R

u

r

a

l COOPERATIVES

Growing a

Cleveland

Renaissance

November / December 2013
2 November/December 2013 / Rural Cooperatives

By Doug O’Brien, Acting Under Secretary

USDA Rural Development

It may not be the major tourist attraction

that the Rock and Roll Hall of Fame is, but

Cleveland is now also home to what is

believed to be the nation’s largest urban

greenhouse. This 3.25-acre expanse of glass

and greenery is a marvel of technology and human

innovation. A number of varieties of lettuce and other leafy

vegetables are being grown here hydroponically, without the

use of soil. The operation is helping to turn a struggling

neighborhood into a source of fresh, local food and jobs.

The workers here are not simply hourly wage earners —

although hourly jobs are also a welcome addition to the

economy of a neighborhood where jobs are scarce. Rather,

they are set to become (after working for a year) workerowners of Green City Growers (GCG), a worker cooperative.

GCG is part of Cleveland’s Evergreen family of worker

co-ops, which also includes Evergreen Energy Solutions, an

installer of solar heating systems, and the Evergreen

Cooperative Laundry (featured in the Nov.-Dec. 2010 issue

of Rural Cooperatives, available on the USDA website), which

uses environmentally friendly technology to clean the laundry

for many of Cleveland’s largest institutions (such as

hospitals).

While each of the three sister co-ops is involved in

entirely different lines of work, one thing they all have in

common is that they are owned by their workers. The longer

a person works for the co-op, the more his or her equity

stake in the business increases. In an inner-city neighborhood

where economic opportunity is scarce, these co-ops offer a

way up for their member-workers.

When a person evolves from “employee” to “workerowner” of a business, the desire and motivation to see it

succeed increases exponentially. The fact that GCG is

helping to meet the growing public demand for local produce

makes the co-op’s story even more compelling.

During a ceremony that marked the opening of the

greenhouse earlier this year, Cleveland Mayor Frank Jackson

called the operation an essential part of the city’s “Sustainable

Cleveland 2019” effort, the goal of which is to create enough

new industries and long-term jobs by the year 2019 to make

the city economy truly sustainable. Production of local food

is a key element in the plan, Jackson noted.

GCG is far from the only urban farming operation that is

creating jobs and expanding the supply fresh, local produce

for city dwellers.

In Milwaukee, Growing Power is an urban farming project

that markets produce from its own 40-acre farm just west of

the city. Its director, Will Allen, is a former professional

basketball player whose parents were sharecroppers in South

Carolina. His daughter, Erika, now runs an offshoot of

Growing Power in Chicago. Detroit, which has been battered

by the loss of much of its industry during the past 20 years, is

also home to successful urban farming projects that grow

hope, along with food, in blighted neighborhoods.

Community wealth building is the goal of the Evergreen

co-ops. The aim is to help “communities and individuals

increase asset ownership, anchor jobs locally, strengthen the

municipal tax base, prevent financial resources from ‘leaking

out’ of the area and ensure local economic stability,” the coop says.

The Evergreen cooperative strategy was designed to

“cause an economic breakthrough in Cleveland. Rather than

a trickle-down strategy, it focuses on economic inclusion and

building a local economy from the ground up,” according to

the co-op’s mission statement. “Rather than offering public

subsidies to induce corporations to bring what are often lowwage jobs into the city,” it continues, “the Evergreen strategy

is catalyzing new businesses that are owned by their

employees; rather than concentrate on workforce training for

employment opportunities that are largely unavailable to lowskill and low-income workers, the Evergreen Initiative first

creates the jobs, and then recruits and trains local residents to

take them.”

Federal Reserve Board Governor Sarah Bloom Raskin has

noted that the Evergreen Cooperatives model “is effective

because it capitalizes on local production and because it

forges a local business-development strategy that effectively

meets many of the anchor institutions’ own needs.”

So why does USDA Rural Development, which

administers financial programs specifically targeted to rural

America, have a stake in efforts such as GCG? Because it is

also home to USDA’s Cooperative Programs office, the only

unit of the federal government specifically charged with

helping to “grow” the co-op business model; we strive to

Commentary

Cleveland Rocks (and Grows)!

continued on page 38
Features

Rural Cooperatives / November/December 2013 3

Volume 80, Number 6

November/December 2013

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,

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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

Doug O’Brien, Acting 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. 8

04 Going Local in Big Sky Country

Western Montana Growers Co-op to notch first $1 million sales year

By Laura Ginsburg

07 USDA to fund advanced biofuels projects

08 Overseas co-op formations help reduce poverty, fight hunger

By Paul Hazen

12 Growing a Cleveland Renaissance

Urban farming co-op aims to boost blighted neighborhood with local foods, new jobs

By Stephen A. Thompson

20 Essential economic roles of farmer co-ops

By K. Charles Ling

29 Article Index 2013

Departments

02 COMMENTARY

16 LEGAL CORNER

18 MANAGEMENT TIP

24 NEWSLINE

p. 12

ON THE COVER: William MacKey (left) and Natopia

Scott transplant 12-day-old artisan lettuce seedlings

into their new “hydroponic home” inside the Green

City Growers cooperative greenhouse. The co-op,

which is owned and operated by its workers, is

creating good jobs in an area of Cleveland that needs

an economic lift. Photo by Lisa DeJong/Cleveland

Plain Dealer

p. 40
4 November/December 2013 / Rural Cooperatives

Going LocalinBigSkyCountry

By Laura Ginsburg, Project Coordinator for Co-op Development

Mission Mountain Food Enterprise Center

Montana has always been known for beef, wheat and

being “Big Sky Country.” As the local food

movement sweeps the nation, Montana is gaining a

reputation for those who like to know where their food comes

from. And in the western part of the state, the Western

Montana Growers Cooperative (WMGC) is leading the pack

for local food aggregation, processing, and distribution. The

WMGC is celebrating its tenth year in 2013, with 38 farmermembers, and nearly $1 million in sales in 2012.

Western Montana Growers Co-op

to notch first $1 million sales year

The Western Montana Growers Cooperative, making a delivery, is helping to meet rising demand for local food.

The co-op has been in business for 10 years, and now has 38 farmer-members. Photo by Neva Hassanein.

Bitterroot apples are one of the co-op’s more popular fruit offerings. Photo by Laura Ginsburg
Rural Cooperatives / November/December 2013 5

In the fall semester of 2012, participants (led by Dr. Neva

Hassanein) in a graduate-level course from the University of

Montana Environmental Studies program completed a case

study of the WMGC. The case study was funded by Mission

Mountain Food Enterprise Center, the USDA-funded

cooperative development division of Lake County

Community Development Corporation, based out of Ronan,

Mont.

Mission Mountain was an integral player in the formation

of the co-op and has been instrumental in providing

cooperative education and development and food handling

guidance and serves as the processing facility for WMGC’s

value-added products.

Three teams, each with own focus

The students divided into three teams, each focusing on

either: (1) staff, partnerships and cooperative structure; (2)

member-owners; or (3) wholesale and community supported

agriculture (CSA) customers. Each group decided on a

sampling platform and used methods such as interviews,

surveys, document review and participant observation to

gather data for the report. All participants, regardless of what

group they were part of, were asked their thoughts on the

role of the WMGC in the regional food system.

As local foods continue to gain traction, particularly with

the movement into wholesale markets such as schools and

institutions, it is important to understand how a cooperatively

owned business contributes to food system development. It is

hoped that this case study will help inform those interested in

developing cooperatively owned food hub businesses while

also contributing to the academic literature regarding food

systems.

Financially, the WMGC is expecting sales to top $1

million in 2013. The previous year saw the co-op return a

profit for the first time, and annual growth for the previous

six years has averaged 30 percent. In the span of 10 years,

WMGC has grown from nine members (who supplied only

fruits and vegetables) to 36 members selling a “complete

grocery basket,” including dairy and grains.

Similarly, the CSA program has grown to more than 160

members since its inception in 2008 and now includes

product-specific shares from local producers, including bread,

coffee, cheese and beef. The recent financial success has been

bolstered by grants for specific projects and generous support

from financial donors who want to see the co-op succeed.

Co-op staff and

producers interviewed

The student team focusing on the WMGC staff and

partners interviewed all of the staff and three key partners.

The co-op employs a manager, assistant manager (a position

now occupied by two people: one who manages finances, the

other manages operations), a warehouse coordinator/primary

driver, a CSA coordinator and two or three additional

warehouse packers and drivers.

The team that studied the grower-members chose to

interview the top 15 highest selling farmers in the co-op, who

account for more than 88 percent of annual sales. These

farmers sell a wide variety of products, ranging from fruits

and vegetables to meat and dairy products. Nearly two-thirds

of those interviewed reported that less than half of their total

sales go through the co-op.

Finally, the buyer team focused on wholesale customers

(health food and grocery stores), emerging institutional

buyers and CSA customers. Health food and grocery stores

comprise 73 percent of the co-op’s total sales. The top 10

wholesale buyers, all four institutions and all of the CSA

members were targeted for interviews or surveys.

From staff perspectives, the aggregation and distribution

capabilities of the WMGC have allowed smaller farmers to

reach more markets through wholesale distribution and with

processed products. Staff members frequently mentioned the

pride they felt in literally representing the fruits of the

farmers’ labor. They also said that being able to deliver highquality, fresh and locally grown items was a key element of

their work.

Partners were equally enthusiastic about the quality of the

produce and the ability of the WMGC to get local goods

into more regional and statewide markets. Newly formed

relationships have led to WMGC items being sold across

Montana through two multi-state distribution companies.

Strong ties to Mission Mountain Food Enterprise Center

have led to increased processing for fresh and frozen

products, most of which go to area schools and institutions.

Co-op yields variety of benefits

Grower-members discussed a variety of co-op membership

benefits, focusing on either finances or community. In
interviews, 13 of the 15 farmers saw the

distribution of goods as being the primary benefit

of the co-op, while seven farmers viewed the

benefits derived from aggregation of products as

being the primary advantage of the co-op. Being

part of a community of individuals doing similar

work was the highest community benefit,

mentioned by 10 farmers.

Farmers echoed the thoughts of staff when they

spoke about the role of the WMGC in the western

Montana food system. Specifically highlighted was

the function as aggregator, distributor and marketer

of local foods, with many growers saying that the

WMGC was “the face” of

local food.

Smaller scale farmers

noted that the aggregation

service of the co-op allows

them to remain competitive.

Growers also say the WMGC

plays a critical role in rebuilding a

more viable and sustainable food system

and serves as an example for other cooperatives.

The success of the co-op noted by staff and

growers comes to fruition in the opinions of

wholesale and CSA customers. Buyers consider the

WMGC a highly valued supplier, with nine of ten

interviewees saying the freshness of the products

was superior to similar products from other

distributors.

Another high point of membership is the direct

contact and relationships the buyers have with coop staff, including managers and drivers. Buyers

appreciate that the co-op stands behind its products

and guarantees customer satisfaction.

With so many small-scale growers offering

products during Montana’s short growing season,

buyers also appreciated the simplicity of making

only one phone call to access goods from multiple

farms. Institutional and CSA customers reported

similar thoughts, and they appreciated the product

quality, the relationships they had with WMGC

staff, and the ability to support multiple farmers

with ease.

Co-op expands

producers’ market reach

As food systems develop in parts of the country

that have lost the infrastructure to handle produce

from small and mid-scale farmers, the role of a

business such as WMGC is to fill that void.

Because the co-op picks up, aggregates, markets,

processes and sells

produce from multiple

farmers to many

consumers, it has

increased the reach and

potential of each individual

farm.

The cooperative structure

has allowed farmers to share in the

risk of re-developing a localized food system — a

process that does not happen quickly and requires

the buy-in from many different people along the

value chain. The cooperative structure may not

always be the easiest to operate, due to factors such

as competition, often low financial returns and a

struggle to maintain member participation. But the

Western Montana Growers Cooperative has shown

that — with perseverance and dedication — a

stronger, better local food system can emerge.

As the WMGC celebrates its first 10 years, it is

clear that Montana consumers are embracing a

model that supports their regional farm families

and will keep small agriculture viable into the

future. n

6 November/December 2013 / Rural Cooperatives

Through its many functions,

the co-op has increased the reach

and potential of each individual farm.
Agriculture Secretary

Tom Vilsack in October

2013 announced the

availability of $181

million to develop

commercial-scale biorefineries or

retrofit existing facilities with

appropriate technology to develop

advanced biofuels. Farmer and utility

cooperatives are among those eligible to

apply for the funds.

“This financing will expand the

number of commercial biorefineries in

operation in the U.S. that are

producing advanced biofuels from nonfood sources,” Vilsack said. “USDA's

Biorefinery Assistance Program is yet

another way USDA is helping to carry

out the Obama Administration’s ‘all-ofthe-above’ energy strategy to develop

every possible source of American-made

energy. But the benefits go beyond

reducing our dependence on foreign oil.

These biorefineries are also creating

lasting job opportunities in rural

America and are boosting the rural

economy as well.”

The Biorefinery Assistance Program

was created through the 2008 Farm Bill

and is administered by USDA Rural

Development. It provides loan

guarantees to viable commercial-scale

facilities to develop new and emerging

technologies for advanced biofuels. In

addition to farmer and electric co-ops,

other eligible entities include: Indian

USDAfunds advanced biofuels projects

The Green Crude Farm in Columbus, N.M., (top) is the world’s first commercial, demonstration algae-to-energy facility. The project was awarded

$104 million in federal funding, including a loan guarantee under USDA’s Biorefinery Assistance Program. Photo courtesy Sapphire Energy Inc. The

Freemont Community Digester in Freemont, Mich., (bottom) is the largest commercial-scale anaerobic digester in the United States. USDA

supported its development with a $12.8 million loan guarantee. Photo courtesy Novi Energy

continued on page 36
Cooperatives are

ubiquitous in rural

America. More than

2,000 farm co-ops

generate $235 billion in

annual sales. Nine hundred rural

electric co-ops provide power to 42

million people. And several hundred

more co-ops are bringing 21st century

telecommunications technologies to

rural America.

8 November/December 2013 / Rural Cooperatives

Overseas co-op formations help

reduce poverty,fight hunger

Editor’s note: Hazen is executive director of the Overseas

Cooperative Development Council in Washington, D.C.

Previously, he was CEO of the Washington-based National

Cooperative Business Association. Hazen speaks frequently at

national and international forums on the role of cooperatives in

community and economic development. In 2001, he was named

CEO Communicator of the Year by the Cooperative

Communicators Association.

By Paul Hazen
Rural Cooperatives / November/December 2013 9

Less well known is what U.S.

cooperatives are doing around the globe

to feed the hungry, reduce poverty and

foster democracy. U.S. cooperative

organizations have been involved in

economic development in poor

countries for more than 60 years. Their

work grew out of the conviction that,

having helped millions in this country,

cooperatives can be adapted to help

low-income people everywhere.

In the “trade-not-aid” tradition,

farmers in developing countries are

taught simple ways to increase

production and how to work together

to increase output and income. As part

of a group, they can negotiate higher

prices for products, lower costs for

inputs and better pursue opportunities

in the marketplace. Rural electric and

communications cooperatives bring

electricity and telecommunications

services to underserved areas of poor

countries, while credit unions make

loans to subsistence farmers and other

small entrepreneurs, allowing them to

grow their businesses.

Rather than simply offering

humanitarian aid, cooperative

development creates stable, selfsufficient businesses that improve lives.

Increased agricultural production and

income helps create wealth while it

reduces hunger, malnutrition and

poverty. It also offers impoverished

farmers prospects that they could not

achieve individually, such as helping

them to secure land rights.

Co-ops teach basics

of democracy

By working within a cooperative,

poor people in underdeveloped

countries also learn democratic

principles, including consensus

decision-making and electing leaders

through a one-member, one-vote

process. Becoming a member of a

cooperative is the first exposure many

people in the developing world have to

the concepts of democratic governance

and local control.

