Rural

COOPERA COOPERATIVES

USDA / Rural Development September/October 2004
2 September/October 2004 / Rural Cooperatives

For the 74th time, the nation’s

40,000 cooperatives will be celebrating

National Cooperative Month in

October. The celebration gives us a

chance to share with the rest of the

world what co-op members know: that

user-owned and user-governed businesses are made to order for meeting a

multitude of needs. 

This year the theme is “Co-ops,

Owned by Our Members, Committed

to Our Communities.” The Co-op

Month Committee is urging co-ops to

undertake some educational activity that

helps publicize the impact their business

has on the broader communities in

which their members live and work and

which are served by the co-op.

You can cite jobs created, annual

payroll, sales and property taxes

paid, civic or charitable organizations supported, scholarship programs sponsored, something

you’ve done to benefit the environment, etc. Brain storm for

even an hour with some of your

staff or directors and you’ll be

surprised at just how many ways

your co-op benefits the communities in its service area. 

Add in “big picture” numbers along

with your “local” numbers to give the

public an idea of the scope and impact

of co-ops in your industry. For example,

more than 3,000 farmer and rancherowned businesses in the United States

create more than 300,000 jobs with a

payroll of $8 billion. Sales of crops and

livestock, value-added products and

farm supplies and services provided by

ag co-ops each year total almost $100

billion. The utility, housing, credit and

consumer co-op sectors all generate

similarly impressive figures. 

You can access a full toolkit of publicity-generating ideas — such as sample editorials, logos, etc. — that will

help you with your activity at the

National Co-op Month Web site:

www.coopmonth.coop.

For activities, you can get handouts

from USDA Rural Development by

calling (202) 720-8381, or e-mail:

jon.hall@usda.gov. For an overview of

co-ops (best for the general public)

request the “Do Yourself a Favor, Join a

Co-op” brochure. If you want something more in depth, ask for the “Coops 101” booklet. Both of these are

good for all types of co-ops. For a complete list of co-op publications available

from USDA, visit:

www.rurdev.usda.gov/rbs/pub/

newpub.htm.

Co-op Month activities to consider:

• Hold an open house at your co-op,

and have members and employees

on hand to lead tours and talk

about the business and why it

operates as a co-op. Where appropriate, offer product samples. The

latter can also be done in town, at a

local grocery store, at a fair or carnival, or wherever appropriate. 

• Have a member and/or employee

visit a local classroom, FFA or 

4-H chapter. Or sponsor a field

trip to your co-op and (for ag coops) also have them visit a member’s farm. 

• Write a press release or an op-ed

commentary for a local or regional newspaper (there are excellent

examples on the www.coopmonth.coop Web site). 

• Work with the governor’s or

mayor’s office to get a Co-op

Month proclamation signed. If

you want the governor to do it,

work with other co-ops, possibly

through your statewide cooperative association.

• Have employees and members

undertake some public

service volunteer activity,

such as performing

repairs on the home of

an elderly person or

needy family as a gesture

of the “get-it-done-ourselves” mentality of

cooperatives. 

Some of you may be

thinking, “we’re just a

small grain and farm

supply co-op, everybody already

knows what we do.” Remember, even

in a rural town, many people may

know what you do, but may be woefully ignorant of the fact that farmers

actually own the business and why.

And for most utility co-ops, Co-op

Month is one more great opportunity

to help your members realize they are

not just patrons, but that they are the

owners who ultimately govern it

through the board of directors that

they elect. ■

Dan Campbell, Editor

COMMENTARY

Committed to our communities
Rural Cooperatives / September/October 2004 3

Rural COOPERATIVES (1088-8845) is published

bimonthly by Rural Business–Cooperative Service,

U.S. Department of Agriculture, 1400 Independence

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

The Secretary of Agriculture has determined that

publication of this periodical is necessary in the

transaction of public business required by law of 

the Department. Periodicals postage paid at

Washington, DC. and additional mailing offices.

Copies may be obtained from the Superintendent of

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change to: Rural Cooperatives, USDA/RBS, Stop

3255, Wash., DC 20250-3255.

Mention in Rural COOPERATIVES of company and

brand names does not signify endorsement over

other companies’ products and services.

Unless otherwise stated, contents of this publication

are not copyrighted and may be reprinted freely. For

noncopyrighted articles, mention of source will be

appreciated but is not required.

The United States Department of Agriculture (USDA)

prohibits discrimination in all its programs and 

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

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

orientation, and marital or family status. (Not all 

prohibited bases apply to all programs). Persons 

with disabilities who require alternative means for

communication of program information (braille, large

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

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

To file a complaint of discrimination, write USDA,

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

Building, 14th and Independence Avenue, SW,

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

(voice or TDD). USDA is an equal opportunity

provider and employer.

Ann Veneman, Secretary of Agriculture

Gilbert Gonzalez, Acting Under Secretary,

USDA Rural Development

Peter Thomas, Acting Administrator, 

Rural Business-Cooperative Service

Pandor Hadjy, Acting Deputy Administrator,

USDA Rural Business-Cooperative Service

Dan Campbell, Editor

Vision Integrated Marketing/KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or

Fax (202) 720-4641, Information Director,

This publication was printed with vegetable oil-based ink.

Rural COOPERA COOPERATIVES

September/October 2004 Volume 71 Number 5

p. 4

p. 8

p. 14

p. 20

FEATURES & NEWS

4 California ag tour gives U.S. trade rep 

crucial insight into state’s export crops

7 Proposed sale of Farm Credit System lender

to Dutch bank ignites controversy

8 Great Escapes

Agri-tourism co-op helping Georgia farmers diversify

By Craig Scroggs

14 Direct Access!

AGP has new Pacific port terminal 

By Jim Rodenburg

18 Backyard powerhouses

“Green Tags” spur development of renewable power co-ops

By Stephen Thompson

20 The canning of Tri Valley

What went wrong at Tri Valley Growers?

By Richard Sexton

26 Signs of Life

Have you checked your co-op’s education pulse lately?

By Jim Wadsworth

30 Three honored for communications excellence

DEPARTMENTS

2 COMMENTARY

11 LEGAL CORNER

25 FOCUS ON: ACCELERATED GENETICS

29 & 40 NEW CO-OP PUBLICATIONS

32 NEWSLINE

39 PAGE FROM THE PAST

On the Cover:

AGP soybean meal is loaded at the Port of Grays Harbor, Wash., for transport

to the Pacific Rim. Photo by Marc Sterling, courtesy Port of Grays Harbor. Inset

photo: Peaches are processed for canning at Tri Valley Growers' plant in

Modesto, Calif. Photo courtesy Modesto Bee.
4 September/October 2004 / Rural Cooperatives

California ag tour gives U.S.

trade rep crucial insight into

state’s export crops 

Editor’s note: Portions of this article are excerpted from one by

Gray Allen in the September/October issue of Blue Diamond’s

Almond Facts member & customer magazine. 

he trip from Geneva, Switzerland, to the irrigated desert valleys of Central California is a

distance of some 5,700 miles, although some

would say the two regions are light years apart.

For Ambassador Allen F. Johnson, the chief

agriculture negotiator for the Office of the U.S. Trade

Representative (USTR), the two regions are inexorably

linked, because what happens at the trade table in Geneva

impacts all American farmers and ranchers.

To help Johnson better understand one of the nation’s leading export crops — almonds — Blue Diamond Growers hosted him during August on two days of a four-day tour of

almond ranches and processing facilities and talks with growers. That’s why you could see Johnson seated behind the wheel

of an almond sweeper, gathering almonds into windrows,

readying them for pick up by a harvester. Johnson also met

T

“Almond crop increases of the magnitude the state has cultivated during the past 25 years represents one of the great agricultural success

stories in the nation’s history," says U.S. Trade Ambassador Allen F. Johnson. Photos by Gray Allen, courtesy Blue Diamond Growers
Rural Cooperatives / September/October 2004 5

with growers and co-op leaders to update them on the results

of recent World Trade Organization (WTO) talks in Geneva

and to listen to their hopes and concerns on trade issues.

Johnson says the first-hand knowledge he gains from visits with farmers and ranchers across America gives him

invaluable insights that increase his effectiveness. 

Billion-pound crops 

The first step in harvesting almonds is to drive a self-propelled tree shaker into place, attach its “jaws” to a tree trunk

and vibrate the tree until the almonds drop to the orchard

floor. In the old days, growers had to manually strike the

trunks with rubber-headed mallets to drop the nuts, catching

the falling almonds on ground tarps. In a few isolated hill

locations, the old-fashioned methods persist. 

Proper “shaking” technique is a must. Shake too lightly

and you leave nuts (called “stick-tights”) on the branches,

wasting crop and creating possible homes for over-wintering

pests. Shake too vigorously, and you could inflict serious

damage to the tree.

Undaunted, and after only a brief demonstration from

grower and Blue Diamond board member Aldo Sansoni,

Johnson hooked a shaker onto a tree and gunned the engine.

He grinned broadly as fat, ripe Nonpareil almonds rained

down. 

The 2004 crop Johnson helped harvest is expected to be

America’s third billion-pound almond crop. 

California produces about 88 percent of the world’s

almonds, and more than 70 percent of the crop is exported

to 95 nations, making almonds the nation’s leading horticultural export. Blue Diamond is the nation’s largest processor

and marketer of the crop, and about two-thirds of the state’s

growers belong to the co-op. 

Just 60 years ago, Spain and Italy produced 80 percent of

the world’s almonds. Mechanization of the California

almond industry has helped turn the tables. Spain is now the

largest single importer of U.S. almonds and is expected to

have purchased 130 million pounds of California almonds by

the end of the 2003-04 marketing season. That’s 24 percent

more than the previous year. Spain could import an additional 20 percent next season due to a second year of Spanish

almond crop failures, the co-op says. 

The value of California almond exports for the current

marketing year surpassed $1 billion in July. Almonds —

increasingly popular as a garnish on salads, in breakfast cereals and combined with countless other foods — are

California’s largest food export. 

Expanding acreage 

Some 550,000 acres in California are planted in almonds,

and advances in tree varieties, planting patterns and in the

science of orchard agronomy have made each acre ever-more

productive. Indeed, as recently as 1989 there were 411,000

bearing acres of almonds in the state producing about 488

million pounds of nuts. 

Almond plantings in the Golden State could increase by

another 250,000 acres by the end of the decade, according to

some estimates. If so, almond export sales would likely surpass those of U.S. wheat. 

“Almond crop increases of the magnitude the state has

cultivated during the past 25 years represent one of the

great agricultural success stories in the nation’s history,”

Johnson said. 

From a marketing stance, development of international

markets is what has made that incredible industry growth

possible, and Blue Diamond is the acknowledged leader in

spreading consumption of American almonds around the

globe. Consumption of California almonds has increased by

an average of nearly 6 percent annually for the past 24 years. 

The co-op’s own test kitchen has also played a key role in the

growth of the industry by pioneering new uses for almonds in

a wide variety of foods, from ice creams to frozen dinners,

cookies and pastries. The majority of almonds are used as a

food ingredient, rather than consumed as snack nuts. 

Co-op supports open markets

Sansoni hosted Johnson, Congressman Denis Cardoza

and about a hundred almond growers and guests at a luncheon in his 104-year-old Delta Farms “Party Barn,” near

Los Banos. Johnson spoke about the work that the agriculture arm of the USTR does to increase trade opportunities

for U.S. farmers. He expanded on those comments the following day at a roundtable discussion with Blue Diamond

officials and guests at the co-op’s main plant in Sacramento.

“We applaud Ambassador Johnson for helping to negotiate the World Trade Organization’s break-through framework agreement for historic reforms in Geneva,” said

Sansoni. He cited expanded market access for U.S. products,

including almonds, through tariff cuts that are still to be

negotiated. He also praised Johnson for achieving agreement

on quota expansion and the elimination of agriculture export

subsidies. 

Johnson’s message emphasized the opportunities for

prosperity for all parties engaged in free trade. “Our mission

is the global liberalization of trade,” he said, pointing out

that with open markets, everyone grows and prospers.

Blue Diamond, he said, is “extremely effective in bringing

important trade issues to our attention and supplying us with

the facts and figures that we need to properly and effectively

represent you.” He praised California agriculture for its

“ingenuity, creativity and entrepreneurial spirit.” The

almond industry in particular, Johnson said, “stays on top of

the issues that affect its trade potential.

“History has not been kind to countries that put up

walls,” he said. 

“America has succeeded because we have an open society.

We have shown that it is better to have a trade deficit and

strong economy than a trade surplus and weak economy.

Closed markets can’t grow. They stagnate. So we are working to open the closed markets of the world to help them
6 September/October 2004 / Rural Cooperatives

grow their economies. That will help

them and us because strong and growing economies buy more American

produce.”

Growers urged to produce

high-value foods for world

As world population and food consumption expands, so will the demand

for high-value products, where the

United States has a comparative

advantage, Johnson continued.

Nationwide, exports of agricultural

products grew more than three times

as fast as the total of all U.S. exports

in the past year. USDA has forecast

record agricultural exports of $61.5

billion through Sept. 30. The United

States is the Number 1 world exporter

of fresh fruits and nuts and second in

fresh vegetables.

“We are also advancing U.S. interests in the World Trade Organization

(WTO) by working to level the playing field for America’s farmers, ranchers and growers, who often face high

barriers to our world-class products,”

Johnson said. “The WTO framework

agreement reached July 31 in Geneva

will benefit American agriculture,

including fruits, nuts and vegetables.

Eliminating export subsidies, reducing

and further harmonizing trade-distorting domestic support and substantially

increasing market access will benefit all

of American agriculture. Clearly, the

$82 billion in subsidies provided by the

European Union must be significantly

reduced,” he declared. 

“It is in the mutual interest of all of

U.S. agriculture — specialty crops,

livestock and program crops — to be

mutually supportive and work towards

these goals. By addressing these three

pillars of agricultural trade together, all

U.S. farmers and ranchers can win.

Only in the WTO can all trading partners be brought to the table to secure a

comprehensive deal that benefits U.S.

agricultural interests by reducing all

types of trade-distorting policies.” 

Enforcing existing trade agreements

is just as important as negotiating new

agreements, he noted. 

“In the case of fresh fruits and vegetables, many of our day-to-day activities involve foreign phytosanitary barriers — plant health issues,” he said.

“Together with USDA scientists and

technical staffs, we are constantly

working with the industry to ensure

that measures imposed by foreign

countries on U.S. fruits and vegetables

have a scientific basis and are not

unnecessarily trade restrictive. As

needed and appropriate, we initiate

dispute settlement cases.

“California’s rich agricultural valleys have sustained farmers for more

than 150 years,” Johnson said. “To

extend this rich tradition of stewardship, we must continue to embrace the

outward vision as the road to the

future. By developing export markets

and continuing our long-standing agricultural heritage, farmers and ranchers

can look outward beyond California’s

coastline to the rest of the world for

their long-term prosperity.” ■ Allen F. Johnson sweeps almonds into windrows, to be collected by a harvester.
Rural Cooperatives / September/October 2004 7

proposal to sell one of

the nation’s leading Farm

Credit System lenders to

a Dutch co-op bank has

sent a shockwave

throughout the nation’s farm co-op

and ag credit communities. “Can they

really do that?” has been the frequent

question asked ever since the proposed

sale of Omaha-based Farm Credit

Services of America (FCSA) to

Rabobank Group of the Netherlands

was announced at the end of July. 

The charter of the Farm Credit

System was revised in the late 1980s so

that member associations can exit the

system. The law was approved when

there were about 1,200 farmer-owned

lending associations in the Farm

Credit System. Today, there are only

92 associations and the sale of one of

the biggest such lenders has raised a

number of policy questions. 

