Rural

COOPERATIVES COOPERATIVES

USDA / Rural Development March/April 2000 USDA / Rural Development March/April 2000

Turning soft wool 

into hard cash
2 March/April 2000 / Rural Cooperatives

As we begin this century of increased

global interaction and communication,

we recognize the need to work toward

improving the technological infrastructure of rural America. Increasing the

level of agricultural trade with foreign

nations will do much to improve the

economic vitality of rural America and

the rural cooperatives which are so vital

to its well-being. 

There are several articles in this magazine that detail trade programs and

technical assistance efforts between

the United States and our international

partners. Some of these initiatives, such

as our effort to create cooperative village

banks in South Africa, will help those

who are disenfranchised by poverty. We

are also committed to working with our

international partners whose future economic development will create marketing opportunities for rural Americans.

USDA Rural Development has bilateral programs to help countries in this

hemisphere with their agricultural development efforts. We expect to continue

offering our assistance in a range of disciplines, from production techniques, to

marketing, extension, pest and disease

eradication, and food safety, among others.

In the United States, agricultural

cooperatives remain a key component of

rural economies. While “rural” is more

than agriculture, the future success of

our nation’s small farms and their cooperatives is critically linked to the success

of economies of rural communities to

which they are interconnected. 

Our rural economy has strengthened

and is growing, but remains fragile and

uneven. Rural earnings, after a decade

of decline, are rising at rates similar to

urban rates in some areas, as is per capita

income. Rural unemployment continues

to decline, to historically low levels.

However, challenges remain. Even with

double-digit percentage growth in the

amount of jobs, the incomes remain significantly lower in rural areas relative to

urban areas.

In June of 1998, when I hosted the

Second International Conference on

Women in Agriculture, more than 1,000

participants from 50 countries came

together to discuss issues facing women

in agriculture and to facilitate the

exchange of information. During the

conference, we established that in rural

communities around the world, we have

similar challenges, many of which can be

addressed by cooperatives. Creating value-added cooperatives can do much to

generate additional income for rural

people, as shown by the cover story in

this issue about how rural women in

Alaska are earning income by knitting

musk ox wool into beautiful garments.

In June of 1999, we successfully

brought together leaders from several

countries to create cooperative relationships to strengthen our nations’ rural

areas and increase the channels of communication between rural Latin America

and rural United States. Again, we

found that we share similar concerns,

such as overcoming limited technological alternatives.

With President Clinton and Vice

President Gore’s leadership, we are

working to build partnerships and develop a comprehensive approach to closing

the digital divide and bringing digital

opportunity to all Americans. Bringing

advanced telecommunications technology to rural America has made significant

impacts on people’s lives. Through our

various programs, Rural Development is

providing many advantages to rural electric and telephone cooperatives to

receive funding for the purpose of

putting these new technologies to work

for rural residents. We are also working

to create opportunities with current and

potential trading partners around the

globe. Communities will revitalize

themselves when opportunities exist for

entrepreneurial initiatives, small business

expansion and job training — all of

which offer upward mobility without

community members having to move to

urban areas to find employment.

In closing, rural economic development and poverty alleviation strategies

shared between countries and rural communities will ultimately lead to enriched

families, empowered communities, and

developed nations.

Jill Long Thompson

Under Secretary, USDA Rural Development

COMMENTARY

Borders are no longer barriers for co-ops
Rural Cooperatives / March/April 2000 3

FEATURES

4 Boosting the 3 Bs 

England’s Plunkett Foundation promotes “the furtherance of

rural cooperation”

Eliza Banks

7 Fingers and needles

Alaskan co-op turns cashmere-soft musk ox wool into hard cash

Pamela J. Karg

12 Strength through unity

Bulgarian honey producers sweeten their future through 

cooperation

James Matson

15 Foreign affairs

USDA Foreign Agricultural Service promotes U.S. agriculture

abroad

Karl Hampton

18 Going global

Export certificates a valuable tool helping co-ops tap overseas

markets

Alan Borst

23 Why U.S. agriculture should support foreign aid

Perry Letson

DEPARTMENTS

2 COMMENTARY

22 A CLOSER LOOK AT...

25 MANAGEMENT TIP

27 NEWSLINE

RURAL COOPERATIVES (1088-8845) is published

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change to: Rural Cooperatives, USDA/RBS, Stop 3255,

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Mention in RURAL COOPERATIVES of company and

brand names does not signify endorsement over

other companies’ products and services.

Unless otherwise stated, contents of this publication are not copyrighted and may be reprinted

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The United States Department of Agriculture (USDA)

prohibits discrimination in all its programs and 

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

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

orientation, and marital or family status. (Not all 

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To file a complaint of discrimination, write USDA,

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Building, 14th and Independence Avenue, SW,

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

(voice or TDD). USDA is an equal opportunity

provider and employer.

Dan Glickman, Secretary of Agriculture

Jill Long Thompson, Under Secretary,

Rural Development

Dayton J. Watkins, Administrator,

Rural Business–Cooperative Service

Gladys Rodriguez, Director of Public Affairs

Dan Campbell, Managing Editor

USDA Design Center, 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

COOPERATIVES COOPERATIVES

March/April 2000 Volume 67 Number 2

On the Cover:

Once extinct in Alaska, the musk ox has made a major comeback. A cooperative

of Alaskan Eskimo women are transforming its soft wool into high-fashion

accessories and earning much-needed income for their poor, rural communities. 

Story on Page 7. Photo copyright Musk Ox Farm
4 March/April 2000 / Rural Cooperatives

By Eliza Banks

n America, hardly a cooperative celebration goes by

when those English craftsmen who formed the

Rochdale Equitable Pioneers Society

aren’t feted for their foresight. So it

may come as a surprise that there’s

often a perceptible lack of enthusiasm toward cooperatives in the

very country credited with their

creation.

But that’s the situation in

some sectors of the United Kingdom today. Despite this skepticism, however, for 80 years there

has been one voice encouraging,

cajoling, and supporting cooperatives and the people who want to

start them. At the Plunkett Foundation, near Oxford in south-central

England, a team of dedicated cooperative advocates acts as a driving force

behind the growth of UK rural cooperatives and other member-controlled

businesses.

Through its accumulated experience, extensive network of consultants,

and a reference library approaching

40,000 books, journals and articles, the

Plunkett Foundation strives to offer

appropriate support and sign-posting

to all types of cooperatives both in the

UK and around the world.

An “Anglo-American Irishman”

Established in 1919, the Plunkett

Foundation bears the name of its

founder, the cooperative organizer,

agriculturalist and statesman Sir

Horace Plunkett (1854-1932). In pursuit of his famous “Three Bs” (Better

Farming, Better Business, Better

Living”), Plunkett and a small band of

influential, but rigorously non-political, associates inspired the creation of

literally hundreds of cooperatives,

first in Ireland and then around the

globe.

In the 1880s, Plunkett spent part of

each year as a Wyoming cattle rancher

and shrewd observer of rural progress,

including the growth of the National

Grange movement. Returning to Ireland in 1889, he soon set about a nonstop program of cooperative development and agricultural education. After

repeated failures, Plunkett established

his first cooperative “creamery” in

1891. Three years later, he founded the

country’s apex organization for the burgeoning number of agricultural cooperatives. His diaries, kept in the

Foundation’s unique cooperative reference library, describe the exhausting work of organizing co-ops in

the face of stern opposition from

local moneylenders, traders, and

other vested interests.

Still a frequent visitor to America, and now Ireland’s equivalent to

the Secretary of Agriculture, Plunkett became a close associate and

confidant of President Theodore

Roosevelt and his apostle of conservation, Gifford Pinchot, sharing

ideas on rural development and, in

1910, publishing The Rural Life Problem of the U.S.

“By golly,” Roosevelt is quoted as

booming to Plunkett, “I wish you were

an American and either in the Senate

or my Cabinet!” Plunkett’s American

connections didn’t end there, and he

subsequently shared his enthusiasm for

empowering farmers with Presidents

Taft and Wilson.

Reluctance persists

So, after all this time, why aren’t UK

farmers more aware of the benefits of

co-ops? And why do UK farmers harbor resistance to collaboration, even

though cooperative involvement is

strong in many sectors and is arguably

vital to competing in a global market?

The reasons are largely historical.

First, England’s smaller geographic

area, greater population density, and

village trading infrastructure meant

Boosting the 3 Bs

England’s Plunkett Foundation promotes “The furtherance of rural cooperation”

I

HORACE PLUNKETT
Rural Cooperatives / March/April 2000 5

that, for most of rural England — and

unlike Ireland or the United States —

there were few compelling reasons to

“circle the wagons” in cooperation.

Second, in the mid-20th century this

island nation’s need to sustain core agricultural productivity was exacerbated by

war. Unfortunately, the support pricing

and capital grants for this purpose were

only made available to individual farms,

thus creating no incentive for cooperation. Ironically, the converse of this was

happening in Continental Europe,

where agricultural economies were being

rebuilt using cooperation as one of the

foundation stones.

Third, there is the legacy of statutory marketing boards in commodities

such as milk, wool and potatoes. Until

recently, that meant individual producers did not have control over this link

in the chain. 

And finally, even today, there is

widespread lack of knowledge about

co-ops and how they work. The subject

receives little, if any, attention in the

nation’s curriculum (and sometimes

even in major schools of agriculture).

And there have been no significant

injections of government capital or a

designated body to promote the development of cooperative enterprise. 

Taken together, these factors have

perpetuated a reluctance to embrace

cooperation. It is this gap that the

Plunkett Foundation seeks to fill with a

combination of information, advice,

seminars, study tours and advocacy.

The current dire straits in UK agriculture would appear to be generating a

re-appraisal of cooperation and its

potential, notes Information Services

Manager Kate Targett. Necessity, she

observes, has often been the mother of

cooperatives as well as invention.

A native of Michigan, Targett has

been working recently to extend the

Foundation’s reach still wider by

uploading the library’s key-worded

index onto the Internet, a project made

possible by a grant from the Dublinand Boston-based Ireland Funds.

Tradition and individuality

In contrast to America’s ready

acceptance of expansion and innovation, the UK agricultural industry has

always taken pride in its long tradition, as well as its individuality. From

her perspective, though, Targett

believes that UK cooperators could

profitably take on board some lessons

from their counterparts across the

Atlantic. “At the moment,” she says,

“the United Kingdom probably has

more to learn from America than it

can teach the United States, although

it has to be remembered that the situations are by no means parallel, particularly in terms of scale and public

policy.”

Having observed the English scene

for 15 years, she suggests that abilities

to change may constitute a further difference. “Whereas Americans will

often default to ‘Why not?’ the British

attitude is sometimes ‘Rather not,’” she

notes. For example, UK cooperatives

have been slow to adopt vertical inteThe Plunkett Foundation is used as a resource by cooperatives worldwide, including this women’s dairy cooperative in Egypt. 

Photos courtesy the Plunkett Foundation.
6 March/April 2000 / Rural Cooperatives

gration as a means of capturing added

value for the producer and keeping

pace with developments in European

and American markets. Meanwhile,

cooperatives such as those in Denmark

and Sweden have forged ahead in processing and marketing products supplied by co-op members.

Cream rises . . . or sour milk?

Yet there are small signs of change

afoot in some UK sectors, such as dairying, where there are examples of successful processing subsidiaries. For the most

part, however, the dairy industry has

evolved differently from the U.S. and

Europe. From the 1930s, the existence

of the Milk Marketing Board meant that

the industry’s processing and manufacturing capacity developed privately.

However, farmers soon became concerned that they were missing out on any

resulting “added value,” which eventually led to the formation of the Board’s

wholly owned subsidiary Dairy Crest.

When the Milk Marketing Board was

deregulated in 1994, Dairy Crest was privatized (although farmers owned most of

the shares). At the same time, Milk Marque was formed and became the largest

dairy cooperative in the European Union.

Initially, it was able to use its strength on

behalf of its members. But the crunch

came last summer when the government’s

competition authorities published a

report highly critical of Milk Marque’s

selling system. As a consequence, the

cooperative decided to split into three

roughly equal regional cooperatives. 

Commenting on these developments

at a recent Plunkett Milk Groups Conference, the Foundation’s Chief Executive Simon Rawlinson noted, “It seems

a travesty that, while the rest of the

world seems to be reaping the benefits

of vertical integration and economies

of scale, the UK seems to be being

forced to regroup and start again. No

other dairy industry in a developed

country has attracted the same attention from the competition authorities,

despite many others having a much

larger market share.” 

