R

u

ral COOPERATIVES

USDA / Rural Development May/June 2009

C o m m u n i t y f a r m c o - o p 

e m b o d i e s P l u n k e t t ' s v i s i o n

Page 20
By Don Gordon

Editor’s note: Gordon is president of the Agricultural Council of

California, which helps to represent the interests of the state’s

farmer-owned cooperatives.“If an issue affects California’s farmerowned enterprises, the Ag Council is there,” says Gordon. Other

states, including parts of Texas and Florida, were also facing severe

droughts as of this writing in April.

alifornia water officials have proclaimed

2007-2009 as California’s worst drought in

150 years, bringing back memories of the

“dust bowl” conditions of the 1930s. While

there’s good reason for concern among the

state’s grower-owned cooperatives — which play such a vital

role in the state’s farm economy, producing everything from

oranges, to almonds, to raisins to milk and cotton — the

drought should be viewed in a broader context.

California is a big state with eight agricultural production

regions that differ in topography, temperature, rainfall, soil,

water, crops, environmental restrictions and degree of urban

encroachment. About 400 commercial crops are produced on

approximately 26 million acres (8 million of which are

irrigated). 

Depending on the region, agricultural water is sourced

from rainfall, irrigation districts, groundwater and riparian

rights. The primary watersheds are in the northern third of

the state whereas 80 percent of the demand is in the lower

two-thirds of the state. 

For the most part, agricultural water supplies remain

adequate. However, certain regions — such as the west side

of the San Joaquin Valley — are in dire straits. The U.S.

Bureau of Reclamation announced that farmers on the west

side of the valley would receive a zero-percent water

allocation, thus choking off water to thousands of acres of

newly planted almond trees and fallowing several 100,000

acres of row-crop land. 

Farther south, acres of avocado trees in San Diego County

are being “stumped” (radically pruned) in order to reduce

water consumption. If the current dry spell extends

significantly beyond 2009, most of the other agricultural

regions will be severely impacted as well. 

Notwithstanding the current situation, California farmers

have been enduring a virtual man-made drought for the past

30 years. Increased environmental, industrial, recreational

and urban demands driven by population growth have

inexorably squeezed agricultural water allocations. The

situation has been further exacerbated by federal court

decisions mandating strict enforcement of the Endangered

Species Act. 

As a result, water supply, quality and cost have been major

2 May/June 2009 / Rural Cooperatives

Commentary 

California’s 30-year drought

C

continued on page 38

Due to lack of water, these avocado trees in San Diego County have been “stumped,” taking them out of production for a few years

in hope that the water situation improves by the time they grow back into production. Photo courtesy San Diego Farm Bureau
Rural Cooperatives / May/June 2009 3

Rural Cooperatives (1088-8845) is published bimonthly

by USDA Rural Development, 1400 Independence Ave.

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

The Secretary of Agriculture has determined that

publication of this periodical is necessary in the

transaction of public business required by law of 

the Department. Periodicals postage paid at

Washington, DC. and additional mailing offices. Copies

may be obtained from the Superintendent of

Documents, Government Printing Office, Washington,

DC, 20402, at $23 per year. Postmaster: send address

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

Wash., DC 20250-3255.

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 freely. For

noncopyrighted articles, mention of source will be

appreciated but is not required.

The U.S. Department of Agriculture (USDA) prohibits

discrimination in all its programs and activities on the

basis of race, color, national origin, age, disabili-ty,

and where applicable, sex, marital status, familial

status, parental status, religion, sexual orientation,

genetic information, political beliefs, reprisal, or

because all or part of an individual’s income is

derived from any public assistance program. (Not 

all prohibited bases apply to all programs.) Persons

with disabilities who require alternative means for

communication of program information (Braille, large

print, audiotape, etc.) should contact USDA’s TARGET

Center at (202) 720-2600 (voice and TDD). 

To file a complaint of discrimination, write to USDA,

Director, Office of Civil Rights, 1400 Independence

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

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

is an equal opportunity provider and employer.

Tom Vilsack, Secretary of Agriculture

Dan Campbell, Editor

Vision Integrated Marketing/KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or

email: coopinfo@wdc.usda.gov

This publication was printed with vegetable oil-based ink.

R

u

ral COOPERATIVES

May/June 2009 Volume 76 Number 3

p. 4

p. 20

p. 26

p. 28

O n t h e C o v e r :

Members of Stroud Community Agriculture proudly display

samples of produce harvested from the co-op’s farm in

Gloucestershire, England. To secure a dependable supply of

quality organic foods, community members started their own

farm. See page 20. Photo courtesy the Soil Organization 

F E A T U R E S

4 Co-op Economic Footprint 

Multi-sector analysis estimates co-op impact at $653 billion 

By Lynn Pitman

8 A Place at the Table 

NFU delegates carry family farmer concerns to Capitol, White House 

By Dan Campbell

14 Waste Not 

Minnesota dairy farms use manure digesters to produce methane gas 

By Stephen Thompson 

20 A Legacy of Cooperation 

Plunkett Foundation still follows founder’s vision for co-ops 

By Mike Perry 

26 Green Thumbs Up

Interest in community gardens sprouting across America 

28 Wind power key to reducing costs for Alaskan

villages 

By Anne Todd 

D E P A R T M E N T S

2 COMMENTARY

13 UTILITY CO-OP CONNECTION

19 LEGAL CORNER

25 CO-OP DEVELOPMENT ACTION

31 NEWSLINE
By Lynn Pitman,

University of Wisconsin

Center for Cooperatives

Editor’s note: for the full report on which

this article is based, visit:

http://reic.uwcc.wisc.edu/.

ooperatives occupy a

unique niche in the

economy of the United

States. Co-ops are

engaged in a broad

range of businesses: electricity

distribution to rural farms and

homeowners, bargaining and marketing

services for agricultural producers, and

delivery of home healthcare services for

the elderly, among many others.

Cooperative businesses have provided

an effective “bottom-up” solution for

meeting needs imperfectly addressed by

the market and have been responsible

for many market innovations.

Nonetheless, no comprehensive

national statistics about U.S.

cooperative businesses exist to quantify

and describe their impact on the U.S.

economy and on the lives and

businesses of Americans. To address this

lack of basic information, the U.S.

Department of Agriculture funded the

Research on the Economic Impact of

Cooperatives (REIC) study, which is

being conducted by the University of

Wisconsin Center for Cooperatives

(UWCC). The project received

matching support from the National

Cooperative Business Association and

the Wisconsin Department of

Agriculture, Trade and Consumer

Protection. UWCC and the University

of Wisconsin-Madison also provided inkind support.

The first phase of the study,

completed in April, provides an initial

snapshot of the size and scope of

cooperative activity. 

How big a footprint?

UWCC collected data summarizing

four aggregate economic sectors and 17

subsectors that were defined by USDA

at the outset of the project. The study

identified more than 29,000 U.S.

cooperative firms operating at 73,000

locations and owning more than $3

trillion in assets. 

These co-ops directly accounted for

more than $500 billion in revenue.

Wages and benefits topped $25 billion

and supported 853,000 jobs. 

There are an estimated 118 million

U.S. cooperative memberships, with

individuals often being members in

more than one co-op. When mutual

insurance policy holders are included,

that number rises to more than 351

million.

There are additional impacts from

the direct business activity of

cooperatives that ripple through the

broader economy. A cooperative’s costs

include outlays that become revenue for

other businesses. Wages, dividends and

patronage refunds paid out by the

cooperative become the personal

income of individuals whose spending is

the source of revenue for other

businesses. 

To gauge the true size of the

4 May/June 2009 / Rural Cooperatives

Sector Revenue Income Wages Firms Employment

($Millions) ($Millions) ($Millions) (No. Full-time jobs)

Commercial Sales & Marketing 201,207 37,737 13,810 3,463 422,505

Social & Public Services 7,523 2,213 1,690 11,311 424,505

Financial Services 394,364 100,660 51,177 9,978 1,133,353

Utilities 49,808 13,392 8,292 4,536 162,873

Total 652,902 154,002 74,969 29,288 2,143,236

*Analysis does not include housing cooperatives.

ECONOMIC IMPACT OF U.S. COOPERATIVES: Aggregate Impact by Sector*
economic “footprint” of cooperatives,

these secondary economic impacts also

need to be part of the analysis. The

study estimates that total cooperative

economic activity, including secondary

impacts, account for nearly $653 billion

in revenue, in excess of 2 million jobs,

almost $75 billion in wages and benefits

paid, and $154 billion in income. 

The commercial sales and marketing

sector encompasses cooperatives that

provide agricultural marketing,

processing and supply services, biofuel

refining companies, consumer

cooperatives that buy wholesale on

behalf of consumers, arts and crafts

cooperatives that supply and sell the

work of artist members, and other

cooperatives that operate across a wide

variety of economic subsectors. Across

all economic-impact measurements,

farmer cooperatives account for the

substantially largest share of this sector. 

Social and public service

cooperatives include firms that provide

a diverse array of healthcare, housing,

transportation and education services.

Housing cooperatives dominate this

aggregate economic sector in terms of

the number of entities, but economic

impacts of housing co-ops were not

reported. Assessment and tax practices

for co-ops vary significantly by

municipality, making it impossible to

achieve data consistency. The

healthcare subsector accounts for the

largest share of employees and

members within this aggregate sector.

While this sector accounts for a tiny

fraction of the economic impacts that

were measured, the largest share of

identified cooperatives — more than 38

percent — fell within this category.

The financial service cooperative

sector encompasses credit unions, banks

within the farm credit system, mutual

insurance companies and a cooperative

finance group comprised of a variety of

financing organizations that lend to

cooperative firms and banks. Credit

unions and mutual insurance companies

account for the largest number of firms,

establishments, memberships and

employees, but the cooperative finance

subsector accounts for the largest share

of assets within the financial services

economic sector. This subsector

includes NCB (formerly the National

Cooperative Bank), the Association of

Corporate Credit Unions, the

Cooperative Finance Corporation and

the Federal Home Loan Bank System,

and accounts for a significant portion of

cooperative economic activity. These

institutions are owned by their

members, are controlled by a board

elected by member institutions and are

operated to provide benefits to their

member banking institutions.

Utilities cooperatives provide

electric, telephone, and water and waste

services. Cooperatives that provide

electric utility services, including

generation and transmission, dominate

this aggregate sector in terms of total

economic activity. Many of these

entities resulted from federal enabling

Rural Cooperatives / May/June 2009 5

Multi-sector analysis estimates total

co-op economic impact at $653 billion 

Commercial Sales & Marketing Total Farm Supply/Mktg Consumer Arts&Crafts Biofuels Other

201,207 128,339 2,124 237 10,302 60,205 

Social & Public Services Total Healthcare Childcare Housing Transport Education

7,523 5,212 421 0 567 1,323 

Financial Services Total Credit Unions Farm Credit Mutual Insurance Co-op Finance —

394,364 74,882 15,382 226,572 77,528 

Utilities Total Electric Water Telephone — —

49,808 43,347 2,582 3,879 

AGGREGATE IMPACTS: Revenue ($Millions)
6 May/June 2009 / Rural Cooperatives

legislation in the 1930s for rural

infrastructure development. Water and

waste cooperatives often perform a

quasi-public function and provide

valued services to their communities. 

Consumer co-ops account for

92 percent of identified firms

Most cooperatives can be catagorized

as either “producer” or “consumer”

cooperatives. A producer cooperative

serves its members by bringing their

products to market, while a consumer

cooperative purchases goods or services

to sell to its members. Producer co-ops

are found almost exclusively within the

agricultural and arts and crafts

categories within the commercial sales

and marketing category. Consumer

cooperatives can be found within all

four of the economic sector groups. 

“Purchasing” (or business-tobusiness) and “worker” cooperatives are

variations on the producer/consumer

split. Purchasing cooperatives are

similar to consumer cooperatives in that

they collectively purchase goods or

services to sell to members, but the

membership is comprised of businesses

and other organizations instead of

individuals. A worker cooperative is a

type of producer cooperative where the

“product” provided by members is

labor. 

About 80 percent of all worker

cooperatives are found in the

commercial sales and marketing sector;

the remainder is found in the social and

public services sector. While about 19

percent of purchasing cooperatives are

found in the commercial sales and

marketing sector, 66 percent are in the

social and public services sector, 4

percent in the financial services sector

and 11 percent in the utilities sector.

Where the numbers came from

Unlike data-reporting agencies of

many other countries, the U.S. Census

Bureau does not identify cooperatives in

any of its census or business reporting

surveys. UWCC used a variety of

resources to conduct its own census of

cooperatives in the commercial, social

services, financial and utilities sectors

that were specified in the USDA grant. 

Some sectors of cooperative activity

are well-documented, and

comprehensive listings were available

from government or trade associations.

For other sectors, a more laborious

primary population discovery process

was necessary to identify and build coop lists.

Once a census was complete,

economic data were collected using a

variety of methods. Some sources were

able to provide aggregated business

activity data as well as lists of

cooperatives, and about 85 percent of

the data on direct cooperative economic

activity were collected in this manner.

Standardized surveys and uniform

sampling methodology were used to

collect key business indicators from

individual cooperatives on the

remaining lists.

To estimate the secondary economic

impacts of cooperative business activity,

the study used IMPLAN, an inputoutput modeling system. Steps were

taken with the analysis to ensure that

the impacts were conservatively

projected. The results of this study

represent the lower bounds of

cooperative activity in the United

States. 

Defining “cooperative”

In many cases, it was unclear

whether an identified organization

should be considered a cooperative. As

baseline criteria, the study used the

USDA definition of a cooperative: an

organization that is owned and

controlled by patron members and

operates for their benefit, distributing

earnings proportional to use. These

defining characteristics were identified

through incorporation, tax filing and

member activity information obtained

through surveys. 