Any sale would have to be approved

by a vote of FCSA’s 51,000 stockholder

members (mostly farmers and ranchers), and would also need to be

reviewed and approved by the Farm

Credit Administration, the regulatory

board that oversees the 100 or so

banks and associations that comprise

the nation’s Farm Credit System. 

Opposition to the deal, which

appears to be considerable, seems to be

based not so much on resentment

toward Rabobank, but rather toward

the very notion that a key component

of the Farm Credit System could be

sold to any foreign bank, and whether

that would ultimately lead to the

diminishment, or even the dissolution, of the entire system. 

FCSA provides credit to

farmers and ranchers in Iowa,

Nebraska, South Dakota and

Wyoming. It has a loan portfolio of

about $8 billion, making it the second

largest of the 92 associations that provide financing to farmers in the $120-

billion Farm Credit System. By comparison, Rabobank has more than $500

billion in total assets. Rabobank has

cooperative roots, but its members are

349 Dutch banks. It does not conduct

business as a cooperative in the United

States. 

Dutch bank bids $600 million 

Rabobank has offered $600 million

for FCSA, and an additional $800 million exit fee would be paid to the Farm

Credit System. It says it would be able

to offer its patrons a much wider array

of financial services than is possible

through the Farm Credit System. It

would also be able to provide services,

such as home loans, in towns that

exceed populations of 2,500 people

(the cap faced by Farm Credit System

associations).

Rabobank would select four FCSA

directors to sit on the initial 11-person

board of the new banking entity that

would operate as part of Rabobank.

FCSA members would stand to collect

an average payment of about $11,000,

according to some reports. However,

actual payments would vary widely

based on the size of

individual loans.

The Farm Credit

Administration

(FCA), FCSA’s federal

regulator, has

received a resolution from the FCSA

board that it plans to submit a formal

request to terminate its status as a

Farm Credit System lending institution, and to then merge into a subsidiary of Rabobank. Once the request

is submitted, FCA has 60 days to act

on the proposal. The agency could

deny the request if it determines the

exit would be harmful to the Farm

Credit System as a whole. 

“We are very excited about this

opportunity with Rabobank,” FCSA

board chairman Paul Folkerts said.

“Over the long term, we believe it will

better position us to meet the changing needs of our customers and agricultural producers, and to provide better service and more choice in the

financial products and services they

need to succeed.”

As of this writing (in late August), it

appeared likely that there will be

Congressional hearings on the proposed sale. Such hearings would try to

determine the likely impact of the sale

on farmers and ranchers in FCSA’s service area, the expected effect on the rest

of the Farm Credit System and whether

FCSA management and directors have

been offered any type of financial

inducements to recommend the sale. 

Proposed sale of Farm Credit

System lender to Dutch bank

ignites controversy

A

continued on page 38
8 September/October 2004 / Rural Cooperatives

By Craig Scroggs, Co-op

Development Specialist

USDA Rural Development, Georgia

outhwest Georgia is best

known for its pine trees,

cotton fields and

peanuts. The main roads

in the area, U.S. 27 and

Ga. 37, take you deep into farm country and into an area that offers a

glimpse into the agricultural past of

the state.

Tall pine trees line the roadways

around towns like Ft. Gaines,

Arlington and Blakely. In the fall and

early winter months, cotton combines

are part of the scenery. Trucks pulling

loaded peanut wagons are also a common sight after harvest.

Agriculture has long been the economic engine that drives these rural

counties, but that engine has been

sputtering lately. In Georgia, farmers

have seen their net farm income

decrease from $1.94 billion in 1998 to

$1.7 billion in 2002, a 12.37-percent

decline in just five years. 

As farmers have seen their profits

continue to decline, some are looking

for alternative enterprises to supplement their income. Landowners now

say that it is time to look elsewhere

for income and to use their natural

resources for something more than

growing crops.

“Southwest Georgia needs to be

known for something other than

poverty. We do have positive

resources that we need to capitalize

on,” says Tucker Price, coordinator

for the Quitman County Extension

office. 

Area rich in amenities

Bordered by the Chattahoochee

River, this area of the state has Lake

Walter F. George as a drawing card,

and nearby Bagby State Park is rich

with natural wildlife. The people here

offer southern hospitality at its best. 

Indications from a tourism survey

showed that more people want to take

different types of vacations, with a growing

interest in agritourism. The natural

resources in the region

could offer families a

different type of vacation experience and

bring needed money

into the region, but no

coordinated effort had

ever been made to

bring this information

to the general public.

A recent study by

the University of

Georgia Center for

Agribusiness and

Economic

Development (UG

Center) shows that

agri-tourism has potential in southwest Georgia. In May

2003, a group of landowners was

brought together by the local Cooperative Extension Service to discuss

possible solutions to these challenges. 

They all had a common concern:

farm income was decreasing and their

communities were slowly dying.

Without something to stem this tide,

none were sure that they would be

able to stay in the business they loved

and in the communities where they lived. So they

decided to act.

Southwest Georgia

Escapes is born

Ten farmers, plantation owners and

wineries formed the Southwest

Georgia Escapes cooperative with a

goal of marketing southwest Georgia

as an agri-tourism destination. 

With assistance from the UG

Center, USDA Rural Development

and the Southwest Georgia

Cooperative Development Center, the

co-op was incorporated, adopted

bylaws and developed a marketing

campaign. The Cooperative

Development Center has been instrumental in the creation of promotional

materials. Clay County Extension

Great Escapes

Agri-tourism co-op helping 

Georgia farmers diversify

Charlie Cowart’s family planted its first muscadine grape vineyard 20 years ago. The family is one of the farm members promoting agri-tourism through the Southwest Georgia Escapes

cooperative. USDA Photos by Craig Scroggs

S
Rural Cooperatives / September/October 2004 9

Director Amy Winstead worked closely with the co-op and developed its

Web site: http://southwestgeorgiaescapes.com. 

Farmer Dan Giles turned 2,000 of

his 3,000 acres into a hunting preserve

for deer, turkey and quail. But advertising is very expensive, and exposure

has been difficult to obtain. By working with other co-op members, he

shares the cost of advertising and

offers city dwellers a unique experience on his farm. 

Giles has a four-bedroom lodge in

which home-cooked meals are provided to all his guests. A local cook was

hired to provide the authentic southern-style meals at the lodge.

“This cooperative has the potential

to get the word out about our area,”

Giles says. 

He was also able to use some of his

farm hands as hunting guides during 

the time of year that they were not

working on the row crops. The opportunity for continued employment without having to lay off some of his help

has turned out to be another positive for

his entrance into the agri-tourism sector. 

“I expect to be able to increase the

flow of customers into my hunting

preserve,” Giles says. 

Winery joins tourism co-op

Still Pond Winery owners Charles

and Susan Cowart also wanted to

become members of the co-op in order

to make their winery more visible with

tourists. Charlie Cowart began planting muscadine grapes more than 20

years ago, expanding his plantings until

his death. His son, Charles, took over

the vineyards and decided to further

expand the offerings. 

The Cowarts have supplied grapes

to numerous other wineries within the

state and been major suppliers of muscadines to area grocery stores for the

fresh grape market. The Cowarts knew

that there was additional income for

them in the marketing of their own

product, so they decided to open their

own winery with a tasting room. In

November 2003, that dream became 

a reality.

Marketing the winery

was still difficult and

expensive. By becoming

members of the co-op,

they were able to join

forces with their neighbors and capitalize on

the exposure that the

whole group was beginning to receive. More

than 2,500 visitors —

from as far south as

Tallahassee, Fla., to as far north as

Columbus, Ohio — have already visited the farm. And all this even before

the co-op’s main marketing efforts

have begun. 

“I expect that we will be able to further market our operation in conjunction with the co-op,” Susan Cowart

says. “Helping each other succeed is of

utmost importance. By working together, we can do for southwest Georgia

what north Georgia did years ago.”

Brochures target tourists 

Membership in Southwest Georgia

Escapes has closed at this time due to

the need to launch the advertising program for the year. The Escapes co-op

is printing 25,000 tri-fold brochures

that will be placed in welcome centers

along I-75 and I-85, in local chamber

of commerce buildings and in other

area businesses. Advertising from other

local businesses is being sought and

will be used to offset the cost of producing the pamphlets. The co-op’s

Web site offers all of the members a

link to their own pages.

The group has participated in several trade shows throughout Georgia,

Charles Cowart gives tourists a taste of some of his Still Pond Winery

vintage. 

Sportsmen in pursuit of game — including quail, deer and wild

boar — can stay in the refurbished Pine Ridge Hunting

Plantation house. continued on page 34
10 September/October 2004 / Rural Cooperatives

he U. S.

Department of

Agriculture

(USDA) is a

potential customer for cooperatives and

others engaged in the production of biobased products. USDA is already

actively purchasing and

using a wide variety of

biobased products and plans

to expand such efforts. 

The USDA Forest

Service, for example, is buying biobased products for signs made

from composite-materials and for

watershed-restoration structures.

USDA’s Agricultural Research Service

(ARS) has already identified and purchased biobased products for farming

operations, grounds keeping and facilities maintenance at its Grazinglands

Research Laboratory in El Reno,

Texas, among other uses. 

The Farm Security and Rural

Investment Act of 2002 (FSRIA),

Section 9002 of Public Law 107-17,

mandates the development of a

Federal Biobased Products Preferred

Procurement Program (FB4P) that

requires federal agencies to purchase

biobased products. Products classified

as biobased are those commercial and

industrial non-food products that are

composed — in whole or significant

part — of biological and/or renewable

domestic agricultural or forestry

materials, including plant, animal and

marine materials.

Agriculture Secretary Ann M.

Veneman says the FB4P, “builds upon

President Bush’s commitment to promote energy independence while protecting the environment. This program

will improve environmental health by

using renewable resources from our

farms and forests to produce products,

that have been derived from fossil

energy sources. This program will

enhance the development of high performing and environmentally friendly

products.”

One example of a product being

purchased by the Forest Service

involves a patented, fortified-wood

composite product called AltreeTM,

which is being used to make road and

interpretive signs. The product consists of small-diameter trees and woody

biomass combined with recycled plastic containers. It was developed in collaboration with the Forest Service’s

own Forest Products Laboratory and

other groups. 

All parts of the tree are used,

including the bark, branches, needles

and berries, resulting in no residual

slash upon harvest. Characteristics

which make it desirable include a density higher than wood, longevity of 35-

50 years plus —

depending on the application

— stain resistance, waterproof, UV resistant, impervious to insects and no leaching

of harmful chemicals into the

soil.

Juniper trees have little

other use, and are considered

a nuisance, robbing the soil

of moisture so that it cannot

support other vegetation. 

USDA/ARS’

Grazinglands Research

Laboratory is purchasing

bio-trans hydraulic tractor fluid, biotwo-cycle engine oil, bio-bar and

chain oil, bio-grease, bio-penetrating

lubricant, biodiesel fuel conditioners

and biofuels. ARS’ level of commitment is so high that the Southern

Plains Area has created an annual

award: the “Southern Plains Area

Greening Award,” which recognizes

locations that have demonstrated

continued effort, progress and

achievement in making environmentally friendly choices. The

Conservation and Production

Research Laboratory in Bushland,

Texas, was this year’s award winner.

For additional information on the

Southern Plains Area Biobased

Program, contact Mike Downing at

(979) 260-9446 or e-mail at mdowning@spa.ars.usda.gov.

For additional information on FB4P

contact Mike Green at (202) 720-7921,

email at Mike.GREEN@usda.gov, or

visit the Biobased Products Initiative

Web site at:

http://www.biobased.oce.usda.gov/publ

ic/index.cfm. ■

T

USDA is actively purchasing a wide variety of biobased products,

including these National Forest signs. They are made in part from

Juniper trees, which are considered a nuisance because they rob

moisture needed by other plants from arid soils.

USDA purchasing 

biobased products
Rural Cooperatives / September/October 2004 11

By Donald A. Frederick 

Program Leader for Law, Policy & Governance

USDA Rural Development

e-mail: donald.frederick@usda.gov

ooperatives have won an important victory in

the battle to remain competitive in the globalized agricultural markets of the 21st Century. A

federal district court in Massachusetts has held

that foreign members do not jeopardize a cooperative’s antitrust protection under the Capper-Volstead Act.

Capper-Volstead provides agricultural producers with a

limited exemption from the antitrust laws that allows them

to market their production on a cooperative basis. Private

parties, as well as antitrust enforcement agencies, can sue

cooperatives for relief from anti-competitive conduct they

believe is outside the scope of protection provided by

Capper-Volstead.

An ongoing case in this area was initiated by Northland

Cranberries, a non-cooperative competitor of Ocean Spray, a

cranberry marketing cooperative, claiming the cooperative

engaged in conduct illegal under the antitrust laws. The cooperative answered that its actions were protected by CapperVolstead. The competitor then asserted that the cooperative is

not entitled to Capper-Volstead protection because a number

of its producer-members are foreign producers. 

Both parties agreed on the facts relevant to this issue:

Northland admitted that the members in question were “producers,” Ocean Spray that they were Canadian and therefore

“foreign.” So the trial court judge used a special procedure

(cross-motions for summary judgment) to let the parties

argue the issue and have it determined before trial.

The judge referred the issue to another court official,

called a Special Master, to sift through the arguments of the

parties and prepare a recommended decision. The Special

Master recommended the court reject all of the competitor’s

arguments and decide that the inclusion of foreign members

in an agricultural cooperative does not deprive that cooperative of its Capper-Volstead protections. The court agreed

and adopted the Special Master’s recommended opinion as

presented (Northland Cranberries v. Ocean Spray Cranberries,

Civil No. 03-CV-10734-JLT (D. Mass. June 10, 2004) (order

adopting Special Master’s Recommendation)).

Background facts

This case has an interesting origin. Northland Cranberries

was formed in 1987 through the merger of five partnerships

growing cranberries in Wisconsin. Northland purchased several more cranberry farms and quickly became the largest grower

member of Ocean Spray. In the early 1990s, cranberry growers and marketers enjoyed several successful years. Northland’s

owners apparently determined that they could earn higher

returns as an independent firm, so, in 1993, Northland

resigned from Ocean Spray. It constructed duplicate processing

facilities and became a competitor of Ocean Spray.

As frequently happens in agriculture, the good years

attracted new production, from both established cranberry

growers and new producers. Beginning with the 1997 crop,

cranberry supply began to exceed demand on an annual basis

and the market price of cranberries fell precipitously.

Northland began to suffer significant losses. In late 2001,

faced with impending bankruptcy, Northland’s owners sold

most of the company to Sun Capital Partners, a leveraged

buyout firm headquartered in Boca Raton, Fla.

Shortly after acquiring Northland, Sun Capital made two

moves. First, it filed this lawsuit alleging a variety of

antitrust violations by Ocean Spray. Shortly thereafter, it

made an unsolicited takeover bid for Ocean Spray’s juice

business and brand name.

Ocean Spray promptly rejected the takeover bid. So this

case involves a leveraged buyout firm that owns a competitor

of a cooperative, pursuing a lawsuit against that cooperative

that, if successful, would likely cripple the cooperative. At

the same time, the firm is trying to buy the cooperative’s

assets, including a highly respected brand name, for the lowest possible price.

The court’s reasoning

The Capper-Volstead Act never mentions the word “cooperative.” Rather, it extends limited antitrust protection to

“persons engaged in the production of agricultural products....” (emphasis added). The term “persons” is not defined

LEGAL CORNER

Capper-Volstead protects 

co-ops with foreign members

C
12 September/October 2004 / Rural Cooperatives

in the act. So the issue before the court

was whether the word “persons,” as

used in this statute, means only United

States producers, or if it also includes

producers in other countries.

