New generation co-ops take their members’ product, move it a couple of steps up the food chain, and process it into a new, different product.
From 1993 to 1996, American producers invested $1.2 billion into these types of ventures, said the chief executive officer of a closed bison processing co-operative in North Dakota.
Dennis Sexhus told KAP members it’s part of a change in attitude. Farmers are refusing to be victims. Instead of moaning about how bad things are, they are taking the offensive by processing and marketing their own products.
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While farmers in the United States average two percent return on the investments they make on their farm, food companies average a 14 percent return on investment, said Sexhus.
Because farmer-members commit production to the co-op, they can plan production and costs because they know their market and price, he said.
Farmers can then focus on production rather than marketing, he added.
Successful closed farmer co-ops have some things in common, said Sexhus:
- A professional marketing plan with plenty of research behind it.
- A business plan with realistic long-term thinking and vision.
- One outstanding leader or champion for the co-op, rather than running things by committee.
- At least 40 percent equity, but 50 percent is better.
- Experienced, professional management that has the full support of the farmer-board of directors to run the business.
Unsuccessful co-ops have failed because they made economic development the goal, said Sexhus. While jobs in rural areas are a nice spinoff, the business plan for the co-op needs to be broader.
His co-op has hosted camera crews from around the world because it has more than half of the world population of bison under contract, said Sexhus. This marketing clout gives the co-op some power in setting prices.
The major changes in the farm economy are spurring new developments like the closed co-ops, said Sexhus.
“Bison herds are now growing and railroads are becoming extinct.”
