Rur al COOPE COOPE USDA / Rural Development Development Rural / USDA r e p o l a e v f e o D s p n o o - s o s C e L d r a H Page 24 Page RATIVES RATIVES July / August 2009 August / July Commentary Growing world population presents challenge and opportunity for U.S. farmers

10 1930 10 1940 19 The Number of People Fed Annually by One Farmer 1950 27 1960 46 1970 73 1980 115 1990 129 2000 139 Today 155

Data: American Farm Bureau Federation

Chris Policinski By Chris Policinski, President and CEO world’s population is nearly 6.8 billion Land O’Lakes Inc. people. By 2050, that number is expected to surpass 9 billion. Given this rate of population growth, world Editor’s note: This commentary is based on Policinski’s address at food production must double by 2050 to meet the increasing the 2009 USDA Agriculture Outlook Forum. Land O’Lakes is a demand, according to the United Nations’ Food and farmer-owned food and agricultural cooperative with annual sales Agriculture Organization (FAO). of $12 billion. Meeting the challenge he extraordinary increase in agricultural Providing food for an expanding population is the long- productivity is one of America’s greatest — term challenge before us. The key to meeting this challenge yet least acknowledged — success stories. It’s is for U.S. agriculture and agribusiness to lead the way in T a story of creating opportunity for U.S. promoting continued productivity increases. Our producers, while also meeting our extraordinary track record demonstrates that we have both responsibility to feed a hungry world. the capacity and the commitment to accomplish this For nearly 90 years, Land O’Lakes has been involved in ambitious goal. both sides of this story. As a producer-owned cooperative, Just consider, in 1930 the average U.S. farmer fed 10 Land O’Lakes has been working to build agricultural people, according to the American Farm Bureau Federation. productivity and create opportunity for American farmers In 1960, that farmer fed two dozen people. By 1990, the since we were founded in 1921. On the global stage, for figure reached the 100 mark. Today, the number is 155. nearly three decades, we have worked to alleviate the Looking specifically at some key areas of production, devastating effects of hunger around the world through the average corn yields in the U.S. have increased from 20 efforts of our International Development Division. bushels an acre in 1930 to more than 150 bushels today; All of this has given Land O’Lakes a unique vantage point wheat yields have tripled since 1930; and per-cow milk and, as we look ahead, it’s clear that continuing to increase agricultural productivity is a critical imperative. Today, the continued on page 42

2 July/August 2009 / Rural Cooperatives Features

Volume 76, Number 4 July/August 2009

Rural Cooperatives (1088-8845) is published bimonthly by USDA Rural Development, 1400 Independence Ave. SW, Stop 0705, Washington, DC. 20250- 0705.

The Secretary of Agriculture has determined that publication of this p. 8 p. 14 p. 18 p. 28 p. 34 periodical is necessary in the transaction of public business required by law of the Department. Periodicals postage paid at Washington, DC. and additional mailing offices. Copies may be obtained from the 4 Dairy co-ops maintain steady market position Superintendent of Documents, By Charles Ling Government Printing Office, Washington, DC, 20402, at $23 per year. Postmaster: send address change to: Rural Cooperatives, USDA/RBS, Stop 3255, 8 Traditions run 100-years deep at Tillamook County Creamery Wash., DC 20250-3255. By Anne Todd

Mention in Rural Cooperatives of company and brand names does not 14 Ripe Time Delivery signify endorsement over other Carolina growers form co-op to supply farm-to-school market companies’ products and services. By Bill Brockhouse & Bruce Pleasant Unless otherwise stated, contents of this publication are not copyrighted and may be reprinted freely. Any opinions express- 18 New life for an old town ed are those of the writers, and do not Wine co-op helps transition from tobacco while boosting agri-tourism necessarily reflect those of USDA or its employees. By Stephen Thompson

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its 21 Rural advocate Dallas Tonsager to lead USDA Rural Development programs and activities on the basis of By Dan Campbell race, color, national origin, age, disabili- ty, and where applicable, sex, marital status, familial status, parental status, Creating Co-op Fever: Hard Lessons Learned religion, sexual orientation, genetic 24 information, political beliefs, reprisal, or By Bill Patrie because all or part of an individual’s income is derived from any public assistance program. (Not all prohibited 28 City Slickers bases apply to all programs.) Persons Co-op boosts Montana ranches that offer working vacations with disabilities who require alternative means for communication of program By Donna Healy information (Braille, large print, audiotape, etc.) should contact USDA’s TARGET Center at (202) 720-2600 (voice and TDD). 31 ’09 Co-op Hall of Fame inductees played crucial role in co-op To file a complaint of discrimination, write movement to USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C. 20250-9410, or call (800) 34 Shift to multifunctional agriculture complicates biofuels 795-3272 (voice), or (202) 720-6382 (TDD). USDA is an equal opportunity provider development and employer. By Thomas W. Gray Departments 2 COMMENTARY 17 LEGAL CORNER Tom Vilsack, Secretary of Agriculture 32 CO-OP DEVELOPMENT ACTION Dallas Tonsager, Under Secretary, 37 NEWSLINE USDA Rural Development Dan Campbell, Editor ON THE COVER: Stephen Hall / KOTA, Design Volunteers fill sandbags to help hold back flood waters near Winfield, Have a cooperative-related question? Mo., in 2008. In this month’s cover story, co-op developer Bill Patrie says Call (202) 720-6483, or email: [email protected] such efforts symbolize the type of united cooperative effort needed for

This publication was printed with vegetable oil-based ink. agricultural co-ops to succeed. Photo by Jocelyn Augustino, courtesy Federal Emergency Management Agency (FEMA)

Rural Cooperatives / July/August 2009 3 Dairy co-ops maintain

By Charles Ling, Ag Economist Fewer farms, more milk USDA Rural Development The 2007 survey shows that there has been no slowing of the trend Editor's note: This article is based on RR toward fewer farmers producing more 218, Marketing Operations of Dairy milk, nor in the westward drift of the Cooperatives, 2007. To order a free copy, dairy industry. e-mail: [email protected], or down- In 2007, there were 49,675 co-op load it from the Internet at: www.rurdev. member producers who marketed milk usda.gov/rbs/pub/research.htm. in the United States, 19 percent (11,715) fewer than five years earlier. airy cooperative The greatest declines were in the East members in the United North Central and West North Central States marketed more regions, each of which had 4,000 fewer than 150 billion pounds member-producers. of milk in 2007, The two North Central regions and maintaining a steady market share for the North Atlantic region together co-ops during the five-year period accounted for 85 percent of all member between 2002 and 2007. This and other producers, but had only 51 percent of findings are the results of a survey of all cooperative milk volume. The South dairy cooperatives conducted by the Atlantic region had the fewest Cooperative Programs of USDA Rural cooperative producers, being home to Development. The survey is done every 2,118 members. five years, with the most recent With the exception of the South questionnaire collecting information on Atlantic, milk volume marketed by the milk-marketing operations of dairy cooperative members in all regions was cooperatives for fiscal 2007. greater than five years earlier. The The 152.5 billion pounds of milk largest increase, up 9 billion pounds, that dairy co-op member-producers was in the Western region, which marketed in 2007 was 9.6 percent more remained the top source of cooperative than in 2002. This volume represented milk volume. Cooperatives in this 82.6 percent of the total milk marketed region marketed 58.1 billion pounds of steady by farmers nationally, a slight increase member milk (38 percent of total in market share from 82.4 percent cooperative milk). recorded five years earlier. The East North Central region The number of dairy cooperatives accounted for 25 percent of total market during this period decreased from 194 cooperative milk, the same share as in to 155. There were 45 cooperatives that 2002. The North Atlantic and West processed or manufactured dairy North Central regions each supplied 13 products, the same number as in 2002. percent of the milk marketed by position Twelve cooperatives only operated cooperative members. receiving stations, while 98 co-ops had Milk deliveries per member- no milk-handling facilities. Most of the producer were up in all regions during latter 98 performed bargaining the five-year period. Nationally, the functions; a few others were “check-off” average per-producer delivery increased co-ops that provided milk testing and 35 percent, from 2.3 million pounds to other services. 3.1 million pounds. Per-member

