Rural

COOPERA COOPERATIVES

USDA / Rural Development November/December 2003

New days,

new ways:

Co-ops finding

ways to adjust to

changing market

conditions

New days,

new ways:

Co-ops finding

ways to adjust to

changing market

conditions

USDA / Rural Development November/December 2003
2 November/December 2003 / Rural Cooperatives

Issues vital to the future of the

nation’s producer-owned cooperatives

were closely examined during a hearing

conducted by the House Ag Committee on Oct. 16 (see page 9). While no

firm answers or course of action was

decided upon, it was obvious that the

state of the co-op sector is front and

center on the agenda of the House

Ag Committee. As Rep. Charles

Stenholm said, this was not a day

for pouring concrete, but for setting up the forms. 

How those forms are filled during coming months may well

determine the future of the

nation’s farmer cooperatives. All

those with a vested interest in

cooperatives should monitor this

process and be prepared to provide

their input.

Ultimately, the question appears

to be not whether change is needed, but how much change. Some

feel a minor tune-up will suffice,

while others say an engine overhaul is

closer to the target. As you can read in

our coverage of the hearing, there is

some strong feeling that the new state

co-op laws in Minnesota and Wyoming

go too far in broadening the co-op

model, while others feel those are the

type of changes needed to keep co-ops

alive and well in the 21st century. 

Much of the testimony related to

how a number of new generation cooperatives—whose leaders are committed

to the concept of producer ownership

and control—have converted their

business structure to LLCs in order to

secure tax benefits and outside equity

to invest in value-added efforts. Others

warned that this outside equity comes

with strings attached—strings that

could potentially lead to some loss of

producer control to outside interests.

Similar differences of opinion exist

over whether the closely related issue

of CoBank’s charter should be expanded so that it can finance a broader array

of cooperatives, and even continue to

lend for a period of five years to some

non-cooperatives that convert to other

business structures. 

Clearly, Congress and the co-op

community have their work cut out for

them. The stakes are high: cooperatives

typically account for around $100 billion in farm sales and they are often the

most important source of jobs and tax

revenue in rural towns where every job

and tax dollar is desperately needed.

They provide quality, affordable supplies and services in rural areas where

they otherwise might not be available.

Even those farmers who do not belong

to a cooperative benefit from their ability to favorably impact prices and terms

of delivery and through their market

expansion efforts. 

Most of the testimony underscored

that successful ag marketing co-ops 

in the future will increasingly be

involved in some stage of value-added

processing of their members’ crops

and livestock. But turning wheat into

pizza is a much more expensive

undertaking than storing it and shipping out of town in railcars, as Keith

Kisling, a wheat farmer from

Oklahoma, testified. How to help

producers get that needed capital

while still keeping the operations

under the control of farmers is the

bottom line. 

A number of questions were

raised about whether existing financial assistance programs at USDA

could be better used by co-ops if

changes were made. Related suggestion ranged from upping the

limits on USDA’s B&I loan guarantees to making changes that will

increase use of our Co-op Stock

Purchase Program. As Rural Development Under Secretary Thomas

Dorr pointed out, a major co-op program review is being launched to evaluate these programs, which hopefully

will lead to improvements. 

Regardless of where you stand on

this debate, we should all be encouraged to see the strong interest of

Congress in cooperatives and to

know that Congressional leaders realize the crucial role co-ops play in the

nation’s rural economy. One thing

everyone seemed to agree on: if we

take steps to strengthen producerowned cooperatives, we also

strengthen the nation. 

James Haskell, 

Acting Deputy Administrator

USDA Rural Business-Cooperative Service 

COMMENTARY

Setting up the forms

How to help 

producers get needed

capital while still

keeping the 

operations under 

the control of farmers

is the bottom line.
Rural Cooperatives / November/December 2003 3

Rural COOPERATIVES (1088-8845) is published

bimonthly by Rural Business–Cooperative Service,

U.S. Department of Agriculture, 1400 Independence

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

The Secretary of Agriculture has determined that

publication of this periodical is necessary in the

transaction of public business required by law of 

the Department. Periodicals postage paid at

Washington, DC. and additional mailing offices.

Copies may be obtained from the Superintendent of

Documents, Government Printing Office, Washington,

DC, 20402, at $21 per year. Postmaster: send address

change to: Rural Cooperatives, USDA/RBS, Stop

3255, Wash., DC 20250-3255.

Mention in Rural COOPERATIVES of company and

brand names does not signify endorsement over

other companies’ products and services.

Unless otherwise stated, contents of this publication

are not copyrighted and may be reprinted freely. For

noncopyrighted articles, mention of source will be

appreciated but is not required.

The 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

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

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

To file a complaint of discrimination, write USDA,

Director, Office of Civil Rights, Room 326-W, Whitten

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

Thomas C. Dorr, Under Secretary, USDA Rural

Development

John Rosso, Administrator, Rural BusinessCooperative Service

James Haskell, Acting Deputy Administrator,

USDA Rural Business-Cooperative Service

Dan Campbell, Editor

Vision Integrated Marketing/KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or

Fax (202) 720-4641, Information Director,

This publication was printed with vegetable oil-based ink.

United States Department of Agriculture

Rural COOPERA .

COOPERATIVES

November/December 2003 Volume 70 Number 6

On the Cover:

Grain rolls in at Western Iowa Cooperative’s 600,000-bushel elevator, from

where much of it will be shipped to California livestock operations. Learn

more about how it and other cooperatives have restructured for success. 

Photo by Larry Laszlo

FEATURES

4 New days, new ways

Co-ops, producers find many ways to prepare for the future

By Robert Heuer

9 Congressional hearing focuses on possible need

for more flexible co-op business model

By Dan Campbell

14 Dismantling of Farmland continues; Smithfield

buying pork business

By Patrick Duffey

16 Survey results: public shows strong preference

for doing business with cooperatives

By Patrick Duffey

17 Revenue, margins trend downward for nation’s

top 100 ag cooperatives

By David Chesnick

21 Co-ops follow more than one path for 

nominating board candidates

By Bruce J. Reynolds

25 Seeking the best

Director leadership: what does it take?

By Jim Wadsworth

26 Cooperative exports decline in 2001; bulk sales

fall but continue to dominate sector

By Tracey L. Kennedy

DEPARTMENTS

2 COMMENTARY

20 VALUE-ADDED CORNER

28 NEWSLINE

34 2003 ARTICLE INDEX
4 November/December 2003 / Rural Cooperatives

By Robert Heuer

tephen Longval knew his

grandfather’s grain business was struggling

upstream in a changing

farm economy, and he was

determined to prevent it from dying. But

the Iowa farmer knew Sloan Cooperative couldn’t survive with a business plan

devised in the 1930s. So Longval led the

effort a few years ago to merge several

local cooperatives, which then built a

railroad facility that allowed members to

sell grain to distant markets. 

“Somebody has to do this business,”

the 59-year-old Longval says. “Farmers are best positioned to do it for

themselves.” 

Leading the way to change

A decade ago, Longval was elected

chairman of the 200-member Sloan

Cooperative. For decades, the co-op

operated an elevator that served a sixsquare-mile area along Iowa’s western

edge. Member-owners hauled shelled

corn and soybeans to town where the

crops were sent to regional markets. 

In the 1970s, the membership voted

to replace the 40-year-old elevator with

a new one that they thought would

meet their needs for years to come.

However, as farms got bigger, individual farmers invested in huge combines,

storage bins and semi-trailers. Eventually, members were going to bypass the

co-op, choosing instead to pocket the

nickel-per-bushel premium for hauling

corn to an Omaha terminal and beans

to a Sioux City area processor. 

By the mid 1980s, the co-op was on

the verge of becoming an unneeded middleman. “We spent several years figuring

out what the cooperative could do for

farmers that farmers can’t do for themselves,” board chairman Longval recalls. 

Knowing their business was in jeopardy, the board faced a tough decision.

Many members were retired or nearing retirement and interested in seeing the co-op’s assets sold so that they

could get their share of the proceeds.

But Longval and others on the board

felt that the majority wanted to keep

the business going.

In 1995, Sloan saw an opportunity

to market the co-op’s Iowa grain to

California livestock operations. This

could be accomplished by tapping

into the Union Pacific Railroad main

line that ran through town. But with

only $15 million a year in annual sales,

the co-op couldn’t afford the $6 million cost for a high-speed grain elevator and track linking the elevator to

the Union Pacific line. Nor could it

hope to generate the grain volume to

justify such an investment. All of the

area’s local co-ops were facing similar

limitations. Ultimately, they merged

to form Western Iowa Cooperative. 

CoBank, which finances cooperatives nationwide, loaned Western Iowa

$6 million—a sum representing 80 percent of the 1,200 members’ local equity. The co-op built a $6 million agroindustrial complex that includes a

100-car rail-spur and a 600,000-bushel

elevator to load unit trains. 

In 2002, the co-op generated $70

million in sales, providing members a

10- to15-cent per bushel premium for

shipping corn to the West Coast. With

plans in the works to sell soybeans to

Mexico, Longval says, “We should survive for awhile.” 

A state of flux 

Western Iowa Cooperative is far

from alone in having to deal with such

challenging issues. Cooperatives

S

A fast-changing competitive landscape is forcing

cooperatives large and

small to reinvent themselves. The farmer-owned

business model, created 75

years ago by the U.S. 

Congress, appears alive

and well, but may be in

need of updating. Some

cooperative leaders say

policies regulating governance, capital formation

and structure need added

flexibility to keep co-ops in

step with a changing farmbusiness environment. In

recent months, 60 federal

legislators have joined the

Congressional Cooperative 

Caucus, which plans to

explore legislative actions

that can help farm co-ops

evolve with the times. 

New days, new ways

Co-ops, producers find many ways to prepare for the future
nationwide are looking for better ways

to serve their grower-owners. Mergers

are on the rise. Successful businesses

realize their “customers” include both

farmers and consumers at faraway grocery stores, as well as stakeholders

throughout the supply chain. To survive, co-ops must find a niche in a

global agri-food sector that links producers to suppliers, processors, distributors and retailers. 

Such realities were unimaginable in

the 1920s and 1930s, when Congress

enacted legislation to promote the

formation of farmer-owned cooperatives. The regulatory framework that

governs the U.S. cooperative system

today continues to cater to the small,

diversified farms that populated the

countryside 80 years ago. 

Lawmakers exempted producer associations from anti-trust regulations so

members could pool marketing activities and, as a result, get better prices

when buying and selling goods and services. To help ensure farmer control

and equal influence for all members,

lawmakers required cooperatives to

generate the lion’s share of capital

internally (from their members). 

Neighboring farmers formed small

cooperatives. They, in turn, banded

together to form regional cooperatives

that provided greater purchasing and

marketing power. 

Throughout the industrialization

era, most farmers and ranchers have

specialized in producing high-volume,

low-value commodities while other

businesses focused on processing and

marketing. But increasing numbers of

cooperatives are developing methods to

capture a larger share of the consumer’s

food dollar. 

Co-op leaders say that collective

action offers the means for farmers and

ranchers to capitalize on the forces that

are merging production, processing

and marketing functions. Questions are

arising about how to provide cooperatives with the latitude to stake their

claim in the new food delivery system. 

Producer control

Several decades ago, North Dakotan

Mike Warner and fellow Red River

Valley sugar beet growers were tired of

selling their commodities to a processor whose out-of-state owners refused

to upgrade the plant. So they formed a

cooperative and bought the company.

Designed to turn member-owners’

commodities into food products, the

American Crystal Sugar Cooperative

(ACSC) became what some say was the

first “new generation co-op.” 

Unlike a traditional co-op that

serves an unlimited number of members, ACSC is a closed co-op that sells

a limited number of shares. Each share

represents an obligation to deliver a

unit of production to the co-op. By

pooling resources to process and market products, farmers turned a struggling beet factory into the United

States’ leading beet processor. 

“Farmers are still the guys at the

throttle,” Warner contends. “Slowly

but surely, I think farmers are going to

gain further control over the processing of food. Over time, the demand

from end users for quality and value

will drive food processing into the

hands of raw commodity owners.”

Nowadays, Warner spends less time

raising crops and more time raising

awareness about the marketing clout of

closed co-ops. His 1996 speech made a

keen impression on Kansas rancher

Steve Irsik. 

Rural Cooperatives / November/December 2003 5

Jack Cronin (right), manager of Western Iowa Cooperative, and co-op member Stephen Longval

check out the co-op’s new, $6 million agro-industrial complex, which includes a 100-car-rail spur.

Longval led the effort to merge several local co-ops to make the new facility possible. Photo by Larry

Laszlo. Inset: Stephen Longval’s grandfather, Ulric, and father, Harry, on the family’s Iowa farm, circa

1930s. All three generations of the family have been co-op members. Photo courtesy Longval family
6 November/December 2003 / Rural Cooperatives

“I’m not a rah-rah co-op guy,” says

Irsik, whose family-owned enterprise

includes wheat fields, a cattle-and-dairy

herd and a cattle-feeding operation.

“Yet, for years I produced genetically

superior products and got paid commodity prices. So, I’m intrigued by the

cooperative concept of developing a

delivery system that allows customers

to know where the product is coming

from—whether it’s identity preserved,

genetically engineered or organic.”

Irsik is a founding member of the

21st Century Alliance, an umbrella

organization that has helped farmers

launch six value-added co-ops in the last

five years. As a production network,

such enterprises can control both a sizeable amount of land and raw product.

This gives end users something that a

General Mills or ConAgra cannot: a

verifiable connection to specific farmers.

Alliance officials estimate that 300

to 500 producer networks are forming

nationwide to pursue value-added

opportunities. Nearly all are undercapitalized and unlikely to acquire

necessary funding through traditional

cooperative financing mechanisms.

Irsik figures most of these businesses

will be hybrids—in part, closed cooperatives structured as LLCs and

pitched to prospective investors with

a plan to sell to private or publicly

traded companies.

Irsik is one of 375 Kansas, Oklahoma

and Texas farmers who own the 21st

Century Grain Processing Cooperative.

He sees capital access issues hindering

the growth of a business that supplies

tortilla and bread manufacturers in the

southwestern United States. “Too many

small investments by too many people

becomes cumbersome,” he says. “The

greater the ownership stake, the greater

the commitment to success.” 

Restructuring needs

Texas farmer Jimmy Dodson doesn’t

have much experience with valueadded businesses, but he’s got an opinion on the future of cooperatives. Dodson is a Gulf Coast cotton and milo

grower, and a board member of Farm

Credit Bank of Texas. The bank is a

member of the $111 billion Farm

Credit System, a nationwide network

of lending institutions owned by more

than a half million farmers, ranchers

and their cooperatives. 

“Well-run cooperatives will continue to thrive,” Dodson says, referring to

co-ops that offer value to customers

through competitive pricing of products and services. “Cooperatives need

to be sensitive to market forces as they

affect customers of all sizes. 

“There’s no question that co-ops

should be structured a little differently,”

Dodson says. “As farming operations

become larger, co-ops need to be more

flexible in their policies and governance

practices to provide competitive services for all sizes of operations. Large

operations already qualify for discounts

and special services from manufacturers

and distributors, so co-ops must offer

these producers advantages like quantity discounts, bulk packaging and board

positions. Keeping large operators

under the co-op tent will enable smaller

producers to continue to benefit from

their cooperatives’ economies of scale.” 

This is, of course, a hot topic with

many cooperatives, especially in the

area of governance. Some say providing proportional voting based on the

business volume a member generates

goes against the one-member, one-vote

tenant at the heart of cooperative principles. But others, like Dodson, say

such a change has to be made if the coop business system wants to keep large

producers on board in an era of consolidating farm operations. 

At a crossroad 

Nationwide, many co-op boards and

managers are grappling with such difficult ownership and structure questions.

Some are asking whether these enterprises must lose cooperative status to

remain competitive? Or, as an Illinois

Institute for Rural Affairs report asks,

“Will agriculture be integrated by and

for the farmer, or for the benefit of the

suppliers, processors and distributors at

the expense of the farmer?” 

These are two of the questions the

newly created Congressional Cooperative Caucus will consider under the

leadership of Rep. Sam Graves of Missouri, Rep. Earl Pomeroy of North

Dakota, Senator Larry Craig of Idaho

and Senator Blanche Lambert Lincoln

of Arkansas. This forum was created at

the behest of the National Council of

Farmer Cooperatives (NCFC) to modernize laws governing cooperatives. 

Terry Barr, who was recently named

interim CEO of NCFC, says farmer

cooperatives are, in essence, partnerships formed because producers think

they can either make a dollar or save a

dollar through the pooling of resources.

“That need is as great today as ever,

possibly even more so now that the

food and agriculture industry consolidation and globalization has fiercely

increased competition and the demand

for capital,” Barr says. 

Doug Sims, vice chairman of NCFC

and in line to become chairman in January, grew up on a western Illinois

farm. He recalls that co-ops provided

the best price for the seed, feed, petroleum and tractors that the family

bought, as well as for the hogs and

grain that they sold. The same is true a

half-century later now that his cousin

runs the farm and Sims is chief executive officer of CoBank. As the only

nationally chartered institution in the

More than 1,200 members deliver their

grain to Western Iowa Co-op. 

Photo by Larry Laszlo
Rural Cooperatives / November/December 2003 7

Farm Credit System, CoBank provides

financing for 1,500 agricultural cooperatives across the United States. 

“What the founders of co-ops were

looking for years ago is very different

from what members want and expect

today,” Sims observes. “ Today, capital

needs often exceed members’ ability to

pay. Yet, the co-op model remains a

dynamic economic tool for producers

who realize they can accomplish much

more as a group than they can alone.

Our customers want to remain cooperatives, but they also need the freedom

to adapt to new circumstances.” 

Some co-ops are finding that the pursuit of new opportunities could mean

losing their cooperative status and their

borrowing relationship with CoBank.

The Farm Credit System is seeking legislation to modify the Farm Credit Act,

allowing CoBank to finance all farmerowned cooperatives, including new generation co-ops. The bank wants to

finance entities that have both a producer and investor class of membership,

provided that the producer class holds at

least 50 percent of the voting control

and operates on a cooperative basis.

South Dakota Soybean Processors

(SDSP) is one such cooperative that

both wants to tap new opportunities

and remain a CoBank customer. SDSP

was formed in 1993 by farmers tired of

exporting soybeans to a distant processor and then paying freight on soybean

meal shipped back and fed to livestock.

The processing co-op has begun supplying a manufacturer that turns oil

resins into industrial products. 

With demand for products exceeding

members’ supply capability, SDSP will

generate significant new sources of nonpatronage income. To avoid double taxation—for the cooperative at the entity

level and members paying on their share

of the proceeds—SDSP has converted

to a limited liability corporation (LLC). 

