by Linda Liston

Overshadowed by successes in other sectors, Ohio agribusiness remains the state's leading industry and an enduring provider of economic growth. Food, forestry and flowers are strong contenders for new investments.

Ask any businessman what he knows of Ohio, and he'll probably cite the state's position as a manufacturing powerhouse. He'll know it as the state that welcomed the first Japanese automaker -- Honda -- to the U.S. He'll know it as a national center of excellence in rubber and plastics and as a pioneer in aviation and in glass technology.

But surprisingly, Ohio's biggest industry has little to do with those images. Ohio's biggest industry is agribusiness -- it is first and foremost a farm products and processing state.

A $56 billion a year industry, agribusiness supplies more jobs and contributes more to the state's favorable trade balance than any other single sector. But despite its importance as a job generator and its billions in bricks and mortar, agribusiness opportunities are not sated.

This report reviews Ohio's advantages for agribusiness investment and points out some exceptional opportunities in its small towns and rural counties.

Here is what Ohio brings to the table:

Ohio occupies a strategic location between the grain belt of the nation's breadbasket and the big markets of the Eastern U.S. Ohio is within 500 miles, or one day's trucking distance, of 61 percent of the nation's population and two-thirds of its purchasing power, plus the population centers of Canada.

Location is a main reason for Ohio's burgeoning agribusiness sector. As Luigino's said when the company established a frozen food plant in southern Ohio in 1991, "Ohio is 500 miles from everywhere."

Ohio has a well-developed transportation system and logistic support services for bringing in bulk raw materials and shipping out finished products. All four modes of transportation -- road, rail, air and water -- are fine-tuned and well-integrated. Ohio is one of the lowest cost business locations in the U.S., ranking well below the national average in costs of food, housing and health care, as well as in overall tax burden. Mother Nature dealt Ohio a bonus. The state receives a substantial 40 inches of rain a year, and, as the farmers say, rain makes grain. In addition, several areas of the state sit atop massive aquifers, which can be tapped by water-demanding food and fiber processing firms. One-third of the state can deliver 100 to 500 gallons of water per minute.

Ohio Agribusiness: A $56 Billion Industry

As Ohio's most significant sector, agribusiness receives major attention -- and major funding -- from state government. Even environmental issues -- an onus in many states -- are approached in an even-handed manner.

Ohio houses one of the most respected agricultural research institutions in the U.S. -- The Ohio State University. The university, and its extension agents, play a major role in bringing the fruits of research to the dinner table.

Ohio ranks in the top five states in production and processing of most food and forest products. Many of its agribusinesses operate on a national basis, and some are globally known.

Major food-related companies headquartered in Ohio include Bob Evans Farms (Columbus), Borden (Columbus), Chiquita Brands International (Cincinnati), Kroger (Cincinnati), Lancaster Colony (Columbus), Smuckers (Orrville) and Wendy's International (Dublin). Other well-known food firms include Honey Baked Ham and Worthington Foods, which specializes in vegetarian foods, such as soy burgers.

In terms of food processing plants, we are not talking small potatoes. Campbell's soup factory at Napoleon is the largest in the world. More ketchup flows from the Heinz plant in Fremont than anywhere else in the world. Pillsbury turns out 1.8 billion pizzas a year at the world's largest pizza plant in Wellston. Dannon operates the world's largest yogurt plant in Auglaize County. The Cargill plant in Dayton is the nation's largest fructose-making facility. The facilities of F&P made Cincinnati a national center for food flavoring and scents. Frozen foods center in Cleveland, with Stouffer's; Wellston, with Pillsbury (frozen pizza and waffles); and Jackson, with Luigino's.

When the new AgriGeneral plant in Hardin County comes on line, Ohio will be the largest egg producer in the country.

The massive plants of Central Soya and Cargill churn out soybean oil -- a ubiquitous ingredient in prepared foods -- for domestic and international markets. The largest producer of Swiss cheese is not Wisconsin -- it's Ohio. Ohio ranks in the top five states in African violets, processing tomatoes, ice cream, hog and sheep operations and livestock slaughter plants. (The attractive river city of Cincinnati was once known as "Porkopolis.")

From raw materials to finished products, agribusiness is a $56 billion industry in Ohio.

But there's much more on the Ohio table. The state is a top 10 producer of celery, apple cider, mushrooms, soybeans, sweet corn and cucumbers. Regional specialties include wine from Lake Erie vineyards.

In wood products, Ohio chalks up more superlatives. Merillat Ind. Inc. in Jackson and Loudonville is one of the nation's biggest producers of cabinets. Mill's Pride in southern Ohio and Sauder in northwest Ohio occupy strong positions in the niche of ready-made or ready-to-assemble furniture, one of the fastest growing segments of the furniture industry.

When you sit down at the dinner table, you are the last link in an integrated food chain. Your dinner is the end product in a long manufacturing line that employs millions and requires billions in bricks and mortar -- not to mention a little boost from Mother Nature.

The chain starts with the people who sell inputs to the farmer -- seed and fertilizer and farm equipment. The next link is the storage industry, such as grain elevators. The processors, packagers and food equipment makers follow. Enter the wholesalers, distributors and logistics specialists. Finally, the products arrive on the supermarket shelves, restaurant menu or other retail outlet. Ohio's 687 food processing facilities employ more than 61,000 people, and industry forecasts predict that number will continue to rise by several thousand workers a year. In the 1990s nearly 200 new and expanded food processing facilities have popped up across the state. The Ohio State University reports that the food and agricultural sectors contribute 13 percent of the output, 11 percent of the value added, 16 percent of the total employment and 11 percent of total income to the state. The food and forestry processing sector is the largest in terms of output, accounting for $25.5 billion. But the food and forestry wholesaling/retailing and the food service sectors are the most significant employers. The entire food and agriculture complex accounts for employment of over 935,400 people, or about one in every six jobs.

The Fun Side of Farming There's something about a spring day that triggers a yearning to play in the dirt and commune with the earth. Most of us satisfy the need with a few tomato plants and flowers. But some make a big business out of that itch to get back to the earth. Several Ohio businessmen have turned farming into popular tourist attractions. Bob Evans Farms in Gallia County in southern Ohio is the homestead of the family that developed a highly successful chain of family-style restaurants. It all began with a downhome restaurant in Gallipolis where truckers would stop for breakfast. The company now employs 19,000 and rings up annual sales of $736 million. In addition to its food service and specialty meat empire, the company opens the farm to hordes of visitors who want to enjoy a day in the country. Young's Jersey Dairy in Champaign County in west central Ohio for years sold its rich, raw milk to people who would stop by. Then, the owner thought, maybe some doughnuts would go well with the milk. One thing led to another, and today Young's is a major Ohio tourist attraction, hosting two million visitors a year. Still a working farm, Young's added a miniature golf course -- Udders and Putters -- opened the barns to visitors and lets the kids crawl all over the old Oliver tractors.

Agribusiness is a main driver behind Ohio's leadership in exports. The state sells over $3 billion in food and agricultural products a year to foreign countries and another $22.6 billion to consumers in other U.S. states.

Ohio is a pro-business state that understands partnering with the private sector. This is the main reason the state, for three years running, has topped all others in new plants and expansions.

This is particularly true in agribusiness where the industry receives the attention of the state's highest official. Gov. George Voinovich, named the "Ag Governor" by a number of industry groups, has been a tremendous supporter of the industry. He sees agribusiness as a critical driver of Ohio's economic growth -- particularly in expanding export markets.

Under Gov. Voinovich's guidance, Ohio legislated numerous incentives for manufacturing -- some of them linked directly to the needs of agribusiness.

Most food manufacturing operations require a large capital investment, and anything a state can do to ease the burden is welcomed.

Ohio offers tax credits against the purchase of manufacturing machinery and equipment. The credit allows a 7.5 percent corporate franchise or state income tax credit on the purchase of new machinery and equipment used in the production or assembly of a manufactured good. The credit applies to the excess of investment over the previous three-year annual average. The tax credit rises to 13.5 percent if the investment is made in a state-designated "Eligible Investment Area."

The state forgives sales tax on materials used in building poultry, livestock and horticultural structures.

Purchases of equipment used in research and development are also exempt from state and county sales tax.

Ohio is a freeport state with no inventory tax on goods in transit. In addition, warehouse equipment used in storing, transporting, mailing or handling inventory distributed outside of the state is exempt from sales tax.

A job creation tax credit is based on the state income tax paid by new full-time employees. The credit against the corporate franchise tax could amount to 100 percent and could apply for up to 10 years.

Companies find training grants from the Ohio Industrial Training Program popular. The availability of the program was one reason Gordon Foods selected Springfield for a $55 million food distribution center last year. A Training Tax Credit allows an income tax credit of 50 percent of the cost (up to $500) of training displaced workers. Another tax credit rewards companies that expand their export activities. Companies that increase their export sales, and at the same time expand either their Ohio payroll or capital expenditures, can claim a franchise tax credit. The credit is 10 percent of pre-tax profit from the expanded export operation.

