USDA RURAL DEVELOPMENT       )

PUBLIC FORUM ON              ) 

COOPERATIVE RESEARCH         )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pages:    1 through 151

 

Place:    Washington, D.C.

 

Date:         September 27, 2005

        UNITED STATES DEPARTMENT OF AGRICULTURE

 

USDA RURAL DEVELOPMENT    )

PUBLIC FORUM ON           ) 

COOPERATIVE RESEARCH      )

 

 

                          Room 107-A

                          Whitten Building

                          1400 Independence Avenue, S.W.

                          Washington, D.C.

 

                          Tuesday,

                          September 27, 2005

 

       The parties met, pursuant to the notice, at

 

9:00 a.m.

 

       BEFORE:  THOMAS DORR, Chairman

 

       [PANEL MEMBERS]{.underline}:

 

       JOHN R. DUNN

       BOBBIE PURCELL

       PETER THOMAS

       THOMAS STAFFORD

       JOHN WELLS

 

       [ATTENDEES]{.underline}:

 

       PAUL HAZEN

       JEAN-MARI PELTIER

       DEB CONLEY

       BILL PATRIE

       PAUL DARBY

       MICHAEL BOLAND

       RANDY TORGERSON

       AUDREY MALAN

       LIZ BAILEY

       ANN HOYT

       CHARLES SNYDER

       DOUGLAS M. KLEINE

                [P R O C E E D I N G S]{.underline}

                                         (9:00 a.m.)

          MR. THOMAS:  My name is Peter Thomas, and I\'m the
administrator of Rural Development\'s Business and Cooperative Service,
and I\'d like to welcome you all here today to this public meeting of
our cooperative research agenda.

          As you know, this Administration has continued to emphasize
the importance of reaching out to the people we serve to gather ideas
and opinions in how best to go about the work of government.

          Just recently we conducted an extensive series of listening
sessions on small and minority business development in the states of
California, Mississippi, and New Mexico.  We believe in outreach, and
today\'s meeting is another important step in reaching out to our
constituents.

          At this time, I\'d like to introduce two members of my staff,
Bobbie Purcell, who is the deputy administrator of our cooperative
programs, and John Dunn, sitting next to her, who is the director of the
cooperative research management division, and Tom Stafford and John
Wells from our cooperative staff who together with the rest of our
research staff in the room will serve as today\'s listeners.

          Now I\'d like to introduce Mr. Thomas Dorr, the Undersecretary
of Rural Development.  Mr. Dorr was appointed by President Bush and
sworn into office by Agriculture Secretary Mike Johanns on July 27,
2005.  Mr. Dorr previously served as Undersecretary for Rural
Development from August \'02 to December 2003.

          During his tenure at USDA, Mr. Dorr\'s leadership has been
instrumental in many of the department\'s efforts to carry out the
President\'s vision of a vibrant rural America.

          Prior to his service at USDA, Mr. Dorr was president of a
family agribusiness in Iowa that included a corn and soybean farm. 
Throughout his career, Mr. Dorr has demonstrated a keen interest in
research and in the role research can play in developing creative
approaches to improving conditions in our rural communities.

          And I might point out that Mr. Dorr has been the leader of
Rural Development\'s role in supporting the disaster relief efforts for
the stricken victims of Hurricanes Katrina and Rita.

          But more importantly, to sum it all up, Mr. Dorr is the type
of guy who comes to Washington and to Rural Development not to get a job
but to do a job.  Ladies and gentlemen, it\'s my pleasure to introduce
to you the Undersecretary of Rural Development, Mr. Thomas Dorr.

          (Applause.)

          MR. DORR:  Thank you, Peter.  It was very kind of you in the
introduction.

          I have a couple of things that I wanted to say, but before I
do start, Peter alluded to not just mine but all of Rural Development\'s
involvement in the disaster surrounding Hurricanes Katrina and Rita, and
I don\'t know how many of you have actually either had a chance to have
been down there to see any of it or to be involved in working anything
out in that area or not on a firsthand basis other than perhaps to have
seen it on television.

          I did get back from about two and a half or three days down
there last week.  I started out in Alexandria, Louisiana, went south to
Baton Rouge, then went east over through Washington, St. Tammany,
Tangipahoa \-- I can\'t say those French names worth a darn \--
Counties.

          Ended up in Bogalusa getting kind of passed from one state
rural development director to Mike Taylor of Louisiana to Nick Walters,
our Mississippi State director, then went over to Wiggins, Mississippi,
stayed there overnight, and then the next day we went south to the
coast, started at Waveland and worked our way up all the way to Ocean
Springs through Gulfport, Biloxi, et cetera.

          If you\'ve seen pictures of this on television, it doesn\'t do
it justice in the sense that you\'ve probably also seen so many of these
darn disaster movies that it doesn\'t look a bit different than a
disaster movie that you\'ve probably seen sometime over the last 10
years, and as a result, it reduces the tragedy and the scope of the
tragedy as you see it on television.  To have been down there and to
have seen what has happened is absolutely

mind-boggling.

          To the extent that you and your organizations that you
represent have an opportunity and/or realize needs that need to be
addressed as a result of this, I encourage you and frankly urge you to
do so in a very blessed manner.  The tragedy and the scope of the
tragedy in and of itself, quite frankly, no one individual could do
justice to it in terms of what is there and what is seen.

          Literally, the only way to explain it in my view is almost
like a little child that has a set of Legos.  He has them all built up
into whatever he wants to build them up and then throws a temper tantrum
and kicks them and scatters them all over and there\'s not one wit of
anything left, and that\'s exactly what it looks like.  It\'s just mile
after mile after mile.

          But of all the tragedy and all the disaster, the loss of life
and the loss of property, there\'s some terrific opportunities that will
now be a result of that.  There will be the effect \-- the net effect
will be almost a green field or a blank sheet sort of environment to
rebuild, to redevelop, and to redo things.

          It\'s an extraordinary opportunity to be creative, to be
thoughtful, to be effective in beginning to deploy some of the thoughts
and the concepts that you all collectively have worked on over the last
several years.  You\'re not going to have five or six years to implement
it.  You\'re going to have a couple of months.

          We\'ve actually pulled together folks from our co-op services
and our office of community development, and we did this three weeks ago
and said begin to frame up an outline of the approach and some of the
options that we have in rural development and in overarching rural
economic development models.

          We are not going to have an opportunity like this for some
time, so I urge all of you (1) truly, regardless of your faith, to keep
these folks in your prayers; (2) to think outside the box creatively
about the source of options and opportunities that this disaster has
provided you with and to work within your organizations and your
associations to see what you can do.  I don\'t think it can be
overstated the need that is going to be present down there.

          Nine hundred thousand families at a minimum have been
displaced from their homes.  There are very, very short-term and
longer-term housing needs.  Infrastructure development that has needed a
lot of upgrading over the years will need to be addressed.       The
State of Mississippi, and I say this unequivocally, the State of
Mississippi has 1,000 rural water associations.  The State of Iowa has
17.  I don\'t know what locally they\'re going to decide to do, but
it\'s clear you don\'t need 1,000 rural water associations.

          So it\'s my hope that you collectively as leaders within your
organizations look at every one of these similar issues and decide what
you can do to make it a better environment, a better system, and a
better place to live.

          There\'s no question that the impact of these disasters gets
greater with each coming disaster, and when I said that down there,
people looked at me and shake their heads and say sure, of course. 
These hurricanes, Category 4 and Category 5, are truly horrendous.  I
say yeah, that\'s part of it, but the real focus of the disasters are
the density of populations that have been built up around these coastal
areas.

          There\'s significant policy and other planning issues that
need to be thought through and thought through very carefully, and I
resolve you to keep that in consideration.

          So I thank you for allowing me just a couple of minutes to
expound on that, and I\'d be delighted to spend whatever amount of time
necessary privately with any of you who are interested in any of others
of these observations or to point you in a direction that you may be
interested in going if you have any questions on that.

          But having said all that, I do want to thank all of you for
coming.  It\'s a real pleasure to be here.  You know, this historically
has always been and it needs to continue to be a partners meeting.  Over
the years, Cooperatives and USDA have truly grown up together.

          This partnership has been one of the foundations of rural
economy for generations, and it\'s pretty evident to me that if rural
America is going to continue to be involved in a strong economic revival
\-- and I would submit to you that in many areas, there is a strong
economic revival going on in rural America \-- it is important, it
really is important that we understand the modern basis for these
relationships.

          The good news today, although I say this now, but I\'ve
already done it, is you really don\'t have to listen to me make a
speech.  Goodness knows I do plenty of that, but today is your turn to
speak to our folks and to our panel, and frankly, I tend to speak
whether I\'m asked to or not, so it really is your lucky day.

          But we\'re here to listen to your thoughts, your suggestions,
and your priorities about the cooperative research program.  I think
it\'s important to point out, though, that our goals are practical and,
in my view, they\'re urgent.  We\'re looking for more bang for the buck.

          We need to better focus our research efforts where there will
be real world payoffs for rural America, and you are some of the best
people to ask about that because you\'ve been involved with it on a
day-to-day and very direct manner.

          This of course is a never-ending challenge.  The world is
changing.  The world is changing very rapidly, and all of us understand
that the competitive pressures, globalization, new technologies, and
emerging markets mean that cooperatives, just like about any other
business in the modern world, must adapt to survive.  Change is a
constant.  I can\'t overemphasize that.

          The challenge is going to be how to anticipate, prepare for,
and profit from change.  We\'re here bottom line because we understand
that rural America has enormous opportunities.  I am probably the
insufferable optimist relative to rural America, and if we are prepared
to seize these opportunities, we can be successful.

          Cooperatives are going to need to address their role in how
best to leverage their member equity, their traditions, and their
mistakes into new, strong, and viable business models whether it is
reining increased deficiencies from traditional business models or
creating new markets with

value-added or branded products or exploiting emerging technologies in
bioagriculture and alternative fuels or leveraging broadband to level
the playing field for rural businesses.

          The opportunities really are there, but it is imperative, it
is imperative that the business models to govern and structure and to
equity transparency work for those rural investors whom you ultimately
represent.  We want to build a research program that helps cooperatives
uncover and take advantage of these opportunities, and we are looking
for ways to build businesses and increase profits while simultaneously
serving the other social needs that cooperatives can clearly help
fulfill.

          We\'re looking for new and creative ideas to increase
investment in cooperatives and business models in rural America and
rural areas generally.  We have a very special interest in using
cooperatives to address the problems faced by small farmers in
historically disadvantaged groups.  So this morning we are looking for
your guidance, your ideas, and your priorities as we define our research
priorities on these issues.

          This is your meeting, so let me close by simply recognizing
and thanking John Dunn, who has done so much to help move this effort
ahead, and I\'m going to turn this microphone over here in just a second
to John, but I want to make one more point before I close.

          John set up and established I think one of the most
significant pieces of research that we have done in rural co-op services
in conjunction with Keith Collins\' shop, the chief economist\'s shop,
and others in looking at the impact of information technologies and
their ability to essentially not only arbitrage commodity prices and
supplies and products from processes but also management and technology
and a host of other things that enable small businesses to survive in a
very competitive environment in rural America.

          And I presume at some point today, John, you\'re going to
visit about that with them, but if you\'re not, we\'ll talk to you more
about it offline, but it\'s probably been one of the most interesting,
intriguing, and exciting pieces of research that I\'ve seen done in a
long time.

          I would like to personally, publicly thank John for the
guidance that he gave that effort because I\'m very, very proud of him. 
So I\'d like to thank you and turn this over to John, and I hope you
have a very, very productive day.  Thanks again.

          (Applause.)

          MR. DORR:  Thank you very much, Tom.  I thank all of you for
coming.  Tom, thanks for opening us up.  Peter, thanks for being here. 
Just an element of ground rules.  Each speaker is going to be allotted
15 minutes.  I will be the timekeeper and give you a two-minute warning
unless I\'m so fascinated in what you\'re saying that I forget to watch
my watch.

          But I would ask that you would leave written copies if you
have them of your presentations in the box up here; also electronic
copies if you brought them with in some sort of hard format.  If not,
please send them to me as well.

          We have five speakers or organizations before break, then
we\'ll break for about 15 minutes, then we have four, then we\'ll break
for lunch, and then we have three after lunch.

          If anybody is here that is not signed up as a speaker, we do
have some available slots towards the end of the day.  See me during a
break and we\'ll get you put on.  Within your 15 minutes, if you want to
talk for 10 and ask questions of us for five, that\'s your prerogative. 
It\'s your 15 minutes to use as you see fit.

          We hope if we have some time at the end of the day and there
are some of you left that we can have some open discussion on research
topics because we very much welcome that.  First out of the box we have
Paul Hazen, National Cooperative Business Association.

          MR. HAZEN:  Good morning.  A very distinguished panel, and I
appreciate the opportunity to be here.  I just want to apologize, I\'m
suffering from a little bit of a cold, so I\'m a little hoarse, but I
hope you understand that.

          I\'m here today on behalf of the 700 members of the National
Co-op Business Association.  It\'s my distinct pleasure to offer our
comments in the type of research the USDA Cooperative Service should
strongly consider conducting.  I want to add that I\'ve learned about
research and cooperatives over the past year.  I\'ve done that by
listening a lot to people who know a lot more than I do.

          Our organization has made our number one priority to expand
the research capacity in cooperatives, and I\'m going to outline the
reasons that we\'ve taken that position.  But I want to start by
commending the department for holding this public meeting, and NCBA
stands ready to assist USDA in this most important endeavor.

          We also commend the many fine institutions that have conducted
research on specific sectors of the larger cooperative family.  These
studies have provided an enormous wealth of information about those
specific sectors.  Despite all the benefits of that research, there\'s a
very pressing need for the economic impact of all U.S. cooperatives to
be studied.

          Earlier this year I was honored to be asked to speak at a
conference at the United Nations.  As I began to draft my comments, it
again hit home the real lack of data on the entire cooperative sector. 
As I was attempting to demonstrate the tremendous positive influence
that cooperatives in the United States produce to these international
representatives, it was extremely frustrating that our country is so
lacking in concrete data on this part of the economy that I know all of
us at this meeting care so deeply about.

          The National Cooperative Bank \-- and you\'ll be hearing more
from Chuck Snyder, their president and CEO later today \-- annually
publishes a list of top 100 cooperatives which was just released last
week.  The assets of just those top 100s were almost at \$300 billion. 
While I\'m grateful for this study, but because of the lack of data, it
excludes the entire purchasing cooperative sector, which alone does
billions of dollars in transactions every year.

          Various cooperative sectors have been studied, and the results
are extremely significant.  In my home state of Wisconsin in a study
funded by USDA, cooperatives were found to support close to 30,000
full-time jobs.

          The South Dakota Rural Electric Cooperative Association found
that electric co-ops alone in that small state generated 800 new jobs
and \$11 million in economic development activity over a five-year
period.       The Alabama Credit Union League found that their state\'s
credit unions generated over 8,000 jobs, \$288 million in household
income, and \$24.1 million in tax receipts.

          In the later example, that is just the credit unions from the
average-sized state, and they represent just a fraction of the
cooperatives within that state.  Just imagine the possibilities if we
could replicate these types of studies on a nationwide basis for all
cooperatives.  This country needs national data on the impact of
cooperatives on the U.S. economy.

          This data needs to include:  (1) the number of jobs created by
cooperatives both directly and indirectly; (2) the level of economic
activity created by cooperatives; (3) the tax revenue generated by the
level of economic activity; (4) a definitive census on the number of
cooperatives and the types of goods and services that are being offered;
(5) the amount of patronage refunds that are returned to the members
from their cooperatives; and lastly, the extent of the social welfare
benefit where cooperatives are meeting the needs of communities that
would not adequately be met by other types of businesses.

          A competent government sanctioned cross-sector,
multi-discipline economic impact study led by a respected academic
institution will provide enormous benefits for all cooperatives.  The
database that this study will create will allow and encourage continuing
research.  This will increase awareness of the cooperative form of
business, which in turn will generate new business which will allow
cooperatives to attract new members and investors.

          Surveys over the years have consistently shown that consumers
like cooperatives and they like being part of and doing business with
cooperatives.  Members and investors want to know that they are buying a
credible product, and respected research builds your credibility.

          Just as a census provides extremely valuable data that
businesses use in their forecasting models, the data gathered from
studying the economic impact of cooperatives will also be an invaluable
tool.  Areas of special need could be identified, and new or existing
cooperatives could be established or expanded to meet those needs.

          The cooperative model gives us so much to be proud of:  people
joining together to meet a need in a fashion that thrives on cooperation
and fair treatment of all the participants.  This is the free market
working at peak efficiency.  Like all successful businesses, it must
generate a positive margin.

          Very few of us who have dedicated our careers to cooperatives
have avoided the experience of having to explain what a cooperative is
many, many times over to friends, colleagues, or even family members. 
Most people in this country have very limited knowledge of a
cooperative, or perhaps they have a frozen image of a brief encounter
with a cooperative many years ago.

          Cooperatives are businesses, serious businesses, generating
billions of dollars of economic activity.  The time is long overdue to
have core research done that so many other parts of the economy enjoy on
a regular basis.  NCBA and our members have worked very hard with many
members of Congress to ensure that the current Agriculture Appropriation
bills have \$500,000 in funds for the type of research we are requesting
in this testimony.

          We will continue to work with the Congress through their
conference committee process to ensure that these funds are approved and
that one major study of economic impact of cooperatives is conducted. 
In the March/April 2005 issue of the *Cooperative Business Journal* \--
and I\'ve attached a copy to my testimony \-- the cover story
highlighted the data gap that exists for cooperatives.

