Issue 25
January 2000

Prairie Grains is the official publication of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, South Dakota Wheat, Inc., and the Minnesota Barley Growers Association.

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Prairie Grains Magazine
January 2000

MN Marketplace aims to match producers with end users, buyers

By Tracy Sayler, Kris Versdahl

A new world order is fast taking shape in agriculture.  The key question is: How might producers mold it to their advantage?

To focus more attention on this issue, the Minnesota Legislature included $450,000 in funding for a program in the 1999 Session called Minnesota Marketplace. The Minnesota Association of Wheat Growers was a major legislative push behind the program, which was conceived to help match producers with end users of agricultural products.

The Minnesota Marketplace concept was built on the premise that there are many opportunities for farmers to produce products that have a higher value in the marketplace than most of the crops and livestock producers currently raise.  However, there is no existing system to identify those opportunities and communicate them to producers.

By the same token, buyers of agricultural products in most cases don't know who to contact or how to identify farmers who produce the type, quality, and quantity of products they want.

The objective of Minnesota Marketplace is to create an organization that will identify and create opportunities for producers to receive a higher value for what they produce by meeting the needs of buyers and processors.  Efforts to establish and fund Minnesota Marketplace as a for-profit cooperative are being led by and comprised of a steering committee of close to 40 Minnesota farm leaders, including leaders of the MAWG.

Zach Fore, University of Minnesota crop systems specialist involved with creating the program, says the legal work is complete in establishing Minnesota Marketplace, which is registered as a cooperative.  A steering committee and a smaller interim board of directors comprised of producers, has developed bylaws and articles and created a strategic plan for the Minnesota Marketplace effort, and will launch informational and membership meetings for producers in Minnesota later this winter. 

Before launching the effort, commodity groups and agricultural leaders from throughout Minnesota met at the World Trade Center in St. Paul to discuss key ag trends, an important first step in establishing a strategic plan, and determining how producers can gain a larger share of the consumer food and fiber dollar in a changing marketplace.

Art Brandli, a producer from Warroad, MN, and vice chairman of the Minnesota Wheat Research and Promotion Council, opened the meeting with a producer's perspective of possible opportunities under the Minnesota Marketplace concept.

Brandli said Minnesota Marketplace has the potential to help end-users identify growers who can produce the products they desire, and help growers identify more profitable production opportunities.

"I believe we are entering a new era in agriculture, where we as producers will become more involved all the way through the value chain.   But for us to benefit in this new era, we have to start thinking of ourselves not just as producers of bulk commodities, but as suppliers," said Brandli.  "What's the difference?  As producers of bulk commodities, we've simply produced the commodities we know how to produce, and delivered them to the local elevator, with no real regard for the end use of that product.   As suppliers, we can work closer with the end-users of our product, and capture more opportunity in the process."

Over the next few pages is insight on agricultural trends from the organizational meeting.

Global Markets, Regional Responses

Jerry Nagel, president of the Red River Trade Council, Crookston, MN, has a new twist to the adage, "think globally, act locally."  He says instead, we should think regionally and act globally.

"We need to begin to think of ourselves agriculturally as a regional unit," says Nagel.  "We have a lot in common with other producers in our region.  If we are going to build enough of a production base to make decisions about our future, then we need to think regionally to get to that size of base."  Nagel says there are customers all over the world that farmers can do business with, and that we in the Northern Plains need to see ourselves functioning in that kind of worldwide business environment.

"I often say we may find ourselves producing and processing things here that we don't like and that we don't eat," says Nagel.  "But somebody else somewhere on the planet does and that can be a very high quality, high-end customer for us."

Nagel says that one way agricultural producers can find these new opportunities and customers is by working together. 

"There are a lot of areas around the world where businesses that produce a common product work together," he says.  "One of the most well-known is a region in Italy where they produce floor tiles.  They became a cluster of small businesses producing a similar product working together to build a reputation, fund research and conduct marketing activities." 

Nagel says that's the kind of concept that can also work in agriculture: a number of agricultural producers producing a product of common quality and specifications.  "We can come together to build a reputation about our products and then perhaps market it together or build some other further processing together," he says.

Nagel says we've also had a tendency to see our current ag system, whether that be pre- or post-Freedom-to-Farm, as a base system that must be preserved.  "I believe our base asset is the land," says Nagel.  "Let's take that land and get out of it the best possible use for those people who own and are caring for that land.  That may mean raising things that don't fit into our traditional view of commodity program agriculture."

"Don't just think about selling corn or beef— put dinner on my table"

Unlike the food service industry, the supermarket (or retail food industry) is experiencing low growth rates, according to John Seltzer with the University of Minnesota Retail Food Industry Center. 

But, even though they capture less of our food dollar, grocery sales still account for more than 80% of what we eat.

Grocery stores are changing to meet the needs of time-strapped shoppers by incorporating "solution selling." More and more food items are being packaged and sold together.  More retail outlets are providing ready-to-eat meals.  Seltzer says solution selling is the simplification of a shopping experience to meet the consumer's need by bundling and merchandising products, services and information to create value for the consumer.  Some examples:  pre-cut, ready-to-cook vegetables; pre-cut bagged salads; and pre-cut, marinated ready-to-cook meat.

"The supermarket is becoming a series of small departments and niches," says Seltzer.  "Instead of thinking about a single product you can supply, agricultural producers should think in terms of how many different places can you sell your products."  For example, wheat can be sold as flour for organic products, for bakery products, as pasta and as couscous.

With increasing concentration in the retail food business, some companies will be spun off, resulting in marketing opportunities for some.  Private labels are a growing phenomenon, which might offer selling opportunities for the producer who can provide supplies consistently. There will continue to be opportunities for neighborhood groceries as ethnicity increases.  "Anything you can do as a producer to help the store provide information will help you." 

There are opportunities for producers to form "alliances" with retail food stores and restaurants.  "They may want to put a local face on production, that their apples are not from Michigan, for example, but grown on Jim's farm three miles away." 

However, match your production to the market.  Have a market in hand before producing the commodity. "If you don't, you'll sit there with lots of inventory or very low prices," he says.  "You want to sell everything you produce at the top dollar." To do that, growers will need to develop relationships with grocers before crops are planted or livestock is raised to match production with demand.

If small-scale niche markets aren't an option, then Seltzer says producers will need to find a way of either differentiating their commodities, or accept that they truly are producing a commodity and are prepared to take the ups and downs of the marketplace.

Any marketing plans should include the Internet, he advises.  Even though you may not actually sell your products on the Web, it is a promotional medium that reaches many demographics.

Information, transportation, and inventory are key components for establishing a presence on retail food shelves.  "Make sure your trading partners know what you have, that you have a good supply, and that you can get it to them," says Seltzer.

"The key message for all ag producers is that they need to follow the consumer," says Seltzer.  "Don't stop at thinking merely that 'I grow wheat used for flour.'" Don't just think about selling corn or beef; put dinner on my table."