However, there were sectors or

situations in which organizations met

some, but not all, of these criteria. For

example, co-ops that provide services

such as childcare or healthcare may be

democratically controlled by their user

members, who benefit from the services

provided. But as nonprofit educational

or charitable organizations, these coops legally do not have owners and

cannot make any earnings distributions.

Other cooperatives, especially within

regulated industries, might include

nonmembers on the board who could

exercise voting privileges.

This study identified and documented these “boundary” issues in the

census; it also delineated boundaries

within sectors that could be supported
by data-collection methods. 

Additional research results

Cooperative firms are fundamentally

different from other forms of business

organization. Simply looking at the

magnitude of cooperative business

activity provides an incomplete analysis

of the wider economic and social

influences of cooperatives. 

To lay the groundwork for research

on more complex impacts, the project

also funded eight discussion papers.

The papers address methodological and

empirical approaches for exploring

deeper issues on the economic and

social significance of cooperatives, and,

in part, will form the basis for subsequent phases of this research project. ■

Rural Cooperatives / May/June 2009 7

Data Sources: University of Wisconsin Center for Cooperatives and UW-Extension

Cooperatives by Sector

■ Commercial Sales & Marketing

■ Utilities

■ Financial Services

■ Social and Public Services

■ County Boundaries

■ State Border
8 May/June 2009 / Rural Cooperatives

By Dan Campbell, Editor 

USDA Rural Development

tanding at the speakers’

podium of the National

Farmers Union (NFU)

annual meeting in

Washington, D.C., in

March, Wes Niederman was helping to

herd a blizzard of NFU policy positions

toward resolution. It was a day-long

example of democracy in action as 600

members (142 of them voting

delegates) from around the nation

discussed and debated issues that

eventually filled 200 pages of policy

positions — many of them issues that

could have a major impact on the

continued viability of family farming. 

Meanwhile, back at the ranch

(literally) in North Dakota, it was

calving time, and Niederman’s family

was dealing with a very different kind

of blizzard — one that roared down

from Canada, dumping 7 inches of

snow and driving the mercury to 20

below zero. Luckily, Niederman’s

daughter, Myra, and a friend were

home for a visit and helped his son

Matthew (a recent college graduate)

ease all those new-born snouts into the

cold world of a North Dakota winter. 

As much as Niederman needed to be

home to help with calving, he says his

work in Washington was just as critical

to the future of the family’s wheat and

cattle farm. He and the other NFU

delegates passed positions dealing with

everything from renewable energy and

commodity check-off programs to rural

healthcare and conservation. 

Delegates to the NFU convention

also heard from — and got to question

— a who’s who of Congressional and

A Place at the Table A Place at the Table 

NFU delegates carry family farmer

concerns to Capitol Hill, White House 
Rural Cooperatives / May/June 2009 9

Executive Branch leaders, including:

Agriculture Secretary Tom Vilsack,

Speaker of the House Nancy Pelosi,

House Ag Committee Chairman Collin

Peterson, Senate Ag Committee

Chairman Tom Harkin and ranking

minority member Charles Grassley, and

Rep. Rosa DeLauro, who chairs the

Agriculture Appropriations

Subcommittee 

“There are always some in

Washington trying to strip money away

from farm programs, so a big part of

our effort this year is to make sure the

[2008] Farm Bill is implemented as

passed,” says Niederman. 

On any day of the year, farmers and

ranchers like Niederman sacrifice

precious work time away from their

farms in order to attend all manner of

ag meetings — ranging from meetings

of their local co-op boards, to farm

commodity councils and state and

national farmers’ associations, such as

NFU. They do so, in part, because they

know that what happens at the point of

a pen in Washington and in their state

capitals can do so much to help or

hinder the work that they do from the

seat of a tractor or in their milking

parlors. 

Staying off the menu

If there was ever a year when it was

opportune to hold the NFU annual

meeting in Washington, this was it.

With the nation in the grips of the

worst economic recession since the

1930s, family farmers must intensify

efforts to ensure that their voices are

heard in the halls of Congress, says

newly elected NFU President Roger

Johnson. 

“In Washington, if you don’t have a

place at the table, you will have a place

on the menu,” says Johnson, who is

taking the reins at NFU after 12 years

as North Dakota agriculture

commissioner. He succeeds Tom Buis,

who is now working at Growth Energy,

Wes Niederman

(right) and his son,

Matthew, make plans

to seed their wheat

crop in North Dakota

a few weeks after

Wes returned home

from the National

Farmers Union (NFU)

meeting in

Washington, D.C.

Photo courtesy

Niederman family. 

Katrina Becker

prepares to bottlefeed a new addition

to her beef cattle

herd. She and her

husband took time

away from their

livestock and the 170

crops they grow in

Wisconsin (examples

at left and above) to

attend the NFU

meeting. Photos

courtesy Stoney

Acres Farm
which promotes biofuels.

Working on Capitol Hill is nothing

new for Johnson, who still owns the

farm his grandfather started 100 years

ago and on which he grew up. As

former president of the National

Association of State Departments of

Agriculture, he is well versed in the

realities of the legislative process, and

he has also devoted much effort to

helping consumers better understand

where their food comes from and what

it takes to produce it. 

The NFU meeting included time for

delegates to form teams that visited

congressional leaders from their various

states to discuss vital farm issues;

Johnson and the NFU board of

directors did the same with White

House officials. 

Key to the NFU lobbying blitz was

to take those 200 pages of policy

positions and boil them down to a page

or two of the most pressing issues. High

on that list is NFU’s support for a

national energy policy calling for 25

percent of the nation’s power to be

generated from renewable resources by

the year 2025. This translates into

support for biofuel and wind power, as

well as efforts that promote local

ownership of renewable energy in order

to keep more of those energy dollars

home in rural America. 

Another top issue for NFU is

support for improved rural healthcare,

which Johnson says is essential if rural

communities are to

hang on to their

population and

attract new

residents. NFU is

also advocating for a

mandatory “capand-trade” system

for carbon credits.

The latter position

puts NFU at odds

with some other

major farm groups.

But Johnson is

convinced NFU is

taking the right path. 

“Climate change legislation will

almost certainly result in farmers having

to pay more for energy and fertilizer,”

Johnson says. He thinks these higher

prices can be offset — and hopefully

even become a net gain for farmers — if

producers are rewarded with carbon

credits for adopting environmentally

friendly farming practices, such as notill farming, re-establishing permanent

vegetation and adopting advanced

grazing techniques.

“This [environmental legislation] is

huge, and agriculture must have a place

at the table,” Johnson says. The key to

earning carbon credits, which farmers

could then sell on the carbon-trading

market, is to show that farming

practices are sufficiently different from

standard practices and that there is

science showing that these practices

result in carbon sequestration. 

Farmers aren’t the only ones who

can benefit from such policies. Johnson

notes that city leaders in Fargo, N.D.,

are earning revenue by drilling holes at

landfills where methane gas (generated

from decomposing trash) is compressed

and stored, then sold to a foodprocessing plant, which burns the gas

for heat. Pound for pound, methane gas

is considered to be a far bigger culprit

of global warming than carbon, which is

one reason interest is growing among

dairy farmers in processing methane gas

from manure (see related article, page

14). 

Dairy farmers struggling

“I keep reading that rural America

hasn’t really been hurt by the economic

downturn,” says Niederman. “But that

just isn’t true. When the economy went

south, our commodity markets went

down with them.” And when that

happens, virtually all of rural America

feels the pain to some extent, he notes. 

No one knows that better this year

10 May/June 2009 / Rural Cooperatives

“These [low] milk prices are the worst event of my life,” says dairy farmer Joaquin

Contente, NFU state director for California. He says industry concentration bears much of

the blame for the disparity between farm and retail milk prices. Photo by Apolinar

Fonseca, courtesy Hanford Sentinel 

Roger Johnson (right) is sworn in as the new NFU president,

succeeding Tom Buis (center). Photo courtesy NFU
Rural Cooperatives / May/June 2009 11

than dairy farmers like Joaquin

Contente, a delegate from Hanford,

Calif., where he runs a 700-cow dairy

farm with his brother. The Contente

family has seen its milk check about cut

in half during the past year.

“These milk prices are the worst

event of my life,” says Contente, who in

March was losing about $75,000 per

month on his operation. He has been

averaging just $9 per hundredweight of

milk sold, down from nearly $20 a year

ago; he needs $15 just to cover costs. At

the same time milk prices were plummeting, he has had to pay record-high

prices for the corn fed to his herd while

also contending with soaring fuel bills. 

While he hasn’t yet seen many farm

failures in his area, “many farmers are

hovering on the brink,” Contente says.

“Younger farmers who are just building

their herds and don’t have much equity

built up in their farms are especially

vulnerable. Many are on the edge.” 

What really bothers Contente is that

grocery store prices for milk have not

shown a similar drop in price to what

farmers are experiencing. He thinks a

big part of the blame is concentration

in the food industry, resulting in everfewer food companies that control more

and more of the retail market. 

“We have about four huge food

With 200 pages of policy positions adopted during the

National Farmers Union annual meeting, most issues

important to farmers and rural communities are addressed in

one way or another. At the top of the list for many of the

delegates is the policy they adopted in support of renewable

energy, the concluding portion of which is excerpted below.

(The full text of all the policies is online at:

http://nfu.org/about/policy).

“BE IT RESOLVED, National Farmers Union supports the

following policies that demonstrate a commitment to

expanding renewable energy and creating additional

financial opportunities through ecosystems services and

markets:

• Federal incentives for local ownership in renewable energy

production to ensure economic benefits stay in local

communities;

• Expansion of the ethanol blend wall above the current 10

percent;

• Cultivation of the renewable electricity marketplace through

enactment of a federal Renewable Portfolio Standard (RPS)

to require a measureable percentage of the market to be

supplied by new, renewable energy;

• Support for Landowner Wind Associations (LWA), to

facilitate existing and emerging LWA’s in assessing and

marketing wind resources to project developers.

• Full funding for research and development of renewable

energy technologies, including efforts to address

infrastructure requirements; and

• A permanent expansion of renewable energy production tax

credits, including those for wind and solar production,

including an option to take grant funding in lieu of tax

credits.

THEREFORE BE IT FURTHER RESOLVED, in supporting

a national, mandatory carbon emission cap-and-trade system

to reduce non-farm greenhouse gas emissions, NFU outlines

the following priorities for pending climate change legislation:

• Providing USDA with authority to implement agricultural

offset programs;

• Eliminating an artificial cap on the use of domestic offset

allowances;

• Ensuring legislation does not unfairly undermine the full

value of agricultural offset activities;

• Empowering USDA to develop effective scientific modeling

tools to measure carbon sequestration on farms;

• Recognizing early actors who have already undertaken

greenhouse gas emission reduction activities; and

• Allowing producers to stack credits and ensure that

projects in greenhouse gas offset markets are not excluded

from also participating in other environmental service

markets.”

Democracy in action: NFU delegates cast their ballots at NFU’s

annual meeting in Washington, D.C. Photo courtesy NFU 

Kick-starting the rural economy

with renewable energy
12 May/June 2009 / Rural Cooperatives

companies that end up touching almost

all of our milk in one way or another

before it reaches the consumer,” he

says. “That’s a big part of the problem

facing us: the lack of a functioning,

truly competitive marketplace due to

concentration.” 

Contente says he thinks some

national farmer associations have

become too closely tied to big food

companies, and have lost their focus on

the farmers they are supposed to be

helping. NFU, on the other hand, “is a

true, bottom-up farm organization that

has only one purpose: to support the

causes of family farmers,” he says. 

Organic growers

succeed with CSA

Wisconsin member Katrina Becker

represents a growing segment of NFU:

young organic vegetable and fruit

farmers. She and her husband, Tony

Schultz, grow 170 different crops on

120 acres on their Stoney Acres Farm

near Athens, Wis. — everything from

broccoli to raspberries, Jerusalem

artichokes and sour cherries. The

family also raises grass-fed beef.

They started a Community

Supported Agriculture (CSA) project

three years ago, and this year added a

neighboring farmer who provides eggs.

So far, the CSA has far exceeded

expectations. It started with 72

members the first year, but in just three

years has grown to 145 families in

nearby communities. 

Members pay either $460 or $300

for 20 weekly produce deliveries, the

amount depending on their share size.

The deliveries begin the first week in

June and last until mid-October — with

an optional final delivery around

Thanksgiving. Members include a

community hospital that enrolled in the

CSA on behalf of its employees. “We’ve

got all the members we can supply right

now,” Becker says. 

Her goal is to expand the CSA by

forming a small co-op with several

other farmers — maybe even bringing

in some beginning farmers interested in

buying land near her farm, where she

says farmland is still relatively

affordable. Becker would also like to

start a processing kitchen where farmers

could further process food — producing

everything from dairy foods to wine and

beer. She also thinks the area has great

agri-tourism potential. 

Becker and Schultz are the type of

business-savvy young farmers that NFU

is looking to as the future of family

farming. As such, they have been picked

as an NFU Enterprise Couple, a

program under which NFU provides

members with training opportunities to

further enhance their abilities as future

leaders.

“We were attracted to NFU because

of its progressive, pro-family farmer

policies, its democratic functioning and

the fact that it is very influential in

Wisconsin,” Becker says. 

A highlight of the trip for her was

the time on Capitol Hill visiting the

Wisconsin Congressional delegation.

“We talked about many issues, such as

the need for dairy price supports,

concerns about market concentration,

our support for conservation programs

and the need for more programs that

help small farms.” 