SDSP remains true to cooperative

principles, such as the one-member,

one-vote policy, CEO Rodney Christianson says. “Who we are is not necessarily determined by the business structure that we use for tax purposes. The

farmers’ task of capturing a greater

share of the food dollar is a difficult

one. Government regulations should

not tie their hands to only one acceptable business structure.”

Many other cooperative leaders

nationwide are reaching this same conclusion. Cooperative principles have

the best chance of enduring if the business structures are able to adapt to new

opportunities, Christianson says. 

The power of numbers

“Co-ops provide a layer of strength

for producers through added buying

and selling power and marketing strategy,” Wisconsin dairy farmer Scott Maier

says. “If a lot of private companies had

their way, they’d flush out the co-ops

and dictate the price that we get for our

product. The co-op gives you a little

more control. If the co-op makes a profit, you either get a dividend or management invests the money into

expansion with the goal of

providing additional benefits

to members in the future.” 

Maier, 38, and his wife,

Daun, are NCFC’s 2002-

2003 Young Ambassadors.

The Maier family partnership

belongs to seven cooperatives,

including dairy manufacturer

and marketing cooperative

Foremost Farms USA. Last

winter, they expanded from

275 to 450 cows. “With cattle

and milk prices down, we

hope to catch the up-trend in

prices,” Scott explains.

“Belonging to cooperatives

gives us a little more stability.

Cooperatives give our industry a much stronger voice to

the people who make policy.

We’re not going to be left out

in the cold.” 

And neither is Doug Carstens, who

chairs the board of Farmers Cooperative Company (FC). His co-op is helping to position central Iowa grain producers for the future. For decades, FC

was a typical small-scale supply and

service cooperative catering to farmers

near Farnhamville, Iowa. 

In the last decade, FC bought or

merged with eight local co-ops or private companies. Today, FC is modernizing a dozen grain elevators along

main rail lines. Representing a membership base of 1.2 million acres, FC

can deal directly with national suppliers

and buyers.

Clearly, consolidation is shaking up

the traditional cooperative structure.

“A decade ago, a big regional co-op

would take a grain buyer’s plan under

its arm and approach 10 locals,”

Carstens says. “Today, we can do for

ourselves what we needed the regionals

to do just a few years ago.”

Ronnie Mohr serves on the board of

directors of Land O’Lakes. The Arden

Hills, Minn.-based company provides

1,300 member cooperatives with feed,

seed, plant food and crop protection

products. Mohr sees “merging local

cooperatives taking on the role of

regionals, and the regionals becoming

more national in scope.”

This 54-year-old Indiana hog and

grain farmer recalls, “When I was in

high school, 28 families made a living

on the 3,600 acres of land that my

brother and two sons now farm.

Nobody’s more aggressive in mergers

and acquisitions than American farmers, and technology has let us do it.

“Cooperatives give our industry a much stronger voice

to the people who make policy,” say Scott and Daun

Maier, Foremost Farms members. Photo by Laura Mihm,

courtesy Foremost Farms 
Big, full-time farmers are increasing,

mid-sized full-time farmers are

decreasing and part-time farmers are

increasing. To succeed, you have to be

aligned with other people.” 

Land O’Lakes operates plants from

California to Pennsylvania, supplying

dairy products to national grocery

chains such as Wal-Mart Stores Inc.

Through Agriliance—a partnership of

three regional farm supply marketing

cooperatives—two of its owners, Land

O’Lakes and CHS Inc., continue to

negotiate savings for their members.

For example, it recently bought 20

percent of the Monsanto’s Roundup

herbicide. With such market share,

Mohr says Agriliance can add value just

as Wal-Mart does through purchasing. 

Creating new advantages 

Clearly, purchasing power, economies of scale and owner equity give

some co-ops a marketplace advantage.

For others, their branded products set

them apart. That’s the story for Mark

Duffy, who is among the 1,400 New

England and New York dairy

farmer/owners of Agri-Mark. AgriMark sells a full line of Cabot-brand

foods that have been a century in the

making. The Cabot name commands a

premium price for members of the coop, which also sells fluid milk. 

“We can’t be the low-cost producer

of milk in the Northeast,” Duffy says.

“As a co-op, we need to take advantage

of other opportunities. All of our

advertising focuses on farmer ownership and the places where the products

come from. We benefit from the fact

that an enormous number of consumers respect what we do.” 

Protecting a brand name at times

requires a co-op to make tough decisions. Ken Kaplan, who grows 100

acres of plums in California and markets them through Sunsweet Growers

Inc., knows this firsthand. He’s seen

Sunsweet, the world’s leading producer

of prunes, shift from a production-driven to a market-driven business. 

Formed in 1917 when the average

prune farm was 10 acres, the Yuba

City, Calif.-based co-op’s 650 members

now grow an average of 80 acres of

plums. For many years, Sunsweet

treated small growers the same as big;

whether a member delivered product

by the truckload or one box at a time

made no difference. In 1997, with the

industry facing overproduction, the

co-op imposed limitations on a longstanding practice of advancing payments to owners of unsold plum crops. 

“The reality of the market was that

small growers needed the cash flow, but

we couldn’t borrow money against an

inventory declining in value,” explains

Kaplan, a Sunsweet board member. 

“The viable farmer would be hurt

less short-term,” Kaplan continues.

“But a lot of growers weren’t viable

over the long run. If we were purely a

processing business, nobody would

have listened to the complaints. We’d

have sold product at the best price we

could. In a co-op, we had to listen, but

we also had to make the conscious

decision to stop subsidizing small

groves at the expense of efficiency.”

Meanwhile, Sunsweet has had to

accommodate the demands of grocery

chains seeking “category managers”

who supply all needs in a specific food

category. The prune co-op keeps its

position on the grocery shelf by

adding products such as apricots,

apples and juices bought from nonmembers. 

Stepping outside the box

“Change itself is the biggest challenge facing co-ops,” South Dakota

Wheat Growers Association (SDWGA) chairman Jake Boomsma says.

Helping SDWGA’s 3,300 farmerinvestors become more profitable, he

says, will inevitably mean stepping outside “the cooperative box.” 

In 2002, the 80-year-old SDWGA

business hired its first CEO from outside the cooperative system. The board

was open to expanding across state lines,

doing business with private companies,

and offered equity stakes to outside

sources to finance expansion. In recent

years, the SDWGA has used traditional

funding mechanisms to invest over $40

million in two ethanol plants, a feedmill

and four train-loading elevator facilities. 

SDWGA is now selling some elevators to farmers who want to expand offrail storage systems. “We get static from

rural leaders because closing down an

elevator takes business out of the community,” Boomsma says. “But for our

business to survive, we need to make

tough economic decisions that provide

the best returns to our members.” 

Conflicts of interest pose unique challenges for co-ops because their members

are also part of the community. Indiana

grain and livestock farmer Myron Moyer

is also pushing for grower groups to gain

the opportunity to attract outside

investors so they can compete with corporate-owned businesses. 

“I hope the federal government will

allow us to be able to partner with nonco-op businesses without losing cooperative status,” says Moyer, who is on

the board of Harvest Land Cooperative. “We are for anything that will

help producers compete.” ■

Editor’s note: Heuer frequently writes

on agricultural policy and rural development issues for a number of publications,

including AgLender, AgriFinance, Farm

Journal, American Bankers Association’s

Journal of Agricultural Lending and

Independent Banker. This article is 

printed courtesy of CoBank. It does not 

necessarily reflect the views or policy of

USDA or its employees. 

8 November/December 2003 / Rural Cooperatives

“All of our advertising focuses on farmer

ownership and the places where the products come from,” says Agri-Mark dairyman

Mark Duffy. Photo courtesy Agri-Mark
By Dan Campbell, editor 

re structural changes

needed in the cooperative business model to

help co-ops remain a

vital cog in the engine of

America’s rural economy? That was the

central question addressed during a

five-hour hearing held by the House

Agriculture Committeeon Oct. 16 in

Washington, D.C. 

A wide array of co-op leaders, government officials, lenders, academics

and others testified. A common theme

was that the fate of U.S. agriculture,

the nation’s farmer-owned cooperatives, rural lenders and the rest of rural

America is inextricably linked, and that

for each of them to thrive, they must

all be strong and prepared to work

together to adapt to change. 

But a wide diversity of opinion was

expressed as to exactly what changes

should be made and how far to go in

altering the co-op business model.

New state co-op laws 

at center of debate 

Throughout the day, numerous references—pro and con—were made to

the new Minnesota and Wyoming

cooperative incorporation laws. Some

said those laws go too far in expanding

the co-op model and that co-ops organized under those statutes are vulnerable to takeovers by outside investors

who may have little real interest in the

fate of producers or rural communities.

Further, they said if the nation winds

up with 50 different definitions of what

a cooperative is, it will lead to chaos. 

“When is a cooperative no longer a

cooperative?” was asked several times.

One committee member noted that

under the new Minnesota law, 99 percent of the equity and 85 percent of the

profits of a co-op could be controlled

by non-producers. 

But others said that these new state

laws are at least a step in the right

direction, and that without changes

such as they encourage, producers will

be locked in a downward spiral. They

will continue to lose the control in ag

industries that they and their predecessors fought so hard to establish during

the past century. They predicted that

increasing numbers of co-ops will

reluctantly have to change their business structure to Limited Liability

Corporations (LLC), or some type of

hybrid LLC-co-op.

The announced purpose of the hearing was to focus the attention of Congress and the nation on trends being seen

among new-generation cooperatives—

particularly regarding why some of them

are finding it more advantageous to

change their business structure to LLCs.

In reality, the focus of the hearing was

broader than that, breaking down into

three primary areas: 1) Should cooperative law be modified to allow for greater

flexibility in business and governance

structure—particularly in ways that will

allow co-ops to raise more equity capital?;

2) Should the charter of CoBank be 

modified so that it can finance a broader

array of farmer-owned enterprises than is

currently permitted?; and 3) What is the

status and future of USDA’s cooperative

programs?

In his opening remarks, Committee

Chairman Bob Goodlatte of Virginia

noted that “The real subject of our

hearing today may just as well be how

we can assist the financing of U.S. agriculture.” He said producers are

increasingly looking “to attract outside,

passive investors who may have an

interest in the community where the

operation is located, but who otherwise

are looking for a reasonable return on

that investment. That calls for new

business structures that may abandon

the traditional cooperative model.” 

Goodlatte noted that the House Ag

Committee last conducted a thorough

examination of the Farm Credit Act

during the farm recession of the

1980s—a crisis period for farmers and

ranchers. Changes enacted in the Farm

Credit System at that time have proven

successful, Goodlatte said, but the time

may be right for a more deliberative

review process “now that the system is

adequately capitalized and relatively

prosperous.” 

High stakes

“Today, we are laying the foundation

for the future of agriculture,” said Rep.

Charles Stenholm of Texas, the ranking

minority member on the Ag Committee. “We’re not pouring the concrete

yet—just putting up the forms; we’ll

pour the concrete later.”

He spoke of the importance of farmer

and utility cooperatives in the West

Texas district he represents and to his

own family. Stenholm noted that he and

his son are members of the Plains Cotton Cooperative Association (PCCA) in

Lubbock, and that he once managed a

rural utility cooperative in Texas.

“PCCA is an excellent example of

how things have changed, and also why

there is a need to review and modernRural Cooperatives / November/December 2003 9

A

Congressional hearing focuses on possible

need for more flexible co-op business model
10 November/December 2003 / Rural Cooperatives

ize federal cooperative law,” Stenholm

said. To make his point, he noted that

in the 1970s, PCCA built a $25-million

plant that spins cotton into denim.

“Since 1976, PCCA’s denim mill alone

has provided its members with $300

million in added-value for their cotton.

However, building that same mill today

would cost between $100 million and

$150 million.” With rural economies

starved for capital and far fewer producers than 30 years ago, he said it is

unlikely PCCA could construct the

same denim mill. 

Stenholm said efforts such as

USDA’s new Value-Added Producer

Grant program and the new Agricultural Innovation Centers established in

10 states are steps in the right direction. But he said “there is much more

work for this committee and USDA to

do to ensure that farmer and rancher

cooperatives have the means to compete in an area of rapid consolidation

and technological innovation.” 

Rep. Collin Peterson of Minnesota

expressed concerns about the new coop law in his state, and said it could

allow non-farmer equity owners to

take over co-ops, which he said has

already occurred. Peterson said co-ops

are getting into industries “controlled

by just 3-4 entities, and they can

squash you like a bug in these commodity areas. When they (large corporations) control so much, they can run

down prices and force you to sell out.”

Peterson said that perhaps co-ops

would find more success pursuing

niche markets, and that care has to be

taken not to lure farmers into commodity areas where they have little real

chance of making money. 

Changing rural landscape

Thomas Dorr, under secretary for

USDA Rural Development, which

houses the Cooperative Services program, painted a picture of a rapidly

changing rural landscape in which

farmers must find new ways to invest in

modern, value-added processing facilities. Otherwise, they face the risk of

becoming ever more marginalized as

producers of basic commodities in a

world economy where other nations

have huge advantages in low-cost labor

and land.

“Farmers and ranchers still retain

a high level of confidence in cooperatives and this business model is still

one of the most trusted tools of business development in rural America,”

Dorr said. “While many producers

have substantial assets that are minimally leveraged, their numbers are

declining. The amount of funds

needed to finance a potentially lucrative agriculture-related business may

be more than potential memberpatrons can, or should, prudently

invest in. Steps should be taken to

make investing in a cooperative

attractive to local non-producers,

and, when advantageous to the producers and the community, non-producer outside investing interests.”

Dorr said that impediments to

attracting non-producer equity to coops can be found in federal and state

laws enacted several decades ago. “If

non-producer outsiders are to invest in

a cooperative, they may well expect to

have a voice in its affairs and the

opportunity to earn a return on their

investment commensurate with the

success of the cooperative,” Dorr said.

“Good governance and increased transparency could also help improve the

cooperative model.” 

Tax issues key

There are numerous examples of

value-added cooperatives that have

converted to LLCs or formed LLC

joint ventures with other co-ops or

investor-owned corporations, said

Doug Flory, chairman of the Farm

Credit System Insurance Corporation, who testified on behalf of Farm

Credit Administration Chariman

Michael Reyna. Flory said LLCs

offer advantages in their ability to

attract outside investors by giving

them a say in management and a proportional return on their investment.

They also may do “a significant

amount of business with farmers who

are not willing, or able, to acquire an

ownership interest in the enterprise,”

Flory said. 

While some large, well-established

co-ops have been successful in raising

outside equity capital, most outside

investors are not farmers and thus cannot be members nor vote in a co-op’s

elections or share in patronage payments, he said. The Wyoming and

Minnesota laws attempt to address this

situation by allowing the creation of a

hybrid between a traditional cooperative and an LLC, with separate membership classes for farmer-patrons and

investors. 

Flory said these state co-op laws each

require that farmers have at least 50 perA panel, which includes Roger Ginder of Iowa State University (far left), testifies at the

House Ag Committee hearing on new generation cooperatives. USDA photos by Dan Campbell
cent voting control, and that Minnesota

requires that 60 percent of financial

returns go to farmers, unless they vote

as a block to accept a lesser amount, but

never less than 15 percent. Both laws

are too new to determine whether many

traditional co-ops will convert to the

new hybrid co-op businesses, Flory said,

adding that other states are considering

similar legislation. 

“The success of hybrid cooperatives

will depend on whether farmers and

investors can work together. Potentially the two groups have different objectives,” which, he stressed, “could be a

source of conflict.” Whether the

hybrids are successful “ultimately

depends on their ability to reconcile

potential conflict between farmers and

investors.”

CoBank seeks changes

Doug Sims, CEO of CoBank, part of

the cooperatively owned Farm Credit

Bank system, said provisions of the

Farm Credit Act make it “increasingly

difficult for a new generation of farmerowned cooperatives...to obtain financing from CoBank.” Farmer cooperatives are increasingly turning to

value-added activities to bolster their

members’ farming operations, and

many are turning to new business models to raise equity capital from non-producers, to minimize tax liabilities and

gain added operational flexibility, Sims

said. “These new structures will often

make the cooperative ineligible for

financing by CoBank,” which provides

about 80 percent of all credit extended

to farmer cooperatives. 

Sims cited the role of co-ops in the

rapidly expanding ethanol industry as

an example of this situation. CoBank

has loaned $200 million to finance 20

farmer-owned ethanol plants in the

Midwest and Great Plains states. To

date, return on equity has been a highly

favorable 10 to 15 percent annually.

But some of these co-ops are turning to

outside investors to build plants.

Tall Corn Ethanol in Coon Rapids,

Iowa, recently altered its corporate

structure to an LLC to attract more

equity from outside investors, Sims

said. Even though farmers still control

the business, it is no longer eligible for

financing from CoBank. The same

scenario holds true for South Dakota

Soybean Processors, which had been a

CoBank customer since its inception

in 1996 but recently converted to an

LLC for tax and equity reasons. 

“This current situation is putting

the farmer-owners of cooperatives in a

very difficult position—by choosing

the most advantageous corporate

structure, the cooperative may be

forced to forgo access to the lender

created specifically to meet the needs

of farmer-owned cooperatives,” Sims testified. 

CoBank is requesting legislation that would change its

charter to: 

■ Allow it to continue

lending to producer associations with both a producer

and investor class, provided that the

producer class holds at least 50 percent

of the voting control and that it operates on a cooperative basis;

■ Permit ag co-ops organized consistent with state cooperative laws to be

eligible for CoBank financing;

■ Allow co-op customers adopting

new business structures to continue to

be eligible for CoBank financing, as

long as the customer maintains at least

50 percent farmer control or continues

to operate under co-op state law;

■ Provide that co-ops that are

CoBank customers but restructure as

non-co-ops would remain eligible for

CoBank financing for a five-year transition period. 

“Without this action, CoBank will

not be able to meet its mission of serving farmer-owned cooperatives,” Sims

warned. He noted that the proposal has

received the endorsement of the

National Council of Farmer Cooperatives (NCFC), the American Farm

Bureau Federation, the Farm Credit

Council and dozens of other farm

organizations. 

Community banking groups

oppose CoBank proposal 

Weighing in against the CoBank

proposal were two banking industry

trade groups, which testified that those

changes would violate the very reason

CoBank was formed while creating

unfair competition for locally owned,

community banks. As a government

sponsored entity, CoBank has access to

lower cost funds than do most community banks. They also raised numerous

questions about the Wyoming and

Minnesota state co-op laws, saying

these statutes could have the opposite

effect they were intended for, and

could actually hasten the loss of producer control.

James Caspary, representing the

Independent Community Bankers of

America (ICBA), said those state laws

would create a business model under

which “outside investors could form

LLCs labeled ‘farmer-owned cooperatives,’ even when farmers don’t have

majority ownership or voting control,

Rural Cooperatives / November/December 2003 11

“Farmers and ranchers still retain

a high level of confidence in cooperatives, and this business model

is still one of the most trusted

tools of business development in

rural America,” USDA Under

Secretary for Rural Development

Thomas Dorr testified. To his left is

Doug Flory, who testified on behalf

of the Farm Credit Administration. 
and be eligible for cooperative benefits.” ICBA, 75 percent of whose members are community banks located in

towns of 10,000 or less, “opposes any

fundamental rewrite of CoBank’s lending charter because it would allow it to

make loans to corporations that may

have no farmer involvement and that

may be unrelated to agriculture,” Caspary testified. 

“We do feel it is appropriate to

explore ways to enhance the accumulation of equity capital within

farmer-owned cooperatives and in

rural America—but this should be

done in a way that doesn’t potentially

lead to the loss of legitimate farmer

control of their cooperatives or in

ways that drastically depart from the

bedrock principles of what makes a

cooperative a cooperative.” 

Policies should not be enacted that

would spur consolidation in agriculture and cooperatives “just for the

sake of growth for some at the

expense of survival for others,” Caspary said. He presented the committee with a list of criticisms of the

Wyoming state law, including a provision under which “one or more outside investors with two-thirds voting

control can merge or consolidate the

entity into another entity, or liquidate

it without any support from the producer-patron members.” 

Caspary said Congress has recently

adopted or updated several programs

which could aid farmers and cooperatives pursuing new ventures. “Unfortunately several of these USDA authorities sit either idle today or have yet to

be fully implemented.” 

Roger Monson, representing the

American Bankers Association, offered

similar testimony. He said the

Wyoming and Minnesota co-op laws

“will allow businesses to continue to be

defined as farmer-owned cooperatives

when...(they) are neither owned by a

majority of farmers or controlled by

farmers.”

Farmers Union urges careful study 

Congress must take the lead in reexamining cooperative business structure, “rather than allowing events or

other institutions to define a new

cooperative model that may sacrifice

the characteristics of cooperatives that

distinguish it from other business

structures,” Doug Peterson testified

on behalf of the 300,000-member

National Farmers Union (NFU).

Peterson, president of NFU’s Minnesota state chapter, said that despite

problems confronting farmers and

their cooperatives, “we believe that a

level of restraint must be exercised to

provide the opportunity for a full discussion of potential alternatives and

outcomes before engaging in a significant modification of the cooperative

12 November/December 2003 / Rural Cooperatives

U.S. Premium Beef (USPB) recently completed a buyout of its former partner—Farmland Industries—in

National Beef, the nation’s fourth largest beef packer. But

its co-op structure threw up barriers to raising the needed investment capital, co-op CEO Steve Hunt testified in

October at the House Ag Committee hearing on new generation co-ops. The co-op is now weighing whether to

convert its business structure to an LLC or reincorporate

under the new Minnesota or Wyoming state co-op laws. 

The main reasons would be to capture “the benefits of

a pass-through tax structure,” he said, and because this

change would allow “unlimited earnings diversification

and provide for recruitment of outside capital, while still

maintaining control in the hands of the producer.” 

But even if the co-op converts its business structure,

it faces hurdles, he said. Co-op members could be

charged substantial taxes on the gain in their co-op stock

value, which has risen sharply. As a new generation coop, USPB members purchase stock in the co-op which

creates a right and requirement to deliver cattle to the

co-op. Those shares can be sold to other producers. 

Leaving the ranks of co-ops would also mean losing

its relationship with CoBank, Hunt testified. 

He proposed a number of changes to the tax code which

would provide relief for co-ops in such situations, including

a one-time conversion tax exemption for cooperatives that

convert to an LLC but still maintain producer control.

“Today, as we witness an acceleration of concentration among food industry participants, the need to

achieve size, scale and market leverage is becoming

paramount to their success,” Hunt said. “These changes

require vast amounts of capital.” 

“Under today’s rules,” he continued, “cooperatives have

only to look to cash-strapped producers to secure equity.

The alternative is to leverage their business through debt, a

strategy that has resulted in numerous public failures.”

Hunt said that when Farmland Industries filed for bankruptcy last spring, USPB was able to buy its interest in

National Beef. That kept the beef operation under producer

control, unlike Farmland’s pork business, which was

snapped up by Smithfield. Hunt said USPB was forced to

form a venture outside of the cooperative and seek outside

investors as partners in order to buy out Farmland’s share

in the partnership. “Had USPB been able to attract alternative sources of capital within the co-op, we would have

owned a larger percentage of the beef business and

increased our odds of maintaining producer control into an

uncertain and very competitive future,” Hunt said. “AddiEquity, tax issues prompt beef co-op to ponder switch
model.” New state co-op laws may

have worthy intentions, but “we are

concerned about the longer term

effects of these proposals on basic

cooperative principles. 

“In addition, schemes that blur the

lines between cooperatives and other

organizational structures may put at

risk existing preferential public policy

treatment for all cooperatives, including, but not limited to, the issues of

partial anti-trust exemption and tax

considerations.” 

“The old adage, ‘he who pays the

piper calls the tune,’ could certainly

apply to outside investors, who may in

fact be able to qualify as farmers under

the current definition,” Peterson

warned. These investors could persuade the co-op board to change traditional allocations of earnings away

from patronage to return on investment. “They might also exert substantial influence on merger, consolidation, liquidation or other critical business decisions.” 

If Congress ultimately decides to

allow more outside investors in co-ops,

“it should establish strict guidelines

and limitations on the level of influence these investors may exert over any

cooperative business structure,” he

said. “At minimum, these rules should

require diversification among investors,

particularly those with interests in

competing businesses....”

In its testimony, the National

Council of Farmer Cooperatives

(NCFC) urged that “the highest priority be given to strengthening USDA

cooperative programs, including the

re-establishment of a separate co-op

agency within USDA. NCFC also said

the Federal Farm Credit Act should

be modernized to ensure farmers have

access to a competitive source of credit capital for their cooperatives—

including new generation cooperatives. It also called for the elimination

of the so-called “triple tax” on farmer

cooperative dividends.

John Henry Smith, board chairman

of Southern States Cooperative

(SSC), and CoBank CEO Douglas

Sims both testified that their organizations “strongly support” NCFC’s

position on strengthening USDA’s

cooperative program. Smith said it

needs to have resources not only to

carry out existing programs, but new

ones as well. He also asked that the

loan guarantee limit on USDA’s Business and Industry Guaranteed Loan

program be boosted from $40 million

to $100 million.

Rep. Stenholm urged that rural

banks find a way to work together with

CoBank and the rest of the Farm Credit System, noting that “the rural America we know is dying...We must bring

in capital and jobs in non-traditional

ways. That’s what this is all about.” ■

Rural Cooperatives / November/December 2003 13

tionally, in order to achieve a majority position, since equity

capital was limited, we were forced to rely more heavily on

riskier debt equity, thereby leveraging the company.” 

Wheat-to-pizza co-op recounts equity challenge 

Keith Kisling, an Oklahoma wheat and cattle producer

and former director of the Burlington Cooperative Association, recounted a similar challenge in raising equity capital in

1996 for Value Added Products, a new-generation cooperative in Alva, Okla. The 850-producer co-op processes 642,000

bushels of wheat annually into $20 million worth of pizza

crusts. After just four years in operation, it is the largest preproofed and frozen dough plant in the nation, Kisling said. 

“Our biggest challenge,” he testified before the Ag

Committee, “was collecting up-front capital to convince

our lenders to buy into the deal.” Some 40 producer meetings were held with the goal of raising $10 million of the

$18 million needed. The most useful financial incentive the

co-op had in attracting producer-members, Kisling said,

was Oklahoma’s 30-percent state credit, which can be

used for seven years by new value-added ventures. “I was

asked consistently in those 40 meetings if there was a similar federal tax credit, and my response had to be “no.”

The co-op raised the additional capital needed with

the help of a Business and Industry Guaranteed Loan and

a Value-Added Producer Grant, both of which are programs of USDA Rural Development. 

As a result, the co-op “now sells pizza crust to the

world instead of railroad cars of wheat. More jobs are

available for young people and more sales tax revenue is

going into our community to provide basic infrastructure

and technology.” 

Kisling said more programs are needed to encourage

and promote these types of farmer-owned value-added

efforts. He urged that USDA’s Value-Added Producer

Grant program be funded at no less than $40 million, and

called for Congress to “expedite the implementation” of

the Rural Business Investment Program (RBIP). He said

RBIP was designed to encourage investments in rural

enterprises through rural business investment companies

created to raise capital, provide operational assistance

to small businesses and participate in a government

guaranteed debenture program. 

The RBIP, coupled with other co-op development programs, “offers an important opportunity for smaller rural

cooperatives to access the resources that are vital to their

success,” Kisling said. But Congress should review technical requirements of the enabling legislation to determine if

they are too restrictive, he continued. He said the entire coop development process also needs to be streamlined,

including shifting some guaranteed loan programs for farmers to USDA’s Farm Service Agency, which he said is in a

better position to encourage more farmer participation. ■

—By Dan Campbell
By Patrick Duffey, writer-editor

USDA Rural Development 

ike a cat unraveling a

big ball of yarn inch by

inch, once mighty

Farmland Industries

Inc., at Kansas City,

Mo., is being unraveled and dismantled. Its operations are being sold to

satisfy an overwhelming debt load

that drove the agricultural supply and

meat-processing cooperative into

bankruptcy May 31, 2002. Although

it filed for Chapter 11 bankruptcy, or

corporate reorganization, the case

has been handled from the early

stages as a virtual Chapter 7, or asset

liquidation bankruptcy. 

Observers note that Farmland’s

demise resulted from borrowing too

heavily to compete in too many capital-intensive businesses, expanding

too aggressively, building too many

projects and depending too heavily on

the fertilizer business when the fertilizer industry was depressed. Thousands of farmers are expected to lose

more than $700 million in equity or

investments.

Robert Terry, Farmland’s chief executive officer, said that if the cooperative’s reorganization plan is approved

by U.S. Bankruptcy Court Judge Jerry

Venters, Farmland could begin paying

claims by year’s end. Additional payments would occur as the cooperative

sells more assets.

Bids have been offered in recent

months for Farmland’s primary fertilizer, petroleum and meat-processing

facilities. 

Cargill, Smithfield bid

for Farmland pork division

Competition developed between

Cargill and Smithfield Foods for the

pork division of Farmland Foods. Bidding peaked in October and went to a

bankruptcy court auction. Smithfield

emerged as the winner. 

Smithfield’s initial bid was $363.5

million, which triggered a hearing

before the Senate Judiciary Committee

due to concerns about concentration in

the meat-packing industry. But the deal

eventually was approved by the

antitrust division of the U.S. Justice

Department.

Cargill, which owns Excell Corporation, a major pork processor in Illinois and Iowa, entered the bidding

with a pre-auction cash offer of $385

million. Smithfield countered at the

auction, increased its cash bid to

$367.4 million for most of the assets,

agreed to honor Farmland’s pork-producer contracts and assumed Farmland’s $90-million pension plan obligation, effectively boosting its offer to

$457.4 million. 

Prior to the fall auction, Smithfield

sold its Canadian pork business to

Maple Leaf. It expected to net $200

million from the deal.

With the Farmland purchase,

Smithfield could become a $10-billion food company that processes

nearly 30 percent of the nation’s pork

Dismantling of Farmland continues;

Smithfield buying pork business

L

14 November/December 2003 / Rural Cooperatives

Farmland Industries had hoped to restructure the cooperative around its successful beef

and pork processing businesses, but virtually all of its assets have now been sold. Smithfield

has purchased the pork operation, while the beef operation will remain under producer control. Photo courtesy Farmland Industries.
supply. Farmland Foods, which

ranked as the 6th largest pork processor, has packaging and processing

plants in Iowa, Kansas, Nebraska, Illinois and Massachusetts. The cooperative processed more than 7 million

hogs per year and accumulated sales

of $1.8 billion last year. 

The sale could become effective in

early November. The combination of

Tyson, Smithfield, Cargill and Swift

now dominate the meat processing

business.

Farmland’s beef processing operation, Farmland National Beef, will

remain under producer control, as it

has been purchased by its former partner in the operation, U.S. premium

Beef, a cooperative (see related story). 

Fertilizer assets sold 

Meanwhile, J.R. Simplot of Boise,

Idaho, has agreed to buy Farmland’s

interest in SF Phosphates, a Utahbased joint venture of the two companies. Simplot will pay $64.5 million

plus the value of Farmland’s share of

cash and working capital. The assets

include a fertilizer plant at Rock

Springs, Wyo., a phosphate mine at

Vernal, Utah, and a 96-mile pipeline

connecting the two. 

The deal is expected to close quickly

once it gets court approval, which was

anticipated in early November. The

assets were not included in Farmland’s

Chapter 11 restructuring.

Pegasus Partners II, a Greenwich,

Conn., investment firm, has offered

to buy Farmland’s petroleum refinery

and adjacent fertilizer plant at Coffeyville, Kan. The deal would also

cover an old oil terminal at Phillipsburg, Kan., and a three-state crude

oil gathering system and related

inventories required to operate the

facilities. The deal was valued at $281

million. The Coffeyville refinery sale

would be contingent on about $134

million being committed to bring the

plant into federal environmental

compliance.

Even after it disposes of these

assets, Farmland still has other holdings, chief among them its grain joint

venture with Archer Daniels Midland.

In partnership with other cooperatives, it also has interest in a pair of

joint ventures: Agrilliance LLC, an

agronomy marketing and sales affiliate

owned with CHS Inc. and Land

O’Lakes. The other venture is Land

O’Lakes/Farmland Feed. 

In May, Farmland closed and sold

its catfish processing operation at

Eudora, Ark., for $200,000 to a group

of 60 farmers associated with Seacat.

No delivery rights were involved.

Farmland acquired the operation in

1998 when it purchased SF Services,

the Arkansas regional farm supply

cooperative. ■

Rural Cooperatives / November/December 2003 15

Farmland National Beef has been purchased by U.S.

Premium Beef (USPB), which had been Farmland

Industries’ partner in the operation and is a producerowned cooperative of 1,850 cattle producers in 37

states. The purchase, valued at $232 million, was

approved by the federal bankruptcy court in St. Louis

on July 15, and the sale was completed Aug. 6. 

USPB is now majority

owner of Farmland National Beef, which will be

renamed National Beef

Packing Co. LLC (NBP). It is

the nation’s fourth largest

beef packer, with about 10 percent of the national beef

market. It processes about 3.2 million head of cattle

annually.

Minority investors are an NBP management group and

NBP Co. Holdings LLC, a South Dakota company managed by Beef Products Inc. (BPI).

“This is an excellent opportunity for additional growth

in the market for USPB stockholders and members,” says

USPB Chief Executive Officer Steve Hunt. “Increasing the

synergies that already exist between our companies will

enable NBP to become even more efficient in processing

and marketing high-quality beef products worldwide.”

The sale includes Farmland National Beef packing

plants in Liberal and Dodge City Kan., as well as furtherprocessing facilities in Hummels Wharf, Pa., Moultrie,

Ga., and the Kansas City Steak Co., Kansas City, Kan.

National Beef also owns National Carriers, a 700-unit

refrigerated trucking operation.

“Having NBP’s management group as minority

owners solidifies their

commitment to making

NBP the industry leader in

terms of product quality as

well as plant operating efficiency,” Hunt said. “Likewise,

IBP, as the world’s leading manufacturer of boneless lean

beef, has a long history of dedication to quality, food safety

and operational efficiency.” 

USPB member cattle are marketed under the U.S. Premium beef brand and numerous NBP product lines,

including Farmland Black Angus Beef, Farmland Certified

Premium Beef, Black Canyon Agnus Beef and Certified

Angus Beef. Member cattle are also marketed direct to

consumers through Kansas City Steak Co, NBP’s quality

steak mail-order business. ■

U.S. Premium Beef seals purchase of Farmland National Beef
16 November/December 2003 / Rural Cooperatives

By Patrick Duffey, writer-editor

USDA Rural Development

eople prefer to do business with cooperatives and

rate them higher than

investor-owned. They

also view the nation’s

more than 40,000 cooperatives as more

democratic and trustworthy than

investor-owned businesses. Those were

among the findings of a major survey

conducted by one of the nation’s major

polling organizations at the behest of the

National Cooperative Business Association (NCBA), Consumer Federation 

of America and a coalition of national

cooperative organizations. 

Of particular interest to farmers is

that 69 percent of survey respondents

said they would be more likely to buy

food if they knew it had been produced

by a farmer-owned cooperative. Likewise, 67 percent said they would be

more likely to buy their electricity or

telecommunications services from a

locally owned utility cooperative. 

The results were presented by

NCBA President Paul Hazen at a press

conference in Washington, D.C., October 1 to kick off the annual observance

of National Cooperative Month. Other

survey participants included Cooperative Union National Association

(CUNA), National Association of Federal Credit Unions, National Cooperative Bank, National Milk Producers

Federation, National Rural Electric

Cooperative Association, National Rural Telecommunications Cooperative,

National Rural Utilities Finance Corp.,

and National Telecommunications

Cooperative Association.

The survey results support the findings of similar surveys undertaken during the past decade. But the new survey

found that that there is now

a much stronger climate of

distrust of major corporations due to the numerous

stock and bookkeeping

manipulation scandals that

have been in the news during the past two years. Federal regulators are scrutinizing corporate governance

and director election practices. Less than half of those

surveyed felt investor-owned

companies were ethically

governed.

Hazen said more than 75

percent of the 2,031 adults

surveyed agreed that cooperatives operate their businesses

in a trustworthy manner,

compared with just 53 percent who rated

investor-owned firms as trustworthy. A

majority also found that businesses—such

as cooperatives—that allow customers to

democratically elect the board of directors and are locally owned and controlled

are more trustworthy. These are common traits found in many U.S. cooperatives, but particularly among those serving agriculture. More than half of U.S.

adults say they are cooperative members.

A whopping 77 percent of those

surveyed said cooperatives have the

best interests of customers in mind,

but less than half attributed that trait

to investor-owned companies. Cooperatives also rated higher than

investor-owned firms by wide margins

on questions of value, quality, price

and commitment to their communities. Agricultural cooperatives are

often major employers in rural communities in which they operate.

Asked whether they would be more

or less likely to buy products and services from a business if they knew it

was a cooperative:

■ 73 percent were more likely to

buy products from a food cooperative;

■ 71 percent were more likely to use

a credit union;

■ 69 percent were more likely to

patronize independent local businesses

that belonged to a buying cooperative;

■ 55 percent said they would prefer

securing health care services offered by

a consumer-owned provider, while 56

percent said they would prefer to use

day care services provided by a parentowned cooperative.

■ More than 80 percent agreed that

cooperatives strengthen rural commuP

Survey results: public shows strong preference

for doing business with cooperatives 

continued on page 29

Chris Galen of the National Milk Producers Association

answers a question during a press conference at the

National Press Club in Washington, D.C., held to announce

the results of a consumer survey that gauged public opinions of cooperatives. He is flanked by Stephen Brobeck,

executive director of the Consumer Federation of America,

and Paul Hazen, president of the National Cooperative

Business Association. USDA photo by Dan Campbell 
Rural Cooperatives / November/December 2003 17

By David Chesnick, 

Ag Economist

USDA Rural Development

david.chesnick@usda.gov

uch of the nation’s

business sector struggled during 2002, and

cooperatives were no

exception. Symbolic of

this economic downturn were Chapter

11 bankruptcy filings by many large

U.S. businesses, including several by

major cooperatives. Preliminary

reports—analyzed as part of USDA’s

annual financial survey of the top 100

farmer-owned cooperatives—show

that more than half of the co-ops ended 2002 with lower total revenue than

in 2001. For the top 100 farm cooperatives as a whole, revenue dipped 7.5

percent from 2001. 

Despite the deteriorating revenue

picture and bankruptcy filings, the

largest cooperatives showed surprising

resilience in the face of a difficult economy in 2002. 

Most of the $5.2-billion decline in

operating revenue can be attributed to

lower sales in the dairy and diversified

co-op groups. These two sectors

accounted for 80 percent of the revenue decline. Strong showings by cotton, grain and rice co-ops helped offset

the downtrend, as indicated in table 1

(which compares total revenue for all

co-op commodity groups between

2001 and 2002).

Gross profit margins for the top 100

co-ops also declined, falling 2.2 percent, to $5.6 billion—the lowest

amount in 10 years. Cost of goods sold

mirrored the change in revenue, falling

8 percent in 2002, which prevented

gross profit margins from falling more

than they did. 

Operating expenses of $4.8 billion

remained virtually unchanged from

2001. This resulted in net operating

margins of $796 million, another 10-

year low. Lower interest expense and

non-operating revenue boosted net

margins from operations by 15.5 percent, to $613 million (table 2). 

Cotton co-op margins soar 

Cotton prices edged higher in 2002,

thanks in part to rising exports. Most

cotton cooperatives reported improved

revenue, with a 14.6-percent gain for

the sector. Prices returned to members

in the form of cost of goods sold

increased 8.8 percent, substantially less

than the increase in revenue. The

result was higher gross margins, which

reached $232 million in 2002, an

increase of just under 150 percent and

the highest level recorded in the past

10 years. 

Cotton cooperatives needed higher

gross margins to cover record-high

operating expenses. Operating expenses jumped 84.3 percent, to $161 million (due mostly to the cost of processing a very large crop), leaving net

operating margins of $70 million in

2002. Due to lower interest rates as

well as lower debt levels, interest

expense was down 41 percent, to $14

million. The result was $62 million in

net margins from operations in 2002, a

tremendous improvement over a $4

million loss in 2001.

Dairy suffers low prices 

Lower milk prices coupled with

lower volume pushed revenue down

10.1 percent for dairy cooperatives in

2002. After reaching record levels in

2001, dairy cooperatives ended the year

with total revenue of $18.9 billion,

M

Revenue, margins trend downward

for nation’s top 100 ag cooperatives

Table 1—Total operating revenue by commodity group, 2001-02,

top 100 cooperatives

Total sales and operating revenue

2002 2001 Difference Change

—–––––––———$1,000———————— —percent—

All cooperatives 63,971,600 69,153,776 (5,182,176) -7.5

Cotton 2,564,256 2,237,298 326,958 14.6

Dairy 18,934,405 21,058,156 (2,123,751) -10.1

Diversified 21,460,701 24,324,871 (2,864,170) -11.8

Fruit & vegetable 5,151,426 5,269,664 (118,238) -2.2

Farm supply 5,280,025 5,892,671 (612,646) -10.4

Grain 5,673,474 5,289,782 383,692 7.3

Poultry & livestock 2,402,144 2,469,662 (67,518) -2.7

Rice 1,049,388 1,038,287 11,101 1.1

Sugar 1,455,781 1,573,385 (117,604) -7.5
18 November/December 2003 / Rural Cooperatives

down $2.1 billion from 2001. Similar

to cotton cooperatives, dairy cooperatives lowered their cost of goods sold

by 10.5 percent, resulting in a 2-percent drop in gross margins, to $1 billion, in 2002. 

Operating expenses for dairy co-ops

were up 2 percent, to $933 million.

Lower gross margins with higher

operating expenses caused net operating margins to fall 19.4 percent, to

$157 million, the lowest level in the

past 10 years. Lower working-capital

loans and lower interest rates cut

interest expense by 25.2 percent, to

$48 million. Although down 17.1 percent from 2001, net margins from

operations were still a healthy $203

million in 2002. 

Cooperative failures

hurt diversified sector

Diversified cooperatives took a hit

in 2002, with two cooperatives filing

for chapter 11 bankruptcy. The losses

generated from these cooperatives

pushed total revenue for diversified

cooperatives down 11.8 percent, to

$21.5 billion. Gross margins were

down 15 percent, to $1.2 billion, levels

not seen since 1994. 

Lower gross margins and higher

operating expenses left diversified

cooperatives with a net operating loss

of $13 million. Despite higher nonoperational revenue and lower interest

expense, diversified cooperatives ended

2002 with a net loss from operations of

$88 million.

Mixed results for 

fruit/vegetable co-ops

As in 2001, the market was mixed

for fruit/vegetables. Some produce

crops had higher prices, while prices

retreated for others. The net result was

that fruit/vegetable cooperatives saw

their net revenue dip 2.2 percent, to

$5.2 billion. Cost of goods sold was cut

2.7 percent, resulting in a slight 0.3

percent decrease in gross margins, to

$997 million. 

Fruit/vegetable cooperatives continued to cut operating expenses. Operating expenses are down 30 percent since

1999, falling to $771 million in 2002.

Lower expense boosted net operating

margins 24 percent, to $226 million.

Lower interest expense also helped the

bottom line for these cooperatives. Net

margins from operations were up 93

percent, to $95 million, in 2002.

Petroleum sale decline

cuts farm supply revenue 

Farm supply cooperatives suffered a

$612.6-million decline in revenue in

2002. Lower petroleum sales accounted

for nearly half of the decrease in revenues. Lower demand for fertilizer also

hurt farm supply sales. Gross margins

were down 6 percent, to $682 million,

the lowest amount since 1993. 

Operating expenses increased 2 percent, to $664 million, for farm supply

co-ops. That’s the highest expense level in the past 10 years. Higher operating expenses combined with lower

gross margins sliced deep into net

operating margins. Net operating

margins were down 76.4 percent, to

$18 million. Fortunately, lower interest expense, along with higher nonoperational revenue, prevented net

margins from operations from becoming a net loss. Net margins from operations were $14 million, down 19.9

percent from 2001.

Grain revenue climbs

Grain prices and supplies held

steady from 2001 to 2002. Virtually

all co-ops categorized as “grain coops” in USDA’s top-100 co-op survey

also provide farm supplies and services to their members. However,

those cooperatives that predominately

market members’ grain generated

higher revenue from their farm supply sales and service revenue. Feed

sales pushed up total farm supply sales

by 37 percent, helping boost total

revenue for grain cooperatives by 7.3

percent, to $5.7 billion. 

Gross margins for grain co-ops

climbed 2 percent, to $533 million.

However, operating expenses jumped

12 percent, to $471 million, suppressing net operating margins 38.6 percent,

to $62 million. Similar to farm supply

cooperatives, grain cooperatives had

lower interest expense and higher nonoperational income, which lifted net

margins from operations to $100 million. However, this was down 6 percent

from 2001.

Livestock margins surge upward 

Declining livestock sales pushed

revenue down for poultry & livestock

cooperatives in the top 100. This

commodity group had a decline in

revenue of 3 percent, to $2.4 billion

in 2002. Gross margins of $174 million were up 28 percent. Even in the

best of times, margins are generally

tight for poultry/livestock cooperaTable 2—Net margins from operation by commodity group, 2001-02,

top 100 cooperatives

Net Margins

2002 2001 Difference Change

—–––––––———$1,000———————— —percent—

All cooperatives 613,634 531,166 82,468 16

Cotton 62,444 (4,175) 66,619 (1,596)

Dairy 203,098 245,046 (41,948) (17)

Diversified (88,086) 97,222 (185,308) (191)

Fruit & vegetable 95,163 49,353 45,810 93 

Farm supply 13,858 17,298 (3,440) (20)

Grain 99,894 105,725 (5,831) (6)

Poultry & livestock 67,177 41,642 25,535 61

Rice 151,223 8,441 142,782 1,692

Sugar 8,863 (29,386) 38,249 (130)
tives, so any increase helps. 

Higher gross margins and lower

operating expenses provide

livestock/poultry cooperatives with a

165.6 percent increase in their net

operating margins. Net operating margins reached $65 million in 2002. Lower interest expense also helped increase

net margins from operations by 61.3

percent, which ended the year at $67

million.

Record net margins for rice 

Rice sales were up 1.1 percent,

which halted the declining revenue

trend of the past few years. Rice

prices and production declined once

again in 2002. A few rice cooperatives

opened some foreign markets for rice

exports, which helped boost their

total sales. However, these sales came

at a price, as their cost of goods sold

jumped 5.6 percent and caused gross

margins to fall 9.1 percent, to $292

million. 

Operating expenses were slashed

54.2 percent, to $140 million, which

left rice cooperatives with the highest

net operating margins in the past 10

years. Net operating margins were up

914.7 percent, to $152 million.

Higher operating margins and lower

interest expense gave rice cooperatives

a tremendous boost to their bottom

line. Net margins from operations skyrocketed 1,691.5 percent, to $151 million, a record high.

Margins hold for sugar co-ops

Revenue for sugar cooperatives fell

8 percent, to $1.5 billion in 2002.

However, lower cost of goods sold

enabled gross margins to remain relatively unchanged from 2001 at $351

million. Lower operating expenses

increased net operating margins 67

percent, to $58 million. 

Higher net operating margins and

lower interest expense allowed sugar

cooperatives to post net margins from

operations of $9 million. Sugar cooperatives have been operating at a net loss

from operations since 1997.

Assets of top 100 drop

Assets for the top 100 cooperatives

fell for the first time since 1998. Figure

1 shows the ownership of assets for the

past five years. Outside claims to cooperatives’ assets are in the form of liabilities. Members’ claims on co-op assets

are reflected in member equity. 

Total assets for the top 100 fell 2.1

percent, to $27.2 billion. Most of the

commodity groups—with the exception of farm supply, grain and rice

cooperatives—saw their assets decline

in 2002. Most of the drop was due to

lower amounts of current assets. 

Current assets fell $564 million to

$12.3 billion.

On the other hand, total liabilities

only declined 0.9 percent to $17.7 

billion. The largest cooperatives

appeared to be transferring more of

their liabilities from short-term to

long-term. While current liabilities

fell 4.7 percent, to $9.5 billion, 

non-current liabilities increased 3.9

percent, to $8.2 billion. 

Member equity fell $327 million, 

to $8.7 billion, the lowest level since

1995. 

Cotton cooperatives ended the year

with 31.7 percent less current assets

than in 2001. Declining current assets

pushed down their total assets by 23.5

percent, to $667 million. Their liabilities, both current and long-term, fell

35.4 percent. Total liabilities for cotton

cooperatives were $387 million at the

end of 2002. Some of the higher margins from operations were rolled over

into their member equity, which

increased 2.9 percent, ending 2002 at

$280 million.

Dairy cooperatives also ended the

year with lower value assets. Current

assets fell 11 percent, which caused

total dairy assets to fall 5.1 percent, to

$4.8 billion. Total liabilities declined

8.7 percent, to $2.7 billion, due to a

drop of 12.9 percent in current liabilities to $41.9 billion. 

Long-term debt actually increased

3.4 percent, to $778 million. Minority

interest and member equity remained

unchanged from 2001, at $378 million

and $1.8 billion, respectively.

Despite the much-reported co-op

bankruptcies, total assets for diversified

cooperatives remained unchanged at

the end of 2002, standing at $10.7 billion. On the other hand, total liabilities

jumped 3.8 percent, to $7.7 billion.

Leading this increase was long-term

debt. Long-term debt was up 5.2 percent, to $4.2 billion, while current liabilities were up 2.3 percent, to $3.5 billion. As would be expected with filings

for bankruptcy, member equity fell

10.8 percent, to $2.7 billion.

Rural Cooperatives / November/December 2003 19

continued on page 30

Figure 1—Composition of total assets, Top 100, 1998-2002

30

25

20

15

10

5

0

1998 1999 2000 2001 2002

$ billions

Total liabilites Minority interest Total member equity
20 November/December 2003 / Rural Cooperatives

By Sally Vielma, 

USDA Rural Development,

Oklahoma

raveling in northwestern

Oklahoma, it is evident

that the waves of wheat

are a major contributor

to the economic base of

the region. As the state song, “Oklahoma,” says, when the wind

comes sweeping down the

plain, the waving wheat can

sure smell sweet. “Sweet”

not only describes the smell

at the Value Added Products

Inc. cooperative’s frozen

dough processing plant, but

also the aroma of several

other aspects of the cooperative’s bakery operations. 

Adding value to hard-red wheat 

A core group of wheat producers in

the Woods County area of northwestern

Oklahoma held initial meetings to discuss value-added processing alternatives

for their hard-red winter wheat. This

variety is the region’s major crop, preferred by producers as a consistent

source of clean, high-quality wheat that

has above-average test weights and protein levels. Wheat producers, cooperative groups, economic development

partners and agricultural business leaders all shared the vision and desire to

add more value to the crop in the region

where it is grown. 

After careful study of information

and research from the Oklahoma

Department of Agriculture, Oklahoma

State University and a professional

consulting firm, the value-added group

opted to pursue production of frozen,

self-rising dough products plant. 

Co-op launched

The group initially organized as a

Limited Liability Company (LLC) as it

planned for the processing of area producers’ hard-red winter wheat into value-added food products. The organization, called Value Added Partners LLC,

assessed the feasibility of a frozen-dough

processing plant. Several associations

with international expertise in the field

of bakery facilities, equipment and supplies greatly assisted the producer group

as it examined value-added alternatives. 

Value Added Partners evolved into a

closed cooperative, and the name

changed to Value Added Partners Inc.

(VAP) in 1999. The co-op, as originally

designed, was to provide wheat producers the opportunity to expand their

customer base through vertically integrated processing. It also would allow

producers to capture a larger share of

the profit margins through the further

processing of their wheat.

The project “just felt right to all of us

from the beginning,” says Mike Dunker,

plant manager. Producer response to the

initial equity drive in 1999 was “fantastic,” board members say. Project backers held 34 producer meetings across

Oklahoma, which resulted in more

than 900 separate producer/investors

joining. 

About $7.5 million in member equity was raised in just three months. A

second equity drive in 2000 brought in

an additional $2 million in one month.

The great response to the second equity

drive was accomplished by mailing a

single letter to producer/investors. The

response was indicative of the strong

level of commitment and belief the producers had in the VAP co-op. 

VAP also used a 70-percent Business

and Industry Guaranteed Loan, for

$7.5 million, from USDA Rural Development for some of the capital expense

for the project.

Perfect site located

With organization structure and

management services in place, VAP

selected a site it felt was perfect for the

dough processing facility: a 48,000-

Sweet smell of success 

Oklahoma wheat producers use USDA financing to launch frozen-dough bakery

T

V ALUE-ADDED CORNER

continued on page 32

Oklahoma wheat is being processed into

frozen, self-rising pizza crusts at the new

Value Added Partners plant in Alva, Okla.

Photo courtesy Value Added Partners
Rural Cooperatives / November/December 2003 21

By Bruce J. Reynolds,

Economist

USDA/RBS Cooperative Services

bruce.reynolds@usda.gov

Editor’s note: This article is the first in a

series (to be continued in future months) on

selecting and compensating directors.

rocedures for selecting

candidates for boards of

directors are seldom a

central topic of “best

practices” seminars for

either cooperatives or investor-owned

firms. But the recent wave of corporate

scandals has moved this topic to center

stage, at least when it comes to investing in corporations. Business journals

and other media are abuzz with recommendations for more democratic methods of director selection.

Cooperatives are governed by

democratic procedures, which

strengthen trust and accountability.

For cooperatives, it is important to

identify candidates with solid business

and planning skills and with good leadership traits. The current debate makes

it an opportune time to review some of

the alternative procedures agricultural

cooperatives use for selecting directors. 

No single selection

procedure fits all 

There is no single “best practice”

for finding excellent board candidates.

Each cooperative must explore what

works best for its members. Clearly,

large membership cooperatives often

need a different procedure for candidate selection than those with relatively

few members. Candidate selection and

nomination are two parts of the

process of getting qualified candidates

on an election ballot. Selection is a

process of deciding who should be

nominated, while nomination is the act

of putting a candidate on the ballot.

Standard procedures for candidate

selection and nomination often have to

be adapted to local conditions. Bylaws

usually authorize more than one procedure for nominating candidates, but

they do not indicate which nomination

methods are used most frequently. 

A survey was recently distributed to

learn more about how cooperatives

select and nominate candidates for

their boards. It listed some of the common procedures and provided blank

space for “other” methods to be

described. Several cooperatives

described additional procedures or sent

copies of policy statements related to

these matters. Responses were received

from 433 cooperatives. A summary of

these alternatives and their potential

strengths and weaknesses may offer

ideas to consider when reviewing your

co-op’s nomination practices. 

Nominating committee

The survey showed that a nominating committee is by far the most widely

used vehicle for selecting candidates.

This method was used by 374 cooperatives, or 86 percent of the respondents,

but most also use other procedures. A

nominating committee is responsible

for finding the best available candidates

from a cooperative’s membership and is

often involved in other preparations

for an election. For example, nominating committees must prepare the 

ballot, which includes their nominations and all others nominated by valid

methods. 

The strength of a nominating 

committee depends on the extent of

deliberation and study that go into its

P

Co-ops follow more than one path

for nominating board candidates

Whether overseeing the business affairs of a local farm supply cooperative (above) or a

multi-state regional, success means having a good board of directors. That requires a wellplanned nominating process. Photo by Sandi White, courtesy Tennessee Farmers Cooperative 
choices. Both directors and other members can share valuable insight about the

membership when serving on a nominating committee. Out of 376 cooperatives reporting on nominating committee composition, 163 (43 percent) use

only non-director members on the committee. Another 131 (35 percent) use a

mix of directors and non-directors, while

82 (22 percent) have only directors on

the nominating committee. 