Working around the world

The Plunkett Foundation’s achievements in the UK are rivaled only by its

successes abroad, where it provides

support tailored to the conditions of

emerging user-controlled groups and

businesses. With a tradition of overseas

development going back decades, the

Foundation recently has been heavily

involved with the emerging democracies of Eastern and Central Europe and

the former Soviet Union. Here, where

cooperatives had become “top-down”

arms of state policy, the Foundation

found a lot of work combating the discredited image of cooperation. It has

met with notable success, Targett says.

In Poland, projects funded by the

European Commission and the UK’s

Department for International Development successfully encouraged farmers

to diversify operations and keep rural

communities viable. In one instance,

Britain’s holiday tradition of “bed and

breakfast inns” inspired Polish farm

families to develop a niche market for

agri-tourism. Recent study tours have

been arranged for delegates from Australia and Zimbabwe. Earlier programs

have influenced participants from Albania, China, Grenada, Hungary, Italy,

Japan, Lesotho, Moldova, St. Lucia,

Uzbekistan and Zambia, among others.

The Foundation’s Library and Information Service is open to all, and a limited amount of assistance and consultation is provided free. Lists of

publications concerning every aspect of

cooperative theory and practice are

available on request, and should soon

be accessible via the Internet.

As an educational trust, the Foundation is not, despite its name, a grant-making organization. Its income is generated

from memberships; project funding from

the European Commission, the UK’s

Department for International Development, and a variety of NGOs and development agencies; and the sale of publications. Since 1927, it has published an

annual anthology of international cooperative know-how, now entitled The

World of Co-operative Enterprise, as well as

being the only organization to compile

and publish an annual directory and statistics of UK agricultural cooperatives.

For more information on the Plunkett Foundation and its services, visit

its website at www.co-op.co.uk./

ukcm/plunkett/index or email

info@plunkett.co.uk. ■

Editor’s note: Raised on an Upper Midwest family dairy farm that does business

through cooperatives, Eliza Banks is now a

writer based in North Yorkshire, England.

The headquarters of the Plunkett Foundation, Oxford, England, where they are in the process of

uploading their key-worded index onto the Internet so emerging and established user-controlled

groups and businesses can learn more from this world-class cooperative resource.
Rural Cooperatives / March/April 2000 7

Pamela J. Karg

Field Editor

oft yet sturdy. Thin but

warm. That’s how Sigrun

Robertson describes the

garments marketed by the

Oomingmak Musk Ox Producers’

Cooperative.

“Qiviut is similar to fine cashmere,”

explains Robertson. She has been with

the cooperative since it began in 1969

and now serves as its executive director.

“And our members love working with

this beautiful fiber to make beautiful

products. They’re artisans,” she adds.

Mention musk oxen to most people

in the lower 48 states, and their questioning eyebrows belie the fact they

know little about this cousin to sheep

and goats. But in the open tundra and

well-vegetated terrain of Alaska, Canada and Greenland, this short-legged,

massively built animal with broad,

down-curving horns and an anklelength outer coat is well known.

Alaskan agriculture has helped the

musk ox evolve into a sustainable

enterprise. But it wasn’t always that

way.

Bringing the musk ox back

Musk oxen are neither oxen nor do

they have glands to produce musk, and

they resemble bison. While their fossils

have been found as far south as Ohio

and France, scientists believe musk

oxen wandered across the Bering

Straits on a narrow land bridge to

North America nearly 2 million years

ago. By the 1850s, though, they had

been hunted to extinction in Alaska.

In the mid-1950s, a Conneticut

native set out to prove that musk oxen

could be domesticated and raised sustainably. The late John J. Teal Jr.

returned from World War II as a decorated B-17 bomber command pilot in

the European campaign. He earned

bachelor’s and master’s degrees in

anthropology from Harvard and Yale,

respectively. Teal had a research fellowship at McGill University in Montreal

and was teaching at the University of

Vermont when he established the Institute of Northern Agricultural

Research, headquartered in HuntingFingers and needles

Alaskan co-op turns cashmere-soft musk ox wool into hard cash

S

Oomingmak members determine how much they want to knit and at what pace based solely on the amount of money they need for their families.

Photo by Bill Bacon, courtesy Oomingmak Musk Ox Producers’ Cooperative.
8 March/April 2000 / Rural Cooperatives

ton, Vt. The NAR’s primary

project was to re-establish musk

oxen in the United States. Teal

captured his first animals during

a Canadian expedition in 1954.

Eventually, he established a herd

for the University of Alaska,

Fairbanks, and managed it for

many years.

Teal’s premise was simple.

Rather than introduce exotic

animals such as cows or llamas to

the Alaskan landscape, he wanted

to develop a cottage industry

around an animal or plant native

to the region.

The ankle-length guard hairs

take musk oxen four to six years to

grow and are essential in protecting the

animals against temperatures that can

dip to 100 degrees below zero. But

beneath that outer coat, Teal knew, is a

light brown, soft, dense undercoat

known as qiviut (pronounced kiv-eeute, meaning “down” or “underwool”

in the Inupiat Eskimo language).

Eight times warmer than sheep wool

by weight and very lightweight, qiviut

is one of the finest natural fibers known

to man and is often referred to as “the

cashmere of the North.” By domesticating the animal, native people

learned the undercoat could be combed

out, cleaned to capture the fine qiviut,

spun into yarn and used to knit garments. Rather than raising musk oxen

for meat and hides, the animal could

provide a renewable resource throughout their lives, Teal was convinced.

Co-op starts with 25 members

The domestication of the musk ox

and the start-up of the Oomingmak

cooperative are tightly inter-woven. By

1969, enough qiviut had been converted to yarn to put it into production.

The first 25 knitters were all from

Mekoryuk, Alaska, located on Nunivak

Island. They were encouraged to try

the fiber and they enlisted as the cooperative’s founding members. Research

had shown qiviut was better suited to

knitting than weaving, and knitting was

a skill Eskimos had learned from missionaries. The fine needles required for

the delicate patterns also meant less

equipment and little financial investment, Robertson says.

The patterns were adopted from traditional village life and Eskimo culture

— from 1,200-year-old artifacts to beadwork designs. The patterns were converted into graphic instructions easily

understood by the older women, most of

whom were not familiar with the complex written English instructions used in

typical knitting patterns. Workshops

were held so members could learn how

to read the patterns and complete the

lace-like stitches. More importantly,

members learned how to handle qiviut.

“It’s spun much finer than what

you’re used to with other yarns,”

Robertson explains.

After the first year, 27 knitters from

Mekoryuk turned the qiviut into 291

scarves, stoles, tunics and nachaqs

(which is now the cooperative’s specialty item and means hat or hood in Eskimo. The nachaq, also called a smokering, is a seamless, tubular garment that

can be worn as a hood or pulled down

around the neck like an over-stuffed,

yet decorative, turtle-neck accessory).

Almost immediately, large retailers

such as Nieman-Marcus featured qiviut

garments. But the large orders, often

requiring special sizes and particular

colors in a short amount of time,

exceeded what the small cooperative

could produce.

“In retrospect, perhaps it was overly

ambitious to think that handknit qiviut

garments could easily step into the fast

and fickle world of fashion,” Robertson

reported in a paper presented at the

First Arctic Ungulate Conference in

Nuuk, Greenland, in 1991. “Instead,

the qiviut garments have found their

own particular market, one that can

accept their peculiarities and appreciate

their very special qualities.” 

Over 200-members strong

Originally, the plan was to wash and

block garments in members’ homes or

to start washing and blocking cooperatives in nearby villages. As it turned

out, sending the garments to the cooperative’s office and store in downtown

Anchorage is a way to ensure quality.

Five employees, including Robertson,

wash and block garments, as well as

inspect them to assure they are as perfect as possible. They also work the

Photo by Gary Lackey, courtesy 

Oomingmak Musk Ox Producers’ Cooperative.

Photo by Ron Eagle, courtesy Oomingmak Musk Ox Producers’

Cooperative.
Rural Cooperatives / March/April 2000 9

retail store six days a week and fill

orders received over the Internet

(www.qiviut.com). The boldly painted

musk oxen adorning the storefront

have made the cooperative a popular

shopping stop for visitors.

Today, over 200 knitter-members,

ranging in age from pre-teens to

octogenarians, own Oomingmak.

Many are related or are close friends

who helped each other get started

knitting and into the cooperative. All

are women, though men have been

members in the past, and nearly all

the members are Alaskan Eskimos,

who work from home in villages ranging from 150 to 300 people.

The cooperative buys most of its

qiviut from the herd Teal helped establish, now kept in the Matanuska Valley

near Palmer and operated by the Musk

Ox Development Corp. as a private

nonprofit organization dedicated to the

development and domestication of the

musk ox. The cooperative contracts

with a cashmere mill on the East Coast

to wash, de-hair and spin the fine yarn.

Up to 600 pounds — or hair from

about 100 musk oxen — are required

by the mill for each run.

Back in Alaska, the yarn is sent to

members. There are no quotas to fill.

Members determine how much they

want to knit and at what pace based

solely on the amount of money they

need for their families. After the finished garment is sent to Anchorage, the

member is paid. Seventy-five percent

of the garments are sold directly from

the cooperative to customers. Prices

range from $95 for a bell-shaped

Cloche cap without a cuff to $495 for a

sleeveless, open-sided tunic that comes

complete with a hand-braided qiviut

belt. Twenty-percent of the garments

are sold through a gift shop at the

Musk Ox Farm.

In fiscal 1999, the cooperative’s sales

were $600,000. After expenses, members receive a dividend check based on

the number of garments they marketed

through Oomingmak.

“In spite of the co-op’s relative success, it probably has not made much of

a dent in the many problems of the

region,” Robertson says. “However, the

co-op was created not to make great

sweeping changes in the native culture

(thereby creating new problems), but

to help with problems within the traditional mode of life. This is not about

making money hand-over-fist.”

Challenges and opportunities

Problems facing Alaskan Natives

are attributed to the introduction of

European culture and its need for

cash to buy ammunition, fuel, electricity, clothing, and even food, she

explains. Before that, Eskimos led

subsistence lifestyles and took or created from the natural resources everything they needed.

Over 26 percent of the 50,000 rural

Alaskan Natives have incomes below

federal poverty levels, compared to

only 9 percent of non-native Alaskans.

The problem is perpetuated by

Alaskan Natives’ isolation from the

cash economy.

While most Oomingmak members

live in the Yukon Kuskokwim region,

which can be reached only by air, their

lifestyles now depend upon a blend of

subsistence and capital enterprise.

Most people fish, hunt and collect

berries in season, and many men leave

heir communities for months at a time

to find jobs in larger cities.

Isolation makes running a cooperative challenging, too. The six-person

board meets quarterly, after which

members receive a newsletter with

updates on board actions, calving,

sales and what satisfied customers are

saying. Repeatedly, members have to

be reminded that Oomingmak is their

John J. Teal Jr. re-introduced the musk ox to Alaska and insisted they be used in a 

sustainable enterprise. As a result, 25 members started the Oomingmak co-op. 

Their knitted garments include symbols that celebrate their Eskimo culture.
10 March/April 2000 / Rural Cooperatives

cooperative and what that ownership means.

The education process will start

anew this year because a new product

line is being introduced. After

months of research, the cooperative

will market garments from a luxurious fiber of 80 percent qiviut and 20

percent silk. For the first time since

1976, a membership drive is planned

in new communities in the Yukon

Kuskokwim and Interior regions, and

St. Lawrence Island, where some of

the state’s highest unemployment

rates – 18 to 63 percent – exist.

The cooperative took out a loan to

buy Canadian qiviut for the new line.

The mill the co-op uses will add silk

from its existing stock. The cooperative

applied for grants to cover staff recruitment time and travel, and new member

training on both the knitting and cooperative ownership fronts.

“The cooperative has successfully

been in business for 30 years, providing rural Alaskans an opportunity to

work part time and earn cash income

for their families,” Robertson says.

“Expanding the membership will

offer this same economic opportunity to women living in other economically depressed communities

in the state.”

