Final Report for FNC02-404
Project Information
PROJECT BACKGROUND
I operate a 400 acre diversified grain and beef cattle farm in Nemaha County, Kansas located in the northeast corner of the state. My wife and two children are also involved in the farm. We have our crops and cattle certified organic. We produce alfalfa, corn, soybeans barley - sometimes wheat and field peas. We typically sold feeder calves through a local sale barn into conventional markets. We use a disciplined, seven year crop rotation plan as the foundation of our organic production system. Our crop rotation is: cereal grain/alfalfa, alfalfa, alfalfa, corn, soybeans, corn, soybeans. We summer graze cattle on mostly warm season pastures, with some pastures divided into paddocks. We graze crop residues during fall and early winter and, during the winter, unroll hay bales on cropland to lower manure spreading costs and to reduce water pollution from livestock wastes.
This is a project by a group of producers. The other project participants are also organic grain and livestock producers with similar production systems as ours. Some also produce hogs.
As I mentioned above, I had already certified our farm as organic, as had other participants, prior to the grant. The key sustainable organic field crop practices we use include: disciplined and diverse crop rotation systems, extensive use of legume cover and green manure crops, non-chemical weed control, integrated crop and livestock production practices, and cooperative marketing. Most of the participants had been practicing organic field crop practices since the mid 1990’s.
Most of the participants in this project had been actively involved in cooperatively marketing their organic grains through Kansas Organic Producers, a marketing & bargaining cooperative. In 2002, there were decent markets for organic soybeans and high protein wheat. We struggled to find organic markets for all of our corn, and it was difficult to find markets for low protein wheat, barley, grain sorghum and hay. There were virtually no established markets for organic beef and pork. We found a great deal of benefit in cooperatively marketing the organic grains for which we had good markets. We wanted to expand the marketing opportunities for all of the organic products we raised, including feed grains, forages and livestock. We thought that by building an organic meat market, we could better utilize and add value to the feed grains and forages for which we did not otherwise have organic markets.
PROJECT DESCRIPTION AND RESULTS
Our key goals for this project were to:
(1) Establish new beef finishing and pork production enterprises for area farms,
(2) Establish a regional market and an effective marketing program in northeast Kansas for organic pork, beef, and possibly chicken by supplying a steady stream of fresh organic meats from several area farms to a regional cooperative grocery store, and
(3) Assist participating farmers in developing supplemental sales of direct marketed organic meats by developing a common label and a uniform pricing structure. We also had a longer term goal of establishing a livestock / meat marketing program as a cooperative venture within Kansas Organic Producers as a means of sustaining our livestock marketing initiative beyond the SARE grant.
Process: The first thing the producer participants in this project did was organize themselves as a Livestock Marketing Committee under the umbrella of Kansas Organic Producers. This brought marketing experience, extensive buyer contacts, and in-kind resources into the project. It also established the foundation for sustained cooperative livestock marketing beyond this project. The livestock marketing committee selected a Livestock Marketing Coordinator, who would serve as the main contact for the project. This was a part-time paid position to carry out the day-to-day work requirements of the project.
The Livestock Marketing Coordinator set-up meetings with Good Natured Family Farms (a Kansas based processor and marketer of natural meats) and The Community Mercantile (a natural and organic foods cooperative grocery in Lawrence, Kansas) to begin organizing the process by which organic beef and pork would move from Kansas farms through a meat processing facility into the retail store.
Good Natured Family Farms (GNFF) was already processing and marketing natural beef into Kansas City grocery stores. It is family farm based organization and shares much of the same interests and values of Kansas Organic Producers. GNFF already had a label under which they could add organic lines of meat products. GNFF had the experience, competence and capacity to receive live animals off of the farm, process them into primal cuts, and deliver the boxed primals to retail stores. It appeared GNFF was the partner the project participants needed to process and deliver fresh meat the Community Mercantile store, assuming the issues of pricing and production costs worked for everyone involved.
