R

u

ral COOPERATIVES COOPERATIVES

USDA / Rural Development November/December 2006

How bike co-op 

went off track

page 16
Renewable energy

is the oldest new

idea to come along

in a long, long time.

The dream of harnessing the power

of the wind and the

energy of the sun is

as old as mankind. 

A hundred years ago, Rudolf Diesel was running engines on

peanut oil. About 80 years ago, Henry Ford predicted that

ethanol was the fuel of the future. 

For many years, cheap and abundant fossil fuels priced

these and most other alternatives off the market. Today, however, the potential of renewable energy is finally ready to be

harvested. 

On Oct. 12 in St. Louis, Mo., I had the privilege of listening as President Bush addressed 1,500 leaders from agriculture, the renewable energy, automobile and oil industries, the

railroads, state and local governments and investment bankers

on the urgency of diversifying America’s energy supply (see

page 8). 

The occasion was the “Advancing Renewable Energy: An

American Rural Renaissance” conference. Sponsored jointly

by USDA and the Department of Energy, the conference

marked a new era. The old phrase “alternative energy” needs

to be retired. Why? Consider this:

• Ethanol production is at 5 billion gallons per year and rising fast;

• More than 10,000 megawatts of wind energy is being generated;

• The biodiesel-production curve is headed almost straight

up, from 2 million gallons in 2000 to a projected 254 million gallons in 2006.

Yesterday’s niche “alternatives” are going mainstream.

Across the spectrum — ethanol, biodiesel, wind, solar and

cellulosic ethanol — technological advances are reducing

costs and improving production efficiencies. While fossil

fuels will continue to provide the bulk of the nation’s fuel

supply for decades to come, the outlines of a new energy

economy are taking shape. For rural America, this is a historic opportunity.

It’s not always possible to put a price tag on opportunity,

but this time we can. Americans this year will spend more on

imported oil than on every ear of corn, bushel of wheat, bale

of hay, cow, hog, tomato, apple and orange combined. USDA

currently projects the total value of U.S. agricultural production in 2006 at $273 billion, while U.S. oil imports for the

year will exceed $300 billion. 

If we can replace 1 billion barrels — about 20 percent of

total oil imports — with biofuels, that is a new market for

America’s farmers greater than this year’s projected net farm

income of $54 billion. Wind and solar power add even more

potential. 

USDA is committed to helping rural America realize this

potential. Since 2001, USDA Rural Development has invested in excess of $482 million in more than 1,000 ethanol,

biodiesel, wind, solar, geothermal and other energy and energy-efficiency projects. USDA as a whole has committed more

than $1.7 billion to renewable energy, bio-based products and

energy-efficiency investments. 

The best news is that private investment is soaring, markets are taking over and the renewable fuels industry is

beginning to move under its own power. America is blessed

with abundant energy resources. Once the price is right,

these will find their way to the market. That is beginning to

happen now. 

The transition to a new energy economy will take decades.

But as President Bush has said on many occasions, America

can beat its addiction to imported oil. We have, in fact, made

more progress on renewable energy in the last six years than

in the previous 30.

That’s no accident. It directly reflects the incentives provided in the 2002 Farm Bill and the Energy Policy Act of 2005, as

well as the continuing commitment outlined in the President’s

Advanced Energy Initiative announced early this year. 

This is important for our national security. It’s good for

the economy and the environment. For rural America, it is

the greatest opportunity for new markets, new investment,

new jobs and wealth creation in our lifetimes. 

It is exciting to be a part of it, and at USDA Rural

Development we look forward to working with you to turn

renewable energy into economic opportunity and an improved

quality of life in rural communities across America.

— Thomas Dorr,

USDA Under Secretary for Rural Development ■

2 November/December 2006 / Rural Cooperatives

COMMENTARY

New Energy Sources: 

Big Deal for Rural America

Thomas Dorr at the opening of a biodiesel

plant in Delaware. USDA photo by Kathy

Beisner
Rural Cooperatives / November/December 2006 3

Rural COOPERATIVES (1088-8845) is published

bimonthly by Rural Business–Cooperative Service,

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

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Copies may be obtained from the Superintendent of

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Mention in Rural COOPERATIVES of company and

brand names does not signify endorsement over

other companies’ products and services.

Unless otherwise stated, contents of this publication

are not copyrighted and may be reprinted freely. For

noncopyrighted articles, mention of source will be

appreciated but is not required.

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

discrimination in all its programs and activities on

the basis of race, color, national origin, age, disability, and where applicable, sex, marital status, familial

status, parental status, religion, sexual orientation,

genetic information, political beliefs, reprisal, or

because all or part of an individual’s income is

derived from any public assistance program. (Not 

all prohibited bases apply to all programs.) Persons

with disabilities who require alternative means for

communication of program information (Braille,

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

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

To file a complaint of discrimination, write to USDA,

Director, Office of Civil Rights, 1400 Independence

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

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

is an equal opportunity provider and employer.

Mike Johanns, Secretary of Agriculture

Thomas C. Dorr, Under Secretary,

USDA Rural Development, 

Jack Gleason, Administrator, 

Rural Business-Cooperative Programs

Dan Campbell, Editor

Vision Integrated Marketing/KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or

Fax (202) 720-4641, Information Director,

This publication was printed with vegetable oil-based ink.

R

u

ral COOPERATIVES COOPERATIVES

November/December 2006 Volume 73 Number 6

p. 4

p. 8

p. 16

p. 20

On the Cover:

Workers didn’t just produce bicycles and accessories at the Burley

Design Cooperative in Oregon, they also owned it until late last summer.

A number of problems led to its demise and recent sale. See page 16. 

USDA photo by Stephen Thompson 

FEATURES 

4 Dairy Dilemma

Ban on rBGH use by Tillamook sparks conflict

by Thomas W. Gray

8 Promise of renewable energy

focus of St. Louis conference

By Stephen Thompson

12 Outside Interests Put Money on Table

Ethanol was built on cash from farmers and their neighbors;

But the boom is pushing them aside in favor of deeper pockets

15 All co-ops must use new tax form

16 Bike Co-op Goes Flat 

Difficulties faced by worker-owned bike co-op

offer lessons for others of potential business pitfalls 

By Stephen Thompson

20 Magnifying the Message 

Co-op Month efforts spread the word about 

benefits of producer- and user-owned businesses 

By James Wadsworth

25 Fading Fortune

Investor-owned growth spurt pushes co-ops off Fortune 500 

Bruce J. Reynolds & David S. Chesnick

DEPARTMENTS

2 COMMENTARY

11 MANAGEMENT TIP

23 VALUE-ADDED CORNER

26 SPOTLIGHT

27 CO-OP DEVELOPMENT ACTION

29 NEWSLINE

41 2006 ANNUAL INDEX
4 November/December 2006 / Rural Cooperatives

Dairy Dilemma

Ban on rBGH use by Tillamook sparks conflict

Thomas W. Gray, Ph.D.

Rural Sociologist

USDA Rural Development, Cooperative Programs

Editor’s note: The author welcomes feedback from readers on this

article and the general topic of the countervailing power of cooperatives in the market place. Their thoughts may be used in future

articles, and can be e-mailed to: Thomas.Gray@usda.gov. Citations

of reference material are listed by author name and title of article,

as available on the Internet. Later references to the same work give

only the author’s name and year of publication. Readers may find a

more extensive version of this article in the forthcoming

Cooperative Accountant, Winter 2007. 

hen Tillamook County Creamery Association

voted in 2004 to ban use of synthetic bovine

growth hormone (rBGH) by its producer-members, it triggered a

conflict within its membership and with

Monsanto Corp., the sole manufacturer of the hormone. The

often-heated dispute lasted about 18 months, from May 2004

until February 2005, during which time the co-op vigorously

resisted efforts by Monsanto and pro-rBGH members to

convince it to reverse course and allow members to use the

growth hormone. 

Tillamook, based in Tillamook County, Ore., is a relatively small dairy cooperative of 147 dairy farmer-members, with

an established worldwide reputation for excellence for a wide

variety of dairy foods. It is especially renowned for its cheddar cheeses. Total sales in 2004 were $260 million. 

Monsanto is a multinational corporation, headquartered in

St. Louis, Mo., with offices in nearly 50 countries. It produces a wide number of chemical and agriculture-related

products. It had sales of $6.3 billion in 2005. (Hoovers Online, September 2005) 

The conflict is, in part, a result of differences in organizational philosophies, structure and power

between different types of economic organizations.

W
In this case, the conflict is between a farmer-owned cooperative and a multinational, investor-driven corporation. This

article suggests how these differences in corporate philosophy

and goals may have influenced the conflict, and comments on

the continuing relevance of cooperatives in furthering democratic business processes in civil society. 

Synthetic rBGH: pros and cons

The FDA approved the use of synthetic growth hormone,

rBGH (recombinant bovine growth hormone) also referred

to as rBST (recombinant

bovine somatotropin) in

1994. It is a genetically

engineered growth hormone that can stimulate

cows to give more milk.

Advocates suggest it can

increase milk yields by

10–25 percent via injections

every 14 days. (Alex

Pulaski, Hormone Fuels a

Fight in Tillamook, 2005) In

an era of high feed and fertilizer costs, with relatively

low milk prices, many

farmers have been tempted

to draw upon the production-increasing abilities of

rBGH. 

John Fetrow (Economics of Recombinant Bovine

Somatotropin, 1999) has estimated that in adequately

managed dairy herds, farmers can earn at least a 50-

percent profit over the expenses of using the product,

given typical prices for milk and feed. “By increasing

production in existing cows, the technology spreads

fixed costs over more production, increasing the margin and profits for the farm.” 

