Rural

COOPERA COOPERATIVES

USDA / Rural Development September/October 2003

Apples & Oranges:

pg. 4 - Sunkist’s new global

strategy

pg. 6 - Why apple 

growers 

value 

co-op

Apples & Oranges:

pg. 4 - Sunkist’s new global

strategy

pg. 6 - Why apple 

growers 

value 

co-op

USDA / Rural Development September/October 2003
2 September/October 2003 / Rural Cooperatives

In the past few years, some large and

well-known farmer cooperatives and

other smaller ones have been forced

into bankruptcy. Although these business failures do not compare in scope

and impact to other businesses that

have failed in other sectors of the economy, and despite the fact that the great

majority of all cooperatives are healthy

businesses, the failures naturally draw

attention to the role of farmer cooperatives in rural America. These cooperative failures, however, require a new

look at the vitality and flexibility of

cooperative businesses in today's global, dynamic economy.

In response to challenges, we must

try to understand what makes cooperatives particularly strong organizations

and yet susceptible to economic stress.

As in any business, a search for causes

of failure leads in several directions.

We must look at both successes and

failures, and then carefully identify

problems and devise solutions.

Some observers have identified

cooperatives' restricted sources of capital as a subject of concern. Cooperatives

depend on member equity for the capital needed to make the investments

required of successful businesses. The

concern is that farmers and other rural

residents, who benefit from strong

cooperatives, often lack the assets to

make the investments for needed

improvements. And even if they are

able to invest, they are discouraged

from doing so by a capital structure that

often makes it difficult for them to get

their money back and does not provide

the opportunity to realize a capital gain

on their investment. Investments in a

cooperative compete with those needed

for members' own farming operations.

Capital requirements are nearly universal among all businesses and some

would argue that cooperatives for the

most part are in no worse position than

other businesses. They point to the

many successful cooperatives, ranging

in size from national marketing entities

to local farm supply stores, that are

doing just fine. They argue that outside

investors will take over cooperatives

they fund and undermine the cooperative's reason for existing: to benefit

patrons on the basis of use rather than

investors on the basis of investment.

They further respond that farmers and

other member-users have the resources

to fund their cooperatives and will do

so as long as they believe the associations will meet their needs.

In the years ahead, cooperatives, like

much of rural America, will face serious

challenges. The companies they buy

from and sell to are becoming larger,

fewer in number and more sophisticated at passing costs and risks off onto

others in their lines of business. Innovations in areas such as biotechnology,

information services and transportation

are making cooperative facilities and

equipment obsolete. Foreign countries

are using our technology to become

lower cost producers of the same basic

farm products we produce in rural

areas. They are becoming competitors

rather than customers.

As farmers and rural residents

respond to these and other challenges, it

is safe to assume that some of them

would benefit from cooperatives with

additional equity. This applies whether

they are starting a new cooperative or

broadening the services of an existing

one. For example, one strategy for protecting and enhancing rural economies is

for producers to engage in value-added

processing and marketing of the products they produce (selling pasta rather

than wheat, ethanol rather than corn). In

this way, farmers and rural communities

capture the returns of the entire process

rather than settle for commodity sales.

The facilities to do the manufacturing

and the people needed to operate the

plants and market the products will take

money. The as yet unanswered question

is, "Where will the money come from?"

As in any business, equity capital will

only be made available if an equity holder realizes returns justifying the capital

investment. Cooperatives, too, must

produce net income and generate benefits to members as a return for the equity

invested. Member equity in the cooperative is built from member investments

directly and through retained refunds,

the cooperative version of retained

income that provides most of the equity

for other businesses. This type of equity

has funded most cooperatives, including

many value-added operations with high

capital requirements.

It is time to explore, with objective

thoughtfulness, other possible sources

of equity capital for cooperatives. A few

cooperatives have taken this approach.

Cooperatives can, and do, offer nonvoting preferred interests. Recently, a

large regional farmer cooperative sold

$90 million in non-voting preferred

stock that pays a dividend of 8 percent

per year. The shares are publically

traded and listed on the NASDAQ

stock exchange. While this means a sizable portion of the cooperative's future

earnings will go to investors based on

investment, few will challenge the

"cooperative" nature of the association.

COMMENTARY

Shaping tomorrow’s cooperatives today

continued on page 29
Rural Cooperatives / September/October 2003 3

Rural COOPERATIVES (1088-8845) is published

bimonthly by Rural Business–Cooperative Service,

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

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Copies may be obtained from the Superintendent of

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Unless otherwise stated, contents of this publication

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prohibits discrimination in all its programs and 

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To file a complaint of discrimination, write USDA,

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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

Thomas C. Dorr, Under Secretary, USDA Rural

Development

John Rosso, Administrator, Rural BusinessCooperative Service

James Haskell, Acting Deputy Administrator,

USDA Rural Business-Cooperative Service

Dan Campbell, Editor

Vision Integrated Marketing/KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or

Fax (202) 720-4641, Information Director,

This publication was printed with vegetable oil-based ink.

United States Department of Agriculture

Rural COOPERA .

COOPERATIVES

September/October 2003 Volume 70 Number 5

On the Cover:

For the first time, Sunkist Growers is putting its brand on some foreign-grown fruit in

order to better meet market demand for a year-round citrus supply. Story on page 4.

Orange photo courtesy Sunkist. A new study that compares the apple markets in

Michigan and New York shows how growers in the former benefit from the existence of a bargaining cooperative. Story on page 6. Apple photo by Ken Hammond, USDA

FEATURES

4 New global strategy

Year-round citrus demand has Sunkist tapping foreign 

market supplies

By Claire Smith

6 Apple industry study shows value of producer

bargaining associations

By Shelly Grow, Amy Guptill, Thomas A. Lyson, Rick Welsh

8 Southern hospitality

Walton Electric Co-op makes a positive difference for Georgia

By Steve Thompson

14 More than milk

Dairylea’s scope of farmer services moves beyond milk marketing

By Pamela J. Karg

18 Minnesota leads the nation in co-op business volume

By Eldon Eversull

20 Wisonsin’s Westby, ‘Little Creamery That

Could,’ marks 100th anniversary

By Patrick Duffey

23 Top co-op communicators honored in Madison

25 Back to School

NICE marks 75th anniversary with return to campus as co-op

youth education program

By Jim Wadsworth and Craig Scroggs

27 GROWMARK certification program prepares

directors for new challenges

DEPARTMENTS

2 COMMENTARY

12 VALUE-ADDED CORNER

28 NEWSLINE
4 September/October 2003 / Rural Cooperatives

New global strategy 

Year-round citrus demand has Sunkist 

tapping foreign market supplies

By Claire Smith

Sunkist, Public Affairs Director

aced with mounting competition

from lower cost

offshore citrus and increasing customer demand for

specialty varieties and yearround supplies from customers, Sunkist Growers has

begun sourcing fruit from

foreign producers. This step

is being taken to strengthen

its leadership position in the

evolving global 

marketplace.

This summer, Sunkist began

importing citrus from offshore sources

to complement the citrus produced by

its 6,000 grower-owners in California

and Arizona. Lemons and grapefruit

from South Africa and Chile bearing

the Sunkist label are being shipped to

Japan and Hong Kong, where sales of

the cooperative’s first non-U.S.-grown

fruit is being test-marketed.

Customers demanding

year-round fruit supply 

While the decision to handle foreign fruit was not an easy one, maintaining its position as the fresh citrus

market leader meant Sunkist had to

respond to its customers’ demand for a

single, year-round supply of citrus.

“We had no choice,” says Jeff Gargiulo,

Sunkist’s president and CEO. “We

operate in a global marketplace. U.S.

politics promote it; economists support

it; retail customers demand it; and consumers want great citrus, year round. 

“Sunkist has always been supportive

of liberalized trade,” he continues, “but

the free-trade agreements we’re seeing

now are one-way streets, benefiting

foreign producers, but not American

growers.” 

Almost half the produce sold in the

United States today is grown outside

its borders. American producers face

increasing competition as the domestic

markets are opened to more imports.

Those low-cost products, entering 

virtually duty free, put American producers at a substantial competitive 

disadvantage, says Gargiulo. 

Sunkist lemons grown in California

and Arizona, for example, command

about $16.50 per 40-pound box

wholesale, while lemons transported

from Chile earn about $13.50 per

box. The major reason for the difference is the average hourly cost for

farm and packinghouse labor. In

Chile, it’s less than $1 vs. $16 in

Sunkist country. 

Couple this increasing domestic

competition with stagnant export

opportunities due to foreign tariff

barriers, and American fresh citrus

growers face enormous competitive

challenges. 

“Our customers tell us they are

going to buy the best product for the

lowest price, and they don’t care where

it comes from,” Gargiulo says.

Category managers 

Today’s large, international retailers require a comprehensive package

of services. To increase efficiency,

they want their suppliers to become

‘category managers’ and to meet all

their needs for a specific product area. 

While Sunkist’s 6,000-plus members

own more than 175,000 acres of groves

F

Photos courtesy Sunkist
across some of the richest agricultural

land in the world and harvest a variety

of citrus, they are limited by seasonality. “Our customers expect us to provide

all kinds of citrus all year-round,” said

Gargiulo. “With this change, Sunkist is

acknowledging that our growers can’t

always supply what our customers

want.”

The changes being made at Sunkist

are evolutionary, not revolutionary.

Over its 110-year history, Sunkist has

continually analyzed its processes and

implemented ways to compete more

effectively in a changing marketplace.

It has developed a comprehensive,

worldwide marketing strategy, and

now it will source product where the

market demands, where the opportunity exists and, in the end, return the

profits to its grower-owners.

Sunkist is currently formulating an

operational structure and exploring different options for offshore sourcing.

The final organization could involve

partnerships, export/import subsidiary

companies or licensing agreements.

Arrangements may differ from country

to country. 

This new marketing strategy may

also enable the cooperative to recover

its prominence in the European market, where the Sunkist name is still

highly regarded but where the European Community’s tariff practices and

high transportation costs have kept its

citrus out. Sunkist will soon be in a

position to overcome those obstacles

and outsource fruit into that market

under the Sunkist name.

Vigorous internal debate

“Would we rather not have to make

the change? Yes,” says Gargiulo. “Do

we feel we have a choice? No.” 

During the past decade, Sunkist and

its growers have vigorously debated

“going global.” The Sunkist name is on

hundreds of licensed products such as

juices, beverages and confections in 45

countries. However, except for some

short-lived experiments, it has sold

only the fresh citrus produced in the

United States by its grower-members.

The change, though long in coming,

was inevitable, says Gargiulo. Export

sales began reflecting the effects of

high-quality, low-cost foreign competition on Sunkist’s share of key Asian

markets. Domestic sales reflected the

retailers’ growing interest in exotic new

items and their use of imports to bring

year-round supplies to American consumers. 

In today’s global marketplace, nothing is “out of season.” Consumers can

now choose from among more than

600 produce items available every day,

all year long. Now that consumers are

used to the variety and availability of

foreign fruit, Sunkist has little choice.

If it doesn’t market it, someone else

will, says Gargiulo. 

While the imports will increase the

cooperative’s revenues at certain times

of year, they will no doubt also compete with California and Arizona citrus. Sunkist’s western-grown Valencia

oranges already share shelf space with

Australian-grown navels during the

mid-to-late summer. And Sunkist’s

western-produced navel oranges

already face heavy competition from

imported Spanish clementines during

the winter. The only difference is that

now the Australian and Spanish fruit

might also be wearing the Sunkist

name.

Inevitably, some traditional growers will be unhappy. The bottom line,

however, is that those Australian

navels and Spanish clementines are

going to be in the markets anyway. It

is to Sunkist growers’ advantage,

Gargiulo says, if their marketing

cooperative can exert some management control of the situation. By

teaming up with quality foreign producers—instead of trying to compete

with them—Sunkist believes it can

benefit its grower-members. 

The key to Sunkist’s future lies in

the broad base of its marketing

strength and its ability to be the kind of

supplier with the fruit varieties and the

kinds of services today’s retailers

demand. In addition, Sunkist has the

strength of its brand, denoting quality,

value, health and safety to consumers

worldwide.

