Rangeland Farmers Cooperative

November 1998
Interview with: Jim Spangler
Goal: Build new processing markets for poultry following closure of traditional processing plant.
Date Established: September 1997
Area Served: Southwest Minnesota
Number of Members: 19
Key Challenges: Financial pressure during idea exploration phase, identifying and developing large-scale processing markets for antibiotic-free poultry.
Helpful Resources: Minnesota Department of Agriculture

Rangeland Farmers Cooperative was conceived by a group of Southern Minnesota poultry growers as an "emergency" response to the sudden loss of their traditional processing market. "Our situation is unique," says Jim Spangler, president of Rangeland Farmers Cooperative. "We had a lot of [poultry] barns and needed to develop markets immediately. We couldn’t gradually build markets."

Why market collaboratively - identifying a need and an opportunity

Spangler, a poultry grower in Worthington, Minnesota, is one of 33 producers who was left without a market when the town’s Campbell Soup processing facility closed its doors on July 31, 1997 with little advance notice. Campbell Soup operated a processing facility in the Worthington area for nearly 50 years, buying chickens from local farmers and creating a market on which growers like Spangler came to depend. At the time of the processing facility closure, most growers, who are now Cooperative members, owned and operated at least one 50,000 bird-capacity poultry barn.

Following the loss of their traditional market, Spangler and a few other growers considered several different processing and marketing options, including collaborative marketing to: (1) develop a relationship with one of 50 other regional broiler companies who, like Campbell, required large-scale supplies of conventionally raised poultry; and/or (2) explore the production of "antibiotic-free" chickens for a premium in alternative markets.

Exploration of an idea

Despite many phone calls and visits, Spangler and the other producers were initially unsuccessful at developing processing agreements with regional broiler companies. Consequently, they turned all of their attention toward the development of a cooperative to market antibiotic-free chickens. Doing most of the leg work himself, Spangler contacted the Minnesota Department of Agriculture (MDA) and applied for the state’s Value-Added Cooperative Grant Program. "I met a couple of times with MDA and they gave me booklets on business planning and other things that we would need to begin a cooperative and market research," Spangler recalls. "They have been really helpful and flexible throughout our development process."

Spangler spent the next several months meeting with 16 other poultry producers, all former Campbell Soup suppliers, who were interested in raising antibiotic-free chickens and marketing their poultry as a cooperative. Together the group developed a business plan, articles of incorporation, and bylaws. In September 1997, Spangler and the other poultry growers incorporated as Rangeland Farmers Cooperative.

Challenges and opportunities

Between September 1997 and April 1998, Rangeland Farmers Cooperative worked to identify and develop large-scale, antibiotic-free markets for their poultry. Throughout this period none of the producers were raising chickens since processing markets had not yet been identified - a financial pressure that led to temporary contract agreements with a conventional processor in Iowa.

The Cooperative signed production contracts with Agra-Processors in Iowa to get their barns back in production while informal market research on retail demand for antibiotic-free poultry continued. Under the arrangement, Agra-Processors supplies chicks, feed, and transportation for the Cooperative’s growers. "It turned out to be a pretty good match," Spangler explains. "Agra-Processors needed exactly the same number of birds that we can produce as a co-op." Consquently, Spangler says Rangeland Farmers Cooperative is adding value to more than one million bushels of Minnesota corn and soybeans through poultry sales. After working out a production schedule based on transportation availability, Rangeland Farmers Cooperative began producing their first conventionally raised birds for the Iowa processor in September 1998, one year after the group formed.

Concurrently, the Cooperative was approached by Worthington Area Industries, a local economic development organization, interested in creating processing jobs for a large pool of unemployed labor. Rangeland Farmers Cooperative and Worthington Area Industries began what has become an ongoing series of conversations about building local processing capacity. "With help from MDA we began preparing reports on the advantages and disadvantages of producing and processing chicken in Minnesota," Spangler says. "We found that labor costs are higher on average here than in Arkansas (the nation’s number one poultry processing state), but that our feed costs are lower by comparison. When we added up the costs, it turns out that our production costs are 10 percent lower in Minnesota than in Arkansas." Spangler says the Cooperative will continue to pursue the establishment of a local processing facility as a long-term goal based on the state’s production cost advantages.

In the meantime, Spangler and the other Cooperative members temporarily abandoned antibiotic-free production because they were unable to identify enough large-scale buyers in alternative markets. "When member barns are full, the Cooperative has 500,000 chickens on hand at all times," Spangler says. "We couldn’t find anyone who wanted that many chickens in the alternative markets."

Membership recruitment, responsibilities, and benefits

Cooperative members were recruited through an invitation-only letter sent to local, Worthington poultry growers. "We had a list of people that owned chicken houses in Worthington," says Spangler. "So we contacted them by mail to see who was interested in joining the Co-op." Members, totaling 19, were asked to contribute a one-time fee of $250 per poultry barn. In addition to their one-time joiners’ fee, Cooperative members are asked to donate time to the Cooperative every year, whether it be on the phone to arrange supply deliveries or as a Cooperative representative at poultry conventions throughout the country. The Cooperative does not employ staff other than Spangler, who manages the business. All staffing needs are filled by members.

In return for Cooperative membership, each grower is given one vote in the Cooperative and the opportunity to deliver up to 315,000 chickens per barn annually. Members are not required to deliver a specified volume of chickens to the Cooperative, but instead submit an estimate to Spangler indicating the number of chickens intended for delivery that year. Asked about potential supply shortages, Spangler says the Cooperative can contract out with other local, non-member growers should they require additional chickens to fulfill their contract with Agra Processors.

Less than two years after the Campbell Soup plant closing, members of the Rangeland Farmers Cooperative have restored their barns to production and consequently eased financial pressures. Moreover, members benefit from the Cooperative through a two-year stable contract and increased bargaining power with Agra Processors. "We have the power, as a group of growers, to confront processors with complaints about prices or supplies," says Spangler, adding that both the secured two-year contracts and the ability to bargain effectively would not have been possible without collaborative group marketing.

Words of advice

Looking back on their experience, Spangler says the two most critical challenges the Cooperative faced when starting out was the development of a financial plan and group communication. "We got lucky with the financial planning," Spangler recalls. "A woman in our group had taught financial planning in Iowa and took the lead on developing this part of the Cooperative’s business plan." As for group communication, Spangler says, they struggled to define common goals as circumstances and opportunities changed. "You need a strong board," Spangler says, "who can facilitate and lead the group." At the same time, he cautions, "it’s really important to listen to everyone in the group at all times" in order to build member commitments and meaningful long-term goals.

December 1999 update

In the last year, the members of the Rangeland Farmers Cooperative have restored even more of their poultry barns to production, from around 20 to now 32 barns in use. This has all been due to increased demand from Agra Processors. The group is very pleased with the arrangement they have with Agra Processors, so, at least for the present, they have set aside their goal of pursuing establishment of a local processing facility.

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