Page 4 

USDA / Rural Development May/June 2011

Rural

COOPERATIVES COOPERATIVES

Virtual food hubs

tap into local

food markets
By Kathleen Merrigan, Deputy Secretary

U.S. Department of Agriculture

o start the new year, I published an article in

USDA’s Rural Cooperatives magazine

(January/February 2011 issue) reflecting on

the successes of the Know Your Farmer,

Know Your Food initiative. This USDA

initiative creates new economic opportunities for our nation’s

farmers and ranchers, promotes local and regional food

systems and expands access to affordable, fresh and local

food. In this month’s cover story, Rural Cooperatives highlights

one of the ways that the Know Your Farmer, Know Your

Food initiative is accomplishing these goals: food hubs.

On the road, I talk to farmers, producers, consumers,

professors, retailers, buyers and other stakeholders

involved in building local and regional food systems.

Though these food systems are diverse, they are

often characterized by common challenges. These

challenges include the ability of small- and midsized producers to gain access to infrastructure —

such as trucks, warehouses, processing space and

storage — in order to reliably meet market demand,

especially from larger institutional buyers in their

region. 

However, this infrastructure often requires more

capital investment, infrastructure maintenance and

dedicated oversight than an individual producer can

handle. 

The solution that can allow these local and

regional markets to scale up? You guessed it: a food

hub! This centrally located business management

structure can assist with aggregation, storage,

processing, distribution and marketing of locally

and regionally produced foods. 

On a recent trip away from the nation’s capital, I

had the pleasure of speaking at the Making Good Food Work

conference in Detroit. The conference served as an incubator

of new ideas to successfully distribute local and regional

foods and bolster regional food systems. This made it the

perfect venue for USDA to announce the results of a

nationwide analysis of food hubs. Some exciting findings are

presented in this study, conducted by the Know Your Farmer,

Know Your Food initiative’s Subcommittee on Food Hubs, in

partnership with the National Association of Produce Market

Managers, the Wallace Center at Winrock International and

the Project for Public Spaces. 

The analysis found that more than 100 food hubs are

currently in operation around the country, over 70 of which

were analyzed for this study. On average, each food hub

creates 13 jobs, and nearly 40 percent of the food hubs

analyzed were started by entrepreneurial producers, producer

groups and other organizations looking to build a strong

distribution and aggregation infrastructure for small- and

mid-size producers. 

Food hubs represent an excellent opportunity for farmer

and rancher cooperatives to pursue high-value, local food

markets. As we aim to create economic growth and revitalize

rural communities, this is exactly the type of innovation we

need to win the future.

But the benefits of food hubs are not merely economic:

more than 40 percent of existing food hubs are

specifically working in “food deserts” to

increase access to fresh, healthful and local

products in communities underserved by fullservice food retail outlets. Nearly all food hubs

surveyed offer fresh produce. At a time when

65 percent of adults are overweight or obese,

and one in three children born after the year

2000 are predicted to be diagnosed with type

II diabetes, the health impacts of food hubs

are vital.

Examples of successful food hubs abound. In

my commentary featured in the

January/February 2011 issue of this magazine,

I highlighted a co-op in Oklahoma that began

as a buying club in 2003 with 20 local

producers and $3,500 worth of sales on its

opening day. Today, the co-op has $70,000 in

monthly sales and a membership base of 3,000

individuals purchasing from 200 Oklahomabased producers. In Detroit — America’s

largest city without a supermarket — Eastern Market

Corporation is serving as a food hub by working to

coordinate aggregation and distribution of healthy foods

from regional producers.

For a more in-depth look at the ways food hubs can help

small farmers tap into regional food markets, be sure to read

this month’s cover story about a virtual food hub network in

Richmond, Va., which has created an Internet marketing

platform that is helping the owners of dozens of small farms

and ranches serve the growing demand for local foods. n

2 May/June 2011 / Rural Cooperatives

Commentary 

Winning the future with food hubs 

For reasons unknown,

a rooster crosses the

road at Tuckahoe

Plantation, in

Goochland County,

Va., part of the Lulus

Local Food network 

of food hubs.
Features

Rural Cooperatives / May/June 2011 3

Volume 78, Number 3

May/June 2011

Rural Cooperatives (1088-8845) is

published bimonthly by USDA Rural

Development, 1400 Independence Ave.

SW, Stop 0705, Washington, DC. 20250-

0705.

The Secretary of Agriculture has

determined that publication of this

periodical is necessary in the transaction

of public business required by law of the

Department. Periodicals postage paid at

Washington, DC. and additional mailing

offices. Copies may be obtained from the

Superintendent of Documents,

Government Printing Office, Washington,

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

send address change to: Rural

Cooperatives, USDA/RBS, Stop 3255,

Wash., DC 20250-3255.

Mention in Rural Cooperatives of

company and brand names does not

signify endorsement over other

companies’ products and services.

Unless otherwise stated, articles in this

publication are not copyrighted and may

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

necessarily reflect those of USDA or its

employees.

The U.S. Department of Agriculture

(USDA) prohibits discrimination in all its

programs and activities on the basis of

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

status, familial status, parental status,

religion, sexual orientation, genetic

information, political beliefs, reprisal, or

because all or part of an individual’s

income is derived from any public

assistance program. (Not all prohibited

bases apply to all programs.) Persons

with disabilities who require alternative

means for communication of program

information (Braille, large print, audiotape,

etc.) should contact USDA’s TARGET

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

To file a complaint of discrimination, write

to USDA, Director, Office of Civil Rights,

1400 Independence Avenue, S.W.,

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

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

USDA is an equal opportunity provider

and employer.

Tom Vilsack, Secretary of Agriculture

Dallas Tonsager, Under Secretary,

USDA Rural Development

Dan Campbell, Editor

Stephen Hall / KOTA, Design

Have a cooperative-related question?

Call (202) 720-6483, or email:

coopinfo@wdc.usda.gov

This publication was printed with vegetable oil-based ink.

p.4

04 Virtual food hub helps Virginia producers tap into local food

markets

By James Matson

12 Switchgrass plant switches on 

Pre-process logistics of handling biomass for ethanol seen as potential role for co-ops

By Dan Campbell

16 USDA program helps offset cost of flex-fuel pump installation

18 Co-ops for caregivers

Homecare co-ops viewed as one answer to long-term care needs in rural America

By Margaret Bau 

22 Tanzanian dairy farmers and co-ops benefit from USDA, Land O’

Lakes help 

By Jennifer Hyman

24 Breeding a merger

Full gamut of merger issues arose during consolidation of A.I. co-ops in Northeast

28 Cooperation on tap

Multi-stakeholder co-ops are force behind new Austin brewpub and fledgling effort in Seattle

By Stephen A. Thompson

31 Long-term trends show co-ops relying less on member equity 

while use of debt increasing

E. Eldon Eversull

34 Ostrander Co-op joins Century Club

By Janet Kubat Willette

Departments

02 COMMENTARY

36 NEWSLINE

p. 18 p. 28

ON THE COVER: Amy’s Organic Garden owner Amy Hicks harvests

greens at her farm in Charles City, Va. She is a member of Fall Line

Farms, a local food cooperative in Richmond that uses the Lulus Local

Food Internet platform to market produce. Story on page 4. USDA

photo by Lance Cheung.
By James Matson, Matson Consulting

Chris Cook, VA FAIRS

Editor’s note: James Matson is a South

Carolina-based business consultant who

assists farmers and co-ops. He is a former

co-op development specialist with USDA

Rural Development. Chris Cook is

executive director with the Virginia

Foundation for Agriculture, Innovation

and Rural Sustainability (VA FAIRS), a

rural cooperative development center based

in Richmond, Va. 

uring the economic

recession, many family

farmers and producer

co-ops have been able

to thrive by meeting

the growing demand for local food

among consumers, restaurants, food

retailers, institutions (such as schools

and health care facilities) and farmers

markets. The Internet has been a

valuable marketing tool for many of

them.

In Virginia and Montana, an

increasing number of producers are

using a software program developed by

Lulus Local Food, which helps to lower

the barrier to market entry for small- to

medium-size producers and co-ops

seeking to increase their local retail

sales.

In just its third year of operation,

Lulus is on track to help local food

hubs ring up more than $1 million in

4 May/June 2011 / Rural Cooperatives

D

Virtual food hub helps Virginia producers tap into
sales in 2011. Lulus Internet site

connects about 200 food producers and

small cooperatives with more than

2,000 customer-families. It has also

created the opportunity for producers

to participate in farm-to-school

contracts, “meet and greet” marketing

events with customers and to supply

fresh local food to charitable

organizations. 

Founded by Molly Harris in late

2008, Lulus Local Food is a Richmond,

Va.-based software provider for virtual

food hubs that connect producers

directly with retail customers. “My goal

was then, and it is now, to get local food

in the hands of as many people as

possible,” Harris says. “We are very

excited about the future of growing the

local food industry and expanding this

venture to help family farmers in other

communities.”

Virtual food hubs can lower the costs

of access to local foods for both

producers and consumers by

automating the sales process. Another

advantage of an Internet-based food

hub is the ability to carry out a

transaction at any time. This means that

customers can place orders whenever

they wish, and that producers can

update their sales items, as needed. 

Simple idea morphed

into an Internet platform 

The “eureka moment” that

prompted Harris to form Lulus Local

Food came in the spring of 2008 when

she met a farmer selling chickens in a

restaurant parking lot. There must be a

better way to connect family-owned and

-operated farms with customers

searching for fresh, local food, she

thought. 

Harris started by assembling an email list of local food suppliers in the

Richmond area. She also had access to a

list of customers interested in buying

local food year-round. Harris compiled

an inventory of what food products

were available, using weekly e-mail

exchanges to conduct business. The

venture soon became a full-time passion

for Harris.

“Molly turned up at my office with a

huge box of paper, asking for help,”

recalls Chris Cook, executive director

of the Virginia Foundation for

Agriculture, Innovation and Rural

Sustainability (FAIRS), a rural

cooperative development center funded

by a Rural Cooperative Development

Grant from USDA Rural Development.

The assistance she received from FAIRS

allowed Harris to incorporate, insure

the business and create a business plan. 

With the program continuing for a

second season in the spring of 2009,

Harris was able to take pre-season

membership fees and apply them as

capital needed for developing a software

program for Fall Line Farms — an online, farm-to-family co-op that

represents more than 75 local farms and

businesses in central Virginia. With the

development of the Lulus software

completed in the spring of 2009, Fall

Line Farms was able to expand its

geographic reach to several locations

Rural Cooperatives / May/June 2011 5

Molly Harris (facing page) created LuLus

Local Food as a marketing network for small

farmers and co-ops seeking to increase sales

to the local food market in Virginia. Suppliers

post what they have on Lulus’ online listing;

customers then make their selection and

select a pick-up location and time. Bruce

Johnson (below) updates the online inventory

for Dragonfly Farms in Beaverdam, Va., as do

dozens of other suppliers associated with

Lulus Local Food website. USDA photos by

Lance Cheung.
6 May/June 2011 / Rural Cooperatives

Coastal Farms describes itself as “an online co-op that is

a one-stop shopping program for quality local food and

products ordered from the comfort of your home.” It opened

a food hub in April 2010 in Hampton Roads, Va., and is

marketing on the LuLus Local Food website. 

Coastal Farms has formed a partnership with a local

private school that is opening new doors on many levels. The

school chef is interested in promoting healthy eating habits

among the children of the school and is purchasing fresh,

local food through Coastal Farms. 

The school is promoting the Coastal Farms program

among the families of its students. A percentage of the

registration fee that families of students at the school pay to

join the food hub is contributed to the school scholarship

fund. 

Coastal Farms has also partnered with a local fitness

chain to establish food pick-up locations throughout the

region. The food hub is offering credits to gym members and

the gym says it is promoting health through exercise and

eating natural food. 

With 15 pick-up locations throughout the

Norfolk/Hampton Roads/Isle of Wight region, hub

administrator Kim Atkinson is pleased with Coastal Farms’

progress. “For small farmers, there were very

few options for selling their products to the

public before the online program was started

last spring,” Atkinson says. “Coastal Farms has

opened up a whole new venue for farmers to

personalize their products, focus on quality

and sell to an appreciative audience in a much

broader region of southeastern Virginia.”

Due to steady sales through Lulus’

website, which now accounts for 95 percent of

its annual sales, Brookview Farm in ManakinSabot, Va., no longer needed to operate an onfarm store. That allows the farm manager to

spend more time in the fields. 

Brookview Farm sells all-natural, grass-fed

beef to customers via the Internet, but has also

been able to sell large supplies of ground beef

to the local public school system and to supply

charitable organizations through the Pounds of

Plenty program (see main story). 

In the past two years, Lulus Local Foods has worked with

several religious denominations interested in supporting the

concept of “food in faith” and promoting healthy

communities. Harvest dinners have triggered an interest in

sourcing local food in church kitchens, where weekly

dinners are often served to large groups of church members.

These contacts have served both as a means to educate

consumers and help to expand the market for the food hubs. 

Co-ops partner with schools, health clubs, churches
throughout the metropolitan Richmond

region. 

Fall Line Farms’ success resulted in

other producers, farmers markets and

cooperatives asking about the

possibility of setting up a food hub that

would use the same Internet platform.

The result was the Lulus Local Food

network website. 

Internet business 

expands season

The Center for Rural Culture

(CRC) is a nonprofit based in

Goochland County, Va., where it

operates a thriving farmers market each

summer. VA FAIRS worked with CRC

and the Local Roots Food Co-op to use

the Lulus online ordering system to

expand its farmers market to a yearround operation. This cooperative

effort has been highly successful. CRC

was also able to make the farmers

market manager position a permanent,

rather than seasonal, job. 

Lulus’ network currently consists of

five food hubs: four in Virginia and one

in Montana. Each hub operates a

Rural Cooperatives / May/June 2011 7

Facing page: Christy (left) and Lilah Talbott

gather their order at the Fall Line Farms’ pickup point at Bon Air United Methodist Church in

Richmond. Christopher Douherty (left) looks for

sunflower sprouts with blemishes while handwashing sprouts at Manakintowne Specialty

Growers, a 21-acre farm in Powhatan County,

Va. Jo Pendergraph’s family and “team” raise

specialty produce there for chefs and food

markets in Richmond, Charlottesville and

Williamsburg, as well as a local food hub.

USDA photos by Lance Cheung.
8 May/June 2011 / Rural Cooperatives

number of pick-up locations for a wide

variety of local food products. Products

sold include fresh fruits and vegetables,

grass-fed meats and dairy products,

homemade breads, pasta and prepared

foods and condiments. Several new food

hubs plan to join the network in the

near future.

The current Lulus software is

designed to connect producers with

retail customers. A new version of the

software is being developed with

continued support from VA FAIRS. 

“This new version is designed to be

much more user friendly and interactive

for all parties involved,” says Harris. “It

will allow producers to easily sell

through multiple hubs and will enable

hubs to network among themselves. It

will also allow for restaurant chefs, local

school systems and institutions (such as

hospitals and colleges) to purchase food

from local farmers.” 