As a cooperative, Sunkist’s charge

has always been to sell the fruit its

members grow today. In the long

term, however, Sunkist must ensure

that it has the opportunity to sell it

growers’ fruit in the future. “But as

the market changes and the produce

industry evolves,” Gargiulo promises,

“Sunkist will never forget who it

works for.” ■

Sunkist CEO Jeff

Gargiulo says the coop would have preferred not to start

branding foreigngrown fruit, but felt it

had no choice given

market trends. 

Rural Cooperatives / September/October 2003 5
6 September/October 2003 / Rural Cooperatives

By Shelly Grow, Henry A.

Wallace Center; Amy Guptill,

Cornell University; Thomas A.

Lyson, Cornell University; and

Rick Welsh, Clarkson

University

Editor’s note: This article is based on

“The Effect of Laws That Foster Agricultural Bargaining: The Case of Apple

Growers in Michigan and New York

State,” available electronically at

www.winrock.org/GENERAL/Publications/AgBargfinal.pdf. For a printed copy,

contact the Wallace Center, (703) 525-

9430, ext. 675. The study was funded by a

grant from the Rural Business-Cooperative

Service of USDA Rural Development.

n agricultural bargaining

association can provide

better prices and other

important benefits to its

members, according to a

new study of apple growers in two states.

The study was conducted by researchers

at the Henry A. Wallace Center for

Agricultural & Environmental Policy at

Winrock International, Cornell University and Clarkson University. 

Apple grower-members of the

Michigan Agricultural Cooperative

Marketing Association (MACMA), a

bargaining cooperative, indicate higher

levels of satisfaction compared to nonMACMA members and to New York

growers, which does not have a state

collective bargaining law. The study

found that MACMA, on average, has

negotiated higher apple prices for

Michigan growers. This price differential, however, appears to be diminishing over time due to intense competition, particularly from international markets.

Mich., N.Y. laws contrast

sharply

To establish a starting

point for understanding the

potential impacts of strong

cooperative bargaining laws

at the federal level, this

research examines the

impact bargaining can have

on prices producers receive

for their products, as well as

other economic and social

benefits bargaining can provide. Apple growers in

Michigan and New York were selected

for study for these reasons:

■ Michigan has a strong law in support of bargaining associations that

requires binding arbitration and good

faith bargaining. New York has no

such law.

■ Michigan has a functioning bargaining cooperative for apples while

New York has none (a previously

formed cooperative in New York is

now defunct).

■ Apples are an important crop in

both states. Michigan ranks No. 3 in the

United States in apple production, while

New York ranks No. 2. Both states

process a significant portion of their

apple harvest and use similar processing

methods (canning, juice, freezing).

■ The apple commodity system fits

the criteria outlined by earlier studies

for potentially successful associations:

limited ability for short-term entry into

the industry (perennial fruit crop) and a

concentrated processing sector. In

addition, while Michigan and New

York are distinct markets for apples,

growers in the two states share processors. This reduces the chance that New

York farmers may fear extreme

reprisals from processors should they

form a bargaining association, as these

processors have demonstrated their

willingness to work with a bargaining

association in Michigan.

Impact of price

The effect of bargaining on prices

received by producers was measured by

comparing actual prices received by

growers, according to processing type,

from 1969 to 2001. Data were examined for growers in Michigan, New

York and nationwide. All prices were

converted into January 2002 dollars.

This analysis shows that prices in

Michigan for canned, juice and frozen

apples were on average higher than the

prices in New York and the overall U.S.

price. This validates the importance

bargaining plays in creating higher farm

prices. But the data also reveal that: (1)

Apple industry study shows value

of producer bargaining associations

A

Apple prices in Michigan were higher than both the average New York and overall U.S. prices, which many growers

in Michigan credit to the existence of the MACMA bargaining cooperative. USDA photo by Ken Hammond 
Rural Cooperatives / September/October 2003 7

real apple prices declined steadily for all

growers over the time period studied

and that (2) the price differential

between Michigan and both New York

and the nation has diminished.

Growers blame imported apples and

apple concentrate from China for

falling U.S. apple prices and the erosion of MACMA’s ability to favorably

affect prices. This suggests that globalization of agricultural markets poses a

significant challenge to domestic-only

bargaining associations.

Other benefits

Benefits other than price received,

particularly the degree of uniformity

and quality of contract terms, are in

many ways the most important measure of the success of bargaining associations. However, these fringe benefits

are not easily quantifiable.

In this study, a short mail survey was

sent to all known apple growers in

Michigan and New York. Just over half

the Michigan growers and just under half

of the New York growers returned valid

surveys. The responses were divided into

three groups: (1) MACMA members; 

(2) growers in Michigan who are not

MACMA members and (3) growers in

New York. Analysis focuses on both 

actual services available and the satisfaction of growers with their marketing

opportunities. The responses reveal:

■ MACMA growers were more

likely to believe they have some influence on the prices received for their

processed apple crop. For this group,

26 percent either agreed or strongly

agreed with this view. Only 7 percent

of Michigan non-MACMA and 8 percent of New York growers agreed or

strongly agreed with this view. In addition, 18 percent of MACMA growers,

10 percent of Michigan non-MACMA

growers and 8 percent of New York

growers agreed or strongly agreed that

they had some influence on the terms

of trade for their processed apple crop.

Clearly, more MACMA growers perceive they have some input into important aspects of the processed-apple

contracts than other growers.

■ MACMA growers were also more

likely to believe they had input into

public policy that might affect them.

Almost 30 percent of MACMA growers agreed or strongly agreed with the

statement that they had input into

such state government policies. Less

than 20 percent of the Michigan nonMACMA growers and about 25 percent of New York growers agreed with

the statement. Regarding input into

federal policies, 22 percent of MACMA growers, 17 percent of Michigan

non-MACMA growers and 14 percent

of New York growers at least agreed

that they had input.

■ MACMA growers were also more

likely than the other two grower

groups to at least agree that they were

generally satisfied with their marketing

arrangements.

■ Almost 70 percent of MACMA

growers support a new federal law that

requires processing firms to bargain

with accredited grower bargaining

cooperatives or associations. However,

49 percent of Michigan non-MACMA

and 56 percent of New York growers

agreed with the statement.

■ Over 50 percent of MACMA

growers agree or strongly agree with

the statement that they could find marketing assistance if they needed it,

compared to only 17 percent of nonMAMCA Michigan growers and 13

percent of New York growers.

■ Over 80 percent of MACMA

growers and more than 50 percent of

the growers in the other two groups

believe that grower bargaining units

raise prices for all growers.

Satisfaction index

To further investigate the potential

impact of membership in MACMA on

attitudes and perceptions, researchers

constructed a “satisfaction” index

from the six survey items discussed

above. A statistical regression analysis

was performed using responses to

other survey questions to ensure the

findings were valid.

The results indicate that membership in MACMA brings with it more

satisfaction as measured by the items in

the index. MACMA members: (1) feel

generally satisfied with marketing

arrangements; (2) feel they can receive

help in finding apple markets and (3)

feel that they have input into contract

terms and price, as well as input into

state and federal policies. 

These results are not surprising considering that MACMA actively lobbies

on behalf of its member growers, represents them in contract negotiations

with processors and maintains a marketing desk that will find outlets for

members’ apples as needed. The importance of these findings is that the members surveyed realize such efforts are

being made on their behalf, and their

perceptions differ from those of 

growers not in the organization.

Other factors that were found to

generate grower satisfaction include

higher numbers of processing firms

available as buyers, lower percentages

of the apple crop sold as processed

apples, fewer times selling to processing firms without an agreed-upon

price, lower percentage of the fresh

apple crop from packing house culls

and membership in an apple processing

cooperative that meets members’ 

marketing needs.

Conclusion

The histories of the New York and

Michigan apple industries indicate that

state legislation that protects growers’

ability to organize is essential for establishing viable bargaining cooperatives.

It is also clear that the presence of a

bargaining cooperative has enhanced

the welfare of Michigan growers, especially MACMA members.

Comparisons of apple prices in

Michigan, New York and the United

States as a whole from 1969 to 2002

show that Michigan growers received

higher prices for their apples through

most of this period. The price benefit

appears to be shrinking, however.

Apple growers assign blame for falling

U.S. apple prices to imported apples

and apple concentrate from China.

The results of the mail survey indicate that MACMA members tend to be

more satisfied than non-members.

continued on page 29
By Steve Thompson, 

writer-editor

USDA Rural Development 

stephenA.thompson@usda.gov

Editor’s note: this is the second of three

articles focusing on the community-building efforts of electric cooperatives. 

o most urban Americans, their electric 

power provider remains

out of sight and out of

mind—except during

power failures and when the electric

bill comes due. But in rural Georgia,

an electric distribution cooperative

has made a place for itself as a community institution, through its efforts

to make a positive impact on the lives

of its members and their families and

neighbors.

Walton Electric Membership Corporation is headquartered in Monroe,

Ga., about 35 miles east of Atlanta. It

serves 100,000 electric subscribers in

ten counties, including parts of the

greater Atlanta area. The co-op works

hard at fulfilling its prime mission of

providing the energy needed to keep

its service area thriving. Walton EMC

aggressively rides herd on costs to

keep its electric rates stable, while

keeping its infrastructure healthy and

returning $2 million in capital credits

to its members last year. The cooperative maintains a reputation for excellent customer service and has received

several recognition awards for its

community outreach efforts. 

Walton’s products are no longer

limited to electricity. Last December,

Walton EMC Natural Gas, a new affiliate, began supplying members with gas priced up to 25

percent less than other gas

marketers in the area. Another affiliate supplies security

equipment and services in the

co-op service area and

beyond.

Co-op’s commitment

to community service 

By most measures, that

kind of record would spell

success for an electric co-op.

But Walton has gone far

beyond its business role to

become a major force for

community service. As the

result of its efforts, firemen

get funds for new equipment.

Low-income patients on prescription medications get help

to defray the cost. A man who

lost his job gets help with his

T

Southern hospitality

Walton Electric Co-op makes a positive difference for Georgia 

8 September/October 2003 / Rural Cooperatives

Walton EMC’s “Round Up” program gave $10,000 to

Recording for the Blind and Dyslexic, which transfers

books to audio cassettes and CDs for visually impaired

students. 

Students of Shiloh High School in Gwinnett County, Ga., cheer a classmate testing an electricpowered car they built. The project is sponsored by Walton EMC, which provides practical

expertise and other resources. Photos courtesy Walton EMC 
mortgage payment. And the co-op is

actively involved in sponsoring educational activities in local schools.

Ronnie Lee, president and CEO of

the cooperative, says that community

involvement is nothing new for Walton. “When I came here 25 years ago,

the co-op already had a long-standing

tradition of being heavily involved in

community service,” he says. Lee

thinks the reason is the

attitudes of the people

who work for the co-op.

“We’re just more serviceoriented. That’s the kind

of employees we have.”

The centerpiece of

Walton’s community

activities is Operation

Round Up, a program in

which members voluntarily agree to have the

amounts on their electric

bills rounded up to the

nearest dollar. More

than 30,000 members

participate in the program. Contributing an

average of 50 cents per bill, the program amassed about $180,000 last

year. The money is used for small

grants to deserving organizations

and individuals.

The recipients are chosen by a 15-

member board of co-op member volunteers, each one appointed by a member of the Walton board of directors.

Says Lee, “They do an outstanding job.

They consider every application for

help that comes in.”

Individual recipients of Operation

Round Up funds include a man suffering from cancer, whose current treatment is not covered by insurance. A

number of people laid off from their

jobs or unable to work for one reason

or another, have been given help with

their mortgage payments. 

One elderly man received $1,500 for

hearing aids he couldn’t otherwise

afford. A low-income family was given

$1,000 for dental work for one of their

children. And a disabled man got funds

for a ceiling lift to help his wife move

him in and out of his bed and the

shower.

Organizations receive gifts from

Operation Round Up for even more

varied reasons. One, called Recording

for the Blind and Dyslexic, was given

$10,000 for transcribing books to

audio tape and CDs. A local chapter

of Habitat for Humanity received

$3,000 to install electric wiring in a

new house. A group called Project

ReNeWal received $3,000 for furniture for a shelter for victims of

domestic violence. 

