The disappearing farm
Can cooperatives keep rural people rooted in the plains?
LEEDS, North Dakota - The Crossroads Cafe is a lonely wilderness outpost on the straight-as-an-arrow highway that leads across the northern tier of North Dakota. On this wintry day, an unobstructed blanket of snow reaches outward to the horizon in every direction.
With a little imagination, you can almost see the wild prairie beneath the drifts, and the bison herd hunkered down in one of the shallow draws.
But this is the Durum Triangle, one of the most intensely farmed regions in the world. Most of the United States' durum wheat crop is grown here, and inside the cafe, a few growers are grabbing lunch. Virgil Anderson, 67, is working on a meatloaf sandwich and a bowl of turkey noodle soup. He looks and sounds every bit the farmer, from his thick, weathered hands and brown flannel shirt, to the topic of our conversation: The latest farming crisis.
With every passing week, Anderson tells me, more and more wheat farmers call it quits on this swath of prairie. They succumb to wheat prices that have fallen to under $3 a bushel and the phaseout of government price supports in the ironically named Freedom-to-Farm bill signed by President Clinton in 1996. From 1992 to 1997, North Dakota farm income dropped 37 percent, while farm expenses rose 17 percent.
It is a dilemma that does not respond to the remedies taught at the agricultural college: "Cut costs, think efficiency and you'll pull through." No matter how many times the calculation is scribbled on sheets of paper at the kitchen table, the numbers just don't add up to a profit.
"Farmers can generally take a down year once in a while," Anderson says. "But some of these farmers have had four or five down years."
Anderson has tried to insulate himself from the ups and downs of the farm economy by buying farms from neighbors who've retired or gone broke. His farm, which covered 640 acres when he began in the 1950s, now sprawls across 2,500 acres. Anderson and his son, who's slowly taking over the family farm, plant more acres in hopes of shearing a few nickels from the cost of growing a bushel of wheat.
Yet getting bigger doesn't guarantee survival, which is why a few years ago Anderson and his neighbors decided to do something radical: They built a factory.
Not far from the cafe, surrounded by wheatfields, sits their $8 million pasta plant. The 300 investors (mostly farmers) who backed it hope to turn the tables on traditional farm economics: Instead of shipping their wheat as a cheap, raw material, they turn it first into valuable frozen tortellini and ravioli.
Farmers Choice Specialty Foods is one of 12 cooperatives that have been built on the North Dakota prairie in the last five years. The Dakota Growers Pasta Co. in Carrington makes dry pasta such as spaghetti and fettuccini. In Hebron, dairy farmers bought their local cheese factory. The North American Bison Cooperative of New Rockford is marketing bison across the continent and into Europe. A Carrington company called AgroOils squeezes the oil from oilseed crops that are increasingly popular on the plains.
These cooperatively owned businesses have a common denominator: They knock out some of agriculture's many middlemen: grain buyers, shippers, processors.
"There's always been this sort of mistrust of the middleman and railroads. Once the wheat leaves the farm gate, farmers know they get screwed," says Fred Kirschenmann, an organic farmer and investor in AgroOils. "In the current system, farmers have essentially been reduced to raw material suppliers. They have no economic power. Farmers are realizing there's just no future in this."
While these cooperatives offer jobs and hope for small rural communities, they are not a sure bet. Some are thriving and seem to understand how to compete in a global marketplace; others are struggling and don't have a clue. Plains co-ops marketing beef, carrots and beans have already failed.
But no one denies that cooperatives represent an important attempt at survival for an economically bleak region. Not only do they offer jobs that keep people in these remote small towns, but they make a case for those who believe that 150 years of farming the Great Plains is more than a failed experiment.
Climbing out on a limb
The Farmers Choice Specialty Foods company is housed in a sleek structure with a facade of black glass and gray aluminum that seems to have been airlifted from a suburban office park. But here, the factory and office stand alone, the sole tenant in the Leeds Industrial Park.
The plant, built in 1996, is state-of-the-art, Anderson says as we walk in, but he admits the company hasn't quite taken off yet.
"We're running kind of lean right now," he says, and plenty of clues confirm this. There is no sign in front of the building because the company can't afford one. Fewer than a dozen cars are parked in front. The receptionist's desk is empty, without a chair or phone, and it's not until you walk upstairs that you see the plant's staff. The company employs 17, a fraction of what its investors had hoped for. But until it gets more contracts for its frozen pasta, production will limp along at less than half of capacity.
"There have been setbacks," Anderson admits, as we sit around the long table in the company's boardroom. Through a window, we see workers in hairnets shoveling chunks of pasta dough and cheese filling into a complex machine of stainless steel that turns out round ravioli. First, there were construction delays, he says. Then the first president of the company's board of directors was killed in a car accident while driving home from a board meeting. But, more fundamentally, the company lacked a savvy marketing campaign.
The management team brought in by the farmers failed to bring in the promised customers: By the time the team was fired, the company was already on the ropes. Part of the failure can be attributed to the increasingly competitive pasta market. Growth in the U.S. frozen-pasta industry - said to be 11 percent a year when the company was born in 1996 - has since dropped by half. Some observers say the company's philosophy - -build it and they will come' - didn't work. Now Farmers Choice hangs by a thread on a few contracts.
This is a common story among the cooperatives that don't make it, says Frayne Olson of the Quentin Burdick Center for Cooperatives at North Dakota State University in Fargo. Farmers are often ill-prepared to steer a co-op into competition with already established companies.
"They're stepping out of their comfort zone," Olson says. "They really have not done their homework: What are they going to sell, who are they going to sell to, in what form are they going to sell it in? They don't find an end market first."
