C O O P E C O O P ERAT I V E S T I V E S

USDA / Rural Development USDA / Rural Development M a rch/April 2008 ch/April 2008

Page 7

Cherry Co-op

Still on Top 

Page 4

All-time Highs Set

by Top 100 Co-ops

Cherry Co-op

Still on Top 

All-time Highs Set

by Top 100 Co-ops
E d i t o r ’s note: This commentary is excerpted from USDA Under

S e c re t a ry for Rural Development Thomas Dorr ’s address during the

opening session of the Washington International Renewable Energ y

C o n f e rence (WIREC 2008), March 4. More conference highlights

will be included in the May-June issue. 

Renewable energy has come of age. But for all of our

nations, renewable energy is both an urgent challenge and a

historic opport u n i t y. 

First the challenge: Since the fall of the Berlin Wa l l ,

between 2 billion and 3 billion people have joined the world

market system. The world is an immensely more pro d u c t i v e ,

wealthier and a vastly more competitive place. Hundreds of

millions of people have already moved into the global middle

class, with energy footprints to match. 

This is a good thing. But the surge in global energ y

demand, the revaluation of energy and other commodities in

world markets and growing environmental concerns about

carbon emissions re q u i re that we adapt. 

In this new world ord e r, renewable energy has pro f o u n d

national security and economic security implications. It is a

high environmental priority. It is creating new markets for

f a rmers, generating new jobs and increasing economic

o p p o rtunity in rural areas around the world. 

For all these reasons, the time to act is now. All of us

recognize this imperative. That is why we are here. We may

be on diff e rent paths, pursuing diff e rent strategies, but we

seek the same goal. 

The United States, by some measures, has come late to this

e ff o rt. The United States is a continental nation with an

abundance of re s o u rces and the luxury of many choices.

Renewables, until relatively re c e n t l y, suff e red as a result. 

But if that is the historical re c o rd, the reality today is very

d i ff e rent. The United States, at the beginning of this decade,

began a new chapter. Old perceptions sometimes die hard, but

the old perception that the United States is a laggard on

renewable energy needs to die here and now. 

• The United States today is one of the world’s leading

p roducers of renewable energ y, measured across all sectors.

• Since the beginning of this decade, installed wind capacity

in the United States has increased sevenfold. We have led

the world in new capacity-added for three years running. 

• Texas alone, if it were a nation, would rank seventh in the

world in wind energ y. Texas is today America’s leading wind

e n e rgy state because of a Renewable Portfolio Standard

signed into law by then-Governor George Bush in 1999.

The Pre s i d e n t ’s commitment to this cause is longstanding,

and continues today. 

• The United States today ranks third in the world in solar

photovoltaics, behind Germany and Japan. Annual domestic

shipments of photovoltaic cells and modules have incre a s e d

m o re than 10-fold, again since the beginning of this decade. 

• The United States is also a leader in geothermal, in wastet o - e n e rgy and in solar- t h e rmal power as well. 

• Tu rning to biofuels, U.S. ethanol production has

q u a d rupled since 2000. We are now the world leader in this

sector and a leader in bringing cellulosic ethanol to market. 

• At the beginning of the decade, U.S. production of biodiesel

was virtually zero, just 2 million gallons. Last year, the U.S.

p roduced 450 million gallons, placing us second in the

world behind Germ a n y. 

The development of renewable energy is not a race against

other nations; it is a race against our own capacity. But it is a

race to which the United States is today fully committed.

While we may have come late to the game, we have in fact,

achieved more in the past eight years than in the previous 30

years combined. So this is a new day. 

We recognize that there are challenges ahead and that the

responses of nations may diff e r. The potential of biofuels, for

example, is already being multiplied by advances in genomics.

But not all nations share the readiness of the United States to

adopt these new techniques. That is their privilege. 

On another front, sustainability is a universally desire d

goal. But sustainability means diff e rent things to diff e re n t

people. Thanks to ongoing advances in science and to

C O M M E N T A R Y

Renewable energy:

common goals, different paths 

2 M a rch/April 2008 / Rural Cooperatives

President George W. Bush (center left) and a group of other

dignitaries, including USDA Under Secretary for Rural

Development Thomas Dorr (far right), check out a plug-in hybrid

car at the WIREC trade show. USDA photo by Ken Hammond

continued on page 42
Rural Cooperatives / M a rch/April 2008 3

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USDA Rural Development

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Have a cooperative-related question?

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C O O P E C O O P ERAT I V E S T I V E S

M a rch/April 2008 Volume 75 Number 2

p. 4

p. 16

p. 20

p. 29

O n t h e C o v e r :

Mount Hood rises majestically above the orchards of the

Oregon Cherry Growers cooperative, which is celebrating its

75th anniversary. See page 7. Photo Courtesy Oregon Cherry

Growers

F E A T U R E S 

4 Largest 100 ag co-ops post record sales, margins

By David Chesnick, E. Eldon Eversull

7 75 Years Strong: Oregon Cherry Co-op

By Mitch Lies

1 0 Whey to Ethanol

Is there a biofuel role for dairy cooperatives? 

By K. Charles Ling

1 2 N o rthwest Passage

Co-ops could be trail-blazers for bioenergy industries in Northwest

By Eric Bowman

1 6 O rganic and Beyond 

Consumer demand growing for differentiated farm products 

By Kathleen Painter

1 9 N o rth Wi n d

Alaska Village Electric named top wind co-op 

2 0 State of the Art

Arts and crafts co-ops help members tap markets 

By Lindsay Atwood

2 9 Ag Versus Industrial Waste for Energ y

By Jessica Ebert

3 5 Alto Dairy sold to Saputo Cheese USA

By Dan Campbell

D E P A R T M E N T S

2 C O M M E N TA RY

2 5 IN THE SPOTLIGHT: ROY ORT O N

3 2 CO-OP DEVELOPMENT ACTION: RIDE SHARING

3 4 UTILITY CO-OP CONNECTION: SHELBY

ELECTRIC CO-OP

3 7 N E W S L I N E

4 4 PAGE FROM THE PA S T
4 M a rch/April 2008 / Rural Cooperatives

By David S. Chesnick and

E. Eldon Eversull

A g r i c u l t u ral Economists

U S DA Rural Development

he 100 largest U.S. agricultural

cooperatives had total sales of almost

$78 billion and net income of $1.5

billion in 2006, both all-time highs

(table 1). Total sales grew by more than

4 percent from 2005 while cost of goods sold grew 3

percent, helping net income grow by $400 million. 

The sales increase of $4 billion in 2006 was due to

stronger sales by diversified cooperatives (which

accounted for $2.2 billion of the gain), farm supply coops ($1.3 billion) and livestock co-ops ($1.1 billion).

Much of the increase in diversified and farm supply

cooperative sales was due to the increase in the price of

fuels and other energy products that these cooperatives

sell.

Grain prices increased greatly in 2006, but with coops using differing fiscal years, not all price increases for

T

Of the Top 100 agricultural cooperatives:

■ The No. 1 ranked co-op had sales of $14 billion. 

■ The 100th ranked co-op had $108 million in sales.

■ Seventeen co-ops had sales of more than $1 billion 

■ Thirty co-ops had sales of $108 million to $200

million.

■ Thirty-eight co-ops had sales of $200 million to

$500 million.

■ All Top 100 co-ops had at least $20 million in total

assets.

■ The Top 100 co-ops accounted for 62 percent of

the total ag cooperative sales of $127 billion in

2006.

Largest 100 agricultural co-ops post

record sales and margins

grain co-ops could be used for this analysis. Marketing

revenue for grain cooperatives increased only 4 percent over

2005. Dairy prices were low in 2006 and total sales for these

cooperatives fell $1.4 billion (6 percent). Milk prices have

increased sharply since 2006, so the dairy sales picture will

look dramatically improved when the 2007 version of this

report is compiled. 

Marketing sales for diversified cooperatives (those that

market grain and sell farm supplies) fell $1.5 billion, or 12

percent, in 2006. This was primarily due to lower grain and

dairy sales. 

There have been a number of changes in the Top 100 in

the past several years. Four cooperatives converted to

investor-owned firms, two declared bankruptcies, leading to

a sale of their assets, and one cooperative declared

bankruptcy but reorganized and is back in the Top 100. But

new co-ops that took their place on the Top 100, and higher

sales by many of the other co-ops that remained on the list,

more than made up for these “lost” members. 

For comparative purposes and analysis, the same 100

cooperatives are in both the 2006 and 2005 data sets. There

are 10 new cooperatives on the list, primarily grain and farm

supply cooperatives that have grown through

merger.

There has been a steady growth in sales in

these cooperatives, with sales growing from

$55 billion in 2000 to $78 billion in 2006

(figure 1). With the changes noted in the

prior paragraph, sales in figure 1 are not

strictly comparable, except for 2005 and 2006,

as cooperatives were added to the Top 100 list

and dropped when their status changed or

they become larger or smaller.

Overall expenses were up about 1 percent,

to $8.1 billion. Wages are the largest expense

item while “other” expenses is a catch-all

category that covers expenses that are not

wage, depreciation or interest related.

Patronage income increased $20 million, to

$210 million, a 13-percent increase. Net

income grew 30 percent, or $350 million. Net

income (after taxes) has grown from $500

million in 2000 to $1.5 billion in 2006 (figure

2).

The Top 100 balance sheet is presented in

table 2. Total assets have grown from $22

billion in 2000 to $28 billion in 2006. Total

assets grew $1.6 billion, or 6 percent, from

2005 to 2006. Current assets comprise more

than half of the Top 100 total assets. The

large increase in other assets and decrease in

investments is due to one cooperative

changing how an asset was reported. Property,

plant and equipment investment increased

$600 million, or more than 8 percent.

Current and total liabilities both grew more

than 5 percent from 2005 to 2006. Total

liabilities grew to $17.5 billion, an increase of

almost $1 billion. Allocated equity comprises

almost 80 percent of total equity. Equity

levels remained low, with equity financing

only 38 percent of assets in 2006 and 37

percent in 2005. ■

6 M a rch/April 2008 / Rural Cooperatives

Figure 2 – Top 100 farmer cooperatives’ net income, 2000-2006 

Figure 1 – Top 100 farmer cooperatives’ total sales, 2000-2006
Rural Cooperatives / M a rch/April 2008 7

By Mitch Lies

Editor’s note: This article is reprinted

courtesy the Capital Press,

www.capitalpress.com.

alem, Ore. — As

Oregon Cherry

Growers recently closed

the book on its first 75

years, it remains a giant

in maraschino cherry production.

The co-op today is much more than

that.

Oregon Cherry Growers today

annually packs thousands of tons of

fresh cherries and, in recent years, the

co-op has branched into producing

infused dried cherries and blueberries.

The result? The co-op today is as

strong as ever.

“Cherry-growing is a pretty volatile

business,” cherry grower and co-op

member Ken Bailey says. “Having these

other products has given the

cooperative much needed stability.”

The transition from maraschino

cherries to the diverse portfolio it

carries today went smoothly, according

to Ed Johnson, president and CEO of

the co-op. But it wasn’t easy.

Johnson said growers already had

shifted acreage from processing

varieties to fresh cherry varieties when

he took the company reins in 2001. The

shift created potential problems

regarding company identity.

“We had to decide who we wanted to

be,” he says. “Up to that point, we were

a processed company that did some

fresh fruit, but we were transitioning to

where we are now. We are now a

formidable fresh company, and we’re

still a formidable processed company.

“We had to determine if those things

were compatible,” he says.

Making the transition, Johnson says,

was critical to the economic survival of

the co-op.

“At the bottom of the change was

opportunity,” he says. “The demand has

increased for fresh because there is a

portion of the population that wants to

eat more fresh fruits and vegetables.

S

Oregon Cherry

Co-op’s diverse

portfolio developed

smoothly, but

not easily

75 Years Strong 75 Years Strong

The Bailey family is among the

farmer-owners of Oregon Cherry

Growers Inc., which is

celebrating its 75th anniversary.

Above, processing maraschino

cherries in the early days of the

co-op.
8 M a rch/April 2008 / Rural Cooperatives

Our growers see that as an opportunity.”

Johnson said the co-op reached a milestone early in the

2000s when, for the first time, it bought briner cherries from

outside the company.

In years past, it was typical for co-op members to sell

thousands of tons of briner cherries to other processors after

meeting its own demand.

Another milestone occurred earlier this year when the coop agreed to a joint venture with Sage Fruit of Yakima,

Wash., to build a 78,000-square-foot, state-of-the-art packing

facility in Wapato, Wash., for its fresh cherry production.

Cost-cuttting changes

The company in recent years has made several smaller

changes that have reduced production costs, including

consolidating its pitting operation. All pitting now is done at

its plant in The Dalles, instead of being split between Salem

and The Dalles as it formerly was.

“We are in a continual cost-reduction journey,” Johnson

said. “We look at every single link in our chain to determine

how we can lower cost.”

One of the biggest obstacles in the future for the co-op is

acquiring adequate labor.

Johnson said the industry closely follows immigration

legislation and regularly submits comments at the federal

level.

“We are challenged,” Johnson said. “Labor is a significant

issue and a significant concern both in the orchards and the

packing lines. We have automated as much as we can.”

Oregon Cherry Growers started in1932 when 53

Willamette Valley cherry growers founded Willamette

Cherry Growers. Other cooperatives also formed in the

region at around the same time, including The Dalles

Cooperative Growers and Columbia Fruit Growers.

According to historical accounts, growers formed the coops to avoid being at the mercy of processors.

In 1966, The Dalles Cooperative and Columbia Fruit

Growers merged under the name The Dalles Cooperative. In

1984, in an attempt to be more vertically integrated, The

Dalles Cooperative and Willamette Cherry Growers merged,

forming Oregon Cherry Growers.
Today the co-op has just under 100 grower-members split

between the Willamette Valley and The Dalles/Hood River

area.

The co-op sells product in domestic food service and retail

markets and works at increasing export sales through market

promotion programs in Pacific Rim countries.

The co-ops’ members typically are on the cutting edge of

production techniques, says the co-op’s board chairman,

cherry grower Greg Johnson of The Dalles. And many are

certified under different sustainable certification programs.

Ed Johnson said growers opted to certify operations as

sustainable largely because markets were demanding it.

The co-op also has increased efficiency in recent years

through better utilization of sort-outs.

“Because of our diversification, we’re able to utilize almost

all of the fruit that we’re buying,” Johnson says. “We’re

flexible and we’ve diversified.” 

The company, he says, should be well-positioned to run

for another 75 years.

“We changed our business model, but it was something

that needed to happen if we were going to stay in business,”

Johnson says. “It’s been a good change. Our balance sheet

has been improving.” ■

Rural Cooperatives / M a rch/April 2008 9

Snow-capped Mount Hood rises above Oregon cherry

orchards. Below, inside the co-op’s processing plant. Photos

courtesy Oregon Cherry Growers
10 M a rch/April 2008 / Rural Cooperatives

By K. Charles Ling

Agricultural Economist

U S DA Rural Development

Editor’s note: See page 46 to order the

research report that this article is based on.

n estimated 90.5 billion

pounds of whey was

generated as a

byproduct of U.S.

cheese production in

2006. Besides the liquid carrier, the

composition of whey is approximately

0.3 percent butterfat, 0.8 percent whey

proteins, 4.9 percent lactose, and 0.5

percent minerals. So there was 4.4

billion pounds of lactose contained in

the whey produced that year.

