United States

Department of

Agriculture

Rural Business–

Cooperative

Service

RBS Research

Report 181

Local Cooperatives’

Role in the IdentityPreserved Grain Industry
Abstract This study examines how locally owned cooperatives have responded to the transition

from commodity to identity-preserved grain marketing. Survey results showed locals’

overall commitment to identity-preserved grains was determined more by a cultural

receptivity to innovation than by differences in priorities among grain, feed, and general managers.

Key words: cooperatives, grain, identity-preserved grain, specialty grain, innovation.

Local Cooperatives’ Role in the Identity-Preserved Grain Industry

Julie A. Hogeland, Agricultural Economist

Rural Business-Cooperative Service

RBS Research Report 181

August 2001
Acknowledgments Particular thanks are due Dave Seehusen for an extensive contribution to questionnaire content; Dick Danielson, Roger Koppen, Barry Whitehall, Clint Van Kley,To m

Miller, and Dick Webker for exposure to the many facets of local cooperatives; Jeff

Stroburg, Don Gales and Robert Turek for added perspective; Mike Sweat and Al

Dombek for an overview of the emerging distribution system; Debbie Dyer, Russ

Sanders, and Joseph Lebeda for an introduction to the identity-preserved grain industry; Larry Gambrell and Joseph Prusacki for increasing the statistical precision of questionnaire and sample and easing the clearance process. Thanks also to RBS staffers

Charles Kraenzle, who reviewed several sampling alternatives and drew the final sample, and Mike Kane and Dave Cummins.

i
Contents Highlights ..........................................................i

Introduction .........................................................1

Organizational Roles .................................................2

Cooperative Culture ..................................................4

Survey Results ......................................................6

Experience with IPG ..................................................7

IPG Advantages and Disadvantages ....................................10

Grain Producer Response ............................................11

Investment Horizons .................................................12

Relationship with Regional Cooperatives .................................13

Competition from Vertical Integration ....................................16

Discussion and Conclusions ..........................................16

i
Highlights This study reports the responses of 230 Midwestern cooperative managers (including

general, feed, and grain department managers) to a 1999 survey on their local’s

response to identity-preserved grains (IPG). All cooperatives surveyed had at least

$14.5.million in annual sales with at least 40 percent in grain sales.

IPG offers a case study on how and why local cooperatives choose to innovate. Most

locally-owned grain cooperatives purchase grain from members and put it into condition for the next level of the marketing chain, not necessarily the end user. Like the

grain industry in general, locals are oriented toward mass marketing, buying in bulk

from many producers, co-mingling and blending lots for an average (No. 2) quality, and

reselling such grain to a variety of users. It has been up to users adapt the grains to

their specific processing requirements. The variation in grain characteristics recently

introduced by genetic engineering and advanced plant breeding techniques has begun

to shift the burden of adjustment back to the grain elevator and feed mill, who must

either adapt or continue marketing undifferentiated grains.

Identity-preservation requires cooperatives to maintain the purity of the specialized

grain by segregating it from other grain, rather than the traditional blending practice.

Such "identity-preservation" costs money and requires extra bins to store the specialized grain, mill cleaning between runs and testing to assure purity of incoming and outgoing grain. Grains developed for specialized food or feed applications require other

revaluations of locals’ established practices, including market development, contracting with growers, specialized facilities, and grower education. Locals’ attitudes toward

these changes were explored in the survey.

The study also evaluated the impact of cooperative culture--priorities and established

ways of doing business--on IPG adoption. Respondents classified their cooperative as

either: an Innovator (being "first" is a priority); Follower (willing to innovate but more

cost sensitive); or Status Quo (conservative, cautious, slow to react, and independent).

Each category represented one-third of respondents.

Innovator-respondents handled a much greater IPG volume than Followers and Status

Quo. Interdependence demonstrated through partnering with regional cooperatives

and investor-owned firms (IOFs) appeared to underwrite Innovators’ willingness to bet

on new products. The more traditional and independent cooperatives appeared to

retain the independence and isolation that is the historical norm of grain cooperatives,

including a competitive, even adversarial relationship with regionals. Unlike Innovators,

Status Quo and Followers saw less evidence of producers adopting IPG in their marketing territory. They preferred to focus on getting the best price for producers through

a unidimensional focus on traditional marketing practices. In contrast, Innovators operated in a multidimensional world where many avenues and perhaps some money-losing detours could ultimately achieve a similar end.

A new cooperative culture appears to be emerging alongside the established framework that includes managers who continually scan the environment for new opportunities, spread risk by partnering, and are psychologically at ease with the time required

for new investments to mature.

iii
Local Cooperatives’ Role 

in the Identity-Preserved 

Grain Industry

Julie A. Hogeland

RBS Agricultural Economist

Introduction

This report is a continuation of a series by

U S D A’s Rural Business-Cooperative Services (RBS)

examining how locally-owned cooperatives are

responding to industries undergoing significant structural change. Previous reports have examined locals’

place in a dairy industry restructured by on-farm feeding and a pork industry undergoing vertical integration.1 The advent of grains developed for specific food

or feed applications requires a similar revaluation of

locals’ established practices.

Like the grain industry in general, locals are oriented toward mass marketing, buying in bulk fro m

many producers, co-mingling and blending lots to

achieve an average No. 2 quality, and reselling the

grain to a variety of users. Users have traditionally

adapted the grains to their specific processing requirements. The variation in grain characteristics recently

introduced by genetic engineering and advanced plant

breeding techniques has begun to shift the burden of

adjustment back to the grain elevator and feed mill,

which must adapt or continue marketing undifferentiated grains.

To adapt, elevators and feed mills must maintain

the purity of the specialized grain by isolating or segregating it to avoid contamination from other grain, a

requirement completely contrary to the historical practice of co-mingling and blending. Such "identity

preservation" costs money in the form of extra bins to

store the specialized grain, mill cleaning between grain

runs, and testing to assure purity of both entering and

exiting grain.

Most locally-owned grain cooperatives have traditionally purchased grain from producer-members,

assembled, dried, conditioned and blended it, and sold

to the next level in the marketing chain. This may be a

grain exporter or processor, not necessarily the end

user. In contrast, the identity-preserved grain market is

expected to be driven by the needs of end users willing

to pay extra for a product with greater starch, protein,

oils, or other characteristics they need.

The new system requires more contact between

end user and elevator or mill because specialized varieties2 are not as readily available as conventional

grains. Moreover, market development to locate potential users may be required to achieve scale economies

and maximize use of specialized facilities. Growers

may require education on the market potential of different grains or specialized planting requirements.

Contracts between growers and users are needed to

assure supply.

Close ties with producers and experience with

grain merchandising and processing put cooperatives

in an ideal position for this adjustment. Yet it’s unclear

to what degree cooperatives are interested in or prepared for these opportunities. Characteristic of an

emerging industry, limited information is available

about preferences, resources, and needs of system participants.3

1

1 Hogeland, Julie A., Local Cooperatives’ Role in the Emerging

Dairy Industry. USDA/Rural Business-Cooperative Service

Research Report 162, June, 1998. Also, Hogeland, Role of Local

Cooperatives in Emerging Swine Industry, RBS Research Report

144, November, 1995.

2 These varieties are typically referred to as “specialty grains,”

“identity-preserved grains,” “GMO” (genetically modified

organisms), and “value-enhanced” grains. The terms specialty

grains and identity-grains preserved grains are used

interchangeably in this report.

3 An excellent reference that discusses the characteristics of types of

IPG is “1998-1999 Value-Enhanced Corn Quality Report” by the

U.S. Grains Council, Washington, D.C. (www.grains.org).
This study seeks to contribute to an informed

response by the cooperative sector through a survey

determining local cooperatives’ resources, preferences,

and experience with identity-preserved grain (IPG).

Responses are interpreted to determine whether cooperatives consider specialty grains a subset of a "core"

grain industry or a core industry by itself, by natureof

the specialized investment required.

IPG provides a case study on how and why local

cooperatives differ in their response to innovation. A

second objective is to interpret survey results through

the filter of documented references to cooperative culture to determine how that shapes decision-making in

local cooperatives. How regional cooperatives and

grain producers interact with culture are also considered.

The third objective is to examine how internal

organizational roles affects locals’ overall commitment

to IPG. Responses by general managers are compared

with those of grain and feed department managers to

determine whether individual department constraints

and priorities exert a particular impact on the decision

to adopt IPG.

These findings can be generalized to innovations

and settings beyond specialty grain where cooperatives have the potential to become a technologically

leading or lagging sector.

Hypotheses

Survey design was guided by several propositions which emerged from preliminary discussion with

industry observers and literaturereview:

1. Cooperative culture and organizational roles

will influence commitment to IPG.4

2. Grain cooperatives could find a new role bargaining on behalf of growers with technology

developers and end users.

3. Trust will be an important factor in reducing

opportunism between regional and local cooperatives.

Discussion of the first hypothesis follows; the latter two will be discussed in the context of survey

results.

Organizational Roles

Specialty grains present a potentially complex

case of structural adjustment because gaining access to

their benefits could require a considerable disruption

of established methods of food and feed grain marketing. The variety of applications for specialty grains

suggest that the decision to or not to adopt requires

weighing the benefits and costs accruing to the departments of a local cooperative most affected by their use,

feed, grain and agronomy.5 In this context, specialty

grains present a particularly interesting case study of

innovation because these departments areresponding

to different stages of the product life cycle6: genetic

engineering has created new products and new growth

opportunities for agronomy departments while feed

and grain departments operate within mature, wellestablished product-market configurations.

Because managers of different departments within the cooperative are expected to have unique priorities,resources, and world views, the degree of commitment to an innovation--the strategy pursued by the

cooperative--is expected to be the result of a process of

internal competition for influence, bargaining, and

compromise, subject to the overarching impact of the

general manager and board of directors.7

This process of reconciling different commodity

interests is similar to the one producers used when

forming the cooperative. Producers continue to influence the cooperative through external coalitions;

departments like feed and grain can be regarded as

internal coalitions.8,9

As producer-based external coalitions sift

through potential demands and constraints on the

cooperative’s behavior, its goals and objectives emerge.

2

4 Reynolds observes, “The lack of systematic studies affecting

organizational culture, and the ambiguous relationship between

organizational culture and effectiveness suggest additional

research. Two major factors should be considered in all future

studies of organizational culture--distinctive industry norms and

the organizational roles of the individuals.” See Reynolds, Paul D.,

Organizational Culture as Related to Industry, Position, and

Performance: A Preliminary Report, Journal of Managemet Studies

23(3), May 1986, 343.

5 Although agronomy departments have an important role as

purveyors of this new technology, only feed and grain

departments were surveyed to simplify the study.

6 The importance of the PLC is stressed in Ruekert, Robert W. and

Walker, Jr., Orville Marketing’s Interaction with Other Functional

Units: A Conceptual Framework and Empirical Evidence, Journal of

Marketing, 51 (Jan. 1987): 13.

7 To simplify the study and focus mainly on the interdepartmental

relationships within locals, the impact of the board of directors

was not considered.

8 A constituency-based theory of the firm is developed in Anderson,

Paul F. Marketing, Strategic Planning and the Theory of the Firm,

Journal of Marketing, 46 (Spring 1982), 19. This section applies his

theory to cooperatives.

9 Cooperatives can also be viewed as coalitions of firms. See Staatz,

John M., Recent Developments of the Theory of Agricultural

Cooperation, Washington, D.C.: National Council of Farmer

Cooperatives, Journal of Agricultural Cooperation, 1987.
These external coalitions also supply resources to the

cooperative which legitimize its existence.

Organizational departments or functional areas best

able to respond to these coalitions enhance their influence in the organization.

At the same time, cooperatives must retain sufficient flexibility to respond to environmental contingencies. Accommodating producer coalitions to ensure

the stability and certainty of resource flows can ultimately limit such flexibility and autonomy. The cooperative’s behavior--willingness to innovate--can then

be seen as the outcome of the trade offs it has made

between dependence on producer support and its need

torespond to environmental contingencies, such as the

emergence of specialty grains.

Differences in roles, expectations, and priorities

were expected to be among those influencing these

internal coalitions’ response to IPG, and therefore,

questionnaireresponses. Because the net impact of

these factors was unclear, the interdepartmental

approach used in this study was exploratory, not predictable.

General Managers— They areresponsible

for determining the strategic direction of the

cooperative, i.e., whether specialty grains would be

compatible with the cooperative’s resources and

mission, either now or in the future. Their overriding

concern is the mission and survival of the cooperative

as a whole, while departmental managers focus on the

common goal through the filter of their individual

departmental goals.

Feed Managers— They determine the

ingredients used for manufacturing feed at the local

cooperative. If specialty grains are used, the feed

manager must arrange for special holding bins and

manufacturing processes to maintain the grain’s

purity. This is a significant decision because a bin

holding 1 million bushels, the minimum size, typically

costs $15 million to build.

Commitment to storage is also an issue. At peak

harvest times, when storage is tight for commodity

grain produced by farmer-members, specialty grain

bins may be half empty. Specialty grains are also risky;

high-oil corn is subject to "going out of condition"

(becoming rancid) when stored. Even though high-oil

corn (HOC) is commonly regarded as moreefficient

than commodity (No. 2 yellow) corn in producing a

high rate of gain in livestock, cheaper or morereadily

available energy substitutes are available, such as No.

1 white grease, a commodity byproduct from hamburger production or rendering operations. Grease is

sprayed on the grain from a fat tank next to the feed

mill. The drawback to this straightforward approach is

the potential for fat clumps which can reduce feed efficiency.10

Feed managers are naturally interested in the bottom line--will customers purchase feed containing speciality grains? Unlike some grain managers who can

get business by paying a penny a bushel higher than

competitors, feed managers must move product to succeed. Moreover, daily feed sales subject the feed

department to a disproportionate amount of cost allocation compared with other departments whererevenue is more sporadic.

