Food hubs offer answer to a disrupted supply chain

Food hubs could be a supply chain solution for California produce.

Instead of languishing in a warehouse waiting for  truck chassis or open cargo containers to ship it around the world, our bountiful California produce could feed into a local supply chain that could go straight to our schools and feed California’s children.

Assembly Bill 1009 created the infrastructure needed to address some of our supply chain bottlenecks in the food system. Authored by Assemblymember Richard Bloom, the bill establishes the Farm to Community Food Hub Program within the Department of Food and Agriculture, and provides $15 million of the general fund for a regional pilot program to establish at least three food hubs throughout the state.

An estimated $688.7 million decline in sales led to a payroll decline of up to $103.3 million, and a total loss to the economy of up to $1.32 billion from March to May 2020.

What is a food hub?

Following the USDA 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.

In other words, it’s a mission-driven center oriented toward a localized supply chain. It often also provides technical and business support to smaller producers.  Why is this important, and how is it different from a typical food distribution business?

The shut down of food service supply chains during the COVID-19 pandemic last year dramatically revealed the brittleness in the globalized aspects of those markets, which were thrown off balance by the disruption to the complex network of supply and demand relationships. This resulted in the unpredictability and loss of markets.

An estimated $688.7 million decline in sales led to a payroll decline of up to $103.3 million, and a total loss to the economy of up to $1.32 billion from March to May 2020.

Specifically in this decline, food service was hit hard with the restaurant industry losing 2.5 million jobs and with tidal wave effects impacting their supply chain. Distributors were scrambling to re-work their supply chains to pivot to meet the disruption, but those that did not already have supply chain relationships with grocery retail or direct to consumer methods suffered profound losses.

More regionalized food systems, where there are centers set up to be in regular touch with local supply and demand, provide greater resilience in times of natural or public health disaster.

During the pandemic, those areas that had community facing food hubs (intentionally structured to serve local markets and local producers) were able to pivot quickly toward redirecting their supply chains to areas of need.

There are hundreds of food hubs throughout the country, mostly located in the northeast, midwest and Great Lakes areas, and about ⅓ of them have received federal, state, or local government funding. California has only about 15, and very few of them have received limited state funding support.

If the pilot program is managed as well as we hope it will be, these food hubs will serve as a model for the rest of California

California is the number one agricultural producer in the country, in terms of dollar volume, with a farm economy valued at over $50 billion 2018. Our agricultural economy is comprised of approximately 81,700 farms, employing 800,000 people in all stages of the farming and ranching economy, and produces over 400 crops.

Notably, 80 percent of farms in California operate on less than 180 acres, and nearly 20% of California’s agricultural producers are socially disadvantaged. Add to that the paradox that in the midst of the agricultural abundance of our state, at least 20% of all Californians suffer from food insecurity.  During the disruptions of COVID, that number rose to 25%, according to the California Association of Food Banks.

How did this come to be? Many would point to our reliance on export economics. While California leads the nation in agricultural production, we lag behind other parts of the country in the development of  regionalized food systems which require capital investment in localized aggregation, and strong processing and distribution infrastructure such as food hubs.

The $15 million secured for the California food hub pilot program was deliberately secured to provide enough funds to provide meaningful start-up capital. It aims to scale up a food hub designed to serve the purposes identified in AB1009, which include prioritizing  aggregation and distribution from local small to mid-scale farms and ranches that are cooperatively owned, or owned by socially disadvantaged (beginning, limited resource, veterans, minorities, or disabled) farmers and ranchers,and producers of climate-friendly and equitably produced food.

The goal is to connect them to large markets, such as public school districts (which are the biggest food service providers in their region) and other public institutions such as food banks.  This will provide an important lifeline of supply chain support and resilience for those California producers.

If the pilot program is managed as well as we hope it will be, these food hubs will serve as a model for the rest of California to continue to spur investment in values-aligned capital aggregation and distribution infrastructure.

The expansion and investment in food hubs  is critical for the future of agriculture in California, which is  currently facing supply chain bottlenecks for its agriculture exports due to a backlog of movement with shipping containers.

Our small and mid-scale family farmers are facing  a new level of risk with climate change, the pandemic, the disruption of global trade, and the already very small profit margins of farming. They are required to make 50 year projections of capital intensive decisions in the face of unprecedented uncertainties.

With a localized food hub ready to take on their supply at mid-scale level, California produce could more readily make its way to cafeterias,commissaries, schools, and hospitals across the state.

This missing piece in the supply chain puzzle is needed in order to build back a better food system economy, support the local farming economy, accelerate climate adaptation and resilience, and re-employ food system workers.
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Editor’s Note: Paula Daniels is co-founder of the Center for Good Food Purchasing and was Senior Advisor on Food Policy to Mayor Villaraigosa of Los Angeles. Lon Hatamiya is an economist who comes from a farming family in Yolo County, and has served as California Secretary of the California Technology, Trade and Commerce Agency.  Genoveva Islas is a board member with Fresno Unified School District and founder of Cultiva La Salud. Craig McNamara is a walnut farmer, owner of Sierra Orchards, and former President of the California State Board of Food and Agriculture.