Over the years, international

Providing mosquito netting is one way U.S. cooperatives are helping to protect

people in Africa from the ravages of mosquito-borne malaria. Here, a nurse in

Uganda helps to properly hang the netting. Photo courtesy Overseas Cooperative

Development Council (OCDC). In Zambia (below), volunteers from Land O’ Lakes

(an OCDC member) are helping farmers improve their livestock management

practices. Photo courtesy Land O’ Lakes
cooperative development has produced

some impressive results. In the 1940s

and 1950s, cooperatives helped create

India’s White Revolution, making that

country the world’s largest milk

producer. They also played a key role in

helping Europe recover from World

War II, triggering the creation of

CARE, the international relief and

development organization.

More recently, cooperatives brought

electric service to 85 million people in

the Philippines and Bangladesh and

opened lucrative global coffee markets

to thousands of small producers in

Africa, Indonesia and Central America.

Organizing cooperatives is also one

of the most cost-effective methods of

achieving development goals. For a

relatively small investment, cooperatives

can transform whole communities by

stimulating economic growth and by

providing social supports.

In the fledgling Southeast Asian

country of East Timor, for example,

coffee cooperatives — assisted by the

National Cooperative Business

Association’s CLUSA International

Program — realized their success

depended on the health of their

members. So they set up a network of

clinics that filled a major gap in the

country’s health services.

Obama: goal is self sufficiency

President Barack Obama captured

the essence of cooperative development

in a speech prior to a 2012 G-8

Summit. “The whole purpose of

development is to create the conditions

where assistance is no longer needed,”

Obama said, “where people have the

dignity and the pride of being selfsufficient....”

Nine of the most active U.S.

organizations in international

cooperative development work together

as the Overseas Cooperative

Development Council (OCDC). They

are: ACDI-VOCA, Communications

Cooperative International, Cooperative

Resources International, Global

Communities, HealthPartners, Land

O’Lakes, NCBA CLUSA, National

Rural Electric Cooperative Association

International (NRECA International)

and the World Council of Credit

Unions.

These nine organizations currently

are involved in 200 development

projects in 70 countries. The projects

are funded through a variety of sources,

with the Foreign Agricultural Service of

10 November/December 2013 / Rural Cooperatives

U.S. co-ops are helping farmers in Madagascar improve their rice yields.
Rural Cooperatives / November/December 2013 11

the U.S. Department of Agriculture

being a leading source of funds via the

Food for Progress program.

Examples of OCDC members’ work

around the globe include:

• In Ethiopia, ACDI/VOCA is using

cooperatives to boost the incomes of

thousands of small farmers. Strategies

include building feed- and dairyprocessing plants and teaching farmers

competitive bidding.

• In Mongolia, Global Communities is

lowering farmers’ costs and raising

productivity by teaching cooperative

approaches. These efforts have led to

joint production of crops, shared labor

and lower cost access to veterinary

services.

• In Tanzania and Zambia, Land

O’Lakes is using cooperatives to

Cooperative development could play a major role in

meeting one of the looming global challenges of the 21st

Century. The growing world population — projected to

reach 9 billion by 2050 — will require at least a 70 percent

increase in food production at a time when farmland

expansion has largely been exhausted, productivity growth

has leveled off and crops are increasingly diverted for

energy and other non-food purposes.

Bottom-up approach needed

A growing list of national and international leaders

favors a shift to a more bottom-up

approach to development — one that

improves lives through wealth building,

rather than handouts. At the core of

this approach is the cooperative

business model, which can help reduce

hunger by both increasing agricultural

production and increasing income

among small farmers.

The financial challenges of 2008-

2009 has fueled an additional wave of

interest in cooperatives. Historically, in

any major economic downturn, people

turn to cooperation to solve economic

and social challenges. The United

Nations declared 2012 the International

Year of Cooperatives, and the U.N. Food

and Agriculture Organization made

cooperatives the theme of World Food

Day 2012.

There is also movement in the

direction of cooperatives in the Obama

Administration’s $3.5 billion Feed the

Future initiative. The first grant under

this initiative went to an NCBA CLUSA

project that is reducing malnutrition and hunger among

Senegal’s rural poor. Feed the Future is designed to help

countries grow enough food to feed their own people.

The gap between what we need to feed the world’s poor

and the food the global market can produce is massive and

growing. Over six decades, cooperative business has led

the fight against malnutrition and starvation in developing

countries. With increased attention from policy makers and

increased investment from donor agencies, cooperatives

are poised to play a major role in closing the global food

gap. n

Co-ops poised to help address world food challenge

In Sri Lanka, dairy production is improving thanks to help from U.S. cooperatives. Photo

courtesy Land O’ Lakes

continued on page 36
12 November/December 2013 / Rural Cooperatives

Urban farming co-op boosts struggling

neighborhood with local foods, new jobs

Growing a Cleveland Renaissance

By Stephen A. Thompson, Assistant Editor
Demand for local

food is strong in

Ohio, an agricultural

state that produces

more than 2,000

kinds of crops and is home to

numerous farmers markets, food

hubs and produce stands. But in

Cleveland, the local food movement

means more than fresh, healthy

produce. Local food production is at

the heart of a grassroots effort to

reclaim portions of the city suffering

from urban decay and

unemployment.

Spearheading the effort in one

struggling Cleveland neighborhood is

a workers’ cooperative that has built

a large-scale greenhouse that is

producing healthy food and creating

jobs in an area that desperately needs

both. Built on 11 acres, the Green

City Growers greenhouse officially

opened last Feb. 25. It has four acres

under roof, with 3.25 acres of

growing area.

Green City Growers employs 25

people who produce high-quality,

hydroponically grown leafy

vegetables. Major crops are Bibb

lettuce, green leaf lettuce, gourmet

lettuces and basil, which are sold to

restaurants and retailers year-round.

City slammed by

real estate bust

The real-estate bust of several

years ago hit Cleveland hard. The

city, already suffering economic

difficulties due to the closure of

many factories, saw a rash of

foreclosures that resulted in

thousands of vacant houses and

plummeting property values. The

U.S. Census Bureau estimates that

more than 8,000 houses have been

demolished in the greater Cleveland

metropolitan area.

Left behind after each demolition

are bare foundations and vacant lots

that are soon filled with weeds and

trash. These attract vermin and

further damage neighborhood

property values and quality of life.

Rural Cooperatives / November/December 2013 13

Constance Suggs tends organic lettuce, grown in nutrient-rich water, without soil.

Living Lettuce (below) is the co-op’s brand of premium, organic lettuce. Photos by

Jerry Mann, courtesy Green City Growers (CGC).
Residents are fighting the decay with a

growing “community gardening”

movement, in which neighbors are

turning abandoned properties into small

greenhouses and vegetable plots. Some

participants are even working to

overhaul local ordinances that

effectively prohibit residents from

raising chickens.

The idea for a worker-owned

greenhouse was first floated by

community leader Alayne Reitland. A

member of the board of the Cleveland

Foundation, an organization dedicated

to the improvement of local

communities, Reitland took the idea to

the leadership of Evergreen

Cooperatives. Evergreen is a project

that promotes worker-owned businesses

as a means of furthering economic

development. Evergreen already had

successfully started a worker-owned

laundry and a workers’ cooperative that

installs solar panels (see Nov.-Dec. 2012

Rural Cooperatives).

Cleveland Foundation

funds feasibility study

Evergreen decided to forge ahead

with a feasibility study for an urban

farming project, funded by a grant from

the Cleveland Foundation. To conduct

the study, the co-op hired Mary

Donnell, a business consultant with

many years of experience in the fresh

produce industry. Completed in 2010,

the study found that the concept had

promise.

The idea simmered for a year, says

Donnell. “When they decided to go

forward with the idea, they asked me to

be the entrepreneur to build it out. I

moved to Cleveland from Bowling

Green, Ohio, in the spring of 2010.”

The neighborhood chosen for the

project certainly needs help. It has a 57-

percent poverty rate and a median

income of less than $18,500. Even

though vacant land is plentiful in the

neighborhood, finding a suitable

building site was not easy.

“We needed a big site, and it needed

to be assembled,” says Donnell. “Most

often in cities, there aren’t 11 acres

already ‘put together.’” Much of the

land for the site chosen, she says, was

foreclosed property owned by banks.

Some of the land was owned by the city,

while other portions were privately owned.

“With any big development project

— especially in the city — there’s a lot

of moving parts,” Donnell says. “Plus,

there’s the design and site work

considerations. Those all have to be

done almost concurrently so that you’re

ready to start the project. We started

into development phase, land assembly,

financing, planning, environmental

assessment, all at that time.”

With a little help

from some friends

Evergreen didn’t blaze the trail

alone. Kent State University’s Ohio

Employee Ownership Center (OEOC),

established in 1987, provides technical

assistance to worker ownership projects

and had helped with the previous

Evergreen co-op projects. Roy Messing,

OEOC’s interim director, helped pull it

all together.

“Our motivation is to provide

employee ownership,” he says. “We’ve

done a lot of work with conversions

[from private to worker ownership], but

this was a chance to launch a project

14 November/December 2013 / Rural Cooperatives

“You have to a coalition of people

who believe in the project and can bring different skills to it.”

build

The Green City Growers’ greenhouse operation represents an investment of about $17 million. It is currently producing

Bibb lettuce, green leaf lettuce, gourmet lettuces and basil. Photos courtesy Green City Growers

continued on page 37
The Ohio Employee Ownership Center (OEOC), a nonprofit

program based at Kent State University, was established in 1987

to provide outreach and technical assistance to Ohio employees

and business owners interested in employee ownership. OEOC

provides training to existing employee-owned firms and helps

establish startup employee-owned ventures.

Startup projects, such as Green City Growers Cooperative, are

much less numerous than are businesses converting from private

to employee ownership. The Center has participated in more

than 100 such conversions since its founding in 1987, according

to Roy Messing, its interim director. “Our founder, John Logue,

was looking at Employee Stock Ownership Plans as a way to

extend the lives of steel and other companies that were having a

rough time in the late 1980s,” he says.

According to Messing, the majority of conversion projects

have been Employee Stock Ownership Plans, or ESOPs. In an

ESOP, shares in the company are given to employees as part of

their compensation. The shares are held in trust until an

employee retires or leaves the company, at which point the

shares are sold.

In effect, ESOPs function as retirement plans and are

governed by the Federal Employee Retirement Income Security

Act (ERISA). While ESOPs may be issued by a company in which

the original owners still hold the majority of shares, in a “100-

percent ESOP” the shares also provide a means by which

ownership can be completely transferred to employees.

ESOPs offer tax advantages

ESOPs can provide significant tax benefits to the original

owners. “If you sell at least 30 percent of your shares to your

employees, you can defer capital gains under Section 1032, so

that’s a benefit for the owner,” says Messing.

By making a 100-percent ESOP an S Corporation, all income

tax can be avoided until shareholders receive cash from the

trust, usually in retirement, according to a pre-determined

formula. S Corporations (or S Corps) are corporations that —

instead of paying federal income tax — pass corporate income

tax liability through to their shareholders.

Shareholders of an S Corp report their portions of income and

losses on their personal tax returns and are taxed at their

individual rates. That means S Corps shareholders avoid double

taxation on the income from their shares.

“If it’s a 100-percent S Corp ESOP, 100 percent of the shares

are held by the ESOP itself and the S Corp, so all the earnings

flow to the trust,” says Messing. “Therefore, there’s no income

tax. We’re seeing a recent trend where many businesses are

transitioning to 100 percent ESOP and taking that tax benefit,

[thereby] having a big windfall in the short term.” (Editor’s note:

An article in the January-February 2009 issue of Rural

Cooperatives describes how a loan guarantee from USDA Rural

Development was used to finance a 100-percent employeeowned conversion of Doucette Industries Inc., which designs

heating and cooling systems. Past issue of Rural Cooperatives

magazines can be accessed at: www.rurdev.usda.gov/

BCP_Coop_RurCoopMag.html).

Tax benefits provide a powerful incentive to owners to go the

ESOP route, Messing says. “There’s not a great deal of tax

incentives for a co-op, because you have 8 1⁄2 months to

distribute the patronage.” As a result, there are about 300

traditional worker cooperatives in the United States as compared

to an estimated 10,000-to-11,000 ESOP companies, says Messing,

“With the ESOP, you can still establish bylaws that are very

cooperative in nature, so you can still have a democratically run

business.”

Co-op structure best for small companies

Despite the attractions of an ESOP, Messing believes there is

an important place in rural development for the worker

cooperative. “If you don’t have 20 employees or more, you can’t

justify an ESOP,” he says. “So smaller businesses go the more

traditional employee-co-op route. I think there are going to be

more opportunities for worker co-ops in rural America, where

you’ve got these small towns and companies with 10 or 15

workers, the owner is going to retire and there’s no son or

daughter to transition it to. So that’s something we’re going to

continue to highlight.”

Motivations tend to differ between startups and conversions,

says Messing. “With startups, there’s a mission involved,” he

says. “With conversions, retiring owners want to continue the

operation (once they are no longer owners). It’s an interesting

blend. Some see their business as a legacy and they want their

employees to continue that legacy. With others, they realize their

employees helped get them where they are and they want to

benefit them.

“People ask what type of company is a good candidate for

conversion to employee ownership,” Messing says. “And I say

it’s a profitable company, because you have to take out debt to

buy out the equity of the owner who is departing. We see cases

where people want to transition to an ESOP or a workers co-op,

and the numbers don’t work. In those cases, we advise them not

to move forward.”

Possible stumbling blocks are numerous. “They may not have

the management capability, or the owner wants to step back

from a management role,” says Messing. “Then they have to

bring in the right people or train the right people to fill that

management void. Each case is different.”

—Stephen A. Thompson

ESOPs, worker co-ops each have

Rural Cooperatives / November/December 2013 15

advantages
16 November/December 2013 / Rural Cooperatives

By David Cook

Editor’s note: Cook is an attorney with the

law firm of Autry, Horton & Cole, LLP in

Atlanta, Ga., who practices in the area of

cooperative law and taxation. He previously

worked as an auditor of cooperatives. He

regularly contributes to a cooperative law

blog at: www.ahclaw.com/cooperative.

In recognition of the

remarkable assistance

they provide to rural

communities and their

unique attributes,

cooperatives receive various benefits

under federal, state and local laws, such

as tax exemption and deductions. One

of the key attributes cited in support of

these benefits is the return of earnings,

or margins, to members and patrons on

a patronage basis. Cooperatives

generally accomplish the return of

earnings and margins through

patronage dividends (also called

patronage refunds), per-unit retains, or

retirement of capital credits.

This concept is best illustrated by

contrasting cooperatives with for-profit

companies. Unlike for-profit

companies, which normally return

equity (or accumulated earnings) in

proportion to their owners’ capital

investment, cooperatives return equity

in proportion to the amount of business

conducted with or for each member or

patron.

Courts and the Internal Revenue

Service (IRS) have reasoned that return

of equity on the basis of patronage is

consistent with the idea that

cooperatives are mere conduits or

agents of their members and patrons.

Accordingly, unlike for-profit

companies, cooperatives should not pay

taxes on patronage earnings.

The obligation of cooperatives to

return equity on a patronage basis arises

from a variety of sources, such as state

laws, federal tax laws, bylaws and

contracts with members and patrons.

Whatever the source, cooperatives

generally have a legal obligation to

return their earnings on a patronage

basis when they are financially capable.

This article addresses the importance of

returning earnings to members and

patrons within a reasonable time. It also

discusses the risks associated with

failure (or a perceived failure) to do so.

Environment of increased risk

In general, cooperative members and

patrons recognize the tremendous

benefits provided by cooperatives.

Cooperatives are owned and effectively

controlled by members, who also are

their customers. Thus, it should come

as no surprise that a huge majority of

patrons and members are deeply

dedicated to their cooperative and

satisfied with the services it provides.

At the same time, cooperatives have

long faced the risk that members and

patrons will allege mismanagement of

the equity of members and patrons

(“member equity”). Such allegations of

mismanagement have involved, for

example, the timeliness of returning

member equity, discounting member

equity, setting off member equity with

outstanding debts of members and

patrons, and discrimination in the

return of member equity.

