Value-added products open up new niche markets for Ontario farmers

by SUSAN MANN

It was Hart who co-founded the snack food product called Real Roasted SOYS, along with Diane Marcou. Hobbs joined the business after finishing university in the spring of 2000 and is now the operating manager and sales person.

What they do is grow and buy large seeded soybean varieties, which are uniquely roasted and then seasoned or candied. The product is available in 10 flavours -- unsalted, salted, salt and garlic, sour cream and onion, barbecue, honey, maple, milk chocolate, white chocolate and mixed chocolate.

"We needed somebody who lived close by who could be there to look after it," says Sharon, explaining how Valerie came to the business. Both Diane and Sharon had full-time jobs so they couldn't devote the hours needed to the venture. "So Valerie has taken it to another level."

The business got its start after Sharon hosted a kitchen meeting and invited Diane Marcou, senior nutrition consultant with Versa Food Services, as guest speaker. The two graduated from university at around the same time and had known each other for a number of years.

The meeting featured a dinner highlighting dishes made with soybeans. At the end of the meeting, Diane, who had been snacking on the roasted soybeans, said, "We really should do something with these." "And that's how it got started," Sharon recalls.

Sharon was interested in the venture because she is involved in a farm that grows soybeans and then roasts them for animal consumption. "I had seen soybeans as snack food when I was down in the United States and realized that they weren't being offered in Canada."

Now their product can be found in gift shops, farm markets, health food stores and some grocery stores and recently they started working with some larger distributors across Canada. To market Real Roasted SOYS, they go to food shows, work the phones, do mail order and deliver to stores.

Sharon and Diane began the business as a cottage industry because they were interested in "going right from the field to the snack food." One of their goals has always been to make roasted soybeans a more mainstream snack, something they say they have now accomplished. Indeed, sales have tripled since about 1999.

Specialized equipment is needed to roast, process and package the products. Environmentally controlled storage facilities are also required to maintain a uniform product. Startup costs such as these run to about $30,000 to $50,000 and do not include the cost of buildings, shipping equipment, vehicles and office facilities.

Yarns, blankets and tartans
At first glance, it wouldn't seem like Sharon, Valerie and Diane have anything in common with Dave Wight, owner of Belle Vallee Wools near New Liskeard in northern Ontario or Barry Bragg, who along with his family operates Bragg's Wild Bird Seed near Bowmanville. But all three operations have created a thriving business by taking a raw commodity and adding value to it on their farms.

For Wight, the hardest part has been that, since he's not producing a food commodity, his woollen mill operation falls into a grey area when it comes to many rules and regulations. The search for machinery of cottage-industry size to process his own 3,000 to 4,000 pounds of wool production a year has also been a challenge.

When he was setting up the business in the late 1980s, Wight ended up buying old machinery from a factory near Tavistock. But the equipment was much larger than he originally intended to buy. In addition, it needed to be cleaned up and the motors had to be rebuilt, a process that took two to three years in his spare time.

While learning how to use the equipment and refining his wool processing, Wight and a local farmer he hired to help him discovered they were allergic to the processing chemicals, so they eliminated them. "We actually went back to a 1920s production system, which also kind of gave us a very unique niche in our selling." Wight used to raise finished lambs on 400 ewes on his farm 35 km northeast of New Liskeard. In addition, he used to do custom work, such as baling hay. "I realized that I had these tons of wool that I was just giving away and it didn't seem to make any economic sense."

After doing some research on where the wool went and what it was worth, he discovered that about $175 million worth of finished wool products are brought back into Ontario every year. "All of our raw wool was just exported and nothing was done with it."

Since he first began producing yarn in 1992, Wight's enterprise has undergone slow and steady growth. Now he has just 100 ewes. He buys raw wool from northern and southern Ontario farmers and uses about 100,000 pounds a year.

Belle Vallee Wools makes yarns and weaves blankets and tartans. It is the only place in Canada that starts out with raw wool and can turn it into family tartans. "It's becoming a larger and larger portion of the business," he says. "That's our specialty and that's where we're heading."

