Do Local Food Systems Really Benefit the Economy?

by Peter Hanlon

Published: 5/11/17, Last updated: 5/24/19

One of the benefits often cited in the call for expanding local and regional food systems in the United States is that it’s good for local economies. The idea certainly makes sense: Shouldn’t a successful local farm be just as vital to a local economy as any other successful local business? The challenge has been generating the hard numbers to back those claims. Research into just how local farms might power the economy is still in its early stages and is hindered by issues ranging from data availability to geographic scope. Ultimately, that puts supporters of expanding local and regional food systems at a disadvantage when working to counteract the rapidly consolidating landscape of food and agriculture.

Existing Studies Show Economic Benefits From Local Food

There are numerous existing studies that establish quantified benefits of a healthy local food system on local economies. To review just a handful of examples:

  • A 2013 study in Michigan found that 17.7 percent of Michigan’s food purchases came from local sources, and that the local food system generated $4.53 billion in sales and employed nearly 19,000 people.
  • Yet another Michigan-focused study found that by linking local, seasonal purchasing to meet nutritional recommendations – more fruits and vegetables — the state could generate more than $200 million in income and nearly 1,800 jobs.
  • On a smaller scale, a Leopold Center for Sustainable Agriculture study looked at the potential impact of re-introducing the production of local fruits, vegetables and meat products in five counties in Iowa, and found that the region would benefit from the addition of between 50 to 75 jobs.
  • The emphasis on small farm production in the state of Vermont resulted in six-fold direct farm sales growth — think farmers markets, CSAs and food hubs — from $3.8 million in 1982 to $22.9 million in 2007.

In a particularly interesting study, Penn State researchers looked at the connections between direct farm sales with not just total farm sales but overall economic growth. While on a national scale direct sales had minimal impact on the economy in general, there was a measurable, positive effect in some regions of the country. In New England, for example, a $1 increase in direct farm sales was associated with a $5 increase in total farm sales. In the Mid-Atlantic, that same $1 was associated with a $9 increase in total farm sales. What surprised the study’s research team was that a $1 increase in agricultural sales nationally managed to increase personal income by 22 cents over five years. In other words, direct farm sales from local farms have a positive effect on total agricultural sales, which in turn help grow the economy. Those 22 cents might sound small, but remember that only two percent of the US workforce is engaged in farming, and any link between local food production and economic development is a powerful finding.

Scope of Economic Research Must Expand

Nearly all studies point to local food systems as a benefit to local economies, but they may in fact be underestimating the benefits. As a 2013 review of published studies concluded, researchers have consistently found positive economic impacts from local food systems at the regional and local level when looking at typical metrics such as output, gross regional product, income and jobs. Those impacts are often modest, however, and ignore other significant benefits such as the links between robust local food systems with environmental quality and healthier diets. Research is also sparse on how much local food markets draw shoppers to neighboring businesses, increase property values or even encourage entrepreneurship.

Economists are now identifying research priorities to get a better handle on the links between local food and economic development. As to be expected with a relatively new area of research, data collection about local food production and consumption must be improved. The geographic scope of research must also be expanded. For example, studies that limit themselves to state or county levels can miss the benefits generated by metropolitan foodsheds that may cross numerous political boundaries.

Finally, researchers should look beyond the typical economic metrics like jobs and income and begin to account for social benefits. Direct trade at farmers markets, CSAs and food hubs are done face to face, and is critical for building community cohesion. These are the opportunities for food producers to re‐insert themselves into the fabric of rural communities and to connect with urban customers. Not only do customers gain a better appreciation for the value of local farms to their communities, they also develop a sense of trust knowing who is growing their food and how they grow it. These improvements in social capital are a key benefit of local food systems that are poorly accounted for in economic research.

With rural populations continuing to decline and large farms accounting for an increasing amount of food production in the US, the growth in direct farm sales is a bright spot for small, local farms. To ensure that it’s supported by policy just as the large food and agricultural players are, the local food sector must continue to clarify and promote the many ways in which it benefits the economies of cities and towns across the country.

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