R

u

ral COOPERATIVES COOPERATIVES

USDA / Rural Development January/February 2007

Bringing home 

California's

billion-pound baby

page 8
Editor’s note: as part of an interview with Blue Diamond Almond

Growers leaders that appears on page 8 of this issue, Rural

Cooperatives asked whether there had been any ramifications at

Blue Diamond when one of its sister tree-nut co-ops voted about two

year ago to convert to an investor-owned corporation. The answer of

Board Chairman Clinton Shick deserves special attention, and is

printed below.

As a former member of the walnut cooperative that converted — and one who continues to grow walnuts (as well as

almonds) — it remains unclear whether the conversion helps

the walnut industry long term. If anything, it confirmed in my

mind that I am on the Blue Diamond board to serve in a way

that benefits all growers in the almond industry. 

Still, the conversion required us to evaluate their action as

a significant event in the co-op world. Blue Diamond didn't

get to be the world’s largest almond processor and marketer

over night. We've been working at it for 96 years, and the success we may enjoy today is made possible by standing on the

shoulders of a lot of folks who worked

hard way before us. 

As a director of a cooperative, the lure

of short-term gains that may be possible

because of preceding, long-term endeavors is seductive and tempting. But what

about the future stability of an industry

that has been served well by the cooperative business model? 

At Blue Diamond, we think the cooperative business model, when properly

managed, can continue to serve not just

today’s member-owners, but those who

will follow after us. 

At a recent Young Co-op Leaders

meeting, I made the comment that, in and

of itself, there is nothing special about a

cooperative. But when you have the right

management with a long-term outlook, and you have an

engaged board, and you have the best people in every discipline, some magic happens. When you enjoy success, all the

benefits flow directly through to the member-owners. 

In the walnut co-op’s case, there have been short-term benefits in the form of a payout for selling the co-op's facilities

and brand. But at what long-term cost? Have future growers

been placed at a

disadvantage

because of this

action? The business is now owned

by stockholders

whose economic

motivation may be

sharply divergent

from the growers'

interests. The

"rest of the story"

is still to be written, and who can

say how it will

turn out?

But for Blue

Diamond, it has

caused our members to reaffirm their support of the

cooperative business model that is

focused on building strong markets with

profitable returns to members. We

believe we have proven, and can continue, to be highly successful conducting

business as a cooperative in which all

members are treated fairly and equitably

over the long term.

When I started growing almonds,

there were about 300,000 acres of

almonds in California. Today, there are

680,000 acres, and California dominates

the world almond market with an 80-percent share. I simply do not believe that

this type of sustained industry growth

would have been possible without the

presence of a grower-owned cooperative

leading the industry in so many crucial ways, from processing

to marketing. These gains have resulted in large part from

growers working together in a cooperative for their common

good and the good of the industry.

— Clinton Shick, Chairman

Blue Diamond Growers ■

2 January/February 2007 / Rural Cooperatives

COMMENTARY

Working for the long term 

Blue Diamond Chairman Clinton Shick on his

almond ranch in Kern County, Calif. Photo by

Catherine Merlo 

These gains have

resulted in large

part from

growers working

together in a

cooperative. 
Rural Cooperatives / January/February 2007 3

Rural COOPERATIVES (1088-8845) is published

bimonthly by Rural Business–Cooperative Service,

U.S. Department of Agriculture, 1400 Independence

Ave. SW, Stop 0705, Washington, DC. 20250-0705.

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Copies may be obtained from the Superintendent of

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To file a complaint of discrimination, write to USDA,

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Avenue, S.W., Washington, D.C. 20250-9410, or call

(800) 795-3272 (voice), or (202) 720-6382 (TDD). USDA

is an equal opportunity provider and employer.

Mike Johanns, Secretary of Agriculture

Thomas C. Dorr, Under Secretary,

USDA Rural Development

Jack Gleason, Administrator, 

Rural Business-Cooperative Programs

Dan Campbell, Editor

Vision Integrated Marketing/KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or

Fax (202) 720-4641, Information Director,

This publication was printed with vegetable oil-based ink.

R

u

ral COOPERATIVES COOPERATIVES

January/February 2007 Volume 74 Number 1

p. 4

p. 14

p. 18

p. 24

On the Cover:

Almonds are swept into windrows for harvest. The U.S. almond

industry now produces more than 1 billion pounds annually. Blue

Diamond Growers officers discuss marketing and other challenges

associated with industry growth, beginning on page 8. Photo courtesy Blue Diamond Growers

FEATURES 

4 Changing of the Guard

Market changes lead to higher level of farmer collaboration in England

By Charlotte Lee-Woolf

8 Billion-Pound Baby

‘High-octane’ almond orchards fuel sustained growth as Blue Diamond

expands global market reach

By Dan Campbell

14 King’s Ransom

Ohio tree farmers’ co-op seeks better markets, prices for ‘King of Pines’

By Ashley Lykins

18 Renewable fuels industry rife with opportunity for co-ops

By Lynn Pitman

22 Outside the Box 

Community-owned department stores an alternative to big-box chain stores

By Jane Livingston

24 Turning Over a New Leaf 

End of tobacco program, rising foreign competition thrust burley co-op

into new role

By Anne Todd

28 Global 300 list reveals world’s largest co-ops

David S. Chesnick & Carolyn Liebrand

DEP A R TMENTS

2 COMMENTARY

17 IN THE SPOTLIGHT

32 CO-OP DEVELOPMENT ACTION

34 NEWSLINE

42 PAGE FROM THE PAST
4 January/February 2007 / Rural Cooperatives

By Charlotte Lee-Woolf

Research Associate, EFFP Ltd.

he farming and food industry in England is

currently going through a period of fundamental change. It is widely believed that the

recent reform of the Common Agricultural

Policy (CAP), particularly the decoupling of

subsidy support from production, will increase the scope for

farmers to become more flexible in what they produce. 

These changing dynamics represent both opportunities

and challenges for farmers as they alter production in

response to market forces rather than subsidy payments.

They must ensure that they meet the needs of their customers in the supply chain in order to compete successfully

in the global food economy. 

Collaboration provides a means for farmers to achieve this:

by farmers working with one another to gain economies of

scale in purchasing of inputs, in production or marketing of

products, or by collaborating with their suppliers and customers in the supply chain to enable farmers to deliver a

cost-effective, professional service to their customers. 

However, the farming industry in England is behind the

game in collaboration. For a range of historical reasons—

including previous trading relationships, differing support structures and land laws and a political focus on the consumer—collaboration among farmers has not developed in England to the

extent it has in some areas of Europe and North America.

T

Changing of the Guard

Market changes lead to higher level of farmer collaboration in England

Grainfarmers PLC is the largest farmer-owned grain-marketing

company in the United Kingdom, with an estimated 20 percent of the

nation’s grain volume. Members’ crop is processed into bread and

other wheat-based foods. Photo Courtesy Grainfarmers PLC
The total output of farmer-controlled businesses (or

FCBs, which are collaborative initiatives often referred to as

cooperatives) in England is at some £4.7 billion, or roughly

35 percent of gross agricultural output. By contrast, in

Denmark and Sweden farmer-controlled business is double

that of their agricultural industries.

English Farming & Food Partnerships (EFFP) is a membership organization with an industry mission to strengthen

the profitability, competitiveness and sustainability of

England’s farming, food and related farm-based businesses

through collaboration. EFFP’s work is funded through a variety of sources, including the public sector, membership fees

and commercial income, and any trading surpluses are reinvested to further develop our mission within the farming and

food industry. 

EFFP aims to make collaboration work through the

growth of market-focused and professionally run FCBs and

by developing cooperation and partnership activities not only

among farmers, but also between farmers and the supply

chain. EFFP offers a comprehensive range of services to help

make this happen. These include help with collaborative supply-chain development, business start-up, business development, corporate governance services, performance management, director development, finance and communications. 

The following examples illustrate some of the ways partnership activities among farmers result in a more effective

and efficient supply chain. In each case, collaboration has a

different role in improving the competitiveness of the farm

businesses involved, including collaborative purchasing of

inputs, farm production, storage and processing and marketing of outputs. 

They demonstrate the importance of collaboration in creating a vibrant and profitable farming and food industry in

England and reinforce the need for farmers to develop

understanding of the market they are producing for, act upon

opportunities identified, reduce unnecessary costs and add

value to production. 

Achieving production efficiencies

Brixworth Farming Co. was established in 2000 by a group

of neighboring farmers wishing to collaborate with each

other at the production level to reduce overhead costs and

improve profitability in an increasingly challenging trading

environment. This joint venture business now farms 4,000

acres and is able to reduce operating costs by 25 percent, or

£40/acre, by pooling resources. 

The group is also able to purchase inputs more cheaply

due to its collective bargaining power. In addition, the partnership offers additional spare management time for the

group to explore other business opportunities or interests.

The key to the success of the partnership is that all collaborating farmers share the same vision for the joint venture

and have compatible business objectives. Consequently, combined lateral thinking among the farmer members has

improved profitability of their farm businesses.

Rural Cooperatives / January/February 2007 5
Sourcing of inputs

Woldmarsh Producers Ltd. was

founded in the 1960s by a group of

farmers who believed they were paying

too much for their inputs. By aggregating their input demand and employing

professional buyers they not only have

managed to significantly reduce their

input costs, but have saved time in the

buying process and administration.

The company has grown to reach an

annual business volume of more than

£46 million and has over 600 members.

This growth has been helped by a cellular structure, whereby Woldmarsh

negotiates input prices for its members

through a central buying team, while

maintaining a high level of communication with its members through local

groups across the region. The dedicated

central-buying team has built close supplier relationships and is able to maximize cost savings to members. 

Members buy as much as 95 percent

of their production supplies through

Woldmarsh. This loyalty is a result of

the prices the company is able to negotiate, but also the large range of services

offered to its members.

Woldmarsh Producers is based upon

a simple but effective business model.

Attention to detail and a constant desire

to improve its service for its members is

the key to success.

Storage and processing of outputs

Grainfarmers PLC stores and conditions grain on behalf of its members

and is now the largest farmer-owned,

arable and grain-marketing company in

the United Kingdom, with an estimated

20 percent of the grain market volume.

Grainfarmers recognizes two key

“customer” groups: its members and its

customers. For members, the company

has focused on cutting out costs in the

supply chain, minimizing risk and

developing guaranteed markets for its

grain. For its customers (e.g., major

end-use flour millers, feed compounders and crushers), Grainfarmers

has focused on reducing costs in the

supply chain and meeting specific enduser product requirements. 

During 2002, the company entered

into a period of disinvestment, acquisitions and joint ventures to strengthen

and expand its grain-trading business.

The joint venture formed between

Grainfarmers and United Agri-Products

(UAP) during this time provides the

company with access into national seed,

fertilizer and agro-chemical supply capabilities and is seen as a key area of development going forward. Subsequently, in

October 2005, Grainfarmers bought out

the UAP share of the joint venture

agreement to further strengthen its

position in this area.

The forging of long-term supply

partnerships has added value for both

growers and end users, supported by

the provision of an appropriate level of

investment in logistical infrastructure

and robust quality-control and foodsafety systems.

Marketing of outputs

Long Clawson Dairy is a marketing

6 January/February 2007 / Rural Cooperatives

Long-Clawson Dairy is the United Kingdom’s largest independent producer of Stilton

cheese, with an annual production of 3,400 tons. It also produces more than 50 other specialty cheeses and blended-cheese products. Photo courtesy Long-Clawson Dairy
FCB, which adds value by processing

and marketing milk produced by its

members. It provides an excellent

example of how farmers can collaborate

to add value to their products, secure

routes to market and create new economic opportunities by being better

placed to provide the volumes, quality

and consistency of supply required by

customers. 

Long Clawson Dairy was founded in

1911 when 11 farmers formed a cooperative to produce Stilton cheese in the

village of Long Clawson in

Leicestershire. Today, Clawson is the

largest independent producer of Stilton,

making around 3,400 tons a year with a

turnover of over £31 million in 2004.

About 85 percent of its milk comes

from dairy farmer shareholders, the

majority of whom are within 15 miles

of Long Clawson. Long Clawson is run

on a commercial basis; the benefit to

the farmer is focused on enhanced dividends rather than the milk price.

A major development for Clawson in

the mid-1970s was the move from

Stilton production into specialty

cheeses. This move followed recognition that it needed to diversify into

more value-added products for its

growth and development. Since then, a

significant level of investment has been

made in research and development, so

that Clawson now has a portfolio of

more than 50 blended-cheese products,

which account for around 40 percent of

turnover.

Clawson’s clear focus on its consumers—the retailers—has allowed the

cooperative to outperform industry

trends, taking a larger share of both the

Stilton and blended-cheese sectors.

Furthermore, Clawson has expanded its

markets by becoming involved in two

initiatives to develop its export market

in both Europe and the United States. 

Long Clawson dairy is acutely aware

of the need for investment in the business, particularly in research and development of new products. In July of this

year, a new dairy and innovation center

was opened. The new dairy will significantly increase output and will also help

accommodate increased demand during

seasonal peaks. The automation of

many processes in the dairy will

improve efficiencies and product quality

and consistency, and the new innovation

center will allow Long Clawson to

respond effectively to their customers’

requirements.

Editor’s note: for more information

about EFFP, the services it offers or the

businesses featured in this article, visit its

web site: www.effp.com, or contact it via email: info@effp.com, or call (+ 44) 02027

2130430. ■

Rural Cooperatives / January/February 2007 7

Grainfarmers PLC also delivers grain to breweries in England. Photo by Tim Scrivener, courtesy Grainfarmers PLC
By Dan Campbell

Editor 

n the mid-1980s, Blue

Diamond Growers ran a

series of humorous TV

commercials, showing coop growers buried up to

their waists in almonds, asking

Americans to buy “a can a week, that’s

all we ask.” In those years, the U.S.

almond industry (then as now, virtually

100-percent California based) was producing around 400 million pounds of

nuts in a typical year. 

If those same commercials were

filmed today, the growers would be

buried up to their necks, as the

California crop now tips the scales at

more than 1 billion pounds in a typical

year. The co-op anticipates a 30-percent increase in bearing acreage by

2010 and that crops will then top 1.5

billion pounds. 

In the history of specialty crops, few,

if any, can match this success. In 1950,

U.S. production of 50 million pounds

represented just 17 percent of the world

market, while Spain commanded more

than 75 percent of the market. Today,

that picture has been turned on its

head. California’s slice of the world

almond market is now 80 percent. Yet

the market has not been glutted, and

crop prices remain strong.

How have they done it? 

On the production side, the gains are

not only the result of new orchard

8 January/February 2007 / Rural Cooperatives

I

Billion-P Billion-Pound ound 

High-octane almond orchards fuel sustained growth

as Blue Diamond expands global market reach 
plantings (statewide acreage now totals

680,000 acres), but through continual

advances in the art and science of farming. More sophisticated fertility and

irrigation technology and practices are

playing a big part. So are new orchardplanting strategies, which involve various combinations of almond tree varieties (there are dozens) and planting

patterns (there are hundreds) that

increase the odds of a successful crop

set during the crucial spring pollination

season. Orchard pollination is a science

unto itself, involving close teamwork

with the honey-bee industry.

Of course, none of this industry

growth would have been possible without parallel advances in almond processing and marketing, where for 96 years

Blue Diamond and its more than 3,000

grower-members have been the industry

leader in developing new almond products and opening domestic and

international markets. From its

own brand of almond snack and

cooking nuts, to the dozens of

different sliced, diced and slivered almonds and almond

pastes developed in its own

research and test kitchens, Blue

Diamond has proven that there

are limitless ways to improve all

foods with almonds. The co-op

works closely with major food

companies that produce pastry,

candy, ice cream, breakfast

cereal, marzipan, frozen foods

and vegetables, breads, salads

and other foods. 

Rural Cooperatives recently

spoke with Blue Diamond

President and CEO Doug

Youngdahl, Board Chairman Clinton

Shick, and long-time Public Affairs

Director Susan Brauner about the role

the co-op plays in ensuring the continued success of its member-growers.

Question: How has the almond industry sustained such dramatic growth

without glutting the market? With

even bigger crops to come, where will

they all be sold?

