NEW YORK AGRICULTURAL INNOVATION CENTER. May 3, 2006 (modified 1/9/07)

NEW YORK AGRICULTURAL INNOVATION CENTER Final Report to USDA Rural Business-Cooperative Service Sponsor ID Agreement No. AIC-2003-NY-01 May 3, 2006 (modified 1/9/07) Michael Hoffmann and William Lesser Cornell University Executive Summary...i Overview of New York Agricultural Innovation Center Project...1 Business Plan Assistance... 11 Business Structure Planning... 14 Crop Value Enhancement... 23 Economic and Environmental Manure Solutions... 27 IPM Labeling and TracSoftware... 30 Value-Added Dairy... 37 Value-Added Horticultural Business Enhancement... 39 Appendix A Contact Data Base Fields... 52 6-Month Evaluation Telephone Survey Questions... 54

EXECUTIVE SUMMARY The New York Agriculture Innovation Center (NY AIC) at Cornell University was established with funds from the USDA Rural Business-Cooperative Service. Additional direct or in-kind funding partners include the NYS Department of Agriculture and Markets and Cornell University. The seven NY AIC subprojects emphasized increased farm income by helping farmers increase the value of the products they sell through such means as first-stage packaging, finding higher value uses for manure and crop by-products, documentation through the marketing chain of integrated pest management and other desirable agricultural practices, quality enhancement, and on-farm first stage product transformation. Business planning assistance was a key element for all activities. Nearly every project exceeded its initial goals. The success of this project, however, is not just that of the subprojects, but also the formation of the New York Farm Viability Institute (NYFVI), a producer-run, 501-c(3) organization committed to supporting producers value-added concepts. The establishment of this new organization was the direct result of the highly successful USDA-funded AIC along with a highly engaged NYFVI-AIC Board of Directors. The NYFVI has leveraged the initial USDA award to more than $8 million in direct funds from New York State for applied research and outreach activities to support agriculture in New York State. In an exceptionally short time span the NYFVI has established itself as an organization that is responsive to the needs of agriculture, is accountable for public dollar investments and is rapidly being recognized as a national model. Information about the NYFVI and activities may be found at http://www.nyfarmviability.org. Project Accomplishments The Business Planning Assistance component set an initial goal of completing 25 business plans but had completed 51 plans for their clients by the end of the USDA-funded project. Business Planning Assistance project leaders were contacted by over 200 producers looking for assistance to develop a business concept into a business plan. Overall, this group believes that the demand for business planning assistance has grown five-fold because of the funding for the NY AIC. The Business Structure component, which focused on helping agricultural producers better manage financial risk through the adoption of an appropriate business structure, was contacted by 38 potential clients, 12 of which were brought to completion. The Crop Value Enhancement component, which provided technical assistance to producers with interests in farm-based value added ventures including first-stage processed products, was contacted by over 1400 potential clients of whom 26 were brought to completion. The Value-Added Horticulture component provided assistance to emerging and existing horticultural operations that were interested in value added production, processing and marketing practices and business development activities. The group was contacted by 147 potential clients, of which 16 projects were completed. The Economic & Environmental Manure Solutions met its goal of working with five farm operations having/considering manure digester facilities. In each case, business plans were developed. The IPM component served New York State clients by developing four new IPM Trac software programs covering 13 crops. The software was delivered to over 400 producers in i

2004 and approximately 300 producers in 2005. This project provided a new and user-friendly record keeping system for pest management practices. These records have become essential for issues related to traceability important to national and international markets. The record-keeping program also was a major time saver for users. The Value Added Dairy component served clients indirectly by developing a market study for artisan cheeses, which could be made by NY producers. The principal outcome of this project was to identify potential markets for artisan cheeses in association with the ever-expanding wine industry in New York State. Their complete market study report is at: http://aem.cornell.edu/outreach/extensionpdf/eb0601.pdf). As is apparent, the demand for the type of assistance provided by these AIC projects was extremely high as reflected in the number of contacts the projects received from producers. The continuation of this assistance, and most especially the assistance of this caliber and expertise, will benefit the producer clientele. NY AIC s Impact on the Future Viability of NY Agriculture. There is no doubt that the NY AIC has had a positive impact on agriculture in NY. The impact can be assessed in new enterprise development, value-added products, job growth and retention, capital investment, and rural development. A recent press release from the NYFVI stated: The Institute has consistently proven its merit by the number of success stories told by farmers and producers as a result of the first round of projects, Empire Council of Agriculture Organizations President Steve Griffen said. The first $1 million in funding from the USDA resulted in more than $25 million in agricultural investments in New York. These are exactly the results that were hoped for when the New York Farm Viability Institute was created. Those producers who implemented their projects and had product sales within the 2 years of the USDA grant had increased sales estimated at $676,000 in one year (in almost all cases this was the first year of new product sales) alone. Over 30 jobs were created with a potential of 76 additional jobs. And, importantly, AIC specialists helped some producer businesses make appropriate, calculated decisions to reject project investments, such that moving forward would have resulted in losses of over $290,000. Over 900 NY farms, including those associated with cooperatives and collaborative producer projects, were assisted by the NY AIC project specialists. ii

