Prairie Grove Nut Growers
An informal co-op targeting ethnic markets.i
Overview
Based in Wapello, Iowa, Prairie Grove Nut Growers is a group of approximately 50 growers
from Iowa, Missouri and Illinois who collectively market their fresh Chinese chestnuts. Although
the business is often referred to as a “cooperative,” it is not currently incorporated as such, and is
more accurately described as an informal brokerage. Over the past decade and a half, growers
have sold their chestnuts to a single appointed broker who sorts them by size, bags them, and
then re-sells them at a mark-up. A dramatic increase in production during the fall of 2013,
however, has growers reconsidering this informal arrangement. It is likely that Prairie Grove Nut
Growers will undergo significant structural changes in the near future, very possibly leading to
formal organization as an agricultural cooperative.
History and Structure
In 1992, landowners in Iowa started planting chestnuts for commercial purposes. Six years later,
in 1998, the trees started producing nuts. Although the total production at that time was only a
few hundred pounds, about a dozen growers got together to discuss how to market their harvest.
Growers were initially intrigued by the idea of forming an agricultural marketing cooperative,
but were relatively unfamiliar with the concept. Enlisting the help of cooperative experts from
Ames, IA, growers learned more about the cooperative structure and the implications of
incorporating as a cooperative. In discussing the legal work necessary to found the cooperative,
growers learned that it would cost about $5,000 to incorporate in Iowa, and up to $20,000 if they
wished to have members across several states. These figures turned the emerging grower group
away from official incorporation, and toward a more informal structure.
One group member suggested appointing a grower to be in charge of marketing, and
selling the entire pool’s chestnut harvest through this one person. The group agreed, and a
“marketing coordinator” was appointed in 2000 to organize selling the chestnuts. One of the
original growers described how they preferred this less formal structure from the beginning:
“We talked about forming an organization that would have a board of directors and
officers and publish a newsletter and nobody wanted to do that. They weren’t interested
in paying dues or an application fee or even filling out an application. All they wanted to
do was have a place to sell their nuts.”
The organization has been informally run ever since, with no directors or officers; the sole
position is the marketing coordinator. The group has not held meetings in several years and,
according to the current marketing coordinator, this is what the growers have preferred as long as
things are going well. The recent spike in production will likely precipitate a grower meeting to
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pursue a reorganization of the business. As currently constituted, though, the “cooperative” has
no official legal existence, but is instead a nexus of multiple handshake agreements.
Operations
Prairie Grove exclusively markets Chinese chestnuts from both seedling trees and from grafted
cultivars. In the estimation of Prairie Grove’s marketing coordinator, the Chinese chestnuts are
superior in quality to the European or Japanese varieties that occasionally make their way into
US grocery stores. While Korea is starting to become a big exporter, the director notes that most
imports into the US are European or European/Japanese hybrids from Italy where they “don’t
export chestnuts they consider fit for human consumption—If they’re any good, they keep them
in Italy.” The main customer base for chestnuts in the US tends to be people who grew up in
other parts of the world where chestnuts are more prevalent. These customers, according to the
marketing director, “hold the grocery store chestnuts in utter contempt.” He considers the
European/Japanese hybrid variety “Colossal” (the main variety grown by CGI growers in
Michigan) to be of equally low quality to the Italian imports. These beliefs about taste, quality,
and preferences of the Asian American and European American market have guided Prairie
Grove Nut Growers’ decision to focus on Chinese Chestnuts.
Ideally, growers harvest their Chinese chestnuts the day they fall out of the tree. They are
responsible for getting the nuts into a cooler or refrigerator as soon as possible after harvest, then
delivering the nuts to the “co-op.” As of 2012, growers were paid according to the following
price schedule: $.85/lb. for < 7/8” diameter, $1.60/lb. for 7/8” to 1”, $2.20 for 1” to 1 1/8”, and
$2.55 for > 1 1/8”. If the chestnuts delivered don’t meet particular quality standards, however,
growers are paid a discounted rate. According to a newsletter for growers, “Batches with over
2% frozen, dry, dirty, moldy, or otherwise damaged nuts will be discounted or rejected. Batches
mixed with excessive debris will be discounted.”1 The chestnuts are sorted into categories from
small to extra-large, then stored just above freezing to preserve freshness. These nuts are then resold at what is generally close to a 25% mark-up. Customers receive a volume discount on orders
over 100lbs., and an even greater discount on orders exceeding 1,000lbs.