4 July/August 2009 / Rural Cooperatives Dairy producers Michelle and Scott Herber of Altura, Minn., are member-owners of AMPI, one of 49 dairy co-ops operating in the West North Central region. Photo by Sheryl Meshke, courtesy AMPI. Facing page: Hungry Tennessee Holsteins dig in. Photo by Mark Johnson, courtesy Tennessee Farmers Cooperative delivery was highest in the Western region, at 21.2 million pounds, a 56- percent increase from 13.6 million pounds in 2002. This was more than 12 times that of the North Atlantic region in 2007. Steady share of milk As in 2002, there were four cooperatives that each handled more than 6 billion pounds of member milk in 2007. These four co-ops accounted for 49.2 percent of cooperative milk volume in 2007, the same share as reported for 2002. The number of cooperatives in the next size group (3 billion to 6 billion pounds of milk) increased by one, to eight co-ops in 2007. The milk volume of this group accounted for 22.9 percent of all cooperative milk, an increase of two points from 2002. The 2-billion- to 3-billion-pounds group declined by one cooperative since 2002, and the group’s share of cooperative milk decreased by 2.3 points, to 8.2 percent in 2007. Together, the 17 cooperatives in the above three size groups had a very slight, 0.3 point decrease in their share of cooperative milk. Their share declined from 80.6 percent in 2002 to 80.3 percent in 2007. The number of cooperatives in the 1 Dairy co-op financial billion- to 2 billion-pounds group more performance than doubled (from 5 to 11), as did the Complete financial data for 2007 submitted by 94 group’s milk volume (from 7.1 billion dairy cooperatives to USDA show that: pounds to 15.4 billion pounds), during the five-year period from 2002 to 2007. ■ Total assets for fiscal 2007 were $12 billion ($8.41 This group showed the most significant per hundredweight (cwt)); increase in the share of total ■ Total liabilities were $8.7 billion ($6.09 per cwt); cooperative milk volume, climbing ■ Members’ equity was $3.3 billion ($2.32 per cwt), from 5.1 percent in 2002 to 10.1 with 82 percent of the equity allocated to members. percent. This increased share came ■ Net margin before taxes was $404 million (28 cents mostly at the expense of the groups of per cwt), a return on equity of 12.2 percent. cooperatives with smaller milk volumes. ■ Together, these 94 cooperatives marketed 94 In terms of milk volume, the relative percent of total cooperative milk volume. position of dairy cooperatives to the from 7 percent in 2002. The co-op rest of the industry has been share of ice cream increased from 3 remarkably stable. The largest four percent to 4 percent, while their share Western dairy cooperatives had only a slightly of ice cream mix increased from 6 21 co-ops higher share of the nation’s total milk percent to 13 percent. 2,736 producers supply, moving up from 40.5 percent in In 2007, cooperatives marketed 11 58.1 billion lbs. 2002 to 40.7 percent in 2007. percent of the nation's yogurt, 14 21.2 million lbs./producer Broadening the focus to the largest percent of the sour cream and 20 eight and the largest 20 dairy percent of the condensed buttermilk. cooperatives, both groups also saw little or no change in their shares of milk. Plant operations and employees NUMBER OF Co-op share of dairy products Dairy cooperatives owned and CO-OPS Volume of butter and nonfat and operated 193 plants in 2007, more than OPERATING skim milk powders made by half of which were in the two North IN EACH cooperatives increased from 2002 to Central regions. REGION 2007. Cooperatives’ share of butter, at A plant may perform more than one 1.087 billion pounds, remained at 71 marketing function. Among the 123 percent of U.S. production, and their plants that reported receiving and share of nonfat and skim milk powders, shipping milk as a part of their plant at 1.444 billion pounds, was an operations, 17 were receiving stations overwhelming 96 percent. that had no other marketing activities. However, cheese made by The other 106 plants also manufactured cooperatives dropped substantially, one or more dairy products, in addition decreasing by 15 percent from 5 years to receiving and shipping milk. earlier, to 2.513 billion pounds. This Dairy cooperatives engaged in the accounted for 26 percent of total U.S. production of various dairy products. production, compared to 34 percent in Most notable were: American cheeses 2002. Cooperatives’ share of dry whey were manufactured in 34 plants, Italian products also declined, from 52 percent cheeses were made in 17 plants and South Central to 42 percent. fluid milk products were packaged in 49 11 co-ops Sales of packaged fluid milk products plants. Twenty-four plants churned 2,353 producers by cooperatives increased both in butter, while 39 plants made dry milk 9.8 billion lbs. volume and in market share. The 4.035 products (other than whey products). 4.2 million lbs./producer billion pounds marketed was 7.4 Whey products were dried in 24 plants. percent of the nation's production, up Sixty-five dairy cooperatives

TA B L E 1 SIZE OF DAIRY COOPERATIVES IN TERMS OF MILK MARKETED BY MEMBERS, 2002 AND 2007

Milk marketed by members Cooperatives Member milk Share of co-op milk 2002 2007 2002 2007 2002 2007 Number Million pounds Percent More than 6 billion pounds 4 4 68,499 75,089 49.2 49.2 3 to 6 billon pounds 7 8 29,040 34,899 20.9 22.9 2 to 3 billon pounds 6 5 14,615 12,504 10.5 8.2 1 to 2 billion pounds 5 11 7,120 15,439 5.1 10.1 0.5 to 1 billion pounds 13 8 9,101 5,176 6.5 3.4 100 to 500 million pounds 30 32 6,761 6,740 4.9 4.4 Less than 100 million pounds 129 87 4,063 2,681 2.9 1.8 Total 194 155 139,199 152,528 100.0 100.0

6 July/August 2009 / Rural Cooperatives West North Central East North Central North Atlantic 49 co-ops 47 co-ops 62 co-ops 10,135 producers 20,255 producers 12,078 producers 19.2 billion lbs. 37.7 billion lbs. 20.4 billion lbs. 1.9 million lbs./producer 1.9 million lbs./producer 1.7 million lbs./producer

South Atlantic 10 co-ops 2,118 producers 7.4 billion lbs. 3.5 million lbs./producer

reported having a total of 21,475 full- TA B L E 2 SHARE OF MILK MARKETED BY MEMBERS OF DAIRY COOPERATIVES, 2002 AND 2007 time and 2,938 part-time employees in 2007. These cooperatives marketed 127.4 billion pounds of member milk, Category 2002 2007 or 84 percent of cooperative milk. Percent Six other cooperatives each had only Share of cooperative volume one part-time employee. Another 15 4 largest cooperatives 49.2 49.2 8 largest cooperatives 62.9 62.3 cooperatives reported having no 20 largest cooperatives 84.0 83.7 employees.These 86 reporting All dairy cooperatives 100.0 100.0 cooperatives represented 55 percent of all dairy cooperatives and marketed 86 Share of total U.S. volume percent of cooperative milk. The 4 largest cooperatives 40.5 40.7 8 largest cooperatives 51.8 51.5 remaining 14 percent of the milk was 20 largest cooperatives 69.2 69.2 handled by the 69 dairy cooperatives All dairy cooperatives 82.4 82.6 that did not supply employment information to USDA. ■

Rural Cooperatives / July/August 2009 7 Unbroken chain: For nearly a century, the fortunes of the Hurliman family have been tied to the co-op that it is a member-owner of: Tillamook County Creamery Association (TCCA). Above, family members pose with their herd in 1915; their descendents (from left) Carl, Kenny and Nick Hurliman returned to the same spot in 2008. Photos courtesy TCCA

By Anne Todd farm in 1915 and the color digital photo farming in this beautiful slice of coastal USDA Rural Development snapped at the same location in 2008 Oregon has been the story of the tell a story of an unbroken chain of Tillamook County Creamery he two photos were traditional, pasture-based dairy farming Association (TCCA), a dairy taken 93 years apart. and cooperation among producers in cooperative that is celebrating its But the grainy, black- the Tillamook Valley of northwestern centennial anniversary all year long. and-white photo taken Oregon. The technology in the milking parlor on the Hurliman dairy For 100 years now, the story of dairy may have changed greatly over the

8 July/August 2009 / Rural Cooperatives Traditions run 100-years deep at Tillamook County Creamery

years, but it all still boils down to dairy relationship with TCCA that stretches TCCA was formed in 1909, just six farmers who know their craft and back four generations, almost to the years before the Hurlimans started their maintain well-cared-for dairy herds that very beginning of the cooperative. In farm. At the time, many small, produce high-quality milk, then 1915, Hurliman’s great-grandfather and independent cheese plants dotted the processing it into a line of award- his two sons bought their dairy farm in county. Ten of these independent winning cheeses sold under the farmers’ Woods, on the northern coast of cheese producers founded TCCA, own brand. Oregon, about a mile from the Pacific deciding to join forces in a farmer- Nick Hurliman’s family has a shore and 20 miles south of Tillamook. owned cooperative that could control