Local fire departments have

received a number of grants for equipment and other purposes. And many

schools are beneficiaries of the program, having received grants for special

educational equipment, furniture and

special expenses.

Demand outpaces funds

The main challenge with Operation

Round Up is that many more applications are being received than the cooperative has funds for. That means trying to get more members to participate

in the program. 

“It seems we’ve reached our saturation point,” said co-op spokesman

Greg Brooks. “When we began the

program, we decided not to go with an

‘opt-out’ sign-up, as many other co-ops

have done.” With an opt-out option,

co-op members are automatically

enrolled in the Round Up program

unless they call or send a postcard saying the want out.

Even though co-ops using an optout sign-up usually get higher participation levels, Walton EMC felt this

option would not be the best way to

serve its members.

“Now it seems that we’re at a

plateau,” Brooks continues. “But we

still don’t regret not going the optout route. Besides providing a community-service opportunity, Operation Round Up is also a public

relations opportunity and we didn’t

want to create dissatisfaction and

make some members feel they were

forced into participation.”

Since the co-op has many more

applications than funds, some very

deserving causes are not receiving

grants. “Our volunteer board frets and

sweats over every application—it takes

this job very seriously—and it’s really

heartbreaking to deny some of the

legitimate requests.”

As a side benefit, he notes, board

members see firsthand the good work

the co-op is doing and they’ve

become stauncher supporters of it. 

Rural Cooperatives / September/October 2003 9

Skilled linemen keep Walton’s infrastructure in good shape while

holding down service costs for co-op members.

The 2003 “Taste of Home” cooking school,

co-sponsored by Walton, attracted 500 participants and raised $3,000 for a local Boys

and Girls Club. The school has been presented annually for 50 years in the Walton service area.
10 September/October 2003 / Rural Cooperatives

Benefitting schools, youth groups

Walton’s support for education goes

beyond Operation Round Up. The coop has a sponsor relationship with a

school in each of the 10 counties in its

service area, participating in incentive

programs for teaching excellence and

helping with expenses for teacher

breakfasts and other functions. Staff

members also give presentations about

electrical safety and the history of the

cooperative movement. 

Every summer, the co-op sends a

delegation of students to the Georgia

Cooperative Council Youth Leadership

Conference, where they learn about

cooperative associations and participate

in exercises teaching teamwork and

leadership skills. 

The co-op also partners with the

local Future Farmers of America

(FFA) chapters in a career development program for students interested

in electrical work. One high-school

physics program got help for its electric vehicle program, winning second

place in the nationwide Electric 

Vehicle Congress.

Walton EMC employees are

known for their involvement in the

community as individuals, as well.

Many volunteer at local schools,

churches, and other community 

institutions. The employees are

enthusiastic supporters of the March

of Dimes and stage two golf tournaments every year to raise funds for the

charity. Lee says anyone is welcome

to play, but most of the participants

are employees themselves. 

Through the tournaments and

other activities, such as a giant

yard sale, co-op employees have

won top place in the local March

of Dimes fundraiser four years

running. And staff members

recently began participating in

“Relay for Life,” a 24-hour relay

walk-a-thon that raises money

for cancer research.

Having service-oriented

employees translates into high

morale and a willingness to

explore new ways to serve

members. The new natural-gas

affiliate is a good example. Coop members were a driving

force behind recent deregulation of the utilities industries in

Georgia, which made it possible for electric co-ops to sell

gas. It was Walton members

seeking improved gas service

who asked cooperative management to enter the market. 

“I was in the electric industry my

whole career, and natural gas is a little

bit different,” Lee says. “But we are an

energy company, and our customers

wanted us to do it.” The new gas service started out with only eight customers last November. The number of

participants has grown to 15,000, and

is expected to climb to 20,000 by this

fall. This growth has been achieved

with no advertising, other than in the

member newsletter.

“It’s been mostly word-of-mouth,

but we’ve gotten a really enthusiastic

response,” says Lee. “Now I’m sure

we did the right thing.”

Starting a security affiliate was

also in response to customer interest.

The security business is different

from electric distribution, but, says

Lee, “Customers know our name.”

Walton got together with another

electric cooperative, Jackson EMC,

to set up the new affiliate about four

years ago. 

Today, EMC Security is subsidiary

wholly owned by Walton and Jackson

EMCs. The venture has been successful, in part, because EMC offers a 

no-nonsense security product, selling

equipment separately from services,

and not tying customers to onerous

leases or monitoring contract requirements like some competitors. 

Monitoring fees are more than competitive. “There’s a six-month, 100

percent money-back guarantee on

every system,” says EMC Security

General Manager Vince Raia. In about

four years, the customer base has

grown to about 8,000, most of it in the

Atlanta metropolitan area.

“It’s just another avenue we can

serve,” says Lee. Though times have

changed, the Walton tradition of service is alive and growing. ■

Walton EMC was recently recognized with the first Samaritan Business

Ethics award, presented by the Covenant Counseling and Family Resource

Center and the Gwinnett, Ga., Chamber of Commerce. The award recognizes

businesses that are “doing the right thing” and which foster heightened

awareness of ethical business practices. 

Covenant Board President Barbara Myers said Walton demonstrates

strong ethics and integrity toward customers, employees and the community.

“Walton operates with the philosophy that the customer is given the benefit of

the doubt,” she said. “Electric rates are structured to provide the most affordable rates possible while recovering the cost of providing electric service.” ■

Walton saluted for business ethics

The Gwinnett County Golden Olympics, sponsored

by Walton EMC, is part of a statewide competition.

Although medals are given, the main purpose of the

event is to encourage physical fitness among

seniors and to have fun. 
Rural Cooperatives / September/October 2003 11
By Karen Spatz, Co-op Development Specialist

USDA Rural Development, California 

hese are not your mother’s canned peaches

anymore! A canned peach is not just a canned

peach, it’s a fun, tasty food that fits today’s

lifestyles, thanks to innovative processors

such as the Pacific Coast Producers (PCP)

cooperative in Lodi, Calif. One of the cooperative’s newest

products is a single-serve fruit bowl which has the potential

to provide a significant boost to the long-stagnant

processed fruit industry here. 

How important is this new product? “It’s the life saver for

the industry,” says PCP President Larry Clay. PCP sees the

potential for 20 percent annual growth after its first year

marketing the product. Clay credits the cooperative’s receipt

of a USDA Producer Value-Added

Grant for helping PCP pursue this

new market several years ahead of

the timetable it could have

achieved on its own. 

Finding success as a 

private-label packer

PCP is a processing and marketing cooperative formed in 1971,

when there were few processors

and lots of fruit in the state looking for a home. This imbalance

drove down fruit prices for California growers, who responded by

forming PCP. 

Justin Micheli, a first-generation

co-op member, says the market situation in California today is similar to

that of the 1970s. “We really had no

other choices but to join a cooperative, as no independent canners

would buy our peaches. It is the

same today,” he says. Justin says that

“the most important reason farmers

join a cooperative is to secure a

home for their product. I would

never plant a tree if I did not have a home for my product.” The

Micheli family farm in Yuba City is headed by John Micheli,

Justin’s son and vice chair of the PCP board of directors.

PCP’s operations have always differed markedly from

those of most other canning cooperatives in that rather than

developing its own brand, the cooperative is focused on

producing for the private-label market. It began as a copacker for Stokely Foods after purchasing three canning

plants in California. 

Until 1984, the co-op packed exclusively for Stokely,

but then began packing 50 percent for private labels and

50 percent as a co-packer. A decision was then made to

move toward 100 percent private-label packing, meaning

the cooperative puts its fruit in cans that bear the store

brand of various retailers. Today, it still packs all its fruit

for the private-label market. In the early 1980s, PCP

expanded production of tomato

products. 

Today, PCP has 183 members

who supply the cooperative with

peaches, tomatoes, pears, grapes

and apricots. The cooperative still

operates three plants, the newest

of which is a tomato-canning plant

in Woodland. Plants in Oroville

and Lodi process the co-op’s fruit.

PCP added plastic-packaging

capacity in 1989. 

USDA grant boosts 

fruit bowl plan 

PCP was awarded a $450,000

Value-Added Market Development

Grant in 2002 by the Rural Business-Cooperative Service of USDA

Rural Development. Grant funds

were used to pay for production

and marketing of single-serve fruit

bowls under the private labels of

U.S. retailers. 

The fruit bowls are 4 oz., singleserve plastic bowls manufactured

by a patented machine. It forms the

12 September/October 2003 / Rural Cooperatives

Adversity to Advantage 

Pacific Coast Producers uses USDA grant to develop single-serve fruit bowl market

T

V ALUE-ADDED CORNER

Inside Pacific Coast Producers packing plant, where single-serve fruit bowls (below) are being produced for the

private-label market. USDA photos by Karen Spatz 
Rural Cooperatives / September/October 2003 13

bowls, fills them with fruit and juice and then seals them.

PCP’s fruit bowl packing line uses member-grown peaches

and pears, which are mixed with juice, syrup or gel products. 

As a private-label food processor and marketer, PCP does

not have its own brand. In most cases, PCP follows market

trends, introducing new products to retailers after a branded

company has made inroads with a new product line. 

PCP initially produced single-serve fruit bowls for Dole

Food Co. under the Dole brand. But Dole cancelled its contract with PCP and began purchasing fruit bowls from a foreign company. 

Single-serve fruit bowls are fairly new in the canned

fruit aisle. Store

brands currently have

at least an equal 

market share with

“brand-name” products. So this is a

major potential market for a private-label

packer, such as PCP.

Turning adversity 

into advantage 

Finding opportunity in adversity, PCP

saw this lost contract

as an opportunity to

capture the emerging

market in private-label

fruit bowls. It completed a comprehensive marketing and feasibility study,

which showed that there was an opportunity for the co-op in

this sector. A business plan was developed which defined how

PCP could successfully compete against low-cost foreign

producers. 

The PCP retail sales team made presentations to 51 retail

store chains, retail wholesalers and food service wholesalers. It

originally offered customers a line of six fruit bowl products,

which has now been expanded to 14 products.

Among the customers PCP is packing fruit bowls for are:

Albertson’s, Aldi, Unified Western Grocers, Fleming, Stop

& Shop, Tops, Bilo, Giant, Brunos, Shaw’s, Hannaford

Brothers, Stater Bros., Western Family, Kroger, Fred Meyer, Ralph’s, QFC, Food 4 Less and Smith’s. Also: Fry’s,

King Soopers, Schnucks, K-VAT, Meijer, Shurefine International, White Rose, Nash Finch, Spartan Stores, The

Suter Co., Roundy’s, HEB Grocery Co., Publix, Fareway

Foods and Amway. The co-op’s customer list also includes:

Winn Dixie, Food Lion, Piggly Wiggly, Roche Brothers,

Wegman’s, Great A&P, Weis Markets, Goya Foods, Nugget

Distributing and Midland Foods. 

PCP has shipped fruit bowls to 40 customers under 32

different store brands. Those 40 customers have ordered 2

million cases using over 70 tons of fruit. PCP hopes it will

add at least 10 more retail chains to its customer list in the

next year. 

PCP leaders are positive about the long-term prospect of

the fruit bowl market. External factors, however, could

have significant impact upon it. In the initial introduction

of the private-label fruit bowl product, two branded fruit

leaders began discounting prices below those on which

PCP based its projections. This caused returns to drop

below expectations. 

Additionally, imported product from Thailand and

China caused U.S. prices to drop. Production costs in foreign countries, due primarily to low-cost labor or large

government subsidies, pose a threat to undercut the price

PCP needs if it is to turn a profit for its members. 

But all factors considered, PCP leaders believe the strong

acceptance of the fruit bowl products by customers in the

initial marketing phase bodes well for the future. They

anticipate growth rates of 20 percent per year. Consumer

acceptance of the single-serve fruit product has been so

encouraging that PCP believes this product will invigorate

the processed fruit market. 

PCP’s grower-members will benefit from the increased

fruit demand to produce this new product, and they will realize the benefit not only through increased deliveries to the

cooperative, but also through increased returns and patronage

payments for this value-added effort.

