-Family Farmers Reverse Top-Down Vertical Integration Trend
-Processing Essential For Growers of Traditional Crops
-New Farmer-Operated Cooperatives Forming, North Dakota Leads
-Pasta Coop Markets Exceptional Quality
-Bison Ranchers Develop Niche Markets Together
-Adding Value to America's Heartland
FAMILY FARMERS REVERSE TOP-DOWN VERTICAL INTEGRATION
Family farmers are working to create a national farm policy that
ensures that farmers get a fair share of the food dollar. At the same
time, many family farmers are working to create local solutions that
will help them sustain their farms and communities.
Family farmers who grow grain and produce livestock throughout
the Midwest and Plains regions are capturing a greater share of the
food dollar by reversing the top-down trend of vertical integration.
Instead of producing raw commodities at cheap market prices for
companies that own feed mills, hatcheries, packer-shipping facilities
and processing plants, a growing number of resourceful family
farmers are adding value to their farm products before selling them
or marketing them directly to consumers and retailers.
These farmers, either independently or through farmer-run
cooperatives, are milling their own grain, processing their own
livestock and marketing their own goods to produce cereals, flour,
pasta, sweeteners and meat cuts.
FARM AID takes a look at how some grain and livestock farmers
have added value to their farm by establishing unique processing
and marketing operations.
PROCESSING ESSENTIAL FOR GROWERS OF TRADITIONAL CROPS
Conventional growers of wheat, corn, oats, barley and soybeans add
value to their crops by processing the grains and marketing a final
product direct to consumers.
The Whole Grain Milling Company in Welcome, Minnesota, for
example, is a family-operated cash grain farm that mills and
markets its own grains to individual consumers, retail outlets and
Doug and Ralph Hilgendorf, who started the company several years
ago, grow organic oats, wheat, soybeans, rye, buckwheat and corn on
their 400-acre farm. The two brothers then grind and process their
grains to produce high lysine corn meal pancakes, hot whole wheat
cereals and more.
"We did this for a number of reasons," says Doug. "The main reason
was to keep the farm viable by adding value to what we grow."
Ralph agrees. "You can't make a living selling corn for $1.90 a
bushel," Ralph says. "If you mill it yourself, you can net $4.00 to
$5.00 per bushel."
"The more you can mill and market yourself, the better chance you
have of making it on the farm," reiterates Ralph.
NEW FARMER-OPERATED COOPERATIVES FORMING, NORTH DAKOTA
Family farmers who are often unable to afford the initial capital and
research costs necessary to open a processing facility individually are
joining together to form processing and marketing cooperatives.
These new farmer-owned and run efforts differ greatly from many
of today's corporate-run and managed "cooperatives."
These new processing cooperatives are owned and operated by
active farmers and ranchers who become members of these new
cooperatives by purchasing shares in the operation and supplying
additional up-front purchasing capital to fund new equipment,
research and marketing costs. Memberships and stock transfers are
usually be reviewed by a board of directors who ensure that new
members are actively engaged in farming.
Tight membership monitoring, sincere commitments from farmers
and adequate capital have enabled many farmer-run processing
cooperatives to attain higher prices for members and to successfully
compete with similar corporate-owned facilities for market share.
To compete, farmer-owned and operated processing cooperatives are
employing the following strategies: focusing on retail and consumer
demands for quality products, capturing newly-emerging markets
for unique products, or diversifying risk by establishing a strategic
relationship with other processors in the market.
"Let's face it," says John Gardner with the North Dakota State
Research and Extension Center, "if you're going to process mainline
commodities, the only way to compete with ADM and Cargill is to
make your product or your operation unique."
North Dakota farmers are leading the way in developing these new
strategies and in creating new processing and marketing
cooperatives. Last month, as part of Farm Aid Day at the State Fair,
FARM AID president Willie Nelson praised the efforts of North
Dakota's family farmers, including successful farmer-run
PASTA COOP MARKETS EXCEPTIONAL QUALITY
One of the most successful examples of North Dakota's farmer-
operated cooperatives is the Dakota Growers Pasta Cooperative in
Carrington, North Dakota.
The cooperative was formed last year by more than 1,000 farmers
who were unhappy with cash market durum prices. "Pasta demand
and prices were going up while durum prices were going down ...
farmers in North Dakota knew they could do better," says Gardner.
"So, they raised $20 million from the Bank of Cooperatives in St. Paul,
Minnesota to build a state-of-the art durum processing facility."