Another business specializing in a unique product is Bragg's Wild Bird Seed, where the emphasis is on producing a very clean, high quality product without any preservatives in the finished seed. Bragg's also tries to provide exceptional service, carrying the bags of seed to customers' cars at their on-farm retail store and opening on Sunday if someone comes by.

Three-quarters of the crops grown at Bragg's go into making birdseed. Four different kinds of peas are used for pigeon seed, three kinds of corn for pigeon and birdseed, sunflowers, barley, oats for horses. They grow Vetch and hard spring wheat. Soybeans are grown to help with crop rotation. "We keep trying different crops every year," Barry says.

The Braggs still do custom corn drying and storing and some of their crop is still sold on the commercial market. But with corn and soybean prices hitting the skids in 1991, they came up with the idea for a wild birdseed business. They started to grow sunflowers and sell them off the farm.

Now they sell some 75 different products, including eight different wild birdseed mixes and eight different pigeon feed mixes. They also provide a custom mix service and now make pigeon grit. About 1993, they got into the racing pigeon feed business, which they supply to customers across Canada. In 1995, they built a pigeon loft for 288 birds and established the Bragg International Race. But the pigeon race is temporarily because of workload.

The entire family is involved in the business. Barry's ex-wife, Anna, does the books, daughter Sara helps out at various shows and son Mark does all the growing of crops. In addition to administrative duties Barry helps run the on-farm retail store and helps with mixing the seed.

Jump in municipal taxes
It's hard to determine if more farmers are doing value-added enterprises on their farms these days as a way to increase income at a time of dismal crop prices. "I think it's fair to say that there's been a substantive movement by a lot of producers either to diversify with a different commodity mix or retail directly (to consumers)," says Jack Wilkinson, president of the Ontario Federation of Agriculture (OFA).

But value adding in itself doesn't solve low commodity prices. OFA has always espoused the view that farmers should do anything they can as managers to use their time and energy better and add value to their product. "To assume that you can add value to a product and that replaces the dollar losses on a farm commodity...it doesn't, work that way," he adds.

OFA believes the farm side of the business should be profitable and any value-added activities farmers do should be viewed as a business that should also be profitable. "You don't value add to try and make an unprofitable side of the business profitable, in my mind, because you might as well just buy the product from somebody else."

For many farmers, getting into a value-added business has meant erecting buildings or other facilities, such as cold storage, a retail store or some type of processing structure on their farms. But that has led some municipalities to reassess that portion of a farmer's business from agricultural to commercial or industrial. And that reassessment has meant a huge jump in municipal taxes for some farmers.

During the last number of years, OFA has been lobbying the provincial government to get this question clarified so these farmers aren't facing a hefty tax burden. "Our view is that as long as it's just their own produce, they should be basically treated as farm," Wilkinson says. "The goal here is not to impact in a negative way someone who's just further processing their own produce and marketing it."

He does acknowledge, though, that the question is not black and white. For example, is a winery with it's own vineyard that is creating and retailing its own wine a farm or is it commercial? And what about the farm's retail store? Should that now be assessed as retail or still part of the farm?

The retail store on the Oegemas' turkey farm was reassessed by Southwold Township as commercial in 1999. The store, called The Turkey Shoppe, is where the Oegemas sell about one-third of their turkey production as either fresh or frozen. The rest goes to a processor, which further processes it into turkey parts. They grow about 50,000 to 55,000 turkeys a year, which is considered to be a medium-sized operation.

Even though Southwold Township has some of the lowest municipal taxes around because the Ford assembly plant is located nearby in Talbotville, commercial taxes are still a whole lot higher than agricultural, says Tom Oegema, one of four partners in the Oegema turkey farm. The other partners are his brother, Heiko, and his nephews, Mike and Wayne.

Tom says commercial taxes are "no fun," but still he doesn't object. "In all fairness to all the other retailers, we ought to carry our proper share."

Has value added moved into mainstream agriculture? The answer is complicated by the fact that value added can be anything from a producer growing specialty crops, to someone setting up a bed and breakfast operation, to on-farm processing. It can even be something as basic as the large, high quality cold-storage facility set up by the apple growers co-operative in Georgian Bay, which allows the growers to market apples during most of year.

