Rural

COOPERATIVES COOPERATIVES

USDA / Rural Development May/June 2001 USDA / Rural Development May/June 2001

ALL BOGGED DOWN:

Cranberry industry

struggles to find balance

ALL BOGGED DOWN:

Cranberry industry

struggles to find balance
2 May/June 2001 / Rural Cooperatives

There is always great interest around the

country when a new federal, state or local

grant program is announced. The Agricultural Risk Protection Act of 2000,

signed into law in June 2000, includes a

section that provides $20 million in federal grants during 2001 for market development of value-added agricultural products. The program was announced in the

Federal Register on March 6. 

Rural Development’s Rural Business-Cooperative Service (RBS) was

given responsibility for administering

the program. By the April 25 deadline

for the first round of $10 million in

grants, the agency had received 211

applications requesting a total of more

than $56 million. This is an indication

of the soaring interest among producer

groups in value-added businesses. 

Grants of up to $500,000 can be

used for defraying costs of feasibility

studies for value- added projects, for

developing business plans and for initial working capital. They cannot be

used for “bricks and mortar,” nor for

engineering studies. A dollar-for-dollar

match is required. Applications are

reviewed and scored competitively.

Applications for the second round of

$10 million in grants are due on June

27 (for more information, e-mail:

thomas.stafford@usda.gov). 

Lessons learned from previous experience gained by USDA/RBS co-op

technical assistance staff suggest that

producer groups should judiciously use

grant money. Over-reliance on grants

has been fatal for a number of new

cooperatives. They are not a be-all and

end-all to the cooperative development

process. In the past, some producer

groups have fallen into the trap of

believing that grants are a substitute for

producers putting their own capital at

risk. They have sought grant after grant,

and when the source of grant funds

dried up, the cooperatives collapsed.

View a grant as an early boost, not 

a crutch.

USDA’s Agricultural Outlook

Forum 2001, held in February, featured

a session on new value-added cooperative development in the livestock and

poultry industries. An article highlighting presentations at that session is

found on page 14 of this issue. Steve

Hunt, CEO of U.S. Premium Beef,

discusses the achievements of this new

cooperative and credits much of its

success to members’ willingness to step

up to the plate with up-front equity

investments in their cooperative. In

Hunt’s words, “true commitment to a

cooperative only comes about through

ownership.” Had members not made a

major financial investment in U.S. Premium Beef, he said the co-op probably

would have collapsed during the rough

first year of operation. These are words

that should be heeded carefully by anyone starting a cooperative. 

Other presentations were made at

the Outlook Conference by Minnesota

pork producer Jim Lewis, representing

Pork America, Wyoming sheep grower

Pat O’Toole, and Iowa Turkey Growers Cooperative CEO Ken Rutledge.

Their comments yielded valuable

insights regarding how to launch a new

cooperative. Similar investments are

being made in the aquaculture, crop

and forestry sectors.

Why are these well-planned efforts

meeting with success? Lee Egerstrom,

Knight-Ridder business/farm reporter

and contributor to the book “A Cooperative Approach to Local Economic

Development,” says value-added, newgeneration cooperatives will spread

because farmers can invest in them at a

fraction of the cost of spreading horizontally by buying out neighbors’ farms.

Furthermore, this expansion vertically

in the market buys farmers a measure of

risk-management protection. Investing

horizontally in more land does not

reduce a producer’s risk exposure. 

These reasons, along with the fact

that farmers retain their independence

and have more control over their economic destiny through cooperative ownership, suggest that these new valueadded efforts are assured of a future that

will continue to merit the support of the

public and Congress. 

Randall Torgerson, Deputy Administrator

USDA Rural Business-Cooperative

Service 

COMMENTARY

New USDA program supports growth of value-added ventures

Randall Torgerson sorts through some of the

211 applications for valued-added market

development grants received by USDA Rural

Development. USDA PHOTO BY KEN HAMMOND
Rural Cooperatives / May/June 2001 3

Rural COOPERATIVES (1088-8845) is published

bimonthly by Rural Business–Cooperative Service,

U.S. Department of Agriculture, 1400 Independence

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

The Secretary of Agriculture has determined that

publication of this periodical is necessary in the

transaction of public business required by law of 

the Department. Periodicals postage paid at

Washington, DC. and additional mailing offices.

Copies may be obtained from the Superintendent of

ZDocuments, Government Printing Office,

Washington, DC, 20402, at $3.50 domestic, $4.38 foreign; or by annual subscription at $15.00 domestic,

$18.75 foreign. Postmaster: send address change to:

Rural Cooperatives, USDA/RBS, Stop 3255, Wash.,

DC 20250-3255.

Mention in Rural COOPERATIVES of company and

brand names does not signify endorsement over

other companies’ products and services.

Unless otherwise stated, contents of this publication

are not copyrighted and may be reprinted freely. For

noncopyrighted articles, mention of source will be

appreciated but is not required.

The United States Department of Agriculture (USDA)

prohibits discrimination in all its programs and 

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

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

orientation, and marital or family status. (Not all 

prohibited bases apply to all programs). Persons 

with disabilities who require alternative means for

communication of program information (braille, large

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

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

To file a complaint of discrimination, write USDA,

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

Building, 14th and Independence Avenue, SW,

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

(voice or TDD). USDA is an equal opportunity

provider and employer.

Ann Veneman, Secretary of Agriculture

Randall Torgerson, Deputy Administrator, USDA

Rural Business-Cooperative Service

Dan Campbell, Managing Editor

Vision 2000/KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or

Fax (202) 720-4641, Information Director,

This publication was printed with vegetable oil-based ink.

United States Department of Agriculture

Rural

COOPERATIVES COOPERATIVES

May/June 2001 Volume 68 Number 3

On the Cover:

The surging size of the U.S. cranberry crop has caused prices to plummet.

Growers hope new product development and a new marketing order will

bring the industry back into balance. Here the crop is harvested in

Washington. See article on page 6. USDA PHOTO

FEATURES

4 All ag, all the time

Farmer-owned radio station has served rural Nebraska 

for 50 years

By Paul Hammel

6 All bogged down

Record cranberry crops, soft markets force industry to eye 

marketing order

By Pamela J. Karg

11 Local co-ops embrace high-tech agronomy systems

By E. Eldon Eversull

14 Hang on to the ranch

Young livestock and poultry co-ops share goal to strengthen 

producers’ role in marketplace.

By Dan Campbell

23 Local cooperatives’ role in identity-preserved

grain industry

By Julie A. Hogeland

DEPARTMENTS

2 COMMENTARY

21 MANAGEMENT TIP

25 NEWSLINE
By Paul Hammel, 

World-Herald Staff Writer

Copyright Omaha World Herald;

reprinted by permission

exington, Neb.—Folks

said it would be a cold

day when a bunch of

farmers started a radio

station.

They were right: It was about 20

degrees below zero on the frigid February day in 1951 when the “Rural

Voice of Nebraska”—KRVN—crackled

to life.

“People didn’t think we’d last a

year,” said Max Brown, the station’s

first general manager.

Now, 50 years later, that unique

farmer/rancher ownership has built a

station with an unmatched focus on the

business of agriculture and one that has

avoided the topsy-turvy trends and

whims of commercial radio.

Just as it has from the beginning,

KRVN broadcasts an almost constant

barrage of weather forecasts, farm

commodity reports and livestock auction updates, as well as regular commentary from 16 different agricultural

groups. Its three farm reporters file live

reports from ag conventions from

Orlando to Arizona and Lincoln to

Lexington.

While other radio stations change

ownership, swap talk-show hosts

and tinker with their musical format

with every new listener survey,

KRVN has stood as a solid rock at

880 on the AM dial.

Only when time permits does a

country-music song sneak on air. Rush

Limbaugh will never bring his act to

KRVN—it would take away time for

constant news about pork bellies and

corn futures, black baldie calves and

farm legislation.

“It’s all ag, all the time,” said Program Manager Craig Larson. “We

joke that some stations have a ‘song of

the day.’ Well, we really have a song of

the day.”

Built with donations of as little as

$10—each solicited over kitchen tables

across Nebraska—KRVN stands as the

nation’s only farmer- and rancherowned radio station.

With its sister stations, KNEB in

Scottsbluff and KTIC in West Point,

KRVN is the only Nebraska station

with a statewide reach during daytime

hours. At night, KRVN’s signal is

pointed west. The signal regularly

reaches former Nebraskans eating

breakfast in California and Arizona.

KRVN listeners can recite the date

and circumstances when their initials

were called on the station’s longtime

“Monogram Money” contest. A wheel

with letters on it is spun to select three

letters. If a listener’s initials match up

with the letters, they have two minutes

to call the station and claim the prize

money, which starts at $8.80.

Stories about furious sprints from

tractor to telephone to call in to the

contest are not uncommon.

The strong signal, a fanatical dedication to farm news and a veteran staff

(the station has had only two general

managers in its history and has three

announcers with more than 20 years of

service), have helped make the station a

Nebraska institution.

“I always felt as a candidate that if I

could land an interview on KRVN that

was worth a lot,” said Gov. Mike

Johanns during a special broadcast on

Feb. 1 to celebrate the station’s 50th

anniversary.

KRVN has been able to stick to its

mission of serving farmers and ranchers because of its unique ownership and

mission, said Eric Brown, the station’s

general manager since 1979 and Max

Brown’s son.

“We’re not like other commercial

stations. I don’t have to have a 30 percent return on investment in this quarter,” Eric Brown said. “We say that

people get their dividends when they

turn on the radio.”

The station was born of necessity.

Farmers and ranchers felt they weren’t

getting enough news about the livestock and grain prices to make smart

decisions on where to sell.

There were no statewide weather

forecasts 50 years ago, leaving folks

vulnerable to bad weather.

By 1947, Nebraska agricultural

groups had enlisted Max Brown, a former ag professor, to check out a project

by the Ohio Farm Bureau to launch a

radio station.

It led to a campaign in Nebraska

that enlisted donations from 4,755

farmers and ranchers from every

county in the state. Each “member”

gets one vote in the Nebraska Rural

Radio Association, which is run like a

farm cooperative, with a board of

directors and an annual business

meeting.

Lexington became KRVN’s home

because of its central location. Station

profits are plowed back into radio

operations or donated to agricultural

research or education. Only farmers

All ag, all the time

Farmer-owned radio station has served rural Nebraska for 50 years

L

4 May/June 2001 / Rural Cooperatives
Rural Cooperatives / January/February 2001 5

and ranchers can become members.

“Our bosses are the guys out there

who listen,” said Mike LePorte, the

station’s farm service director and one

of three reporters whose total focus is

agriculture reporting.

“Our reason for existence is to serve

farmers and ranchers,” LePorte said.

“That’s why we take it so seriously.”

KRVN pioneered the first statewide

weather forecasts, paying for daily

telegrams from Scottsbluff, Lincoln

and Omaha to put them together. It

also arranged for daily reports from the

major farm markets of the day, which

included the Omaha Stockyards and

the Omaha Grain Exchange.

The station almost went broke in its

early days, Max Brown said.

It lost several thousand dollars after

buying Omaha’s KOIL in 1952. The

station was quickly sold after farmers,

due to a drop in prices, had to renege

on pledges to finance the purchase.

The struggle to expand KRVN’s

reach statewide led to a costly

$500,000, 10-year campaign, which

culminated in 1972, to change the station’s dial position from its original

1010 to 880. Only one other station in

the nation is at 880 on the dial, WCBS

in New York City.

KRVN’s daytime signal stretches

from Omaha to the Panhandle and

from the Sand Hills to almost the

Kansas-Oklahoma border.

Although Brown had no radio experience, his staff did. The station’s upto-date market and weather information pulled in listeners, whose bottom

line could be improved by thousands of

dollars by timing the market or by

choosing the higher-paying grain elevator or livestock auction.

Today, KRVN provides weekly

reports from 16 farm organizations as

well as several rural state senators. Market and auction reports are broadcast

every few minutes throughout the day.

On a recent weekday, the station

was abuzz with activity. It’s prime time

for annual meetings of farm organizations; advertisements for herbicides,

seed corn and bull sales flood the airwaves; and the Nebraska Legislature’s

session is in full swing. All that means

plenty of programming and little

room for music.

Plus, a snowstorm had caught central Nebraska by surprise, dumping up

to a foot of snow in some areas when

only an inch had been forecast.

“Let’s play that disclaimer again:

KRVN is not responsible for more

than an inch of snow,” joked afternoon

announcer Don Colvin.

While the radio industry has seen a

storm of mergers and programming

changes, KRVN’s future seems secure.

Because of its unique ownership, it

isn’t likely to be purchased by a larger

chain. Despite a declining number of

farmers and ranchers, the station still

has the highest pull of any farm station in the country—more than 50

percent of ag listeners in its area. The

need for up-to-date information on

farm markets and weather is as strong

as ever.

“If you’re serious about agriculture,”

said program director Larson, “you

need to listen to us, or else you’re

going to miss something.” ■

KRVN remains the nation’s only farmer- and rancher-owned radio station. Here afternoon

announcer Don Colvin hits the airwaves with the latest farm and ranch news. Mike LePorte

(background) is the the station’s farm service director and one of three reporters whose

total focus is agriculture reporting. PHOTO BY JEFF BUNDY, COPYRIGHT OMAHA WORLD HERALD
By Pamela J. Karg

Field Editor

here Ocean Spray

Cranberries goes, so

goes the entire

industry. These days

Ocean Spray and

the cranberry industry are both in a

severe slump. A glut of fruit has

depressed prices to levels that have

many growers hovering on the brink

of bankruptcy. 

In only a few years, the price of a

barrel of cranberries has plunged

from a high of $80 to lows of near

$11. A grower needs to make about

$35 a barrel just to break even. 

Ocean Spray has for many years

been a poster child of success for

farmers who want to add value to

their crop by processing and marketing it themselves. Indeed, many

credit Ocean Spray for making the industry. But the market

has become so precarious that earlier this year some growers—for the second time in two years—forced a referendum

that could have made the cooperative sell its assets to a

giant beverage company. That effort failed, and now the

cooperative is helping lead the fight to stabilize the market

and enable growers to survive the downturn. 