Rural Cooperatives / July/August 2009 9 Good neighbors: The beautiful Oregon coast (USDA photo by Dan Campbell) is just a few miles away from the Tillamook cheese plant. Photo courtesy TCCA cheese quality. purchase the cows and equipment he one organization. Another goal of the new co-op was would need to start a milk pool and run Hurliman’s grandfather, father and to market cheese as a product coming a cheese plant. He also hired Canadian younger brother have all served on the from the county itself, instead of one cheesemaker Peter McIntosh, who was Tillamook board of directors at various coming from the various individual experienced with the cheddaring times in the past. Hurliman, an avid plants. process and brought a recipe for outdoorsman, attends all member The Hurlimans’ farm is pasture- cheddar cheese with him. meetings and says he feels that his voice based, as are most of the co-op’s dairy By 1909, when the TCCA is heard on important issues. “We get farms. Cows graze outside and are cooperative was launched, Tillamook very good communication from milked twice daily. The family milks County was already well known for its Tillamook. They have a really good about 80 to 85 cows, mostly Holsteins, cheese. Although Townsend was the management team,” he says. and has 120 acres of bottomland, 90 first in the county to establish a acres of hill land and rents 80 acres commercial cheese plant, other Marking the anniversary from neighbors. organized, commercial cheesemakers Little did the 10 producers who Like other dairymen across the settled there too. By 1904, banded together in 1909 to protect the country, Tillamook farmers have been cheesemaking in Tillamook County had quality of their Tillamook cheese know affected by the steep drop in milk prices advanced in quality to the extent that a that they were creating a cooperative this year and the overall economic cheese from Tillamook County won and product that would grow over the downturn. “Obviously, we’re not first place at that year’s St. Louis years into an award-winning, nationally making as much as we have in past World’s Fair. recognized brand. years,” Hurliman remarks. “But we live In the late 1940s, four of the larger TCCA has scheduled events conservatively and we’ll get through it. independent plants in the county throughout the year to mark the Farming has always been an up-and- merged. In partnership with TCCA, centennial. The co-op launched a new down occupation.” they built a large, centrally located website, TillamookFanClub.com, that is plant north of the town of Tillamook. an on-line resource center and Early days of co-op This plant is still part of the TCCA community for fans of Tillamook The TCCA story begins in the facility today. products. They also launched an on- 1850s, when the first settlers arrived By 1968, all of the smaller local line store that offers cheese, Tillamook and began establishing farms. But it cheese plants in the county had merged apparel and other gifts. It is also took a giant leap forward in 1894, when and consolidated their operations under offering a special limited-edition a successful dairy entrepreneur named TCCA and had moved their cheese anniversary cheese. T. S. Townsend started the first production to TCCA’s central plant. “The name Tillamook is pretty commercial cheese plant in Tillamook. This marked the beginning of the famous,” says Hurliman. “I feel He took 30 orders for cows from local cooperative’s operations as a single unit privileged to belong with Tillamook. farmers, then went to Portland, Ore., to with all of the smaller plants unified as It’s farmer-owned, dependable and gives

10 July/August 2009 / Rural Cooperatives A sampling of award-winning Tillamook cheeses (photo courtesy TCCA); a replica of The Morning Star — a two-masted schooner launched in 1855 to ship cheese to Portland, and still depicted on the co-op’s label — rests outside the cheese plant. USDA photo by Dan Campbell

Tillamook’s commitment to community restore more than two miles of stream habitat. includes environmental stewardship “We are also committed to supporting the youth in our Tillamook County Creamery Association’s commitment to community,” says Strunk. “One of our more exciting maximizing the potential of its members’ dairy farms would partnerships involves inviting students to use our wetlands mean little were it not for its equal commitment to their property as an outdoor classroom to study and prepare for a communities and the environment. Indeed, corporate career in the science and environmental field. We also offer America, for the most part, has a long way to go before it will five, $2,000 “Excellence in Leadership” scholarships to ever match the type of commitment to community practiced students in Tillamook and Morrow counties each year to for so long by cooperatives such as Tillamook. These encourage higher education. member-owned businesses have long realized that their co- TCCA is the largest employer in Tillamook County and, ops are only as strong as the local communities in which counting the 110 independent family-owned dairies that dot their members live and work. the countryside, it has a large impact on the local economy The cornerstone of Tillamook’s commitment to the and its ability to thrive. community is the cooperative’s “no-net-loss of farmland” “You can also look at our impact from the standpoint that policy. the city of Tillamook is able to host a hospital and other basic “This is a rural county and we are committed to sustaining services for its citizen because of our employee base,” it,” says Tillamook CEO Harold Strunk. “We also believe in Strunk says. “The farms support the veterinarians and the the stewardship of the natural resources in our community, equipment dealers and employ workers as well. We are also so we partner with our local Soil and Water large contributors to the nonprofits in the High school students take Conservation District, the Watershed Council county,” he adds, noting that the co-op has water samples on TCCA- a long-standing relationship with the local and the Tillamook Estuaries Partnership to owned wetlands. improve water quality and salmon habitat and food bank and its member dairy farmers to mitigate flooding. We do this through and employees are among the largest leadership opportunities and funding.” contributors to the United Way. For the past 20 years, the co-op board has “It is also important to factor in the impact funded an environmental stewardship program of tourism on the local economy,” Strunk that finances individual projects to protect the says. “The Tillamook Cheese Factory environment. This April, the State Land Board Visitors Center draws approximately presented a streamside project award to 1 million visitors to the Visitors Center TCCA, the Tillamook Estuaries Partnership and annually. This impacts local restaurants, four other partners for a joint project to remove hotels and other recreational activities in the Coal Creek Dam, owned by TCCA, and to the area.”

Rural Cooperatives / July/August 2009 11 us good prices.” groceries throughout the United States, attraction on the Oregon Coast, Today, the TCCA cooperative is but availability of other products according to the Tillamook Area owned and operated by 110 family dairy currently is mostly limited to the Chamber of Commerce. It started in farmers living in the Tillamook region, western states. the 1950s when the co-op added a small such as the Hurlimans, who work the Significant plant improvements were cheese shop for visitors at the plant. land, milk the cows and set the policies made in the 1990s, including the In 1979, TCCA opened an expanded and direction. Profits from the addition in 1990 of a new cheesemaking Visitors Center for the public, which cooperative go back to the farmer- room and the transition to a new, fully provides an observation area, an owners to help them keep their dairies automated cheddaring system known as educational slide show, a museum, deli economically sustainable. the “Cheddarmaster,” a stainless-steel and fudge counters, and an ice cream- In addition to its premiere cheeses — piece of equipment that drains the whey dipping counter. including several varieties of cheddar, from the curd and aids in the The Visitors Center accommodates mozzarella, colby, flavored cheeses, cheddaring process. nearly 1 million tourists each year. Monterey jack, pepper jack and colby TCCA’s farmers strive to produce jack cheese — TCCA has expanded its State-of-the-art visitors center the highest quality milk possible. In dairy offerings to include ice cream, Tillamook is also home to the order to achieve this, they must meet butter, sour cream and yogurt. Tillamook Cheese Factory’s Visitors many rigorous quality requirements set Tillamook cheese is available in Center, the most visited tourist by their co-op. One major factor that has led to the co-op’s success in meeting this objective is its focus on animal care. All Tillamook cheese and other dairy 100-Year Milestones products are produced with milk from cows that are not supplemented with 1909 Ten cheese factory operators form Tillamook County Creamery artificial growth hormones (rBST). Association (TCCA) cooperative to control product quality. In keeping with Tillamook’s guiding 1911 TCCA starts cow testing to ensure use of clean, healthy cows, remove principles, Hurliman considers himself poor quality ones and help with feed rations and breeding. 1917 TCCA hires ad agency and starts campaign in Los Angeles, San Francisco a good steward of the environment. and Portland. Credited as first community to advertise cheese under a “Lately, farmers have been ‘branded’ as brand-name. the problem, but farming is 1921 The Tillamook brand is on all cheese and trademarked. environmental,” he says. “If you don’t 1946 TCCA starts making rindless cheese. take good care of your cows and your 1947 TCCA starts bottled milk production. land, you don’t make any money.” 1949 Four TCCA factories consolidate and build new central plant. 1966 TCCA redesigns packaging for better recognizability. The Tillamook tradition 1968 Seven cheese factories consolidate and move operations to Tillamook TCCA considers cheesemaking an central plant. This brings all formerly independent county plants into art form, and the co-op works hard to TCCA. carry on the traditions and values 1972 TCCA starts a Premium Ice Cream line. started by its founders many 1978 TCCA starts using refrigerated trucks to haul products to market. 1979 Tillamook opens Visitors Center. generations ago. The co-op is also 1990 TCCA starts new automated “Cheddarmaster” cheddaring system. committed to improving the economic, 1994 TCCA expands Visitors Center to accommodate more than 900,000 annual social and environmental well-being of tourists. Starts low-fat yogurt line. the communities in which it operates. 1998 TCCA starts fat-free yogurt line. TCCA has reaped many dividends 1999 Co-op launches www.tillamookcheese.com Web site. from its business practices and 2001 Co-op expands facilities and doubles cheesemaking capacity. commitment to its members and the 2005 Co-op starts another expansion to increase output by 50 percent. community. For example, the Launches yogurt smoothie and vintage, 100-day-aged white medium cooperative won six awards for its cheddar products. cheddar cheeses at the 2008 National 2006 TCCA completes expansion project. The new vintage white cheddar takes Milk Producers Federation annual top honors at National Milk Producers Federation cheese contest. cheese contest. For the third year in a 2007 TCCA introduces three new flavored cheddars. Names Harold Strunk as president/CEO. row, TCCA was recognized by the 2008 TCCA launches two more flavored cheeses. Portland Business Journal as a Most 2009 TCCA celebrates 100 years as a farmer-owned co-op. Admired Company in Oregon for continued on page 43

