Cooperative Innovation in the Food System, Session #1

Nebraska Cooperative Development Center Author

12/12/2022 Added

15 Plays

Description

Co-ops, Small-Scale Livestock Producers, Fair Prices and Big Impacts. A conversation and Q&A session with Cody Hopkins of Grass Roots Farmers' Cooperative.

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[00:00:07.016]Okay.
[00:00:11.100]And we've got confirmation it's recording, all right.
[00:00:18.210]Okay.
[00:00:19.980]Well, good afternoon, everyone,
[00:00:22.680]and welcome to the Nebraska Cooperative Development Center's
[00:00:27.180]first winter webinar series.
[00:00:31.680]It's about co-op innovation in the food system
[00:00:35.970]and to all the people who are here as attendees.
[00:00:39.060]It's great to see you all,
[00:00:40.470]and thank you for signing up and joining us today.
[00:00:44.670]And a big thank you to our guest, Cody Hopkins
[00:00:47.370]of Falling Sky Farm and Grass Roots Farmers' Cooperative
[00:00:51.150]for being here today.
[00:00:53.610]My name is Margaret Milligan
[00:00:55.050]and I'm the program coordinator
[00:00:57.090]for Buy Fresh Buy Local Nebraska.
[00:01:00.090]We're a program that's focused on local food promotion
[00:01:03.720]and education in the state of Nebraska,
[00:01:07.350]and we're also a part
[00:01:08.760]of the Nebraska Cooperative Development Center,
[00:01:12.450]which is in the agricultural Economics Department
[00:01:15.600]of the University of Nebraska-Lincoln.
[00:01:19.200]So Nebraska Cooperative Development Center or NCDC
[00:01:24.240]believes that the cooperative business model
[00:01:27.270]can improve the quality of life
[00:01:29.340]and economic vitality of rural Nebraska.
[00:01:33.060]And since 1999, NCDC has provided education,
[00:01:37.680]training, and technical assistance to groups
[00:01:40.410]interested in exploring the cooperative model,
[00:01:43.890]including producers.
[00:01:47.430]So NCDC is funded
[00:01:48.930]by the USDA's Rural Cooperative Development Grant program,
[00:01:52.800]and I wanted to give them a big shout out
[00:01:54.930]for making our work possible.
[00:01:58.410]Just some housekeeping things.
[00:02:02.580]Wanted to shout out to Charlotte Narjes,
[00:02:04.890]who is the associate director
[00:02:06.720]of the Nebraska Cooperative Development Center.
[00:02:09.720]She'll be assisting with facilitation
[00:02:11.790]and monitoring the chat box.
[00:02:13.920]So thank you, Charlotte.
[00:02:17.160]The format of today's session,
[00:02:19.980]the first half is gonna be an interview
[00:02:22.110]with Cody Hopkins of Grass Roots Cooperative,
[00:02:26.130]and that conversation hopefully will kind of cover
[00:02:28.620]the foundation of who Cody is, who Grass Roots is,
[00:02:34.290]what they do, why they do it,
[00:02:37.080]and then the second half of the Q and A session
[00:02:40.710]will be between Cody and you all.
[00:02:44.160]And just because there's quite a few of you,
[00:02:46.830]and because of our virtual format,
[00:02:49.860]we're going to be taking your questions in the chat box
[00:02:54.090]so you can type your questions into the chat box
[00:02:58.320]at any time.
[00:03:00.180]And then we'll form like a question queue
[00:03:03.420]to be addressed during the Q and A session.
[00:03:07.110]I'll just take the questions that you've asked
[00:03:09.750]and I'll ask them to Cody.
[00:03:12.180]And we're asking people just to keep themselves muted
[00:03:15.960]because Zoom, you know.
[00:03:19.590]So anyway, thanks again for being here,
[00:03:23.130]and let's get started, let's get started.
[00:03:28.290]Cody, thank you so much for being here.
[00:03:31.290]Welcome, welcome.
[00:03:33.330]Yeah, it's my pleasure.
[00:03:34.320]I'm so happy to be here and able to chat with you guys.
[00:03:38.190]Great, so before we kind of dive in
[00:03:40.860]to the cooperative part,
[00:03:44.130]can you tell the group a little about your story,
[00:03:48.900]who you are, where you are, what you raise,
[00:03:52.680]how you got into farming, what are your markets?
[00:03:56.010]Sure, sure, yeah.
[00:03:57.660]So my wife Andrea and I started our farm back in 2007,
[00:04:03.150]and we're based in the Ozark Mountains in Arkansas,
[00:04:07.020]so kind of the middle of nowhere.
[00:04:09.540]We're about a hundred miles
[00:04:10.680]from the nearest, like real market.
[00:04:12.360]So it is pretty isolated.
[00:04:15.420]And when we started, we're both first generation farmers.
[00:04:19.470]We grew up in rural Arkansas
[00:04:22.642]and both had a passion for trying to figure out a way
[00:04:24.780]to make a living in rural Arkansas.
[00:04:27.030]Both went off to college,
[00:04:28.200]came back to the rural parts of the state and met up
[00:04:31.800]and about the time we met,
[00:04:36.690]we were both trying to figure out,
[00:04:37.560]well, what's our next step here?
[00:04:38.730]And we read about some work that Joel Salatin was doing.
[00:04:41.910]We read the "Omnivore's Dilemma,"
[00:04:43.260]which Michael Pollan wrote,
[00:04:44.280]and that really inspired us to give farming a shot.
[00:04:47.730]And we both cared deeply about our food
[00:04:50.430]and the source of our food,
[00:04:52.020]and like I said,
[00:04:52.853]trying to create opportunities in rural Arkansas.
[00:04:56.250]And so in 2007 we launched our farm
[00:04:58.560]and focused on direct marketing,
[00:05:02.880]grass-fed, and pasture-raised meats.
[00:05:04.500]Started out with pasture chickens,
[00:05:06.090]really followed like the Joel Salatin plan, you know,
[00:05:08.700]the pasture chickens, pasture turkeys, grass-fed beef.
[00:05:12.480]We did forest and pasture-raised hogs and did all of that,
[00:05:17.760]started that, added different species about every year,
[00:05:22.050]and developed local markets.
[00:05:25.050]Well, local being that a hundred mile market really for us.
[00:05:28.920]Going direct to farmer's markets.
[00:05:32.370]We started our own online farmer's market
[00:05:35.250]that was serving a local community,
[00:05:37.530]doing direct to restaurant sales.
[00:05:40.050]And we sort of learning from neighbors,
[00:05:43.860]learning from folks across the country who were doing this
[00:05:46.110]and kind of pieced together a model.
[00:05:48.060]We grew over time.
[00:05:49.050]We started out on a very small amount of land
[00:05:51.450]that we leased,
[00:05:52.283]and now we're on about 400 acres.
[00:05:54.120]And so it was definitely a passion project for us,
[00:06:00.840]and we grew it over time,
[00:06:03.330]but we sort of hit this like barrier,
[00:06:05.670]the barriers that so many farmers face
[00:06:07.620]when you're trying to do something like this,
[00:06:11.663]you're doing all these different things.
[00:06:12.960]You're marketing,
[00:06:14.250]you're trying to figure out the processing solution,
[00:06:17.820]cold chain logistics,
[00:06:20.820]figure out the financials of,
[00:06:22.890]you have so many different enterprises there,
[00:06:25.080]and it was really hard for us to figure out
[00:06:26.850]where one stopped and the next one started, you know?
[00:06:33.210]It was a real balancing act for us.
[00:06:34.950]And we found that the farming part
[00:06:36.930]ended up being a pretty small part
[00:06:38.940]of what we got to do.
[00:06:39.930]We were always on the road.
[00:06:41.130]We'd sort of wave at each other
[00:06:42.840]as we were passing each other.
[00:06:45.480]And so that sort of led us to the idea of forming,
[00:06:49.950]looking for some kind of,
[00:06:50.783]like this model isn't sustainable for us.
[00:06:54.150]Is there a different approach
[00:06:57.720]that would be more sustainable for our family?
