Rural

COOPERA COOPERATIVES

USDA / Rural Development March/April 2001 USDA / Rural Development March/April 2001

Co-ops cope

with power

crisis

Co-ops cope

with power

crisis
2 March/April 2001 / Rural Cooperatives

Research on cooperatives has diminished, as noted in the article by legal

scholar James Baarda on page 21. New

efforts are needed to invigorate

thought and understanding about

major forces impacting the operations

of cooperatives and how they adapt

structurally and functionally to them.

Baarda shows the opportunity to draw

on new, cutting-edge developments in

disciplines such as legal theory, economics, sociology, political science and

behavior management and how to

apply them to cooperatives. Such an

interdisciplinary approach to addressing these issues has the potential to

enrich understanding of the role cooperatives play and better promote cooperative development in the United

States and worldwide.

Sound far-fetched? Building intellectual capital about cooperative

methods of operation, practices and

principles is one of the missions of

USDA’s Cooperative Services program, first authorized in the Cooperative Marketing Act of 1926. At a

time of increasing concentration in

food manufacturing and distribution,

cooperative approaches to marketing

are being looked to increasingly by

Congress as a means for farmers and

other rural residents to access markets

and to gain a modicum of control in

the market chain, rather than being

subservient to outside interests. It is

ironic that – at a time of renewed

interest in value-added marketing and

improved rules for negotiated pricing

over contract terms – research support for work on these important

areas is lacking.

Such research is important for

identifying keys to successful operation of cooperatives and understanding the causes of cooperative failures.

It is also important to shedding light

on how changes in various means of

finance can affect member control

and influence in their cooperatively

owned businesses. Seldom do longterm consequences of deviations from

conventional cooperative practices

merit the in-depth assessment

required to determine if they alter the

basic nature of cooperatives. What

may appear to be the idea of the

moment or just “keeping up with the

Joneses” can end up costing members

their equity and market presence. Just

observe what has happened to TriValley Growers and the Saskatchewan

Wheat Pool. Could unwise courses of

action have been averted by better

understanding the nature of the cooperative business itself?

USDA’s cooperative research program involves in-house efforts and

coordination with university scholars

through agreements that augment

work on mutually agreed-upon projects. This effort needs to be elevated

to meet the critical needs identified in

the Baarda article and to avert a crisis

in cooperative knowledge. Results can

assist cooperative boards of directors

and management in strategic planning,

identification of best practices, and

shed light on issues inherent in the

increasingly complex organizations

required for responding to global competition. They can also assist producers

and other rural residents with

economies in transition from centralized government to more democratically run and market-oriented ones.

The opportunity for application of

the cooperative idea and its use has

never been greater. It is through

research and education that the cooperative idea expands and is nurtured.

Randall Torgerson, Deputy Administrator

USDA Rural Business-Cooperative Service 

COMMENTARY

Research key to expanding co-op knowledge and understanding

Research is

important for

identifying keys 

to successful 

operation of 

cooperatives and

understanding 

the causes of 

cooperative 

failures.
Rural Cooperatives / March/April 2001 3

Rural COOPERATIVES (1088-8845) is published

bimonthly by Rural Business–Cooperative Service,

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

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other companies’ products and services.

Unless otherwise stated, contents of this publication

are not copyrighted and may be reprinted freely. For

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The United States Department of Agriculture (USDA)

prohibits discrimination in all its programs and 

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

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

orientation, and marital or family status. (Not all 

prohibited bases apply to all programs). Persons 

with disabilities who require alternative means for

communication of program information (braille, large

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To file a complaint of discrimination, write USDA,

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Building, 14th and Independence Avenue, SW,

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

(voice or TDD). USDA is an equal opportunity

provider and employer.

Ann Veneman, Secretary of Agriculture

Randall Torgerson, Deputy Administrator, USDA

Rural Business-Cooperative Service

Dan Campbell, Managing Editor

Pamela J. Karg, Field Editor

Vision 2000/KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or

Fax (202) 720-4641, Information Director,

This publication was printed with vegetable oil-based ink.

United States Department of Agriculture

Rural

COOPERA COOPERATIVES

March/April 2001 Volume 68 Number 2

On the Cover:

Alan Pierson contemplates the grim energy picture facing California as he

stands outside milk- storage silos at the Land O’ Lakes processing plant in

Tulare. The plant has experienced numerous power outages, forcing some

members to divert milk to animal feed. Story on page 12. Photo by Josh

Yoshimoto

FEATURES

4 On the sea of grass

Colorado ranchers band together to cut cattle-grazing costs

By Coleman Cornelius

6 Earnings, sales dip for local cooperatives

By Beverly L. Rotan

8 Minnesota leads nation in co-op business volume

By Charles A. Kraenzle

12 Power in peril

California co-ops struggle to cope with the state’s energy crisis

By Catherine Merlo

17 Neighborhoods warm to bargaining power 

of co-ops

By Tux Turkel

19 Keep the co-op candle burning

Effective member relations essential to keeping co-op spirit alive

By James Wadsworth

21 Critical need seen to broaden, invigorate 

current approach to cooperative research

By James Baarda

DEPARTMENTS

2 COMMENTARY

11 IN THE SPOTLIGHT

25 A CLOSER LOOK

26 NEWSLINE
4 March/April 2001 / Rural Cooperatives

By Coleman Cornelius, 

Denver Post 

Northern Colorado Bureau

Copyright Denver Post; reprinted

by permission 

ogan County, Colo. —

The sprawling prairie

owned by the Chimney

Canyon Grazing Association harbors all of human

history on the Eastern Plains.

This arid landscape — where cattle

grazing is managed at a ratio of just one

animal per 15 acres — has its own desolate beauty, and many of its features

have remained unchanged over time.

Atop a sweeping mesa, there are tepee

rings left from Plains Indian ceremonies.

From here, native people could see forbidding canyons coursing through distant chalk cliffs, the canyons for which

the grazing association is named.

A stone-buttressed dugout, not

much bigger than desktop, hints at the

hardships of an early homesteader who

sought meager shelter on the land

where he staked claim.

A collection of immaculately preserved stone buildings and barns is all

that’s left of a ranch once controlled by

John W. Iliff, one of Colorado’s legendary cattle kings in the late 1800s,

whose family later founded the Iliff

School of Theology in Denver.

In the Iliff tradition, the Chimney

Canyon Grazing Associations’ 35

members — 31 men and four women

— make a living raising crops and cattle. They banded together to improve

their chances of success in a harsh

landscape, in a harsh economic climate.

Strength in unity

The Logan County group formed in

1965 with a simple idea: by pooling

their money, small-scale farmers and

ranchers could buy more land for cattle

grazing than they could afford individually, giving each a firmer financial

foothold.

The grazing association is the

largest of its kind in the state and is the

biggest landowner in Logan County,

according to county assessors.

The group owns nearly 32,000

acres in northwestern Logan County;

with additional holdings in adjacent

Weld County, the ranchers control

about 37,000 acres. The northern

Colorado property amounts to about

58 square miles.

“In order for the small farmer to compete, he had to get organized with other

small farmers. That way we could buy

land, because large-unit costs were a lot

less,” said Joe Cucarola, 80, the group’s

founder and an ongoing member.

The association has allowed the

small farmer to be more diversified,

and through diversification, they were

able to stay in business, said Cucarola,

who lives near Sterling.

The idea of a grazing cooperative

retains its appeal for many struggling in an agricultural economy

that is almost perpetually in the pits.

In this economy — where production costs routinely outstrip commodity prices — the Chimney

Canyon Grazing Association has

afforded its members a measure of

financial stability, and has even

helped some to dramatically expand

their operations, members say.

“How would you go buy acreage

for 100 cows today? It’s almost

unheard of,” said Jerry Meisner, the

group’s secretary-treasurer. “I don’t

think a grazing association can be beat

On the sea of grass

Colorado ranchers band together to cut cattle-grazing costs

L
Rural Cooperatives / March/April 2001 5

for a smaller operator.”

Grazing associations sprang

up in Colorado during the

1960s with encouragement

from the federal government.

The Chimney Canyon Grazing Association secured private funding for its land, and a

government agency had

administered the loans.

The grazing association

bought its first parcels for

about $35 an acre at an interest rate of 5 percent, officers

said. The land is worth perhaps $100 an acre today.

Ranchers join by buying

membership in the association. In addition, members

pay annual fees.

These days, the yearly fee

is $55 per ‘animal unit,’

meaning a cow-calf pair, bull

or steer. On average, association members graze 80 animal units on the land, making the average annual

membership fee $4,400 — a

sizable cash outlay for many

small-scale farmers and

ranchers, but still less than it

would cost to individually

lease or buy grazing land, the

association’s officers said.

The fees cover land payments, taxes, insurance,

equipment and the salary of a

full-time ranch manager,

among other costs.

In just a few years, the

association will retire its

loans and will own its land.

That will reduce annual fees

and should boost cattle profits, members said.

The five-month grazing

season begins in May, when

association members move

their cattle onto the hardy and

nutritious buffalo and blue

grama grassland.

Grazing continues through

October, when ranchers collect

their cattle and move the animals to wintertime plots on

their private land. At that time, calves

are weaned and steers head for feedlots to be fattened for slaughter.

Babysitting the cattle

During the summertime grazing

season, ranch manager Dick Rogers

and his wife, Lynn, watch over some

4,500 head of cattle. In pickups and

on horseback, they keep tabs on

about 150 miles of fence line and

make sure electric pumps and windmills are working to draw water for

grazing cattle.

While the couple tend the cattle,

most association members are raising

crops, including alfalfa, feed corn and

wheat on their farmland. The

arrangement allows association members to focus on farming while their

cattle graze under someone else’s

watchful eyes.

While the grazing association has

improved profit margins for its members, their interest in the shared land is

not all money-driven.

A decade or so ago, when many of

the farmers and ranchers could have

used the cash, a group of investors

offered to buy grassland from the

Chimney Canyon Grazing Association to convert it to dryland wheat

production.

But the members didn’t want to see

the windblown grassland plowed up,

and they knew the long-term benefits

of association ownership outweighed

short-term cash gains. So they declined

the offer. 

Though the members are mostly

people of few words, they quietly admit

a pride of ownership and a sense of

responsibility for their shared land. In

private conversations, they recalled

sunsets viewed from prairie bluffs on

their communal property and agreed

that the grazing association has offered

a sense of hope during tough times for

agriculture.

“We hope it will keep operating

the way it has for the past 35 years,”

Meisner said.

Added association president Basil

Stieb: “We don’t plan on selling to 

anybody.” ■

Jerry Meisner, left, secretary-treasurer of the

Chimney Canyon Grazing Association, discusses the

grazing outlook with ranch manager Dick Rogers.

The association manages nearly 32,000 acres for its

members in Logan County, Colo.

Photo by John Epperson, copyright the Denver Post 
Beverly L. Rotan, Ag Economist 

USDA Rural Development

ocal cooperatives handling farm supplies

experienced a slight

decrease in earnings

during 1999, with net

income averaging almost $327,000.

Sales were also down slightly, averaging just over $13 million. About 26

percent of the cooperatives in this

study suffered losses. 

Although patronage refunds were

down from 1998, they were still an

important source of revenues. These

refunds allowed 19 (out of 77) cooperatives that suffered losses on their local

farm supply operations to post a gain in

net income. 

Current assets of local co-ops that

market farm supplies declined, but

total assets increased 7 percent from

1998 to 1999. Investment in plant,

property and equipment (PP&E), grain

and oilseed inventories, farm supply

inventories, and accounts receivable for

farm supply sales grew slightly.

Current liabilities declined 0.6 percent in the two-year period, with

patrons’ credit balances and “other”

liabilities having the largest decrease.

Current term and seasonal short- term

debt used for financing operating

expenses grew in double digits. Also

increasing were accrued expenses,

long-term debt, cash patronage

refunds and dividends. Long-term

debt increased by 10 percent from

1998 to 1999. 

Farm supply sales followed the

downtrend, posting a 3-percent

decrease. Petroleum was the most

important farm supply item sold. Feed

was the second most important farm

supply item sold, although there was a

6-percent decrease from 1998. Surprisingly, seed, tires, batteries and accessories and “other” farm supplies

showed some growth, but these gains

were offset by a steep drop of about 20

percent for other farm supplies sold by

local co-ops. Service income was up

about 10 percent. 

Crop marketing sales also suffered

sharp declines, with grain sales off the

most, sliding 9 percent, to just over $5

million per co-op, on average. 

Cost of goods sold and total sales

(including farm supplies, grain, etc.)

almost offset each other, with cost of

goods sold falling about 7 percent

and total sales falling 6 percent. Cost

of goods sold averaged more than 85

percent of net sales. Total expenses

were up from 1998, increasing about

7 percent.

Agricultural cooperatives continued to play a vital role for farmers,

supplying them with both production

goods and marketing their crops and

livestock. These co-ops are also

important to rural communities,

where they are often one of the

largest employers. These co- ops

generate considerable tax revenues

for rural towns.

The expense for a single employee

averaged $34,493, and the local co-ops

employed an average of 29 people, up

about 4 percent from 1998. 

Directors’ fees and expenses were a

small part of total costs. However,

director compensation was an important factor in getting farmers to rechannel time normally spent on their

own operations to helping to guide

their cooperatives. Board expenses

were rather modest, averaging $896

per director annually. The co-ops surveyed averaged 10 board members. 

