Thilmany, Dawn D.

Watson, Philip

English

Research Papers in Economics

Western Economics Forum, April 2004 
  19  
 
 
THE INCREASING ROLE OF DIRECT MARKETING AND 
FARMERS MARKETS FOR WESTERN US PRODUCERS 
 
By 
Dawn Thilmany and Phil Watson 
 
Department of Agricultural and Resource Economics 
Colorado State University 
 
 
Farmers markets have a rich history in the development of agriculture in the United States.  They 
represented an important community food distribution system long before the rise of the retail 
agribusiness system, and began to re-emerge (after years of decline) after the passage of the Farmer-
to-Consumer Direct Marketing Act of 1976.  Some argue that they are now integral part of the food 
community linking consumers and producers through business and social relationships, while others 
view markets as an appropriate marketing channel for entrepreneurial and small farmers who strive to 
establish a loyal customer base through personal selling and quality differentiated (vs. low margin 
commodity) marketing strategies. 
 
Still, direct markets, including farmers markets, are seldom studied.  For market analysis, it is important 
to understand supply side (number of producers, mix of products and marketing channels) and demand 
side (growth in sales, as well as number and types of potential consumers) factors, as well as how 
direct marketing activities influence the financial performance of farms that adopt such business 
strategies. 
 
The objectives of this article are to summarize the findings of some recent analyses of farmers market 
and direct marketing by agricultural producers, including the US Ag Census, USDA’s Agricultural 
Marketing Service (AMS) 2000 study of Farmers markets and Farmers market data collected every two 
years by the USDA-AMS.  By examining trends in the number of farmers markets, sales made directly 
by producers and how direct marketing strategies relate to other farm characteristics, one can assess 
the potential role of such channels in agricultural development, especially for small farms or producers 
with specialty and value-added agricultural products. 
 
Direct Marketing by Producers 
 
Data on direct marketing from the 2002 Ag Census show some interesting trends in the US and 
Colorado.    For the US, the value of agricultural products directly sold by producers increased from 
$591,820,000 to $812,204,000 between 1997 and 2002 (Table 1), an increase of 37% compared to a 
slight decline in total revenues sold through all channels.  The number of farms direct marketing also 
increased from 110,639 to 116,733 (5.5% growth in farms) at the same time total farm numbers 
declined from 2.2 million to 2.1 million (5% decline). Although revenue from direct sales on the average 
farm is very small in absolute terms, it increased from $5349 to $6958 (30% higher).  This represents a 
little over 7% of average revenues per farm ($94,245).  
 
The increase in direct marketing among most Western states is even more dramatic (Table 1).  
Between 1997 and 2002, 1, 266 farms began direct marketing in this region (26,149 up from 24,833) so 
that 8.5% of all farms now do some direct marketing (compared to 5.5% for the US as a whole).  The 
greatest share of farms direct marketing are in Oregon (15.9%) and Washington (12.6%), suggesting 
strong institutions and consumer support in those states. The greatest growth in number of farms direct 
marketing was in Nevada (48% growth since 1997) and Wyoming (35% since 1997). 
 
 Western Economics Forum, April 2004 
  20  
 
 
 
 
Table 1-Direct Marketing Trends in Western US States 
 
 Direct 
Marketing 
(Farms, 2002) 
Direct 
Marketing % of 
Farms, 2002 
Direct 
Marketing 
(Farms, 1997) 
Direct Market 
Value, 2002 
(,000) 
Share of Value 
Direct 
Marketed, 2002 
Direct Market 
Value, 1997 
(,000) 
Direct Market 
Sales Growth 
(1997-2002) 
Direct Market 
Value/Farm, 
2002  
Direct Market 
Value/Farm, 
1997  
Arizona  711  9.7% 592 $3,911  0.2%  $3,707  5.50% $5,501 $6,202 
California  6,436  8.1% 7,268 $114,356  0.4%  $78,712  45.28% $17,768 $10,830 
Colorado  2,343  7.5% 1,866 $17,406  0.4%  $6,926  151.31% $7,429 $3,712 
Idaho  1,632  6.5% 1,408 $5,889  0.2%  $3,306  78.13% $3,609 $2,348 
Montana  1,164  4.2% 1,048 $4,523  0.2%  $2,181  107.38% $3,886 $2,081 
Nevada  246  8.2% 166 $1,606  0.4%  $707  127.16% $6,528 $4,258 
New Mexico  1,071  7.1% 1,111 $6,582  0.4%  $4,648  41.61% $6,146 $4,183 
Oregon  6,383  15.9% 5,461 $21,411  0.7%  $15,696  36.41% $3,354 $2,874 
Utah  1,115  7.3% 1,148 $6,983  0.6%  $6,609  5.66% $6,262 $5,757 
Washington  4,527  12.6% 4,428 $34,753  0.7%  $16,540  110.11% $7,677 $3,735 
Wyoming  521  5.5% 387 $2,381  0.3%  $871  173.36% $4,570 $2,251 
US  116,733  5.5% 110,639 $812,204 0.4%  $591,820 37.24% $6,958 $5,349
Source: USDA Ag Census, 2002Western Economics Forum, April 2004 
  21  
 