In recent years, some cooperatives

have faced increased complaints and

litigation, including class action

lawsuits, arising from alleged

mismanagement of member equity. For

instance, plaintiffs in these lawsuits have

alleged:

• A cooperative failed to retire member

equity despite having the financial

wherewithal to do so;

Legal Corner

Co-ops should periodically evaluate

their member equity practices

USDA graphic by Stephen A. Thompson
Rural Cooperatives / November/December 2013 17

• A cooperative violated its own

member equity policy;

• A cooperative violated a state statute

concerning return of member equity;

• A cooperative’s bylaws violated public

policy because they effectively resulted in forfeiture of member equity;

• A cooperative had no system in place

to routinely return member equity;

• A cooperative did not notify its

members and patrons of their

member equity allocations;

• A cooperative’s practices

discriminated against classes of

members (e.g., former members) in

favor of other members;

• A cooperative maintained an excessive

amount of member equity or

unusually high equity-to-asset ratio,

suggesting that it was not properly

and timely returning member equity;

• A cooperative improperly discounted

member equity and retained the

discount as permanent equity; and

• A cooperative’s board of directors had

concealed the amount of each

member’s equity by preventing access

to the cooperative’s books and records

and denying members access to board

meetings.

These are serious allegations against

any cooperative. But given the large

amount of member equity held by some

cooperatives, they can have a significant

impact on a cooperative’s finances and

member relations. Damages awarded in

class action lawsuits involving member

equity can be substantial, so the risk of

such complaints should be evaluated

and mitigated.

What are the risk factors?

While most cooperatives will never

face such a complaint, all cooperatives

should evaluate their member equity

practices to limit their risk — and to

promote goodwill with patrons and

members. As with any risk analysis, the

starting point is to identify and quantify

the risk factors. The following are

potential risk factors to consider:

• Magnitude of member equity: A

higher balance of member equity in

comparison to debt indicates higher

risk.

• Age of member equity and length of

rotation periods: The longer a

cooperative retains member equity,

the greater the risk.

• Turnover and contested elections:

Intense election contests, and a high

turnover of directors and

management, generally indicate

higher risk.

• Member or patron satisfaction: As

members and patrons feel less

satisfied with their cooperative, the

risk level increases.

• Cost/benefit comparison: When

customers perceive less benefit in

relation to cooperatives’ fees, the risk

level increases.

• Competitor pricing comparison:

When customers perceive the

cooperative’s costs and fees as greater

than the fees of local competitors, risk

increases.

• Economic conditions of the

community: When the economy of

the cooperative’s community declines,

risk increases.

• Media exposure: Negative media

exposure can increase risk.

After evaluating these and other

factors, cooperatives should look at

their current policies and practices to

mitigate their risk.

Tips for effective management

of member equity

There are several ways to reduce the

risk of complaints concerning member

equity management. The first, and most

important, method is to document and

adhere to a rational member equity

management plan. Such plans are

normally adopted by the cooperative’s

board of directors, board of trustees or

similar board through a bylaw provision

or board policy.

Second, cooperatives should appoint

someone, preferably from the board or

management, to oversee compliance

with the plan. Since some board

members may not be as familiar with

cooperative principles, they may not

understand the importance of following

a member equity management plan.

The appointed person should become

familiar with the plan and periodically

review the cooperative’s practices to

verify the cooperative’s adherence to the

plan.

Third, the cooperative’s financial

officer or accountant should specifically

dedicate a portion of his or her time to

evaluating the cooperative’s ability to

return member equity and explaining

such evaluation to the board. Any

decision to return member equity will

necessarily impact the cooperative’s

financial situation. As a result, a

cooperative’s board should consult with

its financial advisors about the propriety

of any decision concerning member

equity.

Fourth, cooperatives should educate

their board members, management and

staff, along with their members and

patrons, about the role of member

equity. Cooperative boards and

management need to understand the

importance of member equity

management, and the associated legal

requirements and restrictions.

Just as important, cooperatives

should educate their members and

patrons about member equity and its

eventual return. It not only serves to

reduce the risk of unfounded

complaints, but it also can be used to

illustrate the unique benefits of being a

cooperative member or patron —

especially in contrast to for-profit

companies.

Finally, there is no better way to

educate members than by sending them

a check in return of member equity,

along with an explanation of why they

are receiving the check.

Cooperatives provide valuable

benefits to their members and patrons

in a manner that justifies special

benefits under the law. Although most

cooperatives will never face complaints

over member equity mismanagement, it

would benefit any cooperative to

evaluate its current policies and

practices to ensure their legal

compliance and — just as importantly

— promote goodwill with members and

patrons. n
By Jay Lux

Vice President of Talent Management

FCC Services

Editor’s note: This is the third and final

in a series of articles provided by FCC

Services.

The best team wins.

We all know this. We

also know this doesn’t

happen by accident.

Having a plan and

structure for selecting and developing

the right talent, moving it to the right

place at the right time, and understanding key areas of engagement to

retain and motivate that talent will set

your team apart from the competition.

Talent management strategy not only

makes sense, but research also supports

its effectiveness.

In one recent study, conducted by

Right Management group, 49 percent

of 628 senior managers and human

resource professionals surveyed cited

talent management as their company’s

top priority. However, the study also

showed that only 12 percent of major

North American organizations have a

fully implemented talent management

strategy.

Significant research and best-practice

literature cite a few key components in

the strategy process:

• Selection and recruitment;

• Succession management;

• Employee engagement.

Selection and recruitment

Successful talent management

strategy begins with selecting the right

person for each position. Hiring people

can be risky, but hiring the right person

based on data — not intuition — can

minimize risks and increase the

likelihood of success.

Every person has talents and

abilities. The challenge is to fit those

talents to the right position. For

example, some people are naturally

more introverted and some are better

able to interact with others. Some

people are naturally good at working

with details while some are less inclined

to excel at those kinds of tasks.

Effective selection begins with

identifying the appropriate skills for the

role. Clarifying with great specificity

the skills needed for success will allow

you to better assess potential

candidates. Measuring candidates’ skills

and comparing them to your needs

increases the chances of success for all

involved.

Placing an introverted individual into

a job that requires considerable

interaction with others will surely result

in frustration and, ultimately, hinder

performance. There are, of course, no

absolutes (even some of the most

introverted people can interact

effectively with others at times). But

people do have personality tendencies

which help show where people fit best

and where they may struggle.

Maximizing the fit between an

individual and the role will enhance role

satisfaction and performance on the job.

Technology can help

How do you drive this

understanding? Using a robust

assessment process for hiring the right

people goes a long way to building the

best team. Use of statistically reliable

selection instruments is one key.

These tools used to be expensive and

cumbersome. But with today’s

technology, most assessments are

completed online with ease, speed and

little expense. And they also add

measurability to what is otherwise an

intuitive process.

Statistical reliability is critically

important to the effectiveness and

quality of whatever assessment you

choose to use. FCC Services uses a

variety of statistically validated selection

instruments.

The assessment instruments listed

below meet the strictest quality

standards and exceed the American

Psychological Association’s

recommendations on reliability. It is

important to match the tool with the

objective of the selection process.

The Predictive Index (PI) — This

Management Tip

Talent Management: It goes

way beyond recruiting

18 November/December 2013 / Rural Cooperatives
Rural Cooperatives / November/December 2013 19

measures individuals for key aspects of

personality: Dominance, extroversion,

patience and formality. In addition,

clients complete the PI Performance

Requirement Options, an instrument to

identify the levels of each trait that

would most effectively drive

performance in a given role.

The Kenexa Structured Interview

— Kenexa brings years of selection

experience to its formalized interview

process to help uncover key personality

traits that motivate the candidate.

These key motivators are fundamental

aspects of individual behaviors and

performance.

The Hogan Lead — The Hogan

has multiple instruments to give the

most reliable data for selection, as well

as development of potential employees:

personality style and motives/

preferences/interests.

The Watson Glaser Critical

Thinking Assessment — This

measures applicants on key aspects of

critical thinking style — recognition of

assumptions, evaluation of arguments,

and deductive reasoning. In addition to

individual personality styles and

performance in an executive role,

critical thinking and cognitive skills

rank among the most important talents.

The Emotional Competence

Inventory (EQi) — Emotional

Intelligence is one aspect of how people

conduct themselves and is consistently

related to top performance. The EQi is

an instrument that measures levels of

how people interact with others, which

is a driver of effective performance in

the workplace.

In addition to solid assessment tools,

a consistent approach to interviewing

candidates adds to the reliability of your

selection process.

Behavioral interviewing

FCC Services recommends an

approach referred to as “behavioral

interviewing.” The premise of this

method is that the best predictor of

future performance is past performance

in similar circumstances.

In this approach, interview questions

are designed so that the candidates must

relate specific examples of how they

have previously used the critical

competencies or skills required in a job.

For example, if a job requires good

organizational skills, you would not

simply ask, “Are you an organized

person?” but rather, “Tell me about a

large project where you were

responsible for organizing and

managing all the details.”

With behavioral interviewing, the

amount of information and insight

garnered from each question is far

greater than traditional interview

questions.

Succession management

Once you’ve hired the right people,

moving them into the right positions at

the right times throughout their career

is critical. Understanding where your

talent is on their development path is

an indispensable strategic business

objective.

A regular review of the organization’s

talent is key to achieving results today

and into the future. A structured

tracking system for human capital is a

competitive advantage that will keep

you ahead of the industry.

A sound succession management

strategy tied to overall business

objectives brings a structured approach

to your organization to ensure

maximization of human resources. It

strives to retain and develop intellectual

capital and knowledge for the future

through:

• Achieving long-term business results;

• Growing internal capacity – skills,

leadership;

• Driving individual developmental

activities;

• Identifying positions and/or

employees at risk;

• Maximizing diversity;

• Identifying areas where external

selection may be the most

appropriate.

A well-proven successionmanagement program generally follows

a few key steps:

Begin with a review of organization strategy — It is critically

important that the strategic needs of the

organization drive the talent and skills

that support that strategy. Succession

management activities that are not fully

aligned with the business strategy may

result in hiring or developing for skills

that are not supportive of the strategy

or, worse yet, oppositional to it.

Identify key roles critical to that

strategy — Once the strategy has been

clearly articulated and discussed, it is

important to evaluate the key roles that

are needed to support the business and

determine if any of those positions (or

people in them) are at risk of changing

(i.e., retirement).

Define the competencies (skills)

needed to perform effectively in the

key roles — A clear agreement on

exactly what competencies (skills) define

“talent” in your organization is

essential. This can be more challenging

than it sounds. For example, clearly

understanding and agreeing on the

skills that managers must have beyond

technical know-how in their specific

areas may require lengthy discussions to

gain consensus from all involved.

Leaders observe and evaluate

individual proficiency with the

competencies — Once the

competencies for success have been

defined, leaders must take the time to

observe individuals to see how they

perform relative to those competencies

(not just their current position). The

task then is to evaluate that

performance and place a value on it.

Key leaders discuss the

evaluations (“talent review”) — The

talent review session is typically

conducted twice a year. In these

sessions, leaders come prepared to

discuss what they have observed. This is

generally when some rating or

evaluation process takes place (i.e., does

continued on page 38
20 November/December 2013 / Rural Cooperatives

By K. Charles Ling, Ag Economist

USDA Rural Development

e-mail: Charles.ling@wdc.usda.gov

Editor’s note: This article focuses on the

core points of the author’s presentation,

“Farmer Cooperatives and Value Creation:

the Example of Dairy Farmers in the

United States,” delivered at the 5th

meeting of the Organization for Economic

Cooperation and Development (OECD)

Food Chain Analysis Network, Oct. 30-31

in Paris. It is also a concise summary of a

recently completed study into the nature of

the cooperative, as reported in two recent

research reports available from USDA

Rural Development (RR 221 and 224) and

a series of nine articles that have appeared

in Rural Cooperatives magazine.

This summary addresses four salient

points:

1. Economic structure of cooperatives —

what are cooperatives?

2. Market performance of cooperatives

— what do cooperatives do?

3. Transaction governance roles of

cooperatives — how do cooperatives

interact with other market

participants?

4. Variations on the cooperative business

model.

Economic structure of cooperatives — what are co-ops?

In his 1942 book, Economic Theory of

Cooperation: Economic Structure of

Cooperative Organizations, Ivan V.

Emelianoff said that for economic

analysis of cooperatives, the economic

structure of cooperative organizations

should be clearly defined, and the

definition should be free from the

encumbrance of sociological, legal,

technical, social-philosophical and

ethical considerations.

His definition: “Cooperative

organizations represent the aggregates

of economic units.”

“Aggregate” is commonly defined as:

“Any total or whole considered with

reference to its constituent parts; an

assemblage or group of distinct

particulars massed together.”

As defined by Emelianoff: “An

economic unit, or economic individual,

is an economic body admittedly

complete and sufficiently integrated for

individual existence and independent (in

conditions of an exchange economy —

interdependent) economic functioning.”

This economic definition of

cooperatives seems to be simple, yet it

is very robust. What naturally flows

from this definition are what people

often call “cooperative principles,” such

as: members own, members control,

members use, and members benefit

from the cooperative.

Following Emelianoff’s definition,

these are the characteristics of

cooperatives:

• A cooperative is an agency owned and

controlled by members and through

which they conduct their business.

• Each member-farm fully retains its

economic individuality and

independence.

• The board of directors is elected from

among member-farmers.

• Proportionality and service at-cost are

two basic working principles.

• Members provide advances (i.e.,

equity capital) for financing the

cooperative.

• Patronage refunds are returned to

members who have been underpaid or

overcharged.

• Dividend on capital, if any, is interest

payment for using members’ capital.

• The cooperative is neither a

horizontal integration of its members

nor a vertical integration between the

cooperative and its members. “It is a

third mode of organizing coordination.” (Shaffer)

Market performance of

cooperatives — what do

cooperatives do?

The first academic paper on the

theory of cooperation, “Economic

Philosophy of Co-operation,” by Edwin

G. Nourse, was published in 1922 in

the American Economic Review. His ideas

still have relevance to the reality of

market performance of cooperatives

today.

Several examples from the paper

illustrate how farmers organized in

agricultural cooperatives can jointly

perform certain market functions

efficiently — functions which usually

cannot be satisfactorily carried out

alone by individual farmers. These

include:

• Cooperation to gain market access for

producers who otherwise do not have

a market outlet.

• Local and regional coordination of

cooperatives to compete with private

competitors that have grown to great

sizes.

• Formation of region-wide associations of

Essential economic roles

of farmer co-ops
Rural Cooperatives / November/December 2013 21

growers, often in horticultural

regions, to assemble, process and

distribute their products.

These examples show how

cooperatives are organized and grow to

enable farmers to exercise countervailing power and compete. Although

Nourse did not directly use the term

“countervailing power” (the term was

coined later, by Galbraith in 1956), he

did state that the keynote of the

philosophy of cooperation was for

agriculture to have a type of

organization of the size that has an

effective bargaining position in dealing

with commercial organizations.

Another term in the cooperative

lexicon that is attributable to Nourse is

“competitive yardstick,” following his

“brief remark” in 1945, in which he said

the place for the agricultural

cooperative in the nation’s business “is

primarily that of ‘pilot plant’ and

‘yardstick’ operation. Its objective is not

to supersede other forms of business,

but to see that they are kept truly

competitive.”

This is the summary of Nourse’s

ideas regarding the roles cooperatives

play in the marketplace:

• Cooperatives are organized for

efficiently carrying out specific

business functions.

• Cooperatives can be of any size and

geographical scope that allows them

to function efficiently in the

marketplace.

• Cooperatives afford farmers the

organizational sizes for exercising

countervailing power.

• Cooperatives are pro-market; they let

the market supply-and-demand price

be the guidance for producers.

• Cooperatives are a means for farmers

to promote and maintain competition

― as the competitive yardstick of

efficient operations.

