Produce growers to pursue packinghouse
Dane County fresh market produce growers are one step closer to having a local packinghouse to process and market their vegetables, fruit and possibly other farm products.
A group of 30 growers and about 20 other interested parties gathered in Madison Tuesday (Jan. 3) and unanimously decided there was enough interest to formally pursue the idea with support from Dane County government and Wisconsin Farmers Union (WFU).
One of the discussions during the meeting was how to structure the business. It could be formed as a growers' cooperative, they were told, or it could be a hybrid involving private ownership of facilities.
Tom Quinn, executive director of WFU, told the group that Farmers Union is very interested in regenerating cooperative development and would be as supportive as it can of this kind of business.
"Over the years Farmers Union has participated in rural cooperatives. This is another opportunity for rural America to use the cooperative model," he said, adding that the organization has also been very involved in local food system development.
Wisconsin Farmers Union is interested in supporting the project in any way possible, Quinn said, because the organization wants to create opportunities for growers.
Olivia Parry, who works for Dane County, said there has been a gestation period of about six or seven years on this project and she's thrilled to see it coming a step closer to completion.
All 30 growers at the meeting signified their interest in the project by signing a request for information.
Parry said a recent feasibility study showed that there would be demand for a 25,000-square-foot packinghouse in the county that could handle produce from local growers. The study identified "1,000 acres of growers" who were interested in such a packinghouse, she said.
The facility would be designed to aggregate, wash, box or repackage and sell the produce to many institutional buyers - including college campuses and school lunch programs - who are clamoring for local produce.
According to Parry, the county allocated $28,000 for business planning on the project this year and is able to make a $500,000 revolving loan fund available as well.
Dane County is located in a great place to take advantage of several big markets, she said, as Chicago and Minneapolis buyers consider Wisconsin to be "local."
Tim Zander, a Columbus grower with 15 acres of fresh vegetables (along with his organic soybean, corn and small grain operation), said he wanted to pursue the packinghouse idea to make it easier for him to move some of his products.
Growers were told that the packinghouse would be run as a wholesaler, so they would not be able to expect premium market prices. For premium prices they would need to sell at farmers' markets or through community supported agriculture (CSAs), but Zander said he believes the best wholesale prices would be achieved if the group organized itself as a cooperative.
Having a central packinghouse, he said, will give growers a better idea of the price they are going to get, compared to something like a produce auction. At the auction, if there aren't two interested parties, prices are very low, he added.
"I think wholesaling at dependable prices versus a produce auction will be a benefit to growers," he stated.
As someone who grows from 80 to 100 kinds of crops, Zander said he just doesn't have time to develop and serve markets like grocery stores and restaurants himself. He's looking for a grower co-op and packinghouse to do some of that for him.
Parry explained to growers that there will need to be contracts on both the packinghouse and the grower side to make the system work.
She talked about a Virginia growers' co-op, which she recently visited, that has 35 main growers and a 60,000-square-foot packinghouse through which passes produce valued at $18 million a year.
"Their recommendation," she said, "is that we could start in 2012 with a few different crops, find a dedicated broker with local connections, find a facility, get a logistics manager and move two or three crops in our first year."
Nearly all the growers indicated during the meeting that they were interested in starting this year rather than waiting until 2013.
"To me it's about protecting the future," said Zander. "I don't want to see someone else come in and build a packinghouse and take over that market. I think Wisconsin is 20 years ahead of the rest of the country in this area."
The idea is to make a central point where food buyers could go for locally grown produce.
"Buyers only have so much time and they could call our packinghouse as easily as they call Sysco," Zander added, referring to a large food wholesale company.
During a breakout session for the growers, Parry said that there are several buildings already existing in the county that might work for a packinghouse.
Several years of work have already been done by an Institutional Food Marketing (IFM) coalition in the county. It has sponsored food shows to bring together food buyers with local growers.
"There's a big, educated marketplace and a huge demand right here, between Madison and Milwaukee," Parry said, adding that the IFM would continue its efforts to bring along those institutional buyers.
A growers' cooperative packinghouse would provide validity as well as brand and market identity that one grower alone wouldn't have, she said.
"This is extremely exciting. Local is now. It's here. It's time," said Parry.
Darin Von Ruden, president of WFU, said the packinghouse project is a process that isn't going to happen overnight, but said a big step was taken at Tuesday's meeting.
"This is another opportunity for us to be in touch with more family farmers and local growers. Local food is a huge growth sector," Von Ruden said.
Margaret Bau, from the U.S. Department of Agriculture's Rural Development office in Stevens Point, told farmers that they could choose several different business models to organize the new packinghouse business.
Bau, a specialist in cooperative development, said if they organized as a completely producer-owned packinghouse, the growers could control the supply and distribution. Their co-op would employ a broker and a facilities manager.
Another model could include co-ownership of the facility between a grower co-op and a broker or investor group or even WFU, she said. That would include joint governance of the facility and a shared role in supply and distribution.
In a third scenario, the packinghouse could be privately owned with those owners finding their own investment. Producers would form a co-op to sell to this privately owned packinghouse.
In this model, producers would be on the supply side only, she explained.
A small group of growers and others was designated to move the project forward.
Parry said a first step would likely be coming up with a name for a growers' co-op.