First, the court made general observations about the term “persons” in the

context of the Capper-Volstead Act:

• When interpreting a statute, the

plain and unambiguous meaning

of a word prevails in the absence

of clearly expressed legislative

intent to the contrary. No limitation on the ordinary meaning of

“persons” is stated or implied in

the Capper-Volstead Act. As people in other countries are considered “persons,” the term should

be read to refer to foreign farmers

as well as American farmers.

• The conclusion that “persons”

includes foreign producers is confirmed by Congress’ purpose in

passing the Capper-Volstead Act.

In 1922, Congress adopted

Capper-Volstead to provide agricultural cooperatives having capital stock the same status under

antitrust laws that Congress

granted to non-stock cooperatives

in 1914, under Section 6 of the

Clayton Act. The Clayton Act

defines “persons” as including

“corporations and associations

existing under or authorized by

the laws of either the United

States, the laws of any of its territories, the laws of any state, or the

laws of any foreign country.”15

U.S.C. Sec. 12 (emphasis added).

Our primary antitrust law, the

Sherman Act, defines “persons”

the same way. 15 U.S.C. Sec. 7.

The court continued that a basic

rule of interpreting statutes is that

where Congress uses the same term in

the same way in two statutes with

closely related goals, the presumption

is that it intended the term to have the

same meaning in both contexts. A

review of the Clayton Act as a whole

demonstrates that the exemption in

Sec. 6 applies to cooperatives with foreign members. So likewise, the

Capper-Volstead Act applies to cooperatives with foreign members.

The court then addressed and

rejected Northland’s key contentions:

• Northland argued that segments

in the legislative debate over

Capper-Volstead demonstrate that

Congress intended to exclude foreign farmers from the definition

of “persons.” The court found

these statements did not support

Northland’s position. At most,

they show that certain legislators

argued that foreign competition

was likely to prevent protected

cooperatives from achieving a

monopoly position.

• Northland asserted that exemptions from antitrust laws must be

narrowly construed. The court

responded that this rule neither

requires nor permits a court to

disregard the plain language of

the statute when interpreting an

exemption.

• Northland said the court should

conclude “persons” under CapperVolstead does not include foreign

persons, because in another similar statute, the Fisherman’s

Collective Marketing Act,

Congress included a territorial

limitation in the definition of

“aquatic products.” 15 U.S.C. Sec.

521. The court turned that argument around, finding that if

Congress intended to impose a

similar limitation on agricultural

producers in Capper-Volstead, it

would have done so.

• Northland claimed the court

should adopt a presumption

against extraterritorial application of United States law. The

court held that United States

antitrust laws apply to conduct

outside our borders that affects

competition within the United

States, and Northland itself

alleges that the conduct at issue

has had a substantial effect within

the United States. Furthermore,

the presumption applies where a

United States law imposes standards of conduct on persons in

other countries, not where the

statute at issue is an exemption

from U.S. law.

• Northland charged that interpreting “persons” to include foreign

farmers would permit producers

around the world to join together

to cartelize any agricultural product to the detriment of U.S. consumers. The court determined

this argument was also specious. 

It noted that in spite of urging

from USDA to cooperatives to

consider including foreign members, few have done so and none

approaches a monopoly position.

The court also cited the authority

in Sec. 2 of Capper-Volstead for

the Secretary of Agriculture to

bring proceedings against any

farmer cooperative that “monopolizes or restrains trade in interstate

or foreign commerce to such an

extent that the price of any agricultural product is unduly

enhanced....” 7 U.S.C. Sec. 292

(emphasis added).

Conclusion

While this lawsuit continues over

other issues, the court has clearly stated that foreign memberships in farmer

cooperatives are permissible under the

Capper-Volstead Act. In the economic

environment of the 21st Century, it

appears that globalization and concentration among processors, distributors

and retailers is the norm rather than

the exception. 

To bolster their market strength

today, producers must have the ability

to do more than negotiate with the

local canner or grocery store. They

must deal effectively with international

conglomerates that can purchase agricultural products from any country

where a product can be grown. 

This gives buyers the power to play

producers in one country against those

of another, if effect creating a reverse

auction wherein the price received by

producers is driven steadily downward.

U.S. producers may well need the

option to develop international memberships to deal with buyers with this

degree of market power. ■
Rural Cooperatives / September/October 2004 13

By Stephen Thompson

Assistant Editor

he viability of ethanol as

an alternative fuel continues to improve. New

research by USDA economist Hosein Shapouri

shows a marked improvement in the

energy efficiency of ethanol from five

years ago.

In the July-August 2004 issue of

Rural Cooperatives, we reported that

Shapouri’s research had refuted claims

by ethanol opponents that it costs

more energy to produce ethanol than

it yields. His study showed the net

energy balance of ethanol at 36 percent in 1996, an improvement on the 24 percent

figure reported in 1991.

That means that 1.36

BTUs worth of ethanol

requires only one BTU of

energy to produce.

The results of

Shapouri’s latest research,

using data from 2001,

were released in June.

They show an even

greater improvement than

that of the previous fiveyear period, with ethanol’s

net energy balance growing to an impressive 67

percent. The continuing

improvement, he says, is

due to technological

advances both in farming

and manufacturing.

“Crop yields per acre have increased,

fertilizer is more energy efficient and

ethanol plants are more efficient,” he

says. “So the net energy value of

ethanol improves.”

Shapouri’s calculations included the

amount of energy used to grow and

harvest the crop; to transport feedstock, byproducts and the finished

product; energy used in the production

of seed, pesticides and fertilizer; and

energy consumed in the manufacturing

process. 

He is critical of studies that have

disputed the USDA findings, including

one by Dr. David Pimentel, an entomologist, in 2003. Shapouri says the

Pimentel report is deeply flawed, using

questionable and unsupported information, especially on energy expenditures in the production of secondary

inputs, such as farm equipment and the

construction of ethanol plants. “I don’t

know how they come up with these

figures,” he says. 

Shapouri’s research does not include

such calculations because, he says, the

latest figures on energy costs in those

areas are 25 years old. In any case, he

says available information indicates

that energy used in production of secondary inputs is much lower. “This

study,” says Shapouri, “unlike the

Pimentel report, is based on straightforward methodology and highly

regarded quality data.”

Shapouri believes

that the energy efficiency of ethanol will

continue to improve,

due to continuing

increases in crop

yields and improvements in ethanol production technology.

“Inputs of pesticides

and fertilizers in crop

production are continuing to fall,” he says. 

“And in India, a

new molecular filtering technology is

removing the last bit

of water from ethanol

for a much lower cost

than the process we

currently use.”

■

USDA study boosts fuel

conversion efficiency 

rating for ethanol

T

The ribbon-cutting ceremony in August 2002 at Glacial Lakes Energy in

Watertown, S.D., drew a crowd of co-op directors, community leaders and building contractor representatives. Improved operating efficiencies of such plants

have prompted USDA to boost its estimate of the ethanol energy conversion

yield. Photo courtesy Glacial Lakes Energy and the Watertown Public Opinion 
14 September/October 2004 / Rural Cooperatives

By Jim Rodenburg 

AGP Communications Director

idwest soybean producers and their cooperatives now have their

best-ever access to

Pacific Rim customers,

thanks to AGP’s new export terminal

facility at the Port of Grays Harbor in

Aberdeen, Wash. Last December,

Omaha-based AGP, a federated soybean processing and marketing cooperative, loaded its first vessel at Grays

Harbor with 23,000 tons of soybean

meal bound for Australia. Since then,

numerous other shipments of soybean

meal, non-GMO (genetically modified

organism) soybean meal and other specialty grain products have been exported to international customers through

the new terminal. 

The Grays Harbor facility will help

keep AGP competitive in export

markets, with reduced

costs and shipping

time to the

Pacific Rim, as compared to transportation

through the Gulf of

Mexico and other

Pacific Northwest ports.

The terminal also has

the ability to handle

identity-preserved products, which are becoming increasingly important in international markets concerned about food

safety and traceability. 

“We’re very pleased with the facility

and proud of the partnership we have

at the Port of Grays Harbor,” says

Pete Mishek, AGP’s international trade

manager. “The feedback from customers has been very positive.”

Recently, Mishek and Greg Twist,

AGP’s vice president for marketing,

soy and corn processing, led a trade

mission to the port, which was attended by buyers and brokers from

Indonesia and

directors

from

the Iowa Soybean Promotion Board

(ISPB). Dick Vegors, marketing manager of grain and grain co-products,

International Office, Iowa Department

of Economic Development, also joined

the group.

First meeting at port

This was the first time a soybean

association and customers had met at

Grays Harbor, during which Mishek

told the ISPB farmer-directors that the

facility is an investment in their markets. “We want our customers to know

that AGP and Midwestern farmers are

trying to reach them in more efficient

ways every year,” Mishek stressed,

adding that

Direct Access!

AGP’s new Pacific port an investment in 

Midwest soybean farms & facilities 

M AGP’s new international port terminal in Washington has the

ability to handle identity-preserved grain shipments. Photos

by Marc Sterling, courtesy Port of Grays Harbor
Rural Cooperatives / September/October 2004 15

AGP has been shipping soybean meal

through the Pacific Northwest for

about 15 years. 

The importance of Pacific

Northwest exports has been heightened by two developments, according

to Mike Zahn, a commodity analyst

who gave the group a briefing on the

grain markets and industry trends: 

• The ascension of China as a major

importer of goods such as steel

and grain. This strong demand

has resulted in ocean freight rates

reaching record levels, magnifying

the advantages of the most costeffective terminals. 

• U.S. soybean production heading

west, with dramatic increases in

soybean acreage in Minnesota,

Nebraska, North Dakota and

South Dakota over the past several years.

“These factors set up a real opportunity for West Coast shipments,”

Zahn says.

AGP’s custom-built facility on

Terminal 2 at the port is the closest,

most direct route from its processing

plants in the Midwest to Pacific Rim

customers. Gary Nelson, executive

director of the Port of Grays Harbor,

says the deep-water port is two hours

from open sea, compared to 12 hours

from other Pacific Northwest export

facilities located on the Columbia

River. 

The Port of Grays Harbor made

several modifications at Terminal 2 to

handle AGP’s design criteria for

Panama Canal-sized vessels. These

included berth expansion, a heavier

fender system and upgraded mooring

dolphins to secure larger vessels than

the logging ships the port has traditionally handled. 

Rail system key to operation

The rail system is an integral part of

the operation. The Puget Sound and

Pacific Railroad, a short-line railroad

serving the port, connects with both

the Burlington Northern Santa Fe

(BNSF) and Union Pacific (UP) railroads. A new, 8,000-foot looped track

was built around the terminal in order

to move cars continuously through the

unloading facility without switching.

AGP also has a staging area that will

hold approximately 300 railcars prior

to the arrival of a vessel. 

During unloading, Nelson points

out that product is fully covered from

the receiving building to the ship,

helping maintain product quality.

Railcars are emptied two at a time over

a 100-foot-long receiving pit, and the

product moves along on air-supported

conveyors to a scale and automatic

sampler. This high-speed conveying

system has no cracks or crevasses to

retain product, while brushes and air

jets continually clean the belt. 

A mobile loader that traverses the

length of the dock to load the ship is

another feature of the terminal. This

allows the ship to remain stationary,

saving on fuel and crew costs, as well

as reducing loading time.

The terminal is equipped to meet or

exceed international standards for

weights and grades, and can be washed

Midwest-grown soybeans, soybean meal and other grain products will get to Pacific Rim

customers faster, thanks to AGP’s new port facility. 
16 September/October 2004 / Rural Cooperatives

and cleaned after each shipment to

meet requirements for identity-preserved products.

Market success hinges on

quality and timeliness

“What makes the whole

thing work is the people here at

the port,” says Mishek. “The

work ethic and commitment

from the longshoremen and

port management is superb. We

have great partners.”

Those partners include

Midwest soybean producers, who are

represented by associations such as the

Iowa Soybean Promotion Board

(ISPB). 

“The ISPB has been very interested

in the Grays Harbor project from the

early stages, as exports are extremely

important to the soybean industry,”

says Grant Kimberley, market development manager. “For U.S. producers to

stay competitive with South America,

we must guarantee consistency, quality

and timely service. And that’s what this

new port facility can do.”

The ISPB has worked with AGP to

A new, 8,000-foot looped track was built around the terminal to move cars continuously

through the unloading process without the need for switching. 

In addition to gaining greater access to foreign markets for its members, AGP is also striving to add value

to its products by encouraging farmers to enroll in its

Approved Variety Program, which promotes planting

soybean varieties that produce higher-than-average

yields of oil and protein .

Leon Wojahn, a northwest Iowa soybean producer,

has planted 200 acres of soybeans with AGP-approved

varieties, a four-fold increase from his participation

level last year. 

“I contracted 50 acres in the program last year

through my local cooperative, MaxYield Cooperative, to

try it out. I had a good experience,” says Wojahn.

“Those nickels add up.”

By planting and contracting AGP-approved varieties

through participating member cooperatives, producers

are guaranteed component premiums of at least 5

cents a bushel. These soybean varieties have historical data showing potential for achieving desirable oil

and protein levels.

“I think we’ve proven that it’s a fairly easy program

[launched in 2003] to comply with, as producers are not

necessarily required to make big shifts from what

they’re already planting,” says Greg Twist, AGP marketing vice president for soy and corn processing.

“We’re starting to make some headway in raising producers’ awareness of what they’re putting in the field.

They’re asking questions about oil and protein content,

which is now becoming a front-burner issue for seed

companies as they develop new soybean varieties and

work on their genetics.”

While some varieties on the approved list for 2003

failed to make the grade for 2004, Twist says even more

new varieties have been added, giving producers

increased planting options under the program.

“A good feature of the program is that some of the

varieties already popular in this area are included,”

says Gary Strube, general manager, Great Lakes Cooperative in Everly, Iowa. “It’s an easy way for a producer

to pick up $2.50 an acre, based on 50-bushel beans. We

think it’s a good program for soybean farmers and it

has helped boost our seed sales.”

Cooperative managers of participating cooperatives are taking the opportunity to report to their

board not only about local earnings, but also additional premiums that their members receive for contracting approved varieties. “This revenue doesn’t necessarily show up in the cooperative’s bottom line, but it

is having a positive economic impact on its members,” said Twist. ■

— By Jim Rodenburg

Co-op boosting yields of protein, oil 

through approved variety program 
Rural Cooperatives / September/October 2004 17

bring in potential international customers so they can see the whole

process from the very beginning on

the farm, to the elevator, to the processor and then on out to the port facility. 

“We are trying to show customers

that we are serious about meeting their

needs, listening to their concerns and

showing them what we can accomplish,” says Kimberley. 

Vegors was equally enthused about

the opportunities the port terminal

represents for Iowa and Midwest agriculture. “As we get to see more gene

stacking and specialty traits of grain

that companies in foreign countries are

desiring, the ability to clean out the

facility and turn it from one product to

another makes it ideal for the IP

process,” Vegors says. 

During the visit to the port, Greg

Twist told the Indonesian contingent

about AGP’s success working with

member cooperatives and their farmer

owners to produce, process and deliver

identity-preserved products, such as

non-GMO soybean meal. He also says

the quality of soybeans can be raised

through AGP’s approved variety program.

