Rural

COOPERA COOPERATIVES

USDA / Rural Development September/October 2002

Cooperatives:

the fabric of America

Cooperatives:

the fabric of America
2 September/October 2002 / Rural Cooperatives

As member-driven businesses, cooperatives are constantly required to assess

members’ needs and to stay in tune with

those needs. This requirement is also a

fundamental step in organizing new

cooperative business ventures. A lot of

time and effort goes into identifying the

mutual needs of prospective members

and in determining activities that the

cooperative will engage in to meet

those needs. This provides a rationale for members to invest in the

new venture. 

The needs assessment is also an

important—albeit more complicated—step for established cooperatives. Is there sufficient volume of

purchases or marketing to justify

continued use of assets at different

locations? Are there new business

services required that provide an

opportunity for expansion into new

areas, or to extend processing of raw

commodities into more profitable uses

that can return additional income to

members? 

This constant evaluation of member

needs and the cooperative’s ability to

respond to them is a fundamental

strength of cooperative enterprise.

What other business is better able to

determine those needs than a userowned business?

Needs assessment is more complicated for established local and regional

cooperatives due to the increasing

diversity in the size of members’ operations and the wide range of needs

among different segments of the membership. A homogenous membership,

with similar needs and sizes of operations, has generally been regarded as an

underlying key to cooperative success. 

With a diverse membership, cooperative management and boards of directors must work harder to identify market segments that can be profitably

served while still maintaining the common interest of the entire membership. 

For instance, farm supply products

and delivery needed by large commercial farmers differ significantly from

those for small and part-time farmers.

Similarly, the marketing needs of each

segment of membership can differ

markedly. 

Cultural similarities among members and their community of interest

can also be a determining factor for

effective collective action. Such factors

as national origins, religious beliefs,

ethnicity and work ethics are each

manifested in one way or another in

the makeup of cooperatives in the

United States and internationally.

Challenges posed by diverse memberships should be met and turned

into strengths. Cooperatives are

inherently positioned to be more sensitive to varying needs because they

are focused on the business of serving

those needs. Nothing in size, location

or membership makeup detracts from

that central purpose. 

In addition, cooperatives have

demonstrated far more ability to adapt

than they have been credited for.

Forthright, well thought-out responses to rapid and important changes in

American agriculture—and society as

a whole—will make farmer cooperation an ongoing, effective way for

farmers to participate in the control,

benefits and the contributions of

agriculture.

Good examples of assessing

member needs and business lines

that can effectively meet those

needs are found in the articles in

this issue about local cooperatives in western Iowa, and the

evolving cooperative marketing

efforts of small minority farmers

in north Florida and adjoining

states. Each mirrors cultural

attributes of producers in the

communities involved, and the tastes,

preferences and marketing requirements for serving various segments of

the marketplace.

Another excellent contribution to

this dialogue is also found in the Management Tip article, about standards

required of cooperative directors to

meet their responsibilities as stewards

of members’ interests and in overseeing operations of cooperatives.

As Cooperative Month is celebrated

throughout the country in October, we

are reminded of the significant role

played by cooperatives in communities

throughout rural America and the continuing opportunity for needs of farmers and rural residents to be met

through effective forms of group action.

Randall E. Torgerson, 

Deputy Administrator,

USDA Rural Business-Cooperative Service

COMMENTARY

Attention to member, market needs is key to cooperative success

Cultural similarities

among members and

their community of 

interest can also be a

determining factor for

effective collective action. 
Rural Cooperatives / September/October 2002 3

Rural COOPERATIVES (1088-8845) is published

bimonthly by Rural Business–Cooperative Service,

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

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prohibits discrimination in all its programs and 

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

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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

Randall Torgerson, Deputy Administrator, USDA

Rural Business-Cooperative Service

Dan Campbell, Editor

Vision 2000/KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or

Fax (202) 720-4641, Information Director,

This publication was printed with vegetable oil-based ink.

United States Department of Agriculture

Rural COOPERA COOPERATIVES

September/October 2002 Volume 69 Number 5

On the Cover:

October is National Cooperative Month, a time to recognize the

nation’s 48,000 cooperatives and their 120 million members. This

magazine regularly features farmer, fishery, craft and utility cooperatives, but co-ops also provide Americans with housing, health care,

groceries, hardware and banking services. To learn more about how

your cooperative can promote National Cooperative Month, visit:

www.coopmonth.coop . USDA Graphic by Steve Thompson

FEATURES

4 High Society

Sioux Center Farmers Co-op Society ties future to NW Iowa

livestock industry

By Dan Campbell

6 The Right Stuff: Ag-based, but diverse economy

helps Sioux County thrive

By Dan Campbell

8 Co-op’s grain marketer strives to reduce 

producer risk

10 Midwest Farmers Co-op members benefitting

from new rail terminal

18 Taking it to the next level

Success of small Florida vegetable co-op leads to a network of

similar cooperatives

By Glyen Holmes, Vonda Richardson, Dan Schofer

24 Legg sees vital role for utility co-ops in rural

America’s future

By Steve Thompson

26 Still raising cane

George Wedgworth is a 40-year veteran of Florida’s sugar wars

DEPARTMENTS

2 COMMENTARY

15 MANAGEMENT TIP

29 NEWSLINE
4 September/October 2002 / Rural Cooperatives

High Society

Sioux Center Farmers Co-op Society

ties future to NW Iowa livestock industry 

By Dan Campbell, editor

dacampbe@rdmail.rural.usda.gov

ioux County, Iowa, is a fertile, wall-to-wall sea of corn and soybeans. It’s hard to

imagine that with all those bountiful acres—which produce nearly 30 million

bushels of corn and 9 million bushels of soybeans annually—the county would

need to import grain from surrounding counties to help fuel its livestock industry. Yet, as

Iowa’s No. 1 county for both hogs and cattle (and also high in the ranks for poultry production), Sioux County must go outside its own borders to find enough corn to feed all

those hungry snouts and muzzles. 

According to USDA statistics, Sioux County sold nearly 1.6 million hogs and pigs in

1997, up from 873,000 in 1987. It also sold 243,000 beef cattle and calves in 1997 and 2.4

million broilers. All livestock sectors in the county will likely show strong growth since ‘97,

when USDA completes its 2002 

agricultural census. 

S

Corn is loaded onto a conveyor belt that feeds the new ethanol plant at

Sioux Center. 
It comes as little surprise, then, that the

primary strategic direction of the Sioux

Center Farmers Cooperative Society has

been to aggressively pursue the livestock

feed market, with the goal of being the

region’s major producer and supplier of

feed. In the process, it has taken a leading

role in the effort to modernize the area’s

hog-production facilities. 

This effort has received both praise and

some criticism, since many of the new hogproduction facilities have switched over to

contract growing. Yet few will debate that the

co-op’s efforts have fueled growth in Sioux

County’s hog industry at a time when Iowa’s

hog production has remained relatively stagnant. Statewide, hog numbers the past 5 years

have been holding fairly steady, in the range

of 15 million to 15.5 million head. 

‘Progressively conservative’ co-op 

Like the town of Sioux Center, this co-op

has remained profitable and growing at a

time when a number of similar co-ops are

struggling. Sioux Center Farmers Cooperative Society is projecting sales of about $130

million this year, says co-op Manger Ken

Ehrp. During the past 11 years, the co-op

has averaged about $1.7 million in local

earnings every year. “Currently, we have $8

million in working capital, which is virtually

unheard for a company of our size,” he says.

Roger Kempers, co-op president, says the

philosophy of the co-op and its members is

“progressively conservative. We are always

looking for new opportunities that can be

pursued without taking on undue risk.” 

The cooperative is owned by 2,750 producers, about 500 of whom joined in March

2002 as the result of a merger with Siouxland Cooperative, based in Sanborn. That

merger increased the number of elevators in

the co-op’s local network to nine, and

increased storage capacity from 9 million to

19 million bushels.

Member equity is being revolved back to

owners in just 10 years. “Whether we can

maintain that 10-year period is questionable,” Ehrp says. “We’re coming up to some

big (redemption) years, and will likely slip a

bit. We pay 30 percent cash each year for

patronage.” 

The success of the co-op and the town of

Sioux Center go hand-in-hand, Ehrp says.

“This is a wonderful place to live and a wonderful place to do business.” 

Rural Cooperatives / September/October 2002 5

Inset photos, from the left:

Flanked by the Sioux

Center “skyline,” Farmers

Co-op Society Manager Ken

Ehrp (right) reviews operations with board president

Roger Kempers (center) and

director Marv Wynia.

Mechanics in the co-op’s

shop keep the fleet of modern agronomy gear in top

condition. 

Despite low grain and

livestock prices, farmer

Harlan Klassen (right) says

he “feels blessed” to be able

to farm with all four of his

grown sons, including

Darwin (center) and Dan. 

The Farmers Co-op

Society operates its own

feedlot at Sioux Center. 

USDA Photos by Dan Campbell
In addition to grain marketing (see

sidebar, page 8), the co-op has a small

galaxy of other businesses scattered

about Sioux County. Across the parking

lot from the Sioux Center elevator

complex is the co–op’s agronomy office

and a fleet of modern, satellite-guided

applicators. There’s also a large repair

shop where, on this day, two TerraGator applicator rigs are being tuned

up. Also nearby is the co-op-owned

hardware store, which is brimming with

home appliances, paints, tools, lawn

mowers and more. 

The co-op has operated a lumberyard

in Sioux Center since the late 1970s,

when about 100 new homes were being

built each year around town. Construction has currently slowed to 15-20 new

homes per year, and Ehrp says it’s

becoming more of a challenge to maintain profits from the lumberyard. 

Scattered throughout the Sioux

County region are thousands of modern hog barns, which Farmers Co-op

Society not only supplies with feed, but

which it also helps to build and finance

for members.

A few miles outside of town is the

co-op’s 12,000-head cattle confinement

feedlot, which usually operates at full

capacity. Members own the cattle, but

the co-op charges for feed and its delivBy Dan Campbell, Editor

Something right is going on in Sioux County, Iowa.

While many rural Midwest communities are sliding into

oblivion as their stores close and their schools and

churches migrate away with their young people, this

northwest Iowa county’s two largest towns—Sioux Center and Orange City—have growing populations and are

adding new businesses and services. 

Signs of progress abound in Sioux Center, population

6,500. It is home to a fully developed, 120-acre industrial

park, the new 100,000-square-foot Centre Mall and

excellent public and private schools and a 4-year college. It even has a problem many rural towns would love

to share: a tight housing market. 

The most visible manifestation of its thriving business

sector is a $15-million Pella window assembly plant,

which opened about 2 years ago on the northern edge of

town. The plant employs about 500 workers. It has been a

boon not only to Sioux Center, but the entire region, with

workers commuting from 90 different zip codes.

Among other ag-related employers here is Sioux

Automation, which builds livestock feed wagons and

other farm equipment, Sioux Preme Pack hog processing and Trans Ova Genetics, which performs beef and

dairy cattle embryo transfers either in its clinic or on

farms anywhere in the nation. 

The town’s ability to attract new businesses boils

down to its people, a favorable business environment

and amenities that offer a high quality of life, says Mayor Dale Den Herder, a fourth generation resident. His

Dutch ancestors first homesteaded here in 1872, living in

a sod hut even before Sioux Center was founded in 1891.

He, like others, attributes much of Sioux Center’s success to an old-fashioned work ethic, a willingness to try

new things, nurturing families and a deep spiritual faith

that, together, forge a strong sense of community. 

Between 1990 and 2000, Sioux Center’s population

rose 18 percent. “That bucks the trend you will see in

most rural areas,” Den Herder notes. Jobs, of course,

are the key to a stable or growing population. Thirty

years ago the city had only 100 manufacturing jobs.

Today, it has more than 2,300.

He also has high praise for

the Farmers Co-op Society,

not only for being “a strong

friend of farmers that has

helped to modernize the

region’s livestock industry, but

for also being a leader in promoting our community.”

Den Herder is also the president of American State Bank,

which has a $250 million loan

portfolio that reflects the diversification occurring in the

economy here. A decade or so ago, ag accounted for

about 70 percent of those loans, but that has since dipped

to about 40 percent. 

While Sioux Center, Orange City and some other area

towns are thriving, some other rural towns in the region

are struggling just to hold even, and others are seeing

their vitality slowly slip away.

“You don’t have to travel too far to find a lot of hurt

going on,” says Den Herder. “We could be looked upon

as something of an island of prosperity.”

Motivated workforce

The biggest factor in feeding that prosperity is a

“motivated, educated workforce—people who take

pride in what they do,” says Paul Clousing, assistant city

manager and director of the Sioux Center Economic

Development Corporation. The available labor pool is

larger than is readily apparent from the rural landscape.

While there are no large cities—Sioux Center is the

The right stuff: Ag-based, but diverse economy 

helps Sioux County thrive 

6 September/October 2002 / Rural Cooperatives
ery. The co-op also offers brokerage

service to sell cattle for members and

even offers them financing at the feedlot. It has about $8.5 million currently

loaned out to cattle producers. 

“They pay $150 per head up front,

and we loan them the balance,” Ehrp

says. “When the cattle are sold, our

name is the only one on the check from

the processor. We take out our money

for feed, and the producer gets the balance—so we’re always assured of getting

paid.” The primary cattle market is the

packing plant in Sioux City, Iowa.

“It’s very tough to make money on

cattle these days,” Ehrp says while driving past pens filled with fat steers nosing in the feed troughs. “Feeder costs

are just too high compared to what

they earn when they sell. You buy feeder cattle and hope prices (for fed cattle)

go up so you can lock in a profit.” 

Near the cattle feedlot is a new

ethanol plant, operated by a sister coop—Siouxland Energy and Livestock—

which Sioux Center Co-op Society

helped launch. The 14-million-gallon

ethanol plant had initial start-up difficulties with equipment, but plant manager

Bernie Punt says most of those problems

have been resolved, and the ethanol

plant is now operating at about 85 percent capacity. It will consume about 5.3

largest city in a six-county region—there are more people tucked away in all those little towns and farms than

one might think. About 100,000 people live within a 30-

mile radius of the Sioux Center, Clousing notes. 

“Bio technology is the newest wrinkle here,” Clousing says, adding that the town now has three or four biotech businesses that employ about 200 workers.

Sioux Pharm Inc. is a bio-tech firm that extracts

chondroitin sulfate from bovine tracheas, then purifies

the product into pills, called Chondropure, which brings

relief to arthritis sufferers. Dr. Allan Kramer, the company president, says Sioux Pharm is the nation’s largest

producer of this medicine. 

He employs 25 workers, and says a business owner

would be hard pressed to find a better labor pool than in

northwest Iowa. He also gives Sioux Center strong

marks for its “pro-business” orientation and its good

highway and rail system. The state of Iowa was helpful

to him in providing grants for value-added business

development, Kramer says, and the local livestock

industry naturally makes for a good source of raw product for the company.

A thriving college

Dordt College, a 1,400-student college affiliated with

the Christian Reformed Church, attracts students from

36 states, six Canadian provinces and nine foreign countries. The most recent addition to the campus is a $12.5

million Campus Center building, slated to open this

month, that will house student services offices, the business department, a bowling alley and a snack bar. 

The college boasts two new dormitories and a fairly

new recreation center, which features an indoor track.

It also operates a research farm where students can get

hands-on experience in crop and livestock science. 

Sioux Center’s motto, “progress through cooperation,” is certainly true of the relationship of the town and

college, says Clousing. The college, local schools and

town have joined forces to put up much of the $9.1 million needed to replace the city’s aging community swimming pool with a state-of-the-art pool complex, called

the All-Seasons Center. The state of Iowa and local

phone company also contributed needed funds.

The pool complex will feature both indoor and outdoor pools, including a “plunge pool” with tall slides,

an “aquatic family fun park” with other water amusements and a six-lane lap pool. The development will

also include an ice rink that will become the home of

the Dordt College hockey team, the Blades. It is the

type of recreational facility rarely found in a town of

this size, and one which boosts the quality of life that

Rural Cooperatives / September/October 2002 7

Clockwise from the top: 

Work nears completion on the

new student center at Dordt

College in Sioux Center. 

At Med Tec in Orange City,

Bryan Kooi examines a mask used

to stabilize the head of a patient

receiving radiation treatment. 

The new Theater Arts Center

rises on the campus of Northwest

College in Orange City. 

Windows, such as the one

displayed here by Dale

Zevenbergen, are built and

shipped within 7 days of order

from the Pella window plant in

Sioux Center. 

USDA photos by Dan Campbell

continued on page 32
8 September/October 2002 / Rural Cooperatives

million bushels of corn annually. 

A closed, new-generation co-op,

Siouxland Energy has 410 members,

each of whom were required to purchase a minimum of two equity shares.

Each equity share gives a member delivery rights to 2,500 bushels of corn. Total

cost of the plant was about $18.5 million. Sioux Center Co-op Society

is also a member and a major supplier of corn to the plant.

Feed mill retrofit 

increases efficiency 

In support of the goal of being

the primary feed supplier for the

region’s livestock industry, the

Farmers Co-op Society 3 years ago

spent $3.5 million to retrofit its

feed mill. On any given day, Sioux

Center moves 1,200 tons of feed.

With $35 million in sales annually,

feed is by far Sioux Center’s largest

farm supply sale item. By comparison, agronomy brings in $13 million and

lumber $4 million. 

Over a 12-month period, the co-op

handles about 20 million bushels of

corn and 7 million bushels of soybeans.

It can load 54 railcars at a time on the

Burlington Northern Railway

Farmers Co-op Society has maintained its high level of profitability

through years of major investments on

assets—including expanding grain storage, the feed mill retrofit, and greatly

expanding its fleet of trucks and applicators. “We’ve spent a lot of money, but

we’ve made a lot of money,” Ehrp says.

“We are currently about 84 percent

(debt-to-equity) leveraged, which is

about as high as we want to get.” The

debt ratio rose as a result of major

expenditures on growth and renovation

The phone rings, and John Hansen answers it while

leafing through pages of grain market data on his desk.

More grain numbers flicker on his computer monitor.

Grain prices have been gyrating more than normal lately

because of heat and drought in

many states, creating what

Hansen calls “a weather scare.” 