New York Agricultural Innovation Center Project OVERVIEW NY AIC Purpose The purpose of the New York Innovation Center (NY AIC) is to help agricultural producers add value to what they produce. Adding value can include product branding; product quality enhancement; marketing and distribution strategies; on-farm, first-stage product transformation; finding higher-value uses for manure and crop by-products; and more. Business planning assistance is a key element of all AIC activities. For more information about the NY AIC, please visit our website at: http://www.nyaic.org. Challenges and/or unexpected aspects of establishing and operating the NY AIC o Creating and then establishing an identity for the NY AIC has been and still is challenging. Confusion exists when the AIC assistance is provided by Cornell personnel, but under the auspices of the NY AIC. This is confusing to potential clients because the newly established New York Farm Viability Institute, a separate entity from Cornell and the other assistance providers conduct the funding and marketing of the NY AIC. Also policy issues at the University level make formal establishment of a Cornell University NY AIC program identity (with exterior funding source) difficult and time consuming. o Faculty accountability for this project (to the USDA AND to the NYFVI) was a task unfamiliar to some of those participating. Helping them develop an understanding of the importance of the accountability in terms of collecting and reporting information on impact and deliverable producer projects was required. The NYFVI adopted and has promoted an outcome-based approach to funding. Although some AIC participants were familiar with this approach, many others were not and had to be helped with understanding the process and appreciating the importance of setting milestones and providing deliverables. o A challenge for some AIC participants was the nature of agricultural and crop/animal production. Producers stop working on new initiatives during their season of production, harvest and/or sales. The period when producers are not available to move their project forward represents a limitation and expands the time needed for proper feasibility evaluation. o Finally, most concepts when presented by producers are years away from fruition. Business plan development may take 6 months to one year, obtaining financing may take another 6 months. Any impact of additional enterprise production, sales, job creation, and investment may be 2-3 years from our first conversations with producers. Larger, more involved projects involving multiple producers in cooperative situations take even longer to see measures of impact. Fortunately in this case, the NYFVI has adopted and has continued to fund many of the USDA-funded projects and is positioned to monitor their success in the long term. A database for tracking projects was developed under the NYAIC and has now been adopted by the NYFVI. 1

Continuance of the NY Farm Viability Institute o The primary success of this project, however, is not just that of the NY AIC project components, but the fact that the USDA project provided the impetus and backing to establish the New York Farm Viability Institute (NYFVI), a producer-run, 501-c(3) organization committed to supporting producers value-added concepts. It obtained funding for 2005-2006 from the State legislature for $3.2 million, which went to create and administer 3 grants initiatives, NY AIC grants, Extension Innovation grants, and Applied Research grants. It will receive approximately $5 million in NYS funding for the 2006-2007 year to continue its grants programs. Information about the NYFVI and activities may be found at: http://www.nyfarmviability.org. o The success of the project and in converting it to its current independent status was driven by the 3 collaborating partners 1) the NYS Department of Agriculture and Markets, 2) the NYS producer organizations, and 3) Cornell University. The vision of the State and the producer organizations provided the grassroots environment needed to prove its value to the agriculture community and to legislators. The impacts documented with success stories from every project component were instrumental in the continuance and value to the State s agricultural community. o An administrative base with funding is necessary to provide overarching support to the project. In order for the NY AIC to act as an entity with an identity it needs continued structural support in terms of personnel and budget to develop materials, develop and maintain a website and other communications, meeting and conferencing support, travel, and other overhead needs. o Given the success of the NYFVI to date, it is difficult to identify what could have been done differently to assure short or long-term success. Most innovative aspects of project development and implementation. o A strong sense of partnership developed among project members, where partnering was needed, and sharing of information and intellectual resources for an interdisciplinary approach to providing assistance. Monthly meetings with idea sharing, common goals and deliverables, collaborations on workshops and conferences, and a common desire to provide assistance to producers supported this partnership, which is not as commonly seen at the academic level. Project accomplishments. The project successes from the component areas are outlined below. Because of continued funding from the NYFVI, the NY AIC has continued serving agricultural producers. It has continued many of its core activities and expanded into additional activities to include the following: Business Plan Development Business Structure Planning Crop Value Enhancement Economic and Environmental Manure Solutions Enhancing Organic Dairies 2

Increasing High Tunnel Production Horticultural Economic Analysis and Marketing Maple Value-Added Products Manure Solids as Bedding Online Farmers Market Activities of the New York Agricultural Innovation Center (AIC) were initiated March 1, 2004 with the purpose of delivering business assistance to farm enterprises in New York State. The seven sub-project areas which address specific farm needs started activities immediately. In addition, the AIC worked on several needs to coordinate project activities and promote the Center to New York constituents. Overarching activities to this effect include: Developing a website to provide information on the AIC to the general audience throughout the state and country; resources to interested clientele; and a central platform for project personnel to share resources and reports. (www.nyaic.org) Establishing a centralized contact database which contains information on requests from AIC personnel. More specifically, the database contains such items as producer contact information; farm type, structure, commodities, activities; referral information; project activities; and consultant contacts with the producer via telephone or farm visits. (database fields attached) Writing a phone survey to monitor and evaluate all client business projects. This process will be vital to develop measures of project impact as the NY AIC continues into the future. Several completed projects have been surveyed to date. The survey will help to assess successes and barriers, to determine steps and processes involved in a wide variety of consultant/partner projects and will help to determine which steps may be the most vital barriers to farm business project implementation. (survey attached) Developing a publicity program for the NY AIC with promotion materials including table-top display, brochures, fact sheets, and press releases (press release summary attached) SUMMARY OF DELIVERABLES The USDA Rural Business-Cooperative Service specific grant deliverables and the activities of the seven sub-projects are summarized in the tables below. 3

