Weighing the benefits of value-added agriculture.

With a history longer than that of the province itself, Saskatchewan's agriculture sector has developed a world-class reputation for its abundance of fine raw goods. While having such excellent raw products available for world markets was originally was seen as a benefit, by virtue of hindsight, this scenario has proven to be a bit of a double-edged sword.

Indeed because demand for our primary agricultural products has been steady and ongoing, producers were all-too-willing to ship out these raw goods on the next available rail car. Although they may have been realizing their shortterm goal of return on investment, it did little to temper any long-term benefits that could be realized through adding value to that product before it ever left our jurisdiction.

Hence, over the years producers began to come to the conclusion that primary production may not be the panacea that it once was heralded to be. Throw into the equation natural set-backs including drought, grasshoppers and frost--to say nothing of international trade protectionism, including the closure of the U.S. border to Canadian beef--and it becomes evident that if Plan A is primary production, then producers should be looking towards Plan B.

This realization may have come to the fore when the federal government abolished the Crow Rate in 1995, which in essence, reneged on a longstanding deal between the federal government and farmers, which was to guarantee farmers low-cost rail transportation to the sea ports and thus export markets. But once that deal went by the wayside, a whole new line of thinking began to emerge, and since then we've seen a metamorphosis in agriculture.

Gone are the landmark handful of grain elevators at every town. Instead, they have been replaced, albeit far more sporadically, by larger, more efficient inland grain terminals, which in turn serve a far wider customer base. Oftentimes near the shadows of these high throughput terminals are intensive livestock operations, which aside from further accentuating the dramatic shift in Saskatchewan's agricultural reality of the 21st century, also serve as another potential market for growers.

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Included amongst these ILOs is a dramatically increased number of hog barns in the province. Thanks in large part to a handful of commercial hog producers, today Saskatchewan produces approximately 2 million hogs for market, roughly double of what it was 10 years ago. Some industry insiders suggest that the trend will continue.

And now to take it even one step further there is a move afoot, thanks to the big-picture thinking at the Saskatchewan Forest Centre, a not-for-profit organization whose mission is to grow a socially, ecologically and economically sustainable provincial forestry sector, that next on the horizon could be agro-forestry. The Prince Albert-based institution favours a holistic approach to community economic development and addressed this very topic at an agro-forestry conference in Regina in late March.

"If you have a hog barn in your area, there is value in asking yourself if the effluent could be used for irrigation purposes or as fertilizer on a nearby tree plantation," says Joanne Kowalski, communication co-ordinator with the Saskatchewan Forest Centre. "If you have a woodlot on your agricultural land, perhaps this production could be processed in a local sawmill and turned into value-added goods like furniture or flooring that could create new jobs and benefit the entire community."

Although each of these value-added components is a welcome addition to rural Saskatchewan, it's important that the value-added element be realized at the farmgate level, stresses Terry Hildebrandt, president of the Agricultural Producers Association of Saskatchewan (APAS), an organization formed to promote and protect the future of Saskatchewan farms.

To address this very issue, APAS recently held a series of informational meetings across the province to discuss the future of the beef industry in Saskatchewan. Representatives from four packing and processing initiatives were invited to address producers on the benefits of either establishing or investing in existing processing plants.

Stressing they were not favouring one facility or proposal over another, Hildebrandt says APAS's role was simply that of providing a venue for producers to hear what these packers had to say. "It's all about producer empowerment," he offers.

"We really have to learn from this (American border closure to Canadian beef)," Hildebrandt adds. "Although the border opening and the resumption of trade with the United States is highly important, we would be gravely mistaken, if we didn't learn from the impact that BSE has had, and take back control of our industry."

"The most common message we have heard is that producers must take ownership and control of the packing, processing, and marketing aspects of the beef industry."

Hildebrandt notes that there is money in rural Saskatchewan, however, the majority of it may not be in the hands of today's producers.

"It's not too late, there is money available," Hildebrandt says when asked if there should be concerns about depleting capital reserves available in rural Saskatchewan. "It would be like if we could encourage my father to invest money in something that would then benefit my son. But first of all, we want to ensure that it's something that is both sustainable and viable."

"There are no silver bullets," Hildebrandt adds. "We're learning from our mistakes and this whole BSE thing, but it's going to take a while to turn this thing around."

There is a Saskatchewan company, Saskatoon-based Bioriginal, which has taken value-added agriculture into a whole new realm. Specializing in a unique niche, Bioriginal is the world's leading supplier of essential fatty acids (EFAs). These EFAs are then used around the world in nutraceuticals, functional foods, skin care products, cosmetics, animal feed, veterinary products and over-the-counter pharmaceuticals. Sporting a distribution network which spans six continents, with facilities in Canada, the United States, Europe and China, Bioriginal was named both the Exporter of the Year and Business of the Year at the 2003 ABEX Awards, the Saskatchewan Chamber of Commerce's awards of excellence.