Growers of vegetable, fruit and other

specialty crops qualify for few, if any,

federal support programs, she notes.

One way to help them is to offer more

benefits for those who use conservation

practices in their farming.

Despite the success of her family

farm, Becker says she is very concerned

about the small dairy farmers all around

her farm. They have suffered severely

with the drop in milk prices. She, too,

views concentration in the food

industry as one of the major problems

facing farmers. Becker questions why

“anti-monopoly laws are so toothless, or

are not being enforced.” 

NFU President Johnson agrees,

saying concentration in the food

industry has long been a top concern

for NFU. “We’ve pushed the

Department of Justice to disallow the

mergers that have resulted in these

huge food conglomerates, but without a

lot of success. As we’ve seen with the

banking industry during the current

financial crisis, no company should ever

be allowed to become ‘too big to fail.’

We’re all having to pay for the

consequences of that now.” 

Of course, one of the most effective

tools that can help farmers counteract

concentration in the marketplace is

through the use of cooperatives.

Johnston points out that the roots of

NFU are in the cooperative movement,

and that the organization has always

shown strong support for cooperatives. 

“Cooperatives play a big part in

NFU. In North Dakota and much of

the Midwest, cooperatives formed the

foundation that agriculture was founded

and built upon,” Johnson says. ■

Against the vast panorama of the high plains of western North Dakota, Wes Niederman

applies an identification tag to a calf. Photo courtesy Niederman family 
By Anne Mayberry 

Utilities Programs

USDA Rural Development 

f all goes according to

plan, by the end of next

year one of the largest

solar projects in the

world will begin

generating enough electric power to

meet the needs of 9,000 homes in New

Mexico. Tri-State Generation and

Transmission Association, based near

Denver, will work with Tempe Arizona’s

First Solar Inc. to develop a 30-

megawatt (AC), 500,000-panel solar

voltaic power plant. The Cimarron 1

Solar Project is the largest photovoltaic

project by an electric cooperative.

“Tri-State is committed to renewable

energy in our resource planning that

brings value to our member

cooperatives across the four states we

serve,” says Ken Anderson, Tri-State’s

general manager. It is noteworthy,

Anderson adds, that Tri-State’s first

utility-scale renewable energy project

will be among the largest worldwide. 

“This is a significant venture for TriState that meets several objectives

identified by our board of directors,”

Anderson says. “It further diversifies

our generation mix, it assists us in

addressing carbon emissions and it

helps meet our members’ renewable

energy requirements.” 

Colorado and New Mexico require

renewable energy to compose 10

percent of electric utilities’ portfolios by

2020. Tri-State is working with its

distribution cooperatives — electric

cooperative utilities that provide service

directly to consumers — to meet that

goal. The project will be located on a

250-acre parcel of land in Colfax

County in northeastern New Mexico. 

As many as 140 construction

employees are expected to work on the

facility. By August of 2010, the first

portion of the new power plant is

expected to be operational. First Solar

will serve as the engineering,

procurement and construction

contractor. It will also monitor and

maintain the plant. 

“The advantage of the location

selected is that the land is in the service

territory of Springer Electric

Cooperative, one of Tri-States’ 12 New

Mexico distribution co-ops,” says Jim

Van Someren, Tri-State’s

communication manager. “This

territory is solar rich and adjacent to an

existing transmission line, so no new

transmission is needed.”

Tri-State is also looking at wind

power as another component of its

renewable portfolio, says Van Someren.

For Tri-State, however, solar power

offers another advantage. “One of the

additional attractions of this project is

that we expect it will produce near or at

the peak when demand for power is

greatest — on those hot summer days.”

Does Tri-State have plans for

additional solar facilities? 

Van Someren quotes General

Manager Ken Anderson: “You’ll note

that we’re calling this project ‘Cimarron

One.’” ■

Rural Cooperatives / May/June 2009 13

Utility Co-op Connection

Tri-State to build largest

co-op solar power plant

This computer-generated graphic shows massed

solar panels that will comprise part of the 500,000-

panel, solar-energy farm being built near Cimarron,

N.M., by Tri-State Generation and Transmission

Association. Photos courtesy Tri-State
By Stephen Thompson

Assistant Editor 

n the heart of

Minnesota’s dairy

country, two dairy co-op

members are looking to a

future in which farm

waste will be used to supplement

America’s supply of electric power. Both

are using technology that reduces

pollution, greenhouse gas emissions and,

hopefully, farm operation costs.

Methane digesters have been around

for more than 100 years. Using the action

of bacteria, they ferment manure and

other organic waste to generate a mixture

of CO2 and methane, called “biogas,” that

can be burned to power electric

Large and small

Minnesota dairy

farms use manure

digesters to produce

methane gas

Waste Not
generators. Municipal sewage-treatment

plants around the country have used

digesters for decades to help dispose of

sewage sludge. They are also used to

create power from farm wastes on a

large scale in western Europe. 

But in the United States, use of the

technology on farms has yet to become

significant. Dairy farmers Dennis

Haubenschild and Jerry Jennissen hope

to change that by running biogas

generators that contribute significant

amounts of power to the grid, and make

money for their owners in the bargain.

True believer

Haubenschild is a true believer. “I

know what happens when you’re nonsustainable,” he says. In 1953 when his

father purchased the land Dennis farms

today in Princeton, Minn., it had been

completely exhausted by years of crops

grown without replenishing the sandy

soil. “The humus was just gone,” says

Haubenschild. “It took years to get it

productive again.”

His interest in sustainable farming

has led him to try a number of

unconventional measures on his 868-

cow dairy farm, including solar heating

a cow barn, water conservation and

recycling. But the centerpiece of his

conservation effort is an electric

generator run by methane produced

from his cows’ manure.

“A day’s worth of manure from 100

cows gives you the energy of one barrel

of oil,” he says.

The methane is produced by a plugflow digester, a relatively low-tech

method that uses a large, plastic-lined

pit, covered by another plastic

membrane. The manure and bedding

are scraped from the floors of the cow

barns and milking parlor twice a day

and pumped into one end of the

digester. As it flows the length of the

digester, it ferments, releasing methane

gas, which is scrubbed of harmful

hydrogen sulfide and dried before being

piped to an engine-driven generator. 

Some of the waste heat from the

methane-powered engine is used to

keep the digester at optimum

temperature; some warms the cow

barns and milking parlor in cold

weather, saving hundreds of gallons of

fuel per month. 

At the other end of the digester, after

about 25 days, the fermented manure is

run through a mechanical separator that

squeezes out most of the moisture. The

resulting fluid is piped into a lagoon;

the solids, which are free of most

pathogens due to the heat of the

fermentation, are used as bedding for

the cows. 

It’s an elegantly simple, but effective,

process. The fluid digestate is rich in

plant nutrients, and — as a result of the

digestion — is nearly odorless. 

Standing next to the waste lagoon,

the odor reduction benefit is instantly,

and pleasantly, noticeable. Just a few

feet away, one wouldn’t even know the

lagoon is there, whereas the stench

from conventional dairy manure

lagoons often attracts the wrath of

neighbors, municipalities and

environmental authorities.

Environmentally friendly fluid

The digested fluid is

environmentally benign; if it should get

into local waterways due to runoff or

floods, it shouldn’t kill fish and other

aquatic life. And its 7.8 pH level means

it can be spread on cropland without

risk of burning crops. 

Those are huge advantages at a time

during which livestock operations and

dairy producers are coming under

increasing scrutiny by environmental

groups and regulators over the smelly,

toxic contents of their manure lagoons. 

“We’ve doubled our output of alfalfa

since we started using the digestate for

fertilizer,” says Haubenschild. “We used

to get three cuttings a year; now we get

five. And it doesn’t smell when we

spread it on the fields.” 

The liquid is also easier to use. “It

used to be that we’d spend two days just

stirring the pit to get it to where we

could use it for the fields. Now we get a

Dennis Haubenschild’s heifer shed reflects his progressive approach to farming, with composted bedding affording a clean, comfortable

environment for dry and gestating cows. A pond and marsh (facing page, top) provide an attractive wildlife habitat on the doorstep of Jerry

Jennissen’s dairy barn and methane digester. USDA photos by Stephen Thompson 
little separation from snow-melt, but

mostly we can just pump it out.”

The rest of the farm also reflects

Haubenschild’s progressive attitude

toward agriculture.

“Everything’s designed to increase

efficiency and cow comfort,” he says.

That’s reflected in the shed set aside for

dry and gestating cows. The bedding is

composted — mixed up twice a day with a

chisel plow. The result is a fermentation

process that keeps down odors and

provides a comfortable, acceptably clean

and dry substrate for the cows. 

Haubenschild even bales the plastic from

his plastic feed storage bags for recycling.

“I had a deal with my supplier for them to

accept plastic back for recycling,” he

shrugs. “That worked until the

competition got down to one.”

Haubenschild’s farm is well-regarded

by University of Minnesota agriculture

professor Marcia Endres. “He’s a

pioneer,” she says. She regularly brings

classes on field trips to the farm to

analyze and learn from the operation. 

“We really appreciate his

collaboration,” she says. In return,

Haubenschild gets the benefit of fresh

eyes.

Advancing fuel cell technology

The most ambitious of Haubenschild’s

experiments in sustainability is the result

of help from Deere & Co. and a

partnership with the Dr. Philip Goodrich,

Can farmer cooperatives play a larger role in promoting the

recycling of manure into methane gas? In their new report (see

page 39 for ordering information) USDA Ag Economists Carolyn

Liebrand and Charles Ling raise possibilities that a cooperative

approach could address the challenges of adoption of this

technology through improved negotiating strength, technical

assistance for digester design, installation and operation. They

also suggest a possible role for co-ops in management and

marketing services and/or financial guidance and assistance. 

Cooperative efforts may allow milk producers to remain

focused on milk production while lowering costs and/or

increasing returns from energy and byproduct sales. The JulyAugust issue of Rural Cooperatives will present a summary of the

possible benefits from group efforts to adopt anaerobic digester

technology.

Bigger methane role for farmer co-ops? 

Jerry Jennissen installed a methane digester on his farm in partnership with Genex

Cooperative, to see if the technology is practical on a relatively small, 155-cow dairy

farm. 
an associate professor of biosystems and

engineering at the university. This

effort involves a hydrogen fuel cell

laboratory, set up to produce electric

power from hydrogen extracted by the

digester-produced methane. 

Deere provided the grant to build

the facility, with an eye towards possible

future use of fuel cells in methanepowered farm equipment. The

advantage of fuel cells is that they are

more efficient at producing energy than

generators driven by internal

combustion engines. 

Unfortunately, says Haubenschild,

the money to operate the lab has dried

up for the moment, leaving it idle. 

Nevertheless, Haubenschild is

optimistic about the potential of fuel

cells. He points out that hightemperature designs now being

developed, known as molten carbonate

cells, can use methane gas directly,

without first putting it through a

catalytic cracker to separate the

hydrogen. 

And he sees another possible use for

hydrogen extracted from biogas:

ammonia production. Anhydrous

ammonia for use as fertilizer is usually

produced from hydrogen obtained from

natural gas. Haubenschild thinks the

production process is simple enough

that small, decentralized production

facilities could use hydrogen obtained

from digester gas.

Power grid issues are complex 

The big question, of course, is

whether the digester pays its way

through the sale of power. Haubenschild is on the grid of a local distribution cooperative, but selling the

power he makes is complicated. 

Minnesota law requires that electric

utilities purchase some of their power

from renewable sources — such as

digesters and solar and wind generators.

Amounts of power less than 40

kilowatts are purchased under netmetering agreements. Under such an

agreement, power provided to the grid

is paid for at the same rate as the utility

charges the customer. 

However, Haubenschild’s generator

produces much more than that, so the

rest is paid for at a much lower rate, not

by the distribution co-op, but by the

distribution co-op’s generation supplier.

Nevertheless, Haubenschild says the

generator more than breaks even. He

doesn’t elaborate, but his digester has

been in operation for 10 years — long

enough to work out the kinks.

Smaller farm also tries it 

In contrast, Jerry Jennissen’s digester,

installed in December, 2007, is just

getting started. His farm, about 90

miles west of Haubenschild’s, near

Brooten, Minn., is small in comparison;

he currently milks 155 cows. But his

digester and generator setup could be a

prototype for other smaller dairy farms,

if a few problems are worked out first.

Jennissen’s opportunity to build a

digester came when The Minnesota

Project, a nonprofit based in St. Paul,

received a state grant through the

Legislative-Citizen Commission on

Minnesota Resources — a state

government entity that recommends

environmental and conservation

projects for funding from Minnesota

Lottery monies. The Project, in

partnership with Genex Cooperative, a

beef and dairy services co-op, was

looking to develop a manure digester

that would be feasible for use by small

and medium dairies. 

With the help of the Minnesota Milk

Producers’ Association, Jennissen’s

operation was chosen from a number of

interested farmers to host the

prototype, and a request for proposals

resulted in the selection of a Utahbased company, Andigen, to supply the

digester. 

Andigen’s digester is a modern,

vertical design called an Induced

Blanket Reactor (IBR), and resembles a

small silo attached to Jennissen’s cow

barn. A far cry from the old style plugflow digester, it can process the manure

from up to 200 cows in a cycle that

takes about five days, instead of a

month. 

Because it only has to hold about five

days’ worth of manure, it can be much

From left: Haubenschild describes the process of converting manure into methane gas; a

computer monitors the workings of Jennissen’s system; inside Haubenschild’s milking parlor. 
18 May/June 2009 / Rural Cooperatives

smaller and less expensive. It’s easy to

dismantle and sell if the farm shuts

down, and it’s just as easy to add a

second digester if the farm expands.

