Adding value to bulk corn through preparation and packaging

Monday, December 7, 2015

Thirty years ago, the Reesor brothers started selling late-summer corn to passersby from roadside wagons. Today, their packaged corn operation employs 400 people, spanning several Ontario locations and three U.S. states

by JIM ALGIE

Rob and Richard Reesor credit a fairly simple packaging idea for the dramatic expansion of their Ontario-based, cross-border sweet corn operations.

The brothers began 30 years ago as university students with five acres at their parents' York County farm in the Rouge River watershed, just beyond Toronto's northeastern edge. In those days, they sold their late summer crop from roadside wagons to passersby in the urban fringe. Corn income helped with tuition.

Now they manage more than 6,000 acres of sweet corn production in several Ontario locations and three U.S. states, as well as a trio of packing plants to process the crop in Ontario, Virginia and southern Florida. Through retained earnings and careful debt management, the Reesors have quietly turned the roadside, sweet corn business model on its ear.

Instead of a single-season, late-summer speciality for drop-in clients, their Rouge River Farms use a combination of owned and rented land to grow sweet corn year-round for supermarket buyers across much of eastern North America. Spring workload combines May/June seeding in Ontario with the season's first harvest in Florida to boost peak employment to about 400 people.

It's a farm business the brothers could not have predicted when they began. Not even Richard's one-time business plan for a sweet corn wholesaling enterprise during one of his York University MBA courses anticipated the scope of what Rouge River Farms has become.

As they chatted in the board room of their 17,000 sq. ft., two-storey Gormley head office, sweet corn arrived in 50-foot, live-bottom trailer loads from nearby fields. On the board room walls hung a Kent County soil survey chart, detailed maps of York County and the regional municipality of Haldimand-Norfolk as well as a full-colour map of North America.

Elsewhere in the two-storey building, a crew of about 50 workers received and sorted fresh cobs of bi-colour corn. In a process the brothers have evolved over time – including a series of custom-made, conveyor-linked, corn handling devices – cobs from the field pass through an exterior, water-chilling chamber to cool to about 4.4 C before trimming and packing through a brief period of refrigerated storage, then delivered to customers in refrigerated, highway trailers.

In early autumn, Gormley becomes a 24-hour-a-day packing operation at a daily rate of 4,500 cases. It stops only for cleaning and scheduled work breaks, preparing fresh product for stores as far west as the Mississippi, east to the Atlantic and south to the Gulf of Mexico. The Gormley plant fills orders within hours of harvest. More distant locations take longer, but the objective is to put corn within days in the homes of their ultimate consumers.

"In seven to 10 days, it will still be a good eating experience but, obviously, the shorter the better," Rob says. "In Ontario, we get it in less than seven days, sometimes within the day."

Since the Reesors sought to push beyond the edges of Ontario's winter-limited growing season for sweet corn, they've cautiously expanded an empire that just seems to keep on growing. Current plan is to add corn acreage this year in Virginia where the brothers opened their newest packing facilities last year.

Rob's son, Curtis, has joined the firm lately as Rouge River's comptroller and "seems to be doing a good job" with company finances, Rob observes. However, it's still too early to tell about his son's long term interest and involvement, he says.

The Reesor brothers are cautious about publicizing some aspects of their business, which is a private partnership between them. They preferred not to talk about total production volume, total acreage under cultivation and the particular varieties of sweet corn they grow. It's a sign, perhaps, of tight competition in the Ontario market for fresh produce and their awareness of at least one other Canadian grower pursuing North American markets through U.S. expansion.

"Today, we're harvesting here and in Ohio," says Richard. "We're planting in Florida for December harvest. We have crops at different stages of maturity in Ohio and Florida and Georgia that will be harvested between now and then."

Crucial shift
The U.S. breakthrough and major expansion of their Canadian grocery store sales came with a "crucial" shift away from delivering unprocessed corn cobs in bulk. Their move to a cellophane-wrapped, tray pack of five trimmed cobs saves retailers the labour and trash involved in handling unpackaged bulk corn. It reduces potential customer tampering and increases food security.

