Using Small Grain Cover Crop Alternatives to Diversify Crop Rotations

Final Report for LNC97-116

Project Type: Research and Education
Funds awarded in 1997: $92,300.00
Projected End Date: 12/31/2000
Matching Federal Funds: $28,000.00
Matching Non-Federal Funds: $92,000.00
Region: North Central
State: Wisconsin
Project Coordinator:
Dr. Joshua Posner
Agronomy Department, University of Wisconsin
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Project Information

Summary:

Our goal of this project was to increase the sustainability of Midwestern farming systems through diversification of the predominant corn-soybean rotation. Our strategy has been to re-introduce the use of small grain and cover crops following soybeans and preceding corn. We aimed to maintain production while reducing agrochemical inputs leading to increased environmental benefits for society at large and economic benefits for farmers. The specific objectives of this project were to:

1. Provide educational, technical and networking support to farmers interested in integrating small grain-cover crop combinations into their crop rotations
2. Broaden the range of market opportunities and uses for small grains in the Upper Midwest
3. Evaluate and communicate the results and experiences of producers and buyers directly involved with this project to a wider audience of growers and other agriculture professionals.

Objective 1. To meet our first objective, we built a unique outreach team of producers, university agronomists, extension agents, non-governmental organizations and the food-processing industry. To support farmers technically, a detailed handbook on small grain production was prepared and updated annually. Team personnel aided growers with record keeping and production advice. Complementing this manual was the fortnightly Small Grain Update Newsletter that was published between April and October each year.

Production and economic data was collected and analyzed from 30 upper Midwest farms that had integrated small grains into their corn/soybean rotations. Agronomically, farmers were generally pleased with small grain yields and cover crop establishment. Corn yields following small grain and cover crop were comparable to the 2-crop rotation but with 63% less synthetic N. Many growers assessed their soil health and tilth as improved following the small grain and plow down green manure. In addition to better yields, participants in the Small Grains Initiative got better prices. They received, on average, 24% more in 1997, 35.2% more in 1998 and 12.8% more in 1999. Actual total income (not including cost of land or management) was $102.19/a for oats, $146.67/a for wheat and $193.23/a for barley and quite similar to that of corn ($191.51/a). With the small grains, nearly half the income came from the sale of straw.

Objective 2. Our second objective was met through efforts of the team to provide market contracts for production of high-quality food-grade grain for food-industry processors and grain handlers. Several marketing strategies have been developed for placing the small grains and beans from this 3-crop rotation in food markets, yielding a higher price (green labeling, soy sauce production, bread wheat). The team facilitated the formation of local cooperatives among small grain producers to provide the large quantities required by processors, e.g. Itochu (soybeans) and Quaker (oats).

Objective 3. To meet our third objective, results and experiences were disseminated via newsletters, field days, and conference presentations. Results were included in field days and grower meetings (23), conference presentations (12), and newsletters/updates (16) with mailing list of 600 people. Three winter meetings 1998, 1999 and 2000 facilitated direct interaction among the team members and among other producers while providing an opportunity to increase public interest in the diversification of crop rotations and subsequent economic and environmental benefits.

Introduction:

Wisconsin ranked #2 in the U.S.A. in wheat production in the mid-to late 1800’s(1). Since then, there has been a steady decline in total acreage planted to wheat and other small grains. From 1964 to 1998 the area in small grains dropped by more than 70%.(2) On dairy farms, increased usage of corn silage and direct seeded alfalfa, alternative bedding options, and increased reliance on purchased feeds have lessened interest in small grains. Recently, because of government programs and low prices for small grains, small grains have nearly disappeared from farmers’ cropping rotations. For the past few years however, researchers have tried to reintroduce small grains into cropping rotations to increase diversity and improve sustainability.

Note 1: U.S.D.A Statistical Bulletin #158, 1955-56.
Note 2: Wisconsin Dept. Agric. Statistics, 1965 and 1999 publications.
Project Objectives:

Our goal has been to increase the sustainability of regional farming systems, through the introduction of small grain and cover crops to the corn-soybean rotation. Our project addresses, in particular, three of the Program Goals of the North Central Regional SARE which all enhance farming sustainability: (1) enhancing the environmental quality of intensive row crop rotations by including a small grain and cover crop; (2) enhancing the economic viability of individual farm operations by focusing on food- grade grain production; and (3) increasing crop and enterprise diversity on the farm with the inclusion of a third cropping phase for cash grain producers, or small grain feed for dairymen.

