University of Wisconsin Center for Cooperatives

The Farmer-Food Buyer Dialogue Project


Chapter II: The Local Farm Sector

One year previous to the start of this project, a generous grant was received from Mark Dupre, a private organic produce distributor in Cottage Grove, with the purpose of exploring the availability of sustainably-grown farm products in Wisconsin. A survey conducted under that grant revealed a great diversity of food products grown and raised in this state. Besides the obvious wealth of dairy products, Wisconsin farmers offer a wide array of fruits and vegetables, meat products, and also "specialty products" such as sweet sorghum, mushrooms, goat cheese (chevre), maple syrup, honey, and wild gatherings such as hickory nuts and wild leeks.

The survey asked farmers to engage the issues of sustainable agriculture. Specifically, they were asked to identify if and how they would consider their farms "sustainable." Many replied simply that they were certified organic. Others listed farming practices that they felt qualified their farms as sustainable. These survey results were presented in the "1995 Directory of Wisconsin’s Sustainable Direct Market Farms" (now out of print).

The 1994 survey also asked farmers to identify their current marketing strategies, and, more importantly, their interest in new strategies that they had yet to develop. Of 300 farms surveyed, about 40% responded, and, across the board, approximately 60% of those responding expressed an interest in forming new (possibly farmer-owned) enterprises that could process, store, broker, and/or distribute the products from their individual farms.

A dozen of the farmers who responded to the 1994 survey were invited to a focus group interview in Madison early in the Farmer-Food Buyer Dialogue Project. The stated purpose was to further explore their interest in new strategies to expand the market for their products. However, it became clear that there were many other issues that they found just as pressing as -- and related to -- marketing. Among the issues they identified:

In the face of these concerns, at least two things became clear from the start. First, the issues facing Wisconsin’s farmers are quite complex, and can probably not be addressed sufficiently by innovative marketing strategies alone. Second, if the focus group participants were any indication, farmers in Wisconsin not only exhibit a sophisticated understanding of issues related to our broader food system, but they also have concerns that go well beyond their own individual well-being.

A Categorization of Wisconsin Farms

It also became clear through the 1994 survey, through the focus group interviews, and through subsequent workshops and meetings, that many of the issues Wisconsin farms face vary significantly from one farm to the next, particularly with regard to marketing. Table 1 below sub-divides farm types into eighteen categories. These categories are not proposed to cover all farms in Wisconsin, nor is this categorization intended for use beyond the scope of this project. However, these categories should be useful for this discussion of farm products that may be marketed directly to food buyers in Wisconsin.


 

Smaller Scale

Larger Scale

 

Produce

Produce

Organic

Meat

Meat

 

Specialty Products

Specialty Products

 

Produce

Produce

"Natural"

Meat

Meat

 

Specialty Products

Specialty Products

 

Produce

Produce

Commercial

Meat

Meat

 

Specialty Products

Specialty Products


TABLE 1: Identifying farms by product, by scale, and by organic/commercial status.

Organic vs. Natural vs. Commercial

If the table above seems elaborate, it is because it reflects a marketplace for food that became all the more complex when "food safety" and "farm sustainability" became issues for an increasing number of food consumers. An important component of the natural foods industry that sprung up to meet this demand was fresh and processed food originating from "certified organic" farms.

The definition of "organic" used in this project conforms roughly with that of the organic certifying agency whose leadership and farmer-members participated throughout the project. The Wisconsin chapter of the Organic Crop Improvement Association (OCIA) is one of two organic certification agencies that work in Wisconsin.

The organic standards in each state vary enough that the federal government is looking to standardize organic rules for the entire country. Until the federal government finishes that task, the word "organic" can be used by any farm using any farming practices whatsoever without legal consequence. Many certified organic farmers anxiously await enactment of federal standards because it should effectively eliminate use of their marketable label by farmers that neither pay certifying fees nor bear the added costs associated with many organic practices.

Organic food products are often marketed in contrast to "commercial," or what are sometimes called "conventional" food products, which are not raised by certified organic standards. Demand for organic foods hardly represents a threat to commercially produced foods. One retailer noted that organic products make up only .2% of the food sold in the entire food industry.

If organic and commercial were the only distinctions to be made as far as farming practices are concerned, categorizing farms might be less complex. However, some farms make the claim that, while they are not certified organic, they should qualify as "safe" and "sustainable" nevertheless, and therefore deserve to be distinguished from commercially produced food. Many Wisconsin meat producers, who claim to fall into this intermediate category, use the term "natural" to distinguish their products.

Some meat producers were especially vocal on the need for an intermediary category. One lamb producer pointed out that maintaining animal health is a good deal more complicated, biologically and economically, than maintaining the health of plants. She argued that organic meat production therefore can involve substantial costs that are difficult to pass along to consumers. A beef producer argued that humane animal husbandry often required antibiotic treatment of sick animals, even though such treatments might be forbidden under many certified organic standards. A turkey producer suggested that it was impossible to raise turkeys in compliance with organic standards because these animals require medication early on that was not approved under the organic label.

Some of the vegetable producers interviewed expressed related concerns. One farmer who complimented her family’s hog operation with five acres of tomatoes argued that many farmers who are deeply in debt cannot afford the three year transition to organic certification. (Before the organic label can be used to garner premium organic prices, certifying agencies generally require that costly organic practices be instituted for three years in order to wash previously applied chemicals from the soil.)

Arguments such as these have led some to call for a more defined "compromise label" that falls between organic and commercial food products. Some farmers argued that a compromise label would enable more farms to move toward more sustainable farming practices without making the full shift to organic production. Certified organic farmers, on the other hand, argued that a watered-down compromise would siphon profits from organic farming, thereby removing incentives to use those more stringent methods.

