Wal-Mart tries to woo Illinois farmers
By: Kate MacArthur Jan. 03, 2009

Long known for its uneasy relationship with rural America, Wal-Mart Stores Inc. is trying to court small Illinois farmers.

The giant retailer wants to sell more local produce in its Illinois superstores to satisfy increasing customer demand. After reaching out to farmers on its own with mixed results, the Arkansas company is turning to the University of Illinois’ MarketMaker, an online matchmaker for farmers and retailers. Some farmers have signed on, but the company is struggling to find enough supply.

The payoff could be big for Illinois. When farmers increase local food crops by 20%, the state adds $10 billion in farm sales that can generate up to $30 billion in additional local spending a year, says Debbie Hillman, an Evanston-based coordinator of the state-funded Illinois Local and Organic Food and Farm Task Force.

Not all local farmers are lining up to do business with Wal-Mart.

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“I can’t conform to their standards,” says Ed Wonsowski, who owns a 20-acre certified natural farm in Plano that specializes in heirloom tomatoes and peppers. “I can’t afford all the paperwork, the time or the money.”

The retailer has earned a reputation as a ruthless negotiator that squeezes suppliers to cut costs. It’s viewed by some in rural America as a behemoth that squashes smaller retail rivals and reduces worker incomes. Producers who sell through farmers markets — a key source the company wants to recruit — have complained for years that Wal-Mart undercuts their business.

Now, Wal-Mart needs to change its image and recruit farmers to catch up with local demand.

Company officials concede they have to make concessions to work with small farmers, something they’re not willing to do with their big suppliers.

“It’s hand-holding,” says Ron McCormick, a Wal-Mart vice-president and divisional merchandise manager of produce and floral. “Because of the nature of local, small agriculture, a food retailer will have to be more tolerant.”

While not the first, Wal-Mart is the biggest company trying to cater to the “locavore” movement. Consumers are demanding more locally grown food because they view it as fresher, safer and more environmentally friendly than food transported long distances.

Jewel, Dominick’s and other grocers also are seeking local produce. Wal-Mart sees the U of I’s MarketMaker program, which pairs farmers and companies in 13 states, as an answer to many of its challenges in reaching out to small growers locally and nationally.

For a state like Illinois, which is about 80% farmland, Wal-Mart’s interest in local produce would seem like a huge opportunity. But less than 1% of the state’s crops are grown for direct human consumption even though residents spend $48 billion a year on food.

Farming that tiny portion of Illinois are 1,100 farmers with relatively small acreages. Many aren’t set up to sell to retailers and prefer to sell directly to consumers. Farmers markets alone have almost tripled in the state in the past decade to 270.

At farmers markets, producers set their own prices. It’s unclear how much Wal-Mart is willing to pay for locally grown food. But, in the past, it has said it would buy organic produce at no more than a 10% premium over conventionally grown fruits and vegetables.

In order to sell to retailers like Wal-Mart, a farmer has to buy $1 million worth of liability insurance; must pass safety training and certifications, and pay for equipment to harvest, store and ship produce. U of I Extension officials are talking to Wal-Mart about helping defray those costs, says Darlene Knipe, state specialist in marketing and business development at the U of I Extension and a founder of the MarketMaker program.

Ms. Knipe is hoping Wal-Mart will raise MarketMaker’s visibility and attract more retailers. But first she needs to convince the farmers.

Beth Osmund, who owns Cedar Valley Sustainable Farm in Ottawa with her husband, Jody, sells beef, pork, chicken and eggs to about 180 families who pay an $85 monthly subscription fee. She isn’t eager to become a wholesale producer.

“I’m skeptical that a national or multinational retailer can be instrumental in developing our local economy,” she says. “We’re fooling ourselves.”

©2009 by Crain Communications Inc.