Specifically, we have three objectives of the Small Grains Initiative:

1. Provide educational, technical and networking support to farmers interested in integrating small grain-cover crop combinations into their crop rotations
2. Broaden the range of market opportunities and uses for small grains in the Upper Midwest
3. Evaluate and communicate the results and experiences of producers and buyers directly involved with this project to a wider audience.

Research

Materials and methods:

In this project we primarily worked at three levels: (1) with 30 producers to test the potential of introducing small grains into the corn-soybean rotation; (2) with a subset of these producers to conduct additional on-farm trials; and, (3) with a total of approximately 300 producers who marketed their small grains through our program. We developed acreage contracts with the first group of 30 farmers to produce small grains on 20 acres (with at least 5 acres in a cover crop) and offered a small stipend, as a production incentive, to keep field records (see Appendix 1). We provided recommendations for the small grain/cover crop phase in our manual (“Farmer’s Guide & Resource to Quality Small Grain Production” see Appendix 2) and offered help in securing cover crop seed. In addition the team monitored nitrogen levels for the subsequent corn crop (green manure biomass estimates, pre-sidedress N soil tests and corn stalk nitrogen tests). By 1999, when some farmers had all three phases of the rotation in side-by-side comparisons, additional scouting for pests and diseases were undertaken. Field information was recorded in an easy-to-use, pocket-sized notebook (see Appendix 3). We held a number of satellite and super-imposed trials with the cooperating farmers or at local research stations.

  • On farm testing of cover crop options and their impact on subsequent corn yields. Farmers either interseeded or sequentially seeded cover crops during the small grain phase. Cover crop biomass was measured in 1998 and 1999 and total pounds of nitrogen in the green manure were estimated.

    Monitoring nitrogen levels and corn yields. Growers were very concerned that adding a green manure to the small grain phase would require additional investment on their part, but might not have any economic return in the subsequent corn crop. As a result, a number of efforts were made to estimate the impact of these cover crops not only on corn yield but also on the soil and crop nitrogen status throughout the corn year using pre-sidedress nitrate tests, N-rate trials on corn following green manure, and end of season cornstalk tests (Blackmer and Mallarino, 1996).

Research results and discussion:

Small Grains

Yields. Producers on the Small Grains Initiative project consistently averaged higher small grain yield that the Wisconsin state averages (Table 1). In 1997 participants put 38% more oats into the bin than the Wisconsin state average, 23.8% for all crops in 1998 and 21.9% more for all crops in 1999. However, there was a wide range among producers. Producers with the highest yielding wheat were those who planted in late September verses earlier dates. This could be due to less aphid pressure in late September and therefore less viral transmission (Gaska, 1999). Pioneer and Terra varieties tending to have higher yields. There was no consistent pattern with planting date of oats and yield. Producers in the project generally had their oats planted by the first of April which is sufficiently early.

Small grain straw yields ranged from 0.56 to 3.25 tons dry matter/acre. Oat and wheat straw average yields were 1.16 and 1.62 tons dry matter/acre, respectively, across farms. Straw was sold in most cases.

Quality. Small grain quality was high with test weights for oats averaging 37 over 3 years. Test weights for wheat averaged 57 over 2 years. Barley made malt grade on the two farms where it was produced. Project participants received, on average, 24% higher prices in 1997, 35.2% higher in 1998 and 12.8% higher in 1999(3) than the state average.

Note 3: Barley was omitted because there were only 2 participants that grew barley that year and they received 57% higher prices then the state average.

Cover crop biomass and nitrogen production

Establishment. Cover crop establishment is dependent on both moisture and amount of small grain stubble. In 1998, yields of cover crop biomass were excellent ranging between 1790 and 1976 lbs DM/a (Table 2). In 1999, the initial cover crop stand was good. But when dry weather persisted, growth essentially stopped. We have seen good establishment so far in 2000, the better stands being planted just after straw harvest. Generally speaking, dry August weather appears to be more damaging to sequentially seeded cover crops (i.e. those planted after the small grain was harvested) than those that are frost seeded. Also, contrary to some producers’ expectations, we found that good small grain yields did not adversely affect frost seeded red clover establishment. In fact, competition in the Spring resulted in very short early growth of the clover crop and it had almost no adverse effect on the quality of the small grain straw removed at harvest.