It is estimated Monsanto, along with Upjohn, Eli

Lilly and American Cyanamid spent as much as $1

billion in research and development of rBGH.

Monsanto Corporation, currently the sole producer,

sells rBGH under the brand-name Posilac. Bank One

Securities estimates that Monsanto earns upwards of

$270 million a year on rBGH sales. (Vince Patton

2005, Tillamook Bans Artificial Growth Hormone.) 

In June 1997, the Tillamook board approved

member use of the product. In April of 2003 and in

2004 the board held strategic planning discussions on

rBGH use. In May 2004, it voted to require producers to phase out its use in order for members to be

rBGH-free by April 1, 2005. The May 2004 vote was,

in-part, a response to consumer complaints concerning its safety. The vote was especially triggered by

consumer concerns about possible antibiotic residues

left in milk after cows had been treated for rBGHrelated infections. 

In the intervening period, from prior to June 1997 to May

2004, there were numerous press reports concerning the safety of rBGH, ranging from concerns about animal welfare

(mastitis and hoof splitting), consumer health (cancer risks

and antibiotic traces in milk), the natural environment (disposal of used syringes), to its socio-economic impacts (producing more milk for an already glutted milk market). (1997

TED Studies, Bovine Growth Hormone and Dairy Trade) 

Furthermore, Barham, Jackson-Smith and Moon

(University of Wisconsin, 2000) argue that use of

rBGH has not been nearly as profitable for farmers as

first promised, and adoption rates have been much

lower than anticipated. 

Advocates have countered that no research has confirmed higher cancer rates. Mastitis has been found to

occur at higher rates. However, “appropriate” management of a herd can minimize these problems,

thereby eliminating antibiotic milk residues. Fetrow

(1999) has argued the environmental risks may actually decline, since similar volumes of milk can be produced with fewer cows, reducing manure and methane

levels. 

Rural Cooperatives / November/December 2006 5

Tillamook Country Creamery has established an international reputation for

dairy products such as these. Protecting its brand and reputation led the

board to ban use of rBGH. Facing page: a co-op member’s farm in scenic

northwest Oregon. Photos courtesy Tillamook

Customer market

research had 

clearly indicated

that consumers

were concerned and

wanted a change. 
Consumer concerns lead 

to ban; Monsanto reacts 

Tillamook cheese sales are, in part,

driven by a highly visible brand name,

and a well-known reputation for producing a quality product. Most

Tillamook cheeses have won national

and international awards. 

James McMullen, CEO of

Tillamook, says the ban on rBGH was

primarily driven both by direct complaints to the company and by consumer market research. “In 2002...3

percent of phone calls and e-mails

received by the association were related

to bovine growth hormones. That number rose to 4 percent the next year, and

hit 8 percent by 2004.” (Pulaski) 

Steve Neahring, a board member

during the period when rBGH was

being contested, said protecting the

brand was the primary objective. “The

most valuable asset the creamery owns

is that brand.” 

Mark Wustenberg, vice president of

member relations at Tillamook, said

letters and e-mails were important in

making the decision, but that customer

market research had clearly indicated

that consumers were concerned and

wanted a change. 

Tillamook has also taken several

actions to protect the environment in

ecology-conscious Oregon. Such measures have included: 1) fencing 91 miles

of stream-banks to protect riparian

areas from dairy cow damage; 2) creating more than 1,000 alternate water

facilities for cattle; 3) planting over

400,000 trees along local rivers and

streams; 4) encouraging use of manures

as an alternative to commercial fertilizer; 5) building manure storage facilities

and 6) working with local and state governments on various other environmental enhancement projects. (Tillamook

County Creamery Association website,

2006) 

As reported by Pulaski (2005),

“Fearing consumer questions concerning the quality of the brand contributed

to banning the product.” Farmer-members need cooperative sales to stay in

business. They need to be able to use

the cooperative to process their milk

and market their farm products. Their

elected board, after two years of careful

deliberation — acting in its role as

strategic planner for the organization —

voted to ban use of rBGH. 

Monsanto reacted to Tillamook’s ban

with a letter to their rBGH customers

in the area. It said that restricting the

hormone’s use, “seems ill advised

because it would cut into dairy

farmer...choices, particularly their profits.” The letter said Monsanto would

work to ensure farmers have continuing

choices in how they run their dairies.

To do so, it may be necessary for a

Monsanto representative to call on

them and seek their advice.”

Conflict in structure and goals

Structured as an investment firm,

Monsanto obviously needs sales to maximize returns on investment for its

stockholders. Management is evaluated

on its ability to do so. Tillamook, the

cooperative, needs sales to guarantee a

market for the milk production of its

member-users. 

Co-op management performance is

similarly measured based on its ability

to successfully market its members’

products. Monsanto’s need for rBGH

sales came into direct conflict with

Tillamook’s concerns over providing a

continuing outlet for its members’ milk.

The co-op’s ability to market is closely

tied to brand quality, consumer interests

and environmental image and actions.

In January 2005, the cooperative

6 November/December 2006 / Rural Cooperatives

Voting power in Tillamook is on a one-member, onevote basis. This provision creates a more horizontal business organization in that — regardless of the amount of

milk any individual member sends or how much cooperative equity is owned — each member has only one vote.

This reduces tendencies within the cooperative for voting

power to concentrate with any single member or group of

members. 

Members who dislike cooperative policies may

dissent in various ways, among them: 

• Voicing their dissent to their elected representatives

at member meetings (as well as during interim periods); 

• Electing different cooperative decision-makers, i.e.,

boards of directors and other elected officials; 

• Seeking and running for a cooperative office themselves;

• Choosing to leave (or threaten to leave) the cooperative and marketing their milk elsewhere, although

this option can be limited by actual marketing alternatives. In the Tillamook case, members have several choices in the larger Willamette Valley of Oregon

to market their milk, including other cooperatives; 

• Writing letters, filing petitions, talking to the press,

hiring attorneys and seeking assistance from competitive organizations if they so desire. Ideally, however, members will remain loyal to the co-op as long

as they have sufficient opportunities within the

organization to voice their opinions. For the most

part, this has been the case. Chandra Allen,

spokesperson for Tillamook, reports that while the

rBGH vote of a year ago was contentious, there has

been no change in the membership. Members neither joined nor left due to the vote. ■

Protection for dissenting voices
received a petition from 80 members

asking that the board reconsider the

ban. The Tillamook board did reconsider, and on Jan. 31, 2005, announced

it would uphold the restriction. 

Eight days later, a letter was handdelivered to the Tillamook corporate

offices by a District of Columbiabased attorney. The letter called

for a general vote by all cooperative members to consider a change

in its bylaws. The proposed change

was written so that it would mandate that “the Board shall...not in

any way restrict the right of any

member to use any pharmaceutical

product approved by the ...[FDA]

...for use in dairy cattle.” The

petitioning letter had been signed

by 16 Tillamook members, and

had the effect of precipitating an

overall member vote on Feb. 28,

2005. 

Tillamook charged that

Monsanto was meddling in the

internal affairs of the organization.

Monsanto responded that it had

not instigated the vote, nor had it

provided legal assistance to the

Tillamook members seeking the

vote. 

Individual vs. collective rights

Tillamook members who

opposed the ban saw the issue as

one both of economics and individual rights. They also questioned

reports of ill effects on human health

and animal welfare. Bob Northrop, a

cooperative member, said he “stands to

lose thousands of dollars in income

because [his] cows will produce less

milk...and [argued] that the hormone

has no ill effects on humans or cattle.” 

Jim Wilson opposed the ban based

on individual rights concerns, asking

whether there would be further restrictions on products farmers were allowed

to use. “What’s the next thing we won’t

be able to use?”

Carol Leuthold, another member,

argued for the “democratic voice” issue:

“We want the freedom to dairy the way

we feel is best.” This sentiment was

echoed in the comment: “This is about

members of the co-op having a voice

and [our] voice is not being heard.” (As

reported by Pulaski, 2005.) 

Monsanto took a position consistent

with the Tillamook members who

opposed the ban. It was a matter of free

choice, economics and business sense as

well as health. “Monsanto director of

public affairs, Jennifer Garrett, emphasized the findings of the Food and Drug

Administration that there is no impact

on human health and that milk is exactly the same form as [that from] natural

cows and cows on Posilac.” (Patton,

2005, Tillamook Creamery bans use of

artificial growth hormones) 

While FDA studies in the United

States did draw such conclusions, supporters of rBGH restrictions countered

that countries such as Canada,

Australia, New Zealand, Japan and the

EU have banned its use. These countries have taken such action based on

concerns about animal health and

“unanswered questions about human

impacts.” (Patton, 2005) 

Those against its use also point to

faults and conflicts of interest in the

hormone approval process at the FDA

itself. These charges were investigated,

however, and found to be without merit

by the General Accounting Office. 

Ban upheld

Between Feb. 8 and Feb. 28,

2005, more than 6,500 consumers

contacted the cooperative to comment on the vote. Nearly 98 percent requested that Tillamook go

rBGH-free. Member sentiments

were similar on voting day, though

not with such overwhelming percentages. The vote was 87-43 in

favor of retaining the ban. 

In response to the vote, a

Monsanto spokesperson said: “We

are pleased that the producer owners of Tillamook had the opportunity to decide this for themselves

and respect the choices of the

majority of the producer owners...For individual producers, it is

unfortunate that their choice to

use a product that could have provided a significant economic benefit to many Tillamook family

farms had been limited...We hope

that in time Tillamook producers

will reconsider this policy.”