[00:07:00.180]And also for, by 5, 6, 7 years in,
[00:07:04.230]we had developed a pretty strong network of farmers
[00:07:07.200]from around the state
[00:07:08.250]who were experiencing some of the same issues.
[00:07:10.410]And so, we were collaborating in very informal ways,
[00:07:16.770]maybe shared a load of feed so that
[00:07:20.083]we wouldn't have to get a better rate
[00:07:22.440]and not have to cash flow one big semi-load of feed.
[00:07:28.170]We could share that or share a load of animals
[00:07:30.090]going to the processor
[00:07:31.410]or in some cases share a market.
[00:07:33.870]And that, eventually helped lead up
[00:07:36.810]to the idea of forming a cooperative there.
[00:07:40.890]Yeah, thank you for sharing with us
[00:07:44.250]that background information,
[00:07:46.878]and I think a lot of people can resonate with your story
[00:07:52.097]of starting out and progressing through that
[00:07:56.250]and then coming to a transition point.
[00:07:59.430]Can you kind of talk about that transition
[00:08:05.790]between like you're running a business
[00:08:09.780]with you and your wife
[00:08:11.850]and then now you're a part of this cooperative.
[00:08:15.800]Can you kind of talk about the reasons why that came about?
[00:08:21.030]And maybe why the cooperative
[00:08:25.680]and why that would be a good choice for you.
[00:08:30.330]Sure, absolutely.
[00:08:31.290]So, I mean, first of all,
[00:08:33.630]managing a meat business is really challenging.
[00:08:37.410]Like it is very, very, I mean, it's the only industry,
[00:08:40.890]someone told me this once now,
[00:08:41.798]and I say it all the time now,
[00:08:44.250]it's the only industry that disassembles something
[00:08:46.680]to gain value.
[00:08:48.150]And every animal you harvest has a unique yield
[00:08:53.160]and inventory management alone is,
[00:08:57.090]it's not rocket science, but it's not too far away from it,
[00:08:59.550]it seems like, you know, and so just managing inventory.
[00:09:02.273]I mean, we had a walk-in freezer with boxes of meat
[00:09:06.330]and trying to keep up with, are we selling everything,
[00:09:10.020]we'd always end up with a big pile of boxes in there
[00:09:12.810]and thing we needed would be on the very backside of it.
[00:09:16.500]And then trying to also go out
[00:09:19.050]and do the sales and marketing,
[00:09:21.240]just all the different hats you have to wear
[00:09:24.030]to really make that direct marketing individual,
[00:09:28.530]sort of like vertically integrated individual farm business
[00:09:32.850]pencil out is, for us anyway,
[00:09:36.420]it was just not a lifestyle we wanted to live.
[00:09:38.490]And we've seen a lot of farmers go out of business
[00:09:40.470]trying to do that.
[00:09:41.303]Some folks it works for
[00:09:42.660]if you have the right kind of support system
[00:09:44.550]or it fits, you keep the business simple enough.
[00:09:48.750]But for us, as we grew,
[00:09:51.600]we just really started to wrestle with,
[00:09:56.730]we're not really doing a good job at any of these things.
[00:10:00.745]And so is there a model that could help us
[00:10:03.060]where we could start to,
[00:10:04.470]we don't wanna give up control
[00:10:06.060]of access to our market, right?
[00:10:08.160]So that was an important piece.
[00:10:09.750]We know that farmers need to be closely,
[00:10:12.240]we felt strongly and still do,
[00:10:14.160]that farmers need to be directly connected to their market
[00:10:17.220]and need to be involved in sort of the,
[00:10:22.650]one of the reasons we went with the co-op model
[00:10:24.660]is because we wanted farmers to have ownership
[00:10:26.730]in that marketing sales entity
[00:10:29.977]without having to necessarily manage that entity day-to-day.
[00:10:35.021]And so, the reason we sort of moved over to,
[00:10:39.270]started looking at the co-op model was really like,
[00:10:41.460]how can we keep this in the hands of farmers,
[00:10:45.450]but not require farmers to be the amazing marketers,
[00:10:50.520]amazing accountants, amazing financial planners,
[00:10:53.910]amazing inventory managers, amazing at logistics.
[00:10:56.460]And so, those are just some of the examples
[00:11:00.300]and the rationale behind us sort of making that move.
[00:11:05.100]Gotcha, yeah.
[00:11:08.130]So backing up just a little bit,
[00:11:11.160]could you describe if people, if attendees here today
[00:11:16.320]aren't familiar with Grass Roots Farmers' Cooperative,
[00:11:20.520]can you kind of describe what it is that you do?
[00:11:25.470]Who are your members?
[00:11:27.480]How you sell the product
[00:11:29.100]or how the product moves through the cooperative?
[00:11:31.530]I think that'd be good.
[00:11:32.730]Yeah, absolutely.
[00:11:35.390]So we started our farm in 2007.
[00:11:38.220]By probably 2000, I'd say 9, 10,
[00:11:42.330]we started having some pretty tight collaborations
[00:11:44.670]with other farmers.
[00:11:46.170]In 2014, we actually incorporate as a co-op.
[00:11:50.610]And a lot of that was driven by initially,
[00:11:53.250]and it's important, at least from my perspective,
[00:11:56.040]when developing a co-op is really understanding
[00:11:58.380]what's the core value proposition
[00:12:00.150]that the co-op is gonna bring.
[00:12:01.350]Because developing a co-op
[00:12:03.150]and getting it established is a lot of work.
[00:12:05.430]And there's definitely some challenges
[00:12:06.960]when it comes to fundraising
[00:12:08.220]and those kind of things for a co-op.
[00:12:10.230]And so it's not the easiest model.
[00:12:12.270]It's not a silver bullet by any stretch.
[00:12:15.630]And so for us, the thing that really helped galvanize
[00:12:19.770]this group of farmers early on, it was two things.
[00:12:21.930]It was one, one of them was we had a wholesale customer
[00:12:27.210]that approached one of our farmers
[00:12:28.860]that was wanting more volume
[00:12:30.660]than any of us could provide alone, right?
[00:12:32.580]And so that was a really key, galvanizing moment for us.
[00:12:35.460]It's like, okay, well,
[00:12:37.110]and we still sell to that customer today,
[00:12:40.620]so we decided to, well, let's explore a way
[00:12:43.680]we could work together
[00:12:45.000]and market to this individual customer here.
[00:12:48.060]Another thing that happened was we were approached
[00:12:51.660]by a nonprofit based out of Arkansas
[00:12:54.030]called Heifer International.
[00:12:55.410]And they're nonprofit,
[00:12:57.240]they're known mainly for their work
[00:12:59.010]they do across the country,
[00:13:00.330]but they also have a domestic program.
[00:13:02.190]And they approached us and they're wanting to do work with,
[00:13:07.314]help support farmers in Arkansas.
[00:13:09.660]And they were looking for an opportunity
[00:13:13.260]to invest in something that could help sort of lift,
[00:13:16.590]raise all boats, right?
[00:13:17.820]And so they saw the co-op idea as something
[00:13:22.560]that would be a good vehicle for them to make an investment.
[00:13:25.800]So those two things, a market opportunity
[00:13:27.720]and then an interested sort of investor/grantor came along
[00:13:32.790]that really helped,
[00:13:34.470]were two key galvanizing events early on,
[00:13:38.580]when we formed Grass Roots, right?
[00:13:42.179]And still today,
[00:13:43.012]the number one value proposition that Grass Roots offers
[00:13:45.690]is a niche market,
[00:13:47.910]so a premium market that's dependable for farmers, right?
[00:13:51.780]And so we work with them every year
[00:13:53.400]and we basically give contracts
[00:13:57.900]that with the understanding
[00:13:59.400]that barring any kind of like catastrophic market collapse,
[00:14:02.850]we guarantee this level of volume year over year.
[00:14:06.600]And hopefully the goal is to increase it
[00:14:08.670]while adding other farmers too, all right?
[00:14:11.160]Sometimes it might stay flat.
[00:14:13.320]We've never, to my knowledge, walked farmers back
[00:14:16.140]unless they wanted to decrease their volume.
[00:14:19.380]But that's sort of the key value proposition.
