Rural

COOPERA COOPERATIVES

USDA / Rural Development September/October 2001 USDA / Rural Development September/October 2001

ELUSIVE BARGAIN:

Market glut sparks 

raisin price dispute

ELUSIVE BARGAIN:

Market glut sparks 

raisin price dispute
2 September/October 2001 / Rural Cooperatives

Responsibility for seeing that cooperatives are properly managed ultimately falls squarely on the shoulders

of the cooperative’s board of directors.

Key to this role is selection of a chief

executive officer or manager in whom

the board has confidence to run the

day-to-day operations of the cooperative business. The manager also

has responsibility, with the board, to

see that operations are run on a

cooperative basis. 

As user-owned, user-controlled

and user-benefitted businesses,

cooperatives implicitly have a dual

character as an association of people

and as a common business undertaking. Both aspects of the organization must be nourished to achieve

organizational strength and ultimate

business success. This makes management of cooperatives unique

among other forms of businesses. It

is one source of their distinctiveness

and strength.

As cooperatives become more

complex organizations, both in

size and scope of business activity,

management must be sensitive to

operating the cooperative for

members’ benefit and continuing

to meet their needs. Sensitivity to

those needs is a continuous challenge

given the increasing diversity among

cooperative members and the broader

geography represented in many

operations. 

Members must also be properly

educated to understand their responsibilities to the organization. This

includes proper capitalization as userowned businesses so that the stream

of benefits continues to flow to them.

Capital-starved organizations can seldom perform at optimum levels

under any circumstances. Control

follows capital. If members want to

control their organizations, they have

to capitalize them.

Several recent changes in state

cooperative laws attempt to allow for

greater amounts of non-member business than is customary in cooperatives,

or to allow co-op equity to be owned

by non-members. These are onerous

signs of deterioration in the legal foundations for cooperative enterprise in

the country.

The North American cooperative

community was shocked recently when

Agricore, a Canadian regional cooperative that resulted from the 1998

merger of the Alberta Wheat Pool and

the Manitoba Pool Elevators, decided

to relinquish its status as a cooperative

by combining with United Grain

Growers, Ltd., a public company in

which a large investor-owned firm

has an interest. The action effectively displaces the remaining

large grain marketing cooperative

presence in the region, and follows the Saskatchewan Wheat

Pool’s conversion in 1996 to a

publicly-traded company.

Managing business operations

in a difficult climate for farmers

during the past several years has

not been an easy task for cooperative management teams (directors

and managers). Nevertheless,

cooperative business volume in

the United States increased

slightly in 2000. 

A strong cooperative business

sector is important to maintaining

market access for farm operators

and their place in a rapidly restructuring food and fiber system.

Board members need to remain

vigilant that their organizations are

kept member oriented and providing the marketing, farm supply and

other services needed by them. They

also need to ensure that the legal foundations and capital requirements are

met, consistent with operating on a

cooperative basis. 

Farmers can give away control of

their cooperative businesses, but it

cannot be taken away from them. 

Randall Torgerson, deputy administrator

Rural Business-Cooperative Service 

COMMENTARY

Directors share major role as part 

of cooperative management team

Capital-starved 

organizations can 

seldom perform at 

optimum levels under

any circumstances.

Control follows capital. If

members want to control

their organizations, they

have to capitalize them.
Rural Cooperatives / September/October 2001 3

Rural COOPERATIVES (1088-8845) is published

bimonthly by Rural Business–Cooperative Service,

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Unless otherwise stated, contents of this publication

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The United States Department of Agriculture (USDA)

prohibits discrimination in all its programs and 

activities on the basis of race, color, national origin,

sex, religion, age, disability, political beliefs, sexual

orientation, and marital or family status. (Not all 

prohibited bases apply to all programs). Persons 

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Building, 14th and Independence Avenue, SW,

Washington, D.C. 20250-9410, or call (202) 720-5964

(voice or TDD). USDA is an equal opportunity

provider and employer.

Ann Veneman, Secretary of Agriculture

Randall Torgerson, Deputy Administrator, USDA

Rural Business-Cooperative Service

Dan Campbell, Managing Editor

Vision 2000/KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or

Fax (202) 720-4641, Information Director,

This publication was printed with vegetable oil-based ink.

United States Department of Agriculture

Rural COOPERA COOPERATIVES

September/October 2001 Volume 68 Number 5

On the Cover:

Steve Kister, a third-generation raisin farmer and president of the Raisin

Bargaining Association, says the industry must learn to work together better

to survive the bitter price disputes of recent months. Story on page 13. USDA

photo by Catherine Merlo 

FEATURES

4 Co-op-USDA partnership still strong after 75 years

By Patrick Duffey

7 Need for change trumpeted at NICE

Farm Bill Task Force proposes actions to reverse farm-income

downward spiral

By Dan Campbell

13 Hazen selected top CEO communicator

By Dan Campbell

14 Season of turmoil

A price dispute between California’s raisin growers and packers

divides financially troubled industry

By Catherine Merlo

20 More than one way

Dairy cooperatives pursue varied paths to structural change

By Carolyn Liebrand

24 Communications linked to loyalty

If you want your co-op messages heard, it’s still a face-to-face,

hard-copy world

By Dan Campbell

27 Selling it!

Florida citrus industry boosts consumption with extensive,

health-focused advertising and promotion

By Dan Campbell

DEPARTMENTS

2 COMMENTARY

25 NEWSLINE
4 September/October 2001 / Rural Cooperatives

By Patrick Duffey

USDA Rural Development

he 75-year partnership

between the nation’s

farmer-owned cooperatives and USDA was celebrated June 28 during a

special ceremony at USDA headquarters in Washington, D.C., marking

the anniversary of the Cooperative

Marketing Act (CMA).The legislation

launched USDA’s ongoing effort to

promote the use of cooperatives

through technical assistance, research,

educational and information products

and statistical services.

Agriculture Secretary Ann Veneman

was joined by former secretary Earl

Butz and other farm leaders to mark

the historic anniversary and to underscore the importance of cooperatives in

the nation’s rural economy. 

“Our mission provides valuable

tools in the food and agriculture industry’s toolbox to help it better compete

in today’s changing food system,” 

Cooperative–USDA partnership

still strong after 75 years

T

Clockwise from above: American Farm Bureau

Federation’s Richard Newpher, NCFC President David

Graves and U.S. Agriculture Secretary Ann Veneman.

Each stressed the importance of USDA working with

the nation’s cooperatives to strengthen America’s

rural economy. USDA Photos by Bob Nichols 
Rural Cooperatives / September/October 2001 5

Veneman said. “Seventy-five years

after its creation, Cooperative Services

recognizes these changes, and our

employees are playing a major role in

helping to promote the opportunities

that lie ahead in what promises to be a

world of opportunity.”

The combination of globalization,

new technology and changing consumer demands has created a “more

tightly connected food chain with

stronger linkages among producers,

processors and retailers,” she said. This

requires “new relationships and thinking.” Many producers, she continued,

“are finding ways to participate in the

changing market for food products

while improving their bottom lines.”

Veneman cited Dakota Growers

Pasta and U.S. Premium Beef as examples of producer-owned cooperatives

which have been successful in finding

new market opportunities for their

members. 

America’s “best deal” 

For former Secretary Butz, now 92

years old, his return to the USDA

courtyard where the ceremony was

held triggered a flood of memories,

including his first trip to Washington

in 1930 as a delegate to the national

4-H convention. 

“We lived in tents on the Mall, but

the first evening it was raining so the

service was held

here,” he said. 

It was in virtually the same

spot as he stood

that Butz said he

first laid eyes on

a lovely girl

standing by the

fountain who

was to become

his wife. “She

passed away five

or six years ago,”

he said, “but I

still have a warm

spot in my heart

for this place.” 

Butz said his

career had been

a fascinating one, taking him “from the

cornfield to the Cabinet.” 

Butz said he was “fed-up with

attacks on our food system,” by those

who claim our food is unsafe or produced with cruelty. He prodded those

present to do a better job of “telling the

story” for U.S. agriculture. This should

include hammering home the point

that affordable food is the cornerstone

of the nation’s affluence. The average

U.S. consumer, Butz said, spends only

11 to 15 percent of his or her income

on food, creating a vast amount of disposable income that can be spent in

other ways that fuel

the economy. 

“Our cheap food

supply is the best

deal in America – it

leaves 85 percent of

our income for all

else...And cooperatives are one of the

reasons it is the best

bargain.”

Butz recalled

that his father managed the Noble

County Farm

Bureau Cooperative

in Indiana at a time

when a $100,000

sales volume year

was cause “for a big

party.” In those years, farmers typically

raised only 25 or 30 pigs and three or

four sows, he said.

“They would load a half dozen pigs

into a horse-drawn wagon and haul

them to a railhead for shipment to Buffalo, where the co-op would sell them.

“We’ve come a long way since then!”

Farm Bureau says USDA’s 

co-op role crucial 

In the face of a rapid and dramatically changing agricultural industry,

America’s farmers and ranchers consider involvement and assistance by

USDA to be crucial, according to

Richard Newpher, Washington office

executive director of the American

Farm Bureau Federation (AFBF). He

stressed Farm Bureau’s long history of

support for cooperative marketing and

the successes brought about by the

Cooperative Marketing Act. 

“Farmers and ranchers have long

known those cooperative efforts have

paid them benefits that led to their success in American agriculture,” Newpher said. 

Shortly after AFBF was formed in

1919, it established a cooperative marketing department and later assisted in

creating the national enabling legislation (CMA), Newpher said. AFBF, now

representing 5 million member families,

saw the need for “a strong organization

Earl Butz’s son, William Butz, views some of the historic photo 

displays prepared for the anniversary celebration. 

Some of the many cooperative-owned food brands on display during the Cooperative Marketing Act 75th anniversary celebration.
6 September/October 2001 / Rural Cooperatives

to help them deal with the ‘marketing

problem’ of low prices, high handling

costs and trade abuses.” 

Newpher said that need continues

“as does the need for a strong progressive arm in USDA devoted to promoting and spreading the benefits cooperatives can provide.”

Early in the 20th century, AFBF

assisted county and state Farm Bureaus

in developing and providing cooperative

services to its members – from shipping

4-H hogs to market by rail

to organizing carload shipments of limestone and

phosphate. “Agricultural

producers worked together

to help themselves while

helping each other” where

no local fertilizer dealer,

farm supplier and market

for livestock existed. 

Early cooperative ventures purchased bulk fertilizers for distribution to

purchasers in the counties.

Trailblazers were Mississippi, Indiana, Ohio, Illinois and Missouri. Other

states followed. Soon,

petroleum products and

other farm supplies and equipment

were added to the inventories of cooperatives. Farm Bureau also organized

marketing cooperatives for grain, poultry and livestock. 

Not even in the early years did all

farmers support nationwide cooperative

plans, warning against “embracing this

demon of commercial radicalism.” But

the 75-year history of successful cooperative efforts has “laid that demon to

rest,” Newpher said. “Still, the public

perception of the need for cooperative

marketing in agriculture ebbs and

flows, especially when considering the

need for public expenditures.”

Producers look to the USDA for

expertise and assistance in keeping

farms alive and helping them thrive,

Newpher stressed. “Benefits provided

through implementation of the CMA

will move agriculture once again along

the path to prosperity. We look to the

USDA to provide the governance

benefits that enable us to be the most

productive, effective and efficient

farmers possible.”

Stronger co-op marketing 

alternative to subsidies

“Although there are notable exceptions, farmers will never return to getting 45 percent to 47 percent of the consumer food dollar they saw in the 1940s

and 1950s if they continue selling as

they are today and earning only 20 percent of those dollars,” said David

Graves, president of the National Council of Farmer Cooperatives (NCFC). 

The problem, he said, is that farmers are marketing only about 30 percent of what they produce through a

cooperative. As a result, there is a lot to

be accomplished in the future of these

cooperatives.

“Cooperatives can help farmers earn

more of the consumer food dollar and

relieve Congress of having to assist

producers with a yearly subsidy. The

difference between federal assistance

and marketing is a symptom of the

income shortage farmers and ranchers

are experiencing in this country

today,” he said.

In comparing marketing to assistance, Graves noted that the government has spent more than $30 billion

on agricultural subsidies in recent

years. “On the Hill today, there is

growing anxiety that those dollars are

not solving the problem and merely

treating the symptoms of low income

for the nation’s farmers and ranchers,”

Graves said. “The dollars don’t address

the possibility of investment producers

have in the marketplace in attempting

to market their production. 

“You can give farmers money that

serves their needs for one production

cycle,” Graves noted, “but if you are

able to help them market profitably,

you do them a favor and provide

assistance for their

entire careers.”

To address the situation, NCFC formed a

task force to ask cooperative managers and

farmer-owners to 

identify the major challenges these businesses

face in helping farmers

profitably market their

production. They said

cooperatives need better access to capital in

both credit and investment forms (see related

story, page 7).

Looking ahead,

Graves said the farmers’

future “would be better served in the

marketplace if they could move closer

to the consumer in terms of marketing

their products and services and increasing their share of the consumer dollar

spent on food and natural fibers.” The

problem, he said, is the tendency to

look at the price of commodities but

fail to understand what happens to the

consumer. 

Using a biscuit as an example, Graves

said 50 to 60 years ago consumers would

buy a sack of flour derived from farmgrown wheat at the supermarket and

return home to make biscuits from

scratch. By comparison, today’s biscuits

are purchased ready-made and often

stuffed with a fried egg and sausage. 

“There are a lot of goods and services

within that chain of events from which

farmers don’t benefit,” Graves said.

