USDA / Rural Development March/April 1999

Electric Co-op

Breaks Barriers in

North Carolina
There has been a lively debate in recent years

regarding what types of governmental programs are

best carried out by state government, and which are

best left to the federal government. This debate directly impacts some cooperative operations.

In the state of Iowa, for example, the ongoing hogprice crisis resulted in the introduction of legislation

that would force cooperatives to pay equity to member

owners on demand. States in the Northeast and

Southeast regions have debated and, in some cases,

established compacts that set prices for fluid milk.

There has been a heated debate in Colorado over

requiring installation of covers over lagoons that store

waste from large-scale hog farms, some of which are

owned by cooperatives. 

Farm supply cooperatives that handle anhydrous

ammonia have been challenged to protect storage

tanks that have been subject to thefts by drug dealers.

The Missouri legislature recently considered legislation that would provide funds for grants and other

assistance to aid development of new value-added

cooperatives. 

The list goes on, but all these examples make an

important point: legislative bodies — at both the state

and federal levels — are constantly weighing proposals that directly affect the day-to-day operations of

cooperative-owned businesses at the local, regional

and national levels. In response, cooperatives have to

use their associations and allied groups to fend for

themselves in promoting constructive laws and regulations and prohibiting harmful ones.

At the state level, this role has historically been

filled by statewide cooperative councils, institutes or

associations. They are a mouthpiece for all co-ops in

their state and perform an important leadership role in

coalescing cooperative positions on various legislative

and administrative issues. They are also instrumental

in supporting university and high school programs in

education about cooperatives. 

While regional cooperatives play a similarly important role in dealing with state legislatures, they often

do not capture the local cooperative’s positions on critical issues in the representation process. For this reason, state councils must be supported by local cooperatives so they remain vigilant on issues affecting their

well-being. 

In an era of considerable structural change, cooperative leaders cannot afford to overlook the continuing role and importance of having a strong mouthpiece

at the state level to deal with issues important to their

survival and prosperity.

Randall Torgerson,

Deputy Administrator for Cooperative Services

USDA Rural Business-Cooperative Service

2 March/April 1999 / Rural Cooperatives

Exercising Vigilance Over State Laws Important Role of 

State Councils
4 Iowa Cooperatives Lead Nation in Business Volume

USDA’s 1997 statistics show Minnesota in second place, longtime

leader California in third

Charles A. Kraenzle

7 Roanoke Electric Breaks Through Barriers 

This small North Carolina co-op makes history as it opens the

doors of leadership to blacks

Catherine Merlo

12 At Your Disposal 

Smaller livestock operations can reduce pollution and large capital

expenditures by forming a waste management cooperative

R. Wade Binion

14 Cooperatives Online

Co-ops are staking their claim in the boomtown called the Internet

Patricia Miller

19 Restocking the Breadbasket

Cooperative development efforts in Ukraine are helping farmers

rebuild their agricultural system

Jerry C. Namken

29 Getting Involved: What Makes Co-op Members Join In?

USDA study of North Central dairy farmers indicates several

characteristics, from board satisfaction to farm size, contribute to

participation

Thomas W. Gray and Charles A. Kraenzle

11 A CLOSER LOOK AT...

25 IN THE SPOTLIGHT

26 NEWSLINE

31 PAGE FROM THE PAST

RURAL COOPERATIVES (1088-8845) is published bimonthly by

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determined that publication of this periodical is necessary in the

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Mention in RURAL COOPERATIVES of company and brand

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Unless otherwise stated, contents of this publication are not

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discrimination in all its programs and activities on the basis of

race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not

all prohibited bases apply to all programs). Persons with disabilities who require alternative means for communication of program information (braille, large print, audiotape, etc.) should

contact USDA’s TARGET Center at (202) 720-2600 (voice and

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To file a complaint of discrimination, write USDA, Director,

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call (202) 720-5964 (voice or TDD). USDA is an equal opportunity provider and employer.

Dan Glickman, Secretary of Agriculture

Jill Long Thompson, Under Secretary,

Rural Development

Dayton J. Watkins, Administrator,

Rural Business–Cooperative Service

Randall Torgerson, Deputy Administrator,

RBS Cooperative Services

Catherine Merlo, Editor

USDA Design Center, Design

Rural

March/April 1999 

Volume 66 Number 2

Have a cooperative-related question? Call 

(202) 720-6483, or FAX: Information Director,

(202) 720-4641.

This publication was printed with vegetable oil-based ink.

On the Cover: Matthew Grant, board president of the Roanoke Electric Cooperative,

and Gene Bennett, owner of Bennett Farms,

which thrives on electric power supplied by

the co-op. In the background is Bennett’s

grain elevator. Bennett is a member of the

co-op’s Care Trust Board, which reviews

grant applications for community projects.

USDA Photo by Ken Hammond

Story on pages 7-10.
4 March/April 1999 / Rural Cooperatives

Charles A. Kraenzle

Director, Statistics Staff

USDA Rural Development 

Editor’s note: Information for this article

was collected by members of the statistics staff of USDA’s Rural Business-Cooperative Service: Celestine C. Adams,

Katherine C. DeVille, Jacqueline E. Penn

and Ralph M. Richardson.

I owa surged into first place in business volume among the nation’s

cooperatives during 1997, taking

over the top spot held by California for the

previous 10 years.

Iowa cooperatives, with $10.9 billion in

business volume, led all states in 1997.

Minnesota co-ops, with $9.8 billion, ranked

second and California co-ops, with $9.1 billion and the leading state in 1995, placed

third. California co-ops had led the nation

in business volume since 1987. Iowa was

the nation’s leading farm co-op state from 

1979 to 1985. Prior to 1979, California coops had led the nation since 1951, when

USDA began compiling state-by-state data.

In 1995, Iowa was the second leading co-op

state, followed by Minnesota. 

Increased marketings of farm products,

especially grains and oilseeds, and

increased volume of farm supplies helped

Iowa and Minnesota co-ops move up to the

top among the states. Wisconsin, with $6.5

billion, and Illinois, with $6 billion,

remained as the fourth and fifth leading

states (Table 1 and Figure 1). 

Cooperatives in these five states

accounted for $42.4 billion, or 39.8 percent,

of the $106.5 billion in total net business

volume handled by the nation’s 3,791 agricultural cooperatives in 1997. This compares with $36.1 billion (38.5 percent) of

the $93.8 billion generated by the nation’s

co-ops in 1995. They also accounted for

32.4 percent of the total co-op memberships and 36.2 percent of all co-ops in 1997,

compared with 28.7 percent of memberships and 31.8 percent of co-ops in 1995. 

Marketing sales (derived from sale of

crops and livestock) accounted for 72.2 percent of the business volume handled by coops in these five states in 1997, down from

77.5 percent in 1995. California co-ops,

with $8.2 billion, led all states in farm

marketings, followed by Iowa ($7.9 billion)

and Minnesota ($7.4 billion) in 1997. In

fact, marketings accounted for 89.9 percent of California co-ops’ total business volume, down from 92 percent in 1995. 

In Iowa, marketings accounted for 72.7

percent and sales of farm supplies accounted for 24.9 percent of the total business

volume in 1997. Service revenues and other income accounted for the remaining 2.4

percent. 

Iowa Cooperatives Lead 

Nation in Business Volume 

USDA’s 1997 statistics show Minnesota in second place, longtime leader California in third 

Figure 1— Co-ops’ Total Net Business

Volume, Leading States, 1997

0

Thousands

Service

Supply

Marketing

MN IL IA WI MO

300

250

200

150

100

50

400

0

Number

Service

Supply

Marketing

MN ND TX IA WI

350

300

250

200

150

100

50

12

10

8

6

4

2

0

$ billion

Service

Supply

Marketing

IA MN CA WI IL

Figure 2— Number of Co-ops by Function,

Leading States, 1997

Figure 3— Co-ops Memberships by

Function, Leading States, 1997
Rural Cooperatives / March/April 1999 5

California co-ops’ sales of farm supplies

($0.4 billion) accounted for only 4.3 percent of total business volume in 1997. 

Service revenues and other income

($0.5 billion), the highest of all states, was

even higher at 5.8 percent.

Leaders in number of co-ops

Minnesota, North Dakota, Texas, Iowa,

and Wisconsin were the leading states in

number of cooperatives (as determined by

co-op headquarters locations), the same as

reported in 1995. These five states were

home to 1,372 (36.2 percent) of the nation’s

co-ops in 1997, down from 1,447 co-ops and

up from 36.1 percent in 1995 (Figure 2). 

Among the five leading states, Minnesota had about an equal number of marketing and farm supply cooperatives. Texas

had the largest number and proportion of

service co-ops (mainly cotton ginning),

while Wisconsin showed the largest proportion of farm supply cooperatives. Minnesota, however, had the largest number

of farm supply co-ops. 

New York (63), Minnesota (45) and Wisconsin (31) led all states in number of dairy

cooperatives. California (71) and Florida

(27) accounted for 37.8 percent of all fruit

and vegetable cooperatives. Grain cooperatives were most predominant in Iowa

(133), North Dakota (133), Kansas (124),

Illinois (123), and Minnesota (107). These

states accounted for 61.1 percent of all

grain cooperatives, up from 60.5 percent

in 1995.

Minnesota, Illinois, Iowa, Wisconsin,

and Missouri led all states in number of

cooperative memberships with 1,050,799,

or 32.4 percent, of the total cooperative

memberships in 1997 (Figure 3). Among

these states, Illinois exhibited the largest

percentage of memberships (62.4 percent)

in marketing cooperatives. Missouri

showed the largest percentage of memberships in farm supply cooperatives, and

Wisconsin the largest in service co-ops.

Overall, nearly one-half of the memberTable 1 — Farmer cooperative numbers,1

memberships and business volume by

state, 1997 2

Cooperatives headquartered Memberships Business 

in state in state 3volume 4

————Number———— Mil. dol.

Alabama 63 53,791 1,403

Alaska 9 7,675 65

Arizona 10 46,757 738

Arkansas 60 63,242 1,983

California 185 56,715 9,109

Colorado 51 33,648 1,004

Connecticut 4 3,174 205

Delaware 3 25,978 98

Florida 46 27,124 2,485

Georgia 21 25,059 1,900

Hawaii 32 13,397 115

Idaho 41 23,079 1,181

Illinois 203 233,229 6,034

Indiana 60 90,915 2,540

Iowa 223 187,858 10,941

Kansas 148 135,007 3,970

Kentucky 42 136,427 1,078

Louisiana 50 13,556 792

Maine 24 9,214 217

Maryland 18 36,624 417

Massachusetts 14 5,050 655

Michigan 73 73,780 2,229

Minnesota 368 296,058 9,771

Mississippi 83 109,937 1,174

Missouri 75 156,093 3,718

Montana 79 28,995 743

Nebraska 127 109,547 5,077

New Jersey 19 7,724 345

New Mexico 9 8,311 608

New York 96 50,369 2,595

North Carolina 29 72,335 885

North Dakota 297 129,445 3,301

Ohio 95 75,222 2,998

Oklahoma 101 75,431 1,103

Oregon 40 21,747 2,052

Pennsylvania 60 53,378 1,983

South Carolina 6 3,745 378

South Dakota 145 110,927 2,826

Tennessee 79 141,185 722

Texas 272 128,831 3,669

Utah 21 11,550 691

Vermont 5 6,340 397

Virginia 63 93,068 742

Washington 91 30,991 3,271

West Virginia 20 26,202 162

Wisconsin 212 177,561 6,549

Wyoming 14 4,690 162

Other States 5 2,793 163

Foreign 5,034 1,232

United States 3,791 3,238,808 106,474

1/ Includes independent local cooperatives, federations, centralized regional cooperatives,

interregional and cooperatives with mixed organizational structures.

