michael Porter at the Harvard Business School to explain how a company’s increased productivity and global competiveness are enhanced by the local network of complementary businesses and institutions with which a business interacts.

One of the most well-known examples of an industry cluster is Silicon Valley located in the San Francisco Bay area of northern California, where companies related to computer technology are concentrated in one region. California’s Napa Valley is another cluster that has become synonymous with world-class grapes and wine. Not surprisingly, the favorable climate in the Central Valley region of California has led to development and concentration of the citrus, nut and fresh produce industries.

“The goal of this project is to better understand what a successful produce cluster in the Midwest might look like, in terms of the required institutional infrastructure, as well as the relationships and linkages existing between these complementary institutions,” said Brown-Joel, who is working on a master’s degree in business administration at Iowa State University. “While there has been a documented interest in local produce in the Midwest, it’s less clear what type of infrastructure is needed for supplying local produce to higher-volume buyers.”

Brown-Joel said the infrastructure would have elements in a produce value chain including farmers, processers, wholesalers, retailers and aggregators – companies that collect, process and store produce from a number of growers. Companies that offer software to track products from farms to retail stores might be needed as well as other important service providers such as insurance companies and investment firms that specialize in produce, and consultants or educators who can provide technical assistance for farmers.

Riedel’s expertise is in Europe, where production of fresh fruit and vegetables is very concentrated. As part of her doctorate work in agricultural economics at Humboldt University in Berlin, she studied fresh vegetable value chains in Germany, Italy and Spain. In some cases, regions had specific strategies that led to development of the produce cluster.

“In Germany, produce clusters had good support from the local department of agriculture, but producers also had a strong network, and those relationships were very important,” Riedel said.

She said that one province in Spain is known for its iceberg lettuce and broccoli, 90 percent of which is exported to European markets. Another area of southern Spain, sometimes called the “plastic ocean” for its many greenhouses, specializes in production of tomatoes and sweet peppers.

Pirog, Brown-Joel and Riedel have concluded a focus group to collect information for the project. They will create a matrix showing comparisons between Iowa and California on a number of factors, as well as a visual model showing linkages and relationships that are needed.

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