Production and prices for most

grains and oilseeds decreased greatly

6 March/April 2001 / Rural Cooperatives

Earnings, sales dip 

for local cooperatives 

L

Table 1—Size and type definitions used for respondent cooperatives

Cooperative Definition Number

Small up to $5 million in total sales 122

Medium $5 million to $10 million 75

Large $10 million to $20 million 59

Super $20 million and more 35

Cooperative type

Farm supply total net sales from farm supplies 180

Mixed farm supply from 50 to 99 percent 49

Mixed marketing from 25 to 49 percent 48

Marketing less than 25 percent
Rural Cooperatives / March/April 2001 7

in 1999 and most inventories were

probably stored until cooperatives

could capture higher prices. 

Because co-ops are owned by their

farmer/member/patrons, and as long

as those farmers want to own a business where they can purchase their

supplies and market their products,

cooperatives will continue to adapt to

changing economic conditions. Local

cooperatives cannot depend on large

patronage refunds to generate net

earnings. During the past two

decades, consolidation reflected an

attempt to maintain an adequate size

from which to provide their members

with expanded products and markets.

With numerous local co-ops losing

money, further consolidation may be

necessary in the future.

Information for this article was

compiled from a study that collected

detailed financial information from

291 cooperatives. Most respondents

were small farm supply cooperatives,

with sales averaging less than $2.5

million. Cooperatives were grouped

into four sizes by sales volume, using

actual figures. No attempt was made

to deflate these values. Sales groupings used in this report were the same

as in similar USDA studies and, for

the 291 cooperatives, sizes and types

used are summarized in table 1. ■

Most financial ratios used for this study have both a financial and operational impact and measure various performance levels of cooperative operations. To ensure a complete and accurate financial analysis, it is important to

look at a group of financial ratios over a period of time and/or evaluate other

cooperatives or companies with similar sales and functions in the geographical area. 

Highlights of the impact of ratio include: 

• Liquidity ratios – the current ratio (current assets/current liabilities) was

fairly steady, around 1.5 between 1990 and 1999, with a slight downturn in

1995. The quick ratio (current assets-inventory/current liabilities) mimicked the current ratio’s trend;

• Leverage ratios – debt ratio was at a high of 0.47 in 1996. After 1996, the

ratio starts to decline, with the sharpest downturn in 1997;

• Activity ratios – total-asset-turnover ratio fell from 2.13 in 1998 to 1.92 in

1999 because total sales decreased 6 percent while assets increased only

5 percent; much of the increase was in inventories; 

• Profitability ratios – return on total assets ratio fell from 7.88 in 1998 to 6.53

in 1999 because total assets increased while net income decreased (13

percent). ■

Most financial ratios confirm downtrend 

Growmark, TFC to study possible merger 

The boards of directors of Growmark Inc. and Tennessee Farmers Cooperative (TFC) have

approved a study that will examine the potential combination of the two regional agricultural

cooperatives. Dan Kelley, chairman of Growmark, and David Rieben, chairman of TFC, said, “We

are both federated cooperatives owned by our local member organizations. We share a deep commitment to serving the needs of our members. Given our geographic proximity and similar business philosophy, it makes sense to look at how we can work together more closely to benefit our

member-owners.”

Preliminary discussions have focused on potential benefits in the following key areas: (1) building on mutual strengths to enhance and strengthen product and service offerings to members; (2)

utilizing each cooperative’s areas of expertise for the overall benefit of a combined organization,

and (3) utilizing the human resources of each organization to support future expansion opportunities. No timetable was announced for the study, but management indicated a combination could

occur by early 2002 if the study results are positive and members support a plan of consolidation.
8 March/April 2001 / Rural Cooperatives

Charles A. Kraenzle, Director,

Statistics Staff

USDA Rural Business-Cooperative

Service

Editor’s note: Information was collected

by statistics staff members Celestine C.

Adams, Katherine C. DeVille, Jacqueline

E. Penn and Ralph M. Richardson

espite dwindling numbers of farms, Upper

Midwest agricultural

cooperatives - paced by

Minnesota – led the

nation in co-op business volume,

according to data compiled by the U.S.

Department of Agriculture’s Rural

Business-Cooperative Service.

Minnesota cooperatives, with $9.3

billion in net business volume in 1999,

led all states for the first time since

USDA began tracking co-op performance by state in 1951. Wisconsin

ranked second among all states, with $8

billion in co-op business volume, while

Iowa (the leading state in 1997)

dropped to third place, with $7.9 billion in co-op business volume. California co-ops placed fourth with $7.8 billion. California co-ops led the nation

from 1951 through 1977 and again

from 1987 to1995. Iowa was the

nation’s leading farmer co-op state

from 1979 to 1985 and again in 1997.

The 10 leading states ranked by net

business volume are shown in fig. 1.

Total net business volume of co-ops

in Minnesota was down in 1999 compared to 1997 (USDA compiles stateby-state data for co-ops only in every

other year). Decreased marketings of

farm products, especially grains and

oilseeds, and a decreased volume of

farm supplies combined to drop Iowa

to third place. Decreased marketings of

milk, cotton, fruits and vegetables and

other commodities, as well as lower

sales of farm supplies, caused California to slip to fourth place in the state

rankings. 

Wisconsin co-ops, with increased

sales of milk, livestock and farm supplies, moved up into second place.

Wisconsin co-ops increased their net

business volume to $8 billion in 1999

(table 1) from $6.5 billion in 1997.

Cooperatives in these 10 states

accounted for $59.2 billion, or 59.7

percent, of the $99.1 billion in total net

business volume handled by the

nation’s 3,466 agricultural cooperatives

in 1999. This compares with $62.1 billion (58.2 percent) of the $106.7 billion

generated by the nation’s co-ops in

1997. The 10 leading co-op states also

accounted for 53.8 percent of the total

co-op memberships and 56.5 percent

of all co-ops in 1999, compared with

53 percent of memberships and 57.5

percent of co-ops in 1997.

Marketing sales (derived from sales

of crops and livestock) accounted for

76.1 percent of the business volume

handled by co-ops in the top 10 co-op

states in 1999, up from 75.3 percent in

1997. Minnesota co-ops, with $7.1

billion in 1999, led all states in farm

marketing, followed by California

($6.8 billion) and Wisconsin ($6.5 billion). Co-op marketing in Minnesota

accounted for 76.1 percent of their

total net business volume, up from

75.2 percent in 1997. 

In California, marketing accounted

for 86.9 percent and sales of farm supplies accounted for only 8.9 percent of

the total business volume in 1999. Service revenues and other income accounted for the remaining 4.2 percent. 

Iowa led all states in volume of

farm supplies sold, followed by Minnesota and Illinois, the same as in

Minnesota leads nation 

in co-op business volume

D

$ billion

MN WI IA CA IL

Figure 1 Co-ops’ total net business volume by function, ten leading states, 1999

10

8

6

4

2

0

MO KS NE TX WA

■ Service

■ Farm Supply

■ Marketing
Rural Cooperatives / March/April 2001 9

1997. Cooperative supply sales in

Iowa totaled more than $2.3 billion,

$1.9 billion in Minnesota and $1.5 billion in Illinois. Iowa was the leading

state in cooperative sales of feed, crop

protectants and fertilizer. Illinois coops led all states in seed sales, Minnesota led for petroleum sales and

Wisconsin in other farm supply sales. 

Leaders in number of co-ops 

Minnesota, North Dakota and

Texas were the leading states in number of cooperatives (as determined by

co-op headquarters locations), the

same rankings as reported in 1997 and

1995. The top 10 co-op states were

home to 1,957 (56.5 percent) of the

nation’s co-ops in 1999 (fig. 2), down

from 2,180 co-ops and 57.5 percent in

1997. Among the 10 leading states,

Minnesota and South Dakota had

about an equal number of marketing

and farm supply cooperatives. Texas

had the largest number and proportion of service co-ops (mainly cotton

ginning) and Wisconsin the largest

proportion of farm supply cooperaTable 1—Farmer cooperative numbers,1 memberships, and net business volume by State, 19992

Cooperatives Member Net

State headquartered ships business

in State in State3 volume4

————Number——— Mil. dol.

Alabama 63 53,886 1,170

Alaska 9 1,815 76

Arizona 9 3,376 930

Arkansas 53 56,038 1,643

California 181 53,604 7,824

Colorado 47 32,613 929

Connecticut. 4 2,728 176

Delaware 3 43,422 90

Florida 39 26,050 2,419

Georgia 16 26,673 2,007

Hawaii. 28 2,768 104

Idaho 40 18,583 1,332

Illinois 189 195,258 5,316

Indiana 55 75,409 1,931

Iowa 189 180,168 7,932

Kansas 137 133,269 4,659

Kentucky 41 231,862 773

Louisiana 48 12,294 564

Maine 24 8,348 203

Maryland 21 71,953 352

Massachusetts 13 5,551 628

Michigan 62 29,788 1,925

Minnesota 305 186,902 9,306

Mississippi 76 105,239 949

Missouri 71 142,771 4,860

Montana 73 28,720 686

Nebraska 110 92,353 4,543

New Jersey 18 7,347 313

New Mexico 10 2,974 555

New York 98 17,770 3,235

Cooperatives Member Net

State headquartered ships business

in State in State3 volume4

———Number——— Mil. dol.

North Carolina 26 98,404 826

North Dakota 268 118,435 3,041

Ohio 83 55,970 2,277

Oklahoma 94 68,611 1,386

Oregon 35 24,638 1,717

Pennsylvania 56 45,008 1,353

South Carolina 6 3,458 247

South Dakota 136 107,046 2,451

Tennessee 79 139,124 730

Texas 251 118,064 3,401

Utah 17 10,013 461

Vermont 5 5,981 472

Virginia 59 174,308 997

Washington 84 33,903 3,325

West Virginia 27 75,083 89

Wisconsin 191 205,690 8,018

Wyoming 13 5,145 259

Other States 4 30,121 96

Foreign - 4,789 490

United States 3,466 3,173,323 99,064

1 Includes centralized and federated cooperatives and

those with mixed organizational structures. 2 Data covering operations of cooperatives ending their business

years during 1999. Data for states with fewer than three

cooperatives or where disclosure is a problem are included with other states. Totals may not add due to rounding. 

3 Includes farmer members (those entitled to vote for

directors), but not nonvoting patrons. Duplication in these

membership numbers occurs because many farmers

belong to more than one cooperative. 4 Excludes intercooperative business.
10 March/April 2001 / Rural Cooperatives

tives. Minnesota, however, had the

largest number of farm supply co-ops.

Illinois and Iowa had about the same

proportion of marketing and farm

supply co-ops. 

Among the top 10 co-op states,

Minnesota (35) and Wisconsin (30) led

in the number of dairy cooperatives.

California, with 67 fruit and vegetable

cooperatives, accounted for 29 percent

of the nation’s 231 fruit and vegetable

cooperatives. North Dakota had the

largest number of grain cooperatives

(119), followed by Kansas (113), Illinois (110) and Iowa (106). These four

states accounted for 63.7 percent of all

grain cooperatives in the top 10 co-op

states and 50 percent of the 896 U.S.

grain cooperatives.

Leaders in co-op memberships

Kentucky led all states in number of

cooperative memberships with 231,862.

Memberships in the 10 leading states

totaled 1,707,787 and accounted for

53.8 percent of the total U.S. cooperative memberships in 1999 (fig. 3), up

from 53 percent in 1997. Among these

states, Kansas (87.2 percent), followed

by Illinois (59.9 percent), had the

largest percentage of memberships in

marketing cooperatives. 

Virginia (81.6 percent) and Missouri

(76.5 percent) had the largest percentage of memberships in farm supply

cooperatives. Wisconsin (10.4 percent)

was the leader for memberships in

related-service cooperatives (those that

perform services such as livestock

breeding, trucking, storage, etc.).

Overall, 52.1 percent of the total memberships in the top 10 states were in

farm supply cooperatives. 

Among the 10 leading states in coop memberships, Kentucky had the

highest number of memberships per

co-op, with 5,655. Virginia was second with 2,954 and Missouri ranked

third with 2,011. North Dakota

ranked 10th with 442. 

Net business volume per membership among the 10 leading states in

total memberships was highest in

Minnesota ($49,791) followed by

Iowa ($44,026) and Wisconsin

($38,981). Kentucky ranked tenth

with $3,334 per membership. Among

the 10 leading states in net business

volume, California accounted for 296

memberships per co-op and $145,951

per membership. The net business

volume per membership in California

was nearly triple of that reported for

Minnesota.

Total net business volume

(excluding business done between

cooperatives) in 1999 was $99.1 billion, down from $106.7 billion in

1997 and $104.7 billion in 1998.

This includes marketing (the value

of products sold, bargained for or

handled on a commission basis),

farm supplies (sales of fertilizer, crop

protectants, petroleum, feed and

other supplies to members and

patrons) and receipts from services,

such as trucking, storage, ginning,

drying and artificial insemination,

and other income.