“Farmers have no hope of returning to

that 45 percent share if they continue

selling at what they do today.” ■

Farm Bureau Executive Officer Richard Newpher, USDA Rural Business-Cooperative Service Deputy Administrator Randall Torgerson, former Agriculture

Secretary Earl Butz and NCFC President David Graves.
Rural Cooperatives / September/October 2001 7

By Dan Campbell, editor

n meeting rooms, hotel

hallways and around

banquet room dining

tables, the relentless

topic discussed throughout this year’s National Institute on

Cooperative Education (NICE) in

Atlanta was what role cooperatives

should play in pursuing major changes

to help restore the farm sector’s fiscal

health. A young farmer from Montana, noting the large size of the check

from USDA he’ll be getting as part of

an emergency aid payment, said that

money will keep him in business, but

he looks at the aid as a type of welfare

and wonders if there is a future in

farming the way things are going. 

He’s not alone. Half of all U.S. net

farm income will come from government

payments this year. Small wonder, when

you look at what has happened to the

farmers’ slice of the average “food dollar”

spent by consumers, says Dan Kelley,

GROWMARK board chairman. The

farmer’s share is down to 20 percent, the

lowest level ever and down from more

than 37 percent of the food dollar as

recently as 1973, Kelley said during an

address at NICE. 

“Farmers need greater opportunity to

generate income from the marketplace,”

Kelley said while presenting the findings

of the National Council of Farmer

Cooperatives’s (NCFC) Farm Bill Task

Force. Increasing the farmers’ share of

the food dollar by just one cent—to 21

cents—would generate an additional $6

billion in total income for farmers, he

stressed. And an increase of 3 to 4 cents

would offset all the government assistance paid to farmers, he added. 

NCFC is supporting the Farmer Business and Income Opportunity Act of

2001 as a means to help farmers better

manage their risk and improve income

derived from the marketplace. Kelley

said it will help farmers compete more

effectively in the global marketplace and

better capitalize on market opportunities. 

NCFC developed its recommendations during a series of meetings

attended by cooperative leaders from

around the nation. Some of the sessions were standing-room-only affairs,

underscoring the urgency of the need

to boost farm income.

The key is to improve access to capital and other programs that enhance

cooperative efforts, Kelley said.

To improve access to capital, NCFC

recommends:

• Raising the $25 million loan limit

on USDA’s Business & Industry

Loan Guarantee Program. Kelley

noted that Plains Cotton Cooperative built its Texas denim plant

for $25 million in the mid-1970s,

but today that plant would cost

more than $100 million to build.

• Clarifying lending authority under

the 1996 Farm Bill so that traditional cooperatives would have the

same ability to qualify for certain

USDA loan programs as do newgeneration cooperatives. 

• Eliminating the triple tax on co-op

dividends.

• Providing co-ops with new tax

incentives.

• Establishing new sources for equity

capital; this is needed because

financially strapped farmers are

often unable to invest in projects

desperately needed to develop new

Need for change trumpeted at NICE 

Farm Bill Task Force proposes actions to reverse farm-income downward spiral 

I

GROWMARK Chairman Dan Kelley, seen here on his Illinois farm, says farmer-owned

cooperatives need greater access to investment capital to help members regain a larger

a slice of the consumer food dollar. Photo courtesy GROWMARK 
8 September/October 2001 / Rural Cooperatives

Connecting at NICE

Clockwise from top/left: Students participate in a

game designed to build team skills; Sotero Agoot

Jr. of the Kona Pacific Farmers Cooperative (far

right) discusses small co-op marketing strategies

with Deaconess Edna Umoete, a Nigerian cooperative development specialist, and two of her countrymen; Dennis Mullen, CEO of Agrilink Foods,

works the audience during his lively keynote

address; the youth color guard enters the main

meeting hall for a general session; Ohio State’s

Bernard Erven demonstrates how not to conduct a

manager interview. USDA photos by Dan Campbell
Rural Cooperatives / September/October 2001 9

products or open new markets;

new venture capital funds for

cooperatives are thus needed. 

Other provisions within the bill

would seek to revitalize USDA’s cooperative programs by establishing the

Farmer Cooperative Business Service

as a separate agency and maintaining

funding for USDA technical assistance grants for cooperatives. A Sense

of Congress Resolution is also being

sought to reaffirm congressional support for federal programs that encourage and enhance the ability of

farmers to join together in cooperative self-help efforts. 

“This may be our last opportunity

(to enact needed changes),” Kelley said.

“Farmers must work together to find

ways to enhance their income.” 

Don’t procrastinate, innovate!

In his lively NICE keynote

address, Dennis Mullen, CEO of

Agrilink Foods, also sounded the call

to action. He used the example of a

one-pound bag of corn to point out

the crisis facing farmers. In 1991,

that bag of corn cost 57 cents. Ten

years later, the cost is 56.5 cents.

“That is actual deflation,” he said.

“Dairy, cheese, oats, beans—the

trend has been much the same.”

Mullen said Agrilink has also seen

the price for small ears of corn-on-thecob it supplies to fast food outlets, such

as KFC, remain stagnant for nearly a

decade. And some apple producers had

to sell their crop for 8 cents a pound

this year.

“People get raises, electricity and gas

costs go way up, but our (farm) prices

don’t keep up,” Mullen said. “We should

band together to fight this,” he said. 

Innovation in the face of rapidly

changing technology will be the answer

for many successful cooperatives,

Mullen said.

“Innovation is needed to provide

products when and where consumers

want them—you must provide customers with service that sets you

apart.” He projected that in 10 years,

“Walmart will dominate where we

buy food, because it is the world’s

best distribution company—it gets

products to stores better and faster

than anyone.”

Another food trend to watch is the

growth in percentage of older Americans, which will drive increased

demand for food perceived to be

healthier and more nutritious. Mullen

also noted that 70 percent of consumers believe organic foods are better

for their health.

A decade

ago, shoppers

spent an average of 40 minutes in the

grocery store,

but today it is

down to 18

minutes.

“Today, meals

are assembled

rather than

cooked, and

dining can

take place

anywhere. I

just saw an ad

for a minivan

with 17 cupholders!” Mullen said.

Agrilink, Mullen said, wants to

redefine the word “commodity” by

bringing growers and management

together to find ways to add value to

their products. Strategic thrusts for

Agrilink include being the lowest-cost

producer of products and services that

meet customers needs through a program of relentless improvement,

investment in innovation and developing new supplier partnerships. 

Total customer service, development

of a totally effective workforce and pursuit of profitable growth are goals driving Agrilink as it pursues its vision

statement: “To be widely recognized

for leadership and accomplishment as a

food processing and marketing cooperative by using all of its members’ and

employees talents.” 

Are cooperatives getting too big? 

In one of several sessions at NICE

dealing with concentration, Charles

Beckendorf, board vice chairman of

Dairy Farmers of America (DFA), and

John Reifsteck, board vice chairman of

GROWMARK, talked about why their

cooperatives have seen the necessity to

grow to survive during a time when

food companies are consolidating even

more rapidly. 

“The vast majority of growers say

agribusiness is too large, said Reifsteck, who is also president of his local

cooperative, Illini FS Inc. “But when

we ask them if co-ops should be large

enough to meet the competition, they

also say yes.” This creates a major

dilemma for cooperatives dealing with

huge companies that may do more

than $200 billion (such as Walmart) in

sales annually, he said. 

“We need efficiency to compete,

but members are very concerned

about concentration. Producers must

have a competitive marketplace,”

Reifsteck said.

GROWMARK has grown from a

single-state operation in Illinois into a

multi-state, international cooperative.

But a “wave of proposed legislation

and regulations” could threaten

future co-op mergers, and will—at

the very least—make it much more

time-consuming and expensive for coops to pursue mergers, Reifsteck said.

Some of these proposed new rules

would trigger reviews at the attorney

general level if a merged co-op would

result in a new business with more

than $100 million in annual sales. 

A wide array of cooperative literature was available at USDA’s booth.
10 September/October 2001 / Rural Cooperatives

Of all the jobs a co-op board must perform, none are

more important than selecting a CEO or manager to

guide the business. Bernard Erven and Chris Bruynis of

The Ohio State University led participants in a NICE

management seminar through a series of exercises

designed to help improve their odds for picking a winner.

“If the board makes the right decision, it will benefit

the cooperative for many years,” Erven said. But if the

board makes a mistake and picks a weak CEO, the board

won’t be able to compensate for it in

other ways. 

“It’s similar to marriage: the alter

does not correct what a person was

when he or she walked down the

aisle,” Erven said. You can’t motivate

a misfit into being a good CEO, nor

will on-the- job training make it right,

he noted. The challenge is thus to find

the right person the first time. What

the cooperative needs, rather than

what the applicant would like to do,

should guide the hiring process.

If a board lacks confidence that it

can do a good job of finding the right

person for the job, it should get outside help. The best candidates for the job will expect a

good , thorough interview process.

Erven and Bruynis suggested following these steps: 

1. Determine the co-op’s labor and management

needs; do a careful analysis to make sure the candidate

will fit the needs of the entire organization. This will take

a significant amount of the board’s time. 

2. Develop a written, up-to-date job description. 

3. Build a pool of candidates – the more the better. If

you can’t develop a pool, stop the process until you can.

Internal applications should be allowed unless a formal

decision is made not to. But it is advisable not to discriminate against your own employees. 

4. Review the applications and select those you wish

to interview.

5. Conduct the interviews. But first decide who will be

on the interview team, whether it will be a formal or

informal interview, what questions will be asked, how

evaluations will be recorded and where the interview

will be conducted. 

6. Check references. 

7. Make a selection.

8. Hire selected applicant.

Volunteers from the audience participated in mock interviews to

demonstrate effective interview

techniques. These include: asking

questions that cannot be answered

with a yes or no; encouraging applicants to talk about themselves and

covering a variety of topics, including

some “what if” situations.

“You want to determine how candidates bring their own knowledge

into play, perhaps eventually leading

to a situation where they must admit

they don’t know the answer. You are

not so much looking for right

answers to these questions, but to how the applicant

will behave when faced with a tough situation,” Erven

said. “Will the person get angry if he or she feels

trapped?” 

Ask only questions that are job related and will

give insight into a candidate’s ability to perform the job.

It is best to have four or even five board members participate in the interview, and they should practice doing

interviews before the real ones are held. Do not use the

previous CEO to help interview. Also encourage the

applicant to ask questions.

Your new leader should be able to inspire efforts of

others through his leadership style, Bruynis said. ■

Good interview process crucial to selecting top-notch CEO 

Bernard Erven of The Ohio State

University practices job candidate interviewing techniques with Mel Machado of

Blue Diamond Growers. 

But many local co-ops—including

his own—are approaching $100 million

in sales, he said. And these locals have

even fewer resources than do regional

co-ops to deal with a more cumbersome review process. 

“Had these regulations been in place

in the past, I don’t think we would be

as good a co-op as we are today,” Reifsteck said. He noted that his father and

grandfather were both co-op presidents, but said that if those co-ops had

not grown over the years, there is no

way they would be able to meet the

farm supply needs of today’s sophisticated farms.

“It (adoption of the proposed laws)

would be like closing the door on our

co-op fingers as we struggle to compete. Why should we let legislators in

Washington tell us what is good for

our future? Who pays for it? We will,”

he said. 

“We’ve been through much consolidation, but it has all been done for the

best interest of our farmers,” Reifsteck

said. “At the end of the day, we directors go home and must deal with our

sharpest critics, our neighbors and

friends in agriculture.” 
Rural Cooperatives / September/October 2001 11

Why DFA pursued growth 

through mergers

Beckendorf described how DFA

became the nation’s largest dairy co-op

through a series of mergers. The genesis of DFA occurred in October 1996,

he said, “when we lost 30 percent of

our milk price in one week.” Beckendorf traced the price plunge back to

the concentration among food companies and the dramatic drop in the number of large cheese manufacturers that

resulted. Suffering the pinch of higherthan-anticipated milk prices for their

raw ingredient, the large manufacturers

simply sold off enough of their inventories of cheese to drive down the

cheese market, on which farm milk

prices are based. 

He said the industry had also seen the

number of milk processing plants drop

from 2,800 to 500 during the past

decade. “All this concentration left dairy

farmers at a disadvantage because we had

many more cooperatives competing to

sell to fewer buyers,” Beckendorf said.

“We (the original four member co-ops)

met at the Chicago airport that December, and we asked, what can we do? We

can’t take price volatility like this.”

Another writing-on-the-wall event

occurred about six years ago when a

Pepsico official spoke at the National

Milk Producers’ Federation meeting.

Beckendorf said the beverage giant

then had 28 suppliers, but said it

wanted to pare down to just eight.

“We weren’t big enough individually,

as separate co-ops, to handle these

types of national accounts,” Beckendorf said. 

The eyes of co-op leaders were also

opened on a trip to Holland in 1996,

where “we saw that they were 20 years

ahead of us in product development.”

DFA is now nearly four years old,

and it just downsized its board from

119 members to 48 after a three-year

transition period. “Members are still

concerned that dairy farmers not go

the same way as poultry and hog producers,” said Beckendorf, who, with his

brother, milks 250 Holsteins in

Tomball, Texas. “They don’t want to be

piece workers nor to depend on government payments” to survive. 

DFA has done substantial streamlining since its formation, closing 22,

mostly older processing plants and

consolidating 40 offices. Several thousand jobs were lost in the process, “but

it was our dollars at risk,” he said. He

points to the $33 million in earnings

the co-op had last year, adding, “rising

water raises all boats.” 

Is DFA still fighting for survival?

“Yes,” he said, but its odds are greatly

improved thanks to the mergers.

“Before, four of us, as large regional coops, were going to the same customers,

each trying to undercut the other in the

market.” DFA member co-ops (now

seven in number) are no longer running

parallel milk runs and there is less overlap (and therefore greater efficiency) in

its processing plants. 

“In a true merger, “ Beckendorf

said, “all obligations of the members

are retained.” DFA, he said, honored

all equity owed by its member co-ops,

dollar for dollar. “Not one of our

dairy farmers has lost any equity. The

merger strengthened our equity base.”