Virgil Anderson is a dryland farmer who has spent his life waiting for rain. It is stress that will ruin some men, but Anderson has endured it. This pasta plant, however, is wearing him out.
"Sometimes, you know, it just gets you right here," he says, grimacing and clenching his side, "because of the pressure of knowing that us nine guys are responsible for the stockholders. If it doesn't go right, I tell you ... I don't know if I can explain the feeling."
A successful model
Yet a farmers' cooperative can work. Sixty miles across the prairie to the south, on the edge of Carrington (pop. 2,500), the farmer-owned Dakota Growers Pasta Co. is booming. The plant's parking lot is packed with employees' cars, almost all American-made. Railroad cars and semi-trucks line up outside and steam spews out of several stacks.
Inside, I meet Liz Reinhiller, who was around in the early days of the company and recites important dates in the company's history from memory. When the pasta cooperative was little more than a dream, a Minneapolis pasta-company owner said it couldn't be done: "Farmers work three months a year and go to Arizona for the other nine months," he was quoted in local newspapers. "They don't know what a good hard day's work is."
"Farmers were torqued off" by that comment, says John Rice, the company's vice chairman, and it helped motivate the initial drive to raise capital.
In the early days, Dakota Growers resembled a grassroots organizing effort more than a slick startup company. When the company needed a logo for its first business plan, a company executive set a can of Campbell's Soup on a piece of paper, traced a ring around it and from this sketched out the logo.
"We probably don't have quite the glitz and pizzazz of some other companies," Reinhiller says. Yet the approach works. The company manufactures pasta for almost 30 different companies - including Safeway and Western Family - and it is the third-largest manufacturer of dry pasta in the United States. The 1,000-member cooperative also purchased two Minnesota factories once owned by Borden Food Corp.
It reached this position through laying a strong foundation and having some good luck. First, it hired a management team from Kansas City that was already well-respected in the pasta industry. And just as the $40 million plant was coming on line in 1993, Borden's pasta division downsized, leaving a gaping hole in the pasta market for Dakota Growers to fill. The timing was critical.
"If you're a religious person, you could call that an act of God," Rice says.
Investors knew that if the plant failed, they could at least sell it off for 50 cents on the dollar to recoup some money. But Borden's move gave the startup cooperative an advantage they hadn't dreamed of.
The Dakota Growers plant mills 40,000 bushels of wheat a day and employs about 300 people. Most of these jobs are essentially monotonous factory jobs, and the turnover rate is so high that the town of Carrington cannot fill them by itself. Workers commute from farms and small towns as far away as 50 miles.
But the cooperative has brought some well-paying jobs to a region that has few of them. For instance, there's the company's comptroller, who grew up on a local farm and recently moved his family back to the area from Tucson in order to take a job with Dakota Growers.
Unlike most small towns in North Dakota, property values in Carrington are up. The town's motel is expanding, and what began as a 25-foot-wide, downtown grocery has become a supermarket on the highway. Carrington is the envy of small towns across the state, and locals give the Dakota Growers Pasta Co. most of the credit.
Yet beneath the patina of a bustling economy, the town is not immune to the decline sweeping the plains. Not all farmers belong to the co-op, and the pages of the local newspaper fill with farm auction ads.
Pastor Larry Harvala, who preaches at Grace Lutheran Church on the eastern edge of Carrington and at a small, white-clapboard country church, says he can see the farm crisis infiltrating his town.
"If you have a flood or a drought, church attendance goes up," says Harvala. "I believe that in this economic crisis church attendance goes down because people get disgusted. And people are frustrated in that, despite all the work that they do, they're just not able to see a decent wage.
"I'd say that our treasury is lower now than in the ten years that I've been here, so financially it certainly has an impact. I think the trend is towards pessimism," Harvala says.
There is good reason for pessimism. The state's population has dropped steadily since the 1930s, when it peaked at 680,000. It now hovers just above 640,000. In the countryside, farms continue to disappear. During a two-year period beginning in 1997, the state lost 1,500 farms. And next year, the federal Farm Credit Services predicts, 2,000 more farms will disappear. Meanwhile, the remaining farms - which average 1,300 acres - get bigger as they swallow up the defunct farms.
All this makes cooperatives very attractive. "There are a lot of people pointing to these new co-ops as shining stars," Frayne Olson says. "Carrington was on a downhill slide in a hurry. Now it is considered a growth area. If nothing else, the (the co-op) really put the brakes on the slide."
Even if the new generation of farmer-owned cooperatives doesn't reverse the decline in rural North Dakota, they are forcing farmers to view themselves as more than just the producers of raw materials.
For Virgil Anderson, the struggle to make the Farmers Choice cooperative work goes well beyond business. He speaks about preserving rural North Dakota with the conviction of a preacher and the compassion of an adoring father.
For too many years, he says, he's watched families move away, rural schools merge with former football rivals just to keep their doors open, and white, steepled churches abandoned on the plains, their pews and bell auctioned off.
After investing so much, it would be a shame to let Plains society slip away before his grandchildrens' generation got a chance to live it, he says.
"We had to do something. We'd feel bad if we didn't try."
Dustin Solberg, a flatlander from Grand Forks, North Dakota, is an HCN assistant editor. Wayne Gudmundson's photographs first appeared in his book, A Long Way to See: Images and Voices of North Dakota; his work also appears in five other volumes and in the New York Museum of Modern Art.
Dustin Solberg, a flatlander from Grand Forks, North Dakota, is an HCN assistant editor.