Marketing
Until recently, the demand for Prairie Grove Nut Growers’ chestnuts had always far exceeded
their supply. In fact, during spring of 2013, the marketing coordinator described his role as
follows: “I don’t market chestnuts, I ration chestnuts among the customers…If I had 10 times the
volume I did, I would still be rationing chestnuts.” New customers who wish to purchase nuts
from Prairie Grove have, in the past, their place on a several-year waiting list. This pattern is in
line with national trends that underlie optimism about growing the US chestnut industry: In
2011, the US imported over 8 million pounds of chestnuts, and it is estimated that there is only
10% of the necessary acreage planted domestically to satisfy demand.2 Because of such high
1
Prairie Grove Nut Growers, “2012 Newsletter for Growers,”
http://www.prairiegrovenuts.com/Harvester%27s%20Letter%202012.pdf.
2
Malinda Geisler, “Chestnuts,” Agricultural Marketing Research Center, accessed May 30, 2013,
http://www.agmrc.org/commodities__products/nuts/chestnuts/; Marcia Passos Duffy, “A Wide-Open Field for
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demand and relatively short supply, Prairie Grove has historically sold most of its nuts within the
state of Iowa, except for a few mail orders.3
In the first years of the co-op (then called Southeast Iowa Nut Growers), sales increased
from 400 to 10,000 pounds. Pooling production allowed access to larger markets, easier
negotiation of prices, and helped prevent growers from undercutting each other.4 But marketing
the growers’ chestnuts was not without its challenges. During the company’s early years they
sold “large” and “extra-large” chestnuts with ease, however they could not find a market for their
“small” and “medium” sizes. Because “large” and “extra-large” nuts only comprised about half
of the annual harvest, this left a significant number of chestnuts unsold. Initially, the solution was
to turn the small and medium-sized chestnuts into a shelled, value-added specialty product.
Instead of buying an expensive conventional shelling machine the growers wanted to develop
their own mechanical sheller, but had little knowledge of how to do so. In working to create the
sheller, Prairie Grove received financial and technical assistance from the North Central
Initiative for Small Farm Profitability (NCISFP), a four-state multi-institutional organization that
endeavors to increase the profitability of small-to-mid-sized farms in the Midwest. The
assistance from NCISFP, in turn, was facilitated by a grant from the USDA Cooperative State,
Research, Education and Extension Service.5 Growers eventually developed a shelling machine
by modifying and motorizing a hand-crank peanut sheller. With parts costing about $1,000,
building the sheller was far less expensive than buying conventional equipment which could
have cost up to $100,000.6
After developing adequate shelling equipment, the growers first targeted chefs with their
new product—small and medium-sized frozen, peeled chestnuts. Prior to developing the
homemade sheller, market testing had yielded uninspiring results: In 2001, growers used
NCISFP grant support to ship 1,350 pounds of nuts to Nebraska to experiment with a steam
peeling process and gauge interest with area chefs. The process was quite inefficient, yielding
only 250 pounds of kernel, and no chefs in the Lincoln and Omaha areas were interested in using
the frozen, shelled nuts. But when the marketing coordinator contacted 28 chefs in Iowa City and
Des Moines, all but two were interested in the peeled, frozen kernels. The co-op used a licensed
community kitchen to shell and vacuum seal the nuts then sent the one-pound bags to a freezer
warehouse in Iowa City. In March, 2004, co-op representatives brought samples of the frozen,
peeled chestnuts to an organic food trade show in Chicago where they established contacts with
Growers,” Growing Magazine, April 2008, accessed April 16, 2013, http://www.growingmagazine.com/article1018.aspx.
3
Duffy, “A Wide-Open Field.”
4
Christy Hemken, “Chestnuts Take Root in Southeast Iowa,” Farmprogress.com, February 9, 2006, accessed April
16, 2013, http://farmprogress.com/story-chestnuts-take-root-in-southeast-iowa-9-5779.
5
Ibid.
6
“Small But Mighty: Iowa Chestnut Producers Process, Package Small Chestnuts for Sales to White-Tablecloth
Restaurants,” The Western Chestnut 7(1), Winter 2005,
http://www.centerforagroforestry.org/pubs/chestnut/v7n1/v7n1.pdf.