[00:14:22.230]But then on top of that,
[00:14:24.030]when I was talking earlier about all the challenges
[00:14:26.280]that Andrea and I face starting our farm,
[00:14:29.730]we take a lot of those hats,
[00:14:31.800]like we have a great finance team
[00:14:33.690]that does the financial modeling
[00:14:35.400]and helps manage cash flow for the co-op
[00:14:39.750]and those kinds of things.
[00:14:41.340]So we have a marketing team
[00:14:42.960]that is out working to actively grow the market.
[00:14:46.380]We have a couple people on staff
[00:14:47.880]that work directly with the farmers
[00:14:49.410]to help them improve their farming practices.
[00:14:52.320]We have folks that do logistics and customer service.
[00:14:55.710]And so all of those,
[00:14:58.260]those are all employees of, it's not a lot.
[00:15:00.720]We have maybe 15 employees of the co-op,
[00:15:03.840]but they're all sort of wearing different hats
[00:15:07.230]that we used to have to wear individually as a farm.
[00:15:11.160]So instead of us managing inventory,
[00:15:13.920]we have a much more robust inventory management system
[00:15:17.070]and team that's able to do that.
[00:15:19.050]And that's what they focus on every day they come to work.
[00:15:22.140]And same thing on the marketing side and the finance.
[00:15:26.260]And so those are some of the key things the co-op provides.
[00:15:29.730]And basically what we do is, to simplify it,
[00:15:33.060]we go out and find great markets for the farmers,
[00:15:36.540]and then we support the farmers in their production.
[00:15:38.610]And then we get the product,
[00:15:39.870]we make sure everything's in place
[00:15:42.000]to get the product from the farm all the way to the market.
[00:15:46.290]So that includes packaging, processing,
[00:15:48.570]all those kinds of things.
[00:15:50.100]And so that way the farmers
[00:15:51.750]can focus on being really great farmers,
[00:15:53.580]but at the end of the day,
[00:15:54.780]they still have ownership of this cooperative business.
[00:16:01.140]Yeah, thank you for kind of explaining that
[00:16:05.400]and also talking about like how many people
[00:16:11.876]it takes to make this business work
[00:16:15.810]in terms of finance, marketing, logistics, all those areas.
[00:16:22.950]So the members of the cooperative are producers,
[00:16:28.350]is that right?
[00:16:29.183]Yes, it's a producer.
[00:16:30.900]Basically, to be a member, you must be an active producer.
[00:16:36.245]And I saw there's a quick, someone asked,
[00:16:38.640]is there a fee to be in?
[00:16:39.810]And it's a very small,
[00:16:41.280]we don't raise our money through buy-in from farmers.
[00:16:46.080]I think it's maybe a hundred bucks or something,
[00:16:48.060]very little investment for someone to join.
[00:16:51.090]Really it's contingent on like the market need,
[00:16:53.610]us having enough market opportunity to bring on new members.
[00:16:59.285]And the way we raise,
[00:17:00.330]so we don't raise our capital through that way.
[00:17:02.790]We raise it through either,
[00:17:05.370]in the early days it was grant funding,
[00:17:07.380]then go out and maybe we can get debt funding,
[00:17:10.680]those kinds of things.
[00:17:12.060]We still have that partnership with Heifer,
[00:17:13.980]and that's a key piece to be able to make this work
[00:17:16.350]and get it off the ground.
[00:17:21.210]I will say one of the challenges about trying to,
[00:17:24.810]as a co-op, the way we're structured,
[00:17:27.540]you can't take outside invest,
[00:17:29.880]you can't give investors common stock.
[00:17:34.410]And so they're not allowed to have
[00:17:35.970]the same level of membership that a producing member has.
[00:17:41.520]And so that is a challenge
[00:17:43.380]from a capital raising standpoint.
[00:17:45.840]Now you can do sell what's called preferred equity,
[00:17:50.280]which is, it's almost like a loan
[00:17:52.950]kind of as maybe a simple way to think about it.
[00:17:56.100]But it's just not a very,
[00:17:58.530]what you don't provide in this model
[00:18:00.330]is some kind of massive upside for an investor
[00:18:04.080]like you normally get in the venture capital world
[00:18:06.570]where if someone invests a million dollars with you,
[00:18:09.930]they're hoping to get 10 million back or something.
[00:18:12.150]That's just not the kind of model this is.
[00:18:14.520]And it's definitely very focused on the other stakeholders
[00:18:19.920]versus the folks who are bringing capital to the table.
[00:18:23.160]It's focused much more on the suppliers,
[00:18:26.070]which are the producers, right?
[00:18:27.180]And then other partners like processing,
[00:18:29.100]we actually have an equity stake in a processing business
[00:18:32.730]that we work to help stand up and grow.
[00:18:37.811]We're definitely focused on our stakeholders, customers,
[00:18:44.760]farmers, processing partners
[00:18:48.630]versus like trying to get some massive return for investors.
[00:18:54.300]Gotcha, and the producer members,
[00:18:57.210]could you just kind of describe for folks
[00:19:01.560]on the call here today, could you describe
[00:19:04.440]like the producer members who make up Grass Roots?
[00:19:07.950]Like what is the common thread that unites them
[00:19:12.510]since now it seems to have grown beyond
[00:19:16.110]a geographical location,
[00:19:18.150]so it's beyond central Arkansas now?
[00:19:21.270]Like what's the thread?
[00:19:23.220]Could you talk about that?
[00:19:24.840]Sure, absolutely.
[00:19:27.180]So we currently will buy
[00:19:28.560]from somewhere around 50 farms this year.
[00:19:30.990]And they're located, most of them are in Arkansas
[00:19:35.640]or a contiguous state, so Oklahoma, Mississippi, Missouri.
[00:19:40.830]We have some farms we work with in Kentucky,
[00:19:44.070]and at times we've had some partnerships with farms
[00:19:46.080]that are outside of that area,
[00:19:47.430]but that's sort of the,
[00:19:48.360]we're sort of regionally focused at this time
[00:19:51.893]and we have visions for like down the road
[00:19:53.340]trying to grow that as we,
[00:19:56.010]that's a sort of a down the road picture
[00:19:57.690]versus a today picture.
[00:20:01.990]And so I would say that these folks are,
[00:20:04.050]so we have, there's kind of like two groups,
[00:20:06.450]not, I mean, it's two types.
[00:20:08.580]You get folks who have,
[00:20:11.790]they get into this to do direct marketing,
[00:20:14.340]they're going to farmer's markets, they're selling locally,
[00:20:17.790]and then they are looking for a bigger market opportunity.
[00:20:21.870]And then they'll sell us
[00:20:24.660]some of the products they're raising
[00:20:27.150]or animals they're raising.
[00:20:28.980]We have a beef producer, for instance,
[00:20:30.600]that came on a couple years ago that sell,
[00:20:33.510]really started focused on the farmer's markets,
[00:20:36.420]restaurants, and then they had more than they could,
[00:20:39.720]they were producing more volume
[00:20:40.950]than those markets could take at a time.
[00:20:42.990]And we were able to bring them on and start to,
[00:20:45.990]that's one type.
[00:20:46.860]And then another type is you get someone
[00:20:49.950]that does not want to do the marketing at all,
[00:20:52.800]is very interested in farming.
[00:20:54.180]Maybe they're a transitional farmer going from conventional
[00:20:56.940]into something like this, or they are a startup farmer.
[00:21:01.290]Usually they're a little bit further along
[00:21:03.090]than just purely the startup phase.
[00:21:04.710]Or they have some other enterprises they're doing,
[00:21:06.690]like they're raising grass-fed beef
[00:21:08.850]and selling it somewhere else,
[00:21:09.900]and they're looking to add pastured chickens or something.
[00:21:13.500]And so that's another kind,
[00:21:14.460]and they'll sell everything they raised to us.
[00:21:18.688]And it's kind of a mix between the two.
[00:21:21.750]In the beginning, we thought maybe it made more sense
[00:21:24.690]to only work with farmers who sold everything to us,
[00:21:26.700]but as we've grown over the years,
[00:21:28.830]we can clearly see the value we can provide to someone
[00:21:31.260]who is still selling locally to markets
[00:21:34.800]and then wanting to have another outlet.
