USDA / Rural Development July / August 2012

R

u

r

a

l COOPERATIVES

Page 8

NewLife

for aLifeline
By Lee Egerstrom, Minnesota 2020

Editor’s note: Egerstrom is a long-time writer on agricultural

and cooperative topics in the Upper Midwest. This guest

commentary is reprinted courtesy Minnesota 2020, a rural

issues think tank. It is slightly abridged from the original

version, published last winter on the organization’s website

(where the full version can be read): www.mn2020.org

ar from America’s money center,

community-based, farmer-owned and

consumer-owned cooperative businesses in

Minnesota are helping create jobs and

wealth, and investing in their communities.

That became apparent in an event advisory sent by Frank

McDowell, general manager of New Vision Co-op, a

southwestern Minnesota regional agricultural co-op now

based at Brewster.

“There is a lot of strength coming from agriculture for

the last three years or so, and it is good for the whole

economy,” McDowell said. The co-op is “retiring” (paying

back) about $4 million in equity to original members who

formed New Vision in 1998, a merger of two large co-ops

in the area.

About 3,000 farmers in southwest Minnesota and

nearby border areas of Iowa and South Dakota will receive

these checks. “Our local merchants will be glad to see this

money show up on Main Street,” McDowell said.

Such actions are expected as companies, of any

ownership structure, prepare for the future and position

themselves to cope with changing market conditions and

business opportunities.

In contrast, critics of big stock corporations and highfinance note that corporations now have about $3 trillion

stashed away, not being reinvested in the economy. While

this stunts job growth and further holds back economic

progress, other critics warn that when corporations start

“investing,” much of it will likely be in merger and

acquisition (M&A) activity that won’t necessarily grow the

economy or put people back to work.

More often than not, M&A activity creates

“redundancies” and “synergies,” said Gerardo Espinoza,

executive director of the Local Enterprise Assistance Fund

(LEAF) at Brookline, Mass., in a recent interview. They

usually lead to layoffs and more unemployment and

further weakening of the economy.

That is a danger for America down the road. But that

isn’t the case with New Vision Co-op and a new merger

partner, the Wilmont-Adrian ag co-op, which merged into

New Vision on Sept. 1, or other co-ops based in

Minnesota.

Back on Wall Street, another danger is the debt being

acquired by U.S. companies, according to Associated Press

business writer Bernard Condon. In gleanings from

Federal Reserve data, Condon said companies have added

about $358 billion in cash to their holdings since the start

of the 2007-2008 Great Recession while debt increased by

$428 billion in that time.

At this point, it’s unclear how big a threat corporate

debt might represent for the national economy and how it

is being used by companies and industries. Some debt

accumulation may be nothing more than companies

responding to low interest rates from Fed policy that will

position them for more aggressive business action in the

future.

Regardless, the inactivity of Wall Street companies does

make a striking contrast to what is visible from the

Minnesota countryside. Let’s look at some recent

developments:

• Growers and food consumers in the Red Wing area

announced before Thanksgiving that they’ve hired

Sharon Becker to be general manager of the Riverbend

Market Cooperative, soon to open in the river city.

• The Good Food Co-op at Rochester is merging into the

2 July/August 2012 / Rural Cooperatives

Commentary

F

continued on page 42

Construction work progresses on New Vision Cooperative’s

Magnolia feed mill project, a $16 million elevator/feed mill slated

to begin operation in June 2013. It will create 12 jobs in its first

year of operation. Photo courtesy New Vision Cooperative

What Main Streets have over Wall Street
Features

Rural Cooperatives / July/August 2012 3

Volume 79, Number 4

July/August 2012

Rural Cooperatives (1088-8845) is

published bimonthly by USDA Rural

Development, 1400 Independence Ave.

SW, Stop 0705, Washington, DC. 20250-

0705.

The Secretary of Agriculture has

determined that publication of this

periodical is necessary in the transaction

of public business required by law of the

Department. Periodicals postage paid at

Washington, DC. and additional mailing

offices. Copies may be obtained from the

Superintendent of Documents,

Government Printing Office, Washington,

DC, 20402, at $23 per year. Postmaster:

send address change to: Rural

Cooperatives, USDA/RBS, Stop 3255,

Wash., DC 20250-3255.

Mention in Rural Cooperatives of

company and brand names does not

signify endorsement over other

companies’ products and services.

Unless otherwise stated, articles in this

publication are not copyrighted and may

be reprinted freely. Any opinions expressed are those of the writers, and do not

necessarily reflect those of USDA or its

employees.

The U.S. Department of Agriculture

(USDA) prohibits discrimination in all its

programs and activities on the basis of

race, color, national origin, age, disability, and where applicable, sex, marital

status, familial status, parental status,

religion, sexual orientation, genetic

information, political beliefs, reprisal, or

because all or part of an individual’s

income is derived from any public

assistance program. (Not all prohibited

bases apply to all programs.) Persons

with disabilities who require alternative

means for communication of program

information (Braille, large print, audiotape,

etc.) should contact USDA’s TARGET

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

To file a complaint of discrimination, write

to USDA, Director, Office of Civil Rights,

1400 Independence Avenue, S.W.,

Washington, D.C. 20250-9410, or call (800)

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

USDA is an equal opportunity provider

and employer.

Tom Vilsack, Secretary of Agriculture

Dallas Tonsager, Under Secretary,

USDA Rural Development

Dan Campbell, Editor

Stephen Hall / KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or email:

coopinfo@wdc.usda.gov

This publication was printed with vegetable oil-based ink.

p. 4

04 Disasters spur co-op formations

Louisiana co-op association helps fishermen, farmers recover following hurricanes and oil spill

By Anne Todd

08 New life for a lifeline

Cooperative effort in Iowa keeps trains on the tracks

By Stephen Thompson

14 Co-op oil mills play vital role in sustaining cottonseed value

By Bruce J. Reynolds

18 Creating a roadmap for food hub development

By James Matson, Martha Sullins and Chris Cook

22 Co-op leaders confer with White House officials

24 C-FARE meeting shows progress made in co-op goals, values

By Julie A. Hogeland

31 Can co-ops help drive global recovery?

Quebec City to host international co-op conferences

By Jane Livingston

32 CCA salutes those who excel at telling the co-op story

35 Midwest co-op centers share strategies at regional roundtable

By Alice Pickler

Departments

02 COMMENTARY

12 IN THE SPOTLIGHT

27 CO-OPS & COMMUNITY

28 UTILITY CONNECTION

37 NEWSLINE

p. 14 p. 28

ON THE COVER: When a major railway announced plans in 2009 to

abandon 28 miles of a railroad line in northern Iowa, two local farmer

co-ops and a telephone co-op joined forces with others (including

USDA) to make the investments needed to maintain a vital link in the

local economy. See story on page 8.

p. 32
By Anne Todd, Contributing Editor

anne.todd@wdc.usad.gov

espite hurricanes, drought, floods and oil

spills in recent years, agriculture and fishing

remain among Louisiana’s top-earning

industries, netting about $6.1 billion last

year. More than half of the state’s producers

are small-scale farmers and fishermen, for whom these

natural and man-made disasters have created an especially

heavy burden, since even in the best of times, achieving

economic viability can be a challenge for them.

According to the Louisiana Department of Agriculture

and Forestry, slightly more than 60 percent of the state’s

producers are classified as operating small farms, with less

than $20,000 in annual sales. Besides low earnings, small

farmers and fishermen face other barriers to sustaining their

businesses.

These barriers are especially prevalent for socially

disadvantaged, often minority, producers. Challenges include

having limited operating and investment capital and a lack of

access to credit. They also struggle more to tap state, federal

4 July/August 2012 / Rural Cooperatives

D

Louisiana co-op association helps farmers, fishermen

recover following hurricanes and oil spill

Disasters spur co-op formations

Tracy Gauff, a doctoral candidate at Louisiana State University, explains and demonstrates artificial insemination techniques used for goat breeding

before a group of Louisiana Goat Cooperative (LGC) members and other goat producers. Former LGC President Bruce Langley is to the right of Gauff.

Photos courtesy Louisiana Association of Cooperatives
and other support resources. Small, socially disadvantaged

producers also often lack the technical expertise, business

acumen and marketing skills needed to improve their income

and overall chances of business success.

Harvey Reed III is a “man on a mission” to turn things

around for socially disadvantaged small farmers and

fishermen in his home state. As the founder of the Louisiana

Association of Cooperatives (LAC), Reed knows all too well

the day-in, day-out hurdles that small and minority producers

face. He’s seen those difficulties first-hand through more than

20 years of direct experience with rural agricultural

production in Louisiana.

Reed, a graduate of Southern University and Louisiana

State University’s Ag Leadership Program, specializes in

development of co-ops and also works in agribusiness and

general economic development.

Rebounding from

Hurricane Katrina

On Aug. 29, 2005, Hurricane Katrina — one of the five

most deadly hurricanes in U.S. history and the costliest one

to date — struck southeast Louisiana. It caused widespread

destruction throughout the Gulf Coast region, but especially

in Louisiana, where almost 1,600 people lost their lives.

The impact in New Orleans was cataclysmic. The storm

surge, coupled with scores of levee failures, put 80 percent of

the city underwater and displaced hundreds of thousands of

people. The devastation extended over about 90,000 square

miles of the Gulf Coast, from Louisiana to the Florida

Panhandle. The estimated damage from Hurricane Katrina

was more than $81 billion. Louisiana’s farm economy alone

suffered about $1.6 billion in losses.

In the aftermath of Katrina, the situation was dire for

small farmers and fishermen of the Louisiana Gulf Coast.

They were in a desperate struggle to survive the ecological

and economic effects of the disaster and to keep their

businesses afloat.

Witnessing their plight led Reed to form the Louisiana

Association of Cooperatives (LAC). His goals were to: engage

in the Katrina recovery effort; reach out to disadvantaged

small farmers and fishermen and provide them with technical

assistance and resources; and to help them form new

cooperatives to collectively strengthen their operations. His

vision was for a grassroots, highly mobile and rapid-response

organization.

Reed was already deeply involved in Katrina recovery

work before the official incorporation of LAC. He initially

worked with two groups of fishermen, located on opposite

sides of the state, to assess their needs, help them secure

resources and organize as co-ops.

“Recovery and relief — that was our main focus when we

got started,” Reed says. “We realized that after the hurricane

they couldn’t do any fishing because their boats were under

water, damaged or just lost. We asked them about forming a

co-op and they agreed to do it.”

The two groups Reed

initially worked with

organized as the Gulf Coast

Fisheries Cooperative in

Hackberry, La., (see sidebar)

and the South Plaquemines

United Fishing Cooperative

in Pointe A La Hache, La. At

the time that it organized,

South Plaquemines United

included about 50

commercial fishing families

in Plaquemines Parish, south

of New Orleans. However,

the co-op is no longer active.

Reed also collaborated with

the Louisiana Disaster

Recovery Foundation —

today known as the

Foundation for Louisiana —

to mobilize emergency

assistance for his clients. The

foundation, a philanthropic organization, was established to

facilitate the delivery of resources for rebuilding efforts across

the state. Through Reed’s relationships with foundation

members, he was able to provide immediate funding to help

his clients.

LAC was formally incorporated on Dec. 21, 2007, with Reed

at the helm as executive director; its office is in Gretna, La.

Rural Cooperatives / July/August 2012 5

These shrimp pontoon barges were floated up a ship channel by Gulf Coast Fisheries Cooperative members to

save them from an approaching hurricane.
6 July/August 2012 / Rural Cooperatives

On the road to success

From the beginning, Reed was on the go, racking up miles

on his car as he traversed the Gulf Coast and moved inland

to meet with small fishermen and farmers. Early on, Reed

made a commitment that employees of the Louisiana

Association of Cooperatives would work face to face with

clients, as much as possible.

He believes that personal contact is essential to building

trust and solid relationships with clients and potential clients,

especially in situations where cultural norms may differ

between producer groups of different ethnic or racial

backgrounds.

Today, LAC has a staff of nine working with co-ops all

across the state, focusing much of its effort on African

American, Latino and Asian producers. The association also

recently began collaborating with two Native American

producer groups.

For a small cooperative association, LAC has a large

presence in the state: Reed and LAC have client relationships

in 41 of Louisiana’s 64 parishes (counties).

Oil spill impacts

small fishermen

On April 20, 2010, just 41 miles from the Louisiana coast,

there was an explosion on the Deepwater Horizon, an

offshore oil rig. The explosion triggered a massive oil spill

that wasn’t completely contained until five months later, on

Sept. 19. By that time, almost 5 million barrels of oil had

been released into the Gulf of Mexico.

The spill caused widespread damage to the marine ecology

of the region and to the fishing industry and workers that

were dependent on it. A study commissioned for the state in

October 2010 estimated that short-term losses (defined as

gross revenue losses from 2011 through 2013) to fisheries,

the fishing industry and fishermen could be as high as $172

million. The crisis also affected other parts of Louisiana’s

economy and workforce, including the tourism industry and

food processors and retailers.

Although the spill adversely affected all Gulf Coast fishing

operations, small fishermen were particularly hard hit.

According to Reed, relief was initially directed to large

operations; small fishermen had to wait longer for assistance.

Another difficulty for small fishermen was that relief claims

granted after the spill were partially calculated based on

records of past years’ catches and related data. In some cases,

small fishermen did not have formal records of their business

performance in prior years, which delayed processing their

claims.

“Not only the environment was damaged, families were

damaged,” Reed says of the oil spill. LAC staff mobilized to

help provide small Gulf Coast fishermen with relief. In the

fall of 2010, Reed met several times with representatives from

the oil industry and other officials involved in the relief effort

to help expedite small fishermen’s relief claims.

A small association

with a big audience

LAC started a newsletter for members, the Louisiana

Association of Cooperatives Weekly Update, which was distributed

by e-mail. It covered a wide range of topics of interest to

producers, such as reminders of sign-up dates for USDA

programs, alerts about upcoming regional conferences and

other ag events and cooperative extension activities. It also

carried news about imports and exports, food recalls and

international agricultural news.

The newsletter rapidly gained popularity. Members on the

distribution list began forwarding it to other small farmers

and fishermen, friends, family, coworkers — all sorts of

people working in agricultural production in Louisiana. The

newsletter even made its way to staff at the United Nations,

where it gained faithful readers. Reed reports that the

audience for the newsletter eventually grew to about 20,000

readers each week.

But producing a weekly publication began drawing away

too many resources from other important tasks for the

association. So the newsletter was put on hiatus at the end of

2011, to be retooled as a bimonthly publication. Reed says

production of the new publication is expected to start later

this year.

Support from USDA

The Louisiana Association of Cooperatives has been

awarded several competitive grants from USDA Rural

Development through its Small Socially Disadvantaged

Producer Grant (SSDPG) program. The grants help the

As part of its Recovery and Relief Initiatives, the Louisiana Association

of Cooperatives has been involved in many efforts to aid rural

communities following disasters. Here, Dillard University science

graduate students and a professor test soil for contaminates after flood

waters subsided.

continued on page 43
Rural Cooperatives / July/August 2012 7

The Gulf Coast Fisheries Cooperative is one of the original

two co-ops that joined the Louisiana Association of

Cooperatives. The co-op is located in Hackberry, La., a small

town of 1,700 people in Cameron Parish, in southwestern

Louisiana, about 20 miles from the Gulf of Mexico

Earning a living on the water is

a struggle for the members, so

Susan Meaux, her husband and

other fishers in Hackberry formed

the co-op in the hope that it

would strengthen their

businesses and increase their

access to resources. Providing

important help in the formation of

the co-op was Harvey Reed,

founder of the Louisiana

Association of Cooperatives

(LAC).

“Harvey Reed helped us from

the very beginning,” says Meaux,

the co-op’s president. “In a small

community like ours, with such a

small number of fishermen, it’s

hard to get resources. He helped us be heard and be seen.”

The Gulf Coast Fisheries Cooperative has 39 members,

primarily comprised of husband/wife teams who run small

fishing operations. Many of them are teaching their children

the family business in the hope that they can earn their living

on the water. Meaux says she married into the business.

The life of a small fisherman can be difficult; it is hard to

earn enough income to get by, Meaux says. “You can spend

19 hours a day on the water, spinning your wheels for

nothing.” Forming a cooperative — and through its

membership in LAC — has helped Gulf Coast Fisheries

Cooperative members improve their income, she says.

Beset by disasters

In 2008, the Hackberry area was devastated by Hurricane

Ike, which completely flooded the town, gutting all homes

and other buildings. Recovery from Ike has been extremely

difficult, but family and community ties are strong in

Hackberry. Meaux says that the community always steps in

to help those who are in need.