Co-op boosts entire industry

“Ocean Spray has really done a lot to benefit the entire

cranberry industry,” notes Nodji VanWychen. She and her

family are independent growers near Warrens, Wis., the

gateway to the state’s cranberry country.

A three-generation farm operation, the VanWychens grow,

harvest, pack and market their own line of cranberries under

two labels they own. As independent growers, they also market fruit for the private label business. That’s in direct competition with Ocean Spray, the nation’s largest cranberry marketing organization headquartered in Lakeville-Middleboro,

Mass. Yet VanWychen freely admits that the cooperative’s

success directly impacts membergrowers and independents alike.

Like many other agricultural commodities, the cranberry industry is

bogged down with over-production

because of increased acreage and

good weather. Research and development of new products also slowed

in recent years as the financial strains

started up. In response to the turmoil plaguing the industry, Ocean

Spray has changed its top managers

and has promised to roll out nearly

50 new products in the next two

years. It’s going to take time, says

Chris Phillips, Ocean Spray communications director. Meanwhile, financial woes abound.

Ocean Spray reported last fall

that its sales rose slightly, from

$1.36 billion to $1.4 billion. But net

income declined 45 percent, to

$73.5 million, a chasm away from

the $280 million earned in fiscal 1998. It was the second

year in a row the co-op reported weak financial results.

Ocean Spray’s disappointing numbers came as no surprise. Phillips said the co-op had been predicting serious

problems for several years. Wisconsin co-op member

William G. Hatch concurs. “However, the problem was that

they had been ‘crying wolf’ for so many years that no one

believed them,” Hatch says. “ I just think everything was so

good for so long, now we have enough blame to go around

the entire industry.”

So who is to blame for the challenges facing growers and

co-op alike in an industry that has been around since America

itself? It depends on who is speaking.

Phillips says the industry has expanded faster than consumption has risen. Some of that expansion was by the cooperative.

Independent growers also expanded. In Wisconsin, for example, in 1989 there were 150 farmers with 10,000 acres of cranberries. Today, 260 growers farm 18,000 acres of cranberries.

Under a new Ocean Spray management team, surveys

showed that consumers associated the co-op brand with

6 May/June 2001 / Rural Cooperatives

All bogged down

Record cranberry crops, soft markets force industry to eye marketing order

W
Rural Cooperatives / May/June 2001 7

high-quality products, but also higher prices. At the same

time, supermarket consolidations and shifts in the food

industry meant processors were contracting production,

packaging a range of foods under private labels. Those labels

were cheaper and still had perceived value with consumers.

And when grower prices were starting to head south

about two years ago, the Ocean Spray board voted to pay

members a little more money. That left the co-op with less

to invest in research and development and for new product

introductions. 

Support grows for market order

Jeff Kapell is an Ocean Spray member

who has grown cranberries near Plymouth, Mass., since the 1970s. He says

this is the worst economic crunch the

industry has ever faced during all his

years in the business. 

“I was not able to cover my cost of

production last year,” says Kapell. “Folks

who have capital reserves and aren’t

heavily mortgaged will probably be able

to come out of this OK. But growers

who don’t have much in reserve and are

carrying a big mortgage will be hard

pressed to survive.”

Does he think the cooperative is taking

the right road to turn the situation around?

“Only hindsight will tell for sure. But

if it does turn around, Ocean Spray

should be in a good position to continue

to be of major value to its growers in the

future.” 

Regarding the cranberry industry’s

rapid plunge from boom to bust, Kapell

says “there were subtle indications earlier

of looming problems on the horizon.

This is a relatively small industry and it is

very sensitive to even small shifts in supply and demand. Right now we are looking at more than a small shift—we have a

significant surplus to deal with.” 

He feels an industry-backed marketing order is the best way to manage the

surplus. 

Hatch walks the line between independent grower and Ocean Spray member. He and his father, William, have 360

acres of cranberries, which makes them

large growers. When the co-op was

looking to expand acreage, the Hatches

had some acres they placed into co-op

membership. And they also have some

acres which remained out of co-op membership, the fruit from which is contracted

to an independent handler. The younger

Hatch also serves as president of the Wisconsin State Cranberry Growers Association (WSCGA).

“If you read the Stressline (an on-line cranberry news

website) you hear from lots of growers, anonymously, about

what’s happening,” Hatch says. “And some of our own surveys with just our (WSCGA) members show that growers are

divided [over how to deal with the glutted market]. The only

thing we know for sure right now is that growers have agreed

they want a marketing order in place this year.”

That’s a big step. A little more than a year ago, growers

Left: Cranberries are harvested in Wisconsin, which leads the nation in cranberry production.

PHOTO COURTESY UNIVERSITY OF WISCONSIN. Above: Cranberry prices have plunged from a high of

$80 per barrel to lows near $11. Growers typically need $35 per barrel just to break even.

USDA PHOTO
8 May/June 2001 / Rural Cooperatives

could not agree on that vital issue. A

WGCGA survey showed that more

than 90 percent of its membership supported a marketing order to help the

industry achieve greater balance. The

crux of the dispute is whether the

industry should be producing about 4.7

million or 4 million barrels each year,

says Hatch.

Tom Lochner, WSCGA executive

director, agrees that this is the key

issue, adding that about three-fourths

of the membership supported eliminating the surplus in one year. “The

debate right now is what is the right

number?” he says. “As a board, we

agreed that our association is going to

urge USDA to enact a regulation. But

we don’t have a consensus on what that

regulation should be,” adds Lochner. 

How much is enough?

So the industry finds itself divided

once again. The question centers

around how much to reduce production to ease the surplus.

At a meeting in early March in

Wisconsin Rapids, Wis., the Cranberry Marketing Committee (CMC)

agreed to cut the surplus by 32 percent this year. The CMC represents

growers and handlers and makes recommendations to USDA, the only

power that can mandate production

cuts. The committee hoped Agriculture Secretary Ann Veneman would

accept the plan by the end of March,

in time to affect this year’s crop.

However, no decision had been

announced by mid-April and growers

such as Van Wychen and Hatch were

getting nervous about how to manage

their cranberry marsh beds.

“It’s not like a corn or soybean

grower who finds out he doesn’t need

to plant this year,” says Hatch. “We

already had plants in the ground, money tied up in taxes and even more

resources into maintaining growing

those plants until they bear fruit.” 

A marketing order that would limit

the 2001 crop to 4.7 million barrels,

excluding fresh fruit, was recommended to USDA by CMC. Such a

move would be expected to reduce the

surplus to 2.5-3.5 million barrels,

officials said.

Dick Ducklow and Gary Jensen,

members of CMC, voted against this

recommendation during the March

meeting because it does not eliminate

the surplus in one year or raise grower

returns sufficiently.

Ed Jesse, ag economist from the

University of Wisconsin-Madison, recommended a 4-million-barrel limit to

CMC. He said it would reduce the 4.4-

million-barrel surplus to 2 million barrels, which is considered a normal

carryover. Eliminating the surplus in

one year, some growers contend, would

bring grower returns in line with the

Cranberry fruit from North American growers will be

used for beverages to be sold in China via an agreement

between the Ocean Spray cooperative and Beijing

Huiyuan Beverage Group, China’s largest juice company.

The goal is to introduce Ocean Spray juices in China later this year, starting with Beijing, Shanghai, Guangzhou

and in other major markets within the next three years. 

Ocean Spray, owned by 804 cranberry and 126 grapefruit growers, said it

will grant a 10-year

lease to Huiyuan to

manufacture, market

and distribute Ocean

Spray products.

Ocean Spray already

has similar agreements in place in the United Kingdom, Australia, New

Zealand and several Latin American countries. Many of

the member- growers have been suffering through the

third straight year of depressed market prices that are

below production cost. Pressure to sell the cooperative

to private interests has been resisted by the board of

directors (see cover story). 

Rob Hawthorne, the cooperative’s chief executive

officer, said he expects the Chinese juice market to

become the largest in the world in the next 20 years.

It has the potential of using hundreds of thousands of

barrels of cranberries. Opening the Chinese market is

an example of Hawthorne’s plans for other market initiatives aimed at increased demand and higher prices

for the growers. But lack of demand for the current 5-

million-barrel crop may force some growers to quit

the business. However, the Chinese market provides a breath of

fresh air at a time the cooperative

and its grower-owners could use a

new home for their cranberries.

The cooperative’s $220 million

international division has tripled in

size in the past four years. ■

Ocean Spray opens China market for cranberry juice products

The Ocean Spray cooperative has led efforts to

increase consumption of the fruit by developing

a wide variety of cranberry beverages and

other foods. USDA PHOTO
Rural Cooperatives / May/June 2001 9

$35 per barrel cost of production. 

Currently, the price is hovering at

$10-$15 per barrel. The 4-millionbarrel plan would get the grower

price up to cover production costs

sooner, proponents say. They want to

eliminate all the pain in one year,

eliminating nearly all the projected

2.3- million-barrel surplus so good

times can roll again. They also worry

there won’t be enough demand for

the 5 million barrels that still would

be produced.

But handlers supported carrying

over a larger surplus. Ocean Spray, for

example, recommended a market order

that sets the crop at 4.8 million barrels.

“Any more and it cuts into new product

development and new market expansion,” says Phillips. “We need enough

fruit to grow demand. We can control

supply in the short term, but we still

need enough fruit to meet new product

development and market expansion.”

Either cutback would be considerably

more than last year’s 15 percent withCranberry bogs use unique growing systems that include

wetlands, uplands, ditches, flumes, ponds and other water

bodies. An entire cranberry wetland system can provide

diverse habitats to many rare animal and plant species.

In winter, bogs are covered with water that freezes and

provides insulation from frost. As the snow melts and spring

arrives, the bogs are drained and cranberry vines awaken.

Soon after spring, light pink blossoms which resemble the

head and neck of the sandhill crane begin to appear. As

flowers bloom, honeybees and bumblebees work diligently

to pollinate flowers, ensuring a good crop. In mid-July,

petals fall from the flowers leaving tiny green nodes which

after weeks of summer sun, become red, ripe cranberries.

Considered the life blood of cranberries, water is used

throughout the year for irrigation and to protect vines

from weather damage in winter and frost in spring and

fall. As fall approaches, water becomes essential to the

harvesting process.

During harvest, many growers flood their bogs causing cranberries, which have small air pockets in the center, to rise. Growers then use water-reel harvesting

machines to loosen cranberries from their vine causing

them to float on top of the water. These machines look

like miniature combines with cylindrical spool-shaped

metal beaters attached to the front. After floating to the

top, berries are corralled onto conveyers to waiting

trucks which take them to receiving stations and eventually processing plants, where they are used for juice,

sauce, and other processed foods.

Delivered to fresh fruit receiving stations, cranberries

are graded and screened based on their color and ability

to bounce (soft berries will not bounce).

In Massachusetts, 500 growers produce 38 percent of

the nation’s cranberry supply, making the fruit that state’s

number one food crop. As urban sprawl overtakes Massachusetts’ rural areas, growers have sold off some of

their acreage so that Wisconsin is now number one in

cranberry production.

Commercial cranberry production in the Badger

State began in about 1860. Simply digging ditches

around stands of native vines and encouraging their

growth helped early marsh development. Cranberries

are also Wisconsin’s leading fruit crop both in terms of

acreage and value. In 1996, cranberries were produced

on about 13,600 acres in 19 of Wisconsin’s 72 counties.

The farmgate value was about $75 million. That has

plummeted this year in all cranberry regions.

USDA’s National Agricultural Statistical Service estimated in its August 2000 cranberry report that the total cranberry harvest would be 5.84 million barrels, down 8 percent

from 1999 but 7 percent above 1998 levels. Of the five major

cranberry- producing states, Washington (153,000 barrels)

and Oregon (410,000 barrels) expected increases while

New Jersey (550,000), Massachusetts (1.8 million barrels)

and Wisconsin (2.9 million barrels) predicted decreases.

The 2000 harvest followed on the heels of recordhigh production in 1999 which totaled 6.37 million barrels. The 1999 area harvested was a record high 37,300

acres. The average yield of 170.9 barrels per acre was

22.2 barrels above 1998. The average price per barrel

for 1999 was $17, a decrease of $21.80 per barrel from

the 1998 crop year. The steep reduction in the price per

barrel drove the

value of production down

to $109 million,

a 49 percent

drop from 

1998, NASS

reported. ■

Growers use water-reel harvesters to loosen

cranberries from the vine, causing them to

float on top of the water. USDA PHOTO

Cranberry production cycle revolves around water
10 May/June 2001 / Rural Cooperatives

holding, and those who forged the

agreement say it shows the industry can

work together. But some growers still

lobby for deeper cuts that would make a

bigger dent in the surplus.

Grower/handler split

Some growers say the handlers,

who buy and sell berries, care more

about keeping prices down than about

protecting growers, some of whom are

certain to fold if prices don’t increase.

That criticism also goes against Ocean

Spray, which controls about 70 percent of the U.S. cranberry market.

Like everyone else in the cranberry

industry, Phillips says there’s enough

blame to go around. Low prices also

hurt the co-op because it does not

have the financial resources to market

the fruit, he adds.

“They all want cheap fruit. And what

happens with cheap fruit? That means

the growers are going to be sacrificed,”

counters Hal Brown, who runs the

grower “cranberrystressline” website.

Hatch admits poor prices have

impacted his operation. Farming near

Necedah, in the central sands region

of Wisconsin, Hatch has released 50

percent of his workforce. All growers

are spending less in town, and “people

are just trying to survive; we’re just

trying to lose as little money as possible and cutting back wherever we

can,” he says.

“A lot of growers will probably go

out of business if this marketing order

is implemented the way they’ve written

it,” Doanne Andreisson, a grower from

Duxbury, Mass., recently told the

Boston Globe.

