The AgMRC Action is the official monthly publication of the Agricultural Marketing Resource Center - your source for value-added ag information. The AgMRC is a dynamic collaboration of university research and outreach specialists focused on collecting and interpreting information and creating new research to support value-added agricultural activities. All information contained in this newsletter can be found on the site, www.agmrc.org.
Welcome to the first issue of the expanded AgMRC action! This newsletter features new updates, information and resources available at the Agricultural Marketing Resource Center (AgMRC) to assist producers, service providers, rural development specialists and others with value-added agriculture resources. AgMRC was formed as a national virtual resource center for value-added agricultural groups. AgMRC exists to provide producers and processors with critical information in a one-stop-shop to build successful value-added agricultural enterprises.
The Center's Web site, www.AgMRC.org, contains information on various commodities and products, including many market niches farmers can pursue. There is also information on how to start a business and selecting a business structure. Other topics include how to write feasibility, marketing and business plans.
The site contains links and AgMRC-developed pieces on everything from networks of ethanol cooperatives to organic beef producers to a value-added worm business. Directories list value-added consultants, value-added agriculture businesses and applicable laws specific to each state.
I encourage you to visit the AgMRC web site at www.agmrc.org and take a few minutes to learn some new facts about a commodity, do some research on developing a food business plan or see what is happening in your individual state.
Please let us know your thoughts and suggestions for the newsletter. The center's email is
agmrc@iastate.edu or call us toll-free at 866-277-5567.
Sincerely,
Christa Hartsook,
Communications specialist, AgMRC
By Don Hofstrand, co-director, AgMRC, Iowa State University
Producers are joining together to focus on adding value to the crops and livestock they produce. Rather than developing just one value-added business, some of these new alliances are focusing on developing a variety of businesses by identifying new markets and creating new business ventures to service these markets. In other words, they are in the business of creating value-added businesses.
Examples
Below are three examples of these new producer alliances. Many more have either been formed or are in various stages of formation. Although each alliance is unique, they all share the basic mission of creating new value-added businesses.
- 21st Century Producers -- Kansas-based 21st Century Producers was organized in 1996. Its mission is to provide profitable agribusiness opportunities for its members. The alliance has established seven value-added businesses including flour milling, a dry bean company and dairy production. It has about 700 members and has recently expanded in other states.
- Ag Ventures Alliance - This Iowa-based company was formed in 1998 and currently has over 1,100 members. Its mission is to create and facilitate the development of value-added businesses. Ag Ventures has created a corn ethanol business and helped existing value-added businesses like Golden Oval Eggs expand.
- Heartland Agdeavor - Based in Ohio, Heartland enhances farm income by providing investment opportunities to its members in businesses that add value to agricultural commodities. It serves as a clearinghouse for value-added ideas, conducts feasibility studies and prepares business plans.
Advantages of Alliances
These new alliances provide advantages for producers involved in value-added business development that are not available when working in isolation on a single project. Alliances provide a unique form of business "incubator." Not an incubator in terms of physical space and equipment but an incubator in terms of skills development, leadership, idea sharing and access to resources.
- Developing Business Skills -- Instead of developing entrepreneurial and business skills to build just one value-added business, these skills can be used over-and-over to build several businesses. In the process, these skills are further developed and honed.
- Building Leadership Skills - Critical to the success of developing value-added business are leaders. These individuals are often called "champions" because they provide the drive and momentum needed to take a business idea and create a viable business from it. Alliances provide a forum for leaders to get together to learn and draw strength from each other.
- Sharing Ideas - Alliances bring together individuals from different backgrounds with different market and business ideas. This allows for interaction and sharing of ideas that would not occur in isolation.
- Building Relationships - Alliances provide a framework for building relationships with other organizations and individuals such as researchers, financial providers, technology providers, public sector providers and others who are critical to building viable value-added businesses.
- Accessing Funds - Alliances may provide "seed" capital for investigating potential business ideas. Alliance members may be a source of equity for the capitalization of business ventures.
- Timing Business -- As critical as "which" market or industry to enter is the question of "when" to enter. Alliances provide the longevity and patience needed to wait until the proper time to enter an industry or market with a new business.
- Producers are attempting to enhance the value-added business development process by creating these entrepreneurial organizations. In the eyes of this observer, these alliances are critical to the success of the value-added movement.
Elizabeth L. Hund has spent her entire career in agriculture, generally on the finance side. She is the Managing Director for Rabobank International in San Francisco. Rabobank is the largest agricultural bank in the world, focusing on financing all aspects of the food chain globally.
Prior to Rabobank, Hund worked at various commercial banks and Farm Credit Services and was the CFO of a natural beef company.