“Hello John, is this a good time

to sell?” asks the farmer on the

other end. Minutes later, it rings

again, but this time the farmer

calling is seeking advice on when

to buy grain for his hogs. No

sooner does that conversation

end than it rings again, and

Hansen is working out the details

for shipping dairy cattle feed from

his employer—the Sioux Center

Farmers Cooperative Society—all

the way to Alaska, a trip which

involves transport by hydro-train (putting railcars on

ships in Seattle). 

Tucked away though he may be in a small, cluttered

office in northwest Iowa, Hansen sees the world of

grain through his computer. 

“I watch the market all day, and I study it,” Hansen

says. “I not only track grain on a cash basis, but the

futures market as well. I try to put it all together and

present it in a systematic way that the producer can

understand.” 

Yes, it is complicated, he admits. “But the secret is it

that doesn’t have to be as complicated as some make it

out to be.” His modus operandi: study the market, follow

the trends and patterns, then make an informed decision.

So how is the grain market

looking, John?

“Depends,” he says with a

good-natured smile. “Are you

buying or selling? We do a lot of

both here, so it’s all a matter of

perspective.” A spike in corn

prices will bring joy to the heart of

a grain farmer who is selling, but

for a hog producer who is buying

feed, it naturally has the opposite

effect. 

Most local grain co-ops do far

more selling than buying, but

Sioux Center does both in nearequal measure. The co-op also

does pooled marketing for members who so desire. 

“It takes a unique grain merchandiser to wear both

hats like that, and John does a phenomenal job for us,”

says his boss, co-op Manager Ken Ehrp, who himself

earns plaudits from his directors for helping the co-op

thrive. “The producers trust John to give them good

advice, and you can’t put a price tag on that.” 

Hansen, a former grain merchandiser for ADM who

has been with the Sioux Center Co-op Society for 5

years, says, “People think I like to see grain markets

Co-op’s grain marketer strives to reduce producer risk exposure

Customers get quality service and merchandise in

the co-op’s hardware and appliance store in Sioux

Center. 

“I think all producers should take mandatory

classes in grain marketing,” says John Hansen,

grain manager for the Farmers Co-op Society in

Sioux Center.
Rural Cooperatives / September/October 2002 9

of facilities. “Our goal is to get that

down to the mid-to-low 60s. That gives

us opportunity so that if we see something come along that we want to write

a check for, the bank will OK it.” 

The co-op adheres to a very strict

policy on accounts receivable, and has

had “a tremendously good record in

that area over the years,” Ehrp says.

“We’re seeing that change a little

because of (low) livestock and grain

prices, which will make accounts

receivable a challenge in the near

future.” He credits his board for having “great insight 15 years ago when it

set a very strict credit policy, which I

have enforced.” Some co-ops have a

tendency to get lax on their collections, to the determent of the co-op,

he notes. 

Merger yields benefits

The possibility of Sioux Center

merging with Siouxland first surfaced

several years ago, Kempers says. “At

that time there wasn’t sufficient interest. But at least we opened some communications channels that were still

there when the opportunity came.”

As with any merger of cooperatives,

it was a long process involving many

producer meetings, most of them very

well attended. “Financial statements

showing how we looked separately vs.

how we looked together were reviewed

very carefully,” he says.

Marv Wynia, another director, says

overall efficiency of both cooperatives

has been much improved by the merger. “Now we can share trucks, Terragators and other equipment and make

sure they are used more efficiently.” 

“We went from one rail line to

three, which gives us the opportunity

to work for better bids. We also have a

wider area to draw corn from—and

with our feed business, we need a lot of

corn,” says Kempers. 

Many farmers own trucks with

enough capacity to make it worthwhile

to haul it further for a better price. “It’s

nothing for some farmers to haul their

grain 30 or 40 miles to get a better

price. So we’re pulling corn from quite

a way now,” he adds.

Following the merger, Sioux Center

sold its petroleum division to Co-op

Gas and Oil, the local fuel co-op in

Sioux Center. Membership among the

two co-ops overlapped quite heavily,

and Ehrp says his board decided the

high. No, I don’t. But I don’t like to see them low either. I

just need to be able to trade. I am set up to trade and

make money by reducing my risk by hedging and trading

the basis to make money off of it.”

Risk Management 101

“I treat my job as a risk management service to our

producers,” says Hansen. “I strive to reduce their risk,

not increase it. When markets go up, like this,” he says,

gesturing toward his computer, “I work with my feed

customers to help them cover their costs in the most

economical way.”

Too many farmers don’t want to sell grain before

they harvest it, which is a mistake, he says. “You need

to sit down and do some homework in advance of harvest. Figure out your 10-year production average, then

take your worst and best years and throw them out.

Come up with a good average. Then get a percentage

of your crop to market on a favorable trend. If it’s going

up, market a percentage of your crop on it; if the market

is going down, you need to market a higher percentage

before it drops even more. It’s an average-trend game

that you play.” 

But it’s a sad fact of farming life that 80 percent of

producers sell their grain in the bottom half of the market, Hansen says. “My objective is to get them to sell

more on the right side of the market.”

Grain markets, he says, can be a bit like car with an

engine in need of a tune-up. “They get of out of synch—

they’re too high or too low for a few days—and you

need to take advantage of that. When they are too high,

you need to get aggressive and sell into the market.

When they are too low, you need to step up and get that

grain bought for your livestock.” 

Marketing itself, Hansen says, is simple. “Gathering

the information to make the right decision, that’s the

hard part. It’s a lot like school work: you study a lot of

information, then get tested. My test scores come in

once a month, and I get graded on whether we lost or

made money.” In baseball terms, Hansen says it’s those

who hit for consistent average who do best, not the

guys who swing for the fence every time up. “Those

always looking for home runs tend to lose in this game.”

Sioux Center’s grain customers include the multinationals—Cargill, ADM, Bungee, and others—and

regional grain buyers, such as Schoular Grain in Omaha

and Agri-Grain Marketing in Des Moines. “But my

biggest customers are local livestock people around

here; about 80 to 85 percent of our grain stays local.

That’s the flip of most areas, where they probably ship

out 85 percent of their grain.”

That ability to keep grain at home is Sioux County’s

primary value-added ag system, he says. “Those dollars

keeps turning over here.” 

The biggest mistake grain farmers make? “Lack of

studying the market,” Hansen says without even a

pause. “I think all producers should take mandatory

classes in grain marketing. You must study to make a

better business decision, just like we have to do here.

Don’t spend all your time on your tractor—study the

markets. Figure out a plan months ahead of harvest. The

mind set of ‘I’m not going to sell until the banker tells me

to’ is a poor way of marketing.” ■

—By Dan Campbell
10 September/October 2002 / Rural Cooperatives

competition was not beneficial. Not

only is the merged fuel co-op more

efficient, but the sale also reduced

Sioux Center’s long-term debt. “That

gives us a chance to look for additional

opportunities out there and helps them

grow,” Ehrp says. 

Was there concern that Sioux Center could be taking on any liabilities of

Siouxland? 

“Even though the other co-op was

faced with some financial challenges, we

could see that its fixed assets were in

good shape and had been well taken care

of,” Wynia says. “All of their elevators

were in top shape. That was big part of

the decision for us, and why we saw so

much potential from the merger.”

“We looked at it conservatively,”

Kempers adds. “Ken (Ehrp) helped us

assess the opportunity and how it

would fit financially into the total

scope of the company. That is one of

his real strengths, showing you clearly

how all the pieces fit together and how

we would look as one cooperative.” 

Ehrp knows the board well enough,

Kempers says, “that if he comes to us

with a recommendation, he has already

anticipated many of the questions he

knows we will ask. It helps that he has

done the needed research in advance.”

“If you have a manager who gives

Until recently, it wasn’t unusual to see 2-to-3 million

bushels of grain piled up on the ground around the Midwest Farmers Cooperative railcar-loading terminal outside Alton, Iowa. But in April 2001, the tarp covering 2

million bushels of corn blew off in a storm, and then the

skies opened up, dumping more than six inches of rain on

the exposed grain. 

Co-op Manager Ellis “Skip” Hein still recalls that

nightmare vividly. “All you can do in a situation like that is

ship it as fast as you can,” he says. “We were fortunate

that we handle enough grain volume at this location that

we could blend the quality to No. 2 corn. We dodged a

bullet, but it made us realize that we didn’t want to be put

in that position again.”

So the 1.1-million bushel vertical elevator at the terminal, originally built in 1997-98, was expanded with an additional 4.1-million bushel,

automated flat storage facility. The co-op’s

board agreed to invest $7.7 million for the

original terminal and $2.8 million for the

expansion, which were both completed on

time and under budget. “Start-up was virtually flawless, which amazed everyone for

a facility of this size. It only required some

minor tweaking,” Hein says. 

Despite the mammoth size of the facility, the loading operation is so automated

that it can be operated by a single worker

on the outside. The diesel locomotive that

pulls the hopper cars into place is operated by remote control, eliminating the need

for at least one additional worker at the

terminal. The terminal can load a 90-100

car train (with each jumbo hopper car

holding 4,000 bushels) in just 10-12 hours.

The co-op loads 35-to-40 unit trains annually, and trucks several million more

bushels each year to area grain processors, including

soybeans sent to AGP and corn shipped through Midwest’s feed-manufacturing operations. 

Need for new terminal fuels co-op merger 

Midwest, with 9 branches and 13 locations, was

formed in 1997 when Sheldon Farmers Co-op merged its

three locations with

Alton-Orange City

Cooperative’s five

locations. The co-op

expanded again in

1999 when Sutherland Farmers Cooperative joined it. 

Midwest Farmers Co-op members 

benefitting from new rail terminal

Clockwise from top: 

Up on the roof – Tony Jungers does a

rooftop inspection at the new Midwest

Farmers Co-op rail terminal at Alton, Iowa. 

Midwest Agronomy Manager Larry Den

Hartog and his crew are using this high-tech

applicator bar to inject manure-fertilizer into

the soil. 

Another load of corn is delivered to

Midwest’s Alton rail terminal, under the eye

of Manager Skip Hein. 

USDA photos by Dan Campbell 
the board the kind of information it

needs to make good decisions, it makes

your job as a director very enjoyable,

and I have enjoyed my seven years on

this board,” Wynia adds. “I recommend board service to any co-op member asked to jump in and who is willing

to work hard, make tough decisions

and not arrive with a personal agenda.” 

An example of one of those tough

decisions, Wynia says, was when the

Sioux Center board decided to close

down its other lumberyard in the community of Ireton a few years ago. 

“I live close by, and while nobody

ever tore into me, when I would go

into town people would ask why we

closed it and would say how disappointed they were,” Wynia recalls. “It

was hard for some people because we

took away their lumberyard, and it no

doubt had benefitted people there. But

the operation just wasn’t profitable. We

had to weigh that against keeping it

open strictly as a service to the community.” While keeping it open would

have been popular among the people in

Ireton, Wynia said it wouldn’t have

been best for the co-op.

With co-op trucks going back and

forth to Ireton daily, the co-op is still

able to make deliveries of lumber supplies from the Sioux Center store, KemRural Cooperatives / September/October 2002 11

Today, Midwest has 2,300 class-A producer members

within its 70-mile long, 50-mile wide trade territory. Last

year, it had $78 million in sales. In addition to its grain

and farm supply businesses, the co-op also provides

agronomy services, petroleum products, and operates

its own lumberyard, custom cattle feedlot and a dairy

heifer replacement program. It also has an over-theroad trucking operation that hauls for Farmland Foods,

Land O’ Lakes, Sara Lee and others. 

Prior to the 1997 merger, the Sheldon and AltonOrange City co-ops were “truck houses that only had

access to 25-railcar loadout terminals,” says Hein, as he

watches corn-laden trucks pull onto the scales of the

Alton terminal, where a hydraulic sampling arm lowers

into each hopper brimming with Iowa gold. But 25-car

terminals no longer cut it. “They just aren’t competitive

in today’s business environment,” Hein says. The railways say they can’t make a profit from short trains, “and

it is the rail rates that are driving this type of expansion.” 

The need for a larger rail-loading terminal was the

primary issue that drove the 1997 merger. “Neither coop had the resources to build something like this on its

own, even though both were strong co-ops,” Hein says.

“Together, however, we were able to combine resources and meet a crucial need.” Indeed, the co-ops

were strong enough that they used working capital to

finance about 25 percent of the terminal, with a loan

from CoBank providing the rest. 

“Many times in mergers, you see one strong company absorb a weaker one, which can ultimately weaken

the stronger company. If companies recognize opportunities when both are strong, it works out much better,”

says Hein, who has been with the co-op since 1997, prior to which he managed a multi-branch grain and farm

supply facility for Land O’ Lakes in Minnesota. After

mergers, Hein says, co-ops should “make adjustments

in operations as well as with the balance sheets and

valuation of assets so that the surviving company

remains strong.”

The new rail terminal gives co-op members muchimproved access to a greater variety of markets, Hein

says, which means better prices. The co-op now has the

option of shipping to the Pacific Northwest or Southwest livestock feeding markets, as well as the Gulf ports

and Mexico. This has helped add 6 to 10 cents per

bushel for members, he estimates. “So this facility is

very much adding value for our members, who also earn

equity by doing business with their cooperative.” 

Raising heifers

Another innovative way Midwest is providing service

to members with dairies is through a heifer-replacement

program. The co-op takes calves at just a few days old

and raises them in “a strict bio-security environment,”

where they remain for eight weeks. The calves are then

moved to two other places for an additional 8 weeks.

After that, they go to a heifer finisher, where they are

raised to a mature weight. Midwest then returns the

heifers to members’ farms. In less than 2 years, the business—owned by Midwest and its partners in a four-way

limited liability corporation—has grown to about 6,000

cows and 4,100 calves. 

Hein lives in Alton, less than a mile from the new terminal. Alton has seen some decline in its commercial

sector over the past 20 years, but it is now taking important steps to encourage growth again, says Hein, who is

a member of the city council and whose wife is the

town’s economic development director. There is a new

campground that just opened on the north edge of town,

a new 43-acre industrial park, and a new 25-acre housing development on the west end of town. Funds are

also being raised for a new library and museum. 

Midwest Co-op’s board encourages all co-op

employees to be active in the civic life of their communities. Co-op officers and staff are “active on fire and rescue teams, chambers, churches, you name it,” says

Hein. “Our philosophy is: if you are going to live in a

community, be a part of it.” And since Midwest is often

the largest employer and tax payer in the communities

where it operates, it has a vested interest in seeing the

towns thrive, and vice versa. 

continued on page 34
12 September/October 2002 / Rural Cooperatives

pers notes, which has helped limit the

inconvenience caused by the closure. 

Wynia says it seems to be getting

harder to get people to run for the

board. “I think some may feel intimidated by the growing size of the co-op. We

always find good candidates, but it seems

to take more phone calls every year.”

Is the co-op done merging? 

“I think there will be further mergers

in the future,” Ehrp says. “This co-op

has the type of balance sheet and

resources that others, over time, will say

‘that’s a company we would like to do

business with and maybe be a part of.’

Some of the other local co-ops are

stretched a little thin. With a short

crop, and margins becoming thinner while expenses go up, it means

turning a net profit is becoming

quite an issue out here.”

Not only does he foresee more

co-op consolidation, he also sees

no end to consolidation of farms.

“With margins being squeezed

ever harder, it will force greater

efficiencies from producers. It’s

the same for all businesses. So yes,

it will continue to create larger

farming operations—I don’t see

that stopping; it’s just a matter of

the pace at which it will occur.”

Prospects dimming for

grain-only family farms 

There is broad agreement among

farmers and lenders in this area that the

long-term outlook for family farmers

earning good margins from grain alone

are rapidly diminishing. The best odds

for a farmer’s future success is to diversify with livestock, ethanol or to find

some other way to add value to grain.

Growing grain alone, in anything other

than in ever-increasing volumes, is not

going to pay the bills, they say.

Regarding the controversy over the

return to more traditional (i.e., higher)

crop subsidies in the new farm bill,

many here see it as a “damned if you

do, damned if you don’t” scenario. 

“Today’s grain farmer cannot live

without the program payments he gets

from Uncle Sam,” Ehrp says. “My

biggest concern is how much longer

urban people will allow the 2 percent

on the nation’s people who farm to

continue to be subsidized as heavily as

we are now.” If grain subsidies are

slashed at some point, it will have a

“devastating impact on land prices,”

Ehrp continues.

“I look at government farm payments

as essentially a pass through,” says Jim

Plagge, president of Northwestern State

Bank in Orange City, another one of the

area’s thriving rural communities, about

10 miles southeast of Sioux Center.

“Producers take in more money from

the government subsidies, but they pass

most of it on to their landlords or suppliers.” That’s because the costs of supplies and rents seem to move up in tandem with subsidies, he says.

Crop program payments seem to be

accelerating the rate at which farms are

consolidating, Plagge says. It works like

this: “If a 160-acre parcel comes on the

market for rent, a large producer—

farming maybe 2,000 or 3,000 acres—

may take it, figuring the high cost

won’t have much impact on his average,” Plagge says. “But for a little guy

farming 200 or 300 acres, it would be a

huge relative risk. So it does seem to be

making the big bigger, which is the

opposite of what it is supposed to do. 

“Corn prices never get any better

because the supply keeps going up. Yet

we can’t be critical of the farm bill,

because it’s what is keeping many of

our borrowers going,” Plagge continues. “Without it, land prices would fall,

and farmers who own land would suffer.” On the other hand, a farmer who

rents most of his land would likely see

drops in his rent. 

Plagge also sees it as a given that farm

numbers will continue to shrink, which

he says hurts the retail base of the communities, schools, etc. It is an ongoing

war of attrition, and those communities

that will win—or at least survive it—are

those that best diversify their economic

base with value-added agricultural businesses and non-ag businesses—as Orange

City and Sioux Center are doing. 

“As a bank, our total loans outstanding may not change that much, because

someone will still be farming the

land—although we’ll have fewer, bigger accounts.” The bank’s portfolio is

about 50 percent agricultural loans.

Plagge says his bank is coping with a

slow down in the expansion of hog

barn construction, which peaked

about five years ago, but has since

dipped due to stricter environmental

regulations. 

Orange City, he says, will continue to look to agriculture as the

engine that drives the region’s economy, even while it hedges its bets by

diversifying its economy. Likewise,

farmers who will be in the best position for the long haul are those who

diversify with livestock, Plagge says. 

Hog industry changing

The hog industry around the Sioux

County area has been going through a

major transition as more producers

replace traditional, outdoor hog-rearing

facilities with enclosed hog barns. Many

of these new facilities are growing hogs

under contract for large livestock integrators. Farmers typically own these hog

buildings, but the livestock integrator

usually owns the hogs and calls the shots

in how they are raised, including when

they will be sent to market. 