Taking the loan to buy the Canadian fiber was a big step for directors,

but necessary. When the 100-percent

qiviut yarn is plentiful, members are

encouraged to knit more garments

and they respond, filling the shop

with plenty of goods. But then the

yarn supply runs low and the stocks

drop. By starting up the qiviut-silk

line, the cooperative may be able to

ease the problem, which occurs about

every four years.

“I’m not sure what tomorrow’s challenges will be,” she adds. “But I do

know they will center around fingers

and needles,” she adds. ■

In the 1940s and 50s, wild musk oxen were a disaster or two

away from extinction and the villages of coastal Alaska were

some of the most impoverished in the world. Where others

saw two utterly hopeless situations, John Teal’s eyes sparkled

and a vision was born. 

In this windswept and inhospitable land, he saw an opportunity for Alaskan Natives to live together peaceably with this

animal so both would thrive. After more than a decade of

research, Teal started what came to be known as the Musk Ox

Project. Supported by funding from the W.K. Kellogg Foundation, as well as assistance from the University of Alaska and

countless volunteers, the project started Alaska’s first domestic musk ox farm in Fairbanks in 1964.

Today, the farm (www.muskoxfarm.org) is situated outside Palmer in the Matanuska Valley, about 50 miles from

Anchorage. It’s managed by the Musk Ox Development

Corp., a private nonprofit organization dedicated to the

development and domestication of the musk ox, Ovibos

moschatus. Teal’s youngest son, Lansing, oversees its operations today, spending the greatest share of his days at the

farm with the herd.

Every year, thousands of visitors stop by the farm during

regular tour times offered from Mother’s Day through late September. At the end of the summer, visitors anticipate the

impressive dominance displays of rutting bulls in preparing for

the breeding season.

The famous head smashing occurs between males vying for

breeding privileges. Two males will engage in a ritualized display designed to intimidate each other, including pawing at the

ground, walking stiff-legged, and aggressively swinging their

massive horns. Following the displays, the bulls will face-off

and back up about 100 feet before charging together at speeds

close to 35 miles per hour. The head smashing may continue

for up to a dozen times before one bull quits and submits to the

other.

Several separate harems form in the fall. Each harem consists of one bull and a selected group of cows. Breeding lines

are chosen to promote qiviut production, tameness, health and

to avoid inbreeding. Following six weeks in harem, the cows

are moved to a separate pasture and monitored throughout

their eight-month gestation. Calves are born any time from

mid-April to early May, and can weigh up to 25 pounds. They

are born with a full coat of qiviut and boundless energy. The

calves are the main attraction on opening day — Mother’s Day

— at the farm.

Tour fees in combination with foundation grants and private

donations help the farm continue the mission John Teal began

nearly 50 years ago.

“Perhaps the most meaningful support that the farm

receives is the many entirely voluntary contributions made by

the Friends of the Musk Ox, the public membership arm of the

project,” explains Lance Teal. “A wide variety of people have

contributed to the project. From ‘Herd Parent’ Alex Trebek of

Jeopardy! fame to local volunteers lending a hand repairing

fences and fixing hay feeders, donors and volunteers have

remained integral to the success of our work.” ■

The Musk Ox Farm continues Teal’s work

A cousin to sheep and goats, the short-legged, 

massively built musk ox, with its broad downcurving horns, is neither an ox nor does it have

glands to produce musk. Photo copyright Musk Ox Farm.
Rural Cooperatives / March/April 2000 11

A South African financial services co-operative (“village bank”) was one of 44 projects to share in $5 million

awarded during a World Bank competition for innovative

community development proposals. The U.S. Department

of Agriculture’s Rural Business-Cooperative Service has

been involved in a project under the auspices of the

U.S./South African Bi-National Commission to assist in

the development of these so-called village banks.

The proposal, “Leveraging Local Savings for Local

Development,” received $60,000 in the competition. It

was selected from a group of 339 finalists from 60 countries. The finalists were chosen from nearly 2,000 entries.

Finalists set up booths in the atrium of the World Bank’s

headquarters in Washington, DC, and were asked to

explain their projects to a panel of judges.

Wezi Ximaya, chief executive officer of the Financial

Services Association, a trade and financial services

association in South Africa, represented the project in

the competition. According to Ms. Ximaya, the “local

savings for local development” proposal focuses on the

role of a newly organized financial services cooperative

in an overall community development effort. The funds

will be used to conduct pilot community development

projects in rural South African villages that already have

their own financial services cooperatives.

The project was born out of rural South Africa’s deeprooted mistrust of banks, and the unwillingness of commercial banks to serve rural areas. Rural communities,

however, need funds for development projects and the

lack of financial services can thwart that effort. In addition, Ms. Ximaya indicated that community banking structures have tended to be institutionally weak and not integrated with local development priorities.

The solution was to redefine village banking to better

leverage local savings for local development priorities.

Working together, organizers, community leaders and

residents created a sound, local institutional structure, a

“village bank.” It also serves as a link to the formal financial sector.

The village bank is operated by and for the community.

It integrates the community’s development planning and

decision-making processes, and provides local deposit

and withdrawal services for individuals. The bank also

makes loans to the community’s traditional authority for

development projects and to community members for

entrepreneurial and targeted investment activities.

The World Bank competition was modeled after a similar competition in 1998 that awarded $3 million in startup funds to World Bank staff. This year’s competition was

extended to organizations outside the bank.

“It’s remarkable to see so many people from within

and outside the bank join in one very simple objective,

which is to see how we can do development better and

address the issues of poverty,” said World Bank President James Wolfensohn. “In the next 25 years, another 2

billion people will share the world. Most of them will live

in poverty if we don’t take action now,” he said. “We

need ever more effective, innovative solutions to meet

this challenge. The development marketplace can help

bring our collective experience, knowledge and passion

to bear in search for solutions.”

Proposals offered ways to promote good government,

combat corruption, develop legal and judicial systems,

strengthen financial and regulatory systems, and insulate

the poor from crises. Ideas ranged from creating a center

to train Moldova’s disabled children in crafts and specialized enterprises to providing cultural sensitivity training

for judges in indigenous areas affected by war in

Guatemala. Representing the development community

and private sector, jurors judged the proposals on originality, partnerships created, cost effectiveness, potential

for ownership for those who benefit the most and, above

all, expected impact on poverty.

Susan Theiler, an agribusiness specialist on assignment to the bank from the U.S. Department of Agriculture,

visited the event. “The visual impact of these displays is

really amazing,” she said.

For those who weren’t selected for awards, there is

still a chance for funding. “We’re keeping all proposals

on the Web and encouraging donors, foundations and

multilaterals to look at them to see if they can fund

them,” said Mari Kuraaishi, one of the event’s key organizers.

Wolfensohn said he was working with the United

Nations Development Program to try to link unfunded

proposals with potential donors through Net Aid, the

recently launched Website that acts as a clearinghouse

for donors and organizations. ■

South African village banks receive World Bank funding
12 March/April 2000 / Rural Cooperatives

By James Matson,

Agricultural Marketing Specialist

USDA Rural Development

ons of a medieval Bulgarian king debated who

would rule after their

father’s death. The king

requested that a quiver of arrows be

brought to him. He removed a single

arrow and causally snapped it in half.

Then he removed the remaining arrows

from the quiver, held them out to his

sons, and requested they break them.

The sons tried to break the bundle of

arrows without success. The king then

told his sons that, individually, people,

like the arrows, are easily broken, but

there is strength through unity.

Today, that lesson “Strength

Through Unity” is engraved in the

Cyrillic alphabet above the entrance to

the Bulgarian National Assembly in

Sofia. It’s become a time-tested phrase

from Bulgarian history and one that’s

applicable across the cooperative

world.

Bulgarian beekeepers, following this

example, formed cooperatives to purchase supplies and to market their honey

production. In a country still undergoing

its transition to a market-driven economy, individual producers work together

to coordinate their efforts to create a

better situation for all the beekeepermembers. They’re learning the age-old

lesson of strength through unity.

A traditional product

Honey is a traditional Bulgarian

product. It has been produced in Bulgaria for more than 3,000 years. Honey

marketing cooperatives were created

early last century, but were converted to collectives in the Soviet

era. Traditionally, Bulgaria has a

strong domestic honey market.

Foreign visitors to Bulgaria’s popular Black Sea resorts supplemented domestic demand, which

has aided in the development of

international markets.

The 35,000 beekeepers

throughout Bulgaria make up the

Bulgarian Beekeepers Union,

which tries to rectify deficiencies

in the country’s beekeeping system. The Union functions as a

trade association, similar to America’s Beekeeper Federation or

National Corn Growers Association. The Beekeepers Union is

headquartered in the capital of

Sofia, with regional representatives for its 1,700 local beekeeping

societies. 

The years since the breakup of

the communist system in the early

1990s have been tempestuous for

Eastern Europe. The Bulgarian

agricultural sector is no exception

to this turmoil.

During the communist era,

collective farms, often larger than

20,000 acres, produced the majority of the country’s food. Commercialization and costs of production were not considered.

Instead, central planners determined

what would be produced and where it

would be shipped. In recent years, the

collective farms were divided into

smaller holdings, and private land ownership is being slowly re-established. 

Bulgaria is characterized by microclimates — from warm Mediterranean

zones in the south, to broad internal

valleys, and then to mountainous terrain that covers 35 percent of the country. As a result, farmers in different

regions produce many crops including

fruits, vegetables and forest products.

This agricultural diversity results in

many varieties of honey. This range

includes many specialty honeys, such as

Strength through unity

Bulgarian honey producers sweeten their future through cooperation 

S
Rural Cooperatives / March/April 2000 13

one produced from oak trees, that has a

dark, rich flavor, to other honey that

comes from bees that pollinate acacia

and lime trees. 

Small-scale marketing

Bulgarian beekeepers fall into two

general groups. Most producers manage a small number of hives, though

there are a few large producers. 

A typical small producer is more

than 65 years old, and usually a retired

white-collar professional such as a

schoolteacher or bookkeeper. Most of

these smaller producers have been beekeepers since their youth. Many

recount how their first hive was given

to them as a wedding present or how

they helped their parents with their

own bee management. 

These producers live in smaller rural

communities and have hives at their

homes or in the

neighboring countryside. Family

members assist

them with production activities. No

standard production

practice or hive type is used, which leads

to a wide range of quality and volume

differences. In addition, a single small

producer could have three different

styles of hives in the same field. 

These small-scale producers market

honey through personal contacts, home

sales, and uncoordinated interaction

with brokers. However, in rural communities, more honey is produced than

is demanded by local consumers. The

excess honey is stored, sometimes for

years, in whatever containers the beekeeper has available until a broker

shows up to buy it. 

Honey generates a substantial part

of their income because inflation has

eroded the value of their pensions. The

number of hives managed by each producer is small, often 30 or less. The few

thousand dollars a small honey producer can earn, however, has a large economic impact in rural areas where

annual income is even less than the

national average of $4,000.

Commercial-scale beekeepers

Large-scale or commercial producers typically manage between 150 and

200 hives and production techniques

are more standardized. They tend to

know international production techniques and prices. On average, these

large-scale producers are younger than

small producers.

Though production is more standardized among large producers, marketing

practices vary. A few producers have

developed markets and value-added

products. Some are even trying to export

their production. Yet, the majority of

large-scale producers use the more

informal marketing techniques practiced

by small-scale producers.

Differences between the two groups

complicate the marketing situation for

all producers. Key issues confronting the

Bulgarian honey market are perceived

differently by each group. On one hand,

small producers are concerned with

receiving a “fair” price and having access

to markets outside their local communities. On the other hand, large-scale proMany specialty honeys are produced in Bulgaria because of the country’s agricultural 

diversity, which ranges from warm Mediterranean zones to cool mountain ranges. 

Photos by James Matson.

The Riga monastery is one of many architectural treasures found 

in Bulgaria. 
14 March/April 2000 / Rural Cooperatives

ducers complain of a lack of credit, a lack

of quality standards and a lack of markets

for their larger volumes. 

Regulatory and credit systems

hamper business

Nonetheless, all producers face the

issues of low prices, the theft of hives,

access to more markets opportunities,

accurate and timely market information, bear control, and an inadequate

legal framework. Bulgaria as an

emerging market-oriented economy is

still creating the legal structure needed to foster business transactions. In

addition, regulations only establish a

minimum quality for honey, but do

not distinguish between quality

grades. There are no mechanisms to

financially punish producers or brokers that deliberately adulterate honey, which negatively impacts the whole

honey industry. 