And because it demands a slurry of

about 8 percent solids, the design lends

itself to the digestion of a wide range of

substances, including pig manure,

which give plug-flow digesters

“indigestion” because of its high water

content.

Computer allows remote operation

The digester and generator are

monitored and controlled by computer,

with an Internet connection making it

possible for the co-op to run them

remotely. The whole installation fits

nicely in a new addition built onto

Jennissen’s cow barn. 

In addition to the state money, funds

from USDA Natural Resources

Conservation Service’s Environmental

Quality Incentives Program, the North

Fork Crow River Watershed District,

Stearns Electric Association (the local

electric cooperative), plus a

considerable investment by Jennissen

paid for the installation.

Jennissen says the original proposal

called for the digester to be completely

enclosed, but he chose instead that it be

mostly exposed, to save money. About a

quarter of the cylinder is attached to

the barn structure, and Jennissen had

the exposed portion insulated with

three inches of plastic foam against the

frigid winter winds that come roaring

down from Canada. A coil of tubing

around the tank’s midriff carries hot

coolant from the generator engine

when needed to keep the fermentation

at the proper temperature.

Unfortunately, the setup has had its

share of teething problems. When

Rural Cooperatives visited, the generator

was offline due to a failure of the

methane engine — the second such

failure in a few thousand hours of

operation. Gas from the generator was

being burned off in a flare. 

For some reason, the engine, which

is an automotive V-8 adapted for

stationary use, was suffering accelerated

cylinder and bearing wear. The cause

was not clear. Was the operating

temperature too low, the generator

speed too low, or was hydrogen sulfide

in the digester gas the problem? 

Rolly Meinke, Genex’s representative

in charge of the digester project, came

out to the farm to inspect the damage.

Unwilling to let such problems get in

the way of the project, he arranged to

replace the power plant with an industrial engine designed for natural gas,

which runs at a higher operating

temperature and speed.

Striving for greater efficiency

Meanwhile, Jennissen, Meinke and

Joe Borgerding, an electrician who

helped with the initial installation, are

looking for ways to raise efficiency and

increase cash flow. Borgerding, a

trained auto mechanic who in his youth

worked on drag racers, has become

intensely interested in the project. He is

working on developing an enginegenerator package he thinks will

increase output and longevity —

possibly doubling power output. 

Jennissen and Meinke are looking for

ways to raise methane production by

adding substances to the fermentation

process. Associated Milk Producers

Inc., a nearby marketing co-op, has

agreed to supply waste whey to the

project. 

“We’ve already sent a sample to

Andigen,” says Jennissen. “With 2,500

gallons a day we could double methane

production.” Even restaurant grease will

work. And Dennis Haubenschild is

looking into the possibility of using

waste alcohol from a nearby distillery as

a fermentation booster.

Jennissen has also experimented with

raising the fermentation temperature

slightly, and is thinking of trying

fermentation with thermophilic

bacteria, instead of the mesophilic

currently used. The conversion consists

merely of raising the temperature of the

tank from its current 105 to 125

degrees. 

“I’m hoping maybe we can find a

sweet spot that will produce more

methane and less sulfur compounds,” he

says. He’s also interested in current

research to develop bacteria that reduce

production of hydrogen sulfide.

The number of variables seems

daunting, but both Jennissen and

Meinke are convinced that with enough

time and creative effort, the digester

can become economically efficient.

Jennissen’s electric distribution

cooperative, Stearns Electric Co-op, has

promised to buy any power produced

over the 40-kilowatt level at 6.5 cents a

kilowatt-hour. “Pretty much everyone

I’ve dealt with has been very

supportive,” Jennissen says.

Project manager optimistic 

Ryan Stockwell, Clean Energy

Program Manager for The Minnesota

Project, is optimistic about the use of

digesters on Minnesota farms, but says,

“Changes need to be made.” 

Part of the problem, he says, is the

low cutoff for mandated net-metering

power purchase agreements. Forty

kilowatts isn’t much; even Jennissen’s

small operation will produce

substantially more when it’s up to

speed. And the low rates offered by

apparently reluctant power utilities for

power provided in large amounts are a

serious concern. 

Next door, Iowa has mandated 500

kilowatt net-metering, while

Pennsylvania requires power providers

to accept up to three megawatts from

non-residential customers. Stockwell

says there are efforts in the state

legislature to raise net metering

requirements for solar- and windgenerated power, but currently not for

digesters. 

Stockwell thinks any pricing system

should take into account benefits

beyond the production of power.

“We’re not putting a price on benefits

like pathogen, odor, pollution and CO2

reduction,” he says. “The pricing

doesn’t match the benefits.”

Then there’s the issue of establishing

the technology. “We need to develop

the institutional knowledge and the

market,” Stockwell says. “It’s kind of a

chicken-and-egg thing. You need an

established market to get economies of

continued on page 38
Rural Cooperatives / May/June 2009 19

By Stephanie M. Smith, Senior Legal Adviser 

Cooperative Programs, USDA Rural Development 

Editor’s note: After a lengthy absence, the Legal Corner column is

back to provide valuable information on legal, policy and tax issues

affecting cooperatives. 

ransparency in corporate business activity is

no longer an option. The line in the sand

drawn by Main Street dictates that Wall

Street provide complete accountability for

financial actions. 

Cooperatives are not immune from this level of scrutiny.

Indeed, cooperatives have to be especially diligent about the

public perception of their business practices because they

represent the interests of member-owners, rather than

investors. Co-op members expect, and demand, the highest

level of ethical conduct by their directors. 

This article summarizes the standards of conduct required

of co-op directors and some of the unique challenges they

face. 

Directors are held to three standards of conduct: 1) duty

of obedience; 2) duty of care and 3) duty of loyalty to the

company or organization for which they serve and act in

good faith as decisionmakers. 

Director responsibilities include: governing the

organization by establishing broad policies and objectives;

selecting, hiring, supporting and reviewing the performance

of management; ensuring the availability of adequate

financial resources and accounting to the stakeholders for the

organization’s performance. 

When directors breach their duties, they can be held

personally liable to the organization for any injury it may

have suffered due to the breach. 

Cooperative directors must conduct themselves at an even

higher level than other directors due to the complexity and

nuances of how cooperative businesses are structured. Co-op

directors also must be strong supporters and patrons of the

cooperative and must understand its unique role in business. 

Duty of obedience

Directors must exercise their powers for a proper purpose.

They must ensure that they — and the cooperative — do not

engage in illegal or improper actions. Decisions must be

based not only on generally applicable laws, but laws that are

especially applicable to cooperatives. 

It is critical that co-op directors have a reputation for

integrity, honesty and respect for the law. This also means

seeking appropriate legal counsel to assist the board. 

Duty of care

Directors exercise control and management over the

company on behalf of the company. Although the duties of

directors are several, they must exercise those duties jointly. 

Directors have the added pressure of maintaining the

Legal Corner

Co-op directors must adhere

to high standards of conduct 

continued on page 30

Regardless of whether they sit on the board of a billion-dollar federated co-op, or

a small local farm supply co-op (above), directors must adhere to the high ethical

standards expected of cooperatives. USDA photo 
20 May/June 2009 / Rural Cooperatives

A Legacy of Cooperation 

Plunkett Foundation still follows

founder’s vision of co-ops as force for

sustainable rural development

By Mike Perry 

Research and Communications Manager 

Plunkett Foundation 

y George, that’s it! I’ll megaphone it to the

world!” 

These were the words of President

Theodore Roosevelt when he read Sir Horace

Plunkett’s plans for sustainable rural

development in the United States and beyond.

Anglo-Irishman Plunkett, the pioneer of farmer

cooperatives in Ireland, spent 10 years ranching in Wyoming

when he was a young man. This period of his life influenced

his thoughts and actions about the cause to which he

dedicated the majority of his life: helping rural people to

believe in what they can achieve by working together. 

In Wyoming, Sir Horace learned the importance of

enterprise and the value of self-help efforts. He also learned

that by coming together to tackle common issues, farming

and rural communities can be places where people can live

and work — now and in the future.

Sir Horace began looking at cooperation after seeing the

impact of the industrial revolution on rural areas. At this

time, rural people were beginning to leave their communities

to seek employment and the hope of a better life in cities. 

He saw that there were two choices for rural communities.

They could either let the full impact of the industrial

revolution sweep over rural communities or, as he advocated,

rural people and communities could come together and use

cooperative enterprises to provide economic and social

development in their communities. 

Much of Sir Horace’s work at this time was focused on

establishing successful cooperative creameries in Ireland.

The Plunkett Foundation, founded by Sir Horace in 1919

to implement his vision internationally, is celebrating 90

years of helping rural communities to believe in what they

can achieve together. It believes that Sir Horace’s blueprint

Co-op members help harvest crops at one of the Stround

Community Agriculture farms. It is one of the growing number of

Community Supported Agriculture projects in the United Kingdom.

Photos courtesy the Soil Association

for sustainable rural development is even more relevant

today.

Plunkett’s core values 

Plunkett believed in three core values which influenced his

life’s work. These are:

• Economic solutions create social change;

• These solutions enrich rural life;

• Self-help is the most effective way of achieving goals.

These values came together in the phrase Sir Horace is

best known for: “Better farming, better business, better

living.” 

By “better farming,” he meant rural businesses using the

best technology and methods available. By “better business,”

Sir Horace was referring to cooperative business, which he

strongly believed to be the best business model. Lastly,

“better living,” relates to Sir

Horace seeing a need for an

increase in the standards of

living in rural communities.

This was crucial, because he

believed that economic

improvements must lead to

social improvements. No

rural cooperative should

forget its community roots

or it will likely fail as a

business, he stressed.

For the past 90 years,

the Plunkett Foundation has

been dedicated to raising

awareness worldwide of

cooperation and its

potential for helping

farmers and rural

communities to help

themselves.

In the early years of the Plunkett Foundation, a

conference was held in London which brought together those

involved in farmer cooperatives from across the world. At this

event, it was agreed that there was a need to collate, analyse

and distribute information related to farmer cooperatives

internationally. On this same day, it was proposed that the

Plunkett Foundation become a clearinghouse on information

relating to farmer cooperatives. 

This role — as a center for ideas and information — is still

a core aim of the Plunkett Foundation, which it accomplishes

through sharing and receiving information worldwide.

Taking control with co-ops

The common challenges facing rural communities across

the world are heightened by greater distances, a more

dispersed population and lack of access to employment and

services. Through cooperation, Sir Horace believed that

farming and rural communities can take control and provide

sustained economic and social development. 

Stroud Community Agriculture (SCA)

is a cooperative that is pursuing a new

model for sustainable farming in England.

It builds on cooperation and mutual

support so that the risks and rewards of

farming are shared between the farmers

and consumers.

SCA is a community supported

agriculture (CSA) effort, but with a twist

on the most common CSA model found in

America. In the case of SCA, the

consumer-members actually own the coop and hire farmers to run the farm for

them, although members are encouraged

to do volunteer work on the farm. 

Consumers who join the co-op

commit themselves to supporting the

farm and providing a fair income for the

farmers. Farmers can then develop the

health and fertility of the farm, its wildlife

and the environment.

The farm consists of two plots, each

covering about 23 acres in the beautiful

countryside of Gloucestershire (home to

Prince Charles and Princess Anne) about

100 miles west of London. Two full-time

farmers grow organic vegetables and

raise the co-op’s pigs, cows and sheep;

there are also a part-time farmer and an

apprentice. Long-term plans envision

starting a dairy herd, raising chickens/

eggs and growing various fruits, as well

as doing more food processing. 

Consumers, farmers share risks and rewards of organic farm 

Peter Couchman is the new chief executive officer

at the Plunkett Foundation.

Seb Peis, a founding

member of the Thames

Valley Farmers' Market

Cooperative, helps manage

farmers' markets in 14

towns. 
Increasingly, farming and rural communities are

developing innovative ways of addressing the challenges they

face. For instance, in the United Kingdom, there are now

200 rural communities that have set up cooperatives to own

and run a general store — often the last general store in the

community. 

There are also examples of community-owned cafes, post

offices and even swimming pools. Rural communities are also

increasingly using cooperative enterprise approaches for local

food production and acquiring supplies. More recently, co-op

approaches are being used to address health needs. A growing

number of farmers have also set up cooperatively run

farmers’ markets. 

These are all examples of rural communities and farmers

using cooperation to take control. 

Today, the Plunkett Foundation is involved in a wide range

of activities with the aim of promoting and supporting

cooperative enterprise in rural communities worldwide. Sir

Horace believed that his work needed the twin approach of

education and cooperation. 

By education, he was referring to raising the awareness of

the cooperative potential to farmers and rural communities,

sharing information and best practices and creating an

environment where rural cooperative enterprises can thrive.

Central to the education role is giving rural communities the

belief of what is possible through cooperation. 

By cooperation, Sir Horace was referring to direct support

to help rural cooperatives become established, develop and

prosper. These two twin pillars still form the basis of the

Plunkett Foundation’s work.

Couchman to lead Foundation

In April, the Plunkett Foundation appointed Peter

Couchman as its new chief executive. For the previous 25

SCA is managed by an elected “core

group” of volunteers who meet once a

month. Meetings of the whole

membership are held to discuss the

direction of the farm. Decisions regarding

purely farming issues are delegated to the

farmers. 

Members are provided with produce

year around. Seasonal gaps in production

are covered via purchases of organic

vegetables from other farms, using local

suppliers wherever possible (and never

purchased from outside Europe).

