Rural COOPE

May/June 2015

RATIVES

Page 10

MAKING

EVERY DROP

COUNT
By Greg Wuertz

Editor’s note: Wuertz is a farmer and is board chairman of

Calcot, a producer-owned cooperative based in Bakersfield, Calif.

While water may be scarce in several

Western states due to drought, there's no

shortage of ink nor opinions

about the situation.

California has gotten most

of the recent attention, due to the severity

of the drought there and the state’s

importance in producing so much of the

food and fiber supply for our nation and the

world. Yet, drought in these states, including

Arizona, where I farm and live, has been

ongoing for a number of years to varying

degrees of severity.

It took a fourth straight year of drought

to attract so much media attention, and

fingers are being pointed every which way

regarding who is responsible for making a

bad situation worse. “It’s farmers hogging all the water.” “It's

the environmentalists causing water to just flow unchecked to

the sea.” “It's climate change, altering weather patterns.” “It’s

people with their manicured lawns, golf courses and

swimming pools.” “It's a naturally recurring drought; nothing

to worry about.”

Ultimately, the cause of California’s water shortage and the

situation in the developing West is quite complex. Each of

these charges is in some sense correct, as we are all

responsible. At the same time, it is everybody's responsibility

to fix it, and each of us can and must do what we can.

Water is a resource for all the people in each of the states,

and we have more demand than we have water. It is

compounded in California because precipitation falls in the

north and the majority of the population lives in the southern

part of the state. Two great canal systems move water freely

throughout the state, or did, until recently. Even if weather

returns to normal in the next year, this might be a good

opportunity to reassess and reallocate our priorities.

Water’s first and most basic function is to provide life to

the earth itself. Who doesn’t want healthy rivers and

ecosystems? Who doesn’t want wildlife, flowers, birds? The

great California redwoods? Fish? Marine life? Of course, we

all want these things, and that is why half of the water

California receives each year is devoted to nature.

Second, human beings all need drinking water. Our bodies

are two-thirds water overall, and blood is over 90 percent

water. People can survive not eating for up to a month. But

within a week, without water, the human body shuts down.

We actually don't drink that much of the earth’s water, but it

is obviously essential to the well-being of humanity.

Water is also absolutely essential to

producing foods of all kinds, from fruit and

produce to nuts to animal protein. We get

much of the water we need from the foods

we eat. Health experts tell us we need varied

diets, and we are blessed in the West to

have a climate that allows for year-round

agricultural production. We have farmland

that supports an enormous variety of crops,

if we can get sufficient water to it on a

proper schedule. 

California farmers’ yields are among the

highest in the world and the quality is

overwhelmingly high, year after year.

Despite this tremendous efficiency, we’re

being criticized by some for our water usage.

You might have seen statistics along the lines of “one

gallon of water needed to produce one almond.” Technically,

that’s accurate, when you divide the water applied to one tree

over the course of the year to what it produces in almonds.

But this current drought has demonstrated how disconnected

most people are from the “water mathematics” of their own

lifestyles.

How much water do we use to wash a car or a load of

laundry? Fill a swimming pool? How much water do most

people use while showering, or washing their hands or

flushing a toilet? How much water do you need to drink on a

daily basis? How much water falls on the state in a given

year?

Most people do not know the answers to these questions.

They turn on the tap and water comes out. But Western

farmers know exactly how much water they are using,

because the cost of water is exorbitant. (In some cases,

farmers pay for water that they don’t even receive, much less

use.) It’s one of farmers’ largest costs. The high cost of water

is a great incentive to use as little as possible.

Ultimately, farmers have switched to better irrigation

methods to protect our resources and to save money, which

2 May/June 2015 / Rural Cooperatives

continued on page 40

Commentary 

Drought requires joint effort, not finger pointing

Photo by Mark Bagby
Features

Rural Cooperatives / May/June 2015 3

Volume 82, Number 3

May/June 2015

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

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offices. Copies may be obtained from the

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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

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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,

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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

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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

Lisa Mensah, Under Secretary,

USDA Rural Development

Dan Campbell, Editor

Stephen A. Thompson, Assistant 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.

04 Building Co-op Infrastructure

Education efforts needed to develop expertise in co-op legal, tax, financial and accounting issues

By Jenny Bernhardt

06 Begin Here 

Phases and steps in starting a co-op

By James Wadsworth

09 REAP helps paint producer convert to solar energy

By Venus Welch-White

10 Trading Places 

As drought squeezes California, almonds continue to surge while cotton fades

By Dan Campbell

18 Co-op or LLC?

Which business organization best serves members’ interests?

By Bruce J. Reynolds

22 Tackling Trade

How two dairy cooperatives function in world markets

By Carolyn B. Liebrand

27 The Power of Tradition

Tongas unite Afro-Colombian farmer associations, grow local economies

By Hannah Guedenet

30 FirstNet broadband network can enhance rural safety 

By T.J. Kennedy

Departments

02 COMMENTARY

20 FOCUS ON: GREENBELT, MD

33 NEWSLINE

p. 6

ON THE COVER: Micro-jet sprinklers are used to

irrigate an almond orchard in the Central Valley of

California. A large majority of almond orchards are now

irrigated with low-volume systems, such as this, helping

to increase water-use efficiency. For more, see page 10.

Photo by Mel Machado, courtesy Blue Diamond Growers

p. 10 p. 22 p. 30
By Jenny Bernhardt

Cooperative Network

Editor’s note: Bernhardt is

communications director for Cooperative

Network, the nation’s largest statewide

association for cooperative businesses. It

provides government relations, education,

marketing, and technical services to a wide

variety of more than 400 Minnesota and

Wisconsin member-cooperatives. For more

information, visit:

www.cooperativenetwork.coop.

A few years ago, Diane

Dube was attending the

Symposium on Small

Towns at the University

of Minnesota-Morris,

where attendees began discussing how a

town’s only movie theater had

converted to a co-op. The community

hadn’t been able to find an attorney

outside the Twin Cities to handle the

cooperative aspects of the deal. This

realization of a critical co-op resource

gap stayed with Dube after the

conference — and it also seemed like

something students at William Mitchell

College of Law should be aware of. 

Minnesota boasts the highest

number of cooperatives in the nation,

and they aren’t just concentrated in

Minneapolis and St. Paul. As an

attorney, resident adjunct professor at

St. Paul-based William Mitchell, and

director of the college’s Community

Development Clinic, Dube increasingly

felt that her students needed co-op law

exposure to best equip them for practice

4 May/June 2015 / Rural Cooperatives

Education efforts needed to develop expertise 

in co-op legal, tax, financial and accounting issues

Debra Spaeth (left), communications specialist with United FCS, discusses the cooperative’s

financial products and services with student Rongrong Jing during a University of Minnesota

Carlson School of Management networking event in 2014. Photo courtesy Minnesota Cooperative

Education Foundation

Building Co-op Infrastructure
Rural Cooperatives / May/June 2015 5

outside the metro area.

“It’s a business organization form

that doesn’t get much attention, even

though the Upper Midwest is the

birthplace for cooperatives,” Dube

says. “Attorneys who currently practice

cooperative law will be retiring in the

next decade...so we need to be training

the next generation to carry on the work.”

The college did not have room in

the curriculum for an entire class on

cooperative law, and the topic wasn’t

included as part of any other course.

But Dube’s Community Development

Clinic had begun collaborating on a

number of projects with the school’s

Center for Law and Business, and she

felt the timing was right for a learning

session on cooperatives. 

So, she contacted Bill Oemichen,

president and CEO of Cooperative

Network, the statewide association for

cooperatives. [Editor’s note: Oemichen

recently announced he is retiring from

the post, see Newsline, page 36.)

Oemichen is also a lawyer who

specializes in cooperative law. 

Co-op Law 101

Cooperative education is an

important initiative of Cooperative

Network, which provides government

relations, education, marketing and

technical services to cooperatives in

Minnesota and Wisconsin. It’s also a

core focus of Cooperative Network’s

charitable arm, the Minnesota

Cooperative Education Foundation. 

At Dube’s request, Oemichen

prepared an after-hours session to teach

William Mitchell law students and

graduates about the business and legal

characteristics of cooperatives and the

particular laws that regulate

cooperatives in Minnesota. 

“Member-owned cooperatives are a

prominent part of the Upper Midwest

business community and are vital

components of urban and rural

communities,” says Oemichen, who has

also been a guest speaker at the

University of Minnesota Law School.

“If cooperatives are to continue to

thrive here, we must continue to

maintain and grow our legal, tax,

financial and accounting professional

infrastructure. We feel that talking to

law students at William Mitchell and

other law schools about the important

role cooperatives play in their

community, as well as the students’ own

opportunities to work with

cooperatives, will help ensure we retain

and grow our legal infrastructure.”

With funding from the CHS

Foundation, the Minnesota Cooperative

Education Foundation provided

financial support for the January

session, which was advertised through a

campus flier. More than 30 students and

lawyers gathered for Oemichen’s onehour presentation and stayed for nearly

the same amount of question-andanswer time. 

Oemichen addressed the basics of

cooperative business and how co-ops

compare to other business types; the

various co-op sectors in Minnesota;

specific federal and Minnesota laws

governing cooperatives; and the

economic impact of cooperatives.

Anna Ayers Looby, a University of

Minnesota student about to receive her

master’s degree in public health, was

one of the few non-law students in

attendance. She saw the session

continued on page 41

In addition to the Co-ops 101 session for law students, Cooperative

Network offers a number of other co-op education opportunities through its

501(c)(3) charitable arm in Minnesota, the Minnesota Cooperative Education

Foundation (MCEF). With grant funding from the CHS Foundation and the

AgStar Fund for Rural America, MCEF’s educational projects reach everyone

from middle school students to business professionals. Its efforts include: 

• Co-op Networking with Business Students. For the past five years,

MCEF has organized a student/cooperative networking event at the

University of Minnesota Carlson School of Management. Students have the

opportunity to network one-on-one with co-op professionals and to learn

about career opportunities from a variety of Minnesota-based cooperative

businesses such as Land O’Lakes, United FCS, AgriBank, People’s Food Coop, and the Minnesota Rural Electric Association.

• Co-op Curriculum. MCEF staff recently updated a Minnesota version of

the USDA high school curriculum on cooperative business, which will be

reviewed by Minnesota teachers. The materials include extended and

abbreviated versions of lesson plans, worksheets, presentations, and

activities that comply with Minnesota state standards. A university law

school and middle school curriculum are also in the works. Materials will be

available at: www.mcef.coop. 

• Minnesota State Bar Co-op Committee & Continuing Legal Education.

In conjunction with Cooperative Network, MCEF created the nation’s first

cooperative committee in the Minnesota State Bar Association’s business

law section. Any law that deals with cooperatives must now be addressed

by the committee. MCEF has proposed and organized a number of continuing

legal education classes for attorneys through this group. The trainings have

been offered in person and via teleconference or webinar since 2009,

addressing topics such as co-ops 101, health care in cooperatives, and antitrust in agriculture. ■

Co-op education in Minnesota
6 May/June 2015 / Rural Cooperatives

Begin Here

Phases and steps in starting a co-op 
Rural Cooperatives / May/June 2015 7

By James Wadsworth, Ag Economist

USDA Cooperative Programs

Editor’s note: This article is based on material in the recently

revised USDA guide: How to Start a Cooperative (Cooperative

Information Report 7). The guide provides basic information on

cooperative structure and principles, why they are organized, the

phases and steps involved in a co-op development process, and other

pertinent information. 

Cooperatives provide necessary services in

nearly every market segment of the economy.

More than 29,000 cooperatives are operating

in the United States, filling myriad needs for

their member-owners, with more being

formed every day. Starting a co-op is a very demanding

process, consisting of a number of important steps. Cutting

corners will more often than not have a negative, possibly

fatal, impact on a fledgling cooperative. 

People organize co-ops to improve their income or to

provide a needed service. Co-ops may take on one or more of

the functions of marketing, purchasing or providing services.

The co-op business model should be explored whenever a

group of people have identified a specific need that isn’t

being sufficiently met by other businesses in the marketplace,

and/or when they know that it is unlikely that another

business will meet that need.

A compelling need and a few community leaders can spark

the drive to form a cooperative. These leaders can be small

business owners, manufacturers, growers, artisans or any

citizens who lack (or are losing) a market for their products,

satisfactory sources of production supplies or services related

to their occupation. Or, they may wish to secure some other

needed service to reduce their current costs.

Depending on the situation, a new co-op may be

welcomed with enthusiasm or may be met with vigorous

opposition, especially from a likely competitor. In any case,

leaders must demonstrate a combination of expertise,

enthusiasm, practicality, dedication and determination to

ensure that a co-op development project is correctly

undertaken and objectively assessed.

Organizing steps

Starting a co-op is a complex, time-consuming project.

USDA’s “How to Start a Cooperative” guide offers a

comprehensive, 12-step approach for undertaking the effort.

The precise number and types of steps may differ, depending

on each project’s unique circumstances. The guide presents

the steps within four development phases: Identify Economic

Need; Deliberate; Implement; and Execute. Each phase and

the steps or events in each are listed as follows:

Phase I: Identify Economic Need

•Determine the economic need (leaders meet).

• Hold an exploratory meeting. Potential member-users meet

and decide whether to continue. If so, select a steering

committee.

Phase II: Deliberate

• Conduct a member-use analysis and initial market analysis. This

involves surveying the potential member-users to explore

prospective members’ needs, anticipated business volume,

likely locations, business or service characteristics of

prospective members, and the opinions of prospective

members. Discuss the survey results and preliminary cost

analysis and discuss all related issues. Vote whether to

proceed.

• Conduct a feasibility analysis. This is necessary for helping

the steering committee determine if the proposed co-op is

feasible, based on well-developed assumptions, researched

information and the member-use and initial-market

analysis. The steering committee presents the findings to

potential members, along with their recommendation on

whether to proceed. The group then votes.

• Prepare a business plan. The feasibility study acts as the

foundation for a professional business plan which provides

specifics of how the business will operate within its market.

Phase III: Implement

• Employ legal counsel to draft and complete legal papers. These

include articles of incorporation and bylaws. Then hold a

member meeting to review the work of the steering

committee, including the business plan and legal

documents.

• Hold first meeting of new co-op. The goal here is to approve

the bylaws, discuss implementation of the business plan and

elect the first board of directors.

Phase IV: Execute

• Convene first board of directors meeting. Directors elect

officers per the bylaws, appoint committees and discuss

steps to carry out the business plan, including the use of

debt capital, a membership drive and development of

manager qualifications.

• Hold a membership drive. This should be done when a new

co-op needs more members than those who have already
8 May/June 2015 / Rural Cooperatives

committed. Arrange meetings with prospective members

and communicate the vision and goals of the new co-op.

