Agricultural producers looking to create value (e.g. turning their grapes into wine, milk into cheese or corn into ethanol) have looked to New Generation Cooperatives as a solution. New Generation Cooperatives (NGC) allow members to capture additional value by expanding into processing while creating transferable deliver rights for members in the co-op.
How do NGCs differ from traditional cooperatives?
New Generation Cooperatives address capital, marketing, and other challenges of value-added processing by spreading capital contributions and risk among multiple members. New Generation Cooperatives typically have closed membership and sell stock in the co-op that creates transferable delivery rights for members.
Northern Vineyards Winery is a NGC that helps grape growers retain more of their dollar by turning grapes to wine. Pooling grapes ensures a steady supply for processing, thereby increasing operational efficiency and productivity of the winery. Local wines are sold in store, online, and through local retailers.
U.S. Premium Beef benefits members by providing brand recognition. Members’ beef is marketed through established and respected brands: Black Canyon, Certified Premium Beef, and Nature Source Natural Angus. The NGC’s value-based marketing strategy appeals to producers of high-quality beef. Without the co-op’s established premium markets, producers would lose value selling high-quality cattle through other outlets, or be forced to take on the burden of direct-marketing their own high-quality product to capture it’s true value.
When the price of pork fell in the early 2000’s, Allied Producers’ Cooperative built Triumph Foods, a new packing and processing pork plant to serve Midwest pork producers. The NGC focused efforts on educating members to raise better product, providing guidance on genetics, nutrition, environment, and animal handling. Production certification guidelines ensure product consistency.
It would be impossible for a single grain farmer to achieve a volume of product to make value-added processing and marketing a sustainable enterprise. Adkins Energy is a cooperatively managed plant that aggregates grain from over 400 growers to achieve economies of scale for processing corn into ethanol and biodiesel. To capture additional value, the group expanded into distillery. Spent grains are marketed as feed additives.
Kona Pacific Farmers’ Cooperative processes beans from 32 members and exports worldwide. Working together, farmers are able to reach a volume sufficient for export.
Produce growers formed Norpac Foods to process fruit and vegetables into frozen products. Frozen product sold in retail stores provides members with a consistent cash flow throughout the year.
Tuscarora Organic Growers Cooperative work together to aggregate organic product for a volume that provides access to larger markets. Increased buying power allows them to order growing supplies: seed, soil, as well as marketing supplies like boxes and labels, in bulk at a discounted rate.
North Cascade Meat Producers Cooperative built a meat processing plant that made it possible for member farms in Washington state to compete with large integrated farms. The NGC gave members greater bargaining power to influence the marketplace, gain brand recognition, and have their voices heard in a crowded marketplace. The processing plant created opportunities for small farms to increase their production levels and created job opportunities for the local community.
West Liberty Foods Co-op was created when a local poultry processing plant threatened to go out of business. Local poultry farmers acquired the plant to secure access to certified and inspected poultry processing. Today, they retain rights and ownership of several meat processing facilities, and are no longer dependent on an external processor to finish their product. The NGC ensures regulatory compliance of large centralized processing facilities, easing the burden on members.
Smith Island Crab Meat Cooperative provides a mentorship environment for female fish farmers to learn from one another and share in the business. Working collectively, the women aggregate a steady supply of crabs to create products for sale in local restaurants. Their shared processing facility saves individual members money on processing and storage.
“Directory of Closed Membership Producer Cooperatives: New Generation Cooperatives and Limited Liability Companies in the U.S. and Canada.” (June 2007). Macomb, IL.: Illinois Institute for Rural Affairs.