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SPEAKER 1: All right, from macadamia nuts in Hawaii, to muck onions in New York State. Do they go well together?
CHERYL: All right, hello, everyone. We are with the New York State onion farmers. We've been working with them. And the fact sheet is just a single sheet about the data we collected, and then, the conclusion. So our team. I'm Cheryl. This is Erin. And Serenity couldn't be with us today, unfortunately.
And so, for the introduction, there are three different areas in New York State that produce onions, and what they have in common is that they have beautiful organic matter-rich, soil and it is referred to as muck. And it is ideal for going root-based crops because there's no rocks. And it produces a unique and pungent flavor. And our goals were really to develop an understanding of collaborative marketing opportunities for New York State onion industry and to address opportunities presented by both marketing orders and cooperatives and to create deliverables that allow for easy understanding of the benefits and drawbacks of these opportunities, and to aid farmers in these understandings and point out the advantages and disadvantages of each alternative.
So our goals, our deliverables were really just the report which summarizes the differences between marketing orders and cooperatives. And the financial template is a tool that farmers can use to estimate potential costs and benefits of either alternative. And the fact sheet is a single fact sheet summarizing the information from the other two deliverables.
And for the research, marketing orders and cooperatives just outlining the differences between these two structures. The federal marketing orders are regulations that are registered by the USDA and AMS, which is the Agricultural Marketing Service. And that stabilizes market conditions for agricultural goods, such as milk, fruit, and vegetables. So these are typically used for agricultural commodities.
Market orders collectively address marketing challenges related to agricultural commodities. Producers initiate a request for a market order, and when enacted, it binds all producers and handlers under the geographic area listed in the market order. And the Agricultural Marketing Act states that 2/3 of producers or 2/3 of the acres of production is the minimum amount to be enrolled in a marketing order. And for cooperatives, they aid in-- they aid producers through collective action to gain market power through product differentiation, and they pull costs and resources to utilize lower marketing and processing costs and provide marketing services, contracted processing services, such as grading, processing, and packing, and they aid farmers in taking back ownership and autonomy of their business.
ERIN: Thanks, Cheryl. Now, we're going to jump into the financial template here. So essentially, what we were doing with our approach in this template is we needed to make some assumptions about how the market would work in order for us to make any kind of guesses about what the financial outlook would be. So these are the assumptions that we went into this project with.
First of all, New York State muck onions are a premium product that customers are going to be willing to pay a higher price for compared to the price of a standard onion. Branding and marketing also will increase the product's perceived value to the customer. Farmers will, if it is financially feasible, behave in a way that is economically rational, meaning emotions will not be a consideration.
Finally, non-financial benefits and drawbacks to market orders and co-ops will not factor into the decision. Though, in reality, we know that they very much would. So this template assumes that in both cases, both in the cooperative and the marketing order, there is a strict grading procedure to produce a higher quality differentiated product. So this is similar to what was done with the Vidalia onion, and it is what is made in the-- one of the main assumptions made in the report that we pulled a lot of our data from.
So moving on, this is a screenshot from the template, and this is just showing you what the input looks like. So if you're a farmer and you're filling out this template, this is kind of what you're going to be presented with and what you input to get the answers that we're putting out for you. You tell us if you want to look at a co-op or a marketing order. You tell us the number of acres.
And then, we have a whole bunch of really fun options, such as premium yield chance. That basically is just saying how much premium are you going to be getting off of the onions. The standard we have here is medium at 35%, which is the Vidalia onion markup, as well as the markup from the report.
Next, we have bags per acre. Typo on the slide, but that's fine. And this is per farmer, what their production is per acre. It's going to vary. Some have different techniques, things along those lines.
Next, we have co-op adoption rate. So this is saying 1% of people or 1% of bakers in the industry in New York State are getting involved in this co-op. We have some baseline percentages here, but I'll show you some more info later.
And then we have cost per acre. So this is also personal to the farmer. What is their estimated cost per acre of production? They can put in a custom value, but we also have these baseline 4,000 to 8,000 range. And then, it will just remind them what their input was.
Then we get some lovely outputs. So the really fun thing here is it will tell you your original estimated revenue, cost, and profit based on your selections. And then, using that, increase revenue based on each type of onion, and that increased expense is based on the cost of the co-op or the cost of the marketing order. It will give you your new cost and your new estimated profit.
Of course, this does not really take into account, let's say, diminishing returns, economies of scale, things like that. It is a very simple, linear-based model. But it is going to provide an introduction to an understanding of what this cost is going to look like.
Here, we have variable costs at adoption levels. This one was really fun to make. So if only 5% of the acres are involved in the co-op, that's the additional cost per acre.
Then, if we have 100% adoption at the bottom, that's the additional cost per acre at that cost structure. So things like that we were able to create for the farmer to input their own data. And that's just the graph of that there.
So you have this on the fact sheet, if you picked one up. If you scan this, you will be able to view the template. Basically, what you could do is you can make a copy of it.