2/ Data covering operations of cooperatives ending their business year during 1997. Data for

states with fewer than three cooperatives or where disclosure is a problem are included with

other states. Totals may not add due to rounding.

3/ Includes farmer members (those entitled to vote for directors) but not nonvoting patrons.

Duplication in these membership numbers occurs because many farmers belong to more than

one cooperative.

4/ Excludes intercooperative business.
ships in the five states were in farm supply

cooperatives. 

Iowa led all states in volume of farm

supplies sold, followed by Minnesota and

Illinois. Cooperative supply sales in Iowa

totaled more than $2.7 billion, Minnesota

$2.2 billion and Illinois $1.7 billion. Leading states in marketing volume were California, Iowa, and Minnesota with $8.2 billion, $7.9 billion and $7.4 billion,

respectively. Iowa was the leading state in

cooperative sales of feed, crop protectants,

fertilizer and petroleum. Illinois co-ops led

all states in seed sales and Wisconsin led

all states in sales of other types of supply

sales.

Information on farmer cooperative

activity in individual states is collected

every other year through USDA’s annual

survey of farmer cooperatives. Data are

requested on memberships by state, origin of farm products marketed and destination of supplies and equipment. These

data are tabulated to show memberships

and commodity business volumes at the

state level.

Total net business volume (excluding

business done between cooperatives) in

1997 reached $106.5 billion, equal to the

record set in 1996. This includes marketing (the value of products sold, bargained

for or handled on a commission basis),

farm supplies (sales of fertilizer, crop protectants, petroleum, feed, and other supplies to members and patrons) and receipts

from services, such as trucking, storage,

ginning, drying, and artificial insemination and other income. ■

Strong Co-op Themes Emerge 

at Conference

More than 150 leaders from cooperatives, universities and government got a healthy dose of ideas for innovative roles and actions for

cooperatives at the Farmer Cooperative 2000 Conference, held in

Minneapolis, Minn.

Sponsored by the University of Wisconsin Center for Cooperatives

and the Farm Foundation, the conference was designed to serve as a

catalyst for invigorated thinking about the future of farmer cooperatives. Speakers from cooperatives and government, along with university researchers and educators, assessed the powerful forces associated

with an increasingly globalized and industrialized agriculture. They also

considered what approaches farmer cooperatives should embrace to

realize their full potential.

It was clear from the conference discussion that there is no shortage

of models and ideas for farmer cooperative strategies. Several common

themes emerged from the discussion.

• Key drivers from global and industrial trends in agriculture mean

cooperatives need to re-evaluate strategies;

• Producers have a need for cooperatives to deliver financial returns

to them and innovations in producer programs;

• Co-op size is important but excelling is essential;

• Finding adequate capital is a constant challenge. As they seek new

business structures and alliances, cooperatives have an increasing need

for capital, people resources and knowledge;

• Increasingly, cooperatives are tying equity capital to marketing

rights;

• While exporting and global strategy is debated, there is no debate

about the impact of global markets;

• The role of co-ops when government supports are reduced is an

area for policy and business evaluation;

• Human assets of the cooperative and board and member education

are more vital than ever;

• Don’t forget the value of cooperation, including networks, associations and bargaining.

For a more detailed summary on the conference, go to the U.W.

Center for Cooperatives’ Web site at www.wisc.edu/uwcc.
Roanoke Electric Breaks 

Through Barriers

Rural Cooperatives / March/April 1999 7

Catherine Merlo

Editor

Last December, one of the worst ice

storms in recent history struck

several Eastern states. In North

Carolina alone, nearly 40,000 co-op customers spent Christmas without power. 

Among the hardest hit areas in the

state was the territory served by the

Roanoke Electric Cooperative in northern

North Carolina, where 3,000 residents had

no electricity. For three long, hard days,

from December 23-26, co-op manager Curtis Wynn, his office staff and his line crews

scrambled round the clock to repair the

damage caused to major circuits and a substation by ice-laden power lines and trees. 

While residents pulled out their candles

and flashlights, Wynn and his employees

sacrificed their holidays to restore power

as quickly as possible. By Saturday afternoon, the day after Christmas, the lights

were on for all of the co-op’s members. 

For Wynn, the storm had been reminiscent of the power outages he had experienced with hurricanes when working for

a Florida electric cooperative. It was also

symbolic of his tenacity and ability to overcome obstacles in order to obtain his goals,

including the cooperative position he now

holds. 

Up from poverty

Wynn grew up in a poor family, one of

10 children. He worked his way through

college and earned a business degree. His

resume includes nearly 20 years of progressive experience at electric cooperatives.

He has a wife and children. But unlike any

other chief executive officer among U.S.

electric co-ops, Wynn is black. 

In an industry that counts few blacks

in leadership positions, Wynn is the first

black CEO of an electric co-op in North

Carolina, and perhaps the only black CEO

of a rural utility in the nation. 

Roanoke Electric is also the only known

electric association among the nation’s

roughly 1,000 electric co-ops to have — not

just a black CEO — but, concurrently, a

black board president and a black majority of directors.

How did this small rural association,

which ranks 21st in size among North Carolina’s 28 electric co-ops and serves four of

the poorest counties in the state, achieve

this diversity in its leadership?

“The credit for this goes to the people

of this area who have struggled to provide

opportunities for minorities,” says Roanoke

Electric’s Marshall Cherry, manager of

member services and marketing. Cherry

himself is the only black in North Carolina

to hold that title at an electric co-op, and

only the second at Roanoke Electric.

Based in the town of Rich Square, N.C.,

Roanoke Electric counts 13,800 members,

55 percent of whom are black, and nearly

all of whom are dependent on agriculture

for their living. They raise tobacco,

peanuts, corn and some cotton, across a

seven-county area in northern North Carolina. 

Named for the nearby Roanoke River,

the co-op was formed in 1938 to provide

electricity to area residents. There were

317 members when Roanoke Electric first

energized its original 56 miles of line in

May 1939. The co-op’s distribution system

Roanoke Electric Breaks 

Through Barriers

This small North Carolina co-op makes history 

as it opens the doors of leadership to blacks
has now expanded to more than 2,000

miles of line. Today, 95 percent of Roanoke

Electric’s demand, or “load,” is residential. 

As a co-op, it takes membership votes

to put a board in place. And by that reckoning, the members of Roanoke Electric

are responsible for making their co-op the

first in the state to put blacks in key leadership positions. 

But Wynn is even more specific. “It’s all

because of the vision of Matthew Grant,”

he says.

First, the board

At 80, Grant has seen change of almost

every kind sweep his North Carolina

homeland. Born poor, Grant grew up on a

farm in Northampton County, not far from

where he lives today. When he was six, his

father died. His mother, says Grant,

remarried ”a good man” who helped pull

the family through the Depression. When

World War II broke out, Grant went to

work in the shipyards of Virginia. He married and, after the War, returned home to

farm. He became a member of Roanoke

Electric in 1947.

But Grant wasn’t happy with what he

saw. Blacks were almost never hired at

Roanoke Electric. “The janitor was black,”

Grant says. Black members, who made up

the majority of the county, were not always

treated well. “If you had a problem with

8 March/April 1999 / Rural Cooperatives

(Top) Serviceman Bill Parker was one of

many Roanoke Co-op employees who

worked round the clock to restore power

to customers when North Carolina was

hit by one of the worst ice storms of the

century last winter. Photo courtesy Roanoke

Electric Cooperative

(Bottom) Curtis Wynn and Line

Superintendent Gordon Ray take a

reading at one of the co-op’s newest

electrical substations.
Rural Cooperatives / March/April 1999 9

your electricity or your bill, you were talked

to like you were nothing,” Grant says.

But through the 1950s and 1960s, as

the civil rights movement spread, the black

members of Roanoke Electric began to

object more openly to the way they were

treated and to having no voice in their

association.

“In March 1969, due to pressure from

the membership, the board appointed Rascoe Gilliam and me to serve as directors,”

says Grant. “At the annual meeting a few

months later, we were voted in by the

membership.”

The two men had become the first black

board members of any electric cooperative

in North Carolina. But even then, Grant

felt he had little power. “The other board

members weren’t rude, but I had no real

say-so until we finally got a black majority,” Grant says. “It took more than 20 years

to get to that place.” 

As other board members served out

their terms or died, Grant worked hard to

encourage more black members to run for

the board. “I’d tell them that the board is

what makes the policies of the co-op,”

Grant says. “Once you’re on the board, you

can have some say-so. You’ll be able not

only to get to know the general manager

but you’ll be able to vote in the one that

you think best.”

Finding black co-op members to run for

the board wasn’t easy, Grant found. “So

many of them had been taught that their

vote just didn’t count,” he says.

But by 1991, Roanoke Electric’s board

had a black majority. Five of its nine directors were black. In 1993, Grant was elected board president. “My first goal as president was to get more jobs for blacks at our

co-op,” he says. Well aware that the board

doesn’t hire the co-op’s employees, Grant

looked for ways to open doors for blacks.

Gradually, more blacks began to fill better-paying jobs at the co-op.

And then an even greater opportunity

arose. Roanoke Electric’s general manager

announced his plans to retire. It was the

board’s responsibility to hire a new manager. And, just maybe, Grant thought, it

was a chance to open the door to a black

candidate.

Opening the door

Five hundred miles away, at an electric

cooperative in Florida, Wynn had reached

the lowest point of his career. For 17 years,

he had worked at the company, starting as

a truck washer while still in high school.

He had risen through several positions to

become vice president of marketing and

member services. He reported directly to

the CEO.

But when the CEO’s position became

open in 1997, Wynn says he received only

a perfunctory first interview. “I was given

no official reason except that someone else

was more qualified than I,” says Wynn. “I

didn’t buy that.”

Only 34, Wynn began to ponder his life

and future career. Then Wynn got a phone

call from a friend in Atlanta, who told him

about the CEO opening at Roanoke Electric. “I had no intentions of applying for

Harold Miller and students in his

Environmental Science and Electric

Vehicle Technology class at Northampton

County High School East celebrate

another winning performance by an

electric-powered car built by students at

the school. The car runs on 16, 6-volt

batteries, which are energized by a solarpowered charger provided by Roanoke

Electric Cooperative. The school hosts

an electric car race open to all schools

every October (for more information, call

Miller at (252) 585-0627).
10 March/April 1999 / Rural Cooperatives

it,” says Wynn. “I saw those ads all the

time.”

But his friend, who is white, insisted

that Wynn look into Roanoke Electric. The

friend told Wynn about Roanoke Electric’s

black-majority board, and that it was

rumored black applicants might have a

chance. “He saw opportunity for me at

Roanoke Electric,” Wynn says. “The more

I inquired, the better I felt about what was

happening at Roanoke.” 

Once again, Wynn got only one interview. But this time, the outcome was much

different. Two hours after the interview,

Roanoke Electric extended an offer to

Wynn. He accepted, and began managing

the co-op on Oct. 13, 1997.

“This is the opportunity of a lifetime,

and one that I never imagined would

become a reality,” Wynn says. He praises

Roanoke Electric’s diverse board for giving him a fair chance to compete for the

position. “I was chosen based on my merits and abilities, nothing else.”

Roanoke’s board had interviewed both

white and black candidates. “But Curtis

was the one with the best resume,” says

Grant. “He was the one we liked the best.”