Agribusiness still 

comparatively small 

In another session dealing with

concentration, Steve Sonka, University of Illinois ag economist, said recent

large mergers—such as Suiza

Foods/Dean Foods, Cargill/Continental Grain, Dupont/Pioneer Seeds and Tysons

Meats’ ongoing effort to

acquire IBP meat packing—

have made them all bigger,

but they are still small fry

compared to their cousins

in heavy industry, petroleum and electronics. ConAgra today is a $12 billion

company, ADM $9 billion,

Tysons $4 billion and

Dean/Suiza $3 billion. But

consider that General Electric does $420 billion in

business annually, Exxon/

Mobile $300 billion and

Microsoft $300 billion. 

“Wall Street continues

to think most food companies are too

small,” and that they are paying too

much for their capital, Sonka said,

adding that “agribusiness did not

grow fast enough in the last half of

the 1990s.” 

“Why don’t we have 20 meat packers today? Because they would not be

as efficient” [as the four or five that

dominate the industry], he said. Today,

there is much talk about the “evil vertical integrators” who have taken over

pork production in the Southeast,

Sonka said. “But when I was growing

up [on a farm in Iowa], I was taught

that corn farmers who also grew hogs

were evil vertical integrators.” 

The cost of analyzing data and

communicating is dropping rapidly,

Sonka said. “The world has changed.

Walls came down. Information flows

more freely today.” Less expensive

technology makes vertical coordination better than vertical integration,

Sonka said. He noted that Nike owns

no bricks and mortar, and Microsoft

owns little in the way of plants. Commodity returns, he said, are “just

enough to keep you in business. Is that

fair? Who cares? Not the market.” 

Co-ops, Sonka said, need to look

more to brand development, knowledge

accumulation and risk taking, all of

which have high value in today’s market. 

Co-ops should focus on how to get

producers involved in the world of

Economist Steve Sonka: “Farmers should look to the

auto industry model of the 1950s—buy a system and

run it and see what comes out the other end. If it’s

bad, fix it.”
12 September/October 2001 / Rural Cooperatives

“Without a clear vision, mission, set of values and

defined ways to measure success, a cooperative’s communications efforts are an unnecessary investment,” said

Maury Miller, recently retired vice president of member

services at CHS Cooperatives (Cenex Harvest States). 

This philosophy helped guide the communications efforts

of the co-op during the past 25 years as it grew and diversified through a series of mergers, Miller said.,

including a major unification of CENEX and Harvest States Cooperatives in 1998. That historic

merger came together more quicky than many

that had preceded it, in large part because of

the excellent buy- in that existed among both

organizations regarding their new mission.

CENEX and Land O’ Lakes formed a joint

venture in 1987 to market their farm supply

products, including an agronomy operation of

which each owned 50 percent. Just 10 years

later, the joint profitability of the two cooperatives was more than $200 million, and the joint

venture is widely considered as a model of

success. Mergers such as this create “overwhelming communications challenges” needed to blend differing “corporate” cultures, Miller noted.

Consolidations, Miller said, are not so much exercises

in economics as in human relations, which makes communications critical to the success of the effort. In a

merger, some will have to give up things they may hold

dearly. Compromise becomes the order of the day in

order to build a stronger, unified organization. “That’s not

an easy thing to do when dealing with directors and managers who are highly driven and have strong views of

what they want to do,” Miller said.

Effective communications requires clear understanding of the co-op’s:

1. Vision—what does the co-op want to be? In the

case of CHS, the vision was to build “an integrated ag

supply and grain-based foods system.”

2. Mission—what is the co-op’s purpose? For CHS, it

was “improving the cooperative’s and producers’ profitability and value.”

3. Values—What core values will guide the way in

which the co-op does business? Integrity/honesty, professionalism, quality of goods and services and

respect for all were the key values CHS

chose.

4. Measurements of success—growth,

financial and customer success were the performance yardstick CHS selected.

The bottom line for every decision the CHS

board makes is, “Did we help our farmers succeed by this action?” Miller said, “If not, we

didn’t do so well. Helping producers and local

co-ops succeed and serving local communities are why CHS exists, he said.

Miller stressed than an informed member

is a more loyal member, and that about the

last thing CHS would ever do is eliminate its member

magazine (“Partners”), its primary tool for communicating

with 350,000 producer-members. While Miller said he

foresees a big role for the Internet in cooperative communications programs, he stressed that “it is not even close”

to being a replacement for print communications with

members.

Miller said he feels the farm media will usually try to help

you tell your story if you are open and honest with them.

Most communications, he added, should be framed for

readers who will be thinking: “how does this impact me.”

CHS has maintained a strong communications program

in large part, Miller said, because it staffs the office with

communications professionals, and does not use it as “a

dumping ground for people who can’t do real jobs.” ■

Clear sense of vision & mission critical to co-ops facing mergers 

Maury Miller says co-op

consolidations present

“overwhelming communications challenges.” 

knowledge. If farmers would stop purchasing corn varieties that rank in the

lowest 25 percent for yield, they could

earn an extra $28 per acre, he said.

“That’s easy money – more than

enough to buy a jacket for the friend

who sells you that low-yield seed.”

Sonka said co-ops are struggling

to find successful value-added activity, but that “90 brands fail for every

10 that are successful. But the value

of the10 that win will far exceed the

value of the 90 that fail.” 

Concentration is likely to continue

and could even intensify, Sonka said.

“It is valid to have concerns and emotions about this trend, but the real

issue is performance. For co-ops, and

for the rest of ag sector, the key will

be boosting intangible assets.” 

In response to questions about the

ethics of co-ops competing with producers (in areas such as hog feeding), Sonka

responded that producers should look at

these co-ops as businesses they own

which generate profits that they can

share in. Learn why this activity is successful and bring that knowledge gained

to your own operation,” he urged.

How co-ops rate on accumulation of

knowledge, and willingness to share it,

will be a key in the future. “They

should look to the auto industry model

of the 1950s—buy a system and run it

and see what comes out the other end.

If it’s bad, fix it.” ■
By Dan Campbell, editor

ince his first day on the

job as CEO of the

National Cooperative

Business Association

(NCBA), Paul Hazen has

been an ardent practitioner of the art of

communications and has supported and

expanded the association’s communications and education programs. 

Whether providing support to produce NCBA’s award-winning video,

“The Spirit of Cooperation,” making a

speech about the advantages of cooperatives before a major conference, or leading the charge to establish the new

“.coop” Internet domain, Hazen has

been a tireless champion of effective

cooperative communications. In recognition of this commitment, Hazen has

been selected as the CEO Communicator of the Year for 2001 by the Cooperative Communicators Association (CCA). 

In announcing his selection, outgoing CCA President Lani Jordan of

CENEX Harvest States saluted Hazen

for “providing leadership to integrate

communications into the planning and

management process of NCBA, for

supporting its communications staff

and conveying cooperative ideas with

skill and enthusiasm.” 

Accepting the award before an audience of more than 150 at the annual

communications institute of the Cooperative Communicators Association in

Orlando, Fla., Hazen said that cooperatives rarely have the kind of big budgets

for advertising and public affairs programs that are common among large,

investor-owned companies. So they must

compensate with creativity and innovation to make sure they get their messages across to the public, Hazen said. 

He also noted that cooperatives are

often so focused on internal [member/

employee] communications that they

overlook the importance of external

communications.

“If we talk only to each other, we are

doomed as a sector,” said Hazen. “We

must go beyond our own sector of the

economy to reach the media, the public

and lawmakers with messages about the

breadth and economic strength of

cooperatives, he said, noting that surveys have shown that the majority of

American consumers have a favorable

impression of cooperatives. 

Hazen urged cooperatives to emphasize their cooperative status and principles when communicating with the public. “We tend to apologize for being

co-ops, as though we’ve grown successful businesses in spite of our cooperative

status, not because of it. That’s wrong,

and it will get us nowhere.” When talking to the media, Hazen said co-ops

should talk about why cooperatives are

better than other types of business.

“Only through strong, clear communications will more people come to

recognize and embrace the cooperative

business structure.”

Sees huge potential for “.coop”

One major communications feat

which helped Hazen win the CCA honor—creation of the “.coop” Internet

domain—can also help cooperatives differentiate themselves in a “crowded but

extremely important marketplace.” He

noted that the Internet has the power to

someday “eclipse television in popularity,” at a fraction of the cost of TV advertising. The new, .coop Web address is

thus a powerful marketing and branding

tool for the 400 million people worldwide with Internet access (of which 167

million live in the United States). 

“Cooperatives now own a monopoly

on the Internet, which is a strange position for cooperatives. I have never liked

monopolies, but now that we own one,

I guess they are OK,” Hazen joked.

“In four letters, you can tell consumers who you are, how you do business and what you value. In a world

where consumers seem to have shorter

and shorter attention spans, you can’t

find a communications message more

efficient than that.” 

Hazen said .coop will create a

“fresh, modern image” for co-ops,

especially with young consumers, many

of whom would “rather give up their

TV than their Internet connection.”

He envisions students in classrooms

raising their hands to ask teachers what

“.coop” stands for, triggering a discussion about what a cooperative is.

“I believe .coop will do more to promote cooperatives than any other single initiative could have,” Hazen said.

He concluded by challenging each of

the communicators present to “go back

to your CEOs and IT people and get

them thinking about what new names

your cooperative needs for its new,

.coop web address...it’s your job to

encourage them to make use of this

powerful medium.” ■

Rural Cooperatives / September/October 2001 13

Hazen selected top

CEO communicator

Says innovation and “.coop” can compensate for tight budget

S

Paul Hazen
14 September/October 2001 / Rural Cooperatives

By Catherine Merlo

n a normal year, raisin

grower Steve Kister prepares his vineyards near

Fresno, Calif., for a late

summer harvest. In September, he picks the Thompson seedless

grapes hanging lush and heavy on his

vines and lays them to dry under the hot

California sun. In October, when the

grapes have shriveled to raisins, Kister

sends them off to a packer for processing and marketing. He always knows by

then what price he can expect for his

raisin crop, and by November, he typically realizes a profitable cash return. 

The past year, however, has been

anything but normal for Kister and

California’s 5,000 raisin growers, who

produce virtually all of the nation’s

raisins. Along with the state’s 16 major

packers, they have been struggling

through a season of turmoil, dissent and

financial hardship. Shaken by bearish

supply-demand forces and a protracted

price dispute that disrupted the season’s

normal progress and divided growers

and packers, the industry is reeling. 

“This season has been the toughest

downturn our industry has ever faced,”

says Kister, whose family has grown

raisin grapes in the Fresno area since

the 1930s. “Not all growers are going

to survive.”

Kister, 47, has held a front-row seat

to the season’s raisin drama. His family farms 400 acres of raisin grapes, a

large-scale operation compared to the

Season of turmoil

A price dispute between California’s raisin growers 

and packers divides a financially troubled industry

I

Raisins bask in the warm California sun while growers fume over prices that have plunged to levels that could drive 20 percent of the state’s growers out

of business. Photo courtesy California Raisin Marketing Board 
industry average of 40 acres. He is secretary of the commodity-promoting

California Raisin Marketing Board.

He is a member of the Raisin Administrative Committee that oversees the

industry’s federal marketing order. 

But nothing has put Kister closer to

the center of the industry’s fray than his

role as president of the Fresno-based

Raisin Bargaining Association (RBA),

the nation’s largest, and this year’s most

embattled, bargaining association.

Inside RBA and the raisin industry 

Grower-owned and grower-controlled RBA was formed in 1966 to

negotiate with packers for an annual

field price for members’ raisins. That

negotiated price becomes the pricing

standard for the industry. 

With 2,000 members, RBA today

represents 40 percent of the industry’s

raisin volume. Another 30 percent of

growers belong to Sun-Maid Growers,

the well-known raisin-processing

cooperative. The remaining raisin producers are independents. Together,

California growers farm about 270,000

acres of raisin varieties, producing 40

percent of the world’s raisin supply. In

all, the farm-gate value of California

raisins has generally reached about

$320 million a year.

Last October, against a backdrop of

the largest raisin crop in California

history and declining industry sales,

RBA did as it always does. After examining all economic supply and demand

data, it offered its seasonal raisin price

to packers.

RBA was well aware the price situation wasn’t optimistic. Even though

raisin prices had been elevated for the

past couple of years, the supply-demand

scenario did not favor continued high

prices. Estimates put the 2000 raisin

crop at a record 440,000 tons, an

increase of nearly 47 percent over the

previous year. It far exceeded the

350,000 tons the industry generally produces each year. The bumper crop also

sharply surpassed the 280,000 tons the

industry annually sells.

To make matters worse, both

Rural Cooperatives / September/October 2001 15

“We’ve worked hard

for our members

and carried the

water for a lot 

of independent

growers who don’t

belong to RBA or

Sun Maid.”

—Vaughn Koligian
16 September/October 2001 / Rural Cooperatives

domestic and export sales had dropped

to 15-year lows. Some say sales were

hurt by the record prices growers had

been receiving. In 1998, RBA growers

received $1,290 per ton. The following

year, growers bargained for, and got,

$1,425 a ton. 

“We may have priced ourselves out

of the market,” says Jerry Rebensdorf,

president of Fresno Cooperative

Raisin Growers, a packer with 35

grower-members.

Sales losses also were blamed in

part on increased raisin imports, particularly from Chile, Mexico and

Afghanistan, where labor and other

production costs are lower. In addition, increased amounts of California

wine grapes found their way into juice

concentrate channels, taking more

market from the raisin-producing

Thompson seedless grapes. Moreover,

dried fruit consumption has declined

as part of a long-term trend.

“We knew we were entering new

territory,” says Vaughn Koligian, RBA’s

chief executive officer since 1989. “We

knew a price adjustment was in order

but there was no need to take prices to

the unnecessarily low levels proposed

by some packers.”

The bargaining association made

two price offers in October: the first at

$1,100 per ton for Natural Seedless,

and, when that was quickly rejected,

another at $1,025 per ton, a 28 percent

decrease from the previous year. Packers rejected RBA’s second offer as well.