[00:21:37.320]And then they all use the same production standards.
[00:21:39.960]And so that's one thing that's really important, you know,
[00:21:42.780]that they all have to agree to and sign affidavits for
[00:21:47.190]and those kinds of things.
[00:21:50.227]And then in the case of,
[00:21:53.280]like if we're committed to a certain certification
[00:21:57.360]then on the poultry side or the beef side.
[00:22:01.590]Like right now we're going through
[00:22:02.850]the Land to Market regenerative certification program,
[00:22:06.150]and we want all of our farmers to be part of that program.
[00:22:09.030]And so, that's another area where it's a common thread.
[00:22:14.370]They'll have to get on board with those kinds of things.
[00:22:16.650]And they understand that,
[00:22:17.837]'cause for us to get a premium price at Grass Roots
[00:22:23.220]for the product,
[00:22:24.240]there are certain things like that we have to do
[00:22:25.890]to make sure customers see the value of the product,
[00:22:30.076]and the farmers get that.
[00:22:32.850]Right, because it seems like on the consumer end,
[00:22:36.810]that's kind of like your customer base,
[00:22:39.780]people who are interested
[00:22:41.529]in grass-fed, pasture raised products.
[00:22:45.810]That's right.
[00:22:46.643]Is that right? Yes, yeah.
[00:22:49.170]So those are folks who see it's a premium market,
[00:22:55.200]so we're going after folks
[00:22:56.370]who really see the value in what we're doing,
[00:22:58.440]whether it's because of the health benefits
[00:23:01.380]or the quality of the product, taste and flavor,
[00:23:04.920]the environmental impact,
[00:23:07.440]sort of fair trade practices with farmers
[00:23:09.930]and processing partners.
[00:23:12.990]It's usually a mix of all those things that drives a,
[00:23:16.020]maybe one brings a customer in the door,
[00:23:18.210]a couple of the other ones help make 'em stick around.
[00:23:21.270]And it's also one of the reasons
[00:23:22.770]why we've sort of focused more on direct to consumer
[00:23:27.150]and we do wholesale business,
[00:23:29.010]it's private label and those kind of things,
[00:23:30.720]but our focus is on e-commerce
[00:23:33.810]and going directly to the consumer.
[00:23:35.490]So we have those relationships,
[00:23:37.140]and we're able to really develop that sort of,
[00:23:40.230]find that premium market opportunity
[00:23:43.680]that's going to really value what our farmers are doing.
[00:23:47.940]So we can drive those dollars back to the farmers
[00:23:50.157]and the rural communities they're living in.
[00:23:54.385]Right, right.
[00:23:56.190]And have you gotten feedback from producer member-owners
[00:24:02.130]about like what impacts being a member of the cooperative
[00:24:07.265]has made on their business
[00:24:09.150]or their viability as a farm business?
[00:24:13.200]Yeah, yeah.
[00:24:14.033]It is something.
[00:24:16.470]So we've definitely had some farms
[00:24:19.770]who started out doing like we did, direct sales,
[00:24:24.300]trying to manage it all
[00:24:26.811]and them be on the cusp of going outta business
[00:24:28.380]and then transition over to Grass Roots
[00:24:30.360]and have had a lot have been successful
[00:24:33.540]in being able to keep their farm business afloat.
[00:24:36.450]We also have farms that have started,
[00:24:40.590]that didn't see an opportunity,
[00:24:43.230]like you guys get this,
[00:24:45.540]I mean, there's very few opportunities in rural America.
[00:24:51.921]The options are limited.
[00:24:53.250]And us being able to go in
[00:24:55.230]and develop a cluster of farmers in Mississippi recently.
[00:25:00.000]We opened a program there.
[00:25:02.220]We've added two farms so far.
[00:25:04.200]The goal is to continue to grow that program down there.
[00:25:08.550]And this was in a community that didn't have any,
[00:25:10.980]several folks had land, but no opportunities
[00:25:14.700]to use that land for anything
[00:25:16.800]that really make them any money.
[00:25:18.900]And they're really excited about this
[00:25:21.360]being an opportunity for them to create a farm business
[00:25:25.320]that maybe they could pass on to their kids someday.
[00:25:27.720]And so we're definitely hearing stories like that too
[00:25:29.940]from farmers when it comes to finding an opportunity
[00:25:33.540]they can plug into.
[00:25:35.010]They have a guaranteed market.
[00:25:37.140]We signed the long-term contracts with them
[00:25:40.770]and that's been a real win,
[00:25:43.440]and been exciting to see that kind of progress.
[00:25:47.340]Yeah, that's great.
[00:25:50.220]You can reach that national market,
[00:25:52.440]but also, the producers can make other decisions
[00:25:56.220]for themselves in terms of if they wanna sell more locally.
[00:26:01.020]Okay, so I think we should turn it over
[00:26:03.300]to all the participants.
[00:26:06.480]We're gonna kind of,
[00:26:08.850]there's some questions that have come in and let's see here.
[00:26:15.720]I think the first one that I see is,
[00:26:23.130]this is coming from Diane Fish.
[00:26:26.790]And her question is,
[00:26:28.147]"Has the co-op worked to expand slaughter capacity?
[00:26:32.347]"In the Pacific Northwest one main limitation
[00:26:36.247]"to direct market or niche wholesale for protein farmers
[00:26:39.697]"is access to the USDA slaughter and CNW."
[00:26:42.930]And I would say that that's also a, yeah,
[00:26:46.080]I think that's a Nebraska and national problem.
[00:26:50.260]Yeah, yeah, it's a tough one.
[00:26:52.110]So yes, we have, it's been a big part,
[00:26:55.260]especially of our early day,
[00:26:57.000]the 2014 through 20, probably 17, 18,
[00:27:01.320]actually through 2020 I would say.
[00:27:04.920]We started out,
[00:27:06.990]our goal was not to be in the processing business.
[00:27:09.960]And we found a initial processing partner
[00:27:15.210]that we hoped we'd be able to grow with.
[00:27:17.190]And it was just pretty quickly,
[00:27:18.930]it was clear that we were really more volume
[00:27:22.140]than they could handle.
[00:27:23.940]And we were having trouble with quality issues.
[00:27:28.500]And one of the things that happened early on
[00:27:30.780]is that we decided to,
[00:27:32.880]our farm and several of the other initial farms,
[00:27:35.850]to help give the co-op a jumpstart,
[00:27:38.250]put in our customer base into it, right?
[00:27:41.070]And so, that was a big leap of faith.
[00:27:44.580]And one of the big challenges we hit early on
[00:27:47.250]was that when we really started trying to market
[00:27:50.640]and take cooperative products to market.
[00:27:54.840]We ended up with very poor quality processing
[00:27:57.930]that really just made us,
[00:28:02.670]it was a scary moment because we were worried
[00:28:04.410]about people are paying a premium for this.
[00:28:06.540]If we can't get a chicken that's plucked properly
[00:28:09.840]or sausage that's made the right way,
[00:28:12.510]it's gonna put us out of business.
[00:28:13.920]And so, we ended up finding a,
[00:28:17.490]after a couple different sort of dead ends,
[00:28:20.370]we ended up finding a partner on that front
[00:28:24.120]that we decided to formally join with back in 2015.
[00:28:30.270]And they were in a position,
[00:28:32.400]they had started a processing business.
[00:28:34.320]It was still pretty small scale,
[00:28:35.820]it was actually smaller scale
[00:28:37.050]than the one that we were working at.
[00:28:39.300]But they had a real growth mindset.
[00:28:46.158]So we went to them and said,
[00:28:47.160]we were looking for a poultry processing business
[00:28:50.190]or looking for someone to help us start one.
[00:28:52.650]And he's the founder, Andy Shaw said,
[00:28:57.240]well, we're very interested in doing that.
[00:29:03.030]We'd like you all to become partners with us.
[00:29:06.529]We know you're not gonna just back out.