Karen Delahaut, a specialist in Integrated Pest Management (IPM) at the University of Wisconsin-Madison’s Horticulture Department, has suggested that an intermediary standard between organic and commercial might be applied to farms that complete her short training program. She suggested that many farmers still adhere to the old "calendar spraying" method of applying pesticides regardless of need. Upon hearing that suggestion, Richard DeWilde, a respected organic vegetable producer from Viroqua, surmised that if every farmer in Wisconsin enrolled in Karen’s IPM program, pesticide use in the state might be cut in half over-night!

This issue of "organic vs. sustainable" is raised again later in this report. As we shall see, it is as much an economic issue as an environmental one. Organic farmers are content, if not thrilled, to finally garner prices for their products that begin to reflect their true costs of production. At the other end, many food buyers genuinely want to support sustainable agriculture, but are discouraged by organic prices that are sometimes double what they’re accustomed to paying.

And so arose a fundamental question of this project: is there a place where the twain may meet?

Farm Categories, By Product and By Scale

Less needs to be said to explain the categorization of farms by product and by size of operation. As has been said already, this project targeted farms whose products could potentially be marketed directly to food buyers, namely fresh produce, meat, and specialty products. The catch-all term, specialty products, included niche market products like exotic mushrooms, sweet sorghum, and wild hickory nuts, as well as animal products like specialty cheeses and eggs from "free-range" chickens. This special category can also be broadened to include value-added farm products. Examples include sweet sorghum molasses, salsa, and basil pesto.

Table 1 simply illustrates that fresh produce, meats, and specialty products can be discussed separately in terms of organic, natural, and commercial market orientations. Furthermore, when the issue of scale is introduced, the number of distinguishable farm types may effectively be doubled. For our purposes it is not necessary to specify at what point, for instance, a meat producer reaches a "large scale." That distinction is relative to the particular market under consideration.

Table 1 conveys what became evident in the interviews and meetings with farmers who participated in this project. An organic vegetable producer working just five acres of land may have very different issues, with respect to marketing, than another organic farmer that tills fifty acres. Talking with a certified organic and a "natural" meat producer can also elicit very different concerns. A sweet sorghum syrup producer may pursue a much different marketing strategy than someone specializing in a more common product like tomatoes or beef. The remainder of this chapter overviews the broader marketing options available to all Wisconsin farmers.

 

Marketing Options for Wisconsin Farmers

As mentioned in the Introduction, one goal of a regional food system approach is to make sustainable farming practices more profitable for farmers. With this in mind, this project conducted interviews, surveys, and meetings with farmers and food buyers in order to:

    1. map out the marketing options that are available to sustainable farmers within the local food marketplace,
    2. identify obstacles and opportunities in that marketplace,
    3. identify and pursue "next steps" to overcome those obstacles and capitalize on the best of those opportunities.

The remainder of this chapter concentrates on (a) above, and begins to look at (b) from the perspective of the project’s participating farmers. Two "next steps" that have already been taken are also described briefly. The following chapter looks at "obstacles and opportunities" from the food buyers’ perspective. Finally, the concluding chapter will offer general conclusions and identify questions for further research.

Six Strategic Choices

Figure 2 above represents a simplified "map" of the food marketplace, presented from the farmer’s perspective. It illustrates three of six strategic marketing decisions that every farmer must make. In short, these choices are based on the following questions:

    1. What raw food product is the farmer going to grow or raise?
    2. Will the farmer process that product in any way?
    3. Will the farmer market to processors, to wholesalers, to food buyers, or directly to consumers?
    4. Will the farmer target national or local markets?
    5. Will the farmer target the mass market or a smaller niche?
    6. Will the farmer pursue strategies 2-5 individually or in cooperation with other farmers?

The Farms

è

The Processors

è

The Wholesalers

è

The Food Buyers

è

The Consumers

1

R

$

2

a

         

$

     

3

w

P

     

$

Marketing

Co-ops

$

Retailers

   

 

4

r

o

d

u

c

t

 

 

 

Individual

   

 

 

$

 

Private

     

 

 

 

 

Individual

 

 

 

5

 

P

r

o

c

e

s

s

e

 

 

 

 

Farms

 

 

 

$

 

Private

 

 

Processors

 

 

 

 

 

 

 

Wholesalers

 

Restaurants

 

 

 

&

 

 

 

 

 

 

Consumers

6

d

 

$

 

$

         

7

F

o

 

$

Cooperative

Processors

 

$

Marketing

Co-ops

$

Food Service

   

8

o

   

"On-Farm"

$

 

$

Providers

   

9

d

   

Processing

   

$

     

10

s

Operations

$

Figure 2: A Food Flow Chart. This chart shows ten marketing options available to any farmer. Options 3, 4, 5 & 7, while not drawn to scale, are enlarged to represent the dominance of these food routes. Grey area represents "farmer-owned" sectors of the food system. Dollar signs represent the exchange in which the farmer receives payment for his or her food product. When a farmer deals with his or her cooperative, payment is typically received upon delivery of product, and then again at year’s end in the form of a patronage refund -- if the co-op is profitable.

Figure 2 does not illustrate strategic choices 1, 4, or 5 above. Nevertheless, issues of raw product selection, national vs. local markets, and mass vs. niche markets will be discussed in the context of ten marketing options presented in Figure 2. Raw product distinctions are fairly straightforward, and were discussed briefly above. The dichotomy of national vs. local markets can actually involve additional levels (e.g., global, regional, etc.), but these terms will be used to roughly identify two different strategies.

