R

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ral COOPERATIVES COOPERATIVES

USDA / Rural Development May/June 2008

Page 4

Idaho’s Bounty

Local food co-op finds a niche

Idaho’s Bounty

Local food co-op finds a niche

WIREC ‘08

Highlights

Page 8
Editor’s note: This commentary was written

by Joe Jobe, CEO of the National Biodiesel

Board (NBB), based in Jefferson City, Mo.

NBB is the national trade association of the

biodiesel industry and coordinates biodiesel

research and development. 

Despite the recent frenzy of attacks

on biofuels, the U.S. biodiesel industry

strongly believes that cooler heads will

ultimately prevail and that the benefits

of expanded production and use of U.S.

biodiesel will be widely accepted. 

Biofuels have been unfairly blamed

for everything from higher food prices

to rainforest deforestation. These claims

are largely based on faulty science,

ignoring the large body of credible

scientific evidence that shows biodiesel

is a bright spot in our fuel supply —

socially, environmentally and

economically.

U.S. biodiesel production is not a

significant factor in rising food prices.

The “perfect storm” of rising energy

costs, increased global commodity

demand and the weak dollar are the

main causes. In fact, in 2007, only 12

percent of U.S. soybean production and

4 percent of global soybean production

were used by the U.S. biodiesel industry

to produce fuel. 

Of the soybeans used to produce

biodiesel, 81 percent of the yield is

protein that enters the market for either

human consumption or animal feed.

Because of the potential for biodiesel to

create new markets for soybeans, U.S.

soybean farmers — through the

Soybean Checkoff program — have

invested millions of dollars to research

and test biodiesel.

The United Nations Food and

Agriculture Organization (FAO) has

calculated that of the land that could be

used for agriculture today, only 3.7

billion acres of the 10.4 billion acres are

used. And only 1 percent of that area is

used for biofuels, which includes

ethanol. Furthermore, according to U.S.

Census data, the United States currently

has the equivalent of more than 400

million gallons of soybean oil sitting in

inventory. 

During a news conference on April

29, President Bush countered questions

about the impact of biofuels on food

prices. He said the vast majority of the

changes in world food prices are caused

“by weather, increased demand and

energy prices” — not by biofuels. 

In addition, the overwhelming body

of data demonstrates the environmental

benefits of biodiesel.

Consider these facts:

• For every unit of energy it takes to

make domestic biodiesel, 3.5 units are

gained. 

• Biodiesel reduces “lifecycle” carbon

dioxide emissions by 78 percent. 

• In 2007 alone, biodiesel’s contribution

to reducing greenhouse gas emissions

was the equivalent of removing

700,000 passenger vehicles from

America’s roadways, and decreasing

CO2 by 8.06 billion pounds.

Earlier this year, the National

Biodiesel Board established a

Sustainability Task Force, charged with

overseeing the development and

implementation of a comprehensive

sustainability road map for the biodiesel

industry. 

As the demand for biodiesel

continues to grow, the U.S. biodiesel

industry is also working to advance

feedstock development from non-food

sources and to further improve the

environmental “footprint” of existing

oilseed crops as agriculture technology

continues to develop. Other sources of

biodiesel feedstock — such as restaurant

grease, animal fat, corn oil derived from

ethanol production, camelina and algae

— have great potential to expand and

diversify available material for biodiesel

in a sustainable manner. 

The U.S. biodiesel industry strongly

opposes rainforest destruction and nonsustainable agricultural practices

worldwide. 

President Bush further highlighted

America’s need for biofuels from an

energy security standpoint, saying, “It’s

in our national interests that our farmers

grow energy, as opposed to us

COMMENTARY

Biodiesel has important role to play in reducing greenhouse gas emissions

2 May/June 2008 / Rural Cooperatives

“Merrill Lynch...has

said that oil and

gasoline prices would

be about 15 percent

higher if biofuel

producers were not

increasing their

output.”

continued on page 36
Rural Cooperatives / May/June 2008 3

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Thomas C. Dorr, Under Secretary,

USDA Rural Development

Dan Campbell, Editor

Vision Integrated Marketing/KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or

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R

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ral COOPERATIVES COOPERATIVES

May/June 2008 Volume 75 Number 3

p. 4

p. 8

p. 22

p. 28

On the Cover:

Ella Rose Boice, 3, helps her family collect onions, part of a

delivery of farm-fresh produce from Idaho’s Bounty. The co-op

is meeting the demand for locally grown food in the Ketchum,

Idaho, area. Photo by Paulette Phlipot Photography. 

FEATURES 

4 Idaho’s Bounty

New food co-op helps meet growing demand for locally produced foods 

By Lindsay Atwood

8 The New Quest for ‘Fire’

Renewable energy experts come to grips with challenge of the century at WIREC ‘08 

By Dan Campbell

12 Energy innovators push technology

curve ever forward 

By Dan Campbell

14 Raising the Standard

Ability to add value, meet member needs fuels West Central’s growth 

By Dan Campbell

22 Biodiesel at the Intersection

Processors cope with high feedstock prices; eye impact of renewable diesel 

By Anthony Crooks

27 Great River Soy falls victim to soaring

soybean oil prices 

By Anne Todd

28 Baltimore Biodiesel 

Micro co-op contends with growing pains in quest for cleaner air 

By Stephen Thompson

DEP ARTMENTS

2 COMMENTARY

20 UTILITY CO-OP CONNECTION

31 NEWSLINE

38 PAGE FROM THE PAST
Idaho’s Bounty Idaho’s Bounty

New food co-op helps meet growing demand for locally produced foods 

Demand for eggs has been

greater than the co-op has been

able to meet to date. Here, a coop member’s daughter with eggs

from pastured hens.
By Lindsay Atwood,

USDA Rural Development

ot many

people in

the United

States

would

willingly do a job that does

not even pay a living wage,

much less be excited about

it. But five people in

southern Idaho are doing

just that, along with

numerous other volunteers,

and they can hardly contain

their excitement. 

What kind of job could

possibly be so exciting as to

lure people away from

much more lucrative jobs?

For these men and women,

the answer is starting and

running a cooperative that

benefits their local economy

and the future of their

region.

Idaho’s Bounty, a

relatively new online food

co-op that brings together

both producers and

consumers, is a dream come

true for many people in

south-central Idaho. “Our

aim is to support local

farmers and strengthen our

food shed,” says Judy Hall,

the cooperative’s director of

grant writing and a resident

of Ketchum, Idaho. “There

were a lot of questions in

our town about our viability

in the future, and we were

all looking at where we’re

heading as a community into

the future.” 

“Local food — local

agriculture — plays a really

big part in the sustainability

and viability of our

community,” she says. Hall

was not alone in this

sentiment. After writer,

lecturer and conservation

scientist Gary Nabhan gave

a speech challenging

residents to develop a local

food system, people took

action. 

James Reed made it his

job as a volunteer to find

out who was growing food

in the area. Reed, now the

co-op’s director of

operations in the Magic

Valley, started meeting

regularly with other

volunteers to develop a plan.

This collaboration —

and the recognition that

such a project could not be

undertaken alone — was key

to the establishment of the

co-op. Hall says the

counties just to the south of

her home in Blaine County

have a climate favorable for

agriculture. Prior to the

formation of Idaho’s Bounty,

their only markets were the

seasonal farmers markets or

the commodity markets

outside of the region and

state. Blaine County on the

other hand, has abundant

financial resources, but not

agricultural resources. 

“The health of our

neighboring counties to the

south is directly related to

N

Ed Lucero, owner of Morning Star Farm, and his grandson check

out the source of some of the co-op’s milk. All photos by Paulette

Phlipot Photography

The co-op charges a 15-percent fee for all food orders, which

pays the co-op’s overhead costs. Middle photo, a co-op member’s

son picks up his family’s food order from a drop-off point. Lower:

Co-op members enjoy a banquet of locally produced food. 

Rural Cooperatives / May/June 2008 5
the health of our county,” Hall says. “We need to be in

relationship with each other.”

Reed agrees that working together is essential. “If we all

work together as a cooperative, we can build a fantastic local

economy,” he says. “We can do that much better than if we’re

all out on our own.”

Getting started

Volunteers eager to meet Nabhan’s challenge made a trip

to Oklahoma to learn as much as they could from a similar

cooperative operating there. The trip confirmed their belief

that a local food co-op could work in southern Idaho, so they

called a meeting in February 2007 for anyone interested. The

response was extremely positive.

“We were able to find supporters in the community who

really believed in food security issues, rural development and

the local economy,” Reed says.

Working with Hagerman I.D.E.A. Inc. and the Wood

River Resource Conservation and Development Council, the

co-op applied for a Farmers Market Promotion Program

grant from USDA’s Agricultural Marketing Service to help

get the new operation up and running. “The process of

writing a grant forced us to get our act together and create

goals and objectives and a practical plan for this dream

instead of just talking about it,” Hall says.

There was now a concrete plan for the co-op, but they had

to look elsewhere for the money needed to start the

operation. “We wouldn’t hear about the grant until

September,” Hall says, “but we were coming up on the

[growing] season, so we just said, ‘We’re going to do this.’

That built credibility with the producers. They said, ‘Wow,

you’re not just talking. You’re actually doing something! You

are moving food.’”

With help from a private donor, Idaho’s Bounty was born

as a pilot project in May 2007, although it was not officially a

cooperative until September.

How it works

The concept of an online food store of locally produced

foods is relatively new in the co-op community. It is similar

to that of nationally recognized online grocery stores, such as

Stop and Shop’s Peapod, but with a twist. “We work on a

two-week cycle,” Reed says. “All the producers put up on the

Web site what they have available. Then the consumers have

a week to go online and order from the available food. It’s

first come, first served.”

From there, consumers are able to pick up their food every

two weeks at one of several local drop sites. The producers

are guaranteed a local market, and the consumers are

guaranteed fresh, local produce, meat, dairy and other

products.

To become a member, producers and consumers pay a

minimal one-time fee, and producers must agree to the coop’s standards and practices. Additionally, producers and

6 May/June 2008 / Rural Cooperatives

Idaho’s Bounty works something like an online food store, but with all locally produced foods and a business that is owned by producers and consumers.

Here, members rally around the co-op delivery truck.
consumers are charged a 15 percent fee for the goods they

buy or sell, which enables the cooperative to distribute the

food, do marketing, handle all of the money and taxes and

pay for any other financial needs of the co-op.

For a co-op that has existed less than a year, it is

experiencing remarkable success. It currently has 21

producers and almost 400 members, and

demand for locally-produced food is

skyrocketing. “I honestly believe we will

never be able to produce enough to

supply the demand,” Reed says. “I think

as we are able to ramp up supply,

demand is going to be ramping up faster.

The industrial food system just isn’t

cutting it any more.”

One example of this is eggs. Hall

asserts that the co-op simply cannot

supply enough eggs to its customers.

“People really love the farm-fresh

pastured egg,” she says. “Different

farmers who might be doing dairy

farming or large produce crops have

started up with laying hens. They know

how to do it, they have the property and

the land and this has opened up markets

for them. What Idaho’s Bounty did was

publicize that people wanted to buy the

eggs.”

Lessons learned

Helping to coordinate both supply and

demand is one of many things co-op

leaders have had to learn along the way.

“It’s really tricky, because we can’t go out

and sell food that isn’t there, and yet we can’t convince the

producers to ramp up their production if we don’t have a

market for it,” Reed says. 

One of the ways the co-op is working to increase

production is to extend the growing season using

greenhouses. Marketing to consumers has been limited

because of the already sizeable response, although the co-op

is doing some customer education and recently hosted a

dinner at a local restaurant using only Idaho’s Bounty food.

The pricing of their food is another aspect of the business

that Reed describes as a work in progress. “What we want to

do is develop an advisory board so we can work on pricing

together so we don’t sell too cheaply but so that, on the other

hand, we can keep prices down.” Idaho’s Bounty is aware that

as it expands the co-op’s market base, it will be competing

with supermarkets and selling to value-conscious

suburbanites.

A third lesson — and one with a very

steep learning curve for the cooperative

— involves creating and perfecting the

online ordering system, which Hall says

“has taken a lot of work.” 

Idaho’s Bounty used the Oklahoma

food co-op’s ordering system as a model,

but has expanded and customized it to

meet local needs. Hall describes Idaho’s

Bounty as more convenient than a

farmers market, because members can

shop from the convenience of their

kitchen for five straight days in a

shopping cycle.

“Ten years ago, old folks like us

weren’t comfortable enough to go order

food over the Internet,” Reed says.

“Well, now we are. We even order our

movies over the Internet.”

Looking toward the future

For a co-op as progressive as this one,

many of the hopes and dreams are

remarkably steeped in preservation: of

the earth, of the farming way of life, of

the connection between people and their

food and of better eating habits.

Hall describes how Idaho’s Bounty is

making food less anonymous. “We’re breaking down the

anonymity and the separation, and people love that,” she

says. Rather than buying food at a grocery store that may be

shipped in from thousands of miles away, consumers have the

opportunity to know the people producing their food.

Personally, Hall loves knowing that supporting Idaho’s

Bounty is good for her and good for the earth. “I’m

motivated as a person who’s concerned about my own body

and the body of the earth, about health for myself and health

for the planet,” she says.

Rural Cooperatives / May/June 2008 7

“I honestly believe we will never be able to produce enough

[locally grown food] to supply the demand.”

continued on page 36

Coordinating supply and demand is

one thing co-op leaders have

learned along the way. Above,

members bag Hagerman melons.
8 May/June 2008 / Rural Cooperatives

By Dan Campbell, Editor 

Editor’s note: for the complete texts of major

addresses and many PowerPoint presentations

made during the WIREC 2008 conference, visit:

www.wirec2008.gov/wps/portal/wirec2008. 

he bad news for energy

consumers is clear: the world

is running out of fossil fuels.

The good news is equally

clear: the world is running

out of fossil fuels. 

Although contradictory at first glance, the

two statements — made by Herman Scheer,

general counsel for the World Council of

Renewable Energy — are anything but.

According to Scheer and many other speakers

at a three-day international conference on

renewable energy, the depletion rate and skyrocketing costs

of fossil fuels and the corresponding development of “green

power” will ultimately help fight global warming.

Speaking at the WIREC 2008 Conference in Washington,

D.C., in March, Scheer described the pursuit of renewable

energy as “a race against time,” in which the world has “only

a few decades, not centuries” to change the way it produces

and consumes energy. He called the changeover from the

fossil-fuel economy the “major challenge of the 21st century.” 