[00:29:08.340]And so in 2016, we did a joint venture
[00:29:10.770]and launched our own poultry processing business
[00:29:13.320]in partnership with that company.
[00:29:15.540]And so we launched that business
[00:29:17.670]and then we bought into his large animal business.
[00:29:21.150]And that's expanded to,
[00:29:23.280]currently it's two federally inspected facilities,
[00:29:27.390]one that's sort of a management services type agreement,
[00:29:31.260]and the other one is a outright owned facility
[00:29:33.723]that that company owns.
[00:29:35.160]And it's one poultry processing facility
[00:29:37.350]under federal inspection and two custom plants.
[00:29:40.530]And I would say just from a food system impact standpoint,
[00:29:43.290]that's probably like locally
[00:29:45.000]one of the biggest things we've done
[00:29:47.910]and the major impacts we've made,
[00:29:49.620]because certainly it solved a problem
[00:29:51.600]and allowed Grass Roots to keep going.
[00:29:53.910]But it also created a processing capacity
[00:29:56.040]for a lot more like the local farmers here too,
[00:29:59.400]in a way that just didn't exist
[00:30:01.350]before we formed this partnership.
[00:30:04.440]And so, I think they process,
[00:30:08.340]now, a lot of this is custom, but in the two custom plants,
[00:30:11.700]they process for over 3000 farmers, which is pretty nuts.
[00:30:16.785]And about half of the poultry business
[00:30:19.410]is Grass Roots business
[00:30:21.180]and about 30 to 40% of the large animal is Grass Roots.
[00:30:25.530]And so we're sort of the anchor customer there,
[00:30:27.540]other farmers are able to benefit from it.
[00:30:32.190]It wasn't easy to get that off the ground
[00:30:34.110]and get it to a place where it was financially viable,
[00:30:36.780]but through a really great management team and partnership,
[00:30:40.470]we've been able to get those to really great spots.
[00:30:45.420]That certainly was a problem we had to solve early on.
[00:30:50.220]And I would say
[00:30:51.053]was probably one of our closest like near-death experiences
[00:30:58.260]was not having that right partner early on.
[00:31:02.400]And we're very fortunate to be where we are now
[00:31:04.680]with that situation.
[00:31:07.080]Yeah, that's huge.
[00:31:09.510]And I see that Diane has asked kind of a follow up question.
[00:31:15.967]"So with those investments made by your cooperative,
[00:31:18.877]"are your producer members able to benefit financially
[00:31:22.477]"from the investments
[00:31:23.497]"beyond having the security of the processor relationship?"
[00:31:29.520]Yes, so theoretically, yes.
[00:31:32.190]The reality is those businesses aren't big cash cows.
[00:31:37.620]Yeah, I would say
[00:31:39.300]one of the things I've definitely learned over the years
[00:31:41.310]is that a processing business is just as hard
[00:31:44.580]or harder to make profitable as a farm business.
[00:31:46.860]And so I know there's a lot of excitement
[00:31:49.260]around the country about getting into the process.
[00:31:51.690]There's a lot of funds flowing around
[00:31:53.730]around establishing new processing companies.
[00:32:00.150]It's a really tough business model
[00:32:02.160]and takes a certain amount of volume.
[00:32:03.960]Like for instance, our poultry business didn't break even
[00:32:06.780]until about 400,000 birds were going through that facility.
[00:32:12.210]And that took us a while to get there.
[00:32:15.538]And yes, so the farmers do have the potential
[00:32:18.120]to benefit financially from it,
[00:32:19.650]or at least that would go back to the co-op
[00:32:21.300]that could then use it
[00:32:22.200]or pass it as patronage back to the farmers.
[00:32:26.040]But at this stage, there hasn't been enough profits,
[00:32:30.270]that business, if they have any profits,
[00:32:32.490]they retain it typically
[00:32:33.960]to invest in adding new services or new capacity.
[00:32:41.190]Okay, great.
[00:32:43.920]One of the other questions was,
[00:32:45.240]do you have cold storage units
[00:32:47.730]in these various areas of the country
[00:32:50.640]that you're either shipping to or have farmers or producers?
[00:32:55.890]Yeah, so as you all can imagine, cold storage is a,
[00:32:59.787]for a meat supply chain is really complicated,
[00:33:02.293]a really important thing
[00:33:03.330]and can be very complicated and expensive.
[00:33:05.730]And so we do have a centralized sort of,
[00:33:09.930]it's a space we lease at a co-packing facility
[00:33:14.940]where we have kind of a aggregation point, all right?
[00:33:18.240]And it's actually right next
[00:33:20.370]to our poultry processing business.
[00:33:22.680]And so most of our products
[00:33:25.890]go back to that facility for aggregation,
[00:33:28.650]and then either they get shipped directly
[00:33:31.620]to wholesale customers,
[00:33:32.970]or in the case of our e-commerce business,
[00:33:36.930]we do have three different warehouses around the country
[00:33:41.550]that we don't own them, it's a partner,
[00:33:43.380]it's called a third party logistics company,
[00:33:45.330]3PL for short that we work with.
[00:33:48.270]And we ship trailer loads
[00:33:49.183]out to those individual warehouses.
[00:33:52.560]Now, we didn't start out that way.
[00:33:54.180]We started out shipping directly to customers
[00:33:56.940]from our own aggregation facility,
[00:34:01.950]and then outsourced that to a 3PL,
[00:34:04.710]started out using one of their warehouses,
[00:34:06.780]went to two, and now we're at three.
[00:34:10.860]And that's another area where there's no way,
[00:34:15.420]one individual farmer could have figured this,
[00:34:17.310]can manage this or figure it out.
[00:34:18.840]I mean, it takes a couple really smart people
[00:34:21.810]that are working a lot to figure out the right demand,
[00:34:24.660]planning, and moving the right inventory
[00:34:27.060]to the right warehouses and whatnot.
[00:34:28.770]So that's another sort of area where I think the co-op,
[00:34:32.970]the idea of like trying to share the,
[00:34:35.440]for the farmers not trying to do all this stuff
[00:34:37.170]wear all these hats.
[00:34:38.820]That model kind of shines there, I think.
[00:34:42.758]Right, right.
[00:34:43.800]There are so many hats.
[00:34:45.630]There are, yes. So many hats.
[00:34:47.416]Yes, lots of hats.
[00:34:48.633]It's actually a joke we have
[00:34:50.100]when like we have a board meeting,
[00:34:52.290]we haven't done this yet,
[00:34:53.130]but we've talked, we've joked about like making
[00:34:55.560]like four or five different hats
[00:34:57.120]'cause you got your farm hat, you've got your co-op hat,
[00:34:59.610]you've got the processing partner hat
[00:35:01.440]just so many different hats
[00:35:03.630]that one has to sort of wear in that space.
[00:35:07.830]Yes, okay so another question that we've got
[00:35:11.010]is about your production standards.
[00:35:14.370]So the question is,
[00:35:15.990]does your customer base steer those production standards?
[00:35:19.980]So like grass-fed, non-GMO, pasture raised,
[00:35:23.400]or do your farmers agree on a standard
[00:35:26.220]and you try to market it to customers?
[00:35:28.500]So I guess it's kind of like a chicken and the egg.
[00:35:32.460]Yeah, so it's a bit of both.
[00:35:33.780]I mean, I would say it's now more driven by customers,
[00:35:38.940]but within reason.
[00:35:40.592]Like at the end of the day we exist
[00:35:42.900]to provide premium, dependable market opportunities
[00:35:47.160]for our farmers.
[00:35:49.260]Grass Roots should not exist if it's not doing that.
[00:35:52.560]And so if we come across something that is,
[00:35:58.380]oh, we feel like customers will really love this,
[00:36:00.330]but it's gonna put our farmers out of business
[00:36:02.100]if they have to do that,
[00:36:03.150]then we're not gonna do that
[00:36:04.530]because our north star is making sure
[00:36:07.110]that we're impacting farmers
[00:36:08.460]and driving dollars back to them.
[00:36:11.790]But there are times when we have to,
[00:36:15.570]GMO-free feed,
[00:36:17.040]that's something that our customers really care about.
[00:36:19.530]And you know, it increases the cost of production.