• In those fields where the market has

become truly competitive and farmers

can be well served by other firms,

cooperatives may want to cede the

field and assume only a stand-by

position (to preserve members’

capital, time and efforts for use on the

farm), while maintaining the legal

institutions and organizational

capacity to step in if there is a relapse

of market inadequacy.

[Author’s note: Whether the market could

ever be truly competitive is debatable.]

Transaction governance

roles of cooperatives — how

do cooperatives interact with

other market participants?

Cooperatives interact with other

market participants through their roles

in transaction governance, or “in

aligning incentives and crafting

Figure 1 — A simple contractual schema

Adapted from Williamson, 2005, Figure 1: Simple Contractual Schema.

credible contracting

administrative

k = 0

k > 0

D (Hierarchy)

B (Unrelieved hazard)

C (Hybrid)

A (Unassisted market)

s > 0

s = 0

“Each member farm fully retains its economic

individuality and independence,” according to

the co-op attributes outlined by economist

Ivan V. Emelianoff. Seen here is the Hepler

Homestead dairy farm, near Pitman, Pa., a

member of the Dairylea Cooperative. Photo by

Mitch Wojnarowicz, courtesy Dairylea
22 November/December 2013 / Rural Cooperatives

governance structures that are better

attuned to their exchange needs.”

(Williamson, 2002, p. 172).

In marketing milk and milk products

(for example), farmers and their

cooperatives may engage in the

following transaction scenarios.

Scenario I. In a subsistence

agricultural economy, farm production

in excess of family consumption may be

sold off farm. There could be many

sellers and buyers. The transactions are

incidental to subsistence farming, do

not require specific assets, and primarily

belong to a bygone era.

Scenario II. Commercial milk

production requires capital investment

in specialized assets that cannot be

easily employed for alternative uses.

Asset specificity, product perishability

and market volatility cause uncertainty

and pose hazards to the investment of

dairy farmers. They are vulnerable

when dealing with a small number of

milk buyers (processors). They may

organize cooperatives to gain

countervailing power. However,

contracts that spell out the terms of

trade as legal rules may not relieve the

hazard. It is impossible to foresee and

encompass all contingencies in a

contract due to human limitations;

relying on courts for relief is timeconsuming and costly.

Scenario III. Cooperatives are

organizations of farmers and have

comparative advantages of working

closely with members for assembling

milk, providing field services and

performing farm-related functions.

Many processors have chosen to rely on

cooperatives for milk supplies that are

tailored to their requirements for

volume, quality, composition and/or

delivery schedule. Under such an

arrangement, the transactions are

assisted with what is called credible

contracting and supported by inter-firm

contractual safeguards. Instead of a set

of legal rules with court enforcement,

the contract here is a framework or a

set of guidelines for interactions

between the firms. Discrepancies in

performance are resolved through

amicable consultation or negotiation or

by arbitration.

Scenario IV. In addition to selling

members’ milk, it may be necessary for

a dairy cooperative to forward-integrate

into processing dairy products to

balance milk supply or to generate

higher margins from the market for

members’ milk. These processing

enterprises are under the cooperative’s

hierarchical administrative control .

The roles of a cooperative in the

above scenarios fit with the analysis of

the roles of a firm in transaction

governance that constitute the core of

transaction-cost economics (Williamson,

2010, 2007, 2005 and 2002). The four

scenarios correspond to the four

transaction modes in table 1 that is

adapted from Williamson’s Simple

Contractual Schema (figure 1).

The transaction governance

structure Mode A is the unassisted

market. The governance structure

Mode B is the market where asset

specificity exposes transacting parties to

uncertainties and, without safeguards,

to unrelieved contractual hazards to

their investments. Mode C is where the

market is assisted with credible

contracting. All successive production

stages are integrated under hierarchical

control in transaction governance Mode

D.

The attributes of a market mode are

high-incentive intensity, little

administrative control, and a legal-rules

contract regime. On the other hand,

attributes of hierarchy are low-incentive

intensity (where pricing for the

successive stages is at cost-plus),

considerable administrative control (by

Table 1 — Transaction governance modes and attributes

Transaction

governance mode

A: Unassisted market

B: Unrelieved hazard

C: Hybrid

(Credible contracting)

D: Hierarchy

(Administrative)

Asset

specificity

(k)

0

>

>

>

Investment hazard

safeguard

(s)

0

0

>

>

Incentive

intensity

High

<

<

Low

(pricing for

successive stages is

cost plus)

Administrative

control

Little

>

>

Considerable

(by fiat)

Contract

law regime

Competitive norm

Legal rules contract

regime

Credible contracting

Internal implicit

contract law

(Forbearance)

Source: Adapted from Williamson, 2005, Figure 1: Simple Contractual Schema.

Note: “>” indicates a mode having a higher intensity of the particular attribute than the mode above it.

“<” indicates a mode having a lower intensity of the particular attribute than the mode above it.
Rural Cooperatives / November/December 2013 23

Table 2 — Variations on the cooperative business model

Types of cooperatives

Dairy cooperatives1

Agricultural marketing

cooperatives

New-generation

cooperatives

Purchasing

cooperatives2

Affordable Care Act

CO-OPs3

Multi-stakeholder

cooperatives4

Farm production

cooperatives

Cooperatives with

non-patronage

members

Structure

Aggregates of

economic units

Aggregates of

economic units

Aggregates of

economic units

Aggregates of

economic units

Aggregates of

economic units (health

insurance subscribers)

Aggregates of

economic units

Aggregates of

economic units that are

not independent in

production operation

Mixture of patron and

non-patron members

Organization

Centralized member

organizations

Mostly centralized

member organizations;

some are federated

Centralized member

organizations

Local (retail) cooperatives are centralized;

many federated with

other locals; federated

cooperatives may have

direct members

Organized by sponsors;

then become local (inState) centralized

member organizations

Centralized member

organization

Centralized member

organization

Defined by state laws

Governance

Member-governed

Member-governed

Member-governed

Member-governed

Initially formation

board; then membergoverned

Member-governed

Member-governed

Defined by state laws

Source of equity

Members

Members

Members; tied to

delivery rights

Members

Sponsors and

supporters;

accumulated surpluses

Members

Members

Defined by state law

Operation

Members' exclusive

marketing agent―unique

economics

Unique economics if

exclusive marketing

agent; otherwise, like

other firms

Business volume defined

by delivery rights

Sourcing supplies or

services for sale to

members and patrons

Operations are the same

as other insurance

issuers in the relevant

markets; must meet COOP Program standards

and requirements

A framework for multiparty, multi-stage

credible contracting

among members

A vertical integration

between members and

the cooperative in

production

Defined by state laws;

most likely memberpatrons’ business

fiat) and forbearance is the implicit

contract law of internal organization

(the parties must resolve their

differences internally).

Cooperatives are transaction

governance structures, as are noncooperative firms. Depending on the

lines of business, transactions can occur

under all possible governance modes.

Cooperatives adapt to various

governance modes for economizing on

the transaction cost.

For entering into credible

contractual relationships with buyers,

the cooperative’s functions of providing

market access and exercising

countervailing power put its members,

collectively through the cooperative, on

a relatively more equal footing with

buyers. This should make credible

contractual relationships between sellers

and buyers more attainable and stable.

Furthermore, as its members’

collective marketing agency, the

cooperative serves as a single

transaction entity for credible

contracting with buyers. Therefore, it

introduces order and eliminates

conflicts among members who would

otherwise be competing individually for

customers. All these should contribute

to lower the transaction cost.

1Separately listed and used as the standard bearers of traditional cooperative business model.

2Include farm supply cooperatives, utility cooperatives, service cooperatives, consumer cooperatives, credit unions, etc.

3Qualified Nonprofit Health Insurance Issuers under the Consumer Operated and Oriented Plan (CO-OP) Program.

4Defined as cooperatives having, for example, farmers, final customers and intermediaries in the supply chain as members.

continued on page 38
24 November/December 2013 / Rural Cooperatives

USDA helping utility

co-ops expand services

Agriculture Secretary Tom Vilsack in

October announced funding for rural

electric utility system improvements

that will benefit residential and business

customers in 23 states. The projects

include more than $14.3 million to

implement smart grid technology and

nearly $11 million to improve electric

service for Native Americans.

The $960 million in USDA loan

guarantees will help build 3,587 miles

of line that benefit about 17,000 rural

residential and business customers. The

Obama Administration has invested

$152 million in smart grid technologies

nationwide during 2013.

John Padalino, administrator of

USDA’s Rural Utilities Service, made

the announcement on the Secretary’s

behalf while addressing a regional

meeting of the National Rural Electric

Cooperative Association (NRECA) in

San Antonio, Texas. “These investments

will ensure that rural electric infrastructure will continue to meet the

electricity needs of rural residents,

farmers, and commercial and industrial

customers,” Padalino said. “This

funding is part of the Obama

Administration’s vision for a new rural

energy economy.”

Callaway Electric Cooperative in

Missouri, which serves 13,000

customers, received a $9.3 million loan

guarantee. The funds will be used to

build 40 miles of distribution line and

make other system improvements. The

loan includes $1.9 million for smartgrid projects.

In September, USDA announced

funding to improve service for about

7,000 additional rural customers in

seven states. The more than $136

million in USDA loan guarantees will

help build more than 2,200 miles of

electric lines, fund more than $5 million

in smart-grid development and provide

nearly $3 million to improve electric

service for Native Americans.

In Minnesota, USDA will finance

nearly $16 million in loan guarantees to

build more than 200 miles of electric

line and finance more than $1.7 million

in smart-grid technologies for two

projects. North Itasca Electric Co-op

will receive nearly $6 million, and Mille

Lacs Energy Cooperative will get nearly

$10 million to keep electric power

reliable and affordable for rural

customers.

For a full list of fund recipients, visit

the newsroom at: www.rurdev.usda.gov.

Poll shows strong

preference for co-ops

About 74 percent of surveyed

consumers in Minnesota and Wisconsin

prefer doing business with a cooperative

over an investor-owned businesses,

according to the results of a survey

conducted by St. Norbert College’s (De

Pere, Wis.) Strategic Research Institute.

The survey was commissioned by the

Cooperative Network, which provides

government relations, education,

marketing and technical services for its

600 member co-ops in the two states.

The survey results were announced to

help celebrate National Cooperative

Month during October.

The study, funded by CHS Inc.,

asked more than 400 people in the two

states about their opinions of, and use

of, cooperatives. The pollsters

contrasted results to a comparable study

performed in 2007 (prior to the

recession).

This year’s results (2013) revealed

that nearly three of every four (74

percent) respondents who indicated

they were members of a cooperative

said they were more likely to choose

cooperatives over other businesses,

based on their past experiences. That is

Newsline

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

Co-op developments, coast to coast

A crew from Callaway Electric Cooperative (CEC) works on power lines in its rural Missouri

service territory. Photo courtesy CEC
Rural Cooperatives / November/December 2013 25

up from 71 percent in 2007.

Other notable findings included:

• 47 percent of people surveyed had at

least one member of their family who

belonged to a co-op, compared to 36

percent in 2007.

• 69 percent of people who ran a

business within their home were also

members of a co-op, statistically

similar to 2007 results.

• 18 percent of people associated the

words “teamwork/collaboration” with

“co-op” or “cooperative” — a

correlation that did not appear in the

2007 study.

“Minnesota and Wisconsin have a

rich cooperative history and are home

to nearly 2,000 cooperative businesses

— one of the highest concentrations in

the U.S.,” says Bill Oemichen,

president and CEO of Cooperative

Network. “It is appropriate that this

year’s Co-op Month theme was

‘Collaborate, Communicate,

Cooperate,’ three simple words that

illustrate the bedrock of cooperative

business.”

Wisconsin Governor Scott Walker

and Minnesota Governor Mark Dayton

both signed Co-op Month

proclamations (as did many other

governors, as well as U.S. Agriculture

Secretary Tom Vilsack) recognizing the

significant contributions co-ops make to

the states’ economies.

Co-op statistician

Bette Simmons dies

Elizabeth “Bette” J. Simmons, 86, a

former member of the co-op statistics

unit of USDA’s Farmer Cooperative

Service (now the Cooperative Programs

of USDA Rural Development) died

Sept. 16 in Greenbelt, Md. Burial was

Sept. 26 at Gate of Heaven cemetery in

Silver Spring, Md.

In the late 1970s and early 1980s,

Simmons played a key role in the

The board of Dairylea

Cooperative Inc., Syracuse, N.Y., has

voted to merge with Dairy Farmers

of America (DFA). The merger

proposal, presented to members Oct.

16 at Dairylea’s annual meeting,

“reflects a desire to position Dairylea

for the future amid rapidly evolving

market dynamics,” according to a

press release issued by the two

cooperatives.

DFA’s board has endorsed the

merger, which requires approval by

Dairylea’s members, who will vote

on the proposal during a special

meeting in February. Prior to the

vote, a series of informational

sessions will be held to provide

Dairylea members with a

comprehensive overview of the

proposed merger, a more detailed

explanation of the voting process and

the chance to have their questions

answered.

DFA was the nation’s third largest

farmer-owned co-op in 2012, with

$11.9 billion in sales. Dairylea was

the 16th largest farmer co-op, with

nearly $1.6 billion in 2012 sales.

“Today’s dairy industry is

undergoing unprecedented change,”

says CEO Greg Wickham of

Dairylea. “From consolidation in the

marketplace and changing farm

demographics to a movement toward

a global dairy industry, this change

presents both challenges and

opportunities.”

Dairylea’s farmer board of

directors spent the past three years

in a comprehensive examination of

how to best position Dairylea’s

members for the future. This effort

involved soliciting member input and

guidance from the “2020 Group,” a

committee formed in 2010 to gather

ideas on generating value beyond the

traditional cooperative structure.

Among many topics, the group

explored how to create market

opportunities for its members that

peer cooperatives with investments

in processing are attaining.

“Ultimately, the board determined

that merging with DFA, already a

longtime partner in Dairy Marketing

Services, would best complement

Dairylea’s capabilities and resources,

while securing flexibility and

increasing value for our members,”

Wickham says.

Since 2002, Dairylea has been a

member cooperative of DFA.

Wickham says the proposed merger

will provide Dairylea members

access to growing national and

international milk markets, ongoing

patronage dividends, tax benefits and

other opportunities. The merger

provides DFA members with longstanding customer relationships in

the Northeast marketplace,

enhanced farm services and

expanded access to capital to

facilitate strategic growth.

“In many ways, a merger with

DFA is simply a continuation of the

working relationship that Dairylea

has forged with DFA during the past

12 years,” says Rick Smith, DFA

president and CEO.

If the merger is approved by

members, six seats will be added to

DFA’s board to represent expanded

membership in the Northeast, and

DFA’s Northeast Area Council will

maintain local governance and a

grassroots structure familiar to

Dairylea members. n

Dairylea, DFA pursue merger
26 November/December 2013 / Rural Cooperatives

transition from the manual preparation

of cooperative statistics to the use of an

electronic data processing

(EDP) system to process statistics. She

retired from USDA in 1985.

Simmons was a native of

Carbondale, Pa., whose husband,

Kenneth, died in 1969.

“Bette was a very dedicated worker

and played an important role in

tracking and compiling the data needed

to document the vital role farmer coops play in the U.S. farm economy,”

says Ralph Richardson, also a retired

USDA co-op statistician.

USDA funds to aid

small-scale producers

Agriculture Secretary Tom Vilsack in

September announced grants being

made by USDA to support small,

socially disadvantaged agricultural

producers, including a number of

cooperatives. “These grants will help

socially disadvantaged business owners

get the tools they need to succeed and

expand markets across the nation,” he

said.

Funding is provided through USDA’s

Small Socially Disadvantaged Producer

Grant program, which offers technical

assistance to help producers develop

new markets and grow their operations.

For example, the Latino Economic

Development Center in Minneapolis

has been selected to receive a $200,000

grant to provide legal and business

training to small Latino and Hmong

agricultural producers.

