How AURI works

By Cindy Green
Photos by Rolf Hagberg and Kay Mithaugen (Olson photo)

Editor’s note: This is the first installment in a four-part series that explores AURI — who it helps and the services it provides Minnesota. This first segment surveys AURI’s mission and projects. Future installments will cover AURI client services, regional offices, pilot plants, laboratories, research and development focus areas, and how the institute is managing emerging agricultural opportunities.

How AURI works. As a bushel of corn travels from harvester to elevator to processor to packager to retailer — with a transporter at every step — the price climbs. “Each step, from processing to marketing, doubles its cost,” says Edgar Olson, AURI executive director. “That’s how five cents worth of wheat turns into two-dollar bread.” The trick for Minnesota, he says, is to capture as much value as possible before the corn, or any other commodity, leaves the state.

That is AURI’s mission.

For the past 12 years, the state-funded nonprofit institute has been helping businesses and agricultural groups develop new uses and markets for traditional and alternative commodities. Every project gets Minnesota closer to realizing the potential of the state’s abundant ag resources.

“We can’t eat everything we grow, Olson says. “So do we, for example, grow corn only for food or should we also grow it for energy? We can ship it out, but once it hits the barge or the train or the truck, we’ve lost an opportunity. ... If we can turn it into ethanol or biodiesel or any other use, we have that freight advantage because we can market it right here — it doesn’t have to be shipped to the East Coast, West Coast or Gulf.”

Higher prices, more profits

Adding value in-state reaps benefits for farmers in two ways, Olson explains. “If you create additional demand and value, eventually that will come back as increased commodity prices.” Also, by involvement in value-added ventures such as ethanol or food processing, the producer “gains more control farther down the processing chain.”

“However, an individual producer needs capitalization,” Olson says, “not only for his production enterprise but also his processing enterprise. There are other players we can bring in so the producer can share ownership (such as in farmer-owned cooperatives).

“The closer to the production you can do the processing, the better off you will be financially. It’s better to finish, manufacture and ship a processed product than a raw commodity.”

Edgar Olson. Is size an issue?

To boost commodity utilization and in-state processing, AURI has supported a wide range of projects — from a family-owned cheese-making shop to a 500-member soy oil refining cooperative. “We like to think that we don’t say no to anybody — but we do have focus,” Olson says. “The important thing is, how much commodity does it consume?”

“We have projects all the way from roadside stands and a guy doing his own manufacturing and direct marketing to those selling in Sam’s Clubs and Targets. Sometimes we help individuals who love their work, love their project, but don’t have an interest in huge volumes.”

Small food entrepreneurs frequently ask for AURI’s assistance. Typically, they make specialty foods from natural, homegrown ingredients — flavored honey, ethnic sausages, rhubarb jam, soy snacks, lefse mix.

While AURI may not provide major assistance to a small food entrepreneur, the Institute’s food lab and pilot plant in Crookston and meat lab in Marshall can help with ingredient analysis, scaling-up recipes for commercialization, initial processing, packaging, labeling, food safety training and other services. “These services may make the difference over whether a business gets going,” says Kai Bjerkness, AURI planning and development director.

At times, the help may come in exposing the harsh realities of marketing. “If someone comes to us with a salsa recipe they love and all their family and friends say ‘It’s great; you should sell it,’ we ask, ‘Do you want to eat, drink and sleep salsa for the next 10 years? Because that’s what it will take.’ If someone really wants to build a product and a company, they have to be prepared.”

Beyond food

Innovative nonfood projects, such as starch-based packing peanuts, wheat-based cat litter and soy-based lotions and candles, can eventually increase commodity demand. Some emerging industrial projects with even higher potential impact include soybean crushing in southeast Minnesota and small-grain ethanol processing in northern Minnesota.

Energy and coproduct utilization are major focus areas, not only in AURI client assistance, but the Institute’s internal research and development. “The ethanol industry has come of age, ” Olson says, and is not only producing energy but distiller’s grains, an ethanol byproduct that can be used in livestock feed.

“Now we’re looking at biodiesel blended with ethanol (see story, page 3). If we can use the energies we produce in our fields to fuel our tractors and trucks and trains — it’s just that much less we have to import,” Olson says. AURI, through its coproduct utilization program and pilot plant in Waseca, has assisted in such projects as turning livestock waste into energy via anaerobic digesters, a poultry litter power plant and furnaces that burn agricultural waste.

A world of alternatives

Alternative crops and livestock also play a role in adding value to farm production. When farmers switch from supplying mainstream commodities to the market for raising alternatives, their more traditional colleagues may see higher commodity prices as a result.

Alternative livestock operations may generate good income for those farmers willing to take the risk. Livestock that AURI recently investigated include lamb, elk, goats and bison. Crop alternatives also can be profitable, such as cranberries, organic dairy products, hazelnuts, herbs, shiitake mushrooms — especially when entrepreneurs process specialty crops into gourmet or ready-to-eat foods.

Feasibility first

Most of AURI’s work is in technical assistance and feasibility analysis. “You can do almost anything, but is it feasible and practical? Where can you be competitive?” Olson says. Services are provided at AURI’s regional offices in Morris, Marshall, Waseca and Crookston, where AURI is also headquartered.

“We have staff who have an immense amount of experience in product development and technical assistance,” Bjerkness says. Though marketing help is not AURI’s role, it may be the piece that has to be addressed before a project is deemed feasible. “We focus on due diligence and some of that involves marketing. There are three legs of the stool — product, finance and marketing. If you don’t have all three, you’re going to have problems.”

If a business is missing a leg, it “has to have some advisors, a board, something that can help steer the ship. That may mean bringing in financing or marketing help.”

AURI also helps innovators hook up with organizations that have resources in specific research, business development or agricultural production needs, such as the University of Minnesota, State Universities, Minnesota Department of Agriculture, Department of Trade and Economic Development, local development specialists or private consultants. At times, AURI may help fund those outside services.

Though there are many methods to AURI’s mission, the desired outcome is the same: use commodities, increase value, and generate more income for rural Minnesota. To that end, AURI still has plenty of work to do.