The loyalties are complicated, however. Ocean Spray, which has four seats on

the eight-seat CMC, is the largest handler, but also represents 70 percent of

the growers and is obligated to defend

their interests. Phillips says the 4-million-barrel-agreement is a good deal in

the long term for growers. “It was an

important decision, not a popular decision with everyone, to be sure,” he says.

Ocean Spray needs the fruit because

its revamped marketing plan should

increase demand, it claims. The co-op

plans to roll out as many as 21 new

products this year and 32 next year.

“You’ve got to have new product introductions to keep consumers interested,”

Phillips says.

Meanwhile, in the cooperative’s last

annual report, Ocean Spray’s new CEO

H. Robert Hawthorne and Chairman

Sherwood J. Johnson express hope that

better days are ahead. “We do expect

proceeds to turn upward this fiscal

year,” they wrote.

Phillips adds that initiatives the coop put in place this past year will stimulate demand and reduce the surplus.

Besides introducing new products, the

co-op plans to re- vamp its familiar

blue-tidal-wave label, will implement

$76 million worth of cost-cutting measures and will narrow the price-gap

between Ocean Spray and store-brand

cranberry juices. Ocean Spray also has

created a new distribution network for

its single-serve products, and it vows

to improve marketing efforts as it

brings its new products to market

these next two years.

Co-op’s sale still supported by some

Nevertheless, some growers still

think Ocean Spray should be aggressively exploring opportunities to sell

itself to a giant beverage conglomerate.

For the past two years, some growers

have tried to force the issue onto the

co-op’s annual meeting agenda.

For all intents and purposes, Ocean

Spray shares have a fixed value of $25.

But if Ocean Spray were sold, those

shares could be worth far more, some

growers contend, citing studies by

Ocean Spray’s own consultants. 

In 1999, Ocean Spray’s board weighed

a number of strategic options, including a

sale. In the end, a decision was made to

remain a cooperative, to hire a new CEO

and to focus on reorganizing operations.

Efforts at both the 1999 and 2000 annual

meetings by members who wanted to sell

were not successful.

The Ocean Spray sale appeared as

though it could provide growers with

enough money to hang on until barrel

prices rebound. But when it was turned

down in 1999, a group of growers filed

a lawsuit to force Ocean Spray to

reconsider a sale. The matter was finally put to rest when it was defeated at

the co-op’s 2000 annual meeting in San

Diego in December.

“We believe the turnaround strategy

we’ve set in motion is the right strategy

for recovery,” Hawthorne and Johnson

conclude in the annual report. ■

Native Americans in the Great Lakes regions first called the fruit craneberries because sandhill and other cranes feasted on this native species. In

New England, Native Americans referred to them as sassamanash and made

cakes prepared with lean, dried strips of meat pounded into paste and mixed

with animal fat, grains and cranberries. Later used to make dyes and poultices by the Pilgrims, cranberries soon become a vital source of vitamin C for

whalers and a valuable resource to New England residents.

Cranberries actually grow wild from the Carolinas to the Canadian Maritime Provinces. However, they prefer sandy soil, an abundant fresh water

supply and a growing season that lasts from April to November. That makes

places such as southeastern Massachusetts, central and northern Wisconsin and pockets of Oregon some of the more abundant growing areas.

The Cape Cod Cranberry Growers’ Association is one of the oldest farmer

organizations in the country and probably the oldest cranberry association. It

was established in 1888 to standardize the measure—100-pound barrels—

used to sell berries. ■

The history of crane-berries
Rural Cooperatives / May/June 2001 11

E. Eldon Eversull

Agricultural Economist

USDA Rural Business-Cooperative

Service

ocal cooperatives are

rapidly adapting to the

technological revolution

in agronomy practices.

How fast? In just three

years, local cooperatives more than

doubled their adoption of high-tech

agronomy systems, according to a

USDA study. 

In 1996, only about 24 percent of

the local cooperatives reported having

fertilizer application equipment that

used global positioning system (GPS)

and global information system (GIS)

technology. Three years later, that percentage more than doubled—to 57 percent—among the same respondents.

Sixty-eight percent of local co-ops are

now able to prepare field maps with the

aid of GPS and almost half can combine the maps with crop protectant

application for record-keeping purposes. And an additional 16 percent want

to add GPS services. 

This information is from a recent

survey of local co-ops conducted by

USDA’s Rural Business-Cooperative

Service. Cooperatives were asked

about their crop protectant sales, supply sources, competitors, type of

competition and what services they

offer. Almost 400 local farm supply

and marketing cooperatives responded. These co-ops have combined crop

protectant sales of $830 million, or

40 percent of local agricultural cooperatives’ crop protectant sales. The

results of this survey are discussed in

a pending study, Crop Protectant Operations of Local Farm Supply and Marketing Cooperatives.1

The crop protection industry has

undergone many changes during the

past two decades. Increased input costs,

environmental concerns and low crop

prices in the 1980s placed more

emphasis on sustainable agriculture,

using less fertilizers and crop protectants. Interest in technology increased

during the 1990s. Technology permitted crop protectants to be applied in

precise amounts and locations. 

GPS technology pinpoints within several yards the location of crop protectant

application equipment in a farmer’s field.

GIS maps can then be made that comLocal co-ops embrace

high-tech agronomy systems

L

Farmers can use the global positioning system (note the GPS marker behind them) for their

pest control programs. Local co-ops have doubled their use of this high-tech equipment in

just the past three years. PHOTO COURTESY GROWMARK
12 May/June 2001 / Rural Cooperatives

bine the location within the field with soil

samples, scouting reports on pest and

weed damage and yield monitor results.

More recently, genetically modified

organisms (GMOs) have gained attention. Some GMOs allow the farmer to

use less crop protectants by planting

insect-resistant varieties, such as Bt

corn and Bt cotton. Other GMOs are

resistant to popular broad-spectrum

herbicides so they need less crop protectant treatments and because of the

reduction in weed pressure on the crop,

promote no- or minimum-till practices.

Scientists, as well as farmers, have

broadly embraced the benefits of GMOs

and supported their use. Some suggest

GMOs may provide the opportunity for

farmers to produce enough food to overcome world hunger. Some consumers

and/or consumer groups will continue to

object to GMOs until they can be shown

to be safe and directly benefit consumers, such as GMO crops that help

fight disease. 

Even with this new technology that

uses field maps, scouting reports and aerial photos, farmers still have many decision

and interpretation problems. Farmerowned cooperatives, recognizing the need

for better information and analysis, have

been on the forefront in providing

crop/agronomy specialists to interpret the

technology and help with recommendations on crop protectant application, field

mapping and record keeping. 

Cooperatives leading the way

The 185 surveyed cooperatives that

provide GPS/GIS field maps are larger

than the average survey respondent.

Their crop protectant sales average $3.1

million, compared with $1.3 million for

the 198 survey cooperatives that do not

provide GPS/GIS maps. The GPS/GIS

cooperatives purchase about 73 percent

of their herbicides and insecticides from

regional cooperatives, the most common sources (in this study) being CHS

Cooperatives (Cenex Harvest States)/

Land O’Lakes, Farmland and Growmark. These same regionals are most

likely supplying both crop protectants

and promoting agronomy technology to

many of these local cooperatives. The

other 198 cooperatives have looser ties

with regionals, purchasing only about

58 percent of their crop protectants

from them. 

Almost 100 percent of the GPS/GIS

cooperatives employ crop/agronomy

specialists to help farmers choose the

correct crop protectant and scout fields

for pests and weed damage (table 1).

While all of the GPS/GIS cooperatives

make field maps, half of the other cooperatives would like to do so in the

future. Almost 80 percent of the

GPS/GIS cooperatives have crop protection application equipment that can

be guided by GPS units. Only 10 percent of the other cooperatives have

GPS-guided application equipment, but

43 percent would like to. Keeping

records of farmers’ fields can be done by

69 percent of the GPS/GIS cooperatives

while about 3 percent of the other cooperatives are capable of doing so. Again,

about 43 percent of the other cooperatives would like to be able to do this.

Regional comparisons

There are large regional differences

among cooperatives in their use of

agronomy technology. Ten standard

farm production regions2 are used to

analyze responses in a regional format.

Because of the small number of respondents in four regions, the Northeast and

Appalachian, and Southeast and Delta

Table 1—Crop protectant services that GPS/GIS field-mapping cooperatives and all others offer, or would

like to offer, weighted by sales

Currently Would like Currently Would like 

Services offer to offer Services offer to offer 

- - - - Percent - - - - - - - - Percent - - - -

Crop/agronomy specialists—recommendations & scouting Application equipment with GPS units

GPS/GIS cooperatives 98.85 0.47 GPS/GIS cooperatives 78.22 12.19

All other cooperatives 80.78 4.76 All other cooperatives 9.99 42.81

Field mapping/recommendations using GPS/GIS Record keeping with GPS/GIS

GPS/GIS cooperatives 100.00 — GPS/GIS cooperatives 69.02 16.99

All other cooperatives — 49.77 All other cooperatives 3.26 42.53

— = Not available.

A co-op agronomy specialist

uses CPS equipment to take

soil samples that will be

used to develop grid maps.

COURTESY CHS–LAND O’ LAKES
Rural Cooperatives / May/June 2001 13

States are combined into two regions.

The Corn Belt, with 143, has the most

respondents, followed by the Lake

States and Northern Plains, both with

89. The Corn Belt also has some large

respondents, resulting in crop protectant sales averaging almost $3.2 million. 

Cooperatives in most regions have a

high incidence of offering crop/agronomy specialists for recommendations and

field scouting (table 2). The use of

GPS/GIS technology is centered in the

Corn Belt, where the cooperatives are

some of the largest respondents and corn

and soybeans are the predominant crops.

Almost 69 percent of the Corn Belt

cooperatives have application equipment

with GPS units; field mapping can be

made with GPS/GIS technology by 85

percent of the cooperatives, and record

keeping with this technology by 66 percent. The use of GPS/GIS technology

falls as cooperative size decreases and

when the predominant crops are not

corn and soybeans.

Crop protectants are applied based

on pests and weed pressure, soil tests,

infrared, satellite and aerial photography, and field scouting. Additional

analysis of GPS/GIS information is

only as good as its interpretation. Many

farmers rely on outside help to scout

their fields for crop protection. In the

Corn Belt and Lake States, where 85

percent and 66 percent of the respondents, respectively, provide field mapping, cooperatives also employ

crop/agronomy specialists more than

94 percent of the time. 

Strong sales growth 

Local cooperatives studied generally

have experienced strong growth in

crop protectant sales, with an average

annual increase of about 11 percent

from 1991 through 1999. These cooperatives support the cooperative agricultural inputs system, purchasing

more than 68 percent of their herbicides and insecticides, 48 percent of

their fungicides, and 50 percent of all

other crop protectant products from

regional cooperatives. 

Their primary competitors for these

sales to farmers are private suppliers,

followed by other cooperatives. Crop

protectant price is the strongest competitive tool, but advisory scouting and

other services is also important.

Most cooperatives apply crop protectants for farmers. Crop/agronomy specialists are often employed by local cooperatives to assist the farmer in making

crop protection decisions. Many cooperatives also provide a record service to

track the farmers’ use of crop protectants.

The use of GPS/GIS technology is

being championed by local agricultural cooperatives. Field mapping is available to 68 percent of the crop protectant volume. The GPS/GIS

technology is expensive, so larger

cooperatives are more likely to offer it.

Many of the respondents not offering

Table 2—Crop protectant services that cooperatives offer, or would like to offer, by regions, weighted by sales

Currently Would like Currently Would like 

Services offer to offer Services offer to offer 

- - - - Percent - - - - - - - - Percent - - - -

Crop/agronomy specialists—recommendations & scouting Application equipment with GPS units

Northeast and Appalachian 94.42 — Northeast and Appalachian 61.56 18.41

Southeast and Delta States 100.00 — Southeast and Delta States 76.20 —

Southern Plains 71.87 1.62 Southern Plains 53.53 14.72

Corn Belt 96.15 0.78 Corn Belt 68.98 13.59

Lake States 94.30 0.48 Lake States 47.49 28.19

Northern Plains 85.40 8.11 Northern Plains 38.46 33.25

Mountain 99.45 — Mountain 43.25 51.96

Pacific 71.35 — Pacific — 47.13

Field mapping/recommendations using GPS/GIS Record keeping with GPS/GIS

Northeast and Appalachian 73.83 6.75 Northeast and Appalachian 24.46 19.23

Southeast and Delta States 46.63 — Southeast and Delta States 30.52 —

Southern Plains — 36.91 Southern Plains — 36.91

Corn Belt 84.94 6.38 Corn Belt 65.82 15.20

Lake States 65.85 18.38 Lake States 40.72 30.65

Northern Plains 48.11 26.06 Northern Plains 31.53 40.17

Mountain 40.68 54.53 Mountain 28.06 59.65

Pacific 17.52 64.86 Pacific — 48.73

—= Not available.

continued on page 30
By Dan Campbell

Editor 

nce they were

“Marlboro Men”

(cigarettes optional), riding free and

easy in the saddle

(or ATV) as they kept watch over

their herds and flocks. They

were self-reliant loners who

stood up to whatever fate dished

out. They bounced back up

when they got knocked down

and they learned to survive in

conditions in which most of us

would wilt under the strain. 

But globalization of agriculture and concentration in the

meat packing and food retailing

industries has proven to be a bigger challenge than drought, disease or coyotes ever did. As their

ranks thinned and their profits

plummeted, many livestock and

poultry producers have gradually

come to the conclusion that—

gulp—maybe that guy over on

the next ranch or farm could be

an ally rather than a competitor.

Thus, there has been a surge

during the past five years of new,

producer-owned livestock and

poultry cooperatives. They are

being formed by ranchers and

farmers who see group action as the best way to retain ownership of their livestock and to process and market it themselves. 

Representatives of the four major livestock sectors—beef,

pork, poultry and lamb—gathered in Washington, D.C.,

recently for a mini-summit held as part of USDA’s annual

Agricultural Outlook Forum. They shared their experiences

in helping launch a grassroots co-op revolution, the goal of

which is to help livestock producers keep more of the dollars

traditionally siphoned off by middlemen. 