Making changes

Wynn is not only the first black CEO at

an electric co-op but, at 35, is one of the

youngest. He has been described as eager,

aggressive and knowledgeable. Already,

Wynn has begun implementing changes

he thinks are necessary to bring progress

to Roanoke Electric, its members and its

57 employees. He has worked to modernize

the co-op’s computer network system and

to boost staff development. 

“We have an excellent group of employees who are eager to move our organization into the next century,” he says. “They

have expanded their horizons to better

serve our members.”

With an eye on energy deregulation,

Wynn has begun exploring how the co-op

might diversify into other products and

services, such as selling propane gas 

through a joint venture. As an energy services provider, Roanoke Electric might one

day become an Internet Service Provider

or sell home security systems. “We’re considering different approaches,” Wynn says.

Wynn is also trying to get local youths

to take advantage of opportunities, such

as Rural Electric Youth Tours and scholarships, which can show them the opportunities that lie outside of their immediate environment. To co-op members, Wynn

stresses the importance of attending meetings, of joining committees, of running for

various positions. “If you’re not in that

group of decision makers, you never know

about the opportunities and possibilities,”

he says.

Aware of the impoverished economic

base in Roanoke Electric’s service area,

Wynn established an economic development department at the co-op. “We’re trying, through various loans and grants that

are available, to bring more industry and

jobs to this area,” says Wynn.

“We’re trying to make a big difference

in this community,” he adds. “We want to

be more than an electric company that collects from people who can barely pay their

bills. We want to make Roanoke Electric

a huge, visible giant in the community we

serve by giving back as much as we can.”

The leadership Wynn provided in dealing with the ravages of the ice storm last

December is just one example of how the

co-op’s new manager is fulfilling the

promise the board sees in him. “Curtis is

doing a tremendous job of leading this

organization into the next millennium,”

says Grant, “and everyone who works for

us is proud that we found him.”

If there was ever a high point in Wynn’s

life, it’s now, he says, “career-wise, familywise, spiritually.”

And if Roanoke Electric ever had a finer hour, it would be hard for people like

Matthew Grant and Marshall Cherry to

know when that might have been. They

are convinced that their co-op shines like a

beacon, offering proof that a qualified individual such as Wynn can succeed when

given a chance, and sending hope that

opportunities do exist for minorities in the

rural electric industry. ■

North Carolinians—such as Linfent Rose

(left) and Terrica Binson—throughout

Roanoke’s service territory count on their

cooperative to deliver quality service.
Co-op type: Agricultural

marketing co-op engaged in

harvesting, packing, marketing and sales of a wide range

of cut ferns and other foliage

for floral use. Formed in 1986.

Geographical area

served: FernTrust sources its

core products from member

acreage in two north-central

Florida counties. The co-op

also acquires complementary

foliage products from the

Pacific Northwest, Central

and South America and Italy.

CEO: William M. Dellecker, executive vice president.

Number of plants/locations: FernTrust members

produce ferns and other

foliage on 328 acres in Florida. (The state supplies some

80 percent of the cut foliage

used by U.S. florists.) When

the foliage is harvested, it’s

processed in the co-op’s central packing facility in Seville.

In 1994, FernTrust renovated

a historic citrus packinghouse

and converted the 24,000-

square-foot building to a

state-of-the art facility for cut

foliage processing. The building features a system of special coolers to condition foliage

for maximum post-harvest

life. This Fern-Cool process is

unique to FernTrust.

Annual product volume/sales revenue: In 1998,

FernTrust processed nearly 4

million bunches of cut foliage,

representing $4.5 million in

sales.

Number of members: 14.

Number of employees:

100.

Markets: In addition to a

diverse floral customer base

throughout North America,

FernTrust generates nearly

40 percent of its sales through

exports to Great Britain, the

Netherlands, Saudi Arabia

and the Netherlands Antilles.

What’s unique about

this co-op: “The fern industry is characterized by many

small, independent growers,

and relatively few large grower-shippers,” says Dellecker.

“FernTrust ranks among the

larger companies and is the

only marketing cooperative of

its type in the industry.”

FernTrust has distinguished

itself by establishing grades

and standards for cut foliage

and by offering custom packing services.

Biggest changes/trends

taing place in the fern

industry? Distribution and

buying in the United States

and international floral markets are consolidating as

regional wholesalers join

together. Very significant

national consolidations have

taken place within the last

year. “Additionally,” says Dellecker, “supermarkets are

steadily becoming a much

bigger factor in the floral

industry as they move beyond

simply offering pre-made

flower bouquets.” At a producer level, higher cultivation

and labor costs have squeezed

margins since market pricing

has remained stagnant or

even declined in some cases

due to market pressure from

large wholesale buyers.

Philosophy that drives

this co-op: “FernTrust’s

grower-members bring

together a cooperative trust of

acreage, assets, talents and

efforts,” Dellecker says. “This

base supports a continuing

commitment to earning their

customers’ trust by providing

floral products of exceptional

quality and value, backed by

dedicated customer service.”

Plans to keep viable in

the 21st century: To concentrate on continued development of its value-added services directed to the needs of

different market segments.

Also, to work in partnering

relationships with existing

key customers and potential

new ones. “These efforts are

aimed at creating market

recognition and stimulating

demand for FernTrust’s products rather than having them

perceived only as commodities in a market that’s historically been dominated by this

view,” Dellecker says. 

FernTrust also is studying

opportunities for achieving

further consolidation at a producer level to present an even

stronger source of production

to the larger consolidated

buying and distribution

groups emerging in the floral

industry. “Such producer consolidations should also help

growers restore, and then

maintain, satisfactory margins,” says Dellecker. ■

Rural Cooperatives / March/April 1999 11

FernTrust Inc.

Seville, Florida

A CLOSER LOOK AT...

(Left) A modern FernTrust

Leatherleaf fernery near

Seville, Fla. (Below) FernTrust

produces a variety of

specialized foliage products

ready for sale in supermarket

floral departments. Photos

courtesy FernTrust
12 March/April 1999 / Rural Cooperatives

At Your Disposal

Smaller livestock operations can reduce pollution and large capital

expenditures by forming a waste management cooperative

R. Wade Binion

Agricultural Marketing Specialist

Although the farming community generally has a high regard

for environmental conservation

and pollution control, livestock owners are

constantly faced with the challenge of

increasing production while still using

environmentally sound management practices. Most farm operations have been voluntarily addressing this issue for years,

regardless of the size of their operation.

However, the disposal of livestock waste

in accordance with governmental regulations will continue to be a growing concern.

Very often pollution in our waterways

and groundwater is attributed to runoff

directly from livestock operations or as the

result of manure spread on cropland as

fertilizer. “Dairy Waste Causing a Stink”,

or “Maryland Lawmakers Pressured on

Farm Pollution” are just two examples of

articles that have appeared in various publications throughout the country in the

past few months.

Pollution concerns

In the summer of 1997, an outbreak of

the microbe Pfiesteria piscicida in the

Chesapeake Bay caused the death of thousands of fish in the waters of Maryland

and Virginia. Some scientists believe the

widespread presence of Pfiesteria piscicida resulted from high levels of nitrogen

and phosphorus in bay waters, with the

probable source being runoff from surrounding farms that use manure-based

fertilizers. In response, states that border

the Chesapeake Bay have proposed various limits and controls on the use of

manure based fertilizers.

These types of controls are not unique

to the Chesapeake Bay area. In North

Dakota, for example, state law prohibits

the feeding of livestock within 60 feet of

the top bank of a lake or stream. And Ohio

has established an Animal Waste Pollution Abatement Program. This program

requires operators of facilities with more

than 1,000 animal units, or that maintain

a controlled discharge waste management

system, to obtain approval and other permits from the Ohio Environmental Protection Agency (EPA) to operate a manure

management plan. Other state regulations range from strict mandatory restrictions to voluntary guidelines designed to

assist farmers in alternative means for disposal or use of animal waste.

Pollution from livestock operations has

also become a federal concern. In March

1999, Vice President Gore released the

National Strategy for Animal Feeding

Operations. Developed jointly by the United States Department of Agriculture

(USDA) and the federal EPA, this document is designed to control the disposal of

waste by both growers and processors of

animals. The federal strategy should also

ensure that all states enforce the same regulations.

Waste management practices

Farmers have been voluntarily addressing pollution from water runoff from individual farms through the use of “best management practices.” These practices are

designed to control non-point source pollution. They involve either diverting water

away from stored manure or controlling

the flow of runoff water away from existing

bodies of water through the use of vegetative cover, terracing, conservation tillage,

controlled grazing, and diversion systems.

Other more intensive waste management systems available to livestock and

poultry operations include composting, solid separators that use anaerobic or aerobic digestion, and bio-digestion. Most of

these systems can be designed to fit various sizes and types of operations. However, each one can require a large initial capital investment and can be very labor

intensive to operate.

Composting, which is widely used in

the poultry industry, breaks down the

organic matter of animal waste under controlled conditions. The resulting end product is lower in volume and nutrient content, reducing the risk of pollution. While

basically a simple process, composting can

be very labor intensive and can require a

large storage area, making it difficult for

the small livestock operator to maintain.

A solid separation system consists of a

large storage tank or lagoon that uses

gravity to separate solid matter from the

liquid over time, while breaking down the

organic matter through anaerobic or aerobic digestion. After the solid portion has

settled out, the diluted liquid is siphoned

off. Both can then be disposed of in a more

controlled manner, such as on days when

no rain is forecasted, reducing the threat of

pollution.

More advanced solid separation systems use a centrifuge to spin the manure

and leave a dense compacted solid.

Although this type of system will separate

the solids and liquids much more quickly,

it is requires a much larger capital investment to construct.

Bio-digestion is the most complicated

and capital-intensive system. This type of

system combines solid separation with a

method of collecting the methane gas that

is emitted during the anaerobic process.

Although highly capital intensive, biodigestion derives economic benefit from

the three end products it generates: a liquid organic fertilizer, a solid material that

can be used for composting, and methane

gas that can be used as an energy source.

In one instance, a 4,690 cow dairy operation in Arizona has been able to save

nearly $200,000 a year in electricity costs

by using the methane gas produced from

its bio-digestion system. Although this is

a very large dairy, the general manager of

this operation firmly believes a biogas system could be an economically viable option

for any dairy with a herd of at least 100

cows.

Even so, smaller livestock operations

with limited space, labor, or financing may

find it too economically difficult to con-
struct and operate any type of waste management system. According to a study

from the Texas Agricultural Extension Service, the $107,071 initial investment needed to construct a waste management system for a 300-cow dairy was 70 percent

greater than the $150,509 needed for a

720-cow dairy herd, when evaluated on a

per-head basis.

A cooperative alternative

Given this, a cooperatively owned and

operated waste management facility could

be an excellent alternative for smaller livestock operations. Already, there are examples of individual producers who found

that operating an individual waste management systems was not economically

feasible, regardless of type or size, and

have utilized cooperative principles and

practices to share the cost of constructing

and operating a waste management system with other producers.

In northwestern Connecticut, the

Blackberry River runs through the Canaan

Valley, eventually becoming part of the

Housatonic River Watershed. The nearly

2,500 head of cattle in the valley generate

close to 45,000 tons of manure each year.

Disposing of this large volume of waste can

be difficult during the winter months when

the ground is usually frozen and covered

in snow.

As a result, five farms in the valley

have taken a proactive approach to reducing pollution in the watershed by forming

a jointly owned and controlled waste management cooperative. Initially, the cooperative was to operate a storage facility,

solid separator, and manure digester at a

single site that would be used by all members. The cooperative would then store liquid waste for use when the ground was not

frozen and then compost the solids for sale

commercially.

