Progress report for ONE19-332
This project seeks to discover best practices for producer marketing cooperatives in order to ensure profitability, increase sales, and expand participation.
Objective1: Research and assess best practices for producer marketing cooperatives.
Objective 2: Review best practices with partner cooperatives and complete plan for implementation of new practices in at least three topic areas.
Objective 3: Disseminate project process and conclusions, both positive and negative, to stakeholders, including participating coops and their members, other existing cooperatives, producers interested in forming cooperatives, and other agricultural service providers and relevant organizations.
This project will benefit the 42 farms that are current members or shippers with Our Family Farms and PVGA by ensuring that these coops continue to operate and thrive, providing services that producers depend on, including marketing, branding, aggregation, discounted supplies, ordering, payment, inventory management, and distribution. The project will also benefit potential new members of these cooperatives. CISA is also committed to making the information we gain through this project available to emerging producer cooperatives, although we cannot complete those activities within the scope of this proposal.
Vegetable and dairy farmers in our three-county region of Massachusetts have benefited from two long-standing producer marketing cooperatives, Our Family Farms Milk Marketing Cooperative (OFF), founded in 1997, and Pioneer Valley Growers’ Association (PVGA), founded in 1978. Both coops play critical roles in sustaining farms in our region, and both face significant transitions as founding members reach retirement age. This project will support these producer cooperatives in researching and reviewing best practices to help them thrive in changing conditions and adapt to attract and serve new, younger growers.
Producer cooperatives also face obstacles to success. Margins in most agricultural sectors are very low and, in many cases, cooperatives are made up of competitors. The pressures on cooperatives, combined with a decrease in the total number of farmers, has meant many cooperatives have closed or been consolidated. Since 2000, the US has seen a 40% decline in agricultural cooperatives, with only 1,953 remaining in 2016 (Demko 2018, p. 7-9). Fruit, vegetable, and dairy cooperatives saw the greatest decline, with an average of 23 fruit and vegetable cooperatives closing per year, followed by dairy cooperatives (Demko 2018, p. 1).
Dairy farms and wholesale vegetable growers, while dissimilar in many ways, share key attributes relevant to the work outlined here. Both have little or no control over the price of their products in traditional large wholesale marketplaces, and both are often in a low-price position. Efforts to achieve marketing or distribution efficiencies or to implement or improve branding that conveys a market advantage are very important to their success.
Agricultural marketing cooperatives allow their members to work together on key activities related to marketing and distribution, rather than fulfilling these activities individually or relinquishing their products to a non-farm distributor or processor. In order to continue to succeed, cooperatives need to update practices and to retain and grow membership.
These cooperatives are important assets to our local food economy. In our region, both wholesale vegetable and dairy farms tend to be larger than average, in terms of acreage and jobs, and therefore their profitability disproportionately impacts our agricultural land base and economy. In this competitive environment, marketing coops can provide farmers with an essential sales outlet, but they must adapt their practices and structures to stay relevant.
In a report on best practices for niche meat cooperatives prepared by NCGrowth at the University of North Carolina, the authors note that “agricultural cooperatives allow small scale and larger scale farmers, producers, and processors to strategically pool resources and capital in ways that allow them to capitalize on their collaboration to collectively foster opportunity and success” (De Groot 2018, p. 1). Our planned project is based on a similar understanding of the power of cooperatives to support farm profitability and success. Although the focus of this North Carolina study was on young cooperatives, our experience suggests that many of the same factors can influence the on-going success of mature cooperatives, especially at moments of transition or challenge. NCGrowth identified key areas of cooperative management and developed case studies of several model cooperatives, exploring how they approached important organizational structures such as member equity investments. In our project, we propose a similar approach of learning from other cooperatives, but we will be applying these examples to mature producer cooperatives in New England.
The USDA has also supported significant research and assistance for producer cooperatives, much of it relevant to our partner cooperatives. A 1997 publication, for example, focuses on “Decision-Making in Cooperatives with Diverse Member Interests” (Reynolds 1997), and suggests a process for managing a situation which the PVGA has been wrestling with: members who sell product through the cooperative AND directly to the cooperative’s buyers, thus providing competition from the coop’s own members.