And the challenge grows daily. U.S. Energy Secretary

Samuel Bodman cited estimates that the world’s primary

energy needs will grow by more than 50 percent by 2030.

“Meeting this demand will require the investment of billions

of dollars annually for decades, around the world and at all

stages of the energy cycle,” he said. 

To help meet this challenge, WIREC ‘08 (Washington

International Renewable Energy Conference) brought

together more than 3,000 delegates (including government,

industry and academic leaders) from 113 countries, all with

the same basic goal: to accelerate the development and

deployment of all types of renewable energy. In dozens of

often-packed conference halls and meeting rooms,

participants discussed issues as diverse as developments in

carbon-trading markets, the role of forestry in renewable

energy, how to “plug in” new energy sources to the existing

power grid and virtually every other issue crucial to the

rapidly developing “green-power” industry.

The overall atmosphere of the conference was something

T

The New Quest

for ‘Fire’

International cast of renewable energy 
Rural Cooperatives / May/June 2008 9

experts comes to grips with ‘challenge of the century’ at WIREC ‘08 

like a combination United Nations/energy-industry think

tank, geared toward accelerating the quest for renewable

energy.

Promoting energy security

Regardless of where one stands on the global warming

debate, the development of home-grown, renewable energy is

the key to energy security for America; the nation must wean

itself of its dangerous and expensive addiction to imported

oil, President George W. Bush stressed in his keynote speech. 

The President also called for creation of an international,

clean-technology fund under

which wealthy nations

would help poorer nations

clean up their

environments. “I call on

our Congress to commit $2

billion to the fund,” the

President said. “And in my

travels in my last year of

the presidency, I’m going to

call on other wealthy

nations to contribute to this

fund.” 

Real life, hands-on

evidence of how far this

industry has come in a

relatively short period of

time was on display at a

renewable energy trade show that filled the main exhibit hall

of the Washington Convention Center. Exhibits there

promoted everything from the latest wind-power-generating

equipment to new methods for finding and drilling for

geothermal power (see page 12).

President vows no retreat on biofuels

Underscoring how serious America’s imported-oil

addiction has become, President Bush noted that in 1985, 20

percent of America’s oil came from abroad. “Today, that

number is nearly 60 percent,” Bush said. “The dependency

upon oil puts us at the mercy of terrorists.”

Bush said the nation’s basic energy strategy must be

twofold: “One, we’re going to change the way we drive our

cars; and two, we’ll change the way we power our businesses

and homes.” 

The federal government

has spent more than $12 billion

since 2000 for research and

development of alternative energy,

Bush noted, adding that the 2007

Energy Bill raises the mandatory

fuel economy standard to 35 miles

per gallon by 2020 and requires

the use of 36 billion gallons of

renewable fuel by 2022. 

Bush called biodiesel “the

most promising” of the biofuels,

and said the 450 million gallons of

biodiesel produced last year is up

80 percent from 2006. Likewise,

he said ethanol production has

quadrupled, from 1.6 billion

gallons in 2000 to more than 6.4 billion gallons in 2007.

“Last year we accounted for nearly half of the worldwide

ethanol production.”

But the President acknowledged that “a lot of challenges”

Agriculture Secretary Ed Schafer called WIREC ’08 the “first global conference...that recognizes the importance of agriculture to renewable

energy.” Below, President Bush said the $1 billion invested by the federal government in cellulosic ethanol research will promote non-food sources

for biofuel. USDA Photos by Bob Nichols
arise whenever such a massive new demand is placed on the

nation’s grain stocks. “If you’re a hog-raiser in the United

States, you’re beginning to worry about the cost of corn to

feed your animals. I’m beginning to hear complaints from

our cattlemen about the high price of corn.” Higher corn

prices are also beginning to affect the price of food, he

observed. 

“And so, we’ve got to do something about it. The best

thing to do is not to retreat from our commitment to

alternative fuels, but to spend research and development

money on alternatives to ethanol made from other materials,”

he said. Bush cited the $1 billion invested by the government

to make cellulosic ethanol more cost competitive as an

example of what needs to be done. In just a few years, the

projected cost of cellulosic ethanol has already dropped by 60

percent, Bush said.

“I look forward to the day when Texas ranchers can grow

switchgrass...and then have that switchgrass converted to

fuel. I look forward to the day when people in the parts of

our country that have a lot of forests are able to convert

wood chips into fuel. And those days are coming.” 

Plug-in hybrid car technology is advancing rapidly toward

meeting a short-term goal to develop vehicles that can be

driven for the first 40 miles on electricity, he said. He also

noted that $1.2 billion in research funds are being spent on

hydrogen-power vehicles. 

Agriculture and energy production converging

Agriculture Secretary Ed Schafer said WIREC ‘08 marked

“the first global conference of this magnitude that recognizes

agriculture’s importance as a driver of renewable energy. I’m

glad agriculture has a seat at the table now, because

agricultural and rural areas are the primary contributors to

renewable energy.” 

Displacing 1 billion barrels of imported oil (at $100 per

barrel) with biofuels could double the level of farm income

from the $96 billion expected this year to nearly $200 billion,

Schafer said. To reach that level would mean boosting the 9

billion gallons of biofuel expected to be produced this year to

42 billion gallons annually. 

“Renewables have clearly boosted our farm economy and

have spread positive effects across our broader economy as

well,” Schafer continued. “The potential benefits are clear:

more stable demand for energy crops drives up prices.

Higher prices drive up farm income and farmland values.

And it’s the farmers and rural residents who stand to benefit.”

These benefits extend far beyond the

farm field, since processing plants

nearby are needed “to turn those

feedstocks into fuels. That means

jobs, investment and income.”

The beneficial impact of the trend

toward renewable-energy agriculture

means proportionately even more for

the majority of the world’s nations,

which depend on agriculture for a

much greater share of their gross

national product than does the United

States, he observed. 

Advances in the conversion

technology used to process feedstocks

into energy are also needed. “Our

scientists are working on this issue

now, and are collaborating with our

university partners on a number of

exciting projects to improve the

fermentation process for ethanol,”

Schafer said. “Similar technological

advances are required in the fields of

solar, hydro, geothermal and wind

energy.” 

Schafer said the proposed budget

for USDA contains an additional $25

million for research on the

modification of plant cell walls and

crop residues, and an additional $19

million for research on bioenergy and

bio-based fuels. To further this effort,

10 May/June 2008 / Rural Cooperatives

If there was a surprise in President Bush’s address at WIREC, it was

perhaps the emphasis that he placed on nuclear power. “I strongly believe

the United States must promote nuclear power,” the President said, adding

that “nuclear power is limitless...and it generates a massive amount of

electricity without causing air pollution or any greenhouse gases.” 

Yet, he said, the U.S. nuclear industry has been at a virtual standstill

for many years while “France, our ally and friend, gets nearly 80 percent of

its power from nuclear power.”

Bush said his administration is working to eliminate the barriers to

development of nuclear power plants, and last year invested more than

$300 million in nuclear energy technologies. “We want our people to

understand that this generation of nuclear power plants is safe.”

“We’ve also launched a program called Nuclear Power 2010,” Bush

said, noting that this industry-government partnership has already resulted

in six applications to build new U.S. nuclear power plants, with 13 more

applications expected to be submitted this year. “The paradigm is

beginning to shift,” he said, adding that construction will be supported by

$18.5 billion in government loan guarantees. 

The President also hailed the growth of the wind-energy industry,

which he said has jumped more than 300 percent since 2000. More than 20

percent of new electrical generating capacity added in America came

from wind last year, he said. Gains in development of advanced solar

energy are also encouraging, Bush said, noting that more than $1 billion is

being invested in solar power research.

Paradigm shifting on nuclear power
Rural Cooperatives / May/June 2008 11

Schafer announced the awarding of

$18.4 million in grants from USDA and

DOE for 21 biomass research and

development projects. 

Inventing the future

“The best way to predict the future,”

said Vinod Khosla, “is to invent it.”

Khosla — founding CEO of Sun

Microsystems and a billionaire venture

capitalist who has started a number of

renewable energy businesses and made

major investments in biofuels —

cautioned people not to be overly ready

to accept the dire predictions of

environmentalists regarding global

warming. For example, he has noted that

rising temperatures could result in

increased plant growth, which could

actually decrease carbon dioxide levels in

the atmosphere. 

Most forecasts about the future are

invariably wrong, Khosla stressed. To

make his point, he cited a number of

examples of “expert predictions” that

proved to be wildly inaccurate. For

example, one respected economic

forecasting firm predicted a rate of

increase in demand for mobile phone

services that underestimated actual

demand by 600 percent. And few, if

any, predicted the 500 percent decline

in the cost of transistors that the

electronics industry has benefited

from, he noted. 

Casting a gaze into his own crystal

ball, Khosla predicted that $1 per

gallon cellulosic ethanol and cleanenergy electricity for 7 cents per

kilowatt are on the horizon. 

A “cap and trade” system for carbon

emissions could pay for most of the

changeover to renewable energy

production, he said. Such a program

would set mandatory limits (a cap) on

carbon dioxide emissions and create a

market in which allowances to emit the

gas could be traded. This cap could be

set lower than existing emission levels,

and then be reduced over time. 

Interest in this concept is growing rapidly, as indicated by

the standing-room-only crowd of perhaps 200 people that

jammed a breakout session on carbon trading. When the

same topic was covered at another energy summit several

years ago, the number of speakers on the panel outnumbered the people in the audience.

Renewable energy could help pull

much of the world out of poverty,

Khosla said, noting that biomass

energy could result in a $500 billion

transfer to Africa and Latin America.

“It would prove far more valuable

than foreign aid and debt

forgiveness.” 

“Food vs. fuel is not a relevant

debate because it will really not take

that much land to do biofuel the

right way,” Khosla said. 

He has estimated that if U.S.

agriculture would divert 80 million

acres of land that grow commodity

crops for export to energy crop

production (which developing

nations would support, since they

believe American ag exports depress

their own farm sectors), and

combine that land with 40 million

acres of conservation-reserve

program lands which could be

planted with energy crops, we would

have 120 million acres for biofuel.

Growing our way to a cleaner future

Under Secretary for Rural Development Thomas Dorr

stressed that the energy revolution now upon us is a unique

Conference participants were encouraged to make formal pledges

of what they will do to promote renewable energy. More than 130

pledges were collected, including:

• Nations as diverse as Egypt and the Netherlands vowed to produce 20

percent of their power from renewable energy by 2020;

• Denmark pledged to increase its renewable energy share to at least

30 percent by 2025;

• Canada committed to adopting new tax incentives that will accelerate

the rate of renewable and clean energy development;

• Tanzania pledged that 1 million residents would gain access to

electricity from renewable energy resources; 

• Cape Verde committed to increasing renewable sources of energy to

50 percent of market share by 2020, with one island running

completely on renewable energy by that time;

• Indonesia pledged to enact a new national energy policy that will rely

more on conservation and energy diversification.

Pledges for the future

Under Secretary for Rural Development

Thomas Dorr called renewable energy “an

immense opportunity for farmers and rural

communities.” USDA photo by Bob Nichols

continued on page 37
12 May/June 2008 / Rural Cooperatives

By Dan Campbell, Editor

Question: How many sailors does it take to change a

light bulb? Or, more specifically, to change the model for

portable solar power generation?

Answer: Three. 

Anchored in Key West, Fla., during the winter

of 1997-98, the skippers of three small sailboats

who were about to begin long ocean voyages

started to tinker with concepts for a better way

to power their onboard refrigerators, lights and

communications equipment. There was no room

for large, bulky solar-power systems, or for large

banks of batteries and the diesel fuel supplies

needed to recharge them at sea. 

The compact, lightweight solar-power

systems they adapted and built from existing

parts were admittedly crude, but occupied very

little deck space and worked well through rough

seas and doldrums. One of the sailor-inventors

even adapted his maritime solar-power gear for

use on a land trek in Peru. 

When they met up again in 2003, after

logging thousands of voyaging miles, the

sailors were amazed that all three systems

were still working perfectly. Agreeing that they

had designed the proverbial “better mouse

trap,” with real commercial potential, they formed a

company and sought out solar engineering and

manufacturing expertise to help refine their model. After two

years of development work, the Solar Stik was launched

commercially “with the intent to revolutionize the solar

energy market, on land and sea,” says Stephanie Hollis,

chief financial officer for Solar Stik, based in St. Augustine,

Fla. 

That voyage that started in 1998 resulted in a port of call

in March 2008 at the WIREC ‘08 trade show in Washington,

D.C. Solar Stik was one of 246 exhibits demonstrating

renewable energy products and services. Like most of the

other booths, the Stik exhibit was a very busy place. People

from around the world with every imaginable need for small,

portable power generators stopped by to inspect, lift, shift

and discuss the equipment with Hollis and company

president Brian Bosley.

Weighing only 80 pounds when assembled, the units are

filling the need for purposes as diverse as land and sea

recreation, home back-up power generation, and by

emergency first responders and even the military.

“Our first sale — five units — was to the U.S. Army for

use in Iraq,” says Bosley, who has further meetings lined up

with armed services to discuss possible future purchases. A

National Guard officer stopped by the booth and was

intrigued by possible use of the Solar Stik in the immediate

aftermath of hurricanes and other disasters. A delegation

from Ghana saw the Stik as a possible replacement for outdated, non-functioning solar systems on some buildings in

their West African country.

“WIREC was really our first big ‘coming out event’ and

the response was truly overwhelming,” Bosley says. 

Energy innovators, large and small,

push technology curve ever forward

Stephanie Hollis describes how the two 50-watt solar panels on the

Solar Stik can be quickly adjusted just three times a day to ensure that

maximum sun is hitting them. USDA Photo by Bob Nichols 
Rural Cooperatives / May/June 2008 13

Innovations unlimited

The Solar Stik booth was just one example of the

fascinating confluence of small-shop “backyard” inventors,

large industries and leading biofuel companies that were

showing their wares at the huge trade show, which filled the

main exhibit hall at the Washington convention center.

Thomas Edison and Henry Ford would have felt right at home

walking the aisles of the trade fair and talking to the men and

women who are convinced the world is on the cusp of an

energy revolution — and doing their part to advance it. 

A number of states, foreign nations, educational

institutions, nonprofit organizations and trade associations

also had exhibits where they touted what they are doing to

promote renewable energy. 

No exhibit was bigger or more impressive than Volvo’s:

seven huge tractor trucks, each adapted to run on a different

type of renewable fuel, including 100 percent biodiesel,

synthetic diesel, hydrogen and methanol/ethanol blends. 