Whey may be made into many

products with various processes and

technologies. Condensed whey, dry

whey, dry modified whey, whey protein

concentrate and isolates, as well as

lactose (crystallized and dried), are all

whey products. There are many other

secondary and tertiary products that can

be derived from whey, but the volume

of whey used in these products is

relatively small.

Whey products produced in 2006

were estimated to contain 1.9 billion

pounds of lactose. That means there

was about 2.5 billion pounds of surplus

lactose not used for whey products.

This vast amount of surplus lactose

could be fermented to produce an

estimated 203 million gallons of

ethanol. This assumes complete

consumption of lactose in fermentation

and ethanol conversion efficiency at 100

percent of the theoretical yield.

Dairy cooperatives’ share of the

whey-ethanol potential could be 65

million gallons. There are two

industrial-scale whey-ethanol plants in

the United States, at Corona, Calif.

(although this plant is slated for

closure), and Melrose, Minn. Both

began operation in the 1980s and are

currently owned and operated by dai

cooperatives. Together, they produce 

million gallons of fuel ethanol a year

The whey-to-ethanol plant

commissioned in 1978 by Carbery M

Products Ltd. of Ireland is believed t

be the first modern commercial

operation to produce potable

(drinkable) alcohol. Starting in 1985, 

has produced fuel ethanol as well. Th

Carbery process developed by the

company has been adopted by plants 

New Zealand and the United States.

New Zealand started using fuel ethan

produced from whey in August 2007

Conversion pro c e s s

All ethanol production processes

share some basic principles and steps

Whey permeate from protein ultrafiltration is concentrated by reverse

osmosis to attain high lactose conten

Lactose is fermented with some spec

strains of yeast. Once the fermentatio

has been completed, the liquid (beer) 

separated and moved to the distillatio

process to extract ethanol.

This ethanol is then sent through 

rectifier for dehydration and then

denatured. The effluent (stillage and

spent yeast) may be discharged to a

treatment system, digested for metha

gas, then sold as feed or further

processed into food, feed or other

products.

To be economically viable, a

dehydration plant (and by inference, 

ethanol plant) needs to have a minim

daily capacity of 60,000 liters of etha

(about 15,850 gallons a day, or 5 mill

gallons a year), according to a 2005

New Zealand report. The estimated

“at-gate” cost (operating and capital

service costs) of producing ethanol fr

whey permeate at maximum technica

potential, with a level of uncertainty 

+/- 20 percent, was N.Z. $0.6-$0.7 p

liter. Using a currency exchange rate 

NZ $1 = U.S. $0.7, the estimated cos

translated to U.S. $1.60-1.85 per

gallon.

A

Is there a

biofuel role

for dairy

cooperatives?

W h ey to Ethanol
This estimate is similar

to the costs quoted by

sources in the United

States: about $1 per gallon

of operating cost and a

capital service cost that is

predicated on the capital

cost of from $1.50 to $4

per annual gallon for a

commercial operation,

depending on the scale of

the plant. The estimated

operating cost assumes

that whey permeate used

in ethanol fermentation is

a free (no cost) feedstock.

Capital cost is the cost of

the plant construction

project.

There is an opportunity

cost of lactose for ethanol

fermentation only if there

are competing uses of the

same lactose, such as

manufacturing dry whey,

lactose or other whey

products. If there is no

such competition, then the

whey permeate somehow

has to be disposed of and

the opportunity cost of

lactose for ethanol

fermentation is likely to be

zero or even negative.

It would take 12.29

pounds of lactose to

produce a gallon of

ethanol, if the lactose is

completely consumed in fermentation

and ethanol conversion efficiency is 100

percent of the theoretical yield. For

every $0.01 net lactose value (price of

lactose net of processor’s cost), the

feedstock cost for fermentation would

be $0.1229 per gallon of ethanol. If

lactose consumption is less than

complete in fermentation and ethanol

conversion efficiency is less than 100

percent of the theoretical yield, then

more than 12.29 pounds of lactose is

required to produce a gallon of ethanol

and the feedstock cost would be higher.

Economic feasibility

Whether it is economically feasible

to produce ethanol from whey permeate

is determined by the balance of the

production costs and the expected

revenues. Net returns from the ethanol

enterprise should be measured against

the profitability of making other whey

products or of other uses, to determine

whether ethanol production is a more

worthwhile undertaking. A further

consideration should be deciding which

of the whey enterprises fit better with a

cooperative’s overall business strategy.

The fact that the two whey-ethanol

plants have been in operation for more

than 20 years is an indication that: (1)

fuel ethanol production from whey is

technically feasible, (2) whey-to-fuel

ethanol production

technologies and processes

are mature and capable of

being adopted for

commercial operations and

(3) producing fuel ethanol

from whey is economically

feasible.

In assessing the

feasibility of a new wheyethanol plant, the cost of

whey permeate as

feedstock needs to be

carefully evaluated in this

era of whey products price

uncertainties. Other

important factors to

consider, beside feedstock

cost, are: (1) appropriate

plant scale that would

minimize capital cost and

the cost of assembling

feedstock, (2) appropriate

technology and process

that would minimize

operating cost, (3) best

alternative for using and/or

disposing of the effluent,

(4) ethanol price and (5)

various government

production incentives.

Dairy cooperatives are

certainly well-positioned

to coordinate whey

assembly for ethanol

production. However, in

view of the current high

and unsettled dry whey

product prices, there are great

uncertainties concerning the long-term

development of the whey-ethanol

production enterprise.

There was a very high attrition rate

of fuel ethanol plants during the 1980s.

Experiences of that period provide

some lessons that may be relevant to

future commercial whey-ethanol

development. To be successful, a fuel

ethanol plant should have proper

technology selection, proper

engineering design, adequate research

support, credible feasibility study,

adequate financing and personnel with

technical and managerial expertise in

the biochemical process. ■

Rural Cooperatives / M a rch/April 2008 11

This ethanol plant uses whey from the adjoining cheese plant in

Corona, Calif., as its feedstock. However, Dairy Farmers of America

(DFA) is closing the cheese plant. Photo courtesy DFA
By Eric Bowman

Co-op Development Specialist

Northwest Cooperative Development Center

e r i c @ n w c d c. c o o p

Editor’s note: The Northwest Cooperative Development Center

(NWCDC) received funding from the Bullitt Foundation and

USDA Rural Development to explore the role of the cooperative

business model in emerging bioenergy industries. The Center

produced a study, Harvesting Northwest Bioenergy

Cooperatives; Mapping the Route to a Cooperatively-Owned

Future for Emerging Bioenergy Industries available on the web

(www.nwcdc.coop/Resources/HarvestingNWBioECoops.pdf), upon

which this article is based. It examines the past, present and future

role of cooperatively owned businesses in the budding bioenergy

industry. The conclusions are based on one year of research,

including interviews with existing co-ops, surveys of groups seeking

to form co-ops and a review of case studies and articles.

ioenergy presents the Pacific Northwest with

tremendous opportunities for cleaner energy

and economic development. It’s touted as

being the answer to a variety of regional

problems ranging from rural out-migration

to diminishing natural resources.

The Northwest is a region born through resource

extraction and now defined by a “post-industrial” economy.

The traditional economy of resource-based industries and

manufacturing are transitioning into a “new” economy of

high-value-added sectors, such as software and biotech. 

This economic transition has created new winners, but

also new losers. For example, Microsoft has created many

new millionaires while population and median incomes are

rapidly decreasing in many rural towns. 

The rise of a renewable energy industry has created hope

and promise that a rural renaissance is on the horizon.

12 M a rch/April 2008 / Rural Cooperatives

B

N o r t h west Pa s s a g e

Co-ops could be trail-blazers for emerging

bioenergy industries in Pacific Northwest 

Cow manure on the Dan DeRuyter dairy in eastern Washington is being converted into enough methane to generate electricity

to light up more than 200 homes. 
Renewable energy resources, such as wind and biomass, are

distributed throughout rural regions and hold the potential

for widely distributed economic benefits. Rural economies

are realizing new potential from pre-existing assets. (The

term “bioenergy” in this article refers to renewable energy

made from biological sources, including liquid “biofuels”

(primarily ethanol and biodiesel) and “biopower,” derived

from numerous biomass sources, such as anaerobic digestion

generation.)

The opportunity for economic development should not

only be viewed within the context of jobs

creation and commodity prices, but also

the long-term future of potential

ownership and equity. Different ownership

models are ultimately designed to benefit

their stakeholders, i.e., the owners. Local

ownership substantially increases

economic benefits compared to absentee,

investor-owned businesses.

While the Midwest has offered a

dynamic example for how to build locally

owned biofuels plants, the situation in the

Pacific Northwest is much different.

Unlike the Midwest, the Northwest

doesn’t have as long of a cultural tradition

of farmer co-ops. The Northwest has a

more diverse ecology and geography and,

subsequently, a broader range of crops.

Whereas the agricultural infrastructure of

the Midwest is based on a surplus of highvolume/low-value commodities, the

Northwest is based on specialty crops (such as apples, wine,

etc.) and geared for export. According to data from USDA

Census of Agriculture, the produce value per acre in Idaho,

Washington and Oregon are four times that of Iowa.

The specific industries perceived as holding the greatest

potential for bioenergy development in the Pacific Northwest

are:

• Biodiesel 

• Ethanol 

• Anaerobic digestion 

• Combustion of woody biomass 

N o rt h w e s t ’s considerable potential 

The Northwest holds near-term potential for a regionally

based liquid biofuel/biodiesel industry. Oregon, Washington

and Idaho have the potential to grow substantial oilseed

crops, primarily rotational canola. 

Multiple farmer-owned projects are now underway but a

great deal of infrastructure capacity has yet to be developed.

Currently, there are few regional crushers to separate the

meal and the oil, and more hybrid research is needed to

guarantee producers reliable crop yields. Just as with ethanol,

oilseed producers (for example, the Pendleton Grain

Growers) can engage in a variety of capacities to capture

greater value for their agricultural products.

The Midwest ethanol industry provides a timely case study

of how a liquid biofuels industry can be developed from the

farm up. Nationally, the ethanol industry is experiencing a

rapid transformation toward larger, investor-owned facilities.

Virtually all current ethanol industry development in the

Pacific Northwest is investor-owned.

The Northwest’s primary comparative advantages for

ethanol production are low-cost commodities already flowing

through the region, via rail and barges, to Pacific Rim

markets. It also has a large, pre-existing feed-mash market to

supply the region’s dairies.

While corn and wheat are grown in the Pacific Northwest,

the most abundant biomass feedstocks are forestry and

agricultural residues. That said, the future of cellulosic

feedstocks for ethanol is still unclear. Research and

development and the refining of technologies are needed to

fully commercialize a cellulosic ethanol industry.

Assuming the production technology will be

commercialized, the long-term potential for cellulosic

ethanol is enormous and could play a major role in the liquid

biofuels industry. Just as an investor-owned firm (such as

Iogen with Goldman Sachs and Royal Dutch/Shell) can

e x p l o re launching a cellulosic ethanol re f i n e ry, so could

a group of agricultural producers explore cooperating

t o :

• Jointly market their agricultural residues to a biofuel plant

(i.e., act as a bargaining and supply procurement

cooperative);

• Join in a joint venture with an investor-owned or privately

held company to operate a plant;

• Launch a producer-owned small- to medium-scale facility.

Rural Cooperatives / M a rch/April 2008 13

1. Democratically controlled by those it serves; surplus is distributed equitably.

2. Ties to local community mean co-ops are more likely to be socially

conscientious, more accountable and more representative of the broader

community.

3. No investors to feed, so more income stays in the community.

4. Permanence: co-ops live beyond their founders.

5. Self-management, as co-ops are a self-help tool for people to achieve

together what they cannot achieve alone.

6. Trusted business partners — most people believe producers to be honest and

reliable individuals.

7. Co-ops focus on social, individual and community needs in addition to the

bottom line. Most investor-owned firms focus only on the bottom line. 

M a r ketable advantages of the

co-op business model 
14 M a rch/April 2008 / Rural Cooperatives

AD power suited to co-ops 

Anaerobic digestion (or “AD”) promises a niche solution

to a distinct set of problems, from energy production to

manure management. A well-recognized industry in other

parts of the world, AD is quickly becoming more feasible in

the Pacific Northwest because of technical advancements for

its cooler climate. A group of farmers in a local area with

large quantities of animal waste could realize economic

opportunities by forming an AD bioenergy cooperative. 

Cooperative ownership is well-suited to address specific

project needs, such as the initial high capital costs of digester

construction and the need for large quantities of manure. As

an industry, AD offers promising opportunities to form

synergies between multiple stakeholder groups, i.e., farmers

who need improved manure management and communities

that want clean waterways.

Woody biomass

The combustion of woody biomass for heat and power is

an established industry led by wood products manufacturers.

Innovation promises that new technologies, such as

integrated biorefineries, are likely just around the corner.

Because bioenergy production uses large amounts of

feedstock, a co-op of like-producing individuals (such as

straw-producing seed growers) could efficiently support such

a facility. Because of the sheer quantity of available resources,

woody biomass promises to play an increasing role in the

nation’s renewable energy portfolio.

America now has an opportunity to establish the future

direction of the bioenergy industry and what it will

accomplish for the nation. There will be costs and benefits,

no matter the direction. If we seek a bioenergy economy that

delivers on its promises to rural America, then we must

incorporate rural economic development priorities.

While every state in the Pacific Northwest is seeking to

accelerate the development of nascent bioenergy industries,

there is still much development to occur in order to have the

vibrant, regionally based industry people envision. 

Forms are constructed to channel the flow of manure at the DeRuyter Dairy methane gas facility. Although this operation is not

owned by a cooperative, this technology is well adapted for cooperatives to pursue.
Rural Cooperatives / M a rch/April 2008 15

Recommendations for new and existing co-ops:

• Normal rules of business apply to co-ops: create a marketdriven enterprise with a well-researched and thought-out

business plan, have adequate reserve funds, etc. 

• Build partnerships — co-ops represent a broader

community than an average limited liability corporation

(LLC) and, by definition, must appreciate and incorporate

community interests. This is strength for co-ops.

• Identify what differentiates the group, be it feedstock

production or marketing, and leverage these strengths to

ensure economic success (see sidebar, page 13). 

Co-ops must clearly identify and research their markets,

resources and partners to determine if the project justifies the

possible risks.

Key recommendations for local govern m e n t ,

policymakers and the general public:

• Provide guaranteed markets through contracts, such as the

business relationship the City of Portland is exploring with

Pendleton Grain Growers and Madison Farms to

potentially supply Oregon-grown biodiesel.

• Encourage and support accessible and sizable capitalization,

including investment equity, grants and debt availability

that provides “gap” financing and loan guarantees. 