Not operating a standard “brick and

mortar operation” is a financial

advantage for virtual food hubs. But this

makes the website and other technical

infrastructure extremely critical for

these operations.

Differs from a CSA

The producers and co-ops working

under the Lulus marketing umbrella

offer a vast array of products for sale,

usually at a price that is competitive

with local retailers. It brings together a

widely dispersed customer base and

producers. This system allows

producers to set their own prices. Even

though they pay a percentage of sales as

a fee to the food hub they belong to,

this still allows them to retain a higher

price than if they had sold through an

intermediary. Lulus itself does not set

membership fees or service fees; the

software program allows each food hub

administrator to set these fees based on

local market conditions. 

Most of the food hubs work on a

weekly cycle, with orders opening and

closing over a period of time. Food

pick-up at a preferred location is

scheduled on a specified day. 

In most CSA (community supported

agriculture) programs, customers get an

assortment of whatever crops are

currently being harvested, as

determined by the CSA. But in this

food hub system, a customer can order

a specific item from the participating

network farms, much like shopping

from an online catalogue. The

customers only pay for what they order

each week. There is no minimum or

maximum order and the customer is not

required to order each week. 

The membership and service fee, set

by each hub, covers marketing, logistics

Kate Lainhart gathers shungiku micro greens before cutting them into “bite-sized” lengths for

Manakintowne Specialty Growers. Facing page: Pigs at Keenbell Farm in Rockville, Va., are

pasture-raised by third-generation farmer C.J. Isbell. The farm produces grass-fed beef, pastured

pork and free-range eggs using “beyond organic standards” as part of the Fall Line Farms co-op

local food hub. USDA photos by Lance Cheung.

continued on page 43
Rural Cooperatives / May/June 2011 9

By James Matson, Matson Consulting

Martha Sullins, Colorado State University

Chris Cook, VA FAIRS

Editor’s note: This article is extracted from a longer paper, Food

Hubs: Local Food Marketing Solution? The report was

produced for the Virginia Foundation for Agriculture, Innovation

and Rural Sustainability (VA FAIRS) Development Center, with

support from a Rural Cooperative Development Grant provided by

USDA Rural Development. James Matson is a South Carolinabased business consultant. Martha Sullins is a small farm specialist

with Colorado State University Extension. Chris Cook is executive

director with VA FAIRS, a rural cooperative development center

based in Richmond, Va. 

he dramatic increase in the number of food

hubs during the past few years has been

supported by a number of state and federal

efforts, including USDA’s “Know Your

Farmer, Know Your Food” initiative. USDA

defines a food hub as: “a centrally located facility with a

business management structure facilitating the aggregation,

storage, processing, distribution and/or marketing of

locally/regionally produced food products.” 

The target markets for these services have typically been

wholesale customers — including institutions, restaurants and

grocery stores — which tend to have a hard time buying local

products in the desired volumes. Through the increasing use

of e-commerce and similar innovative business models, food

hubs are providing a means for local producers to connect

directly to retail consumers. 

This article examines some of the ways food hubs can

increase their odds of success, and thus continue to expand

their role in promoting local foods. 

Providing access to local food markets 

A primary role of a food hub is to facilitate market access

for agricultural producers who address market outlets (retail

or wholesale) that would otherwise be less accessible or

completely inaccessible due to scale or location of the food

production with respect to the market outlet. 

A successful food hub often will provide consumers access

to a larger number of local food providers than they could

access individually. Food hubs usually provide greater

delivery reliability than can be obtained through purchasing

from many small producers acting independently.

Food hubs function by fulfilling a variety of tasks,

including:

1. Market access for local producers; 

2. Information sharing on food production and marketing

practices;

3. Product transportation and distribution; 

KEYS TO SUCCESS FOR FOOD HUBS

T
10 May/June 2011 / Rural Cooperatives

4. Brokerage services; 

5. Product bundling and aggregation; 

6. Maintaining a consumer/producer connection;

7. Season extension for local product sales; and 

8. Producer-oriented technical assistance.

Lack of financial, management 

resources hinder many 

Like all nascent businesses, there are many potential

constraints to the development and growth of food hubs.

Some of these business limitations are recognized and

addressed by the organizations assisting with the

development of food hubs. Others are more difficult to

quantify. 

The primary constraints are often hard for a new

organization to overcome. These may involve the lack of

sufficient financial resources and a robust risk-management

plan. Some constraints may take a longer time for a new

entity to address, such as human resource development (as

part of a staffing plan) and gaining access to local foodprocessing facilities. 

One typical constraint is a lack of skilled management,

which is often accompanied by poor recordkeeping,

accounting and financial management. This is especially true

in producer-based organizations, where managers may have a

great deal of knowledge about production agriculture, but

have less knowledge of business management. A University of

Wisconsin report concluded that cooperative food hubs

usually need to develop or hire skilled management.

There may also be legal or regulatory constraints on food

hub development. These constraints may be imposed by

local, state or federal law. The uncertainty surrounding the

most recent Federal Food Safety Modernization Act, enacted

Jan. 5, 2011, is likely to affect the growth of food hubs.

Roadmap for food hub development 

Food hubs develop and evolve from highly localized

circumstances and are dependent on several factors. Some

factors that contribute to the success of food hubs include: 

1. Having a strategic plan with clearly defined goals and a

vision and mission statement to ensure that the hub’s

original intents are maintained (for example: fair prices for

farmers or sustainable agricultural production methods). 

2. Getting all stakeholders engaged early in the process

and defining their interests and areas of expertise. Make

sure there is a management or oversight team that is

inclusive of the membership. The concerns of farmers and

other businesses and investors must be addressed. The

team should include individuals with skills in financial

management, the regulatory environment, marketing and

packaging, inventory management and quality control and

farmer/business owner engagement. As one study noted,

make sure all parties are well matched in size and scale and

that they operate with similar goals and values. This limits

some risk that may arise in fulfilling contracts with

vendors and buyers.

3. Understanding the location of different direct markets

and how to access them. For instance, if the market

outlet is geographically distant from the production unit,

how will transportation occur and how can products be

priced to cover those costs? Is backhauling feasible to

generate revenue on an otherwise empty return load? Is

the market one with a customer base that is less familiar

with purchasing and preparing fresh foods, for example,

some urban or at-risk populations?

4. Having an education program/strategy. An educational

program may have to be an integral part of the hub

development. This may include partnering with an

outreach entity, such as a university extension service or a

nonprofit agency. Such entities can deliver consumer

Sandy Fisher, co-owner of Brookview Farm in Manakin-Sabot, Va.,

enjoys being a rancher that supplies beef to Fall Line Farms. Below: a

reposed, but vigilant, sheepdog guards a grazing flock at Tuckahoe

Plantation, in Goochland County, Va., the boyhood home of President

Thomas Jefferson. It is still a working farm with cattle, sheep, chickens

and rabbits that sells meat through the Fall Line Farms co-op. USDA

Photos by Lance Cheung.
Rural Cooperatives / May/June 2011 11

information based on what the hub provides and when the

product arrives to the consumer. If local farmers and

ranchers have limited experience in direct marketing but

are going to be supplying products through a food hub,

then they will need support and training in production

planning, quality control, packaging and delivery. It may

benefit the efficiency of the hub overall if other training

and production improvement opportunities are offered,

such as business planning or season extension techniques. 

5. Learning and understanding end-user requirements.

Many end users require producers or processors to have

Good Agricultural Practices (GAP) or Hazard Analysis

Critical Control Point (HACCP) programs in place in

order to receive product. This may necessitate additional

costs in producer/business-owner training, and the

development of specific protocols and quality assurance to

meet the end user's requirements. Another type of

producer support that may be necessary is affordable

product liability insurance for individual vendors or

umbrella coverage for vendors that is purchased through

the hub. This is critical for hubs accessing institutional

markets, such as schools or hotels. The existence of such

requirements for accessing a direct market may also cause

some business owners to withdraw from the supply pool. 

6. Acknowledging the level and types of infrastructure

necessary to operate a food hub. These may include

technical infrastructure (such as billing protocols),

Internet-management systems and payment processes.

Physical infrastructure is also essential (such as product

warehousing or processing capability) in order to ensure

increased product quality and packaging control across

suppliers. 

7. Determining the correct business structure. The

cooperative (or quasi-cooperative) business model is well

suited to food hubs. But when setting up the business, no

one type of business structure is the best fit for all food

hubs. Rather, the business structure must help stakeholders

meet their goals for financial, marketing and production

planning and growth. It appears that flexibility is the key,

and the management team should be able to identify the

point at which a certain business structure constrains

further investment and an alternative structure (such as

incorporating one business function or outsourcing

distribution) is the only way the hub can maintain its

market share or expand into new markets. 

8. Determining the threshold scale needed for the food

hub to be able to operate in an economically efficient

manner. Investment capital required for supply-chain

infrastructure (for vehicles, storage facilities, retail

locations, etc.) can be a significant barrier to starting local

aggregation and distribution businesses. There are also

businesses with technical expertise in processing,

distribution or transportation with which a food hub could

contract to more efficiently execute some of the more

complex, or cost-prohibitive, functions of direct marketing

through a hub. A key issue here is how comfortable the

stakeholders are with alternative lenders or certain

subcontractors. This sort of “comfort level” assessment is

an important component in developing a strategic business

plan for a food hub. 

9. Identifying all sources of technical and financial

support, including those considered less conventional.

There are emerging areas of public and private financial

support for food hubs, including micro-lenders, private

investors, economic development entities and nonprofit

community-based organizations. 

10. Managing information efficiently. It is critical that

timely and accurate information flow between producers

and consumers — or between producers and wholesalers.

The success of a food hub depends on this, and it will

help to minimize or avoid price or marketing risk,

production risk and some legal risks. Information

management, supported by dedicated staff and

technology, impacts the hub’s ability to manage orders

accurately, to monitor product quality and to convey

product attributes to consumers and other vendors.

Information management also enables a hub to remain in

compliance with certain federal, state and local food

safety regulations and to maintain transparent working

relationships across multiple partners in a value chain. 

Conclusions 

Food hubs serve as a way for a group of varied producers

to find a local market for their agricultural production. They

provide the thread of connectivity that keeps consumers in

contact with farmers and ranchers, even when that thread is

electronic, as with a virtual food hub. 

Food hubs’ success or failure should not be measured

solely as aggregating units, or in terms of total volume of

product moved, but more in terms of the places to which the

product goes and the people who benefit from it. With

growing demand for local or regional food products,

conventional marketing channels are ill-equipped to supply

local food where and how people wish to purchase it. Food

hubs help producers and consumers connect in a marketing

manner that retains the valuable information as to where a

food item was produced and how it was grown. 

Large grocery retail chains rarely have farmers themselves

offering produce for sale in their stores, yet this is the essence

of farmers markets and the direct marketing experience so

many people desire. By bundling together the product from

multiple farmers for distribution to other direct markets —

such as restaurants, schools, hospitals, workplace cafeterias,

and other end consumers — food hubs make it possible to

supply them with fresh, local products produced by local

growers in the quantities and packaging the customers

require. n
12 May/June 2011 / Rural Cooperatives

By Dan Campbell, Editor 

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

or Brad and Kim Black, the decision three

years ago to plant 290 acres of switchgrass as

a feedstock for ethanol was based both on a

desire to diversify their grain, soybean and

beef cattle farm, and “to hopefully help get

the nation off its dependence on foreign oil.” After a difficult

first year with the crop (in part due to a drought), the next

two years were much smoother. They say their switchgrass

now requires less time and effort than the other crops they

grow on the farm, just three miles from a new demonstration-scale cellulosic ethanol plant in Vonore, Tenn. 

Likewise, Jim Thompson and his son, Jamie, were looking

for a way to diversify their Monroe County, Tenn., dairy farm

and hopefully to become “pioneers in the new, green-energy

economy.” They, too, have found getting started with

switchgrass to “be a challenge, to say the least,” according to

Jim. But they are optimistic that it will get easier as they gain

experience with the new crop. 

Dillon VanZant of Athens, Tenn., says he likes the fact

Switchgrass Plant

F

Pre-process logistics of

handling biomass for

ethanol seen as potential

role for co-ops

Above: A bale of switchgrass awaits transportation to

the Genera Energy cellulosic ethanol plant in Vonore,

Tenn. Facing page, a technician monitors the plant

processing operation, which is in the process of

switching fuel from corn stover to switchgrass. All

photos courtesy Genera Energy
Rural Cooperatives / May/June 2011 13

that after the first year or so, he has been able to “manage the

crop from a distance,” which is important, because he planted

it 14 miles away from his home. 

These growers and several others share their experiences

growing switchgrass in videos posted on the website of

Genera Energy LLC (www.generaenergy.net), which is

operating a prototype cellulosic ethanol plant in Vonore, in

partnership with DuPont Dansico Cellulosic Ethanol

(DDCE). In all, 61 farmers have planted more than 5,100

acres of Alamo switchgrass (including 1,000 acres of

improved varieties) under contract to Genera Energy, which

was established in 2008 by the University of Tennessee

Research Foundation. Its goal is to help commercialize

biofuel technology and support the development of a

sustainable biomass industry. 

Growers are finding that switchgrass will grow on

marginal land and can be planted and harvested using

conventional forage crop equipment (no-till seed drills, round

hay balers, etc.). It is harvested once each year, after the first

killing frost (typically in early November in East Tennessee).

The crop helps to build up the carbon content of soil, pushing carbon out beyond the roots and into the surrounding soil. 

The University of Tennessee has switchgrass test plots that

are now 25 years old, and the yields have been just as good in

the 25th year as in the third year (when it hits full

production). 

Major role seen for Southeast 

The Renewable Fuel Standard 2 (RFS2) calls for the

production of 16 billion gallons of cellulosic biofuel (half of

the nation’s total biofuel supply) by 2022. USDA’s regional

“roadmap” plan for meeting that mandate envisions up to 50

percent of the cellulosic fuel being produced in the Southeast, due to its robust growing season and potential for high

per-acre tonnage. 

Today, a mature stand of switchgrass should produce about

eight dry tons per acre in eastern Tennessee. That 5,100 acres

being grown in East Tennessee may sound like a lot of

cellulose. But consider this: a commercial-scale, 50-milliongallon-per-year processing plant will require up to 100,000

acres of the crop, annually producing more than 600,000 tons

of biomass.

To drive that point home, Dr. Kelly Tiller, Genera Energy

president and CEO, likes to show an aerial photo of a

Switches On
14 May/June 2011 / Rural Cooperatives

football field-size plot covered with rows of stacked, round

bales of switchgrass. 

“That’s 2,400 bales of switchgrass, or about what a

commercial-scale plant would use in just 24 hours,” Tiller

said during a presentation she made in February as part of a

biomass energy panel at USDA’s annual Ag Outlook Forum. 

This then, is one of the primary challenges facing biomass

energy as it moves toward commercialization: the need to

work out the logistics of handling, storing and transporting

all that feedstock to ethanol plants. “It is critical that we look

at all of this as an integrated system, not as individual pieces

of something bigger,” Tiller says. 