Information on farmer cooperative activity in individual states is collected every other year through

USDA’s annual survey of farmer

cooperatives. Data requested are on

memberships by state, origin of farm

products marketed and destination of

supplies and equipment. These data

are tabulated to show memberships

and commodity business volumes at

the state level. ■

Number

MN ND TX WI IL

Figure 2 Number of co-ops by function, ten leading states, 1999

IA CA KS SD NE

■ Service

■ Farm Supply

■ Marketing

250

200

150

100

50

0

350

300

thousands 

KY WI IL MN IA

Figure 3 Co-ops’ memberships by function, ten leading states, 1999

250

200

150

100

50

0

VA MO TN KS ND

■ Service

■ Farm Supply

■ Marketing
Rural Cooperatives / March/April 2001 11

Personal background: Born on a

Wisconsin dairy farm, Cropp remembers

attending with his dad a Pure Milk Association meeting, at which the little tyke

was bored. But as he grew, so did his

interest in agriculture. A bout with polio

exempted him from military service and

he headed to the University of Wisconsin-Platteville to study agriculture education. While working at UW-Madison on

his master’s degree and Ph.D. in agricultural economics, with thesis work in milk

marketing, he had to teach a co-op class.

That’s now a responsibility he relishes

teaching every fall semester.

Education posts: For nearly 20

years, Cropp taught ag-economics at

his alma mater. He then served as

executive director to a special task

force studying the future of America’s

dairyland and coupled that assignment

with duties in the UW Cooperative

Extension Service. Then, after serving

as dean of the UW- Platteville College

of Agriculture, Cropp accepted new

responsibilities as director of the UW

Center for Cooperatives in 1990. He

now splits time between the Center

for Cooperatives and the UW-Madison Agricultural and Applied Economics Department, where he is a dairy

marketing and policy specialist.

Co-op honors: Cropp received the

Distinguished Extension Program

award from the American Agricultural

Economics Association in August 2000.

In 30 years, recognitions have come

from the American Institute of Cooperation, Association of Co-op Educators,

St. Paul Bank for Co-ops, Wisconsin

Federation of Co-op, UW-Platteville

and Extension, Wisconsin Association

of County Ag Agents, Wisconsin Milk

Marketing Board, Wisconsin 4-H

and FFA, Alpha Gamma Rho (ag

fraternity), Wisconsin Farm Bureau,

GROWMARK, Farmers Union

Milk Marketing Co-op and Accelerated Genetics.

Why such a commitment to coops? “It consumes you. I think people who work in the co-op arena

share the same philosophy of supporting a system of self-help to create a better bottom line for members. We have a soft spot for farmers

and rural communities and, through

a cooperative, you see the benefits

going back to those people. I’d like to

think that I’m of some use, that what I

do is of some value and that I’ve made a

difference while working with people.

And that’s the part of my job that I like

the best. I think I’ve learned more from

working with co-op boards and members

than I’ve been able to help them learn.”

What co-op lessons do you find

yourself continually teaching? “We

know that when farmers aren’t doing

well, the co-ops aren’t doing well

either. So it gets frustrating when you

have good, hard working farm families

that are looking to their co-ops to do

things for them. But it’s difficult to

understand the complex changes going

on throughout agriculture that are

impacting members and co-ops. And it

can become difficult to demonstrate

the value of cooperatives during times

like these. So we spend a lot of time at

the Center working with boards to get

them to think about where they are

now, what trends are impacting their

co-op and how they need to respond to

them. Frankly, there are some co-ops

out there that need to make some

changes in how they operate. Otherwise, I fear they might not be around in

another five years.”

Where do you think co-ops are

headed? “Director education is more

important than ever because of their

responsibilities to be visionary and do

long-range planning in a more complex

business environment. And we find ourselves doing more specialized training

with individual co-op boards. That’s

because directors today represent a more

heterogeneous membership. We have

differentiated services, a shrinking farm

population whose operations are getting

larger at the same time we have consolidations on the other side of the marketing equation with our customer base.

There is more technology on the farm

and in the co-op. Business structures can

be more complex as co-ops bring in nonmember investments. So the answers

become more critical to questions of

how we structure the co-op, who our

customers are, what their needs are, how

and if we’re going to serve them, and

how we’re going to finance all of this at a

time when farm income is depressed.” ■

IN THE SPOTLIGHT

Robert Cropp says today’s complex business environment increases the need for more specialized

training for co-op board members.

Photo by Pamela J. Karg, courtesy Foremost Farms USA 

Robert A. Cropp 

Agricultural Economist

University of Wisconsin-Madison Center for Co-ops & UW-Extension
12 March/April 2001 / Rural Cooperatives

Power in peril

California co-ops struggle to cope with the state’s energy crisis

By Catherine Merlo

he telephone call – and the

realization that a serious

crisis was at hand – came on Jan. 16.

Land O’ Lakes officials were told they

would lose all energy in 30 minutes at

their milk processing plant in Tulare,

Calif. The call came from Southern

California Edison, the plant’s power

provider and one of California’s two

largest utilities. 

At first, no one was greatly alarmed.

Despite a few brief power interruptions

in late 2000, the plant had never

experienced a serious energy loss in its

10 years.

This time, however, was different....

T
On Jan. 16, as California’s energy reserves fell to less than

1.5 percent – creating a stage-three (crisis situation) alert –

power to the Land O’Lakes plant was cut for 10 consecutive

hours. The following day, power was shut off for 17 hours.

On Jan. 18, after the plant had been without power for more

than 10 straight hours, Land O’Lakes officials made an agonizing decision.

“We had to keep the plant running,” says Alan Pierson,

vice president of finance and

administration for Land

O’Lakes’ Western Division.

“So we chose to pay premium

rates in exchange for keeping

the power on. We had no

choice.”

Land O’Lakes paid a high

price for its dilemma. To

process the 11 million gallons

of milk it was receiving daily,

the plant incurred extra costs

of $70,000 an hour to keep

the power on. That week, its

losses soared to more than $1

million. Many of its 220

members were forced to

divert millions of gallons of

milk – much of it to calf-feeding operations – because they

had no way to store or

process their highly perishable commodity.

That was the case at the

Van Beek Bros. Dairy farm

near Tulare, one of three

large dairy farms operated by

Bill Van Beek and his two

brothers. Although they have

back-up generators to keep

their milking machines running during a power outage,

the Van Beeks had to sell

milk for only pennies on the

gallon to a calf-feeding farm

when the Land O’ Lakes

plant shut down. 

“We lost close to $1.50 a

gallon on more than 5,000

gallons of milk,” Bill Van

Beek says. “Yesterday (March 20) the farm itself was hit by a

power outage for the first time, which lasted about an hour.

It slowed us down a bit, but we’re afraid the power situation

is going to get worse this summer.”

From Jan. 1 to Feb. 28, the Land O’ Lakes plant sustained

19 power outages. Each time, the plant, which sits in the

heart of California’s $4.3 billion dairy industry, was forced to

stop its processing operations for hours. Lights, phone service and computers were useless.

“We had never experienced power interruptions like that

before,” says Pierson. “It was literally a nightmare.”

Power shock

Land O’Lakes power problems may be among the worst,

but the milk processor is certainly not the only California coop hit hard by energy troubles these days.

Across the Golden State, agricultural co-ops of all kinds -–

from fruit and nut, to cotton, plant nursery and dairy – are

caught in an unprecedented energy crisis. They are wrestling

not just with power blackouts and the threat of more to

come, but with skyrocketing energy prices for electricity, natural gas and diesel. Many co-ops have seen a five-fold

increase in monthly power bills. 

“The energy crisis has been disastrous for California agriculture,” says Bob Graf, executive vice president of field

operations for Pacific Coast Producers, a fruit processing and

marketing co-op in Lodi, Calif.

All this could not come at a worse time. Certainly, California has faced crises before. But now, the state’s farming woes

have come together all at once in a “perfect storm” that has

created a situation of emergency proportions. 

Prices for nearly every agricultural commodity in the state

are down. It’s been a drier-than-normal winter, and water

may be in short supply. On top of that, the economy appears

headed for a slowdown, a further blow to the state’s already

beleaguered agricultural industry.

“We’ve always had issues and challenges to deal with in

California,” says Rich Ghilarducci, CEO of Humboldt

Creamery Association, a 75-member dairy marketing cooperative in northern California. 

“But if it’s industry specific, you have the knowledge and

experience to take care of it,” Ghilarducci says. “The energy

situation is out of our control. It’s hard to make decisions to

take care of this challenge.”

Worst of all, this winter’s energy crisis may be just the

beginning. Fears of what looms on the horizon are widespread, especially with the approach of California’s triple-digit summer temperatures. Power demands are expected to rise

Rural Cooperatives / March/April 2001 13

Doug, left, and Bill Van Beek had to divert more than 5,000 gallons of milk to animal feed recently when

power outages shut down the Land O’ Lakes dairy plant in Tulare,Calif. They say environmental and other

regulations which discourage construction of new power plants bear much of the blame for the crisis. 

Photo by Josh Yoshimoto
even higher when the state’s residents turn on their air conditioners, increasing the threat of more blackouts.

At the same time, growers and processors will be faced with

the harvest demands of many of the state’s perishable food

crops. Will there be power, they ask? And if so, at what cost?

Co-ops, consumers and utilities alike are bracing for the worst.

“The magnitude of this problem has not sunk in for most

people,” says Pierson. “This summer will be worse than anything we’ve gone through so far.”

The consequences of California’s energy problems are farreaching. California has the world’s sixth largest economy, is

the nation’s most populous state, and, with a $27 billion farming industry, is the No. 1 agricultural producer in the United

States.

What caused California’s energy crisis

is open to heated debate. Critics point to

the state’s flawed energy deregulation

policy. Others cite the lack of new power

plants, caused in part by what they say is

too much bureaucratic red tape and an

over- zealous environmental regulation

which “handcuffs” energy development

efforts. Everyone is pointing fingers

these days. 

What matters now, though, is just getting through the crisis. And for the state’s

agricultural co-ops, that hasn’t been easy.

Uneasy aftermath

Today, the Land O’Lakes plant in

Tulare is running with bated breath. By

early March, the blackouts had diminished. Still, its employees keep the lights

and the thermostat turned down. All

available power goes to production to

make butter, cheese, whole milk, non-fat powders and fluid

milk. While the plant has not had to resort to layoffs, it has

curtailed employee hours.

“The Public Utilities Commission has temporarily waived

the fees we incurred during this winter’s power interruptions,” says Pierson. “But the issue is not resolved.”

Land O’Lakes – like many industrial businesses in California – operates on an interruptible power contract with Southern California Edison. Under its agreement, the plant agrees

to curtail energy use for up to 6 hours at a time whenever

California’s power reserves are threatened. 

In return, the plant receives a 15-percent discount on its

power rates. If it chooses not to lose power during those peak

energy times, it keeps its energy but pays severe fines. January’s outages, which lasted more than 6 hours at a stretch,

remain a point of contention for Land O’Lakes. At issue is

whether the utility had the right to implement back-to-back

interruptions with no break in between. While it works to

resolve its differences with Southern California Edison, Land

O’Lakes has remained on its interruptible contract.

“After this winter’s power interruptions, our first reaction

was to get off the interruptible system,” says Pierson. “But

then we realized rolling blackouts, which come without

warning, are more devastating. At least, under the current

system, we have some warning.”

Interruptible power — an iffy situation

But there are many businesses on the interruptible power system that are deeply unhappy with it. Fruit Growers

Supply Co., the supply arm of the Sunkist Growers citrus

cooperative, tried to get out of its interruptible power contract with Southern California Edison when it came up for

renewal in late 2000. Although its contract assured no

more than 150 hours of outages a year, the co-op was concerned. It had already sustained a few

outages at its carton-making plant in

Ontario, Calif., and feared the situation would get worse. But Fruit Growers Supply was not allowed out of its

contract.

In January, at the peak of carton-making operations, the Fruit Growers Supply plant sustained repeated outages. “In

one week in mid-January, we had 45

hours of interruptions,” says Vice President Fielding Thompson, who heads up

the co-op’s supply division. 

As operations fell behind, Fruit

Growers Supply incurred unusually high

overtime costs to keep employees working through the weekend to catch up on

order commitments.

“In late January, as reported through

Southern California Edison, the Public

Utilities Commission (PUC) announced

there would be no more fines for those on interruptible power who chose to keep their power on,” Thompson says. 

“Frankly, we are concerned about their credibility, especially

when it comes to saying there won’t be any fines,” he says.

Power bills skyrocket

While many co-ops did not experience power interruptions during the January-February crunch, the energy crisis

has been a nightmare for them all the same.

At Humboldt Creamery Association, soaring natural gas

prices have increased the dairy co-op’s monthly energy bills

by a whopping $100,000 per month since Dec. 1, 2000.

“On top of that, Pacific Gas & Electric (PG&E) implemented a new 15-percent surcharge that started in February,”

says Ghilarducci. “That new surcharge alone costs us $15,000

a month.”

PG&E is one of the state’s three major utilities, along with

Southern California Edison and San Diego Gas & Electric. 

Though subject to rolling blackouts, Pacific Coast Producers of Lodi, Calif., has not suffered any power outages

14 March/April 2001 / Rural Cooperatives

“The magnitude of this problem has not

sunk in for most people,” says Alan Pierson,

outside the huge dairy plant in Tulare that he

manages for Land O’ Lakes.

Photo by Josh Yoshimoto
yet. But with its peak harvesting and canning season set to

begin in June, the 150-member co-op is deeply concerned

about the energy situation. To process its fresh fruit and

tomatoes, Pacific Coast Producers relies heavily on natural

gas to fuel its canning and evaporation operations. The coop’s cold storage warehousing and shipping operations also

use substantial amounts of energy. 