Unstinting support for agribusiness earned George Voinovich the designation of "Ag Governor." Here, he places the "Ohio Proud" label on a package of chicken.

Local jurisdictions offer additional incentives. These include Enterprise Zones, Community Reinvestment Areas, Rural Enterprise Zones and revolving low-interest loans. Some counties are also eligible for extended tax credits under Ohio's manufacturing machinery and equipment investment tax credit.

While incentives are almost always welcomed, companies also look at the day-to-day way business is done in a state. For example, when Ken Aleong, president of Basic Grains, was looking for a Midwest location to produce his line of rice cakes, he found Ohio "very business-oriented."

"I dealt with four or five different states and I felt much more comfortable with Ohio," reports Aleong. "Ohio was a lot more 'user-friendly,' and showed a real interest in having our business. You can sense the honesty."

That pro-business attitude also extends to the regulatory environment. The Ohio Environmental Protection Agency does its job in a firm but fair manner.

Says Nick Chilton, president of Wyandot, a snack food maker in Marion: "We're very fortunate that we can talk about waste water issues in a non-adversarial setting. The people at Ohio EPA are not pushovers, but they are very helpful."

"We approach projects on a proactive basis, bringing the Ohio Environmental Protection Agency and the Dept. of Agriculture in early to move the project forward," says Don Clark of the Ohio Dept. of Development. "This results in a much more positive relationship and a much quicker time frame than industry experiences in other states. It's a customer-service approach rather than a bureaucratic approach."

Ohio summons some of the best agricultural research talent in the nation to the needs of agribusiness. The Ohio Agricultural Research and Development Center (OARDC) in Wooster is a world-class problem-solving, opportunity-enhancing unit. The "wizards of Wooster" are well known for their ability to develop new uses for Ohio farm products and to enhance the marketability of existing products.

Many of Ohio's food processors rely heavily on the OSU School of Food Technology and its technical advisers. "It's a major benefit to be located in a state as progressive as Ohio," says Nick Chilton, president of Wyandot.

Ohio Entrepreneurship Rural Ohio has an exceptional number of up-by-the-bootstraps stories. Companies like Longaberger (baskets) and 5B's (custom embroidery), born in basements or garages, are now billion-dollar businesses. Most of the businesses were started by those who shucked the big city for the mental freedom that comes with living in a small town. Ohio's food industry has its share of entrepreneurs and niche marketers, as well. Such was the case of Robert Rothschild III, president of Rothschild Berry Farm in Champaign County in west central Ohio. His company specializes in gourmet red raspberry goodies, beautifully bottled in fancy imported glass. Rothschild, a former engineer, said goodbye to San Francisco 20 years ago when he moved to his 170-acre Ohio farm. "This is not the raspberry capital of the world," says Rothschild, "but we felt that to survive in the ag business you have to do things differently. There's just too much competition in general farming. In niche products we can more or less dictate what we charge, whereas in commodity products, like corn, the market dictates the price." Rothschild made a modest $5,000 a year when he started the business. It has now grown to $5 million annually, with a growth rate of 20 percent a year. The company sells in specialty food stores, gift shops and department stores and through upper-end catalogs such as Neiman Marcus. Raspberry salsa? "It's good on corn chips," says Rothschild.

OSU, working in tandem with industry, is uncovering some intriguing new uses for Ohio-grown grain. Don Clark, agribusiness specialist with the Ohio Dept. of Development, reports that industrial uses of crop-derived oil are gaining ground and interest. Early research looks promising for biodiesel made from soybean oil, soy ink, biodegradable plastics and other products. "The industrial use of grains is about 700 million bushels this year, 30 percent higher than in 1990 and 300 percent higher than in 1980," says Clark. Clark also reports that use of such renewable crops as alfalfa and switchgrass to produce ethanol has real growth potential. Fueling the interest is the fact that prices for corn, the major ingredient in ethanol, are at an all-time high. The aggressive entry of Asian companies into U.S. corn markets is a primary driver for the price increase. Crop fibers may also see use in building materials. Wheat and oat straw can be used for lightweight, strong and economically competitive products for the construction industry. In another research program, the Ohio Dept. of Agriculture is encouraging year-round livestock grazing to reduce feed costs and improve profitability for livestock producers. Farmers in Appalachia particularly would benefit if the extended grazing systems become widespread. In a unique public/private pilot project, 154 acres at the Lucasville Correctional Institution are being used to study costs and benefits of year-round grazing.