Grain Managers— The largest department in

the cooperative determines its primary function. For

many locals that department is grain. The grain

manager sells grain on behalf of member grain farmers

or buys grain for milling or other processing

operations of the cooperative. A grain manager may

view specialty grains as an opportunity to expand into

a new market with a different customer base than the

export-oriented commodity grain market. If the local

has a high volume from commodity grain, however,

the special handling, testing, and transportation

requirements of specialty grain may simply require too

much adjustment in day-to-day business practices to

be profitable or practical.

Managerial Sampling Design

Using RBS criteria to define large cooperatives,

only locals with 1998 total annual sales of nearly $15

million were chosen for the survey.11 These cooperatives have departments and probably will have a feed

manager (if selling feed) and a grain manager (if selling grain) or both on the staff.

RBS categorizes local cooperatives as (1) selling

both grain and feed; (2) completely specialized in feed

sales (no grain); and (3) completely specialized in

grain sales (no feed). The population of general managers is drawn from all three categories. The population of feed managers is drawn from cooperatives who

sell both feed and grain plus those specialized in feed.

3

10 In a larger sense, substituting HOC for animal fats in feed

constitutes a zero-sum game for agriculture as a whole since it

transfers income from one agricultural sector to another. See

Baumel, C. Phillip, et al., “GM Corn has impact on feed

consumption,” Feedstuffs, September 27, 1999.

11 In 1999, RBS defined large cooperatives as those with annual sales

of at least $30 million.
The population of grain managers is likewise drawn

from cooperatives who sell both grain and feed plus

those specialized in grain.

Yearly fluctuations in grain prices substantially

affect whether supply cooperatives with high grain

throughput will be classified as grain cooperatives.12

To capture cooperatives with a high volume of grain

sales irrespective of a particular year’s level of prices,

supply cooperatives having (1) total sales of at least

$14.9M and (2) grain sales amounting to at least 39.5

percent of total sales were part of the group sampled.

Information collection was limited to 19 States

that are major producers of corn, wheat, and soybeans

according Field Crops Final Estimates 1992-97

(USDA/NASS, Statistical Bulletin No. 947, Dec. 1998).

Utah and its two feed cooperatives that service pork

producers, an important target market of specialized

grains, were also included. The States were grouped

into four regions: (1) North Central--Iowa, Minnesota,

W isconsin, South Dakota, and North Dakota; (2)

Eastern Corn Belt--Illinois, Indiana, and Ohio; (3)

South Central--Nebraska, Kansas, Missouri, Texas, and

Oklahoma; and (4) West--Utah, Colorado, Montana,

Oregon, Washington, and Idaho.

Using random sampling, 920 managers were

polled, 386 from the North Central region; 256 fro m

Eastern Corn Belt; 214 from South Central; and 64 fro m

W est.13 The number of feed or grain managers surveyed within a particular region was basically a third

of the region’s total sample.

Cooperative Culture

Restricting the survey to large cooperatives

assumed that they probably had the financial resources

toafford the retooling required for handling specialty

grains, compared with their smaller counterparts.14

Although the survey’s initial focus was the impact of

managerial position on attitudes toward IPG, it was

recognized that cooperative managers’ willingness to

innovate is influenced not only by the mandate of their

individual departments, but also by the culture or

operating style of their particular local.

Cooperatives do have particular operating styles

or cultures. Reynolds15 identifies different cultures and

decision making norms as factors shaping cooperative

mergers; Wadsworth asks whether important aspects

of culture or identity are obliterated in the aftermath.16

Cooperatives also vary in their response to innovation. In reviewing the impact of loss of Government

storage programs on local cooperatives, Stearns,

Cobia, and Warman looked for evidence of computerized accounting systems and quality of grain storage,

among other factors, in determining progressiveness.17

They delineated three such categories of locals: progressive, intermediate, and conservative.

Progressive managers readily changed merchandising practices and participated in mergers and acquisitions--changes resisted by intermediate and conservative managers. Conservatives perceived fewer

courses of action available to them than their counterparts, perhaps because they were less aggressive, less

successful in raising margins, and their cooperatives

were smaller. Stearns, et al, observed, "It also appears

conservative managers were unable to implement

many of the changes they thought practical."18 In short,

they did not make things happen.

A similar classification was used in this study,

based on the premise that some cooperatives preferred

to be at the forefront of new concepts while others had

a "wait and see" attitude toward innovation.

Respondents described the operating style of their

cooperative as either:

a. W e value being "first" with new products, markets, and technologies, even though not all

efforts prove to be profitable. We typically

respond rapidly to early signals about areas of

opportunity.

4

12 RBS classifies a grain marketing cooperative using two

characteristics: the value of the products marketed through

transacted sales represents its largest source of business volume,

and the cooperative markets only grain, or grain and other

products. If it markets other products, grain accounts for the

largest share of its marketing volume.

13 Sampling was done with a 90 percent confidence level and 5

percent level of precision.

14 It can be argued the small cooperatives in a survival mode might

be more willing to dedicate their facilities to specialty grains.

However, this study limited variation in size to focus on

managerial variation.

15 Reynolds, Bruce, James J. Wadsworth and Donald A. Frederick,

Cooperative Merger/Consolidation Negotiations--The Important

Role of Faciliation. USDA: Rural Business-Cooperative Service,

Cooperative Information Report 52, March 1996.

16 Wadsworth, James J. Cooperative Unification: Highlights from

1989 to Early 1999. USDA: Rural Business-Cooperative Service,

RBS Research Report 174, September, 1999.

17 Stearns, Larry, David W. Cobia, and Marc Warman, Strategies for

Survival by Cooperative Country Elevators--Revisited, USDA:

Rural Business-Cooperative Service, RBS Research Report 158,

December 1997.

18 Ibid.,8.
b. W e seldom are "first" with new products.

However, we monitor our major competitors

to see if we can be second with a more costefficient, perhaps more innovative product.

c. W e try to maintain a secure niche in a relatively

stable product or area. We try to protect our

domain by offering higher quality, superior service, lower prices, etc. We tend to ignore industry changes that have no direct influence on current areas of operation or commodity priorities.

These can be classified as "Innovator," "Follower,"

and "Status Quo" positions.19

These descriptions cast Innovators as highly

proactive, curious, and more interested in maximizing

sales than profits. From this, it is likely Innovators will

have more experience with IPG than either Follower or

Status Quo locals because they want to be "first."

Followers take a morereasoned, financially cautious

approach to innovation. Status Quo locals are

autonomous, preferring to operate within established

boundaries, geographic and otherwise. They are not

risk takers.

Iowa’s West Central Cooperative has developed

this innovation-friendly approach over the past

decade.20 Noticing how rapidly some managers folded

once they encountered obstacles, West Central concluded, "A key dimension of a culture based on innovation is that we must be willing to allow for experiments and accept failure."21

Applications—Although the size of respondents

was expected to automatically relegate them to the

Innovator category, important features of cooperative

culture correspond to the Status Quo position.

For grain cooperatives, the "secure niche" preferred by Status Quo locals could be the straightforward objective of getting producer-members the highest price. They would not dilute this focus even if lack

of diversification increases financial stress on core services. "Service at cost," a cornerstone of cooperative

philosophy22, would reinforce this by minimizing

expenditures that could erode members’ return.

At the extreme, such cooperatives would operate

minimally maintained, fully depreciated facilities. The

cooperative may even be operating in the red to provide basic services. Reynolds identifies feed mills as

one of top money-losing services among local cooperatives in Oklahoma.23 Such feed operations might be

limited to mainly grind and mix mills because the

cooperative cannot afford or justify advances like pelleting, biosecurity or computerized formulations. In

fact, members’ reluctance to finance needed facilities

has been cited as a core problem in the grain producercooperative interface.24

Under such operating constraints, the marketing

practices of the cooperative are likely to be similarly

streamlined--primarily buy-sell, where the cooperative

functions as a middleman between grower and the

next level of the marketing channel. (Ginder observes

that the cooperative grain system has been developed

on a buy-sell basis from its inception).25 The cooperative’s income then depends on the marketing margins

(spread between the buying and resale prices) for

grain. Some risk losing member business by trying to

compensate for inadequate capitalization through

maximizing the spread. Slowness in acknowledging

basis movements and quickness in discounting grain

could be the result of attempting to maintain themselves as a viable economic entity.

By default or design, the secure niche may also be

a homogeneous customer base of relatively small,

often older, diversified family farmers. The link

between cooperative and customer is a trust based on

familiarity ("We grew up together."). Established loyalties may mean that the cooperative neither gets new

customers, nor loses the existing ones. Unlike more

aggressive suppliers, such cooperatives are often particularly sensitive to farmers other suppliers might

write off as inefficient.

5

19 Gupta, Ashok K., S.P. Raj, and David Wilemon, A Model for

Studying R&D--Marketing Interface in the Product Innovation

Process, Journal of Marketing, 50 (Apr. 1986), 15. In their

framework, Innovators are “Prospectors” Followers are

“Analyzers,” and Status Quo, “Defenders” and “Reactors.”

20 Seaman, Wayne, “The Chain is Only as Strong as the Weakest

Link: The Need to Strengthen Human Capital in Cooperatives,”

Farmer Cooperatives in the 21st Century Conference Proceedings,

Iowa State University, June 9-11, 1999.

21 Ibid, 43.

22 ”Service at cost is a generally accepted principle of cooperation. It

usually is acomplished by the allocation of net margins to patrons

on the basis of business done with the cooperative. This procedure

may or may not result in all patrons receiving service at the

cooperative’s cost of serving their class of transaction.” See Menzie,

Keith L, Paul V. Preckel, and Lee F. Schrader, Cost-of-Service vs.

Uniform Pricing in a Cooperative Feed Manufacturing and

Distribution System, Journal of Agricultural Cooperation, 1987, 31.

23 Reynolds, Bruce J., Decision-Making in Cooperatives with Diverse

Member Interests, USDA: Rural Business-Cooperative Service,

RBS Research Report 155, April 1997, 5.

24 Thurston, Stanley K., Michael J. Phillips, James E. Haskell, and

David Volkin. Improving the Export Capability of Grain

Cooperatives, USDA: Farmer Cooperative Service, FCS Research

Report 34, 53.

25 Ginder, Roger. Restructuring the Grain Industry and

Cooperatives Role. Ames, Iowa: Iowa State University

Department of Econmics Staff Paper, Rev. 1991, 14.
Developing a loyal customer base may be a necessary counterpart to the value placed on independence by their customers--their option to sell anywhere that they can get another penny a bushel.

Cummins, et al., explain: "The grain producer tends to

sell at the best price, often discounting the value of the

services and overall benefits provided by the cooperative. . . even though the producer invests in the cooperative, an obligation to do business [with it] is often

lacking."26

Paradoxically, the value members place on independence also encourages them to form--and keep--

their "own" cooperative, even if its marketing territory

is small, limited to a county or two. Fulton observes,

"Joint ventures and strategic alliances allow the local

cooperatives to preserve their status as separate business entities and therefore, the loyalty and commitment of their members."27

This parochialism contributes to a certain isolation, although members may not perceive it as such.

Reynolds observes, "Members who prefer smaller,

more localized cooperatives value their familiarity and

acquaintance with the membership--a condition which

is often diminished by consolidation with a cooperative outside their community."28 Parochialism may also

affect another core issue in the producer- cooperative

interface: whether producers can be served moreeffectively through unifying two adjacent cooperatives, a

difficulty observed by Thurston, et al.29

Independence is expressed in other ways. The

local’s grain is typically sold to the highest bidder,

even if its own regional cooperative wants it.

Describing the grain industry of the 1980s, Dahl

observed, "Regional cooperatives have few captive

customers among their affiliated locals. Their price

bids must be competitive with investor-oriented firms

(IOFs) or they lose the business."30

Such opportunism among locals can carry over

into other activities and result in situations wherea

noncooperative partner is valued or trusted more than

the regional they own. While economics may make

such choices valid in any particular instance, overall,

the cultural emphasis on independence can lead to

issues of ownership and control within the federated

system. For example, although a group of locals owns

the regional cooperative, some may not necessarily

identify with it. At the extreme, the regional becomes

just another agribusiness supplier, one that can be

played off others to get the best deal.

While member affiliation with a particular

regional cooperative may be tenuous from year to year

in the local’s search for the best deal, often the bedrock

image or identity of the cooperative is intrinsically

linked with the persona of its general manager. The

late Truman Torgerson’s comments reflecting on his

experience managing Lake to Lake, dairy cooperative

in Wisconsin suggest this possibility:

W e have learned that the influence of the manager (chief executive officer), next to the loyalty of the

members, exceeds all other influences. And the success of the cooperative depends on his integrity,skills,

and ability in developing with directors a constructive

business plan and policy that effectively meets various

conditions as they arise.31

Cooperative managers have a pivotal role in fostering innovation. Those who define their role simply

as moving more product than the previous year (e.g.,

fertilizer), may not see the need to develop new, more

complicated services and products, such as precision

agriculture and speciality grain. For some, marketing

is simply a matter of, "You sell it for $1.50; we’ll sell it

for $1.49." Others, who literally try to maintain the status quo, may approach competition gingerly: "You stay

in your territory and I’ll stay in mine." This approach

is changing, although , as managers become more willing to declare, "This county is mine."

Survey Results

Managerial Responses— The survey netted

responses from 143 general managers; 49 feed

managers, and 38 grain managers--a 25 percent

response rate overall. General managers represented

62 percent of all respondents; feed managers, 21

6

26 Cummins, David E., Franicis P. Yager, Charles Hunley, Michael

Kane and Bruce Reynolds, Cooperative Involvement in Grain

Marketing. USDA: Agricultural Cooperative Service, ACS

Research Report 38, August 1984, 14.

27 Fulton, Joan R., Michaell P. Popp, and Carolyn Gray, Strategic

Alliance and Joint Venture Agreements in Grain Marketing

Cooperatives. American Cooperation 1996 Yearbook, Washington,

D.C.: National Council of Farmer Cooperatives, 2.

28 Reynolds, Bruce, Specialization Networks Offer Alternative to

Consolidation of Local Cooperatives, USDA: Rural Business and

Cooperative Development Service, Farmer Cooperatives,

February, 1995, 146.