Another challenge facing beekeepers

— especially large-scale producers — is

access to adequate credit. Agricultural

enterprises are regarded as old-fashioned

by urban Bulgarian lenders. A farm credit system, where lenders are familiar with

production practices, does not exist. The

few producers who can obtain credit pay

back more than 150 percent of the

amount borrowed annually.

Seeking international expertise

Against this backdrop, the Bulgarian

Beekeepers Union has sought the assistance of international agencies such as

the USDA or ACDI/VOCA (a nonprofit development organization). Representatives of these agencies have provided advice on ways to improve the

Bulgarian legal and financial framework. And they coordinate their work

with the Bulgarian government officials

to implement necessary local and

national changes. 

The producers recognize that an

improvement in the institutional

framework represents only a partial

solution. The margin between the

farmgate price and the price paid by

the final honey consumer is quite wide.

Consumer prices often are as much as

five times higher than the farmgate

price. 

In an attempt to retain more income

for producers, the Beekeepers Union

assisted in the formation of the cooperative Agropchel SA. It is a separate

commercial entity that operates on

behalf of its 700 members across the

country. This supply and marketing

cooperative for producers of honey and

related products was organized in 1997

and was capitalized with 50,000 stock

shares. Agropchel sells production

inputs and then markets the honey

products.

As with many start-up businesses,

the cooperative has worked hard to

improve its bookkeeping systems. It

has also instituted production and quality standards.

But designing a marketing plan that

generates sufficient income for members and the capital necessary for

future expansion is a major problem it

confronts. Other issues management

faces include the guarantee of a consistent, quality production and a focus on

the right value-added products. 

Some producers also view the cooperative as a purchaser of last resort. To

confront this problem, Agropchel is

instituting marketing agreements with

producers. In addition, a regional warehouse collection system and market

segmentation for certifiable organic

honey are being considered. 

Bulgarian beekeepers face many challenges in their transition to a consumerdriven market system. In their response,

they are heeding the wisdom of their

medieval king. By uniting to improve

the situation for the industry as a whole

and joining together to form commercial cooperatives, they are creating for

themselves a sweeter future. ■

The typical Bulgarian beekeeper is usually a retired, white-collar professional. 
Rural Cooperatives / March/April 2000 15

Foreign affairs

USDA Foreign Agricultural Service promotes U.S. agriculture abroad

By Karl Hampton

USDA Foreign Agricultural Service

re U.S. agricultural interests represented overseas?

Does it matter whether

they are or not? The

answer to both questions is a resounding “yes,” says Timothy J. Galvin,

administrator of USDA’s Foreign Agricultural Service (FAS). “FAS represents

the diverse interests of U.S. agribusiness — from farmers to food manufacturers — abroad,” Galvin says. It also

collects, analyzes and disseminates

information about global supply and

demand, trade trends and emerging

market opportunities.

The goal of FAS is to improve market access for U.S. products. To do this,

the agency implements programs

designed to build new markets and to

maintain the competitive position of

U.S. products in the global marketplace. FAS also carries out food aid and

market-related technical assistance programs, as well as operates a variety of

Congressionally mandated import and

export programs. 

Under the terms of a recent memorandum of understanding, FAS will also

be working closely with the USDA

Rural Business-Cooperative Service to

help develop export marketing plans

for cooperatives that wish to sell agricultural goods overseas (see sidebar,

page 16). 

Why U.S. exports matter

Established in 1953, FAS has

employees in about 70 overseas offices

covering more than 130 countries.

These offices link foreign buyers with

potential suppliers in the United States.

They also assist U.S. exporters in

launching products in overseas markets

that are often characterized by different

food preferences, social customs and

marketing systems.

In 1999, U.S. agricultural exports

totaled $49 billion. A slight increase in

export value is expected this year.

Overseas markets account for onequarter of farm cash receipts.

According to USDA’s Economic

Research Service, each export dollar

creates another $1.28 in supporting

activities to process, package, ship and

finance products. This means that agricultural exports currently generate

$112 billion in total economic activity.

About 750,000 jobs are tied to agricultural exports as well.

Market development

FAS programs help U.S. exporters

develop and maintain markets overseas

for hundreds of food and agricultural

products, ranging from bulk commodities to brand-name supermarket items.

Promotional activities are done primarily in cooperation with nonprofit agricultural trade associations, companies

that agree to plan, manage and contribute support staff and money. The

largest of FAS’ promotional programs

are the Foreign Market Development

Cooperator program (FMD) and the

Market Access Program

(MAP). In addition,

FAS sponsors the

United States’ participation in several

major trade shows

and a numA
16 March/April 2000 / Rural Cooperatives

ber of industry exhibitions overseas

each year.

International trade policy 

FAS coordinates and directs USDA’s

international trade agreement programs and negotiations, working closely with the U.S. Trade Representative’s

office. International trade policy

experts within FAS help identify — and

work to reduce — foreign trade practices that discourage U.S. farm exports. 

Statistics and market information 

FAS collects global crop and livestock production data and

import/export information from its

attaches, ag traders, remote sensing

systems and other sources. FAS uses

this information to prepare production

forecasts and assess export marketing

opportunities, as well as track changes

in policies affecting U.S. agricultural

exports and imports. FAS publishes

nearly 200 commodity reports per year

that present a world picture of production, consumption and trade flows for

about 100 crop and livestock commodities. These reports and much more

information are just a click away

through the FAS homepage at

www.fas.usda.gov

Commercial export financing 

FAS provides exporters with shortand intermediate-term commercial

financing support through Commodity

Credit Corporation export credit guar-

“There is no higher priority for USDA than working to

ensure the long-term survival and economic well-being of

America’s small- and medium-size family farms,” Agriculture

Secretary Dan Glickman said while announcing two new steps

to help small farmers and ranchers find better ways to market

and export their products. “Expanded export opportunities and

improved marketing offer tremendous opportunities to boost

small-farm incomes during this time of depressed prices.”

USDA will provide $500,000 to help small farmers develop

new ways to market their products, including direct selling to

restaurants and institutions, agri-tourism and pick-your-own

farms. Under USDA’s Sustainable Agriculture Research and

Education Program, the University of Vermont, University of

Nebraska, University of Georgia and Utah State University will

select and assist specific new marketing projects that will

benefit smaller farms. 

In addition, USDA will offer technical assistance to help

small farmers and ranchers form cooperatives to export crops

and livestock to international markets. Loans are available to

help finance the development of value-added processing at

existing cooperatives. ■

USDA extends more help to small farms

Overseas markets account for a quarter of farm cash receipts in the United States and 

about 750,000 U.S. jobs are tied to agricultural exports.
Rural Cooperatives / March/April 2000 17

antee programs. These programs protect U.S. exporters or financial institutions against risk if an importer’s foreign bank fails to make payment. The

GSM-102/103 programs are designed

to expand and maintain foreign markets for U.S. agricultural commodities, and may help developing nations

make the transition from concessional financing to cash purchases.

The Supplier Credit Guarantee

Program guarantees payments on

promissory notes from importers for

a percentage of the face value up to

180 days. And the Facility Guarantee

Program provides payment guarantees to facilitate the financing of

manufactured goods and services

exported from the United States to

improve or establish agriculturerelated facilities in emerging markets.

Concessional sales 

The United States is one of the

world’s largest food-aid donors. Over

the years, donated U.S. food has often

meant life or death to victims of earthquakes, floods, droughts and civil strife.

The administration of U.S. food aid

programs is shared by the U.S. Department of Agriculture (USDA) and the

Agency for International Development

(USAID). USDA has available three

channels for providing food aid: the

Public Law 480, Title I program, the

Food for Progress program (FFP), and

the Section 416(b) program.

Agricultural linkages 

International cooperation and

development activities enhance the

competitiveness of U.S. agriculture

and preserve natural resource systems.

These efforts help U.S. agriculture

gain access to emerging technologies

and international research, both of

which are critical to creating new

products, practices and markets. FAS

also shares U.S. agricultural knowledge and assists low- and middleincome countries in building stable

economies to battle hunger and poverty while increasing their imports of U.S.

agricultural products. FAS collaborates

with USAID, other government agencies, foreign governments, international

organizations, universities and the private sector to achieve these goals. 

For more information about FAS

and its multi-faceted programs, visit its

website at: www.fas.usda.gov, or contact the Office of Outreach at 202-720-

7420, fax 202-205-9728 or e-mail at

tapo@fas.usda.gov. ■

A global marketplace means consumers anywhere want products from everywhere. USDA’s Foreign

Agricultural Service publishes nearly 200 commodity reports per year that present a world picture of

production, consumption and trade flows for about 100 crops and livestock commodities.
18 March/April 2000 / Rural Cooperatives

Going global

Export certificates a valuable tool helping co-ops tap overseas markets 

Alan Borst

Ag Economist

USDA Rural Development

Rural Business-Cooperative Service

hat tools allow businesses – in particular,

cooperatives – to work

together to market

products overseas? As businesses

increasingly compete in a global economy, it’s critical they understand the

“ins” and “outs” of U.S. regulations

that can help them avoid antitrust litigation and capture higher export earnings.

Agricultural cooperatives have

joined with cooperative- and investorowned competitors to form joint

exporting groups throughout the past

100 years. These export groups have

been able to capture economies of size,

to spread export marketing risks and

costs across all members, and to

increase each group’s ability to deal

with foreign importers which are frequently organized as buyer cartels or

state trading enterprises. However,

such cooperative efforts may be curtailed or not even undertaken because

of the threat of costly antitrust litigation.

Possible antitrust plaintiffs can

include competitors who are outside

the group, farmers who supply either

member or non-member firms, trading

companies or other marketing intermediaries which have some commercial

relationship with the group, state attorneys general, Federal antitrust regulators, or even disgruntled firms from

within the group. The threat of

antitrust litigation is serious, even if the

case is weak, because the lawsuits are

among the most costly. Cooperative

executives must consider the time and

resources that could be tied up and the

prospect of paying triple damages if

they are unsuccessful in defending a

lawsuit. Nearly all antitrust cases are

filed by private plaintiffs.

Export trade certificate of review

U.S. policy makers have long recognized the benefits of horizontal export

coordination on member export earnings and competitiveness, and they

have promoted it through the granting

of limited antitrust exemptions —

notably the Webb-Pomerene Act

(WPA) of 1918. Agricultural cooperative members are also covered by the

Capper-Volstead Act (CVA) of 1922,

which grants limited protections

against antitrust litigation in both

domestic and foreign joint marketing

operations. By the early 1980s, U.S.

policy makers had concluded that the

WPA protections were inadequate, and

thus passed the Export Trade Certificate of Review (COR) antitrust preclearance program as Title III of the

Export Trading Company Act of 1982.

The COR program is administered

by the U.S. Department of Commerce’s Office of Export Trading Company Affairs. Certificates are issued by

the Secretary of Commerce, with the

concurrence of the Attorney General.

This program allows U.S. exporters to

submit specific joint export plans to

Commerce and the U.S. Department

of Justice’s Antitrust Division. Certified

firms or associations are provided with

immunity from federal and state government antitrust suits with regard to

approved export conduct. (It is important to note that the COR program

does not protect holders from foreign

antitrust litigation.) In addition, certified exporters receive the following

procedural advantages related to private antitrust actions.

• There is a presumption that certified export conduct complies with

U.S. antitrust laws. Plaintiffs bear

the burden of proving either that

the agencies erred in their initial

issuance of the certificate or that

conditions have changed so that an

originally correct certificate is no

longer correct.

• If a certificate holder is found

liable, its liability is reduced from

treble to single damages for damages resulting from the certified

export conduct.

• If the certificate holder prevails,

it may recover attorney’s fees.

• Finally, there is a shorter

statute of limitations

within which plaintiffs

can bring an

antitrust action

(relative to that

found in other

U.S. antitrust

laws).

W
Additional COR advantages

Cooperative exporters seeking protection or clarity regarding antitrust

exposure have various options from

which to choose, including the WPA,

the CVA, and the Business Review Letter (BRL) programs at the Justice

Department and the Federal Trade

Commission. Depending on the

exporters’ needs, the COR program

may provide the following additional

advantages over some of the other

alternatives.

• WPA only covers joint exporters

of goods; COR allows for coverage

of both goods and services.

• WPA is limited to export associations; COR immunizes one or

more firms in any organizational

configuration.