• Educate about, and advocate for, the benefits of local

ownership.

• Realize the broader condition of industry development and

seek to create what is wanted, be it decentralized, locallyowned or centralized, absentee-owned business. 

• Create ownership-based incentives and/or tax benefits, such

as Minnesota’s disincentives for selling off a farmer-owned

facility.

Time to build equity is now

While we may still be at the dawn of the renewable energy

industry, it is important for co-ops to build equity now. As

private capital has rushed into renewable energy, the

resources are becoming increasingly under contract with

well-capitalized and entrenched firms.

As Under Secretary for Rural Development Thomas Dorr

has pointed out, “This is probably the greatest new

opportunity for wealth creation in rural America in our

lifetimes...” It is no secret wealth is generated through the

accumulation and leveraging of assets, not through passively

providing inputs.

In the Pacific Northwest, a “gold-rush mentality” has led

to a rapid acquisition of the “low hanging fruit” of renewable

energy resources. For example, look at the wind industry,

where much of the easily accessible wind rights have

consolidated into the possession of just several firms. While

there are still niche holes well-suited to communities, family

farmers and co-ops, the major players are in place.

There would be enormous environmental benefits if all

the manure in the Northwest flowed into investor-owned

digesters of the design-build-own-operate model.

Unfortunately though in that scenario, the priority of local,

rural economic benefit risks being decoupled from the other

aims of the renewable energy projects.

Investors will play a powerful role in the rapid

development of these industries, yet it is important for local

players, co-ops and communities to develop and maintain

equity early while opportunities are still available before these

industries mature (see sidebar, above). These industries will

undoubtedly expand and contract, as ethanol has

demonstrated. Farmers, co-ops and communities will need to

be strategic in their risk exposure. 

Usually caused by product innovation or deregulation, the

following lifecycle stages are common in emerging

industries:

1. Dormant: low numbers of competitors enjoy high monopoly

profits.

2. Takeoff: soaring entry and virtually non-existent exit from

the market.

3. High Turnover: many firms enter and leave the market.

4. Shake-out: mass exit via mergers, bankruptcies, etc.

5. Stabilization: a stable oligopoly emerges.

(Source: Michael Gort, Steven Klepper. Time paths in the

diffusion of product innovations. Economic Journal, vol. 92,

No. 367. September, 1982). 

Industrial lifecycle stages

These units crush canola seed at Pendleton Grain Growers

Co-op. The resulting oil and meal can be used for biodiesel.

USDA Rural Development provided a $300,000 Value-Added

Producer Grant for the biodiesel project.
16 M a rch/April 2008 / Rural Cooperatives

By Kathleen Painter

Analyst 

Center for Sustaining Ag & Natural Resources 

Washington State University kpainter@wsu.edu 

Editor’s note: This article is based on the author’s research report,

An Analysis of Food-Chain Demand for Differentiated Farm

Commodities: Implications for the Farm Sector, published

under a cooperative research agreement with the Cooperative

Programs of USDA Rural Development. To download the full

report from the Web, or to order a free hard copy, please see page

46 of this magazine. 

round the country, a growing number of

consumers are choosing fresh local produce,

pasture-raised meats and artisan breads and

cheeses. Like organic foods, the attributes of

these products are not necessarily apparent

— labels may be needed to differentiate them. Consumer

demand for quality food appears to be experiencing a

paradigm shift. Consumers want to know where their food

comes from and how it is produced. 

A survey mailed to more than 1,000 randomly selected

consumers in five coastal California counties revealed that 59

percent wanted to know more about their food. Specifically,

they wanted to know about food safety, nutritional content,

how food animals are treated, environmental impacts,

working conditions, wages and how far the food travels

(Curlee, 2006). 

Consumers are increasingly saying they choose foods for

social, environmental and long-term health reasons. An

Organic and Beyond 

A

Labels that differentiate farm products in the marketplace —

such as pasture-raised poultry and organic produce or

meats — can add significant value to a product.
Rural Cooperatives / M a rch/April 2008 17

underlying dissatisfaction with conventional fare may explain

the strong growth rate of the organic sector over the past 15

years. Recent studies have shown a greater interest in locally

produced foods than in organic products (Ostrom, 2006). In

one study, consumers preferred food grown locally using

some pesticides to foods grown organically (Pirog, 2004). 

Responding to consumer demand, the Whole Foods

grocery store chain announced in 2006 that it would greatly

expand its local organic offerings. A Time magazine article

suggests that “the new activist slogan on campus is ‘Eat

Local’ (Roosevelt, 2005), and reported that 200 universities

around the country were purchasing food from regional

farmers, according to the Community Food Security

Coalition. 

Price still a barrier 

Price remains the most prominent barrier to increased

consumption of organic products (Hartman Group, 2004).

For most consumers, the relative price differential between a

conventional and an organic item determines their

purchasing behavior (Yiridoe et al., 2006). For die-hard

organic customers, price is relatively less important, as they

will purchase organic products without much regard for

price. However, as large discount retailers like Wal-Mart

begin carrying inexpensive organic items, a new, larger group

of organic consumers can be expected. 

Industry leaders believe that expanding market preferences

and concerns can support multiple certification options (Exo,

2006). If consumers are mainly looking for fresh produce

grown without pesticides, a certification system could be

developed for this attribute. If the overriding concern for

milk consumers is hormone usage, another certification could

be developed to address this issue. 

Pressure from consumers and other groups for bovine

growth hormone-free milk has encouraged several large dairy

cooperatives to ban the usage of this chemical and label their

milk accordingly.

Can changing consumer pre f e re n c e s

help family farm e r s ?

Can demand for higher quality foods help family farmers

stay in business? Since institutional food service operations

can use fairly large quantities, supplying high-quality food to

this channel holds some hope for mid-scale producers.

Focused efforts to bring buyers and sellers together will be

needed to coordinate these types of transactions. 

Alternative certification programs such as Food Alliance

certified or FamilyFarmed, both of which have Web-based

background information and third-party certification, help

guide businesses and consumers to producers who are

catering to this market. 

Demand exceeding supply

Demand for high-quality, differentiated farm products

appears to be outpacing supply (Kirchenmann, 2006; Yee,

2006). While there is currently a window of opportunity, the

timeframe may be limited. Large companies such as WalMart, Costco and Whole Foods already contract directly with

farmers, using their house brands to market these products. 

Farmers need their own branding and marketing systems if

they want to maintain more control and profit for

themselves, but they may need extensive marketing assistance

plus processing and distribution facilities in order to do this. 

Organic Valley provides an excellent example of a marketsavvy grower cooperative, with sales of more than $330

million and participation by more than 1,000 dairy, vegetable,

poultry, beef, citrus and beef farms in 2006. 

Dairy has been one of the most rapidly growing segments

of the organic market. Purchases of organic dairy products

comprised 13 percent of the organic food market in 2003 and

is predicted to grow by over 15 percent per year through

2008. Substantial conversions to organic production are

needed to supply this growing market. Clearly, there is

consumer demand for hormone-free, antibiotic-free, pastured

dairy products. But large organic dairy producers are now

dominating the market for these types of products. 

With a 78-percent growth rate, meat represented the

fastest growing category of organic food in 2003 (NBJ, 2004).

Demand for organic meat, fish and poultry are expected to

grow at a rate of 43 percent through 2008. Currently, there is

Consumer demand growing for

differentiated farm products 
18 M a rch/April 2008 / Rural Cooperatives

a shortage of organic meat due

to the recent rapid rise in

demand, the time and cost of

becoming organically certified

and shortages of organic feed

and a relatively long

production cycle, particularly

in the case of beef. 

Demand for “natural”

brands is also very strong in

the meat and poultry

categories. Restaurants and

food service are using natural

offerings, including several

restaurant chains. 

Organic and natural meats

are perceived as safer and

“cleaner” than conventionally

raised meats that can use

antibiotics, steroids or growth

hormones, according to the

results of a phone survey in 2001 of 500 randomly selected

respondents from Nebraska, Iowa, Wisconsin and Missouri

(Food Processing Center, 2001). Other important consumer

concerns include the environment, animal safety, sourcing

and traceability. Consumers also state that natural and

organically raised meat tastes better (CDS, 2006). 

Strong consumer demand is evident in the organic poultry

and egg categories as well. Wholesale prices for organic

poultry averaged more than 350 percent of conventional

poultry for January 2006 through June 2006, while USDA

says wholesale prices for organic eggs were more than four

times higher than prices for conventional eggs for the same

period. 

F rom organic to otherwise diff e re n t i a t e d

Will consumers who buy organic food be interested in

buying farm products that are differentiated in other ways? 

If products can cater specifically to consumers’ main concerns

—such as free of genetically modified organisms (GMO) or

grown without broad-spectrum pesticides —then consumer

demand should be higher. This is especially true if these

characteristics can be provided at a lower cost than the

organic product. 

If farmers can provide fresh, locally grown, sustainably

produced products, they should be able to interest the

growing segment of consumers who are purchasing organic.

About two-thirds of the consumers in a recent study

purchased organic foods for health and nutrition reasons

(Hartman, 2004). Other reasons included taste (38 percent),

food safety (30 percent) and the environment (26 percent). 

Consumers are willing to pay more for multiple attributes,

such as organic grass-fed beef. Multiple attributes together

may provide the necessary impetus to sell the product.

Consumers are increasing their consumption of fresh

foods, which they believe provide

better taste, health, and nutrition

(Reynolds-Zayak, 2004). In a Fresh

Trends 2004 report, consumer

panelists reported on their current

use of fresh produce compared to

five years earlier (Barton, 2004).

Overall, consumers reported

purchasing an average of 18

percent more fresh produce

compared to five years earlier.

Increasingly, fresh fruit is

consumed as a snack, in order to

increase fresh produce intake. 

If non-organic farmers can

grow foods without the use of

pesticides, then they may be

addressing one of the consumers’

most serious concerns. 

A successful example of this

type of approach is the certified

pesticide-free tomatoes produced by Eurofresh, a U.S.

corporation which operates the single largest glass

greenhouse system in the world in Arizona. The company

claims its varieties have more cancer-fighting lycopene than

any others. Its products are certified by the Nutriclean

program of Scientific Certification Systems, which performs

random checks and requires stringent recordkeeping. 

Another example is the pasture-raised poultry label

Greener Pastures Poultry. This company successfully

developed a devoted clientele for its premium, pasture-raised

poultry. After weighing the costs and benefits of various

certification schemes, it decided against the use of third-party

certification. Sadly, it ceased operation after five years, due to

the inability to develop a processing facility that would allow

it to operate at a sustainable level. 

B road appeal of ’locally gro w n ’

Differentiated farm products may fill a specific niche

without having to incur the costs of adhering to organic

guidelines. A recent poll suggests that the appeal of “grown

locally by family farmers” is very broad, as 75 percent of the

consumers and 55 percent of food business respondents chose

these terms as their first choice for produce or meat products

(Pirog, 2003). 

“Buying local” is one way for consumers to support local

agriculture while eating fresher, less-processed foods and

reducing energy spent on transporting food. A Roper poll

conducted for Organic Valley, a growers’ cooperative

headquartered in Wisconsin, revealed that the majority of

Americans trust smaller scale farms to produce safe,

nutritious food in ways that won't harm the environment. 

For a detailed list of the references used for this article, please

send an e-mail to the author at: kpainter@wsu.edu. ■

" F a rmers need their own

branding and marketing

systems if they want to

maintain more control and

p rofit for themselves, but

they may need extensive

marketing assistance..." 
laska Village Electric

Cooperative (AVEC) in

Anchorage is the

winner of the 2007

Wind Cooperative of

the Year award, presented by the U.S.

Department of Energy (DOE) and the

National Rural Electric Cooperative

Association (NRECA). This annual

award, in its seventh year, recognizes

AVEC for leadership, demonstrated

success and innovation in its windpower program. 

AVEC provides electricity service to

53 small, native villages in rural Alaska

and is using wind power to reduce its

dependence on diesel power. In

collaboration with the wind industry,

DOE is striving to help develop

advanced wind energy technologies to

help meet the rapidly growing demand

for energy.

“We applaud the Alaska Village

Electric Cooperative for its

commitment to wind power

development, and for building upon

President Bush’s commitment to

dramatically increase the use of this

clean and abundant source of energy,”

DOE Assistant Secretary for Energy

Efficiency and Renewable Energy Andy

Karsner said. “With Department of

Energy support, unprecedented growth

rates in emissions-free, affordable wind

production will increasingly help meet

the nation’s rapidly growing demand for

energy.”

AVEC currently has 990 kilowatts

(kW) of installed wind-generating

capacity in four of the communities it

serves. Two of these communities,

Toksook Bay and Kasigluk, represent

the first field deployment of the

Northwind 100/20 wind turbine. This

is a 100 kW turbine with a

20-meter rotor specifically

designed for deployment in

cold, harsh climates. This

turbine, designed and

developed in conjunction

with DOE, received a

Research and Development

100 Award in 2000. AVEC

wind turbines are producing

up to 25 percent of the

annual electricity needs of

Toksook Bay and Kasigluk. 

“Alaska Village Electric Cooperative

is very pleased that DOE and NRECA

are recognizing our efforts to meet the

challenges of developing wind power in

remote Alaskan villages,” AVEC

President and CEO Meera Kohler said.

She also thanked Senator Ted Stevens

and the Denali Commission for

providing crucial help. “We see a drop

of diesel not burned as a drop of diesel

saved. AVEC will continue to pursue

wind as aggressively as we can afford

to.”

AVEC was one of six rural memberowned utilities nominated this year for

the award, which was presented at the

National Rural Electric Cooperative

Association’s TechAdvantage 2008

Conference and Expo in Anaheim,

Calif. Last Mile Electric Cooperative

Rural Cooperatives / M a rch/April 2008 19

Wind turbines are helping the Alaska Village Electric Co-op (AVEC) reduce dependence on diesel fuel

to provide power to 53 small villages. Photo courtesy AVEC

A

continued on page 43

Alaska Village

Electric named

top wind co-op

North Wi n d
By Lindsay Atwood

U S DA Rural Development

n a lively city

street in

Berkeley,

Calif., welldressed

shoppers peer into a modernlooking window display of

paintings and jewelry, admiring

the contemporary storefront

and eclectic collection of art

inside. Almost 2,000 miles away

in a remote Alaskan village,

Alaskan native women mail

their exquisitely knitted hats

and scarves to Anchorage for

sale to visiting tourists,

weathered fishermen and Websurfing shoppers worldwide.

These two businesses may

sound very different, but they

share a key, unifying trait: both

are arts and crafts cooperatives.

Cooperatives are common in many

business sectors, and the production

and sale of fine arts and crafts are no

exception. But arts and crafts co-ops

face some unique challenges. 

Liz Bailey, executive director of the

Cooperative Development Foundation

in Washington, D.C., is responsible for

conducting an on-line arts and crafts

co-op auction during Co-op Month

each October, and she has a wealth of

knowledge about arts and crafts co-ops

in general. 