As in other parts of the country

where this transition has occurred, this

trend toward contract hog production

has not been without controversy.

However, Sioux Center co-op leaders

saw the change in the hog industry as

an on-rushing train that the co-op and

its members would either have to board

The Tri-State Livestock Auction in Sioux Center provides a

local market for independent hog producers. “There is no

substitute for active bidding” to maximize prices, says

manager Ronald Jordan. But many in this area have

switched to contract growing. 
Rural Cooperatives / September/October 2002 13

or get run over by. Given that choice,

they decided to hop on board, and so

far they feel it has been a success for

both the co-op and its members. 

Since Sioux Center Co-op launched

the hog barn building program, Ehrp

estimates it has put up as many as 70,000

hog spaces in one year, or about 7,000

buildings (averaging 1,000 head each).

This year he expects the co-op will put

up about 30,000 more hog spaces. But

the construction rate is slowing, due

both to tougher environmental regulations and the fact that many of the older

outdoor facilities have now been converted to confinement barns. 

Kempers says the co-op’s building

contractor provides farmers with a

turn-key hog operation. The co-op

supplies the feed and lines up the

farmer with an integrator. 

“The farmer and integrator get

together, and, if things work out, they

usually enter into a 10-year contract,”

Ehrp says. At the end of 10-years, the

building is paid for. The farmer then has

the option to produce hogs on his own or

enter into a new contract with an integrator. “So far the hog buildings have

retained their value very well,” Ehrp says. 

“It was controversial in the beginning,” says board member Wynia. “We

had a lot of individual, family producers

raising hogs on their own farms, and

they saw the co-op as going into direct

competition with them. At the same

time, we realized the swine industry was

changing, and we couldn’t stop it.” 

Packers and the public are demanding more uniform, lean pork, “which is

harder to produce under the old production system, with so many different

types of farrowing operations and

genetic lines,” says Kempers. “Under

this system, there are fewer variables.” 

The new hog production system

has also has helped the co-op increase

its efficiency as a feed producer,

Wynia says. “Now we have a ninephase feeding program for hogs, and

it’s easier to mix only nine rations of

feed as opposed to 100.” 

Some producers, including Kempers, did not wish to make the conversion to contract production, and

phased out of hog production. Until a

few years ago, he had a 160-head, farrow-to-finish operation on his farm.

“But I had to make a decision to fix up

my facility or get out, and I decided the

return on labor was not what I wanted

(from contract growing), so I got out.” 

He continues to grow crops and

works part-time job as Christian education director for his church, which Kempers says works well with farming, since

it allows him more free time in summer

when the farm demands are greatest.

Wynia had a similar decision to

make for his 100-head dairy. Faced

with the need to modernize and expand

the dairy, Wynia instead closed the

dairy 4 years ago. He and his brother

now focus on growing corn and soybeans, but still raise about 100 dairy

replacement heifers each year. 

Part of the reason the co-op started

its new hog system was in response to

requests from young farmers who were

desperately seeking help to get into, or

stay, in farming, Ehrp says. “We’ve had

so many young producers come to us

in the past 8-9 years and say, ‘can you

help me stay on the farm?’ We felt this

was the most viable option for many.” 

But what about fears that hog producers are going down the same route

as poultry producers, and will wind up

as low-paid, piece-wage laborers working for integrators? 

“Absolutely, those fears do exist. We

are seeing the hog industry head in the

same direction as the poultry industry,”

Ehrp says. “The big players are getting

bigger, and the small producers are saying ‘I can’t compete any more,’ and are

getting out. It’s sad. We certainly don’t

promote it, but it is the trend and it’s

hard to buck it. Even the cattle industry is now beginning to head in the

same direction.” 

In the past, it was those periodic

$60-price spikes that made hogs the

mortgage payers, Ehrp says. “But those

days are probably gone. There’s just too

many hogs out there and the barns are

always full,” he says, noting that the

tremendous growth in hog production

recently in places such as Colorado and

Oklahoma has also swelled the pipeline. 

Making the change

Harlan Klassen and his four sons, ages

28 to 40, grow 5,000 acres of corn and

soybeans near the town of Little Rock, in

Lyon County, north of Sioux County. In

addition to all that cropland, his sons

earn supplemental income doing jobs

such as driving a truck for the co-op and

working as mechanics. But they also have

diversified into livestock.

The two oldest brothers, Dan and

Darwin, are partners in a 200-head

herd of registered Angus/Limousine

cattle. The younger brothers, Brad

and Rick, have enrolled in Sioux

Center’s hog program, and are now

raising 2,400 hogs in two enclosed

barns. Their integrator delivers the

pigs at 40 to 50 pounds, and the

brothers feed them until they weigh

220 to 280 pounds. 

Brad says the labor commitment is

reasonable, leaving him plenty of time

for his other farming and off-farm

work. The big attraction of this system

is that the farmer knows how much he

will make at a time when so many producers are losing money on hogs.

“This way, you are guaranteed a return

for your labor,” he says. 

At one time, the Klassens raised

their own hogs, but they saw little

future in anything other than contract

growing. “Raising hogs (independently)

Mark Van Roekel, who farms near Orange

City, is not one to put all of his eggs in one

basket. In addition to crops, his diversified

farm includes hogs, cattle and goats. 
14 September/October 2002 / Rural Cooperatives

on family farms is dying around here,”

Harlan says. 

Unlike Sioux Center and Orange

City, you see plenty of shuttered

storefronts in the nearby town of Little Rock. “Our town is slowly slipping away,” Harlan says, ticking off

the businesses that have closed in

recent years. “We had a feed store, a

butcher shop, another grocery

store—they’re all gone now. We had

three or four cafes, but only one now.

And we lost our high school 10 years

ago in a sharing agreement with

another community.” As editor of the

town’s newspaper for 24 years, his

wife, Virginia, has closely monitored

the town’s fortunes. 

Despite the town’s struggle and low

grain and livestock prices, Harlan says

he “feels blessed” to be doing something he loves as much as farming, and

that all four of his sons have been able

to go into the business with him. “And

I’ve got the four best daughters-in-law

on earth,” he adds.

“I’ll never leave here,” he says while

offering some hay to his Paint ponies.

But Harlan does admit feeling a bit

envious of Sioux Center’s success.

Informed that Sioux Center got a good

rainfall the night before while his farm

got just a trace, Harlan says “Gee, they

even get all the rain. Sioux Center is

just a garden spot—there’s no other

way to look at it.” 

Still independent 

Mark Van Roekel, another board

member of Sioux Center Farmers Coop Society, farms near Orange City and

is still operating as an independent hog

producer. He has a highly diversified

livestock and crops farm, and prizes his

independence too much to contemplate the switch to contract growing.

“I’m too independent to be a contract grower—I’m just not ready for it

yet,” Van Roekel says.

He has a 1,200-pig nursery as well

as two hog finishing barns with 1,200

head each. He also raises 300 fed cattle,

300 nanny goats and grows 350 acres

of crops. 

None of the markets—livestock or

crops—look good these days, he says as

he brushes away some hungry goats

intent on nibbling his feet. “This is the

worst year I’ve had—the hog market

has been poor and the cattle market—

which looked good until April—has

also been going downhill.” 

Van Roekel has a hog marketing

contract with Farmland Industries,

which has a premium matrix that pays

a lump sum based on a feed conversion tables and quality grading. Under

the contract, Farmland must approve

the feed source—which in his case is

Sioux Center. 

Despite the disappointing prices,

Van Roekel, like Klassen, loves life in

northwest Iowa. “Life can’t be much

better than it is here,” he says. He

moved away as a young man to farm

near Fort Dodge, Iowa, but returned to

Orange City about 14 years ago. “This

is where I was born and raised; it’s

where our religious faith is based and

it’s where we decided we wanted to live

and raise our kids,” says Van Roekel,

who is also a director on his rural water

district board. 

A local marketing outlet in Sioux

Center for independent hog producers

is the Tri-State Livestock Auction.

Manager/owner Ronald Jordan says

business volume has been building

since he bought the auction about 6

years ago. Indeed, he says the 2,000-to3,000 hogs he auctions each week is up

sharply from when he bought the auction. A typical producer selling at the

auction yard has “maybe 40 head to

sell, but we get some larger ones too,

with 200 to 300 head.”

Not surprisingly, he takes a dim

view of contract growing. “The trend

toward contract growing is killing the

market,” Jordan says. “There is no substitute for competitive bidding” to

maximize prices, he says. 

Jordan says he’s had success expanding the scope of bidders to include several packers in Mexico and states as far

away as Louisiana, Texas and the West

Coast. This increase in the yards’ marketing sphere is helping sellers earn $3-

$4 a head more than others are earning, Jordan says. 

New laws slowing industry growth

Whether independent or contract

growing, one thing all hog producers

are concerned about is how the industry

will be impacted by Iowa’s new environmental laws, enacted primarily to limit

smells associated with hog production. 

“Last winter, I told my board I

thought we would build 70 hog buildings this year,” Ehrp says. “But because

of changes in environmental laws, I

think it will be closer to 30. More planning and time is required up front now

before you can build, and distance

buffers are greater. It will eliminate a

lot of hog building construction.” 

Ehrp says many producers are now

“gun shy” about putting up hog building because of fear of potential lawsuits

that can pit neighbor vs. neighbor.

Ironically, Ehrp says the new enclosed

hog barns, which have waste lagoons

under the barn, generate far less smell

than outdoor lagoons. 

“This community is supportive of

ag—to a point,” Ehrp says. “But when

the wind is from the west, the town

smells the odor from the co-op’s cattle

feedlot, and that can be an issue with

the younger generation moving in.

They are not as tolerant of the smells

as the older generation. 

“They need to remember that

Sioux County is a livestock county—it

is why we are so successful. We have

to accept a certain amount of smell

and live with it.” 

Ehrp recalls the complaints the city

started getting after one new hog barn

was erected. “Trouble is, no hogs had

even been delivered to it yet. People

were apparently smelling a nearby city

water treatment plant,” Ehrp says,

shaking his head. “Sometimes the perception is far worse than the reality.” 

Could it drive more of the industry

overseas? “If we don’t change some legislation (environmental and anti-packer

livestock ownership laws), it sure could.

If they make it tough enough on our

industry, South America and Mexico

sure want our business—and there has

already been much expansion of the hog

industry there. Some day we may wake

up and say, ‘what did we do here?’” ■
Rural Cooperatives / September/October 2002 15

By James Baarda

USDA RBS Economist

james.baarda@usda.gov 

Editor’s note: In the last issue we examined the circle of seven responsibilities that

all directors have. This second article in a

series of three discusses standards of conduct

applied to directors and the sources of legal

liability imposed on directors when they

don’t meet the standards. It concludes with

a discussion of protections for individual

directors against personal liability. Just as

responsibilities can be divided into seven

distinct, yet related, items, standards of

conduct, liabilities and responses can be

viewed in seven steps.

Directors’ roles in

perspective

A number of responsibilities are imposed on a

cooperative board of

directors, but where do individual directors fit in? Four perspectives of directors’ roles help identify board and individual director responsibilities. Starting

with the broadest perspective and narrowing the view to the individual director gives the following breakdown.

The cooperative is a business organization, almost always a corporation.

All of the substantial rules governing

cooperative directors come from corporate law.

The cooperative is a very special

kind of corporation. Cooperatives operate according to appropriate cooperative rules or principles. These unique

cooperative attributes define cooperatives’ unique objectives, they require

specialized income distribution and

financing techniques, they impose

unusual decisions on the board of directors and they give cooperative directors

“something else to think about.”

Narrowing the perspective further,

the board of directors acts as a body.

The power to act on behalf of the

cooperative is given to the board of

directors as a body, not to individual

directors. No special power is given to

an individual board member to act officially. As an individual, a board member has no greater authority than an

ordinary cooperative member. The

board derives its authority from the

incorporation statutes, articles of incorporation, bylaws, and the members.

These all identify the board of directors as the governing body.

This perspective further defines an

individual director’s participation in the

cooperative. Decisions are board of

director decisions, so an individual

director must be able to work effectively

within the dynamics of the board to

influence board decisions. The board as

a whole will be effective only if procedures, committee structures and interaction is conducive to good decision-making. If a director objects to a decision, it

is imperative that a negative vote be

recorded, otherwise the director will be

held to have agreed with the decision.

Responsibilities, standards of conduct and possible liabilities fall on

board members as individuals. If the

standards of conduct are not met, individual directors may be liable to shareholders and members, to the cooperative, to creditors, to patrons and to the

public through civil or criminal laws.

What are the standards of conduct by

which directors are measured?

2. Standards of conduct

Standards of conduct for corporate

directors have been developed over

many years by judicial decisions and

legislative action. Although cooperative

directors face numerous special problems, no separate set of standards has

ever been developed for cooperative

directors. Therefore, corporate rules

generally apply to cooperative directors.

Standards applicable to cooperative

directors (as is the case with corporate

directors) are usually divided into three

“duties.” These are summaries of many

decisions and statutes and are stated in

general terms in this article. The three

duties are “duty of obedience,” “duty of

care” and “duty of loyalty.”

3. Duty of obedience

The term “duty of obedience”

sounds odd but is logical when

Co-op directors held 

to high standards

MANAGEMENT TIP

1.

The Circle of Seven

Responsibilities

(As described in the previous article

in this series, see July-August 2002

issue, page 30.)

Directors:

1. Represent members

2. Establish cooperative policies

3. Hire and supervise management

4. Oversee acquisition and preservation of cooperative assets

5. Preserve the cooperative character

of the organization

6. Assess the cooperative’s performance

7. Inform members
explained. The duty means first that

directors must perform their roles in

conformity with the statutes and terms

of the cooperative’s documented

requirements for the directors. The

authority given to the board of directors is defined, as is the purpose of the

cooperative. Acts beyond those limits

are “ultra vires” and are not authorized.

Neither may the board make decisions that are either themselves illegal

or that will cause the cooperative to do

something illegal. The duty of obedience also implies that the board should

mandate necessary records and recordkeeping, internal procedures, policies

and compliance programs, then supervise the process to the extent necessary

to protect the cooperative from illegal

or improper actions.

4. Duty of care

The duty of care, also called the duty

of diligence, has developed in judicial

decisions but is also found in many corporate statutes. Statutes typically

describe the duty of care in three parts:

good faith, prudence and judgment.

Directors are required to act in good

faith in all circumstances. Directors

must also exercise care that an ordinary

person in a like position would in similar situations. Finally, a director must

make decisions for the cooperative in a

manner that he or she reasonably

believes to be in the best interests of

the cooperative. Directors have the

highest obligation to the cooperative

and stand in a relationship of trust—a

fiduciary relationship. Good faith, conscientious care and best judgments are

expected of each and every director.

Diligence and care raise two particular challenges for cooperative directors.

Directors may fail in their duty if the

board does not adequately supervise

management. The board must devise

some way to be sure that management

and employees conduct themselves in

the cooperative’s affairs in an ethical and

legal manner. The board also establishes

the cooperative’s strategic direction and

evaluates management’s progress toward

the cooperative’s goals. In addition to

selecting top management (usually the

manager or CEO), the board’s duty of

diligence requires that the board evaluate management’s performance, establish succession plans and, if necessary,

dismiss top management.

Often, questions about a director’s

performance revolve

around what the director knows. Generally,

ignorance does not

excuse a director from

liability. Directors must

know what they are

doing or they cannot

satisfy their duty of care.

The knowledge requirement is usually

divided into two important parts.

Directors will be held accountable for

what they know and what they should

know. A director who is actually ignorant of a fact is not excused if the law

requires that the fact should have been

known by the director.

How is a director to gain this knowledge? Directors are sometimes said to

have a duty to inquire about facts which

are required for them to carry out all of

their responsibilities. Directors have a

right to inspect all books and records.

They have the additional

duty to understand the

financial condition of the

cooperative and its business operations. Directors are presumed to

know what is in the

cooperative’s books and

records. As a general

statement, directors will

be charged with knowledge of what it is their

duty to know.

5. Duty of loyalty

Loyalty is perhaps the most troublesome area of liability in corporate law,

including cooperative law. It is troublesome because it is not well understood,

and the presence of disloyalty or conflicts

of interest is devastating to a director’s

personal position of trust in the cooperative. As has been mentioned, directors

occupy a position of highest trust and

confidence upon which the cooperative

and the entire membership relies. That

position must be protected in any action

taken and in any decisions made.

Several kinds of behavior are prohibited by the duty of loyalty. Self-dealing,

where the director makes a special profit by doing business with the cooperative, is a breach of the duty of loyalty.

As discussed in the previous article,

directors of cooperatives are placed

almost automatically in a position of

dealing with the cooperative. This is

not a problem if handled properly. In

fact, a common statutory provision

describes permissible situations. A typical provision states “No director, during

the term of his office, shall be a party to

a contract for profit with the association

differing in any way from the business

relations accorded a regular member or

holders of common stock of the association or others, or differing from terms

generally current in that district.” Conflicts of interest situations always pose

special challenges.

The duty of loyalty imposes other

restrictions on directors. A director will

violate the duty of loyalty by dealing

with someone directly who could have

otherwise dealt with the cooperative.

This is called “appropriating the cooperative’s opportunity.” Loyalty also

requires the highest degree of honesty

and fair dealing with the cooperative

and on the cooperative’s behalf.

16 September/October 2002 / Rural Cooperatives

Do corporate statutes apply

to cooperative directors?

Generally yes, for two reasons. Cooperative incorporation statutes usually state that corporate law applies

to cooperatives unless corporate law conflicts. Cooperatives are incorporated bodies that have all of the

basic characteristics of corporations; directors’ roles,

duties and responsibilities are no exception.

Conflicts of interest

Conflicts of interest involving directors are unavoidable and can have serious consequences if not handled

properly by the board and the cooperative. This topic

will be further examined in the third part of this series.
Directors are often in a position

where they could violate the final aspect

of the duty of loyalty: that of confidentiality. Directors are privy to information about the cooperative that may not

be public. This is particularly the case

where directors have access to information about the affairs of other members

of the cooperative. Directors are under

strict prohibitions about either divulging

confidential information to anyone else

or using it for their own benefit regardless of the harm to the cooperative.