At the same time the meetings and work with GNFF and The Community Mercantile were going on, the other producer participants in the project were meeting and working on developing a Livestock Inventory Report Form and a Direct Meat Marketing Brochure. A livestock inventory system that identifies the animals’ numbers and the times at which they are ready is necessary to plan and determine the feasibility and actual operation of the processing and marketing program. The livestock marketing committee developed and circulated a livestock inventory form. The committee also developed, printed and distributed a Direct Meat Marketing Program brochure, under the umbrella of Kansas Organic Producers. The brochure explained what the Direct Meat Marketing Programs is, outlined its key features and benefits for both farmers and consumers, displayed pricing information for both the meat and the processing, and gave purchasing instructions. We got a couple of local papers to print our press release on the Direct Meat Marketing Program, and participating producers posted and handed out brochures.
People:
Mary Fund, Kansas Rural Center. Runoff of livestock waste into Kansas streams, rivers and lakes is a key environmental issue in Kansas. The participants in this project were concerned that as they and other producers transitioned from producing and selling feeder calves to producing and marketing finished beef, the increased production of manure could increase the risk of runoff pollution from livestock waste. Mary is the program manager for the Kansas Rural Center’s Clean Water Farms Project. This project offers farmers training, assistance and an incentive payment to complete a “Whole Farm Environmental Self Assessment” on their farm. The assessment helps farmers begin a whole farm planning process, while also identifying and evaluating the specific water quality risk factors associated with their current operation and management practices. Mary’s project helped organize the process through which 17 KOP members and project participants completed the assessment.
Earl Wright, Kansas Organic Producers. Earl is the marketing director of Kansas Organic Producers. He has worked with many of the participants in this project in marketing their organic grain. Earl played a key role in developing markets for organic feed grains, forages, and feeder cattle. He also helped develop the certified organic processing infrastructure, such as feed milling and range cube manufacturing, that improve the marketing opportunities for feed grain and forage sales. Earl’s extensive marketing contacts helped create new opportunities and a range of options for participants to market organic feed and livestock.
Rena Hawkins, Good Natured Family Farms & KSU. Rene worked with project participants to develop and evaluate enterprise budgets for organic pork and beef production using KSU livestock enterprise software.
Jennifer Drey, Kansas Organic Producers. Jennifer provided the bookkeeping and accounting services for project participants in keeping records, paying expenses and settling payments on feed, forage and livestock sales.
Results: The initial inventory of available organic beef and pork showed that there was an insufficient supply available to provide a steady stream of product into The Community Mercantile retail store. Most of the organic beef producers were still selling feeder calves into conventional markets. The time frame for increasing the supply of organic finished beef was at least a year, given that producers would have to retain feeder calves to graze and finish over a second year. In the interim, the meetings between the project Livestock Marketing Coordinator, Good Natured Family Farms, and the Community Mercantile led to Good Natured Family Farms delivering “natural beef” to The Community Mercantile. Where the Mercantile’s natural beef had previously been coming from out of state, an in-state supply of natural beef was now brought into the store. While a supply of local organic beef was still not available, the Mercantile was pleased to offer their customers a local source of natural beef. Also, putting in place the system of supplying natural beef was a way to start a supply chain process that could also deliver organic meat, once the organic supply was adequately available.
The financial analysis of the whole process of taking live cattle at the farm gate through processing, delivery, retail display and sales showed that it would be difficult to pay farmers their asking price on organic cattle and end up with a retail price that customers would pay. With some enterprise analysis of organic beef finishing, the beef producers in this project were unwilling to lower their asking price. During this same time, participating producers had developed and circulated their Direct Meat Marketing Program brochure. They found that they could get their asking price through a direct marketing program with consumers.
By mid 2004, three main factors emerged that influenced the interest and ability of organic field crop and livestock producers to market organic livestock. The first of these factors was drought. Many parts of the Midwest have suffered moderate to severe drought for extended periods of time since 2000. In 2004, 2005, and into 2006 most of the areas where participants in this project live have suffered drought. These conditions have decreased yields of grain and forage crops, along with pasture. Also, as cattle producers shift from selling yearling calves to finished beef, they need access to additional pasture. Drought limits pasture availability by reducing the amount of forage growth and by stimulating more pressure on pasture rental from producers needing to rent additional pasture.