Co-op members pay a monthly fee of 35

pounds per share (about $52) to receive

produce and meat (pork and beef). All the

produce from the farm is shared between

the supporting consumers, or (if there is a

surplus) is sold locally. 

Begins with only a vision

The co-op grew out of a strong interest

in finding a source of locally produced,

organic food. “We began with no land, no

farm, no money and no members,” says

Jade Bashford, one of the co-op founders.

“All we had was a vision.” 

Starting with a one-acre plot in

Brookthorpe in 2002, the farm later

expanded to 23 acres near Hawkwood

College on the outskirts of Stroud, then

expanded again with an additional 24

acres leased near Brookthorpe.

The expansion of the farm meant that

more members were needed to ensure

that the project remained viable. A

membership drive was launched,

supported by a grant from the National

Lottery Seed Program’s “Growing Home”

initiative. 

The grant paid the salary for a

marketing person who could actively

promote membership to a wider circle and

produce a membership brochure. The

money also helped pay for some muchMore than 200 rural communities in the United Kingdom have established cooperative general stores.

Cooperatives that forget their community roots will likely fail, Horace Plunkett believed. 
24 May/June 2009 / Rural Cooperatives

needed equipment.

This effort proved very

successful, and in less than a year

membership had risen to 100, with

a waiting list that soon rose to 30

families. By autumn 2007,

membership had expanded to 150.

Today, membership is approaching

200, which the core group has

decided is the optimal size for the

farm. 

The farm follows a biodynamic

philosophy (a holistic method of

organic farming that emphasizes

balancing the interrelationships of

soil, plants and animals as a

closed, self-nourishing system). By

keeping a herd of cattle, the co-op

is able to maintain soil fertility and

ensure that good crops of

vegetables are grown without

relying on external sources of

manure and compost. The herd is

maintained for most of the year on

the farm’s own grass and hay. 

In order to sell surplus produce

and meat on the organic food

market, the farm has attained

Demeter certification for

biodynamic produce (which

includes full organic status).

Trip to grocery store

can’t compare

Members have the option of

picking up their produce directly

from the farm or from a local pickup point. 

Jade Bashford picks up her

produce every Tuesday, using

scales there to weigh the posted,

per-share allotment of the week’s

harvest. “It’s really a treat to come

here,” she says of her trips to the

farm, which she greatly prefers to

the “chore” of going to the

grocery store.

But the co-op is more than just

a source of organic produce and

meat. It sponsors social events to

mark the turning of the agricultural

year and build a sense of community among the members. 

“All members of the

cooperative can choose to get

involved with the life of the farm

and join specific working groups,”

says co-op member Molly Scott

Cato.

Activity revolves around the farm

with picnics, shared meals,

bonfires, night-time walks,

seasonal festivals and children’s

activities. 

Members do not have to

contribute work on the farm,

although many do, and regular

community workdays are

scheduled. 

As for the future, “We want to

encourage the development of

more CSAs in our area to feed

more local people, and also across

the world” says Cato. “We will

also look to extend the range of

produce we offer.” ■

years, Couchman has worked in the consumer cooperative

sector and has also been involved in a wide range of activities

that have promoted cooperation worldwide. 

“I believe that the Plunkett Foundation’s approach is the

model for farming and rural communities worldwide,” says

Couchman. “Rural people have the answers — our role is to

help them to believe in what they can achieve together.”

From 1922 to 2001, the Plunkett Foundation published

the World of Cooperative Enterprise, a leading publication on

cooperation. This publication included contributions from

cooperative thinkers and practitioners from across the world. 

As part of the 90th anniversary celebration, the Plunkett

Foundation will be re-launching the publication in a modern

form. The reason, as Couchman says, is that “Good ideas

come from farming and rural communities across the world.

By spreading new ideas, fresh thinking and different

approaches, all of those involved in cooperatives across the

world have the opportunity to cement cooperative enterprise

as the business model for farming and rural communities.”

During 2009, the Plunkett Foundation will be looking to

re-establish links with organizations it has worked with

throughout its history. It is also keen to hear from

organizations that share its values and those who would like

to know more.

For more information, visit the Plunkett Foundation’s

website at: www.plunkett.co.uk. ■

The core principles of Stroud

Community Agriculture

• To support organic and biodynamic

agriculture;

• To pioneer a new economic model

based on mutual benefit and shared

risk and ensure that the farmers

have a decent livelihood;

• To be fully inclusive. Low income

shall not exclude anyone;

• To encourage practical involvement

on all levels;

• To be transparent in all our affairs.

To make decisions on the basis of

consensus wherever possible. To

strive towards social justice; 

• To offer opportunities for learning,

therapy and re-connecting with the

life of the earth;

• To network with others to promote

community supported agriculture to

other communities and farms and

share our learning (both economic

and farming);

• To encourage members, in

cooperation with the farmers, to use

the farm for their individual and

social activities and celebrations;

• To develop a sense of community

around the farm;

• To work cooperatively with other

enterprises that share our

principles. 
Rural Cooperatives / May/June 2009 25

By Rita Simerly

Cooperation Works!

he Attala County Self-Help Cooperative

(ACSHC) is helping to expand and

strengthen community involvement in Attala

County, Miss. ACSHC was formed in 2005

to save rural resources in central Mississippi

through the use of educational outreach programs that target

small landowners with limited assets. The primary focus of

the effort is on agriculture and horticulture.

While the organization serves adults, it also has a number

of youth-oriented programs that promote education related

to sustaining and preserving natural resources. Inspired by

the success of their neighbors at the Winston County SelfHelp Cooperative, ACSHC has grown from 12 members in

2005 to 27 paying members today, including four women and

15 youths. 

As both a founder and youth coordinator for ACSHC,

Daniel Teague is currently focusing on expanding children’s

participation through the Attala County Youth

Greenhouse/Garden Project. This project involves the

construction and maintenance of a greenhouse on the Long

Creek Elementary School campus in Sallis, Miss. Children

from kindergarten to sixth grade are participating in the

effort. 

Promoting ag sustainability 

The greenhouse both serves as an educational tool for

agricultural sustainability and helps recruit new members to

get involved in the cooperative.

“We brought in youth [to participate] from the lay-out

stage when there was nothing on the ground,” says Teague.

“We let them participate and got them involved. We’re

letting them take part in every aspect of its construction.”

The goal of the project is to inspire children and teenagers

to take charge of what, and how, they eat by teaching them

about small-scale gardening through hands-on experience. 

The importance of healthy eating is especially salient in

Mississippi, where about 32 percent of the adult population is

categorized as obese, according to the U.S. Centers for

Disease Control and Prevention. Because roughly 80 percent

of obese children are likely to become obese adults, it is

important to begin nutritional education early. 

By offering a fun and informative after-school activity,

ACSHC not only educates students about sharing and

working cooperatively within their community, but about

improving their health and lifestyle for years to come. 

ACSHC has received local support from members through

donations of seeds, building materials, money and volunteer

assistance from adults and youth. More funds are being

sought for future expansion of the project.

“There has been a melting pot of ways people have

assisted us,” says Teague, noting that the Greenhouse should

be completed this spring. “I’ve been very pleased with the

result.” ■

Co-op Development Action

Greenhouse grows more than plants — co-op teaches

youth about nutrition, community involvement 

Adult and youth members of the Attala County Self-Help Cooperative in Mississippi construct a

greenhouse, where they will learn about agricultural sustainability. Photo courtesy Daniel Teague
26 May/June 2009 / Rural Cooperatives

Editor’s note: compiled from Internet and other sources by Anne

Todd. 

irst Lady Michelle Obama and about two

dozen local students from Bancroft

Elementary School in Washington, D.C.,

made national headlines in March when they

broke ground for an 1,100-square-foot

organic “kitchen garden” on the south lawn of the White

House. The garden will grow spring vegetables for the White

House and Miriam’s Kitchen, an organization that serves

homeless people in the District of Columbia.

Although the garden will provide food for the first family,

Mrs. Obama says that its most important role will be to

educate children about healthy, locally grown fruit and

vegetables at a time when obesity and diabetes have become

national health concerns. This kitchen garden is the first

vegetable garden at the White House since First Lady

Eleanor Roosevelt planted her victory garden during World

War II. The garden contains 55 varieties of plants;

predominantly vegetables.

In February, to commemorate Abraham Lincoln’s 200th

birthday, Agriculture Secretary Vilsack announced that

USDA would convert a 1,250-square-foot section of

pavement at its headquarters into a “People’s Garden.” The

name derives from USDA having been created during

Lincoln’s presidency, which he often referred to as “The

People’s Department.” 

The original USDA community garden project envisioned

using Embassy window boxes, tree planting and field office

plots designed to promote “going green” by retaining water

and reducing runoff; using roof gardens for energy efficiency;

and using native plants and sound conservation practices. 

On April 22 (Earth Day), Secretary Vilsack announced

that USDA would expand its original garden concept to

include the grounds of USDA’s Jamie L. Whitten

Headquarters Building, which fronts The National Mall. The

first phase of the garden is called the “Three Sisters” Garden,

in reference to the Native American tradition of interplanting

corn, beans and squash in the same mound. The planting

method is a centuries-old, sustainable process that has

provided long-term soil fertility and a healthy diet to

generations of American Indians.

The garden will also include raised organic vegetable beds,

organic transition plots, an organic urban container garden,

an organic kitchen pollinator garden, rain gardens and a bat

house. USDA is planning to have the garden fully certified

organic within three years. 

The vegetable garden is expected to provide a large variety

and amount of produce, which USDA plans to donate to a

local food bank. 

Co-op concept extends to gardening

Even before the First Lady announced plans for her

garden, interest in community gardening was on the rise.

Ecological and food safety concerns and the recession have

contributed to this renewed interest.

Some co-ops and quasi-cooperative organizations are

F

Green Thumbs Up

Interest in community gardens sprouting all across America
Rural Cooperatives / May/June 2009 27

promoting community gardens. A number of co-op food

stores have started community gardens for their members.

For example, the Hanover Consumer Cooperative Society,

which operates co-op food stores in several New Hampshire

communities, started a community garden adjacent to the

Norwich Farmers Market. Member-gardeners must attend

orientation meetings and agree to use only organic

herbicides, pesticides and fertilizers on their plots. 

Buffalo, N.Y., is home to Urban Roots, a cooperatively

owned retail gardening center that offers plants and plantrelated supplies. “We know that keeping local dollars in the

immediate area benefits all of us,” says Blair Woods of Urban

Roots. “Our vision is of Urban Roots becoming a replicable

model for cooperative garden centers in other urban areas.”

Community gardens are springing up nationwide as

communities transform vacant lots into green spaces.

According to the National Gardening Association, 1 million

households participated in community gardens in 2008. Even

more impressive is that an estimated 5 million households are

extremely, or very, interested in having a garden plot in a

community garden located near their home. 

Gardens are being sponsored by colleges and universities,

municipalities, community-development organizations,

nonprofits and civic and faith-based organizations.

Community gardens are also being supported by

Cooperative Extension services, volunteers and public and

private funding sources. Some gardens operate by charging a

fee for residents to reserve their plot; other gardens let

residents use them for free but request that they donate their

extra produce back to local food banks.

The make-up of community gardens varies, depending on

the needs and goals of the groups that create them. They can

be designed to grow flowers or fruits and vegetables, and laid

out as single community plot or as many individual plots.

They can be sited on vacant lots, schoolyards, church or

hospital grounds, or in almost any neighborhood with some

open space. Some community gardens are designed as a series

of plots dedicated to “urban agriculture” where the produce

is grown for the market.

Numerous benefits

According to the American Community Gardening

Association, community gardens provide numerous benefits,

which include: improving the quality of life for people who

participate in the garden; providing a catalyst for

neighborhood and community development; stimulating

social interaction;

encouraging self-reliance;

beautifying neighborhoods; producing nutritious food and

reducing family food expense. Other benefits include:

conserving resources; creating opportunity for recreation,

exercise, therapy and education; reducing crime; preserving

green space; creating income opportunities and economic

development; reducing city heat from streets and parking

lots, and providing opportunities for intergenerational and

cross-cultural connections. 

The American Community Gardening Association

estimates that there are 18,000 community gardens in the

United States and Canada. 

USDA supports community garden projects in a variety of

ways, including grants provided through the USDA

Cooperative State Research, Education, and Extension

Service (CSREES), direct onsite technical assistance and

guidance from Extension Service representatives, and guides

developed by the USDA Natural Resources Conservation

Service and USDA Food and Nutrition Service to help

community gardeners improve their production techniques. 

To learn more about the USDA People’s Garden, visit

http://www.usda.gov/wps/portal/?navid=PEOPLES_GARDE

N. Tips on starting or joining a community garden project

are included in USDA’s “We Can” publication at

http://www.fns.usda.gov/fsec/FILES/wecan.pdf. Or, visit the

American Community Gardening Association website at

http://www.communitygarden.org. To learn about starting a

cooperative, visit: http://www.rurdev.usda.gov/rbs/coops

/csdir.htm. ■

First Lady Michelle Obama (facing page) and students from Bancroft

Elementary School break ground on the new organic garden at the

White House. White House photo by Joyce N. Boghosian. 

Urban Roots, a retail gardening

center co-op, engages in urban

beautification projects in Buffalo,

N.Y., and sponsors educational

events for local youth (far left).

Photos courtesy Urban Roots.
28 May/June 2009 / Rural Cooperatives

By Anne Todd

USDA Rural Development 

he expansive utility infrastructure that exists

for most Americans in the lower 48 states is a

luxury that simply isn’t available for Alaskans

living in the remote, rural areas of the state.

The majority of these small communities

aren’t even accessible by road, let alone power lines. 