Rob Simpson, manager for national field marketing, says

Volvo remains convinced that the diesel engine “is still the

future of power for heavy trucks,” and is being adapted to

run on more environmentally friendly fuels. “The goal here is

to show the variety of fuel alternatives for diesel engines;

they are not all commercially viable yet, but we are showing

what can be done. These are all production trucks.”

Other automakers displayed plug-in hybrid cars that can

run the first 40 to 50 miles just on the power of an over-night

electric charge. 

Nick Bowdish of Fagan Inc. said his company — a major

builder and operator of ethanol plants — can build a stateof-the-art, turn-key ethanol plant for clients, and is

increasingly doing so outside the traditional Cornbelt

territory for biofuels. It currently has plants under

construction in Georgia and Texas. 

“We’re also here to show how Fagan is part of the

larger renewable energy industry,” he added, explaining how

the ethanol plants of today run on significantly less power

and require less water than was the case just a few years

ago. 

As for fears that ethanol is diverting too much corn from

the food chain, he pointed to seed technology advances

being made by Monsanto and others that he said will double

per-acre corn harvests in the next 20 years. 

Snapshots of change

A few other snapshots of the some of the

exhibits at the trade fair:

• Louis Capuana Jr., president of

Thermasource, a geothermal consulting and

drilling business based in Santa Rosa, Calif.,

explained how advances in technology are

allowing his company to tap into and

generate power from geothermal resources

that in the past would not have been

considered hot enough for commercial use.

• The Sea Breeze Power Corp. displayed plans

and maps for transferring wind power from

British Columbia to power-hungry California,

which would involve the use of undersea

power cables. 

• AgriPower Inc., of Great Neck, N.Y.,

presented a modular, portable biomass

generator that can run on a wide variety of ag

or industrial wastes. The $1.2 million power

plants use a fluid-bed combustor and several

heat exchangers to heat compressed air that drives a turbine

generator. Originally created for use in developing countries,

they are now being used to meet many needs, such as at

landfills, where trash is being turned into power instead of

filling valuable land space. 

• PaceGlobal, a Fairfax, Va.-based energy consulting firm,

was there to attract clients with services that Marketing

Director Chrissy Hunt said range from carbon and energy

management to price forecasting and project valuation. 

USDA was one of the major sponsors of WIREC ‘08,

which will next move to India in 2010. ■

More than 240 exhibits filled the trade show floor at WIREC 2008.
14 May/June 2008 / Rural Cooperatives

By Dan Campbell, Editor

t was 1933 — in the grip of the Great

Depression — that the business known today

as West Central changed its business

structure to a farmer-owned cooperative. 

Those bleak times of widespread business

failure and armies of unemployed Americans drove home the

need for farmers to pursue the advantages gained from

standing together to market their crops and for purchasing

supplies. 

It was in 1942, during the middle of another great struggle

and the uncertainties of whether America would prevail in

World War II against powerful enemies on two fronts, that

the co-op made another momentous decision: to begin

processing its members’ soybeans into livestock feed at home,

in west Iowa. Up until then, nearly all the crop was shipped

to cotton mills in the South. Processed feed was then hauled

back to Iowa, with most of the value-added dollars having

been shed along the way. By 1955, the co-op was processing

80 percent of its members’ grain.

This “value-added” effort and the desire to keep more

profits at home would become a driving business philosophy

at West Central for the next six decades. 

Today, as West Central celebrates its 75th anniversary as a

cooperative, this once humble local co-op that started with a

single, 20,000-bushel elevator and one small farm office in

Ralston, Iowa, is now a diversified cooperative that had $436

million in sales last year. It is a market leader with a proven

track record in developing products ranging from specialized

dairy cattle feeds to biodiesel technology. 

It is the nation’s 16th leading grain marketer, with 18

locations in a 55-mile radius of Ralston that handle about 80

million bushels of grain and oilseeds annually. The co-op has

3,500 members in 10 Iowa counties. 

In the 1960s, West Central moved into the liquid and bulk

fertilizer markets, and began shipping 20,000-gallon tankers

of soy oil to markets as distant as California. To help avoid

confusion with a number of other co-ops in the region with

“Farmers” in their name, the West Central name was adopted

in 1978 (it had been called the Farmers Cooperative

Association of Ralston). 

The next year, the cooperative doubled in size by merging

with a co-op in Boone, Iowa. It has continued to grow

through mergers and acquisitions ever since (see

“Milestones” sidebar).

Raising the Standard

I

Ability to add value, meet member needs 
Rural Cooperatives / May/June 2008 15

In the 1990s, West Central began processing soybeans into

biodiesel, eventually becoming one of the largest marketers

of biodiesel in the nation. Although its biodiesel operations

are now part of another business, Renewable Energy Group

Inc. (REG), West Central continues to hold majority interest

in that company. REG builds turn-key biodiesel plants for

customers, and also provides them with operating and

marketing expertise and training. 

Following are excerpts from a conversation in April that

Rural Cooperatives had with West Central CEO Jeffrey

Stroburg and Board Chairman Scott Chesnut. Stroburg, who

was raised in south Iowa, was previously CEO at

CountryMark in Indianapolis until it merged with Land O’

Lakes, taking the helm at West Central in 2000. Chesnut is a

fourth generation Iowa farmer with a grain and beef cattle

operation north of Boone, Iowa.

Question: The year 1942 was a real red-letter date in the

history of the co-op, when it began processing soybeans and making

its own livestock feeds, rather than shipping beans out of state. How

important has this value-added focus been to your members and

rural Iowa?

Stroburg: It was a pretty amazing decision for that time,

when you consider that those were war years with hard-tofind steel and supplies. It was a very difficult time to decide

to go into value-added processing of commodities. We were

one of the very first soy processors in the Midwest, so it was

a pretty innovative, daring move that really did set the stage

for a culture of value-added at our cooperative.

Chesnut: I think the co-op structure has worked amazingly

well when you look back and see that there are now fourth

and fifth generation farm families that are still utilizing the

cooperative. Not that many things operate continually

through that many generations and work just as well now as

they did at the beginning. 

Stroburg: Regarding the impact on local communities, just

consider that every dollar generated here changes hands

something like seven times. 

Chesnut: The more value we keep here in our own

communities, the more it generates growth and stimulates

the local economy and spreads out. 

Q. West Central is a good example of how a well-managed co-op

can grow through mergers and acquisitions. What do you look for

in these mergers, and what are the keys to successfully merging two

businesses?

fuels West Central’s 75 years of growth

From left: a West Central field representative and a member

check on a field of soybeans; a co-op rail tanker transports

SoyPower biodiesel to market; West Central has facilities in 18

locations in west Iowa. All photos courtesy West Central.
16 May/June 2008 / Rural Cooperatives

Chesnut: We look for strategic growth opportunities. Some

co-ops seem to pursue growth just to gain size and structure,

but we are looking for long-range strategic solutions that will

improve our facilities and benefit our members. We do not

pursue growth just to be the biggest. We look for mergers

where it is a win-win for both parties. If both parties don’t

get some benefit from it, it is not likely to be very successful.

In addition to strategic growth, we hope to improve the

personnel in our organization. 

Q. Do these co-ops generally get a seat on the board?

Chesnut: A seat on the board is not automatic, although we

do usually provide for representation any time we’ve had a

merger; a board seat has to come from a vote of the

membership. So those areas become part of the nomination

process, and probably someone will be nominated from that

area. We have a nine-member board, with one outside

director. 

Q. Do you reach a point where growth is no longer

advantageous to members? 

Stroburg: Growth for the sake of growth is not

advantageous. If you look at our company, we will do around

$400 million of business in a year. In the grand scheme of

things, that is still a pretty small company. At what point does

size start to work against you? I don’t know that that is

quantifiable. It’s how and why you grow. One plus one does

not always equal three. In some cases, one plus one equals

less than two. 

Q. West Central has a track record of constantly pushing for

modernization of its facilities — evidenced in ways such as the

automation of your liquid fertilizer and bulk fertilizer facilities,

and more recently your grain elevators. This requires some sizable

expenditures. Is it hard to get the board

to support these types of moves? 

Chesnut: The board is always very

analytical as we approach these

investments to ensure we are making

a proper decision, and our personnel

are constantly doing analytical work

in these areas. The board requires a

lot of input and looks closely at all of

the numbers. We don’t always make

an immediate decision — we may

request more research first. For the

most part, we have accepted projects

brought before the board, because by

the time we see it, it has been pretty

well analyzed. Management knows a

bad decision is not likely to get

through us, so they usually only bring

us good projects that advance our

long-range strategy. 

Stroburg: Every six months the

board updates the strategic plan.

That’s not to say that it gets changed

every six months, but we look at it to

see if it still flies. One key component

of the strategic plan is automation. So

the board is involved in the idea of

automating our facilities and has

approved of it in the strategic plan.

When we bring a proposal to the

board, one of first things we address

is how it fits in the strategic plan —

how does it move us forward? So the

board is involved even at the

1933 Existing grain business incorporates

as Farmers Cooperative Association of

Ralston. Two years later it hired its first

manager, Karl Nolin.

1942 Begins processing locally gown

soybeans in its new processing plant. 

1955 Begins branding its bean meal as

“Farmers Feeds.” Annual report notes that

80 percent of grain received was

processed at co-op’s own feedmill rather

than shipped out of state. 

1958 First issue of Co-op News published

in 1958 to help combat

“anti-co-op propaganda

running rampant.” 

1959 Co-op expands to

Jefferson. 

1960s During the 1960s, the

liquid fertilizer and ammonia

business takes off. 

1960s Early in the 1960s, a

major change in farm policy

means local elevators are

no longer needed to store

West Central Milestones
Rural Cooperatives / May/June 2008 17

conceptual level. 

Chesnut: Automation allows us to

more efficiently use our personnel,

and that is something we are

constantly looking at. 

Q. How do you typically finance plant

modernization or expansion?

Chesnut: We use income from

operations, we use investments from

members, we use CoBank and

sometimes we look at leasing

possibilities. Some bonds have been

used for major projects. 

Q. In light of your recent storage

expansion and having gained access to

three railroads, how can grain

cooperatives position themselves to

compete in a sector where much of the

grain now goes directly to biofuel

refineries, bypassing the traditional

cooperative first handler? 

Stroburg: It all comes down to the

economic value that we can deliver to

the end user. We are on the main

line of Union Pacific. Customers, for

example, who are feeding chickens in

the South will get their grain from

people who have the economic

advantage, and we have that with our

rail access. So we service customers

who are ethanol producers — and

they are definitely good customers of

ours — but we also continue to move grain out of state to

livestock producers who have been good customers, some for

them for 20 years. 

Q. West Central has developed a number of LLCs. Do you see

the use of LLCs by cooperatives growing? If so, what impact does

this have on cooperatives and their ownership by the farmers who

use them?

Stroburg: We’ve used LLCs since the 1990s, when we

formed one to manufacture biodiesel. West Central was the

majority owner, but the LLC allowed us to bring in strategic

partners to grow that business. Another LLC was formed in

the early 2000s with a construction company so we could

take the technology we learned in biodiesel and leverage that

into a plant construction company. But we had to bring in

somebody who had the construction expertise that we lacked.

In that case, it was a 50/50-owned LLC between West

Central and the construction company. It allowed us to lever

and maximize the value of our technology, which we could

not have done otherwise. So, LLCs have their place, but like

any other business structure they have to be used

appropriately 

Q. An explosion in 2001 destroyed West Central’s InterWest soy

biodiesel plant, but you managed to turn that tragedy into a

triumph by bouncing back with a 12-million gallon, state-of-theart plant. What were the major steps in the chain of events from

the day after the disaster to the opening of the new plant? 

Stroburg: We had an employee hurt in that tragedy, and

once we handled the near-term issues, it made us step back

and think about how we were approaching the biodiesel

industry. It forced us to look at what we knew — what

knowledge we had gained. We felt we were in the best

position to continue in the biodiesel business based on our

government grain, diminishing these

organizations’ storage income and

creating space in storage facilities. With

inflation up and a drop in storage income,

the co-op is forced to look at improving

efficiencies and lowering costs.

1964 Co-op explores futures markets and

hedging. It is one of the first handlers in

the region to begin using hopper cars and

unit trains. It reaps the benefits of giving

farmers a better price for their grain and

opening new markets.

1967 A new type of hog feed is

introduced: pelleted “sow

brickettes.” A sow can be

hand-fed three to four

pounds of them a day,

with little waste. The

brickettes contain 20

percent protein.

1971 Karl Nolin, the only general

manager the co-op has ever known,

retires, to be succeeded by Wayne

Seaman as general manager and Tom

Feldman as marketing manager. 

1972 First 50-rail car shipment out of

Jefferson. 

1974 Becomes one of the first

co-ops to lease its own rail

cars. Rail cars are at a

premium, so this secures the

co-op’s supply. The co-op

paints all rail cars pink,

bringing national attention and

gaining accessibility to the cars –

because very few others wanted to use

pink cars.

1978 Changes name to West Central

Cooperative.
18 May/June 2008 / Rural Cooperatives

intellectual capital. It ultimately led to the formation of an

LLC where we got economic value from that intellectual

capital. This process helped us realize that the real asset was

not the building and the pipes, but in our knowledge of how

to do it. It allowed us to build a state-of-the-art plant, then

take that technology and sell it in the

marketplace, which brought revenue

in to our stockholders. We had gone

through a three- or four-year period

where it was very difficult to make

any money in biodiesel. Our

stockholders had invested a lot in

biodiesel — time, energy and capital.

By selling technology and building

plants for others, we were able to get

a return back to our stockholders for

that investment. 

Chesnut: It fit West Central’s longtime model of adding value. 

Q. How important was this new plant

to West Central, and the overall industry? In what way did it

represent a technological advance for the industry?

Chesnut: It was the largest plant in the country and was

state-of-the-art, with a new design that West Central had

perfected — and continues to perfect today. It set the

standard both for quality and cost of production, and

continues to add value for our local producers. 

Q. How has the REG business changed since its inception?

Stroburg: Renewable Energy Group LLC was formed in

2003 with Todd & Sergeant, a construction company, and we

each held 50 percent ownership. In 2006, we brought in

outside investors, and we rolled all of our biodiesel activities

— all that we had been doing in biodiesel since late 1990s —

into a single entity: REG Inc. It was no longer an LLC. At

that point, we brought in outside investors — financial and

strategic investors. These included Natural Gas Partners in

Dallas, Texas, Bungee North America and E D & F Man

Holdings Ltd., a London-based

company that does business in the

United States as Westway. In the

process, we raised about $100 million

to move forward with the biodiesel

company. 