• WPA associations are limited to

exporting; COR exporters may

conduct import or domestic business, though only their export

business is covered.

• WPA is ambiguous leaning toward negative on exclusive

contracting arrangements; COR

could immunize them.

• WPA is a general exemption;

COR immunizes specific joint

export activities through a preclearance procedure, which provides greater certainty.

• WPA, CVA, and BRL do not provide any of the procedural advantages allowed for in COR coverage.

• BRL is a specific but non-binding

statement of the Department of

Justice’s position on reviewed conduct; COR pre-clearance is binding on the Justice Department and

other potential public plaintiffs

(unless circumstances have

changed).

• CVA covers only joint marketing

activity of farmers; COR potentially

covers any exporting firm, including

investor-owned co-op competitors

and other related channel

members.

The COR program is voluntary and

there are no application fees. Although

many applicants use legal counsel, the

application form is intended to be easy

to complete by the applicant, and the

Office of Export Trading Company

Affairs is available to provide pre-application counseling to interested applicants at no cost. Decisions on certification are done, except in extraordinary

circumstances, within 90 days from the

day a completed application is accepted. Analysts, economists, and attorneys

from both the Commerce and Justice

Departments review and process the

applications, with Commerce being the

contact point for the applicant. The

process is intended to be user-friendly

and additional information from applicants is normally sought through conference calls.

Protection at a modest cost

The COR program has been criticized for failing to meet inflated expectations regarding its macroeconomic

impact that surrounded its 1982 passage by Congress. But, critics are misguided if they assess the program’s

success or value by whether it

has had an impact on the

trade deficit or U.S.

unemployment

rates.

It is best

to consider

Illustration courtesy Exlaw.com.

Rural Cooperatives / March/April 2000 19
20 March/April 2000 / Rural Cooperatives

this program as one useful tool, among

many, available to U.S. exporters. The

success of any export venture depends

on business realities and the efforts

export partners put into the venture.

Nevertheless, if the threat of antitrust

liability is of any concern, the COR

program offers some certainty and protection at a relatively modest cost. It

should be noted that the costs to the

government for running this program

are, likewise, modest (particularly when

compared with the potential liability to

exporters using it). In addition, obtaining a COR sometimes serves as a catalyst for renewed export activities by

certificate holders.

Congress made agricultural

exporters a major target group for this

program. In Title I, Section 102 (a) (5)

of the Export Trading Company Act of

1982 Congress stated:

“The Congress finds that...although

the United States is the world’s leading

agricultural exporting nation, many

farm products are not marketed as

widely and effectively abroad as they

could be through export trading companies.”

An important target sub-group of

these agribusinesses were agricultural

marketing cooperatives. In 1986, Janice

Payt, attorney advisor at the Commerce Department’s Office of the

Assistant General Counsel for Trade

Development, made the case in the

Journal of Agricultural Taxation & Law

that cooperatives could benefit from

the COR program to strengthen their

market power:

“It may be advantageous to organize

an ETC [export trading company] as a

cooperative, and cooperatives can, as

members, form or otherwise participate

in ETCs. Generally, cooperatives can

use the ETC Act to obtain antitrust

protection not available under the CVA

alone and can combine the two statutes

to obtain optimum protection for

export activities.... To obtain optimum

benefits from joint exporting, cooperatives may desire to enter into arrangements with nonproducers. Such

arrangements fail to qualify for the

CVA [Capper-Volstead Act] exemption,

inasmuch as the CVA requires all members of a cooperative to be agricultural

producers. For example, courts have

held that a nonproducer processor is

not an eligible agricultural producer

within the meaning of the CVA.... By

using Title III certification, cooperatives can obtain immunity for their

export activities with noncooperatives,

while still retaining the CVA exemption for domestic (and foreign) cooperative activities.”

Co-ops use antitrust pre-clearance

It should also be noted that, in the

1996 Farm Bill, Congress encouraged

the U.S. dairy industry to “establish

and maintain one or more export trading companies under the [ETC Act]”

and authorized the Secretary of Agriculture to provide his advice and assistance as necessary.

Agricultural marketing cooperatives

have used the Export Trade Certificate

of Review antitrust pre-clearance program for many purposes. Over 40

cooperatives have been certified in 18

different export groups since the first

certificate was issued in 1983. Much

has been written about the potential

benefits which COR offers to prospective joint exporters, while little has

been said about the experiences which

certified firms have had with this program.

A series of interviews were conducted with executives from cooperative

members of a majority of certified joint

export marketing groups with cooperative membership. Questions were asked

about how COR pre-clearance influenced their export grouping activities,

and what limits existed to undertaking

the certified conduct. Some cooperatives reported that certification played a

central role in enabling their exportgrouping venture by resolving serious

antitrust threats which would have otherwise stopped the venture. Others

reported that the certification was valuable as inexpensive legal insurance, but

not absolutely needed for their venture’s joint exporting activities.

Most of the certified groups with

cooperative membership failed shortly

after start-up or have operated

sporadically and at the margin, with very limited sales

volumes. A few of the certified

groups, however, have been

very successful in their joint

exporting activities. These are

groups which, not coincidentally, have heavily used their

certification. The threat of

antitrust litigation tends to be

proportional to the potential

market power the exporters

could collectively exercise

through the group. The

greater the potential market

power, the greater the potential damages to be won

through antitrust litigation.

There are natural checks to

the exercise of joint export

market power among certified

U.S. firms. Certification has

almost always been sought for

joint exporting to new or undeveloped markets. There are also

the strong vertical market links

between these established U.S.

exporters and their importing partners,

who do not wish to confront horizontally coordinated U.S. exporters. No

examples were found of competing

exporters initiating horizontal coordination with respect to established

export markets. Further, once vertical

relationships were developed between

individual U.S. exporters and foreign

importers, horizontal coordination

tended to decline.

Business relationships important

A large proportion of the certified

joint exporting activities faced little

actual threat from potential antitrust

litigation. Nevertheless, there were

industries with painful memories of

past antitrust actions, and others without a history of antitrust litigation, per

se, but where relations among competitors were otherwise strained and litigation of other sorts had been threatened

or taken. In these situations, certification enabled even low-risk joint marketing activities by providing assurance

to highly risk-averse exporters.
Rural Cooperatives / March/April 2000 21

Most of the respondents reported

that the importers with whom they

dealt were also horizontally coordinated, either as state trading enterprises

with some measure of publicly conferred authority, or as buyer cartels that

presented a united marketing front.

Thus certification enabled the exercise

of countervailing power against coordinated importers.

The business culture among the joint

exporters was another determinant of

their capacity to actually undertake the

activities for which they were certified.

The potential efficiencies some certified

groups possessed went unused when distrust and suspicion fueled rivalry over

cooperation. Conversely, where

exporters knew and trusted each other

well, some export activities were successfully implemented.

Most of the certified export groups

were coordinated by a commodity association, which usually established a distinct entity to administer the joint marketing activities. This served the

purpose of preserving the commodity

association’s eligibility to receive export

promotion funds and services.

One area in particular where certification has proved useful is in legitimating

political relationships between U.S. commodity associations and foreign governments. Certification helped U.S. commodity groups to: 1) administer tariff

export quotas granted by a foreign economic union; 2) negotiate a suspension

agreement to terminate an anti-dumping

investigation brought by a foreign government; and 3) implement phyto-sanitary requirements imposed by importingcountry agricultural officials. This has

allowed commodity groups to take active

and coordinated roles in governing their

export markets on important issues.

Several cooperative executives

reported that certified joint exporting

was undertaken in conjunction with other horizontal coordination, as exercised

under Federal marketing orders, information-sharing cooperatives, and bargaining cooperatives. Some of these other entities provided financing and other

support for the joint exporting efforts.

Some COR program applicants

were third parties, such as economic

development specialists or trade association staffers, who were seeking to

facilitate horizontal coordination from

outside the industry. These ventures

were typically less successful in promoting joint exporting than were certificates directly sought by exporters.

Overall satisfaction with COR

The COR program is a tool which

has been used to free several cooperatives from antitrust fears. Some cooperatives have been protected from the active

threat of non-member farmer lawsuits,

while others have been freed from the

threat of litigation from other sub-sector

stakeholders from outside the group.

However, antitrust litigation was treatended in one instance when a certificate

holder used its certificate to protect its

joint exporting arrangement with a disgruntled cooperative supplier that had

earlier threatened the holder with

antitrust legal action. 

Most cooperative and ETC executives reported receiving certification for

almost all of their joint exporting plans,

although a few compromises were necessary. All expressed appreciation for

Commerce’s COR staff, and they had

no complaints about the overall process

of obtaining and maintaining their certification. Respondents valued the role

of Commerce, which they perceived as

being business-friendly and as the main

contact point in the process. They also

view Commerce as the liaison for interactions with Justice, which is perceived

as less business-friendly because it is an

enforcement agency.

In summary, cooperatives and the

certified export marketing groups to

which they belong have been generally

satisfied with the protections provided

by the COR program against the threat

of potential antitrust litigation. A majority of cooperative exporters have not

sought certification, and many of those

who obtained it have never effectively

used it. But for those who have used

their certification to resolve active

antitrust threats or to assure otherwise

anxious competitors, and who have subsequently engaged in joint export marketing activities, the COR program can

be fairly credited with having enabled

their higher export earnings. ■

Over 40 cooperatives have been certified in 18 different export groups under the COR antitrust

pre-clearance program. Research shows they are generally satisfied with the protection it provides against antitrust litigation and how that enables higher export earnings.
22 March/April 2000 / Rural Cooperatives

Co-op type: Founded in 1997, Mt.

Pride is the home of USDA-inspected

rabbit, goat and lamb growers.

Service provided: With the help of

local cooperative extension agents,

members are especially developing

rabbit production practices,

experimenting with new products, and

coordinating their efforts to supply

over 1,500 pounds of rabbit fryers to

major supermarket chains. 

Production Coordinator: Paige

Dopson, program assistant, Garrett

County Cooperative Extension Service,

Maryland, who also serves as treasurer.

Board: A 10-member board of small

producers governs the co-op. Its

officers include President Barbara

Harvey, Moatsville, W.V.; Vice

President Charlotte Koontz, Philippi,

W.V.; and Secretary Ieda Darnell,

Bruceton Mills, W.V. Membership

shares are $50 each.

Geographic area: There are many

members in the cooperative stretching

from Maryland, Virginia and North

Carolina west to West Virginia and

Pennsylvania. However, fewer than 50

growers supply the majority of meat

processed at

Country Pride

Meats,

Friendsville,

Md., one of only

three USDAinspected rabbit

processors in

the country.

Product highlights: Rabbit production

hit an all-time high in the war years of

the 1940s. With meat scarce, families in

rural and urban areas supplemented their

diets with home-grown rabbit. In the

late 1940s and early 50s, domestic rabbit

was common in meat departments in

certain areas of the

United States and it

sold for about the same

price as chicken. While

the poultry industry

moved ahead in

production and

marketing techniques,

the rabbit industry

lagged. Now Mt. Pride

members are marketing

whole fryers, taken at

4.5 to 6 pounds, live

weight.

Cooperative members also market goat

and lamb. However,

that meat isn’t marketed

through retail store outlets under the cooperative’s own label.

The rabbit meat has been sold in about

400 Shop N Save, Foodland, Country

Market and SuperValu supermarkets in

the membership region, as well as some

Ohio stores.

Recent developments:

James I. McNitt, a

noted rabbit

researcher at

Southern

University, Baton

Rouge, La., has

found that consumers

want rabbit parts while

only whole rabbits are

usually available. Even

though whole fryers are the mainstay,

Mt. Pride members are considering

other types of value-added products as

rabbit supplies increase. Extension

agents Ron Swope, Marion County,

W.V.; Jim Simms, Garrett County,

Md.; and Melanie Barkley, Bedford

County, Penn.; are helping develop

basic rabbit production practices.

Members and their processor are

exploring both smoked and marinated

rabbit; experimenting with products

such as “rabbit wings,” using the

foreleg in a sauce; and studying the

possibility of rabbit sausage. The coop is also networking with the meat

goat industry to organize a channel

for direct marketing of goats and

lambs to processors so more money

can be returned to farmers. 

For more information: Mt. Pride

Cooperative, Inc., 1916 Maryland Hwy.