“There was the grower demand to sell more of their

crops and, thanks to the grant, we had the resources and

capacity to provide the public with the finished product,”

Andy Russick, vice president of retail sales for PCP,

recently told the Oroville Mercury Register. “We couldn’t

have done it without the USDA grant program.” 

For more information about PCP, visit its Web site: 

http://www.pcoastp.com/. For more information on USDA

Rural Development’s Producer Value-Added Grant Program,

visit www.rurdev.usda.gov/ rbs/coops/vadg.htm or call Gail

Thuner at (202) 690-2426. ■

PCP members’ peaches and other crops are processed into singleserve fruit bowls and other fruit products by the co-op. PCP

President Larry Clay says this convenience food has the potential to

pump new life into the stagnant canned-fruit industry.
By Pamela J. Karg 

Editor’s note: Karg is communications specialist based in

Baraboo, Wis., with extensive experience working with 

cooperatives. 

challenge the premise of the question ‘What is

Dairylea doing to survive?’” says Rick Smith,

chief executive officer of the dairy cooperative

based in Syracuse, N.Y. “Who wants to just

survive? We want to thrive and have our members thrive. In doing that, we’re finding ways for our members to enhance their farm income.”

At a time when many food businesses are growing in the

number of plants, suppliers and employees they encompass,

Dairylea Cooperative Inc. has taken a different tack. Like a

well-positioned Wall Street financier, the Northeast’s largest

milk-marketing organization has diversified its portfolio of

services in response to a changing farm economy.

“I give credit to the organizations that have found ways to

be successful with dairy processing plants and brand names,

but there’s not just one way of doing business. And neither

way is right or wrong. It’s a matter of what works for your

farmers and your organization,” Smith explains.

A history of change

But Dairylea’s current focus did not happen overnight. In

fact, the cooperative’s history and the Northeast dairy scene

are rife with change.

A group of Orange County, N.Y., dairy farmers united in

1907 to increase their bargaining power, forming one of the

first cooperatives in the country: The Dairymen’s League. By

the 1930s, its membership had grown to more than 100,000

farms. To guarantee a market for its members’ milk, the

League began operating its own processing and manufacturing plants. And its Dairylea line of products became one of

the best-established brands in the region. 

In 1969, the League changed its name to its popular consumer brand name, Dairylea. But by 1988, Dairylea had sold

its product lines and the last of its milk plants, and refocused

its resources on enhancing the overall profitability of its

membership.

Dairy farming is the largest agricultural industry in

Dairylea’s home state of New York, providing more than 50

percent of its agricultural income. In 2002, the state had

about 7,100 dairy farms with almost 679,000 milking cows,

making New York the third largest dairy state in America.

But the majority of the dairy industry moved to the Upper

Midwest a century ago and is shifting again to California,

Texas, Washington, New Mexico and Idaho.

The Northeastern and Mid-Atlantic regions remain

major milk-producing regions despite the decline in farm

and cow numbers there. New York and Pennsylvania

remain among the top milk-producing states in the country. The region produces about the same amount of milk

as California within a similarly sized geographic region.

However, the region has almost 50 percent more consumers than does California. This makes it a prime location for dairying. 

Today, Dairylea is a fast-growing, service-oriented and

multi-faceted organization. Since the early 1990s, Dairylea’s

membership has grown substantially throughout the region

and the volume of raw milk that it markets has quadrupled. At

the same time, Dairylea has greatly expanded its array of programs and services to reflect what its members want from the

cooperative. More than a marketer for its farmers’ milk,

Dairylea and its subsidiaries are focused on maximizing the

profitability of each member’s farm operation, Smith explains.

“Our mission is to enhance our farmers’ profitability.

Profitability has two major components: income and costs.

Not only does Dairylea work hard to secure a competitive

price for member milk, but it also provides programs and services that help make a farm business efficient and profitable,”

Smith says.

Milk marketing partnerships

“Many of the long-term, major dairy companies of the

past have exited the region, while others have merged,” says

Dairylea President Clyde Rutherford, who operates a 500-

acre dairy farm with his wife, Jeannette, and partners Elmer

and Ann Johnson. “The number of milk plants in the region

has declined. This will continue. In general, we are no longer

dealing mainly with the family-owned businesses that we

knew for generations. Many of the major dairy operations in

the East are part of diversified mega-corporations, many

international in scope.”

More than milk

Dairylea’s scope of farmer services moves beyond milk marketing

“I

14 September/October 2003 / Rural Cooperatives
On this sea of change, Dairylea has emerged as the largest

milk-marketing organization based in the Northeast. Last

year, it sold 5.5 billion pounds of raw milk through a milkmarketing network that reaches from Maine to Ohio to

Maryland. Sales have steadily increased and are now at $1

billion. The cooperative also has investments in several dairy

companies in the region, as well as many long-term sales

agreements.

“Dairylea has developed a strong yet flexible milk marketing network throughout the Northeast. We maintain business agreements and joint ventures with

other cooperatives and proprietary companies, and are, therefore, free of dependency on any one plant, customer or relationship,” Smith explains.

In September 1999, Dairylea formed a

partnership with Dairy Farmers of

America (DFA), Kansas City, Mo., the

nation’s largest dairy cooperative. The

new entity, Dairy Marketing Services

(DMS) LLC, markets nearly 16 billion

pounds of milk provided by more than

9,500 dairy producers in the eastern

region. It is supplying the milk requirements of more than 90 processors and

manufacturers in the region. 

As the retail industry continues to consolidate, DMS has played a vital role in

the industry. Last year, DMS became a

national company and has established

milk marketing relationships with industry giants such as Dean Foods, Land O

Lakes, Vermont-based cooperative St.

Albans and others.

“We are excited about this venture

which allows for increased savings for our

farmers on milk hauling and supply distribution,” says Rutherford. “At the same

time, we are managing near 50 percent of

the Northeast’s milk supply, which enables

us to provide superior service to our customers, particularly those large dairy companies with multiple plant operations.”

Before the formation of DMS, Dairylea

and DFA had a common investment in

Dietrich’s Milk Products in Pennsylvania,

and had milk exchange arrangements with

several of their common customers. The

creation of DMS has improved the efficiency of serving the fluctuating needs of

all their customers, including major players Dean Foods, Kraft Foods, Great Lakes

Cheese, Leprino Foods, H.P. Hood and

Sorrento Cheese.

“For many, many years, farmers have

been concerned about the lack of cost-effectiveness regarding several milk tankers going down the same roads and

picking up milk at different farms depending on which

cooperative the farmer belonged to,” adds Rutherford.

“Additionally, milk supplies that were logical for a particular plant often went to a more distant facility because the

cooperative serving that customer did not market that local

block of milk. With the creation of Dairy Marketing Services, we have moved a giant step closer to maximizing the

efficiency of milk assembly and distribution in our region.”

Rural Cooperatives / September/October 2003 15

New York, home of Dairylea, has more than 679,000 dairy cattle, making it the third largest

dairy state in the nation, lagging only California and Wisconsin. Grant-Heilman Photography
Beyond the milk truck

“Dairy farmer-owned cooperatives have changed over the

years,” adds Rutherford. “Some have merged and some have

gone out of business. At the same time, organizations that

provide services for farmers have changed significantly in

recent years.”

The first issue that moves a farmer from one milk-marketing

organization to another is price. Dairy farmers will jump ship

for what seems like a few pennies for every 100 pounds marketed, which can quickly add up to thousands of dollars annually.

But Dairylea has moved beyond just the assembling and

marketing of milk, and then paying farmers a competitive

price for their raw supply. The approach seems to be paying

off in the cooperative’s ability to attract more people to its

membership, which has grown steadily

over the past few years, says Smith. He

believes that growth comes from the

added services that fill a void and focus

on helping farmers reduce their costs.

In addition to DMS, Dairylea’s other

subsidiaries include Agri-Edge Development, Agri-Services Agency, Eagle Dairy

Direct, Empire Livestock Marketing and

Agri-Financial Services. It also maintains

a partnership with Dairy One—the former Northeast Dairy Herd Improvement Association. Each entity adds value

to the membership a farmer holds in the

cooperative.

“We continue to examine new ways

of doing business. Some of our ideas

would be viewed as non-traditional for a

dairy cooperative,” admits Smith. “In

recent years, Dairylea has evolved from

being strictly a milk-marketing cooperative to becoming an agricultural service organization that focuses on milk marketing.”

Agri-Edge Development

Dairylea’s Agri-Edge subsidiary is a business- and development-planning venture that focuses its efforts on problem

solving, sourcing solutions and mobilizing needed resources

for farm and non-farm agricultural businesses.

Agri-Edge Development has reviewed hundreds of farm

and non-farm businesses since it started in 1998. It has

worked with a wide range of business types in their efforts to

expand operations, upgrade facilities, implement new technology, start a new venture, enter into a joint venture, turn a

difficult situation around, or simply improve profitability.

In one instance, Agri-Edge helped a young dairy farmer

who was milking 80 cows in a rented facility to implement a

plan to buy a quality facility from an older farmer. Working

with the young farmer’s primary lender, Agri-Edge helped

source capital for the additional cows needed to make the

purchase provide sufficient cash flow. It even assisted with

sourcing of the animals. Additionally, a group of advisors was

brought together to work with the young farmer in his startup operation. A milk price risk management plan was developed to provide support to the farmer and the lender in the

face of price volatility.

This subsidiary is focused on delivering results for individual agribusinesses to invigorate the region’s agricultural

industry and rural economies, explains Tom Shephard of

Agri-Edge.

Agri-Service Agency

This is the oldest of the services offered by Dairylea,

and it provides farmers and their employees across the

country access to a wide variety of competitively priced

insurance programs.

Coverages include medical, dental,

workers’ compensation, disability, life

and long-term care insurances for farmers, their families and their employees.

Most notably, its workers’ compensation

coverages provide up-front discounts, a

potential dividend and the lowest net

cost available in the marketplace. The

Blue Cross and Blue Shield network, a

long-time insurance leader, sponsors its

national health plan.

Agri-Services Agency (ASA) also offers

and administers the innovative Farmer

Flex benefit plans that can save money for

agribusinesses, farmers and their employees. In addition, Medical Expense Reimbursement Plans are available, which allow

the average family of four to save about

$100 per month by allocating pre-tax dollars toward insurance-related expenses.

This program allows participants to earmark funds for the cost of insurance premiums, deductibles

and non-covered medical, dental and vision care expenses.

More than 60,000 farmers, agribusiness owners, their

employees and families are covered by ASA insurance plans.

The vast majority of its business is in the health-care and

workers’ compensation insurances.

In New York, ASA provides EMPACT—the Empire State

Agricultural Compensation Trust. Structured as an independent trust, EMPACT is able to offer substantial up-front premium savings as well as year-end dividends.

ASA provides workers’ compensation coverage through its

Agri-Services Safety Group program in New York, Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Connecticut, Massachusetts, Vermont, New Hampshire, Rhode Island

and Michigan. This group offers its members discounted

rates and year-end dividends, resulting in significant savings.

A bonus dividend is often available for those farms and businesses with favorable safety records.

Additionally, ASA conducts an on-going farm safety pro16 September/October 2003 / Rural Cooperatives

“Dairylea has evolved from being a milkmarketing cooperative to becoming an

agricultural service organization that

focuses on milk marketing,” says Dairylea

CEO Rick Smith. Photo courtesy Dairylea
gram for participants in its workers’ compensation 

programs. The goal of the safety program is to reduce

employee injuries by improving work practices and providing

safer work areas. Fewer injuries result in fewer claims, thereby lowering workers’ compensation premiums. 

Agri-Financial Services 

and Dairylease

Because today’s farmers are spending more time with consultants, bankers and others to help plan and implement

short- and long-term business strategies, Dairylea developed

Agri-Financial Services and Dairylease cattle leasing program.

Whether a farmer is looking to purchase a new tractor,

expand his or her herd, or make some much-needed updates

and repairs to facilities, these

programs offer an additional

source for funding for Dairylea

members.

Besides a line of credit, AgriFinancial Services offers capital

loans. Both have maximum terms

of five years.