The terms "mass" and "niche" markets were used rather loosely throughout this project. An example of a niche market is one that involves the sale of certified organic apples. Consumers that demand organic apples for whatever reason -- taste, health, environment, prestige -- are willing to pay a premium price over that of a "commercial" apple. Another example of a niche market product would be New Berlin farmer Ken Weston’s "antique" apple varieties, which cannot be found in most grocery produce isles.

Finally, apple cider may fall into a niche category if it is successfully distinguished as a "local" product. If consumers value the local nature of the product, they may pay more for local cider when visiting an apple orchard or even the grocery store. As we shall see, food buyers surveyed in this project definitely saw an added value in being able to say a food product they offer is locally sourced.

The "mass market," then, is described simply as one which involves the sale of a food product that is not distinguished in any way that would merit it a premium price. Furthermore, a mass market product may be targeted toward local as well as national markets. A grocery store may source commercial (non-organic) Red Delicious apples from a local grower and charge roughly the same price as for apples sourced from Washington State. It can be said, then, that that apple grower pursued a local, mass market strategy.

The remainder of this Local Farm Sector chapter considers ten marketing options illustrated in Figure 2. The text follows its own logic, rather than the sequence as spatially presented in Figure 2. Issues of product selection, national vs. local, and niche vs. mass markets will be raised, as appropriate. Examples from Wisconsin for each of the ten options are offered, and some opinions of the various options are also presented, as offered by the project’s participating farmers.

Direct Marketing to Consumers (Options 1 and 10)

Many of the farmers that participated in this project believed that their best marketing option was one that resulted in a direct cash exchange with the ultimate food consumer. In this way, farmers may enjoy 100% of the so-called "food dollar," sharing not a cent with the so-called "middleman." This approach, often called "direct marketing," is shown as marketing Option 1 (with respect to raw product) and Option 10 (with respect to on-farm processed product) in Figure 2.

Issues related to processing are discussed further below. For now, it will suffice to say that both raw and processed products can be marketed directly to consumers. A number of different approaches with respect to direct marketing exist. These include:

On-farm storefronts (or farm stores) are retail operations located on the farm. In a strict sense, these farm stores could be classified within the "retailer" category that appears in options 2 through 9 of Figure 2. Like any retailer, farm stores should be licensed to handle and sell food products, and they may also market foods produced by others, off the farm. However, for simplicity’s sake, the farm store is considered a direct marketing approach used by farmers to by-pass all "middlemen" in pursuit of direct farmer-to-consumer exchanges.

A number of farm stores in southwestern Wisconsin advertise collectively in a publication called Farm Trails. This publication tries to tie farmers into the growing "ag. tourism industry," which encourages Wisconsin’s tourists to visit farms and farm attractions. Some of the farms in Farm Trails are also pick-your-own (PYO) operations, which involve their customers in the harvest of what they buy. Strawberry and raspberry PYOs are probably most common. There are as many as thirty berry PYOs in southern Wisconsin, gathered together in the Wisconsin Berry Growers Association.

At least one farmer participating in this project marketed the bulk of his farm’s products through an on-farm storefront. Bill Thackery, owner of B & B Farm Market of St. Cloud, runs an attractive store out of his barn on busy Highway 23 in east central Wisconsin. His store got started with the help of the DATCP’s Sustainable Ag. Program, Cooperative Development Services of Madison, and the Eastern Wisconsin Sustainable Farmers’ Network, of which Bill is a member.

While the group considered forming a cooperative to run the store, Bill decided he’d rather maintain his independence. (He wanted Sundays off.) Nevertheless, the project is essentially a cooperative effort. Not only does Bill market his own chickens and beefalo from the store, but he also sells his neighbors’ pork, venison, lamb, and specialty products on consignment.

Farm stands are distinguished from farm stores in that they are individual retail outlets that are set up on a temporary basis off the farm. Often they are located in city parking lots or at the corners of busy intersections. None of the farmers that participated in this project operated farm stands in this manner.

When a number of farm stands are operated in the same location on a regular basis, this is a farmers’ market. Perhaps the most elaborate and successful farmers’ market in Wisconsin is the Dane County Farmers Market in Madison. In its twenty years of existence, it has become one of the premier markets in the country. Guided and managed by a farmer-elected board and a farmer-manager, this highly developed market has a waiting list of several years for farmers hoping to secure a guaranteed spot on the eight-block market surrounding the state capitol building.

Generally speaking, the direct marketing approaches above may be used by farmers targeting either "niche" or "mass" markets. The final two approaches -- CSAs and mail order -- are more typically taken by farmers that target niche markets.

Community Supported Agriculture (CSA) farms typically involve good faith contracts between a group of consumers and a fruit and vegetable producer. The consumers agree to pay a lump sum of money early in the growing season for produce they will receive from the grower in weekly deliveries throughout that season. In the past four years, eighteen Wisconsin CSA farms have joined together to form the Madison Area Community Supported Agriculture Coalition (MACSAC).

One of the purposes of the coalition has been to generate publicity together to inform Madison consumers of the CSA alternative. The coalition has also been a means for CSA farmers to share their experiences. This summer, MACSAC volunteers published a locally-oriented, vegetable guide and cookbook, which is available through Madison natural foods groceries, or directly from MACSAC volunteer Laurie McKeen (see Appendix I)..

All eighteen of the MACSAC farms grow according to certified organic methods. No examples were found of CSAs that offered commercial produce. The premium prices the growers are able to garner for their produce reflects the added value of their organic label, as well as the "local" nature of their products -- something the CSA farmers tend to promote.