(Pulaski 2005)

Christie Lincoln, then a

spokesperson for Tillamook, said:

“We are a consumer-driven company

and we’re keeping consumers in mind. I

think this is a confirmation that our

members believe in us.” (William

McCall, 2005, Dairy Co-op Rejects

Monsanto Proposal to Reject Hormone Ban,

The Oregonian)

Collective interests

In joining a cooperative, members

give up some individual rights (in this

case, concerning a milk-production

practice) in exchange for greater collective market presence and all the advantages that brings. Individual members

delegate certain decision-making rights

to their elected board of directors to

make strategic planning (and operaRural Cooperatives / November/December 2006 7

Tillamook’s visitor center provides tourists a view of its

cheese-making operation. USDA photo by Dan Campbell

continued on page 36
By Stephen Thompson, Assistant Editor

stephenA.Thompson@wdc.usda.gov

Editor’s note: For more conference highlights, including the 

complete text of many of the major speeches, visit:

www.rurdev.usda.gov/rd/energy/#are.

orn ethanol and biodiesel may dominate the

renewable energy

arena now, but new

technologies may

expand and change

the picture dramatically in coming

years. Cellulosic ethanol may hold

the greatest potential of all for the

nation’s energy future, and wind,

solar, methane and hydrogen will

also likely play a role in helping the

nation move toward energy independence. These were among

prime messages participants took

home from “Advancing Renewable

Energy: An American Rural

Renaissance,” a conference in St.

Louis, Mo., Oct. 10–12, sponsored

by the U.S. Departments of

Agriculture and Energy. 

The event attracted about 1,500

participants, who heard from probably the greatest gathering ever of

high-ranking government and

industry leaders and researchers for

the purpose of addressing the state of the renewable energy

industry. Speakers included President George W. Bush,

Agriculture Secretary Mike Johanns and Energy Secretary

Samuel W. Bodman, among many others. 

America is at a “confluence of national security concerns

and environmental concerns that have come together, probably unlike any other time in our history,” President Bush said,

necessitating development of new energy sources not only for

economic reasons, but for national security as well. “We’re

too dependent on oil,” he stressed. 

Alluding to the rapid drop in gasoline prices this fall, the

President said, “I welcome the lower gasoline prices. My

worry is that a low price of gasoline will make us complacent

about our future when it comes to energy, because I fully

understand that energy is going to help determine whether or

not this nation remains the economic leader in the world.”

President Bush said one way Washington is helping

change the energy picture is by rewarding people for investing in research and development. The fact that the federal

research and development tax credit expires every year and

has to be annually renewed by Congress is problematic, he

said. “It means there’s unpredictability in the tax code, and

that’s not wise if you’re trying to encourage people to invest

dollars in the long-term,” he said, adding that the tax credit

should be made a permanent part of the tax code.

Regarding ethanol, Bush said, “I like the idea of promoting a fuel that relies upon our farmers. For those of you who

are in the ethanol business, you’re on the leading edge of

change. It’s coming, and government can help.” More feedstocks are needed to help boost ethanol production, he said,

8 November/December 2006 / Rural Cooperatives

Promise of renewable energy

focus of St. Louis conference

U.S. Energy Secretary Samuel Bodman, left, and Agriculture Secretary Mike Johanns announce the

awarding of $17 million for biomass energy research. USDA photos by Ken Hammond 

C
citing sugar, wood chips and switchgrass.

The President also expressed strong

support for federal expenditures on

renewable energy research and “new

ways to conserve and new ways to protect the environment through new technologies.” He referred to hydrogen

power as a promising, long-term energy

resource. “We’re spending $1.2 billion

to encourage hydrogen fuel cells. It’s

coming. It’s an interesting industry evolution, to think about your automobiles

being powered by hydrogen, and the

only emission is water vapor.”

The President said that with ongoing

research into new battery technologies,

he could “envision a day in which light

and powerful batteries will become

available in the marketplace so that you

can drive the first 40 miles on electricity — and your car won’t have to look

like a golf cart.”

USDA funds biomass development

Secretary Johanns used his welcoming speech to announce the awarding

of $17 million in USDA and

Department of Energy (DOE) assistance to 17 biomass research facilities.

“Our challenge is to increase the production and use of alternative energy

across this great nation, to maximize

its potential so that renewable fuels

are an economically viable and sustainable alternative,” Johanns said.

Both he and Secretary Bodman

extolled the potential of ethanol production from cellulose.

It was also announced that an additional $4 million will be awarded for

bio-based fuels research to accelerate

the development of alternative fuels.

The goal of the research is to lead to

breakthroughs that further the goal of

replacing 30 percent of transportation

fuels with biofuels by 2030. 

Secretary Johanns noted that in the

past six years, the number of ethanol

plants in operation increased from 54

to more than 100 producing 5 billion

gallons per year. An additional 44 are

under construction, representing a further 3 billion gallons of annual production. 

The number of biodiesel plants has

multiplied by more than eight times in

the past six years, from 10 to 86 plants,

with another 78 plants either under

construction or being expanded, which

will boost biodiesel production to about

2 billion gallons per year. 

Johanns countered

arguments that without

government subsidies,

ethanol is not competitive with oil. It costs an

average of about $1.10

to produce a gallon of

ethanol, he noted, and

the average wholesale

price of gasoline was

more than $2 per gallon in 2006. “Ethanol

will continue to be

competitive with gasoline as long as oil prices

don’t drop below $30

per barrel,” Johanns

said, noting that DOE

has forecast oil prices

will “even out, in the

long run, at more than

$50 per barrel.” 

Energy Secretary Bodman said the

secret to success with cellulosic ethanol

is engineering the microbes used to

break down both plant cell walls and

the plants themselves. Department of

Energy-sponsored research is making

gains in this area, he said.

“Our goal, as the President

announced in his State of the Union

Address, is to make cellulosic ethanol

Rural Cooperatives / November/December 2006 9

“Energy is going to

help determine

whether or not this

nation remains the

economic leader in

the world.” 

— President George W. Bush

President Bush said more feedstocks, in addition to corn, must be developed to offset oil imports. USDA Under Secretary

for Rural Development Thomas Dorr (above, left) noted that Rural Development has invested $460 million to develop

new energy sources. Next page, Agriculture Secretary Mike Johanns addresses the conference.
cost-competitive by 2012,” Bodman

stressed. 

Renewable Energy Century

USDA Chief Economist Keith

Collins said, “The potential costs to our

society of failing to develop new energy

sources, and the potential benefits to

agriculture and rural America of developing them, leave only one conclusion:

we must work vigorously to make the

21st century the renewable energy century.” U.S. energy consumption is likely

to rise 30 percent by 2030, adding to

the urgency to develop new energy

sources, he said. 

Biodiesel production is soaring right

along with ethanol. Only 5 percent of

the nation’s soybean oil was used to

make biodiesel in 2005, he said. “But

only one year later, 2006, we expect

biodiesel to consume 13 percent of total

soybean oil.”

“As more corn moves to more

ethanol plants, corn prices will rise,

corn acreage is likely to rise and there

will be ripple effects on agricultural

commodity markets broadly,” Collins

said. That may mean more acres being

pulled out of the Conservation Reserve

Program, which could have environmental impacts. 

Corn ethanol alone is insufficient to

meet much of the demand for motor

fuel, Collins noted. “Other sources of

renewable and alternative energy must

be developed if the U.S. is to make a

dent in oil imports,” he said. 

Patricia Woertz, president of Archer

Daniels Midland — and a former vice

president of Chevron — told the conference that while ethanol and biodiesel

will continue to be important, new

products still in the laboratory will supplement them, and possibly supplant

them in time. “We do know that the

future of energy is not in a single feedstock or product, but it is in diversity of

supply,” she noted. 

Woertz also urged for an end to the

“food or fuel” debate. The answer is

both, she said. “Put simply, in the big

picture, we will not meet the growing

demand for food in this world unless we

also supply the growing demand for

energy.”

The world is now using petroleum

faster than new sources are developed,

Woertz pointed out. Refining capacity

is also falling behind. New energy

sources, she said, will be needed to fill a

gap in global supply that will probably

develop by mid-century. “So the question is not whether a sustainable market

for biofuels exists,” she said, “but rather,

‘how big can — or should — that market become?’” 

Woertz indicated that ADM is

investing heavily in biofuels in the

United States and abroad, including

biodiesel and research on cellulosic

ethanol. ADM’s approach to cellulosic

ethanol centers on using corn hulls,

thus potentially boosting corn ethanol

production by 15 percent for the same

input, she said.

Petroleum industry and biofuel 

Red Cavaney, CEO of the American

Petroleum Institute, said that, far from

being opponents of ethanol, the U.S.

petroleum industry sees it as a valuable

source of fuel. “In our view, ethanol is

here to stay, and it is a very important

part of our nation’s gasoline pool,”

Cavaney stressed. “It is absolutely

essential that ethanol and the entire

biofuels industry become strong, vital

and self-sufficient.”

Cavaney expressed his opposition to

current ethanol policies, however, saying that the ethanol industry is capable

of competing in a free market without

subsidies and government incentives.

He cautioned that states mandating

ethanol use would encourage “boutique fuels,” raising costs and leading

to price volatility. He advocated allowing the market to determine the way in

which alternative fuels are introduced.