[00:36:22.320]We gotta be able to pass that along
[00:36:23.730]in our pricing to customers.
[00:36:26.670]But that's an area
[00:36:27.503]where I'm sure farmers would love to have cheaper feed
[00:36:29.970]in some cases.
[00:36:31.110]I mean, some may philosophically like align with that,
[00:36:33.630]but some may not.
[00:36:35.160]But the reality is customers want that,
[00:36:36.990]and that's something that we've gotta figure out
[00:36:38.640]a way to do.
[00:36:39.473]So it's a balancing act and it really is.
[00:36:42.180]So much of this ends up being
[00:36:45.810]pretty candid conversations
[00:36:47.910]between the cooperative management team
[00:36:52.020]and the farmers around like,
[00:36:54.750]okay, well I know you'd love to get paid this,
[00:36:57.630]but we're gonna need you to,
[00:36:59.400]we can't pay that and be able to make enough money here.
[00:37:02.007]And so, like in some cases
[00:37:06.000]we end up increasing the payment to farmers.
[00:37:08.160]Like we're always sort of reevaluating our pricing there,
[00:37:14.746]do we pass that along to customers.
[00:37:16.020]Some cases we say, all right,
[00:37:17.220]well, we're gonna need you to increase the volume
[00:37:20.580]that you're doing. We can't work with a farmer
[00:37:22.246]that's raising a thousand chickens a year
[00:37:24.930]because the reality is you're gonna need more per pound
[00:37:28.680]to make your business worth it
[00:37:30.660]than someone who's raising
[00:37:31.920]20,000 chickens a year, for instance.
[00:37:33.810]And so those are just a lot of back and forth,
[00:37:36.739]and it's a constant work in progress to try to figure out,
[00:37:43.110]to work through those kinds of things.
[00:37:46.020]And so I've gotten a little bit off topic.
[00:37:49.590]Yeah, I think it's actually right on topic
[00:37:52.860]because our next question, here it is,
[00:37:58.087]"You have mentioned your team of advisors,
[00:38:00.697]"business planners, et cetera.
[00:38:03.697]"Some cooperatives get big enough to hire a management team.
[00:38:08.677]"And the question is, is it still farmer managed
[00:38:12.781]"or have you transitioned
[00:38:14.017]"to just kind of more farmer owned and hired management?"
[00:38:18.150]So that question was very directly related to what you're--
[00:38:22.440]Yeah, yeah.
[00:38:24.780]So in the beginning there,
[00:38:25.740]we had farmers involved in a lot of different tasks.
[00:38:33.240]I'm glad those days are behind us
[00:38:35.970]just because it makes things really,
[00:38:39.120]it's tough because then the farmers
[00:38:41.730]aren't able to focus on being,
[00:38:42.660]we had farmers in some cases that focused on trying to help,
[00:38:46.020]they would help pack boxes or whatever,
[00:38:47.790]and their farm would suffer,
[00:38:51.510]the quality of their production would suffer.
[00:38:53.490]And so, we started out with farmers
[00:38:56.610]really rolling up their sleeves
[00:38:57.870]and helping out in different areas.
[00:38:59.130]Now we're at a place where I'm the only farmer,
[00:39:02.280]and actually, I'm not even sure
[00:39:03.210]I can call myself a real farmer anymore.
[00:39:04.980]My wife does all the farming
[00:39:06.330]and she'll get all the credit, all right.
[00:39:08.220]I help out on weekends.
[00:39:09.900]But we are now at a place
[00:39:16.110]where we don't have any farmers
[00:39:17.340]involved in the day-to-day operations except for myself.
[00:39:20.730]And so it's an outsourced management team.
[00:39:26.640]It took a while to get there,
[00:39:28.380]but that was an important transition
[00:39:30.930]and one that I think is,
[00:39:33.720]we found it tough to make it work with farmers
[00:39:36.090]trying to wear those hats in the business.
[00:39:39.900]Yeah, and I guess just a follow up question to that,
[00:39:44.700]we work with cooperatives who have the board of directors
[00:39:48.180]and some decision making
[00:39:50.640]is left to the members of the cooperative.
[00:39:54.450]Could you describe kind of how that works at Grass Roots?
[00:39:58.260]Yeah, so one thing we did fairly early on
[00:40:01.710]is brought in this group,
[00:40:03.300]I can't remember their name now,
[00:40:04.800]but at the time it was called CDS.
[00:40:07.200]It was a cooperative sort of development group
[00:40:10.290]that they worked mainly I think with cooperative,
[00:40:13.290]like consumer co-ops, like grocery stores.
[00:40:16.410]But they really helped us in developing our bylaws
[00:40:19.485]and sort of reporting process and whatnot for the co-op,
[00:40:24.754]and getting clear on the roles and responsibilities
[00:40:27.120]for the board versus management versus the members.
[00:40:32.070]And so the members elect the board members, right?
[00:40:35.100]That's it, that's their vote.
[00:40:37.320]There's a couple of other things in the bylaws,
[00:40:39.030]like if we're gonna sell the company
[00:40:40.560]or those kinds of things.
[00:40:42.780]And then the board members,
[00:40:45.842]they have pretty clear guidelines
[00:40:49.020]on what they're responsible for
[00:40:51.300]and their job is to hire,
[00:40:53.730]like they hire the CEO or general manager
[00:40:57.510]or whatever you wanna call the position.
[00:40:59.520]And then that general manager or CEO
[00:41:02.160]is responsible for hiring
[00:41:03.360]all of the other individual members of the team.
[00:41:09.330]And keeping those lines very clear is super important.
[00:41:14.610]You don't want your board members trying to say,
[00:41:16.770]we need to fire this person or fire that person.
[00:41:21.240]Trying to keep those very clear lines of distinction
[00:41:23.850]between what the individual members do
[00:41:26.340]versus the board members versus the management team
[00:41:31.140]and general manager is really important.
[00:41:33.360]And I think it's at the end of the day,
[00:41:36.330]that's something that I've read several years ago,
[00:41:39.360]and this is more about like food or not aggregators,
[00:41:43.200]but food hubs.
[00:41:44.550]I'd say the same thing applies to co-ops too,
[00:41:49.290]is especially at the early stages,
[00:41:52.380]in the first four or five years,
[00:41:53.880]turnover in the general manager role is an absolute,
[00:41:58.309]like will kill a co-op in no time.
[00:42:02.880]And I think it's very important to have clear,
[00:42:05.190]strong leadership early on,
[00:42:07.800]and you don't want a lot of turnover there.
[00:42:09.450]We had a vegetable co-op that was working alongside us.
[00:42:13.770]They went through three or four different general managers,
[00:42:16.110]and I could just see how that really took a toll
[00:42:18.600]on their ability to execute their business.
[00:42:20.517]And they ended up going out of business.
[00:42:23.730]But it's a really getting clarity on,
[00:42:27.750]well, what decisions does the board make?
[00:42:29.490]Like in the case of pricing,
[00:42:31.980]the rates we pay our farmers,
[00:42:33.720]ultimately that's a decision
[00:42:35.670]that the board signs off on, right?
[00:42:39.420]They vote on that, they decide on like, what is that price?
[00:42:45.990]It's management's job
[00:42:47.010]to bring proposal to the board to consider.
[00:42:51.960]And then there's back and forth
[00:42:54.240]between the board and management on like,
[00:42:58.830]well, farmers may want more,
[00:43:02.760]but here's why we don't think it should be more.
[00:43:05.220]And then, you just sort of back and forth
[00:43:07.320]until you reach a final decision.
[00:43:09.030]But ultimately, like that's in the hands
[00:43:10.530]of the board of farmers to make a final decision on.
[00:43:14.670]And getting clear on what kinds of decisions
[00:43:18.660]fall into that category versus like the kinds of decisions
[00:43:22.290]that the general manager or CEO would make.
[00:43:25.444]And you gotta figure that stuff out in any business,
[00:43:28.260]but it's really very, very important
[00:43:30.600]when you have all of these,
[00:43:31.770]this like ecosystem of stakeholders
[00:43:34.140]that you're trying to manage
[00:43:35.250]and make sure that people understand
[00:43:38.610]what do you get to have a say on?