The switchgrass being grown for this project is all located

within a 50-mile radius of the plant, referred to in the

industry as a “biorefinery.” 

Tiller calls the switchgrass production effort to date “a

tremendous success. Many farmers have come back and asked

to grow more acres.” The main selling points for farmers

include a high yield potential with low inputs and that the

crop can be grown on marginal land. “Some of the land was

not even in agricultural production prior to this project.” 

Growers have been earning about $450 per acre, per year

on a three-year contract. Genera Energy provides them with

seed and technical expertise. Tiller notes that the contracts

offered for this first-of-its-kind, large-scale demonstration

project may not correlate to the commercial market that

follows. 

Opportunity for co-ops 

One way of handling so much biomass would be to create

several regional aggregation facilities for each large cellulosic

ethanol plant. Some supply chain steps — such as storage,

size reduction (e.g., grinding, hammer milling), separation,

densification (e.g., compaction, pelletization) and other preprocessing — could occur at them, Tiller says. These

intermediary handling stations, in turn, would feed into the

main ethanol plant, thus reducing the need to haul the bulky

form of the dry crop to only 5 to 10 miles, rather than up to

50 miles.

This is where Tiller sees a great opportunity for a farmers’

cooperative. 

“This would be a very good fit for a new-generation or

other value-added farmers cooperative,” she says. Indeed, the

Tennessee Biomass Supply Cooperative (TBSC) has been

formed as the framework for a federated co-op that would

“coordinate production and processing operations, optimize

economic returns to rural Tennessee, capture favorable

antitrust and tax treatment and meet the growth demands of

Tennessee’s new biomass industry.” The new co-op would

allow individual farmers to benefit from shared resources,

economies of scale and better-negotiated prices, she adds. 

The TBSC (statewide) cooperative and its regional

(member) cooperatives are being organized under the

provisions of the Tennessee Processing Cooperative Law

(TCA Section 43-38-101) and would have limited, or

“closed,” membership, consistent with demand for contract

production.

Cost to build pre-processing/compaction depots could run

from $7 million to $15 million, Tiller estimates, which would

be more in the range of what growers could typically raise,

vs. the $200 million to $400 million cost to build a

commercial-scale cellulosic biorefinery. 

Rather than being a scale up of a laboratory, the Genera Energy cellulosic ethanol plant is more like a “scale down of a full commercial plant

design,” Dr. Kelly Tiller says. 
Rural Cooperatives / May/June 2011 15

The new ethanol plant in Vonore is adjacent to a new

research and development (R&D) campus now under

construction: Tennessee’s Biomass Innovation Park, which

should be in operation by the end of this summer. Tiller

refers to it as a “world class R&D campus” that will work

with multiple feedstocks to identify the ways and means to

integrate the entire biomass supply chain, including:

• Harvesting, handling, storage, densification and logistics;

• Pre-processing;

• High-throughput screening and analysis;

• Agronomics, plant genetics and production;

• Intermediate processing and conversion.

The park is funded primarily by the state of Tennessee as

one part of the comprehensive and integrated $70.5 million

Tennessee Biofuels Initiative. Genera received a $5 million

grant from the U.S. Department of Energy that is funding a

bulk-handling demonstration facility in the park. Lessons

learned from Tennessee’s Biomass Innovation Park could

become a template for other regional biomass depots. 

The biorefinery, built and operated in partnership with

DuPont Danisco Cellulosic Ethanol, began operating about

18 months ago, initially running on corn

cobs. It then transitioned to corn stover

(the stalks, stems and leaves), and is in

the process of moving to switchgrass. 

Tiller calls the biorefinery in Vonore a

“large scale research and development

facility. Rather than being a scale-up of a

laboratory, it is more like a scale-down of

a full commercial plant design,” she says,

adding that “there are about as many

input and output points as there would

be in a commercial-scale facility.” It can

produce up to 250,000 gallons per year. 

At least initially, biorefineries will

require long-term contracts for biomass

to supply them. Thus, grower contracts

for the industry will need to be longterm — perhaps up to 20 years — to lock

in the supply needed, she says. Since it

takes several years to bring the crop into

full production, farmers will also want

assurance of the market for their crop

before committing to grow it. “The

number one thing you need before

planting switchgrass is a contract with a

buyer,” farmer Brad Black emphasizes. 

New, improved varieties of

switchgrass are being developed. Tiller

says she recently read about a new

variety that could yield 30 percent more

ethanol than existing varieties. “That’s

huge — game changing,” she stresses. 

The lack of a long-term bio-energy policy for the nation

represents a big challenge to those promoting investments in

biomass, she says. Still, with oil imports driving up the

nation’s deficit and hurting the economy, the biomass

industry must maintain momentum, she says. “There has

been a lot of buzz about biomass, but it ebbs and flows.” 

Farmers, she notes, have a long memory when it comes to

recalling something they got burned on. 

“Many farmers not only remember something bad that

happened to them, but that happened to their fathers,

grandfathers and great grandfathers. We won’t have a lot of

recovery time from any kind of black eye — you basically get

one chance. We must maintain and sustain momentum, or I

fear it will set us back to where we started from, or even

further.” 

But seeing is believing, and Tiller believes the cellulosic

ethanol now flowing from this Tennessee biorefinery is going

to create a lot of believers. n

Jim Thompson and son Jamie say they planted switchgrass both to diversify their Tennessee

dairy farm and to “be pioneers in the new green-energy economy.” Below: standard haying

equipment can be used to harvest and bale switchgrass.
16 May/June 2011 / Rural Cooperatives

USDA program helps offset cost

of flex-fuel pump installation

armer cooperatives and grower-owned LLCs

not only help produce ethanol, many of them

also operate retail fuel service stations that

deliver ethanol to consumers. The cost of

purchasing and installing flex-fuel pumps has

been an obstacle to their spread, but now operators will have

access to grants and loan guarantees through USDA Rural

Development that can help speed the rate of installation. 

Nearly all retail gasoline stations can dispense an E10 fuel

blend, which contains 10 percent ethanol and 90 percent

gasoline. Flexible fuel pumps are specifically designed to

dispense E85, an ethanol blend that contains 85 percent

ethanol and 15 percent gasoline. In addition, they may also

dispense “mid-level blends,” including E15 (15 percent

ethanol) and E30 (30 percent ethanol). 

Unlike conventional gasoline engines, the engines in

flexible fuel vehicles (FFVs) are specifically designed to use a

wide range of ethanol/gasoline blends, up to E85. Currently,

there are nearly 10 million FFVs on the road in the United

States, with more than 1 million being added every year. 

But an estimated 90 percent of the nation’s FFVs do not

have ready access to the higher blends of ethanol. Although

F

Photo courtesy Gilbarco Veeder-Root
Rural Cooperatives / May/June 2011 17

these vehicles can be identified by a logo on the vehicle or by

the gas cap, an equally high percentage of FFV drivers are

unaware of their vehicles’ unique “flexible fuel” feature.

Why E85 and mid-level blends?

Our country has established a strategic national security

goal of producing 36 billion gallons of biofuel per year by

2022. “To meet this goal, it is imperative that fuels with

ethanol content higher than E10 be made available for use in

FFVs,” says Dallas Tonsager, Under Secretary for USDA

Rural Development. The majority of vehicles in the United

States currently use E10 blends, which are about to reach

market saturation (referred to as the E10 blend wall). 

In 2010, 13.3 billion gallons of ethanol were produced,

roughly 10 percent of the amount of gasoline sold in the

United States. To break through the E10 blend wall, higher

blends must be made available to give consumers a choice at

the pump. These higher blends will help to substantially

reduce both fine particulate and greenhouse gas emissions,

reduce our dependency on imported oil, provide greater sales

opportunities for gasoline station retailers and consume the

billions of gallons of ethanol that are produced each year.

“These higher ethanol blends will also allow the biofuel

industry to continue to grow and to expand to new areas of

the country with new, non-corn starch feedstock and to

create 1 million jobs across rural America,” Tonsager notes.

“Cooperatives that operate retail fuel stations can play a big

role in helping to meet this national security goal and to

capture the economic development impacts of producing 36

billion gallons of biofuel per year.” 

Eligibility overview

An applicant is generally eligible for USDA’s flexible fuel

pump program if the applicant:

• Meets the definition of a rural small business or an

agricultural producer;

• Is current on all federal debts;

• Is not debarred for receiving federal assistance; and

• Has made satisfactory progress on any prior Rural Energy

for America Program grants/guaranteed loans.

A project is generally eligible if it:

• Is for the installation of a retail flexible fuel pump;

• Is located in a rural area; 

• Uses a commercially available, replicable technology;

• Has technical merit;

• Is owned by the applicant, who must control the revenues

and expenses of the project and must have a place of

business in a state;

• Has satisfactory sources of revenue for the life of the

project; and

• Has its site controlled by the applicant for the financing

term of any associated federal loan or loan guarantee.

If the flexible fuel pump makes available more than one

type of blended liquid transportation fuel, at least one of the

blends must exceed the highest requirement, which may be a

state or federal level, for the percentage volume for a

renewable fuel.

Financial assistance

Both grants and loan guarantees are available. Grant

awards are limited to no more than 25 percent of total

eligible project costs, with a minimum grant of $2,500 and a

maximum grant of $500,000. Applicants must secure the

remaining funds. Loan guarantees of up to 75 percent of total

eligible project costs are also available.

Eligible project costs include, but are not limited to:

• Post-application purchase/installation of equipment,

including underground storage tanks;

• Post-application construction or improvements;

• Energy audits/assessments;

• Permit and license fees;

• Professional service fees, except application preparation;

• Feasibility studies/technical reports/business plans; and

• Retrofitting.

Application overview

An application and a technical report must be submitted.

Applicants can apply on a per-station basis or across multiple

locations on a single application. The technical report must

cover:

• Qualifications of the project team;

• Agreements, permits, certifications;

• Resource assessment;

• Design and engineering;

• Project development schedule and economic assessment;

• Equipment procurement/installation;

• Operations and maintenance; and

• Dismantling/disposal of components.

For Fiscal Year 2011, applications must be submitted by

June 15, 2011. n

Additional resources:

• Clean Fuels Foundation’s National FlexFuel Vehicle

Awareness Campaign: Infrastructure Development

Guide;

• Growth Energy (website designed for ethanol retailers);

• American Coalition for Ethanol & Renewable Fuels

Association;

• Blend Your Own Ethanol (gasoline retailer education

campaign);

• Protec (full service install-fuel);

• Dresser Wayne/Gibarco (pump manufacturers);

• U.S. Department of Energy (DOE)/National Renewable

Energy Lab Alternative Fuels and Advanced Vehicle Data

Center; and

• DOE’s Clean Cities Program.

To reach any USDA Rural Development State office,

call 1-800-670-6553, or visit: www.rurdev.usda.gov.
By Margaret Bau 

e-mail: margaret.bau@wi.usda.gov

Editor’s note: Margaret Bau is a co-op specialist with USDA Rural Development in Wisconsin. 

he state of efforts to organize more homecare cooperatives

was the focus of a day-long forum at the National Press

Club in Washington, D.C., in March, sponsored by the

Cooperative Development Foundation. Homecare worker

co-ops can play a significant role in helping to keep more seniors and 

18 May/June 2011 / Rural Cooperatives

Homecare co-ops viewed as one answer

to long-term care needs in rural America

T

CO-OPS FOR CAREGIVERS 

All photos courtesy Cooperative Care
Rural Cooperatives / May/June 2011 19

people with disabilities in their homes, rather than in

nursing homes or institutions. Studies show that clients

usually remain healthier and are happier when they can

stay in their homes.

But because pay and benefits are so poor for homecare

workers, there is a tremendous rate of worker turnover

and it can be difficult to find qualified workers. By

organizing in worker-owned co-ops, homecare workers

may increase their pay and benefits while helping ensure

that patients have the reliable, qualified help they need to

remain in their homes longer. 

While there have been some notable homecare co-op

success stories, speakers at the forum noted that major

obstacles must be overcome if this movement is to

expand significantly. 

Judy Canales, deputy administrator for the Rural

Business-Cooperative Service (part of USDA Rural

Development) started the meeting by saying the aging of

America and the implications for the nation’s healthcare

system is a major concern for USDA Rural

Development, since its goal is to help raise rural living

standards. The rural population is aging even faster than

the nation as a whole, making it essential to identify

creative alternatives to provide services for seniors, she

added. Homecare cooperatives offer such an alternative. 

Reality of direct-care work force

Leonila Vega, executive director of the caregiver

advocacy group Direct Care Alliance, noted that there

are 3 million direct-homecare workers in the United

States; another 1 million will be needed in the coming 10

years. Direct-care workers are the eyes and ears of the

long-term care system. 

Elders and people with disabilities spend more time

with direct-care workers than they do with their

physicians, social workers or nurses. Yet this essential

workforce earns a median wage of only $9.46 per hour,

with most workers unable to piece together a full work

week. More than 37 percent of workers in homecare lack

health insurance. Of all professions, direct-care workers

have the second-highest rates for depression and the

fifth-highest incidence of back injuries.

Since the 1970s, the long-term care industry counted

on an endless supply of baby boomer, low-income

women entering the workforce with a willingness to do

this work. The business model is built upon low

investment in training, high labor force turnover and low

expectations of quality. 

Turnover rates at home health agencies average up to

75 percent annually. This is devastating to the quality of

life for a frail elder or an individual with a disability who

depends upon a stable relationship with the people

providing their most intimate care.

Worker co-ops in long-term care

There are a handful of worker cooperatives in the

U.S. homecare industry. The first was Cooperative

Homecare Associates (CHCA), which started as a

welfare-to-work experiment in the mid-1980s. It sought

to train African-American, Latin-American and newimmigrant women to work in homecare in the South

Bronx, N.Y. Project organizers were dismayed by the

work conditions these newly trained women faced

(including minimal wages, no benefits, injuries, part-time

work and low status). 

So they created a worker co-op to address

fundamental issues within the homecare industry. In

theory, worker cooperatives should maximize wages,

increase benefits, provide a voice in decisionmaking and

increase worker status through business ownership. 

Several other homecare worker co-ops were organized

in Northeastern cities in the early 1990s. But sudden

regulatory changes Congress made to Medicare and

Medicaid in 1996 resulted in the closure of all but two of

these worker co-ops. 

Inspired by CHCA and responding to local

conditions, Cooperative Care opened in 2001 in

Wautoma, Wis., as the country’s first homecare worker

cooperative in a rural area. A handful of similar worker

co-ops were explored or organized in rural Wisconsin,

Hawaii, Washington and Oregon (thanks in part to onetime seed money provided by USDA Rural Development

in 2005). CHCA also inspired I Am Unique, a worker

co-op of nurses providing highly specialized ventilator

and tracheotomy care for clients in Raleigh, N.C. 

This handful of worker co-ops has provided modest

increases in wages and a range of benefits for their

member-owners. Several of the worker co-ops provide

initial and ongoing training. The more established coops offer peer mentoring and opportunities for

“I used to be a mouse in a corner. But now I am a mouse that roars.” 
20 May/June 2011 / Rural Cooperatives

advancement within management.