Tray-packed corn also opened doors for Rouge River. The move from roadside stands and farmers' markets to supermarket sales began with a cold call to a local Loblaws produce manager. "We had a surplus of corn and we started calling stores," Richard recalled. One produce manager led to others.

By the time they were supplying 100 Toronto-area stores with loose corn in bulk, they had begun looking for ways to expand both supply and season. Customer demand drove the search for earlier maturity than is possible in their York County home territory. They added crop land in the Langton area of Norfolk County.

"It was probably a week or 10 days earlier, so it just lengthened our season and led to the next move," Rob says. Norfolk County harvested as much as 15 per cent of Ontario's 22,318-acre, $38 million crop in 2014 and claims to be Canada's leading region for sweet corn production. Their successful move to Norfolk got them thinking about Ohio.

"Instead of a week, let's get a month," Richard says of their rationale at the time. The hurdle they faced as Canadian growers moving into U.S. production was that most customers "were fairly satisfied with their established U.S. suppliers," Rob says. "So when we tried to sell our bulk corn and bring it back here, it was not an easy transition."

At the same time, new varieties were expanding the season, flavour and palatability of sweet corn. The Reesors chose breeds that are "consumer friendly, rather than farmer-friendly," Richard says. Their choices are widely available "gourmet sweet" varieties and all are non-genetically modified because, he says retailers really don't want GMO products. When it comes to variety selection, the Reesors emphasize "taste and quality versus straight yield."

Even so, grocers initially resisted buying their U.S.-grown corn. "It was not until we started tray-packing corn that they started paying attention to us," Rob says. A particularly large crop 15 years ago and the relatively poor prices that resulted got them thinking about how to add value to bulk corn through preparation and packaging.

"We tried it and quickly our wholesale bulk business disappeared and became a tray-pack business," he says.

"We didn't invent tray packing; the stores were already doing it on their own. What we did was deliver a product ready to sell. So our U.S. corn that we were trying to sell in bulk was easier to sell and so that's when we went from Ohio to Georgia."

Rob and Richard share management duties, but Rob supervises plant operations while Richard runs the agricultural side. The enterprise depends heavily on a core of key employees who manage various aspects of the business. Both men emphasize their dependence on others.

"We couldn't imagine Richard and me going back to doing everything," Rob says. The operation has a "highly competent team of managers" and supportive family members, particularly their wives. "Two people don't build a business like this without having tremendous staff that you can trust to take ownership of a piece and then run with it," Richard says.

Neonics limited
In all growing regions, Rouge River uses minimum tillage tactics for field preparation. They plant as much as possible into cover crops to minimize erosion, using shallow mulch tillage and zone tillage equipment in front of the corn planter.

They use commercial fertilizer and cover crops to manage fertility with composted corn trimmings and purchased poultry manure compost in some regions. Hired consultants in each region scout crop, sample plant tissues and provide advice about fertility and pest control. Using integrated pest management (IPM) methods, they monitor for insect damage and disease and treat for any problems that arise.

The regime includes limited use of neonicotinoid-treated seed, which now makes up only about a third of the Rouge River crop. Richard adopted an Integrated Pest Management approach to neonics in 2014 "in light of the concerns involving bee health." Although Ontario's controversial new regulations on neonics don't apply to sweet corn, Richard now restricts their use to the "most vulnerable lands," essentially areas where early plantings go into crop residue on sandy soils.

Both Reesors maintain dual U.S. and Canadian citizenship, a legacy of their American-born mother, Stella. American citizenship simplifies potential border-crossing problems, but there have been surprisingly few problems either with doing business in two countries or shipping products back and forth between them.

"NAFTA (the North American Free Trade Agreement) made it easy," Rob says. "When we started, there was a 15 per cent duty on corn coming across the border into Ontario, which gradually went away over time," Richard says. "So it's a different mindset. Produce moves very easily."

Variations in the value of Canadian and U.S. currencies are just a fact of life for businesses such as theirs, the brothers say. "In our business, most people think in U.S. dollars," Richard says. "Even Canadian inputs are more or less based on the U.S. dollar, because it's a world market for fertilizer and seeds. Wild fluctuations are a factor but generally prices don't change much in the cycle of a crop."

