What is a food hub? In general, food hubs help farmers get their products from the field to the consumer. According to USDA’s definition, a regional food hub is “a business or organization that actively manages the aggregation, distribution and marketing of source-identified food products, primarily from local and regional producers to strengthen their ability to satisfy wholesale, retail and institutional demand.”
Although there has been a lot of recent media coverage about food hubs because of a proposed hub on the Eastern Shore and a planned hub in Baltimore, food hubs are not a new phenomenon in Maryland. There are five existing and four emerging food hubs in our State. Despite their growth and common mission, not all food hubs are alike, and farmers should understand the legal and business structure of any individual food hub before utilizing one for their operation.
Food hubs, such as the Garrett Growers Cooperative, have a producer cooperative legal structure. This means that the business is a democratic organization controlled by its farmer members who contribute toward the capital of the cooperative and can participate in setting policies and making decisions. Cooperatives differ from corporations in that most allow one member to have one vote, as opposed to corporations whose shareholders vote on the basis of their shares or percentage of ownership. Cooperative expenses are paid out of the regular commissions on sales, and any profits at the end of the year are distributed according to the members’ wishes.
A food hub can also be organized as privately held businesses, such as Hometown Harvest in Frederick, which means that the hub is usually owned by a limited liability corporation or other corporate structure and run as a for-profit enterprise. In deciding to use a privately held food hub, farmers should carefully review the terms of the producer contract and understand the term or duration of the contract, the price structure and what, if any, control they have over the business decisions of the hub before they sign on the dotted line.
Alternatively, food hubs can be owned by nonprofit organizations such as the proposed Easton Food Hub and either also operated by a nonprofit or another form of business entity. A producer should request and read the by-laws of the owner and/or operating business entity before committing to a food hub governed by a business entity. The by-laws are the operating documents which outline how a business entity can act, make decisions, and elect or remove members of the Board of Directors. A benefit to a nonprofit food hub is the greater access to grant programs and donations compared to privately held food hubs. However, nonprofit food hubs can have greater difficulty acquiring bank financing or other forms of private investment as compared to for-profit business entities.
There are also publicly held food hubs, in the form of city owned farmers’ markets such as Eastern Market in Washington D.C. Participating in a farmer’s market generally requires minimal rental or vendor fees for the producer but requires that either the producer or an employee spend time attending the market which can reduce the overall profitability of participating. Further, the range of consumers reached through a farmer’s market is generally limited to those in attendance at the market itself, but lasting relationships can be formed through the personal interaction with consumers at the market.
Despite the differences among Maryland food hubs, according to the Southern Maryland Agricultural Development Commission, in the summer of 2014 the existing and emerging Maryland food hubs convened and expressed a willingness to periodically meet and work together as a Food Hub Coalition. Although it is unclear what the future holds for food hubs, it appears that these unique agricultural food distribution systems are definitely on the rise.
To learn more about food hubs, check out USDA’s Regional Food Hub Resource Guide: http://www.ngfn.org/resources/ngfn-database/knowledge/FoodHubResourceGuide.pdf
If you are not quite ready to join a food hub but need to market your products and connect with buyers, plan on attending the Buyer-Grower Expo hosted by the Maryland Department of Agriculture on January 22, 2014 in Annapolis, MD.