Doug Youngdahl: Demand has actually out-paced supply. Although prices are

cyclical, the overall trend has been sufficiently profitable to support and

encourage increased almond plantings.

We’ve expanded markets around the

world and now sell in 95 countries. In

the United States, where about 30 percent of each crop is consumed, we’ve

seen annual per capita consumption rise

from around three-fourths of a pound

to one pound.

The marketing challenge involves a

combination of making gains in mature,

well-established markets and opening

new markets in developing countries

where the standard of living is rising.

The biggest growth opportunities today

are probably China and the rest of Asia.

We’ve made significant gains—especially this year in China, a market of 1.3

billion people where we’ve only had a

real presence for about five years. India

is a market of another 1 billion people,

and more of them now recognize that

almonds are a delicious source of protein and 21 vitamins and minerals. 

Q. Where are the major almond-production growth areas? 

Clinton Shick: There has been huge

growth in Kern County [the Bakersfield

area] and along the west side of the

Central Valley in Fresno and Kings

counties. Growth is being fueled by

both new, ‘high-octane’ orchard plantings and conversion of other tree and

row crops into almonds. We used to

think a ton of almonds per acre was nirvana, but now 3,000-pound yields are

produced regularly, and some orchards

produce 4,000 pounds per acre. We are

just much more productive with our

land.

Q. How have Blue Diamond members

fared during this period of growth?

Youngdahl: During the past five years,

Blue Diamond returns to our growers

have increased each year—on a per

pound basis, compared to the prior year

—by 26 percent, then by 35 percent,

then 43 percent and now 27 percent.

What is particularly amazing about this

recent trend is that the increases have

occurred over the four largest crops in

California almond history.

Q. Internationally, who are your major

competitors today?

Youngdahl: Spain ranks second.

Ironically, it is also our largest export

market. They have equipment in place

to process almonds and have found that

our California almonds are actually easier to process than their own. So Spain

re-exports a lot of what they buy from

us. Spain has the necessary

Mediterranean climate and a lot of

acres to cultivate, but water is the limitRural Cooperatives / January/February 2007 9

Bab 

Babyy

The almond bloom in Central California is one of

nature’s most beautiful spectacles. Successful pollination during bloom is crucial to a good almond

crop. Facing page: Blue Diamond featured its own

growers (and the honey-bear mascot) in television

ads in the 1980s. Photos courtesy Blue Diamond
ing factor. Australia, which currently

produces around 45 million pounds, is

expanding and hopes to double its production in about five years, which

would give it about the same size crop

as Spain. 

Q. What’s been the impact of the

strong euro vs. the U.S. dollar on your

sales in Europe? Did the creation of the

euro make business transactions a little

simpler for you?

Youngdahl: The strength of the euro

has helped us in Western Europe, our

largest market, because they can afford

to buy more almonds. But currency

rates go in cycles. People often ask what

happens when the dollar gains strength

again. I like to point out that fastest

market growth rate is in the U.S.,

where consumers obviously are paying

in U.S. dollars. 

Fortunately, we have always sold

internationally in U.S. dollars, so the

euro has had no real impact on our sales

transactions there. However, it has

made it easier for some of our

European customers to buy from us and

then move almonds around by trading

with a uniform currency. 

Shick: We’ve had a pretty stable, cheap

dollar for a number of years, and it’s

played a big part in avoiding a

supply/demand problem. I can remember back in the 1980s and early 90s

when it was the other way around, and

it really fouled up our ability to market

overseas. So we really put a premium

on trying to develop as much domestic

business as we can, because changes in

the dollar value vs. international currencies do not affect us here. One day the

exchange rate may not be as favorable

for exporters, so you can’t get lulled

into false sense of security. You need to

plan accordingly. 

Q. Any key international trade issues

facing BD?

Youngdahl: We work closely with our

government trade representatives to

open markets around the world for

California almonds, and we

very much appreciate the good

work they have done in the

trade arena. Blue Diamond has

always supported free-trade

agreements for almonds

throughout the world, whether

via bilateral or multilateral

agreements. In addition, the

Market Access Program has

been another key enabler supporting the expansion of the

almond industry in export markets over the years. 

Q. Doug, you’ve been the CEO

there now for five years. What

was the biggest challenge facing you

when you came on board, and what

changes did you implement? What’s on

top of your “to do” list right now?

Youngdahl: When I became CEO, the

biggest challenge was an almond market

price that was near or below the cost of

production for our members. In addition, our Blue Diamond return was not

viewed as competitive with others in

our industry. 

Working with our board of directors,

we began in 2001 to hold annual joint

strategic planning sessions between our

board of directors and key management. 

Through this transparent strategic

planning process, we define, review and

agree upon clear strategies for the

future. During the last five years, we

have redefined our culture around the

business maxim: “Good planning is a

prerequisite for good execution on the

way to desirable results.” 

Without spelling out all of the

changes, the results of this approach

have been highly successful. Blue

Diamond member-returns have been

10 January/February 2007 / Rural Cooperatives
Rural Cooperatives / January/February 2007 11

among the best in the industry, our

operations have become leaner and

more efficient, our customer relationships have been further enhanced and

strengthened, and our balance sheet is

stronger.

We are now preparing for our next

strategic planning session. In this session, we are looking out over a 10-year

planning horizon to ensure Blue

Diamond is properly positioned

to meet the challenges and the

golden opportunity that is sure

to come with the larger almond

crops forecasted. 

Q. Any crucial factors for successful strategic planning?

Shick: One reason it has worked

for us has been the transparency

of the process. When these

efforts don’t work, it’s often

because board and management

don’t have a relationship of trust

that allows for open and honest

dialog. Doug has been very

open, and the meetings have

been transparent. Not everything that is said gets implemented, but the process puts

issues on the table that we can talk

about openly and honestly. It’s really

been a good thing from both sides of

the equation: the farmer/producer side

and the marketing/processing side. It is

helping us get to where we need to go. 

Brauner: In preparation for the next

session, management is already reviewing our progress last year and drafting

new targets. When we meet with the

board in April, we will strategize off-site

for three days. We’ll get a clear picture

of where we are and where we need to

go. 

Youngdahl: These six sessions so far

have provided a perfect opportunity for

board and management to reflect how

the company is performing within our

industry for our members. Are we

achieving our mission and vision? Are

we doing the job we need to do in the

short term, and what do we need to do

to prepare our organization for the long

term, in five and 10 years? It’s been a

key part of our success. 

Q. Clinton, you’ve been vice chairman

for 17 years while Howard Isom served

as chairman. He was well respected not

only by the members and the industry,

but by co-ops

nationally. What

do you think his

greatest talent as

chairman was?

Shick: All Blue

Diamond board

members,

whether owners

of small or large

operations, are

successful businessmen. In addition to his almond

ranch, Howard

has a very successful certified public

accounting (CPA)

business in Chico,

Calif. Most people point to his

financial skills and

acumen as his greatest contribution to

our board. While important, I really

think that was secondary. Because of his

CPA work with many types of businesses through the years, he could see

which practices work and which don’t.

He would never mention business

clients by name, but he obviously

gleaned an enormous amount of experience and insight from them, and that

influenced the mindset he brought to

our board room. So I would say his

greatest contribution was bringing to

the table successful business practices

and ideas. He was sharp enough to

apply those practices to the almond

industry. 

Q. What is your basic philosophy of

being a successful director?

Shick: First and foremost: you hire the

very best CEO you can find, and we’ve

done that. You hire good people, you

establish expectations, and then you

hold them accountable to hit the targets

the board sets. You evaluate openly and

honestly.

Directors need to stay out of the

operational issues as much as possible.

Farmers tend to be very operations oriented, and it’s real easy for them to get

into the nuts and bolts of how a business runs. I am going to try to resist

that tendency. Instead, we will sit down

with Doug and his management team

and set realistic goals every year, then

we as directors will concentrate on

monitoring and evaluating the co-op’s

real performance against those goals.

That is the critical role of the board. 

It is vitally important that we take a

long-term view in managing our company’s capital. For a time, I think we

were playing it too close to the vest

when it came to moving into new technologies that could help us. We’ve

changed course there and are now staying more on the cutting edge of technology additions to our processes. We

realize that to maintain an industry

leadership position, we must be a lowcost producer. 

Q. A sensitive issue for many co-ops is

that they feel they pay most of the bill

to open markets, and then their comTop left: Blue Diamond CEO Doug Youngdahl outside the gift store at

the co-op’s visitor center in Sacramento; Blue Diamond’s plant in

Sacramento is the world’s largest tree-nut processing facility; Co-op

Chairman Clinton Shick on his almond ranch. Photos courtesy Blue

Diamond
petitors waltz in behind them and get

the gain without sharing in cost of

opening the door.

Youngdahl: Free-riders are a fact of life

whenever you are a market leader.

While you may pay the price of admission to open markets, you do not own

them. You have to repeatedly earn market share to keep it. 

Shick: A rising tide lifts all boats. If you

are the biggest and smartest force in the

industry, it is just your lot in life. To

help ourselves as Blue Diamond members, we know we will be helping the

industry as a whole, but that is a good

thing. 

Q. Does the existence of the Almond

Board of California help ensure that

all pay a share for marketing and promotion?

Youngdahl: Blue Diamond was a key

supporter for the creation of the

Almond Board of California under a

federal marketing order in 1950. Today,

a three-cent per pound assessment

exists on all California almond production, which is collected by almond handlers and paid to the Almond Board.

This revenue supports a collective

investment in our industry’s future, primarily to increase consumer global

awareness of California almonds. The

process is working, and it is partially

offsetting the “free-rider” syndrome. 

Q. There’s been a lot of good news on

the health front for tree nuts and

almonds. Is that playing a part in

surging demand?

Youndahl: Absolutely. There has been

a lot of good news about almond nutrition and the related favorable health

benefits. Scientific evidence continues

to mount suggesting that a regular diet

of almonds may help maintain healthy

hearts, reduce weight, prevent diabetes,

fight arthritis, inhibit tumor cell growth

and may even help lower the risk of

Alzheimer’s. The International Tree

Nut Council’s Nutrition, Research and

Education Foundation, which I chair,

has invested in new science and

research, resulting in the Food and

Drug Administration’s approval of a

health claim for almonds and other tree

nuts. Additional research, plus investments by the Almond Board, has

brought forth some really exciting science, and more studies are underway to

support the health benefits. 

Brauner: Just 10 years ago, none of the

nine world tree nut industries were

talking to each other. They viewed each

other only as competitors. Through the

International Tree Nut Council, they

came together in California to figure

out ways to increase consumption of all

tree nuts. We pooled funds to get solid

nutrition research done. We got our

qualified health claim from FDA, and

that is a key success story for the entire

world tree nut industry. 

Q. What are the major ways in which

Blue Diamond adds value to its members’ crop? What new products look

promising?

Youngdahl: We add value by creating

and expanding global market opportunities and then by capturing the highest

margin product market segments for

our members. We sell to the most

refined processed-ingredient industrial

customers and to the less defined commodity market customers. 

Our Blue Diamond retail branded

business is in one of our fastest growing

market segments. Gross sales have

tripled in the last five years and will

double again before the end of the

decade. New products, like our Bold

line of wasabi and soy flavored almonds

and jalapeño smokehouse almonds, have

added excitement to the snack nut aisle.

Nut Thins and Almond Breeze have

achieved great success within the

Natural Foods category. These successes are stimulating more new and exciting products that will be introduced to

markets later this year.

Shick: I can’t emphasize enough how

our brand separates us from the pack.

Even beyond our retail-branded sales,

owning an internationally recognized

brand helps us in making sales to industrial and food service buyers.

Youngdahl: With big crop increases

coming in the next decade, we need to

12 January/February 2007 / Rural Cooperatives

Almonds are one of mankind’s oldest and most venerated foods, as these historical

kernels indicate (courtesy Blue Diamond and Carol E. LaRosso’s 1989 book,

“Almond Ventures.”) 

■ Almonds were grown in the Nile Valley in 1450 BC, where the ancient Egyptians

prized almonds for their nutritional value. Some 30 almonds were found near

King Tutankhamen’s mummy – perhaps a nutritious snack to help him on his voyage to the afterlife. 

■ Desert nomads provided food for long journeys by mixing ground almonds with

chopped dates, pieces of pistachio nuts, sesame oil and breadcrumbs. The mixture was rolled into little balls, which did not spoil and were easily carried for

prolonged periods in deserts where no other food was available.

■ Almond oil may have been the first cosmetic, used in ancient Asia and North

Africa to treat skin dried by the sun and wind. 

■ Ancient Chinese medicines often used ground almonds in combination with

herbs and plants.

■ Anthimus, a Greek physician of the fifth century who produced a work on dietetAlmond roots run deep through human history
insulate ourselves as much as possible

for what could be a significant price

adjustment. Part of the way we do that

is to grow our consumer-branded business. 

Q. How do you ensure a flow of qualified new directors for the board?

Brauner: About 11 years ago, we started a young leader program based on the

Land O’Lakes program. Dan

Cummings, our newest board member,

and I spent three or four days at their

annual meeting, learning about their

young leader program. Our program

has been very successful for us, with

three of our nine directors having come

up through the program, and several

more on our statewide Grower Liaison

Committee. 

Shick: Continuing education for sitting

directors is also very important. The

National Council of Farmer

Cooperatives (NCFC) plays a big role

there. We try to get a majority of our

board members to the director workshops NCFC holds at its annual meeting. We’ve had some very good ‘takehomes’ from those sessions and from

comparing notes with other co-op

directors from across the country. We

get challenged in our thinking, and it

exposes us to the ways other co-ops are

doing things in other places. You get a

broader perspective.

Q. You also have to market the co-op to

keep and attract members. How competitive is the almond industry in

California?

Youngdahl: The California almond

industry is very competitive. There are

over 110 California almond handlers.

Essentially, very large growers who

market their own crop are our principle

competition. Some of them—including

the No. 2 handler—also deliver to Blue

Diamond. They understand that supporting the industry leader raises the

tide for all in the industry. 

Q. Volume incentives for members

always seem to be a controversial issue

with co-ops, but they seem to be getting

more common. Are you offering them,

and if so, have they helped keep larger

growers in the co-op?

Youngdahl: We introduced a volume

premium two years ago, which is paid

in volume increments—the greater the

volume, the higher the premium, up to

six cents per pound. Yes, this premium

is working to retain and attract larger

volume growers to Blue Diamond.

Overall, Blue Diamond’s premium program is the benchmark for our industry. 

Shick: It’s also been a good thing from

the huller-sheller point of view. Blue

Diamond receives product either in

boxes or in bulk truck loads, the latter

being where volume premiums are

earned. I’m also a member of a co-op

sheller, so that program has caused us

to put more emphasis on planning our

runs so that we get more product into

bulk deliveries to qualify for those premiums. It’s been good for Blue

Diamond and has helped us at the

huller-sheller level to become more

efficient. 

Q. Any new member services being

offered or contemplated?

Youngdahl: Blue Diamond offers members health insurance, workers’ comRural Cooperatives / January/February 2007 13

ics, cited the use of almond emulsion as a remedy for angina attacks and

inflammation of mucous membranes. 

■ The frequent use of almonds in marriage and birth ceremonies derives from

the Greek myth of Attis, originally a god of vegetation first worshiped in Phrygia and later throughout the Roman Empire. Attis was said to have been conceived after his mother consumed almonds.

■ Sweet almonds were a traditional treat in Rome, where they were used as a

snack prior to drinking to help avoid intoxication. 

■ Marzipan, an almond confection, may have originated in Spain when a

famine gripped the land after the battle of Navas De Tolosa in 1212. The

monks of San Clemente helped in the recovery by developing a secret recipe

for marzipan, which became the foundation for Spain’s industry. 

■ Then again, in Lubeck, Germany, legend has it that during the Middle Ages,

the city was being besieged and its people were starving. But a hidden store

of almonds and sugar was found and used to make into a sweet bread they

named marzipan (“Mars” for the Roman god of war, and “pan” for bread).

The siege was lifted when some marzipan was shared with the enemy, who

concluded that the city was too well fed to capitulate any time soon. 