The sheer isolation of such communities, coupled with

Arctic weather conditions, present numerous challenges for

delivery of any type of utility service. The lack of roads and

extreme weather make it difficult to transport materials and

equipment. 

Permafrost (permanently frozen subsoil) hampers

construction and makes construction logistics much more

complex. Consequently, due to these unique conditions,

diesel fuel has served as the primary source of electrical

power in rural Alaska because it can be shipped and stored

above ground, even in remote locations and under arctic

conditions.

World’s largest retail service market

The Alaska Village Electric Cooperative (AVEC) —

founded in 1968 and based in Anchorage — provides electric

power to more than 7,500 customers in 53 villages scattered

throughout some of the most remote stretches of rural

Alaska. AVEC’s huge service area is the largest service

territory in the world for a retail power cooperative. It spans

800 miles from Kivalina in the north to Old Harbor on

Kodiak Island in the south. It also stretches 600 miles from

Minto in the east to Gambell on St. Lawrence Island in the

west. 

Fuel costs in Alaska are well more than three times greater

than the costs in the lower 48 states. In recent years, those

costs have been rising rapidly. In 2008, the skyrocketing cost

of diesel resulted in a fuel charge for average AVEC

customers of 37 cents per kilowatt-hour.

AVEC operates 48 diesel plants. However, because of

rising diesel costs, in 1999 the cooperative began to develop a

wind-power program that integrates wind into several of its

village diesel power systems. This effort builds upon

experience of previous Alaska wind pioneers Kotzebue

Electric Association and TDX Power. The goal of this

project is to reduce diesel use by 25 percent in 10 years. 

AVEC currently owns wind turbines operating in five

Wind

key to

reducing costs

for isolated

Alaska

villages 

T

power
Rural Cooperatives / May/June 2009 29

communities with connections to three other communities.

In 2008, its turbines, rated at 1,360 kilowatts (kW), had the

highest wind-generating capacity and production of any

utility in the entire state.

AVEC built its first integrated wind-diesel facility in

Selawik, Alaska. That system has four AOC 65-kW turbines

with a generating capacity of 260 kW. The total wind-diesel

generating capacity is 1,647 kW. 

Since it was the first such project AVEC had undertaken,

the co-op faced many design and performance challenges.

However, working through and solving those problems

helped the cooperative garner the field experience and

knowledge needed to start other projects and to expand its

wind program, which is now nationally and internationally

recognized.

AVEC developed two highly successful wind farm projects

in Toksook Bay and Kasigluk that reduced fuel costs by 12

cents for customers in the five villages being served by the

project (compared to the average cost paid by other AVEC

customers). Each of these projects employ three wind

turbines that generate as much as 25 percent of the annual

electricity needs for two communities. 

These projects involved integration of wind power into

small, isolated diesel grids, operation in sub-zero conditions

and construction in challenging geotechnical and permafrost

conditions.

AVEC also has two Northwind 100 wind turbines in

Savoonga. These turbines, which went into operation last

fall, have a generating capacity of 200 kW. The total winddiesel generating capacity is 1,870 kW. Hooper Bay has three

Northwind 100 turbines in operation and will be fully

commissioned this year.

Wind offsets rising diesel costs

The more wind generators that AVEC can install, the

more the co-op can reduce fuel costs and diesel consumption

for its customers. AVEC currently has several more projects

under construction, from which the cooperative expects to

obtain similar benefits. For example, AVEC plans to install

seven more Northwind 100 turbines in 2009. Four of these

will be sited in Chevak and three in Gambell. 

AVEC also has placed meteorological towers in the

communities of Emmonak, St. Mary’s, Shaktoolik, Marshall

and Old Harbor to assess the quality of wind

resources and determine if these locales can

economically support the generation of wind

power. 

Thirty-nine of the 53 villages in AVEC’s service area are

classified as “4+ Wind Regions” (the wind power density

classes range from one to seven). 

“AVEC will continue to pursue wind as aggressively as we

can afford to,” says Meera Kohler, the co-op president and

chief executive officer. 

A combination of resources is used to fund the projects.

These include AVEC cooperative equity, equity contributions

by entities such as the Coastal Villages Region Fund, grants

from the Rural Utilities Programs of USDA Rural

Development, the Denali Commission and state of Alaska. It

also uses renewable energy credit sales to Native Energy and

the anticipated proceeds from the sale of Clean Renewable

Energy Bonds (CREBs). 

Communities and native corporations have helped advance

the projects by providing land and access.

Turbines generate big savings

In 2007, the turbines in Selawik, Kasigluk and Toksook

Bay generated 1.1 million net kilowatt hours (kWh) and

displaced the need for 81,481 gallons of diesel fuel. At an

average cost of $2.75 per gallon (and $3.30 in Selawik),

AVEC saved more than $200,000 in diesel generation costs. 

In 2008, the turbines in these three communities

generated more than 1.3 million kWh and displaced 99,191

gallons of diesel. At the 2008 average cost of $4.73 per

gallon, this equates to a savings of $453,000 in dieselgeneration costs. Including the wind turbines that became

operational in late 2008, AVEC’s total net wind energy

production is more than 1.4 million kWh. Wind power saved

108,057 gallons of diesel and $493,000 in diesel costs.

With results like this, it is not hard to see why AVEC was

selected in 2007 as the Wind Cooperative of the Year. This

honor from the U.S. Department of Energy (DOE) — in

partnership with the National Rural Electric Cooperative

Association — recognized AVEC for its leadership and

demonstrated success and innovation in its wind power

program. AVEC is the seventh such recipient of the award.

AVEC was one of six rural member-owned utilities

nominated in 2007. 

For more information about AVEC and its renewable

energy initiatives, visit its website at http://www.avec.org. ■

By using windpower as a source of electrical

energy for isolated villages, the Alaska Village

Electric Cooperative (AVEC) is on track to

reduce its diesel fuel needs by 25 percent in 10

years. Photos courtesy AVEC
30 May/June 2009 / Rural Cooperatives

cooperative character of the organization. They must be

familiar with, and understand, the importance of the

cooperative principles and establish policies based on these

principles, which must be well-communicated to the

membership. 

Decisions must be based not only on corporate law, but on

specific cooperative state statutory laws. These may include

special tax laws that apply to cooperatives, cooperative

antitrust laws that mandate or prohibit certain business

structures and behavior, and state co-op incorporation

statutes that mandate special requirements. 

Co-op directors are required to have a clear understanding

of financial documents, performance measures and the shortand long-term consequences of decisions. 

Because they operate for the mutual benefit of their

members (rather than solely to maximize the value of the

business), cooperatives use special techniques to finance the

business. They have financial needs, opportunities and

limitations not found in other businesses. 

Directors must determine and distribute patronage

refunds to find a balance between monetary returns to

members vs. additions to the cooperative’s equity. There can

also be tension between the board and the members as to

whether the co-op chooses to use debt or equity as a source

of financing the business. The reasons for these types of

decisions must be communicated to members. 

Duty of loyalty

As fiduciaries, directors may not put themselves in a

position where their interests and duties conflict with the

duties that they owe to the business. As such, their actions

must be transparent and accountable to the co-op. A director

will not be able to escape liability by asserting that a decision

was well meant if the action shows otherwise. 

Co-op directors are in a different position than other types

of directors. Their decisions will affect them as member-users

of the co-op just as they affect other members and the co-op

itself. 

The personal dealings directors have with the cooperative

can place them in a precarious position. An action that

appears innocent when taken may, in hindsight, look very

bad. However, they can avoid problems if the conflict is

clearly recognized and decisions are made solely with the

interests of the co-op foremost; all questions should then be

addressed openly and honestly.

The ‘good faith’ test

Directors must act honestly and in good faith. Courts have

long held the view that the test to determine if a director acts

in good faith is subjective and must take into account the

unique interests of the company. However, directors may still

be held to have failed in this duty if they fail to question

whether a transaction was in the best interests of the

company.

The single action most likely to raise personal liability

issues for co-op directors relates to their personal use of the

co-op and their duty of loyalty. It is imperative that directors

are sensitive to their dual role and measure their actions

using the good faith test.

When standards are breached 

There are a variety of remedies available to companies that

seek legal recourse against directors in a case of breach of

duties. These include injunction, damages, rescission, account

of profits and summary dismissal. 

After the Enron scandal in 2002, Congress passed the

Sarbanes-Oxley Act (“Act”), which introduced new standards

of accountability for boards of directors for U.S. companies

or companies listed on U.S. stock exchanges. 

Under this Act, directors risk large fines and prison

sentences for accounting crimes. Internal controls of the

company are now the direct responsibility of directors. As a

result, the vast majority of public companies have hired

internal auditors to ensure that the company adheres to the

highest standards of internal controls. 

The same remedies are available to cooperatives, except

for remedies allowed under the Act. The Act is only

applicable to publicly traded companies under jurisdiction of

the Securities Exchange Commission. But some states are

pushing for application to be extended to large nonprofit

organizations. 

Although the provisions of the Act do not directly affect coop directors, they should be used as a guide for best practices.

Co-op directors may be held personally liable if they fail to

act in accordance with statutory laws and regulations on

behalf of the cooperative.

Directors may look to the co-op to be indemnified in

defense of a lawsuit. Legal fees and costs could nearly

bankrupt a cooperative even if a loss is eventually recovered.

Co-op directors are charged to think through business

problems independently and to communicate to the members

any events that may adversely impact the cooperative with

the eye of avoiding possible litigation.

While they are held to very high standards, co-op

directors are usually compensated very modestly for serving

on a board. Yet the role of a co-op director is one of great

honor, from which they should garner personal pride and

satisfaction, knowing that the role of co-op director is

absolutely critical to the functioning of the cooperative

system of business.

■

Legal Corner

continued from page 19
Rural Cooperatives / May/June 2009 31

Newsline

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

Co-op developments, coast to coast

AGP marks 25th year

with record cash returns

Despite extraordinary economic

volatility in 2008, AGP posted record

earnings of almost $144 million on sales

of about $4.3 billion. The co-op

returned a record $75.8 million in cash

to members, bringing total cash returns

for the past five years to more than

$213 million.

AGP CEO and General Manager

Marty Reagan announced the record

earnings and returns as part of his

remarks at the 2008 AGP annual

meeting in Omaha, Neb., in January,

which marked the 25th anniversary of

the soybean-processing cooperative.

“All of us at AGP continue to recognize

the importance of these dollars and the

value they bring to local communities

that have been so supportive of AGP

throughout our 25-year history,”

Reagan said. 

Chief Financial Officer Keith

Spackler reported that the co-op’s

$143.9 million in earnings represented

an increase of more than 63 percent

from fiscal 2007. The AGP board

approved record patronage of $88.9

million, of which 30 percent, or $26.7

million, was paid in cash. Fiscal 2008

patronage refund rates were: 39.6 cents

per bushel on soybeans; $16.82 per ton

on soybean meal; and $8.41 per ton for

soy hulls. 

Equity redemption of $45 million

was also approved by the board.

Combined with the $26.7 million cash

patronage and value-based premiums of

$4.1 million (which are not included in

the company’s earnings), the equity

redemption resulted in total cash

returned to members of $75.8 million,

up from the $45.2 million returned in

2007.

Capital expenditures totaled $94.1

million, the majority of which was

invested in AGP’s core businesses of soy

processing and refining.

Member-stockholder equity in AGP

has grown substantially in the past 25

years. Equity was about $54 million

when the cooperative was formed, but

by the end of fiscal 2008, it had grown

to nearly $578 million. 

In addition to strong local demand

for soybean meal, the co-op was highly

successful in marketing its meal

internationally in Mexico, Canada, the

Pacific Rim and other areas. AGP

exported a record volume of soybean

meal, equivalent to more than 25

million bushels of soybeans.

Results were mixed for AGP’s

renewable fuels businesses. While soy

biodiesel achieved record volume and

earnings, the ethanol market sagged.

Biodiesel and ethanol are as much

political fuels as they are renewable

ones, said John Campbell, AGP senior

vice president of government relations

and industrial products. “Looking

forward, both the politics and the

economics have moved against us,” he

said. “... AGP’s position remains the

same — we believe in renewable energy,

these markets are good for agriculture,

and we are in the business for the longterm.”

Although grain markets were wildly

volatile in 2008, AGP Grain was

Soybean processing co-op Ag Processing Inc. (AGP) had sales of $4.3 billion and almost $144 million in earnings

last year. Photo courtesy AGP
32 May/June 2009 / Rural Cooperatives

successful in leveraging trading

opportunities to post record earnings.

Masterfeeds, AGP’s animal nutrition

company in Canada, was challenged by

tough market conditions. Nevertheless,

it acquired two feed businesses to reinforce its position in the Canadian industry.

Maine fishing co-op opens

certified processing facility

After months of hard work and

preparation, the Midcoast Fishermen’s

Cooperative received final approval in

March from the Maine Department of

Agriculture to begin operating a new,

certified seafood processing facility in

Port Clyde, Maine. The co-op began

picking Maine shrimp at the facility on

March 16 and selling the meat to local

consumers and restaurants. 

The co-op fishermen work from the

last fleet of small, groundfishing boats

east of Portland. The village of Port

Clyde is among the last true fishing

communities left from the industry’s

heyday. The co-op reports that Port

Clyde Fresh Catch customers have been

enthusiastically snapping up the frozen,

Maine shrimp meat in 1-pound

containers through special sales that the

cooperative has been running since the

facility began operating. 

With the arrival of spring, the Maine

shrimp season draws to a close; the coop fishermen make the annual

switchover for groundfish season, and

the processing facility transitions to

filleting fish in late May.

