This study examines the structure, function, and perceived success of an organic growers\u27 cooperative organization called OFARM

Ginder, Roger

Guptil, Amy

Levins, Richard A.

Waldoch, Laurance R.

Welsh, Richard

English

This study examines the structure, function, and perceived success of an organic growers' cooperative organization called OFARM.</p

Levins, Richard

Waldoch, Laurance

Digital Repository @ Iowa State University (ISU)

Forming agricultural bargaining units for a sustainable andequitable agriculture: The case of the Organic FarmersAssociation for Relationship Marketing (OFARM)Question & AnswerQ: Can farmers enhance and protect the price of organicproducts with group marketing?A: The results of this study indicate that organizedfarmers can obtain prices in the range of 10 to 40percent higher than those received by farmers actingalone to market organic grains.Volume 15 (2006) • Leopold Center Progress Report • page 59Abstract: This study examines the structure, function, and perceived success of an organic growers’ cooperative organization called OFARM.Competitive Grant Report P10-2003BackgroundThe business of American agriculture is becoming highlyconcentrated;  both contract and vertically integratedproduction have increased. This creates potential forfarmers to organize themselves to bargain collectively,since this would allow them to negotiate more effectivelywithin the concentrated, vertically coordinated structure.However, as the level of contract growing has increased,the number of active bargaining associations has de-creased. Some analysts have attributed this to the lack oflegal protection for grower organizing efforts.Despite these trends, a cooperative marketing andbargaining association has been formed in the upperMidwest, OFARM or Organic Farmers Association forRelationship Marketing (http://www.ofarm.org/). OFARMPrincipal Investigator:Roger GinderEconomicsIowa State UniversityCo-investigators:Amy GuptilSociologyState University of New YorkBrockport, NYRichard A. LevinsApplied Economics (Emeritus)University of MinnesotaLaurance R. WaldochAttorneyMinneapolis, MNRick WelshSociologyClarkson UniversityPotsdam, NYBudget:$36, 684 for two yearsis the umbrella organization for eight groups involved inraising and marketing of organic farm products, with amission “to coordinate the efforts of producer marketinggroups to benefit and sustain organic producers.”  OFARMactivities include the exchange of pricing and marketinginformation, the education of policy makers, collectivebargaining with buyers of members’ products, and assistingfarmers in adopting new crops and agronomic practices.OFARM was founded in 2001 after several years of discus-sion about the need for an umbrella group to help organicproducers market their crops. In legal terms, OFARM is amarketing agency in common, comprised of organizationsthat satisfy the Capper-Volstead Act requirements of farmerownership and control.Farmers join cooperatives for two reasons. So-called “brickand mortar” cooperatives allow farmers to further processtheir products and therefore add value. Their alter ego“bargaining cooperatives” allow farmers to act collectivelyin pricing products at the farm gate.  In the upper Midwest,several smaller bargaining cooperatives have sprung up tomarket organic grains on behalf of member farmers. Thecooperatives have, in turn, networked through a marketingagreement in common to form OFARM. Members interactthrough monthly conference calls and several meetingsthroughout the year. The design of the organization and itssimultaneous focus on collective bargaining, collectivemarketing, and the promotion and enhancement of organicVolume 15 (2006) • Leopold Center Progress Report • page 60production make it a potential model for other farmergroups.This report combines a number of analyses to generate acomplete picture of the structure, function, and perceivedsuccess of OFARM. Investigators merge non-participantobservations of OFARM board member meetings andconference calls with in-depth interviews of these sameboard members. A price analysis was conducted, tocompare prices received by OFARM and those reported bya private service collecting price data on organic agricul-tural commodities. The investigators also offer an analysisof the legal foundations for OFARM operations and con-sider the state and federal laws that may enhance or hindersimilar organizations in the Midwest.Approach and methodsThe researchers observed the work of the organization inphone calls and meetings, and conducted individualinterviews with members of the board, marketing directors,and OFARM staff. Most of the interviews were 30- to 40-minute telephone conversations. Most interviewees repre-sented member organizations as OFARM board members,marketing agents or both.Results and discussionOFARM’s key strengths. It has a committed core group ofmembers whose appreciation for OFARM continues togrow. All interviewees voiced strong support for OFARM asa critically important contributor to their own organization’ssuccess. The benefit mentioned most frequently andenthusiastically was the marketing information thatcomes through OFARM. In addition, some membersnoted that OFARM provides opportunities formentorship, mutual support, and joint promotion. Newermembers cited the value of OFARM connecting themwith more experienced growers and marketers who canoffer advice. Overall, the relationships formed throughOFARM go beyond the direct exchange of information toother forms of mutual assistance.OFARM has successfully galvanized a committed coregroup of members who trust one another and theorganization. OFARM was able to start small and buildon a social infrastructure of trust. It has benefited fromthe rapidly rising demand for organic goods.While OFARM has been helped by the organic boom,there is a drawback. The burgeoning market encouragesfarmers within the cooperating organizations to bypassthe cooperatives in order to market to the deep-pocketedcorporations now getting involved in organics.  