The Staple Foods Project as a Driver for Business Development

Steve Bosserman's picture


 

Working Model

Recently, Brandon Jaeger posted an update
on the Staple Foods Project underway in SE Ohio that highlights how
grant funding is often used to demonstrate the feasibility of a
potentially valuable concept.  Embedded below is the Staple Foods
Project Flowchart Brandon included in his posting.  Central to the
diagram is the "working model" for "production and processing of beans,
grains, pseudo-cereals, and oilseed" within Southeastern Ohio.  All of
the activities depicted on the chart relate to the setup and functional
demonstration of the model and its likelihood to generate economic
opportunities, foster community self-reliance and food security, and
promote the adoption of organic production practices by local farmers. 
The grant funding provides essential support for those activities.  Yet
does a working model provide sufficient information to guide successful
business development through startups and expansions?  Not really. 
Here's why.

Staple Foods Project Flowchart

Projects

Projects are about fulfilling charters, completing missions, and
meeting the conditions outlined in proposals.  They start, they end,
and they are evaluated.  Funding for projects is awarded based on the
expectation that certain activities will take place and specific
outcomes will occur.  Success is achieved when the activities are
completed and the outcomes are met within the specified timeframe.

 

Businesses

Business is all about the flow of resources from production to
consumption and back again in sustained, repetitious cycles.  Value
increases with each step in the cycle.  People pay according to the
value they receive at each juncture.  People invest based on the
likelihood that the business will make more than it spends from one
cycle to the next.  Success is measured by the frequency of cycles and
the profit generated with each cycle.

 

Sustained business cycles require that two conditions be met:

  • People pay more for the value they receive than what it cost the business to add the value
  • Part of the profit is reinvested in the processes that create value so
    that product and service features, functionality, and form, and
    internal operations adapt to developments in technology, respond
    favorably to customer requirements, and increased performance according
    to quality, cost, and schedule metrics

As suggested by these two conditions, businesses cannot be sustained
without profit, satisfied customers, and continuous improvement in
operations.  

Cash Flow

While the Staple Foods Project Flowchart captures the necessary
elements for project evaluation, business development requires data
layers that reflect flow throughout the business cycle.  Most notable
among these is cash flow,
which encompasses operations, investment, and finance. Some basic
questions to consider regarding cash flow include the following.  What
is the projected revenue from sales each month?  What are the projected
monthly expenses to meet payroll, pay the lease and utility bills,
service debts, purchase materials and supplies, etc.?  Will there be
enough cash on hand from month to month to remain financially solvent
across the business cycle and from one cycle to the next?  What brings
in more revenue, increases investment, reduces expenses, and shifts
expenses from short term to long term? 

 

These questions lead to additional layers of questions such as the
following.  How big is the market and how much are potential customers
willing to pay?  Who else is in the same market?  How easy is it to get
into the same market?  How much of the business cycle requires
proprietary, dedicated assets?  How much of those assets--land,
facilities, and equipment--is leased, rented, or shared rather than
purchased?  How many of the materials and supplies are purchased by
barter or community currencies?

 

As the questions suggest, a cash flow analysis guides business
decisions such as whether to make or buy, own or lease, and trade or
finance.  A spreadsheet is better suited for cash flow analysis than a
flowchart due to its timeline tracking and scenario planning
capabilities.  The start of a cash flow analysis is a budget.  Below is
the equipment budget Brandon provided with his posting.  This
spreadsheet shows how the money from various grants is being
apportioned to cover investments in equipment in harvest, post-harvest,
and processing stages.  In some instances, like a SAMAP commercial
mill, the equipment will be purchased ready-to-use from a manufacturer,
in other cases existing equipment, like a thresher, will be modified to
function apart from its original purpose or design, and in particular
applications, such as bagging, the prototype of a new machine form will
be fabricated and tested. 

Staple Seed Equipment Budget

As is typical for a project where the goal is a "working model" for
a product or process, the resources go into "hardware" to complete the
project and not necessarily into "software" to understand the business
and "peopleware" to run it.  The Staple Seed Equipment Budget dutifully documents how money is to be invested in capital equipment
for a potential business.  Embedded within the text, are several of the
key questions about make or buy, own or lease, but those questions
cannot be answered until the capital equipment allocations are placed
on a monthly timeline and projected revenue and expenses are included. 
Perhaps Brandon will expand the equipment budget to be more
representative of the staple foods business opportunity space.