29 Thurston et al., 53.

30 Dahl, Reynold P., “Structural Change and Performance of Grain

Marketing Cooperatives,” Journal of Agricultural Cooperation, 1991,

72.

31 Torgerson, Truman, Building Markets and People Cooperatively:

The Lake of Lake Story. USDA: Agricultural Cooperative Service,

1990.
percent; and grain managers, 17 percent.32, 33 Returns

were heavily skewed in favor of general managers,

despite repeated follow-ups to other managers, a

result which may demonstrate the primacy of that role

within cooperatives.34

More than 40 percent of managerial respondents

werefrom the North Central region (Iowa, Minnesota,

W isconsin, South Dakota, and North Dakota) and 30

percent from the Eastern Corn Belt (Illinois, Indiana,

Ohio) (Table 1).

Innovator Response— Overall, respondents

were evenly divided among the categories of

Innovator, Follower, and Status Quo (Table 2).35

Regional distribution by innovative style is shown in

Tables 3 and 4.

Survey Overview— Locals were instructed to

select all responses or alternatives that described their

situation. Survey topics are discussed in the following

sequence:

● experience with IPG

● assessment of advantages and disadvantages;

grain producer response;

● investment horizons;

● relationship with regional cooperatives;

● competition from vertical integration; and

● discussion and conclusions.

Experience with IPG

To ascertain links between IPG experience and

attitudes, respondents indicated the volume of identity-preserved and commodity grain handled by their

local during 1998 and expectations for 1999.36

Corn

1998 IP Corn—Varieties include blue, hard

endosperm, high amylose, high starch, organic, post

harvest pesticide free, waxy, white, high oil (HOC),

nutritionally dense/high protein, high lysine/opaque,

and low phytase.

Across the 135 respondents reporting, the average amount of such grains handled by their local was

142,000 bushels. Maximum amount handled was 2.3

million bushels. Sixty-three locals did not handle any

IP corn.

At 257,000 bushels in 1998, Innovators’ average

IPG corn volume was almost double that of Followers

and five times as much as Status Quo locals (Table 5).

These were significant differences (p>.005) according

to F-test values from an analysis of variance (Table 6).

Statistically significant differences in average volume

were not apparent between Innovators and Followers,

nor between Followers and Status Quo locals.

The maximum volume handled among Innovator

locals was 2 million bushels; 2.3 million among

Followers, and 0.7 million bushels among Status Quo

locals.

1998 Commodity Corn— The primary

example of this category is No. 2 Yellow Corn. Across

the 177 locals responding, the average amount

handled was almost 4.2 million bushels. Maximum

volume was 33.8 million bushels. Only 5 locals

handled no commodity corn.

At about 7.3 million bushels, the average amount

handled by Innovators exceeded Followers by almost 4

million bushels and Status Quo by 4.5 million bushels

(Table 5). Only a slight difference existed between the

average volumes of Followers and Status Quo locals.

Innovators’ volume compared with Status Quo was

extremely significant (p>.0001), and compared with

Followers, highly significant (p>.001) (Table 6).

Across respondents, an average of .03 of a bushel

of IPG corn was handled for every bushel of commodity corn. Among Innovators and Followers, this ratio

was .04 and among Status Quo, .02

The maximum amount of commodity corn handled among Innovator locals was almost 34M bushels,

compared with 16M bushels for Followers, and 13M

bushels for Status Quo locals. Maximum Innovator

volume was twice that of Followers and 2.6 times that

of Status Quo locals.

Anticipated 1999 IP Corn—The average

anticipated volume was 246,000 bushels according to

the 128 locals responding, representing a 42 percent

increase over average 1998 volume. Maximum

expected volume was 5 million bushels.

At 408,000 bushels, Innovators expected to

almost double their average expected volume in 1999.

Followers anticipated moving from 1998's 141,000

7

32 Total percentages may not add up to 100 due to rounding.

33 Responses from managers provide the largest numerical basis for

conclusions, and so are reported first.

34 Such results negated the survey’s random sampling.

35 Where multiple managers were surveyed from the same local,

some ratings of innovativeness may have differed. Few responses

were received from multiple managers within the same

cooperative, so such overlap was ignored.

36 Minimum volume for all grains was zero.
bushels to 208,000 bushels. Status Quo locals anticipated a 241 percent increase--from 50,000 bushels to

168,000 bushels. Differences between innovator classes

in expected outcomes were not statistically significant,

however.

Expected 1999 Commodity Corn—The 162

respondents expected an average of 4.4 million bushels

to a maximum of 35 million bushels.

Innovators expected to handle an average of 7.3

million bushels; Followers, 3.5 million bushels; and

Status Quo, 3.2 million bushels. Respective maximums

were 35 million; 14 million; and 20 million. Differences

between all three groups were extremely significant

(p>.0002); as well as between Innovator and Status

Quo (p>.0009). The difference between Innovators’ and

Followers’ expected commodity volume was highly

significant (p>.002).

Wheat

1998 IP Wheat—Most wheat varieties--hard

red winter, hardred spring, soft red spring, soft red

winter, durum, hard white, and soft white--are

typically considered wheat classes, with traits more

inherent than genetically engineered.37 Such traits

constrain end uses to particular applications--pasta

rather than confectionary goods. Wheat cannot be

switched among alternative uses, while the default

market for genetically engineered corn is the No. 2

yellow corn market.

Eighty-one locals did not handle IP wheat.

Average volume of the 87 respondents was 60,000

bushels, with a minimum of zero and a maximum of

0.5 million bushels. When considering average volume

by innovator class, differences were marked:

Innovators averaged 41,000 bushels; Followers and

Status Quo, 2,000 bushels each (Table 5). Differences

between all three groups were significant (p>.05); as

were the differences between Innovators and Status

Quo (p>.07) and Innovators and Followers (p>.09)

(Table 6).

1998 Commodity Wheat—The 126

respondents handled an average of 1 million bushels,

with a maximum of 13 million bushels. Twenty-nine

locals did not handle commodity wheat.

Innovators led again, handling an average of 2.1

million bushels, compared with Followers’ 452,000

bushels and Status Quos’ 905,000 bushels (Table 5).

Innovators’ maximum was 13 million bushels, with 9

million for Followers and 8 million for Status Quo.

Differences between all three groups were highly significant (p>.001), as well as between Innovators and

Followers (p>.001). Significant differences existed

between Innovators and Status Quo (p>.04), but not

between Followers and Status Quo (Table 6).

Anticipated 1999 IP Wheat—Among the 76

respondents reporting, average 1999 volume was

expected to be 19,000 bushels, with a maximum of

750,000 bushels. The patterns apparent in actual 1998

bushels by innovative style were duplicated for 1999

expectations, although Innovators expected to almost

double their volume (Table 5).

Expected 1999 Commodity Wheat—

Average volume projected by the 108 respondents was

3.2 million bushels, to a maximum of 250 million

bushels. Innovators anticipated 1.9 million bushels to a

maximum of 10 million; Followers expected 7.3 million

bushels to a maximum of 250 million; and Status Quo

expected 748,000 bushels, to a maximum of 4 million

bushels. Only differences between Innovators and

Status Quo were significant (p>.03).

Soybeans

1998 IPG Soybeans—Varieties include tofu,

high oleic, low linolenic, and high protein. The

maximum volume among the 114 respondents

reporting was 1 million. bushels, with an average of

45,800 bushels. Seventy-five locals did not handle IP

soybeans.

The average volume of Innovators was 100,000

bushels, to a maximum of 1 million bushels. Followers’

average was 28,000 bushels, to a maximum of 260,000

bushels. Status Quo average was 23,000 bushels, up to

300,000 bushels (Table 5). Differences between all three

groups were highly significant (p>.03); and between

Innovator and Status Quo, significant at p>.05, and for

Innovator and Follower compared, significant at p>.07

(Table 6).

1998 Commodity Soybeans—The maximum

volume for the 166 respondents was 22 million

bushels, with an average of 1.6 million bushels. Only

10 locals did not handle generic soybeans.

Innovators’ average volume was 2.5 million to a

maximum of 15 million bushels (Table 5). Followers’

average volume was 1.1 million to a maximum of 4

8

37 Sparks, Inc., has observed that no biotech wheat product has been

commercialized yet due to the presumed greater difficulty in its

genetic modification and scientific delay.
million bushels. Status Quo average volume was 1.4

million to a maximum of 22 million bushels.

Differences between all three groups were highly significant (p>.01); between Innovators and Status Quo

significant (p>.06); between Innovators and Followers,

highly significant (p>.002); and not significant between

Followers and Status Quo (Table 6).

Anticipated 1999 IPG Soybeans—The

maximum expected volume for the 144 respondents

reporting was 28 million bushels, at an average of 1.8

million bushels.

Innovators anticipated an average of 169,000

bushels, to a maximum of 2 million bushels (Table 5).

Followers anticipated an average of 109,000 bushels,

also to a maximum of 2 million bushels. Status Quo

foresaw an average of 76,000 bushels, to a maximum of

1 million bushels. None of these differences were significant (Table 6).

Anticipated 1999 Commodity Soybeans—The

average anticipated volume among the 144

respondents was 1.7 million bushels, to a maximum of

28 million bushels (Table 5). Innovators expected to

average 2.6 million bushels, to a maximum of 15

million bushels, and for Followers it was an average of

1.1 million bushels, to a maximum of 4 million

bushels. Status Quo expected to average 1.6 million

bushels, to a maximum of 28 million bushels.

Significant differences existed between all three groups

(p>.08) (Table 6). Only the difference between

Innovators and Followers was highly significant

(p>.01).

IPG Handling Premiums

Locals reported their typical commodity grain

handling margins are generally 10 cents/bushel.

Industry observers said that an IPG premium much

beyond that would place local elevators at a serious

competitive disadvantage, potentially precluding a

cooperative role in the specialty industry. Cunningham

and Unnevehr report a survey of Midwestern grain

handlers indicated they paid a premium to the farmer

of 30 cents/bushel above the market price, and the

"country elevator usually received that amount plus

ten cents morefrom whomever they delivered to."38

Low premiums are also supported by test results fro m

Bremer County, Iowa, where local elevators incurred

an additional handling charge of only 5 cents/bushel

when handling high oil corn, compared with conventional corn.39

Survey results from locals indicated 61 percent of

general managers wanted a premium of at least 10

cents/bushel, making IPG, at a minimum, twice as

expensive as conventional grain (Table 7). Grain and

feed managers were more willing to accept to accept

lower premiums.

Interest in larger premiums persisted when innovative style was considered, especially among Status

Quo locals (Table 8). Yet, Innovator locals were almost

twice as likely as Status Quo locals to charge a premium below 10 cents, 35 percent versus 18 percent.

Follower locals fell in between at 28 percent. Moreover,

Follower and Status Quo locals were almost three

times as likely as Innovator locals not to know IPG

handling costs.

Recent industry opinion regards IPG as a product

still in many ways unknown, including handling costs.

Nevertheless, survey evidence shows Innovator locals

specializing in IP corn (i.e., handling over the survey’s

average of 142,000 bushels) are considerably more likely to have lower handling costs--65 percent charged less

than a 10 cent/bushel premium (Table 9).40 These managers have transferred the volume- driven mentality of

the commodity sector to IPG, to use facilities as intensively as possible--which suggests getting into IPG may

be something of an "all or nothing" proposition.

Specialized IPG Services

IPG involvement can be regarded as growing

from simple activities to complex ones like manufacturing pasta or handling high volumes of multiple

varieties. From the standpoint of volume, results

showed locals were at two extremes--either heavily or

barely involved. Further survey results revealed that,

irrespective of grain species, keeping up with developments in the IPG market was the most popular activity

pursued by locals (Tables 10-12). Providing technical

information and seed distribution followed in importance, although each was pursued by less than 20 percent of respondents.41 Processing activities--milling,

crushing, refining--and grain quality or composition

assays--were rarely conducted.

9

38 Cunningham, Carrie J. and Laurian J. Unnevehr, Market

Segmentation for Genetically Modified Corn and Soybean

Exports. Presented at Transitions in Agbiotech: Economics of

Strategy and Policy,” June 24-25, 1999, Washington, D.C., 9.

39 Baumel, 23.

40 Small sample size for Follower and Status Quo precluded

generalizations about their practices.

41 Bias from a small number of respondents may explain why

Follower wheat activities were less concentrated in outlook

monitoring.
IPG Handling Capabilities

Physical involvement with IPG demands specialized resources. Respondents ranked their capabilities

for handling several key aspects of IPG, from seed distribution and access to cleaning, drying, and storage

(Table 13). Cooperatives reported their most significant

weaknesses in grain testing, e.g., (1) NIR--nearinfrared technology--to measure composition, and (2)

assays for grain quality, fat content, etc. A lesser concern, but nevertheless reported by 60 percent of all

managers, was the scarcity of bins at the elevator during the peak harvest period. Commitment to IPG probably cannot happen by the cooperative sector as a

whole unless infrastructure is substantially improved

in these areas.

Combining "excellent" and "adequate" ratings

revealed cooperatives werestrongest in obtaining and

distributing IPG seed, including accessing seed

exchanges when needed, and providing technical support. Grain cleaning and drying facilities appeared to

be suitable for the present, with 57 percent of all managers providing a combined favorable rating, but probably not adequate for greater stress on the existing system.

Managers werelargely consistent on these issues,

irrespective of position (Table 14). Differences by innovative style were also not apparent (Table 15).

Buyer Availability

Buyer availability has generally been considered

to be a moot issue for IPG insofar as most grains are

grown under contract for a specific user and therefore

would not be sold on the open market. Demand is

expected to generate its own supply, not the reverse.

Nevertheless, about 20 percent of managers routinely

experienced difficulty finding buyers (Table 16). More

than 25 percent of Status Quo cooperatives also experienced problems, compared with 15 percent of

Innovators and 23 percent of Followers. Whether evaluated by managerial position or innovative style, the

consensus was that more development is needed to

identify potential IPG buyers.

The survey asked whether buyers werereadily

available or required effort--particularly market development--to locate (Table 17). More Eastern Corn Belt

locals than those in other regions reported buyers

required little or no work to identify. Cooperatives

from the South Central region stressed the need for

more market development.

