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.

Multi-State University Project Aiming to Assist Stakeholders in Understanding Ethnic Greens and Herbs Marketing and Production Issues and Opportunities

U.S. Census data shows that the mainstream population only increased by 9.7% from 2000 to 2010 as compared to 43% for Asians and 43% for Hispanics (Census 2000, 2010).  With this increase in population, there certainly would be an increased demand for ethnic produce; hence, opportunities exist for producers, wholesalers, and retailers who focus on growing and selling ethnic greens and herbs to serve the needs of these clientele.

Spanish oregano

Ability to successfully provide ethnic consumers with greens and herbs they desire will depend on collaboration among different parts of the industry, from the farmer to the processer and marketer to the consumer, and also involve institutions of higher learning to provide science-based innovations and an educated workforce.

To facilitate this, a multi-disciplinary project has been implemented to analyze consumer demand for ethnic greens and herbs and production feasibility for select ethnic greens and herbs, and to host a one-day workshop during which researchers will share outcomes from ethnic greens and herbs production and marketing studies.

Funding provided by a USDA National Institute of Food and Agriculture, Specialty Crop Research Initiative grant is allowing researchers and Extension personnel from Rutgers-The State University of New Jersey, The Pennsylvania State University, University of Massachusetts, and University of Florida to host the March 3, 2014 workshop in Valley Forge, PA.

Where will the workshop be held? The all-day workshop will be held in Valley Forge, PA. 

What are the conference fees and other associated costs? Attendees will not be charged any fees to attend.  USDA National Institute of Food and Agriculture, Specialty Crop Research Initiative grant funds will cover attendees’ lodging for the night of March 2nd, based on double occupancy, meals during the conference on the 3rd, and materials/workshop attendance.

Who should attend?  Growers, wholesalers, retailers, and other stakeholders, Extension personnel, researchers, association representatives, and similar industry members who are involved in ethnic food production/sales and marketing/sourcing/education. 
 
To let us know that you want to be added to the invitation list, email Dana Ollendyke at: djm428@psu.edu 


The project is being funded by a USDA National Institute of Food and Agriculture, Specialty Crop Research Initiative grant, Project Award Number: SCRI 2009-51181-06035.  The goal of the Specialty Crop Research Initiative is to solve critical specialty crop agriculture issues and address priorities through multifunctional research and Extension. For more information about the program, visit http://www.csrees.usda.gov

Marketing "Sustainable Farming" to Consumers: A Research Review

A recent journal article by Hillary Sackett, Robert Shupp, and Glynn Tonsor includes results that may benefit some readers who are marketing products with a "sustainable" label.  I'll provide the short version here but you may be able to obtain a copy of the work from one of the authors.

Research Motivation & Background

Sustainable agriculture is often described as a farmer working to not only be profitable but also do no harm to the environment and the broader society.  This so-called "triple bottom line" is sometimes referred to as "Profit, People, Planet."  While many in the agriculture industry debate the term, sometimes strongly, it's clear that a segment of consumers make purchases based on their perceptions of sustainability and the practices that make a farm sustainable.  Food marketers need to understand these consumers in order to target promotional efforts accurately.

The researchers used an internet survey to gather feedback from 1,002 people in 2010.  There were two different versions of the survey; one for apples and one for beef.  For each, ten different characteristics of sustainability were defined.  These characteristics reflected 6 production practices, some of which were different between apples and beef.  (For example, one practice for beef was "prohibited use of antibiotics" and one practice for apples was "limited herbicide use.")  Using a method called "Best-Worst Scaling," the researchers repeatedly asked respondents to choose the most and least important options from a group that included six of the ten total characteristics.  By answering this type of question a number of times, with different groupings, the respondent's preferences become clear.

The researchers analyzed the data to determine the relative importance of each of these characteristics.  They did this first for the entire group of respondents and then they used a tool called "latent class cluster analysis" to group similar types of respondents.  The benefit of this type of tool is that the data naturally group themselves rather than the researchers providing their best judgment to group the respondents.  The researchers then explore the clusters to understand the factors that differentiate the clusters.  The results for both types of analysis are useful for marketers!

Primary Findings

Overall, the size of the farm was ranked significantly higher than any other characteristics for both apples and beef.  The factor related to "locally-grown" was ranked 2nd for beef and 4th for apples.  A full set of results is shown below.