• Acquire capital. The board arranges for adequate capital,

including equity stock and borrowed funds. Financial

analysis in the business plan helps determine capital needs.

• Hire a manager. The board hires a qualified manager who

will be responsible for day-to-day operations and hiring

staff.

• Acquire equipment and facilities, then begin operations. The

manager and board together — according to the business

plan — determine what facilities and equipment are needed

and then acquire or rent them. The manager hires

employees to operate the co-op.

Detailed explanations of each of these four phases and the

12 steps or events are provided in the guide. 

In developing a co-op, there is more to know than the

various phases and steps to follow. There are principles to

understand and pitfalls to avoid. There are various ways to

capitalize the co-op that may need to come into play. There

are legal aspects of development that need to be researched

and considered, and there are general rules for success that

should be well understood.

Development principles

Cooperation Works!, a network of cooperative developers,

created 12 important principles that co-op development

practitioners should follow when working to form co-ops.

Known as the Madison Principles, they include:

• Declare conflicts of interest

• Develop co-ops using proven models

• Facilitate the goals of the steering committee

• Use a market-driven approach

• Acknowledge the importance of member involvement

• Seek tangible benefits

• Steer toward revenue generation

• Honor diversity

• Make cooperative-to-cooperative connections

• Promote social and economic empowerment

• Understand that cooperatives work everywhere

• Have a vision of the cooperative community that is

global 

For more information on these principles, see the CIR 7

guide and/or visit: www.cooperationworks.coop/about/

madison-principles.

Pitfalls to avoid

There are pitfalls that must be avoided when forming a

co-op. Being aware of them is crucial in steering clear of a

fatal mistake. Avoid the following:

• Lack of a clearly identified mission

• Inadequate planning

• Failure to use experienced advisors and consultants

• Lack of member leadership

• Lack of member commitment

• Lack of competent management

• Failure to identify and minimize risks

• Poor assumptions

• Lack of financing

• Inadequate communications

More information on each of these pitfalls is contained in

the guide. Similarly, there are some general rules for success

that should be understood as the co-op begins operation.

These include:

• Use advisors and committees effectively

• Keep members informed and involved

• Maintain good board-to-manager relations

• Conduct businesslike meetings

• Follow sound business practices

• Forge links with other co-ops

Considerable time and effort are spent in starting a co-op.

Carefully completing all the steps necessary in the co-op

project, following some well-derived principles, knowing and

avoiding the potential pitfalls and knowing general rules for

success will all help to increase the odds of developing a

successful co-op business. ■

USDA’s How to Start a Cooperative (CIR 7) has been

updated and revised. This guide also provides

information on topics such as capitalizing a

cooperative and developing/adopting the necessary

legal documents. The guide includes a number of

sample documents and financial statements that a

new co-op will likely need to create. 

How to Start a Cooperative is one of Rural

Development’s most-requested publications. It is

intended for rural residents interested in forming coops, as well as for development practitioners,

professionals and students. It works well in tandem

with another USDA report: Vital Steps: A Cooperative

Feasibility Study Guide (Service Report 58). These coop publications, in addition to many others, can be

found online at: www.rd.usda.gov/publications/

publications-cooperatives. 

A PowerPoint presentation on organizing a co-op,

based on the CIR 7 guide, is also posted there. To

order free hard copies of USDA co-op reports, e-mail:

coopinfo@wdc.usda.gov, or write to: Cooperative

Information, USDA Cooperative Programs, STOP 3254,

Washington D.C. 20250-3254, or call 202-720-7395. ■

Guide has been updated
Rural Cooperatives / May/June 2015 9

By Venus Welch-White 

National REAP Outreach Coordinator

USDA Rural Business Programs 

Developing renewable

energy presents an

enormous economic

opportunity for rural

America. USDA’s

REAP (Renewable Energy Systems and

Energy Efficiency Improvements

Assistance) program can help farmers,

ranchers, rural small business owners

and cooperatives incorporate renewable

energy and energy-efficiency

technology into their operations. This

helps to create jobs while making

America more energy independent. 

When small rural businesses and

farmers cut their energy costs with

cleaner and more efficient energy, it

helps their bottom line and reduces the

amount of greenhouse gas emission that

affects our climate.

Master Paints, a paint manufacturer

in Guayanilla, Puerto Rico, is one

example of a rural business that is

putting REAP funds to good use. A

REAP grant helped it convert to 100

percent solar energy. The business

manufactures a myriad of paint and

chemicals and offers a line of

specialized lime-based protective

coatings for the restoration of historic

buildings and structures. 

Master Paints’ products have been

used in historic preservation jobs in

Puerto Rico, Florida, South Carolina

and the Caribbean. It is the only Puerto

Rican company certified by Green Seal,

an independent nonprofit organization

based in Washington, D.C., that works

to achieve a healthier and cleaner

environment by identifying and

promoting products and services that

do not contaminate or emit toxic

residues. 

The Green Seal is awarded to

products and services that promote

conservation of resources and habitats,

and that help reduce global warming

and the depletion of the ozone layer. In

2012, its first year with the new solar

generation system, Master Paints

generated 287,372 killowatt hours of

power. Total savings for the business

was $71,000 that year. 

Funding sources for the project

were:

• Rural Development-REAP Grant,

Section 9007 — $206,955;

• Green Energy Fund (a Puerto Rico

incentive program) — $380,785;

• Owner’s contribution — $240,260. 

“All of the above” approach

Renewable energy production and

increased energy efficiency are

important parts of the Obama

Administration’s “all-of-the-above”

energy strategy. Reducing the energy

costs of agricultural producers and rural

small businesses is an important

element of the 2014 Farm Bill.

Since 2009, USDA has awarded $545

million for more than 8,800 REAP

projects nationwide. This includes $361

REAP helps paint producer 

convert to solar energy

continued on page 41

The Master Paints production plant in Guayanilla, Puerto Rico, used funding provided by

USDA’s REAP program to install this expansive array of solar-power panels on its rooftop.

The plant is now 100-percent solar powered. Photo courtesy Master Paints
10 May/June 2015 / Rural Cooperatives

By Dan Campbell, editor

e-mail: dan.campbell@wdc.usda.gov

Charles Fanucchi’s

father first planted

cotton on the family

farm south of

Bakersfield, Calif., in

1925, when the crop was new to the

state. The irrigated crop thrived in the

hot, dry climate. More and more

farmers planted it. During the 1970s,

the Golden State’s cotton acreage

peaked at about 1.65 million acres. 

California doesn’t just grow cotton;

it has long been a major center of

cotton innovation. It was among the

first areas of the U.S. to grow irrigated

cotton and the first state to machineharvest cotton. It also introduced

premium cotton varieties that earn

growers top dollar. It was first to

market U.S. cotton in China and many

other export markets.

Trading Places

As drought squeezes California, almonds continue to surge while cotton fades
Rural Cooperatives / May/June 2015 11

In the 90 years since they sowed that

first cotton, the Fanucchi family has

always grown cotton on its diversified

farm in the southern end of the state’s

fertile Central Valley. That is, until

now. 

“We never thought the day would

come, but we won’t be planting any

cotton at all this year,” says Fanucchi, a

director and past chairman of the

Calcot growers’ cooperative,

headquartered in Bakersfield. “Cotton

just won’t cover the cost of the water it

needs.” It was an emotional decision for

the family, for whom cotton has been

such a huge part of their lives for so long.

“But it gets down to water

availability and the cost of water vs. the

expected return for cotton or other

crops,” he observes. “It’s all a financial

equation, and it must balance out.” 

To save water, close to 800 acres of

the family farm will be fallowed this

year, due to lack of affordable irrigation

Facing page: Almond harvesting has become highly mechanized with the development of specialized machinery, such as this tree shaker. Photo by

Mel Machado, courtesy Blue Diamond Growers. Above: California’s 2015 cotton crop may not even hit 200,000 acres, due both to the drought and

changing crop patterns. Here, rows of young cotton plants are about to be cultivated in Kern County. Photo by Mark Bagby, courtesy Calcot 
12 May/June 2015 / Rural Cooperatives

water. So will at least another 400,000

acres of farmland around the Central

Valley as growers and their cooperatives

contend with the worst year of a

staggering, four-year drought. (The

University of California-Davis was

scheduled to release an updated estimate of

fallowed farmland in the state in June,

after deadline for this magazine.)

Those 400,000 fallowed acres

represent an estimated $4 billion in lost

production value. Further, when land

isn’t planted, supplies and services are

not purchased, less labor is needed, less

tax revenue is generated — the impact

ripples throughout the economy of the

Valley. 

In a normal water year, a large part

of Fanucchi’s farm would be irrigated

with water delivered by the Friant-Kern

Canal, part of the giant Central Valley

Project, built in 1951 and operated by

the U.S. Bureau of Reclamation. It

transports water from Millerton Lake, a

reservoir on the San Joaquin River

north of Fresno, to the Kern River. It is

normally a major source of water for

farmers in Fresno, Kern and Tulare

counties.

But like virtually all Central

California farmers this year, Fanucchi’s

allocation of “federal water” has been

reduced to zero, meaning he will have

to pump more ground water for his

farm’s needs. Fanucchi has his own

wells, and the local water district also

has wells to help supply members. 

Pumped groundwater is usually

much more expensive than riparian

“We never thought the day would come, but

we won’t be planting any cotton at all this

year,” says Charles Fanucchi (above). The

drought in California and high cost of water

have accelerated his farm’s shift to higher

value crops, while other land will be fallowed.

Photo by Mark Bagby, courtesy Calcot. The

Delta-Mendota Canal is a major source of

irrigation water for thousands of farms, but a

four-year drought has resulted in drastic

reductions in water allocations. Photo by Mel

Machado, courtesy Blue Diamond Growers 
Rural Cooperatives / May/June 2015 13

(river) water, and is of lower quality,

being higher in salt and mineral

content. Hence, many growers will be

pulling land out of production this year

and hoping that snow returns to the

Sierra Nevada Mountains next winter.

This year’s snowpack was the lowest

ever recorded, and it is this mountain

snow that feeds the state’s rivers and

reservoirs as it melts during the spring

and summer. 

Long-term trend

Even without the drought, the longterm trend since the mid-1970s has

been for cotton acreage to be

transitioned into higher value crops,

usually nut or fruit trees, grape vines or

vegetable crops. That’s certainly been

true for Fanucchi, who farms with his

two brothers and some of the family’s

next generation. “It’s been a gradual

transition away from cotton for us,” he

says. 

A tell-tale sign of that trend was the

closure this year of his local co-op

cotton gin. “That, too, was a tough

decision — you hate to see it happen.”

But there just wasn’t enough cotton

volume to keep it going, he says. Kern

County, which is about the size of

Connecticut, was once home to about

40 cotton gins, but now has only two.

Both are co-ops, and have the capacity

to absorb the crop that would have

been handled by the closed gin. 

Calcot itself does no ginning — it is

strictly a marketing co-op, which

assembles, sells and transports cotton to

destinations in the U.S. and about 30

nations around the globe.

Fanucchi is far from alone in

following the path away from cotton.

The state has averaged only about

300,000 acres of cotton the past five

years, and in this drought year, cotton

will likely not even reach 200,000 acres,

according to Calcot Communication

Director Mark Bagby. 

The Fanucchi family started growing

almonds, which they market through

the Blue Diamond Growers

cooperative, about 40 years ago. They

have also been shifting other cotton

acreage to vegetable crops, including

carrots, tomatoes, garlic and onions.

One effect of the drought has been to

shift more vegetable crops away from

the west side of the Valley, where the

water situation is worse, to the eastern

part of the Valley, says Fanucchi.

“Farmers grow 200 different crops in

Kern County, so they have a lot of

alternatives to cotton,” says Calcot’s

Bagby. “Increasingly, they have elected

to turn to those alternatives, with

almonds by far being the biggest one.”

Helping to offset some of the lost

acreage in California have been new

members Calcot has picked up in

Arizona, New Mexico and far-west

Texas, the latter two states being fairly

new territory for the co-op. One irony

of the trend, Bagby says, is that “cotton

paid the bills for a lot of those new

acres of almonds.” 

Mel Machado, Blue Diamond Growers’ director of member relations, points

out some of the reasons California has climbed to the top of the world

almond tree: 

• A Mediterranean-like climate perfectly suited to the crop. 

• The almond industry is heavily mechanized, reducing its need for large

amounts of seasonal labor, compared to other crops.

• Once harvested, almonds are relatively easy to store and have a long

“shelf life” that enhances their value for exporting.

• The state has a multi-faceted infrastructure developed to support almond

growers. This includes tree nurseries, equipment builders who churn out

the specialized tree shakers and nut sweepers needed at harvest,

irrigation system manufacturers, crop advisors who understand the

intricacies of growing almonds, as well as technically advanced

processing plants. 

• A number of reports have found that almonds, eaten in moderation, can be

an important part of a healthy diet, fueling public demand. 

• Almonds can be sliced, diced, slivered and “you name it” into hundreds

of sizes and shapes. 

• Snack nuts are actually a small part of the market, with most almonds

going to the food ingredients market, where they are used on everything

from pastry to breakfast cereals, vegetable mixes to salads; and chocolate

bars to ice cream.

• Almonds can also be processed into almond paste to supply the huge

demand in Europe for marzipan. Blue Diamond and are others are

constantly developing new almond foods, such as the co-op’s Almond Nut

Thins snack crackers, Breeze almond milk beverage and almond butter. 

• Last, but not least, a good supply of irrigation water — drought or no

drought. ■

Why California dominates 

world almond production
14 May/June 2015 / Rural Cooperatives

Almonds now king 

of California crops 

Almonds have been on a 50-year

growth spurt that even the drought has

not been able to slow. Indeed, almond

trends are something of a mirror image

of cotton. 

Back in the mid-1970s, there were

about 250,000 acres of almond orchards

in the state. Today, there are about

890,000 bearing acres. With new (nonbearing) orchards counted, the total is

now just over 1 million acres.

Despite the drought, growers are still

planting almonds at a good clip,

according to Mel Machado, Director of

Member Relations for Blue Diamond.

At first glance, this might seem illogical,

since permanent crops — i.e., trees and

vines — must be watered even during a

drought, no matter the cost, whereas

field crop land can simply be idled. 

“You may see an orchard being

pulled out, and perhaps it’s only a

1,000-pound producer [a good orchard

can produce 3,000 pounds per acre].

But it still is making OK money at

today’s prices,” Machado says. “So you

can question the logic there. But if you

look closer, you will see that the grower

is consolidating his water supply. If you

have an orchard within a few years of

being scheduled for removal, you do it a

little early so that you can move more

of that expensive water to your better

orchards.” 