Reed and the LAC were also instrumental in directing

resources and assistance to the Gulf Coast Fisheries

Cooperative after Hurricane Ike to help members get their

businesses going again.

The Gulf oil spill dealt another

blow to co-op members, as it did

to other fishermen along the

Louisiana Gulf Coast. “Even

though it’s peak season for

seafood, fishers are barely

breaking even this year,” Meaux

reports.

With technical assistance

from LAC and the Foundation for

Louisiana, the co-op applied in

2007 for a state grant to build a

processing facility. The co-op

was awarded a $1.1 million grant

in 2008 to replace value-added

seafood storage and processing

equipment. Construction and

equipment installation were delayed due to Hurricane Ike,

but work on these improvements is currently underway.

An eye toward the future

Despite the hardships that the Meauxs and other co-op

members have experienced, they are persevering and say

they intend to keep their fishing businesses going. Being

part of a co-op and members of LAC have been two avenues

of support and resources.

Once work on the processing facility is complete, it will

help increase members’ earnings, since they will not have to

pay for processing from outside sources. Co-op members

have benefited from financial resources and training that

they likely would not have received as individual operators.

“If we hadn’t formed a co-op, experiences could have

passed us by,” Meaux says. “By being in a co-op, we can

get more done.” ■

New processing facility should

improve outlook for fishing co-op

Co-op member Eddie LeJuine heads back to port

with his daily catch of black drum fish.
8 July/August 2012 / Rural Cooperatives

By Stephen Thompson, Assistant Editor

stephenathompson@wdc.usda.gov

or many rural

communities,

railroad service is a

lifeline. Commodity

sellers and small

manufacturers need access to

efficient, economical transport to

move their products to buyers.

Trains, in most instances, are by far

the most efficient carriers.

So in 2009, when Union Pacific

Railroad (UP) gave notice of its

intent to abandon 28 miles of track

to the 4,100-population community

of Forest City, Iowa, it set off a

shockwave. Local government,

business owners, farmers and co-op

leaders got together to find a way to

keep the line open. The result was

the creation of a locally owned

limited liability corporation (LLC)

that purchased the property and

leased it to a local railway.

The rail line survived, and a vital

building block of the prosperity of

three Iowa counties was preserved.

Sparse rail traffic

sparks crisis

From Union Pacific’s perspective,

the problem was clear: there just

wasn’t enough traffic on the line to

justify keeping it in operation. As the

largest railroad in the United States,

with almost 32,000 miles of track,

UP has traditionally used big,

powerful locomotives and long trains

to achieve economies of scale. Small

trains and lightly-used rail lines don’t

fit its equipment or its business

model, and the Forest City line was

simply not economical for UP.

Many shippers along the route

weren’t able to take advantage of the

line when it was open, explains

David Kingland, president of Forest

City Economic Development and

CEO of the local bank. “Major rail

companies want to work with a

minimum 100 cars at a time, and

they don’t service the small shippers

or receivers,” he says. “If you have a

small company on the line, say an

elevator that has five cars of fertilizer

coming in, the big shippers don’t

want to deliver to that. Likewise, if a

smaller co-op elevator wants to ship

20 cars of grain out, they don’t want

to service that either. So, we had this

rail that for years had very little

traffic on it, just almost nothing.”

Even so, the news that the

railroad had applied to the U.S.

Department of Transportation

(DOT) for permission to abandon

the track caused consternation.

“Forest City is at the end of the

line,” says Beth Bilyeu, the Forest

City Economic Development’s

executive director. “We knew that if

it closed down, nobody was going to

build another one.”

F

Cooperative effort in Iowa keeps trains on the tracks

Newlife

for alifeline
Rural Cooperatives / July/August 2012 9

Kingland makes the same point.

“Railroads were established in the mid1800s in this part of the country,” he

says. “You can’t establish a rail line now.

For light use like ours in an agricultural

area, you’d never get the right of way. If

we had lost this line, it would have been

lost forever. We’d never have rail

service here again.”

Short-line railway

seen as alternative

Bilyeu saw a possible savior in the

Iowa Northern Railway, a short-line,

Class III railroad founded in 1984 to

take over part of the Rock Island

Railroad. Iowa Northern now operates

nearly 200 miles of track and connects

with six major railroads, including the

Union Pacific, and other smaller lines

as well. It serves two ethanol producers,

and its up-to-date terminal in Manly,

Iowa, is designed to handle and store

ethanol and the commodities used to

make it. And its main line comes close

enough to the Forest City line that

connecting to it seemed feasible.

Having it buy Union Pacific’s

unwanted rail line seemed the ideal

solution.

When Bilyeu ran into Iowa

Northern’s president, Dan Sabin, at a

DOT conference, “I did what any good

little development person would do,”

she chuckles. “I said to him, ‘why don’t

you buy this rail line?’”

Sabin was interested, but he had a

problem. Because traffic on the line was

so light, he wanted some assurances

that his company would get enough

business to make taking it over worth

the risk. So he offered an alternative. If

a group of local investors could

purchase the line, Iowa Northern would

lease it from them and operate it.

Sabin figured that if a local group,

especially shippers, bought the line,

they would be committed to using it.

The railroad even offered to sweeten

the deal.

“What really made this work,” says

Bilyeu, “is that Iowa Northern said if

we could raise a portion of the money

as investments, Iowa Northern would

guarantee that the lease payments

would cover the debt servicing. Well,

now we have a ball game.”

Potential seen in

‘orphaned’ rail line

Joshua Sabin, Dan’s son and the

administrative officer of the railroad,

says that the company saw potential in

the rail line. “They had good customers

without good rail service. We had good

service and connections.” Moreover, the

railroad had completed a similar deal

several years before when it acquired a

branch line to Oelwein, Iowa — a town

similar to Forest City, although, says

Sabin, that project was not as large or as

complicated as the Forest City

partnership turned out to be.

Short-line railroads can offer better

service to small customers than the

The Iowa Northern Railway operates 200 miles of track, including 28 miles of rail serving Forest City, Iowa, that otherwise would have been

abandoned in 2009. USDA Rural Development contributed $600,000 through its Rural Economic Development Loan and Grant (REDLG) program to

help maintain service on the rail line. Photo courtesy Iowa Northern Railway
10 July/August 2012 / Rural Cooperatives

giant, main-line companies, says Sabin.

“The big, Class I railroads typically

focus on moving high volumes long

distances. That’s what they’re good at

doing. We can focus on a highly

personalized plan — on moving the

customer’s goods to where the market

offers the best return. Our whole model

is serving the customer, making sure

they’re happy and giving them the

options to make money and ship more.

That’s how we’ve become successful.”

Sabin says that his railroad’s good

working relationship with Union

Pacific, which connects with Iowa

Northern at Manly, is another plus for

his customers. “We have synergies with

UP,” he says. “We have a partnership

with them on transporting wind turbine

components, with a distribution site at

the terminal. That means it’s easy for us

to put together transportation packages

to benefit our clients.”

Complex deal takes time

While it seemed to be a match made

in heaven, putting the deal together was

anything but smooth. Finding the

investors took several months.

“We did a private placement only to

qualified investors,” says Bilyeu. To

participate, an investor had to have an

annual income of at least $250,000, or a

net worth of at least $1 million.

Participation was offered in $25,000

units, and letters invited potential

participants to presentations held jointly

by Forest City Economic Development

and Iowa Northern.

The project soon raised $1 million in

equity, against a total expected cost of

$2 million. Two local cooperatives,

MaxYield of West Bend, Iowa, and

Farmers Cooperative Association of

Forest City, were major investors, along

with Winnebago Industries, which

manufactures recreational vehicles in

Forest City. A nearby telephone

cooperative, Communications One of

Kanawha, Iowa, also invested, as did

nine individuals, including farmers and

business owners.

It was the rest of the deal that caused

headaches. It required negotiating with

two major railroads, shepherding two

government loan applications to

completion and untangling the

complicated web of land deeds and

easements that made up the right-ofway. That took two years. “I never

thought it would take this long,” says

Bilyeu. “Not in my wildest dreams.”

Pivotal to the project was making

agreements with two giant railroads.

Union Pacific owned the line, and

Canadian Pacific Railway (CP) owned

20 miles of track the trains would have

to use if they were to connect with Iowa

Northern’s main line at Nora Springs.

“When you’re dealing with major

railroads, they are so large and so

bureaucratic that it’s difficult to

negotiate a deal with them,” says

Kingland. “This transaction was very

small and didn’t mean anything to

them. It was a very difficult thing to

maneuver; it probably would have been

a lot easier for Union Pacific just to

shut down the line. And to make our

railroad viable, we had to get trackage

rights with Canadian Pacific. It took

many months to get an agreement with

CP. So we had those two issues to deal

with.”

“Before the sale could be completed,

title to the 28-mile-long right-of-way

had to be established. “Title work is

difficult,” Kingland says, “because some

of the land involved is railroad property,

and some of it is easements. And often

there are easements on the railroad

right-of-way from utilities and

telephone companies, and so on, and

you have to really check those out.”

USDA, Iowa help

with financing

Help with the massive

documentation requirements was

provided by a local business attorney

and CPA, both of whom agreed to defer

being paid until the deal was finalized.

“Finding the right attorney who didn’t

represent any of the entities we were

dealing with was a problem,” admits

Bilyeu. The local attorney also

recommended a securities attorney

based in Minneapolis, Minn.

“Bootstrapping a project like this can

be difficult,” says Bilyeu. “It took a

considerable amount of time and

money. Forest City Economic

Development fronted quite a bit of

money to keep this going.”

The total estimated price of the deal

was $2 million. Of that amount, $1.5

million would go to purchase the rightof-way from Union Pacific, and another

$500,000 was earmarked to construct a

switch connecting the track to the

Canadian Pacific line. The remaining

$1 million came from two, zero-percent

interest government loans: $400,000

from the Iowa Department of

Transportation, and $600,000 through a

USDA Rural Development Rural

Economic Development Loan and

Grant (REDLG).

The USDA loan was sponsored by

Forest City’s local telephone co-op,

Winnebago Cooperative Telecom

Association of Lake Mills, Iowa. The

co-op took responsibility for making

and servicing the loan (see sidebar).

“That was a nice, brave step by the

board,” Bilyeu says.

“As wonderful as those government

loans are, we knew that they take time,”

says Bilyeu. “So we got a $1 million line

of credit with a local bank as a bridge

loan. We had to meet all the

“There’s a saying in economic development

that each project blows up a minimum of

three times. This one blew up so many times I

lost count,” says Beth Bilyer, Forest City

Economic Development’s executive director.
Rural Cooperatives / July/August 2012 11

underwriting requirements.”

It helped that David Kingland was

the president of that local bank

(Manufacturers Bank and Trust) and

that Iowa Northern also guaranteed the

line of credit. “The bank did the bridge

loan on the faith that we would get the

financing,” says Kingland. “But we

structured it so it could have served as

permanent financing, with a 10-year

amortization, if the loans didn’t come

through.”

Under the terms of the agreement,

Iowa Northern will purchase the rail

line at the end of 10 years, when the

financing is paid off. The investors then

will get their money back, plus 4

percent interest.

“There’s a saying in economic

development that each project blows up

a minimum of three times,” says Bilyeu.

“This one blew up so many times I lost

count.”

But persistence paid off. The

headaches and frustrations all came

good on Nov. 21, 2011, when Iowa

Governor Terry Branstad rode in an

Iowa Northern locomotive that cut the

ribbon inaugurating the new North

Central Iowa Rail Corridor.

Railroad attracts new business

The new line has wasted no time

bringing new opportunities to local

businesses. “Now that we bought the

line and have a short-line operator

that’s willing to serve the customers

along the track, we’ve had more cars

shipped in eight months than we had

shipped in the previous eight years,”

says Kingland. “The freight rates are

much better than what UP could offer.

And, of course, the alternative is

trucking — rail is so much more

economical.”

Harry Bormann, MaxYield

Cooperative’s grain team leader, agrees.

“We’ve been very impressed with the

Iowa Northern’s handling of that rail

line and the service we’ve received,” he

says. The line is already saving the coop money, he adds, because it enables it

to ship grain to the important Cedar

Rapids market by rail, instead of truck.

The short line’s flexibility and

willingness to handle smaller trains is a

big asset, Bormann says. “They’re able

to react much quicker; they’re much

more nimble than the major carriers.

It’s enabled us to take a location that

had a good 25-car rail siding and use it

without having to expand it to 100 cars,

like the UP and some of the other

major railroads require.”

Bormann says that he was “skeptical

at first” about the co-op’s investment,

but now says: “We feel that the payback

will be fairly rapid. Iowa Northern has

provided us with good service and good

rates. We’ve moved almost 100 cars a

month since March on that line.”

Kingland sees bigger possibilities for

the future. “It really gives us an

opportunity to do some development

along the rail line,” he says. “It may be

agriculture; it may not. Agribusiness is

the biggest thing around here, of

course, but there’s also a lot of wind

energy in the area and other kinds of

industry as well. At this point, it doesn’t

look like a huge deal in terms of

economic impact yet, but it sure has the

potential for it. It has the potential to

be a lot bigger.”

Iowa Northern’s Joshua Sabin is

happy with the outcome, too.

“We would have preferred it to move

a little quicker,” he says. “But the

businesses and communities up there

are really excited to see trains serving

the area, seeing the railroad back in

town. And we’re happy to be that

partner. It’s a really neat project, it just

makes sense. It’s fun to watch it grow

and mature. We’d definitely look at

duplicating it in the future.”

Asked if he thinks it’s a model for

other short-line railroads to pursue, he

says: “Absolutely!”

Kingland has some advice for other

communities contemplating a similar

project: “Be very patient, and don’t give

up. We heard the word ‘no’ several

times. But we kept working. And

eventually, we got a deal.” ■

USDA Rural Development’s REDLG (Rural Economic

Development Loan & Grant) program provides funding to

rural projects through local utility cooperatives or other

utility organizations.

Under the RED loan program, USDA provides zerointerest loans to local utilities which, in turn, pass the funds

on to local businesses for projects that will create and retain

employment in rural areas. The ultimate recipients repay the

lending utility directly. The utility is responsible for

repayment to the agency.

Under the RED grant program, USDA provides grant funds

to local utilities which use the funding to establish revolving

loan funds. Loans are made from the revolving loan fund for

projects that will create or retain rural jobs. When the

revolving loan fund is terminated, the grant is repaid to the

agency.

For the North Central Iowa Rail Corridor, USDA provided a

$600,000 RED loan package to Winnebago Cooperative

Telecom Association of Lake Mills, Iowa, which made and

services the loan to North Central Iowa Rail Corridor, LLC.

REDLG lenders are prohibited from becoming investors in

the projects they finance. ■

How a REDLG works
rian Henehan recently

retired from his

position as senior

extension associate and

program leader of the

Cooperative Enterprise Program at

Cornell University. Henehan was

responsible for developing and

delivering an educational program for

senior management, directors, members

and staff of cooperative businesses. He

conducted applied research on

cooperative organizational behavior,

marketing and decision making.

Henehan received national

recognition in 1995 for his work in

cooperative education from the

National Committee for Cooperative

Month. He has served as secretary of

the Northeast Cooperative Council, a

nonprofit organization serving rural

cooperatives in New York and New

England since 1990. During his tenure,

the Council developed a newsletter,

Cooperative Notes, and designed the

“Cooperative Means Business”

educational program for co-op

employees. He also expanded

programming for future leaders

through Council members hosting a

conference and by enhancing

educational programming for managers

and directors through collaboration

with the Springfield Bank for

Cooperatives and, later, with CoBank.

Henehan encouraged Cornell

University to host boards of directors of

cooperatives to meet on campus to

learn about current research relevant to

a variety of farm and agricultural

businesses.

His involvement in national

initiatives included serving as a member

of the National Rural Cooperative

Development Task Force, which helped

to secure funding for rural cooperative

development centers authorized in the

1990 Farm Bill. As a founding member

of the eXtension Community of

Practice on cooperatives, he helped

create on-line educational resources on

a range of topics related to cooperatives

at: www.extension.org/cooperatives.

Question: What was most rewarding to

you about devoting your career to

working with cooperatives?

Henehan: As an economist, I have been

impressed with the variety of ways that

cooperatives can generate economic

value for members that result in

improved conditions for them as well as

their communities.

Q. What was the most frustrating

aspect of working with co-ops?

Henehan: Although democratic control

is one of the strengths of the

cooperative model, group decisionmaking can be slow and tedious.

Sometimes “hidden agendas” or

personality conflicts can make the work

a bit frustrating. However, I remain

impressed with the high level of

engagement, integrity and commitment

that cooperative leaders exhibit.