■ Almonds were a primary trading good for seafaring Portuguese merchants

of the 16th century. 

continued on page 38

A

vase from

classical

Greece shows

an almond

harvest.
14 January/February 2007 / Rural Cooperatives

Ohio tree farmers’ cooperative seeks

better markets, prices for ‘King of Pines’

By Ashley Lykins

Ohio Cooperative

Development Center

unlight filters through a southeastern Ohio

forest near Amesville as Pete Woyar stops his

pick-up truck alongside a gravel road.

Pointing to some tree farms, he explains that

these stands of white pine belong to members of the Ohio

Premium Pine Cooperative (OPPC), based in

McConnelsville. 

“We’re a group of landowners who thought that by

banding together we could more effectively market pine,”

explains Woyar, a forester and secretary for the

cooperative.

S

King’s Ransom s Ransom
Rural Cooperatives / January/February 2007 15

Pine trees are actively marketed,

Woyar explains, but it is a relatively

low-value market in which most of the

trees are used for wood pulp. Many of

these pines, however, yield good lumber

and with a better marketing effort can

net higher value when sold as material

for furniture, wainscot siding, log

homes and timber frames. That desire

is what led to the formation of OPPC.

“We thought we could exert a little

more marketing leverage [as a co-op]

because together we have a greater

amount of pine to work with,” Woyar

says.

Marketing the king

The late Harold Jeffers, who founded Jeffers Tree Farm, played a key role

in the formation of the co-op in 2000.

He moved to the area in 1948, buying a

farm near Chesterville, and soon began

planting pine trees. In 2003, Jeffers was

inducted into the Ohio Department of

Natural Resources Hall of Fame—the

only tree farmer ever so recognized.

Today, Jeffers’ son, Jim, controls the

3,200-acre farm, and he still plants pine

trees.

“White pine is a historically important wood in the development of the

United States,” says Jim Jeffers. “We’re

a little farther south of its [normal]

range, but it seems to have good growth

and not a lot of disease problems. It’s a

majestic tree. It’s not just any pine tree:

it’s the king of pines.”

The elder Jeffers worked his large

pine acreage intensively, thinning and

pruning to build strong stands, says

Woyar. “The farm had really grown to

a pretty good size,” he says. “But he

wasn’t satisfied with selling the pine as a

low-value product to be ground into

wood chips.”

Jeffers brought Woyar into the picture because “there is a difference

between an industrial forester and a

land-management forester,” according

to Woyar. “I’m an industrial forester,”

he says. “I’m the timber beast. They are

landowners and growers of timber, and

most don’t understand the mechanics of

the market. That’s why they brought

me in.”

Additionally, Woyar says he knows

the technical side of logging, how to

restore a site and how to supervise logging contractors. 

Meetings lead to co-op

After he became involved, Woyar, a

retired forestry instructor from Hocking

College, met with a group of tree farmers interested in forming a co-op.

Meetings were held, at which Woyar

urged the growers to “be realistic,”

stressing that some of the trees were

not fit for anything other than wood

pulp. However, for many of their trees,

he said better markets could be developed. 

At that point, the group enlisted help

from others, including The Ohio

Cooperative Development Center

(OCDC) and USDA Rural

Development. “They were very helpful,” Woyar says. “We were told how to

establish a set of bylaws, how to define

ourselves as a business and how to set

ourselves up as a co-op.”

Acting as a “motivator” for the

future co-op, Ron Miller, forestry

industry specialist at the Ohio State

University South Centers in Piketon,

Ohio, had originally met with a group

of people involved with forestry in

1993. 

“We discussed issues associated with

white pine, and it led to a couple of

marketing projects,” Miller says. “This

allowed the transition for white pine

growers to form a co-op that believed

there were more markets for white pine

than just paper.”

At that time, “the only choice

landowners had was to sell it for paper

for a modest payment,” Miller says.

“When someone has spent half their

life watching the pine grow, that’s disappointing, and the forestry industry’s

credibility is at stake.”

Grants spur market work

The cooperative development center

gave OPPC a series of “mini-grants.”

One was used to take a trip to

Wisconsin to visit a pine cooperative

(which is no longer in existence).

Another was used to develop a brochure

as a recruitment tool, while a third

helped create the co-op’s logo, letterhead and stationery.

“The center also provided many

services, such as creating a mailing list,

mailing things for us and helping us

establish our base in McConnelsville,”

Woyar says. 

The cooperative applied for and

received a $160,000 Value-Added

Producer Grant from USDA Rural

Development that was used for a study

of the pine market. 

“We did a very thorough, 18-month

study of pine markets as they existed

then,” Woyar says, which helped to

identify opportunities for the co-op’s

wood.

By 2004, the cooperative had a complete set of bylaws and membership and

market agreements and registered as an

Ohio cooperative.

The name of the co-op is important,

Miller says. “The name conveys that

Ohio pine is premium pine,” he

explains, adding that trade marking and

branding is a key element in business. 

In 2004, OPPC began thinning

white pine by using contractors with

cut-to-length equipment, a new technology for the region that involves delimbing trees and cutting them to

length directly at the stump area.

Lumber prices up sharply

OPPC has, according to Woyar, exerted some influence on the stumpage price,

Pete Woyer leads a visitor through

forest owned by members of the Ohio

Premium Pine Cooperative.
16 January/February 2007 / Rural Cooperatives

which is now 50 to 100 percent more

than when the co-op was established.

Part of that gain is due to an

improvement in the overall market, he

notes. “But I like to think that part of it

has been our marketing effort, too.”

A Canadian company, for example, is

offering 20 percent more than market

price for the group’s large pine logs, he

says. “We’re looking for specialty products for our individual trees,” Woyar

says of the co-op’s marketing strategy.

“Some people have large trees, and

there is a niche market out there for big

pine trees.”

Members thoroughly inventory their

properties so as to be knowledgeable

about what they’ve got to market. The

co-op has an extensive list of contacts,

who are kept abreast of what OPPC has

available. Likewise, those contacts communicate their needs and specifications

to the co-op.

A future goal is to add more value to

members’ timber by relying less on

“spot sales,” and instead hiring a logging contactor to harvest the trees and

either market the logs or go into basic

manufacturing.

“The way timber is sold, it’s often a

once-in-a-lifetime opportunity for

many landowners,” explains Woyar.

“They make a decision to sell their timber, and they might cut the whole farm.

It might be another 30 or 40 years

before there can be another timber harvest. We would instead like to cut a little bit, more frequently, so we’re producing timber on a continuing, sustainable basis.”

Not only are the members of OPPC

attempting to be “fairly compensated”

for their work and material, according

to Woyar, but they also want to set an

example. “We’re in this to practice

good, sustainable forestry. We would

like to see the co-op recognized as a

dependable supplier of raw materials for

local sawmills and others.”

Challenges ahead

There are major challenges facing

the co-op, says Woyar. Finding enough

cash to run the business is the first.

Right now, the co-op is “making a modest profit,” Woyar says, but not earning

enough to hire a full-time manager. To

an extent, it is still reliant on grants.

OPPC recently applied for another

grant for smaller, lighter logging equipment which would have less impact on

the land and allow it to tackle smaller

logging jobs. The logging machinery

used now is expensive and is geared for

harvesting large quantities of 30- to 40-

year-old trees. “That’s our biggest hurdle right now: to get smaller logging

equipment on land and make it profitable,” says Woyar. 

Recruitment of new members and

encouraging member involvement is

another challenge, he says. The

landowners, especially large forest owners, are usually retired, and they often

don’t feel “a sense of urgency” about

their lumber business. 

Demographics play a part when an

older member dies and the forest land

passes to an heir. “You’ve got an older

membership and have to face the facts:

mortality becomes an issue,” says

Woyar.

“There’s a transition. The new generation comes in with a different set of

objectives without the benefit of having

gone through the formation process of

the co-op. A re-education and training

process takes place to bring them on

and keep the co-op going,” Woyar says. 

The bright side of the transition is

that a new perspective can be found

with the new members, which include

lawyers, doctors, computer programmers and bankers. “It’s a different perspective.”

“There should be a plan for succession,” Miller says. “The next generation

comes into the co-op, and they need to

get in tune with it.”

Jim Jeffers says he would like to see

more members in OPPC. “I think if it’s

going to have an economic impact of

any significance, it needs to have a lot

more members,” says Jeffers, a lawyer

in California who has spent considerable time in Ohio since taking over the

tree farm. The emphasis, he says,

should be to join the co-op and learn

how to make the forest healthier. 

“There ought to be more emphasis

on accelerating growth and making

trees less disease-prone,” Jeffers adds.

Approximately a third of the family’s

tree farm is enrolled in the cooperative.

Members sign a marketing agreement,

which grants marketing rights to the

landowner’s pine to the cooperative. 

Inspiring other forest co-ops

“OPPC is truly people getting

together to cooperate to make a better

situation,” Woyar says. “[Members] are

willing to take some money from a sale

and put it into a pot to benefit all the

members, and that’s what differentiates

a co-op from other businesses.”

Miller says he thinks that if OPPC

flourishes, there is potential for more

forestry cooperatives, including hardwood co-ops.

Establishing a cooperative is a long

and slow process, says Woyar. “It takes

a lot of work and a lot of talking. You’re

not going to sit down and in two days

have a co-op.”

A second piece of advice Woyar

offers is to seek help from a cooperative

development center, the local chamber

of commerce and USDA. “They all

have talents and skills, and they all have

mandates to assist these types of businesses. Avail yourself of all the help that

is out there.” 

For more information, contact

Woyar at 740-664-2475 or

pwoyar@verizon.net. ■

The access road is named for the late

Harold Jeffers, founder of Jeffers Tree

Farm.
Rural Cooperatives / January/February 2007 17

By Patricia Daughrity

Editor’s note: Daughrity is a freelance

writer and a member of National Grape

Cooperative/Welch’s, who lives in Ripley,

New York. 

ith his retirement in

November, Welch’s

CEO Daniel Dillon

gave up purple grapes,

but not agriculture.

Dillon, 61, and wife Sherry are now

growing “baby” gourmet vegetables on

their 32-acre farm near Sudbury, Mass.

Their spread is comprised of equal parts

of managed forest, open pasture and

fresh vegetables.

The farm was founded by Thomas

Bent, who began farming it in the 18th

century. It was later taken over by John

Stone and held in his family for five

generations. To honor its heritage, the

Dillons have named the operation BentStone Farm.

Dillon is building a 900-square-foot

greenhouse for his specialty-crop hobby

farm. Baby cucumbers with delicate

blooms, heirloom tomatoes and ultraruby crystal lettuce will be some of his

initial crops. He plans to sell the vegetable gems to area restaurants, which

will use them for unique garnishes. Not

entirely done with fruit, he plans on

converting the pastureland to fruit

trees, and, of course, grapes. 

Turbulent days for juice industry

The tranquility of Bent-Stone Farm

contrasts with the turbulence of the

overall juice industry as it struggles to

halt declining consumption. The juicegrape market has been particularly turbulent, leading to some speculation that

this may have caused Dillon to retire

sooner than planned. 

Not so, says Dillon, noting that he

informed his board three years ago that

he would retire before he turned 62.

“Working with the board, we had a

well-thought-out succession plan. I was

clear that I didn’t want to hang around

after I announced I was leaving – particularly when my successor was an

internal candidate.” (David Lukiewski,

senior vice president of sales and marketing, was named the new CEO in late

October.) Dillon, who had been with

Welch’s since 1982, says his time there

constituted “a most enjoyable career.”

Enjoyable, but volatile. 

Enjoyable, because Dillon is credited

with restoring the company’s competitiveness and building demand for the

products of Welch’s, which is the processing and marketing arm of the

National Grape Cooperative. Twentyfive years ago, Welch’s was a $200-million-per-year business on the downturn. Today, it does

$600 million in

annual sales and is

owner of one of

the most respected

food brands in the

world. 

“In the early

1980s, we seriously

considered not

accepting more

than 225,000 tons

[of grapes] because

we did not have

demand for more

than that. In 2006,

we received over

400,000 tons and

our members were not ‘inconvenienced’

in the least in implementing that

accomplishment,” Dillon recalls.

“Welch’s has provided a secure market

for our members’ quality grapes. We

are fulfilling our mission better than at

any time in our past.” 

Volatile, because low-carbohydrate

diets and escalating input costs have

combined to create a severe market dip

for the “grape-juice rollercoaster.”

These pressures were made worse with

a bumper crop of sour grapes delivered

in fall 2003. 

The cumulative result was an estimated 20 percent customer drop-off.

The co-op is still in the recovery mode. 

“Today we can look back at over $70

million in cost increases in three short

years.” Because of challenges posed by

the 2003 crop and declines in juice category sales, it was obvious that Welch’s

IN THE SPOTLIGHT

Welch’s Daniel Dillon swaps

crops, but stays in agriculture

Welch’s CEO Dan Dillon recently retired to his own small farm in

Massachusetts. Photo courtesy Welch’s 

W

continued on page 40
By Lynn Pitman 

University of Wisconsin Center for Cooperatives 

Editor’s note: UWCC established the Farmer Cooperative

Conference in 1998 with seed money from the Farm Foundation,

which continues to provide funding. The conference objective is to

provide co-op directors and managers, professional organizations,

government representatives and academics with information on

major trends and issues affecting agricultural cooperatives. For

information on next year’s conference, visit: www.wcc.wisc.edu

rom ethanol to methane, agriculture is playing

a significant role in addressing today’s energy

issues. The 9th annual Farmer Cooperative

Conference, held in Minneapolis in November,

addressed the tremendous opportunities – and

challenges—that exist for farmer cooperatives in the rapidly

developing field of bio-energy and other renewable energy

resources. The conference—sponsored by the University of

Wisconsin Center for Cooperatives (UWCC)—attracted

more than 150 U.S. and Canadian co-op leaders.

As energy prices and policy interact with the resources and

needs of agriculture, the shifting biofuels industry is presenting new opportunities for cooperatives to deliver benefits to

producers. Speakers stressed that cooperatives are uniquely

positioned to provide an infrastructure for many facets of the

biofuels industry and for the development of the environmental offsets market. 

Opportunities for traditional marketing and supply services will continue, while new opportunities for cooperatives

will develop in response to innovations in renewable energy.

New Farm Bill likely to increase support for energy

Will there be significant changes in the 2007 Farm Bill,

and what kind of challenges and opportunities will be created

for farmer cooperatives? Terry Barr, economist for the

National Council of Farmer Cooperatives, tackled that question, although he noted that many specifics are still lacking.

18 January/February 2007 / Rural Cooperatives

Renewable fuels

industry rife

with opportunity for

co-ops

F
While bio-energy priorities are influencing Farm Bill legislation, many energy policy issues—such as ethanol imports—

are controlled by non-agricultural legislative committees. It is

important not to lose sight of the fundamental programs that

have been part of the Farm Bill, Barr stressed. 

The Farm Bill will be influenced by a broad range of factors, including the federal budget, the Doha trade talks and

the general political climate. Battles over discretionary spending may be exacerbated by concerns about federal debt, he

said. Any resumptions of the Doha Round of trade negotiations will involve difficult tradeoffs between domestic supports and market access for imports, and are expected to

work against the status quo. 

Barr noted that the last three Farm Bills have been written

in election years. Because the margin of control of Congress

is now so close, it will more difficult to move through any

legislation in 2007. Positioning for the 2008 elections and

budget concerns will influence legislation more strongly than

policy issues. 

The Farm Bill also affects a wide variety of other non-producer groups that are often at odds with current farm policy.

Most farm groups favor a one-year extension of the existing

Farm Bill, with the exception of corn and specialty groups,

Barr said. 

Any significant shifts of funding in a new Farm Bill will

alter the business risks and incentives for farmers and cooperatives. Co-ops will have expanded opportunities in marketing

and risk management if new revenue stabilization programs

replace the marketing loan and counter-cyclical programs and

shift more risk to the farmer.

Co-ops need to “follow the money” and develop the

appropriate delivery mechanisms for new environmental programs, Barr urged. The ability of co-ops to aggregate the

efforts of smaller producers allows co-ops to document environmental compliance and conservation practices needed to

establish tradable offsets, and to participate in the development of markets that buy and sell environmental credits.