And even if immediately replanted,

the young, non-bearing trees require

much less water. Machado explains that

a mature almond orchard needs an

average of 36-40 inches of water per

year, but an orchard of almond

seedlings can get by on 16 inches of

water, gradually increasing as it begins

to set a nut crop worth harvesting in

about its fourth or fifth year. 

Blue Diamond members earned an

average of $3.26 per pound in 2013, vs.

a 10-year average of $1.75. More than

90 percent of almond farms are family

owned, with more than half of those

being about 50 acres or less, according

to Machado. 

“People are planting them [almonds]

like crazy,” says John Pucheu Jr., a

third-generation farmer who grows

cotton and other crops near

Tranquillity, about 35 miles southwest

of Fresno. “The more we plant, the

higher the price goes — it defies all

traditional agricultural economics.

Usually, when the market is good,

everyone rushes into it, and then it

crashes.” But almonds are in such heavy

demand (see sidebar, page 13) that there

appears to be no “crash” in sight, he

says.

And so Pucheu, a former chairman

of the National Cotton Council and a

Calcot director and past chairman, has

jumped onto the almond bandwagon.

He planted his first almonds, about 400

acres, in 2014 and is planting more this

year. “So I hope the trend keeps going

for a number of years yet. But

eventually, supply will catch up with

demand.”

Pucheu isn’t putting all of his eggs in

two baskets, however. In addition to

cotton and almonds, the family grows

canning tomatoes, alfalfa for seed and

onions for dehydration. He has also

specialized in growing nothing but

Pima cotton, a variety known for its

extra-long, strong fiber which is in

demand for products such as quality

dress shirts, bed sheets and towels. It

earns about 50 percent more than

Upland cotton. California’s cotton mix

has shifted from nearly all Upland

cotton 15 years ago to about three Pima

acres for each Upland acre — and in

this drought year, the mix favors Pima

by about four to one. 

“We are fortunate to have very good,

senior water rights on the San Joaquin

River,” Pucheu says. Those rights date

back to the late 1800s. Still, even he is

bracing for “a significant increase in

water costs. The riparian water is

basically free, but a larger percentage of

our water will come from wells this

year. 

“Many growers have no surface

water and will be relying entirely on

wells. Those are the areas where we are

seeing some marked drops in the water

table,” Pucheu says. This starts a vicious

cycle: the more you pump, the more the

water table drops and the more

expensive water gets. When a well goes

dry, you have to drill a new, deeper

well. But drilling businesses report

having an eight-month or longer

backlog of job orders.

USDA estimated the 2014 almond

crop at 2.1 billion pounds, but at

harvest it tipped the scales at 1.87

billion pounds. The nut crop had

shrunk between the June estimate and

September harvest due to water stress,

Machado says. He believes a similar

situation could well occur this year. 

State’s highly complex 

water picture 

Depending on where they farm in

the Central Valley, growers can get

water from the federal water project,

the state water project, any number of

local water districts with reservoirs and

wells, their own river water rights and

from their own wells — or all of the

above. It can get quite complicated. 

Daniel Bays is a young (28) Blue

Diamond member who farms with his

father, Ken, and grandfather, Gene,

near the town of Patterson on the west

“Many growers have no surface water, and will be relying

entirely on wells.”
Rural Cooperatives / May/June 2015 15

side of the Valley. In addition to

almonds, the Bays family grows

walnuts, apricots, processing tomatoes,

lima beans, wheat and melons. 

“This is the first big drought I’ve

had to contend with since I became

involved in the farm management,”

Bays says. “But my dad and granddad

talk about a bad drought in the early

1990s and another — which they call

‘the big one’ — in 1977. We face major

differences now, the biggest one being

in how the state and federal water

projects — which so many growers

depend on — are managed.” More

water is now being reserved to meet

stricter environmental standards, Bays

says, meaning farmers have to scramble

more to make up the difference. 

The Bays’ family farm serves as a

good example of the state’s complex

water picture. Different portions of the

farm get water from three different

rivers: the Stanislaus, Tuolumne and

Merced Rivers, and via three different

water districts. The West Stanislaus and

Patterson Water Districts draw water

from San Joaquin River and the Central

Valley Project via the Delta Mendota

Canal (part of the federal water

project). For the second consecutive

year, they will get no federal project

water.

They also belong to the Del Puerto

Water District, which draws all of its

water from the federal project. The

portion of the Bays’ farm served by this

water district is thus most impacted by

the drought. They will have to depend

on pumps for all their irrigation water

on that acreage, greatly increasing their

production costs. 

“Overall, our water costs will be

three to four times higher than in a

non-drought year,” Bays says. “Our

contract price of Del Puerto District

water is now $75 an acre foot, but we

have had a zero allocation for 2014 and

2015. Well water is costing $250 an

acre foot. The West Stanislaus

Irrigation District raised its price from

$75 an acre foot last year to $135 this

year, but delivery has since been

curtailed because they can no longer

pump San Joaquin River water.” 

It takes about 3.4 acre feet of water

to grow almonds on his land. “If you try

to buy water on the open market, it will

probably cost $1,000 to $2,000 an acre

foot, if you can even find any.” The

higher cost of water drives the switch

from rows crops to higher value tree

crops, Bays says.

Bays has fallowed about 200 acres of

land due to drought. That includes

about 40 acres of older almond trees

that would normally have been kept in

production for several more years. Most

of the other 160 acres would have been

planted with processing tomatoes.

Almost all of his orchards are

irrigated with drip or micro-sprinkler

systems. These watering systems have

become the norm in the past 25 years

or so, replacing traditional flood

irrigation practices. Machado’s rough

estimate is that at least 70 percent of

the co-op’s growers have low-volume

irrigation systems. 

“Overall, our water costs will be three to four times higher than in a non-drought year,” says

Daniel Bays, seen here checking on his almond trees. Photo courtesy California Almond Board.

Below: A nut cart hauls a load of almonds to a waiting truck tor transport to a hulling co-op, from

where they will be shipped to a Blue Diamond processing plant. The Delta-Mendota Canal.

Photos by Mel Machado, courtesy Blue Diamond Growers
16 May/June 2015 / Rural Cooperatives

By limiting the area watered to a

tree’s root zone, water is used much

more efficiently, Bays explains. The

results can be dramatic; his drip/micro

sprinkler system has in some cases

helped to nearly double his almond

yield, from 1,500 pounds to 3,000

pounds per acre. 

Drip systems also allow Bays “to

more accurately follow a deficitirrigation strategy.” That’s the amount

of water he will “dial back” from

normal. This year, he will likely have to

cut back to 75 percent of normal

watering on most of his orchards. 

“That is a serious step to take,” he says,

“because it not only will reduce this

year’s crop, but next year’s as well

because of the loss of bud-wood

development caused by water stress this

year.” 

Machado says the impact of deficit

watering may actually take a bigger toll

on the 2016 crop than on this year’s.

Dealing with media

Another way almonds and cotton

have traded places is in the manner they

have sometimes been singled out for

criticism for requiring such a large

amount of the state’s precious water.

During the drought of 1977, it was

cotton in the crosshairs of media

criticism. Now it’s almonds. With the

crown goes the lightning rod. 

In 1977, cotton growers were

criticized for “using so much water to

grow a low-value field crop that could

be grown in other states,” Bagby says. It

would make more sense, according to

this line of thinking, to instead use the

water for high-value (tree and vine)

crops. That is, of course, exactly what

has happened in the ensuing 35 years,

but the critics have simply found a new

scapegoat, Machado says. 

“Some people are saying almonds are

the new cotton,” notes Bays. “Almond

growers feel like we are walking around

with a target on our backs.” 

Farmers like Pucheu bristle when

claims are made that agriculture uses 80

percent of the state’s water resources.

“That doesn’t count the 50 percent or

so of water reserved for environmental

purposes,” he says. “In reality,

agriculture uses about 40 percent of the

state’s water.” And with that water, they

supply the nation with more than half

of its fruits, nuts and vegetables. 

The water debate heated up when

Governor Jerry Brown issued

mandatory water restrictions requiring

cities and communities to reduce water

use by 25 percent, while imposing no

new state restrictions on agriculture. 

That led to some feelings of ‘why do

we have to let our lawns turn brown while

farmers still get all the water they need,’

Machado says. “Of course, most

farmers have already had their water

reduced, sometimes drastically, and they

are paying much more for what they do

get.” Nevertheless, Machado says the

press “has been brutal toward

agriculture in general, and almonds in

particular.

“The big guy always gets kicked the

hardest, and we are now the big guy,”

Machado says. By late April, when

interviewed for this article, Machado

said the media picture had improved

substantially, with a number of fair,

more balanced reports in the media

concerning the water/agriculture

situation. 

Future issues

Not far from Pucheu’s farm is a

bypass canal which carries excess water

out of the Kings River Basin. It may

seem like a distant dream now, but in

wet years, Pucheu has seen the bypass

transport as much as 1 million acre feet

of water to the ocean. “There is no way

to store it for dry years,” he says. “And

that is just one river.” 

So what are the chances that

California will ever again build some

sizable new water storage projects to

meet not just the needs of farmers, but

also of its burgeoning population?

“Remote,” says Machado. “Two new

reservoirs have been on the books for

years — Temperance Flat on San

Joaquin River, east of Fresno, and the

Sites Reservoir on the west side of the

Sacramento Valley.” The latter would

be an “off-stream reservoir” (i.e., runoff flows will not fill the reservoir;

rather, water would be pumped into it

from other sources). “Funding is

supposed to have been provided

through a water bond approved last

year. But that is a long-term project. I

doubt they will be completed in my

lifetime.” 

California’s population has climbed

by 18 million people, to just under 40

million, since the 1970s, yet the state

has done very little to increase its water

infrastructure, Machado notes. “If we

can build high-speed rail, why not new

water infrastructure?” 

Bagby asks a similar question: “If we

can build transcontinental oil pipelines,

why not a pipeline to ship more water

to California?” With the bulk of the

state’s urban population being clustered

on the coast — conveniently close to a

large water supply called the Pacific

Ocean — cities and the state should be

doing far more to develop water

desalination plants, he adds.

Farmer co-ops do much for their

members, but they cannot make it snow

in the mountains. And so they have

been very proactive in helping to

promote educational efforts aimed at

the public, media and the legislature,

Bagby says. 

“We strive to help shape the debate

over farm and water policies. We stress

how farmers need less water than in the

past to grow crops,” Bagby continues.

“An acre of cotton here used to need 36

inches of water, but we’ve reduced that

to 30 inches or less.” Almonds require

nearly a third less water than they did

25 years or so ago, he adds. 

“We have an incredible food industry

here that is really a gift to the world; we

produce an unmatched variety of foods

and some of the world’s finest cotton.

Lost production here could mean less

varied, more expensive produce for the

nation, or importing crops from

countries that have far less oversight in

how the crops were produced. Co-ops
have a big role to play in

continuing their efforts to

educate the public about what

is at stake here.”

While the state’s cotton

industry has contracted, it

remains important. When one

considers that per-acre yields

are about double what they

were when the acreage peaked

in 1970s, 300,000 acres of

cotton today would be nearly

the equivalent of 600,000 acres

then. 

Bagby recalls asking one

grower why he was planting

almonds in the midst of a

drought. The grower

responded: “Because it won’t

last forever. Someday it will

snow again in the mountains.

Someday it will rain again in

the Valley. I need to be ready.” 

Machado recalls reading an

account of another grower who

was also asked why he

continued to plant trees during

a drought. His response:

“Because I’m a farmer, not a

watcher.” 

“I think that tells the

farmer’s story perfectly,”

Machado says. “As a farmer,

you take calculated risks, then

you move forward. There is no

such thing as farming without

risk.” 

Even though he planted no

cotton this year, Fanucchi says

he is not throwing in the towel

on cotton — not even a 100-

percent Pima cotton towel!

“When the water situation

improves and the numbers look

better, we may well plant

cotton again.” ■

Rural Cooperatives / May/June 2015 17

USDA has numerous programs that can help

farmers, ranchers, rural small businesses

and rural communities prepare, build longterm resilience, and respond to the impacts

of drought. To read a summary of these

programs, including web links to complete

program descriptions, go to: www.usda.gov\

drought.

Programs include conservation

assistance that promotes soil health and

water use efficiency; disaster programs that

compensate producers for drought-related

losses; and grants and loans that assist

communities with rural waste and drinking

water needs. ■

USDA Drought Programs

and Assistance

William O’Neal Jamison checks a solar-powered

well and watering system that improves the

productivity of this part of his Black Angus cattle

ranch near O’Neals, Calif. The USDA Natural

Resources Conservation Service (NRCS) assisted

him with a cost share of three new photovoltaic

panels that produce electricity to power the

electric well pumps. The Environmental Quality

Incentives Program (EQIP) provides financial and

technical assistance to help producers address

natural resource concerns and deliver

environmental benefits, such as improved water

and air quality, conserved ground and surface

water, reduced soil erosion and sedimentation or

improved or created wildlife habitat. USDA photo

by Lance Cheung.
18 May/June 2015 / Rural Cooperatives

By Bruce J. Reynolds, Ag Economist

USDA Cooperative Programs

e-mail: bruce.reynolds@wdc.usda.gov 

The Limited Liability

Company (LLC) is one

of the more recent ways

to establish a business

with government

sanction and legal protections. While

an LLC can be established by one

individual, its regulatory provisions are

also attractive for collective business

ownership and are being used as an

alternative to organizing cooperative

businesses. 

These two alternative business forms

can be compared and contrasted on

several regulatory requirements, such as

differences in taxation. Yet, their

regulatory differences alone do not

provide sufficient information for

making decisions about how to organize

a business. It is also important to

consider the strategic purposes of those

seeking to build a business. 

This article reviews the major

regulatory differences between LLCs

and cooperatives and discusses how they

need to be valued, based on the

purposes of any group wanting to own

and build an enterprise. 

Relative newcomer 

An LLC combines the single-tax,

pass-through of partnership with the

limited liability accorded to corporate

forms of organization. In contrast to

cooperatives, members can be patrons

or investors or any combination

thereof. The first limited liability

company act was enacted by Wyoming

in 1977. By the early 1990s, most states

had passed similar statutes. 

LLCs are often established and

governed democratically as

cooperatives. In some cases, this

approach qualifies an LLC for access to

lending programs that were established

for cooperatives. LLCs have become a

popular way to organize due to the

single-tax pass-through, flexibility

regarding membership by both

investors and patrons and in how

earnings are allocated to members. 

In an effort to offset the LLC

advantage in access to investor capital,

Wyoming adopted a new cooperative

statute in 2005 that provided for nonpatron investor members. A few states

followed with similar statutes. 