Q. The soaring price for soybeans is

causing distress for many biodiesel

processors, although it has certainly been

good for growers and soy oil processors.

How has this impacted West Central and

REG? 

Stroburg: As a soybean processor,

West Central sells oil to REG, and the

high prices have been good for soy

processors, but tough for the biodiesel industry. We are only

one investor in REG. So while West Central is not making

that much money on its investment in biodiesel right now,

the economics of crushing soybeans is pretty good.

Chesnut: The soy-crushing operation has been adding

tremendous value to our producer-members. 

Stroburg: Scott and I were at a meeting two or three weeks

ago with some investors in REG. It just so happens that most

of them were also farmers and stockholders in West Central,

so we started out by saying that the biodiesel industry is not

doing so well right now — that there is not a lot of money to

be made. On the other hand, you are getting $12 for your

beans. So it is a counter-cyclical investment. 

1979 Merges with Farmers Elevator and

Livestock Co., Boone, Iowa, doubling its

locations.

1983 Merges with

Farmers Cooperative at

Halbur and Templeton;

purchases an additional

elevator in Templeton,

boosting capacity to

21.5 million bushels and

gaining access to the

Burlington Northern

Railroad. 

1984 West Central receives grants to

examine ruminant protein value of

expeller-processed soybean meal. The coop has been looking at feeding swine

high-protein bean meal, and is curious

about potential bypass value the meal

could have in cattle. As a result, SoyPlus

feed launched, with sales skyrocketing

throughout the ‘80s.

1986 With the popularity of the SoyPlus

product, soy processing is expanded at

the cooperative with the expansion of the

soy plant in 1986. By then, SoyPlus was

being shipped across the United States by

West Central Milestones

West Central is the nation’s 16th

largest grain handler.
Q. It seems as if almost overnight, biofuels have gone from being

one of the great hopes for a world that desperately needs renewable

energy, to being vilified in the media. Does this surprise you? How

should the industry be responding?

Chesnut: Sometimes these articles

do damage us, and sometimes the

information they use is inaccurate,

based on old studies and research.

Both the soybean and corn growers

associations have done a lot of

research on biofuels and are trying to

bring forward information that

counters the misinformation. We all

have to work hard to get this

information out. It’s an ongoing

education process. The price of

petroleum products going up so much,

so rapidly, is actually what is causing a

lot of the problems. 

Stroburg: It’s a matter of balance. If

we rely strictly on petroleum-based energy, there will be

problems. When you think about what biofuels can do for

the world, there are some negatives and we need to deal with

them. Like clearing rain forests in Indonesia to plant palm.

We need to minimize impacts on the environment. But if you

look at biofuel in general, it creates an opportunity for

countries around the world to participate in energy

production in a way that they never have before. Petroleum

resources are highly concentrated in nations such as Saudi

Arabia, Venezuela, Iran, Iraq and the Persian Gulf countries.

When you look at energy made from new carbons, that we

create year by year, we create tremendous new opportunities

for farmers in places like India, Africa and Central America

to participate in energy production. 

High food prices are not driven solely, or even primarily,

by renewable fuels, but rather by the investment community

moving into commodities. We are seeing runups in prices for

wheat, which is fairly unconnected to

biofuels. Rice prices are going up, and

so are metals like platinum and copper

— you name the commodity, and we

are seeing the prices boom. This is not

driven by biofuels. It is driven by

hedge funds and other financial

institutions that see commodities as a

hedge against the falling dollar, and

maybe as a safe place to put a portion

of their portfolio. That portion might

be $3 billion or $4 billion. That has

really contributed to the runup in

commodities. It is not fair to blame it

all on renewable fuels. 

Q. What is the position of West Central

and REG regarding the emergence of renewable diesel?

Stroburg: It is just part of the process. We will see

renewable diesel manufactured in traditional petroleum

refineries. What it doesn’t do is create additional refining

capacity. It might even diminish refining capacity to the

extent that when refineries run vegetable oil, it slows down

capacity. So, I think we will see refineries using feedstocks

other than crude petroleum. It will just be another part of the

industry. 

Q. How does West Central ensure the succession of strong board

members, and do you do anything to promote director education

Rural Cooperatives / May/June 2008 19

both truck and rail.

1989 Unites with Farmers Cooperative of

Audubon-Exira. 

1991 Purchases Adair Feed & Grain,

gaining access to Iowa Interstate Railroad

and new markets. 

1995 Unifies with Consolidated

Cooperative in Gowrie. 

1996 Begins to process soy oil into

biodiesel in a plant owned by InterWest,

an LLC owned equally by West Central

and InterChem.

1998 Unifies with Farmers Elevator Co-op

of Scranton-Bagley and Farmers Co-op

Elevator Co. of Boxholm. 

2000 After 42 years with the co-op,

Wayne Seaman retires and is succeeded

by Jeff Stroburg. 

2002 Opens 12-million gallon biodiesel

plant, the nation’s largest. Begins to

market biofuel intellectual property though

new subsidiary, Renewable Energy Group,

a collaborative effort with Todd &

Sargeant, a construction and engineering

firm. 

2006 REG completes a $100 million private

equity financing deal, into which West

Central invests its biodiesel facilities;

West Central maintains controlling

interest in REG. 

2008 Co-op marks 75th anniversary. 

■

Co-op CEO Jeffrey Stroburg and

Chairman Scott Chesnut prepare for a

board meeting in April.

continued on page 37
20 May/June 2008 / Rural Cooperatives

Keeping the Lights On

RECs face huge challenge as energy demand

grows at twice rate of new power generation

UTILITY CO-OP CONNECTION

By Anne Mayberry, 

Rural Utilities Programs

USDA Rural Development

The growing demand for electric power nationwide,

coupled with climate change concerns and increasing energy

costs, has increased interest in energy conservation and

efficiency programs, and has expanded investment in

alternative fuels. Despite these efforts, experts tell us that

without additional electric generation, we may see power

shortages during the next five to ten years. 

Renewable energy comprises about 11 percent of the

power sold by rural electric cooperatives, with hydropower

accounting for the majority of it. More than 90 percent of

cooperatives educate consumers about energy efficiency and

conservation, and nearly one-half offer financial incentives

for consumer efficiency and conservation efforts.

Cooperatives continue to increase their use of alternative

fuels and engage in research and development of technologies

designed to address concerns about greenhouse gases. 

Yet, data indicate this investment in conservation, energy

programs and renewable energy projects will not meet future

electric-power demand. 

Basin Electric Cooperative already generates 136 megawatts (MW) of electricity at wind farms such as this, and will be expanding

with an additional 300 MW (see related article, page 31). Photos courtesy Basin Electric Cooperative
Rural Cooperatives / May/June 2008 21

NRECA: Renewable alone won’t meet need 

“Loads are growing. We need more than renewable

energy to meet increased demand,” explains John Holt,

senior manager of generation and fuels in the Energy Policy

Department of the National Rural Electric Cooperative

Association. A look at one rural electric cooperative’s wind

program explains the value of renewable fuels and how their

use fits into the current situation. 

Basin Electric Power Cooperative, a generation and

transmission utility based in North Dakota, has developed

several alternative energy projects, including a heat recovery

project designed to capture waste heat from pipeline

compressors to generate over 20 megawatts of electricity.

Basin is also invested in wind power and is among the

recipients of USDA Rural Development loans to finance

production of electric power from wind energy. 

“Overall, installed wind generation capacity is

approximately 16,800 megawatts (MW) of electricity in the

United States, demonstrating the tremendous growth

potential of wind energy,” says Ron Rebenitsch, Basin’s

manager of alternative technologies. Currently, Basin has 136

MW of wind capacity in its portfolio and plans to increase

that by an additional 300 MW in the near future. Wind

energy is growing, not just in the United States, but

worldwide. “Because of this growing worldwide demand,

most wind turbine manufacturers are sold out through 2010,”

Rebenitsch says. 

Demand outpaces new generation 

Electricity use is projected to grow twice as fast as capacity

will increase during the next 10 years, according to the North

American Electric Reliability Corporation (NERC) — a selfregulatory organization that enforces the reliability of the

electric power system in the United States. NERC warns that

our ability to manage unplanned events, such as equipment

failures and unplanned weather, is becoming increasingly

limited. 

“Renewable resources are an important part of North

American’s energy future, but reliably integrating them into

the bulk power system has its challenges,” the

organization says in its most recent Long-Term

Reliability Assessment.

Renewable energy, such as wind and solar

power, is not considered “baseload power”

because it does not provide power 24 hours a

day, seven days a week. Holt says this is the

downside to most forms of renewable energy. 

“It’s not dispatchable. On hot summer

days, when air conditioners are running full

power, there may be no wind,” Holt says.

“Cloud cover can diminish solar capacity.”

One of the issues now extensively discussed in

the renewable power industry is the accuracy

of weather forecasting. “Everyone is

emphasizing the need for better forecasting to

prepare for drops in power,” he says. “This is a key

management issue.” 

Rebenitsch echoes Holt’s point about wind not always

being where it’s needed, when it’s needed. On average, Basin’s

data indicate that its 136 MW of wind power capacity

generates at least 16 MW of power 80 percent of the time; it

generates 50 MW 47 percent of the time. For example,

during peak electric demand in July 2007, the 136 MW of

wind produced 61 MW of electric power. However, during

July 2006, wind was the source of only 6 MW of electric

power during the peak demand period. 

Wind’s primary value comes from its displacement of fuel,

such as coal, diesel or gas,” Rebenitsch points out. Utilities

typically use wind to displace the highest cost fuel in

operation, often natural gas, he notes. 

CREBs help co-ops generate green power 

Tax credits have played a major role in the development

and use of alternative fuels. Although wind project costs are

rising, tax credits help keep wind power affordable. 

More than half of a wind project’s cash-flow is tax related,

Holt explains, adding that while many cooperatives have

purchased renewable power for years, they did not generate

their own renewable energy. “Rural electric cooperatives

initially bought green energy from other sources, at slightly

higher costs,” explains Holt. “Initially, cooperatives could not

take advantage of the tax credits that other sectors of the

industry were using to offset the costs of renewable

investment. But implementation of Clean Renewable Energy

Bonds (CREBs), which allow cooperatives to issue zerointerest bonds to fund renewable energy projects, helped

level the playing field.” 

The lack of transmission — the ability to move power

from one point to another — plays a role in getting

renewable energy to the nation’s power grid. Our aging grid

needs investment, but, according to NERC, transmission

investment lags not just because of the cost to build, but also

because transmission projects are falling victim to the “NIMS

syndrome — Not in My State!”

Rebenitsch puts transmission costs in

perspective: “More than one-half of the cost

of the consumer’s power supply bill is in the

wires.” Holt phrases it another way: “It’s no

good to have that wind coming out of North

Dakota if you don’t have the transmission to

get it out of North Dakota.” 

The near-term solution, Holt says, is

likely to increase use of natural gas. “If this

switch to gas does occur, we’ll need to

import [more of it].” Holt says he’s usually

an optimist, but with all the constraints now

facing electric utilities, including rural

electric cooperatives, he expects to see more

blinking lights during the next five to ten

years. ■

“It’s no good to

have that wind

coming out of

North Dakota if

you don’t have

the transmission

to get it out of

North Dakota.” 
22 May/June 2008 / Rural Cooperatives

By Anthony Crooks,

Ag Economist

USDA Rural Development

iodiesel has experienced

more than its share of

growing pains as it

moves from infancy as

an alternative fuel

toward becoming a well-established,

viable renewable fuel. Producers

endured a very trying year in 2007.

Hopefully, with these ups and downs

has come invaluable experience, but

there are reasons to expect that the

market turbulence isn’t quite over. 

Market rocked by

oilseed prices

High feedstock costs were far and

away the most destabilizing factor faced

by biodiesel producers this past year.

Soybean biodiesel feedstocks rose

steadily and prices increased sharply

throughout the year. 

It is hard to imagine now, but not

long ago soy oil was less than 20 cents

per pound. But from February of 2005

to December 2007, soy oil prices

jumped 160 percent, from 18 cents to

47 cents per pound. As of this writing

(in late March), soy oil futures continue

to exceed historically high values at 55

cents per pound, while soybeans have

pushed through a 35-year-old record of

$12.50 per bushel. 

“Beans in the teens” is hardly wishful

thinking for soybean growers anymore;

it’s simply a fact of life. And while

higher feedstock prices were

anticipated, the sheer magnitude caught

almost everyone off guard. The impacts

of higher energy costs worked their way

through the economy and were

especially detrimental to the agriculture

and transportation sectors. But a

“perfect storm” of increased corn

demand, significantly fewer soybean

acres in production and a growing

demand for biodiesel feedstock pushed

soy oil prices to dizzying heights. 

Processors struggle

with high prices

For many biodiesel producers, the

economic pressure was too great to

withstand. A dozen plants reportedly

filed for bankruptcy in 2007, and others

are for sale (see article about Great

River Soy on page 27). According to the

most recent information provided by

the National Biodiesel Board, there are

172 U.S. plants operating, with 2.21

B

Processors cope with high feedstock prices;

eye impact of renewable diesel on market 

Biodiesel at

the Intersection
Rural Cooperatives / May/June 2008 23

billion gallons of production capacity.

But industry and USDA estimates

concur that only 450 million gallons

were produced in 2007. 

In other words, about 80 percent of

the nation’s biodiesel production

capacity is sitting idle. Many plants,

while not shuttered, produce fuel solely

on a “per order” basis. 

Although this meant desperate

circumstances for many last year, the

situation turned out to be a boon for

biodiesel producer-exporters. As the

dollar continued its slide throughout

2007, trading at a 15-year low, it

simultaneously pushed crude oil prices

and U.S. biodiesel exports to an all-time

high. 

After taking full advantage of the

biodiesel Blenders Credit, about 80

percent of U.S.-produced biodiesel is

exported, largely to the European

Union (EU). Even though the EU has

stepped up its protests against U.S.

subsidies for biodiesel exports,

Congress — in lieu of repealing the law

that permits exported biodiesel to

receive the Blenders Credit — seems

likely to allow the credit to sunset this

December, according to many market

watchers. And even those who believe

that the credit may be extended,

recognize that modifications are

necessary to address a number of areas

in the program.

The Blenders Credit expiration

seems to be the price the industry paid

in advance to receive a biodieselspecific (or methyl-ester) renewable fuel

standard (RFS) in the Energy

Independence and Security Act of 2007

(HR 6), signed in December. But while

an RFS was warmly received by the

industry, the requirement of 500

million gallons of biodiesel to be

blended into the nation’s fuel supply in

2009 (expanding to 1 billion gallons per

year in 2012) is viewed by many in the

industry as too-little, too-late. 