“Growers have always got what RBA

asked for,” says Dennis Housepian,

vice president of sales for Caruthers

Raisin Packing Co., a medium-sized

packer just outside of Fresno. “This

time, reality set in. We could not continue to accept their prices

because the reality of the marketplace would not allow us to do

that. Compared to demand and

where the market was, their offers

were unrealistically high.”

Growers and packers 

deadlock over prices

With the packers’ rejection of

RBA’s second offer, two courses

were now open to resolve the

price dispute: conciliation and

arbitration. RBA sought conciliation, which is overseen by California’s Department of Food and

Agriculture (CDFA).

“Conciliation is much more

expeditious,” Koligian says. “It

provides an opportunity to settle

the price in a matter of days, while

arbitration takes months.”

The packers also agreed to

conciliation. CDFA ordered conciliation to take place Dec. 8-10 in Fresno.

When it concluded, no resolution had

been reached.

“There was too much division

between the two sides,” says Koligian.

On Dec. 11, RBA filed notice to go

to binding arbitration to resolve the

price dispute. It was the first time in

RBA’s 34-year history that arbitration

was needed to settle price.

“We had come close a couple of

times before but the industry had compromised and agreement had been

reached,” Koligian says. 

As 2001 began, the split between

growers and packers grew more contentious. Packer representatives

accused RBA of purposely delaying a

pricing settlement to create an artificial shortage of raisins in the marketplace. RBA denied the charge, saying

it had no interest in delaying payments

to its members.

RBA called for a three-member

arbitration panel. The bargaining association and packers argued over who

should comprise the third, and neutral,

arbitrator. RBA already had chosen

Dave Zollinger, former president of

the California Tomato Growers Association, as its representative. The packers had selected Daniel F. Quinn, a

Stockton attorney, to represent them. 

Finally, in February, the two sides

In late July—several months earlier than prices are typically announced—

the Raisin Bargaining Association (RBA) agreed to a price of $880 per ton for

the 2001 crop, angering some growers who say they need at least $1,000 per

ton just to break even. RBA CEO Vaughn Koligian told the Fresno Bee newspaper that RBA directors were not pleased with the price, but that the majority

felt it was necessary to ease out of the market glut that is plaguing the industry. 

Koligian said the price should stimulate sales momentum and help the

industry “get out of this mess as quickly as possible,” the newspaper reported.

However, some observers say the low price for a second consecutive year

could drive some growers to a new bargaining association. ■

2001 crop price leaves growers unhappy

Vaughn Koligian, CEO of the Raisin Bargaining

Association, says that while the group is disappointed with low prices growers received, he is

pleased the major raisin buyers, such as Kellogg’s,

have responded by using 25 percent more

California raisins. USDA photo by Catherine Merlo 
Rural Cooperatives / September/October 2001 17

agreed upon Eugene Lynch, a retired

San Francisco judge, as the neutral arbitrator. But another setback arose in

March when it was learned that, because

of a busy schedule, Lynch would not be

able to meet with Zollinger and Quinn

until April 30. RBA appealed to packers

to find another judge who could hear

the case sooner. Packer representatives

said no. Disappointed, RBA had to proceed with Lynch.

It was now the height of the raisinmarketing season, which runs Aug. 1

to July 31, and there was still no price

in sight. The waiting process dragged

on. “It was a calamity unfolding,”

says Koligian. “The price delay was

affecting growers both financially and

emotionally.”

The mood was tense at RBA’s annual

meeting March 3, attended by an

unusually large crowd of nearly 900.

Koligian discussed the season’s tough

financial challenges and the growerpacker division. He also reminded

members that RBA had performed

exceptionally well over the past decade,

and called on them to stand strong with

the association.

In a question-and-answer session

near the meeting’s end, frustrated

growers commented on the pricing

deadlock, packers and on-the-farm

financial troubles. There was even a

call not to renew Koligian’s contract.

That led nowhere, and several growers

rallied to Koligian’s defense.

Growers were not the only ones

affected by the pricing uncertainty.

“The situation created havoc in the

marketplace from the unknown factor

of not having the price settled,” says

Housepian.

Packers filled orders from the previous year’s inventory of raisins, bought

at a price of $1,425 per ton. “We had to

get rid of that inventory or take a

tremendous loss,” Housepian says. “We

were out in the marketplace without

knowing our cost of production. But

we had to hold our place in the market.

That uncertainty led prices to continue

dropping like a rock.”

Arbitration price “devastating”

The six-month pricing deadlock was

broken May 2 after three days of binding

RBA was formed in 1966 to help California’s raisin

growers fare better economically. Of the 5,000 raisin

growers in the industry at that time, some 2,000 were

members of Sun-Maid Growers and the rest were independent growers. Each year, these non-cooperative

members had to negotiate individual sales contracts

with their packers.

“Those open-price contracts could be compared to

buying an airplane ticket without knowing where you

were flying,” says Vaughn Koligian, RBA president.

“Packers were able to play large growers against small

growers and even take advantage of the operator who

wasn’t a good negotiator.

Some packers were consistent and paid all of their

growers the same fair price, while others held out and

paid a range of prices. Damage incurred from rains or

similar occurrences made the negotiations that much

tougher at times. There was also a great deal of work to

be done to sign pricing contracts with so many growers. 

“When you compound this problem with the fact that

there were about 20 packers at the time, you can see

the task was quite difficult,” Koligian says.

Under the leadership of grower Ernie Bedrosian,

RBA’s initial members put up the capital to start the

association. Support for the bargaining group grew

rapidly, although there was still some reluctance by

many in the industry.

“Keep in mind,” says Koligian, “that growers were

essentially paid by their packer at a price that could

fluctuate from farmer to farmer. If they joined RBA,

would there be repercussions?”

RBA offered its first contract in 1967. The first company to sign an RBA contract was Enoch Packing Company, established in 1919 and still operating today under

the grandchildren of its founder. 

The original master contract has been modified

slightly over the years but its original foundation remains

intact. RBA signs with a packer to deliver the products

of its members. If a packer does not sign, RBA will divert

its members’ tonnage to another signatory packer.

“The strength of the contract comes from the fact

that the grower passes title of his product to RBA in

consideration for the marketing of that product,” Koligian says. “Taking title gives us control over the raisins

and separates RBA from a number of other bargaining

associations. It also places a greater burden on us to

ensure our members have a home for their products.”

RBA members typically deliver about 140,000 tons of

raisins a year with a value of approximately $140 million.

Its 33-member board of raisin producers sets the policy

for RBA’s five-member staff. In addition to price negotiations, RBA represents growers on labor issues, air quality, legal matters and support in Washington, D.C. and

Sacramento. RBA also holds 13 of the 47 seats on the

Raisin Administrative Committee, which oversees the

industry’s federal marketing order. ■

How the Raisin Bargaining Association got its start
arbitration in San Francisco. Arbitrators

determined the free tonnage price for

the year’s raisins would be $877.50 per

ton on the free tonnage, or 53 percent of

the crop.

(Under a formula used for

the industry’s

federal marketing order, part

of the raisin

crop is put into

reserve and the

remaining tonnage is freed for

marketing. See

sidebar on state

and federal

marketing

orders.) 

When the

result was

announced,

Koligian says the RBA “was devastated.”

“We couldn’t believe the price would

be this low,” he says.

RBA had fought for a price of

$1,100 per ton throughout the arbitration. The $877.50 price on 53-percent free tonnage put growers’ net

price for the season at about $465 per

ton. That compared to the previous

year’s price of $1,425 on 85 percent

free tonnage, or a net of $1,211. Most

raisin growers must net somewhere in

the range of $750 per ton to meet

production costs.

“I was hoping for at least $900 per

ton on the arbitration price,” says

Rebensdorf. “At this price level,

we’re going to lose money on the

crop and I’m not happy about that.

But this had to be done to increase

industry sales.” 

Although arbitration resolved the

price dispute, the industry’s wounds

linger.

“It’s the worst split I’ve ever seen in

this industry,” says Pete Penner, a

long-time raisin grower and former

18 September/October 2001 / Rural Cooperatives

California’s raisin industry operates under both a federal and a state marketing order.

State marketing order 

Thanks to the state marketing order funded by growers

to promote their sweet, dried commodity, California’s dancing raisins have returned. Growers reinstated the state

marketing order in 1998 after a four-year disappearance.

The previous marketing order had been discontinued in

1994 after pressure from industry packers, says Pete Penner, chairman of the California Raisin Marketing Board

(CRMB), which oversees the marketing order’s activities. 

Domestic raisin sales declined 3 percent a year after

1994, says Kathy Moulthrop, CRMB’s communications

administrator. “Because of that downturn, growers realized we needed generic promotion of raisins,” she says.

Growers not only voted to reinstate the state marketing order in 1998 but, in May of this year, overwhelmingly

approved a five-year continuance of the program. A perton assessment to growers funds the program.

Today, the program promotes raisins through a print

advertising campaign, “Look Who’s Cooking With California Raisins.” The campaign features several prominent

chefs. CRMB also sponsors health and nutrition research. 

Most recently, the program has gone to “a full court

press,” Penner says. It recently granted licensing agreements to Hardee’s Restaurants, Hershey’s Creamery Co.

and Brach’s Candy Co., to use the dancing raisin images

in various promotions, including television commercials. 

Federal marketing order 

The federal marketing order was designed to provide

for the orderly buying and selling of raisins, to increase

sales and to improve returns to growers. 

The Raisin Administrative Committee, a board comprised of growers and packers, oversees the order. The

RAC sets grades and standards for incoming and

processed raisins and oversees the disposition of

reserve tonnage.

The industry uses a formula to determine its “free”

and “reserve” tonnage. Here’s how it works: Growers

deliver their crop to a packer, who pays them directly for

what is called free tonnage, as determined by the formula. Those raisins not acquired by the processor are

placed into a pool as reserve tonnage. Growers share in

an undivided interest in the reserve pool. ■

State and federal marketing orders direct 

dancing raisins and market supply

“It’s been a season of turmoil and chaos,” says Dennis Housepian of

Caruthers Raisin Packing Co., one of the industry’s 16 major packers.

He believes growers and packers “must sit down and understand

each other.” USDA photo by Catherine Merlo
chairman of the board of Sun-Maid

Growers of California.

Trying to survive

The industry’s problems have not

disappeared. Although the lower prices

have recently spurred raisin sales and

the upcoming crop will be smaller, the

situation in the vineyards is close to

desperate. Production costs are high.

Water is in short supply. Land values

have plummeted. Many growers are

struggling to stay afloat. 

“Most raisin growers have lost about

$500 an acre where they might normally net $500 to $1,000,” says Penner,

who remains a Sun-Maid director.

“I would estimate that 20 percent of

the state’s raisin growers will go broke

this year,” Rebensdorf says.

Changes are needed, growers and

packers agree. But opinions vary on

what those changes should be.

“We need to get to a level where we

can start selling raisins and get our

markets back,” says Rebensdorf. “The

only way we’re going to do that is to

reduce production. Our problem is

over-supply.”

Housepian believes the quality of

California’s raisin crop must improve to

better meet world competition. 

Penner says the industry must do a

better marketing job to increase raisin

consumption.

Better understanding is needed

between growers and packers, says

Alan Kasparian, a raisin farmer and

grower relations manager for a Fresno packer. “This year amplified

problems that have been there for a

long time,” he says. “Growers and

packers have more in common than

they think.”

There has been criticism by packers

over the federal marketing order and

calls to modify its provisions,

although RBA’s Kister believes the

order has served raisin growers well.

Some growers believe packers

should support the Fresno-based California Raisin Marketing Board

(CRMB), which has a $5-million

annual budget to raise awareness for

raisins with the goal of raising

demand and increasing sales. 

A small group of growers, unhappy

with the arbitration outcome and

RBA, have formed a rival bargaining

association called the California

Raisin Reform Association. But many

growers and packers alike believe the

industry can support only one bargaining association. Most, including nonmembers like Penner and Rebensdorf,

continue to endorse RBA.

“RBA and the marketing order have

kept us in business for the past 34

years,” Rebensdorf maintains.

“I would rue the day if we ever lost

RBA,” Penner says.

Koligian staunchly defends RBA.

“It’s shortsighted of people to judge

this association by the 2000-01 season,”

he says. “We’ve worked hard for our

members and carried the water for a lot

of independent growers who don’t

belong to RBA or Sun Maid.”

Industry changes are coming, says

Kister, but the process will be painful.

“Our problems are real and they cannot be addressed or fixed quickly,” he

says, already anticipating a packed

meeting schedule. 

But first, he says, the division

between raisin packers and growers

must end. “In tough times, we must

pull together,” he says. “We have to

work as one industry to survive.

Maybe now, people can see the value

of that.” ■

Rural Cooperatives / September/October 2001 19

Sun Maid, a grower-owned cooperative, is

the industry’s largest processor. Photo courtesy Sun Maid 

Many of Steve Kister’s Thompson seedless grape vineyards are 60 years old. Raisin’s are

Kister’s only crop. USDA photo by Catherine Merlo
20 September/October 2001 / Rural Cooperatives

By Carolyn Liebrand, 

Agricultural Economist

USDA/RBS/Cooperative Services

Editor’s note: This article is based on

USDA/RBS Research Report187, “Structural

Changes in the Dairy Co-op Sector, 1992-2000,”

which presents a detailed look at the changes in

the U.S. dairy cooperative sector and documents

the structural changes that occurred in the final

decade of the 20th century.

s the 20th century drew to a

close, the dairy industry continued to adapt to dynamic

market conditions such as

advances in production technology (both on the farm and in the milk

plant), consolidation and growth of retail

food chains, and vertical and horizontal integration in milk manufacturing/processing

sectors. Other changes include new trade rules and practices

and changes in government dairy programs. 

Increasing size and productivity of production units and

reduction in the number of production plants have become

the tell-tale signs of change. Dairy cooperatives have likewise

followed this pattern: fewer cooperatives were handling an

increasing volume of milk, as the waning years of the century

saw another wave of rapid consolidation in the dairy sector. 