Turnover rates at the homecare co-ops

average around 20 percent annually. 

Success story: What 

a worker co-op can do

More striking are the opportunities

co-ops create for leadership

development. Tracy Dudzinski, a

certified nursing assistant and board

president of the 10-year-old

Cooperative Care, in Wisconsin, told

how her co-op was organized and the

difference it has made in the lives of

both the owner-members and the

clients. 

When Dudzinski started with

Cooperative Care, she didn’t even know

what a co-op was. But she soon found

herself serving on co-op committees

and was elected to the board. She

became board president, then moved

into leadership positions at the state

level, being elected president of the

newly formed Wisconsin Direct Care

Alliance. At the national level, she is

serving as president of the Direct Care

Alliance. 

Dudzinski “found her voice” during

a one-week leadership training course

sponsored by Direct Care Alliance. “I

used to be a mouse in a corner,”

Dudzinski said. “But now I am a mouse

that roars.” She noted that operating a

cooperative is hard work and can

sometimes be frustrating.

“But it is worth all the hard work

and frustration.” 

Why so little progress?

Given the potential that worker

cooperatives can offer member-owners

in enhancing wages and benefits,

professional development, a voice in

decision making and business

ownership, why haven’t the gains to

caregivers in worker co-ops been more

dramatic? Robyn Stone, a noted, longterm care researcher, has asked: “Why

aren’t there hundreds of these homecare

worker co-ops across the country?”

Why aren’t there thousands of Tracys?

The answers are complex. The

demand for long-term care will grow

exponentially as baby boomers age.

Meanwhile, the workforce supply of

direct-care workers will stagnate if low

pay and low status remain the industry

norm. 

Cooperative impact on long-term

care has remained modest due to the

structure and funding mechanisms of

the industry. Rather than supporting

individuals to live life to the fullest

(more of a hospice approach), people

with chronic conditions and life-long

disabilities are expected to “get better”

(a medical intervention approach). The

prevailing funding mechanism for

medical care in the United States is feefor-service — but this is an ill fit for

helping people manage ongoing

conditions. 

The majority of people who require

long-term care are not covered by

private insurance and cannot afford to

pay for services “out-of-pocket” for an

extended period of time. Most longterm care is paid for via Medicaid and

Medicare. Government-funded

reimbursement rates were based upon

what some have termed an “exploitive,”

1970s-era labor model that assumes a

low level of professionalism, thereby

requiring micromanagement of service

delivery. 

Whether employed by a for-profit,

nonprofit or worker co-op agency,

wages have been stymied by the

dominant Medicare/Medicaid

reimbursement rates. Public funding for

the current long-term care system

seems unlikely to increase during the

coming decade, given the budgetcutting environment now prevalent at

the state and federal level. 

Joy Johnson Wilson, health policy

director for the National Conference of

State Legislatures, told conference

attendees that she was “the wet blanket”

for co-op homecare initiatives. The

fiscal reality is that most state legislators

are overwhelmingly concerned about

budget shortfalls, she noted. In the

current economic climate, about the

best that can be hoped for is proposing

homecare pilot projects and

demonstrating outcomes that are cost

neutral, she said. 

There are 3 million direct-homecare providers in the United States, and another 1 million

will be needed in the next 10 years. 
Rural Cooperatives / May/June 2011 21

Stone is pessimistic about any

advances occurring in the public-pay

market during the next 10 years

(whether Medicare, Medicaid or state

funding). Innovation in homecare

agencies (and improving labor force

conditions) will have to come from

private market innovations, she said.

Organizing homecare 

worker co-ops

Diane Gasaway, executive director of

the Northwest Cooperative

Development Center, outlined the steps

to organizing a cooperative — steps

that mirrored the experience shared by

Cooperative Care. The Northwest

Center has been the most active of the

co-op development centers across the

country in exploring and organizing

homecare worker co-ops. 

Gasaway said

organizing homecare

co-ops in rural

Oregon is virtually

impossible, due to a

law mandating

administrative offices

be maintained every

50 miles within an

industry. 

In Washington and

Hawaii, Medicare regulations mandate

that an agency must be in existence for

at least a year before that agency can

serve Medicare recipients.

Reimbursement rates for Medicaid and

Medicare are extremely low, making it

difficult for an agency to pay workers

living wages, she said.

A new rural homecare co-op

Kimberley Schorr, a health

professional and board member who is

“the glue” that keeps Paradise

Homecare Cooperative on the big

island of Hawaii operational, shared her

passion and insights into what it takes

to empower people to promote longterm care on the “non-tourist side of

the island.” 

Hawaii is home to the nation’s

longest lived population. But caregivers

face tremendous challenges in

transportation (most workers need to

take a 1.5-hour public bus trip to the

“tourist side” of the island to serve their

clients). Cell phone coverage is spotty,

and most workers can’t afford them

anyway, she said. 

Schorr said she is very worried about

new Medicaid regulations that will

negatively impact both caregivers and

care recipients (such as not reimbursing

caregivers for running errands for

clients, or authorizing so few care hours

of service that it makes care cost

prohibitive).

Multi-stakeholder 

co-ops as an option

During the afternoon panel, this

writer spoke about the success of

Cooperative Care, but also of a

“spectacular failure” with a second

homecare worker co-op. 

Caregivers have big hearts, but they

don’t necessarily have the business

acumen, professional networks or longrange planning discipline needed to

respond to market fluctuations.

Involving consumers of services, their

families, existing health care networks

and disability advocacy groups as coowners of a cooperative business might

be a way to overcome some of the

limitations of a pure worker-owned coop and the current climate of the

public-pay market. 

Parallel examples of multistakeholder co-ops are popping up

across the country in rebuilding local

food systems. Italy and Quebec have a

history of multi-stakeholder co-ops

which the United States can learn from

— including the formation since 1996

of more than 100 multi-stakeholder coops that provide homecare in Quebec. 

Possible health 

network applications

Day surgery is increasingly common.

However, many patients need several

days or weeks of help bathing,

grooming and housekeeping when

returning home for recovery. A

forward-thinking hospital administrator

should welcome the opportunity to

partner with homecare workers to

ensure a high level of quality care —

and thereby help to avoid infection,

injury or re-admittance to the hospital

post surgery. 

The same situation exists for

rehabilitation centers. Stroke and

paralysis victims may spend months in

rehabilitation centers. Upon release

“Forward-thinking institutional partners should share a common 

trait: a desire to reduce overall health costs and to help patients live life

to the fullest.”

continued on page 41
22 May/June 2011 / Rural Cooperatives

By Jennifer Hyman

Editor’s note: Jennifer Hyman is

communications manager for Land O’Lakes

International Development.

new USDA-funded

dairy development

program is expected to

play a catalytic role in

improving the quality

of life for smallholder farmers across

northern Tanzania. 

Land O’Lakes International

Development’s three-year Tanzania

Dairy Development Program (TDDP)

will boost incomes and strengthen food

security for nearly 18,000 farmers and

agricultural input and service providers.

It will also indirectly assist an additional

87,000 family members and raise

awareness about milk’s nutritional value

among more than 1.5 million

consumers.

Tanzania has Africa’s third-largest

cattle herd, and nearly two-thirds of the

rural poor already own livestock. This

means there is great potential for

poverty alleviation through dairy

development. However, limited

production and inefficiencies along the

value chain prevent farmers from

enjoying the incomes and improved

food security that dairying provides in

neighboring countries, such as Kenya. 

Program launch

“Despite the fact that small-scale

dairying is an important agricultural

activity for many poor families, dairy

cooperatives are still very few,” John

Mngodo, Tanzania’s director of national

food security, explained at the program

launch in January. Only 142 of the

country’s 9,501 registered cooperatives

Tanzanian dairy farmers and co-ops

benefit from USDA, Land O’ Lakes help

A
Rural Cooperatives / May/June 2011 23

focus on livestock or dairy. 

“This attests to the significance of

this new program, which aims to create

and strengthen dairy cooperatives at the

grassroots,” Mngodo added. 

Rachel Trego, of USDA’s Foreign

Agricultural Service, also spoke at the

program launch, saying TDDP shows

the commitment of the American

people to helping ensure lasting food

security for the people of Tanzania.

Quoting Agriculture Secretary Tom

Vilsack, Trego said, “This food

assistance program furthers the Obama

administration’s efforts to introduce and

expand free enterprise in the agricultural sector of developing countries and

emerging democracies around the

world.” 

Trego added that, within the last

year, USDA has provided more than

$145 million in international assistance

under the Food for Progress Program

(FFPr), benefiting more than 3.4

million people and providing access to

new opportunities for farmers and rural

communities worldwide. TDDP is

funded through a FFPr award.

The TDDP is also building upon

Land O’Lakes’ previous U.S. Agency

for International Development

(USAID)-funded dairy development

activities in Tanzania, from 1999

through 2010. These relatively smallscale efforts focused on forming dairy

cooperatives, improving processor

capacity and raising consumer

awareness. 

While the TDDP will continue to

strengthen the country’s dairy sector,

particularly in the “northern corridor”

areas of Tanga, Kilimanjaro, Arusha and

Mara, one of its greatest areas of

emphasis will be on training

smallholder farmers and cooperative

members how to improve their milk

production and collection efforts. The

program will also improve farmers’

access to feed, breeding and veterinary

services, and provide training and

technical assistance to milk processors. 

Co-op enhances economic

power of women 

Along the foothills of Mt.

Kilimanjaro, cultural norms have long

dictated that men’s livelihoods center

on coffee farming while women earn

their money through dairy. Given the

challenges many smallholder women

farmers face in earning viable incomes

independently, a group of 98 women

decided to join forces in 1997 to form

the Marukeni Women’s Cooperative.

Establishing the cooperative was an

important first step, but the women still

faced serious constraints to success.

Lacking milk-collection infrastructure

and a cooling tank, they could only

collect milk once a day. They would

milk at midnight, then trek on foot to

the market in order to sell their milk

before 6 a.m. This left them exhausted

and unable to do much else the rest of

the day. 

The women’s limited knowledge of

animal care, feeding, milk handling and

hygiene also severely impeded their

production potential. Worst of all, their

cooperative was poorly managed, with

some of Marukeni’s leaders misappropriating the women’s hard-earned

funds. 

In 2001, under an earlier USAIDfunded program, Land O’Lakes began

providing Marukeni’s members with

training on cooperative governance,

farm production, milk handling and

financial management. This led to the

removal of its corrupt leaders. 

Land O’Lakes also facilitated the

purchase of a new, 1,400-liter milkcooling tank, which enabled them to

begin milking twice a day and grow the

cooperative to over 300 members. It

boosted milk collection volumes from

under 250 to more than 750 liters a day

and greatly expanded members’ profits. 

With the additional money, the women

were able to purchase the building that

houses their cooling tank and serves as

the cooperative’s meeting point. 

Children also benefit 

“Before we received help from Land

O’Lakes, I didn’t have time to take my

children to school, build a proper house

or have enough food to properly feed

my five children,” explained Aquierdo

Dorsey. Like about half of Marukeni’s

members, she is a widow. “But now I’ve

been able to help get my children

through high school, and even have

time to spend at home with my

grandchildren.” 

Local agricultural official Umago

Chifurai explained that the cooperative’s

growth has also played a formative role

in improving gender parity and

promoting leadership roles for women

in the community, particularly now that

men are struggling to make ends meet

through coffee farming. 

“Men are now moving away from the

coffee culture,” he says. “They are

helping their wives to plant grass for

the cattle, women are more respected in

society and they also have greater

economic power.”

While Marukeni Women’s

Cooperative has made tremendous

inroads since it first received Land

O’Lakes assistance, the members are

extremely excited about the help they

will receive through the USDA-funded

Tanzania Dairy Development Program.

They are looking forward to receiving

additional training on animal feeding,

health and medicine, and improving

breeding services. 

“We are also hoping to learn how to

process independently, or get connected

to a processor that will buy our milk,”

explained co-op chair Stella Kileo. “We

need to overcome transport issues and

ensure we can still profit when there is

a glut of milk during the rainy season.” 

The purchase of a 1,400-liter milk cooling tank has enabled co-op members to begin

milking twice daily and to expand the co-op to more than 300 members. Photo by

Jennifer Hyman, courtesy Land O’ Lakes

continued on page 41
24 May/June 2011 / Rural Cooperatives

armer cooperative

mergers are usually

driven when producermembers push their

organizations to

become more efficient and better

positioned within their industries, a key

result being greater economic and

service benefits for members. Many

hundreds of mergers during the past 25

years or so have greatly changed the

face of the nation’s farmer co-op sector,

which is now characterized by fewer,

larger co-ops. 

Even so, mergers are often a difficult

strategy to employ. Directors and

members wrestle with consolidation,

which can trigger strong emotions tied

to the perceived loss of autonomy and

local control. Other factors — such as

the need to resolve equity and debt

issues, the logistics of facilities that

might be moved or closed, and the lack

of trust between former competitors —

can represent serious obstacles to a

merger, even when financial projections

strongly support consolidation. 

To offer more perspective on these

issues, the following conversation

presents the experience of a former

director of an artificial breeding

cooperative with the consolidation

process. In the 1950s and 1960s,

Jeremiah Wadsworth was instrumental

in merging artificial insemination (A.I.)

cooperatives in the New England states

and New York. Wadsworth worked with

a number of co-op directors, managers,

cooperative extension agents and other

professionals to create the New

England Selective Breeding Association

(NESBA) in 1959 from the merger of

four smaller breeding co-ops.

Wadsworth was then involved in further

consolidation talks that led to the

formation of the Eastern Artificial

Insemination Cooperative (Eastern AI)

in 1966. 

He offered the following insights

during a conversation with his son,

James Wadsworth, an agricultural

economist with USDA Cooperative

Programs. 

Q. When did you first become involved

with artificial insemination

cooperatives?

Jeremiah Wadsworth: “In 1952, I

accompanied my uncle to a South

Hartford County Animal Breeding

Association (SHCABA) meeting in

Rocky Hill, Conn., shortly after we had

started using artificial insemination on

the farm.

“We saw an immediate improvement

in our cattle and milk production. After

attending that meeting and listening to

the officers, I became more interested

in the cooperative and was later elected

to the board of directors of South

Hartford County, a local district of the

statewide co-op: Connecticut Artificial

F

Full gamut of merger issues arose during

consolidation of A.I. co-ops in Northeast

BREEDING A MERGER
Rural Cooperatives / May/June 2011 25

Breeding Association (CABA). Each

local district had directors on the CABA

board, which I was elected to in1953. I

eventually became secretary of the

CABA board and, in 1962, was elected

president.”

Q. Can you describe the events that led

to the formation of NESBA?

“There were several efforts to

develop a single New England bull-stud

cooperative from the cooperative

organizations serving the New England

states. Those efforts were unsuccessful

until 1957, when merger talks began

again with more genuine interest than

before. The cooperatives included in

the talks were CABA, Massachusetts

Selective Breeding Association (MSBA),

Maine Breeding Association (MBA),

New Hampshire-Vermont Breeding

Association (NHVTBA), Rhode Island

Breeders Association (RIBA) and

Central Vermont Breeding Association

(CVBA). 

