Lester Kroeger and neighbor Jerry Stencel are Minnesota pioneers in identity-preserved (IP) crop production. They've been at it nearly 25 years.
The Waseca area growers helped form the Minnesota Waxy Corn Growers in 1978 as farmer owners. Their company later morphed into SunRich, located at Hope, MN, to reflect the fact they were then raising and processing IP soybeans for export to Japan to make tofu.
Today, they contract for any IP crop for which there is a demand, though it's mainly corn and soybeans, says LaVerne Klecker, grain manager for SunRich.
A big hunk of the production is certified organic corn and soybeans, which they contract from 15 states. They also handle non-genetically modified grain; clear-hilum soybeans, mostly for tofu production; and green soybeans for food and soymilk. They also market food ingredients.
“I'm totally devoted to our company, and I just love the way they've operated,” says Kroeger. “We get basis-fixed contracts, and you can get them 12-18 months before we plant the crop.”
Of course there is extra work in producing identity-preserved crops, but the incentive is a price premium that hopefully makes it well worthwhile. How good can those premiums be?
“It can vary so much, but that is kind of the excitement of it,” notes Stencel. “There were years when we got a $1/bu premium for waxy corn, and then there were years when we just broke even with the regular dent corn. But we hung in there, and I think it has turned out really well for us.”
As original farmer owners, Kroeger and Stencel knew there would be challenges — and there were. “We've had a few tough years along the way like every business has,” Kroeger says, “and we've all just had to dig our heels in and come up with some money, or whatever, to keep it going.”
Adds Stencel: “This venture has had good leaders, which is the key. In the end, it has definitely been worth it.”
To help handle the very sizable capital investment involved, SunRich merged with Stake Technology, a Canadian firm, in 1997, and became a stock company traded on NASDAQ. The original investment of the farmer owners was converted to stock, but many contract growers today are not stockholders.
“I see this approach of a farmer-started venture as a good way to gain extra value,” notes Jurgen Peters, University of Minnesota extension educator at Waseca. “These farmers who are owners can profit both from their farm production and profit from earnings of the company. They are in it from both ends.
“I see this as a beautiful way to develop a market for yourself, and it may serve as a model for farmers around the country to look at other possibilities,” Peters adds. “But it takes farmer and community leadership to light the fire.”
Klecker makes the bottom-line point of whether such ventures succeed or not. “We always look at it this way. It's got to work for the grower, for SunRich and the buyer of your products. As soon as it doesn't work for one of them, it's not going to end up working for anybody. It's got to be a win-win-win deal.”
What about the hoops a grower has to jump through to stay in compliance with IP rules?
“The hoops really aren't that difficult to jump through,” says Kroeger. “It's something you grow into.”
Stencel echoes that sentiment. “It's just another form of farming, and once you've been at it for a while, it comes easy. But you have to pay attention and work at it. If you get anything mixed up, you've lost your opportunity for a premium.”
Bill Wilcke, University of Minnesota extension ag engineer, sees IP crop production as a current niche market, but one that will definitely grow with a lot of small niches.
With that comes the challenge of avoiding co-mingling and keeping everything identity preserved from planting through sale.
“Preserving the identity of grain with special characteristics is likely to become increasingly important for producers and other grain handlers,” he notes.
Here's Wilcke's checklist of pointers:
Develop a customer-service attitude. It could be critical for customer satisfaction, and premium prices could be at stake. Auditing and testing may be part of the deal, but honesty and trust are also important.
Know what's in your contract. The devil can be in the details.
Check to make sure the company is bonded and solid, so you're assured of getting your money.
Develop an IP plan. Make a list of all steps involved in producing a crop from seed to final delivery, trying to anticipate all points where contamination could occur. Record the plan, and document actions to implement it.
Consider growing and storing IP crops in separate locations. Or, consider storing IP crops in bins not tied into the grain handling system you use for other crops.
Keep detailed records. Use names or numbers to identify each field, grain bin and grain-hauling vehicle and consider placing signs or labels on each field, bin or vehicle.
Clean equipment between crops. This includes planters, combines, trucks, dump pits, grain conveyors, dryers and storage bins.
Keep an eye on custom operators. Watch them to make sure they clean their equipment, too, so your grain isn't contaminated.
Keep samples. Consider taking samples of your seed, harvested crop, delivered crop, attaching meaningful labels and keeping samples until you are sure the final buyer is satisfied the crop meets identity and quality standards.