Why the Milk Train Stopped

My dad used to ride the local “milk train” from Omaha where he attended Creighton University back to Cedar County, Nebraska where my grandparents farmed near Fordyce. I don’t know when that train stopped running, but the reasons for its demise can be traced to a disastrous set of public policies that encouraged systematic disinvestment in owner-operated diversified farms.

Diversified?

Diversified farmers raised several types of crops and livestock. They milked cows that grazed on open pastures. They fed very little grain and did not use expensive chemicals and equipment. Chickens were raised for meat and eggs and butcher hogs consumed the excess milk and grain. The hogs were trucked to livestock markets in Omaha and Sioux City and the milk and eggs rode the train to Omaha. Although by no means perfect, this farming system operated throughout the Midwest and Plains States.

Public Policy, Disinvestment and Economic Decline

But starting after the Second World War, local bankers and diversified farmers faced competition from big city banks and government agencies. The USDA played a leading role in convincing farmers to borrow ever-larger amounts of money to finance the application of petroleum-based fertilizers, herbicides and pesticides on corn, soybeans and alfalfa. These crops were (and are) trucked to dairy cows, hogs and chickens housed in closed confinement barns and beef cattle held in large feedlots.

Over time, these policy and investment decisions produced a steady decline in the number of diversified farms as well as the processing plants that once supplied near-by Missouri Valley cities, and export markets. The processors have moved south and west in search of cheap commodities, water and labor.

As a result, Missouri Valley residents now spend billions each year on non-local (read imported) meat and dairy products. For example, we estimate that Kansas City and Omaha area residents spend a combined 300 million dollars a year on imported organic food (USDA, OTA and Census data). Fresh vegetables are the biggest organic import.

A Sustainable Economic Development Strategy

We can compete on price, quality and availability with most imported fresh vegetables by building locally financed, four-season greenhouses near big cities. These modern high capacity facilities can create new jobs while reducing water and energy consumption. They can also eliminate harmful chemicals and fertilizers in our food chain by using soil mixtures based on well-composted livestock and poultry manure from efficient diversified organic farms.

On economic development, its not hard to imagine large and efficient sustainable farms and gardens around every big Missouri Valley city. There are no good reasons why these farms and gardens should not be locally owned and operated by the folks who do the work. Further, sound economic development policy demands that near-by processing plants be owned by entrepreneurs (including workers) who earn reasonable profits and living wages. This is no pipe dream!

Farmer-owned Food Brands

We know smart conventional, natural and organic farmers, ranchers and feeders who are already marketing specialty meats and poultry through established commodity channels. In order to by-pass volatile commodity markets, some of these producers want to own retail brands, and yes, contract with locally-owned food processors and distributors to supply high-end Missouri Valley grocery and food service outlets.

You can help us get started by considering an investment in a new farmer-controlled marketing company. We are using Slow Money principals to guide the organizational process. To learn more about farmer-controlled marketing and local financing, please go to Raised Free.

Finally, we are planning to develop our two Omaha area farms to showcase the latest in efficient organic farming technologies and marketing methods. We would be delighted to discuss our plans with qualified investors and experienced organic farmers and gardeners.

Thank you.

Jim Steffen
js@RaisedFree.org
402-317-2639

Updated: 03-28-2020

Pickups vs Semi-Trucks: Why Organic Farms Fail in the Missouri Valley

I have written often about the amount of money Omaha and Kansas City area residents spend on imported (non-local) organic foods and food products. Using Organic Trade Association and USDA data, my ballpark estimate for both areas combined is 290 million dollars per year. So why can’t more of these foods be grown and processed in the Missouri Valley? There is nothing wrong with our climate, soils, farmers and workers. So what’s the problem?

The Commodity Mentality

Based on recent discussions with nationally recognized farm managers, area ag lenders and USDA officials, it is clear that the conventional ag financing and commodity marketing systems are not designed for sustainable food production and processing. As it is now, the organic production base in the Missouri Valley depends almost entirely on exporting relatively small amounts of organic commodities like alfalfa and corn. Because of the small production base and the absence of efficient local and regional processing, there is not enough free cash at the farm level to start new organic (sustainable) farms, ranches and gardens.

Pickups vs Semi Trucks

Sustainable food systems will continue as attractive dreams in the Missouri Valley as long as farmers, investors and lenders limit themselves to small volume CSA’s, farmers markets and restaurants. The real money in the food business originates in big city grocery stores, especially the upscale retailers like Whole Foods and Trader Joes, etc. Over-the-road diesels pulling 40 foot refrigerated trailers supply their stores.

These trailers may look empty when they pull out of town, but in effect, they are loaded with our money – money that we could use to build efficient local food systems that compete with the imports. As an aside, our tax-funded schools, universities, hospitals and military bases are also part of this same problem. I will write about local food purchasing requirements in the near future.

None of this will change until farmers, landowners and investors team up to build farmer-controlled food brands that can compete in up-scale grocery stores. This requires new business models for sustainable agriculture.

New Business Models

In our view, these models should: 1) Allow sustainable producers to control their own food brands and cash flows, 2) Support demand-driven marketing, production and processing systems that supply a wide variety of shelf-stable products, and 3) Allow for a systematic transition to pasture-based production systems. These systems must include enough hay and grain to support efficient meat, dairy and fresh produce production and processing in close proximity to big cities.

If you are not yet convinced, ask yourself a very basic question. Why do Organic Valley and Horizon ship milk to Kansas City? Answer; there is no competition. The same question and answer works just as well for meat, poultry, fruit and vegetables.

The absence of effective competition in the Missouri Valley has left the door wide open for Big Food. According to the New York Times, “organic food has become a wildly lucrative business for Big Food and a premium-price-means-premium-profit section of the grocery store.”  The high profit margins explain why big companies like Walmart and Whole Foods Market have been buying organic food manufacturers and/or contracting with big organic growers and manufacturers as fast as they can.

