Alt Country by Jim Veenbaas
Alberta Venture, September 2005, Volume 9, issue 7

All is not doom and gloom down on the farm. A small but growing cadre of innovative farmers enjoy fast-growing markets and premium prices. Their secret? Breaking out of the commodity rut.

What started as a last-ditch bid for survival has grown into a thriving food processing business for Tony and Penny Marshall. The owners of Highwood Crossing, south of Calgary, switched to organic farming 15 years ago as a way to keep their small farm, which has been in the family for more than 100 years, viable in a world of ever-expanding farms and large-scale beef and grain production.

They never dreamed it would develop into a food processing company with more than 25 products that are sold to some of the nation's most prominent chefs and can now be found on the shelves of Canada Safeway stores. "We have a half section of land and we probably wouldn't be able to survive on such a small land base if we were farming conventionally," explains Tony. "It's turned out to be a really positive move."

The Marshalls' story is not unique. A small but expanding group of Alberta farmers have met with success by diversifying away from commodity products, adding income and value to the work they do on the farm. No longer are they satisfied to grow one or two crops, raise a few head of cattle, and hope for strong prices. Value-added businesses are breathing new life - and revenue - into their farming operations.

Global competition, increased costs, the BSE (bovine spongiform encephalopathy) crisis and drought are prompting many more Alberta producers to take a second look at their farming operations. Beef exports plunged from $3.9 billion in 2002 to $1.9 billion in 2004. Producers in countries like Brazil, Australia and Argentina have challenged Canada's dominance in traditional grain and livestock markets, and have forced Alberta farmers to seek new markets and add value to their agriculture operations.

"We are seeing a lot more competition coming from other nations. In some of the areas where we used to have a competitive advantage, we don't have that anymore," says Allan Pelletier, branch head of Strategic Direction and Measures for Alberta Agriculture, Food and Rural Development.

"With the primary commodities, price sensitivity has become so much greater. You're driven by costs and you're a price taker. You have to really control your costs and you can only push them down so far."

The Alberta government has long recognized this reality and the need to diversify production on the farm. In the mid-1990s, the province developed the Agri-Food Growth Strategy that set a goal of $20 billion in value-added production and $10 billion in primary production by 2010. The timetable has been knocked back by the BSE issue, but it hasn't stopped the move toward diversification.

"What we're trying to do with our growth strategy is build new opportunities and help producers grow their industry and capture the markets out there. We have basically maintained our $10-billion value-added industry, which is pretty good considering some of the losses we have incurred in agriculture," says Pelletier.

Producers are selling their products to consumers directly, they are processing and packaging livestock and grain into a variety of value-added products, they are adopting innovative growing techniques that add value to their crops and they are dabbling in complementary industries such as tourism and even energy.

Diversification is also being driven by the changing needs of domestic consumers. According to a trend report produced for the province in 2001, the domestic market is being influenced by the changing tastes and preferences of consumers, who are more sophisticated, have more disposable income and have higher demands for quality and value. Price is no longer the determining consideration for many consumers, who are more interested in products that are safe, fresh and healthy. In fact, the province is forecasting an 8% annual increase in these markets, which will boost sales from $963 million in 2003-2004 to $1.7 billion by 2010.

The renewed interest in domestic markets harkens back to the days before refrigerated trucks laden with fresh vegetables and fruit from California ran Alberta's market gardens out of business. Farmers are discovering they can compete for the urban consumer's dollar after all - not on price so much as on freshness and quality.

"We need to take advantage of the domestic opportunities and respond to what consumers want. That doesn't mean you stop selling to the traditional markets. You just take a more balanced approach. It's more business focused. The traditional way of marketing isn't as valuable as it once was and if we don't change, the world will change around us and we will probably see a shrinking market," says Pelletier.

Highwood Crossing, Aldersyde

When Tony Marshall talks about his canola oil, you might think he's describing his favourite bottle of wine. His passion is unmistakable and infectious.

"Traditionally, you kind of think of canola oil as being inert: no flavour, no colour, no aroma. Ours has a brilliant golden colour with a unique flavour and a brilliant bouquet," says Marshall. "It has a fatty acid profile that is very similar to extra virgin olive oil."

Producing that type of quality begins in the field, where the canola is grown. Marshall is a third-generation farmer who switched from conventional growing methods in 1989 to sustainable organic farming. Although he made the switch for environmental reasons, Marshall knew it would add value to his crop as well.

"The farm has been in the family for over 100 years and we were thinking how we could take it through the next 100 and we saw organic farming as part of the solution," says Marshall.