As aresult, communicating the long-term value of OFARM tothe farmer members has been a constant struggle, andmembers are not always in agreement on the bestmethods of promotion.  There also are some legalconstraints based on the legally circumscribed structureof the organization.Price analysis and comparison carried out for this projectsuggested that collective marketing by OFARM coopera-tives has positive economic advantages for its members.A comparison of prices received by member and non-member farmers indicates that OFARM is negotiatinghigher prices than farmers are able to receive when theyare acting alone.ConclusionsAs the organic industry matures, it may well becomemore concentrated and dominated by corporations. Asthis shift occurs, the ability for organic (and other)farmers to organize and share market information andbargain collectively increases in importance.This study suggests that OFARM has emerged as apotentially important model for farmers and their pro-ducer associations. The best available evidence anddata shows that OFARM has been successful inVolume 15 (2006) • Leopold Center Progress Report • page 61For more information contact Roger Ginder, Economics,  478BHeady Hall, Iowa State University, Ames, IA 50011; phone: 515-294-6260; e-mail: ginder@iastate.edustrengthening the position of organic growers relative tothe buyers of their products. This has resulted becausethe organizations that comprise OFARM regularly shareinformation on market conditions, pricing, and location ofproduct. Based on this analysis, OFARM appears tohave been successful in creating an increasingly well-known and effective organization that has preventedgrain buyers from pitting farm groups against each otherto gain an advantage. The number of groups andfarmers that has joined OFARM has enabled the group’sactivities to raise prices for the farmer members beyondthe premium prices typically paid to organic grainproducers.Two characteristics of the organic agriculture industryprovide favorable and unfavorable conditions for anorganization such as OFARM to emerge and succeed.They are:1. The seemingly inexhaustible and rising demandfor organic food products, and2. The growing corporate presence in the organicindustry.Demand that exceeds supply has allowed producerorganizations to take advantage of incentives to cooper-ate, fill rising demand, and potentially build strongrelationships. It also has strengthened the hand oforganic producers in relationships with buyers.  Inaddition, as the organic industry becomes more concen-trated and very large companies dominate the market-place, organic farmers may find it difficult to operatesuccessfully without forming marketing bargainingassociations with other organic farmers.At the same time, it is clear that OFARM members maybreak their contracts with OFARM as corporations paysignificantly higher prices directly to farmers in order tosecure supply in a tight organic market. If this type ofaction increases, it could put a severe strain on OFARMand its members.Organic farmers could benefit over the long term byorganizing themselves to develop market clout. This couldallow them to successfully coordinate marketing to provideconsistent volume and quality to buyers and consumers. Inaddition, group market power also enhances their positionto bargain collectively and maintain high prices for theirorganically produced commodities.  OFARM may inspireother niche production groups to collectively market theirproducts.Education and outreachInformation from this study has appeared in The NaturalFarmer (Publication of the Northeast Organic FarmingAssociation), The Land Stewardship Letter and Hoard’sDairyman. Presentations featuring findings from the studywere given at the 2005 meetings of the Rural SociologicalSociety, the Minnesota Organic Conference, the UpperMidwest Organic Conference, and the Upper MidwestValue-Added Conference.Richard Levins included a chapter based on this study inhis book Market Power for Farmers: What It Is, How to GetIt, How to Use It (Institute for Rural America, Ames, IA,2005). Levins also featured the same work in “Build MarketPower” (Successful Farming, Februrary 2006).Leveraged fundsFunds leveraged through this project include a ScholarlyIncentive Grant of $500 from SUNY College at Brockportand a United University Professionals Individual Develop-ment Award of $672. A pending request based on theproject is for the Rural Sociological Society’s Early CareersAward Competition.

Forming agricultural bargaining units for a sustainable and equitable agriculture

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Forming agricultural bargaining units for a sustainable and equitable agriculture

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