Most of the significant initiatives for biofuels are outside

the jurisdiction of the agricultural legislative committees, but

Barr said that significant incentives for cooperatives to participate in the biofuels industry may be part of the next generation of energy legislation.

Biofuel policies no substitute for commodity programs

Randall Fortenbery, Agribusiness Professor at the

University of Wisconsin-Madison, described the recent activity in biofuels as being driven by four different concerns: the

need to reduce dependence on imported oil; an interest in

the potential environmental benefits; a way to increase

demand for agricultural commodities and as a catalyst for

rural economic development. Fortenbery took a critical look

at how effectively current biofuels policy addresses these

issues. 

Current public policy includes both consumption mandates and production incentives, influencing both demand

and supply in the biofuels market. But public policies will not

change the fact that the United States will continue to be

dependent on oil imports for decades, given current and projected energy consumption levels.

Neither can biofuels public policies substitute for commodity programs to enhance farm income. Ethanol prices are

driven by the price of gas, not corn, and ethanol plant investments should not be seen as a hedge on corn crops,

Fortenbery said. The U.S. soon will face global competition

from countries such as Brazil, which will require technology

rather than low commodity prices to be used as a competitive

advantage.

Fortenbery also reviewed the type of economic benefits

that a new biofuels plant are thought to create. He pointed

out that economic impact estimates often use overly optimistic multipliers that generate unrealistic bumps in income,

sales, jobs and tax revenues. Support for the public policy that

is critical to the growth of the U.S. biofuels industry can only

be maintained if it is based on credible, realistic assumptions

and goals that do not overstate the possible benefits, he

stressed. 

Other industry challenges include expanding the transportation infrastructure that is required to support it. Service

providers need to be part of facility planning from the start.

As biofuels production continues to increase, so will the

volume of distillers-grain byproducts. The byproducts markets are crucial to production facility profitability, but as production volume increases, new markets will need to be developed to counterbalance the downward pressure on prices.

CHS, Growmark, others expanding biofuel efforts

Don Olson, senior vice president of refined fuels for CHS

Rural Cooperatives / January/February 2007 19

Corn-laden trucks make deliveries (facing page) and are weighed

(above) at ethanol plants in Missouri. Opportunities for co-ops in the

renewable energy industry were the focus of the annual Farmer

Cooperative Conference. Page 20: Carbon dioxide is a valuable coproduct produced at the Northeast Missouri Grain Cooperative

ethanol plant. USDA photos by Dan Campbell
Inc., presented a model for co-op involvement in the renewable fuels industry, based on CHS’ energy-sector business.

Under the Cenex brand, CHS sells refined fuels, propane

and lubricant oil and has moved into the logistics and marketing aspects of ethanol and biodiesel production. 

At present, 98 percent of the ethanol is produced in the

Corn Belt. In five years, it is expected that this figure will be

80 percent. Transporting biofuels to the population centers

on the coasts, where competitive products from China and

Brazil are also imported, remains a challenge, Olson noted. 

Government mandates are needed to promote expanded

E85 use, which will be critical to absorbing new ethanol

capacity. Cenex already retails E85 in some locations and is

well positioned to more broadly distribute it as part of its fuel

products mix. 

To supply its biofuels delivery system, CHS also has a 25.6

percent ownership stake in U.S. BioEnergy, which has

ethanol plants both under construction and in production.

The two companies have formed a joint venture, Provista,

which wholesales ethanol and biodiesel. CHS plans to have 1

billion gallons of ethanol under contract by 2009 in both

U.S. BioEnergy and outside ethanol plants, and plans to

develop a larger presence in biodiesel marketing.

Steve Barwick, vice president for sales and marketing at

Growmark, said that the co-op’s energy division is its largest

division. It has interests in several other energy-related ventures. Barwick sees cooperative opportunities on several

fronts. Increased ethanol production will drive demand for

products and services that co-ops are well positioned to meet:

farm inputs for increased corn acreage; grain storage; agronomic services; and the aggregating, shipping and storage

related to transportation of fuels and grain. Longer term possibilities include expansion of the market for dry distillers

grain (DDG).

Gary Haer, vice president of sales and marketing for

Renewable Energy Group (REG), discussed biodiesel project

development. REG grew out of West Central Cooperative’s

involvement in biodiesel, and offers construction, production,

management and marketing services for biodiesel projects.

Transportation, logistics and coordination with distribution

systems are critical to a project’s success. 

To avoid setbacks in growth, the industry must address

product-quality issues that have resulted from investment in

projects oriented towards quick returns, he noted. 

Hurdles facing the industry were discussed, including how

to handle ethanol trading credits, developing markets for the

growing DDG supply and the entry of the petroleum industry into bioenergy. The grassroots structure of cooperatives

can be the basis of the infrastructure that is critical to biofuel

ventures. Co-op members were early adopters of biodiesel

and continue to be a prime market for the product, as well as

providers of capital, Haer said. 

Co-ops also can represent farmers in the public arena, and

have lobbied for tax credits related to biofuels that benefit

them. 

Opportunities for co-ops sourcing corn & soybeans

Joe Anniss, general manager of MaxYield, said that a sig20 January/February 2007 / Rural Cooperatives

Tom Houser, vice president for CoBank’s Commercial

Agribusiness Division, provided an overview of the risks

currently associated with ethanol. CoBank has been a

lender to the ethanol and biodiesel industries since 1992,

and its biofuels commitments presently total more than

$700 million, primarily in ethanol.

The growth of the industry has

attracted many investors, and startup capital for new plants has

recently been readily available. He

cautioned that the ethanol industry

is a function of supply and demand

for oil, and that ethanol is simply a

blend component for gasoline at this

time. 

Houser said if crude prices fall

back to $40-plus per barrel, the economics of ethanol drastically

change, although the renewable fuel standard does provide a floor for the industry. Volatility will exist in the market as the margin trade-offs between price increases for

corn, natural gas and ethanol work through the system.

Many of the project forecasts do not take into account

debt and depreciation. 

The saturation of the DDG market will also need to be

addressed, he said. However, the current legislative landscape is favorable to ethanol, and technology continues

to improve, Houser added.

Paul Harrison, president of Western Wisconsin

Financing co-op

energy opportunities
nificant percentage of his co-op’s total savings this year is

from ethanol. MaxYield’s area of influence is north-central

Iowa. Given its location and amount of grain handled, the

co-op had already evaluated many biofuel options when it

decided to invest in an ethanol plant project in 2002. 

At this time, it appears that the co-op made the correct

decision to participate in the ethanol project, but the situation could very well change, he noted. Annis expects corn

supplies to tighten as investment in new ethanol projects continues in markets already saturated. Co-ops have an edge in

sourcing grain in these situations because they are willing to

work with small producers, know the product and are familiar

with the issues that producers face.

Randall Doyal, CEO of Al-Corn Clean Fuel, pointed out

that with the development of the biofuels sector, there is no

longer a separation between the cost of feedstock and the

value of the final product. This has had the effect of removing barriers for outside investors to invest in ethanol plants.

To meet the challenges from consolidation and from foreign

competition, vertical integration with local co-ops is a possibility. 

Local elevators have relationships with growers and the

knowledge of grain origination that ethanol plants lack, but

they will need to shift their perspective to build on these

advantages. 

Lionel La Belle, president of the Saskatchewan Ethanol

Development Council (SEDC), said that while Canada is

energy independent, its agricultural situation is similar to

that of the United States. There are currently about 101 biofuels plants in operation in western Canada, 48 of which are

producer-owned. Another 40 plants are under construction

or are being significantly expanded. The Canadian federal

government’s Ethanol Expansion Program (EEP) has faltered, and five of the 11 planned ethanol plants are in limbo,

he noted. 

La Belle sees the development of the Canadian ethanol

industry as an essential part of the solution to the problem of

falling wheat prices in western Canada. La Belle looks to the

federal government to support the development of the industry by setting national renewable fuel standards, supporting

rural-based ownership, and promoting a national perspective

so that investment in ethanol capacity can occur where biomass feedstock is abundant. 

Wind, methane, switchgrass & sugar

Ron Schwartau, director of the Minnesota Rural Electric

Association, described the challenges in meeting President

Bush’s 2006 State of the Union goal of generating 20 percent

of U.S. electricity through wind. A backlog of orders for new

wind turbines, increased costs and grid interconnection are

all issues confronting the wind industry. Some of these problems may be mitigated by newer designs, and cooperative

wind farms may be able to offer the economies of scale that

make wind power more feasible.

Dave Malmskog, director of economic analysis for

American Crystal Sugar Co., said that under current prices

and credits, U.S. sugar feedstock is too costly to be economically viable for ethanol production. Brazil’s success using

sugar cane for ethanol is based on low feedstock costs,

national support programs and low environmental standards.

Michael Gratz, president of NewBio E Systems, discussed

on-site anaerobic digesters to process organic waste into

methane gas, using waste solids as land applications, landfill

or as animal feed. Economic feasibility of this process hinges

on savings in waste disposal costs, current energy costs and

energy value of the methane, and whether the processes are

eligible for renewable energy or emissions trading credits. 

Bill Belden, project manager for Chariton Valley Biomass

Project, said the recently completed co-fire test campaigns

for switchgrass were not profitable. However, government

Rural Cooperatives / January/February 2007 21

Renewable Energy Cooperative, discussed how the coop financed its new ethanol plant. A goal of the project

was to benefit the farmer-producer, so the cooperative

structure was adopted. 

State and federal grants were important in the early

development stages of the project. The board invested

the time to go through each step of the business start-up

process thoroughly. Harrison credited the process as

having created a project that could attract both producer

and outside investors. 

Robert Hensley, attorney with Dorsey & Whitney, noted that most biofuel projects are organized as LLCs,

requiring a 30–40 percent equity investment. The cost of

ethanol plants has skyrocketed, and the backlog of contracts with reputable builders has meant that upfront letters of intent are part of any feasibility assessment. 

He cautioned against giving too much equity to outside investors, which tend to be fee-oriented and only

interested in a quick return. Another pitfall has been a

tendency to underestimate project costs.

Mark Hanson, attorney with Lindquist & Vennum, discussed co-op participation in biofuels projects where

both producers and investors are members. For a project

to be successful, participants must bring an advantage in

feedstock costs, process costs or marketing to the project. 

Hanson sees the biggest asset that producer co-ops

bring to biofuels projects as the ability to aggregate and

store grain. Cooperative participants in biofuels projects

have not sufficiently focused on producer exit strategies

(which help producers maintain liquidity) and share valuation, which takes into account the “enterprise value,” or

start-up risk, that early investors incur.

—By Lynn Pitman

continued on page 41
22 January/February 2007 / Rural Cooperatives

By Jane Livingston 

Editor’s note: Livingston is a freelance

writer based in Maine with extensive experience writing about cooperatives

cross the United States,

residents of many rural

towns have to travel 20

miles or more to buy

underwear, jeans,

sneakers, a toaster, towels or an

inexpensive watch. Their locally owned

department stores closed years ago,

unable to compete with chain stores.

Then, many of the chains faltered and

faded as out-migration cut the customer

base while regional “big-box”

superstores kept pulling people farther

away from home town Main Streets. 

In other cases, communities with no

place left to buy everyday clothing and

small appliances have tried to attract a

big-box retail store to locate in their

town, but lack the population base to

lure one. This was the case in Powell,

Wyo. With a population of 5,500, the

community—located 20 miles north of

Cody, Wyo., and 90 miles south of

Billings, Mont.—simply did not offer

the economy of scale sought by a bigbox retail chain. 

Sharon Earhart, director of the

Powell Chamber of Commerce, can

laugh now as she remembers the situation. "I'm so glad that when we asked

the big stores to come open up in our

town, they said, 'Are you kidding? Get

a life.' So we did! And a much better

one. I'm grateful to them that they all

said no, or we never would have started

down the road of this great adventure."

Powell takes the plunge

That adventure began five years ago,

when some local business people and

other Powell residents incorporated as

The Mercantile and began selling $500

shares in the company to their

neighbors. Within months, they had

raised $400,000 in start-up capital.

They opened the door of their

new store in the summer of 2002.

Community response was enthusiastic. Residents with special expertise

stepped forward to help when asked.

"Nobody ever turned us down,"

Earhart says. They were fortunate

to have a retired department store

buyer and manager, Mike Reile, in

their midst. His willingness to work

pro bono until the company was

formed enabled them to move ahead

and begin buying inventory sooner

than they had planned to do. 

"He's very bold," she says. "You

have to be that way because the rag

industry is tough and very fickle. You

can't let your feelings get hurt, or buy

just what you like."

The three or four potential competitors already established in Powell were

very supportive of the project and all

have benefited from The Merc's presence. Earhart notes that the town had a

precedent for this sort of commercial

cooperation. When one of Powell's two

car dealers closed, the remaining dealer

was the strongest advocate for attracting another one. "His business fell off

because people perceived that without

competition the prices would go up.

When the original dealer who'd closed

re-opened, both businesses did better

right away."

Earhart says people come from as far

as Billings, Mont., a city of 95,000 people nearly 100 miles away. "All the malls

are like cookie cutters, they all sell the

same thing," she explains. "Here, you

don't know what you're going to find,

but it will be something you won't find

at the mall. People like that." 

Five consecutive profitable years

A good merchandise buyer is key to

a store's success, Earhart stresses.

Powell was prepared to mount a national search until they found Mike Reile.

But, she adds, a community may not

have to look that far. While meeting

with a group in Upstate New York, a

steering committee member recalled

that her employer's wife was a buyer.

"When the idea gets to the point where

it becomes real and people see its validity," she notes, "people step forward."

And step forward they did, in Powell.

Within months of selling the first $500

shares to local residents in early 2002,

The Mercantile raised $400,000 in

start-up capital. They opened the door

of their new store that summer. They

have had five straight profitable years,

Outside the Box

Community-owned department stores 

an alternative to big-box chain stores

A

The Mercantile, a community-owned

department store in Powell, Wyo., has had

five consecutive profitable years since it

opened in 2002. Photos courtesy Powell

Chamber of Commerce.
Rural Cooperatives / January/February 2007 23

and in 2006 they purchased the store

next door in order to double their size.

"We've become a tourist destination,

who'd have thought it!" Earhart

exclaims.

Similar efforts have started in a number of rural communities in Wyoming

and Montana, and are now sprouting in

the Northeast. One of the first towns to

take a hard look at community ownership of a retail department store is

Greenfield, Mass. A group of

Greenfield citizens have been pursuing

the idea of starting such a store for two

years. This past November, in partnership with the Cooperative Development

Institute (CDI), they invited Earhart to

share her town's story. As of this writing, they were awaiting state approval

to launch their stock sale. 

Co-op oriented town

Greenfield has more than three

times the population of Powell, but—

sitting halfway between the thriving

Hampshire County college area of

Northampton-Amherst, Mass., and the

popular tourist destination of

Brattleboro, Vt.—competition for retail

dollars is fierce. There's even a department store on Main Street already, but

it deals mostly in more upscale, pricier

products. 

Greenfield also has certain advantages. It is the county seat of rural

Franklin County and received national

attention about 12 years ago when it

mounted a successful referendum campaign that prevented a big-box chain

store from opening there. Three years

ago when an Ames department chain

store closed, the strong undercurrent of

loyalty to local businesses remained

undiminished. 

Despite Greenfield Mayor Christine

Forgey openly courting a big-box store,

the “buy local” sentiment keeps growing, as witnessed by the farmers markets

and community-supported farmers’

associations that dot the county. The

town supports several thriving retail

grocery stores that include—in addition

to a multinational-owned chain store—a

well-established, family-owned store

and Green Fields Market, a natural

products cooperative on Main Street

owned by its 1,400 consumer-members. 

There's also a Greenfield Co-op

Bank, a farmers' cooperative exchange,

several worker-owned co-ops and some

cooperative housing in this town. So

when the idea of a communityowned, retail department store

began to surface in Greenfield,

many people were quick to see

the possibilities. 

Seminar plants seed

The idea for a communityowned store was planted when

Bob Rottenberg, a local business development consultant,

attended a cooperative-business-development training

institute in 2003, where a

Montana retail store was presented as a case study. The

training was conducted by

CooperationWorks!, a national

network of cooperative development centers. Rottenberg was on the

staff of CDI at the time. CDI, the

Northeast region's development center

for cooperative enterprise, is a founding

member of CooperationWorks!