Suite A, Mt. Lake Park, MD 21550;

(301) 334-6960; fax 334-6961; or

www.mtnpride.com.

A CLOSER LOOK AT...

Mt. Pride Cooperative Inc.

Mt. Lake Park, MD

In-store food sampling by co-op members relates to consumers

that rabbit is USDA inspected, 95 percent fat-free, versatile and

has an exceptional gourmet flavor.

Photos courtesy Mt. Pride Cooperative Inc.
Rural Cooperatives / March/April 2000 23

By Perry Letson 

Assistant Vice President of

Communications

ACDI/VOCA

oreign aid” is a term

that often provokes

intense debate. However, besides benefiting the needy, U.S. foreign assistance is

a wise investment in our own economic

fortune. This is especially true when the

aid is devoted to agricultural development. American agriculture must look

beyond current difficulties and support

strategic agricultural aid overseas. 

It is well established, though counterintuitive, that broad-based agricultural growth in developing countries

boosts ag imports from the United

States. When people in developing

nations earn disposable income, they

spend it on improving their diets.

According to the International Food

Policy Research Institute, each dollar

increase in developing-country farm

output leads, on average, to 73 cents in

imports from the United States,

including 24 cents of agricultural

imports from the United States. 

Agriculture is a critical engine for a

nation’s economy because, on average,

a $1 increase in ag production generates $2.32 worth of growth in the overall economy. And agricultural assistance works: U.S. investments in better

seeds and farming techniques have

helped feed an extra billion people in

the developing world since the early

1960s.

Exports: key to U.S. ag success

Today, agriculture is the bright spot

in a gloomy U.S. balance of payments

picture. While large global supplies

and weak import demand have in

recent years hurt U.S. farm exports, the

Food and Agricultural Policy Research

Institute projects that over the next 10

years the value of exports will increase

by more than 40 percent. In 1998 Secretary Glickman put it succinctly:

“Without world markets, the U.S. farm

economy goes in the tank.” 

Wayne Boutwell, former president of

the National Council of Farmer Cooperatives and now president of Southern

States Cooperative, said in 1996 that

“over the next 50 years, 94 percent of the

growth in population-based food

demand will occur outside the industrialized countries. This is where the battle

will be fought for world markets.”

While our traditional agricultural

markets in Europe and Japan are maturing, developing countries offer accelerated population and economic growth.

China’s economy alone is expected to

triple in seven years! Unless we want to

be left behind in global competition, the

United States must pursue foreign assistance that conforms to the demographic

realities. To the extent the aid is agriculture-oriented, it will be more effective at

accomplishing broad-based economic

development and more likely to cultivate

new customers for U.S. farm products.

Agricultural aid in decline

Yet agricultural aid from all industrialized nations plummeted almost 50 percent in real terms over 1986-96. The

United States is leading the decline.

Fifty years ago, the United States

provided almost two-thirds of all the

foreign assistance in the world. Now

we rank last among the 21 industrialized nations (according to the Organization for Economic Cooperation

and Development) in percentage of

GNP per capita devoted to humanitarian assistance abroad. In actual

donations, we rank behind Japan,

Germany and France – nations with

much smaller populations than the

United States. There has been a 40

percent erosion in U.S. aid (in real

dollars) over the last decade, and

we’ve closed 28 missions of the U.S.

Agency for International Development (USAID) since 1993.

From an agricultural marketing

standpoint, this is folly! Other nations

– our competitors – are becoming

more generous and more strategic with

their aid programs as we shrink from

our rightful role as world leader. 

The actual amount of the federal

budget devoted to foreign aid is less

than 1 percent. According to a University of Maryland poll, a majority of

Americans believe the United States

spends 15 percent or more of the federal budget on foreign aid. The same

Why U.S. agriculture should

support foreign aid

“F

José Artigas of Farmers Commodities

Corporation in Egypt on an ACDI/VOCA

project to strengthen Egypt’s grain industry. The Des Moines co-op discovered

opportunities in its field of agricultural risk

management and today has a thriving

office in Cairo. Photo courtesy ACDI/VOCA.
24 March/April 2000 / Rural Cooperatives

respondents believe the proper amount

should be about 6 percent.

Congressional support for foreign

aid has ebbed in recent years. Too

many Americans misunderstand the

win-win aspect of international economic development and are cynical

because past aid in certain cases

propped up dictators. In general, we

Americans say we support the idea of

development and humanitarian assistance, and we tend to be generous

when disaster strikes. However, citizen

support for aid is more a latent value

than an urgent, activist concern, and

Capitol Hill has consequently treated it

as a low priority.

A history of success 

There’s no denying that U.S. foreign assistance has had remarkable

success. Since the inception of the

Marshall Plan in 1947, America has

provided vital resources, development

models (including cooperative forms

of business and banking), and critical

know-how around the globe. From

France, Italy, Germany, Spain and

Japan in the post-war era, to Thailand, Chile and Costa Rica in more

recent years, foreign aid has brought

tremendous gains.

In the 1950s and early 1960s, the

four developing countries that

received the most U.S. aid were

Brazil, Korea, Taiwan and Turkey.

Today, we have over $100 billion in

trade with each. Now South Korea

each year buys U.S. goods that are

worth more than all the assistance

provided to that nation since 1962.

In addition, there have been

astounding benefits to American agriculture: Wheat varieties with dwarfing genes found in Asia as part of a

USAID program are now grown on

almost two-thirds of the area under

wheat cultivation in the United

States. 

Co-ops: a natural at international

economic development

Even with the gains, 800 million

people are still chronically hungry,

and the world population is increasing

by approximately 80 million per year.

U.S. farm cooperatives and farm credit banks have a proud history of helping those in need overseas. CARE,

ACDI/VOCA and its predecessor

organizations – Agricultural Cooperative Development International and

Volunteers in Cooperative Assistance

– as well as NCBC, NRECA and other organizations have carried the

co-op banner to the far corners of the

world, creating prosperity and injecting the democratic values and efficiency of co-ops where they are most

needed. Today, with world markets

beckoning, U.S. farmers can’t afford

to be isolationist; they must support

strategic foreign aid.

There are many ways of looking at

foreign assistance. It’s investing in

people so that they can join the global

information and economic order. It’s

leveraging the limited resources of

governments to build indigenous

skills and promote private initiative.

Ultimately, it’s a process of making

friends and creating customers overseas in stable political environments –

customers who have money to spend

and look to America as a worthy helpmate and a reliable supplier of quality

goods.

Ted Turner says, “We cannot save

the United States in the long haul

without saving the whole world. We

cannot throw up walls at our borders

or set tariffs on imports. We cannot

escape environmental degradation of

our foreign neighbors. Why create

refugees when we can cultivate buyers?”

Howard Shultz, CEO of Starbucks,

adds, “Supporting global development

is not charity – it’s an investment.

And, it’s the right thing to do.”

The new world economy is based

on democracy and trade: currently,

American foreign aid, what there is of

it, is becoming more business-oriented, and trade barriers are inevitably

coming down. The United States

must be engaged overseas to prepare

for a future in which more and more

customers will have names that are

harder and harder to pronounce. A

future in which diseases more easily

become pandemics; a future in which

we’ll eventually discover that an enormous amount of the world’s vital

genetic diversity is reposed across our

border in remote rain forests or on

mountain terraces.

More than money

Seat-of-the-pants economists may

say that private investment in the

developing world has soared in the past

few years from $30 billion in 1987 to

near $200 billion today and that this

massive infusion of money will make all

the difference. Right? Unfortunately,

no. In most cases, it only makes the

rich richer. The vast majority of this

private investment went to a mere

handful of nations – less than three

percent went to all sub-Saharan Africa.

Private investment will not bring about

broad-based global economic prosperity. There must be government and civil

society intervention to make aid equitable.

Whether it’s helping to organize

smallholder farmers in Malawi to capture market share from colonial-style

plantations, or teaching marketing to

bakers in Romania, or bringing cooperative banking back to Poland,

people-to-people, private

enterprise-based development assistance is inexpensive in the long run

especially if it helps avert crises. The

prosperity it brings will pay off manifold for market-hungry American agriculture.

We, as a people, must not miss the

opportunity to be good leaders, to be

good businessmen and to be good

period. If we’re serious about finding

new markets, about creating new

business opportunities for American

companies in this competitive environment, we must recognize that we

have a vested interest in helping the

developing world – especially in agriculture. ■

Opinions expressed by guest columnists

in Rural Cooperatives magazine do not

necessarily represent those of the U.S.

Department of Agriculture.
Rural Cooperatives / March/April 2000 25

By Beverly L. Rotan

Economist

USDA Rural Development

Rural Business-Cooperative Service

ith farm commodity

prices severely

depressed and thousands of producers all

across the nation struggling for their

economic survival, most farmers could

improve their odds by belonging to

financially strong marketing and supply

cooperatives to add some certainty to

an uncertain world. But a cooperative is

not a panacea, and managers and directors need to constantly monitor all

aspects of the cooperative operation to

make certain it is returning a good value to its members. 

One way to measure the success of

your farm supply cooperative is to

compare it with the performance of

cooperatives with similar functions

during the past year. Was its performance higher, lower or about the same

as the average of a cross section of local

farm cooperatives with similar factors?

The two tables below contain average financial data compiled from a survey of 329 cooperatives for 1997 and

1998. These include trend and industry

norm comparisons. Fill in the blanks

and compare these benchmarks with

your cooperative’s financial data. 

So how is your cooperative doing? ■

W

MANAGEMENT TIP

H o w D o e s Yo u r L o c a l F a r m S u p p l y

Cooperative Rate?

Table 1—Compare your farm supply cooperative 1/ with averages for cooperatives with similar functions.

Size (1997) 2, 3/ Size (1998) 2, 3/ Your 

Measure/Item Unit Small Medium Large Super Small Medium Large Super cooperative

Sell farm supplies only Percent 85 60 41 10 85 60 41 10

Total assets Mil. dol. 1.6 4.1 7.4 14.0 1.6 4.3 7.9 15.4

Long-term debt Thou. dol. 90.0 342.0 661.2 786.3 88.1 361.7 759.4 1,284.4

Total liabilities Thou. dol. 404.6 1,287.0 2,646.5 5,544.1 405.6 1,324.3 2,937.2 6,055.9

Total sales Mil. dol. 2.9 7.2 13.3 24.9 2.6 7.0 12.7 26.0

Total service revenue Thou. dol. 48.1 204.1 320.1 665.9 56.2 201.7 321.7 686.5

Total revenue Mil. dol. 2.9 7.7 14.1 26.5 2.7 7.2 13.5 27.6

Net income (losses) Thou. dol. 115.4 335.5 642.2 1,159.2 85.7 300.3 506.8 1,049.4

Labor of total expenses Percent 54 51 53 54 54 51 53 55

Patronage refunds received Thou. dol. 67.1 184.9 319.5 761.6 70.5 184.2 333.3 790.2

Liquidity ratios

Current Ratio 2.39 1.90 1.51 1.42 2.35 1.90 1.40 1.41

Quick Ratio 1.42 1.05 0.80 0.71 1.38 1.05 0.75 0.63

Leverage ratios

Debt to asset Ratio 0.11 0.13 0.16 0.18 0.09 0.12 0.17 0.19

Debt to equity Ratio 0.08 0.12 0.14 0.09 0.07 0.12 0.15 0.13

Times interest earned Ratio 7.37 7.47 6.27 7.30 5.87 6.83 5.37 5.88

Activity ratios

Fixed asset turnover Ratio 7.87 6.81 5.86 6.68 6.62 5.97 5.02 5.79

Total asset turnover Ratio 1.78 1.76 1.80 1.78 1.57 1.57 1.60 1.68

Profitability ratio

Gross profit margins Percent 16.99 16.64 18.65 16.12 17.86 18.15 19.56 15.88

Return on total assets before

interest and taxes Percent 9.12 10.01 10.97 10.57 6.81 8.76 8.30 8.85

Return on total equity Percent 10.05 11.87 13.49 13.68 7.20 10.21 10.13 11.22

1/ 100 percent of sales were generated from farm supply sales. 

2/ Small = Sales are $5 million or less; medium = over $5 million to $10 million; large = over $10 million to $20 million; 

and super = over $20 million. 

3/ There were 329 cooperatives surveyed in both years.
26 March/April 2000 / Rural Cooperatives

Table 2—Compare your mixed farm supply cooperative 1/ with averages for cooperatives with similar functions.