Ranked preferences for measures of sustainability on apple and beef farms

The numbers in parentheses show the level of the preference among all respondents.  These can be compared against each other.  Therefore, small farms is nearly twice as important than the second option for both apples and beef.

The latent-class cluster analysis then provided four distinct groups of respondents for apples and five distinct groups for beef.  These are described below.

Apple Cluster Groups

1. Localvores - 14% of respondents fell into a grouping that heavily valued local production.  These also valued minimal herbicide use and preventive/cultural pest control.
2. Small Business Enthusiasts - 30% fell into a group that placed heavy value on farm size and financial stability of the farm.  These also valued several of the production practices roughly evenly.
3. Price-Savvy Shoppers - 10% were consistently most concerned with food prices.
4. Sustainably Indifferent - 46% placed roughly equal weight on the characteristics.  It is not possible to discern whether these respondents care little or greatly about these characteristics; only that they care roughly equally about them.

Beef Cluster Groups

1. Animal Rights Activists - 15% place a great amount of weight on animal safety and pasture-based feed.
2. Nutrition Buffs - 24% place a great deal of importance on limited antibiotic use, growth hormones, and pasture-based feed.
3. Price-Savvy Shoppers - 10% indicate that price is the leading concern.
4. Sustainably Indifferent - 41% fell into this group, as described above.
5. Say No to GMOs - 10% placed full weight on the prohibition of genetically modified livestock.

Putting These Results to Work

The results of this work provide a bit of insight for the food marketer.  Assuming the apple-related results are applicable to other fruits, or maybe produce in general, you can see that themes of "small farms," "Integrated Pest Management," "local," and other production-oriented descriptors could be used in your marketing and promotional materials/websites/social media outlets.  The same could be done for beef (and possibly other meats) based on the beef results.

The research also does a nice job of segmenting the markets.  Based on my readings, I suspect that most of those in the "Sustainably Indifferent" groups are not actively seeking sustainably-grown products.  Of course, the "Price-Savvy Shoppers" are also not in the target market.  Therefore, the article provides some insights into why the others are in the market for sustainably-produced foods.  For apples, some consumers are most interested in buying local.  Others want to support small businesses, whether local or not.  For beef, some are most concerned about animal rights or non-GMOs while others view sustainable products as more healthy.

Use these and other related phrases on your labels as well as your promotional materials.  It should help you connect more deeply with your customers as you hone in on what concerns them the most.  Good luck!

_______________________________________________________________________

"Consumer Perceptions of Sustainable Farming Practices: A Best-Worst Scenario." (2013) Agricultural and Resource Economics Review. 42(2) pp. 275-290.

How to Get Started with a Written Business Plan

by Lynn Kime, Senior Extension Associate

Business planning is an on-going practice that most agricultural businesses try to avoid. It takes time away from working in production of crops or livestock, which is what most producers enjoy. That is one reason you started farming, to work with your hands in the field or with your livestock. However, with the changing times, more producers are being asked for business plans, especially when applying for loans from your lender.

Business planning can be an eye-opening experience for most producers. It makes you realize that you are not an island in a large ocean. You will look at your industry from a several perspectives global, regional, local, and your own operation. The research you conduct to write the plan will enrich your view of your industry and your own operation.

When you think of writing a business plan, think of the process of preparing to take a family vacation. What steps do you take when planning the vacation? You get family consensus on where to go, decide on the travel method (auto, plane, bus, train), map the route or rely on your GPS unit, take the trip, and then you evaluate the enjoyment of the trip.  Was it an enjoyable vacation form the entire family? When planning your trip, you can use a vacation planner to do the work. Business planning is much the same as planning a vacation; you are providing a map of your business for the future.  You will complete the same steps as taking the trip. When developing a business plan, you can also hire someone to write the plan. However, it becomes their interpretation of the business, not yours.

Your business should be enjoyable for the entire family as all members are impacted by the business. All family members may not work within the operation but will be impacted by the business with the owner(s) being away from the family at times. During several times of the year; planting, harvesting, calving, or when livestock are having young, the owner(s) may not be home for very long. Are all family members on board for this?