Cavaney was followed by Vinod

Khosla, the billionaire former cofounder of Sun Microsystems and now

an ethanol booster and venture capicontinued on page 38

10 November/December 2006 / Rural Cooperatives
Bruce J. Reynolds, Ag Economist 

USDA Rural Development 

Editor’s note: Made a move at the managerial or director level at your co-op that you

think would be of interest to other co-op

managers and directors? If so, please contact

the editor at: dan.campbell@wdc.usda.gov. 

here is no shortage of

“how-to” books and articles about improving

organizations and leadership. This genre typically

provides fairly similar sets of recommended best-practices to follow. Of

course, learning to recite best-practice

disciplines is one thing, but a genuine

understanding needed for their effective

application is another matter entirely. 

A context for visualizing how this or

that discipline would work helps build

genuine understanding. Short of direct

experience applying management disciplines, the closest approximation is to

read situational scenarios and case studies. Jim Brown — a founding partner of

Strive!, a leadership development firm

specializing in governance issues — has

written The Imperfect Board Member:

Discovering the Seven Disciplines of

Governance Excellence, which provides an

illuminating look at his subject and

gives vitality to his set of best-practices

for board members and management. 

While using a story to demonstrate

best-practices, the author also provides

summary tables of key points and diagrams to illustrate interactive processes.

But if a reader were to skip the scenarios and just read through the lists of

summary points and glance at the diagrams, the lack of context would greatly

reduce the likelihood that the book will

make a real impact. 

Furthermore, the situational scenarios contain insights that are not listed in

summary tables. A few of these insights

are discussed below, particularly some

points with special relevance for cooperatives. The complete list of key points

and the seven disciplines is not re-stated

here, but should prove of interest for

co-op leaders and others who read the

book.

The Imperfect CEO ought to be

added to the title, because the CEO is

also part of these stories and is involved

in much of the book’s wisdom about

superior governance. Even an excellent

board can perform poorly if its interactions with the CEO are strained. 

The book provides insightful parallels between the boards of a for-profit

corporation and a citizen group that

directs the work of a community parks

and recreation department.

Surprisingly, the lessons learned are

drawn from the latter and are applied

for the benefit and improvement of the

former. In this sequence, the CEO is

the source of some of the friction in the

corporate board room. As a community

board member, he introduces a few

wrinkles that have to be ironed-out.

The fact that the CEO gains bestpractice insights from his service on the

community board offers a lesson in

humility. The term “imperfect” in the

book’s title also suggests the author’s

implicit belief that a little humility can

make a positive contribution to good

governance. The need for humility is

especially relevant when boards are

rightly composed of individuals with

diverse backgrounds and have disagreements to work-out. 

Another useful insight that Brown

demonstrates from the workings of the

community board is that directors must

refrain from “talking as a customer and

expecting to be heard as an owner.” In

this case the board members are users

of their community’s parks and recreation services, yet, as directors, they

have to stay focused on benefits for the

whole community and not specific ones

for themselves. Likewise, directors of a

cooperative are users of the services and

also must adopt a long-term and total

membership perspective.

Brown recommends that organizations draw bright lines to demarcate the

boundaries of responsibility between

principals and agents. The directors are

representatives of the principals who

are responsible for overall direction,

planning and fiduciary duties. The

agents are the hired management and

staff who are responsible for operations

Rural Cooperatives / November/December 2006 11

MANAGEMENT TIP

Imperfect Directors & CEOs

New book focuses on seven disciplines of business governance excellence 

continued on page 40

T
By Minneapolis Star Tribune Staff 

Editor’s note: this article was the fourth in

a five-part series on the ethanol boom in

Minnesota and the Midwest that appeared

in the Minneapolis Star Tribune in

October. It is reprinted by permission of the

Star Tribune, www.startribune.com. 

orris, Minn. — Bobby

Johnson is still not used

to the snide comments

and envious glances. 

Johnson, who owns the

grain elevator in this western Minnesota

city, dates the resentment to a Nov. 14,

2005, meeting at the Old No. 1 Bar &

Grill. There, amid impassioned

speeches and accusations of

selling out, Johnson and other

shareholders voted to sell the

city’s ethanol plant to an

Australian company. 

The sale generated windfalls,

some in excess of $2 million,

for some investors. Johnson,

54, made half-a-million dollars

— enough to pay off four

decades of debt. But it also

turned some farmers against

one another, creating division

in a community once united

behind the ideal of a locally

owned ethanol plant. 

“You couldn’t pry their farms

away from them, but they sold

this one [ethanol plant] real

quick,” said Gerald Rust, a

Glenwood farmer and former

chairman of the plant’s board

who voted against the sale. 

Midwest farmers may have

built the U.S. ethanol industry,

but two decades later they are

increasingly worried about

being elbowed aside as

Washington politicians, Detroit

automakers and Wall Street

investment bankers finally

embrace it. 

Just one in eight ethanol

plants under construction this

12 November/December 2006 / Rural Cooperatives

Outside Interests Put Money on Table

Ethanol was built on cash from farmers and their neighbors; 

But the boom is pushing them aside in favor of deeper pockets

Corn flows into Bobby Johnson’s grain elevator in Morris, Minn. Johnson made about $500,000 on the

sale of ethanol stocks when an Australian company bought out the mostly farmer-owned plant. Photos

by David Joles, Minneapolis Star Tribune 

“No one from a big

city can comprehend

what an ethanol

plant means to a

farming community

of this size.”

M
summer were farmer-owned, compared

with eight in 10 just two years ago,

according to the Renewable Fuels

Association, a trade group. And with

foreign and U.S. investors combing the

countryside for sites to build or plants

to buy, a number of farmers are opting

to sell rather than risk competing

against the much larger privately owned

plants. 

This spring, Global Ethanol, an

Australian investment group created by

a large South African bank

and other investors, bought a

60-percent stake in an ethanol

plant in Lakota, Iowa, for

$100 million. About a third of

the plant’s nearly 1,300 farmer

members voted against the

deal. 

About 125 miles west, in

Sioux Center, Iowa, a farmerowned ethanol cooperative is

weighing a merger offer from

a public company that it won’t

identify. The plant’s general

manager, Bernie Punt, said he

expects the board of directors

to vote on the proposal within the next

month. 

A cooperative effort 

To some farmers and politicians, the

notion of sending profits from an

ethanol plant to far-flung investors

undermines the rationale behind the

industry — that farmers reap the profits

from value-added processing. It’s a sensitive issue in Minnesota, where most of

the ethanol plants are still owned by

farmer groups. 

In Winnebago, a southwestern

Minnesota city with fewer than 1,500

people, the Corn Plus ethanol plant

employs the mayor, three firefighters

and two members of the city’s rescue

and ambulance squad, according to general manager Keith Kor. Each spring,

the plant sponsors the after-prom party

at the local high school, with refreshments and prizes paid for by ethanol

money. 

Last year, the farmer-owned plant

paid $16 million in profits back to its

750 shareholders. 

David O’Brien, owner of the Napa

Auto and Farm Parts store in

Winnebago, said he makes up to two

deliveries a day to the plant. “No one

from a big city can comprehend what

an ethanol plant means to a farming

community of this size,” he said. 

In June, VeraSun Energy raised more

than $400 million through an initial

stock offering. Before the ethanol

boom, however, plant backers would

spend months on the road, meeting in

American Legion halls, coffee shops

and church basements, where they

would try to sell the concept to hundreds of individual investors. 

“They were like evangelical meetings,” recalled Loris VanHooserof

Foley, Minn., who owns shares in the

Central MN Ethanol Co-op, a plant in

Little Falls, Minn. “Only people who

truly believed in the promise of ethanol

would commit themselves to that much

work.” 

Lenders usually needed more convincing. Directors of the Corn Plus

plant, desperate for a loan in 1993,

resorted to sending a batch of strawberry pies to a local bank. 

“In the old days, you generally had

to sweeten people up before they’d talk

to you about ethanol,” said Bob Weerts,

former chairman of Corn Plus. “Now

they’re bringing us the pies.” 

Today, nearly one out of three farmers in Minnesota who grow at least 100

acres of corn owns shares in ethanol

plants, according to the Institute for

Agriculture and Trade Policy in

Minneapolis. 

“If a farmer in the Midwest hasn’t

been given a chance to invest in an

ethanol plant by now, then you gotta

wonder what rock he was sleeping

under,” said Greg Lepper, a corn and

soybean farmer from Ashland, Ill. 

Some, such as Randy Buboltz of

Hector, Minn., have bet heavily on the

industry. The corn and soybean farmer

owns more than 100,000 shares in the

Heartland Corn Products ethanol plant

in Winthrop, a stake worth

about $500,000. He delivers a

third of his corn crop each

year to the farmer-owned

plant, and twice each day he

calls up the website of the

Chicago Board of Trade to

check the price of ethanol

futures. 

Buboltz said he invested in the Winthrop plant

because he saw it as an attractive hedge: if corn prices fell,

the local ethanol plant got

more profitable and he would

receive fatter dividend checks. 

“It was all focused on this little

dream of adding a small premium to

our corn value,” he said. “But from

Wall Street’s perspective, it’s got nothing to do with that. And that’s what

scares me.” 

Indeed, with demand for ethanol

surging, plants such as the ones in

Winthrop and Winnebago have become

prime takeover targets for large corporations, Silicon Valley-based investors

and foreign syndicates looking for quick

entry into a new source of energy. 

In the 1990s, before ethanol really

took off, Corn Plus got one or two buyout inquiries a year. The plant now gets

one or two a month. Twice this spring

the plant had to scuttle expansion plans

after discovering that two out-of-state

corporations had already snatched up

the sites it wanted. 