Help for new art i s t s

Bailey says co-ops can help new or

up-and-coming artists develop a

reputation and get their feet on the

ground. “I had a member of [a co-op] in

California tell me that for new artists

coming out and trying to get

themselves established, the coop is the perfect model,” she

says. “It would be absolutely

essential for a starting artist.”

Rural craftspeople without

an immediate market for their

works can also benefit from

belonging to a co-op. Co-ops

provide them with access to

the market and act as a magnet

to draw in tourists for the

greater good of the rural

economy.

“It allows artists who want

to live in rural areas for all the

quality of life issues...a

business link that makes it

possible for them to live there

and be part of the rural

economy,” Bailey says.

For any artist, though,

whether new or established,

rural or urban, a co-op

essentially does for members

what a commercial gallery would do: It

gives talented artists a market for their

work.

Tenacity helps gallery

s u rvive and thrive

The Arts and Crafts Cooperative

Inc. (ACCI) Gallery in Berkeley holds

the distinction of being the oldest arts

and crafts co-op west of the Mississippi.

The gallery has persevered through the

20 M a rch/April 2008 / Rural Cooperatives

O

State of the A r t

From Alaskan villages

to trendy California

shopping districts,

arts & crafts co-ops

help members tap

markets
Rural Cooperatives / M a rch/April 2008 21

Facing page: Urban landscape painter Anthony Holdsworth begins a painting of the co-op gallery building. This

page, clockwise from upper left: bronze sculpture on granite base by Robert Cantor; Pinzette glass by Michael

Sosin; Ceramics by Glenda Jordan. All artists are co-op members. Photos courtesy ACCI 
22 M a rch/April 2008 / Rural Cooperatives

ups and downs of start-up and

maintenance, and last year it

celebrated its 50th anniversary.

Now an established, viable

business, ACCI Gallery no

longer has to borrow money

from members to stay afloat.

“There have been plenty of

times when we’ve been in the

‘save the co-op’ state,” says Lisah Horner, the gallery’s

executive director. “We’re not operating in panic mode [any

more]. The members can relax.”

What began as a group of people putting blankets on the

sidewalk to sell their wares has evolved into a 130-member

cooperative with paid staff and a fully paid for building on a

busy Berkeley street.

“We were always on this street,” says Horner of the

immensely popular ‘Gourmet Ghetto,’ as it is known in

Berkeley. “We have so much attention from the restaurants

around us. There is no way we could have done it without

the street traffic and foot traffic.”

But location alone was not enough to keep the gallery in

business. Horner describes the main contributing factor to

the longevity of the co-op in one word: tenacity. “This would

never happen without a large group of people who invested

personally and financially into it

and were just determined to

make it happen,” she says. 

Recognizing the

importance of the business and

day-to-day operations of the

gallery, the member artists

organized a board of directors.

“You need business-minded

people involved,” says Horner, who served on the board prior

to becoming the gallery’s director. “What I get to do is select

people who I think would be ideal candidates — people who

have owned businesses and have corporate backgrounds.”

In addition to their artwork, member artists contribute to

the business side of the co-op with their $250 annual dues, 20

hours per year of work for the co-op and 45 percent of their

sales going to pay for the building, staff, advertising and

other costs. 

Co-op identity a plus

So successful has ACCI Gallery been in managing the

business that unless it actively marketed the gallery’s

cooperative status, it might be easy to mistake it for a

commercial gallery. Co-op leaders are adamant, however, that

the acronym in the name be spelled out and that people know

Just as with any small business, arts and crafts co-ops

often struggle through the start-up period and get mired

down in management disputes and business problems. Liz

Bailey believes that this is what will either make or break a

co-op. 

“They have to market their products, and management

may be one of the few things they don’t do well,” says Bailey,

executive director of the Cooperative Development

Foundation. Arts and crafts co-ops can survive “if they can

figure out how to manage the daily business and stay friends,

be business colleagues and allow room for each to do their

own artistic work, but then come together as a group to make

that co-op thrive.”

One of the challenges that Bailey has noticed and that

she is working to combat is the fact that arts and crafts coops are hard to find unless they have the word “co-op” in

their name. “The one thing that we have found is that they

still don’t self-identify as a co-op community,” she says. “We

have to find ways to bring them together.”

The arts and crafts focus of Co-op Month in October is

one way that Bailey is working to overcome this disconnect

within the arts and crafts co-op community. Many of the coops included in the auction have demonstrated incredible

staying power. They have overcome management issues and

day-to-day business stresses. They have established solid

and respectable reputations within their communities and

around the nation. They have benefited hundreds of artists

over the years.

Early disputes can derail co-ops

Children of a member of the Oomingmak Musk Ox

Producers’ Co-op (OMOPC) learn how their mother knits

scarves, hats and other apparel from musk ox wool.

Photos courtesy OMOPC
Rural Cooperatives / M a rch/April 2008 23

it is a co-op. After all, “it’s got a

life of its own separate from a

commercial gallery where you

go drop your art and leave,”

Horner says. 

Customers appreciate the

hands-on, personal approach to

the co-op and have shown great

interest in understanding the

alternative business structure. “In fact, they ask my staff

repeatedly,” Horner says. “They want to know how the

whole operation works.” 

Staff are eager to talk about the co-op model, as well as

the artists, while they are selling. “It creates a dialogue, and

you try to educate as well as sell art,” Horner says. This is a

dimension less frequently found at commercial galleries but

important to ACCI, and it has served them well. “We have a

fabulous reputation,” Horner asserts. “It helps [the artists],

and they sell.” 

Aside from the business, the daily grind, the sales and the

management pressures, ACCI Gallery has provided a haven

to Bay Area artists. “This is an opportunity for people to...be

a part of a community of artists,” Horner says. 

There are members who have been with the co-op for 40

years. They stay because of what the co-op does for them.

The co-op stays because of what the members do for it. It is a

cycle that has worked for ACCI Gallery for 50 years and

counting.

Co-op spins musk ox wool into high fashion

Half a continent and a cultural world away from Berkeley,

the Oomingmak Musk Ox Producers’ Cooperative has a

history as rich as the cultures and heritage of its members. Its

story began when, more than half a century ago, Harvardeducated Dr. John Teal Jr. began his research on the Arctic

Musk Ox, also known by its Eskimo name, Oomingmak. His

goal was to determine whether the animal could be

domesticated and used for its fine underwool, called Qiviut. 

From his research, the Musk Ox Farm was born and is

now located in Palmer, Alaska. In 1968, not long after the

domestication of these animals began, the Oomingmak Musk

Ox Producers’ Cooperative came into being. Twenty-five

women in a small village on Nunivak Island off the west coast

of Alaska took part in a knitting workshop. It was this group

that comprised the original membership of the Oomingmak

Musk Ox Producers’

Cooperative. Today, 40 years

later, its infant business has

grown to include some 200 to

250 members in villages all

across Alaska.

Almost from the very

beginning, the co-op and the

Musk Ox Farm in Palmer have

shared a special relationship. The cooperative buys all of the

fiber from the Musk Ox Farm each year, as well as from

people in Alaskan villages who hunt the musk ox as part of

their subsistence lifestyles. “It is a very fine and very

expensive fiber that is bought by the cooperative as a whole

and yet trusted to each member without any cost to them,”

says Sigrun Robertson, executive director of the cooperative.

Once they have procured the fiber, the co-op sends it to a

cashmere mill to be spun into yarn. “From the time we send

the fiber out until we get the yarn can take a year, maybe

more,” Robertson says. “The fiber is very limited. We can’t

just go out and buy more fiber. We have to make sure we

procure enough.”

This incredibly warm, soft and lightweight yarn is then

sent to any co-op member who asks for yarn to be knit into

hats, scarves, stoles and the co-op’s signature item: the

nachaq. Although the hat patterns are universal, each knitter

has a specific pattern for the scarves and nachaqs that is

unique to the village or area that he or she is from.

Tapping wholesale and retail markets 

Back in the co-op headquarters in Anchorage, Sigrun

Robertson handles the business side of the co-op. “The

knitting comes in here. A check is cut the same day and

mailed out the next day,” says Robertson. 

Each of the items is evaluated in Anchorage for quality

and workmanship. Then the items are all washed, blocked,

packaged, labeled and sold, both wholesale and retail. “We

produce 4,000 to 5,000 items per year at the most,”

Robertson says. “They’re beautiful items.”

The Oomingmak Musk Ox Producers’ Cooperative goods

are sold at its store in Anchorage, at David Morgan in

Seattle, at the Musk Ox Farm in Palmer and online. “One

would think it would be people from higher income levels

and people who prefer to save and purchase nice things,” says

continued on page 42

The heavy coats that help musk oxen survive the Arctic

winter also provide wool for co-op knitters. 
24 M a rch/April 2008 / Rural Cooperatives

For more than three decades, Cabin

Creek Quilters Cooperative served rural

crafts people of West Virginia. It provided

income for many coal mining families,

promoted tourism in the area and

preserved the region’s traditions and

heritage. 

Ten years ago, the cooperative had

300 members and was strategically

headquartered in an 1840-vintage house.

Today, Cabin Creek Quilters still strives to

preserve heritage and provide income,

but as a privately owned company rather

than as a cooperative.

President and owner Rebecca

Stelling was once a member of the

cooperative’s board. “You’ve got to get

someone involved that really understands

marketing and the business aspects, and

that’s where I came into play,” she says.

“The women...came to me.”

Stelling asserts that the cooperative

model was very effective in the 1960s,

1970s and 1980s, but she feels it is no

longer a viable way of doing things. “From

a management perspective, it’s really

hard to manage it and maintain it with

that kind of structure,” she says. “Now it’s

a business that I operate, so I can really

stay on top of things.”

When Cabin Creek Quilters changed

from a cooperative to a corporation in

July 2007, there were only about 20 co-op

members. Stelling still works with the

former members of the co-op to produce

quilts and she also uses new quilters. “I’m

involving more women, which is truly a

goal of something like this,” she says.

Cabin Creek Quilters no longer has a

retail location, and West Virginia State

University now owns the historic house

that once served as the co-op’s

headquarters. Stelling markets her

product by doing special shows

throughout the year, and she provides

custom quilts for customers through her

Web site: www.cabincreekquilts.com. 

Quilters co-op goes priva t e

Quilting has long provided an

important source of income for

craftspeople in West Virginia.

After many years as a co-op,

Cabin Creek Quilters now

operates as a privately owned

business. The co-op’s retail store

has closed. USDA file photos
Rural Cooperatives / M a rch/April 2008 25

By Patricia Daughrity

Editor’s note: Daughrity is a freelance agricultural writer based in

western New York and is the daughter of Roy Orton. 

hink of a bib overall-wearing farm boy who

relishes playing practical jokes and shooting

his BB gun more than cracking the books.

Think of a persevering inventor who ignores

sneers of “It can't be done,” and finally

proves that it can. 

Think also of a business leader of a fruit beverage

company who has the guts to do what is right — even if it

costs him his position. Think of a cooperative director who,

as the dark-suited chairman, helps set the course of a

sophisticated, $52 billion cooperative bank. 

What four people come to mind? In this case, these

descriptions all apply to one man: Roy Orton, who has led

three major U.S. cooperatives during his career.

For his 53 years of involvement with cooperatives —

including service as president of National Grape

Cooperative, and chairman of Welch’s and CoBank — Orton

was chosen as the 2008 Director of the Year by the National

Council of Farmer Cooperatives (NCFC). The honor goes to

farmer cooperative directors who “take the lead to help their

board of directors make decisions vital to their cooperative.” 

NCFC President Jean-Marie Peltier saluted Orton for his

“outstanding leadership” and “dedication to the principles of

farmer-ownership.”

“Whoever raised Roy Orton knew what they were doing,”

says Ted Wolfe, former executive vice president of Welch’s.

How did Orton go from farming to winning NCFC’s

prestigious award? The answer is rooted in purple grapes.

Invention re v o l u t i o n i z e d

C o n c o rd grape industry 

In 1938, in rural Ripley, N.Y., Joseph Roy Orton was born

to Ross and Martha Orton, the middle of three children.

Oblivious to the world’s hardship during this era, little JR (as

he was then called), along with siblings Lois and Donald,

romped with the

chickens and played

cowboys and

Indians, straddling

de-barked lengths of

sumac that served

for horses. 

As he grew, JR

worked alongside his

dad in the chicken

coops and orchards

as the family farm

grew into the

largest poultry and

cherry operation in

the county.

Gathering eggs,

hauling chicken

feed and moving

10-foot ladders during cherry harvest filled the boy’s

weekends, nights and summers. Hard work and discipline

were served fresh daily on the farm. 

At age 20, Orton purchased his first farm — a Concord

vineyard next door to his parents’ farm. At that time, the

juicy, thick-skinned grapes were hand-trimmed, hand-tied

and hand-picked, then were trucked to Welch’s for

processing into juice and jelly.

As in any farming operation, hand-picking grapes is

sluggish work, weather dependent and costly. Inspired to

streamline vineyard operations, Orton and his Uncle Max

brainstormed on a faster, cheaper way to harvest the indigo

fruit. Exploring mechanization, the Ortons knew their

contraption had to be substantially faster than hand-picking

and would have to pick the vines clean. 

Making the odds longer was the narrow window of

opportunity in the autumn to test their ideas while still handharvesting the crop. They also had to contend with

naysayers. Even Orton’s alma mater, the esteemed agriculture

school at Cornell University felt “...it was impractical to pick

the [single curtain]...vines mechanically,” according to the

T

I N T H E S P O T L I G H T

A Nice Guy Who Finished Fi r s t

Roy Orton’s track record at National Grape 

and CoBank earns top honors from NCFC

Roy Orton has been honored for his

leadership at National Grape 

Co-op/Welch’s and CoBank. Photos

courtesy National Grape Co-op
26 M a rch/April 2008 / Rural Cooperatives

Finger Lakes Wine Museum newsletter.

Nevertheless, the men experimented with an over-the-row

framework, with vibrating internal “fingers” that jiggled off

the fruit. The framework was a cinch. The main challenge

was in finding the right material and a shape for the fingers.

Converting horizontal motion into vertical motion also

proved critical to clean-pick the vines. 

A resolve to succeed 

At the time, Orton was (and remains) a member of

National Grape Cooperative, the growers’ co-op that owns

Welch’s. As word of Orton’s experiment spread, many

responded with cynicism. But the doubters did not shake his

resolve. 

By age 26, Orton had built a slick prototype harvester and

reached a deal with a licensee-buyer for his patent on his

mechanical grape harvester. In 1967, Chisholm Ryder Co.

built a model using Orton’s patented machine. 

The new machines slashed

harvest costs. Grower returns

ballooned. 

One farm worker would do

well to harvest a ton of grapes

per day, whereas the big blue,

self-propelled machines that

used the Ortons’ technology

could harvest four or five tons

per hour. This huge advance

prompted more acres of grapes

to be planted, because growers

could now manage more vines. 

“No new product of ours has

ever had such immediate

acceptance, and no other new

product seems to have fewer

mechanical problems,” Lee

Towson, of Chisholm Ryder,

said at the time. Sales of the

harvesters shot up like a

champagne cork and the

naysayers quickly moved on,

raining on someone else’s

dream. 