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enthusiastic chefs, helping to make the new product a “highly desired commodity among local
restaurants.”7
But marketing small and medium chestnuts to chefs through this frozen value-added
product turned out to be just a temporary endeavor. About five years ago, a Bosnian man from
Waterloo, Iowa showed up at Prairie Grove Nut Growers and bought 300 pounds of mediumsized fresh chestnuts—several times the number of medium-sized nuts than had been sold fresh
over the preceding few years. Chestnuts are a common ingredient in Eastern European diets, and
Waterloo is home to about 4,000 Bosnian immigrants. The individual had such success selling
the chestnuts that a half dozen Bosnian immigrants returned to Wapello the following year,
buying all of Prairie Grove’s medium-sized chestnuts. The year after that, the marketing
coordinator had to start a waiting list, and the Bosnians from Waterloo began buying the smallsized nuts, too. Discovering this ethnic market has allowed Prairie Grove to sell all of its nuts
fresh instead of having to process the small and medium-sized nuts—a welcome development
according to the current marketing coordinator: “There’s absolutely no reason to do value-added
processing when we can sell everything fresh. It’s just way more profitable to sell fresh chestnuts
because of the cost of the processing...And the hassle and the time and the hours and the
government paperwork.” It had taken ten pounds of chestnuts to produce four pounds of frozen
kernels; being able to sell ten pounds fresh for a higher price than four pounds frozen meant that
processing was no longer worth it.
As Prairie Grove has focused exclusively on selling fresh chestnuts, they have moved
away from selling to chefs. While they originally provided an important market for the frozen
chestnuts, Prairie Grove’s marketing director described chefs as “moving targets,” frequently
changing restaurants and locations. This made it difficult to establish reliable lists of customers.
Additionally, he noted that each individual chef doesn’t buy much product. When customers are
driving from 250 miles away to buy a thousand pounds of chestnuts, it makes little time and
money sense to “drive 50 miles to try and sell two pounds of chestnuts to a chef.” Although the
high-end restaurant business was initially a valuable market, Prairie Grove’s marketing
coordinator is “glad I don’t have to deal with it—anymore.”
Challenges
The fortuitous emergence of a nearby ethnic market has both mitigated and highlighted one
potential challenge facing Prairie Grove Nut Growers: Americans’ lack of familiarity with
chestnuts. A 2002 report prepared by the University of Nebraska-Lincoln Food Processing
Center for Southeast Iowa Nut Growers Cooperative (as it was then called) noted that “U.S.
growers and processors of chestnuts face a mostly ‘uneducated’ market of chestnut consumers
and chefs,” making “ethnic market(s)…the low hanging fruit for the U.S. chestnut industry.”8
Similarly, Prairie Grove’s marketing coordinator claimed that, while American families might
7
Ibid.
UNL Food Processing Center, “Chestnut Market Opportunities: Assessing Upscale Restaurant Interest in ValueAdded Chestnut Products,” September 2002,
http://www.practicalfarmers.org/assets/files/Southeast_Iowa_Nut_Growers_Co-op.pdf, p. 2, 6.
8
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buy a pound of chestnuts around Christmastime in nostalgic homage to the traditional song, the
typical Bosnian family might buy 300 to 800 pounds per year. Although the chestnut’s Asian and
European heritage makes immigrant families “a very large percentage of the potential market,”
expanding or diversifying the market may mean facing the challenge of selling to a relatively
unfamiliar American consumer. The UN-L report recommended that Iowa growers need to
“Educate, educate, educate!” because most consumers don’t “know how to shell, prepare or eat”
chestnuts despite a generally positive seasonal familiarity with them. Transcending the
Christmastime stereotype and encouraging consumers to consider more year-round uses for
chestnuts would be important in growing the market. 9 One strategy the co-op has employed in
the past is supplying grocers and their customers with brochures containing information about
how to store, cure and cook chestnuts.10 Another approach has been filling the Prairie Grove Nut
Growers website with recipes for everything from chestnut cookies, pies and crepes to chestnut
puree and microwaved chestnuts. If the ethnic market ever flags, or production drastically
increases, these strategies are likely to become more important.
Another challenge the business faced in its early years was determining the appropriate
markup after the nuts were purchased from the growers. Originally, the marketing coordinator
hadn’t realized that chestnuts lose moisture weight every day, even while being kept in cool
storage. As the chestnuts lose moisture, they lose value. Growers had initially settled on a 12%
mark-up, but by the time the nuts were re-sold, they had often lost about 10% if their weight.
This caused the business to struggle with being profitable over its first few years of existence.
Eventually, it was determined that a higher mark-up would be necessary—now 23-28%
depending on size.