The new beef and poultry co-ops represented at the

meeting are already considered to be successes, although

their track records are still short. The new pork and lamb

cooperatives hope to emulate the success of the beef and

turkey co-ops.

“Cooperatives give producers marketing power so that

they can compete with the corporate interests that are

14 May/June 2001 / Rural Cooperatives

Hang on to the ranch 

Young livestock & poultry co-ops share goal to strengthen producers’ role in marketplace 

O

Kelly Giles, a board member of U.S. Premium Beef, says the survival of his cow-calf stocker operation hinges

on the ability of the co-op to add value to his cattle through processing and marketing. So far, the co-op has

done just that by working with Farmland Industries to create value-added products such as Farmland’s Ground

& Browned packaged beef (at right). USDA PHOTO BY BOB NICHOLS. BEEF PRODUCT: PHOTO COURTESY FARMLAND INDUSTRIES
attempting to dominate agriculture, as well as an opportunity

to improve their product quality and consistency to meet the

rising demands of consumers,” said Randall Torgerson,

deputy administrator for USDA’s Rural Business-Cooperative

Service and the session organizer and moderator. He was one

of several speakers to use the “Marlboro man” as a symbol for

the stockman of old—producers who now realize that they

are “at the 11th hour” to make needed structural changes.

Otherwise, most of them could wind up as little more than

“piece-wage producers” working for huge food corporations,

if they survive at all, he warned.

Selling meat & meals, not cattle

Kansas cattleman Steven Hunt said there was no secret

about the motivation for forming U.S. Premium Beef: fear!

In the mid-1990s, young producers such as himself could see

the end of their ranching way of life fast approaching. “A lot

of us who had invested a vast amount of capital into our livestock businesses realized that if we didn’t make a drastic

change, we would have to get out of the business.” 

The system was broken and had to be fixed, he said. The

problem was similar to an industrial model in which General

Motors sells Cadillacs and Chevrolets for the same price.“If

that was true, how much longer do you think General Motors

would make Cadillacs?” Hunt asked.

Yet that is the system in which the cattle industry has traditionally operated, he said. “We group our cattle in feedlots and

sell them for one price. It’s a system that rewards mediocrity. It’s

a marketing system that led us to a situation where our industry

produces too many Chevrolets and not enough Cadillacs.” 

This realization helped lead to the formation of U.S. Premium Beef, a producer-owned marketing and processing

cooperative that has been highly successful so far in implementing its strategy to “sell meat and meals, not cattle.” 

Membership in the co-op, of which Hunt is now CEO,

has grown from 200 producers at inception in 1997 to 1,400

ranchers, backgrounders and feedlot operators in 38 states

today. The co-op now holds a 29 percent interest in Farmland National Beef,

the nation’s fourth

largest beef processor

and marketer. Its program to pay premiums

for high-quality carcasses has helped

members earn significantly better payments

than the industry average. The co-op’s premiums-for-quality

program has also stimulated some of the

competition to implement a quality-grid

payment system. 

Hunt listed three principals that have been keys to the coop’s success:

1) Cattle are marketed in a system that pays based on the

quality of the carcass, not just the weight;

2) Producers get detailed grading data from the co-op to

help them improve the quality of their product;

3) Producer commitment—producers must not only

commit to meeting the co-op’s quality standards, but invest

a significant amount of capital in the co-op. True commitment to a co-op “only comes about through ownership,”

Hunt said. 

When it was being launched, many observers advised the

fledgling co-op not to get involved in “brick and mortar”

ownership. But the economic analysis performed for the feasibility study said the co-op needed an ownership stake in a

processing facility.

The economic analysis also showed that cattle producers,

on average, invest from $2,000 to $3,000 per animal unit

(which includes the cost of livestock and all their other

overhead expenses). But the overhead investment to process

beef is only $100 to $200 per animal unit, Hunt said. “So

when you look at the economics of vertical integration, is it

more likely that a processor will go out and invest up to

$3,000 per animal unit (to produce cattle), or would a producer be more likely to invest $100 to $200 per animal unit

(to process it into beef)? This was the point when we in

U.S. Premium Beef said not only can we do this [launch a

co-op], but we have to.”

As a new-generation co-op, the amount of stock the members buy in the co-op establishes their delivery right (and

obligation). Producers originally invested $55 per head of

cattle. For a producer who bought 1,000 shares in the co-op,

the investment would have been $55,000, giving him the

right to deliver 1,000 head annually to the co-op.

By the time U.S. Premium Beef closed its membership

drive in November 1997, it had raised $38 million from

members and secured an additional $38 million in debt.

Know your limitations

Hunt said a key to success in a value-added venture is to

know your limitations. “We were producers—pretty smart

producers, we liked to think, and we had varied backgrounds

[he, for example, had worked as an ag lender]. But we weren’t

experienced marketers or processors.” 

So the co-op leaders felt it was essential to partner with a

successful beef processor and marketer.

In this search, they talked with the nation’s six largest beef

processors. “If you walk into a packer’s office with nearly a

million cattle to offer, you will get an audience,” Hunt said.

“But when you start to talk about ownership and governance

structure, the crowd thins out pretty fast. But a couple of

them stuck around, and we ended up with an agreement with

another cooperative: Farmland Industries.” 

Farmland was not chosen because it is a cooperative,

Hunt said, but because Farmland National Beef leads the

Rural Cooperatives / May/June 2001 15
16 May/June 2001 / Rural Cooperatives

industry in number of value-added beef products. More

than 30 percent of its revenue comes from value-added

products, and more than 16 percent of its products are sold

overseas, he noted. 

“And as the fourth largest beef processor, we also felt it

was about the right size—that we could buy a large enough

piece of it that we could look our members in the eye and tell

them they had some control in this company.” 

Convincing producers that they would have to give up a

little independence at first in order to gain independence for

the long-haul was the biggest hurdle U.S. Premium Beef had

to clear, Hunt said. “Yes, it was difficult to bring more than

$70 million in capital together, and yes, it was hard to negotiate a deal with processors. But the single most difficult thing

to do was to bring together independent cattle producers

from all over the country.”

Hunt advises others to focus on doing what it takes to

create a successful business, with consideration of the coop’s impact on local economies being secondary. “What

scares me is when economic development goals drive a project—where the motivation is to employ people and

increase the tax base. That is not a bad thing, but the priority should be on putting together a project that will generate

earnings for the owners. Then the rest [the jobs, increased

tax base, etc.] will come.” 

He noted that an additional 1,000 employees have been

hired since the co-op took partial ownership of the meatpacking operation, boosting total employment to 4,500. But

that was never a stated goal in the feasibility study.

U.S. Premium Beef closed the deal with Farmland on Dec. 1,

1997, and by the following week it had delivered the first 10,000

cattle to the processing plants in Dodge City and Liberal, Kan.

In a little more than three years, U.S. Premium Beef has

processed 1.8 million cattle, paid out premiums of $24 million,

has $36 million in earnings and more $1.5 billion in sales (that’s

just its share of the processing operation). Not surprisingly, it is

looking to expand, possibly into a multi-species livestock co-op. 

Quitting, cold turkey

If anything, Iowa

Turkey Growers Cooperative was formed under

even greater duress than

U.S. Premium Beef. Ken

Rutledge, the co-op’s

president and CEO, said

the alarm sounded in

May 1996 when Oscar

Mayer (then a division of

Kraft Foods, which was

in turn a division of General Foods which was in

turn a division of Phillip

Morris) announced that

Up-front capital key to surviving a slow start

U.S. Premium Beef’s premium payment program got off

to a slow start. “We soon found out that not all of us produce the best animals,” Steven Hunt said. In the first six

weeks of operation, the co-op’s producers earned less than

the industry average. For all of 1998, members averaged just

$7 per head in premiums. “It was not a fun year,” he said.

“No, they didn’t trust the plant. No, they didn’t trust our

company. Fingers pointed everywhere, but nobody was

looking in the mirror.” The co-op supplied members the

carcass grading data and other information they needed

to improve their programs, and soon the premium payments began climbing.

Despite the rough start, few members quit. Hunt credits that in large part to the fact that co-op promoters

“underpromised and overdelivered. I’m an old banker, and

we realized the need to capitalize aggressively up front,

assuming we would have a tough start. We told members

not to expect a lot of money out of the company for the

first three years, and not to be surprised if their cattle did

not grade as well as they thought.” 

The co-op survived the painful start-up phase without

the need for additional capital from members, “although

some forgot what we told them and we had to show them

the (marketing) presentation again. If we had not required

a big financial commitment up front, I would not be standing here today.” When things got rough, members “would

have walked away.” 

Three years later, members are smiling much more

broadly today as they average nearly $20 per head in premiums. The top 50 percent of the co-op’s producers are

earning over $30 in premiums. The top 25 percent are

earning $40 over the market. 

For any producers who would like to buy into the co-op

with some of those $55 shares, forget it. They last traded

for $90 a share, but none are currently for sale. The overall return on investment from the beginning is now over

200 percent. 

Ken Rutledge said six of the initial 47 members of the Iowa

Turkey Growers Cooperative dropped out during the rough

first 18 months of the co-op’s life. Most of them left when the

co- op had to request additional equity investments to keep

the operation afloat. “It was pretty tough times.” ■

Processed turkey rolls through the

Iowa Turkey Grower Cooperative’s

plant in West Liberty, Iowa. PHOTO COURTESY IOWA TURKEY GROWERS COOPERATIVE
Rural Cooperatives / May/June 2001 17

it would be closing its turkey processing plant in West Liberty, Iowa. That

could have spelled the end for the

turkey producers who supplied the

plant, as there were no other plants

in the area that could handle their

volume. 

By the next month, 47 growers

banded together to form a new cooperative under the motto “strive to survive.” The task before them was

daunting: they had to find another way

to continue to produce turkeys, “or

else convert their buildings to boat

storage, which is not a very attractive

option if you know much about central

Iowa,” Rutledge said. “They found

they would have to mortgage all they

owned in order to continue to produce

turkeys, taking a risk few others would

be willing to take.” 

But they were determined, and got

help from USDA Rural Development,

the state of Iowa and others to launch

their co-op. In December 1997, Kraft’s

facilities in Iowa were transferred to

the Iowa Turkey Growers Cooperative. 

The co-op processed its first birds

in January 1997, but the timing for

launching the operation could not have

been worse. Turkey production was at

a record level and prices soon plunged

to the lowest level in the modern history of the U.S. turkey business. The

depressed market continued through

June of 1998. The normal break-even

point for turkey breast meat is about

$1.60 a pound, but during this period,

the market dropped as low as $1.07.

The co-op’s management team had

been formed in November 1996, which

Rutledge said “was much too late. A

sales program was non-existent [at the

outset]. The only commitment on

hand was from Kraft to take a portion

of the product.”

But then, the worm turned. 

“Sometimes it’s good to be in the

right spot at the right time—and we

happened to be there” when supply

and demand came back into balance,

Rutledge said. Two of the co-op’s

major competitors either closed their

plants or converted to chicken. And,

after a year and a half of struggling to

survive, the co-op’s sales and marketing

programs began to bear fruit. 

Strategic alliances were put into

place, including a deal that saw the coop become the supplier for a private

label line of deli products with the

largest retailer in the United States. A

similar deal was sealed with a mid-size

retailer. A large-volume co-manufacturing agreement was also

concluded with one of

largest food companies

in the world and a program with Oscar Mayer was strengthened

and continued beyond

an initial two-year

period. The West Liberty plant also began

production of beef,

pork and chicken

products. 

Today, the co-op’s

plant is the largest

producer of deli items

for two of the largest

sandwich shop chains

in the nation: Subway

Sandwich Shops and

Schlotzsky’s. The co-op has received

numerous awards for product excellence and the Iowa Governor’s Award

of Excellence for 2000 for being an

innovative producer of value-added

food products.

Rutledge noted that in 1998 the coop ranked 157th among the nation’s

meat processors, and estimated that the

co-op will climb to 75th by 2000, a

year in which it reported $135 million

in sales. 

Bringing home the bacon

Jim Lewis, a hog producer from

Welcome, Minn., and vice chairman of

Pork America, said his co-op was also

born in a time of crisis. With hog

numbers building and processing

capacity falling, the pork market

plunged in 1994. That turned out to

“be a shot over the bow,” Lewis said.

The real crunch came in 1998,

brought on by the closure of a major

pork processor and increased imports

from Canada, which caused the hog

supply to exceed U.S. processing

capacity on some days. 

“Actual prices fell lower than in the

Great Depression—it was devastating,”

Lewis said. Hog producers lost

between $4 and $5 billion in equity. 

Producers knew they had to go

after the pork business beyond the sale

of live hogs, he said. “Some producers

may still be under the delusion that

they can produce their way to profits—

but we don’t think they can.” Those

producers who hope to survive on the

profits from production alone are in a

“death spiral,” Lewis said.

“We must unify with others and

move up through the marketing chain.

Pork America is not out to fix the

entire industry, but we can help our

shareholders,” he said, thanking USDA

(as did the other speakers) for its assistance in establishing their cooperative. 

Another concern of producers is the

dramatic increase in hogs being produced under contract to meat processors. In 1994, Lewis said about 71 percent of hogs were sold on the open

market, but by January 2001, that shared

had declined to only 17.3 percent. 

“So the question is: do we really have

an open market?” Ag lenders are a major

force driving this trend, he said. “With

huge losses in equity and capital, lenders

are pushing growers to sign contracts.”

But with plants running at near capacity,

Cooperatives have traditionally not played a major role in the

poultry industry, but the success of the Iowa Turkey Growers

Cooperative has generated renewed interest in them. USDA PHOTO
18 May/June 2001 / Rural Cooperatives

some growers are also worried about

finding a home for their hogs.

There is also good news: demand

for pork is climbing. New retail price

records were set in each of the first seven months of 2000, and the United

States has been a net exporter of pork

for the past five years, a situation that

last occurred in the 1950s.