Rick Lunz, president of the Corn

Plus board, said the ethanol plant

learned the hard way that being local

didn’t give it an inside edge over outside

competitors. “The ethanol industry is

expanding so quickly that the first perRural Cooperatives / November/December 2006 13

Bobby Johnson, with daughter Christine, says he occasionally gets

snide comments and envious glances from others in the town, due

to the big pay day he got when the local ethanol plant was sold .
son that looks at a site and has all the

requirements gets to build it,” he said.

“It’s just a different world.” 

The issue of local control is on

Washington’s agenda. Minnesota

Senator Norm Coleman said federal

policymakers are pondering how to tie

local ownership to federal ethanol subsidies. 

“Who is going to reap the benefit 

of this ethanol explosion?” Coleman

asked. “Is it going to be folks at the

local level, is it going to be farmers, 

is it going to be through co-ops ... 

or is it going to be Wall Street?” 

Pride, then a divide 

Built in 1990, the Morris ethanol

plant was one of the city’s most conspicuous landmarks and rivaled the local

branch of the University of Minnesota

as a source of pride. 

Known locally as DENCO —

Diversified Energy Co. — the facility

proved so profitable that area store

owners said they timed their sales

around its twice-annual dividend

checks. Those who bought shares in

2000 earned back almost their entire

investment in dividends within two

years, plant officials say. 

State subsidies helped. Like most

ethanol plants in Minnesota, DENCO

received state payments for every gallon

of ethanol it produced — more than

$20 million so far. The plant is entitled

to receive producer payments through

2009. 

Yet the plant’s profitability surprised

some of its initial investors. At the time

of DENCO’s initial share offering, local

farmers worried whether the plant

could survive a calamity, like the 1996

drought that drained profits from a

large ethanol plant in nearby Marshall. 

Doug Ehlers, president of First

Federal Savings Bank in Morris,

remembers a grueling information 

session at the Best Western hotel in

Morris. There weren’t enough seats, so

he spent five hours sitting on the floor

while a group of farmers tried to persuade their friends and neighbors to

invest. 

“At that time, there were some people who thought they’d never sell those

shares,” Ehlers said. 

Last year, Babcock & Brown

Environmental Investments offered

$8.40 in cash for every DENCO share,

a 740-percent return for the company’s

original investors. 

In Morris, some viewed the $50 million buyout as a godsend for a small

plant that faced an uncertain future

competing against new plants three to

four times its size. More than 90 percent of the plant’s 363 shareholders

voted in favor of the transaction. 

Yet some farmers viewed the sale as

an act of betrayal — akin to selling a

local baseball team. They resented that

a handful of large shareholders stood to

walk away with million-dollar windfalls,

while future profits would flow to a foreign company. 

When shareholders arrived at the

Old No. 1 that November night to

vote, each received a booklet describing

the offer and the amount of shares

owned by the plant’s largest shareholders. Farmers who owned only a few

thousand shares could compare their

modest payday to those who owned

100,000 shares or more. 

The information fueled the perception among some investors that the

decision to sell was already made before

they stepped into the restaurant that

night. “The big boys made up their

minds, and there was no stopping

them,” said Dean Monson, a city councilman in nearby Chokio, Minn., and

owner of a trucking company. 

Erv Krosch, owner of the Dairy

Queen in Morris, said he knew next to

nothing about ethanol when he borrowed about half the $25,000 he needed

to invest in DENCO in 2000. He

learned about the plant from members

of DENCO’s board, who would often

stop in his restaurant at night to discuss

strategy over a burger and coffee, he

said. 

Krosch was among a small minority

of investors who voted against the sale.

“My biggest concern was that future

profits would leave the area,” he said.

“Small rural areas like this need to

retain as much as we possibly can.” 

Johnson, despite making enough

money to pay off four decades worth of

debt, resisted the urge to celebrate that

night. Instead, he had a few drinks,

shook a few hands and went home. 

“You could tell by the way people

were looking at you that they were

envious,” he said. 

Life after the sale 

Today, someone passing through

Morris would have no idea that

investors here reaped millions in profits

nearly a year ago. Flouting one’s wealth

is frowned upon in this city of 5,200. 

“Around here, if you drive a fancy

sports car ... there’s a good chance that

no one will do business with you,”

Johnson said. 

For Johnson, life hasn’t changed

much since the DENCO sale. He still

works in a tiny office about the size of a

moving van, scattered with buckets of

grain and cigarette butts. He can still

drive a nail with one measured blow

and lift 100-pound sacks of feed with a

single arm. And he still sticks his hand

in the corn as it drops from the grain

trucks, because he doesn’t trust the

electronic moisture testers that bigger

grain elevators use. 

“The only way to know if the grain

is good and dry is to touch it, feel it,

smell it,” he said, as he let the grain

pour over his arms like a warm shower. 

Yet the resentment that Johnson felt

that November night at the Old No. 1

still lingers. It slips out in a passing

remark from old friends or acquaintances. “They’ll say something like, ‘You

don’t have to worry, Bobby, with all

your money,’ or ‘If I had your money,

I’d burn mine,” he said. “It’s not so

much what they say, but the way they

say it.” 

The irony is that Johnson isn’t nearly

as wealthy as some people in Morris

make him out to be. He used nearly all

his proceeds from the DENCO sale to

pay off business loans, including about

$400,000 in debts on three new grain

bins he built along the railroad tracks in

the center of Morris. 

For the first time since he took over

14 November/December 2006 / Rural Cooperatives

continued on page 34
David Chatfield, Jack Gherty,

Charles Gill and Jean Jantzen have 

been selected for induction into the

Cooperative Hall of Fame. The four

cooperative business leaders will be recognized at the annual Hall of Fame

Dinner and Induction Ceremony at

Washington’s National Press Club on

May 2. The Hall of Fame, the cooperative community’s highest honor, recognizes those who have made “heroic”

contributions to cooperative enterprise.

• Chatfield is the retired president &

CEO of California and Nevada

Credit Union Leagues. Chatfield

advanced the cause of credit unions

here and around the globe in various

positions over four decades. He is

credited with devising the first national political action system for credit

unions and with helping to found and

lead the Filene Research Institute, the

credit union community’s think tank. 

• Gherty retired last year after 35 years

with Land O’Lakes, 16 of them as its

president and CEO. During his

tenure, Minnesota-based Land

O’Lakes was transformed from a

regional into a national farmer-owned

business, giving producers a powerful

presence in the marketplace and a

voice in the policy arena. Under

Gherty, the co-op’s membership

expanded from 15 to 39 states and

annual sales tripled. In 1987, Gherty

spearheaded a precedent-setting joint

venture between Land O’Lakes and

Cenex that established a new model

for cooperative business activity. 

• Gill is the retired governor and CEO

of the National Rural Utilities

Cooperative Finance Corporation

(CFC). He helped shape CFC during

its formative years and served as its

governor from 1979 to 1995. While

working at USDA in the late 1960s,

he helped create CFC as an alternative source of capital for electric coops. He joined the CFC staff in 1972

and was tapped to be its second governor seven years later. Under his

leadership, CFC grew seven-fold as a

lending cooperative and created a

number of institutions that improved

the quality of life in rural America. 

• Jantzen is a life-long champion of coop communications and education.

She began her career in 1963 as a secretary for a predecessor co-op of CHS

Inc., now a $12 billion Minnesotabased food and energy cooperative. A

role model for women in cooperatives, she rose through the ranks and

was a key player in the 1998 merger

between Cenex and Harvest States

that created today’s CHS. She retired

in 1999 as CHS’ vice president for

public relations. Jantzen was a longtime trustee of the Cooperative

Foundation and was instrumental in

the growth of the CHS Foundation,

which today provides more than $1.3

million a year for cooperative education and other purposes. 

Nominations for the Hall of Fame,

established in 1974, are screened by two

committees of national co-op leaders.

The NCBA board makes the final

selections. The Hall can be visited on

the Internet at: www.heroes.coop. ■

Rural Cooperatives / November/December 2006 15

he Internal Revenue

Service (IRS) released a

draft version of new Form

1120-C on Oct. 12. This

form is the new common

federal income tax reporting form for all

cooperatives, including farmer cooperatives (which previously filed Form 990-

C) and all other subchapter T cooperatives (which previously filed Form 1120).

Interested parties were given 30 days to

comment on the draft.

The new form must be used by cooperatives for tax years ending on or after

Dec. 31, 2006. So, cooperatives on a calendar year tax year will be using Form

1120-C to report their 2006 income.

Cooperatives with total assets of $10

million or more will need to attach

Schedule M-3 to their Form 1120-C.

Schedule M-3 asks questions about the

taxpayer’s financial statements and reconciles any differences between book

income and reported income for tax

purposes.

By the time this magazine is mailed,

IRS will likely have released both the

final version of Form 1120-C and the

Instructions. Cooperatives that have not

already done so are encouraged to meet

with their tax preparer to discuss Form

1120-C and any related electronic filing

requirements so the transition to the

new form does not disrupt other operations or lead to avoidable disputes with

the IRS. ■

All cooperatives must use new

federal income tax form 1120-C

T

‘Heroic’ leaders named to Cooperative Hall of Fame
By Stephen Thompson,

Assistant Editor 

n the fitness-oriented town of Eugene, Ore., 

a different kind of cooperative struggled with

many of the problems familiar to modern agricultural, value-added co-ops. In the end, the

difficulties inherent in the worker-owned cooperative model forced Burley Design Cooperative, a manufacturer of much-sought-after premium bicycles and bike accessories for 28 years, to sell out to a private investor. 