Dairy cooperative adjustment

The number of dairy cooperatives in the United States fell

almost 20 percent between 1992 and the end of 2000. However, the adjustment was more dynamic than the net loss of

52 cooperatives indicates. A closer look reveals that 84 cooperatives went out of existence (or, 32 percent of the 1992

dairy cooperative numbers) during the nine-year period. 

Some dairy co-ops disappeared

Dairy cooperatives exited the industry in a variety of manners. Many of the exiting cooperatives dissolved, going out of

business and leaving no successor organization (table 1). Former members then joined other cooperatives, formed new

cooperatives or resorted to selling their milk directly to milk

plants independent of a co-op. A small number of dairy cooperatives were acquired by other dairy firms not operating on a

cooperative basis (“investor-owned firms”). A few co-ops had

their milk sales decline to less than one-half of their total

sales, thus were no longer classified as predominately dairy

cooperatives. This reorientation to other operations, usually

feed or supplies, sometimes was the result of a merger with a

supply cooperative. Finally, another large segment exited by

merging with other dairy cooperatives. 

Cooperatives combined with other dairy cooperatives for

various reasons such as: to take advantage of scale economies;

to better configure and utilize a system of manufacturing

plants and to reduce operating overhead; to foster marketing

clout; and to secure milk supplies, often eliminating overlapping activities, such as milk pick-up routes. Another driving

force behind the mergers was to keep pace with consolidation

in the retail sector, thereby allowing the unified cooperatives

to supply larger volumes and meet customer product requirements through horizontal integration. 

Also, the increased ability to transport milk due to

improvements in trucking, milk quality and milk handling–

More than one way...

Dairy co-ops pursue varied paths to structural change

A

Silos—including the state’s tallest—tower over Gary Kline, a field representative for Dairy

Farmers of America on the farm of Gerald Garber south of Harrisonburg, Va. Garber’s previous

co-op, Valley of Virginia Milk Producers Association, became the seventh co-op to join DFA

when it merged with the larger co-op in February, 2000. Photo by Raymond Crouch, courtesy DFA
Rural Cooperatives / September/October 2001 21

as well as advanced packaging technology—may have facilitated this consolidation between dairy cooperatives. Furthermore, the increased merger activity the last three years of the

century may have, in part, been a result of cooperatives anticipating and reacting to the new, consolidated Federal Milk

Marketing Orders (FMMO), which went into effect Jan. 1,

2000. The mergers expanded the geographical reach and

market power of the surviving/emerging organizations and

by 2000 some dairy cooperatives’ memberships spanned multiple regions or were even nationwide, while the number of

states housing dairy cooperative headquarters shrunk.

When dairy cooperatives exited the industry by merger,

either the exiting cooperative’s operations were consolidated

into an ongoing dairy cooperative that maintained its identity, or a new dairy cooperative was formed and the unifying

cooperatives lost their identities. Indeed, 26 of the 36 dairy

cooperatives exiting through merger between 1992 and the

end of 2000 eventually became part of six new cooperatives

formed by consolidation in this time period. Four of these six

new cooperatives handled more than 1 billion pounds of milk

per year. Just 10 cooperatives that exited via unification were

absorbed into ongoing concerns. 

Formation of new dairy co-ops

In contrast to the overall trend of shrinking dairy cooperative numbers, 32 dairy cooperatives were newly organized

between 1992 and the end of 2000. This means that 15 percent of the nation’s present dairy

cooperatives were formed during

the past nine years. Six cooperatives were created by dairy cooperative unification, as mentioned

previously, but most were formed

by newly organized groups of producers (table 2). So, despite the

headline-making consolidation

taking place in the dairy cooperative sector during the 1990s, other

trends were also afoot. 

All but one of the 26 cooperatives organized by these new

groups of farmers seeking alternative marketing avenues for their

milk handled less than 1 billion

pounds of milk annually, and the

majority of these handled less

than 50 million pounds. These

new groups of producers banded

together for a variety of reasons.

Some formed to capture marketing margins by further processing

their milk, focusing on a particular market niche. Commonly, the

market niche was specialty cheese

— a unique variety or product

with distinguishing characteristics (perceived or real) such as

“organic,” “rBST-free,” “locally produced,” etc. One group

formed with the intention of processing branded fluid milk

and capitalizing on similar types of attributes. 

Additionally, some dairy farmers may have been seeking

other alternatives to “mega-cooperatives” for their marketing

needs in forming a few of these new organizations. Others

were formed by groups of new dairy operations that were

similarly situated. Several of the new dairy cooperatives may

have been, in essence, successors to cooperatives that had

gone out of business for a time.

Adjustment in dairy co-op operations

The type of marketing operations a dairy cooperative

engages in on behalf of its members varies from cooperative

to cooperative. Between 1992 and 2000, there was adjustment in the numbers of dairy cooperatives engaging in various marketing activities. In addition to entries and exits,

some cooperatives altered the focus of their operations to

adapt to changing market conditions, which put them into a

different operational group.

A large portion of U.S. dairy cooperatives do not own or

operate milk manufacturing or processing facilities, but they

do provide producers a voice in the marketplace, meeting

such needs as negotiating milk price and terms of trade,

ensuring the accuracy of weights and tests in computing producer milk checks, and providing representation in government policy matters. These “bargaining-only” cooperatives were

the most numerous type in 1992

and, by 2000, represented an even

larger share of U.S. cooperatives

(table 3). Many of the new bargaining-only cooperatives were

formed by new groups of producers (as opposed to being the result

of cooperative consolidation). 

A handful of cooperatives

closed their aging manufacturing

facilities during this time period

but continued their bargaining

activities. These co-ops were

regrouped into USDA’s “bargaining-only” designation. Thus,

bargaining-only cooperative

numbers dropped off at a slower

pace than the other operating

types over the nine-year period. 

Another subset of the nation’s

dairy cooperatives, in addition to

their bargaining activities, manufactures milk into commodity, or

undifferentiated, dairy products,

such as butter, powder and bulk

Photo by Sheryl Doering Meshke, courtesy AMPI

cheese. Some of this activity
occurs on a small scale for market-balancing purposes, and others on a large

scale to capture economies of size. This

commodity manufacturing group

declined by more than one-half

from1992 through 2000, a higher rate

than the other operating types. 

Maintaining small, under-utilized and

old balancing plants is costly, while building new, large-scale plants is also expensive, particularly for small cooperatives.

On the other hand, for those that manufactured commodity products on a large

scale, the limited flexibility of a narrow

product line probably left them more vulnerable to inventory losses arising from

the volatile milk prices of the 1990s than a

more diversified product line would have.

Accordingly, no new cooperatives were

organized to focus solely on these types of

operations, an indication of the commodity manufacturing cooperatives’ declining

profitability in the marketplace.

Many of the commodity manufacturing cooperatives that exited between

1992 and 2000 did so by merging with

diversified cooperatives — cooperatives

that own a system of plants to make a

variety of products — both differentiated and commodity, while at the same

time selling a large portion of their milk

supply to other handlers and performing the requisite bargaining services.

The consolidation of commodity manufacturing cooperatives with (or into)

diversified cooperatives improved flexibility in product mix and efficiency

from a more rationalized system of

plants. Some plants were closed when

they could not be utilized efficiently

within the new system of plants. These

plant closures alarmed some producers

who formerly had their milk shipped to

these local plants, even though their

milk still had a marketing outlet with

the cooperative.

Diversified cooperatives are the

least numerous of the operating types

—these 14 cooperatives represent just

6.6 percent of all U.S. dairy cooperatives in 2000. However, they account

for over one-half of all milk handled

by the nation’s dairy cooperatives.

Their shrinking numbers truly reflect

the fewer-but-larger co-op trend and

represent increasing horizontal, as

well as vertical, coordination. An indication of their vitality is that none of

the exiting diversified cooperatives

dissolved or went out of operation.

Instead, all but one merged with

another cooperative. 

These cooperatives expanded (predominantly through mergers) in

response to the changing market conditions. Indeed, by 2000, there were no

diversified cooperatives that handled

less than 50 million pounds of milk

annually. Their large volumes, wide

product mixes and geographical reach

position them to be suppliers of choice

to the large, national food companies.

Moreover, some are sophisticated marketers of consumer products as well.

This vertical integration extends the dairy

producer members’

operations up the food

chain, returning more

of the marketing margins back to the farmer. 

Taking an alternative approach, some

cooperatives manufacture selected products

on a smaller scale for

a particular market

niche—typically

cheese. For this article, these “brandedcheese” cooperatives

and the cooperatives

that package fluid

milk are grouped

together. Both aim to

22 September/October 2001 / Rural Cooperatives

Table 1—What happened to the 84 cooperatives exiting between

1992 and 2000?

Action: Number Percent 

Dissolved or out of operation 36 42.9 

Merged into another dairy cooperative 36 42.9 

Acquired by a non-cooperative dairy firm 8 9.5 

Merged or refocused into non-dairy cooperative 4 4.8 

Total, all dairy cooperative exits 84 100.0 

Note: Totals may not add due to rounding.

An AMPI truck makes a milk run in Wisconsin. The elimination of duplicate milk routes is a major cost-saving

factor in some co-op mergers. Photo by Sheryl Doering Meshke, courtesy AMPI 
Rural Cooperatives / September/October 2001 23

move their members closer to the

consumer. In fact, some of these

dairy cooperatives market products

made from member milk directly to

consumers. 

The specialty cheese cooperatives

must compete with other cheesemakers

on the basis of the quality and uniqueness of their product, as they lack the

size and scale to compete on price with

the large commodity cheesemakers.

(Almost by definition, these specialty

cheese-making cooperatives are predominately small, handling less than 50

million pounds of milk annually.)

These smaller cooperatives must find

and develop a niche for their specialty

product. For those unable to do so, the

market is unforgiving. 

Stiff competition also faces fluid

processing cooperatives. The mature,

highly competitive fluid processing

sector has faced perhaps the most consolidation by investor-owned firms

(IOF) and only a handful of dairy

cooperatives continue to thrive in the

fluid business. Yet one cooperative has

been rather successful and grew to

where it handled over 1 billion pounds

of milk in 2000.

Regardless of the intense market

competition, fluid and branded-cheese

cooperatives are the second most

common type of dairy cooperative in

the United States and represent an

ever-so-slightly larger share of total

dairy cooperative numbers in 2000

compared to 1992. Thirty percent of

the fluid and branded-cheese cooperatives were formed since 1992, a faster

pace than for the other operating

types. All of these newly formed

branded-cheese and fluid processing

cooperatives were small.

Dairy co-ops remain viable

Dairy cooperatives have taken

diverse roads to address their specific

marketing needs, but each has its merits. Thus, the role of cooperatives in

the dairy industry remains a dominant

one as the 21st century begins. 

Dairy cooperatives in the United

States have demonstrated an ability to

successfully adapt to changing market

conditions. While the trend appears

to be away from operating small balancing plants, others are finding

opportunity in capturing niche markets on a small scale. Alternatively,

some cooperatives have eliminated

their unprofitable manufacturing

operations and focus their attention

on gaining power at the bargaining

table and providing services to their

members. 

Finally, representing the majority

of total cooperative milk volume,

diversified cooperatives offer milk and

dairy product buyers a full range of

services while securing marketing

margins and security for their members. Many of the high-volume hard

product manufacturing cooperatives

have been folded into the plant systems operated by the diverse cooperatives. Thus it seems dairy producers

will continue to have a variety of

cooperative avenues to meet their

needs and preferences in marketing

their milk. ■

Table 3—Distribution of dairy cooperatives, exits and entries 1992-2000, by type

Type 

Type of cooperative 1992 Exits Percent Entries Percent change1/ Net change 2000

No. No. % of ’92 No. % of ’00 No. No. % of ’92 No.

Bargaining-only 179 48 -26.8 21 +13.4 +5 -22 -12.3 157 

Commodity2/ 35 18 -51.4 0 +0.0 -2 -20 -57.1 15 

manufacturing

Diversified 19 8 -42.1 3 +21.4 0 -5 -26.3 14 

Fluid, branded 32 10 -31.3 8 +29.6 -3 -5 -15.6 27 

-cheese3/

Totals 265 84 -31.7 32 +15.0 0 -52 -19.6 213

1/ Cooperatives that remained in operation from 1992 through 2000 but changed the focus of their operations from one operating

type to another.

2/ Includes bargaining-balancing cooperatives (cooperatives that operate plants to manufacture milk into commodity products to

balance milk supplies) and hard product manufacturing cooperatives (cooperatives that operate manufacturing plants at high

capacity making undifferentiated products such as butter, powder and cheese).

3/ Includes both cooperatives that primarily package fluid milk products and those cooperatives manufacturing “branded”

cheese and other specialty products for niche markets.

Table 2—Origin of dairy cooperatives formed between 1992 and 2000

Source: Number Percent 

Merger of existing cooperatives 6 18.7 

New group of producers 26 81.3

Total, all new dairy cooperatives 32 100.0 
24 September/October 2001 / Rural Cooperatives

By Dan Campbell, editor

Editor’s note: a more detailed report on

the findings of Trechter’s study will be

included in an upcoming issue of “Rural

Cooperatives.” 

well-informed

cooperative

member tends to

be a more loyal member—

but don’t rely too heavily

on e-mail or a Web site to

keep members up-to-date

on cooperative happenings.

Cooperative employees and

a hard copy of a co-op

newsletter are still ranked

by members as their preferred sources for cooperative news, according to

results of a survey funded

by USDA Cooperative 

Services. Electronic communications rated dead last

in order of preference, 

says David Trechter, 

associate professor of

agriculture economics at

the University of 

Wisconsin-River Falls. 

Communications linked to loyalty

If you want your co-op messages heard, it’s still a face-to-face, hard-copy world 

A

Visual aid: Joe Huffine, marketing director for Tennessee

Farmers Cooperative, got help

gaining everyone’s attention

from his 18-month-old daughter,

Madison. His humor-laced presentation made very serious

points about the huge differences that exist between different generations of Americans,

their wants and how they perceive the world. Co-op marketing

and communications efforts

must take these differences into

account, he said.