Size (1997) 2, 3/ Size (1998) 2, 3/ Your 

Measure/Item Unit Small Medium Large Super Small Medium Large Super cooperative

Market farm products and

sell farm supplies Percent 6 19 24 19 6 19 24 19

Total assets Mil. dol. 1.1 3.7 8.3 16.2 1.1 3.9 8.6 17.4

Long-term debt Thou. dol. 27.9 479.4 1,063.2 2,029.7 116.0 571.2 1,117.8 2,094.0

Total liabilities Thou. dol. 399.1 1,380.0 3,293.8 8,099.2 342.8 1,467.2 3,381.7 8,594.6

Total sales Mil. dol. 2.7 7.9 14.6 34.9 2.5 7.3 14.4 34.3

Total service revenue Thou. dol. 60.6 251.3 550.1 1,102.9 65.6 293.8 598.5 1,224.7

Total revenue Mil. dol. 2.9 8.4 15.6 36.9 2.6 7.8 15.5 36.4

Net income (losses) Thou. dol. 14.3 232.8 377.2 868.3 34.2 233.0 388.1 941.9

Labor of total expenses Percent 51 48 51 48 51 49 51 49

Patronage refunds received Thou. dol. 27.9 125.8 345.6 634.9 31.8 126.6 365.2 662.6

Liquidity ratios

Current Ratio 1.54 1.74 1.44 1.36 2.33 1.70 1.30 1.32

Quick Ratio 0.80 1.07 0.81 0.64 1.18 0.94 0.68 0.59

Leverage ratios

Debt to asset Ratio 0.14 0.17 0.20 0.25 0.20 0.19 0.20 0.25

Debt to equity Ratio 0.04 0.21 0.21 0.25 0.16 0.24 0.21 0.24

Times interest earned Ratio 1.70 4.47 3.61 3.20 2.53 4.68 3.37 3.32

Activity ratios

Fixed asset turnover Ratio 11.83 7.39 5.80 7.98 10.29 5.72 5.06 7.19

Total asset turnover Ratio 2.49 2.17 1.76 2.15 2.31 1.87 1.66 1.97

Profitability ratio

Gross profit margins Percent 11.17 12.37 14.51 13.45 12.47 13.31 15.58 15.10

Return on total assets before

interest and taxes Percent 4.00 8.96 6.82 8.35 5.83 8.03 6.75 8.36

Return on total equity Percent 2.03 10.25 7.49 10.70 4.73 9.66 7.37 10.64

1/ 50 to 99 percent of sales were generated from farm supply sales. 

2/ Small = Sales are $5 million or less; medium = over $5 million to $10 million; large = over $10 million to $20 million; 

and super = over $20 million. 

3/ There were 329 cooperatives surveyed in both years.

Land O’Lakes buys butter business

Land O’Lakes Inc., Arden Hills, Minn., recently announced its purchase of Madison Dairy, a 95-year-old, family-owned

business in Wisconsin’s capital city. The butter plant is the city’s 18th largest business, employing 80 and tallying $290 million in

revenues last year. Madison Dairy, owned by the Steinhauer family, produced 15 percent of the nation’s butter in 1999. Land

O’Lakes controls about 33 percent of the U.S. butter market. The deal will allow the co-op to add a major production facility to

its current roster of butter plants in Faribault, Minn.; Carlisle, Pa., Kent, Ohio; and Tulare, Calif.

In other news involving LO’L:

•LO’L and Alto Dairy Cooperative are studying whether to construct a jointly owned cheese plant in Wisconisn that would

be the state’s largest. It could handle up to 6 million pounds of milk daily — or about 600,000 pounds of cheese a day.

•LO’L and Cooperative Business International Inc. have formed Specialty Grains LLC, a partnership which will integrate

seed contracting, and the marketing and delivery of specialty grains to overseas customers. The key to Specialty Grains will be

an integrated, formalized contract production system. The original focus of the venture is expected to be identity preserved soybeans and white corn. 

•LO’L, Cenex Harvest States Cooperatives and Farmland Industries announced that Agriliance LLC will be the name of the

agronomy marketing joint venture between the three regionals. It maintains marketing and sales offices in St. Paul, Minn., and

Kansas City, Mo. Agriliance was originally proposed in anticipation of a unification between Cenex Harvest States and Farmland which did not receive the necessary member approval. This alliance is not contingent on a Farmland and Cenex Harvest

States unification. Agriliance will be the largest North American crop input provider; marketing approximately 15 million tons

of crop nutrients, $1.7 billion of crop protection products, and $300 million of Croplan Genetics seed. 
Rural Cooperatives / March/April 2000 27

Welch’s sales soar; 

Pokeman coming!

For many ag co-ops, 1999 was a year

they’d rather forget. One exception:

Welch Foods Inc. of Concord, Mass.

Thanks to new products, wider distribution and studies that tout the health

benefits of grape juice, the marketing

arm of the National Grape Cooperative

Association Inc., recently out-performed much of the industry. Over the

past eight months, Welch’s has seen

monthly sales running more than 20

percent above the previous year’s levels,

said Daniel P. Dillon, Welch president

and CEO.

Most members grow their grapes in

Michigan, New York, Ohio, Pennsylvania, Washington state and Ontario. As

grapes thrive, many other farm products are hurting. The co-op may be

thriving because it’s doing a good job

fulfilling its purpose: maximizing profits and preserving the long-term livelihood of members by stimulating

demand through marketing efforts and

advertising campaigns. Welch’s ads target families and feature cute kids. New

market efforts include a sponsorship of

I-Village, a Website that caters to

women. And soon Pokemon characters

will be enlisted in a Welch’s promotion.

Also stimulating demand is medical

research that Welch’s has supported.

This research claims that white grape

juice may be the easiest juice for a

young child to digest and that purple

grape juice is as good for the heart as

red wine.

What’s really impressive about last

year, according to Dillon, is that about

one-third of sales came from new products introduced within the past five

years; in the early 1990s, new products

accounted for about only 10 percent of

overall sales.

Merger creates Evergreen Co-op

McLean County Service Co. members recently attended their final annual meeting, followed by the first board

meeting of Evergreen FS, created

through a combination of McLean

County Service and Woodford FS in

Illinois. Farmer-members of the two

Growmark Inc.-member cooperatives

elected Dan Kelley, Normal, board

president; Rick Dickinson, Congerville,

vice president; and Darwin Builta, Bellflower, secretary-treasurer. Other

directors on the new board include

Mark Newmann and Kent Hodel, both

of Metamora; Irvin Bane, Bellflower;

Russel Johnson, Chenoa; Jerry Wisted,

McLean; Lynn Rader, Bloomington;

and Paul Duzan, Colfax.

Evergreen FS serves 4,200 farmers,

providing them fuel, fertilizer, LP gas,

agrifinancing, precision farming and

grain marketing and storage services.

The co-op employs 250 people, with its

main office in Bloomington. Woodford

FS posted 1999 sales of more than $11

million. McLean County Service completed its third-best year with sales

exceeding $77.8 million. Doug Oehler,

former McLean County Service general manager, remains in that position,

NEWSLINE

Welch’s new Pokeman jelly jars are sure to be a big hit with the public. Photos courtesy Welch’s.
28 March/April 2000 / Rural Cooperatives

while Bob Eichelberger, former Woodford FS general manager, takes over as

assistant manager of operations. 

Ag Council salutes Steve Easter 

Steve Easter, who recently retired

after a long career as vice president of

member and government relations for

Blue Diamond Growers, was honored

with the Co-op Career Professional

Award for 2000 during the 81st annual

meeting of the Agricultural Council of

California in Sacramento. Easter was

saluted for his 32 years of service to

agricultural cooperatives. 

He continues to serve as a director

of the Almond Board of California and

is past president of the Almond Hullers

and Processors Association. Easter is

also a former chairman of the Agricultural Council of California and member of the Advisory Committee on

Horticultural Trade to the Secretary of

Agriculture and the U.S. Trade Representative. He also served as chairman of

the American Institute of Cooperation. 

Rural Utilities sells debt securities

National Rural Utilities Cooperative

Finance Corp. (NRUCFC), Washington, D.C., filed to sell up to $300 million in debt securities. Combined with

$100 million in previously registered

securities, the offering is worth $400

million, according to the self registration filed with the Securities and

Exchange Commission. 

The non-profit Herndon, Va.-based

cooperative provides financing to supplement the loan program of the U.S.

Agriculture Department’s Rural Utilities Services. The proceeds from the

offering will be added to NRUCFC

general funds which will be used to

make loans to members, repay debt,

refinance long-term debt and other

corporate purposes. 

NRTC praises House Ag Committee

for moving to close ‘digital divide’

The U.S. House Agriculture Committee voted in mid-February to bring

the benefits of local satellite TV broadcasts – and perhaps high-speed Internet

service – to the half of America overlooked in last year’s Satellite Home

Viewer Improvement Act (SHVA).

Bob Phillips, president and CEO of

the National Rural Telecommunications Cooperative (NRTC) hailed

approval of the “Rural Local Broadcast

Signal Act” by the House Ag Committee as “a major step toward bridging

the ‘digital divide’ looming in rural

America.” Phillips’ comments came following a 41-0 vote by the committee to

approve the bill, which contains $1.25

billion in federal incentives to assist

non-profit organizations in providing

local broadcast television services to

rural areas.

“The Committee sent a clear message – rural Americans are not secondclass citizens and they deserve access to

the same news and information services

as urban Americans,” Phillips said.

“H.R. 3615 is the right bill at the right

time to address the lack of access to

broadcast signals in vast areas of the

country,” he said.

Phillips praised the co-authors of

the legislation, Reps. Bob Goodlatte (R

-VA) and Rick Boucher (D -VA) along

with Rep. Charles Stenholm (D -TX)

for moving quickly to provide the

incentives. “They understand the plight

of rural consumers, and they have

crafted a bill that not only offers significant incentives to address the crisis,

but a bill that puts the right agency —

the Department of Agriculture’s Rural

Utilities Service (RUS) — in charge of

administering the local broadcast signal

program,” he said. “The telecommunications loan guarantee program administered by RUS has a 100 percent

repayment record – not one dime of

taxpayer money has ever been used to

cover a loan default,” he said.

SD co-op plans egg production plant

Dakota Layers Cooperative received

a $48,000 grant to plan an egg-production plant that would house 750,000

hens. The money comes from the

South Dakota Governor’s Office of

Economic Development to study the

feasibility of a plant north of Flandreau,

reports Scott Ramsdell, president and

founder of the farmer-owned cooperative.

The $41.5-million plant would create 15 jobs. It will use 650,000 bushels

of corn and tons of soybeans. The coop has held a public meeting to discuss

the plan and has taken an option to buy

a quarter section of land. The plant

would consist of 10 barns, and the site

Minnesota power alliance established

Minnkota Power Cooperative, Inc., will work with Minnesota Power,

Inc., and Great River Energy in an alliance to optimize about 4,000

megawatts of generation assets. The alliance will also combine the power

supply assets and customer loads for all three companies and will result in

a larger resource base to help mitigate risk in volatile power markets.

MPEX, a division of Minnesota Power, will provide power trading, least

cost supply and risk management services for the combined operations.

The companies plan to complete alliance details by summer.

“This is the right thing to do in today’s energy marketplace,” said

Dave Loer, president and CEO of Minnkota. It is a consumer-owned

generation and transmission cooperative serving 12 distribution co-ops.

Its service area, approximately 35,000 square miles, is in northwestern

Minnesota and eastern North Dakota with a population of 300,000. Its

generating facilities are among the lowest-cost producers of electric energy in the country.
Rural Cooperatives / March/April 2000 29

would feature a processing plant to

grade, clean and package eggs. In addition, a mill is being proposed to convert locally grown corn and soybeans

into feed. Ron Wheeler, the state’s economic development commissioner, said

the plant would be a boon to Flandreau. Local businesses ranging from

electric cooperatives to main street

business should see increased business,

he said.

Small Poultry Processor Co-op

Planned

Karen Machetta, a central Missouri

woman who uses organic methods to

raise free-range chickens north of

Columbia, says a poultry processing

plant would let small producers compete with large corporations. Farmers

would be able to bring birds in for processing and USDA inspection. Her

effort received a boost with a $7,180

grant for consultants’ services for the

project. The money came from the

Missouri Value-Added Grant Program

of the state’s department of agriculture. 