A second factor limiting the transition to organic beef marketing was the development of a very strong conventional feeder calf market in 2004 that continues today. From late 2004 until currently, 600 lb. conventional feeder cattle could bring from $1.20 to $1.35 per pound at the local sale barn. These prices exceed what, just a few years ago, organic cattle producers thought their organic calves should bring. It is easy to deliver cattle to the local sale barn, the seller can deliver them when he wants, and the farmer gets paid the same day. Selling calves into a very strong feeder calf market during a drought is a big help in managing the production and income losses typically associated with a drought. While these organic producers were selling feeder cattle into the conventional market, most maintained the organic certification status of the beef operations for when market conditions change.
The third factor limiting the transition to organic livestock marketing was the surge in demand and prices for organic feed grains and hay that began in 2005. The growth in organic dairy has had a big impact on the organic forage and feed grain markets. Beginning in the later part of 2004, KOP could market all of the average quality alfalfa hay it could find. This has continued until today. In fact, demand for good quality hay exceeds available supply. The market for organic feed grains is even stronger. Where once KOP struggled to find markets for all of the corn, barley and feed wheat, the problem now is to find enough supply to meet the customers’ needs. Organic feed corn prices hit record highs with harvest of the 2005 corn crop. There was a lot of corn that sold for $6.00 to $6.50 per bushel net to the producer in late 2005 and into 2006. Farmers could sell organic feed soybeans at net prices of $12 to $14 per bushel.
Beginning in the fall of 2005, KOP sold every bushel of low protein wheat and barley its members could supply. In 2006, the market demand for low protein wheat for food use gained strength, pulling low protein wheat out of the feed market and into the food market. Overall it appears the supply of organic corn and feed beans will be greater this year, and prices may be less than a year ago, but there is still very strong demand and good prices for organic feed grains and forages.
The strong demand and high prices for organic forages and feed grains, coupled with a very strong conventional market for feeder cattle, discourage participating farmers in this project from putting expensive organic feed stuffs into cattle that could already bring a very good price in the conventional market. The economics of the situation said sell the grain and sell the cattle, particularly when viewed in the context of prolonged drought conditions.
The situation is not quite the same with organic pork marketing. Conventional pork prices have not been high like the conventional beef prices. The price for organic hogs is much better than conventional hogs. If organic hog producers can produce much of their own grain and acquire purchased organic grains locally, avoiding high shipping costs, it makes sense to continue the organic hog production and marketing. We have two participants currently marketing organic hogs to Organic Valley.
The cooperative relationship between the participating farmers in this project and KOP continues to open up new opportunities, both for organic feed and livestock production. Over the past four years, KOP has greatly expanded its capacity for feed processing and, along with that, its feed marketing. Through collaborative, contractual relationships with three local feed processors, in which KOP coordinates and pays for organic certification, KOP is able to offer processed organic feed products to organic livestock producers. Currently these products include organic soybean meal, a variety of organic ground grain mixes, and organic range cubes. This kind of value-added feed processing and marketing creates greater usage of the wide variety and quality of grains and forages of member farmers.
KOP has sold organic corn to a Texas-based organic beef finishing and marketing company for several years. This relationship is continuing to develop. KOP has worked with this buyer over the past few months to locate and certify a western Kansas beef finishing operation. This would locate the beef finishing program closer to the feed source, saving significant shipping costs. It also will create more economical opportunities to source organic feeder cattle from Kansas and surrounding areas. This could provide a way to market both organic feed grains and feeder cattle through an established beef marketing program.
KOP’s relationship with Texas and Colorado organic dairy farmers in supplying hay and ground feed may also create new livestock producing opportunities. KOP is currently exploring the possibility of having its member farmers raise dairy replacement heifers for some of the dairies. This could be arranged under various scenarios. A key benefit is that it locates the growing of the heifers closer to where the pasture and feed is produced, lowering the feed costs.