Hund sees a role for the Agricultural Marketing Resource Center in the future. “I am very hopeful that AgMRC will be a resource and learning center for all peole interested in doing more with their product,” Hund said. “I hope that AgMRC can be used as a ‘clearing house’ where people can find other resources to help move their project along.”
Hund sees the center providing a myriad of resources and information, including financial, legal, marketing and consumer trends. She is working with AgMRC staff to develop a section on “Why You Should Care About Financial Management.” This will have a variety of delivery methods for users, including type, streaming video and DVD. “I am excited to be involved in using new technology to bring information and knowledge to a diverse user group,” Hund said.
Hund is an alumna of Kansas State University and the University of Colorado and is married to Dr. Daniel Downey, an agricultural engineer at the University of California, Davis.
The AgMRC Advisory Council oversees the center. The 12-member Advisory Council, with membership including farmers, CEOs of farmer-owned businesses, agricultural lenders, and legal experts, provides guidance to the AgMRC.
Current members include:
Duane Acker, Talycoed II, Atlantic, Iowa;
Mark Hanson, Lindquist & Vennum, P.L.L.P., Minneapolis, Minn.;
Elizabeth Hund, Rabobank, San Francisco, Calif.;
Steve Hunt, U.S. Premium Beef, Kansas City, Mo.;
Stanley R. Johnson, Iowa State University, Ames, Iowa;
Jeff Kistner, CoBank, Omaha, Neb.;
Barry Kriebel, Sun-Maid Growers, Kingsburg, Calif.;
Eugene Quast, Swiss Valley Farms, Dubuque, Iowa;
Richard E. Rominger, Rominger Farms, Winters, Calif.;
Kenneth Rutledge, West Liberty Foods, West Liberty, Iowa and
Chris Williams, 21st Century Producers Inc., Manhattan, Kan.
Business Development
Templates developed by Kansas State University for the USDA value-added agricultural product market development grant program were added. This can be found at http://www.agmrc.org/
business/valueaddedgrant.html.
The first half of a reorganization for business development was completed. Sections within business development now cross-link to other related sections in business development and markets and industries.
Commodities & Products
New Commodities Added
Commodity poultry, ducks and geese, onions and maple sugar.
Updated Commodities
Herbs, pastured poultry, commodity pork, foodservice pork, international pork, niche pork, natural pork, organic pork, direct market pork, certified/verified pork and pork processing.
New Analysis Tools
A Bioprocessing and Bioproducts Degree Programs section was added under the biomass section of commodities and products. This page gives an overview of the types of degrees available and lists the universities with course descriptions for the applicable degrees.
Markets & Industries
New information was added to the food section
of markets & industries. Food consumption trends, food safety and international issues have new information added to them.
State Directories
Each state was given its own page within the directory and expanded to include laws
specific to that state for value-added agriculture and
additional contacts and resources for producers to locate within their individual state. The state directories page is at http://www.agmrc.org/
directories/dir.html. State pages updated this month include Mississippi, Pennsylvania, Oregon and Indiana.
AgMRC Services
The AgMRC Services section of the web site is a new area for special web-based programs offered by AgMRC.
The curriculum section of the services area contains materials to assist educators in acquainting students with the concepts of adding value to agricultural products using www.agmrc.org as a resource base.
Also located in this section is a Request for Proposals (RFPs) section. Value-added businesses and groups can post RFPs at this location. Businesses can use this free service by sending AgMRC their RFP.
The information on www.agmrc.org is divided into different areas of an agricultural business.
>>To find information on a specific ag commodity in which you have interest, click on Commodities and Products. Different niches for each commodity will be under the main headings of each.
>>To find information on market trends, such as the organic industry or food consumption statistics, as well as broad industry structure information, click on Markets and Industries.
>>To find “how-to” information to develop or expand your ag business, click on Business Development.
>>Specific consultants, state contacts and laws and value-added businesses can be found in the Directories and State Resources section.
>>Upcoming value-added ag events are located in the Upcoming Events calendar.
The agricultural economy in Mississippi is an important sector of the state’s economy. Adding value to products within this sector is a common interest among all of the commodity support groups and ag related agencies. The Mississippi State University Extension Service Food and Fiber Center is the only entity within the state with a stated mission of adding value to the state's agricultural, forest, marine and aquacultural commodities.
Additionally, there is a substantial effort by the catfish industry through The Catfish Institute, and much of the value-added for other products is driven by individual firms or individuals. The Department of Agriculture and Commerce and the various commodity associations encourage value-added product development and have worked to secure funding to promote value-added activities. In recent years, the Mississippi legislature created a Land, Water and Timber Board, with appropriate funding, to encourage job creation and increased economic activity in the ag industry in the state.
