Starting a Farmers’ Cooperative Group

Consider starting a farmers' co-op. Working together with other producers may be the key to getting your product sold in volume.

by Dani Yokhna

By Jamie Henneman

One of the drawbacks of a small farm can be its comfortable, manageable size.

While a small, family operation can turn out a high-quality product, it is limited when it comes to marketing the vegetables, meat or other goods to buyers like restaurants and grocery stores that traditionally need to order by volume.

Working with other producers to form a cooperative is one strategy for getting your foot in the door so you can work with these high-volume buyers.

Although cooperatives are usually comprised of full-time growers who have the funds to invest in a full-time salesperson (think grain growers or orchardists in a fruit co-op), a twist on the traditional model may be advantageous for small farmers who are willing to work together.

Farming cooperatives can help small farmers optimize their sales
© Tami Zigo

One of the major draws of working with other farmers is the organization of efforts under one product label.

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Instead of a handful of growers trying to sell “Joe’s Produce,” “Sally’s Produce” and “Tom’s Produce” to the same regional markets, those growers could come together and coordinate their efforts.

This prevents doubling-up at the same markets or multiple pitches to the same restaurant or grocery store. By unifying under a product label, “Joe, Sally and Tom” could work together to provide both volume and efficiency to the restaurants and stores that are unaccustomed to working with small farms.

Working with a group of farmers with the same target product can also be encouraging as you share production information, divide tasks and share advertising costs. You can also opt to take turns at a farmers’ market or implement other labor- and time-saving activities.

Set Goals
However, for this unconventional set-up to work properly, the farmers in the cooperative group all need to have the same vision.

Use the co-op checklist to determine goals of the co-op
© Tami Zigo

Do you just want to sell a small amount on the weekends? Are you working toward full-time production? How much growth does the cooperative want to experience? How many markets/restaurants/stores do you want to service?

Agreeing on a common production goal is very important because it directly relates to the amount of time members will be willing to invest.
A retiree who is raising poultry as a hobby, for instance, may not have the same interest and drive for growth as a young couple who want to make farming their occupation. If a group of producers is mixed in this way, you’ll have people who want to participate for social reasons and not for business reasons. This, of course, hurts those who are trying to make farming a vocation. If everyone has the same goal, much heartache and conflict can be avoided.

Co-op Checklist
  • Determine how co-op decisions will be made and have a regular meeting schedule.
  • Choose a co-op label, slogan or other identifier and make sure all producers have the same promotional materials to hand out.
  • Set standards for a consistent product and have producers sign agreements promising to adhere to those standards.
  • Have all producers determine the amount of product they have to sell and when it will be ready, possibly committing to that volume in a vendor/sales agreement.

It is also important to determine early on how decisions will be made. Will there be a board of directors? Officers? Who gets to vote? Do the number of votes depend on the volume of product raised?

It’s also very helpful to establish a format for meetings; Robert’s Rules of Order (parliamentary procedure) and similar procedures ensure business matters are attended to.

Get it in Writing
Although lots of farmers have good intentions or are spurred on by big dreams, their commitment to supplying the co-op with “X” number of a product really needs to be on paper in some kind of notarized contract or agreement.

This prevents producers from casually committing up front and then not having the product when orders need to be filled.

In organizing your cooperative, you will likely decide how much product each producer is willing to sell through the cooperative and when the product will be available. It’s important to get this commitment in writing, signed and notarized.

Nothing is worse than cooperative members securing orders only to discover that someone has backed out and the volume isn’t there.

This not only hurts your cooperative, but gives chefs and stores a negative opinion of family farms. In many instances, your interrelations with these establishments will pave the way or close the door for future farmers.

If you decide to share sales, pay membership dues or share expenses, establishing a checking account dedicated to your cooperative will be important for tax purposes. When opening a checking account, your group will need to decide if it wants to be a business that retains profits for later use or a nonprofit organization that does not retain monies. Both for-profits and nonprofits will need to obtain a business license from their state government.

Nonprofits may also have to obtain nonprofit status through the federal government, which can be a long and involved process. Be sure to address this issue first to keep the wheels greased and things moving right along.

Create Uniformity
In order to market as a group, it’s helpful to agree on a cooperative logo, trademark, business name, slogan or other identifier to be used in advertising.

Co-op labels can be as fancy as one made by a professional designer or as simple as one put together on a home computer. What’s important is that each member has the same signage, brochures, business cards, labels, etc., to create uniformity in selling the product.
This lends credibility to the cooperative and shows that all producers are on the same page. The buyer, therefore, can invest some certainty in knowing that goods will be delivered on time, they will be consistent and that the company will be reliable.

Though it may sound like a no-brainer, products sold through the co-op need to be consistent in quality—uniform in appearance, in growing standards and in the manner they are delivered. This is a crucial element to establishing a good relationship with restaurants, stores or institutions that are accustomed to buying everything from napkins and ketchup to meats and vegetables from the same wholesaler.

Little things like keeping (or removing) the neck on every whole chicken for sale, the color and ripeness of every box of peaches, and the tenderness of every cut of beef is important. Chefs, grocery managers and cooks don’t like surprises. Products that aren’t consistent will eventually turn off these buyers who could make the decision not to order from your co-op again.

Your Story is an Asset
One of the small producer’s biggest assets is their personal story. Meeting real producers, hearing their stories and being able to take seasonal tours of cooperative farms invites buyers to obtain a valuable, personal connection to their food.

Big box stores try to replicate this sense of connection through slick advertising campaigns, but chefs, managers and everyday consumers can ultimately be won over by you—the farmer. By meeting people in person, being on time with deliveries and remaining easily accessible by phone, e-mail or fax, you’re giving big-time (and small-time!) buyers the efficiency of a wholesaler with the personal touch of a family farm.

One of the most rewarding aspects of agriculture is getting to bond with other farmers. Although we all have different ideas, production tactics and methods, there is the common thread of growing food that runs through every farming operation. When it comes to small farming, it’s extremely beneficial to remember that “a high tide floats all boats.”

Everyone has to eat; as the interest in family farms continues to grow, there will be plenty of markets for all farmers. Being territorial, divisive or overly competitive hurts everyone in the long run. As a farmer, you are part of a special group of people who gets to put good food on the plate of every American. That’s something to be proud of, as well as to enjoy.

About the Author
Jamie Henneman is a diversified small farmer in Washington State who raises chickens, beef, rabbits, cabrito, pigs and produce. In 2006 she was the coordinator for a Western Sustainable Agriculture Research and Education grant that worked to establish a pastured poultry co-op.

This article first appeared in the May/June 2007 issue of Hobby Farms magazine. Subscribe to Hobby Farms>>

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