Yields. 1998: Three species of legume cover crop, berseem clover, hairy vetch, and annual medic, were measured across two farms in 1998 (Table 2). All species were sequentially seeded after small grain harvest and established well. Average production ranged between 1716 and 1976 lb DM/a. Berseem clover produced the highest average of biomass but hairy vetch had the tightest range from 1063 to 2368 lb DM/a.

1999: Red clover (interseeded with small grain) produced the highest biomass (lb DM/a) and 15 out of 25 farmers chose to seed this species (Table 2). In 1999, an average of 2627 lb DM/a was produced across 12 sites. Three seedings were failures due to dry weather and one was accidentally sprayed. Other species sequentially seeded included hairy vetch, berseem clover and sweet clover. Hairy vetch and berseem clover produced approximate 1600 lb DM/a over 2 years and 11 sites.

Legume cover crops provided between 41 and 70 lb N/a measured by total N in aboveground biomass in 1998. Hairy vetch and berseem clover were planted both years and yield and total N were higher in 1998 due the better establishment and growing conditions (Table 2). Red clover was planted in both years but it was not measured in 1998 although stands were visually appraised as very good stands in 1998. More species were measured in 1999 with sweet clover providing very little N and red clover producing the most N. Hairy vetch and red clover produced up to 101 and 153 lb N/a, respectively in 1999.

Corn

Yields. Where we had the two-phase (corn and soybean) and three-phase (corn, soybean, small grain + cover crop) rotations side by side, corn yields were quite similar while synthetic N inputs were reduced by 63% on the 3-crop rotation (Table 3). Most of the times that hairy vetch or red clover were used, pre-sidedress nitrate tests the subsequent year was above 15 ppm, resulting in significantly lower N recommendation for corn (Table 4). End-of-season stalk nitrate test showed that additional N inputs on corn following green manure plow down always resulted in higher stalk nitrates but not improved corn yields (Table 5). On farms where multiple cover crops were compared with fallow, corn yields were highest following hairy vetch with 10 bu/a more than the fallow (Table 6).

On-station trails showed economic N inputs on corn following small grain and green manure (Table 7). Yield responses from 20 to 60 pounds of applied-inorganic N/acre, depending on location, increased net return, at current N and corn prices. Applying additional N, over 60 lb/acre, did not always increase yield, yet always reduced net income.

Plant counts. We found no statistical differences in number of plants/acre that followed either fallow or cover crop treatments across several farms. Similarly, we found no differences in number of plants/acre between 2 or 3-crop systems on a farm using repeated and randomized plots.

Surface residue. Spring ground cover by small grain residue averaged 33% over 1999 and 2000. Residue was not different between small grain alone or small grain with cover crop. Year 2000 data showed higher small grain residue (47%) than 1999 (23%) . This was likely due to a dry fall of 1999 with little rainfall events. Measurements were taken in early June 2000 before heavy rain induced flooding.

Soybeans

In our study, soybean is the crop in our 3rd phase. In October, 2000 we will have the first soybeans yield data. Plant counts in the spring of 2000 were significantly higher (p<0.05) on the 3-crop system vs. 2-crop system on both farms that had this comparison. Plant counts on 3-crop averaged 181,500 plants/acre while the 2-crop system averaged 161,610 plants/acre [LSD (0.05) = 6700]. White mold was very low ranging from almost non-existent in wide row soybeans (1.6% incidence) to slightly higher levels in narrow row beans (6.0% incidence). There were no differences in white mold incidence between 2-crop and 3-crop systems, where comparisons between systems were made between fields with the same spaced rows.

Research conclusions:

The Small Grains Initiative, as we call it, is a win-win system in production, environment, and economics. Diversifying the rotation has resulted in maintaining production outcomes while minimizing inputs, aiding in economic and environmental viability. Reduction in insecticide positively impacts wildlife. Reduction in synthetic nitrogen fertilizer prevents ground and surface water pollution. Reduced use of synthetic N also improves soil health due to less soil acidification, and by using cover crops, the soil is protected from erosion.