          In that article, it pointed out that it has been years since
the government has attempted any systematic data collection on
cooperatives.  It is very likely that we will be given the opportunity
to correct this problem which has plagued cooperatives.  This is a
phenomenal opportunity to reinvigorate USDA\'s Rural
Business-Cooperative Service and continue a tradition of a
public/private partnership that will truly provide lasting benefits for
all cooperative members.

          Let us join together in utilizing this opportunity to serve
all the people in the United States and around the world that benefit
from our cooperatives.  Thank you for this opportunity to share our
thoughts from NCBA, and I\'d be happy to take any questions.

          MR. DUNN:  Paul, how do you see this study which sounds kind
of like a one-shop thing becoming a sustaining, ongoing tracking program
for all of us here?

          MR. HAZEN:  Well, I believe we\'ve talked a lot about this in
our organization, and NCBA represents all different kinds of
cooperatives, and I think what we\'re really looking for is some type of
economic model where on a continuing basis we would be updating that
data and producing the result.

          I think we would not be interested in a

one-shot deal because that\'s a great snapshot, you know, according to a
photographer, but it\'s the ongoing, and so we can start to establish
patterns and benchmarks and things in order to make projections, so we
would hope that a model would be created and the economic data that
would be collected would be plugged into that.

          And then, again, in order to encourage continuing research,
one thing that I\'ve found in talking with some leading researchers at
some major universities is with the lack of data, it\'s hard really to
attract kind of the top people in the country who do research because
they don\'t want to have to do that data collection part of it.

          And without being able to produce that, I don\'t think we\'re
really attracting the top people, and we would hope that an ongoing
basis, the people in the leading research institutions would see that as
a real value.

          MS. PURCELL:  I think it would be important, too, for us to
have a unified working arrangement with all of our partners in this to
be able to collect the kind of data because you need to have people that
are willing to provide that data to you, and I think it would take a
partnership of all of us to be able to collect that type of data.

          MR. HAZEN:  Absolutely.  Yes.

          MR. THOMAS:  I am moved to mention a program we do have under
way and would certainly include cooperatives is a program called SEBAS,
social economic benefit analysis, and I view it now as a Christmas
tree.  It\'s kind of bare, and we\'re going to put bulbs on it and
decorations and track jobs and tax impact and so forth and so on in the
local communities, and it\'s along that line with what you\'re
requesting, and hopefully it will be a good fit and a good answer to
your question.

          MR. HAZEN:  Mm-hmm.  One other thing I wanted to just point
out but didn\'t include it in testimony, I think it\'s important for us
to take a look at the entire nation.

          Cooperatives are not restricted by geography, and there may be
models in urban areas or internationally that we could study and analyze
that would provide the kind of solutions that Mr. Dorr was talking
about, new ways of doing things.  And I hope we\'re not restricted by
geography and look for where the innovation is occurring as we think
about research.

          And the other thing is that, you know, if you take the example
of an electric cooperative, you know, many of them serve suburban areas
as well as rural areas, and I think when you take a look at the economy
of a state or of a region, there\'s many different kinds of geographic
areas there, and I think in our research we need to take a look at how
cooperatives function across the country.

          MR. DUNN:  Mm-hmm.

          MR. HAZEN:  Thank you very much.

          MR. DUNN:  Thank you very much.  Paul, you actually have about
four minutes left.  Do you want to make a pitch for the race for Co-op
Development?

          MR. HAZEN:  Yes.  On Saturday, the Cooperative Development
Foundation is having a fundraiser, and if anybody is inclined to run,
this is a race for Cooperative Development, you can join the USDA team.

          (Laughter.)

          MR. DUNN:  Thank you.  Jean-Mari Peltier, National Council of
Farmer Cooperatives.

          MS. PELTIER:  Good morning.  You can imagine my chagrin at
hearing that my predecessor here at the microphone had a terrible cold,
so I\'m kind of wondering whether I actually want to touch the
microphone.

          (Laughter.)

          MS. PELTIER:  I didn\'t want to take any chances here.

          Good morning.  My name is Jean-Mari Peltier, and I\'m the
president of the National Council of Farmer Cooperatives.  There are
about 3,000 farmer cooperatives across the United States that represent
two million farmers accounting for \$115 billion in total sales and we
think about 250,000 related jobs with a combined payroll in the
agricultural sector of over \$8 billion.

          Being farmer-owned, they also provide another important boost
to the local economy as monies that are generated and the net margins of
farmer cooperatives tend to be spent in the rural communities in which
they are generated.

          We\'ve been very supportive and thankful for the historic role
of the USDA in supporting the role of farmer cooperatives and also in
support that USDA recently lent in a review that\'s been undertaken by
the Antitrust Modernization Commission.

          This Antitrust Modernization Commission was established by
Congress to take a look at telecommunications laws, and Congressional
commissions being what they are, they\'ve expanded the scope of their
review to take a look at all immunities or many immunities and
exemptions.  Number one on their list being the one that is often
considered the Magna Carta of farmer cooperatives, and that\'s
Capper-Volstead.

          At the very time when Agriculture finds itself pinched in
dealing in a globalized retail and food service food sector, at the time
when those to whom we\'re selling are becoming more and more
consolidated, at this very time when farmers are struggling to have the
scope and scale of operations to sell into this globalized food chain,
we have a commission that\'s evaluating whether or not farmers will be
able to join together to cooperatively talk about price.

          So we\'re very thankful for the position that was filed with
this Antitrust Modernization Commission.  We\'re hopeful that Secretary
Johanns will be offered an opportunity to speak when the commission
holds its field hearing on November 7th.

          Let me also say that as I mentioned before, this hearing is
extremely timely because we are looking at an entire food and ag system
from retail counters to the farmer in the field that\'s undergoing
tremendous and comprehensive changes.

          Traditional business structures are being reexamined,
redefined, and restructured throughout the entire food chain, and I
would say that that\'s no different in the cooperative sector.

          As a part of our strategic plan that was adopted last year,
the National Council of Farmer Cooperatives has decided to undertake a
comprehensive review of the existing business structures of farmer
cooperatives and the way we\'re currently operating.

          We\'ve created a cooperative business advisory group that\'s
chaired by Jack Gherty from Land O\'Lakes, and this cooperative business
advisory group which also consists of attorneys and accountants who are
specialists in farm co-ops as well as representatives of academia has
come together to try to outline a series of questions that we think we
need to answer.

          We are identifying the next set of structural challenges that
are going to confront the farmer cooperative business model and trying
as a result of the work that we\'ve undertaken to provide a new menu of
strategic options to give farmers and farmer-owned businesses the
flexibility needed to organize and finance a business that can
effectively compete in the global marketplace.

          As a part of this work, we\'ve undertaken two surveys, one of
which is very, very detailed and is geared towards accountants and
councils general of farmer-owned cooperatives, and it\'s asking for
detailed information about the existing structure of co-ops, those tax
provisions that they take advantage of, their compliance with and
reliance upon the Capper-Volstead Act.

          In addition, we set out to see what is keeping farmer
cooperative CEOs awake at night, and in structuring that survey, we went
out to five prominent agricultural researchers from the land grant
universities and asked them if they had the opportunity to ask the top
50 farm co-op CEOs their five most pressing questions, what would those
be?

          We\'ve consolidated that into one survey, and Dr. Terry Barr,
who\'s the chief economist at NCFC, and I have over the summer been
conducting one-on-one surveys with the CEOs of our farmer cooperative
members.

          All of this work is generating literally a mountain of data, a
mountain of data that\'s going to be able to be analyzed by both
geography as well as the type of cooperative we\'re talking about,
whether it\'s a supply cooperative, whether it\'s a marketing
cooperative, whether it\'s farm credit, whether it\'s a bargaining
cooperative.

          We\'ll be able to analyze the changing demographics of their
membership and the impact that that\'s had on demands on the
cooperative.  We\'ll be able to talk about the different methods that
our farmer cooperatives have utilized to capitalize their businesses.

          You may recall that over about the last five years there has
been a relatively steady drumbeat that\'s suggested that the chief
obstacle that\'s facing farmer cooperatives is the lack of access to
sufficient capital to fund their organizations in this new, expanded and
globalized marketplace.  We\'re finding that that\'s true, but the
question is not so much access to capital as it is access to equity
capital rather than taking on long-term debt.

          Farmer cooperatives have responded to this in a variety of
ways, one of which is the issuing of preferred stock.  That\'s why the
repeal of the dividend allocation rule was so important to farmer
co-ops, and we were so happy that that was included as part of the Jobs
Creation Act last year.

          We will be able to through our study analyze those results to
see how many of our farmer cooperatives are looking at preferred stock
and the overall economic benefit that will be a result of the passage of
the Jobs Creation Act.

          Another key issue, though, especially as we take a look at the
changing demographics and an aging population in rural America, one of
the really important factors that we\'re determining from our review is
that farmer cooperatives are struggling with being able to provide a
vehicle for their members to be able to access the value of the
cooperative without selling off the value of that enterprise.

          Obviously, it\'s going to take a lot of work to review all of
this data that we have.  We have done the data-gathering.  We will be
looking for an opportunity to sit down with you and talk with you about
preliminarily what our results have been, but we definitely will be
looking for partnerships on helping us sift through this data and
analyze what its

long-term impacts will be.

          One of the other areas that we\'ve determined as a part of
this study is that many of our cooperatives are expanding their work
with nonmembers both as a means to expand their product lines as well as
an opportunity to generate profits that can be held in permanent equity
within the co-op.  The impacts of expansion of this nonmember business
are really something that I think we need to take a look at with the
long-term effects on governance within the cooperative structure.

          Finally, we want to thank you for this opportunity to present
testimony, and I\'ve tried to keep my remarks brief so that you can ask
me questions about really what we\'re looking at with the National
Council of Farmer Cooperatives in this cooperative business advisory
group, and with that, I\'d like to conclude my remarks and open up any
questions that any of the panelists may have.

          MR. DUNN:  Thank you, Jean-Mari.  As you know, cooperative
services, cooperative programs under various names has had a really
course partnership with the National Council over the years going back
to at least early in my career dealing with petroleum, certainly on
taxation issues all along, so we do welcome the opportunity to work with
you on this latest and we want to do everything we can do to I guess
rebuild that research relationship that we have had, had in the past.

          There has been a lot of discussion over the past several years
about the research role that cooperative programs provide as to whether
or not it needs to be expanded to look beyond farmer and agricultural
cooperatives to include other types of rural businesses.  What is the
council\'s current feeling right now about where we ought to be
deploying ourselves, what we ought to be emphasizing in that respect?

          MS. PELTIER:  Well, I think that\'s a valid  question, and
once again, let me say how much we\'ve appreciated the work that the
cooperative service has done through the years with NCFC.

          Even most recently we had a very important cooperative project
with USDA and analyzing the impact of the spill prevention rule that EPA
had put in place, and in that particular case, Rural
Business-Cooperative Service was instrumental in pulling together the
data both from cooperatives, especially supply cooperatives that sell
and distribute diesel and other petroleum-based products as well as even
having storage of vegetable-based oils.

          EPA was totally unaware that literally tens of thousands of
farms were caught by that spill prevention rule, and so I think that\'s
a prime example of the kind of working relationship.

          One of the things that NCFC had had as part of its platform a
couple of years ago was looking for agency status for Rural
Business-Cooperative Service, and that idea was based on the fact that
we see regulations being put into place on an ongoing basis, and the
impact of those regulations on farmer cooperatives isn\'t fully
anticipated.

          And so moving Rural Business-Cooperative Service into the role
of analysis of impacts of pending regulations among the cooperatives is
something we\'d really like to see.

          In terms of expansion of the role beyond farmer cooperatives,
we understand that there is an interest in doing that, and certainly the
project that Paul Hazen just discussed would put you in that role.

          You know, if we looked at the authorizing legislation, it
seems to suggest that the service is supposed to be focused on rendering
service to associations of producers of agricultural products, and so
from our perspective, we hate to see them focus on farmer cooperatives
and those organizations that are involved in the storage, cooperative
purchasing, farms supplies, farm credit and financing, insurance and
other co-op activities, we hate to see that diluted by an expansion into
areas beyond those services that are important to farmer cooperatives,
but we understand the pressures that you face.

          MS. PURCELL:  Thank you.  And let me just say that we would
look forward to working with you and helping sift through that data if
you give us that opportunity because I think that would be a wonderful
educational experience for us as well to find out really what is on the
minds of today\'s farmers and how we can help them best, and I think
from that we could actually help establish a research agenda for us in
that area, so I think that would be an important place to start.

          MS. PELTIER:  Bobbie, let me also suggest that one of the
things that we\'ve picked up in talking especially to directors of
farmers cooperatives, as each of them are analyzing what their options
are for capitalizing their organizations, they really could use some
help in sifting through what the implications of various forms of
capitalizing their company are.

          MS. PURCELL:  And the tax implications?

          MS. PELTIER:  Exactly.  What are the advantages of creating
LLCs versus partnerships versus strategic alliances and even going as
far as some information like preferred stock, and so especially in
helping us create that matrix that would be something that we really are
interested in working with you on.

          MS. PURCELL:  And I think we clearly have the capacity to help
you with that, and we\'d be more than happy to begin that project.

          MS. PELTIER:  Great.  Thank you.

          MS. PURCELL:  Thank you.

          MS. PELTIER:  We\'re going to whip through this before
lunchtime.

          (Laughter.)

          MS. PURCELL:  Thank you very much.

          MR. DUNN:  We\'ll bring back Mr. Dorr to speak some more. 
Okay.  Next up \-- thank you very much \-- Deb Conley, Indiana
Cooperative Development Center.

          MS. CONLEY:  Good morning.

          MR. DUNN:  Good morning, Deb.

          MS. CONLEY:  I\'m so glad that you know my name because I got
to make comment on the farm bill recently when they were in Indianapolis
and I forgot to tell them my name, so my comments there were totally
anonymous.

          (Laughter.)

          MS. CONLEY:  I\'d like to thank you for this opportunity. 
I\'m not going to leave you my paper.  I have edited and reedited, so I
will compile this when I get back to the office later today and send
that in electronic version.

          I wanted to say that it\'s clear that rural means more than
just farming and small towns.  In my estimation, rural development
encompasses everything about rural quality of life including the
condition of infrastructure, the safety of the communities, the strength
of businesses, and the education of the children.

          Rural America needs additional tools in order to prosper in
the future.  We see cooperatives as just one tool to address many of the
rural issues that rural America faces today.  Co-ops have been making a
difference in this country for many years, but what\'s the true impact? 
I mean, that\'s what we\'re finding is difficult to measure.

          In addition, I think we have for too long not taken a good
look at our neighbors around the world and what they are doing.  How are
co-ops structured in other countries?  Are they more or less effective
in enhancing quality of life and economic developments than in the
U.S.?  What\'s the impact around the world economically?

          That\'s just the beginning of the conversation we could have
about the global impact of cooperatives.  I believe we must better
capture a comprehensive picture of the cooperative model in order to
most effectively use this very important tool.

          From an organizational standpoint, there are several
challenges that future research could address.  In our role to help
develop new cooperative businesses, several questions have been posed to
us that we can\'t adequately answer.  These include:  How much do
cooperatives impact our states\' economy?  How many cooperatives are
there?  Where do co-ops access capital?  In what areas are co-ops more
successful, and in what areas are they proving not to be?

          In light of those questions and more, we support this research
project that you\'ll be undertaking and are glad to have the opportunity
to provide input.  I won\'t use my whole 15 minutes, so somebody else
can have it, or we\'ll go to lunch early.

          In particular, I suggest that in addition to the traditional
information gathered by the USDA regarding co-ops that the following
data be gathered:  expand research to include co-ops in all sectors;
identify the sectors in rural areas which show the most potential for
growth for cooperative businesses; compare the sustainability of
cooperative businesses to other forms of business; measure the economic
impact of cooperatives in each state; develop a measure for noneconomic
benefits of cooperatives, community cohesiveness, citizen participation,
growth in other sectors and community improvement.  I don\'t think we
ever see the whole impact, the total impact, that co-ops have in
communities.

          Also, I know it was alluded to earlier \-- actually, mine\'s
an illusion.  This isn\'t \-- oh, forget it.  I think we should evaluate
the effect of gentrification in co-ops; identify the resources leveraged
per dollar invested in co-ops; determine the rate of growth or decline
in the co-op arena for each sector; again identify how co-ops access
capital; and how do we compare internationally?  Our structures, the
governance, the economic impact, et cetera.

          Identify the social and economic conditions which cause rural
citizens to respond to the cooperative model as an opportunity; and
regarding the co-ops incorporating under new state statutes similar to
Minnesota 308(b), what types of cooperatives incorporate under these
news statutes?  What are the scale of the cooperatives incorporating
there, the revenue generated, employees, geographical location?  What\'s
the percentage of nontraditional investment, composition of the board of
directors, impact of the new generation co-ops on traditional co-ops?

          We\'ll be looking in Indiana at our cooperative law, and those
are questions that have been posed and, you know, in what direction do
we go, and we\'re actually getting ready to undertake our own research
activity to kind of identify those things, but they would be very
helpful.

          So I\'d really like to thank you for your time.  We look
forward to the results of this research.  It will be very, very helpful
in our endeavors on a daily basis, and, you know, it will benefit us all
both locally in the State of Indiana and collectively as a cooperative
world.  That\'s all I really have.

          MS. PURCELL:  Thank you.  Well, it seems like you\'ve already
done a lot of our work in carving out the details, and we thank you for
that.

          MS. CONLEY:  Sure.