Reflecting on the innovation

that revolutionized the grape

industry, Orton, with

characteristic humility, says “We

didn’t know any better.”

Past CoBank Chairman Otis

Molz remarks, “One of the very

prominent characteristics of Roy is he isn’t afraid of change.

He’s always willing to try something new if there is a chance

of improvement.” 

In 1970 he was elected to the National Grape board. In

1981 he became chairman of the two-board system of

National Grape and Welch’s, a position he held for 13

consecutive years.

Do what is right, not what is popular

Orton instinctively knew that the popular vote is often

aligned with a short-term (often financial) gain. But the vote

for what is right for a co-op is often based on the

organization’s long-term health. Leadership favoring the

former may flicker briefly, and such decisions may prove

quite popular. By contrast, leadership that promotes the longterm good of the business will often face strong resistance.

Colleagues say Orton earned a reputation for leadership

based on his integrity. He favored what was right for the

membership, regardless of how it impacted his short-term

popularity. Ironically, it was that philosophy that probably

cost him re-election to his 14th term on the board in 1993.

One of the toughest challenges the dual, National

Grape/Welch’s boards faced in the years before that election

was the issue of declining quality

and yields from Arkansas

grower-members. The co-op

maintained a facility in Arkansas

to receive the crop, but over

time the economics there grew

worse. One year production in

Arkansas dropped to less than

2,000 tons (about the production

of one large grower in a highproduction region). In addition

to low yields, the Arkansas crop

repeatedly did not meet the coop’s rigorous quality standards,

according to Everett Baldwin,

former Welch’s CEO. 

The directors and

management resolved it was in

the best interest for the co-op to

pull out of Arkansas. But the

popular opinion pushed for

maintaining the status quo.

Emotions ran high in Arkansas,

and growers there filed a lawsuit,

naming Orton and Baldwin as

defendants. 

Orton recalls this period

being made even more difficult

because “they were some of the

most loyal members I ever met

in my life.” The litigation lasted

a year, the end result being that

the growers there were dropped by the co-op, although they

were awarded a small settlement. 

“Roy was never afraid to take on an unpopular cause if he

felt it was in the best interest of Welch’s, and, by extension, in

the best interests of the membership,” says Dan Dillon,

These bottles of Welch’s grape juice will soon be boxed

and shipped to supermarkets.
Rural Cooperatives / M a rch/April 2008 27

former Welch’s CEO. As

upsetting as the lawsuit was,

Orton “grew in stature,

composure and [in his] ability to

ask tough questions,” says Welch’s

Ted Wolfe. 

S e rvice with CoBank

Orton’s accomplishments with

National Grape led to his election

to the board of the Springfield

Bank for Cooperatives (in

Massachusetts) in 1992. Two years

later the bank merged into CoBank, which was initially

formed in 1989 when 10 of the 12 Banks for Cooperatives

(part of the Farm Credit System) were reorganized and

streamlined to cut administrative costs and better serve the

financial needs of agricultural cooperatives. 

In 2002, Orton was elected chair of CoBank, in part due

to his proven ability to build consensus from a table of

diverse thinkers.

Humility is unlikely to have its own chapter in a leadership

textbook, but it is clearly one of Orton’s secret weapons.

Consistently downplaying his own contributions, he strove to

shift the limelight toward others, enhancing his rapport with

other directors, management and stakeholders. 

Jack Cassidy, CoBank’s secretary and senior vice president

of board and government relations, notes that Orton is

known for “lack of ego and uncommon humility.” The values

he exhibits that come from being a

farmer from a small town in rural

New York are refreshing in the

financial world, he adds. 

Orton’s “what-you-see-is-whatyou-get” persona didn’t always

mesh with those who are less

forthright. “You can get cynical in

this business,” Cassidy confides,

pointing out that Orton found

ways to work with people with

different value sets and still get

results. 

“You know the saying that ‘nice guys finish last?’ Roy

proved that statement wrong. He kept his values,” Cassidy

adds.

Striving for inclusiveness

While a dictatorial leader imposes his/her beliefs on

others, the inclusive leader works with others to develop

options and reach consensus. “Roy always gave every director

a chance to voice his or her opinion,” says Stan Dean, former

CoBank director, adding that Orton earned a reputation for

being fair to both sides of an issue. 

“He doesn't keep information to himself as a way to

control other people,” says Cassidy. A case in point was the

1994 Springfield Bank merger into CoBank, and how he

handled the resulting need to reduce the board size. After the

continued on page 43

Proving the naysayers wrong, Roy Orton (seen below with his original prototype in the 1960s) invented a grape-harvesting machine that

revolutionized the industry. The basic technology he developed is still being used today (above).
28 M a rch/April 2008 / Rural Cooperatives

Feedstock availability, consistency

are challenges to development

of waste-to-energy

projects

A g r i c u l t u r a l Versus 
Rural Cooperatives / M a rch/April 2008 29

By Jessica Ebert

Editor’s note: This article is reprinted courtesy Biomass Magazine,

www.biomassmagazine.com. 

ny conversation about the challenges of

converting waste into energy — regardless of

whether the source of the feedstock is

agricultural or industrial, and regardless of

whether the end products are solid or liquid

fuel or electricity — comes down to an issue

of feedstock availability.

“I don’t care what technology you have. If you don’t have

the feedstocks, you don’t have anything,” says Steve Flick, a

Missouri farmer and chairman of the Show

Me Energy Cooperative board of directors.

“We say it’s like having the prettiest girl

ask you to the dance. If you can’t dance, then

you might as well not embarrass yourself.”

The cooperative, which is made up of

more than 400 farmers, is just now

stepping out on the renewable energy

dance floor with a flexible business model

betting it will garner admiration, rather

than embarrassment. 

Show Me Energy has its origins in

west-central Missouri, where a group of

farmers and producers with a vision of

using cellulose for energy production

began meeting monthly until 2004, when

they officially organized under the state’s

New Generation Cooperative law. At that

time, the group sanctioned a feasibility

study, which in turn determined that the

model the group envisioned would be a

good fit for producers in western Missouri

and eastern Kansas. 

“Missouri was a prime state because we

have all these dichotomies of scale,” says

Flick, a seed-company owner and farmer

who will be planting six acres of

miscanthus this spring. “We have corn

farmers in the north, grass-seed farmers in

the south, wheat farmers in the west and

soybean farmers in the central part of the

state. It’s a really good fit.” 

In-house technology used

At the center of the cooperative’s model is technology

developed in-house that converts agricultural residues into

biomass fuel pellets. The farmers who invest in the

cooperative sign a market agreement committing them to

produce a certain amount of biomass each year.

In addition, co-op members must adhere to high standards

of environmental stewardship, Flick says. For corn stover,

producers must leave about 30 percent of the residue on their

fields. For native grasses, farmers must harvest in the late fall

after a killing frost and leave rows around waterways and

tributaries. 

“We are adamant about making this business model not

only profitable, but realistically environmentally friendly,” he

says. 

A

Industrial Wa s t e for Energy
30 M a rch/April 2008 / Rural Cooperatives

The farmers that abide by these rules collect and store the

residue on their farms in round bales, which are eventually

trucked to the cooperative’s new pellet-production facility in

Centerview, Mo. This is the main drawback to using

agricultural residues as an energy feedstock: they are bulky

and transporting them becomes economically

disadvantageous after a certain distance.

Show Me Energy pays each farmer a certain amount per

ton for residue and also pays for the hauling costs within a

100-mile radius of the plant.

Farmers outside this area

aren’t discouraged from

participating, but they must

pay the transportation fee for

any additional distance

(anything over 100 miles).

100,000 tons of pellets

The pellet-production

facility will produce 100,000

tons of biomass pellets each

year. This fuel source will be

co-fired at a local utility; five

pounds of pellets will be cofired with every 100 pounds

of coal burned.

But that’s just Phase One

of the cooperative’s vision. In

Phase Two, Show Me Energy has teamed with Clean Energy

Technologies LLC, a Black and Veatch Corp. company, to

build a biomass-to-liquid fuel facility next door to the

Centerview plant.

This second plant would demonstrate the gasification of

biomass pellets for the production of liquid fuels such as

ethanol, methanol, synthetic diesel, aviation or other fuels.

The team hopes to win a U.S. Department of Energy grant

before moving forward with the project.

Flick hopes other producer groups will embrace the basic

tenets of the co-op: sustainability, flexibility and availability.

“We’ve always felt that our model is a very economically

adaptable model because it’s the farmers who work really

hard to make it work,” he says. “It’s better than the ‘contractproduction’ model that some people have been deciding to

do, where they go out and have a technology and contract

the feedstock. We feed the cow [the cooperative] with homegrown energy produced on

local farms.”

Feedstocks that fit

Another way to think about

this is to use a feedstock that

makes sense for your locale

and process. For rural

producers such as those of

Show Me Energy, that means

agricultural residues.

For those in urban settings,

a more fitting feedstock is

industrial waste, which could

take the form of plastic,

rubber, process heat,

municipal solid waste or food

processing debris.

These are the feedstocks

targeted by Changing World Technologies Inc. (CWT), a

New-York based technology developer that aims to identify

and commercialize energy-efficient and eco-friendly

emerging technologies. The company’s thermal conversion

process technology converts wastes ranging from mixed

plastics to post-consumer tires, food processing waste and

municipal solid waste, to solids, renewable diesel and

specialty chemicals.

The Show Me Energy cooperative plant in west-central Missouri

is processing ag wastes into biomass fuel pellets. Photo by

Chuck Limach, Show Me Energy Co-op

Transported 

waste is 

crushed, 

screened 

and mixed 

into a 

water-based 

slurry.

The slurry is prepped for 

separation by applying 

extreme heat 

and pressure

The breakdown of this 

organic matter ultimately 

separates organic and 

inorganic matter in

the slurry.

Larger particles are removed 

and later recombined 

with smaller mineral particles.

The thermal reactor further 

breaks down both liquid and solid 

materials under greater heat 

and pressure.

The result is 

a mixture of 

renewable diesel, 

nitrogen-rich water, 

and mineral particles.

These components 

are separated by 

conventional means.

Recombined solid minerals,

renewable diesel and nitrogen-rich 

water (fertilizer) are each stored 

separately for sale and distribution.

PREPARATION SEPARATION CONVERSION COLLECTION
In terms of agricultural residues, the

company has done work with manure and

corn stover, as well as a combination of

those types of wastes. The company hasn’t

finished any kind of demonstration plant

design for that material because it’s been

focusing on food processing wastes. 

However, it has generated lots of good

data and it will be something they will

build on in the future, says Brian Appel,

chairman and CEO of CWT. The key will

be finding a “champion” to shepherd the

projects forward. 

Appel points to the company’s success

in processing food wastes to define what

he means by a champion. “When we

developed the food processing technology,

ConAgra Foods was one of the larger food

slaughter houses in the world, and the

company aggressively was trying to find an

alternative to feeding animals back to

animals,” Appel explains. “ConAgra was

the champion. Instead of taking this

material and turning it back into animal

feed, it was diverted away from the food

chain so we would minimize any

transmittable diseases like BSE (bovine

spongiform encephalopathy).” BSE is

more commonly known as mad cow

disease. 

When it comes to the agricultural side

of things, those champions are a little

harder to find, Appel says. “A lot of these

are still individual family farmers, and it’s

much harder to get someone who wants

to be the champion of just that area. It

has to be someone who understands the

big picture in agriculture and has the

resources to go from pilot-plant to a

commercial-demonstration facility.” 

Consistency big issue

for industrial waste

In terms of industrial waste — which Appel classifies as a

sub-set of municipal solid waste — the biggest challenge is

not so much finding a champion as it is finding consistent

feedstocks. “With municipal solid waste, you never know

what you’re going to get,” he says. “It’s always changing as

consumer and manufacturing habits change and as efforts to

recycle intensify.” 

To circumvent this inconsistency, CWT is working with

large industrial shredder companies — also referred to as

metal recyclers — to design a demonstration plant for the

conversion of shredder residue to fuel. 

“Shredder residue is a more consistent feedstock,” Appel

explains. “If you take a refrigerator or a car and send it

through a giant shredder, those companies collect the metal

and the glass.” The leftover material — plastic and rubber

from the tires or the hoses under the hood, or the vinyl seats

and the stuffing in the cushions — is what CWT is focusing

on because it’s more identifiable, he says. 

In addition to identifying a consistent source of feedstock,

another challenge to overcome is the hype, Appel says. 

“Alternative fuels have been hyped worldwide. One of the

biggest challenges that we’ve had is coming behind other

additives and other alternative fuels,” he says. Therefore,

fixed-energy markets are the first target for CWT. “We’ve

been a proponent of making fixed energy as the place to learn

how to use these fuels because it’s a logical progression to

then go into transportation.” ■

Rural Cooperatives / March/April 2008 31

Vision Statement:

Show Me Energy Cooperative has as its guiding vision a commitment to

establish an innovative, profitable, leading model for production of biomassbased fuels which may be replicated across the country by small producerowned cooperatives that will provide a positive economic impact on the regions

where they are located.

Mission Statement: 

Show Me Energy Cooperative is a nonprofit, producer-owned cooperative

founded to support the development of renewable biomass energy sources in

West Central Missouri through the following actions and efforts:

A) Establishment of suitable conditions in the field of energy development which

incorporate the efforts, products and goals of local agricultural biomass

producers;

B) Provide additional revenue streams for farmers and producers for their

products by utilization in biomass energy production;

C) Support and reinforce the local economy and community through employment

and development of renewable, sustainable technologies;

D) Keep member-owners informed about their co-op business, economic,

political, charitable and social environments;

E) Help to improve the quality of life, both now and in the forseeable future, in the

areas where Show Me Energy Cooperative has a business, purchasing or

distributing presence.

Co-op Vision & Mission 

To promote

environmental

stewardship, Show

Me Energy Co-op

members must leave

30-percent of crop

residues on their

fields.
32 M a rch/April 2008 / Rural Cooperatives

By Jane Livingston 

C o o p e ration Wo r k s !

Editor’s note: Livingston is a Maine-based writer, editor,

marketing consultant and community organizer for cooperative

development.

e're talking about a new look at a very old

idea,” says Frayne Olson of the Iowa Alliance

for Cooperative Business Development at

Iowa State University. “Sharing machinery

and labor has been around a long time.” 

Given the rising profitability of growing most commodity

crops during the past couple of years, one might think Iowa

farmers would have little interest in learning how to set up

micro-cooperatives or partnerships for sharing and

purchasing equipment and labor.

Think again.

While many farm sectors are currently doing quite well,

that picture can change quickly, Olson notes. As such, smart

farmers look for every possible way to sustain their success in

good times and bad. 

The equipment Olson is talking about isn’t an old, saddleseat tractor with a bunch of attachments. Farmers seeking to

expand or upgrade operations today are often looking at

combines, sprayers and row-crop planters. These are costly,

big-ticket items. A new combine and headers, for example,

can cost upward of $250,000. If two, three or more farmers

can share a piece of equipment such as this, they can save a

lot of dollars. 