Mail order marketing can be used by farmers looking to sell their products directly to consumers living outside the farmer’s local area. Again, niche market products that cannot be obtained at a consumer’s grocery store are much more likely to be sold in this manner. A few of this project’s participating meat producers marketed some of their organic and natural meats via mail order catalogs or advertisements in national magazines. A producer of sweet sorghum (a processed product) also marketed some of his products in this manner.

There is one obvious advantage to direct marketing: the farmer receives 100% of the price paid by the ultimate food consumer. However, direct-to-consumer markets do not necessarily offer the greatest return to the farmer. As many farmers said, there are significant costs and limits associated with direct marketing, particularly labor costs and the farmer’s own time constraints. Time is a precious resource for farmers busy growing food. Furthermore, in cases such as the Dane County Farmers Market, market saturation has limited opportunities for direct marketing.

Obstacles to increased and improved direct marketing by farmers, therefore, would include saturation of existing markets as well as time constraints and labor costs that limit the extent to which farmers can profit from direct marketing. At the same time, at least two opportunities were expressed by farmers. First, some did express interest in developing or improving farmers markets closer to their own local area, modeled after the very successful Dane County Farmers Market. This may require funding from outside sources to prepare guidelines for developing and managing such a market. (In the past year, dozens of individuals from around the state and country have requested such information.)

A second opportunity for direct marketing involved expanding the CSA movement. While as many as 1,000 Madison families participated in CSAs in 1995, that represents a small percentage of Madison’s population of 200,000. Furthermore, CSAs have not been nearly as successful in other parts of the state. Milwaukee, in particular, may represent a tremendous opportunity.

And so, with these two stated opportunities, two related themes arise for the first time. In the case of farmers’ markets, farmer education is needed so farmers may pool together to create and manage the collaborative direct marketing strategy of a farmers’ market. In the case of CSA development, even more important than farmer education is the education of consumers to convey that such an option exists, how it works, and why they should give it a try. The need for farmer and consumer education will be raised again at the conclusion of this report.

Finally, a third theme should have become apparent through this discussion of direct marketing. In most of the options and examples discussed, an important element of the strategies of individual farmers was cooperation. Whether advertising farm stores in the Farm Trails publication, marketing each other’s products on consignment, managing a highly developed farmers’ market, or jointly promoting the CSA movement, Wisconsin farmers have often found they are more likely to succeed individually if they are able to work together toward common ends. This theme of cooperation will also be raised again (and again).

Direct Wholesaling Raw and Processed Products (Options 2 and 9)

Richard DeWilde of Harmony Valley Farm in Viroqua may have coined the term "direct wholesaling." It would be appropriate if he did, because he is arguably one of the best to ever incorporate this marketing strategy. Direct marketing is simply what happens when an individual farmer sells his products directly to a restaurant chef, grocery retailer, or food service provider. As direct wholesaler, the farmer is both broker and distributor of his own food products. Between planting, cultivating, and harvesting, the farmer is on the phone taking orders, in the truck making deliveries, and behind the computer processing invoices.

By selling directly to food buyers, a farmer may not receive as high a price as selling directly to the final consumer. However, he may sell enough per delivery so that the margins add up to make it a worthwhile strategy. Besides the advantage of selling large volumes per sale (relative to the average direct-to-consumer sale), the direct wholesaler may contract ahead with food buyers so that he may already have a market for his crops when purchasing seed in January. In cases that arose in this project, these contracts were typically good faith contracts, and it’s not altogether unusual for either side to modify or even break these agreements.

Direct wholesaling is not so much an alternative to direct-to-consumer marketing as it is an alternative to two other options which are discussed further below: selling to private and/or cooperative wholesalers. Compared to either option, direct wholesaling has the advantage of offering the farmer the full price that the chef, retailer, or food service provider pays for the food. Both private and cooperative wholesalers take a portion of that price from the farmer to pay the costs of brokerage and/or distribution.

The pluses and minuses related to direct wholesaling parallel those of direct-to-consumer approaches. The farmer may receive more of the food buyer’s dollar by wholesaling his products himself, but there are inevitable limits of time. A farmer can spend only so much time on the phone, in the truck, and behind the computer when there is farming to be done. While outside labor may be hired for this work, labor and management costs are still a factor. Furthermore, wholesaling requires sales and accounting skills that not every farmer enjoys.

A number of Wisconsin farmers have had some success with direct wholesaling to up-scale restaurants and natural foods cooperatives in Madison. Most of the direct wholesale farmers interviewed in this project sold certified organic meats and produce, or specialty items like shitake mushrooms. These niche products are not always readily available from the food buyers’ conventional suppliers. In addition, many food buyers are interested in purchasing distinctive items from local farms so they can feature those items as "locally-grown" in their various promotions.

Nevertheless, there are serious obstacles to increasing direct wholesale opportunities for Wisconsin farmers. First, as mentioned, there is a limit to how many accounts each farmer can develop and serve well. It seems that most food buyers fall into two opposite categories: either they purchase too little of a given item each week to make it worthwhile for a farmer to deal with them (this is true of many restaurants) or else they purchase too much of a variety of items for any one farmer to properly serve them, even in the peak of harvest (this is true of many mainstream groceries).

It was found that the market in Madison is becoming somewhat saturated with regard to those food buyers that fall nicely in between the "too little/too big" categories. If farmers wanted to sell their raw or processed products to either the smaller or the larger food buyers, it became clear that they could not do it alone.