Table 1. Number of producers who contacted the NY AIC for assistance as well as the number of producer agreements to work with the AIC, number of completed producer projects, and number of deliverable projects required under the project proposal. Project # Contacts # Agreements # Completed # Project Deliverable Business Plans 210 90 51 25 Business Structure 38 17 12 10 Crop Value Enhancement 1411 24 recruited 26 (10 of these intensively) (2004 year) Economic & Environmental Manure Solutions 34 8 5 20 (10 out of 20 intensively) 5 (3 intensively/5 w/business plans) IPM-Labeling & TracSoftware 3 IPM-grown 943 Trac 04 633 Trac 05 1 IPM-grown 433 Trac 04 301 Trac 05 126-TracApple 04 307-TracGrape 04 433-'04 total [ Introduced 291 apple growers and 218 grape growers.] 50 (50 additional producers on IPM label) 450 (50 apple; 400 introduced to 4 additional Trac softwares) 4 new Trac 2005 software covering 13 additional crops. 80-TracApple 05 198-TracGrape 05 10-TracBerry 05 13-TracStoneFruit 05 301-total '05 to date Value-Added Dairy 10 not applicable not applicable not applicable to its market study deliverable Value-Added Horticulture 147 22 16 10 (5 out of 10 intensively) 4

Table 2 List of supplemental activities of the USDA-funded NY AIC projects as described in the various sub-project proposals. Sub-Project BUSINESS PLANS Develop a pre-business planning workbook Develop worksheets and computerized tools for outreach consultants Provide a training event for Cornell Cooperative Extension (10-15 people) and NY FarmNet consultants BUSINESS STRUCTURE Explore opportunities for innovative ag product traceability business opportunities. Develop informational and educational resources on business structure design specific to New York State Activities 100% complete, 500 hard copies distributed, available at: http://agviability.cornell.edu/preplanning_guide.htm Completed Completed 44 attended Ongoing --Compiled bibliography of current publications and developing business structure tools --Published and distributed, Doing Business in New York State : Structures and Strategies by B. Anderson, B. Henehan and C. Sullivan available at: www.agviability.cornell.edu). Participate in or collaborate on 2 workshops ECON. & ENV. MANURE SOLUTIONS Financial Analysis Model A down-loadable MS Excel spreadsheet model to assist dairy producers in analyzing the economics of applying one or more of the manure management technologies outlined above. Inputs are required for each of the selected technologies. Outputs include three years of pro-forma financials including income statements, cash flow statements, and balance sheets. Provide information and technical assistance in the areas of manure management (Additional Activities) --Developing a Business Structure Workshop with Steve Richards. Target audience Farm Management educators. Held at the end of 2004. --Created on-demand workshop offering of Analyzing Business Structure Options promoted on the AEM Extension and Outreach website. 100% completed waiting for modifications from lending institutions 100% completed; Ongoing activities Wrote 6 grant applications with 5

CROP VALUE ENHANCEMENT Identification of technical services necessary for successful implementation of value-added business plans IPM & TRACSOFTWARE Increase the number of retail outlets selling IPM labeled products from 1 supermarket chain with 60 stores to 2 supermarket chains with 100 stores. Update Trac software for at least 4 other crops and introduce to 100 growers of each crop. (Additional Activities) farmers for funding of their projects (NY Ag & Markets, USDA, NYSERDA) Ongoing Ongoing with focus shifted to SYSCO and wholesale distribution Trac Software updated for 13 crops including grape, pear, stone fruit (peach & nectarine, apricot, plum), cherry (sweet & tart), and berry (strawberry, raspberry & blackberry, blueberry, currant & gooseberry). Introduced Trac Software to over 600 tree fruit growers, over 400 grape growers, and over 50 berry growers. Currently there are approximately 100 TracApple users, 300 TracGrape users, 25 TracStoneFruit users, and 25 TracBerry users. -- IPM Elements provide the basis for certifying food as IPM-grown. IPM Elements have been finalized and posted on the IPM Elements webpage http://www.nysipm.cornell.edu/ele ments/index.html for potatoes, onions, juice grapes, and apples. --An IPM Elements worksheet for Trac software completed for apple, blueberry, raspberry, and strawberry which will record and calculate the level of IPM Elements practiced. --Submitted two proposals for TracVegetable, not funded. --Birds Eye Foods underwent the audit required by SYSCO. The audit was conducted by AIB, a national food safety audit firm, and consisted of a visit to Birds Eye Foods facilities, interviews with Birds Eye Foods employees, review of documentation and random selection of a few growers whose records were reviewed and who were interviewed. Birds Eye Foods expects to hear the results of the 6