A complete list of grant recipients

follows. The funding is contingent

upon the recipient meeting the terms of

the grant agreement.

Alabama

• Alabama A&M University – $195,730

grant to help socially disadvantaged

producers build sustainable farming

and agricultural businesses.

California

• Southern California Focus on

Cooperation – $200,000 grant to

provide technical assistance and

cooperative education to refugee and

immigrant farmers.

Hawaii

• The Kohala Center Inc. – $151,913

grant to provide technical assistance

to Palili ‘O Kohala Cooperative, Maui

Aquaponics Cooperative, Kau

Agricultural Water Cooperative and

Cho Global Farming Cooperative.

Illinois

• Pembroke Family Farmers

Association – $153,925 grant to help

create business management practices.

Kentucky

• Kentucky State University – $103,450

grant to help small socially

disadvantaged producers develop

cooperatives, register and secure

proper title to farmland and fully use

various USDA programs that assist

small farmers.

Massachusetts

• Cooperative Development Institute –

$45,192 grant to help partner

organizations in Maine, New

Hampshire and Vermont provide

technical assistance to immigrant and

refugee farmers from Bhutan,

Somalia, Burundi, Sudan and the

Congo.

Minnesota

• Latino Economic Development

Center – $200,000 grant to provide

legal and business training to small

Latino and Hmong agricultural

producers.

New Mexico

• Southwest Development Center Inc.

– $150,000 grant to help set up and

manage two food hubs at a food

cooperative.

North Carolina

• North Carolina A&T State

University – $196,120 grant to help

farm businesses develop marketing

plans.

New York

• North Country Grown Cooperative

Inc. – $109,552 grant to provide

training on peer-to-peer learning and

business development practices.

Puerto Rico

• Cooperativa De Ganaderos De Carne

De Res – $123,800 grant to develop a

marketing plan, provide legal

assistance and animal health and

humane treatment training.

South Carolina

• Farmers Cooperative/Community

Improvement – $40,700 grant to

provide legal assistance, leadership

training and identify ways to expand

agricultural production.

South Dakota

William “Tubz” Kalipi demonstrates a hand-driven piece of equipment during a grower field day.

The Makakuoha Cooperative helps Native Hawaiian beginning farmers on the island of Moloka‘i.
Rural Cooperatives / November/December 2013 27

National Cooperative Bank (NCB)

has released its annual list of the

nation’s top 100 cooperatives, showing

that businesses on the list generated

$226.4 billion in sales in 2012, a 5-

percent increase from 2011. The NCB

Co-op 100 includes co-ops from all

sectors of the economy, whereas the

top 100 co-ops list USDA compiles (see

the September-October 2013 issue of

Rural Cooperatives) is limited to

agricultural co-ops.

“The NCB Co-op 100 is a great

reminder of the substantial impact and

important role cooperative businesses

play in our national economy across

every sector,” says Charles E. Snyder,

president and CEO of NCB. “As we

continue to see improvements in the

market, there is an increase in the

formation of new cooperatives in

urban, suburban and rural settings,

offering competitive goods and

services to meet the needs of these

communities.

“As a socially responsible financial

institution, created to address the

needs of our nation’s cooperatives, we

are proud of our role in supporting the

growth of these organizations, while

also giving back to the communities

they serve,” Snyder adds.

Below are the top two co-ops in

each of the major business sectors of

the NCB Co-op 100 (followed by their

headquarters location, 2012 revenue

and overall ranking on the list):

Agriculture:

• CHS Inc., Saint Paul, Minn. — $40.6

billion, ranking first overall;

• Land O’ Lakes, Saint Paul, Minn. —

$14.1 billion, ranking second overall;

Grocery:

• Wakefern Food Corp, Keasbey, N.J.

— $11 billion, fourth overall.

• Associated Wholesale Grocers Inc.,

Kansas City, Kan. — $7.8 billion, sixth

overall.

Hardware & Lumber:

• ACE Hardware, Oakbrook, Ill. — $3.8

billion, 10th overall;

• Do It Best Corp., Fort Wayne, Ind. —

$2.6 billion, 15th overall;

Finance:

• Navy Federal Credit Union, Merrifield,

Va. — $3.6 billion, 12th overall;

• CoBank, Greenwood, Colo. — $2.1

billion, 20th overall;

Healthcare:

• HealthPartners Inc., South

Bloomington, Minn. — $3.9 billion,

ninth overall;

• Group Health Cooperative, Seattle,

Wash. — $3.6 billion, 13th overall;

Energy & Communications:

• National Cooperative Refinery Assoc.,

McPherson, Kan. — $4 billion, eighth

overall;

• Basin Electric Power Cooperative,

Bismarck, N.D. — $1.9 billion, 24th

overall.

While the companies and rankings

of the list change every year, the

overall cooperative sector continues to

advance, playing an increasingly

influential role in the global economy.

As a long-time advocate for

cooperatives, NCB notes that its

mission is “to provide critical financing

to promote the growth and expansion

of these businesses, while also

deploying hundreds of millions of

dollars to support underserved

communities and cooperative

expansion initiatives.”

The entire NCB Co-op 100 report is

available at: www.coop100.coop. n

NCB Co-op 100 tops $226 billion in sales

• Intertribal Buffalo Council –

$200,000 grant to provide best

management practices training on

low-stress handling methods for

buffalo.

New co-op dairy

plant for Michigan

Dairy Farmers of America (DFA) in

September broke ground on an

ingredient processing facility in Cass

City, Mich. The $40 million plant will

serve a region where milk production is

steadily outpacing local plant capacity.

At completion next fall, the 33,000-

square-foot plant will process up to 3

million pounds of fresh milk daily, to be

supplied by DFA member farms in the

Michigan Thumb area. Initially, the

plant will produce condensed whole and

skim milk, as well as cream. A phasedconstruction plan will allow for growth

among current and future DFA

members, with the potential to add

additional manufacturing of valueadded dairy products.

“This plant will provide a local home

Navy Federal Credit Union (NFCU) is the

top-ranked financial credit union on the

NCB Co-op 100 for 2012. Photo courtesy

NFCU
28 November/December 2013 / Rural Cooperatives

for our members’ milk, answering the

growing need for Michigan plant

capacity while building a base for valueadded processing in the future,” says

Mark Korsmeyer, executive vice

president of DFA.

Numerous partner agencies

contributed substantial support to the

plant. The Michigan Strategic Fund

(MSF) approved a $500,000 Michigan

Business Development Program grant

and a $1 million Community

Development Block Grant, while the

Michigan Economic Development

Corporation is contributing $300,000 in

corporate funds. MSF also awarded

Tuscola County and Cass City a new

15-year Agriculture Processing

Renaissance Zone designation for the

project.

The Village of Cass City also offered

support by providing revenue bonding

valued at about $6.7 million for a

wastewater pretreatment system and

public infrastructure improvements.

In addition to creating at least 25 fulltime positions at the facility, increased

employment opportunities are expected

to occur on member farms and in

agriculture support industries.

DFA also announced in September it

would be joining with Craigs Station

Ventures (CSV) to build a $12 million

cold milk separation facility in York,

N.Y. The collaboration is the first in

which DFA is partnering directly with a

farmer group for a project that will

benefit all of the cooperative’s farmer

owners.

At completion, expected in the

summer of 2014, the plant will begin

processing nearly 1 million pounds of

milk daily, with the capability to

increase to 2 million pounds. The

facility, which will employ 11 full-time

staff, will also have the capability to

provide value-added production in the

future.

The plant will help meet the region’s

increasing demand for cream, created

by existing dairy processors expanding

production capabilities and new

processors entering the marketplace.

The remaining skim will be sold to

local yogurt and cheese plants.

Built on a dairy, the 14,000-squarefoot plant will emphasize traceability,

sustainability and innovation. In an

effort to reduce the facility’s carbon

footprint, it will be connected to an

anaerobic digester, which will convert

manure into renewable energy for the

facility.

Credit conference offers

insight for co-op mangers

Mid America Cooperative Education

Inc., a subsidiary of the Mid America

Cooperative Council (MACC),

presented its eighth annual Credit

Conference, Oct. 17-18 in Indianapolis,

Ind. The conference attracted 30

attendees — primarily supply co-op

credit managers — from Illinois,

Indiana, Ohio, Michigan, Minnesota,

Pennsylvania, Virginia and Wisconsin.

Points stressed during the

conference include:

• Larger farmers are seeking a business

relationship with their suppliers and

expect them to have a solid

understanding of their operations.

Cooperative management needs to be

committed to serving those needs.

• As grain prices soften, the suppliers of

inputs and credit anticipate their

management ability will be tested.

Don’t be the last vendor to

understand critical financial

information about your

member/owners.

• Use credit application to list all of

your co-op’s credit needs. Share this

information with your sales personnel

to serve your member/owners’

anticipated (and unanticipated) needs.

• Secondary financing for farmers has

allowed cooperative input suppliers to

spread their risk, while maintaining

working capital needs.

• Soybean production is anticipated to

grow in 2014, as corn stocks are

replenished and corn prices soften.

For more information about

MACC’s Credit Conference, as well as

the Council’s other cooperative

education classes, call (317) 726-6910 or

send an e-mail to:

knowledge@macc.coop.

Co-ops to use tankers

fueled with natural gas

Select Milk Producers and Dairy

Farmers of America are converting a

portion of their diesel needs to

compressed natural gas (CNG). AMP

Americas announced in October that it

has signed an agreement with the two

co-ops, under which AMP-Trillium, a

joint venture between AMP Americas

and Trillium CNG, will build seven

public fueling stations in Texas by early

2014. The CNG trucks will travel more

than 13.2 million miles per year,

servicing routes throughout Texas.

The fueling stations — which will be

built in Waco, Amarillo, Harrold,

Sweetwater, Weatherford, Kerrville and

Midland — will initially fuel 40 new,

Class-8 Kenworth and Peterbilt CNG

sleeper trucks, with that number to

double over the course of the agreement.

“It is estimated that the culmination

of this deal will displace carbon

emissions equal to removing 2,400 cars

per year from the road and will save the

supply chain $1.50 to $2 in fuel savings

on every gallon sold. It lets us build a

network of public, fast-fill CNG

stations across all of the major Texas

corridors that can be used by any fleet

running trucks across the state,” says

Nathan Laurell, CEO of AMP

Americas.

CNG is domestic, abundant and

about 40 percent less expensive than

diesel, Laurell notes. It reduces

dependence on foreign oil and has

significant environmental benefits.

Because it is the cleanest burning fossil

fuel, CNG cars and trucks require less

vehicle maintenance and enjoy a longer

engine life.

Western Dairy Transport and

Reynolds Nationwide are “for-hire”

trucking lines and are the only carriers

involved in the agreement with the

dairy co-ops. The new trucks will be a

combination of both leases and

purchases. The CNG fueling stations

are public stations open to all haulers.

n
Rural Cooperatives / November/December 2013 29

2013 Article Index

Information appearing in Rural Cooperatives magazine during calendar

year 2013 has been indexed to help you find past articles. Articles are

indexed by issue and page. Back issues can be found on-line at:

www.rurdev.usda.gov/BCP_Coop_RurCoopMag.html

TITLE FEATURES ............................................................................................ISSUE / PAGE

Antitrust Challenges Facing Farmers and their cooperatives ...............................May/June 16

Aquaculture providing opportunities for Virginia farmers to diversify ...............Sept./Oct. 31

Battlefield Lessons ...................................................................................................July/Aug 28

Gettysburg Leadership Experience demonstrates that lessons from 150 years ago are still

relevant for co-op leaders

Bio-energy impact, base-capital financing among topics at

Farmer Co-op Conference .................................................................................Jan./Feb. 17

Birds of a Feather ...................................................................................................May/June 16

Squab producers ‘flock together’ to process, market through co-op

Building Bridges ......................................................................................................May/June. 8

ACDI/VOCA celebrates 50 years of expanding opportunities worldwide

Business blooms rapidly for Northwest horticulture co-op .................................Sept./Oct. 27

Central Indiana’s first food hub goes ‘LIVE!’ .......................................................Sept./Oct. 32

Co-ops: an engine for rural progress ......................................................................Sep./Oct. 19

Co-op conversations help bring security to manufactured housing owners .........Jan./Feb. 28

Co-op food market planned in South Carolina ....................................................May/June 33

The Co-op Nature of (the Affordable Care Act) CO-OPs ...................................Jan./Feb. 32

Co-ops poised to help address world food challenge............................................Nov./Dec. 11

Co-ops urged to plan now for Co-op Month activities .........................................July/Aug. 36

Cooperation Works members working for job growth, strong rural economy ..Sept./Oct. 36

Creating a safety culture ............................................................................................Jan./Feb. 4

Garden City Co-op tragedy underscores need for co-ops to make employee safety

priority No.1

Dairy co-op ensures feed supply for organic feed mill .........................................Sept./Oct. 28

Director Diligence ..................................................................................................July/Aug. 31

Co-ops should assess director skills, ability to fulfill duties

Effort launched to assist worker co-ops ............................................................March/April 29

ESOPS, worker co-ops each have advantages.......................................................Nov./Dec. 15

Essential economic roles of farmer co-ops............................................................Nov./Dec. 20

Equity Elevator & Trading Co. joins century club ...............................................May/June 18

The Face of the ‘Franchise’ ....................................................................................July/Aug. 14

Brand development key to Sun-Maid’s sweet century as raisin industry leader

From food hubs to brewpubs, cooperatives are growing in Ohio .......................Sept./Oct. 22

From Rhode Island to Puerto Rico, co-ops ‘adding value’ with USDA support ...July/Aug. 8

Going Local in Big Sky Country

Western Montana Growers Co-op to notch first $1 million sales year............Nov./Dec. 4

Grain, farm supply sectors lead way as ag co-ops set sales, income record ...........Sep./Oct. 4

Great Lakes Center pursues innovative co-op solutions .....................................Sept./Oct. 29

Growing a Cleveland Renaissance

Urban farming co-op boosts neighborhood with local foods, jobs.................Nov./Dec/ 12

Here today, here tomorrow .......................................................................................Jan./Feb. 7

Alabama co-op helps limited-resource growers process and market produce
30 November/December 2013 / Rural Cooperatives

Indivisible Reserves ............................................................................May/June 12

Some see unallocated equity as a way co-ops can help

fortify their future Initiative helping convert grocery

stores into co-ops ..........................................................................Sept./Oct. 25

Keeping their co-op alive .................................................................March/April 4

How the Isla Vista Food Co-op used ‘crowd funding’

to pave a new way

The Lure of Distant Shores ................................................................May/June 20

Co-ops share export strategies during USDA Outlook Forum

Most Co-op Network members say 2012 was a solid

economic year ...................................................................................Jan/Feb 36

Multi-stakeholder co-op to bolster New Hampshire

fishing industry ...............................................................................Sept./Oct. 24

New co-op ‘hubs’ help meet need for local food

in Wisconsin ...................................................................................Sept./Oct. 21

New farmer-owned fertilizer plant being explored ........................Sept./Oct. 33

The Need for Speed ........................................................................March/April 24

Ursa Farmers Co-op works with FCC Services to prevent

member profits from heading down river

Organic Valley turns 25 ...................................................................March/April 22

Overseas co-op formations help reduce poverty,

fight hunger........................................................................................Nov./Dec. 8

Pennsylvania Bred and Fed ..................................................................July/Aug. 4

Keystone Beef’s aggregation and marketing boosts income

for small-scale cattle producers

Peonies rising star of Alaskan agriculture ......................................Sept./Oct. 19

Premier Co-op adapts equity policy to reflect changing

membership .....................................................................................July/Aug. 34

A ‘Real Pickle’ for Workers. ................................................................July/Aug. 11

Food processor re-forms as worker co-op to maintain role

in local food system

Rocky Ford Renaissance ......................................................................Jan./Feb. 10

Colorado cantaloupe growers rebound after crisis

Simple Yoga & Wellness Co-op promotes health

in Montana ......................................................................................Sept./Oct. 34

