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Bob Moon: The budding local food movement is getting a super sized boost. Wal-Mart has announced plans to get more of the produce it sells from local farms. Its reason? The rising cost of fuel.
From the Marketplace Sustainability Desk, Sam Eaton reports.
Sam Eaton: Wal-Mart says it's committed to double-digit growth in the amount of local fruits and vegetables it sells at its U.S. supercenters. The retail giant says in the past two years, it's boosted the number of local farmers it works with by 50 percent. That means it'll spend about $400 million on local produce this year.
But Iowa State agricultural economist Bruce Babcock says Wal-Mart isn't doing it for the local farmers.
Bruce Babcock: With $4.80 diesel, it makes sense from the bottom line to not import and to pay trucking costs on all this food.
Wal-Mart says it's already saved about $1.5 million in fuel costs by selling more of its peaches in the same states they buy them.
Michele Halsell with the University of Arkansas helped Wal-Mart develop its local sourcing plan and she says the ripple effects extend well beyond retailer's bottom line.
Michele Halsell: It creates access. It helps to expand the reach of the program so that more local farmers can get into the game. It also expands the reach of the program so that other buyers, produce buyers large and small, can also get into the game.
But that expansion could cause growing pains. Babcock says Wal-Mart's definition of local produce isn't the same as that of the local food movement, which promotes small-scale farming and environmental values.
Babcock: Local to Wal-Mart means it's produced in a state and it could be produced on a mega-farm.
In other words, he says, in the eyes of Wal-Mart, that factory farm down the road is just as local as the family-owned vegetable patch.
In Los Angeles, I'm Sam Eaton for Marketplace.
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Comments: 6
This whole thing with big businesses of any kind--Wal-Mart, megafarms, Microsoft, and so on--is that they all started out as the little guy. If you're a small farmer or business owner of any kind, you have to get rid of that guilty feeling when you start crossing that line of being "too successful." I think that holds a lot of good people back, and I think it's wrong that a lot of us have been taught that way of thinking even in school. If a company does begin to misbehave, they eventually lose customers (and sometimes employees) and have to correct those issues if they want to gain them back. That's not the same as this "business success=evil" idea that keeps floating around.
I personally shop a little bit of everywhere--locally, Wal-Mart, online--I go with the business that gives me the best value for my money. I think that's what's great about a market-driven system in that it keeps businesses focused on what the customer wants.
I think we have to understand that the cheapest price often includes exploitation of somebody. I like a bargain as much as the next person, but I don't consider the added exploitation a good value.
We do need to understand that "local food" means a different thing to Wal-Mart and the farmer down the road who keeps 500 chickens for egg production, and the farmer who milks a dozen goats to sell milk at the Farmer's Market. It's summer time--if you want to buy local, check out your local farmer's market.
1. Am I reading the message that a buyer should pay more than the "cheapest" price a seller is willing to part with a good or a service? Wal-mart is obligated to seek the cheapest purchase prices. Suppliers are obligated to seek the high sales prices.
Remember, their obligation is to seek the greatest profits on a net present value basis. Therefore, one does not act to jeopardize the aggregate value of future profits unless the action brings greater value than that aggregate value.
2. A factory owner that finds Wal-mart won't let her raise her prices is an oversimplificaton of her situation. Wal-mart isn't stopping her. Wal-mart is not obligated to buy at higher prices -- unless, of course, this price hike is contracted. (Thus, the issue is contractual and not an on-going negotitiation.) The factory owner is more likely arguing that Wal-mart won't keep buying from her, if she elects to raise prices.
3. Buying local and paying a little more, because the money stays in the community IS a means of seeking the cheapest prices. The price does not represent buying a single good. One is buying a good and the accompanying services in the local community.
Summarizing:
Paying more than something is worth is economically irrational behaviour. Selling at a price lower than necessary is economically irrational behaviour. There are surrounding factors that are part of purchasing/selling decision that effect the market clearing price.
So, I find it distasteful the villification of Wal-mart as immoral force in our society. It's is an amoral force that society (American, Canadian, Mexican, Chinese, Japanese, UK -- although not German due to Wal-mart mismanagement) has chosen to exploit Wal-mart's lower everyday prices.
Full Disclosure: I don't exploit Wal-mart's lower prices, because of (a) inconviently located stores for me, (b) I don't like the selection of goods, (c) I don't find store layout appealing. I haven't been inside a Wal-mart for the last 5-years.