Substantial savings in synthetic N inputs were accomplished in our study with the use of legume cover crops. Synthetic N inputs were reduced by 63% on corn in the 3-crop rotation compared to the 2-crop rotation (Table 3). However, in the duration of this study, the price per unit of N was fairly inexpensive compared to the cost of legume seed. This is a difficult hurdle to get farmers to justify spending more on cover crops when synthetic N is comparatively less expensive. However, N prices have already jumped 25% over one year from 1999 to 2000. In the year 2001, synthetic N prices are forecasted to increase twofold as natural gas price increases (Jim Witthaus, mimeo, 2000). At higher synthetic N prices, it makes economic and environmental sense to use biological N sources.

Energy saving from reduced synthetic N production is also a major benefit to a more diverse/lower input system. As fuel prices climbed to record heights in the summer of 2000, there was renewed concern about the economic returns from high input systems. Energy costs to produce synthetic N fertilizer are extremely high with energy values of 8250 kcal per pound of N. Continuing to rely so heavily on fossil fuels to produce synthetic N is costly and will result in loss of this non-renewable resource. Within enterprise types, increasing plant diversity will result in decreasing energy inputs as shown on the Wisconsin Integrated Cropping System trial from 1993-1999. Our systems research over this time period has shown energy output to input ratios to be 8.0 for the corn/soybean rotation and 11.8 for corn/soybean/wheat-red clover system. Policy changes and mandatory regulation will likely be necessary to reduce synthetic N use as is already happening in Europe.

To do a full analysis of the small grains program, one more growing season needs to be completed (2000). After the 2000 cropping season, we will have enough data to compare both 2 and 3-crop systems. The full report will be complete in February, 2001.

Economic Analysis

Economics from Small Grains Initiative

(by Don Schuster, Outreach Specialist at the Center for Integrated Agricultural Systems, UW-Madison.)

Methods

Data books were sent to farmers and filled out with the aid of project personnel. Input costs, yields, prices received were requested and total expenses and net income was calculated (Table 1). The data we collected from farmers was in 3 states, but predominately Wisconsin. Therefore, the prices received were compared to the Wisconsin state average along with the Wisconsin state average bushels per acre.

The following analysis assumes that machinery cost for growing small grains would be $38 per acre and $54 per acre for corn and soybeans, respectively. All other cost used are actual information that was received from the farmers. The equipment set data used to calculated this was taken from the 1999 Wisconsin Integrated Cropping Systems Trial, 7th Annual Report. No cost for land and management has been included.

Results

Program participants received higher prices than did farmers who were not involved with this program. The Wisconsin state average price of oats was $1.19 from 1997-1999. The state average price of wheat was $1.92 from 1998-1999. Growers received for wheat and oats, on average, 24% more in 1997, 35% more in 1998 and 13% more in 1999 (Table 1)(4) Possible explanations for these higher prices include organic premiums for some farmers in the study. Also, participants in our study may be more progressive, well-informed and knowledgeable enabling them to consistently produce high quality grain. Participants also on average faired better than the state average when it came to total yield per acre. In 1997, oat yields were 38% higher than the state average, and all crops were 25.5 and 18.5% higher than the state average in 1998 and 1999, respectively (Table 1). Expenses were 40% lower in the small grain phase than the corn phase. Reduced N inputs in corn following wheat and green manure ranged from $1.50/a to $8.00/a savings compared to corn following soybean (Table 3). Actual total income was $102.19/a for oats, $146.67/a for wheat and $193.23/a for barley, quite similar to that of corn ($191.51/a). With the small grains, nearly half the income came from the sale of straw. Generally, by adding a small grain and cover crop to the corn/soybean rotation, farmers were able to reduce synthetic N inputs in the corn phase by 13%, as well as, overall reduction in agrochemicals for the system. Therefore, the system should be more economically and environmentally attractive to farmers.

Note 4: Wisconsin Dept. of Agricultural Statistics, 1999 publication.
Marketing

(Prepared by Ron Doetch, Sharon International Grain and Tony Ends, Michael Fields Agricultural Institute.)

Introduction

Broadening small grains market opportunities in the upper Midwest has proven more complicated than merely providing growers with food-grade grain contracts. Food processors and grain handlers, while initially supportive of this effort, present almost insurmountable barriers to a revival of regional small grain production. However, persistent market research, negotiations with Asian markets and coordination with growers and grain buyers, has achieved a modest measure of success during this project. They illustrate the need for new strategies and new approaches to the marketing of small grains.