Burley built high-end bicycles, including tandems and

recumbent bikes, on which the rider reclines as if in a chair.

It originated the child-carrying bicycle trailer and produced a

line of outdoor clothing and rain gear. The new owner has

announced that the bicycles and clothing will be dropped;

only the trailers, Burley’s strongest product line, will continue

in production.

The products had a reputation both in the United States

and overseas for high quality, durability and affordability. The

bike co-op competed in a market in which competition is

fierce from China and other countries with much lower production costs. Burley child trailers, which can be converted to

athletic strollers, retail from about $240 to more than $400.

Its tandem bicycles ranged in price from about $1,000 to

more than $5,000. 

Burley had no problem selling its wares — in fact, its main

dilemma was the opposite: it couldn’t make enough product

to meet demand. Further, as the new millennium began, inefficiencies ate away at its bottom line and it began having

trouble meeting its delivery obligations. After more than two

profitable decades, the cooperative began losing money in the

early 2000s. By 2005, it was losing $1.5 million a year.

Production limitation hurt co-op

Cary Lieberman was the marketing manager for the coop, and has been retained by the new owner. He says the coop’s inability to expand production was rooted in the cooperative structure itself. 

Part of the problem is one with which many co-ops are

familiar. When members can’t provide enough capital on

their own, the only alternative is to borrow. However, says

Lieberman, “Raising capital is a nightmare. Banks don’t

understand the

co-op model.” 

Another part of

Burley’s struggle was the tension between its tradition as an

egalitarian worker cooperative, in which all members originally had equal authority, and the need for employees who

specialize in management and have the knowledge, experience and authority to make decisions. Throughout its existence, the co-op’s structure evolved as it attempted to be true

to its roots and competitive at the same time.

The production problem was complicated by the fact that

Burley products, while not cheap, were priced lower than

competing products of the same quality. Lieberman names a

competitor that sells “virtually identical bikes” for $2,000

more. The easy solution might seem to be to increase prices

until demand and supply even out. 

But Burley was wary about raising prices: “We don’t want

to alienate our loyal customer base, and we don’t want to

hurt our reputation for great quality at reasonable prices,”

Lieberman told Rural Cooperatives.

Reluctance to charge more when turning customers away

might seem odd to some, but Burley was not a typical manufacturer. It was founded as a private business in 1969 by Alan

Scholz, who owned a bicycle shop in Fargo, N.D., when he

16 November/December 2006 / Rural Cooperatives

Bike Co-op Goes Flat 

Difficulties faced by worker-owned bike co-op

offer lessons for others of potential business pitfalls 

I
started selling bike bags sewn by his girlfriend, Beverly

Anderson, to other bike shops. In 1974, Scholz and Anderson

moved to the small Oregon town of Cottage Grove, and their

product line expanded to include bike shorts, backpacks, rainwear and ski clothing. The sewing was done by a small group

of people working in their homes and paid by the piece.

Employees form co-op

In 1978, Scholz and Anderson decided they didn’t want to

be bosses. They sold their business to their employees, after

having cooperative bylaws drawn up by a local attorney,

remaining on as co-op members. 

In the beginning, all members received the same wages, 

a practice that was to continue until only a few years ago.

Production of trailers began at about the same time. After a

difficult period during the recession of 1982 — during which

a number of members, including the founders, left the cooperative — business expanded dramatically as the fitness craze

took hold of newly affluent baby boomers. 

Burley moved to the larger town of Eugene to take advantage of a bigger labor force and better logistics. 

Eugene is an outdoorsman’s delight,

with mild weather

year-round and

easy access to

the spectacular

Oregon

coast,

year-round skiing and breathtaking rock-climbing, hiking and

mountain-biking venues nearby.

“Very few places in the country would

compare,” says Lieberman. 

In the 1980s, it was also a good place to get a bike

business off the ground. A Sony manufacturing plant provided good income to a relatively young and athletic population, a good local market for the co-op. 

Eugene, a university town, is known for a strong sense

of community, which fit well with the public-spirited

nature of the co-op and also contributed to the firm’s continuing commitment to quality. “If you’re going to see the people you sell to on the street, you want to be sure that your

products don’t disappoint them,” says Lieberman.

By December 1985, the cooperative had 15 members.

They were paid an hourly wage that varied by the month, as

determined by expected profits. The co-op restructured its

bylaws and established a regular payroll. All the members

were made employees and were paid consistent wages. A portion of the profits was set aside to fund capital improvements and meet other expenses.

While the changes improved the firm’s efficiency, other

ways of doing business left over from the early days of the coop remained. All members, regardless of their position,

received the same wage. Governing the co-op remained simple in concept: all members were directors. Acquiring new

skills and training was left up to individual members. 

Business expertise needed

Elliot Gehr, the last president of the co-op, was with

Burley for 18 years. “We’d always been amateurs,” he says,

“But we needed the expertise of business professionals.” As

the cooperative began a move to expand into the national

marketplace, its egalitarian informality became more of a

handicap.

Having all members on the board is democratic, but as a

cooperative grows, decision-making becomes more cumbersome and conflicts can cause delays. The U.S. market for

bicycles is subject to fads and rapidly changing styles and

trends, making such a management model a serious liability.

In 1987, founder Alan Scholz, by then no longer a member, proposed a partnership to build tandem bicycles. At the

time, the only high-performance tandems available were

very expensive. Scholz saw an opportunity in a

growing trend of couples engaging in fitness

activities together. 

In a joint venture with Scholz’s

company, Advanced Training Products,

Burley began manufacturing tandems, further contributing to business growth.

Burley and Scholz later ended the joint

venture, and the co-op began producing

bicycles entirely in-house.

By 1989, membership had grown to

39, and it was clear that things had

to change. Management of the

firm was still by consensus.

The workforce was divided into teams, each with

a leader. However, the

team leaders were only

first among equals; they

were not given effective

authority over their

team members. 

Management was

becoming increasingly

unwieldy, and decision-making

Rural Cooperatives / November/December 2006 17

USDA photos and graphic by Stephen Thompson
was handicapped by the necessity to get

a large number of people to agree on

the smallest details. “People would

waste time arguing where to put the hot

plate,” one member told me. “They’d

waste $300 worth of time arguing over

the color to paint a bike.” 

Restructuring improves productivity 

The co-op appointed a committee to

study restructuring. After much debate

and controversy, it was decided to elect

an eight-member board of directors and

to give team leaders the status of managers with the ultimate responsibility

for the performance of the people they

supervised. 

Gehr saw the elected board as a

mixed blessing. While it streamlined

decision-making, it also made many of

the workers feel insulated from running

of the co-op. “Some people choose not

to participate in our outer democracy

(government),” he says. “And now,

some chose not to participate here.”

The new structure made for muchimproved efficiency. Production and

sales continued to grow. By 1992, it was

clear that top-level management expertise had to come from outside. “We realized we had to import talent,” says

Gehr. For the first time, a new general

manager was brought in from outside as

an employee.

Also in 1992, the cooperative found

itself caught short, swamped by a wave

of unanticipated orders. In response, it

hired about 20 seasonal non-member

workers. After that, many more workers

were hired as non-members. The quick

expansion of employment resulted in

some problems, including what Gehr

says were some mistakes in hiring. 

In 2003, membership in the cooperative was closed, with all further hires

being employees only. In retrospect,

Gehr thinks that was a bad idea. “We

got bad advice,” he says. “Instead, we

should have hired more members.”

Gehr believes that membership encourages badly needed responsibility and

creativity. By the time the co-op converted, only 55 percent of the workers

were members.

Differential pay introduced

Another innovation made at the

same time showed more promise. For

the first time, differential pay was introduced. While pay levels were still lower

than average in most areas, paying more

for greater expertise or productivity

allowed Burley much greater flexibility

in hiring and retaining needed talent. 

Lieberman says that the shift to differential pay “shook things up.” As with

any innovation, it had its bad effects as

well as good. “Some people lost enthusiasm because they felt it was a betrayal

of cooperative principles.” 

Gehr maintains that other bad advice

hampered the co-op’s efforts to grow.

“The trouble is, most accountants just

aren’t familiar with the cooperative

model,” he says. “As a result, we didn’t

take advantage of opportunities to plow

profits back into the business, as we

should have.”

Gehr is especially troubled by the

co-op’s past ignorance of the use of

non-qualified dividends. “If you’re

growing, qualified dividends are the

easy answer. But in a less profitable

year, if you give out all of your profits

as dividend payments to members, you

have to borrow. The use of non-qualified dividends allows you to build up a

financial cushion.”

Lieberman says that in the past, the

cooperative was “property-focused” at

the expense of investing in machinery.

It moved into its present facility in

1996, a spacious, modern “green” building constructed with the help of the

members. But while the facility had

ample room, the use of the space available was not as efficient as it could be. 

After taking advantage of a state

grant for training in manufacturing efficiency, co-op managers and board

members realized that the various

stages of production were scattered

haphazardly. Machines and work stations had remained where they were

originally put, and new elements were

stuck wherever they would fit. 

Using what they had learned, they

were able to rationalize the set-up so

that each workstation required the same

amount of time. The trailer shop

showed an 18-percent improvement in

productivity, Gehr says, and nobody

had to work any harder. 

The changes ran into resistance from

18 November/December 2006 / Rural Cooperatives

Lots of hand labor, such as proper alignment of bike frames (as seen here in the Burley plant), is required in production of high-quality bicycles. 
some members, however. Once the

machines were put into their new, more

efficient positions, workers returning

after the weekend found everything

moved back to its original place.

