John & Susan Merrell
41390 Hwy 226
Scio, OR 97374
503-394-3790
503-551-7219 (cell)
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Value Added Overview

Value Added Agriculture, quite simply, is increasing the economic value and consumer appeal of an agricultural commodity such as alpaca fiber.  Value adding benefits the producer, since it increases profits and can provide a shield against the price swings seen in the commodity markets.  Value adding often entails some level of vertical integration.

Commodity markets have historically been subject to vicious price variations, changes that can not always be traced to simple laws of supply and demand.  This is particularly true in agriculture.

Value adding provides some insulation to the vagaries of the marketplace.  It adds features to a raw commodity, and increases the perception of value in the eyes of the consumer.

Value adding can take place at many levels.  It is the process that buyers of commodities use in developing proudcts that ultimately appear in retail outlets.  When the producer of the commodity takes back these processes they increase their control over their market, and they increase their profits.

Let's look at the wool industry as it was traditionally structured to understand this, and how it relates to alpaca fiber.

Wool growers invested time and money in their flocks of sheep.  Once yearly they brought in shearing teams to harvest the wool off of their animals.  The wool was classed by fineness and baled for sale.

This is the first step of value adding, the harvesting of the wool itself.

The second step of value adding was the grading of the wool into different classes based on fineness and color purity. 

The third step of value adding was the baling of the wool.

Unfortunately, these first steps were necessary to even get the wool to market, and they generally were costs incurred by the producer, since the shearing teams and wool classers were often employed by a third party.

Baled wool was sold to a buyer, often at auction.  The buyer would then find textile manufacturers that would purchase the wool, taking a profit for the service provided.  The manufacturer would then scour the wool, card it and turn it into yarn.

We can see several more stages of value adding here.

Yarn was then turned into finished goods - clothing, blankets and such.  These in turn were sold to distributors who found wholesale markets to move the product into.  The wholesale buyers would in turn sell too the end consumer at retail prices.

Wool that the producer might sell for pennies a pound found its way into suits that sold for hundreds of dollars, and each step of the value added chain provided profits for middlemen that might never have set foot on a farm.

Value adding can move the producer closer to the end customer, and allows the producer to benefit from the profits that have traditionally gone to the middlemen in the production chain. 

One way that alpaca owners are working to capture value added profits is by using the Cooperative model.

 

 
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