“Spending time developing face-toface relationships with international

buyers — such as the Indonesians, who

represent some of the largest consumers of soybean meal in the world

— is a very valuable investment,” Twist

says. “I think they were very impressed

with the port facility and realized that

U.S. farmers take a real interest in supplying quality and meeting or exceeding their needs. It’s all about bringing

value to our customers in order to

increase exports, and that value

includes a competitive and efficient

transportation system.”

For more information about AGP’s

export terminal, go online to:

www.agpportofgraysharbor.com. ■

To help it better provide wholesale dealers with

crop nutrients, Agriliance has signed a lease with the

Port of Galveston to operate a general-purpose bulk

cargo terminal. Agriliance, a joint venture owned by

CHS Inc. and Land of Lakes, will enter a 15-year lease

with the port, with an option for seven additional threeyear renewal periods.

By mid-2008, Agriliance

expects to ship more than

800,000 tons of cargo annually

through the terminal.

“With the Port of Galveston,

we’re enhancing our crop nutrients distribution capabilities

across all U.S. markets, especially for rail shipments to western regions,” says George

Thornton, Agriliance president

and chief executive officer. He

says Agriliance also anticipates

that moving shipments through

Galveston will allow the company to divert some rail loads from

Mississippi River terminals,

thereby helping ease river bottlenecks. 

“We began importing bulk

product in 2003 through a port

in Louisiana,” he continues.

“Expansion into Galveston is an

integral part of our company’s

import strategy, which is

expected to increase significantly in the near term.”

Steven M. Cernak, port director, says “This agreement will allow the Port of Galveston to increase our

cargo throughput, which will result in increased

employment at the facility and at other ancillary companies servicing the new terminal.”

Agriliance will operate as a general-purpose bulk

cargo terminal that will initially receive only inbound

products. The longer-term goal

is to make improvements to

allow for both import and

export operations. Potential

cargoes include bulk fertilizer

products, bulk agricultural

products, bulk grains and grain

substitutes, non-hazardous

bulk minerals or mineral products and non-hazardous chemicals.

Pier 35/36, the old Imperial

Sugar Docks, was previously

leased to River Materials LLC.

With the signing of the agreement, Agriliance acquires the

use of the terminal and purchases the assets of River

Materials.

Agriliance LLC markets

crop nutrients, crop protection

products, and seed and crop

technical services to farmers

and ranchers through local

cooperatives and independent

dealers in all 50 states, Canada

and Mexico. ■

Agriliance to operate major terminal at Port of Galveston

Bucket cranes unload bulk materials from ships and

drop them on this conveyor belt, which terminates in

a warehouse. More conveyor belts carry them from

the warehouse to rail cars. Photo courtesy Port of

Galveston
18 September/October 2004 / Rural Cooperatives

By Stephen Thompson

Assistant Editor

enewable power is the

basis for a new kind of

co-op developing in the

Pacific Northwest. In

Montana and

Washington, farmers in Our

Wind Cooperative are producing power from relatively

small, “backyard-style” wind

turbines. In Oregon and

Washington, owners of

small, home-size photovoltaic arrays — or solar-electric

panels — have banded

together in the Northwest

Solar Co-op. Both co-ops

are using a new concept to

encourage the use of renewable energy, while putting

dollars in their members’

pockets at the same time.

The concept is simple:

sell the environmental benefits of

renewable energy to customers who

want to help reduce the consumption

of conventionally produced power. 

Doug Boleyn, a solar power consultant in Gladstone, Ore., wanted to find

a new way to help clients recover some

of the costs of a home solar-power

installation. He found the answer in 

a new project by the Bonneville

Environmental Foundation, a nonprofit organization based in nearby

Portland that seeks to promote the 

use of renewable energy sources. 

Perfect match

The foundation had developed a

new way to sell environmental benefits, through certificates called “Green

Tags” (see sidebar), and was looking to

expand into small solar systems. It was

a perfect match.

Photovoltaic systems provide environmentally clean power, but their

output is intermittent: when the sun

goes down, so does the power.

Overcast days reduce output considerably. For this reason, home solarpower systems are almost always

hooked up to the local power grid.

(For an example of stand-alone solar

systems, see “Isolated Navajos tap

solar power,” Rural Cooperatives,

March/April 2002, page 6; current

and back issues are accessible on-line

at www.rurdev.usda.gov/rbs/pub/

openmag.htm.)

An electronic inverter converts the

direct-current power from the solar

panel to usable house current. When

the sun is out, the system routes any

solar power not being used to the

power grid; when the solar system isn’t

making power, electricity from the

power utility is used. A meter measures

current both ways, and the utility pays

the user a rebate for the excess power. 

Members of the co-op are required

to have their solar systems hooked up to

the local power utility to ensure that all

the power they produce is

used, either by the owner or

by the utility’s other customers. The amount of solar

power output is measured,

and at the end of each year

each member sends his or her

meter reading to the co-op.

The total of all members’

solar production is added up

by the co-op and sent in to

the Bonneville Environmental

Foundation, which pays for

the Green Tags and distributes them to customers. The

co-op then sends the members the checks for their

Green Tags production.

Utility gets the energy;

co-op sells Green Tags 

Each member is required to sign an

“attestation” form every year, confirming the amount of green power produced and that it meets all criteria for

being renewable and non-polluting.

The Green Tags are certified as valid

by an independent third-party entity,

the Green-e Renewable Electricity

Certification Program. 

A typical home solar-power system

puts out a maximum of about 1 kilowatt, and costs about $13,000 to

$20,000, according to Boleyn. The

amount of money each co-op member

receives is comparatively small —

Backyard powerhouses

“Green Tags” spur development of

renewable power co-ops in Northwest 

A wind turbine is erected in Liberty County, Montana. Local supporters

hope it is the first of many such installations. Photo courtesy NW Seed.

(Above, right) The Gray family of Medford, Ore., with their photovoltaic

array. Photo courtesy Doug Boleyn. Both sell the environmental benefits

of their green power through a new kind of co-op.

R
Rural Cooperatives / September/October 2004 19

about $200 to $250 per year. But, he

says, the added funds help in making a

solar installation cost effective, and

selling the tags gives others who don’t

have access to a green power source a

chance to participate in the production

and use of renewable energy. 

“While $250 isn’t that much,” he

says, “sometimes it seems to make the

difference when people are considering purchasing a solar-power unit.

Salesmen for photovoltaic systems are

now using Green Tags as a ‘sweetener’

for potential customers.”

Making money 

from the wind

Like the Northwest Solar Co-op,

Our Wind Cooperative promotes

grassroots production of green power.

Our Wind members run small, 10-kilowatt wind turbine generators — producing more power than Northwest

Solar’s solar panels, but a far cry from

the enormous turbines erected by utilities, the largest of which can produce as

much as 4,200 kilowatts (see “Catch

the wind,” Rural Cooperatives,

March/April 2002, page 4). 

The co-op was launched by

Seattle-based Northwest Sustainable

Energy for Economic Development

(NW SEED), Last Mile Electric

Cooperative, Northwest Cooperative

Development Center and other nonprofit organizations seeking to promote customer-owned wind power

among farmers and rural landowners

in the Pacific Northwest.

NW SEED used a number of federal grants and loans to do the groundwork for the co-op. A contract award

of $300,000 from the Department of

Energy’s National Renewable Energy

Systems Laboratory helped get the

effort off the ground by financing a

survey of wind characteristics in the

target area. A Value-Added Producer

Grant (VAPG) of $50,000 from USDA

Rural Development was used to conduct a feasibility study and to plan

studies of various possible turbine sites. 

The Bonneville Foundation helped

by making upfront payments for projected Green Tags production, and also

made available a low-interest loan.

The initiative had no problem finding potential participants: it received

over 300 applications. Each was

screened according to criteria, including availability of financing, local wind

characteristics and access to power

transmission facilities. Ten sites were

chosen for the initial installations. 

Five turbines installed

The cooperative was incorporated

in November 2003. So far, five turbines have been installed, and one is

under construction. 

“Each site is different,” says NW

Seed project manager Jennifer Grove.

Not only do geographic characteristics

differ, but so do local regulations and

permit requirements. 

In addition, incentives for installing

wind generators are different in each

state as well. In Montana for example,

the co-op took advantage of funding

from state renewable energy incentive

programs and a streamlined permitting

process. 

The co-op found a different kind 

of success in Washington. Financial

support from Seattle City Light and

Klickitat Public Utility District comGreen Tags are certificates of environmental benefit

that can be sold and traded. In effect, they allow a person or entity to support a renewable energy source,

without regard to where both the producer and the

purchaser are located. Green Tags provide additional

income to owners of renewable-energy generators,

apart from that derived from the sale of the actual

power or the savings derived by consuming homemade power. 

Green Tags function on the principle that electrical

power is fungible — that is, one unit of it is identical in

use to another, regardless of its source. 

They work like this: 

• A producer of “green” electricity — from a wind

turbine, solar array, or other renewable source —

records the amount of power produced by the

green source. Through a cooperative or other entity, the producer sells certificates for that amount

of energy — Green Tags. 

• The actual power that is produced by the green

source is consumed at the site or sold to the local

utility. The sale of Green Tags is thus separate

from the sale and use of the power produced by

the green source — in this case, solar arrays and

wind turbines. 

• Customers who want to use green power buy the

certificates. The actual physical power that the

customer consumes is not produced by the green

source. But by buying Green Tags, the customer

takes ownership of the “green” characteristics of

the green producer’s power. Doing so offsets the

environmental damage done by the production of

the conventional power the customer uses — that

is, the customer’s consumption of power does not

add overall to the pollution being produced to

generate power. Conversely, having sold the

Green Tags, the owner of the green power source

can’t claim to be using green power. ■

— By Stephen Thompson

How Green Tags work

continued on page 36
20 September/October 2004 / Rural Cooperatives

By Richard Sexton, Professor

Agricultural and Resoures Economics

University of California, Davis

Himawan Hariyoga, Ag Economist

Editor’s note: Many questions have been

raised regarding the causes of the demise of

one of California’s leading food processing

cooperatives. A recently completed study

conducted for the University of California

Giannini Foundation provides some

answers. USDA Rural Development provided support for the study under a cooperative research agreement. 

ri Valley Growers (TVG)

was a California agricultural cooperative owned

by more than 500 member-growers and was

California’s largest fruit canner, with

$782 million in sales during 1998.

Members — who delivered primarily

tomatoes, peaches, pears and olives to

the cooperative for processing and

marketing — held $125 million of

equity in the co-op in 1998. TVG was

also a major Central Valley employer,

with more than 9,500 seasonal and

1,500 annual employees. 

But severe financial difficulties

forced TVG to file a voluntary petition

for reorganization under Chapter 11 of

the U.S. Bankruptcy Code in July

2000. Its assets were subsequently sold

to various buyers. Although a number

of factors contributed to its downfall,

perhaps the major one was the cooperative’s failure to adequately position its

tomato processing operations to reflect

the restructuring the industry had

undergone. Weakness in the tomato

operation — including under-utilization of plants and failure to meet the

explosion of demand for pasta sauces

and Mexican food salsas — led to

tomatoes being subsidized by the coop’s much more successful fruit canning operations, to the detriment of

the latter. Other negative factors

included lack of strong membership

contracts requiring crop delivery, a

high debt-to-assets ratio and poor

management decisions, ranging from

over-paying members for crops in

some years to the termination of too

many experienced plant supervisors

when new management took over the

co-op in the mid-1990s. 

A noteworthy finding of this study

is that Tri Valley’s business structure as

a cooperative did not contribute to its

failure. 

Essentials of TVG’s operations

TVG was formed in 1963 when two

existing co-ops, Tri Valley Packing

Assn. and Turlock Cooperative

Growers, merged. In 1964 Oberti

olives joined TVG, while in 1978

TVG purchased S&W Fine Foods.

TVG also grew through acquisition of

the assets and members of other financially distressed or failed processing

cooperatives. This list includes

Glorietta Foods in 1981, Cal Can in

1983, and Sacramento Growers Co-op

in 1993. 

By the mid-1990s, TVG operated

10 processing plants — nine in

California and a tomato reprocessing

facility in New Jersey. TVG procured

raw products from growers on both a

membership and a cash-contract basis

and converted them into a wide variety

of processed products. As time passed,

the percentage of product, especially

tomatoes, procured through cash contracts increased. For the products it

acquired on a membership basis, TVG

returned revenues to growers through

commodity pools. Prior to 1983, TVG

operated a single pool, whereby all

revenues and costs flowed into a single

account, and surplus in excess of each

commodity’s “established value” was

The canning of Tri Valley

What went wrong at Tri Valley Growers, 

and what can other co-ops learn from it?

T

Peach and fruit crops were increasingly forced to subsidize TVG’s processing tomato

operations in the final years of the co-op. Photo courtesy Modesto Bee
Rural Cooperatives / September/October 2004 21

returned to members in proportion to

their patronage with TVG. Established

value, in turn, was usually set in accord

with industry prices that were discovered through bargaining between the

commodity bargaining associations for

tomatoes, peaches and pears, and the

major independent processors of those

commodities.

In 1983, TVG established the

“50/50” pooling concept, whereby

commodity-specific pools were established, and 50 percent of revenues

derived from each commodity flowed

into its own pool, while 50 percent

went to the general pool. In 1996,

TVG restructured itself as a “newgeneration cooperative,” wherein

members’ equity was converted to

capital stock, and the 50/50 pooling

concept was replaced by a complicated alternative that essentially represented a return to the single-pool

concept.

TVG’s tomato operations

Tomatoes comprised about 40 percent of TVG’s revenues in the 1990s.

The industry had undergone major

structural changes by then. Production

had relocated from coastal areas to the

Central Valley, causing a mismatch

between production and processing

capacity, and the processing technology had come to emphasize low-cost,

bulk-paste manufacturing undertaken

in the producing areas, with remanufacturing into specific products done

elsewhere. 

Processed tomato products sell in a

global market, and prices are subject to

wide fluctuations and are strongly

influenced by inventories carried forward from the prior crop year. On

both a nominal and a real basis, prices

declined on average from the period

1974-2000.

TVG joined the paste revolution in

1974, when it built a paste manufacturing facility near Volta and secured a

favorable 10-year, cost-plus paste contract. In 1984 TVG acquired a paste

remanufacturing facility in New Jersey.

However, TVG also adopted a nonstrategic approach to expansion in the

1980s through acquiring the membership and facilities of two failed co-ops,

Glorietta and Cal Can. 

The result was that TVG’s tomato

facilities were not well aligned geographically with its production, causing it to have higher shipping costs

than the competition and, in some

cases, its facilities lacked state-of-theart technology. Its production capabilities were also not well aligned with

the market’s needs, as then-CEO and

board chair James Saras himself noted

in 1993.

These circumstances suggest that

TVG needed to make investments in

plant modernization and relocation,

but it was constrained during the late

1980s and 1990s from doing so

because it was already carrying a high

debt-to-equity ratio, and its members

were themselves suffering from adversities in the raw-product market, making it difficult to collect more equity

from them.

TVG’s inability to compete in the

growing but cost-driven bulk-paste

segment of the market caused it to

refocus on producing peeled products

Tomatoes comprised

about 40 percent of Tri

Valley Growers' revenue

in the 1990s, which was a

period of major change

for the tomato processing

industry. Photo courtesy

Modesto Bee
22 September/October 2004 / Rural Cooperatives

and branded product sales in the

1990s, but this strategy was constrained because TVG’s brands were

weak and the value-added strategy

brought it in to direct competition

with larger, financially stronger rivals.

TVG’s major market channels were

retail (mostly private label), 44 percent;

food service, 30 percent; and contract,

12 percent. 

Overall, TVG produced a

wide variety of low-value

and/or low-margin products.