Generally, a violation of the duty of

loyalty, typically in situations referred

to as conflicts of interest, is the quickest and surest way to make a director

liable for wrongdoing.

6. The business judgment rule

Directors constantly exercise judgment on behalf of the cooperative, and

sometimes that judgment does not lead

to the best outcomes for the cooperative. Unexpected events can turn a good

plan bad. Or directors may simply make

a mistake in judgment. What happens

when directors’ actions lead to losses or

other detriment to the cooperative?

Normally, courts will not interfere

with the internal operations of a business to replace the judgments of the

directors with the court’s own judgment

on business matters after the fact. The

business judgment rule says that, absent

fraud or self-dealing, business judgments made by directors will not be

overturned by the courts and will not

lead to director liability. Directors do

not and cannot guarantee the success of

the cooperative or each decision made.

Courts have generally given three

reasons for the business judgment rule.

Few members would be willing to

serve as cooperative directors if they

faced personal liability for good faith

errors in judgments that results in

harm to the cooperative. Courts also

recognize that courts themselves are

ill-equipped to make business judgments for directors and that secondguessing board decisions is not an efficient way to monitor directors. Finally,

a cooperative cannot be managed efficiently if directors are not given wide

latitude in law to handle the cooperative’s affairs.

It is important to understand the limits of the business judgment rule. Courts

usually say that the authority of directors

is absolute when they act within the law,

and questions of policy and internal management are—in the absence of nonfeasance, misfeasance or malfeasance—left

wholly to their discretion. The rule is not

a protection if the offending action was

an abuse of the board’s discretion, was

tainted with board member conflicts of

interest or was a result of the directors’

abdication of their duties to the cooperative. Courts will step in and hold directors liable for their actions when directors are guilty of willful abuse of their

discretionary powers, or bad faith, or of

neglected duty, or of perversion of the

purposes of the corporation, or when

fraud or breach of trust is involved. Otherwise, directors are not personally liable

for mistakes while exercising their

informed, best judgment.

7. Minimizing risk

An easy but inadequate suggestion

for avoiding problems as a cooperative

director is to understand and appreciate

the responsibilities listed in the first

article in this series, know and adhere

to all standards of conduct in this article and make no mistakes that may be

detrimental to the cooperative. The

first two suggestions are in the control

of each director and are, in fact, the

best defenses to legal challenges to

director performance. 

Protection is best when a proactive

attitude is adopted by each director to

know the responsibilities and standards,

understand what it means for the director’s performance and identify particularly sensitive issues in the cooperative,

for the board of directors and regarding

the director’s own personal performance.

Directors may also give attention to

several other actions and practices that

are beneficial to their performance.

Board structure, proper use of committees, effective board discussions and

leadership, flows of information from

management to the board and good

board-management relations can avoid

a number of problems. Directors may

rely on experts, advisors, employees,

Rural Cooperatives / September/October 2002 17

Implementing exercise

Establish a schedule to consider—at board meetings or ancillary meetings—

each of the standards of conduct imposed on directors. Systematically consider

each standard and its requirements. At each meeting, thoroughly examine one

of the standards outlined in this article.

• What specifically does the board currently do to meet the standard?

• What are board’s weaknesses regarding the standard?

• Does each director have the skill, interest and time to consider and respond

to the standard’s requirements?

• Does the board have the knowledge and information necessary to meet the

standards?

• What specific steps can be taken to make the board meet every standard?

• Is there consensus on the board’s performance?

• Would members agree with the board’s self-assessment?

Even more than the board’s responsibilities, the standards are personal to each

director. Each director should individually address the issue and propose his or

her own solution to problems perceived about the standard of conduct under discussion. These sessions may be more effective if management is not present.

The board should also consider the mechanisms the cooperative has in place

to protect directors, such as indemnification provisions and D & O insurance.

Assessment of state law applicable to the cooperative and directors will be part

of the analysis.

continued on page 35
18 September/October 2002 / Rural Cooperatives

By Glyen Holmes

Liaison with New North Florida Cooperative, 

USDA Natural Resources Conservation Service 

Vonda Richardson

Marketing Specialist, 

Florida A&M University

Dan Schofer

Agricultural Engineer, 

USDA Agricultural Marketing Service

Editor’s Note: The early achievements of the New North Florida Cooperative were

featured in the July/August 1999 Rural Cooperatives. This article reports on the

progress of the past 3 years, and how the cooperative has expanded the business beyond

its initial scope

ew North Florida Cooperative (NNFC) is a new-generation

cooperative formed by small-scale vegetable and fruit farmers in

the Florida Panhandle to create and expand marketing and processing opportunities for its members. NNFC members say that

when they farmed individually, they were “price takers.” The

cooperative has enabled them to become “price makers” by taking greater control of their products and providing member-growers with bargaining power in

the marketplace. 

“Having a market, knowing where your products are going and when you

need to harvest makes farming a lot easier,” says Spencer Lewis, an NNFC

member. “Working with the co-op saves me a lot of time compared to selling

along the road, and it eliminates wasted crops in the field.”

From its initial success helping members sell collard greens and other crops to

a local school district, this Florida cooperative has now expanded its scope of

operations to 15 school districts in three states, added product lines and increased

the level of value-added preparation and packaging. It has also created a network

of similar cooperatives in its region which are working together to expand valueadded processing and marketing opportunities for small-scale farmers. 

The cooperative recently built a structure to house its office and a classroom.

A phone, fax, computer and answering machine located in a central office

enables NNFC to easily communicate with its members and customers. Eleasa

Varner, NNFC’s office manager, notes, “Keeping files and records organized and

secure in a central office has really helped with payments, bills and finances.” 

Putting customers first

The co-op management team made its first food service industry sale to

J’Amy Petersen, food service director of the Gadsden County, Fla., School District. The presentation demonstrated the co-op’s professionalism, courtesy, seriN

Taking it to 

the next level 

Success of small Florida vegetable co-op 

leads to a network of similar cooperatives 

From the top: 

Collard greens thrive in the soil of northern Florida.

NNFC member Spencer Lewis harvests

and loads greens in plenty of time to meet

the deadline for a scheduled delivery.

Greens are washed and chopped at the

co-op’s packing house.

Photos by Dan Schofer, courtesy USDA/AMS
ousness of purpose and accountability. It also stressed that the co-op is as a

Department of Defense-certified vendor.

After its presentation, the co-op management team carefully listened to

Petersen discuss the school district’s needs. The cooperative then arranged to

deliver free samples to Gadsden County schools to demonstrate product quality

and the co-op’s dependability. At that time, the cooperative did not have any

processing equipment, so the participating farmers washed, chopped and bagged

the collard greens by hand.

The next day the deliveries were made on time. Petersen and her cafeteria

managers were happy with the quality and freshness of the products and the

timeliness of the deliveries. NNFC has been providing fresh collard greens to

Gadsden County schools consistently ever since. 

“The fresh peas and greens have really improved the meals we serve to the

children,” says Mitchell Williams, a cafeteria manager in Gadsden County. “The

children love the fresh vegetables. I enjoy working with the co-op and look forward to working with them in the years to come.” 

Expanding to more schools

NNFC has kept Gadsden County as an important customer and expanded its

market to schools in other areas, including Jackson County and Albany County,

Ga. Regularly servicing several school districts has helped the cooperative to

acquire capital, invest profits in equipment and necessary infrastructure and

develop a small amount of working capital. The cooperative applied for, and

received, two small loans from the Jackson County Development Council

(JCDC) to purchase refrigerated storage and a small processing machine. JCDC

is a community-based, nonprofit organization established to increase local economic opportunity in Jackson County (a designated Empowerment Zone). 

Ever since the cooperative formed, JCDC has been helping it acquire capital

and develop a good credit history. By making its loan payments on a regular

basis, the cooperative has established the foundation of a good credit history. 

Profits from consistent sales have been invested in processing buildings and

gradual improvements in transportation. The improvements from the acquired

capital and invested profits greatly increased the amounts of product that could

be processed, stored and delivered. This experience has created the groundwork

for larger scale deliveries in the future. 

It was important to develop a working capital fund to cover bills due between

harvest and the receipt of payment from customers. Early on, the co-op established a policy of paying the farmer for the harvested produce at the time products were picked up for processing.

Schools as customers

Over the past 2 years, NNFC has delivered produce to 15 school districts in

the region (table 1, page 23). Some of the school districts have been steady customers for years, while other sales were “pilot projects” consisting of one- or twotime sales to new school districts to demonstrate the co-op’s quality and delivery

standards. Building on these initial deliveries, NNFC plans to develop strong, sustainable business relationships with those “pilot” school districts as well.

Diversifying to military markets

NNFC has experimented with diversifying its initial customer base. The

cooperative delivered muscadine grapes to the Defense Subsistence Office

(DSO) of the Department of Defense (DoD) in Jacksonville, Fla., in September

2000 for distribution through military base commissaries. This office provides

fresh produce to over 30 military bases, from South Carolina to the Caribbean.

It also provides fruit and vegetables to over 2,200 schools. 

Rural Cooperatives / September/October 2002 19

Processed collard greens are bagged and

loaded into a co-op truck for delivery to one

of the 15 school districts in three states currently being served by the cooperative. 
NNFC had previously worked with

the DSO to become a certified vendor,

so there was already an existing relationship. This breakthrough sale to

DoD was a first for the cooperative,

and has opened the door to future

sales. The sale helped cooperative leaders realize that they needed to investigate other produce varieties in order to

supply the DoD and help boost profits.

Pilot retail sales

Retail grocery sales are also

another market channel that

the cooperative has pursued.

Between 1998 and 2001,

NNFC sold value-added collard greens to local Winn Dixie

and Grocery Outlet stores. 

Leafy greens were very popular with customers because of

their freshness and convenience. Store produce managers were happy with the

cooperative because of the

freshness and consumer

acceptance. 

During the summer of

2001, one store sold 200 bags

of NNFC greens per week.

Nevertheless, logistics and

fluctuating demand made this

market difficult to sustain. 

While NNFC is not supplying any retail grocery stores

this year, the sales provided valuable

experience and increased cash flow. In

2002, the cooperative is focusing on

schools, its primary market. 

Product lines

The cooperative’s main product

remains collard greens, which are

offered through two separate lines: a

fine cut and a country cut. The cooperative also recently began selling peas to

schools. Pea lines available to schools

are: black-eyed, purple hull, butter,

cream #4 and cream #8. The cooperative is planning on expanding the

amounts and variety of peas sold to

schools this fall. 

NNFC is looking to sell a french fry

cut of sweet potato, supplied by the

Sweet Potato Growers Association in

Mississippi. It has also grown

Habanero peppers, which were sold in

bulk to a regional hot-sauce company. 

The cooperative has experimented

with the strawberry market, selling

fruit to schools both for breakfasts and

lunch deserts. The perishability and

market pressures on prices hurt the

profitability of the co-op’s strawberry

trade, so it has discontinued strawberry

production and sales. 

The co-op also supplied blackberries

for use in desserts, such as cobblers and

pies. But blackberries are harvested

mid-summer, creating perishability

problems, so the cooperative has discontinued production.

The cooperative has worked closely

with Dr. Kathleen Colverson, southeast

program manager for Heifer International. Colverson says, “Based on my

years of experience in working with

limited-resource farmers, I am excited

about NNFC’s progress. This type of

marketing approach can easily be

duplicated by other groups of farmers.” 

The cooperative is currently raising

goats for meat. There have been some

sales of ground chevron (goat meat) to

school districts and additional sales are

planned for the fall.

Value-added processing

NNFC adds value to its leafy greens

by washing, chopping, bagging and

weighing them. The country cut is a

larger, home-style cut while the fine

cut consists of 1/4-inch squares. 

Through careful attention in the

processing stage, the cooperative

assures consistent quality and volumes

of its final products. It realized early on

that it had to differentiate itself and its

products from other suppliers. NNFC chose fresh,

leafy greens because there

was an undeveloped market

niche locally and in schools

for them. 

Fresh was the only option

because the frozen and

canned greens markets were

already filled by established

companies. Washed, cut and

“ready-for-the-pot” features

not only provided convenience, but also differentiated NNFC’s products from

other product lines. 

Value-added processing

has given NNFC access to

markets that would be

unavailable with raw products, such as bunches of

whole greens. Cafeteria

managers and workers do

not have the time to wash

and chop greens to serve hundreds of

children. The convenience of NNFC’s

greens save cafeteria managers and

workers a great deal of time.

NNFC’s value-added processing,

combined with the co-op’s bargaining

power, allows the cooperative to set a

selling price that is fair to customers

and, at the same time, provides a reasonable return to its members. This

stands in contrast to individual farmers

selling bunched greens straight from

the field. 

The flip side of value-added processing is that NNFC has had to spend

much time and effort acquiring necessary capital, purchasing or leasing

equipment, maintaining and repairing

the equipment and closely monitoring

its quality standards. 

20 September/October 2002 / Rural Cooperatives

Dan Schofer of USDA’s Ag Marketing Service, who is providing

technical assistance to the New North Florida Cooperative, discusses delivery needs with school cafeteria manager Mitchell

Williams in Gadsden County, Fla. 
The Jackson County Development Council Inc.

(JCDC) presented NNFC with a USDA Rural Business

Enterprise Grant (RBEG) check for $327,863 on Aug. 8,

2001. JCDC wrote the grant proposal and was

responsible for its administration. The funds were

used to improve infrastructure and provide working

capital for NNFC. 

“Sometimes it’s hard to pull

yourself up by your bootstraps

when you don’t have a pair of

boots,” Chuck Clemons, USDA

Rural Development state

director for Florida, told the

crowd at the check presentation ceremony. “I am hoping

that today, by delivering this

check, we can provide our

small, economically disadvantaged farmers with some bigsized boots in the form of

equipment and operating capital so that this goal can be

achieved.” Lunch served at

the event included NNFC’s

fresh collard greens. 

NNFC used the funds from

USDA Rural Development and JCDC to purchase four

refrigerated trucks, which, along with two vehicles

previously purchased, give the co-op a small fleet of

refrigerated trucks. These vehicles are essential for

the success of both the cooperative and the Small

Farmer Distribution Network. The fleet of trucks will

help expand marketing opportunities, both geographically and in volume. 

The USDA RBEG program helps public bodies and

private, nonprofit corporations finance and facilitate the

development of small and emerging private business

enterprise in rural communities of fewer than 50,000

people. Grants may be used to establish a revolving

loan fund to provide “gap” financing to small and

emerging businesses, to purchase or lease equipment

and machinery, for technical assistance, such as marketing and feasibility studies, and training for rural

entrepreneurs. 

The small business being assisted must have less

than $1 million in gross revenues and fewer than 50

new employees. The Rural

Business-Cooperative Service’s Specialty Lenders

Division, administered

through USDA Rural Development, has a number of

flexible financial tools to

assist small and emerging

rural businesses. If you’re

interested in learning more

about how USDA can assist

rural businesses or cooperatives, contact the USDA Rural Development State Office

serving your community, or

visit: www.rurdev.usda.gov . 

Several other government agencies and organizations have also helped

NNFC improve its operations. USDA’s Natural Resources Conservation Service has provided outreach to the co-op since its

inception for production and organization structure.

USDA’s Agricultural Marketing Service provided 

technical assistance in postharvest handling and

marketing. The West Florida Resource Conservation

and Development Council facilitated cooperative

agreements with USDA/AMS.

The Florida State Bureau of Farmers Markets provided the cooperative—through the Agriculture Venture

Services Program—with lease incentives, assistance

with equipment needs and business plan development.

Heifer International assisted NNFC with goat production

and agricultural trials. ■

USDA lends co-op support with Rural Business Enterprise Grant

Packaging a key factor

The cooperative felt it was important to develop quality packaging to

maintain the quality and freshness of its

produce. Packaging also provides convenience and improved product

appearance for customers. 

Plastic bags holding 1, 11⁄2 , 2 and 3

pounds of leafy greens were selected.

The NNFC logo is clearly displayed

on the front. Nutritional facts, recipes,

contact information and a UPC code

are located on the back of the package. 

Transportation and logistics

Transportation has improved as the

cooperative expanded its sales and marketing area. The cooperative now uses

several refrigerated trucks for deliveries. These trucks improve product handling and enable larger orders to be

filled more efficiently. They have also

helped the cooperative dramatically

increase its marketing area to include

schools in other states. 

The management team and truck

drivers are constantly challenged by the

Members of the New North Florida Cooperative receive a

ceremonial check for $327,000 from USDA Rural

Development. The money is being used for infrastructure

improvements in the co-op’s vegetable and fruit processing and delivery operations, and for working capital.

Rural Cooperatives / September/October 2002 21
22 September/October 2002 / Rural Cooperatives

logistics of deliveries. Schools in rural

areas are distributed over a wide area.

Delivering with one eye on the map

and the other on a clock is crucial. 

Serving larger school districts in metropolitan areas can also require careful

logistical planning for deliveries. For

example, the cooperative delivered

greens to 56 schools in Jefferson County,

Ala., in the spring of 2001. In the planning stage, an average delivery and travel

time of 30 minutes for each school was

assumed. The total delivery time would

be 28 hours, which would correspond to

31⁄2 working days for one driver and truck. 

The decision was made to coordinate the deliveries using two vehicles,

mobile phones and predetermined

meeting locations. Using this method,

the deliveries were completed in two

days. This situation demonstrates the

difficulties that logistics can present. 

Educating other farmers 

NNFC works to assist other small

farmers in the community and region

as well as its own members. It teaches

new production and farm-business

practices in its classroom. NNFC also

often hosts groups of farmers or cooperative members from other states. 

Members of NNFC candidly discuss

their successes and learning experiences with visitors. NNFC also advises

individual farmers through informal

channels. The cooperative has been

very active in agricultural marketing

conferences. Members have described

their success and learning experiences

to audiences in Florida, Georgia,

Alabama, Mississippi, Tennessee, Missouri and California. NNFC views this

outreach as an important responsibility

to the small and limited-resource farmer

community. 

The Small Farmer 

Distribution Network

The NNFC is now collaborating

with other limited-resource, minority

cooperatives in developing the Small

Farmer Distribution Network. The

network will provide marketing, education, processing and transportation

assistance to other cooperatives in the

region. This should result in larger

amounts and a wider variety of products available to schools. The network

should also increase the sales area for

each participating cooperative. 