12 July/August 2009 / Rural Cooperatives A conversation with Tillamook President/CEO Harold Strunk  Question: How important has the co-op business that make member relations structure been to the long-lasting success of and communications easier Tillamook? What do you consider to be the greatest than for a co-op with, say, strength and weakness of the co-op business model? 1,000 members? Harold Strunk: “The cooperative has allowed the “Yes, it is easy to keep your dairy industry to survive in Tillamook County. Absent finger on the pulse of what is the ability to band together and produce a high-quality going on. Conversely, members are very interested in dairy product under a brand name, the dairy industry the detailed workings of the company, which means we in the county would not have been able to survive. have 110 bosses. A large part of our communications is The weakness is that given the strong brand that has keeping our members informed about the constantly developed, the co-op structure provides some changing business environment.” constraints to growth. The members have the burden on their shoulders of carrying the capital requirements  You are celebrating the co-op’s 100th birthday in a for growth. The members have an investment in the year that has seen milk prices plummet severely. operation of their own farms and the capital required What’s the situation there in the Pacific Northwest? to operate the creamery.” “Yes, it is difficult in the Pacific Northwest, as it is everywhere in the country. Milk prices are below  How has your marketing strategy evolved or production costs. We have been fortunate that the changed in recent years? Do you have any new Association has been able to maintain a good financial products or marketing efforts planned for the start of performance due to strong performance of the your second century? Tillamook brand. “The Tillamook brand marketing strategy is This has allowed us to pay our members a evolving significantly heading into our second century. substantial premium for their milk. However, it is still Our strategy recognizes that Tillamook plays a very not enough of a premium to cover their production important role in the lives of people…as both a lifestyle costs during this very low milk market. brand and a great-tasting food product. To capitalize It is hard to celebrate such a milestone in our co- on this, we are utilizing two key marketing programs op’s history when the situation on the farms is so tough that allow us to build direct, personal relationships that for our members. However, we feel it is very important have an impact with our targeted consumers: social to celebrate this achievement. The co-op, during its media and grassroots events. history, has done a great job looking into the future In recognizing the power of the Internet, we are and has made good business decisions, which allowed connecting daily with current and potential Tillamook TCCA to reach our 100-year anniversary, and for that users via direct, one-on-one social media web they should be proud. This is a great cooperative with programs. These programs include our Tillamook Fan a strong and growing brand.” Club website, Facebook, Twitter and YouTube. The information we share about our brand via these web  The co-op has a state-of-the-art visitors center and tools inspires people to become brand enthusiasts; they gift store adjacent to the main plant in Tillamook. then motivate others to connect with us. Does that generate much profit for the co-op, or does it We have built an extremely unique, customized fall more under the realm of promotion and experiential tasting program that will excite both advertising? consumers and our retail customer-partners. We will “The Tillamook Cheese Factory Visitors Center is put our great-tasting cheese in the mouths of hundreds for-profit, but it is a minimal profit. The Visitors of thousands people via a national tour that launches in Center is our most important and effective marketing August 2009 and will run throughout 2010.” resource. It is the epicenter of our brand, where our consumers and fans can enjoy a rich and  With only 110 members, you probably know multidimensional brand experience. virtually every one of them on a first name basis. Does continued on page 43

Rural Cooperatives / July/August 2009 13 Ripe Time Delivery

Carolina growers form co-op to supply farm-to-school market

By Bill Brockhouse North Carolina originated in 1997 Carolina used the program. The Cooperative Development Specialist through a partnership between the U.S. number increased to 67 school districts USDA Rural Development/Cooperative Department of Defense and the Mar- in 2008, which made record purchases Programs kets and Food Distribution Division of of $700,000 through the program the North Carolina Department of during the 2008-09 school year, up Bruce Pleasant Agriculture and Consumer Services from $502,000 in 2006-07. Cooperative Development Specialist (NCDA&CS). The first effort involved USDA Rural Development/North Carolina supplying apples to schools in western Birth of the cooperative North Carolina. The initial success The North Carolina Farm-To- orth Carolina has 2,513 resulted in the program expanding School Cooperative was incorporated in elementary and throughout the state, with participation 2008, born out of producers’ desire to secondary schools with growing every year. supply fresh, healthy produce to the 1.44 million students. There are more than 2,000 farm-to- school children of their state. The co- That’s a lot of hungry school programs operating in 39 states. op and its mission have been a source of mouths to feed. These schools are They bring healthy food from local pride for the state’s produce growers increasingly turning to North Carolina farms to children’s plates at school. This ever since. produce growers for a wide variety of also helps provide a market for local “The schools’ participation in the nutritious, freshest-possible foods, such farmers and reduce the distance food is program allows the producers to as watermelon, broccoli and cabbage. shipped. diversify their sales and provides a The farm-to-school program in In 2004, 60 school districts in North healthier diet for the children.” says

14 July/August 2009 / Rural Cooperatives Bursting with just-picked flavor, North Carolina strawberries are harvested, shipped and served within 48 hours to hungry students in one of the 67 school districts being supplied by the North Carolina Farm-to-School Co-op.

cooperative President James Sharp. Carolina agriculture and good Coast. He says if the schools add a “This is also an opportunity to educate nutrition. summer feeding program, produce children through promotions about the Grower/suppliers pay an assessment could be supplied year round. origins of their food.” of 50 cents per case of produce The most recent Farm Bill gives In addition to providing fresh delivered to the schools to help fund schools the option to purchase produce produce, the program teaches promotions and to pay for educational from local farmers. A month before elementary and secondary school materials. each commodity offering is in peak children about North Carolina produce The cooperative has 30 members season, a memorandum is sent and how it is produced. This who supply 12 commodities. These electronically to all the Child Nutrition educational effort involves posters in include eight varieties of apples, Directors with an order form. Upon school cafeterias, lesson plans and seedless watermelon, cabbage, broccoli receipt of the solicitation, the schools coloring activities for younger children. crowns, sweet potatoes, apple slices, place their orders electronically, NCDA&CS tractor-trailers are rolling strawberries and blueberries. guaranteeing the delivery of the freshest advertisements that display images of “You can’t get any fresher produce produce available when promised. In school children enjoying North than this,” says Tommy Fleetwood, the past, they were not able to indicate Carolina strawberries. This year the agricultural marketing supervisor with a geographic preference, due to group will consider using promotional the NCDA. “It is delivered to the procurement regulations, explains “tent cards” on cafeteria tables and schools two days after harvest,” he Marilyn Moody, senior director for other educational items to help increase notes, compared to at least a week for Child Nutrition Services for Wake students’ understanding of North produce shipped in from the West County Public Schools. “This allows us

