The United States Department of Agriculture (USDA) reported in August that farm profits would drop by more than 30 percent this year. It's bad news for an industry already plagued with high production costs and falling prices.
So how do our farmers, who struggle each year to just make a profit—let alone keep it—overcome such a downturn?
In Minnesota, more and more farmers are depending on each other by pooling their resources to start businesses, which ensures they're involved with processing, not just growing, crops.
By spreading risk among many farmers, growers are able to get into the higher value side of food and fuel production. And, the vertical integration that farmer-owned cooperatives bring can help a grower weather the tough times on the farm, says Andy Quinn, a corn and ethanol producer in Litchfield, Minnesota.
"It acts as a balance. When the bottom drops out of corn prices, things are usually better for ethanol producers and vice versa," explained Quinn, a founding member of Bushmills Ethanol, which was started in December 2005 after private investors opted against building the facility.
"We knew if we wanted an ethanol plant, we'd have to do it ourselves," Quinn said. "So we hit the road to raise money for our new venture. I'd swear we met with every farmer in this state to talk about the possibilities of ethanol."
Within three months, Quinn and his fellow members had enough money to break ground on the new plant, and within a year, the plant was built and all of the debt was paid back.
"Retiring that debt has really allowed us to survive this slump," said Quinn. "It gives us just enough room to breathe and pray for a better year ahead."
Farmer Andy Quinn
Because of the risks involved in production agriculture, coupled with its lack of profitability, it is difficult for farmers to attract investors to back their production. Thus a cooperative is ideal for the industry because it allows farmers to pool their resources and gain access to the tools they need to operate, like new machinery or lower interest rates at the bank.
"A combine can cost upwards of $300,000, and trust me, your average family farm cannot afford to purchase new equipment every time it's needed," Quinn bemoaned. "A cooperative enables farmers to make the necessary purchases for the joint use of all its members."
Farm cooperatives are not only beneficial to the farmers; they are also essential to the development of the rural communities that surround them. A cooperatives returns are distributed directly back to the members—not to investors in New York City—who in turn, distribute them into the local economy.
"Cooperatives, in my mind, are two-fold," Quinn explained. "It directly benefits the farmers, because we can purchase services and materials that we wouldn't otherwise have access to, like healthcare benefits and new equipment. And it directly benefits the community, providing jobs and pumping revenue back into the our economy."
Minnesota—the state with the largest number of business cooperatives in the nation—can certainly speak to their economic benefits. A report released by the USDA shows that Minnesota's farm cooperatives account for more than 11,000 jobs and $17 billion in revenue.
A good amount of that revenue comes from ethanol cooperatives like Bushmills Ethanol. And while ethanol is having a tough year, Quinn says it could be much worse.
"You're not a real farmer if you can't handle change. Agriculture is an ever-changing landscape, and in order to survive, you have to adapt and overcome," he maintains. "I'd have been driven out of this business long ago if I had to rely on someone else to determine my fate."
Today, Bushmills Ethanol has more than 440 members, and since its inception in 2005, has yet to miss a dividend payment to its shareholders—or should we say farmers.
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