“We cannot afford to lose power availability or experience

delays during the harvest,” says Graf. “We would lose a considerable amount of raw and canned product. We have to pay

whatever it takes to keep our operations going. If we were to

shut down, our losses would be even greater.”

Like many other co-ops, Pacific Coast Producers says it is

not that easy to pass on costs to customers. “Higher costs just

might be enough to make a consumer turn away from fruit to

eating a Twinkie instead,” Graf says.

The situation is the same for Humboldt Creamery, where

natural-gas price hikes have raised the co-op’s production costs

by 5-6 cents a pound. The co-op is absorbing the increases.

“I can’t just go out and raise our prices,” Ghilarducci says.

“Sixty percent of our sales are outside of California. My competitors outside of California don’t have these problems or

these added costs.” 

What’s being done

Although Humboldt has not experienced any blackouts, it

has stood on the brink. More than once, the co-op has

received notice that its power would be shut down in an hour.

For a facility that processes 100,000 gallons of milk a day,

that’s too close for comfort. As a result, the co-op is looking at

diverting milk away from energy-hungry operations like powder drying that rely on natural gas. Instead, Humboldt will

process more milk in its ice- cream manufacturing facilities. 

Humboldt Creamery also is considering the purchase of a

powerful generator that could supply power during any

future outages. The price tag for the new generator, says

Ghilarducci, is a hefty $500,000.

Likewise, Land O’Lakes has approved a $2.7 million capital expenditure to buy a 6.5-megawatt generator to serve as a

back-up for the Tulare plant. Fueled by natural gas, it will

provide 60- 70 percent of the plant’s energy needs. 

Saticoy Lemon Association, a 350-member co-op with

four packinghouses in Ventura County, has rented three generators to provide back-up power during outages. Together,

the generators will raise the co-op’s expenses by $20,000 a

month. Saticoy, which also operates on an interruptible power system, experienced 14 power outages from December

through February.

“Our biggest concern is what is going to happen this summer, which is our busy season,” says Saticoy president Glenn

Miller. “We may have to purchase one or two more generators. I’ve learned a lot about power in the last couple of

months. We can expect that there won’t be enough power

and there will be rolling blackouts.”

Rural Cooperatives / March/April 2001 15

A few lucky co-ops in California have operations in

place that are helping them through the energy crisis.

For example, Diamond Walnut, a 2,000-member walnut

processing and marketing co-op in Stockton, Calif., operates a co-generating plant at its headquarters -— and

has since 1980. The 4.5-megawatt plant, fueled by walnut

shells, produces enough power to run the walnut-processing facility and generates excess capacity that the

co-op sells to Pacific Gas & Electric, one of the state’s

two largest utilities.

In Sacramento, Blue Diamond Growers fortunately has

missed the power outages, although the almond processing and marketing co-op has seen its natural gas prices

jump five-fold. It’s also expecting a 15-percent increase in

its electricity costs by April. That’s no small amount of

money.

“Our costs for electricity average $1.5 million to $2 million per year,” says Joe Carlone, Blue Diamond’s director

for facilities and engineering.

On the plus side, however, Blue Diamond has for many

years had a “good neighbor” policy with its power

provider, Sacramento Municipal Utility District. The co-op

voluntarily reduces its power load when the utility’s energy supply drops sharply. “In doing so, we shed, or contribute, 1 megawatt of power back into California’s grid

system,” Carlone says.

But Blue Diamond also has something else going for it.

For years, the co-op has run a steam-producing boiler in

its almond processing plant. Fired by methane gas from a

nearby landfill, the boiler warms the plant in the winter.

Mostly, however, the boiler is used to pre-condition, dry

and roast the almonds. Not only does the boiler not rely

on electricity, natural gas or diesel, but cost of the

methane gas is just 20 cents per thermal unit (therm).

That compares to February’s natural gas prices of about

$1.40 per therm.

“That boiler is a gold mine for us right now,” says 

Carlone.

While Blue Diamond has worked to install more energy efficient equipment, it too is looking at acquiring a

back-up generator to run its operations should the power

go out. ■

A lucky few unscathed by crisis
16 March/April 2001/ Rural Cooperatives

Fruit Growers Supply has located a

1.5-megawatt generator to serve as a

back-up power provider. But the co-op

hasn’t hooked it up yet. Cost to complete

permitting and setup for the generator,

says Thompson, is $70,000. Then another $12,500 a month would be spent to

lease the generator, with additional costs

for its diesel. By March, as the power

blackouts came to a stop, Fruit Growers

Supply was still studying the ramifications of installing the generator.

“Legislation is being proposed that

would limit blackouts to no more than

six hours per day,” says Thompson. “If

that were to be the case, we could

schedule our operations around that. If

the generator is not needed, it’s not a

good decision to spend that kind of

money to hook it up. The problem is we

don’t know what’s going to happen. If

the energy situation gets worse, there

won’t be any generators available when

we need them.”

Gloomy outlook

Co-ops across the state are working

with state officials to find solutions to

the crisis, particularly in the area of

power availability, rate increases and the

interruptible power system. 

Whatever solutions are developed must keep the long

term in mind, Thompson says.

“We need to make sure we get the energy system in California under control without making mistakes now that will

cost us for many years to come,” he says. 

Many stress the importance of building more dams, which

would not only provide hydroelectric power but, at the same

time, increase water-storage capacity — a critical issue in a

state where so much of the agriculture depends on irrigation.

And they believe the recent crisis has encouraged state officials to be more receptive to new power generation. But they

recognize that such projects will not happen quickly.

“Building new power generation will take at least two

years,” says Saticoy’s Miller.

Faced with uncertainty and the threat of more blackouts,

most are not optimistic.

“The worst is yet to come,” says Humboldt Creamery’s

Ghilarducci. “California’s power demand increases by 50 percent in the summer. If we can’t make it now, how are we

going to make it through the summer?”

Tulare County dairyman Bill Van Beek lays most of the

blame for the power crisis on what he and many others

consider to be overly-stringent environmental regulations

that have deterred construction of new power generating

plants in the state. The “half-way” approach the state took

to power deregulation has also left California with some of

the worst of both regulated and deregulated power systems, he adds. 

Environmental regulations are also frustrating Van Beek

and his brothers as they pursue plans to build another, 2,700-

head dairy farm in the Tulare area.

“Environmental organizations from San Francisco are

fighting us in the courts, even though the local community is

behind us,” Van Beek says. “Why should they be able to tell

us we can’t build a new dairy farm in Tulare — where farming is the lifeblood of the economy — and create 30 new jobs

and who knows how many indirect jobs in a county where we

have 16 percent unemployment? It just seems as though

some of these organizations want to make it impossible to do

business in California.”

Has he ever thought of moving his operation out of the state?

“No. This is where I grew up and where all my family is

— this is my home. It’s where I want to farm — if they don’t

turn out the lights on us.” ■

Editor’s note: Merlo is a freelance writer based in Bakersfield,

Calif., with extensive experience working for, and writing about,

cooperatives. 

As farmers look for ways to ensure adequate

power for routine operations such as pumping

water, some are considering the use of back-up

generators as insurance against future blackouts.

Gerry Rominger is an almond and alfalfa producer in Arbuckle, Calif., and a member of Blue

Diamond’s board of directors. He operates his

own almond hulling and shelling operation from

September through November. Concerned about

his power costs for next fall, Rominger is looking

into the possibility of renting a generator for the

season to assure availability of power. The cost

would be more than $30,000 a month. And that’s not counting the diesel fuel

costs, “which would be double that,” he says.

The price increases in natural gas, which is used to make fertilizer, are

being felt on his farm too. “Fertilizer for my trees has risen to $230 per ton

compared to $120 last year,” Rominger says. “Today, we’re getting about $1

per pound for almonds. Three years ago, we were getting $1.50.” 

Rominger adds, “This is probably the worst crisis we’ve had because it

comes at a time when we have low commodity price for everything and a

water shortage too. We’re all competing for California’s limited resources.

We’re on a collision course and there are no quick fixes.” ■

Farmers looking at

back-up power systems

Gerry Rominger is looking at possible back-up

power sources for his

new almond-hulling

plant. “It may get worse

before it gets better,” he

says. Photo by Gregg Rihl 
Rural Cooperatives / March/April 2001 17

By Tux Turkel, Staff Writer

Portland Press Herald 

Copyright 2000 Blethen Maine

Newspapers, Inc. Reprinted by permission

ot far from the stores and

traffic at busy Cook’s

Corner, Maine, stand

quiet neighborhoods of

clustered, cape-style

homes, clad in weathered clapboards.

At Coastal Estates II, a trained eye can

spot metal vents sticking out from the

wooden siding, an indicator that most

occupants here warm their homes with

through-the-wall kerosene heaters. 

Efficient and easy to install, kerosene

heaters have become a popular weapon

to battle the Maine winter. Too bad the

fuel isn’t less expensive. Last week

kerosene was running $1.65 a gallon or

so in the Brunswick area, roughly 25

cents more a gallon than heating oil. 

But for 41 of the 50 homes in this

planned development, kerosene is a

relative bargain. The residents have

organized a homeowners fuel-buying

cooperative that negotiated a discount

with a local dealer. In exchange for

handling one master bill and coordinating delivery schedules, the owners

bought a total of 15,000 gallons of

kerosene last year at roughly 25 percent below the retail cash price. That

added up to an estimated savings of

about $100 a home. 

“In a cold winter, people could save

much more,” said Jim Friedlander, a

resident who helped organize the buying group. 

Cooperative fuel buying isn’t a new

concept. It’s commonly used by companies and government.

Dealers can give a

better price when

they deliver large

volumes to a single

group of commercial

customers. 

But residential,

neighborhood co-ops

are a recent and

growing trend, driven by high energy

prices. Dealers say

they are getting

more inquiries from

organized groups of

homeowners. 

That said, neighborhood fuel-buying

co-ops aren’t easy to

organize and sustain, and they may not

be financially attractive to dealers. The

one operated by the Coastal Estates II

homeowners association, however, is

an example of how some Maine residents can save money on heat by banding together. 

The co-op was conceived by Friedlander, who is retired and moved with his

wife two years ago to the development.

Friedlander had experience with cooperative fuel-buying for town governments

when he was director of the Greater

Portland Council of Governments from

1979-1981. He also participated in a fuel

co-op with innkeepers in Freeport,

where he owns a bed and breakfast. He

wondered why a buying group wouldn’t

work at Coastal Estates II. 

The 15-year-old units in his development are good candidates. The

homes were originally heated with

electricity. When that became too costly, most owners put kerosene heaters in

their living or dining rooms, fed by

tanks installed in attached garages. 

Everyone fended for themselves

until last winter, buying from a variety

of oil dealers. But at a homeowners

association meeting last year, Friedlander suggested putting a questionnaire

in the group’s monthly newsletter, to

see if residents were interested in saving money through collective purchasing. Forty-one owners said ‘yes.’ 

Friedlander called six oil dealers and

sent out bids. The bids asked for the

lowest mark-up for delivery over the

wholesale price in Portland Harbor,

where oil products enter southern

Maine. Four replies came back. The

lowest was from C.N. Brown. 

The association is staying this year

with C.N. Brown, which has offered a

price of 17 cents per gallon above

wholesale, if the bill is paid within 30

Neighborhoods warm to

bargaining power of co-ops 

N

Jim Friedlander organized a consumers’ fuel cooperative in

Brunswick, Maine. The co-op negotiated a discount rate on

kerosene that saved its 41 members 25 percent on the retail price.

Photo by Gordon Chibroski, copyright Portland Press Herald
18 March/April 2001 / Rural Cooperatives

days. After that, the price differential

rises to 27 cents per gallon. 

For example: The wholesale price

for kerosene at the middle of last week

was around $1.27 a gallon. That means

homeowners would pay C.N. Brown

$1.44 for kerosene that the company

was selling retail for $ 1.70 a gallon, a

cash price that reflects transportation,

overhead and profit. 

C.N. Brown can offer a discount to

the homeowners because of two

important economies of scale. First,

the company sends one master bill to

the homeowners association. That

saves on accounting expenses. Second,

C.N. Brown has arranged twicemonthly deliveries for all homes. That

saves big money. High diesel and

labor costs are pinching oil dealers,

who would rather not have their

trucks criss-crossing the countryside,

dropping 100 gallons here and 200

gallons there.

“We go up there and empty a whole

truck,” said Mark Cyr, heating oil sales

manager at C.N. Brown. 

Cyr said the cooperation of the

homeowners group helps make the

deal workable. For instance: The fillup spigots for the kerosene tanks are

inside garages at Coastal Estates II.

Homeowners have to open their garage

doors or give the driver access on specific days. Those kind of logistics make

the company cautious about accepting

bids from less-organized homeowners. 

“This is a unique situation,” Cyr

said. “It works for us.” 

The association also needs to operate like a small business. 

One resident, who acts as the finance

manager, agreed to get the master bill

and distribute individual bills to each

home. He receives a 2-cents-a-gallon

stipend for his trouble. Last year, a

renter in one of the units skipped out

without paying the final bill. This year,

the association has taken a $ 100 downpayment from everyone. 

A successful co-op will also need

someone like Friedlander, who has the

time and interest to oversee the bids

and organize homeowners. 

“Someone’s got to take the bull by

the horns,” he said. 

