An international team of researchers examining local supply networks in the United States have claimed farmers can make a profit selling their produce directly to local businesses; a decision which other research suggests can in turn strengthen local economies, provide environmental benefits and shorten supply chains. However, the team warned farmers must not let possible "new costs weaken their commitment to the novel venture."

Professor Amit Sharma of Pennsylvania State University examined local supply chains and interviewed farmers selling food to a local market in the Midwestern USA. The farmers, who were identified through a local growers' directory, were asked about direct and indirect costs of their operations, including production, storage, packaging, marketing, transportation and delivery.

Prof Sharma concluded that farmers supplying local restaurants and shops not associated with large chains can suffer extra costs for marketing and transportation. However, he elaborated, "We found that the farmers who really made a conscious decision to sell local and who made more of a commitment tended to do better than those who are just testing the waters with local direct selling."

Sharma explained that farmers who were only testing the idea of selling to local restaurants tend to either never try to reach the local market, or quickly opt out of local selling.

In a study published this month in the Journal of Agriculture, Food Systems and Community Development, Professor Sharma and his colleagues said issues associated with 'going local' can seem like a chore. These include creating a web presence and extra work developing relationships with other businesspeople.

He said, "For some farmers, it may seem like making a web site, for example, is a monumental task, but, it actually may be easy to make a web site, or even hire someone to create one for very little money." He added that, in the United States at least, many farmer organisations, extension units, and state agencies host websites with templates that producers can use to market their products and that these organisations often use grant money to make the templates free for the farmers.

He also pointed out that, although effort needs to be put into developing local supply chain relationships, farmers can capture additional revenue for the venture through higher prices and improved sales margins. "The local foods movement is huge and retailers are wishing to meet the desires of their customers," Professor Sharma said, "Other research conducted by our team has found that 40 percent or more of people will pay a premium for identified local ingredients."

Most local outlets can charge a slightly higher price for goods, giving farmers a premium on products sold to those businesses. Selling produce themselves, instead of through a distribution company, may also improve margins for the farmers, since they are not losing revenue to the distributor.

Closer relationships with retailers can benefit farmers in other ways. Sharma added that, "Farmers may find that their margins [are] higher when they sell locally – they are cutting out the middleman." Retailers and restaurants in local economies also tend to be more open to identifying where menu ingredients came from, improving marketing and promotion for the farmer supplier.

Sharma said that farmers can take the first step to create a local sales channel by meeting with chefs and shop owners. They can learn what types of products these local businesses need and what they would be willing to pay for the items. Iowa State University's Catherine Strohbehn, who was also involved in the research, added, "Local foods are valued by chefs because of the relationships that are formed; the chefs know where and how the product is grown or produced and they trust the farmer."

The US researchers concluded that "the principal that businesses must know their market is also true in direct retail foodservices sales."

Sharma said he expects some farmers to seize the opportunities to sell to the local market. Other farmers will pass because of the perceived costs, extra work and multiple requirements of different restaurants. "A lot of times there's a status quo that exists and it's difficult for farmers to get out of that mindset," said Sharma. "Many farmers are reluctant to take on these extra costs."