Q. What is lacking in cooperative

education today, and how can the need

be met? Are we losing or gaining

ground at university level?

Henehan: I fear that that as federal and

state governments face tough economic

times, the level of budget cuts for

publically funded education and

government agencies may cause us to

lose some ground. Cooperatives and the

agricultural-industry have relied heavily

on the land grant university system and

12 July/August 2012 / Rural Cooperatives

In The Spotlight

Brian Henehan

Senior Extension Associate, Cornell University

B

Brain Henehan (left) discusses co-op issues with Ed Schoen, a director with

Dairy Farmers of America, and Dan Wolf (center), board chairman of

Upstate-Niagara Cooperative, during a recent Northeast Cooperative

Council annual meeting.
USDA to produce talented

students/employees, to conduct relevant

applied research and to provide

outreach to farmers and industry at a

very low cost to end-users. However,

the taxpayers have spoken, and all publically funded activities are under the gun.

Most of the recent endowments

being received by universities to replace

some of the lost public funding are

generated by gifts from wealthy

individuals. Cooperatives can be at a

disadvantage in this regard, in that by

design, they are not created to generate

a high level of individual wealth.

Although a number of cooperatives

through foundations or other strategies

are helping to support cooperative

education and research.

Q. You wrote a paper: “Questions co-op

directors should be asking management.” Which of those questions do you

think are most critical?

Henehan: I was co-author of the paper

with Professor Bruce Anderson, my

mentor at Cornell, who came up with

the idea for the paper. In our work with

boards of directors, we often encouraged directors to ask the “right” questions in a productive manner. Finally,

we decided to write a list of questions

and suggest how to best ask them.

It is difficult to single out one or two

questions, but two areas come to mind.

One is creating value for members,

which can be addressed by asking: “Are

we the market of first choice for

members? If not, why not?” We also

emphasized the importance of

effectively communicating a welldefined vision, mission and measurable

objectives, as tested by this question:

“Do employees and members

understand the cooperative’s vision,

mission and objectives?”

Q. What lessons can co-op leaders learn

from the failure of Agway (or other

large co-op failures)?

Henehan: Professor Anderson and I

wrote a paper, “What Went Wrong at

Agway.” Although it was never

published, it was circulated extensively

online. Some of the lessons I would

suggest are:

• Make sure your cooperative’s delivery

system for serving the members of

today (and tomorrow) is current and

relevant. To achieve this relevance,

ongoing investment is needed and you

must understand how your members’

operations are changing.

• Avoid having to spread out

management talent across a wide

range of enterprises that may exceed

your “core competencies.”

• Don’t try to be the “safety net” for all

producers in your territory. The

primary focus should be on your

current members and members of

tomorrow.

• Continue to ask these questions:

“What business areas of your

cooperative will be obsolete in three

to five years? Is the cooperative being

aggressive enough in closing or

divesting from losing operations?”

Q. Are co-ops as relevant in today’s

economy as they were 50 years ago?

Henehan: I believe the cooperative

model is more relevant in today’s

economy. In tough economic times,

with less public resources, the mutual

self-help strategy of cooperatives

becomes very valuable and relevant.

Q. Are there consistent areas where you

feel co-ops are “missing the boat”?

Henehan: Today’s cooperatives need to

do a better job of explaining the value

of being a co-op member, as well as

investing in a cooperative. The returns

can be more difficult to measure than in

an investor-oriented firm.

Given the high rate of farmers and

cooperative employees retiring over the

next 10 years, cooperatives will be

challenged (as will many ag-related

businesses) to attract the needed talent

at all levels of the organization: boards,

management and staff. Farmer

cooperatives have traditionally been

primarily led by white males; moving

diversity ahead at all levels can create a

wider pool of talent to draw from.

Q. What areas do you see as having the

greatest growth potential for

cooperatives in the Northeast? What

role can the Northeast Co-op Council

or extension play in promoting new or

expanded co-ops?

Henehan: Many changes are occurring

in today’s food system. New products,

innovative distribution channels,

changing consumer demand can all

present a number of opportunities for

groups of producers, manufactures and

consumers to cooperate for their

mutual benefit. The Council helped

start the regional rural cooperative

development center — the Cooperative

Development Institute — which works

with start-up cooperatives.

The Council can help stimulate

discussion and analysis about growth

potential for established cooperatives

and encourage Cornell University and

other universities to remain engaged in

the world of cooperative education and

research. Cornell has a rich legacy of

working with cooperatives dating back

more than 100 years to Professor

Liberty Hyde Bailey’s work with the

Country Life Commission and rural

cooperative development.

It is important to continue to build a

knowledgeable group of Extension

educators familiar with how

cooperatives succeed, as well as

understanding the limits and the power

of the cooperative model.

Q. What are the most pressing issues

facing cooperatives for the next five

years?

Henehan: Generating adequate capital

to fund assets and resources remains a

pressing issue. Understanding and

practicing sustainability as climate

change becomes more critical is a

pressing issue for all of us, as is

acquiring and retaining talented people

at all levels — as cooperative directors,

managers, staff and members. Cooperatives have the capacity to successfully

address all of these issues. ■

Rural Cooperatives / July/August 2012 13
14 July/August 2012 / Rural Cooperatives

Bruce J. Reynolds, Ag Economist

Cooperative Programs

USDA Rural Development

bruce.reynolds@wdc.usda.gov

ottonseed has long been

a valuable byproduct

for cotton producers

and their cooperatives.

From 2000-2009,

cottonseed contributed 15 percent to

annual farm income derived from

cotton production. That was up from a

12 percent average during the 20 years

from 1980 to 1999 (Ash).

Cooperative cottonseed processors

handle about 30 to 35 percent of the

crop of upland cottonseed. Their

involvement has a market-wide impact

in sustaining the value of cottonseed,

generating benefits that accrue to

members as well as to all cotton

farmers. This article discusses the

mechanisms of the cooperative impact

and how it has changed in the

cottonseed industry.

Gaining market share

Farmers and cooperative cotton gins

began establishing oil mills for crushing

(processing) cottonseed after the

formation of the Federal Farm Credit

system in 1933. By the 1950s, cooperative oil mills started to gradually

establish a significant market share, as

measured in 10-year intervals in Figure

1. Reports of cooperative returns to

members were disseminated to other

farmers and cotton gins (Burgess)

(Perdue). This informationdisseminating role of cooperatives was

conceived by E. G. Nourse as a

“competitive yardstick,” that pressures

non-cooperative agribusinesses to pay

competitive prices to farmers. These

firms would pay higher prices lest a new

cooperative oil mill would be formed.

By the 1980s, the role of cooperative

oil mills began to change from the

competitive yardstick to that of

sustaining the value of cottonseed.

This change occurred because many of

the farmers and cotton gins that in the

past had exclusively sold to oil mills

began to increasingly sell to the

emerging market for unprocessed

cottonseed as a dairy feed.

C

insustainingcottonseedvalue

Co-opoilmillsplayvital role

Cottonseed now contributes about 15 percent of annual farm income for cotton growers, thanks in large part to the increased share of the crop that

is processed by cooperatives. Opposite page: tanks of cotton oil outside Lubbock, Texas.
Rural Cooperatives / July/August 2012 15

Cottonseed basics

Cottonseed is a byproduct from

ginning harvested cotton to produce

marketable bales of cotton fiber. About

800 pounds of cottonseed are produced

from a bale of cotton. Prior to the late

19th century, about 2 percent of the

cottonseed crop was needed for use as

planting seed; the remainder was

regarded as waste. Technological

breakthroughs in the 1890s enabled

cottonseed to be processed into edible

oil and protein feed; other marketable

cotton byproducts include seed hulls

(also used for feed) and linters fiber

(very short, fine fibers that are used in

making stationary and other products).

After 1890, hundreds of local oil mills

operated to make cottonseed the largest

source of edible oil in the United

States, until losing that distinction to

soybean oil in the 1940s (Perdue).

The members of cooperative oil

mills are cotton gins, many of which are

also cooperatives. The cotton gins

distribute returns from cottonseed to

their farmer-patrons. Earnings of

cooperative oil mills may vary greatly

from one year to the next, not only due

to changes in demand for products and

for whole seed as a dairy feed, but also

because the annual production of

cottonseed is determined by the size of

the cotton harvest. The annual

cottonseed supply in recent years has

ranged from about 5 million to 8

million tons. As a byproduct,

cottonseed lacks a supply response to

market demand, so adjustments fall

entirely on changes in prices.

Formation of

cooperative oil mills

Efforts were made in the early 20th

century to establish cooperative oil

mills, but the amount of borrowing

necessary to finance such projects was a

barrier. The machinery and equipment

is capital intensive and substantial

seasonal loans are required for

purchasing cottonseed during the

harvest period. By contrast, soybeans

can be procured throughout the year

from grain elevators.

The formation of the Federal Farm

Credit System in 1933 was a turning

point. Federal Farm Credit included a

network of Banks for Cooperatives that

were active lenders for oil mill start-ups

and worked closely with these

cooperatives in on-going financial

planning for maintaining efficient

operations (see sidebar).

Steady expansion occurred, and by

1940 seven cooperative oil mills were

operating (Burgess), growing in number

to 13 by 1950 (Perdue). After that the

pace of start-ups slowed. By 1960, there

were 14 cooperative oil mills. From

1970 to 1980, the number of co-op oil

mills had stabilized at 17, as indicated in

figure 1. This pattern of entry by

cooperatives into a market, which

eventually slows and then levels off,

conforms to the model predicted by

Nourse. As the “yardstick” increases

competitive pressure to raise farm

product prices, Nourse believed that

the incentive for establishing more

cooperatives diminishes.

By 1990, the competitive yardstick

from cooperative processing was no

longer an operative market mechanism.

Oil mills, including cooperatives, were

exiting the industry as the demand for

cottonseed as a dairy feed expanded.

Industry downsizing

In the 1980s, dairy nutritionists

identified the benefits of using whole,

unprocessed cottonseed as a cattle feed.

Prior to the 1980s, about 95 percent of

cottonseed production was processed by

oil mills. In Figure 2 (showing the

years 1980 to 2011) cottonseed supply

is the annual crop plus beginning

inventory, less ending inventory. For

the 1970-1979 time period, the

inventory adjustments were not

recorded; instead, “sales of cotton-seed

to oil mills” was

the reported

annual supply.

Figure 2

shows that the

first significant

increase in whole

cottonseed as a

cattle feed

occurred in 1979.

Prior to that year,

the residual

amount that was

not crushed was

used as planting seed. By 1999, less

than half of the cottonseed crop was

crushed and during the past decade it

has averaged about 40 percent.

The first oil mills to exit the industry

were those that had not stayed current

with processing equipment and,

therefore, had comparatively high

operating costs. Based on performance

surveys of cooperative oil mills, the

least efficient processors had about $15

to $20 per ton higher manufacturing

costs than the most efficient mills
during the late 1980s (USDA). By 1990, the number of

cooperative oil mills had dropped to 10, down from 17 in

1980.

Figure 1, however, shows that with the exception of 2000,

non-cooperatives were exiting the cottonseed crushing

industry at a faster rate than were cooperative mills, as

indicated by their share of the crush at each 10-year interval.

Cooperatives sustaining cottonseed value

The value of cottonseed is now determined by both the

dairy feed and cottonseed product markets. The prices per

ton of cottonseed sold in these two markets tend to converge,

but will typically vary due to changing market conditions.

Payment for cottonseed works differently in a cooperative

system. Instead of offering a spot-market price, co-op

members receive an advance on delivery and a final payment

at the end of the fiscal year.

Depending on market conditions, oil mills often sell some

cottonseed to dairy feed buyers. But, if none of the

cottonseed crop were processed, prices would plummet. Only

a major expansion in the U.S. dairy herd could offset the

large price decline that would occur without the market

demand for processing cottonseed. Crushing provides a

critical market balancing function that sustains the value of

cottonseed. While all active oil mills contribute to sustaining

the value of cottonseed, cooperatives have taken a larger role

in processing the annual crops.

The share of the crush performed by five cooperatives in

2010 was about 60 percent (figure 1). However, this is an

underestimate. The total cottonseed crush data includes the

processing of pima cottonseed in California by a noncooperative oil mill. This type of cottonseed lacks linter

fibers and cannot be fed to dairy cows without special

processing. As a result, most of it is crushed.

Oil mills that crush upland cottonseed, by contrast, have a

price impact on the dairy feed market. If the volume of the

pima crush were removed from the data, the cooperatives’

share as indicated in Figure 1 for 2010 would be larger,

possibly 65 percent or higher.

Impact of cooperatives

The involvement of cooperatives in the cottonseed

processing industry was an important milestone in improving

returns to U.S. cotton farmers. Successful entry of a few

cooperatives during the 1930s encouraged more start-ups

until the early 1980s. Their history is an example of the

Nourse model of how cooperatives provide additional

competition to the benefit of farmers.

The development of the dairy feed market for cottonseed

became another avenue to boost earnings for farmers. Prices

for cottonseed in the dairy feed market gain support from a

successful, though smaller, oilseed milling industry.

16 July/August 2012 / Rural Cooperatives

continued on page 43

Fig. 2 — Cottonseed supply and crush, 1970-2011

Cottonseed supply

Crush

Sources: USDA/Economic Research Service, Oil Crops Yearbook 2011

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

19701972197419761978198019821984198619881990

1992199419961998200020022004200620082010

6,000 Tons

5,000

4,000

3,000

2,000

1,000

0

1950 1960 1970 1980 1990 2000 2010

U.S. crush Cooperative crush (2010 estimated)

45%

53%

34%

17% 27%

8%

60%*

17 mills 6 mills 5 mills

10 mills

17 mills 14 mills

13 mills

Fig. 1— Cooperative share of U.S. cottonseed crush,

1950 to 2010 Tons

Sources: Perdue, Dunn and USDA
Rural Cooperatives / July/August 2012 17

An independent business can gain perspective on its

own economic performance by participating in

comparative performance studies with similar

businesses. Conglomerate firms with multiple foodprocessing locations and retail chain stores have their

own internal comparative studies of all similar operating

units.

In contrast to conglomerates and chain-stores,

cooperatives often operate at a single or possibly a few

locations and have no means of comparing operating

results. Lacking multiple operating locations is not

necessarily a competitive disadvantage, but these co-ops

often lack data for comparative performance analysis

with other independent cooperatives.

Cooperative oil mills are an example of a group of

businesses that benefited by having access to

comparative performance reports. During the early years

of Farm Credit and the Banks for Cooperatives, both

cottonseed and soybean processing cooperatives

participated in annual performance studies. The Farmer

Cooperative Service (FCS), as a part of Farm Credit until

1953, maintained these annual reports, including

comparative performance studies for cooperatives in

other industries, such as dairy.

Starting in 1948, the performance reports were

presented at annual meetings for cooperative cottonseed

and soybean processors; a joint annual meeting of

oilseed processors was begun in 1955 (Perdue). These

meetings involved participants sharing ideas on why

some had, for example, higher or lower costs than

others.

In addition, the Banks for Cooperatives held periodic

meetings that focused on comparisons of financial data

for oil mills. Discussions about specific areas of

performance evolved into a broader strategic dialogue as

the managers of the cooperative oil mills developed

familiarity and trust in one another.

The strategic dialogue resulted in some successful

joint projects. In 1962, several of the soybean and

cottonseed oil mill cooperatives formed a common

marketing agency for vegetable oil: Soy Cot Sales Inc.

They worked with Soy Cot to lease port facilities for

exporting soybean and cottonseed oil.

Merger creates AGP Inc.

By 1983, the structure of the soybean processing

industry had become sufficiently concentrated that

several cooperatives decided to merge, forming AGP Inc.

The comparative performance reports were a useful

source of information in planning this large-scale merger.

USDA’s Cooperative Programs worked with a consulting

firm on the study to establish AGP.

Soy Cot continued to provide marketing services for

the cottonseed processing cooperatives until the late

1990s. The largest cooperative cottonseed processor,

PYCO Industries Inc. in Lubbock, Texas, extended its

operations to make a fully refined product that can be

sold directly to customers for cooking oil. With only a few

other cooperative oil mills in operation, Soy Cot closed

and USDA’s comparative performance reports ended in

1999.

Oilseed processing was one of the earliest sectors

where cooperatives participated in comparative

performance studies. Many other industry sectors can

benefit from such studies. For example, food retailing

cooperatives and farmer-owned bio-energy businesses

are participating in comparative performance studies

managed by CoopMetrics, a cooperative that specializes

in this service.

USDA Rural Development’s Cooperative Programs

maintains a series of benchmark financial ratios for

cooperatives that are included in its annual co-op

statistical survey. Cooperative accounting firms are also

a source for starting or participating in a comparative

study of similar cooperatives.