The cooperatives participating in

the network are:

• New North Florida Cooperative

• Central Arkansas Processing

Company (CAAPCO)

• Sweet Potato Growers Association

(Mississippi, Arkansas and

Louisiana)

• Flint River Vegetable Cooperative

(Georgia)

• Coastal Georgia Farmers Cooperative 

• Tri-County Cooperative (Florida)

• Perry County Farmers Cooperative (Alabama)

Each cooperative will produce and

deliver greens, peas and sweet potatoes

to schools in its own region. The cooperatives will specialize in their own

products and lines, but will also market

products from other cooperatives in

the network. 

The network should greatly increase

the sales volume for each cooperative.

Waddell Sanders, president of the

Sweet Potato Growers Association in

Mound Bayou, Miss., says: “The

NNFC and the Small Farmer Distribution Network are godsends. We have

been having difficulties in marketing

for years. NNFC and the network have

helped us establish marketing opportunities here in Mississippi. Their realworld experiences have helped us overcome our marketing difficulties.” 

The network should also make food

service directors’ jobs easier by providing a central contact for several varieties of healthy, fresh produce grown

by small farmers. The NNFC will

coordinate marketing, production,

quality standards, transportation and

distribution logistics. 

The network met with the Mississippi Department of Agriculture and

the Mississippi State Food Service purchasing director in June to discuss sales

of fresh produce and value-added prodThe New North Florida Cooperative (NNFC) is committed to member training and education, in keeping with its

mission and vision statements (below) to provide members

with skills in: market development; education; processing

and packaging; transportation; leadership development;

management; acquiring capital; billing and payments;

finance; quality standards; planning and communications.

Mission statement: The New North Florida Cooperative provides fresh, healthy agricultural products at a

fair price to local school lunch and breakfast programs.

The cooperative is responsible for the marketing, handling, processing and delivery services of agricultural

products produced by participating local small farm

operators. The cooperative will meet the needs of local

small farm operators by facilitating the flow of profit

from the value-added business operation to and within

the local community. 

Vision Statement: The New North Florida Cooperative

will be a service cooperative providing education, marketing, and technology transfer in order to provide a competitive edge for small farmers in the northern Florida

region. The income generated from the value-added business will flow to, and within, the local community. The

cooperative’s primary business will be targeted to providing fresh, healthy agricultural products to local school

districts throughout the area. The cooperative will also

develop additional fruit and vegetable lines that will be

produced and sold as additional sources of revenue. ■

A commitment to members 
Rural Cooperatives / September/October 2002 23

ucts to 20 Mississippi school districts

this fall. The state has been very supportive of supplying fresh, local produce to schools. Mississippi is working

with the network to facilitate sales and,

hopefully, develop a long-term business

partnership. 

The Mississippi Department of

Agriculture has also been working

with the Sweet Potato Growers Association to develop value-added sweet

potato products that will fill an

important, nutritional niche in local

schools. The Rural Business-Cooperative Service of USDA Rural Development has also provided technical

assistance to the co-op. 

The network met with the Arkansas

state food director last spring, and

sales are planned for the fall in about

15 counties, including the Dollar Way,

Little Rock and Pine Bluff school districts. In Florida this fall, the network

plans to expand its market by adding

Palm Beach and Santa Rosa County

School Districts to its existing customer base. The network will be selling fresh produce to almost 50 school

districts on a regular basis in the fall

of 2002.

Postharvest handling

Providing fresh, healthful produce

to local schools requires special

postharvest handling practices and

equipment to ensure the highest possible quality. The produce should look

healthy and have a good color. Texture

is also important. Produce should be

crisp, crunchy and firm. Fresh produce

is sweeter and has a better taste. 

This is very important to school

food service directors, because they

provide these products to children,

who can be very demanding customers.

The cooperative has always focused on

postharvest handling equipment as an

important step in meeting customer

needs and expectations. 

Proper postharvest handling starts

in the fields. In high field temperatures, refrigeration is crucial to peas

and leafy greens. Limited-resource

farmers providing fresh produce to the

cooperative observe that having the

trucks in the field at harvest is crucial

to quality and shelf life. 

Leafy greens and peas are harvested

and immediately placed in trucks to

remove field heat. The truck then

transports a load of peas for shelling,

then delivers them to

local schools. 

Refrigerated trucks

have greatly increased the

market potential for the

cooperative. By regulating temperatures in

trucks, the cooperative

has increased its delivery

area and still maintains

high-quality products.

The refrigeration and

holding capacity of these

trucks have also enabled

the cooperative to make

larger deliveries to suburban and urban schools. 

After buying fresh collard greens from the

cooperative, many schools

asked about the availability of fresh peas and beans.

But the farmers could not

economically harvest peas

by hand and still meet the

school districts’ price limitations. The

solution was to lower harvesting costs

and increase harvesting capacity with a

mechanical, self-propelled pea harvester. 

This purchase was made possible

with a loan through JCDC. The selfpropelled pea harvester meant peas

were arriving much faster and in

greater volume, but created a timeconsuming bottleneck in the peashelling area. So the co-op used another loan from JCDC to purchase a

pea-shelling line, which cleared the

bottleneck. Through increased crop

volume and reduced labor costs, the

cooperative is meeting price requirements of the schools.

The harvester and pea-shelling line

will also provide service to other cooperatives. Sharing these resources

should pave the way for more sales and

improve profits for member cooperatives, also benefitting the rural communities where they are located. 

Much accomplished 

in a short time period 

NNFC has accomplished much in

only 5 years. It started with a group of

farmers cutting greens by hand on cold

nights for next-day delivery. Breakthrough sales led to long-term business relationships and additional sales

to other schools. 

The co-op’s profits were re-invested

into infrastructure to improve processing, refrigeration, storage and transportation. By providing quality products,

on-time deliveries with professional

courtesy, NNFC developed a reputation

as a dependable vendor of fresh fruits

and vegetables to schools.

Bringing in other small farmer

cooperatives into the Small Farmer

Distribution Network will economically benefit the NNFC as well as other

small farmers looking for profitable,

sustainable marketing opportunities. 

The NNFC and other participating

cooperatives in the Small Farmer Distribution Network are looking forward

to a busy fall. New school districts,

expanding markets into new states,

additional product lines, expanded 

continued on page 37

Table 1—School Districts and Meal Counts

Serviced by NNFC, 2000-2002

School Districts Students Served Lunch

(Florida)

Gadsden 7,000

Broward 230,000

Jackson 7,000

Leon 31,000

Bay 25,000

Hamilton 3,500

(Georgia)

Dougherty 17,000

Tift 7,000

(Alabama)

Jefferson 40,000

Opelika City 4,000

Enterprise City 5,800

Auburn City 4,000

Tuscaloosa City 10,000

Montgomery 34,000

Dothan City 10,000
24 September/October 2002 / Rural Cooperatives

By Steve Thompson

USDA Rural Development

sathomps@rdmail.rural.usda.gov

ilda Gay Legg, Administrator of USDA Rural

Development’s Rural

Utilities Service (RUS),

has worked in a number

of capacities to promote development

in rural areas. A native of rural Adair

County, Ky., she served as executive

director and CEO of the Center for

Rural Development in Somerset, Ky.,

from 1994 until her appointment as

RUS administrator in October 2001.

In that position, she helped develop

and implement a broadband telecommunications program in rural communities throughout southern and eastern

Kentucky. 

From 1990 to 1993, Legg served as

alternate federal co-chairman for the

Appalachian Regional Commission in

Washington, D.C. There she represented and promoted economic policies and assisted in the management

of a $190 million budget for job creation, building infrastructure, education and workforce training, as well as

research programs for economic

development. 

Legg has also served as a field representative for Kentucky Senator Mitch

McConnell, as acting executive director of the National Council on the

Handicapped and as the director of

admissions for Lindsey Wilson College

in Columbia, Ky.

Legg believes that access to highspeed, broadband communications service is vital to the future growth and

prosperity of rural America. She talked

with “Rural Cooperatives” magazine

about the promise of broadband and the

challenge of promoting rural economic

development in the 21st Century.

Rural Cooperatives: It has been estimated that the cost of providing rural

America with broadband communications

would be in the neighborhood of $14 billion. Can we afford that cost?

Legg: I think a better question is,

can we afford not to have broadband in

rural America. Rural communities will

always face a big challenge in competing economically with urban areas.

They need to have competitive infrastructure both to attract companies

from outside and to encourage the

development of locally-owned businesses. And that leads us to what I call

the Three “A’s” of technology:

1. Communities have to be aware of

what new technology, such as high-speed

internet connections, can do for them.

2. They have to have access to it. And

that leads to:

3. Application—applying the technology constructively.

My job at the Center for Rural

Development was dealing with the first

two requirements. We established and

managed 40 World Wide Web conference sites in eastern Kentucky, in small

towns and villages of 1,000 to 5,000

people, occasionally more. The sites

offered high-speed, interactive video

conferencing and community-access

computers to all comers.

The way the sites were used gave

us a glimpse of the possibilities this

technology offers people living in rural areas. In one town, we had an

elderly gentleman who would bicycle

over from his home every day and

spend an hour or so surfing the Web.

Another user was a lady who used the

computers to communicate through

e-mail with her grandson in the army

overseas. A local hospital rented the

video-conferencing facility to hold

management meetings with its sister

hospital in another part of the state.

And a life-insurance agent used the

conferencing services to simultaneously keep in touch with her district

office in Lexington and her corporate

office in Colorado. 

This is only the tip of the iceberg,

because rural people may not yet be

aware of what this technology offers

them in their private lives and in making their living. I think it will take a little time, but I have no doubt that in the

future the way we do business will

depend on broadband.

H

Legg sees vital role for utility 

co-ops in rural America’s future

RUS Administrator Hilda Gay Legg
Rural Cooperatives / September/October 2002 25

That brings up the question: just what

does broadband offer rural areas? Can it help

them entice a corporation to bring in jobs?

The thing to remember is that

before corporations decide to locate in

a rural area, they’re going to make sure

they have access to the same kind of

infrastructure and services they can get

in an urban area, not just for doing

business, but also for the sake of their

employees. That includes fast computer

communications, and, just as important,

the other resources to which broadband

gives access, that otherwise might not

be available outside the cities. 

Bringing a big corporate facility to

your rural area can be important. In Kentucky, we’ve made big efforts using tools

such as tax credits to bring in big facilities,

like a Toyota assembly plant to Georgetown. So broadband isn’t the only reason

any company will want to locate to your

area: they’re going to look at the whole

package. 

But we’ve also had successes because

of access. For example, Amazon.com

has a communications center coming

to Campbellsville, where infrastructure

in place was a big factor.

We have to remember that small

operations, such as call centers and local

small businesses are important, too. Four

or five jobs added to an existing business

because of expansion does not seem like

a big deal. But in the long run, this type

of growth is more sustainable and may

be more realistic to building the community than hitting the home run, like

the Toyota plant or Amazon.com.

By connecting people and computers in different locations, the new technology has the potential to help rural

businesses achieve economies of scale

that allow them to compete on an equal

footing with businesses located in the

cities. And it also offers incentives to

people who might want to return home

after living in the city. They’re going to

want the conveniences and advantages

they’ve gotten used to, from not having

to depend on a slow dial-up connection, to convenient banking—all sorts

of things broadband makes possible.

A good case in point is telemedicine

and distance learning, which use video

conferencing to put medical specialists in

remote clinics and operating rooms, and

teachers in specialized subjects in remote

classrooms. Using these technologies

you can have access to the same level of

medical care and the same education

curriculum you could find in the city.

RUS is actively promoting its new Distance Learning/Telemedicine (DLT) program, but it has met resistance in some

areas. Would you care to comment?

We’re making loans, but not as

many as we’d like. I think it’s going to

take time for the telemedicine technology to be fully accepted, and there are

a number of reasons. The first is that

the clinics that can most use telemedicine are the ones that are in the most

remote, least-developed areas. Unfortunately, they’re also often the ones

with the least ability to pay the costs of

installation and hook-up. 

There’s also a cultural problem. People just don’t want remote doctors;

they’re used to dealing with a physician

face-to-face, and they’d rather travel

miles out of their way than to be examined over a remote hook-up. It will take

awhile to get used to this new technology, just as it took awhile to get used to

the telephone and other innovations.

There are other problems, too, such

as: when you have a remote doctor and a

doctor on the spot both helping a

patient, which one does the billing?

How is the fee split? We have no precedents yet for those issues, and they’ll

have to be worked out. 

Distance learning presents some special problems, too. For instance, we

have a college in rural Kentucky that’s

linked to one in southern Tennessee and

a tribal college out West. They share a

language teacher, but the colleges are

located in the jurisdictions of different

accrediting bodies. So how do they

resolve the accreditation issue? New

technology always poses challenges to

existing systems, and the people who are

in charge of those systems aren’t used to

it and need to learn how to deal with it. 

When you get enough colleges

demanding the resolution of the accreditation issue, it will get resolved, and the

other problems will, too. The culture

has to change to adapt itself to new

technology, but it takes time. In the

meantime, we often have to go out of

our way to find the most isolated, hungriest doctor to get someone who is

willing to take the risk of adopting the

new technology.

In an emergency, the DLT technology really proves its worth. A rural

clinic with a surgeon who isn’t experienced in a specific type of surgery

could—with a telemedicine set-up—be

guided through a surgical process by a

specialist at a large hospital. 

The great thing about this technology is that, in a situation like that, the

camera provides a sharp, close-up view

for the remote physician that is actually

superior to what the doctor on the spot

can get using his own unaided vision.

For all practical purposes the remote

doctor is right at his elbow, guiding

him through the procedure. 

As long as we’re talking about development in rural areas, what do you think

utility co-ops can do to encourage economic

growth in the areas they serve?

There’s a lot utility co-ops can do,

and many of them are playing important

roles in improving the quality of life for

their members. For instance, many coops maintain local community centers.

Putting conference centers in those facilities is one example of what they can do. 

But more important is that co-ops

should be leaders in their communities.

They need to recognize, as many do,

that their obligations to their members

do not end with simply providing utility service, whether it’s telecommunications, power or water and waste disposal. They need to work actively to grow

their local economies. They need to

embrace change. They need to be part

of the active recruitment of businesses,

and to share their business and financial expertise with their members and

potential members. The revolving loan

funds and business incubators that

many rural utilities co-ops are setting

up are good examples of this approach.

Utility co-ops, by their very nature,

continued on page 36
By Susan Salisbury, 

Palm Beach Post Staff Writer

Editor’s Note: This article is reprinted courtesy the Palm Beach Post

eorge Wedgworth relishes talking about the

time he decided to have a little fun with environmentalists who have opposed the powerful

sugar industry in the Glades for decades.

“I told them when the muck is all gone, we

will build condos. They’ll be gated communities, and we will

name them after you. I said it with a straight face. Then I see

Charles Lee quoted in the newspaper saying, ‘We’ve got to

stop this development.’

“I did it to aggravate him,” says Wedgworth, 73, who

founded and heads the Sugar Cane Growers Cooperative of

Florida. He succeeded. Lee, executive vice president of the

Audubon Society of Florida,

takes the idea seriously even

today. “I’m not sure I agree with

George Wedgworth on many

things, but on the question of

urban development being worse

than growing sugar, we would

agree on that,” he said recently.

Wedgworth can’t be blamed

for trying to bring some levity to

the battles he’s fought as chief

executive and president of the

54-grower cooperative he began

in July 1960.

As its chief, he has been on the

front lines of the industry’s

biggest political, environmental,

economic and labor-related battles.

Throughout, the co-op has been a

stable group, with five of its original board members still serving

today.

The co-op’s first year, 1962-63,

saw production of 77,617 tons of sugar from 21,649 acres. Last

season, it produced 373,895 tons from 75,558 acres, about 20

percent of Florida’s sugar production. Over that same period, the

co-op’s annual revenue from sugar and molasses sales has grown

to more than $150 million.

The co-op marked its 40th crop year in April.

“I’m a great believer in teamwork. One person can’t do it

all,” Wedgworth says. “It has to be a team whether it’s a

cooperative or a company.”

Wedgworth’s perspective is unique among the heads of Florida’s three sugar firms. Unlike the bosses at West Palm Beachbased Florida Crystals Corp. and Clewiston-based U.S. Sugar

Corp., Wedgworth grew up in the Glades. He was born in

Starkeville, Miss., and his family moved to Belle Glade in 1930,

when George was two and his father, Herman, became a plant

pathologist at the University of Florida’s agricultural center.

Within two years, Herman Wedgworth quit his $1,800-ayear job and started his own vegetable farm.

It’s an upbringing that George Wedgworth, a 1946 graduate of Belle Glade High School, has never moved away from,

despite his success and wealth. He

won’t disclose his income, but

says, “I’m paid way too much.”

With labor and trade acumen

second to none in the industry,

Wedgworth still prefers the simpler

lifestyle of an old Florida farmer

over that of a sugar magnate. He

only recently traded in his early

‘90s Oldsmobile for a new Buick.

Wedgworth and his wife, Peggy,

who met in the ninth grade, live in

Belle Glade in the one-story concrete block house George’s mother, Ruth, built in 1941. The white,

five-bedroom house faces two-lane

East Canal Street and overlooks the

sugar cane fields and smokestacks

of the co-op’s sugar mill.

Wedgworth lived away from the

Glades only when he and Peggy

attended what was then called

Michigan State College, now

Michigan State University. He graduated with honors in 1950

with a degree in agricultural engineering.

“I just don’t know any different. I’m within five minutes of

26 September/October 2002 / Rural Cooperatives

Still raising cane

George Wedgworth is a 40-year veteran of Florida’s sugar wars

G

George Wedgworth, president and CEO of Sugar Cane

Growers Cooperative of Florida, and the co-op’s 54 other

growers produced 373,895 tons of sugar last season,

compared with 77,617 tons in its first season, 1962-63.

Since the co-op began operating, sugar has replaced

winter vegetables as the region’s top cash crop. 

Photo by Scott Wiseman, courtesy Palm Beach Post
Rural Cooperatives / September/October 2002 27

my office. I’ve never had the desire to go anywhere else,” says

Wedgworth, the father of four grown children—two sons and

two daughters. He and his wife have 11 grandchildren.

Geography hasn’t hampered his success

Instead, he and his family, owners of Wedgworth’s Inc.,

the state’s largest fertilizer company, with 150,000 tons of

“Big W” brand production a year, and Wedgworth Farms

Inc., a 5,000-acre sugar cane farm, have made their livelihood

from the muck, the rich black soil of the Glades.