IPG Feed

Twenty five percent of all managers reported

their local had manufactured IPG-based feed during

1998-99 (Table 18). Manufacturing was morefrequent

among Innovators (37 percent) than Followers (27 percent) and Status Quo (10 percent).

IPG Advantages and Disadvantages

Trait Preferences

When choosing traits for seed originated (sold)

by their locals, the priority among managers was maximizing net returns for grain producer-members, followed by compatibility with grain facilities and expertise (Table 19). Accessibility of traits was third,

indicating specific germplasm, as a "manufactured"

product, may have limited availability.

Feed concerns influenced choice for 10 percent of

respondents, via interest in traits lowering ration cost

or increasing feed efficiency, or those directly supporting locals’ own feed manufacturing. Sensitivity to such

issues was particularly marked among feed managers.

Maximizing producers’ returns, facility compatibility,

or trait access were markedly more important among

general managers than feed managers. Grain managers were generally in accord with general managers.

Results suggest locals’ priorities are independent

of other agribusinesses. Little support was demonstrated for the food or feed operations of regionals or

investor-owned firms, implying minimal vertical coordination and integration between locals and others in

the supply chain.

When considered by innovative style, the overwhelming priority was maximizing grain producer

return, (80 percent, Status Quo locals; 76 percent,

Innovators; and 72 percent, Followers (Table 20)).42

Compatibility with grain facilities and supporting

locals’ feed manufacturing were a distant second and

third.

IPG Advantages

Concern about members’ returns also skewed

perception of IPG advantages: 24 percent of all managers viewed IPG as a way for members to diversify

and increase revenue (Table 21). Second was IPG’s

potential as a new opportunity for cooperatives, and

third, the competitive edge conferred by these grains--

a factor less apparent to feed managers than others.

10

42 It is not clear why preferences according to managerial position

should be more diverse than those revealed by innovative style.
Feed managers were more enthused about IPG’s role

in higher quality feed rations and increased feed efficiency, while grain managers viewed IPG as a new

product opportunity.

The member focus demonstrated in trait preferences and perceived advantages undoubtedly reflect

cooperatives’ reason for being. Wadsworth says that

the ultimate goal of cooperatives undergoing industry

change should be to serve producer members in the

most efficient and beneficial way.43 This benefit may be

self-limiting, however. Citing cooperatives’ historically

limited role in grain exports, Ginder observes, "the system tended to concentrate on activities directly related

to the grain and farm products produced by the farmers who owned the system."44

"New opportunities" dominated member returns

as the primary advantage of IPG irrespective of innovative style, particularly among Follower locals, who

may be seeking a way to take their cooperative to the

next level (Table 22). Second among Status Quo locals

was IPG as a way for members to diversify and

increase revenue. Innovators’ second priority, maintaining a competitive edge in grain marketing, as well

as Followers, high quality feed rations, exhibit a subtle

but telling difference in emphasis from Status Quo.

The latter appears to be driven by a singular focus of

raising the prices members receive for grain, a goal

other locals may pursue indirectly through more varied approaches.

IPG Disadvantages

The need for premiums to drive change at each

level of the grain marketing system and questions

regarding the "true" value of a product produced outside the open market have frequently been considered

obstacles to IPG’s adoption. These and other issues

were evaluated in a lengthy survey question.

Responses have been grouped according to whether

they reflect (1) overall system concerns, i.e, the need

for premiums and end-use demand to drive the IPG

market; (2) grower issues; or (3) concerns about

changes in the day-to-day practices of cooperative elevators.

Grower commitment was the salient issue among

managers: Werereturns sufficient to sustain farmer

interest enough to develop a consistent market, given

the potential for yield drag (reduced yields arising

from limited pollination or other factors) (Table 23)?

Elevator obstacles ranked second as a group, mainly

reflecting the need for considerable or expensive facility adjustments required to accommodate IPG, and loss

of income and flexibility from blending--a standard

revenue-generating practice in the industry.

Specialty seed grain appears to be a market apart

from seed distributed by farmers. Despite industry

concerns about competition from farmer-dealers, cooperative managers did not see a potential conflict of

interest.

Status Quo locals particularly were concerned

about maintaining established operating practices and

facilities (Table 24). Ten percent of Status Quo were

concerned about the need for potentially expensive

facility adjustments, compared with 5 percent of

Followers and 1 percent of Innovators. Twenty-five

percent of Status Quo were concerned about IPG’s

impact on the revenue and flexibility offered by grain

blending, compared with 14 percent of Followers and

10 percent of Innovators. Blending different grains to

reach an average No. 2 quality is diametrically

opposed to the segregation and purity required for

IPG marketing.

Innovator managers were looking toward future

developments in IPG, insofar as 17 percent said,

"Multiple (stacked) traits interest us more than the current single trait emphasis of IPG."

Grain Producer Response

For any agricultural cooperative, paying attention to many different grower trends would seem to be

a necessary part of business. In contrast, the survey’s

definition of Status Quo managers was those who

"tend to ignore industry changes that have no direct

influence on current areas of operation or commodity

priorities." And, in fact, the aptness of this description

showed in their observations regarding four aspects of

farmer behavior: extent of IPG adoption and trend

over the past year; size of producer adopting IPG; and

producer size most likely to increase.

1999 Farmer Adoption—Respondents

predominately saw IPG having a scattered impact on

farmers within their marketing territory (Table 25).

Grain managers particularly saw evidence of IPG

adoption. Nine percent of all managers did not know

what impact IPG had within their area.

Sixteen percent of Innovators saw IPG making

substantial inroads, measured by farm numbers or

sizes, compared with 7 percent of Followers and 1 percent of Status Quo (Table 26). Twelve percent of Status

11

43 Wadsworth, 4.

44 Ginder, 16.
Quo did not expect IPG to have any impact in the

future on producers in their marketing territory. Only

5 percent each of Followers and Innovators felt the

same. Fourteen percent of Status Quo said they didn’t

know the extent of farmer adoption in their territory,

compared with 4 percent of Innovators and 7 percent

of Followers.

Trend from 1998 to 1999—About 40 percent

ofrespondents saw increased planting from 1998 to

1999, coinciding with industry observations (Table 27).

Sixty percent of Innovators observed increased

planting, compared with 36 percent of Followers and

26 percent of Status Quo (Table 28). Only 4 percent of

Innovators did not know what the trend was, along

with 12 percent of Followers and 21 percent of Status

Quo. Pfeffer and Salancik observe that organizational

environments are not given realities; they arecreated

through a process of attention and interpretation.45

Here, it is evident cooperative managers see what they

look for. If they are interested in IPG they study

producer trends.

Size of Producer Adopting IPG—Among

respondents, almost 50 percent saw IPG adoption

taking place predominately among large producers

with 500 to 1,500 acres (Table 29). Grain managers

were more definitive about this aspect of IPG than

general and feed managers. Almost 20 percent saw

IPG adoption occurring regardless of producer size.

Another 20 percent of managers simply didn’t know.

Findings were similar when evaluated by innovative style (Table 30). Thirty percent of Status Quo

didn’t know the trend, along with 18 percent of

Followers and 13 percent of innovators.

Product Size Likely To Increase—Here,

again, large producers predominated, whether

considered by managerial opinion or innovative style

(Tables 31-32). Those who didn’t know were 17 percent

of Status Quo, 16 percent of Followers, and 14 percent

of Innovators.

Causes of Turnover—Inadequate premiums,

yield drag, and limited elevator storage were the

leading reasons accounting for turnover among

contract growers, according to managers (Table 33).

The significance of elevator availability highlights the

importance of cooperative infrastructure to back up

members’ planting intentions.

Grain and feed managers in particular believed

IPG was too much work for producers compared with

other grains, an observation made by only 3 percent of

general managers. Departmental managers perceived a

higher level of producer concerns about elevator storage and perceptions of a small and inconsistent market, leading to a "wait and see" response by producers.

Investment Horizons

A particularly appropriate role for locals identified by industry observers is bargaining on behalf of

growers for inputs and prices. This is an unconventional role for grain and supply cooperatives, but the

special demands of IPG have opened to question many

established roles and behaviors. These and related

issues were examined in a series of questions exploring the various dimensions of investment: the anticipated accommodation required for IPG; preferred

ways of integrating IPG into the business; and willingness to wait for a satisfactory ROI (return on investment).

Anticipated Impact on Locals—Virtually no

managers anticipated making major adjustments in

their grain operations to accommodate IPG (Table 35).

Almost half expected to be making at least some

adjustments and 30 percent expected to have minimal

involvement with IPG--"business as usual." Only 2-3

percent concluded IPG would have no impact on their

local. Close to 20 percent didn’t know what to predict.

These findings were duplicated by innovative

style (Table 36). Curiously, 21 percent of Innovators

didn’t know what to expect, compared with only 11

percent of Followers and Status Quo. Given Status

Quo’s low receptivity to the many aspects of these

grains, it is possible they had already decided not to

handle IPG.

Preferred IPG Activities—For 25 percent of

allrespondents, coordinating feeding of cooperativeor member-owned livestock with member-produced

IPG was the most attractive option (Table 37). Twentythree percent chose developing strategic alliances with

IPG seed companies or technology developers.

Bargaining regarding producers’ contract terms of

inputs was chosen by 17 percent, the same percent

who saw themselves jumping in and out of the IPG

12

45 Pfeffer, Jeffrey and Gerald R. Salancik, The External Control of

Organizations. New York: Harper & Row, 1978, 13.
business as warranted by grain prices.

Innovators were highly in favor of feeding livestock (43 percent) compared with 33 percent of

Followers and 18 percent of Status Quo (Table 38). The

latter liked being an in-and-outer in response to grain

prices, 40 percent compared with 9 percent of

Innovators and 22 percent of Followers.

From these results, it is not inconceivable to

advocate a bargaining role for local cooperatives. The

caveat is that they prefer more traditional roles of feeding livestock or pursuing strategic alliances--roles with

which they are more familiar.

Return on Investment—Fully 50 percent of

allrespondents wanted to wait and see how the IPG

market develops before they would consider investing

(Table 39). Twenty-five percent were willing to wait

from 2 to 5 years for a satisfactory return on an

investment of at least $250,000, a benchmark used to

qualify as a major investment. This, and the 14 percent

willing to wait 5 years suggest cooperative managers

have some appreciation of the time required for

investments to mature.

By innovative style, however,adifferent consensus emerges. Sixty-two percent of Status Quo wanted

to "wait and see," compared with 36 percent of

Innovators and 51 percent of Followers (Table 40).

Innovators were almost 3 times as likely as Status Quo

locals to be willing to wait from 2 to 5 years for a satisfactory payoff.

Clearly, Status Quo locals were skittish about

committing investment resources to IPG. Innovators

favored a bolder approach, reflecting their priority on

being industry leaders and greater willingness to risk

losses.

Relationship with Regional Cooperatives

Competition with Locals

Most local cooperatives are members of one or

moreregional cooperatives upon whom they rely for

advanced grain marketing programs; further assembly

and processing; assisting in modernizing and constructing grain facilities; and providing merger and

other economic and legal assistance.46

The ties between regionals and locals have

always been weaker than in other commodities

because most grain locals can and do market independently of regionals’ own assembly and marketing

efforts. As member grain producers routinely seek the

best price on their own,47 so do their locals. This independence has shrunk the grain volume available to

regionals; limited the cooperative presence in export

markets; and generated a gradual pullback by regionalsfrom what is considered to be a commodity "first

handler" business for cooperatives. Alliances with

investor-owned firms such as Cargill or ADM appear

to have filled in the blanks in the regional-local interface.48

The scope of regionals’ services to locals is also

changing. They arefrequently considered too stretched

to adequately serve member locals.49 This may not

matter for large successful locals, who may no longer

require the regional’s services and bypass it.50 It may

well matter for less successful locals who can be considered "a burden to the regional cooperative."51 Such

locals may not be able to afford the service fees

increasingly required to gain access to specialized services and technical assistance offered by regionals to

member cooperatives. Other neighboring locals may

become the source of such services, perhaps as a prelude to a merger or joint venture. Or, the local may

become a division of a regional cooperative, in a merger process called "regionalization."52 The latter, in particular, has been perceived by locals as a potential

threat to their autonomy and the integrity of the federated system.53

Interviewed locals appear to be defining regionals more as global-reach food companies than as grain

cooperatives (particularly as locals themselves enter

exporting). Regionals’ identity as service providers for

locals also appears to be diminishing--unless locals are

willing to merge with the regional. Regionals appear to

be specializing in one arena and locals in another.

13

46 Grain Cooperatives, USDA: Agricultural Cooperative Service,

Cooperative Information Report 1, Section 15, Revised September

1990, 30.

47 Cummins, 14.

48 Examples are joint ventures between Ag Processing Inc and ADM;

Growmark and ADM; and AGRI Industries and Cargill. See

Warman, Mar, Cooperative Grain Marketing: Changes, Issues,

and Alternatives, RBS unublished ms., 1992.

49 Hogeland, 1995, 16.

50 Fulton, Joan R. and Robert P. King, “Relationships among

Information Expenditure, Economic Performance, and Size in

Local Grain Marketing Cooperatives in the Upper Midwest,”

Agribusiness 9(2), 1993, 144.

51 Ibid.

52 Stevens, Bob, “Regionalization: A Tool for Maintaining a

Cooperative Presence,” American Cooperation 1998. Washington,

D.C.: National Council of Farmer Cooperatives, 39.

53 ”Cenex-Harvest States starts move to linked system,” Feedstuffs,

December 21, 1998, 20.
As the cooperative sector enters the IPG business,

this specialization and division of labor could preclude

the procurement competition between large locals and

their regionals that ultimately forestalled meaningful

cooperative participation in export markets. Global

market development is considered a prerequisite for

maximizing IPG’s potential--high oil corn, for example, can have particular value in hot climates that cannot store grease. Yet entrenched perceptions of competition between the two levels of the federated system

could circumscribe cooperative participation in this

further evolution of the grain market.