Pooling oats in volume (for dispersal in lot sizes of 7 rail cars per month), for instance, could not surmount logistical problems of critical grain storage space shortages this past July in the Upper Midwest. Agreements to accept semi-truck loads of grain, while easily attainable, required bottom line contracts for production quantities higher than the scale of this project. The 50 scattered growers in 20-acre trials associated with this project proved unable to meet this volume. Fluctuating prices for corn and soybeans (from record highs to 10- and 50-year lows) the past 5 years also influenced feed prices early on, circumventing trial delivery to food grade markets.

Foreign Competition remains strong:
Foreign production in competition with upper Midwestern growers remains strong. Canada’s spring wheat plantings in 1996 exceeded 24.6 million acres, and barley acreage the same year was just short of 13 million acres. Spring wheat and barley are among the top three crops grown in Canada. About 40 percent of Canada’s oats, another of its important cash grains, were exported in the 1998-99 growing season. Most of this grain went to the U.S. premium horse feeds and milling oat markets (rolled oats or its components).

Pooling and strong collective production capacity still drive Canadian exports. Together, the Saskatchewan Wheat Pool and its wholly-owned subsidiary Can-Oat operate 470 line elevators in Canada with more than 80,000 farm members. They dominate the grain trade and have in less than 15 years become the largest industrial supplier of oat products in the world. Can-Oat Milling added a second processing facility in 1997 at Saskatoon, Saskatchewan, to its first modern plant constructed in 1991 at Portage la Prairie. These two facilities process more than 250,000 metric tons of raw oats every year into both intermediate and finished food products. Daily processing of oat ingredients exceeds one million pounds. About 95 percent of this production is exported – much of it to the United States, and Can-Oat has avowed that it will maintain a leading presence as a supplier to industrial cereal and baked goods manufacturers in this hemisphere.

Facing the Canadian small grains production capacity, the Quaker Oats Company has now allied with Cargill, Inc., the largest grain handler in the world, with a strong presence in Canada. Under its arrangement with Cargill, Quaker has been sourcing oats in Canada at volumes of 25-rail car lot sizes to meet its 50-million bushel annual demand for oats. The 99-year-old cereal maker enjoyed $5 billion in net sales in 1999 across all food categories, and it has a 10 percent share of the $7.6 billion U.S. cold cereal market. Quaker initially agreed to purchase semi-load lots of oats from growers who would collaborate with the USDA SARE Small Grains Initiative. However, it wanted a minimum contract of 750,000 bushels of food-grade quality oats. Growers in the initiative have met Quaker’s food-grade standards (13 percent moisture, 36-pound test weight, etc.). Yet logistics, freight and volume requirements have conspired against successful transactions.

Ultimately, the depth and strength of Canadian oat production, pooling efforts and organization have continued to depress oat prices – and domestic food-grade oat production – in the United States. Projected U.S. corn harvests for 2000 (73.1 million acres of corn, up from 70.5 million in 1999) and soybeans (73.5 million acres, up from 72.5 million) reflect continued national commitment to the two-crop rotation. For growers’ efforts, USDA price forecasts in July 2000 showed farmers will get an average of $1.70/bu for corn, 10 cents below last year’s prices, and $4.40/bu for soybeans, down 25 cents below 1999.

Growers in this initiative showed they can grow quality oats, wheat and barley that meet grain-purchasing specifications for a variety of uses. Delivering volume in heavily consolidated markets still poses a terrific challenge. Growers cannot source sufficient quantities of small grains for individual buyers and processors in the United States. Major members of the brewing industry. For example, seek a minimum of 25-rail car lots of grain. Seminole Feeds, based in Ocala, Fla., has in recent years sought a high-quality, 600,000-bushel oat supply or pool of suppliers for an expanding recreational horse feed market along the eastern seaboard.

New Midwest Initiatives: Consolidated Grain & Barge (CGB) Enterprises, Inc.
Our Small Grains Initiative, however, demonstrated that even with meager resources and a small grower base, volumes of small grains for targeted markets can be achieved in the upper Midwest. In advance of the 1999 wheat harvest, our Small Grains Update newsletter, which grew from 150 to more than 600 circulation during the project, announced an “on-farm buyer’s call” arrangement with CGB Enterprises. Staff also described this polling arrangement in a press release and feature story distributed ahead of a field tour in July 1999. Consolidated Grain & Barge Enterprises, Inc. offered to pay a $0.10/bushel premium. The bid was made to growers who agreed to load their grain together in bulk within a certain time period. The offer for one barge-load lot of wheat sought 50,000 bushels of grain. The wheat was to be collected at one of CGB Enterprises’ northern Illinois facilities. By the end of the harvest, CGB Enterprises actually bought 12 barge loads of wheat from Upper Midwestern farmers, approximately 600,000 bushels.

