Organic farmers increasingly
turn to cooperative business model
Alan Borst, Ag Economist
Cooperative Programs
USDA Rural Development
alan.borst@wdc.usda.gov
he organic food market
has expanded and
matured into a $10
billion industry, with
sales growing about 15
to 20 percent each year. Many of the
early co-ops that sprang up to serve the
market have also matured, while new
co-ops continue to be formed to meet
the growing demand for organic foods.”
— Excerpt from “Organic Co-ops
Taking Root,” Rural Cooperatives, May-June 2005.
Since 2005, the U.S. organic
products industry has continued to
experience remarkable growth, and
organic farmers have continued to
increase their use of marketing
cooperatives. In 2009, U.S. organic
food and beverage sales grew 5.1
percent, to $24.8 billion, according to
the Organic Trade Association’s (OTA)
2010 Organic Industry Survey.
OTA estimates the total U.S.
organics product market — including
food and beverages and non-food
products, such as supplements, personal
care products and clothing — grew 5.3
percent, to $26.6 billion. In 2008, OTA
found that organic food sales had grown
15.8 percent from the previous year.
In 1991, the USDA Agricultural
Cooperative Service (now the
Cooperative Programs office of USDA
Rural Development) conducted a survey
of U.S. organic producer marketing
cooperatives (OPMCs) and found that:
there were 10 operating in 1987, with
gross sales of $3.3 million; 15 of these
co-ops were operating in 1991, with
gross sales of $6.38 million and 384
producer-members.
In 1989 there were an estimated
5,328 U.S. organic growers, of which
2,264 were certified. No OPMC data
was collected after 1991.
When USDA Cooperative Programs
put together an informal OPMC
directory in 2010, it found that there
are about 45 OPMCs operating. While
there has been no actual survey, a few
numbers indicate the magnitude of
growth. The largest OPMC — Organic
Valley — had sales of $520 million in
2009 and a membership of 1,652
farmers in 33 states and three Canadian
provinces. In 2008, there were 12,941
certified organic producers in the
United States, according to the USDA
Economic Research Service. There are
certified organic farmers in all 50 states.
Although some skeptics predicted
that organic food was a passing fancy,
four OPMCs have now each been
operating for longer than 20 years:
- Organic Valley of LaFarge, Wis., was
originally organized as the Coulee
Region Organic Produce Pool in
1988. Organic Valley produces milk,
soy, cheese, butter, spreads, creams,
eggs, produce and juice, which are
sold in supermarkets, natural foods
stores and food cooperatives
nationwide.
- Deep Root Organic Cooperative,
headquartered in Johnson, Vt., was
founded in 1986. It consists of 19
member vegetable farms from
throughout Vermont and the eastern
townships of Quebec.
- Tuscarora Organic Growers was
established in 1988. Today, it has 28
fruit and vegetable farm members
from South-Central Pennsylvania.
- Finger Lakes Organic Growers
Cooperative of Rose, N.Y., was
organized in 1986 as a wholesaler of
fruits, vegetables, herbs and nuts. It
has 17 member farms.
These four OPMCs stand out as
successful examples of organic farmers
effectively marketing through
cooperative associations. Their
longevity is remarkable in the relatively
young and turbulent organic sector.
OFARM fills bargaining role
Some OPMCs have been organized
to increase member market power
through bargaining and informationsharing.
The Organic Farmers Agency
for Relationship Marketing (OFARM)
is an association with eight OPMC
members. It is an information-sharing
cooperative that does not directly
negotiate prices or contract terms for its
member co-ops. But it allows individual
cooperatives to act in concert as they
price and market products.
Thus the market power of each
individual cooperative is enhanced
because buyers are prevented from
playing the marketer for one
cooperative against that for another.
OFARM collects information on
inventories, production, marketing and
pricing, then shares this information
with its members.
OFARM members have recently
confronted a very challenging market
situation with escalating input costs, the
global economic crisis, a softening of
organic sales, unfavorable weather and
some quality and storage issues.
At its March 2010 annual meeting,
OFARM leaders said they would focus
on increasing communication with
organic farmers, enlisting more
membership and improving target
prices. Their strategy is to educate the
organic sector on the importance of a
marketing plan.
Its 10-year track record shows that
the financial performance of OFARM
members has been in the upper third of
the marketplace.
One of OFARMs members — the
Kansas Organic Producers Association
— is a bargaining cooperative for about
60 organic grain and livestock farmers
located primarily in Kansas, with some
members also in bordering states.
KOP’s purpose is to help build markets
for organic grain and livestock and to
represent its members in negotiating
sales and coordinating deliveries of
organic products. These two kinds of
cooperatives complement each other in
promoting grower market power.
Co-op model used
in many ways
Since the 1991 survey, organic
farmers have used the cooperative
business model in a variety of
innovative ways. With the rapid growth
of community supported agriculture
(CSA) operations, some CSAs have
joined with others in OPMCs to lower
their production risk, diversify their
offerings to consumers and extend their
seasons.
Cooperative CSA operations have
been established in Washington, Ohio,
New York and Pennsylvania.
Some OPMCs specialize in a specific
product — such as almonds or cotton
— while others have a broader
commodity focus in grains, dairy and
livestock products or produce. A few
OPMCs are distinguished by the nature
of their membership, such as the Amish
or a specific minority group.
Some OPMCs were organized with
significant outside assistance. Among
the organizations that have provided
such help are the National Farmers
Organization, Rocky Mountain Farmers
Union Cooperative Development
Center, New Mexico Department of
Agriculture and New Mexico State
University Cooperative Extension.
Over the past few decades, USDA
Rural Development, through its
Business and Cooperative Programs,
has also provided several OPMCs with
both financial and technical assistance.
Some of these co-ops are in the very
beginning stages of organizing, while
others are over 20 years old. Some have
membership from all over the country,
and even Canada, while others have
only local members.
Organic farmers are marketing
through cooperative associations more
than ever. Beyond this, many more
agricultural cooperatives have both
conventional and organic farmer
members. In the 20 years since the
Organic Foods Production Act of 1990
was passed and USDA organic
certification was authorized, OPMCs
have grown along with the organic
market by almost all measures.
OPMCs have performed all of the
same functions as their conventional
counterparts. It will be interesting to
see what the next 20 years holds.