Interest in value-added ventures in Mississippi is growing, according to Virgil Culver, director of the MSU Food and Fiber Center. “On the larger scale, new interest in value-added poultry products, catfish products and red meats is evident,” Culver said. “ At the entrepreneurial level, niche markets for many types of specialty products are being explored. We have a thriving specialty foods industry in the state with several smaller companies winning awards at various levels, including the International Fancy Food and Confection Show. There seems to be more than a little interest in biomass products, particularly ethanol, with several larger projects in the works. A state-of-the-art cow slaughter facility will open in April 2004.”
According to Culver, sweet potato processing is becoming a reality in the state after several false starts in the last 10-15 years. Blueberry packing/processing is expanding. Cut flowers is being looked at closely as a potential new industry in the state.
“There is no question that the entrepreneurial spirit of some people is a tremendous asset,” Culver said. “We like to think that those with the highest potential for success will come to the table with a marketable idea, a good management skills set and some funds of their own.”
For startup projects, most clients of the Food and Fiber Center first want an independent, objective assessment of their idea. Secondly, the clients want someone to help them develop a plan (business or feasibility) that they can use to secure funding. “After that our role may be no more than technical advisor bearing the seal of the university to add credibility,” Culver said. “However, many of the clients that actually start a business have continued to depend on assistance from us as their needs change over time.”
The Food and Fiber Center can be found at http://ext.msstate.edu/departments/foodandfiber/.
It started out as a hobby. Claudia Clark moved from Georgia to Plainfield, Vt., when her husband retired three years ago. A natural curiosity about new foods and years of experience in new product development for major food companies and restaurant chains created the desire in Clark to try her hand at making her own maple syrup from sugar maple trees on their property.
"The first year, we tapped 12 trees, not knowing which, if any, were sugar maples," she said. "We were lucky and 10 of those trees were sugar maples. I started out boiling one gallon of sap in a lasagna pan on my gas grill and after several days discovered it really does take 40 gallons of sap to make one gallon of syrup!"
Tapping the sugar maple trees begins in February or early March, depending on the weather. In order for the sugar to flow from the roots of the tree upward, the temperature must be below freezing at night and above freezing during the day. The sugaring season can last from a couple weeks to a couple months, again dependant on the weather. After the long boiling process to turn the sap into syrup, the syrup is filtered to remove the gritty "sugar sand" as it is called. Grades of the syrup are based on color and flavor. Typically, the lighter color, lighter flavor syrups (Grade A) come from sap produced early in the season and the darker, more flavorful syrups (Grade B) are from later sap.
The long processing time of boiling sap gave Clark a lot of "think time." "I read a lot of information on maple syrup and talked to local sugarmakers," Clark said. "Everyone told me to be careful when boiling sap because the syrup will pick up flavors from the pan, fuel, etc. I wondered if it would pick up good flavors as well as the off flavors, so I started throwing ginger, cinnamon, cardamom in the evaporator pan with the sap."
Infused maple syrups were born. The market for fruit-type syrups was already in existence and syrups are a mainstay for breakfast foods. Infused syrups offer more than the traditional maple syrup, but without the strong fruit flavors
associated with fruit syrups. Infused syrup has subtle spices and flavors blended with the maple syrup. The result is used in all manner of cooking to counterbalance intensely flavored ingredients, enhance full-flavored richness, complement hearty flavors, replace honey or brown sugar and accent simple elegance.
"I position this as a gourmet cooking ingredient," Clark said. "This is just like your infused cooking oils and it means that syrup can be used for a lot more than just pancakes."
Moosewood Hollow offers several flavors of infused syrups, including Sweet Autumn, Sweet Ginger, Sweet Chai, Sweet Heat and Sweet Savory.
Clark's entrepreneurial spirit took over. She immersed herself in the world of maple syrup and started working on new flavors. In 2002 she put labels on bottles and set off for the Fancy Foods
Show in New York. The publicity paid off and her infused syrups have been featured in Better Homes and Gardens, The Trentonian, The Oregonian, The Los Angeles Times, The New York Times, USA Today and O, the Oprah Magazine. At the summer 2003 New York Fancy Food Show Gourmet Retailer selected the infused syrups as an "Aisle Winner."
"Approval of the key influencers is crucial," she said. "No matter how wonderful your product is, if you can't get it into buyers' hands, it doesn't matter."
Sales for Clark's syrups have spiked through direct sales and wholesale sales after each article appeared in the major food editor's columns or magazine features.
Clark handles the entire business, although Moosewood Hollow has grown enough to require purchasing all her syrup from local suppliers. She takes all the orders and has sales representatives spread across the United States. Internet sales were just launched as well. She credits her success to date with having a clearly defined target audience and knowing that market well. "You need to be able to look at yourself and be very critical of your product and the audience you wish to reach," Clark said. "Where are you headed? What does my audience need or want? Get inside your customer's head and really understand them and also understand who influences them."