A director-only nominating committee can operate without conflicts of

interest when there are board vacancies

or when elections are staggered so that

there are always some directors who

are not running. However, a potential

weakness of the board’s involvement is

that nominating committees may not

be formed when elections involve

incumbent directors. 

About two-thirds of the cooperatives

reported that they do not have a policy

requiring that elections be contested,

thus often allowing incumbents to run

unopposed. Although many cooperatives reported difficulty finding members willing to challenge popular

incumbents, nominating committees

perform better if they are actively

searching and recruiting candidates for

all elections. 

Directors, as well as managers, have

experience in knowing what capabilities are most needed on their board.

Managers often work in an advisory

capacity with the nominating committees. Directors have an appreciation for

certain attributes candidates would

bring to the board. For those cooperatives which disallow directors on the

nominating committee, information

sharing between board and committee

can contribute to better candidate

selections. 

Determining who serves on the

nominating committee is often another

way for directors to exercise influence.

Most non-directors are appointed to

the committee by directors. 

Advantages of director influence on

candidate selection may become a

weakness if applied without checks and

balances. Selecting for positive traits,

such as a team player, may unintentionally screen out “devil’s advocate”-type

directors—those who contribute by

questioning the status quo and who

may offer valuable new ideas. Another

possible weakness of director control

over candidate selection might occur if

members feel they have no real influence on the process of who can be

elected to the board. 

These kinds of weaknesses have

inspired a manager of one rural electric

cooperative to recommend “good riddance” to the nominating committee.1

Yet, there are ways to capture potential

strengths and minimize perceived

weaknesses of nominating committees.

For example, to address concerns by

members of too much director control

over candidate selection, nominating

committees can be elected rather than

appointed. At least 20 cooperatives

reported holding elections during their

annual meeting to select the nominating committee. 

Several cooperatives issue a formal

request for volunteers for the committee, and a couple reported using a 

random selection procedure to solicit

non-director volunteers to serve. The

purpose of these efforts is to find ways

to get more members involved in the

process of candidate selection. 

Nominations from the floor

Nominating committees didn’t

become the most widely used procedure for selecting candidates until the

latter part of the 20th century. A similar survey was last conducted by Cooperative Services in 1949.2 At that time,

only 19 percent of 962 respondent

cooperatives used nominating committees, while nominations-from-the-floor

during annual or district meetings were

used by 64 percent of co-ops (which

has now fallen to 36 percent). 

The strength of floor nominations is

in having increased member access to

the candidate selection process. Its

impact is likely to be greatest in cooperatives that report having no nominating committees, or which only occasionally use them, as was the case for

39 cooperatives. 

Weaknesses of nominations-fromthe-floor mirror the strengths of nominating committees. There is potential

for too much spontaneity or lack of

study and deliberation about potential

candidates. But in those cases where

members at annual or district meetings

have substantial familiarity with one

another, nominations from the floor

are unlikely to result in neglect of the

best candidates. 

The shift over time from nominations-from-the-floor to nominating

committees as the most commonly

used procedure may reflect the increasing complexity of business faced by

cooperative boards. More cooperatives

have responded to this complexity by

22 November/December 2003 / Rural Cooperatives

• Nominating committee

– Composed of different combinations of non-director members and

directors

– Board appointments of non-director members of committee

– At-large or district elections of non-director members of committee

• Nominations form the floor of annual or district meetings

• Recruitment by directors

• Member caucus at annual or district meetings

• Nominations by mail

• Ballot write-ins

• Nomination by application

• Associate board

Methods for selecting and recruiting

candidates for directors
reducing their use of spontaneous procedures for selecting candidates. 

Recruitment by directors

Candidate recruitment by directors

is widely reported. Although 157 cooperatives reported such recruitment,

some of it overlaps with the work of

nominating committees that include

directors. However, recruitment by

directors is a distinctive procedure for

candidate selection when nominating

committees are not used by a co-op, or

when they are exclusively composed of

non-directors. These conditions apply

to 45 cooperatives in the survey. 

Member caucus

Member caucuses (usually held during annual or district meetings) can

engage much broader participation in

the nomination process than do nominating committees. In contrast to

nominations-from-the-floor, more

time is allotted for group deliberation. Although not listed as an

option in the survey, three cooperatives reported using caucuses. 

Usually, cooperatives do not

have both member caucuses and

nominating committees. While

most cooperatives use the latter

procedure, it should be noted that

caucuses are used by some relatively

large membership cooperatives, so that

a fairly substantial number of farmers

participate in this method of candidate

selection. 

Nominations by mail

A cooperative’s entire membership

can function as a virtual nominating

committee by soliciting nominations

by mail, or via a newsletter. The

mechanics of this procedure vary, but,

as an example, one cooperative mails a

response card to each member to

make a nomination. All nominees listed on the returned response cards are

put on the ballot. Ballots are then

mailed to members. In the event of a

tie, a run-off election is held. The

procedure is applied in each of the

cooperative’s 22 districts. 

The strengths of nominations by

mail are not only in having all members involved, but also in the opportunity for individuals to make nominations without the pressures for group

consensus that prevail in meetings. A

potential weakness for this procedure is

that it misses the benefits of group discussion about potential nominees. But

familiarity with potential nominees

that often exists in membership districts enables a nomination-by-mail

procedure to work well. Another

potential weakness is plurality voting,

where a candidate might lose when

running against two or more contenders but would win in a one-on-one

election against those same candidates. 

Ballot write-ins

Provision is often made for writingin candidates on ballots when members

are dissatisfied with the official list of

nominees. Ballot write-ins can be

regarded as more of a membership

right than a candidate selection procedure. It recognizes the right to vote for

who you want to, rather than being

limited to the official nominees. It’s

applicable when using paper or other

forms of a written ballot that are distributed by mail or at annual meetings. 

Ballot write-ins are often disallowed

when any number of nominations from

the floor are included in the vote. The

nominations-by-mail procedure does

not accept ballot write-ins because

members had their opportunity to

nominate on the response card. Nevertheless, many cooperatives have bylaws

that authorize ballot write-ins. Out of

the survey response by 433 cooperatives, 52 reported frequent use and 132

have occasional use of write-in candidates on the ballot. 

Nomination by application

Cooperatives generally prefer an

open process of candidate selection, in

the sense of not limiting any member

from running for the board. Similar to

the procedures of nominations from

the floor and ballot write-ins, a member can be nominated without having

major name-recognition among the

membership, and may even get on the

ballot primarily by self-selection. An

applicant usually must submit pertinent

information to the cooperative or

nominating committee several weeks

before the election. 

In some cases, a signed petition by a

specific threshold number of members

is required. Its advantage over nominations-from-the-floor and ballot

write-ins is that cooperatives often distribute a “bio” on each candidate so

that members can use this information

to help them decide whom to vote

for. Frequent use of nomination by

application was reported by 26

cooperatives, while 105 reported

occasional use. 

Associate board

An associate board is a practical

method for developing quality candidates for directors. These members are usually young farmers who

stand out as good prospects and are

either appointed by directors or can

apply to be confirmed by membership

vote. Associate boards participate in

selected meetings of the board and

may have special committee assignments, with the primary objective

being that they gain experience for

becoming future directors. As a recruiting procedure, this has some similarities with candidate recruitment by

directors, as well as being a member

education program. 

Although the survey did not specify

associate boards as a candidate selection procedure, 17 cooperatives

reported having this type of program,

which suggests that it is relatively

popular. A possible limitation is in

having to make choices in the present

about directors for the future, in contrast to a search procedure just prior

Rural Cooperatives / November/December 2003 23

In short, a nominating

committee can operate

as if it were an office

of human resources.
to an election. But it is an effective

way to develop a competent board and

to boost newly elected directors along

the learning curve faster than

would normally occur. 

Searching for candidates

Procedures for selecting cooperative director candidates are

not often scrutinized and

changed. There has been a gradual shift to procedures with more

deliberation and study of potential candidates and slightly less

reliance on spontaneous methods

of selection. This change is indicated

by the rise of the nominating committee and the decreased use of nominations from the floor that occurred

between 1949 and 2003. 

Increased use of nominating committees reflects efforts to address some

of the problems that many cooperatives

have encountered in finding members

who have an aptitude for serving and

who are willing to serve. Many survey

participants reported the latter consideration as a major problem. When substantially large numbers of members

are reluctant to serve, there is need for

more advanced planning to search for

potential candidates and to hold discussions about the benefits of serving on

the board.

Candidate recruitment by directors

outside of nominating committee work

has also been driven by the need to find

“willing and able” candidates. In addition, associate boards address these

problems more head-on than the more

spontaneous methods of candidate

selection. 

The weaknesses of nominating

committees are less in their design

than in their execution, particularly

when their search process is too narrow. The committee should not limit

its considerations to a circle of friends

or be satisfied when it has found a

“willing and able” candidate, but must

build a database of capable candidates.

This exercise ought to be carried out,

not only for board vacancies, but also

to find challengers to the incumbent

directors. Nominating committees

could survey the membership for suggested candidates, as well as asking for

information about members’ relevant

skills for serving on the board. In

short, a nominating committee can

operate as if it were an office of

human resources.

Candidate selection procedures in

cooperatives will continue to be driven by demand for skilled leadership

in carrying out the increasingly

challenging tasks of fiduciary duties

and long-range planning. Furthermore, difficult issues of business

ethics accompany the growing

financial complexity of today’s cooperatives. In the wake of recent corporate financial scandals, business

ethics are receiving more emphasis

overall. In fact, investor-owned firms

are being urged to apply democratic

principles to reform their director candidate selection procedures. Good

advice that has long been followed by

cooperatives. ■

1 Avram Patt, “Here’s a Novel Concept: Get Rid of Your Nominating

Committee,” Cooperative Business

Journal, NCBA, Aug/Sep 2002. 2 Nelda Griffen, H. N. Weigandt

and K. B. Gardner, Selecting and

Electing Directors of Farmers’ Cooperatives. USDA/Farmer Cooperative

Service, General Report #14, 1955.

(Note—the survey was taken in 1949,

but the report was not published 

until 1955). 

24 November/December 2003 / Rural Cooperatives

There has been a 

gradual shift to 

procedures with more

deliberation and study

of potential candidates.

‘CHS Inc.’ now official name

In an effort to ease confusion and simplify its corporate name, Cenex Harvest States will henceforth be recognized as CHS Inc. In a vote of the membership, 87 percent favored the legal name change, which only

required a majority for passage. About half of the cooperative members and producers in 27 states cast ballots. 

Meanwhile, CHS is shifting its Tex-Mex food business in January to a new location in Fort Worth, Texas,

which will be a more automated facility. The cooperative purchased Rodriguez Foods two years ago and will

shift its tortilla and chip production to the new site. The company also makes tamales, burritos and enchaladas and supplies Texas prisons, the U.S. military and restaurant chains. CHS plans to invest $15 million in

the 100,000-square-foot facility at Fort Worth and move 15 million pounds of annual production there from

Minnesota. ■
By Jim Wadsworth, Program Leader, Education

and Member Relations

USDA Rural Development

he Greek philosopher Diogenes is said to have

walked city streets, lantern in hand, looking for

an honest man. While honesty is one quality

cooperatives should seek in their leaders, there

are many others. 

As the statement at right implies, cooperatives need strong

leadership to meet present and future challenges. But serious

questions arise. What does leadership mean for a cooperative? What makes an effective cooperative leader? Precisely

what skills or traits are required? What type of people fulfill

this need?

There are many definitions for cooperative leadership.

These may include: having the ability to lead the board of

directors toward sound decisions; being loyal to the cooperative and inspiring loyalty in others; being unselfish and trustworthy; having courage to take on hard problems and the

integrity to stand by decisions; understanding and upholding

cooperative principles and concepts. 

But do these definitions go far enough to enable members

and directors to successfully identify and choose future leaders? To a degree. But other leader characteristics should also

be considered. 

Many would agree that effective leaders often have important personality traits that are intangible, or that lie below

the surface. Indeed, there’s often something inexplicable that

makes some people leaders. The strength of their personality—be it charm or stature (i.e., they connect to people and

carry themselves well)—in itself makes them effective leaders.

These people usually stand out from the crowd. They possess

traits that are difficult to learn, since they often come naturally to such people. There may be some who try to “act out”

these traits, but they are usually seen as just that: as actors. 

However, certain leadership traits, behaviors and methods

can be learned or acquired through experience, education,

training and self-study. The following are traits commonly

found among effective leaders. 

Enthusiasm—Does the person show consistent enthusiasm

toward the cooperative, people and life in general? Is the person positive and upbeat when challenged with difficult circumstances and issues? An effective leader confronts business and

life with enthusiasm, isn’t a pessimist or a complainer. These

people are willing to take on tough issues with the same enthusiasm that they display going about their everyday lives.

Listening ability—A leader listens to people and hears

what they have to say. The listening is sincere and patient

and shows respect for different opinions. A good listener listens to learn, rather than listens only to await a chance to

talk. This trait inspires trust and confidence.

Think before speaking—Effective leaders are those

who have the ability to think things through before constructing their words and phrases. Speaking very quickly or

off the cuff works for some people, but others often find

themselves saying things they didn’t actually mean or

intend to say. Leaders need to have the ability to analyze

information, and then form logical conclusions before

articulating their thoughts. 

Stubbornness vs. flexibility—Leaders often learn when

to stick to their guns and when to be more flexible. This usually takes experience, because every situation is different.

Effective leaders are those who have learned when to stay the

course in their opinions and decisions and when to be flexible. Leaders must be careful not to be indecisive, stubborn or

Rural Cooperatives / November/December 2003 25

T

Seeking the best 

Director leadership:

what does it take?

“Little positive can 

happen for cooperatives

unless they have leadership able to meet the

challenges of the 21st

century. Skills required

to lead cooperatives

must be identified and

developed in directors

and managers.”

—Excerpted from “Agricultural 

Cooperatives in the 21st Century”

(RBS Cooperative Information 

Report 60, pg. 17).

continued on page 33
26 November/December 2003 / Rural Cooperatives

By Tracey L. Kennedy,

Agricultural Economist

USDA Rural Development

Editor’s note: USDA’s Rural BusinessCooperative Service began an annual 

survey of cooperative involvement in 

international markets in 1997. Prior to

then, cooperative exports and imports were

measured at five-year intervals. An

overview of survey findings for 2001 is

presented here.

gricultural exports by

U.S. cooperatives in

2001 dropped by more

than 13 percent, to $5.07

billion, from 2000, but

still topped 1998 and 1999, when the

global currency and financial crises still

plagued world markets. A 25-percent

decrease in sales of bulk commodities

in 2001 was wholly responsible for the

overall decline.

The total for all U.S. agricultural

exports was $53.6 billion, an increase of

almost 5 percent from 2000. While

trends in U.S. trade continue to point to

the increased importance of consumerrelated products relative to bulk commodities, exports by U.S. cooperatives

remain concentrated in bulk products. Of

the total for cooperatives in 2001, $2.96

billion, or 58 percent, consisted of bulk

commodities (mainly grains, oilseeds and

cotton). Bulk sales account for about 35

percent of all U.S. agricultural exports. 

Consumer-oriented or high-value

products (meats, dairy products, tree

nuts and fresh and processed fruits and

vegetables) accounted for $1.81 billion,

or 36 percent, of total exports by cooperatives, compared to 42 percent for all

U.S. exports.

Intermediate products (ingredients

and partially processed products, such

as flours, meals, oils, prepared feeds

and animal byproducts) accounted for

$290 million, or 6 percent, of cooperative exports, compared to 23 percent

for all U.S. ag exports (figure 2). Cooperatives also reported $61 million of

exports of non-agricultural products

(farm production supplies and fisheries

products) in 2001.

A

Cooperative exports decline in 2001; bulk

sales fall but continue to dominate sector

Figure 1—Agricultural exports by U.S. cooperatives 1997-2001

$9.0

$8.0

$7.0

$6.0

$5.0

$4.0

$3.0

$2.0

$1.0

$0.0

1997 1998 1999 2000 2001

$ billions

◆

◆ ◆

◆

◆

Figure 2—Cooperative exports by category 2001

Intermediate

Consumer

Bulk

6%

36%

58%
Rural Cooperatives / November/December 2003 27

Sales concentrated

among few, large co-ops

Among the 81 cooperatives reporting

to USDA on their export sales in 2001,

exports continued to be concentrated

among a few of the largest cooperatives.

Just six cooperatives—each having sales of

greater than $100 million—were responsible for 73.5 percent of all exports by

cooperatives. Those six cooperatives represented a range of agricultural products

and geographic areas. The magnitude of

exports among individual cooperatives

continues to be diverse, ranging from less

than $10,000 to almost $2 billion.

Co-op share of U.S. exports

Cooperatives’ overall share of U.S.

agricultural exports for 2001 was approximately 9.4 percent, down from 11.4

percent in 2000. The co-op share for

bulk commodities was 15.7 percent,

down from 21.5 percent the previous

year, while exports of consumer-oriented

products accounted for 8 percent of U.S.

consumer exports, up slightly from 7.5

percent in 2000. Intermediate product

exports from cooperatives had a 2.4-percent share, up slightly from 2.1 percent.

Broad recovery while

market shifts continue 

Exports by cooperatives showed

improvement across two of three major

product categories in 2001 (figure 3).

Bulk commodity sales continue to be

volatile, falling by more than 25 percent

in 2001 after recent showings of both

sharp decreases (54 percent in 1998)

and increases (47 percent in 2000). 

A sharp decline in cooperative sales

of wheat in Asian markets was responsible for the drop in 2001, while other

bulk products, such as cotton and

coarse grains, showed significant gains.

U.S. exports of bulk commodities

showed much more modest change

over the same period.

Consumer-oriented products continued to gain ground, following on a

percent increase in 2000 with a gain of

almost 12 percent, to $1.8 billion, in

2001. In contrast, U.S. sales of consumer-related exports rose just 3.6 percent in 2001. Gains in meats, dairy

products and tree nuts drove cooperatives’ increase, while fruit and vegetable

products fell off slightly. 

Intermediate products, which had

shown significant volatility in the late

1990s, recovered from a 50-percent

decline in 2000 with a 23-percent

increase, to $290 million, in 2001. This

was mainly on the strength of increases

in prepared feeds and oilseed meals.

U.S. sales of the same commodities

have shown modest increases in the

past two years.