“The CABA board of directors took

a strong, positive approach to the talks,

even endorsing the NHVTBA

headquarters in Concord, N.H., as the

likely location for the headquarters of

the new co-op. However, NHVTBA

and MBA decided to back out of the

merger discussions, which was

disappointing. But the remaining four

cooperatives — CABA, MSBA, CVBA

and RIBA — acted quickly to approve

merger, and formed New England

Selective Breeding Association

(NESBA). 

“The decision was made for the new

cooperative to be headquartered in

Woodbridge, Conn., with the bull studs

to be at Woodbridge and at the MSBA

site in Massachusetts. The CABA board

favored a complete consolidation, with

the elimination of state and local service

units. But the final decision was to

consolidate only the production

facilities. So the resulting cooperative

had a federated structure [a co-op of

cooperatives]. CABA and MSBA were

each given three members on NESBA’s

nine-member board of directors; CVBA

was given two board slots and RIBA

was given one.” 

Q. What process did you go through

and what issues were raised during the

merger talks?

“The CABA board worked to inform

the membership of the proposed

merger by attending all the county

association annual meetings. Some

farmers questioned the loss of county

influence and control that would occur

in a merger. They saw a merger as

diluting the membership. But overall, it

was an easy sell for CABA members

once they heard of the efficiencies and

benefits that would be gained — and

because the new cooperative’s

headquarters was going to be in

Woodbridge. 

“A strong reason for contemplating a

merger was the feeling that significant

efficiencies would be gained through a

single, centralized management. An

even stronger reason was the

continuing problem with the

distribution of semen and the limited

number of good bulls in use. Access to a

greater number of bulls from more

herds over an expanded geographic area

would allow for better genetics (less

recessive gene issues) for all farmers.

A.I. had greatly improved herds (with

higher production, better cows, etc.)

and farmers wanted the improvements

to continue. 

Q. What were some of the benefits of

the new NESBA?

Farmers were excited that NESBA

was helping to improve conception

rates, extending longevity in their herds

from the better cows, raising

Artificial insemination

(A.I.) technology has

evolved greatly over the

past 60 years, helping to

revolutionize livestock

breeding practices, as

seen in these historic and

modern pictures. Herd

genetics and farmer

safety have both

improved, thanks to A.I.

technology. Photos

courtesy GENEX

Cooperative Inc.
26 May/June 2011 / Rural Cooperatives

production through the use of good

bulls, and providing access to welltrained and more experienced

technicians. Other major benefits were

a low, $6 breeding fee (made possible by

better economies of scale) and having

sire committees operating within a

wider geographic area with more herds

to choose from. The committees’ job

was to find top cows for contracting

with farmer-members for future bulls

that could provide improved genetics. 

“It was during the late 1950s and

early 1960s that the young sire

programs were begun at NYABC and

NESBA. This involved taking the top

bulls in stud and breeding them to the

top 1 percent of production-type cows

to produce future sires. To do this, the

sire committees were busy traveling to

top herds. Having more herds to choose

top cows from was a big benefit. 

“Another great benefit of the

cooperative was the joint help received

from three state extension dairymen —

Stanley Gaunt from Massachusetts, Bob

Benson from Connecticut and John

Atwood from Rhode Island. NESBA

also benefited from information from

the herdsmen and professors from

respective land grant institutions.

Through the manager of the

cooperative (Paul Heller), we had a

good relationship with the University of

Connecticut, which was conducting

research on A.I. and its practices. Dr.

Pickett was already conducting semen

research (to improve semen and raise

conception rates) and developing A.I.

methods (moving from ampule to

straw) at the University of Connecticut.

But the cooperative was able to tap into

the other universities as well, developing New England-wide support for

applied A.I. research.

“It was a fantastic time. The NESBA

annual meetings were an exhilarating

forum where members made friends

shared experiences and gained

confidence in their breeding programs,

due to the success of the cooperative.” 

Q. What precipitated the merger that

ultimately led to the formation of

Eastern AI?

“Members were happy with NESBA

and the progress being made with use

of artificial insemination. But the board

and management started wondering if

we shouldn’t be thinking of further

mergers to push ahead for reduced costs

and greater farmer benefits. 

“We had reached the limits on highuse sires. In order to limit use to cows

from which heifer calves would be

raised, we increased the cost of semen

on the high-end bulls while leaving

other sires the same. We also felt it

necessary to strive toward a goal of

maintaining a reasonable breeding fee

($6); we didn’t want to see that increase. 

“In the fall of 1963, the NESBA

board initiated discussions with

NHVTBA and MBA to seek ways of

working together to reduce costs. MBA

and NESBA worked out an agreement

for the joint purchasing and sampling of

Holstein bulls. So, NESBA and MBA

had developed a good working

relationship; and NHVTBA — after

two straight poor years financially —

started looking at merger differently. 

“But first there was a meeting held in

April 1965 in Allentown, Pa., where a

merger of the whole Northeast A.I.

industry was seriously considered. We

(NESBA, along with NHVTBA, MBA

and NYABC) had a great meeting with

directors from cooperatives in

Pennsylvania, Maryland and New

Jersey. Most of us had met at National

Association of Animal Breeders

meetings over the years, so we were

acquainted with the larger organizations’ feelings that they were somewhat

superior to the smaller ones, but that

did not bother us. At the meeting, we

did not make significant progress,

although representatives from the

cooperatives in Pennsylvania and New

Jersey said they would discuss the

possibilities with their boards. It turned

out to be too much, too soon.” 

Q. What happened next? What issues

were raised and what outside parties

were involved in facilitation?

“A few months after the

Pennsylvania meeting, the state

extension dairymen suggested that the

New England cooperatives and NYABC

seriously look at getting together. Thus,

NYABC, NESBA, MBA and NHVTBA

proceeded with talks. To help with this,

we involved Elmer Towne (former

Vermont commissioner of agriculture)

to facilitate the meetings. Officials from

the Bank for Cooperatives also helped a

great deal; they attended all the

meetings. 

“NYABC wanted sire committee

chairmen to be on the board of

directors and also wanted to employ an

executive committee. NESBA didn’t

want an executive committee, but rather

wanted an efficiently sized board

making decisions together with

management – not to simply be told

what to do by an executive committee. 

“That issue almost destroyed the

merger. But some of the NYABC

directors supported the New

Englanders’ premise, and we ended up

voting for a 12-director board, where

eight would come from NYABC and

four would come from New England

(one from NESBA, one from MBA and

two from NHVTBA).

“As president of NESBA, I went on

the circuit to sell the merger. The

members really turned out at the

meetings. We were determined to have

a membership vote after completing full

discussions and questioning. Extension

dairyman Dr. Robert Benson, from the

University of Connecticut, was a

valuable asset in the process. He

provided an objective viewpoint of the

advantages and disadvantages of the

merger.” 

“In February 1965, all four

cooperatives voted to proceed with a

complete merger. For NESBA, the full

member vote was unanimous, except for

one dairyman in Tolland County (CT)

who accused the NESBA board of

destroying the cooperative and

confiscating the equity of members. His

was the lone vote against the merger in

all 12 cooperative districts. 

“Indeed, equity money was an issue.

However, we were able to sell NESBA’s

land and buildings in Woodbridge for

$330,000. After providing $100,000 (in

addition to our bulls and equipment)
for the members’ equity stake in the

newly formed Eastern AI, NESBA’s

8,000 members received $230,000 back

in equity. That was calculated on the

basis of $1 for every cow they had bred

through the cooperatives (at the $6

breeding fee).”

Q. Can you describe some of the

thoughts and feelings you had toward

this newly formed cooperative?

“It was exciting to see the

development of cooperation with the

merging partners. It was a challenging

and rewarding experience serving on

the new 12-member board of a

cooperative with 46,000 members that

had the responsibility of breeding cows

in seven states. It was particularly

gratifying to see farmers remain in the

cooperative during that transitional first

year, when the cooperative bred

875,000 cows on member farms. 

“We had an experienced technician

group and district field men who

efficiently coordinated our technician

services. I was proud to be on a board

that was working hard to set policies

during this time of significant change,

and then watching management

effectively enact the policies. It was very

rewarding to work with Charles

Krumm, the new manager of Eastern

AI (who had been manager of NYABC),

who did a great job of challenging the

directors and members, and motivating

the staff.” n

Rural Cooperatives / May/June 2011 27

Co-op mergers require

insight, commitment

The experiences of A.I. cooperatives in the Northeast provide a glimpse

at how cooperative consolidation occurred during a time of rapid change in

genetic breeding in the dairy industry. Farmers were clearly excited at the

prospect of breeding better cows, developing more productive herds and

owning the business that provided these important breeding services. They

didn’t want to see the progress stall or diminish, so they negotiated

mergers of their cooperatives to gain economies of scale, greater

efficiencies and access to better products and services. 

Commitment to the process and the critical thinking needed to carry it

out came into play from many parties. It took strong leadership from the coop boards of directors as well as expert consultation from university

researchers, extension dairymen, other professionals and cooperative

management. While merger isn’t always the only strategy for improvement

of cooperatives, there are times when it makes sense, as was the case

here. 

The resulting Eastern AI cooperative

operated from the mid-1960s until the

mid-1980s in New York and New

England, as well as overseas. 

When the cooperative found it

necessary to gain further benefits for

its members, especially in the growing

international sales arena, it sought out

further cooperation. In 1986, Eastern AI

joined ranks with Atlantic Breeders

Cooperative in Pennsylvania and the

Louisiana Animal Breeders Cooperative.

A partnership called Federated

Genetics was formed. This partnership used the full lineup of bulls from all

three cooperatives and also conducted sales in non-member states and

internationally. 

The three partner cooperatives of Federated Genetics then fully merged

into a single cooperative in the early 1990s (USDA Cooperative Programs

provided technical assistance to the cooperatives during that time). In 1996,

Federated Genetics was renamed Genex Cooperative Inc., when it joined

Cooperative Resources International, a holding cooperative headquartered

in Wisconsin. Genex has since grown even larger via mergers with other

A.I. cooperatives. 

The A.I. industry has seen many changes through the years, including

many mergers, partnerships and working relationships. The joint efforts

and consolidations have clearly helped the organizations prosper in a

rapidly changing environment. Strong cooperative leadership by many

throughout this period of change has resulted in an A.I. industry that

remains dominated by farmer-owned, farmer-controlled cooperatives that

are fully engaged in providing excellent products, services and economic

benefits to their members. n

“Strong cooperative leadership by many

throughout this period of change has resulted

in an A.I. industry that remains dominated by

farmer-owned, farmer-controlled cooperatives

that are fully engaged in providing excellent

products, services and economic benefits to

their members.” 
28 May/June 2011 / Rural Cooperatives

COOPERATION ON TAP

Multi-stakeholder co-ops are force behind new

Austin brewpub and fledgling effort in Seattle 
By Stephen A. Thompson, Assistant Editor

e-mail: stephena.thompson@wdc.usda.gov 

co-op isn’t usually what one thinks of when

one looks for a place to have a beer, but a

couple of new cooperatives are working to

change that.

The Black Star Co-op Pub and Brewery

Co-op in Austin, Texas, recently opened its doors, and

Seattle’s Flying Bike Cooperative Brewery is riding a wave of

interest and support among local beer lovers as it works to set

up a brewery and taproom.

Both Austin and Seattle are significant markets for “craft

beer.” Craft beers are brewed by low-volume “microbreweries” to have more flavor and variety than popular

mass-market beers. They are often inspired by British or

other European traditional beers, or they can offer new and

experimental brews. In the past 20 years, craft beers have

carved out a small but growing segment of the market,

especially in urban areas among young professionals,

accounting for nearly 8 percent of the beer market in 2010.

Co-op patterned on Belgium pubs

Black Star was born in Austin in 2006, after craft beer

enthusiast Steven Yarak got the inspiration to open a

community-owned neighborhood beer bar similar to those he

had experienced in Belgium, a country with hundreds of

small, traditional breweries. A flyer and Internet campaign

resulted in a meeting in a vacant lot with 16 people, including

Jeff Young, a trained brewer. Young wanted to take the idea

one step further: not only to serve high-quality beer, but to

brew it on the premises as well — a so-called “brewpub.”

Texas is not known for being a hotbed of craft-beer

activity, ranking near the bottom of the list in numbers of

breweries per capita. But Austin is a little different from most

of the state: a university town with a thriving music scene and

laid-back, youthful lifestyle. It has a solid market for craft

beers. With a strong, almost small-town sense of community,

it seemed an ideal place to try out Yarak and Young’s ideas.

Getting the cooperative up and running proved to be

more complicated than anticipated. Attracting members was

not a problem. With seed money from the first members, a

small home-brewing outfit was purchased and Young’s beer

recipes were soon attracting enthusiastic fans at gatherings

such as beer socials and the Craft Brewers Conference, held

in Austin in April 2007. 

Many members, after paying the $150 membership fee,

were willing to purchase investment shares in amounts of up

to $50,000, which helped raise $475,000. But jumping

through the regulatory hoops and locating and leasing a site

proved more difficult. For one thing, local regulations all but

required operating a restaurant along with the bar,

complicating the entire operation. The lease for a proposed

site fell through at the last minute, disrupting schedules and

leading to long delays.

Co-op a “unique work environment” 

Finally, in September 2010, the cooperative opened a new

brewery, taproom and restaurant in an attractive, postmodern building, located in a new mixed-use development

near the center of town. 

Black Star is a multi-stakeholder cooperative, with both

consumers and workers as members. The operation is staffed

by a “Workers’ Assembly of 17,” of which six are full-time

staff, including Yarak and Young. The workers elect a liaison

to the nine-member board of directors, which is elected to

staggered, three-year terms by the Members’ Assembly.

Members can pay their $150 fee all at once, or over time

after an initial $40 payment. Members are entitled to

Rural Cooperatives / May/June 2011 29

A membership meeting of the new Flying Bike Cooperative

Brewery in Seattle, Wash., which hopes to follow in the

footsteps of Austin’s Black Star Co-op Pub and Brewery

(lower photo). Photos courtesy pictured co-ops

A
30 May/June 2011 / Rural Cooperatives

participate in biannual meetings and “membership

appreciation events,” patronage refunds and a free beer on

each anniversary of joining the co-op.

Karinne Thornblom joined the Workers’ Assembly in

August, 2009, after answering an online ad. She brought her

experience in running her own coffee bar to the work of

setting up and running the bar and restaurant. “It’s a unique

work environment,” she says. It calls on workers to manage

themselves, rather than be constantly supervised. “It’s been a

real learning curve for all of us. We had to learn how to

empower ourselves.” She calls her work “a labor of love.” 

Thornblom says that so far the cooperative is doing well,

paying its bills and offering a “good living” to its workers.

The co-op has adopted the Rochedale Cooperative

Principles, which call for community participation, educating

and training members and the public, and working with and

helping other cooperatives. Black Star hosts fund-raising

events for nonprofits and other cooperatives, including Third

Coast Workers for Cooperation, an Austin organization that

promotes worker co-ops.