Comparative studies are not just an exercise in factfinding and analysis; when presented and discussed at

meetings, they provide a forum for strategic dialogue.

On-going dialogue is the most effective way to utilize

comparative data and for cooperatives to develop a

sense of how to modify this or that “best-practice” to fit

their conditions and member priorities. ■

Comparative performance reports

help co-ops learn from peers
18 July/August 2012 / Rural Cooperatives

Creating

a roadmap

forfood hub

development

Editor’s note: James Matson and Martha

Sullins are consultants with Matson

Consulting, Aiken, S.C. Chris Cook is

executive director of the Virginia

Foundation for Agriculture, Innovation

and Rural Sustainability, Richmond, Va.

This article is excerpted from a

forthcoming USDA cooperative research

report: “The Role of Food Hubs In Local

Food Marketing,” available from USDA’s

Cooperative Programs office by midAugust. To order a hard copy, send an email to: coopinfo@wdc.usda.gov, or call

(202) 720-8381. It can also be downloaded

from the Internet at www.rurdev.usda

.gov. Financial support for this research

was provided via a Cooperative

Development Research Grant from USDA

Rural Development.

By James Matson, Martha Sullins and Chris Cook

Food hubs and growing demand

for local foods are making it

possible for more new farmers to

get started and more co-ops to

launch. Photo courtesy Agriculture

and Land-Based Training

Association.
Rural Cooperatives / July/August 2012 19

round the country, food

hubs are building

bridges to help connect

producers of local foods

with a growing base of

consumers seeking home-grown foods.

Food hubs are developing scale

efficiency and improving distribution to

geographically dispersed consumers,

including households, retailers and

wholesalers.

USDA’s working definition of a food

hub is: “A business or organization that

actively manages the aggregation,

distribution and marketing of sourceidentified food products, primarily from

local and regional producers, to

strengthen their ability to satisfy

wholesale, retail, and institutional

demand.”

A recent Good Food Network

webinar defined a food hub as “small or

large warehouses that aggregate food

and facilitate sales to wholesale

customers or directly to consumers.”

Although these definitions focus on the

physical movement of goods, USDA

does note that a food hub can also be

defined by market efficiency functions,

in addition to more abstract goals of

building a diversified food culture.

It is worthwhile to consider a

broader definition of food hubs, in

terms of function rather than form, for

two reasons:

1. Many hubs have evolved from an

educational or social mission to bring

consumers and producers together in

the marketplace. While selling local

foods to consumers is one function,

these hubs may also seek to educate

their buyers about the importance of

retaining food dollars in the local

economy or keeping working

agricultural lands in production.

2. Second, some very functional hubs

exist that do not consist of brick and

mortar facilities; rather, they “live”

primarily in a virtual context and are

thus able to transmit information

quickly among buyers and sellers of

local and regional food products; this is

particularly pertinent in situations

where lack of information is the key

barrier to greater market efficiency.

USDA’s Regional Food Hub

Resource Guide (available online at:

www.ams.usda.gov/foodhubs) provides a

clear, practical example of this by

saying: “Food hubs are examples of

innovative, value chain-based business

models that strive to achieve triple

bottom-line (economic, social, and

environmental) impacts within their

communities. They do this by offering

a suite of services to producers, buyers

and the wider community.”

Cooperative-structured

food hubs

Many different ownership structures

are used to operate food hubs, including

those formed as cooperatives, which can

be led by producers, retailers,

consumers or a combination thereof.

There are several advantages to the

cooperative business structure that

make it a good fit for an emerging food

hub. The cooperative structure is a

well-known, established community

entity with strong roots in agriculture

that is owned and democratically

controlled by its members. The

membership fees provide working and

investment capital for the food hub,

with any surplus revenue returned to

members.

A co-op is managed by a board of

directors elected by the members,

which — in the case of a food hub —

may be made up entirely of producers

who will manage the organization to

meet their members’ needs (providing a

fair return on products sold, arranging

transportation of goods to end

consumers, promoting a certain

production practice, or serving a certain

geographic area).

Many cooperatives — such as the

Oklahoma Food Cooperative (featured

in the May-June 2012 issue), the High

Plains Food Cooperative in Colorado

and the Weaver Street Market in

Carrboro, N.C. — have evolved and

currently operate as multi-stakeholder

cooperatives. This business structure

includes consumers, workers and

producers in the same business entity.

An example of a more standard produce

ownership structure is La Montanita,

based in Albuquerque, N.M. Each of

these examples has achieved different

scales of impact on their respective local

and regional food systems.

A
20 July/August 2012 / Rural Cooperatives

Other cooperatives with similar

operations to the Oklahoma Food

Cooperative and High Plains Food

Cooperative model include the Iowa

Food Cooperative (Iowa), Crosstimbers

Food Cooperative (Texas),

Idaho’s Bounty Cooperative,

Massachusetts Local Food

Co-op, Nebraska Food

Cooperative, Ottawa Valley

Food Co-op (Ontario,

Canada), West Michigan

Cooperative and the Wichita

Food Co-op (Kansas).

Weaver Street Market

began operations in 1988. In

addition to its own bakery

and fresh food kitchen,

Weaver Street Market offers

a wide variety of natural and

locally grown products. Milk

comes from Maple View

Farms, two miles up the road.

Eggs are delivered fresh daily

from Latta’s Egg Ranch in

Hillsborough, N.C. Flour

comes from Lindley Mills in

Graham, N.C. About a dozen

local area farmers, who sell

their produce at the Carrboro

Farmer’s Market, also sell to

Weaver Street Market.

Keeping the market

community owned and

operated has proven to be a

very popular idea. The 2011

annual report indicates that the

cooperative made a profit of about

$250,000 and nearly half of its $26

million in sales was sourced from local

products with nearly 16,000 households

as member/ owners.

Founded in 1976, La Montanita

currently stocks and sells more than

1,100 products from nearly 700 local

growers in New Mexico and Colorado.

Its 2008 sales were $2.8 million. La

Montanita is a cooperative that supplies

four retail stores in New Mexico,

distributing both local and national

brands through a co-op distribution

center (the CDC).

The CDC, in turn, also sells to other

specialty retailers and restaurants. La

Montanita started a distribution arm

through the CDC in 2007 to extend the

operation and create greater market

access for the region’s producers.

Products are now sourced from within

300 miles of Albuquerque (including

southern Colorado) and distributed

across New Mexico.

Roadmap to hub development

The development and evolution of

food hubs is usually highly localized and

depends on several factors. Even so,

there are some lessons that can be

applied from reviewing examples from

across the country. Some factors appear

to contribute to success more than

others, including:

1. Having a strategic plan with clear

goals and a vision for developing the

food system helps ensure that the hub’s

original intents are maintained (for

example: fair prices for farmers or

promoting sustainable agricultural

production methods).

2. Getting all stakeholders engaged

early on in the process and

defining their interests and

areas of expertise. This

involves:

a. Making sure there is

a management or oversight

team that is inclusive and

that hears farmers’ concerns,

as well as those of other

businesses and investors.

b. Ensuring that the

team has individuals with

skills and proven experience

in financial management, the

regulatory environment,

marketing and packaging,

inventory management and

quality control, and that can

engage meaningfully with

farmer/business owners.

c. Making sure that all

parties are well-matched in

size and scale, and operate

with similar goals and values.

d. Producer and

members with previous

experience growing and

supplying food for local

markets.

This limits some risk

that may arise in fulfilling

contracts with vendors and buyers. This

process will also dramatically increase

the potential for success.

3. Understanding the location of

different direct markets and how to

access them.

a. If the market outlet is

geographically distant from the

production unit, how will

transportation occur and how can

products be priced to cover those costs?

b. Is backhauling feasible to generate

revenue on an otherwise empty return

load?

c. If the market is one with a

customer base that is less familiar with

purchasing and preparing fresh foods

USDA photo by Lance Cheung
Rural Cooperatives / July/August 2012 21

(some urban or at-risk populations,

schools without “scratch-cooking”

experience), education may be vital to

the hub’s success.

4. An educational program may have

to be an integral part of the hub

development. This may include

partnering with an outreach entity, such

as a university extension service or nonprofit, that can deliver information

about what the hub provides and when

the product can be delivered to the

consumer. Producers may need training

on post-farm business practices, such as

quality control, packaging and delivery.

Likewise, there may be a need for

training in coordinated practices, such

as common production practices or

season-extension techniques.

5. The hub may have to reduce risk

on the buyers’ side to access markets.

Many end users require that GAP (good

agricultural practices) or HACCP

(hazard analysis and critical control

points) plans be implemented by

producers or processors in order to

receive product. This may necessitate

additional costs in producer/business

owner training and the development of

specific protocols and quality assurance

to meet the end user’s requirements.

Another type of producer support that

may be necessary is securing affordable

product liability insurance for individual

vendors, or umbrella insurance

coverage for vendors that can be

purchased through the hub, since this is

critical for hubs accessing institutional

markets, such as schools or hotels. Such

requirements for accessing a direct

market may also cause some business

owners to withdraw from the supply

pool.

6. Capital is required for supply

chain infrastructure, such as vehicles,

storage facilities, and retail locations.

Capital availability can be a significant

barrier to starting local aggregation and

distribution businesses. A certain level

and type of infrastructure is necessary

to operate a food hub, including:

a. Technical infrastructure, such as

billing protocols, Internet management

systems and payment processes.

b. Physical infrastructure may also be

essential (such as product warehousing

or processing capability) in order to

ensure increased product quality and

packaging control across suppliers.

c. Hard work and enterprise can

assist with hub development, but a lack

of critical infrastructures can greatly

increase the chance of failure.

7. Given the many uses for food

hubs, no one type of business structure

is clearly the best fit for a food hub.

Rather, the business structure must be

one that helps the stakeholders meet

their goals for financial, marketing and

production planning and growth. It

appears that a certain initial flexibility is

key, and the management team should

identify the point at which a particular

business structure constrains further

investment. An alternative structure

(such as incorporating one business

function or outsourcing distribution)

may sometimes be the only way the hub

can maintain its market share or expand

into new markets.

8. Identify all sources of technical

and financial support, including those

considered less conventional.

a. There are emerging areas of

public and private financial support for

food hubs, including micro-lenders,

private investors, economic

development entities and nonprofit

community-based organizations.

b. There are also businesses with

technical expertise in processing,

distribution or transportation with

which a hub could contract to more

efficiently execute some of the more

complex or cost-prohibitive functions of

direct marketing through a hub. At

issue here is how comfortable the

stakeholders are with alternative lenders

or certain subcontractors. This sort of

“comfort level” assessment is an

important component in developing a

strategic business plan for a food hub.

c. Donated or shared equipment and

facilities can substantially reduce the

capital required to start and operate the

food hub.

d. It is essential that members have

“skin in the game.” That is to say, that

all owners need to have a capital stake

in the success of the venture.

9. Managing information efficiently

is critical to the success of a food hub.

a. Timely and accurate information

flow between producers and consumers,

or between producers and wholesalers,

helps to minimize or avoid risks, such as

price or marketing risk, production risk

and some legal risks.

b. Information management —

supported by dedicated staff and

technology — impacts the hub’s ability

to manage orders accurately, to monitor

product quality and to convey product

attributes to consumers and other

vendors.

c. Information is needed to remain in

compliance with certain federal, state

and local food safety regulations, and to

maintain transparent working

relationships across multiple partners in

a value chain.

Value derives from

broader benefits

The success or failure of a food hub

should not be measured solely in terms

of its aggregating function or in terms

of total volume of product moved. It

should also be valued in terms of the

places its products go and the people

who benefit from it.

With growing demand for local or

regional food products, many

conventional marketing channels are illequipped to supply local food where

and how people wish to purchase it.

Food hubs can address this in a manner

that is economically viable and still

serve its social and other community

functions.

Food hubs help producers and

consumers connect in a manner that

retains the valuable information as to

where a food item was produced and

how it was grown or processed. This

serves the members and has the

possibility of creating a successful

alternative supply chain for local

agricultural products. ■
22 July/August 2012 / Rural Cooperatives

Editor’s note: This article combines excerpts

from an article by David J. Thompson that

appeared in the May/June Cooperative

Business Journal, and an article by Dana

Kelroy that appeared in the May 11 issue of

Cooperative Network’s Contact newsletter.

eaders of 150 U.S.

cooperatives gathered

at the White House on

May 4 for a national

dialogue about the role

of cooperatives in community

development, job creation and

economic opportunity. Also discussed

were the kind of policy and legal

initiatives needed to help cooperatives

play an even greater role in benefitting

their members and strengthening the

American economy.

The National Cooperative Business

Association (NCBA) assembled the coop delegation to “include the widest

possible swath of cooperators, as well as

advocates for cooperatives,” says Liz

Bailey, interim president of NCBA.

“Our goal was to have the event foster

new conversations and collaborations

among the cooperative community,”

says Bailey. “I think we succeeded in

meeting both of those goals.”

The event began with a briefing by

senior Obama administration officials,

followed by breakout sessions where

cooperative leaders met with members

of the Administration to discuss small

business development, job creation,

innovative agriculture programs and

financial cooperatives.

Among a number of White House

officials who addressed the meeting

were Kyle Lierman of the Office of

Public Engagement, and Jack Lew,

President Obama’s White House chief

of staff. Lew credited co-ops for

“building our American economy and

creating jobs,” and praised credit unions

for being a fundamental source of

banking services to many Americans.

Judith Canales, acting deputy under

secretary for USDA Rural Development, also stressed the vital role co-ops

play and how USDA works with them.

Participants informed White House

Co-op leaders confer with White House officials

L
Rural Cooperatives / July/August 2012 23

officials about the importance of several

policy initiatives, including: the new

Farm Bill; legislation that would allow

credit unions to lend to small

businesses; and the need to fund

programs that support broadband

deployment in rural areas. They also

discussed some of the regulatory

barriers that prevent cooperative

businesses from making an even larger

contribution to the nation’s economic

health and vitality.

In the auditorium for the briefing

was Chuck Snyder, CEO of NCB

(National Cooperative Bank), who

noted that the nation’s 29,000

cooperatives serve one in three

Americans, do $652 billion in annual

sales and support over 2 million jobs.

“Cooperatives grow local economies,

promote community development, and

offer services and solutions because of

their group buying power,” added Bill

Oemichen, Cooperative Network

president and CEO.

Ralph Paige, executive director of

the Southern Federation of

Cooperatives, called attention to the

impact of cuts in social program

budgets that affect cooperatives serving

the poor, especially in the South.

When cooperative leaders broke into

small groups, they met with officials

from USDA, the Small Business

Administration, the U.S. Department of

the Treasury and the President’s

Domestic Policy Council to further

discuss federal regulations affecting

cooperatives. The back and forth

between the White House presenters

and the co-op participants was rapidfire. The three-hour dialogue covered

every co-op segment, with discussion of

issues about agricultural cooperatives,

consumer cooperatives, credit unions,

health and housing cooperatives, mutual

insurance, rural electric cooperatives

and worker cooperatives.

International Co-operative Alliance

President Dame Pauline Green from

Great Britain said she was impressed by

how enthusiastically American cooperators rose to the occasion to tell their

story at the White House meeting. ■

Opposite page: some of the 150 co-op

leaders invited to meet with White House

officials file up the steps of the

Eisenhower Executive Office Building,

home to the majority of White House staff

offices. Clockwise from left: Judith

Canales, acting deputy under secretary

for USDA Rural Development, addresses

the gathering; breakout sessions were

held to discuss specific co-op issues;

National Association of Housing

Cooperatives President Vernon Oakes

asks a question. Photos courtesy National

Cooperative Business Association
24 July/August 2012 / Rural Cooperatives

Julie A. Hogeland, Ag Economist

Cooperative Programs

USDA Rural Development

ow far cooperatives

have come in recent

decades was evident

during a meeting

organized by the

Council on Food, Agricultural and

Resource Economics (C-FARE) last

August in Washington D.C. C-FARE’s

mission includes helping food,

agricultural and resource economists

identify underdeveloped research topics.

To that end, Phil Kenkel, Bill Fitzwater

Cooperative Chair at Oklahoma State

University, served as project manager

for a multi-dimensional C-FARE

project: “Agricultural Cooperatives:

Economics, Opportunities and

Structure in a New Era of Food, Fiber

and Fuel.”

A panel of 15 cooperative experts

convened by Kenkel kicked off the CFARE project by identifying current

challenges. The meeting was sponsored

primarily by the CHS Foundation.

Similar panels have been organized

every decade since the 1970s.