When creating a written business plan, get input from all family members as the owner(s) may fall into the rut of doing things a certain way because they have always been done that way. Other members may see ways to better the business that you do not. Also, having a business team will assist in the alternative view of the business. This business team should consist of your accountant, attorney, insurance salesperson, and any trusted mentors you have.

When writing your business plan you will develop goals and objectives to accomplish those goals and research the past, present, and probable future of the industry. You will decide if your current business structure is appropriate for the present and future of the business and which structure will assist with the transition to the next generation. Your risk management plan should also be included within the plan. This assures the reader that you have considered what may go wrong and the steps you plan to take if they do.

The marketing plan is a very important section of the plan, even if you wholesale your production. It does not matter how well you produce anything if there is no market for your production.  Having a strong market for production is critical to any business. If you are retailing or direct marketing your production, who is your customer and do they want what you produce? Your market research will determine your first and best customer. Also if you are in the retail market, what are you planning to do with the percentage of production that is not the highest grade? Having a plan for your “seconds” is something to consider as not all production is fit for your best customer.

Another important section of the plan is to create the financial documents to support your plan and to evaluate the success of the business. Your financial documents should include a balance sheet, income statement, and cash flow statement. Your lender will closely review these statements when considering your loan application. These statements may be the most difficult to develop as you should construct several scenarios for each. Your actual statements may be provided by your accountant but you should try to project two to three years out if at all possible. You should also develop best and worst case scenarios. Again, this will show the reader you have considered several possibilities.

After the plan is constructed, you will write the executive summary section of the plan. This executive summary is what the lender reads first as you will use this section to determine if the business is viable and provide the supporting information. Most lenders will read the executive summary and review the financial documents to make their recommendation concerning the loan.

There are several places to learn more about business planning. The Agricultural Alternatives series contains a publication titled Agricultural Alternatives:Developing a Business Plan. Penn State Extension has a course this winter titled Your Future in Focus. The course will be offered via live webinars on Tuesday evenings beginning January 14, 2014 from 6:30 to 9:00 pm. There are also two face-to-face sessions included in the course. 

Open Season for Farm Revenue Insurance

by John Berry, Extension Educator, Lehigh County

Crop insurance has become the risk-management tool of choice for many farmers, because it works. The program was created to ensure that the private sector would help shoulder part of agriculture’s risk.

Crop insurance not only prevents taxpayers from shouldering the full burden of a farm disaster, but also gets payments to farmers relatively quickly. Mother Nature does not just strike large crop farms and a crop-insurance indemnity does not make a farmer or rancher ‘whole’ any more than a check from an insurance company replaces a house lost in a tornado. However, the AGR and AGR-Lite insurance products are intended to benefit the diverse and sometimes modest sized farms on the east coast.

Crop insurance is a public-private partnership, designed to ensure that when disaster strikes, the private sector – crop insurance companies – are there to help shoulder the risk and the financial burden of rebuilding.  Crop insurance policies are purchased by the farmer and suited to the farmer’s needs, comfort with risk and financial situation.

USDA’s Risk Management Agency (RMA) recently announced the Adjusted Gross Revenue (AGR) insurance for farmers and ranchers is again being offered for 2014. The application deadline is January 31, 2014.  Current AGR policyholders also have until January 31, 2014, to make any changes to existing contracts.  AGR provides whole farm income protection under an umbrella-type policy that covers income from all crops and some livestock, provided the income from livestock and livestock products does not exceed 35 percent of total farm income.

Unlike traditional crop insurance guarantees based on yields, AGR provides a guarantee against a significant decline in overall farm income from the average of the most recent five years (2008 – 2012).  As a result of substantial premium subsidies provided by the USDA, AGR can be a very affordable way to guarantee an income flow from your farm operation.

In addition, a similar product called AGR-Lite, which crops and covers livestock and has a limitation of $1,000,000 in coverage.  AGR-Lite is available in almost all counties for the states listed above for 2014.  The sales closing date for new AGR-Lite contracts is March 15, 2014.  Current AGR-Lite policyholders also have until January 31, 2014, to make any changes to existing contracts. 