Wedgworth’s youngest son, Dennis, a Duke University

graduate, runs the family businesses. The elder Wedgworth

sees to business at the co-op, Belle Glade’s largest employer,

with 900 employees.

True to his philosophy on teamwork, Wedgworth has

done two multimillion-dollar deals with rival Florida Crystals, owned by the Fanjul family

of Palm Beach.

Florida Crystals and the coop last year bought the company that makes Domino Sugar

and its three refineries for $205

million. That followed a 1998

partnership in which they

bought Refined Sugars Inc., a

Yonkers, N.Y., refinery, for a

reported $65 million.

“They have a higher profile

than we do politically,” Wedgworth says of the Fanjuls, “but

(the co-op and the family) got a lot in common with sugar.”

Wedgworth, with a reputation for being feisty and thorough, believes in dealing with controversy head-on, whether

the issue is phosphorus levels in Lake Okeechobee or ash

residue from burning cane fields before harvesting.

“He likes getting to the bottom of things,” says Belle

Glade grower Rick Roth, 49, a co-op board member whose

family has known the Wedgworths for decades. “He’s been a

true visionary who takes time to understand how all the

pieces fit together.”

Dalton Yancey, executive vice president of the Florida

Sugar Cane League, the industry’s longtime Washington lobbyist, echoed those sentiments.

He said Wedgworth reads everything that comes his way

and never backs down. “If I am going to be in a fight at the end

of an alley, I want George Wedgworth in that alley with me.

He will fight and has a reputation for getting things done.”

Even the Audubon’s Lee concedes: “George has been the

grand old spokesman for sugar and agriculture in the Everglades Agricultural Area for a long time. He is respected in

that industry, and is a tenacious advocate for his industry.”

Haunted by childhood tragedy

Wedgworth’s early years were marked by tragedy. He still

is haunted by a day in 1938.

“I was with my father when he got killed. He was at the

(vegetable) packing house and a crane was lifting a 10-ton ice

machine. My cousin and I were playing in the packing house.

I heard the accident. I remember seeing him under those

beams,” George says, choking up.

“My mother stepped right in to run the (family’s thriving

vegetable farm). She was keeping the books already,” Wedgworth recalls. “Her kids were 5, 10 and 15 when he died. She

didn’t come home until 9 or 10 o’clock at night.”

Wedgworth says his parents had a profound influence on

him. Their drive became his—and showed itself when he was

a youngster in 4-H. He started with six cows and had a herd

of 26 by high school.

His parents, Wedgworth says, “came here from Michigan

State College (where Herman was an associate professor)

with nothing but the shirts on their backs. They both came

from meager backgrounds, and

they thrived on a challenge.”

Wedgworth does, too. He

and farm manager Vernie

Boots, a mechanic, built the

first mobile celery harvesting

unit in 1950. The machine, no

longer in use, allowed picking

and packing to be done in the

field, saving time and money.

Wedgworth also founded

the Florida Celery Exchange in

the 1950s. The cooperative put

an end to growers selling

against each other.

“I found that we could grow beautiful, beautiful celery, and

then the salesmen would give it away. My mother said, ‘Well,

if you are going to be critical of our sales methods, I am

going to put you in charge of it.’”

The exchange soon was born. But celery, like other vegetables, is a fragile crop. When the U.S. government decided it

no longer wanted to be dependent on sugar from Cuba following Fidel Castro’s takeover, Wedgworth saw an opportunity to

move into growing the more stable commodity.

In 1960, he called 16 Glades vegetable growers about

forming a sugar cooperative. With 52 growers on board initially, the Glades Sugar House broke ground in October 1961.

“George is one of the first people who started the movement in the 1960s to expand the industry beyond just U.S.

Sugar and (the Fanjul family’s) Okeelanta, which existed at

that time,” said Jim Terrill, executive vice president of U.S.

Sugar Corp. “He’s a pioneer.”

The big switch to sugar cane

By the end of the decade, Wedgworth Farms, as well as

many other former vegetable growers, had switched to growing nothing but sugar cane.

Sugar growers shared some hot political issues with the rest

of agriculture. A big issue was the poor working and living

The Wedgworth Packing Plant, circa 1932-33, from the scrapbook of Herman Wedgworth, George’s father. 

Photo courtesy of the Wedgworth family
conditions of migrant laborers, including cane cutters, the socalled guest workers from the British West Indies, mostly

Jamaica. In 1970, Wedgworth testified before the U.S. Senate

subcommittee on migratory labor on behalf of Florida vegetable and sugar cane growers to counter some of the charges

against the industry. In that testimony, he ripped into newscaster Chet Huntley’s report titled “Migrant—An NBC White

Paper,” saying it was filled with “inaccuracies and bias.”

The “Palm Beach Post-Times” ran the complete text of

Wedgworth’s testimony. He was quoted as saying: “I feel that

there was much ‘sneaky journalism’ involved in the film,

which took exceptional circumstance or incident—many

times out of context—and implied that Florida was ‘rampant

with conditions bordering on slavery and racism’ and that no one in

Florida was making any constructive effort to help the migrant.

These accusations and innuendoes

are just not so.”

By the late ‘70s, the sugar

industry began harvesting

mechanically. The co-op had

totally mechanized its harvest by

the 1991-92 crop, ending the need

for the hand-cutting of cane—and

saving $10 million a year. But disputes over labor contracts from

the 1980s continue to this day.

The sugar industry’s burning of

cane fields, a part of the harvesting

process to clear away debris, also has been controversial. In

the 1960s, the American Lung Association alleged that the

ash and smoke from the burning was killing people.

Wedgworth remembers the day in 1968 when he received

a letter signed by then-Gov. Claude Kirk saying the industry

must “cease and desist” from burning cane fields.

“Nat Reed was head of the state Department of Pollution,”

Wedgworth said. “I called him and said, ‘Mr. Reed . . . it would

shut us down and put over 25,000 people out of work. We’re

going to find the best people we can to tell us what we’re

doing. If we’re doing something wrong, we’ll correct it.’ ”

Out of that came a burn permit process regulated by the

state’s Forestry Department and a network of 37 air samplers

in Palm Beach, Hendry and Broward Counties that still operates today, measuring particles.

“We’re still burning,” Wedgworth says. “We had to

change some of our techniques. But we’re still burning.”

More environmental issues

Today, environmental issues loom the largest for sugar

growers. The $8 billion Everglades Restoration Project,

aimed at meeting the water-related needs of the region for

the next 50 years and restoring the Everglades, was signed by

then-President Clinton in December 2000.

Before that, Wedgworth and about 20 other agricultural

leaders—and environmentalists, including Reed of Hobe

Sound—had signed a letter asking Congress to include Everglades restoration in the Water Resource and Development

Act of 2000.

“We were very pleased . . . that we got a document with

my signature on it along with Nat Reed’s,” Wedgworth says.

“If we had continued to throw darts at each other, nothing

would get done. It was a great day.”

Wedgworth said that was shattered, however, when environmental groups began raising questions about the restoration project right after the agreement was signed.

“Now I am afraid they’re not satisfied,” Wedgworth says.

He said the sugar industry has its own questions about how

water storage and recovery wells

will work and is waiting for engineers and water managers to conduct pilot projects.

Wedgworth doesn’t expect to be

around to see the end of conflict

and controversy in the sugar

industry, but considers it part of

the business. In 1996, the industry

fought a proposed penny-a-pound

tax on sugar that voters defeated.

Environmental groups pushed for

the tax to pay for Everglades

cleanup. The $35 million campaign was costly for both sides.

“It was unfortunate that the

environmental groups attacked the

industry when we could have accomplished a lot more for the

Everglades if we could have sat down across the table to try to

determine what’s good for the Everglades,” he says. 

“We have always had our doors wide open for those discussions,” he adds. “They’re the ones who attacked the industry

with a referendum that could have damaged our company to

the extent we would not still be here if it had passed.

“The way to help the Everglades is to stay out of fighting

each other, and roll up our sleeves and do something that is

good for the Everglades.”

When he’s not fighting the industry’s battles, Wedgworth

and his wife—who considers herself his polar opposite

because of her more laid-back personality—like to escape to

their ranch in Okeechobee County on the weekends.

“Last weekend he put up 25 birdhouses for bluebirds. He

plays tennis and he relaxes more up there,” says Peggy

Wedgworth. “He’s got his computers, and he checks his email. He drives the tractor and mows the pastures.”

The seemingly tireless Wedgworth recovered well from

open-heart surgery in 1978 and doesn’t plan to retire.

Peggy expects him to continue his 50-hours-plus work weeks.

“I think he was motivated by his mother. He saw how

she worked and kept everything going. Right now with the

sugar mill, he loves what he’s doing. That makes a lot of

difference.” ■

28 September/October 2002 / Rural Cooperatives

A worker sprays beans on the Wedgworth farm in the

1930s. Much of the land is now planted in sugar cane.

Photo courtesy of the Wedgworth family
Rural Cooperatives / September/October 2002 29

Pacific Coast Producers

moves tomato operation

Tomato growers around Woodland,

Calif., are getting a boost this year with

the opening of a newly refurbished

processing plant, purchased earlier by

Pacific Coast Producers (PCP) from

Del Monte. The 40-acre operation had

been closed during the 2001 season. In

moving its entire tomato processing

operation from Lodi to Woodland,

PCP significantly will cut its transportation costs. “All of our growers are

now within a 20-mile radius of Woodland,” said President Larry Clay. He

called the move “a great opportunity

for the cooperative.” 

Tonnage is expected to climb from

350,000 tons a year to 510,000 tons.

PCP is the third largest processor and

marketer of canned peaches, pears,

apricot and fruit cocktail mix nationwide and the leading supplier of

canned tomato products.

WestFarm Foods expands

A major dairy plant expansion came

on line this summer at WestFarm

Foods’ plant at Jerome, Idaho. The

addition to the original condensing

plant will allow it to process 3.3 million

pounds of milk into powder every day.

The expansion of the original condensing plant was an outgrowth of the 1998

corporate strategy to become a lowcost processor of selected finished dairy

products. 

The $40.2 million project will open

capacity at existing plants to process

milk from the Treasure Valley and eastern Washington state, where the supply

is expected to grow an additional 1.5

million pounds per day in coming

years. The company’s aim was to

increase its presence in Idaho, a state

where milk production has been climbing from 6 to 12 percent annually.

USDA co-op statistician

Charles Kraenzle dies

Charles A. Kraenzle, who was

responsible for compiling USDA’s

annual cooperative statistics report and

a number of articles each year for this

publication, died Aug.14 at his home in

Annandale, Va. Kraenzle, 61, was

awarded USDA’s prestigious

“Superior Service” award in

2000 for his contributions to

America’s cooperative sector.

“The number of co-ops

and members in the nation,

their share of various commodity markets and every

thing else one could wish to

know about America’s farmer

cooperatives were compiled

and reported by Charlie and

his staff,” said Randall Torgerson, deputy administrator of

USDA’s Rural-Business

Cooperative Service. “He will be

sorely missed not

only here at

USDA, but by the

nation’s cooperative community.”

Kraenzle had

directed USDA’s

cooperative statistics and technical services staff since

1988. As director of USDA Agricultural Cooperative Service’s cooperative management division earlier in

the 1980s, Kraenzle was responsible

for supervising research and other

work related to farmer cooperative

finance strategies, management and

operations, policy, statistics and automated data processing. 

He began his career as an agricultural economist with USDA’s Farmer

Cooperative Service—the forerunner

of today’s USDA/RBS Cooperative

Services program—in 1973. Kraenzle

earned his masters degree in agricultural economics at the University of

Missouri and a doctorate at the University of Connecticut. 

Earlier, in partnership with his

brother, he had a 700-acre grain and

livestock farm in Ste. Genevieve, Mo.

Kraenzle served on the board of local

cooperatives associated with Missouri

Farmers Association and MFA Oil Co. 

Kraenzle authored or co-authored

numerous publications and articles

related to agricultural cooperatives,

including reports on grain marketing,

problems and issues facing farmer

cooperatives and cooperative use of

subsidiaries. In 1980, he coauthored

the book, “Survival Strategies for AgriNEWSLINE

The West Foods plant in Jerome, Idaho, can now

process 3.3 million pounds of milk into powder daily.

Photo courtesy WestFarm Foods 

Compiled by Patrick Duffey

Charles Kraenzle
cultural Cooperatives,” published by

Iowa State University.

Eldon Eversull is serving as acting

director of the Cooperative Services

statistics staff until a permanent

replacement is named. 

Iowans form beef co-op 

Iowa cattle producers, with the help

of low-interest loans from the state to

finance equity stock purchases, have

formed Iowa Quality Beef Supply

Network, a new cooperative. The

Iowa Cattleman’s Association promoted the effort. The co-op plans to raise

$7.5 million to renovate and operate a

beef slaughtering plant at Tama, in

eastern Iowa. The state has set aside

$10 million for producers to use up to

$250,000 per investor for 5 years.

Plans call for American Foods of

Green Bay, Wis., the nation’s ninth

largest meat packer, to manage the

plant and maintain a 25 percent ownership interest. 

The plant, scheduled to open this winter, is expected to employ 400 people and

slaughter 300,000 cattle annually. Organizers plan to slaughter fed cattle, Holstein steers and cows at the plant and

produce specialty beef for Jewish and

Muslim markets. The cooperative of 980

producers won the right in bankruptcy

court to lease the plant from the city.

Pro Fac sells majority 

interest in AgriLink 

Nearly 90 percent of the 500 grower-members of Pro Fac Cooperative,

Rochester, N.Y., have voted to sell

their controlling interest in AgriLink

Foods, a frozen-vegetable processing

and marketing subsidiary, in exchange

for a $175 million equity investment by

Vestar Capital Partners. Members will

still have a minority interest—reportedly about 42 percent—in AgriLink.

The company will be known as Vestar/Agrilink Holdings LLC, an affiliate

of the Vestar financing company of

New York. 

In September, Pro-Fac paid a 43

cent dividend for its fourth quarter to

shareholders of its class-A preferred

stock. Payment had been delayed pending the Vestar deal. AgriLink also

secured $470 million in new syndication financing from more than 40 institutions for use in reducing existing

bank indebtedness. 

LOL expands marketings 

in Mitsui, Dean ventures

In a pair of joint ventures this summer, Minnesota-based Land O’ Lakes

(LOL) significantly expanded its

potential dairy product marketings on

both the national and international

scenes. The most recent move was to

expand an alliance and licensing

arrangement with Dean Foods, Dallas,

Texas. Dean, through its Morningstar

Foods subsidiary, will use the LOL

brand name nationally on a broad

range of value-added milk and cultured

dairy products. 

The first product launched under

the new venture is LOL’s Dairy Ease, a

lactose-free milk. 

The venture supercedes an earlier

dairy marketing alliance between the

two firms. Jack Gherty, LOL president,

said the cooperative would benefit

from Dean’s national brand-based

product development and expertise.

The arrangement grants perpetual,

royalty-bearing national licensing

rights of the LOL brand directly to

Dean Foods and includes additional

value-added products, such as milks,

aseptic products, infant formulas and

soy products. 

On the western front, LOL and Mitsui & Co. Ltd., one of Japan’s top trading companies, have opened Cheese &

Protein International, a $150 million

cheese and dairy plant joint venture at

Tulare, Calif. The business can process

3 million pounds of milk a day. Tulare

County’s milk was valued at $1.1 billion

last year, the first Golden State county

with a billion-dollar commodity. 

The 450,000-square-foot plant, with

its staff of 120 employees, had been

operating for a couple months before

the July grand opening. The plant will

initially produce 120 million pounds of

mozzarella cheese and 75 million

pounds of whey solids used as thickening and foaming additives in food products, including infant formula, nutritional drinks and ice cream. In the

second phase, to be completed in 2004,

production will double to 240 million

pounds of cheese and 150 million

pounds of whey. LOL’s mozzarella

operation at Gustine, Calif., acquired in

2000 from the Beatrice Group, has seen

staff scaled back from 143 to about 100.

The operation may be shut down later

this fall, and the building sold or leased

because of the new Tulare operation.

Deegan, Solberg, other 

co-op leaders win honors 

Michael Deegan, chief executive

officer for ACDI/VOCA, the development arm of the National Council of

Farmer Cooperatives in Washington,

D.C., is recipient of the distinguished

service award from the Association for

International Agriculture and Rural

Development. He was cited for building “a strong, more efficient organization that is highly respected in the

international agricultural development

community.” Deegan has been credited

30 September/October 2002 / Rural Cooperatives

Land O’ Lakes and Mitsui & Co. of Japan have opened this $150 million dairy processing plant

in Tulare, Calif., which they will operate under a joint venture called Cheese & Protein

International. Photo courtesy Land O’ Lakes 
Rural Cooperatives / September/October 2002 31

with engendering appreciation between

developers and

policy makers

for the important role of

agriculture in

economic

development.

He says agriculture is a key

engine of growth in most developing

countries.

In ACDI/VOCA’s most recent

annual report, Deegan says the organization “broke new ground with

endeavors that are shaping the way

economies and societies are advancing.” Among the 60 projects in more

than 40 developing countries last year

were community development efforts

in Bolivia and Serbia, rehabilitating a

former war zone near Eritrea, reaching

out to people with HIV/AIDS in

Africa, conducting a feed subsidiary

program to help farmers and herders

cope with endemic water shortages in

the West Bank and Gaza and launching

a supplemental feeding program for

Indonesian school children.

Other co-op leaders winning awards

include:

• At GROWMARK, Bloomington,

Ill., Jeff Solberg, vice president finance,

was elected chairman of the Institute of

Cooperative Financial Officers, which

reviews and evaluates developments in

corporate financing, taxation, auditing,

accounting, information technology

and financial derivatives as they apply

to cooperatives.

• In Wisconsin, the Badger Chapter of the National Agri-Marketing

Association has cited Don Storhoff,

retired CEO of Foremost Farms at

Baraboo, as the agribusiness leader of

the year, its highest honor. During his

career, Storhoff represented three

dairy industry trade associations as

well as members of his dairy marketing cooperative. 

• Ohio State University has honored

Herman Brubaker, chairman of Dairy

Farmers of America, with its Dairy Science Hall award. The Ohio dairyman

was cited as one of the state’s “greatest

drivers, leaders and promoters in

today’s dairy industry.” 

• Ivan Strickler, Kansas dairyman

and retired chairman of Mid-America

Dairymen Inc., received the National

Pedigreed Livestock Council’s distinguished service award for more than

50 years as a dairy industry leader. 