The state's focus is on value-added processing or manufacturing of ag commodities into consumer goods or industrial products. For example, says Clark, "instead of sending our corn to the North Carolina and Delmarva Peninsula hog and poultry industries, we want to keep the corn here, bring in a plant to make food and fiber products, and enjoy the economic growth."

Manufacturers want reasonable labor costs and productive workers. This is where Ohio excels, particularly in its smaller cities and rural communities, where the farm-based work ethic is still much in evidence.

Ken Aleong of Basic Grains points out the benefits of a rural workforce: "The Ohio workforce has a better appreciation of ag manufacturing processes. What worries me in the metropolitan environment is the constant turnover of employees. But in a rural environment, you find workers will stay with you for some time, and that's a big plus. The last thing you need when you operate sophisticated machinery is to have employee turnover."

Food processing is not a footloose industry that can locate virtually anywhere. Locations almost never make the short list if they have high transportation costs or are located a significant distance from raw materials or final markets. On average, transportation accounts for five percent of product costs.

Ohio occupies a strategic location with respect to both raw materials and final markets. Through its back door pours the bounty of the nation's grain belt. Out its front door cascade the final products for the East Coast markets, the largest single agglomeration of population in the nation.

Ohio itself is large internal market. Eight metro areas, 15 micropolitan cities and countless rural communities house 11.1 million people. Ohio's population, quintessentially American, makes an excellent test market for new products. To tap the potential of the raw materials and the market, Ohio brings into play its superior transportation infrastructure.
	Dannon's yogurt plant in Auglaize county is the largest in the world.

Ranking 35th in land area in the nation, Ohio has the 10th largest highway network in the U.S. and more railroad track per square mile than any other state. It adds the options of shipping via 700 miles of navigable waterways or three all-cargo airports, part of Ohio's system of 184 public airports. Moreover, integration of the modes facilitates transfer from road to rail to vessel or from road to aircraft.

Rail is particularly important because agricultural commodities have a low value-to-weight ratio, and food plants are frequently located on rail. The iron highways to the Lake Erie and Ohio River ports give the state an edge in the export market.

Long a rail hub, Ohio is usually one of the first states to benefit from new railroading technology. The state houses several large intermodal marshaling yards and container shipping centers.

Ohio is served by three Class I U.S. lines -- Conrail, Norfolk Southern and CSX -- plus Canadian National and scores of aggressive shortlines. In some areas, the shortlines were established specifically as a lifeline to markets for agribusiness. They provide regular, dependable schedules and are often willing to provide "extras," like additional switching or special cars as a customer service.

The availability of multiple carriers means shippers are not captive to one line and can often negotiate lower rates.

With Lake Erie forming its northern border and the Ohio River most of its eastern and southern border, Ohio offers major advantages for bulk shippers, particularly those in the agribusiness and chemical industries.

The food industry is undergoing tremendous transition in response to demographic trends and global competition. The trick for agribusiness is to recognize the trends and ride the wave. Many Ohio firms are doing just that.

Shorter product life cycles mean food makers vie as never before for space on supermarket shelves, introducing enticing new products or adding zest or more exciting packaging to older ones. The winners in this trend are companies like Wyandot that can retool product and packaging lines quickly.

Consumer preference for low-fat, "healthy" foods means greater consumption of complex carbohydrates, such as bread. This trend is driving growth in Ohio's milling and bakery industries. Filling, low-fat treats like the rice cakes produced by Basic Grains in Mercer County and the vegetarian soy burgers made by Worthington Foods in Muskingum County are a response to a constantly dieting American public.

The family pet is also seeing healthier eating options, with more consumer concern for Fido's nutritional needs. There is also consolidation occurring in pet food retailing, with specialty pet superstores increasingly replacing the supermarket as the point of purchase. This has meant new business for top-of-the-line pet food producer Bil-Jac in Medina County. The company has been able to extend its market far wider by marketing through the pet superstores than it could have on its own.

The demand for prepared or easily prepared foods to suit the busy lifestyle of two-income households and the rising number of elderly consumers shows no signs of diminishing. This used to mean the prosaic TV dinner -- now it's more likely to feature packaged salads and home-baked bread from refrigerated or frozen dough. Convenience is a major trend spurring the success of companies like Sandridge Salads in Medina County. A large and fast-growing component of the agricultural production sector is Ohio's nursery and horticultural industries, accounting for over $1.4 billion in output. The outlook for this industry is especially rosy. Says Theodore J. Host, CEO of The Scotts Co.: "Our demographics research tells us that for people 54 and older, the number one activity is gardening. By the year 2000 a million more people each year will turn 54." Scott's, a world leader in do-it-yourself lawn care, professional turf care and horticulture, is headquartered in Marysville and also has its flagship R&D facility and a major manufacturing plant in the town. The "nationalization" of regional specialties is opening up fresh opportunities for Ohio agribusinesses. "We're seeing trends everyone said would never happen," says Don Mennel, president of Mennel Milling in Fostoria. "For example, the breakfast biscuit was a southern phenomenon that everyone said would never transfer to the north. Now, all the fast food restaurants are serving breakfast biscuits. Flour tortillas are going national. Bagels for breakfast, lunch and dinner are one of the hottest growth items in grocery stores today. Grain production and the milling industry are being fueled by increased demand for grain-based products and consumer awareness that complex carbohydrates are good for you."