[00:43:40.530]You don't get to decide on what the marketing strategy is,
[00:43:45.660]but, sure, you could find a way to have some input
[00:43:48.030]or raise some questions or whatever at some point.
[00:43:52.290]And that's a delicate balance.
[00:43:54.600]Yeah, thank you for sharing that.
[00:43:56.280]Yeah, and having the information available to people
[00:44:04.200]to make that decision if they want to be involved
[00:44:07.230]or how they can be involved.
[00:44:09.300]And kind of on the pricing,
[00:44:12.750]you brought up pricing, and we do have a question.
[00:44:16.710]Can you talk about how your farmer members
[00:44:19.470]can forecast price?
[00:44:21.060]Does the co-op set a weekly price
[00:44:23.130]and farmers can sell when they want?
[00:44:25.350]Do you contract a date to sell animals to the co-op?
[00:44:29.790]Do you bid prices?
[00:44:32.820]So a lot rolled into that question.
[00:44:35.100]Yeah, so we set prices a couple times a year.
[00:44:41.010]In some cases, if it's a pretty like tame year,
[00:44:44.340]which we haven't had in a while, we'll do it once,
[00:44:46.860]and in some cases we'll do it a couple of times.
[00:44:49.260]We also have in like a cost plus type model.
[00:44:54.480]Like if feed prices go up this amount,
[00:44:56.580]then we will pay more for a period of time
[00:44:59.520]until feed prices come back down.
[00:45:01.050]If they go lower, then we'll reduce that payout price.
[00:45:03.630]So we do peg a lot for,
[00:45:05.280]like on our pastured chickens and turkeys and pork,
[00:45:08.850]peg that to the feed price as a way to help make sure
[00:45:14.370]that farmers are still being kept whole.
[00:45:16.260]We also do a lot of work digging in
[00:45:18.720]with farmers on their financials
[00:45:20.250]to try to understand like, okay,
[00:45:22.860]how is this working for you?
[00:45:25.920]Is the scale right? Is the pay right?
[00:45:29.070]What's your operating costs?
[00:45:30.210]So we'll take multiple farmers and get anonymous data,
[00:45:33.330]put that into a financial plan and sort of look at like,
[00:45:36.870]okay, if we don't raise our farmer,
[00:45:40.944]like right now we're in the process of evaluating actually,
[00:45:43.200]and just made the decision to increase our payout rates
[00:45:47.460]in a couple of areas because farmers,
[00:45:50.490]we adjusted for the feed price,
[00:45:51.780]but now we're seeing expenses with inflation
[00:45:54.360]go up a certain percent.
[00:45:55.950]And we're seeing that farmers
[00:45:59.280]are gonna not be able to be profitable
[00:46:01.500]if we don't make some adjustments here.
[00:46:03.060]So it's a very in the weeds,
[00:46:06.450]we get in the weeds with farmers on that.
[00:46:08.130]So we're not basing it off of,
[00:46:09.810]like we do use some commodity prices,
[00:46:12.150]like the feed prices is a commodity price,
[00:46:15.660]and that's part of the equation,
[00:46:17.400]but we're not just looking at that either.
[00:46:19.290]We're looking at like scale and actuals
[00:46:22.680]to really make sure
[00:46:23.610]that we're driving as much back to the farmer as possible
[00:46:27.480]and treating them fairly.
[00:46:29.910]But the challenge,
[00:46:33.187](dog barks)
[00:46:34.020]hold on, I got a puppy dog outside that's barking here.
[00:46:37.320]No problem. (chuckles)
[00:46:41.370]Everybody left the house,
[00:46:42.390]so he was having some withdrawals, I think.
[00:46:48.347]We worked very closely with farmers on setting that,
[00:46:50.730]and it is a delicate dance between,
[00:46:56.070]and we're very transparent about this,
[00:46:57.780]and okay, the marketing business
[00:47:01.170]has to make a certain amount to be able to make this work.
[00:47:03.810]And so, you've gotta balance,
[00:47:07.770]and understanding can we,
[00:47:09.630]like we just recently did some pricing research
[00:47:11.820]and that gave us the confidence that,
[00:47:14.430]okay, we can make some adjustments in some of our prices,
[00:47:18.035]our consumer-facing prices.
[00:47:20.760]And so, it's just that sort of back and forth,
[00:47:23.700]always trying to get that balance between,
[00:47:27.120]how do we make sure we take care of the customer
[00:47:29.490]and then how we make sure we take care of the farmer
[00:47:31.530]and we're in between here
[00:47:32.550]and we also get the processor in there
[00:47:33.903]that no one's getting rich there either.
[00:47:35.940]And so it's a sort of delicate balance
[00:47:38.070]between trying to manage those stakeholders
[00:47:40.500]and accomplish our mission here
[00:47:42.380]of really driving dollars back to our farmers
[00:47:45.420]in a way that's gonna make them profitable
[00:47:47.820]and be able to stay in business.
[00:47:50.580]If a farmer showed up in like a super fancy truck
[00:47:53.070]and said, I'm not making enough money,
[00:47:55.230]and they were only raising 5,000 chickens a year,
[00:47:58.470]well that we can't help that farmer,
[00:48:01.650]but if we can look in aggregate and see, look, gosh,
[00:48:04.020]you know, our farmers are really struggling with,
[00:48:07.950]in the case of chickens,
[00:48:09.000]they have to buy propane or shavings
[00:48:11.010]to brood their chickens for a couple of weeks
[00:48:12.840]before they go out on pasture.
[00:48:14.640]If those prices go up,
[00:48:15.633]then we've gotta figure out some way
[00:48:17.070]to try to help address that.
[00:48:18.570]And it's a mix of marketing, pricing research
[00:48:22.170]and a mix of, there's some efficiencies that we can,
[00:48:25.530]we've actually recently brought someone
[00:48:27.840]to do a little bit of analysis
[00:48:29.520]on if there are things we're missing on the farming side
[00:48:32.070]that could help make our farmers more profitable
[00:48:34.290]so that we don't have to focus always on
[00:48:37.320]raising the price to the consumer.
[00:48:39.690]Yeah, that seems like a very, very complex,
[00:48:43.830]nuanced, and always adapting issue.
[00:48:48.690]And it sounds like you are kind of supporting your producers
[00:48:53.220]and farmers in that way of bringing someone on
[00:48:57.180]to see if something could change in production.
[00:49:01.530]Yeah, yeah, we definitely don't want,
[00:49:02.910]so it's again, wearing in those different hats.
[00:49:05.880]We don't wanna be in a position
[00:49:06.990]where the farmers are always like a price taker,
[00:49:11.040]and that like, no matter, here's where the market is,
[00:49:14.010]that's not how we work.
[00:49:15.030]It's more about like what's actually,
[00:49:16.410]given the current climate,
[00:49:18.390]the sort of models that we look at,
[00:49:22.350]like our farmers being able to make a decent livelihood
[00:49:26.520]and that's very relative,
[00:49:27.900]but we work to sort of establish the benchmarks there
[00:49:33.480]and then work towards trying to do the best we can
[00:49:37.050]to manage all the different stakeholders
[00:49:38.610]and end up with a solution
[00:49:39.570]that's gonna do right by the farmers.
[00:49:42.840]Yeah.
[00:49:44.670]Okay, Cody, here's a question.
[00:49:47.947]"What do you want to see in the future?"
[00:49:50.970]Hmm.
[00:49:53.580]So, I think that for us anyway,
[00:49:59.760]what we would love to do,
[00:50:01.350]there aren't a lot of co-ops out there in the ag space,
[00:50:05.610]younger co-ops anyway, maybe there's some more sprouting up,
[00:50:09.390]but it's a tough one to make work,
[00:50:10.770]but we've been really inspired by Organic Valley,
[00:50:13.080]love their sort of regional pool model.
[00:50:15.690]I know that's kind of a common theme in the dairy industry,
[00:50:20.070]but we want to be able to take what we've learned
[00:50:22.890]and spread that by hopefully establishing
[00:50:25.710]regional pools over time.