 

Staple Foods Business Ecosystem

The Staple Foods Project Flowchart makes reference to mapping
activities underway that use GIS coordinates and ground truth
verification to pinpoint the exact location of local agriculture system
(LAS) resources and stakeholders in Southeast Ohio.  It also denotes
specific partners who are collaborating on particular initiatives
chartered to increase staple foods crop production, specialized
equipment manufacturing, and staple foods production-to-consumption
process development.  The combination of these two contributes
substantially to the definition of a local business ecosystem
Such an ecological perspective provides a framework to identify LAS
players and their interconnections and advance opportunities to
strengthen, expand, and sustain business interests within the LAS.

 

Staple Foods Portfolios and Practices

The Staple Foods Project Flowchart also denotes where the "working
model" acts as a demonstration project to convey useful information to
staple foods business owners and managers.  To assure an adequate
supply of harvested staple food crops requires more production capacity
be allocated to this purpose.  This means the current crop portfolio
will be modified to include staple foods.  Adding staple foods to the
crop portfolio may change agricultural practices since staple food
crops are grown under different conditions than more conventional
crops.  Changes in portfolio and practices often demand a different equipment system solution as Brandon states in his posting:

 

"Most notably of these are in the arena
of crop storage and harvesting. The latter, in particular, may be of
interest to many farmers / processors interested in grain production.
This is removing the combine from the farm, replacing it with a
mechanism that only cuts the crop just below the seed head, and then
binds, bags, or bales the crop. Farmers can either cooperatively own a
stationary threshing machine or take their crop to a processing
business that owns one, in order to have their crop threshed and
otherwise processed. This reduces the number of complicated and
expensive harvesting units that are out in the field and also allows
threshing to happen any time of day or night, and in any kind of
weather."

 

As is evident, the decision to grow staple food crops has
far-reaching business ramifications.  It raises questions about
investment, payback, potential loss of revenue, additional expense, and
more time to research, learn, adapt.  Is it worth it?  J.B. King of King Family Farm and Kip Rondy of Green Edge Gardens,
who are dedicating some portion of their assets to staple food crops
like amaranth, millet, adzuki, sunflower, heirloom meal corn, black
turtle beans, buckwheat, and spelts, will have part of the answer after
this season.  But the full answer will not be known until more of the
business ecosystem surrounding staple foods is fully captured.

 

Staple Foods Production-to-Consumption Cooperative

Earlier this week, Leslie Miller posted the results of the first meeting of what is called the Regional Southeast Ohio Local Foods Working Group
(RSOLFWG).  Membership invitations to this group are extended across
the local food supply chain from producers to consumers.  This
extensive span offers the opportunity to create a consumer cooperative that features robust, interdependent, resilient horizontal linkages and draws upon information and communication technology to further horizontal integration
strategies.  Such developments help clarify and stabilize supply and
demand within a local area during a specific time period which leads to
more effective business planning and ongoing operations.  In the case
for staple foods, this means knowing the quantity of ready-to-use grain
and flour consumers are committed to purchase during the 2010 season
matched by the commitment of producers and processors to provide
sufficient raw stock and processed materials at affordable prices
determined through a managed cost structure and acceptable profit margin.

 

Asset mapping offers a convenient complement to horizontal
integration and consumer cooperative structures.  The RSOLFWG game plan
includes this step as noted in the minutes: 

"Further research the asset mapping that Rural Action is working on with the Regional Nonprofit Alliance
- this seems to be a very helpful tool to identify local individuals,
groups, farmers, producers, etc. in the local foods/sustainable
agriculture arena."

Look for more progress over the summer with asset mapping as the
RSOLFWG activities are carried out.  The next meeting in August will
set the stage for further exploration of a consumer cooperative.

 

Another development along the lines of a consumer cooperative is the recent invitation extended by Ray Leard of Purely American to members of the Athens Farmers Market to consider forming a farmer-owned cannery cooperative.  The exchange on Local Food Columbus,
suggests this approach is not without its detractors and doubters. 
However, in a follow-up conversation with Ray, he observed that one of
the significant benefits from a local cooperative is the opportunity to
establish a local brand.  In Southeast Ohio such a brand can be quickly
associated with the broader region of Appalachia.  But it can also be tied much closer to home.  Ray volunteered "Hocking River Valley Foods"  That would work!