Switching to hard red winter wheat:
Feed-grade soft winter wheat purchased from farmers in this program cannot tap higher premium markets in the upper Midwest. Spring wheat varieties planted in the upper Midwest were often developed through western wheat breeding programs in arid climates and alkaline soils. Trials here show very low yields. With assistance from the Small Grains Initiative, two northern Illinois farmers began late last year growing high-protein, hard red winter wheat. The ‘Patriot’ variety of wheat, grown for seed, targets the bread milling market. Millers indicate they will purchase this wheat according to specifications at $0.50 to $1/bushel over soft winter wheat. Production harvested in July 2000 provided 7,500 seed units for planting this fall.

A consultant to the Small Grains Initiative worked for several years to procure this milling quality wheat variety for SARE effort producers. Negotiations in Canada for a hard red variety were finally successful last year, with acquisition of ‘Patriot’ variety seed from C&M Seeds in Palmerston, Ontario. C&M Seeds has 419 Canadian growers producing 18,892 acres of milling wheat, which provides them $20 to $50 more profit per acre. The Patriot variety was developed in southern Ontario at about the same latitude as Milwaukee, Wis. This new hard red wheat has an extremely hard kernel and other characteristics millers seek. It also boasts straw strength essential to hard reds grown in high nitrogen ground such as is found in cash grain rich areas. Trials have demonstrated excellent winter survival, early maturity, mildew resistance and protein premiums.

Yields at the two trial sites in Illinois, despite above average moisture through late spring and early summer, were 65 bu/acre and 80 bu/acre. One grower had more fertilizer present in his seed trial and thus more lodging and not as good of quality. The other achieved 63-lb. test weight. Samples were provided to local flour millers toward establishing “Identity Preserved” wheat production contracts. These contracts were made available to Midwestern growers for additional wheat seed plantings in September 2000 and for greatly expanded stocks in 2001. A cluster of central Wisconsin growers in the initiative this year planted about 4,000 acres in a 1.4 relative maturity bean. This allowed early bean harvest and fall planting of the ‘Patriot’ wheat seed grown in the northern Illinois trial planting. It will also ensure better yield potential and reduced over-wintering problems for the hard red wheat, as opposed to plantings following the 2 and 2.4 maturity beans typical of this region.

Amber Milling recently completed a plant in Kenosha with a 21,000 cwt. (2.1 million pounds) of primary finished productive capacity per day. The plant has a 950,000-bushel storage facility as well. Amber Milling is a subsidiary of Harvest States Milling, which recently merged with CENEX and Land O’ Lakes. It is a contract buyer for food-grade grains, producing Semolina, Durum flour and bakery flour, ranging from 12 to 14.2 percent protein. With connections to Canadian Pacific and Union Pacific railroads, Amber’s Kenosha plant purchases wheat in 104-car lots. Under the present strategy, growers in the Small Grains Initiative will be able to balloon stocks of the hard red winter wheat following the July 2001 harvest. They will then target Amber Milling’s new hard wheat bakery flour products – bread, rolls, etc. – with locally sourced, high-protein grain.

Working with Kikkoman:
Kikkoman Foods Inc. has operated a plant in Walworth Wisconsin since 1972 making soy sauce, teriyaki sauce and related products. The best-selling, most widely recognized maker of naturally brewed soy sauce built a second $40 million plant in Folsom, California 2 years ago. These facilities produce more than 20 million gallons of soy sauce each year for distribution through 10 centers around the United States. Kikkoman responded favorably to a proposal from this initiative to source a quality wheat variety in the Midwest. While its Walworth facility has long stood in America’s most fertile soybean and wheat-producing region, it has been railing its grains from outside the area. For wheat, which the Walworth plant uses in quantities of a rail car per week, this has meant a reliance on dark northern spring wheat varieties grown in the Dakotas. This wheat presently is not identity preserved and is supplied by Cargill. It is dark in color for the manufacture of soy sauces.