To explore this, locals were asked how much they

competed with their regional cooperative in the commodity grain business. For a quarter of all managers,

specialization was evident because the regional served

different markets than the local (Table 41). For 28 percent, very little competition occurred because the local

partnered with the regional in key activities.

Competition did hang on among a third of respondents, driven by the need to maximize grain prices for

producer-members. Only 10 percent reported considerable competition, such that the regional was one of

their chief competitors in the grain business.

Diminished regional participation in grain may

account for this response. Managers were consistent in

these viewpoints, aside from those feed managers who

considered their local above competition because it

was a superlocal or so-called "mini-regional."

Important differences were evident by innovative

style (Table 42). Partnering diminished competition for

at least 32 percent of Innovators and Followers but

only 19 percent of Status Quo locals. Getting the best

price for growers drove 40 percent of Status Quo locals

to compete as necessary with their regionals, compared with 22 percent of Innovators and 32 percent of

Followers.

Preferred Regional Participation

Asked how they preferred to work with their

regional in IPG activities, 43 percent of managers said,

"work closely as a partner" (Table 43). Fifteen percent

would like their regional to invest in IPG food or feed

processing operations to complement locals’ raw material acquisitions. This may be considered a very limited endorsement of upstream integration by regionals.

Some interest was expressed in alliances with other

locals or with technology/seed companies.

By innovative style, a slightly greater percent of

Status Quo expected the regional to partner with them;

more were also concerned about potential competition

from regionals (Table 45). Innovators were particularly

interested in pursuing alliances with technology developers/seed companies, a finding which echoes comments by interviewed locals: In IPG, what do regionals

bring to the table ?

If locals decide not to participate in IPG marketing or handling, regionals could decide to go it alone, a

move consistent with their evolving sphere of activity

in food processing. Confronted with this possibility,42

percent of respondents expressed concern that regionals might bypass locals (Table 45). Yet, 37 percent were

willing to interpretregional involvement as a foundation for their futureefforts. Responses expressing

slight reservations or an unequivocally endorsing

direct participation wererejected. From this it seems

apparent that how regionals enter IPG could make

member locals pleased or not.

Direct participation was highly acceptable to 24

percent of Innovators; 10 percent of Followers, but

only 8 percent of Status Quo (Table 46). Similarly,51

percent of Status Quo were concerned about being

bypassed, compared with 34 percent of Innovators and

46 percent of Followers. Almost one-third of

Innovators and Status Quo were willing to regard

direct participation as a foundation for their own

efforts, however, along with 42 percent of Followers.

By managerial position or innovative style, locals

overwhelmingly rejected the notion that they or their

regionals should stay out of IPG. So, although thereis

some polarity among responses by innovative style, a

certain amount of flexibility exists--which regionals

can either cultivate or override.

Partnering Advantages

Many possibilities were listed in the survey to

determine what aspects of regionals appealed to locals

considering IPG activities. Among all managers, the

primary advantages wereregionals’ alliances with

other system participants (15 percent); global market

access/share uncertainty and risk (both, 13 percent);

and their potential to offer a total system, from seed to

food or feed (11 percent) (Table 47). The relatively

small percent for each item probably results from the

large number of potential advantages contained within

the survey question.

Consistent with locals’ evolution to a position of

less day-to-day dependence on regionals, only 4 percent cited their technical production expertise as an

advantage. Another four percent said they trusted

regionals more than other partners, another indication

that the traditional regional-local interface is changing

significantly.

14
Historically,regionals have wholesaled their

manufactured inputs to locals and provided research

and technical support. Locals have been, in theory,the

retailer,providing credit and customer technical support.54 Yetregionals have increasingly gone direct to

customers, blurring traditional boundaries, and in the

process, perhaps throwing all aspects of traditional

roles open to question.

Iftrust is defined as the "expectation that one’s

exchange partner will not act opportunistically,"55 then

regionals have, to a degree, failed their locals by going

direct, because, "The possibility of opportunistic

behavior by a partner generates the most salient transaction costs in the alliance context."56 Increasing

alliances with noncooperative partners can then be

understood as a sanction imposed on regionals by

locals, a loss of repeat business with the same partner.57 Regionals then lose out on "character-based

trust," where firms morereadily trust others socially

similar to themselves.58 Such trust is an important safeguard or control mechanism in alliances, reducing or

eliminating the need to "spell everything out" before

proceeding.

Fuzzy and permeable boundaries between locals

and regionals may be attributed to the fact that the

survival of the federated cooperative system has

always been implicitly predicated on double margins

orfrom the farmer perspective, double markups. Such

conflicts can only be minimized by carefully circumscribed, nonoverlapping roles. But the shrinking customer base for locals has introduced a destabilizing

element in the federated system by forcing locals to

serve larger marketing territories to survive. In the

process, they have co-opted many of the activities formerly the exclusive domain of regionals.

For both regionals and locals to survive as a system, it becomes increasingly important to scope out

activities exclusive to each. Interviews and survey

results coincide here, by identifying system alliances

and networks and building a global presence as proper

activities for regionals, things locals are only equipped

to do only in rare instances.

The importance of system alliances and global

access became even more prominent when innovative

style was considered (Table 48). Also important here

was regionals’ potential for a "total system" encompassing the entire production and marketing channel.

Innovators in particular favored alliances 35 percent,

versus 28 percent of Followers and 22 percent of Status

Quo.

Partnering Disadvantages

The most pronounced disadvantage to regional

partnering concerned the pivotal role of farmer-members, how to get sufficient return per acre to sustain

their interest in IPG, cited by 24 percent of all managers (Table 49). This issue, and sharing margins with

regionals, preoccupied grain managers, in particular.

Feed managers stressed the potentially sluggish

response induced by regionals’ administrative layers

and the need to sustain a low-cost supplier position by

minimizing input costs. Potentially conflicting priorities between regional and local also concerned them.

General managers were more likely than their feed or

grain counterparts to see no disadvantages at all to

partnering with regionals.

Having adequate technical support to deliver

new technology to farmers was not considered a particular hurdle, perhaps because locals have evolved

their own internal pool of expertise, making technical

support from regionals less critical.

Status Quo locals were particularly concerned

that IPG would not deliver enough return/acreto

farmers, another reflection of their mandate to provide

high prices to growers. They, along with Followers,

had twice the concern of Innovators about sharing IPG

margins with regional partners. This again demonstrates Status Quo’s’ emphasis on autonomy and independence.

It is important to note that, across innovative

styles, aside from concern about returns/acre, most

locals said there was no disadvantage to working with

their regional in IPG.

15

54 Halverson, Duane, The Need for Cooperative Restructuring in

Light of the Changing Structure of Agriculture and Changing

Markets: Is a Seamless System Possible?, Proceedings, Farmer

Cooperatives in the 21st Century, 1998, 26.

55 Gulati, Ranjay, Does Familiarity Breed Trust: The Implications of

Repeated Ties for Contractual Choice in Alliances, Academy of

Management Journal, 1995, 38(1), 89.

56 Ibid., 99.

57 Ibid., 93.

58 Ibid., 95.
Competition from Vertical Integration

Industry observers have been concerned that the

contract production and producer-processor relations

found in the broiler and pork industries will be replicated in the grain industry as IPG-contract production

spreads.59 Coffey asks bluntly, "Will pork, beef, sheep,

grain, and vegetables all eventually wind up in total

integration akin to the present broiler system?"60 H e

anticipates local farm suppliers might be bypassed

insofar as farm customers (contract growers) are

required to buy supplies from the contractor--the typical situation in pork and poultry.

To determine whether locals were equally concerned, they were asked if their local cooperative was

concerned that IPG developers/suppliers will take

over the grain market just as large integrators have

made inroads in the pork market and other agricultural products.

In fact, locals were concerned that integration

would be replicated in the grain industry. Fifty-five

percent agreed (strongly or somewhat) and 26 percent

disagreed (strongly or somewhat) (Table 51).

By innovative style, 14 percent of Status Quo

agreed strongly, compared with 7 percent of

Innovators and 11 percent of Followers (Table 52). The

"agree somewhat" response was concentrated in the

Innovator and Follower categories: essentially 50 percent each, compared with 35 percent for Status Quo.

The Innovator response may have been moderated by

their willingness to pursue alliances with technology

developers/seed companies.

Perhaps as another reflection of their relative

indifference to the IPG market, 24 percent of Status

Quo had no opinion, compared with 14 percent of

Innovators and 19 percent of Followers.

Discussion and Conclusions

This study began with the premise that changes

by local cooperatives would occur through a process of

balancing the conflicting interests and resources at various managerial levels, not unlike the process experienced by producers when forming the cooperative.

Survey results from 230 managers found that such a

constituency-based model of innovation did not

describe local cooperatives’ response to the innovation

of identity-preserved grains (IPG). With minor exceptions, feed and grain department managers agreed

with the priorities of their general manager: cooperatives spoke with one voice.

Despite internal consistency and uniformity of

size, cooperatives differed markedly in their receptivity to innovation, which can be attributed to their operating style or culture. At one extreme, cooperatives

took a circumscribed view of their activities and

domain, largely limiting themselves to a single overriding objective: getting the best grain price for member producers. At the other extreme, cooperatives

operated in a multidimensional world where many

avenues and perhaps some money-losing detours

could ultimately achieve a similar end. Cooperatives

were found between these extremes but overall they

resembled, in volume and attitudes, the more constricted cooperatives.

Yet either group, uni- or multidimensional, was

successful by the standard of annual sales, a minimum

of $14.5 million. By this standard, each could afford to

innovate. Nevertheless, the singular focus of the unidimensional cooperatives may have insulated them fro m

a wider world view. If their grain marketing approach

gives them adequate sales and volume today, they may

not look for evidence that their approach may be less

successful tomorro w.

Although changes among producers would be

expected to trigger adjustments in the cooperatives

they own, survey results showed that unidimensional

cooperatives were slow to acknowledge such changes.

Unlike their more progressive counterparts, they saw

less evidence of producers adopting IPG in their marketing territory and were less likely to observe relevant characteristics of such producers, like size. How

much of this operating style is due to members’ mandate is not clear. The motto of a prominent Midwestern

local, "We change--but only when farmers need us to

change," highlights what for many locals is a cultural

imperative.

For multidimensional locals, the cultural priority

placed on being first and willingness to bet on new

products, like specialty grain-based feed, appears to be

underwritten by relationships with regional cooperatives and IOFs. These cooperatives emphasize interdependence, while unidimensional cooperatives appear

more likely to retain the independence and isolation

16

59 Hamilton, Neal D., Tending the Seeds; The Emergence of a New

Agriculture in the United States. Drake Journal of Agricultural Law

(1), 1996. See also, Hamilton, “Why Own the Farm If You Can

Own the Farmer (and the Crop)? Contract Production and

Intellectual Property Protection of Grain Crops. Nebraska Law

Review 73 (48), 48-103.

60 Coffey, Joseph, D. Ag Analysis: Alternatives to the Integration of

Agriculture, Cooperative Farmer, Richmond, Virginia: Southern

States Cooperative, July-August 1997.
that is the historical norm of grain cooperatives,

including a competitive, if not adversarial, relationship

with regional cooperatives.

Recorded dimensions of cooperative culture have

emphasized that cooperatives, like their farmer-owners, are conservative, cautious, slow to react, and highly independent. A new cooperative culture is emerging

to take its place along this established framework to

include managers who continually scan the environment for new opportunities, who spread risk by partnering, and who are psychologically at ease with the

time required for new investments to mature. Such

managers are, however, not quite ready to engage in

bargaining activities on behalf of IPG contract growers.

Their preference is for activities closer to their experience, feeding cooperative-owned livestock with member-produced IPG grain, for example.

These results indicate local cooperatives can and

should be segmented by regional cooperatives or others addressing their needs. That is, they should group

locals according to behavioral traits, such as (1) the

primary objective or focus of the cooperative (e.g., a

single-minded focus on maximizing grain price versus

more multidimensional objectives); (2) willingness to

tolerate financial uncertainty; (3) responsiveness to

prior innovations; and (4) willingness to move outside

established product or geographic boundaries; and

develop programs accordingly. These are all aspects of

decision-making style.

Locals particularly valued regional cooperatives’

potential to develop system-wide alliances and their

global market access, things they themselves are poorly positioned for. Some expressed concerns about

regionals’ proceeding independently of locals in pursuing IPG activities. Trust did not rank high as a motivator for associating with regionals over other potential partners. Many locals have reached a point of less

day-to-day dependence on regionals, making them

less willing to automatically turn to the nearestregional when seeking alliances and partnerships.

Next to feeding livestock, locals envisioned themselves pursuing strategic alliances with IPG seed companies or technology developers. These findings suggest regionals need to be aggressive in putting

partnerships and alliances in place which compensate

for shortcomings of the cooperative sector. Otherwise,

raw materials and product could ultimately be

siphoned from the cooperative system as locals build

alliances on their own with noncooperative partners.

Because the specialty grain market has been

slower to develop than anticipated, no wholesale

accommodation to its requirements is immediately

required by the cooperative sector. It is likely that

cooperative managers will have time to see which

pockets of opportunity offered by particular grains are

worth cultivating. Controversy over the grains role in

food and feed will give managers needed time to

improve their infrastructure and testing capabilities.

Nevertheless, survey results strongly suggest IPG

are primarily attractive to those cooperatives already

deeply committed to the grain industry, as evidenced

by their greater volumes of commodity corn, wheat,

and soybeans. These managers have transferred the

volume-driven mentality of the commodity sector to

IPG, to use facilities as intensively as possible. This

suggests IPG may be something of an "all or nothing"

proposition. It is likely that many cooperative managers will continue their focus on commodity grain for

as long as possible.

The subtle drawbacks to this position may not be

immediately apparent. Some industry observers

believe the costs of separation are often greater than

what profits can capture, making share gain in socalled "soft assets" (the relationship with the customer)

the primary incentive for participating in IPG. Such

assets are an indispensable advantage in a rapidly consolidating agribusiness environment. As supply chains

lock into place, some cooperatives may never be able

to compensate for delayed entry into IPG. Other

observers conclude IPG will eventually represent the

cream of the grain crop, making the commodity sector

a lower quality,residual market.