          MR. DUNN:  Deb, from your perspective working at the ground
level, we really have a new generation of people out in rural areas that
think decidedly differently and were raised decidedly differently than
those of us in my generation and my parents\' generations, how do you
see the receptivity of ideas cooperative among the up-and-coming
leaders?  Is it strong?  Is it weak?  Do we have a job to do there?

          MS. CONLEY:  I think we do have a job to do there.  I think we
have an educational component that is really lacking, and that\'s
something that we\'re really focusing on in the state.

          The new generation that is familiar with the cooperative model
or has in some other way worked collectively really has an easy time
grasping this and moving forward with it, but folks who are very rugged
individualists and, you know, Gen-Xers are a lot more \-- they\'re a lot
more resistant to the model is what we\'re finding, and so I really
believe that we have a lot of education to do.

          I think that there\'s a gap definitely between the older
generations that really know what co-ops are and functioned in co-ops
and are used to that model and the newer generations that haven\'t seen
it to be tremendously effective, and quite honestly in our state, there
just isn\'t a tremendous presence of co-ops, so they just don\'t \--
they aren\'t that familiar with it.

          MS. PURCELL:  Is there enough data out there, and is the new
generation far enough developed I guess my question would be in your
mind for the rugged individuals who want to set up their own businesses
and go their own way versus some folks that have gotten together and
worked cooperatively?  Do you think enough time has passed in that
generation?  Is there enough data out there to kind of do an analysis
and a comparison there?

          MS. CONLEY:  I think that\'s a really good question.  I\'m not
sure if enough time has passed.  There may be.  I mean, there may be
because of the fact that I think the rugged individualists are finding
that they can only go so far individually, and so they might be up
against that wall where they could answer that better at this time.

          MS. PURCELL:  Interesting answer.

          Anyone else?

          MR. WELLS:  Yes.  You mentioned the whole list of possible
topics specific to your work as a center.  One of the things that, you
know, I think about is, from the education standpoint, is there a need
for developmental educational research about the co-op model?  It seems
like we\'re missing younger people in our process.  I\'d just like from
a development center perspective is there a need to have a little bit of
a focus on educational delivery or access or the whole area there?

          MS. CONLEY:  Absolutely.  Our one other person in the center
had the opportunity to go talk to a group of young people at the
MidAmerica Council Cooperative Youth CampOut.  I don\'t remember what
the name of it was, but he got to present, and one of the things that he
came back with was that the kids didn\'t know before they came there
what co-ops were.  They didn\'t understand the structure.  They didn\'t
know anything about it, and I think that that\'s definitely an area that
we need to look at.

          And if we could just get it into the public school systems as
a viable business model, at least some familiarity would be a great
start.  And I know we had a presentation here about the rural education
or agricultural education piece, and I don\'t know if that would fit in
there somehow since there\'s already a method to kind of access the
schools if maybe that would be someplace that it could go.

          MR. WELLS:  Well, it seems to me that technology allows itself
of delivering to young people in a variety of ways.  Even through iPods.

          MS. CONLEY:  Yes.  Yes, we had actually talked about maybe
doing a project with either Future Farmers or 4-H about having them
create a co-op, kind of a virtual co-op and really working through that
model with them so that we could demonstrate that in the state, so that
might be another avenue.

          MS. PURCELL:  Thank you very much.

          MS. CONLEY:  Thank you.

          MR. DUNN:  Thank you, Deb.

          Deb talked about rugged individualists, so with that, Bill
Patrie.

          (Laughter.)

          MR. DUNN:  Go to Enterprise Center and a whole string of other
organizations that we could probably attach him to.

          MR. PATRIE:  Thank you.  I will save everybody time, and I
really look forward to your questions, so save your questions.  I have
seven items of research that I\'d like to see you undertake.

          First, to start with, I want to focus on the aspect of human
cooperation rather than the legal form of cooperatives.  I think we
sometimes get lost in what we\'re looking at.  What are we looking at? 
The important thing is how human beings cooperate to make their lives
better rather than all these fine nuances of legalities.

          The first point to make is that there\'s a very thin portion
of the American population that even knows what we\'re talking about
when we talk about human cooperation.  Researchers estimate that about
13 percent of American citizens are born as cooperators.  That\'s their
first instinct to solve problems, and those of us in this room represent
those 13 percent.  We\'re self-selected.  We come a long way to talk
about it.  We\'re not the audience.

          The audience is the 63 percent of the American population that
joins cooperatives, that sees the work that others have done and joins
those cooperatives, and they do so, as researchers say, because they\'re
intolerant reciprocators.  Intolerant means that they won\'t allow
free-riding, they won\'t be taken advantage of, but they will
reciprocate.  They will see that the cooperative makes sense to them and
it gives them a benefit.

          That\'s the discipline of a cooperative, and we need to
understand that discipline, and I\'ll get to that issue in a second.  So
I don\'t think it\'s important that we treat cooperatives as a sacred
thing or a C-Corporation as a sacred thing, but what is sacred is the
right of human beings to organize together for mutual benefit.  I think
we agree with that.  That\'s what democracy is about.

          First, I\'d urge two case studies on recent conversions.  The
one is Dakota Growers Pasta Cooperative converted from a cooperative to
a C-Corporation, and the other that I think would be very interesting
for USDA to research and study is the Saskatchewan Wheat Pool, which
went through a very controversial \-- both are still controversial
conversions, and what have been the consequences?  What were the motives
of those conversions?  What were the mechanics of those conversions? 
They\'re not simple things to do.

          And then what is the aftermath?  What has happened
afterwards?  On of the questions you were talking about earlier,
liquidity, is the stock more liquid now than it was when it was a
conversion?  What about access to equity investments from others?  Has
that improved or gotten worse or about the same?

          I\'d also urge USDA to study two other conversions the other
way, from C-Corporations to cooperatives.  One in my home state,
American Crystal Sugar, maybe it\'s been studied, but I think it would
be interesting to see what has been the long-term effect of those beet
growers who bought American Crystal Sugar and what did they go through
and what has been the history, the performance history, of that
cooperative?

          The other one which might seem strange to some is the
conversion of U.S. West subscriber lines, telephone lines, to
cooperative lines.  Fifteen cooperatives and telephone companies in
North Dakota bought U.S. West subscriber lines and converted it and have
been operating it now for almost 10 years.

          And I think we can learn a lot because we have operating
history before and after what happened to the cost of service.  Did we
in fact reduce the cost of service to the subscriber?  Is the technology
better or worse than when U.S. West operated those companies?

          And then there are two other studies I think would be very
helpful.  Both of these would also be in my home state.  One is Spring
Wheat Bakers, the Spring Wheat Bakers Cooperative, and the other is
North American Bison Cooperative.  These are spectacular studies in that
they have some negative outcomes.  Collectively, between the two of
those companies, they have lost close to \$50 million in farmer dollars,
and that has gotten everybody\'s attention.

          A lot of people are subscribing the reasons for their
struggles as because they are cooperative as if that contributed to the
problems they had, and then subsequently saying therefore cooperatives
don\'t work.  What is the truth?  Let\'s separate what actually happened
in each of those two very unique distinguished companies.  They were
very aggressive, very bold.  I think it would be interesting reading.  I
think the nation\'s public will be interested in understanding what all
happened.

          And then lastly, the seventh study I think would be very
useful is to understand the psychology of human cooperation as it
relates to what we know today by modern scholars.  Robert Kurzban at the
University of Pennsylvania has done some interesting work on game theory
about why human beings cooperate.  We used to say that everything we
needed to know about human behavior was defined in the words
\"enlightened self-interest.\"  Well, that\'s not true.

          We don\'t know what that means anymore.  People do things that
are probably not in their economic self-interest and we have trouble
explaining that, and I think USDA needs to study the psychology of human
cooperation as it relates to rural places and help answer the question
why can really intelligent people form a board and do really dumb
things.

          You know, we need to understand what goes on, and that\'s not
just in cooperatives.  When we look at companies that have recently
failed, how did that happen?  What was the psychological process that
destroyed economic benefit?  And that information is out there; we just
haven\'t paid attention to it.

          I\'m from a very rural place.  I grew up on a farm and we
raised animals.  We really knew a lot more about our animals than we
knew about how human beings behave in groups, and it\'s time we get
caught up.

          The very nature of our public meeting today is that we believe
that human cooperation can make our lives better in America, and that\'s
really one of the founding principles of this country, and if you study
these seven issues, I think you will make Benjamin Franklin proud when
he helped form the United States of America.  I\'d be glad to answer
your questions.

          MS. PURCELL:  First of all, let me thank you for your
suggestions and I want to take you up on one right away, the North
American Bison.  In fact, that\'s one that our staff picked out as a
research project, and our delay has been me asking you for some
assistance in that, so I\'ll ask you for that now and maybe we can get
that project underway.

          Also one that\'s kind of interesting to me because of a former
life is the U.S. West conversion to co-ops, and I bet you I can tell you
what\'s happened to cost of service and quality of service just knowing
how well cooperatives do business there, but I think that would be an
interesting research project as well and also help one of our sister
agencies within rural development.

          MR. PATRIE:  I agree.  I meant to say to the extent that I\'m
in North Dakota, I\'m a prejudiced academic.  I can\'t say, you know,
here\'s what happened.  I think I could accurately do that, but no one
would believe me because I have a stake in that, and it\'s going to take
USDA\'s help to study these organizations from some distance, and even
in a North Dakota institution, there are political pressures that affect
us all, and so it would be very helpful.

          And of course, if I start talking about the telephone
cooperatives, I would be bragging instantly.  It is remarkable what
they\'ve accomplished, but the rest of the world doesn\'t know it, and I
think highlighting that is a rightful role of USDA.

          MR. THOMAS:  Your comment about board failure and so forth is
an interesting one to me, and I think we have boards comprised of
farmers being farmers and knowing full well what they\'re doing and so
forth where all of a sudden you\'re now faced with business and
corporate decisions, and they\'re tough, but even if they knew what they
were doing, to discipline themselves and their fellow farmers to do so,
you have to make these cold, hard decisions specifically as from a
business point of view.

          So the makeup of that board is very important.  We might do
well to emphasize more of an outside business background type of thing. 
Would you agree?

          MR. PATRIE:  I think there \-- I agree that we need research
on the subject.  I have two minds on that one issue.  One is farmers are
smarter than you think and they\'re dumber than you think, and it
doesn\'t have anything to do with them being farmers.         We have a
coal gasification plant in North Dakota.  It cost \$2 billion to build. 
It produces synthetic natural gas.  It\'s an amazing operation that has
been profitable since the farmers have owned it through Basin Electric,
and it\'s run by farmers, and that amazes me.  And they have hired the
chemists and they have hired the talent to run it, and they do have
outside advisers that are capable.  The telephone cooperatives I
mentioned run extremely sophisticated companies, and they\'re farmers,
and they hire the talent to do it.

          Yet, we have farmers who make such bone-headed decisions in
the board room that it leaves you breathless, so what\'s the
difference?  And that\'s what I think we need to understand.  Why do
good boards, why did the Enron board \-- they\'re, as the book says, the
smartest guys in the room.  They\'re very smart.  Very dumb decisions. 
What is causing that behavior, and how can we learn as cooperatives when
it\'s happening to us?

          We pride ourselves in the rural electric family that we
believe in board training.  We spend lots of money on it, but the boards
that need the training often don\'t get it, and why is that, and how can
we make it turn that situation around?  We need research on that.

          MR. THOMAS:  Thank you.

          MS. PURCELL:  Thank you.

          MR. DUNN:  Thank you.  And last before break, Paul Darby,
Southern States Cooperative Foundation.

          MR. DARBY:  Good morning, all.  We very much appreciate the
opportunity to share some thoughts about cooperative research.  I think
this is the first time that at least I remember when you\'ve asked for
input on co-op research.  That\'s remarkable in itself, and it shows the
new enlightenment at the Department, so congratulations.

          I think you know about what the Southern States Cooperative
Foundation is and the fact that we do provide hands-on technical
assistance.  Our mission is real simple, to be a committed partner in
building profitable farmer-based enterprises that sustain our rural
communities.  We\'re sponsored by the Southern States Cooperative, which
gives us access to some very good talent at very senior levels of a
billion dollar supply cooperative, and we take advantage of that at
every opportunity.

          We\'ve worked with groups in North Carolina, Kentucky,
Virginia, West Virginia, Georgia over the last six years, and we have
some ideas that we think may be helpful.  We\'ve worked with cooperative
agreements, rural business enterprise grants, rural co-op grants with
USDA.

          One of the first issues that we think would merit further
study is how can producers truly access the equity in their farms for
value-added business development without selling out.  That is an issue
that we bump up against every single day.

          Equity capital is absolutely a significant issue, and
Jean-Mari was very correct.  It\'s not capital, it\'s equity capital. 
Now, for a group of producers in a start-up enterprise, it\'s even more
difficult even though each of these individuals very likely is
successful in their farming operation.  Many of them are small, but many
of them have developed a niche market and are very successful.

          They may have millions and millions of dollars in assets on
that farm, and yet, because they either have a loan with a commercial
bank or farm credit and those assets are part of the collateral,
they\'re not able to touch those, so there\'s absolutely an issue there
that needs to be looked at.

          Now USDA has tried to deal with the issue of producer equity,
lowering that requirement down in both BNI and in your energy programs,
but the fact is lenders still have that high-threshold equity
requirement.  It can be as high as 55 or 60 percent.         So even
though you have a program there that\'s to address that, because you\'re
counting on a commercial lender being a partner, that doesn\'t happen,
and they don\'t step up to the plate, and sometimes they will actually
back away from the plate.

          A second issue, and it\'s been talked about, why are
cooperatives converting to stock corps and LLCs, and Bill is absolutely
right.  What happened with the Pasta co-op in North Dakota would be a
phenomenal case study, and there\'s a lot to be learned there, but it
needs to be done sooner than later because the further away from that
process, the more people are going to be shaded by what they perceived
to happen, not what really happened.

          But beyond realizing the value of a market niche or brand,
there\'s probably some more basic issues that need to be explored there,
so we would urge that to be a research topic.

          A third one, why are new value-added enterprises being
developed outside the co-op model.  We\'ve got one very specific one. 
It\'s a biodiesel project in North Carolina that we\'ve been working
with for three years.  It\'s Atlantic Bioenergy.  The leadership of that
project from day one wanted it to be a cooperative, but there were
roadblock after roadblock after roadblock that prevented it from being a
cooperative.

          First off, North Carolina\'s law says to be a member of a
cooperative, to be an owner, be part of that governance, you must be an
agricultural producer. That immediately locked out the Golden Leaf
Foundation which wanted to put \$5 million equity in that project. They
wanted to be a part of the governance structure, and they couldn\'t
under a cooperative scenario.

          There were agribusiness investors in North Carolina that
wanted to be a part of that ownership structure.  They couldn\'t be
involved.  Some of them could shoehorn it through the back door.  They
owned some land.  They had a tobacco quota.  They would have had ways
that even under fairly conservative structures they would have been able
to do it, but mostly they couldn\'t do that, so that group had to go to
an LLC structure.

          Now there are lots of issues about public directors and
patronage.  That group also decided not to build a soybean crushing
plant, which would have been an ideal feedstock going into the biodiesel
plant.

          Costs and time.  It would have taken three years and another
\$40 million to put up a crush plant. The time is now to get those
plants online, so they had to make a business decision to say okay, even
if we could define a structure for producers, it didn\'t meet the other
tests.

          Now there is a fourth issue, and I\'ll go to it quickly. 
There\'s also the example of a group of producers deciding to establish
a traditional cooperative, not a new generation cooperative today.  Why
did they do it?  That happened right here in our state of Virginia, the
Virginia Poultry Growers cooperative down in Hinton.

          A hundred and forty-one producers, most of whom had never been
members of a cooperative.  Some had.  Some were members of the electric
co-op.  Some were members of the dairy co-op, but a majority of those
people had not been part of a cooperative.  They chose to establish a
cooperative.  Now why?  We think there\'s some real interesting things
to study if you do a case study of that group.

          Now Virginia\'s cooperative law has a wonderful little
provision that a lot of states don\'t have and that is that they require
public directors.  There are three public directors on the Poultry
Growers Cooperative board, one from banking, one from a university
background, a teacher, and the third is actually a marketing partner for
Value-Added Products, and that third firm made a multi-million dollar
equity investment in that cooperative.

          Now they couldn\'t be a Class A member.  They had to buy
preferred stock, but because of that provision in state law, they could
be a part of the governance structure.  And that really is the key for a
lot of companies and individuals that want to invest.  And there\'s a
lot of stories and there\'s probably a lot more history there.

          That cooperative also is interesting from the standpoint that
it was a startup, and in six months and six days, it went from an idea
to operation and processed their first turkey.  It\'s also gone from
zero sales to it will be a \$100 million plus company this year. 
That\'s staggering.

          There is a whole area of research about why customers want to
deal with that cooperative and why they didn\'t deal with the
predecessor company that shut down that plant, and that probably gets to
what Paul Hazen was saying about people know and trust a producer-owned
organization.  They believe it represents quality, but that\'s another
area of that overall case study.

          We would certainly, as Bill said, be very willing to be a
collaborator on research, to share anything that we know.  We think
there is certainly  value in USDA not simply going to a university,
which is kind of what\'s been the case in the past, but bringing in
people with boots on the ground from the centers to collaborate on a
bigger project, working with the trade groups that represent
cooperatives and really making this a fairly broad-focused effort.

          We certainly applaud you for taking the time to pull us all
together and look forward to seeing what you intend to roll out after
the first of the fiscal year.

          MS. PURCELL:  Thanks.  Any questions?

          MR. DARBY:  Questions?