“Producers are more efficient than

ever; but they face bigger risks and

smaller rewards than ever. We do not

want to continue on this road,” Lewis

said. For those who want to reduce

their risk, Lewis said there is nothing

wrong with entering into contracts.

But many others still want the chance

for greater rewards and are willing to

take some risk.

To help these producers, the

National Pork Producers Council

formed a task force in 1999 to look

into new opportunities for producers.

Taking inspiration from U.S. Premium

Beef, the council appointed a task

force of producers to research these

opportunities. The task force gave its

report to a group of 53 producers, who

represented 20 million hogs, who voted unanimously to form a steering

committee to pursue a national pork

co-op. By the end of 1999, Pork America was incorporated. 

“Through funds from USDA’s Rural

Business-Cooperative Service and an

agreement with the National Pork Producers Council, a major feasibility

study was performed which noted that

many old packing plants will soon have

to be replaced, creating an opportunity

for the new cooperative,” Lewis said.

The study found that the cooperative

could not succeed on a small scale, and

that supporters of the concept would

have to think big, with the goal of

becoming one of the top three processors within five years. 

Members include producers, co-ops

and groups of producers; all must bear

the risk of producing their own pigs.

Pork America will be an umbrella organization that will help members share

information, coordinate marketing and

provide other services. It also plans to

invest in a processing facility. 

“We didn’t intend to get into ownership of bricks and mortar at the start,”

Lewis said. “But it looks like our best

option at this point. We think we can

buy one of these plants at a discount.”

Indeed, the co-op hopes to sign a contract for a plant that will enable it to

recoup its investment in only one year.

It is also looking into possible partnerships and co-marketing ventures. 

Many pork processors, he said, are

in a similar situation as producers.

“They are very successful, familyowned businesses, but are also being

squeezed by consolidation,” he said,

adding that such a processor could

make a good partner for the co-op. 

“We don’t think anything on the

scale of Pork America has ever been

tried before coming out of the blocks,”

Lewis said. 

Guarding their flocks

Patrick O’Toole, co-chairman of

the new Mountain States Lamb

Cooperative, said lamb producers

Ken Rutledge said there are three main trends in the meat industry which

the Iowa Turkey Growers Cooperative will be pursuing, and he advised other

co-op value-added food ventures to pay close attention to them as well:

■ Brand marketing—major food companies will look for strategic alliance

partners to grow, slaughter and process product. “This is already happening

at our co-op, with four separate co-manufacturing agreements with four of the

largest food companies in the country.” He said Nike athletic wear is the “ultimate brand marketing program—it owns no production facilities. All of its

products are co- manufactured. This trend bodes well for cooperative food

processors.”

■ Private label market—this sector of food production is today very different from the old, generic-label product formerly seen in grocery stores. “Major

retailers today want to place their names on upper-end, high-quality products

that will compete against the major brands,” Rutledge said. The private label

business in 2000 grew at a rate of more than 9 percent, while brand sales were

flat. “Because most food brands do not want to produce private label products, this situation creates a continuing opportunity for co-ops,” he said.

■ Food safety—Rutledge called this the most important trend and “the

issue of the millennium for food processors. If you are planning to open a foodproduction facility, you have a golden opportunity to build a state-of- the-art

facility with food safety as the integral part. If you expect to be chosen as a

major food processor for a food company...you better provide it with reason to

select your company.” 

Rutledge concluded by stressing how different the frame of reference and

the demands of today’s young consumers are from those of their parents’ generation. Quoting Carol Christiansen of the Dairy Deli Bakery Association:

“Their idea of home cooking will be take-out like mom used to buy.” ■

Food trends bode well for co-ops

Hog farmers hope to limit the impact of

market plunges, such as the one that

occurred in 1998, by uniting under the

umbrella of the new, Pork America

cooperative. USDA PHOTO
Rural Cooperatives / May/June 2001 19

hope to rally their sagging industry

with a venture similar to U.S. Premium Beef and the Iowa Turkey Growers Co-op. There is no time to waste.

The U.S. sheep population has

plunged to 8.5 million head, the lowest level since USDA began keeping

records in 1867. The industry peaked

at 56 million head in 1947.

Carbon County, Wyo., where

O’Toole ranches, once had more sheep

than any other county in the nation—

360,000 in the early 1950s. Today, he

is one of the last full-time sheep ranchers in the county. Where sheep once

grazed the mountain valleys in this

region, today the land sprouts expensive subdivisions and “trophy homes”

of the nouveau-rich. As ranch land is

moved out of livestock production and

into residential and resort development, it has a big impact on open

spaces and wildlife, he noted. “We lose

much more than farms when we lose

family farms,” O’Toole said.

Things started to get extremely

hairy for wool producers about a

decade ago, when congress eliminated the support programs for wool and

honey. “The buzz word then was

deficit reduction,” O’Toole said, and

these two industries became sacrificial lambs. He recalls a visit to thenSenator Alan Simpson of Wyoming,

who told him the industry would suffer severely as a result of the action.

His blunt warning proved prophetic.

Since that day, Wyoming’s sheep

population has plunged by half. 

The industry has also been shrinking under pressure from an onslaught

of imported lamb from Australia and

New Zealand. This trend has been

accelerated in recent years by the

strong U.S. dollar, which makes

imports much cheaper. 

“The mission of our cooperative is

to find a way to stabilize a very good

industry,” O’Toole said. Like the other

successful cooperatives, they hope to

manage this by uniting producers who

will invest in their own processing and

marketing ventures. 

The co-op includes predominantly

sheep ranchers from six western states:

Wyoming, Colorado, Utah, Idaho,

Montana and South Dakota. Part of

the initial strategy is to market a superior product which he said is already

widely perceived to be “the best lamb

in the world.” The fact that nearly half

of the co-op’s lambs can be raised

mostly on grass and without antibiotics

“is a definite selling point.”

Co-op officials have visited virtually

every major sheep marketer in the

nation. They have formed a genetic/

technical committee which is working

with experts from major universities to

help focus the cooperative on uniform

health, carcass standards and market

strategies. The co-op is also considering

a partnership with an existing packer, or

buying its own plant. 

While other meat industries have

made progress in moving to a system of

paying producers for high quality carcasses, O’Toole said the sheep industry

has not kept pace. However, he said

this provides a void for the cooperative

to fill, and the co-op members hope to

emulate the role U.S. Premium Beef is

playing in this area for its members.

The co-op is also interested in producing for the kosher market. O’Toole’s

own lambs kosher at more than 90 percent, an indication of the quality and

health of co-op lambs. 

The co-op has tentatively scheduled an equity drive which will charge

members $10 a head. It has held 25

meetings so far, and has signed up

more than 100 members in all six

The Mountain States Lamb Cooperative hopes to sign up producers with more than

350,000 lambs to help pull the industry out of a steep recession. PHOTO COURTESY AMERICAN

SHEEP INDUSTRY ASSOCIATION
20 May/June 2001 / Rural Cooperatives

states it plans to operate in. “This

task would have been much easier a

decade ago, but since then, the

depressed market has eaten up the

equity in their operations,” O’Toole

said. The co-op is well on its way to

signing up producers with 350,0000

lambs as an initial base.

USDA’s role 

USDA’s Torgerson noted that Congress has recognized the need for new,

farmer-owned, value-added cooperatives such as these, and is supporting

them through various technical assistance, loan and grant programs offered

through the Rural Business-Cooperative Service (RBS) of USDA Rural

Development. The 1996 Farm Bill

extended USDA’s Business and Industry (B&I) Loan Guarantee program to

include producer loan guarantees for

stock purchase in new, value-added

cooperatives. USDA/RBS has also

established a set aside in the B&I program, reserving $100 million to $200

million annually for use by farmerowned cooperatives. 

USDA is also supporting Cooperative Development Centers to provide

another source of technical assistance

for co-op start-ups throughout Rural

America. As part of the Agricultural

Risk Protection Act of 2000, Congress

established a value-added product

marketing grant program to further

promote this type of business activity. 

The cooperatives that participated

in the forum all benefitted in one way

or another from these USDA programs. Torgerson noted: “These new

initiatives represent examples of proactive efforts to fight concentration in

their industries and to provide members with continued market access.” ■

In her first formal speech as secretary of agriculture,

delivered at USDA’s annual Agricultural Outlook Forum in

February, Ann Veneman cited several farmer-owned

cooperatives—including U.S. Premium Beef—as examples of the types of operations growers will need for success in the 21st century. She stressed that farmers must

produce based on the needs of consumers, and said

small-scale farmers seeking to add value to their products may benefit from group action. 

“Consolidation and mergers in the food sector are

forcing new strategies for operations and production in

all sectors of the food chain,” Veneman said. “The everdemanding consumers drive the market today. They want

simplified, tailored solutions that bring convenience and

help improve their lives.”

The combination of globalization, technology and

changing consumer demands means “a more tightly connected food chain with stronger linkages among producers, processors and retailers,” Veneman said. “Evolution of

the new food system may be viewed in different ways, but

ultimately, requires new relationships and new thinking.” 

Structural changes in the grain and meatpacking industries have left many farmers feeling vulnerable about their

ability to benefit from the changes, she said. But many

farmers, large and small, are “finding ways to participate

in the changing market for food products, while improving

their bottom lines. These farmers are taking the lead in

more efficiently synchronizing farm production with market

demand by recognizing higher value production and valueadded processing businesses.” This trend is being seen

both among large farmers and smaller farmers who band

together in alliances, she noted. As successful examples

of the later, she mentioned Dakota Growers Pasta cooperative, U.S. Premium Beef and Tennessee Pork Producers. 

Veneman said her initial focus at USDA will be on

expanding trade opportunities for U.S. agriculture, supporting development and the adoption of new technology to promote increased production and new products—such as

ethanol and bio-diesel fuels—and exploring ways to ease

regulatory, burdens on farmers, making sure regulations are

“based on sound science and common sense.” She’s also

focusing on USDA’s food safety and disease prevention programs and ways to improve farm safety-net programs.

Quoting Ken Blanchard’s book “Mission Possible,”

Veneman said, “If you are not involved today in creating

tomorrow’s markets, or knowledgeable about what’s happening in these markets, you are unlikely to find yourselves competing in them.” ■

Editor’s note: Secretary Veneman’s entire Outlook Conference speech can be read at the following web site:

http://www.usda.gov/news/releases/2001/02/0031.htm

Steve Hunt of U.S. Premium Beef shares his

experiences during the USDA Agricultural

Outlook Conference. To the right are: Jim

Lewis of Pork America, Patrick O’Toole of

Mountain States Lamb Cooperative and Ken

Rutledge of Iowa Turkey Growers

Cooperative. USDA PHOTO BY DAN CAMPBELL

Veneman cites cooperatives as vehicle 

to help growers add value to products 
Rural Cooperatives / May/June 2001 21

Beverly L. Rotan, Ag Economist

USDA Rural Business-Cooperative Service

ow does your cooperative’s performance compare with cooperatives with similar functions?

Was it higher, lower or about the same as the

average of a cross section of local farm cooperatives for such factors as sales, product mix,

etc.? Comparisons with other cooperatives—including trend

lines and industry-norms—may help to determine how well

your cooperative is doing. 

The two tables below contain average financial data

compiled from a survey of 291 cooperatives for 1998 and

1999. Fill in the blanks and compare these benchmarks

with your cooperative’s financial data. How’s your cooperative doing? ■

Table 1—Compare your local farm supply cooperative with industry averages1

Size (1998) 2, 3 Size (1999) 2, 3 Your

Measure/Item Unit Small Medium Large Super Small Medium Large Super cooperative 

Sell farm supplies only Percent 85 38 26 5 85 38 26 5 ____

Total assets Mil. dol. 1.6 4.4 7.7 14.2 1.8 4.8 8.3 14.9 ____

Long-term debt Thou. dol. 76.8 420.9 827.0 1,982.1 70.2 438.5 919.0 2,112.7 ____

Total liabilities Thou. dol. 390.9 1,413.2 3,029.9 5,999.3 393.9 1,660.0 3,392.1 6,204.4 ____

Total sales Mil. dol. 2.5 6.6 13.1 24.9 2.5 6.6 13.2 23.6 ____

Total service revenue Thou. dol. 65.5 236.1 322.7 718.3 84.7 227.1 348.4 743.0 ____

Total revenue Mil. dol. 2.7 7.0 13.8 26.3 2.7 7.1 14.0 25.0 ____

Net income (losses) Thou. dol. 100.0 334.1 501.7 900.3 89.4 263.6 461.2 820.0 ____

Labor of total expenses Percent 54.1 52.0 54.2 53.0 54.1 52.0 54.7 53.5 ____

Patronage refunds received Thou. dol. 70.5 194.0 281.9 531.8 61.2 173.9 275.0 484.7 ____

Liquidity ratios

Current Ratio 2.50 1.84 1.37 1.34 2.35 1.90 1.40 1.41 ____

Quick Ratio 1.49 1.00 0.70 0.77 1.38 1.05 0.75 0.63 ____

Leverage ratios

Debt Ratio 0.24 0.32 0.39 0.42 0.09 0.12 0.17 0.19 ____

Debt-to-equity Ratio 0.32 0.47 0.65 0.73 0.07 0.12 0.15 0.13 ____

Times interest earned Ratio 7.28 6.46 4.64 4.63 5.87 6.83 5.37 5.88 ____

Activity ratios

Fixed asset turnover Ratio 7.23 5.49 5.24 5.03 6.62 5.97 5.02 5.79 ____

Total asset turnover Ratio 1.56 1.49 1.70 1.75 1.57 1.57 1.60 1.68 ____

Profitability ratio

Gross profit margins Percent 17.41 17.93 20.19 17.08 17.86 18.15 19.56 15.88 ____

Return on total assets before

interest and taxes Percent 7.11 8.97 8.32 8.07 8.76 8.30 8.85 ____

Return on total equity Percent 10.36 13.37 13.34 14.47 7.20 10.21 10.13 11.22 ____

1/ 100 percent of sales were generated from farm supply sales. 2/ Small = Sales are $5 million or less; medium = over $5 million to $10 million; large =

over $10 million to $20 million; and super = over $20 million. 3/ There were 329 cooperatives surveyed in both years.