Once the cooperative began organizing,

leaders determined that a multi-site facility would be better logistically than a single-site operation. Each site uses a different waste management method. The

cooperative has been essential to the success of this venture by allowing the individual operations to share labor and equipment costs. The cooperative is also

responsible for administering permits,

financing and supervising facility construction and operation.

The Methane Energy and Agriculture

Development (MEAD) Project is another

cooperative venture being planned in

Tillamook County, Oregon, as a joint working effort of public officials, a private enterprise, and a local cooperative, MEADCO.

When completed, the privately owned company will construct and operate an anaerobic digestion facility that will operate on

manure supplied by 15 dairy farms in the

county. Current plans call for the facility’s owner to sell the biogas and soil end

products from the process commercially

and return the liquid nutrient end product to the cooperative members.

Tests on the liquid nutrient end product have shown that it is free of pathogens

such as fecal coliform and weed seed, is

less odorous, and contains a more readily

available ammonium form of nitrogen.

This should reduce the risk of groundwater

contamination and lengthen the window

of time for spreading the waste during

rainy seasons.

If successful, this will help farmers

operate within Oregon Department of Agriculture’s Confined Animal Feeding Operation (CAFO) oversight program. This program is designed to prevent pollution of

groundwater in part by assigning a maximum number of cows for each dairy based

on such factors as manure storage facilities and manure application processes.

A cooperatively owned waste management system can offer an economically

viable solution to smaller farm operations

in managing animal waste in an environmentally sound manner. If you are interested in information on cooperatives, contact USDA’s Cooperative Services,

Cooperative Development Division at Stop

3254, 1400 Independence Avenue, SW,

Washington, DC 20250-3254; or call (202)

720-3750. ■

Rural Cooperatives / March/April 1999 13

On-farm livestock waste lagoons can

create environmental hazards if not

properly designed and maintained. Some

farmers are turning to cooperatives to

help meet this challenge. USDA Photos
14 March/April 1999 / Rural Cooperatives

By Patricia Miller

Editor’s note: Miller is a freelance writer

based in Minneapolis, Minn., who has

broad experience working for and with

cooperatives. 

By the end of 1999, it’s estimated

that 300 million people will be

using the Internet, and that it

will rack up revenues of $3 billion. So how

do cooperatives — especially rural cooperatives — fit into this electronic marketplace? Fire up your computer, grab your

mouse and let’s surf!

Check out the addresses

Cooperatives, whether they are large

or small, already have staked their claim

in the boomtown called the Internet. The

list of online co-ops reads like a cooperative Who’s Who, with rural electrics, telephone cooperatives, farm supply, grower,

dairy and service cooperatives and their

national trade organizations well represented.

But what are they doing online? First

and foremost, they’re creating a presence

— letting members, consumers and the

general public know they’re out there.

They’re telling their story — of their business, their products, services and history

— to a brave new audience that may know

them well, or not at all.

Many co-ops will admit they first

launched a Web site because everyone else

was doing it. But they quickly point out

the business goals and strategies behind

their sites. These aren’t placeholding sites,

they’re hardworking sites that are evolvCooperatives Online

Co-ops are staking their claim in the boomtown called the Internet

Visitor’s Guide

Here’s an easy reference list for those

co-op Web sites featured in this story.

Please note that USDA does not warrant the information contained on the

cooperative’s Web sites, nor does it recommend the products or services of

these co-ops over any other products

and services in the marketplace. 

Agway, Inc.

www.agway.com

Blue Diamond Growers

www.bluediamondgrowers.com

Dairylea

www.dairylea.com

Darigold

www.darigold.com

Equity Cooperative Livestock Sales 

Assn. www.equitycoop.com

Farm Credit Leasing

www.fcleasing.com

Farm Credit Services

www.farmcredit.com

Farmland Industries

www.farmland.com

Land O’Lakes, Inc.

www.landolakes.com

Logan Telephone Cooperative

www.logantele.com

National Council of Farmer

Cooperatives www.ncfc.org

National Milk Producers Federation

www.nmpf.com

Nationwide Insurance

www.nationwide.com

Pennsylvania Rural Electric Assn.

www.prea.com

Select Sires, Inc.

www.selectsires.com

Sunkist

www.sunkist.com

USDA Rural Development

www.rurdev.usda.gov

Welches

www.welchs.com

Farmers like Chris Dunsmore from Renville, Minn., learn about—and often access—

new products and services offered through co-op Web sites. (Photo by David Lundquist,

Cenex Harvest States/Land O’Lakes.)
ing as the co-ops learn more what their

growing online audience needs and expects

from them.

“A Web site isn’t like a brochure that

once it’s printed, its done,” says Lydia

Botham, director of public relations for

Land O’Lakes. “A Web site is a communication piece that is constantly changing to

meet the needs of the audience and to keep

them coming back. Changing, updating

— it’s what they expect from this technology, and it’s our challenge to meet their

expectations while advancing our business

goals.”

In addition to providing information,

co-ops now conduct real-time livestock auctions, sell products, allow members to

check their financial accounts, sign up for

new services and much more. Here are

what some online cooperatives have to

offer.

Information in bloom

Blue Diamond Growers, Sacramento,

Calif., is one of a host of grower/producer

co-ops on the Net. Along with Sunkist,

Welch’s and others, it provides general

information about the cooperative as well

as specific information for growers. One of

the newest additions is the “Bloom Report

Web Cam.”

Every day, the site posts photos of four

almond trees — one in each of the co-op’s

growing regions — to show the progress of

the bloom, which in large part will determine the success of the upcoming crop. The

same trees are featured every day and will

be followed on the site through harvest.

Along with the “bloom cam,” there’s a

weather report, which includes bee activity and a chart showing bloom progress.

“It’s being used by everyone right now

— brokers, buyers, growers, school kids,”

says Diana Manges, public relations and

advertising coordinator. “The idea came

from our sales and marketing department

based on the large volume of daily calls

requesting information about the progress

of the crop. Now people can check it out

for themselves.”

Rural Cooperatives / March/April 1999 15

Producers check the Cenex Harvest

States and Land O’Lakes Web sites for

everything from emerging agricultural

technology to producer financing. 

(Photo by David Lundquist, Cenex Harvest

States/Land O’Lakes)
Manges says the Web site adds value

for members, customers, consumers and

employees because information is accessible when they need it. “We want to be the

No. 1 almond handler and we want to be

seen as the No. 1 Web site to come to for

almond information.”

On the hoof

The smell of the sale ring and the call of

the auctioneer may be absent, but that’s

all that is missing from Equity Cooperative Livestock Sales Association’s online,

real-time livestock auctions. The co-op

launched its first nationwide online sale

in mid-1998. 

Bidders register for the sale, which

begins precisely on time. The livestock is

described in writing, then the bidding

begins. Following each bid is a 10-second

bidding “window.” Anyone interested in

upping the bid hits the “bid” icon on their

screen and watches to see the bid accepted.

The auction continues until 10 seconds

elapse without a new bid. Just like in a

“live” auction, the livestock goes to the

highest bidder. Buyers are billed for the

animals on delivery.

“Our Internet auction is an extension

of the electronic marketing system we’ve

had in place for 20 years,” says Dave Johnson, vice president of marketing. “This

was the logical next step as we looked at

ways to make the auctions more efficient

and reduce marketing costs for both buyers

and sellers. The online auction also helps

determine a fair market weight, is very

competitive and very anonymous. And it’s

easier on the animals because they’re not

moved from the farm or feedlot until the

online auction is complete.” For customers

looking to improve their herd genetics,

Select Sires offers its stock of semen and

embryos for sale online. Customers can

browse through the online catalog of dairy

and beef sires and dams.

Internet access

One of the biggest obstacles for rural

areas is access to the Internet. In 1995,

Logan Telephone Cooperative of Auburn,

Ky., became an Internet Service Provider

(ISP) and launched a Web site to offer tips

and technical support for Internet use. The

co-op, which has about 7,000 customers,

now has nearly 1,400 Internet subscribers.

“Until recently, we were the only ISP

for this area,” says Stacey Biggs, public

affairs and marketing coordinator for

Logan. “Our customers can access the

Internet for the cost of a local call. We never expected to have so many subscribers,

and the service just continues to grow. In

December we signed up nearly 170 new

users.”

Biggs says customers also can use

Logan’s Web site to get billing information,

switch long-distance carriers and more.

“The site, and being an ISP, gives us great

exposure in our community,” she adds.

“Logan’s home page is the default for our

ISP customers when they log on to the

Internet, and I use it to publicize new services and features.”

Members only

Increasingly, cooperatives are including a “members only” section on their Web

sites, accessible only by password. Several

dairy cooperatives — including Dairylea,

Darigold and Land O’Lakes — offer these

secure pages so producers can access test

results or milk check information. Agway

Inc. recently added a secure site just for

its board of directors.

“Our Web site is a major vehicle for

marketing and information about our cooperative,” says Steve Hoefer, vice president

of public affairs for Agway. “It represents

the phenomenal change in the marketplace, and the need for everyone in the coop to be constantly learning and adapting.

We saw that our board needed to be part of

this process, too.”

So, Agway developed a directors-only

Web site as part of its expanded board education program. Each director received a

laptop computer, and Agway provided

them with Internet access. On the site,

directors find minutes of board meetings, a

16 March/April 1999 / Rural Cooperatives

Becky Lyle, a grain producer from

Ritzville, Wash., can use her laptop

computer to access up-to-the-minute

information offered by her local farm

supply co-op. (Photo by David Lundquist, Cenex

Harvest States/Land O’Lakes)
current calendar, PowerPoint presentations they can adapt for their own use and

more.

“We’ve found the site really facilitates

communication with and for the board

members,” Hoefer says. “It encourages

them to learn new things and share that

information fast.”

At your electric service

The Pennsylvania Rural Electric Assn.

first launched its Web site in response to

changes in the energy industry. The co-op

knew consumers would be facing a bewildering array of choices as the industry

becomes more deregulated, and PREA

wanted to provide them with up-to-date

and easy-to-understand information about

the changes.

“Being able to keep our customers

informed justified the initial expense of the

site,” says Perry Stambaugh, editor and

director of communications for PREA,

which serves 600,000 consumers of 13

member co-ops in Pennsylvania and New

Jersey.

Stambaugh says the site’s new Y2K section also has been attracting attention

from users and the key graphic on the

home page — a lineman at work — follows

through with PREA’s latest image campaign.

From equipment to home equity loans

Whether customers are looking to lease

agricultural equipment, apply for a home

equity loan, check their bank statements

or make an insurance claim, they now can

secure these services on the Internet.

Farm Credit Services not only allows

customers to apply for loans online, but

the organization soon will allow online payments as well. The home page for Farm

Credit Services also links customers to

local branches.

Need a tractor, Terragator or milking

parlor equipment? Farm Credit Leasing

offers a wide variety of equipment for

lease to agricultural customers.

Customers can read descriptions of the

new and used equipment online and

arrange for the lease as well.

For insurance services, customers can

turn to Nationwide Insurance’s site.

Some of the services include auto insurance quotes, claims information, the location of the agency nearest you, plus

descriptions of the company’s full line of

insurance policies.

At the industry level

To learn what’s new in the cooperative

world, members can visit sites provided

by trade organizations such as the

National Council of Farmer Co-operatives and National Milk Producers

Federation. These groups not only

explain their mission, but keep members

up-to-date with legislative matters.

Adding a Web site to your 

cooperative business toolbox

While many cooperatives will admit they launched a Web site to “keep up with

the Joneses,” they’re also quick to outline the thinking and strategies that provide

the business foundation of their site. Jana Bourne, of Avatar Digital Media

(www.avatar.net/cca), frequently advises cooperatives on developing and improving their Web sites. Here are some tips she offers to help make your Web site a

valuable addition to your business toolbox.