Their biggest risk comes from adverse weather and, in some ways, it's less risky in Ontario than in other regions where the Reesors grow corn. Ontario yields are equal to those in Florida and Georgia, and northern input costs are generally lower because of lower pest control costs.

Their Ontario operations feature soils and weather that are generally favourable to sweet corn production. There's limited need for irrigation and pest control requires less attention because insects tend not to survive the Ontario winter.

Rouge River's business has also benefitted from a close appreciation of the retailers' perspective. While still in high school, Richard helped run his mother's retail store at the York Farmers Market in Thornhill when their father, Elmer, became fatally ill. His experience marketing eggs, poultry and produce directly to retail customers helped him connect with retailers later when he and Rob began knocking on grocers' doors.

"I would think that, generally, we have a very strong, positive opinion of the major retailers in Canada," he says. "They've been very good and very fair. They've helped us improve our game," Rob concludes. BF

Keys to taking farm business to the next level
Rouge River Farms' business pattern of diversified regions for cropping and added value packaging, together with reliance on rented land, contract advice and field work, follows a pattern identified in Canadian agriculture by Ivey Business School professor David Sparling.

 "We do see a number of entrepreneurial farmers or farming families who really take their businesses to the next level," Sparling says. Chair of Agri-Food Innovation and Regulation at Western University's Ivey School in London, Ont., Sparling and his students have examined large farm business adjustments during a period of growth in Canadian agriculture between 2007 and 2011.

"They aren't putting all of their assets into land, so they can rent land and sometimes rent facilities. They'll share equipment, both transportation as well as production, so they tend to be lean," he says. "The other thing is the whole idea of moving up the value chain. `Let's get closer to the consumer, where there's more value,'" he says.

Sparling was unaware of the Reesors' business until a reporter called. However, Rouge River's regional diversification and packing techniques for sweet corn do fit the pattern of other, large-scale farming enterprises Sparling and his students have analyzed.

"So the retailer gets a solution in terms of a much better product with a lot less waste and the consumer gets exactly the same efficient use of assets and especially scarce financial assets," he says.

Sparling emphasized other characteristics of the Reesor operation that seem to match his findings, including "a mixed group of capabilities, usually within the family, but also bringing in expertise whenever they need it and this idea of going up the chain."

Diversification into U.S. growing regions was less common among the businesses Sparling and his students have studied, although he did refer to Canadian-based hog farming operations with facilities in both countries.

Recent Ivey School studies show that Canada's largest farms produce and invest more proportionally than smaller farms, but also have developed complex business strategies for growth and diversification. A widely-publicized report by Sparling and post-doctoral fellow Nicoleta Uzea following their study of Canada's largest 2,500 farms with more than $1 million in annual sales showed that those farms accounted for 28 per cent of the nation's agricultural production.

A related but less well-known 2013 study by Sparling and Ivey research associate Erin Cheney for Agriculture and Agri-Food Canada, examined a sample of 14 of the country's largest farms to identify recent operating changes. What Sparling and Cheney discovered through interviews and financial records were mainly family-run and family-owned businesses with "complex" and "sophisticated" operations featuring multiple customers and multiple lines of business.

"Not only were the farms complex, they were changing," the 28-page report concluded. "Many had moved into new lines of business and adopted new business models." As well, the researchers found large farm operations they studied rely typically on leased assets for expansion.

"Managers of the large farms examined did not feel the need to own all of their productive assets," the report said. Among the 14 unidentified businesses studied, 11 "leased at least part of their productive assets, usually land but also equipment and facilities to expand their capabilities without straining their financial resources."

The farms operate at multiple levels of the chain and have taken the extra steps needed to make their farm successful and competitive, the report says.

Despite diversification of farm-related businesses along the supply chain, the farm "remains the heart of the venture and the main focus of the leaders involved. "These are the farming businesses of the future, highly productive enterprises that take on all activities needed to maximize the value of their production," the report said. BF