How does your local 

farm supply co-op rate?

H

MANAGEMENT TIP
22 May/June 2001 / Rural Cooperatives

Table 2—Compare your mixed farm supply cooperative with industry averages1

Size (1998) 2, 3 Size (1999) 2, 3 Your

Measure/Item Unit Small Medium Large Super Small Medium Large Super cooperative 

Sell farm supplies only Percent 85 38 26 5 85 38 26 5 ________

Market farm products and

sell farm supplies Percent 6 16 13 16 6 16 13 16 ________

Total assets Mil. dol. 1.2 3.9 7.5 16.4 1.3 3.8 8.3 17.4 ________

Long-term debt Thou. dol. 21.7 616.3 808.0 1,899.9 62.9 438.8 1,417.4 2,180.3 ________

Total liabilities Thou. dol. 390.9 1,4 59.8 2,782.4 7,436.1 379.0 1,390.8 3,544.0 7,556.7 ________

Total sales Mil. dol. 2.7 7.2 13.8 32.9 2.7 6.9 13.3 31.2 ________

Total service revenue Thou. dol. 64.1 349.6 568.7 1,241.2 80.8 402.8 626.8 1,563.3 ________

Total revenue Mil. dol. 2.8 7.8 14.8 35.0 2.9 7.5 14.4 33.6 ________

Net income (losses) Thou. dol. 10.7 259.2 414.3 1,041.4 50.9 202.4 318.9 994.1 ________

Labor of total expenses Percent 50.9 48.1 51.3 48.8 53.4 48.8 51.0 50.0 ________

Patronage refunds received Thou. dol. 35.4 135.3 319.4 639.1 34.5 109.7 253.0 548.0 ________

Liquidity ratios

Current Ratio 2.05 1.67 1.41 1.35 1.71 1.56 1.39 1.38 ________

Quick Ratio 1.31 0.97 0.70 0.64 0.83 0.86 0.70 0.69 ________

Leverage ratios

Debt Ratio 0.27 0.38 0.37 0.45 0.30 0.37 0.43 0.43 ________

Debt to equity Ratio 0.37 0.61 0.59 0.82 0.43 0.58 0.74 0.77 ________

Times interest earned Ratio 1.55 4.60 3.96 3.75 3.54 4.10 3.11 3.74 ________

Activity ratios

Fixed asset turnover Ratio 18.55 5.63 5.87 7.03 10.55 5.75 4.79 6.11 ________

Total asset turnover Ratio 2.21 1.86 1.84 2.00 2.16 1.83 1.60 1.79 ________

Profitability ratio

Gross profit margins Percent 9.44 13.36 14.96 15.10 11.62 14.30 16.03 16.27 ________

Return on total assets before

interest and taxes Percent 2.51 8.56 7.38 8.63 5.60 7.07 5.66 7.79 ________

Return on total equity Percent 1.37 14.48 10.58 13.36 7.58 11.97 8.12 11.44 ________

1/ 50 to 99 percent of sales were generated from farm supply sales. 2/ Small = Sales are $5 million or less; medium = over $5 million to $10 million;

large = over $10 million to $20 million; and super = over $20 million. 3/ There were 329 cooperatives surveyed in both years.

Olive growers have formed a cooperative that has

purchased a Madera, Calif., olive cannery from bankrupt

Tri Valley Growers (TVG). According to the Modesto Bee

newspaper, California Olive Growers bought the cannery

for only $1, but committed to spending $9.5 million on

environmental cleanup around the plant. 

The new co-op hopes to have the plant ready by September to process this year’s crop. When production

resumes, the cooperative will focus on frozen black

olives for the food-service industry. The deal includes

the popular Oberti olive brand. 

The U.S. Bankruptcy Court also recently approved the

sale of nine other TVG canneries and most of its assets

to a new subsidiary of the John Hancock Life Insurance

Co., which was the co-op’s largest creditor. 

The Madera olive cannery site is saddled with environmental problems. Production of black olives over the

years has left a chloride residue in the groundwater

underneath the cannery. Even though evaporation ponds

were used, chemicals leached into the soil and affected

water quality. The growers have reached an agreement

with the Central Valley Walter Quality Control Board

which gives them 25 years to complete the cleanup. The

cooperative will continue pumping and cleansing

groundwater as part of the cleanup. TVG closed the

plant in 1999 due to the water quality problems. 

New olive co-op buys TVG cannery
Julie A. Hogeland, Ag Economist

USDA Rural Business-Cooperative Service

dentity-preserved grains have generated a

small revolution in the marketplace and offer a

case study on how and why local cooperatives

choose to innovate.

Like the grain industry in general, local coops are oriented toward mass marketing, buying in bulk from

many producers, co-mingling and blending lots for an average

(No. 2) quality. Such grain is then re-sold to a variety of users. 

It has been up to users to adapt the grains to their specific

processing requirements. But improvements in processing

characteristics or nutrient value recently introduced by

genetic engineering and advanced plant breeding techniques

have begun to shift the burden of adjustment back to the

grain elevator and feed mill.

Capturing the greater inherent value of these grains

requires specially dedicated elevators or grain bins for

identity preservation (IP). Mill cleaning between runs and

testing to assure purity of incoming and outgoing grain are

also required. Re-valuations of other established practices—including market development, contracting with

growers, specialized facilities and grower education—may

also be required. Recent news reports about specialized

feed grains filtering into the food chain suggest that handling margins may not cover the cost of segregation or

other adjustments.

In mid-1999, just before controversy about health and

safety issues exploded in the European Union, USDA/RBS

conducted a survey of local cooperatives’ interest in and

experience with such identity preserved grains. Respondents surveyed were local cooperatives with at least $15

million in annual sales (with about 40 percent from total

grain sales). 

The survey offered a window on how cooperative culture—including priorities and established ways of doing

business—influenced local cooperatives’ response to IP

grain. Respondents, who included general managers or

feed or grain department managers, picked one of the following three choices to describe the operating style of

their cooperative: 

a. We value being “first” with new products, markets and technologies, even though not all efforts prove to be profitable. We typically respond rapidly to early signals about areas of opportunity. 

b. We seldom are “first” with new products. However, we monitor our major competitors to see if we can be second with a more

cost-efficient, perhaps more innovative product.

c. We try to maintain a secure niche in a relatively stable product or area. We try to protect our domain by offering higher quality, superior service, lower prices, etc. We tend to ignore industry

changes that have no direct influence on current areas of operation

or commodity priorities.

Those who chose the first category were classified as

“Innovators”; the second, “Followers”; and the third, 

“Status Quo.”

It was expected that most would consider themselves Status Quo. Cooperatives are often considered to be conservative organizations, reflecting the orientation of producermembers buffeted by weather and a constantly changing

political landscape. Change within cooperatives is seldom

fast because operational and structural changes are carefully

deliberated to determine the impact on the organization’s

future course. The service orientation of cooperatives, coupled with industry overcapacity in feed mills and elevators,

means members may be reluctant to upgrade facilities or

invest in new ones. 

Success in the grain industry has generally depended on

maximizing facility turnover and maximizing the spread,

the difference between the buying and resale prices for

grain. Cooperatives that have been successful by this standard may see no reason to jeopardize that success by

investing in an innovation that requires a lot of add-ons to

make it work. 

In the course of seeking the highest resale price for

members’ grain, such locals may regard their regional cooperative as just another bidder. This may be an outgrowth of

grain producers’ willingness to sell anywhere that earns an

extra penny per bushel. But minimal producer commitment

at the local level can reduce a local cooperative’s commitment to its regional cooperative, lowering coordination

within the system as a whole. Nevertheless, competition

between regionals and locals appears to be the norm in

cooperative grain marketing.

Rural Cooperatives / May/June 2001 23

Local cooperatives’ role in

identity-preserved grain industry

I
Local co-ops cope with the constant possibility of member

turnover by striving for a loyal customer base. The result

may be a niche of relatively small, often older, diversified

family farmers. The link between local and producer is a

trust based on familiarity (“We grew up together,” was a

common comment). Established loyalties may mean that if

the cooperative doesn’t get new customers, neither does it

lose established

ones. Unlike more

aggressive suppliers, such cooperatives are often

particularly sensitive to farmers

other suppliers

might write off as

inefficient. These

cooperatives may

expend their

financial resources

by not building or

upgrading facilities, but by

extending credit

to a clientele

viewed as 

neighbors.

Although the

222 respondents were evenly split between the three categories, the “Follower” category seemed to closely resemble,

in volume and attitudes, the “Status Quo” group. The contrasts between Innovators and the Status Quo and Follower

groups suggests that the small revolution triggered by IP

grains portends a cultural divide among local cooperatives.

Respondents from the “Innovator” group handled a much

greater volume of IP grain than the Follower and Status Quo

groups, replicating the volume-driven commodity market

within an IP context. Interdependence demonstrated through

partnering with regional cooperatives and investor-owned

firms (IOFs) appeared to underwrite Innovators’ willingness

to bet on new products. The more traditional and independent Status Quo/Follower cooperatives were more likely to

regard regionals as competitors. 

The Follower and Status Quo groups appeared to resist

change, and, not surprisingly, they saw less evidence of

producers adopting IP grains in their marketing territory

than did Innovators. Sixteen percent of Innovators saw IP

grains making substantial inroads in their marketing territories, measured by farm numbers or sizes, compared with

7 percent of the Follower and 1 percent of Status Quo

groups. Twelve percent of the Status Quo group did not

expect IP grains to affect producers in their area in the

future. Only 5 percent each of Follower and Innovator

groups felt the same. Fourteen percent of the Status Quo

group acknowledged they didn’t know the extent of farmer

adoption in their territory, compared with 4 percent of

Innovators and 7 percent of the Follower group. 

Slightly over 40 percent of all respondents saw

increased planting of IP-grains from 1998 to 1999, coinciding with industry observations. Sixty percent of Innovators observed

increased planting, compared

with 36 percent

of Followers and

26 percent of

Status Quo. Similarly, Status

Quo respondents

were the least

likely to know

what size of producers were

adopting IP

grains. 

Here again,

Innovators were

the most knowledgeable. Status

Quo locals pictured themselves

being an industry in-and-outer according to grain prices,

whereas Innovators were more likely to commit to a specific

role using IP grain, such as feeding livestock. A “wait and

see” attitude was common among Status Quo locals. 

These results demonstrate the truth in the observation

that organizational environments are not given realities;

they are created through a process of attention and interpretation. Status Quo and, to a lesser degree, Follower local coops preferred to get the best prices for grain by continuing

to focus on traditional marketing practices. Theirs was a

narrowly honed strategy. In contrast, Innovator co-ops operated in a multi- dimensional world where many avenues, and

perhaps some money-losing detours, could ultimately

achieve a similar end.

These survey results suggest that a new cooperative

culture appears to be emerging alongside the established

framework that includes managers who continually scan

the environment for new opportunities, spread risk by

partnering, and are psychologically at ease with the time

required for new investments to mature. While continued

controversy over IP grain may justify a conservative

approach, survey results suggest some two-thirds of local

cooperative elevators—and perhaps their members as

well—may change only when forced to do so by industry

conditions. ■

24 May/June 2001 / Rural Cooperatives
Rural Cooperatives / May/June 2001 25

‘Best of the best’ inducted into 

Co-op Hall of Fame

John B. Gauci, David A. Hamil,

and Otis and Mary Lee Molz have

received the highest honor bestowed

by the cooperative community: induction into the Cooperative Hall of

Fame. Hundreds gathered at a ceremony April 25 at the National Press

Club in Washington, D.C., to honor

them and their outstanding contributions to cooperatives. 

To mark the 25th anniversary of the

Cooperative Hall of Fame, a number

of past Hall of Fame inductees attended the event. The anniversary was also

marked by the launching of a new

Cooperative Hall of Fame Web site,

www.coopheroes.org. 

Master of Ceremonies Harvey

Sigelbaum, co-CEO of MultiPlan

Inc., explained that the 2001 inductees

were selected by two committees of

national co-op leaders based on their

“genuinely heroic” contributions to

cooperatives. “They truly are the best

of the best,” said Sigelbaum.

John B. Gauci was recognized for his

life-long devotion to developing co-ops

throughout the world to help people

improve their lives. In his acceptance

speech, Gauci emphasized the need for all

cooperatives and coop leaders to commit

themselves to ongoing

and new co-op development initiatives.

David A. Hamil

served as administrator of the Rural Electrification Administration for 14 years

under four presidents

and was a driving

force behind the creation of the National

Rural Utilities Cooperative Finance Corporation. He was visibly touched by the

honor bestowed upon

him. At age 92, he

thanked the group for remembering the

“old timers” and their efforts. 

Otis and Mary Lee Molz were

honored for their years of volunteerism in cooperatives in the United

States and overseas. Otis acknowledged the support of others in their

efforts while Mary Lee urged the

young cooperators in the room to

devote themselves to co-ops. 

The Cooperative Development

Foundation, a national foundation

promoting self- help and mutual aid in

community, economic and social

development through cooperative

enterprise, administers the Cooperative Hall of Fame. 

DFA sells interest in Suiza 

for cash, six dairy plants

On the heels of a merger between

Suiza Foods of Dallas and Dean Foods

of suburban Chicago, Dairy Farmers of

America (DFA) has sold its nearly 34

percent interest in Suiza. In return,

DFA gained more than $165 million

plus ownership in six dairy plants located in: Miami and Winter Haven, Fla.;

Birmingham, Ala.; Cincinnati, Ohio;

Charleston, S.C.; and Salt Lake City,

Utah. The plants represent areas

where Suiza and Dean, the nation’s two

largest dairy processors, had overlapping operations. 

Suiza paid $1.5 billion in cash and

stock to buy Dean Foods and absorbed

its $1 billion debt. The Associated

Press and The Wall Street Journal

report that the new company, which

will carry the Dean name, will have an

estimated $10 billion in dairy and specialty food sales. It will control a 30- to

35-percent share of the fluid milk market, depending upon the outcome of

some antitrust issues. The deal is

expected to be closed later this year.