Parts standardized

Other measures were put into the

works to improve efficiency. The co-op

began working to standardize the parts

that make up its various bicycle trailer

models, which are now the largest selling brand in Germany (they meet stringent German safety codes) and continue

to expand sales in North America. 

Burley saved not only time and

money, but cut back on greenhouse-gas

emissions through the use of powder

coating for bike finishes. Powder coating is more environmentally friendly

than “wet spray” paint, because it doesn’t use volatile solvents. It also takes

less skill and less time to apply. Wet

spraying demands care and skill to

apply the coat properly — applying it

too wet results in runs and sags; not

wet enough results in a dull or

“orange-peeled” finish. 

Powder coating works by spraying a

dry, electrically charged polymer powder onto the metal surface. The bike

frame is then placed in a large oven and

heated. The powder melts and forms a

hard, glossy protective finish. Besides

being more efficient to apply, powder

also gives a much tougher and more

durable coat. The disadvantage of powder coating is the sizeable capital expenditure required for the large oven to

heat the painted items.

Other upgrades included automation

of various tasks, including wheel building and truing and the production of

small parts. According to Gehr, the

automation reduced risk in comparison

to using outside suppliers: “By producing parts in-house, we’re not beholden

to others for delivery.”

In any case, the bike shop worked, as

Gehr put it, like a “cottage industry,”

with a huge number of different parts

for the various models and a great deal

of hand work. This doubtless contributed to a decision by the new owner

to close down production of all bicycles.

When interviewed last summer

(prior to the conversion), Lieberman

and Gehr both said that the Burley

board and management were well aware

of these and other stumbling blocks to

greater efficiency. “We’re making

investments now that we should have

made 5 years ago,” said Lieberman. 

Need for credit heralds change

The need for credit for upgrades led

to the cooperative’s conversion. The

firm’s CEO, Char Ellingsworth, had

been brought in from outside as the

chief financial officer. She was promoted when her predecessor left to use

experience he gained at the cooperative to engage in “lean manufacturing”

training.

One of Ellingsworth’s recommendations was a change in status to a worker-owned corporation. At the time, the

move was seen as solution to remaining

true to the cooperative spirit. The

intent was not to issue stock to raise

money, but to make the firm more

attractive to lenders. 

Cooperative shares were to be converted proportionately to stock shares.

Current workers were to be issued common stock, and former workers who

still held membership were given preferred stock. There was to be no controlling interest.

The board voted unanimously in

favor of the move. When the vote was

put to the membership, a significant

minority opposed it, seeing it as a

betrayal of the cooperative tradition.

“There were definitely a lot of unhappy

people,” says Lieberman. Nevertheless,

on June 23, 2006, the co-op voted to

convert.

The change apparently came too late

to save worker ownership of the firm.

By September, Burley had a huge backlog of orders — including more than

3,000 trailer orders — which it was

unable to fill because of a lack of cash

to pay suppliers. A search for emergency funding resulted in an offer by a

local businessman, Michael Coughlin,

to purchase the company’s assets and

liabilities. The purchase went through

on Sept. 8.

Coughlin says he wants to keep

Burley production in Eugene, unlike

other producers in the market that have

switched production overseas. However,

while 53 jobs were retained, the rest of

Rural Cooperatives / November/December 2006 19

“Some people lost

enthusiasm because

they felt it was a

betrayal of cooperative

principles.”

continued on page 35
By James Wadsworth

Education & Outreach Program Leader

USDA Rural Development 

high-voltage racing team, harvest festival displays, an on-line auction of co-op crafts and the

creation of an Internet co-op tutorial were some

of the many ways the nation’s co-ops observed

National Cooperative Month in October.

“Owned by our Members, Committed to Our

Communities” was the theme of this year’s event, and co-ops

of every size and type drove that message home in numerous

ways. Newspaper, radio and magazine ads were probably the

most popular method of spreading the word, but there were

also classroom visits, press releases, public service announcements and speeches before civic organizations, among

many other efforts.

The annual observance is intended to teach people

about the cooperative form of business, and to remind

members and non-members alike about what cooperatives do and the vital role they play in the life and

economy of their communities and the nation. 

Co-op Month is a time for cooperatives and co-op-related

organizations to stand tall and promote how cooperatives

benefit their members, their communities and their employees — and how co-ops work to provide such benefits every

day, year in and year out.

Following is a small sampling of the ways co-ops across

the country observed Co-op Month:

• Perhaps the crown

jewel of Co-op

Month activities is

the NCB (National

Cooperative Bank)

list of America’s

Top 100 Cooperatives, released

each year at the

start of

Cooperative

Month. The co-op distributes an attractive color bulletin

that not only includes a fold-out list of the entire Top 100

with details about each co-op, but also a wealth of related

information and charts. It provides a concise, revealing

look at the nation’s various co-op sectors. The co-op

bank also issues a press release to get the word out. 

This year’s report shows that the Top 100 co-ops

generated more than $140 billion in revenues, an

increase of nearly 10 percent from the previous year.

Ag co-ops remain the largest co-op sector, accounting

for $62.2 billion of the total, followed by grocery co-ops at

$32.2 billion, energy and electric co-ops at $14.3 billion,

finance co-ops at $13 billion, hardware and lumber co-ops

at $10.8 billion and all others at $8.4 billion. To view the

list, visit: www.ncb.coop.

• A related effort was launched this year during Co-op

Month by the International Co-operative Alliance when

it released the first ever Global 300 Cooperatives in Lyon,

France. The list of the Top 300 co-ops in the world shows

that Zen-Noh, a Japanese food and beverage co-op, is the

world’s biggest co-op, with $55.5 billion in annual sales.

The Global 300 shows that Switzerland’s largest employer

is a co-op, as are Europe’s largest dairy business, the

largest bank in France, New Zealand’s largest company

20 November/December 2006 / Rural Cooperatives

Magnifying the Message 

Co-op Month efforts spread the word about 

benefits of producer- and user-owned businesses 

A

Frontier Farm Credit in Kansas ran this Co-op Month ad (left) in farm

publications. Above, a poster that Foremost Farms used to promote a

Co-op Month booth at a harvest festival.
and the world’s largest marketer of rice.

Co-ops in 28 nations comprise the Global

300 list. 

The United States has the most cooperatives on the list with 62. Agriculture

accounts for about a third of the co-ops on

the list (virtually every one of the 28 nations represented

have at least one ag co-op on it). Financial institutions

(insurance, bank, credit unions and diversified financial

organizations) account for about 25 percent of the Global

300. Retail and wholesale co-ops comprise another 25 percent of the list. Other areas represented include energy,

health and manufacturing. See the

list at: www.global300.coop.

• The Race for Cooperative

Development in Washington,

D.C., sponsored by the

Cooperative Development

Foundation, raised more than

$50,000 to support cooperative

development efforts around the

globe. In addition to sponsoring

the race, the Foundation also hosted an on-line auction of cooperative art and craft items, which ran

from Oct. 6 through 31. Goods

auctioned included photos and

prints, quilts, clothing, rugs, jewelry, pottery, carvings, vacations and

other household items. Values

ranged from $14 to $7,700. The

auction proved to be more than a

fund-raiser. CDF Executive Director Elizabeth Bailey says

it also led to discussions with art and craft co-ops about

dealing with demutalization issues and the need for more

networking and idea sharing among art and craft co-ops. 

• Many cooperatives and co-op related associations ran special feature articles in their member publications and on

their websites during Cooperative Month. To cite just a

couple of examples: Georgia Magazine, published by the

Georgia Electric Membership Corporation, the trade

association for Georgia’s 42 customer-owned electric utilities, ran articles about the impact that rural electric cooperatives have on Georgia’s economy; the October issue of

Washington State Grange News contained a five-page

Cooperative Month supplement that highlighted many

cooperatives in the Northwest and their activities. The

newspaper is distributed widely to producers in the

Northwest region and to cooperative leaders around the

nation.

• Rural electric cooperatives and associations promote

Cooperative Month in a host of creative ways, from ads

and radio spots to magazine articles and prize drawings.

The National Rural Electric Cooperative Association

website includes a Co-op Month banner and links to

information about cooperatives, as well as an interview

with National Cooperative Business Association President

Paul Hazen about the importance of cooperatives.

Rural Cooperatives / November/December 2006 21

Team “High Voltage” represented the National Rural Electric

Cooperative Association (NRECA) at the Cooperative Develop-ment

5K Race in Washington, D.C. NRECA raised about $2,000 for the

Cooperative Development Foundation. 

This quilt was one of dozens of items auctioned over the Internet

to raise funds for international co-op development. Next page, one

of a series of Co-op Month ads posted for downloading at:

www.co-opmonth.coop.
• The greater cooperative family has a

long history of supporting cooperative

education and funding scholarship

opportunities as part of their commitment to their communities. In

Kansas, for example, the Arthur

Capper Cooperative Center and

Kansas State University Department

of Agricultural Economics awarded

11 cooperative scholarships to

College of Agriculture students for

the 2006–2007 academic year. 

• Adams Electric Cooperative,

Gettysburg, Pa., produced a radio ad

that describes how the co-op’s line

crews drove bucket trucks and supplies to Mississippi and Louisiana to

help restore power to members of

electric cooperatives hit by hurricanes Katrina and Rita.

Cooperatives helping cooperatives

for the ultimate benefit of members

was the underlying theme.

