File C5-05

Capturing vs. Creating Value

The way in which value is added to agricultural production can affect the potential for risk and reward. When evaluating value-added enterprises, it is important to recognize the difference between capturing value and creating value.

production processes are generally well known and established through the link to traditional agricultural production. To illustrate:
• An alliance of beef producers, backgrounding or retaining ownership, generally has knowledge of cattle feeding and the skills to background calves.

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Individual members of an ethanol or meatpacking

Capturing value occurs through changes in distribution of value in the Food/fiber production chain.
These changes are generally efforts to “capture” more of the consumer dollar. Direct marketing, vertical integration, producer alliances and cooperative efforts are often directed toward capturing more of the enduse value of farm production. Following are examples of capturing added value:
• Beef producers who join an alliance to market back-grounded calves or retain ownership of animals in the feedlot.
• Producers who form cooperatives to build meatpacking or ethanol plants.
• Producers who package or market their production directly to consumers.
Creating value occurs with actual or perceived value to a customer for a superior product or service. The objective is to create something that has value. New products, enhanced product characteristics, services, brand names or unique customer experiences may create additional value for farm products. Examples of activities for creating added value are:
• Marketing unique or branded products.
• Producing identity-preserved or specialty crops for value chain participation.
• Combining family activities (animal petting, hay