VALUE-ADDED DAIRY Identify a minimum of four product/market partnerships. From each partnership, develop plans for two specialty cheeses (some products may be identified for more than one of the marketing arrangement). Establish production protocols for the identified cheeses and produce initial quantities for marketing trials. audit soon --Aiding the development of traceability standards for SYSCO, the largest U.S. foodservice distributor. --Launched the Trac webpage on the NYS IPM website www.nysipm.cornell.edu/trac/ -- Trac Software Frequently Asked Questions (FAQs) published on the NYS IPM Trac website. -- Secured grant to develop TracTurf. 3 market channels studied: restaurant trade, specialty shops, wineries. multiple cheeses identified as suitable for each channel VALUE-ADDED HORTICULTURE 5 educational modules of on-line business planning materials including print, video, and presentation materials Modules: Market/Marketing Research (completed) Pricing Strategies, Product Development, Retail Food Channel, and Marketing to the Foodservice Channel (expected to be available in Summer 2006) Two training sessions on using the material will be provided to extension educators and other ag-service providers. 7

AIC Outreach/Workshops 11/10/05 "Stimulating Innovation in Agriculture: Ag Innovation Center Outreach". Cornell Economic Development Summit-Workshop on the USDA-funded NYAIC. (This created extensive discussion at Cornell University and has provided us with opportunities for collaboration with a variety of Cornell and state-wide economic development specialists with a diverse range of expertise) 7/26/05 "Stimulating Innovation in Agriculture: Ag Innovation Center Outreach". A Symposium for the American Agricultural Economics Association (AAEA) Conference, Providence, RI. 5/13/05 New York Ag Innovation Center-Adding Value to New York s Agriculture. Association of Cornell Cooperative Extension Educators Conference, Buffalo, NY [selected workshop on AIC activities] 12/11/04 Cornell s AIC-Adding Value to New York s Agriculture. Agribusiness Economic Outlook, keynote presentation. Cornell University, Ithaca, NY. Publications Richards, Steve. 2004. Starting an Ag Business? A Pre-Planning Guide. E.B. 2004-08, Department of Applied Economics and Management, Cornell University, Ithaca, New York. http://www.nyfarmviability.org/aic/pdf/pre-businessplanworkbook.pdf Wind Energy Development in NYS: Issues for Landowners by C. Dorociak, D. Chapman, B. Henehan and J. Barry available at: http://aem.cornell.edu/outreach/extensionpdf/eb0504.pdf Gloy, A. and M. Stephenson. 2006. A Value-Added Opportunity: Market Potential for Specialty Cheeses in Select New York Markets. E.B. 2006-01. Department of Applied Economics and Management, Cornell University, Ithaca, New York. http://aem.cornell.edu/outreach/extensionpdf/eb0601.pdf. (Summaries and/or full reports are being provided to industry organizations and individuals) Fact Sheets Considerations in Establishing a New Business Structure for Farm Energy Enterprises. By J. Barry and B. Henehan. available at http://www.nyaic.org/pdf/considerations_in_establishing_new_bus_structure.pdf Media / Public Materials Developed New York Ag Innovation Center brochure - in 3rd printing Articles The following Smart Marketing articles may be found at: http://hortmgt.aem.cornell.edu/smart_marketing/index.htm 8

Gloy, Angela and Mark Stephenson. Marketing Specialty Cheeses in New York: A Piece of Cake?. Smart Marketing. Department of Applied Economics and Management, Cornell University, Ithaca, NY. March 2006. Weybright, Robert and Wen-fei Uva. Year Round Marketing of the Seasonal Agriculture Enterprises - Tips and Techniques. Smart Marketing. Department of Applied Economics and Management, Cornell University, Ithaca, NY. February 2006. Weybright, Robert and Wen-fei Uva. Year-Round Marketing of the Seasonal Agricultural Enterprise - Should I or Shouldn t I. Smart Marketing. Department of Applied Economics and Management, Cornell University, Ithaca, NY. January 2006. Gloy, Angela and Mark Stephenson. Marketing Fundamentals One Key to New York Specialty Cheese Markets. Smart Marketing. Department of Applied Economics and Management, Cornell University, Ithaca, NY. October 2004. Weybright, Robert. Identifying, Building and Selling the Value in YOUR Business. Smart Marketing. Department of Applied Economics and Management, Cornell University, Ithaca, NY. September 2004. Weybright, Robert. Selling Value Not Price. Smart Marketing. Department of Applied Economics and Management, Cornell University, Ithaca, NY. August 2004. Press Releases Issued 02/24/06 NY FarmNet/NY FarmLink Efforts Support Cornell s Ag Innovation Center 02/22/06 Project to Analyze Use of Manure as Dairy Bedding: Will Look at Herd Health and Economics 02/13/06 NYAIC is Phenomenal Networking Source, Best Information Clearinghouse, Says Onion Jelly Maker Reaching Regional, National, Global Markets http://www.news.cornell.edu/stories/feb06/onion.jelly.ssl.html 03/14/06 NYFVI Project Sweetens Products, Markets for New York s Maple Producers http://www.news.cornell.edu/stories/march06/maple.products.kd.html 03/07/06 NYAIC Helping NY Farmer Add Cost-Effective, Environmentally-Friendly Manure Handling System 12/05/05 Onion Processor Benefits from Food Safety Plan; Attracts New Customers 06/21/05 Thanks to NY Ag Innovation Center, Processor Buying More New York-Grown Produce 06/15/05 NY Ag Innovation Center Helps Cooperative Establish Independence and View for Sustainable Future 05/19/05 NY Ag Innovation Center Helps Farmer and Baker Sell Fancy Packed Peaches to Upscale Markets 9