          MR. DUNN:  One of the principal themes in what you\'re talking
about and a couple of other of our speakers have talked about is really
what it is that defines the cooperativeness of an organization.  We\'ve
traditionally thought that what defines it is adherence to, you know,
the strict cooperative principals.

          Notions of outside equity have been viewed as pushing against
that, and as we look at, you know, Wyoming laws and Minnesota laws and
some of the other laws, we\'re seeing that that organization that we
call a cooperative is now taking on a decidedly different character.  Is
there a threshold beyond which we\'ve lost something that defines
cooperativeness as a concept, and what is that concept, and is it
something we need to be concerned about?

          MR. DARBY:  I think it absolutely is something that you need
to be concerned about.  In the case of the LLC in North Carolina,
Atlantic Bioenergy, the requirement of both Golden Leaf, the \$5 million
equity investor, and Farm Credit, which is likely to be the lead lender,
is that there be 51 percent farmer ownership and control, which in fact
will mean that there is control in the producers.

          I think losing that control, moving it outside the producer
base is problematic down the road.  You could have a board of directors
saying, you know, it really doesn\'t make sense that we\'re doing it
this way, so we\'re going to in fact propose changes, and as has been
seen elsewhere with cooperatives converting to stock corps, there\'s a
pretty good chance they can convince producers to act in their economic
self-interest short-term to do that, so I think you\'re very right to be
concerned about that.

          MR. THOMAS:  Paul, as you know, I\'m familiar with Virginia
Turkey Growers, and I\'m curious.  The driver of that situation was the
closing of the plant.  And did all of the \-- I don\'t know \-- it was
130, 140 individual growers sign up for the cooperative?

          MR. DARBY:  Peter, they did indeed.

          MR. THOMAS:  Yes.  It was all the present suppliers to the
plant basically that \--

          MR. DARBY:  There were \-- but early on there were producers
who left and became suppliers to Cargill, a handful.  Those same people
are wanting to become members because this cooperative has not just
processed turkeys and sold the meat; they\'re doing a lot of things. 
They\'re providing healthcare coverage for all their members and their
families as part of a much larger group.

          They have established investment opportunities that a lot of
cooperatives have in preferred stock, but other opportunities that
members can take advantage of, so I think there \-- there\'s a waiting
list right now I think of 40 growers that want to become members.

          There are lessons to be learned in the way that this
cooperative set up a grower council that basically recommends to the
board what the policy should be with regard to what growers need to do
to continue to supply to the cooperative, and they did that day one.

          The very first meeting they said we\'ve got to get some
growers together to start working on the marketing agreement and the
roles and responsibilities, and that simply doesn\'t happen in an awful
lot of businesses that are in the protein business.

          MR. DUNN:  Paul, thank you.

          MS. PURCELL:  Thank you very much.

          MR. DARBY:  Thank you.  Fifteen minutes used.

          MS. PURCELL:  Before we go to break, I just wanted to not only
thank the panels that have been up so far, and so after this point and
as we go through all the next presentations, we\'ve kind of limited it
to us asking questions, but at the end of the day, for anyone who does
want to stay throughout the day, I would like to throw it open to a
discussion of everyone of any of the thoughts or ideas that have been
heard or discussed today.

          So if anybody does want to stay through the whole day and
discuss things that have been said either by you or by other folks and
get into a bigger larger discussion, we\'ll be happy to do that, but I
did want to point out that that opportunity is available for those that
will be with us toward the end of the day.

          MR. DUNN:  A couple of housekeeping matters.  We\'ll pick back
up at 10:45.  Bathrooms are adjoining the patio which is just outside
the door to your left. Women\'s is immediately to the right around the
corner. Men\'s is on the other side.  If you want coffee or
refreshments, go out the door to your left.  There\'s a curved stairway
that goes down near the entrance.  It takes you to a little cafeteria
downstairs.

          MR. THOMAS:  Just follow me.

          (Laughter.)

          MR. DUNN:  Also, most of the research staff of the
cooperatives program is here.  I hope all of you, our guests, will be
able to have the opportunity to exchange and have some discussion and
meet some of the folks that you haven\'t met before.  Let\'s sort of
make this a good exercise in partnering and collaborating while we\'re
here.  So we\'ll see you all in about 25 minutes.

          (Whereupon, a short recess was taken.)

          MR. DUNN:  Mike Boland from Kansas State University, kind of
representing the NCERA-194 group.

          MR. BOLAND:  Thank you for providing the opportunity to make a
few remarks about the research needs of rural cooperatives and the
business and organizational challenges.  I think a lot of things I\'ve
got to say echo what we\'ve heard this morning.           I\'m currently
serving as president of NC \-- it used to be NCL-194, but USDA has gone
to a new nomenclature, so we\'re now NCERA-194, which is the
organization of land grant faculty doing research on cooperatives.

          Over the past three years, this organization has seen a
resurgence in membership with attendance at its annual meetings the last
two years being among the highest.  And what\'s sort of ironic is that a
bunch of the new faculty who have been researching cooperatives have
kind of not tied in with USDA, NCS, and other organizations as was the
case in the past.

          And I think Bill Patrie talked about a new generation of
people in rural communities this morning.  I think that there\'s
certainly a new generation of faculty working on cooperatives, and many
of these have interests broader than just farmer cooperatives.

          I\'ve got a longer paper that I sent to John, and I\'m only
going to read from parts of it here that my remarks were focused on
three aspects of research on cooperatives.

          In the paper, I present some prehistorical data on land grant
universities and the role of research teaching and extension, and then I
also described some current resources available for research on land
grant universities that come out of the National Food and Agribusiness
Management Education Commission, which I was the co-chair of the last
two years for USDA, so kind of talk about some of the capacity for doing
research.

          And then finally the things I want to talk about in the short
period here today is a short overview of what I perceive the needs are
for research based on my discussions with the members of NCERA over the
past few weeks.  And again, in the interest of time, this is going to
reflect portions from my printed remarks, and John Dunn will have the
longer set.

          The current need for research that in visiting with the 25 or
30 members of NCERA-194 are again the things that we\'ve heard about
this morning.  The two big things as I related to is equity management. 
I think that\'s something that we\'ve heard all the speakers starting
with Mr. Dorr this morning talking about that.

          One of the studies we really need is information on existing
equity management programs that are used by cooperatives, because we
have a lot of cooperatives looking at the age of patron, involving
funds, the different types out there, but USDA did a similar study about
15 years ago on this particular topic.

          But we really need an inventory of what\'s being done out
there in terms of those type of programs because we are seeing if you
look at state by state, we see different states using different
programs, and a lot of those are dictated by the specialists working in
that state, the education that we see from USDA.

          But I think we would need to know just a good inventory of
what\'s being used and what some of the trends are over time because
these do represent an awful lot of wealth in rural areas, and as Mr.
Dorr has spoken at length over the last several years, there\'s a lot of
untapped equity in rural America that we just don\'t have access to.

          Inherent in these research topics is the need for information
on finance, governance, and strategic thinking, but among the survey
work \-- and again, I want to emphasize with the survey work, typically,
they\'re not very good unless you get a strong response rate, and one of
the things that \-- there\'s been a lot of good work done at USDA-RBCS,
but sometimes you don\'t get the strong response rates as you\'d like.

          And there are ways that farmers respond and ask surveys. 
There\'s people that respond to census and manufacturing surveys done at
the Department of Commerce, and I think that any type of research like
this that involves surveys, I think building a broad coalition and so
forth to try to get a strong response rate and break it out by asset
size, type of cooperatives, geographic location, et cetera, can be very
valuable in this area.

          A second topic of research is with regard to outside equity,
which we\'ve heard a lot about this morning.  We need some baseline
information on how many cooperatives access outside equity, the changes
in governance and organizational structure, and how this capital is
being used, and Jean-Mari it sounds like is doing some of that, but
it\'s pretty difficult to keep track of all the press releases that have
been written in the past two years by cooperatives that are undergoing
organizational changes.  I think a broad inventory of that would really
help in getting us some baseline data on this topic.

          There\'s been some discussion this morning about some of the
economic impact work that we need done on cooperatives, and certainly
those are valuable research tools.  I think there is sometimes the
census and manufacturing data that\'s done every five years.

          There may be a way in that to put a variable that firms just
check off if they\'re a cooperative or not a cooperative, and every five
years companies report this data.  They report the salary information. 
They report capital expenditures.  They report depreciation.  They
report sales in a variable that\'s similar to what we call value-added
in economics.

          But maybe there\'s a way to work with the Department of
Commerce to help collect some of that data and have a variable created
that allows it to be reported as a cooperative or not, and that would
help get us some of this economic impact data that\'s been discussed.

          These are just two types of research that we believe is
urgently needed.  There are other members of NCERA-194 that have
different needs, but these two really were head and shoulders above the
other things that people talked about.

          Again, as I talked about, we need strong response rates.  A
lot of this involves intensive survey work, but the good thing is that
USDA has a good reputation with people and they\'ve got the contacts,
and one of the things I think that\'s been unique about RBCS relative to
other USDA agencies is there\'s always been a strong relationship
between the land grant universities and USDA-RBCS.

          And I think that\'s something that\'s very unique to many USDA
agencies that lament the fact that we don\'t have as good ties with
universities.  I think there are a lot of good ties that exist these
days, and I think that\'s a good thing.

          The last thing that I heard several people mention is that we
need to get the general cooperatives back and running again, and it\'s a
good way to report some of the research that\'s been done on
cooperatives and acquaint people with what\'s been done.

          Again, there\'s a new generation of faculty that are involved
in NCERA-194.  They\'re probably not as tied into USDA as some of the
previous generation of faculty was, but I think there\'s things we can
do to get them involved.

          The last point I want to make is that everybody that I talked
to ensured that if there is funding available for research, make sure
it\'s competitive.

          And I think as I said, there are a lot of new faculty that may
not be on the radar screens of some folks, but they\'re eager to do
research on cooperatives, they\'re eager to be connected, and the good
thing is these new faculty have got explicit appointments in research as
opposed to extension and teaching, and so they have resources that are
devoted to research that they\'re not spread as thin as other faculty,
and I think that\'s a good thing.

          So thank you for providing the opportunity to speak on behalf
of NCERA-194.  And I\'ve left the remainder part of my time to answer
questions that you may have about our organization or any of my remarks.

          MS. PURCELL:  Thank you.  How would you recommend that we get
a better partnership going with some of the new faculty in the
university?

          MR. BOLAND:  Well, a lot of us are economists, and money works
when it comes to profits agreements and other things.

          (Laughter.)

          MR. DUNN:  I think they\'re on to us now.

          MR. BOLAND:  I do think we need to do a better job getting
folks committed to organizations like NCS.  There used to be a lot of us
who worked with the nice program and other things that were involved. 
There\'s organizations of aid that I think some of them are getting
involved with.

          A lot of it, though, is that there\'s a, you know, help peer
review on things.  You know, a lot times you\'ve got grants you need
help with peer review on.  A lot of times you\'ve got \-- maybe there\'s
internal projects that you need to get peer-reviewed.

          I think that there are younger people \-- I don\'t want to say
they take those things more seriously, but they\'re looking to be
involved, and so when those opportunities come along, they\'re more
inclined to say yes as opposed to no because they\'ve got a full plate,
and so I think that there\'s just a lot of people that are looking to be
connected somehow, and sometimes those are low-lying fruit that you can
take advantage of and get them hooked in.

          Certainly let them review on the general cooperatives, for
example.  I think a lot of the \-- you know, I\'ve been a member or have
gotten a journal for 10 years and I\'ve never been asked to review for
it.  You know, that\'s something I would do, and there\'s a lot of other
folks I think that would be in that same perspective.

          MR. DUNN:  How can we go about identifying who these folks are
that have the co-op interest? Because they\'re clearly flying under a
lot of radar screens.

          MR. BOLAND:  Yes, and a lot of them are new hires in the last
five years I would argue, and they\'re not hired into positions that say
co-op, but they have an interest, you know, to work for people like
Brick, Stetson & Davis, and so they\'ve got a

co-op interest, but they\'re hired into agribusiness jobs, but the
reality is, I mean, if you\'re looking for something kind of fun to do
in agribusiness,

co-ops are a fun thing to do research on.

          And I can get you a list, John, if you want.  I mean, we\'ve
got NCERA-194 membership, and I can procure a database for you with
contacts and e-mails and so forth.  I\'d be glad to do that on behalf of
our organization.

          MR. DUNN:  Good.  I appreciate that.

          MS. PURCELL:  One of the things that we\'ve been kicking
around, of course, with the federal government, oftentimes, things
aren\'t easy to do, but maybe take a couple of our vacant positions and
have like a revolving internship or fellowship maybe with folks at the
university.  Is that something you think some of your staff might be
interested in?

          MR. BOLAND:  Yes.  CSREES does that I know.  You know, most
people would argue that they sort of like to be going to D.C. for six
months or a year.  They wouldn\'t want to live there, but it would be
kind of a fun place to go and work for a while.  You know, that\'s
something I\'d be glad to \-- we\'ve got our annual meeting in
November.  It\'s something I\'d be glad to follow up with you on and
just gauge the interest on that.

          Many faculty these days are on nine-month appointments, and so
they\'re looking for things that fund the three months of their time,
and a lot in fact are teaching one semester, so it\'s not like just
summertime when they\'ve got three months.

          They could make it, you know, January to March type, or folks
that are on a semester or something, because I know the summers may not
be convenient for you folks to bring people in for three months, but
most new faculty hired these days are on nine months and they\'re
looking for things to do for the three months of their time, and I would
think that would be something that we\'d have some people that have an
interest in.

          MR. STAFFORD:  More than a sabbatical-type of thing then. 
You\'re just talking about a temporary \--

          MR. BOLAND:  Yes.  I think people with three or six months \--
these CSREES fellowships I know are six months sometimes or a year.  If
that\'s what you\'ve got in mind, I think that\'s, you know, a length of
time that folks could think about something like that and get some
release time.

          MR. WELLS:  Michael, there\'s an awful lot of researchers
that\'s done research that ends up just sitting on shelves in paper
form.  What are your thoughts on, you know, dissemination methods that
we could do better research and make it more visible?

          MR. BOLAND:  You know, one of the things we\'ve done, I did a
number of cooperative agreements in the 1990s when we had reports, but,
you know, there was never a way to post it on USDA\'s website.  You\'ve
got a big website with all the work that you folks do.  There just never
seemed to be a good way.  We\'d send things in on a CD, and it just \--
and again, technology has come a long way since the days when you guys
had funding for cooperative agreements, but you guys do fund things,
and, you know, you\'ve got a website I think.

          The argument I was making \-- I don\'t have any comments.  You
just enforce this on people.  Tell them look, you owe us a two-page
whatever it is and, you know, we\'re not going to pass your \-- you
know, you\'ve got that form due on the audit at the end of this thing,
we\'re not going to sign off on that unless you deliver this, and I\'d
make people commit to write something for *Rural Cooperatives*.  I mean,
you guys did that with us on two things, and there\'s nothing like
having a little bit of an enforcement mechanism.

          You can demand more of us.  There\'s nothing wrong with that,
and, you know, I think people will respond to that, so there\'s nothing
wrong with making us write things for *Rural Cooperatives* or other
things, and I think we can get that done, so just demand it.  I mean, I
don\'t think there\'s anything wrong with that.

          MR. DUNN:  I appreciate that.

          MS. PURCELL:  Thank you.

          MR. BOLAND:  Thanks for having us down, and, John, I\'ve got
some additional edits, so I\'ll get you a clean copy of that Gross file
that I sent you yesterday, and you can use that as you see fit.

          MR. DUNN:  Okay.  Excellent.  So everybody knows, I will be
\-- we will be putting up everybody\'s submissions on the web, so
everybody\'s going to be able to access them electronically.  Thank you.

          Next, an unfamiliar face, Randy Torgerson.

          MR. TORGERSON:  Keeping things properly positive here, just
piggybacking on Mike Boland\'s comment, I\'d like to tell you that I\'m
a product of Intergovernmental Personnel Exchange Act.  I came in from
the University of Missouri.  I spent a year and a half in the AMS, Ag
Marketing Service, and then a short-term assignment became longer, and I
spent 27 years in Co-op Services, so that is a program, Bobbie, that
does work, and Pete, and it should be seriously explored.

          I have a statement that I\'ve submitted.  I\'ll highlight a
few things, quite a few as a matter of fact, but not all, and I hope to
share some content with you that I hope is meaningful.

          I think as we look at the role of farmer cooperatives in the
United States and others have suggested this, things are changing
dramatically as they must, and to keep pace with the business world as
well as with the economic environment in which cooperatives are finding
themselves.

          It\'s only however through continued recognition, support, and
understanding of farmer cooperatives that they will continue to play a
critical role in responding to the changes similar to what has
characterized these unique organizations throughout the country\'s
history.

          We feel that cooperatives can continue to vitalize and support
American agriculture and its rural communities in these times, also
times of opportunity, but only if the strengths and potentials are
captured and preserved.

          Among other things, this requires very thoughtful and creative
assessments of efforts to promote practices and structures that deviate
from accepted cooperative norms of operation.  It also requires an
imaginative leadership from institutions that are well-suited to make
assessments, provide vital information and assistance to those who wish
to create and use strong cooperatives as well as offering lessons from
their extraordinary performance in American agriculture and rural
communities.

          Now one such institution that has a very strong history in
doing this for over three quarters of a century are in fact the CS
programs in the department, and I speak today in my statement to urge
that the foundations of USDA\'s several roles in serving creative and
growing in effective cooperatives be revitalized.

          This report here of *Rural Cooperative Publications*\' catalog
in the department I think contains many studies that have been
distributed and widely used not only in this country but worldwide.