Even with this higher mark-up Prairie Grove has continued to sell every last chestnut. In
a spring, 2013 interview, the marketing coordinator stated that, “I am absolutely not looking for
new customers—I am looking for new growers.” Although he estimated that chestnuts might
eventually net a landowner $1,000 to $6,000 per acre annually, convincing people to grow
chestnuts in the Midwest can be a challenge, especially given the relative lack of standardized
agronomic knowledge and experience.11 Although there are generally few pests that affect
Chinese chestnut trees, the seedlings are vulnerable to browse by deer, rabbits and mice; harvest
time means competition with wild animals for the fallen chestnuts which must be harvested by
hand. Occasionally, chestnut weevils can present a more serious problem. Additionally, there is a
general dearth of quality Chinese chestnut seedling stock, which can make starting an orchard
difficult. Even with good stock, it takes at least three to five years for the trees to start producing
nuts. With estimates that establishment costs can range from $2,000 to $5,000 an acre, potential
growers might be dissuaded by a lack of short-term return on investment. In confronting this
challenge, the marketing coordinator has guest lectured at five colleges and universities, trying to
convince people to grow chestnuts. He also hosts tours at his farm to try to ignite interest, and
9
Ibid, p. 21-2.
Malinda Miller, “Southeast Iowa Nut Growers Co-op,” Agricultural Marketing Resource Center Value-Added
Business Profile, November 2002, http://www.agmrc.org/media/cms/SEnuts_08B2AC6D0625C.pdf.
11
Duffy, “A Wide-Open Field for Growers.”
10
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has published a free online “Chestnut Primer” to serve as a resource and reference for interested
growers.12
Moving forward
For many years, Prairie Grove Nut Growers was in the enviable position of being able to let
their customers come to them. In fact, just last year several Bosnians from St. Louis with
connections to Waterloo, IA made the trip to Prairie Grove Nut Growers wanting to purchase a
few thousand pounds per trip. According to the marketing coordinator, there had seemed to be a
“bottomless pit” of demand, with the “limiting factor [being] the number of chestnuts grown in
the Midwest.” The fall 2013 harvest, however, significantly changed this prior marketing
outlook. Prairie Grove Nut Growers experienced a dramatic increase in production with one
grower harvesting a crop four times greater than his previous record. For the first time in six
years the business had to go looking for customers, reaching out to markets in Chicago,
Minneapolis and St. Louis.
The production increase also affected Prairie Grove Nut Growers’ operations, and
potentially its structure: The marketing coordinator had to hire two individuals to help clean, sort
and bag the chestnuts, and even with this help it was hard to keep up. With no time to harvest his
own chestnuts, the marketing coordinator was forced to hire two additional people to harvest his
crop, as well as opening his orchard for “U-pick” by Bosnian families. This has led him to the
conclusion that the business has grown too big to be managed by one individual or even one
family. With this in mind, the coordinator has gone about organizing the first grower meeting in
roughly ten years to discuss the future structure of the business.
While the results of the meeting remain to be seen, the spike in production is sure to lead
to structural and organizational changes at Prairie Grove Nut Growers. The current marketing
coordinator wants to turn the marketing job over to someone else so he can focus on harvesting
his own chestnuts, and several members have expressed interest in the position. Additionally, he
suggests that the time may have come to legally organize as cooperative with a board of
directors, officers, and hired employees. As production increases, a new facility may also be
necessary, with room to accommodate even bigger harvests if current trends continue.
For a decade and a half, the informal structure of the “co-op” helped streamline
operations and reduced the time and effort that growers had to spend thinking about processing,
marketing, and business decision-making. It appears that although the informal approach worked
well for a certain scale of operations, Prairie Grove Nut Growers has outgrown this
organizational structure. As their volume of business increases, more people will be involved
with the enterprise in an official capacity, and it appears that more capital will be necessary as
well. Especially since the membership has not met in nearly a decade, whether and exactly how
the grower-members decide to move toward a more official, legally-defined organization will be
the key challenge for the enterprise moving forward. Will members be willing and able to
increase their time and capital commitments? How has operating so informally for so many years
12
Ibid.
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affected growers’ expectations about cooperatives? These are just a few of the questions that will
likely make the impending reorganization of Prairie Grove Nut Growers interesting and
instructive for those seeking to create collective processing businesses in small—yet growing—
agricultural industries.
i
Authored by Brady Williams, University of Wisconsin-Madison, College of Agricultural and Life Sciences
Agroecology Program. June 2014. This work was conducted through the UW-Center for Integrated Agricultural
Systems as part of a USDA - NIFA project entitled “Developing Native and Native-European Hybrid Hazelnut
Germplasm and Agronomics for the Upper Midwest”, Donald Wyse, PD, University of Minnesota with Lois Braun,
University of Minnesota; Tony Kern, Northland College; Mike Demchik, University of Wisconsin – Stevens Point;
Larry Godsey, University of Missouri Center for Agroforestry; Jason Fischbach, University of Wisconsin Extension;
and Brent McCown, Michael Bell and Michelle Miller, University of Wisconsin - Madison.
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