04/07/05 NY Ag Innovation Center Opening Channels to Wineries and Food Buyers for Farmstead Cheesemakers 03/01/05 Fueling Business Growth and Job Creation Through AIC 02/02/05 Ag Innovation Center Helping NY Farmers Convert Cow Manure to Cash 01/12/05 IPM-Grown in New York NY Ag Innovation Center Encouraging Fruit & Vegetable Growers to Adopt Integrated Pest Management/Tracking 12/15/04 Ag Innovation Center Projects Represent High Return on Investment to NY 12/08/04 Ag Innovation Brochure Outlines Services Available to NY s Farmers 10

Business Plan Assistance Prepared by Ed Staehr, NY FarmNet/NY FarmLink Steve Richards, NY FarmNet/NY FarmLink 1. OVERALL GOAL: To help producers explore value added agricultural ventures or enterprises through assisting them in the creation of business plans. 2. SPECIFIC OBJECTIVES: 1. Coordinate and develop business planning outreach tools in conjunction with materials developed by partners in the Agricultural Innovation Center. 2. To train, coordinate, and support business planning outreach provided by NY FarmLink/NY FarmNet consultants and Cornell Cooperative Extension educators. 3. Create a protocol for responding to requests for business planning assistance. 4. Provide business planning assistance to farm producers in New York State. 3. STATED DELIVERABLES: 1. Develop a pre-business planning workbook that will help participants organize their ideas. 2. Develop worksheets and computerized tools for outreach consultants to use in aiding participants with their business planning. 3. Provide a training event for Cornell Cooperative Extension (10-15 people) and NY FarmNet consultants (20-30 people) that will be involved in business planning assistance. 4. Ongoing support of Cornell Cooperative Extension agents and NY FarmNet consultants. A core group of 10 persons (both FarmNet and Cornell Cooperative Extension) will be working individually with farm producers. 5. Responding to farmer requests for business planning assistance. It is expected that we will receive between 50-100 requests for some sort of business planning assistance. 6. Provide business planning assistance to farmers in New York. It is expected that we will distribute 50-100 workbooks, consult with 50-100 farms, and complete 25 business additional plans in the 12 month period ending January 31, 2006. 4. PROGRESS REPORT: Objective 1: Develop a pre-business planning workbook: The workbook has undergone a multiple printings and continues to be popular. It was the most requested publication at the NY FarmNet/NY FarmLink exhibit at Empire Farm Days. Some of the primary audiences were reached with this workbook by: 11

i. Sending copies to all Cooperative Extension Associations ii. iii. iv. Sending copies to all NY Farm Bureau Field Representatives Sending copies to business planning workshops Sending copies to calls for NY FarmNet assistance v. Placing a free PDF on the AIC website Objective 2: Develop worksheets and computerized tools: Worksheets and tools were explained at a June consultant training in Oswego. Objective 3: Provide a training event for NY FarmNet consultants: A November training was held in Syracuse to reinforce business planning concepts. Extension Educators were encouraged to participate. Two Extension Educators participated in the training. Objective 4: Ongoing support of Cornell Cooperative Extension agents and NY FarmNet consultants. The core group (10) of consultants and CCE educators has been chosen and each is charged with doing at least one business plan. The final reports will be sent to Steve Richards, Director, NY FarmLink. Objective 5: Responding to farmer requests for business planning assistance: Have received requests for business plan assistance from 210 producers, 90 of which have continued in the process to this point; resulting in appointments for 110 farm consultations. Objective 6: Provide business planning assistance: As of November 2005, NY FarmLink and NY FarmNet have distributed over 290 pre business planning workbooks, consulted with 110 producers, and have completed 51 cumulative business plans. 2. How stakeholders have been engaged (or plans to do so) Grower organizations have been informed by AIC through various press releases written about business planning impacts. An article was published in Farm Bureau s Grassroots newsletter about business planning and AIC. The merits of business planning were presented to the Assembly Task Force Hearing on Agriculture in Syracuse. We have developed an individualized study financial management course approved by the Farm Service Agency to speed up access to obtaining financing. So far, four producers have participated in individualized study related to business planning. An article in Northeast Dairy Business profiled a farmer we worked with on a custom heifer raising enterprise. 3. Describe how you plan to evaluate the success of your subproject. The success of business planning will be evaluated by farmer satisfaction and the number of new jobs created or preserved. An additional measure of success is requests for collaboration by other AIC partners. So far, we have received requests from seven groups to collaborate on business planning, and it is expected that more will express interest in working together. 12