During this period, it manufactured 435 tomato product

items or labels, including 154

peeled products, 148 remanufactured products, 61 paste

items, 22 sauce products and

17 puree items. For the most

part, TVG missed the explosion in demand in the 1990s

for pasta sauces, Mexican salsas and barbeque sauces. 

Very low raw product

prices in 1991-92 caused

reduced grower shipments

to TVG in subsequent years,

leading to underutilization

of plant capacity — tomatoes processed in five plants

could have been consolidated into three. Poor alignment of production with

processing capacity, inefficient technology and under-utilization of plant

capacity combined to make TVG a

high-cost tomato processor relative to

most competitors. Stagnant processed

product sales in the early 1990s also

led to high inventory costs.

Indeed, tomato market adversities

led to low grower returns and persistent subsidization from fruits to tomatoes under the 50/50 pooling arrangement. Most TVG growers were multicannery growers and lacked loyalty to

TVG. TVG lacked strong membership contracts that would have

required delivery and instead was

forced to offer tomato growers special

deals — cash contracts, accelerated

payments and low rates of equity

retention — to retain the patronage of

tomato growers in the 1990s. Only 54

percent of tomatoes were acquired on

a membership basis in 1996.

Tomatoes were a growth industry

relative to canned fruits and TVG

gained marketing synergies by selling

both tomato and fruit products. But

the co-op was not competitive in the

bulk-paste market, lacked strong

brands and resources to compete with

major branded-product producers

and faced stiff competition and

increasingly powerful retail buyers

for private-label sales. Its severe

problems and limitations in the tomato market caused TVG to actively

contemplate an exit strategy from

tomatoes in 1994. But a new board

and management team took over

soon thereafter and recommitted

TVG to the tomato market.

TVG’s fruit and

olive operations

Fruits comprised about 53 percent

of TVG’s revenues in the 1990s, with

canned peaches and fruit cocktail representing the lion’s share. Prior to its

bankruptcy, TVG was the largest fruit

processor in California, with about a

40-percent aggregate share of the

market. TVG had its own brands,

such as Libby and S&W, but sold a

majority of its product under private

labels.

On balance, TVG was better positioned in fruits than tomatoes, and fruit

products on average generated a higher

margin than did tomato products. On

the downside, per capita consumption

of canned peaches and pears declined

rather consistently from 1970 through

the 1990s, as fresh fruit

alternatives became

increasingly available.

Despite its large share of

California production,

TVG lacked large national

market shares or dominant

brands for any of its

processed products and was

essentially a price taker in

these markets.

Things were also more

favorable on the membership side for fruits than for

tomatoes. Most of TVG’s

fruits were procured on a

membership basis and —

perhaps because they had

fewer selling options than

the tomato growers —

TVG’s fruit growers were

generally loyal to the coop. However, the persistent subsidies from peaches to tomatoes through the 50/50

pooling arrangement from the mid1980s through the mid-1990s caused

discontent among the peach growers.

Although olives were a high-margin item for TVG, they caused many

problems. Movement of olives as a

percent of production was consistently the lowest of any TVG commodity,

the percent of non-member purchases

increased rapidly to 71.5 percent in

1996, and costs in excess of $10 million were incurred due to environmental contamination of the olive

processing plant in Madera.

As with tomatoes, acquisitions and

joint ventures involving TVG’s fruit

and olive operations appear to have

been happenstance (such as the acquisitions of failed cooperatives), not

strategy. Unlike its major competitors,

A bidder signals his offer for equipment being auctioned at one of

TVG’s processing plants, following its bankruptcy. Photo courtesy

California Farm Bureau
Rural Cooperatives / September/October 2004 23

Pacific Coast Producers, a pear co-op

that focused on low-cost, private-label

production, and Del Monte, which

focused on value-added brands, TVG

tried to perform in both market segments. However, despite many problems, TVG’s fruit operations (excluding olives) were competitive to the

very end.

“New-Generation” restructuring

In April 1995, Joseph Famalette was

hired as CEO and president of TVG.

Famalette had been the architect of a

restructuring plan for his previous

employer, American Crystal Sugar, and

presented a similar plan to TVG members in June 1996. TVG’s equity base

was hemorrhaging at this time due to

loss of members and increased use of

cash contracts, which presented no

opportunity for a retain.

The restructuring plan included converting existing equity to a capital stock

issued by commodity class. The capital

stock conferred both a delivery right

and obligation and could only be transferred, with board approval, to another

California producer of the commodity.

For example, 1.8 million shares of

tomato stock were authorized, implying

delivery of 1.8 million tons, but less

than 800,000 shares were issued. 

The 50/50 pooling concept was

replaced with a “profitability target”

concept that was closely akin to the

old, single-pool concept. The

restructuring was also accompanied

by a purge of many employees from

the pre-Famalette era who were

replaced with executives who had little prior experience with cooperatives

or food processing. A retired TVG

executive noted wryly, “They fired

everyone who knew where the light

switch was at.”

Final downward spiral

In 1996, TVG changed its definition of operating income and redefined its fiscal year. The new management also raised prices after the 1996

pack, in market conditions that were

not supportive of higher prices. This

move resulted in declining sales and

rising inventories. Long-term debt

rose from $30.1 million in fiscal 1995-

96 to $145.6 million in fiscal 1996-97.

In August 1997, TVG’s auditor,

Deloitte & Touche, warned TVG of

an increased risk of inaccurate financial reporting, in part because the

position of chief financial officer had

been eliminated in the downsizing.

In August 1998, TVG announced a

net loss of $78 million and fired CEO

Famalette. About 50 percent of this

loss resulted from paying growers 129

percent of the established value vs. the

90 percent that was guaranteed. TVG

ended fiscal 1998-99 with a loss in

excess of $120 million. These losses

were carried forward on TVG’s books,

effectively depleting the cooperative’s

equity, and making it functionally

bankrupt even before the official filing

in July 2000. 

Analysis of TVG’s demise

The seeds of TVG’s demise were in

place prior to the 1990s in the form of

high inventories, low productivity of

assets, high operating and transportation costs relative to the competition

and a high debt-to-equity ratio, which

inhibited needed investments in modern plant and equipment. TVG was

competitive in fruit processing, but not

in tomato processing. TVG needed to

become competitive in tomatoes by

either finding a market niche where it

could thrive, or else jettisoning its

tomato line. 

Using fruit revenues to cross subsidize tomatoes was not a viable longterm strategy. It will never be known

• David Long, CEO of Signature Fruit (which now

runs TVG’s fruit canning plants): “TVG had too

many products in too many packages, which ended

up in inventories. It made a mistake pursuing

branded products when its strength was in private

labels.”

• Jeff Boese, president, California League of Food

Processors: “TVG was not a low-cost producer.

(Joe) Famalette brought in people who were not

from the food business.”

• Mike Machado, California assemblyman and former

TVG board member: “TVG lacked capital to make

needed improvements in plant and equipment.”

• Larry Clay, CEO of Pacific Coast Producers: “The

board was at fault for failing to discipline growers,

lacking a strong business orientation, displaying

favoritism towards certain growers and lacking

control over management. Acquiring failed competitors was a bad strategy, and accounting tricks

and manipulations were used....”

• Chris Rufer, Morningstar CEO: “Acquired facilities

were in poor condition and unproductive. TVG

postponed making the right decisions, lacked

strong leaders and was run by a board [of farmers],

not entrepreneurs.”

• Bill Allewelt, former TVG CEO: “The company was

taken down by the ruinous decisions from a board of

directors that seemed blinded to economic realities. ■

What went wrong? Some opinions
24 September/October 2004 / Rural Cooperatives

whether TVG could have survived as a

fruit processor, if it had divested its

tomato lines in advance of the disastrous last years of its operation. 

The new-generation cooperative

restructuring was largely unsuccessful,

in that it failed to stabilize either the

equity base or the base of raw product.

However, this move had little, per se,

to do with the bankruptcy. Rather, the

restructuring was a desperate response

to severe problems that were already in

place. The cost-reduction measures

implemented at this time were counterproductive because they were too

radical and ill-targeted, so as to negatively impact TVG’s ability to generate

revenues. The long-standing problems

of poor internal controls and lack of a

centralized information system were

never addressed.

Some have viewed TVG’s bankruptcy as a sign that co-ops are illsuited to succeed in 21st century markets. One way to address this concern

is to ask which of TVG’s problems

were due to its cooperative structure

vs. being due to market conditions or

internal problems. 

We view the acquisition of inefficient capital from defunct co-ops as

both a co-op (due to a sense of obligation to help fellow co-ops) and a management problem. The high debt-toequity ratio that TVG experienced is

common among cooperatives, and is

due to the limited pool from which

they can draw equity (namely, the

members), and members’ reluctance to

contribute to long-lived projects,

known as the “horizon problem.” The

unwillingness to terminate growers

who were no longer viable producers

for the cooperative and the dramatic

grower overpayments in the final years

probably also trace to the grower-ownership dimension of a cooperative.

Market problems were fundamentally

twofold, but neither was insurmountable. The tomato market, though growing over time, was very volatile, and the

canned fruit market was in decline.

There were several internal problems related to management and the

board. Non-strategic acquisitions of

failed competitors has already been

noted, and failure to adopt an integrated management information system

was a critical error. So, too, was the

Famalette-era purge of employees who

were knowledgeable about the food

processing business. 

Other internal problems attributable

to the co-op’s leadership include failure

to come to grips with the grower end

of the tomato business, including overreliance on cash contracts. Finally,

TVG had a persistent lack of focus on

the selling side — for example, whether

to emphasize brand or private label

sales and whether to emphasize paste

or value-added products in tomatoes.

Ultimately, we do not think that

TVG’s cooperative structure was the

major factor in its bankruptcy. The fact

that peer cooperative Pacific Coast

Producers continues to experience success supports this view. We do think

the TVG experience offers lessons for

cooperatives. 

A multi-product marketing co-op is

desirable in the sense that modern

markets prefer “full-line” suppliers.

But marketing multiple products has

the potential to create significant internal problems in terms of pooling and

director loyalty and responsibility.

TVG’s experience with its tomato

growers emphasizes the importance of

long-term grower contracts to encourage member loyalty. However, loyalty

to other cooperatives should not

replace sound business judgments. 

Finally, TVG was probably slower

in responding to changing market

forces than its competitors, perhaps

due to a cumbersome cooperative decision-making process. ■

Ultimately, we do

not think that

TVG’s cooperative

structure was the

major factor in its

bankruptcy.

• The seeds of TVG’s demise were in place prior to

the 1990s, in the form of high inventories, low productivity of assets, high operating and transportation costs relative to the competition and high debt

to equity, which inhibited needed investments in

modern plants and equipment.

• TVG was competitive in fruit, especially peaches,

but not tomatoes. TVG either needed to become

competitive in tomatoes by finding a market niche,

or else jettisoning its tomato line. Using fruit revenues to cross subsidize tomatoes was not a

viable long-term solution. 

• The new-generation co-op restructuring was

largely unsuccessful, as it failed to stabilize either

the equity base or the base of raw product. However, it had little to do with the bankruptcy. Rather,

the restructuring was a desperate response to

severe problems already in place. ■

General conclusions about co-op’s downfall
Rural Cooperatives / September/October 2004 25

What is Accelerated Genetics? 

Accelerated Genetics, based in

Baraboo, Wis., is a global provider of

bovine genetics and research, reproductive services and solution-based

animal health products. Its vision is to

be the forerunner in developing innovative technologies and exceptional services that will aid customers in achieving their ultimate herd goals. Starting

in 1941, Accelerated Genetics, formerly known as Tri-State Breeders

Cooperative, has grown from a small,

Upper Midwest cooperative to a global

marketer in more than 82 countries. 

What is the co-op’s basic business

strategy?

While much of the industry has

undergone mergers and acquisitions in

recent years, Accelerated Genetics has

remained autonomous in a shrinking

market. It was one of the first in the

Artificial insemination (A.I.) industry

to follow a path of diversification. Key

business moves have included: 1977 —

Created an Animal Health Product

Division; 1988 — Developed Genetic

Visions, Genetic Marker Research

Subsidiary; 2000 — Unveiled Global

Alliance, a marketing and technology

exchange with European and Canadian

competitors; 2001 — Joint Purchase of

World Wide Sires Ltd., a global marketing network.

How is the co-op adjusting to a

changing marketplace? 

The U.S. dairy industry is rapidly

evolving, as the numerous small herds

that once populated the Midwest, East

and West Coasts are being replaced by

larger operations that use economies of

size to modernize and stay competitive

in a volatile marketplace. This translates into fewer decisionmakers, or

fewer potential A.I. customers. Fierce

competition among the five major A.I.

firms and a handful of niche semen

providers has challenged those left. 

“Accelerated Genetics has risen 

to the challenge by relying on its

internal strength: its people,” says

Roger Ripley, CEO and President 

of Accelerated Genetics. “Success 

has come through customers willing 

to share input, leadership willing to

listen and a team of aggressive employees poised to implement new

ideas.” In four of the past five years,

Accelerated Genetics has enjoyed double-digit semen unit sales increases.

Value-added services and products

have assisted in keeping the company

profitable and growing, he noted. 

Any recent capital improvements? 

Recent capital improvements have

included the expansion of a semen distribution warehouse, expansion of

semen processing lab and the addition

of a new 70-sire housing facility. All

were completed without incurring

additional debt.

How are you ensuring future

leadership? 

The Young Producer Leadership

program was implemented in 1984.

This in-house public relations project

originally started as a “farm wife” program, but within a couple of years

evolved to a different audience. Dairy

and beef producers under the age of 40

are encouraged to participate in both

leadership and extended-learning conferences hosted around the Midwest

membership area. The Young Producer

Program is designed to help producers

develop friendships, build leadership

qualities and strengthen communication

skills through an educational supportive

network in a fun environment. The

obvious by-product of the Young

Producer program is the gleaning of

future leadership for the cooperative

delegate system. Currently, all 10

members on the board of directors are

Innovation drives 

Accelerated Genetics

FOCUS ON...

continued on page 35

Dairy and beef sires are housed in the Accelerated Genetics' Tri-West Production

facility in Westby, Wis. Above, champion bulls, such as this one, can help co-op

members improve their dairy herds. Photos courtesy Accelerated Genetics 
26 September/October 2004 / Rural Cooperatives

Jim Wadsworth, Co-op Education

& Member Relations

USDA Rural Development

ducation is a lifetime

endeavor for cooperatives, not a special event.

Is your cooperative’s

education pulse beating

strongly? Is it engaged in important

educational initiatives? 

If not, then it’s clearly time for a

renewal of your co-op education effort.

Even if your education program

appears to be running smoothly, it

still may be time to check the pulse to

make sure that its scope and resources

are sufficient for maximum benefits. 

The adage that “education is the

lifeblood of a cooperative” has always

had credence and it continues to ring

true today. Cooperative leaders

attuned to their environment should

be able to clearly see the need for coop education endeavors. 

If not, reflect on some of the recent

negative factors that are impacting

cooperatives, their members and

potential members: major business and

co-op failures; ethical meltdowns that

have rocked the business world and

hurt the public perception of all businesses — co-ops included; co-ops

struggling for effective leadership; rising competition from multinational

corporations with seemingly endless

resources; etc. 

We should also reflect on positive

factors: cooperatives expanding into

new markets; mergers are creating synergies; co-ops developing new valueadded products; renewed focus on the

producer-owned nature of cooperatives

as a marketing advantage, etc.