Last year, Machetta received

$10,000 to study demand for the plant.

She had hoped the latest grant would

be enough to build the plant, but program manager Tony Stafford said capital expenses are ineligible. One possibility is for farmers to organize a

cooperative. Larry Kieffer, a farmer in

Macon, has been working on such a

project but said his efforts are in a very

early stage. Kieffer said the plant would

be very important to small farmers. In a

1999 survey, nearly 300 farmers

expressed interest in a processing plant

and co-op that could help them market

birds. The survey showed farmers

would produce 96,000 chickens, 4,500

pheasants and 14,000 ducks.

NCBA to help ‘false’ co-ops become

real

The National Cooperative Business

Association (NCBA) has announced an

initiative to address the problem of

businesses presenting themselves as

cooperatives when they are not cooperatives. The problem, explained NCBA’s

Paul Hazen, has become more prevalent with the advent of e-business and

group purchasing. The businesses may

be trading on the good will that the

public has for cooperative businesses or

may be ignorant of cooperative operating principles. “Regardless of the reasons for these false claims, NCBA’s mission is to support and protect

cooperative enterprise,” he said.

The association will rely on members and other interested cooperators

to keep it informed of potential problem businesses. Indeed, the new initiative was prompted by a call to the association about the status of a business

promoting itself as a cooperative when

that was not the case. NCBA’s response

to such cases is a two-stage program.

When a questionable business is identified, NCBA will contact the business to

determine whether it is operating as a

cooperative. If it is determined to be a

non-cooperative, NCBA will first educate the business about cooperatives

and help it truly become a cooperative.

The initiative harkens back to the

beginnings of the association in 1916.

At that time, James Peter Warbasse,

association president, exposed a number of stores calling themselves cooperatives that were not democratically

controlled or run, but were instead

generating substantial profits for a few

people.

Tomato co-op files canner complaint

The California Tomato Growers

Association, a Stockton-based cooperative of canning-tomato growers, filed

an unfair trade-practices complaint

against Sun Garden-Gangi Canning

Co. The Association claims that the

Riverbank canner has cut out every

association grower and 100 percent of

their tonnage from Sun Garden-Gangi’s contracted tonnage for the 2000

crop year.

Facing lingering surpluses from last

year’s bumper crop, Kevin Gangi said

that a number of canners have cut back

on contracts for the upcoming harvest.

The Association, which gives growers

more clout than if they bargained individually, claims that Sun Garden-Gangi’s actions constitute a boycott, discrimination and a failure to bargain.

California law requires that commodity

buyers bargain reasonably and seriously

with grower cooperatives they recently

had done business with.

Tri Valley Growers sues Oracle

Tri Valley Growers of California

announced a lawsuit against Oracle

Corp., alleging fraud, negligent misrepresentation, malpractice and breach

of contract because the Redwood City,

Calif., software developer allegedly

failed to fulfill its promise to modernize

the food co-op’s production and management systems. TVG is asking for

more than $20 million in damages. The

lawsuit follows Oracle’s alleged refusal

to accept responsibility for a failed venture into enterprise resource planning

(ERP) software. 

TVG retained Oracle in 1996 to

install ERP software that would

enable the co-op to integrate and

computerize its operations – from raw

product delivery to finished goods

distribution. For TVG, this modernization of production and management meant computer systems at nine

factories employing more than 9,500

workers, processing more than 1 million tons of fruit and vegetables annually, and distributing and marketing

15,000 Stock Keeping Units (skus), 24

brands and thousands of private label

food products domestically and internationally. 

According to TVG’s lawsuit, Oracle’s ERP solution never worked.

Rather than correct the problem, admit

failure or provide the promised level of

support to make the system work, Oracle blamed TVG’s computers and its

lack of technical expertise. The co-op

reports it abandoned the investment

and retained another vendor. TVG

filed its lawsuit in California Superior

Court. Founded in 1932, TVG

processes and markets nearly half of the

canned peaches, pears and apricots and

close to 10 percent of the canned tomato products in the United States. 

Co-ops buying into ‘green’ power

California co-ops are voting for the

environment with their electricity purchases. At least five co-ops have

switched to a green electricity provider
30 March/April 2000 / Rural Cooperatives

for their stores. There is also an organized effort underway to get all 60,000

members of all the state’s food co-ops

to purchase power from one of several

existing green power providers. 

“The co-op movement was born out

of a frustration with the status quo way

of doing business,” said Steven Kelly,

executive director of the Renewable

Energy Marketing Board. “It only

makes sense for co-ops, which often

offer more environmentally conscious

and superior products, to purchase

their electricity from non-polluting

renewable sources such as solar, wind

or geothermal steam power.” 

Berkeley-based Missing Link, a worker-owned bike co-op, is one of the most

recent to switch to green power. The

store went to GreenMountain.com’s 100

percent renewable energy product,

which helps support construction of a

new solar photo-voltaic power plant in

Mendocino County and costs less than

generic power. 

Another Berkeley-based co-op,

University Students’ Cooperative

Association, switched to Green

Mountain a year ago. The student

housing cooperative – the largest in

North America – owns 20 properties,

all of which are now powered by

green electricity. Co-opportunity

Consumers Co-op, Santa Monica,

went with Commonwealth Energy,

Tustin, Calif., providing power generated from geo-thermal steam coming

from Sonoma, Lake and Imperial

counties. Both Isle Vista Food Cooperative, Santa Barbara, and People O.

B. Organic Food Co-op, Ocean Beach,

switched to GreenMountain.com’s

Wind For The Future. These co-ops

are paying about a 10 percent premium to ensure that 25 percent of their

electricity is generated at new wind

turbines installed in the San Gorgonio

Pass, California’s wind farming site. 

The three food co-ops that have

already switched are part of a

statewide campaign organized by the

Twin Pines Cooperative Foundation

to get the 10 largest food co-op stores

to purchase green power and then

educate members to also switch to

green power. The education campaign

is funded by the California Energy

Commission.

Imperial Sugar offers plants to co-op

Imperial Sugar Co., the largest

U.S. marketer and processor of

refined sugar, has offered to sell its

plants in Tracy and Woodland, Calif.,

to the California Beet Growers Association. Based in Sugar Land, Texas,

Imperial Sugar markets its products

under a variety of brands, including

Spreckels, Holly and Dixie Crystals.

“We discussed the possibility of a

grower cooperative buying both

plants and the growers said they

would take the idea under consideration,” said Bill Schwer, Imperial’s

executive vice president. “We talked

in general terms, not specifics, so this

is the start of our discussions. We

offered to manage the plants and market the sugar and by-products.”

Imperial, which owns four California plants, is the state’s only processor.

Sugar beet profits have largely soured

over the past decade, according to

industry data. The value of the country’s sugar beet crop plummeted from

$34 million in 1989 to less than $7

million in 1998, the most recent figures available. Harvested acreage

dropped. Other factors such as the

emergence of a soil-borne virus,

drought and growing popularity of

substitutes for beet and cane sugar,

also hammered yields and profits.

Meanwhile, world expansion in planted sugar beet acreage has produced a

record crop. And the possibility of

significantly higher imports of Mexican sugar into the U.S. market beginning Oct. 1 – enabled by the North

American Free Trade Agreement –

may further push prices down. Reacting to the news, refined bulk-sugar

prices fell recently to 15-year lows.

American Crystal considers

forfeiture of sugar

American Crystal Sugar Co., Moorehead, Minn., may forfeit sugar to the

government for the first time in more

than 20 years because of poor prices. In a

member letter, President James Horvath

told the 900 growers that it must consider the option. The USDA’s sugar program allows processors to put sugar up

as collateral for nine-month loans. If

Glickman sets 2000 goals 

Calling 1999 “another extremely difficult year for America’s farmers,” USDA Secretary Dan Glickman said President Clinton’s fiscal

2001 budget includes new proposals to strengthen the farm safety net

and to help farmers weather difficult times. 

Glickman’s year 2000 priorities include: 

Supporting American farmers and ranchers: He will work with Congress to improve the 1996 Farm Bill, providing a stronger and broader

safety net and enhanced conservation programs.

Helping farmers and rural America prosper: He will make significant additional investments in research and rural economic development, aggressively seek further opening of global markets, implement

mandatory price reporting to help ensure fair competition for small

farmers and ranchers, and propose a national organic standard.

Moving ahead together: Glickman pledged continued progress on

civil rights, ensuring that fairness and inclusion are part of everything

USDA does.
Rural Cooperatives / March/April 2000 31

prices remain under the loan rate,

processors have the option of forfeiting

the sugar to the government instead of

repaying the loan in cash.

Horvath blamed trade and domestic

policies for pushing sugar prices to

their lowest levels in some 15 years.

Among other factors, Horvath said, the

United States is required to import

1.25 million tons of sugar annually.

Canadian imports of stuffed molasses –

a mixture of sugar and molasses – have

displaced at least 100,000 tons of

domestic sugar, he claimed.

Mark Weber, executive director of the

Red River Valley Sugarbeet Growers

Association in Fargo, said forfeiting sugar

also could give the industry a black eye.

The federal sugar program was designed

to operate at no cost to the government.

“When we won the farm program on

sugar, we only won by nine votes in the

House,” Weber said. “We’re going to

have to build a program that’s economically responsible, politically feasible and

provides a safety net for growers within

the budget constraints of Congress.”

Growmark adds facilities

Growmark Inc. added 16 retail and

eight wholesale Illinois agrichemical

facilities to its existing member company

network of fertilizer and agrichemical

plants by purchasing Agro Distribution

LLC in Illinois. Bloomington- based

Growmark bought the facilities for an

undisclosed price from Minnesota-based

farm cooperative Cenex-Land O’ Lakes

Agronomy Co., which bought the former Terra Industries facilities last June.

“This purchase will complement the

excellent distribution system our member

cooperatives currently have,” said Growmark CEO Bill Davisson. “Ultimately,

adding these facilities into the Growmark

system will mean better service to our

farmer-owners, which is our top priority.

This is a valuable opportunity to expand

our ability to meet and exceed farmers’

needs in an efficient manner.”

New Nebraska pork co-op planned

Stan Rosendahl, Creston, Neb.,

immediate past president of the

Nebraska Pork Producers, announced

during the 27th annual Pork Expo at

Platte County Agricultural Park that a

new pork co-op is being planned. He is

chairman of the steering committee

developing Family Quality Pork Producers. Meetings are expected this

spring to gauge interest and provide

further details, including selection of a

project site. The plan tentatively calls

for producers to buy shares in the coop. The co-op will not own livestock

and all profits will go directly to producers. Consumers have started to ask

for specific types and qualities of product and the co-op will try to market to

those demands, Rosendahl said.

“The goal is to be further into the

pork chain, closer to the consumer,”

Rosendahl said.

New pork co-op could hike profits

Jack Rundquist, a Butler County, Ill.,

pork producer, has been elected chairman of Pork America, a closed cooperative marketing association which plans to

coordinate pork production, processing,

distribution and marketing for members.

With no funds to work with, revenue

initially must come from Pork America

memberships. Until April 15, producers

who joined the co-op paid $500 for every

5,000 hogs they plan to market. Producers who market fewer than 5,000 hogs

could combine forces with nearby producers to meet the commitment,

Rundquist said. Producers who join have

both the right and obligation to deliver

hogs.

Rundquist and seven other board

members from six states have a target of

2,000 memberships, after which they will

look for marketing opportunities. “We

may be able to cooperate with an existing

processor,” said Rundquist, citing a successful effort by beef producers to buy

slaughter space with Farmland Industries

to market a special brand of beef.

DFA Cow gets rave reviews

Hundreds of cows recently promenaded through the streets of downtown

Chicago. No, it wasn’t the return of the stockyards. The bovine beauties were

life-sized fiberglass cows transformed by Chicago artists into enchanting

works of art. Chicago’s “Cows on Parade” were on display along Michigan

Avenue, in the Loop and River North, near museums, in Grant Park and on the

Moo-seum campus. Dairy Farmers of America’s “Uncle Sam Cow” was the

favorite of Chicago officials and tourists alike. For a statue, this cow really got

around. She was featured on a postcard the nation’s largest dairy cooperative

sent to members of Congress in Washington, D.C.

Photo courtesy Dairy Farmers of America.
32 March/April 2000 / Rural Cooperatives Rural

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