This increase in activity resulted in an 80% increase in direct sales revenues for the region as sales 
jumped from $139,903,000 to $219,801,000 in 2002.  Similarly, the average sales per farm increased 
from $4,385 to $6,612 (50% growth).  These revenues include a number of marketing channels 
(farmers markets, roadside stands, CSAs and pick-your-own) and illustrate a notable shift in marketing 
strategies by Western producers. 
 
Not surprisingly, California accounts for over one-half the direct marketing revenues, but Oregon, 
Washington and Colorado also exceed $10 million dollars.  The greatest growth in direct marketing 
revenues was reported among farms in Wyoming (173%), Colorado (151%) and Nevada (127%).  
Although Colorado and Nevada’s large population growth may be fueling the consumer demand, 
Wyoming’s growth appears to be supply driven (given the high growth in farms choosing this marketing 
strategy).  The average sales per farm grew by over 100% in Colorado, Washington and Wyoming, 
while the average sales per farm increased by an average of 56% across the whole region. 
 
All of the top ten counties with respect to total direct marketing revenues are in California, which is not 
surprising given its longer seasons and climates that can produce a wide variety of consumer-ready 
products (fruits, vegetables, nuts).  Still, the highest growth in direct marketing activities is in states, 
such as Colorado, Washington, Montana and Utah, where there is upwards of 1000% growth as 
producers go from nearly zero direct marketing to significant revenues in 2002.  Table 2 shows the 
largest direct marketing counties in each state (ranked by total direct marketing revenues) and the 
county with the highest growth in direct marketing revenues in each state (conditional on at least 
$200,000 in sales since highest growth was often in counties with a very small revenue base in 1997). 
 
Table 2: County in each State with Greatest Revenues from Direct Marketing and  
Greatest Growth in Direct Marketing between 1997 and 2002 
State/County Direct 
Mkting 
Revenues 
(,000s) 
State/County Growth  in 
Direct 
Mkting 
Revenues 
(1997-2002) 
Arizona\Maricopa $1,248 Arizona\Cochise  188.9%
California\San 
Joaquin 
$8,165 California\Modoc 1064.7%
Colorado\Adams $3,187 Colorado\Rio 
Grande 
1973.9%
Idaho\Canyon $775 Idaho\Lemhi  354.5%
Montana\Lake $620 Montana\Ravalli  177.0%
Nevada\Clark $551 Nevada\Washoe  719.3%
New 
Mexico\Bernalillo 
$1,141 New Mexico\Lea  720.7%
Oregon\Lane $2,327 Oregon\Benton 291.1%
Utah\Cache $2,938 Utah\Cache  1680.6%
Washington\Skagit $3,695 Washington\Pacific 5690.7%
Wyoming\Park $317 Wyoming\Sheridan 1371.4%
Source: USDA Ag Census, 2002 
 
Similar to the states themselves, there is a great degree of difference in the direct marketing revenues 
among the counties, with the Pacific Coast showing the greatest direct marketing activity, but high 
population growth states such as Colorado and Utah also appear to have significant direct marketing 
activity and growth. 
 