Ann Wylie led a workshop that helped co-op communicators explore new ways to tap their

creativity. USDA Photos by Dan Campbell
Rural Cooperatives / September/October 2001 25

Presenting survey highlights at the

Cooperative Communicators Association’s annual institute in Florida,

Trechter said the Upper Midwest

study involved two surveys, one of coop managers and the other of co-op

members. The response from managers was low enough to cast doubt on

that set of findings, but the 759

responses from members were a good,

statistically solid return rate, he said. 

Members were asked to rank their

level of commitment to their co-op,

using a scale of 0-100. “A 100 means

you would walk over hot coals for your

co-op,” Trechter said. “A zero means if

your truck was running on fumes, and

you were passing a CENEX filling station, you would probably hop out and

push it to the next Standard station.”

Those findings of loyalty were correlated to the communications preference of the members. 

Trechter says he was surprised that

“face time with co-op employees and

managers ranked first and second on a

list of 10 communications preferences.

“So informal communications channels

are still hugely important,” he said. 

A hard copy of a co-op newsletter

rated third in popularity, followed by

press coverage in local newspapers.

Annual meetings ranked fifth as a

source of co-op information. Only 15

percent of the members rated electronic communications as important or

very important. 

“That’s not to say that electronic

communications are not important, but

it is a distinct minority of people who

are living in an e-world, at least among

the farm population in the Upper Midwest,” Trechter said. “And I suspect it

is much the same in the rest of the

country.” 

Since co-op employees are viewed as

such an important source of co-op

information, internal communications

that keep your staff well-informed are

“hugely important,” Trechter said.

Leta Mach of NCBA (right) works on an exercise with Jamie Gasper, a Michigan State

University ag major and member of the Agricultural Communicators of Tomorrow during

the CCA institute. 

Doug Graham, director of sponsor communications and

administration for Nationwide Insurance, Columbus, Ohio,

has been honored by the Cooperative Communicators

Association with the Klinefelter Award, the association’s top career service award. It is awarded annually to an individual who helps raise

the standards of cooperative communications and who furthers the cooperative system and spirit. 

Graham, a 20-year veteran of co-op communications and former CCA president, plans

and produces all communication programs that

promote Nationwide (a mutual, or member- owned,

insurance company). He writes articles – on topics such as

farm safety, real estate planning and protecting personal

assets – for member publications. He also produces Nationwide videos. 

Other top awards presented at CCA’s annual communications institute in Orlando, Fla. included:

• Writer of the year – Richard Biever, Indiana Statewide

Association of Rural Electric Cooperatives;

• Photographer of the year – David

Lundquist, CHS Cooperatives;

• Publication of the year – Lani Jordan,

CHS Cooperatives (for a CHS brochure);

•Special project of the year – Leta Mach,

National Cooperative Business Association

(for NCBA’s Co-op 101 educational program). 

“Power in Peril,” the cover story of the

March/April 2001 issue of “Rural Cooperatives”

magazine, won a second place news-feature award. The

article, written by regular contributor Catherine Merlo of

Bakersfield, Calif., examined the impact of California’s

energy crisis on cooperatives and their members. ■

Graham wins top CCA honor
Appeal of annual meetings

Annual meetings are best for

“preaching to the choir,” Trechter said.

They appeal most to members who

have served on the board or a co-op

committee. The higher the level of

education, the less important annual

meetings tend to be with members. So

annual meetings tend to be good for

communicating with committed members, while newsletters are more

important for reaching less-committed

members. 

Among other noteworthy survey

results:

• Commitment to a

cooperative increased

among members who had

served on a co- op board or

committee, or who had coop training.

• Supply co-op members

tended to be more loyal

than marketing co-op

members. (Trechter noted

that 1997-99 were bad

years for many commodity

prices, which may have

dampened co-op loyalty

among marketing co-op

members surveyed.) 

• The smaller, more local

and more homogenous a

co-op’s membership was,

the more loyal the members

tend to be.

• Co-ops that have not gone

through a merger tend to have more

loyal members. “Change is scary for

many people and change does not necessarily build member commitment,”

Trechter said.

• The more a member has invested

in his or her co-op, the stronger the

member’s loyalty to it. Financial performance of a co-op also has an

impact: the more solvent a co-op is

and the lower the co-op’s debt to equity, the stronger the commitment of the

membership.

• Members preferred co-ops that

publish newsletters more frequently,

feeling that the news is fresher and

more up to date. 

• Managers with long tenure at 

a co-op give greater credibility to the

newsletter as a source of information. ■

26 September/October 2001 / Rural Cooperatives

CCA: building better co-ops 

through communications

The Cooperative Communicators Association (CCA) is an organization of 350

communications professionals dedicated to the concept that a strong communications program helps build stronger, more effective co-ops. The membership

includes communicators from the full spectrum of cooperatives: agricultural,

rural utility, housing, credit and consumer. 

Since its founding in 1953, CCA has been dedicated to improving the communications skills of its members and helping them more effectively spread the messages of their cooperatives. The focal point of CCA’s activity is its annual communications institute, held in mid-to-late June each year. This year’s conference was

held in Orlando, Fla. The 2002 event will move to Burlington, Vt., June 22-25. 

“There are a number of good professional associations for communications

and public affairs specialists, but cooperatives face so many unique challenges

that they need an organization like CCA that is dedicated to focusing on the

issues facing cooperatives,” says CCA President Heather Berry, a member of the

editorial staff of “Rural Missouri,” the publication of the Association of Missouri

Electric Cooperatives. 

For more information on CCA, visit the organization’s website at www.CoopComm.com, or call (806) 795-2783. ■

(Ranking, with “1” being the

highest rated source for co-op

information, based on a University of Wisconsin survey of coop members in Minnesota and

Wisconsin.)

1. Communications with 

co-op employees

2. Communications with 

co-op manager

3. Co-op newsletter

4. Newspaper articles

5. Annual meeting

6. Communications with

board members

7. Communications with 

other members

8. Member surveys

9. Focus groups

10. Electronic communications ■

Co-op members’

preferred 

communications

channels

David Trechter was surprised that “face time with co-op

employees and managers” topped the list of co-op

communications methods preferred by co-op members

in the Upper Midwest. 
Rural Cooperatives / September/October 2001 27

By Dan Campbell, editor

he Florida citrus industry has long been a food

industry leader in promoting its juices and other products as key components in a healthy

diet. These promotional and educational

efforts have played a significant role in helping

to boost the average per capita consumption of orange juice

in the United States from 5.4 gallons per person in the mid1990s, to six gallons at present. This rise in consumption has

come despite higher consumer prices. 

Eric Boomhower, marketing communications

director for the Florida Department of Citrus

(Florida Citrus), shared insight on the strategies

used to keep consumers coming back for more

Florida OJ.

In 1996, Florida Citrus launched what it termed

its “triple crown campaign,” which helped spread

the word about recent scientific research linking

citrus products to good health. Florida Citrus

worked closely with the American Cancer Society,

the American Heart Association and the March of

Dimes in creating a series of new television commercials and print ads that trumpet these findings. 

“We had to deliver a serious message about disease prevention in a way that would not turn off

consumers,” Boomhower said. “We did this

through a series of television advertisements,

including one of the most popular TV spots we

ever produced.”

Boomhower showed clips of the commercials,

in which the narrator says that “The American

Cancer Society says a healthy diet, including

Florida orange juice, can reduce the risk of some

cancers.” Having a well-respected third party as

the source for the health message lends much

greater credibility to it, he noted. 

In another TV ad from the campaign, the narrator says: “The American Heart Association has certified

that Florida grapefruit and orange juice are part of a hearthealthy diet.” The key message in another commercial is

that: “The March of Dimes has found that the folic acid in

orange juice can help prevent certain birth defects.” 

This multi-million dollar advertising campaign was also

supplemented by a series of three, 15- or 30-second public

service announcements (PSAs) which stress the impact of diet

on good health. Although a PSA “looks and feels like a TV

commercial, they are different in several key ways,”

Selling it!

Florida citrus industry boosts consumption with extensive, 

health-focused advertising & promotion 

T

The Florida Department of Citrus teamed with the March

of Dimes to produce this ad campaign.
28 September/October 2001 / Rural Cooperatives

Boomhower said. Any commercial message in a PSA must be

very subtle, with the weight of the message promoting some

public good, such as disease prevention. 

Florida Citrus secured the services of three, health-conscious celebrities who donated their services for the campaign: super-model Cheryl Tiegs, actress Lauren Bacall and

tennis ace Pete Sampras. In each PSA, these celebrity

spokesmen stress the need for a healthy diet as a way to

help reduce your odds of falling victim to cancer. In two of

the spots, the only link to orange juice is a visual product

placement.

Cost for production and distribution per PSA was about

$100,000. “It would cost more than that just for one 30-

second commercial during prime time,” Boomhower noted.

The American Cancer Society has also helped distribute

the PSAs through its own channels. Health organizations

quoted in the TV ads and PSAs are asked by Florida Citrus

to review and approve them before they are aired. 

While many of the airings for PSAs

occur “in the wee hours of the night”

or early morning, Boomhower said

they have also received prime-time

airings. This campaign also has

involved consumer brochures and the

side panels of orange juice and milk

cartons, which Boomhower said are

“like mini billboards in the store and

on your table.”

Be ready to pounce on good news

When the scientific community produces a report that is favorable to your

product, be ready to pounce. 

Florida Citrus was aware that a 1999

Harvard University study found that

drinking a glass of grapefruit or orange

juice daily can reduce the risk stroke

by 25 percent. So the same day the

study results were announced in the

Journal of the American Medical Association, Florida Citrus launched an

integrated media campaign, starting

with a TV commercial produced in

partnership with the American Heart

Association. The next day, print ads

began appearing in major newspapers;

a week later, print ads were appearing

in national magazines. 

Florida Citrus also did a major “PR

blitz,” sending out print and video

news releases that trumpeted the Harvard study findings to media in all

major markets. 

“This generated some big time TV

placements for us,” Boomhower said.

Coverage of the story was carried on the Today Show, CNN

News, Fox News and other major news programs.

Boomhower traveled to New York with one of the scientists

who did the research. They met with the editorial staffs of a

number of major health and lifestyle magazines, including

“Family Circle” and “Women’s Day,” to talk about the role

citrus juice can play in reducing stroke. 

This PR effort generated more than 400 broadcast airings,

with an estimated audience of 125 million. This helped drive

a 21 percent increase in consumer recognition of the stroke

reduction benefits of orange juice. 

Another way to promote your story with the media is

through a “satellite media tour.” Florida Citrus used this

strategy when a University of Florida study showed the benefits of citrus juice in the diet. “For a satellite tour, your rent

studio time and the media comes to you,” Boomhower said.

“This is a neat, low-cost way to take your message out into

the heart of the market,” Boomhower said. 

Print ads such as this and TV commercials drive home the good health messages about

orange juice.
Rural Cooperatives / September/October 2001 29

Cooperatives and others in the food industry caughtup in the debate over food bio-technology—an “emotional and controversial” issue for some—need to

develop a careful communications strategy based on solid science, says Cheryl

Toner, associate director for health communications for the International Food

Information Council (IFIC).

“Be sensitive to the words you use

and how they can impact your message,” Toner said. For example, the public tends to react negatively to the words

“genetically engineered or genetically

modified,” she said. However, describing

the process as “food or agricultural

biotechnology” elicits a more positive or

neutral response from consumers.

“When people hear the phrase ‘bioengineering,’ they think of food that has gone

directly from the petri dish to their dinner

plate, and that such food is just not natural,” Toner said. 

“We must make the public understand

that seeds are modified and planted in

the ground by farmers, then grown and

harvested just like other crops. It’s still

agriculture.” 

It is also a good idea to remind consumers that oversight of our food is 

provided by multiple, reliable government

agencies, including USDA, FDA and EPA,

Toner said. 

“The ultimate issue in the minds of

most consumers is: What does this mean

for me at my dinner table?” 

Stress the benefits

It is important for co-ops that use biotechnology

to explain the purpose and benefits of this new food

technology, Toner said. “You can explain

that biotech is an evolution of traditional agricultural practice, which has gone

from using yeast in brewing and bread

making, to advanced plant-breeding

techniques to today’s biotechnology,

which uses tools of genetics to add or

extract select genes to achieve desired

traits in plants. 

“Keep the emphasis on the farmer’s

role,” Toner stressed. She also urged

communicators to cite specific examples

of the benefits and goals of food

biotechnology, such as: 

• cooking oils that contain less saturated fats; 

• safer animal feeds; 

• better tasting, fresher foods;

• foods with enhanced nutrients; 

• crops grown with less impact on the

land due to reduced use of pesticides

and more flexible weed controls; 

• improved water quality protection

and soil conservation.

While claims of absolute safety can

never be made, food industry representatives can communicate accurate, up-todate scientific information that emphasizes

the years of exhaustive research that have

gone in to developing biotechnology.

She noted that this technology can be a

valuable tool in the effort to fight global hunger. ■

Better eating through biotechnology? 

Tips shared for communicating about biotech food issues 

This brochure on food

biotechnology is available

from the International Food

Information Council. For a

copy, e-mail toner@ific.org, or

fax (202) 296-6547

Event sponsorship

Event sponsorship can also be used to

publicize your product. Florida Citrus did

this recently by sponsoring a cross-country bike ride by Bob Green, talk show

hostess Oprah Winfrey’s personal fitness

trainer. During media interviews as he

pedaled his way across the nation, Green

would tout the importance of a good diet

– including orange juice – on health. 

The sponsors reaped an unexpected

media bonanza when Green was pedaling into Chicago for an appearance on

the Oprah show. At one point in their

conversation, Oprah exclaimed “I love

Florida orange juice!” Boomhower said

that hiring Oprah as a spokesperson

would be beyond his budget, but they

still got a lucky endorsement by working with Green.