In 2007, a Uniform Limited

Cooperatives Association Act (ULCAA)

was made available for states to adopt so

that groups can organize with

advantageous features of both an LLC

and a cooperative. The ULCAA

requires an entity to adhere to

cooperative principles. Fifteen states

have adopted the ULCAA, but, based

on this author’s research, this option has

not been widely adopted. 

Some of the regulatory differences

between LLCs and cooperatives are

examined below, followed by an

examination of the importance of

purpose and long-term goals in guiding

the choice of business organization

form. 

Advantages of LLCs 

An LLC provides a set of business

advantages that were not completely

met by previous organizational

alternatives such as partnerships, 

CO-OPorLLC?

Which business organization best serves members’ interests?

Only cooperatives can

both create equity from

earnings and make a

later distribution to

members while incurring

a single, pass-through

tax.
Rural Cooperatives / May/June 2015 19

S corporations, and cooperatives.

General partnerships, commonly used

for professional services, do not offer

sufficient limited liability that is

appropriate for many types of

businesses. Although corporate forms of

business provide limited liability,

incorporation involves more steps and

rules than the comparatively simple

process of establishing an LLC. In

addition, cooperative incorporation

statutes require adherence to principles

of cooperation, which some groups may

regard as unnecessary for the business

they want to establish. 

As compared to cooperatives, LLCs

have a complete pass-through of taxes

on all earnings, from whatever source,

and they can be allocated based on

member investment. Subchapter T

cooperatives require all patron-based

cash distributions and non-cash equity

allocations to be taxable to members,

with gains from non-patron business

taxable to the cooperative. 

Even Section 521 cooperatives — by

having more pass-through opportunities

than Subchapter T cooperatives — are

subject to limits on dividends from

capital stock and member business must

exceed that from non-members.

Members of 521 cooperatives must be

farmers and ranchers. Such restrictions

do not apply to LLCs. For businesses

with substantial revenues from nonmember dealings, LLCs may have tax

reduction advantages over cooperatives. 

From the standpoint of raising

capital, the most substantial advantage

of LLCs over cooperatives is that they

allow membership by investors who are

not actively involved in using the

business. While cooperatives often

build capital reserves from non-member

business, LLCs can also establish

substantial permanent capital by using

member investment in shares. 

Where the advantage of access to

investors really comes into play is in

having appreciable and transferrable

stock. In these cases, members of an

LLC have an exit strategy with a

market for selling their stock to new

investor members. By contrast,

cooperatives with transferrable stock are

usually limited in having only other

users or patrons of the business as

buyers; they cannot sell their shares to

non-participating investor-members. 

The ease of access to outside

investment, member exit-strategy

attractiveness and the option of

complete tax pass-through are big

selling points. LLCs have been

especially useful for joint ventures and

for other businesses in which the

principals are not seeking long-term

commitment as stakeholders. 

Advantages of cooperatives

Tax treatment of an LLC’s retained

earnings is complicated and not as

favorable as cooperative tax treatment.

Before 1997, if LLCs wanted to retain

earnings for supporting their

businesses, such retains were taxed at

the members’ personnel rate. This

limitation was removed in 1997 by an

IRS ruling that provided the option for

LLCs to select corporate taxation and

retain earnings in the business. While

the corporate tax rate is usually lower

than personal rates, any distribution of

dividends from such earnings would be

taxable to members, so those earnings

would be taxed twice. 

A cooperative can be financed by its

earnings and at a later date distribute

those earnings as cash payments to

patrons on the basis of a single-tax,

pass-through. This flexibility is not

available to LLCs. A cooperative can

also redeem equity to members with

flexibility as to when members will pay

the single-tax, pass-through tax. 

When issuing qualified notices,

members pay the tax on equity that will

be distributed later. In the case of nonqualified notices, the cooperative pays a

corporate income tax on the allocated

earnings to members’ equity accounts.

When it eventually distributes the

equity as cash, members pay their taxes

and the cooperative gets a tax credit.

This effective means of financing a

business and distributing earnings on a

single-tax basis is not available to LLCs. 

A lasting business

When members want to build a

sustainable business — with democratic

control by those who use its services —

a cooperative will usually achieve that

purpose better than an LLC. The

opposite view is that in lacking a market

for transferrable stock, traditional

cooperatives have weak staying power

because members inadequately invest

for the future. These situations are

dubbed “the horizon problem” when

current owners cannot capture the value

of investments that will benefit the

next-generation of owners. 

For large corporations with actively

traded stock, such market mechanisms

help resolve the horizon problem.

Investments for the distant future are

recognized in stock valuations in the

current period. LLC members may

capture gains from a business that

appreciates in value but do not have

access to a highly liquid market for

their transferrable shares. This

limitation creates incentives for patron

members to increasingly sell shares to

non-patron investors.

Non-patron investors usually have

no stake in perpetuating the particular

Non-patron investors

usually have no stake in

perpetuating the particular

set of services provided, nor

a stake in a particular

community.

continued on page 40
20 May/June 2015 / Rural Cooperatives

By Suzette Agans

Rural Development Specialist

USDA Rural Development 

e-mail: suzette.agans@wdc.usda.gov

The story of Greenbelt,

Md., is a many-faceted,

layered story about a

town that has had an

impact on how we look

at cooperatives and the many ways they

can deliver services to their residents.

The focus of this article is on the

history of cooperatives in Greenbelt, a

suburb of Washington, D.C., that is

home to nine cooperatives, with more

forming. It will also touch upon the

social implications of the decisions

made over the years by planners,

government officials and residents.

An experiment in 

community development

In 1937, the first families moved into

the brand new community of

Greenbelt. The town was rather

unique, in that only three such

“experimental towns” had been built to

that date. One was in Greendale, Wis.,

the other in Greenhills, Ohio. An

earlier attempt to develop a similar

community in New Jersey had failed. 

What made these towns unique is

that the federal government was

experimenting with new,

social/community development

concepts that promoted the idea of

building whole communities —

including schools, community

buildings, churches, places of

employment, etc. Potential tenants were

interviewed with an eye toward finding

residents who would be able, and

willing, to build the social infrastructure

needed for a viable community. 

Greenbelters, as residents refer to

themselves, went about doing just that,

coaching and managing sports leagues,

forming a newspaper cooperative, a

grocery store cooperative and a credit

union, among other co-ops. There was

so much going on that one holiday

season the town council declared a

moratorium on all meetings for two

weeks so that families could enjoy time

together. 

Federal role ends

In the early 1950s, the federal

government began turning away from

some of President Franklin D.

Roosevelt’s public works/job creation

programs. Housing in Greenbelt was

sold to the residents while community

property was turned over to the

incorporated City of Greenbelt. This

caused much controversy, which is

partly captured in a semi-documentary

movie, “Three Brave Men,” in 1956,

although it was not filmed on location. 

In the movie, as in real life, many

residents wanted the government to

Focus On: Greenbelt, Md.

A city that runs on cooperatives

Greenbelt, Md., was one of three so-called “experimental towns” when developed in the 1930s.

U.S. Library of Congress photo. Below: A scene from Alight Dance Theater’s production of

“Hometown Heroes: 75 Years of Extraordinary Greenbelt Women,” which explored the

experiences of women who lived in Greenbelt from the late 1930s to the present day. Photo by

Eric Zhang
Rural Cooperatives / May/June 2015 21

continue to own the town and did not

want their fellow neighbors to manage

the housing cooperative. False charges

were made that Greenbelters were

communists. 

But eventually the furor subsided,

and most residents embraced the

concept of replacing federal government ownership with resident-owned

and controlled housing cooperative. 

Greenbelt today

Today, the city of Greenbelt is home

to about 23,000 people, 3,000 of them

living in cooperative housing, 9,000

living in apartments and the rest in

single family homes. Cooperatives still

play a significant role in Greenbelt.

These include:

• Greenbelt News Review — believed to

be the nation’s oldest, continuously run

worker cooperative newspaper;

• New Deal Café — serves as the

“community’s living room;”

• Greenbelt Co-op Supermarket &

Pharmacy — simply referred to as “the

Co-op;”

• Greenbelt Nursery School;

• Greenbelt Federal Credit Union;

• Rapidan Camp — located in the

foothills of Virginia, although a

Greenbelt Cooperative;

• Greenbelt Homes Inc. — a 1,600-

member housing cooperative, believed

to be the nation’s largest and oldest

housing co-op, outside of New York

City. 

• Evergreen Health Care — a

healthcare co-op, recently created

under the Affordable Care Act;

• Greenbelt Community Solar, LLC —

an LLC founded with cooperative

principles, including one member, one

vote. 

• Other businesses — which will

become worker- or community-owned

co-ops — are currently in the formation

stage, including: Friends of the

Greenbelt Theater, a communityowned, single-screen movie theater;

The Franklin Park Early Learning

Center; a composting business, and a

thrift shop. 

A hotbed of cooperatives

Why did the city of Greenbelt turn

into a “hotbed” of cooperatives? The

answer is most likely because of the

design of the town and the way it came

into being. It was a new town with

founding principles that are still carried

forward today as each new resident

moves into it. 

The design of the town was based on

several ideas prevalent at the time,

including the ideas of architect Lewis

Mumford and the Garden-City

Movement, which stressed the ideals of

having a wholesome, safe environment

for families. 

In today’s planning terminology,

Greenbelt was designed under the New

Utopia or New Urbanism planning

concept. Houses are close together,

parking is in pods and walkways are

separate from vehicle traffic. Stores,

restaurants and community facilities are

within walking distance, all with less

emphasis on access by cars. 

The community design, the effort to

seek residents who wanted to build a

community and early efforts to build

cooperative enterprises by the early

founders of Greenbelt, all combined to

create a community with a strong co-op

foundation that is able to adapt to

change. 

Now, 78 years later, current residents

continue to encourage like-minded

people to come to the community and

to convince newcomers to embrace the

Greenbelt way of life, living, shopping,

working and governing cooperatively

together. ■

Construction workers lay the foundation of a new building in Greenbelt during the 1930s. Today,

Greenbelt is home to nine cooperatives, with more being formed. U.S. Library of Congress photo.

Below: Delivering the Greenbelt News Review, a newspaper produced by a worker cooperative,

to Greenbelt Housing Incorporated Cooperative members. Photo by Eric Zhang 
22 May/June 2015 / Rural Cooperatives

By Carolyn B. Liebrand

Ag Economist

USDA Cooperative Programs 

Editor’s note: This article focuses on the

findings of two cooperatives presented at the

2015 USDA Agricultural Outlook Forum,

held in Arlington, Va. in February. The

author welcomes your feedback on this

article: Carolyn.Liebrand@ wdc.usda.gov.

Dairy Farmers of

America (DFA), based

in Kansas City, Mo.,

and New Zealandbased Fonterra are both

producer-owned cooperatives that have

dominant roles in their country’s dairy

industry. Their members each produce

around 40 billion pounds of milk

annually (table 1). 

Each of the cooperatives provided an

overview of their international

marketing efforts during the 2015

USDA Agricultural Outlook Forum. Jay

Waldvogel of DFA discussed the

cooperative’s approach to trade with

China. From the other side of the

globe, Rick Pedersen gave Fonterra’s

global perspective on sourcing dairy

products around the world. 

DFA is a leading milk marketing

cooperative and dairy food processor

that was formed by a merger of four

dairy cooperatives in 1998. Since then,

more dairy cooperatives have merged

into DFA and the cooperative now has

more than 14,000 farmer-members who

operate more than 8,000 farms in 48

states. DFA members produced nearly

20 percent of the nation’s total milk

supply in 2013. 

DFA is also a dairy foods processor

with investments in brands and plants

that bring added value to members.

The co-op delivers raw milk to various

customers and joint venture partners. It

also makes cheese, butter, dairy

ingredients and various consumer

products in its extensive, nationwide

system of manufacturing plants.

Counting both member and nonmember milk, DFA uses about 30

percent of the nation’s milk for its

activities. 

The co-op’s core business is

marketing members’ milk, paying

members a competitive price and

providing leadership in the forging of

dairy industry policy. In addition, DFA

offers programs and services aimed at

making it easier and more profitable for

their members to farm. 

Fonterra (which means “spring from

the land”) was formed in 2001 to

represent the interests of most of New

Zealand’s dairy farmers. The milk

produced by Fonterra’s 10,500 farmershareholders in New Zealand amounts

to more than 90 percent of the

country’s milk. However, over onefourth of the total milk processed

annually by Fonterra worldwide —

about 50 billion pounds in 2013 — is

sourced from outside of New Zealand. 

Fonterra is the world’s largest dairy

exporter, Pedersen said, sending milk

products to 140 countries. Fonterra

sources some of its fresh milk from

within such key markets as Australia,

Chile, Brazil, Sri Lanka and North

America. The cooperative also produces

its own milk in China on two farms

with three additional farms under

development. Fonterra produces more

than 4 billion pounds of dairy

ingredients, specialty ingredients and

consumer products annually, nearly all

of which is exported.

Global dairy trade

Global milk production is led by the

28 countries that make up the European

Tackling Trade

How two dairy cooperatives

function in world markets
Rural Cooperatives / May/June 2015 23

Union (EU), the United States and

India. The EU produced more than 300

billion pounds of cow’s milk in 2013,

while the U.S. produced around 200

billion pounds. India produced 127

billion pounds of milk from cows and

another 170 billion pounds from

buffalo.

However, less than 10 percent of

global dairy production is traded across

national borders. According to

Pedersen, in terms of total productpounds, the top exporters are the

European Union, New Zealand and

then the United States. The top

importers are China and Russia,

followed by Mexico. 

Table 2 shows milk production and

export levels of four major dairy

products that are commonly traded

internationally. The United States is a

leading producer of cheese, nonfat dry

milk (NDM) and butter. New Zealand

is the world’s top whole milk powder

(WMP) producer. 

The United States exports a minor

share of the cheese, butter and WMP it

produces (6, 11 and 36 percent of

United States 201 19 31 39 19

New Zealand 45 4 2 41 91

Total* 1,032 100

Sources: Hoards Dairyman, USDA Foreign Agricultural Service

* Total, 16 selected countries

Billion pounds Percent of total*

production

Percent of

domestic

production

Billion pounds Percent of

domestic

production

Billion pounds Percent of

domestic

production

COUNTRY

COWS MILK

PRODUCTION SHARE 

DOMESTIC

FLUID USE

Table 1 — Milk production in the United States and New Zealand, 2013

DFA FONTERRA

Facing page: A food lab technician tests

cheese formulations at Dairy Farmers of

America’s (DFA) plant in Turlock, Calif. These

bags of DFA whole milk powder (below) are

heading for one of the co-op’s export markets.