Asia, Latin America still top markets

Asia continued as the most important regional destination for cooperative exports in 2001, accounting for 37

percent, or $1.95 billion, of co-op

exports. But that was down from $2.46

billion, or 41.5 percent, of the total in

2000. Latin America’s emergence (primarily Mexico) as a primary market

continued in 2001, taking in $1.36 billion (26 percent) worth of cooperative

exports. That compares to $1.41 billion, or 23.6 percent, the previous year. 

European destinations recovered

somewhat in 2001, accounting for $628

million, 12 percent, of cooperative

exports. That compares to $532.4 million, 8.9 percent, in 2000. African markets lost some ground in 2001, with

$401 million in export sales there compared to $600.7 million in 2000, a drop

from 10.2 percent to 8 percent. ■

Figure 3—Cooperative exports by category 1997-2001

$6.0

$5.0

$4.0

$3.0

$2.0

$1.0

$0.0

1997 1998 1999 2000 2001

$ billions

◆

◆

◆

◆

◆

Figure 4—Cooperative exports by destination, 2001

North America-$381.8 million

Africa $401.7 million

Europe-$628.6

million

●

● ●

● ●

■ ■

■

■ ■

Bulk

Consumer

Intermediate

Asia

$1,944.5 mil

Latin America $1,363.6 million

Middle East-$133.1 million

Oceania-$34.3 million

Unidentified $240.5 million
Barr interim NCFC president

Terry Barr, vice president and chief

economist for the National Council of

Farmer Cooperatives in Washington,

D.C., is serving as interim president

with the departure of President David

Graves on Oct. 31.The selection of

Barr, who has been with the council

for nearly 20 years, was announced by

Board Chairman Jack Gherty. Meanwhile a search committee has been

formed to recruit and screen candidates for the executive post, but no

timetable has been set for that decision. Graves, who had served as

NCFC president since 1997, departed

to pursue other business interests. He

will continue to advise and counsel

during the transition period.

Scholarships available for

CCA Institute at Louisville

The Cooperative Communicators

Association (CCA) is again offering an

expense-paid trip for a pair of college

students who are studying journalism

to attend CCA’s annual institute next

June in Louisville, Ky. Applications are

available from CCA’s website:

www.communicators.coop. Deadline is

Dec. 1. The two interns selected will

assist with CCA communication activities, working from remote sites via the

Internet for five-month internships,

running from January through May.

They may be eligible for college credit

from their participation.The internships are funded by a grant from The

Cooperative Foundation.

Former NMPF Exec. Pat Healy

dies; backed Dairy Promo Act

Patrick B. Healy, president of the

National Milk Producers Federation

at Arlington, Va., from 1969 to 1985,

died of cancer Sept. 12. He joined

NMPF in 1954 after several years

with USDA’s dairy division. During

his NMPF tenure, he successfully lobbied for significant increases in dairy

price support loans and also backed

creation of the National Dairy Promotion Act of 1983 (first national

dairy commodity checkoff).

$119 billion in ‘02 sales 

notched by top 100 co-ops 

The nation’s 100 largest cooperatives—representing the agriculture,

finance, housing, energy and hardware

sectors—reported $119 billion in sales

in 2002, according to National

Cooperative Bank (NCB). 

Agriculture co-ops

dominate the list, with 41

farmer-owned co-ops

accounting for about half

of the revenue. 

The report is an important

indicator of the cooperative business activity across the country, says

Charles Snyder, president and chief

executive officer of the Washington,

D.C.-based bank. The 100 cooperatives showed earnings of $346 million,

up $50 million from 2001. The entire

report is available on the Web at:

www.co-op100.coop, or by calling

(202) 336-7665.

Topping the list was CHS Cooperatives, the St. Paul-based agricultural

and food cooperative. The next highest

ranked ag co-ops on the list (in

descending order) were: Farmland

Industries, Dairy Farmers of America,

Land O’ Lakes, California Dairies Inc.,

Gold Kist, Ag Processing Inc., Southern States Cooperative, West Farm

Foods, Staplcotn, GROWMARK Inc.

and Foremost Farms USA.

“When I look at the revenues

reflected in this year’s NCB Co-op 100

list for agriculture and other cooperative sectors, I’m extremely impressed,”

Snyder said. “For more than 100 years,

America’s cooperatives have not only

survived, but flourished—prevailing

through adversity and economic

downturns, bringing fiscal stability and

prosperity to millions of people.”

Snyder said the role of co-ops

becomes more important as more

traditional companies face loss of

business revenue and corporate cutbacks. “Rather than being

owned by outside investors,

cooperatives look inward

toward their members,

those who use and benefit

from the goods and services provided. The focus

of cooperatives is to maximize economic returns for

members, not top-ranking executives

or distant investors,” he said. 

“Cooperatives have never been

more pertinent. Americans are

demanding consistent and secure

businesses connected in a real way to

their communities—and cooperatives

offer that dependability to thousands

across the nation each day.”

Alto turns dry milk

into cheese for hungry

For the first time since the 1980s, the

federal government is including cheese

in its emergency food assistance program and a Wisconsin dairy cooperative

28 November/December 2003 / Rural Cooperatives

NEWSLINE

Compiled by Patrick Duffey
nities and help farmers succeed;

■ 64 percent said that food products

produced by farmer-owned cooperatives were of higher quality than those

produced by other types of companies.

“The survey demonstrates that consumers know cooperatives by their reputations for quality service and products,” Hazen said. “And those who are

already members of cooperatives have

an even stronger loyalty to, and preference for them. Regardless of how you

measure it,” Hazen said, “in terms of

cost savings, value or satisfaction, consumers can get more for their money

from cooperatives.”

The challenge, he said, “is in raising consumer awareness of, and

access to, cooperatives and to make

more information about cooperatives

available to consumers.”

When asked how familiar they were

with the details of cooperative organization and philosophy, 47 percent said

they were familiar with cooperatives,

30 percent were not very familiar and

22 percent were not familiar at all.

Familiarity was higher among men in

the 45 to 64 age range and among

adults in households earning more than

$35,000 annually.

When asked to rate cooperatives for

10 possible business attributes, cooperatives outscored investor-owned companies on eight of ten attributes—and

by wide margins in some cases.

■ 81 percent said cooperatives can

be counted on to meet customer’s needs

■ 79 percent said cooperatives were

committed to providing the highest

quality of service to their customers

■ 78 percent said cooperatives are

committed to, and involved in, their

communities

Cooperatives in the United States

serve 120 million members and operate in nearly every industry. They

range in size from those listed among

the Fortune 500 companies to single,

small local storefronts. About 30 percent of farm products in the U.S. are

marketed through 3,200 farmer-owned

cooperatives. More than 30 cooperatives have annual revenue of more than

$1 billion,while the top 100 co-ops

generate combined revenue of about

$120 billion.

Electricity is provided to 36 million

people by about 1,000 rural electric

cooperatives which own and maintain

nearly half of the electrical distribution

lines in the nation and cover 75 percent

of the land mass. ■

is involved in the pilot program. Alto Dairy at

Waupun recently received a

truckload of nonfat dry milk

(NFDM) from USDA’s

Food and Nutrition Service

and converted it into Mozzarella cheese for use in the

Hunger Task Force food

program. This was the first

time government stocks

were used in such an

exchange. The 20,000

pounds of Mozzarella

cheese, enough to top

40,000 pizzas, were designated for use by emergency

feeding organizations in Milwaukee. 

“It sounds simple, but this unprecedented exchange took years of commitment from our state and federal government officials at USDA and the

Department of Health and Family Services, Alto Dairy and our team at

Hunger Task Force,” said Sherrie Tussler, executive director of the task

force. “This partnership allows us to

work with a Wisconsin cheese manufacturer to turn an unpopular dairy

product into fresh food for distribution

to thousands of men, women and children who rely on us each

month.”

The task force will distribute the pilot cheese to

28 Milwaukee-area food

pantries that serve an

average of 20,000 people

each month. Alto CEO

Rich Scheuerman said he

was pleased “to work with

the task force in this pilot

program to help feed the

hungry. I can’t think of a

better way for Alto, its

employees and farmerowners to help feed the

hungry in Wisconsin.”

Agronomy, seed expansions

boost GROWMARK sales

Illinois-based GROWMARK

expanded its operating territory and

posted improved sales and earnings for

fiscal 2003. Speaking at the regional coop’s annual meeting in Chicago, Vice

President for Finance Jeff Goldberg

reported pre-tax earnings of $26 million from sales of $1.7 billion, both up

from 2002. Local member cooperatives

will share in patronage of $18.3 million. 

Chief Executive Officer Don Davisson said the cooperative had a good

year, but must continue to improve in

areas such as fertilizer management.

Davisson is also board chairman of CF

Industries, an inter-regional fertilizer

manufacturing and distributing cooperative owned by GROWMARK and a

number of other regional cooperatives.,

Davisson said increasing prices of natural gas were driving up costs for making nitrogen fertilizer applied as anhydrous ammonia. 

To reach future growth goals, he

said, GROWMARK must increase volume and market share and continue

offering new products and services.

Part of the current gain stems from

increased sales and broadening of its

seed lines to complement the FS

brands. Expanding into the Northeast,

via purchasing 40 agronomy outlets

and seed assets from Agway, provided a

substantial boost in this area. 

Southern States lowers debt,

weighs further asset sales 

Staggered by three years of losses,

due largely to a stagnant agricultural

market, poor growing seasons,

increased imports and low farm prices,

Southern States Cooperative (SSC),

Rural Cooperatives / November/December 2003 29

Survey continued from page 16

Alto Dairy CEO Rich

Scheuerman and Sherrie

Tussler complete a ceremonial trade of milk powder

for cheese as part of Alto’s

involvement in anti-hunger

efforts in Milwaukee.
Richmond, Va., is regaining its financial footing by rapidly cutting its debts.

SSC has reduced its debtload by 62

percent in 21 months and hopes to see

a profit for fiscal 2004. 

SSC executives have denied the firm

was headed for bankruptcy, although it

has had unsolicited offers for parts of

the cooperative’s assets. The co-op lost

$14.8 million in fiscal 2001 and $68.2

million in 2002. The co-op expects a

much smaller loss for 2003.

CEO Tom Scribner indicated sales

of assets to further reduce debt would

be made by the board later this year.

SSC has closed cotton gins in Georgia

and South Carolina and shut 21

unprofitable stores across its 23-state

trade territory. It has also signed a

long-term lease of its grain facilities to

Perdue Farms, closed its trucking business in favor of a transportation deal

with Overnite Transportation, sold its

Wetsel seed and agronomy supply subsidiary and shifted its credit business to

John Deere Credit’s Farm Plan. Currently, only three of SSC’s 140 stores

are losing money vs. 70 two years ago.

Florida sugar co-op closes

jointly owned refinery

A Brooklyn, N.Y., sugar refinery

owned in part by a Florida sugar cooperative will be closed in January due to

excessive capacity in the industry. The

former Domino plant was one of three

purchased by Belle Glade-based Sugar

Cane Growers and Florida Crystals

Corp. more than two years ago for

$180 million. They formed an umbrella organization, The American Sugar

Refining Co. 

Some products will still be packaged

at Brooklyn, but with a sharply reduced

staff. The plant had been operating at

less than half of its refining capacity. A

cooperative spokesperson indicated this

plant had been a drain on the system. It

is the 15th sugar refinery closed in the

past 23 years.

FDA clears lactoferin use

for co-op’s beef products

Months after a similar clearance by

the U.S. Department of Agriculture,

the Food and Drug Administration has

concurred with scientific data indicating use of lactoferin, a milk derivative,

is safe even for people allergic to milk.

The spray is applied to beef products.

The USDA finding was sought by ALF

Ventures, a partnership between Farmland National Beef and its successor

owner, the U.S. Premium Beef cooperative, and Dutch-based DMV International. DMV, one of the largest producers of lactoferin worldwide, is part

of Dutch-based Campina. The endorsement provides the product with

“generally recognized as safe” status.

Court confirms tax

on co-op’s fertilizer

Fertilizer stored by Cooperative

Agronomy Services (CAS) of Groton,

S.D., is subject to sales tax, the South

30 November/December 2003 / Rural Cooperatives

Top 100 Coops continued from page 19

Total assets for fruit/vegetable

cooperatives dropped 8.2 percent,

with both current- and long-term

assets falling. Current assets declined

5.4 percent, to $1.6 billion, while noncurrent assets were down 11.4 percent, to $1.3 billion. Liabilities fell 6.5

percent, to $2.2 billion. 

Current liabilities fell 9.9 percent

and long-tem liabilities fell 3.7 percent,

to $935 million and $1.2 billion respectively. Equity for fruit/vegetable co-ops

fell to its lowest level in the last 10

years, at $777 million, a 13-percent

decline.

Supply, grain co-ops 

expand asset base

Farm supply cooperatives were one

of the few commodity groups showing

an expanded asset base. Total assets

grew 3.8 percent, to $2.6 billion. The

growth was due to expanded current

asset levels, which grew 13 percent, to

$1.4 billion. However, the growth was

due to higher debt levels. Current liabilities grew 3.1 percent, to $959 million, while long-term liabilities grew at

a 24.4 percent rate, ending 2002 at

$647 million. Equity fell 5.6 percent, to

$1 billion. 

Grain cooperatives also ended 2002

with a higher asset level. Both current

and long-term assets grew, with net

assets growing 9.6 percent, to $2.6 billion. Current assets increased 11.9 percent while non-current assets grew 7.1

percent, to $1.4 billion and $1.2 billion, respectively. 

Grain cooperatives used both borrowed funds and member equity to

fund the asset expansion. Total liabilities grew 12.2 percent, to $1.5 billion,

while member equity grew 6.6 percent,

to $1 billion.

Poultry/livestock cooperatives saw

assets drop by 11 percent, to $894

million. Current assets were 14.5 percent lower and non-current assets

were 23.3 percent lower. Liabilities,

both current and long-term, were

down 16.1 percent, to $606 million.

Current liabilities were 28.9 percent

lower and long-term liabilities were

1.9 percent lower. With higher margins, poultry/livestock cooperatives

were able to add equity to their balance sheets. Member equity was up

2.3 percent, to $285 million. 

Assets grew at a modest 1.4 percent

for rice cooperatives in 2002, to $478

million. Growth in both current and

non-current assets fueled the increase.

This expansion was solely due to

member investment. Total liabilities

shrank 4.1 percent, to $214 million,

with long-term debt being the main

contributor to this reduction. Member equity grew at 6.3 percent, to

$264 million. 

Sugar cooperative assets fell by 1.5

percent, to $4.5 billion. Most of the

decline was in current assets, which

fell 4 percent, to $397 million.

Although there was a slight increase

of 0.8 percent in long-term debt, to

$465 million, total liabilities fell 2.9

percent, to $801 million. Member

equity grew 5 percent, reaching $459

million, the highest level of the past

10 years. ■
Dakota Supreme Court has ruled, siding with the South Dakota Revenue

Department. The cooperative is

owned by and serves about a dozen

local cooperatives in the Dakotas. 

The court contended the storage fees

were taxable because CAS was not an

auxiliary of the local cooperatives and

the $6-per-ton storage fee was a separate

transaction from the eventual sale of fertilizer by the locals to their farmer members. The court said the storage was not

a tax-exempt agricultural service, noting

CAS was not involved in applying the

fertilizer or in planting, cultivating and

protecting crops. The cooperative contended the storage and sale were a single

transaction and tax exempt.

Bargaining co-ops name new leaders

Leadership changes were recently

made at the helm of three cooperative

bargaining associations. Ronald Schuler,

retired manager of the California Canning Peach Association, has agreed to

serve as interim chief operating officer

for California Tomato Growers Association (CTGA) until the board finds a

permanent successor to John Welty,

who recently resigned. Schuler is a past

chairman of the National Council of

Farmer Cooperatives and a director of

the California Agriculture Bargaining

Rural Cooperatives / November/December 2003 31

Even after 35 years as leader of the British rock band

Jethro Tull, Ian Anderson is not too old to rock’n’roll,

and he’s definitely not too old to farm. When he’s not

playing flute and singing with Tull or performing as a

solo artist, Anderson often occupies himself back home

with his farming interests. 

For many years, Anderson’s salmon farm in

Scotland was Britain’s largest. That’s right,

Aqualung does aquaculture. Although he

recently sold that operation, he and his wife

continue to farm a variety of crops in England.

As a result, the Andersons have developed a

strong appreciation for the role of cooperatives in helping farmers. 

“Co-ops have been a fact of life for us for

probably 20 years,” Anderson says. “They not

only help in selling [our crops], but also in

buying raw materials, animal feeds, diesel

fuel or whatever. From an economic point of

view, co-ops are a necessity—they help us

get the kind of buying and selling clout that comes from

a combined level of production or purchase,” says

Anderson, who has written songs such as “Farm on the

Freeway” and “Heavy Horses” that focus on agriculture

and changing rural life. 

When touring America, as he is currently (a solo tour

which extends through November), Anderson and his

wife usually drive themselves from city to city and enjoy

exploring our nation’s vast, diverse agricultural landscape along the way.

“When we travel around America, we are always

looking out the window, saying ‘what the heck was that

growing in that field over there?’ Or, ‘what was that 1,000

acres over there planted in?’ We’re always interested in

what is growing where and why, and what it’s worth and

to whom.”

Agricultural issues are changing rapidly, “not just in

America or the UK, but throughout the planet,” Anderson

says. “Throw in a bit of global warming on top of everything else, and boy, are we farmers—I say ‘we,’ but I

don’t depend on farming for a living—in a state of flux.” 

Farming in Britain is no longer the quaint world pictured in James Herriott’s “All Creatures, Great and

Small” books. “There’s even some panic among

farmers there. Suicide among farmers in my

country is at one of the highest levels [for any

occupational group],” says Anderson. 

“I guess that may apply in the U.S. for the

same reasons—people who have grown up

with a multi-generational and cultural lifestyle

that is threatened by forces that they don’t

always understand and which they have no

possibility of input or control over. And that

really tears a man apart in a way that us folks

who play music for a living, or who work in a

bank or in construction, don’t understand. That

strange and passionate, vital sense of involvement that some people have with the land of

their birth, the land of their fathers and land of opportunity, as it must have once been. 

“I can feel that when I drive through the heartland of

America, just as I do when driving through the English

countryside. There are people who are wringing their

hands and saying, “I just don’t know how I am going to

get through tomorrow.”

When interviewed this summer, the Andersons were

feeling a bit of that pain themselves. “We just had maybe

five weeks of drought here in the UK, followed by a torrential downpour in the last 24 hours. I haven’t been out

to look at our fields today, but I will lay my money that

half of our winter corn is laying on its side right now.

These are things that happen to farming folks.”