Rural Cooperatives / July/August 2009 15 to get fresh produce at the peak of ripeness on the lunch supplier must have a representative present at the meeting, tray,” Moody says. where discussions are held regarding price, volume, varieties, grade standards and packing methods. Food distribution network In late July, the NCDA&CS solicits bids on behalf of Farm-to-school program delivery is made possible with Child Nutrition Services for North Carolina Schools. the help of a unique food distribution service through Produce must be North Carolina-grown and certified as NCDA&CS, which maintains a network of 14 trucks and 30 meeting USDA’s Good Agricultural Practices (GAP) food trailers. It also has facilities for storing and cooling safety guidelines. commodities, helping to ensure that produce is the freshest Successful bidders must also be able to provide all possible when it is served to students. commodities listed and provide a $2-million liability policy. This fleet of trucks, along with two warehouses with In its first year, the cooperative’s bid was chosen, and it has coolers and freezers, is believed to be the only food enjoyed a successful year with a high volume of high-quality distribution network in the nation operated by a state produce. department of agriculture. NCDA&CS collects the orders Because of its low overhead and experience in feeding the from school nutrition directors. Produce is then picked up at state’s school children, the cooperative has a unique three grower delivery points. From there it is hauled to one opportunity to keep fresh produce at the “peak of ripeness” of the warehouses, where orders are processed and the in North Carolina schools. ■ produce is then trucked to the schools — all within 48 hours. This past year, 13,000 flats of strawberries were provided to schools by the cooperative. That represents about 100 acres of strawberries, Fleetwood says. Grower control and responsibility The cooperative has a board of seven growers, most of All North Carolina Farm-To-School Cooperative whom also serve as representatives of statewide commodity members must be growers who are using the organizations. Three NCDA&CS representatives serve the cooperative to market through the farm-to-school board as non-voting advisors. It is aided by a five-member program. Thus, they have responsibility for monitoring advisory committee, comprised of child nutrition directors, operations, establishing standards and controlling the which meets two or three times each year. The committee overall strategic direction of the cooperative. helps test new products and provides feedback to the The cooperative’s objectives are to: cooperative regarding the success of trial products. ■ Supply locally-grown fresh fruits and vegetables to Boosting quality and distribution school systems throughout North Carolina; ■ Promote healthy eating to school students across the The cooperative’s main purpose, in terms of its members’ state to fight childhood obesity; operations, is to improve the quality and facilitate the ■ Provide nutrition education concerning fresh fruits distribution of members’ produce. Until the cooperative was and vegetables to students throughout the state; formed, NCDA&CS was responsible for program operations, ■ Support organizations that complement the interests from farm-gate to schools. NCDA&CS still has many of the organization and its membership; responsibilities, but is sharing more of them with growers. ■ Promote North Carolina farmers and agriculture. Reasons for using the cooperative business structure included the desire to provide growers with control of marketing, to increase coordination and efficiency of operations and to comply with existing federal cooperative laws. As member-owners of the business, growers have responsibilities to their cooperative. This includes signing a marketing agreement which contains requirements for produce they deliver. Requirements include the volume and type of produce, cooling, grading, washing and packaging. They also elect a board of directors and keep informed about how their cooperative is performing.

The road ahead As with any cooperative, organization does not guarantee a market for the members. A supplier meeting for each Truck trailers display promotions for the farm-to-school produce program. commodity is held each year prior to bidding on the farm-to- school contract. All members participating as a commodity

16 July/August 2009 / Rural Cooperatives Legal Corner Capper-Volstead, Revisited

Essential reading for co-op directors By Stephanie M. Smith, Senior Legal Adviser USDA's Capper-Volstead brochure Cooperative Programs, USDA Rural Development is back in print, with minor updates. To order copies, send e-mail to: n today’s uncertain times, the Capper-Volstead [email protected], or call Act is not without reach of legislative change. 202-720-8381. Capper-Volstead was enacted to address economic issues that faced agricultural producers. It gives agricultural producers a limited antitrust exemption to market their production on a cooperative basis, which legally permits reduction of competition among agricultural producers when they join and act in the marketplace, in effect, as one farmer. Summarized below are highlights of possible legislative and Under the terms of the consent decree, EMMC agreed to judicial responses to Capper-Volstead. remove all restrictions on producing mushrooms from the In 2002, Congress created the Antitrust Modernization deeds and to restrain from similar activity in the future. No Commission (AMC) to examine whether the antitrust laws fine or other additional punishment was levied against the should be modernized and to submit its findings to Congress association or its producer-members. and the President. The AMC is a 12-member, bipartisan Thus, EMMC members may continue to agree on prices commission consisting primarily of antitrust lawyers with and otherwise market their mushrooms through their large law firms and major corporations. The commissioners cooperative. A consent decree does not set a judicial originally planned to complete a draft report by the summer precedent in the same way a court decision can. However, of 2006 and to submit a final report in the spring of 2007. At this case should put marketing associations on notice that the this time, a final report is still being drafted for Justice Department may intervene when it believes a recommendation by commissioners appointed to several cooperative’s actions artificially reduce the acreage and working groups to decide on antitrust immunity legislation, facilities available to non-members to grow and market the such as Capper-Volstead. Information about the AMC, its same product as the cooperative’s members, thereby commissioners and the initial reports of all working groups depriving consumers of the benefits of competition. are available at: http://www.amc.gov. And the beat goes on… In December 2004, the Department of Justice (“Justice”) On March 26, 2009, All American Mushroom Inc., Robert simultaneously filed an antitrust lawsuit against the Eastern Altman and Associate Grocers Inc., filed an action against Mushroom Marketing Cooperative (EMMC) of Kennett EMMC related to the same issues brought by Justice. In this Square, Pa., while also entering into a consent decree settling case, however, the court ruled against the cooperative, saying the case. EMMC, in an attempt to limit mushroom that it is not entitled to the Capper-Volstead antitrust production by non-members of the cooperative, purchased immunity. The court found, on cross-motions, for summary and leased land capable of producing mushrooms and placed judgment that the cooperative’s admission of a non-farmer deed restrictions on the titles to the land. The deed member with voting rights destroyed its antitrust immunity. restrictions barred mushroom farming on the land, in The cooperative and its members have filed a notice of perpetuity. appeal in the Third Circuit and the plaintiffs have filed their At this time, Justice did not challenge the Capper-Volstead opposition to the appeal. If the appeal is denied, the case will status of EMMC. Rather, Justice asserted in its complaint be remanded back to the District Court for further review of that the Capper-Volstead Act does not protect members of a antitrust violations and other issues. cooperative who conspire to prevent independent, non- Producer-owned marketing cooperatives will want to keep member farms from competing with the cooperative or its abreast of legislative and judicial actions and be ready to members. defend their antitrust protections if necessary. ■

Rural Cooperatives / July/August 2009 17 Wine co-op helps transition from tobacco while boosting agri-tourism

New life for an old town

18 July/August 2009 / Rural Cooperatives By Stephen Thompson, Assistant Editor the small average size of land parcels raises the costs of e-mail: [email protected] cultivation and harvesting. So, with the demise of tobacco, local farmers and rural n the picturesque farmland of historic St. planners have been searching for high-value cash crops that Mary’s County in Southern Maryland, a can take its place. One that offers some hope, interestingly, is cooperative of wine-grape growers is working catnip. Another is wine. to build a new industry that can help take the place of a lost cash crop. Vines replace tobacco For centuries, the agricultural lifeblood of the county was Rich Fuller is a retired civil servant who worked at air-cured tobacco. It grew well in the sandy soil and hot, Patuxent Naval Air Station, on the banks of the Chesapeake humid climate and it provided a good living from as little as Bay in St. Mary’s County. He now volunteers at Summerseat 30 acres. Fortunes were made from it. In colonial times, Farm, a historic former tobacco plantation, owned by a tobacco was Maryland’s prime export, and its leaves even nonprofit organization, near the county seat of served as currency. Leonardtown. He’s also president of the

Facing page: Symbolic of the changes occurring in Maryland agriculture, an old tobacco barn provides the backdrop for a vineyard. Above: A site plan for a development that includes not only the co-op’s winery (upper right corner), but a park with water access for kayaking and canoeing. USDA photos by Stephen Thompson

But in 2004, the federal tobacco price-support system Southern Maryland Wine Growers Cooperative, an came to an end, and with it a way of life. The Maryland association of 15 viticulturists who are pioneering local wine cigarette restitution, or “buyout,” fund provided 10 years of production. payments, starting in 2000, to compensate farmers for the The cooperative was formed in 2007, after political loss of their protected tobacco allotments and help them officials from Leonardtown and the county came to a local make the transition to new crops. St. Mary’s County had the group of winegrowers with an offer. They would provide largest number of participants in the program. funding and a building for a winery. In return, the Today, only one year before the buyout program begins to winegrowers would help develop wine as a commercial expire, tobacco has all but disappeared from the Southern industry — not just as a new livelihood for farmers, but also Maryland landscape, with less than 100 acres planted in St. as a means of making the area more attractive to tourists. Mary’s County. The auction houses that were centers of the Wineries have proved to be valuable tourist draws in industry and of cultural tradition are all closed. The only hint nearby areas. In neighboring Virginia, wine festivals, tastings of the crop’s former importance is the many curing barns and vineyard tours draw thousands of visitors every year. now standing incongruously among fields of corn and Next door to St. Mary’s, Calvert County, Md., has established soybeans. the Patuxent Wine Trail, a tour of five vineyards. But the trouble with corn and other grains is that they are As a tourist attraction, St. Mary’s County has a lot going low-value crops, requiring much larger acreages to be for it. It’s only an hour drive from Washington, D.C., and profitable. Corn yields are not especially high in the area, and boasts beautiful scenery and a historic past. It includes St.