Momentum continued through six

articles in the on-line magazine Choices

which addressed key aspects of the

cooperative business model, including:

external challenges; strategy; finance;

governance and the cooperative life

cycle; new cooperative development;

and communicating the value package

(the articles are online at:

www.choicesmagazine.org). Next,

eXtension hosted a national webinar on

Communicating the Cooperative Value

Package. In November, the 2011

Farmers Cooperative Conference and

the NCERA-210 Cooperative Research

Committee provided a venue for revisiting the issues and themes first

raised by cooperative experts in August.

This article draws on expert panel

discussion from the initial C-FARE

meeting, plus Choices articles, to

contrast the goals and aspirations of

contemporary co-ops with their 20th

century counterparts.

Where we’ve been

It is difficult to realize how far

cooperatives have come without

knowing where they have been. For

most of the 20th century, many

cooperatives were preoccupied with

alleviating the impact of agricultural

industrialization on producer-members.

During this turbulent and painful era,

producers lost competition and market

access as corporate-led integration and

industrialization transformed the

marketing and production of key

agricultural commodities: beef,

processing vegetables, broilers, pork,

dairy and grains. These external

changes prompted cooperatives to

buffer and strengthen producers against

structural transformation by increasing

competition or modernizing production

H

C-FARE meeting shows progress

made in co-op goals, values

Farmer cooperatives have long played a key role in helping their members process, market and

transport their crops, whether Florida potatoes in the 1930s (top and facing page) or California

raisins in the 1990s (bottom). Managerial choices are more crucial than ever for firms navigating

today’s volatile markets.
Rural Cooperatives / July/August 2012 25

practices.

Toward the end of the century,

integrated production and marketing —

leading to the development of the

modern supply chain — directed

cooperative attention inward. To

compete within highly capitalized and

industrialized food chains, cooperatives

needed more capital. This realization

prompted cooperatives to clarify and

strengthen their property rights to be

more competitive with other investment

choices available to producers.

Today’s cooperative environment is

increasingly complex compared with the

past. Critical issues — such as market

instability, managerial succession and

cooperative profitability — are

intertwined. Surveyed cooperatives

identified abrupt and extreme global

market fluctuations as the most critical

issue facing them.

“When the pace of change has really

accelerated, strategy becomes an ongoing process,” said Greg McKee,

director of the Quentin Burdick Center

for Cooperatives at North Dakota State

University.

Managerial choice can be crucial for

firms navigating volatile markets.

Studies suggest that leaders experienced

with dynamic and uncertain

environments can prepare a firm for

future economic instability better than

candidates from more stable,

predictable settings. Turbulent and

uncertain economic environments

confront cooperatives with much that is

beyond their control.

Outcomes will be at least partially in

the control of other firms, industries,

interest groups or nations. Managers

skilled in managing such interdependencies and constraints heighten the

likelihood of outcomes favorable to

cooperatives.

Cooperatives in the 20th century

tended to look within themselves to

define and resolve problems. By the end

of the century, cooperatives began

challenging themselves to “think out of

the box.” Indeed, the C-FARE

conference revealed that cooperatives

have become more receptive to

outside influences and information

exchange.

“Best practices are outside

cooperatives as much as inside them,”

observed Barry Kriebel, president of the

Sun-Maid raisin growers’ co-op.

Evidence that thinking “out of the box”

has become an integral part of

cooperative culture is demonstrated by

the entrepreneurial nature of many

cooperatives, said Dave Barton of

Kansas State University.

Measuring competitive

performance

A long-established aspect of

cooperative culture has been the stress

on cooperative performance relative to

competitors. Cooperatives frequently

self-identify as “competitive yardsticks,”

committed to matching or exceeding

the competition. Kriebel noted that the

tendency is to measure “cooperative vs.

cooperatives,” an approach which does

not capture cooperatives’ performance

within their own industry.

A more accurate reading of

cooperative strength would result from

comparing how well cooperatives have

performed relative to non-cooperatives

within the same industry. A related issue

is how companies manage resources to

uphold their value proposition. “Do

cooperatives approach strategy

differently than non-cooperatives?”

McKee asked.

In the 20th century, cooperatives

were often ambivalent about profits

attained by more than a favorable turn

of a commodity price cycle. Challenges

to cooperative integrity and survival

occurred when members perceived that

cooperatives were retaining too much

profit.

Further, although members are quick

to seek out the benefits of the

cooperative business model, they can be

reluctant to assume the responsibilities

of ownership and control. The failure

of prominent cooperatives within the

past two decades has reinforced the

message that debt can no longer

substitute for a sound financial plan.

Cooperatives in volatile industries need

robust balance sheets because

commodity price increases demand a

rapid increase in cooperative equity.

Operating with thin margins is more

the rule than the exception in the co-op

community. Perhaps for that reason, CFARE participants indicated

cooperatives should maximize the profit

distributed, with residual cash, to

patron owners. This is a fine line.

Kriebel noted that paying “excess”

profits to members could cause

cooperatives to lose ground if, at the

same time, they fail to match

competitors’ capital improvements in

plant and equipment.

Alternatively, cooperatives may be so

well-positioned in the marketplace that

commodity-hungry competitors may

use outside equity in an attempt to

demutualize them. Greater openness

toward non-cooperatives does not

eliminate the need for cooperatives to
26 July/August 2012 / Rural Cooperatives

protect their marketing networks and

infrastructures.

How will cooperatives earn more

profits? Nearly a third of the C-FARE

panel ranked consumer preferences as

extremely important. The 20th century

view that consumers or retailers were

adversaries intent on driving down food

prices or producer incomes was no

longer evident. Contemporary

cooperatives are clearly market driven.

Responding

to change

Another priority identified by CFARE participants was keeping pace

with the potentially profound changes

at the member level predicted by the

cooperative life cycle. During the initial

stage of the business life cycle,

producers have a common interest in

resolving a marketing problem, which

provides economic justification for

forming a cooperative.

In the second stage, the problem is

confronted through a unique

organizational design. As growth

occurs, the beginning of differences, or

heterogeneity, among producermembers appears (stage 3).

Heterogeneity is revealed by marked

discrepancies in member equity

contributions relative to cooperative

use, or differences in member

production costs fostering different

expectations for prices. That is, some

producer-members get more benefit out

of the cooperative than others.

To Carl Casale, CEO of CHS Inc.,

an effective response to heterogeneity

begins with the local solutions provided

by employees — from CHS member

cooperatives or company-owned retail

facilities — who personally know the

needs and goals of producer-owners.

Barton concurred: “The number one

success factor for cooperatives is to

compete on human resources.”

Heterogeneity is often associated

with the question raised by Rod Kelsay,

executive director, Mid-America

Cooperative Council: “Does the value

that the founding fathers saw in the

cooperative still exist?”

Select Sires, a livestock genetics/

breeding cooperative, starts by asking:

“What is the market the co-op is trying

to fit?” Heterogeneity often suggests a

need to redesign the cooperative, even

to the extent of cooperative conversion.

A similar identity crisis may occur when

boards have been led by the same leader

for a long time.

Yet, there are many underlying

reasons for collective marketing. Contemporary values — such as a commitment to sustainable practices or being a

low-cost provider — could provide a

new rationale for cooperation and an

antidote to member heterogeneity.

Both Kriebel and Jeff Stroburg,

president and CEO of Iowa’s West

Central Cooperative, noted that

cooperatives (other than newgeneration co-ops) do not buy and sell

their equity. Consequently, producers

lack an exit strategy, such as a pool that

markets co-op stock without necessarily

involving the co-op; this observation

warrants further institutional design.

The 20th century cooperative legacy

of designing and ordering markets by

creating rules of exchange has given coops a unique ability to intervene in

situations of uncertainty where the

“rules of the game” aren’t clear. Social

and economic justice finds new

expression in cooperatives responding

to natural disasters, or the recent

dissolution of some federal or state

marketing orders.

In his position as program director

of the Federation of Southern

Cooperatives, C-FARE panelist (and

long-time cooperative developer) John

Zippert finds that disasters push people

to want something different than they

had. His team provides technical

expertise and helps bring potential

members together by challenging the

status quo.

New cooperatives, such as the South

Plaquemines United Fisheries Co-op

(also see page 4) grew out of the

response to Hurricane Katrina. Several

local fishery cooperatives are

considering a regional marketing

system that will facilitate direct

shipment of seafood to distant

consumers.

Managerial succession issues

Managerial succession was another

critical issue broached by C-FARE

participants. Seemingly overnight, coops large and small can lose a

significant number of managers or

work-teams through retirements or

attrition. Fortunately, evidence suggests

progress is being made to develop the

next generation of producers,

cooperative leaders, board members and

long-term committed employees.

Ensuring that young farmers and

ranchers understand the value of being

a cooperative customer and owner is the

foundation for a smooth transition to

new generations of leaders, including

management, said Casale of CHS.

Robust young producer programs,

supplemented by scholarships and

internships, will encourage young

people to pursue careers with

cooperatives. “Most aggressive co-ops

go after intern programs and do it

well,” Barton observed.

Indeed, West Central’s Stroburg

noted that the cooperative has a 20-

person internship program that includes

exposure to the new field of

biogenetics.

C-FARE panelists concurred that

cooperative communications have to

underscore the value membership

brings to the individual. Yet, only about

half of the C-FARE survey respondents

indicate that their cooperative tailors

the communication mix to accommodate member heterogeneity. For

example, young farmer/young

cooperator programs often provide

organizational background information

less likely to be useful to long-term

members.

Methods used to educate external

stakeholders on the value of the

cooperative business model and

member concerns have fallen short of

what is needed, even to the point of

being “pretty inadequate at present.”

Panelist Chuck Conner, CEO of the

National Council of Farmer

Cooperatives, said: “Anticipating

member and constituent needs and

responding appropriately is one of the

biggest challenges facing leaders.” ■
Rural Cooperatives / July/August 2012 27

Co-ops & Community

CoBank program will help co-ops

build stronger communities

Editor’s note: This article was provided by

CoBank. The “Co-ops & Community” page

spotlights co-op efforts that fulfill the

mission of “commitment to community.”

Regardless of whether these efforts make a

co-op’s home town a better place to live and

work, or are helping people on the other side

of the world, co-ops are reaching out to

make a difference. If you know of a co-op, a

co-op member or co-op employee whose

efforts deserve to be recognized on this page,

please contact: dan.campbell@wdc.usda.gov.

Reprint articles from co-op publications are

welcome.

oBank in June

announced the creation

of a $3 million

charitable fund

designed to benefit

cooperatives and charitable groups they

support throughout rural America.

Under the bank’s new “Sharing

Success” program, CoBank will match

contributions by its cooperative

customers to nonprofit organizations of

their choice. Contributions made

during the remainder of 2012 will be

matched on a dollar-for-dollar basis,

from a minimum of $1,000 up to a

maximum of $5,000.

“Shared success is a hallmark of the

cooperative business model, so we’re

absolutely delighted to be announcing

this new program,” says Robert B.

Engel, president and chief executive

officer of CoBank, a cooperative bank

serving agribusinesses, rural infrastructure providers and Farm Credit

associations throughout the United

States.

“Throughout rural America,

cooperatives of all sizes are working not

only to provide value to their members,

but to improve the quality of life in

their local communities,” he continues.

“We hope all our cooperative customers

will take advantage of this new fund,

and use it to leverage the support they

provide to worthy causes in the areas

they serve.”

Effort in spirit of 2012

Year of Cooperatives

The launch of CoBank’s Sharing

Success program coincides with the

United Nations’ “International Year of

Cooperatives” in 2012. Throughout the

year, the United Nations and

cooperative organizations are using

programs and special events to celebrate

the many contributions of co-ops and

the strength of the cooperative model.

“I commend CoBank for its

generous decision to establish this

fund,” says Wilson Beebe, chairman of

the National Cooperative Business

Association. “I can think of no better

way for a cooperative to take part in the

International Year of Cooperatives than

by participating in the Sharing Success

initiative.”

The “Sharing Success” grant

program is designed to highlight the

role that cooperatives play in the U.S.,

notes Arthur Hodges, senior vice

president of corporate communications

at CoBank. Agribusiness cooperatives

are a critical part of the nation’s overall

agricultural value chain, and electric

cooperatives deliver affordable, reliable

power to millions of homes and

businesses around the country.

Member-owned water and

communications service providers are

also vital to the quality of life in rural

communities. “These businesses, all of

which are served by CoBank, together

form the backbone of America’s rural

economy,” Hodges says.

Application window

opens Aug. 1

All of CoBank’s cooperative

customers are eligible to participate in

the program, and each customer is

eligible for a single grant. The

organizations that receive the funds

must have a 501(C)(3) designation. This

means that the types of charities or

groups that can receive funding vary

from a local food bank to an important

university program. It will be up to

each customer to decide who they want

to partner with in their community.

CoBank will begin formally

accepting applications for funding from

cooperatives on Aug. 1, 2012. The

program will run through Dec. 31,

2012, or when the $3 million matching

fund is exhausted, whichever comes

first. Cooperative customers interested

in participating should contact their

CoBank relationship manager for an

application and detailed program

requirements.

Additional information about the

Sharing Success program is available at:

www.cobank.com/sharingsuccess. ■

C
By Anne Mayberry

Rural Utilities Programs

USDA Rural Development

bout 50 million people

live in rural communities. Reliable

access to water is

necessary for these

communities to grow and prosper.

Most rural consumers get their water

from one of the thousands of

community water systems nationwide,

the majority of which provide service

for communities with populations of

less than 10,000.

Challenges facing these small

systems include finding sufficient

revenue to ensure that they have the

capacity to meet community needs and

respond to growth while still keeping

rates affordable. Other challenges

include complying with environmental

requirements and finding and retaining

technical staff to operate and maintain

the systems.

The absence of clean water is not

just an obstacle to growth and economic development, but a threat to the

very survival of rural communities.

Despite — or possibly because of —

these challenges, rural water systems

can play a key role in economic growth

of their communities.

Co-op capitalizes

on opportunities

The Breezy Hill Water and Sewer

Co. in Graniteville, S.C., is among

those small rural water systems that

have succeeded in delivering clean,

affordable water to their customers,

while simultaneously looking ahead to

future needs. Charles Hilton, the

general manager, came to Breezy Hill

in 1988. Breezy Hill, organized as a

cooperative, at that time served 2,500

residential customers, only 300 of

whom had sewer service. This lowincome area of the system had many

septic tank issues, so with a grant from

the U. S. Department of Housing and

Urban Development (HUD), a sewer

system was installed, thereby eliminating the health concerns of the area.

The town has several small

commercial establishments and a

technical college. Hilton noted that the

system needed to increase revenue and

was under a Health Department

Consent Order to improve water

quality. Hilton soon realized that

improved cash flow, as well as

expanding the co-op’s commercial base,

would be needed to make the utility

financially healthy once again.

Two years later, when a car

dealership requested water service,

Hilton saw an investment opportunity.

Breezy Hill and the car dealership split

the cost of a new water main that would

be large enough to meet future

development needs. The return on that

investment was commercial growth that

continues today. “They just built 150

new apartments on that road, on a line

that was installed with a joint venture; it

continues to pay off 20 years later,” says

Hilton. That set a pattern in which the

co-op continued to look at innovative

ways to that ensure infrastructure was

28 July/August 2012 / Rural Cooperatives

Utility Co-op Connection

A

Carolina water co-op plays key role

in driving economic development

Construction work progresses on the Breezy Hill Water plant and transmission line,

which will have the capacity to handle 5 million gallons of water per day. The project has

received more than $7 million in loans and nearly $2 million in grants in Recovery Act

funding from the Rural Utilities Programs of USDA Rural Development. The project will

help the community continue to attract new business and create jobs.
in place to meet the needs of the

community.

Planning for the future was one of

Hilton’s priorities. During the early

1990s, he told the cooperative board

the co-op needed to construct a system

that would use more surface water as a

source. Breezy Hill’s groundwater

system had limited potential. Aiken

County, where Breezy Hill is located, is

an area with “a thin water table,”

meaning that the aquifer could not

supply the necessary amount of water to

make the area viable for future

investment from developers and

industrial clients.

“Drilling wells here and there for

water for existing growth patterns of

individual homes within the system

wasn’t a problem at the time, but longterm prospects of a permanent water

source had to be found if we were to

maintain our rate of growth in the

future,” Hilton says.

Textile industry

decline triggers need

Up until the 1990s, the community’s

economic development had been tied to

the growth of the textile industry. In the

1800s, the textile companies had bought

huge tracts of land to protect their

water shed, which powered plant

generation and was a key part of their

manufacturing process.

“In the early ‘90s, a textile company

came to us wanting to buy potable

water. So we borrowed money from the

U.S. Department of Agriculture

(USDA) and began long-term construction of a system to move water to

industrial clients,” Hilton says.

