WW-07539 Reviewed 2008
For many farmers, cooperation and collective action in marketing can be keys to survival and success in our rapidly changing food system. Acting on your own, it may be difficult to maintain the steady flow of high-quality product required to establish a consistent presence in the market place, and you may not be able to take advantage of size economies in processing, transportation, and advertising. Also, itís difficult for one person to run a farming operation and devote the time required to develop the specialized skills and personal contacts needed for successful marketing. Finally, if you sell your products in a market where there are only a few large buyers, you may not have the market power needed to bargain for a fair price if you act independently.
|"The weavers of Rochdale who founded modern cooperative enterprise balanced independence with interdependence, self interest with good will, and action with foresight."|
|President Franklin D. Roosevelt |
Greetings to Rochdale, 1944
Examples of farmers working together on marketing abound in Minnesota.
This publication is a basic roadmap and resource guide for establishing a collaborative marketing group (CMG).
We define a CMG as a group of farmers who have agreed to work together over an extended time period to market the agricultural products they produce. A CMG may be a formally established business organization or an informal association. Some CMGs are based on significant investments in processing and distribution facilities, while others rely on the human capital embodied in their membersí ideas and the social capital embodied in their collaborative spirit. Regardless of its size, form, or asset base, though, a CMG focuses on marketing, is owned and operated by its members, and exists for their benefit.
Many CMGs are cooperatives. This is not surprising. Cooperatives have played an important role in American agriculture throughout this century, and the cooperative form of business organization offers important competitive, legal, and tax advantages to farmers who want to work together. In addition, there are a number of state and federal programs that provide technical assistance, grants, and loan guarantees for CMGs that are organized as cooperatives. But a CMG need not be organized as a cooperative. New organizational forms, such as the Limited Liability Company (LLC) and Limited Liability Partnership (LLP), can offer many of the same advantages and may be more flexible. We will provide more information on organizational forms later. At this point, though, we will simply say that the choice of an organizational form of a CMG should be based on a careful analysis of business and legal considerations.
|What is a cooperative?
David Barton defines a cooperative in terms of three basic principles.
A cooperative is a user-owned and user-controlled business that distributes benefits on the basis of use. More specifically, it is distinguished from other businesses by three concepts or principles: First, the user-owner principle. Persons who own and finance the cooperative are those that use it. Second, the user-control principle. Control of the cooperative is by those who use the cooperative. Third, the user-benefits principle. Benefits of the cooperative are distributed to its users on the basis of their use.
|Barton, David. "What Is a Cooperative" in Cooperatives in Agriculture, David Cobia, ed. Englewood Cliffs, NJ: Prentice-Hall, 1989, pp. 1-20.|
We began work on this publication by interviewing farmer-members from CMGs in Minnesota. We asked about their reasons for working together and their experiences in developing an idea into a collaborative effort that helped them market more successfully. We asked about where they went for help and what they might do differently if they were starting over. The stories of these CMGs are woven into the text that follows and full profiles of each are included.
It was clear from our conversations with members of CMGs that Minnesota has a wide range of public and private sector resources that support the formation and operation of collaborative marketing efforts. So our next step was to visit key resource providers. We asked when members of a CMG should approach them, what services they can and cannot provide, and how much farmers should expect to pay for their service. We also asked what information CMG members will need to provide and how CMGs can use their services most effectively. We often draw on insights from our interviews with resource providers in this publication and we have included a resource guide to help you know where to go for help.
Each CMG is unique, but some common themes did emerge from our discussions with CMG members and resource providers.
The Resource Guide begins with a comprehensive listing of service providers and publications related to issues ranging from business and strategic planning to transportation and distribution. It concludes with an alphabetical directory of contact information for each of the businesses, agencies, and organizations identified as a potential service provider.
Though you may choose to read this publication from cover to cover, we do not expect many to use it that way.
Throughout this publication we have woven in examples based on the real experiences of 10 col- laborative marketing groups in Minnesota. The following is an introduction to each of the 10 CMG profiles intended to provide you with some background information on each group to keep in mind as you read highlights of their stories in the coming pages. You may be interested in following certain groups in particular, such as those that have a similar organizational situation to yours, those that have a similar product, or those that are in your area. You also might identify certain groups you would like to read more about. The full profiles of all 10 groups can be found in alphabetical order in Collaborative Marketing Group Profiles.
We have organized the groups here by their phase of development: Those that are in the process of forming, those that are already operating, and those that are already well-established and have been long standing. Included in each introduction is information about when the group formed, its goals, organizational structure, product, area served, and number of members.
CMG profiles: forming
Minnesota Agro-Forestry Cooperative
The Minnesota Agro-Forestry Cooperative was established in February of 1997 with the goal of encouraging hybrid poplar tree production as an alternative crop to take advantage of existing market demand. This formally organized cooperative has 33 members and serves all of Minnesota.
Prairie Farmers Cooperative
This 15-member group was originally incorporated as a cooperative in 1996 and reincorporated in February 1997. Serving Southwest Minnesota, its goal is to add value to pork through processing and marketing fresh cuts.
Prairie Lamb Cooperative
Prairie Lamb incorporated as a cooperative in July 1995 with the goal of developing markets for innovative, consumer-ready lamb products. It serves the Upper Midwest region and currently has 35 members.
CMG profiles: operating
Apple Crisp Cooperative
This cooperative incorporated in September 1995. Serving Southern Minnesota, its goal is to collectively market premium-grade apples to secure stable prices amidst orchard expansion and industry consolidation, and to build new, value-added markets for second-grade apples. It has seven members.
Central Minnesota Buckwheat Growers
The goals of this 16-member group are to pool buckwheat sales to access volume premiums and promote sustainable farm management. Formally organized as a cooperative in June 1997, it serves Central Minnesota.
Dawson Buying Station Network
This informal organization began in June 1998 with the goal of pooling small-scale hog deliveries to fill large-scale processing demand. It serves Central Minnesota and currently has 20 members.
Rangeland Farmers Cooperative
Rangeland Farmers incorporated as a cooperative in September 1997 with the goal of building new processing markets for poultry, following the closure of a traditional processing plant in the area. Serving Southwest Minnesota, it has 19 members.
Whole Farm Cooperative
The goal of this 25-member group is to market value-added products for a diversified group of farms. It incorporated as a cooperative in December 1997 and serves Central Minnesota.
CMG profiles: long-standing
This group of farmers formed a formal cooperative in February 1988 with the goal of securing stable, profitable prices for small-scale producers through development of new markets for organic dairy, vegetable, and meat products. It now has 170 members, serving the entire United States.
St. Paul Growers Association
Also known as the St. Paul Farmers Market, this formal association started in 1852 with the goals of improving direct marketing opportunities and educating urban consumers about local food production. It has 185 members and serves East Central Minnesota.
In accordance with the Americans with Disabilities Act, this material is available in alternative formats upon request. Please contact your University of Minnesota Extension office or the Extension Store at (800) 876-8636.