Photos courtesy DFA
24 May/June 2015 / Rural Cooperatives

domestic production in 2013,

respectively). NDM is the only product

where a majority of the U.S. domestic

production was exported in 2013 (58

percent).

In contrast, New Zealand exports

almost all of the dairy products it

makes. It is the world’s leading exporter

of butter and WMP. Indeed, more than

60 percent of the butter and whole milk

powder traded worldwide in 2013 were

exported from New Zealand.

Contrasting marketing

environments

The statistics outlined in tables 1 and

2 highlight the different market

environments faced by dairy producers

in the two countries. The United States

produces almost 20 percent of the milk

produced worldwide, but uses nearly

one-third of it for fluid purposes within

its borders. In contrast, New Zealand

ranked seventh among the milk

producing nations and accounted for

less than 5 percent of worldwide milk

production in 2013 (USDA Foreign

Agricultural Service). Furthermore, just

2 percent of the milk produced in New

Zealand is used for domestic fluid use. 

The sheer size and dynamism of the

U.S. market has drawn multinational

dairy companies, including Fonterra, to

Butter

United States 1,863 3 9.2 203 10.9 3

New Zealand 1,179 4 5.8 1,120 95.0 1

Total* 20,172 1,797 

Cheese

United States 11,100 2 28.6 699 6.3 2

New Zealand 686 8 1.8 611 89.1 3

Total* 38,830 3,721

Dry Whole Milk Powder

United States 73 11 0.7 26 36.4 6

New Zealand 2,866 1 28.8 2,846 99.3 1

Total* 9,963 4,396

Nonfat Dry Milk

United States 2,108 2 24.2 1,224 58.1 1

New Zealand 891 4 10.2 864 97.0 3

Total* 8,715 3,666

Source: USDA Foreign Agricultural Service

1

Rank among reporting countries

* Total, 13-20 selected countries representing approximately 90 percent of world trade volumes

Million pounds Percent of total*

production

Million pounds

Percent of

domestic

production

COUNTRY PRODUCTION RANK1 SHARE EXPORTS SHARE RANK1

Table 2 — Dairy products, production and exports, 2013
Rural Cooperatives / May/June 2015 25

the U.S. market (USDA Economic

Research Service). New Zealand’s milk

production far surpasses the ability of

its domestic market to absorb it. So,

export markets are vital to the livelihood

of New Zealand’s milk producers.

Export markets are growing in

importance for the U.S. dairy industry.

Dairy exports from the United States

rose from about 5 percent of total milk

solids produced in early 2000s to 15

percent in 2013-14. 

Export markets became more

attractive to U.S. suppliers as world

prices for dairy products converged

with domestic prices, in part because of

tighter global stocks of dairy products,

milk production declines and rising

demand in various foreign countries.

The relatively weak dollar value vs.

some major foreign currencies also

played a role (although recently, the

Table 3 — Milk marketing environment, Dairy Farmers of America and Fonterra 

Milk production

Co-op’s role in the domestic market

Export markets

Co-op’s export strategy

Attribute DFA Fonterra

Thirty percent of the nation’s milk

production is domestic fluid use. (62

billion pounds in 2013.)

Significant (members produce 19

percent of domestic production). Co-op

markets 30 percent of the nation’s milk.

Volume exported growing — from about

5 percent of total milk solids produced in

early 2000s to 15 percent in 2013-14.

Minor shares of the nation’s butter,

cheese and whole milk powder are

exported. Majority of the nation’s nonfat

dry milk production is exported (58

percent).

Enter markets where the co-op’s

products can compete. Follow their U.S.

customers into foreign markets. Focus

on building lasting relationships directly

with international customers.

Two percent of the nation’s milk

production is domestic fluid use. 

(1 billion pounds in 2013.)

Dominant role (members produce 91

percent of domestic production).

Must grow milk supply from international

sources to maintain international market

presence.

Almost all of the dairy products

produced domestically are exported (89

to 99 percent).

Develop a global manufacturing

footprint. Source milk supplies globally

utilizing a multi-hub strategy to match

demand growth to best source of supply.

Invest in foreign dairy farms to enhance

downstream partnerships.

Milk curds are churned at the DFA plant in Turlock. Photo courtesy DFA
26 May/June 2015 / Rural Cooperatives

dollar has strengthened). The favorable

conditions spurred some U.S. dairy

marketers to seek to become reliable

suppliers to world markets, rather than

making intermittent sales of surplus

products. The increasing quantities

exported also contributed to bolstered

prices for U.S. producers.

Different approaches 

to markets

As cooperatives, Dairy Farmers of

America and Fonterra are each owned

and controlled by their producerowners; they are operated to best secure

optimal market outlets for their

members’ milk. 

However, a cooperative’s structure

and operational focus reflect the

character and aspirations of its

membership. This is influenced by the

economic, social, market and

agricultural environment members

operate in (Ling, USDA Cooperative

Programs). Accordingly, DFA and

Fonterra have taken different

approaches to find and preserve markets

for their members’ milk (table 3). 

DFA’s approach — Waldvogel

explained that DFA’s approach to world

markets is to build upon the capacity it

has developed domestically. He pointed

out that export markets offer “more

people, more money, more places.”

International markets can be a viable

outlet for ever-expanding U.S. milk

production, a growing opportunity to

market member milk. 

DFA’s approach to exporting is to: 

• Enter markets where DFA is

competitive; 

• Focus on volume growth and valueadded products; 

• Build relationships in international

markets; 

• Understand and manage risk. 

As an example of DFA’s strategy for

international marketing, Waldvogel

described the co-op’s efforts in China.

DFA’s products are competitive in

China due to that country’s “food

challenge”: a large, growing population

and limited farmland and fresh water all

combine to contribute to relatively

higher cost of milk production. The coop focuses on developing new market

demand by developing premium and

new value-added products. 

DFA supports its customers who sell

into global markets. The experience

gained in working with the customers’

exporting efforts provided opportunities

for DFA to cultivate relationships

directly with businesses in China. For

example, the co-op now has a joint

venture with a Chinese company. 

DFA built a plant in China to

demonstrate DFA’s long-term

commitment to the Chinese market.

The goal of the joint venture is to

supply new needs, not replace existing

suppliers. Supply agreements with

national and global customers will

expand the market for memberproducers’ milk.

Fonterra’s approach — By

necessity, Fonterra has been more

aggressive in entering international

markets than DFA. Due to population

growth, rising prosperity in developing

nations and urbanization, Pedersen

expects worldwide consumption of dairy

products to rise some 36 percent over

the next decade, requiring a whopping

1.4 trillion pounds of liquid milk to

make those products. 

The co-op’s New Zealand

production base has limited capacity for

growth. Therefore, as world trade

expands, its market share could shrink,

perhaps undermining the co-op’s

dominant role in world trade. 

To complement the production of

their New Zealand farmer-shareholders

and to ensure they are always able to

supply their customers, Fonterra has

developed local supplies of fresh milk in

key foreign markets. In addition,

through its partnerships, the co-op has

a global manufacturing footprint and

can source a variety of products from its

various “hubs” around the world.

Calling this a multi-hub strategy, it

allows the co-op to better match

demand growth to the co-op’s best

source of supply.

Fonterra views China as a key

strategic market because it is one of the

world’s largest markets for dairy

products. It is a key market for Fonterra

ingredients, foodservice and consumer

products. Fonterra is seeking to

enhance its already significant presence

there by investing directly in dairy

farms. The co-op believes the local milk

supplies will provide it with a platform

to develop partnerships down the

marketing chain within China.

Cooperation works

These two cooperatives show that

the cooperative form of business is

effective in securing markets for dairy

farmers. The examples of DFA and

Fonterra illustrate the far-reaching

efforts cooperatives can and do take to

efficiently market milk and dairy

products to domestic and world

markets. Cooperation has allowed

farmer-members to focus on the

efficient production of quality milk by

assigning the marketing function to

their cooperatives. 

References:

• Pedersen, Rick, “Becoming Globally

Relevant: Sourcing Dairy from Around

the World,” Fonterra North America,

presentation to the USDA 2015

Agricultural Outlook Forum,

Washington, D.C., February 20, 2015.

http://www.usda.gov/oce/forum/2015_S

peeches/RPedersen.pdf 

• Waldvogel, Jay. “Dairy Farmers of

America's Joint Dairy Venture with the

Chinese,” Dairy Farmers of America,

presentation to the USDA 2015

Agricultural Outlook Forum,

Washington, D.C., February 20, 2015.

http://www.usda.gov/oce/forum/2015_S

peeches/JWaldvogel.pdf

• USDA Foreign Agricultural Service

http://apps.fas.usda.gov/psdonline/psdQ

uery.aspx, downloaded 4/14/2015.

• Ling, Charles. “The Nature of the

Cooperative,” Cooperative Information

Report 65, United States Department

of Agriculture, Rural Development,

November 2014, page 11. ■
By Hannah Guedenet

Communications Technical Manager

ACDI/VOCA 

Editor’s note: This article was provided

courtesy of ACDI/VOCA, a nonprofit that

helps to enable financial institutions,

cooperatives, producer associations and other

enterprises to manage and finance

themselves.

For Maria Adelaida

González, the rebirth of

the traditional

Colombian tonga, a

community farming

group, has strengthened her ability to

provide for her family. 

“I was widowed and left to manage

my husband’s farm,” says González, a

member of the Northern Cauca

Association of Traditional Farm

Producers (ASPROFINCA). “The

tongas have helped me, because now

I’ve learned almost everything that men

do on the farm. I learned how to plant

cocoa and plantain, how to prune the

trees, and how to harvest.” 

The tongas are a traditional method

of farming that has been slowly dying

out in many Afro-Colombian

communities. But with the support of

the United States Agency for

International Development’s (USAID)

Afro-Colombian and Indigenous

Program (ACIP), ASPROFINCA and

other farmer associations like it are

organizing tongas that meet regularly to

work on a different community

member’s land and address issues that

their farmers are facing. Support for

each other ranges from repairing roads

after landslides to building additional

rooms in a home. 

ASPROFINCA is an association of

600 Afro-Colombian farming families

in the Cauca department of Colombia’s

Pacific region. Despite the diversity and

richness of resources throughout

Colombia, poverty is a very real

concern in northern Cauca. In 2013, 58

Tongas unite Afro-Colombian farmer associations,

grow local economies

The Power of Tradition

Tongas, or community farming groups, are making a comeback in Colombia, where they are helping members work together to

produce crops such as cocoa and plantains. Photos courtesy ACDI/VOCA

Rural Cooperatives / May/June 2015 27
28 May/June 2015 / Rural Cooperatives

percent of Cauca’s population earned

less than $86 per month; 28 percent

earned less than $42. 

Strengthening communities,

preserving cultural practices

Despite participation in a farming

association, most farmers are still

isolated; they may only interact with

one another during harvest. Tongas

build collective responsibility and

engagement in Afro-Colombian farmer

associations. Individuals are able to see

that the success or failure of their

neighbor’s farm has an impact on their

own lives. They are able to share

experiences and support each other. 

“For Afro-Colombians, the tonga

means we work together. Tongas

produce great outcomes, especially

because we have a lot of farmers that

are now elderly that cannot handle the

hard work anymore,” says Jorge Milton

Mosquera, an ACIP participant.

ACIP uses the tongas to teach

improved planting and harvesting

techniques, such as tree pruning, to

boost productivity. These techniques,

combined with traditional farming

practices, enable farmers to produce the

quality and quantity of goods needed to

be competitive in local markets.

In addition to tongas, ACIP ensures

the preservation of Afro-Colombian

“finca tradicional,” or traditional farms,

which typically produce a diverse

combination of subsistence and cash

crops. An average ASPROFINCA farm

produces cocoa, plantain, bananas,

oranges, mandarin oranges and limes.

These farms also reserve a section for

medicinal plants, of which they have a

rich knowledge. As with many other

cultural practices, this knowledge is

being lost with modernization. ACIP is

helping these communities to regain

their expertise in medicinal plants. 

Returning to traditional farming

techniques also helps to protect the

environment and promotes “climatesmart agriculture.” By relying on crop

diversification, ASPROFINCA farmers

improve their soil quality and are able

to produce more on a small plot of

land. Their farm diversity is also a

positive response to large expanses of

industrial mono-crop farms —

primarily sugarcane — that are

common in northern Cauca. 

Increasing market access 

for producer associations

The burden for food production

does not lie solely on the shoulders of

farming families. Farmers are just one

component in the chain of actors that

moves goods from field to consumers. A

major obstacle for smallholder farmers

is being able to get their products to

market. They don’t have strong

connections with buyers, let alone input

suppliers or processors. This leaves

USAID’s ACIP project promotes the preservation of

ancestral farming traditions and ethnic identity among

farming associations. The project uses a multi-pronged

approach to improve economic and societal outcomes for

Afro-Colombian and indigenous communities. 

Afro-Colombian farming communities in the rural areas

of Colombia face myriad challenges in addition to poverty.

Displacement of large numbers of people has occurred. The

quality of their land is threatened by their proximity to largescale mining and monocrop farming industries.

Implemented by ACDI/VOCA, a U.S.-based nonprofit

organization that promotes economic opportunities around

the world, ACIP is the first stand-alone program whose sole

purpose is to improve the lives of disadvantaged ethnic

populations in Colombia. ■

Restoring ancestral farming methods

The growers use the additional income to buy fertilizers,

construct storage facilities or invest in farming equipment.
them vulnerable to market fluctuations

and predatory market practices. 

Before working with ACIP,

ASPROFINCA farmers were

dependent on unreliable, and

sometimes dishonest, middlemen

buyers. These buyers would take their

goods with a promise to pay them once

the goods were sold at market. But

farmers had no power to negotiate a fair

price or even to ensure that the buyer

returned with a payment. 

The association now relies on tongas

to harvest and gather produce from

each farm. ASPROFINCA collects

farmers’ goods in rented trucks.

Farmers receive same-day, upfront

payment. Through this aggregation

system, ASPROFINCA sells more than

1,500 kilos of plantains weekly. The use

of their collective bargaining power

allows association members to be more

competitive on the market and to

achieve higher prices for their goods.

In Cauca, ACIP partners with

ASPROFINCA to strengthen

connections along the cocoa and

plantain value chains. The association

has developed significant linkages with

national and regional markets. For

example, they have a formal agreement

with Colombia’s largest cocoa trader,

Nacional de Chocolates. 

Due to daily fluctuations in global

cocoa prices, cocoa farmers could not

rely on a steady income. ASPROFINCA

now buys farmers’ dried beans at a set

price that is slightly lower than the

market average. Farmers are willing to

reduce the price in return for a more

predictable cash flow and because they

know that the margin is reinvested in

the association, which benefits all

members. 

