GLEANINGS
Small Grower in Michigan Finds New Path to Bigger Profits
Leelanau’s Blackstar Farms preserves farmland, curbs sprawl, boosts employment

By Arlin Wasserman, Michigan Land Use Institute

February 13, 2003: Thriving Blackstar Farms in Leelanau County is an example of "new entrepreneurial agriculture," a blend of small-scale farming and business practices that eschews middlemen and sells finished products directly to customers.

While most American farmers scramble to keep up with agribusiness’s unrelenting "get big or get out" model, a small farm tucked away in the scenic northwest corner of Michigan’s lower peninsula is following a more promising path. Instead of growing endless acres of corn, soybeans and other commodity crops, Blackstar Farms in Leelanau County operates a winery, a stable, a cheese factory, and even a bed and breakfast. The thriving 120-acre farm is an example of "new entrepreneurial agriculture," a blend of small-scale farming and business practices that eschews middlemen and sells finished products directly to customers.

But there’s more going on at Blackstar than just the careful aging of award-winning Pinot Noir and some of the region’s first fruit brandies. Don Coe and partners Kerm Campbell, a retired corporate executive, and Jack Stegenga, a stockbroker, have created an entrepreneurial model that they say allows farmers to hop off the high-volume, low-profit treadmill that’s killing off so many smaller operations. When they are not busy boosting their own profits, Mr. Coe and company are teaching their neighbors how to do the same by developing fresh, new approaches to an ancient human endeavor.

For instance, Blackstar helps neighboring farmers by purchasing huge quantities of their fruit. Nearby grower Mike Mikowski sells his pears to Mr. Coe for about ten dollars apiece rather than for the pennies the baby food industry paid him, now that he grows them inside bottles as a first step in producing Blackstar’s high-end brandy.

Blackstar's other enterprises including housing overnight guests and using its ample grape harvest to produce high quality wines instead of simply selling the grapes in the open market. Recently, Blackstar also heightened the wine-cheese connection in the county by renting space at the farm to the Leelanau Cheese Company, a producer of some of the region's finest hard and soft cheeses. The arrangement is good for Blackstar because it bolsters their business strategy of promoting Leelanau County as an agricultural destination for visitors. It's also good for the cheese company because it provides consumers easier access to great cheese.

Entrepreneurship Pays in Agriculture

Blackstar’s strategy is the same one entrepreneurs everywhere use: Increase the value of everything you produce. Compared to farms still playing the commodity game, Blackstar adds four more dollars to each dollar worth of product grown on its property or entering its gate. It’s enough to make a middleman cry.

This approach, which saves agricultural land from sprawling development by increasing farm profits and creating jobs, comes at a pivotal time for agriculture, both in Leelanau County and throughout Michigan. Small farms are struggling with low prices for huge commodity crops and rural communities are slowly becoming ghost towns ripe for more commercial exploitation.
Blackstar’s strategy helps keep land in farming and improves the local economy. It also offers Governor-elect Jennifer Granholm several policy options that could produce new jobs in Michigan. During the campaign Ms. Granholm said she was looking for ways to stem sprawling development, preserve Michigan’s remaining farmland, and cut a state budget that’s facing huge deficits. She identified processing and product development programs that could increase the value of commodity crops. She also favored coupling purchase of development rights programs with promoting consumer demand for Michigan products. (See: Dick Posthumus Thinks Small Farms Are Dead in Michigan? He’s wrong. http://www.mlui.org/reportarticle.asp?fileid=16356 ).

Using tools that are already at hand, particularly the state government’s highly effective economic development expertise and the ingenuity of many of its small farmers, Ms. Granholm could generate a new policy that catalyzes a host of new farming operations which create jobs and increase rural economic prosperity without environmental sacrifices or increased red ink. Suddenly, the challenge – to somehow find the money to protect farmland – would become an opportunity to create new jobs and increased prosperity in Michigan’s farming communities.

Keep Adding Value
The "beverage business," as Mr. Coe calls winemaking, helps make Blackstar competitive in a rural county where property values are soaring and many growers teeter on the edge of a financial disaster triggered by a disastrously late spring frost that killed their delicate fruit tree crops. But the problems run even deeper. "We have a farm community in considerable trouble," Mr. Coe said. "Their kids aren't interested in going into farming and they're looking at escape strategies. What will we do when our savings are gone?"

So while many farmers see selling land as a survival strategy, Blackstar is showing that squeezing more value out of every piece of fruit grown on smaller parcels of land, and avoiding the high cost of buying and farming ever more acreage, can be just as profitable. A former corporate executive with the Hiram Walker distillery in Canada, Mr. Coe noted that the current era is hardly the first time farmers have downsized. The region’s first crop, grown right after the Civil War, was potatoes; a 300-acre farm could provide a good living. When new, post-war federal taxes forced those pioneering operations down to half of their size, farmers turned to the cherry trees that still define Leelanau’s landscape.

"You can make a living on 150 acres of cherry trees," Mr. Coe said. "Now we're on to the next intensive agriculture: Grapes. A family can make a living on 25 acres of grapes."

The Cost of Saving Farmland

The Leelanau Agriculture Alliance, a local farmland conservation group, also is working on the problem of economic competitiveness. In September, it released a long-awaited report that documented the loss of 10,000 acres of active farmland in the county from 1990 to 2000. Of that amount, 1,500 acres have already become lots for small homes. The report also noted that development pressures have increased property taxes and land prices, making the selling of farmland to residential developers even more tempting.

The Alliance report calls for purchasing farmers’ development rights with a mix of local, state, and private funds. The report found widespread public support in Leelanau for an annual $105 household property tax hike to preserve farmland, but it would protect only a fraction of the county’s farm operations.
Agriculture economist Doug Kreiger, who worked on the Alliance report, said it will be hard to find enough money to make a real difference. "It doesn’t have to come through a millage," he said, but "right now the options for local governments are limited – development fees, impact fees, tourist room fees all can’t be done now under existing state laws."
With many county officials drawing the line at new levies to protect farmland, raising enough local funds during tough economic times is challenging. That’s why Mr. Krieger recognizes that a "program to lease or buy development rights by itself won’t preserve the agricultural industry. It has to be part of a larger strategy. Just preserving farmland isn’t going to do any good. Tax burden and low prices for commodities need to be addressed."

Benefits: Land and Jobs
Mr. Coe and his business partners are doing just that at Blackstar Farms. They’ve put 120 acres of former residential land – an old mansion and its accompanying estate lands – back into agriculture. Without the value-added strategy, their land might have become yet another subdivision. Today their four-year-old venture employs 60 full-time and 20 part-time people in year-round, high-paying jobs.

Arlin Wasserman, a Kellogg Food and Society Policy fellow, is policy director at the Michigan Land Use Institute. Reach him at arlin@mlui.org.