In addition, the Dairylease cattle leasing program was initiated

in 1996 to give farmers another

option for financing cattle. The

tax benefits, along with the fact

that a lease frees up capital for

other areas of the business, are

attractive to many Dairylea farmers. The premise that assets

do not have to be owned to be successful holds true for cattle,

as it does for equipment, vehicles and land.

This 36-month program provides the option for a buy-out

at the end of the lease for a predetermined amount. Also, the

farmer keeps all offspring born to the leased cows while

agreeing to replace any leased cows that are sold or culled.

There is a minimum of 20 cows required for a lease, and the

maximum lease would be 50 percent of the farmer’s herd.

“The key to this program is that the farmer selects the

animals and negotiates the price,” explains Karen Cartier,

who works with the Dairylease program.

Buying programs 

To help members reduce farm input costs, Dairylea has

developed several innovative buying programs through its

subsidiary, Eagle Supply Co. For members looking to save

money on corn and forage seeds, fertilizer, chemicals, pharmaceuticals and a variety of other farm and milk house supplies, the Dairy Direct offers reduced pricing and direct-tofarm delivery. 

Additionally, a large-scale buying program is in place for

those members who can take bulk delivery of products ranging from commodities to minerals to milk replacer to silage

plastic. Purchasing products on-line through Eagle Supply

Company’s e-commerce site will soon be possible. 

Livestock marketing venture

In 1999, Dairylea launched another marketing venture

when its Empire Livestock Marketing LLC (Empire Livestock) subsidiary joined with L&L Livestock to create a new

direct marketing program. Empire Livestock is the largest

full-service marketer of livestock in the Northeast. It operates nine regional markets and a direct marketing facility,

commanding more than a 50 percent market share of all livestock sales in its operating territory. 

Empire Livestock offers a variety of enhanced services to

help producers maximize income from the sale of livestock,

equipment and facilities. When bovine spongiform

encephalopathy (BSE) fears devastated the livestock industry in the United Kingdom two years ago, Empire Livestock played a leading role in

addressing public concerns about

the safety of domestic livestock. 

Dairylea partners 

with Dairy One 

Having access to a reliable and

accurate milk testing and information system is an extremely valuable

management tool for dairy farmers.

Smith says that’s why Dairylea and

the Northeast Dairy Herd

Improvement Association joined

forces several years ago to create

Dairy One—an information technology cooperative that provides farm management information

services throughout the Northeast and Mid-Atlantic regions. 

Since its formation, Dairy One has succeeded in expanding

and improving laboratory testing and information reporting

services. In addition, it is better able to respond to the individualized needs of the region’s farmers. Dairy One services

include milk testing laboratories for DHIA analysis, producer

payment analysis and dairy research analysis; records service

tailored to the needs of individual farmers to help make profitable herd management decisions; dairy management software and support; and a feed and forage laboratory.

Where to next?

“Controlling the expense side of the dairy operation, we

believe, is as important as enhancing the revenue side,”

Rutherford says.

To that end, Dairylea turned to its members again to analyze

their needs and determine how the cooperative could assist. On

April 1, a new employment company was added to its portfolio to

help place people on Northeast dairy farms. The new service will

provide employment screening, hiring, training, resource and

supporter materials, and “help bridge cultures,” explains Smith.

“No one across this geographical area is doing business

like we are,” he adds. “We recognize a need in our members

and we determine if, and how, we can provide services. We’ve

been very proactive.” ■

Rural Cooperatives / September/October 2003 17

New free-stall barns such as this one are a common sight in

New York, as dairy farmers follow the trend to modernize their

operations and expand their herds. Photo courtesy Dairylea. 
18 September/October 2003 / Rural Cooperatives

E. Eldon Eversull

Agricultural Economist

USDA Rural Business-Cooperative

Service

Editor’s note: Information for this

article was collected by USDA/RBS co-op

statistics staff members Celestine C.

Adams, Katherine C. DeVille and 

Jacqueline E. Penn.

ven with lower prices in

many agricultural sectors, net business volume

for the nation’s farmerowned cooperatives

increased by almost 4 percent in 2001,

to more than $103 billion. Leading the

way once again was Minnesota with

$9.9 billion in sales by farmer cooperatives (table 1). Minnesota took over the

top spot for the first time in 1999. 

Iowa, which was the leading state in

1997, was second in 2001, with cooperative net business volume of $9.2 billion.

Wisconsin, at $8.7 billion, fell from second to third place. USDA has been collecting statewide cooperative data every

other year since 1951 (figure 1).

Iowa had the largest gain in co-op

sales since 1999, increasing $1.3 billion. Of that amount, $1.2 billion was

from additional products marketed.

Wisconsin had an additional $516 million in marketing sales while Minnesota’s gain of $590 million was almost

equally divided between marketing and

farm supply sales. Cooperative sales

increased in 34 states and the District

of Columbia, while 16 states experienced a sales decline.

A breakdown by sale of individual

products shows the following highE

Minnesota leads the nation in

co-op business volume

Figure 1—Cooperatives’ total net business volume by function,

ten leading states

10

8

6

4

2

0

MN IA WI CA IL KS NE MO TX WA

Billion $

Service Farm Supply Marketing

Figure 2—Number of cooperatives by function, ten leading states,

2001

350

300

250

200

150

100

50

0

MN ND TX WI IL CA IA KS SD NE

Number

Service Farm Supply Marketing
lights for the leading co-op states from

1999 to 2001:

■ Minnesota cooperatives increased

sales of milk/milk products by $263

million; grains/oilseeds by $232 million

and petroleum by $256 million. 

■ Wisconsin cooperatives increased

milk/milk product sales by $356 million. 

■ Iowa cooperatives increased

grain/oilseed sales by $648 million;

livestock/poultry by $346 million and

milk/milk products by $120 million. 

Cooperatives in the 10 leading

states increased their net business volume by about $2.5 billion in 2001

compared with 1999. These cooperatives account for 60 percent of total

net cooperative business volume, 63

percent of marketing volume, 51 percent of farm supplies sold and 66 percent of total service sales.

Minnesota was the top state for

marketing cooperative products; Iowa

was tops for selling farm supplies and

California had the highest service

receipts for cooperatives. Minnesota

led all states in cooperative marketing

of sugar and in manufactured food

products and was second in milk/milk

products and grains/oilseeds. 

Iowa was the top state for cooperative marketing of dry beans/peas and

grains/oilseeds and was second for livestock and manufactured food products.

Wisconsin was first for cooperative

marketing of milk/milk products.

For cooperative farm supply sales,

Minnesota was the leader for petroleum and was second for feed and other

miscellaneous farm supplies. Iowa was

first for cooperative sales of feed, seed,

Rural Cooperatives / September/October 2003 19

Table 1—Farmer cooperative numbers, memberships, and net business volume by State, 20011,2

Cooperatives Cooperatives

headquartered Memberships Net business headquartered Memberships Net business

State in state in state3 volume4 state in state in state3 volume4

Number Million $ Number Million $

Alabama 62 42,222 950 North Carolina 22 96,351 975

Alaska 9 4,812 44 North Dakota 239 120,303 3,292

Arizona 9 2,710 608 Ohio 73 53,407 2,792

Arkansas 52 55,431 1,671 Oklahoma 81 65,640 1,562

California 171 49,553 7,573 Oregon 33 27,043 1,704

Colorado 47 29,122 1,119 Pennsylvania 54 33,442 1,441

Connecticut 5 1,899 214 South Carolina 5 2,639 185

Delaware 3 43,430 104 South Dakota 126 98,395 2,700

Florida 40 29,753 2,414 Tennessee 79 137,805 809

Georgia 17 21,748 1,677 Texas 238 109,926 3,876

Hawaii 20 904 29 Utah 17 9,354 512

Idaho 37 20,259 1,422 Vermont 5 4,557 523

Illinois 175 175,871 5,470 Virginia 57 193,470 847

Indiana 46 66,818 2,071 Washington 78 31,664 3,331

Iowa 166 162,249 9,232 West Virginia 26 83,051 99

Kansas 133 129,576 4,794 Wisconsin 175 186,490 8,738

Kentucky 42 242,873 708 Wyoming 12 5,485 241

Louisiana 47 13,032 736 Other States 4 2,440 111

Maine 26 7,922 225 Foreign — 2,765 500

Maryland 17 74,404 411

Massachusetts 12 4,573 637 United States 3,229 3,033,907 103,269

Michigan 62 28,660 2,198

Minnesota 293 176,594 9,896 1 Includes cooperatives with centralized, federated,

Mississippi 70 111,043 1,056 and mixed organizational structures.

Missouri 66 109,134 4,611 2 Data for states with fewer than three cooperatives

Montana 65 33,066 719 combined with other states. Totals may not add 

Nebraska 95 84,834 4,721 due to rounding.

New Jersey 16 7,052 388 3 Includes farmer members entitled to vote for 

New Mexico 10 2,705 507 directors. There are more members than U.S. 

New York 92 37,431 2,826 farmers because many farmers belong to more

than one cooperative.

4 Excludes inter-cooperative business.

continued on page 30
By Patrick Duffey, writer-editor

USDA Rural Development 

any parents have read the “Little Engine That

Could” story to their children, but this might

be called a tale of the “Little Creamery That

Could.” Today’s small community business in

the southwestern Wisconsin village of Westby, Wis., was started in 1903. Few thought surviving grandchildren five generations later would still live to see it and

enjoy its dairy products, which would eventually be differentiated as “farmer-certified rBGH-free.”

In many ways, little Westby Cooperative Creamery strives

amidst some of the nation’s major dairy cooperatives operating in Wisconsin’s Dairyland. This year, Westby is celebrating its 100th anniversary. The small community amidst

scenic rolling hills unscathed by glacial flows of 10,000 years

ago is located just west of the state’s capital at Madison.

On Oct. 31, 1903, 300 Vernon County dairy farmers paid

$10 each for a capital stock certificate and filed articles of incorporation to form the cooperative. The typical farmer then had

about 10 cows. Small farms dotted the landscape. Local farmers

brought cream by horse-drawn wagons to the factory, which

was built for $1,225 on a parcel of land that cost $400. 

In 1927, the Main Street factory was built and still stands,

albeit with subsequent remodeling and additions. That first

year, the cream from Vernon County dairy farms was made

into 67,524 pounds of butter. 

Demise of milk cans

Although the first generation is gone, several second- and

third-generation patrons still recall the early days. Carla

Olson, 83, of Westby is a second-generation patron. “Cows

were milked by hand and milk was separated from cream

with a hand-cranked separator,” she says. 

Her father-in-law, Arne Olson, traveled with his brother

from Norway in 1893 by steamship, settled in the Westby

area and helped build the original creamery building. In

those days, many made their own cheese and butter at the

farm, she recalled. 

In time, Model T cars and trucks replaced the wagons and

later came even larger trucks that hauled the metal cans,

which contained 100 pounds of milk. The old standby cans

gave way to bulk tanks at the farms by 1969. 

20 September/October 2003 / Rural Cooperatives

M

Wisconsin’s Westby, ‘Little Creamery

That Could,’ marks 100th anniversary

A cooperative milk tanker, circa 1943. Right, sorting empty milk cans at the Westby Cooperative

“new building” in the early 1940s. Photos courtesy Westby Cooperative 
Rural Cooperatives / September/October 2003 21

Today, Vernon County has only 600 surviving dairy farmers, and the milk feeding the cooperative comes from 120

members in a half dozen surrounding counties. Westby operates with a staff of 37. 

As a farmer-owned cooperative, the Westby Cooperative

Creamery takes pride in the traditions started a century

ago. Its hard cheeses are handcrafted in open vats by

qualified cheesemakers, not machines. And its pure and

natural butter recipe hasn’t changed in 100 years.

Its main products are cottage cheese, sour cream, butter

and a variety of cheeses made from about a third of the milk

the cooperative receives. The balance is sold to other dairy

processors.

Cheddar cheesemaking at Westby Cooperative in Vernon County,

Wis., during the 1940s. 

The Westby intake

room in 1942, where

milk was dumped

and weighed.
Westby label is born

When Tom Gronemus took over as manager in 1992,

Westby had lost a major market. For many years it made

and sold bulk cottage cheese to Dean Foods. But that

relationship ended in 1992. 