          This component of USDA represents a very unique institutional
support structure offering a bundle of services and expertise with a
capacity unlike any other found in federal government.  This program of
service needs to be strengthened and given effective administrative
staffing and budget support if it is to be sustained.

          Sadly, that support has not been forthcoming in the last 12
years since the agency status for cooperative support was removed and
those responsible for carrying out statutory mandate for services to
cooperatives including research were moved to the rural development
area.  The program as a result is languishing at a time of very critical
need.

          Properly chosen research will help cooperatives and their
members meet these needs by responding to major changes in agriculture
and rural America.  It will guide them in continuing to be important
contributors to agriculture and to rural communities.

          Now I\'ve listed areas of recommended and needed research here
in both commodity and functional areas in my statement, and I\'ll
highlight just a few of them.

          Commodity-specific studies of structural adjustments and
respective industries and sectors are required as a means of
understanding the economics of new value-added initiatives but also the
attendant effects of these new institutions on commodity marketing in
these various sectors, and a few examples I think will highlight this.

          The expansion and manufacture of alternative fuels using corn,
soybeans, and other crops as well as animal byproducts has greatly
altered the patterns of traditional commodity markets and attendant
infrastructure needs.  How are cooperatives adjusting to these changes,
and what are the needed strategies for remaining viable businesses
serving farmer members?

          Another area:  red meats.  Several attempts have been made
into processing and marketing red meats.  Some like Oregon Natural Beef
Cooperative and the pork cooperative at Rantoul, Illinois, have become
successful.  Others like beef cooperatives in Iowa, ranchers lamb in
Texas and a small pork cooperative in Minnesota, and I think Bill Patrie
would add efforts by beef producers in North Dakota, have not met with
success.

          What have been the keys to success or the mistakes made that
have led to these different outcomes for livestock producers?  Potato
growers have recently attempted organization of a North American
cooperative to better control supplies.  What has been the experience of
cooperatives generally in supply control?  Does the CWT program by dairy
cooperatives provide any guidance for potential success in this
endeavor?

          Bargaining cooperatives represent grower members and contract
negotiations with processors, and they\'re dealing with major firms and
often encounter problems in gaining recognition.  Are national
legislative remedies required to augment the bargaining process?

          Fruit growers historically have used marketing agencies in
common as a strategy for better providing access to large accounts but
also substantial savings in administrative costs.  What are the
essential components of successful operation of marketing agencies in
common?

          In a similar sector, almond growers in California have
benefitted from carving out international markets for nuts at the very
time that production has been growing nationally in this country.  What
can other cooperatives learn from the marketing success of Blue Diamond?

          Several organic and natural food producer cooperatives have
found success in niche marketing.  What have been the ingredients for
their success?  What relationships exist or can be developed between
niche marketing groups and established cooperatives?            The
structure of the dairy industry continues to change with more commodity
and ingredient production concentrated in western states and production
of finished products in the midwest and east.  How can they best link? 
How can they coordinate?

          What I\'m suggesting here is that we should make no mistake
about it.  Staff expertise knowledgeable about commodity sectors is
essential to problem-solving analysis of these issues facing cooperative
businesses.

          An excellent example is found in the recently released and
widely read publication by Charlie Ling of the dairy program area, the
*Dairy Cooperative Growth Challenges:  Technology, Ingredients
(Proteins) and Equity Financing*.  More studies of this nature should be
considered.

          There are likewise a number of functional areas of needed
research as follows:  The theory of cooperation needs to be revisited
through examination and updates as have been periodically accomplished
in the past.  Only if we understand the foundation of cooperatives can
we effectively use the principals to capture new opportunities in a
changing American agriculture.

          Analysis of the role of cooperation in maintaining a
producer-driven economic organization of agriculture as opposed to a
corporate-dominated one and its impact on rural development, quality of
life, leadership development, and contribution to institutional
structure in rural areas require some serious examination.

          As part of that, a difficult issue is that of addressing
cooperative strengths that can be lost if only measures of
noncooperative businesses are used to measure cooperative performance,
so how do we measure that performance, and how is that differing between
IOFs and cooperative forms of businesses?

          As we know in the member relations area and governance,
educating and informing members is recognized as one of the best ways of
building loyalty in supporting cooperatives.  However, in large-scale
cooperatives, some of them covering several states and in some cases
nationally, they encounter member relation challenges, and it raises the
question of what techniques are available to bridge the distance gap and
keep members involved.

          How do we keep large cooperatives democratic while allowing
for a scale of operations that competes with the ADMs, the Cargills, the
Dean Foods, and the Smithfields?

          I\'d like also to suggest that more work on agriculture in the
middle requires some attention.  Rural sociologists have taken the lead
in examining smaller scale choices that capitalize on niche marketing
for consumer interests, and those consumer interests are typically found
in organic or natural, local and environmentally sensitive approaches to
production in marketing using brand strategies.

          This work is very congruent to earlier Goldschmidt studies
concerning contributions of smaller-scale agriculture, and as we\'ve
heard repeatedly here today, marketing a value-added product and the
capital-intensive nature of these operations brings up financing
issues.  What are the best ways of meeting financing needs yet preserve
cooperative character of organizations and remain true to cooperative
principals?

          What are the alternatives to going public when dealing with
equity redemption and other restructuring issues?  Terry Barr just
mentioned to me and I think it\'s pertinent that research is also needed
to respond to the Mackenzie reports of a couple years ago which
suggested that cooperatives destroy value.

          In the interest of time, I\'ll bypass a couple of the other
functional areas and focus lastly in that area on urgent attention
needed to continuing the tabulation and reporting of collected
statistics on cooperatives.

          More than a two-year gap in annual statistics has occurred,
and it\'s occurred largely because the programming and reformatting
system for tabulation was supposed to be delivered to Co-op Services,
and it was never met by Rural Development.  These statistics are
important to a vibrant research program and also to state and national
cooperative councils and indeed to other governmental agencies.

          Now, when I headed the Cooperative Service in years past, the
department was involved in drafting new legislation that paralleled the
Cooperative Marketing Act of 1926 for farmers but would have extended a
similar bundle of services additionally to nonfarm rural cooperatives. 
There continues to be an opportunity to provide research, technical
assistance, education, and cooperative development resources to meet
these needs of this category of recipients.

          However, it should not, and I emphasize should not, come at
the expense of further diluting services to farmer cooperatives.  It
should be based on a new legislative mandate.

          The ability of Cooperative Service to conduct needed research
I\'d like to suggest to you folks as an outsider now looking in is under
siege.  It\'s under siege because staffing has diminished to a point
where a limited output is not impressive.

          It is also under siege because management above the division
director level does not understand the research mission.  Having not
replaced vacancies such as the financial program leader, grains and oils
seats program leader, fruit and vegetable program leader, livestock
marketing specialist, cooperative educational specialist, cooperative
development specialist, and the assistant deputy administrator positions
means that the resource base has been sharply curtailed.

          Two minutes.  And furthermore other support things have likely
been curtailed, and this is really a tragic outcome for one of USDA\'s
most productive and cohesive research and technical assistance
providers.  My suggestion is if Rural Development can\'t provide the
needed support, the program ought to be shifted to another
Undersecretary mission area that indeed would.

          In his book [Farmers, Cooperatives, and USDA:  A History of
the Agriculture Cooperative Service]{.underline}, renowned USDA
historian Wayne Rasmussen wrote, and I quote, \"The Cooperative
Marketing Act of \'26 might be called the constitution of the
Agriculture Cooperative Service.  It outlines the duties of the service,
but most importantly it provides continuity, just as our federal
Constitution provides continuity in our national government.

          \"For more than six decades, the service, whatever it may have
in its title or placed in whatever particular organization, has under
law carried out a program of service, research, and education for
agriculture cooperatives.\"

          In short, there\'s a critical need for recapturing this
continuity and rebuilding the critical mass necessary for carrying out
effective programs.

          Thank you for the opportunity to participate in the hearing. 
I\'m glad it\'s being done, and I\'m sharing these comments for the
record.  Thank you.

          MS. PURCELL:  Thank you.

          MR. TORGERSON:  I used my time.

          MR. DUNN:  Twenty-seconds left.

          MR. TORGERSON:  All right.

          MR. DUNN:  Randy, when are you going to finally form an
opinion?

          (Laughter.)

          MR. TORGERSON:  You bet.

          MS. PURCELL:  Thank you.

          MR. TORGERSON:  Okay.

          MR. DUNN:  Next up, Audrey Malan with Cooperation Works!

          MS. MALAN:  Good morning.

          MS. PURCELL:  Good morning.

          MS. MALAN:  Good morning.  It\'s really nice to see all of
you, and I bring you good tidings from the State of Wyoming.  It\'s nice
to see you in person, though.  I\'m the executive director of
Cooperation Works!  It\'s a national organization comprised of 21 co-op
business development centers serving rural communities in 42 states
across the country.

          Cooperative Development Centers created Cooperation Works! to
provide a network to exchange expertise and best practices, provide for
professional development, and collaborate on multicenter strategies to
increase project success, and I greatly appreciate this opportunity to
discuss with you potential topics of co-op research.

          As you know, co-ops are deeply rooted in rural communities. 
They reduce costs, provide services, jobs, increase tax revenues that
generate wealth to their member owners.  Cooperatives also don\'t pull
up stakes and move overseas for cheaper labor.  Co-op business
development is a highly effective rural development strategy, and I urge
USDA to make a renewed commitment to the development of new cooperative
businesses in the U.S. and to undertake co-op research that will
facilitate that development.

          Cooperatives play a key role in the U.S. economy as we\'ve
heard today.  Although we don\'t have the current research on the
overall impact on the economy, we do know that there are between 25,000
and 40,000 cooperatives in the U.S. and that the top 100 co-ops alone
have assets over \$284 billion.

          USDA has researched the economic impact of cooperatives in the
states of Wisconsin and Minnesota, as documented in the Rural Business
Service Research Reports 196 and 200.

          There are 798 cooperatives in the State of Wisconsin
representing 2.7 million members and \$5.6 billion in gross sales. 
Taking into account the multiplier effect, Wisconsin cooperatives
support nearly 30,000 full-time jobs and generate almost \$1 billion in
total income within the state.

          In Minnesota, a little over a third of the total co-ops
generate \$6.7 billion in revenues that result in total direct,
indirect, and induced impacts of almost \$11 billion in output and a
total employment of almost 80,000, but here was the surprise from the
two economic impact studies:  The economic impact of the co-op business
model itself.  Locally owned profits in the form of patronage dividends
returned to the members and spent in their local economies.

          In Wisconsin, the cash patronage refunds and dividends
returned to the member owners generate more than \$500 million in
additional net income to the state.  In Minnesota, the net gain to the
economy is \$600 million.  Clearly, cooperatives are a highly effective
rural development strategy.

          One of the most effective federal rural development
initiatives ever undertaken was the formation of rural electric
cooperatives.  Not only did the lights come on in rural America, but
rural communities in partnership with the federal government built some
of the most stable businesses in the U.S. economy.

          In light of the outrageous Enron scandal and the cost to
millions of consumers and thousands of its employees, rural electric
co-ops flat transparent businesses owned by their members stand as a
beacon of light, integrity, and high economic and community value.  The
development of rural electric co-ops represented a public-private
partnership, private as in the interest of rural communities.

          It was a systematic sector-based approach that included the
necessary research, technical assistance, capital investment, financial
oversight, and ongoing networking support.

          The cooperative business development centers of Cooperation
Works! have helped develop 388 new businesses owned and controlled by
47,000 members, created more than 5,800 new jobs, and leveraged
investment over \$901 million.

          The centers receive core funding through the USDA Rural
Cooperative Development Grant Program, which enables them to provide the
critical technical assistance to stakeholders to start new enterprises. 
There is no other program or funding source to provide those services.

          Investment in the RCDG program is paying back returns to the
federal government in the form of new businesses, new taxes, new jobs,
and new wealth for rural residents.  There are few federal programs that
generate such a high return on investment.  The centers of CW through
the RCDG program and in partnership with USDA have developed a
coordinated national infrastructure to support the development of new
co-op businesses.

          The weakness of the RCDG program has been at annual funding
cycles.  Most co-ops take 24 months to get off the ground and may take
even longer when working in communities of entrenched poverty. 

Short-term funding cycles make it difficult to undertake long-term,
sector-based systematic approaches.  When a center is funded one year
and not the next, trained staff must be let go and projects designed to
deliver benefits die on the vine.

          Additionally, the centers lack the resources to undertake
critical research necessary to support more complex sector-based
initiatives, and there is often a disconnect between the research
academics need to conduct to get tenure and the research required in the
field.

          I recommend that USDA engage in research that will facilitate
the development of strategic sector-based systematic approaches to the
development of new co-op businesses.

          Here is a simple example.  Municipal co-ops are a proven
strategy for county and state governments to reduce costs without
reducing services.  How often does a strategy like that come around? 
Municipal

co-ops are fairly straightforward organizations, but we lack the
research required to build an effective implementation strategy.

          The research would go something like researching existing
municipal co-ops, assess greatest opportunities to reduce costs, outline
models to meet those opportunities, implement pilot programs, and you
all know the rest.

          Successful implementation of this strategy would bring
tangible results for local and state government and a broader
appreciation for Co-op Services, but similar strategies should be
applied to even more critical aspects of rural life:  healthcare, senior
care, affordable housing, business retention, job creation, et cetera.

          We have developed much of the capacity required to launch
sector-specific strategies.  We would be willing to work with USDA to
identify specific research from which to implement strategic development
initiatives key to rural health, wealth, and vitality.  Any questions?

          MR. DUNN:  Audrey, with what you said and what Mike Boland
said earlier and a couple other people have talked about is we have all
these research assets that are kind of out there operating almost \--
still probably operating kind of on their own.  How can we begin to
bring those together and do a better job of coordinating our research,
making sure that we\'re getting synergies out of it that we need to? 
Basically, how can we do a better job of working together?

          MS. MALAN:  Well, I think the key is a commitment to
developing new cooperative businesses and to do it in a strategic way. 
You know, we\'ve been at this now for a long time.  We know what works
in co-op development.  We know what new businesses need to succeed, and
we know that we can be more strategic with our resources.

          I don\'t want to harp on this.  I think everyone knows how I
feel about this, but the 12-month funding cycles prevent centers from
developing the capacity and the momentum to implement long-term
strategies, and that\'s really a problem.

          You know, I guess it was what Mr. Boland said.  You know, you
guys have the dollars if you\'re buying research, but there really is
not a lot of incentive on the part of universities to do the kinds of
research we need in the field.

          For example, everyone is familiar with the home healthcare
model of cooperative care in the State of Wisconsin.  This is a dramatic
cooperative, dramatically improving people\'s lives.  It\'s improving
the seniors\' lives because they get consistent care rather than new
people coming in their house every day, and of course it\'s improved
working conditions for the women who are taking care of our elderly
people, but we need research.  We need to know.

          The county initially contracted with independent caregivers. 
Now they\'re contracting with cooperative care.  They\'re paying
slightly more to contract with cooperative care than they were paying
when they did their own contracting.

          Now it would be very good to know are the long-term costs
lower to the county.  The short-term costs may be higher; the long-term
costs are lower.  You know, this gives us information where we could
then go into other counties and begin to build a development strategy.

          MS. PURCELL:  So I guess your recommendation to us would be to
take some cooperative development projects that appear to be working and
really \-- the newer ones, and really dig into them and see what their
strengths are, what their weaknesses are so that we can then maybe
perfect the model and move it forward into other parts of the country.

          MS. MALAN:  That might be one approach.  Another is ask a
rural sociologist or anthropologist what are the top three major
concerns in rural life today.  You know, you can design co-op strategies
to meet all of those.  You know, I think it\'s more having a strategic
orientation and thinking for the long term, implementing pilot projects
and then assessing those projects.

          But, you know, fundamentally, I think it\'s a key vision of
your organization, your department, to commit to effective development
of new cooperative businesses in rural America, and your organization is
remarkable.  I mean, the intellectual capital in this organization on
cooperatives you see in very few places in the whole world.  We have an
incredible resource here.

          And we as co-op development practitioners, you know, we
actually at Cooperation Works!, we\'re expanding our practitioners.  We
do a training every year.  We just trained 23 brand new co-op
development practitioners.  You guys are losing your cooperative
business development expertise and capacity.

          Anyway, it\'s a subject that all of you happen to know I could
talk a lot about, but I would like to see you make a commitment because
it is so critical to rural America.

          MR. STAFFORD:  One thing you said was that you already know
how to develop cooperatives.  We know what works, what doesn\'t work. 
So you\'re suggesting that all we need to do is research on those
sectors that we haven\'t done?  In other words, we have been working
primarily in agriculture and \--

          MS. MALAN:  I would say research that was focused on new
cooperative business developments.  Does that make sense, Tom?

          MR. STAFFORD:  Partially.

          MS. MALAN:  You\'ve done research on cooperatives, but on
strategic initiatives to replicate, is that going back to the rural
electric cooperatives?  Now that was a very strategic type of
development work.  I mean, they came in with a plan.  There was clear
financial oversight.  There were loans, and there was followup
networking support for those new rural electric cooperatives, and they
built \-- you know, it had remarkable impacts today in rural America. 
So am I answering your question?

          MR. STAFFORD:  Partially.

          MS. MALAN:  It\'s more of a focus on strategic development
rather than just haphazard development, you know, taking a sector and
developing a strategy in that sector to benefit the stakeholders.

          MS. PURCELL:  Thank you.

          MR. DUNN:  Liz Bailey, from Cooperative Development
Foundation.

          MS. BAILEY:  Thank you.

          MR. DUNN:  Thank you.