The association has also offered to

help organize other groups. Paul Putnam, past president of the association,

has met with representatives from seven other planned developments in

Brunswick. 

“With all the news about oil prices

you’d think everyone would want to

get in on it,” Putnam said. 

Elsewhere in Maine, other neighborhood associations are doing just that.

Their agreements take different forms. 

Robert Tracy, a regional manager

for Irving Oil, said the company has

negotiated fixed-price contracts with a

dozen homeowner groups in southern

Maine. Each homeowner is billed separately, but the efficiency comes by

delivering large volumes of oil to one

place on scheduled days. 

In Freeport, for instance, homeowners in the Bishop Farm Road subdivision were savvy enough to negotiate a

fixed-price contract with Irving early

last summer, when oil prices were much

lower. Irving was able to secure a supply

that will allow it to sell the homeowners

oil this winter for 98 cents a gallon. 

“Homeowners are becoming very

sophisticated in this type of market,”

Tracy said. “They understand the

details of oil buying and they buy early

to lock in prices.” 

At Coastal Estates II, Friedlander

said he’s happy to hear from residents

in condominiums or subdivisions who

want more information about how to

organize a fuel-buying co-op. (His email address is Ikesspot@aol.com.) 

“Falmouth and Portland are loaded

with developments like this,” he said.

“They have more opportunity to make

something like this succeed.” ■

Tennessee Farmers’ sales top $408 million

Fiscal 2000 sales were up $21 million from 1999, to hit $408.7 million for Tennessee Farmers Cooperative at

La.Vergne. Pre-tax net savings reached $4.2 million while total assets rose to $156.2 million. Increased sales

were reported in beef and horse feed, farm hardware, equine products, and seeds. Fertilizer sales hit a record

468,000 tons, and sales were also boosted by expanded tire lines, higher fuel sales (due in part to higher

prices), and $26.2 million in sales (up $1 million from the previous year) for the home, lawn and specialty

department. 

David Rieben of Decherd, Tenn., was elected new chairman of the board, replacing Gerald Caldwell. Johnny Daniel was elected to succeed Rieben as vice chairman.

In other Tennessee Farmers news, the co-op presented its highest annual honor, the James Walker Cooperative Spirit Award (named for a retired vice president of sales), to Kenneth Michael of Scotts Hill. Michael

spent nearly 40 years in the cooperative’s system, including local cooperative management and most recently

as an operations specialist in West Tennessee. 

In a letter to local cooperative managers at his retirement, Michael encouraged them to work together and

support each other. “This federated cooperative is like a marriage – it must be built on trust and mutual

respect to survive. The cooperative principles should never be compromised, but we must be ready to compromise our method of accomplishing our objective.” ■
Rural Cooperatives / March/April 2001 19

By Jim Wadsworth

Education and Member Relations

USDA Rural Business-Cooperative

Service

e just don’t feel our

cooperative is a cooperative anymore.” Sound

familiar? 

This disturbing

perception is becoming all-too common among some cooperative members. This feeling and similar ones —

such as, “I don’t feel my co-op has any

more interest in me than would an

investor-owned corporation,” etc. —

provide stark evidence that a cooperative’s member relations efforts are lacking. Greater contact with members and

improved member communications

may be needed to reverse this negative

perception. If this type of perception

spreads among your members and is

not adequately addressed, your co-op’s

future is not bright — regardless of

where the markets go. 

Without proper attention to member relations, member loyalty will often

deteriorate. Under these circumstances,

members’ use, control and ownership of

the co-op will slip. While some members may continue to be committed to

their co-op, others may slip away. Most

members need to be regularly reminded

that they indeed are a critical asset to

their cooperatives. Their participation

in the co-op is the defining link to reaping benefits and success. 

The need for enhanced work in

member relations’ area is well understood, but is often overlooked. 

Of course, some cooperatives are

doing a great job with member relations. Others are trying to fix their

member relations program after their

cooperative culture has slipped. Others

choose to ignore this vital area until it

is too late to correct it. 

New cooperatives often concentrate

hard on member relations. Lately,

we’ve heard much about new, new-generation or value-added cooperatives.

With their closed- or limited- membership policies, member relations in these

cooperatives are probably pretty

healthy. At the same time, we are also in

an era of continuous structural change

in cooperatives. Many cooperatives are

restructuring their operations — largescale mergers, joint ventures and other

strategic measures have been consummated. Global markets have evolved. 

Thus, many of today’s large cooperatives have complex operations and/or

expansive geographic membership

regions. In these cases, it is quite likely

that some members feel disconnected

from their cooperatives. Depressed

markets for many farm commodities

have also created economic turmoil and

even led to some co-op bankruptcies,

which further hurts the cooperative

culture and image. 

Many co-op leaders believe providing quality services is their best member relations’ tool. Indeed, it is

extremely important. But quality service alone isn’t always enough to create

cooperative loyalty. Given the intense

competition they face, cooperatives

must do more. They need to be more

assertive in building member relations

in other ways. Otherwise, members

may become dissatisfied and the cooperative’s future may be endangered. 

Continuous effort needed 

Cooperatives must work continuously to strengthen member relations.

This is critical for a strong cooperative

culture and future success. Well developed and implemented member relations goals/strategies need to be outlined. Some important ones include:

• Communicate with members (a

fundamental necessity);

• Educate members (a continuous

need);

• Promote the co-op (the cooperative image);

• Motivate members (member

responsibility, loyalty).

Effective communication channels

are necessary in cooperatives for disseminating timely information to

members, to educate, promote and

motivate. Strong communication

builds a cooperative connection to

members. Cooperatives that talk to

their members make them feel more

connected and important and more apt

to be loyal. 

Communications with members

should regularly include information

about:

• The cooperative’s background,

objectives, organization and general operations.

• Cooperative principles and practices and the benefits that members receive from the co-op.

• Cooperative policies — especially

when adopting new ones, or

changing old ones. Members must

know why policies are being developed or changed. Members must

be kept apprised of how policies

affect them.

• Products/commodities – where

Keep the co-op candle burning

Effective member relations essential to keep co-op spirit alive & kicking 

W
20 March/April 2001 / Rural Cooperatives

they come from, where they go

and how they are handled.

• Services — what’s offered, what’s

new and what to expect.

• Cooperative plans — changes in

operation methods, equipment,

services offered and overall strategic direction.

• Future outlook — for business,

agriculture in general, and for their

commodity product in particular.

• Cooperative finances — encompassing sales, savings and losses;

overall budgets and future financial plans; development of new

products/services, and equity

position and redemption plans.

Member communication is accomplished through the annual meeting,

local meetings, educational forums,

open houses, planned tours, newsletters,

bulletin boards, informational leaflets,

promotional activities and through electronic means (i.e., radio, television,

Internet). Management, directors and

employees need to take an active role in

communications with members. 

Cooperatives should communicate

information that tells members

everything they should know on a

regular basis. No member should be

left in the dark about important aspects

of their business. Talk to them in good

and bad times. Make them understand

their cooperative’s unique principles

and practices and remind them of their

responsibilities in those respects.

Strong communication should be

the foremost goal for improving member relations in cooperatives. Cooperative relations benefits flow from good

communication and well-informed

members are usually more loyal and

conscientious toward their cooperatives. Cooperatives must “talk” to their

members and establish a relationship

that nurtures cooperative culture. 

Education about cooperative principles, practices and benefits is extremely

important in cooperatives. “Education is

a social process....Education is

growth.... Education is not a preparation for life; education is life itself.”

Those words, spoken by philosopher

and theorist John Dewey, convey that

education is a vital lifelong process. 

For cooperatives, with their unique

principles and business and governance

structure, education is their lifeblood

and must be a continuing priority. If

members are to live by cooperative

principles and practices to gain economic benefit as an extension of their

farm operations, they must consistently

be taught those very aspects of cooperation. Members use, control, and benefit

from their cooperatives. They need to

be reminded of it and hear it regularly. 

The unique principles of cooperation should be taught to members,

youth and the general public. Directors

need to be educated on any number of

important aspects to successfully meet

their responsibilities. Cooperative

employees also should be wellschooled in cooperative principles and

should be responsible for improving

member relations as part of their job. 

Educational activity must not only

be directed at members, but members

themselves also need to be active cooperative educational stewards to youth,

potential future cooperators and the

general public.

Members or potential members are

educated through written materials,

visuals, meetings, conferences and

workshops; by management, directors,

other members and various programs

and school classes or programs. Fully

understanding cooperatives and their

unique nature is a relationship-building

tool that cooperatives cannot afford to

ignore. They must commit to education and see that it is an intricate part

of their organizations.

Promoting cooperative image is a

goal often overlooked by cooperatives.

However, this goal appears to have

been reborn, at least in some areas and

by some cooperatives. Two examples of

such image promotion include Blue

Diamond Growers with almonds and

Cabot Cooperative Creamery (owned

by AgriMark, Inc.) with Cabot

cheese. These cooperatives not only

promote their brand products, but

also are assertive in letting the public

know that these products are derived

in cooperative businesses owned and

controlled by farmers.

Cooperatives should let the world

know about their unique organizations. They should heavily promote to

all the farmer-ownership aspects, the

quality of their products and services

associated with farmer-ownership,

and the unique principles of cooperatives. This promotion not only helps

the business overall, but is a memberrelations tool as well. Member pride

and loyalty is most likely to swell if

the impact of the cooperative business

is seen and felt by many. 

Motivation of members is born from

strong member relations. Member identification — where members are made

to feel directly connected to their cooperative — is a strong motivational tool.

All three of the member relations’

strategies discussed work to create

member cooperative identification. Successful co-ops must employ communications that points out how a cooperative is working for members as an

extension of their farm businesses, and

how the co-op needs their support and

helps them overcome the obstacles they

face. This type of communication can

provide a sense of fulfillment and pride

in members and thus, motivate them to

use and control their cooperatives. 

Motivated members further help by

instilling that same pride and loyalty in

other members, since many members

Communications

Motivate

Promote

Image

Promote

Inform &

Educate

Cooperative

Membership

(Shell)

Cooperative

(Yolk)

Free Flowing

Information

(Albumen)

Candling Cooperative Member Relations

continued on page 30
Rural Cooperatives / March/April 2001 21

By James Baarda

Editor’s note: Baarda is a former legal affairs specialist with

USDA’s Agricultural Cooperative Service and former educational

program director for the National Council of Farmer Cooperatives.

He is currently an attorney with The Ackerson Group in Washington, D.C. This article was inspired by his recent international experiences dealing with cooperatives in former Soviet republics, by

trends with new-generation cooperatives, the recent failure of a

large U.S. cooperative, the restructuring of other cooperatives and

member lawsuits that seek to force dissolution of their cooperatives.

“These events challenge the very existence and character of cooperatives as we know them; combined, they suggest that cooperatives are

indeed at a crossroads,” says Baarda. 

reative thinking about cooperatives seems to

have flagged during the past 10 years. Cooperative scholarship has become increasingly fragmented and, in some cases, irrelevant. Failure

to bring the full range of scholarship, thought

and research to bear on cooperatives (in disciplines other

than traditional agricultural economics) may lead to an isolated, inbred field of co-op scholarship. Failure to produce

meaningful research will ultimately do irreparable harm to the

nation’s cooperative movement at

a time when it is in critical need

of sound scholarship. 

Useful research is being done

and excellent people are working

on important cooperative issues.

However, for two reasons, I do

not believe that the overall

impact of this work is meeting its

potential. 

My first concern is that each

scholar/researcher is working in a

vacuum without appreciating and

incorporating what other

researchers and scholars are contributing in other disciplines.

Secondly, some cooperative

scholars and researchers may be

losing touch not only with other disciplines, but with fundamental changes throughout the agricultural sector that will

determine the future of cooperatives in the United States and

in significant portions of the rest of the world.

The time has come to break out from parochial views of

cooperative theory and initiate a new campaign to revitalize

cooperative scholarship. 

The three major issues I see are: (1) The overly restricted scope of the current body of cooperative scholarship; (2)

consequences of this narrowness for cooperative scholarship

and cooperatives; and (3) the failure of institutions to

address important issues and possible solutions.

I. Why traditional scholarship is failing to answer

questions about co-ops

There are five areas in which cooperative research and

scholarship does not adequately incorporate the full range of

relevant scholarship, or is not oriented toward events that

have the greatest significance to cooperatives.

Integrating legal and economic theory for cooperatives 

Cooperative scholars have done a reasonably good job of

borrowing from, and adapting corporate business theories.

The work growing out of USDA Agricultural Cooperative

Service’s cooperative theory project

about 15 years ago is one example.

More recently, scholarship at several U.S. and Canadian universities

and others have continued to

explore the field. It appears to me,

however, that the well of creativity

is beginning to run dry and that

recent work is more an exercise in

re-casting established ideas in new

terms or refining unresolved, but

rather minor, problems. 

This is not to say that economic theory has been applied adequately for cooperatives. Indeed,

much research and methodology

in economics has not yet been

explored sufficiently, and no one

seems to have successfully tackled

new frontiers. 