Several recent SARE-funded projects have focused on early-stage marketing cooperatives and food hubs. We believe that many of the challenges faced by start-up marketing cooperatives also apply to some mature coops. “Food Hub Development in the Rural Midwest” (FNC17-1093), for example, addressed issues of food safety, traceability, and branding (Nixon 2019). Managing new food safety requirements, both in their own facility and on member farms, is an important challenge for PVGA. Although our partner cooperatives have established brands, they want to consider updating or refreshing their brands, logos, and websites.
The farms participating in “The Minnesota Hmong Agriculture Cooperative Aggregation and Value-Added Program” (FNC17-1102) were much smaller than most of the farm members of our producer cooperatives, but faced some similar challenges related to entering value-added production and exploring new institutional markets (Thao 2018). Through this project, we will review earlier projects focused on new cooperatives and test their application to mature cooperatives.
Our review of this research suggests that there is a wealth of information on cooperative management and development. Much of it focuses on new cooperatives and is not adapted for cooperatives that have been operating for many years and may have deeply entrenched habits and norms. At the same time, it reinforces the need for skilled, personalized technical assistance and facilitation support. Most farmer cooperatives are under-staffed and rely heavily on contributions from farmer board members and members who are extremely busy with their individual farm businesses.
de Groot, Juliana, “Niche Meat Cooperative Structure: Risk Mitigation through Bylaws, Member Equity Investment, and Stakeholder Collaboration,” NCGrowth, Chapel Hill, North Carolina, 2018, p. 1. http://www.ncgrowth.unc.edu/wp-content/uploads/2018/12/NCGrowth_Niche_Meat_Cooperative_Structures_10152018.pdf
Demko, Dr. Iryna. Trends of US Agricultural Cooperatives (1913-2016). CFAES Center for Cooperatives, 2018, p 1. https://cooperatives.cfaes.ohio-state.edu/sites/coop/files/imce/Research/Trends%20of%20US%20Agricultural%20Cooperatives%20Branded%20Final%20November2018%20PUB.pdf
Nixon, Katie, “Food Hub Development in the Rural Midwest,” Final Report for FNC17-1093, USDA Sustainable Agriculture Research and Education program, 2019. https://projects.sare.org/project-reports/fnc17-1093/
Reynolds, Bruce J., “Decision-Making in Cooperatives with Diverse Member Interests Rural Business-Cooperative Service,” RBS Research Report 155, USDA Rural Business-Cooperative Service, April 1997. https://www.rd.usda.gov/files/rr155.pdf
Thao, Phenli, “The Minnesota Hmong Agriculture Cooperative’s Aggregation and Value- added Program,” Final Report for FNC17-1102, USDA Sustainable Agriculture Research and Education program, 2018. https://projects.sare.org/project-reports/fnc17-1102/
During 2020, CISA staff and consultants have continued to work with two long-standing producer cooperatives in our region, Pioneer Valley Growers Association (PVGA) and the Pioneer Milk Marketing Cooperative, doing business as Our Family Farms (OFF). The COVID-19 pandemic has impacted both businesses and the work that we are doing together in a number of ways. We anticipated completing an implementation plan for each cooperative in advance of beginning work to support progress towards implementation. The onset of the pandemic reinforced the need for flexible and resilient business planning, and we are now supporting each cooperative in a more iterative process as they address both long-term and immediate needs.
During the winter of 2020, our work with the Pioneer Valley Growers Association (PVGA) included meetings with the PVGA board and General Manager to identify and prioritize needs and discuss options for addressing those needs. PVGA board members decided to focus on board governance, decision-making, oversight, and communication. They worked during the winter and early spring with a consultant from Cooperative Development Institute, Jonah Fertig-Burd, to learn more about these topics and to consider options for implementation of new approaches.