Although the magnitude of specialty grains’

impact may not meet initial industry projections, they

will bring more testing and quality control into the

domestic industry. Managers focused solely on commodity grains will probably resist these changes and

become poorly positioned to compete in an evolving

marketplace requiring greater precision. For them, specialty grains are a core industry by themselves, requiring too high a cost in cultural change and specialized

resources to pursue. For multidimensional managers,

it is clear that specialty grains are a subset of a core

grain industry and so, an inevitable component of

their operations.

17
18

Table 1--Region of Respondents, Managers

Manager

General Feed Grain All

------------------------Percent------------------

Region:

West (Utah, Colorado,

Montana, Washington,

Idaho Oregon) 9 2 5 7

North Central (Iowa, 

Minnesota, Wisconsin,

South Dakota, North 

Dakota) 36 61 54 44

Eastern Corn Belt

(Illinois, Indiana, 

Ohio) 37 14 22 30

South Central 

(Nebraska, Kansas, 

Missouri, Texas, 

Oklahoma) 18 23 19 19

—— —— —— ——

Total 100 100 100 100

Table 2--Innovator and Managerial Classification of Respondents

Manager*

General Feed Grain Total

N Percent N Percent N Percent N Percent

Innovator 42 30 21 47 10 28 74 33

Follower 44 32 13 29 17 47 75 34

Status Quo 52 38 11 24 9 25 73 33

—— —— —— —— —— —— —— ——

Total 138 100 45 100 36 100 220 100

* Total manager distribution was 143 general managers; 49 feed managers; and 38 grain managers.
19

Table 3--Region of Respondents, Innovative Style

Innovator Category

Innovator Follower Statu Quo

-----------------------Percent------------------

Region:

West (Utah, Colorado, 

Montana, Washington, 

Idaho, Oregon) 9 3 12

North Central (Iowa, 

Minnesota, Wisconsin, 

South Dakota, North Dakota) 51 46 33

Eastern Corn Belt 

(Illinois, Indiana, Ohio) 19 33 37

South Central (Nebraska, 

Kansas, Missouri, 

Texas, Oklahoma) 20 18 18

—— —— ——

Total 100 100 100

Table 4--Innovator Distribution Within Respondent

Regions

Innovator Category

Innovator Follower Status Quo N TotalPct.

----------------------------------Percent-----------------------

Region: 

West 39 11 50 18 100

North Central 39 36 25 25 100

Eastern Corn

Belt 21 38 41 41 100

South Central 33 34 33 42 100
20

Table 5--Grain Volume by Innovative Style

Average Volumes Handled

Corn Wheat Soybeans

Status Status Status

Innovator Follower Quo Innovator Follower Quo Innovator Follower Quo

--------------------------------------------------------1,000Bushels------------------------------------------------------

a. IPG Bushels, 1998 257 141 50 41 2 2 100 28 23

N = (42) (44) (42) (20) (29) (34) (33) (38) (39)

b. Commodity Bushels, 1998 7,298 3,378 2,787 2,119 452 905 2,545 1,109 1,419

N = (48) (60) (61) (31) (41) (49) (47) (54) (58)

c. Expected IPG Bushels, 1999 408 208 168 79 3 2 169 109 76

N= (37) (45) (38) (17) (27) (29) (30) (37) (35)

d. Expected Commodity Bushels, 1999 7,310 3,543 3,230 1,898 7,348 748 2,577 1,144 1,661

N = (44) (54) (57) (27) (36) (42) (43) (47) (54)

Table 6--Comparative Grain Volumes, Innovative Style

Corn Wheat Soybeans

N F statistic Prob > F N F statistic Prob > F N F statistic Prob > F

IPG Bushels, 1998:

Innovator/Follower/Status Quo 128 3.30 .04 83 3.14 .05 110 3.54 .03

Innovator/Status Quo 84 8.32 .005* 54 3.40 .07 72 4.16 .05

Innovator/Follower 86 1.47 .23 49 2.94 .09 71 3.45 .07

Follower/Status Quo 86 1.68 .20 63 .01 .94 77 0.17 .68

Commodity Bushels, 1998 :

Innovator/Follower/Status Quo 169 12.27 .0001** 121 5.18 .001* 159 4.34 .01* 

Innovator/Status Quo 109 16.69 .0001** 80 4.40 .04 105 3.49 .06

Innovator/Follower 108 11.89 .001* 72 7.70 .001* 101 9.83 .002*

Follower/Status Quo 121 1.00 .32 90 1.81 .18 112 0.55 .46

Expected IPG Bushels, 1999:

Innovator/Follower/Status Quo 120 1.39 .25 73 3.76 .03 102 0.65 .52

Innovator/Status Quo 75 2.13 .15 46 3.96 .05 65 1.46 .23

Innovator/Follower 82 1.54 .22 44 3.57 .07 67 0.41 .52

Follower/Status Quo 83 0.10 .75 56 0.16 .68 72 0.22 .64

Expected Commodity Bushels:1999

Innovator/Follower/Status Quo 155 9.11 .0002* 105 0.77 .47 144 2.55 .08

Innovator/Status Quo 101 11.81 .0009* 69 4.94 .03 97 1.52 .22

Innovator/Follower 98 10.26 .0018 63 0.46 .50 90 7.84 .01*

Follower/Status Quo 111 0.20 .66 78 1.06 .31 101 0.80 .37
21

Table 7--IPG Handling Margins, Managers

Q. On average, what premium over your normal grain margin is

required for your local to handle IPG?

Manager

General Feed Grain All

------------------------------Percent----------------------

Cents/bushel:

a. At least 25 25 13 14 21

b. 20-25 12 13 15 13

c. 15-19 11 13 6 11

d. 10-14 13 13 8 12

e. 5-9 9 8 17 10

f. 3-5 8 7 14 9

g. 0-3 4 2 8 5

h. None 4 9 0 4

. Don’t know. i —— —— —— ——

Total 100 100 100 100

Table 8--IPG Handling Margins, Innovative Style

Q On average, what premium over your normal grain margin is

required for your local to handle IPG?

Innovator Category

Innovator Follower Status Quo

--------------------Percent--------------------

Cents/bushel:

a. At least 25 20 11 33

b. 20-25 13 12 13

c. 5-19 16 11 6

d. 10-14 7 18 10

e. 5-9 14 9 6

. 3-5 13 7 6 f

g. 0-3 4 7 3

h. None 4 5 3

i Don’t know 7 20 20

—— —— ——

Total 100 100 100

Table 9--IPG Handling Margins, Managers and

Innovative Style, with Above A verage IP Corn

Q.On average, what premium over your normal grain margin is

required for your local to handle IPG?

Inovator Category

Innovator Follower Status Quo All Managers

---------------------------Percent---------------------------------

Cents/bushel:

a. At least 25 0 29 0 8

b. 20-25 12 0 50 10

c. 15-19 12 0 0 8

d. 10-14 6 14 0 8

e. 5-9 29 0 50 23

. 3-5 24 14 0 19 f

g. 0-3 6 43 0 15

h. None 6 0 0 4

. Don’t know 6 0 0 6 i

—— —— —— ——

Total 100 100 100 100

Table 10--IPG Services Provided by locals, Managers

Q. What IPG-related services does your local currently provide?

All Managers

Corn Wheat Soybeans

-----------------Percent------------

a. IPG seed distribution. 15 13 17

b. Technical information/services 18 15 18

c. Milling, crushing, refining. 6 2 1

d. Quality assays. 5 6 4

e. Grain composition assays. 8 5 5

. Financial services, f

production credit. 10 14 11

g. Partnering with other

companies or cooperatives

to build business. 13 10 12

h. Monitor outlook as basis

for future involvement. 26 35 31 —— —— ——

Total 100 100 100
22

Table 11--IPG services provided by locals, Managers

Q. .What IPG-related services does your local currently provide?

Corn Wheat Soybeans

General Feed Grain General Feed Grain General Feed Grain

------------------------------------------------------------Percent------------------------------------------------------------

a. IPG seed distribution. 16 16 14 12 12 5 19 14 16

b. Technical information/services. 18 19 16 14 15 20 17 21 18

c. Milling, crushing, refining. 6 7 2 1 4 5 1 1 3

d. Quality assays. 4 5 4 6 8 54 33

e. Grain composition assays. 8 9 10 6 4 5 5 6 5

f. Financial services, production

credit. 11 10 6 12 23 10 11 148

g. Partnering with other companies

or cooperatives to build business. 12 13 16 12 4 10 13 10 9

h. Monitor outlook as basis for

future involvement. 25 21 31 36 31 40 30 30 37

—— —— —— —— —— —— —— —— ——

Total pct. 100 100 100 100 100 100 100 100 100

Table 12--IPG Services, Innovative Style

Q. .What IPG-related services does your local currently provide?

Corn Wheat Soybeans

Status Status Status

Innov ator Follower Quo Innov ator Follower Quo Innov ator Follower Quo

------------------------------------------------------------------Percent------------------------------------------------------------------

a. IPG seed distribution 0 2 3 5 13 13 0 7 6

b. Technical information/services 3 11 15 0 13 6 7 9 13

c. Milling, crushing, refining 0 2 5 0 0 0 0 0 0

d. Quality assays 2 2 0 5 0 0 0 2 0

e. Grain composition assays 3 9 5 5 13 0 2 2 3

. Financial services, production f

credit 10 11 0 10 13 6 15 13 0

g. Partnering with other companies

or cooperatives to build business 17 11 18 10 13 13 9 7 16

h. Monitor outlook as basis for

future involvement 64 52 55 65 38 63 67 61 63 —— —— —— —— —— —— —— —— ——

Total 100 100 100 100 100 100 100 100 100
23

Table 13--IPG Capabilities, Managers

All Managers

Needs

Excellent Adquate Improvement

----------------Percent-----------------

a. Provide IPG seed access 

distribution on a timely basis. 33 42 25

b. Ability to access IPG seed 

exchanges when needed. 16 48 37

c. Provide technical information 

on traits, planting, insects, etc. 30 43 28

d. Bins for separate IPG storage

at elevator during peak 

harvest for all grains. 7 33 60

e. NIR (near-infrared technology) 

to measure grain composition. 10 11 79

. Ability to assay grain quality, f

fat content, etc. 5 16 79

g. Grain cleaning and drying 

facilities. 16 41 42

—— —— ——

Total 100 100 100

Table 14--IPG Capabilities, Managers

Q. How do you rate your current capabilties for physical and technical aspects of IPG?

Excellent Adequate Needs

Considerable

Improvement

General Feed Grain General Feed Grain General Feed Grain

-----------------------------------------------------Percent---------------------------------------------------

a. Provide IPG seed access distribution on a

timely basis. 29 36 49 42 50 32 29 14 19

b. Ability to access IPG seed exchanges when

needed. 15 19 16 43 55 57 42 26 27

c. Provide technical information on traits, planting,

insects, etc. 29 34 28 36 57 51 35 10 22

d. Bins for separate IPG storage at elevator during

peak harvest for all grains. 7 7 6 36 22 34 57 70 60

e. NIR (near-infrared technology) to measure

grain composition. 10 12 6 8 18 15 82 71 78

. Ability to assay grain quality, fat content, etc. 3 14 0 15 20 14 81 66 86 f

g. Grain cleaning and drying facilities. 17 10 18 36 49 55 46 41 27
24

Table 15--IPG Handling Capabilities, Innovative Style

Q. How do you rate your current capabilties for physical and technical aspects of IPG?

Excellent Adequate Needs

Considerable

Improvement

Innovator Follower Status Quo Innovator Follower Status Quo Innovator Follower Status Quo

--------------------------------------------------------------Percent----------------------------------------------------------------

a. Provide IPG seed access/distribution on a timely basis 49 31 14 38 47 45 13 22 41

b. Ability to access IPG seed

exchanges when needed. 51 24 13 40 51 38 9 24 50

c. Provide technical information

on traits, planting, insects, etc. 29 10 5 48 53 39 23 37 55

d. Bins for separate IPG storage at

elevator during peak harvest for

all grains. 12 1 10 43 28 23 45 70 67

e. NIR (near-infrared technology) to

measure grain composition. 20 6 5 17 11 7 64 83 88

. Ability to assay grain quality, f

fat content, etc. 11 1 4 28 15 5 61 84 91

g. Grain cleaning and drying facilties. 18 7 25 46 45 34 35 48 41

—— —— —— —— —— —— —— —— ——

Total 100 100 100 100 100 100 100 100 100

Table 16--Availability of IPG Buyers

Q. If your cooperative markets IP grain, how difficult has it been to find buyers for the grain on a timely basis?

Managers Innovative Style

General Feed Grain All Innovator Follower Status Quo

---------------------------------------------------------------Percent-----------------------------------------------------------------

a. Buyers are readily available. 3 0 13 5 8 2 5

b. With a little work, it’s possible

tofind sufficient buyers. 14 15 17 14 19 10 16

c. From time to time, it can be

difficulttofind buyers. 24 26 22 24 26 29 13

d. Buyers are generally hard

tofind. 22 21 21 22 15 23 26

e. More market development is

needed to identify current and

prospective buyers. 37 38 27 34 32 35 39

—— —— —— —— —— —— ——

Total 100 100 100 100 100 100 100
25

Table 17--Availability of Buyers for IPG Grain, Region

Q.If your cooperative markets IPG, how difficult has it been to find

buyers for the grain on a timely basis?