Know your audience. As with any communication tool, it’s essential to know

whom your Web site — and each of its sections — is targeting. Develop the content, as well as the design, to fit that audience. For instance, there’s nothing fancy about Equity Livestock’s live auction page. It just needs to provide the basic

information for participating in the auction, with no frills or glitz tacked on.

Form a team. One of the best models for a Web site team is: product managers

(who know the audience); marketing communications specialists (who know the

company and understand content creation); and technology professionals (who

know the technology and its capabilities).

Develop a strategic business plan. Whether you’re just launching a site or

are expanding an existing one, your Web site should have its own business plan.

As you develop a plan, clarify the site’s purpose, what messages you want to communicate and how you want to position your cooperative. Identify goals and set priorities.

Set a budget. Your budget should encompass: graphic design and writing; HTML

programming and advanced software applications, including forms and security; bandwidth, marketing your site; and content and programming maintenance.

Measure success. Your goals and objectives will help you determine the success of your site. There are a number of surveying instruments available that can

measure not only the number of visitors coming to your site, but how long they stay

and where they go. 

Rural Cooperatives / March/April 1999 17
18 March/April 1999 / Rural Cooperatives

What’s for dinner?

Food marketing cooperatives such as

Sunkist, Farmland Industries and Land

O’Lakes all give consumers a helping hand

when it comes to preparing great-tasting

meals — featuring their products, of

course. 

At the Land O’Lakes site, not only can

consumers create their own “recipe box,”

but they also can choose a menu, complete

with shopping list. One new feature of the

site allows harried cooks to check their

pantry, type in the ingredients they have

on hand and then receive suggested recipes

using those ingredients.

“Consumers come to our site because

they want information on products, they

need help with meal planning or they’re

looking for a special-occasion recipe,” says

Lydia Botham, director of public relations

for Land O’Lakes. “And they want to do it

on their time, when its convenient to them,

not when our 800 number is in service or

when the information finally reaches them

by mail.”

Visitors to the site also can purchase

cookbooks and Land O’Lakes-identified

merchandise.

On the grow

Cooperatives’ presence on — and their

business use of — the Internet will only

continue to grow as customers, members

and employees demand it, and as they look

to the future direction of their business

and see how the Internet can help them

achieve their goals. ■

Almond growers may see their crop firsthand as they drive past their orchards, but for

brokers and buyers, the next best thing is Blue Diamond Growers’ Web site. It offers a

new photo every day to show the trees’ all-important bloom progress. (Photo by Catherine

Merlo.)
Rural Cooperatives / March/April 1999 19

Jerry C. Namken 

Senior Resource Economist

USDA Natural Resources Conservation Service

Editor’s note: Namken spent nearly two

months in late 1998 in Ukraine working on

a project for USDA’s Cooperative State

Research, Education, and Extension Service. Following is his report on Ukraine’s

transition from the Communist system to

a new market economy.

I nternational agricultural cooperative development in the former Soviet Union is not just an exciting field

to work in but a challenging one as well.

Differences in tastes, production methods,

government interventions, taxation, infrastructure and market diversity make

improvements difficult enough by themselves. Add the language barrier and distrust from years of Soviet government rule

and the task becomes nearly impossible. 

However, some farmers seem to prevail

in spite of such obstacles. Slowly but surely, countries in the former Soviet Bloc are

entering into market-style economies.

Ukraine is one of these. In the dynamic

process following perestroika (major economic reforms), marketing trends among

private farmers in production, marketing

and retailing are becoming clearer in the

Oblast (state) of Odessa. 

Part of this process involves USDA’s

Commercial Agriculture Development Program, a cooperative development project

funded by the Agency for International

Development and implemented by USDA’s

Foreign Agricultural Service and Cooperative State Research, Education, and

Extension Service (CSREES). This pilot

effort is educating privatized farmers

about Western-style cooperative principles

and helping them organize and run their

own businesses.

This is an important addition to Odessa

Oblast. Part of the breadbasket of the former Soviet Union, the area enjoys a moderately continental and comparatively dry

climate. The deep-black loamy soil is noted for its wheat, sunflower, and wine production. The Oblast also has a port terminal on the Black Sea at Odessa, making it

an ideal region for the transition of the

land from government ownership to private ownership. 

Restocking the Breadbasket

Cooperative development efforts in Ukraine are 

helping farmers rebuild their agricultural system

Project member Lewis Beckham inspects the wheelhouse of a Ukrainian tractor.

USDA Photos by Jerry Namken
Conservation and the environment

Although the 1986 Chernobyl nuclear

disaster took place in the extreme western part of the country, conserving

Ukraine’s important resources has been a

priority. Askanyia-Nova, Ukraine’s first

nature preserve, was established in 1921

and endangered species are bred there. A

Ministry of Environment has been established to levy taxes on air, water emissions

and solid waste disposal. The revenues are

to be used for environmental protection

activities. The system, however, is somewhat lax.

The conservation of natural resources

is expected to become more important as

more lands go into private hands. Under

the old system, the government directed

and applied conservation to the agricultural lands operated by the large collective farms. Production, rather than profit, was maximized on these farms. 

Newly private farmers, however, are

more concerned with profits. Conservation

efforts that might have taken place under

the old system are often discontinued in

order to save money. There is a need,

though, for Ukraine’s very productive agricultural lands to retain their sustainability for economic, social and environmental reasons.

Trends in farmer groups

Four types of producers are taking root

to secure their future in the emerging

Ukrainian economy. The state-owned collective farms still enjoy the lion’s share of

the government’s support, while some private businessmen have developed largescale agribusinesses that include farms in

their corporate structures. Those most in

need of help are the medium-scale private

farmers, who produce much more than

they consume. The fourth type are the

small-scale private farmers (or dacha owners), who are mainly subsistence producers.

Collectives

While many agricultural collectives

were physically or economically raided into

non-functioning shells following the early

days of perestroika, others simply quit producing because they lacked inputs or capital for operating, or could not sell their

products for cash. However, a good many

agricultural collectives survive. Government taxation practices keep these businesses in place, but only by not following

up on bad debt. These collectives still suffer from the inefficiencies of the old system, with no cash to pay labor, purchase

inputs or cover the costs of production. In

addition, managers often have little experience in marketing their commodities.

The justification for the government’s

continued support of these large collectives

follows a countrywide plan for privatization of state-owned lands. It would be

impossible to change overnight from state

owned and directed agricultural produc20 March/April 1999 / Rural Cooperatives

A large variety of products are available for sale or barter at the Co-op in Belgorod.
Rural Cooperatives / March/April 1999 21

tion to privately owned and directed production without a catastrophic loss in production and a terrible effect on the population. 

Also, while the collectives are often inefficient, they still produce the largest

amounts of the country’s agricultural commodities. Distribution and marketing

channels are in place to ensure commodity supply to the urban areas. Many people are employed in providing these services.

People continue to work on the collectives, often without being paid. Having no

cash, collective managers often pay

employees with bartered inputs or production from the collective. Still other collective members pilfer these inputs and

act as pipelines to supply themselves and

friends. (The going rate for a small bottle of

vodka is one tankful of diesel.) Bartering

government supplies of such inputs as

diesel, fertilizer and pesticide from collectives is widespread throughout the Odessa

Oblast.

Bartering

Collectives run up huge debts, which

are written off by the government. To offset the lack of sufficient funding, the government taxes heavily (20 percent) for value-added sales in all sectors of the

economy. It imposes a 30-percent service

tax, in addition to the cost of operation, for

anyone using a service business such as

milling, crushing, etc. There is even a 10-

percent tax on the depreciation of capital

goods.

Such taxes afford no incentives for this

agriculturally based country to move to a

cash economy. The government uses revenue accountants to tax cash and valueadded transactions. Great creativity as

well as different sets of books are sometimes employed by private citizens to circumvent these “tax police.”

The government bureaucracy is not,

however, set up to tax bartered goods. Bartering is a complex art of knowing where

current supplies and demand exist. There

are big winners as well as big losers. Some

Ukrainian economists estimate that 30-40

percent of a commodity’s value is lost

through barter transactions.

It is not uncommon to hear of complicated turnarounds. For example, a largescale producer might receive tractor parts

on credit as payment from a collective. He

will then trade the tractor parts to other

farmers for their wheat. He will then mill

the grain into flour, with part of the grain

given to the miller as payment. The flour

then will be shipped to the Chernobyl

Oblast in western Ukraine and traded for

building materials. Eventually, the materials will be backhauled to the Odessa

Oblast, where building supplies are in

short supply. These are then sold for cash

on a piecemeal basis to pay off the debt for

the tractor parts.

Large-scale producers

Many of today’s large-scale farm producers were, in the past, managers of collectives that have ceased to exist. Opportunistic and hugely entrepreneurial in

spirit, many of them were able to secure

loans from the government during perestroika to buy land and purchase equipment from bankrupt collectives. They paid

off these loans at accelerated rates during

the period of high inflation following perestroika. These producers estimate that it

usually takes 300-400 hectares (about 740-

990 acres) to farm profitably. 

These large-scale producers are often

more like agribusiness managers than

they are large landholders. Unusually

inventive of ways to circumvent government taxation, they put in their own processing and value-adding facilities and

open retail stores in order not to pay taxes

up front. 

Using wheat as an example, costs of

producing one metric ton might be about

120 hrivnas. The hrivna is the Ukrainian

currency; it takes about 4.25 hrivnas to

equal $1. At the farm gate, one ton of

wheat would sell for 200 hrivnas. The 20-

percent value-added tax is paid on the 200

A new sunflower oil press is examined by

sales staff at a co-op store.

Small packets of vegetable seeds are in

big demand by dacha owners.
22 March/April 1999 / Rural Cooperatives

hrivnas, not the 80 hrivnas. Milling would

produce enough flour for about 2,000

loaves of bread, plus some waste that could

be fed to hogs. A loaf of bread can sell for

about 1 hrivna. 

A producer, then, would rather pay 20

percent of 2,000 hrivnas in taxes rather

than 20 percent of 200 hrivnas, even

though there would be some added costs

from milling and baking. If the producer

owned his own mill and bakery, he would

not incur the 30-percent service tax.

Representing the probable future of

Ukrainian farming, these producers are

going to great lengths to establish retail

stores. The final consumers are the holders

of cash in the country. But the amount of

money transacted in each sale is very low,

and it takes some time and many transactions to accumulate sufficient working

capital.

Medium-scale producers

Owning anywhere from 10-100

hectares (about 25-250 acres), these

landowners represent many of the newly

“privatized” farmers. Many are highly educated and were trained during the days of

the Soviet Union, and are the professionals

on whom the former collectives depended.

Now, disgruntled with the old system, and

as new farmers, they often express the

desire to remain independent of the collective system and place high value on

making their own decisions.

These farmers represent the group of

producers with the greatest needs. While

they have developed their own sources for

seed, pesticides, fertilizers and farm equipment in the last six years, their ability to

improve crop and animal production has

been reduced by limited access to highquality genetic seeds, reliable farm inputs,

and modern planting, cultivation and harvesting techniques and machinery.

Because many do not have farming backgrounds, their level of education relating

to crop genetics, production practices, and

farming economics is also lacking. 

Farm equipment ranges from the old to

the new at a museum of agriculture

outside the capital city of Kiev.
Rural Cooperatives / March/April 1999 23

The size of their operations is also a factor. While many have farms that are too

small to provide a good living, they persist

in the hope of growing larger in the future.