• Hugh Harris, executive secretary

of the Virginia Council of Farmer

Cooperatives and a retiree from Southern States Cooperative, has received

the Outstanding Friend of Virginia

Agriculture award. 

Dorr to lead USDA Rural Development

Thomas C. Dorr, of Marcus, Iowa, has been appointed by President George

W. Bush to be under secretary for USDA Rural Development. He was sworn

into office by Agriculture Secretary Ann M. Veneman on Aug. 9. 

“I am pleased with the president’s decision to appoint Tom Dorr as under

secretary of USDA Rural Development,” Veneman said. “As a family farmer from

Iowa, Tom brings more than 30

years of experience, understanding and knowledge of rural issues and values to this

position. I have confidence that

he will work tirelessly to

advance the president’s agenda by strengthening programs

to help families and businesses

in rural communities throughout America.

“Under Tom’s leadership,”

Veneman continued, “USDA

will work hard to implement

the many aspects of the new farm bill that are aimed at enhancing rural

development programs. And, there is no doubt that he will manage this

agency with integrity, fairness and the ingenuity that is needed to strengthen

rural development programs in the future.”

Dorr has broad agricultural, financial and business experience. He has

served as a member of the board of directors of the 7th District Federal

Reserve Bank of Chicago, the Iowa Board of Regents from 1991-1997, and as

a member and officer of the Iowa and National Corn Growers Associations.

Prior to his current appointment, Dorr was president of a family business consisting of a corn and soybean farm, a state-licensed commercial grain elevator and warehouse, and two limited liability family owned companies which

finish swine. He has hosted on his farm former Soviet Republic and Republic

of China scientists, academicians, farmers and government officials.

Dorr graduated from Morningside College with a B.S. degree in business

administration. He and his wife, Ann, have two children, Allison and Andrew.

As under secretary for rural development, Dorr oversees the Rural BusinessCooperative Service, Rural Housing Service and Rural Utilities Service, which

together have $14 billion in annual funding authority for loans, grants and technical assistance to develop rural housing, community facilities, utilities and businesses and cooperatives. Rural Development has an $80 billion-portfolio of

existing loans. It has over 7,000 employees located across the United States and

in Puerto Rico, the Virgin Islands and the Western Pacific Trust territories. ■

ACDI/VOCA’s Michael

Deegan

Agriculture Secretary Ann Veneman, left,

swears in Thomas C. Dorr as the new rural

development under secretary. With Dorr is his

wife, Ann. USDA Photo
32 September/October 2002 / Rural Cooperatives

Riceland buys Missouri mill

To serve members’ increased acreage in Missouri, Riceland Foods of

Stuttgart, Ark., plans to buy a rice storage and milling facility in New Madrid,

Ark., from Louis Dreyfus Corp. Riceland President Richard Bell said the

mill has access to major highway, river

and rail transportation. “I expect Missouri, in time, will be the third-largest

rice growing state in the South,” Bell

says. Rice acreage in southeast Missouri has doubled in the past 5 years

and the added supply has severely

strained Riceland’s other marketing

facilities in the region, he said. 

The New Madrid facility, built in

1988 and updated with state-of-the-art

milling equipment, would ease the situation at the cooperative facilities, particularly at harvest time. The facility is

located within the New Madrid Port

Authority, and Bell said Riceland plans

to bring more value-added business

and employment to the port. Of the

cooperative’s 9,000 members, 700 farm

in southeast Missouri.

Farmland suit nets $17 million;

reorganization plan shaping up

Although it’s a far cry from the $42

million in damages the cooperative

sought from multiple sources, it appears

chemical giant BASF Corp. will pay

Farmland Industries more than $17 million in damages, before legal fees and

expenses, to settle a vitamin price-fixing

lawsuit. The cooperative had purchased

$123.5 million in vitamins for use in

animal feed products. Farmland’s pricefixing suits against other vitamin makers

and distributors continue. 

Meanwhile, Farmland President and

CEO Robert Terry said the cooperative

is preparing a strategic reorganization

plan for a September presentation to the

bankruptcy court and creditors. The coop hopes the reorganization plan will be

approved in November. “It is designed

to ensure Farmland emerges as a financially strong company for the benefit of

all stakeholders,” he said. The businesses involved in the bankruptcy have

assets of about $2 billion and liabilities

of about $1.5 billion. A third quarter

deficit of $189.5 million was driven by

$55.1 million in petroleum losses, due

partly to refinery maintenance. 

Terry, however, has been optimistic

about improved earnings later this year

in the Refrigerated Foods unit, which

includes Farmland’s beef and pork products. Similarly, he is anticipating profits

from the nitrogen fertilizer business this

fall after multi-year losses, caused by

high natural gas prices and adverse

weather. 

Since filing for Chapter 11 bankruptcy protection May 31, Farmland has

The Right Stuff continued from page 7

helps attract families and young people to the area, Den

Herder says. 

Attracting Pella

The key to attracting the 263,000-square-foot Pella window plant was Sioux Center’s “ability to

put together an entire package,” says

Clousing. Pella needed not only a 50-

acre parcel of land, but adequate

access roads and a bypass route so that

truck traffic from the plant would not

impact downtown Sioux Center. 

The development corporation and City

of Sioux Center found a good site and were

able to get grants from the Iowa Department of Transportation to help with the

needed road work. Under Iowa’s New

Jobs and Income program, Sioux Center

was also able to help Pella secure a partial

income tax reduction for 10 years as

another incentive to build within the state.

Of course, reliable, low-cost utility

service is also a must for an industry of

this size, and Sioux Center’s municipal

utility has a good reputation. It worked

with the state to get grants that helped defray some of the

costs of developing the plant site.

Once before, Sioux Center had been a finalist under consideration for a Pella plant, only to lose out on the final cut to

another community. So when Pella began looking to expand

again, Sioux Center was already on the list, says Clousing.

The Pella plant, which makes architectural-series windows, does not begin assembling them until it receives an

order, but then builds and ships them within seven days of

the order receipt, says Dale Zevenbergen, scheduling manager for the plant.

The plant runs two shifts daily, but is

perhaps somewhat unusual in that it

runs a day and a graveyard shift, shutting down in the evening. That’s a “family friendly” schedule the workers voted for so that parents could be home

evenings with their children.

Orange City blooming 

Like its annual Tulip Festival, which

draws 100,000 people every spring,

Orange City is also blooming. Located

about 10 miles to the southeast of

Sioux Center, the two towns have many

similarities. They are about the same

size, have a similar economic mix of

industry—both ag and non-ag—and

are home to emerging, high-tech businesses and thriving 4-year colleges. The people of both

communities are primarily of Dutch ancestry

Major employers in Orange City include Diamond-Vogel

Paints, Advanced Brands, a producer of boxed beef and

Just hanging out: On a mild summer night,

Eric Kots, left, and Greg Schouten shoot the

breeze in downtown Sioux Center. Despite

saying that “there isn’t that much to do here,”

both say they love life in northwest Iowa—

especially compared to a recent sojourn in

Chicago, where they found “too much noise

and congestion.” 
Rural Cooperatives / September/October 2002 33

closed 16 convenience stores in

Arkansas, stopped production at several

fertilizer plants due to the weak market,

laid off more than 100 employees, terminated another 180 part-time and fulltime employees, and is negotiating to

sell a phosphate fertilizer operation. 

The bankruptcy court allowed

Farmland to borrow $306 million to

sustain its operations.

The cooperative owes about $570

million to 20,000 individual bond holders, about $340 million to secured creditors, such as banks, and another $590

million to other unsecured creditors,

such as vendors.

West Central opens Iowa’s 

largest soydiesel plant

With an eye toward helping the

nation wean its dependence on foreign

oil, West Central Cooperative of Ralston, Iowa, has opened the nation’

largest soydiesel processing plant. The

$6 million facility, located next to the

cooperative’s soybean processing plant,

will turn 10 million bushels of locally

grow soybeans into 12 million gallons

of soydiesel fuel for diesel markets

across North America.

“People are recognizing that a

soydiesel blend will extend the life of

vehicle and machinery diesel engines

and improve air quality at the same

time,” says Chief Executive Officer

Jeff Stroburg. 

More companies with fleet vehicles are being pushed by mandated

environmental standards to use a

diesel blend because it can reduce or

eliminate the diesel odor. Initially,

the West Central plant will use oil

from its own processing plant, but as

production expands it will buy soy oil

from other processors in Iowa, which

will help relieve the glut in the state,

Stroburg said. West Central’s 18

grain elevators receive soybeans from

up to 12 counties in western Iowa.

Adami heads 

livestock co-op

Wisconsin’s Equity Cooperative

Livestock Association has chosen its

chief financial officer to be its new

president and chief executive officer.

The board earlier had turned to

Charles Adami, its vice president of

finance, to serve as interim CEO this

spring when former President Gregory

Beck resigned. Although Adami’s

tenure with the cooperative only started in 2000, he had 25 years prior experience in business, mostly in financial

management, team building and business forecasting. He said the 80-yearold cooperative’s financial stress was

caused by reduced livestock volume

amidst an ever-diminishing milk herd

pork products, American Identity, a maker of promotional

products, and Northwestern College. 

Med Tec is a local high-tech business that develops and

manufactures radiation oncology equipment, used to position and stabilize cancer patients receiving radiation treatment. The company started in Dallas, Texas, in 1982, but

relocated about 12 years ago to Orange City, the home town

of founder Clayton Paul Korver. It has been expanding ever

since, and today has a work force of 100 and growing. 

Bryan Kooi, Med Tec’s human resources manager, says

the company attracts and keeps good workers with competitive wages and benefits and a comfortable, clean work

environment where “having fun on the job is part of our corporate philosophy.” The company also offers “family-friendly work schedules” that provide flexibility for employees to

balance family and work commitments. 

Its products are sold in 90 countries around the world.

Foreign competition is stiff, so research and development is

a big part of the work. Its special niche is oncology accessories, an example being a plastic mask that melts in warm

water to the exact form of a patient’s face, and is then used

to stabilize the head during radiation treatments. 

Even Med Tec’s building and board room boast a hightech look that has won plaudits for architect Larry Leslie,

from nearby Alton.

Med Tec’s owner decided to return to Orange City

because of the good things about small-town America. “It’s

safe, with a very low crime rate, has good schools and

affordable housing,” Kooi notes. And the two colleges in

close proximity offer wonderful cultural events not typically

found in a rural area. Other recreational amenities include a

nearby 18-hole golf course and top-notch boating and fishing about one hour away at Lake Okoboji. 

Northwestern College, affiliated with the Reformed

Church in America, is home to about 1,200 students, who

also come from all over the nation. Construction crews have

been busy on the campus, recently putting the finishing

touches on a new, $6 million theater arts center. This will

help bring more cultural attractions to the city. 

James Plagge, president of Northwestern State Bank in

Orange City, says both Northwestern College and Dordt College have remained true to their religious roots, while many

other church-affiliated liberal arts colleges have severed

their church connections. “As a result, a lot of those small

colleges are now a dime a dozen, with little to differentiate

themselves; many are suffering. But there are still a lot of

students out there who want to attend a Christian college,

and these two schools are thriving.” He also noted that a

sizable portion of the alumni are also pleased with the

church’s ongoing role with the colleges, and have been gracious with their support.

One thing Sioux County has been lacking is a movie theater, but that void was recently filled with a new, six-screen

cinema in Orange City. Plagge’s bank worked with USDA

Rural Development on an $850,000 Business and Industry

Guaranteed loan to finance the theater, which he says is

doing very well. “USDA was great to work with— we couldn’t have done that package without them,” Plagge says. ■
34 September/October 2002 / Rural Cooperatives

in its trade territory, packer concentration, increased operating costs and

personnel changes. The cooperative’s

operating revenue dropped almost

$240,000, to $11.9 million, while operating expenses climbed by $500,000, to

$12.1 million. A sharp increase in

patronage refunds of almost $170,000

rescued cooperative members, but

final net proceeds were down almost

$800,000, to $42,559. 

North Carolina craft 

cooperative thriving

After only six months in operation,

the new Appalachian Heritage

Crafters store in Murphy, N.C., may

be setting a pattern for other rural

areas in economic transition. When

the community’s primary manufacturer exited for Mexico, the all-volunteer cooperative was formed. Murphy is nestled in the Appalachian

Mountains in the southwestern corner of the state near Georgia and

Tennessee. Crafters have been making everything from patchwork quilts

and bark baskets to carved walking

sticks and homemade jam. The store

generated $50,000 in profits in its

first six months. 

Bison co-op buys

Denver food firm

With an eye toward boosting its

meat sales in a glutted industry, the

North American Bison Cooperative,

New Rockford, N.D., has purchased

Denver-based New West Foods, which

sells bison meat in retail grocery

stores. The bison cooperative, formed

in 1993 by 350 producers in 19 states

and four Canadian provinces, has

focused primarily on the restaurant

and food service business, so merging

the sales and marketing organizations

with the Denver firm makes sense, says

Dennis Sexhus, the cooperative’s chief

executive officer.

The co-op was the major supplier

to New West Foods, formerly the

Denver Buffalo Co. Retail labels

from both firms will be used on bison

meat products. While production still

outpaces market development, Sexhus sees the industry returning to

health in another year or so. The

cooperative’s sales this year are

expected to reach $25 million, or

double the 2001 level. 

Buffalo numbers have been climbing despite a glutted market for buffalo meat. The national buffalo herd

numbers about 400,000, compared

with only 50,000 a decade ago. While

the cooperative provides half the

Keeping current with technology 

Keeping ahead of the technology curve is a big challenge

for co-ops, and the new rail terminal with its computerized

receiving and loading systems is only one way Midwest is

doing so. All branches of the co-op are connected by fiber

optic cable, “so accounting and internal communications are

live at all times,” Hein says. Midwest provides full brokerage

service with licensed grain and livestock brokers on staff. 

Midwest’s agronomy division is also totally computerized,

and it is developing a state-of-the-art manure-fertilizer

spreading system. With northwest Iowa’s huge hog and cattle population, there is plenty of manure, which makes excellent fertilizer and saves farmers big money on fertilizer bills. 

But many producers don’t have enough land to take all

the manure generated by their livestock operations, and

application is coming under increasingly strict environmental regulation to prevent problems with runoff and groundwater contamination. Hein says a manure management plan

is required before most lenders will finance a new hog barn

or dairy. This often involves getting an easement from neighboring farmers that agree to take the manure. 

With so much manure readily available, it has cut into

sales of commercial fertilizer, always a major source of

income for local farm supply co-ops. Every 1,000-hog building provides enough manure to meet the phosphorous and

potash fertilizer needs for 160 acres. Midwest Agronomy

Manger Larry Den Hartog says just one of the huge new

dairies moving into the area can take 2,500 acres of fertilizer

sales away. 

But Midwest is making the most of the situation by offering members variable-rate manure spreading service. The

co-op has one computerized GPS manure unit, costing

about $347,000, which is equipped with a grass/alfalfa applicator bar, and has ordered a second unit from the Netherlands. These are being used in combination with global positioning system technology maps that show exactly where

and how much fertilizer can be applied to a field. 

Den Hartog designed a mobile holding tank unit that supplies the manure applicators. “The driver never even has to

get out of the cab—it keeps the flow going,” he says, noting

that the co-op charges by the gallon applied. “We’re the first

co-op dealing with variable-rate manure application here,

but Europe is way ahead of us in this technology—especially Holland,” he says, where much of the best land is below

sea level and must be managed very carefully. Den Hartog is

planning a trip to Holland to study their manure-management techniques more closely.

The new applicator bars inject the manure several inches

deep into the earth, getting it down to the roots of the plants for

quicker intake, and making it less likely that there will be any

problems with runoff. The co-op expects to apply 25 million gallons this fall, and hopes to do 30 million gallons next year. 

Den Hartog says the co-op’s board is very supportive of

staying on top of new technologies. “They know we don’t

come to them on a whim; when we request a major purchase

of new equipment, we’ve already worked out the budget, the

hours and the supplies we’ll need to make it pencil out.” ■

– By Dan Campbell

Midwest Farmers Co-op continued from page 11
nation’s supply of buffalo meat, it has

nearly 4 million pounds—the equivalent of a year’s production—in its

freezers. The U.S. Department of

Agriculture recently agreed to buy $10

million in buffalo meat for hospitals

and prisons.

Agway selling insurance

unit to Indiana Farm Bureau

Agway Inc., Syracuse, N.Y., has

signed an agreement to sell Agway

Insurance, its property and casualty

insurance company, for $21 million

to the Indiana Farm Bureau Insurance Co. Agway’s wholly owned

insurance subsidiary wrote more than

$30 million in premiums to more

than 300 independent agencies in 10

New England and eastern states.

Indiana Farm Bureau has 465 independent agents, nearly $400 million

premiums in force and serves more

than 275,000 members. The deal

requires approval by the New York

Insurance Department. 

Tillamook marketing effort

targets Latino population 

This spring, Tillamook County

Creamery Association introduced

cheese recipes using Monterey Jack

and Cheddar cheese aimed at Latino

families. The idea stemmed from a

cheese recipe contest last year sponsored by the Oregon-based dairy

cooperative. Tillamook used a registered dietician to guide development

of the recipes for the Latino community and to show how to incorporate

Rural Cooperatives / September/October 2002 35

Management Tip continued from page 17

and board committees, within certain

limits. Reliance does not relieve directors of their responsibilities but does

show care and diligence. 

Reliance on others must, of course,

be justified and cannot amount to abdication of responsibilities and duties.

Director training is key to effective

directorship. Effective training programs must go far beyond indoctrination by management about the cooperative’s business from management’s

viewpoint.

Compliance programs can be helpful, and in some cases are necessary, to

implement directors duties of care and

management monitoring. Compliance

programs are formalized internal programs to monitor certain types of

behavior to be sure neither the cooperative nor employees violate some law or

fail to take a required action. These

programs are typically designed around

legal requirements such as environmental issues, antitrust and securities laws,

financing issues, or special problems

that may be sensitive for a particular

cooperative. To be effective, the board

must insist on workable programs, must

monitor their implementation and

insist on full support by management at

all levels. In some cases, a poor compliance program is more likely to cause

problems than no program at all.