Critical need seen to broaden,

invigorate current approach to

cooperative research

C

James Baarda tours the Makariv Service Cooperative in

Kyiv Oblast, Ukraine, where he discusses rabbit production management with a young co-op member. His experiences working with overseas and U.S. co-ops helped

spark the accompanying article on the state of co-op

research. Photo courtesy James Baarda 
22 March/April 2001 / Rural Cooperatives

At the same time that economic theory has developed, no

body of legal theory has been developed for cooperatives that

parallels corporate theory. Thus, the enormous deepening and

broadening of ideas that exist in corporate legal theory, for

example, have not progressed for cooperatives. This is not to

say that cooperative legal analysis is lacking. But the fundamental rationale for cooperative law and economics has not

been developed as well as legal theory and economics for corporations, partnerships, inter-firm arrangements and other

forms of business organization. 

Rich world of scholarship beyond cooperatives 

I believe the most serious failing of cooperative research is

that economic and business (or “firm”) theory for cooperatives is restricted to basic economics and is further largely

restricted to traditional economics with traditional underlying assumptions. The

relationship between

cooperative vs. corporate

legal theory is almost

nonexistent, as are the

cross-linkages between

corporate law and cooperative theory — and

cooperative law and noncooperative theory. This

situation leaves fundamental questions unexplored that are of critical

interest to cooperatives.

Nowhere is this more

evident than in corporate legal theory. Current scholarship in corporate law theory is

extraordinarily rich in

ideas that are directly

applicable to cooperatives. Needless to say, the theory of

business organizations has been extensively explored in

corporate legal theory. Corporate legal scholarship has

progressed far beyond that, however, to address and challenge some of the foundations of corporate existence,

structure and behavior. 

Examples include corporation contract theories, theories

based on public policy and public good, theories based on the

sharing of responsibilities among participants, theories based

on stakeholder obligations and fiduciary principles, and theories that challenge the “rationality” assumptions upon which

economic theories are founded. 

Contributions of research on individual and group motivation, the role of institutions, social consciousness, historical patterns and political science are incorporated into corporation

legal theory far more than they have been for cooperatives. Corporate legal scholarship challenges the foundations of the

assumptions of pure rationality upon which neoclassical economics is based, challenges assumptions of profit maximization

and the assumed consequences, challenges assumptions of shareholder value maximization objectives in corporations and the

assumed consequences, and adds the important elements of personal motivations. Corporate structure and operation is far more

complex than anything that can be totally explained by simple

theories as they now exist. This all rings true for cooperatives.

Cooperatives actually have more of an interest and far

more at stake in the issues and answers discussed in corporate

law theory than do corporations. Indeed, some of the challenges to standard corporate theory and the economic analysis of the firm are the very reasons why cooperatives were

created, why they continue to exist and why they distinguish

themselves from other businesses even though cooperatives,

too, are corporations. 

Yet all this has gone almost totally unexplored because

cooperative theory at this

point has no mechanism in

which to address the

issues. Corporate legal

theory provides just such a

mechanism. The results of

such scholarship and the

lessons that can be learned

may be appropriated for

cooperatives through fundamental research so long

as the breadth of such

research is adequate.

Fundamental changes

in agriculture 

It appears that there is a

scarcity of careful and indepth consideration of how

three important “sea

changes” in agriculture may

relate to cooperatives. The

first is that of the increasing prevalence of contract agriculture,

the industrialization of agriculture and the resulting changes

facing production agriculture, which is the foundation of

farmer cooperation. 

The second shortage of interconnected scholarship is

related to biotechnology. This is similar to the industrialization issue, but addresses yet another process in the diminishing independence of farmers and their economic position as

producers. 

Third, the economic and social impacts of concentration

have not received enough attention in cooperative scholarship. This includes concentration not only in the supply and

marketing chains, but in the production subsector itself.

While others have written about these issues, no one is

investigating the deeper meanings and foundations of such

phenomena and relating them to theories of cooperatives to

reach conclusions about cooperatives and their future. This

needs to be based on scholarship and research rather than on

opinion or casual observation.

James Baarda (left) discusses cooperative law and taxation with Edward

Pikaloff, attorney for the Makariv Service Cooperative in Kyiv Oblast,

Ukraine. Also with him is translator Nadia Potabenko. Ukraine adopted a

new cooperative law in 1997, and many co-ops there are now operating for

the first time under a modern law.
Cooperative lessons throughout the world 

Better understanding of international cooperatives is also

needed to develop a deeper understanding of cooperatives,

both in theory and in practice. My experiences in several former Soviet Union republics and other Eastern European

countries have been extraordinarily enlightening regarding

issues facing cooperatives in rapidly changing agricultural sectors. Not only are the changes rapid, but they are also directly

connected to the most basic cooperative characteristics. 

The enormous challenges facing cooperatives in the

national economies and agricultural sectors of economies in

transition, the varied and conflicting opinions of what cooperatives are and what roles they play, and the massive changes

in legal and economic forces at work all paint vivid pictures

of every aspect of cooperatives. They cast an entirely new

light on cooperatives as businesses that are operated by and

for farmers. 

Public discourse in other countries is serious and important, addressing issues as fundamental as: “What is a true

cooperative?” Because every issue is just as important for

contemporary U.S. cooperatives as for cooperatives elsewhere, exchanges between U. S. and foreign cooperative

scholars can be extraordinarily beneficial to both. Hard and

painful lessons learned elsewhere may offer lessons we in this

country cannot ignore.

Unification, leverage and multipliers 

Finally, I do not see a concerted effort to integrate and use

the results of all research and thinking done on cooperatives.

Many research projects are, by their nature, rather narrow in

application and cannot add much to a deeper understanding

of cooperatives. Other projects are used only for the superficial results, but their broader implications are not appreciated

when considered in isolation. 

In some instances, follow-up projects or a concerted

effort to draw the fullest implications from existing results

would greatly magnify the usefulness of the research. This

includes the failure to fully appreciate the interrelationships

of different kinds of cooperatives. 

In the United States, agricultural cooperatives too often

have tended to consider themselves the true representatives

of business cooperatives while other types of cooperatives are

more the products of social, ideological and non-economically oriented ideologies. If the fundamentals of cooperatives

and the distinctions between cooperatives and other kinds of

businesses are to be fully appreciated, however, cooperatives

of every type should be studied and the essence of cooperation drawn from comparisons and contrasts. 

In short, a big-picture attitude toward cooperatives is

needed; the scope of research and scholarship should be

designed to reflect this perspective.

II. Consequences

The focus of any assessment or critique should naturally

be on those things that lead to solutions and specific plans of

action. I see three primary consequences. 

Information and analytical tools 

Interdisciplinary scholarship would establish a basis for a

deeper understanding of cooperatives and their role in a profoundly changing agricultural system, as well as a dramatically changing world economy. The tools for analysis growing

out of the new body of thought would be more powerful to

explain cooperatives and predict the economic ecology in

which they will exist in the next few decades, and would further enhance the tool kit that might be used to look into the

future. Results of interdisciplinary research and scholarship

would provide a significantly greater set of guides to cooperatives and those using cooperatives to respond to changing

forces in agriculture and the economy as a whole.

An academic community of interest 

Unfortunately, no broad-based community of scholars and

researchers exists outside of agricultural economics in academia, government or cooperatives. As a consequence, the benefits of interdisciplinary exchanges are lost, as is the benefit

of additional work contributed by those in other professional

disciplines. They do not know or appreciate cooperatives or

cooperative- oriented research. Needless to say, if cooperative researchers and scholars reach into other disciplines to

draw from them what is useful for cooperatives, the breadth

of available knowledge will be increased. 

A quantum leap in the total “intellectual” power devoted to

cooperatives would occur if researchers and scholars from many

other disciplines began to produce articles, books, presentations

and other products about cooperatives. This will not occur until

those who set the agendas and produce the research in other disciplines realize that cooperative business is a subject worthy of

their talents, time and professional career development. 

I firmly believe that if an interdisciplinary approach to

cooperatives mentioned in the first section were to be carried

out effectively in the near future, and the commensurate professional results became part of the literature, many others

would see the connection to their own disciplines and would

eagerly turn attention to cooperatives. 

Two additional benefits could realistically be expected.

First, students would become interested through the influence of faculty and because cooperatives are inherently interesting. This would most certainly lead to graduate work and

writing on cooperatives, would contribute to cooperative literature and would bolster the dwindling number of individuals who have at least a passing understanding of cooperatives. 

Second, and of equal importance, those who teach

would find that cooperatives provide an interesting and

important addition to the topic taught. A cooperative element – or at least a mention – could be added to classes in

law, economics, business and business management,

finance, accounting, public policy, sociology, ethics, economic planning, community development, rural development, international development, international trade,

government, political science and many others. This will

not occur, however, until a professor’s interest is peaked

sufficiently or the topic is included in textbooks or other

Rural Cooperatives / March/April 2001 23
publications upon which the professor relies.

Guidance and coordination 

Because cooperative scholars and researchers have not

successfully established the kind of research and linkages

mentioned earlier, little guidance exists for those who wish

to explore new topics in cooperatives and no mechanism

exists to show in what way effective research can or should

be coordinated. The only coordination that would offer

any cohesiveness is the individualized interest of

researchers and students. 

If, for example, a single research project identified a topic

of substantial interest to multiple disciplines, projects to find

solutions to the issues presented in each discipline would be a

method of “passive” coordination, much like Adam Smith’s

“invisible hand.” The self- fulfilling actions of many

researchers and scholars would naturally lead to a growing

body of knowledge on cooperative issues but only if the core

research is done very well.

III.Responsibilities and solutions

At present, I do not see an organization or individual

that has, or is prepared, to take the interdisciplinary,

focused approach to research that is needed. None of the

cooperative centers conduct the research required of the

type of work suggested. Similarly, no universities appear to

have the full complement of faculty, students and commitment to engage in this effort. No national organization is

in a position to provide the leadership and coordination

needed, let alone the professional capabilities to actually

engage in the work.

Neither is there any mechanism – through funding or

research project control – that can provide specific coordination and leadership to achieve a sustained and effective

attack on the issues presented above. Rather, the only effective “coordination” appears to be provided by the leadership

of one or more scholars who address the issues so effectively

that they establish a focal point around which others wish to

gather in a scholarly community of shared interests. If the

true creativity and extraordinary professional interest in

these topics exist and can be communicated well, I believe

scholars in other professions will take up the cause. 

To initiate this process, it will fall heavily on one or more

scholars who are now steeped in cooperatives but who are

also able and willing to conduct research suitable for publication in journals written for other disciplines. For example,

to engage members of the legal profession who specialize in

corporate legal theory in activities related to cooperative

theory, someone “in cooperatives” will need to conduct

research of such a kind that it can be published in law

reviews or other specialized journals that are read by those

who write and conduct research in corporate law theory.

The greater the volume and extent of such publications by

the cooperative researcher, the greater will be the response

and the enhanced interest from outside the agricultural economics profession.

Several locations can be considered for the initiation of interdisciplinary projects. A university would seem to be well suited

for this purpose, but universities face several drawbacks. Limitations include the specific interests of individual faculty members

and the typical independence of faculty to pursue those interests,

limitations on most university commitment to cooperatives,

pressures on faculty to publish in their own profession, and

teaching and administrative burdens preventing scholars from

devoting the time and resources that it will take to be effective. 

These observations apply to law schools and as well to

agricultural economics departments. As noted above, I don’t

see much possibility that any of the cooperative centers will,

or can, take on this task. And no national organization is

capable of this work, nor would they be likely to allocate sufficient resources to such a project.

Clearly, USDA should be considered as a possible center

of such broad-based, creative and interdisciplinary scholarship. The advantages of such an arrangement are that a

focus on cooperatives and a long-term commitment to the

idea of farmer cooperatives now exists at USDA’s Rural Business-Cooperative service. In addition, it is a center where

public funding has been dedicated to improving cooperative

businesses and public understanding of cooperatives. 

Unfortunately, USDA faces some serious obstacles.

Although USDA has a team of researchers who understand

various aspects of cooperatives, no individual “faculty” member there is in a position to engage in the concentrated work

needed to initiate the interdisciplinary work required by the

above-mentioned issues or to carry it forward as an integral

part of USDA’s cooperative mission. 

Neither can the allocation of research project funding on a

piecemeal basis, even if such funding exists, effectively generate the results required. This is primarily because contracted

projects are neither long-term nor typically granted to those

who are already sufficiently knowledgeable about cooperatives

to make efficient use of the funds rather than expend substantial resources learning the basics.

I am convinced from my current research and general

observations that this effort is badly needed. The rewards to

cooperatives will be immense, and the failure to explore

interdisciplinary research and scholarship will place cooperatives in a very bad position when they are seriously challenged as they will be in the future. 

New and creative scholarship based on fresh ideas is critically needed by cooperatives immediately, and little

focused leadership appears to be in the wings to revive

cooperative scholarship and appropriate research. I strongly

recommend that USDA assert aggressive leadership to seek

a solution to the lack of research, writing and thinking

about critical cooperative issues that can only succeed by

initiating a dialogue with other professions that will eventually yield information, analytical frameworks and a community of interest in cooperatives, unrestrained by boundaries

of professional disciplines and that is not limited by traditional methods. ■

24 March/April 2001 / Rural Cooperatives
Rural Cooperatives / March/April 2001 25

CEO/President — Lonnie Salam,

chairman of the Yakama Tribal Council

Board governance — The Tribal

Council is in the process of selecting

the utility board.

The Yakama Nation — The Confederated Tribes and Bands of the

Yakama Indian Nation are descendents

of 14 tribes and bands that are federally

recognized under the Treaty of 1855.