4. Challenges/barriers being encountered, if any. The main challenge is keeping up with requests in a timely manner. Demand for business planning continues to increase, as more farmers find out about AIC. In response to increased demands, Steve Bulkley was recently hired to provide leadership for business planning efforts. Dr. Bulkley brings decades of experience in working with farm families to achieve their business goals and is a welcome addition to our team. 5. "Additional opportunities" on the horizon (e.g., new directions/ideas, grant opportunities that could build on AIC or use its support, etc.). A significant new opportunity is working with Marty Broccoli and a national vegetable processor to source locally grown vegetables for processing. The processor presently has vegetables shipped in and would like to purchase locally grown vegetables to reduce transportation costs. 13

Business Structure Planning Prepared by Jude Barry and Brian Henehan Department of Applied Economics and Management 1. OVERALL GOAL: Increase the number of successful, value-added enterprises that utilize sound business organizational structures for the benefit of New York agricultural producers. SPECIFIC GOALS: Assist specifically: Groups or firms selecting business arrangements/structures that ensure an adequate supply of NY quality farm products needed for value-added businesses. Decision-makers arriving at optimal business structures to acquire the capital and management talent necessary for a successful expansion or launch of their new valueadded business. Groups or firms designing governance and decision making structures that facilitate effective management of the proposed or expanding business. Producers or firms adopting innovative multi-firm (or farm) business structures needed to accomplish their mutual business objectives such as alliances, joint ventures, cooperatives or networks. 2. SPECIFIC OBJECTIVES: Identify start-up or existing value-added businesses seeking new organizational structures Review critical issues related to business structure options with participants. Focus on building structures that can attract the needed: capital, management, and agricultural production. Assist groups, firms or individual farms in creating effective governance and decisionmaking structures able to direct and effectively manage value-added businesses. Develop team approach that collaborates with other AIC projects, stakeholder groups, public agencies, and business advisors. 3. STATED DELIVERABLES: Identify 25 prospective start-up or existing value-added businesses seeking new organizational structures Screen identified group to select 15 participants to work with directly. Advise 10 participants on business and legal structure. Document impact (select participants with significant results from participation). Participate in or collaborate on 2 workshops aimed at accomplishing objectives. Develop informational and educational resources on business structure design specific to New York State 4. PROGRESS REPORT: 14

6. Brief overview of progress (by objective and deliverables) Objective 1: Identify start-up or existing value-added businesses seeking new organizational structures (Identify 25 prospective firms, screen to select 15) Identified more than 35 prospective groups or individuals. Some were not at the business structure analysis stage but rather at a point where they needed resources to analyze the feasibility of their proposal. Objective 2: Provide information, guidance and advise 10 participants on business and legal structure issues. 21 individuals or groups have been selected since the start of the project to work with on issues of business structure. Details of work to date with elected participants are presented in Business Projects and Potential Impacts to New York Agriculture, page 12. Objective 3: Participate in or collaborate on 2 workshops aimed at accomplishing objectives and develop informational and educational resources on business structure design specific to New York State Gave presentations on the AIC Business Structure project at a number of meetings/conferences with the following audiences present: Cornell Cooperative Extension staff statewide, NY FarmNet volunteers and CCE Farm management educators. Business Structure Workshop with Steve Richards in December, 2004. Approximately 12 State-wide Farm Management educators attended. Compiling bibliography of current publications and developing business structure tools where there are gaps, both for for profit and not for profit entities. Published and distributed 4 new resources: i. Doing Business in New York State: Structures and Strategies by B. Anderson, B. Henehan and C. Sullivan available at http://www.aem.cornell.edu/outreach/extensionpdf/eb0407.pdf ii. "Considerations in Establishing a New Business Structure for Farm Energy Enterprises." By J. Barry and B. Henehan. available at http://agviability.cornell.edu/pdf/considerations_in_establishing_new_bus_struct ure.pdf iii. Wind Energy Development in NYS: Issues for Landowners by C. Dorociak, D. Chapman, B. Henehan and J. Barry available at: http://aem.cornell.edu/outreach/extensionpdf/eb0504.pdf iv. Business Structure Webpage developed as a useful resource tool: (http://agviability.cornell.edu/bustruc.htm ). This page includes a list of links for people to access simple business structure information and tools across the World Wide Web. Held Strengthening Cooperation - A workshop for new and emerging farmer-owned business. Many of the producer groups we have been working with throughout the 15