Kikkoman’s requires a wheat with 13 to 15 percent protein, similar moisture features and zero vomatoxin presence. If state line growers enrolled in the Small Grains Initiative can meet such requirements, they can deliver single truck lots to the Walworth facility. The plant lacks storage capacity and has been operating under a “just-in-time” sourcing system for the 500,000 bushels of wheat it purchases in any given year. For wheat growers in northern Illinois and southern or central Wisconsin, this situation presents a truck buyer advantage. The freight spread over western suppliers is about 40 cents/bushel, and the premium for food-grade quality wheat Kikkoman’s needs for its products could bring 50 cents to $1/bushel.

Promoting food quality of the three-phase rotation:
This effort follows a marketing strategy of establishing premiums for corn, soybeans and small grains, grown together in a wider rotation. Targeted are superior output characteristics – less incidence of disease, toxins, pests, for instance – across the production. The effort has been discussing merits of this approach with Japanese and domestic concerns. Quality Traders, which produces specialty grains in the United States for distribution in Japan and elsewhere, has led this promotional effort. It is funding a study in Elkhorn, Wisconsin to document the quality characteristics of corn and beans grown in the wider rotation. Reduced damage and yield from white mold in soybeans is targeted in this research. QTI has also underwritten the Patriot seed effort with a buy-back agreement. Buyers willing to purchase corn and beans at premium prices from this wider rotation represent minimum lot sizes of 30,000 acres. Asahi Breweries, Ltd., of Japan, is interested in corn from the wider rotations.

Some individual producers have independently sought out specialty markets, tapping the new trend toward niche marketing. They demonstrate that what growers do in marketing their small grains is as important as what they do in the field to get good yields. The Small Grains Initiative has maintained an advisory and referral service through its consultant at Sharon International Grain in Walworth County, Wisconsin on the state line. This program has sampled, tested and advised more than 200 growers on quality and quantity specifications targeting specific organic and conventional markets. Efforts were made to link growers with the closest available market based on lot sizes and farm locations. Many shipments of oats in this referral program went to millers sourcing grains through St. Ansgar, Iowa. The consultant in this project has been challenging growers to add value to their small grains, to increase their storage capacity and physical ability to preserve identity, and to adapt their timing of sales to the tailored needs of individual market clients.

The Small Grains Initiative has also uncovered strong grower interest in the concept of developing a farmer-owned enterprise for small grains. In winter producer meetings for the initiative, 28 growers (almost all of those present) filled out two-page surveys of support for this approach. Marketing and business studies would have to document the feasibility of such an undertaking, and significant investment and public grant or loan support would also be essential. The retail dollar value of breakfast cereals, snack and pet foods in the United States, however, is more than $40 billion annually, with cereals marking steady growth through the 1990s and representing more than one-fourth of that sum.

Related experiences:
A farmer-owned, value-added marketing strategy could stimulate economic incentives for farmers to widen the conventional corn-soybean rotation to include small grains and cover crops. It would make this possible by mapping out business, marketing, product and processing plans for stronger returns derived from their own value-added manufacturing. About 75 “new generation” cooperatives, such as the Dakota Pasta Growers Co-op in Carrington, North Dakota and the Minnesota Corn Processors Cooperative, have sprung up since 1990. These cooperatives focus more on value-added products, market (rather than supply-driven) orientation, aggressive strategies and up-front farmer investments than have traditional cooperatives. They respond to strong needs in the farm community for local level, multi-state involvement.

Three custom processors expressed interest in a small grains cooperative of farmers and providing services to them for manufacturing specialty foods and products, which the group would then market. A cooperative small grains business could target the growing interest in green label, organic, locally-grown and/or eco-label foods. Models for such farmer-owned enterprises are receiving public support. Iowa has appropriated $25 million in interest-free loans for grower-owned ventures as stimulus to enterprises, such as a large bakery that will buy certified organic wheat from Iowa farmers. It also offers 5 percent stock ownership to farmers and non-recourse loans for stock purchase. Another farm group in North Dakota has attracted 250 oat growers to a project called Oat Technologies. The group plans to undertake an equity drive to build a $40 million processing plant within the year. The plant will make lethicin, sterols, antioxidants, oils, defatted soluble fiber, proteins and starches from oats. The group forecasts annual revenues of $25 million and hopes to pay farmers up to $2.20/bushel. The cooperative estimates it will need 51,700 tones of oats per year; it is targeting nutraceuticals, cosmetics and industrial niche markets. Representatives visited Prairie Oat Growers Assoc. in Winnipeg in December 1999, to attract Canadian growers to the cooperative. Illinois growers who have participated in the small grains project are trying to organize a group marketing effort. The farmers are making application with Boone County Soil and Water Conservation District and members of the Northern Illinois Organic Growers Association for grant assistance to undertake joint marketing of feeds produced in expanded rotations.