So it was only natural that when a

local resident came to Rottenberg and

asked what could be done to prevent

the big-box stores from becoming

established in their town, he suggested

they look into a group-based business.

A small group of active citizens began

working together. The group included a

couple of city council members, the

executive director of the county community development corporation, a

bank president, a carpenter, an insurance adjuster, a filmmaker and one

clothing retailer.

"Most of us were not experienced in

the retail business, and none of us had

ever been involved in selling stock,"

Rottenberg notes. But they had been

unsuccessful in attracting private entrepreneurs who might back their endeavor, so they were faced with creating

their own business.

The first step was to review the

options for incorporation. While many

were drawn to the co-op model, the

steering committee ultimately chose the

community ownership path. Their reasoning, after many hours of discussion

and a considerable amount of research,

was that they needed to acquire start-up

capital within a set timeframe to get the

business off the ground. 

Establishing the appropriate price for

a share was a challenge. The “one

member, one vote” principle of cooperatives was seen as too restrictive,

because group members felt they would

need many people to buy more than

one share.

As a compromise, shares were priced

at $100, but were initially offered only

in blocks of five. Initial investors can

buy between $500 and $10,000 worth

of stock. If, and when, enough equity is

raised to open the store, they hope to

offer individual shares of stock, instead

of a five-share minimum investment. In

the meantime, the group is exploring

ways that local banks might use the

Community Reinvestment Act to set up

low-interest loans or outright grants to

help less-affluent residents become coowners of Greenfield Mercantile.

Most dollars leave town

The Mercantile business plan lays

out key market numbers: of the $50

million local residents spend on these

types of retail items every year, $40 milUSDA Rural Development Massachusetts State

Director David Tuttle presents a $23,000 Rural

Business Enterprise Grant to leaders of an effort

to start a community-owned department store in

Greenfield, Mass. 

continued on page 39
By Anne Todd

USDA Rural Development

he U.S. tobacco program was successful for

more than 60 years in creating a stable market

that returned untold millions of dollars from

the golden-leaf cash crop to rural producers

and communities. The tobacco program helped

balance supply with demand each year under a system that

involved growers owning or leasing “quota shares” to produce tobacco, much of which they sold at auction through

cooperative-owned warehouses. 

But the industry has been rocked by seismic changes in the

past decade, during which domestic tobacco production has

steadily declined as health-conscious consumers have increasingly turned away from cigarette smoking. In 1995, U.S.

tobacco growers produced about 1.2 billion pounds of tobacco. By 2005, production was down to about 647 million

pounds. At the same time, competition from foreign tobacco

producers has become much stiffer. Today, the United States

ranks fourth in production, behind China, Brazil and India. 

The “tobacco buyout program” of 2004 ended the nation’s

traditional tobacco program, creating even more changes.

The dust has now begun to settle somewhat from that change

24 January/February 2007 / Rural Cooperatives

Turning Over a New Leaf

End of tobacco program,

rising foreign competition,

thrust burley co-op into new role

Turning Over a New Leaf

T
Rural Cooperatives / January/February 2007 25

in the industry’s foundation. Despite

what some thought, the industry—while

changed—appears likely to survive.

Indeed, it even shows signs of rebounding in many areas, according to Burley

Tobacco Growers Cooperative

Association (BTGCA) President Roger

Quarles, who says progress in developing new overseas markets—including

China—offers much promise for U.S.

producers.

Early burley co-op history

The original Burley Tobacco

Growers Cooperative was formed in

1921 by a group of tobacco growers to

address the problem of volatile and low

prices. The co-op signed a five-year

contract with more than 75 percent of

the growers in a five-state area—

Kentucky, Indiana, Ohio, West Virginia

and Missouri—who agreed to deliver

their tobacco to the co-op. It purchased

or leased 124 out of 130 warehouses in

the area, contracted and purchased redrying plants and built storage facilities. 

The first few years for the co-op

were successful, resulting in the handling of more than 940 million pounds

of tobacco. But, at the same time, problems arose because of breaches of contract and because there was no limit on

sales. 

The first five-year contracts ended in

1926. At the time, membership was

106,000, but interest faded and no new

contracts were signed. The existing coop members kept going, working on

various issues and making efforts to

reorganize their marketing arrangements, but none of their efforts were

successful until the new agricultural

policies of the 1930s began to emerge. 

Onset of price supports

The Agricultural Adjustment Act of

1938 established the tobacco price-support system. The system allowed for a

guaranteed price for the product in

exchange for the control of supply.

Before then, tobacco farmers faced difficult conditions. The price for tobacco

was set by the tobacco companies and

farmers were at their mercy; tobacco

sold for only pennies per pound. 

Civic leaders and others saw the

plight of the tobacco farmer and did

something about it. Around 1941,

BTGCA was asked, and agreed, to help

administer the federal price-support

program. For unsold leaf tobaccos, the

program relied on farmer-owned tobacco co-ops, like BTGCA, to manage

“pools” of leaf tobacco passed over at

auction. 

At auctions, if the tobacco companies

didn't bid for a pile of tobacco for at

least one cent more than the price support, the farmer received an advance,

non-recourse loan from the co-op or

pool. 

The financing for the purchase was

obtained by borrowing funds from the

Commodity Credit Corporation

(CCC). The CCC, in turn, borrowed

money from the U.S. Treasury. Since

the 1930s, tobacco co-ops have borrowed and repaid with interest over $10

billion in CCC loans. 

Foreign competition changes picture

Under the program, BTGCA would

borrow money from USDA, process,

store and sell tobacco. Subsequently, it

would repay the loans. 

This system was successful when the

United Sates had the dominant share of

the world market. But the system

resulted in higher prices each year,

which allowed foreign producers to

steadily gain in production until the
26 January/February 2007 / Rural Cooperatives

program was no longer effective.

Congress determined that the solution

was to eliminate the non-value-added

cost of leasing and get production rights

into the hands of growers.

In October 2004, the “American Jobs

Creation Act of 2004,” which included

provisions for “Fair and Equitable

Tobacco Reform,” was signed into law

by President Bush. The law marked the

end of the federal tobacco marketing

quota and price support loan programs.

The legislation included a Tobacco

Transition Payment Program

(TTPP)—also known as the “Tobacco

Buyout”—to make payments to tobacco

quota holders and growers (beginning

in 2005 and ending in 2014) to help

them with the transition to the free

market. It was felt that the buyout was

the only solution that would accomplish

the goals of eliminating the non-valueadded cost of leasing while also providing necessary compensation to both

tobacco quota holders and growers.

Beginning with the 2005 tobacco

crop season, there were no planting

restrictions, no marketing cards and no

price-support loans. The deadline for

tobacco growers to sign up for the

TTPP was June 17, 2005.

Burley Co-op in post-buyout arena

Today, BTGCA continues to represent tobacco growers in the same fivestate region. Membership is offered to

anyone who is sharing the risk of producing burley tobacco in the five states

and who certifies to BTGCA that they

are producing at least 500 pounds of

burley during the current crop year.

Additionally, producers eligible under

Rolling with the Punches

Flue-Cured Tobacco Growers Co-op developing own products

In 2002, with the Federal Tobacco Program soon to end, leaders of the

Flue-Cured Tobacco Cooperative in Raleigh, N.C., knew that the co-op

would have to radically shift gears to remain viable. For some time, direct

contracts between the tobacco companies and growers had been threatening the traditional tobacco auction system which, in turn, was adversely

affecting price supports. 

The co-op would have to make the transition from its traditional role as a

price-support program administrator and embark on a new role as a valueadded marketing and sales cooperative operating on the free market.

In anticipation of the end of the price-support and quota program, the

co-op began exploring new business opportunities to help its members stay

in production. One area investigated was the feasibility of manufacturing its

own brand of cigarettes. 

Co-op purchases state-of-the-art factory

In July 2004, just three months before legislation was passed that ended

the Federal Tobacco Program, the Flue-Cured Tobacco Cooperative purchased Vector Tobacco, a processing and cigarette manufacturing facility

in Timberlake, N.C. Next, the co-op created a new subsidiary organization to

operate the facility: the U.S. Flue-Cured Tobacco Growers Inc., and also

renamed the facility for the subsidiary.

The Timberlake plant is the first ever of its kind: the only grower-owned

cigarette manufacturing facility in the United States. Located off U.S. Highway 501 about 20 miles north of Durham, the state-of-the-art, 350,000-

square-foot plant threshes, expands stems, toasts burley, cuts tobacco and

manufactures cigarettes, all in one location. 

Tobacco products available through the Timberlake facility include cutrag blended and flavored tobacco products made to customers’ specifications. Annually, the facility can process up to 15,000 metric tons of tobacco

strips and produce 10 billion cigarettes. 

“We now have the facility to produce several value-added tobacco prod-
Rural Cooperatives / January/February 2007 27

the association’s 2002-2004 bylaws, and

whose name appears on USDA lists of

burley growers for the 2002-2004 crop

years, are also eligible for membership. 

According to BTGCA President

Roger Quarles, when the tobacco buyout was authorized, many growers used

the opportunity to exit production (they

were paid for their tobacco quota), but

the reforms allowed other growers to

expand production. BTGCA records

show that, on average, in the postprice-support era, the trend is toward

fewer, larger farms. However, thousands

of small family-sized farms remain,

where tobacco best suits the limited tillable land available to them. 

Many farms with less than 10 acres

of tobacco production are staying in the

business, using family labor. But midsized tobacco farms (10-50 acres) are

becoming less prevalent. Due to the

large amount of labor required to harvest tobacco, most farms are staying

small enough to use family labor or getting large enough to hire a significant

number of migrant workers to support

production.

In 2005, more than 90 percent of

U.S. burley tobacco was purchased

from farmers through direct contracts

with four tobacco companies (significant consolidation of the tobacco companies has occurred in recent years).

However, 15 tobacco auction warehouses in the “burley-belt” still hosted auction sales last year. 

BTGCA participated in those 2005

auction sales and purchased tobacco for

export customers. 

“The presence of an alternative market offers growers something to fall

back on, and the BTGCA’s involvement

as a buyer adds competition to the marketplace,” says Quarles. “While this

alternative market is a small part of the

total market, having one more purchaser of burley tobacco is good for all

growers.”

In 2005, about 6.1 million pounds of

burley tobacco were sold at auction.

About 3.9 million pounds were sold for

an average of $157.06 per hundredweight (CWT) in markets in which

BTGCA participated. 

Sales in the other markets averaged

$153.98 per CWT. 

BTGCA also purchased 2005 cropyear tobacco in an effort to provide a

reserve of burley to use in promotion

and expansion of export markets.

BTGCA has worked to develop new

export opportunities for burley growers

for many years.

Production and labor concerns

According to Quarles, many tobacco

growers are looking to expand production, but are constrained by a farmlabor shortage facing much of U.S.

agriculture. There are simply not

enough U.S. workers willing to do the

hard work needed on a tobacco farm,

he says. 

An average tobacco farmer must hire

150 hours of labor to produce one acre.

“Since it is impossible for tobacco

growers to find sufficient local labor to

meet their needs, most of this work

must be done by migrant workers,”

Quarles says. 

ucts, including consumer products,” Cooperative President Albert Johnson

said. “That translates to more income opportunities for members in the

future.” The ability to manufacture products has already created growth

opportunities for the Flue-Cured Tobacco Cooperative. The co-op currently

makes cigarettes and small cigars under contract with a number of companies.

The cooperative is also working on the product design that will lead to

its own cigarette product, marketed under its own brand. The co-op has

hired a marketing firm to help with product positioning, sales and distribution, and is testing a variety of blends through consumer focus groups to

determine which one appeals most to consumers. 

Serving growers for 60 years

For almost 60 years, the Flue-Cured Tobacco Cooperative has been providing consumers with premium U.S. flue-cured tobacco. Established in

1946 just after the end of World War II, the then-Flue-Cured Tobacco Cooperative Stabilization Corporation was started by tobacco farmers in Georgia,

North Carolina, South Carolina and Virginia to administer the federal tobacco price-support program and sell members' tobacco to global buyers.

In 1967, the co-op purchased the Brown Tobacco Co. in Fuquay Varina,

N.C., to provide re-drying and storage for growers. The facility and storage

operation were subsequently renamed Tobacco Growers Services Inc. 

In 2001, because of the threats to the auction and price support systems,

the co-op started two marketing centers as a pilot program to see if these

efforts would benefit their farmer-members. The pilot was so successful

that, by the end of 2001, the program was expanded to include 14 marketing

centers. For the 2006 crop year, there were 11 marketing centers.

After the federal program ended, the co-op revised its name and became

the Flue-Cured Tobacco Cooperative. Today, the co-op has 3,500 active

members and, as of late fall 2006, the processing facility was working 24

hours a day, 7 days a week to process the 2006 crop. Co-op members are

celebrating the end of quotas limiting the tobacco acreage they can plant

and looking forward to new markets and future opportunities for their crop.

To learn more about the Flue-Cured Tobacco Cooperative, visit

http://www.fctcsc.com. 

continued on page 38
28 January/February 2007 / Rural Cooperatives

David S. Chesnick &

Carolyn B. Liebrand

Economists

USDA Rural Development, Cooperative Programs

david.chesnick@wdc.usda.gov

carolyn.liebrand@wdc.usda.gov

o demonstrate the importance of cooperatives in today’s global economy, the

International Co-operative Alliance (ICA)

initiated the Global 300 project—a listing of

the world’s 300 largest cooperatives.

ICA believes that cooperatives are not as visible in the global

economy as are for-profit businesses. It was felt a Global 300

list would help clarify just how vital cooperatives are to the

global economy. 

Through the hard work of many cooperators around the

world, the Global 300 was released on Oct. 25. The full list

of cooperatives and mutuals, as some user-owned businesses

are called, can be found at the Web site:

www.global300.coop. 

The International Co-operative Alliance is the independent, nongovernmental association that unites, represents and

serves co-ops worldwide. Founded in 1895, the ICA has 230

member organizations from 92 countries active in all sectors

of the economy. Together, these co-ops represent more than

800 million people worldwide.

Global 300 list reveals 

world’s largest cooperatives

T

Global 300 Cooperatives 2004

Total Revenues and Number of Cooperatives by Country
Rural Cooperatives / January/February 2007 29

World’s Top 25 Cooperatives

Name Type Country Sales

In U.S. Millions, 2004

1. ZEN-NOH Food and Agriculture Japan $53,898

2. Zenkyoren Insurance Japan $46,680

3. Crédit Agricole Group Finance France $32,914

4. Nationwide Mutual Insurance Company Insurance U.S. $23,711

5. National Agricultural Cooperative Federation Food and Agriculture Korea $22,669

6. Groupama Insurance France $21,651

7. Migros Retail Switzerland $17,779

8. The Co-operative Group Retail U.K. $16,556

9. Edeka Zentrale AG Retail Germany $15,986

10. Mondragon Corp. Materials Spain $14,155

11. Rabobank Group Finance Netherlands $13,608

12. UNIPOL Finance Italy $12,386

13. Co-op Swiss Retail Switzerland $12,371

14. Groupe Caisse D'Epargne Banking France $12,143

15. Co-op Norden Retail Denmark, Norway, Sweden $11,968

16. Confédération Nationale du Crédit Mutuel Banking France $11,848

17. Metsäliitto Food and Agriculture Finland $11,636

18. R+V Versicherung AG Insurance Germany $11,240

19. CHS, Inc. Food and Agriculture U.S. $10,980

20. The Norinchukin Bank Group Banking Japan $10,643

21. Groupe Banques Populaires Finance France $10,348

22. Dairy Farmers of America Food and Agriculture U.S. $8,936

23. Zenrosai Insurance Japan $8,932

24. Fonterra Co-operative Group Food and Agriculture New Zealand $8,354

25. ReWe Group (Zentral-Aktiengesellschaft) Retail Germany $8,307
$1 trillion in revenue

Listed among the Global 300 are some of the world’s

largest businesses. The Global 300 co-ops had total revenue

of nearly $1 trillion in 2004. If they were a nation, these 300

co-ops would have the 10th largest gross domestic product in

the world, ranking just behind Canada. 