The creamery was making 500-pound barrel cheese

for Borden and 68-pound packs of butter for the federal

government. “We didn’t even have a label or logo,” he

recalls. His 30 years with the cooperative makes him personally familiar with the most recent third of its history. 

When Gronemus moved into management, he and the

board jumped into marketing and developed the “Westby”

label. They recruited a sales force, created and tried new

products and now have developed a distribution system to

deliver fresh products direct to the stores. 

Fresh cheese curds have become a specialty. “During the

summer, we sell 30,000 to 40,000 pounds of them and our

local dairy store at the creamery is a popular stop for local

customers and travelers,” Gronemus says. “We emphasize

high-quality dairy products made with milk from small

dairy farms. 

“All of our milk is farmer-certified rBGH-free, which also

appeals to many people. Our dairy farmers believe hormones

used to enhance milk production stress their cows and thereby decrease the quality and wholesomeness of the milk.”

Official ‘Packers’ Cheese’

Steve Holte, who milks 50 cows near Westby, heads the

board of seven directors as it embarks on its journey into the

cooperative’s second century. The newest feather in the

cooperative’s cap is the contract it signed last summer to provide the Official Cheese of the Green Bay Packers, home of

the “Cheeseheads.”

Manager Gronemus says the cooperative is “thrilled about

the new partnership. We started off with a new product line

with the ‘Official Cheese Curds of the Green Bay Packers’

and expanded the line during

the season.” 

When ABC’s Monday 

Night Football traveled to 

Lambeau Field last November,

Westby capitalized on the

opportunity, commissioning

cheese carvings of ABC’s John 

Madden and Al Michaels.

Fans got a taste of the new

products when the curds

reached most Wisconsin grocery stores last fall. Westby’s

products can also be ordered

online at www.westbycreamery.com.

The creamery launched the

first of its many centennial

celebrations this spring with

the “World’s Largest Office

Party,” sponsored by a

LaCrosse area radio station. It

attracted nearly 5,000 party

goers who witnessed the

creamery’s cheese curd toss

and sampled products. 

Cheese carvings of the local

radio personalities were made

from young cheddar cheese

and later used in promotions at local grocery stores.

Curd Mobile debuts

The official birthday party, dubbed ‘The Ultimate

Cheesehead Challenge,’ was conducted in mid-May as part

of the community’s annual Norwegian Syttende Mai celebration. In addition to celebrity appearances from Green

Bay Packer Mark Tauscher and legendary farm broadcaster

Orion Samuelson, the observance marked the long-anticipated debut of the Westby Cooperative Creamery Curd

Mobile. Time ran out before Gronemus could train anyone

else, so he was busy adding batter and frying curds for the

long line of eager customers. 

It proved to be a popular place to promote the cooperative’s array of products, and a profit center. “It far surpassed

my expectations in terms of sales and interest,” he said.

Westby promotes the freshness of its dairy products. “Our

butter, for instance, is made from fresh cream only a few

hours old,” Gronemus proudly proclaims. The cooperative

claims this freshness gives its products a special flavor. 

So what’s ahead for this “little creamery that could?” If its

performance in the past 100 years is any barometer, Westby

will be digging deeper into its market with new and better

products for its customers, and reminding existing and new

members that when you’re part of a cooperative, great things

can be accomplished. ■

22 September/October 2003 / Rural Cooperatives

Even Westby dairy cows are fans of the Green Bay Packers,

appropriate since the co-op has been designated as the official

“Packers Cheese.”
HS Chief Executive

Officer John Johnson,

whose communications

skills helped his cooperative transition

through a major merger, is the 2003

recipient of the CEO Communicator

of the Year Award, presented in June

by the Cooperative Communicators

Association (CCA). CCA observed its

50th anniversary in Madison, Wis.,

marking a return to the city where

the organization was launched in

1953 to help strengthen the nation’s

cooperatives through improved 

communications.

Other top honors went to Rural

Cooperatives editor Dan Campbell,

who received the Klinefelter Award,

and Tennessee Cooperator editor Allison

Morgan, who earned the Michael

Graznak Award. Randall Torgerson,

who recently retired after 28 years

heading USDA’s cooperative program, won a special “Co-op 

Champion Award.” 

Originally known as the Cooperative

Editorial Association, the organization

today represents 300 communications

professionals in the United States and

several foreign nations who work for

farm, utility, credit, housing and other

types of cooperatives. 

Communications forge

new identity for CHS

Johnson’s communications efforts

played a key role in successfully forging a new identity for CHS, a multifaceted cooperative with $8 billion in

annual sales. CHS was formed by the

merger of CENEX, an energy and

agronomy supply co-op, and Harvest

States Cooperative, one of the nation’s

leading grain marketing co-ops.

“In the five years since CHS Cooperatives was established, John Johnson

has proven himself a skilled leader at

not only setting direction for the new

company, but in using communications to build understanding and support among members, employees, customers and other stakeholders,” says

Lani Jordan, CHS director of corporate communications. 

Although members of the two coops voted overwhelmingly in favor

the merger, the ride got a little rocky

in the early days, making it essential

that Johnson and his staff communicate effectively at all levels. Members

from both the grain and supply sides

of the organization struggled to

understand the direction of the new

company, as did the employees of

both cooperatives. If that wasn’t

enough, another merger a year later

between CHS and Farmland Industries was proposed, but was voted

down by the members, creating further communications challenges. 

Johnson, who was originally president and general manager of CHS,

assumed the CEO job in June 2000.

He made communications and relationship building a top priority from

the first day, working tirelessly to build

trust in CHS. That trust has translated

into long-term support for the cooperative’s mission, vision and strategic

actions to implement them.

Today, communications is a central

part of the cooperative’s strategic vision

and daily operation. Johnson spends

three-quarters of his time communicating formally and informally with CHS

stakeholders. 

USDA editor honored

Dan Campbell, editor of USDA’s

Rural Cooperatives magazine and deputy

director of public affairs for USDA

Rural Development, won the Klinefelter Award, CCA’s highest honor for a

communicator, for his “contributions

to furthering the cooperative system

and spirit and raising the standards of

cooperative communications.”

Campbell was cited for bringing

new ideas to the leaders of the nation’s

co-ops and expanding the scope of the

magazine to include a broader range of

cooperatives that can help improve the

quality of life in rural areas. 

“He is known for his creative writing, insightful photography and his

excellence in producing good, solid

Rural Cooperatives / September/October 2003 23

C

Top co-op communicators

honored in Madison 

Dan Campbell

John Johnson

Allison Morgan
publications,” said award presenter

Leta Mach of the National Cooperative Business Association. 

A graduate of the University of 

Colorado with a degree in journalism,

Campbell started his post-college

career at the bottom—literally—

working 2,000 feet underground in a

molybdenum mine high in the Colorado Rockies. He then became news

editor for a twice-weekly newspaper in

Estes Park, Colo., before moving on

to the job of farm editor of a daily

newspaper and a monthly farm tabloid

in Central California. 

That was where he first began working with ag cooperatives, leading him

to a job as publications editor for Blue

Diamond Almond Growers in Sacramento. That in turn led him to the editor’s job at USDA in 1992. 

Campbell is the 45th recipient of

the honor, named for H.E. Klinefelter,

an outstanding writer who joined the

staff of Missouri Farmer magazine in

1931, now MFA Inc.’s Today’s Farmer.

Klinefelter assumed the editorship in

1939 and became well known for his

articles advocating cooperatives. He

died in 1956.

TFC editor gets Graznak 

Allison Morgan, communications

specialist with Tennessee Farmers

Cooperative (TFC), was awarded the

2003 Michael Graznak award, presented

to an outstanding communicator under

the age of 36. She was selected for her

excellence in telling the co-op story in

the pages of The Tennessee Cooperator

newspaper, of which she is editor.

She was called “a complete communicator,” and “a prolific writer, eagleeyed editor, accomplished photographer and talented designer.” Morgan is

also proof that co-op youth programs

yield dividends. As a high school junior,

she wrote a prize-winning essay about a

trip to Washington, D.C., as a participant in the annual Youth Tour sponsored by the National Rural Electric

Cooperative Association. 

Morgan joined TFC in 1996 after

graduating from Middle Tennessee

State University with a degree in mass

communications and expects to complete her master’s degree in the same

area of study at that university this

fall. She was CCA’s writer of the year

in 2002.

Michael Graznak was an outstanding

co-op writer and photographer for

Farmland Industries who died on

assignment in 1976. 

“Co-op Champion” named

The Co-op Champion Award was

presented to Randall Torgerson in

recognition of his strong advocacy for

cooperative communications during

his distinguished career at USDA. In

1974, he was tabbed by Agriculture

Secretary Earl Butz to head what was

then called the Farmer Cooperative

Service. Although he retired last year,

Torgerson continues to be extremely

active as a speaker and panelist in coop meetings across the nation. 

“We need people like this special

man,” CCA President Mark Bagby

said of Torgerson. “In the past 30

years, there has been no more forceful

spokesman, nor a more vigilant

watchdog for cooperatives. Whether

pointing the way to new opportunities

for cooperatives, sounding the alarm

about potential negative changes, or

fighting for resources for USDA’s

cooperative education and research

program, Dr. Randall Torgerson has

been a relentless champion of the

cooperative way of doing business. 

“He is a champion and advocate

because he believes cooperatives are far

more than a successful business model,

but also a means to strengthen and protect the soul of America’s rural life...He

not only lived by the co-op book, he

helped write it,” Bagby added. “Much

of the modern cooperative system in

the United States shows the influence

of his ideas.” 

Top contest winners

Top award winners in CCA’s annual

communications competition were:

■ Richard Biever, senior editor for

the Indiana Statewide Rural Electric

Cooperatives Inc., earned “Writer of

the Year” honors. This is the second

time Biever has claimed the award.

■ Bob McEowen, field editor for the

Association of Missouri Electric Cooperatives, was named “Photographer of

the Year.” Contest judges said “Bob is a

real photojournalist with a knack for

capturing the decisive moment.”

■ Lydia Botham of Land O’Lakes

won top honors in special projects for

her campaign “Life’s Simple

Moments.” Her project was selected as

the top winner in its class of more than

100 entries. 

■ Cooperative Profiles Magazine,

edited by Jessica Lamker of CHS

Cooperatives-Land O’Lakes, received

“Publication of the Year” honors. The

contest judge said, “This publication is

attractive, highly readable and in all

aspects supports its objectives. It is

highly unlikely to end up in the reader’s circular file, but rather retained for

a source of future reference.”

Rural Cooperatives and its contributors won several awards, including 

second place for best member magazine. The judges said the magazine is

“visually appealing, highly readable

with good content and use of design

elements to support text and creative

photography.” 

John Dunn and four USDA coauthors won first place in the cooperative education writing category for an

article they authored on the challenges

cooperatives will face in the 21st 

Century, which was the cover story 

of the Jan.-Feb. 2003 issue of Rural

Cooperatives. In that same category,

USDA’s James Baarda won second

place for a series of three articles providing an overview of the responsibilities of co-op directors.

Four new directors were elected to

the CCA board: Claire Smith of

Sunkist Growers; Glen Liford of Tennessee Farmers Cooperative; Leta

Mach of the NCBA and Chuck Lay of

MFA Inc. Sheryl Meshke of AMPI is

the new CCA president. 

The 2004 CCA Communications

Institute will be held in Louisville, Ky.,

June 12-15, and will conclude the yearlong observation of the organization’s

50th anniversary. ■

24 September/October 2003 / Rural Cooperatives
By Jim Wadsworth

Program Leader, Co-op Education

and Member Relations

Craig Scroggs 

Co-op Development Specialist, Ga.

USDA Rural Development

ack to school was

the order of the day

for the diamond

anniversary of the National

Institute of Cooperative Education (NICE), held on the campus of Virginia Polytechnic

Institute and State University

(VaTech) in Blacksburg, Va.,

July 27—30. This marked the

first time since 1986 that the

conference was held on a

college campus. Colleges

were the traditional settings

before the mid-1980s for

the event, which has roots

that stretch back to the 1920s. 