Conclusions:
Disappearance of local businesses and infrastructure for handling, transporting and processing small grains over the past 40 years is still making return to production difficult for individual growers. Long-distance trucking fees eat into returns and diminish premiums. Freight-car volumes prohibit small-scale production and discourage experimentation. As transportation costs generally rise with fuel costs and depletion of energy resources, even large processors will soon be persuaded to patronize growers closer to home.

In 20 to 30 presentations with farmers and farm groups around the region each year of the past 3 and in talks at scores of field days, collaborators have addressed these marketing strategies in the overall effort to widen rotations with small grains and cover crops. Barriers cited in the grant application to SARE – foreign transportation, pooling, volume and marketing power – at the start of this effort are just as real today as they were 3 years ago. Competitive markets for domestic production of small grains do exist, that some foreign strengths can be matched and that prospects for individual and collective enterprise are just as real as the challenges. American farmers have shown they can produce high quality, food-grade small grains for milling and malting. Their limitations relate to meeting required lot sizes, coordinated handling and shipping capabilities, which mega markets typically require today. American farmers have shown they can out-innovate research, with some exceptions due to the lack of variety research and breeding programs that do not address premium and added-value markets in the Upper Midwest.

If the sustainable agricultural community is to help Upper Midwest growers make a significant share of domestic small grains production as fluid as corn and soybeans, it will require minimally the three dominant features of our marketing effort: (1) Strong grower involvement, networking and communication; (2) outside, public assistance and commitment to making these approaches for both domestic and foreign markets work and to providing resources necessary to help farmers make them happen; (3) concerted, cooperative work with Asian markets that recognize and reward agronomic and ecological advantages of quality grains from wider rotations.

Growers on a broad basis are not accustomed to aggressively marketing their grains, and they are not organized to do so collectively. They need the seasoned experience of parties who have worked in the private grain industry. Multiple delivery and collection points, obviously, must be established to help overcome lot size and transportation barriers. On-farm and collective storage capacity with strong sensitivity to the timing and delivery requirements of specialized markets need to become commonplace. And the importance of this mode of delivery and customer service needs to become widely understood and accepted. A complex situation that has evolved over the past 40 years of decline in U.S. small grains production, thus, defies simple solutions.

Farmer Adoption

In addition to the 30 cooperating farmers we estimate that over 3000 farmers either participated in our field days, received our Manual, were inscribed to receive our Small Grains Update, or participated in our marketing program. We estimate that more than 300 farmers will continue to market their small grains with our program. From private conversations with our cooperating farmers, most will continue to use small grains in their cash grain rotations. Others will join the program as marketing channels improve and more people appreciate cover crops for their high N credit, soil cover effect, and impact on soil structure.

Involvement Of Other Audiences

The Small Grains Initiative has presented its findings to several groups through our outreach efforts (Table 8). For example, we caught the interest of food safety-conscious consumers at the Food For Thought Festival. Restaurateurs have expressed interest in obtaining organically grown soybeans. Agency personnel from Boone County Soil and Water Conservation District, Natural Resource Conservation Service, and Northern Illinois Organic Growers Association have attended our field days and participated in our conferences. The USDA Dairy Forage Research Center has provided us with on-station research trials involving small grain and cover crops. Crop consultants (Agstat, Soil Solutions, AgControl) have also assisted us by spreading the results to their clientele.

Participation Summary

Project Outcomes

Recommendations:

Areas needing additional study

An educational effort is necessary to help growers focus on small grain production as they currently do with corn and soybeans. The techniques and varieties are available for good production in the humid upper Midwest. What is still missing is the “culture” of quality small grain production. Simultaneously with developing this tradition must come increased options for marketing. Both the issues of finding niche markets (local sourcing of oats, green labeling, performance market for horses) and volume must be addressed.

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.