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Our Hungry Planet: Going solo in the global market

A Minnesota farmer, tired of being pushed around by agricultural conglomerates in the U.S., peddles his crops worldwide.

Last update: December 5, 2008 - 12:03 PM

GOOD THUNDER, MINN.

It's a little past midnight when Wayne Knewtson's BlackBerry begins to buzz.

A food broker in Japan has e-mailed, asking how low the Minnesota farmer will go in discounting a shipment of soybeans. Knewtson rolls out of bed, rubs sleep from his eyes and heads to his office in the farmyard machine shop, where he will sip coffee and read e-mails from customers half a world away.

Knewtson's roots -- and most of his corn and soybeans -- are planted here, in the rich Blue Earth County topsoil his family has worked since 1954. But his customer is no longer the local grain elevator. These days, his soybeans go directly to Japan and the Philippines for making tofu.

Grocery shoppers are struggling with ever-higher food bills, but for many farmers, these are the best of times. Farm incomes are surging, thanks in part to record prices for soybeans, corn and other crops reached this past year.

The reasons are both dramatic -- rising populations that are eating more like Americans -- and mundane -- a weak dollar this past year made it cheap for foreign countries to buy our food, and liberalized trade policies means Minnesota farmers such as Knewtson have access to more customers than ever.

In 2008, the United States is expected to export nearly twice the agricultural products it did in 2005. In the past year alone, exports increased by an unprecedented $33 billion, to $115 billion, though that figure is distorted by the grain spikes earlier in the year.

Most farmers haven't taken the drastic steps of Knewtson, who now sells directly to foreign buyers. The majority of exports are carried out by far bigger players, including agri-giants such as Cargill, CHS and ADM. But Knewtson's gamble has paid off, even in this increasingly volatile food market.

"I'm a farmer at heart," Knewtson said recently. "Farming is the most important thing to me personally. But in the last few years, that's changed. We're not the typical farm, anymore."

Japanese visitors

The sun beats down on the southern Minnesota prairie on a warm September afternoon as Knewtson turns off a two-lane highway and steers his sport-utility vehicle onto the edge of a soybean field.

He parks, steps outside and leads two Japanese businessmen into the field to inspect a new variety of soybean that he is growing with help from the University of Minnesota.

"I was here two weeks ago and they were pretty green yet," Knewtson says as he plucks pods from a stem and rubs them into the palm of his hand to get at the beans. "But they look really healthy."

Knewtson learned to farm walking these same fields with his father, Ellsworth, one of the first farmers to grow soybeans on the fertile prairie south of the Minnesota River Valley.

He has spent nearly all of his 59 years in the area -- he left for the Twin Cities in the late 1960s to pursue an agronomy degree at the U, and until a few years ago, most of his business was growing soybeans and soybean seeds for food companies across the United States. His work took him coast to coast, but never overseas.

Then in 1999, one U.S. company told him that it didn't need his beans because of an oversupply in the Asian markets. Knewtson said it cost him about $10,000. When it happened again the next year, Knewtson, a tall, soft-spoken man with thinning blond hair and a face reddened by years of working the fields, figured there had to be a better way of doing business.

He had a strong interest in international trade from his college days. And unlike most farmers, he had cleaning and bagging equipment that he once used in the production and sale of seed soybeans. That could put him in control of his whole operation. He just needed a foreign buyer.

'Am I doing the right thing?'

After reading about the growing demand for soybeans in Asia, Knewtson signed up for a food and beverage trade show in Tokyo. It was 2002.

He had no contacts in Tokyo and spoke no Japanese. "I didn't know what I was doing."

Once at the show, he hired an interpreter. But Day 1 was a bust: He sat at a largely empty booth after the airline lost his suitcase with photographs and soybean samples.

Even after his supplies arrived, Knewtson's booth was sparse. "I was standing there in my coat and tie and letting people run their fingers through my soybeans,'' he said. "More than once I thought, 'Boy, am I doing the right thing here?'"

Weeks later nobody he'd met at the show had called him back. Nobody e-mailed.

Already out $10,000 on that trip, Knewtson sunk another $4,000 into a second trip to Tokyo a few months later for a show that focused just on soybeans. "Will it ever pay off?'" Knewtson wondered.

Several earlier contacts showed more interest, leading to his first sale a month later.

In the fall of 2002, Knewtson shipped one container of beans -- 740 bushels out of the 40,000 bushels he produced that year -- to Tokyo. After expenses, he earned about $1 to $2 more per bushel than those he sold in the United States.

His career as international exporter had begun.

Market push

The United States produces 36 percent of the world's soybeans, more than any other nation. And Minnesota grows more beans than any state but Iowa and Illinois, $1.08 billion worth last year.