The Nation’s Cultural Heritage Center

is located in Toppenish, Wash.

`Geographic area served — The

utility will serve approximately 15,000

people who reside on the 1.4-millionacre Yakama Reservation in central

Washington along the eastern slopes of

the Cascade Mountain Range. The

reservation is 1 1/2 times larger than

the state of Rhode Island.

Background – The Energy Policy

Act of 1992 deregulated the electricity

industry. Bonneville Power Administration (BPA) —the federally sponsored power marketing agency — recognized the Yakama Nation and other

Pacific Northwest tribes in late 1999 as

“public bodies” or “cooperatives.” The

ruling allowed the Yakama Nation to

start forming its own tribal utility. Federal law then grants first priority to

public bodies — municipalities, public

utility districts and cooperatives – that

want to purchase power from the

Columbia River Power System. 

Tribal and all other new utilities

had to meet certain requirements to

be eligible for service in the 2001-06

contract period. Among the qualifications, districts had to be established

and well on their way to acquiring distribution systems. 

As a rule, BPA requires utility customers to own an entire distribution

system to be eligible for service. But

some Northwest tribes may have

unique circumstances, given their

large, sparsely populated areas and

fragmented distribution facilities within reservations. Therefore, it may not

make sense for them to own all the distribution facilities they will need to

serve consumers. On a case-by-case

basis, the BPA is considering whether

to waive full ownership requirements.

Meanwhile, the U.S. Department of

Energy also provided grants to tribes

to identify and study participation in a

deregulated electrical industry.

Why did the Nation decide to form

a tribal utility? Through an extensive

study and development of a business

plan, it was determined that purchasing

low-cost power from the BPA will

reduce electricity costs for all the consumers on the Yakama Reservation.

The new utility will provide jobs and

promote economic development on the

Reservation. It will expand access to

energy efficiency and low-income

weatherization programs available to

residents on the Reservation.

At what point is the Nation in

putting together the tribal utility? The

Yakama Nation has negotiated a power

sales contract with the BPA. Its next

effort will be to begin discussions with

PacifiCorp regarding the purchase of

the distribution system. The Nation

has also started to explore financing,

training and a number of other issues

as it establishes its own tribal utility.

The anticipated timeline is for the

Nation’s power to flow through its own

system by late 2001. ■

A CLOSER LOOK AT...

Yakama Power Tribal Utility

Preston Harrison, of the Yakama tribe’s economic development office, sees major benefits

derived from tribal ownership of its utility system. Photo courtesy Yakama Tribal Council
Farmland to expand branded-bread

distribution

To expand distribution of its branded

breads, Farmland Industries of Kansas

City, Mo., has formed United Bakeries

International. The new business is a

joint venture with Mountain View Harvest Cooperative, and gives Farmland a

stake in the Mountain View-owned

Gerard’s Bakeries at Longmont, Colo.

For members, Gerard’s represents

another market outlet for their wheat. 

Mountain View was formed in 1997

by 225 grain producers who purchased

Gerard’s and who grow grains that meet

particular specifications for the bakery’s

breads. Gerard’s sells rolls and breads to

restaurants and hotels in 40 states. Last

year, Farmland test-marketed its own

brand of breads (baked by Gerard’s)

under the Farmland and Carando

brands. Five bread products were first

test-marketed last fall: a multigrain loaf,

sourdough loaf, sourdough dinner rolls,

deli sandwich rolls and potato rolls – all

carry the Farmland brand. The Carando brand is featured on focaccia bread

and an Italian loaf. 

“We are interested in helping consumers link Farmland bread to Farmland beef and pork products,” says Ken

Thomas, director of Farmland Grain

processing. “When consumers put

Farmland’s beef or pork products on

their plates, they can now add our

quality bread products too.”

Sunkist revenues down

Revenues for Sunkist, the California

citrus marketing cooperative, dropped

about 2 percent, to about $847 million

last year. Payments to growers were

down 3 percent, to $682 million. Acting President James Mast said factors

in the decline included poor fruit quality, retail consolidation and foreign

competition. The cooperative also

decided to quit marketing Argentine

lemons out of concern that it could

introduce harmful pests or diseases. 

Ag stress prompts cutbacks 

at Southern States 

Reflecting the current stress in agriculture, Southern States Cooperative

(SSC) based at Richmond, Va., has

begun reviewing its operations and trimming its staff. The cooperative has about

5,000 employees in 25 states, including

750 employees at its headquarters. The

cooperative’s 300,000-plus farmer members have been hard hit by low commodity prices and cuts in tobacco quotas.

In line with that reduction, SSC has

forged a marketing link with United

Producers, Inc. (UPI), at Columbus,

Ohio, to provide livestock marketing

and credit services to livestock producers in the Midwest and Southeast. UPI

will lease and operate with the option

to buy selected SSC livestock marketing facilities. Producers Credit Corporation, a UPI subsidiary, will provide

livestock credit services to the membership. UPI serves 40,000 livestockproducing members. 

Calcot to end almond sales

The two-year-old almond marketing

division of Calcot, California’s cotton

marketing cooperative at Bakersfield, is

being disbanded due to low grower

returns and soft prices. The almond

business never generated the kind of

revenue the co-op had hoped when

launching the almond division in 1998,

according to Calcot president Tom

Smith. Of its 1,800 cotton members,

500 also grow almonds. Calcot handled

about 11 million pounds of almonds last

year and is expecting 10 million pounds

this year. Grower-members will have to

find a new home for their almonds next

season. California’s largest almond

processor and marketer is Sacramentobased Blue Diamond Growers, also a

grower-owned cooperative. 

USDA to award $25 million 

to boost value-added ag 

USDA Rural Development is making

$25 million in grants available for the

development of agricultural producerowned processing businesses. The new

26 March/April 2001 / Rural Cooperatives

NEWSLINE
Rural Cooperatives / March/April 2001 27

Value-Added Agricultural Product Market Development grants program is

designed to encourage producers of

agricultural commodities to process

their raw products into marketable

goods, thereby increasing farm income. 

Of the total amount, $20 million will

go to help associations of independent

producers establish value-added business ventures. The remaining $5 million will be awarded to establish a pilot

project known as the Agricultural Marketing Resource Center. Ventures in

which agricultural producers add value

to their products by processing, packaging, or other means are eligible to apply

for grants. Grants can be awarded for

such activities as conducting feasibility

analysis, developing business and marketing plans, or as working capital while

the venture develops cash flow. 

Grant funds cannot be used for the

development or acquisition of buildings or other facilities, or to purchase,

rent, or install fixed equipment. The

maximum allowable grant amount is

$500,000, and grant recipients must

provide 1-to-1 matching funds. 

Grant applications for this purpose

will be accepted in two rounds. Applications for the first round must be received

by 4 p.m. Eastern Time, April 23, 2001.

The deadline for the second round is 4

p.m. Eastern Time, June 27, 2001. 

Nonprofit corporations and institutions of higher learning are eligible to

apply to establish the Agricultural Marketing Resource Center. The center

will collect and make available information on value-added processing to

independent producers and processors.

It will also develop a strategy to establish a nationwide market information

and coordination system. 

The recipient of the $5 million grant

must supply an additional $5 million in

matching funds. All applications for this

grant must be received by 4 p.m. Eastern Time, April 30, 2001. This program is administered by USDA’s Rural

Business Cooperative Service. Further

information is available at USDA Rural

Development state offices, or at the following Web address: http://www.rurdev.usda.gov/rbs/coops/vadg.htm. 

ACDI/VOCA seeking farm credit

specialists for overseas missions 

Loan officers, credit association managers, and farm credit bank employees

who would be willing to work for several weeks with financial institutions in

developing nations are sorely needed for

ACDI/VOCA missions. ACDI/VOCA

is a nonprofit international development

organization that helps farmers, rural

finance institutions, agribusinesses,

cooperatives and private and government agencies abroad. Its members consist of leading U.S. agribusiness cooperatives and farm credit banks. 

ACDI/VOCA volunteers donate

their time and talent to work side by

side with farmers and entrepreneurs

who are pushing for economic progress

and democratic reforms around the

world. Some continue with long-term

assignments after that. There is growing

demand for expertise in four categories: 

• Bank Management; 

• Financial Planning and Management

• Rural and Micro-Credit

• Agricultural Lending

Volunteer assignments are for a

period of two to four weeks, depending

on project needs and volunteer availability. Requests for specialists arrive

regularly, with approximately six weeks’

lead time before a volunteer is needed

in the field. Paid assignments as international advisors can last from two

weeks to three years. 

For more information, visit the website: www.acdivoca.org, or (800) 929-

8622, fax: (202) 626-8726 or e-mail:

volunteer@acdivoca.org

LOL earnings best since ‘96 

Land O’ Lakes Inc. (LOL) reported

is strongest earnings in four years thanks

to strategic moves in its dairy division,

stabilized cheese and butter prices and a

rebounding swine market this past year.

Net earnings for fiscal 2000 reached

$102.9 million while net sales topped

$5.8 billion. LOL’s dairy division posted

earnings of $87.9 million on sales of $3.2

billion, but that reflected $44 million

gained from selling its fluid dairy business to Dean Foods. 

In other news, LOL and Dairy

Farmers of America (DFA) have

formed a joint venture to own and

operate a cheese plant at Melrose,

Minn., that LOL purchased from Kraft

Foods. Built in 1970, the plant processes about 1 billion pounds of milk annually into bulk cheese which is then

shipped to other plants for further processing and packaging. The 150

employees were invited to continue in

their jobs. LOL members have long

been a suppliers to the factory. Kraft

will continue purchasing cheese from

the plant. This will be the first partnership between the two dairy cooperatives. DFA has 19,500 members in 45

states and processes nearly 37 billion

pounds of milk a year. LOL produces

600 dairy products and processes 12

billion pounds of milk annually. 

LOL is also developing a large

cheese plant in South Dakota in a joint

venture with Davisco Foods International and is considering construction

of a cheese plant in Wisconsin with

Alto Dairy Co-op at Waupun. 

Jack Gherty, chief executive officer

of Land O’ Lakes has been elected

chairperson of the National Council of

Farmer Cooperatives during its annual

meeting. Gherty succeeds Don Schriver, executive vice president of Dairy

Farmers of America. The council’s first

Director of the Year Award was presented to Jack Hardesty, president of

Maryland-Virginia Milk Producers

Association at Reston, Va. 

CENEX Harvest States buys

Rodriguez Food

CENEX Harvest States (CHS) has

acquired Rodriguez Festive Food Inc.

of Fort Worth, Texas, a manufacturer

of wheat and corn tortillas, tortilla chips

and a full-line of Mexican foods. The

purchase price was not announced.

Rodriguez Food represented a “strategic fit [for CHS] as we continue to

expand our tortilla, chip and Mexican

food business,” said Joel Bachul, CHS

vice president and general manager.

“The facilities at Fort Worth will help

us better serve our national and regional customers.” CHS’ tortilla and Mexican food sales now top $65 million
annually. Its Mexican food brands

include: La Canasta and Arizona Brand

tortilla chips, Paradisio tortillas and El

Gran Deli, among others. It operates

additional Mexican food processing

plants in Minneapolis, Minn., and

Phoenix, Ariz. 

In other CHS news, the St. PaulMinn.-based co-op has joined a new,

on-line agricultural commodity marketplace – Pradium – headquartered

at Annapolis, Md. Pradium will be

an on- line, business-to-business

marketplace. 

Tri-Valley sells S&W brand;

Sale of canneries imminent

Bankrupt Tri-Valley Growers has

agreed to sell its S&W food brand to

Del Monte for $39 million. Del Monte

says it plans to contract with Tri-Valley’s successor to produce S&W fruit

and vegetable products for this season,

but will then move production to its

own facilities in California. The S&W

brand was the “jewel” in Tri-Valley’s

product line. 

At press deadline for this issue in

mid-March, a final sales agreement was

expected any day that will likely transfer ownership of the co-op’s huge fruit

packing canneries in Central California

to Signature Fruit LLC, a new company formed by John Hancock Life

Insurance, Tri-Valley’s largest creditor.

Separate sales are being pursued for the

co-op’s tomato processing business. 

Some $20 million in federal disaster payments from USDA will also be

made to the cooperative’s 500 members — mostly tomato, peach, pear

and apricot growers — who lost money on Tri-Valley contracts when the

co-op cut back production of canned

fruits and tomato products due to its

deteriorated financial condition.

Members may be able to collect up to

half their losses. 

DFA reopens Dakota plant

After lying dormant for six months

during refitting for new technology

and product lines, a cheesemaking

plant at Pollock, S.D., has been

reopened by Dairy Farmers of America

(DFA) and has begun manufacturing

cheese and dairy-based ingredients for

sophisticated food applications. The

joint venture between DFA and the

New Zealand Dairy Board is called

DairiConcepts and is based at Springfield, Mo. The limited partnership features equal ownership. The firm has

production facilities at Hummelstown,

Pa.., Bruce, Wis., Zumbrota, Minn.,

and Eldorado Springs, Mo.

.

New Minn-Dak CEO

David Roche is the new chief executive officer of Minn-Dak Farmers

Cooperative at Wahpeton, N.D. He

has extensive experience in the sugar

industry, according to cooperative

chairman Victor Krabbenhoft. Roche

replaces Larry Steward who retired last

September. 