L e a rning to work together

“Farming is not just a one-man show any more,” says

Olson. “And farm labor, especially skilled labor, is hard to

come by.” Justifying the purchase cost of a major piece of

farm equipment also creates the need to coordinate

supporting activities to make full use of a machine’s time in

the field. Sharing the workload among partners can result in

significant gains in efficiency. One farmer may specialize in

driving the combine while others may haul the crop to

market or a storage facility.

Hammering out the actual agreements between partners

can be a daunting task, however. That’s why the Iowa

Alliance created a workshop to introduce interested

producers to the concept of shared-equipment and sharedlabor co-ops, as well as other types of “sharing” partnerships.

The first thing workshop participants do is review a series

of case studies the Alliance has compiled. These studies focus

on groups of producers who have formed, or tried to form,

similar associations. They give a perspective on what others

have done and provide a good starting point for discussion. 

“Farmers are really concerned about the nuts and bolts

stuff,” Olson says. “So we hit them right away with the

question: How do you divide the costs? We give them some

spread sheets and other information, even offer some

accounting procedures to help them make it more equitable.”

But that’s only a start. Participants are then asked to

describe their farm operations, their skill sets and work

habits. They also identify their own personality traits and

what they are looking for in an ideal partner.

Some farmers want a partner with similar skills and needs,

figuring that will make for a smoother working relationship

and easier communications. Others prefer to find someone

with different skills that will complement and expand on

their own. Both types of partnership/co-ops have value.

Being able to arrange a mutually agreeable work schedule is,

of course, also crucial.

“W

Ride Sharing 

Equipment- and labor-sharing co-ops

can help farmers save on rising costs

C O - O P D E V E L O P M E N T A C T I O N
share use and costs of that one machine. Others may

want to share labor or share multiple pieces of

equipment. Farmers can also form a co-op or

partnership to purchase equipment and inputs — even to

jointly market their crops (if they are not already

members of a marketing cooperative). 

Once prospective partners have

gone through the process of

identifying what they want from

one another and what each has to

offer, Olson says they should have

a pretty good idea about whether

they want to work together.

The important thing for people

to take away from the workshop,

Olson emphasizes, is the

recognition that they can work

together if they are willing to look

at equipment- and labor-sharing

realistically and remain somewhat

flexible in planning day-to-day

activities. They also need to

clearly define what it is they can

do together better than they can

do individually.

“Our whole objective is to make the pie bigger,”

Olson concludes. 

To learn more about the Iowa Alliance, visit:

www.extension.iastate.edu/coops. For more information

on the workshops, visit: www.machinerysharing.info.

26 professionals enrolled in the fall session of “The Art and

Science of Cooperative Business Development,” a five-day

training program conducted by CooperationWorks! The New

Orleans contingent was experienced in conventional business

assistance but was unfamiliar with the co-op business model. In

light of the enormous rebuilding needs that still exist in their home

city, they were awarded scholarships by the Cooperative

Development Foundation and CooperationWorks!

“By working together through cooperative ventures, residents

of the Gulf region will have a much stronger voice in rebuilding

their communities and their lives,” says Audrey Malan of

CooperationWorks!

The Mississippi Center for Cooperative Development (part of

the Mississippi Association of Cooperatives) is helping a New

Orleans nursing home’s employees create a worker cooperative to

offer laundry, cleaning, food preparation and other services to

elderly residents of Saint Margaret’s Daughters’ Nursing Home,

located in a former hospital in the city's Lower Ninth Ward, and

other local people in need of assistance.

To apply for the upcoming spring 2008 training, call 1-800-600-

7682 or e-mail info@cooperationworks.coop.

Participants in a workshop for co-op development specialists tour the

Willy St. Food Co-op in Madison, Wis.

Rural Cooperatives / M a rch/April 2008 33

Farmers hit the books at a workshop where they explored the

pros and cons of farm equipment-sharing co-ops. 
34 M a rch/April 2008 / Rural Cooperatives

By Anne Mayberry 

U S DA Rural Development

Utilities Pro g rams 

emand management.

What it’s not: The

latest corporate

leadership trend. What

it is: A way for your

electric utility to better manage power

use. 

Generally reserved for commercial

and industrial customers, Shelby

Electric Cooperative in Illinois has

taken the demand-management practice

to a new level by including small

businesses and residential customers in

its distributed-generation program.

Shelby’s small business- and

residential-demand management

program originated in April 2006, after

a tornado caused power outages. The

cooperative had difficulty restoring

electricity to customers served by an

investor-owned utility substation.

Applying principles of its distributed

generation program — created for

l a rg e commercial and industrial

customers to smaller customers —

Shelby delivered a unique program to

meet rural needs. 

Distributed generation is the practice

of electric utilities working with

customers interested in installing their

own electric power generation units to

generate their own power, when

necessary. This additional power

generation can then be tapped by the

utility during outages or periods of peak

use. 

Incentives established

Shelby’s program includes incentives

that encourage residential membercustomers to purchase natural gas and

propane-powered generators. If they

allow the cooperative to interrupt their

service during peak demand, they

qualify for a 15-percent reduction in

their electric bills.

This ability to interrupt customer

service can help utilities better control

electric load and increase reliable

service during high-demand periods.

Shelby uses technology that provides

two-way communication to electric

meters that provides load control and

demand response, in addition to outage

detection and automated billing.

Generators begin providing power

within 30 seconds after an outage. Once

service is restored, they automatically

turn off.

The advantages for customers are

lower electric bills, peace of mind that

they will have electricity during power

failures and knowledge that they are

participating in a program that could

reduce carbon dioxide emissions.

Advantages for the cooperative include

reductions in power costs, increased

ability to meet customers’ demands

during peak periods of power use and

greater system reliability.

As a result of the tornado-caused

power outages, “we realized that

offering generators to these customers

made sense,” says Kevin Bernson,

Shelby’s vice president of media and

public relations. “We decided to help

people with the financing, then created

an interruptible-rate program for small

businesses and residential customers.

We reduce the electric bill by 15

percent for customers who participate

in the demand management program.” 

The program had an additional

advantage when the cooperative was

asked to curb power use last summer

when hot days increased demand for

electric power.

P rogram pays during ice storm 

An unforeseen benefit of the

program was realized during an ice

storm that hit the co-op’s service area in

December 2006. 

“The ice storm really created a spike

in requests for the generators,” Bernson

recalls. “More recently, the eight- to

ten-inch snowstorms this winter also

triggered calls. One of the biggest

advantages of this program for our

customers has been peace of mind.”

L owering the Pe a k

D

Tornado impact prompts Illinois co-op

to expand demand-management program 

Installation of 100 of these generators at

homes and small businesses will help the

Shelby Electric Cooperative during peakdemand periods and during power

outages.

continued on page 43

U T I L I T Y C O - O P C O N N E C T I O N
Alto members approve sale

to Saputo Cheese USA

By Dan Campbell, editor

lto Dairy

Cooperative,

operated as a

farmer-owned

cooperative in

Wisconsin for 114 years, has

announced that its members have

approved the sale of its assets to

Saputo Cheese USA Inc. in a deal

worth $160 million. The

transaction, which was

unanimously approved by Alto

Dairy’s board in January, was

approved by 98 percent of the

cooperative’s members from

across Wisconsin and the Upper

Peninsula of Michigan. They

voted during a special meeting in

Fond du Lac, Wis., on Feb. 27. 

“Although it is hard to see an

end to the cooperative form of

business at Alto, our board is

pleased that we were able to

provide an economic return to

our members for their investment

and loyalty to the cooperative,”

said Howard Zellmer, Alto’s board

chairman. 

The $160 million from Saputo is reportedly about 40

percent above the market value for the co-op’s assets, and

means members will get their full equity from the co-op.

Saputo will be paying each former co-op member a premium

for continuing to ship to its plants.

Robert Cropp, professor emeritus with the University of

Wisconsin Center for Cooperatives, said the sale of the co-op

comes “as a real disappointment” to proponents of farmer

ownership of value-added facilities. He said he hopes the sale

of Alto Dairy will “serve as a wake-up call” to the Upper

Midwest dairy industry about the need to address some of the

serious structural challenges facing it.

The overall challenge is: How can the Upper Midwest

better compete with the growing dairy industry in the West

and Southwest? Dairy industry growth in the West is being

fueled by investments in new plants

and the lower cost of procuring

milk. Cropp blames “a rather

irrational milk-pricing system,

which requires payment of

unjustified premiums” to producers

in the Upper Midwest for further

tilting the market in the direction

of the West.

Another major challenge, Cropp

says, is for the Upper Midwest

dairy industry to invest more in

facilities that produce value-added

cheeses and that process dairy whey

into high-protein food ingredients,

as is occurring in the West. He

thinks such an effort might best be

pursued as a joint venture by the

region’s remaining dairy co-ops. 

The roots of the sale go back to

the fall of 2006, when the Alto

board of directors and management

began looking at ways to accelerate

the co-op’s strategic plan. “As part

of this process, the offer from

Saputo surfaced,” Alto spokesperson

Karen Endres said. “It was our

obligation to bring this offer

forward to our members.” 

“Alto Dairy’s members overwhelmingly supported the sale

of assets to Saputo Cheese USA Inc.,” Rich Scheuerman,

Alto’s president and chief executive officer, said in the co-op’s

announcement of the sale. In it, he called the sale a “historic

day for the cooperative,” adding that “the sale will strengthen

the business by improving the long-term viability of our

manufacturing facilities, providing job stability and a longterm purchaser of milk for dairy producers in Wisconsin.” 

Alto’s cheese plant near Waupun, Wis., is the largest and

newest cheese plant in the state. The co-op also owned a

cheese plant at Black Creek, Wis. 

Alto had annual sales of $378 million in 2007, with a profit

of $5 million. However, Cropp said it lost money in four out

of the past six years, and has had difficulty with timely

redeeming of member equity for several years. 

A

After 114 years as a farmer-owned cooperative,

Wisconsin’s Alto Dairy will soon transfer to corporate

ownership. Photo courtesy Alto Dairy

continued on page 36

Rural Cooperatives / M a rch/April 2008 35
36 M a rch/April 2008 / Rural Cooperatives

Ed Schafer was sworn in as the 29th Secretary of the U.S.

Department of Agriculture (USDA) on January 28. Schafer

brings a record as an

innovative, two-term governor

of North Dakota to USDA along

with extensive private-sector

experience as both an

entrepreneur and a business

executive.

Schafer served as North

Dakota’s governor from 1992 to

2000 and made diversifying and

expanding North Dakota’s

economy, reducing the cost of

government and advancing

agriculture his top priorities in

office. He worked to normalize

trading relations with China and

develop that nation as an export market for North Dakota farm

products. Schafer led efforts to upgrade North Dakota’s

communications infrastructure and make high-speed voice

and data networks available to farmers, ranchers and rural

businesses.

To expand the state’s job base, he encouraged the growth

of value-added agricultural industries such as pasta and cornsweetener manufacturing. As chair of the Western Governors

Association, Schafer led regional efforts to demonstrate how

technology could improve the efficiency and lower the cost of

delivering government services such as health benefits and

food stamps. He also worked to make telemedicine more

available and affordable in rural areas.

Schafer co-founded and co-chaired the Governors

Biotechnology Partnership to increase public understanding

and support for the benefits of agricultural biotechnology.

He has had a lifelong interest in conservation, helping to

arrange the USDA Forest Service’s purchase last year of the

5,200-acre Elkhorn Ranch in North Dakota — where Theodore

Roosevelt had a home and operated a cattle ranch in the 1 8 8 0 s.

Born and raised in Bismarck, N.D., Schafer graduated from

the University of North Dakota in 1969 with a bachelor’s degree

in Business Administration and earned an MBA from the

University of Denver in 1970. Secretary Schafer’s grandfather

immigrated to North Dakota from Denmark and homesteaded

land in Hettinger County that he turned into a wheat and

livestock farm. Schafer spent summers there while growing

up. He helped his uncles with chores, tinkered with engines

and learned firsthand about agriculture.

Before entering public life, Schafer was an executive with

the Gold Seal Co. in Bismarck, a consumer products

marketer.

Ed Schafer takes reins at USDA

The large vote in favor of the sale is

probably an indication both of the co-op’s

stressed financial situation and the fact

that Saputo “made a very sweet offer,”

Cropp said. Some earlier management

decisions hurt the co-op, including a

money-losing venture with a partner in

Texas to produce ingredients for the pizza

industry, as well as a very competitive

operating environment, Cropp said.

New management was brought in

about four years ago, and major costcutting steps were taken, including a 25-

percent reduction in labor expenses and moves into higher

value-added cheese products. But such steps apparently were

not enough.

On the bright side, the deal does show that Saputo

believes in the continued viability of the Wisconsin cheese

market, Cropp noted. Saputo also recently bought a Land O’

Lakes cheese plant in California.

All employees will be offered employment by Saputo,

including all management, with the exception of the CEO,

said Endres, adding that the co-op’s field-service team and

state-certified labs will also be maintained

and acquired by Saputo.

“Our members were never required

to sign contracts (they could leave on any

day) and they won’t be required going

forward,” said Endres. “Dairy producers

in the state have many options of where to

ship milk. These options include

cooperatives and proprietary operations.”

“All equity holders in the business,

including current and past milk shippers,

will receive 100 percent of their equity

shortly after the transaction closes,” she

said. “There are additional payments to active shipping

members, based on their patronage to the cooperative.”

Saputo is one of the top 20 dairy processors in the world,

the largest dairy processor in Canada and is among the top

five cheese producers in the United States.

Challenges facing the Upper Midwest dairy industry,

including the sale of Alto, will be among the topics addressed

April 2-3 during the Minnesota-Wisconsin Dairy Policy

Conference and the Dairy Directors’ Leadership Conference

in La Crosse, Wis.

Secretary of Agriculture

Ed Schafer

The sale of Alto

D a i ry“should serv e

as a wake-up call to

the Upper Midwest

d a i ry industry.”

— R o b e rt Cropp
Rural Cooperatives / M a rch/April 2008 37

Agri-Mark has re c o rd earnings

Agri-Mark dairy cooperative in 2007

had a record, after-tax profit of $17.6

million, easily surpassing the previous

record of $11.4 million set in 2003. Coop leaders say the earnings were

welcome news for dairy farmers who

have been struggling the past few years

with low market prices and huge

increases in production costs —

especially for energy.

Agri-Mark’s profit allocation will be

50 cents per hundredweight. This

represents allocated earnings of roughly

$9,000 for the average Agri-Mark

member milking 100 cows and

producing 1.8 million pounds of milk

per year.

The Methuen, Mass.-based co-op,

owned by 1,300 dairy farmers, had sales

of about $836 million and marketed

more than 300 million gallons of milk.

Co-op officials say the continued

strength of the cooperative's Cabot and

McCadam branded businesses, strong

demand for the whey proteins and

powder produced by the co-op and cost

reductions due to changes Agri-Mark

made in its business during the past

year, all worked to boost profits. In

addition, Agri-Mark members also

received several million dollars in

monthly premiums for overall milk

quality and other incentives that the coop was able to return to its dairy farm

families.

