"I think the emphasis before was to form a processing venture focused on adding value to a particular commodity. But I think now we're seeing more emphasis on producers joining together to identify marketing opportunities, no matter the commodity or if a processing plant is involved or not," says Sorenson.

Indeed, Sorenson says FarmConnect will not necessarily return profits to shareholders through equity-intensive business holdings. Rather, returns will likely come in the form of higher value production opportunities. That also means a much lower participation cost than most value added co-ops (There is an up-front fee of $500 to join FarmConnect, and an annual $100 membership fee thereafter). Further, it will seek out diverse profit opportunities for its members for crops and livestock.

"One common theme with all efforts including FarmConnect is the emphasis on getting a number of producers involved. By working together the members of FarmConnect as well as any other such venture will be in a better position to identify and negotiate production and marketing opportunities, as opposed to going it alone," says Sorenson.

Efforts similar to FarmConnect are occurring in other states, including Iowa, Illinois, Michigan, Nebraska, Kansas, and North Carolina, says Sorenson. "In most cases, they are alliances or groups of producers looking at many opportunities to make better profits for members by meeting the needs of buyers."

These alliances and groups are also becoming networked with each other. Sorenson says leaders of about ten producer alliances and cooperatives across the country are in the process of forming a national organization to help facilitate a common goal: better producer profits in the marketplace.

"There's more communication amongst different efforts in different states. There's a realization that we can cut across state lines and work together and learn from one another. So I see that as another dynamic to 'next generation' co-ops as well," says Sorenson.

U.S. Ag Producers Alliance

Eight producer alliances and "next generation" farm cooperatives recently formed a U.S. Ag Producers Alliance. The mission of the group, headquartered administratively at the Red River Trade Council, Crookston, MN, is to enhance the profitability of its member organizations and the producers they represent.

Legally organized ag producer groups such as cooperatives, corporations or limited liability companies that have been formed to promote or engage in value-added agribusinesses are eligible to join.

"I look to a bright future for that group," says Brad Petersburg, chair of the USAPA's interim board of directors. Petersburg, a producer and a leader involved with the Iowa-based Ag Ventures Alliance, says the organization will allow members to seek or share joint venture opportunities, and work together on market research and development efforts that may not be feasible by individual organizations. The group may also work to influence government policy related to value-added agriculture.

"It will allow us to accomplish a lot more in value-added agriculture by networking with each other across the country," says Petersburg. A national organization will also be helpful to cooperatives that are just developing. "It will help with the learning curve," he says. "It helps to learn from those who have already gone through it."

Alliances and next-generation co-ops

Following are a handful of producer alliances and next-generation ag cooperatives organizing or already underway across the country. None is more than six years old. Most are members of the U.S. Ag Producers Alliance. All were formed with the intent of improving profitability of their producer members.

Ag Ventures Alliance, Iowa—About 275 producers are members of AVA, which organized in 1998 to help facilitate value-added projects in Iowa. A membership fee of $250 allows a producer an inside track in value-added projects. One of AVA's first major projects was an expansion of Golden Oval. The egg cooperative is building a $35 million, 2.7 million bird facility in north central Iowa that will be slightly larger than its first facility in Renville, MN. AVA is also exploring corn, soy, and dairy value-added projects, and the possibility of a producer-owned retail outlet.

Agra-Marke, Kansas—About 150 producers are members of this limited liability company organized in May, 1998. It bought an elevator and is working to develop value-enhanced ag opportunities for its members, mostly corn and soybean producers.

Central Illinois Grain Alliance, Illinois—Close to 50 producers are involved with this effort that began in 1998 with membership across several counties. Members who join CIGA automatically become members of Producers Alliance, a statewide effort. CIGA's primary project currently is a contract for delivery of food grade corn to Mexico, for which CIGA members earn a premium.

FarmConnect, Minnesota—This effort will create a closed cooperative to work with buyers and end users to find out exactly what they need, and work with crop and livestock producers to meet those needs. It plans to benefit producer members by identifying market opportunities to add value to their production. A producer membership drive is being conducted across Minnesota through mid March, with a signup deadline of April 1.