Suiza has completed 43 acquisitions in

its eight-year history. 

Meanwhile, DFA has placed its new

plants in a new company called National

Dairy Holdings, LP. It will share ownership with three dairy entrepreneurs. The

firm will also operate the Valley Rich

plant at Roanoke, Va., which had been

The newest inductees into the Cooperative Hall of Fame were

joined by some Hall of Fame alumni during the induction ceremony in Washington D.C. in April. Seated, from left, are: John

Gauci, David Hamil and Mary Lee Molz (all three are new

inductees for 2001). Standing (from left): Henry Holloway, Gonze

Twitty, Ed Jaenke, Roger Willcox, Stan Dreyer, David Smith,

Glenn Webb, Otis Molz (new inductee) and Malcom Harding.

PHOTO BY KEITH BARRACLOUGH, COURTESY COOPERATIVE DEVELOPMENT FOUNDATION

NEWSLINE
26 May/June 2001 / Rural Cooperatives

jointly owned by DFA and Allen Meyer,

one of the three entrepreneurs. 

According to newspaper reports,

U.S. Sen. Patrick Leahy of Vermont

expressed reservations about the SuizaDean merger. “The acquisition would

create a company with vast market

power not only over consumers, but

also over farmers who can expect to be

offered even lower prices for their

labor and products,” he said. Last year,

Leahy had asked the Justice 

Department to look into potential

anti competitive activities of Suiza.

“It already controls or handles 70

percent of the fluid milk in New

England, and regional retail milk

prices already have risen because of

the concentration.” 

In other DFA news, its corporate

board of directors has been reduced

from 116 to 48, marking the end of

the cooperative’s initial restructuring

period following its formation. The

new board was seated at the April 3

annual meeting in Kansas City, Mo.

The directors had been chosen earlier

for a one-year term to represent a

local district within DFA’s seven geographic marketing areas in its 45-state

territory. In the officer election, Herman Brubaker of West Alexandria,

Ohio, was re-named chairman of the

board, the post he has held since DFA

was formed in 1998. Other officers

are: Tom Camerlo, Florence, Colo.,

first vice chairman,; Charles Beckendorf, Tomball, Texas, vice chairman; Bill Siebenborn, Trenton, Mo.,

vice chairman; and Randy Mooney,

Rogersville, Mo., secretary-treasurer. 

DFA, the nation’s largest dairy

cooperative, last year processed and

marketed 45 million pounds of milk

for its 27,000 members.

Swiss Valley sets dividend

The board of directors for Swiss

Valley Farms, Davenport, Iowa, has

declared a 22-cent per hundredweight

dividend to members who delivered

milk to the cooperative in fiscal 2000.

Swiss Valley earned a $6 million profit,

from which it paid 12 cents per hundredweight in cash (54.5 percent) and

the balance in stock. 

The year was marked by tremendous

growth in market share, membership

and growth in equity for the cooperative, said Gene Quast, the cooperative’s

chief executive officer. The cooperative’s milk supply increased 37 percent.

Plant expansion this summer at Mindoro, Wis., will increase blue cheese

production. Production and storage

capacity has been expanded at the plant

in Cedar Rapids, Iowa, which will

increase the supply of cultured products, such as cottage cheese and yogurt. 

In other news, the cooperative has

totally revamped its website, www.swissvalley.com, to offer members a myriad

of information about the dairy cooperative. Each division has a site with informative pages linked from the main page.

Members can also access extensive producer information, including check history and test results. Swiss Valley has

1,700 members farming in Iowa, Illinois, Wisconsin and Minnesota. 

Farmland, ADM launch grain 

joint venture

When Bob Honse assumed the reins

as CEO of Farmland Industries last

September, he faced an immediate challenge to reduce the regional cooperative’s level of borrowing. Several years

of declining earnings and substantial

losses from a depressed fertilizer market

in 2000 sparked a top-to-bottom review

of all the cooperative’s operations.

Proactive measures to improve the balance sheet were identified as part of this

review. Staff reductions, sale of assets

and possible joint ventures for some of

its operations were all considered. 

One of the first results from the

review is a new, grain-marketing joint

venture with Archer Daniels Midland

(ADM), a major investor-owned agricultural processor. This joint venture

could generate potential savings of

about $10 million annually, the cooperative projects. Farmland’s internal

review showed that its grain business

borrowed the most but returned the

least among its operating units. The

To meet the growing demand for blue

cheese, Swiss Valley Farms is increasing

production of its Mindoro Blue. PHOTO

COURTESY SWISS VALLEY FARMS

Land O’ Lakes and Dairy Farmers of America have formed a joint venture—

Melrose Dairy Proteins LLC—to help stabilize local milk markets for Upper

Midwest dairy farmers. As a key to this effort, the two co-ops have purchased the Kraft Foods cheese plant in Melrose, Minn., which produces

cheddar and other hard natural cheeses. The plant purchases 1 billion

pounds of milk annually from 850 Minnesota dairy farms. PHOTO COURTESY DFA 
Rural Cooperatives / May/June 2001 27

new ADM/Farmland company will

lease and operate the cooperative’s 24

elevators and share the profits.

The Kansas City Star reports that

Farmland will receive $3 million annually in lease fees. All of the 400 elevator

employees will retain their jobs while

another 100 employees at the co- op’s

headquarters will join the venture or be

reassigned at Farmland. In addition to

reducing the co-op’s debt, the pact will

enhance patronage-based earnings for

the grain business, Honse said. 

The grain business is characterized

by low margins and high capital

demands. Honse said the cooperative’s

only export facilities are on the Texas

Gulf Coast. With the new venture,

Farmland gains access to markets

served through the Mississippi River,

the Great Lakes region and the Pacific

Northwest while ADM expands to the

Great Plains wheat market. 

In early May, Farmland announced

that it was closing its canned-ham plant

in Carroll, Iowa, which will cost the

community 150 jobs. The 51-year-old

plant was aging, and the popularity of

canned hams has also declined, the coop noted. The cooperative has also idled

nitrogen fertilizer plants in Lawrence,

Kan., Pollock, La., and Enid, Okla.

Diamond sales top $244 Million

Sales revenue from walnuts and other nuts increased 13 percent, to more

than $244 million, for Diamond of

California in fiscal 2000. Diamond

generated net earnings of $18 million,

17 percent higher than in 1999. Gross

sales from Diamond Nut Co., which

markets nuts other than walnuts, grew

from $39 million to $53 million while

earnings before interest and taxes

increased 33 percent, from $3 million

to $4 million. Diamond’s equity

resources now total $54. 

Diamond completed it’s transition

from the former Sun-Diamond Growers partnership and established separate

resources for managing sales and distribution, sales administration and information system functions. International

retail sales volume climbed 300 percent

in the past five years. Food service and

ingredient business grew 29 percent last

year in the domestic market and 45 percent in the international market. Diamond is not only America’s top walnut

marketer, but also the leading brand in

a variety of other nuts. Cooperative

President Michael Mendes noted,

“This extraordinary level of awareness

A business jet that crashed into a cooler warehouse

at the Morning Glory Dairy milk bottling plant at DePere,

near Green Bay, Wis., on April 2 killed the pilot and

caused several employees to be hospitalized with severe

burns. As of late April, two of the burn victims were still in

critical condition at a Milwaukee burn center.

Cause of the accident is under investigation by the

National Transportation Safety Board. The plant is owned

by Foremost Farms USA,

Baraboo, Wis. The crash

sparked an explosion,

ammonia leak and fire in a

cooler and product storage

area. Neither the dollar loss

nor amount of insurance

coverage have been disclosed, said Joan Behr,

Foremost Farm’s director of

employee relations and

communication. The rebuilt

cooler won’t be back in service until Labor Day. 

The accident occurred

during a late afternoon shift change when only 35-40 of the

187 employees were in the plant. Employees followed an

evacuation plan, escaped the premises and reported to

designated gathering area so firemen could quickly fight

the fire. Bottling and some other production resumed within 24 hours while other plant functions gradually returned.

Most employees returned to work within 48 hours. During

the interim, the cooperative is renting 23,500 square feet of

cooler space from a private firm in Green Bay. 

Wisconsin Gov. Scott McCallum flew to Green Bay

with cabinet members and advisers, and toured the

crash site to assess the damage. The explosion wiped

out a supply of dairy products about to be shipped to

food services, schools and grocery stores. The plant

processed about 500,000 gallons of milk a week for retail,

food service and school customers and 1 million pounds

of sour cream a week for

hundreds of customers in

northern Wisconsin and

upper Michigan.

During the week after

the accident, the cooperative diverted 25 percent

of its production and distribution to Foremost’s

plant at Waukesha near

Milwaukee. Milk for some

customers was briefly

sourced from Swiss Valley Farms and Land

O’Lakes, neighboring

dairy cooperatives. Area counselors were engaged by

Foremost to assist the employees after the fire. Directors, employees and the media received daily updates

and newsletters carried articles about the accident.

Milk pickup schedules at member farms were altered

for only a day or two. “Support for the cooperative and

employees from the community has been overwhelming,” Behr said. 

Plane crash stalls production at Foremost dairy plant

The pilot was killed and heavy damage was done to this Foremost

Farms USA milk bottling plant in DePere, Wis., when a small business jet crashed into it. PHOTO COURTESY FOREMOST FARMS USA.
derives from the company’s investment

in the brand.”

AMPI leader urges more 

member participation in co-op

One of the basic tenets of cooperatives is member participation, although

it’s not always emphasized the way it

should be.

Mark Furth,

general manager of Associated Milk Producers Inc.

(AMPI), at

New Ulm,

Minn., feels so

strongly about

the issue that

he made

increased

member participation one

of his five-year

goals for the

cooperative.

Last on his list

was “growing

new roots.” 

Writing in

the cooperative’s “Dairymen’s Digest”

magazine, Furth explained, “Although

AMPI has experienced near-record

growth in membership and milk volume, member involvement has to keep

pace. In a cooperative, involvement

should not be optional. You have an

investment in this farm-to-market

business. It’s your company. Is it working for you?” The magazine included a

listing of the cooperative’s elected

leaders. “This listing is a useful tool

when wanting to propose a resolution,

discuss an issue or learn more about

your cooperative,” Furth continued.

“Becoming involved may be as simple

as calling a fellow AMPI member

about a concern or as rewarding as

aspiring to be on the corporate board

of directors. You decide. It’s your business. Accept the challenge!

“As an AMPI owner, 4,800 Midwest

neighbors are your business partners.

Together, you own a farm-to-market

business that processes, packages and

markets your milk. In an age when producers everywhere are striving to move

their products up the food chain, you

are well on your way,” Furth reminded

the membership. 

During fiscal 2000, AMPI achieved

$1 billion in sales, had increased earnings of $9.8 million and revolved $8.9

million back to members. Amidst an

environment of rising producer exits

and retirements, more than 300 new

producers joined AMPI last year. The

cooperative’s record-breaking sales and

volume of packaged cheeses were the

catalyst for a $3 million facility expansion at Portage, Wis. The building project will be completed later this year

and increase the plant’s sales cooler

capacity. “Our consumer-packaging

facilities are a long-term investment for

our business,” Furth said. “New customer orders of aseptically packaged

products made in Dawson, Minn., and

cheese packaged in Portage resulted in

double digit sales growth.” 

In the officer election following the

annual meeting, Paul Toft, Rice Lake,

Wis., former vice president of the board

and a director for 14 years, was elected

president. He succeeds Wayne Bok,

Geddes, S.D., who is retiring from the

dairy industry. The board has been

downsized from 34 to 33 members. Toft

has been marketing milk through AMPI

to its plant at Jim Fall, Wis., since 1973.

His youngest son, Mark, returned to

the dairy farm this spring.

Texas rice co-op formed

A group of about 30 rice growers

near the Wharton County community

of Louise, Texas, have formed a new

marketing cooperative to earn more

from the long-grain rice market. Producers are not only suffering from historic low prices, but also from the high

cost of farm production supplies, particularly fuel and fertilizer. The cooperative hopes to handle members’ rice

from the dryer to the grocery shelf.

The interim board will canvass other

rice growers with an eye to increasing

membership. Simultaneously, it will

work on developing the legal and business framework of the cooperative. 

The new rice co-op has set a minimum commitment of 1.2 million hundredweights of rice and a maximum of

2.5 million hundredweights—about

one-fourth of the rice grown in the

Texas area west of Houston. The concept is similar to Riceland Foods, an

Arkansas rice marketing cooperative. A

key to the plan will be to buy or lease a

mill with established brands which earn

more than bulk rice in domestic and

export markets. The cooperative already

has a small mill in mind to purchase.

Rice acres hit a 30-year low last year, but

the yield was up due to improved varieties and ideal growing conditions. 

Pork co-op faces obstacles

Despite opposition from a local

group, Family Quality Pork Processors

Cooperative of northeastern Nebraska

is taking steps to operate a $2.4 million

packing plant that can slaughter

250,000 hogs per year. In the first step,

the Boone County Planing Commission has approved a site east of Petersburg. The next step will be to obtain a

conditional-use permit to operate the

planned $2.4-million facility, which

would employ about 40 workers. The

cooperative seeks to expand its current

membership of 125 to 150. 

Proponents say the facility will look

more like a farm than a factory and have

less odor and runoff than traditional

slaughter plants. Investors see the cooperative as a way of helping small producers stay in business. Members are

being asked to pay a fee of $12 for every

hog they want slaughtered at the plant

each year. Membership investment was

open to the first 149 producers who

wanted to invest up to $250 per person

to fund the business plan.

Wisconsin co-op initiates 

semen research trial

Results are expected this summer

from a sexed-semen research trial being

conducted in collaboration with Accelerated Genetics of Baraboo, Wis., XY

Inc. and Colorado State University.