NYAIC project had similar organizational challenges in developing their business and a number of educational needs became apparent. Examples of such educational needs for groups of producers include strategic planning, creating a common vision, decision making and financial planning. In September we surveyed the groups of producers that we have worked with through the NYAIC and acquired feedback on a proposed workshop to teach skills to tackle challenges these groups face and enable similar groups from across the state to network with each other. On February 21 st -22 nd, 2006 we held the Strengthening Cooperation Workshop. Speakers were from the New York AIC, the New Jersey AIC (at Rutgers Food Innovation Center) and Kentucky Center for Cooperative Development. 20 producers and educators attended this workshop. 9 New York agricultural businesses were represented. The workshop was evaluated by producers, who anticipate that their group s members will achieve the following for their businesses as a result of the workshop training: Impact measure Number attending workshop who thought the training would have impact on their member businesses Access new markets 12 Retain existing markets 13 Cut costs for individual farm businesses 7 Improve producer profitability 11 Develop new products, 10 Expand business enterprises 10 Increase total farm sales and 12 Be in a better position to increase investment opportunities 9 More details on this workshop can be found at: http://aem.cornell.edu/special_programs/business_workshop_2006.pdf Objective 4: Document impact (select participants with significant results from participation). All business assistance provided and individual progress made is documented in a database. Some evaluations have been made to assess the progress of participants and any future information they may need. 7. How stakeholders have been engaged (or plans to do so) Stakeholders have been engaged before and throughout the project. Their input has been requested on a continuous basis. Some examples include: Participants of the business structure component communicate their business development needs throughout the duration of their specific projects. 16

Other producers come to the project expressing their needs for business structure assistance in the future (Examples: Pro-Fac Cooperative, Inc., the North East Sheep and Goat Dairy Cooperative group and Farm to Chef Express). Presentations and feedback was received from stakeholders at several presentations on the AIC business structure component given to (i) the board of directors of the North East Cooperative Council, (ii) Agriculture Economic Development Program Work Team, (iii) Agricultural Marketing and Management Program Work Team (iv) Cornell Cooperative Extension (v) New York State Department of Agriculture and Markets and (vi) the USDA Office of Rural Development. Surveying participants to design our Strengthening Cooperation workshop 8. Describe how you plan to evaluate the success of your subproject. An evaluation of participants assesses the following criteria: Increased sales of NY Farm products and farm income New product development using NY farm products Access to new markets or retaining current markets for NY producers Increased returns to NY producers from value-added businesses Increased organizational efficiency and coordination that directly benefits NY producers (see table in objective 3) 9. Challenges/barriers being encountered, if any. Year 1, First quarter: Recruitment of new staff took longer than anticipated. Year 2, First quarter: Grant writing for continuation of this project has been time consuming. 10. "Additional opportunities" on the horizon (e.g., new directions/ideas, grant opportunities that could build on AIC or use its support, etc.). Landowners and producers are getting increasingly involved with renewable energy generation using methane, wind, ethanol, biomass products. We have been collaboratively applying for funds with people in Cornell University s Department of Biological and Environmental Engineering to develop tools and provide assistance to producers that are getting involved in renewable energy opportunities and require assistance in developing appropriate business structures. Wind energy is a very current concern as many New York State land owners are being asked to commit to wind energy lease options. The issue of wind energy development rights continues to grow in New York State and landowners are facing some difficult decisions for their land and their community s long-term sustainability. We continue to be contacted by a number of land owners and farmers that are being approached by wind energy developers. Information is shared to help land owners assess for themselves the impact of wind energy development agreements on their farm entity and organization. The following table shows some specific outreach activities we have been involved in to inform producers of considerations for their farm businesses. 17

Date Presentation Title/Presenter Event 02/25/06 Wind Energy Development in New York Considerations for Landowners Panel Discussion with Brian Henehan SUNY Delhi 02/3/06 Wind Energy Development in New York Considerations for Landowners Panel Discussion with Brian Henehan. Transitioning to Renewable and Ag-based Products and Energy: a panel discussion. Part of the Rural New York Initiative at Cornell University. Number Attending Audience/ Location 400 Farmers, Landowners, Town and county officials, community members (from 3 counties) Delhi, NY 35-40 Cornell Faculty, students and Cornell Cooperative Extension County-based Educators Ithaca, NY 10/20/05 Wind Energy Development in New York Considerations for Landowners by Judith Barry St. Lawrence Co. Cornell Cooperative Extension workshop 35 Farmers, landowners, town and county officials, educators Madrid, NY 10/26/05 Wind Energy Development in New York Considerations for Landowners and Lenders NY Bankers School & Farm Finance Faculty Dept. of Applied Economics and Management, Cornell University 43 Private lenders and Federal agency staff Waterloo, NY 07/14/04 Report on Ag. Innovation Center Activities New York Farm Viability Institute/ NYAIC Board Meeting 12 Institute directors, staff, and Cornell faculty Ithaca, NY Producers are exploring non-profit organizational options, such as associations or farmerto-farmer learning groups, and require assistance. Existing agriculture related business considering restructuring and strategic organizational change. We have applied collaboratively for USDA funds to coordinate 18

applied research to evaluate and develop case studies on the specific needs of producers making strategic change and undertaking business innovation. We see an opportunity to collaborate more closely with NY FarmNet and other Cornell projects to ensure a more comprehensive business assistance package for each individual project that approaches NYAIC. In July, 2005 we coordinated a collaborative symposium at the American Agricultural Economics Association national conference to present the successes of AICs nationally. 5 Land Grant Universities were represented. We see an opportunity to build on this exchange to better share resources, program development and funding ideas. In early November, 2005, we presented information on the USDA-funded NYAIC at the Cornell Economic Development Summit. This created extensive discussion at Cornell University and has provided us with opportunities for collaboration with a variety of Cornell and state-wide economic development specialists with a diverse range of expertise. We have been working collaboratively with SUNY Morrisville to assist them with business structure planning challenges. Over the project period, some strong collaborative opportunities have been developed with the Cooperative Development Institute in Massachusetts and with Business Management and Marketing experts at the Rutgers Food Innovation Center at the State University of New Jersey. 19