'Dear Agco' Six hundred jobs means a lot to a rural county like Mercer in western Ohio. So when the county was threatened with loss of those jobs, it turned out an incredible pull-together performance to save the day. This is the story of how the little community of Coldwater (pop. 4,335) bulldogged a potential 600-job deficit into an 850-job success. The story begins nearly 100 years ago in a plant that made manure spreaders. After passing through a number of corporate hands, the 1.4 million-sq. ft. behemoth plant was eventually leased by Agco, a young, Georgia-based farm equipment maker and marketer. The former company had promised to clean up the plant's environmental problems but didn't. This was going to force Agco to leave, eliminating more than 600 jobs in the community. "We told Agco, 'We're not letting you leave,' " says Larry Stelzer, Mercer County's economic development director. "Agco said, 'You didn't hear us -- we're moving our equipment out in the next 30 days.' I said we were not going to let that happen." Mercer business leaders and officials from the state Dept. of Development launched a letter campaign to Agco. In all, Agco received 72,000 letters spelling out reasons for the company to reconsider. Citizens wore badges that read, "100 years in the making. We're not done yet." The Ohio EPA got on board with environmental relief, bringing to bear Ohio's new "brownfield" site clean-up incentive. The Ohio Dept. of Development proferred an incentive package involving loans and a buyout of the property. What company could refuse? Certainly not Agco. The culmination of the save-Agco effort came at a big pep rally at the high school stadium where the company announced not only that it was staying but was also adding 200 new jobs. "This was a cast of thousands project," says Don Clark, agribusiness specialist with the Ohio Dept. of Development. "Everyone -- county and township officials, the Dept. of Development, Ohio EPA, the union and state officials -- focused on what we had to do to get the job done. And not only did we save the original jobs, we added 200 more when the company said it would bring operations from Iowa and North Carolina to Ohio." Agco, which produced its first tractor in Coldwater in 1995, is now the No. 3 ag equipment maker in the world. The company makes and markets under such brand names as White, New Idea, Agco Allis, Black Machine, Agcostar, Farmhand/Glenco, Hesston and Massey Ferguson.

Continuing consolidation and restructuring in the food processing industry is a fact of life. Like the automakers, big food processors are more and more looking for reliable sole source suppliers. Some, like Pillsbury, no longer make many of their basic ingredients, such as flour, relying solely on reliable suppliers that can be trusted to consistently meet Pillsbury's expectations. Others use dependable suppliers as adjuncts to their own manufacturing capacity. Wyandot, in Marion, for example, supplies snacks packaged under dozens of labels.

The global flow of investment in agricultural production, processing and retailing, once just a trickle, is now a torrent. This is a two-way street, with big European agribusiness conglomerates setting up shop in the U.S. or buying up American firms, and American companies testing world markets.

The foreign influence in Ohio is strong. Furniture-maker Mill's Pride (Great Britain), Dannon (France), Nestle's (Switzerland) and Pillsbury (now owned by the British firm Grand Metropolitan Plc) are among foreign-based multinationals. These companies and others are in Ohio to access the large and relatively well-heeled U.S. consumer base.

Likewise, Ohio manufacturers and retailers are appearing in greater numbers in world markets. With Ohio's well-integrated transportation network, agribusiness can access both European and Asian markets. The opportunities for export are particularly apparent in the Pacific Rim. The state is sharpening its marketing message to attract Asian interest in Ohio food and fiber products.

"We have a tremendous opportunity to send raw materials and value-added products to Asia," says Don Clark of the Ohio Dept. of Development. "The increase in exports to the Pacific Rim of meat, food, fiber and grain products is unbelievable, and it's projected to continue."

Meigs County		Pike County
West Central Ohio		Mercer and Auglaize Counties
Hardin County		Marion County
Village of Leipsic		Fostoria
Medina County		Mid-Ohio / Obetz and Gahanna