For the first few years, Marshall and his wife, Penny, were happy to simply grow their crops and sell to processors. Although their yield per acre dropped with organic farming, Marshall says the price they received was any-where from 50% to 300% more, depending on the crop. And they were convinced they could generate even more revenue by producing their own canola oil. In 1996, they bought a cold press from Germany, using their own finances, and started producing high-quality cooking oil that has become famous with Canadian chefs for its freshness and taste.

Their commitment to the highest standards of quality has pushed sales through the roof. They have expanded to 25 different products that include muffins, flour, rolled oats and hot cereal. Many of their products are now sold in Safeway stores and sales have grown 25% to 30% each year.

"Traditionally agriculture is very production-focused. The marketing of it was really loading it into the truck, taking it to the elevator and going home and waiting for the cheque. We've turned that completely around. While we're still concerned about production, we are very market-focused. Organics isn't going to save the farm if the banker is at the door. People see that we get such a huge premium for our crops, but it takes a long time to get into that position."

Highland Feeders, Vegreville

Nothing goes to waste at the Highland Feeders feedlot, not even the waste. The massive cattle operation near Vegreville has taken diversification in a completely different direction by transforming cow manure into renewable energy.

Brothers Mike and Bernie Kotelko have built a power plant that separates methane and carbon dioxide from cow manure and uses it to fuel an engine for their power generator. The plant not only generates enough electricity to run the massive feedlot, it also produces a surplus capable of supplying power to 700 homes, which generates extra revenue for the feedlot.

"We're taking something that has little value and a negative image with the public and we're turning it into energy. It not only diversifies our revenue stream, but it mitigates some of the issues with large- scale livestock production," says Mike Kotelko, vice president of Highland Feeders.

The Kotelkos have been farming in the Vegreville area for two generations. Their father started the farm in 1947 and diversification has been essential to its success. "We went from being a diversified, mixed family farm to a specialized grain farm and then we diversified by feeding some cattle and then into a specialized feedlot, and now we're going back into a new diversification phase," says Mike.

"We went through some large expansion on the grain side and could see that simply exporting grain as a raw commodity was not capturing all the opportunity out there. You don't have the marketing opportunities that you do with the value-added production. If you can add value and process your own products, you have a lot more flexibility than just selling a raw commodity."

Highland Feeders is now the fifth largest feedlot in Canada with capacity to finish 70,000 head a year and 6,000 acres of land for silage. The list of value-added products includes a fertilizer made from waste and a line of high-quality beef products that are hormone- and antibiotic-free.

With its impressive range of diversified products, Highland Feeders has managed to survive the BSE crisis better than most producers. "It's been challenging for sure. We've had to be more diligent in the way we operate our core business and it forces you to look at what you're doing and shows why you can't always export raw commodities because this is what happens."

Linda's Market Gardens , Smoky Lake

When Linda Christensen started Linda's Mar-ket Gardens in 1983, she had two children at home, two rows of cucumbers and an unwavering belief that people would buy fresh produce if it was available. Her target market at the time was her rural neighbours.

"Lots of other women were working off the farm and they didn't have time to go out and weed the garden, although they still wanted fresh produce. I thought we could fill the gap," says Christensen.

Her instincts were right. The Smoky Lake business boomed from the beginning. She started selling at farmers markets and demand was so strong she expanded to other products like potatoes, corn, peas, strawberries and raspberries on a 20-acre plot. To keep up with demand, Christensen built a greenhouse in 1992. Despite this success, she thought the business could generate even more revenue with a better location. That sparked another expansion phase in 1999 with the construction of a country store close to Highway 28. The store now boasts a cooler for fresh produce, a cafe, jams and jellies, a wide selection of meat, pre-cooked meals, honey and even t-shirts.

"When we were still on the farm, we would get lots of people come into the greenhouse, but with the market garden we only get three or four customers a day. Now (with the retail store) we get up to 50 customers an hour," says Chris-ten-sen.

The business has been a big boost for the family's farm, which like most agricultural operations has struggled though years of drought and a BSE crisis. "Farming is a tough business. BSE has been a disaster and although the grain side is manageable, it's still a high risk because of all the input costs. The big thing for us is that we can set our own prices for the vegetables. We can actually make a profit."

Bles-Wold Farm Yogurt, Lacombe

When Tinie Eilers made her first batch of yogurt in a pail in her kitchen in 1996, she had no idea it would blossom into a business that now boasts sales to more than 80 retail customers.
Eilers and her husband Hennie moved to Alberta from Holland in 1994 to set up Bles-Wold Dairy. A couple of years later, she whipped up a batch of yogurt for her daughter using a recipe from her brother back home. "I made the yogurt because my daughter didn't like the yogurt here. She found it too tangy. I wan-ted to make it mild and low-fat," says Eilers.