Summary: We did get a local source of beef into The Community Mercantile, although it is natural beef instead of organic. Possibly the main reason for why natural beef works while organic does not in this instance is the high price of organic grains. While our collaborative effort with Good Natured Family Farms and The Community Mercantile hasn’t developed like we initially planned, we strongly believe the collaboration was beneficial and can be built upon in the future when conditions are more suitable.
Our collaborative effort on the Direct Meat Marketing Program was successful. It is an inexpensive program to operate, and the cooperative effort helps expand the market more than what isolated individuals working alone can do.
The collaborative relationship with Kansas Organic Producers created many more marketing opportunities and actual sales for feed grain, forage and livestock than what we thought would develop at the beginning of the project. The project participants are currently receiving excellent prices on all of the products they produce on their farms, whereas at the outset of this project that was not the case.
Discussion: Collaborative and cooperative relationships in processing and marketing can be very beneficial for farmers in exploring new enterprises. You need to know your own strengths and seek collaborative relationships with others who have the strengths you lack. This allows the partners to test new activities with sufficient expertise and with lower risk.
The synergy in collaborative / cooperative relationships can create solutions and opportunities no one previously imagined. Weather conditions, such as drought, and changing market conditions can have a big impact on how your marketing plans develop. You need to build flexibility into your plan.
To be sustainable, organic beef finishing needs to be more foraged based compared to conventional beef finishing, given the current and projected high prices for organic grain.
In an environment of high energy costs, developing more comprehensive local production, supply, processing, and marketing networks will give producers substantial cost advantages.
The strong markets over the past two years for organic feed grain and forages, along with the strong conventional feeder calf market, has helped our project participants weather the ongoing drought conditions. The strong organic feed grain market, coupled with drought, resulted in producers planting more acres of cereal grains, such as wheat and barley, in the place of corn. And with a decent market for organic forages, producers who do not raise cattle have brought more alfalfa acres into their crop rotation systems. Increasing the relative portion of cereal grain and alfalfa into field cropping systems improves soil conservation and water quality protection.
Using the Kansas Rural Center’s Whole Farm Environmental Assessment has improved our understanding of how livestock and crop production, grazing and other practices can threaten water quality. Many of our participants are changing management practices and their use of livestock wintering facilities to better protect water.
The initial barrier we sought to overcome was to develop higher value markets for the full range of organic grains, forages and livestock that we produced on our farms. We have overcome that barrier, but not in exactly the way we set out to do so. Our collaborative relationship with Kansas Organic Producers helped us access the developing markets for organic feed grains, forages and feeder cattle. Prices and other competitive markets limited our ability to develop the local fresh organic meat market from our farms to retail outlets.
The key advantage of a project like ours is that it gave us the opportunity to develop and test a marketing initiative in a real world setting. The planning that went into developing the project and the program requirements imposed the discipline necessary to carry out the project. The learning curve in projects like this is very steep. It makes the project challenging and exciting.
In making recommendations to other producers on marketing initiatives like ours, building strong collaborative / cooperative relationships with other producers, organizations and businesses is invaluable. These relationships help you to better and more quickly understand the key issues and give you more options for adapting to changing conditions.
OUTREACH
Project participants conducted a number of outreach activities. We distributed the Direct Meat Marketing Program brochure at conferences and workshops, along with posting them on local bulletin boards, handing them out to customers and neighbors, and including them in KOP mailings. We also issued some press releases on the Direct Meat Marketing Program. We participated as workshop leaders and panel members at local meetings on organic farming and on direct marketing. We had several members who, for the past four years, participated in workshops at Kansas State University’s annual Sustainable Ag Conference. Our livestock marketing coordinator routinely reports to KOP membership and board at membership, board, and annual meetings. Through its ongoing marketing activities, KOP seeks out new producers and buyers of organic livestock, feed grains, forages, pasture and feeding facilities. Our livestock marketing coordinator also participated in the Kansas City Food Circle’s local foods initiative.
PROGRAM EVALUATION
This program was very helpful to us in learning and testing the issues and some of the options in approaching organic livestock and meat marketing programs. We will continue to pursue an organized, varied approach to marketing organic livestock and meat. The Producer Grant Program served us well. We do not have any recommendations for change in the program.