The goal is to introduce sexed semen

28 May/June 2001 / Rural Cooperatives

Paul Toft

Mark Furth 

PHOTOS COURTESY AMPI
Rural Cooperatives / May/June 2001 29

Transactions are pending with three new grower-owned

sugar beet cooperatives to purchase the major processing

plants currently owned by Imperial Sugar Co. of Sugar Land,

Texas, its subsidiaries, and Western Sugar Co., owned by

Tate & Lyle LLC of London. Imperial, the largest processor

and marketer of refined sugar in the United States, filed for

chapter 11 bankruptcy protection in January. 

“Once Imperial sells Michigan Sugar and Western

Sugar sells its factories, 90 percent of the sugar beets

planted (nationwide this year) will be processed at cooperative factories,” said Dick McKamey, president of the

Washakie Beet Growers Association at

Worland, Wyo. “The growers needed to

take this risk not only for themselves, but

also for the community and the (factory)

employees,” McKamey said.

The Washakie association has signed a

one-year lease for the Holly Sugar factory.

The company, which had planned to close

the plant unless growers leased it, will

continue operating it and market the sugar.

Growers have been plagued with the

lowest prices in 20 years, a glut of sugar,

high energy costs and cheap imports from

Canada and Mexico. Plans have been postponed until

June 30 by the Rocky Mountain Sugar Growers Cooperative to purchase Western Sugar Company at Scotts Bluff,

Neb. The cooperative was formed last July when the

Western plants were offered for sale. 

The delay is expected to help the cooperative to solidify

its financing. Also sidelined was a proposal by the Scotts

Bluff city council to commit $500,000 to a 10-year loan from

the city’s sales tax proceeds to help the cooperative with

operating expenses. During the interim, the cooperative

will seek to increase its committed acres from 150,000 to

170,000, especially in Colorado and Nebraska. The plants

operate more efficiently at the 170,000-acre mark, although

Western Sugar’s six factories can process up to 185,000

acres of sugar beets.

Growers in Wyoming, Montana, Colorado and Nebraska are subscribing to the new cooperative at a rate of $185

per acre. The $78 million agreement will give sugar beet

growers their first processing plant ownership stake in the

90-year history of the North Platte River Valley’s sugar

industry. Hod Kosman, a Scottsbluff bankerer, volunteered

to assist the cooperative. If farmers don’t preserve the

region’s sugar industry and buy Western Sugar, Kosman

says land values could drop up to 20 percent. “It’s [investing] an excellent way for farmers to participate upstream,

and they don’t have that opportunity often,” he said. 

Rick Dorn, a third-generation Montana beet grower and

president of the cooperative, said “This is not the growers’

burden alone.” Although prices have bottomed, cooperative backers believe that’s why the deal is within reach of

the growers. The cooperative is offering to lease shares to

non-members at $70 per acre for two years; after that, producers can buy shares for an extra $140 per acre. 

The lease will keep the plant open to handle this year’s

beet crop. The agreement was reached just as farmers

were about to sow the 2001 crop. The cooperative will

have title to all the sugar produced. In an Associated Press

report, Washakie President Rick McCamey

said, “The growers needed to take the risk

not only for themselves, but also to support

both the community and employees.”

Meanwhile, Imperial has signed a letter

of intent to sell the capital stock of Michigan Sugar Co.’s four factories to Michigan

Sugar Beet Growers Inc., a new cooperative of 1,400 growers based at Saginaw.

However, the cooperative recently learned

it did not qualify for tax- exempt bonds to

finance and purchase the facilities. It is

seeking low-interest financing elsewhere.

The group needs to secure about $40 million plus an undetermined line of credit to operate the processing plants.

The cooperative expects to secure 125,000 acres, or

the amount of sugar beets processed annually in the

Michigan plants. Richard Leach, its executive vice president, said the only way growers will be paid for last year’s

crop is for members to contract with the cooperative.

The transaction is subject to the negotiation of a definitive

agreement and approval of the company’s board of directors

and resolution of Imperial’s Jan. 16 petition for relief to the

U.S. Bankruptcy Court for the District of Delaware.

Purchase terms include a cash payment of $55 million at closing, deferred payments of $10 million and the

cooperative’s assumption of $18.3 million in industrial

development bonds. The cooperative faces an Oct. 1

financing deadline. If the deal is closed later, the company will manage the four Michigan factories and market the processed refined sugar under a lease and management agreement so the 2001 crop can be processed.

Further, the cooperative will sign a sales and marketing

agreement so the company will continue marketing the

refined sugar processed by Michigan Sugar Co. after

the sale. The cooperative has members in Michigan and

Ontario, Canada. A membership drive will follow to sell

about 24-million shares at $200 each plus delivery of one

acre of production.

Beet grower co-ops on brink of processing most U.S. sugar 

PHOTO COURTESY

AMERICAN

CRYSTAL SUGAR
to the North American artificial insemination industry. It’s the first time an AI

organization in the United States has

conducted such a research trial. It will

inseminate 1,200 virgin heifers in a

concentrated number of dairy herds.

The semen was collected from three

Accelerated Genetics’ sires housed at

XY Inc., in Ft. Collins. The ultimate

goal is to predetermine the sex of

calves from specific matings with the

result to have faster gain within herds.

MMPA returns $1.9 million in cash

For the sixth consecutive year,

Michigan Milk Producers Association

(MMPA) has paid $1.9 million in cash

patronage refunds to its members.

The funds represent 30 percent of the

$65.7 million allocated earnings generated by the cooperative in fiscal

2000. The patronage includes all of

the farm supply earnings and 25 percent of the milk marketing profits.

Cash payments set a record because

the $4.1 million returned in 1988 and

1989 was paid in equities. 

“The ability to make these cash payments and maintain a competitive pay

price is the essence of a strong cooperative,” said MMPA President Eldwood

Kirkpatrick. “We have consistently

generated premiums and net savings

(since 1987) while requiring no capital

equity retains from our members,” he

said. “We have operated without any

equity capital retain and relied on plant

operations, milk marketings and member dues to fund the cooperative.”

Foremost converts to mozzarella

A $91,000 grant from the Wisconsin

Development Fund to Foremost Farms

is being used to retrain the 50 employees at its cheese production plant at

Richland Center, Wis., which will

switch from manufacturing cheddar to

mozzarella cheese. The major conversion comes on the heels of a tough year

for the cooperative based at Baraboo.

Earnings for fiscal 2000 reached only

$10 million, down from $19 million a

year earlier. Similarly, revenues

dropped to $1.1 billion from $1.3 billion in 1999 due to lower cheese prices

and higher energy costs. 

Patronage refunds for fiscal 2000

reached $12.6 million, or an average 23

cents per hundredweight for milk marketed through the cooperative. Duaine

Kamenick, Foremost’s finance vice

president, said it had been a trying year

for dairy farmers. “Milk prices were

lower than they had been in decades

and were followed by record prices in

1998,” he said. The average milk price

for Foremost members in 2000 was

$11.62 per hundredweight, vs. $13.93

per hundredweight in 1999. Members

received patronage refunds totaling

$12.6 million, down $2.31 from the

1999 price of $13.93 per hundredweight. Members marketed 5.3 million

pounds of milk. As in past years, Foremost will pay 25 percent of its patronage in cash and add the rest to members’ equity accounts.

Record loan level for 

Texas FCBs 

The Farm Credit Bank of Texas and

23 local credit cooperatives in the fivestate Tenth Farm Credit District ended fiscal 2000 with record loan volume

and strong earnings despite difficult

weather and market conditions faced

by many agricultural customers. Gross

loan volume reached $5.2 billion, a

new record for the 84-year-old district

and 9.1 percent higher than 1999.

Improvements in the livestock industry

contributed substantially to the strong

demand for agricultural and equipment loans. Expansion in the integrated processing and marketing sector

also were factors.

30 May/June 2001 / Rural Cooperatives

Local co-ops embracing high-tech agronomy systems continued from page 13

it want to offer GPS/GIS technology

in the future.

Compared with cooperative fertilizer operations in 1996, there are many

similar responses. Local cooperatives

are still strongly supported by the

regional cooperative procurement and

distribution system. Private suppliers

and other cooperatives are strong competitors, especially on price.

Cooperative crop protectant application equipment with GPS/GIS

technology, combined with the farmers’ use of yield monitors on harvesting equipment, provides farmers with

maps showing where crop protection

works and where pest damage 

lowers yields. 

Local cooperatives, with long experience in fertilizer and crop protectant

application and employing crop/agronomy specialists, can help interpret or

make field maps for farmers. Working

with regional cooperative personnel,

locals provide agronomy record-keeping programs and innovative ways to

combine field maps, yield monitors,

and fertilizer and crop protectant application equipment.

Use of GPS/GIS technology,

crop/agronomy specialists and record

keeping is expensive. Many of the

respondents that do not offer some or

all of these services want to offer them

but may be unable to because of the

high fixed costs and large volume of

crop protectants required. Smaller

cooperatives may be able to share a

crop/agronomy specialist with a nearby

cooperative or purchase GPS/GIS

application units with another cooperative(s) and share the use and expenses.

These cooperatives might also consider

setting up an agronomy subsidiary or

limited liability company to share the

use and expenses of new technology,

equipment and personnel. ■

1 This study will soon be available for viewing at www.rurdev.usda.gov/rbs/ pub/

newpub.htm.

2 Standard farm production regions used,

Northeast: ME, NH, VT, NY, MA, RI,

CT, PA, NJ, DE, MD, and DC. Lake

States: MI, WI, and MN. Corn Belt: OH,

IN, IL, IA, and MO. Northern Plains: ND,

SD, NE, and KS. Appalachian: VA, WV,

KY, TN, and NC. Southeast: SC, GA, AL,

and FL. Delta States: MS, LA, and AR.

Southern Plains: OK and TX. Mountain:

MT, ID, WY, CO, UT, NV, AZ, and NM.

Pacific: WA, OR, CA, HI, and AK.
Rural Cooperatives / May/June 2001 31

Or, to go straight to the Library of Publications, access: http://www.rurdev.usda.gov/rbs/pub/newpub.htm

If you know the title or publication number of the report you want, scan down the list until you come to it.

To locate a breakdown of publications by subject matter:

1. Click on any one of the four “Reports” categories in the middle of the “RBS Library” menu.

2. Access our catalog by clicking on “Rural Cooperative Publications” in the first line of the second paragraph on the

screen that appears (regardless of the type of “reports” accessed).

3. The first option under “Contents” is “Publications by Subject Matter.”

It’s easy to read and/or download USDA 

publications about cooperatives from the Internet

The Rural Business Cooperative Service has more than 150 cooperative reports (as well as past

issues of this magazine) available on the Internet for viewing or downloading. These titles cover a

vast array of topics, ranging from the general, such as “How to Start a Cooperative” or

“Cooperatives 101,” to technical subjects, such “Tax Treatment for Cooperatives” or “Managing

Cooperative Antitrust Risk.” 

To access any of these reports, follow these easy steps:

Go to the USDA Rural Development home page, “http://www.rurdev.usda.gov”

Click on “Publications” in the lower blue bar at the top of the page

Click either “Rural Cooperatives magazine” or “Business/Cooperative Publications”

If you chose “Business/Cooperative Publications” in step 3, you can then click either “Cooperative

Information Reports,” “Research Reports,” “Service Reports” or “Miscellaneous Reports.”

1.

2.

3.

4.

Want to access other web sites about USDA programs that support cooperatives?

The Business and Industry (B&I) Loan Guarantee Program provides government backing for commercial loans to cooperatives and

other businesses in rural areas and also guarantees loans to producers to pay for stock in new value-added cooperatives. See

http://www.rurdev.usda.gov/rbs/busp/b&i_gar.htm

Rural Cooperative Development Grants are made to nonprofit organizations and institutions of higher learning to establish and operate centers for cooperative development. See http://www.rurdev.usda.gov/rbs/coops/rcdg.htm

Under the Market Access Program, Commodity Credit Corporation (CCC) funds are used to partially reimburse cooperatives and

nonprofit regional and national agricultural trade organizations, among others, for the cost of conducting market development projects for eligible products in specific countries. See http://www.fas.usda.gov/mos/programs/mapprog.html

In fiscal 2001 and 2002, USDA will use CCC funds to make cash payments of up to $150 million to bioenergy companies, including

cooperatives, that increase their purchases of corn, soybeans, and other commodities to expand production of ethanol and

biodiesel in the United States from products grown in the United States. See http://www.fsa.usda.gov/daco/bioenergy/bioenergy.htm

.

.

.

.
32 May/June 2001 / Rural Cooperatives Rural

COOPERATIVES COOPERATIVES

Subscriptions Order Form

Company or Personal Name (please type or print clearly)

Additional Address/Attention Line

Street Address

City State Zip Code

Daytime Phone Number including area code

Purchase Order Number

YES, enter my subscription as follows:

___ subscriptions to Rural Cooperatives (NFC) for

$21 per year ($26.25 foreign).

The Total cost of my order is $ _________ . The price

includes regular domestic postage and handling and

is subject to change.

Mail This Form To: 

New Orders, Superintendent of Documents •

PO Box 371954 • Pittsburgh, PA • 15250-7965

May we make your name/address available to

other mailers? ____ yes ____ no

Order Processing Code

*5389

Please Choose Method of Payment:

check payable to the Superintendent of Documents 

GPO Deposit Account __ __ __ __ __ __ __ – __

VISA or MasterCard Account

__ __ __ __ – __ __ __ __ – __ __ __ __ – __ __ __ __ – __ __ __ __ – __ __ __ __

__ __ – __ __ (Credit Card expiration date)

(Authorizing Signature)

Thank You for

Your Order!

Charge your

order. It’s Easy!

To fax your order

(202) 512-2233

United States

Department of Agriculture

Washington, DC 20250

OFFICIAL BUSINESS

Penalty for private use, $300

NOTICE:

❏ Check here to stop receiving this publication,

and mail this sheet to the address below.

❏ NEW ADDRESS. Send mailing label

on this page and changes to:

USDA/Rural Business–Cooperative Service

Stop 3255

Washington, D. C. 20250-3255

Periodicals Postage Paid

U.S. Department of Agriculture