Making market inroads

Industry insiders have long held that

an RFS would be required for biodiesel

to make inroads into the U.S.

commercial transportation-fuel market.

Finding markets for biodiesel has

become a challenge even during the

best of times. Biodiesel is chosen for a

variety of reasons: regulatory

compliance (for air quality and

renewable fuels standards), patriotic and

energy security reasons. However, it

may still be a while before biodiesel is

chosen because it’s the best available

product in a competitive marketplace. 

In the meantime, the industry

continues to hope that the heating oil

and other stationary fuel markets will

begin to recognize what a good fit

biodiesel can be. Nevertheless, if

biodiesel is to find acceptance as a

commercial transportation fuel, it will

have to compete on price and quality

with petroleum diesel. In addition to

being sold at a competitive price,

biodiesel must have cold-weather flow,

comparable energy content, reasonable

fuel-filter-maintenance requirements,

etc. After all, truck drivers don’t have to

contend with these issues with regular

diesel fuel. Why, then, should they deal

with these issues to use biodiesel? Truck

drivers’ operating margins are as thin as

those in any other service industry.

Even a penny a gallon is a big deal, and

enough to make or change fuel

purchasing decisions. 

Renewable diesel

But if biodiesel producers aren’t

already facing enough difficulty, the

emergence of “renewable” diesel is

expected to create decidedly more

industry turbulence. Renewable diesel is

Soybean prices increased to $12.50 per

bushel in late March. USDA photo
24 May/June 2008 / Rural Cooperatives

a broad class of fuels derived from

biomass feedstocks, including oils or

animal fats, processed through

petrochemical processes.

The most advanced of these

petroleum refinery processes are called

hydrotreating and thermal

depolymerization (TDP). These

processes use vegetable oils or animal

fats solely or co-processed with

petroleum distillate fractions (diesel

fuel) to produce a hydrocarbon mixture

that satisfies the standard for petroleum

diesel fuel (ASTM D975).

Consequently, renewable diesel may

use the existing petroleum

infrastructure for blending and

transporting (in particular, the nation’s

pipeline system). 

The technology for producing

renewable diesel fuel from soybean oil

was developed by ConocoPhillips and

tested in 2006 at its refinery in

Whitegate, Ireland. But other

manufacturers (including Neste Oil)

have also announced their intent to

commercialize similar technologies and

expect to produce renewable diesel in

the United States either late this year or

in 2009. 

This development was widely

encouraged in the spring of 2006 by a

broad interpretation by the Internal

Revenue Service to include coprocessed, or “green,” diesel and

Fischer Tropsch-style distillates

synthesized from biomass as qualifying

for the Blenders’ Credit. 

On the heels of the IRS ruling,

ConocoPhillips and Tyson Foods

announced a partnership to use fat from

Tyson’s rendering plants to produce up

to 175 million gallons a year of

renewable diesel that meets all federal

standards for ultra-low-sulfur diesel.

Production began late last year and is

expected to ramp up through 2009. The

total bio-refining capacity under

construction for fuels made from animal

fat is now above 250 million gallons per

year. 

Attractive economics 

Renewable diesel production offers

some very attractive economics, given a

present breakeven price of $4.50 per

gallon for biodiesel (when $1 per gallon

is subtracted for the Blenders Credit)

and a feedstock price of 55 cents per

pound of soybean oil. At 28 cents per

pound for Tyson’s poultry, hog or beef

fat — plus conversion costs which range

from 5 to 10 cents a pound, transportation costs of about 5 cents per pound

and capital investment/depreciation of

from 6 to 13 cents a pound — renewable diesel breakeven costs of $3.12 per

gallon appear quite attractive against

the current low sulfur diesel price in

Houston of $2.92 per gallon (after the

Blenders Credit).

The National Biodiesel Board’s

response is one of understandable

concern: 

“In a time of budget deficits and

rising fuel prices – due in large part to

limited domestic refining capacity –

biodiesel producers question the

wisdom of directing tax revenue to

subsidize existing oil refining

operations. One of the most significant

factors behind rising fuel prices is the

constraint on refining capacity in the

United States. Biodiesel producers

contribute doubly to our nation’s

energy independence by producing fuel

and building refining capacity. 

“In sharp contrast, co-processed

renewable diesel uses existing refining

capacity to displace limited amounts of

imported petroleum with a domestic

bio-oil. Because the supply of available

feedstock — animal fat and vegetable

oils — is essentially fixed, the Blender’s

Credit to integrated oil companies

engaged in co-processing serves to push

feedstock prices even higher than their

already unprecedented levels. 

“Substantial economic benefits are

A “perfect storm” of increased corn demand,

significantly fewer soybean acres in production and

a growing demand for biodiesel feedstock pushed

soy oil prices to dizzying heights.
Rural Cooperatives / May/June 2008 25

associated with domestic biodiesel

production: an estimated 39,102 jobs

and $24 billion are expected to be

added to the economy between now

and 2015. The economic,

environmental and rural development

benefits associated with biodiesel

production may very well be lost if the

tax incentive is directed to support

existing oil refinery operations.”

Congress, NBB adopt

similar stances 

In 2007, the U.S. House of

Representatives introduced a bill to

clarify that co-processed renewable

diesel does not qualify for the $1 per

gallon tax credit. A report issued to

accompany the (then proposed) 2007

Energy Bill noted the Committee’s

stance that tax incentives for renewable

diesel should encourage the building of

new plants and provide new refining

capacity for renewable diesel, but are

not intended to subsidize decades’ old

refinery capacity in a way that

contributes neither to investment in

production capacity nor fuel. 

Although HR 2776 passed the House

last August, substantial portions of it

were folded into the omnibus energy

AGP is the largest cooperative soybean processor in the

world, as well as the largest soybean processor in Iowa and

the fourth largest soybean processor in the United States,

based on capacity. AGP began refining soybean oil in 1985,

and in 1997 began soybean methyl ester production at

Sergeant Bluff, Iowa. AGP markets soy methyl-ester

products under the SOYGOLD brand in a variety of

applications, including biodiesel fuel. In the fall of 2007, AGP

began operations in a newly constructed methyl ester plant

in St. Joseph, Mo. 

John Campbell, AGP’s senior vice president of industrial

products and government relations, says that this federated

co-op “does not believe that renewable diesel producers will

have any significant advantage over traditional biodiesel

producers using the same feedstock, especially when their

downstream and upstream opportunity costs are considered.

Refiners do not use existing refineries to make renewable

diesel, as is widely believed.”

For an integrated oil company, such a decision is far

more complex than a single refinery “go” or “no-go”

decision. Such a commitment involves substantially large

investments and the studied calculation that it’s significantly

more profitable to process biomass feedstock than

petroleum, Campbell says. 

CHS Inc. is also following the renewable diesel issue

very closely because its food, energy and renewable energy

businesses are directly impacted by the debate. 

CHS has refined petroleum for 75 years in Montana and

Kansas and distributes fuel to more than 20 states. The

cooperative has extensive assets involved with oilseed

crushing and production of oilseed-based sauces and

dressings. It has also been involved in biofuel blending and

distribution, including biodiesel, for 30 years and in ethanol

production for two years. 

Bob Looney of CHS Federal Affairs Office, provided the

following summary of CHS’ viewpoint on renewable diesel. 

“Since the establishment of the renewable diesel $1 tax

break in the 2005 Energy Policy Act, CHS has looked at the

investment costs, the quality, security and dependability of

consistent feedstock (fats and oilseeds), and other factors to

decide whether to invest in renewable diesel. CHS looks at

renewable diesel from several perspectives: 

(1) Economics — CHS invests in activities that make

sense economically and believes that the $1 Blender’s Credit

can help firm up that condition and possibility. We also

looked at the 50 cent credit from the Highway Bill but believe

it is insufficient. 

(2) Quality — Fuel industry experts have suggested

that renewable diesel (RD) has better qualities than

biodiesel. One of those is quality consistency; another is cold

weather storage and distribution, which biodiesel does not

have. We have worked with this issue in Minnesota and

Montana. It adds costs to biodiesel. Because of economics

and quality, CHS has no plans to go into making methyl

esters to make biodiesel. We will, however, continue to

blend methyl esters to make a low percentage biodiesel (our

blends range from 0.5 percent to 2 percent) in some of our

trade territory. CHS recently constructed a biodiesel

blending facility in Colorado. 

(3) Competing demands — Another issue is

sometimes part of the “food vs. fuel debate” – our oilseed

experts see a limit to biodiesel’s pull on oilseed stock before

it creates another stress on oilseed prices.

(4) Politics — CHS is sensitive to our various partners’

needs. As we started to look closely at renewable diesel, the

National Biodiesel Board (NBB), of which CHS is a supporter,

felt the tax break was too generous for petroleum companies

and posed a threat to their members, and so decided to fight

to limit the eligibility. CHS worked with NBB, the American

Soybean Association (ASA), and others to seek a political

compromise.” ■

CHS, AGP weigh multiple factors for feedstock choices
26 May/June 2008 / Rural Cooperatives

bill that became the Energy

Independence and Security Act of 2007

(HR 6), signed into law in December

with all renewable diesel provisions

removed from the bill prior to cloture. 

The bigger picture: the nexus

of agriculture and energy

However layered and complex the

implications of renewable diesel

development may seem for the biofuels

industry, consolidation and realignment

of the sector seem less likely a result of

this innovative new technology than

from a massive over-investment in

production capacity, relative to the

available feedstock. Once capacity

exceeds what can be economically

processed, given a fixed amount of

feedstock, it doesn’t really matter what

type of plant or technology is

employed. Feedstocks are far and away

the most significant factor of

production.

What may have also been lost amid

the controversy is that a fundamental

shift in commodity pricing occurred in

2007 as all globally traded fats and oils

(lipids) converged with world crude oil

prices. Figure 1 illustrates the price

movements of the principal biodiesel

feedstocks. Note their steadily upward

and closely correlated movement

throughout 2006 and into the first

quarter of 2008. 

The nexus between agriculture and

energy is even more evident, however,

when world lipid prices are correlated

with crude oil prices, as illustrated in

Figure 2 (published in January 2008

Biodiesel magazine, "NBB In Sight —

Guns, butter and biodiesel,” by Joe

Jobe, CEO of the National Biodiesel

Board, and originally in the Nov. 7

issue of Kingsman Biodiesel Weekly).

In 2007, global vegetable oil markets

began moving in tandem with crude oil.

What’s even more noteworthy is that

prices converged even as U.S. fats and

oil inventories grew. This remarkable

shift makes clear that agricultural lipids

are now globally traded as energy

commodities. 

What’s also clear is that current

commodity prices are signaling

agriculture to increase lipid production,

significantly and quickly, in recognition

that expected global supply will be

insufficient to meet tomorrow’s energy

demands. Seemingly, most of

agriculture is now in the “oil business,”

either directly or by default, and should

plan accordingly.

How long will it be before refineries

compete directly with biodiesel

producers for available lipid molecules?

The methyl-ester-specific RFS and the

likely allowed sun-setting of the

Blenders Credit are less than subtle

Congressional suggestions that

dependence on government subsidies is

no longer a sustainable business model. 

Growers and feedstock providers are

the clear winners in the near term. And

if we remember that the first among

many motivations for a biodiesel

industry was to create a demand

mechanism to raise commodity prices,

we can applaud the wildly successful

effort. On the other hand, as all

commodity prices revert to their longterm means, prudent growers and

feedstock providers would do well to

prepare for harder times of their own. 

Some expect to see a return to

fencerow-to-fencerow plantings, even as

land values and rental rates ratchet ever

higher and commodity markets endure

considerably greater volatility. 

Others have speculated that farmland

values and asset valuation could be

heading for a major correction. ■

Rolling price correlations reflect the degree of linear relationship between two variables;

the measure ranges from +1 to -1. A correlation of +1 means that there is a perfect positive

linear relationship between the two variables; -1 is a perfectly negative linear relationship,

and a correlation of 0 means there is no linear relationship between them.
By Anne Todd

USDA Rural Development

ess than a year ago, in August 2007, the

Great River Soy Processing Cooperative, a

farmer-owned biodiesel production co-op in

Lilbourn, Mo., was preparing to begin

operation. Great River Soy was one of three

biodiesel plants located in the southeastern Missouri

“Bootheel,” a three-county region dotted with small, rural

communities where agriculture is the lifeblood and where

hopes for economic revival have been buoyed in recent years

by the prospects of renewable energy.

Construction of the Great River Soy plant was complete

last August, and construction of a soybean crushing facility

was slated to follow in spring 2008. Like the other biodiesel

plants in the Missouri Bootheel, the Lilbourn plant had a

production capacity of 5 million gallons of B100 (100 percent

pure, neat biodiesel) per year. The company planned to make

B100 exclusively from soybean oil.

Biodiesel plants have been emerging all over Missouri in

the past few years, spurred in large part by the state’s

Qualified Biodiesel Producer Incentive Fund. The state

legislature established the fund in 2002 to encourage

Missouri biodiesel production by providing a 30-cent-pergallon subsidy for the first 15 million gallons produced each

year at facilities where at least 51 percent of owners are

Missouri agricultural producers. 

Big hurdle to clear

Great River Soy had a big hurdle to overcome even before

it started operation. Soybean oil represents almost 90 percent

of the cost of biodiesel production. For the 2007 season,

many growers were swayed by the ethanol mandate to switch

from soybeans to corn. In Missouri alone, the 2007 soybean

yield was 11 million acres less than the 2006 crop. The

smaller crop, coupled with increased demand for biodiesel,

caused soybean prices to soar to almost 40 cents per pound

by August 2007 — about double the price compared to 2006.

(As of mid-April, soybeans were 62 cents per pound.)

Although Great River Soy general manager Stan Polivick

was nervous at the time about those high prices, he knew that

there would be challenges associated with any type of new

agricultural venture. Industry experts were predicting that

biodiesel demand would rise, and the higher prices that

farmers would get for their soybeans was expected to help

defray any potential start-up losses for farmer-owned

biodiesel plants.

Great River Soy started operations in October 2007 and

produced 94,000 gallons of B100 biodiesel that month.

Unfortunately, the co-op had to halt production soon

afterward.

As a start-up business, the company had only limited cash

reserves. Because of the skyrocketing soybean prices, the

amount of cash needed up front was quite high. Co-op

leaders realized that the cash-flow cycle would be about seven

weeks. This translated to a necessary cash reserve of more

than $2 million. 