Enthusiastic start for Flying Bike Co-op 

Black Star has also given help to a cooperative that hopes

to follow in its footsteps. Seattle’s Flying Bike Cooperative

Brewery was founded in March, 2010, by two friends who

enjoy brewing their own beer, and decided they’d like to start

a co-op to sell it. Like Austin, Seattle has a lively music scene

and a young, active population. However, unlike Texas,

Washington state already has one of the highest ratios of

breweries to population in the country. 

Founder and President Jeff Hicks says there is room for

more. “The craft-beer market is exploding,” he says. “The

existing breweries can’t handle the demand.” 

Hicks talked to Black Star and developed a mailing list of

about 50 people. A start-up meeting in the summer of 2010

drew about a dozen people, resulting in the election of a

nine-member board of directors. A development plan was put

together with the help of some Black Star members and the

Northwest Cooperative Development Center, in nearby

Olympia, using a model developed by CDS Consulting Coop. CDS, headquartered in Putney, Vt., offers startup

technical assistance to food cooperatives. 

The plan originally called for a membership drive starting

April 11, 2011, with the goal of signing up 300 members by

June. However, that goal was reached in only four days and

membership has continued to grow. Like Black Star, Flying

Bike charges a one-time $150 membership fee. All members

joining before the co-op opens its doors get special lifetime

benefits. The first 300 founding members are known as the

“Thirsty 300,” and will get a small price break on their beer.

Reaching their membership goal so quickly has put the

founders on the spot. “We had no idea we’d get so many

members so soon,” says Hicks. “We were expecting to have a

little more time to get to the next step.” Current activities

include conducting a location study. The cooperative is

developing a “heat map” showing relative concentrations of

members as an aid to finding the ideal site for its facility. 

“In the meantime, we’re forming committees and people

are scouting locations,” he says, “And we’re trying to figure

out how big the restaurant and taproom should be.” Like

those in Austin, Seattle regulations practically require a

restaurant to be included. Like Black Star, Flying Bike plans

to raise capital through member loans, and possibly other

sources.

More information needed

One obstacle to progress is a lack of information. “There

are no craft brewery consulting firms,” says Hicks. While the

Northwest Cooperative Development Center and CDS have

been very helpful, he says, “there’s only so much help they

can offer. It would be great if there were guidelines for

setting up brew-pub cooperatives, but there aren’t any yet.” 

Hicks says that breweries in the Seattle area, though

potential competitors, have been quite helpful.

Another problem is finding legal help. This task is

complicated by the daunting legal and regulatory

requirements faced by bars and restaurants. “We’ve had a lot

of people calling us offering their services,” says Hicks. “But

we’re having trouble finding people that have dealt with our

situation. Do we need a brewery lawyer or a co-op lawyer?”

Hicks thinks the cooperative will have to hire more than one

attorney to handle the various legal filings and questions.

Flying Bike’s relationship with Black Star may help them

avoid some pitfalls, Hicks says. The president of Black Star’s

board has become a member of Flying Bike and the two

cooperatives communicate regularly. “They’ve made some

mistakes, learned some lessons that they’ve passed on to us,”

says Hicks. 

Hicks is enthusiastic about Flying Bike’s role as a pioneer

in the cooperative brewpub business. He says the co-op is

already talking to people around the country interested in

setting up their own co-ops. He hopes that Flying Bike’s

experiences and those of Black Star can be passed on to other

cooperative brewpubs, making the process of establishing a

community-owned brewery and taproom a little easier. 

“It’s an opportunity to help others do better than we’ve

done,” he says. In the meantime, he and his fellow founders

have their hands full blazing the trail. n

“It’s been a real learning curve for all of us. 

We had to learn how to empower ourselves.”
Rural Cooperatives / May/June 2011 31

E. Eldon Eversull

Agricultural Economist

USDA Rural Development 

Co-op Programs

This article summarizes the findings of a

new USDA Rural Development report:

Cooperative Financial Profile, 2008

(Research Report 222). Free copies are

available from: coopinfo@wdc.usda.gov, or

calling (202) 720-8381. To download a

pdf version from the Internet, visit:

www.rurdev.usda.gov/

rbs/pub/NEWPUB.htm).

s member- and userowned businesses,

cooperatives need to

modify their financial

structure periodically

in order to successfully compete in

U.S. and international markets. USDA

has periodically documented the

financial profile of farmer, rancher and

fishery cooperatives during the past 50

years with a series of reports that began

in 1954. It was updated in 1962, 1970,

1976, 1987, 1997 and 2008. 

This article analyzes how

cooperatives have changed their

financial composition by focusing on

the sources of capital for co-ops and

how they distribute net income and net

losses. Also included in the full report –

but not discussed in this article – are

common-size income statements and

balance sheets, as well as ratio analysis

based on seven cooperative asset sizes

and eight cooperative types (based on

products sold or marketed).

Long-term cooperative trends

During the past half century, the

number of farmer and rancher

cooperatives has dropped from more

than 10,000 to just over 2,400 (Figure

1). Although fewer in number, total

assets owned by farmer co-ops have

grown substantially. In 2008, co-op

assets were more than 13 times larger

than the asset levels of 1954. 

Co-op assets grew the most between

1970 and 1976. By dollar amount, the

most rapid growth was between 1997

Long-term

trends show 

co-ops relying

less on member

equity while

use of debt

increasing

A
32 May/June 2011 / Rural Cooperatives

and 2008. The 1,164 co-ops that

responded to USDA’s financial profile

survey reported a total asset level of

$48.2 billion in 2008, which represents

more than 78 percent of total

cooperative assets, estimated to be

$61.2 billion [DeVille, et al].

Funding sources 

Funding sources consist of: (1) equity

capital, (2) borrowed funds, and (3)

other liabilities. 

Equity capital is primarily derived

from net income and is influenced by

decisions made by the board of

directors regarding distribution of net

income, equity redemption and the use

of debt or equity to finance assets.

User-owners finance cooperatives

through the accumulation of equity

capital, by direct investment, patronage

refunds and per-unit retains. Without

equity accumulation, the cooperative

cannot grow. To maintain investment

proportionality among current and past

users, equity redemption is used by

most cooperatives.

Direct investment in a cooperative is

usually through the purchase of an

ownership share or shares. Preferred

stock may also be used. Patronage

refunds are net income allocated to a

patron based on the quantity or value of

business conducted with the

cooperative. Per-unit retains are not

based on net income, but rather on the

amount of products sold through the

cooperative or business conducted.

Marketing agreements with members or

bylaw provisions establish the authority

for the cooperative to deduct per-unit

retains from product payments.

Allocating net income and

redeeming equity are unique practices

of cooperatives. The bylaws of the

cooperative govern its net income

allocation and equity redemption. The

cooperative’s board of directors is

responsible for determining the

allocation of net income and equity

redemption. Capital accumulation is the

result of net income allocation and

equity redemption. 

More than a half century ago, equity

capital financed 57 percent of

cooperative assets — about the same

amount as in 1962 (Figure 2). Equity

levels declined through 1976, but then

increased until 1987. Equity levels

dropped in 1997 and 2008, when only

32 percent of assets were funded by

equity. 

Borrowed funds come from CoBank,

commercial banks, bonds and notes

issued by the cooperative, loans from

other cooperatives or their financial

subsidiaries and other sources and

lenders. Borrowed funding as a percent

of total assets reached a high of 33

percent in both 1970 and 1976, only to

fall below 30 percent in 1987 and 1997.

Reliance on borrowed funds rose above

31 percent again in 2008.

CoBank is the main source of
Rural Cooperatives / May/June 2011 33

borrowed funds for cooperatives

(Figure 3). CoBank is the surviving

bank for cooperatives after a series of

mergers among cooperative banks that

are part of the Farm Credit System.

CoBank and its predecessors

provided more than 64 percent of all

funds borrowed by cooperatives in

1970. CoBank provided about the same

percentage of borrowed funds in 2008,

although its percent of all co-op lending

dropped somewhat between these two

time periods.

From 1954 through 1976, bonds and

notes issued by cooperatives were the

second highest source of borrowed

funds. About 37 percent of borrowed

funds in 1954 were derived from bonds

and notes. But this funding source has

fallen steadily, dropping to only 8

percent of borrowed funds in 2008.

Commercial banks provided about 8

percent of borrowed funds from 1954

through 1987, but borrowing from

commercial banks grew to 16 percent in

both 1997 and 2008. The final source

of borrowed funds is a catch-all “other”

category. “Other” consists mainly of

loans from other cooperatives or their

financial subsidiaries, equipment

dealers, the Small Business Administration, industrial revenue bonds,

certificates of debt and the Commodity

Credit Corporation. Overall, other

sources of borrowed funds fluctuated

from 9 percent in 1954 to 26 percent in

1987, dropping back down to 12

percent in 2008.

“Other liabilities” are obligations due

suppliers, members and others. Obligations due suppliers are dependent on

the type of business a cooperative conducts. Dairy marketing cooperatives

have fairly steady business levels

throughout the year, and thus have

about the same funding obligations to

their suppliers (i.e., raw milk payments

to members). Farm supply cooperatives,

on the other hand, have a more cyclical

payment process to suppliers of seed,

fertilizer and crop protectants. Thus,

they have higher obligations due to

suppliers in late winter and early spring,

when inventories are built up.

There has been a steady increase in

the use of other liabilities to finance

assets. Other liabilities have risen from

18 percent in 1954 to 37 percent in

2008 (Figure 2).

Distribution of net income

Distribution of net income provides

equity accumulation through non-cash

patronage refunds and unallocated

accounts. Distribution of net income is

shown in Figure 4. For most of the

survey years, cash and non-cash

patronage refunds comprise the

majority of net income distribution.

Cash patronage of 31 percent of net

income or losses in 1954 rose to 41

percent in 1970, but has since steadily

declined, to 27 percent in 2008. 

Non-cash patronage refunds have

declined overall, from 56 percent in

1954 to 31 percent in 2008. There were

increases (to at least 43 percent) in both

1976 and 1997. Unallocated distribution of net income or losses increased

from 6 percent in 1954 to 30 percent in

2008.

In the 1987 and 2008 surveys,

unallocated distribution of net income

(retained earnings) was equal to, or

larger, than the distribution for cash

patronage and non-cash patronage.

There were large losses in both 1986

and 2007, followed by large growth of

income in the following years. Some of

the growth in retained earnings in 1987

and 2008 may have been applied to

offset losses charged against retained

earnings in the prior years. Of the 1,164

respondents, 83 had losses in 2008.

Almost all of the co-ops distributed

losses to retained earnings. n

Bibliography

DeVille, Katherine, Jacqueline Penn,

and Eldon Eversull, Cooperative

Statistics, 2008, U.S. Department of

Agriculture, Rural Development,

Service Report 69, October 2009.

Rathbone, Robert C., and Roger A.

Wissman, Farmer Cooperatives’ Financial

Profile, 1997, U.S. Department of

Agriculture, Rural BusinessCooperative Service, Research Report

171, April 2000.
34 May/June 2011 / Rural Cooperatives

By Janet Kubat Willette

Editor’s note: this article is reprinted

courtesy Agri News.

strander Farmers

Cooperative capped its

100th year with its

induction into the

Minnesota Grain and

Feed Association (MGFA) Century

Club. The induction occurred during

the MGFA’s 104th annual convention in

Duluth.

“It’s something to celebrate, being

100 years old,” said Matt Litwiller,

general manager of the cooperative.

“There aren’t too many businesses

that can say that,” said Wayne DeWall

of Grand Meadow, secretary of the

cooperative board of directors. “It is

pretty awe-inspiring I guess.

It’s pretty hard to believe where we’ve

come from and where we’re going.” 

When the cooperative started in

1910, there was no electricity. Seed and

grain were moved by hand. The

cooperative handled primarily coal and

discouraged the storage of grain,

Litwiller said.

Highlights of the cooperative’s

history are spelled out in documents

created in celebration of the

cooperative’s 100th anniversary. O.P.

Capital investments improve

services for members

By Janet Kubat Willette/ Agri News

On May 1, 1910, 12 forward-thinking farmers established

the Farmers Cooperative Elevator and Mercantile Company of

Ostrander. Today, nearly 101 years later, the Ostrander

Farmers Cooperative is led by a five-member board with a

vision for growing the cooperative as it enters its second

century.

“It’s a really good group of guys that are working on the

board,” said board secretary Wayne DeWall of Grand

Meadow. “We take everything into consideration. We may not

always please everybody...we’re trying to do what’s best for

the cooperative to make it survive another 100 years.”

The cooperative has grown from its Ostrander location,

which was established to serve the farmers in Beaver and

Bloomfield townships in Fillmore County and Bennington

Township in Mower County, to a cooperative that serves

farmers in five counties in two states from locations in four

communities.

The cooperative has locations in Ostrander, Wykoff, LeRoy

and Chester, Iowa. It serves farmers from Fillmore, Mower and

Houston counties in Minnesota and Howard and Mitchell

counties in Iowa, said Matt Litwiller, general manager of

Ostrander Farmers Cooperative.

The co-op is the largest employer in Ostrander, with 30

year-round employees and an additional 10 seasonal

employees, hired in spring and fall.

O

OSTRANDER CO-OP

JOINS CENTURY CLUB
Rural Cooperatives / May/June 2011 35

Hadland was president from 1910 to

1924. Ervil A. Dugstad was the notary

public who signed the original articles

of incorporation. Copies of the five,

neatly handwritten papers are on

display. They keep the originals in a

safe place, Litwiller said.

In the mid-1920s, the cooperative

received electricity; in the 1930s it

purchased a radio to keep in touch with

grain markets. 

The Depression took a toll, but a

dividend of 50 cents a share was paid to

shareholders with current accounts.

The general manager lowered his salary

to $100 a month to help control costs.

The 1940s and 1950s were decades

of growth. In the 1940s, the cooperative

purchased its first truck and a

lumberyard. In the 1950s, it purchased

a feed mill and in 1955 installed its first

grain dryer — a 475-bushel batch dryer.

Interest rate jumps in the 1960s

made the business a struggle at times,

according to historical documents.

Interest rates jumped from 6.5 percent

to 8.25 percent in a four-month span.

The drought of 1964 brought losses for

the cooperative. 

In 1969, though, the cooperative

board approved a profit-sharing plan

for employees.

Financial challenges continued in

the 1970s as interest rates climbed to

13.75 percent. Accounts receivable were

at an all-time high in 1979.

The lumberyard was sold in the

1980s. The board considered

purchasing computer programs. Interest

rates were 15.75 percent to 16.25

percent.

The 1990s were a period of growth.

The cooperative purchased grain

elevators in Wykoff and Chester and

entered a joint venture with LeRoy

cooperative elevator.

The cooperative celebrated its 100

years with a big event that attracted

more than 450 people for a meal,

Litwiller said.

The cooperative now offers grain

storage, grain marketing, grain drying

and full agronomy services. It also sells

seed and propane.

DeWall said when he looks through

the minutes of the past 100 years, the

issues were similar. He recalls one

meeting where the board members

discussed whether or not to buy a rail

car of fertilizer.