West North Region

Central Eastern South

Corn Belt Central

-----------------------Percent------------------------

a. Buyers are readily

available. 0 3 9 4

b. With a little work, it’s

possible to find

sufficient buyers. 0 15 19 8

c. From time to time,

it can be difficult to

find buyers. 50 25 26 13

d. Buyers are generally

hard to find. 17 26 14 29

e. More market

development is

needed to identify

current and

prospective buyers. 33 32 32 46

—— —— —— ——

Total 100 100 100 100

Table 18--IPG Feed Manufacturing

Q. During the 1998-99 period, has your coperative manufactured feed containing IPG?

-------------------Managers-------------- ----------------Innovative Style-------------------

General Feed Grain All Innovator Follower Status Quo

----------------------------------------------------Percent--------------------------------------------------------------------

Yes 24 37 32 28 37 27 10

No 76 63 68 72 63 73 90

—— —— —— —— —— —— ——

Total 100 100 100 100 100 100 100
26

Table 19--Trait Preferences, Managers

Q.What is most important to your local when choosing value-added

seed traits to originate

Manager

General Feed Grain All

---------------------Percent-----------

a. Minimizing conflict of interest with

our member-farmers who are also

seed dealers. 4 1 2 3

b. Lowering cost of feed rations or

increasing feed efficiency for our

livestock producer-members. 10 24 12 13

c. Improving our feed-based

strategic alliances, i.e., with pork

or poultry integrators. 4 14 4 6

d. Supporting our local’s food

processing activities. 2 1 3 2

e. Supporting our regional’s food

processing activities. 3 0 3 2

. Supporting food processing f

operations of agribusinesses other

than cooperatives. 2 1 1 2

g. Supporting our local’s feed

manufacturing. 7 22 6 10

h. Supporting our regional’s feed

manufacturing. 1 2 2 2

. Market access, easy availability 17 7 18 15 i

. Compatibility with our grain j

handling facilties and expertise. 22 10 19 19

k. Maximizing net returns for our

grain producer-members. 27 18 31 26

—— —— ————

Total 100 100 100 100

Table 20--Trait Preferences, Innovative Style

Q.What is most important to your local when choosing value-added

seed traits to originate?

Innovator Category

Innovator Follower Status Quo

-------------------Percent-----------------

a. Minimizing conflictof

interest with our

member-farmers who

are also seed dealers. 0 0 0

b. Lowering cost of feed rations

or increasing feed efficiency

for our livestock

producer-members. 0 0 0

c. Improving our feed-based

strategic alliances, i.e., with

pork or poultry integrators. 0 0 0

d. Supporting our local’s food

processing activities. 0 0 0

e. Supporting our regional’s

food processing activities. 0 1 0

. Supporting food processing f

operations of agribusinesses

other than cooperatives. 0 0 0

g. Supporting our local’s feed

manufacturing. 7 11 11

h. Supporting our regional’s

feed manufacturing. 0 1 2

. Market access, easy i

availability. 4 3 2

. Compatibility with our grain j

handling facilties and

expertise. 13 11 6

k. Maximizing net returns for

our grain producer-members. 76 72 80

—— —— ——

Total 100 100 100
27

Table 21--IPG Advantages, Managers

Q. What are the advantages to your local in handling IPG?

Manager

General Feed Grain All

----------------Percent--------------

a. Way for members to diversify,

increase revenue. 26 21 23 24

b. Get ahead of the curve in a

new market product. 5 5 10 6

c. Need IPG to supplement

commodity business. 8 3 8 6

d. Growth potential sufficient to

justify involvement. 6 3 8 6

e. Helps maintain competitive

edge in grain marketing. 14 7 14 12

. Increased feed efficiency. 8 14 9 10 f

g. Higher quality feed rations. 10 22 7 12

h. Improve milk or meat quality,

taste, shelf life. 3 6 3 4

. IPG offer new opportunities i

for cooperatives. 20 18 18 19

—— —— ————

Total 100 100 100 100

Table 22--IPG Advantages, Innovative Style

Q. What are the advantages to your local in handling IPG?

Innovator Category

Innovator Follower Status Quo

------------------Percent---------------

a. Way for members to diversify,

increase revenue. 9 9 21

b. Get ahead of the curve in a

new market product. 4 1 0

c. Need IPG to supplement

commodity business. 1 6 3

d. Growth potential sufficient to

justify involvement. 7 1 0

e. Helps maintain competitive

edge in grain marketing. 19 11 16

. Increased feed efficiency. 4 9 5 f

g. Higher quality feed rations. 16 16 16

h. Improve milk or meat quality,

taste, shelf life. 3 7 6

. IPG offer new opportunities i

for cooperatives. 34 40 32

—— —— ——

Total 100 100 100
28

Table 23--IPG Disadvantages, Managers

Manager

General Feed Grain All

-------------------Percent-----------

System obstacles:

a. Premiums required for each

system participant (farmer,

local, end-user). 6 8 9 7

b. End use market is insufficiently

developed. 8 9 7 8

c. "True" or appropriate market

value for IPG difficult to

determine. 9 11 9 9

d. IPG market could be

undermined by substitutes. 3 3 2 3

Grower obstacles:

e. Net returns/acre may be too

low to sustain farmer interest. 12 12 11 12

. Need sufficient acres to f

guarantee a consistent market. 15 11 11 14

g. Production shortfalls from

yield drag. 13 8 14 12

h. IPG competes with seed

distributed by

member-producers. 0 1 1 0

Elevator/Cooperative Obstacles:

. Need considerable or i

expensive facility adjustments. 12 13 11 12

j Need considerable or expensive

transportation adjustments. 3 3 1 3

k. Cost of educating growers,

customers, about benefits. 2 3 53

. Loss of fl l exibility, revenue,

from blending. 9 3 11 8

m. Fat tanks utimately more

reliable, cheaper. 3 9 4 5

n. Multiple (stacked) traits

interest us more than current

single trait emphasis. 5 5 45

—— —— ————

Total 100 100 100 100

Table 24--IPG Disadvantages, Innovative Style

Innovator Category

Innovator Follower Status Quo

------------------Percent-----------------

System obstacles:

a. Premiums required for each

system participant (farmer,

local, end-user). 0 4 0

b. End use market is

insufficiently developed. 4 1 1

c. "True" or appropriate market

value for IPG difficult to

determine. 6 1 3

d. IPG market could be

undermined by substitutes. 0 1 0

Grower obstacles:

e. Net returns/acre may be too

low to sustain farmer interest. 17 14 4

. Need sufficient acres to f

guarantee a consistent market. 14 12 12

g. Production shortfalls from

yield drag. 13 27 16

h. IPG competes with seed

distributed by

member-producers. 0 0 1

Elevator/Cooperative Obstacles:

. Need considerable or expensive i

facility adjustments. 1 5 10

. Need considerable or expensive j

transportation adjustments. 3 0 3

k. Cost of educating growers,

customers, about benefits.3 1 6

l. Loss of flexibility, revenue, from

blending. 10 14 25

m. Fat tanks utimately more

reliable, cheaper. 11 11 6

n. Multiple (stacked) traits

interest us more than current

single trait emphasis. 17 7 10

—— —— ——

Total 100 100 100
29

Table 25--Farmer Adoption of IPG, Managers

Q. During 1999, how have farmers in your local’s marketing territory

accepted (planted) IPG?

Manager

General Feed Grain All

---------------Percent------------

a. IPG has made substantial

inroads, measured by farm

numbers or sizes. 8 2 16 8

b. Some impact--here and there we

see interest and activity among

area farmers. 52 62 64 56

c. No impact as yet, but we expect

this to change. 23 20 8 20

d. No impact, and this is not likely

to change. 9 8 7 8

e. Don’t know. 8 9 5 9

—— ———— ——

Total 100 100 100 100

Table 26--Farmer Adoption of IPG, Innovative Style

Q.During 1999, how have farmers in your local’s marketing territory

accepted (planted) IPG?

Innovator Category

Innovator Follower Status Quo

---------------Percent----------------

a. IPG has made substantial

inroads, measured by

farm numbers or sizes. 16 7 1

b. Some impact--here and

there we see interest and

activity among area

farmers. 59 61 47

c. No impact as yet, but we

expect this to change. 15 20 26

d. No impact, and this is not

likely to change. 5 5 12

e. Don’t know. 4 7 14

—— —— ——

Total 100 100 100

Table 27--Fluctuations in Farmer Adoption of IPG,

Managers

Q.How has farmer acceptance (planting) of IPG changed from 1998

to 1999?

Manager

General Feed Grain All

-----------------Percent-----------

a. No difference between 1998

and 1999. 35 29 18 30

b. 1999 brought increased

planting over 1998. 35 46 59 41

c. Farmer planting of IPG is

lower during 1999. 18 11 11 15

d. Don’t know. 12 14 12 13

— — — — — —— —

Total 100 100 100 100

Table 28--Fluctuations in Farmer Adoption of IPG,

Innovative Style

Q. How has farmer acceptance (planting) of IPG changed from 1998

to 1999?

Innovator Category

Status 

Innovator Follower Quo

---------------------Percent-----------------

a. No difference between

1998 and 1999. 21 32 40

b. 1999 brought increased

planting over 1998. 60 36 26

c. Farmer planting of IPG is

lower during 1999. 15 19 13

d. Don’t know. 4 12 21

—— —— ——

Total 100 100 100
30

Table 29--Producer Size and Adoption of IPG, Managers

Q. In your marketing territory, what size producer has adopted IPG?

Manager

General Feed Grain All

--------------------Percent----------

a. Producers have uniformly

adopted IPG regardless of size. 16 18 19 17

b. Mostly very large producers

(1,500 acres+). 5 7 8 6

c. Mostly large producers

(500-1,500 acres). 48 44 56 48

d. Mostly small producers

(1-500 acres). 8 12 11 9

e. Don’t know. 23 20 6 20

—— —— ————

Total 100 100 100 100

Table 31--Producer Size and Commitment to IPG,

Managers

Q. Among the following producer sizes, who are the most likely to

increase IPG acreage to 10 percent or more of their totalacreage?

Managers

General Feed Grain All

----------------Percent--------------

a. Producers who increase IPG

acreage will do so regardless

of size 23 16 13 20

b. Very large producers

(1,500 acres+). 11 13 12 12

c. Large producers

(500-1,500 acres). 43 39 52 44

d. Small producers

(1-500 acres). 8 18 5 9

e. Don’t know. 14 13 17 15

—— —— ————

Total 100 100 100 100

Table 30--Producer Size and Adoption of IPG,

Innovative Style

Q. In your marketing territory, what size producer has adopted IPG?

Innovator Category

Innovator Follower Status Quo

-----------------Percent--------------

a. Producers have uniformly

adopted IPG regardless of

size. 25 16 10

b. Mostly very large producers

(1,500 acres+). 6 7 6

c. Mostly large producers

(500-1,500 acres). 52 49 41

d. Mostly small producers

(1-500 acres). 4 10 13

e. Don’t know. 13 18 30

—— —— ——

Total 100 100 100

Table 32--Producer Size and Comitment to IPG,

Innovative Style

Q. Among the following producer sizes, who are the most likely to

increase IPG acreage to 10 percent or more of their total acreage?

Innovator Category

Innovator Follower Status Quo

----------------Percent---------------

a. Producers who increase IPG

acreage will do so regardless

of size. 21 18 21

b. Very large producers

(1,500 acres+). 11 12 11

c. Large producers

(500-1,500 acres). 49 44 39

d. Small producers

(1-500 acres). 6 10 13

e. Don’t know. 14 16 17

—— —— ——

Total 100 100 100
31

Table 33--Producer Turnover, Managers

Q.What are the primary causes of turnover among contract growers?

Manager

General Feed Grain All

------------Percent---------

a. Inadequate premiums. 18 18 14 17

b. Actual or perceived yield drag. 19 8 11 15

c. Difficulty finding customers. 5 5 4 5

d. Market is too small and

unreliable. 8 10 11 9

e. Difficulties accessing desired

traits or varieties. 4 0 0 2

. Multiple traits not available. 1 0 0 1 f

g. Market easily saturated for

some traits. 2 0 7 2

h. IPG too much work compared

with other grains. 3 13 14 7

. Insufficient technical information i

available for farmers. 2 0 0 1

. Farmers want to keep open j

(noncontract) markets for grain. 3 0 0 2

k. Seed and other inputs too

expensive. 6 3 0 4

. Planting conditions too l

unreliable. 2 0 0 1

m. Too much competition from

other enterprises. 2 0 0 1

n. Farmers want to see IPG

market develop further. 5 10 11 7

o. Limited on-farm IPG storage. 7 10 7 8

p. Limited elevator IPG storage. 7 18 14 11

q. Transportation expense or

limitations. 1 5 7 3

r. Restrictions on saving seed. 4 0 0 2

— — — — — —— —

Total 100 100 100 100

Table 34--Producer Turnover, Innovative Style

Q. What are the primary causes of turnover among contract growers?

Innovator Category

Innovator Follower Status Quo

--------------------Percent--------------

a. Inadequate premiums 6 0 25

b. Actual or perceived yield drag. 6 22 0

c. Difficulty finding customers. 0 0 13

d. Market is too small and

unreliable. 6 0 0

e. Difficulties accessing desired

traits or varieties. 0 0 13

. Multiple traits not available. 0 0 0 f

g. Market easily saturated for

some traits. 0 0 0

h. IPG too much work compared

with other grains. 6 11 0

. Insufficient technical information i

available for farmers. 6 0 0

. Farmers want to keep open j

(noncontract) markets for grain. 0 0 0

k. Seed and other inputs too

expensive. 6 0 13

. Planting conditions too l

unreliable. 6 0 0

m. Too much competition from

other enterprises (pork, GPS,

etc.). 60 0

n. Farmers want to see IPG

market develop further. 6 0 25

o. Limited on-farm IPG storage. 6 11 0

p. Limited elevator IPG storage. 13 56 13

q. Transportation expense or

limitations. 13 0 0

r. Restrictions on saving seed. 13 0 0

—— —— ——

Total 100 100 100
32

Table 35--Anticipated Impact of IPG on Locals’

Operations, Managers

Q.In the next 3 years (1999-2001), how much impact will IPG have on

your local’s operations?

Manager

General Feed Grain All

------------------Percent-----------

a. Substantial impact--we

anticipate overhauling or

making major adjustments in

our grain operations to

accommodate IPG. 2 2 0 2

b. Noticeable impact--we expect

to be making several

adjustments to accommodate

the requirements (production,

handling, etc.) of IPG. 41 60 58 48

c. Little impact--we expect

"business as usual" to continue

in our grain business. 33 26 29 30

d. No impact. 3 2 3 3

e. Don’t know--the impact and

significance of IPG isn’t clear. 21 11 11 18

Table 36--Anticipated Impact of IPG on Locals’

Operations, Innovative Style

Q.In the next 3 years (1999-2001), how much impact will IPG have on

your local’s operations?