This created an insurmountable cash-flow problem for the

fledgling company, which didn’t have enough reserves to

outlast the funding gaps. Another issue was that all of the

soybean oil used at the Lilbourn plant was being purchased

from external providers, instead of from member/owners of

the co-op. Other factors contributing to the shutdown were

the low price of biodiesel at the pump, compared to the price

of production, and high distribution costs.

In January 2008, Great River Soy converted to a limited

liability company (LLC) in an effort to increase investments

from members. However, revamping the business structure

didn’t improve the situation. Great River Soy Processing

LLC is currently seeking a buyer.

Aftermath

Does Polivick still believe that the U.S. biodiesel industry

has a viable future? “Yes,” is his emphatic response.

“Agriculture is always a rollercoaster,” he says. “Right now is

a difficult time.”

Polivick believes that renewable energy producers must

devise other ways of production besides relying on foodgrade industry feedstocks. He predicts that that transition

will take place over the coming years.

Currently, equipment and facilities are designed to process

food-grade products. Once that equipment is redesigned to

handle non-food feedstocks, Polivick believes that renewable

energy will serve its purpose, have a long-term future and be

“very viable, for sure.” ■

Rural Cooperatives / May/June 2008 27

L

Great River Soy falls victim to soaring soybean oil prices

Great River Soy’s conversion from a co-op to an

LLC did not raise enough working capital, and it

is currently for sale.
28 May/June 2008 / Rural Cooperatives

By Stephen Thompson, Assistant Editor 

his is how we’re going to take over the

world,” says Ilya Goldberg, pointing to an

unassuming metal tank with a hose and

nozzle.

Goldberg is the technical guru for the

Baltimore Biodiesel Cooperative, a group of about 150

owners of diesel cars and trucks who have banded together to

purchase a “greener” fuel for their vehicles. The 500-gallon

tank, ensconced in a metal cage for protection from thieves

and vandals, is where members come to fill up.

The tank is located next to an old industrial building now

housing a garden supply store, a small farmers market and a

small collection of food retail stands. The owners of the

building let the cooperative use the space, including a small

information booth on the inside, for free.

Easing access

The co-op, which was founded in 2006 and began

operation last year, sells about 10,000 gallons annually — not

a large amount. But Goldberg says increasing that total

should be easy, once a new electronic self-serve sales system

is up and running.

Currently, the tank must be attended by a volunteer, who

unlocks the cage and oversees each transaction. This

dependence on volunteers means that the filling station is

open only for 3 hours each Friday evening and Saturday

afternoon. 

One customer on a recent Friday evening is an architect

who says he used to design “green” buildings, but then

decided he wanted to do more than design “one building at a

time.” He now consults for environmental causes. 

“I wanted a car that reflected my convictions,” he says as

Goldberg proudly shows him the new fueling access system.

He considered a hybrid, but chose a diesel car because he

considers it more environmentally-friendly if run on

biodiesel. 

Mark Eckley is another customer and volunteer, a friend

of Goldberg’s who was at first a little wary of putting strange

stuff in his fuel tank. “But Ilya convinced me,” he grins.

“Besides, I’m from Texas, and truckers there use it, so I

figured it wasn’t fly-by-night.”

Fighting misconceptions

The cooperative often finds itself fighting misconceptions

about biodiesel. “Mechanics tell people ‘Oh, you’ll ruin your

engine,’” says Goldberg. Problems caused by biodiesel

brewed in people’s garages may be partly to blame. Another

issue, says Goldberg, is the “food versus fuel” debate.

Developed by Goldberg and financed with a grant from

the city of Baltimore, the self-serve system uses a credit-card

“T

Baltimore Biodiesel

Micro consumer co-op contends

with growing pains in quest for

cleaner air 
Rural Cooperatives / May/June 2008 29

“swiper” and PIN number pad to determine the identity of

the user. It queries a server through a high-speed Internet

connection to make sure the user is a co-op member, unlocks

the cage and starts the pump. It also records the transaction

and bills the member’s credit card account. 

Goldberg says that after the customer’s account is billed,

the number of the credit card is discarded to protect

customer privacy. The high-speed connection is provided

gratis by a local Internet provider called Believe Wireless.

The cooperative plans to make the system available to other

biodiesel co-ops once any problems have been worked out.

Goldberg sees this system as the key to expanding the coop. 

“The issue with scalability was volunteer hours,” he says.

“Once we get this system up and running, we’ll have access

24/7.” He figures that with the current membership,

doubling sales should be easy. And he sees much greater

growth ahead. 

The co-op was approached by a local advertising firm that

mounts billboards on trucks. The ad company decided not to

participate because of the limited hours of availability.

Goldberg figures that if the co-op can land that fleet

account, factoring in membership growth and a couple more

outlets, a 10-fold growth in business is possible.

Goldberg has designed the fueling station to make setting

one up as simple as possible. Along with the access system, he

has included provisions for a solar panel for power and a cell

phone Internet connection. “That way we can be completely

off the grid,” he says. “We want to drop these things here,

there and everywhere.”

The cooperative is run on a volunteer, nonprofit basis by

enthusiast-activists and hobbyists. Members pay a $70

refundable fee to join, plus a $30 annual fee. It’s a spin-off of

a public-service organization called Charm21, which

describes itself as “dedicated to implementing resultsoriented programs that promote the use of renewable fuels

and resources in the Greater Baltimore region.” 

Plan to process own fuel dropped

Charm21 set up the biodiesel cooperative, originally

intending to produce its own product from waste cooking oil

from restaurants and other local sources. But the practical

problems of small-scale biodiesel production, including

providing a consistent, high-quality product and finding the

people to run the plant, cause the fledgling co-op to

reconsider. “We wanted to expand the market and educate

the public,” says Goldberg, “Not spend our resources

experimenting.” 

As he’s talking, a middle-aged woman in a hybrid drives

up. Her car doesn’t use diesel. She’s here to find out if she

can recycle some expired cooking oil through the co-op, but

is disappointed to learn that the co-op doesn’t make its own

biodiesel. “We get a lot of this,” says Goldberg. 

But she goes away happy after someone suggests that she

could burn the oil in a lamp. She does have an oil lamp,

doesn’t she? “Well, sure,” she says. “You mean a regular oil

lamp? I never thought of that.”

The next step in expanding the biodiesel market is a

Left: Dr. Bob fills “Maryland’s only biodiesel art car” at the co-op’s biodiesel filling station. Above: The co-op maintains an information booth

(upper right) inside the warehouse next to the biodiesel filling station. USDA photos by Stephen Thompson
30 May/June 2008 / Rural Cooperatives

proposed location at a local concert venue just outside of the

city. “We get a lot of band tour buses coming in to fill up on

green fuel,” says Goldberg. Singer Willie Nelson’s bus is one

example; Nelson has even published a book, “On the Clean

Road Again,” advocating biodiesel as a means of reducing

dependence on foreign oil and saving the family farm.

Getting bugs out

But first, some bugs must be fixed. Today, the fuel is

coming out at an excruciatingly slow rate. The problem

seems to be a clogged filter. When the filter is changed,

things speed up for a while, but the flow soon slows down

again. 

Speculation focuses on the filters themselves — are they

compatible with biodiesel? Could the filter media be swelling

up? Or is there some crud in the tank that quickly clogs the

filter? Mark theorizes that the last delivery may have been

from the dregs of the winter fuel tank, containing sediment

that wasn’t properly filtered.

This isn’t the only time problems have dogged the co-op.

In October, 2007, a delivery of biodiesel with a relatively

high “gel point” stopped business in its tracks. The fuel,

apparently made from animal fat, turned solid when the

temperature fell below 52 degrees Fahrenheit. 

“We had two tons of Crisco!” says Goldberg. 

Being stuck with what amounted to a tank full of lard was

bad enough, but the real damage was suffered by members’

vehicles. Many had to be towed to garages and have their fuel

systems flushed. 

Meanwhile, the tank was emptied by renting two kerosene

heaters, each resembling a giant blowdryer, and training

them on it, then pumping the stuff into barrels. The fuel now

resides on a member’s farm, waiting for summer, when it

should work just fine. Goldberg chuckles that “there’s

probably a tank farm somewhere filled with Crisco.” 

The co-op now sells a “winter mix” during cool-weather

months consisting of half soy-oil biodiesel and half kerosene.

“It’s what works,” says Eckley.

Dealing with distributors

The “Crisco episode” only highlighted a greater issue.

The co-op, because of its small size and lack of transport, has

to buy its biodiesel from petroleum distributors — who, it

turns out, are not always reliable. “It’s really touch and go,”

says Goldberg. 

Part of the problem is that distributors are not very

knowledgeable about biodiesel. “They just don’t know the

product,” Goldberg says. “They’re just dabbling in biodiesel.

They could talk to us, but they don’t, because we’re just a

little co-op. So they talk to their buddies in the oil industry,

but they don’t know much either.” 

Now the co-op always demands an ASTM sheet — a

document telling the precise characteristics of the batch of

fuel being purchased. 

Not being taken seriously by suppliers has caused other

difficulties. “One time, the truck just didn’t show up,” says

Goldberg. “I felt like asking them, ‘Is this what you’d do to a

back-up generator for a hospital or something?’” 

In addition, suppliers sometimes try to back down from

obligations. “We get a lot whining. They’ll ask us ‘why don’t

you buy B20 (diesel fuel containing 80 percent petroleum)?’

Well, because we don’t want B20!”

Going through middlemen also raises costs, as does being

able to buy only 500 gallons at a time. The small amount

means that the co-op can’t get a long-term contract.

Eckley says that the prices charged by the distributors

often don’t seem to have much to do with what’s going on in

the market. “It’s like, ‘Pick a prime number,’” he grumbles.

Co-op members are currently paying about a 60-cent

premium per gallon over regular petro-diesel.

Co-op eyes own tanker 

The co-op’s answer to these uncertainties is to buy a fuel

tanker truck. Some funds remain from the grant used to

develop the self-serve system, and the cooperative has

arranged for additional financing with one of its members.

Currently, members are looking for a used truck in the 2,000-

to 3,200-gallon range. There’s only one hitch: “Right now we

have the money to buy the truck, but not to fill it up!” grins

Goldberg.

Having the truck will serve dual purposes. First, the

cooperative can forget about middlemen and go to the source

for its product; several manufacturers are within driving

distance, and a local plant is nearing completion. That would

enable it to pick and choose its product at lower prices. 

There’s another advantage. The cooperative acquired a

salvaged, 1,000-gallon tank in an attempt to increase storage

capacity, but was hindered by local building codes prohibiting

fuel tanks larger than 500 gallons next to a building.

However, there are no regulations forbidding parking a

3,000-gallon tanker truck in the same spot, so the truck could

be both transport and storage facility.

Committed customer-members

A small, but steady, stream of diesel vehicles – mostly

European sedans — comes to fill up at the co-op. 

One is colorfully painted with American flags and other

symbols. Its owner is Bob Heironimus, who calls himself Dr.

Bob and who boasts that his is “Maryland’s only biodiesel art

car.” 

Dr. Bob says that the car illustrates various influences on

the founding of the United States, and one of the flags he

flies on it is in support of America’s missing prisoners of war. 

He’s an enthusiastic promoter of biodiesel. “I’d buy it if it

cost $12 a gallon,” he says.

Taking over the world might not be on the agenda just yet,

but the members of Baltimore Biodiesel are happy just doing

their part to make Baltimore’s air a little cleaner. ■
Rural Cooperatives / May/June 2008 31

Basin Electric forms

wind subsidiary

Basin Electric Power Cooperative

has formed a subsidiary to build a 77-

turbine wind farm south of Minot,

N.D. The wind farm will cost about

$240 million and generate 115

megawatts (MW) of electricity when

operational in 2010. Construction is

expected to start in early summer of

2009.

The co-op’s wind subsidiary is called

PrairieWinds ND1 Inc. Although

newly formed, its roots go back to

2002, when Basin Electric built and

began operating four wind turbines —

two near Minot, N.D., and two near

Chamberlain, S.D. By 2010, Basin

Electric will have added almost 140

wind turbines to the landscape of North

Dakota. 

Co-op officials say North Dakota has

the best available wind resources in the

nation, with South Dakota ranking

second.

“We are evaluating the most efficient

approach for operations and

maintenance,” project manager Ron

Rebenitsch says. “Options include using

wind contractors specializing in

operations and maintenance, or hiring

staff workers.” 

Amanda Wangler, project engineer

for the Minot wind project, has been

immersed in “micrositing” — the

process of choosing exactly where each

turbine will be located within an 8,000

to 12,000-acre area. Location affects

power output. 

“If we put the turbines too close

together, we’ll get a lower efficiency,

maybe 80 percent of what it should be,”

Wangler says. “If we spread them

too far apart, we’ll have 100 percent

efficiency, but our wind farm will be

spread all over. We’ll have longer

roads, more cables. So it’s kind of a

balancing act.” 

Basin Electric has also

constructed more than 1,500

megawatts of coal-based generating

capacity in North Dakota. Another

subsidiary, Dakota Gasification Co.,

owns and operates the Great Plains

Synfuels Plant, which produces natural

gas from coal. It’s the only plant of its

kind in the United States.

Sales, income soar

for Land O’Lakes 

Land O’Lakes had $8.9 billion in net

sales in 2007, up 26 percent from 2006,

and had net earnings of $162 million,

up 83 percent. The co-op also returned

$58 million in cash to members. The

co-op saw improvement in most key

financial ratios, including return on

equity, return on invested capital and

the company's long-term debt-tocapital. 

“Over the past year, we achieved

superior business performance and

financial results nearly across the board,

maintained a strong balance sheet and

made significant strategic progress in

shaping our organization for the

future,” President and CEO Chris

Policinski said at the co-op’s 87th

annual meeting in Minneapolis. 

Chief Financial Officer Dan Knutson

said strong markets, brand strength,

targeted marketing and aggressive costreduction efforts all contributed to the

co-op’s 2007 performance. 

“This past year, we delivered nearly

$30 million in ‘best-cost’ savings, with a

focus on both doing the basics even

better and reshaping the organization to

drive new efficiencies,” Policinski said.

Cost-saving actions included:

combining common “backroom”

business-unit functions, such as

accounting, human resources and

information systems; centralizing

purchasing in transportation, printing

and contract labor; and bringing

increased discipline to policies and

processes in activities such as travel

spending and meeting planning.