 Western Economics Forum, April 2004 
  22  
 
Direct Marketing and Farm Characteristics 
 
To look for more generalizable trends between direct marketing and other farm structure, location and 
profitability factors, a correlation was calculated across the cross-section of all Western counties.  First, 
the correlation between direct marketing revenues and several variables, including number of farms in 
different sales categories, total income from farm-related sources, net farm income, value of organic 
sales, the urban continuum code and the natural amenity index (available from USDA-ERS data 
sources).  Then, the same correlations were estimated against the total market value of products sold 
across counties.   
 
First, it is interesting to note that there is a positive correlation between value of direct marketing sales 
and net farm income, total farm income, and total organic sales.  Moreover, direct marketing revenues 
appear to be positively correlated with more urban-adjacent counties with a high natural amenity index.  
This could suggest both demand (a large number of interested consumers) and supply (favorable 
climate for growing a diverse set of products) effects.   
 
Statistical comparisons of correlations between total market value and direct market value are even 
more interesting.  Gross market sales values are positively correlated with income, as expected.  But, 
pairwise comparisons suggest that gross farm income is more highly correlated with direct marketing 
revenues, while net cash farm income is less strongly correlated to direct marketing activity.   Organic 
sales value is also more positively related to total market sales value (suggesting scale economies), but 
less correlated with direct marketing revenues which counters the usual argument that organics are 
relatively more likely to be marketed directly.   Although all revenues are enhanced by proximity to 
urban areas and natural amenities, the relationship is stronger with direct-marketed agricultural sales.  
This not only confirms that concentrated populations assist producers who want to direct market, but 
also, those drawn to high amenity areas may also prefer to buy direct from producers (perhaps to 
support open space in amenity rich areas). 
 
In terms of market structure, there are few surprises.  The positive correlation between direct marketing 
sales and number of farms is always positive, but it is relatively higher than the correlation with total 
market sales value for only farms below $25,000.  The number of larger farms is more strongly 
correlated with total market value of ag products sold.  So, it is clear that direct marketing is far more 
likely to be a marketing strategy for the very smallest of operations. 
 
Farmers Market Trends 
 
The presence of farmers markets is one of the most apparent signals of consumer and producer 
interest in developing direct markets, since there are some organizational costs in establishing such 
markets, and such markets will only continue or develop in the presence of sufficient consumer demand 
(and proven sales records by participating vendors). The USDA’s Agricultural Marketing Service states 
that, “Farmers markets, now an integral part in the urban/farm linkage, have continued to rise in 
popularity, mostly due to the growing consumer interest in obtaining fresh products directly from the 
farm.”   
 
The number of farmers markets in the United States has grown dramatically, increasing 79 percent 
from 1994 to 2002, with over 3,100 farmers markets operating in the United States (Figure 1).  Table 3 
shows the number of farmers markets in Western states has grown even more dramatically, with over 
831 markets, representing 168% growth since 1994 (or about 20% annually).  It is interesting to note 
that this growth is very similar to that seen in the value of sales marketed directly by producers in the 
Western region. 
 
 
 Western Economics Forum, April 2004 
  23  
 
 
Figure 1: Growth in US and Western Farmers Markets, 1994-2002
1757
2225
2748
2842
3137
310
422
517
600
831
0
500
1000
1500
2000
2500
3000
3500
1994 1996 1998 2000 2002
N
u
m
b
e
r
 
o
f
 
F
a
r
m
e
r
s
 
M
a
r
k
e
t
s
US Western
 
 
Source: Brown (2002) and USDA-Agricultural Marketing Services (2002) 
 
 
 
Table 3: Farmers Markets Numbers by State, 1994-2002 
 
Source: Brown (2002) and USDA-AMS (2002) 
 
 
1994  1996 1998 2000  2002 
US  1757 2225 2748 2842 3137 
Western Region  310 422 517 600 831 
Arizona  5 5 12 12 32 
California  169 249 305 340 443 
Colorado  29 30 34 39 62 
Idaho  19 20 21 24 26 
Montana  7 7 7 16 28 
Nevada 0 0 4 10 17 
New Mexico  19 23 27 27 42 
Oregon 18 24 36 44 64 
Utah  3338  1 9  
Washington  35 55 62 74 87 
Wyoming  6666  1 1  Western Economics Forum, April 2004 
  24  
 
According to a 2000 USDA study on farmers markets, such markets are likely the most important direct 
marketing channel for US producers (Payne, 2002).  Moreover, with recent growth in revenues from 
farmers markets, the importance of farmers markets to farm income is expected to rise.  In 2000, 
19,000 farmers reported selling their produce only at farmers markets.  Yet, farmers markets are not 
necessarily an exclusive marketing channel for producers, as 69% of farmers market participants also 
have retail and wholesale markets to which they sell higher volumes of product at lower margins 
(Payne 2002).  Looking at direct marketing of agricultural products in the broader context of farm sales 
growth and number of farms participating in these activities may indicate the relative importance of 
direct marketing activities. 
 
