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Farm-Biz
at-a-glance
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For farmers transitioning from conventional to organic production,
the switch is perhaps made easier by the lure of eager markets
and premium prices. But while such markets and prices do exist,
physically reaching them can often be a challenge.
Proximity certainly did matter for Curt Petrich of Crookston,
Minn. Premium markets were hundreds of miles away from the
northwestern corner of the state where Petrich farms 1500
acres of organic soybeans and small grains. He was beginning
to weary of long-distance drives hauling crops to the Twin
Cities area when he heard about a seed processing plant that
was a mere hour away, in Moorhead, Minn.
Petrich asked around, and uncovered three intriguing bits
of information. First, he learned that the plant was well
equipped to handle organic grain, and in fact had been processing
some organic product. Second, he was told that the facility
currently belonged to Anheuser-Busch—the company had
been hoping to process special variety of barley there. And
third, Anheuser-Busch's plans had changed, and the facility
was now for sale.
“I’d heard that Monsanto and Cargill were interested
in this place,” Petrich said. He relished the idea of
trying a bit of vertical integration and keeping the building
out of the hands of the big guys. In an emerging business
like organic farming, Petrich saw wisdom in holding on to
a bigger segment of the added-value opportunity.
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"I remember thinking, ‘Okay,
I’m organic. Now what?" |
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Plus, there were some specific features of the plant that
Petrich felt were very appealing. “What attracted me
almost immediately was the fact that this place was built
to keep identity intact,” says Petrich. Identity, he
knew, was often a key to successful overseas marketing. Asian
and European customers, in particular, will pay to be certain
they are getting a specific variety—and only that variety.
They do not want any interloping seeds or grains, or variations
in quality. This can be especially true of a commodity that
is certified organic or non-GMO.
Banding together
All of this convinced Petrich that he should set out on a new
adventure and seriously pursue ownership of this unique site
and the opportunities that it presented. Yet he knew he couldn’t
go this alone: He would need partners to help carry the financial
and administrative burdens.
Petrich approached five of his farming neighbors with the
idea of a joint purchase. Together, he suggested, they could
own a business to market their organic products and capture
a slightly larger piece of the profit margin. Their reaction
was not initially positive, notes Petrich. “They all
said, ‘You want to do what? And they want how much?’”
But slowly and surely, the concept grew on the group. Of
the six (counting Petrich), five were organic. According to
Robin Brekken, also of Crookston, they all faced the same
challenges regarding marketing. “I remember thinking,
‘Okay, I’m organic. Now what?’ All the old
markets and marketplaces were of little use anymore."
The costs of shipping, including the time spent managing
that aspect of the farming business, were a new concern for
these producers, many of whom had only recently transitioned
into organic production. This business could address that.
“As we looked at the efficiencies we could create, we
suddenly saw the value of this venture,” notes Brekken.
Before they approached a banker, the group hired a consultant
who could assist them in determining if this was a feasible
business idea. The consultant studied market demand, plant
capacity and debt serviceability. He also helped set up a
model cash flow to assess whether the idea could sustain itself.
Eventually, the group put together adequate equity to secure
a loan, and financing was obtained through a local lender.
“I made Anheuser-Busch an offer—I told them I’d
give them their asking price in cash,” notes Petrich.
“That got their attention.”
Preserved identity processing and handling
Petrich is now manager of the aptly named Earthwise Processors,
LLC. “All processing here is segregated,” he explains.
This means that only one type of seed grain is processed at
a time. To make that guarantee, careful cleaning is required
between loads. Generally, an entire day or more is dedicated
to the preparation of a product for sale. Cleaning alone can
take up to eight hours, and is often completed in the evenings
to prepare for the next incoming crop. Even the truck bay
must be carefully swept and blown out with pressurized air
if a batch of organically produced grain follows one that
has been raised by conventional methods.
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“What we offer is a specific variety, of specific size
and specific quality, packaged and delivered to a specific
location,” says Petrich. Earthwise customers can call
up and make a request, and the staff will do whatever they
can to find and purchase that product. Usually farmers deliver
their crops to the facility, but if needed, Earthwise can
pick up from the farm site. Earthwise currently processes
soybeans, wheat, corn, millet, safflower, sunflower, flax,
barley, peas, canola, edible beans, oats and popcorn, among
other grains and seeds.
This care in handling is in large part why Earthwise can
expect a premium price for the commodities it processes. Fifteen
employees run the plant’s equipment and complete the
cleaning and sorting of the crops received there. Products
are carefully cleaned and sorted by custom machinery designed
to meet customer specifications, notes Petrich.
An air screen and destoner remove any foreign materials from
the seeds and grains. Gravity tables are used to separate
the product by weight. Another roller/separator segregates
soybeans by shape. Again, the expense of all of this is justified
by the selling price, says Petrich. Earthwise’s clientele
expect no less.
After the initial preparation, products are packaged according
clients' needs, in paper or plastic, and in quantities ranging
from 25 lb up to 2,000 lb. Products can be also be shipped
in bulk using containers, trucks or railcars. Grains and seeds
can also be stored on site, if needed. Earthwise Processors
operates two warehouses that total 35,000 sq. ft. In addition,
the site has 40 storage bins with a total capacity of 400,000
bushels.
Expanding markets, at home and abroad
Earthwise's buyers are far more exacting than the domestic
market generally, notes Petrich. In order to provide the greatest
possible transparency, Earthwise is certified through the
American Institute of Bakers (AIB). All product is tested
once when it enters the plant, and again after processing
to verify precisely what is being received from farmers and
to certify that clients are getting exactly what they have
ordered. When truckloads of a product leave the plant, Petrich
notes, the truck is sealed at the point of departure. Clients
also receive a photo of the product as it departs from Earthwise,
to give them a point of reference in the event damage occurs
during shipping.
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"I wouldn’t be here as
a farmer if I hadn’t switched to organic." |
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The AIB certification is an outward verification of the promise
Earthwise makes to its customers. Earthwise also holds certifications
from Quality Assurance International (QAI) and Farm Verified
Organic (FVO), and they are in the process of establishing
Hazard Analysis and Critical Control Point (HAACP) procedures.
This year, Earthwise will celebrate its fourth anniversary.
Petrich is reluctant to declare the business a complete success,
but growth thus far has been dramatic.
Petrich, who also serves as president of Earthwise, notes
that 300 farmers bring their goods to this outlet. He estimates
that the original six owners sell 80 percent of their total
crop production through the facility.
The doors that have been opened and the opportunities created
have certainly put demands on the time of the owners. Yet
they all feel the business has been a marketing asset. “We
sell to Japan, to Korea—but we also sell domestically,
right next door,” says Petrich.
The next phase may involve some further processing for the
products Earthwise handles. Petrich knows his adventure in
organic production is just beginning. “I wouldn’t
be here as a farmer if I hadn’t switched to organic,”
he states. He’s hopeful that the doors opened by Earthwise
Processors, LLC, will multiply, bringing opportunities to
organic farmers across the region.
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