Eighty youth scholars from

Arkansas, Kansas, Kentucky, North

Carolina, Pennsylvania, South Dakota, Tennessee, Virginia and Wisconsin

attended this unique national educational forum that focused on the

theme: “Cooperatives: A Gem of a

Deal.” 

Dixie Watts Reaves, professor of

agricultural economics at VaTech,

played the key role in getting NICE

up and running again after it was

discontinued last year as a much

larger conference that catered to

youth, young farmers, directors,

educators and others. The objective

was to ensure that the traditional

youth development component of

NICE would continue.

Given the tremendous amount 

of enthusiasm exhibited by the 

youth scholars and rave reviews of all

involved, it is clear that there remains

a strong need for a NICE youth 

conference. 

Running the store

Danny Adams of Southern States

Cooperative discussed farm store business concepts and led the students

through a cooperative business simulation exercise. Students in nine teams

used their newly acquired business acumen for setting margins and sales

goals, controlling inventory and analyzing financial data to direct their

cooperative stores toward improved

performance. The teams made a series

Rural Cooperatives / September/October 2003 25

B

Back to School

NICE marks 75th anniversary with return to 

campus as co-op youth education program

Above, students gather for a general session at the

75th NICE conference in Blacksburg, Va. Below

and next page, students learned more about cooperatives through activities such as operating their

own purchasing cooperatives, analyzing cooperative case studies and various team-building exercises. USDA photos by Craig Scroggs 
26 September/October 2003 / Rural Cooperatives

of four decisions, each involving 38

variables. 

Winning teams in each of the three

market areas were crowned, based

upon their stores’ increased net worth.

By the end of the simulation, the

teams had learned a great deal about

managing and directing a co-op farm

supply store.

Student teams also formed their

own purchasing cooperatives, which

they operated throughout the institute. They developed business plans,

selected goods to sell or services to

perform, set prices and marketed

their goods or services to each other.

T-shirts, water, candy, soda, visors

and various other goods were offered.

Each student cooperative that earned

a profit then contributed that money

to a scholarship fund for the 2004

NICE.

The teams competed in assessing

and analyzing two cooperative case

studies where the students were

required to effectively identify the

problems with the cases, propose possible solutions and consequences, then

choose the best solution. The competition was close and the judging tight.

Lionel Williamson and Patsy Whitehead of the Kentucky Council of

Cooperatives scored the cases. The

winners of each case study delivered

and defended their solutions to all the

teams, resulting in vigorous debate

and further enriching the learning

experience.

NICE participants took a MyersBriggs Type Indicator (MBTI) survey

(to assess personality traits) before the

institute. Judith Jones of VaTech discussed uses of the MBTI, handed out

individual results and did some aggregate assessments of the group. 

Institute participants toured a

Southern States Cooperative regional warehouse, attended a southernstyle barbeque dinner in Longwood

Park in Salem, Va., and attended a

baseball game in the crisp mountain

air at the picturesque Salem

Avalanche ballpark.

Working together 

Team-building challenge activities

were interwoven throughout the program, with students organized in various groups to learn the benefits of

mutual cooperation and trust. The level of spirit generated by these activities

enhanced camaraderie and relationships among students. 

A cooperative education and

employment opportunities session was

added to the institute. Students

got an overview of job opportunities in cooperatives and

were advised of what to expect

when reaching college and

confronting the challenges of

selecting and pursuing minor

and major courses of study. 

A formal banquet on the

final evening of the institute

gave students an opportunity

to dress up and socialize, take

group pictures, perform a skit and

receive recognition for individual

achievements. An institute video presentation capturing students involved

in different activities during the week

generated laughs. Following the 

banquet, a dance and karaoke party

was held. 

After a cooperative history and

governing principles lesson, students

acted out the development and founding of the first consumer cooperative,

started by a group of weavers in

Rochdale, England in 1844. This 

provided students with a unique 

perspective of the discussions and

cooperation required to form a cooperative business.

The competition to be named an

“outstanding youth scholar”

advanced through a series of interviews conducted throughout the

institute in front of a panel of adult

leaders. The winners, announced at

the banquet, were: Janice Keeley of

Oregon and Adam Wolking of

Kansas. Runners-up were: Lori

Andrews of Arkansas and Daniel

Nead of North Carolina.

A number of sponsors helped 

make the 75th anniversary of NICE a

reality. Students expressed their

appreciation with displays of banners

and announcements. ■

The fun and enthusiastic learning reflected at this diamond anniversary of

NICE provided a strong foundation for continuation of the program. Adult leaders discussed committing to future plans to further advance the quest of educating America’s youth on cooperatives on a national level. It was clear that

developing even greater participation and increasing energy toward future

strong national institutes is a reality well within reach. 

The return to campus for this year’s NICE proved to be an ideal setting for

this event, now streamlined as a youth education program.

In the last issue of this magazine (see commentary on page 2, July/August

2003 issue) James Haskell, acting deputy administrator for USDA/RBS, said

“The need for cooperative education is greater today than at any time in memory.” Programs such as this must continue. 

Just as with various other educational programs around the country, this

year’s NICE proved that some seeds of cooperative education remain firmly

planted. With care and focus, they can continue to grow. ■

The future of NICE 
Rural Cooperatives / September/October 2003 27

oday’s cooperative director faces more challenges than ever. The

knowledge and skills

needed to be an effective

director continue to grow in number

and importance.

“Our local cooperative members are

three to ten times larger than they used

to be,” says Rick Wills, director of education and development for GROWMARK, Bloomington, Ill. “Directors

used to make decisions affecting one

county; now it could be for a quarter of a

state. As this growth was occurring, the

message we kept hearing from directors

was the need for more training.”

To assist directors in attaining and

developing skills and knowledge,

GROWMARK developed the Certified Cooperative Director Program for

its FS member cooperative directors.

The program is designed to improve

the abilities of board members to better

carry out their individual and team

leadership roles by providing education,

involvement and recognition processes.

“GROWMARK regional managers

identified the skills necessary for successful board members and the program was

developed around the need to understand cooperative financing, legal and

board responsibilities as well as how to

improve leadership,” Wills says. “Board

members are finding that the same skills

are applicable to their own business and

other board responsibilities.”

Program launched in Canada

A pilot program was launched in

Ontario beginning in late 2000 and was

brought to the rest of GROWMARK’s

trade area in 2001. Currently, twothirds of the FS directors are involved

in the process. More than 120 are certified, and 425 are actively pursuing certification, according to Wills.

“I am pleasantly surprised by directors’ acceptance of the program. It asks

for extra time from busy people, but

the support has been overwhelming. They see the

need and value of certification. Some local co-ops are

making it a requirement for

new directors,” Wills adds.

Group and individual

director development plans

include required and optional

activities. These include participation in ongoing programs sponsored and conducted by GROWMARK as

well as local and regional

activities conducted by local

management, GROWMARK

regional staff, GROWMARK education and development staff and/or outside providers.

To become certified, a director must

earn at least 30 credits over a two-year

period. Required programs include:

“New Director Orientation,” “Cooperative Finance 100,” and “Director

Responsibilities.” There are currently

15 additional programs, including topics dealing with fiduciary responsibility,

understanding pricing, smart risk taking and leading change.

Decertification required 

To keep the skill levels current,

directors must recertify every two

years. To retain certification, directors

must obtain an additional 30 credits

during each two-year period.

“We are providing directors a higher

level of knowledge and expertise to

make better decisions for more successful cooperatives,” Wills says. “This

should help farmers have increased

confidence in their local boards. They

can know that directors have the tools

to protect their investment and guide

the co-op to meet members’ needs.

The more training we provide, the

more the directors want.”

Cooperative directors who have

participated in the program say it has

great value.

Ron Weidner, president and board

chairman of CONSERV FS, based in

Wauconda, Ill., says 70 percent of his

board is certified. “We recently went

through a merger, and this training was

beneficial. People are reading about coops being dissolved, and members are

concerned. We owe our stakeholders

(members, employees and the community) to keep up with the changes and to

GROWMARK certification program

prepares directors for new challenges 

T

continued on page 31

GROWMARK Chairman Dan Kelly provides an overview

of what makes a good co-op director during a directorcertification meeting. About two-thirds of FS co-op

directors have been involved in the program since it

was launched in 2000. Photo courtesy GROWMARK.
Iowa Quality Beef

opens Tama plant

Iowa has a third beef processing

plant in operation with the re-opening

of a now modernized plant in Tama.

The plant is owned by 900 producermembers of the Iowa Quality Beef

Supply Cooperative (see May-June

2003 Rural Cooperatives for more on

this co-op). The opening was delayed

from the original target date by construction snags and the need to raise

some additional funds. The $32 million project had been promoted by the

Iowa Cattlemen’s Association. The

plant will initially process 1,200 to

1,500 cattle daily.

Indiana’s Countrymark offers 

metered biodiesel blending

The first metered soy biodieselblending system in the nation has been

introduced at Countrymark Cooperative’s terminal at Jolietville near Indianapolis, Ind. The operation is considered a significant step in making the

distribution process seamless. Most others use a splash blending system to get

the required mix. Joe Jobe, executive

director of the National Biodiesel Board,

says “having biodiesel available at large

regional distribution terminals would cut

transportation cost for biodiesel and

lower the end price for consumers.” 

Countrymark sees this as the first

step for its fuel distribution arm and

plans to extend the service to its other

terminals if it proves successful. Grants

from the Indiana Soybean Board

helped cover feasibility study costs and

infrastructure improvements.

Videos, brochures promote 

Co-op Month in October

Looking for an effective, entertaining way to show and tell all about

cooperatives? National Cooperative

Bank’s (NCB) award-winning “What

is a Co-op? You’d be Surprised”

brochure and video can do just that.

Produced as a cooperative education

project, the brochure and video illustrates the many benefits and remarkable

diversity of today’s

cooperatives. 

Inside the brochure,

a stylized map pops up

to illustrate how cooperative endeavors are

interwoven throughout

American society. The

accompanying text

spotlights the principles

that generally guide a

co-op’s operation and

outlines the business

advantages of cooperative ventures. 

The lively 20-minute video

demonstrates how cooperatives

across the country are part of everyday life in the 21st century. The

video highlights child care, housing,

credit union, agricultural, grocery

and other cooperatives that help

build a community. 

Both brochure and video are 

available at no charge. To obtain

copies, e-mail your request to 

marcom@ncb.coop.

Co-op Development Forum

slated for Minneapolis

The National Cooperative Business

Association’s 9th Annual Cooperative

Development Forum, to be held Nov.

5-7 in Minneapolis, will bring together cooperative development professionals to discuss the role of cooperatives in rural and urban economic

development. 

Keynote speakers Paul Hazen, president and CEO of NCBA, and JeanYves Lord, executive director of the

Canadian Cooperative Association, will

discuss cooperative development in

their respective countries. Panel sessions will feature cooperatives that have

established other new co-ops and steps

to create a community culture for

cooperative development. 

In stakeholder sessions about housing co-ops, sustainable forestry cooperatives, value-added agricultural

cooperatives, urban cooperative development and coffee cooperatives, participants will explore issues and strategies for cooperative development. A

special pre-conference session addresses structural change and non-member

capital strategies. Following the con28 September/October 2003 / Rural Cooperatives

NEWSLINE

Compiled by Patrick Duffey

Countrymark Cooperative has opened the nation’s first metered

soy biodiesel-blending system. Photo courtesy Countrymark
Wyoming and Minnesota recently

accepted the "outside equity" argument

and enacted new state laws permitting

entities still called "cooperatives" to

have substantial non-user involvement.

In both states, a "cooperative" can have

up to 85 percent of its earnings allocated to investors on the basis of investment. And up to 85 percent of the voting control can be in the hands of

non-patron members, although patrons

are guaranteed the right to select directors with at least 50 percent of the voting power on the board.

Whether entities, which choose to

have this large non-patron presence,

should be truly considered "cooperatives" is doubtful. This holds true even

if a good portion of the non-patron

interests are held by users. What distinguishes a cooperative from other

forms of business is not "who" owns

and controls it and is entitled to the

earnings but "how" these attributes are

allocated. In a cooperative, it is based

on use, not investment.