Times changed, and the textile

industry closed plants. Because the

textile manufacturers no longer needed

the land, they sold it to developers. In

1993, they sold property to Aiken

County, which wanted land to construct

an industrial park. Breezy Hill had to

quickly decide whether to provide water

and wastewater facilities to the new

park, or relinquish that portion of its

service territory. The co-op agreed to

provide the facilities and then learned

that the first company to relocate would

need to have water and waste services in

place within one year.

“We didn’t have a water line within

two miles of that park,” Hilton recalls.

“The line we did have was far too small

Rural Cooperatives / July/August 2012 29
30 July/August 2012 / Rural Cooperatives

to handle the required capacity — 2,000

gallons per minute fire flow. There was

no sewer service in the area. We

managed to install two wells, tie them

into our system and build tanks to meet

flow requirements.” Breezy Hill again

looked to USDA for financing to meet

future infrastructure needs.

Co-op’s investment pays off

Breezy Hill’s investment paid off. In

1995, a tire manufacturer built a large

facility on 500 acres, bringing 600 jobs

to the area. “At this point, we had

created about 900 new jobs in total. We

continued to plan for the future,”

Hilton says.

By 2000, Breezy Hill was serving

4,500 taps and was anticipating

continued commercial growth. “We had

discussed the need to look at additional

water sources in the early ‘90s. During

the next several years we considered all

possibilities to increase our water

supply. We even looked at using the old

textile water plants to meet growing

water and wastewater needs. We

developed plans to build that surface

water plant, but we were simply short

of funds to ‘cash flow’ the size of

project that needed to be built.”

It was about this time that the

American Recovery and Reinvestment

Act of 2009 (Recovery Act) became law.

Breezy Hill applied for, and was

awarded, a $2 million grant and $7

million loan to construct a new water

plant and build a major high-service

distribution line to serve as the

backbone of the water distribution

system.

The project also provides backup

contingencies for any part of the service

area. “One of the first things that any

potential industrial client would look at

is the number of options we had to feed

a site with water if a section of the

system failed for any reason,” Hilton

explains. “Most of these industries

require dual feed; through careful

design of the system, we have been able

to supply as many as four feeds to

ensure the industry’s ability to stay up

and running should a portion of the

water system fail.”

This project would also provide

capacity to meet future community

growth. The system is almost complete.

“As soon as the new plant comes on line

— as early as January 2013 — we will

be totally self sufficient in long-term

water supply needs,” Hilton says.

Because most industries use less

water than they did 20 years ago,

Hilton notes that the new Breezy Hill

plant should meet the community’s

needs for at least 25 years. “Had it not

been for USDA and other federal

agencies, we could not have added the

capacity to support the economic

growth we’ve seen in Aiken County.”

The county has benefitted from the

expanding industrial base, which has

provided new jobs and offset rising

property taxes needed to fund

community needs.

Hilton credits a progressive

cooperative board for looking to longterm needs and qualified staff to build

and maintain the utility. “Our board is

from the community and interested in

the community. Their motivation to

serve on our board is to improve the

quality of life for Aiken County

residents; they do not have political

motivations or self-interests. I am

blessed to work for a board that puts

the community first — period”

The county had requested assistance

from urban areas in 1968 in supplying

water, but were turned down, Hilton

notes. The cooperative was formed as a

result, and USDA funding helped build

the system.

Co-op opposes consolidation

“Breezy Hill is financially sound,”

Hilton says. “It meets EPA (U.S.

Environmental Protection Agency)

requirements. We do a good job. Many

municipal systems now want to

consolidate or take over these rural

districts because they are healthy. But a

lot of citizens — who remember that

we had to build our own water and

wastewater facilities 40 and 50 years ago

because these same municipal systems

would not bring services to these rural

areas — are opposed to consolidation.

“There is also still a lot of

community pride in these systems.

When no one would aid these rural

areas with water and sewer services

years ago, the folks stepped up to the

plate and — with the help of the old

FmHA (Farmers Home Administration,

now part of USDA Rural Development)

— thousands of these systems were

built nationwide. Obviously, the

investment has paid off — the default

rate on these loans has been historically

less than 0.5 percent. Plus, the federal

government has received the income

from the interest off these loans,

bringing much needed cash back into

the federal coffers. This doesn’t include

the benefits at the local level of

increased job opportunities and increased tax base for both the local and

state governments.”

Experienced staff

makes huge difference

Breezy Hill has also avoided some of

the major challenges small systems face,

in large part because it trains its own

staff of 11. “We have good people and

little turnover. If you have a two-man

system and they’re both close to

retirement, you have a problem.”

Breezy Hill’s industrial park is

attractive to commercial and industrial

firms, Hilton says. “When we are asked

to make a commitment to an interested

client for relocation to the area, our

standard answer is ‘bring it on.’ We can

generally make that comment on the

spot and these clients know from past

history that we can deliver. The key is

to invest in capital improvements, but

spend what you need on a level that

makes sense and is affordable.

“We have been fortunate in our

relationship with USDA’s Rural Utilities

Programs. Funding a system with 75

percent grants is a thing of the past. We

look for cash flow. We watch our rates.

We’re owned by our customers and

we’re here to serve them. That’s part of

what we are in rural America, and that’s

part of being a cooperative.” ■
By Jane Livingston,

Cooperative communications consultant

jane_livingston@myfairpoint.net

n 2008, cooperative

financial institutions in

the United States were

hurt, but did not

require the massive

bailouts that many private sector

lenders needed. Unlike some financial

institutions that received bailouts but

then sharply cut back on lending, most

cooperative financial institutions around

the world kept right on lending.

Indeed, credit union and cooperative

bank deposits grew — increasing their

ability to lend — as people sought

trusted places for their savings.

Cooperative share values did not

collapse because, in part, they are not

traded in marketplaces where the desire

is for quick profits; rather, co-ops are

focused on long-term member and

community needs.

The fact that the cooperative sector

of the global economy has performed

better than the investor-owned sector

during the past four years should not be

surprising. If the output of the world’s

cooperatives were represented by one

country, that country would be among

the G8 nations. The output of the

world’s 300 largest co-ops alone would

create the ninth largest national

economy.

This is a business model that works

all over the planet.

Waking the sleeping giant

Yet, the cooperative model is too

often a sleeping giant. How can we

wake the giant? How can we gear up

the cooperative economy so that it can

help more of the world’s people,

sooner? The need to spread knowledge

about how cooperatives work is urgent,

global and growing.

What do cooperative leaders need to

know about economics? What will

reduce the likelihood of new or existing

cooperatives from failing? What will

spur cooperative economic growth?

These are the kinds of questions that

cooperative leaders from around the

world will face at the Imagine 2012

International Conference on Cooperative Economics, this Oct. 6-7. It

will be immediately followed by the

International Summit on Cooperatives,

Oct. 8-11; its theme is “The Amazing

Power of Cooperatives.” Both events

take place in Quebec City, Canada.

Co-hosts are the International Cooperative Alliance, the Desjardins

Group (Canada’s largest financial cooperative group) and the international

Master of Management, Co-operatives

and Credit Unions (MMCCU)

program, based at Saint Mary’s

University in Halifax, Nova Scotia.

Imagine 2012 will host a global

convergence of cooperative and credit

union directors, senior managers,

officers, young leaders and other

participants. They will be exposed to

the work of 15 specialists on the cutting

edge of economics.

Many assumptions and beliefs about

cooperative economics will be

challenged at the conference. New ideas

will surface; new questions will emerge.

Participants from around the world will

take away concepts, analyses and

observations that can be developed into

a universally accepted discipline of

Cooperative Economics.

Thomas Homer-Dixon, chair of

Global Systems for the Centre for

International Governance Innovation at

Balsillie School of International Affairs

in Ontario, is one of the presenters at

Imagine 2012.

“In a world that now seems

perpetually on the edge of an economic

abyss, nothing could be more important

than this. Imagine 2012 will explore

practical and sorely needed alternatives

to current conventional economic

models, theories and practices that

threaten our children’s future,” HomerDixon says.

Tools can help global recovery

Such a set of broadly accepted tools

could put cooperatives in the driver’s

seat of a new global economy. For this

to happen, cooperative leaders must

step back and question many of their

most deeply rooted assumptions and

beliefs about economics.

“Imagine 2012 could not have come

at a better time,” says Nelson Kuria,

Rural Cooperatives / July/August 2012 31

continued on page 43

I

Quebec City to host international co-op conferences

Can co-ops help drive globalrecovery?

Quebec City will host two major international

cooperative conferences in October. Photo

courtesy Roy Tennant
32 July/August 2012 / Rural Cooperatives

Editor’s note: This article is excerpted and adapted from several

longer articles that appeared in the CCA Communicator enewsletter. Authors are: Marian Douglas of Flint Energies, Claire

Smith of Sunkist and Jason Jenkins of Rural Missouri.

ew cooperatives thrive over the long-term

without effective communications programs

that keep their members informed about

their cooperative. For 59 years, the

Cooperative Communicators Association

(CCA) has been helping to strengthen the nation’s

cooperatives by improving the skills of their communications

staff members.

In June, CCA held its annual communications institute in

Tucson, Ariz., where several days of seminars were held

covering a full gamut of communications topics. CCA also

saluted the best in co-op communications efforts of the past

year and presented career awards to outstanding practitioners

of the art of co-op communications.

CEO winner “runs

toward the fire”

The Outstanding CEO Communicator award was

presented to Bob Frazee, CEO of MidAtlantic Farm Credit

in Westminster, Md. He was recognized, in part, due to his

ability and willingness to face even bad news situations “with

a gung-ho attitude” and “stay and fight” determination.

Frazee believes in the strength of a solid communications

plan in times of crisis, which paid off when one of the co-op’s

clients declared bankruptcy, pulling Farm Credit into a

firestorm of controversy.

False reports began circulating about MidAtlantic —

F

CCAsalutes thosewho excel

attelling the co-op story

This photo of Dairy Farmers of America member Marlane Williams represented “a quantum leap” forward from run-of-the-mill cow photos, said one

of the judges who selected it as photo of the year. “It’s celebratory,” said another judge. Facing page: Associated Milk Producers Inc. won

Publication of the Year honors for its annual report titled “You.”
Rural Cooperatives / July/August 2012 33

including that it was the client’s only

lender and that the cooperative held

millions of dollars in loans that would not

be repaid.

In the earliest moments (over a

weekend) of the crisis, Frazee assembled a

team of co-op employees — led by the

communications director and including the

client’s loan officer, the chief credit officer

and legislative affairs officer — to combat

the inaccurate and negative press coverage.

Not only did Frazee run toward the

fire, he also fully embraced the social

media arm of the co-op’s communications

plan. A public website dedicated to the

coverage of the bankruptcy was launched

with a personal message board where

Frazee posted frequent updates. He made

phone calls to community leaders to

“gauge the temperature” of the situation

and to direct them to the co-op’s website

as a resource.

The firestorm was quickly

extinguished by the clear, up-to-date

information provided on the co-op

website, which helped stop the rumor mill

in its tracks. The media began to use this

website as a resource and often quoted

Frazee’s updates in their press coverage.

MidAtlantic Farm Credit has since

received numerous requests to share the

communications plan.

Frazee says he

has seen a lot of

change in the banking

industry in 30 years. But those changes

are small compared to the evolution in

technology he’s witnessed. He admits he

may not completely understand social

media, but he sees the benefit of being

able to communicate directly with

people, and says the benefit far outweighs

the risk.

Klinefelter winner helps

drive AGP’s success

The H.E. Klinefelter Award was

presented to James Rodenburg of Ag

Processing Inc. (AGP) in Omaha, Neb.

The award, CCA’s highest honor for a

career co-op communicator, is presented to a member whose

work is considered by their peers to be outstanding.

One nominator called Rodenburg “a respected colleague

whose contribution to our company’s success is driven by his

lifelong understanding and knowledge of the importance of

cooperatives to U.S. agriculture.” Another said he is: “The

ultimate communicator, who exemplifies the highest standard

of professionalism and outstanding leadership in

communications.”

Rodenburg joined AGP’s Corporate and Member

Relations Department in 1996 as publications editor. Prior to

that, he had spent 20 years in the livestock industry, including

serving as executive secretary of the Omaha Livestock

Exchange and as communications manager for the Sioux City

Stockyards. He is also a member of the National Farm

Broadcasters Association.

Rodenburg not only has the cooperative spirit, but was

born into it. He grew up in a cooperative farm family in

southwest Iowa. He earned his degree in journalism and mass

communications from Iowa State University.

“Jim is recognized by his peers and superiors as a

professional in communications and public relations,” says

Mike Maranell, AGP’s senior vice president of member and

corporate relations. “His broad understanding of our business

and the marketplace truly makes him one-of-a-kind. We

appreciate his talent and his value on our team.”

Straight Talk helps

earn Graznak Award

The 2012 Michael Graznak Award, which honors one of

the nation’s brightest young (under the age of 35) co-op

communicators, was presented to Megan McKoy-Noe of the

National Rural Electric Cooperative Association (NRECA).

She was praised for her “passion for co-ops and the ideals

they were founded on,” and as someone who “promotes the

co-op philosophy in all her work.”

McKoy-Noe is the associate editor

NRECA’s Straight Talk Alert, an

electronic news resource. Each month,

it contains editorial, graphic,

audiovisual and other materials that

support more than 900 electric

distribution cooperatives and statewide

co-op publications. McKoy-Noe serves

as a writer and designer for consumerfocused content and maintains social

media outlets, including a YouTube

channel.

“Straight Talk has come in like an

angel of mercy with a suitcase full of

relevant, well-organized and easily

accessible communications tools in a

variety of media,” wrote Carol

Moczygemba, executive editor of Texas

Co-op Power, citing how invaluable the

materials are for co-op communicators who wear many hats.

Before joining NRECA, McKoy-Noe was the assistant

director of communications for GreyStone Power in

Douglasville, Ga. “Megan sets as high an example for co-op

communicators as I have witnessed in my 23-year career with
34 July/August 2012 / Rural Cooperatives

electric cooperatives,” says Perry

Stambaugh, her supervisor at NRECA.

She has become NRECA’s expert on

how electric co-ops should incorporate

social media into their everyday

practices.

McKoy-Noe is a champion of the

“cooperative difference” and has

worked to strengthen relationships

among all co-ops. She has received

numerous awards of excellence in

NRECA communications contests and

was CCA’s Writer of the Year in both

2011 and 2012. She and her husband,

Paul, live in Decatur, Ga.

Top Awards in

Communication Contest

■ Publication of the Year: 2010

Annual Report, Associated Milk

Producers Inc. (AMPI) — Calling it

“an excellent example of design, writing

and overall execution against

objectives,” judges tapped AMPI’s 2010

annual report as the Publication of the

Year. The entry was also the first place

winner in the annual reports (small

shop) class. The report was designed

and written in-house, and compared

very favorably with many other

publications with greater resources.

■ Programs & Projects “Best of

Show”: “I’m Co-op” Tennessee

Farmers Cooperative — The judge

described this as a “clever and creative”

campaign which resonated with its

target audience. The judge noted that

the use of real people and real stories in

all elements of the campaign as reasons

it stood apart from others.

■ Writer of the Year: Megan

McKoy-Noe, National Rural Electric

Cooperative Association

(NRECA) — “Beautiful

writing!” gushed the judge

who tapped McKoy-Noe

for Writer of the Year. The

judge gave high marks to

McKoy-Noe’s portfolio of

articles for effectively

incorporating facts and

figures and quantifiable

benefits and costs into her

work. “She focuses on

sharing the three core

messages for electric

cooperatives: “we exist to

provide safe, reliable and

affordable power.”

Whether she was writing a

speech or a feature story,

she exhibited that focus in

every piece submitted, the

judge noted.

■ Photographer of the Year: Jason

Jenkins, Association of Missouri

Electric

Cooperatives

(AMEC) — A threejudge panel selected

Rural Missouri staffer

Jason Jenkins’ photo

portfolio as the year’s

best. He also won the

award in 2010. The

judges said the photos

in Jenkins’ portfolio

were consistently well

exposed and well

executed. They were

especially drawn to

several shots from the

photographer’s

“Aircraft from

Another Era” photo essay and story.

■ Outstanding Leader Award — This

special (non-contest) award was

presented to Nancy Jorgensen, a

freelance writer and editor who

contributes to a number of cooperative

publications. She was recognized as

“one of CCA’s brightest stars.” The

award is given annually to a member

who demonstrates exceptional

leadership through his or her volunteer

activities within the organization. The

CCA board selected Jorgensen for her

work as the sponsorship chair for the

2012 Communications Institute. She

raised $30,000 in sponsorships, believed

to be the most money ever donated in

support of the Institute.