"Some people wouldn't view that as value adding," Wilkinson notes. But (the co-operative) view is "that it substantially changes the profitability of their business because they're not dumping all their product within the first two months of harvesting."

The OFA president sees value added as anything that producers can do to change their farm operation to add value to the bottom line. For some farmers, that would just be adding storage facilities so they can either market throughout the year or lower their costs. For others, it's turning a raw commodity into a finished product that they then either sell themselves or market to a retailer.

But some farmers still see value-added as just a niche-market activity. That's partly the view of Jack Vanderkooy, a former dairy and cash crop farmer who now grows seedlings for greenhouse growers. "People come up with a novel idea, but usually there's only one or two people doing that in the province," so it's a niche he says. On the other hand, he also considers farmers growing premium soybeans as doing value added. And that's done on a broader scale.

Al Mussell, senior research associate with the George Morris Centre at Guelph believes more farmers have been getting into value-added businesses during the past five to 10 years, particularly in western Canada.

There are a number of reasons for this trend, but a leading motivation, says Mussell, is "simply that we've got U.S. farm programs that, even in the case of the least distortionary one currently being debated under the Farm Bill, still provide levels of support that our treasury hasn't any intention of matching," he says. If the price of corn and soybeans for the past two years becomes the normal price, "you've got to do something else, something better and different and smarter. That takes you immediately into value added."

On their 1,200-acre farm, the Oegemas consider themselves to be adding value in a number of ways. In addition to selling turkeys through their retail store, they grow specialty crops, Identity Preserved soybeans or crops such as winter wheat or soybeans for seeds.

Some of the winter wheat is a specialty wheat grown under contract for a mill in Toledo. "They pay a premium. It's not much, but in this competitive market where the market price is so low, you have to take everything you can get," Tom says. "It's not a lot of extra work to do a good job and meet their requirements." BF

Handy hints for successful value-added farming

by SUSAN MANN

* Growing specialty crops such as Identity Preserved soybeans isn't going to make you rich. "But it makes it a little easier to try and make a go of the cash crop business today. These are difficult days." -- Tom Oegema, turkey and cash crop farmer.

* Get tax rules in writing because no one in the tax department seems to have the same interpretation of the rules. -- Barry Bragg, Bragg's Wild Bird Seed.

* When it comes to marketing off the farm, being in a good location that's fairly close to an urban area and with a lot of traffic makes it a whole lot easier. "It's difficult to have off-farm marketing if you're not in a well travelled area. People really have to be committed to come to you if you're not on a busy road or if you're difficult to find." -- Tom Oegema.

* "Go for it." -- Sharon Hart, soybean and cash crop farmer and co-founder of Real Roasted SOYS.

* Don't pass up opportunities for free advertising, such as when the local newspaper or TV station wants to come and do an interview and take pictures on your farm. Oegema turkey farm has benefited tremendously from the local TV station or newspaper taking pictures of turkeys on their farm for Thanksgiving for Christmas. --Tom Oegema.

* "For me it's been an opportunity to be creative, and designing your own niche market is certainly exciting." -- Sharon Hart.

* Seek professional help where needed, especially in advertising and promotion and in setting up books with the right computer program. -- Barry Bragg.

* When you encounter obstacles, take the long-term view. Even reflecting on where you've come from and how far you've come in the past year can help keep you on track. -- Valerie Hobbs, operating manager and sales person for Real Roasted SOYS.

* "Know the market and what the customers want, and then decide if it's what you want to do." -- Dave Wight, owner of Belle Vallee Wools.

* Research your business thoroughly and know all your costs before setting prices. "When we started, we really didn't add enough margin in." It hard to raise prices to ensure the correct margin once your customer base is established. -- Barry Bragg. BF

For would-be entrepreneurs, help is on hand from the Guelph Food Technology Centre

by SUSAN MANN

Last July, the GFTC started a $196,000 project in partnership with Agriculture and Agri-Food Canada called Value-Added Product/Process Development. Its purpose is to increase the demand for agricultural products, to provide Ontario producers, rural entrepreneurs and small to medium-sized enterprises with knowledge and skills to develop value-added products. It also provides training courses in product development, marketing and food safety, offers resource information and networking opportunities and seeks to increase the awareness of government funding that's available.