The United States is home to more of the Global 300

than any other nation, with 62 (or nearly 20 percent of the

total list). It is followed by France, with 45, then Germany

with 33 and Italy with 28 co-ops on the list. Cooperatives in

these four countries represent more than 50 percent of the

Global 300. 

Japan, however, is home to both the No. 1 and 2 ranked

businesses. Topping the Global 300 is Zen-Noh, a national

federation of agriculture and food cooperatives that had revenue of $53.8 billion in 2004 (see sidebar). Also included in

the Global 300 are: the largest rice miller and marketer in the

world; the largest employer in Switzerland; the largest bank

in France and the largest food processor in India.

The largest U.S. business on the list is Columbus, Ohiobased Nationwide Mutual Insurance Co. (which is owned by

its policy holders), at No. 4, with $23.7 billion in annual revenue. The next highest ranked U.S. cooperative is CHS Inc.,

a federated agribusiness cooperative, which had sales of $10.9

billion in 2004. The next-ranked U.S. co-ops were DFA at

22, LoL at 28 and Wakefern Foods, a food retailing co-op

with $7.1 billion in 2004 sales, at No. 30. 

Built to last

Since cooperatives are generally organized for the benefit

of members rather than to earn profits for investors, they

tend to take a longer term view with respect to their operations. That is not to say that cooperatives don’t look at the

bottom line, but rather that they have other objectives that

focus more on the long-term survival of the business.

This is illustrated by how long many of these cooperatives

have existed. Nearly half of the Global 300 cooperatives were

established prior to 1940. Indeed, more than 13 percent were

formed prior to the 1900s. That’s right: more than 1 in 10 of

the Global 300 cooperatives have been around for more than

100 years. Businesses do not turn the century mark unless

they have consistently met a strong need better than their

competition.

Three groups or business sectors make up more than 80

percent of the Global 300. These sectors include agriculture,

financial institutions (including insurance, banking, credit

unions and diversified financial organizations) and

retailing/wholesaling businesses.

More than one-third of the Global 300 cooperatives are

involved in agriculture. Nearly every country represented in

the Global 300 has at least one agriculture cooperative represented in the list of 300 cooperatives. 

Financial institutes represented more than a quarter of the

total Global 300 cooperatives. However, these cooperatives

held the largest amount of assets of any group, controlling

more than 45 percent of the Global 300 assets.

Establishing a definition of a cooperative business—

one that applies across all countries and business sectors—was somewhat problematic in determining the

Global 300. Many cooperatives also use other corporate

forms, such as subsidiary company structures in which

the co-op may have either total or majority ownership.

At what point are some of these related, supporting

cooperative business structures no longer really cooperatives?

In order to determine what is, or isn’t, a cooperative

or mutual business, a data-validation group was established with the help of the Cooperative Programs staff of

USDA Rural Development. 

The first test for inclusion was that a business must

have a cooperative or mutual character and be recognized as such by its business sector. International Cooperative Association (ICA) members, or members of an

ICA-related organization, were placed on the list. Many

mutual insurers are members of International Cooperative Mutual Insurance Federation, but are not members

of ICA. Regardless, they were eligible for the Global 300.

A business was included if considered a co-op or

mutual by its business sector and according to the available business structures in its host nation. 

For the next step, the data-validation group looked at

the list and determined if inclusions or exclusions

should be made from the list for various reasons. It was

decided not to limit the list to just cooperatives, because

in some countries there is no appropriate legislation for

forming cooperatives. In these nations, some businesses that would in other countries be incorporated as

cooperatives are instead formed as mutuals.

Global 300 selection criteria
Rural Cooperatives / January/February 2007 31

Retailing/wholesaling cooperatives represented 31 percent

of the total Global 300. More than one half of all these cooperatives are headquartered in three countries: the United

States (19.4 percent), Italy (19.4 percent) and France (11.8

percent).

As mentioned earlier, revenue generated by the Global

300 totaled $965 billion. The graph on page 28 illustrates the

revenues (in U.S. dollars) of the cooperatives by country.

Sixty percent of the total revenues were generated by cooperatives in four countries: France ($174 billion); Japan ($143.6

billion); United States ($133.1 billion); and Germany ($125.6

billion).

One of the main goals of the Global 300 project was to

demonstrate the important role cooperatives play in the

world market. In that, the project proved to be successful. It

is believed that as this project continues, we will find that

cooperatives are not “old dinosaurs heading for extinction,”

but rather, cooperatives are a vital cog in the global economy.

■

ZEN-NOH – the National Federation of Agricultural Cooperative Associations – is Japan's federation of agricultural

co-ops and is the largest co-op organization in the world. Of

the 3 million farm households in Japan, most belong to one

of ZEN-NOH's 1,010 primary-level co-ops.

The co-op had total sales of $56.3 billion in 2003 and

employs about 12,500 people. 

In cooperation with Japan’s regional federations and primary-level co-ops, ZEN-NOH serves its member farmers by

purchasing and distributing materials and equipment for

agricultural production and daily farm needs. ZEN-NOH is

equally involved in the collection, distribution and marketing

of ag products, which it handles through its own channels.

ZEN-NOH works to further develop Japanese agriculture, to

improve farm life and to secure reliable food supplies for the

nation. 

Japan relies heavily on overseas sources for raw materials. To ensure cost-efficient and stable operations, ZENNOH imports quality materials for Japanese farmers, including fertilizers, feedstuffs, liquid petroleum gas and oil.

Imports for ZEN-NOH from the United States include feed

ingredients, feed grains, sulphate of potash magnesia,

ammonium phosphate, corrugated-fiber board, soybeans,

seeds and sulphate of potash.

Overseas operations range from importing directly from

producing countries, establishing procurement subsidiaries

and production bases, to chartering ocean-going vessels.

ZEN-NOH was incorporated in March 1972 and includes

1,173 ag co-op members. Of these, 1,010 are primary-level

co-ops, 10 are prefectural economic federations of co-ops,

43 are specialized federations of co-ops and 66 are other

types of ag federations. There are 44 associate members. 

To learn more, ZEN-NOH’s 2004 business profile is available (in English) at: http://www.zennoh.or.jp/ENGLISH/ALACALTE/2004/businessprofile.html. 

ZEN-NOH: Japan’s federated ag co-op

ZEN-NOH, the world’s largest cooperative, with annual sales of more than $53 billion, is a federated co-op involved in everything from the sale of farm supplies to operating its own food markets. Photo courtesy ZEN-NOH
32 January/February 2007 / Rural Cooperatives

merging and mature coops have proven invaluable for creating and

retaining good jobs. Both

can serve as powerful

tools to leverage opportunities in tough

times and tight industries. Across the

country, the cooperative development

centers of the Cooperation Works! network are helping working men and

women start new cooperative businesses

and reshape existing ones, including

worker-owned healthcare provider

cooperatives. 

Northcountry Cooperative

Development Fund (NCDF), founded

in 1978 in Minneapolis, issues loans to

producer, worker and consumer cooperatives in 11 states of the Upper

Midwest. NCDF also provides technical

assistance, training and advisory services, and is a member of Cooperation

Works!

One of NCDF’s recent loan disbursements was to the Circle of Care

Cooperative, a home healthcare worker-owned cooperative based in

Wisconsin. In addition to the $205,000

loan that enabled it to open for business, NCDF staff also assisted with the

co-op's business plan. 

Home healthcare is a low-profile

industry, says NCDF Executive

Director Margaret Lund, but its potential is sky-high as institutional care costs

rise and the population ages. The caregiver co-ops are creating new jobs and

making existing ones better. They offer

workers' compensation to people who

often do a lot of heavy lifting and provide trusted back-up when a caregiver

needs someone to step in. 

Co-op members form support networks to help one another deal with the

challenges of doing some of society's

most important work, work that is too

often undervalued. Lund also notes

that, as member-owners, "the co-op

provides leadership opportunities for

these women. The also clients have

much more continuity of care because

that's what really matters to the caregivers. So, when they run the agency,

that's naturally a priority."

Homecare co-op rises to challenge

A major contract fell through just as

Circle of Care was getting ready to

open for business, forcing members to

rethink their business strategy in a

hurry. They had the help of NCDF

staff, which “rolled with the punches”

and helped seek a solution. NCDF also

offered collective experience, intelligence and

a positive attitude for

dealing with the situation.

The co-op was also

assisted by Margaret

Bau, cooperative

development specialist

with USDA Rural

Development in

Wisconsin and nationally recognized proponent for, and organizer

of, rural worker-owned

homecare cooperatives. 

Like others, she

recognizes that the

already huge need for

home-based care will

only grow, and caregiver co-ops offer a low-equity way to

increase and improve services. She and

others are looking for ways to overcome

obstacles to starting such co-ops.

Challenged industry

"Until recently, I believed that in

order to organize a homecare worker

co-op, you would need a major contract

with a public body (e.g., county or

state) and a good relationship with a

benevolent public agency," Bau says.

Such co-ops have proven successful in

urban settings for many years, such as

Cooperative Home Care Associates,

based in New York's Bronx, and Home

Care Associates in Philadelphia.

But the upheaval at the Circle of

Care forced members to overhaul the

CO-OP DEVELOPMENT ACTION

Nurturing Caregiver Co-ops

NCDF helps finance critical need for in-home rural healthcare services

E

Pam Swendryzynski helps prepare a meal for Vada

Leinweber. Co-ops help home care providers earn a livable wage and help more seniors stay in their homes.
Rural Cooperatives / January/February 2007 33

business plan and offer their services to

private-pay clients, who are more affluent than the elderly and disabled people

covered by Medicare and Medicaid.

Bau explains, "This is an experiment

that offers interesting opportunities to

the rest of the country. Remember that

50 or 100 years ago, farmer co-op

members were not getting advanced

degrees and running multimillion-dollar

operations. Homecare co-ops are just

getting started, and they could use the

same kind of help the farmer co-ops

received. 

"Breaking into the private pay market will require a significant marketing

plan," Bau continues. "This means a

larger initial loan. It also means the coop probably won't be profitable for two

to three years, more like a conventional

business start-up. But unlike most businesses, this is a service industry of mostly low-income women, so there isn't

much collateral."

Co-op advantages

Homecare worker co-ops do have

some significant market advantages.

Because they don’t have to turn profits

for investors or pay franchise fees, they

can offer workers higher wages, benefits

and patronage refunds. 

"In the case of the Circle of Care

Cooperative," Bau says, "experienced

caregivers are coming out of the woodwork to become members." They are

drawn by wages $2 to $4 per hour higher than local agencies offer, plus health

insurance, mileage reimbursements and

patronage refunds. 

Meanwhile, at five-year-old

Cooperative Care in Wautoma, Wis.,

members have initiated a mentoring

program, a self-evaluation process and

an ongoing exploration of what it

means to be an owner of the business,

which serves public-pay clients. 

"What I find most telling about

them," observes Bau, "is the number of

two-generation memberships they have

—there are at least six now. Mothers are

encouraging their adult sons and

daughters to become member-owners!"

Guide to go on Web

The Cooperative Development

Foundation in Washington, D.C.,

recently awarded a $27,800 grant to the

regional community action agency,

which fostered the development of both

caregiver co-ops. A guide of "lessons

learned" by the pioneers in rural homecare cooperatives is to be published on

the Web. 

The guide will pay special attention

to replicable aspects of development

and those policies each co-ops needs to

create "from scratch." A collection of

resources will be made available on the

University of Wisconsin's Center for

Cooperatives Web site:

www.wisc.edu/uwcc early in 2007. ■

Most of Indian Springs Farmers

Association market outlets were temporarily shut down in the wake of the

2005 hurricane season. This included a

big offshore Gulf Coast gambling casino

that had been one of the co-op's most

promising customers. But the business

lobby rallied to pass legislation to allow

onshore gambling, and by May the casino was rebuilt on land and back in operation. Not long after, the two parties

signed a memorandum in which the

casino agreed that if Indian Springs produced a food on the casino's grocery

list, the casino would buy all that the coop could supply of the item.

Indian Springs is one of four cooperatives currently on a fast track for technical assistance from the Mississippi

Center for Cooperative Development.

Center staff is helping the co-ops concentrate on three niche markets: casinos, schools and farmers markets. Projected outcomes are stated in a strategic plan the co-ops

created with the help of the center's advisory board and

the elected board of its parent organization, the Mississippi Association of

Cooperatives (MAC). 

Goals include having all four co-ops

combined hit $1 million in sales by 2011,

and for at least one of them to reach the

$1 million mark by 2013.

Members see the value in linking to a

larger member base, such as MAC, says

Melbah Smith, the center's executive

director. Just as the center is a member

of the CooperationWorks! national network of co-op development centers, the

association itself is a member of the

Federation of Southern Cooperatives,

which serves mostly black farm families

in 10 states and forms a considerable

constituency.

In addition to being “solidarity

savvy,” one thing these farmers share is

vision. “Co-ops like Indian Springs are

trailblazers,” Smith says. “They are getting out there, opening eyes and ears—

and doors. All they need is a little leadership and direction.

They can do the rest.”

Mississippi produce co-op supplying casino

Indian Springs co-op members

prepare produce for shipment to

one of Mississippi’s casino

resorts.
34 January/February 2007 / Rural Cooperatives

Web-based calculator helps 

control animal-housing energy

Agriculture Secretary Mike Johanns

in November unveiled a Web-based

energy-awareness tool designed to help

agricultural producers reduce energy

costs related to animal housing. The

"Energy Estimator for Animal

Housing" evaluates the energy use and

costs associated with heating, lighting

and ventilating poultry, swine and dairy

housing. This is the fourth energy estimator tool USDA has developed as part

of its overall energy strategy to reduce

the impacts of high energy costs and to

help develop long-term solutions for

producers. 

"A good analysis of the use and costs

for heating, lighting and ventilating

animal housing contributes to a comprehensive picture of how energy is

used on the farm or ranch," Johanns

said. "This tool can result in significant

energy and cost savings for producers if

they take the appropriate actions." 

Producers with animal-feeding operations can save up to $250 million

annually nationwide by regularly maintaining their ventilation and heating

systems and using more energy-efficient

fixtures and equipment. Individual producers may realize up to 50 percent savings in energy use by maintaining their

ventilation and heating equipment regularly. 

The energy estimator has three components—one each for poultry, swine

and dairy—that operate independently.

Producers should use the estimator for

guidance rather than as a sole source for

decisionmaking. It evaluates alternatives

based on producer input, but does not

offer site-specific recommendations. It

does not estimate the cost of implementing recommended practices. 

USDA recommends that producers

take their animal housing energy analysis to their local USDA Service Center,

Cooperative Extension office or rural

electric cooperative for more field-specific assistance. For additional information, visit: http://ahat.sc.egov.usda.gov. 

TFC: Animal health ‘in the bag’

Taking its inspiration from ice cream

packaging, Tennessee Farmers

Cooperative (TFC) has produced and

distributed 50,000 insulated bags as part

of a campaign to help ensure that animal health products are safely transported from the co-op to the farm. The

bags, which are

padded and insulated to protect products from light, heat

and cold, are being

given to farmers

when they purchase

livestock vaccines

and other animal

health items requiring refrigeration at

co-op stores

throughout TFC’s

statewide system. 

For years,

beef-production

experts have been

preaching the

importance of the

proper handling of

animal health products that require

refrigeration. If the

medicine gets too

cold or warm, its

effectiveness can be

compromised. The

results are huge,

industry-wide losses

due to vaccine replacement, added veterinary costs and unnecessary tissue

damage.

“The beauty of the bag is that it really kills three birds with one stone,” says

John Houston, manager of TFC’s

Animal Health Department, who coordinated production of the bags. “It is

insulated to keep products requiring

refrigeration at the proper temperature;

it is made of a reflective material that

prevents sunlight from reaching the

product, which can decrease its effectiveness; and, perhaps most importantly,

it has Beef Quality Assurance [BQA]

vaccination guidelines printed on the

NEWSLINE

Send items to: dan.campbell@wdc.USDA.gov

A promotional poster for USDA’s new, online tool that helps

producers estimate energy needs for animal housing.
Rural Cooperatives / January/February 2007 35

outside.”