“She said it spontaneously – we had

no part in it,” Boomhower stressed.

“We think we got a pretty big bang for

our buck with this effort.” Total cost

was $300,000. 

Teenagers and children present special communications challenges because

they care little about health messages,

Boomhower said. So Florida citrus created

a TV ad aimed at the young which promotes the energy-enhancing aspects of

OJ, with the slogan: “Florida orange juice

for energy – are you drinking enough?”

Boomhower said he must strive to

show a balance of different Florida

juice brands in print and broadcast ads.

“We have to walk a fine line to make

sure we don’t promote one brand more

than another.” ■
30 January/February 2001 / Rural Cooperatives

LOL buys Purina Mills, 

expands feed business

North America’s largest farmerowned animal feed business will grow

substantially with the planned purchase

by Minnesota-based Land O’ Lakes

(LOL) of Purina Mills, based in St.

Louis. The $230 million price represents $23 per share in cash for 10 million shares of common stock. LOL also

agreed to assume the firm’s $130 million debt load. Manufacturing, transportation and purchasing functions will

be combined.

Purina Mills, the nation’s third

largest livestock feed manufacturer, had

sales of $839.8 million last year. It will

continue to operate as a separate company out of St. Louis with its own sales

and marketing team, product lines,

brand, nationwide dealer network and

2,300 employees. The firm also retains

its nationwide red-and-white checkerboard logo which has appeared on the

company’s feed sacks since the early

1900s. Included in the deal was Purina

Mills’ research and development center

at Gray Summit, Mo. 

The cooperative’s portfolio of dairy

cow, swine and poultry feeds will be

expanded to include horse feed, for

which Purina is a major distributor.

LOL will blend Purina’s 42 mills with

the 70 from its joint feed venture with

Kansas City-based Farmland Industries. When it was formed last September, LOL Farmland, LLC, became the

largest animal feed company in North

America. It expects to post sales of $1.8

billion from its first year of operation.

Last year, LOL achieved sales of nearly

$6 billion and margins of $103 million. 

Among the benefits of the purchase,

said LOL President Jack Gherty, will

be increased efficiency in production,

distribution and purchasing. It brings

together two well-recognized brands in

different product categories. “We are

building the economies of scale and

critical mass necessary to compete

nationally in the consolidating feed

industry. The transaction has positive

implications for the long-term success

of our farmer-owned feed system,” he

said. “It will unite two strong brands, as

well as complimentary geography and

product lines.”

Purina Mills includes Ralston Purina’s U.S. livestock feed business. The

rest of Ralston Purina was purchased

earlier this year by Geneva-based Nestle SA for $11 billion. Ralston Purina

still distributes Purina Chow dog and

cat foods.

Bekkers new Gold Kist CEO 

The board of directors of Atlantabased Gold Kist, Inc., the nation’s

largest farmer-owned chicken processor, has

named John

Bekkers as its

new president

and chief

executive

officer following the

retirement of

Gaylord

Coan, its previous executive and

chairman who had a 46-year career

with the cooperative. 

Bekkers’ Gold Kist career spans 16

years. He had been president and chief

operating officer since 1995. He is the

immediate past chairman of the

National Chicken Council, a director of

Farm Credit Leasing of Minneapolis,

and member of the advisory board of

Robobank in Holland. Gold Kist had

been one of his clients while he earlier

served as a management consultant.

Trio of dairy co-ops ends 

LOL merger study

The 1,600 members of Maryland &

Virginia Milk Producers Cooperative at

Laurel, Md., plus those of dairy cooperatives in Arkansas and Texas have decided to end merger talks with Land

O’Lakes (LOL). Maryland and Virginia

co-op general manager Robert Shore

said “a significant level of member concern” has been expressed regarding the

proposed merger. However, he said the

cooperatives would explore other ways

of working together. 

“Member response to the merger

proposal at 14 information meetings

varied from “strong support to strong

opposition,” Shore said. But the opposition was strong enough that the

cooperatives decided to cancel the

study. If approved, the three co-ops

would have been placed in an Eastern

fluid milk marketing division, along

with LOL’s earlier holdings from a

merger in the Philadelphia area.

The other co-ops involved are

Arkansas Dairy Cooperatives Association at Damascus and Lone Star Milk

Producers, Inc., at Windhorst, Texas.

“We are exploring other ways to

strengthen marketing alliances with

our Advantage partners,” Shore said.

“Though this (merger) proposal will

not continue to be developed, the

NEWSLINE

John Bekkers
Rural Cooperatives / January/February 2001 31

board and management will do its best

in maximizing income, market stability

and service for all members.” 

Catfish cooperative 

opens in Kentucky 

Kentucky legislators were treated to

fried catfish during a dedication of the 

state’s first cooperative catfish processing plant this summer. It will take two

years for the plant to reach its production peak, employing 15 to 20 people

to process a million pounds a year of

the protein-fed channel catfish. Kentucky Agriculture Commissioner Billy

Ray Smith has cited “value adding”

specialty crops such as catfish as a way

to breathe new life into the state’s

farming economy. Kentucky farmers

are seeking alternate enterprises to

replace plummeting grain prices and

the decline of tobacco. Smith said clay

soil and ample groundwater available in

the state were suited to catfish raised in

farm ponds. Western Kentucky farmers

have dominated applications for $4

million in state cost-sharing funds to

help people get started in aquaculture.

Ohio State honors Ron Long

Ron Long, vice president for sire procurement for Select Sires Inc., Plain

City, Ohio, has been inducted into Ohio

State University’s Dairy Science Hall of

Service. Long has been a dairy leader on

state, national and international levels

for more than 40 years. Dairy producers

throughout the world have benefitted

from Select Mating Service, a cattle mating program pioneered by Long that has

grown to include more than 50 professionals who make more than 2 million

matings annually. Long had also been

president of the National Shrine Club.

Universal buys Triton Tire

Triton Tire and Battery at Eagan,

Minn., has come under full ownership

of Universal Cooperatives. It had been

a joint venture since 1997 with CHS

Cooperatives and Farmland Industries.

Universal had been a managing partner

of the venture since 1998 and had provided purchasing, warehousing and distribution services.

Online procurement pilot

saves money for Roanoke EC

Roanoke Electric Cooperative at

Rich Square, N.C., recently saved its

members an estimated $200,000 by

using a web-based application that

facilitates online procurement of construction work plan contractors. The

rural electric cooperative (REC) used

the online bidding process to select a

contractor to provide labor for this

year’s construction under its four-year

plan. The overall process, including

the use of online web-based systems,

is consistent with the Rural Utilities

Service (RUS) regulation governing

procurement. An

exception is a feature

that allows competitors to view the low

bid and change bids

during the solicitation period.

Bidders dropped

their quotes by more

than $206,000

($620,152 to

$413,829) during the

process. The cooperative expects to

save 30 percent over

its anticipated cost

for the project. “The

process creates a truly competitive environment, while

bringing about an

extremely efficient

process,” said Curtis

Wynn, the cooperative’s chief executive officer. “We are extremely satisfied with the savings we are seeing by

using the system.

Although its regulations do not

specifically authorize online procurement, RUS gave Roanoke’s pilot project a waiver because RUS was satisfied with how the bidding process 

was handled. 

The agency has indicated it will

consider requests from other borrowers who wish to try this type of procedure. Roanoke REC found that

most bids were posted in the last 

|two hours. 

Birds Eye launches branded

retail fresh vegetable line

Agrilink Foods, the fully owned subsidiary of Pro Fac Cooperative at

Rochester, N.Y., will soon debut across

the country with a line of branded

fresh vegetables under its popular Birds

Eye brand. The product line is expected to add millions to the company’s

bottom line. 

Donna Rippin, Agrilink’s business

director, business development, said it

wanted to “make sure we had a consumer viable proposition in the test

markets. Our plan was based on the

Birds Eye brand being sold at a premium... The products (a

15-pound bag of russet

potatoes) sold at a premium and actually outsold the competition in

double-digit dollars.”

The competition, she

said, includes key players in the fresh produce

market. But transferring

a brand’s equity into a

new and different class

of foods is not a simple

task. “Commodities are

price driven and brands

haven’t successfully

infiltrated the territory

yet.” One of the biggest

risks is the potential to

affect other branded

products, she said.

“With fresh produce,

for example, damaged or

poor-quality product is readily visible.

Consumers can see, feel, touch and smell

the product. Any negative experience

could affect their perception of other

products carrying the brand name.”

Meanwhile, Agrilink has received

a $500,000 grant from several

sources including the State of New

York for use on a $1.2 million project

to move vegetable and frozen fruit

lines from a recently closed AgriFrozen facility in Washburn, Ore., to

Fulton, N.Y., and add 50 new jobs at

Fulton. The fruit line will added

600,000 cases to the facility’s incremental volume.

This 15-pound bag of Russet potatoes will bear Agrilink’s “Birds Eye”

brand. Photo courtesy Agrilink
32 January/February 2001 / Rural Cooperatives

Supreme Court ruling clouds

commodity marketing promotion 

A U.S. Supreme Court decision in a

case dealing with a nationwide generic

advertising program promoting fresh

mushrooms puts in question a dozen

generic product marketing programs

with a combined budget of about $500

million to promote fruits, vegetables,

meats and dairy products.

In a 6-3 vote, the justices sided with

those who opposed the mandatory

checkoff programs supported by a

majority of producers of particular commodities. The court said that growers

can’t be forced to pay for these government-sponsored advertising programs.

The court majority agreed with dissidents who have long complained that

the forced funding of generic advertising violates their First Amendment free

speech rights. The suit was pursued by a

Tennessee company that grows fresh

mushrooms. Under a 1990 law, Congress authorized an industry board to

collect a one-cent-per-pound fee.

Attorney Kendall Manock, representing several farm industry boards

that support the checkoffs, said the programs are involved in promoting trade

and opening markets in China and Mexico, not just sponsoring advertisements.

A purely voluntary program wouldn’t

survive because of free riders, he said.

Aside from federal programs, California has 51 cooperative ad programs

that will spend $140 million this fiscal

year on marketing. The largest promotions are for cheese, milk and table

grapes followed by those for raisins,

beef, wheat, kiwi, citrus fruits, cut flowers and strawberries. These, too, are

subject to a free-speech challenge from

growers who object to the assessments. 

Farmland cuts long-term debt,

but still has quarterly loss 

The nation’s largest agricultural

cooperative made substantial strides in

stemming the continuing flow of red

ink and cut $200 million from its longterm debt, lowering it to $280 million

by the end of the third quarter of its

current fiscal year. Farmland Industries

of Kansas City reported a $42.4 million

quarterly loss despite sales of $3.2 billion, up from $3 billion for the same

quarter last year. The loss figure

included one-time costs, restructuring

and tax considerations.

Bob Honse, Farmland’s chief executive officer, said the restructuring costs

covered several transactions including

closing two Farmland meat plants in

Iowa and a wheat gluten plant at Russell, Kan. Excluding those, Farmland

had a $27.1 million gain on $9.1 billion

sales for the nine months vs. a $64 million loss on $8.8 billion sales for the

same period last year. While some

gains came from higher petroleum

sales, $30 million was derived from

reduced operating and administrative

costs at Farmland, Honse said. 

The cooperative recently leased its

domestic grain handling business to

Archer Daniels Midland, earlier shuffled

its feed business into a joint venture

with Land O’Lakes, and plans to sell its

petroleum refinery at Coffeyville, Kan.,

and close its pork processing plant at

Topeka, Kan., next year. Purchased in

1996, the pork facility fell victim to

changing retail attitudes. The 190

employees and 40 million pounds of

production will be absorbed elsewhere

in the Farmland system. 

Meanwhile, Farmland Beef, a joint

venture between Farmland Industries

and U.S. Premium Beef, has opened

two case-ready plants (pre-packaged

cuts of beef and pork sent directly from

the processor to the retail shelf and

eliminating the grocery store butcher).

A third plant will open next spring in

the Kansas City area and employ 200

workers. The cooperative said it was

making the transitions in its pork processing plants to improve efficiencies,

grow its market share and expand the

Farmland brand. Sales for Farmland’s

refrigerated foods group are up $175

million to $3.4 billion for the first three

quarters from the same period last year. 

In a subsequent move to reduce the

number of enterprises in which it is

involved, Farmland has announced

plans to sell its entire 40+ percent share

of stock in two Heartland Grain Fuels

LP ethanol-producing plants in South

Dakota to its partner. Bill Paulsen,

Heartland manager, didn’t rule out the

possibility of non-farmers buying

shares, but South Dakota Wheat

Growers will continue to have controlling interest in Heartland, which produces 22 million gallons of ethanol a

year at plants in Huron and Aberdeen.

Details on how to purchase shares will

be available later this year. Earlier this

year, Williams Bio-Energy, Tulsa,

Okla., a unit of Williams Companies,

purchased a 5-percent interest in the

operations and agreed to market and

distribute the ethanol. The joint venture began in 1993. The Huron plant

opened in 2000. 

Ottowa Co-op gains in sale

of bankrupt FCA in Kansas

A U. S. bankruptcy court judge has

approved the sale of properties owned

by Farmers Cooperative Association

(FCA) of Lawrence, Kan., to a group of

investors headed by Overland Park

attorney Robert Laing for nearly $3.2

million. The sale of grain elevators, fertilizer plants and other properties to

Laing’s group had been recommended

by the cooperative’s board of directors.

The purchase did not include the grain

inventory. FCA has liabilities of $20

million, including $10 million owed to

CoBank. FCA sought Chapter 11 bankruptcy protection last September. It was

the largest local cooperative in Kansas.

Laing has since sold seven elevators

to Ottowa (Kan.) Co-op, which will

triple its grain handling capacity, double

its sales and require 10 more employees.

The entire group of elevators will be

connected by a computerized network

which will track all transactions, scale

weights and loads. Experienced branch

managers will operate the elevators. 