Other highlights for 2007 included:

restructuring Land O’Lakes’ investment

in agronomy and the alignment of the

NEWSLINE

Send items to: dan.campbell@wdc.USDA.gov

Basin Electric Co-op is building a 77-

turbine wind farm south of Minot, N.D.
32 May/June 2008 / Rural Cooperatives

Seed and Crop Protection Products

businesses under a new WinField

Solutions marketing identity; the sale of

Cheese & Protein International, the coop’s West Coast cheese and whey

processing facility; and the expansion of

the manufacturing capacity of Land

O’Lakes Tulare, Calif., dairy processing

plant, among others. 

Record $11.1 billion

revenue for DFA 

Dairy Farmers of America, Inc.

(DFA) had record revenue and

operating income in 2007, but because

of one-time, non-cash charges of $144.8

million, the co-op recorded a net loss of

$109.3 million for the year. The noncash charges were a result of plant

closures and the re-valuation of DFA’s

past investments. 

“DFA’s financial outlook has never

been better,” said Tom Camerlo, of

Florence, Colo., chairman of DFA’s

board. “We had record revenues and

strong profits in most of our businesses.

The non-cash charges will not affect

our continuing operations, cash flow or

member milk checks.” 

Driven by record-high milk prices,

DFA had record revenues of $11.1

billion in 2007, up $3.6 billion from

2006. DFA members received an

average price of $19.38 per

hundredweight, up $6.30 from 2006.

DFA marketed a record 61.9 billion

pounds of milk in 2007, and continues

to grow its international business,

increasing export sales to $211.4 million

in 2007. 

Operating income from DFA’s Dairy

Food Products Group was very strong

in 2007. Both Formulated Dairy Food

Products and Keller’s Creamery butter

divisions had record earnings. 

The Italian cheese division recorded

very strong operating income, and the

American cheese division improved

from recent years. American Dairy

Brands, the retail branded cheese

division of DFA, had strong revenue

and volume, though operating income

was impacted by rising cheese markets. 

As part of its focus on improved

profitability and long-term growth,

DFA closed two cheese plants in 2007,

resulting in the one-time, non-cash

charges. Closing the plants in

Lovington, N.M., and Corona, Calif.,

will improve DFA’s profitability.

Record milk prices negatively

impacted a number of DFA’s fluid milk

joint ventures. The businesses were not

always able to pass higher milk costs to

the marketplace, resulting in reduced

profits and, in some cases, devaluation

of assets.

CRI revenue tops $125 million 

Cooperative Resources International

(CRI), Shawano, Wis., reported pre-tax

income of just under $4.08 million, a

3.3 percent return on total revenue of

more than $125 million. Speaking at

the co-op’s 15th annual meetings (held

in Stevens Point, Wis., Bloomington,

Minn., Albany, N.Y., and Harrisburg,

Pa.), CEO Doug Wilson said, “The

cooperative’s growth in revenue is

commendable. Although the entire

purpose of creating CRI was growth

through an efficient structure, we have

likely surpassed our founders’

expectations.”

Highlights for the co-op’s major

subsidiaries included:

• AgSource Cooperative Services —

Had revenue of $14.78 million. Dairy

Herd Improvement (DHI) operations

saw increases in all aspects of service:

field, laboratory and records processing.

More than 646,000 cows were on test,

the highest number in six years. The

Food and Environmental Division saw

revenue increase 7.7 percent, with more

than 800,000 patron samples tested. 

• Central Livestock Association —

More than 1.2 million head of livestock

were marketed through Central’s five

market locations in 2007. The South St.

Paul, Minn., market was closed April

11, resulting in expanded sale schedules

in nearby Zumbrota and Albany, Minn.

The co-op is also promoting TEAM,

the real-time Internet auction. 

• Genex Cooperative Inc. — Semen

sales grew by more than 820,000 units,

including a 20-percent increase in

Jersey units. A record-average of 5,367

cows were bred per day. GenChoiceTM

sexed semen was introduced and the

GenChoice dairy and beef sire lineups

were expanded. The Genex Farm

Systems division opened a new office

and warehouse in Melrose, Minn.

• International Division — Achieved its

highest revenue to date, with significant

growth in Jersey and beef semen sales.

First-time shipments of bovine semen

were made to Russia, Ukraine,

Kazakhstan, India and Tunisia. CRI

Genética in Brazil, a distributorship

purchased in 2006, had 33 percent sales

growth.

AMPI’s Furth to retire following

year of record income 

Mark Furth, president and chief

executive officer of Associated Milk

Producers Inc. (AMPI), New Ulm,

Minn., has announced he will retire

from the milk-marketing cooperative in

2008. Furth made the announcement at

the co-op’s annual meeting in

Bloomington in March, where it was

also announced that AMPI had record

earnings of $24.8 million in 2007. 

AMPI’s board of directors has begun

a search for a successor.

AMPI CEO Mark Furth will retire

this year. 
Rural Cooperatives / May/June 2008 33

“AMPI is strong, not just financially,

but strongly focused on purpose,” Furth

said at the co-op’s annual meeting.

“This milk marketing business has what

it takes to continue being a leading milk

marketing cooperative – committed

owners and employees.”

Furth began his career at AMPI in

1970, shortly after the cooperative was

formed. He held positions in accounting, marketing and membership and

was named assistant manager in 1985.

In 1989 he became general manager of

AMPI’s former North Central Region

and, later, AMPI.

The restructuring of AMPI in the

late 1990s was a turning point for the

cooperative, Furth said. The North

Central Region — comprised of six

Upper Midwest states — retained the

AMPI name. 

NCGA promotes

bulk-buying options 

Purchasing products from bulk bins

allows consumers to reduce the amount

of packaging that ends up in landfills

while getting their favorite foods,

typically at lower prices and in exactly

the amount they need. The National

Cooperative Grocers Association

(NCGA), a business services

cooperative representing 109 food coops nationwide, encourages shoppers to

“give bulk a chance.”

“Co-ops have a long history of

offering products in bulk,” says Robynn

Shrader, chief executive officer of

NCGA. “Buying in bulk is a simple and

easy way to shop, giving consumers

more choices at affordable prices while

having a positive impact on the

environment.”

According to the Environmental

Protection Agency (EPA), nearly 80

million tons of waste is generated from

packaging and containers annually —

nearly a third of annual municipal solid

waste. Purchasing products in bulk and

storing food in reusable containers can

help eliminate that waste. 

In most cases, buying in bulk is as

simple as weighing the quantity needed

and writing down the item’s bin

number. Most bulk bin aisles include

beans, cereals, flours, grains, herbs and

spices, nut butters, oils, pastas,

sweeteners, tea, coffee, pet food and

household and toiletry items, such as

soaps.

Co-op plans to buy

N.D. hog plant

A co-op of Midwest and Canadian

hog producers plans to buy a majority

interest in a North Dakota slaughter

plant. Cloverdale Growers’ Alliance

Cooperative, a group of about 60 hog

farmers in North Dakota, Montana and

Minnesota, has supplied the Mandanbased Cloverdale Foods Co. for the past

decade. The farmers’ alliance has signed

a letter of intent to buy a controlling

interest in Cloverdale’s Minot plant,

according to newspaper reports. 

The co-op is putting together a

business plan and soon will begin a

push to sign up more farmers in its

current area and in South Dakota and

Canada. Financial terms of the deal are

not being disclosed.

Landmark Co-op to build

soy-crushing plant 

Wisconsin Governor Jim Doyle has

announced the awarding of a $4 million

grant for the construction of the state’s

first soybean-crushing facility, which

will create soybean oil for biodiesel.

Landmark Services Cooperative, a

farmer-owned co-op, was awarded the

grant to build a plant with the capacity

to process 20

million bushels of

soybeans annually. 

“The soybeans

Wisconsin grows so

well will stay here

in the state, get

processed in

Evansville and may

end up fueling the

tractors along these

roads,” Governor

Doyle said. “This

facility offers us a

way to create

jobs, free us from

big oil companies

and advance our

commitment to renewable energy.”

Currently, most of the state’s soybean

crop is processed in other states and

sold back to Wisconsin farmers for

feed. Last year, the state’s first largescale commercial biodiesel plant opened

in DeForest, with the capacity of

producing 20 million gallons of

biodiesel annually from a variety of

feedstock sources, including soybean

oil.

Wisconsin ranked 14th in the nation

in soybean production in 2007 with

51.9 million bushels. It is the only topproducing soybean state without a

large-scale soybean-crushing facility. 

In March, Governor Doyle launched

Clean Energy Wisconsin, a

comprehensive plan to move the state

forward by promoting renewable

energy, creating new jobs, increasing

energy security and efficiency, and

improving the environment. 

Foremost reopens

Waumandee cheese plant 

Foremost Farms USA has announced

the reopening of its Waumandee, Wis.,

cheese plant. The plant, which

historically has produced Italian and

American styles of cheese and whey

products, has been converted to

produce 640-pound blocks of cheddar

cheese for aging. This is the variety of

cheese that captured the Grand

Champion and Best-of-Class awards for

Foremost Farms at the 2007 National

John Blaska, Landmark Co-op board president (second from

left) accepts a ceremonial check for $4 million from Wisconsin

Governor Jim Doyle (fourth from left) to help the co-op build

the state's first soy-crushing plant.
34 May/June 2008 / Rural Cooperatives

Milk Producers Federation

Championship Cheese Contest, and

which won its class at the 2007 World

Dairy Expo Championship Dairy

Products Contest. 

“The Waumandee plant was idled at

the beginning of 2007 with the intent of

bringing back a profitable product mix,”

says Dave Fuhrmann, the co-op

president. “The plant has an impressive

infrastructure and skilled cheesemakers

and employees. It is a very valuable

asset to the cooperative and the

milkshed in the Waumandee Valley.”

U.S. Premium Beef selling

National Beef to JBS-Swift 

U.S. Premium Beef LLC (USPB)

and National Beef Packing Co. LLC

have announced that they have entered

into a purchase agreement with JBS

S.A., under which JBS will acquire all of

the outstanding membership interests

of National Beef — the company

formed from the former Farmland beef

division. Under the terms of the

agreement, JBS will pay the members of

National Beef about $465 million cash

and $95 million in JBS common stock.

In addition, JBS will assume all of

National Beef’s debt and other liabilities

at closing. 

The sale will combine all of National

Beef’s operations and facilities,

including National Carriers Inc. and its

ownership in Kansas City Steak Co.

LLC, with JBS-Swift’s beef operations.

National Beef President Tim M. Klein

will become president and CEO of the

joint National Beef/JBS-Swift beef

operations. 

“This transaction will enable our

company to become a part of a leading

multi-national food company,” Steve

Hunt, CEO of USPB, said in making

the announcement. “Being able to

diversify through JBS will put our

company in a position to compete long

term in an increasingly competitive

environment.”

CHS buys Provista Renewable

Fuels, Spokane’s Zip Trip

CHS Inc. has acquired full

ownership of Provista Renewable Fuels

Marketing, which markets more than

550 million gallons of ethanol annually.

CHS purchased the 50-percent interest

in Provista owned by US BioEnergy

Corp., an ethanol manufacturing firm.

US BioEnergy merged with VeraSun

Corp. in April, giving it 100 percent

ownership. 

In a separate deal, CHS has signed a

purchase agreement to acquire 33 Zip

Trip convenience stores in the Spokane,

Wash., area from Jopo Inc. and Jo-By

Enterprises LLC. 

Terms of the transactions were not

announced. 

CHS says it will operate Provista

under its present name and leadership.

“As sole owner of this successful

renewable fuels marketing and

distribution operation, CHS looks

forward to new opportunities to

connect biofuels producers and blenders

quickly and efficiently as the alternative

fuels industry continues to grow,” says

Leon Westbrock, CHS executive vice

president and chief operating officer for

energy. CHS will operate Zip Trip

locations under its Cenex energy brand.

The re-identification of the locations

to the Cenex brand is expected to be

complete by mid-summer 2008.

There currently are 1,600 Cenexbranded retail operations in the United

States, including 800 convenience

stores, most of which are operated by

cooperatives and independent retailers.

Tri-State joins

renewable energy co-op

Tri-State Generation and

Transmission Association is among the

first to join a national organization

focused on the development and

deployment of renewable energy by

electric cooperatives. At its March

meeting, the association’s board of

directors approved the membership

subscription agreement with the

National Renewables Cooperative

Organization (NRCO).

NRCO is a banding together of

electric co-ops nationwide that are

jointly working to meet their renewable

power legal requirements and portfolio

goals. Currently, more than half the

states in the nation have adopted

renewable portfolio standards (RPS),

including Colorado and New Mexico,

where Tri-State serves member co-ops.

These RPS standards require utilities to

meet a set renewable energy megawatt

quantity or precise percentage by a

specific date. The federal government is

also considering a national renewable

standard. 

With an initial annual budget of

nearly $1 million, NRCO requires a

commitment of $100,000 for the first

year of the program from a minimum

of 10 members. Generation and

transmission cooperatives (such as TriState), unaffiliated distribution

cooperatives and “partial requirements”

cooperatives (with legal ability to

participate in the wholesale market) are

eligible for membership.

According to Tri-State executive vice

president/general manager J.M. Shafer,

“NRCO offers cooperatives a way to

pool our resources and efforts into a

single national program that shows

support for renewables and will put coops in a proactive position if a national

standard for renewable energy becomes

law.” 

Organic Valley forms

grower pool to ensure feed

supply, price stability

In an effort to provide market

stability to both crop growers and

livestock producers, Organic Valley

Family of Farms is opening its

membership to organic crop growers

with the introduction of its Grower

Pool. With more than 1,200 member

farms, Organic Valley is America’s

largest cooperative of organic farmers

and is one of the nation’s leading

organic brands.

continued on page 36
Rural Cooperatives / May/June 2008 35

Ten years ago, the future of the Michigan turkey industry

looked grim after the state’s major live turkey processor, Sara

Lee, announced that it no longer needed Michigan birds for

Thanksgiving. So, a group of 15 turkey farmers committed to

keeping the state’s turkey industry alive came together and

formed the Michigan Turkey Producers Cooperative (MTPC). 

“Growers had no place to take their turkeys,” recalls Dan

Lennon, CEO and president of MTPC, who was a member of

that initial group of producers. “They either had to build their

own plant, or go out of business.” 

Because of the group’s entrepreneurial actions and

subsequent growth over the past decade,

the Michigan Turkey Producers Cooperative

was named the winner of the Michigan State

University Product Center Award for the

Most Successful Business Transition. 