But you would have to be ‘thick as a brick’ not to realize that co-ops can help farmers living through hard

times and good. ■

— By Dan Campbell, Editor 

Tull’s Anderson says co-ops not just ‘living in the past’
32 November/December 2003 / Rural Cooperatives

Value Added continued from page 20

square-foot building with eight acres of

grounds in Alva, Okla. The facility had

previously housed a Wal-Mart store

and had several features that fit the

needs of VAP. These included climate

control, open span sanitary design,

loading docks and adequate utilities

and services. 

The property around the facility

would allow for plant, warehouse and

freezer expansion. The state-of-the-art,

“high speed” baking equipment purchased for the plant is very specialized

and incorporates the latest European

bakery technology for frozen, self-rising dough. It is used in manufacturing

flat and artisan bread products, which

includes frozen, self-rising pizza

crust—currently VAP’s main product. 

The decision to focus on pizza crust

production has proven to be a good

choice for the co-op. VAP is currently

selling pizza crust to some of the

nation’s largest retailers of frozen pizza. 

In 2001, the co-op was awarded a

$500,000 Value-Added Producer Grant

from USDA Rural Development. This

grant was a working-capital grant that

assisted them in branching out with

other dough products and in processing and marketing some additional

dough and bread products. 

Expanding product line

VAP has produced and sold several

different types of bread and dough

products since that time. These

include four varieties of baguettes,

three flavors of Danish rolls and the

dough for a puffed pastry. Two sizes

of “crazy bread” (a bread that is used

for dipping) are being produced 

and sold. 

VAP’s dough and bread product

markets continue to grow, and it has

the capability to produce almost any

imaginable type of bread product. The

newest addition to VAP’s product line

is a unique frozen cinnamon roll that

can be microwaved. “Good” does not

even come close to describing the

product. It is incredible, and sweet! 

The plant has its main line running

at full capacity with pizza crust, while

a pilot line (for orders of less than

1,000 pounds) is running full time for

cinnamon rolls. They use this smaller

production line also to develop new

products. The main line has the capability to process 10,000 pounds of

dough per hour. 

VAP has 80 full-time employees,

about 15 percent of whom are also producers in the cooperative. The amount

of freight transportation has grown so

much that a trucking company was

launched to handle it. It owns 12 trucks

and 20 trailers and employs 15 fulltime drivers. All this activity supports

the vision of the cooperative in creating job opportunities in the area and

supporting the small farmer.

Adapting to various situations in the

marketplace has provided valuable

experience for VAP. The co-op has

successfully made necessary adjustments in labor, products and marketing efforts. The co-op is effectively

managed and will continue to benefit

producers while having a positive

impact on the entire area. 

The producers who launched the

co-op say they made a very good initial

choice in seeking out experts in the

kind of food processing they wanted to

do. Dunker, who served as a consultant

to the project in the very early stages of

the project, and his brother Harry, the

co-op’s operations manager, together

have 60 years of experience in the baking industry and plant set up. 

With accomplishments and strides

achieved so far by the co-op, who

knows what could happen next? Some

co-op members say a pizza-topping

plant and toppings-producer venture

would be sweet! Stay tuned. ■

advisory committee. CTGA has been

representing the interests of California

tomato growers for more than 50 years.

The cooperative has slated its annual

meeting for Jan. 21 in Modesto. 

At Michigan Processing Apple

Growers, Dawn Drake, with 12 years’

experience in the association, succeeds

Tom Butler, who has retired. Jack

Pressley, manager of the Malheur Potato Bargaining Association in Vale, Ore.,

died in September. His successor is yet

to be named.

New Calcot CEO seeks

return of stability

Calcot, Bakersfield, Calif., has turned

to Robert Norris, 60, executive vice

president since 1992, to permanently fill

The NASCAR racing circuit will be a little sweeter

this year, with racing star

Kyle Petty promoting Sue

Bee honey with Sue Bee

Honey logos on his racing

car and with personal

appearances at some marketing events. The Iowabased co-op also will be featuring Petty on in-store

promotional posters and on

many of its product labels. ■
Rural Cooperatives / November/December 2003 33

overly flexible. Rather, they should use a blend of those traits,

depending on the situation. Consistency is key—those being

led must come to understand and know the decision-making

processes of their leaders. 

Complete tasks—Leaders complete things when they’re

supposed to be done, or make sure that those responsible get

it done. Leaders are prepared for action and are able to instill

in others the need to be prepared. Completing work and projects in a timely manner creates respect and allows people to

witness the ability and integrity of their leaders. 

Take responsibility—“The buck stops here” is a slogan

good leaders adopt. They are willing to take responsibility

for negative events or occurrences that fall under their jurisdiction. They don’t try to pass problems off on someone else,

but take them on. They also know how to graciously take

credit for success and—even more important—know how to

give credit to others when it is due.

Thought provoking—A good leader is able to get others

to think about things rather than just follow blindly. A leader

involves people by provoking thoughts through challenges

and by providing information. This trait often allows a leader

to build relationships that will endure and create commitment needed to complete tasks.

Effective leaders will have many of the qualities or traits

outlined here, and probably some others as well. Often, various traits compliment each other, giving the person even

greater leadership stature and ability. If some traits are lacking, an effort should be made to improve in those areas. 

Understanding and knowing what traits to look for while

identifying perspective leaders is critical. In addition, it is also

important to understand whether an identified leader will be

a good fit in a specific situation. Even though a person may

be identified as a suitable leader, it does not necessarily mean

that the person will thrive in all leadership roles. 

Indeed, a person may be a tremendous leader in one situation, but not a good leader in a different situation, such as in

a cooperative. These questions may need to be asked:

■ How well will the prospective leader fit into the situation given the circumstances? Will the leader be likely to succeed in the environment?

■ How well will he or she fit, given the other leaders and

personalities involved? 

■ Will the person be liked and accepted by the other cooperative players, be they members, directors or employees?

■ Does the situation seem to be one where the person will

have an adequate opportunity to grow into the leadership

position and thrive?

■ Does the person have the right educational background,

experience and knowledge of cooperatives and business?

■ Is the person open minded about learning more about

being an effective director? Will he/she be willing to be further educated, partake of training workshops and attend conferences, etc.?

■ Does the person have the vision, values and staying power

necessary to fit the opportunities afforded by the cooperative?

These and other pertinent questions must be addressed when

working to select quality leaders for cooperatives in the current

competitive environment. Leader-quality people should be

sought out, even though it may be a challenge to recruit them

because they are often very busy and lack the extra time to take

on additional responsibilities and leadership roles. Knowing the

traits to look for and the questions to ask can help identify the

best people to lead cooperative boards and cooperatives as we go

forward into a challenging and competitive future. ■

the CEO post he

had been holding

on an interim

basis since June.

Norris replaces

former CEO

David Farley,

who exited earlier after only nine

months with the

cooperative. 

Norris is only

the seventh CEO in Calcot’s 76-year

history and the first Californian to

hold the job. The board was “looking

for someone who could bring stability

back into the company and bring Calcot back to the stature it has held over

the years.” Norris says he is goal oriented and could work with the staff

and growers. Meanwhile, Farley has

filed a wrongful termination lawsuit.

Asian imports force

co-op to switch fish

Facing a tide of frozen catfish

imports from China and Vietnam

produced at half the domestic cost,

the Illinois Fish Farmers Co-op at

Pinckneyville has discontinued processing catfish at its Prairie Lands

Seafood plant and cut its work force

to a small, core group. Doug Wojcieszak, the co-op’s executive director,

says the cooperative will shift to more

profitable fish: hybrid stripped bass,

freshwater shrimp, largemouth bass

and, potentially, perch, bluegill and

walleye. These fish require little or no

processing and are destined for the

local market or the live-haul and fresh

markets.

The Illinois Department of Agriculture saw the new catfish co-op as a

potentially important new avenue for

southern Illinois agriculture. It contributed $6 million to the venture and

USDA provided a $150,000 loan guaranteed by the city and a mortgage on

the building.

The processing plant will be sold

with the equipment. The cooperative

plans to continue to deliver technical

services to its members. When the

cooperative started in 1999, the state

had 12 fish and shrimp farms; now

there are more than 60. 

Director leadership continued from page 25

Calcot CEO Robert

Norris
34 November/December 2003 / Rural Cooperatives

Information appearing in Rural Cooperatives magazine during calendar year 2003 has been indexed to 

help you find past articles. Articles are indexed by month and page. Back issues can be found on-line at

www.rurdev.usda.gov

Title Features Issue—Page 

A shared harvest

Machinery co-ops could help small, Upper Midwest dairy farms March/April 24

AFT guide helps farmers and ranchers transfer land to the next generation July/Aug. 10

Annual Reports:

How to read them and what they should tell you about your co-op Jan./Feb. 10

Apple industry study shows value of producer bargaining associations Sept./Oct. 6

Back to School

NICE marks 75th anniversary with return to campus as co-op youth education program Sept./Oct. 25

Bargaining is big for small business

Resurgence seen in bargaining co-ops March/April 12

Bumper crop buoys Kansas cotton co-op March/April 23

Congressional hearing focuses on possible need for more flexible co-op business model Nov./Dec. 9

Co-op development stages & timeline May/June 10

Co-op store part of Oneida Food Systems Jan./Feb. 28

Cooperative care logo loaded with symbolism May/June 10

Cooperative care mission statement May/June 32

‘Cooperative’ comes first May/June 9

Cooperative exports decline in 2001; bulk sales fall but continue to dominate sector Nov./Dec. 26

Co-ops follow more than one path for nominating board candidates Nov./Dec. 21

Co-ops increase share of farm marketings; share of farm supply sales dips slightly May/June 19

Dismantling of Farmland continues; Smithfield buying pork business Nov./Dec. 15

Equity, tax issues prompt beef co-op to ponder switch Nov./Dec. 12

Facility closures always a tough decision for co-ops March/April 17

Farm Credit Banks merge in Midwest Jan./Feb. 24

Farming with 8.5 million neighbors July/Aug. 7

$44-million push for new geographic technology May/June 25

Frogs, snakes & kilowatts

East Kentucky Power Co-op finds green in environmental program Jan./Feb. 16

Funding Business Development Centers July/Aug. 18

Great Lakes Pork Co-op adjusts plan to seek alternative packing plant May/June 8

GROWMARK certification program prepares directors for new challenges Sept./Oct. 27

Hard choices

Hard white wheat varieties officer co-ops opportunities and challenges March/April 4

House calls

In-home care givers form cooperative to provide vital service for elderly, May/June 9

disabled in rural Wisconsin 

Large co-ops see growth in ‘01, reverse declining net margins Jan./Feb. 20

Living with Sprawl

As farms give way to subdivisions and traffic lights, America’s rural cooperatives struggle to adjust July/Aug. 4

Local co-ops’ net income and sales climb in 2001 Jan./Feb. 31

Low-overhead approach taken by Dakota Lamb Growers Co-op May/June 7

Meeting the challenge: co-ops in the 21st century Jan./Feb. 4

Merrills first Northeast dairy family to win national land conservation prize July/Aug. 10

Methods for selecting and recruiting candidates for directors Nov./Dec. 22

Minnesota leads the nation in co-op business volume Sept./Oct. 18

More than a power source

Brunswick Electric typifies commitment of cooperatives to support rural communities July/Aug. 15

More than milk

Dairylea’s scope of farmer services moves beyond milk marketing Sept./Oct. 14

Natural beef anchors product line for co-op of Kansas family farms May/June 5

Negotiating the crossroads of a new century Jan./Feb. 7

Network difficulties

Tales of two Iowa pork-producer networks show that bottom-up approach works best March/April 18

New days, new ways

Co-ops, producers find many ways to prepare for the future Nov./Dec. 4

New global strategy

Year-round citrus demand has Sunkist tapping foreign market supplies Sept./Oct. 4

New kids on the block

Iowa beef co-op sees strategic partnership as best way to break into highly competitive retail beef market May/June 4

NMPF scales back CWT milk supply-balancing plan July/Aug. 28

No mountain too high

Rural broadband service helping to save lives of isolated patients May/June 22

Oneida grocery co-op boosts community; helps keep more money on reservation Jan./Feb. 26

Orange Empire bows to urban sprawl in Southern California July/Aug. 8

2003 Article Index
Rural Cooperatives / November/December 2003 35

Port OKs Texas co-op lease July/Aug. 21

Professor’s idea blossoms into major co-op 

conference for college students July/Aug. 30

Revenue, margins trend downward for nation’s top 

100 ag cooperatives Nov./Dec. 17

Role of cooperative principles Jan./Feb. 5

Seeking the best 

Director leadership: what does it take? Nov./Dec. 25

Southern hospitality

Walton Electric Co-op makes a positive difference 

for Georgia Sept./Oct. 8

Striking oil

South Dakota Soybean Processors finds new ways 

to add value to crop March/April 20

Survey results: public shows strong preference 

for doing business with cooperatives Nov./Dec. 14

Talking with pictures

Photo experts offer tips on how to better tell your co-op 

story with strong photos July/Aug. 22

The ‘closure’ dilemma

Conducting business in a way that helps keep both members and their

co-op in business can be a challenge March/April 15

The future of NICE Sept./Oct. 26

The Greene Bean Project: Growers’ field of dreams 

is edible beans May/June 16

Top co-op communicators honored in Madison Sept./Oct. 23

‘Tough bargaining’ helps almond growers July/Aug. 19

Trailblazers

Leadership development programs key to more 

women winning seats on co-op boards May/June 13

Treaty of Oak Creek moved Oneida tribe to Wisconsin Jan./Feb. 29

Tull’s Anderson says co-ops not just ‘living in the past’ Nov./Dec. 31

Tune-up your meetings

Periodic analysis is necessary to ensure that cooperative board meetings

are efficient, effective and productive May/June 26

Turkey growers grateful for Nebraska, Michigan co-ops Jan./Feb. 33

Turning problems into profits

Alpaca co-op survives early dissension to build 

domestic fiber & products market March/April 8

2-year waiting list for wildlife lectures Jan./Feb. 19

U.S. Premium Beef offers to buy Farmland 

share in processing business July/Aug. 12

U.S. Premium Beef seals purchase of Farmland National Beef Nov./Dec. 16

USDA Outlook Conference to focus on critical challenges Jan./Feb. 13

USDA plays active role in farmland protection July/Aug. 9

USDA providing $1.4 billion to expand rural broadband May/June 24

USDA’s RBEG program stimulates business 

creation on reservations, other rural areas Jan./Feb. 30

USDA’s REDLG program July/Aug. 17

USDA’s Value-Added Producer Grants invest 

millions in innovative ag businesses March/April 11

Walton saluted for business ethics Sept./Oct. 10

Waving the red flag

Survey examines correlation between ethical 

environment and fraud in co-ops July/Aug. 13

What went wrong at Agway?

Cornell professors describe how co-op’s chickens 

came home to roost Jan./Feb. 15

Wisconsin’s Westby, ‘Little Creamery That Could,’ 

marks 100th anniversary Sept./Oct. 20

Magazine Departments

Commentary/Editorial

Assessing the risks and opportunities ahead Jan./Feb. 2

Coopeative education can help renew and revitalize co-ops July/Aug. 2

Setting up the forms Nov./Dec. 2

Shaping tomorrow’s cooperatives today Sept./Oct. 2

The keeper of the co-op faith March/April 2

Why Cooperatives? May/June 2

Focus On...

Ursa Farmers Cooperative

Ursa, Illinois Jan./Feb. 25

Management Tip

How does your local farm supply cooperative rate? March/April 22

Newsline

West Central Soy receives value-added ag award Jan./Feb. 34

Upstate Dairy Co-op targets teen market

Growmark purchases Agway’s agronomy, seed businesses

Agri-Mark to buy McCadam Cheese

Farmland gets extension; 2002 losses at $346 million

American Crystal Co-op pays $34 million for sugar plants

Graves joins USDA advisors

Improving denim market sparks PCCA rebound

GROWMARK turns 75 with sales of $1.3 billion

CHS nets $126 million

Nilsestuen, Ziewacz head Wisconsin ag office March/April 29

Va. Tech NICE site; NCFC Sets PAL date

TFC regains profitability after $1.8 million in cuts

Kansas co-op leader Joe Lieber dies

AgriBank top co-op bank

Alto Dairy GM Retires

Agway selling Telmark; CEO Cardarelli to step down

CF eyes plant shutdown

Cal/West Seed, Senesco in pact

Dilland succeeds Wosje as Michigan Milk CEO

Dakota Pride, Canterra form Merridian Seeds venture

LOL nets $98 million; consolidating feed mills

CHS opens Brazil office; ’02 sales at $7.5 billion

Golden Growers rejects change

Dakota Layers Co-op operating in Flandreau

Co-op Communicators mark 50th anniversary

Farmland eyes revamp, sale of meat business

DVM to purchase all Agri-Mark Lactoferrin

Md.-Va. Milk Producers buy North Carolina dairy co-op

Southern States motto: 180 degrees, 160 days

Smith to chair AMCOT

Organic co-op plans new HQ as sales soar May/June 28

NORPAC buying Simplot’s vegetable processing plant

DFA boosts net margins; Camerlo succeeds Brubaker

GROWMARK, TruServ form local retail pact in Ontario

Agway eyes sale of remaining assets

Alto Dairy trims 90 jobs

Mtn. Lamb Co-op, Rosen forge pact

NMPF seeks voluntary plan to balance supply, demand

ND co-op plans DC restaurant

NC growers market biodiesel

Olsen to lead Tree Top co-op

Mid-Missouri Energy raises $17 million

Wilson heads co-op foundation

Farmland turns $29 million profit for second quarter

AMPI sales top $1 billion for ‘02

New board, CEO make changes at Ocean Spray

Dividend allocation rule focus of legislation

Foremost sales reflect dairy ills

Iowa hog co-op set to open processing plants

Calcot makes progress payment

MMPA members get $1.9 million patronage

SW Farm Credit loans climb in ‘02

David Holm to lead Iowa Institute for Co-ops

AGP sets volume record: Reagan sees member support July/Aug. 30

SSC, Farm Plan forge credit pact

Wool Growers pick Etcheverry

PCP sells canning operation to focus on food processing

Wyoming Sugar enters alliance with Cargill

Dakota Hay Co-op finds success in horse market

Kentucky’s catfish co-op reels in supermarket order

Montana educator develops co-op business lesson plans

Meadow Farms Hog Co-op opens modern Illinois plant

Texas catfish co-op opens

NMPF adds three associates

Farmers sue chairman, others who promoted co-op sale to ADM

Sidney Sugars in supply deal

Nebraska North Star Neighbors direct market co-op’s meat

Foremost restructures in face of declining Midwest supply

Ozark Mountain Pork Co-op source of Missouri Farm Pride

Zwald AMPI’s treasurer

LOL closes research facility

NCBA fetes Kaptur, Oxley

GROWMARK creates seed, agronomy subsidiaries in NE
36 November/December 2003 / Rural Cooperatives