AGP sells CN Feed to ADM,

buys Canadian operations 

Omaha-based Ag Processing Inc.

(AGP) has sold its U.S. half of Consolidated Nutrition (CN) feed venture to

its partner, Archer Daniels Midland

(ADM), and in turn acquired ADM’s

half of CN’s Canadian operation and

the “Master Feeds” brand. The joint
Rural Cooperatives / January/February 2001 33

Given continuing high energy prices and the search

for alternate fuels, agricultural producers are continuing

to form and operate cooperative ethanol plants that primarily use corn as their feedstock, although others are

using government surplus sugar or studying use of agricultural waste products.

With an eye toward increasing ethanol production, the

U.S. Department of Agriculture will provide up to $150 million

in subsidies in 2001 and another $150 million in incentive payments for 2002 for its bioenergy program. It provides higher

payments to small processors and cooperatives to encourage expansion of domestic bioenergy production capacity. More than 5 percent of

the nation’s corn production (567 million

bushels) is used for production of biofuels

and more than 50 ethanol plants are operating in 20 states.

Last fall, USDA announced a two-year

program to subsidize companies – including cooperatives – that buy crops, principally corn and soybeans, for use in production of bioenergy products such as ethanol

or biodiesel. Payments are capped at $7.5

million per company and range from 29

percent to 40 percent of the cost of the crops, depending

upon the size of the company. Ethanol production is currently subsidized by a 5.4-cent-per-gallon federal excise tax

break and consumes about 600 million bushels of the annual U.S. crop of more than 9 billion bushels of corn.

Meanwhile, the Environmental Protection Agency

(EPA) has denied California’s request to waive the federal

oxygen content for reformulated gasoline. This is expected to sharply expand the demand for ethanol in the state.

While most Midwest ethanol plants use corn, Californians

can also use orchard clippings, wood chips from lumber

mills, whey from cheese factories and lawn clippings

from urban areas. The state has the potential to produce

200 million gallons of ethanol.

Here is a sampling of pending cooperative ethanol

projects:

■ The Rice Straw Cooperative at Gridley, Calif., has

been formed to convert straw stalks left from the rice

harvest to ethanol. The $100 million refinery near Sacramento would open in 2003.

■ Maryland grain growers are exploring a barleybased ethanol facility. The state has a corn deficit

because so much of it is consumed by its giant poultry

industry. The plant would produce between 15 million

and 25 million gallons of ethanol a year and cost

between $30 million and $50 million.

■ Iowa’s Des Moines County supervisors have earmarked $10,000 for a study on a new ethanol plant operated by Big River Resources. The cooperative hopes to

raise $100,000 for a feasibility study and organizing effort

aimed at developing a 15-million bushel plant with an

annual payroll of $30,000 to $40,000.

■ At a more advanced stage, Quad County Corn

Processors’ Cooperative, Galva, Iowa, has been

approved by USDA for a $12.5 million loan guarantee for

construction of an 18- million-gallon-a-year ethanol plant.

The 416 members have raised $8.5 million in equity capital for the plant that will

use 6.8 million bushels of corn per year.

■ About 80 farmers have formed Iroquois Bio-Energy Cooperative in northwest

Indiana with plans to develop a $60 million

ethanol plant that would produce 40 million

gallons a year and use 14 million bushels of

corn from more than 400 farmers. 

■Midwest Grain Processors Cooperative will open a new, 45-million-gallon

ethanol plant next fall at Lakota, Iowa. The

co-op’s 998 members raised $16 million in

start-up capital. Some 80 percent of Kossuth County voters

passed a referendum to issue $5 million in bonds to help build

the plant. The co-op hopes the plant will generate $70 million

in annual revenue and create 30 jobs. 

■ Near Minden, Neb., Kearney Area Ag Producers

Alliance is seeking to raise $18 million to finance an ethanol

plant to produce 30 million gallons a year. Cattle feeders are

being invited to invest $12,000 plus 8,000 bushels of corn

(2,000 quarterly), agree to purchase 600 tons of distillers’

grain annually and pay a $200 membership fee. The plant

would require 12 million bushels of corn annually.

■ Construction is underway at Big Stone City near

Sioux Falls, S.D., for the Northern Growers Cooperative

ethanol plant that will produce 40 million gallons a year.

When the $45 million plant is completed next year, it will

employ 35 people.

■ Agra Resources Cooperative near Albert Lea,

Minn., is tripling its capacity at a cost of $18 million to

about 45 million gallons of ethanol annually

■ Tall Corn Ethanol Cooperative at Coon Rapids, Iowa,

plans to open its plant next August and produce 40 million

gallons of the fuel. The state has seven ethanol plants

with two under construction and eight more proposed,

according to the Iowa Corn Growers Association.

—Patrick Duffey

Energy prices spark interest in ethanol co-ops

Corn, soybeans and other feedstocks are being used to fuel new

bioenergy plants. USDA photo by

Ken Hammond
venture had been operating since 1994. 

The transaction will allow AGP to

focus its resources on food and industrial products such as soy-based diesel

fuel, solvents and additives that

enhance chemical performance,

according to spokesman Mike

Maranell. AGP is the world’s largest

cooperative soybean processor and a

major processor of vegetable oils. 

Calcot cotton farmers may face

repayment of earlier advances

Cotton producer-members of Calcot Ltd., a cotton-marketing cooperative based at Bakersfield, Calif., may be

forced to return some of the cash

advances it received from Calcot.

Growers have had to return advances

to Calcot only once previously in its 45

years. Calcot will make a final settlement in September for last year’s harvest. Last fall, cotton farmers were

advanced cash based on futures prices. 

PCP buys $9 million plant

to suit tomato growers

Seeing an opportunity to expand

tomato operations, grower-owned

cooperative Pacific Coast Producers

(PCP), Lodi, Calif., is purchasing the

Del Monte processing plant at Woodland, Calif., for $9 million. The 41-acre

site includes the plant, three warehouses and a processing area. The plant had

been closed after the 2000 season. 

PCP will process 350,000 tons of

tomatoes at its Lodi cannery and next

year will process 525,00 tons at Woodland. Ninety-five percent of PCP’s

tomato growers live within 20 miles of

Woodland. The cooperative expects

freight savings of about $3.5 million

annually and will spend another $18

million for new equipment and updated facilities. The breakup of Tri Valley

Growers and its tomato processing

business left a vacancy in the state. 

Rocky Mountain Sugar Co-op

pays $48 million for plants 

Sugar beet growers in four western

states, who formed a Rocky Mountain

Sugar Growers Cooperative a year

ago, have purchased Western Sugar

Co. from Tate & Lyle, the giant

British sugar processor, for $48 million. The cooperative gains processing

plants at Billings and Lovell, Wyo.;

Fort Morgan and Greeley, Colo., and

Scottsbluff, Neb. Corporate offices

were in Denver. 

Last year, Tate & Lyle had offered

to sell Western Sugar to its 1,100 sugar growers for $78 million, or about

half its estimated liquidation value.

Growers planted 130,000 acres this

spring. Growers will receive a letter

from the cooperative which outlines

details of the purchase, includes a

closing balance sheet and information

on interest rates for loan financing. A

mechanism provides for growers who

did not commit acres this year to buy

into the plant.

Dakota Beef Co-op buys 

Nebraska meatpacker 

Dakota Beef Cooperative at Bismark, N.D., plans to buy a 60 percent

interest in Elkhorn Valley Packing

Company at Dodge, Neb., over the

next five years but continue pursuing a

goal of building a future plant in the

Dakotas. Cooperative organizers will

need a minimum of 40,000 cattle a

year. A membership drive is planned.

Elkhorn, which also has a slaughterhouse in Wellington, Kan., markets

beef in the United States and other

countries on both retail and wholesale

levels. Most of the firm’s cattle come

from Kansas and Nebraska. Dakota

Beef grew out of the failed Northern

Plains Premium Beef, which sought to

build a slaughterhouse in western

South Dakota but was caught in a poor

ranch economy in the 1990s.

Ramey Co-op joins AMPI

The 150 members of Minnesotabased Ramey Farmers Cooperative

Creamery have voted to merge and

market their milk with Associated

Milk Producers Inc. (AMPI) of New

Ulm, Minn. Ramey members marketed 140 million pounds a year to Glencoe Butter and Produce Association,

also now a part of AMPI. The Ramey

cooperative, formed in 1913, will continue providing farm production supplies to its members.

Texans form rice co-op

About 27 Texas rice growers have

voted to form a new cooperative. It

hopes to handle members’ rice from

the drier to the grocery shelf. The new

board of directors has been canvassing

34 September/October 2001 / Rural Cooperatives

Prompted by special freight rates for elevators that can load 110-car trains

in 15 hours, high-speed grain loading stations, including this one near Moccasin on the Burlington Northern Santa Fe mainline, are being built in Montana. Several are being built by CHS Cooperatives and joint venture partners to enhance export grain delivery to the West Coast. Mountain View

Co-op’s new $6 million elevator near Collins is scheduled to open this

November, in time for the fall grain shipping season. (Photo courtesy CHS )
Rural Cooperatives / September/October 2001 35

other rice growers with an eye toward

increasing membership. Minimum

commitment was set at 1.2 million

hundredweights of rice and a maximum

of 2.5 million hundredweights. The

cooperative will seek to gain valueadded profit for its currently lowpriced long-grain rice.

German co-op banks merge

Germany’s two rival cooperative

banks have merged to become the

largest cooperative bank and sixth

largest bank in that nation in terms of

assets. DG and DZ banks will each own

50 percent of the new firm operating

under the DZ banner. It provides refinancing to agriculture which has been

suffering from crises including outbreaks of mad cow disease. The company will serve as the central clearing

bank for about 1,500 local cooperatives.

Illinois fund boosts co-ops 

Illinois has allocated $3 million in

its fiscal 2002 agricultural budget for

use by producers developing valueadded cooperatives. The fund can pay

for up to 75 percent of the cost of

technical assistance, including feasibility studies. State Farm Bureau President Ron Warfield said AgriFIRST

program funds for these projects “will

greatly enhance the ability of Illinois

farmers to capitalize on new ways to

capture a bigger share of the consumer food dollar.” 

Indiana’s Ag Plus Forms

Capping discussions for the past two

years, two Indiana grain marketing and

agronomy service cooperatives near

Fort Wayne, Ind., have merged to form

Ag Plus Inc. Being blended are Farmers Elevator Co. of South Whitley and

Allen County Co-op at Woodburn. Jeff

Mize, manager of Farmers Elevator,

will manage the new entity, which

combines more than 1,700 members

and about 80 employees.

Undaunted by low prices,

Ocean Spray eyes turnaround

Ocean Spray’s cranberry-grower

members are sticking with their cooperative as it pursues new marketings

despite low prices that management

says could extend another 2 to 5 years.

The cooperative, which had sales of

$1.36 billion last year, represents about

900 growers, mostly in Massachusetts,

New Jersey and Wisconsin. 

Earlier this year, members voted

by a 2-to-1 margin to back a turnaround plan and not sell the cooperative, the biggest player in the cranberry business. Any sale would

require support from a 75 percent

majority of the cooperative’s shares.

Ocean Spray is pinning its hopes on

effective marketing and is spending

half of its $30 million advertising

budget next year to promote a new

white cranberry juice product. The

cooperative also is pursuing its new

market in China. 

Sugar beet growers seek

help buying Holly plant

The Washakie Beet Growers Association in Wyoming supplying the

Holly Sugar Factory at Worland is

planning to sign a one-year lease of

the factory from its bankrupt owner,

Imperial Sugar, to allow more time

for purchase negotiations. President

Dick McKamey said the factory

needs about 20,000 acres of sugar

beets to stay afloat. Holly also operates a refinery and seed research laboratory in Wyoming. 

Tillamook opens cheese plant

Columbia River Processing Inc., a

wholly owned subsidiary of Tillamook

County Creamery Association

(TCCA) at Boardman, Ore., has

begun operating a new cheese plant

capable of producing 58 million

pounds of cheese a year using 1.6 million pounds of milk per day. Its cold

storage facility can handle 30 days of

cheese production. The cheese will be

trucked to TCCA’s flagship plant in

Tillamook for extended aging, storage, packaging and distribution. Whey

will be condensed through a reverse

osmosis system and shipped to a plant

operated by a neighboring cooperative

for further processing.

Pork America buys 

Iowa packing plant

Pork America Inc. has purchased 

the former Ace hog slaughter and processing plant at Estherville, Iowa. The

cooperative facility was expected to

begin operating this summer. It would

initially process about 100 head per day

and operate with 12 employees. In

time, production is scheduled to

increase to 600 head per day which

would require about 40 employees.

CHS ends incentive program,

returns $14 million invested

An innovative five-year experiment

aimed at raising farm income from its

processing business for members of

CHS Cooperatives has been shelved

by the Minnesota-based cooperative.

CHS plans to return $14 million to the

855 farmers who invested. The program sold shares in the new businesses

known as Equity Partnership Units.

Investing farmers could expect greater

returns from profits of those businesses that processed their grains or

oilseed crops. However, CHS still

believes there is merit in the idea that

is fashioned after popular new-generation cooperatives operating in the

Upper Midwest. President John Johnson said the program was doomed

because a depressed flour milling 

market limited earnings. Meanwhile,

the cooperative will continue to

explore ways for members to invest

directly in value-added businesses.

Golden Gem Growers Shuts

Lake Garfield Packing House

Citing a flat market for its specialty

oranges for the past several years plus

competition from other tropical

fruits, Golden Gem Growers has shut

its packing house at Lake Garfield,

Fla. This and its larger house at

Umatilla have been operating below

capacity. Fresh fruit activities will be

concentrated at Umatilla which has a

capacity for about 600,000 cartons.

Golden Gem’s juice fruit will be

processed at a plant at Lake Wales

which has a long-term contract with a

Brazilian citrus cooperative.
36 September/October 2001 / Rural Cooperatives Rural

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