Both the challenges and opportunities create a critical need for a greater

understanding of cooperatives. As far

back as the 1920s, cooperative leaders

and the agricultural community developed an extensive program of education

— the American Institute of

Cooperation — to expand knowledge of

cooperatives. Even at a time of diminished resources available for cooperative

education, the need and importance for

it has not been lost today. 

Multiple initiatives needed

Like a brilliant diamond, cooperative education needs to be multifaceted. Educational initiatives should

address directors, members, employees

and the public. A good overall education program should promote understanding of the cooperative’s character,

governance, finances, policies, structure, operations, strategic efforts and

market position. 

Education efforts will vary, depending on the audience. The outline

below defines cooperative education

audiences and provides some examples

of the type of training that each audience may require or benefit from.

• Directors — specialized training;

leadership institutes; director

workshops; seminars/conferences. 

• Members (including young

cooperators) — initiation to

cooperative basics; basic cooperative instruction; seminars/conferences. 

• Employees — basic cooperative

instruction; specialized position

training. 

• General public (including youth)

— special conventions; agricultural camps; vocational agriculture; cooperative promotions.

Cooperatives should make a point

to review educational initiatives in

greater detail and scope on a regular

basis. Let’s take a snapshot.

Director education 

possibilities are vast

A recent USDA report,

Agricultural Cooperatives in the 21st

Century, says that to develop competent directors for the 21st century,

co-ops must provide them with the

type of specialized training needed to

succeed in an increasingly complex

marketing environment. This training

could include special financial or business training or courses at local colSigns of life

Have you checked your co-op’s

education pulse lately?

Cooperative education 

program initiatives 

Goal: Better understanding of how co-ops

work for co-op directors, members and

employees, as well as the general public.

This includes co-op character, governance, finances, policies, structure, operations, strategic efforts and positioning

for continued member benefits. 

Tools include:

• Workshops

• Conferences & seminars

• Publications & Web sites

• Leadership training

• Institutes

• On-line training

• Colleges, schools

• Specialized training

• In-house instruction

• Special promotions and media events

E
Rural Cooperatives / September/October 2004 27

leges or schools. They should also be

supplied with appropriate reading

materials to enhance their knowledge

of both general issues impacting their

business, and co-op-specific issues. 

Directors should attend leadership

institutes, which are highly valuable for

increasing the understanding of “big

picture” issues and which allow for

face-to-face networking and learning

from others. The Graduate Institute of

Cooperative Leadership (GICL), held

annually at the University of Missouri,

is one such institute. A number of

national and state cooperative associations sponsor leadership institutes, as

do some cooperative centers. 

Directors should also have the

opportunity, or even be required, to

attend director workshops. These provide a unique learning experience that

exposes directors to a variety of crucial

topics — both basic and advanced —

that are specific to the challenges faced

by co-op directors. Many state and

regional co-op councils and associations put on high-quality director

workshops and are honing the programs every year to make them even

more relevant. For example, the

University of Wisconsin Center for

Cooperatives (http://www.wisc.edu/

uwcc/) sponsors a number of workshops for cooperative directors. 

Large national seminars and conferences sometimes include director

workshops as well. 

Even when they do not, attendance

at such events can be highly educational and useful for directors. They often

provide cutting-edge presentations on

important issues or studies and create a

kind of open-air venue for networking

among cooperative professionals. The

Annual Farmer Cooperatives

Conference, sponsored by the

University of Wisconsin Center for

Cooperatives, is one such event.

Others include annual conventions by

national and state cooperative-related

associations.

Resources and opportunities for

director education demand the attention of cooperatives. Cooperatives

should look to cooperative centers,

state cooperative councils, universities,

departments of agriculture, national

associations, among others, for information on where and when such special programs are scheduled. 

Whenever possible, cooperatives

must encourage their directors to participate. If budget limits do not permit

sending the entire board, they should

at least send one or two directors, who

can report back to the full board on

what they learned. 

Communication of significant information between management and

directors is also essential. Management

must keep directors tuned in to issues

and circumstances the cooperative faces. 

USDA Rural Development cooperative programs library: 

http://www.rurdev.usda.gov/rbs/pub/cooprpts.htm

This library contains numerous cooperative information, research, and service reports.

Examples of publications for basic cooperative education:

• CIR 55: Co-ops 101 

• CIR 11: Cooperatives, What They Are and the Role of Members, Directors, Managers, and Employees (also has PowerPoint slides coinciding with each chapter that can be downloaded from the site...they can be modified as needed)

• CIR 5: Cooperatives in Agribusiness

A few director education resources:

• CIR 58: Assessing Performance and Needs of Cooperative Boards of Directors

• CIR 61: The Circle of Responsibilities for Co-op Boards

• CIR 62: Directors: Asking Necessary Questions

Some online educational resource sites:

• Online Cooperative Business Curriculum (A Baker’s Dozen) developed at the University of Montana-Bozeman:

http://aginternational.msu.montana.edu/Coop%20Lessons/cooperative_business_curriculum1.htm

• National 4-H Council cooperative development online youth lesson: Check-out Cooperatives:

http://cooperative.n4h.org

• Online cooperative training modules by CHS, Inc.: http://www.mbrservices.com/Training/tutorials.cfm

• Quentin Burdick Center for Cooperatives - online new generation cooperative modules:

http://www.ag.ndsu.nodak.edu/qbcc/

Quick Picks —

Some select cooperative education resources
28 September/October 2004 / Rural Cooperatives

Education tune ups

for members, staff, public

Members, employees and the public

all need to be continually educated on

the attributes of cooperatives. 

Included among members are

young cooperators — a group that

deserves special attention given that

they are the key members of the future

and will often become directors. They

should be provided the opportunity to

attend and take part in various state

and national seminars or conferences.

Group interaction will broaden their

perspectives, exposing them to ideas

and solutions being used by other coops that might work for their own.

Employee co-op education —

extending beyond normal job training

— must also be a priority. Cooperative

employees must understand their

cooperative’s unique structure and

operations, how it fits into the community and business environment, and

how it is positioned for future success.

Employees should be provided with

materials that clearly explain the cooperative, and they should be allowed

opportunities (at workshops, conferences, institutes) where they will learn

more about cooperation and the issues

facing cooperatives.

The general public is best reached

through cooperative-related promotions, special events and advertisements. Some cooperatives do an effective job in educating the public about

how they benefit their communities

and/or region. A number of farmer

cooperatives gain recognition from

their branded products or producer

relationships. Many rural electric

cooperatives and credit unions have

aggressive advertising programs that

tout the benefits of the co-op in their

operating areas. 

Cooperative presence at special

regional, state, or community events

The Association of Cooperative Educators (ACE)

held its annual institute in Montreal, Canada, in August,

where the focus included how health and social care

needs can be met through cooperatives and how

cooperative identity can be the center of business and

development success. 

About 80 educators attended the event, the theme

of which was “cooperative education: enhancing your

business, strengthening your community.” Other topics

included:

• The Social Economy of Quebec;

• Cooperative Education and Research: Where We

Are, Where We Need to Go;

• Integrating Research into Development of Cooperative Management Curriculum;

• Community Building and Cooperative Development;

• Building Democracy with On-line Communities;

• Attracting and Developing Women Leaders in

Cooperatives;

• Connecting With Youth.

One of the special attributes of the ACE institute is

the cross-border collaboration and sharing of education initiatives among members and associates. Speakers included cooperative educators from Puerto Rico,

Canada and the United States.

The ACE institute is a highly participatory event,

with numerous perspectives offered through presentations, speaker panels and workshops. Another

highlight of the annual institute is the cooperative

tours (rural and urban), where participants visit a

number of cooperatives for a first-hand learning

experience.

The institute is held annually to provide educators

with a forum to highlight programs and practices that

increase understanding, innovation and professionalism in cooperative education. The institute results in a

synergistic sharing of ideas, experiences, and thoughts

in the cooperative education arena. 

The next ACE institute will be held in Alexandria,

Va., Aug. 4-7, 2005.

ACE’s growing membership — presently 252 voting

members — consists of educators from cooperatives,

cooperative associations (local, state and national),

cooperative councils and centers, schools and universities, and state and federal government agencies. 

ACE benefits cooperative education and the cooperative movement by: 

• Promoting cooperative research: ACE promotes

cooperative research by providing forums for

researchers. 

• Developing linkages: ACE works closely with universities, cooperatives and supporting organizations to coordinate and collaborate on programs

and projects. 

• Building capacity: With foundation assistance,

ACE helps to develop future cooperative educators

by providing scholarship support for students to

the ACE institute. 

• Spreading the word: ACE responses to numerous

inquiries from cooperative educators around the

world. Its quarterly newsletter is available to all on

its Web site:

http://www.wisc.edu/uwcc/ace/ace.html ■

— By James Wadsworth, USDA Rural Development

Co-op identity among topics during annual ACE institute 
Rural Cooperatives / September/October 2004 29

provides further communication

opportunities. Employees and members can also be good resources for

educating the general public about the

co-op and its special human aspects.

Also included in the public group

are youth. Young people need to be

exposed to and taught about cooperatives, their unique business structure,

member orientation and how they fit

in the marketplace. Many youth will

have opportunities to become members, directors and employees of

cooperatives and early exposure to

cooperation will enhance the potential for future relationships. 

Vocational-agricultural schools,

state cooperative councils and state

and national organizations such as

FFA and 4-H expose youth to cooperation. Many cooperatives provide

funding and opportunities for members’ children to attend youth camps

or national association institutes.

Reaching as many children as possible

with information about the cooperative model will pay dividends in future

years to the cooperative community.

The annual National Institute of

Cooperative Education (NICE) for

youth is an example of a national

learning event with significant participation.

Cooperatives must invest

The numerous cooperative education opportunities and programs discussed throughout this article all have

continued on page 38
30 September/October 2004 / Rural Cooperatives

ithout strong, effective

communication and

education programs,

most cooperatives

won’t survive from one

generation to the next. 

Communications — be it in the

form of publications, member meetings, Web sites, annual reports or

through co-op field representatives —

is the life blood of a successful cooperative. If members don’t understand

why the co-op is taking certain actions

— or not taking them — it is only a

matter of time before apathy, dissent

and the competition erodes the membership base. 

For their outstanding efforts to

keep their members well informed 

and their cooperatives alive and well,

the Cooperative Communicators

Association (CCA) annually recognizes

some of the nation’s top practitioners

of the art of co-op communications.

This year’s awards were presented in

June during CCA’s annual communications institute in Louisville, Ky., an

event which marked the start of CCA’s

second half century of service to the

nation’s cooperative sector. 

Top award winners included: CEO

Communicator of the Year — Mark

Furth of AMPI in New Ulm, Minn.;

H.E. Klinefelter Award winner —

Patricia Keough-Wilson, recently

retired from Minn-Dak in Whapeton,

N.D.; and Graznak Award

winner — Lisa Moorhouse

of CHS Inc. in Inver Grove

Heights, Minn. 

Furth: a respected voice

in co-op and dairy industry 

When Mark Furth speaks, people

listen — especially dairy producers. For

example, a recent survey found that 97

percent of AMPI members read Furth’s

Manager’s Message column, mailed

each month to members with their

milk checks. This high readership rating is a reflection of his integrity, clarity and ability to relate the type of

information members want to hear in a

style that they can relate too. 

He was commended for building

communications into all planning and

management processes at AMPI, and

for successfully using his skills as a

one-on-one communicator to bring

AMPI members’ viewpoints into

national dairy policy discussions. 

Furth says he considers the award

recognition of the co-op’s overall commitment to communications. “I’m fortunate to represent every employee and

Furth, Wilson, Moorhouse 

win top honors for

communications excellence

W

AMPI CEO Mark Furth 

Minn-Dak’s Patricia CHS’ Lisa Moorhouse

Keough-Wilson
Rural Cooperatives / September/October 2004 31

member who has gone out of their way

to make communications a priority.”

Nominator Don Wick, a wellknown Midwest farm broadcaster and

dairy journalist, says: “Mark is a tireless advocate for the cooperative system, the dairy industry and his farmermembers.” Adds Bill Oemichen, president and CEO of the Wisconsin

Federation of Cooperatives: “Not only

is Mark an effective communicator

himself, but he is extremely mindful of

the role communications play for his

cooperative and its members.” 

After joining AMPI in 1970, Furth

rose through the ranks of the billiondollar co-op, which has 1,700 employees, becoming general manager in

1989. The AMPI corporate office is

located at the site of his first hometown job, here he started as a grocery

bagger in his youth. Furth was praised

for holding on to “the small town values he grew up with, including hard

work and honest, straight-forward

communications.” 

Keough-Wilson: voice and 

conscience of her co-op 

During its half-century of life, CCA

has included within its ranks many

outstanding communicators who have

done much to bolster the nation’s network of cooperatives. But few rise to

the status of being called “the voice

and conscience of her cooperative,” as

was Keough-Wilson. Co-op leaders

say they looked to her to help “interpret the big picture impacting the coop’s day-to-day business, using her

keen insight to present senior management with alternative perspectives.”

Keough-Wilson’s career included

stints as a newspaper reporter, publisher of her own agricultural publication

and long service as communications

director of the Minn-Dak sugarbeet

growers’ cooperative. She was communications director at the co-op from

1989 until her retirement in 2003.

During her career, Keough-Wilson

won countless awards for journalism

and communications excellence, but

she says the Klinefelter Award — presented to those who help make a significant contribution to advancing the

art of co-op communications — was

the crowning recognition of her career.

Among those nominating her was

former North Dakota Governor

George Sinner, who said that KeoughWilson was “a genius in telling the

cooperative story and in making that

story understandable, as well as believable and acceptable.” Minn-Dak once

even “loaned” Keough-Wilson to the

city government to quickly and

expertly write a proposal to help

attract an important ag processing

facility to the area. 

She was praised for consistently

demonstrating an interest in defining

communication as broadly as possible,

believing in the importance of two-way

communications and multiple

approaches to achieving goals. KeoughWilson “is willing to take risks to try

something new, but lays the groundwork carefully to ensure success.”

She directed the launch of a co-op

leadership-development program that

has become a national model.

Graduates of the program say “she saw

the need to ensure the future success

of the co-op by acting in the present...and helped us gain a vision of

how we can influence and lead our

organization in the years to come.” 

Keough-Wilson was the first

woman board member to serve on her

state’s Coordinating Council of

Cooperatives and chaired the board of

the Cooperative Foundation, which

supports a broad array of cooperativebased initiatives, and where she helped

to establish a new communications

strategy. 

Through her leadership in CCA,

including service as president, she has

been a bridge builder, pushing for the

first joint program between a regional

association of CCA and the

Association of Cooperative Educators’

Institute. More recently, she chaired

CCA’s 50th anniversary observation.

CHS’ Moorhouse excels at

multiple communications tasks 

Lisa Moorhouse has a real passion

for communications and cooperatives.

Her selection as the Graznak Award

winner recognizes her as one of the

nation’s best young (age 36 and under)

co-op communicators. She was praised

for her “creative internal communications efforts at CHS and the ability to

share an often complex cooperative

story with employees and many other

stakeholders in the co-op.” 

A co-worker said of Moorhouse:

“Even though our co-op has been

enmeshed in constant change, she has

met every challenge with a can-do attitude, professional skill and creativity.” 

Moorhouse is responsible for CHS

employee communications, including

serving as editor for the employee

newsletter and manager of the employee Intranet site. She also develops

communication strategies, including

human resources-related issues, and

works with governmental relations and

a wide range of additional communications responsibilities.