About one third of the state's 2007 soybean crop was exported. Minnesota farmers sold a record $3.6 billion of wheat, corn, chicken and other food to foreign markets last year, a 50 percent gain in five years.

To be sure, as big as exports are, the bulk of what Americans eat is still home grown. And even as exports increase in volume and sales, the movement to grow organic and "buy local" is gaining momentum.

For all the overseas sales, few farmers deal directly with foreign buyers. Most truck their beans to a local elevator or processor, take their check and head home.

But a small, growing number of farmers and processors see advantages in doing it themselves -- by going to markets where buyers want specific varieties of soybeans or other commodities, they have more control over what happens to their crop and can improve their profit margins.

"There is no reason why any farmer who has the desire, in today's age of the Internet, can't find customers overseas or domestically who can give him a better price," said Ron Anderson, a former farmer who processes and exports pinto beans and sunflower products from companies near Crookston, Minn. "All he has to do is ship direct."

The Minnesota Department of Agriculture has begun in recent years leading trade trips abroad with hopes of helping farmers and businesses develop connections, particularly in the rapidly-developing Asian market. This month, it is leading a small delegation of farmers and shippers, including Knewtson, on a two-week trade mission to Vietnam and Taiwan. It's the delegation's third trip and first to Vietnam, which state leaders feel is a prime target for Minnesota farmers.

"Ninety-six percent of the world's population lives outside the United States," said the state's agriculture commisioner Gene Hugoson. "Why would we limit ourselves to such a miniscule number of [buyers] when there are other opportunities out there?

"And you look at where the potential growth is, and quite frankly, it's not in the United States. You can't just have all your proverbial eggs in one basket. You have to have some diversity."

Asians, in particular, Hugoson said, want a personal relationship with their customers. "They still depend on that face-to-face contact, and wanting to be comfortable in who they are doing business with."

Nearly 500,000 bushels

The 600-acre farmstead Knewtson runs with his son and business partner, Adam, 36, still feels much like the 320-acre farm his parents bought in 1954.

From a distance, three towering blue silos mark the site just east of Hwy. 22. In their shadow sit a half-dozen storage bins and a large seed-cleaning plant, where Knewtson houses his cleaning and bagging operation and offices.

Knewtson spends most of his time upstairs, holed up in a windowless office crunching numbers, checking e-mails and working the phones.

A large color map of Asia and the Pacific hangs on his office wall. On his desk nearby are neat stacks of the endless paperwork from running an international business.

"It seems like every customer wants a different kind of document," said Geri Howieson, office manager and one of four full-time employees who work for Knewtson.

Knewtson can't grow enough of his soybeans, which are not genetically modified to resist certain pesticides -- the so-called non-GMO that many Asian buyers prefer. So he contracts with two dozen Midwest farmers to produce enough for his customers.

One sunny morning during the fall harvest, about a half-dozen trucks pulled up outside his shop waiting to deliver beans to the Twin Cities for the first leg of the journey overseas. As they waited, several more trucks transferred grain from the cleaning plant to nearby storage bins.

After the beans are bagged and stacked on pallets, they're loaded onto trucks and hauled to Minneapolis. From there, they are put on rail cars and sent to Vancouver, British Columbia, before being loaded on a ship and sent to ports throughout Japan.

He's shipped nearly a half-million bushels of beans overseas since he started, making an average of 50 to 60 cents more per bushel than if he sold the beans down the street.

This year has been especially busy. High grain prices extended the good run farmers have had in recent years.

The result -- average household income for farmers is projected to be nearly $87,000, or about 26 percent more than it was five years ago.

Price volatility of the past year has actually made business at home more lucrative than in years past. Soybean prices hit an all-time high in July.

Exports had accounted for about 80 percent of Knewtson's profit, but with the boom in grain prices increasing his overall farm income, that slipped to about half this year.

Still, Knewtson believes this year's prices were a blip. Indeed they've been falling to more normal levels since summer. So he's continuing to expand the export business, planning to hire another full-time staffer next year.

"I planted the crop this year," Knewtson said. "But it may not happen next year."

He has reinvested most of his new money into the business, spending some of the profits to rent more land to grow more soybeans. He also bought two new forklifts and paid off debt for some equipment, including his combine.

"Things wear out," he said. "And you try and become more efficient."

But he does indulge. He and his wife, Gail, moved to a new home on a lake this fall. The couple travel more because of the business and have little splurges while there, including fine restaurants and fancy cooking knives from a 700-year-old knife shop in Tokyo.

"Things like that, that are not related to making more money, we enjoy," Knewtson said. "But you can discover it because you are in a different place in the world because of the business."

Richard Meryhew • 612-673-4425

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