Ag Co-ops: Growing Trend in Farming
Farmers join together to form agriculture cooperatives to grow, process, market, and distribute new farm products
For Mark and Louis Robertson Jr., love for the soil of McLean County runs deep in their veins. The brothers farm land settled by their great-great-grandfather more than a century and a half ago.
Together they work a diverse farming operation that includes beef cattle, grain crops, and tobacco. But the newest additions to their busy schedules are bell peppers, cucumbers, and pumpkins.
When John Murdock looks over his farming operation in far western Kentucky’s Calloway County, he sees land that once grew only marginal grain crops today producing a bountiful catfish harvest.
“Last year, on these three ponds, we cleared $660 an acre,” Murdock says as he looked over part of his aquaculture operation. “You can’t do that with soybeans.”
Murdock and the Robertsons are part of a growing trend in Kentucky agriculture. They’re among dozens of producers who are banding together in cooperatives to sell their products.
“We started looking at this in 1999 when we started becoming concerned about what was happening with tobacco and farm income,” says Murdock, who returned to Kentucky after a 40-year career as a professor of soil science at the University of Wisconsin. He’s a founding member and past president of the Purchase Area Aquaculture Cooperative in western Kentucky.
Today, he and his son Rick have 45 acres of ponds producing catfish through the cooperative as well as 2,600 acres of corn, soybeans, and wheat. Their ponds are located on parcels that proved to be poor grain producers compared to other fields in their operation.
“It fits well into our cropping system,” Murdock says. “We needed a cash crop to give us income at different times of the year.”
The Robertsons are members of the West Kentucky Growers Cooperative in Owensboro, the state’s newest and largest farmer-owned produce cooperative.
“With the decline in tobacco we were looking for something to replace that, and we had the labor supply and needed the added revenue,” says Mark Robertson.
Grain prices had been stuck at the same level for several years as well, and people are looking for any way to stay on the farm, Louis Robertson Jr. says.
“It’s a survival thing—finding new opportunities,” Mark Robertson says. “It is a challenge and a risky business. It’s very intensive. You don’t go away on vacation for a week and hope your vegetables are okay.”
“It’s been a real learning experience,” Louis Robertson Jr. says.
Farmers realizing the need to get more profit for their products are driving the growing interest in cooperatives in Kentucky, says Larry Snell, executive director of the Kentucky Center for Cooperative Development, a nonprofit agency that facilitates cooperative development. Snell says there are 42 farmer-owned co-ops in Kentucky, with 242,873 members, more than any other state.
Cooperative members are generally farmers who may not be large enough on their own to develop markets, says Tim Woods, a horticulture marketing specialist with the University of Kentucky College of Agriculture. “By working together, they can put together large amounts of produce and have a bigger presence in the marketplace,” he says.
Snell, who for 33 years was manager of Cumberland Farm Products vegetable cooperative in Monticello, is a big proponent of farmers working together to improve their purchasing power as well as their profits.
There is a learning curve for farmers as they switch from independent grower to cooperative member, he says. Additionally, a lot of the cooperatives in Kentucky are seeing farmers grow products they have never produced before.
As for cooperative board members, “They have to leave individual goals at home and think of the goals of the cooperative,” Snell says.
Success Behind an Aquaculture Co-op
Formed in 1999, the Purchase Area Aquaculture Cooperative began processing catfish in 2001 at its newly constructed plant near Tri City. Today, the co-op is processing 100,000 to 140,000 pounds of live fish a month, 12 months a year, says Dan Bonk, sales and marketing manager and catfish farmer. This year, members also processed freshwater shrimp and have a black bass pilot project under way.
The Purchase region has several ingredients key to making the aquaculture business a success—soil that compacts to hold water, an abundant underground water supply to fill ponds, and grains needed to feed the fish, Murdock says. Additionally, the cooperative is located far enough south to have nearly as many growing days as Mississippi, a state where especially warm days can slow the growing process, he says.
The cooperative has 53 members, 36 to 38 of which are currently producers. Others are hoping to get funding from the Kentucky Agricultural Development Board to help in pond construction.
The processing plant has between 38 and 41 employees and sells to groceries, state parks, and restaurants. Other than in Kentucky, the cooperative markets its product in a number of surrounding states as well, thanks to landing deals with retailers such as Kroger.
“We’ve found when we move our product into a restaurant, they see an increase in sales of fish,” Bonk says. “I think you will probably find out there is very little fish that will compare with it.”
Tom French, chairman of the cooperative’s board of directors, sees tremendous potential in aquaculture production. It is an enterprise that does not take tremendous acreage, or require strenuous labor, with costs running about $7,500 per acre for pond construction.
“As far as I’m concerned, tobacco is history unless you can grow 50 to 100 acres,” he says. “I don’t see a future in it for the small guy. But a small guy can be successful with aquaculture.
“We are still in the growing phase,” French says. “We are still developing markets, production ponds, and even the plant.”
Growing a Vegetable Co-op
The West Kentucky Growers Cooperative, established in 2000, is the youngest vegetable cooperative in Kentucky. It has the largest volume and number of commodities of the state’s four vegetable cooperatives.
“We would not have ventured into vegetable production without the cooperative,” Mark Robertson says. “The cooperative provides the packaging facilities, the ability to market, and the volume to attract buyers.”
The co-op has 65 members in Daviess, Henderson, McLean, Ohio, Hopkins, and Caldwell counties in Kentucky, as well as members in southern Indiana and southern Illinois.