          MS. BAILEY:  The last one before lunch, so I\'ll get going. 
I\'m Liz Bailey, executive director in The Cooperative Development
Foundation, and I thank you for the opportunity to represent The
Cooperative Development Foundation at this hearing where you\'re
soliciting comments how best to strengthen rural cooperative businesses
through the research and public policy priorities of the Department of
Agriculture.

          CDF has been a player in the cooperative philanthropy
community for more than 60 years, and it serves as a community
foundation for the cooperative found community.  Our primary business is
the disbursement of funds through a cluster of modest grant and loan
programs, but we\'re also in the business of expanding public awareness
and attracting more financial resources to cooperative development.

          CDF applauds the USDA for its longstanding commitment to
cooperative research and development, and we appreciate this opportunity
to suggest ways to refine that commitment in a way that we believe will
leverage additional resources.

          I would like to suggest three ways the USDA could adjust its
priorities without serious financial consequences and potentially
leverage more understanding of cooperatives, new resources for
cooperative development, and ultimately the development of new
cooperative enterprises.

          First, I suggest to focus on research and education that
starts with a strong economic research component.  Second, I suggest
creating an environment that encourages more collaboration with new
public and private sector partners.  And third, I suggest that USDA make
it a priority to have more cooperative development professionals in the
field.

          First, the focus on research and education.  We all know
there\'s a basic lack of understanding about cooperatives in all levels
of government, in the business community, in the academic world, in my
philanthropic world, and among the general public.  Too few understand
how cooperatives function and the role they play in the nation\'s
economy.

          We all use anecdotal stories to tell of successful cooperative
enterprises, but we don\'t have access to the kind of aggregated
economic data that is routinely used by economic and business analysts
to map U.S. economic activity and interpret the data for those who make
or influence public policy.

          Government, through its support of university research, has
traditionally been the source of this kind of basic research, and I\'d
like to suggest that this should be a major new focus for USDA\'s
research activity.  I\'m not suggesting research just for the sake of
having research.  Rather,  I envision this research as the foundation of
a new and expanded cooperative development agenda.

          I like to think of this research as the yeast that makes the
bread rise.  An old nursery rhyme popped into my head when I was
preparing for this, \"The House that Jack Built.\"  It takes me back. 
It started with malt on the floor in the house that\'s eaten by a rat
that\'s killed by the cat that\'s worried by a dog that\'s tossed by a
cow who was milked by a maiden and so on and so on.  You\'ll have to
refer to your own Google search for the rest of it.

          (Laughter.)

          MS. BAILEY:  The malt in the nursery rhyme started a chain of
events that culminated with a happy ending, ironically, a farmer selling
his corn.  Think of core economic research as the malt that starts a
chain of events that leads to more knowledge about cooperatives, that
leads to more interest in cooperative development, that leads to new
resources for cooperative development that culminates in yet another
happy ending:  new and thriving cooperative businesses.

          This kind of data would be extremely useful to all of us who
are doing outreach and telling the cooperative story to new and
expanding audiences.  It\'s also important to have that data that\'s
continually updated.  It can\'t be a one-time snapshot.  It\'s data that
needs to be tracked and reported on a regular basis.

          I enjoy seeing people\'s reactions when I point out to them
and reveal to them that cooperatives are all around them, but I\'m
missing an important tool in my toolbox if I can\'t also steer them
towards the solid economic analysis that goes beyond the anecdotal and
helps establish the depth and breadth of the cooperative sector\'s
impact on the economy.

          My second suggestion is that we need to focus on more
collaboration that brings new players to cooperative development.  We
need an atmosphere that encourages more collaboration with new partners
who can bring their networks and their resources to the table.

          CDF is one of the handful of foundations that focus on
cooperative development.  I\'m sure my colleagues in the other
foundations will agree there\'s not enough funding for all the work that
could be done and that we receive far more requests for funding than we
can accommodate.

          An example from CDF\'s own experiences, our newest grant fund,
the MSC mutual service cooperative fund, which makes grants for
feasibility studies, educational programming, and technical assistance
projects.  CDF has been managing the MSC fund for two grant cycles.

          In 2004, we had about \$90,000 available for grants.  We
received 44 applications and almost \$1 million of requests.  In 2005,
we narrowed the focus thinking that might help solve the problem.  We
still received over \$300,000 in proposals, three times the funds
available.

          We will continue to do all we can to expand the resources we
have to support cooperative development, but more importantly, we hope
to be able to leverage additional resources from outside the traditional
cooperative family.  Let me give you an example of how we intend to do
that.

          Several weeks ago, CDF and its MSC fund hosted a public forum
called \"Cooperative Solutions for Seniors\" at which we had experts in
home care, senior housing, and senior healthcare share the podium with
experts in cooperative home care, cooperative housing, and cooperative
healthcare.

          We know we started something as we watched the exchange of
business cards between panel members, and we hope to translate that into
some ongoing collaboration with some of these experts who now know
something new about cooperative development.

          We anticipate opportunities for collaborative funding
proposals to foundations outside the cooperative world to foundations
that focus on workforce issues, on healthcare issues or senior issues,
but foundations that have not previously funded cooperative development.

          CDF intends to look for opportunities for this kind of
collaboration in all of its grant and loan programs, and we hope that
our colleagues in the cooperative community will find similar
opportunities to bring new partners and new dollars to cooperative
development.

          We hope the USDA will make collaboration with new partners a
higher priority.  USDA can take on the mission to educate and engage the
economic and rural development researchers and experts in other federal
agencies, in places like HHS, HUD, Interior, SBA, and Commerce.  We need
to help them understand how cooperatives can help them achieve their
rural program priorities.

          We hope the cooperative development professionals in the field
will similarly engage their colleagues in the broader community and
economic development arena in joint ventures, and we hope the university
researchers will network more effectively across campus and geographic
boundaries to do more collaborative research that may include academic
experts in fields that would bring valuable new perspective to research
on the cooperative model.  I know it\'s easy to say, harder to do.

          How do we capture the interests of these new potential
players?  I\'d like to suggest four key ingredients.  We need to be able
to provide them with objective data that they can use to validate the
economic impact of cooperatives.  It\'s that critical economic research
agenda.  We need to help them understand the structure of a cooperative
business.  What makes co-ops different as well as what makes them just
like other forms of business?

          We need to provide them with examples of best practices of
cooperative businesses, and probably hardest, we need to do our homework
and learn their priorities.  We need to make cooperatives relevant to
their needs and their program priorities.

          I\'m convinced the climate is right for this kind of
collaboration which will not only leverage new financial resources but
result in new and innovative suggestions for cooperative development.

          My last suggestion for USDA is to make it a priority to have
cooperative development professionals in the field.  We need more good
people to choose cooperative development as a career path both in the
career ranks of the U.S. Government and in the nonprofit and private
sector organizations that work in economic and community development.

          If we are successful with the first two priorities I
suggested, assembling the data and attracting new cooperative
development collaborators, we will need more experts in the field who
understand cooperatives, how to form them, and what are the legal,
financial, and organizational issues involved with building such a
member-owned business.

          We also will need more expertise in generating solid
feasibility studies and complete business plans without which both
equity investment and debt financing will be nearly impossible to get. 
        We already have some good tools to build cooperative development
capacity in the field, but we can always use more.  Cooperative
development professionals have a great resource in the professional
development training program that\'s been developed by Cooperation
Works!

          We hope that the CW training program will also attract growing
numbers of community and economic development professionals who want to
collaborate with cooperative development professionals and learn how to
effectively create cooperative business enterprises.  USDA needs to have
a network of field staff in place who understand cooperative development
and the wide array of applications of the business model.

          I encourage USDA to make cooperative development a priority in
the recruiting and training of its career workforce.  It would be
wonderful to have in-depth cooperative development expertise on the USDA
team in each and every state.  Thank you for this opportunity, and I
look forward to working with you to implement any of these suggestions,
and I welcome your questions.

          MR. DUNN:  Liz, when you have conversations in meetings in
some of the various foundations, funders that have heretofore not really
been exposed to the cooperative model and you\'re putting them together
with cooperative experts, what is it about the cooperative form of
organization is exciting these folks?  What are they?

          MS. BAILEY:  I think it\'s the member involvement that\'s a
key critical part of it.  In part, it\'s people are getting awareness of
co-ops that they didn\'t know were co-ops in their midst, which is kind
that A-ha experience for starters.  You know, they don\'t realize, they
don\'t think of credit unions as being co-ops.

          You know, they know the traditional agricultural model, but
they don\'t think of all the other ways that co-ops work, and I think
part of it is well, they see as we\'ve exposed them to some of these
successes where they see it say in the home care field where they see
something that\'s working, and then they\'re intrigued by the results
that they see and they want to learn more about the model that gets you
there.

          So I think it\'s that results base, which again gets to my
point of figuring out what their priorities are and what their needs
are.  If they\'re looking for better ways, higher-quality ways to
achieve home care or healthcare or, you know, meet their \-- if they\'re
in the senior context, they\'re looking at the number of seniors and the
unavailability of housing to meet that need.

          They start there with we\'ve got a problem, and then if you
can show them how co-ops have played a role in that, I think that\'s how
you get people in rather than starting strictly with this is what a
cooperative is.  I think you have to almost have some of those results
and that economic data is another where you can demonstrate what role it
plays in the economy.

          MR. THOMAS:  I share your concern as the administrator when we
see 3 or 400 applications for a particular grant program and we\'re only
able to fund 120 or 130 of them.  You might want to share with us in the
future how you score and how you do it if we could come up with a better
way to make it equitable, more equitable, so all of them I think would
be well-served.

          I\'m curious, how many other organizations such as your
philanthropic organizations are there that have a concentration such as
you?

          MS. BAILEY:  It\'s a handful really.  You have the Cooperative
Foundation and the CHS Foundation.  Land O\'Lakes has a foundation, but
what\'s disbursed there too is the priorities that the trustees
establish.  Some of them because of the nature of who their members are
will have much more of a community-based decision in terms of how they
spend the money.  They may not spend it for the broader educational
focus.

          Other foundations like the Morris Foundation out of the Twin
Cities have a scholarship focus exclusively again because they don\'t
have \-- none of them have huge resources.  We have \$6 million in
assets, and our work is all from either the revolving loan fund or
endowments so that we have, you know, modest resources to put into it.

          It would be wonderful to wake up someday and see some new
foundations out there, but that\'s where I think the challenge isn\'t so
much to wring your hands over how few of us are there but figure out how
we can leverage the dollars of the Robert Woods Johnson Foundation and
the other places like that who deal in a much, much bigger universe of
funding, and to the extent that we can get cooperatives integrated into
their priorities, then the sky could be the limit truly if we did our
work.

          I think the same thing holds with the federal agencies in that
there are pockets of dollars that you all could access for your work,
and you could have some interesting collaborative initiatives I think
too where rather than carrying the burden of home care work here in USDA
look to work with the Health and Human Services teams that also have
rural health issues on their plate.  I think that could produce some
marvelous synergies.

          MR. WELLS:  Liz, from your foundation perspective because you
deal with people at the grass roots, where do people go to find out
about cooperative development if you know?  Where are they starting?

          MS. BAILEY:  Google.  I think they really do start at Google. 
Okay?  When I realized when we put out our brand announcements, we got
inquiries that come in from people we know aren\'t in our \-- we try to
get out to the networks that we know, but I think people really do use
the internet very effectively to search, or, you know, there are
directories of foundations that kind of work, but I think we\'ll find
people interested.

          We\'ve always had, and you may get this, too, where you get
some applications where they haven\'t read what our program priorities
are.  They just saw economic development \-- maybe they found us through
economic development, and it really doesn\'t either fit with the focus
that we\'ve set for right now.

          But they\'re \-- you know, they\'re desperately looking for
that place where they might get some traction.  And some search out
through the networks that they have where we can get the word out to
people who are known quantities or are catalysts themselves for more
information.

          We\'d love to be able to be more of a clearinghouse as we
raise the money to update our own website, we\'d like to be able to
provide links to all of the places that we believe people should also be
aware of for funding so that we can make it easier for people who really
do need to find the resources to get there.  I think it\'s a lot about
information and educating people.

          MR. DUNN:  Liz, thank you.

          MS. BAILEY:  Thank you.

          MR. DUNN:  Okay.  We will adjourn for lunch.  Can we reconvene
at 1:00?  We\'re running a little ahead.  We\'ve got a powerhouse lineup
then starting at 1:00 and hopefully have some discussion afterward, so I
encourage you all to return.  And if you need a guide to any of the fine
lunch spots here in USDA, grab a staffer.  We\'ve got them here, and
they all look alike.

          (Whereupon, at 11:47 a.m., the meeting in the above-entitled
matter was recessed, to reconvene at 1:00 p.m. this same day, Tuesday,
September 27, 2005.)

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                                         (1:01 p.m.)

          MS. PURCELL:  Okay.  We will get started.  I\'ll turn it back
over to John.

          MALE VOICE:  And we will obligate him.

          MS. PURCELL:  Yes, we will.  We\'re obligated to.

          MR. DUNN:  Welcome back from lunch.  I trust everybody ate
well.  I had some Indian food downstairs that people are going to be \--
oh, never mind.  First out for this afternoon, Ann Hoyt from the
University of Wisconsin and NCBA.  Hi, Ann.

          MS. HOYT:  Hello.  It\'s good to see you all.

          MS. PURCELL:  Thank you.

          MR. DUNN:  Good to see you.

          MS. HOYT:  I\'ve been traveling a lot, so I\'m going to read
my remarks so I don\'t lose track, but I wanted to thank you for the
opportunity to talk with you today regarding the research needs of rural
cooperatives.

          As you know, my name is Ann Hoyt.  I\'m a professor at the
University of Wisconsin-Madison and the University of Wisconsin
extension where I\'m a consumer cooperative specialist.  I\'m also a
chair of the board of directors of the National Cooperative Business
Association, and it\'s important as a professor that I let you know that
I\'m here representing NCBA and not the University of Wisconsin.

          It\'s appropriate that RBCS conduct these hearings as the
service has been the primary federal government agency that has
conducted and supported research on cooperative business for many
years.  That work has been extensive and has provided value primarily to
cooperatives engaged in the production and marketing of agricultural
products.

          However, as you well know, America\'s rural communities are
changing rapidly as agriculture becomes a more concentrated industry
with fewer farmers operating larger farms.  At the same time as you\'ve
heard today already, many nonfarming Americans are moving to rural areas
or establishing second homes there, resulting in a changing population
composition and income base for many rural communities.

          So I think this is really a good time to step back and
reconsider the research role of RBCS and how the dollars invested in
research on cooperatives can have the most impact.  You\'ve asked
today\'s participants to comment on the business and organizational
challenges facing cooperatives.

          There are many, as there are for our investor-owned and
nonprofit business colleagues.  Like many other businesses, cooperatives
face challenges related to globalization, human resource management,
growth, competition, and production and marketing methods, but in
addition, cooperatives face challenges that are uniquely related to
being cooperatives, and you\'ve heard several of these mentioned already
today.

          I feel like I may be an underline to what happened this
morning, but I don\'t think it hurts to repeat some of these.  Of
course, one of the major challenges is demutualization, and I don\'t
think I need to talk about that.

          Another one is member relations, which was mentioned earlier,
and the challenge is how to maintain strong member identification and
support when the cooperative needs to grow significantly to achieve
economies of scale.

          A third is capitalization, which we\'ve already heard quite a
bit about today.  Another that we\'ve heard about are changes in
taxation and accounting policies, and the last that I would say is an
important one is the challenge of low public awareness of the value and
contributions of cooperative businesses, particularly their
contributions to local economies.

          All of these I would agree with the previous people that have
spoken to you are significant challenges that deserve careful research,
but from a researcher\'s perspective, they are really secondary to a far
more basic research need facing all cooperatives in the country, and
that need grows as you\'ve heard already from the absence of reliable,
comparable data on the United States\' cooperative movement, both rural
and urban.

          As you\'ve heard from others this morning, the cooperative
business community has limited, solid, research-based evidence on the
true extent of cooperative business in the country.  We have reliable
information on cooperatives in specific industries, credit unions and
rural electric cooperatives, for example, but limited information on
purchasing cooperatives, worker-owned co-ops, and the many types of
cooperatives that are owned by consumers.

          Our most commonly used statistic I use when I talk about being
the chair of the NCBA board is that we have 47,000 cooperatives in the
United States with 120 million members.  That statistic is based on work
that was done in 1984.  The things that we know since then, the numbers
that we\'ve used since then, we\'re not exactly sure where those numbers
come from.  They are educated guesses.

          We have no comprehensive cooperative statistics on total
revenues of the country\'s cooperatives, on how many people are employed
by them, nor how much tax revenue is generated by them.  Estimates of
total cooperative revenue range from three and a half percent to seven
percent of the gross national product.

          At the same time, we know that cooperatives have significant
market share in individual industries and in individual communities,
particularly in rural areas, so we know that cooperative businesses are
important on the American economy, but we don\'t know how important they
are.

          I think RBCS could make a vital contribution to the
cooperative community and an important contribution to the country by
focusing its research efforts on establishing an ongoing method to
collect reliable data that measures the economic impact of cooperatives
on rural communities in the hope that \-- and I wrote this before I sat
here; I do think I am repeating points, but I\'m hoping that I won\'t be
\-- that have already been made today.

          In my mind, there are at least eight reasons why it\'s
important that RBCS give serious consideration to focusing and devoting
its research, cooperative research dollars, to developing this
comprehensive database on cooperative business activities.