ASPROFINCA is also in

negotiations with traders to sell their

cocoa for export to Peruvian and

Ecuadorian markets. 

All of these elements work together

to guarantee a steady market — and a

reliable income — for Afro-Colombian

farming families, which helps them

break out of the cycle of subsistence

living and poverty. They now plan for

the future. 

The growers use the additional

income to buy fertilizers, construct

storage facilities or invest in farming

equipment. In the end, these gains

benefit all members of the household.

There is more nutritious food on the

table, children attend school and

families grow their savings. The AfroColombian communities can take pride

in their accomplishments, while also

staying true to their rich culture and

history. ■

“The tongas have helped me... I learned how to plant cocoa and

plantain, how to prune the trees and how to harvest.” 

Tongas members (above and below) prune cocoa trees. These associations build collective

responsibility and engagement among Afro-Colombian farmers.

Rural Cooperatives / May/June 2015 29
30 May/June 2015 / Rural Cooperatives

By T.J. Kennedy 

Acting Executive Director 

First Responder Network Authority

Editor’s note: USDA Rural Development

is among the federal agencies participating

in the effort to ensure that a wireless public

safety network is available nationwide.

USDA Rural Utilities Service borrowers

— including some rural electric and rural

telephone cooperatives — are also part of

the FirstNet efforts. For more information,

visit: www.firstnet.gov.

Public safety

professionals put their

lives on the line every

day to protect our

health, safety and

property. Their ability to provide these

critical services in our communities

depends on communications, including

access to and sharing of information

among other first responders. 

Communications challenges can

affect response operations and hinder

public safety personnel from saving

lives and property. While the terrorist

attacks of Sept. 11, 2001, brought this

issue into focus, these challenges can

still occur during emergency response

operations. Because of this, Congress

passed the Middle Class Tax Relief and

Job Creation Act of 2012 (Act) to create

a nationwide public safety broadband

network (NPSBN). 

Under the Act, Congress established

the First Responder Network Authority

(FirstNet) as an independent authority

within the U.S. Department of

Commerce to take all actions necessary

to ensure the building, deployment and

operation of the NPSBN in all states,

five U.S. territories, and the District of

Columbia. FirstNet’s mission is to

create an interoperable nationwide

public safety network linking first

responders from local jurisdictions with

state, tribal and federal public safety

agencies across the nation, including

those first responders operating in rural

communities. 

Modern wireless network 

for public safety

Like the commercial 4G (fourth

FirstNet broadband network 

can enhance rural safety
Rural Cooperatives / May/June 2015 31

generation) Long-Term Evolution

(LTE) networks supporting personal

smartphones, FirstNet is working to

deploy an IP-based wireless public

safety network. A key difference,

however, is that the NPSBN is being

developed specifically to meet the needs

of first responders and provide them

with mission-critical capabilities, such

as priority and pre-emption during

large emergencies. 

Initially, the network is intended to

provide high-speed mission critical data

services, in addition to non-mission

critical voice capabilities, to augment

responders’ land mobile radio networks.

FirstNet plans to enable users to send

and receive data, video, images, voice

and text — and benefit from the ability

to leverage applications. Just as one can

now download apps on personal

smartphones, tablets or laptops, once

Assume it takes 30 minutes for a rural car crash to be discovered and 30

minutes for paramedics to arrive at the scene and assess the severity of

patient injuries. Today, this could delay the call for a helicopter and other

decisions about what the patient(s) need. This time lost is critical to the

survival of trauma patients.

In contrast, FirstNet intends to enable capabilities like automatic

advanced crash notification (AACN) introduced by car manufacturers to be

integrated into emergency response scenarios to decrease response times,

improve treatment, and better equip responders. In 60 seconds, data coming

out of car systems, including the location of the crash, the speed at impact,

and the forces acting on the car and people in it, could be transmitted from

the car to public safety answering points and communicated via FirstNet to

first responder smartphones.

EMS could run AACN data from a wrecked car through an app enabled

by FirstNet to determine the percentage likelihood of severe injury. If the

chance of serious injury hits a predetermined threshold, the local medevac

team would report to the helicopter team and standby. If the chance of

serious injury hits a higher threshold, the helicopter team could be

dispatched for the scene immediately and, because the car is assumed

damaged enough to warrant extrication assistance, extrication equipment

could automatically be dispatched. This way, when the ambulance gets to

the scene, the helicopter and extrication professionals and equipment are

already en route.

When a paramedic exits the ambulance at the scene of a car accident

today, it can take 6-10 minutes to approach the car, make sure the scene is

safe, do an adequate patient assessment and history, write that information

down, and report all that information to the ER and get treatment

instructions. In contrast, with the envisioned capabilities of FirstNet,

paramedics could begin sending vital signs and monitoring and history data

to the entire patient care team, including emergency room doctors and

specialists, within 60 seconds of seeing the patient. 

Broadband network speeds 

response in emergencies

Increased broadband mobility holds great

promise for improving public safety, especially

in rural areas. Here, members of an

emergency response team demonstrate how a

tablet computer, receiving broadband signals,

can be used inside an ambulance. Facing

page: Officers of the Laurel, Md., Police

Department use smartphones and body

cameras, enabled by broadband service, to

enhance communications. Photo courtesy

Laurel Police Department
32 May/June 2015 / Rural Cooperatives

the FirstNet network is established,

FirstNet envisions public safety users

being able to download public safety

apps for their FirstNet devices. 

Mobile technology to benefit

rural first responders

Just as smartphones and IP-based

networks have changed the way

individuals communicate in their

personal lives, FirstNet believes the

network will change the way public

safety entities operate for the better.

FirstNet’s goal is to enable first

responders to take advantage of

evolving, mobile communications

technology through intelligent devices

like smartphones and tablets, as well as

wearable technology. 

Increased broadband mobility holds

great promise for the public safety

community. This is particularly true for

rural public safety entities. In the case

of emergency medical services (EMS),

for example, critical facilities, such as

trauma centers, could be 90 minutes

away from the site of a serious accident. 

As such, rural emergency medical

technicians (EMT) may be confronted

with a patient who appears stable

enough to transport in an ambulance,

and midway into a 90-minute transfer

to the city trauma center, the patient

has a more severe reaction than

anticipated. Using video transmitted

over the NPSBN, creating a “virtual

doctor” in the ambulance could enable

doctors to look at the patient and his or

her vitals, consult with the EMT, and

make decisions about implementing a

treatment plan to help stabilize the

patient until they arrive at the hospital.

Evolving mobile technologies

present endless possibilities for how the

NPSBN could benefit response

operations. FirstNet’s goal is to

facilitate a faster, more informed, and

better coordinated response to incidents

across city, county, regional, state,

tribal, and federal public safety

personnel. 

During a crime in process or medical

emergencies, for example, the ability to

share real-time images and video of the

scene, as well as the locations of

responders and locally relevant

information, improves communications,

situational awareness, and outcomes. 

To plan for this network, FirstNet is

consulting through the Single Point of

Contact (SPOC) in each state and

territory to increase its understanding

of the communications needs of local

jurisdictions and public safety entities.

The consultation process is an

opportunity for stakeholders to provide

FirstNet with feedback and directly

inform the build-out of the network in

their state or territory. 

Rural telecommunications and utility

cooperatives can be part of that process

by working with key individuals in each

state, including the SPOC. To

participate in consultation meetings,

stakeholders should contact their state

SPOC. A list of SPOCs is available at:

www.firstnet.gov/sites/default/files/2015

0213_DIR_SPOCs.pdf.

FirstNet’s RFP Process

FirstNet’s enabling legislation (the

Act) requires the organization to

conduct a Request for Proposals (RFP)

process for the building, deployment,

operation, maintenance, and

improvement of the network. FirstNet

intends to issue an RFP in order to

enter into an award(s) for a network

provider or providers for equipment

and services to provide Band 14 LTE

services to public safety entities

nationwide. Our goal is to ensure the

deployment of a nationwide broadband

network that achieves the best value for

public safety entities.

FirstNet is initiating an acquisition

process that promotes innovation,

allows for flexibility and encourages

competition. In April, FirstNet released

draft RFP documents and is seeking

feedback from industry and states.

Deadline for draft RFP responses is July

27, 2015, at 12 pm Eastern Time.

Additionally, FirstNet continues to

create numerous opportunities for

feedback from interested parties,

including states and territories, local

jurisdictions, tribal nations, federal

agencies, public safety stakeholders, and

market participants. 

FirstNet has an Industry Liaison

who serves as a point of contact for

market participants who have general

questions about doing business with

FirstNet. For more information, please

contact the Industry Liaison at:

FirstNetIndustryLiaison@firstnet.gov.

■

A camera mounted on a police cruiser uses broadband. Photo courtesy Laurel Police Department 
Rural Cooperatives / May/June 2015 33

ACE Institute

July 12-15 in Mass. 

The 2015 ACE

(Association of

Cooperative Educators)

Institute will be held July

12-15 at the University of

Massachusetts, Murray D.

Lincoln Campus Cent, in

Amherst. 

Vern Dosch, CEO of

the National Information

Solutions Cooperative

(NISC), will be the

keynote speaker. NISC is

a nearly 50-year-old

technology business built

on the cooperative model.

It started by providing

software and I.T. services

for three rural cooperatives in the late

1960s. It has grown to 1,000-plus

employees who serve 14 million end

users in 49 states or territories and

Canada. 

Dosch will discuss the importance of

ongoing employee education and

awareness about being a cooperative

and how a cooperative culture builds a

different kind of organization that

engages employees, delights customers

and sparks better results. 

For more information, contact Sarah

Pike at pike@ace.coop, or (763) 432-2032.

Stover Ventures launched 

by Iowa co-op, partner

Ag Ventures Alliance Cooperative

(AgVA) of Mason City, Iowa, and

Cellulose Sciences International (CSI)

of Madison, Wis., have completed a

financing agreement resulting in the

formation of a new joint venture: Stover

Ventures LLC. Stover Ventures will

commercialize CSI’s patented biomass

treatment process for producing highly

digestible feed products and high-value

specialty chemicals from agricultural

residues. The process offers both

economic and practical benefits for corn

growers and dairy and beef producers,

the partners say.

Corn stover management is an area

of growing concern for growers in

high-yielding areas of the Corn Belt,

they add. Stover Ventures will convert

harvested, excess stover into marketable

and transportable products, providing

growers extra revenue per acre and

effectively managing excess residue.

Finding new sources for both feed

and energy supplies from shrinking

acres will be required to feed and fuel a

growing and hungry world, according

to the co-op. Stover Ventures will

address these needs by providing a new

source of highly digestible fiber for

inclusion in dairy or cattle

rations. Livestock producers

will be able to utilize Stover

Ventures’ product in their

rations to improve income to

feed cost ratios.

AgVA has committed

$275,000 of seed funds to

launch the venture, with

another $225,000 available if

feed trials remain positive. CSI

is providing an exclusive

license of the patent and

technical expertise. 

Brad Saeger, an agriculture

business developer based in

Willmar, Minn., will lead the

development effort for the new

company. Stover Ventures says

it will begin pilot-scale

production and dairy feeding trials this

year, with commercial-scale facilities

scheduled to begin production in 2017.

Investment backs Missouri

botanical business 

Advantage Capital Agribusiness

Partners LP (ACAP) has announced an

investment in North American Natural

Resources Inc., (d/b/a American

Botanicals), a manufacturer and supplier

of bulk herbs and botanical products in

Eolia, Mo. American Botanicals buys,

processes, sells and exports hundreds of

roots, herbs, barks and other botanical

products, which are purchased directly

from U.S. farmers and dealers and used

in products ranging from foods to

cosmetics and nutritional supplements

by the company’s more than 400

customers. More than 90 percent of

these natural products are collected in

the wild. 

Newsline

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

Co-op developments, coast to coast
34 May/June 2015 / Rural Cooperatives

ACAP is a $154.5-million fund,

licensed as a Rural Business Investment

Company (RBIC) by the U.S.

Department of Agriculture (USDA)

that focuses on businesses involved in

the production, processing and supply

of agricultural products. It is a

partnership between Advantage Capital

Partners and nine Farm Credit

organizations that have committed $150

million to the fund.

Stroburg to lead 

Southern States 

Southern States Cooperative (SSC),

Richmond, Va., has selected Jeff

Stroburg as its

new president and

CEO. Stroburg,

who recently

retired as CEO of

West Central

Cooperative in

Iowa, started the

new job May 4. 

“Jeff’s

extensive experience in agricultural

cooperatives has prepared him well for

this role and provides a solid foundation

for the continued growth and success of

Southern States,” says SSC Chairman

Raleigh Ward of Effingham, S.C. “We

look forward to the experience and

energy he will bring to the table and

the continued success of the cooperative

going forward.”

Southern States is a farm supply and

service cooperative with more than

200,000 farmer-members. It provides a

wide range of farm inputs, including

fertilizer, seed, livestock feed, pet food,

animal health supplies and petroleum

products, as well as other items for the

farm and home. The cooperative

operates 1,200 retail outlets in 23 states.

Stroburg served as president and

CEO of West Central Cooperative for

16 years, where he led the co-op’s

growth to more than $700 million in

annual sales and consistent profits. He

led the spinoff of the company’s

biodiesel business in 2006, forming the

Renewable Energy Group. He remains

as REG’s board chair. 

Stroburg has also served on a

number of boards and associations,

including CF Industries, the National

Council of Farmer Cooperatives and

the Graduate Institute for Cooperative

Learning (GICL). A graduate of Iowa

State University, Stroburg was raised on

a farm in southern Iowa. 

“Southern States is one of the

nation’s largest farmer cooperatives and

its approach to innovative business

solutions for members has always

impressed me,” Stroburg says.

“Jeff brings experience in many

different business segments and

understands the nature and business

philosophy of cooperatives,” says

current President and CEO Tom

Scribner, who is retiring. 

Tree Top hires new 

president and CEO 

Tree Top Inc. has selected Keith

Gomes as the company’s new president

and CEO. 

Gomes brings more than 30 years of

food industry experience in various

leadership roles to Tree Top. He

assumed the co-op’s leadership role on

Jan. 5, succeeding Tom Stokes, who

retired after 15 years as CEO. 

Tree Top is an agricultural

cooperative owned by more than 1,000

apple and pear growers in the Pacific

Northwest. It produces premium juices,

fruit-based products and ingredients for

consumers and most of the world’s

leading food and beverage

manufacturers. It operates eight

processing facilities in Washington,

Oregon and California. 

Gomes had been with Dairy Farmers

of America (DFA) since 2008, where he

was chief operating officer of the

Global Dairy Products Group, which

has nearly $4 billion in annual sales.