USDA writers honored

USDA’s Rural Cooperatives magazine

won three awards in the writing contest.

Assistant Editor Stephen Thompson

won second place in the Technical

Writing class for “Banking on Butanol,”

about a Missouri cooperative’s butanol

fuel project. Contributing Editor Anne

Todd won second place in the

Serious/Investigative Features class for

“Forging Links,” about a local food coop’s efforts to find new markets for its

members’ produce. Editor Dan

Campbell won the honorable mention

in that same category for “All the Right

Moves,” about a successful Texas farm

supply co-op.

For a complete list of all award

winners, visit: www.communicators.

coop. ■

Bob Frazee

Megan McKoy-Noe and James Rodenburg
Rural Cooperatives / July/August 2012 35

Midwest co-op centers share

strategies atregionalroundtable

By Alice Pickler, Administrative Assistant

Mid America Cooperative Council

ooperatives can help

each other

tremendously by

sharing experiences,

including “what works”

success stories and “what doesn’t work”

experiences. So, too, can the nation’s

cooperative development centers, which

assist in starting cooperatives and in

helping existing cooperatives develop

new products or services. While these

centers have much in common, each is

also engaged in unique endeavors.

The Mid America Cooperative

Council — an association of 110

cooperatives and supporters in Indiana,

Illinois, Kentucky, Michigan and Ohio

— is one of 32 state and regional

cooperative councils. The council’s

mission is to: “Promote, Foster and

Enhance the Values of Cooperatives.” It

is engaged in an outreach effort to

connect other entities that work with

cooperatives.

In April, six cooperative development

centers in four states (Indiana,

Kentucky, Michigan and Ohio) met in

Elizabethtown, Ky., to learn from each

other. By networking on a regional

basis, the roundtable provided an opportunity for cooperative professionals

to explore new partnerships, resources

and opportunities to collaborate.

The event was coordinated by the

Mid America Cooperative Council

(MACC). MACC’s educational

programs are designed for emerging coop leaders, including co-op employees,

directors and students. This was the

seventh meeting of its kind, since 2007.

The meetings have proven to be very

productive in sharing what development

practices work and how to improve

them.

“Each cooperative development

center is involved in unique activities;

therefore, we can share experiences and

assist each other in our areas of

strength,” says Roy Messing of the

Ohio Employee Ownership Center.

The meeting objective is to raise the

exposure level of each cooperative

development center and provide an

opportunity to network.

USDA Rural Development’s Rural

Cooperative Development Grant

(RCDG) program is an important

source of funds for the centers. The

goal of the program is to improve the

economic condition of rural areas

through cooperative development.

Grants are provided for the

establishment and operation of centers

that have the expertise, or can contract

for expertise, to help rural businesses

launch, expand or make operational

improvements, with the primary targets

being cooperatives or other mutuallyowned businesses.

The following are brief overviews of

the six co-op development centers that

participated in the roundtable.

■ The Indiana Cooperative

Development Center is focused on

assisting food cooperatives, farmers

markets and networking with the

broader cooperative community at the

annual Co-op Summit. Recent efforts

include assisting with the start-up of an

organic dairy farm and working with a

beer brewing cooperative and an artists’

co-op. It partners with Bloomingfoods

to hold a well-attended food

Cooperative Development Center leaders from four states – members of the Mid America

Cooperative Council – met in Elizabethtown, Ky., for roundtable discussions that helped identify

new resources and forge stronger working partnerships.

C
36 July/August 2012 / Rural Cooperatives

cooperative conference where

participants share experiences and learn

how to solve challenges. Food co-op

experts from around the country

address the conference, recognized as a

model for food co-op education.

■ The Michigan Cooperative

Development Program provides

comprehensive cooperative business

development services in rural Michigan.

It is administered by the Michigan State

University (MSU) Product Center for

Food, Ag, and Bio, which has worked

with cooperatives since its inception in

2004. Cooperative Development

Program clients include: 1) Legends of

the Lakes Cooperative — several fisheries,

including Native American-owned, that

banded together to brand their wildcaught Whitefish fillets and create

other value-added products for the

whitefish industry; 2) Farmers On the

Move — comprised of Hispanic farmers

with small operations who have joined

forces to jointly pack and market

products; this organization also provides

educational services and food safety

training for cooperative members; 3)

Four Seasons Produce Cooperative — a

group of small producers growing in

hoop houses who jointly pack and

market vegetables from March to

January. Customers are primarily

institutional buyers in mid-Michigan; 4)

Mother’s Milk Cooperative — a newly

formed co-op that aggregates human

milk for high-value processed products,

and to provide other services and

benefits to young mothers.

■ Ohio State University’s Ohio

Cooperative Development Center

(OCDC) provides technical service for

new and emerging cooperatives in rural

and Appalachia communities in Ohio,

West Virginia and adjacent states, as

well as national groups based in Ohio

or West Virginia. Operating since 1997,

OCDC assists about 40 groups

annually, of which six or seven usually

incorporate each year. The center has

formed a formal partnership with local

Ohio and West Virginia Extension

educators to assist in providing

increased technical services capacity and

a regional presence for improved

networking. Thirty extension educators

have committed to work with local food

and/or small farms related cooperatives

in their area. The OCDC also works

closely with the statewide Non-Profit

Local Foods Network (NPLFN), the

mission of which is to improve the

economic conditions and personal

health of communities through

“growing new growers.” It promotes

development of co-op training

programs, sustainable incubator farms,

business cooperative networks,

community-support systems and

apprenticeship/mentor training

programs. These regional efforts are

located in rural areas near distressed

communities to serve the unemployed

and underemployed, part-time growers,

local consumers and to increase the

availability of fresh food.

■ Center for Cooperative Forest

Enterprises (CCFE) works with forest

products businesses interested in using

the cooperative business model. Prices

for forest products have fallen as the

construction industry has declined in

the past few years. As a result, forest

product-related businesses are looking

for other products they can offer.

Current opportunities appear strong in

bundled firewood, typically sold

through food stores. The CCFE is a

program of The National Network of

Forest Practitioners, which is based in

Athens, Ohio, but it works on a

national scale.

■ The Ohio Employee Ownership

Center, a nonprofit outreach center of

Kent State University, supports the

development of employee-owned

businesses across Ohio and around the

world through efforts that have proven

to save jobs, create wealth and grow the

economy. OEOC’s work rests on a

simple philosophy: broader ownership

of productive assets is a good thing for

employees, communities and our

country. Since being founded in 1987,

OEOC has assisted 91 companies

become employee owned. These

companies represent some 15,000

worker/owners, with well over $300

million of equity in the businesses, in

which they have shared ownership. The

Cooperative Development Center at

Kent State University joined OEOC in

2009 after receiving a USDA Rural

Cooperative Development Grant. Work

under this grant focuses in three

primary areas: 1) Outreach and

promotion of employee/worker-owned

cooperatives; OEOC was involved in

the development and launch of the

Evergreen Cooperative Laundry in

Cleveland as well as the conversion of

Select Machine Co. from a private

business to a worker cooperative. 2)

Linking rural agricultural producers to

urban users; OEOC worked with the

development of the “Lake to River

Cooperative,” a multi-stakeholder

cooperative in Ohio’s Mahoning Valley,

which includes both producers and

consumers as members. 3) General

outreach and research on cooperative

topics; the center recently completed its

third Ohio Cooperative Symposium,

which provided cooperative training for

a wide variety of attendees, and funded

development of a well-regarded manual

for multi-stakeholder co-ops, titled:

“Solidarity as a Business Model.”

■ The Kentucky Center for

Agriculture and Rural Development

(KCARD) is a nonprofit organization

established to facilitate agricultural and

rural business development in

Kentucky. KCARD provides education,

technical assistance and business

support services to new and existing

agribusinesses across the commonwealth. KCARD staff consults with

groups on critical questions related to

incorporating, financing, management,

marketing, accounting and legal concerns. The organization networks with

state and national resources to assist

with all aspects of business

development. ■
Rural Cooperatives / July/August 2012 37

Newsline

Send co-op news items to: dan.campbell@wdc.USDA.gov

Co-op developments, coast to coast

FAO opens co-op office

In an effort to further its

collaboration with cooperatives

worldwide, the Food and Agriculture

Organization of the United Nations

(FAO) has opened a new liaison office

in Rome that will focus on promoting

cooperatives and other producer-owned

organizations. The office opened just a

few days after the International Day of

Cooperatives, celebrated on July 7.

“We are confident that this liaison

office will allow cooperatives and

producer organizations to have a

stronger voice as FAO’s key partners in

ending hunger and poverty,” FAO

Director-General José Graziano da

Silva said at the opening ceremony. The

event was attended by representatives of

the International Cooperative Alliance

and the World Farmers Organization.

“Cooperatives and producer

organizations have a key role to play in

bringing about a future without

hunger,” he continued. “Standing alone,

a smallholder has fewer opportunities.”

But by joining with other farmers in

cooperatives, he noted, they are better

able to negotiate better prices and to

gain access to more markets and

services.

FAO says it will continue to

encourage governments to establish

favorable policies, legal frameworks,

economic incentives and participatory

processes that will help strengthen

cooperatives and other producer

organizations. In 2011 alone, more than

180 FAO programs and projects in

more than 100 countries helped

cooperatives and producer groups reach

their goals.

FAO has revamped its website to

further this effort, which can be viewed

at: www.fao.org/partnerships/partnershome/en/.

The United Nations is leading

efforts to observe 2012 International

Year of Cooperatives. It also is

promoting World Food Day, held each

year on Oct. 16, which has adopted the

theme: Agricultural Cooperatives: Key

to Feeding the World.

DFA building

Nevada dairy plant

Dairy Farmers of America Inc.

(DFA) in April broke ground on a new

dairy ingredient plant in Fallon, Nev.

The 110,000-square-foot plant is being

built on a 31-acre parcel in the New

River Business Park. The $85 million

facility will produce dried dairy

ingredients, including whole-milk

powder, on an on-demand basis. The

plant can process 2 million pounds of

raw milk and produce about 250,000

pounds of dried dairy ingredients daily,

or 90 million pounds annually, for

domestic and global customers.

“As a milk marketing cooperative

focused on our dairy farmer owners, we

have a responsibility and an obligation

to explore new options to bring our

members greater returns,” says Mark

Korsmeyer, DFA executive vice

president and president of DFA’s Global

Dairy Products Group. He says the

project provides DFA the opportunity

to enter a new market segment and to

continue to leverage dairy farmer equity

into profitable investments.

In addition to the creation of at least

40 full-time jobs at the facility,

increased employment opportunities are

expected to occur in the community, on

member farms and in agriculture

support industries. Construction is

scheduled for completion during the

summer of 2013.

Land O’Lakes, Eggland’s Best

announce egg joint venture

Land O’Lakes Inc. and Eggland’s

Best Inc. recently announced the

An artist’s rendering of a 110,000-square-foot dairy ingredients plant

being built in Fallon, Nev.
38 July/August 2012 / Rural Cooperatives

creation of a branded, specialty egg

joint venture, in which each

organization will hold a 50 percent

stake. Land O’Lakes, a federated

cooperative, is the national licensor of

Land O’ Lakes brand eggs. Eggland’s

Best is a cooperative that manages the

advertising and marketing of Eggland’s

Best brand eggs — the No. 1 branded

egg in the United States.

The new joint venture will license

both co-op brands. Former Eggland’s

Best President and CEO Charles T.

Lanktree is serving as president and

CEO of the new company, called

Eggland’s Best LLC. Land O’Lakes says

the joint venture will expand its

participation in the growing branded

specialty egg category.

Beef co-op leader

Doc Hatfield dies

Patrick “Doc” Hatfield, who along

with his wife, Connie, was the guiding

force behind the Country Natural Beef

Cooperative in Oregon, died in March

at age 74. He has been credited with

helping to create the natural-beef

market.

According to a report in the Great

Bend Bulletin: “Despite the awards and

academic interest he and his wife

earned for the Country Natural Beef

cooperative they developed, Doc

Hatfield never set aside his cowboy hat

and boots or lost his love for ice cream

bars.” For their efforts, the Hatfields

earned the Oregon Governor’s Gold

Award in 2007 and the Kerr Award

from the High Desert Museum in 2001.

“As charismatic leaders, the

Hatfields’ presence strongly affected the

culture of the co-op and played a

critical role in establishing close

relationships with the key customers of

the co-op over the years,” according to

a 2009 case study of the co-op by

Zhaohui Wu, an associate professor of

business at Oregon State University.

Wu said Country Natural Beef stands

out for its style of decision-making,

which gives a voice to all ranch family

members, according to the Bulletin

article. The co-op pioneered industry

efforts to produce a consistent supply of

antibiotic- and hormone-free beef and

bridged the culture gap between

ranchers and urban consumers, he

added.

Hatfield graduated from Colorado

State University with a degree in

veterinary medicine, hence the lifelong

nickname “Doc.” He worked as a

veterinarian until 1976, when he moved

to Brothers, Ore., and went into cattle

ranching, a career in which his

veterinarian skills often proved helpful.

Hatfield’s legacy is ongoing, as the

natural beef produced by the co-op’s 70

family ranches is for sale in 92 Whole

Foods Markets in 10 states, in 53 other

grocery stores and in 136 restaurants.

NFU releases free

co-op curriculum

National Farmers Union (NFU) is

introducing a special co-op education

curriculum as part of its observation of

2012 International Year of

Cooperatives. “Cooperation is at the

heart of America, from its largest cities

to its smallest towns,” says NFU

President Roger Johnson. “Schools,

organizations and community leaders

are invited to use these lessons. The coop curriculum is available to everyone

for free.”

The curriculum provides six separate

lessons each for collegiate and adult

students. The lessons are written to

introduce how cooperation works to

help individuals accomplish as a group

what they could not on their own.

To download the curriculum, visit:

www.nfu.org/education/educationmaterials. To learn more about ways to

use the curriculum, contact NFU

Director of Education Maria Miller at:

mmiller@nfudc.org. The curriculum

was developed with support from CHS

Foundation, in cooperation with the

NFU Foundation.

Farmers Union members have

helped organize hundreds of successful

cooperative businesses, some of which

are among the Fortune 500 companies.

Ocean Spray building new

plant in Pennsylvania

Ocean Spray Cranberries Inc. and

the Pennsylvania Department of

Community and Economic

Development held a groundbreaking

ceremony in April to celebrate the start

of construction on the co-op’s new juice

bottling plant in the Upper Macungie

Township, Pa. The $110 million

investment by Ocean Spray will bring

165 good-paying, high-skilled jobs and

training opportunities to the

community. The Lehigh Valley

Beverage Facility will be the co-op’s

first manufacturing facility in

Pennsylvania.

The 315,000-square-foot-plant is

being built on a 44-acre site and will

produce more than 32 million cases of

beverages each year. The state-of-theart facility will bottle both Ocean Spray

juices and Nestle’s Juicy Juice products.

The facility is slated for completion

during the fall of 2013.

“The positive impact of this project

on the community will be enormous,

and one the commonwealth is proud to

support,” Pennsylvania Department of

Community and Economic

Development Secretary C. Alan Walker

said. “Our agricultural roots run deep at

Ocean Spray, and we are excited to

Doc Hatfield puts on a natural beef

cooking demonstration, which is one

way his co-op promotes its products.
Rural Cooperatives / July/August 2012 39

bring good jobs and a commitment to

corporate citizenship to the Lehigh

Valley community,” said Randy

Papadellis, Ocean Spray president and

CEO.

In keeping with the co-op’s

commitment to minimizing its

environmental impact, Ocean Spray

plans to pursue a Gold LEED

certification for the building. Ocean

Spray will ensure that it is using

environmentally friendly methods and

materials to build the facility and

manage construction waste. Ocean

Spray will conserve energy through

greater efficiencies and smart building

designs, such as a high-tech HVAC

system.

When the new facility goes into

production, it will replace a manufacturing plant in Bordentown, N.J.

During the transition, Ocean Spray says

it has offered its employees at the

Bordentown facility the most generous

incentive, relocation and transition

packages in the cooperative’s history.

Ocean spray is owned by 700 mostly

small family farms — many of them

fifth-generation growers who have been

harvesting cranberries for as long as 138

years.

Accelerate Genetics

saluted for export success

Accelerated Genetics, a Baraboo,

Wis.-based livestock breeding

cooperative, has been awarded the 2011

Governor’s Export Achievement Award.

Wisconsin Governor Scott Walker

presented the annual Export

Achievement Awards in May to

recognize firms and organizations that

have achieved extraordinary results in

international sales or have contributed

to Wisconsin’s increased ability to

compete in a global market.

