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Additional information is available through the Center for Applied Rural Innovation and Food Processing Center,
University of Nebraska,58 H. C. Filley Hall, Lincoln, NE 68583-0947 or online at www.farmprofitability.org.
This material is based upon work supported by the Cooperative State Research, Education, and Extension Service, U.S. Department of Agriculture. Any opinion, 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.
Taking Back the Profit First Things First PastureLand decided to focus
Dan and Muriel French are The first step was to decide on the high-end specialty market.
grass-based dairy farmers just what the group wanted to pro- The higher premiums are needed
south of Minneapolis and St. duce and market. There is cur- to pay the farm-gate price and
Paul, Minnesota. They began rently a successful niche market cover operating and processing
management-intensive grazing for organic milk, but that didn’t expenses.
about 15 years ago to cut costs seem feasible in this situation But if they were going to ask
and improve profits. But, like because fluid milk has a limited for more money for their product,
most dairy farmers, they were shelf life and processors have a there had to be a real difference
prisoners of market price. They 500-gallon minimum batch. that would attract consumers to
could cut their costs, but were The group chose to start with PastureLand products. The
stuck with the price. cheese and butter. These easily market for organics is growing,
And they had no control over movable and storable products but they wanted to go beyond
that price. The pitfall of commod- have a long shelf life, which organic to pioneer the next step
ity prices is that as costs to the makes it easier to match supply in quality food.
producer go down, the price of to demand. PastureLand plans to
the commodity goes down, too. add ice cream in the future, and Grass is Better
The average dairy farmer, it will consider adding fluid milk as The farmers found the answer
seems, can never get ahead. Even the co-op gets bigger. right at home. Milk from rumi-
very efficient farmers watch their Next, they needed to find nants that graze fresh grass is rich
potential profits drive off the farm processors able to make quality in conjugated linoleic acid (CLA),
with the milk truck. specialty products. Small dairy as much as five times as much as
After years of talking about it, a processors have been disappear- is found in the milk of grainfed
group of six grass-based dairy ing all over the country, but animals. Research suggests CLA
farmers, including Dan, decided Minnesota has more than most can reduce cancerous tumors (Ip,
they would try to get around that states. They used the state busi- C, J.A. Scimeca, et al. (1994)
market bias. ness directory to find processors, “Conjugated linoleic acid. A
Instead of taking what was left calling around until they found powerful anti-carcinogen from
of the profits after everyone else good prospects—often through animal fat sources,” p. 1053.
took their share out, they would
take control of processing, distri-
bution and marketing in order
to keep more of that profit on
“THE BIGGEST PROBLEM MOST START-UP BUSINESSES
the farm.
Unlike most current milk coop-
HAVE IS NOT FIGURING A LARGE ENOUGH PROFIT.”
eratives, this group focuses on get-
ting profits to the farmers rather
than building equity for the leads from processors that were Cancer 74 (3 suppl):1050-4.)
organization. Although they’re too small or busy for their needs. Other health benefits that may
now a formal co-op with rules and Once they had a product and a be associated with CLA consump-
bylaws, the six families that com- processor, they were ready to start tion are decreased obesity and
prise PastureLand Farms still marketing. But why would con- heart-attack rates. (For more
make decisions by consensus at sumers pick PastureLand’s cheese information on CLA and the
their bi-weekly meetings. They’re and butter? benefits of grass-based agriculture,
committed to that decision-mak- go to www.eatwild.com, or read
ing process, and feel that if they Standing Out in a Crowd Why Grassfed Is Best! by Jo
can’t reach consensus about an Recognizing they couldn’t Robinson.)
issue, then it probably needs compete with generic and main- The health benefits of CLA
more discussion. stream products on price, make PastureLand products
12 • Profitable Practices & Strategies for a New Generation • Center for Rural Affairs
could provide enough cream to months developing their own that it is a long process that
process a full batch. packaging paper with their logo requires time, work, planning,
Many processors don’t even and marketing information on it. and money. In the early stages it’s
want to handle small volumes. Costs per pound will go down a huge added workload. Besides
After finding a processor that is as volume increases. Dan figures managing your existing business
willing to work with you, says the ideal size for the co-op is (in Dan’s case, his dairy farm),
Dan, a plant can merge or be 25 farms, which will minimize you also have to take on the mar-
bought out. You either have to many of the costs associated keting and delivery.
find another processor, or re- with low volume. The success of this kind of
educate the key people and enterprise is dependent on the
management to keep production So You Wanna’ Sell Cheese? people involved. Dan says, “It
steady, and both options take a (or butter, or beef, or...)
takes people with passion and
lot of time. It’s a challenge to Dan says the first step in direct
vision to get something like this
keep up with the dynamics of marketing any product is to eval-
started, but without someone
the industry. uate your resources. Make sure
who can organize to minimize
Maintaining brand identity is you have the support system you
costs and fill orders, it is not
critical in a specialty market, but need to get your product to mar-
packaging can be expensive. ket, and find a market that can going to succeed.”
Small lots of packaging materials bear the expenses you need cov- Dan and the other farmers
cost more to print than larger ered. PastureLand entered the used grant programs to get start-
runs, and different packaging premium, high-end deli cheese ed, but he thinks others can start
machines use different paper or market for just those reasons. up with different funding
film. PastureLand originally used Dan notes, “The milk price and sources. Thanks to this group,
plain paper to wrap its butter, but generic cheese price fluctuate there will be a model to follow.
the farmers realized that it didn’t widely, but the deli cheese price Is this idea profitable? “It’s too
make sense to ask premium is relatively constant.” early to tell, but it feels real
prices for butter wrapped in Anyone starting this type of good!” says Dan.
generic paper. They spent nine business needs to understand
Profitable Practices & Strategies for a New Generation • Center for Rural Affairs • 13