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Missouri Department of Agriculture

Ag Business Development

Alliances

As production agriculture continues to receive low returns for the investment, producers are starting to look at other opportunities to increase their income. Many producers are exploring the financial opportunities gained by working together in groups.

Working as a group, producers are often able to secure a better price for their product because they are selling it in larger quantities and have distributed their marketing costs over several producers rather than each individual assuming all the cost. Another benefit of working with a group of producers is that new opportunities can be explored for a smaller investment.

One of the most visible examples of new opportunities through group entrepreneurship is the formation of new generation cooperatives (NGC). New generation cooperatives are starting or being explored all across the Midwest region. These cooperatives require a significant investment by producers to secure a delivery right. While many of these cooperatives are being explored, producer alliances offer still another option to group entrepreneurship. In recent years several Midwestern states have seen formal and informal producer alliances form.

Producer alliances range from an informal network of neighbors or producers to a more formalized group of producer members. Often neighbors form informal networks so that they can share the cost of production and increase their profits. One example of this type of alliance is a group of pork producers who each specialize in one phase of pork production. One producer may breed and farrow the sows, another producer gets the pigs at weaning and raises them until they are a specific age and then another producer feeds the pigs until they reach market weight. A second example is sheep producers who form an alliance so that they can send a full semi-load of lambs to a processing plant. They must all have a product that meets specifications set by the alliance and processing plant but they will receive a better price because they are sending a large number of animals that yield a quality product.

Another example is vegetable producers who market their vegetables through a Community Supported Agriculture (CSA) venture. Before the growing season, all the members of the alliance must sit down and decide what crops they are going to grow for the CSA and who is going to grow each crop. Each producer grows specific vegetables that are included in the weekly basket. The CSA baskets are assembled using produce from each of the members’ farms and the producers are able to reach more consumers because they spread out the variety of produce they had to grow. A second produce example is an alliance formed by producers who market to institutions like hospitals or prisons. These producers must plan what they are going to grow and decide in advance which producer will grow specific vegetables. They are able to offer a larger selection to the institution because of the number of producers working together. One single producer would not be able to fill the demand of a hospital or institution.

Another type of producer alliance is based on a membership fee to join an organization. The alliance generates income from their membership fees which allows them to research new marketing opportunities for agricultural products. Farmers, agribusinesses, agricultural organizations and universities are members of alliances. In most alliances the farmers are the only members who receive a vote on alliance business or alliance projects. Another selling point of these alliances is that membership in the alliance allows a producer member the first opportunity to invest in any of the projects the alliance generates.

The alliance usually has an executive staff and these staff members are in charge of researching potential projects for the farmers to invest. Their findings are brought before the membership and the members decide how they would like to proceed. Some projects have led to new generation cooperatives processing commodities like corn, soybeans, eggs, and dairy production. Other projects include opportunities in marketing identity preserved crops and niche markets. The benefit of this type of alliance is that the staff researches potential ventures, which allows the farmers to look at several different agricultural opportunities before making an investment decision.

Existing producer alliances or articles containing information about producer alliances:

• Ag Ventures Alliance
• 21^st Century Alliance
• Farm Connect- A farmer-owned cooperative that is supported by Northern Great Plains, Inc. (NGP) and the University of Minnesota, Crookston (UMC).
• Producer Alliances in the New Agriculture (pdf), published in the August 2001 issue of the Main Street Economist.