Farmers are strongly urged to contact a local crop insurance agent, as soon as possible, for more information and premium quotes for both products.  For a list of crop insurance agents, farmers may contact their local USDA Farm Service Agency office or log on to the following Risk Management Agency web site: http://www3.rma.usda.gov/tools/agents/

Learning from Consumers: Examples of Easy and Insightful Questions to Ask

In last week’s blog, I encouraged you to learn about your customers’ needs, wants, and likes.  This week I wanted to provide you with examples of questions that you might ask them and that could provide you with a great deal of valuable data. 

No matter what survey format you choose or the type of retail operation you own or manage, consider asking:

• Why do you shop at our store?
• How frequently do you visit our business?
• What additional goods do you think we should stock and that you would be interested in purchasing from us? 
• What other businesses are you visiting today?
• What events and activities do they attend/participate and how do they learn about these events/activities? 

A good bit of information could be gleaned from asking these questions, which includes identifying businesses that you could cross promote with and further build your customer base.  Responses also help you learn about festivals or celebrations where you could have a presence.  Asking customers how they learn about these events and activities is one way to identify avenues through which you could promote your products.
 
On-farm markets or farmers’ market venders might be interested in selling produce items that they have never sold before.  If you fit this description, ask consumers the following questions to learn if the product has potential:

• If we offered ‘x,’ would you be interested in purchasing it?  Why or why not?
• Do you already purchase ‘x?’  How often do you purchase ‘x’ and how do you use it in meals and snacks?
• Do you serve ‘x’ to family and friends when entertaining?  If yes, what other food items or beverages do you serve with ‘x?’ (This question can help you with cross merchandising the potential product with existing goods, or help you learn about other items you could stock.)
• How many adults and children live in your household? Of these household members, how many already eat ‘x?’

Would customers buy canning supplies from you? Don't guess, ask them.

What if a group of your customers share a similar heritage and you would like to provide them with products they could use to create authentic meals?  Consider asking questions that will help you determine the following:

• Products that are in greater demand during specific periods such as holidays, seasons, or for festivals and special occasions.
• If there is a preference for a particular variety, size, condition, type of package, or partially/fully cooked product.
• What foods, cooking tools, or particular brands they have difficulty finding locally. 

Additionally, think about what other products you could sell, even those that might be a little more “nontraditional.” For example, ask consumers about their other interests.  How many of your customers are pet owners?  Traditional garden centers have been successful selling pet products and pet foods, as there are consumers who spend a significant amount of money on their pet’s care and well being.  Pet food is also a product category that pet owners need to purchase on a frequent basis, thus they may return again and again to restock their supply.  You may also find that these goods bring new consumers to your business.

Survey Customers to Learn about Their Wants, Likes, and Needs

Over the past couple of months, I’ve spoken to audiences of small business owners and during my presentations I’ve stressed the importance of learning about their customers’ needs, wants, interests, etc.

Certainly, I understand the number of responsibilities that a small business owner has and that sometimes the staff is overwhelmed, but how will you know what products to continue to offer, which new product categories to investigate, and whether consumers like your store’s layout and design if you don’t ask them?

I would encourage you, even during this busy time of the retail year, to start learning about your customers, or reacquaint yourself with their preferences and behaviors, by asking them certain questions.  Most likely you have a standard set of questions that you ask to help build a rapport with visitors, but also consider creating a survey that could capture their responses and that you can refer to from time to time.   Begin the process by involving customers on your mail and email lists and those enrolled in your loyalty program.  If you own a tasting room, include questions on your wine club enrollment form or offer to wave the tasting fee if customers fill out a short survey.

             Before stocking something new, ask customers if they would be interested in buying the products.

In a previous post, Learning Directly From Your Customers, I described some techniques for conducting focus group session, but don’t forget that you will want responses from a larger group of consumers to make actual business decisions.  Therefore, consider collecting survey responses via the Internet.  Aside from posting questions on your website and on your Facebook business page, you could conduct an online survey using one of the many tools available: SurveyMonkey.com, Zoomerang.com, and SurveyGizmo.com. 

These and other online survey programs allow users to collect a limited number of responses for free with more features available when an annual subscription is purchased.  Don’t forget to direct customers to the survey by sending links to it in emails, incorporating the link into your webpage, or posting and promoting it on your Facebook business page and in tweets. 

In next week’s post I will provide some examples of questions that you might ask your customers.