The cooperative has launched one of

the nation’s first Community Supported

Fishery efforts (or CSF), with

subscribers getting regular deliveries of

fresh fish and shrimp, as determined by

the number of shares they buy. 

The CSF sales and restaurant sales

are critical strategies for the future of

both the fishermen and the Port Clyde

community. The seafood-processing

facility adds another chapter to this

strategy by providing new, value-added

marketing opportunities for members

and new jobs for members of the

community. The cooperative is working

to expand sales to retailers and

distributors in Maine and elsewhere. 

AgStar buys six VeraSun

plants; hopes to re-sell to

farmer co-ops

AgStar, a Farm Credit System bank

based in Mankato, Minn., in March

purchased six ethanol plants formerly

belonging to bankrupt VeraSun. The

bank’s credit bid was for $324 million.

The six plants were to remain in idle

mode for about 60 days while buyers

are found. 

According to press reports, a number

of farm groups were interested in

acquiring some of the plants, but did

not have the financial clout to win them

during the auction conducted by the

bankruptcy court. But the bank, itself a

cooperative, hopes to give them a

chance to do so.

“Part of this is to give farmers and

farmer cooperatives the opportunity to

buy these plants,” Paul DeBriyn,

president and CEO of the bank, was

quoted in the St. Paul Pioneer-Press.

“We think that would be the best

outcome.” He told the newspaper that

he thought two to six of the plants

would wind up owned by farmer

cooperatives. 

VeraSun’s other seven ethanol plants

and one plant site under development

were purchased for $477 million by San

Antonio-based Valero Energy

Corporation, North America’s largest

petroleum refining and marketing

company. These plants have an annual

production capacity of 780 million

gallons. 

The six plants purchased by AgStar,

located in five Upper Midwest states,

are described by the bank as being

state-of-the-art facilities with annual

production capacity of 470 million

gallons of ethanol. “This purchase will

protect the interests of AgStar

stockholders and our fellow creditors in

the lending group,” said Paul DeBriyn,

president and CEO of AgStar.

“Basically, we’ve taken the necessary

steps to ensure these plants will be sold

for fair market value.” 

The AgStar-led lending group,

comprised of 16 financial institutions,

has received ample interest in the plants

from potential buyers, DeBriyn said.

“Even during the auction process, we

were fielding inquiries from companies

interested in purchasing one or more of

these six plants. Ethanol has

experienced recent volatility but

remains a viable industry.” 

DeBriyn said he hopes to sell the

plants as quickly as possible. “This is

The Midcoast Fishermen’s Cooperative has opened its own seafood

processing facility in Port Clyde, Maine. Photo by Peter Ralston,

courtesy the Island Institute
Rural Cooperatives / May/June 2009 33

vital so that corn will again be

purchased from local sources, jobs will

be brought back to rural America, and

the renewable fuels industry as a whole

will be reinvigorated.” AgStar has

contracted with ICM Inc. to oversee

plant operations during the transition

period.

Record revenue at DFA in ’08;

plunging milk price sparks

effort 

Dairy Farmers of America had

record revenue of $11.7 billion and net

income of $61.7 million in 2008. The

cooperative marketed 61.2 billion

pounds of milk and directed more than

$7 billion dollars in milk payments to

18,000 farmer-members. 

“Although 2008 was a record year

for the cooperative, our results are

delivered with mixed feelings,” Camerlo

said at the co-op’s annual meeting in

Kansas City in March. “We are proud

of the cooperative’s progress and

Humboldt Creamery

files Chapter 11

Humboldt Creamery filed for Chapter 11 bankruptcy

protection April 21 in U.S. Bankruptcy Court in Santa Rosa,

Calif. By filing for Chapter 11, the co-op has indicated its

desire to continue to operate. The co-op is looking for

possible partners or buyers.

Len Mayer, appointed as interim CEO, has

concluded that the core, on-going operations of

Humboldt are profitable and will be preserved.

The bankruptcy filing was necessitated by the

co-op’s “impaired financial condition, which was

discovered after the resignation of former CEO

Richard Ghilarducci,” the company said in a press

release. Humboldt Creamery’s bankruptcy filing lists

assets of $50 million to $100 million, with liabilities

of a like amount.

Humboldt Creamery is the oldest independent dairy

cooperative in California and specializes in pasturebased and organic dairy farming. It is owned and

operated by about 50 family farmers and produces

high-quality fluid milk products, ice cream and milk

powder shipped nationally and internationally. Based in

Fernbridge in Humboldt County, it has additional facilities in

Stockton, Calif., and Los Angeles.

Ghilarducci, who had been the co-op president and CEO

since 1997, unexpectedly resigned Feb. 20. The news that the

co-op was in trouble was even more surprising, coming just a

month or so after it had announced a record sales year in

2008. The co-op has issued a statement accusing its former

CEO of manipulating the accounting books to hide the true

condition of the company. The co-op says the Securities and

Exchange Commission, the FBI and U.S. Department of

Justice are going over the financial records. 

Ghilarducci’s attorney, Elliot Peters, has countered in the

press that it is “cynical and false” to blame his client for the

current financial problems of the co-op.

Humboldt’s major secured creditors are its lenders:

CoBank and American AgCredit. These lenders “have

cooperated with Humboldt in negotiating the terms of a

debtor-in-possession loan agreement providing an additional

$3 million for Humboldt, allowing it to reorganize its business

in Chapter 11,” the co-op press release says. 

A new financing arrangement with lenders “will allow us

to pay on a current basis all of our suppliers for goods,

supplies and services delivered to us after the filing of the

bankruptcy case, and to at the same time find a strategic

buyer who can continue the operations of this business that

was started in 1929,” Mayer said. 

Humboldt has hired investment bankers Duff & Phelps to

help it find a partner or buyer. “With the support of its existing

lenders, Humboldt expects to find a new partner who will

work with it to continue the business and solve the problems

caused by the former lack of financial reporting,” Mayer said. 

More than 60 percent of dairy farmers in the Humboldt

County area ship milk to the co-op, and its loss would be a

severe blow to agriculture in the state’s north coastal area. 

“It would be devastating — this is the most devastating news

in agriculture during my lifetime,” County Farm Bureau

Executive Director Katherine Ziemer told the Times-Standard

newspaper. “If the creamery doesn't make it, it will have

lasting effects for generations to come — so many people in

Ferndale are tied to what has happened at Humboldt

Creamery.”

Although Humboldt Creamery has filed for Chapter 11 Bankruptcy, a

spokesman says its core business remains profitable. The co-op is

searching for a partner that will enable it to continue the creamery's

legacy of producing quality dairy foods. Photo courtesy Humboldt

Creamery
34 May/June 2009 / Rural Cooperatives

achievements — and the individuals

who contributed to these successes. At

the same time, we are deeply concerned

about our members and the economic

influences shaping 2009.”

Record operating profits were helped

by the strong performance of DFA’s

commercial division, Dairy Food

Products Group, which represented 17

percent of consolidated net sales. Sales

of milk comprised 77 percent of

consolidated net sales. Revenue and

cost of sales were significantly affected

by fluctuations in milk prices, which

were, on average, at record high levels

during 2007, but declined in 2008. 

DFA says it is taking numerous

measures to assist members during the

current low-price cycle. “Although we

expect to have to manage through

volatility in this industry, this down

cycle is an especially bad one,” Camerlo

said. “We are seeing drastically lower

milk prices at a time when on-farm

costs are at historically high levels.

Compounding this is the fact that we

are in a global economic crisis.”

DFA has several initiatives underway

designed to ease the burden on

members. Among these initiatives are:

• Continued support for the

Cooperatives Working Together

(CWT) program, a dairy farmerfunded self-help initiative to better

balance supply with demand.

• Establishment of a DFA Cares

hotline, a 24-hour support system to

offer assistance to members.

Producers can speak to a DFA staff

member and ask general questions,

seek market information or, in some

cases, receive consultative assistance. 

• Working to educate the financial

community on the dire conditions

dairy farmers face and to discuss ways

in which they can collaborate to assist

members. DFA recently conducted a

webinar for more than 500 members

of the lending and agribusiness

community, as well as nutritionists,

suppliers, academians and others with

a stake in dairy farmers’ futures.

• Having DFA staff work closely with

lawmakers and USDA to enact, or

expand, government programs that

will benefit dairy producers, including

use of the Dairy Export Incentive

Program. 

Record milk volume,

sales growth at AMPI

Associated Milk Producers Inc.

(AMPI) reported record milk volume

and sales growth for 2008. “A record

5.8 billion pounds of milk [up 6

percent], combined with strong dairy

product markets and AMPI sales,

resulted in $1.7 billion of revenue,”

AMPI President and CEO Ed Welch

told 400 annual meeting delegates in

Bloomington, Minn. Welch, a 25-year

AMPI employee, was selected last year

to lead the co-op. 

AMPI exceeded annual budget

expectations with $11 million in

earnings from operations, before

inventory adjustment. Earnings were

bolstered by strong domestic sales of

bulk natural cheese, as well as

consumer-packaged cheese and butter.

AMPI members shared $12.3 million of

equity payments. 

Welch said the co-op recognized a

$14.9 million loss due to the

devaluation of dairy product inventory

by year’s end. “Global demand, which

buoyed dairy product prices and sales

throughout the first half of 2008, nearly

disappeared in the fourth quarter,” he

said. The markets also affected on-farm

milk prices. Prices plummeted in early

2009, following two years of nearrecord milk prices.

AMPI Chairman Paul Toft, a dairy

farmer from Rice Lake, Wis., said the

ultimate measure of cooperative

performance is long-term growth. “We

continue to focus on growing our

membership and consumer-packaged

dairy product business to ready this

cooperative for the next generation of

member-owners.”

AMPI highlights for 2008 include:

• Record milk volume contributed to

the cooperative’s 9-percent growth in

bulk natural cheese production. 

• As a preferred supplier for America’s

leading fast-food restaurant chains,

AMPI processed cheese slice

production increased 16 percent. 

• Butter production was 6 percent

higher, with growth in categories

ranging from traditional retailpackaged quarters to single-serve

continentals favored by food service

customers. 

• A new whey protein concentrate dryer

was installed at the Paynesville, Minn.

plant, with whey protein being

marketed to domestic and global

customers. 

CHS notches fifth year

of record returns

Record earnings in 2008 are enabling

CHS Inc. to disburse up to $343

million to its owners in 48 states. This

marks the fifth consecutive year of

record returns to owners by CHS and is

the largest ever made by a U.S.

cooperative.

Of that amount, $231 million is

being distributed in cash patronage,

equity redemption and CHS preferred

stock issued as equity redemption.

Distributions of equity and preferred

stock dividends later this year are

expected to bring the fiscal 2009 total

to $343 million.

“Once again, CHS has demonstrated

one of the most important ways we can

deliver on our mission of adding value

for all of our stakeholders,” says

Michael Toelle, CHS board chairman.

“The strong performance the company

achieved during fiscal 2008 has enabled

CHS to continue to grow, to be

financially sound and to provide a

return on our owners’ investment in

diverse businesses, ranging from energy

to grain marketing to food processing.”

CHS net income for its fiscal year

ending Aug. 31, 2008, was $803 million.

During 2009, distributions are being
Rural Cooperatives / May/June 2009 35

made to about 1,200 member

companies and more than 35,000

individuals. Patronage is based on

business done with CHS during fiscal

2008, while equity redemptions and

preferred stock distributions represent

retirement of ownership in CHS earned

in past years.

A Fortune 200 company, CHS is

owned by farmers, ranchers and

cooperatives, along with thousands of

preferred stockholders across the

United States. 

Agri-Mark earns $11.8 million

Agri-Mark, Methuen, Mass., earned

an after-tax profit of $11.8 million for

2008, the second best year ever for the

cooperative’s 1,300 Northeast dairy

farm families. Agri-Mark sales of

member-farm milk and manufactured

dairy products for 2008 generated $881

million in revenue.

Agri-Mark farmers also shared in a

record, extra $17.1 million in their bimonthly milk checks throughout the

year for overall milk quality and other

incentives that the co-op was able to

negotiate with its customers and return

to members. Profit allocation to the coop’s dairy farmers will be 25 cents per

hundredweight for all milk that each

farm family shipped to the co-op during

the 2008. This represents allocated

earnings of roughly $4,500 for the

average Agri-Mark member milking

100 cows.

Despite “a very difficult marketing

environment,” during which milk prices

nationwide have plunged, “Agri-Mark

continues to generate substantial profits

for dairy farmers,” said Neal Rea, a

dairy farmer from Cambridge, N.Y.,

who was elected to his third term as the

co-op’s chairman. 

The continued strength of the coop’s Cabot and McCadam branded

cheeses exceeded expectations in 2008.

Both cheese brands maintained market

share or grew in sales at a time when

many other brands saw sales decline.

This brand demand, combined with

steady sales of butter and whey proteins

produced by the co-op, all worked to

boost returns to farmers. 

Rea said that although the

cooperative business has done well,

dairy farmers are still facing severe

challenges. The past two years have

seen record-high production costs both

on the farm and within the cooperative’s

plant operations. Farmers have been

struggling with high energy and feed

costs in particular. Compounding

problems, 2009 farm prices are

expected to be the lowest in decades,

and the financial crisis has made loans

and credit more difficult for farmers to

attain. 

The benefits of farmers owning

added-value businesses were apparent in

2008, Rea says. By being part of AgriMark, members assure themselves of

secure markets with their investment in

owning facilities to process their milk

and support their branded products.