Payne (2002) also found that the Pacific Coast and Rocky Mountain regions exhibited the largest 
growth in the number of producers involved in each market (10% vs. 6% nationally), and a higher share 
of producers who use markets as their only method of sales.   Still, the rapid population growth in 
Western states is not clearly beneficial to farmers markets.  In the Western region, producers are far 
more likely to drive over 50 miles to markets (20%) than the national average (12%), suggesting less 
proximate market access.  But, this is supported by the higher share of producers who make over 
$25,000 in annual sales at Western region markets (11% vs. 7% nationally). 
 
The Role of Farmers Markets in Local Food Systems 
 
There are broader community and policy issues that relate to farmers markets and direct marketing as 
well.  Hilchey, Lyson and Gillespie suggest that farmers markets enhance producers’ business 
opportunities, foster business skills and have positive effects on producer-vendor families.  For the 
broader community, the conclude that markets may have spillovers to other adjacent businesses on 
market day, support entrepreneurial start-ups in ag and food industries and support food nutrition, 
security and educational goals. 
 
Because of the broader economic and social benefits, there are some who believe that public support 
for farmers markets should grow. The USDA found that 82 percent of markets are already self-
sustaining and market income is sufficient to pay for all costs associated with the operation of the 
market (not including grant or in-kind support).  But, this may be misleading, as the study focused on 
existing markets, and there is no information on what other markets might exist if public support were 
available.  This is especially true in more rural areas, where there is an insufficient consumer base 
relative to what is necessary to support a market’s overhead. 
   
Farmers markets appear to play a significant role in food security and assistance.  According to the 
USDA, 58 percent of markets participate in WIC coupon, food stamps, local and/or state nutrition 
programs, but the participation rate is lower in the Western region.    To support more localized 
assistance efforts, 25 percent of markets participate in gleaning programs that assist food recovery 
organizations in the distribution of food and food products to needy families in local communities. In 
2000, Western region markets reported over one million pounds of donated food, averaging 5900 
pounds per market, which is lower than the national average. 
 
Current trends suggest that farmers markets will continue to grow in popularity as producers seek to 
personally connect with consumers.  Yet, some markets are already experiencing difficulties in 
attracting producer-vendors who must balance marketing activities with their production obligations.  
Still, this growth does motivate the need to further explore the relationship between direct marketing, 
local economic development, farm financial performance and producers’ ability to differentiate their 
products. 
 
 
 
 Western Economics Forum, April 2004 
  25  
 
References 
 
Brown, A. 2002. Farmers' market research 1940 to 2000: An inventory and review. American Journal of 
Alternative Agriculture 17(4). 
 
Hilchey, D., T. Lyson and G. Gillespie. 2004. “Farmers Markets and Rural Economic Development.” 
Community and Economic Development Toolbox.  
http://www.cdtoolbox.org/agriculture_economic_development/). (Accessed December 2004). 
 
Payne, T.  2002. US Farmers Markets—2000: A Study of Emerging Trend. Agricultural Marketing 
Service, USDA, Washington, DC (http://www.ams.usda.gov/directmarketing/) 
 
USDA Agricultural Census. County Level Data.  Volume 1.  
http://www.nass.usda.gov/census/census02/volume1/index2.htm 
 
USDA Agricultural Marketing Service. Farmers Market Directory. 
http://www.ams.usda.gov/farmersmarkets/map.htm (Accessed August 2004) 
 
 
Acknowledgments:   Thanks to the Colorado Agricultural Experiment Station for financial support and 
Steve Vickner for helpful comments on an earlier draft. 

THE INCREASING ROLE OF DIRECT MARKETING AND FARMERS MARKETS FOR WESTERN US PRODUCERS

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