          We need to accurately understand the size and scope of the
Unites States\' cooperative movement.  We need to understand the impact
of cooperatives on the economy of rural America.  We need to be able to
accurately assess the economic and social impacts of public policy on
cooperative businesses.  We need to understand whether this method of
conducting business creates benefits that other business forums do not.

          We need to discover whether there are cooperative models in
urban areas that could provide benefits to rural communities.  We need
to identify cooperative businesses in urban areas that could be either
suppliers to rural cooperatives or consumers of rural cooperatives\'
goods and services.  We need to have a fundamental database from which
we would be able to track the growth or decline of cooperative
enterprise.

          And we need to create a reliable database that will encourage
and attract both researchers and funders to the study of American
cooperative business. And there\'s one additional issue that deserves
consideration.  It\'s been mentioned earlier, and although I am very
aware that your primary focus is on rural America, I hope that you will
consider establishing a research effort that includes all of the
country\'s cooperatives, both rural and urban.

          There is much to be gained from freely available information
about all of the country\'s cooperatives not the least of which are
co-op-to-co-op purchasing and marketing opportunities.  Cooperative
businesses are growing in many industries and I believe have much to
offer the entire country.  A comprehensive research effort which would
identify the economic impact of cooperatives would help us identify
areas in which we might focus our development efforts.

          It\'s been nearly 50 years since the federal government
devoted resources to collecting basic data on all types of American
cooperatives.  I think that\'s an accurate statistic.  I was thinking
that that was the work that was done by Florence Parker at the Bureau of
Labor Statistics when she collected data on all kinds of cooperatives.

          If our estimates of American members of cooperatives are
exaggerated by even 100 percent, we would still expect that 60 million
citizens are cooperative members.  These are all citizens who own and
control businesses that are specifically designed to meet their needs
for supplies, for markets, for jobs, for consumer goods, and for
services.

          In most cases, these are locally owned and locally controlled
businesses that keep local resources in local communities.  They are
among the most democratic of our country\'s institutions.  USDA\'s
resources will be well-spent to work with the country\'s cooperatives
and continuing to work with the country\'s cooperatives to provide the
basic research on all types of cooperatives that\'s needed to foster the
growth of these important actors in the economy.

          And I\'d be happy to answer any questions or provide any
information if you have anything that would be helpful.

          MR. DUNN:  Thank you, Ann.  Putting on your sort of academic
hat and looking at what has happened to the research community with
respect to cooperatives over the last couple of decades, it\'s for the
most part really weakened, and there\'s lots of reasons for that, you
know, lack of funding, resources being redirected by universities
elsewhere.  What sorts of things do you see that can turn that around?

          MS. HOYT:  I was hoping you would ask me that question because
Paul Hazen and I met with a very senior professor in the School of
Business at the University of Wisconsin to ask that question; you know,
how do we get your attention in the business school.

          I don\'t think we have a lot of faculty in the country in
business schools that are doing this kind of research, and he said the
best thing we could do is have a top journal \-- he recommended the
*American Economic Review* \-- feature an issue on cooperatives and
attract a top-flight academic to doing that work, someone that is
extremely well-known and to actually make an effort to go out and search
the very well-known academics in their fields, the people that are at
the top of their game and get them to write on cooperatives and work to
attract those people who would then attract others.

          And he felt that the academic community is unaware of
cooperatives as a business form.  This is a faculty member who serves on
the board of a credit union and, you know, knows quite a bit about
cooperatives in general.

          I think that to do that, to attract a nationally known or
internationally known scholar to doing cooperative research actually we
need this data.  We need to have some database that\'s there that can be
adapted to whatever this scholar studies.  I think that it\'s very, very
hard to convince a senior faculty member to start a whole new data
collection effort.

          It\'s easier with junior faculty, but with junior faculty, you
don\'t get the exposure that you do with seniors, senior faculty, not
seniors period, so I thought that was an interesting approach to what we
need to get it \-- you know, to attract people in the universities, and
I personally think it\'s a different approach than we\'ve used in the
cooperative movement to go after the really top-flight academics.

          MS. PURCELL:  Would you think that the study that several
people including yourself and Paul have recommended on the overall
economic on the cooperative movement, that study and the publications
and the results which we all expect to be showing a significant
monumental impact on the economy, wouldn\'t you think that that would
also be a good tool in getting academic and business leaders more
involved in the cooperative movement and thinking along those lines when
they see the economic impact that it would have?

          MS. HOYT:  Absolutely.  I completely agree with that, and I
think that one of the reasons that especially in the business schools we
don\'t attract faculty is because they\'re not interested.

          MS. PURCELL:  Right.

          MS. HOYT:  And we say all kinds of things about business
school faculty, but, you know, they want to do research on businesses
that have a big impact, and they don\'t want to be doing research on
something that they think is biwater in the economy, so I think
absolutely if we had that information, we would be able to attract
people as well.

          MS. PURCELL:  And promote it properly.

          MS. HOYT:  Exactly.  And we can make a good case that this is
really important business to the country and I think to the nature of
the country as a democracy.

          What I\'m finding in my work in doing co-op education is that
people are responding much, much more, and I\'ve been doing this for
about 20 years, and I\'d say in the last five years, people that attend
conferences and call us and students that want to study cooperatives are
responding to the need to preserve democratic institutions, and I think
that\'s one of the biggest selling points that we have with
cooperatives.

          MR. WELLS:  If we could figure out how to collect the required
data, at least to start, where should that dataset reside?  Is that
within government?  Within USDA?  Is it a public/private center?  What
attracts the B schools, others?

          MS. HOYT:  Access.  Access is what attracts them, so it has to
be someplace where it\'s easy to

get \-- it\'s easy to \-- like the survey of consumer finances.  You can
get access to it on the web.  That\'s maintained by the government, but
what attracts researchers is that you don\'t have to jump through a lot
of hoops to get somebody to give you permission and then you can only
use part of the data and so forth, so I think historically that kind of
data and access has been maintained by the federal government.

          I have another comment that I didn\'t put in my remarks, but I
think \-- I don\'t want to tell you how to function in the government,
but I do think that there\'s an opportunity here because you all have
had the research \-- sort of the corner on cooperative research for many
years, the opportunity to provide leadership to cooperate with other
departments who, as you\'ve heard earlier, who really have an interest
in serving people through cooperatives and building that data collection
effort.

          So that were this to be nationwide and both rural and urban,
then it would be either a departmental kind of data collection effort. 
I think that the security of maintaining a database over a long period
of time is important, and you don\'t know whether it would be more
secure in a university or in a government office.  My experience with
the center for cooperatives at Wisconsin is that it would be more secure
in the federal government.

          MR. DUNN:  Ann, I took the timekeeper\'s prerogative to give
you the three minutes that Paul didn\'t use this morning.

          (Laughter.)

          MS. HOYT:  So I assume that I was fascinating.

          (Laughter.)

          MR. DUNN:  That\'s why you got three minutes.

          MS. HOYT:  Thank you very much.

          MS. PURCELL:  Thank you.

          MS. HOYT:  Thanks for the opportunity.

          MS. PURCELL:  Thank you so much.

          MR. DUNN:  Thank you.  Chuck Snyder, National Cooperative
Bank.

          MR. SNYDER:  Thank you very much.  I\'m very pleased to be
here.  Any time I get to talk about cooperatives I\'m happy, so it is
with great pleasure that I appear before you today.

          My name is Chuck Snyder.  I\'m president and CEO of the
National Cooperative Bank, and we were started by an act of Congress in
1978 to lend to cooperatives that are outside of the farm credit
services as well as the rural utilities.

          We were privatized in \'81.  NCB became a cooperative owned by
its member borrowers, and we service the grocery, hardware, franchise
cooperatives who are member owners and anchor many of the Main Street
stores, whatever is left after Wal-Mart, that still occupy our Main
Streets in rural America.

          We also serve housing cooperatives that are home to seniors
and families in American communities both rural and urban, and community
health clinics, assisted living facilities, continued care retirement
communities and other healthcare facilities that provide critical and
well-meaning support to both rural and urban communities.

          In the course of 25 years of providing financing to
cooperatives and their members, we have learned many things, including
that cooperatives can be excellent credit risks.  If you look at our
loss ratio in comparison to other financial institutions, we do very
well, and cooperatives generally want to repay you and they want to do
the right thing, which is a great thing for a bank.

          We have wonderful inspiring stories to tell the way that the
cooperatives sustain their members and communities in which they
operate, and I\'m sure you have heard a dozen of those cooperative
stories.  The first thing that cooperatives do when they talk, they tell
a story about how they have benefitted their community, which is really,
really good, but it\'s also very frustrating because we don\'t have the
research to back up some of those stories.

          I am often frustrated when I hear yet another uninformed
utterance to the effect that cooperatives don\'t work.  I counter this
confidence with some of those stories, but sometimes it\'s dismissed
mainly as being anecdotal, and we need some hard data.

          In part, to counter that sort of misunderstanding, NCB
annually produces the \"Co-op 100,\" a listing of the past 100 largest
cooperatives by revenue, which includes a comparison to the previous
year\'s data book for revenue and assets, and I\'ve included a copy of
the 2004 \"Co-op 100\" which uses 2003 data with my written testimony,
and I also have included an advance copy of the 2005 \"Co-op 100,\"
which will be released October 3rd.

          As the soon to be released \"Co-op 100\" listing for this
year, the country\'s top cooperatives are a mixture of agricultural
supply, marketing cooperatives, grocery, hardware, lumber distribution,
along with a mixture of healthcare, finance, energy, and other
cooperatives.  Whether these cooperatives are located in rural or urban
communities, their impact extends far beyond the borders of which they
serve.

          From 2003 to 2004, these cooperatives grew both as a group
with few exceptions individually.  Total revenue grew by 14 percent last
year as a total, which I think is very, very strong growth.  It shows
that America\'s cooperatives are healthy, at least for the top 100.

          The \"Co-op 100\" is just a piece of evidence annually and
over time to the breath and depth and strength of American\'s
cooperative businesses, but is only a small part of the analysis we need
to develop to understand the economic and social impact of cooperatives
in American communities.

          USDA and various universities have provided excellent
cooperative case studies and documented cooperative best practices in a
variety of settings.  Trade associations like the National Rural
Electric Cooperative Association, NRECA, and Credit Union National
Association, CUNA, and others have done an excellent job of gathering
statistics regarding the individual sectors.

          We at NCB have sponsored some excellent research on affordable
housing cooperatives, but it\'s very frustrating for me because a
cooperative, if it does fail, usually the media will look at that and
sometimes call me and say gee, does that mean that cooperatives no
longer work?  And that\'s farthest from the truth.

          Like most corporations, cooperatives have life cycles, and you
go through that life cycle and there\'s a lot of change in our economy,
in the world, and things change.  If you take a look at the *Fortune
500* list today, compare it with that of 40 years ago, you\'ll see the
list is dramatically different, so there\'s nothing wrong with change.

          There\'s nothing wrong with cooperatives, and we need some
basic research which really shows the vibrancy of this sector as well as
some of the needs for improvement as well.

          Certainly, more of this work needs to be done, but there is
another dimension that research needs to examine.  We need to determine
cooperatives comprehensibly.  We need to understand the volume of
business done by cooperatives in the various sectors and cross-sectors
and the impact it has on the U.S. economy as a whole.

          We need to understand the role cooperatives play as direct
employers in creating certain jobs among their members.  We need to
understand the role of cooperatives in economic developing and
sustaining their immediate communities with a special focus on the
differential effect in retaining earnings within those communities.

          It is a source of comprehensive focus that will allow us all
to build a case and demonstrate convincingly that cooperatives not only
work but work very well, and I urge you to make such a comprehensive
research a major focus of the USDA cooperative research agenda.  Thank
you very much, and if you have any questions, I\'ll be glad to entertain
any.

          MS. PURCELL:  Well, it certainly sounds like coming from a
lender\'s perspective that you might have some data that\'s very
valuable to us in this effort, and is there any ability for us to have a
collaboration data sharing?

          MR. SNYDER:  We would be glad to share any data that we have
in summary form as far as various different sectors.  You know, I think
that that gets right down to the core strength of co-ops.

          Also co-ops you just can\'t measure in pure economic impact as
well.  Cooperatives have to be measured in other impacts.  For example,
in affordable housing, it\'s not just the savings of rent.  It\'s
becoming what it really means to become a homeowner, what it really
means to \-- people tend to vote more in housing cooperatives.  They
tend to \-- they have less crime in housing cooperatives.

          You ask the leaders of the co-ops and they tend to learn
corporate governance, and some have gone on to serve in city councils
and things that would never have happened except for the experience in
running a cooperative, and so there\'s a lot of other data points that
should be measured and should be discussed and talked about, and you can
use those with agricultural cooperatives or utility cooperatives or
any.  It\'s just not the economic impact.  It\'s the social impact and
other things that really allows cooperatives to shine in your community.

          We do a lot of low-income lending as well, and one of the
things that has impressed me in my tenure at NCB is the ability of
cooperatives to reach down into the lower income strata and allow people
to help themselves.  We have done it in affordable housing and
healthcare.

          Recently, we had a healthcare conference at the Press Club,
and there was all sorts of great stories, but one of the stories which
we\'re particularly proud of because the bank provided some seed money
was providing training to New York City toward welfare moms, if you
will, to give them training for home healthcare, and it\'s been a
tremendous success because not only has it created jobs for those
individuals, and high-paying jobs with benefits, real working, you know,
living wages, but also provides needed care within that community.

          And the people that receive that care like it because it\'s
provided by people that live in that community and they can relate to it
better, et cetera, and there\'s an excellent example of how co-ops,
worker co-ops in this case, can reach down into the lower economic
strata and allow people to help themselves.

          MR. DUNN:  I definitely appreciate your remarks.  With respect
to some of the nonfinancial, harder-to-quantify impacts of cooperation,
we do find ourselves stuck with being anecdotal way too often, yet I
think that forces us to sell short by a longshot the contribution that
cooperatives make to the community, and somehow we\'ve got to
collectively get our hands around an objective scientific way of
measuring such things as leadership and the impact that it does on a
community.

          You know, we think about some of the work that we do
internationally and what this country wants to promote in terms of its
democratic ideals.  What better mechanism is there to use to teach that
than the cooperative form of business?  But how do we get our hands
around that in an objective scientific sort of way that, you know, we
can put numbers on?  You know, that\'s kind of a challenge to all of us
that I think we need to work on.

          MR. SNYDER:  Well, it is a particular big challenge.  We have
created a social impact database which captures in my opinion probably
too many of these social factors because it becomes overly large.  We
would be willing to share some of the information that we\'re capturing
to maybe spark some thoughts as to maybe information that you would may
want to capture in various different sectors.

          You know, I think that that helps to sell our public case as
well.  It\'s just not about economics.  It\'s about improving the
quality of people\'s lives and giving people roots in which to stay in
these communities.  I mean, there\'s some communities that have
benefitted significantly because of the cooperative because there\'s
just a local community flavor that\'s sort of a glue so to speak in many
respects that helps.

          There\'s a lot of other factors, economic factors, that target
that, but I think that the cooperative form is unique and offers unique
benefits as well.

          MR. DUNN:  Thank you.

          MR. SNYDER:  Any other questions?

          Thank you very much.

          MS. PURCELL:  Thank you.

          MR. DUNN:  Thank you very much.  And our last presenter today,
Douglas Kleine, National Association of Housing Cooperatives.

          MR. KLEINE:  Good afternoon, and my congratulations to your
keeping this on time, and I\'m not going to mess that up.

          My name is Doug Kleine.  I\'m executive director of the
National Association of Housing Cooperatives, and I really thank you for
convening this session and taking such a serious interest in the
research needs of the cooperative sector.

          While housing co-ops are thought of as an urban phenomenon,
they exist in rural areas as well.  You can find HUD-insured housing
co-ops serving a Lakota tribe in South Dakota, housing co-ops serving
seniors in Iowa and rural Minnesota, rural Wisconsin, and Northwest
Arkansas.  You can find cooperatively owned manufactured home parks in
New Hampshire and Massachusetts and central Florida, all in rural areas,
and there\'s farm worker co-ops in California\'s central valley.

          Housing co-ops are financed through a number of private and
public programs including USDA\'s 515 program, which has produced an
estimated 5,000 cooperatively owned homes.  All together, housing

co-ops, and there are 10,000 of them, contribute over \$11 billion to
the economy while providing homeownership to some three million
Americans, almost 40 percent of whom are low and moderate income.

          Chuck Snyder mentioned the credit risk.  Housing co-ops
insured under Section 213 have their mortgage insurance premiums go into
a separate pool, and that then pays patronage dividends back to the
participants and that has paid patronage dividends back to the
participants every year of its existence, and in the last 10 years,
it\'s been paying back probably 90, 95 percent of what\'s collected. 
It\'s just the most successful multi-family program that HUD has ever
had.

          And in looking at some of the other research that has been
done by the Urban Institute comparing co-ops serving low and moderate
income residents with rental housing, serving low and moderate income
residents that co-ops have lower operating costs by a significant
factor, which then saves the government in rent subsidy in those co-ops.

          For all the good of housing co-ops, there is very little
government data collection on multi-family housing as a whole.  We know
more about how many bathrooms are in units than we know about how many
cooperative entities that there are.

          One Census question on co-ops was in the 1990 census and was
then dropped in the 2000 census.  When Census reports on housing starts,
townhouses are counted as multifamily starts, but if they\'re deeded out
as fee simple, then they\'re counted as single family.

          Census also does an economic census, and we\'re looking for
the 2007 economic census which will cover real estate as an industry,
sales and management, and we\'ve offered some comments to Census on how
to make that effort a little more meaningful to cooperatives to be able
to separate out the cooperative data from the rental data and get some
information on co-op budgets and some things of that nature.