Rural Cooperatives / July/August 2009 19 Mary’s City, the first capital of Maryland and the fourth- tourism is one way to do that,” says Schaller. oldest English settlement in North America. It is also home This isn’t the first agricultural development project on to a number of other charming small communities. Old which the county has embarked. The Loveville Produce lighthouses, plantations, bed-and-breakfasts and small Auction, also a recent county initiative, is located a few miles museums dot the landscape. down the road. Operated by members of the local Amish A sizeable Amish colony adds to the atmosphere, and the community, it is used by more than 50 Amish farmers as a wide highway shoulders built for their horse-drawn wagons market for their vegetables, cut flowers, nursery plants, and carriages attract large numbers of bicyclists every year for firewood, hay, and other products. the Amish 100 bicycle tour. Schaller says the auction is succeeding in its goal of The building offered by the town for the winery is a encouraging the development of agricultural cash crops to former state highway department maintenance shop. It’s replace tobacco, as it is hoped the winery will do. located next to an undeveloped park, on the banks of a picturesque creek. Co-op experimenting with varieties With the infrastructure taken care of, the co-op’s side of Winery to anchor park/market development the bargain is making the winery work. Each member has Laschelle McKay, the town administrator, is supervising contributed a $2,000 stake and pledged to help run the the renovation of the building and the development of the facility. A $2,000 investment may not seem like much, but property. The plan is to make the winery the anchor of a most of the members have up until now been little more than beautifully landscaped park with a picnic area, nature walk, a hobbyists, some growing only an acre or two of grapes. For demonstration garden and a canoe- and kayak-launching them, going “professional” is a big step. area. A canoe-tour company has The vintners did the research and announced plans to launch trips located a source for the winery from the park, which McKay sees as equipment, but there remains the a welcome complement to the problem of how to find grape winery (see illustration). varieties that will grow in local The park will complement other conditions and produce a decent efforts by the town to draw tourists, wine. including the redevelopment of the “This isn’t the easiest part of the waterfront; the town originally world to grow wine grapes,” Fuller served as a tobacco port. says. “There are a lot of varieties that Leonardtown boasts a number of just don’t work. Syrah vines just die. restaurants, galleries, shops and a Riesling grapes grow, ripen and then photogenic town square. It also hosts rot immediately. Cabernet Sauvignon a number of special events vines grow really well here, but they throughout the year, including a continue to grow late in the fall, and county fair, a classic car show, crab then freeze and die back to the and oyster festivals, an antique show, ground when the cold weather a bluegrass music festival and other Co-op members Gerald Byrne, Carolyn Baldwin comes. events that could benefit the winery and Rich Fuller inspect one of Byrne's “So, it used to be that people who project — and vice versa. vineyards. Growing grapes successfully in the grew grapes here used hybrids that McKay’s current goal is to get the region requires vigilance against pests. did well in the climate, but didn’t winery operating in time for this make the best wine,” Fuller year’s harvest in September. The landscaping and other continues. “They just got used to the way the wine tasted.” construction will take a little longer. She seems proud of the The hot, humid climate also encourages insects, various cooperation between county, town and winegrowers in kinds of fungus, and other pests. Fuller says that precise and getting the project off the ground. “It’s taken us years to get timely application of crop protectants is vital for a successful to this point,” she says. “But it’s finally coming together.” harvest. An untimely rain can disrupt the application schedule Bob Schaller, in charge of business development for the and lead to losses. Summerseat farm is currently trying out county and a close collaborator with McKay on the project, 15 different vine varieties supplied by the University of shares her satisfaction in the results of the collaboration. The Maryland’s Cooperative Extension service in a search for the county has put up $535,000 and the town added $35,000 for best compromise between hardiness and flavor. All of them the winery, including the vats and other equipment. To must be grafted to resistant American rootstock to survive develop the park, a grant of $200,000 was obtained from the soil pests. The types that seem to work out best, Fuller says, state, matched by $200,000 from the town. are those from Italy, including the popular Sangiovese grape, “We need to diversify our economic base, and agri- continued on page 42

20 July/August 2009 / Rural Cooperatives Building a better rural America: Dallas Tonsager (left) helps participants in a USDA-sponsored self-help housing program build a home in Delaware. Under the program, low-income people invest “sweat equity” for their downpayment on a new home. USDA photos by Bob Nichols

By Dan Campbell, editor responsible for regulating and examining the Farm Credit System, a nationwide producer-owned cooperative financial allas Tonsager, a South Dakota farmer with system that meets nearly one-third of the credit needs of the wide-ranging experience working with nation’s farmers and ranchers. He also served as a board agricultural cooperatives and in key member of the Farm Credit System Insurance Corporation. government positions, is the new under Before joining the FCA, Tonsager was executive director secretary for USDA Rural Development. of the South Dakota Value-Added Agriculture Development Tonsager will oversee a total portfolio of more than $100 Center, where he helped producers develop value-added billion that USDA has invested through 40 different Rural agricultural projects and to increase the consumer appeal of Development programs to make rural America a better place agricultural products. to live and do business in. Rural Development has more than This is the second major office Tonsager has held at 6,000 employees in some 500 offices across the nation and in USDA. Under President Clinton, he was state director for U.S. territories. USDA Rural Development in South Dakota. He is thus well Tonsager is a well-known champion of rural America who versed with the agency and its work to support and develop has a keen interest in cooperatives — especially for the role rural business and cooperatives, rural utilities, rural housing they play in uniting producers and other rural people in and community development. As South Dakota state director order to develop their own value-added businesses. from 1993-2001, he oversaw a diversified loan portfolio of Prior to his new appointment at USDA, Tonsager was a more than $100 million. In 1999, he was recognized as one of board member of the Farm Credit Administration (FCA), to Rural Development’s two outstanding state directors. which he was appointed in 2004 by President Bush. FCA is In the late 1980s and early 1990s, he gained insight into

Rural Cooperatives / July/August 2009 21 the needs of family farmers while serving two terms as president of the South Dakota Farmers Union. He also served on the board of National Farmers Union Insurance. During that same period, he was also a board member of Green Thumb Inc., a nationwide job-training program for senior citizens. From 1990-1993, Tonsager was a member of the advisory board of the Commodity Futures Trading Commission, the federal government’s watchdog agency that oversees the “Co-ops need to constantly examine themselves to ensure they are reflecting their

members’ needs.” Dallas Tonsager discusses USDA’s housing programs during a National Housing Month event in Delaware.

materials, technical assistance, co-op development, research, trading of futures for oil, precious metals, grains, currencies etc.) during the past decade or so. Do you see a chance to and other commodities. It also regulates trading in derivatives rebuild the program? linked to stock indexes and bonds. I certainly hope so. I am a strong proponent for Tonsager grew up on a dairy farm, and along with his cooperatives. I like what co-ops do and I grew up in a co-op brother (Doug) he owns Plainview Farm in Oldham, S.D., culture. It is the right kind of business model for this time. where they grow corn, soybeans, wheat and hay. He earned a Some creative things have been done with co-ops during the BS degree in agriculture from South Dakota State University past decade. This has allowed additional capital to flow into in 1976. co-ops. The idea of producers investing to create ventures to Tonsager and his wife, Sharon, have two sons. add value to what they grow is so important to the rural The following conversation took place in June a few weeks economy. So I will be a strong advocate for the growth of after Tonsager had settled into his new office at USDA Cooperative Services to better support and work closely with headquarters in Washington, D.C. cooperatives. I’m quite excited about the prospects.