The cooperative has evolved from a

single product line — selling live turkeys —

to selling a wide array of turkey-based

products. Buyers include companies such as

Sysco, Gordon Foods and Superior Seafoods. 

USDA Rural Development has provided

financial support for the cooperative under

several of its programs. In 2000, eight co-op members received

loans under USDA’s Cooperative Stock Purchase Program to

make their initial investment in the co-op start-up. In 2003, and

again in 2005, MTPC received Value-Added Producer Grants

from USDA, the first to pay for a project feasibility study, the

second for working capital. (For more information on these and

other USDA Rural Development programs, please visit:

www.rurdev.usda.gov.)

Chris Peterson, director of the

MSU Product Center, said it was

important for the center to recognize

its more inventive clients. “It was

exciting to recognize some of our

more innovative and interesting

clients,” Peterson says. “Studies

indicate that, particularly in rural

communities, we (in Michigan) tend

not to celebrate entrepreneurial

successes, even though we are

inclined to be fairly hard on

entrepreneurial failures. When we

had several clients really deserving

of an award, it seemed particularly

appropriate to recognize them in that

way.”

Lennon says that adding valueadded products to the cooperative’s

line-up had been planned since the

company’s inception. The original

production plant was an idle French

fry facility that had been out of

business for two years. After

purchasing the building in June 1999, MTPC converted the

brownfield site into a state-of-the-art, live processing and rawmeat plant that began operating in March 2000. By late 2001,

the company had started producing its

flavored raw boneless roasts, sausage and

burgers. 

“We knew from the beginning that we did

not want to be a 100-percent commodity

processing plant,” Lennon says. 

The next step for the cooperative was to

construct a new cooking facility. Built in

2005, the new plant creates ready-to-eat

turkey products that are sold to a wide

variety of food service and retail customers

throughout the United States. ■

Michigan Turkey Cooperative Earns Product Center Award

Michigan Turkey Producers Cooperative CEO Dan Lennon said that either the co-op had

to build its own plant or members would have had to shut down their farms.
Reed agrees that fresh, locally farmed

food is better, noting that studies have

proven the superiority of its quality.

Local farming, he asserts, is also a better

way of life. “If farms and dairies are

huge, then we don’t have agricultural

communities. We have agricultural

industry, and there’s no real social

structure,” he says. “I think that farming

is a very noble occupation. I think it

builds good character. It’s just a

neighborly way to live.”

In the months and years to come,

Idaho’s Bounty has big plans for their

co-op. They want to become financially

sustainable without government help,

although they are extremely grateful for

the help that USDA and others have

given for their start-up. They want to

bring the next generation into

sustainable farming by developing a

strong local food economy. And they

want to help other co-ops develop

similar local food businesses in their

own regions. “We are an open source,”

Hall says. “We will share what we have

learned with anyone who wants it.”

Echoing a common cooperative

sentiment, the leaders and members of

Idaho’s Bounty are concerned about

more than just themselves and their

own local communities. They do this

because they truly believe that food

cooperatives promoting sustainable

agriculture and good eating habits are a

better way to do business and a better

way to live. 

“I believe that individuals want to

make a difference, and buying local food

is a way, because eating is something we

do every day,” Hall says. “We can make

a difference every day by the choices we

make about what food we buy, knowing

where it comes from and supporting

small farms that grow this food. In the

face of sometimes overwhelming

problems in the world, supporting local

farms is a step you can take as an

individual for your children and yourself

that matters.” ■

Idaho’s Bounty

continued from page 7

Growers joining the pool will benefit

from a guaranteed floor price for their

crops on a long-term contract basis and

will be able to enroll all or portions of

their crop acreage in the pool. Organic

Valley will offer contracts for feedgrade grains, beans, oilseeds and hay

beginning with the 2008-2010 cycle.

The Grower Pool’s prices will reflect

differences in the co-op’s 15 grower

regions. Members will form their own

executive committee to develop policy

and pricing guidelines. After one

production year, any member can add a

year to the contract at a newly set floor

price, or can opt out of the pool.

“Our objective is to establish

regional floor prices for crops that are

clearly profitable for growers yet still

affordable for our livestock producers,”

says Lowell Rheinheimer, farm

resources manager for Organic Valley.

Hanlin to succeed

Lindgren at Sunkist

Sunkist Growers’ board of directors

has unanimously elected Russell L.

Hanlin as executive vice president.

Hanlin will assume the office of

president and chief executive officer of

the nation’s oldest and largest citrus

marketing co-op Nov. 1, when current

president and CEO Timothy J.

Lindgren retires. 

Board Chairman Nick Bozick

praised Lindgren for “two years of

exceptional service. We are fortunate

that Tim was available to lead at

Sunkist at a challenging time in our

business. During his tenure, we not

only weathered a freeze, we also

realigned our operations to drive greater returns to our growers at lower costs.

“We are also fortunate to have in

place the right individual to assume the

presidency when President Lindgren

retires,” Bozick added. Hanlin, a 30-

year veteran of Sunkist, is currently

senior vice president for sales and

marketing. “Russ knows Sunkist. He

has experience in every aspect of our

sales and marketing operations,” says

Bozick. “He also knows citrus. His

expertise has made him a valued

participant in industry groups.” ■

purchasing energy from parts of the

world that are unstable or may not like

us.”

The U.S. biodiesel industry is

helping to increase the nation’s refining

capacity by building plants that produce

an American-made, cleaner burning

fuel. The 500 million gallons of

biodiesel produced in the United States

in 2007 displaced 20 million barrels of

petroleum. Merrill Lynch commodity

strategist Francisco Blanch has said that

oil and gasoline prices would be about

15 percent higher if biofuel producers

were not increasing their output. 

The Energy Independence and

Security Act of 2007 (EISA), enacted in

December 2007, updates the volume of

renewable fuels required in 2008 and

creates a new 36-billion-gallon program

beginning in 2009 and continuing

through 2022. For the first time, the

program provides a specific renewable

requirement for diesel fuel that

establishes a 500-million-gallon

standard for biomass-based diesel, which

includes biodiesel, starting in 2009 and

increasing to 1 billion gallons in 2012. 

The U.S. biodiesel industry fully

expects to meet the 50-percent

greenhouse gas reduction requirement

for biomass-based diesel under the

federal Renewable Fuels Standard.

During the Washington International

Renewable Energy Conference 2008 in

March, the President called biodiesel

the “most promising” renewable fuel for

helping to meet these new standards

(see page 8).

The facts are clear. Biodiesel

significantly reduces carbon emissions,

creates good-paying, “green” jobs and

reduces our nation’s dependence on

foreign oil. The biodiesel industry looks

forward to constructively working with

policymakers, biodiesel stakeholders,

environmental organizations and the

public to meet our shared goal of

addressing climate change and energy

security. ■

Commentary

continued from page 2

36 May/June 2008 / Rural Cooperatives
Rural Cooperatives / May/June 2008 37

opportunity for rural people. “I have long argued that in

the United States, renewable energy is the biggest

opportunity for economic growth and wealth creation in

our lifetimes. I am convinced, after our discussions [here],

that this perception is shared around the world,” Dorr said

in remarks summarizing some of the conference highlights. 

“There is, above all, a universal recognition that

renewable energy is indeed an immense opportunity for

farmers and rural communities. No one wants to sit this

one out,” Dorr said. “We must, as President Bush

reminded, grow our way to a cleaner future.”

He stressed that the changeover to a renewable energy

industry will not succeed if it hinders economic growth.

“For much of the world, economic growth remains a lifeor-death issue ... and time is a life-or-death variable,” Dorr

continued. To dramatize this, he noted that “80 percent of

people in sub-Saharan Africa have no access to electricity,

100 years after the invention of the light bulb.” 

Dorr said the food vs. fuel debate is manageable, as

indicated by the many conference speakers who described

significant gains in expected crop yields thanks to new seed

and growing technologies. Further, he pointed to experts

from around the world who described under-utilized

agricultural resources that can be put into production, and

advances being made in second- and third-generation

feedstocks so that biofuels can be produced from non-food

crops. 

“So from an agricultural perspective, the question is not

food vs. fuel — it is food and fuel. And both are

opportunities for agriculture.” 

Dorr noted that several presenters emphasized the need

for micro-lending to support small-scale, off-grid power

generation. “A modern rural credit and banking system is a

necessary threshold condition for self-sustaining rural

growth.” 

Global imperative

Energy Secretary Bodman said there is now a global

imperative to act. “In this country, as perhaps never before,

the American people are calling for action — and taking

action themselves.”

Wealthy, industrialized nations “must keep the energy

needs of the world’s poorest nations in our discussions,”

Bodman said. “A major global effort to promote renewable

energy will support economic growth and allow developing

nations to ‘leap-frog’ over some of the dirtiest, but most

rudimentary and prevalent, fossil-fuel-based

technologies — improving public health and our

environment.” ■

The New Quest for ‘Fire’

continued from page 11

once they join the board? 

Chesnut: West Central has a policy of finding strong board

members. In the late 1980s, we started an associate director

program that allowed us to have one or two associate (nonvoting) directors on the board who serve alongside regular

directors. They attend all the meetings and go through all

decision-making processes. They do not necessarily become

regular board members, but they have the potential to do so.

It allows more people to bring input back to the board and to

relay information to the membership. The board works with

the nominating committee each year to help identify the type

of skills an individual needs to make a good candidate. 

Once on the board, we stress ongoing education. We have

outside experts come in to help with strategic planning, and

we attend the National Council of Farmer Cooperatives

meetings, which include strong board education programs.

The Iowa Institute of Cooperatives also has good educational

programs. West Central also has an education program for

employees, and board members participate in that as well. 

Q. What major projects are on the West Central drawing board

right now?

Chesnut: We are always looking for value-added

opportunities, and have three or four new products in the

development stage, but can’t really discuss them at this point.

They involve converting soybean meal into other products. 

Q. How do you think the co-op will be different in 10 years?

Chesnut: I’m sure that technology will make huge changes

that we are not even aware of yet. Changes are occurring so

rapidly, it is almost hard to keep up. The size of operations

that we deal with will be bigger, and we will have to move

faster. 

Q. What basic advice can you offer to the leaders of other local

co-ops that might want to emulate West Central’s success?

Chesnut: Over 75 years, one thing West Central has always

had is strong management. We’ve been very fortunate that

the co-op has had only a small number of managers [three],

which has been a great benefit. Each of those managers were

able to take what was on the table when they came in and

grow the organization and make it stronger than it was.

Long-range strategic planning has been something that has

helped West Central look forward and develop our

programs, facilities and personnel. 

Stroburg: Looking at the long-range strategy every six

months does two things: either it confirms that you have the

right strategy, or, if that can’t be confirmed, it means the

strategy should change. It also reminds everybody of where

we are headed. ■

Raising the Standard

continued from page 19
50 Years Ago...

From the May & June 1958 issue of News for Farmer Cooperatives

Poultry industry sees exempt trucking

Lower rates and better service — these are the principal

benefits arising from the interstate trucking of fresh- and

frozen-processed poultry under the agricultural exemption

clause. This statement is based on information revealed in a

nationwide study of poultry processors and motor carriers

conducted jointly by the USDA Agriculture Marketing

Service and the Farmers Cooperative Service. 

The exemption refers to the 1935 Motor Carrier Act, as

amended, which contains a clause stating that agricultural

commodities are exempt from economic regulation by the

Interstate Commerce Commission.

In April 1956, the U.S. Supreme Court affirmed a decision

by the District Court of the Southern District of Texas that

both fresh and frozen dressed poultry came under the

agricultural exemption clause.

Farmer cooperatives have an interest in this exemption and

its effect on their operations. These co-ops market 6 percent

of the entire U.S. volume of broilers and other poultry,

excluding turkeys. In 1956, this amounted to 213 million

pounds (ready-to-cook weight). Farmer co-ops also marketed

16 percent of the total U.S. production of turkeys in 1956.

30 Years Ago...

From the May & June 1978 issues of Farmer Cooperatives

Co-op farm exports help pay

for petroleum imports

Seventy-three cooperatives directly exported agricultural

commodities valued at more than $2 billion in 1976. That

represented 9.2 percent of total U.S. agricultural exports.

USDA Cooperative Services conducted a survey of export

activity in part to respond to a flood of requests for factual

information about the nature and extent of participation by

co-ops in international trade. The data will also aid other

marketing research work aimed at increasing cooperative

export activity.

Interest in cooperative exports is the greatest it has ever

been. One reason is widespread understanding of the critical

need for a high level of exports to pay, at least in part, for

increasingly costly imports of petroleum. Secretary Bergland

has brought attention to the desirability of greater cooperative

participation in the huge international grain trade.

The top four commodities exported, based on value at U.S.

ports, were the same for co-ops as for all U.S. agricultural

exports: feed grains (87 percent of which was corn), wheat,

soybeans and cotton. The four crops accounted for 65 percent

of total U.S. exports and 68 percent of cooperative exports.

Data from the 73 direct-exporting co-ops document the

foothold co-ops have in international trade, demonstrating the

potential for a greater export role in the future.

10 Years Ago...

From the May/June 1998 issue of Rural Cooperatives

Freshwater Farms: Generating more jobs

from Mississippi catfish

Delta Pride Catfish may be the world’s biggest catfish

processor, but it’s certainly not the only one. Catfish

production is a major industry in Mississippi, and one Delta

county in particular, Humphreys County, is known as the

catfish capital of the world.

“The biggest cash crop in Humphreys County is catfish

production,” says Freshwater Farms president Larry E.

Shurden. “We’ve got more than 30,000 acres of catfish

ponds.”

Headquartered in the heart of Humphreys County,

Freshwater Farms Inc. is a small, but growing, catfish

marketing and processing company. “This year, we’ll do $22

million in sales,” says Shurden. “In two years, we expect to do

$30 million.”

With the help of a $2.5 million USDA Rural Development

Business and Industry loan guarantee, Freshwater Farms

opened a state-of-the-art catfish processing plant in 1997 near

Belzoni. The company borrowed another $3 million from

state, federal and local sources to build the 50,000-square-foot

plant.

Freshwater Farms now employs 210 local workers and

processes some 25 catfish products, including whole fish,

fillets, nuggets, strips and steaks. Some 70 percent of the

company’s catfish is individually quick-frozen, and the rest is

fresh ice-packed. But the company has plans for moving into

the value-added arena.

The survival of Freshwater Farms is critical to Humphreys

County. About half of the County’s population of 11,000 lives

within a few miles of Belzoni, where many work for the

catfish sector. ■

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38 May/June 2008 / Rural Cooperatives

40 May/June 2008 / Rural Cooperatives

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