PVGA board members also prioritized the need to make infrastructure (facility) investments and systems improvements, and to identify new market opportunities. They worked with Michael Botelho (Massachusetts Department of Agricultural Resources Produce Safety Team), Lisa McKeag (University of Massachusetts Extension), and Chris Callahan (University of Vermont Extension and the Northeast Center to Advance Food Safety) to assess building layout, current and projected needs, and layout for expanded value-added production. We supported PVGA is developing a plan for staged investment in facility improvements and using that plan to define the scope of work and to submit two successful grant applications for facility improvements. We also helped PVGA secure a new market for value-added products which included some financial support for facility improvements and food safety updates through a Kendall Foundation Food Vision Prize awarded to the University of Vermont and Norwich University.
Inventory management was one of the systems improvements identified by PVGA staff, board, and members. In summer/fall 2020, PVGA hired a consultant to work with the General Manager on systems and inventory management, and purchased and implemented an inventory management program, Fishbowl.
The activities described above were developed as part of PVGA's on-going efforts to review their business and plan for the future, conducted in partnership with CISA and supported by this NESARE grant. Some of the activities were funded through other sources, including Massachusetts food safety programs, the Federal State Marketing Improvement Program, state grants and PVGA revenues.
Our early planning with Our Family Farms was slowed by the pandemic, which had an immediate impact on dairy farms due to school closings and other market shifts. The cooperative also experienced some changes in membership during this time.
Like PVGA, Our Family Farms received grant funding from a Massachusetts’ COVID-response program focused on food system resilience and food access. They are considering new options for processing and expansion into value-added products. We have identified a consultant and OFF staff, CISA staff, and the consultant have worked together to develop a plan for branding and market analysis for new products and market expansion, but work has not yet begun.
Both cooperatives with which we are working have experience significant changes in markets and sales due to the COVID-19 pandemic. For example, PVGA lost institutional buyers and gained additional sales to food banks. Travel to visit other cooperatives, originally a part of our plans for this project, is not possible right now. We are exploring other methods of learning from other cooperatives.
Our work to date on this project has been primarily with the Pioneer Valley Growers Association (PVGA). We expect to begin work soon with the Pioneer Valley Milk Marketing Cooperative, doing business as Our Family Farms (OFF).
PVGA, founded in 1978, now serves 25 members and about the same number of non-member growers. Their aggregation, distribution, and marketing services allows produce from vegetable farms varying from 15 to 200 acres to reach large-scale markets, including supermarkets such as Market Basket and Shaw’s.
PVGA is on the cusp of a major transition as several of their core, long-term members are close to retirement. In addition, PVGA needs to invest in their facility in order to increase efficiency, ease compliance with food safety requirements, and manage new market opportunities such as value-added processing and tracking organic and conventional products.
We have begun working on a needs assessment with PVGA board and staff members. We are discussing topics including:
- Cooperative structure, governance, accountability, and financial oversight;
- Member communication and outreach;
- Cooperative business vision;
- Marketing and branding;
- New enterprises, such as value-added production;
- Needed infrastructure investments.
We have identified a possible consultant to work with PVGA board and members to prioritize and address some of these topics and are currently drafting a scope of work.
We have also worked with PVGA board members on some immediate needs. These include a review of current and future financing needs and an introduction to the Cooperative Fund of New England (CFNE), a community development loan fund focused on cooperatives. The interest and expertise in cooperative businesses which CFNE brings to the lending relationship will provide immediate and on-going value to PVGA.
In addition, we are working with PVGA board and staff members to assess appropriate investments in equipment and facility upgrades to facilitate expansion of their value-added processing activities. The Massachusetts Department of Agricultural Resources Produce Safety Team will be helping to identify and prioritize facility improvements that will make compliance with food safety requirements easier and more efficient.
Next steps in our work with PVGA include meetings with the Produce Safety Team staff at the PVGA facility; an in-person meeting with a cooperative consultant and completion of a scope of work; and further work on identifying short-term investments related to value-added production.
Education & Outreach Activities and Participation Summary
PVGA has worked with CISA staff, a consultant from the Cooperative Development Institute, food safety staff from University of Massachusetts Extension, the Massachusetts Department of Agricultural Resources, and the University of Vermont, and a business systems consultant.
Our Family Farms has worked with CISA staff and a marketing and branding consultant to identify priorities and develop a scope of work.