Farmer-Owned Retail Food Brands

My children and I own two small farms in the Omaha area that we inherited from my parents, 60 farmable acres near Bennington, NE and 270 south of Massena, Iowa. Both farms are in permanent pasture. Our Massena place is rented to an experienced beef cow-calf family. I am still in the process of converting our Bennington ground from small grains to permanent pasture.

I want to lease these farms with purchase options to young farm families that stay in the beef business. However high interest rates and uncertain cattle markets work against young producers who need long-term loans. Further, these farms are too small to make money as free-standing operations in today’s markets. We are not alone.

ERS and USDA research shows that small farms make up over 90 percent of all U.S. farms. However, as a group, they earn only 35 percent of the gross income from farming while larger farms earn the rest.

We know of no business model(s) that has been shown to increase landownership rates among smaller crop and livestock commodity producers. As it is now, smaller farmers most often sell to larger farmers to settle debts, estates, and fund retirement.

Cooperatives and Farmland Succession

To measurably increase farmland succession among small farmers, we need far more farm-level income. The first step toward sustainable farm profits is to increase farm sizes – without selling land or taking on more debt.

Toward this end, we are inviting Omaha area landowners and farmers to pool contiguous and nearby farms to form larger operating units that can be leased to younger farmers – with purchase options. We call these “production units.”

Landowner-controlled production units have three objectives, 1) Reduce unit capital and operating costs, 2) Increase contract amounts for high-value crops and livestock sold to commodity buyers, and most importantly, 3) Develop investor quality farmer-owned retail food brands for nearby population centers. This strategy is designed to attract qualified local investors, as minority shareholders, in production unit farms, unit operations, and in product and market development for high-value farmer-owned retail food brands.

Cooperation among landowners is the first step toward investor participation. Although cooperatives have a long history in agriculture, usually in food processing and sometimes in distribution and marketing of farmer-owned brands, we cannot find research that shows how farmer and investor-financed cooperatives have increased land ownership rates among the above-mentioned 90 percent.

A word of caution is due here. We have no doubt that larger operating units will help attract better commodity contracts. However, the marginal price increases are unlikely to produce enough new income to support farmland succession. We need successful farmer-owned retail food brands!

Three-level Cooperative Brand Development

As a first step toward new income, my company is developing a three-level cooperative business model controlled by farmland owners and managed by younger farmers. Since our own farm income depends on beef markets, our Level One program starts with local grazing loops organized by row crop and beef producers. My business partners and I will work with the owners of contiguous and nearby farms to write preliminary business plans for each farm, and separate operating plans for the proposed grazing loop. In other words, four farm plans, one loop plan. A one-page planning summary is available.

For Level Two, producers will be invited to consider incorporating “regenerative production units” that will supply grain, hay, alfalfa, cattle to conventional and specialty commodity buyers, and in time, to farmer-owned beef brands. These small farm management and marketing companies will provide a legal structure to help keep profitable land in the family. Page 2 on this website explains farmland succession in this context.

If interest warrants, my business partners and I will help write new business plans for each production unit farm and a separate plan for each unit. Once the landowners approve these plans, we will outline lease/purchase options contingent on Level Three financing for:

• Production unit capital and operating costs
• Commodity market management for conventional and specialty crops and cattle
• Product and market research for farmer-owned specialty food brands

Level Three starts with private meetings to discuss production unit business plans with the leaders of area institutions (universities, hospitals, etc.), local elected officials, and the owners of restaurants and grocery stores. With support from my business partners, production unit landowners and farmers will lead these meetings.

The objective is to show how local farmer-owned brands can reduce local food costs while improving the profit outlook for locally owned farms, and for food processing operations that contract with production units.

In closing, successful farmer-owned retail brands supplied by landowner-controlled production units could offer a new path to farmland succession within families that already own small farms.

Please call me to arrange an appointment. Thank you.