NFU fetes cooperator Swenson

Co-op community fetes heroes as four join Hall of Fame

Rhode Island dairy co-op launches own milk brand

UW offers co-op educational site for youth, young members

Iowa Quality Beef opens Tama plant Sept./Oct. 28

Indiana’s Countrymark offers metered biodiesel blending

Videos, brochures promote Co-op Month in October

Co-op Development Forum slated for Minneapolis

Minnesota law opens co-op membership to new investors

Michigan Sugar 4th co-op in Midwest Agri-Commodities

Breeding to head Kansas Co-op Council

Bailey to head Co-op Development Foundation

Court OKs ADM buying MCP, spinoff venture

Calcot, Ocean Spray among co-ops with new leaders

Bongards Creameries buys LOL’s Perham operation

Bushel 42 Pasta closes

Agway energy firm offers green power

LOL Farmland Feed eyes ethanol co-products market

Sun-Maid, Licente join for Canadian Juice Line

Riceland Foods, Cargill in lecithin marketing alliance

Barr interim NCFC president Nov./Dec. 28

Scholarships available for CCA Institute at Louisville

Former NMPF Exec. Pat Healy dies; backed Dairy Promo Act

$119 billion in ’02 sales notched by top 100 co-ops

Alto turns dry milk into cheese for hungry

Agronomy, seed expansions boost GROWMARK sales

Southern States lowers debt, weighs further asset sales

Florida sugar co-op closes jointly owned refinery

FDA clears lactoferin use for co-op’s beef products

Court confirms tax on co-op’s fertilizer

New Calcot CEO seeks return of stability

Asian imports force co-op to switch fish

‘CHS Inc.’ now official name 

Value-Added Corner

Adversity to Advantage

Pacific Coast Producers uses USDA grant to 

develop single-serve fruit bowl market Sept./Oct. 12

Ag Marketing Resource Center helping producers 

develop value-added strategies May/June 15

‘No go’ can be a good show

Feasibility study advises co-ops not to pursue tortilla project July/Aug. 20

Sweet smell of success

Oklahoma wheat producers use USDA financing 

to launch frozen-dough bakery Nov./Dec. 20

USDA’s Value-Added Producer Grants invest millions 

in innovative ag businesses March/April 11

Subjects

Bargaining

Apple industry study shows value of producer 

bargaining associations Sept./Oct. 6

Bargaining is big for small business

Resurgence seen in bargaining co-ops March/April 12

‘Tough bargaining’ helps almond growers July/Aug. 19

Communication/Education

Adapting to change

Educating members helps smooth transitions May/June 23

Annual Reports:

How to read them and what they should tell you 

about your co-op Jan./Feb. 10

Survey results: public shows strong preference for 

doing business with cooperatives Nov./Dec. 14

Talking with pictures

Photo experts offer tips on how to better tell your co-op 

story with strong photos July/Aug. 22

Top co-op communicators honored in Madison Sept./Oct. 23

Consumer Co-ops

Co-op development stages & timeline May/June 10

Co-op store part of Oneida Food Systems Jan./Feb. 28

House calls

In-home care givers form cooperative to provide vital 

service for elderly, disabled in rural Wisconsin May/June 9

Oneida grocery co-op boosts community; 

helps keep more money on reservation Jan./Feb. 26

Co-op Development

Co-op development: a tool to promote democracy, 

self-reliance March/April 17

Co-op development stages & timeline May/June 10

Director Education and Development

Co-ops follow more than one path for nominating 

board candidates Nov./Dec. 21

GROWMARK certification program prepares 

directors for new challenges Sept./Oct. 27

Seeking the best 

Director leadership: what does it take? Nov./Dec. 25

Trailblazers

Leadership development programs key to more 

women winning seats on co-op boards May/June 13

Tune-up your meetings

Periodic analysis is necessary to ensure that cooperative 

board meetings are efficient, effective and productive May/June 26

Dairy

Merrills first Northeast dairy family to win national 

land conservation prize July/Aug. 10

More than milk

Dairylea’s scope of farmer services moves beyond 

milk marketing Sept./Oct. 14

NMPF scales back CWT milk supply-balancing plan July/Aug. 28

Wisconsin’s Westby, ‘Little Creamery That Could,’ 

marks 100th anniversary Sept./Oct. 20

Education

Back to School

NICE marks 75th anniversary with return to campus 

as co-op youth education program Sept./Oct. 25

GROWMARK certification program prepares 

directors for new challenges Sept./Oct. 27

Meeting the challenge: co-ops in the 21st century Jan./Feb. 4

Negotiating the crossroads of a new century Jan./Feb. 7

Professor’s idea blossoms into major co-op 

conference for college students July/Aug. 30

Survey results: public shows strong preference 

for doing business with cooperatives Nov./Dec. 14

The future of NICE Sept./Oct. 26

USDA Outlook Conference to focus on critical challenges Jan./Feb. 13

Energy

Catch the wind

Co-op’s giant windmills work with Mother Nature 

to provide power March/April 4

Frogs, snakes & kilowatts

East Kentucky Power Co-op finds green in 

environmental program Jan./Feb. 16

Environment

AFT guide helps farmers and ranchers transfer land 

to the next generation July/Aug. 10

Farming with 8.5 million neighbors July/Aug. 7

Frogs, snakes & kilowatts

East Kentucky Power Co-op finds green in 

environmental program Jan./Feb. 16

Living with Sprawl

As farms give way to subdivisions and traffic lights, 

America’s rural cooperatives struggle to adjust July/Aug. 4

Merrills first Northeast dairy family to win national 

land conservation prize July/Aug. 10

Orange Empire bows to urban sprawl in Southern California July/Aug. 8

USDA plays active role in farmland protection July/Aug. 9

Farm Supply, Agronomy & Service

A shared harvest

Machinery co-ops could help small, 

Upper Midwest dairy farms March/April 24

Battening Down the Hatches:

Co-op security measures intensified in post-September 

11 world May/June 4

Co-ops increase share of farm marketings; 
Rural Cooperatives / November/December 2003 37

share of farm supply sales dips slightly May/June 19

Dismantling of Farmland continues; Smithfield 

buying pork business Nov./Dec. 15

How does your local farm supply cooperative rate? March/April 22

Large co-ops see growth in ‘01, reverse declining 

net margins Jan./Feb. 20

Local co-ops’ net income and sales climb in 2001 Jan./Feb. 31

Minnesota leads the nation in co-op business volume Sept./Oct. 18

More than milk

Dairylea’s scope of farmer services moves 

beyond milk marketing Sept./Oct. 14

Revenue, margins trend downward for nation’s 

top 100 ag cooperatives Nov./Dec. 17

Ursa Farmers Cooperative

Ursa, Illinois Jan./Feb. 25

What went wrong at Agway? Jan./Feb. 15

Finance

A shared harvest

Machinery co-ops could help small, Upper 

Midwest dairy farms March/April 24

Annual Reports:

How to read them and what they should tell you 

about your co-op Jan./Feb. 10

Dismantling of Farmland continues; Smithfield 

buying pork business Nov./Dec. 15

Funding Business Development Centers July/Aug. 18

How does your local farm supply cooperative rate? March/April 22

Large co-ops see growth in ‘01, reverse declining 

net margins Jan./Feb. 20

Meeting the challenge: co-ops in the 21st century Jan./Feb. 4

Minnesota leads the nation in co-op business volume Sept./Oct. 18

Negotiating the crossroads of a new century Jan./Feb. 7

New days, new ways

Co-ops, producers find many ways to prepare for the future Nov./Dec. 4

Striking oil

South Dakota Soybean Processors finds new ways 

to add value to crop March/April 20

U.S. Premium Beef offers to buy Farmland share in 

processing business July/Aug. 12

U.S. Premium Beef seals purchase of Farmland National Beef Nov./Dec. 16

USDA’s REDLG program July/Aug. 17

What went wrong at Agway?

Cornell professors describe how co-op’s chickens 

came home to roost Jan./Feb. 15

Fruits, Nuts

Adversity to Advantage

Pacific Coast Producers uses USDA grant to develop 

single-serve fruit bowl market Sept./Oct. 12

Apple industry study shows value of producer 

bargaining associations Sept./Oct. 6

New global strategy

Year-round citrus demand has Sunkist tapping 

foreign market supplies Sept./Oct. 4

‘Tough bargaining’ helps almond growers July/Aug. 19

Grains & OilSeeds

Cooperative Marketing Association Program:

Another way grain co-ops can serve their members Jan./Feb. 24

Facility closures always a tough decision for co-ops March/April 17

Local co-ops’ net income and sales climb in 2001 Jan./Feb. 31 

‘No go’ can be a good show

Feasibility study advises co-ops not to pursue tortilla project July/Aug. 20

Sweet smell of success

Oklahoma wheat producers use USDA financing 

to launch frozen-dough bakery Nov./Dec. 20

Striking oil

South Dakota Soybean Processors finds new ways to 

add value to crop March/April 20

The ‘closure’ dilemma

Conducting business in a way that helps keep both members 

and their co-op in business can be a challenge March/April 15

Ursa Farmers Cooperative

Ursa, Illinois Jan./Feb. 25

Governance

Ask the right questions

Members should probe reasons for co-op conversions, 

other major changes May/June 20

Co-ops follow more than one path for nominating 

board candidates Nov./Dec. 21

Seeking the best 

Director leadership: what does it take? Nov./Dec. 25

Waving the red flag

Survey examines correlation between ethical 

environment and fraud in co-ops July/Aug. 13

Tune-up your meetings

Periodic analysis is necessary to ensure that cooperative 

board meetings are efficient, effective and productive May/June 26

Legislative and Legal

AFT guide helps farmers and ranchers transfer 

land to the next generation July/Aug. 10

Congressional hearing focuses on possible need for 

more flexible co-op business model Nov./Dec. 9

Cooperative Marketing Association Program:

Another way grain co-ops can serve their members Jan./Feb. 24

Equity, tax issues prompt beef co-op to ponder switch Nov./Dec. 12

Local co-ops’ net income and sales climb in 2001 Jan./Feb. 31

NMPF scales back CWT milk supply-balancing plan July/Aug. 28

The ‘closure’ dilemma

Conducting business in a way that helps keep both members 

and their co-op in business can be a challenge March/April 15

Tune-up your meetings

Periodic analysis is necessary to ensure that cooperative board meetings

are efficient, effective and productive May/June 26

Waving the red flag

Survey examines correlation between ethical 

environment and fraud in co-ops July/Aug. 13

Livestock

Equity, tax issues prompt beef co-op to ponder switch Nov./Dec. 12

Great Lakes Pork Co-op adjusts plan to seek 

alternative packing plant May/June 8

Low-overhead approach taken by 

Dakota Lamb Growers Co-op May/June 7

Natural beef anchors product line for co-op of 

Kansas family farms May/June 5

Network difficulties

Tales of two Iowa pork-producer networks show 

that bottom-up approach works best March/April 18

New kids on the block

Iowa beef co-op sees strategic partnership as best way 

to break into highly competitive retail beef market May/June 4

U.S. Premium Beef offers to buy Farmland share in 

processing business July/Aug. 12

U.S. Premium Beef seals purchase of Farmland National Beef Nov./Dec. 16

Management

Adapting to change

Educating members helps smooth transitions May/June 23

Facility closures always a tough decision for co-ops March/April 17

How does your local farm supply cooperative rate? March/April 22

Meeting the challenge: co-ops in the 21st century Jan./Feb. 4

Negotiating the crossroads of a new century Jan./Feb. 7

The ‘closure’ dilemma

Conducting business in a way that helps keep both members 

and their co-op in business can be a challenge March/April 15

Marketing

Adversity to Advantage

Pacific Coast Producers uses USDA grant to develop 

single-serve fruit bowl market Sept./Oct. 12

Bargaining is big for small business

Resurgence seen in bargaining co-ops March/April 12

Cooperative exports decline in 2001; bulk sales fall but 

continue to dominate sector Nov./Dec. 26

Cooperative Marketing Association Program:

Another way grain co-ops can serve their members Jan./Feb. 24

Co-ops increase share of farm marketings; share of farm 

supply sales dips slightly May/June 19

Dismantling of Farmland continues; Smithfield 
38 November/December 2003 / Rural Cooperatives

buying pork business Nov./Dec. 15

Great Lakes Pork Co-op adjusts plan to seek 

alternative packing plant May/June 8

How does your local farm supply cooperative rate? March/April 22

Large co-ops see growth in ‘01, reverse declining net margins Jan./Feb. 20

Local co-ops’ net income and sales climb in 2001 Jan./Feb. 31

Low-overhead approach taken by Dakota Lamb Growers Co-op May/June 7

Minnesota leads the nation in co-op business volume Sept./Oct. 18

More than milk

Dairylea’s scope of farmer services moves beyond 

milk marketing Sept./Oct. 14

Natural beef anchors product line for co-op of Kansas 

family farms May/June 5

New days, new ways

Co-ops, producers find many ways to prepare for the future Nov./Dec. 4

New global strategy

Year-round citrus demand has Sunkist tapping foreign 

market supplies Sept./Oct. 4

New kids on the block

Iowa beef co-op sees strategic partnership as best way to break into highly competitive retail beef market May/June 4

NMPF scales back CWT milk supply-balancing plan July/Aug. 28

Revenue, margins trend downward for nation’s top 

100 ag cooperatives Nov./Dec. 17

Striking oil

South Dakota Soybean Processors finds new ways to 

add value to crop March/April 20

Ursa Farmers Cooperative

Ursa, Illinois Jan./Feb. 25

Wisconsin’s Westby, ‘Little Creamery That Could,’ 

marks 100th anniversary Sept./Oct. 20

Member Relations 

Adapting to change

Educating members helps smooth transitions May/June 23

Annual Reports:

How to read them and what they should tell you 

about your co-op Jan./Feb. 10

Facility closures always a tough decision for co-ops March/April 17

Network difficulties

Tales of two Iowa pork-producer networks show that 

bottom-up approach works best March/April 18

The ‘closure’ dilemma

Conducting business in a way that helps keep both members 

and their co-op in business can be a challenge March/April 15

Trailblazers

Leadership development programs key to more 

women winning seats on co-op boards May/June 13

Rural Development 

Ag Marketing Resource Center helping producers 

develop value-added strategies May/June 15

Farming with 8.5 million neighbors July/Aug. 7

$44-million push for new geographic technology May/June 25

House calls

In-home care givers form cooperative to provide 

vital service for elderly, disabled in rural Wisconsin May/June 9

Living with Sprawl

As farms give way to subdivisions and traffic lights, 

America’s rural cooperatives struggle to adjust July/Aug. 4

More than a power source

Brunswick Electric typifies commitment of cooperatives 

to support rural communities July/Aug. 15

No mountain too high

Rural broadband service helping to save lives of 

isolated patients May/June 22

Oneida grocery co-op boosts community; helps keep 

more money on reservation Jan./Feb. 26

Orange Empire bows to urban sprawl in 

Southern California July/Aug. 8

Southern hospitality

Walton Electric Co-op makes a positive difference 

for Georgia Sept./Oct. 8

USDA plays active role in farmland protection July/Aug. 9

USDA providing $1.4 billion to expand rural broadband May/June 24

USDA’s REDLG program July/Aug. 17

USDA’s Value-Added Producer Grants invest millions 

in innovative ag businesses March/April 11

Statistics

Revenue, margins tend downward for nation’s top 

100 ag cooperatives Nov./Dec. 17

Technology 

Catch the wind

Co-op’s giant windmills work with Mother Nature 

to provide power March/April 4

$44-million push for new geographic technology May/June 25

Meeting the challenge: co-ops in the 21st century Jan./Feb. 4

No mountain too high

Rural broadband service helping to save lives of 

isolated patients May/June 22

USDA providing $1.4 billion to expand rural broadband May/June 24

Trade 

Cooperative exports decline in 2001; bulk sales fall 

but continue to dominate sector Nov./Dec. 26

New global strategy

Year-round citrus demand has Sunkist tapping 

foreign market supplies Sept./Oct. 4

Utility Co-ops 

Catch the wind

Co-op’s giant windmills work with Mother Nature 

to provide power March/April 4

Frogs, snakes & kilowatts

East Kentucky Power Co-op finds green in 

environmental program Jan./Feb. 16

Funding Business Development Centers July/Aug. 18

More than a power source

Brunswick Electric typifies commitment of cooperatives 

to support rural communities July/Aug. 15

No mountain too high

Rural broadband service helping to save lives of 

isolated patients May/June 22

Southern hospitality

Walton Electric Co-op makes a positive difference 

for Georgia Sept./Oct. 8

Walton saluted for business ethics Sept./Oct. 10

Value Added 

Adversity to Advantage

Pacific Coast Producers uses USDA grant to 

develop single-serve fruit bowl market Sept./Oct. 12

Ag Marketing Resource Center helping producers 

develop value-added strategies May/June 15

Congressional hearing focuses on possible need 

for more flexible co-op business model Nov./Dec. 9

Equity, tax issues prompt beef co-op to ponder switch Nov./Dec. 12

Great Lakes Pork Co-op adjusts plan to seek alternative 

packing plant May/June 8

Low-overhead approach taken by Dakota Lamb 

Growers Co-op May/June 7

Natural beef anchors product line for co-op of Kansas 

family farms May/June 5

New days, new ways

Co-ops, producers find many ways to prepare 

for the future Nov./Dec. 4

New kids on the block

Iowa beef co-op sees strategic partnership as best way 

to break into highly competitive retail beef market May/June 4

‘No go’ can be a good show

Feasibility study advises co-ops not to pursue 

tortilla project July/Aug. 20

Sweet smell of success

Oklahoma wheat producers use USDA financing to launch 

frozen-dough bakery Nov./Dec. 20

The Greene Bean Project: Growers’ field of dreams is 

edible beans May/June 16

USDA’s Value-Added Producer Grants invest millions 

in innovative ag businesses March/April 11

Vegetables

The Greene Bean Project: Growers’ field of dreams 

is edible beans May/June 16
Rural Cooperatives / November/December 2003 39
40 November/December 2003 / Rural Cooperatives

United States

Department of Agriculture

Washington, DC 20250

OFFICIAL BUSINESS

Penalty for private use, $300

NOTICE:

❏ Check here to stop receiving this publication,

and mail this sheet to the address below.

❏ NEW ADDRESS. Send mailing label

on this page and changes to:

USDA/Rural Business–Cooperative Service

Stop 3256

Washington, D. C. 20250-3256

Periodicals Postage Paid

U.S. Department of Agriculture