Many of these farmers have developed

their own informal cooperative arrangements to share planting, cultivation and

harvesting equipment. Because of the tax

situation, access to cash markets at postharvest time is not deemed important.

Rather, what they want is access to valueadding processes such as storage, processing, milling, packaging, distribution

and, finally, to retail markets where the

cash is available.

Small-scale producers

The fourth type of producers are the

small-scale dacha owners. In Ukraine, private citizens are entitled to two hectares

(five acres) on which to build a home.

Many citizens build their homesteads on

the outskirts of rural villages and grow a

variety of garden produce to supplement

their income. Usually they pickle, smoke

and store enough from the two hectares to

see themselves through the year.

Even these small plots of land are used

for agricultural production. Some estimate

that 5 percent of the population is involved

this way. Yet, these private farmers

account for 20 percent of the country’s agricultural production.

Unlike subsistence farmers in some

Third World countries who consume about

80 percent of what they produce and market the other 20 percent, these producers

consume about 20 percent and market the

rest. Their plots receive intensive care

throughout the production cycle. By saving seed from year to year, planting vineyards or orchards and cultivating and harvesting by hand, they reduce the need for

farm inputs. Furthermore, inputs require

cash, which is hard to come by. 

These farmers need markets — preferably markets that are nearby because they

can’t afford the cost of transportation for

even small amounts of their production.

They need markets that are easily accessible by the general population and by the

entrepreneurial traders and distributors

that travel the public roads.

Organizing cooperatives

The development of the Commercial

Agriculture Development Program has

been dynamic. Initial surveys among private farmers indicated that education of

cooperative principles, agronomy and marketing knowledge were what was needed. 

Before long, however, producers felt

that lowering their input costs would

result in increasing their net profit and,

thus, put money in their pockets. Also,

large multinational companies arrived on

the scene and it was felt that they represented a source of credit for producerowned cooperatives.

With this in mind, three groups of farmers in three different riones (counties) were

assisted in organizing cooperatives to start

farm input stores. These private farmer

groups were identified by the Ukrainian

government. A fourth group was identified

by the National Farmers Union and also

received assistance.

These four groups are located in Belgorod Dnistrovski, Ivanovski, Lubashovski and Artsiski. The first three groups

share some of the same characteristics.

Each board of directors is primarily made

up of a few producers (8-15) who worked

together under the old collective system.

Trust, or rather a lack of trust for those

they don’t know, has kept membership

numbers small.

A second trait is that few of the members of the boards were actually farmers

in the old system. Some were accountants

or economists, chemists or machinists.

However, at least one agronomist sits on

each board.

As each board began to organize, four

different strategies emerged in response

to the lack of working capital. Credit relationships with the multinationals were

slow to become established because of the

taxation situation. Still, all four cooperatives were able to open the doors to their

stores during the first crop production year.

Belgorod Dnistrovski chose to ally itself

with a large producer and agribusiness

manager. Unable to secure a building or

put enough working capital together to

purchase inputs, the board turned to the

Farm inputs and tractor parts line the shelves of the cooperative at Artoiski. producer. He gave the cooperative use of
24 March/April 1999 / Rural Cooperatives

one of his buildings, then put his own

barter goods there as inputs for cash sale,

with a sales commission going to the cooperative.

The process is not without its growing

pains. Ivanovski changed executive directors in midstream. Because the cooperative is small and located in a small town,

selling farm inputs is hard. The business

environment is further complicated by

Ivanovski’s relative closeness to Odessa

and its many stores. Without a track

record, the cooperative found it hard to

attract any one supplier willing to provide

credit and merchandise, even on commission. The new executive director has

numerous contacts in the trading community and has used these relationships to

help the store start to fill its shelves. 

In Lubashovski, the board has put itself

in the hands of a large agribusinessman

who owns several retail stores. The cooperative chose to sell only tractor parts and

not compete with his other stores, which

sell the usual Ukrainian farm inputs.

In yet another strategy, Artsiski organized itself differently. Unwilling to hire

an outside executive director, the board

directed the chairman to fill that spot. The

odd arrangement has produced very good

results. Although the inventory is small

by American standards, it is the largest

among the four stores and the only one

where the inventory is paid for. Even better, the value of the cooperative’s inventory has been growing at 5-6 percent per

month as it continues to use profits for

inventory purchases.

Lessons learned

As the project evolved, and each of

these cooperatives struggled to solve its

own problems, it became apparent that

access to inputs was not the solution to

putting cash into the pockets of producers.

Sourcing inputs from the old collective system has developed some sophistication

during the last five years. In addition, cash

for inputs has almost been non-existent.

Forming cooperatives with Western

principles has been hard also. Attitudes

and idealism left from the old collective

system still pervade the business environment because farmers haven’t seen

with their own eyes how Western systems

work. One very positive step in this project has been to send each of the chairmen

to the United States to view the cooperative system in place here.

For example, agreement in the old collective system was often reached by consensus among the leadership rather than

by democratic voting. While the current

boards of the project cooperatives are small

and trust each other because members

worked together in the past, new membership growth will necessitate the need

for ballot voting.

Another lesson learned is the need for

members of a cooperative to be somewhat

homogeneous with respect to size of operation, crops grown, economic levels and

marketing needs. The boards of directors of

those cooperatives that have a large

agribusinessman as a member often experience disagreement in developing solutions to membership problems. In the

United States, proportional voting is used

in limited situations. However, Ukrainian

cooperatives have yet to develop this type

of voting or trust.

In the United States, the uniqueness

of cooperatives as user-owned, user-controlled and user-benefited businesses is

recognized in law through single taxation

and a limited anti-trust exemption for

farmers acting through cooperatives.

USDA also provides support for cooperatives through a multi-faceted program of

research, technical assistance, education

and help in organizing cooperatives into

new cooperatives. 

No such environment for cooperatives

exists in Ukraine, but cooperatives are

forming on their own merit to obtain services that are otherwise unobtainable.

However, there is little, if any, working

capital available in Ukraine to purchase

the capital goods that can be used to provide such services.

The future

There is promise for Western-style cooperatives to exist in Ukraine. With support

from this project, the National Farmers

Union, the National Agricultural Cooperative Union and the Center of Reforms in

Agriculture have recognized the need to

provide incentives for cooperatives in

Ukraine. Their efforts have resulted in the

Ukrainian president signing a decree

exempting almost all of agriculture from

the value-added tax. This still has to be

approved by the Rada (congress), and will

be a first step in moving the country to a

cash economy.

Given the history of the people and the

country and the high value of its productive lands, the newly formed cooperatives

also present opportunities for the Western

world as conduits for continued resource

conservation efforts. Already organized

with highly visible stores in their town

areas, these progressive farmers represent

the leading edge of agricultural thinking

and often act as examples for the rest of

the farming population to follow.

Still, the greatest asset of the country is

its own people. With a tireless work ethic,

they have set about rebuilding their agricultural system. In doing so, they are feeding themselves and their neighbors. As

they enjoy more successes, new opportunities for private farmers will surely come

their way. ■

Classical architecture abounds in the

Black Sea port of Odessa.
Rural Cooperatives / March/April 1999 25

“Farmers need a cooperative

that will help them stand toe-totoe with food manufacturers and

processors to establish fair

prices for their commodities.”

Co-op description: Michigan

Agricultural Cooperative Marketing

Association (MACMA) is the Michigan

Farm Bureau’s marketing affiliate.

This cooperative was organized in

1961 to provide marketing, bargaining

and various group marketing and

related services. MACMA counts more

than 2,000 farmer-members, who voluntarily work together to improve the

profitability of their operations.

MACMA’s five divisions — for

Michigan’s processing apples, red tart

cherries, asparagus, plums and feeder

pigs — provide industry information,

establish and negotiate prices and bargain with processors. 

Background: Harmson grew up in

rural Michigan. A Vietnam veteran, he

earned a bachelor’s degree in business

administration from Central Michigan

University and a master’s degree from

Michigan State University. Harmson

has worked in both private and public

organizations, dealing with the promotion and marketing of food on a

national and international basis. “I’ve

been involved in cooperatives as a

member and a manager,” Harmson

says.

What developments are taking

place at MACMA? “MACMA, like

many cooperatives, is faced with rapid

change from all directions,” says

Harmson. “Membership, services,

financial resources, and technology all

present challenges in the context of

today’s world market and the industrialization of agriculture.” In response,

MACMA has helped: 

• form CherrCo, Inc., a federated cooperative for tart cherry cooperatives

interested in establishing tart cherry

prices on a national basis;

• develop a plan for a new and innovative value-added Hog Networking

Cooperative; 

• expand marketing and bargaining

for processing apples beyond Michigan; 

• establish a “one-stop shop” for farm

labor management information; 

• support the proposed establishment

of a regional/national Ag Employers

Association (formed as a farmer-owned

stock cooperative), and has actively

worked for national marketing and

bargaining legislation.

Goals for MACMA: “MACMA’s role

today is as important as it was 30

years ago,” says Harmson. “Farmers,

large and small, need to be profitable.

They need a cooperative that will provide them with timely and accurate

information, and help them stand toeto-toe with food manufacturers and

processors to establish fair prices for

their commodities.” He notes that

farmers not only need to capture more

value-added returns for their efforts

but to have a more significant voice in

the food industry. “The MACMA philosophy on a national level could significantly support food security,”

Harmson adds.

Biggest MACMA concerns? “Where

do I start?” asks Harmson. He points

to the Food Quality Protection Act,

other economic and environmental

challenges and risk management. “But

my biggest concern for our members,

and U.S. farmers in general, is that we

won’t be able to compete in the world

market because of inadequate trade

policies,” he says.

Key rural development issues? “The

clash between new rural home owners

and farmers,” Harmson says. “Also,

subsequent township ordinances limiting what, when, where, and how farmers can farm.” ■

IN THE SPOTLIGHT

Randy G. Harmson

General manager, 

Michigan Agricultural Cooperative Marketing Association, Inc.
Tri Valley Growers

appoints new president

and CEO

Tri Valley Growers 

(TVG), a leading U.S. food

processor, has appointed

Jeffrey P. Shaw as president and chief executive

officer. Shaw comes to TVG

from Green Bay, Wis.-

based Dean Foods

Vegetable Co., where he

had served as president

since 1992. There, he significantly raised shareholder value and changed the

company into a teambased, results-driven, highperformance culture. Shaw successfully acquired and combined five companies to expand Dean Foods Vegetable division to a $650-million business.

“We are very excited that Jeff has joined us. He brings a

wealth of experience to the president and CEO position,”

said Jaswant Bains, chairman of TVG, a 500-member

California-based cooperative. Shaw joins TVG following

seven months of interim management led by CEO R.D. Cook

and president Timothy R. Barron. They had replaced president and CEO Joseph Famalette, who departed in August

1998. 

Prior to joining Dean Foods, Shaw served as president of

Richard A. Shaw,Inc., a Watsonville, Calif.-based food company. He holds a bachelor of science degree in accounting

from San Jose State University and a master of business

administration degree in taxation from California State

University, Hayward.

Two California fruit co-ops form alliance

Mayflower-TCLA and Blue Anchor Inc., two California 

fruit cooperatives, have formed an alliance to strengthen

market position, reduce costs and open new opportunities. 

“It is certainly no secret that the continued consolidation

by major retailers demands some form of consolidation by

shippers,” said alliance president John Dubendorf. “The

Mayflower-Blue Anchor alliance is a natural, with a complementary product base that enhances the ability to service all

customers, including major chains. We hope other shippers

will be interested in the concept.”