Selling to Private Processors and Wholesalers (5)

Options 4 and It must be noted that Figure 2 is not drawn to scale. If it were, marketing options 4 and 5 might dominate the presentation, while the options discussed thus far (1, 2, 9, and 10) would represent small slivers of this Food Flow Chart. The cooperative options (3, 6, 7, and 8) might also be drawn larger to represent the significant portion of agricultural products that are processed and marketed through farmer-owned cooperative enterprises. Finally, if drawn to scale, the level of processed foods as a percentage of all farm products would have greatly exceeded the level of raw products making their way to food buyers and final consumers.

The stated purpose of bringing farmers and food buyers together in this project was to determine what it would take to get local food buyers to purchase greater quantities of local farm products. One strategy for marketing raw farm products is to sell them to private wholesalers (Option 4). Over the course of the project, just three private wholesalers were approached to determine their interest in this project. Two of these wholesalers are small, local businesses. The third is a large national corporation.

Mark Dupre of Needs Lettuce in Cottage Grove showed early and enthusiastic interest in this project. As mentioned, he provided initial funding for exploratory work that preceded it. At the time, Mark was selling exclusively certified organic produce to restaurants and retailers in the Madison and Chicago areas. He was genuinely interested in sourcing more of his product from Wisconsin, as opposed to California, Florida, and elsewhere. Unfortunately, over the course of the project, a number of factors (not to be mentioned here) interrupted the collaboration between Mark and this project, and eventually another local wholesaler was approached for assistance.

Bobby Golden of Golden Produce has sold commercial produce to restaurants in the Madison area for many years. He is well known and respected by many growers in the area, and his restaurant customers are served well. For this reason, Bobby was eventually approached by a participating farmer to request his assistance in marketing locally-grown, organic produce to his restaurant clients. Bobby’s cooperation was essential to establishing the Home Grown Wisconsin enterprise that began business in May of this year. This venture will be discussed further below.

Finally, early in this project, Juanita McDowell of the Wisconsin Fresh Market Fruit and Vegetable Association organized a tour of the Baraboo warehouse of Sysco, Inc., a broadline distributor of food service products. Top management of the Baraboo office met with more than a dozen growers to express their interest in sourcing more fresh produce from Wisconsin farms.

The only condition the Sysco representatives set was that growers must either produce enough individually or gather together enough cooperatively to make it worth Sysco’s time and effort to deal with them. It was not clear just what volume they required, but they reported having done business with local farmers in the past. They were interested in both commercial and organic produce. This opportunity was not pursued within the scope of this project. It is not know whether Juanita’s group has taken steps to pursue business with Sysco, but it is surely an opportunity worth exploring further.

The strategy of selling farm products to private processors (Option 5) was not explored in this project. It is known that a great many acres of farmland in the Central Sands Region of Wisconsin are planted in vegetables under contract with national canning companies. It would be worthwhile to determine exactly how many acres of which vegetables are under such contracts; how much, if any, are in certified organic production; and how content these farmers are with these arrangements.

Obviously, private wholesalers and processors do offer a market for Wisconsin farmers’ raw food products. However, most of the farmers that participated in this project were dubious of how beneficial such an option is for them. Private wholesale and processing markets may be attractive to farmers who want an easy outlet for their farms’ production -- as long as they are willing to accept these buyers’ prices.

Farmers interested in capturing a large portion of the end consumer’s dollar may doubt whether they can do so by selling to private businesses twice or more removed from those consumers. Farmers interested in incorporating sustainable farming practices may doubt whether the prices they would receive from large private buyers would ever begin to reflect whatever added costs more sustainable growing methods may incur. There is one additional category of marketing options that farmers may pursue -- cooperative ventures.

Cooperative Wholesaling and Processing (Options 3, 6, 7, and 8)

Figure 2 of the Food Flow Chart presents four cooperative approaches. Under Option 3, farmers may sell their raw product through a marketing cooperative that, in turn, sells that raw product to retailers, restaurants, or food service providers. Looking ahead, this is the approach taken by Home Grown Wisconsin, the cooperative that resulted from this project. More established examples in Wisconsin are the Equity and Midwest Livestock cooperatives, which have recently merged.

Under Option 6, a cooperative would process its farmers’ raw products and then sell them to private wholesalers that, in turn, sell to private wholesalers. Actually, this is quite common. Figure 2 simplifies reality in the sense that many levels of private brokers and wholesale distributors often handle food products before the food finally makes it to the retail, restaurant, or food service markets.

Cooperative enterprise has a long and productive history in Wisconsin, particularly in agriculture. Late in the previous century, and early in this one, Wisconsin farmers formed cooperatives to purchase cheaper supplies and receive higher prices for their production than private firms were offering. Electricity that private firms would not provide was also spread to the countryside by cooperatives, while telephone service, insurance, and credit has been provided through cooperative enterprise as well.

A cooperative represents a collective self-help initiative. It is also a business, and as such it must meet the same "bottom line" that every business contends with. But beyond the bottom line of covering costs, private businesses seek profits for their owners. Cooperatives may also pursue profits, but they do so with one subtle difference -- the profits they seek are for their users, who, through personal investment, are also are the owners of the venture.

Each farmer co-op member that uses or "patronizes" the cooperative is rewarded with service-at-cost, plus a portion of cooperative profits that reflects their individual use of the business. An attempt was made to present this arrangement in Figure 2. The dollar signs that appear between sectors represent the exchange in which farmers receive payment for their food products. In direct marketing, for instance, the exchange occurs between farmers and consumers.

A distinction is presented in Figure 2 between Options 3 and 4. In Option 4, farmers sell products to a private wholesaler, and receive payment. In Option 3, the marketing co-op also pays the farmer upon delivery. However, the dollar sign that falls after the marketing co-op in Option 3 represents the "patronage refund check" a farmer-member may receive if the cooperative generates a profit. This check reflects a portion of the co-op’s profits in proportion to the value of raw product delivered by the farmer in the course of the fiscal year. Similar distinctions between private and cooperative processing intermediaries are presented in Options 5 through 8.