Innovator Category

Innovator Follower Status Quo

------------------Percent--------------

a. Substantial impact--we

anticipate overhauling or

making major adjustments in

our grain operations to

accommodate IPG. 2 2 0

b. Noticeable impact--we

expect to be making several

adjustments to accommodate

the requirements

(production,

handling, etc.) of IPG. 41 60 58

c. Little impact--we expect

"business as usual" to

continue in our grain

business. 33 26 29

d. No impact. 3 2 3

e. Don’t know--the impact and

significance of IPG isn’t

clear. 21 11 11

—— —— ——

Total 100 100 100

Table 37--IPG Activities Preferred by Locals, Managers

Q.In the next 3 years (1999-2001) can you see your local cooperative

...

Manager

General Feed Grain All

---------Percent-----------

a. Bargaining regarding inputs or

contract terms on behalf of

farmer-growers of IPG. 18 10 21 17

b. Investing in an IPG processing

facility with your regional

cooperative or other locals. 6 7 8 6

c. Developing strategic alliances

with IPG seed companies or

technology developers. 25 19 21 23

d. Developing strategic alliances

with privately owned grain

companies. 17 7 6 13

e. Coordinating feeding of

cooperative or member owned

livestock with member-produced

IPG. 16 46 26 25

. Jumping in and out of the IPG f

business as grain prices warrant. 18 12 19 17

— — — — — —— —

Total 100 100 100 100
33

Table 38--IPG Activities Preferred by Locals, Innovative

Style

Q.In the next 3 years (1999-2001) can you see your local

cooperative . . .

Innovator Follower Status Quo

-----------------Percent-----------------

a. Bargaining regarding inputs

or contract terms on behalf

of farmer-growers of IPG. 6 8 7

b. Investing in an IPG

processing facility with your

regional cooperative or

other locals. 4 3 2

c. Developing strategic

alliances with IPG seed

companies or technology

developers. 25 17 20

d. Developing strategic

alliances with privately

owned grain companies. 12 17 13

e. Coordinating feeding of

cooperative or member

owned livestock with

member-produced IPG. 43 33 18

. Jumping in and out of the f

IPG business as grain

prices warrant. 9 22 40

—— —— ——

Total 100 100 100

Table 39--Payoff Horizon for IPG Investments,

Managers

Q.If your local makes a substantial investment in IPG technologies or

infrastructure (>$250K), how long will it wait for a satisfactory return on

investment (ROI)?

Manager

General Feed Grain All

----------------------Percent-------------

a. Would wait and see how

market develops before

considering investing. 43 59 63 50

b. Less than 1 year. 0 2 0 1

c. 1-2 years. 10 9 8 10

d. Between 2-5 years. 26 25 22 25

e. Over 5 years. 20 5 7 14

—— —— —— ——

Total 100 100 100 100

Table 40--Payoff Horizon for IPG Investments,

Innovative Style

Q.If your local makes a substantial investment in IPG technologies or

infrastructure (>$250K), how long will it wait for a satisfactory return on

investment (ROI)?

Innovator Category

Innovator Follower Status Quo

-----------------Percent----------------

a. Would wait and see how

market develops before

considering investing. 36 51 62

b. Less than 1 year. 0 1 0

c. 1-2 years. 11 8 10

d. Between 2-5 years. 36 26 14

e. Over 5 years. 17 14 13

—— —— ——

Total 100 100 100
34

Table 41--Relational Style with Regional Cooperative,

Managers

Q. In the commodity grain business, how much do you compete with

your regional cooperative?

Manager

General Feed Grain All

-------------------Percent----------

a. None; the regional serves

different markets than the local. 27 18 31 25 

b. None; we are a superlocal or

‘mini-regional.’ 3 9 5 5

c. Very little; the regional and our

local are partners in key activities. 28 29 24 28

d. Some; we have to do what’s

needed to get the best price for our

members. 31 35 28 32

e. Considerably; in the grain

business we consider the regiona

one of our chief competitors. 11 8 11 10

— — — —— —— —

Total 100 100 100 100

Table 42--Relational Style with Regional Cooperative,

Innovative Style

Q.In the commodity grain business, how much do you compete with

your regional cooperative?

Innovator Category

Status 

Innovator Follower Quo

--------------Percent------------------

a. None; the regional serves

different markets than the local. 25 27 21

b. None; we are a superlocal or

‘mini-regional.’ 8 1 6

c. Very little; the regional and our

local are partners in key

activities. 33 32 19

d. Some; we have to do what’s

needed to get the best price for

our members. 22 32 40

e. Considerably; in the grain

business we consider the

regional one of our chief

competitors. 11 7 14

—— —— ——

Total 100 100 100 Table 43--Preferred Specialty Grain Relationship with

Regional, Managers

Q.How do you prefer to work with your regional in IPG activities?

Manager

General Feed Grain All

-----------------Percent----------

a. We would expect our regional to

work closely as a partner with us. 42 41 48 43

b. We want our regional to invest

in IPG food or feed procesing

operations to expand our market. 14 19 16 15

c. We would prefer that our regional

does not compete with us in IPG. 10 12 16 11

d. We are concerned regionals will

proceed with IPG without involving

locals. 11 5 6 9

e. We prefer to form alliances with

other locals. 11 12 4 10

. We prefer to form alliances with f

technology developers/seed

companies. 11 10 8 10

g. Our regional has better things

to do than pursue IPG marketing. 2 0 2 2

— — — — — —— —

Total 100 100 100 100
35

Table 44--Preferred Specialty Grain Relationship with

Regional, Innovative Style

Q.How do you prefer to work with your regional in IPG activities?

Innovator Category

Innovator Follower Status Quo

------------------Percent-----------------

a. We would expect our regional

to work closely as a partner

with us. 37 38 44

b. We want our regional to

invest in IPG food or feed

procesing operations to

expand our market. 14 19 12

c. We would prefer that our

regional does not compete

with us in IPG. 10 11 15

d. We are concerned regionals

will proceed with IPG without

involving locals. 7 10 7

e. We prefer to form alliances

with other locals. 13 10 10

. We prefer to form alliances f

with technology

developers/seed companies. 17 10 9

g. Our regional has better

things to do than pursue IPG

marketing. 1 3 3

—— —— ——

Total 100 100 100

Table 45--Desirable Regional Cooperative Participation

in IPG, Managers

Q.If your local cooperative decides not to participate in IPG marketing

or handling, to what extent would you accept your regional

cooperative’s direct participation (independent of your local)?

Manager

General Feed Grain All

------------------Percent------------

a. Regional direct participation is

very acceptable to our local. 12 15 19 14

b. Even though we don’t currently

participate, we view regional

participation as a foundation for

our future involvement in IPG. 36 36 41 37

c. Our local would have reservations

about local participation. 5 10 7 6

d. We are concerned about regionals

bypassing the local cooperative

system. 45 39 34 42

e. We don’t want to be involved with

IPG, nor do we want our regional

to be. 1 0 0 1

—— —— ————

Total 100 100 100 100

Table 46--Desirable Regional Cooperative Participation

in IPG, Innovative Style

Q.If your local cooperative decides not to participate in IPG marketing

or handling, to what extent would you accept your regional

cooperative’s direct participation (independent of your local)?

Innovator Category

Innovators Followers Status Quo

-------------Percent------------

a. Regional direct participation

is very acceptable to our local. 24 10 8

b. Even though we don’t

currently participate, we

view regional participation

as a foundation for our

future involvement in IPG. 32 42 32

c. Our local would have

reservations about local

participation. 10 1 6

d. We are concerned about

regionals bypassing the

local cooperative system. 34 46 51

e. We don’t want to be involved

with IPG, nor do we want our

regional to be. 0 0 3

—— —— ——

Total 100 100 100
36

Table 47--Regional Partnering Advantages, Managers

Q.What are the advantages to working with your regional cooperative

in IPG?

Manager

General Feed Grain All

-----------------Percent---------

a. Share uncertainty and risk. 12 11 18 13

b. Share costs 8 9 7 8

c. Access to complementary

technologies, processing. 8 10 7 8

d. Reducing innovation period. 2 4 1 2

e. Regional has "big picture." 6 2 4 5

. Potential to expand product f

range. 9 8 6 8

g. Global market access. 11 15 16 13

h. Technical production expertise. 4 4 3 4

. Contracting and legal expertise. 6 7 4 6 i

. Regional offers total system from j

seed to food or feed. 10 14 12 11

k. Potential to test system to work

out bugs. 3 4 3 3

. Regionals’ alliances with other l

system participants. 16 10 16 15

m. Trust regional more than other

partners. 6 2 3 4

— — — — — —— —

Total 100 100 100 100

Table 48--Regional Partnering Advantages, Innovative

Style

Q.What are the advantages to working with your regional cooperative

in IPG?

Manager

Innovator Follower Status 

Quo

-----------------Percent----------------

a. Share uncertainty and risk. 0 4 2

b. Share costs 3 4 0

c. Access to complementary

technologies, processing. 0 3 2

d. Regional has "big picture." 0 1 5

e. Potential to expand product

range. 1 4 9

f. Global market access. 16 13 13

g. Technical production

expertise. 3 3 3

h. Contracting and legal

expertise. 6 10 6

. Regional offers total system i

from seed to food or feed. 16 19 16

. Potential to test system to j

work out bugs. 3 1 8

k. Regionals’ alliances with

other system participants. 35 28 22

. Trust regional more than l

other partners. 9 8 9

m. None of the above. 7 0 5

—— —— ——

Total 100 100 100
37

Table 49--Regional Partnering Disadvantages,

Managers

Q.What are the disadvantages or limitations (if any) to working with

your regional cooperative in IPG?

Manager

General Feed Grain All

------------------Percent----------

a. None 14 9 8 12

b. Bureaucracy within regional

slows response. 17 17 10 16

c. Margin would need to be

shared with regional. 13 19 23 16

d. Regional’s priorities conflict

with local’s. 7 12 4 8

e. Having right people to deliver

new technology to farmers. 6 5 4 6

. Lowering feed or grain cost to f

be low cost supplier. 5 13 3 7

g. Determining how to distribute

new technology. 3 1 1 2

h. Regional resources allocated

across many locals

(spread too thin). 6 7 8 7

. Regional’s processing i

operations incompatible with

our choice of IPG traits. 3 2 0 2

. How to get sufficient return per j

acre to sustain farmer

interest. 24 15 37 24

— — — — — —— —

Total 100 100 100 100

Table 50--Regional Partnering Disadvantages,

Innovative Style

Q.What are the disadvantages or limitations (if any) to working with

your regional cooperative in IPG?

Innovator Category

Innovator Follower Status Quo

------------------Percent----------------

-

a. None 22 11 15

b. Bureaucracy within regional

slows response. 10 6 9

c. Margin would need to be

shared with regional. 7 14 13

d. Regional’s priorities conflict

with local’s. 10 3 9

e. Having right people to

deliver new technology to

farmers. 4 10 1

. Lowering feed or grain cost f

to be low cost supplier. 6 10 3

g. Determining how to distribute

new technology. 0 0 4

h. Regional resources allocated

across many locals

(spread too thin). 10 7 6

. Regional’s processing i

operations incompatible with

our choice of IPG traits. 1 4 1

. How to get sufficient return j

per acre to sustain farmer

interest. 28 31 38

—— —— ——

Total 100 100 100
38

Table 51--Parallels Between Pork and Grain Industries,

Managers

Q. How much do you agree with this statement: Our local cooperative

is concerned that IPG developers/suppliers will take over the grain

market just as large integrators have made inroads in the pork market

and other agricultural products.

Managers

General Feed Grain All

--------------Percent--------------

Agree Strongly 13 0 14 10

Agree Somewhat 46 39 49 45

No Opinion 18 29 12 19

Disagree Somewhat 18 30 22 21

Strongly Disagree 6 2 4 5 —— —— —— ——

Total 100 100 100 100

Table 52--Parallels between Pork and Grain Industries,

Innovative Style

Q. How much do you agree with this statement: Our local cooperative

is concerned that IPG developers/suppliers will take over the grain

market just as large integrators have made inroads in the pork market

and other agricultural products.

Innovator Category

Innovator Follower Status Quo

----------------Percent--------------

Agree Strongly 7 11 14

Agree Somewhat 50 49 35

No Opinion 14 19 24

Disagree Somewhat 23 19 24

Strongly Disagree 7 3 4 —— —— ——

Total 100 100 100
U.S. Department of Agriculture

Rural Business–Cooperative Service

Stop 3250

Washington, D.C. 20250-3250

Rural Business–Cooperative Service (RBS) provides research,

management, and educational assistance to cooperatives to

strengthen the economic position of farmers and other rural

residents. It works directly with cooperative leaders and

Federal and State agencies to improve organization,

leadership, and operation of cooperatives and to give guidance

to further development.

The cooperative segment of RBS (1) helps farmers and other

rural residents develop cooperatives to obtain supplies and

services at lower cost and to get better prices for products they

sell; (2) advises rural residents on developing existing

resources through cooperative action to enhance rural living;

(3) helps cooperatives improve services and operating

efficiency; (4) informs members, directors, employees, and the

public on how cooperatives work and benefit their members

and their communities; and (5) encourages international

cooperative programs. RBS also publishes research and

educational materials and issues Rural Cooperatives magazine.

The U.S. Department of Agriculture (USDA) prohibits

discrimination in all its programs and activities on the basis of

race, color, national origin, gender, religion, age, disability,

political beliefs, sexual orientation, and marital or family

status. (Not all prohibited bases apply to all programs.)

Persons with disabilities who require alternative means for

communication of program information (braille, large print,

audiotape, etc.) should contact USDA’s TARGET Center at

(202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA, Director,

Office of Civil Rights, Room 326-W, Whitten Building, 14th and

Independence Avenue, SW, Washington, D.C. 20250-9410 or

call (202) 720-5964 (voice or TDD). USDA is an equal

opportunity provider and employer.