The task of cooperative leaders,

members, directors and advisors—as is

our's here at USDA—is to take a careful look at where cooperatives are,

where they are going and what they

need to maintain their critical role for

farmers and rural America. The essential character and strengths of cooperatives must be preserved while responding to new economic and business

forces. The challenge for the cooperative community will be to make

informed and wise decisions with positive and lasting impacts on cooperatives, farmers and rural communities. 

James Haskell, Acting Deputy Administrator, USDA Rural Business-Cooperative

Service

ference, participants can join tours of

Minneapolis cooperatives. 

A limited number of scholarships

are also available. The conference hotel

is the Crowne Plaza Northstar. For

more conference information, contact

Leta Mach (202) 638-6222; e-mail:

lmach@ncba.coop. Or visit the conference Web site: http://www.ncba.coop/

whatnew.cfm#conf.

Minnesota law opens co-op

membership to new investors

Minnesota’s Cooperative Associations Act has been modified to combine portions of the state’s traditional

cooperative law with portions of the

limited liability statute to create a

new business entity for cooperatives.

The new law allows all forms of cooperatives in the state to take on

investor-members, in addition to traditional patron members. Investors

may not necessarily purchase from

the cooperative but may join it to

earn a profit on their investment and

to provide capital funds for cooperative expansion. The measure was

endorsed by the Minnesota Association of Cooperatives and was based

on a similar legislation approved in

Wyoming in 2002.

Michigan Sugar 4th co-op in

Midwest Agri-Commodities 

Saginaw-based Michigan Sugar Co.

has become the fourth cooperative

member of Midwest Agri-Commodities, a marketing arm formed in 1979.

Midwest globally markets more than

12.3 million tons of beet pulp, beet

molasses and desugared beet molasses

to the livestock, dairy and poultry

industries. The addition of Michigan

Sugar should push the marketing volume to 1.5 million tons.

Chuck Hufford, president of Midwest, called the arrangement a “winwin situation” for both the marketer

and its cooperative members. “Domestically, Michigan Sugar provides us

with important access to eastern United States customers and globally gives

a transportation alternative to service

European agri-product clients.”

Thomas Zimmer, Michigan Sugar’s

chairman, said the organizations were

“mutually compatible with common

objectives and commitment to success

in the agri-products marketplace.”

Other owners are American Crystal

Sugar Co., Minn-Dak Farmers Cooperative and Southern Minnesota Beet

Sugar Cooperative.

Breeding to head

Kansas Co-op Council 

Patrick Breeding, former vice chairman of the Kansas Cooperative Council, had been named the organization’s

chairman following the resignation of

Dave Andra, Danville Co-op, due to

illness. Andra, a director since 1988,

had been re-elected chairman at the

annual meeting in March. The council

is studying an alliance with Kansas

Farmers Service Association to secure

managerial, operational and secretarial

services following the death of Joe

Lieber, who had been the council’s

executive officer. 

Rural Cooperatives / September/October 2003 29

Commentary continued from page 2

Holding a number of control variables

constant, the survey analysis showed

that MACMA members appear to reap

substantial fringe benefits from their

membership in the bargaining cooperative. These benefits include having

input into contract terms and public

policy that affects them, as well as finding marketing assistance if needed.

Overall, the researchers conclude that

strong laws that enable the establishment

of bargaining cooperatives, although not

panaceas, help growers to maintain their

operations in the face of structural

change in the apple industry. ■

Apple industry continued from page 7
Bailey to head Co-op

Development Foundation

The Cooperative Development

Foundation in Washington, D.C., has

a new executive director: Elizabeth

Bailey, who served in the administrations of three former Wisconsin 

governors and was former director for

development for the National Guard

Association of the USA. She replaces

Judy Ziewacz, who earlier this year

became deputy secretary of the Wisconsin Department of Agriculture,

Trade and Consumer Protection.

Court OKs ADM buying

MCP, spinoff venture

The disputed sale of Minnesota

Corn Processors (MCP) in Marshall,

Minn., to Archer Daniels Midland

(ADM) of Decatur, Ill., has cleared its

final hurdle with approval of the deal

by a federal judge in Washington,

D.C. Despite objections from a group

of law professors and economists, District Judge John Bates said the modified agreement met U. S. Justice

Department objections and the sale

was in the public interest. To ease

market-concentration concerns, the

pact requires MCP to dissolve its joint

venture with Corn Products International to market corn syrup and highfructose corn syrup. The conditions

had been met at the end of 2002.

ADM had gained a strong share in the

syrup and ethanol markets from purchasing MCP and its joint venture.

ADM has been operating MCP since

last September. 

Calcot, Ocean Spray among

co-ops with new leaders

Marketing cooperatives operating in

different geographical areas of the

nation have made leadership changes.

New leaders include:

■ David Farley’s tenure as chief

executive officer at Calcot, the West

Coast’s largest cotton marketing cooperative, lasted only eight months. He

has been replaced by Robert Norris,

the co-op’s executive vice president and

a 30-year employee of Calcot. 

■ Ocean Spray, the Massachusettsbased cranberry marketer, confirmed

its earlier interim choice of Randy

30 September/October 2003 / Rural Cooperatives

Minnesota leads the nation continued from page 19

fertilizer and crop protectants. Wisconsin was the top cooperative state for

sales of miscellaneous farm supplies

and was second for petroleum.

Leaders in number of cooperatives

Minnesota was home to the largest

number of cooperative headquarters,

with 293, followed by North Dakota

with 239 and Texas with 238 (figure

2). The same three states also had the

most cooperatives in 1999, 1997 and

1995. The top 10 states had 56 percent of all cooperative headquarters,

57 percent of all marketing cooperatives, 51 percent of farm supply cooperatives and 68 percent of service

cooperatives. 

Minnesota and North Dakota both

had about the same number of marketing and farm supply cooperatives. Texas

by far had the most service cooperatives. 

By individual products, North

Dakota had the most dry bean/pea,

grain/oilseed and livestock cooperatives. Texas had the most cotton and

rice cooperatives. California had the

most fresh fruit/vegetable, nut, and

poultry cooperatives. Minnesota had

the most farm supply cooperatives.

Co-op membership leaders

Kentucky led the nation with

242,873 farmers with cooperative memberships, followed by Virginia and Wisconsin. The top 10 states for cooperative memberships are shown in figure 3.

For the top 10 states, 54 percent of all

cooperative memberships are in these

states, 58 percent of all cooperative

marketing memberships, 51 percent of

farm supply and 48 percent of service.

Kentucky led all states in tobacco

cooperative memberships. Virginia had

the most nut cooperative memberships

and was second in farm supply members. Wisconsin had the most milk/milk

products and livestock memberships. 

Individual state data for farmer

cooperatives are collected every other

year by USDA Rural Business-Cooperative Service. The survey asks for

membership, sales and marketing data

by state. The data from the 2001 survey were used to develop this report. A

complete summary of state-by-state

cooperative activity is available in the

new USDA publication, Farmer Cooperative Statistics, 2001, RBS Service

Report 61. To order, call (202) 720-

8381, or e-mail jon.hall@usda.gov or

download at www.rurdev.usda.gov/

rbs/pub/sr61.pdf. ■

Figure 3—Cooperatives’ memberships by function, ten leading

states, 2001

250

200

150

100

50

0

KY VA WI MN IL IA TN KS ND MS

Thousands

Service Farm Supply Marketing
Papadellis as its permanent CEO and

president. 

■ At Alto Dairy, based at Waupun,

Wis., the board has selected Rich

Scheuerman, a 15-year veteran of the

dairy industry, to be its new president. 

■ Select Sires at Plain City, Ohio,

has hired Steve Crea as its chief financial officer to manage its business,

finance, human resources and management information systems development. 

■ Kevin Hall, a Nebraska farmerrancher, is the new chairman of the

board of Western Sugar Cooperative,

replacing Rick Dorn of Billings, Mont.,

who steered the formation of the sugar

cooperative and its purchase of the

Western Sugar Company assets. 

Bongards Creameries buys

LOL’s Perham operation

Bongards Creameries, with extensive experience in manufacturing natural and processed cheese in Minnesota, has purchased Land O’Lakes’

cheese manufacturing facility at Perham, Minn. LOL had earlier

announced plans to close the plant.

Roger Engleman, Bongards general

manager, said he was excited about the

opportunity to reopen the plant noted

for its cheese and whey products and to

retain jobs in the community. Bongards

had $163 million in sales last year to

the consumer, food service and industrial cheese and whey markets.

Bushel 42 Pasta closes 

Lacking a partner, Bushel 42 Pasta

at Crosby, N.D., which is owned by

227 durum wheat growers in North

Dakota and eastern Montana, closed

in late July and laid off 50 employees.

Company officials said it would seek

to sell or lease the plant. CEO Keith

Olson said the cooperative would

seek ways to get a return for the

shareholders.

Agway energy firm

offers green power 

Customers of Agway Energy Products in upstate New York will be

offered the option of buying green

power in the service territories of

Niagara Mohawk and New York State

Electric & Gas, where it already

operates as an energy supplier. Agway

has become a partner with Sterling

Planet of Alphretta, Ga., one of the

three green marketers participating

in Niagara Mohawk’s renewable

energy program. Agway will offer

energy derived from wind, water and

biomass to customers willing to pay

1.5 cents per kilowatt-hour in addition to regular electrical charges.

Agway filed for Chapter 11 bankruptcy reorganization last October

but the energy division was not part

of the filing.

LOL Farmland Feed eyes 

ethanol co-products market

Land O’Lakes Farmland Feed

LLC is working with corn and livestock producers and numerous marketing initiatives to enhance profitability through marketing and sale

of ethanol co-products. Distillers

dried grain with solubles and wet distillers grain have been recognized as

practical and cost-efficient feed supplements for cattle, swine and poultry.

The market has materialized in the

past three years. Ethanol production

is expected to increase dramatically

over the next 5 to 10 years. 

In another development, the feed

firm is planning to build a new, 300-

cow dairy research facility at its center

near Gray Summit, Mo. “It will go a

long way in ensuring that we sustain

our leadership in research and development,” said Bob DeGregorio, president

of the feed company. Construction

should be completed by year’s end. It

will replace an existing dairy research

unit at Gray Summit plus facilities at

Fort Dodge, Iowa. 

Sun-Maid, Licente Join for 

Canadian Juice Line 

The Sun-Maid brand behind the

popular California marketing cooperative’s raisins and dried fruit products will

begin to appear on a Canadian firm’s

new line of fruit juice drinks being

introduced late this summer. A. Licente

Inc., based in Rougemont, Quebec, is a

Canadian leader in the production of

pure fruit drinks. It has signed a licensing agreement with California’s SunMaid Growers to produce and market

the new line under the cooperative’s

brand in Canada. The firm is the main

subsidiary of Licente Industries, Inc.,

which markets its products under a variety of trademarks, including Sunkist. 

Riceland Foods, Cargill in

lecithin marketing alliance 

A strategic alliance to manufacture,

market and sell lecithin products to

food, pharmaceutical and technical customers worldwide has been formed by

Riceland Foods of Stuttgart, Ark., and

Cargill, Minneapolis, Minn. The

agreement was to take effect Sept. 1.

Riceland will continue producing deoiled lecithin, as it has for the past 25

years, and Cargill will market and distribute it. Riceland President Richard

Bell said the deal would allow the

cooperative to operate its facilities

more efficiently and provide a source

of conventional (non-GM) crude

lecithin for processing.

Rural Cooperatives / September/October 2003 31

continue our education. Dysfunctional

companies have dysfunctional directors.

Directors have to know the consequences of their decisions.”

Board education doesn’t only mean

better decisions, according to Weidner.

It helps the board function as a team.

“We can’t have different agendas.”

Lynn Haseley, board chairman and

president of Ag-Land FS Inc., based

in Pekin, Ill., says “We expect our

crops people, fuel and LP-gas drivers

to pursue certification. Director certification is one more way we can show

patrons and employees our dedication

and care.” Haseley expects all 12

members of his board to be certified

by September. ■

GROWMARK certification continued from page 27
32 September/October 2003 / Rural Cooperatives

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