Although strong consumer demand is in place, investors and lenders still think of conventional and organic agriculture as commodity businesses. This strategic industry failure represents an important business opportunity for farmers, landowners, investors and lenders who can work together to build new business models.

We believe the best sustainable food business models will combine: 1) Organic and Biodynamic production methods, 2) Professional marketing for high-value, farmer-controlled local and regional food brands, and 3) First-rate market information and financial reporting services for qualified local investors and financial advisors. We are organizing the Raised Free Investment Group to meet this need.

Demonstration Farms

We plan to start in Omaha since we own two farms in that area. These farms will serve as demonstration sites for innovative, farmer-managed “brand partnerships”.

To learn more, please go to www.RaisedFree.org and then contact me to arrange a meeting for your civic group, church, business organization or economic development agency.

Thank you.

Re-posted 03/27/17

Investing in Sustainable Agriculture

Courtesy Boys Town Hall of History

Sustainable (natural and organic) agriculture in the Missouri Valley will begin to thrive once qualified local investors understand the profit potential of farmer-controlled food brands along with efficient local food economies. To develop new farms and food brands, Raised Free offers market information and market management services in the Omaha and Kansas City areas. We are a market management company specializing in building relationships with urban consumers who want sustainable foods from local farmers and food businesses.

Sustainable

For us, “sustainable” describes local and regional food systems that are in transition to organic and similar methods. These farmer-controlled systems have strict origin identification procedures with planned investment programs for profitable farms and food processing designed for near-by urban and suburban residents.

Brand Partnerships

Farmer-controlled partnerships (LLC’s) will own and manage these brands. In order to produce truckload lots from tight geographic areas, each brand will contract with local partnership farmers. In return for a negotiated percentage of the brand profits, local minority investors will fund marketing, processing and distribution.

Experience

Our experiences are in marketing and management. We are not farm managers, real estate agents, bankers or investment advisors. However, we are forming working partnerships with firms and individuals with these skills.

Please call or e-mail for more information.

Jim Steffen,
402-317-2639
jim@massenafarms.com

Marketing “Sustainably” Produced and Processed Foods

Photo from Jim Knopik, Fullerton, NE

Before the food industry makes a serious move toward “sustainable” practices, it needs a concrete definition of the term, along with consumer demand data that offers real profit opportunities to each member of the food system (retail, farming, food processing, etc.).

Sustainable = Local + Organic + Pasture + Profit

For us in the colder parts of the Missouri Valley, our definition combines pasture-based production of organic meat, dairy and poultry with enough grain to feed hogs and chickens, and enough hay to winter cattle and sheep. The hilly and more erodible land near the Missouri River will benefit from pasture-based agriculture, along with local economies. Further, farm profits will improve because production costs for meat and dairy (with intensive pasture management) and processing costs (with modern facilities close to population centers) will be less than the same costs in the conventional food system. Less grain, less fuel and more income from farmer-controlled food brands are the main elements in this equation.

Raised Free

By definition, animals raised on pasture require only small amounts of non-GMO grain, which makes continuous confinement feeding unnecessary and expensive. Over time, diversified food systems that integrate different food groups in close proximity to one-another will rival monoculture unit costs. For example, commercial gardens can use well-composted manure from near-by dairies while hay and small grains can be produced in continuous rotations with non-GMO corn, soybeans, alfalfa and new pasture. Further, composted commercial food wastes from near-by population centers can help rebuild soils and reduce landfill costs for institutions, restaurants and grocery stores.

Jobs and Brand Partnerships

Large and local sustainable food systems could also bring new living wage jobs with safe working conditions in fields and packinghouses, particularly if these operations are located near big cities where decent jobs are in short supply. The quality of these jobs depends on the ability of farmers, contractors and food processors to access large amounts of risk capital to finance advanced technologies that reduce labor costs and food prices. Local brand partnerships offer excellent platforms to negotiate technology investments, wages, working conditions, farm profits and food prices.

Food Miles and Food Security

As farmer-controlled sustainable food brands capture market share, they will begin to eliminate “food mile” costs from grocery stores prices. Improved food security is another important benefit. Food safety and environmental issues will not change significantly with sustainable agriculture. However, improved early detection of health and environmental threats will reduce overall regulatory costs if state and local authorities adopt cross training in multiple environmental and health disciplines.

Barriers

The main barriers to large-scale sustainable food production and processing are a lack of proven consumer demand, and start-up complexity. For example, Omaha area farmers will not produce pasture-raised chickens in any numbers without access to a USDA-inspected processing facility that can be scaled up to supply branded, certified organic products to high-end grocery stores. Investors and lenders can be forgiven if they hesitate to finance these operations without reliable demand data.

The first steps toward these data require consumers to understand the basic issues, particularly the environmental, health and economic importance of local, pasture-based food systems. They must also have access to locally grown products that are similar to imported products in quality and price. Consumer education and product development go hand in hand. Simply talking about food system sustainability is not productive. Local products must be available in amounts that can meet continually increasing demand.

Building consumer support need not be complex and expensive. It starts with three key elements: 1) Small production units with local or on-farm processing, 2) Full cost accounting, and 3) A serious investment in marketing. If you build it, they will not come if they don’t know about it. Marketing is the key. CSA’s, farmers markets, local investment clubs, churches, business groups, etc. are all great places to meet like-minded urban consumers and potential investors.

Next, if demand is good at prices close to organic imports, the local brand partners will need to start raising large amounts of money on a continuous basis to: 1) Train and equip additional producers, 2) Build USDA-inspected processing in near-by cities, and 3) Finance ever more marketing campaigns.

Posted: 01/03/2017