Mayflower Marketing Corporation (a subsidiary of

Mayflower-TCLA) will be responsible for marketing the two

firms’ wide variety of fruit. Mayflower-TCLA was formed in

1966 with the merger of Mayflower Fruit Association, a premium shipper of plums, persimmons and table grapes, and

Tulare County Lemon Association, a long-established citrus

packing house. All citrus items will continue to be marketed

by Sunkist. Blue Anchor Inc. is a 200-member marketing

cooperative of grapes, pears, peaches, plums, nectarines,

apricots, cherries, kiwifruit, various specialty fruits, and

Chilean fruit.

Sunkist revenues top $1 billion 

Sunkist Growers sold 90 million cartons of fresh citrus, 

the largest volume in its 105-year history, during 1998, president emeritus Russell Hanlin told some 1,000 members

gathered for the cooperative’s annual meeting Feb. 5 in

Visalia, Calif.

For the seventh consecutive year, total revenues for

Sunkist, the oldest and largest citrus marketing cooperative

in the world, exceeded $1 billion, Hanlin said. The $1.069

billion revenue figure was just $27 million under the alltime record set in 1995.

“Most importantly,” said Hanlin, “returns to our 6,500

grower-members reached $861 million, the second highest

total in Sunkist’s history and just under the all-time record

of 1997. 

It was also a good year for Sunkist’s processing operation,

which handled more than 700,000 tons of citrus. Memorable

for more than its financial results, 1998 was also the year

the cooperative said farewell to Hanlin, its president and

CEO for the past 20 years. His replacement is Vince

Lupinacci, who discussed these challenges and the evolution

taking place in the citrus industry:

• The increasing consumer demands for convenience and

value and the continuing consolidation of the retail trade,

both of which create a new set of marketing conditions for

those who supply them;

• The focus on free trade and opening of domestic markets to global competitors and the expanding production of

foreign citrus;

• The availability of quality labor.

Lupinacci also updated the audience on the Christmas

freeze and its effect. He noted that while estimates of crop

damages were still a moving target, they indicated there

was still a substantial amount of fruit to sell this season.

NCFC chairman highlights association’s

achievements

National Council of Farmer Cooperatives’ (NCFC) outgoing chairman Ron Schuler emphasized the trade association’s achievements throughout the past year, despite concerns over the agricultural economy, at NCFC’s 70th annual

meeting in San Antonio, Texas, in January.

26 March/April 1999 / Rural Cooperatives

NEWSLINE

Jeffrey P. Shaw
Rural Cooperatives / March/April 1999 27

“NCFC’s efforts this year have contributed billions of dollars in benefits that go directly to the bottom line of farmer

cooperatives, including helping bring forth a significant farm

assistance package that is beneficial to many cooperatives

and their farmer members as we position ourselves for the

new millennium,” said Schuler, president and CEO of

California Canning Peach Association.

Other NCFC accomplishments Schuler highlighted were:

• Approval of legislation that eliminates regulations

excluding farmer cooperatives from participation in USDA’s

commodity purchase programs.

• Protection of cooperative director voting rights.

• IRS approval of expanded use of limited-liability companies by cooperatives.

• New legislation and a Supreme Court victory allowing

tax-free transactions for purchase of agricultural processing

and refining facilities.

• Stopping the possible cancellation of multiple pesticide

products.

“It has been my privilege to work with a trade association

that can be described as both flexible and responsive,”

Schuler noted. He acknowledged NCFC’s ability to adapt to

the rapid pace of change in the agricultural industry

throughout his term, which has enabled it to stay ahead of

the competition and provide unique benefits for its members. New NCFC chairman is Noel Estensen, president and

CEO and Cenex Harvest States.

Farmland, Cenex Harvest States win communications

honors

Farmland Industries Inc. received the Best In 

Cooperative Communications (BCC) Award, and Cenex

Harvest States had the highest cumulative point winnings

to take top honors in the National Council of Farmer

Cooperatives’ (NCFC) 1998 Cooperative Information Fair.

Farmland Industries, Kansas City, Mo., was awarded the

BCC Award for a Product/Service Marketing video titled

“Farmland Food Marketing and Overview.” The award is

presented annually to the entry the judges consider best

overall in the 45 classes of the annual communications competition.

With 98 points, Cenex Harvest States had the highest

cumulative point winnings in the Fair competition. Blue

Diamond Growers, Sacramento, Calif., was runner-up, with

84 points. They were followed by: Farmland Industries, with

77 points; Diamond Walnut Growers Inc., Stockton, Calif.,

with 70 points; and Southern States Cooperative, Richmond,

Va., 63 points. Twenty-nine agricultural cooperative organizations participated in the 1998 Information Fair competition. 

The Cooperative Information Fair has been conducted

annually since 1946 to evaluate communications materials

produced by NCFC member cooperatives and their affiliates.

It includes publications, writing, photography, advertising,

promotional and educational materials, audio-visual presentations, public relations, and communications programs.

California dairy co-ops explore merger

Three California dairy cooperatives representing 44 percent of the state’s milk production are exploring the possibility of a merger. The cooperatives involved are San Joaquin

Valley Dairymen, Danish Creamery Association and

California Milk Producers. The three co-ops have a combined membership of 700 dairy farmers. The merger is being

seen as a way to expand product lines, increase efficiency

and open up new export markets. It would create one of the

largest milk-producing associations in the nation. Co-op

members are expected to vote on the merger proposal this

summer.

Prairie Farms Dairy reports record earnings for 1998

Prairie Farms Dairy Inc., Carlinville, Ill., reported alltime-high earnings of slightly more than $50 million for the

fiscal year ending September 30, 1998. The record yearly

earnings reflected an increase of 13.5 percent over the previous year, according to Leonard J. Southwell, the co-op’s executive vice president and chief executive officer. Dollar sales

of $933 million also hit an all-time high, and reached $50

million above the previous year.

Tree Top finalizes Seneca acquisition

Tree Top has finalized the acquisition of Seneca Foods 

Corporation’s processing facility in Prosser, Wash. The plant

began operation as a Tree Top facility Feb. 1. The acquisition also gave Tree Top an exclusive license to the Seneca

brand for all apple sauce products and Seneca’s non-branded

specialty fruit concentrates business. The purchase comes at

a time when the volume of processing apples in the Pacific

Northwest is at a near-record high. Seneca had been processing apples for Tree Top during much of the acquisition

negotiations. The plant’s processing capacity will assist Tree

Top in accommodating the continued large volume of processing fruit projected for the future.

The exclusive license of the Seneca label for all apple

sauce products gives Tree Top the No. 1 and No. 2 selling

sauce brand in the Northwest and solid sauce distribution in

its major markets. For the time being, Tree Top will produce

apple sauce under both the Tree Top and the Seneca labels.

The specialty fruit concentrates produced in the Prosser

facility will provide additional revenue for Tree Top, enhancing the cooperative’s non-member business earnings.

Earnings from non-member business provide necessary

working capital for the cooperative, allowing member earnings to be distributed in full in the year they are recorded.

NEWSLINE
The Prosser location in the southeastern corner of

Washington State provides Tree Top with a facility geographically closer to its Oregon and Idaho grower-members.

In other Tree Top news, the cooperative has signed a letter of intent to purchase Watermill Foods, Inc., MiltonFreewater, Ore. Founded in 1975, Watermill is a quality

manufacturer of frozen cherries, apples and plums and one

of the largest employers in the Milton-Freewater area. “Tree

Top views Watermill and its customer base as a potential

outlet for additional peeler fruit,” Tom Stokes, chief operating officer, said.

CoBank reports ‘98 net income of $150 million 

CoBank, a $20-billion financial services institution 

specializing in U.S. agribusiness and rural America, reported net income of $150 million for 1998. Earnings increased

slightly from the 1997 total of $147 million. Celebrating its

10-year anniversary in 1999, CoBank has seen its agribusiness base grow to $9.1 billion at year-end 1998. 

Agribusiness continues to account for the bank’s largest

customer segment. Business with rural utilities in the past

decade tripled, increasing from $1.6 billion in loans outstanding in 1989 to $4.5 billion in 1998. CoBank also

expanded its presence in international markets, financing

$2.3 billion in agricultural exports at year-end 1998, and a

total of $27 billion since the bank began its international

program. CoBank is pursuing a merger opportunity with the

St. Paul Bank for Cooperatives of St. Paul, Minn., to further

increase its capacity to serve rural America.

International cooperative book available

The World of Cooperative Enterprise 1999, a collection of 

articles from international authors, features an in-depth

look at issues and developments shaping the future of cooperatives. Major themes in this year’s edition include the

debate over converting co-ops to other business structures,

contractual rights and obligations of membership and innovations in cooperation. The book can be ordered by contacting the Plunkett Foundation, 23 Hanborough Business

Park, Long Hanborough, Oxford OX8 8LH, U.K. Telephone

is (01993) 883636. Fax is (01993) 883576.

USDA streamlines DLT loan and grant program

Agriculture Secretary Dan Glickman has announced 

proposed changes for the 1999 Distance Learning and

Telemedicine (DLT) Loan and Grant Program, making it more

user friendly. Changes in the program will separate the application for the loan, loan/grant combinations and the grantonly portions of the DLT assistance. DLT is USDA’s program

that provides loans and grants to rural areas to use new technology for improving educational and medical services.

“The proposed changes improve the DLT loan and grant

program by targeting three types of assistance, enabling the

program to be more responsive to the needs of education and

health care providers in rural areas,” said Glickman. “The

ability of rural communities to access these funds to improve

the quality of education and health care is key to the development of rural America.” 

“The 1999 DLT program will make available $150 million

in loans and $12.5 million in grants to rural education systems and health care providers,” said Under Secretary Jill

Long Thompson of USDA Rural Development, the agency

which administers the program. “The Distance Learning

and Telemedicine Program, a major administration initiative, has helped rural America be a part of the Information

Revolution.” 

The changes will remove some of the previously required

steps in the application process for loans and will expand

the uses of loan funds. Applications for grants will go

through the competitive process and poverty levels will be

used for scoring purposes, instead of grant eligibility.

Applications for loans may be accepted now through USDA

Rural Development state offices or through the USDA Rural

Utilities Service national office in Washington, D.C.

The DLT program complements the discount rate program, called the E-rate, that was developed in the

Telecommunications Act of 1996 to ensure rural schools,

libraries and health care providers would be able to connect

to the Internet at a reasonable cost. 

Since the DLT program was started in 1993, it has funded 252 projects in 43 states and two U.S. territories, for a

total of $68 million. The funding has helped more than

1,000 schools and learning centers provide increased educational opportunities to rural students and residents. It has

improved health care at more than 725 hospitals and rural

health care clinics.

The proposed changes are published in the March 25

Federal Register. Detailed information on the DLT program

can be obtained from visiting the Rural Utilities Service

website at www.usda.gov/rus/dlt/dlml.htm.

Agway expands into retail store

Agway Inc. of Syracuse, N.Y., has expanded its traditional farm supply retailing business into a new type of store

format called Cultivations. Agway introduced its new retail

format in November 1998 in Lansdale, Pa., about 25 miles

northwest of Philadelphia. The store, featuring an outdoor

garden for seasonal displays, covers 8,000 square feet with a

4,000-square-foot greenhouse.

Designed to appeal to middle- to upper-income women

aged 30-50, Cultivations blends the look of an interior

design studio, housewares retailer, coffeehouse and flower

28 March/April 1999 / Rural Cooperatives

NEWSLINE
Rural Cooperatives / March/April 1999 29

shop. In addition to offering farm store staples such as

plants and garden implements, the store sells its own line of

bath and body oils, candles and clothing.