Legal audits are another technique

directors may use to assist them in

their duties. A legal audit can include

review of the cooperative’s legal structure and documents that govern the

cooperative internally as well as its

relationships with members and others, analysis of assets and liabilities,

evaluation of potential claims against

the cooperative, a thorough examination of procedures in place and recommendations for changes needed to

address weaknesses.

Whatever action is taken, the overall

attitude of directors should be active,

positive, creative and dynamic. The

great responsibilities imposed on cooperative directors and the associated

potential for liability should not lead to

a defensive posture.

Indemnification

Legal challenges to cooperative

directors and litigation involving directors cannot always be avoided. The

trauma of such actions against directors

is significant. In one regard, the burdens can be relieved somewhat in most

circumstances.

Legislation has been used in many

states to allow a corporation (and presumably a cooperative) to indemnify

directors who are subject to legal

action that requires expenditures of

sometimes substantial sums in defense.

Indemnification in this context simply

means that the cooperative pays for

costs incurred by a director who is

responding to legal actions for some

act as a director. 

In addition to authorizing indemnification and describing procedures for

indemnification, statutes usually establish standards of conduct permitting

indemnification. A cooperative may not

be permitted to indemnify a director

where the director’s conduct in question fails to meet certain standards of

conduct. For example, directors who

cause harm to the cooperative by selfdealing or fraud against the cooperative

cannot demand indemnification when

they are sued for such actions. When

contemplating indemnification, a board

considers not only the applicable statutory requirements and restrictions, but

also determines under what circumstances the cooperative should or

should not indemnify a director.

Insurance

Cooperatives can purchase insurance

to protect the cooperative and its directors in case costs are incurred defending

litigation against directors. Usually

called D & O insurance because it covers both directors and officers, the

insurance is often in the form of two

policies. One covers directors to the

extent the cooperative does not fully

indemnify them for their costs. The

other covers the cooperative itself for

the indemnification made to directors.

As with nearly any insurance

arrangement, each policy will be tailored to the needs of the cooperative.

Terms will be negotiated that include:

level of coverage, exclusions, claims or

occurrences methods, deductibles and

general claims procedures. ■
36 September/October 2002 / Rural Cooperatives

cheese into their diets to counter calcium deficiencies. Recipes were distributed to independent retail locations and to Catholic parishes in the

Los Angeles area. 

The 92-year-old cooperative is

owned by about 150 dairy farmer

families in Oregon’s Tillamook

County.

Farmland preservation 

honor comes with $10,000

A Nov. 1 deadline has been set for

farmer or rancher nominations for

American Farmland Trust’s annual

$10,000 Steward of the Land award.

The award honors farmers who demonstrate exceptional on-farm stewardship

and actively promote farmland protection policies across community lines. To

obtain a nomination kit, call 202-331-

7300, ext. 3044; e-mail gchen@farmland.org with your name and complete

address or access the trust’s website at:

http://www.farmland.org/steward.

Grace Chen is award coordinator. 

Bushel pasta co-op

tries retail brand 

Bushel 42 Pasta Co., a young pastamaking cooperative at Crosby, N.D., is

experimenting with its own retail pasta

brand. The cooperative, which opened

earlier this year, plans to sell a small

amount of lasagna under its own brand

and logo in some West Coast retail

stores, with a Bushel 42 macaroni and

cheese product to follow soon. The

cooperative, owned by 250 farmers in

North Dakota and eastern Montana,

drew interest from discount retail

stores and drug stores after being featured in a trade magazine article. The

firm makes specialty pasta items for

food companies and food service

providers. 

The cooperative got a boost from

USDA Rural Development in the

form of an 80 percent guarantee of a

$2.8 million-loan to help the new

cooperative buy machinery and

equipment. The loan will help create

another 35 jobs. 

The company has become a local

source of pride for the Divide County

community of 1,000 residents. However, the cooperative has no plans for

immediate widespread distribution of

its products to grocery stores. Shelf

space cost, or slotting fees, are an

expensive part of developing a market

brand, said Mark Gunter, sales and

marketing manager. “It’s the cost of

doing business that has to be built into

your program.” 

Forty-two pounds of pasta can 

be derived from a single bushel of

wheat, hence the cooperative’s trade

name.

Hilda Gay Legg continued from page 25

have a lot to offer. Unlike political

leadership, they’re around for the long

term, and they have a vital stake in the

economic health of their service areas.

They have lots of experience and

expertise in finance and business, and

often have the financial resources to

invest in development projects. And I

have to say that I have been very

impressed by the dedication and professionalism of the co-op board members and managers I have met.

What direction would you like to see

RUS and USDA Rural Development take?

I’d like to see RUS and Rural Development take a more synergistic approach

to their mission. By that, I mean that

their should be more coordination

between the agencies to most effectively

use our resources. At the state level, this

is already happening, because the

employees of the different agencies work

next to each other under the same state

director. But I think that at the national

level, here in Washington, we need to

work on building more team efforts. 

For instance, if we’re making a

telecommunications loan in a certain

area, could we multiply its impact with a

complementary project funded by a Rural Business Enterprise Grant, or perhaps

a Rural Business-Cooperative Service

loan? What about housing or community facilities loans—is there a way these

might fit in? I think we should think

about how the different agencies can

collaborate, and perhaps set a goal of

coordinating broadband loans and other

assistance in ten separate rural areas.

That would be a good start.

I also think we need to make sure

our field people are well-educated in

what the new technologies offer rural

areas and how to best take advantage of

it in the areas they serve. We need to

offer them training that will equip

them to embrace change and make it

work for their customers.

But in the end, development in a rural area depends on the people who live

and work there. It doesn’t matter how

much federal help you get; if you don’t

have local investment, local involvement

and local leadership, you’re not going to

get results. Communities have to decide

where they want to go, remembering

that jobs are the key—everything else

follows. Do they want manufacturing?

Do they want to go in another direction? What kind of advantages does

your community have that can help you

achieve your objectives? How do you

use those advantages? People from outside can’t make those decisions. That’s

where I think the leadership of co-ops,

and not just utility co-ops, can make a

big difference. 

People have to remember, that

development is an ongoing process, and

rural areas are always going to have to

work harder at it. Also, there are always

going to be setbacks, due to market

changes and the volatility of corporate

business. When you go out to entice

companies to locate in your community,

or encourage local business start-ups

and expansions, you’re going to have a

lot of disappointments. Your community leaders have to have tenacity, and the

individual members of your community

have to have a sense of power. They

can’t be passive; they can’t count on

someone else, whether it’s a company

or a government agency, to make it

work. They have to take an active part

in the development effort. ■
Rural Cooperatives / September/October 2002 37

DFA, Dairylea solidify pact;

Black Hills Milk to merge

Dairy Farmers of America (DFA),

Kansas City, Mo., has expanded the

scope of its joint venture relationship

with Dairylea Inc., a dairy

bargaining/service cooperative at Syracuse, N.Y. Dairylea has become DFA’s

first cooperative member by making an

initial $3 million investment in DFA

and agreeing to future retain contributions. Two Dairylea members—Clyde

Rutherford and Sandy Staufer—have

been placed on the DFA board, giving

Dairylea a voice in DFA’s policy and

marketing decisions.

For the past several years, Dairylea

has been operating Dairy Marketing

Services, a marketing venture within

DFA’s Northeast Council. DFA markets Dairylea’s 5.5 billion pounds of

annual milk production. The latest

action leaves the door open to a future

merger.

Dairylea, which also offers nine

other businesses services—including

insurance and financial services—to

its 2,000 dairy farmer members, has

combined annual sales of close to $1

billion.

In another action, the 43 members

of Black Hills Milk Producers at Rapid

City, S.D., agreed to merge with DFA.

Black Hills Milk members produce 70

million pounds of milk annually. Manager Mike Paulsen will continue to

provide marketing and member services. Bob Verhuizen, Black Hills

chairman, was elected to a 2-year term

on the DFA Central Area Council.

Gail Kring new cotton co-op CEO

Gail Kring, currently vice president

of operations, will become the new

chief executive officer this fall for

PYCO Industries Inc., a cotton processing cooperative based at Lubbock,

Texas. Kring will succeed Wayne Martin, the current CEO, who will be

retiring after almost a decade at the

helm. Next year, Martin will complete

13 years on the CoBank board. PYCO

is owned by cooperative cotton gins in

Texas, Arkansas and Mississippi and has

processing facilities at Lubbock and

Greenwood, Miss.

Co-op increases security 

for anhydrous tanks

To thwart theft and increase community safety, Westland Co-op at

Crawfordsville, Ind., has spent

$25,000 to install locks on its 500

anhydrous ammonia tanks. Phil Pirtle, risk coordinator for the cooperative, said it wanted to prevent any

tampering or theft of anhydrous

ammonia, which can be used to manufacture methamphetamines. The

locks can only be opened with a key

and can not be cut off. 

CHS adds Fairmont crusher,

expands grain businesses

A $60 million soybean crushing

plant, slated to open for the 2003 fall

harvest, is under construction near

Fairmont, Minn., by the Harvest

States Division of CHS Cooperatives.

When completed, it will double the

crushing capacity of 110,000 bushels

at CHS’ plant in Mankato, Minn. The

Fairmont plant will employ 38 people

full-time.

Steve Burnet, CHS chairman,

likened the expansion to planting

seeds for a crop that will be harvested

for multiple seasons. “The soybeans

producers deliver to the plant will

begin a value-added journey through

the cooperative,” he said. 

Meanwhile, CHS has purchased 

six local grain elevators in North

Dakota from Cargill. They have

been attached to area local cooperatives affiliated with CHS. Similarly,

grain elevators at Denton and Geraldine, Mont., have been purchased by

CHS from General Mills and will be

managed by Central Montana Coop, a CHS member local. It plans to

negotiate with a nonprofit, shortline railroad at Denton to haul harvested grain this fall from the locals

to the high-speed shuttle loader at

Moccasin, Mont., which was built 2

years ago by CHS and United Grain

Corp. 

Harvest States Foods, part of CHS’

Harvest States division, has broken

ground for a new tortilla processing

plant at Newton, N.C. The 10,000-

square-foot facility will produce corn

and flour tortillas and tortilla chips for

eastern retail and food service customers. When completed next summer,

the plant will employ 70 people and

operate two shifts.

Co-op seminar set for Spokane

The 31st cooperative leadership

seminar is slated for Spokane, Wash.,

Jan. 8-10, and sponsored by the Executive Institute for Northwest Cooperatives. The program features seminars

for new directors, valuable tools for

established cooperative directors and

managers and networking with cooperative leaders from Idaho, Oregon,

Washington, Montana, Utah and

Alaska. For further information, call

208-888-0988.

Taking it to the next level continued from page 23

processing capabilities and increased

production capacity can be expected to

provide additional challenges, but with

the chance for additional profits. 

For more information on NNFC,

please see the comprehensive report,

“Innovative Marketing Opportunities

for Small Farmers: Local Schools as

Customers” at www.ams.usda.gov/

directmarketing/publications.htm

under the section “Farm to School

Publications.” Also, available at the

same site is the publication “How

Local Farmers and School Food Service

Buyers Are Building Alliances.” For a

copy of USDA Rural Development’s

“How to Start a Cooperative,” a stepby-step guide to launching a cooperative, visit: http://www.rurdev.usda.gov

/rbs/pub/cir7/cir7.pdf http://www.rurdev.usda.ogv.andclick. ■
38 September/October 2002 / Rural Cooperatives

USDA provides $5 million in grants 

to foster co-op development in 19 states 

Agriculture Secretary Ann M. Veneman awarded $5

million in grants in August to promote cooperative

development in 19 states, as part of the Bush administration’s ongoing commitment to invest in, and bolster,

jobs and economic development in rural America.

“Using cooperative ventures to bring new economic

opportunities to rural areas is an important part of creating new jobs in rural America,” said Veneman.

“These grants will give rural residents the opportunity

to expand and improve local businesses and

economies.” 

The cooperative development grant program is

administered through the Rural Business-Cooperative

Service of USDA Rural Development. The grants were

awarded on a competitive basis and are intended to foster rural cooperative development through projects that

provide rural residents with education and technical

assistance in areas of cooperative start-up, marketing

and managing, and other self-help tools. 

Grants were awarded to:

ALABAMA-Federation of Southern Cooperatives,

$299,365—To provide technical assistance, rural business development support and cooperative business

training to cooperatives in the South. 

ARKANSAS-Winrock International Institute for Ag

Development, $238,681—To expand jobs and income in

rural Arkansas through cooperative development. 

CALIFORNIA-University of California, $299,530—To

provide new and existing cooperative development

assistance, and cooperative research and education.

COLORADO-Rocky Mountain Cooperative Development Center, $298,740—To support and strengthen

emerging and existing cooperatives throughout the

region.

KANSAS-Kansas State University, $300,000—To provide educational and technical assistance in the development of new agricultural cooperatives.

KENTUCKY-The Kentucky Center of Cooperative

Development, $269,500—To improve economic conditions in rural Kentucky by promoting new cooperatives

and continuing efforts to improve existing farmer

cooperatives.

MASSACHUSETTS-Cooperative Development Institute, $297,618—To provide cooperative development

activities targeting low-income and under-served communities in the Northeast. 

MARYLAND-University of Maryland-Eastern Shore,

$289,500—To develop and enhance cooperative organizations, particularly female and minority-owned

enterprises.

MINNESOTA-North Country Cooperative Foundation,

$294,000—To encourage information and expansion of

cooperative housing enterprises that will help rural residents and communities increase opportunities for economic stability and prosperity.

MISSOURI-Family Farm Opportunity Center,

$173,385—To develop cooperative activity, which sustains and enhances rural communities. 

MISSISSIPPI-Mississippi Association of Cooperatives, $161,667—To provide technical assistance to

existing cooperatives and pre-development assistance

to start-up groups.

MONTANA-MSU-N/Montana Cooperative Development Center, $291,652—To provide cooperative development, technical assistance, education and applied

research in rural Montana.

NORTH DAKOTA–Dakota Cooperative Development

Center, $300,000—To provide technical assistance for

the development of new-generation cooperatives in

North Dakota.

NEBRASKA-Nebraska Cooperative Development

Center, $294,979—To provide technical assistance and

education for enhancing long-term cooperative development capacity with a sustainable approach.

OHIO-Ohio Cooperative Development Center,

$294,976—To provide agriculture producers with information, training and marketing tools, and to assist in economic development and sustainability.

PENNSYLVANIA-Keystone Development Center,

$300,000—To provide technical and limited financial

assistance in cooperative development in the MidAtlantic states.

SOUTH DAKOTA-Value-added Ag. Development Center Inc., $100,000— To assist in the creation of valueadded agriculture cooperative businesses in South

Dakota.

TEXAS–The University of Texas–Pan American,

$232,460—To promote rural economic development and

facilitate the creation and retention of jobs in rural

South Texas through the development of rural cooperatives, value-added processing and rural business.

VIRGINIA-Southern States Cooperative Foundation,

$299,980—To assist farmers in the traditional, tobaccodependent regions in developing innovative cooperative

enterprises that take advantage of trends in the modern

marketplace. ■
Rural Cooperatives / September/October 2002 39

Calcot makes cotton payment 

Members of Calcot, Bakersfield,

Calif., received a 4-cent-per-pound

progressive payment this summer, signaling a slight recovery in the cotton

futures market. The market recently

reached a historic-low price of 28 cents

per pound. The installment was for

2001-02 San Joaquin Valley acala cotton. Chairman Tom Smith said the

payment was tied to improved export

sales due to lower value of the dollar

and favorable timing. 

Bothast heads ethanol center

A new, $20 million corn-to-ethanol

research center being built on the

campus of the University of Southern

Illinois at Edwardsville will be directed

by Rodney Bothast. He had been

research leader of USDA’s fermentation biochemistry research uni at the

National Center for Agricultural Utilization Research at Peoria, Ill. The

new center is being financed by federal

and state funds. 

Bothast will supervise a staff of

about 12. He hopes to attract and train

graduate students to work in the

ethanol center, the first in the public

domain to explore ways to convert

starch in corn into fuel for internal

combustion engines.

Kansas gets first cotton gin

Southwest Kansas farmers looking

for an alternative crop will have access

to a new cotton gin this fall, thanks to

the formation of Northwest Cotton

Growers Inc. It is building a new $3.5

million gin on a 46-acre site near the

community of Moscow. 

Five years ago, cotton as a cash crop

was virtually unknown in the state. But

about 45,000 acres of cotton were harvested last year. The cooperative’s location will eliminate a transportation cost

hurdle. The closest gin was hundreds

of miles away. 

The new gin will have the capacity

to handle 60,000 bales of cotton. The

ginned cotton will be hauled to Altus,

Okla., where it will be warehoused and

marketed by Plains Cotton Cooperative Association.

Debts force closure of

Heritage Tomato Co-op

Touted in 1999 as an economic

model for other rural communities to

emulate by former President Bill Clinton, the Hermitage (Ark.) Tomato

Cooperative Association folded this

summer under a $9.5 million debt. Its

tomato processing center, never put to

use, along with other cooperative

property and equipment, will be sold

at auction Oct. 11 by Farmer’s Bank of

Hamburg, Ark. 

NMPF monitors dairy imports

The National Milk Producers Federation is producing “Import Watch,” a

new quarterly on-line newsletter which

will analyze the flow of imported dairy

products into the United States and

how they affect the domestic market.

President Jerry Kozak noted that dairy

imports have risen from 3.21 percent in

1995 to 5 percent in 2000. He said the

newsletter was designed to help dairy

farmers, processors and policymakers

gain a better understanding of the relationship between dairy imports and the

domestic marketplace. It can be view 

at www.nmpf.org.

Changing Faces, focus of MidAtlantic Cooperators Event

“Cooperatives: Changing Faces”

will be the theme of keynote remarks

by Chuck Cruickshank, director of

procurement, member services and

transportation for Land O‚ Lakes at a

conference Oct. 22-23 at Carlisle, Pa.

The conference is sponsored by the

Mid-Atlantic Alliance of Cooperatives. Also featured will be William

Beckham, vice president and director

of internal audit at AgFirst Farm

Credit Bank, who will discuss business

ethics for co-ops, leadership development and director liability. Wayne

Figurelle of PennTAP will discuss

technology and e-commerce opportunities for co-ops, while Leta Mach,

education director for National Cooperative Business Association, will discuss the future of cooperatives and

national trends. For more information, call (814) 238-2401, or e-mail

info@maacooperatives.org
40 September/October 2002 / Rural Cooperatives

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