Cooperative members now receive approximately $7.00 per bushel
for their wheat in the form of cash grain payments and processing
Dakota Growers Pasta Cooperative has displaced many of its
corporate competitors by supplying retailers across the country with
pasta processed from the highest grade durum wheat. Pasta sales
have already been booked with quality-conscious retailers into 1996.
"This cooperative has shown some great leadership," says Gardner. "I
think it will become a model for other producers looking to establish
long-term markets and viable farm income."
BISON RANCHERS DEVELOP NICHE MARKETS TOGETHER
The North American Bison Cooperative in New Rockford, North
Dakota has successfully processed and marketed buffalo meat to
domestic niche markets since last February.
"Before the coop was formed, bison ranchers were independently
responsible for marketing to local retailers," says Brad Lodge, the
cooperative's manager. "Many of them didn't have the time or the
skills to develop these markets on their own, so that's why we
started the cooperative."
The Cooperative's 187 members, like those at the Dakota Growers
Pasta Cooperative, conducted extensive market research before
organizing the venture and as a result now receive higher prices for
their bison meat, as well as the assurance that they will have a
permanent market for their product. The plant is European Union
approved, which Lodge says will ensure future market expansion to
Europe, where bison meat is in high demand.
"This is no 'get rich' operation," cautions Lodge, "but it has enabled
bison ranchers to earn a decent living."
ADDING VALUE TO AMERICA'S HEARTLAND
Value-added ventures that are solely farmer owned and operated
have contributed significantly to rural economic development in
Investments made by local farmers rather than by short-term, profit
conscious shareholders, ensure the long-term survival of these new
processing and marketing operations while generating viable farm
income for local families and local businesses.
North Dakota producers have been successful at building these new
operations in part because of the state's agriculture assistance
Sarah Vogel, North Dakota Commissioner of Agriculture, has helped
create several state-sponsored programs that facilitate farmer-
owned crop and livestock value-added ventures.
North Dakota makes almost $1 million available each year to fund
feasibility studies and market research, as well as legal fees and
other start-up costs associated with the establishment of new crop or
livestock-based businesses. In addition, Vogel says the Bank of
North Dakota has made millions of dollars available to help farmers
pay for new equipment needed for processing.
Vogel says she and other Agriculture Commissioners from around the
nation are developing a proposal for the 1995 farm bill that will
make bloc grants for similar rural development initiatives available
to each state from the federal government. "The federal government
should help emulate and foster this kind of state-supported rural
economic development," Vogel says, because it has been successful
at adding value to farmers' income and the rural economies they
FARM AID is also helping put more money in the pockets of family
farmers and rural business owners by offering grants to non-profit
farm groups to conduct outreach and education about direct
marketing and value-added opportunities for family farmers.
Sources: The Kiplinger Agriculture Letter, August 5, 1994; Peter Behr,
"Wheat Farmers Lose Ground as Processed Food Exports Grow,"
WASHINGTON POST, August 7, 1994; Telephone interviews with: Fred
Kirshernman, Northern Plains Sustainable Agriculture Society,
August 15, 1994; John Gardner, Carrington Research and Extension
Center, August 15, 1994; Sarah Vogel, North Dakota Agriculture
Department, August 15, 1994; Ralph Hillgendorf, July 12, 1994; Brad
Lodge, North American Bison Cooperative, August 16, 1994.
Ralph Hilgendorf of Whole Grain Milling Co. Box 78, Welcome, MN
56181. (612) 644-6265. Ralph is happy to answer any questions
farmers may have about starting up their own milling and marketing
"From the Grassroots: Profiles of 103 Rural Self-Development
Projects," ECONOMIC RESEARCH SERVICE, April 1991. Contact ERS for
more information: ERS-NASS, P.O. Box 1608, Rockville, MD 20849-
1608. 1-800-999-6779. $11.00.
Results from a survey of rural businesses, including marketing and
value-added operations. Two follow-up surveys were conducted in
August and November of 1993.
We welcome comments and suggestions: contact Harry Smith at
FARM AID, (617) 354-2922. Fax: (617) 354-6992. E-Mail:
HN3322@connectinc.com. We encourage the reproduction of
FARM AID NEWS. Produced by The Institute for Agriculture and
Trade Policy (IATP) for FARM AID. Editors: Gigi DiGiacomo and
Harry Smith. For information on other agriculture bulletins, contact
IATP: (612) 379-5980. Fax: (612) 379-5982. E-Mail: