USDA / Rural Development September / October 2012

R

u

r

a

l COOPERATIVES

Gearing Up

the Co-op Economy

RECORD SALES YEAR

FOR CO-OPS / page 4

TOP 100 AG CO-OPS

FOR 2011 / page 8

CO-OP MONTH SPECIAL

SECTION / page 20
2 September/October 2012 / Rural Cooperatives

Commentary

October is National Cooperative Month. In support of the occasion, Agriculture

Secretary Tom Vilsack has signed this proclamation, which is on display at a

number of locations around USDA's headquarters in Washington, D.C.
Features

Rural Cooperatives / September/October 2012 3

Volume 79, Number 5

September/October 2012

Rural Cooperatives (1088-8845) is

published bimonthly by USDA Rural

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The Secretary of Agriculture has

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USDA is an equal opportunity provider

and employer.

Tom Vilsack, Secretary of Agriculture

Dallas Tonsager, Under Secretary,

USDA Rural Development

Dan Campbell, Editor

Stephen Hall / KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or email:

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This publication was printed with vegetable oil-based ink.

p. 4

04 Farm co-ops set sales, income records

Number of full-time jobs up 1,800

08 Top 100 ag co-ops eclipse previous sales record by $18 billion

By Sarah Ali and David Chesnick

20 Gearing Up the Co-op Economy

37 Use of joint ventures by ag co-ops on rise

By Bruce J. Reynolds

40 ‘The pillar of my home’ Coffee co-ops brew better quality of life for Ethiopian farm families

By Anja Tranovich

Departments

02 COMMENTARY

18 MANAGEMENT TIP

44 NEWSLINE

p. 18

ON THE COVER: The nation’s nearly 2,300 agricultural cooperatives

set new records for both sales and income in 2011, besting the previous

sales record by more than $10 billion. Also in this issue is our annual

look at the nation’s 100 largest ag co-ops, which also set records, thanks

in large part to higher commodity prices in most sectors. See pages 4

and 8.

p. 40

C O - O P M O N T H S P E C I A L S E C T I O N
4 September/October 2012 / Rural Cooperatives

Farmco-ops set sales,income records

Number of full-time jobs up 1,800
Editor’s note: Information for this

article was compiled by the Cooperative

Programs statistics staff of USDA Rural

Development: Sarah Ali, Jacqueline E.

Penn and E. Eldon Eversull.

armer, rancher and

fishery cooperatives

posted record sales

and income in 2011,

surpassing the

previous record sales of 2008 by $10

billion while besting the old income

record by $500 million. Employment

levels remained strong, with

cooperatives employing 184,000 fulltime, part-time and seasonal

workers, up slightly from 2010.

The year saw double-digit increases

in prices for dairy products, cotton,

livestock and grains and oilseeds.

Farm production expenses also had

double-digit increases in 2011, with

feed, fertilizer and fuel prices leading

the upward trend. The 2,285

surveyed cooperatives had sales of

$213 billion, exceeding 2010 sales by

more than $40 billion (table 1).

“These new cooperative sales and

income records for 2011 underscore

the strength and productivity of the

nation’s farmer- and rancher-owned

cooperatives and the vital role they

play in the nation’s economy,” says

Dallas Tonsager, under secretary for

USDA Rural Development. “Prices

are expected to remain strong in

2012, but production may be

dampened, with almost two-thirds of

the contiguous U.S. experiencing

drought.”

Grain and oilseed sales by

cooperatives climbed by almost $14

billion, while dairy product

marketings increased $8 billion

(table 2). Cotton sales increased

more than $1.5 billion while

livestock and sugar sales both gained

over $600 million. Sales of farm

supplies increased by $10 billion,

Rural Cooperatives / September/October 2012 5

F

Table 1

U.S. cooperatives, comparison of 2011 and 2010

Item 2011 2010 Change

Number Percent

Sales (Gross, Billion $)

Marketing 128.0 103.0 24.27

Supplies 80.9 63.8 26.72

Service 4.5 4.9 -9.69

Total 213.4 171.8 24.21

Balance sheet (Billion $)

Assets 78.5 65.0 20.68

Liabilities 50.6 39.2 29.11

Equity 27.9 25.9 7.90

Liabilities and net worth 78.5 65.0 20.68

Income Statement (Billion $)

Sales (Gross) 213.4 171.8 24.21

Patronage income 0.6 0.7 -11.42

Net income before taxes 5.4 4.3 25.53

Employees (Thousand)

Full-time 130.9 129.0 1.43

Part-time, seasonal 52.8 54.4 -2.95

Total 183.6 183.4 0.13

Membership (Million) 2.3 2.2 1.83

Cooperatives (Number) 2,285 2,314 -1.25
6 September/October 2012 / Rural Cooperatives

primarily due to increasing energy

prices. Farm supply co-ops recorded

gains of more than $3 billion for

petroleum products, while sales were

up by $1 billion for fertilizer, feed

and crop protectants.

Net income before taxes for

agricultural co-ops was a record $5.4

billion, eclipsing the previous high of

$4.9 billion, set in 2008. Net income

was up more than 25 percent, or $1

billion, from 2010.

Marketing of food, fiber,

renewable fuels and farm supplies by

cooperatives experienced 24-percent

increases over the previous year

(table 1), according to the annual

survey conducted by the Cooperative

Programs office of USDA Rural

Development. Gross business

volume of $213 billion was the

largest ever, as was net income

Photo courtesy AGP Inc.

Figure 1 — Cooperatives’ Gross and Net Business Volumes, 1979 –2011

Billion dollars

225

200

175

150

125

100

75

50

25

0

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

1 Includes inter -cooperative business.

2 Excludes inter -cooperative business.

Net2

Gross1
Rural Cooperatives / September/October 2012 7

Table 2

U.S. cooperatives net business volume, 2011 and 2010

Item 2011 2010 Change

$ billions Percent

Products marketed:

Bean and pea (dry edible) 0.151 0.160 -5.9

Cotton 3.971 2.294 73.1

Dairy 39.140 31.126 25.7

Fish 0.251 0.225 11.6

Fruit and vegetable 5.562 5.451 2.0

Grain and oilseed 53.923 40.489 33.2

Livestock 4.231 3.539 19.6

Nut 0.907 0.905 0.2

Poultry 1.302 1.179 10.4

Rice 1.536 1.518 1.2

Sugar 4.737 4.101 15.5

Tobacco 0.251 0.243 3.4

Wool and mohair 0.005 0.005 3.2

Other marketing 5.817 4.522 28.6

Total marketing 121.784 95.756 27.2

Supplies purchased:

Crop protectants 6.494 5.641 15.1

Feed 10.531 8.599 22.5

Fertilizer 11.681 9.371 24.7

Petroleum 20.092 16.468 22.0

Seed 2.831 2.626 7.8

Other supplies 5.692 4.413 29.0

Total supplies 57.322 47.118 21.7

Services and other income 4.453 4.930 -9.7

Total business 183.559 147.805 24.2

before taxes (figure 1).

The value of cooperative

assets in 2011 grew by about $13

billion, with liabilities increasing

by $11 billion and owner equity

gaining $2 billion. Equity capital

remains low but is clearly

showing an upward trend, with

an 8-percent increase over the

previous year (figure 2).

Patronage income (refunds

from other cooperatives due to

sales between cooperatives) fell

by more than 11 percent, to

$613 million, down from $674

million in 2010.

Farmer, rancher and fishery

cooperatives remain one of the

largest employers in many rural

communities and also provide

jobs in many cities. The total

farm co-op workforce of 184,000

was up slightly from 2010.

While full-time jobs at co-ops

increased by 1,800, the number

of part-time and seasonal

employees declined by 1,600.

There was a continued

downward trend in farm

numbers, with USDA counting

2.2 million farms in 2011, down

about 10,000 from 2010. The

number of farmer cooperatives

continues to decline; there are

now 2,285 farmer, rancher and

fishery cooperatives, down from

2,314 in 2010. Mergers account

for most of the drop, resulting in

larger cooperatives.

Producers held 2.3 million

memberships in cooperatives in

2011, up 2 percent from 2010.

The number of U.S. farms and

cooperative memberships are

now about equal. This does not

mean that every producer is a

member of an agricultural

cooperative. Previous studies

have found that many farmers

and ranchers are members of up

to three cooperatives, so farm

numbers and cooperative

memberships are not strictly

comparable. n

Figure 2 — Cooperatives’ Assets, Liabilities, and Net Worth, 2002 – 2011

Billion dollars

80

70

60

50

40

30

20

10

0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Net worth

Liabilities

Assets
8 September/October 2012 / Rural Cooperatives

ag co-ops eclipse previous

sales record by $18 billion

Top

A stainless steel cheese vat is installed at the AMPI dairy plant in Jim Falls, Wis. The co-op’s investment in state-of-the-art cheese technology

has led to the production of more and better cheese from the same volume of milk. Photo courtesy AMPI
Rural Cooperatives / September/October 2012 9

By Sarah Ali and David Chesnick

Agricultural Economists

Cooperative Programs

USDA Rural Development

he nation's 100 largest

agricultural cooperatives reported record

sales revenue of $148

billion in 2011, an

increase of almost 30 percent over

2010, when revenue totaled $113 billion

(table 1). Net income for the 100 top

co-ops also set a new record in 2011,

reaching $3.17 billion, up from $2.35

billion in 2010. The previous records

were $130 billion for sales and $2.42

billion for income, both marks set in

2008.

All seven function areas showed

higher sales in 2011. Leading the

increase were the mixed grain and farm

supply cooperatives, with total sales

increasing 37 percent. These

cooperatives accounted for nearly onehalf of the total increase in sales. Those

cooperatives selling farm supplies saw

sales of farm supplies increase by $12

billion, or 36 percent.

Saint Paul home to

two of top three co-ops

CHS Inc., Saint Paul, Minn. — an

energy, farm supply, grain and food coop — was once again the nation’s

largest ag co-op, with $36.9 billion in

revenue in 2011. It was followed by

Dairy Farmers of America, Kansas City,

Mo., with $12.9 billion in revenue. It

traded places from 2010 with third

ranked Land O’ Lakes Inc., St. Paul,

Minn., a dairy food and farm supply coop, with $12.8 billion in revenue.

Iowa is home to 14 of the top 100 ag

co-ops, the most of any state. It is

followed by Minnesota with 13,

Nebraska with 10, California with 6 and

Wisconsin with 5 top 100 ag co-ops.

The biggest upward jumps on the list

were made by cotton cooperatives, due

primarily to sharply higher cotton

prices in 2011. Carolinas Cotton

Growers Cooperative, Garner, N.C.,

made the largest upward jump, rising

from 129 in 2010 to 71 on the 2011 list.

It was followed by Calcot Ltd.,

Bakersfield, Calif., which climbed from

131 to 85 in 2011.

The next eight biggest gainers on the

list were all grain or mixed (grain and

farm supply) co-ops, again due largely

to high grain prices.

Cost of goods sold rises

Cost of goods sold was also up 31

percent over 2011, mirroring the

increase in total sales. With marketing

cooperatives — such as dairy, fruit and

vegetables, cotton, sugar and grain coops — the cost of goods sold usually

represent payments to members for

their product.

Gross margins increased by 18

percent, to $12 billion. However, gross

margin as a percent of total sales

declined from 9 percent in 2010 to 8

percent in 2011.

Service revenues were down 15

percent, to $1.4 billion in 2011, with

grain and mixed grain co-ops

accounting for most of the decline.

Total expenses for the top 100 ag coops increased by 7 percent from 2010 to

2011. The largest cost increase was

labor expense, which increased by

nearly $300 million in 2011, to $5

billion. Dairy and mixed grain/farm

supply cooperatives were the main

cause of this increase.

While cooperatives are considered

“not for profit”, they do generate net

margins and pay taxes. The top 100

cooperatives paid 21 percent higher

taxes in 2011. Farm supply cooperatives

paid almost $100 million more in taxes

in 2011 than 2010, which accounted for

the bulk of the increase.

Net margins climb $800 million

Net margins increased by more than

$800 million in 2011. Most of the

increase came within the mixed

Figure 1—Total Business Volume, Top 100 Ag Co-ops Figure 2—Net Income, Top 100 Ag Co-ops

($ billions)

160

140

120

100

80

2006 2007 2008 2009 2010 2011

($ billions)

3.5

3.3

3.1

2.9

2.7

2.5

2.3

2.1

1.9

1.7

1.5

2006 2007 2008 2009 2010 2011
grain/farm supply and farm supply cooperatives. Dairy and

fruit and vegetable cooperatives had lower net margins

compared to 2010. However, both groups still returned solid

net margins in 2011 ($339 million and $467 million,

respectively).

The asset base for the top 100 grew by $9.6 billion

between 2010 and 2011. Seventy-seven percent of the

increase was due to mixed grain/farm supply and farm

supply cooperatives. Total assets in 2011 were $49.5 billion

(table 2).

Current assets accounted for nearly 90 percent of that

increase; the largest 100 cooperatives ended 2011 with $32.6

billion in current assets. Mixed grain and farm supply

cooperatives, which include some of the largest farmer

cooperatives, accounted for 50 percent of total amount of

current assets.

Fixed assets also showed an increase of $934 million,

pushing the total for the top 100 co-ops to $10.7 billion.

Current liabilities increased by more than $6.4 billion for

the largest 100 ag co-ops. At the end of 2011, total current

liabilities for the largest 100 ag co-ops were $23.6 billion.

Total liabilities increased by $9.6 billion, ending the year at

$33.7 billion.

Equity allocated to members jumped 2 percent in 2011,

to $11 billion. Retained earnings also showed a substantial

increase of 29 percent, ending the year at $4.7 billion. Based

on the combined balance sheet, it would appear that

throughout the recession, cooperatives have relied more

heavily on member financing than borrowed funds.

However, looking at the average performance ratios shows a

different result.

Table 3 illustrates the performance measures for the

largest 100 ag co-ops. These ratios are the average values

for all 100 co-ops. This provides a more accurate reflection

of the performance for all the co-ops and is not influenced

by the largest of the group. For example, the largest five coops represent 50 percent of total business volume.

Therefore, they will have more influence on the combined

values in table 1 and 2.

Debt-to-asset ratio rises

The debt-to-asset ratio illustrates what percentage of the

businesses assets are financed by debt. In 2011, the ratio

rose from 0.63 to 0.67. This shows that, on average, the

largest ag co-ops are financing their assets with higher

amounts of debt. Only the fruit/vegetable co-op sector had

lower overall debt financing.

The current ratio provides a comparison of how a

business’ most liquid assets can cover its current liabilities.

Between 2010 and 2011, the current ratio fell from 1.46 to

1.41. This would indicate that a majority of the co-ops were

less liquid in 2011 than in 2010. The dairy and

fruit/vegetable co-ops were the only sectors to have, on

average, a higher current ratio in 2011.

Long-term debt and equity are generally used to finance

Figure 4—Assets of Cooperatives by Function, 2011

Mixed (Grain & Supply)

47%

Supply

16%

Other

5%

Fruit & Vegetable

6%

Sugar

5%

Dairy

15%

Grain

6.0%

10 September/October 2012 / Rural Cooperatives

Figure 3—Sales Revenue of Cooperatives by Function, 2011

Mixed (Grain & Supply)

43%

Supply

16%

Fruit & Vegetable

4%

Sugar 3%

Dairy

23%

Grain

5%

Other 6%
Rural Cooperatives / September/October 2012 11

a business’ long-term assets. The longterm debt-to-equity ratio focuses on

this long-term financing. The ratio

jumped from 0.66 in 2010 to 0.73 in

2011. The higher long-term debt

financing was caused mostly by the

dairy, mixed grain/farm supply and

sugar co-op sectors.

More reliance on debt

Overall, the top 100 ag co-ops used

more debt in 2011. Some sectors —

such as grain, farm supply and the

“other” sector co-ops — used relatively

more short-term debt to finance

operations while dairy, mixed and sugar

co-ops relied more on long-term debt

for financing. Fruit/vegetable co-ops

were the only sector to lower the

amount of debt used.

The times-interest-earned ratio

shows how much a business can cover

its interest expense on a pre-tax basis.

The higher the ratio the better, as a

low value could indicate trouble paying

obligations. In 2011, the average value

dropped from 17.4 times to 13.1 times.

However, revenue before interest and

taxes of 13.1 times more than interest

expense is considered a strong position.

All co-op sectors averaged interest

coverage of over five times.

Efficiency ratios examine how well a

business uses its assets in its operations.

For example, fixed asset turnover

measures the ability to generate sales

from a business’ fixed assets. While

there is no standard ratio to compare,

looking at the change over time helps.

This ratio increased from 31.7 to 36.9.

As a general rule, those co-ops with

high amounts of fixed capital, such as

processing co-ops, will have a lower

fixed-asset-turnover ratio than some of

those that provide mostly marketing

services.

Profitability ratios

less key for co-ops

Profitability ratios are important for

any business, as an unprofitable

business will obviously soon be out of

business. However, co-ops are in a

unique position in that they try to

operate as close to cost as possible. For

Table 1

Top 100 Ag Co-ops, Combined Operating Statement

Item 2011 2010 Difference Change

............... $ billions ......................... Percent

Total sales 147.59 113.60 34.00 29.9%

Cost of goods sold 135.57 103.39 32.17 31.1%

Gross margins 12.03 10.20 1.82 17.9%

Service revenue 1.42 1.68 -0.26 -15.4%

Wages 5.05 4.75 0.30 6.2%

Depreciation 1.22 1.15 0.08 6.7%

Interest expense 0.58 0.48 0.10 20.2%

Other expenses 3.64 3.42 0.22 6.4%

Total expenses 10.50 9.81 0.69 7.0%

Net operating margins 2.95 2.08 0.87 42.1%

Patronage refunds received 0.18 0.19 -0.01 -7.2%

Non-operating

revenue/expenses 0.23 0.24 -0.01 -3.1%

Net margins before taxes 3.36 2.51 0.85 33.9%

Taxes 0.19 0.16 0.03 20.9%

Net margins 3.17 2.35 0.82 34.8%

Table 2

Top 100 Ag Co-ops, Combined Balance Sheet

Item 2011 2010 Difference Change

............... $ billions ......................... Percent

Current assets 32.56 23.84 8.72 36.6%

Investment in other co-ops 1.55 1.46 0.09 6.3%

Plant, property &equipment 10.69 9.76 0.93 9.6%

Other assets 4.67 4.83 -0.16 -3.3%

Total assets 49.47 39.89 9.59 24.0%

Current liabilites 23.65 17.20 6.45 37.5%

Long-term liabilities 10.02 8.19 1.83 22.4%

Total liabilities 33.67 25.39 8.28 32.6%

Allocated equity 11.06 10.83 0.23 2.1%

Retained earnings 4.74 3.66 1.08 29.4%

Total equity 15.80 14.49 1.31 9.0%

Total liabilities and equity 49.47 39.89 9.59 24.0%
12 September/October 2012 / Rural Cooperatives

example, gross margins will tend to be

lower than for a non-cooperative business

in the same field.

Between 2010 and 2011, the gross profit

margin decreased slightly, from 11 to 10

percent. Net operating margins held steady

at 2 percent during the two years. There

was not much change between the co-op

sectors for either of these two ratios.

Return on total assets measures business

earnings before interest and taxes against

its total net assets. The average return on

total assets for the top 100 ag co-ops also

remain steady at 8 percent. Farm supply

co-ops had the highest returns at 12

percent while dairy co-ops had the lowest

at 6 percent. All the other co-op sectors

were around 7 percent in 2011.

Return on members’ equity measures

net earnings after taxes against total equity.

This examines the returns to members. In

2011, the return on members’ equity was

17 percent. This is down slightly from

2010 when it was at 19 percent.

About the tables and figures

In table 5, the rank, name, revenue and

assets are given for the nation’s 100 largest

agricultural cooperatives. Information for

the largest cooperatives has been

segmented into seven function areas as

defined in table 4. The functional areas

(and the number of cooperatives in each

Mixed

29%

Supply

Other 10%

10%

Sugar

7%

Dairy

22% Grain

14%

Figure 5—Distribution of Cooperatives by Function, 2011

Fruit & Vegetable

10%

Table 3

Combined Average Ratios, Top 100 Ag Co-ps

Item 2011 2010

Current ratio 1.41 1.46

Debt to assets 0.67 0.63

Long-term debt-to-equity 0.73 0.66

Times interest earned 13.08 16.99

Fixed asset turnover 36.88 31.65

Gross profit margin 0.10 0.11

Net operating margin 0.02 0.02

Return on total assets 0.08 0.08

Return on member equity 0.17 0.19

Table 4

Criteria used for sorting co-ops by segment

Type of cooperative

Supply

Mixed

Grain

Dairy

Sugar

Fruit and Vegetable

Other

Cooperative defined

Derive at least 75% of their total revenue from farm supply sales.

Derive between 25% and 75% of total revenue from farm supply sales; remainder from marketing.

Derive at least 75% of total revenue from grain marketing.

Market members’ raw milk; some also manufacture products such as cheese and ice cream.

Refine sugar beets and cane into sugar; market sugar and related by-products.

Generally further process and market fruits or vegetables, rather than marketing raw products.

Includes co-ops that market livestock, rice, cotton and nuts.

continued on page 50
Rural Cooperatives / September/October 2012 13

2011

RANK

2010

RANK

Table 5—Top 100 Largest Agriculture Cooperatives

Note: Names withheld by request for the cooperatives ranked: 7, 40 and 78.

NAME

CHS Inc.,

Saint Paul, Minn.

Dairy Farmers of America,

Kansas City, Mo.

Land O'Lakes, Inc.,

Saint Paul, Minn.

GROWMARK Inc., Bloomington, Ill.

Ag Processing Inc.,

Omaha, Neb.

California Dairies Inc., Artesia, Calif.

Name withheld by request.

United Sugars Corp., Bloomington, Minn.

Northwest Dairy Association,

Seattle, Wash.

Associated Milk Producers Inc.,

New Ulm, Minn.

United Suppliers Inc.,

Eldora, Iowa

Plains Cotton Cooperative Assoc.,

Lubbock, Texas

Foremost Farms USA Cooperative,

Baraboo, Wis.

Ocean Spray Cranberries Inc.,

Lakeville-Midddleboro, Mass.

Prairie Farms Dairy Inc.,

Carlinville, Ill.

Dairylea Cooperative Inc.,

Syracuse, N.Y.

Countrymark Cooperative Holding

Corp., Indianapolis, Ind.

American Crystal Sugar Company,

Moorhead, Minn.

United Producers Inc.,

Columbus, Ohio

South Dakota Wheat Growers

Association, Aberdeen, S.D.

Mixed (Energy, Supply, Food, Grain)

Dairy

Mixed (Supply,

Dairy, Food)

Supply

Supply

Dairy

Sugar

Dairy

Dairy

Supply

Other (Cotton)

Dairy

Fruit & Vegetable

Dairy

Dairy

Supply

Sugar

Other (Livestock)

Mixed (Grain,

Supply)

2010

ASSETS

2011

ASSETS

2010

REVENUE

2011

REVENUE

TYPE

$ million

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

1

3

2

4

5

6

8

10

7

13

25

14

11

12

20

19

17

16

23

36,936

12,924

12,849

8,742

4,372

3,657

2,173

2,071

1,979

1,949

1,843

1,666

1,620

1,612

1,588

1,566

1,544

1,473

1,376

25,315

9,872

11,146

6,154

3,302

2,963

1,700

1,650

1,709

1,387

1,008

1,374

1,582

1,518

1,335

1,123

1,197

1,204

1,047

12,217

2,295

5,438

2,631

1,332

809

190

579

324

887

265

466

1,226

715

186

545

878

40

584

8,666

2,165

4,885

1,876

1,187

676

131

496

288

662

187

398

1,201

684

181

417

788

38

473
14 September/October 2012 / Rural Cooperatives

2011

RANK

2010

RANK

NAME

MFA Incorporated,

Columbia, Mo.

Maryland & Virginia Milk Producers

Co-op Assoc., Reston, Va.

MFA Oil Company,

Columbia, Mo.

Farmers Cooperative Co., Ames, Iowa

Producers Livestock Marketing

Assoc. Omaha, Neb.

Riceland Foods Inc., Stuttgart, Ark.

Co-Alliance, LLP, Avon, Ind.

Innovative Ag Services Co., Monticello, Iowa

Sunkist Growers Inc.,

Sherman Oaks, Calif.

Staple Cotton Cooperative Assoc.,

Greenwood, Miss.

Heartland Co-op,

W. Des Moines, Iowa

Agri-Mark Inc.,

Methuen, Mass.

Aurora Cooperative Elevator Co.,

Aurora, Neb.

Select Milk Producers Inc.,

Artesia, N.M.

Lone Star Milk Producers,

Windthorst, Texas

Snake River Sugar Co.,

Boise, Idaho

Michigan Milk Producers Assoc.,

Novi, Mich.

United Dairymen of Arizona,

Tempe, Ariz.

Blue Diamond Growers,

Sacramento, Calif.

Name withheld by request.

Supply

Dairy

Supply

Mixed (Grain,

Supply)

Other (Livestock)

Other (Rice)

Supply

Grain

Fruit & Vegetable

Other (Cotton)

Grain

Dairy

Mixed (Grain, Supply)

Dairy

Dairy

Sugar

Dairy

Dairy

Other (Nut)

2010

ASSETS

2011

ASSETS

2010

REVENUE

2011

REVENUE

TYPE

$ million

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

21

15

22

27

26

18

32

44

24

38

34

30

43

33

36

28

35

42

31

1,366

1,356

1,307

1,243

1,153

1,109

1,042

1,028

1,019

963

962

899

892

888

879

876

871

830

825

1,051

1,221

1,047

842

908

1,127

767

610

1,013

658

710

782

614

727

688

827

699

615

775

408

159

381

546

115

574

382

250

183

354

483

316

427

107

97

699

167

131

297

358

158

338

330

122

480

255

117

190

278

199

268

325

91

64

673

161

110

276

Table 5—Top 100 Largest Agriculture Cooperatives
Rural Cooperatives / September/October 2012 15

2011

RANK

2010

RANK

Table 5—Top 100 Largest Agriculture Cooperatives

NAME

Tennessee Farmers Cooperative,

La Vergne, Tenn.

Upstate Niagara Cooperative Inc.,

Buffalo, N.Y.

Cooperative Regions of Organic

Producer Pools (CROPP), La Farge, Wis.

Farmers Cooperative, Dorchester, Neb.

Trupointe Cooperative,

Piqua, Ohio

Cooperative Producers Inc., Hastings, Neb.

Central Valley Ag Cooperative, O’Neil, Neb.

National Grape Co-operative Assoc. Inc., Westfield, N.Y.

NEW Cooperative Inc.,

Fort Dodge, Iowa

United Farmers Cooperative,

York, Neb.

Citrus World Inc. (Florida Natural

Growers), Lake Wales, Fla.

Equity Cooperative Livestock Sales

Assoc., Baraboo, Wis.

Heritage Cooperative, Inc.,

W. Mansfield, Ohio

Sunrise Cooperative Inc.,

Fremont, Ohio

NFO Inc.,

Ames, Iowa

Watonwan Farm Service Co.,

Truman, Minn.

Michigan Sugar Co.,

Bay City, Mich.

North Central Farmers Elevator,

Ipswich, S. D.

Producers Rice Mill Inc.,

Stuttgart, Ark.

United Cooperative, Beaver Dam, Wis.

Supply

Dairy

Dairy

Mixed (Grain,

Supply)

Mixed (Grain,

Supply)

Grain

Mixed (Supply,

Grain)

Fruit & Vegetable

Grain

Grain

Fruit & Vegetable

Other (Livestock)

Grain

Mixed (Grain, Supply)

Dairy

Mixed (Grain, Supply)

Sugar

Mixed (Grain,

Supply)

Other (Rice)

Supply

2010

ASSETS

2011

ASSETS

2010

REVENUE

2011

REVENUE

TYPE

$ million

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

46

41

40

45

51

39

53

11

54

57

47

52

59

59

55

68

58

60

56

76

726

722

716

716

713

695

672

640

637

633

615

591

583

577

568

555

549

529

528

525

581

619

620

602

512

639

506

660

498

450

577

510

443

432

492

388

448

442

479

326

278

217

180

265

229

361

251

362

257

213

313

33

170

224

35

195

256

201

206

365

211

203

160

192

168

241

167

364

173

156

296

29

114

151

32

92

255

137

172

332
16 September/October 2012 / Rural Cooperatives

2011

RANK

2010

RANK

Table 5—Top 100 Largest Agriculture Cooperatives

NAME

Southern Minnesota Beet Sugar

Cooperative, Renville, Minn.

Pacific Coast Producers,

Lodi, Calif.

Landmark Services Cooperative,

Cottage Grove,Wis.

Tillamook County Creamery

Association, Tillamook, Ore.

First District Assoc.,

Litchfield, Minn.

Key Cooperative, Roland, Iowa

Farmers Grain Terminal Inc., Greenville, Miss.

Alabama Farmers Cooperative Inc., Decatur, Ala.

West Central Cooperative,

Ralston, Iowa

Premier Cooperative Inc.,

Champaign, Ill.

Carolinas Cotton Growers

Cooperative Inc., Garner, N.C.

Frenchman Valley Farmers

Cooperative Inc., Imperial, Neb.

Western Consolidated Cooperatives,

Holloway, Minn.

River Valley Cooperative,

Davenport, Iowa

Alliance Grain Co.

Gibson City, Ill.

Western Sugar Cooperative,

Denver, Colo.

Swiss Valley Farms Cooperative,

Davenport, Iowa

Name withheld by request.

Farmers Cooperative Society, Sioux

Center, Iowa

Five Star Cooperative, New Hampton, Iowa

Sugar

Fruit & Vegetable

Mixed (Supply,

Grain)

Dairy

Dairy

Mixed (Supply,

Grain)

Grain

Grain

Mixed (Grain,

Supply)

Grain

Other (Cotton)

Mixed (Supply, Grain)

Mixed (Grain, Supply)

Mixed (Grain, Supply)

Grain

Sugar

Dairy

Mixed (Grain,

Supply)

Mixed (Grain,

Supply)

2010

REVENUE

2011

ASSETS

2010

REVENUE

2011

REVENUE

TYPE

$ million

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

61

50

85

63

67

73

48

65

49

83

129

64

77

75

102

92

74

105

104

510

502

500

479

477

474

473

463

445

444

435

432

431

424

405

401

397

394

391

440

516

295

426

391

350

306

415

520

308

210

419

343

346

274

383

347

167

271

360

304

166

295

95

116

174

232

381

153

181

287

199

155

112

230

119

182

153

319

301

155

264

87

110

116

198

250

99

123

153

201

84

60

197

115

127

57
Rural Cooperatives / September/October 2012 17

2011

RANK

2010

RANK

Table 5—Top 100 Largest Agriculture Cooperatives

NAME

Frontier Cooperative Inc.,

Brainard, Neb.

New Vision Cooperative,

Brewster, Minn.

Harvest Land Co-op,

Richmond, Ind.

Horizon Resources,

Williston, N.D.

Calcot Ltd., Bakersfield, Calif.

Ray-Carroll County Grain Growers

Inc., Richmond, Mo.

Meadowland Farmers Cooperative,

Lamberton, Minn.

Gold-Eagle Cooperative,

Goldfield, Iowa

Tree Top Inc.,

Selah, Wash.

Clifford Farmers Co-op Elevator Co.,

Clifford, N.D.

Ag Valley Cooperative Non-Stock,

Edison, Neb.

Bongards Creameries,

Bongards, Minn.

Saint Albans Cooperative Creamery

Inc., St. Albans, Vt.

The Garden City Co-op Inc.,

Garden City, Kan.

Farmers Cooperative Elevator Co.,

Hanley Falls, Minn.

NORPAC Foods Inc.,

Stayton , Ore.

Sun-Maid Growers of California,

Kingsburg, Calif.

Minn-Dak Farmers Cooperative,

Whapeton, Minn.

Western Iowa Cooperative,

Hornick, Iowa

Producers Livestock Marketing

Assoc., North Salt Lake, Utah

Mixed (Grain,

Supply)

Mixed (Grain,

Supply)

Mixed (Supply,

Grain)

Mixed (Supply,

Grain)

Other (Cotton)

Grain

Mixed (Grain,

Supply)

Mixed

(Supply,Grain)

Fruit & Vegetable

Mixed (Grain,

Supply)

Grain

Dairy

Dairy

Mixed (Grain,

Supply)

Mixed (Grain,

Supply)

Fruit & Vegetable

Fruit & Vegetable

Sugar

Mixed (Grain,

Supply)

Other (Livestock)

2010

ASSETS

2011

ASSETS

2010

REVENUE

2011

REVENUE

TYPE

$ million

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

86

106

78

114

131

79

71

96

69

134

90

100

88

93

112

70

80

116

121

101

389

387

387

385

385

381

381

375

371

370

369

367

361

360

359

356

352

346

339

338

294

266

342

245

206

332

357

281

365

196

307

339

293

285

249

359

323

242

233

275

167

125

163

116

133

103

179

96

292

76

237

91

34

110

160

249

178

230

114

43

121

89

134

103

123

90

129

92

277

58

126

70

31

103

159

247

168

197

105

34
By Andrew Zenk

Editor’s note: Andrew Zenk is an

AgCountry Farm Credit Services

agribusiness consultant specializing in

succession and retirement planning.

bout 96 percent of U.S.

farms are run by

families, farmer

partnerships or

cooperatives, but as

many as 89 percent of farmers don’t

have a farm-transfer plan, according to

USDA. That’s a staggering number, and

producers such as Lee Watson, a corn,

bean and wheat farmer in Bellevue,

Ohio, are doing something about it.

Watson, who has worked with Ag

Credit ACA for 19 years, is

transitioning his farming operation to

his son, Dusten, with a detailed

succession plan.

“You hate to think about it, but you

need to plan,” Watson says. “So about

three years ago, we started passing

shares of our farming corporation to

Dusten.” The goal is to have at least

half of the shares transferred by the

time the elder Watson retires.

A succession plan provides an

important opportunity to carefully

protect a family’s hard-earned

investment. This requires planning,

18 September/October 2012 / Rural Cooperatives

Management Tip

Thoughtful succession planning keeps

families farming for generations

“You hate to think about it, but you need to plan [for the transfer of your estate],” says Lee

Watson, far left. He is in the process of transferring shares in the family farming corporation to

the family of his son, Dusten (right). Photo courtesy Farm Credit. Larry and Jenny Black (below,

right) hope that their children will someday take over the citrus operation. Although decades

away from retirement, they are doing estate planning now. Photo by Ron O’Connor, courtesy Farm

Credit

A
Rural Cooperatives / September/October 2012 19

open lines of communication and

discipline. Family operations that

incorporate the following five practices

into their planning set themselves up

for success for generations to come:

1. BUILD good habits through

education: solid business plans lead

to effective succession plans.

It is never too early to begin

planning. Producers should already be

managing and planning for short- and

mid-term operational and financial

goals, which lay the foundation for a

solid succession plan. There are many

resources that help young and

beginning producers network and learn

the business side of agriculture.

Even the most seasoned producers

can benefit from programs that address

current market situations. Building

good habits early will help to preserve

your operation for the next generation

and maximize the contributions of the

current and previous generations.

Larry and Jenny Black, fifthgeneration citrus growers and memberowners of Peace River Packing, a citrus

growing and fresh fruit

packing/marketing cooperative, are

decades away from retirement, but they

already appreciate the value of keeping

Peace River in the family. The family is

a member of Farm Credit of Central

Florida, and Peace River is a customermember of CoBank, another Farm

Credit entity. Two years ago, The

Blacks were honored with the Young

Farmer and Rancher of the Year Award

from the Florida Farm Bureau,

recognizing their successful farming

operation and Larry’s extensive

community and industry involvement.

“I’m in constant pursuit of

improving my farming operation and

moving in a positive direction,” Larry

says, “and I hope that my young

children will also become farmers

someday.”

2. PREPARE to be a multigenerational farm before your

transition is complete.

While many families have long

envisioned a time when they pass the

family operation down to their sons or

daughters, making sufficient income to

enable younger generations to join the

family business before one generation

retires is a challenge for many.

Jimmy Carter, a sixth-generation

farmer and owner of Southern Belle,

and his son Jake, are thriving today by

embracing diversification and

innovation as two generations of

Carters work together on the family’s

200 acres in Georgia. Jake started

bringing new ideas to the farm soon

after college. He started a “pick-yourown” strawberries, blueberries and

blackberries operation and opened the

farm for agri-tourism in 2005, a

business that has grown to host several

thousand visitors in a single weekend.

In addition to hosting a petting zoo,

bike track and corn cannon, the Carters

create an intricate corn maze each year.

3. MAKE open, frequent

communication a priority.

It is often hard for people to separate

their family from their business partner,

and communication within a family can

be difficult regardless of a business

relationship. Open communication

about this reality and agreeing upon a

workable communication strategy are

important in the planning process.

Paul Rovey, owner and operator of a

2,000-cow dairy farm in Glendale,

Ariz., says his farm is all about family.

He works the farm with his five

children and took over the farm from

his father when he graduated from

college in 1978. “I’ve grown the

operation from 200 cows to 2,000. I

owe this success to my family; I

wouldn’t be here without them.”

4. PLAN for the “what ifs” in

life and your operation.

You need a plan that provides a roadmap in the event of a death, disability,

departure and other possibilities life

may bring. Having a mutual agreement

on an action plan for these “what ifs” is

crucial to succession of the farm.

Generally, these are handled with an

estate plan for all involved and a

collective agreement that is consistent

with the personal estate plan. The

contents of these plans are unique to

every family, and consulting with a

professional is a must.

5. LOOK to the experts for guidance.

Jimmy Carter, with son Jake, operate their thriving Georgia farm as a multi-generational

family-farm enterprise. Photo courtesy Farm Credit

continued on page 51
Gearing Up

the Co-op Economy

C O - O P M O N T H S P E C I A L S E C T I O N

A rainbow that seems to arc around the height-adjuster gear of a vintage cultivator symbolizes the promise of a

new crop of farmer co-ops. The photo was taken by Laurie Childs at Harlequin Organics Farm near Dixon, Mont.

At the time, she was a driver for Western Montana Growers Cooperative and was farming part time.
Rural Cooperatives / September/October 2012 21

ontana is known for its

big, open spaces. “It is

the place we call home,

and we love it,” says

Karl Sutton, program

manager of the Mission Mountain Food

Enterprise Center, a division of Lake

County Community Development in

Ronan, Mont. “But it is a challenge to

link any one farm to consumers when

the distances are so great.”

Co-ownership in a cooperative is a

way to aggregate volume, increase

capabilities and share costs, Sutton

explains. “There is value added, not

only value in the sense of dollars, but

also in the value of the relationships

that connect us all.”

The value of cooperatives to their

communities and to each other is the

theme of a Northwest regional

conference to be held October 5-6 in

Seattle. The conference, “Cultivating

NW Co-ops: Celebrating Our Food

Community,” will take a sixstate/regional look at co-ops and their

impacts upon communities and food

systems.

Every year, October is recognized as

Cooperative Month and this year, as a

special observance, 2012 has been

designated the International Year of the

Cooperative by the United Nations.

“It's timely to consider how cooperative

business models contribute to our local

and regional food systems,” explains

Diane Gasaway, executive director of

the Northwest Cooperative Development Center (NWCDC), a co-host of

the conference. “The regional

conference in Seattle will highlight

cooperatives in many lines of business

that form the links between farm and

table. Cooperatives that market and

distribute, provide financing and

operate retail stores will be

participating.

“The conference itself is an example

of collaboration,” Gasaway continues.

The co-hosts are the cooperative

development centers based in

Washington, Alaska and Montana,

along with CDS Consulting Co-op.

The conference’s broad-based steering

committee and sponsors include many

successful cooperatives.

Montana schools reap

benefits of co-op

Karl Sutton says the Western

Montana Growers Cooperative is

benefiting schools with deliveries of

local produce. The cooperative was

established to increase the scale of

production of fresh produce in the area

through aggregation, marketing and

distribution, he explains.

In a unique collaboration with

Montana’s Lake County Development

“Cooperative Enterprises Build a Better World” is the theme of 2012

International Year of Cooperatives, as designated by the United Nations. With

October also being Cooperative Month, it provides twice as much reason for

celebrating the many benefits that producer- and user-owned cooperatives

confer to their members. As U.S. Agriculture Secretary Tom Vilsack notes in

his proclamation of Co-op Month (see page 2), in America alone, more than

130 million Americans are members of a cooperative. These range from coops with many thousands of members (a few of which are listed on the

Fortune 500), to tiny co-ops serving the needs of a dozen or fewer members.

All that matters is that people have a common need that can be best met

through group action.

On the following pages, some of the nation’s co-op development centers

provide a glimpse at new and emerging co-ops and co-op endeavors that are

helping still more people to help themselves with cooperative businesses.

Northwest co-ops forge new links for local foods

M

By Meredith Rafferty, Northwest Co-op Development Center

CO-OP MONTH
22 September/October 2012 / Rural Cooperatives

Center, the cooperative now has access

to a produce- and meat-processing

facility and is delivering local foods to

four schools and the University of

Montana campus through the USDA

Fresh Fruit and Vegetable program.

The cooperative had gross sales of

$750,000 in 2011.

The entire process from farm to

consumer is a value-added chain,

explains Sutton. Carrots from the field

need to be cleaned and transported.

When supplied to schools, they also

need to be cut, packaged and delivered

in refrigerated trucks.

Without the processing step

provided through the cooperative

agreement between Mission Mountain

Food Enterprise Center and Western

Montana Growers Cooperative, the

processing link to the schools would not

exist. “Schools in our region do not

have the equipment and labor to slice

carrots or peel and cube a winter

squash.” The processing step adds

value. “It brings healthy, fresh food to

the schools, retains dollars in our

communities and connects people to

place,” says Sutton.

Cooperation among

co-ops magnifies values

Other links in the value-added chain

are member-owned food co-ops that

have forged new relationships with local

farms to put local products on their

grocery shelves. An example is Ashland

Food Co-op, which for 40 years has

emphasized wholesome foods in its fullservice grocery co-op.

This 8,000 member co-op business

in southern Oregon is known for its

certified organic produce and products.

“Yes, our co-op is a business,” says

Annie Hoy, outreach manager for the

Steve Dagger and Jane Kile check on crops

produced for Westerrn Montana Growers

Cooperative. Kile, a founding member, was

the driving force behind the launch of the coop 10 years ago. She died three years ago,

but the co-op continues to market the crops

of its members. Photo by Marti de Alva.

The Ashland Food Co-op (AFC) serves 8,000 members in southern Oregon. Photo courtesy AFC
mall, mobile processing

units have proven to be

useful in helping smallscale poultry and

livestock producers

meet the needs of local markets in a

number of areas around the nation. But

in western Montana, a concerted effort

over several years to employ this

strategy has yet to gain economic

viability, due to a number of reasons.

Still, producers here hope that with

additional steps, they will be able to

“grow their businesses” and help meet

the rising public demand for homegrown poultry.

Co-op formed to

spearhead effort

The Montana Poultry Grower’s

Cooperative (MPGC) was incorporated

in 2006 to provide Montana’s smallscale poultry producers a way to

collaborate to meet their processing and

marketing needs. MPGC provides its

18 members with access to two types of

mobile poultry processing

infrastructure:

• Two small-scale pluckers and

scalders, and

• One state-licensed mobile processing

unit (MPU), comprised of a truck and

trailer.

In addition to the processing

equipment, the cooperative organizes

education workshops on heritage breeds

of poultry, pasture-raised poultry

production methods and safe, efficient

poultry processing practices.

The formation of MPGC followed

on the heels of strategic research and

legislative work conducted by the Grow

Montana Coalition, formed in 2004.

Grow Montana is a broad-based food

and agriculture policy coalition with a

common purpose of promoting

community economic development

policies that support sustainable

Montana-owned food production,

processing and distribution. The

ultimate goal is to improve access to

Montana-produced foods.

Rural Cooperatives / September/October 2012 23

co-op. “But it is a business based on our

values. The values in our mission

statement led us into the community in

support of local farmers and local

products.

“For our type of food cooperatives,”

Hoy continues, “there is always

outreach to members to support them

in their knowledge of healthy food and

healthy living. We realize our place in

the community and actively support

local farmers and local foods.

“We also work hand-in-hand with

other cooperatives in this area,” Hoy

adds, pointing to a close relationship

with the Rogue Federal Credit Union,

Grange Co-op, Medford Food Co-op

and Siskiyou Sustainable Cooperative in

the Rogue Valley of Oregon. These

relationships bring mutual support to

the Rogue Valley local food system.

Together with Ashland Food Co-op,

these cooperatives employ 600 people

with a total payroll and benefits of $25

million.

“One of the principles of

cooperatives is sharing information and

supporting each other,” says Hoy,

adding that these co-ops are working

together across business sectors. “This

is all about living our values as owners

and members of cooperatives.”

Co-ops are an important link in the

local food chain. According to a recent

study by the National Cooperative

Grocers Association, the average food

cooperative purchases from 157 local

farmers and food producers; locally

sourced products make up an average of

20 percent of co-op grocery sales. The

study, Healthy Foods, Healthy

Communities: The Social and Economic

Impacts of Food Co-ops, also found that

for every $1,000 shoppers spend at their

local food co-op, $1,604 in economic

activity is generated in their local

economy.

Cooperatives are making a difference

to local foods and food systems through

their values. For cooperatives

worldwide, it’s a difference worth

celebrating during International Year of

the Cooperative, and every year.

For more information about the

NWCDC, contact Meredith Rafferty at

(360) 943-4241, or visit:

www.NWCDC.coop. n

Montana’s small-scale poultry growers struggle

to find economic way to process, market birds

By Karl Sutton, Program Manager, Mission Mountain Food Enterprise Center, a division of Lake County Community Development

S

CO-OP MONTH

Demand is growing for pasture-raised poultry,

such as these turkeys being raised by a

member of the Montana Poultry Growers

Cooperative (MPGC), which was formed in

2006. Photos courtesy MPGC
24 September/October 2012 / Rural Cooperatives

Prior to 2004, Montana’s regulatory

statutes did not recognize mobile

processing units, nor did the statutes

place such units under any regulatory

agency. Grow Montana successfully

promoted the passage of HB-484 in

2004, which gives the Montana

Department of Livestock the authority

to inspect mobile processing units.

Between 2004 and 2006, a steering

committee comprised of small-scale

poultry producers began developing

MPGC’s business framework, leading to

the start of poultry processing using

small-scale equipment.

In 2006, Mission Mountain Food

Enterprise and Cooperative

Development Center (MMFEC) — a

division of Lake County Community

Development Corporation in Ronan,

Mont. — supported a professional

research report on appropriate mobile

processing technology for Montana’s

small-scale, pastured-poultry producers.

The resulting report — “Mobile

Processing: Appropriate Technology for

Pastured Poultry Producers” — was

written by University of Montana

graduate student Sarah Stokes. It made

use of case studies, surveys and

interviews to evaluate the status of

Montana’s pastured-poultry industry,

the market potential for pasture-raised

poultry in western Montana and the

processing and regulatory barriers that

were hindering producers from meeting

the market demand.

The poultry producers surveyed for

the report were classified as “microscale” producers, meaning they raise

fewer than 1,000 birds per year. These

producers had no legal method of

accessing potential markets because

Montana did not recognize the Federal

1,000 Bird Limit Exemption that allows

farmers to slaughter and market fewer

than 1,000 birds directly from the farm

to the consumer. Many of these farmers

were selling on-farm, live birds to

sidestep Montana’s laws.

Despite a clear demand for pastureraised poultry, the state’s lack of

recognition of the 1,000-bird

exemption and lack of state-inspected

processing facilities presented

significant barriers to producers’ ability

to access farmer markets and retail

grocery stores.

Market parameters identified

Based on evaluations of MPUs in

New York, Washington and Kentucky,

the university report surmised that

MPUs in Montana would only be

feasible if there was an adequate base of

producers with operations scaled to

match processing unit capacities and

that were located within one to two

hours of the processing unit’s home

base.

The university researcher offered

three recommendations to help

Montana’s small-scale poultry industry

move forward:

1. Amend Montana rules, or pass

new legislation, to allow a 1,000-bird

exemption for on-farm poultry

slaughter and direct sales to customers;

2. Obtain more small-scale

processing equipment that could be

located closer to cooperative

members; and

3. Develop a state-inspected MPU

for poultry.

On the heels of this research, MPGC

members — with support from

MMFEC, the Alternative Energy

Resources Organization, and Farms for

Families — began developing

Montana’s first (and currently only)

MPU. MPGC’s pioneering work

involved designing and building the

MPU and developing a user/processing

manual that enabled producers to meet

regulatory requirements of Hazard

Analysis Critical Control Points

(HACCP) and Standard Sanitary

Operating Procedures (SSOP). It also

delivered a producer training program

that prepared MPGC members to

process high-quality, safe poultry.

By the spring of 2009, the state’s first

MPU had been inspected and licensed

by the Montana Department of

Livestock, in accordance with the

federal 20,000-bird limit exemption. In

accordance with the 20,000 bird limit

A mobile poultry processing unit is available to co-op members, but more volume will be needed

to cover all operation costs.
Rural Cooperatives / September/October 2012 25

exemption, the slaughter facility is

regularly inspected, although an

inspector does not need to be onsite at

the time of processing. This exemption

allows farmers to sell at farmers markets

and into wholesale markets.

More volume needed

Under-utilization of the MPU has

been a critical concern for MPGC.

Without sufficient revenue generated

from leasing the MPU at the price of

$1.75 per bird processed, the

cooperative has struggled to cover the

costs of insurance and maintenance of

the infrastructure.

Last January, MPGC members were

surveyed to evaluate how effective the

MPU was in helping them to grow

their businesses. According to the final

report, 14 of 18 MPGC producers raise

meat birds, with an average flock size of

175 birds. Only one producer raises

more than 1,000 birds. Ten out of 14

producers are using the small-scale

plucking and scalding equipment while

only four use the licensed MPU. Of the

four producers using the MPU, only

two are marketing their birds to

commercial markets while the other

two are marketing direct to individual

customers.

The 2012 report surmises that

MPGC producers have not grown their

operations due to:

• Continued regulatory challenges (i.e.,

Montana still does not recognize the

federal 1,000-bird exemption, so

MPU producers must obtain licenses

from both the Montana Department

of Livestock and the Montana

Department of Public Health and

Human Services);

• The distance they must travel to

retrieve the MPU are too great for

some producers;

• High feed costs; and

• Lack of technical support (especially

for breed selection for pasture-poultry

and efficient range production

techniques).

These findings corroborate Stokes’

2006 report.

Montana needs a two-tiered system

that meets the needs of producers who

raise fewer than 1,000 birds. The 2012

report surmises that if Montana

recognized the federal 1,000-bird

exemption, micro-level producers could

then legally sell on their farms and

grow their businesses.

Only for producers close to reaching

the threshold of 1,000 birds will the

MPU become an appropriate resource.

At that point, regionally located, stateinspected facilities that reduce the drive

time for producers could enable

Montana poultry growers to capture the

markets for pastured poultry. n

he recent birth of the

Colorado Health

Insurance Cooperative

includes a number of

very important lessons

for future health insurance co-op

developers, and perhaps for those

working on other types of co-op

development projects. Our experience

with the project suggests that the

following attributes among the core

initial working group are critical:

• A passion for co-ops (of course!);

• An abiding commitment to rural

health care;

• Comprehensive health insurance and

health care experience and

knowledge;

• Strong connections in the health care

field built on lasting trust.

In a nutshell, all you have to do is

find some really smart, passionate folks

who know everybody and who are

willing to work for free!

New law opens door

for more health co-ops

The federal Patient Protection and

Affordable Care Act (ACA) was passed

in 2010 after much debate. ACA

authorizes the establishment of

nonprofit, private Consumer Operated

and Oriented Plans (CO-OPs) for

health insurance under a start-up loan

program admin-istered by the U.S.

Department of Health and Human

Services (HHS).

In the spring of 2011, at an informational meeting sponsored by the health

care community in Denver regarding

CO-OPs, the Rocky Mountain Farmers

Union Foundation (RMFU) sensed an

exciting opportunity to make a positive

difference for health care in the rural

Rocky Mountain West. This was a

challenging problem we had been

working on for decades. RMFU has

been advocating for family farmers and

ranchers and their communities for

more than 100 years and is a strong

believer in cooperatives.

Discussions were held among RMFU

staff with extensive experience in rural

health care, social issues and

cooperative development. These talks

focused on one issue in particular: Can

a CO-OP realistically serve only rural

health care needs in Colorado and

Wyoming?

Those discussions led RMFU to

invite a number of potential partners to

the table, with such skills as: expertise

in Colorado rural health issues; thirdColorado launches health insurance co-op

By Bill Stevenson, Director, Rocky Mountain Farmers Union, Cooperative Development Center

T

CO-OP MONTH
26 September/October 2012 / Rural Cooperatives

party health insurance administrator

capabilities, health foundation expertise

and funding, and business savvy in

cooperative formation and operations.

Working group launched

A working group was formed in the

fall of 2011, with a chairperson and at

least some formality to its proceedings.

This group considered adding technical

expertise and identified the next steps

necessary to build the health insurance

co-op, including involvement of other

institutions and funding sources.

In the finest cooperative

development tradition, a decision was

made that a feasibility study with the

seeds for a business plan was needed.

This plan would need to determine if

this co-op idea could work; if so, all the

“how, what, who and when” questions

would have to be addressed.

We were very fortunate in that

members of our working group had

deep connections in the health care

industry, which led us to other individuals with expertise and even more

connections who offered their help.

This led to an important gathering last

February of “interested persons” with a

variety of specialties who wanted to be

kept informed and involved.

The resources the working group

was gathering were truly impressive by

any measure within the Colorado health

insurance, health care and rural

advocacy communities.

The cost of the feasibility study

(which included the costs for actuary

and statistical knowledge, as well as an

analysis of provider networks, claims

processes and general administration

and legal issues) was estimated at more

than $100,000. A budget was

established by interviewing four actuary

candidates and reviewing their cost

estimates, as well as securing cost

estimates for statistical work and the

services of a third-party administrator.

Fundraising then began, ultimately

yielding generous commitments from

the Colorado Health Foundation and

USDA to sponsor the feasibility study.

Preparing for HHS

loan application

With the feasibility study underway,

the working group began to plan for

the co-op’s HHS loan application,

which was due in April, 2012. But what

would the feasibility study reveal?

The results finally arrived, with the

important revelation that the health

insurance co-op was viable and could be

rural in focus. But the study also said a

co-op must include urban, as well as

rural, residents to ensure the number of

members necessary for the company to

survive and thrive.

By March the time had come for the

health insurance co-op to incorporate as

the Colorado Health Insurance

Cooperative Inc., a Colorado nonprofit

cooperative, with RMFU as the co-op’s

sole member (until it actually begins

issuing policies). Five directors were

selected for the board: a former rural

healthcare expert in government, a

prominent cooperative lawyer and

developer, a former Colorado state

insurance commissioner and state

auditor, a former health insurance

company CEO, and a former rural

healthcare administrator.

The co-op also needed to develop

working relationships with Colorado’s

Division of Insurance. In early April,

the co-op applied for about $69 million

in start-up and solvency loans from

HHS. The voluminous application

effort was led by the co-op’s interim,

third-party administrator and actuary.

The need for technical savvy at this

point was paramount.

As we waited for the HHS decisionmaking process to unfold, the co-op

Board members of the Colorado Health Insurance Cooperative hope their experience launching their new co-op will be helpful to others considering

a similar cooperative. Photo courtesy Rocky Mountain Farmers Union
he Iowa Alliance for

Cooperative Business

Development (IACBD)

and the Agricultural

Entrepreneurship

Initiative (AgEI) have developed an

experience-based learning program for

Iowa State University students, giving

them the opportunity to work with

Iowa’s rural cooperatives.

The program, funded through a

Rural Cooperative Development Grant

from USDA Rural Development, is

designed to team students and faculty

with cooperatives to develop new

businesses in rural areas.

Cooperatives are major drivers of

economic development in rural areas

and are positioned to help

entrepreneurs. This program combines

the energy of university students, the

technical knowledge of faculty and the

business resources of established

cooperatives to create new businesses.

Rural Cooperatives / September/October 2012 27

began to plan for the start-up, with a

highly qualified interim CEO hired

(based on some strong

recommendations) who performed

much of the detail work at no charge.

Interview preparation pays off

In mid-May, the first hurdle was

cleared when the co-op leaders flew to

Washington, D.C., to be interviewed

about the loan application at the offices

of business consultant Deloitte, HHS’s

counselor in the selection process. All

five directors participated, along with

the co-op’s interim third-party

administrator, actuary and CEO. The

interview went extremely well, thanks

to the group’s careful listening to the

expectations that Deloitte laid out for

them, as well as thorough preparation

(both in Denver and upon their arrival

in Washington the day before the

interview). The expertise of the co-op’s

interim third-party administrator,

actuary and CEO also proved

invaluable during the interview.

By mid-June we had achieved

success. HHS notified the co-op board

president that the co-op had been

accepted for ACA’s CO-OP loan

program, subject to successful

“negotiation” of loan particulars. (The

basic loan terms — such as interest

rates and repayment requirements —

were non-negotiable, while others, such

as business plan milestones, needed

further discussion or clarification.)

Just a short time later, the U.S.

Supreme Court ruled in favor of ACA’s

constitutionality, and in late July the coop’s loan documents were signed, the

transaction closed and the award was

made public.

Permanent staff hired

The board expanded to seven in

May, with the addition of a rural

hospital administrator and the

administrator of a rural, Federally

Qualified Health Center. By midAugust, the board and the interim CEO

(now being paid) hired a human

resources consultant, a project manager,

a legal counsel, a regulatory-compliance

specialist, an accounting firm and a

public relations firm. All were hired as

independent contractors.

Interviews were also begun for a fulltime CEO (six candidates passed the

initial review and a CEO was hired in

September). Job descriptions were

drafted and posted for the co-op’s chief

financial officer, regulatory compliance

officer and director of consumer

services (all considered senior staff

positions).

Meanwhile, RMFU was planning to

hire at least two outreach/education

staff members, to assist in the essential

community organizing, grassroots work

necessary to promote and develop the

co-op throughout Colorado.

The co-op will begin marketing

policies in the fall of 2013, with the first

effective date Jan. 1, 2014.

Hard work, but co-op

has huge potential

This process shows that there is an

incredible amount of work to do when

starting an insurance company. But with

health care such a critical issue for so

many rural Americans, it is an effort

that has to be made in more places.

To reiterate the themes mentioned at

the start of this article, the co-op’s

success has depended on enlisting the

help of amazing people with a unique

variety of interests, all of whom have a

passion for helping people through

cooperative businesses. They also all

have an abiding commitment to

improving rural health care, and

experience and knowledge of health

insurance and health care issues. They

also had strong connections built on

lasting trust.

In short, they are really smart,

passionate people who know everybody

in the health care field and are willing

to work for free!

With that as a base, those who

dream of dramatically changing the

health insurance world for the better

really can succeed. n

Iowa State students team with co-ops to develop new businesses

By Carly Cummings, Program Assistant, Iowa State University

T

CO-OP MONTH
28 September/October 2012 / Rural Cooperatives

Pushing business concepts

to the front burner

“The thought behind our program is

that managers at rural cooperatives have

business development projects that

often are difficult to move off the back

burner,” says Kevin Kimle, director of

the AgEI at Iowa State. “Some of those

projects can be moved forward by

students and faculty, teamed with

managers from cooperatives.”

The program started in 2011 with

three interns working at Farmers

Cooperative Co. in Afton, Iowa. The

students conducted market research and

financial analysis and reviewed

engineering processes for a new feed

business the cooperative wanted to

develop.

“With the high price of corn and

alfalfa, farmers are looking for

alternative sources of energy and fiber

in their feed rations,” says Randy Pettit,

Farmers Cooperative feed manager.

“Developing a product at a lower cost is

what the market is demanding.”

The three interns, all students in the

College of Agriculture and Life

Sciences at Iowa State, completed a

plan for the new business.

In 2012, the AgEI and the IACBD

placed another three interns with

Heartland Cooperative in central Iowa.

Their objective was to develop a

logistics model and business plan for

Heartland’s fertilizer business. Marc

Melhus, Heartland vice president of

operations, served as the project lead.

“The purpose of this project was to

compare and determine the best way for

Heartland to provide custom fertilizer

application services to our customers by

looking at the two distinct models we

currently employ,” explains Melhus.

“The students were challenged with

exploring the economics of each model

and to consider the other factors

involved in consolidating the two

models into one.”

Conducting market research

After being briefed on the company’s

goals and objectives for this project, the

students conducted market research and

financial analysis and made location

visits to familiarize themselves with the

fertilizer market and Heartland’s

business structure.

Throughout the summer, the

students collaborated with Iowa State

faculty members Bobby Martens and

Georgeanne Artz to evaluate the

efficiencies of alternative facility

strategies. Many factors were built into

the analysis, including travel distances,

building maintenance, fertilizer prices

and custom application costs. The

interns were challenged with evaluating

each of these factors and combining

them to determine the optimal business

model for Heartland’s fertilizer

business.

“The students gave us the jump-start

the organization needed to pursue the

best decision for further developing our

fertilizer business,” says Melhus. “It was

also a great way for students to

participate in a high-impact business

development project at a cooperative.”

The program’s continuing goal is to

partner with Iowa cooperatives and

generate rural economic impact. The

public/private partnership model

creates valuable opportunities for

participating cooperatives as well as the

students and faculty from Iowa State.

For more information on this

program, contact Stacey Noe, program

coordinator, at 515-294-4945, or:

snoe@iastate.edu.

The IACBD is a USDA Rural

Cooperative Development Center

located at Iowa State that focuses on

applied research and agricultural

cooperative development. The AgEI

provides training and guidance to

students for the development of highgrowth agricultural businesses. n

These Iowa State University students have gained real-world experience in what it takes to run a

successful cooperative. Touring a Farmers Cooperative Co. warehouse are student interns (from

left): Nicole Jennett, Erica Lundy and Casey Clemens. Photo by Ronda Driskill
Rural Cooperatives / September/October 2012 29

Editor’s note: Keeton is a Kentucky-based

writer who produced this article on behalf of

the Kentucky Center for Agriculture and

Rural Development.

entral Kentucky

Growers Association

(CKGA) began in 1998

as a vegetable marketing cooperative when a

small group of growers decided to

diversify away from tobacco, which had

been a mainstay on farms in the area.

The new focus of their efforts was on

horticulture production.

“I began growing pumpkins for the

co-op in ‘98 or ’99, I believe,” says

Kevan Evans, owner of Evans Orchard.

“I had already begun transitioning away

from tobacco into vegetable and fruit

production, selling at farmers markets

and from a small farm market. Becoming a member of the co-op gave me

another marketing option to expand my

horticulture production before we really

started to grow our agri-tourism

business: Evans Orchard.”

The co-op became a key marketing

outlet for current CKGA president,

Zeldon Angel. He began producing

horticulture products as he saw the

change looming for Kentucky’s tobacco

industry. As a co-op member, Angel

has worked closely with the

management to help identify new

marketing opportunities for the co-op.

“Over the years, we have tried

almost every marketing approach that

exists,” says Angel. “Some have worked,

and others haven’t. But we have always

been open to hear new ideas.”

Currently CKGA is working with

Castellini and Cabbage Inc. to market

Central Kentucky Growers helps members

transition from tobacco to vegetables

By Kara Keeton

C

CO-OP MONTH

“Between the determination and willingness to sacrifice on our [members’] part, and KCARD’s

dedication to work with us, we were able to pull out of the red,” says Zeldon Angel, president of

the Central Kentucky Growers Association (CKGA). Photo courtesy CKGA
30 September/October 2012 / Rural Cooperatives

co-op products. The primary crops for

CKGA are cucumbers and peppers —

which can be packaged across the

processing line at its facility — but it

has also had success with green beans

and producing cabbage under contract

for Cabbage Inc., a fresh produce

company based in Sheffield Lake, Ohio.

“In the early years our members had

to step up financially to get the co-op

going,” explains Angel. “Over the years,

we have seen that level of financial

commitment from our members and

the community. It has been that

determination that kept us going even

when other co-ops were closing the

doors.”

Seed money helps

co-op expand

In 2001, CKGA received a boost

when it was awarded nearly $500,000 in

Kentucky Agricultural Development

Funds for the purchase of equipment

and market development. These funds

allowed CKGA to work with more

growers and buyers.

Soon, the growing co-op was in need

of another expansion. In 2003, the

group received an additional $300,000

to update a production line, expand to

year-round marketing, and to meet the

needs of new and existing growers.

Evans admits that the funds from the

Ag Development Board (ADB) were

critical to the early development and

growth of CKGA. But serving as

current secretary and one-time

president of the co-op, Evans also

recognizes that there were challenges

the group faced in those early years

with inexperienced members,

production problems, retaining buyers

and general management issues that

needed more than just money to fix.

“One of our biggest issues was the

tobacco mentality,” said Angel. “The

thought was that if we grow it, there is

a market for it; but it is not that way in

the vegetable business.”

Evans and Angel both point to

CKGA’s involvement with the Kentucky

Center for Agriculture and Rural

Development (KCARD) as the key

factor to helping the organization

overcome the challenges along the way.

“In 2005, we were struggling with

several issues at the co-op and went

back to the Ag Development Board for

funding assistance; we received about

$121,000 as a forgivable loan to

stabilize management and purchase

necessary equipment,” explained Angel.

“Yet, what made the difference with this

round of funding was that we began

working with Larry Snell [KCARD

executive director] and KCARD to get

a handle on financials.”

Angel explains that working with

KCARD helped the CKGA board of

directors realize what needed to done

each year to make accurate projections

about how to run the business. They

followed KCARDs recommendation

and brought in an outside company in

2006 to run the business for a year to

give them ideas on management.

“When we began working with

KCARD, we were in the red. But Larry

Snell and the staff just kept working

with us on what we needed to do on the

financial side to get a better handle on

things and to make accurate projections

so we could pull enough out to balance

the budget,” says Angel. “Between the

determination and willingness to

sacrifice on our members’ part and

KCARD’s dedication to work with us,

we were able to pull out of the red.”

Strong working

relationship with KCARD

Since that experience, the co-op has

continued to work with KCARD

periodically to review finances, polices

and general management. Recently, the

group had to turn to KCARD once

again as it met with the Agriculture

Development Board to review the terms

of the forgivable loan.

“If we hadn’t worked with KCARD

during this evaluation of our agreement

with ADB, then the deal probably

wouldn’t have gotten done,” Angel says.

“KCARD’s knowledge of the industry

and the fact that they were working

with us to address the terms of the

agreement brought to the table a level

of credibility that helped us to achieve a

workable agreement.”

“The major strength of CKGA is the

leadership and unwavering commitment

of its board of directors over the years,”

says Snell. “They are determined that

the cooperative will succeed and

provide a reliable market for

commercial vegetable growers in

Central Kentucky.”

Angel realizes there will continue to

be challenges for CKGA. This year the

major challenge has been the weather.

Dry, hot conditions have made it

difficult for the group to produce

quality products to take to the market.

But he believes that the commitment to

the CKGA remains.

“As much hard work as we have all

put into the co-op, I hope we are still

going strong in five to ten years,” says

Angel. “We want to make it selfsustaining and keep it going. It will

work, but we just need to find a few

more growers who are willing to make

the sacrifices to produce a quality

product for the market.” n

Butch Case is vice president and a long-time

member of CKGA, which was launched in

1998 to help tobacco growers switch to

vegetable and fruit crops.
Rural Cooperatives / September/October 2012 31

Editor’s note: This is a condensed and

slightly adapted version of an article by

Shlomit Auciello that was originally

published in the Aug. 16, 2012 edition of

The Lincoln County News. It is

reprinted here with permission.

The Cooperative Development Institute

(CDI) (www.cdi.coop) is the Northeast’s

center for cooperative business education,

training and technical assistance. It has

been serving New England and New York

since 1995. This year, CDI formed a

partnership with the Genesis Fund to bring

more resident-owned cooperative

development to the state of Maine.

“We look forward to helping more

resident-owners build communities and take

control of their circumstances,” says Noemi

Giszpenc, CDI executive director. “When

co-ops pay attention to their members’ needs

and leverage their collective resources, they

can become the seedbed of new cooperative

activities that benefit their owners and the

community.”

he story of Medomak Mobile Home

Cooperative illustrates

that when residents

gain control over their

shared land, they are

able to mobilize greater

trust and care, which can translate into

such tangible benefits as affordable local

food and better maintained homes and

grounds. This in turn makes the park a

desirable place to live, ensuring lower

turnover and quicker filling of vacancies

— which benefits the co-op’s bottom

line.

When the board of the 32-unit

Medomak Mobile Home Cooperative

in Waldoboro, Maine, heard a

suggestion last summer to create a

community garden, treasurer Linda

Norwood took action.

Norwood, who has lived at the park

since 1995, went next door to the

Hannaford supermarket to research the

cost of a salad, pricing the lettuce,

tomatoes, cucumbers and onions. When

she compared the result against what it

would cost to grow the vegetables at

home, she asked the board for support.

With the help of the Genesis Fund,

which had supported the park’s

conversion to a co-op in 2006, and

contributions from businesses and

individuals, co-op members built six

raised plant beds. They filled them with

soil, planted seeds and seedlings, and

learned how to use organic methods.

The project was just one of many

ways the co-op works to build a closeknit community. Last year, members

worked side-by-side with volunteers on

repair projects to improve the safety of

individual homes. In addition, residents

host work days approximately once a

month to maintain the grounds, clear

abandoned home sites and make

improvements to common facilities.

“There’s tremendous community

building,” says Liza Fleming-Ives,

associate director of the Genesis

Community Loan Fund. At the end of a

work day, residents gather for a

community meal.

“People live busy lives,” FlemingIves says. “Many in the park work

multiple jobs, all kinds of shifts, have

young children or are elderly.” In spite

of the efforts residents undergo just to

make ends meet and take care of basic

responsibilities, they work hard to meet

the challenges of community living, she

says.

Norwood says the formation of a

cooperative has meant that residents

take a greater interest in the well-being

of their neighbors.

“Since the co-op has taken over,

there’s been a big change,” says John

T

CO-OP MONTH

Public garden latest addition at resident-owned community in Maine

The community garden at the Medomak

Mobile Home Cooperative has helped improve

the diets of members with more fresh

produce.
ne of the major limiting

factors on growth of

the nation’s organic

dairy and livestock

industries is the

availability of quality organic feeds at an

affordable price. That’s why a new coop of dairy farmers in northern Indiana

is pursuing the purchase of an organic

feed mill to help ensure the future

viability of their farms and

communities.

Co-op seen as vital

for community

The Indiana Cooperative

Development Center (ICDC) was

contacted in early 2011 by Wisconsinbased Organic Valley — the nation’s

largest organic cooperative — and asked

to assist a group of 80 organic milk

producers in northern Indiana form a

cooperative to purchase a local organic

feed mill in Wolcottville, Ind. The

farmers are also members of Organic

Valley.

Most of these producers have small

organic farms with fewer than 50 dairy

cows. The majority of the milk

producers belong to the local Amish

32 September/October 2012 / Rural Cooperatives

Flaherty, a veteran who serves as

cooperative president and has lived at

Medomak since 1996.

Gardens help residents

help each other

“Most of the people in this park are

on low- and fixed-incomes,” Norwood

says. “Many are on food stamps

(SNAP). I wondered how they would

eat if prices kept going up.”

She sited the garden on land that is

too wet for mobile homes, and sought

donations of money, lumber and plants.

She used the cash to buy tomato cages,

sticks, twine, chicken wire and

marigolds.

“Everything else has been donated,

and happily donated,” she says.

Seedlings came from a local garden

center, along with more advice and

support. A signboard, next to the plant

beds, lists 17 sponsors who helped make

the gardens a reality.

“They grew like you couldn’t

believe,” Flaherty says. Next year the

community hopes to have 18 raised

beds. He says he plans to have two beds

next year, so that he can grow food to

give away to his neighbors.

“I’m happy just sitting on a stool

with a jar of mayonnaise and a loaf of

bread in the cucumber patch,” says

Norwood, who is now head of the

Garden Committee.

When Flaherty was hospitalized,

early in the summer, Norwood and

other neighbors kept an eye on his

house and watered his garden. For his

part, Flaherty brings a daily basket of

cherry tomatoes to a couple who do not

have a garden. Norwood says that is

representative of changes in the

community since residents took over

ownership.

“Here, we care about everybody.

Everybody owns this now. People take

care of what they own. That’s what this

is all about,” Flaherty said. n

Co-op members use this sign by the community garden to thank their sponsors. Seen here are

Linda Norwood, co-op treasurer, and John Flaherty, co-op president. Photos by Shlomit Auciello

Feed mill seen as key to success of Amish dairy farms

By Debbie Trocha, Executive Director, Indiana Cooperative Development Center

O

CO-OP MONTH
Rural Cooperatives / September/October 2012 33

community, a group which usually

prefers to avoid public exposure.

Their leaders are mostly elders of

the community (although there are also

some younger producers in their 30s

rising to leadership positions) and they

typically do business on a handshake

agreement, which can be problematic in

today’s business world.

Social responsibility is more than a

buzz word for the Amish — it’s a way of

life for them. They are thus developing

the cooperative for “the community” —

not only for their community, but for

their neighbors as well. They look at

the organic model as the best way to

keep their small farms profitable and

sustainable.

An initial two-day meeting of all

interested parties was held in late

March 2011. A five-member executive

committee was formed, and funds were

committed for initial expenses for the

formation of a cooperative.

Future linked to

reliable feed supply

These milk producers were

concerned about their ability to obtain a

reliable supply of high-quality organic

livestock feed and supplies — with a

degree of price stability — for

themselves and for future generations.

The Wolcottville Organic Feed Mill is

a major source of

organic feed for

their dairy herds.

The continued

operation of the

mill is thus

viewed as key to

the expansion of

the area’s organic dairy/livestock

industry and the profitability of

producers.

Following the initial meeting, ICDC

staff worked with the co-op organizing

committee to explore the possibility of

purchasing the Wolcottville Organic

Feed Mill. ICDC staff helped the

steering committee review and

understand the financial statements of

the existing mill operation and to

identify a firm that could provide a fair

appraisal of the mill’s value.

An attorney experienced in co-op law

was identified, and ICDC staff assisted

in the development of the co-op’s

articles of incorporation and bylaws.

By 2012, the steering committee was

meeting every two weeks to complete

the co-op organizational documents. In

April 2012, the cooperative — the

W.O.L.F. (Wolcottville Organic

Livestock Feed) Cooperative — was

registered with the Indiana Secretary of

State, and its first board was elected.

Because a number of producers in

Michigan are interested in becoming

members of the cooperative,

incorporation in Michigan is also being

considered.

Equity drive meets goal

Membership documents were then

developed and the equity drive began in

mid-summer. It took only a few weeks

for the co-op to reach more than 50

percent of its goal of raising $250,000.

The directors have established a goal of

having a 50-percent equity stake prior

to the purchase of the mill.

ICDC provided training in July for

the board to ensure that members

understood their fiduciary

responsibilities to the co-op.

As of this writing, in early

September, the co-op expects to

purchase the feed mill by the first of the

year, helping to ensure the future

viability of organic dairy production

among this community of farmers.

“Our producer-members knew they

wanted to form a cooperative from the

beginning.,” says Dan Mosgaller,

regional coordinator for Organic Valley.

“Without the assistance from the

Indiana Cooperative Development

Center, W.O.L.F. Cooperative would

not be at this stage of development.” n

Amish dairy farmers in Indiana have formed a co-op to pursue the purchase of an organic feed mill. Most Amish farmers, such as this one in

Pennsylvania, rely on horses or mules to work their crops. USDA photo by Dan Campbell
34 September/October 2012 / Rural Cooperatives

he loss of a grocery

store in a rural

community can be a

devastating blow,

especially when it is the

only, or at least major, source of local

groceries. Not only do people then have

to travel farther and expend more time

and money to get their groceries, but it

can also be a serious blow to

community pride and make it harder to

attract new residents and businesses.

When the only grocery store in

Elwood, Neb., closed last January,

community leaders quickly responded,

organizing a community meeting the

next month to consider opening a

cooperatively owned grocery store. The

meeting attracted more than 100

people, almost all of whom felt that a

grocery store was vital to the future of

the community.

Following the meeting, community

leaders developed and distributed a

survey to gauge interest in opening a

co-op grocery store, which revealed

widespread support for the concept. A

committed, hard-working steering

committee was then formed to pursue

the project.

This steering committee formed subcommittees that focused on facilities,

business and finance issues, and

incorporation options. Expert advice

was sought from a local attorney,

insurance agents, former store owners,

neighboring stores and managers of

grain co-ops in nearby towns (one grain

co-op also owned a grocery store). Ideas

were also sought from cooperative

accountants, area economic developers

and grocery suppliers.

A financial plan was developed for

remodeling the store, and more

community-wide meetings have been

held, showing that there continues to be

widespread support for opening a new

grocery store.

The cooperative was incorporated in

May as the Elwood Hometown

Cooperative Market. The board of

directors is conducting a membership

drive. If the drive is successful, the

former store location will be purchased

and remodeled, with operations

anticipated to begin before the end of

year.

The Nebraska Cooperative

Development Center (NCDC)

provided the outline for this process, a

spreadsheet for the financials, referrals

for attorneys and guidance for each

committee. It has been working hand in

hand with the steering committee each

step of the way.

Farmers’ Market Association

The Farmers’ Market Association

was proposed in 2010 as a way of

creating a network that would connect

Nebraska farmers markets and

managers. The need for such an

organization was underscored by a

doubling in the number of farmers

markets in Nebraska during the past 10

years.

NCDC hosted an

exploratory meeting in

central Nebraska, inviting

all farmers’ market

managers from across the

state. The meeting

explored the potential of a

statewide association and

the kinds of programs and

services an association

could provide its members.

These services could

include: consumer

education; group

marketing opportunities;

assistance with funding

(such as grants and

fundraising); market manager training;

statewide networking; and how to

accept SNAP (food stamp) benefits, and

debit and credit cards for payment at

farmers markets.

A steering committee was formed

and has continued to meet regularly to

plan an organizational structure that

could be a model for a future

association. The committee successfully

applied for a Specialty Crop Block

Grant from USDA this year to improve

food safety in Nebraska’s farmers’

markets. In partnership with the

University of Nebraska–Lincoln, a

series of GAP (Good Agricultural

Practices) workshops were held across

the state for vendors and market

managers. Market managers were

provided with food safety tool kits

which included educational materials

for market customers and marketing

ideas.

NCDC awarded the committee a

small grant in 2012 to assist it with

paying incorporation legal fees,

membership recruitment and annual

meeting planning. It is anticipated that

the committee will complete its work

Nebraska town striving to recover from loss of grocery store

By Amanda Lynne Bergstrom, Graduate Assistant, Nebraska Cooperative Development Center

T

CO-OP MONTH

The number of farmers markets in Nebraska has doubled

during the past 10 years, leading to the formation of the

Farmers’ Market Association. Photo courtesy Nebraska Coop Development Center
Editor’s note: Smith is executive director

at the Keystone Development Center in

York, Pa.; Fogarty-Harnish is a co-op

development consultant at Keystone. The

authors thank Gef Flimlin, professor and

marine extension agent with Rutgers

Cooperative Extension, for his assistance.

For more information about Keystone,

contact: smith@kdc.coop.

ne of the Keystone

Development Center’s

most exciting new

projects involves oyster

and clam growers in

New Jersey. This group is employing

state-of-the art technology to raise

oysters and clams in a controlled

environment — first in laboratory

settings, then in coastal waters and in

Delaware Bay, leased from the state of

New Jersey.

Shellfish are spawned in New Jersey

hatcheries, where they are fed specially

grown phytoplankton

and nurtured until they

are large enough to be

nourished on bay water

in land-based nurseries.

After that, the clams (8

to 15 millimeters in

size) are planted on the

bay bottom and

covered with 1⁄4-inch

plastic mesh, where

they remain until ready

for harvest in about

two to three years.

The oysters go

through a similar landbased rearing process,

but are grown in heavy

mesh bags, which are

usually raised off the

bay bottom, until they

reach market size in two

years. Constant cleaning

and management of the

Rural Cooperatives / September/October 2012 35

and formally organize the association

sometime this fall.

Co-op Business Assessment

and Evaluation Program

As cooperatively owned businesses

develop and implement their business

plans, many return to NCDC in their

second through fifth years of operation,

seeking assistance in taking another step

forward in development of their

business. These co-ops, which typically

have accomplished their initial goals,

have encountered obstacles and

identified opportunities for further

business development.

NCDC has now developed a formal

business assessment and evaluation tool

for use with cooperatively or mutually

owned companies in Nebraska. It is

based on the model developed by the

Kentucky Center for Agriculture and

Rural Development (KCARD).

The “Nebraska model” for

cooperative business assessment was

tested in 2011, and the program was

implemented in 2012. The business

assessment program is called CoBAsE

(Cooperative Business Assessment and

Evaluation). It is a fee-for-service

program from NCDC.

One such study was completed in

2012 for a co-op that began business in

2005, and NCDC has also assisted two

other groups, formally and informally,

under the program.

The business assessment program

normally consists of:

• Initial meetings with board and

critical partners;

• Interviews with the board and

employees, cooperative members,

business partners and resource

providers;

• Review of several years of financial

statements;

• Review of past business plans, ideas

and studies;

• Review of marketing materials,

website and social media use;

• Review of physical facilities and

processes;

• Review of past and current feasibility

studies.

Following the formal report of the

findings to the board, NCDC provides

a list of recommended “action steps” as

well as a timeline for action. As a part

of its “normal” work process, NCDC

will continue to work with CoBAsE

clients for follow-up of business

development and growth. n

Jersey shellfish co-op well situated for growth

By Cathy Smith, Peggy Fogarty-Harnish

O

CO-OP MONTH

Shellfish grower Charlie Cummings directs a jet of water as he

cleans his new crop of clams. Co-op members also raise oysters

in New Jersey coastal waters and Delaware Bay. Photos

courtesy Keystone Development Center
36 September/October 2012 / Rural Cooperatives

crop is necessary to reduce mortality

from predation or bio-fouling, caused

by seaweeds. (Author’s note: this

description is a simplified version of the

process).

A major competitive advantage for

the New Jersey shellfish growers is the

proximity of their production areas to

roughly 40 percent of the U.S.

population along the New YorkWashington D.C. corridor, which also

contains eight of the nation’s top 10

counties for median income.

Keystone Development Center

(KDC) is helping the group to

cooperatively develop its market

through a variety of strategies. Rutgers

Cooperative Extension of Ocean

County (Marine Extension), the New

Jersey Sea Grant Consortium and the

New Jersey Department of Agriculture

are KDC’s partners in the development

of the shellfish cooperative.

Shellfish farming creates

environmental benefits

A growing body of scientific

information is documenting the

environmental benefits of shellfish

farming. These benefits include: marine

habitat creation; removal of excessive

amounts of nutrients from water;

carbon sequestration; shoreline and

bottom stabilization; reduction in the

impact of waves on coastal areas; and

more productive natural shellfish beds.

Shellfish farmers pay permit and

lease fees for the privilege of conferring

these benefits to the public through the

course of producing their product.

There has been discussion aimed at

generating revenue for shellfish growers

in exchange for the environmental

benefits that result from shellfish

production. The growers hope that a

valid strategy is to leverage these

environmental benefits toward the goal

of generating a greater connection with

customers who value local food

production. Access to new

markets and price premiums is a

positive business outcome of

forging these local food

connections.

Eight to 10 clam growers and

12 oyster growers in New Jersey

have begun the process of

developing a marketing,

purchasing and shared-services

cooperative for their products.

KDC is currently assisting the

group with a logistics study for

locating a shellfish aggregation

center. KDC is also assisting its

partners in the development of a

survey that would gauge

production volume and is examining the

existing infrastructure and potential

markets available to producers.

The current transportation and

distribution assets of shellfish growers

are predominantly built to serve

conventional sales to wholesalers in

coastal and shore-oriented retail outlets,

which are highly seasonal. One of their

goals is to expand their year-round

markets.

Forging links with food co-ops

In the next year, KDC will continue

to assist the group with logistical plans

for siting aggregation points,

identifying area markets and developing

transportation plans for efficient

marketing. This includes connecting

shellfish producers with food

cooperatives in the area — a primary

goal for the group.

The growers identified the

development of effective, directmarking strategies that emphasize the

local aspect of farm-raised shellfish as

their most significant marketing

challenge. Emphasis on local food

production is, likewise, a viable strategy

for shellfish growers in other regions.

Currently, more than 85 percent of the

seafood consumed in the Unites States

is imported, so the market is open for

local products.

The MidAtlantic Alliance of

Cooperatives (MAFCA) is being used as

one resource to help develop the

connections to food cooperatives.

MAFCA, in its third year of operation,

is a network of food cooperatives in the

Mid-Atlantic area. KDC has been

instrumental in the formation of the

organization and continues to support

this important organization.

MAFCA currently has 22 member

cooperatives and has identified an

additional 20 potential members.

Within this group are 10 start-up

operations, most of which KDC has

been advising.

The food cooperative members have

an estimated total membership of nearly

39,000 individuals or households.

Current aggregate gross sales are more

than $100 million, not including the

projected sales of the start-ups.

MAFCA estimates that its members

are already purchasing more than $16

million annually in local products.

Representatives of the shellfish group

have met with several food cooperatives

in the area through MAFCA, and the

response has been very positive.

“Through this project, our members

would have improved access to local

seafood, as well as the knowledge that

we are contributing to a sustainable,

local, cooperative economy,” says Sue

Wasserkrug, an MAFCA board

member. “This project would be an

important component in expanding

access to local shellfish for thousands of

families in the Mid-Atlantic region,

while ensuring the vibrancy of the

coastal New Jersey economy.” n

A co-op member’s oyster hatchery near

Atlantic City, N.J.
Use ofjoint ventures by ag co-ops on rise

By Bruce J. Reynolds Ag Economist

USDA Rural Development

oint ventures and

subsidiaries offer

alternative ways for

cooperatives to test

market opportunities or

to gain expertise about new industries

without having to build a new division

within their organizations. In some

cases, providing a new service may

involve such large economies of size

that sharing costs in a joint venture

produces substantial savings.

The types of businesses that

cooperatives establish as joint ventures

are examined in a recent research

report, Joint Ventures and Subsidiaries of

Agricultural Cooperatives, Research

Report 226, available for download

from USDA at: www.rurdev.usda.gov/

BCP_Coop_RRs.htm; or, for a free

hard copy, send e-mail to: coopinfo@

wdc.usda.gov. This article is based on

that report.

Survey methodology

The collection of data for this report

combined a mail survey with follow-up

by telephone of cooperatives that

reported involvement in joint ventures.

The 185 co-ops reported having 108

wholly-owned subsidiaries and 209 joint

ventures.

The follow-up by telephone

interviews identified the names of the

joint ventures, enabling the elimination

of any duplicate reporting of joint

ventures. In addition, details on the

types of businesses that cooperatives

organized in joint ventures were

obtained; the same information was not

collected for wholly-owned subsidiaries.

The distribution of different types of

businesses for joint ventures is

presented in the pie chart.

Several distinctive developments are

identified in the report, of which three

are highlighted in this article: the

prevalence of the Limited Liability

Company (LLC) as a legal form for

organizing, using joint ventures to

combine all business operations of

separately owned partners and the

strategy of spawning new businesses.

Use of Limited

Liability Companies (LLC)

Cooperatives have established

subsidiaries and participated in joint

ventures over many decades, but the

availability of the LLC as a legal form

of organizing during the mid-1990s

significantly increased their number. In

a survey from 2010/2011, agricultural

cooperatives reported participation in

240 LLCs, of which 172 were joint

ventures. A corporation was the second

J

The Scircleville Grain and Fertilizer hub in Indiana is part of Co-Alliance LLP, a

joint venture of five cooperatives. Photo courtesy Co-Alliance LLP.

Rural Cooperatives / September/October 2012 37
38 September/October 2012 / Rural Cooperatives

most used form, followed by limited

liability partnerships.

A 1975 study of cooperatives

involved in food marketing and

processing identified 22 joint ventures,

as compared to almost 100 federated

cooperatives in operation at that time.

Comparing those findings with the

results of USDA latest research suggests

that the LLC form of organization is

being used in many cases as a substitute

for incorporating as a federated

cooperative.

Many cooperatives have joint

ventures that include non-cooperatives.

Although a federated cooperative can be

established with non-cooperatives, it is

more common today to have joint

ventures instead. The 1975 study

identified six joint ventures with both

cooperatives and non-cooperatives out

of a total of 22 such businesses. By

contrast, the recent study showed that

there were 83 joint ventures that

included non-cooperatives partners out

of 175 joint ventures that reported

partner information.

The availability of organizing as an

LLC may not only increase the

frequency of joint ventures but also

accommodates more of them between

cooperatives and non-cooperatives. Of

course, other market forces have also

played a part in increasing the

participation of cooperatives with noncooperatives in joint ventures since

1975.

Most of the joint venture activity

with agricultural cooperatives did not

involve numerous partners (more than

20). Joint ventures with 7 to 20

agricultural cooperatives as members

were mostly organized for purchasing

supplies, obtaining regulatory compliance services or sharing marketing

agents.

The survey identified 17 farm supply

purchasing joint ventures, with one

organized as a cooperative and the

other 16 as LLCs. By contrast, there

are several examples of purchasing

cooperatives organized by nonagricultural small businesses (as

reported in USDA’s Cooperative

Information Report 63). They mostly

operate nationwide, with memberships

well in excess of 100.

Examples include Imark, which

purchases supplies for electrical

equipment distributors, and Carpet

One, with a large membership of store

owners who retail carpet and floor

products.

Organizing large memberships in

cooperatives rather than in LLCs may

have advantages for empowering a

board of directors. Delegating decisionmaking authority to a small board of

directors in a cooperative is sanctioned

by incorporation statutes. Granting

such authority to a few partners in an

LLC with a large membership may

involve more complex legal provisions.

Business combinations

Since the early 1990s, there have

been several instances of neighboring

cooperatives combining a division, such

as their agronomy units, into a single

operating unit. These joint actions are

often precursors to mergers of the

cooperatives. A recent development for

some local grain and farm supply

cooperatives is to form joint ventures

with similar businesses that combine all

operations into an LLC operating

entity with one trade name. In these

cases, there is no plan for a future

merger. Instead, each cooperative

functions as a holding company for the

Processing 30

Marketing agent 21

Other 29

Bioenergy 16

Fuel distribution 21

Joint ventures by type of business operation

Business combination 6 Agronomy 29

Feed mills 21

Supplies purchasing

Grain terminals 19
joint venture and retains its separate

membership for distributing patronage

dividends.

The survey identified six joint

ventures that combine all grain

marketing and farm supply services

under one trade name. Four of these

ventures include cooperatives

partnering with one non-cooperative

from different multi-national

agribusiness companies.

When operating with noncooperatives under a new trade name,

cooperative identity may be diminished

or lost for future generations of

farmers. Two of these businesscombination joint ventures exclusively

have cooperatives as partners and

promote cooperative principles to their

members.

Business spawning

In contrast to combining business

operations of two or more cooperatives,

joint ventures can also be organized for

entering businesses in which the

partners have not had previous

involvement. One form of this type of

development is called “spawning,”

which refers to a business that helps

others start up a new activity that it

does not want to exclusively own and

operate within its organizational

structure.

The survey identified a few examples

of spawning. Large regional

cooperatives participate in some joint

ventures for facilitating direct

involvement and ownership by local

cooperatives in new businesses. For

example, several feed milling joint

ventures involved a large regional

cooperative working in joint ownership

with local cooperatives.

There were also examples of rural

electric cooperatives participating in

propane distribution joint ventures with

farm supply cooperatives to assist in the

start-up of those businesses. The rural

electric co-ops eventually left the joint

ventures once these propane businesses

were firmly established. Apart from

joint venture partnering to spawn

businesses, utility cooperatives also have

a role in helping USDA Rural

Development implement renewable

energy programs and new enterprises.

Working together

USDA Cooperative Programs’

Research Report 226 updates the

current status of cooperative

involvement in joint ventures and

subsidiaries. It reports a variety of

different types of businesses where

cooperatives have identified advantages

of lower costs and better performance

by working with others.

As cooperatives represent farmers

and ranchers working together, this

research shows that they can extend the

same idea in forming joint ventures with

other cooperatives and businesses. n

Rural Cooperatives / September/October 2012 39
40 September/October 2012 / Rural Cooperatives

‘The pillar of my home’

By Anja Tranovich

Coffee co-ops brew

better quality of

life for Ethiopian

farm families

Editor’s note: Anja Tranovich is editor and media relations senior

specialist for ACDI/VOCA, a nonprofit organization promoting

economic and cooperative development around the world. ACDI/VOCA

has worked in 145 countries since 1963 implementing projects funded

by USDA, the U.S. Agency for International Development (USAID),

ACDI/VOCA member cooperatives and farm credit banks, the Bill &

Melinda Gates Foundation and others.

It has been a long, bumpy road for members of the Ferro

Cooperative in Ethiopia, seen here sorting and drying

their crop. But the co-op is helping growers earn a better

return for their coffee. Photos courtesy ACDI/VOCA
Rural Cooperatives / September/October 2012 41

n 2005, the Ferro coffee cooperative in

Ethiopia accomplished a remarkable feat: its

Shirkina, dry-processed coffee was designated

as a Starbucks’ Black Apron exclusive coffee.

It was only the eighth coffee in the world to

receive the designation.

Starbucks introduced the Black Apron label in 2004 to

designate “rare, exotic and cherished coffees...that represent

Starbucks’ expertise in coffee and dedication to the farmers

who grow the finest beans.”

The Seattle coffee giant has worked closely with the coop, buying the first year’s crop even when it ultimately had to

be thrown away due to problems during the sun- drying

process. But the second year’s harvest produced an

I
42 September/October 2012 / Rural Cooperatives

extraordinary, limited-issue coffee that Starbucks marketed

with great success. The company also provided a $15,000

grant to the Ferro co-op’s community and extended $5

million in financing through a nonprofit associate, EcoLogic

Finance.

For the co-op members, it had been a long, bumpy path

from Ferro’s small “backyard coffee gardens” to upscale

coffee shops in the West, glowing reviews and a rarefied

retail price of $26 per pound.

World’s 2nd most

valuable commodity

Much is at stake in the global coffee market. Coffee is the

world’s second most valuable commodity, trailing only

petroleum. Today, most coffee lovers don’t blink at the

premium prices fetched by Ethiopian specialty-roast coffee in

high-end shops. But it wasn’t always that way.

Ethiopia, the birthplace of coffee, once had a reputation

for producing mediocre quality coffee. Its coffee was

aggregated and sold as a bulk commodity instead of as a

value-added, specialty food. Government intervention,

limited availability of capital to farmers and careless

processing kept Ethiopian coffee — and its growers —

marginalized.

A number of U.S. development organizations,

cooperatives and volunteers worked with USDA, the U.S.

“Without cooperatives, Ethiopian coffee growers

would be out of the market.”

Ethiopia, considered to be the birthplace of coffee, is regaining its reputation as a producer of premium coffee beans, seen here being dried.
Rural Cooperatives / September/October 2012 43

Agency for International Development (USAID), the

Ethiopian government and Ethiopian farmers for nearly two

decades to reform the cooperative sector. That work

propelled the development of the entire coffee value chain

upward, enabling cooperatives such as Ferro to reach new,

vastly expanded markets.

“Without cooperatives, Ethiopian coffee growers would be

out of the market,” says Asnake Bekele, general manager of

the Sidama Coffee Farmers Cooperative Union, which

represents 80,000 smallholders. There are now 37,647

primary cooperatives in Ethiopia, with 5.9 million individual

members. Cooperatives directly benefit 39 percent of the

country’s farmers.

U.N. recognizes promise of cooperatives

The United Nations (U.N.) has designated 2012 as the

International Year of Cooperatives, and the U.N.’s Food and

Agricultural Organization (FAO) is celebrating World Food

Day on Oct. 16 with the theme: “Agricultural Cooperatives:

Key to Feeding the World.” These efforts resonate deeply in

a place like Ethiopia, where growers’ needs are virtually

unlimited and food shortages constantly loom. Co-ops here

are a critical organizing medium and a catalyst for economic

growth.

With a history of recurrent drought and regular structural

food deficits, Ethiopia faces serious agricultural challenges.

Half of the country’s gross domestic product is based on

agriculture, but a lack of technical know-how, widespread use

of out-dated agricultural practices and a co-op system that

was previously more of an entity of the state than a modern

business model all combined to inhibit economic growth.

On-the-ground training

and development

After the collapse of the authoritarian Derg regime in

1991, the United States began providing Farmer-to-Farmer

Program volunteers and other assistance to boost Ethiopia’s

agricultural sector. ACDI/VOCA and Land O’Lakes were

among the organizations that sent U.S. volunteer experts to

train local cooperatives in management, accounting and

operations under Farmer-to-Farmer and other development

programs.

Volunteer Brad Perry, the president of an agribusiness

consulting firm in Omaha, Neb., has completed five

assignments in Ethiopia. His first trip was to Yirgalem, an

area in the heart of the country with rich soil and a damp

climate. Working all day in a university classroom, with only

short coffee breaks during the intense heat of the day, he

trained about 40 cooperative members in financial

management.

The trainees were “extremely capable and competent

people,” Perry recalls. “The highest compliment I could

give,” he continues, “is that I’d hire them in a heartbeat.”

But the Ethiopian marketplace presented many barriers.

Labor is cheap in Ethiopia, while capital — especially during

the 1990s — was nearly inaccessible, acutely so for farmers.

In his classes, Perry would set aside time to work through

case studies, each of which identified an actual problem

facing their co-ops. It seemed that nearly all his projects

became feasibility studies on how to amass capital to purchase

a truck, expand coffee processing or build a warehouse.

Cooperative unions

provide breakthrough

Co-op capacity building took place both person-to-person

and insti-tutionally. In 1997, ACDI/VOCA began a USAIDfunded program to consolidate primary cooperatives into

unions in order to increase their leverage and impact through

increased bargaining power, management capacity and

economies of scale. This helped them access capital.

One of the first apex organizations — the Lumme

Farmers’ Cooperative Union — initiated a competitive

bidding process and bought inputs directly from importers to

save $175,000 in fertilizer costs for all cooperatives in the

Oromia region.

Over two years, the success of this union model was

replicated in other districts of the region, reducing overall

fertilizer costs by $4 million for 47,000 coffee and cereal

farmers. For the first time in Ethiopian cooperative history,

farmers were also paid a dividend on their production.

These dividends had direct impact: they allowed members

such as Etensesh Mekonen to cover her thatched-roof house

with corrugated iron sheeting. Other union members

invested dividends back into their coffee ventures, started

new businesses or paid for their children’s education.

Strengthening co-ops’

capacity to scale up

Ethiopian cooperatives worked with U.S. businesses and

agencies to build a reputation as a source for high-quality,

organic and fair trade coffee for the global market. It was a

comprehensive, value-chain approach that addressed

opportunities and constraints at each level of the industry.

The emphasis was placed on strengthening cooperation

among small-scale producers, as well as establishing

secondary cooperatives or unions to achieve the economies of

scale needed to reach international markets.

The coffee unions won the right to sell outside of the state

auction process. Once international roasters and buyers could

purchase specific lots of coffee instead of undifferentiated

commodity, there was a revolution in coffee quality.

Suddenly growers had incentives to produce carefully tended

and processed coffee; quality standards soon skyrocketed.

In 2005, the California-based Ecafe Foundation worked

with local stakeholders to organize a co-op coffee

continued on page 50
44 September/October 2012 / Rural Cooperatives

Land O’Lakes acquires

Kozy Shack

Land O’Lakes has acquired Kozy

Shack Enterprises Inc., a market leader

in the chilled dairy desserts category in

North America. “Kozy Shack is a strong

strategic fit with our value-added dairy

foods product portfolio,” says Land

O’Lakes President and CEO Chris

Policinski.

Kozy Shack, based in New York, was

founded more than 40 years ago and

markets dessert products in the United

States and Canada, with a small

presence in Ireland. Its plant in

Hicksville, N.Y., produces 70 percent of

its product volume. It also has a plant in

Turlock, Calif. The company also owns

and operates a logistics services

company, Freshway Distributors, which

serves various third-party manufacturers

and distributors.

“The acquisition of Kozy Shack

represents a new category for Land

O’Lakes — refrigerated desserts —

which offers our retail customers an

even wider selection of premium dairy

food products,” Policinski says. Land

O’Lakes will apply its extensive sales,

marketing, distribution and customer

service expertise to expand sales of these

products, he adds.

Co-op conference to

explore global market trends,

innovation

Ways in which agricultural

cooperatives can strategically position

themselves for sustainable growth will

be the focus of this year’s Farmer

Cooperative Conference, Nov. 8-9 in

Minneapolis. Now in its 15th year, this

annual national conference regularly

attracts top cooperative business leaders

and industry experts. They come

together to share the latest research,

trends and innovative approaches by

agricultural cooperatives.

The conference is organized by the

University of Wisconsin Center for

Cooperatives, with assistance from a

planning committee of industry and

academic experts.

This year’s conference theme is

“Leading Change: Envisioning the

Future.” Sessions will address the

impact of the global economy on coops, federal policy developments,

valuing cooperative businesses in

mergers and acquisitions, trends in the

energy marketplace and successful

cooperative leadership programs.

“This is one of the few events where

academics, service providers, directors

and employees of cooperatives have an

opportunity to interact in the same

forum,” says Michael Boland, a

professor of agricultural economics at

the University of Minnesota. He is

examining the culture of safety within

cooperatives and will be moderating a

panel at the conference on developing

Newsline

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

Co-op developments, coast to coast
Rural Cooperatives / September/October 2012 45

better practices relating to risk and

safety.

Support for the program comes from

CoBank, CHS, Dorsey & Whitney,

Farm Foundation, GROWMARK,

Land O’Lakes, Lindquist and Vennum,

NCFC Education Foundation, Stoel

Rives, CliftonLarsonAllen and the

Ralph K. Morris Foundation.

“The University of Wisconsin

Center for Cooperatives has put

together another outstanding program

this year, and we urge cooperative

organizations to attend the conference

and to support its ongoing success,”

says Peter Rudeen of CoBank’s

Regional Agribusiness Banking Group.

The two-day conference will be hosted

at the Radisson Plaza Hotel

Minneapolis. More information about

the conference program and

registration is available at:

www.uwcc.wisc.edu or by contacting

Anne Reynolds at 608-263-4775 or

atreynol@wisc.edu.

Established in 1962, the UW Center

for Cooperatives focuses on education,

research and outreach on all aspects of

the cooperative business model,

including development, finance,

structure and governance.

Linn Co-op to get

boost with E15 sales

The Linn Co-op Oil Co. in Marion

will be one of the first Iowa fuel

retailers to offer E15 (gasoline

containing 15 percent ethanol) for late

model vehicles. The Iowa Renewable

Fuels Association announced in early

September that it has launched an

advertising campaign to promote E15.

CoBank announced Sept. 13 that it is launching new

initiatives to assist agricultural borrowers and others

impacted by the 2012 drought. CoBank’s base of

customers includes hundreds of grain and farm supply

cooperatives in the central region of the country, as well

as a large number of customers in the protein and dairy

sectors, where impacts from the drought have been the

worst. In addition, the bank’s affiliated Farm Credit

associations serve over 70,000 individual farmers and

ranchers in 23 states across the nation, including many

drought-impacted areas.

“We’re committed to supporting our customer-owners

at a time of significant challenge for U.S. agriculture,”

says Robert B. Engel, CoBank’s president and CEO. “Our

agribusiness customers are, in general, in good financial

condition and accustomed to dealing with weatherrelated volatility that is a fact of life for their industry. The

same is true of the farmers and ranchers who borrow

from our affiliated Farm Credit associations. But we

believe having this program in place will help us better

fulfill our mission as the impacts of this historic drought

are felt over the balance of the year.”

CoBank’s drought relief initiatives will include

expedited review and processing of any customer’s loan

request stemming from the drought, as well as working

collaboratively with borrowers experiencing droughtrelated distress on a case-by-case basis. In addition, the

bank will partner with its affiliated associations to

provide support for local drought relief programs

established to assist farmers, ranchers and other rural

borrowers within their individual service territories.

“As a cooperatively owned, mission-based lender,

CoBank’s core purpose is to provide dependable credit

for agriculture and the other vital industries we serve in

rural America,” Engel says. CoBank and the nation’s

three other Farm Credit banks issued a joint statement

saying that despite the challenges presented by the

drought, the Farm Credit System remains well positioned

to meet the financial needs of the farmers, ranchers,

cooperatives and other rural borrowers.

CoBank also announced it will contribute $1 million to

Feeding America, the nation’s leading hunger relief

charity. The funds will be designated to support programs

in areas of the country where the bank and its affiliated

associations have significant operations. n

CoBank announces drought assistance initiatives
46 September/October 2012 / Rural Cooperatives

The campaign is co-sponsored by the

Iowa Corn Growers.

Billboards announcing the

availability of E15 at Linn Co-op have

been erected. The billboards were to be

changed to a branding message on Sept.

24, and are to stay up until Oct. 7. The

slogan for the campaign will be: “The

roads of Iowa will never be the same.”

Campaign messages will emphasize the

cost savings and performance benefits

of E15, according to association

officials.

In June, the U.S. Environmental

Protection Agency approved rules

allowing retailers to sell the 15-percent

ethanol fuel blend for 2001 and later

vehicles. Linn Co-op was among the

first five retailers to receive an EPA

approval letter to sell the fuel.

Robert Hawk new CEO at

blueberry co-op

Robert E. Hawk assumed duty Aug.

1 as CEO and president of MBG

Marketing, a blueberry cooperative

based in Grand Junction, Mich. During

his 35 years of professional experience,

Hawk has worked in a variety of

production and senior management

positions at leading consumer products

companies, including Weaver Popcorn

Co. Inc., CROSSMARK Inc. and

Northland Cranberries.

“Bob’s experience in value-added

product development and plant

operations are an excellent fit for our

recently completed strategic plan,” says

Pat Goin, chairwoman of the MBG

board.

Hawk says he is impressed that

MBG, established in 1936, “has had the

foresight to invest in new innovations

and expanded capabilities. We will

continue to focus on growing and

delivering a high level of quality

products and services that lead to solid

customer relationships, loyal consumers

and long-term grower profitability.”

In 2013, MGB will be exploring

opportunities for new, value-added

products and will open an IQF

(instantly quick frozen) berry processing

plant in Bloomingdale, Mich. The coop will be offering several new

proprietary blueberry varieties that have

been developed by its in-house plant

breeders. “These berries have incredible

flavor, size and improved vigor for

better shelf life,” Goin says.

“As a growers’ cooperative, we also

focus on attracting additional highquality growers into the organization so

that we can provide a consistent supply

of delicious berries to our clients,” says

Goin, who credited Hawk for “hitting

the ground running” in August as the

co-op was handling a record 2012 crop.

MBG Marketing – also known as

“The Blueberry People” – is a

producer-owned blueberry marketing

cooperative with many multi-generation

farm families growing primarily

blueberries in Michigan, Indiana,

Georgia, Florida, New Jersey, North

Carolina, Oregon, Washington and

British Columbia. In conjunction with

its three partners in grower-owned

Naturipe Farms, MBG is the largest

marketer of fresh and processed

blueberries in the world.

MFA expands

operations in Kansas

MFA Enterprises, a wholly owned

subsidiary of MFA Inc., has purchased

Irsik & Doll’s feed mill and grain

elevator in Emporia, Kan., as well as

Emch Feed and Elevator Co. Inc. in

Madison, Kan. The new additions will

strengthen its feed manufacturing and

grain merchandising operations in the

region, the co-op says.

MFA, which had net sales of $1.3

billion in 2011, also recently added a

retail outlet in Osage City, Kan., to the

Ag Choice Agri Services centers MFA

already operates in eastern Kansas and

northeastern Oklahoma through its

AGChoice retail stores.

“Buying the Emporia and Madison

facilities allows MFA to expand its

scope of agricultural products and

services to a wider geographical area

and to strengthen service to MFA’s

existing farmer and rancher customers

in eastern Kansas, Missouri and the

Midwest,” says Alan Wessler, MFA vice

president of feed operations and animal

health.

MFA serves 45,000-plus active

farmers in Missouri, eastern Kansas,

northeastern Oklahoma and adjacent

states. Founded in 1914, MFA has 131

company-owned locations and 25 local

MFA affiliates with 23 branches. The

cooperative also serves about 400

independent dealers and local

cooperatives not affiliated with MFA.

USDA loans to help co-ops

deploy smart grid technology

U.S. Agriculture Secretary Tom

Vilsack in August announced that rural

electric utilities in 18 states will receive

loan guarantees to make improvements

to electric lines and transmission

facilities, and to reduce peak-demand

electric loads by deploying “smart grid”

technologies. USDA Rural Utilities

Administrator Jonathan Adelstein made

the announcement on Vilsack's behalf

while visiting the offices of one of the

recipients, Southside Electric

Cooperative (SEC) in Crewe, Va.

This consumer-owned, Virginia

power cooperative is using the USDA

funds to build and improve a

distribution line and a transmission line;

it will also invest nearly $7.4 million for

smart grid system enhancements. In all,

service will be upgraded for about 1,500

SEC members.

“Maintaining and upgrading rural

electric systems improves system

reliability, creates jobs and supports

economic development,” Vilsack says.

Robert Hawk
Rural Cooperatives / September/October 2012 47

“With these loans, we are continuing to

help cooperatives provide reliable

service to rural residents. A significant

portion of this funding will go to smart

grid technologies, helping consumers

lower their electric bills and reducing

peak demand for producers.”

The awards announced in August

include support for nearly $29 million

in smart grid projects, helping USDA

Rural Development move closer to

reaching Secretary Vilsack’s goal of

providing more than $250 million for

smart grid technologies. In all, USDA is

investing more than $420 million in

rural electric infrastructure.

Farm Credit supports

Gardening for Greenbacks

Three of the nation’s leading

agricultural lenders have joined forces

to provide financial support for

beginning urban farmers in Cleveland

as part of the city’s “Gardening for

Greenbacks” program. Minneapolisbased AgriBank, Denver-based CoBank

and Louisville-based Farm Credit MidAmerica each committed $45,000 to the

program for a total donation of

$135,000.

All three institutions are members of

the Farm Credit System, a nationwide

network of producer-owned banks and

associations chartered to meet the

credit needs of agriculture and other

key rural industries.

Gardening for Greenbacks is an

initiative developed by the city of

Cleveland to increase the production of

local foods and establish Cleveland as a

model for local food system

development. By providing financial

assistance to local entrepreneurs for the

development of for-profit urban food

gardens, the program aims to encourage

economic development while helping to

ensure that every resident has access to

fresh, healthy and affordable food.

“Our contribution to Gardening for

Greenbacks is a great way for us to

serve farmers in an urban

environment,” says Bill York, AgriBank

CEO. “We recognize the value urban

farming offers to local communities as a

supplement to more traditional forms of

agriculture. Cleveland is at the

forefront of this movement and we are

proud to help further their efforts.”

“As a mission-based lender, we are

committed to encouraging the

development of local food systems,

including urban farming. We’re

delighted to be partnering with other

Farm Credit organizations in support of

this innovative program,” adds Andrew

Jacob, executive vice president at

CoBank.

The Farm Credit donation will fund

grants of up to $5,000 to enable

program participants acquire the

necessary equipment for urban

gardening, such as tools, fencing and

irrigation systems. Grant recipients are

required to successfully complete a

market gardener training class offered

by the Ohio State University Extension

and to sell their produce locally.

For nearly a century, Farm Credit

has been a national provider of credit

and related services to rural America

through a cooperative network of

customer-owned lending institutions

and specialized service organizations.

Book says co-ops best way

to re-charge U.S. economy

E.G. Nadeau, a well-known

cooperative development consultant,

has written a new book:

“The Cooperative Solution: How the

United States

can tame

recessions,

reduce

inequality and

protect the

environment.”

It focuses on

the widespread

role of

cooperatives in

the U.S.

economy and makes the case for greatly

expanding their role in the future as a

means to stabilize the economy and

improve the quality of life for its

citizens.

Despite the major presence of co-ops

in the world economy and in the

United States, this democratically

owned part of the private sector is

inadequately understood and greatly

underappreciated, Nadeau says. His

basic tenet is that co-ops are

democratically controlled and are

motivated primarily by the goal of

providing services to their members,

not by generating profits for their

owners and investors. As a result, coops are much more likely to avoid the

negative consequences of economic

institutions that are primarily driven by

the quest for ever-increasing profits.

Nadeau, who has a Ph.D. in

sociology from the University of

Wisconsin-Madison, has spent the past

40 years researching, developing,

teaching and writing about cooperatives

in the United States and in 20 other

Cleveland Mayor Frank G. Jackson (far left) gathers with Farm Credit and CoBank officials

and other city council members during a ceremonial check presentation made in support of

the city’s Gardening for Greenbacks program. Photo courtesy Farm Credit
48 September/October 2012 / Rural Cooperatives

countries. For more information, send

e-mail to: egnadeau@inxpress.net.

Minn-Dak

expanding sugar plant

Minn-Dak Farmers Cooperative is

planning a $70-million expansion to be

built over two years at its sugar beet

processing plant in Wahpeton, Minn.,

according to the Wahpeton Daily

News. The molasses de-sugarization

plant will turn byproduct beet molasses

into products used in food, pharmaceuticals and feed supplements. The coop says the project will create 20 fulltime jobs.

The Richland County Commission

has approved a tax break for the

expansion, under which property taxes

will be waived the first five years and

cut in half the next five years, the

newspaper reported.

Eric Erba new strategy

officer at California Dairies

California Dairies Inc. (CDI), the

nation’s second largest dairy processing

cooperative, has appointed Eric Erba as

senior vice president and chief strategy

officer (CSO). He will report to Andrei

Mikhalevsky, president and CEO.

Erba is the former senior vice

president of administrative affairs for

CDI, based in Visalia, Calif., where he

has worked since 2006. Before that, he

was the assistant director for the

Division of Animal Health and Food

Safety Services at the California

Department of Food and Agriculture.

He holds a doctorate degree from

Cornell University in ag economics

(dairy markets and policy specialty).

The co-op has also appointed David

Treiber as senior vice president of fluid

business development. In his new role

with CDI, Trieber will manage all fluid,

condensed and cream sales. He had

been vice president and division

manager for food ingredients at

Challenge Dairy Products, a wholly

owned subsidiary of CDI, since 1999.

CDI is the largest member-owned

milk marketing and processing

cooperative in California, producing 43

percent of the state’s milk. It is owned

by more than 420 dairy producers, who

ship more than 17 billion pounds of

milk annually to their co-op, which

manufactures butter (including the

Danish Creamery and Challenge

brands), fluid milk products and milk

powders.

USDA issues expanded

farmers market directory

There has been a 9.6 percent

increase in the past year in the number

of farmers markets listed in USDA’s

National Farmers Market Directory,

U.S. Agriculture Deputy Secretary

Kathleen Merrigan announced in

August to help kick off National

Farmers Market Week. Many farmers

markets are organized as cooperatives,

and many others operate on cooperative

principles.

USDA’s farmers market directory can

be viewed on-line at:

farmersmarkets.usda.gov. It identifies

7,864 farmers markets operating

throughout the United States, up from

7,175 markets listed the year before.

The information collected in the

directory is provided voluntarily by

farmers market managers through an

annual USDA outreach effort.

“Farmers markets are a critical

ingredient to our nation’s food system,”

Merrigan said at the kickoff event.

“These outlets provide benefits not

only to the farmers looking for

important income opportunities, but

also to communities looking for fresh,

healthy foods. The directory is an online tool that helps connect farmers and

consumers, communities and businesses

around the country.”

The states with the most farmers

markets are: California (827); New York

(647); Massachusetts (313); Michigan

(311); Wisconsin (298); Illinois (292);

Ohio (264); Pennsylvania (254);

Virginia and Iowa (tied with 227) and

North Carolina (202). Together, these

states account for nearly half of the

farmers markets listed in the 2012

directory.

USDA’s Food and Nutrition Service

is helping more farmers markets gain

the ability to accept SNAP

(Supplemental Nutrition Assistance

Program, formerly food stamps). It has

made $4 million available to equip

farmers’ markets with wireless, pointof-sale equipment. Currently, more

than 2,500 farmers markets are using

Electronic Benefit Transfer technology.

CHS, Mountain View Co-op

building warehouse

Energy, grains and foods co-op CHS

Inc. and Mountain View Co-op of

Black Eagle have formed a limited

liability company to build a 35,000-ton

dry fertilizer warehouse at Collins,

Minn. Warehouse construction is

underway, with completion expected

mid-summer 2013.

Mountain View Co-op will be the

facility’s exclusive fertilizer retailer,

serving growers throughout their trade

area. Products stored at the new facility

will include urea, phosphates, potash,

ammonium sulfate and micronutrients,

and all agronomic products routinely

used by area growers.

“Over the years, we’ve noticed a

continued shift to earlier planting and

an increase in the time it takes fertilizer

manufacturers to get products to us to

meet growers’ needs,” says Bruce Clark,

general manager of Mountain View

Co-op. “This new facility will enable us

to meet our growers’ increased demand

for nitrogen and sulfur products, to

ensure healthy, profitable crop

production.”

Located in north-central Montana,

Farmers markets such as this are

increasingly popular with shoppers.
Rural Cooperatives / September/October 2012 49

Mountain View Co-op operates

10 agronomy locations within a

100-mile radius of Great Falls,

serving farmers growing dryland

winter wheat and irrigated hay,

malt barley and dryland barley.

“Urea normally produced and

shipped from Canada is

increasingly being used locally

by Canadian farmers, greatly

limiting product availability,”

says Cheryl Schmura, CHS vice

president for its Crop Nutrients

division. “The strategic location

of the Collins fertilizer hub

plant means customers in this

region will have secure,

competitive supply.”

In other CHS news, the coop has announced that it will

serve as the exclusive off-take

company for urea fertilizer

produced by the Summit Texas

Clean Energy Project LLC

plant at Penwell, Texas. CHS

will also be a minor investor in

the plant, which is expected to

generate up to 700,000 tons of

urea annually.

“The ability to source highquality, domestically produced

urea will help enhance and

streamline our operations while

providing consistent supply to

customers throughout the region,” says

Schmura.

USDA helping Minn.

co-op build feed mill

As construction crews were busy

recently putting the finishing touches

on New Vision Co-op’s new grain

elevator and feed mill in Magnolia,

Minn., USDA Rural Development

State Director Colleen Landkamer and

other area leaders visited the site to

highlight the economic impact of the

project. “This investment by USDA

means jobs and economic development

opportunities,” Landkamer said.

The investment from USDA Rural

Development came in the form of a

$740,000 Rural Economic

Development Loan made to the

Lismore Telephone Cooperative, which

re-loaned the funds to New Vision Coop to help pay for the $12.6-million

project.

The facility will process about 120

tons of feed an hour, employ 15 people

and deliver swine, dairy and poultry

feed to customers from as far as 100

miles away. About 200 area farmers will

supply the 3 million bushels of corn and

500,000 bushels of soybean to the mill

annually.

“It’s a big deal,” says Frank

McDowell, New Vision’s general

manager. The elevator is expected to be

open in November and the mill should

be operating by June.

USDA Rural Development also

selected Lismore Telephone

Cooperative to receive a $300,000

Rural Economic Development Grant,

which will be used to establish a

revolving loan fund to help small

businesses in Rock County with “gap

financing” and job creation projects.

As construction crews worked

and heavy machinery roared

behind him, McDowell thanked

USDA and Lismore Telephone

for supporting the project.

“Because of their guidance and

support, livestock producers will

have access to the most efficient

and versatile feed mill in the

Midwest.”

Both the loan and the grant

were awarded through USDA’s

Rural Economic Development

Loan and Grant (REDLG)

program, which provides zerointerest loans to local utilities

which, in turn, provide funds to

local businesses (ultimate

recipients) for projects that will

create and retain employment in

rural areas.

Hispanic, women farmers

may seek compensation

Hispanic and women farmers

and ranchers who believe that

the U. S. Department of

Agriculture (USDA) improperly

denied them farm loan benefits

between 1981and 2000 because

they are Hispanic or female may

be eligible to apply for

compensation if:

1) They sought a farm loan or farmloan servicing during that period;

2) The loan was denied, provided

late, approved for a lesser amount than

requested, approved with restrictive

conditions or USDA failed to provide

appropriate loan service; and

3) They believe these actions were

based on their being Hispanic or

female.

To receive a claims package, visit:

www.farmerclaims.gov, or call 1-888-

508-4429.

For further guidance, you may

contact a lawyer or other legal services

provider in your community. USDA

cannot provide legal advice. If you are

currently represented by counsel

regarding allegations of discrimination

or in a lawsuit claiming discrimination,

you should contact your counsel

regarding this claims process. n

New Vision Co-op’s feed mill in Magnolia, Minn., during

construction. The grain elevator at the $12.6 million facility

is expected to open by November, with the feed mill to be

in operation by June.
segment) are: farm supply co-ops (10);

mixed farm supply and grain co-ops

(29); grain co-ops (14); dairy co-ops

(22); sugar co-ops (7); fruit and

vegetable co-ops (8); and other

marketing co-ops (10).

Historical comparison

Comparing total gross business

volume of these 100 cooperatives from

2006 to 2011 shows that there was a

peak in 2008, then total gross business

volume fell before hitting a high during

2011. Total business volume increased

by almost 30 percent between 2010 and

2011 as illustrated in figure 1.

Patronage income (income from

other cooperatives) increased by $12.2

million in 2011, or 7.3 percent. Net

income (after taxes) grew by 38 percent,

or $877 million. The value of crop and

livestock production affected the

increase in net income during 2011.

Figure 3 shows that mixed grain and

supply cooperatives account for 43

percent of the revenue of the top 100

co-ops while comprising only 29

percent of the number of cooperatives

on the list (the largest group). The

mixed grain and supply group also

accounted for 47 percent of the assets

of the top 100 ag-co-ops.

Dairy (22 cooperatives) accounted

for 23 percent of the revenue and 15

percent of the assets (figure 4). This

dropped from last year’s figures of 25

percent and 17 percent, respectively.

Changes in the size of the functional

groups between 2002 and 2011 are

shown in figures 5 and 6. Mixed

cooperatives were also the most

numerous (29 percent) in 2002. The

number of co-ops in each functional

group shows only small fluctuations

during the 10-year period. n

competition. The highest-scoring

coffees from the competition were

selected to participate in an Internet

auction hosted by the Specialty Coffee

Association of America (SCAA). This

first-ever Internet auction of Ethiopian

coffee generated more than $187,000

for farmers in 150 co-ops, with an

average price paid of $3.22 per pound,

compared to the then-market price of

$1.30 per pound.

An overall premium of $75,000 was

paid for these coffees, with all proceeds

distributed to the cooperatives. A

second auction in 2006 earned more

than $250,000. In addition to benefiting

these limited-resource producers, the

reputation of Ethiopian coffee was also

elevated into the first rank.

As a result of the auction, William

Boot, co-founder of Ecafe, declared:

“Farmers at the co-op level who

produce these exemplary coffees will

receive the prices and the recognition

they deserve.”

Building on success

Today, a USDA-funded

ACDI/VOCA project is working to

increase the incomes of smallholder

farmers through improved access to

consistent, affordable and high-quality

animal feeds that can support greater

livestock productivity and efficiency.

The Agricultural Growth ProgramAgribusiness and Market Development

(AGP-AMDe) — a USAID-funded,

Feed the Future initiative — is

currently strengthening Ethiopia’s

agriculture sector, enhancing access to

finance and stimulating innovation and

private sector investment. Amde means

“pillar of my home” in Amharic,

signaling its importance to household

well-being. Continued cooperative

development is a cornerstone of this

project.

“...As we look across sub-Saharan

Africa, we see enormous economic

growth, even as the global economy

continues to struggle,” U.S. Secretary

of State Hillary Clinton said in

Johannesburg, South Africa, on Aug. 6

during the U.S.-South Africa Business

Partnership Summit. “Seven of the

world’s 10 fastest-growing economies

are in this region,” she added.

Ethiopia, with more than 8 percent

GDP growth during the past decade, is

one of the countries Secretary Clinton

was referring to. However, its rural

poor still tend to be left out.

Food security in Ethiopia depends

largely on smallholder farmer

agriculture. For example, most of the

country’s coffee is produced by

smallholder farmers owning just three

to five acres of land and earning less

than $1 per day. Ethiopia’s decision to

revitalize its farmer cooperatives and

help them transition to marketoriented, private business organizations

– coupled with ongoing USAID- and

USDA-funded programs – has

established a framework for future

success.

Interventions to date through these

programs have had a big impact. An

ACDI/VOCA program assessment

showed that farmers reported having:

• Improved diet (64 percent of farmers);

• Better educated children (84 percent);

• Increased purchasing power for

consumer goods (77 percent);

• Improved homes (67 percent);

• Increased numbers of livestock (54

percent) and

• Newfound ability to hire labor (51

percent).

Revolutionizing Ethiopia’s

co-op movement

“The bureau, supported by

ACDI/VOCA with USAID funding, is

50 September/October 2012 / Rural Cooperatives

‘The pillar of my home’

continued from page 43

Top 100

continued from page 12
Rural Cooperatives / September/October 2012 51

Succession plans, like any business

plan, involve numerous factors that

require careful consideration. Seek

professional advice from to your lender,

accountant and attorney when

formulating a succession plan.

Succession planning

resources from Farm Credit

If keeping the farm in your family is

a top priority, look to experts you trust

to begin or revisit a succession plan; ask

questions and seek advice to help guide

you in building and maintaining a plan

that works for you and your family

business. Farm Credit, through its retail

banks and associations, offers many

programs that help borrower-owners

plan for and navigate the complexities

of succession planning.

Among them:

• AgSouth’s AgAware:

agsouthfc.com/AgSouthAgAwareProg

ram.html;

• AgCountry Farm Credit Services:

agcountry.com/en/Products-andServices/Succession-andRetirement.aspx;

• Visit farmcredit.com/locations to find

a Farm Credit location and additional

resources near you.

Management Tip

continued from page 19

revolutionizing the cooperative

movement in Ethiopia,” says Zerihun

Alemayehu, former head of the

cooperative promotion bureau in the

Ethiopian prime minister's office.

Cooperatives under the previous regime

were poorly managed, he says

“The new model cooperatives

currently being promoted by the

government and ACDI/VOCA,”

Alemayehu continues, “are democratic,

business-oriented and professionally

managed with increased income to

member farmers as the primary

objective.”

Brad Perry agrees with Alemayehu

regarding the impact of cooperatives,

both in Ethiopia and the United States.

The work he did in Ethiopia

reinvigorated his appreciation of the

value and worth of cooperatives, which

has also benefited his work in the

United States, he says.

“It’s been a refresher course for me

on co-op theory and education,” Perry

says. “Because they really believe it [the

value of cooperatives] in Ethiopia; too

many times in the U.S., we’ve lost sight

of it.”

“The Nature of the Cooperative” is a collection of five articles 

reprinted from Rural Cooperatives Magazine that examine cooperatives 

and their place in our free-market economy.

Author Charles Ling explains co-op economic structure, theory and 

practice, as well as the economics of cooperative marketing and 

co-ops’ relationships with other market participants through their roles 

in transaction governance.

Available as hard copy or online. For hard copies, email: 

coopinfo@wdc.usda.gov. Request Publication CIR 65 and indicate 

quantity needed. Or call: (202) 720-8381. Or write: USDA Co-op Info, 

Stop 0705, 1400 Independence Ave., SW, Washington DC 20250. 

To download from the Web, visit: 

www.rurdev.usda.gov/rbs/pub/cir65.pdf

Now Available ailable ailable
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Penalty for private use, $300

NOTICE:

q Check here to stop receiving this publication and mail this

sheet to the address below.

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52 September/October 2012 / Rural Cooperatives