Houston says these guidelines—

which include a diagram illustrating the

proper injection sites and recommendations on needle size, vaccine and antibiotic storage, and syringe use—will go a

long way toward reducing monetary

losses attributed to the tissue damage

that often results from improper vaccinations.

The idea for the bag originated with

Dr. Clyde Lane, a University of

Tennessee professor of animal science

and state coordinator of Tennessee’s

BQA program, who says he was

inspired by seeing a customer purchase

a gallon of ice cream at a grocery store

checkout lane. 

PCCA’s Darneille to lead

International Cotton Association

Plains Cotton Cooperative

Association (PCCA) President and

CEO Wally Darneille was elected president of the International Cotton

Association (ICA) during its annual

meeting in Liverpool, England. He is

the first American to serve in that position. 

“Wally’s term as ICA president in

2006-07 comes at an important time for

PCCA and our members,” says PCCA

Chairman Eddie Smith, a cotton producer from Floydada, Texas. “His service to the organization will increase the

visibility of PCCA and our members’

cotton throughout the world textile

industry at a time when the volume of

our export sales continues to increase.”

Formerly known as the Liverpool

Cotton Association and established

more than 160 years ago, ICA represents almost all cotton growing and

consuming countries.

Darneille was elected to ICA’s board

of directors in 1997 and served as chairman of its rules committee before

becoming first vice president in

December 2005. About two-thirds of

the world’s cotton exports are traded

under ICA rules and arbitration, which

date back to the dawn of the Industrial

Revolution, when Liverpool and

Manchester were the center of the

world’s cotton trade. The rules provide

a framework for contracting and for the

resolution of disputes.

ICA also provides testing services

and conducts seminars in Liverpool and

throughout the world regarding trade

rules, practices and new developments.

Record sales year for 

Accelerated Genetics 

Accelerated Genetics Co-op set new

sales records in 2006, with sales of

$37.4 million, up $3.3 million above the

prior year’s record results. At the same

time, the cooperative reports that its

balance sheet grew in strength and

cash-flow improved, allowing the co-op

to pay off remaining debt early in the

fiscal year.

Semen unit sales exceeded 4 million

units, a 7-percent jump. Beef sales also

set a record, with domestic sales growth

of nearly 16 percent. In addition, farmproduct sales remained strong at $8.6

million.

“As the year progressed, challenges

arose as a result of declining milk

prices,” said Roger Ripley, president

and CEO. “However, due to a strong

start to the fiscal year, outstanding

proofs in all breeds and excitement

from developing technologies, we were

able to maintain and finish another

record year.”

Facility needs have been a priority as

part of the cooperative’s long-range

planning. During the past year, the coop’s main production laboratory, in

Westby, Wis., was remodeled.

Additionally, construction is underway

on a semen warehouse and embryo lab,

which will be adjacent to “The Palace,”

where the co-op’s most popular bulls

are housed. 

“The need for a new warehouse and

lab became evident during this year to

accommodate the consistent growth

we’ve been experiencing, as well as

anticipated growth in this decade,”

Ripley said. 

Humboldt Creamery

launches organic milk 

Humboldt Creamery is launching an

organic line of milk. Creamery officials

said the cool, coastal valleys where

Humboldt Creamery’s dairy farms are

located produce lush, fertile pastures

where the cows are free to graze yearround in a natural environment ideal

for organic milk production.

None of Humboldt Creamery’s

member dairies use the growth hormone rBST, and more than half have

gone completely organic. “All of our

organic dairies have also been ‘FreeFarmed Certified’ by the American

Humane Association,” Ralph Giannini,

the dairy co-op’s sales manager, told the

PCCA CEO Wally Danielle

Tennessee Farmers Cooperative has

developed insulated bags to help protect livestock vaccines and other temperature-sensitive animal healthcare

products.
36 January/February 2007 / Rural Cooperatives

Eureka Reporter. “So organic milk not

only gives peace of mind for our consumers, it also means ideal conditions for

our dairy cows.”

Humboldt Creamery has been producing organic dairy products for years. The

dairy cooperative is the nation’s leading

producer of powered organic milk. Its new

line of organic ice cream is already on grocery freezer shelves.

Nationally, consumers are embracing

organic milk, the sale of which increased

25 percent last year, even as overall milk

consumption decreased 8 percent.

Humboldt Creamery is a co-op of 62

member dairies originally formed in 1929.

Florida's Natural introduces

organic juice products

Florida's Natural Growers has

launched "Earth's Own Organics"

refrigerated juices. The line of blended,

not-from-concentrate juices carries the

USDA seal for organic products. The

juices are packed using the co-op’s

patented, one-liter-quick-chill process,

which ensures a long shelf life with the

freshest flavor.

"These blended flavors are the first

not-from-concentrate refrigerated

juices that are also organic with an

extended shelf life," says Walt Lincer,

vice president of sales and marketing.

Organic products are the fastest growing category in retail grocery. 

Flavors available include:

orange/mango, orange/peach,

apple/peach, apple/cranberry and a 15-

percent not-from-concentrate premium

lemonade.

Florida's Natural Growers is comprised of 12 grower organizations representing more than 1,100 individual

growers with 60,000 acres of citrus in

Florida. The Lake Wales processing

facility employs over 700 people and can

extract more than 10 million pounds of

fruit every 24 hours in peak season.

Pilgrim's Pride to pay

$1.1 billion for Gold Kist

Atlanta-based Gold Kist has agreed

to a $1.1 billion takeover by Pilgrim's

Pride Corp., according to a December

report in the Atlanta Constitution

Journal. Gold Kist investors will get

$21 a share, $1 per share more than an

earlier offer, the companies announced.

The deal will create the world's largest

chicken company in terms of production, displacing Tyson Foods.

Pilgrim's Pride has said previously

that it would not close facilities or lay

workers off after a merger. Gold Kist's

Chairman A.D. Frazier said in a news

release announcing the deal that "after

careful consideration" a special committee of independent directors as well as

the whole board "determined that the

Pilgrim's Pride enhanced offer is in the

best interests of our shareholders,

employees, growers and customers. We

look forward to working with the

Pilgrim's Pride board and management

on a smooth integration, and we recommend that all stockholders embrace this

transaction by tendering their shares."

Gold Kist was once America’s largest

poultry co-op, prior to converting to an

investor-owned corporation. 

GROWMARK to market

BMI soy-based biodiesel

GROWMARK Inc. has signed an

agreement to market the majority of the

soy-based biodiesel to be manufactured

by BioFuels Manufacturing Illinois

(BMI) Inc.’s proposed Peoria, Ill., plant.

BMI, a minority-owned company based

in Normal, Ill., plans to construct a 45-

million-gallon-per-year operation using

soybean oil as its primary feedstock. 

Capital costs for the facility, which

are projected at $35 million, will be

financed through equity and debt.

Construction is scheduled to be completed in late 2007. At full capacity,

BMI will be using the production from

nearly 1 million acres of Illinois soybeans annually.

The proposed plant will be located

on a 10-acre site in an industrial park

just west of Peoria. Initial plans call for

the plant to expand to 120 million gallons within five years. GROWMARK’s

B100 biodiesel sales increased from 9

million gallons in 2005 to more than

13.5 million gallons in 2006. At a B2

equivalent, this represents nearly 700

million blended gallons.

“The GROWMARK system has

been marketing renewable fuels for

nearly 30 years, including biodiesel for

the past six years,” says Shelly Kruse,

GROWMARK Energy Division manager. “This venture reaffirms our commitment to renewable fuels, and helps

ensure that we will have a reliable supply of quality biodiesel for our members

and partners as we collectively work to

meet the growing demand in the marketplace.” 

Iowa, Minn., co-op elevators merging

Citing higher efficiency and positioning to meet future ethanol grain

needs, two North Iowa-based cooperative elevators have merged into a new

company called Progressive Ag

Cooperative. According to a report in

the Mason City Globe Gazette,

Northwood Cooperative Elevator, with

plants in Carpenter, Iowa, Glenville,

Minn., London, Minn. and Myrtle,

Minn., officially joined with Farmers

Cooperative Co., which has plants in

Manly and Grafton, Iowa. Northwood

will be headquarters for the company.

Nearly 80 percent of the members

approved the merger in a September

vote. Osage Cooperative Elevator

declined to be part of the merger, with

shareholders turning back participation

with less than 60 percent approval,

according to the Globe Gazette.

The merger affects about 40 employees. No changes in staffing have been

announced. The plants store and merchandise grain, offer agronomy services

and manufacture fertilizer at the

Glenville plant. The merger “helps us

with efficiencies, as we face the growth

of ethanol plants,” General Manager

Warren Fisk said.

Lukiewski to lead Welch’s

Welch’s has named David J.

Lukiewski to succeed Daniel P. Dillon

(see related article, page 17) as its new

president and chief executive officer.

Lukiewski also succeeds Dillon as one

of the two Welch’s executives on the

10-member Welch’s board. 

Lukiewski joined Welch’s in 1995 as

vice president of sales, a position he
Rural Cooperatives / January/February 2007 37

held until 2000 when he was named

senior vice president of sales. In 2003

he was appointed senior vice president

of global sales and marketing, the position he held before being named president and CEO. Lukiewski is the 13th

president of Welch’s, the world’s leading

manufacturer and marketer of Concord

and Niagara grape-based products. The

company was founded by Dr. Thomas

B. Welch in 1869.

During his tenure as senior vice

president, Lukiewski led Welch’s corporate domestic sales and marketing and

international organizations with responsibility for all customer and consumer

activities. He helped to accelerate international market roll-outs in China,

Mexico and the United Kingdom while

introducing a number of new products

and successfully refocusing the company’s marketing efforts on its core business: purple grape juice made from

Concord grapes. Those efforts and others have led to a 40-percent increase in

sales volume since Lukiewski joined the

company in 1995. 

Prior to joining Welch’s, Lukiewski

held positions at Reckitt & Colman, a

manufacturer and marketer of consumer products, and Johnson &

Johnson, one of the world’s leading

pharmaceutical companies. 

He graduated from the University of

Scranton (Pa.) with a B.A. degree and

received his M.B.A. from the Kotz

Graduate School of Management, now

affiliated with St. Thomas University in

St. Paul., Minn. He is a native of

Scranton, Pa., and currently resides in

Westford, Mass.

ITC finds dumping injures

U.S. lemon juice industry

The U.S. International Trade

Commission (ITC) voted unanimously

in November to continue an investigation of dumping allegations, by ruling

preliminarily that U.S. lemon juice producers have been materially injured by

Argentine and Mexican imports. The

decision was made in response to a petition filed in September by Sunkist

Growers Inc. and supported by Ventura

Processing, requesting that anti-dumping duties be levied to offset what some

producers consider to be the unfair

prices offered by Argentine and

Mexican processors in the U.S. market

the past three years.

“We are very pleased that all the

commissioners voted to move forward

with this investigation,” says Tim

Lindgren, Sunkist president and CEO.

“The U.S. has simply been flooded with

unfairly priced juice in recent years, disrupting the market and making it very

difficult to earn a reasonable return. A

thorough investigation is warranted by

both the Trade Commission and the

Commerce Department.”

Both the ITC and the U.S. Dept. of

Commerce will continue the investigation, with a preliminary determination

of dumping scheduled for February 28.

If affirmative, this decision may impose

an anti-dumping tariff on imports from

those countries, which should strengthen the bulk price for juice in the United

States. Given the limited volume of

lemon juice that is used in making beverages, any additional duty is very

unlikely to be felt by the consumer at

the checkout counter, but it will help

domestic processing remain a viable

user of domestic lemons, according to

Sunkist. ■

Deputy Agriculture Secretary Chuck Conner announced in late October

that broadband and telecommunications loans of almost $210 million are

being awarded to communications firms in four states. The funds, provided

through two USDA Rural Development programs, will allow for the extension of new and improved telecommunications services to more than

40,000 residential and business subscribers.

"Providing state-of-the-art communications service in rural areas not

only allows for improved access to educational services, it promotes the

development of business ventures and increased job opportunities," said

Conner. "This is part of the President's commitment to make quality communications services available to the residents of rural America." 

These loans will be used to:

■ Extend telecommunications services to 5,765 new customers in rural

New Mexico, most of whom do not have telephone service. The loan to

Sacred Wind Communications Inc. of Santa Fe will provide funds to establish a microwave network, install microwave towers and wire the inside of

homes for telecommunications service in five counties.

■ Enable the Cheyenne River Sioux Tribe Telephone Authority of Eagle

Butte, S.D., to provide new and improved service to subscribers in two

counties, including connecting 724 new subscribers and deploying 45 miles

of new cable. 

■ Help Southwest Texas Telephone Co. of Rocksprings connect 68 new

consumers and deploy 125 miles of cable in six counties.

■ Allow Fiber 520-522 LLC, of Salem, Ill., to construct a fiber-to-home

broadband system in 12 counties. The system will connect 32,732 residential and 1,494 business subscribers, providing high speed data, video and

voice services.

USDA Rural Development’s telecommunications loan program—consisting of hardship, cost-of-money and guaranteed loans—finances voice

telephone service. Since 1995, every telephone line this program has constructed has been capable of providing broadband service using digital subscriber loop (DSL) technology. Further information on rural programs is

available at: http://www.rurdev.usda.gov. ■

USDA providing $210 million for

rural broadband, telecom
38 January/February 2007 / Rural Cooperatives

Billion-Pound Baby continued from page 13

pensation insurance and an investment certificate program

that is currently earning participants 6 percent on their savings.

Q. Here’s a situation your field reps probably face: I’m an

almond grower, and a small packer down the road from me

says he’s paid two or three cents a pound more than Blue

Diamond for the past couple of years. Give me some good

reasons why I should I should stay in the co-op.

Youngdahl: There are numerous reasons. We tell growers

they should partner with us at Blue Diamond for benefits that

include: balanced risk, industry-leading returns, year-round

selling strategy, worldwide marketing power, faster payments,

powerful consumer brand, innovative product development,

more payment options, more contract options and our cutting-edge technology. In addition, we tell them that Blue

Diamond is the industry leader—the one all others benchmark on. We influence the market for the benefit of all growers. Such leadership should be supported.

Shick: There are growers who will move for two cents. It’s

not as important when prices are at $2 per pound as when

they were $1. If a guy wants to play that game, you probably

are not going to talk him out of it. But if you look closely at

other handlers, not one is consistently at the top. Blue

Diamond will consistently be right near the top. ■

BTGCA believes that, unless the labor situation is corrected soon, many tobacco growers will not be able to continue

production.

Because of BTGCA’s concerns about labor, the co-op

started a new program to help burley tobacco producers

acquire H-2A workers. Under the program, BTGCA producer-members will have discounted H-2A labor services provided to them through an affiliate, Commodity Growers

Cooperative. Additional information about the H-2A guest

worker program and the BTGCA discount-labor program is

at: http://www.commoditygrowers.com. 

Outlook for the future

"The goal of BTGCA is to improve profitability and stability for its producer-members while increasing production

market share,” says Quarles. “BTGCA’s goal is to increase

members' market share of worldwide burley production. The

tobacco industry has become increasingly dependent on

exports as U.S. manufacturers have shifted production overseas and U.S. consumption declines.” 

BTGCA hopes to sustain a market where producers have a

second marketing option for tobacco that is not accepted

under contract. Additionally, the co-op hopes to develop new

export markets where U.S. burley growers are not currently

selling tobacco. BTGCA has focused much of its attention

in recent years on China, which consumes 32.5 percent of

the world’s cigarettes, but uses practically no burley tobacco. 

China produces about 1.7 trillion cigarettes annually—

three times more than the U.S. production this year. Rising

incomes for many people in China mean that Chinese manufacturers are looking for higher quality tobacco to meet the

demand. Even a very small share of the Chinese market could

amount to a sizeable increase in exports of U.S. burley tobacco.

In 2002, BTGCA successfully sold the first U.S. burley to

China. BTGCA has been a leader in exporting U.S. burley to

China, with exports exceeding 4 million pounds over the past

couple of years. According to Quarles, Chinese customers

prefer to purchase tobacco from BTGCA because it allows

them to work directly with growers. While sales have been

small so far, BTGCA sees tremendous potential to expand its

market in China. 