But it has not been an overnight success, says Jerome Konecsni, Bioriginal's vice-president of corporate development. Rather, he says it has been a well-developed business plan which has guided the company to its record heights. An intrinsic part of this plan is securing a mutually beneficial working arrangement with its suppliers--Saskatchewan farmers.

"It's been something that has been a part of our business right from the beginning, a strong relationship with growers," Konecsni says. "It's been a partnership and an important part of our relationship with farmers is we know we need to add value to them. If we want to sustain an ongoing relationship with them then we really have to provide them with opportunities for their own growth and development."

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Konecsni says that there are certain attributes Bioriginal looks for in their grower-suppliers. Conceding that the product itself is an important part of this equation, even more so, he says, is the person who's growing the crops.

"It's just as much an attitude towards business and an approach towards agriculture as anything," Konecsni relates. "Our borage growers group is a good example where they work together cooperatively. They have their own association with an elected executive. A lot of the people that we bring on board are directly referred to us by existing growers who understand our philosophy."

Konecsni says that Bioriginal is interested in people who see the benefits of a long-term relationship. He admits that in certain circumstances some growers may be able to speculate on the spot market and achieve a higher return. But Bioriginal's approach is such that over the long term, growers would be better off through the company's long-term reliability and greater access to a consistent market.

Admitting it's easier to grow supply than it is to grow demand, Konecsni says by virtue of capacity, Bioriginal could not possibly serve as a market for all Saskatchewan-based growers. Their niche-market products, while acutely desirable and in very high demand across their world markets, also have a capacity.

Bioriginal's primary market is the American market, which represents over half of its sales, while their secondary markets of Canada and Europe are roughly the same size. Home to a European office located in The Netherlands, Konecsni says the European market, which had been developed over the last three or four years, has greatly enhanced Bioriginal's bottom line.

The value-added processes that occur at Bioriginal's Melville Street location in Saskatoon is an impressive array of ingenuity combined with capability. Admittedly, consumers would not confuse Bioriginal's products with other, more familiar food products like enriched white flour, oatmeal or even Cheerios, for example. Rather, Bioriginal's products consist of a full range of essential fatty acids including Omega 6, Omega 3, fish oils, plant oils and algae oils.

"There are many different stages of processing," Konecsni says. "There is the extraction of the oil from the seed, then there's the refining of the oil itself, depending upon the customers' specifications. Then there's blending, where you blend the oils with other ingredients and formulations that the customers want."

"Then there's number of ways it can be packaged and sold. It can be sold in soft-gel capsules, it can be sold in bottles, it can be then put into powders, or emulsified. So there's a number of ways in which these oils can be incorporated, depending upon the end use."

Yet despite Bioriginal's past successes and confidence in achieving further ones down the road, Konecsni shares Hildebrandt's view of there being no silver bullet when it comes to adding value to agriculture.

"Just because somebody else is having success in an area, you've got to be careful that you don't go and try to duplicate that," he says. "There's this real thin line between supply and demand and it's so much easier to outstrip demand with supply, in which case the prices fall. People need to understand the inelasticity of niche markets associated with specialty crops."

"So supply management is one of the most critical components of specialty agricultural crops," he notes, adding one other critical element. "Also, having a real good connection to the market--understanding what the market needs are, understanding what the competitive environment is."

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"If you can find a product that is better than those that are currently out there and it has significant scientific validation--the science, the market access and the supply management--those have been Bioriginal's keys to success."

"When everybody else was selling supplements, and a lot of them were selling supplements and herbs that were questionable in terms of their scientific research, we stayed with essential fatty acids, because we knew they were based on solid science."

Aside from overseeing Bioriginal's corporate development, Konecsni also serves as the chair of Ag-West Bio, a non-profit organization whose mandate is to grow the value-added agricultural sector in Saskatchewan. This position is quite complementary to his position at Bioriginal, as they share similar philosophies and goals for the value-added agricultural sector.

Using flax as an example, Konecsni reveals that Ag-West's goal is to maximize the value of the raw product; he believes that an increase of over 10-fold is possible. Aside from the oil, other sellable value-added products include flax fibre and flax meal, which can also be made into flax flour.

"The goal of value-added agriculture that Ag-West Bio champions is to take that ($1 worth of) seed and get $10 (or more) of value out of it," Konecsni says. "And I think that's an achievable goal."

As today's farms evolve from that of their predecessors, it's clear that science, technology and business savvy are as much of an essential part of a farmer's repertoire as anything else. Understandably, good land and good luck can only get you so far, and that's precisely why Plan B--value-added agriculture--in whichever form that may be, could well be the remedy that the agriculture sector so desperately wants--and is actively seeking.

With ingenuity and resourcefulness on their side--as well as resiliency, grit and determination--the smart money says Saskatchewan producers' proactive approach will pay off in the long run.

By Keith Moen

Photos courtesy Bioriginal