Grain Growers Cooperative, North Carolina—Legally incorporated as a marketing co-op, GGC has completed its bylaws and will soon develop a marketing plan. About 15 agricultural leaders in the state are involved with this effort. GGC is still developing its focus of "coordinated integration," but one possibility may be producing soybeans and other grains for specific markets, including the poultry industry.

Innovative Farmers, Michigan—A non-profit cooperative intended to explore value-added opportunities for its members, this effort began six years ago with 120 acres of plots experimenting with alternative crop systems. That led to an effort to develop crops for value-added markets. Over 260 producers in Michigan and Ohio invested a total of $180,000 to establish a cooperative development fund. IF is now using that funding along with federal cooperative development funding to develop the Michigan Edible Bean Cooperative. A stock offering for the bean co-op will replenish the IF development fund.

Innovative Growers, Iowa—This group of producers is organizing to become a limited liability company. It hopes to conduct a membership drive later this year and develop contracts with end users enabling better profits for its members.

Kearney Area Ag Producers Alliance, Nebraska—In existence for about four years, the KAAPA has over 300 producer members, many within a 70-mile radius of Kearney, Neb. However, it may seek to expand its membership statewide. Last year, KAAPA exported 750,000 bushels of high oleic corn and some waxy corn under contract to Japan. KAAPA is looking at other value-added market opportunities as well. KAAPA recently formed an agreement with the Farm and Ranch Network in Nebraska, a Kearney-based farm publication, to help with KAAPA's staff needs and to help KAAPA expand its marketing efforts.

Partners, Nebraska—A project coordinated through the University of Nebraska's Center for Rural Revitalization, Partners is a non-profit effort to help producers increase income. Its board consists of producers, agribusiness and economic development leaders. It helped establish hay marketing co-op, a women's marketing group, and is looking at other opportunities that would boost farm commodity profits.

Producers Alliance, Illinois— The Illinois Farm Bureau is involved with this statewide effort that recently merged with Two Rivers Ag Producers Alliance, also of Illinois. About 125 producers are members of PA, which eventually hopes to expand to 500 plus members, and include producers outside of Illinois' borders. PA's focus is to capture more profit from commodities produced by its members.

21st Century Alliance—Organized in January 1996, 21st Century Alliance has 750 members, mostly from Kansas but also from six other states. Each member who joins invests an initial $750, and an annual renewal fee of $200. It has generated five new producer cooperatives over the past three years, the first a grain processing cooperative under which producers deliver identity-preserved wheat to a flour mill owned by the co-op in New Mexico that mills tortilla and bakers flour marketed in the southwest U.S. Also developed were two dairy cooperatives and a pinto bean processing co-op. 21st Century Alliance has also formed a co-op to become involved in the developing ag fiber (including wheat straw) industry. In 1998 and 1999, 21st Century developed an identity-preserved wheat delivery system for 3.5 million bushels of wheat for General Mills.

An equation on how golobal trends may affect farm management

Shift from production driven to market-driven agriculture

+

Globalization dominated by trans-national companies

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New Technologies such as biotechnology, precision farming, information management

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Consumer demands for consistency, food safety, choice, reliability of supply, enexpensisve food, and sustainable production

=

Industrialization of Agriculture:
-Integration
-Cooperation
-Quality Assurance Systems

+

Reduction in the Number of Farm Businesses

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Low Margins on Undifferentiated Commodites and opportunities for Value Adding and Market Niches

This figure summarizes how Robert Napier, associate professor in farm management at Orange Agricultural College, University of Sydney, Australia, envisions how global ag trends may affect ag changes in the 21st Century. Napier predicts a more global, market-driven, technologically-advanced agricultural system will meet various consumer demands with fewer but more integrated farm businesses producing more differentiated commodities. Producer alliances and so-called "next generation marketing cooperatives" hope to capitalize on these trends.