BTGCA is retaining a small inventory—5 to 10 million

pounds of burley—to use in developing new markets. The

co-op is also exploring opportunities to market value-added

products, as well as any other marketing opportunities that

will provide new income opportunities for members. 

In 2006, around 2 million pounds of burley tobacco were

sold at auction for an average of $1.62 per pound. Purchasers

are paying higher prices at auction than under contract; however, due to warehouse fees, growers net less at auction. 

While the 2006 marketing season for burley is still underTurning Over a New Leaf continued from page 27

A Blue Diamond almond-storage facility near Modesto, Calif. 
Rural Cooperatives / January/February 2007 39

way, most producers are very pleased with the outcome,

Quarles says. Most growers averaged at least 10 cents more

per pound than in 2005.

“Overall, BTGCA believes that the general market outlook for U.S. burley is very promising,” Quarles says. World

production of burley has remained at a stable level of around

1.7 billion pounds for the past several years. However, for

several decades, U.S. growers have experienced a slide in

production and market share. According to BTGCA, it now

appears that that trend is reversing, and burley growers will

see great opportunities for growth in the coming years. 

To learn more about the Burley Tobacco Growers

Cooperative Association and the opportunities the co-op

provides for tobacco producers, visit their Web site at

http://www.burleytobacco.com. ■

lion is spent outside of Greenfield. If the Mercantile can

attract only 3 percent of this trade, it can be profitable, the

plan says. 

Once the state approves the stock sale (which was expected

by about Jan. 1), the biggest challenges will be to select the

right store site and manager. Two sites are under serious consideration: a former bank in the center of town and a nearby

furniture store. Rottenberg says the manager search involves

looking for a “rare bird”: someone who can serve not only as

a buyer of many types of merchandise, but who is also a good

operations manager. 

A number of factors have kept the project moving forward.

"We drew a lot on Powell's experience," he says, commending their generosity in how much and how readily they

shared important information. "But," he adds, "ultimately,

our circumstances are very different, and we had to do our

own homework."

Help came early from a board member contact at Suffolk

University, who provided them with valuable input for their

business plan. They applied for, and received, a Rural

Business Enterprise Grant (RBEG) for $23,000 from USDA

Rural Development. The grant was matched by a

$7,000 contribution from board members to help

with the early business development. 

The key role played by Franklin County

Community Development Corporation’s (CDC)

executive director John Waite was critical, as was

the willingness of both his organization and CDI

to allocate some of his and Bob Rottenberg's time

and expertise to the effort. 

The steering committee and, subsequently,

the board of directors worked tirelessly, meeting

weekly in the early months, forming subcommittees that focused on location, market research, a

business plan, and other details. While some were

motivated by their opposition to big-box stores,

others simply wanted to find a way to revitalize the

town center. 

Membership open statewide

"It was important from the beginning that

the community-ownership aspect not be obliterated by people being able to amass major blocks of

shares," Rottenberg explains. "So we established a cap that

says no one can own more than 3 percent of the outstanding

stock. To amass anything like control, or an influencing

share, you'd have to put together a lot of people." The business has also been structured with a clause that required

approval by a super-majority for a proposed sale or change in

the bylaws.

After much discussion, it was decided to open membership

to any resident of Massachusetts. As Rottenberg recounts,

"We thought there would be people interested in this idea

who might want to invest in it, but who wouldn't necessarily

ever shop there. They just might want to support what we're

doing. 

“We originally restricted it to western Massachusetts, but

later realized that the odds of people from eastern

Massachusetts taking control of our store were pretty slim. 

"And if people in the Boston area want to support this

'buy local' effort with their dollars," he says, "We'll take

'em!" ■

Outside the Box continued from page 23

Greenfield is home to a number of cooperatives, including

the Green Fields Market. 
40 January/February 2007 / Rural Cooperatives

could not pass through

these cost increases with

price increases. “In other

words, if we did nothing,

proceeds would be reduced

by $70 million.”

Implementing a company-wide recovery plan,

Welch’s closed its

Kennewick plant in

Washington state, cut compensation, reduced staffing

and cut capital investments.

Adding to the instability

was an unexpectedly large

2005 crop, weighing in at

about 414,000 tons—

100,000 tons more than a

normal crop and 40 percent

more than the previous year

—and a very high-quality

crop. 

It cost an additional $6

million to receive and market

that crop in fiscal year 2006,

money which was not in the fiscal plan for that year, Dillon

concedes. “We are not happy with the financial results, but

we are very proud of how we managed these issues for the

long-term good of the enterprise. We can now look forward

to FY ’07 and beyond with optimism. Obviously, we can’t

‘get it all back’ in one year...but the negatives have been

managed and the turnaround is well underway.” 

Secure market, brand name benefit members

The co-op’s grower-owners have made clear that the ability to deliver their entire crop to Welch’s—year after year,

regardless of any industry surplus—is important to them.

One of the biggest challenges Dillon faced as CEO was communicating the cost of this “secure market” benefit to co-op

members. Recent price estimates range from $6 million to

$10 million per year, due largely to costs of crop storage,

product development and marketing. Dillon estimates the

cost of market security ranges from $100 to $125 per ton. 

Dillon offers this advice to his successor: “The strength of

the Welch’s brand name is what differentiates Welch’s from

less-successful co-ops. Support that brand reputation in

everything you do.” He further cites Welch’s brand power as

one of the reasons the company remains ranked the “best

agricultural cooperative in America,” based on Standard and

Poors financial rating and

consumer ratings.

Additionally, Wal-Mart

recognized the growerowned company as

“Supplier of the Year”

twice in recent years. 

Before he retired,

Dillon offered one more

“berry of wisdom” regarding the organization’s board

structure. National Grape

Cooperative and its Welch’s

marketing arm benefit from

a “two-board” system. The

National Grape board is

100 percent comprised of

growers, while the Welch’s

board blends growers,

management and outside

directors. Dillon likens the

system to the U.S. House

of Representatives and

Senate, both in terms of

governance and rate of

progress. 

Though the wheels sometimes turn slowly, he is a proponent of the quality decisionmaking that he says results from

the two-fold board configuration. He cautions against tampering with the structure.

“The two-board system is a unique advantage that this

organization possesses. Don’t let the system erode. The roles

and responsibilities of the two boards should not be allowed

to blur.” He further illustrates that this system works best

when there are strong-willed people with strong opinions

around the board table. 

“As I retire from Welch’s, I number among my friends a

number of grower-directors. I hope the majority of growerdirectors respect me and my contribution to the co-op as

much as I respect theirs,” he concludes.

Following some leisure activities ranging from a trip to

Disney World with his grandchildren to international sightseeing, Dillon plans to dote over his “infant vegetables” and

to continue service on various industry, philanthropic and

for-profit boards, including the Ad Council and Grocery

Manufacturers of America, among others. 

Says Dillon, “I think retirement is going to be exhausting,

but we are looking forward to it.” ■

Welch’s Daniel Dillon continued from page 17

Concord grape juice is bottled at a Welch’s processing plant. Photo

courtesy National Grape Cooperative/Welch’s 
Rural Cooperatives / January/February 2007 41

initiatives and future market dynamics

could make it more attractive. 

Producer co-ops can offer the infrastructure for handling and processing

biomass, and are well-positioned to

develop and manage quality control

issues, provide financing opportunities,

and provide outreach and education, he

added. 

Cargill bio-energy efforts

Pat Bowe, president of corn milling

for Cargill Inc., said Cargill currently

owns three ethanol and two biodiesel

plants, one of which is a joint venture

with soybean farmers, who have a controlling interest. 

Until recently, it has not been easy

for the plants to turn a profit, but that

trend has changed. Cargill also has

service agreements with 12 plants, and

that number is increasing. The company provides the infrastructure for purchasing corn from local farmers and

selling to the plants. 

About 2 billion gallons of ethanol are

produced from these activities—about 1

billion gallons from Cargill’s plants, and

another billion gallons from its service

agreements. 

Bowe said scaling-up the transportation infrastructure to keep large plants

running is a major challenge.

He expects corn will become a

domestic, rather than an export, crop as

a result of the increased demand from

ethanol plants. That will require additional changes in transport systems. 

While money could eventually

address hard-asset problems, labor for

trucking might be a limiting factor in

the short run.

Environmental management

opportunities for co-ops

Jim Shelton, agronomy division

manager for Landmark Services

Cooperative, described agronomy services that can be customized for the specific needs of members. As producers

look for lower input prices, higher

yields and higher prices for their grain,

this type of program can help maintain

grower loyalty.

Duane Toenges, manager of AgCert

USA Services, described cooperative

opportunities associated with greenhouse gas emissions. AgCert produces

and sells agriculturally derived greenhouse gas (GHG) emission-reduction

offsets by aggregating farm and production activities and providing a link

to potential buyers. While agriculture

accounts for 20 percent of GHG emissions globally, farming is also an activity that can be a sink for these emissions. 

Cooperatives could provide valuable

data collection and site assessment

functions that would allow individual

farmers to aggregate emission reductions that meet all global “credibility”

tests. Co-ops could also organize centralized biogas recovery systems.

Larry Wojchick, of Goldstar

Cooperative, described the forest management services that local farm supply

cooperatives can provide. Woodlands

can be a valuable economic part of the

farm, but small acreages on individual

farms makes it difficult for farmers to

obtain better timber prices, forest management plans, or a way to participate

in the value added chain. 

E.G. Nadeau of Cooperative

Development Services, sees a role for

farm supply cooperatives as aggregators

of biomass, including wood and woody

byproducts. However, the development

of this infrastructure requires that more

farmers think of their woodlots as part

of their farm profitability plan. ■

Renewable fuels industry rife with opportunity for co-ops continued from page 21

Making it, driving it: an ethanol-fueled SUV outside the Mid-Missouri Energy Co-op

ethanol plant. USDA photo by Dan Campbell 
42 January/February 2007 / Rural Cooperatives

50 Years Ago...

From the January & February 1957 issues of News for Cooperatives

Citrus co-ops help growers share export bonus

Florida citrus growers earned $12.2 million from citrus

exports in the 1955-56 season. Growers realized that amount

over and above what they would have received had there been

no active export program. 

According to

Martin Hearn, export

coordinator of Florida

Citrus Mutual, “Every million boxes of Florida

oranges shipped overseas,

either in fresh or processed

form, results in an increase

of 5 cents per box on the

entire remaining production consumed domestically. On grapefruit, when

production is within tolerable limits, this figure is 13

cents per box.” Or, as

Hearn indicates, growers’

returns for oranges are 3

percent higher at the ontree level for each 1 percent of the total Florida

crop exported.

This program should

interest cooperators, not

only in Florida, but in

other areas as well, for it

offers a modern-day lesson

that clearly demonstrates

the value of cooperative

organization. 

Florida Citrus Mutual

put on a campaign in the

fall of 1955 to acquaint sales personnel with the preferences

and requirements of the European market, which included a

10-day tour of those markets by mostly cooperative shippers.

On the heels of this trip came the realization that Spanish citrus exports for that season and for seasons to come would be

severely curtailed due to an unusually bad freeze. Interest in

the export market took on a new look. As a result of this

emphasis on exports, Florida’s 1955-56 fresh overseas export

volume showed an increase of nearly 461,000 boxes, or 41

percent, over the previous seasons. The state’s two largest citrus marketing cooperatives accounted for almost nine-tenths

of the increase last season.

Locker plants: new merchandising mechanism

Frozen-food locker plants can help farmers process and sell

locally some of what they produce. These plants also help

farmers consume a portion of their own food. 

Community frozen-food locker plants—plus their “sidekick,” the home freezer—offer farmers a unique, built-toorder mechanism for improving local processing and merchandising. Since most plants are located near the source of

livestock, poultry and other perishable foods, they can process

and merchandise foods in wholesale quantities direct to locker

and home freezer patrons, as well as to retail outlets, institutions and others in localized areas. 

Such a system of marketing cuts labor, transportation and

handling costs, bypasses or eliminates some steps in the marketing process and converts the farmer’s raw product into a

form of commercial product suitable for consumer use.

Because of these plants’ direct contact with consumers, they

can ascertain consumers’ preferences and more quickly reflect

them back to producers, as well as narrow the spread between

producers and consumers.

30 Years Ago...

From the January and February 1977 issues of Farmer

Cooperatives

Farmer co-ops show

innovation with special services

Agricultural cooperatives provide a variety of special or

unusual services to meet the needs of their farmer members,

according to a new study compiled by John M. Bailey, senior

agricultural economist with USDA’s Farmer Cooperative

Service. Crop production aids offered by cooperatives include

machinery rental, bulk handling of seed, crop monitoring,

pest management, yield improvements and citrus grove care.

Livestock production services include fence construction,

PAGE FROM THE PAST

From the archives of Rural Cooperatives

and its predecessor magazines
Rural Cooperatives / January/February 2007 43

cattle feeding, and determination of total-dairyration profiles, establishing new turkey growers in

a risk-sharing program,

and maintaining a truck

route for dairy supplies.

Among marketing

services are selling potatoes in the futures market, assembling black

walnuts for sale, and

freezing fish for price

stabilization.

Management services include an advance

deposit program that

earns interest on the

deposit, an economic

feasibility study guide, and a farm consulting and tax service.

Individual co-op members are being offered health examinations, a credit card program, commercial painting service,

mortuary service, and employee commuter vans.

NMPF meeting focuses on Capper-Volstead

Words of assurance about the Capper-Volstead Act and a

challenge to preserve cooperatives and dairy marketing programs were heard at the National Milk Producers Federation

(NMPF) annual convention, Nov. 28 to Dec. 1, 1976.

“There is no threat to the Capper-Volstead Act,” explains

Congressman Thomas S. Foley, chairman of the House

Committee on Agriculture. “The new administration has

committed to protect the basic legislation and the needs of the

agriculture movement. Congressional support is overwhelmingly strong and it must be continued.” 

Foley also told the 2,500 dairy farmers and cooperative

leaders assembled in San Francisco that it may be necessary to

extend the current farm legislation one year to give the new

administration more time to review current programs. He

concluded by calling for federal disaster protection for farmers, some form of price support programs and increased agricultural research and education programs.

NMPF Secretary Patrick B. Healy warned that cooperatives, the market order program, the price support program

and preservation of the domestic milk market must not be

impaired legislatively. Continuing, Healy said extra care must

be taken to make certain that “damage is not done to the

complex of legislation that has made farming possible in

today’s America.” Referring to these programs, Healy concluded, “Let the word go out from here and be heard by all

those responsible—or who become responsible in areas of

interest to dairy farmers—that there are certain things we

hold to be inviolable.”

10 Years Ago...

From the November/December 1996 issue of Rural Cooperatives

Harvest States launches investment plan

With the disappearing safety net of government farm programs, producers and their cooperatives are looking to the

marketplace to provide greater returns. Harvest States

Cooperatives, which just

reported record earnings

of $57.9 million on total

sales of $8.2 billion, has

devised a strategy to

accomplish that goal. 

The Harvest States

Investment Plan applies

to the co-op’s strengths

and established track

record, adding the best

of the new, definedmembership cooperative

approach. The catalyst in

the mix is a commitment

to strive for the maximum return to members

from value-added processing, marketing and services. 

The plan gives producers and cooperatives an opportunity

to increase returns from Harvest States food processing operations by investing in “equity participation units.” Investments

would be available on a per-bushel basis. They would carry

the right and obligation for the member-investor to deliver

the number of bushels involved to an authorized delivery

point, normally a nearby member cooperative or Harvest

States facility. This provision is a key element in ensuring that

the plan qualifies for cooperative status. 

Co-op banks hold market share

A new Farm Credit Administration report notes that while

the Farm Credit System (FCS) has lost market share since the

mid-1980s, banks for cooperatives have maintained their historical average market share of about 60 percent. Banks for

cooperatives’ portion of the FCS loan portfolio more than

doubled, from 10.9 percent to 26 percent, during the same

period. 

The report traces changes since 1969 in rural and farm

demographics, as well as the characteristics of farm finance

and farm real estate, as well as modifications that have

occurred in the financing of farmer cooperatives. ■
44 January/February 2007 / Rural Cooperatives

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