          HUD\'s data collection, because we\'re the ones that have to
tell them how good their properties are doing, is sad indeed.  The
American Housing Survey which is done for HUD by the Census Bureau
relies on sampling that creates very large errors.  If in one year they
sample in San Antonio rather than in Chicago or in Salt Lake City rather
than Miami, you just get numbers going way up and down when they try to
apply them on a national basis.

          In addition, it relies on local government for saying this
building is a co-op and this building is a condo, and local government
has no way of knowing that.

          Even within HUD\'s own portfolio, it counts market rate co-ops
as homeownership when they cite the number of homeowners we have, but
they count limited equity co-ops serving low and moderate income and
African-American people, they count them as rentals, and co-ops serving
low-income seniors as rental because they can\'t distinguish within the
same program which things are rental and which things are co-op.

          I hope 515 doesn\'t have that problem.  I haven\'t looked that
carefully at the numbers that are there, but if it does, that\'s step
one of which ones are which.  So housing costs are a limited part of
rural America.

          We do ask you to perhaps do two things, three counting the 515
separation:  Demonstrate to other agencies that housing co-ops can
actually be counted, and to take a leadership role perhaps with other
agencies in bringing some sense to a flawed, hodgepodge data collection
efforts that are going on.

          That said, the most important thing I can say to you today is
that we need a national study and data collection on co-ops of all
types.  The highest priority should be given to establishing a system
for regular data collection and reporting, and as Ann Hoyt says, access
on the cooperative sector\'s role in American life and in the American
economy, and with regard to American life, there have been some studies
on rural co-ops for seniors and the impact it had on those individuals.

          And I think Chuck Snyder alluded to a study which does have
quantifiable data from New York City measuring things like
neighborliness on a scale within co-ops and comparing co-op buildings
with the similar rental buildings and documenting that that social
capital is there.  Thank you very much.  I appreciate the opportunity to
address you today.

          MS. PURCELL:  Thank you.

          MR. DUNN:  One thing you mentioned triggered something that
Mike Boland was talking about earlier and suggests that there are
probably several opportunities out there for the cooperative community
as a whole to get some variables on some of these Census activities that
are done whether in census of manufacturing it includes a variable of,
you know, are you organized as a cooperative.

          These things, you know, basically take some money.  We have to
buy variables is the way it works out, but it strikes me is we might
have an opportunity if we as a community can collectively come up with a
strategy for doing that and all be of one voice and one mind in working
together to get those variables put into the housing census, the census
of manufacturing, the ag census, you know, cutting across, and then
coming up with the resources by which we can buy those variables.

          That would tremendously increase the amount of data that we
have and that we could analyze across any number of dimensions that we
\-- you know, basically you can do a two-way classification on any
variable they collect if we have that, you know, that single variable in
there, so that might be an area that we need some collective discussion
on.

          MR. KLEINE:  I agree.  I did not mention while we have co-ops
in rural areas, they have problems that will not be unfamiliar to you. 
They\'re smaller than co-ops in urban areas.  They\'re more isolated.

          There\'s a lack of professional services that understand
between, you know, accountants and attorneys and property managers or
accountants and attorneys who understand what a co-op is, property
managers that would treat them as owners rather than as renters, and
I\'m not sure how you solve those kinds of problems.  It just goes with
rural life.

          MS. PURCELL:  Thank you very much.

          MR. KLEINE:  Thank you very much.

          MS. PURCELL:  Well, first of all, I\'d like to thank everyone
who participated today, and at this point, before I close, I\'d like to
throw it open to the audience.  I mean, did anyone hear anything that
sparked an idea from one of the other presenters that you\'d like to
raise at this point?  Do you have any questions for us at this point? 
Throw it open?  Sure.

          AUDIENCE MEMBER:  Well, a couple of things that were said that
I jotted down and I wanted to comment here on.  These are in no
particular order, but as we try to reach out to people who are doing
research \-- and we talked about the NCER-194 group, and now it\'s
called something else.  I didn\'t quite catch what it was, though.

          There are also a lot of people doing research in other
sectors.  We\'ve identified some of them and I know there are more out
there in various universities.  Some at land grants, but in different
colleges, not necessarily the ag college, people doing work in worker
cooperatives or daycare or purchasing cooperatives, and so I think as we
try to build that list, we should make sure that we work to gather some
of those folks along the same way.

          The other thing is as we think about this is that there is as
you know lots of research that goes on in other countries, and we need
to I think keep that in mind as we think about how to go about this,
either are there good researchers we could apply here in the U.S. or
utilize.

          And there\'s a project going on at the University of British
Columbia called the Cooperative Learning Center that\'s trying to create
a global database of existing research that could be searchable, and
when we think about research that needs to be done, getting plugged into
that I think is an important other area.

          The third thing is coordination and dissemination of
information.  I think it\'s a really tough challenge for us and trying
to figure out where the research is needed and why this is a really good
start, and then when it\'s done, getting it out to the folks who
actually need it.

          I think the credit unions probably do the best job of that,
and they have something called the Filene Research Institute.  They
bring together leaders from the sector on a regular basis.  They
identify the type of research that needs to be done.  It gets done.  It
gets disseminated out to those same folks, and I think that some kind of
process either like that or similar to that would be really valuable. 
     I think that\'s to me what\'s been missing.  We get research done,
but it\'s not necessarily connected to where the co-op community has
identified where that research is to be done, and it\'s hard to get it
disseminated out to the right folks.

          So those are just observations I had from hearing other people
talk that I wanted to make sure kind of got into the record.

          MS. PURCELL:  Great.  Thank you.  Anybody else?  Yes?

          AUDIENCE MEMBER:  Yes.  As we look at research, I haven\'t
heard much discussion about small and limited resource farmers issues. 
Are we assuming that one size fits all?  Should we have research
tailored towards different sized farms or what have you?

          MS. PURCELL:  I think that\'s certainly something that we
could look at because obviously there are going to be different issues
and different impacts and certainly we can take that into consideration.

          AUDIENCE MEMBER:  Well, I wanted to know if any of the
presenters had any ideas on this.

          MS. PURCELL:  Anyone?  Sure.

          MR. SNYDER:  Yes.  I think our observation has been the kind
of traditional approach to cooperative development that we would take in
most communities doesn\'t necessarily work in limited resource
communities, and NCB has had a lot of experience in this
internationally.  We use an entirely different approach in developing
country with very limited resource people than we do perhaps with a
group of business people or farmers or consumers here in the U.S.

          And I think that is we\'ve tried to do some research on that
in the past.  Ann\'s done some work on that, and I think there\'s some
lessons we can learn that kind of gets at your point is it\'s not
necessarily the same approach without wholly having the kind of body of
research around that to draw the conclusions to give you anecdotal
experiences on how we\'ve done it, because we know the traditional
method doesn\'t necessarily work in developing countries.

          MS. PURCELL:  Anyone else?  Yes, Julie.

          JULIE:  We\'ve gotten into kind of a cooperative model which
is very oriented to size and scale, and it\'s almost to some degree
Wal-Mart-driven.  I want to say this is totally the way cooperation is
looked at today, but it does seem to be a predominant theme in some of
the talks that I\'ve looked at from conferences.

          And I\'d like to know from people that are here today if they
can comment on is this the optimal way to protect farmers\' interest,
because in the past, I mean, with cooperatives thinking of themselves as
a competitive yardstick, there was like the ADMs and the Cargills of the
world were thought of as adversaries.

          And now, with supply chain marketing, one partners with the
buyer because they need to serve the consumer, both need to serve the
consumer because both have this joint interest in getting the product on
the shelf and making sure the consumer is happy.

          So it\'s a different culture right now than it has been in the
past, but is there some pattern in that maybe we\'re not seeing in terms
of protecting farmers\' interests?  Because this drive to size and scale
really brings huge demands for capital on  cooperatives that a lot of
times they have to then turn to outside investors to fill.  I just want
some comments on that if anybody could answer anything.

          (No response.)

          MS. PURCELL:  Well, clearly it\'s something we\'re going to
have to give some thought to.

          (Laughter.)

          MR. TORGERSON:  I think I mentioned in my laundry list of
research projects the fact that there are in fact a number of pretty
successful smaller scale models out there that are tailoring their
marketing orientation to some of the organics and natural foods and some
of the others and being quite successful in it, and that certainly is
counter to the Wal-Mart models, and I think the challenge is to measure
some of the benefits to those.

          As some of my former colleagues know, I\'ve always been very,
very critical of extension service in recent years for emphasizing
direct marketing and specifically individual farmers marketing on their
own because that\'s the antithesis of cooperation.

          But I think what we\'re seeing happen now is going through the
learning curve is that there are a number of combinations of
smaller-sized cooperatives in scale being formed out there and actually
finding some niche markets which we need to document, you know, some of
those experiences, how it\'s being done and evaluate what the
sustainability of it is.

          MS. PURCELL:  Thank you.  Anybody else?  Yes?

          AUDIENCE MEMBER:  Well, I think Mike Boland made the
suggestion about maybe more of the research reports we do get
summarizing, we\'ll put them in *Rural Co-Ops Magazine*.  I\'d just like
to say, you know, I think that\'s an excellent idea.

          MS. PURCELL:  I agree.

          AUDIENCE MEMBER:  I mean, we do do it kind of somewhat
haphazardly.  I think now maybe 50 percent of them do, but making it a
requirement would probably be a good idea except in some circumstances. 
It wouldn\'t always work, but I think it\'s a good idea. And again on
the dissemination issue that Paul and a few others have brought up, I
really do think we need to revamp the Co-op Services\' web presence.

          MS. PURCELL:  I agree.

          AUDIENCE MEMBER:  We\'ve really got an antiquated website, and
we\'ve been griping about this for years and years and years.  You know,
I admit it has gotten a little bit better, but if we can\'t do it
in-house, we need to spend a little bit of money to bring in an outside
web designer to fix that baby up, and those of us who work here have a
hard time negotiating it, so people outside, really, good luck.

          MS. PURCELL:  I agree wholeheartedly.  Thank you.  Anyone
else?

          MR. STAFFORD:  Let me ask a question here of everybody I
guess.  One of the themes I\'m hearing is that we should be doing a lot
more data collection, direct our research to general \-- what should
datapoints be, how are we going to get those things?           Am I to
understand that to say that our priorities should be forget research
that we had been doing, make everybody concentrate on nonagriculture and
do some data collection?  Is that what I\'m hearing?  We can\'t do it
all.  We know that.

          AUDIENCE MEMBER:  No.  We\'d like for you to do it all.

          (Laughter.)

          MR. STAFFORD:  Okay then.

          MS. PURCELL:  It\'s decided we\'re doing it all.  Yes, Paul?

          MR. HAZEN:  You know, we spent a lot of time at the NCB board
level, and there\'s a letter attached to my testimony from NRECA and
CUNA and others.  I think the real feeling was that if we don\'t get
that right, we really can\'t do a good job on the other type of
sector-specific research that obviously needs to be done, and so if we
can collectively \-- and it really is a collective effort because, you
know, the credit unions collect a lot of great data, so that\'s kind of
done, you know, if you take that as an example.

          So where are the holes?  How do we bring it all together and
make it make sense and make it available?  If we can do that right, then
we can move on to the next step, and that doesn\'t mean that there
isn\'t specific research that\'s not going to need to be done on
specific topics that a lot of people have outlined good things today,
but we have to make sure that we have got adequate coverage around that
basic research in order to go to the next step.

          MS. PURCELL:  Yes, Bruce?

          BRUCE:  You know, I don\'t understand that, Tom.  I think some
of the research will involve understanding the kind of data that we
would be searching for and actually asking let\'s say it\'s the census
of agriculture or the Department of Commerce.  We talked about do we
would ask manufacturing collection are you a co-op or not.

          But then you get into a lot of complicated sector issues. 
Doug Kleine pointed out HUD collects data, but they don\'t make accurate
separations between a limited equity of a new market, so we would
actually have to go in and actually define markets so that we can
present to them these are some of the nuances.

          It might be a little easier in credit unions and rural
electric co-ops to do that, but when you\'re talking about purchasing
co-ops, worker co-ops, consumer co-ops, you\'ve got some real difficult
definitions, so you have to work on so if we\'re telling Commerce to
collect some data, we have to be able to define some of the variables,
and so we\'ve got to have a market definition issue, so there\'s a lot
of preliminary work to do other than just us actually sending out
surveys.

          MS. PURCELL:  I agree.

          MR. DUNN:  You may all ask what we\'re going to do with this
material that we\'re collecting, so rather than have somebody ask me,
I\'m going to try to give you an answer up front.

          MS. PURCELL:  That\'s what I\'m talking about.

          MR. DUNN:  Oh, you know what we\'re going to do with it? 
Okay.  Then Bobbie is going to tell you.

          MS. PURCELL:  That was going to be my closing remarks.

          MR. DUNN:  Your turn.

          MS. PURCELL:  Thank you.

          (Laughter.)

          MS. PURCELL:  Anybody else have anything they want to say?

          (No response.)

          MS. PURCELL:  Well, first, let me thank you again, each and
every one of you, for coming and presenting and for the staff to come
and listen.  I think it\'s critically important.  One of the first
things that I wanted to do when I came to cooperative programs was to
get in touch with all of our partners and to find out where best you
think our research resources could be used.

          As I think many of you indicated, we have a brilliant staff
with a lot of knowledge and a lot of expertise, but if our research
isn\'t relevant to your needs, then we\'re not really serving our
customers and our constituents the best way, and so I do want to very
much thank you for this effort that you put in today.  I know many of
you had to take time out of your busy schedule, so we all here in this
room very much want to send out our appreciation.

          You\'ve given us tremendous food for thought today from the
very big picture, large-scale projects that many of you have pointed out
looking at the impact both economically and socially out of the
cooperatives in this country, and Paul and I have talked on this on many
occasions.  We\'re very supportive of this initiative.  We think it is
critically important.

          In my past life when I worked at the Rural Utility Service \--
and for those of you who don\'t know me or haven\'t met me in the past,
I\'m not totally new to cooperatives.  For the previous 25 years of my
career, I did work at the Rural Utility Service with both the electric
and telephone cooperatives, so I\'m very in tune with the cooperative
movement.

          Maybe not necessarily specifics in housing cooperatives or
grocery cooperatives and farming cooperatives, but I know the intent.  I
know the good that they do.  I know how they serve their membership, and
I\'m a tremendous supporter of that.  I do want to point out I was only
10 years old when I started, so any of you doing math out there \-- but
I am very much a proponent of that, and I want you to know that.

          You\'ve given us as I said tremendous food for thought today. 
I think you\'ve given us some very big picture items, but some very
specific items that we can look at as well, and I think we need to start
looking at those.  I think it\'s critically important not only for us to
get our hands on the overall economic impact and social impact of
cooperatives but also why do cooperatives fail and why do cooperatives
succeed in a certain sector.

          I think that is important information that if we do the
research and we can make some of these determinations, maybe we can help
other cooperatives in the future.  I think it\'s very interesting and
important to understand cooperation and the social impacts of it, and I
think that is a good issue that was brought up today.

          The interdepartmental collaboration that many of you talked
about I think is critically important, particularly if we are going to
go on some of these data-gathering journeys down the road.  I think
there is as someone pointed out a lot of data available.

          I know RUS has tremendous data on the electric co-ops, on the
telephone co-ops.  I\'m sure the National Cooperative Bank has
tremendous data that we can rely on and borrow from without having to
start from scratch, so I think there are some good partnerships and good
collaborations that we can develop out of this.

          What are we going to do next with this?  Well, we\'re going to
sit down and we\'re going to go through all of it, but not over the long
term.  This is something I\'m very excited about and something I want us
to get working on very quickly, so next week I want to sit down with the
staff and try to digest this and come up with a long-term and a
short-term research agenda for us.

          Now, since we\'re in the government, it\'s not real easy for
us oftentimes to move too quickly, but we want to, and we also want to
move down this path with you at our side throughout this whole process. 
         Now, regretfully, it\'s hard sometimes for us to pick up the
phone and call one partner over another, and again, the reason today for
the formal public meeting is to give everybody a chance to comment, to
provide your thoughts and ideas.

          But I would hope and I would ask for your help and cooperation
as we move forward because we\'re going to want to bounce ideas off of
you.  We\'re going to want to get your continued input as we go down
this road, so I\'m hoping that within maybe the next 30 days we not
necessarily have to get together in this formal of a situation again,
but you might be getting a call from us.

          We\'d like to look into this.  Do you have some suggestions? 
Can we sit down and can we meet?  And that\'s how I would like to
proceed unless someone has a better idea.

          MR. DUNN:  Not me.

          (Laughter.)

          MS. PURCELL:  So again thank you very much.  Please keep in
touch.  We\'re going to try to keep in touch with you, and we\'re really
going to try to move this agenda forward.  Thank you again, and have a
lovely afternoon.

          (Applause.)

          (Whereupon, at 2:00 p.m., the meeting in the above-entitled
matter was concluded.)

//

               [REPORTER\'S CERTIFICATE]{.underline}

 

DOCKET NO.:    \--

CASE TITLE:    USDA Public Forum

HEARING DATE:  September 27, 2005

LOCATION:      Washington, D.C.

 

          I hereby certify that the proceedings and evidence are
contained fully and accurately on the tapes and notes reported by me at
the hearing in the above case before the U.S. Department of Agriculture.

 

 

                        Date:  September 27, 2005

 

                        [                            ]{.underline}

                        Bernadette Herboso

                        Official Reporter

                        Heritage Reporting Corporation

                        Suite 600

                        1220 L Street, N.W.

                        Washington, D.C.  20005-4018