As of 1993, a total of 228 farmer cooperatives were serving Wisconsin. Most of that number represent local farm supply stores that provide their members with the seed, chemicals, fuel, tools, and services they use to produce food. A much smaller number of cooperatives are involved in marketing Wisconsin farmers’ products. In terms of gross sales, however, agricultural marketing cooperatives in Wisconsin do roughly twice the business of the supply co-ops.

Cooperative agricultural marketing has been an important part of Wisconsin’s economy for many years. Dairy cooperatives, in particular, have provided Wisconsin dairy farmers access to national and global markets for their raw milk for many decades. These cooperatives have processed and marketed their members’ raw milk (Option 7), and by so doing they have joined the ranks of the so-called "Fortune 500" American companies. Many of these dairy cooperatives have merged over the years, so that now a handful remain to service the bulk of Wisconsin’s dairy farmers.

Despite this success, many farmers who participated in this project expressed deep concerns about Wisconsin’s farm cooperatives. Some complained of inefficiencies and bloated management costs that siphoned off profits that should have been returned to farmer members. Surely, managers of every farm cooperative that has ever existed have suffered criticism from members who were certain that internal costs could be reduced and that refunds to members should be increased.

Participating farmers also complained that the supply cooperatives have encouraged unsustainable farming methods by selling and promoting farm supplies and farming systems that may contribute to various environmental and health problems in agriculture. Keeping to a position of avoidance with regard to definitions of sustainability, a conclusion will not be offered in this report as to Wisconsin cooperatives’ performance on this controversial issue.

The only conclusion made here regarding Wisconsin farm cooperatives indisputable: most Wisconsin cooperatives have marketed their members’ products as commodities to mass markets at national and international levels This project was only concerned with local markets, and, within that local area, niches were explored more extensively than were mass markets.

Cooperative Processing and Marketing: A Short Case Study

At least one exception to the "commodity approach" taken by Wisconsin cooperatives is the Coulee Region Organic Produce Pool (CROPP) of La Farge. Organized ten years ago to market their members’ fresh produce, the co-op soon shifted to production and marketing of certified organic dairy products, a highly successful efort for them. Their cheeses, butter, fluid milk, and cream are now marketed throughout the U.S. under their own "Organic Valley" label, and they have a waiting list of farmers looking to join. Members receive $4 to $6 more per hundredweight for the portion of their raw milk that makes it to organic markets.

By measure of CROPP’s own managers, the portion of the co-op’s business devoted to wholesaling organic fresh vegetables has been only modestly successful. Currently, eighteen members market their produce through CROPP. CROPP, in turn, sells about half of this produce directly to retailers, and half to private distributors. The latter strategy is not represented in Figure 2, but it essentially represents a third intermediary between the farmer and the final consumer (CROPP, private wholesalers, and retailers). The result of this marketing strategy have been mixed; some producers have left CROPP dissatisfied with the prices they were receiving for their fresh produce.

In contrast, CROPP’s success with processed dairy products should be very instructive. By adding value to its members’ raw product, the co-op has essentially moved itself up the so-called "food chain." In other words, CROPP members have moved beyond food production into food processing. The higher value of processed products is returned to members in the form of higher prices for their raw milk.

This value-added approach is by no means new. Cooperatives large and small have processed and sold dairy products for their members for decades. What is special is that CROPP has targeted a lucrative niche market for organic dairy products. Furthermore, to match supply to that demand, CROPP pays members the organic premium for only that portion of their raw milk that makes it to organic markets -- for the rest of their milk members receive standard prices.

In many respects, CROPP’s "Organic Valley" business may represent one of the nation’s first so-called "New Generation" (farmer) Cooperatives (NGCs). Usually this new term is applied to the cooperatives of North and South Dakota and Minnesota, where a great surge of new co-op development has attracted the attention of farmers and economic developers throughout the United States. While lacking certain key components of the NGC model, CROPP’s assertive, market-oriented approach is a fundamental characteristic of the NGC phenomenon.

A summary of the NGC approach is provided in Appendix III. It will suffice here to say that the CROPP experience provides a good example of the opportunities available to farmers in Wisconsin. CROPP is doing at least two things right: adding value to its members’ raw products and targeting niche markets for its processed end-products. Obviously, the success CROPP dairy farmers have enjoyed would not have been possible had they not joined together in this cooperative venture.

On-Farm Processing: A Short Case Study

It is possible, of course, for farmers to add value to their raw products without the cooperation of other farmers. This approach appears in Options 9 and 10 of the Food Flow Chart of Figure 2. The distinguishing factors in these three options is the manner in which the farmer-processor markets products. In Option 8, the farmer markets her private product through a marketing cooperative. (While not depicted in Figure 2, the farmer-processor could also market through a private wholesaler.) In Options 9 and 10, the farmer-processor markets directly to food buyers and consumers, respectively.

Half-way through this Farmer-Food Buyer DialogueProject, a tour of an on-farm processing operation was sponsored northeast of Fond du Lac. Richard and Cheryl Wittgreve, owners and operators of the Rolling Meadows Sorghum Mill of Elkhart Lake, offered their insights into on-farm processing, and markets for processed products. Their sweet sorghum syrup is a niche market product in the sense that it is an uncommon product that was long ago replaced by cheaper processed sugar as a sweetener in the American diet. Apparently, their customers are willing to pay the higher price for the Wittgreves’ sorghum either because of its sentimental value as a historic American product, or because of its unique flavor and other attributes that distinguish it from common white sugar.