Smart Growth ....................................................................................March/April 32

Brattleboro Co-op’s development includes downtown housing

Specialty Potato Alliance ...............................................................March/April 10

Marketing alliance wins new buyers ‘one tastebud at a time’

Start Me Up .............................................................................................May/June 4

Study of 14 newly launched co-ops reveals valuable lessons

Survey reveals co-op employee compensation trends ..............March/April 7

Telling the co-op story ..........................................................................Jan./Feb. 16

USDA journal marks 80 years of promoting co-ops as

powerful, self-help economic tool

Top 100 ag co-ops set sales, income records ..................................Sept./Oct. 8

USDA funds advanced biofuels projects ............................................Nov./Dec. 7

USDA funds help reopen town’s only grocery ...............................May/June 29

USDA-supported programs help Mali farmers adapt

in hard times ....................................................................................Jan./Feb. 14

A Way with Words...and pictures, and websites, etc. ..................July/Aug. 22

CCA salutes best in co-op communications

Worker Cooperatives .......................................................................March/April 26

Another variation on the co-op business model

MAGAZINE DEPARTMENTS

Commentary

Cleveland Rocks (and Grows)! .............................................................Nov./Dec. 2

Co-ops have a role in farmland preservation ....................................Sept./Oct. 2

Co-ops understand and enhance power of community .............March/April .2

Fanfares for the common man .............................................................July/Aug. 2

Raising the bar on safety ........................................................................Jan./Feb. 2

The Co-op Way .......................................................................................May/June 2

Co-op Development Action

Stronger Together: Cooperative Farms ............................................May/June 32

Co-ops & Community

DFA Cares Foundation expands co-op’s community focus ............Sept./Oct. 6

Electric co-op assists in rebuilding after tornado ..........................July/Aug. 32

Retired educator, part-time farmer remains

dedicated to schools .................................................................March/April 31

Focus On

Farmers’ Rice Cooperative

International markets key for California rice co-op ............March/April 14

Legal Corner

Co-ops should periodically evaluate their member

equity practices...............................................................................Nov./Dec. 16

Management Tip

Talent Management: It goes way beyond recruiting......................Nov./Dec. 18

Newsline

Blue Diamond marks record, $1 billion sales year ..........................Jan./Feb. 37

Cunningham succeeds Rice as CEO of Farm Credit of Florida

Ocean Spray sets sales record

Spackler succeeds Reagan as AGP Inc. CEO

Florida’s Natural celebrates best year

Hispanic, women farmers may seek compensation

California Dairies acquires Security Milk Producers

CHS initiative to foster co-op university education

United Cooperative purchases Auroraville grain facilities

Jill Long Thompson to chair Farm Credit Administration

California dairy co-op leader Brian Pacheco honored by UC

NCBA Veterans Initiative offers job opportunities

Wisconsin dairy co-ops merge

NMPF seats new board members

Fifth Season sees first year success ...........................................March/April 35

ACE institute set for Puerto Rico

Paper or plastic? Marva Maid provides option

DFA settles lawsuit

USDA releases report on growing role of food hubs

CHS sets records for income, cash payout to members

CoBank earnings climb sharply; record patronage paid

Co-op governance symposium slated

UFC purchases Jensen Seed & Fertilizer

Southern States’ Roanoke Mill honored

USDA Farm-to-School grants available

Record sales, earnings at Land O’ Lakes

Ag journal seeks papers on co-ops

Traceability wins Top Innovator honor for PCCA division .............May/June 34

MMPA pays $1.8 million cash patronage

Wickstrom to succeed Roche at Minn-Dak

Consumer co-op leader Sally Jewell new Interior Secretary

USDA, dairy producers working to reduce greenhouse gas

Wisconsin food hub co-op organizes

AMPI reports $1.7 billion in sales

FARM program participation at 70 percent

Ric Sundal named COO o f Moark

WAGES launches successful worker co-ops

Sunkist turns 120 with strong fiscal showing

Foremost Farms consolidates cheese operations

Record year for Westby Cooperative Creamery

VAPG grants support local producers, bio-based initiatives

NCBA program to help credit unions protect members

CoBank appoints new executives

Farmers Co-op Conference Nov. 7-8

USDA program promotes job creation

Land O’ Lakes’ Krikiva retiring; Veazy, McBeth appointed

United Cooperative sales hit $643 million

New River Organic opens distribution facility .................................July/Aug. 38

Study shows federal milk order could benefit California
Rural Cooperatives / November/December 2013 31

O’Brien new leader at USDA Rural Development

Aurora Cooperative announces expansion

Azevedo new chairman at California Dairies

CHS, ConAgra, Cargill plan flour joint venture

Mulhern next CEO at NMPF

Blue Diamond opens Turlock plant

Wisconsin co-ops complete merger

Organic Valley keeps rolling after fire at HQ

Cartoon character to promote REAL Seal

CWT members support program changes

Equity Livestock marks 90th anniversary

O’Brien: Regional food systems could boost rural NY

CHS offers Center for Cooperative Growth

New agronomy unit at Southern States; co-op closing some

stores, adding others ....................................................................Sept./Oct. 37

Denver eyed for Ardent Mills HQ

NCB partnering with Spanish bank to bolster co-op sector

CVA, ADM joint venture to build Nebraska grain-loading facility

Rural Cooperatives editor, four others saluted by ACE

Farmer Co-op Conference to focus on global, U.S. market trends

Minnesota electric co-op plans to acquire Alliant Energy

DFA acquires Dairy Maid, expands fluid milk business

Iowa co-op to produce cellulosic ethanol

Indiana grain facility rebuilding after explosion

United Cooperative subsidiary to merge with Hillsboro co-op

USDA helping utility co-ops expand services..................................Nov./Dec. 24

Dairylea, DFA pursue merger

Poll shows strong preference for co-ops

USDA funds to aid small-scale producers

New co-op dairy plant for Michigan

NCB Co-op 100 tops $226 billion in sales

Credit conference offers insight for co-op managers

Co-ops to use tankers fueled with natural gas

Co-op statistician Bette Simmons dies

Utility Co-op Connection

Energy-efficiency programs yield dividends for members .........May/June. 29

SUBJECTS

Aquaculture/Fishery

Aquaculture providing opportunity for Virginia farmers

to diversify .......................................................................................Sept./Oct. 31

Multi-stakeholder co-op to bolster New Hampshire

fishing industry ...............................................................................Sept./Oct. 24

Communications/ Public Relations

A Way with Words...and pictures, and websites, etc.....................July/Aug.23

CCA salutes best in co-op communications

AMPI wins top “career” awards ........................................................July/Aug. 25

Co-ops urged to plan now for Co-op Month Activities ...................July/Aug. 36

Jakins picked as top co-op CEO communicator .............................July/Aug. 27

Rocky Ford Renaissance........................................................................Jan./Feb.10

Colorado cantaloupe growers rebound after crisis

Rural Cooperatives editor, four others saluted by ACE .................Sept./Oct. 39

Telling the co-op story...........................................................................Jan./Feb. 16

USDA journal marks 80 years of promoting co-ops as a

powerful, self-help tool

Community

Clark County REMC aids tornado recovery efforts..........................July/Aug. 33

Co-ops have a role in farmland preservation ...................................Sept./Oct. 2

Cooperation Works members working for job growth, strong

rural economy ................................................................................Sept./Oct. 36

DFA Cares Foundation expands co-ops’ community focus ............Sept./Oct. 2

Electric co-op assists in rebuilding after tornado ...........................July/Aug. 32

Simple Yoga & Wellness Co-op promotes health

in Montana ......................................................................................Sept./Oct. 34

Smart Growth

Brattleboro Co-ops development includes downtown

housing .........................................................................................March/April 32

Retired educator, part-time farmer remains dedicated to

schools..........................................................................................March/April 30

Co-op Development

Aquaculture providing opportunities for Virginia farmers

to diversify .......................................................................................Sept./Oct. 31

Building Bridges

ACDI/VOCA celebrates 50 years of expanding

opportunities worldwide .................................................................May/June 8

Business blooms rapidly for Northwest horticulture co-op .........Sept./Oct. 27

Central Indiana’s first food hub goes ‘LIVE!’ ....................................Sept./Oct. 32

Co-op conversions help bring security to manufactured

housing owners ...............................................................................Jan./Feb. 28

Co-op food market planned in South Carolina ..............................May/June 33

Cooperation Works members working for job growth,

strong rural economy ....................................................................Sept./Oct. 36

Dairy co-op ensures feed supply for organic feed mill..................Sept./Oct. 28

Effort launched to assist worker co-ops.......................................March/April 29

From food hubs to brewpubs, cooperatives are

growing in Ohio ..............................................................................Sept./Oct. 22

Going Local in Big Sky Country

Western Montana Growers Co-op to notch first $1 million

sales year...........................................................................................Nov./Dec. 4

Great Lakes Center pursues innovative co-op solutions ..............Sept./Oct. 29

Growing a Cleveland Renaissance

Urban farming co-op boosts struggling neighborhood

with local foods, jobs .....................................................................Nov./Dec/ 12

Here today, here tomorrow

Alabama co-op helps limited-resource growers process

and market produce .........................................................................Jan./Feb. 7

Initiative helping convert grocery stores into co-ops ...................Sept./Oct. 25

Keeping their co-op alive

How the Isla Vista Food Co-op used ‘crowd funding’

to pave a new way .......................................................................March/April 4

Multi-stakeholder co-op to bolster New Hampshire

fishing industry ...............................................................................Sept./Oct. 24

New co-op “hubs’ help meet need for local food

in Wisconsin ...................................................................................Sept./Oct. 21

New farmer-owned fertilizer plant being explored ........................Sept./Oct. 33

Overseas co-op formations help reduce poverty,

fight hunger........................................................................................Nov./Dec. 8

Pennsylvania Bred and Fed ...................................................................July/Aug. 4

Keystone Beef’s aggregation and marketing

boosts income for small cattle producers

Peonies rising star of Alaskan agriculture ......................................Sept./Oct. 19

Simple Yoga & Wellness Co-op promotes health

in Montana ......................................................................................Sept./Oct. 34

Specialty Potato Alliance

Marketing alliance wins new buyers ‘one tastebud

at a time’.......................................................................................March/April 10

Start Me Up

Study of 14 newly launched co-ops reveals

valuable lessons...............................................................................May/June 4

Stronger Together: Cooperative Farms ..........................................May/June 32

USDA funds help reopen town’s only grocery ..............................May/June 31

USDA-supported programs help Mali farmers

adapt in hard times .........................................................................Jan./Feb. 14

WAGES launches successful worker co-ops..................................May/June 37

Co-op History

Antitrust challenges facing farmers and their cooperatives...........Jan./Feb.22

Co-op crucial to industry’s success ....................................................July/Aug.19

Equity Elevator & Trading Co. joins century club.............................May/June18

Telling the co-op story

USDA journal marks 80 years of promoting co-ops as

a powerful self-help tool ...........................................................March/April 16
32 November/December 2013 / Rural Cooperatives

The Face of the ‘Franchise’

Brand development key to Sun-Maid’s sweet century as

raisin industry leader.......................................................................July/Aug.15

Co-op Month

Co-ops: Growing rural progress .......................................................Sept./Oct. 19

Co-ops urged to plan now for Co-op Month activities ..................July/Aug. 36

National Cooperative Month October 2013 ....................................Sept./Oct. 18

Co-op Principles/Advantages/Impact

Co-ops urged to plan now for Co-op Month Activities ...................July/Aug. 36

Essential economic roles of farmer co-ops .....................................Nov./Dec. 20

ESOPS, worker co-ops each have advantages...............................Nov./Dec. 15

Retired educator, part-time farmer remains dedicated

to schools.....................................................................................March/April 30

Start Me Up

Study of 14 newly launched co-ops reveals

valuable lessons...............................................................................May/June 4

The Co-op Way........................................................................................May/June 2

Co-op Statistics

Grain, farm supply sectors lead way as ag co-ops set sales,

income records ................................................................................Sept./Oct. 4

NCB Co-op 100 tops $226 billion in sales ..........................................Nov./Dec. 27

Top 100 ag co-ops set sales, income records ..................................Sept./Oct. 8

Dairy

Co-ops & Community

DFA Cares Foundation expands co-op’s

community focus ..............................................................................Sept./Oct. 6

Dairy Co-op ensures feed supply by operating

organic grain mill ...........................................................................Sept./Oct. 28

Essential economic roles of farmer co-ops .....................................Nov./Dec. 20

From Rhode Island to Puerto Rico, Co-ops ‘adding

value’ with USDA support................................................................July/Aug. 8

Organic Valley turns 25 ....................................................................March/April 22

Directors/Leadership/Governance

Battlefield Lessons

Gettysburg Leadership Experience demonstrates that lessons

from 150 years ago are still relevant for co-op leaders ...........July/Aug. 28

Building stronger co-ops .................................................................March/April 25

Director Diligence

Co-ops should assess director skills and ability to

fulfill duties .......................................................................................July/Aug. 31

Start Me Up

Study of 14 newly launched co-ops reveals valuable

lessons ...............................................................................................May/June 4

Worker Cooperatives:

Another variation on the co-op business model...................March/April 26

Environment/Energy

Aquaculture providing opportunities for Virginia farmers

to diversify .......................................................................................Sept./Oct. 31

Bio-energy impact, base-capital financing among topics

at co-op conference .......................................................................Jan./Feb. 17

Clark County REMC aids tornado recovery efforts .........................July/Aug. 33

Co-ops have a role in farmland preservation ...................................Sept./Oct. 2

Electric co-op assists in rebuilding after tornado ...........................July/Aug. 32

Energy-efficiency programs yield dividends for

co-ops and members ....................................................................May/June 29

Iowa co-op to produce cellulosic ethanol ......................................Sept./Oct. 41

Multi-stakeholder co-op to bolster New Hampshire

fishing industry ...............................................................................Sept./Oct. 24

New co-op ‘hubs’ help meet need for local food

in Wisconsin ...................................................................................Sept./Oct. 21

USDA funds advanced biofuels projects ............................................Nov./Dec. 7

Exports

Farmers’ Rice Cooperative

Co-op crucial to industry’s success ..............................................July/Aug.19

Global expansion reinforces CHS as a market leader...................May/June 24

Long-range work in China pays off for almond co-op ..................May/June 22

The Lure of Distant Shores

Co-ops share export strategies during USDA Outlook

Forum................................................................................................May/June 20

USDA programs help ag exporters ...................................................May/June 28

World demand for U.S. cattle genetics fuels export

growth ..............................................................................................May/June 26

Farm Supply and Services

Dairy Co-op ensures feed supply by operating organic

grain mill ..........................................................................................Sept./Oct. 28

Equity Elevator & Trading Co. joins century club............................May/June 18

Grain, farm supply sectors lead way as ag co-ops set

sales, income records ....................................................................Sept./Oct. 4

New farmer-owned fertilizer plant being explored ........................Sept./Oct. 33

Premier Co-op adapts equity policy to reflect

changing membership ....................................................................July/Aug. 34

Top 100 ag co-ops set sales, income records ..................................Sept./Oct. 8

Finance/ Financial Services

Battlefield Lessons

Gettysburg Leadership Experience demonstrates that lessons

from 150 years ago are still relevant for co-op leaders ...........July-Aug. 28

Bio-energy impact, base-capital financing among

topics at Farmer Co-op Conference........................................March/April 25

Co-op conversions help bring security to manufactured

housing owners ...............................................................................Jan./Feb. 28

Indivisible Reserves

Some see unallocated equity as a way co-ops can

help fortify their future .................................................................May/June 12

Keeping their co-op alive

How the Isla Vista Food Co-op used ‘crowd funding’

to pave a new way .......................................................................March/April 4

Survey reveals co-op employee compensation trends................March/April 7

Loan fund boosts ownership through co-ops ..................................Jan./Feb. 31

Premier Co-op adapts equity policy to reflect changing

membership......................................................................................July/Aug. 34