Accelerated Genetics, recognized for

being a top agricultural exporter, does

about half of its business outside the

country. It made its first international

sale in 1957. In 2008, Accelerated

Genetics constructed a 24-stall

European Union Qualified Sire

Isolation facility. During the past few

years, it has also initiated cutting-edge

marketing techniques to promote its

sires and has added team members who

are native to various countries it does

business in, helping to “cross the bridge

into the global community.”

Accelerated Genetics is celebrating

its 70th Anniversary with the theme:

“Celebrating 70 Years of Innovation.”

Oregon grain co-ops

purchase Cargill terminal

Pendleton Grain Growers, Morrow

County Grain Growers and the Port of

Morrow in Oregon signed an

agreement in May to purchase a grain

terminal on the Columbia River

previously owned by Cargill Inc. The

three purchasers will own the grain

terminal as tenants in common. They

have entered into a lease agreement

with East Oregon Grain Growers LLC,

a joint venture owned by Pendleton

Grain Growers and Morrow County

Hispanic and women farmers and

ranchers who believe that the U. S.

Department of Agriculture (USDA)

improperly denied them farm loan benefits

between 1981and 2000 because they are

Hispanic or female, may be eligible to apply

for compensation if:

1) You sought a farm loan or farm-loan

servicing during that period;

2) The loan was denied, provided late,

approved for a lesser amount than

requested, approved with restrictive

conditions or USDA failed to provide

appropriate loan service; and

3) You believe these actions were based

on your being Hispanic or female.

To receive a claims package, visit: www.farmerclaims

.gov, or call 1-888-508-4429. For further guidance, you may

contact a lawyer or other legal services provider in your

community. USDA cannot provide legal advice. If you are

currently represented by counsel regarding allegations of

discrimination or in a lawsuit claiming discrimination, you

should contact your counsel regarding this claims process.

■

Hispanic, women farmers may seek compensation

USDA photos by Bob Nichols
40 July/August 2012 / Rural Cooperatives

Grain Growers. East Oregon Grain

Growers will lease and operate the

facility.

The co-ops say this strategic

partnership provides Morrow County

Grain Growers and Pendleton Grain

Growers part ownership and facility

management of one of the most

efficient, high-capacity grain elevators

on the Columbia/Snake River System.

This joint venture facilitates the

logistical needs of both cooperatives to

better serve their members’ grain

handling and marketing needs, they say.

Both cooperatives reported strong

financial results this past year and see

their East Oregon Grain Growers

venture as a strategic alliance to

strengthen their respective grain

operations and logistics. Pendleton

Grain Growers, headquartered in

Pendleton, Ore., and Morrow County

Grain Growers, headquartered in

Lexington, Ore., are both farmerowned cooperatives that have served

their members and communities for

over 80 years.

Located in the heart of the

Northwest, the Port of Morrow is

strategically connected to the world

through Columbia River barges,

railroads and Interstate freeways.

Feit to lead United

Cranberry Co-op

Tim Feit has been named executive

director of United Cranberry Growers

Cooperative. He will be responsible for

running the day-to-day operations of

the Wausau, Wis.-based group, an

agricultural cooperative of independent

cranberry growers formed in 2010,

according to an article in Wisconsin Ag

Connection.

Feit was promotions director for the

past six years for the Wisconsin Potato

and Vegetable Growers Association; he

has over 20 years of experience in

marketing. He is a graduate of the

University of Wisconsin-Stevens Point

with a degree in Business

Administration and an MBA from the

University of Wisconisn-Oshkosh

Montana food co-op

being organized

Montana farmers and food

producers have launched an effort to

start a Montana food cooperative. The

focus will be on bringing together

Agriculture Secretary Tom Vilsack met in Des Moines,

Iowa, in June with business and community leaders to

discuss how continuing demand for American food and

agricultural products abroad has led to the three best

consecutive years for U.S. farm exports in our nation’s

history. Vilsack said the success of American agriculture is a

positive economic story that is creating jobs in rural America

and benefitting people around the world.

“In 2010, President Obama committed to doubling U.S.

exports in five years, and just two years later we are on

pace to meet that goal,” Vilsack said. “Meanwhile, people

around the world continue to demand U.S. food and

agricultural products, boosting American businesses and

supporting our rural communities. To ensure these

successes continue, USDA has aggressively worked to

expand export opportunities and reduce barriers to trade.

“Fewer restrictions abroad, stronger trade deals for U.S.

agriculture and greater export assistance for U.S.

businesses supports more than 1 million Americans jobs in

industries from packing and shipping, to food processing, to

transportation,” Vilsack continued. “This is an Americanmade success story worth sharing with our friends, family

and neighbors.”

Vilsack pointed to Iowa’s low unemployment rate of 5.1

percent as proof of agriculture’s success. Last year, Iowa

exported a record $7 billion in agricultural products, which

supported nearly 60,000 jobs on and off the farm. Thus far in

2012, the state’s farm exports show a 15-percent gain over

last year’s record total.

Vilsack also highlighted a joint report released by the

White House Rural Council and USDA, which notes how the

President’s National Export Initiative has opened new

markets for U.S. agricultural products and services and

contributed to a historic level of agricultural exports. ■

Vilsack: Farm exports creating jobs

The last three years have been the best on record for U.S.

agricultural exports. Farmer cooperatives are among the

nation’s major exporters. Photo courtesy Ag Processing Inc.
Rural Cooperatives / July/August 2012 41

Agriculture Secretary Tom Vilsack in June announced

that USDA has selected 450 renewable energy projects

nationwide for funding under the Rural Energy for America

Program (REAP), authorized by the 2008 Farm Bill. The

announcement was made in North Carolina, which is home

to 31 of the projects receiving USDA funding, including

projects that: help agricultural producers and rural small

businesses reduce energy consumption and costs; use

renewable energy technologies in their operation; and/or

conduct feasibility studies for renewable energy projects.

“The Obama administration and USDA are helping

agricultural producers and rural small business owners

reduce their energy costs and consumption — and by doing

so are helping to create jobs, preserve our natural

resources, protect the environment and strengthen the

bottom line for businesses,” said Vilsack. “This is part of the

administration’s “all of the above” energy strategy. Stable

energy costs create an environment for sustainable job

growth in rural America.”

REAP offers funds for farmers, ranchers and rural small

businesses to purchase and install renewable energy

systems and make energy-efficiency improvements. These

federal funds leverage other funding sources for

businesses. In all, USDA announced nearly $7.4 million in

energy grants.

Vilsack made the announcement while touring Metrolina

Greenhouses, a family-owned plant and services company

in Huntersville, N.C., that has received a REAP guaranteed

loan and three grants totaling over $1 million since 2007.

Among the work Metrolina has undertaken with the funds is

construction of a wood boiler heating system to supplement

and replace the natural gas and fuel it uses at its 120-acre

facility. In addition to heating greenhouses, using wood

chips in the boiler provides an additional market for local

lumber mills and logging operations.

Examples of some other funded projects include:

• Tennessee small business owner Rick Alexander is using a

REAP grant and investing another $325,000 to create the

first solar-powered business in Maury County, Tenn.

Electricity is the largest expense for the climate-controlled

storage facility he built as a creative re-use of a former

furniture making plant.

• Maurice Nichols received a grant to purchase an energyefficient grain dryer for his farm in Mount Hope, Wis.,

saving more than 42 percent in annual energy use.

• Whispering Pines Poultry farm in Centre, Ala., will use a

REAP grant to replace four propane heaters with

renewable biomass wood pellet heaters to improve heating

efficiency of its poultry houses, resulting in expected

energy savings of more than $3,000 per barn annually.

For a complete listing of Rural Energy for America

Program grant recipients announced, visit the Newsroom at:

www.usda.gov. ■

USDA funds renewable energy efforts

consumers and producers to create easy

access to local, nutritious and affordable

food while promoting sustainable

agriculture. A steering committee was

formed last spring during a meeting

facilitated by Karl Sutton, program

manager at the Mission Mountain Food

Enterprise and Co-op Development

Center in Ronan. The committee

researched other co-ops in Idaho,

Oklahoma and Madison, Wis.

The projected service area is western

Montana, from Eureka to Hamilton. By

working with other producers, co-ops,

businesses and farm-to-table

organizations, the plan is to extend

service to the majority of the state in

the near future. People interested in

Solar-powered poultry houses are just one type of energysaving project USDA is backing through its Renewable

Energy for America Program (REAP). This Pennsylvania farm

received REAP funds in 2011. USDA photos by Lance Cheung
42 July/August 2012 / Rural Cooperatives

joining the co-op, as producers or

consumers, may contact Jason Moore at

(406) 285-1149, or Lake County

Community Development Corporation,

407 Main St. S.W., Ronan, Mont.

59864, or call (406) 676-5901. For

more information, visit: www.montana

coop.com.

Dairy: a $14.7 billion

Michigan industry

Michigan’s dairy industry contributes

$14.68 billion to the state’s economy

each year, according to a recently

released Michigan State University

(MSU) study. Ken Nobis, president of

the Michigan Milk Producers

Association, says he wasn’t surprised by

the new statistics.

“Dairy has always been a substantial

part of Michigan’s economy, currently

generating almost 40,000 direct and

indirect jobs,” Nobis says. “It is truly a

bright spot in our state’s economy,

showcasing the innovation,

commitment and tenacity of our state’s

dairy farmers, processors, wholesalers

and retailers.”

The study found that $2.33 billion is

produced by dairy farming, $7.97

billion from milk processing and $4.37

billion from wholesaling and retailing.

These numbers represent historic

highs, caused by a rising number of

cows and milk production in the state.

Dairy farm cash recipients swelled

nearly 50 percent from 2006 to 2010,

with 8.3 billion pounds of milk

produced in 2010, compared to 7.1

billion pounds in 2006. Estimates are

based predominately on 2010 data, the

latest available. Processing data was

obtained from the 2007 economic

census, which some industry experts

think understates the current level of

dairy processing.

Michigan ranks eighth among the

states in milk production, with the

number of dairy cows and the amount

of milk produced in the state increasing

steadily.

Snokist assets go to

PCP, Del Monte

The sale of the assets of bankrupt

Snokist Growers, Yakima, Wash., to

Del Monte Foods, San Francisco,

Calif., and Pacific Coast Producers,

Lodi, Calif., was approved in May for

$27.7 million by the bankruptcy court.

Del Monte bid on the fixed assets and

Pacific Coast Producers, another fruit

grower cooperative, bid on the

inventory, according to a report in the

Capital Press.

The cooperative’s 150 growermembers are not part of the deal and

may sell their fruit to Del Monte or

other processors. Snokist, a processor

of apples and pears, filed for Chapter

11 bankruptcy reorganization Dec. 7. It

listed assets of $69.5 million and debts

of $49.5 million. ■

The Michigan dairy industry creates

40,000 direct or indirect jobs, says Ken

Nobis, president of Michigan Milk

Producers Association, seen here on his

farm near St. Johns, Mich.

La Crosse-based People’s Food Coop. Rather than create redundancies

and job losses from synergies, this

merger will lead to a doubling of

store space in Rochester and more

jobs.

• Two recent announcements from

the farmers and their local co-ops

that own CHS Inc. has the Inver

Grove Heights co-op expanding its

soybean processing businesses. It

acquired Creston Bean Processing

LLC, at Creston, Iowa, and will

transport soybean oil from Creston

to Mankato, where CHS will

process it into food ingredients for

human consumption. More recently,

the Minneapolis Star Tribune

reported CHS is purchasing Solbar

Industries Ltd., an Israeli soy

protein processor, for $133 million

that will add two processing plants

in Israel, one in China and one in

Nebraska to CHS operations. Its

last fiscal year was the most

profitable ever for the co-op.

• First half results [2011] for Arden

Hills-based Land O’Lakes, another

major farm co-op, found sales up 15

percent, to $6.93 billion, and profits

up 75 percent, to $168 million.

• Across the metro area,

Bloomington-based HealthPartners

Inc., proudly announced it was the

top-ranked health plan in Minnesota

for the seventh consecutive year and

a national leader, based on National

Committee for Quality Assurance

rankings for 2011-2012.

Espinoza, whose LEAF organization participates with Minneapolisbased Northcountry Cooperative

Development Fund and other groups

to finance cooperatives and employee

ownership programs, said similar

“ground up” development efforts are

visible in several parts of the country.

Unlike corporate profits that

concentrate into a few hands at the

top, co-ops’ successes funnel back to

workers, farmers and customers.

People are realizing the importance of

community development, he said.

The answers to our economic

problems “aren’t going to be found

on Wall Street.” ■

Commentary

continued from page 2
Rural Cooperatives / July/August 2012 43

association carry out its mission to

provide technical assistance and

resources to small farmers and

fishermen. In 2009, LAC received a

$175,000 SSDPG. It was awarded

$200,000 grants — the maximum

available under the program — in 2010

and 2011.

Cooperative staff in USDA Rural

Development’s Louisiana state office

have worked closely with Reed and

LAC over the years to support the work

of the association, assist it with the

grant application and documentation

processes, to inform LAC members

about the availability of government

assistance and offer other help.

The road ahead

Since its “trial by fire” launch six

years ago, prompted by Hurricane

Katrina, the Louisiana Association of

Cooperatives has grown substantially.

Today, more than 20 cooperatives are

LAC members and the association is an

advocate not just for fishermen, but also

for a wide variety of agricultural co-ops,

including crop and livestock producers.

Even though the formation of

cooperatives is challenging in

Louisiana, in part because there is no

state co-op law to guide their creation,

Reed and LAC have to date helped

create 10 new cooperatives, primarily

comprised of small, socially

disadvantaged Louisiana producers.

Additional co-ops are in the early stages

of planning and development with

LAC’s support and guidance.

Reed’s goals for LAC in the future

include helping more small and

minority producers and fishermen in

Louisiana develop co-ops and other

alliances, and to help them with

research activities.

To learn more, contact the Louisiana

Association of Cooperatives at:

lcooperatives@gmail.com or (504) 319-

1085. ■

Nourse had not considered this type

of supportive role for cooperatives. He

believed they need only gain a market

share that is sufficient to affect

competitive prices for farmers. Nourse

did not extend his economic model to

other sources of benefits that derive

from farmer ownership and control of

vertically integrated businesses.

Cooperatives proved to be relatively

more adept at operating in a downsizing cottonseed processing industry

than most other processors. Today, they

maintain the major share of the U.S.

crush.

References • Ash, Mark, Economic Research Service/USDA.

e-mail communication, April 30, 2012.

• Burgess, John S. Jr. 1939. Crushing Cottonseed

Cooperatively. Farm Credit Administration, Cir.

C-114.

• Dunn, John R., et al. 1980. Cooperative

Involvement and Opportunities in Oilseeds.

Agricultural Cooperative Service, USDA, ACS

Research Report 13.

• Nourse, Edwin G., 1944. The Place of the

Cooperative in Our National Economy. American

Cooperation: American Institute of

Cooperation, 1942- 1945, pp. 33-39. Reprinted

in the Journal of Agricultural Cooperation.

1992. pp. 105-111.

• Perdue, Elmer and Daniel H. McVey. 1971.

Growth of Cottonseed and Soybean Processing

Cooperatives. Farmer Cooperative Service,

USDA, FCS Information 75.

• USDA/RBS, 1956 to 1999, unpublished

technical assistance reports for cooperative

cottonseed processors. ■

CEO of the 40-year-old CIC Insurance

Group of Kenya. “For 50 years, the

African continent has been the guinea

pig for various types of economic

models that have failed dismally. The

world’s poor people don’t need

sympathy and pity. Rather, they need

the type of empowerment that true

cooperatives facilitate through bringing

the majority of the marginalized

population into the mainstream of

economic activity.”

Coordinating the Imagine 2012

conference is Tom Webb, who retired

this year from his post as program

manager of the MMCCU program (for

more information on it, visit:

www.mmccu.coop). “Imagine the global

influence of a widespread understanding of economics focused on meeting

human needs sustainably, not just on

wealth creation,” Webb says. “Imagine

world-class economists mingling with

leaders of the world’s ninth largest

economy to shape better approaches to

understanding and analyzing local,

national and global economics. Imagine

this group of leaders coming together

to identify ways to use the cooperative

business model to build a better world.”

For more information visit:

www.imagine2012.coop.

Editor’s note: Tom Webb contributed to

this article. ■

Disaster spurs co-op

formations

continued from page 6

Can co-ops help drive global

recovery?

continued from page 31

Co-op oil mills play vital role

in sustaining cottonseed value

continued from page 16

Tom Webb, coordinator of the upcoming

Imagine 2012 conference, confers with

Dame Pauline Green, president of the

International Cooperative Alliance.
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44 July/August 2012 / Rural Cooperatives