Understanding her customers is something Clark has done well. "Success has actually been my most unexpected problem to date! I'm much farther along in my mental business plan than I expected to be. I have some decisions to make about future expansion, sales, etc."
Another challenge faced by small gourmet food businesses with a different product is the size of the retail outlets. "There seems to me to be three distinct sizes of stores - independent, regional and national stores," Clark said. "Selling a larger volume to the regional and national stores is very appealing, but frequently is very challenging. The regional and national stores don't always want to take on a really new or
different product."
Their buyers have told Clark, "Our customers won't understand what to do with the syrups." Undeterred, Clark continues to place the syrups in the smaller gourmet stores which, once the owner taste the syrups, are more than willing to take a chance with a new product. More importantly, her Internet customers are beginning to reorder and the products continue to get great press coverage.
The business has grown far beyond a hobby and Clark has hopes that this will help the maple syrup industry expand beyond breakfast foods. "The maple industry in Vermont is composed of lots of small, independent sugarmakers. If people try my syrups and then start buying either plain maple syrup or my products to cook with, then I will have accomplished my personal goal - to help sell more maple syrup."
Agricultural producers have long sought to capture a greater share of the downstream value their commodities create. Many recent efforts to vertically integrate into processing activities have involved the formation of New Generation Cooperatives (NGCs). New generation cooperatives have many of the characteristics of traditional cooperatives but are normally more restrictive in membership, finance and marketing. Some of these NGCs have succeeded in industries where others have failed.
The proliferation of NGCs has created a need to identify and understand the factors critical to the success of these ventures. In order to address this need, Oklahoma State University conducted a national survey of NGC managers.
However, there are some key factors to success that have been identified. Commonly identified ingredients to success include:
- A motivated core group of producers
- Identifying a strategic advantage
- Detailed, unbiased feasibility assessment and business plan
- Well timed equity drive resulting in an adequate capital base
- Legally binding membership and marketing agreements
- Qualified manager
While there is no single recipe for NGC success, detailed planning, adequate equity and capable management appear to be the key ingredients.
Full paper found at http://www.agmrc.org/business/pdf/newgenerationsuccess.pdf
Paper by Rodney B. Holcomb, Associate Professor, Dept. of Agricultural Economics and Economist, Food & Agricultural Products Center and Philip Kenkel, Professor, Dept. of Agricultural Economics and Bill Fitzwater Endowed Chair for Cooperative Studies, Oklahoma State University.
Biodiesel derived from soybean oil is not a unique or new concept; in fact, the first diesel engines were designed to run on refined vegetable oils.
Biodiesel by definition refers to renewable diesel fuel made from any number of plant or animal oils or fats. Soydiesel specifically refers to diesel made from soy oil; however as soydiesel has gained popularity, the product is now often referred to using both term interchangeably.
Soydiesel has recently experienced a surge in interest created by two recent federal policy changes. The first policy will require removal of nearly all the sulfur in petroleum-based diesel by 2006. Soydiesel blended at extremely low rates with petroleum diesel will replace the lubricity characteristics previously provided by the sulfur. The second policy is an EPACT regulation that now allows tax credit for fleet owners utilizing soydiesel. This legislation is similar to programs used to promote usage of other renewable fuels, such as ethanol, by large fleets and government vehicle pools. More than 100 major fleets utilize soydiesel and this tax-credit program.
Supply
Growth trends in consumption have seen soydiesel go from .5 million gallons in 1999 to 25 million gallon in 2002. Industry proponents think this trend could escalate to more than 100 million gallons in the next three to five years. A recent economic study predicted a total potential demand of more than 450 million gallons of soydiesel within 15 years.
With a conversion ratio of 1.5 gallons of fuel per bushel of beans, this would result in the increased utilization from the current 15 million bushels of beans to more than 300 million bushels.
Currently there are seventeen soydiesel plants in production with a collective capacity potential that far exceeds the current demand of 30 million gallons. West Central Cooperative in Ralston, Iowa, opened a 12 million gallon facility in 2002 that is currently the largest dedicated facility in production. More than a dozen plants are proposed or in early stages of production in preparation. One of the largest of these new plants is a 30 million gallon facility being built by the Minnesota Soybean Processors in Brewster, Minn., in response to growing national demand and Minnesota legislation to require all diesel fuel sold in that state to contain a minimum of a 2 percent blend of soydiesel by the year 2005.
Bio-fuels made from soy oil have several advantages over other bio-based fuels based on conversion efficiencies and environmental factors. The limiting factor for soy could be its cost. Eighty percent of the cost of biodiesel production is the cost of the feedstock. Another determining factor on the geographical success of the soydiesel industry will be the ability to economically utilize the meal component from the soybean after the oil has been extracted for refinement.