Their products include sweet corn, bell peppers, jalapeno peppers, cubanelle (similar to banana) peppers, yellow and crooked neck squash, zucchini, red, white, and gold potatoes, tomatoes, cucumbers, broccoli, cabbage, and pumpkins. The processing facility in Daviess County operates from May through November, and employs six full-time and up to 85 seasonal workers.
Produce from the co-op goes to distribution centers and retailers throughout the United States, Europe, Canada, and Puerto Rico.
“Farmers see this as an opportunity to stay on the farm and replace some of the lost tobacco income,” says Joe Cecil, West Kentucky Growers Cooperative chief executive officer and president of sales. “With drastic cuts in (tobacco) quota, farmers in the area got together and were brainstorming, and vegetables became an option. We knew we had the climate and soil type conducive to vegetable production, then we began exploring marketing opportunities.”
WKGC leased packing, storage, and cooling facilities from the Ellis Estate for the first two years for $1 annually and purchased the facilities in 2002, along with 145 surrounding acres that have an underground water supply and are available for members to grow produce.
Economics & Lessons Learned
As farmers move into cooperative buying and selling, many of the new markets can be more volatile. Cooperatives can help farmers spread the risk, Snell says.
Kentucky farmers have been somewhat spoiled by the consistency of pricing and production that tobacco provided, Cecil notes. The vegetable market can be outstanding today, but another supply kicks in tomorrow and the bottom falls out. The investment can also be greater.
The Robertsons say they discovered just how jumpy the produce market can be this year. “The last two weeks of July we saw the highest price we’ve ever had on peppers, and the first week of August was about the lowest we’ve ever had,” Mark Robertson says.
“Unlike with corn and soybeans that can be stored, vegetables are a perishable commodity,” Louis Robertson Jr. says. Luckily, the cooperative was able to secure a deal with a Maryland processor about that time.
Not only do cooperatives provide an opportunity for the member farmers, they also aid in the economic well-being of their communities.
“When we get into full production we’ll be buying 4 million pounds of catfish, and at 65 cents a pound that’s money put back into the local economy,” Murdock says.
Progress is also evidenced by the nearly 40 jobs at the processing facility, construction work on pond development, and another market for locally grown grains to be used as fish food.
“If you begin to add up all the economic benefits, it will be well over $10 million a year,” Murdock says.
Farmers have invested many of their own dollars into making cooperatives in the state a success. Additional support has come from many sources, especially from money set aside by the Kentucky General Assembly to transition Kentucky’s agriculture economy from one highly dependent on tobacco to a more multifaceted industry.
These funds, commonly referred to as Phase I money, are administered by the Kentucky Agricultural Development Board. Since its first investment in March 2001, the board has approved more than $12.6 million for various cooperative projects from 11 groups across the Commonwealth. Another $860,000 was distributed from agricultural development allocations sent to counties and then selected by the counties to go into a co-op project, according to figures from the Governor’s Office of Agricultural Policy.
“Phase I tobacco money has been a real boost for cooperative development in the state’s farm sector,” Snell says.
It takes many people to make these cooperatives successful ventures, say the members.
“For our venture to be successful it has taken the farmers, production workers, state and local officials, Kentucky State University, University of Kentucky, Kentucky Department of Agriculture, Governor’s Office of Agricultural Policy, and the Kentucky Agricultural Development Board,” says French.
Both West Kentucky Growers Cooperative and Purchase Area Aquaculture Cooperative have faced challenges and recognize that more lie ahead, but their members see opportunities and a more optimistic future for Kentucky’s farm families.
“The board saw this as an opportunity to build a future for agriculture. We knew it would be a long road, but if we could build a future for young people, wouldn’t it be wonderful,” Cecil says.
KENTUCKY CENTER FOR COOPERATIVE DEVELOPMENT
The Kentucky Center for Cooperative Development was established in 2001 as a nonprofit agency to facilitate cooperative development in Kentucky.
The center, located in Elizabethtown, provides leadership, education, and technical support for emerging and existing cooperatives.
The center works with all types of cooperatives, but about 75 percent of its time is currently devoted to agriculture cooperatives and groups that could become cooperatives, says Larry Snell, executive director.
KCCD is funded by the U.S. Department of Agriculture’s Rural Business-Cooperative Service and the Kentucky Agricultural Development Board with in-kind support from the Kentucky Department of Agriculture and the University of Kentucky.
KCCD works in partnership with the Kentucky Department of Agriculture, University of Kentucky, Kentucky Farm Bureau, Burley Tobacco Growers Cooperative, CoBank, Kentucky Council of Cooperatives, and Kentucky Association of Electric Cooperatives.
For more information on cooperatives and KCCD contact: Kentucky Center for Cooperative Development, 411 Ring Road, Elizabethtown, KY 42701, (270) 763-8258, or go on the Web to www.kccd.org
HOW A COOPERATIVE WORKS
A cooperative is a business owned and democratically controlled by its members. Proceeds from a cooperative are distributed on a usage basis.
A board of directors, elected by its members, oversees the operation and direction of the cooperative. The board hires staff to handle day-to-day management.
Cooperatives exist in all facets of industry from agriculture to electric energy to telecommunications.
Generally, in an agriculture cooperative, farmers own the business that packs, grades, cools, distributes, and markets their product.
Additionally, some cooperatives purchase products and services for members. By banding together, members receive cost savings through large-scale purchases of feed, seed, or other supplies.
An estimated 30 percent of farmers’ products in the United States are marketed through cooperatives.