Cabot offers organic cheddar

Cabot (Vt) Creamery Cooperative,

owned by Agri-Mark, has introduced a

line of organic cheddar cheeses.

Cabot’s facility is now a certified

organic plant. The new line is sold

throughout the natural foods community and was developed out of concerns over food safety and animal welfare. Cabot has dramatically pushed up

sales of hormone-free milk and organic milk in Maine.

Swiss Valley pays dividend

A $6 million profit earned this past

year year by Swiss Valley Farms, Davenport, Iowa, will result in cooperative members receiving a 22-cent-perhundredweight dividend in cash and

stock. Farmers will receive a 12-centper-hundredweight cash payment

(54.5 percent of the declared dividend) for every 100 pounds of milk

marketed with Swiss Valley. The

cooperative’s milk production

increased 37 percent during the year

due to unifications. The extra supply

helped the cooperative achieve an

increased market share. 

Two expansion projects will come on

stream this year: a major expansion and

renovation at Mindoro to meet an

increased demand for blue cheese and a

renovation at the Cedar Rapids cultured products plant to increase production and storage for cottage cheese,

yogurt, sour cream and dips.

Mullen heads food processors

Dennis Mullen, president and

chief executive officer at Agrilink, a

fruit and vegetable processing cooperative at Rochester, N.Y., was named

chairman of the National Food

Processors Association (NFPA) board

of directors at its 93rd annual meeting in Chicago. The scientific trade

association represents the $460 billion food processing industry. With

three laboratory centers, 

NFPA is the leading authority on food

science and safety.

In marketing news, Agrilink is looking at growth opportunities in Canada

via a reintroduction of its Birds Eye

brand products after a long absence

from store shelves. 

A team developed distribution plans

and redesigned packaging to meet Canadian requirements. Agrilink also exhibited at the Toronto Royal Winter Fair.

Beef co-op opens marketing

The new Consolidated Beef Producers co-op, Amarillo, Texas, completed

its first cattle sale in February, reports

Gary Kaplan, the co-op’s chief executive officer. Members pay an initial

$3,000 fee, commit cattle on a weekly

basis for sale to packers, and agree to

sell at least 5,000 head of cattle through

the consortium. The co-op will negotiate with the packers. 

28 March/April 2001 / Rural Cooperatives
Rural Cooperatives / March/April 2001 29

By Paul Hazen, President and CEO, National

Cooperative Business Association

A little-known international body that yields tremendous power over the Internet and e-commerce

announced on November 16, 2000 its selection of .coop

as one of only seven new top-level domains (TLD) that

will join .com and .org at the end of Internet addresses

later this year.

This new dedicated Internet suffix

will give co-ops a unique online identity and the opportunity to differentiate themselves in e-commerce — a

privilege many other sectors sought,

but failed to achieve, when the Internet Corporation for Assigned Names

and Numbers (ICANN) began

accepting applications for new toplevel domains last fall. 

In a highly competitive process,

cooperatives beat out lawyers who

wanted .law, financial groups that

wanted .fin, telephone companies that wanted .mobile,

and many other sector-specific groups. ICANN received

47 applications for some 180 proposed new names. The

National Cooperative Business Association’s (NCBA)

application for .coop was among only a handful of applications by nonprofit organizations. 

NCBA beat the competition because we had a solid

application and strong grassroots support from cooperatives in the U.S. and overseas. 

In the end, ICANN put .coop in the elite group of the

well-known .com, .org, and .net, and now, .info, .biz ,

.name, .museum, .aero, and .pro – the other new names. 

How can we use it? 

.coop presents new marketing and membership

opportunities. Many co-ops already have websites

under .com and .org. Co-ops can choose to register

their name under .coop in order to increase their Internet exposure, while keeping their .com or .org addresses. Internet addresses using different top-level

domains can point to the same website.

.coop can help consumer cooperatives emphasize

their values and commitment to their consumer-members, providing an edge over other sellers of goods and

services. And more importantly, .coop will help consumers find the co-ops they trust online.

.coop provides new membership opportunities for

agricultural and other producer cooperatives. Since the

domain name emphasizes the difference between coops and investor-owned businesses, .coop can help

attract and keep new members by promoting the member-ownership benefits of co-ops. Cooperatives can also

use the new .coop TLD for their members-only site. 

And even producer cooperatives that have longrelied on .com for their consumer identity may wish to

begin using .coop to market the

farmer-income benefits of co-ops to

those consumers who value an economically vibrant rural America.

More and more, co- ops are finding

that their values and principles sell. 

Perhaps most exciting, .coop can

help increase public awareness of

cooperatives. In just four letters,

cooperatives have the opportunity to

educate not just their own members,

but the general public about what

cooperatives are, why they matter

and how they contribute to the global economy. As ubiquitous as the Internet has become in daily life, there is

simply no question that .coop will give cooperatives

greater public recognition and a competitive edge. 

Of course, cooperatives don’t have to use .coop. But

they’ll probably want to reserve that option for the

future by registering for .coop later this year.

What happened to the hyphen? 

NCBA applied for both .coop and .co-op. Many in the

U.S. preferred the hyphen, but others who don’t use the

hyphen, such as those in Spanish-speaking countries,

did not. In the end, ICANN rejected the hyphen in order

to make the new TLD as globally applicable as possible. 

Now what? 

NCBA, as the new owner of the .coop TLD, is

negotiating a contract with ICANN and Poptel, a

worker-owned cooperative Internet service provider

in the U.K. that will serve as the registry operator and

registrar. We should be able to begin registration

sometime this summer. For now, co-ops can go to our

website at www.ncba.org and click on the blue .coop

button. From there, go to “How to Register,” where

you’ll be able to put your name on an e-mail list for

updates on registration details. 

Dot what? Dot coop!

New Internet name for cooperatives provides new marketing, membership opportunities 
ProGold resumes operations;

Growers ponder crop options 

Production of corn sweeteners

resumed March 11 at the co-opowned ProGold corn- milling plant in

Wahpeton, N.D. The plant had been

idle for two months due to high energy costs and sluggish demand for corn

fructose sweeteners. The $260-million

facility processes 85,000 bushels of

corn daily and pays farmers about 10

cents per bushel more than most local

elevators. Despite the closure, Cargill

met an obligation to buy corn for the

plant – including 500 million bushels

in January. Plant workers remained on

the job during the shutdown, performing maintenance and servicing

customers from existing inventory. 

The plant has been leased and

operated since 1997 by Cargill Inc. of

Minneapolis, Minn. The company

has not ruled out further shutdowns

if economic conditions worsen.

Uncertainty over the plant’s status

has left many corn growers pondering a switch from corn to soybeans or

some other crop. Sharp rises in natural gas costs could prompt the plant

to switch to fuel oil or another energy source. ProGold is owned by

Golden Growers Cooperative (49

percent), Minn- Dak Farmers Cooperative (5 percent) and American

Crystal Sugar Co. (46 percent).

Farmland sets sales record but still

records loss for 2000

In his first annual meeting as chief

executive officer, Farmland Industries’

Robert Honse reported record sales of

$12.2 billion for fiscal 2000, but the

depressed farm economy continued to

drag on the cooperative’s profitability.

Farmland’s net-after-tax losses continued at $29.2 million, with the nitrogen

fertilizer business causing a special

drain on earnings. After a decade of

growing and diversifying to compete

with large multinational companies,

Honse said Farmland would refocus on

profitability: attaining investment grade

status among financial analysts to lower

interest costs.

“We must find ways to rely less on

others’ money to run our business,” he

said. A key to that is building the

Farmland brand, in which the cooperative has heavily invested, Honse

stressed, by building the brand’s value

and expanding its reach so in time it

reaches national recognition. Continued reliance is planned on joint food

ventures: Farmland National Beef,

Farmland Springwater Farms Catfish

(the second largest catfish processor in

the nation), and Farmland Pork, plus

wholly owned divisions to provide farm

production supplies.

It has also been announced that the

co-op’s Farmland National Beef subsidiary will expand its operations to

Moultrie, Ga., by investing $8 million

to rehabilitate an old plant there. 

Court rejects initial AGP bid for FCA

Ag Processing (AGP) Inc.’s proposed

purchase of the bankrupt Farmers

Cooperative Association (FCA) – a large,

local grain marketing co-op in

Lawrence, Kan. – for $11.7 million was

rejected March 13 by U.S. Bankruptcy

Judge John Flannagan. He ruled that

FCA will have to devise a plan for

accepting and reviewing competing bids,

including offers from Archer Daniels

Midland Co. and Bunge Corp., among

others. Omaha, Neb.-based AGP — the

only cooperative seeking to buy FCA —

may still have the best offer, but the

judge says he wants more time to make

sure. FCA had hoped to complete the

sale to AGP, a grower-owned soybean

processing co-op, by April 1, in time for

growers to prepare for spring planting.

AGP’s offer was for most of FCA’s inventories and all but three of its facilities.

In other AGP news, the co-op has

just completed another successful year.

Fiscal 2000 results showed the cooperative had pre-tax earnings of $20.9 million on sales of nearly $2 billion. The

slight decline from 1999 reflected lower

commodity prices. It was the first annual

meeting with Marty Reagan at the helm,

having succeeded Jim Lindsay. 

30 March/April 2001 / Rural Cooperatives

Keep the co-op candle burning continued from page 20

tend to “follow the pack.” The result of

this should show members that they

are better off serving themselves

through their cooperatives than by

doing business with others (e.g., noncooperatives). Communication aimed

at member identification creates the

foundation for greater member motivation in cooperatives. Cooperatives must

work continuously to create this quality

that engages members to be active participants in their cooperative.

Candling member relations 

The egg-shaped exhibit depicting

effective member relations shows that

building member relations begins at

the core of the cooperative “yolk” with

communications. Communication

efforts in information, education, promotion and motivation flow freely

through the cooperative’s “albumen,”

reaching and nourishing the cooperative “shell.” The cooperative membership makes up the “shell” of the cooperative “egg,” providing a loyal

nurturing environment that helps the

“egg” to thrive. The lit candle indicates

the need to keep member relations

burning within the cooperative. While

this exhibit provides some fun, it offers

a serious message as well.

Building member relations begins and

ends with communication. Show a lack

of it and cooperatives will likely find their

members gaining a “non-cooperative”

perception that can be very difficult to

overcome. Conversely, making communication a core function of the organization — to implement important goals

and strategies such as those discussed —

will go a long way toward thickening the

membership shell of the cooperative.

Indeed, to be cooperatives in every

sense of their distinct principles and

structures, a strong effort on behalf of

member relations is required. Cooperatives need to commit and remain

committed to keeping the member

relations “candle” lit within their organizations. ■
Rural Cooperatives / March/April 2001 31

Or, to go straight to the Library of Publications, access: http://www.rurdev.usda.gov/rbs/pub/newpub.htm

If you know the title or publication number of the report you want, scan down the list until you come to it.

To locate a breakdown of publications by subject matter:

1. Click on any one of the four “Reports” categories in the middle of the “RBS Library” menu.

2. Access our catalog by clicking on “Rural Cooperative Publications” in the first line of the second paragraph on the

screen that appears (regardless of the type of “reports” accessed).

3. The first option under “Contents” is “Publications by Subject Matter.”

It’s easy to read and/or download USDA 

publications about cooperatives from the Internet

The Rural Business Cooperative Service has more than 150 cooperative reports (as well as past

issues of this magazine) available on the Internet for viewing or downloading. These titles cover a

vast array of topics, ranging from the general, such as “How to Start a Cooperative” or

“Cooperatives 101,” to technical subjects, such “Tax Treatment for Cooperatives” or “Managing

Cooperative Antitrust Risk.” 

To access any of these reports, follow these easy steps:

Go to the USDA Rural Development home page, “http://www.rurdev.usda.gov”

Click on “Publications” in the lower blue bar at the top of the page

Click either “Rural Cooperatives magazine” or “Business/Cooperative Publications”

If you chose “Business/Cooperative Publications” in step 3, you can then click either “Cooperative

Information Reports,” “Research Reports,” “Service Reports” or “Miscellaneous Reports.”

1.

2.

3.

4.

Want to access other web sites about USDA programs that support cooperatives?

The Business and Industry (B&I) Loan Guarantee Program provides government backing for commercial loans to cooperatives and

other businesses in rural areas and also guarantees loans to producers to pay for stock in new value-added cooperatives. See

http://www.rurdev.usda.gov/rbs/busp/b&i_gar.htm

Rural Cooperative Development Grants are made to nonprofit organizations and institutions of higher learning to establish and operate centers for cooperative development. See http://www.rurdev.usda.gov/rbs/coops/rcdg.htm

Under the Market Access Program, Commodity Credit Corporation (CCC) funds are used to partially reimburse cooperatives and

nonprofit regional and national agricultural trade organizations, among others, for the cost of conducting market development projects for eligible products in specific countries. See http://www.fas.usda.gov/mos/programs/mapprog.html

In fiscal 2001 and 2002, USDA will use CCC funds to make cash payments of up to $150 million to bioenergy companies, including

cooperatives, that increase their purchases of corn, soybeans, and other commodities to expand production of ethanol and

biodiesel in the United States from products grown in the United States. See http://www.fsa.usda.gov/daco/bioenergy/bioenergy.htm

.

.

.

.
32 March/April 2001 / Rural Cooperatives Rural

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Stop 3255

Washington, D. C. 20250-3255

Periodicals Postage Paid

U.S. Department of Agriculture