[00:50:27.930]And we want to, at the end of the day,
[00:50:31.380]we're trying to help build a food system of integrity
[00:50:33.720]where farmers are really treated fairly
[00:50:35.610]and processing employees are treated fairly
[00:50:37.290]and customers have access
[00:50:39.450]to really high quality products like this.
[00:50:43.222]And so we see that,
[00:50:46.290]the way to get there
[00:50:47.130]is through sort of a regional pool model,
[00:50:49.620]and already have some of those kind of informally working
[00:50:52.980]at this stage on a small level,
[00:50:56.340]our customers are spread around the country,
[00:50:57.900]and so we love the idea of being able
[00:50:59.310]to offer sort of regional products to regional customers
[00:51:01.860]in a way that really drives home the transparency
[00:51:06.000]of what we're doing.
[00:51:07.230]One thing I failed to mention
[00:51:08.250]is that everything we ship out,
[00:51:10.872]it's all under the Grass Roots brand,
[00:51:12.210]but everything has a farm of origin stamp on it.
[00:51:14.220]And so that's important to us.
[00:51:16.380]Every package of chicken breast, every package of bacon,
[00:51:19.260]well, whatever it is,
[00:51:20.340]like we want it to be traceable back to that individual farm
[00:51:26.433]that we don't let someone like order
[00:51:28.770]this farm versus that farm on the site.
[00:51:30.630]We actually hardly ever get that kind of question at all.
[00:51:33.900]But it is important for us to sort of raise up
[00:51:36.240]the individual farmers too as we do this.
[00:51:39.570]That's really cool.
[00:51:40.800]And I would love to learn more
[00:51:44.160]about how that sticker is traced back.
[00:51:48.540]But that's for another day.
[00:51:50.313]That just seems like magic right now.
[00:51:54.120]Thank you, and so what time is it here?
[00:52:00.002]We have five minutes.
[00:52:01.350]Okay, quickly, do you include ducks or rabbits
[00:52:06.913]in your livestock product?
[00:52:07.910]We don't do rabbits and we haven't done ducks yet,
[00:52:11.430]but we actually are experimenting
[00:52:12.600]with a small amount of ducks this winter
[00:52:15.690]given we do pastured chickens
[00:52:17.910]and turkeys in the green season down here,
[00:52:20.100]which is really from like late February
[00:52:24.270]through Thanksgiving, early December.
[00:52:29.070]And one of the challenges
[00:52:31.020]with the poultry processing business
[00:52:32.730]is keeping volume going through year round.
[00:52:35.640]And so we're looking at doing ducks in the off season
[00:52:38.130]'cause they're much more hardy.
[00:52:39.930]We do have some farmers that are in southern Arkansas
[00:52:42.150]that more have green grass this time of year.
[00:52:45.960]And so we're gonna experiment this year,
[00:52:48.900]I guess early next year with doing some ducks,
[00:52:51.210]and something that we think our customers would like,
[00:52:54.030]and can see we're always looking for those win-wins.
[00:52:57.120]Like where's it gonna give
[00:52:58.950]something interesting to the customer,
[00:53:00.930]give farmers a new way to make some income
[00:53:02.970]and then create something that's gonna work well
[00:53:04.890]for the processors.
[00:53:05.760]Those are our three key stakeholders
[00:53:07.500]that we're always thinking about.
[00:53:08.610]And so it's important
[00:53:12.854]that we see ducks maybe being one of those things.
[00:53:16.170]All right.
[00:53:17.003]That's exciting for all the duck lovers out there.
[00:53:22.500]Okay, so I think the final question is
[00:53:25.650]if someone in the food system,
[00:53:29.520]be that a producer
[00:53:31.020]or somebody who maybe has a passion or interest
[00:53:35.280]in processing or transport or whatever,
[00:53:39.060]if somebody interested in the food system
[00:53:42.720]is looking at starting a cooperative business,
[00:53:45.990]like a business using the cooperative model,
[00:53:49.440]like what is a piece of advice
[00:53:51.810]that you would give them before they started that journey?
[00:53:57.030]Really get clear
[00:53:58.230]on what the common like core value proposition
[00:54:01.500]is for the co-op.
[00:54:04.984]It's really understanding like what is it
[00:54:08.111]that the co-op is gonna provide?
[00:54:09.570]Is it market opportunities? Is it a purchasing co-op?
[00:54:13.200]Is it trying to solve a processing issue?
[00:54:17.280]So to me that's something that I've seen,
[00:54:21.450]going back to that veggie co-op that didn't make it.
[00:54:24.240]They really struggled with their identity
[00:54:25.920]and like what actually was the value
[00:54:27.900]that the co-op was providing to those farmers.
[00:54:32.610]And so for us,
[00:54:33.930]the core is that dependable market opportunity
[00:54:36.720]at a premium price.
[00:54:38.220]We'll spend 4 to $5 million this year with farmers
[00:54:42.810]and that's a big impact and that's what really drives,
[00:54:45.180]that's the core value proposition
[00:54:47.940]for the farmers we're working with.
[00:54:49.050]So getting very clear on that
[00:54:50.340]because in reality this is a kind of a weird business model.
[00:54:59.250]It's not something that's easy to fund,
[00:55:01.980]it's a lot of stakeholders to manage.
[00:55:04.620]It's something I love,
[00:55:05.490]I think it's a great model
[00:55:07.020]for trying to get multi-stakeholder inclusion
[00:55:10.380]that's not just an investor
[00:55:13.080]that you're thinking about
[00:55:13.913]when you're thinking about stakeholders.
[00:55:16.350]And so, it's the right fit for us,
[00:55:19.590]but really trying to understand.
[00:55:21.360]Can you get enough alignment with some producers
[00:55:23.880]on what that core value proposition is.
[00:55:27.420]Yes, thank you for sharing that.
[00:55:30.360]And Cody, do you have any final words
[00:55:33.210]that you'd like to share with us?
[00:55:36.780]Nothing comes to mind, but reach out anytime.
[00:55:39.810]more than happy to connect.
[00:55:41.400]It's Cody@grassrootscoop.com.
[00:55:44.910]I really appreciate you all
[00:55:46.680]giving me the opportunity to share our story.
[00:55:48.960]Thank you so much.
[00:55:49.830]I thought the questions that that folks came up with
[00:55:52.830]were really good and we could probably spend like hours
[00:55:56.820]talking about this stuff.
[00:55:58.050]I wish that we had hours, maybe sometime in the future.
[00:56:02.160]But yeah, I want to thank you so much for joining us today.
[00:56:06.844]And just to give folks on the call,
[00:56:09.240]just a little bit of information.
[00:56:12.990]Nebraska Cooperative Development Center, NCDC,
[00:56:17.370]like we're here to help groups explore the cooperative model
[00:56:23.370]and to explore what Cody's talking about.
[00:56:26.850]Like what's your vision?
[00:56:29.010]Like what's bringing you together?
[00:56:30.930]Is the cooperative model right for this group
[00:56:34.470]solving this problem,
[00:56:36.510]or a group who wants a certain goal?
[00:56:39.240]So, contact Charlotte or myself,
[00:56:43.980]and we'll start the conversation with you.
[00:56:47.370]But yeah, I'm trying to think if there's anything else.
[00:56:51.120]I'll be sending up sending out a short survey
[00:56:56.100]with some evaluation details and whatnot to you all,
[00:57:01.380]so you'll have a chance to give your feedback.
[00:57:05.190]And I wanted to thank everybody for attending today
[00:57:07.890]and maybe see some of you next week.
[00:57:10.440]We're gonna have Hannah Breckbill from Humble Hands Harvest
[00:57:14.760]out of Decorah Iowa.
[00:57:16.860]And she's gonna be talking about her diversified farm
[00:57:22.200]that is also a worker cooperative
[00:57:24.360]and has kind of a unique land access story.
[00:57:28.950]So hopefully you can join us then.
[00:57:31.170]But thank you, thank you, Cody.
[00:57:32.910]Thanks everybody. Have a great day, thank you.
[00:57:35.263]Bye. Bye.

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Cooperative Innovation in the Food System, Session #1

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