Subject: Farm Aid News 8-16-94
From: [email-masked] (IATP)
Date: 16 Aug 1994 23:17:34 -0000
Newsgroups: alt.sustainable.agriculture

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FARM AID NEWS
Volume 2, Number 17
Tuesday, August 16, 1994
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HEADLINES:

-Family Farmers Reverse Top-Down Vertical Integration Trend
-Processing Essential For Growers of Traditional Crops
-New Farmer-Operated Cooperatives Forming, North Dakota Leads
 Way
-Pasta Coop Markets Exceptional Quality 
-Bison Ranchers Develop Niche Markets Together
-Adding Value to America's Heartland
-RESOURCES
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FAMILY FARMERS REVERSE TOP-DOWN VERTICAL INTEGRATION 
TREND 

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.
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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 
bakers.  

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. 
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NEW FARMER-OPERATED COOPERATIVES FORMING, NORTH DAKOTA 
LEADS WAY 

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 
cooperatives.
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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 
dividends.  

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." 
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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."
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ADDING VALUE TO AMERICA'S HEARTLAND

Value-added ventures that are solely farmer owned and operated 
have contributed significantly to  rural economic development in 
many communities. 

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 
programs.  

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 
support.

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.
 _____________________________________________
RESOURCES:

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 
operation. 

"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.
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We welcome comments and suggestions: contact Harry Smith at 
FARM AID, (617) 354-2922.  Fax: (617) 354-6992.  E-Mail: 
[email-masked].  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: 
[email-masked]
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