Q. With your background, you seem to be ideally suited for Q. Can co-ops play a major role in the revival of the rural the position of Under Secretary for Rural Development. Are economy? you feeling pretty excited about it? Absolutely, and they are playing an import role in it every Tonsager: Sure, it’s a great opportunity and something single day. We have rural co-op electric systems, co-op rural I’ve been contemplating for some time. I do have some water systems, co-op telephone systems, co-op farm supply concerns about the agency, which has seen reductions in systems and co-op marketing systems. They are fundamental staffing levels and has shifted its focus from direct to to agriculture and to life in rural America. Value-added co- guaranteed loans. I plan to fight to get more emphasis back ops — be they new-generation or traditional model co-ops — on the direct loan programs and to grow the Cooperative are essential to the rural economy and will play an important Services program. role in rural stimulus. We will look to support them in every We have in Agriculture Secretary Tom Vilsack a leader way we can. who cares a great deal about rural development. At the same time, the economic downturn has resulted in an economic Q. Any specific sectors where you see special potential for co- stimulus package being approved by Congress that includes op growth? extra funds for some of our programs, such as broadband, I think the local foods movement — “know your farmer, water and wastewater development. I feel fortunate to have know your food” — is something that really lends itself to arrived here at a unique time when Rural Development is cooperatives. Producers of local foods can associate with getting a lot of attention and has some extra resources to other producers to pursue this market, and in many cases work with. they already are. It just makes a lot of sense. Rural electric co-ops are also well positioned to help with Q. The Cooperative Services program has declined sharply economic stimulus. Many rural electric co-ops are using in terms of staffing and therefore output (co-op educational USDA’s Rural Economic Development Loan and Grant

22 July/August 2009 / Rural Cooperatives Program to support economic development activity in their still owns a farm] sells corn to ethanol plants and sells communities. This often involves setting up revolving loan soybeans to a processing co-op. So co-ops have always been funds for projects. Co-ops have also been very active in major players in the daily life of my family. renewable energy development, including wind energy. We’ve had a strong period of developing value-added Q. Any specific projects you worked on during your years businesses, especially alternative energy. Renewable energy with the South Dakota value-added center or with Farmers has gone through some cycles, but I will be a strong advocate Union that you think exemplify projects that can be for using co-ops to continue building energy ventures and replicated elsewhere? other value-added projects. I am also a very strong supporter Even prior to being at the co-op center, I worked on a of USDA’s Value-Added Producer Grant Program (VAPG). contract to develop a blue cheese processing plant in Wisconsin. That kind of artisan cheese-processing makes a Q. As you mentioned, biofuels have certainly been through lot of sense in many areas. Much of my work in South some huge swings in fortune during the past few years. Are Dakota revolved around ethanol and biodiesel, and those you still optimistic about this sector and its potential for types of projects certainly can, and are, being replicated in producers to benefit from it? other parts of the country. Another project involved organic Absolutely, although we have to pursue it thoughtfully and flaxseed processing and marketing. Another involved on a sound economic basis. I’ve grown up in country where I processing soybeans into a food-grade product. can see the direct economic benefits that have accrued to The idea is to create products for specialty markets, producers from biofuel programs. But we must also be adding value to a locally produced commodity. The more cognizant of the impact that biofuels have on livestock value-added centers and co-op development centers can producers. facilitate these kinds of businesses, the better. That said, the livestock sector also has opportunities with renewable fuels. I was just at a biogas conference in Q. From the vantage point of your years at Farm Credit, California, where they are very excited about the opportunity what major lesson do you think the nation should have of producing methane gas and biogas from waste products. learned from what has been called “the excessively reckless, We need to be looking very hard to see how we can help the speculative” climate that reigned for so many years on Wall livestock sector get more involved in alternative energy. Street and has been widely blamed for leading us into the USDA has done 120 projects so far just in the biogas area – worst recession since the 1930s? some really great demonstration projects. The Farm Credit System (FCS) is quite conservative. Even predating my tenure on the board of the Farm Credit Q. How important is it that members be active in their co- Administration [FCA, which regulates the FCS], they ops? maintained a very basic regulatory process that requires By definition, co-ops are meant to help people assist system institutions to keep set amounts of capital on hand. If themselves by working together. The more attention people their capital eroded, we pulled them back and said: “no, you pay to their local co-ops and participate in them, the more shouldn’t be doing that; you need to maintain a more sound their co-op will reflect their needs. If co-ops have a weakness, capital base.” it is that sometimes when they are working really well, people As the regulator of the Farm Credit System of financial stop paying attention to them; they take the co-op for cooperatives, we at FCA would send in examiners to make granted and think they no longer need to be active sure that the underwriting practices at the member participants. institutions were good and that that they stayed in a safe If co-ops are to be relevant in their communities, members zone. Farm Credit has been a very good model of making must go to co-op meetings and participate in the life of the sure that the capital of the owners and investors in those co- co-op. And they must communicate to the co-op what they ops was looked out for, and that the underwriting of loans expect from it. Co-ops need to constantly examine was done in a safe and sound manner. themselves to ensure they are reflecting their patrons’ needs. My sense is that these other large financial institutions When that stops happening, co-ops get into trouble. When that got into so much trouble were allowed to reduce their co-ops start focusing on things that do not necessarily serve capital levels very significantly. I’m very disappointed with their patrons, they have a problem. how this happened and how these financial institutions over- leveraged themselves. I wish that they had been regulated in a Q. Tell us more about your co-op roots. stronger manner, which I believe could have prevented this My family belonged to a dairy cooperative; we got our from occurring. electricity from a rural electric co-op; we were served by a The Farm Credit System learned lessons from its period local co-op elevator and we got our oil and fuel from a supply of distress in the 1980s, and worked to put itself in a much co-op. Co-ops touched virtually everything we did, and to a stronger position after that, with a fiscal policy that is large extent they still do. My brother [with whom Tonsager continued on page 33

Rural Cooperatives / July/August 2009 23 Creating Co-op Fever: Hard Lessons Learned

Editor’s note: This commentary is excerpted and adapted from a longer paper that presents 14 lessons Patrie learned during his many years devoted to starting cooperative enterprises in his home state of North Dakota. The title refers to his 1998 publication (published by, and available from, USDA) “Creating Co-op Fever,” about a surge of new co-ops and producer-owned businesses in North Dakota and neighboring states. From 1990 until 2006, he worked on 104 development projects that represented $800 million in investments. Of those businesses, 30 are still operating, generating hundreds of millions of dollars in new revenue and employing several thousand people. For the complete text of his paper, e-mail Patrie at: [email protected].

By Bill Patrie, Executive Director It asks you a deeply personal but well-organized, effort last spring to Common Enterprise Development Corp. question as if the answer really matters. build a levy of sandbags when the Red It does matter, because if you and I and River reached a record high of 41.6 ithout a compelling many others want to create something feet. vision, co-ops are very badly, and we are willing to invest There were two images of the future not sustainable our energies to make it become reality, of Fargo, N.D., at this time. The W A vision (according to there is a good chance we will. national media portrayed a flood as Peter Senge in “The Images of the future really matter. inevitable; state emergency agencies Fifth Discipline”) is the answer to the My son, a student at Minnesota State developed relocation plans changing all question: “What do you want to University at Moorhead, Minn., and four lanes of Interstate 94 to west create?” That is a very positive 10,000 other volunteers (many of them bound for evacuees. question. It implies that you can create college and high school students), The other image was held in the something. worked around the clock in a fevered, minds of those tired college and high

24 July/August 2009 / Rural Cooperatives wrong. They ask negative questions, As a co-op organizer, if I can’t find such as: “What is wrong with us? Who trustworthy, electable leaders to serve screwed up?” on the steering committee to study the A steering committee for an feasibility, I stop. Not everyone does. emerging cooperative that does not A rural electric cooperative bought a have a vision of its own success processing plant, put money into it and embedded in the minds of the chair and attempted to sell it to the growers who the board is not likely to survive. In my sold oil seeds to it. The growers were view, a deeply held positive image of the also members of the electric cooperative’s future is a more important cooperative; they didn’t understand why asset than balance sheet equity. they needed to take the rural electric cooperative off the hook (to finance the There is no easy “cookie start-up), since they owned the electric cutter” approach to creating cooperative as well. They didn’t buy it. cooperatives Many co-op developers will be As co-op developers and educators, tempted to violate this lesson. Don’t! we are always looking for that A vision or a dream is an image of “northwest passage” to reduce the future that we deeply desire. Martin cooperative development to a routine. Luther King did not say: “I have a But all co-op development efforts are strategic plan.” Instead, he spoke

“To a cooperative developer, the first job is getting the right local leaders. Fail this test, and nothing else matters.”