NCFC meeting explores impact

of climate change laws on ag

The National Council of Farmer

Cooperatives (NCFC) hosted a meeting

in Washington, D.C., in April that

attracted a broad range of agricultural

organizations to discuss the real-world

costs that climate legislation will impose

on farms, cooperatives and rural

households across America. Bob

Looney, vice president of government

affairs for CHS Inc., discussed the

impact the legislation will have on

petroleum refiners, while Kirk Johnson,

vice president of environmental policy

at the National Rural Electric

Cooperative Association, looked at how

the law would likely raise consumers’

utility bills.

Bill Herz, vice president of scientific

programs at The Fertilizer Institute,

provided an overview of how fertilizer

prices are likely to rise under any

climate change proposal. Presentations

are available on NCFC’s website:

www.ncfc.org/ncfc-climate-changeinitiative.html. 

“Agriculture needs to become a

much more active participant in the

process as climate change legislation

begins to move through Congress,” says

NCFC President Charles Conner. “As

we do this, it is especially important

that we look at the impact that this

legislation will have on farm and

household budgets across rural

America.”

Among the consequences of climate

change legislation discussed were:

• Climate change legislation could cost

the average American family more

than $2,400 a year in increased utility

costs alone; 

• The U.S. Environmental Protection

Agency predicts that the cost of

natural gas, a key component of

nitrogen fertilizers, will increase by 25

percent almost immediately under the

plan; 

• The plan would jeopardize the

existence of small, rural petroleum

refiners, who produce nearly twothirds of the fuel used in rural

America, thereby resulting in

increased gasoline and diesel costs for
36 May/June 2009 / Rural Cooperatives

farmers and others. 

The session was the first in a series

of topical meetings that NCFC plans to

hold; future sessions will look at

commodity-specific impacts of climate

legislation, opportunities provided in a

cap-and-trade system, and how

legislation might affect the

transportation infrastructure and

agricultural trade. 

Record sales, member

payments for LO’L

Land O’Lakes, a Minneapolis,

Minn.-based dairy foods and farm

supply co-op, had record net sales of

$12 billion in 2008, up 35 percent from

$8.9 billion in 2007. The co-op also

returned a record $98 million to its

members. Net earnings of $159.6

million were just slightly off from

2007’s record $160.9 million. About

two-thirds of the sales increase was the

result of the company’s acquisition in

late 2007 of a crop protection products

business. 

President and CEO Chris Policinski

said that these results — coupled with

strategic progress in becoming a more

focused, more disciplined and

financially stronger organization — put

Land O’Lakes in a solid position

moving into 2009. “No matter what

business you are in, you can expect a

bumpy ride in 2009,” Policinski said.

“At Land O’Lakes, we’re confident we

have the financial foundation, resources,

strategies and people in place to

weather the storm and continue to

generate value for member-owners and

customers.”

He said the company has felt the

impact of the current economic

recession, particularly in the fourthquarter, when results were negatively

affected by a steep decline in

commodity prices. This narrowed

margins, required inventory writedowns and resulted in significant

unrealized hedging losses. 

The company improved its longterm, debt-to-capital ratio, which was at

34.8 percent as of Dec. 31, 2008,

compared to 36.5 percent as of Dec. 31,

2007. During the fourth quarter, the

company’s corporate debt rating was

upgraded to “BB+” by Standard and

Poor’s, following an upgrade to “Ba1”

by Moody’s Investors Service.

Performance by business unit shows:

• Dairy foods sales of $4.1 billion and

pretax earnings of $16.3 million in

2008 compared to sales of $4.2 billion

and pretax earnings of $28.5 million

in 2007.

• Feed sales climbed to $3.9 billion, but

it proved to be a break-even year for

the unit, compared to sales of $3.1

billion and pretax earnings of $30.9

million in 2007.

• Layers/Eggs sales, conducted through

MoArk LLC, were $606 million with

pretax earnings of $29.9 million, up

from $514 million and $19.9 million

the previous year.

• Seed sales notched a new record at

$1.2 billion, with pretax earnings of

$33.4 million, compared to sales of

$917 million and pretax earnings of

$43.9 million in 2007.

• Agronomy sales, primarily crop

protection products, hit $2.3 billion

with pretax earnings of $112.5

million. This is a new division,

following its acquisition from

Agriliance LLC late in 2007. 

Two-thirds of milk supply

enrolled in CWT program 

Cooperatives Working Together

(CWT) has reached its goal of signing

up a “super-majority” of the nation’s

milk supply for two years, which will

enable the self-help program to “focus

on reducing the current devastating

imbalance in milk supply and demand,”

according to CWT officials. About 67

percent of the nation’s milk supply has

now committed to pay the 10 cent per

hundredweight membership assessment

for a full two years (through December

2010). More memberships are still

being received, that will further boost

the enrollment.

“March is shaping up to be one of

the toughest months ever for America’s

dairy farmers, given the painfully low

milk price, combined with elevated

input costs,” Jerry Kozak, president and

CEO of NMPF, which manages CWT,

said in late March. “But the good news

is that CWT will continue to be

engaged in efforts to improve the

difficult economic situation that dairy

producers are facing.” 

Hog co-op files for bankruptcy

Meadowbrook Farms, an Illinois hog

cooperative that opened in 2002,

announced plans in March to file for

Chapter 7 Bankruptcy. It said its assets

will be liquidated, including a

processing plant in Rantoul, Ill. 

The co-op once had 200 members,

but was down to less than half that

number, according to press reports. Its

600 employees were laid off in

December. It had for many months

been paying below-market rates for hog

deliveries, leading to steady erosion in

member business. 

Co-op members are unsecured

creditors who will only collect the $5

million the co-op owes them if funds

remain after payments are made to

secured creditors (typically lenders and

suppliers). 

According to press reports,

Meadowbrook Farms officials have

blamed a major customer for defaulting

on a key contract, leading to $5 million

in losses. It has filed a complaint against

the customer in Champaign County

Court. The customer has denied the

allegations, saying it was the co-op that

violated the contract. 

N.Y. Times includes special

co-op section 

The April 6 issue of the New York

Times included a special advertorial

(paid editorial and advertising content)

section that focused on the advantages

of cooperative businesses. The

advertorial on cooperatives featured a

four-page section of ads and editorial

copy. 

The purpose of the advertorial was

to educate consumers and policymakers

on the value of cooperatives, according

to the National Cooperatives Business

Association (NCBA), which

spearheaded the effort. “It tells a truly

compelling story about cooperatives,”

says NCBA President Paul Hazen. 
Rural Cooperatives / May/June 2009 37

The advertorial section focused on a

variety of different types of co-op

businesses, including: Cabot Creamery,

Organic Valley, Wakefern Food

Corporation (ShopRite), RaboBank,

NYU Credit Union, NCBA, BizUnite,

CCA Global and Carpet One. In

January, The Times also ran an

advertorial featuring credit unions

covering three pages of ads and text. 

NCBA originated the idea for the

cooperative advertorial last fall, when

The Times contacted it for a list of

national and regional credit unions to

participate in the January advertorial.

Beginning last fall, the NCBA

marketing/communications team

collaborated with The Times to ensure

that the advertorial “tells the most

robust story on why cooperatives are

the better business model when it

comes to economic and social change,”

Hazen adds. 

The Times interviewed John Dunn,

NCBA vice president of international

development (and formerly with USDA

Cooperative Programs) and Jim Jenkins,

NCBA communications director, for

background used in the editorial

portions of the spread. 

A copy of the advertorial can be

downloaded from the NCBA website at:

www.thebetterchoice.coop. 

USDA accepting applications 

for co-op development grants 

USDA is accepting applications for

grants to fund cooperative development

centers that work to improve economic

conditions in rural areas. Applications

are due by the close of business on June

29, 2009. 

“These cooperative development

centers provide rural Americans with

stronger technical and managerial skills,

helping small businesses become more

profitable and creating jobs in rural

communities,” says Agriculture

Secretary Tom Vilsack. Grants of up to

$200,000 may be awarded to colleges,

universities and nonprofit groups to

create and operate centers that help

individuals or groups establish, expand

or operate rural businesses, especially

cooperatives. 

The grants are being provided

through USDA Rural Development’s

Rural Cooperative Development Grant

program. The centers promote

President Obama’s goal to bring

increased economic opportunities to

rural residents by giving them tools to

help their businesses grow. 

Cooperative program grants can be

used, among other things, to conduct

feasibility studies, create and implement

business plans and help businesses

develop new markets for their products

and services. USDA may award up to

$4.4 million in grants, which may

finance up to 75 percent of the cost of

establishing and operating the

cooperative centers. Recipients must

match 25 percent of the total project

cost. 

The application guide for this grant

program can be found at http://www.

rurdev.usda.gov/rbs/coops.htm. Also see

the April 29, 2009, Federal Register, page

19485. ■

Organic Valley sales top $528 million 

Organic Valley, the nation’s largest cooperative of organic family farmers

and one of the nation’s leading organic brands, had record sales of $528 million

in 2008, a 22-percent increase over 2007. This follows a 29-percent rise in sales

from 2006 to 2007. The co-op’s sales have grown nearly 153 percent in the past

five years. 

The cooperative, with 1,332

farmer-members in 32 states and

one Canadian province, expects

2009 sales to reach $549 million, a

4-percent increase. 

“In light of the difficult economic

environment and a softening in

consumer spending, our farmers

are very happy to once again

experience double-digit sales

growth in 2008 and to forecast

continued growth for 2009,” says

George Siemon, one of the founding

farmers and CEO of Organic Valley.

“Economic crises are not new to

family farmers. Our mission to save

family farms and strengthen rural

communities was born in the 1980s,

when farmers faced yet another

economic crisis. We learned then

that good things can come from hard times when we work cooperatively.” 

To determine the total amount of synthetic chemicals and performanceenhancing drugs its organic farming practices have avoided using, Organic

Valley compared its member-farm data to 20 years of USDA data on

conventional farm use. As a result, Organic Valley estimates that co-op

members avoided using 58 million pounds of synthetic nitrogen and 605,747

doses of performance-enhancing drugs administered to animals. 

The co-op sold more than $9 million in Class E preferred stock last year,

almost double the amount in previous years. New products introduced last year

include Pasture Butter (a sweet, lightly salted cultured butter); Whipped Butter

and Vermont Cheddar Cheese, a premium organic cheese. 
38 May/June 2009 / Rural Cooperatives

scale, but the market’s not going to be

there until you’ve developed your

technology and you’ve got enough

producers out there.”

Europe far ahead

Stockwell agrees with Haubenschild

and Jennissen that the technology is

much more established in western

Europe. In Europe, digesters are

commonly used to dispose of farm and

food-processing waste.

More than 4,000 digesters in various

sizes have been built in Germany alone.

“We’re like teenagers compared to the

Europeans,” Stockwell says. “They

went through this 25 years ago — they

learned from the oil embargo in the

1970s.”

At a minimum, Stockwell expects it

to take four to five years before

methane digesters on U.S. farms begin

to take off. For other applications, such

as waste from food processors, he thinks

it may be 20 years before the

technology is widely adopted. 

His organization is trying to hurry

things along by developing education

and outreach programs to encourage

grassroots support in Minnesota. It’s

also working on a “best practices”

digester handbook for farmers, using

information gained from

Haubenschild’s and Jennissen’s

operations.

In any case, he thinks grass-roots

support for the technology is building.

“Every time Jerry and Dennis give a

presentation about their systems, it’s

standing room only,” he says. “People

are definitely interested. Once we get

the costs down and get pricing

mechanisms in place, I think we’ll get a

lot more investment.” ■

Waste Not

continued from page 18

factors in determining farmers’ decisions to employ watersaving irrigation technologies and conservation practices long

before the 2007-2009 drought hit. 

Due to the size and diversity of agriculture in California, it

is impossible to generalize about water use efficiency

practices. However, the following trends reflect what is

currently happening on California farms:

• Water cost is forcing lower value field crops to give way to

higher value permanent plantings. For example, from 1997-

2006, cotton acreage declined 68 percent (from 880,000 to

285,000 acres). During the same time frame, almond

acreage increased 45 percent (from 505,000 to 730,000

acres).

• A diversity of water-saving irrigation and recycling

technologies is being employed. For example, processing

tomato acreage (traditionally furrow irrigated), is

incorporating sub-surface drip irrigation technologies.

• Groundwater “banking” through voluntary, locally

organized districts is playing a vital role in providing

drought “insurance.” For example, the Kern Water Bank at

the southern end of the San Joaquin Valley has about 10

million acre-feet of storage capacity. During the current

drought, this subsurface reserve has provided much needed

relief to the local farmers who have switched their cropping

patterns to permanent plantings.

• Water transfers from the “haves” to the “have nots” are

more prevalent as the law of supply and demand increases

the value of water. If agricultural water users earn more

revenue from the sale of water to urban areas, crop

production will be curtailed to accommodate transfers.

The complex system of federal and state water projects

that served the California economy magnificently during the

latter part of the 20th century has been overtaxed by periodic

droughts and competing demands. For 30 years, lawmakers

have studied and debated — but failed to enact — measures

to improve our water supply and distribution system. 

Although Mother Nature ultimately holds the trump

cards, the state’s water problems will only be solved if

political consensus can be achieved. In the meantime, the

quantity, quality, cost and legal sanctions associated with

water allocation and use will be increasingly problematic as

California’s population reaches 50 million by 2030.

Many of the fruit, nut and vegetable crops grown here

cannot be grown in other parts of the nation. Thus,

California’s water shortages have ramifications that extend

beyond our state’s borders into domestic and international

markets. For this reason California cooperatives and their

members will be actively engaged in the struggle to find

solutions to our water policy challenges. ■

Commentary

continued from page 2

“Every time

Jerry and Dennis

give a presentation about their

systems, it’s

standing room

only.” 

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40 May/June 2009 / Rural Cooperatives