Not only does she help to inspire

CHS employees, they help to inspire

If members don’t

understand why 

the co-op is taking

certain actions — 

or not taking them

— it is only a matter of time before

apathy, dissent and

the competition

erodes the membership base.

continued on page 37
32 September/October 2004 / Rural Cooperatives

Iowa hearing examines 

key issues affecting co-ops

Iowa Senator Chuck Grassley,

chairman of the Senate Committee on

Finance, conducted a hearing in Sioux

City, Iowa, on Aug. 25 to examine legislation that would increase tax incentives for rural communities and cooperatives. Grassley called the hearing to

focus on his Heartland Investment and

Rural Employment (HIRE) Act, introduced in July. The HIRE Act proposes

a series of changes to benefit agricultural cooperatives, small businesses,

and promote affordable housing in

rural communities, among other goals. 

The bill includes creating a commission to study the tax laws pertaining to cooperatives, including

Subchapter T of the federal tax code,

which governs agricultural cooperatives but has not been updated in more

than 40 years. The commission would

study: whether the subchapter should

be modernized; the barriers to raising

equity within a cooperative; and

whether a new limited liability cooperative structure should be created for

cooperatives that would benefit from

being taxed and (for business purposes)

be treated under the more flexible

rules of a limited liability company. 

As proposed, the commission would

include cooperative experts from all

over the country and would have one

year to submit a report to the President

and Congress with its findings and recommendations.

Updates for agricultural cooperatives include:

• a modification to cooperative marketing rules to include value-added

processing involving animals;

• an extension of declaratory judgment procedures to farmers’ cooperative organizations;

• payment of dividends on stock of

cooperatives without reducing

patronage dividends;

• and the apportionment of credits,

meaning cooperatives could allow

eligible patrons the benefit of general business credits earned by the

cooperative. 

“These changes need to happen so

cooperatives can continue to compete

effectively in the world-wide market,”

Grassley said. 

U.S. Premium Beef converts to LLC;

begins test marketing natural beef 

Shareholders of U.S. Premium Beef

Ltd. (USPB) have voted to approve the

conversion from a Kansas cooperative

to a Delaware Limited Liability Co.

(LLC), effective Aug. 29, 2004. “The

LLC structure is a business platform

that better positions U.S. Premium

Beef to compete in a very dynamic

industry,” Steve Hunt, USPB CEO,

said in announcing the conversion.

“Our philosophy of financially rewarding producers who market high-quality

grading cattle through our company

will not change,” Hunt added. 

“Under the LLC structure, our

unit holders, as well as producers who

lease units to deliver cattle, will have

the same opportunity to market their

cattle through the company’s valuebased marketing system as before.”

The LLC structure creates Class A

and Class B units. The Class A units

will carry delivery rights and obligations, just as USPB shares did under

the cooperative structure. Class B

units are “investor” units with no

delivery rights. The restructuring will

allow both beef producers who want

to guarantee market access to deliver

cattle and other non-producer

investors to own units in U.S.

Premium Beef, LLC.

U.S. Premium Beef Ltd. was organized as a Kansas cooperative in 1996.

Today it is the majority owner of the

nation’s fourth largest beef processor,

National Beef Packing Co., LLC,

(NPB) which processes approximately

10 percent of the U.S. fed-beef supply

at its plants in Liberal and Dodge

City, Kan. More than 1,900 producers

from 36 states have joined USPB to

market cattle on the company’s highquality grid.

In other news, National Beef has

begun test marketing its first product

line in the natural beef food category,

with the introduction of Naturewell

Natural BeefTM, which comes from cattle given no antibiotics, hormones or

steroids during the final 120 days in

the finishing process. Cattle that qualify for the Naturewell brand are exclusively English and English cross-bred

cattle. The beef is Grade A maturity

only and has a “Slight 30” or higher

marbling score. It is a blend of Choice

and Select grade beef product. 

“While our introduction of

Naturewell is only in the test stage at

this time, we are encouraged by the

results of the extensive consumer

NEWSLINE

Compiled by Dan Campbell

Send items to: dan.campbell@USDA.gov
Rural Cooperatives / September/October 2004 33

research we’ve conducted to determine

the potential market demand for natural beef products,” Hunt says.

“Because it is a test market product,

we’re working with a small number of

USPB and NBP customer feedyards

that can commit to deliver cattle on a

weekly basis that fit the Naturewell

specifications to our plants.”

Riceland’s Richard Bell retires

in year of record sales, income 

Richard Bell, 70, credited by many

with transforming his co-op into the

world’s leading rice miller and marketer, retired July 31 after nearly a

quarter century at the helm of

Riceland Foods Inc., in Stuttgart, Ark.

He’s going out with a bang, as

Riceland expects record sales of more

than $950 million for the current marketing year, a 9-percent increase from

the previous year. The co-op also

expects to pay record earnings and

payments to its members, up 22 percent from the previous year. Total

assets and member equity will also set

new records by year’s end.

Bell’s successor is Daniel Kennedy,

who had been the co-op’s executive vice

president. Kennedy joined the co-op in

2000 after 16 years with Monsanto Co.

He is a Louisiana native and holds a

bachelor’s degree in agricultural economics from Mississippi State

University and a master of business

administration degree from Northwestern University outside Chicago.

Bell, an Illinois native, came to

Riceland in early 1977 from

Washington, D.C., where he served as

assistant agriculture secretary for international affairs and commodity programs. He also served as president of

USDA’s Commodity Credit

Corporation and as chairman of the

Federal Crop Insurance Corporation.

His early career was spent as a foreign

service officer at various American

embassies.

Bell plans to remain active in the

rice industry, including working as an

advisor to Riceland on legislation,

trade and crop research issues. He

will also continue outside activities,

including serving on the boards of

Arkansas State University, the

University of Arkansas for Medical

Sciences Foundation Fund and various other civic, educational and charitable boards. 

Riceland provides marketing services for rice, soybeans and wheat

grown by its 9,000 farmer-members in

Arkansas, Louisiana, Mississippi,

Missouri and Texas. 

Co-op buys cigarette plant

U.S. Flue-Cured Tobacco Growers Inc.,

an affiliate of the Flue-Cured Tobacco

Stabilization Corp., is paying nearly $26

million for a cigarette manufacturing

Richard Bell

Thomas W. Gray, Ph.D., rural sociologist with the

Cooperative Services office of USDA Rural

Development, is the recipient of the 2004 Rural

Sociology Society award for excellence in public service.

The award was presented at the annual professional

meeting of the Rural Sociology Society (RSS), held in

Sacramento, Calif., in August. The award is granted to

those people who have distinguished themselves in their

work roles with contributions that achieve the missions

of the Society and their applications to rural America. 

Dr. Gray was nominated, and competitively selected,

for his lifetime contributions to the generation, dissemination and applications of knowledge to agricultural

cooperatives across the United States at the university

and community levels.

The RSS is a professional social science association

oriented to enhancing the viability and quality of rural

life, communities, and the environment. Gray was cited

by the RSS for "creating an innovative agenda of research

and technical assistance — which did not exist (at USDA)

before — and built a multi-scaled approach that ranged

from understanding micro-level

factors influencing cooperatives,

to their operation and challenges

within a restructured global food

system." Gray was also called the

person most responsible for

keeping an interest in co-ops

alive among the nation's rural

sociologists. 

“Tom’s work helps us to

never forget that cooperatives

ultimately are organizations of

people, created and operated for the benefit of the members and their communities,” says John Dunn, director of

the Resource Management Division at USDA Rural

Development, of which Gray is a part. “There are myriad

human and social issues that arise out of this unique form

of business ownership, and Tom’s career has been devoted

to examining these issues and stimulating others in the

rural sociology profession to advance their understanding

of the rich meanings of cooperative behavior.” ■

USDA’s Tom Gray honored for public service to co-ops 

Tom Gray

Daniel Kennedy
34 September/October 2004 / Rural Cooperatives

plant near Roxboro, N.C., which was

formerly owned by Vector Tobacco.

The co-op, which has members in

five states, will manufacture both its

own brand of cigarettes, and will custom pack under other brands for its

customers. Co-op members will be the

preferred source for tobacco, but it will

contract with other growers for leaf if

demand requires it. Plant capacity is

about 30 million pounds of leaf. 

Lionel Edwards, general manager of

the co-op, says the goal is to add value

to members’ crop by producing a premium cigarette for a reasonable price. 

Chesapeake farmers to 

market low-carb bread

Chesapeake Fields Farmers, a

farmer-owned LLC that includes 

a co-op in its membership, and the

University of Maryland are ushering

in a new generation of bread making.

Together, they’ve created a low-carb,

low-calorie, high-protein, artisan-quality bread, which they say is unlike anything found on today’s grocery shelves. 

Slated to hit stores in September or

October, Chesapeake Fields’ breads

offer just six grams of carbohydrates

per slice — with no added calories and

no genetic modifications. “Most lean

breads on the market have a reduced

carb count of eight grams per slice,

compared to 12 for traditional breads,”

says Y. Martin Lo, an associate professor of food bioprocess engineering at

the University of Maryland. “The

problem is, these new products pack

on extra calories.” 

Lo, in conjunction with Chesapeake

Fields, based in Chestertown, Md.,

tested over 60 strains of wheat and isolated those yielding the best dietfriendly qualities when baked. Those

strains, narrowed down to two, are the

core of the company’s all-natural,

high-protein baked goods. The company is also working with Lo through

the university’s Maryland Industrial

Partnerships (MIP) program to add

science to bread making. 

“Customers want out-of-the-oven

freshness,” said Lo. “They want handmade bread that’s chewy, but doesn’t

stick to your teeth. Our goal is to

consistently deliver that quality, for

longer times on the shelf, by understanding the interaction of proteins

during the dough formation and baking processes.” 

Chesapeake Fields’ breads also offer

product identity preservation. “We’ll

be able to pick up a loaf of bread and

tell you exactly which lot on which

field it came from,” says John Hall,

president and executive director of

Chesapeake Fields. 

Chesapeake Fields plans to create

143 jobs and $52 million in revenue in

just four years at multiple manufacturing sites near Chestertown. The company’s first products will initially hit

700 retail outlets in Delaware and eastern Maryland and Virginia. MIP provides funding — matched by participating companies — for universitybased research projects that help companies develop new products. 

The farmers also received a

$250,000 grant from USDA Rural

Development. 

The mission of Chesapeake Fields

Institute is to strengthen the profitability of traditional agricultural

markets for family farms, while conserving the region’s natural and cultural resources. For more information on

Chesapeake Fields, visit www.chesapeakefields.com.

with each member offering information concerning its operations. A list of

interested parties is being maintained

and follow-up contacts are being made

by the individual members. 

“We have many attractions specific

to this area the people may want to

check out,” says Price. In addition to

the members’ farms, the state park and

Lake Walter F. George, the area has

several excellent golf courses and many

antebellum mansions in nearby towns.

Other members in the co-op include

a watermelon farmer, fishing pond

operator, other hunting plantations and

a horseback and nature trail business. 

For such a new group and new concept for Georgia, the group has

worked well together and anticipates

great things coming from their efforts.

Watermelon farmer Joyce Sanders is

happy to be involved with the group,

even though her product is only available seasonally. 

“We joined the group knowing that

we may not gain as much as others, but

we wanted to help,” she said.

Price stated that he hopes the co-op

will give the incentive to landowners to

further develop their land for outdoor

recreational activities.

“By joining together to form

Southwest Georgia Escapes, landowners can pool their resources and

knowledge to capitalize and market

resources in this area,” he says. ■

Great escapes continued from page 9

University of Maryland food researcher 

Y. Martin Lo tested 60 strains of wheat to

find the right, diet-friendly recipes for the

Chesapeake Fields Farmers. Photo courtesy

University of Maryland
Rural Cooperatives / September/October 2004 35

GROWMARK profits climb;

election reduces board size 

Growmark had net income of $29.8

million for fiscal 2004, compared to

$19 million in 2003. Sales climbed

more than $350 million, topping $2

billion. Growmark also announced that

it would be returning $25 million in

patronage refunds to members.

Helping the regional farm supply coop to the improved showing were sales

of more than 1 billion gallons of gasoline, propane and distillates, due in part

to marketing across a broader geographic area. “Member cooperatives

continue to use the Home Grown Fuels

campaign to promote both ethanol and

soy biodiesel products,” Vice President

of Finance Jeff Solberg said during the

co-op’s annual meeting in Chicago.

“Approximately 70 percent of gasoline

marketed by FS member cooperatives

contain a 10-percent ethanol blend.” 

The fertilizer division reported sales

up 3 percent, while crop protectant sales

surged ahead 5 percent. The seed division also saw sales climb. 

In the grain division, member volume

fell 4 percent. Ethanol plants in Iowa

and Missouri plus large rail shippers in

Iowa, Missouri, and Illinois, continue to

be strong competitors for grain volume. 

MID-CO COMMODITIES, which

offers commodity hedging and advisory services to member cooperatives and

their producers, had earnings of $1.3

million and will return $650,000 in

cash patronage.

GROWMARK members also elected 16 directors to its board, reflecting

a recent bylaw change that reduces the

board from 24 members. Fifteen of the

16 director were elected from six geographic zones covering all of North

America. There are multiple directors

per zone, who will serve staggered

terms of one, two or three years. One

director-at-large was selected to represent the Illinois, Iowa and Wisconsin

Farm Bureaus (which are affiliated

with GROWMARK). Dan Kelley, reelected to a three-year term, was also

re-elected chairman. 

“This board restructuring is part of

an overall governance modification

plan GROWMARK embarked on four

years ago,” says Kelley, from Normal,

Ill. “Our governance zones represent

our business base and provide for geographic expansion in the future.”

Newly elected board members

(each to a one-year term) were: Allen

Tanner of Creston, Iowa; Matt Heitz

of Farley, Iowa; John Eccles of

Durham, Ontario. Newly elected to 

a three-tear term as the Farm Bureau

director is Henry Kallal of Jerseyville,

Ill. All other directors were re-elected. 

Foremost Farms USA revolves

$4.2 million in member equity

Foremost Farms USA is revolving

$4.2 million of allocated equity and

allocated surplus back to its members.

The payments are in addition to the

cash portion of 2003 patronage, issued

in April. In total, Foremost Farms has

issued more than $6 million in cash

payments to equity holders in 2004.

The allocated equity payments will be

mailed to past and present memberowners age 72 and older who are sole

proprietors. 

“Our bottom line and balance sheet,

which look better this year for a number of reasons, allowed the board to

revolve these dollars,” said Foremost

President Dave Fuhrmann. “Foremost

Farms has not only benefited from a

better dairy economy in the last year,

but from cost-saving measures and

operational improvements.” 

Dallas, Nielsen join 

Co-op Foundation board

Cooperative leaders Terri Dallas

and Jeff J. Nielsen were recently

selected as new trustees of the

Cooperative Foundation, which represents a diverse array of cooperatives in

agriculture, housing, food, electric and

credit unions in the Upper Midwest.

Dallas, of Shawano, Wis., is vice president of information and public relations for Cooperative Resources

International (CRI), one of the world’s

largest artificial insemination organizations. CRI provides breed-leading

dairy and beef genetics to farmers in

60 countries. 

Nielsen has been the general manager of United Farmers Cooperative

(UFC) since 1999. UFC, based in

Lafayette, Minn., is a farmer-owned,

products of the Accelerated Genetics

Young Producer program.

What major challenges 

confront the co-op? 

The biggest challenges in the cattle

business today are getting cows bred

and ensuring replacement stock will be

available in the future. Accelerated

Genetics is assisting in the education,

training and organization of sciencebased estrus-synchronization protocols. Providing labor assistance and

recordkeeping technologies will be key

to giving value-added services to the

basic semen purchase. Accelerated

Genetics is also an industry leader in

studying semen sexing technologies

that might prove commercially viable

in the very near future. 

