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Locally Grown Foods Can Increase Distribution Costs

ITHACA, N.Y.—As consumers demand more locally grown food products, U.S. food suppliers are finding out it isn’t always economically or environmentally viable for multi-product industries to focus heavily on local sales, according to a new study published in the journal Food Policy. The findings are particularly important to the U.S. dairy industry, which plans to reduce its greenhouse gas emissions 25 percent by 2025, in part through supply chain reductions.

Cornell University researchers developed an economic model for the U.S. dairy industry that examined assembly, interplant transportation, processing and distribution for all dairy products, including milk, yogurt, cheese and butter. The study showed that the average distance traveled for all U.S. dairy products was about 320 miles from farm to market. Scenarios were developed to compare impacts of increasing local sales, focusing on reducing weighted average source distance, a unit of measurement comparable to food miles.

They found although small reductions in food miles are not relatively costly to the supply chain, reductions of more than 45 miles produce larger cost increases. In one scenario, reducing the average distance traveled of milk by 10 percent required a 30-percent increase in overall food miles for all other dairy products.

“The dairy sector is an excellent example for examining the economic consequences of increased localization of food supply chains," the researchers said. “We find that increased localization reduces assembly costs while increasing processing and distribution costs. The weighted average source distance for some products decreased at the expense of increases in other products."

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