Over the next 10 years, Agway will launch 10 more

Cultivations in the Philadelphia market. The co-op hopes to

have about 50 of these stores across the nation within five

years. Each store is expected to generate annual sales of

between $2.5 million and $3.5 million and employ about 15.

Honse Picked for Farmland leadership positions

Bob Honse, a 25-year employee of Farmland Industries, 

has been named executive vice president and chief operating

officer of Farmland. In his new position, Honse will oversee

all Farmland operations, including the ag inputs, meat and

livestock, and grain divisions. He will report directly to H.D.

“Harry” Cleberg, president and CEO for Kansas City-based

Farmland. Honse has extensive experience in agribusiness

management. He joined Farmland as project manager at

Farmland’s fertilizer manufacturing plant in Lawrence,

Kan., and was later promoted to plant manager. He subsequently is served as general manager for phosphate manufacturing at Bartow, Fla.; vice president and general manager for fertilizer and ag chemicals; and executive vice president, agricultural operations. Before being named to the

new position, Honse was executive vice president, ag input

businesses, which encompasses the company’s crop production and petroleum businesses. He received his bachelor’s

degree in chemical engineering from the University of

Virginia.

Farmland enters alliances with MFA, Cenex Harvest

States 

Farmland Industries and MFA Inc. have finalized an 

agreement to form a feed manufacturing and marketing

alliance. It combines the Farmland and MFA sales staffs

and milling capacities in Missouri, which will increase the

efficiency and effectiveness of both cooperatives’ feed businesses. Farmland will procure feed ingredients for the

alliance, while MFA will manage feed marketing personnel.

Each cooperative will manage its respective feed mills. MFA

brings 14 feed mills to the alliance while Farmland brings

one mill located in Centralia, Mo., which will eventually be

converted to a swine-dedicated facility.

Farmland’s America’s Best Pork and Farmland Supreme

Beef Alliance will be marketed alongside MFA’s livestock

marketing programs through MFA retail stores and both

companies’ feed sales staffs. MFA’s feed sales staff and livestock production specialists will work together with the

Farmland feed sales staff. Each cooperative will maintain its

respective relationships with current customers, and the

alliance sales force will represent products and programs

instead of locations or companies. Both cooperatives’ logos

will appear on alliance feed bags.

Cenex, Farmland exploring grain venture

In a separate action, Farmland Industries and Cenex

Harvest States have announced plans to explore combining

certain aspects of their grain operations. Farmland and St.

Paul-based Cenex Harvest States already have many common owners and customers across multiple lines of business

and are involved in several joint ventures together. After

considering business direction and strategic fit, the boards of

both cooperatives have directed that these discussions proceed on an aggressive schedule. ■

NEWSLINE

H.D. “Harry” Cleberg Bob Honse

Leadership... continued from page 31

And I believe it is a role of leadership to recognize that we

shouldn’t just pick conformists in top roles of the organization,

thereby avoiding anyone who will come up with new ideas, who

will disagree on some major premises.

Healthy dissent is good for an organization.

I’ve learned more from my critics than those who didn’t rock

the boat. How often have I been urged to use my influence to

silence member company managers who were critical, sometimes unreasonably so.

But I have always refused to do so. First, because when the

chips are down, they are always with us. Second, if you silence

or brush aside unreasonable criticism, you also silence criticism

you should hear.

Criticism is never sweet. It is hard to take. But it is the price

we pay for leadership.
30 March/April 1999 / Rural Cooperatives

Thomas W. Gray and

Charles A. Kraenzle

USDA Rural Development

Editor’s note: Gray is a rural sociologist in

the education and member relations program area of USDA’s Rural BusinessCooperative Service (RBS). Kraenzle is

director of the statistics staff of

USDA/RBS.

What influences a farmer to

participate in his or her

cooperative? Are there certain characteristics that can be identified

that explain farmers’ participation? These

were objectives of a USDA study of 1,156

dairy-farmer members in the North Central states. All were members of the same

cooperative. 

Members may participate in cooperatives in a variety of ways. Some limit their

participation to economic patronage while

others: 1) attend meetings; 2) serve on

committees, 3) serve as elected officers,

and/or 4) recruit other members. For this

study, these latter four methods of participation were identified for measurement with member characteristics. 

Member characteristics included

beliefs concerning cooperative principles,

collective action and individual member

identities associated with cooperative

membership. They also included life satisfaction with farming, member satisfaction with the cooperative operations and

representation, member influence on

cooperative decision making and equitable treatment among members. Demographic characteristics of members and

measures of farm size and farm type were

also included. 

Attendance at meetings was found to

be positively related to eight member

characteristics. In other words, the

greater the measured value of these characteristics, and the more intense the

belief, the more likely a member’s attendance at cooperative meetings. These

characteristics included: 1) percent of

gross farm sales from the sale of milk; 2)

gross farm sales; 3) size of milking herd;

4) belief in cooperative ownership; 5)

belief that co-ops should practice one person, one vote; 6) belief that co-ops should

support education for their members and

the public; 7) satisfaction with farming

as a way of life; and 8) satisfaction with

their district director. 

Three characteristics — 1) spouse

employment off-farm; 2) belief that members have too much say about how the

cooperative is run; and 3) belief that the

cooperative primarily benefits small farms

— were found to have a negative impact

on attendance at board meetings. The

greater the measured value or frequency

of these characteristics and/or the more

intense the belief, the less likely a member was to attend cooperative meetings.

Serving on committees positively

related to five characteristics. These

include: 1) gross farm sales; 2) hired more

than half of the farm labor; 3) belief that

co-ops should work with other co-ops; 4)

belief that members receive benefits from

doing business the cooperative way; and

5) satisfaction with their cooperative

board of directors. These members tended

to operate larger farms, were stronger in

some of their cooperative beliefs and were

more satisfied with their board than

members not serving on committees.

Service in elected office was positively related to: 1) gross farm sales; 2) size

of milking herd; 3) belief that co-ops

should practice one person, one vote; 4)

belief that co-ops should work with other

co-ops; 5) belief in co-op ownership; and

6) satisfaction with their co-op board of

directors. Again, the greater the measured

value of these characteristics, and the

more intense the belief, the more likely a

member was to serve in an elected office.

The belief that an individual farmer

can usually make better marketing decisions than a group of farmers or agency

was negatively related to service in an

elected office. These members were less

likely to serve as elected co-op officers.

Recruitment of other farmers into the

co-op was positively related to size of

milking herd and to the belief that belonging to the co-op is an important part of

their identity as a farmer. Consequently,

members with larger cow herds and/or a

strong belief in belonging to the cooperative were more likely to recruit others to

join the cooperative. Members who more

intensely believed that the cooperative

primarily benefits large farms were less

likely to recruit others.

A size bias was found in the study.

Members from larger farms were more

involved in the co-op. Members from

smaller farms were less satisfied and had

less time available to participate. 

The study also revealed the importance that participation plays in validating or developing farmer understanding

and appreciation of cooperative organization. Cooperatives may seek to improve

the responsiveness of their organizations

by being sensitive to and making accommodations for greater involvement of

members from smaller farms.

Given greater involvement, the co-op

and its members may begin to identify

ways of improving the satisfaction of

these farmers and strengthening the cooperative itself. Study results suggest

emphasizing cooperative principles, the

benefits of cooperation, and the importance of participation as a possible place

to start.

Study results also demonstrate the relevance and continuing importance of cooperative principles, beliefs in collective

action and member identification with

cooperative organization and action.

Findings of the study are published in

the report, Member Participation in Agricultural Cooperatives: A Regression and

Scale Analysis, RBS Research Report 165.

It can be purchased from USDA, Rural

Business-Cooperative Service. ■

Getting Involved: What Makes 

Co-op Members Join In?

USDA study of North Central dairy farmers indicates several characteristics,

from board satisfaction to farm size, contribute to participation
C.H. Becker

Editor’s note: From 1941-68, Becker served as general manager of FS Services Inc., a regional farm cooperative based in

Bloomington, Ill. He retired in 1969 as senior vice president of

FS Services. The co-op consolidated with Illinois Grain Corporation in 1980 to become GROWMARK. The article below is

condensed from one Becker wrote for the May 1969 issue of

Farmer Cooperatives, now Rural Cooperatives. Today, 92-yearold Becker lives in Phoenix, Ariz.

Several years ago, a staff member — long since gone

from FS Services — made a recommendation that I

adopted as head of this regional cooperative. Six months

later I asked why it wasn’t working. He said, “I never was in

favor of it.”

I said, “But you recommended it.” He then said, “I thought

that was what you wanted me to recommend.” Now, he was a

highly skilled person and very intelligent. But he did not belong

in a leadership position, and he was removed from it.

It is one thing to wait until you have heard discussions and

sorted out the facts. It is quite another to wait and see which

way the wind is blowing. A leader must be an original. He can’t

be a carbon copy.

Certainly, I have no instant wisdom to impart on leadership.

But I do have some ideas, some reflections after many years in

the manager’s chair of FS Services and as a board member at

various times in some 15 organizations.

How I see leadership. Basically, I see leadership as the

capacity to influence people, to take an idea of one’s own or someone else’s and get it accepted, to have enough judgement to know

what can or cannot be sold, and to have the flexibility necessary

to get it sold without sacrificing principle. It involves the ability

to compromise in order to move ahead. 

Leadership cannot be conferred. Often, people do not understand this. They think that appointment to a job or election to a

board or office endows them with leadership. It doesn’t. It merely offers the opportunity for leadership.

Some people discover that they don’t want to be leaders. They

are not willing to suffer the loss of face that goes with the leadership. So they follow and pretend they are leading.

Right interplay between boards and managers is vital. Cooperatives must have leadership from both board and manager,

but in the right perspective for each.

I would be naive to suggest that all board members are equal

in leadership capacity, or that by doing or not doing certain things

they can become equal. But if the board will recognize leadership and give it rein, it can

discharge its leadership function effectively.

And I have never seen a

board that would not respond

to leadership. Many times I

have heard boards criticized

as “impossible.” People would

say the board was interfering

with management, it was trying to manage, it was always

going off on tangents, it was

totally negative.

Most often the reason for

these sentiments traced

directly to the manager or

whatever the top officer was

called. He was not giving the

leadership he should have. Today, as a board member, I can get

impatient when a manager doesn’t provide leadership — when

he says, “This is the problem, what do you think we should do?”

— or when he just says, “This is the problem,” implying that the

board should do something.

Rather, the manager should say, “This is the problem as I see

it — this is what I recommend we do.” Or perhaps he should

say, “This is the problem as I see it. I want the benefit of your

views before I formulate a recommendation next month, or I’d

like a committee to work with me on this.”

As a board member, I want recommendations and I want

them in writing. But I don’t want to be called upon to make a

decision on the spur of the moment. I want time to reflect. That

is why, as a manager, I always tried to introduce and discuss

any significant recommendations a month or more before asking

the board for a decision on my recommendation.

I’ve seen literally hundreds of managers fail because they

didn’t understand their proper leadership role. For every manager who usurps board functions, there are three or four who

ask the board to make management decisions — and boards

ultimately tire of both kinds.

Of course, the board is finally responsible and it must decide

the framework of policies within which management must function. But any board on which I’ve served has viewed its executive

as its leader in discharging the board’s responsibility. And if we

felt he was not functioning properly as a leader, we changed

executives — no matter how brilliant or how popular he was.

But perhaps the board’s greatest leadership role is selecting

a manager and creating a climate in which people carry out effectively the organization’s policies and objectives — because they

want to, not because they are told to.

See “Leadership” page 29

31 March/April 1999 / Rural Cooperatives

PAGE FROM THE PAST

What Is Leadership?

A leader must be an original, not a carbon copy

C.H. Becker
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