Why Marketing Cooperatives?

Retail consumer markets for organic, non-GMO and other high-value foods are in the early development stages in the Missouri Valley.

In order to increase sustainable farm income, we must create new production economies by consolidating our commodity marketing programs and developing our own retail brand(s) for local and regional grocery and food service outlets.

By no means am I suggesting that we abandon commodity export markets in favor of local and regional retail. We need the established commodity markets because local and regional consumer demand is still very weak when compared to the demand for conventionally produced foods and imported (non-local) organic and other specialty foods. Further, we need to fill the legal and operational gaps between individual farms and ranches and distant food manufacturers.

To take advantage of these new opportunities, we are asking Missouri Valley investors to finance series of local, producer-controlled “production cooperatives”. A professionally managed “regional marketing cooperative” will provide marketing and other essential services to our local production co-ops.

Our goal for the local production co-ops and our regional marketing cooperative is to develop a network of local farms and ranches that can supply near-by cities at a profit. To begin, we are asking qualified investors to back Raised Free as a producer-controlled marketing cooperative. By steadily increasing farm profits, local farm economies and wages will improve while we rebuild vital  soil, water and wildlife resources.

Organizational issues are addressed on the “About” page on this website. This page explains why sustainable livestock producers in the Missouri Valley need a new business model.

Conventional Thinking

Bigger-is-better is the prevailing business model in agriculture and food processing. This model pushes environmental, labor and health costs off the books.

Bigger-is-better, also known as “conventional” farming requires ever-larger farms with continual investments in new equipment and other non-local inputs, including credit and risk capital. There is little doubt that this combination has produced very low unit costs for all types of farm commodities, while at the same time draining away rural populations, decreasing real average incomes and causing real environmental harm.

These losses are not restricted to rural areas. Urban wages and tax support for public schools, healthcare, roads and bridges have all suffered in Missouri Valley cities as the meat packing and dairy industries moved west and south toward low cost land, labor and water.

To make matters worse, the middle and upper income residents of Omaha and Kansas City are supporting the bigger-is-better model to the tune of almost 300 million dollars a year, and growing.  Think Whole Foods (Amazon), Sprouts and Natural Grocers, among others. These 2016 numbers come from the Organic Trade Association, the USDA and the Census Bureau.

Every big city in the Valley depends on the same dysfunctional food system. In almost every case, high-value organic and natural foods come from outside of Missouri Valley trade areas. We (sustainable farmers, ranchers and landowners) ship our high-value commodities to distant food manufacturers. These commodities are then packaged as branded organic and other specialty foods and imported back into our cities.

Does this system make sense? As suggested above and elsewhere on this website, we firmly believe that Missouri Valley farmers should own their own food brands.

Why Sustainable Farms Fail

These are four basic reasons for the failure of sustainable farms in the Missouri Valley. First, from long experience in organic agriculture, I know that young sustainable farmers cannot earn enough selling specialty commodities to afford the notes on land while paying taxes and maintaining pastures, water systems, terraces, fences and buildings.

Second, although farmers markets, community supported agriculture (CSA’s), food hubs and local restaurants are more visible in recent years, these direct sales venues do not produce the free cash required to scale up local food systems for retail grocery customers.

Third, both Omaha and Kansas City lack affordable processing for specialty meat and fresh produce. Meat and poultry processing are particularly important because they have the potential to support large and efficient pasture-based food systems that require far less grain and eliminate the need for large-scale confinement feeding.

Fourth and most important, the Missouri Valley lacks an effective financial infrastructure for sustainable agriculture. Without adequate investments, the vast majority of organic, pasture-based and Biodynamic start-ups will fail, and in all likelihood, their land will return to conventional methods.

Overcoming the Barriers

Our local production co-ops  can help experienced sustainable farmers and ranchers work with neighboring conventional producers who are converting land to sustainable production methods. Using forward contracts to consolidate individual commodity marketing programs will help conventional and sustainable producers scale up production with less risk.

This strategy starts with the recognition that the “conventional” farming model is changing. These farmers are adopting more environmentally friendly methods, including no-till planting, cover crops, integrated pest management and filter strips.

Further, and perhaps overlooked by sustainable producers is the fact that many conventional farmers and ranchers, along with their food chain partners, have direct experience with branded retail products like milk, fresh produce, meat and poultry. Sustainable producers should take note of the existing retail supply chains and begin to look for shared opportunities in retail markets that are closer to home.

And while conventional producers adopt more sustainable farming practices, a few USDA-certified organic producers are investing in land and new technology to produce low cost organic commodities. Although there is very little data, most of these investments appear to be in grain, vegetable, meat and poultry production for East and West Coasts markets, and for big cities like Chicago and Denver.

As noted elsewhere on the this website, real estate investment trusts and other non-local investment groups are promoting organic agriculture as an opportunity for high net-worth, passive investors.  This does very little for our rural and urban economies because the profits do not go to Missouri Valley owner-operators and food entrepreneurs. The Missouri Valley needs functioning investment programs focused on farmland succession and economies-of-scale in sustainable food production and processing.

Wall Street Is Not Helping

The vast majority of middle and upper income urban residents in the Missouri Valley place all of their savings and retirement funds with Wall Street firms – without considering local investment opportunities. They (we) can’t be blamed because professionally managed investment programs for sustainable agriculture are not available in the Missouri Valley. This financial outsourcing drains away essential resources from low-income rural and urban communities that need healthy food and decent jobs.

In spite of Wall Street’s continued failures, some local investors are beginning to work directly with Missouri Valley farmers and ranchers. For example, farms and supply chains associated with Baumans Cedar Valley Farms and Central Grazing Company have expanded with the help of the national Slow Money organization and a local volunteer group from Lawrence, KS.  Omaha, Nebraska investors are also working with local growers and food businesses.

Please contact me for more information.

Thank you.

Jim Steffen

Revised: 05/06/2019

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