The Wittgreves grow all the sorghum that they process in a licensed facility on their farm. After the tour, Richard explained the intricate relationships between producing the crop and then processing it at the other end. Change one variable in production -- planting, tillage, harvest -- and it has repercussions at the processing stage. Gains in weed control can save hours of time in the sorting stage that precedes the press.

The processing scale must be appropriate for the level of production -- and for the size of the market targeted. Again, small changes can have a great impact. Investing in one time-saving technology in the process may solve one problem, but it often reveals the need for additional adjustments and further investment that was not previously apparent.

One aspect of on-farm processing that the Wittgreves had no problem with involved licensing and meeting other regulations. Licensing costs were not excessive. They worked closely with their local state regulator to ensure that they met all codes. They found him very helpful and committed to the development of small rural businesses -- as long as they followed a relatively simple set of safety rules.

In a rural economy that is increasingly short on supply of competent, seasonal labor, one constraint to growth of an on-farm processing operation is the time family members must devote to the operation. With their children leaving the farm, the Wittgreves are concerned that maintaining their current scale will be difficult and that labor costs may be prohibitive. They’d prefer to expand.

Besides production and processing demands, time must also be set aside for marketing on-farm processed products. The Wittreves currently tour many of the country fairs in the region, and, like the farmers in the Farm Trails publication, they have tapped into agricultural tourism. Farm visitors purchase some of their sorghum at the farm store, while some is also sold via mail order catalogs.

Despite all of these markets, Richard is convinced he could sell everything he produces and more if he could keep a salesperson on the road in Wisconsin just one day a week. However, it apparently would not be cost effective for a salesperson to make such rounds for just one product.

This case study of an on-farm processing operation is offered to contrast with larger-scale processing alternatives. As already mentioned, milk producers across the state have their raw product processed into a wide variety of dairy products, by both cooperatives and private processing ventures. Cranberry growers in Wisconsin market their product through their membership in Ocean Spray, a cooperative with 39.5% share of the "smooth beverages" market, more than Tropicana or Snapple.

From the start of this project, there was essentially a bias away from "large-scale" marketing approaches like Ocean Spray. The project focused on Wisconsin farms and Wisconsin-area markets alone; businesses like Ocean Spray -- whose farmers and markets are found throughout the United States -- lay outside the project’s scope. Even the CROPP dairy program, which is intent to continue its expansion nationally, did not choose to participate, as such.

On the other hand, CROPP’s vegetable program managers were quite involved. Not only did they offer interviews and attend meetings, but they also convinced the CROPP board and top management to allow the vegetable program to join as a group member of the Home Grown Wisconsin Cooperative that was formed in April 1996. The conclusion of this chapter begins to explain why HGW evolved from this project.

 

Market Obstacles and Opportunities in Wisconsin: From the Farmer Perspective

The previous ten pages skimmed over ten distinct marketing alternatives available to Wisconsin farmers. Admittedly, Figure 2 and the text that accompanied it greatly simplify a complex and global food economy. Nevertheless, it is hoped that the preceding overview, and the examples that accompanied it, will make the ensuing discussion more clear. After twelve months of interviews, meetings, and workshops with many dozens of farmers of various backgrounds and experience, it is time to share their opinions of the marketplace.

Niche Markets

This project was heavily biased from the start in the direction of (a) sustainable agriculture and (b) local markets. Farmers who shared an interest in these topics were solicited to participate. If they chose to participate, they probably shared both of those biases, which informed their opinions of obstacles and opportunities within the local food marketplace.

For the most part, farmer participants shared one common aspect: they were already targeting niche markets of one kind or another. Many were certified organic, and were very optimistic about future growth of the organic niche market. Many looked forward to federal standardization of organic farming methods as a way to strictly define the organic niche, for the sake of both farmers and consumers.

Also involved in this project were beef, pork, chicken, lamb, and turkey producers who were not certified organic but who marketed their products as "natural." As such, these producers also targeted a niche market, albeit one less strictly defined than the organic market. Other participating farmers produced and marketed less common products such as bison and beefalo, exotic mushrooms, sweet sorghum, goat cheese, basil pesto, and wild leeks.

It seems that niche marketing and sustainable agriculture fit well together. Both organic and natural producers tend to advertise their farms as sustainable, in one sense or another. The premium prices they receive in turn help pay the costs of whatever sustainable methods use. Likewise, producers of uncommon products like beefalo may "subsidize" sustainable practices, if they so choose, because their niche products garner them a premium that producers of common commodities do not enjoy.

In terms of acreage, most of these farmers are generally be considered small-scale. Nevertheless, it seems clear that many of the farms provided the bulk of their family’s income. Participating farmers were looking for a means of increasing their farms’ incomes by expanding current local markets and developing new ones.

In general, participating farmers also tended to have disdain for the so-called "middlemen." More often than not, they were as critical of the cooperative middle as of the private. In other words, most of these farmers believed that the best way for them to cover the costs of their (sustainable) production was to aim as directly for the consumer as possible. Even with examples such as the CROPP dairy program, (formally instituted) cooperative approaches between farmers were not altogether popular.

A small number of community supported agriculture farms indicated early on that they were content enough with their CSA approach. This model does represent a cooperative effort, but the cooperating parties are individual farmers and some ten-to-two hundred of their consumer members. Some of the CSA farmers marketed exclusively to these members.

However, most of the farmers that were contacted in this project recognized limits to direct-to-consumer marketing. Many were already directly wholesaling to restaurants and retailers. Some were marketing through wholesalers. Some of these farmers were marketing through the CROPP vegetable program, or had done so in the past. A relatively small number of participants were already processing their raw products on-farm, while many producers, particularly fruit and vegetable growers, were looking to process in the future, either on-farm or off.