Gomes’ experience includes managing

the production and worldwide

marketing of perishable and nonperishable consumer products and

ingredients. 

“Keith’s extensive experience in

strategic planning and proven ability to

successfully execute and drive business

and profitability goals in a large

organization contributed greatly to his

selection,” says Randy Smith, Tree

Top’s board chairman. 

MMPA sales top $1 billion 

Michigan Milk Producers Assoc.

(MMPA) had $1 billion in sales in 2014,

and marketed 4.44 billion pounds of

member milk, up 3.1 percent from

2013, delegates were told during the

co-op’s 99th annual meeting in Lansing,

Mich. 

MMPA President Ken Nobis

emphasized the cooperative’s

commitment to processing the growing

member milk supply, saying, “Our

members have invested nearly $100

million in the last five years in dairy

processing that has brought increased

capacity to our plants, added value to

our members’ milk and created jobs for

Michigan Milk Producers Assoc.

(MMPA) has invested nearly $100

million in new processing equipment —

including this butter churn — during the

past five years. Photo courtesy MMPA
Rural Cooperatives / May/June 2015 35

the community. However, we are not

finished with expansion as we move

forward into 2015, because we see

continued production growth by our

members and growing global markets.”

Average milk price paid to the coop’s 1,200 member-farmers in 2014 was

$23.82 per hundredweight, up $3.54

from 2013. Member equity increased

3.9 percent, and the co-op paid

members $21.2 million over-market

value. 

“Prices have, and will continue to,

retract from all-time highs that we just

experienced, and we must prepare for

that,” said General Manager Joe Diglio.

“I believe cooperatives can, and will,

work through the challenges that we

face today to develop a more unified

approach in handling market conditions

as they evolve.” 

Diglio reviewed steps taken last year

to address the growth in milk

production, citing the installation of the

reverse osmosis (RO) system at the

MMPA Constantine plant, being done

in partnership with Foremost Farms

USA. A butter churn was also added at

the Ovid plant. “The RO system is a

great example of how our resources can

come together and be successful when

working collaboratively for the benefit

of member-owners,” Diglio said. 

Peter Vitaliano, National Milk

Producers Federation’s vice president of

economic policy and market research,

discussed the 2015 price outlook,

noting that “2015 isn’t going to be

anywhere close to the record milk

prices of 2014. But it’s also not going to

be anywhere near as disastrous as 2009.

Right now, it looks like dairy producer

margins will be somewhat better than

they averaged during 2011-2013.”

Vitaliano said the outlook will

improve when the major dairyimporting countries return to their

normal levels of buying dairy products. 

NMPF: analysis supports

wholesomeness of milk 

The results of a U.S. Food and Drug

Administration analysis of milk samples

from nearly 2,000 dairy farms clearly

demonstrate that regulations to keep

drug residues out of milk are effective

in protecting public health, according

to the National Milk Producers

Federation (NMPF). In the analysis,

made public in March by FDA’s Center

for Veterinary Medicine, analyzed the

milk samples for 31 different drugs.

More than 99 percent of samples were

found to be free of drug residues.

“The report confirms that America’s

dairy farmers are delivering on their

commitment to provide safe and

wholesome milk to consumers,” says

NMPF President and CEO Jim

Mulhern. “The findings are a positive

affirmation of our milk safety, although

we need continued education among

farmers, veterinarians and
36 May/June 2015 / Rural Cooperatives

pharmaceutical companies, and

outreach on how to prevent future trace

levels of residues.”

In the analysis, FDA collected milk

samples from 1,912 farms. About half

the farms had been cited earlier for

drug residue violations in market-bound

meat. The remaining farms were

randomly selected. FDA was checking

to see if dairy farms with drug residue

violations in meat were producing milk

that also contained residues.

Co-op Network CEO 

Oemichen to retire

Cooperative Network President and

CEO Bill Oemichen has announced his

retirement,

effective Oct. 16,

concluding 14

years with the

association.

Oemichen has

served as

president and

CEO since 2002.

Under his

leadership,

Cooperative Network has grown to

become an influential advocate on

legislative and regulatory issues for

cooperatives, on both the national and

state level. 

It was under Oemichen’s leadership

that the former Wisconsin Federation

of Cooperatives and Minnesota

Association of Cooperatives united to

form Cooperative Network in 2007,

becoming the largest all-cooperative

trade association in the nation. It

represents more than 400 cooperative

business members in Minnesota and

Wisconsin.

Other accomplishments during his

leadership include: 

• Drafting, and leading, legislative

efforts to enact the Wisconsin Dairy

Investment Tax Credit in 2004, which

helped bring about more than $2 billion

in reinvestment into a struggling

Wisconsin dairy industry.

• Creating the Farmers’ Health

Cooperative of Wisconsin in 2007 to

provide the state’s agricultural

producers and agribusinesses affordable

and quality health insurance and to

stimulate health care marketplace

competition.

• Gaining global recognition as an

information source on corporate and

cooperative governance, including

invitations to speak before the

parliaments of several nations on

cooperative governance issues in 2014

and 2015. 

• Enacting new cooperative laws in

Minnesota (2004) and Wisconsin (2005)

that have enhanced local economic

development by allowing community

members to invest money into area

cooperative businesses.

• Advocating before the U.S.

Congress for health care cooperatives to

be included in the Affordable Care Act.

Cooperative Network then served in a

leading advisory role to the U.S.

Department of Health and Human

Services in determining how $6 billion

in federal funding would be used to

support the development of 24 new

health care cooperatives, which today

provide health insurance to more than 1

million Americans.

“Bill has successfully led Cooperative

Network through much change during

his tenure, shaping it into the strong

association it is today,” says Cooperative

Network Board Chair Curt Eischens, a

Minnesota farmer who is assistant

secretary-treasurer on the CHS Inc.

board. “Cooperative Network is well

positioned to continue to serve

cooperatives in Minnesota and

Wisconsin, and we look forward to

bringing on new leadership to help us

grow our future together.”

Oemichen, an attorney, previously

served as head of the Wisconsin

Division of Trade and Consumer

Protection. Prior to this, Oemichen was

deputy commissioner of the Minnesota

Department of Agriculture and was a

staff member in both houses of the

Minnesota Legislature as well as the

U.S. House of Representatives.

“I have greatly enjoyed my work

representing Wisconsin and Minnesota

cooperatives and advancing memberowned cooperatives as the preferred

form of ownership,” Oemichen says. “I

thank the Cooperative Network board

for giving me the opportunity to play a

key leadership role in demonstrating

that consumers, workers, and our state

and local communities are much better

served by citizens participating in and

supporting member-owned and -led

cooperatives.”

Brinkley new PCCA

president/CEO

Plains Cotton Cooperative

Association (PCCA) has named Kevin

Brinkley as president and chief

executive officer of the Lubbock-based,

farmer-owned cooperative, effective

July 1. The announcement follows a

nationwide search to replace Wally

Darneille, who retired Feb. 28. 

“We are very pleased to announce

the selection of Kevin to lead PCCA’s

cotton marketing,

warehousing and

software services

for our members

and customers,”

says PCCA

Chairman Eddie

Smith. “He is

well known and

respected in the

cotton industry

and will complement PCCA’s

management team.”

Originally from Burnet, Texas,

Brinkley attended Texas Tech

University where he graduated with

bachelor’s and master’s degrees in

agricultural economics. Upon

graduation, he joined the staff of the

National Cotton Council as field

representative for the Texas High and

Rolling Plains. In 1990, he was

promoted to an economist and

conducted farm policy analysis and

marketing support for Cotton Council

International’s efforts to promote U.S.

cotton.

Brinkley joined the staff of The
Rural Cooperatives / May/June 2015 37

Seam as marketing manager when the

company was created in 2000 to offer

the world’s first completely online,

neutral exchanges for cotton trading. In

2003, he was promoted to vice

president of marketing and business

development, and The Seam added

other commodities such as grains,

peanuts and dairy to its trading

platform. The company also began

offering food trading platforms for

major manufacturers and reverse

auction procurement systems for

USDA. 

In 2011, he was promoted to senior

vice president to oversee all daily

operations of The Seam and was named

its chairman and chief executive officer

in January 2015.

“PCCA is a stalwart of the U.S.

cotton industry,” Brinkley says. “My

vision is to serve our members by

continuing to provide the quality of

service and value that have made the

cooperative the supplier of choice for

customers around the world.” 

Founded in 1953, PCCA today is

owned by about 15,000 cotton

producers in Texas, Oklahoma, Kansas

and New Mexico. It is one of the

largest originators of U.S. cotton to

textile mills worldwide. 

Farmer Co-op Conf. Nov. 5-6 

The 18th annual Farmer

Cooperatives Conference returns to

Minneapolis, Minn., Nov. 5-6.

Presented by the University of

Wisconsin (UW) Center for

Cooperatives, the conference provides a

forum for cooperative directors,

managers and those doing business with

agricultural cooperatives to explore

current issues that will shape the future

of farmer-owned cooperatives.

This year’s program will look at

supply chain and transportation issues,

economic trends and human resources

and strategies for developing a co-op

culture. “This event is an exciting

opportunity to hear cooperative

business leaders assess the cooperative

business environment,” says UW’s Anne

Reynolds. For more information,

contact her at: anne.reynolds@wisc.edu.

Co-op Innovation Award 

goes to worker co-op orgs. 

Capital Impact Partners is awarding

$40,000 to the Democracy at Work

Institute and United States Federation

of Worker Cooperatives through its

first Co-op Innovation Award. These

organizations were chosen based on

their track record in providing highquality technical assistance to start-up

and existing co-ops, as well as their

leadership in scaling the cooperative

model with a focus on low-income

communities.

“Thirty years ago, Capital Impact

was born out of the need to support

consumer and small business

cooperatives working in low-income

communities,” says Terry Simonette,

president and CEO of Capital Impact

Partners. “We are thrilled to continue

that tradition with the debut of our Coop Innovation Award and support for

these two worthy organizations which

are demonstrating their leadership in

building strong, vibrant communities.”

The Democracy at Work Institute

(DAWI) received $20,000 for its

“Conversion Collaboration.” This

coordinated, national effort is designed

to help scale worker co-op conversions

or traditional small businesses which

would like to transition to workerowned co-ops. Through this effort,

DAWI will create a supportive

ecosystem of business organizations,

technical assistance providers and

lenders with a focus on low-wage

industries. 

“More than 40 percent of worker

cooperatives in existence today were

formed by converting an existing

business to worker ownership, and

Pope Francis recently talked to more than 7,000 members of the

Confederation of Italian Cooperatives in Rome, referring to cooperatives as

“key actors in promoting the economy of honesty. The Church has always

acknowledged, appreciated

and encouraged the

cooperative experience.”

Cooperatives should

“continue to be the motor

for lifting up and developing

the weakest part of our

local communities and of

civil society,” Pope Francis

said. This involves “giving

first place to the foundation

of new cooperative

enterprises, along with the

further development of

those already in existence,

so as to create, above all, new work opportunities that currently do not exist.”

He also mentioned a role for worker-owned co-ops that could take over

businesses when the owners retire or die. 

“Unite with determination the right means for carrying out good works.

Collaborate more with cooperative banks and businesses, organize resources

to allow families to live with dignity and serenity, and pay fair salaries to your

workers...Money, placed at the service of life, can be managed in the right

way by the cooperative.” He added: In “an authentic and true cooperative,

capital does not rule over people, but people over capital.”

Pope Francis addresses co-op group

Pope Francis accepts a gift of co-op food products

during a meeting with members of the

Confederation of Italian Cooperatives (CIC) in Rome. 
38 May/June 2015 / Rural Cooperatives

several recent large and high-profile

conversions show that conversion

activity is only growing,” Melissa

Hoover, DAWI executive director.

“With this funding, Capital Impact

Partners has its finger on the pulse, and

the pulse is strong!” 

The U.S. Federation of Worker

Cooperatives (USFWC), a national

grassroots membership organization for

worker co-ops, was awarded $20,000 for

its “Grants for Growth” fund. This

revolving grant fund will provide small

technical assistance grants to existing

co-ops who want to grow their

businesses. These grants will increase

the number of loan-ready worker coops and their capacity to create new

jobs. 

“The revolving fund we’ve developed

will cover the up-front costs of business

technical assistance, addressing a known

need for three important Federation

stakeholders — established worker

cooperative businesses, knowledgeable

cooperative developers and co-opfriendly financial institutions — in a

coordinated way that has the ability to

unlock significant growth potential,”

says Amy Johnson, co-executive

director for the USFWC.

USDA’s Ling honored by UConn

Charles Ling, who retired from

USDA Cooperative Programs in

January 2015, recently received the

2015 Distinguished Alumni Award from

the College of Agriculture, Health and

Natural Resources (CAHNR) at the

University of Connecticut (UConn).

The award recognizes Ling for his 40-

year career conducting research and

technical assistance at USDA, and the

many benefits his work yielded for

farmers and their dairy cooperatives. 

Ling received his master’s degree

(1970) and doctorate degree (1973)

from UConn. The honor was bestowed

April 22 during an awards ceremony at

the UConn campus in Storrs, Ct.

Among the many publications he

produced at USDA is “The Nature of

the Cooperative,” a collection of articles

he wrote that examine the economic

theory underlying agricultural

cooperatives. In this report, he

systematically reviewed economic

literature and traced the evolution of

cooperative theory, including a reevaluation of Edwin G. Nourse’s

seminal 1922 paper: “The Economic

Theory of Cooperation.” (To request a

copy, e-mail: coopinfo@wdc.usda.gov.) 

Spearman to chair FCA;

Tonsager, Hall join board 

Kenneth A. Spearman has been

selected by President Barack Obama as

chairman and

CEO of the Farm

Credit Administration (FCA).

He assumed the

new post on

March 13.

Spearman has

served as a

member of the

FCA board and,

concurrently, as chairman of the Farm

Credit System Insurance Corporation.

His term on the board will expire in

May 2016. He succeeds Jill Long

Thompson, who has served as FCA

chair and CEO since November 2012. 

As FCA chairman, Spearman will be

responsible for policymaking, adopting

regulations and overseeing the

examination and regulation of the

institutions constituting the Farm

Credit System (FCS), including the

Federal Agricultural Mortgage

Corporation. The banks and directlending associations of the FCS have

$217.1 billion in gross loans

outstanding to U.S. farmers, ranchers

and their cooperatives; they have $282.8

billion in total assets. 

Spearman has many years of

experience in finance, agriculture and

ag cooperatives. He spent 28 years in

the citrus industry. From 1980 to 1991,

he was controller of Citrus Central, a

$100-million cooperative in Orlando,

Fla. He later served as director of

internal audit for Florida’s 

Natural Growers. 