The project is aimed Ontario farmers, rural entrepreneurs and enterprises of less than 200 employees. As part of the project, three new value-added and product/process development courses have been developed. The first series has already been held and will be offered again later this year, says Barb Maly, business development manager for the GFTC. The basics of bringing a value-added product to market will be offered on Nov. 27, basic product development on Nov. 8 and processing foods safely on July 3 and Oct. 18. All courses are under $100 and will be held at the GFTC on McGilvray St.

Often, bringing a product to market involves going back and forth between the various steps and stages. For example, after very small-scale batches are made, they are then scaled up for commercial production in one of the GFTC's four pilot plants. But a formulation that works in a farm kitchen or in a lab might need to be redesigned once it's scaled up and industrial processes are imposed on the formula.

"There may be some ingredients that just don't stand up to that rigour," notes Maly. "That's why we have this intermediate step in our pilot plants. It's small scale compared to commercial, but the same types of equipment found in large-scale commercial production are used. All work is done on a confidential basis and clients own the research and development.

Another part of the GFTC-Agriculture Canada project is the development of a step-by-step reference guide to value-added product and process development. It will be available in May through the GFTC and cost $65. "This is probably beneficial for those who may not be able to take the courses but who just want a reference manual," she says.

The GFTC began operation in 1994 as a non-profit, fee-for-service organization and has been a self-funded company since 1997. As a technology transfer organization that was set up as a co-operative agreement between the food industry, the University of Guelph and OMAFRA, it can help with research and product development, pilot and process development training and food safety and quality systems. For example, the GFTC assisted in the development of two Caribbean seasoned chicken meat products, and Ontario's canned potato crop was saved by research conducted by GFTC. Other value-added projects it has helped develop include soy-based products, extraction of canola proteins and new shell egg products.

In the past seven years, the GFTC generated nearly $50 million in economic benefits through the development of value-added food products for its clients. In addition, it provides $300,000 to $500,000 worth of free advice to clients each year seeking to produce value-added products.

Another resource for farmers interested in investigating the potential of value-added businesses is a publication of OATI (the Ontario Agricultural Training Institute) called "The Agricultural Diversification, Value-Added Ideas Book."

Although OATI is in the midst of changing and downsizing to a consulting/research business from an ag-related adult education provider, it has an agreement with the Canadian Farm Business Management Council to distribute its resource material. The book is $25 and is available through the Council's Web site at www.farmcentre.com.

This book is chock-full of stories of producers who have started alternative enterprises or launched value-added businesses. An additional feature is the appendix, which lists sources for information and help. BF

Cost constraints force OATI to turn from adult education to consulting

by SUSAN MANN

Based in Guelph, the new OATI will primarily be a consulting business, with a focus on educational research and development. OATI finished a three-year funding contract with the federal government in March. During this time, its goal was to try and become self-sustainable and to offer courses on a cost recovery basis.

"We couldn't do it," explains program manager Cathy Bartolic, whose job finished on May 1. "We've looked at our records and, as our registration fees have increased, the number of courses we've offered has decreased." One-day courses were around $80, which is a bargain in the training industry but, she adds, "farmers don't see it that way." That $80 would have covered about 90 per cent of OATI's delivery expenses but none of its overhead costs. That would have meant OATI would have had to charge more than $80 for a one-day course.

"This reorganization recognizes both an opportunity and a need," says general manager Carolyn Pletsch, one of two people left on staff. "The need for adult education in agriculture has not gone away, nor has the value it can provide. What's changed is the allocation of responsibility and resources."

She says OATI sees "an opportunity to assist provincial and federal governments, agribusiness, business corporations, commodity organizations and others in their efforts to develop effective adult education programs." As for OATI's resources, those are available through the Canadian Farm Business Management Council.

OATI was incorporated in 1990. Its mission was to improve agriculture through the provision of adult education programs and the promotion of agricultural research. It was a non-profit, non-governmental organization committed to incorporating participatory learning principles into the practice of farmer training. BF