"VALUE-ADDED" AND "VERTICAL INTEGRATION" ARE PHRASES OFTEN HEARD ON "MARKET TO MARKET." THEY DESCRIBE THE BUSINESS VENTURES UNDERTAKEN BY FARMERS IN THE INTEREST OF ECONOMIC SURVIVAL. OFTEN BORNE OUT OF FRUSTRATION, THE VENTURES ARE WAYS IN WHICH FARMERS TRY TO EXTRACT MORE VALUE FROM THE GOODS THEY PRODUCE.
BUT SUCH VENTURES ARE NOT EASILY EMBRACED. START-UP COSTS ARE HIGH, CONDUCTING RESEARCH IS TIME-CONSUMING, AND ENTERING THE COMPETITIVE FOOD INDUSTRY CAN BE DAUNTING.
BUT THAT HASN'T STOPPED ONE GROUP OF MIDWEST FARMERS, WHO'VE LAUNCHED THEIR OWN PRODUCT LINE OF CEREALS AND CHIPS. NANCY CROWFOOT REPORTS.
WALK DOWN ANY GROCERY AISLE OF SNACK CHIPS AND THE IMPLIED "HEALTHIER" OPTIONS CAN BE OVERWHELMING. THERE IS "LOW FAT" … "FAT FREE" … "NO SALT" … "FAT FREE AND LESS SODIUM"… AND "REDUCED FAT."
NOW, A GROUP OF FARMERS HAS ADDED TO THE OPTIONS... TORTILLA CHIPS THAT ARE "CHEMICAL FREE." THEY ALSO HAVE LINE OF CHEMICAL FREE, NON-GMO, CEREALS.
THEY, LIKE MANY FARMERS, ARE TAPPING INTO THE "VALUE-ADDED" AGRICULTURE MARKETPLACE, AND HOPING TO CAPTURE A PLACE IN THE CONSUMER'S SHOPPING CART.
Bill Lashmett, American Growers/Farm For Profit tape1, 57:40, p8: "In May of 1998, we had a group of farmers in, I'd say about 30 of them. We had a long bull session and we decided, that look, we're going to have to handle this thing ourselves. We've got to grow the grain, we've got to keep control of it."
BILL LASHMETT IS A RETIRED IOWA FARMER AND ENTREPENUER WHO NOW LIVES IN NORTHERN MINNESOTA. HE RAISED A LITTLE MORE THAN TWO MILLION DOLLARS THROUGH HIS OWN PERSONAL INVESTMENT AND THE SALE OF STOCK SHARES TO FARMERS TO ESTABLISH "AMERICAN GROWERS FOODS." NINE OF THE INVESTORS PUT UP A MINIMUM OF $30,000 EACH TO BE CONSIDERED "VOTING MEMBERS" OF THE COMPANY.
AMERICAN GROWERS THEN CONTRACTED WITH SMALL PROCESSING COMPANIES … LIKE THIS OATS FACILITY IN CHELSEA, IOWA … TO CLEAN, PROCESS AND PACKAGE THEIR PRODUCTS.
Mike Perry, Iowa Oats Processors, Chelsea, IA (paraphrased) "They were ready to market their product and we were ready to help them do that. Up until then, yes, you have to take everything on the surface, as is. I was very happy to see them develop their business so we could develop ours at the same time."
MIKE PERRY SAYS AMERICAN GROWERS ACCOUNTS FOR TEN PERCENT OF THEIR OATS PROCESSING BUSINESS.
TO PROCESS FOR AMERICAN GROWERS, THE OATS COMPANY HAD TO AGREE TO CLEAN OUT THEIR EQUIPMENT SO NO CHEMICAL RESIDUES FROM PREVIOUS CROPS WOULD CONTAMINATE THE CHEMICAL-FREE CROPS.
STRINGENT REQUIREMENTS ALSO APPLY TO THE FARMERS … WHO MUST FOLLOW LASHMETT'S OWN MODEL OF SUSTAINABLE FARMING.
THE SUSTAINABLE PRACTICES INCLUDE USING SOIL APPLICATION PRODUCTS LASHMETT PRODUCES AND MARKETS UNDER THE BRAND NAME, "FARM FOR PROFIT."
Bill: "If you have been on the farm for profit for four years, then your soil could be tested to see if its chemical free and if it's chemical free, then your grain can be eligible to be sold through american growers."
FARMERS ARE ENCOURAGED TO USE REDUCED AMOUNTS OF HERBICIDES AND FERTILIZERS WHEN NEEDED. BUT LASHMETT SAYS NO TRACE OF THE CHEMICALS REMAIN IN THE CROP WHEN USING HIS PRODUCTS. HE SAYS THE PRODUCTS CONTAIN "NUTRIENTS" TO ENCOURAGE THE BACTERIA IN THE SOIL TO GROW AND EXPAND … AND BASICALLY "DIGEST" THE CHEMICALS. HE SAYS IT IS THE SAME MATERIAL AND PROCESS USED TO CLEAN UP TOXIC WASTE SPILLS.