“We’re always looking for different

opportunities,” DeWall said. “We’re

also open to researching anything new.

Our board is a board that doesn’t take

any decision lightly.”

Decisions have to be unanimous, he

said. If any member has questions, the

issue is further researched.

The opportunity in Ostrander and

surrounding communities is huge,

Litwiller said. Farmers who used to

grow 140 to 150 bushels of corn per

acre are now growing 180 to 200

bushels, he said, adding that he’ll see

300 bushels per acre in his lifetime.

The cooperative is growing, much

like cooperatives in Iowa did five years

ago, Litwiller said. He previously

worked in Fort Dodge, and is from

southeast Iowa.

While there are many opportunities

in the grain and agriculture industry,

the primary challenge is volatility,

Litwiller said, noting that it costs four

times as much to purchase grain as it

did two years ago. The cooperative

needs to have a strong balance sheet

and to control those expenses that it

can. n

The cooperative has made significant capital investments

in recent years. A new office was added at the Ostrander

grain location in 2008. A 750,000-bushel grain bin, a 1 millionbushel air pile, a 100,000-bushel wet bin and a 5,000-bushelper-hour Zimmerman tower grain dryer were constructed in

2009. The cooperative received a grant from USDA Rural

Development to install the energy efficient dryer, Litwiller said.

People used to wait three hours to dump grain at Ostrander,

Litwiller said. Moving 40,000 to 50,000 bushels of grain was a

big day.

The cooperative now handles 125,000 bushels a day at

Ostrander, where the longest wait is 40 minutes. The

improvements generated $53,000 in tax revenue for Fillmore

County and $16,000 for LeRoy-Ostrander Schools.

Improvements were also made at the Wykoff location.

Farmers used to wait three hours, but after improvements

made last year, the wait dropped to 30 minutes, Litwiller said.

The cooperative added a 550,000-bushel bin and a 15,000-

bushel-per-hour grain leg. They also added a 6,000 bushel-per

hour-grain dryer.

The additional grain capacity helped the cooperative grow

its grain business volume by 3 million bushels from 2008 to

2010, Litwiller said. In 2008, the cooperative handled 3.2 million

bushels of grain. By 2010, that number had climbed to more

than 6.5 million bushels.

Everything is hauled into and out of all four locations on

wheels, Litwiller said. Markets are ethanol plants in Preston

and Lyle and New Hampton and Charles City, Iowa, and

Mississippi River ports in Winona and McGregor, Iowa. n

Even after 100 years in operation, the

Ostrander Farmers Cooperative is always

looking for new opportunities. Matt Litwiller is

the co-op’s current general manager. Photos

by Janet Kubat Willette, courtesy Agri News
Co-ops rally 

to help Japan 

Nebraska farmers

and co-ops are donating grain to aid

victims of the earthquake and tsunami that

devastated portions of

northeast Japan in

March. The assistance

program has been

developed by the

Nebraska Corn

Growers Association,

Aurora Cooperative

and Cooperative

Partners Inc., which

are working in

conjunction with the

American Red Cross. Farmer-owned

KRVN rural radio is also supporting

the initiative. 

Aurora Cooperative has 19 graindelivery locations across the state and

all are participating in the program,

which runs through July 30. As of April

13, farmers had already donated more

than 6,100 bushels of grain that sold for

more than $43,000 through Aurora

Cooperative locations. 

“Farmers often help out a neighbor

in need. This is a great way to extend

that generosity,” says George

Hohwieler, chief executive officer of

Aurora Cooperative. “Farmers can

simply deliver grain to one of our

locations and designate the entire load,

or a percentage of the load, to relief

efforts. Farmers will get a receipt for

their contribution and 100 percent of

the dollars from the sale of that grain

will go to the Red Cross.”

“We’ve seen an incredible response

to the grain donation program. It’s the

largest program we’ve ever had in our

chapter, and dollars generated will go

directly to the Red Cross international

relief effort,” says Renae Foster, chief

operating officer of the Central Plains

Regional Chapter of the American Red

Cross, adding that “the need in Japan is

staggering.”

For more information, contact Dawn

Caldwell at Aurora Cooperative:

dcaldwell@auroracoop.com, or 402-

694-2106. 

The Cooperative Development

Foundation (CDF), in Arlington, Va., is

also accepting contributions to aid in

the recovery. Japan is home to the

Japanese Consumers Cooperative

Union and to many other cooperatives,

including student housing cooperatives.

CDF’s Elizabeth Bailey notes that the

Japanese Consumers Cooperative

Union donated the seed money for

CDF’s Kagawa Fund, which has made

more than $800,000 in loans to expand

student housing co-ops across the

United States, enabling many students

to afford college while teaching them

leadership, financial, and management

skills.

For more information, visit:

www.CDF.coop, or write CDF at 2011

Crystal Drive, Suite 800, Arlington, Va.

22202.

DFA promotes

environmental stewardship

In observance of Earth Day on April

22, Dairy Farmers of America Inc.

(DFA) released the results of an internal

assessment that is helping the co-op

better understand the environmental

impact of its operations and determine

and manage its “carbon footprint.” The

consumption of fuel and electricity in

its plants, fuel use by DFA vehicles and

the impact of renewable energy programs for members were all examined

to establish a benchmark from which

the cooperative can measure the results

36 May/June 2011 / Rural Cooperatives

Newsline

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

Co-op developments, coast to coast

Farmers and co-op employees in Nebraska are helping to raise money via grain

donations to aid victims of the devastating earthquake and tsunami in Japan. Photo

courtesy Aurora Cooperative.
of current and future sustainability

initiatives. 

“Whether it is in our plants, on the

road or on member farms, we are

working to ensure that DFA and our

members’ legacies last for generations,”

says David Darr, vice president of

sustainability and public affairs. “This

includes efforts in the areas of energy

usage, transportation and animal care

and wellness.” DFA’s 21 wholly owned

plants have completed, or are planning,

150 projects with a sustainability focus,

from instituting new wastewater

treatment programs to upgrading

lighting systems. 

Examples of sustainable innovation

at DFA plants include: 

• Water management at the Hughson,

Calif., plant, has resulted in an 11.2-

percent reduction in well water use

and a 120,000-gallon-per-month

savings by using re-circulated water. 

• Facility upgrades and process

improvements at the Springfield, Mo.,

plant have decreased use of electricity,

water and natural gas. Projects

include lighting upgrades, a steamtrap survey and repairs, installing a

new boiler control system, reclaiming

glass rinse water and reducing use of

compressed air. 

• Process improvements at the Fort

Morgan, Colo., plant, have reduced

energy use and conserved water. Reusing the water removed from milk in

the concentration process for cleaning

has reduced water use by 2 million

gallons per year.

In addition, all five of DFA’s contract

manufacturing plants have committed

to the Energy Star Challenge, with a

goal to reduce energy use by 10 percent

or more within five years. 

In 2010, average fuel efficiency

among DFA’s transportation fleet

increased 9.1 percent from the year

before. DFA has also been phasing in

larger capacity milk trucks. In 2010,

DFA’s use of higher capacity trucks in

Colorado reduced annual milk truck

trips by 5,838, or 517,580 miles driven.

That saved 94,105 gallons of fuel and

2,098,541 pounds of carbon dioxide. 

More than 30 member farms

conducted energy efficiency audits

during 2010 in partnership with DFA’s

Dairy Energy Services (DES). These

dairy energy audits identified an

average annual savings of 31,922

kilowatt per dairy, for an average cost

savings of $3,494. Through DES,

members can also participate in wind

and solar power assessments. 

United Co-op celebrates 

75th anniversary 

United Cooperative, Beaver Dam,

Wis., is observing its 75th anniversary

with the news that its sales topped $325

million in 2010, accompanied by a

sizable jump in income. 

“Happy 75th anniversary! We’re

officially century bound,” David

Cramer, United Cooperative president

and chief executive officer, said in

welcoming patron-members to the coop’s annual meeting in April. “Some of

us will be here for that [100th

anniversary], and some of us won’t; but

you can be sure the cooperative will be

here in another 25 years and beyond.” 

Cramer reported that the co-op’s

pre-tax income for 2010 was $24.3

million, or $11.6 million more than in

2009. Investments in three ethanolproduction facilities contributed more

than $10.7 million to its net income,

while patronage from regional

cooperatives added another $3.7

million. 

On April 11, United released $3.65

million in cash to patrons. During 2010,

more than $6.6 million in cash was paid

to members in equity retirement,

dividends on capital stock and

patronage.

Formed in 1936, United Cooperative

is a full-service cooperative offering

feed, grain, agronomy and energy

products and services to Wisconsin

farmers and consumers. 

Cotton co-op sponsors 

denim design competition 

Apparel design students at Texas

Tech University got a “field to fashion”

Rural Cooperatives / May/June 2011 37

Loading railcars with grain at United Cooperative’s Ripon facility. The Beaver Dam, Wis.-

based co-op is celebrating its 75th anniversary. Photo courtesy United Cooperative
look at the cotton industry by

competing in the Denim Runway 2011

design contest, sponsored by Plains

Cotton Cooperative Association

(PCCA) and Cotton Council

International (CCI). The contest is held

in collaboration with the university’s

Apparel Design and Manufacturing

Department (ADM). The main goal is

to help contestants understand all of the

links in the denim apparel supply chain. 

“It is vitally important for consumers

to know and understand where their

fiber comes from and everything

involved in the entire supply chain,”

says PCCA president and CEO Wally

Darneille.

Last October, students visited a

Lubbock-area cotton farm during

harvest to learn about cotton

production and the environmental

stewardship practiced by farmers. They

also visited a cotton gin and heard

presentations about PCCA’s cottonmarketing programs. In February,

students toured PCCA’s denim mill. 

The design contest consists of a

fashion jeans (for men and women)

design competition, as well as two new

categories this year: a casual wear

design contest and a cotton-trends

competition, in which students research

trends for cotton fiber and apparel. 

Organic Valley expands

members, products in Northeast 

Organic Valley has announced that it

will welcome up to 53 organic farmers

from Lancaster County Organic

Farmers Cooperative (LOFCO).

Organic Valley, based in La Farge,

Wis., is the nation’s oldest organic

farmer-owned cooperative, founded in

1988.

LOFCO says it hopes the alliance

with Organic Valley will bring it a more

stable market. Organic Valley will offer

full membership to LOFCO organic

dairy members, pending a period of due

diligence, as is standard procedure for

Organic Valley. During that period, it

will conduct individual farm visits to

review farm conditions and milk quality

of each farm, as well as inspect their

pasture plans. 

“We have a shared mission with

LOFCO of keeping farmers on farms,”

says George Siemon, a founding farmer

of the co-op and its self-described “CE-I-E-I-O.” “Our regional model

supports local farmers and economies,

and our ties in the farmer communities

of Pennsylvania run deep. It is an honor

to have these farmers ask to join us.”

In other co-op news, Organic Valley

has launched New York Fresh organic

milk for consumers in the New York

City metropolitan region. The milk is

produced on the cooperative’s family

farms in the Empire State and bottled,

distributed and sold in the region,

“ensuring fewer miles from farm to

table,” Siemon says.

New York Fresh milk is available in

skim, low fat, reduced fat and whole

varieties. New York Fresh cartons will

feature images and stories of the

farmer-owners who produce the milk.

The packaging will also display the

“Pride of New York” logo.

“Our vision is simple: keep it organic

and close to home,” says Siemon.

Organic Valley has 222 farmer-owners

in the Northeast and another 174 in

New England. Organic Valley reports

that sales grew to $621 million in 2010,

exceeding expectations.

CHS Acquires Eastern 

European Grain Co. 

CHS Inc. has acquired Agri Point

Limited from East Point Holdings

Limited in Nicosia, Cyprus. The Agri

Point acquisition is part of the co-op’s

ongoing global grain-origination

expansion, adding about 1.5 to 2 million

metric tons of corn, wheat and barley.

“Acquiring Agri Point enables CHS

to further develop its global

competency and presence into the highgrowth areas of Romania, Bulgaria,

Hungary and Serbia,” says Claudio

Scarrozza, general manager for CHS

Europe. “In addition, we’re adding

important infrastructure to our global

supply chain capabilities with a deepwater port in Constanta, Romania, a

barge-loading facility on the Danube

River at Giurgiu, Romania; and an

inland grain terminal at Oroshaza,

Hungary.”

In other CHS news, the co-op has

begun trading fertilizer at its European

operations office in Geneva,

Switzerland. CHS currently sources

crop nutrients from 19 countries, but

until now has only marketed fertilizer

products domestically. 

“In many [market areas], we’re

already shipping grain to the same

regions where we buy fertilizer. Fully

integrating these businesses will help us

maximize our sourcing and logistical

strengths and better serve customers,”

says Mark Palmquist, CHS executive

vice president and chief operating

officer for Ag Business. 

Schlangen new 

board chair at AMPI 

Steve Schlangen, a dairy farmer from

Albany, Minn., has been elected

chairman of the 3,000-member

Associated Milk Producers Inc. (AMPI),

in Bloomington, Minn. He was elected

to the post following the co-op’s annual

meeting in March. 

“Steve’s genuine ability to connect

with others and maintain a clear vision

for the cooperative will be a great asset

as he assumes the role of chairman,”

says AMPI President and CEO Ed

Welch. “He understands the core values

38 May/June 2011 / Rural Cooperatives
Rural Cooperatives / May/June 2011 39

of AMPI and the need to aggressively

pursue member interests in the

economic and political arenas.” 

Schlangen and his wife own and operate

a 65-cow dairy farm. He has

served on the AMPI board

of directors since 2001. “I

am very humbled and proud

to represent my fellow coop owners and will work

hard to ensure AMPI

remains the best milk

market for Midwest dairy

producers,” Schlangen says.

He succeeds Paul Toft, who

farms near Rice Lake, Wis.,

and retired after serving as

AMPI chairman for the past

decade. 

The 400 delegates and

guests at the two-day annual meeting in

Bloomington were told that the co-op

had achieved a fifth consecutive year of

sales increases, with sales of $1.7 billion.

Despite strong sales and profitable

operations, a year-end market drop

devalued product inventory, resulting in

a $1.5-million loss for the cooperative.

AMPI members still shared $12.9

million from the previous year’s

earnings and member equity. 

More than half of AMPI sales came

from consumer-packaged dairy

products. Sales of packaged and

processed cheese grew 5 percent, butter

sales were up 7 percent, pudding and

cheese sauce sales jumped 10 percent,

and ice cream-mix sales climbed 19

percent. The industry saw increased

global demand for dairy proteins last

year, which led to improved milk prices

following the depressed markets of

2009. AMPI sold more than 28 percent

of its powdered dairy products

internationally.

Sunkist to brand table grapes

For the first time in nearly 120 years,

Sunkist Growers Inc., a Sherman Oaks,

Calif.-based citrus cooperative, will

market table grapes bearing the Sunkist

brand. The expanded fruit line, which is

debuting this spring, is the result of

partnerships between Sunkist and two

California grape grower-shippers:

Richard Bagdasarian Inc., of Mecca,

and Reedley-based Bravante Produce. 

