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New wave farmer co-ops

New groups of farmers are banding together to meet consumer needs.

A new cooperative movement is afoot in the hinterlands that just might change the face of American agriculture.

And, no, we're not talking about the mega-merger between Land O'Lakes, Cenex Harvest States Cooperatives and Farmland Industries. This is a farmer-driven, cooperative effort to create value-added ventures or special, contractual alliances with end users of farmer-grown commodities and products.

This movement touts the philosophy of interdependent farming over independent farming. Those in the know say it is time to move into an economy where producers work together with end users. "We've tried the independent route, and it has failed," says a farmer who attended a recent co-op organizational meeting in Minnesota.

Midwest alliances One of the oldest of the new-wave cooperatives is the four-year-old 21st Century Alliance headquartered in Manhattan, KS. Another is Innovative Farmers, which was created by a group of farmers in central Michigan. Growers have started similar co-ops in Iowa, Illinois, Nebraska (those states each have two such co-ops) and North Carolina.

Hoping to join the movement is an organization in Minnesota called FarmConnect. The group held 18 meetings in rural Minnesota communities in February and March to explain the cooperative concept and sign on a limit of 2,000 farmer members.

These are "closed" co-ops, where membership is limited to a set number of growers who pay a one-time sign-up fee, plus an annual co-op membership payment. These fees vary from alliance to alliance.

Brent Sorenson, CEO of FarmConnect, says growers in the co-ops further benefit because the alliances and co-ops network with one another under an umbrella organization called the U.S. Ag Producers Alliance. "There is the realization that we can cut across state lines and work together and learn from one another," he says.

Chris Williams, vice president of operations for 21st Century Alliance, calls these groups "nontraditional co-ops." "They're not for every farmer," he states.

"Nor are they intended to disrupt the traditional infrastructure," Sorenson adds. "We see no need to reinvent the wheel."Working togetherIn fact, the alli ance needs the cooperation of that infrastructure to succeed in its objectives. For example, Williams notes the need to segregate specialty grain products for shipment. Some of the 750 21st Century growers grew a special wheat product for General Mills that had to be segregated from traditionally blended grains in western Kansas and eastern Colorado. "The elevators had to agree not to co-mingle the grain," Williams says. Such contracts, and cooperation, are signs of success for the alliances and their members; such an agreement probably wouldn't have been made with an individual or small group of independent farmers.

"We may continue growing traditional crops, but with a focus, with a realized end consumer who works closely with a group of cooperating farmers," Sorenson explains. "Our role is to help define those markets, those end consumers, and get them together with our growers. We will serve as the clearinghouse for marketing ideas, a clearinghouse of market information and situations, and a clearinghouse to a specific group of cooperative farmers who can provide the production services. We won't be signing the contracts but will offer the information and the structure to get those parties together to sign the contracts."

"Our experience," Williams says, "shows that the major food processors, for instance, realize the need for a higher quality grain product and are looking for the people who can deliver that product to them at the volume they need. And they are willing to pay more for it because they trust the quality."

List of successes This is but one of the efforts of 21st Century. Williams says that in four years the alliance, which has producers in eight states, has accumulated $3.2 million in equity and has started five new businesses besides the contracts. Included are two flour mills and two 1,000-plus commercial dairy farms that buy co-op members' grain and hay products. The co-op also started a company called Golden Forest Ag Fiber Co-op, whose 200 members, with 200,000 acres, seek plywood markets for their processed wheat straw.

Williams is nearly apologetic when he says the alliance "is so new that it is hard to show an immediate return." However, stocks have appreciated by a third in the four years of operation, and the growers are showing a $0.28/bu. premium above the market price for wheat. "It's happening. But it's happening slowly," Williams says.

Jim Lecurex, executive director of the Michigan group, says co-ops vary from memberships that want to "brick and mortar" value-added facilities to those that opt to work within the existing infrastructure and meet the needs of both end users and farm cooperators through contract arrangements. Some of his cooperators are building an alfalfa processing plant, while another facet is working with end-user processors to set up a specialty dry bean project.

This is a list of accomplishments that Sorenson can only wish for at this point. Although his Minnesota co-op is at the infant stage, he's confident that it will have similar successes. Value-added cooperative efforts have been in place for more than a decade in the state, and although there hasn't been such an organized effort at attracting alliances between growers and customers, some Minnesota farmers have long histories of growing specialty crops for food processors.

Sorenson's resume reveals his involvement with other innovative groups; new ideas (along with their ups and downs) are nothing new to him. Among his earlier ventures was working with the Agricultural Utilization Research Institute, a state-funded organization that helps farmers develop products and find markets for them. In the past year he moved over to the Northern Great Plains Initiative for Rural Development to develop the framework for FarmConnect. His impressive marketplace development committee includes major commodity organizations for livestock and crops; even such far-reaching groups as the Sustainable Farming Association are joining the effort.

Growing for the consumer "It is really difficult for individual farmers to find these types of markets for their products," Sorenson says. "But as a cooperative group of farmers, we can develop these kinds of relationships. We have seen a lot of interest on both sides of the equation. This is a positive sign, because what we're doing now as independent producers just isn't working. What we eventually hope to have is a win-win situation for both producers and end users. We see end users benefiting from these alliances by connecting them to significant numbers of producers who are capable of supplying the quantity and quality of products they need, and benefiting farmer producers by identifying market niches and opportunities to add value to their production."

Endorsing the movement with aplomb is Minnesota Commissioner of Agriculture Gene Hugoson, who says that "interdependence will likely be the key word for 21st century farming. Gone are the days when producers produce what they want when they want to produce it. Just as many other industries have adopted 'just-in-time' supply practices, so will we. Producers must get to know their customers and learn the farm products they want."

In some areas of America's breadbasket, small groups of farmers in these new-age alliances and co-ops are discovering that truth. They can only hope it isn't too late.

For more information about 21st Century Alliance, contact the group at Dept. FIN, 315 Houston St., Suite C, Manhattan, KS 66502, 785/587-8798. For more information about Innovative Farmers, call 517/269-6099 or circle 201. For more information about FarmConnect, contact the group at Dept. FIN, Box 396, Crookston, MN 56716, 218/281-8449.

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