Rettig and Fruth presented their unique answer to farm expansion at the Great Lakes Regional Dairy Conference in Frankenmuth, Michigan.
After navigating their way through the farm crisis of the ’80s, both men entered the ’90s without the desire to expand their cropping operations individually. While they knew they would have to do something different to survive, expanding was not the goal. Fruth commented, “I decided not to expand but to grow an alliance.”
Fruth described the beginnings of the partnership with neighbor Mark Schwiebert. “Mark knew how to grow soybeans; I knew how to grow popcorn. So we swapped acres of popcorn for acres of soybeans, and at the end of the year, they tallied up the value of the acres we traded and then settled the difference in cash.” They found this to be satisfactory and then began collaborating on machinery. As they examined the potential shortfalls of their partnership, they determined they needed a risk-share mechanism. They grew their partnership but realized they had no one coming behind them to take over the operation, and taking on another partner looked like a viable option. They approached another neighbor, Rob Rettig, about sharing a bookkeeper, and he wholeheartedly agreed.
“We became increasingly aware that this just made too much sense. You talk about the ideas and potential of a collaborative venture, but what you don’t talk about is that you can get the benefits of being bigger with no financial risk.” Rettig continued, “You get market access; you can cut costs; you can get economies of scale; and you don’t have any financial risk – you actually decrease your risk. That’s like ‘Captain Obvious,’ but you don’t hear about it.”
Fruth commented when the farm economy gets bad, “our natural inclination is to double down or suck it up and we will make it through, but we are here today to give you some ideas and strategies that could increase your quality of life and make you more profitable in the long run.”
Rettig noted that while farmers are independent by nature, he and Fruth were not afraid to be different. “Culturally that’s not who farmers are, but Rick and I were never afraid to be different, and we share a lot of the same core values, and we gradually started working together,” Rettig explained. While there were years here and there they would have been fine on their own, they continued to work together and then started down the merger path.
Rettig explained the advantages to collaboration:
- Market access – Achieving adequate scale to gain marketplace recognition and security of output.
- Economies of scale – Achieving adequate scale to lower cost per unit of output while more efficiently utilizing specialized resources, including management, labor and machinery.
- Risk mitigation – Achieving the ability to better spread risk and broadening access to risk mitigation tools.
- Professional management – The opportunity to better utilize specialized labor and management.
- Stability and security – Having a more professionally managed, structured and capitalized business that is better postured for succession and adversity.
- Responsible growth – Achieving growth without some of the negative social stigmas caused by competing for resources with neighbors and competitors.
While no solution is fault-free, Rettig and Fruth presented some of the challenges of collaboration, and they include loss of independence, fair treatment and compensation of all involved parties in addition to development of a proper legal structure. Development of a proper organizational structure and personnel management skills can be a challenge along with diseconomies of scale and FSA rules and regulations.
“The organizational chart was one of the most difficult things to work out,” Rettig said. Everyone working together is crucial, and there are several considerations to examine before collaborating with another producer. Shared internal core values is the most important, and earned trust is imperative.
There also needs to be a mutual benefit for all parties involved, where they support one another and “have each other’s back.” A partnership needs to have compatible business strategies. They need to be on the same page with the treatment of customers, employees, family and landlords, take social responsibility and have similar risk tolerance and goals.
Fruth and Rettig offered several suggestions for those considering a collaboration like New Vision Farms. Producers need to remember they are trading independence for interdependence and that they will be accountable to others in ways that they are not accountable today.
Moving slowly or attempting to collaborate on a small-scale project prior to considering larger projects will give producers a better idea of the pros and cons of a partnership. And being transparent at all times is crucial.
Incentivized agreements are a way to structure agreements such that all parties are encouraged to “play nice.” They encouraged producers to avoid arrangements where one side can easily take advantage of another. They added, if formal business is achieved, be certain to achieve governance that protects all parties.
Finally, they advised producers to keep their eye on the prize and not to let minor, temporary annoyances deter achievement of a larger purpose.
Melissa Hart is a freelance writer in North Adams, Michigan.
PHOTO 1: New Vision Farms’ diverse cropping operations include popcorn; fresh market green beans; identity-preserved traited and non-GMO soybeans for seed, export and processing; identity-preserved soft red, hard red and hard white winter wheat for seed and milling; and yellow corn.
PHOTO 2: Ohio farmers Rob Rettig (left), Mark Schwiebert (center) and Rick Fruth (right) came together to form New Vision Farms, an alliance that allows each partner to mitigate risk while taking advantage of economies of scale, market access, professional management and responsible growth. Photos courtesy of New Vision Farms.