 

Staple Foods Manufacturer-to-Manufacturer Cooperative

In many instances the equipment systems to produce, process,
package, and distribute staple seed crop products require invention and
innovation, even to the point of starting the design with a clean sheet
of paper--or blank display on a computer ;-)  The high cost of research
and development (R&D) often precludes investment by all but those
companies with the deepest pockets.  Even then, the market is regarded
as insufficient to offer an acceptable return on investment.  The
consequence is that much of the shift toward local agriculture systems
is unsupported by efficient, affordable, and appropriate equipment
systems.  Producers and processors are forced to apply their talent and
creativity to adapt existing equipment or cobble something together
that works neither, of which, takes advantage of technological
developments that reduce operating and maintenance costs, lower the
risk of injury, and provide a viable long term solution.  But there are
alternatives.

 

Brandon listed several people who have a vested interest in addressing the equipment system deficiency:

  • Students and faculty from the Ohio University Russ College of Mechanical Engineering
    want to develop a "portable / stationary thresher / cleaner / de-huller
    unit, which can make harvest of these crops much more flexible on the
    small, irregular plots of our region"
  • Jim Hance of En-Hanced Products, Inc.
    is interested in adapting their product lines of seed-cleaners and
    screens to additional staple seed crop applications as well as
    co-developing other equipment systems solutions in the staple seed
    opportunity space
  • Butch Mitchell of Carbon Cycle Engineering
    coordinates a project to press fuel oil from seeds for on-the-farm
    applications and wants to collaborate in processing sunflower oil as a
    food product
  • Steve Faivre of Memes Associates, Ltd.
    wants to link small-scale, specialized equipment manufacturers within
    Southeast Ohio into a collective effort that leverages their unique
    capabilities, spreads investment costs and risk, yields effective
    solutions that address the specific areas of opportunity within a LAS
    for staple foods

 

As Brandon notes, "Manufacturing is, after all, one of the pillars of
healthy regional economies, and very important in the realm of food
production."  Let's use it!  The four people mentioned above reference
collaboration, co-development, and collective effort.  This suggests
that a manufacturer-to-manufacturer cooperative may be worthy of
consideration.  European automobile manufacturers have established collaborative R&D structures.  U.S. automobile manufacturers have utilized a similar approach sponsored by the EPA.  The EU is underwriting the European Institute of Innovation and Technology
as a cooperative approach to strengthen the ties between academe and
business and boost innovation and commercialize developments quickly
and effectively.

A rapidly emerging trend is the use of social networking to bring
collaborators together irrespective of geographic location and focus
attention on solving problems and taking advantage of opportunities
within specific localities offers great promise for the future. 
An article entitled, The New Socialism: Global Collectivist Society Is Coming Online in the June 2009 issue of Wired looks at the long term possibilities presented by rampant connectivity.  Sam Rose
of Social Synergy Web posted the following comment about small-scale
agriculture equipment in local agriculture systems on another online
group.  It highlights the effectiveness of virtual working
relationships to broaden the range of alternatives:

 

"I am communicating now with some old
allies in the automotive industry about exploring both flexible
fabrication and biofuel conversion. I am also talking to them about the
opportunities in fabrication of open design small farm equipment.
Basically, I am looking to start a pilot project with these people
(they happen to be located in North Carolina) by the fall. Green energy
and food production technology are some other areas to be explored,
too.

I am also starting a simultaneous pilot
here in Michigan for flexible fabrication. We are interested in all of
the above, plus open source electronics and mobile communications like http://www.openmoko.com/"

Southeast Ohio could become a "technology uptake outpost" nested within
the dense webs of local, regional and global networks and actively
engaged in the open development and application of creative solutions
to issues at home and afar.  This invites a very different organization
design based on principles of openness, reciprocity, and trust.  Are we
ready for that?

 

Where from Here...

Projects and businesses go hand in hand, but they serve different
purposes and are dissimilarly organized.  The Staple Foods Project is
chartered to develop a "working model" that successfully moves grain
from the point of harvest to the point of sale to the public.  But this
does not assure the formation of a sustainable business.  Nonetheless,
the two objectives can be done concurrently.  In summary, the
requirements include the following:

  • Business ecosystem framework
  • Diligent cash flow analysis
  • Attention to changes in portfolio and practices
  • Formation of cooperative structures that do the following:
    • Encourage collective responsibility at the local level for the staple foods production to consumption value chain
    • Share and leverage investment in the development and manufacturing of
      specialized equipment system solutions for small-scale staple foods
      operations

No doubt there are other important conditions to be met, but these will
get the process of integrating a successful working model for staple
foods with successful business development. 

Stay tuned...  More to come...

 

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