Future plans?

“Accelerated Genetics has staked

its claim with innovative ideas and

diversification to meet the needs of

customers today and into the future,”

says CEO Ripley. “Delegates, directors and management are constantly

challenged to envision the future and

focus on products and services that

will make a difference to future customers. Their enthusiasm for positive

opportunities in the industry helps to

mold the policy. We believe in our

motto: that innovation breeds excellence.” ■

Innovation drives Accelerated Genetics continued from page 25
36 September/October 2004 / Rural Cooperatives

diversified cooperative with nearly $70

million in current sales. He helped pioneer a new employee-owned, self-insurance group that not only stabilized the

cost of health care for UFC’s employees,

but served as the foundation for a new

venture that will allow farmers to participate in a self-driven health care plan.

For more than 50 years, The

Cooperative Foundation has supported

innovative cooperative development

and education projects. For more information, visit: www.coopfoundation.org. 

Michigan Sugar to buy Monitor Sugar

Michigan Sugar, owned by 1,000

Michigan sugarbeet farmers, plans to

buy Monitor Sugar Co., owned by

Illovo Sugar Ltd. of Durban, South

Africa, for $63 million. Monitor is supplied by about 600 farmers. The new

company will operate under the name

Michigan Sugar, but the co-op will

continue to market under Monitor’s

Big Chief Sugar brand, in addition to

its own Pioneer Sugar brand.

“I think it’s a good thing for the

growers here,” Jack C. Frank, a member of the board of the Monitor Sugar

Beet Growers, told the Bay City Times.

“The industry has been here 103 years

and it should stay here. For our industry to survive, we had to become a coop. That’s the trend.”

Michigan sugarbeet growers produce about $115 million worth of sugarbeets a year, 3 percent of the state’s

$3.8 billion in farm revenue. The

industry employs 1,400 farmers and

2,300 workers at five processing plants,

four owned by Michigan Sugar and

one by Monitor Sugar. 

Idaho wheat growers joining CHS

Latah County Grain Growers, a

wheat co-op in Moscow, Idaho, has

opted to merge into Primeland

Cooperatives, the Lewiston-based division of CHS Inc. The merger will end

75 years of independent operation by

the Latah growers. A co-op representative says the move was necessitated

by the federal government’s accelerated

export of stored wheat to poor nations

and the popularity of the Conservation

Reserve Program, which, when combined, siphoned off too much money.

The government’s decision to move

millions of bushels of grain overseas

during the past 18 months has cost

the cooperative $200,000 in lost storage fees. At the same time, the increasing popularity of the land reserve program has idled 35,000 acres in the

county and eliminated demand for

items that cooperative provides, like

seed and fertilizer. 

Iowa meatpacking plant closes

Iowa Quality Beef has closed its

packing plant in Tama, Iowa, and will

layoff 540 workers. It hopes to reopen

pensated for lengthier and more complicated permitting. All of these factors, including differences in overall

yearly energy production, mean that

costs and payback periods are different

for each installation. 

Co-op members own their turbines

and are responsible for financing them.

However, according to Grove, Our

Wind was able to find a number of

sources to help share the capital cost of

the turbines. Assistance included

grants by utilities, rebates by Bergey

Windpower, the manufacturer of the

turbines, and state, local and federal

government programs. 

USDA Rural Development awarded

the co-op a Renewable Energy

Systems Grant of $77,749 to help offset capital costs for each of nine turbines. 

“We were able to reduce installation costs to the members by about 80

percent for the first five turbines,

from an average of $41,000 to about

$8,000,” Grove says. “That reduces

the time it takes for each turbine to

pay for itself from about 50 years to

only seven.”

Turbine ownership & motivation vary

Four of the five existing turbines are

on land owned by private citizens or

farmers. One was built by a county

government. 

Co-op members have different reasons for participating. Doug Nelson,

who owns an 800-acre ranch in

Montana, says that, while he was

interested in turbine technology, 

the main reason he wanted a turbine

was to reduce his power costs. 

Ed Kennell, on the other hand, a

retired plumber in rural Washington,

pursued renewable energy systems as a

hobby for 30 years. “I was into clean

energy when nobody even knew what

the term meant,” he says. 

Don Marble, a Liberty County,

Mont., commissioner, says, “We have

three things out here: wheat, wind and

cows.” In an area currently in economic doldrums, he and other members of

his community were interested in wind

power as a potential source of economic development. After seeing a presentation about wind power projects in

South Dakota, Marble got serious and

started an initiative to install an Our

Wind generator, which supplies power

for county facilities. 

For Marble and his community, the

new turbine may be only the beginning.

The county is currently conducting a

survey to determine suitability for larger, utility-style wind generators. Marble

says there have already been expressions

of interest from a utility company.

Though the total amount of power

produced by both co-ops is small, such

efforts may point the way for many

more grass-roots, green power projects. Much will depend on startup

costs, which may improve in the future

with better technology and more

sources of financial assistance. 

Meanwhile, co-op members have

the satisfaction of knowing that they

are doing their part to reduce greenhouse gas emissions. And for them,

that’s enough. ■

Backyard powerhouses continued from page 19
Rural Cooperatives / September/October 2004 37

in a few months. It blames the decision

to close on the impact mad cow disease

had on beef exports. The Tama plant is

a joint venture of the Iowa Quality

Beef Supply Cooperative and American

Foods Group of Green Bay, Wisconsin. 

Wythe Willey of the beef co-op says

the closing was necessary because

American Foods Group decided not to

buy cattle for the plant anymore. Carl

Kuehne, owner and CEO of American

Foods Group, says his company had

been buying the cattle for the plant

since February. He says he doesn’t

know if his company will be part of the

Tama operation when, and if, the plant

reopens. The Tama plant, which

opened in 2003, has the capacity to

handle 1,200 hundred cattle a day.

Former Lt. Gov. Bradley

takes job with DFA 

Former New Mexico Lt. Gov.

Walter Bradley has been appointed

director of government and industry

relations for the Dairy Farmers of

America in the Southwest region.

The Kansas City, Mo.-based organization is the largest milk marketing

cooperative in the United States,

serving nearly 23,000 dairy farmers in

49 states. In the Southwest, the organization markets milk for 568 dairy

farms, which supply more than

939,600 gallons of milk to local markets each year.

Bradley says he’s a big fan of dairy

products. “This is an exciting opportunity for me and my family,” he said.

“New Mexico is the nation’s seventh

largest milk producing state, and DFA’s

dairy farmers produced more than 70

percent of that milk.” He served as

lieutenant governor from 1995 to 2002

under then-Gov. Gary Johnson. ■

her. Moorhouse relates the tale of a

CHS truckdriver who was “so incredibly proud of what he does. You could

see it in his face and hear it in his

voice. He drove 500 miles a day, hauling thousands of gallons of fuel. He

knew how he impacted hundreds of

people in his area of the country. What

an incredible honor to tell his and others’ stories to our employees and

member-owners.” 

She joined the cooperative in 1996

after receiving her BA in public relations from Minnesota State University

—Moorhead. In 2004, she earned a

Master’s Certificate in mass communications from the University of St.

Thomas. 

Moorhouse has been active in CCA

for the past six years. In 2003, she was

named volunteer of the year for her

work as chair and assistant chair of both

the publications and special projects

categories of the CCA communications

contest, as well as leading the effort to

redesign CCA’s Web site. Moorhouse

also serves on the Minnesota FFA

Foundation board of directors.

Sunkist’s Smith among 

other top winners

Other top award winners in CCA’s

2004 cooperative communications contest included: 

• Communications Programs and

Projects, Best of Class: Claire

Smith of Sunkist for the co-op’s

Web site: www.sunkist.com. 

• Writer of the Year: Richard Biever

of Indiana Statewide REC Inc.,

for a portfolio of articles;

• Photographer of the Year: David

Lundquist, CHS/LO’L, for a

portfolio of photos;

• Publication of the Year: Richard

Schweitzer, American Crystal

Sugar, for the co-op’s 2003 

annual report.

USDA’s Rural Cooperatives magazine won several awards in the contest, including first place for serious

feature articles for “Living with

Sprawl,” by Catherine Merlo, about

how some co-ops are dealing with

urban sprawl. 

USDA ag economist Julie Hogeland

won an honorable mention for co-op

education for an article titled “How

Business Culture Drives Economic

Behavior in Co-ops.” The overall magazine won an honorable mention for

best member magazine. 

For a complete list of CCA award

winners and more information about

the organization, visit: www.communicators.coop. 

CCA is a national organization of

more than 350 professional communicators who work for cooperative businesses and organizations throughout

the United States and a number of

other nations. ■ 

Furth, Wilson, Moorhouse win top honors continued from page 31

U.S. Agriculture Secretary Ann M. Veneman toured the DariConcepts plant in Portales,

N.M., in August, where she discussed trade and other issues with Rep. Steve Pearce 

(center) and DFA board member Alva Carter. The plant is a joint venture of DFA. Photo by

Pete Gibbs, courtesy DFA 
38 September/October 2004 / Rural Cooperatives

one thing in common — they require

an investment. The investment necessary is financial as well as human. The

financial investment comes in the form

of developing education programs and

materials and/or paying for people to

attend programs that others have

already set up and are operating. 

The human investment extends to

developing enthusiasm and positive

energy for programs and as well the

time investment needed for development and participation.

Cooperatives must continuously

assess their education initiatives and

then allow for appropriate investments

to maintain and improve them. The

unique nature of the human interactions necessary for strong cooperative

efforts makes multifaceted cooperative

education an imperative. ■

Several banks, including CoBank,

and associations within the Farm Credit

System and the Farm Credit Council

(the trade organization of the Farm

Credit System) have expressed opposition to the deal. In addition, a group of

FCSA stockholders calling themselves

“Farmers for Farm Credit,” have begun

organizing to oppose the sale. That

group says it is “dedicated to preserving

an American farmer-owned and controlled cooperative lender.”

AgStar makes counter bid

One concern is that if FCSA leaves

the system, people who buy Farm

Credit System bonds may begin to

question the continued financial viability of the system. If investors were to

stop buying bonds, it could force a rise

in interest rates for farmers and ranchers needing loans, says Paul DeBriyn,

president of AgStar, another Farm

Credit System bank which has tendered a counterproposal to buy FCSA. 

Under the AgStar offer, technically a

merger proposal, there would be a cash

distribution of $650 million, and the

offer’s value could rise to more than $1

billion with future cash patronage dividends. Further, by remaining within

the Farm Credit System, memberstockholders would preserve their ownership and control of the bank and

keep it headquartered in the Midwest

— at Mankato, Minn., AgStar notes. 

It is FCSA’s lack of paying patronage to members which has left it holding some large cash reserves and

reportedly made it an inviting target

for a takeover bid. AgStar, on the other

hand, has paid patronage since 1998,

including $23 million to its 12,000

members in 2003. 

In a joint letter to the FCSA board,

the CEOs of three key Farm Credit

System banks — William Collins of

AgriBank FCB, F. Andy Lowery of

AgFirst and Douglas Sims of CoBank

— are urging that the counteroffer

from AgStar be accepted, which they

say would be backed with their banks’

own $84 billion in assets.

In a letter to customers, Sims and

CoBank Chairman J. Roy Orton say:

“The sale [to Rabobank] could have an

adverse effect on the Farm Credit

System and pose a severe threat to the

cohesiveness of the only cooperative

financial institution managed to serve

rural America.” 

They also stressed that one reason

FCSA even exists today is that the

Farm Credit System invested more

than $600 million (25 percent of it

from CoBank or its predecessor) into

the Omaha Farm Credit District during the farm crisis of the 1980s. 

Sale price questioned

Orton says Rabobank’s proposal

amounts to 44 cents on the dollar of

FCSA’s book value of $1.35 billion at a

time when other rural lenders are selling for more than twice that much. 

Neil Harl, an Iowa State University

ag economist, told the Des Moines

Register that the proposed sale has

“touched off a flood of phone calls from

farmers expressing anger, frustration

and opposition” to the sale. “I’ve rarely

taken so many angry calls,” he said.

Another press report quotes John

Blanchfield of the American Bankers

Association as saying his organization

lacked enough details to comment on

the proposed sale, but that in general,

ABA supports privatization of the

Farm Credit System because it “focuses its lending on larger, wealthier borrowers, abusing its federal sponsorship.” 

Farm Credits System banks counter

that the opposite is true — that they

do, as mandated by Congress, strive to

lend to young and beginning farmers

and ranchers who they say are all too

often ignored by commercial lenders. 

United FCS, another Farm Credit

System lender which serves about 6,000

farmers and ranchers in Minnesota and

Wisconsin, has issued a statement saying the proposed sale of FCSA should

spark dialogue within the Farm Credit

System “not over who should acquire

whom...but instead on what’s best for

rural America. Rural America has

changed dramatically in the 88 years

since the system was established, and

yet its charter and authorities are essentially unchanged,” says Marc Knisley,

Minnesota Valley FCS president. “We

can and should be doing more for rural

America, and we view the recent decision of FCSA to exit the system as a

symptom of these deeper, underlying

issues.” ■

Proposed sale of Farm Credit System lender to Dutch bank ignites controversy continued from page 7

Signs of Life continued from page 29
Rural Cooperatives / September/October 2004 39

ilwaukee

teenagers

obviously

enjoyed a

good milkshake made with local

Golden Guernsey milk in

this 1945-55 era photo, used

in a USDA report of the day

on fluid milk marketing

efforts by co-ops. Golden

Guernsey, now part of the

Foremost Farms USA cooperative, is still the preferred

milk brand for millions of

Americans. But teens of

today aren’t quite so keen to

indulge their dairy cravings by pairing

up with dueling straws over a chocolate

or vanilla shake. 

So co-ops such as Foremost Farms

are offering them a wide variety of new

ways to enjoy milk snacks, such as new,

single-serve lowfat

chocolate milk drinks.

This marketing effort

dovetails nicely with

the desire of many

parents and schools

to encourage teens to

ease up on their sodapop consumption and

to instead drink more

milk and real juice

products.

The co-op’s 1-

percent fat, chocolate drinks are

sweetened with

SPLENDA®, a non-nutritive sweetener. They are being marketed under

the Morning GloryTM GG Golden

Guernsey Dairy®, and Grip It. Sip

It.TM brands. 

“In today’s society, there is widespread concern about obesity and

interest in weight loss, coupled with an

ongoing calcium crisis,” says Joe Weis,

vice president of the Foremost Farms

Fluid Products Division. “Chocolate

milk is the No. 1 selling flavored milk,

so it makes sense to provide a lowfat,

no-sugar-added alternative to address

consumers’ needs.” 

The new product has 56 percent

less sugar, 52 percent fewer carbohydrates and 47 percent fewer calories

than regular chocolate milk. It is available in pint, quart and half-gallons. 

Headquartered in Baraboo, Wis.,

Foremost Farms operates 20 manufacturing facilities and one milk transfer station for its 3,700 dairy farmermembers in Wisconsin, Minnesota,

Iowa, Illinois, Indiana, Michigan and

Ohio. The cooperative employs 1,500

people. ■

Back to the future 

Milk was cool with teens in ‘55, gets an update for ‘05 

M

Golden Guernsey milk has always been the perfect mixer for milk shakes,

as seen in this circa-1950 photo.

The staff at the Golden Guernsey General Store take a milk

break during the Wisconsin State Fair. Grip It, Sip It brand

chocolate milk appears to be the beverage of choice. Photo by

Laura Mihm, courtesy Foremost Farms USA

P A GE FROM THE PAST
40 September/October 2004 / Rural Cooperatives

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