“Last year was finally a good one for

farm prices, but milk production costs

also climbed to record levels,” says

Board Chairman Neal Rea, a dairy

farmer from Cambridge, N.Y. “That is

why I am so pleased that Agri-Mark is

able to generate these year-end profits

and also earn money for the farm in the

form of monthly premiums.”

The co-op’s whey protein plant in

Middlebury, Vt., continues to generate

strong revenues from processing whey

into more value-added products. The

co-op’s whey proteins and powders are

marketed both nationally and

internationally and are used as

ingredients in hundreds of products,

including sports nutrition drinks and

baby formulas.

“Our brands continued to grow and

the commercial side of our business was

strong as well,” says Paul Percy, who

milks 350 cows near Stowe, Vt., and has

served on the Agri-Mark board since

the co-op was formed in 1980. “I see

the potential for many good years

ahead.”

Paul P. Johnston, Agri-Mark

president and CEO, says he recognizes

the challenges of sustaining such highprofit levels year to year, especially

given the volatility of both national and

international dairy markets and farm

milk prices. Still, Johnston says AgriMark is stronger financially and better

prepared today to face the future.

“Northeast dairy farmers need to

market a larger percentage of their own

high-quality dairy products directly to

the consumer so they can capture a

larger portion of the dollars they spend

on those products,” says Johnston. “We

will continue to work to expand our

branded sales in 2008 and explore every

opportunity to stabilize farm milk prices

at levels above the cost of production

for our farmer-members.”

Snokist expanding pro c e s s i n g ;

will exit fre s h - p roduce sector

Snokist, Yakima, Wash., will exit the

fresh-fruit packing business in early

2008 to fully concentrate efforts and

direct its resources to the processed-,

canned- and aseptic-fruit product lines.

Snokist says it has a fruit-bowl line

which produces fruit blends, high- and

low-acid products and gelatins. Co-op

officials say all of these products have

tremendous growth opportunities for

single-serve packaging and as valueadded ingredients for the food industry.

Snokist has made a significant

research and development investment

and has set a goal to add four new

products each year and distribute to

customers.

Snokist President Jim Davis said the

co-op is committed to continuously

taking steps to improve efficiencies and

ensure that it remains competitive for

the next 100 years. “The new direction

and vision is very clear: to be a

N E W S L I N E

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

Record profits at Agri-Mark in 2007 will

help dairy farmers hard hit by rising costs

in recent years.

Snokist will now be putting all of its

energies into its processed fruit-products

business.
38 M a rch/April 2008 / Rural Cooperatives

profitable, grower-owned, packagedfruit company,” he says. “Snokist will

strengthen the ongoing commitment to

the private-label programs of our

customers with unique products,

partnerships and personalized customer

service.”

Exiting the fresh division requires

changes to both the co-op’s business

infrastructure and its properties. The

latter includes selling the Mead Avenue

location and the Grandview Port

property. Both Grandview plant No. 1

and No. 2 will be leased, with an option

to purchase. The Sawyer facility will be

retained for future needs.

Snokist has been a prominent leader

in the fruit industry since 1903 and a

major worldwide producer and shipper

of fresh cherries, pears and apples as

well as one of the largest canners in the

world.

Sioux Center ethanol plant

to double fuel pro d u c t i o n

Siouxland Energy and Livestock

Cooperative in Sioux Center, Iowa, has

completed a major expansion of its

ethanol plant, more than doubling

annual production capacity from 25

million gallons to 60 million gallons.

The plant can now process more than

20 million bushels of corn annually and

will market about 400,000 tons of wet

distillers grains and 140,000 tons of

condensed distillers soluables syrup.

The plant opened in 2001, making it

Iowa’s oldest operating farmer-owned

ethanol plant. Co-op Manager Bernie

Punt said the plant “has a new

perspective today in the extremely fastchanging ethanol industry. Our

expansion project helps keep our plant

competitive so that we can continue

adding value to the farming operations

in Northwest Iowa.”

New biodiesel facility

opens in Colorado

A new biodiesel blending and storage

facility has opened in Aurora, Colo.,

increasing the availability of the

cleaner-burning fuel for the area.

Pipeline company Magellan Midstream

Partners L.P. owns the facility, which is

located at an existing petroleum

terminal. CHS Inc., a Minnesota-based

energy and grain-based foods

cooperative, will market and distribute

the fuel.

“By combining a biodiesel blending

and storage facility with Magellan’s

existing infrastructure, we can get

blended fuel to our customers faster and

more efficiently,” says Drew Combs of

CHS. “Rack blending as opposed to

splash blending provides more accuracy

and higher quality as well as one-stop

loading with a single bill-of-lading.”

Company officials say the move

demonstrates biodiesel’s increased

integration into the nation’s petroleum

infrastructure. The recently passed

federal Energy Bill includes an

expanded Renewable Fuels Standard,

which for the first time will require

more renewable fuel to be incorporated

into the U.S. diesel market. Biodiesel

and other renewable fuels depend on

petroleum infrastructure, such as the

Magellan terminal, for easy distribution,

they noted.

The new biodiesel-blending facility

has an 84,000-gallon tank and will make

biodiesel blends available to petroleum

distributors. Those customers will likely

include area truck and car fleets and

could lead to more public pumps.

Current Colorado biodiesel users

include Jefferson County Public

Schools, the City of Lakewood, New

Belgium Brewery in Ft. Collins,

Safeway and Aspen Ski Resort.

Oemichen tells Senate panel

about rural healthcare co-ops

Testifying before the U.S. Senate

Small Business and Entrepreneurship

Committee, Bill Oemichen, president

and CEO of the Minnesota Association

of Cooperatives (MAC) and Wisconsin

Federation of Cooperatives (WFC),

described ways for small businesses to

address healthcare needs. Specifically,

Oemichen addressed support for federal

reforms that would help small

employers, including farmers, gain

access to affordable, quality health

insurance coverage.

“We believe the member-owned

cooperative model that puts consumers

in charge of their own health decisions

is the perfect fit for health care,” said

Oemichen.

With the support of its member

cooperatives, MAC and WFC created a

project called “Co-op Care” to allow

small employers, including farmers, to

join together to purchase health

insurance as a large group. They

successfully sought passage of enabling

legislation in both Minnesota and

Wisconsin to provide a Co-op Care

Production will more than double at Siouxland Energy’s ethanol plant (seen here prior to

recent expansion).
Rural Cooperatives / M a rch/April 2008 39

model, and have since worked to

establish healthcare purchasing

cooperatives in both states aimed at

farmers and small businesses.

“When compared to the large group

market, small employers — especially

farmers — buying health insurance face

greater challenges: stricter

underwriting, fewer choices, lower

quality benefits and little or no data

upon which to base informed

decisions,” he testified. “Bringing small

employers together under the

cooperative umbrella allows the coop...to negotiate directly with insurers

or providers similar to a large employer.

This, in turn, allows the cooperative to

negotiate higher quality coverage,

improve benefit choices, relax

underwriting criteria — if it so chooses

— and utilize cost and quality data to

educate members about cost drivers and

ensure that rate increases are in line

with claims experience.”

MAC and WFC serve more than 800

member-cooperatives owned by more

than 6.3 million Minnesota and

Wisconsin residents.

ACE unveils new Web site

The Association of Cooperative

Educators (ACE) has unveiled a new,

improved Web site to help improve

communication and connections among

ACE members and the cooperative

education community (www.ace.coop).

ACE says it is striving to use its Web

site and newsletter to “make links

between ideas, people, programs and

geographical regions.” The ACE

newsletter, “Update,” is also posted to

the Web site.

The importance of cooperative

communications is stressed in

“Communications — A Movable

Feast,” an article in a recent ACE

newsletter by Ian MacPherson of the

British Columbia Institute for Cooperative Studies at the University of

Victoria, Canada.

ACE is a membership organization

that brings together educators,

researchers, cooperative members, and

cooperative developers from across

cooperative sectors and national

borders. The resulting cross-pollination

of ideas enhances cooperative

development, strengthens cooperatives,

promotes professionalism and improves

public understanding of cooperatives.

ACE benefits cooperative education

and the cooperative movement by:

• Promoting cooperative research;

• Developing linkages between

universities, cooperatives and

supporting organizations;

• Building capacity to support the

development of innovation and

acumen in cooperatives;

• Spreading the word by providing

resources on cooperative education.

ACE holds an annual institute where

members and guests gather to share

cooperative education studies, ideas,

endeavors and thought. The 2008

Institute will be held in Ottawa,

Ontario, July 29-Aug. 1, where the

theme will be: “The Sustainable

Cooperative: Vision, Leadership,

Education.” For more details, visit the

ACE website: www.ace.coop.

Tennessee Farmers Co-op

sets new sales re c o rd

Consolidated sales for Tennessee

Farmers Cooperative (TFC) and its

subsidiaries reached an all-time high of

$584 million in 2007, an increase of $63

million from 2006. In a year full of

challenges — including a late-spring

freeze, summer drought, short hay

supplies and higher input costs — the

sales record was welcome news for

Tennessee farmers.

TFC’s subsidiaries include ADI, ADI

Agronomy, Fort Loudoun Terminal,

Co-op Vet Health, Risk Management

and Stockdale’s.

Net income (before taxes and

member programs) was $15.8 million,

compared to $10.4 million in 2006.

TFC alone had income of $11 million,

up from $9 million in 2006. All

operations departments were profitable

in 2007, and both ADI and ADI

Agronomy had their best year since

TFC purchased them in 1992.

The cooperative returned $8 million

to member co-ops in patronage and

allocated reserves in October. That

money will eventually flow back as

patronage payments to the farmers who

own the local co-ops. CEO Bart Krisle

said TFC has paid $204 million in

patronage and reserves to member coops during the past 25 years. In turn,

local co-ops have distributed $185

Tennessee Farmers Cooperative CEO Bart Krisle tells members how the co-op set a new

sales record in 2007.
40 M a rch/April 2008 / Rural Cooperatives

million of that amount in cash to their

farmer-owners.

“These figures represent the

cooperative system at its finest — a

system that is a very relevant and

effective form of business today,” said

Krisle, who is completing his second

year as CEO. “The co-op system keeps

money in our state, in our agricultural

community, in our local economies and

in our farmers’ hands.”

While higher prices of inputs, such

as fertilizer and fuel, played a major

role in the sales figures, Krisle said sales

volume was up in these areas as well.

Systemwide fertilizer tonnage increased

22 percent from last year.

Manufacturing records were broken

at TFC’s metal fabrication plant in

LaVergne, Tenn., where co-op products

such as feeders, hay rings and gates are

made. TFC’s Jackson Feed Mill had its

best production year, at 85,000 tons.

“Whether it was making fertilizer

available when farmers needed it most,

or providing livestock feeds formulated

to help stretch low hay supplies, our

system pulls together best when the

chips are down,” said Board Chairman

Ross Via, a Crockett County row-crop

farmer. “It is the difficult times — not

the ideal ones — that show us the true

value of our cooperative system.”

Via’s seven-year service on the TFC

board ended with the 2007 annual

meeting, and Stephen Philpott of

Shelbyville, Tenn., was elected by fellow

board members as the new chairman.

Bill Mayo of Tennessee Ridge was

selected as vice chairman.

TFC, established in 1945 as a

regional farm supply cooperative,

provides products and services to 60

member co-ops, which serve some

70,000 farmer-owners and more than

500,000 other customers across

Tennessee and in several neighboring

states.

Co-ops to expand oilseedc rushing capability

Producers Cooperative Oil Mill

(PCOM), a 63-year veteran in

processing cottonseed in the Southern

Great Plains, is expanding its operation

to include the processing of canola,

sunflowers and other oil seeds for food

and biofuels. PCOM has signed an

agreement with the recently formed

Plains Oilseed Products Cooperative

(POP) to jointly promote and crush

canola, sunflowers, cotton seed and

other oilseeds.

“We want our cotton-growing clients

in the Southern Plains and Mid-South

to know we will continue to provide

them with the same quality service we

have given for more than a half

century,” said Gary Conkling, oil mill

president and CEO.

The unusual alliance of agricultural

producers — including an oilseed

crusher, state universities, a national

seed supplier and American Farmers

and Ranchers Mutual Insurance Co.

(Oklahoma Farmers Union) — will

provide agriculture producers in the

Southern Great Plains with a new

market for current and future oilseed

crops.

PCOM will retrofit current

cottonseed-crushing capacity to allow

additional capacity and infrastructure

for crushing winter canola and

sunflowers for oil to be used in the

food industry and for biofuel

production. POP will continue to work

with grain handlers across the Southern

Great Plains to establish additional

local delivery points for growers’

oilseed.

Oklahoma Farmers and Ranchers

Energy Enterprise (OKFREE), formed

by Oklahoma Farmers Union, was

supported through a Value-Added

Producer Grant from USDA Rural

Development to study the feasibility of

processing oilseed and to understand

the market opportunities for oilseed in

the food and biofuels industry.

F o n t e rra delays

f a rmers’ sale vote

Fonterra Cooperative Group Ltd.,

the world’s largest dairy exporter, has

said it needs more time to persuade the

New Zealand farmers who own the

cooperative that they should support a

stock sale. It has delayed a vote on the

proposal, according to a report carried

by Bloomberg News Service. “We've

got a lot more work to do to win

members’ support,” Fonterra Chairman

Henry van der Heyden said. The

postponement of the vote, initially set

for May, was announced Feb. 15 in a

letter to members.

The farmer-shareholders were to

vote on a new structure for the

company as the first stage of a sale of

shares in 2010 that could have raised

about $2 billion, Bloomberg reported.

Fonterra, based in Auckland,

announced the plan in November,

citing the need to access outside capital

to fund expansion. “Farmers are

conservative people and they’ve built up

the company to what it is,” said Alan

Moore of Milford Asset Management in

Wellington, N.Z. “Maybe they think:

‘Why should we give that up?’”

N C B A’s Paul Hazen addre s s e s

U.N. on co-ops and job growth

Paul Hazen, president and CEO of

the National Cooperative Business

Association (NCBA), told a United

Nations panel in New York City in

February about the role of cooperatives

About 150,000 coffee growers in East

Timor are being helped by a cooperative

formed with assistance from the

National Cooperative Business

Association.
Rural Cooperatives / M a rch/April 2008 41

in reducing poverty through

employment generation. Hazen

addressed the 46th Session for the

Commission on Social Development.

In East Timor, for example, NCBA

has helped create employment for more

than 150,000 farmers selling coffee

through assisted entities. Cooperativa

Café, which sells its coffee to Starbucks,

has grown to be the largest private

employer in the country since this

project began in 1995. Hazen cited this

as one of several examples for the

Commission. “At NCBA, we have a

consistent track record of showcasing

why cooperatives are a better business

model. One obvious benefit is the

amount of jobs they create in local

communities to allow people to

improve the quality of their lives,” said

Hazen.

Hazen spoke on behalf of the

International Cooperative Alliance

(ICA), an independent, nongovernmental association which

represents socially responsible

cooperatives worldwide. Hazen is a

member of the organization’s board.