The Need for Speed

Usra Farmers Co-op works with FCC Services to prevent

member profits from heading down river...............................March/April 24

Worker Cooperatives:

Another variation on the co-op business model...................March/April 26

Floral/Horticulture

Business blooms rapidly for Northwest horticulture co-op .........Sept./Oct. 27

Peonies rising star of Alaskan agriculture ......................................Sept./Oct. 19

Food Co-ops

Co-op food market planned in South Carolina ..............................May/June 33

Initiative helping convert grocery stores into co-ops ...................Sept./Oct. 25

Keeping their co-op alive

How the Isla Vista Food Co-op used ‘crowd funding’

to pave a new way .......................................................................March/April 4

Smart Growth

Brattleboro Co-ops development includes

downtown housing .....................................................................March/April 32

USDA funds help reopen town’s only grocery ..............................May/June 31

Foreign Co-ops

Building Bridges

ACDI/VOCA celebrates 50 years of expanding

opportunities worldwide .................................................................May/June 8

Co-ops poised to help address world food challenge....................Nov./Dec. 11

Indivisible Reserves

Some see unallocated equity as a way co-ops can

help fortify their future .................................................................May/June 12
Rural Cooperatives / November/December 2013 33

OCDC brings CLARITY to co-op laws in foreign countries ............Nov./Dec. 10

Overseas co-op formations help reduce poverty, fight hunger......Nov./Dec. 8

USDA program helps expand ag production in Malawi ...............Nov./Dec. 15

USDA-supported programs help Mali farmers

adapt in hard times .........................................................................Jan./Feb. 14

Fruit, Nuts

Co-op crucial to raisin industry’s success .........................................July/Aug.19

Fanfares for the common man ..............................................................July/Aug. 2

Long-range work in China pays off for almond co-op ..................May/June 22

Rocky Ford Renaissance

Colorado cantaloupe growers rebound after crisis ..................Jan./Feb. 10

San Joaquin Valley: Nirvana for raisins ............................................July/Aug. 20

The Face of the ‘Franchise’

Brand development key to Sun-Maid’s sweet century

as raisin industry leader.................................................................July/Aug. 15

Grains/Oilseeds/Rice

Creating a safety culture

Garden City Co-op tragedy underscores need for ag co-ops

to make employee safety priority No.1 ...........................................Jan./Feb 4

Equity Elevator & Trading Co. joins century club............................May/June 18

Farmers’ Rice Cooperative

International markets key for California rice co-op .............March/April 14

Global expansion reinforces CHS as a market leader ..................May/June 24

The Need for Speed

Usra Farmers Co-op works with FCC Services to

prevent member profits from heading down river................March/April 24

Health & Home Services

Great Lakes Center pursues innovative co-op solutions...............Sept./Oct. 29

Most Co-op Network members say 2012 was a solid

economic year .................................................................................Jan./Feb. 36

The Co-op Nature of (the Affordable Care Act) Co-ops .................Jan./Feb. 32

Housing

Co-op conversions help bring security to manufactured

housing owners ...............................................................................Jan./Feb. 28

Great Lakes Center pursues innovative co-op solutions ..............Sept./Oct. 29

Loan fund boosts ownership through co-ops ..................................Jan./Feb. 31

Legal/Legislative

Antitrust challenges facing farmers and their cooperatives ........Jan./Feb. 22

The Co-op Nature of (the Affordable Care Act) Co-ops .................Jan./Feb. 32

Co-ops should periodically evaluate their

member equity practices...............................................................Nov./Dec. 16

OCDC brings CLARITY to co-op laws in foreign countries ............Nov./Dec. 10

Livestock & Poultry

Birds of a Feather

Squab producers ‘flock together’ to process, market

through co-op .................................................................................May/June 16

Key beef industry sectors .....................................................................July/Aug. 7

Pennsylvania Bred and Fed

Keystone Beef’s aggregation and marketing boosts

income for small-scale cattle producers .....................................July/Aug. 4

World demand for U.S. cattle genetics fuels export growth ........May/June 26

Management

Co-ops should periodically evaluate their member equity

practices...........................................................................................Nov./Dec. 16

Director Diligence

Co-ops should asses director skills and ability

to fulfill duties ..................................................................................July/Aug. 31

Start Me Up

Study of 14 newly launched co-ops reveals

valuable lessons...............................................................................May/June 4

Survey reveals co-op employee compensation trends................March/April 7

Talent Management: It goes way beyond recruiting......................Nov./Dec. 18

Top 100 ag co-ops set sales, income records ..................................Sept./Oct. 8

Marketing

Birds of a Feather

Squab producers ‘flock together’ to process, market

through co-op ................................................................................May/June 16

Business blooms rapidly for Northwest

horticulture co-op ..........................................................................Sept./Oct. 27

Central Indiana’s first food hub goes “LIVE!” .................................Sept./Oct. 32

Fanfares for the common man ..............................................................July/Aug. 2

Farmers’ Rice Cooperative

International markets key for California rice co-op .............March/April 14

Global expansion reinforces CHS as a market leader ..................May/June 24

Going Local in Big Sky Country

Western Montana Growers Co-op to notch first $1 million

sales year...........................................................................................Nov./Dec. 4

Grain, farm supply sectors lead way as ag co-ops set

sales, income record ......................................................................Sept./Oct. 4

Here today, here tomorrow

Alabama co-op helps limited-resource growers process

and market produce .........................................................................Jan./Feb. 7

Long-range work in China pays off for almond co-op ..................May/June 22

Organic Valley turns 25 ....................................................................March/April 22

Rocky Ford Renaissance

Colorado cantaloupe growers rebound after crisis .................Jan./Feb. 10

San Joaquin Valley: Nirvana for raisins ...........................................July/Aug. 20

Specialty Potato Alliance

Marketing alliance wins new buyers ‘one tastebud

at a time’.......................................................................................March/April 10

The Face of the ‘Franchise’

Brand development key to Sun-Maid’s sweet century as

raisin industry leader......................................................................July/Aug. 15

The Lure of Distant Shores

Co-ops share export strategies during USDA

Outlook Forum ................................................................................May/June 20

Top 100 ag co-ops set sales, income records ..................................Sept./Oct. 8

World demand for U.S. cattle genetics fuels

export growth..................................................................................May/June 26

Safety

Raising the bar on safety ........................................................................Jan./Feb. 2

Creating a safety culture

Garden City Co-op tragedy underscores need for ag

co-ops to make employee safety priority No.1.............................Jan./Feb. 4

Sustainable/Local/Organic

A ‘Real Pickle’ for workers

Food processor re-forms as worker co-op to maintain

role in local food system ...............................................................July/Aug. 11

Central Indiana’s first food hub goes “LIVE!” .................................Sept./Oct. 32

Dairy Co-op ensures feed supply by operating

organic grain mill ...........................................................................Sept./Oct. 28

From food hubs to brewpubs, cooperatives are

growing in Ohio ..............................................................................Sept./Oct. 22

Going Local in Big Sky Country

Western Montana Growers Co-op to notch first $1 million

sales year...........................................................................................Nov./Dec. 4

Growing a Cleveland Renaissance

Urban farming co-op boosts struggling neighborhood

with local foods, jobs .....................................................................Nov./Dec/ 12

Multi-stakeholder co-op to bolster New Hampshire

fishing industry ...............................................................................Sept./Oct. 24

New co-op ‘hubs’ help meet need for local food

in Wisconsin ...................................................................................Sept./Oct. 21

Organic Valley turns 25 ....................................................................March/April 22

Pennsylvania Bred and Fed

Keystone Beef’s aggregation and marketing boosts

income for small-scale cattle producers .....................................July/Aug. 4

Stronger Together: Cooperative Farms ..........................................May/June 32

Transportation

Global expansion reinforces CHS as a market leader ..................May/June 24
34 November/December 2013 / Rural Cooperatives

The Lure of Distant Shores

Co-ops share export strategies during USDA

Outlook Forum ................................................................................May/June 20

The Need for Speed

Usra Farmers Co-op works with FCC Services to

prevent member profits from heading down river................March/April 24

Utility Co-ops

Clark County REMC tornado recovery efforts .................................July/Aug. 33

Electric co-op assists in rebuilding after tornado ...........................July/Aug. 32

Energy-efficiency programs yield dividends

for co-ops and members ..............................................................May/June 29

Jakins picked as top co-op CEO communicator .............................July/Aug. 27

USDA helping utility co-ops expand services..................................Nov./Dec. 24

USDA

From Rhode Island to Puerto Rico, co-ops ‘adding value’

with USDA support............................................................................July/Aug. 8

National Cooperative Month October 2013 .....................................Sept./Oct. 19

O’Brien new leader at USDA Rural Development............................July/Aug. 39

Telling the co-op story

USDA journal marks 80 years of promoting co-ops

as a powerful, self-help economic tool ..................................March/April 16

USDA funds advanced biofuels projects ............................................Nov./Dec. 7

USDA funds help reopen town’s only grocery ..............................May/June 31

USDA programs help ag exporters ...................................................May/June 28

USDA-supported programs help Mali farmers adapt

in hard times .....................................................................................Jan./Feb. 14

Value Added

A ‘Real Pickle’ for workers

Food processor re-forms as worker co-op to maintain

role in local food system ...............................................................July/Aug. 11

Co-op crucial to industry’s success ...................................................July/Aug. 19

From Rhode Island to Puerto Rico, co-ops ‘adding value’

with USDA support............................................................................July/Aug. 8

Pennsylvania Bred and Fed

Keystone Beef’s aggregation and marketing boosts

income for small-scale cattle producers .....................................July/Aug. 4

The Face of the ‘Franchise’

Brand development key to Sun-Maid’s sweet century as

raisin industry leader......................................................................July/Aug. 15

Worker Co-ops

Cleveland Rocks (and Grows)! .............................................................Nov./Dec. 2

Effort launched to assist worker co-ops.......................................March/April 29

ESOPS, worker co-ops each have advantages...............................Nov./Dec. 15

Growing a Cleveland Renaissance

Urban farming co-op boosts struggling neighborhood

with local foods, jobs .....................................................................Nov./Dec/ 12

A ‘Real Pickle’ for workers

Food processor re-forms as worker co-op to maintain

role in local food system ...............................................................July/Aug. 11

WAGES launches successful worker co-ops..................................May/June 37

Worker Cooperatives

Another variation on the co-op business model ..................March/April 26

Vegetable/Potato

Developing new fingerling varieties ..............................................March/April 12

Effort launched to assist worker co-ops.......................................March/April 29

Here today, here tomorrow

Alabama co-op helps limited-resource growers process

and market produce ..........................................................................Jan./Feb. 7

Specialty Potato Alliance

Marketing alliance wins new buyers ‘one tastebud

at a time’.......................................................................................March/April 10

AUTHORS

Ali, Sarah

Farmers’ Rice Cooperative

International markets key for California rice co-op ............March/April 14

Grain, farm supply sectors lead way as ag co-ops set

sales, income record ........................................................................Sep./Oct. 4

Top 100 ag co-ops set sales, income records ..................................Sept./Oct. 8

Bergstrom, Amanda

USDA funds help reopen town’s only grocery ...............................May/June 29

Berner, Courtney

Start Me Up

Study of 14 newly launched co-ops reveals

valuable lessons...............................................................................May/June 4

New co-op ‘hubs’ help meet need for local food

in Wisconsin .....................................................................................Sept/Oct. 21

Brushett, Lynda

Multi-stakeholder co-op to bolster New Hampshire

fishing industry.................................................................................Sept/Oct. 24

Campbell, Dan

Fanfares for the common man ..............................................................July/Aug. 2

Global expansion reinforces CHS as a market leader...................May/June 24

Long-range work in China pays off for almond co-op ...................May/June 22

The Lure of Distant Shores

Co-ops share export strategies during USDA

Outlook Forum ................................................................................May/June 20

Telling the co-op story

USDA journal marks 80 years of promoting co-ops

as a powerful self-help tool .....................................................March/April 16

World demand for U.S. cattle genetics fuels

export growth..................................................................................May/June 27

Carson, Marlis

Antitrust challenges facing farmers and their cooperatives .........Jan./Feb. 22

Chesnick, David

Top 100 ag co-ops set sales, income records....................................Sept./Oct. 8

Cleland, Mary Ann

Co-op food market planned in South Carolina ................................May/June 33

Cook, David

Co-ops should periodically evaluate their member

equity practices...............................................................................Nov./Dec. 16

Crandall, James

USDA funds help reopen town’s only grocery ................................May/June 29

Cranford, Elaine

USDA funds help reopen town’s only grocery ................................May/June 29

Crow, Andrew

Peonies rising star of Alaskan agriculture .......................................Sept./Oct. 19

Erickson, Mary

Most Co-op Network members say 2012 was a solid

economic year..................................................................................Jan./Feb. 36

Eversull, Eldon E.

Grain, farm supply sectors lead way as ag co-ops set sales,

income records .................................................................................Sep./Oct. 4

Survey reveals co-op employee compensation trends................March/April 7

Foster, Julie

Simple Yoga & Wellness Co-op promotes health

in Montana.......................................................................................Sept./Oct. 34
Rural Cooperatives / November/December 2013 35

Frederick, Donald

Antitrust challenges facing farmers and their cooperatives .........Jan./Feb. 22

Garner, Fay

Here today, here tomorrow

Alabama co-op helps limited-resource growers process

and market produce ..........................................................................Jan./Feb. 7

Ginsburg, Laura

Going Local in Big Sky Country

Western Montana Growers Co-op to notch first $1 million

sales year...........................................................................................Nov./Dec. 4

Giszpenc, Noemi

Multi-stakeholder co-op to bolster New Hampshire

fishing industry.................................................................................Sept/Oct. 24

Hazen, Paul

Overseas co-op formations help reduce poverty,

fight hunger........................................................................................Nov./Dec. 8

Lambert, Molly

Smart Growth

Brattleboro Co-op’s development includes downtown

housing .........................................................................................March/April 32

Lawson, Aja

Keeping Their Co-op Alive

How the Isla Vista Food Co-op used ‘crowd funding’

to pave a new way .......................................................................March/April 4

Ling, Charles

The Co-op Nature of (the Affordable Care Act) CO-OP’s ................Jan./Feb. 32

Essential economic roles of farmer co-ops .....................................Nov./Dec. 20

Worker Cooperatives

Another variation on the co-op business model...................March/April 26

Lund, Margaret

Premier Co-op adapts equity policy to reflect changing membership

July/Aug. 34

Lux, Jay

Talent Management: It goes way beyond recruiting......................Nov./Dec. 18

Matson, James

Aquaculture providing opportunities for Virginia farmers

to diversify ..............................................................................................Sept./Oct. 31

Nelson, William

Raising the bar on safety ........................................................................Jan./Feb. 2

O’Brien, Doug

Cleveland Rocks (and Grows)! .............................................................Nov./Dec. 2

Patrie, Bill

New farmer-owned fertilizer plant being explored.........................Sept./Oct. 33

Pike, Sara

Cooperation Works members working for job growth,

stronger rural economy .......................................................................Sept./Oct. 36

Recca, Lee

Rocky Ford Renaissance

Colorado cantaloupe growers rebound after crisis ..................Jan./Feb. 10

Reynolds, Bruce

Indivisible Reserves

Some see unallocated equity as a way co-ops can

help fortify their future ..................................................................May/June 12

Bio-energy impact, base-capital financing among topics

at Farmer Co-op Conference .........................................................Jan./Feb. 17

Reid, Stuart

Initiative helping convert grocery stores into co-ops .....................Sept./Oct.25

Rinehart, Joe

A ‘Real Pickle’ for workers

Food processor re-forms as worker co-op to maintain

role in local food system................................................................July/Aug. 11

Effort launched to assist worker co-ops.......................................March/April 29

Shaw, Jessica

Aquaculture providing opportunities for Virginia farmers

to diversify........................................................................................Sept./Oct. 31

Stender, Carol

Equity Elevator & Trading Co. joins century club............................May/June 18

Taylor, David

USDA-supported programs help Mali farmers adapt

in hard times .....................................................................................Jan./Feb. 14

Thompson, Stephen A.