Friends and neighbours sampled the yogurt and liked it so much Tinie decided to go into large-scale production. The couple ordered a tank from Holland. To sell their output they went to farmers' markets in Red Deer, Lacombe, Ponoka and Edmonton."I remember the first time I had a full tank of 400 litres," Eilers recalls. "I couldn't sleep, I was so worried about selling it all. From the farmers market, we really determined what people like. I found out that most people like it a little bit sweeter than I do, a little bit thicker and they like to have varieties."

Fast forward nine years and Bles-Wold is now producing nine different varieties and 4,000 litres of yogurt a week. It's distributed in Co-op grocery stores and IGA, as well as numerous specialty shops. Sales have increased 25% in the last 18 months and expansion plans are in the works.

Yogurt production makes sense for the Eilers family because they have direct control over the milk that goes into it. Although they use milk from their own cows, they must still buy it from the Alberta Dairy Control Board, as per supply management rules. "It's expanding rapidly. We're actually having trouble keeping up with demand. Demand is very high and we have some clients who want us to manufacture other products, to have more items on the shelf," says Eilers.

Bloomin' Inn , Pincher Creek

The rooms are booked every weekend for the next two years and the list of clients includes Governor General Adrienne Clarkson. What started out as a bed and breakfast eight years ago has quickly blossomed into a 35-room inn, with a seven-acre walking garden, workshop facilities and even a meat shop.

Situated on a 640-acre farm in the shadow of the Rocky Mountains near Pincher Creek, the Bloomin' Inn has transformed the family farm of Francis and Colleen Cyr from a traditional grain and livestock operation into a popular tourism destination."People really have a thirst for getting out into the country and experiencing the rural lifestyle. We started by building an addition and putting four rooms in the house. Then it got busier and busier. People love it here," explains Colleen.

Consumer demand has driven almost continuous expansion since the bed and breakfast was built in 1995. When the Cyrs outgrew the four rooms, they transformed the farm's workshop into two cabins. They added a country meat shop and antique store and are mulling plans for a historically themed "bloom town." Like many producers who diversify, the Cyrs were in a good position to finance their early diversification efforts with the banks because of the equity built up in their farmland.

The key to success, however, has been offering weekend workshops for people who enjoy scrapbooking, quilting and knitting.

"You have to have a marketing hook. You need more than just peace and quiet as a selling feature. We give our customers something to do. Once we started offering the retreats, it just went crazy from there. They come for the workshops, but when they get here everything drives them back. They can go out and milk the cows with my husband in the morning. They pick eggs if they want. We really work hard at giving them a good experience," says Colleen.

Although the farm has been in the Cyr family for more than a century, Colleen and Francis stopped growing large-scale grain crops in the early 1980s. They recognized early that traditional farming was too risky. Even before building the inn, Colleen ran a company that made dried flower arrangements using home-grown materials. At one point, the business employed 29 people.

"You had very little control over anything. With ag tourism, now we decide what we're doing. If we want to sell more items that's what we will do. Agriculture is never going to be the way it was, but it's going to be better. People are looking at alternatives now. They're not taking it for granted."

The Jam Lady, Two Hills

She's known by thousands of people for her cheery smile and for wearing a fishing hat with a flower in it. Donna Borody is even better known for her delicious jams and jellies that are sold at farmers' markets in Edmonton and Calgary. In fact, most people simply refer to her as the Jam Lady, which is also the name of her product line.

"We never want our jams to be seen as mediocre. There's too much of that out there. Our success can be traced to the fact that we offer something above and beyond," says Borody, who offers more than 300 products. "We're processing on a Wednesday or a Thursday and we're doing farmers markets on Friday. The jar of jam might still be warm. It really doesn't get much fresher than that."

Although Borody has been selling her jams, jellies and sauces for the last 14 years, she only moved to her farm in the Two Hills area three years ago.

"My husband grew up on a farm in Saskatchewan and we always wanted to return to the country, but the capital investment involved in a grain farm is phenomenal.... It costs hundreds of thousands of dollars," explains Borody.

Instead, the family decided to grow 40 acres of raspberries, saskatoons, cranberries, choke cherries, black currents, crab apples and vegetables. Most of their produce is processed into their jams and jellies, but they also sell fresh vegetables.

Success for the Borodys isn't mass distribution in giant retail outlets or packaging thousands of jars of jam. Success is sustainability: making their new farm turn a small profit while living out their dream. "We're not risk takers. Our approach has always been calculated to ensure that we stand a reasonable chance of coming out of this successfully.

"The exciting part is marketing the berries directly and working with regional chefs. This is really niche market, but the demand is there. It creates a new, exciting aspect for small farming. We're looking for the needs and responding to them."