It's on Google Slides-- Google Sheets. You all should have access to it. So if you go ahead and scan it, you'll be able to mess around with that template and see what we've been working on.
Now, we are going to have a little bit of technology fun, because Serenity did record her parts for us. So I'm going to go ahead and play the audio and you can hear her talk about her part of the project.
SERENITY: Thank you, Erin, for walking us through that financial template. This kind of allows us to segue into the next part of our presentation, which discusses a fact sheet that we've built. This is really just a simple document, as you can see here to the left, and as you've seen us passing around through the audience.
It's a sheet with a brief outline of the differences between a marketing order and a cooperative. It details what the key distinctions are, what the key differences are, and what they offer a farmer. So, for example, a cooperative does tend to have higher costs because its overall working through the business in different dimensions that could include processing, production, marketing, distribution channels, any of the above, in addition to the main key of marketing.
And then, a marketing order tends to be a little cheaper with initial investment costs. And it does focus mainly on marketing, so it doesn't allow for all those other channels, but maybe it is the right option, depending on the farmers that are involved, and depending on the region of New York that the farmers would like to operate in. And then, on the bottom, you can just see a step-by-step guide on how to start a marketing order or start a cooperative, and this is really just to streamline the process, make it a little less intimidating and give farmers the tools they need to get started wherever they see fit.
ERIN: It's like she's really here. Moving on to our conclusion.
SERENITY: And finally, to wrap up, we just wanted to walk through some key takeaways from our presentation. We'd really like to emphasize that starting either a cooperative or a marketing order for New York State muck onions will really help farmers take the market power back into their hands. In previous years, there have been joint marketing efforts to start either a marketing order, a co-op, or something to that effect, and it's been unsuccessful. But now, there's a new quorum of farmers that are really coming together.
And with proper branding, the muck onion truly is a premium product that can bring in both more money and more recognition for the farmers that are cultivating this business. Federal marketing orders and cooperatives both streamline the marketing efforts that farmers need to do in order to succeed and grow at a large scale. And we've outlined a step-by-step guide, as well as a financial cost estimator as to how to go about doing that. We're really excited by this project, and we really had a lot of fun going through all of the options and all of the different scenarios that it would take to make this happen. And we look forward to seeing the New York State muck onion become a national brand.
ERIN: Great. And with that, that's all we had. The QR code is here, once again, if you want to take a look at the template.
If you've previously looked at the old document of it, you might need to refresh your page. I don't think any of you would have, just letting you know. Yeah, now, we're open for questions.
[APPLAUSE]
SPEAKER 1: Do we have any clients on the Zoomer?
SPEAKER 2: Yes, Mary's here.
SPEAKER 1: Mary? Please.
MARY: Mary, here. Mary, here. I think I'm the client, right? There was a little hint on that last slide about cooperatives being a choice, and so, essentially, this was kind of a little bit of getting near doing the ability to do a SWOT analysis with some of this data. So the group, would you recommend the co-op, recommend a marketing order, or recommend both for the average producer in New York State?
CHERYL: Do you want to take it?
SPEAKER 1: Share the spot.
ERIN: I think it's definitely a tough call. In previous consulting projects, going in with an answer when you don't know completely can sometimes feel a little irresponsible. That being said, I think the flexibility that a co-op provides over a marketing order for individuals at all levels, I think, is an easier pill to swallow. Having to convince 66% of all farmers in the state that a marketing order is something that they want to do might be difficult to achieve, especially given the costs with a marketing order, at least, on the model of the Vidalia onion.
That being said, the co-op model is going to allow for more flexibility. It allows for more options. Being said, that's my primary reason for leaning towards co-op, is that flexibility and the more feasibility, I think, is probably the word I'm going for. But do you have anything to add on?
CHERYL: Yeah, that was really well said. I would go along with co-ops as well, just because, like Erin stated, you don't need as many farmers to get together to start a co-op as you would a marketing order. And also, there's less regulations in that compared to a marketing order. And they can really kind of customize it to their needs and decide what they want to get together on.
SPEAKER 1: I'm going to button it up there and just say, yeah, they're very different schemes, right? One is about collaborative marketing, and the other one is about that and more. And does that make-- does that make sense for these arguments? So this is great. Are the fact sheets and that financial template available for editing and updating for the client in the future?
ERIN: Absolutely. They've all been shared. The template can absolutely be changed. So if anyone wants to open it up and mess around with it, feel free. It's kind of fun, kind of relaxing for some.
SPEAKER 1: It might be something Bobby and Mary want to-- Mary want to talk about it moving forward. So let's thank them again. Awesome job.
[APPLAUSE]
Part of the Grand Challenges curriculum, Cooperative Business Management (AEM3260/5260) focuses on engaged learning with community and cooperative clients.
In May of 2022, ten student project teams presented the results of their semester-long work with community partners. Professor Todd Schmit evaluates.
Project title : Collaborative onion marketing opportunitiesCommunity Partner : CCE Orange County, NYS onion farmersStudent Team : Sheryl Kiernan, Srinidhi Rajesh, Arin Sheehan
