VALUE-ADDED: Earthwise Processors, LLC, Moorhead, Minn.
Market makers

Four years ago, a group of farmers in northern Minnesota were having trouble accessing markets for their organic grain crops. So they bought a processing and storage facility in their own backyard.

By Deb Hyke

Farm-Biz at-a-glance

For farmers transitioning from conventional to organic production, the switch is perhaps made easier by the lure of eager markets and premium prices. But while such markets and prices do exist, physically reaching them can often be a challenge.

Proximity certainly did matter for Curt Petrich of Crookston, Minn. Premium markets were hundreds of miles away from the northwestern corner of the state where Petrich farms. He was beginning to weary of long-distance drives hauling crops to the Twin Cities area when he heard about a seed processing plant that was a mere hour away, in Moorhead, Minn.

Petrich asked around, and uncovered three intriguing bits of information. First, he learned that the plant was well equipped to handle organic grain, and in fact had been processing some organic product. Second, he was told that the facility currently belonged to Anheuser-Busch—the company had been hoping to process special variety of barley there. And third, Anheuser-Busch's plans had changed, and the facility was now for sale.

“I’d heard that Monsanto and Cargill were interested in this place,” Petrich said. He relished the idea of trying a bit of vertical integration and keeping the building out of the hands of the big guys. In an emerging business like organic farming, Petrich saw wisdom in holding on to a bigger segment of the added-value opportunity.

Plus, there were some specific features of the plant that Petrich felt were very appealing. “What attracted me almost immediately was the fact that this place was built to keep identity intact,” says Petrich. Identity, he knew, was often a key to successful overseas marketing. Asian and European customers, in particular, will pay to be certain they are getting a specific variety—and only that variety. They do not want any interloping seeds or grains, or variations in quality. This can be especially true of a commodity that is certified organic or non-GMO.

Banding together

All of this convinced Petrich that he should set out on a new adventure and seriously pursue ownership of this unique site and the opportunities that it presented. Yet he knew he couldn’t go this alone: He would need partners to help carry the financial and administrative burdens.

Petrich approached five of his farming neighbors with the idea of a joint purchase. Together, he suggested, they could own a business to market their organic products and capture a slightly larger piece of the profit margin. Their reaction was not initially positive, notes Petrich. “They all said, ‘You want to do what? And they want how much?’”

But slowly and surely, the concept grew on the group. Of the six (counting Petrich), five were organic. According to Robin Brekken, also of Crookston, they all faced the same challenges regarding marketing. “I remember thinking, ‘Okay, I’m organic. Now what?’ All the old markets and marketplaces were of little use anymore."

The costs of shipping, including the time spent managing that aspect of the farming business, were a new concern for these producers, many of whom had only recently transitioned into organic production. This business could address that. “As we looked at the efficiencies we could create, we suddenly saw the value of this venture,” notes Brekken.

Before they approached a banker, the group hired a consultant who could assist them in determining if this was a feasible business idea. The consultant studied market demand, plant capacity and debt serviceability. He also helped set up a model cash flow to assess whether the idea could sustain itself. Eventually, the group put together adequate equity to secure a loan, and financing was obtained through a local lender.

“I made Anheuser-Busch an offer—I told them I’d give them their asking price in cash,” notes Petrich. “That got their attention.”

Preserved identity processing and handling

Petrich is now manager of the aptly named Earthwise Processors, LLC. “All processing here is segregated,” he explains. This means that only one type of seed grain is processed at a time. To make that guarantee, careful cleaning is required between loads. Generally, an entire day or more is dedicated to the preparation of a product for sale. Cleaning alone can take up to eight hours, and is often completed in the evenings to prepare for the next incoming crop. Even the truck bay must be carefully swept and blown out with pressurized air if a batch of organically produced grain follows one that has been raised by conventional methods.

“What we offer is a specific variety, of specific size and specific quality, packaged and delivered to a specific location,” says Petrich. Earthwise customers can call up and make a request, and the staff will do whatever they can to find and purchase that product. Usually farmers deliver their crops to the facility, but if needed, Earthwise can pick up from the farm site. Earthwise currently processes soybeans, wheat, corn, millet, safflower, sunflower, flax, barley, peas, canola, edible beans, oats and popcorn, among other grains and seeds.

This care in handling is in large part why Earthwise can expect a premium price for the commodities it processes. Fifteen employees run the plant’s equipment and complete the cleaning and sorting of the crops received there. Products are carefully cleaned and sorted by custom machinery designed to meet customer specifications, notes Petrich.

An air screen and destoner remove any foreign materials from the seeds and grains. Gravity tables are used to separate the product by weight. Another roller/separator segregates soybeans by shape. Again, the expense of all of this is justified by the selling price, says Petrich. Earthwise’s clientele expect no less.

After the initial preparation, products are packaged according clients' needs, in paper or plastic, and in quantities ranging from 25 lb up to 2,000 lb. Products can be also be shipped in bulk using containers, trucks or railcars. Grains and seeds can also be stored on site, if needed. Earthwise Processors operates two warehouses that total 35,000 sq. ft. In addition, the site has 40 storage bins with a total capacity of 400,000 bushels.

Expanding markets, at home and abroad

Earthwise's buyers are far more exacting than the domestic market generally, notes Petrich. In order to provide the greatest possible transparency, Earthwise is certified through the American Institute of Bakers (AIB). All product is tested once when it enters the plant, and again after processing to verify precisely what is being received from farmers and to certify that clients are getting exactly what they have ordered. When truckloads of a product leave the plant, Petrich notes, the truck is sealed at the point of departure. Clients also receive a photo of the product as it departs from Earthwise, to give them a point of reference in the event damage occurs during shipping.

The AIB certification is an outward verification of the promise Earthwise makes to its customers. Earthwise also holds certifications from Quality Assurance International (QAI) and Farm Verified Organic (FVO), and they are in the process of establishing Hazard Analysis and Critical Control Point (HAACP) procedures.

This year, Earthwise will celebrate its fourth anniversary. Petrich is reluctant to declare the business a complete success, but growth thus far has been dramatic.

Petrich, who also serves as president of Earthwise, notes that 300 farmers bring their goods to this outlet. He estimates that the original six owners sell 80 percent of their total crop production through the facility.

The doors that have been opened and the opportunities created have certainly put demands on the time of the owners. Yet they all feel the business has been a marketing asset. “We sell to Japan, to Korea—but we also sell domestically, right next door,” says Petrich.

The next phase may involve some further processing for the products Earthwise handles. Petrich knows his adventure in organic production is just beginning. “I wouldn’t be here as a farmer if I hadn’t switched to organic,” he states. He’s hopeful that the doors opened by Earthwise Processors, LLC, will multiply, bringing opportunities to organic farmers across the region.