Two Steps Taken

On December 12, 1996, half-way through the Farmer-Food Buyer Dialogue Project, an early first step had been taken toward a perceived opportunity. By that time, it was decided that fresh, certified organic, fruit and vegetable products would be the focus of exploration. In good part, this track was taken because of all the farmers participating in this project, organic producer growers seemed most intent on addressing obstacles and opportunities in a concerted and cooperative effort. Organics were also chosen because they represented a clearly defined niche market that might be able to subsidize sustainable farming practices.

Fresh produce was chosen over meat products because meat cannot be marketed as organic until federal organic standards are put in place. Also, it was known that the Wisconsin Farmland Conservancy, of Menomonie, was already pursuing opportunities for direct marketing sustainable meat products, so there was no sense duplicating their efforts. Specialty products were not chosen because too few of their producers participated in this project.

At the meeting on December 12th, about a dozen people met on the UW-Madison campus to discuss wholesale and processing opportunities for organic produce in the local food marketplace. They were all forewarned: the meeting’s goal was to identify and pursue means of working together to meet common ends.

Three meeting participants were organic growers already direct wholesaling to restaurants and retailers in Madison and beyond. Two individuals represented existing "joint efforts" by farmers to wholesale produce -- CROPP (previously described) and Sweet Earth Organics, an informal cooperative of primarily Amish producers. Also present were representatives from UWCC, CIAS, and the Michael Fields Agricultural Institute (MFAI).

Two major decisions were made at this meeting. First, that the best opportunity to work together entailed developing and serving a market for organic produce in the restaurant markets of Madison, Chicago, and Milwaukee -- with Madison as the primary starting point. Mainstream groceries and food service providers (cafeterias) in the Madison-area were considered future opportunities, and natural foods groceries in the Madison-area were deemed already being well served by organic produce farmers’ individual and cooperative marketing efforts.

The second decision made that day: while value-added processing was a potential opportunity, it would be best to concentrate first on cooperative wholesaling to restaurants. However, while processing may have been shelved temporarily, in late spring 1996 it was taken up again.

Home Grown Wisconsin

Throughout the winter and spring, we pursued step one, and sent surveys to organic fruit and vegetable growers throughout southern Wisconsin. Sixteen Madison restaurants were queried for their interest in purchasing more locally-grown, organic produce. A steering committee of five farmers, one chef, and two university specialists met from mid-January through early April to direct the interest of growers and chefs toward new business in the 1996 growing season.

The result of these efforts has become Home Grown Wisconsin (HGW), a new cooperative composed of farmer and chef members who are interested in expanding the Madison restaurant market for locally-grown, organically-grown farm products. On April 18th, members selected a temporary board of five farmers, three chefs, and two university advisors to guide the organization through its first summer. A general manager was hired to act as the link between farmers and chefs. An attorney was secured and formal cooperation papers were filed in August with the Secretary of State’s office.

Four months into its first season, HGW is suffering the predictable pressures of a new business. It is too early to conclude whether this first "next step" was a wise one. The remainder of this report should help explain why this step was taken, while the conclusion of the report will revisit this new initiative.

The River Valley Kitchen Project

As mentioned, the farmers at the December 12th meeting recommended postponing exploration of processing opportunities. However, another farmer and processor, Mark Olson of Renaissance Farm, contacted CIAS’s Steve Stevenson some months later and asked for help in getting some processing activity going in the Spring Green area, one hour west of Madison.

A meeting was held on April 4th in Spring Green. Representatives from CIAS, MFAI, and UWCC met with residents from the area to discuss ways to encourage small-scale food processing in a licensed kitchen that Mark Olson was renting. By the end of the meeting, the River Valley Kitchen project as initiated. CIAS would take the lead in this project.

It is not within the scope of this report to detail this project. It will suffice to say that initial "experimentation" will begin this fall. The trial project will process a limited supply of commercial, natural, and/or organic fruits and vegetables as early as October, and will begin preliminary test marketing in the Madison area. The project has recently been accepted as a chapter member of the Wisconsin Rural Development Center (WRDC) of Mount Horeb. A 501c3 non-profit organization, WRDC will hold and administer any grants received to pursue this opportunity further. For the remainder of 1996, Stevenson of CIAS will act as the contact person for this project.

Even before work with River Valley Kitchen began, we learned that a similar project was already underway in northern Wisconsin. Chemamegon Organic Growers of the Ashland area already manages small-scale processing of organic farm products there. Initial contacts were made with that project’s coordinator, Ken Raspotnik, but no further steps have been taken to connect with that two-year-old initiative.

 

Working with Food Buyers

Despite the criticism participating farmers often directed at cooperatives in Wisconsin, it became clear that cooperation abounds among Wisconsin farmers. They join together to share knowledge of sustainable farming practices, to collectively promote their individual farms, and, in some cases, to join formal cooperatives to market and/or process their raw products together.

At the outset of this project we hooped that other sectors of the local food marketplace could be drawn into this spirit of cooperation: retailers, restaurants, and food service providers of Wisconsin and neighboring cities. It was not a forlorn hope. The following chapter presents the information Wisconsin-area food buyers offered regarding obstacles and opportunities for expanding the market for locally-grown, sustainably-grown farm products.

While presented separately from and following this chapter on the local farm sector, in fact, input from food buyers was obtained throughout this Farmer-Food Buyer Dialogue Project. Their advice and cooperation made possible the initial steps taken to expand local markets.


 Return to UWCC Homepage