“By bringing the cooperative enterprise

to more communities both in the

United States and around the rest of

the globe, we give some of the world’s

poorest people the keys to a better life,”

Hazen said.

USDA renewable energ y

studies on Web

Four studies commissioned by

USDA Rural Development to help

focus attention on crucial strategic

issues facing the nation’s renewable

energy industry have been posted to

the Internet. The four studies, which

were summarized in the JanuaryFebruary issue of this magazine, can be

accessed by selecting “Spotlights” at:

w ww.rurdev.usda.gov/rbs/coops/csdir.ht

m.

The studies focus on:

• Ways to better integrate wind and

solar power into the nation’s power

grid;

• How new investment models could

help reverse the decline in local

ownership of biofuels plants;

• Business-ownership models most

applicable for biofuels plants;

• A look at major obstacles limiting

growth of the renewable energy

industry, such as the need for

improved transportation

infrastructure.

The issue of USDA’s Rural

Cooperatives magazine with the study

summaries can also be viewed online (as

can the past 10 years of the magazine)

at: www.rurdev.usda.gov/rbs/pub/

openmag.htm.

Bill Davisson named

c h a i rman of NCFC

Bill Davisson, chief executive officer

of GROWMARK Inc., a farmer

cooperative headquartered in

Bloomington, Ill., was elected chairman

of the National Council of Farmer

Cooperatives (NCFC) during the

organization’s recent annual meeting in

Lake Buena Vista, Fla. Davisson takes

over leadership of the association from

John Johnson, CEO of CHS Inc., who

completed his second one-year term as

chairman in 2007.

Davisson has served as CEO of

GROWMARK since 1998, having

worked his way up through the

GROWMARK system over the course

of his career.

NCFC also elected a new vice

chairman at the meeting, Douglas

Youngdahl, president and CEO of Blue

Diamond Growers of Sacramento,

Calif.

“I know that both Bill and Doug will

work tirelessly to ensure that NCFC

continues to represent the interests of

farmer cooperatives and their members

in a dynamic business and policy

environment,” says NCFC President

Jean-Mari Peltier. “I, along with the

entire staff at NCFC, look forward to

working with them over the coming

year.”

Tobacco lawsuit ends

with $100 million payment

Nearly 200,000 burley tobacco

growers in four states will share an

estimated $100 million under a final

judgment entered in December 2007 in

their lawsuit against the Burley Tobacco

Growers Cooperative Association,

Lexington, Ky. Each farmer will likely

get about $430, according to a report in

the Lexington Herald-Leader.

The plaintiffs asked the court to

order the co-op to pay members from

what they deemed to be excessive

reserves, held since at least 1992. The

co-op contended that it was required by

the federal government to keep a large

reserve to protect the federal

Commodity Credit Corp. from losses

on loans made by the co-op.

The co-op issued a statement saying

it was pleased with the judgment

because it would restore growers’

confidence in its future, and because it

avoided being dissolved, as requested by

the plaintiffs.

With the end of the federal tobacco

support program, a smaller volume of

burley tobacco is being sold at co-op

auctions and the number of growers has

declined sharply. Many of those who

are left grow under contract with

cigarette makers, the Herald-Leader

reported. “We have been working hard

to attract foreign buyers for burley

tobacco,” says co-op President Roger

Quarles.

Bill Davisson
Robertson of the co-op’s clientele. “But

I have found that you don’t know.

There are young people. There are

fishermen. It’s such a variety. A good

part of our purchases are, of course,

made by summer tourists to Alaska, and

that’s how the word gets spread.”

Despite its limited marketing, the

word does continue to spread.

Robertson credits two things for this

high demand: the fine quality of the

fiber, and the hands-on, personal

approach and story behind the items. “I

think the fact that this is truly meant to

help the people in the villages...is a big

drawing point,” Robertson says.

The Oomingmak Musk Ox

Producers’ Cooperative stands out, not

only because it is structured differently

than a typical business, but because it

exists solely for the benefit of the

people living in remote Alaskan villages.

“These are villages you could not get to

by car,” Robertson says. “It really is

truly way out there. You don’t go there

on a whim,” she says, adding that there

are very few jobs in such villages.

The beauty of the

cooperative is that it

provides a way for

these people to make

money but is flexible

enough to allow them

time to live their

mostly subsistence

lifestyles. “It’s

something that you fit

in with the other parts

in your world, like

taking care of your

children, preserving

the things that you

need to pick and

preserve in the

summer or drying

fish,” Robertson says.

Robertson admits that the co-op has

changed very little since its beginning,

other than incorporating computers at

headquarters, developing a Web site

and increasing the number of members.

Unlike other businesses and co-ops that

work to stay on top of, and even ahead

of, the next big thing, Robertson makes

clear that Oomingmak Musk Ox

Producers’ Cooperative’s goal is very

different: “We’re not a mover and a

shaker type of business. We are steeped

in tradition, and that’s where we intend

to be.” ■

State of the Art

continued from page 23

42 M a rch/April 2008 / Rural Cooperatives

i m p roved farming techniques, American

f a rmers have steadily increased yields

while at the same time reducing ero s i o n ,

reducing the need for irrigation and

reducing fert i l i z e r, herbicide and

pesticide intensity while pro t e c t i n g

habitat. 

We have done all this without

infringing on the private pro p e rty rights

of farmers as they seek new markets and

to convert acreage to higher valueadded crops. Producers will continue to

apply these skills to the many issues that

will arise as we build out the biofuels

i n d u s t ry, provided that we do not place

a rtificial barriers in the way.

Sustainability can be dynamic, as well

as static; we must not be paralyzed by a

fear of change. 

Nations differ also in their openness

to markets. The United States is

committed to the rapid build-out of

renewable energ y.

But we are committed as well to

minimizing costs to consumers — to a

s t rong, pro - g rowth economic policy and

to moving renewable energy industries

f rom subsidies to the market as rapidly

as possible. Other nations may strike a

d i ff e rent balance. 

Let us respect our diff e rences and

l e a rn from each other while not

constraining the ability of the world

market to trade in these new energ y

re s o u rces. 

After this conference, we will leave

with a renewed appreciation of the

global scope of this cause — hopefully

with a deepened understanding of the

choices we face and the diversity of the

strategies open to us, and with new

enthusiasm for the work ahead. 

Nearly 30 years ago, the late Julian

Simon argued that “the human

imagination, coupled with the human

spirit was, indeed, the ultimate

re s o u rce.” I believe that this is tru e .

To g e t h e r, we can build a cleaner, more

sustainable, and more productive energ y

f u t u re. That is the goal of WIREC

2008. Let’s get to work. ■

C o m m e n t a ry

continued from page 2

A sampling of the co-op's scarves,

hats and nachaqs (a tubular garment

worn as a hood or about the neck).

Hundreds of miles of Arctic tundra may separate

them, but Alaskan villagers market their knitted goods

united in a co-op.
and Wolverine Power Supply

Cooperative were also honored for their

innovation and contributions to wind

technology.

Last Mile is developing the 300-

Megawatt (MW) White Creek wind

project in Washington state. When

completed, it will be the largest publicly

developed wind project in the United

States. Wolverine, located in Cadillac,

Mich., has developed the state’s first

multi-megawatt wind project, Harvest

Wind Farm in Huron County.

Previous awardees include Associated

Electric Cooperative Inc., Illinois Rural

Electric Cooperative, Western Farmers

Electric Cooperative (Oklahoma), Holy

Cross Energy (Colorado), Basin

Electric Power Cooperative (North

Dakota) and Great River Energy

(Minnesota).

DOE’s Wind Powering America

program aims to help the nation

achieve targeted regional economic

development, enhance power

generation options, protect the

environment and help increase our

energy security. In 2007, the United

States installed 5,240 MW of new wind

power, a 45-percent increase over 2007.

The United States has the fastest

growing wind-power capacity in the

world. ■

merger, the bank’s board ballooned to

39 directors — far from the lean

governance structure Orton and others

deemed in the best interest of the

membership. 

According to Cassidy, downsizing

“was in the best interest of the

organization,” but it would have been

much easier to delay such action.

However, “Roy wanted to address it

now.”

Although the board overwhelmingly

agreed to reduce the number of

directors, no one wanted to eliminate

his or her own seat, and tension ensued.

Orton appointed a committee, with

himself as chair, which ultimately

recommended a plan to reduce the

board in phases over three years. Each

director was able to serve out his or her

term, although the seat would not be

filled after that.

“It took honesty, integrity and a lot

of leadership to pull this off,” recalls

Dean.

“His leadership in governance at

CoBank has led to changes in board

structure that puts CoBank at the

leading edge,” says Everett Dobrinski,

CoBank's new chairman. He praised

Orton for leading by example,

voluntarily giving up his own seat by

not seeking reelection.

“I didn't think it was right for me to

promote downsizing, chair the

committee and then stay on,” Orton

recalls. The board has now been

reduced to 12 elected and four

appointed directors. 

CoBank CEO Robert B. Engel

commends Orton for his vision, saying

his key contribution to the financial

institution was his solid “understanding

of good governance before it was

vogue.” 

Baldwin borrows from famed NFL

coach Bill Parcell to describe Orton:

“You are what your record says you

are.” Orton’s track record shows that he

is bowing out at the top of his game. ■

A Nice Guy Who Finished First

continued from page 27

Another advantage for the cooperative

is the revenue for the cooperative’s

propane subsidiary, Shelby Energy,

Bernson says. Shelby won a 2007

Expanding Excellence Award from CS

Week, an electric utility customer

service organization, and Electric Light

and Power magazine. The award

recognizes outstanding contributions,

innovations and excellence in utility

customer service.

For every 100 generators installed,

the cooperative can increase peakdemand control by 1 megawatt (MW).

Every MW of controlled demand can

result in about $50,000 in annual power

cost savings. These savings can be

passed on to customers and increase

system stability. During a 10-year

period, the net benefits are expected to

exceed initial project implementation

costs, according to the cooperative.

$500,000 annual savings

The cooperative’s goal is to install

enough generators to achieve 10 MW

of interruptible capacity, which could

save more than $500,000 in annual

power costs — nearly 5 percent of

Shelby’s total power supply costs.

Installation of enough generators could

reduce the need to turn on peaking

units, used when electric power is in

high demand.

Bernson noted that Shelby’s farm

and residential customer-members who

are participating in the demandmanagement program enjoy the

benefits of knowing that during power

outages, their generators will continue

to supply electricity to meet their needs. 

“One of our customers, a farmer,

told us that now he doesn’t need to

worry about making sure he has

somebody check his property if he’s

away when an outage occurs. He no

longer has to mess with generator fuel

and fuel storage, or manage generatorsafety concerns, such as extension cords

and proper ventilation. He doesn’t need

to deal with the elements to get his

generator started during outages. 

“It’s a safer way to go,” Bernson

notes. “Best of all, our members who

participate can save money each month

and we keep peak load costs down.” ■

Lowering the Peak

continued from page 34

Rural Cooperatives / M a rch/April 2008 43

N o rth Wi n d

continued from page 19
50 Years A g o . . .

From the March 1958 issue of News for Farmer Cooperatives

Burlington Consumers Cooperative

exceeds goal in 20th year

In its 20th year, 1957, Burlington (Wis.) Consumers

Cooperative handled sales of more than $1.5 million, its

highest volume in five years. During its 20 years, the co-op

has refunded nearly $567,000 to members, almost $280,000 in

cash as dividends and interest on stock and bonds, patro n a g e

refunds, and redeemed stock.

Other outstanding co-op re c o rds set include: 

• An increase in assets to a new high during the past 10 years,

without the aid of additional member capital.

• A favorable ratio of assets to liabilities, indicating a sound

financial condition.

• Tremendous quantities in tonnage and gallons handled in

the four departments: feed, farm, machinery, petroleum and

h a rd w a re .

The year 1957 was outstanding, too, because the co-op

reached and exceeded its sales goal projected five years ago; it

stepped up its public relations work and it organized and

developed a credit union, besides adding other new serv i c e s

and facilities.

30 Years A g o . . .

F rom the April 1958 issue of News for Farmer Cooperatives

F a rmland disposal system meets

1985 pollution standard s

The future is now for a waste disposal system just

c o n s t ructed at Farmland Foods’ beef slaughtering plant in

G a rden City, Kan. The system meets govern m e n t

re q u i rements set for 1985. “The ‘land application system’

designed specifically for the Garden City plant meets 1985

Z e ro Pollution Discharge re q u i rements set by the Federal

Water Pollution Control Act,” John H. We s t e rh o ff, Farm l a n d

Foods president, explained.

The new system complements the existing waste water

t reatment facility at the beef plant.

N i t rogen-rich effluent from the waste treatment plant is

now transferred to two newly constructed 18-acre storage

ponds. The two ponds have a total capacity of 130 million

gallons of water. The effluent had formerly been discharg e d

into the Arkansas River. The huge quantities of water used

daily at the Garden City plant are provided by Farm l a n d

Foods from its own wells.

Those unseen attributes 

Roger Baccigaluppi, president of the California Almond

G rowers Exchange, Sacramento, touched upon the “margin of

g reatness” his cooperative has — a margin that is a key

attribute to many of this country ’s cooperatives. “In the midst

of buildings and machinery,” he observes, “the typical visitor

misses several all-important elements that allow the

cooperative to produce Blue Diamond quality products and

retain its leading position in the almond industry.” 

The unseen elements he cites include the growers’ work,

investment and planning to provide the harvest, the board of

d i rectors’ and members’ concerns over quality (his cooperative

in 1976 had about half the insect damage of all other

C a l i f o rnia handlers combined), the cooperative board and

management teamwork on strategy, and the cooperative’s

employees’ skills that pre p a re and see products through to

m a r k e t .

10 Years A g o . . .

F rom the March/April 1998 issue of Rural Cooperatives

Wo m e n ’s crab meat co-op helps re v i v e

Chesapeake Bay island economy 

Five years ago, the hardy people of Ty l e rton, Md., were

s t ruggling to pre s e rve a way of life that for generations has

revolved around the harvesting of the sea. Crabbing and

fishing — the only industries in this 75-person village on

Smith Island in the Bay — had fallen on hard times. Sea

catches had been falling, with many species disappearing fro m

local waters. Tough new state crabbing regulations were

making it even harder for Ty l e rton watermen to stay in

b u s i n e s s .

To save their crab-picking industry, island women formed a

cooperative in 1993. After a 3-year struggle, Smith Island

Crab Meat Cooperative Inc. secured funding for a new

picking and packing facility, raising $283,000.

To d a y, the co-op’s facility is in its third operating season in

a licensed, state-of-the-art building. In 1997, it sold 19,000

pounds of crab meat. The co-op has buyers for the meat even

b e f o re it’s picked. Co-op members are looking for other

business possibilities as well. Says Janice Marshall, founder

and president, “This small co-op of women is combining

business basics and an excellent product into a success we

never expected.” ■

P A G E F R O M T H E P A S T

F rom the archives of Rural Cooperatives

44 M a rch/April 2008 / Rural Cooperatives

46 M a rch/April 2008 / Rural Cooperatives

48 M a rch/April 2008 / Rural Cooperatives

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