Business Projects and Potential Impacts to New York Agriculture Business Considering Dairy Value Added Business Project Activity and stage to date Met with group to discuss business structure issues, joint ventures and feasibility analysis. Developed proposal for feasibility study. Provided resources for implementing feasibility study and selecting consultant to do this. A hired consultant has worked on the feasibility project. Potential Impact $5-7 million proposed investment Adding value to NY milk production. Restructuring cooperative and relationship with local member businesses Considering new joint venture with NY food processor. Formation of a marketing group to serve Beach Plum Growers and advisors on Eastern Sea-board Formalizing producer group to continue to sales to schools. Formation of a retail, wholesale and distribution business for producers across a variety of commodities Wine producers considering formation of a purchasing group Met with CEO and legal counsel. Developed paper on new cooperative network concept business structure. Paper has been considered by their Board of Directors and presented as a viable business opportunity to their farmer members across NYS, at their annual meetings. Discussions within the business are ongoing. Met with cooperative leaders and firm managers. Provided resources as needed. Was not pursued. Group has been working for some time on developing the new innovative Beach Plum fruit. There is some pressure to formalize group to continue independently. Provided assistance on group formation and developing survey to ensure the group developed meets producer needs. Survey was run. The group has had success in selling to schools and establishing distribution network. Met with steering committee to look at options for forming a business entity to continue the project. Provided several resources. Early 2005, they formally incorporated. They are developing a business plan and formulating sound proposals to bring producers into an agricultural village business opportunity. NY AIC provided business structure resources and developed a paper presenting specific business structure options that are available within the overall plan. Presentation to the group of wine and grape producers. Discussed options. Directed to Central NY purchasing group for the wine industry. The group is looking to increase grape growing in the region. Over 50,000 acres of processed vegetables in New York State 500 farmer members in the US Value-added to New York Produce 18 NY farm members 60 producers a significant number from NYS 2004 sales $11-15,000 31 producers selling to 4 schools in St. Lawrence county They anticipate creating 2 new jobs in 2005. As a cooperative the producers now feel that they are in the position to develop new markets and increase sales considerably. $3-4 million proposed investment Adding value to milk, meats, vegetables. Estimated creating 65+ jobs Ulster & Dutchess counties 20

Business Dairy sheep and goat producers are considering their options for a marketing and distribution business. Value-added vegetable business considering the option of a partnership. Large wholesale farm market cooperative are considering the distribution and marketing options for future viability in their business LLC of vegetable growers are investigating some strategic opportunities for the future viability of their business Group of bee producers are investigating opportunities to form an association and certification standards Group of Goat, sheep, beef, chicken and deer producers are considering the formation of a cooperative for processing and marketing meat for the Halal market A Cooperative of Feed Dealers is undertaking a strategic review of their business. Project Activity and stage to date There are several new markets for goat and sheep milk. A group of sheep and goat dairies are considering their business options. Provided a specific business-planning guide to assist the group in asking the appropriate questions for a viable distribution business. Met with the steering committee to provide requested information and discuss next steps. Have assisted with answering question on distribution and feasibility analysis. Assistance includes providing mapping expertise and producer survey questions. Discussions ongoing. Owner of a successful business required assistance in assessing a business partnership opportunity. Provided resources, met and provided some focus on the needs of the business. Provided resources. Assistance required in assessing the opportunities for a centrally located wholesale market. Talks are ongoing. Changes in management have meant that progress in assistance has been disrupted. Provided some technical business structure resources to assist with strategic planning and marketing for the future viability of the business. Early stages. Aim to provide assistance with structuring an association. Extension Educator that is assisting this group attended Strengthening Cooperation a workshop for new and emerging businesses which we held in Feb, 2006. Have provided assistance with formalizing their business plan, what an appropriate business structure might look like, how they might raise sufficient capital and have provided answers to some questions to help them assess the viability of purchasing a processing plant. Provided information so the cooperative can better understand the trends in the business at both the customer and cooperative member level. Potential Impact 20 specialty dairy producers. Current source of milk for specialty cheese plants is MI. Opportunity to grow and sustain small specialty dairies. 1 business in the Finger Lakes. 65 farmers and value added enterprises. Increased sales through both wholesale distributors and a new emerging retail business, selling directly to consumers. Albany County and surrounding Counties 15 Producers Sales Vegetable producers in Oswego and other Counties Statewide 20+ producers Producers that will benefit are NYS-wide (but particularly in Northern NY and Western NY). Assist NYS-wide independent feed mills remain viable and increase their purchasing power to compete effectively. 21