Sunkist expects to bring about 2

million cartons of grapes to market,

including multiple varieties of red,

green and black seedless grapes, as well

as the red globe seeded variety. 

Because Bagdasarian’s acreage is in

the California desert, where grapes

ripen early, while Bravante grows

grapes in the San Joaquin Valley, the

partnerships will provide Sunkistbranded table grapes from May into late

fall. 

“The synergies created by

combining Sunkist’s marketing expertise

and the experienced sales networks

within the two grape operations adds

value to both,” says Russ Hanlin,

president and chief executive officer of

Sunkist.

“Sunkist is one of the best known

and most trusted brands in fresh

produce,” says Nick Bozick, president

of Richard Bagdasarian. “This

expansion of the Sunkist produce line is

a marriage between high-quality

growers and a world-class brand.”

Bagdasarian and Bravante also grow

Sunkist citrus. 

Evergreen model 

impresses HUD official

In a recent interview with Shelterforce

magazine, Ron Sims, the deputy

secretary of the U.S. Department of

Housing and Urban Development

(HUD), called Cleveland’s Evergreen

Cooperative model “brilliant” and

outlined how HUD aims to revise its

own Section 3 program to encourage

co-op formation. (See the Nov.-Dec.

2010 issue of “Rural Cooperatives,”

page 12, for an overview of the

Evergreen family of co-ops,

which in-cludes worker-owned

co-ops that operate a

commercial laundry and a solar

panel installation business.) 

“...I said to the people in

HUD, ‘Have we ever thought

about telling [residents of poor

communities] why don’t we

make you the employer?’” Sims

told the magazine. “Isn’t that

what we really want to achieve

in the end: self-sustaining

employment — to have them

take a risk so they are the ones

knowing they have to go to work

because, in the end, it is their company?

“Now that’s what they did in

Cleveland at the Evergreen Co-op.

They’ve applied it to solar, and they’re

now doing a plan so that they will grow

crops in the winter in these large

greenhouses...Again, all the participants

will be people out of these poorer

communities. Brilliant.

“So we are now changing what we

call Section 3. We have a team that

we’ve sent out in the country to look at

innovative practice, and then we’re

Steve Schlangen
40 May/June 2011 / Rural Cooperatives

going to create training sessions. All

because I was out in Cleveland.”

Prairie Skies Co-op to 

build biofuels facility

Plans have been announced to build

a “third-generation biofuels project” in

Madelia, Minn., that will use

agricultural feedstocks to produce

gasoline, diesel and ammonia. Prairie

Skies Biomass Co-op, a local grower

cooperative, has announced that it will

supply the feedstock and own a

torrefaction facility as part of the first

phase of the project. Two additional

phases will provide a combinedcycle power generation facility and

fuels/ammonia facility.

The gasoline and diesel produced

will be “drop-in fuels,” not an

additive or blend stock. A mix of

locally grown feedstocks will be

converted to an energy-dense,

torrified material in this first phase.

The main feedstocks will include

native grasses, alfalfa, wheat straw,

corn stover and willow. The 300-ton

per day facility will produce about

75,000 tons per year of torrified

material and other co-products.

The project supports and

advances the sustainability goals of

the Madelia Model, a rural

development concept developed by

Rural Advantage, a Minnesota

nonprofit corporation. The facility

will employ 20 permanent fulltime

positions plus additional positions

throughout the feedstock supply

value chain. 

For more information, contact

Linda Meschke, spokesperson for

the Prairie Skies Biomass Co-op, at:

linda@ ruraladvantage.org or 507-238-

5449.

Record-setting year 

for Westby Creamery

Westby Cooperative Creamery held

its 107th annual meeting in January,

where it reported record sales of $37

million, a 20-percent gain over 2009,

General Manager Pete Kondrup

reported to the more than 100 member

dairy farm families, employees and

friends in attendance. According to a

report in the Wisconsin Ag Connection, a

record 110 million pounds of milk

passed through the cooperative as fluid

or manufactured dairy food products,

including a growing volume of

certified-organic milk. Kondrup said

member patronage distribution of 24

cents per hundredweight was also paid

as cash, with 36 cents per hundredweight provided as stock certificates to

members.

Wisconsin Ag Connection also reported

that Kondrup said the co-op has added

more new dairy farm members than in

any other year in recent history, and is

now owned by 137 Wisconsin dairy

farm families, many of whom are

fourth- or fifth-generation family

farmers.

“Our business has continued to grow

through a good mix of Westby brand

and private-label retail products,”

Kondrup said, noting that Food Service

and Ingredient customer segments have

also grown, with increased sales for

cultured products, butter and hard

cheeses. “With record sales and net

income, we have strengthened our

balance sheet, reduced debt and

increased our capital reserve for

investments in operations and new

product development.”

Virginia broadband 

co-op’s efforts create jobs 

Virginia Governor Bob McDonnell

has announced that ICF International, a

global professional services firm, will

open its first operations center for

business process management in

Henry County, Va. ICF

International partners with

government and commercial clients

to deliver professional services and

technology solutions for a wide

variety of sectors, including in the

energy, environment, transportation, health, education, homeland

security and defense markets.

This $15-million center will

bring 539 new jobs to the region.

The operations center will be in the

Patriot Centre Industrial Park,

designated as a Virginia

“GigaPark.”

GigaParks is a marketing

initiative created by the MidAtlantic Broadband Cooperative

(MBC) to showcase the benefits of

more than 100 business, industrial

and technology parks in Southern

and Southwestern Virginia. These

parks have access to a high-capacity

broadband infrastructure, along

with a low-cost operating

environment.

“We’re very proud that MBC’s

advanced open-access fiber optic

network played an important role in

ICF’s decision to locate at the Patriot

Centre GigaPark,” says Tad Deriso,

president and CEO of MBC. “Our

infrastructure enables companies like

ICF to locate their operations center in

a low-cost region, yet still enjoy carrierclass network connectivity to the

world.” More than 60 private-sector

telecom providers are members of the

co-op. n

Westby Creamery Cooperative has continued

to grow its business through a mix of 

Westby brand and private-label product sales.

Photo courtesy Westby Creamery Cooperative 
Rural Cooperatives / May/June 2011 41

Building upon earlier work

The challenges experienced by the women of Marukeni

and their excitement about the breadth and depth of

assistance TDDP will provide for the entire value chain is

reflected by a preponderance of beneficiaries along Tanzania’s

northern corridor. 

Unable to trust they would be paid fairly by informal

collectors, six women living on the outskirts of Moshi

decided in 1996 to begin pooling and collectively selling their

milk to local shops and individuals. Although the group

doubled to 12 women over the next three years and began

experimenting with making Tilsiter cheese, the members’

lack of knowledge in a number of areas hindered growth.

Through an earlier USAID-funded program, Land

O’Lakes in 2001 helped the women formalize their group

and register as the Kijimo Women’s Cooperative. “Land

O’Lakes helped us secure a 1,500-liter cooling tank and they

sent seven of our members for training on improved milk

production, animal husbandry and processing,” recalled

Kijimo’s chairwoman, Margaret Sirikwa. 

Through this training, women were able to diversify their

product base to include mozzarella, Gouda and Camembert

cheeses, as well as cultured milk, Sirikwa noted. As a result,

the women started selling their products not only in Moshi

and Arusha, but also in the capital of Dar es Salaam. 

“Just as important as improving our technical expertise, Land

O’Lakes helped us learn what it really means to be a

cooperative,” said Sirikwa. “We learned how to keep records,

do basic accounting, understand the cooperative law and

effectively manage our business. We were also able to grow

our membership to 54 women, since members knew we could

guarantee milk sales and help them realize a profit.”

Meeting growing demand for cheese

Given the growing demand for cheese, particularly among

tourists, the biggest challenge for the women of Kijimo is

how to enhance their product supply through enhanced milk

production. 

“It has been over five years since we last received technical

training from Land O’Lakes, and our members could use

refresher trainings on feeding and breeding through the new

USDA program so that we can enhance production,” noted

Sirikwa. “But if we can further grow our supply of milk, I’m

confident we can meet market demand.”

Although the rural farmers need substantial technical

assistance to fully realize the fruits of their labor through

dairy development, the program is already aggressively on

track for meeting its targets. In late March, just three weeks

into program implementation, TDDP had already

established three program offices and trained about 770

farmers in animal husbandry. 

Beyond the direct beneficiaries of this new USDA-funded

program, Tanzanian government officials have made clear

their hopes about how much the program will achieve.

Minister of Parliament Benedict Ole Nangoro, the deputy

minister for livestock and fisheries, has said that he believes

TDDP could “serve as a model and generate lessons learned

for improved food security that can be emulated elsewhere in

the country.” n

from the center, direct-care workers could ensure that the

transition to home goes smoothly and that strategies for

healthy eating, exercise and hygiene become routine. 

These forward-thinking institutional partners should share

a common trait: a desire to reduce overall health costs (by

avoiding the need for additional medical intervention) and to

help patients live life to the fullest. 

Health systems would have more of an incentive to

partner with direct-care workers and care recipients if

Medicare, Medicaid and private insurance reimbursement

were based upon the added benefits of healthy outcomes,

rather than fee-for-service. For example, in October 2012,

the federal health law will penalize hospitals if they have

higher-than-expected rates of readmission for three medical

conditions (heart attack, pneumonia and heart failure). 

To reduce readmissions, hospitals are encouraged to enter

into accountable care organizations, in which a team of

providers (hospitals, primary care doctors, home health

agencies) agree to share responsibility for taking care of a

group of patients. A pilot project could evaluate and

document presumed cost savings and healthy outcomes. 

Next steps

The Cooperative Development Foundation plans to

explore the multi-stakeholder co-op model in the provision

of home-based care, and will conduct a feasibility study. CDF

will search for potential pilot sites to test the model and seek

out partners, such as local hospitals or advocacy groups,

which may enter into membership of a homecare co-op. 

For more information on multi-stakeholder co-ops, read

Solidarity as a Business Model: A Multi-Stakeholder Cooperatives

Manual recently published by the Cooperative Development

Center at Kent State University (and funded by the 2010

Rural Cooperative Development Grant from USDA Rural

Development): www.oeockent.org. n

Co-ops for Caregivers

continued from page 21

Tanzanian Dairy Farmers

continued from page 23

Rural Cooperatives / May/June 2011 43

and administrative expenses associated

with running the program. With one

order, one payment and one pick-up,

customers can order food from many

different family-owned and -operated

farms and small businesses. 

The program is also easy for

producers to use. Producers sign up

with as many hubs as they can service,

based on geographic and time

considerations. From each hub, the

producers can then choose the number

of delivery/pick-up locations that they

want to service each week. 

Producers post products available for

sale and set their own prices. They

collect and prepare orders, then make

their own deliveries. There are no

minimum or maximum quantities for

any product sold. Producers can remove

their listings at any time. 

Some growers only raise one crop

and sell for only a few weeks each year.

Others post their products year-round,

while others come and go with postings

throughout the year. This flexibility

allows producers to extend their

growing seasons and try new products. 

Not just for the well-to-do

Each hub has multiple delivery/pickup options. For instance, Fall Line

Farms, one of the hubs using the Lulus

program, is a year-round co-op with

more than 75 members and 500 active

customers. More than 2,000 locally

produced agricultural products are

offered each week at a dozen pick-up

locations around Richmond. For this

hub, sales average $10,000 a week. 

Patchwork Farms, a new food hub in

rural Louisa County, Va., is not only

changing the way farmers source food

for their own families, but has also set

up a network structure for farmers to

expand their market reach into larger

urban cities which, in the past, they

lacked sufficient volume to service. 

Expanding into both urban and rural

areas has shown that support for local

food is not just a trend for the well-todo. Many of the program’s thriving sites

are located in working class communities where families want healthy food

and to support local producers. 

Increasing sales to local restaurants

and education and healthcare

institutions will open more doors for

producers. Providing virtual tools for

making these transactions seamless and

efficient opens new venues for

cooperative aggregations of producers.

Supporting communities 

The Lulus network also has

significant ties to local communities

through its support for schools and

charities. 

When crops mature, there is often

an abundance of an item which needs to

be picked and sold quickly. Lulus’

Pounds of Plenty program allows

customers the opportunity to make a

donation of local food products to

selected community charities, such as

the Virginia Food Bank and Meals on

Wheels. 

Producers love the program because

they get paid for more of their

production, the customer gets a receipt

for tax purposes and the charities

receive fresh local foods. Since it started

in 2009, more than 1,200 pounds of

fresh produce and grass-fed ground

beef have been donated to charities in

metropolitan Richmond.

“Thanks to the variety and amount

of food that we receive through

generous donors like Fall Line Farms,

we’re able to provide options to people

in local communities who may not have

access to such items,” says Kim Bridges

of the Central Virginia Food Bank and

Meals on Wheels for Central Virginia.

The food bank often serves needy

people living in food deserts, “where

the closest store doesn’t offer

affordable, healthy food options. For

these clients, getting fresh produce or

protein can be very challenging. We’re

grateful to have such help in the fight

against hunger.”

Through its farm-to-school

program, Lulus provides a venue for

local food producers to work

cooperatively to fulfill contracts with

area schools. The contracts include

preapproved items that meet the

requirements of the school menus. The

program also creates an efficient way

for school nutrition directors to place

and track orders and make payments

through a centralized purchasing

arrangement designed for sourcing local

food. 

The flexibility of this virtual buying

tool allows producers to reach both

public and private educational

institutions. Availability of fresh

produce is often limited in the winter,

so the ability to aggregate products

electronically to meet demand for large

orders opens up a whole new market for

small growers. 

For events such as Earth Day and fall

harvest festivals, Lulus’ producers have

been invited onto school campuses to

visit with students and share

information about their sustainable

farming practices.

Dee Scherr runs a small farmer

cooperative in the rural southeastern

region of Virginia that sells produce

through Lulus’ food hubs and to local

restaurants. It also participates in the

Pounds of Plenty and farm-to-school

programs. 

“Through the Pounds of Plenty

program and the generous support of

co-op customers, we can bring the same

fresh produce — cucumbers, tomatoes,

collards, kale and sweet potatoes — to

the Central Virginia Food Bank for

people who would not normally have

access to these fresh products,” says

Scherr. Through the farm-to-school

program, the co-op contracts for

regular weekly orders from a local

school. 

The future for local food is looking

promising, thanks in part to the many

hundreds of small grassroots efforts

taking place in communities all over the

country. Partnerships between private

and public sectors play a huge role in

the success of all these organizations.

Understanding the intricate needs of all

players in the local food system is

mandatory for progress to be made. n

Virtual food hub

continued from page 8
Periodicals Postage Paid

U.S. Department of Agriculture

United States

Department of Agriculture

Washington, DC 20250

OFFICIAL BUSINESS

Penalty for private use, $300

NOTICE:

q Check here to stop receiving this publication and mail this

sheet to the address below.

q NEW ADDRESS. Send mailing label on this page and changes

to:

USDA/Rural Business—Cooperative Service

Stop 0705

Washington, D. C. 20250-3255

44 May/June 2011 / Rural Cooperatives