Friday, January 17, 2014

Joining a Food Cooperative

by Juliette Enfield, Extension Educator in Warren Co.

Have you been thinking of scaling up your farm enterprise or exploring new regional markets?  Think about what is holding you back.  Is it the long distances the drive, the increase in marketing efforts, or the access to capital for business expansion?  A cooperative may help you solve these issues.

Cooperatives are member created organizations that combine resources to meet common needs.  In the case of expansion into new food markets, the cooperative will invest in the equipment needed for large scale food distribution.  This would include a packing facility, a refrigerated delivery truck, and employees to make the deliveries, address customer relations, and market the foods that are produced by members of the cooperative.

Cooperatives sell to a variety of different customers including CSA members of the coop, grocery stores, and restaurants in the area.  As a member of the cooperative, your farm products will be purchased at a price set by the members and the cooperative.  The coop then resells your farm products at a higher price in order to recover costs needed to run the coop.

Combining products from multiple farms protects against crop failure by having multiple suppliers of one product, it allows for greater variety in a customer's food shopping basket, and it meets the high quantity and quality requirements for entry into larger markets.
Cooperatives allows farmers to offer a wide variety of products to their customers

Research your area to find out if there are cooperatives in your area.  Some cooperatives in Pennsylvania include the Tuscarora Organic Growers Cooperative, the Northwest Pennsylvania Growers Cooperative, the Clarion River Organics Cooperative, and the Penn's Corner Cooperative.  Each cooperative has its own membership requirements and geographical distribution network.  Contact the cooperative to find our what their membership fees are.

If there are no cooperatives in your area, you could start one.  Discuss the idea with other farmers in your area who would like to achieve similar goals.  Although the initial set up of a cooperative would be time consuming if there is not one in place, in the long term it could allow you to focus on growing and making value-added products instead of finding ways to market your farm, transport your farm products, and gain access to capital for expansion.

Steps for creating a cooperative include clearly defining a mission, electing a board of directors, conducting a feasibility study, drafting a business plan, establishing tax status, registering the business, and deciding on membership fees and purchasing prices.  The Keystone Development Center is a non-profit group that helps farmers develop cooperatives.

For additional business planning resources, see the Penn State Extension Agricultural Alternatives page.  There are publications on Cooperatives, Developing a Business Plan and conducting an Enterprise Budget Analysis.

Source: USDA, How to Start a Cooperative, Cooperative Information Report 45, Section 14. Revised April 2011.  Accessed January 14, 2014.

1 comment:

Anonymous said...

Cooperatives are almost never good for a farmer, unless you're the founding farmer. Then you get to grow all of the good, high value crops and the other members are left with the lesser desired crops that have smaller margins. I've been told this by the founding family of a PA co-op. Co-ops pay farmers 50%-65% of retail value. Almost all cooperatives have buy-in fees that are upwards of $3000, in addition to yearly membership fees. Many have no-compete agreements with their growers. So, you can't sell your products in the same market as the cooperative. Cooperatives will only buy select crops from a farm--this fosters a monoculture. I personally know several farmers that belong to Western PA cooperatives and none of them farm full-time for a living. They simply can't make a living working under the cooperative. They all have to hold other jobs to keep them afloat. I'm glad to see a movement in WesternPA to buy farm-direct. You get a fresher product, with a longer shelf life and the the sale goes directly to the farmer who grew it.