SOME UNIVERSITY AGRONOMISTS SAY SCIENTIFIC TESTING DOES NOT SUPPORT THE FARM FOR PROFIT PRODUCTS.
BUT AN EIGHT YEAR ILLINOIS CENTRAL COLLEGE FIELD STUDY LENDS SUPPORT TO THE FARM FOR PROFIT CLAIM THAT ITS PRODUCTS COMBINED WITH REDUCED INPUTS RESULTED IN YIELDS COMPARABLE TO CONVENTIONAL METHODS AND GREATER PROFITABILITY.
IT IS A PROCESS THAT MARK SCHELDER HAS USED SINCE 1983. HE NOW SELLS THE PRODUCTS TO OTHER FARMERS.
AND JUST LAST SEASON, HE BEGAN RAISING CROPS FOR AMERICAN GROWERS FOODS.
TO CONFIRM HIS IDENTITY PRESERVED CROP IS CHEMICAL FREE, SCHLEDER PAYS AN INDEPENDENT LABORATORY $1,130 A YEAR TO HAVE HIS SOIL AND CROP TESTED FOR MORE THAN 300 CHEMICAL RESIDUES. IF ANY RESIDUES ARE FOUND, THE CROP IS REJECTED FOR USE IN AMERICAN GROWERS FOODS.
SCHLEDER "PASSED" ALL THE HURDLES, AND SOLD, AMONG OTHER CROPS, 2,000 BUSHELS OF CORN …WHICH HE HAULED TO PROCESSORS IN CHICAGO AND SOUTHERN MINNESOTA.
HE SAYS, THE EXTRA WORK AND TRAVEL WAS WORTH IT FOR THE PREMIUM PRICE.
Mark Schleder, Green Valley, IL: "the semi travel was, I think 600 miles and it was about 90 cent deliver charge on that grain, but we received $4.75 for that corn that was delivered to that, so 90 cents, we were still somewhere in that $3.50 to $3.75 range by the time we got all said and done. Which is a very good premium for grain right now."
SOME OF THE PREMIUM PRICES OFFERED SEEM HIGH. FOR EXAMPLE, THE COMPANY MAY PAY UP TO $5.00 A BUSHEL FOR CORN … $8.00 FOR WHEAT, $10 FOR FOOD-GRADE SOYBEANS, AND UP TO $5.00 FOR OATS. HOWEVER, THE COMPANY DOES ASK FARMERS TO GIVE BACK 10% ... IN THE FORM OF AN ASSESSMENT.
THE PROCEEDS FROM THE CHECK-OFF GO FOR AMERICAN GROWERS OPERATING EXPENSES, INCLUDING PROMOTION AND ADVERTISING.
PROMOTION THIS SPRING HAS INCLUDED A $100,000 BILLBOARD ADVERTISING CAMPAIGN IN AND AROUND PEORIA ILLINOIS. A FORMER OUTDOOR ADVERTISING SALESPERSON, IS NOW A MARKETING AND SALES DIRECTOR FOR AMERICAN GROWERS.
J.C. ZARVELL, Peoria, IL: "one thing that has helped us tremendously is that we're backing our product now, more than ever before, with advertising. Several stores will ask, ‘what are you going to do for us? How are you going to promote this product people haven't heard of?'
Tom Boitnott, Festival Foods grocery manager: "J.C. came to see me, had a very lucrative situation and also, had a lot of advertising behind it, so made it, what we call a no-brainer."
THE "NO BRAINER" DECISION INCLUDED AMERICAN GROWERS PLACEMENT OF THE GROCERY STORE NAME ON THEIR BILLBOARDS. TOM BOITNOTT SAYS IT HELPED NOT ONLY WITH CEREAL SALES FOR AMERICAN GROWERS … BUT BIG SALES FOR HIS STORE.
Tom Boitnott, grocer: "We sold through a huge display. I believe we had about 200 cases in here, under two weeks, which I think is really good on a new item like this."
BUT THE "NEWNESS" OF THE PRODUCTS MAY WEAR OFF... EVEN IF THE BUYING PUBLIC LIKES THE IDEA OF PURCHASING PRODUCTS THAT ARE FARMER GROWN … AND FARMER OWNED.
THAT MAY BE WHY THE TWO-YEAR OLD AMERICAN GROWERS IS TRYING TO INCREASE ITS PRESENCE BY EXPANDING ITS PRODUCT LINE.
THERE ARE CURRENTLY 14 PRODUCTS AVAILABLE. AND THERE ARE SEEDS IN THE GROUND TO PRODUCE CROPS FOR ADDITIONAL CHEMICAL FREE PRODUCTS, WHICH WILL INCLUDE POPCORN, POTATO CHIPS, AND A VARIETY OF DRIED BEANS AND SOUP MIXES. FOR MARKET TO MARKET, I'M NANCY CROWFOOT.