Dallas Tonsager of South Dakota

recently joined the FCA board. He will

serve the remainder of the six-year term

previously held by Jill Long Thompson,

which expires in May 2020. Both

Tonsager and Long Thompson are

former under secretaries of USDA

Rural Development. 

While at USDA, Tonsager was a

member of the Commodity Credit

Corporation board. He previously

served on the FCA board from 2004 to

2009 and was an ex-officio member of

the Farm Credit System Insurance

Corporation board. 

Jeffery S. Hall has also joined the

FCA board, where he will serve the

remainder of the six-year term

previously held by Leland A. Strom,

which expires in October 2018. He also

will serve as a member of the Farm

Credit System Insurance Corporation

board. 

Hall was president of The Capstone

Group, a firm he co-founded in 2009.

He was the state executive director in

Kentucky for USDA’s Farm Service

Agency from 2001 to 2009. From 1994

to 2001, he was assistant to the dean at

the University of Kentucky College of

Agriculture. 

Whatcom Farmers Co-op

merges with CHS Inc. 

Producer-members of Whatcom

Farmers Cooperative (WFC), a fullservice ag cooperative based in Lynden,

Wash., have approved a merger with

CHS Inc. The proposal will become

effective in July, pending appropriate

due diligence by both organizations and

approval by the CHS board. 

“A lot of time and effort by the

board of directors went into the

decision to bring this proposal to our

members,” says WFC Chairman Jeff

Bedlington. “WFC will remain a locally

based company, staying true to its roots.

We are excited for the opportunities

that CHS and WFC can provide for

our employees and customers.”

“CHS continually looks for strategic
Rural Cooperatives / May/June 2015 39

opportunities that strengthen our ability

to help our farmer-owners grow their

businesses,” says Lynden Johnson,

executive vice president of CHS. Don

Eucker will continue to lead the group

as general manager. 

Founded in 1941 as Whatcom

Grange, today WFC has locations in

the communities of Lynden,

Bellingham, Fairhaven, Ferndale, Blaine

and Nooksack, which serve customers

throughout Whatcom County.

Andersen to leave 

Nebraska Co-op Council 

Robert C. Andersen, president of the

Nebraska Cooperative Council (NCC),

has announced he will retire March 1,

2016, ending a distinguished NCC

career of 42 years. He leaves behind a

legacy of financial strength, and an

effective association known nationally

for excellence. The NCC board has

begun the process of selecting a new

president. 

“Over his four decades of service,

Bob has worked hard to bring a unified

voice regarding cooperative issues to

the legislature,” says David Briggs,

NCC chair and general manager of

WESTCO in Alliance, Neb. “Bob has

built strong relationships with

institutions and agencies all across the

nation.”

“Under Bob’s direction, the Council

has provided exceptional educational

opportunities for both the directors and

the employees of co-ops in Nebraska

and surrounding states,” adds Bruce

Favinger, NCC board secretary and

chair of Cooperative Producers Inc. in

Hastings, Neb.

“I have been very fortunate to have

worked with some of the most

honorable and dedicated

farmer/rancher directors, cooperative

managers and cooperative stakeholders

in Nebraska and the Midwest,”

Andersen says. “It has been my

privilege to work closely with

these leaders who are committed to

fulfilling the needs of their

farmer/rancher members, coupled with

creating a positive economic impact

upon their community and our state.”

NCC, founded in 1945, represents

Nebraska co-ops and the more than

56,200 farmers and ranchers who own

them. These co-ops serve more than

390 communities and employ more

than 5,575 employees. 

Paige wins Spirit of

Cooperation Award

Ralph Paige, former executive

director of the Federation of Southern

Cooperatives/Land Assistance Fund, is

the 2015 recipient of the Stan Dreyer

Spirit of Cooperation Award. The award

is bestowed by National Cooperative

Bank (NCB), a leading financial services

company serving cooperatives

nationwide. 

The award, named for a former

NCB leader, was presented at NCB’s

annual meeting. It is bestowed each

year on someone who “portrays the

spirit of the cooperative principals in his

or her personal and professional life.”

Paige recently retired from the

Federation after 45 years, spending the

past 30 as its executive director. He was

also presented with a letter from

President Obama, thanking him for his

contributions while leading the

Federation, and for serving as a leader

for economic empowerment and social

justice for southern farmers and rural

communities. 

Under Paige’s leadership, the

organization developed more than 200

units of low-income housing, 75

cooperatives, 18 community credit

unions and a training program for rural

leaders. He led the Federation efforts to

support development and passage of

USDA’s Small Farmers Program, which

provides the coordination of outreach,

technical assistance and education

efforts to socially disadvantaged and

veteran farmers, ranchers and forest

landowners, helping to improve their

participation in the full range of USDA

programs. 

The award is named for a former

NCB executive director who was

instrumental in the passage of the

Congressional Bank Act of 1978, which

resulted in the formation of NCB.

Dreyer’s dedication to fostering the

growth and success of cooperatives,

nationally and internationally, has

earned him widespread recognition and

an enduring legacy.

Iowa governor tours Quad

County ethanol plant

Quad County Corn Processors

(QCCP) and Syngenta in April hosted

Iowa Governor Terry Branstad and Lt.

Gov. Kim Reynolds on a tour of the

state’s first commercial cellulosic

ethanol plant, in Galva, Iowa. QCCP

recently passed the 1-million-gallon

milestone for cellulosic ethanol

production, using the Cellerate process

technology. 

Cellerate is a collaboration between

Syngenta and Cellulosic Ethanol

Technologies LLC, a wholly owned

subsidiary of QCCP. Cellerate process

technology is designed to increase an

ethanol plant’s production by allowing

the corn kernel fiber to be converted

into cellulosic ethanol. Co-op leaders

say Cellerate will enable the biofuels

industry “to create 2 billion gallons of

additional cellulosic ethanol — all from

corn already being processed. ■

Ralph Paige (left) receives the Stan Dreyer

Spirit of Cooperation Award from Charles

Snyder, president and CEO of National

Cooperative Bank (NCB).
helps boost profits. My own family

helped pioneer drip irrigation in

Arizona, and we are producing more

with less water than ever before.

Related to farming is the use of

water for commercial and industrial

processes. Based on what I read,

California has done a good job of

conserving water in these areas, likely

for the same reasons we do: water is

expensive and we’re all striving for

maximum efficiency.

Finally, water is used to support our

modern lifestyles, watering lawns and

shrubs and trees, hosing down

sidewalks, filling pools, making soccer

fields and golf courses green. Somehow

we must find ways to balance these

competing choices for what we do with

our most precious, limited resource — water. 

That is where I believe our nation’s

co-ops can, and do, play a major role in

educating and informing people about

our water supplies, the demands made

upon them, the systems that deliver

water to our farms and our homes, the

changes agriculture has made to be

more efficient and to push back against

misinformation that portrays farmers as

the bad guys in a drought.

People have a natural inclination to

mass into groups of common interests,

especially in times of crisis. Farmers and

their co-ops must stand together to tell

their story of how we use water.

Otherwise, choices could be made that

are not in anybody’s best interests.

What it really boils down to is this:

farmers only use the water needed to

feed and clothe the people in our nation

and the world. That’s the message we

need to convey and our co-ops are

doing yeoman’s work in delivering the

message. ■

Commentary

continued from page 2

40 May/June 2015 / Rural Cooperatives

set of services provided, nor a stake in

any particular community. The

incentive for LLCs with patronmembers to transition to non-patron

ownership is evident. But whether, or

how frequent, such conversions occur,

only time and historical research will

tell. 

The longevity record for

cooperatives is noteworthy. Rural

Cooperatives magazine’s May/June 2014

issue reported on the expanding list of

“century cooperatives,” which then

stood at 134, and is projected to double

in the next six years. Cooperatives

reaching 100 years represent a much

higher percentage of the total pool of

such businesses, compared to publically

listed companies. 

Cooperatives provide an exit plan by

returning all equity to retiring

members. While an exit strategy is an

important part of planning, it is not an

all-consuming concern for those who

want to build a democratically owned

business that can be passed on to other

users of its services. 

More questions to ask

An LLC might be the right choice

for some businesses, but more questions

need to be asked beyond that of what is

easiest to establish and what offers the

greatest single-tax, pass-through

advantage. One must ask: Do members

plan on taking all earnings rather than

retaining them in the business to

support its growth? In financing a

business, the lowest cost of capital is

from earnings generated by operations.

Only cooperatives can both create

equity from earnings and make a later

distribution to members while incurring

a single, pass-through tax.

Another question for members to

ask, or to probe, is the value they place

on building an entity that will sustain as

a democratically controlled and userbenefited business. Such objectives are

worth considering when choosing an

organizational form. It may turn out

that an LLC can also accomplish such

objectives. 

Professional advisors naturally focus

on what they perceive to be in the

“client’s best interest” when advising on

the choice of a form of business

organization. But decisions in one’s best

interest ought to involve a thoughtful

discussion. There is more to be

weighed than ease of access to investors

and exit strategies. There are

community-impact aspects of building a

business, as well as generating profits

for members. Cooperatives serve such

objectives better than any other form of

business organization. ■

References

• Eversull, E. Eldon (2014) “The Long

Run—Number of Ag Co-ops

Celebrating 100th Anniversaries on

the Rise,” Rural Cooperatives

May/June. 

• Frederick, Donald A. (2013) Income

Tax Treatment of Cooperatives, Parts 1-

5, USDA/Cooperative Information

Report 44.

• Frederick, Donald A. (1997) “The

ABC’s of LLC’s,” Rural Cooperatives

July/August. 

Co-op or LLC?

continued from page 19 When members want to build a sustainable business — with

democratic control by those who use its services — a cooperative

will usually achieve that purpose better than an LLC. 
Rural Cooperatives / May/June 2015 41

advertised while on the William

Mitchell campus and wanted to learn

more. 

“Mostly, I was shocked by how

prominent and big cooperatives are,”

Ayers Looby says. “I didn't realize that

the business model, which seems so

grounded and valued, had the capacity

to expand to such great numbers and

breadth. It also made me feel excited

that I wouldn't have to look too far

when I graduate...to find cooperatives

that I could both work for and support

with my business!”

The Co-ops 101 session was the first

of its kind to be offered at the law

school, which had worked with

Cooperative Network and the

Minnesota Cooperative Education

Foundation several years earlier to

survey law schools in Minnesota and

Wisconsin to unearth what students

were being taught regarding

cooperatives and where more

information was needed. The study

concluded little was being taught on

the cooperative form of business.

Collaboration with universities

Asked for her advice for cooperatives

seeking to provide information about

who they are and what they have to

offer on university campuses, Dube

says, “For us...it’s not so much what do

co-ops have to offer us as it is what do

co-ops need from us. I think if law

students understood that there is a

demand for lawyers to represent

cooperatives, there would be more

incentives for our school to include

cooperative law in the curriculum in

some way — whether as a day or multiday conference or as a for-credit

course.”

Oemichen agrees that

communication is key. “There is a very

important role to play for our future

lawyers in incorporating, advising and

representing cooperative businesses,” he

says. “As the only type of corporation

with a set of seven principles, we

present an attractive business and

governance model for many law

students. Our challenge is to help

certain law, business and accounting

students understand that we are a viable

business model they should embrace

during their professional career.”

He concluded the class by

emphasizing key “cooperative

differences,” saying:

• Co-ops are created to meet a need

not being met by the for-profit

community;

• Members who purchase the

cooperative’s products and services

“own” and lead the cooperative;

• Co-ops are incentivized to focus on

member needs rather than on the

profit motives of investors;

• Member education is a core

cooperative principle;

• Giving back to the community is also

a core principle.

Building Co-op Infrasructure

continued from page 5

million in REAP grants and loans for

more than 2,900 renewable energy

systems. 

Some key facts about this effort:

• When fully operational, it is

estimated that these renewable energy

systems will generate more than 6

billion kilowatt hours annually —

enough to power more than 5.5 million

homes for a year.

• The new Census of Agriculture

shows the number of farms using

renewable energy has doubled in the

past five years. 

Program improved

On Dec. 29, 2014, USDA published

a final rule outlining key improvements

to the REAP program and seeking

applications for more than $280 million

in available REAP guaranteed loans and

grants to agricultural producers and

rural small businesses for installing

renewable energy systems and making

energy efficiency improvements. 

Renewable energy systems are: wind,

solar, renewable biomass, anaerobic

digesters, geothermal, hydroelectric and

hydrogen. Energy-efficiency

improvements include, but are not

limited to equipment, lighting, heating,

cooling, ventilation, fans, automated

controls, windows and insulation. 

Some positive changes from the

newly published rule include:

• A simpler, streamlined application

process that also designates funds for

smaller projects and provides for

assistance with applications;

• An expanded application window:

loan and grant applications are being

accepted and reviewed year-round, and

loan applications compete on a monthly

cycle;

• Provides grants up to $500,000 and

loan guarantees up to $25 million for

renewable energy systems and energyefficiency improvements for rural small

businesses and agricultural producers;

• Authorizes $50 million annually;

authorizations are no longer contingent

upon future Farm Bills;

• Adds resource conservation and

development councils as eligible entities

to apply for energy audit and renewable

energy development assistance grants.

For fiscal 2015, USDA has over $280

million available in REAP funding, with

over $200 million available for

guaranteed loan and $80 million

available for grants.

For more information on the REAP

program, visit: www.rd.usda.gov and

type “REAP” in the search box, or email: Venus.WelchWhite@wdc.

usda.gov. ■

REAP Helps Paint Producer

continued from page 9
42 January/February 2015 / Rural Cooperatives
Rural Cooperatives / January/February 2015 43

New

Running a Food Hub: Lessons Learned From the

Field, SR 77

This report is part of multi-volume, technical report

series: Running a Food Hub. This first volume

compiles a number of best business practices for

starting or expanding a food hub enterprise. It

includes operational profiles of the food hubs

profiled in the report.
Periodicals Postage Paid

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44 May/June 2015 / Rural Cooperatives

Begin Here

This guide (Cooperative Information Report 7) now has updated editorial and graphic content. It

includes a step-by-step game plan and sample documents and work sheets designed to help new

co-ops put down healthy roots. It can be used for starting all types of cooperatives. 

For free hard copies, send your request to: coopinfo@wdc.usda.gov, or write: USDA Co-op Info.,

Stop 0705, 1400 Independence Ave. SW, Washington, D.C. 20250, or call: (202) 720-7395. It is also

posted on the USDA Rural Development website at: www.rd.usda.gov/publications/publicationscooperatives.

Launch your cooperative using 

the tried and true steps outlined in

USDA’s “How to Start a Cooperative.”