• Boone REMC, Lebanon, Ind., a

rural utility cooperative that serves

more than 10,000 customers in

Indiana, held a Co-op Month

drawing for a $150-credit on a

members’ electric bill and a $100

gift card to an electronics store. To

register for the drawing, customers

had to complete a short survey. The

cooperative has found that its Co-op

Month drawing is a simple way to

engage members and to remind

them that the co-op works for them.

The three survey questions are: Did

you know that Boone REMC is a

customer-owned cooperative? What is

the best way to communicate with

you? How can your cooperative

improve customer service?

• CHS/Land O’Lakes Member

Services sent a news release to its

state and national associations to use

in their newsletters for Cooperative

Month. The release describes the

availability of free on-line cooperative educational tutorials for anyone

to use, at: mbrservices.com. Tutorial

topics include cooperative principals

and practices, financial understanding

and commodity risk management.

• The Virginia Council of Farmer

Cooperatives, in association with

Friends of Industry of Agriculture,

held its annual Cooperative Month

Kick-off Breakfast, drawing more

than 125 leaders from cooperatives

and agricultural associations, government officials and representatives

from Virginia Tech and Virginia State

universities. The keynote speech was

by Ed Scott, the vice president of

Culpeper Farmers Cooperative,

Culpeper, Va. Virginia Governor Tim

Kaine signed a gubernatorial proclamation declaring October as

Cooperative Month in the commonwealth, and three annual cooperative

awards were presented to exceptional

cooperative members at the breakfast.

• The Wisconsin Farmers Union

published a special Co-op Month

issue of it newsletter, which featured

ads from co-ops and credit unions

around the state. A record 68 co-ops

and credit unions were featured this

year. A portion of

the ad fees collected go to support

WFU’s educational co-op camp at

Kamp Kenwood.

• Frontier Farm Credit, Manhattan,

Kan., placed an advertisement about

its business and its status as a cooperative in various regional agriculture

publications. It also

converted the ad into

a poster which was

widely displayed. 

• Foremost Farms and

a number of other cooperatives in

Wisconsin (including Accelerated

Genetics, Badgerland Farm Credit,

Co-op Country Partners, Oakdale

Electric Cooperative, Wisconsin Milk

Marketing Board and Westby Co-op

Credit Union) jointly promoted

Cooperative Month at the Harvest

Days Festival in Reedsville, Wis.

The co-ops used displays, exhibits

and demonstrations that highlighted

the many benefits cooperatives provide to members and their communities. The co-op booth offered door

prizes and free food. 

Plan now!

The examples reviewed here are just

a small sampling of Cooperative

Month efforts. While cooperative education and outreach is a full-time

endeavor, Cooperative Month is one

time when the combined efforts for all

co-ops can greatly magnify the message and spread it further. 

The National Cooperative Month

Committee, made up of representatives from cooperative organizations in

Washington, D.C., has created a website — www.co-opmonth.coop — with

ready-to-use ads and many other

resources co-ops can use to plan for the

next Cooperative Month. The National

Cooperative Business Association is

the coordinator of National

Cooperative Month.

Remember: the right time to start

planning for Cooperative Month 2007

is now! If your co-op does not have

one, form a Co-op Month Committee

that meets at least monthly for the next

six months, and then more frequently as

next October nears. Also, check to see if

your statewide co-op associations are

planning any special efforts you can

join. ■

22 November/December 2006 / Rural Cooperatives
By Dan Schofer,

Co-op Development Specialist

USDA Rural Development 

ew Jersey farmers and

food processors are facing

increasing pressures from

urban sprawl and stricter

land-use regulations.

These trends are forcing them to

rethink historic production practices.

Many producers and co-ops need professional guidance to meet changing

regulations and to maximize food safety. 

Access to new food technologies is

essential to preserving New Jersey’s

farms, increasing farmers’ market share

and boosting their profitability.

To help meet these needs, USDA

Rural Development’s New Jersey State

Office has partnered with the Rutgers

University Food Innovation Center

(FIC) and other stakeholders to expand

delivery of technical assistance to farmers, cooperatives, food processors and

rural communities. This assistance can

range from the formation of a co-op

steering committee to the implementation of a business plan. 

Rutgers sought a one-time

Agricultural Innovation Center grant in

2003 from USDA Rural Development

(RD) to get the center started. Since its

launch, FIC has helped 500 businesses,

with its primary focus being on New

Jersey’s agricultural sector. 

The partnership between USDA/RD

and FIC has provided grassroots technical assistance to farmers and rural businesses. USDA/RD funding, in combination with local FIC expertise, has

opened an avenue for product and business development not previously available in New Jersey. 

FIC has assembled a multi-discipline

team with various areas of expertise —

including business development, product development, food manufacturing

and retail marketing/sales — to help

strengthen the state’s farm and food

industry.

Business incubator 

FIC is currently building a 23,000-

square-foot business incubator in

Bridgeton, N. J. This facility will enable

FIC to fully realize the contribution it

can make to the New Jersey economy.

It will house food-processing and laboratory space, analytical laboratories and

distance-learning and teleconferencing

equipment. It will also provide administrative office space for staff and clients. 

The business incubator will help

with the formation of new cooperatives

and food companies while also providing a wide array of resources and technologies for existing producer groups

and food businesses. It is designed for

use by farmers and cooperatives, startup food companies, existing small- and

mid-sized food companies, and retail

and food-service establishments. The

incubator will provide assistance from

concept to commercialization.

“We want to develop an economic

model for other states looking to preserve farms and increase the quality of

life in rural communities,” explains FIC

Director Lou Cooperhouse. 

Co-op Development Center

In 2004, FIC received a Rural

Cooperative Development Grant from

USDA Rural Development to establish

a program to support the development

of cooperatives throughout New Jersey.

Rural Cooperatives / November/December 2006 23

VALUE-ADDED CORNER

From Concept to Commercialization

New Jersey business incubator to assist 

producers, co-ops & food processors

N

An artist’s depiction of the new Rutgers Food Innovation Center.

continued on page 40
24 November/December 2006 / Rural Cooperatives

By William Harms,

University of Chicago

Editor’s note: “In the Spotlight” recognizes

the accomplishments of cooperative leaders

and members. To suggest someone to be 

featured, send e-mail to: dan.campbell@

wdc.usda.gov, or call (202) 720-6483. 

fter a long and fruitful

career as leader of one of

the nation’s leading berry

co-ops, 79-year-old

Herbert Baum earned a

Ph.D. from the University of Chicago

in August, making him the oldest person ever to be awarded a doctorate by

the university. Baum, who also worked

as a federal government ag economist

early in his career, clearly knows strawberries from the inside out. 

Early in his career, Baum worked at

Blue Goose Inc., based in Anaheim,

Calif., a nationwide grower and shipper

of fruits and vegetables. He helped

develop the relatively new strawberry

industry there, which Blue Goose was

pioneering. Baum joined Naturipe

Berry Growers in San Jose, Calif., in

1958, where he became vice president

of sales for the strawberry grower-shipper cooperative. He became president

of the cooperative, retiring in 1991 after

being twice-elected chairman of the

California Strawberry Commission. 

Baum’s ability to understand the free

market was particularly crucial to the

success of the berry industry, because

the federal government does not support the price of strawberries and other

fresh fruit by buying excess production.

Baum also was a firm backer of marketing and advertising, which increased the

nation’s demand for strawberries and

compensated for the problem of over

production. 

When he left the University of

Chicago in 1951 to become an agricultural economist in Washington, D.C.,

Baum had a master’s degree and was just

short of writing his dissertation to earn a

doctorate. His dissertation contributes to

agricultural economics by examining

how to measure the impact of fees

charged producers for commodity promotion and research. 

The thesis, based on a case study of

the strawberry industry in California,

developed a model for researchers to

understand the long-term value of the

fees assessed growers. The model shows

how the policies of the state strawberry

commission, which supported research

into improved varieties, improved production per acre and aided grower profitability. 

James Heckman, winner of the

Nobel Prize in Economic Sciences in

2000, said of Baum’s work, “Herb

Baum’s Ph. D. thesis is a well-executed

study of an industry partially monopolized by government authority. His

application of basic price theory to

understand the consequences of this

policy is in the best tradition of empirical price theory at Chicago. He combines theory with evidence in a convincing way in a serious piece of research on

a major agricultural industry.” 

Baum’s work with strawberries

began in California in 1953 after working for the federal government upon

completing is master’s degree. Inspired

by former professor and free-market

economist Milton Friedman, who went

on to receive a Nobel Prize, Baum

decided to find work in private industry. 

“I went into the produce business

because, as a boy growing up in Fort

Wayne, Ind., that was the business my

family was in,” explains Baum. 

The strawberry business was in its

infancy when Baum went to California.

Fresh strawberries at the time were only

available from local producers and the

season was short. Most strawberries

grown in California were frozen and

shipped while the fresh ones were consumed in the state. New varieties,

improved growing techniques, and better marketing and transportation revolutionized the industry. 

By the 1990s, strawberries were

grown up and down the coastal valleys

of California and shipped around the

country nearly year-around. The industry also developed a thriving export

market in Japan. Fresh strawberry consumption in the United States grew per

capita from 1.6 pounds in 1962 to 5.23

pounds in 2005. ■

IN THE SPOTLIGHT

Fruit co-op leader Baum oldest ever

to earn University of Chicago Ph.D.

Herbert Baum, Ph.D., on graduation day.

Photo by Lloyd DeGrane, Univ. of Chicago 

A
To second section of 

Rural Cooperatives 

November/December 2006