Birds of a Feather

Squab producers ‘flock together’ to process, market

through co-op .................................................................................May/June 16

ESOPS, worker co-ops each have advantages...............................Nov./Dec. 15

Growing a Cleveland Renaissance

Urban farming co-op boosts struggling neighborhood

with local foods, jobs .....................................................................Nov./Dec/ 12

Todd, Ann

Specialty Potato Alliance

Marketing alliance wins new buyers ‘one tastebud

at a time’.......................................................................................March/April 10

Tonsager, Dallas

The Co-op Way........................................................................................May/June 2

Tranovich, Anja

ACD/VOCA celebrates 50 years of expanding opportunities

worldwide..........................................................................................May/June 8

Trocha, Debbie

Central Indiana’s first food hub goes ‘LIVE”.....................................Sept./Oct. 32

Turbeville, Debbie

Co-op food market planned in South Carolina ................................May/June 33

Varnum, Steve

Co-op conversions help bring security to manufactured

housing owners................................................................................Jan./Feb. 28

Villines, Chris

Retired educator, part-time farmer remains dedicated

to schools.....................................................................................March/April 30

Voltz, Jeff

Business blooms rapidly for Northwest horticulture co-op..........Sept./Oct. 27

Wadsworth, James

Director Diligence

Co-ops should assess director skills for fulfilling duties..........July/Aug. 31

Wagner, Bob

Co-ops have a role in farmland preservation ....................................Sept./Oct. 2

Welch, Christie

From food hubs to brewpubs, cooperatives are

growing in Ohio...............................................................................Sept./Oct. 22
36 November/December 2013 / Rural Cooperatives

tribes, state or local governments,

corporations, agricultural producer

associations, higher education

institutions, public power entities or

consortiums of any of the above.

Sapphire Energy’s “Green Crude

Farm” in Columbus, N.M., is an

example of how this program is

supporting the development of

advanced biofuels. In 2011, USDA

provided Sapphire Energy with a $54.5

million loan guarantee to build a

refined algal oil commercial facility.

Algal fuel is processed from algae. It

releases CO2 when burned, but unlike

fossil fuel, the CO2 is taken out of the

atmosphere by the growing of algae.

The Green Crude Farm plant has

been in continuous operation since May

2012, producing renewable algal oil that

can be further refined to replace

petroleum-derived diesel and jet fuel.

The facility is a fully sustainable

project. Biomass not used in the

production of fuel will be recycled as

nutrients to support the algae ponds.

Reintroducing the residual biomass to

the pond systems significantly lowers

overall fertilizer requirements and the

carbon footprint.

According to the company, more

than 600 jobs were created throughout

the first phase of construction at the

facility, and 30 full-time employees

currently operate the plant. The

company expects to produce 100 barrels

of refined algal oil per day by 2015, and

to be at commercial-scale production by

2018. After receiving additional equity

from private investors, Sapphire was

able to repay the remaining balance on

its USDA-backed loan earlier this year.

In 2011, USDA issued a $12.8

million loan guarantee to Fremont

Community Digester for construction

of an anaerobic digester in Fremont,

Mich. The digester, which began

commercial operations late last year, is

the largest commercial-scale anaerobic

digester in the United States. It has the

capacity to process more than 100,000

tons of food waste annually to produce

biogas and electricity.

Biogas from the digester runs

generators, with 2.85 megawatts of

capacity. The electricity produced is

sold to a local utility and is providing

power for about 1,500 local homes.

Applications for biorefinery

assistance are due by Jan. 30, 2014.

More information about how to apply is

available in the October 2, 2013 Federal

Register announcement, or by

contacting Todd Hubbell at USDA

Rural Development, todd.hubbell@

wdc.usda.gov.

Since the start of the Obama

Administration, the USDA Biorefinery

Assistance Program has provided about

$684 million in assistance to support

biofuels projects in eight states. n

counter malnutrition and boost the

incomes of small dairy farmers,

including women. Strategies include

teaching farmers proper hygiene for

their animals and helping them connect

to processors, traders and consumers.

• In Malawi, Communications

Cooperative International is setting up

an information and communications

technology cooperative that will give

farmers access to market, management

and health information via a mobile

phone or Internet.

• In South Africa and Nicaragua,

Cooperative Resources International is

helping transform household-level

producers and their cooperatives into

profitable commercial firms.

• In Uganda, HealthPartners is working

with a health care cooperative to reduce

the effects of malaria and other

catastrophic illnesses.

• In Southern Sudan, after a 20-year

civil war, NRECA International

launched electrification projects that are

providing power to thousands of homes

and businesses.

• In Mexico, the World Council of

Credit Unions is working with a local

credit union to ensure that banana

farmers have sufficient assets to operate

their businesses and get a fair price for

their crop.

• In Mozambique, NCBA’s CLUSA

International Program helped establish

producer organizations that are

benefiting thousands of rural farmers

through economies of scale.

Stumbling blocks remain

Despite many positive outcomes,

however, OCDC members face

challenges. The lack of a legal and

regulatory framework for cooperatives

can be a major stumbling block in some

countries, while insufficient

documentation of the success of

cooperative development can hinder

funding efforts.

To address the legal framework issue,

OCDC devised a set of cooperative

business law principles that can be

applied in any country. To address the

documentation problem OCDC

recently created a research center that

will present clear evidence of the

effectiveness of international

cooperative development around the

globe.

Over the years, cooperative

organizations have lifted millions of

people out of poverty by helping those

in underdeveloped countries form and

grow their own businesses.

International cooperative development

is built on the same member-owned

model we see in this country — a model

that can compete successfully with

other forms of business anywhere in the

world. n

USDA to fund advanced

biofuels projects

continued from page 7

Overseas co-op formations help reduce poverty, fight hunger

continued from page 11
Rural Cooperatives / November/December 2013 37

that would employ people from a tough

neighborhood with not a lot of

opportunity.” OEOC had helped with

the two earlier Evergreen projects, so a

good relationship already existed

between the two organizations.

Much of OEOC’s work involved

financing the project. “Mary has a

background in production, and

Evergreen has its own formula for

employee ownership, so we didn’t have

to get too engaged in that,” says

Messing. “A lot of what we did was on

the financial side. I’m an ex-banker; we

worked a lot with building out their

plan, going back and forth on various

iterations of their projections, and

getting them connected with the right

folks to go out and make the market.”

The financial package was

complicated. “We worked with the

Commonwealth Revolving Loan Fund,

a separate entity that we manage that

was the key piece for the financing,”

says Messing. “We connected

Evergreen with other groups that

helped them round out their financial

plan.”

OEOC worked to develop operating

funds. Once it was demonstrated that

the operation could meet financial

projections, attention was turned to real

estate issues, Messing explains.

Evergreen’s own financial entity,

Evergreen Development Corporation,

did most of the work on the real estate

funding package.

Evergreen also provided the

financing for the pre-development

stage. “Everything that happened

before breaking ground, including the

design work, was funded from the

Evergreen Cooperative’s development

fund,” says Donnell. “It was paid back

at closing.”

City government

plays integral role

The Cleveland city government was

instrumental in making the project

possible. The financial package

included $8 million in U.S. Department

of Housing and Urban Development

(HUD) Section 108 Community

Development Block Grant funds, issued

through the city. Section 108 funds are

made available to communities for

economic development, housing

rehabilitation, public facilities and

large-scale physical development

projects. In addition, the city provided

$2 million under its own Brownfield

Redevelopment Program, which seeks

to provide land for new businesses and

encourage economic development in

hard-hit areas.

These and other funds were

leveraged into New Market Tax

Credits, under a U.S. Treasury program

that provides tax credit incentives to

investors purchasing bonds issued by

certified Community Development

Entities, which must invest in lowincome communities. The tax credit

equals 39 percent of the investment,

paid out over seven years. When the

seven years are up, the debt must be

refinanced. The entire start-up cost of

the project was $16.5 million.

New Market Tax Credits can’t be

used to finance operating expenses.

Thus, real estate must be held by a

separate trust and leased to the

operating entity — adding to the

complexity of the project.

“There was some back-and-forth

over which assets would be held by the

land trust and which by the operating

entity; we helped with that,” says

Messing. OEOC provided bridge

financing through the revolving loan

fund for expenses relating to

administration and other activities

before the construction was finished.

“There’s no reason to draw down the

operating loans until they’re close

enough to actually start the operation,”

he says.

Besides helping with the financing,

the city government also helped with

acquiring the real estate. “The city

purchased the land, and then we

purchased the land from the city,”

Donnell says. “The city has been a very

good partner of ours. It wanted the

greenhouse to be here. The city’s

Department of Economic Development

was really helpful in every way. But all

of it is part of a whole — support from

the top leadership, from the city

planning people — it was really

everybody’s commitment to the project

that was a huge component of making

this happen. I’m really grateful to the

city of Cleveland.”

Business will transition

to employee ownership

The operating company, organized

under Ohio cooperative law, will

become an employee-owned co-op

when employees who have worked

there at least a year are given shares. At

least two seats on the board of directors

are reserved for members elected from

among the employees. Donnell says the

company should have a positive cash

flow by the second quarter of this year.

“We have 25 employees that we’ve

hired since December, so we’re making

a difference,” Donnell says. “We had

31,000 hours of construction in 2012,

and all those people were buying gas for

their cars and eating lunch in the

neighborhood. So we started our

economic impact a year and a half ago.”

When asked for advice for others

contemplating such a project, Donnell

echoes economic development people

everywhere. “Be a problem solver, and

be persistent,” she says. “You need the

perseverance to make it happen.”

“My advice is to match the assets and

the needs of the community,” says

Donnell. “Make sure there’s a need for

your products and services; a robust

business plan is really important.”

Getting the right people to help is also

vital, Donnell stresses. “Certainly, you

have to build a coalition of people who

believe in the project and can bring

different skills to it. And hire the talent

you need, to bring the expertise in.”

“These are not easy things to do in a

city,” says Donnell. “But they’re

definitely worth doing and they can be

done. We’re living proof.” n

Growing

continued from page 14
38 November/December 2013 / Rural Cooperatives

the employee have “high potential,” are

they “well placed in their role,” or is

more time needed to evaluate the

person).

Review progress, measure and

follow up — After each talent review

session, it is important to evaluate the

processes and ask: “Are we achieving

the objectives we have for succession

management?”

Understanding engagement

Maximizing organizational results in

today’s market requires leaders to have

a keen understanding of what makes

people function at the highest levels.

With stiff competition for talent in

today’s marketplace, understanding

specific engagement factors is necessary

to retain the talent you work so hard to

attract.

A complete understanding of where

your organization is maximizing

engagement factors and where gaps

may exist allows you to take the right

steps to increase overall engagement

and improve organizational results. As

opposed to intuition and hunch, using

an instrument that is based on research

allows you to understand factors that

do, in fact, actually impact engagement.

The most successful organizations

make employee engagement an

ongoing priority. Research has shown

that engaged employees care about the

future of the company and are willing

to invest the discretionary effort to see

that the organization succeeds.

In today’s knowledge-based

economy, talent is the difference.

Attracting the right people and

retaining an engaged, competent team

will set you apart from the competition.

A clear, concise strategy that uses

validated tools and consistent processes

and tracking systems to recruit,

position and engage your talent can be

the difference between success and

failure. n

Management Tip

continued from page 19

expand cooperative education via this

magazine and the many other co-op

reports we publish. USDA Rural

Development is thus happy to help

spread the word about this promising

co-op project, and we hope that it can

be replicated elsewhere.

As the Evergreen cooperatives are

proving, co-ops are not only good for

farmers and rural people, but they can

also play a major role in sparking an

economic revival in urban settings. And

that’s something all Americans have a

stake in.

As one Evergreen co-op member

says, “It’s not just a job, it’s a future.” n

Commentary

continued from page 2

A cooperative does not own the

assets for producing the milk that the

cooperative markets for its members;

the assets and the investment hazard

associated with asset specificity belong

to member-farms. By pooling members’

milk in its marketing efforts, the

cooperative, in essence, also pools

members’ investment hazard.

As a result, each member’s share of

the hazard conceivably is less than if

they individually market their products.

The fact that asset specificity and the

associated investment hazard belong to

individual members reaffirms the

cooperative’s unique economic structure

of being an aggregate of its memberfarms.

Variations on the

cooperative business model

Cooperative organizations represent

the aggregates of economic units. The

intrinsic cooperative structure entails

the uniqueness of the cooperative’s

organization, governance, equity

financing and operation. Different

commodities have their own

characteristics and different types of

cooperatives have their own special

attributes.

Laying out each type of cooperative

(or each cooperative) in the format of

table 2 (page 23) provides a comprehensive view of their similarities and

differences. Most variations occur in the

area of operation, where the

cooperative’s commodities, lines of

business and transaction governance

modes determine how it operates.

References • Emelianoff, Ivan V. Economic Theory of Cooperation:

Economic Structure of Cooperative Organizations,

Washington, D.C. 1942 (litho-printed by Edwards

Brothers, Inc., Ann Arbor, Michigan), 269 pages.

• Galbraith, John K. American Capitalism: The Concept of

Countervailing Power, revised edition, Houghton

Mifflin Company, Boston, 1956; esp. Chapter XI, The

Case of Agriculture, pp. 154-165.

• Hess, Jerry N. Oral History Interview with Dr. Edwin G.

Nourse, Washington, D. C., March 7, 1972, Harry S.

Truman Library, Independence, Missouri.

http://www.trumanlibrary.org/oralhist/nourseeg.htm.

• Nourse, Edwin G. “The Economic Philosophy of CoOperation,” American Economic Review, Volume XII,

No. 4, December 1922, pp. 577-597.

• Nourse, Edwin G. “The Place of the Cooperative in

Our National Economy,” American Cooperation 1942 to

1945, American Institute of Cooperation, 1945, pp. 33-

39.

• Shaffer, James D. “Thinking about Farmers'

Cooperatives, Contracts, and Economic

Coordination,” Cooperative Theory: New Approaches,

ACS Service Report Number 18, U.S. Department of

Agriculture, Agricultural Cooperative Service. July

1987, pp. 61-86.

• Williamson, Oliver E. “The Theory of the Firm as

Governance Structure: From Choice to Contract,”

Journal of Economic Perspectives, Volume 16, number 3,

summer 2002, pp. 171-195.

• Williamson, Oliver E. “The Economics of

Governance,” American Economic Review, 95 (May

2005), 1-18.

• Williamson, Oliver E. “Transaction Cost Economics:

An Introduction,” Economic Discussion Papers,

Discussion Paper No. 2007-3, March 1, 2007.

http://www.economics-ejournal.org/

economics/discussionpapers/2007-3.

• Williamson, Oliver E. “Transaction Cost Economics:

The Natural Progression,” American Economic Review,

100 (June 2010): 673-690. (Prize Lecture, the Sveriges

Riksbank Prize in Economic Sciences in Memory of

Alfred Nobel 2009, Stockholm University, Sweden,

December 8, 2009).

• American Heritage Dictionary of the English

Language, New College Edition, Houghton Mifflin

Company, Boston, 1976. n

Essential economic roles

continued from page 23

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40 November/December 2013 / Rural Cooperatives

How well is your co-op doing?

Does it measure up in comparison with others?

This report helps you find out.

A survey of 2,238 U.S. farmer, rancher and fishery

cooperatives, ending their business year during

calendar year 2012, showed that ag co-ops had a

record year, with a net business volume of $235

billion and net income (before taxes) of $6.1 billion.

This USDA web-only publication presents a wealth of detailed information

about the nation’s cooperatives in 2012, including co-op assets, financial ratios and numbers of

members and employees. Balance sheets and income statements for various co-op commodity

sectors are presented, both by size and products sold, to help management and board members

see how their cooperatives compare with similar cooperatives.

Available now! Get it online at: www.rurdev.usda.gov/BCP_Coop_SRs.htm.