still dependent on local cooperative personally about the kind of future he leadership. wanted. That vision had power. Sandbag dikes such as this — built in a Here is the lesson: Don’t ever start a fevered, round-the-clock effort by students cooperative without trustworthy local There is no surrogate and other volunteers — helped the people of leadership already in place. This is for local leadership Fargo hold back the swollen Red River early indeed a hard lesson and it leads to Cooperative educators and last spring. Photo courtesy Daniel Reetz bitter arguments. I have lost those developers must find ways to work on arguments numerous times. But I am the local level. University- or capitol sure about this. city-based development programs that I have seen the other side — where a can’t get their staff to meetings in developer (usually with the best of farmhouse kitchens will not likely school students and the mayors of the intentions) gains control of a property understand how this works. cities of Fargo and Moorhead. That from an owner and re-develops it with While the Extension Service is one image was stated quite simply by Sen. the intention of forming a cooperative of the most successful programs in Byron Dorgan who, when he was asked and selling it at a profit to the history at helping to diffuse innovations by the media why the federal cooperative. This methodology requires (see “Diffusion of Innovations,” Everett government didn’t order an evacuation, inordinate faith in someone’s ability to Rogers, 1995, The Free Press, Simon replied: “The people of Fargo and recruit and train cooperative directors. and Shuster), it has not yet learned how Moorhead think they are going to win It also requires the potential co-op to capture innovations that come from — and I won’t bet against them.” They members to see the financial value of the ground up. won. joining. But they may not. The Extension agent is an Organizations that have a negative Because cooperatives are democratic information provider and problem image of their own future cannibalize organizations, they will elect their own solver, but only in rare cases are they themselves as they try to fix what is leaders, not leaders selected by experts. agents of change. Land-grant

Rural Cooperatives / July/August 2009 25 universities teach local leadership in strategist, confidant and listener who They do happen. carefully designed curricula to carefully models good leadership skills. selected potential leaders. Unfor- Jim Collins, in his book “Good to There are no perfect leaders tunately, local leaders are selected by Great,” makes an excellent point: John Calhoun supposedly said of community members — often with getting the right people on the bus is Henry Clay that although Clay was different criteria. the CEO’s first job. To a cooperative brilliant, he was also corrupt and “like a The answer is real-time leadership developer, the first job is getting the rotten mackerel in the moonlight, he training for leaders who have already right local leaders. Fail this test, and both shines and stinks.” been elected. This training may occur nothing else matters. I have learned that to be true in at board meetings or community This is especially difficult, because today’s leadership ranks as well. I have meetings, but it needs to occur in the the co-op educator or developer doesn’t worked with men and women whose community. control the local leadership selection — skills and character were just what the The trainer of local leadership is but only influence it. Finding a new enterprise needed. But what is more like a 4-H leader than a trustworthy, already-busy person who more common is a mixture of brilliance university-based leadership expert. The can commit to a long-term “servant- and stupidity. It is tempting to leadership trainer is actually a coach, leadership” role is asking for miracles. exaggerate the virtues of the leader and attempt to minimize the weaknesses. However, local people will not be The Madison Principles fooled since they know their leaders. Editor’s note: These professional standards for cooperative development Patience and “just-in-time” practitioners were written by the members of CooperationWorks! — a national leadership training can go a long way network of cooperative developers — in Madison, Wis., in 1995. toward converting a solid community member into a good leader. It is 1. Individuals providing technical assistance subscribe to the highest level of essential, however, to have that leader ethics and shall declare any conflict of interest, real or perceived, so that in charge of the project. If local they can be a credible source of objective feedback and an articulate leadership is not available, stop the advocate of the project as needed. process until it is. 2. Cooperatives are tools for development and should promote both social empowerment and economic goals. Discipline is essential 3. Applied appropriately, cooperatives have value to all population groups and There is not yet a recognized body of for all businesses and services in the public and private sectors. knowledge that defines the standards 4. Each cooperative responds to its unique economic, social and cultural for co-op development practitioners to context; as a consequence, each cooperative is different. follow. CooperationWorks! (a national 5. There are essential steps that must be taken in a critical path to succeed. training network for co-op developers) 6. An enthusiastic group of local, trustworthy leaders is a prerequisite for has published the Madison Principles providing technical assistance. The effective cooperative development (see sidebar) to guide cooperative practitioner nurtures that leadership by helping them shape a vision that developers, but there is no enforcement will unite members and provide ongoing training. mechanism for those who violate them. 7. Cooperatives only work when they are market driven; the development Federal agencies that provide financial practitioner seeks to ensure that accurate market projections precede support for cooperative development other development steps. should agree on something like a “best 8. Member control through a democratic process is essential for success. practices” statement. 9. Success also depends on the commitment of the member’s time and Contractors, lawyers, doctors, financial resources. accountants and many other professions 10. There must be tangible economic benefits for members. have standards of conduct that if 11. The cooperative’s products and services must generate sufficient revenue violated can cause individuals to lose so that the effort can be financially self-sustaining. Provisions must be made professional standing. That is not true to share any surplus equity. in the cooperative development world 12. Market opportunities exist throughout the world. Cooperatives and market in the United States. development should transcend national boundaries. In the work of co-op development, a 13. Successful, established cooperatives should assist emerging cooperatives long-term view is generally needed. to develop. New and emerging cooperatives should be encouraged to The Bank of North Dakota took 10 communicate with and learn from successful cooperatives. years from inception to funding. A power plant takes 10 years to permit and site. New ideas can transform rural up dead stock from farms and renderable materials from packing plants in a four-state region. FUMPA recently added a biodiesel facility to its Redwood Falls plant and has added a line of kitty litter to its product line. It has also established a foundation that helps establish other cooperatives. This co-op has paid millions of dollars in patronage to its members. FUMPA has experimented with mobile facilities and more energy- efficient processes. Co-op leaders always have time to talk with you and give you a tour. It is one of the most financially healthy cooperatives I know of, but I have never once heard the chairman or the CEO brag. Bill Patrie meets with U.S. and Canadian pork producers in Minot, N.D., to discuss buying a These types of people are the kind of hog processing plant. folks I look for to help start new cooperatives. economies, but the process is Without the discipline of source Rekindling the dream evolutionary not revolutionary. identification, Northern Plains If people do not share a dream, they Discipline is needed to adhere to a Premium Beef was just another cattle have no sense of place and are not a reliable set of principles — such as the company. The non-complying rancher part of something larger than Madison Principles — by cooperative was asked to leave the cooperative, and themselves, Kent Kedl, an associate developers who must not become he did. professor at South Dakota State corrupted by the lure of quick fixes. I have learned that if members are University, wrote in the December One-hundred years after the idea of the not capable of the necessary disciplines 1984 issue of “Small Town.” The role Bank of North Dakota was first inherent in running the cooperative, it of the cooperative educator and advanced, that institution is providing will not last. developer is to rekindle the dream. financing to farmers to join The world is turning our way. It cooperatives. But there had to be a Courage and intelligence doesn’t always seem that way — but great deal of discipline along the way to outweigh charisma as a people really do want to cooperate. keep the bank from going broke. leadership trait They want better lives, they want to Likewise, a cooperative must have Jim Collins in “Built to Last” and live in peace and they want their internal discipline. Peter Senge in “The Fifth Discipline” children to be secure. Ideology and At an organizational meeting for all came to this same conclusion. As I partisanship and egotism have Northern Plains Premium Beef, a look around at the cooperatives that imprisoned us, but we can get out. We rancher from Saskatchewan protested last, I see board chairs and managers can rekindle the dreams of a better life, the idea of having to place a Northern who have remarkable humility. They and people will use that dream to Plains ear tag on each of his calves. But are focused on delivering a member change the world and make it better. this was essential, because the co-op benefit in a clear, straightforward way. We can learn to treasure our had committed itself to being able to In most cases, they have placed their neighbors and facilitate the cooperation identify all meat products it sold all the egos out of the way, have learned to that leads to a better life. We can enjoy way back to the ranch where a calf was take unfair criticism and have come to and practice this life-giving skill we born. Jim Rainey, a former CEO of understand the unique aspects of the have been given, so that long after we Farmland Industries who was acting as economic sector they work in. are gone and our awards are packed our executive advisor, was normally a Farmers Union Marketing and away in dusty boxes, there will be soft-spoken man, but in response to this Processing Association (FUMPA) was people living happy and prosperous rancher’s comment he banged the table formed in the 1920s. It operates lives — and they will say: “We did it with the palm of his hand and said: rendering plants in Redwood Falls and ourselves.” ■ “Discipline, gentlemen, discipline.” Long Prairie, Minn. The co-op picks

Rural Cooperatives / July/August 2009 27 City Slickers

Co-op boosts Montana ranches that offer working vacations

By Donna Healy of Big Timber. But the top-of-the- newspaper printing ink for a living. She world view from the bench above the also spends the equivalent of about Editor’s note: this article is reprinted ranch house seems like a holdover from $570 to board a horse in Germany, an courtesy the Billings Gazette. To see other another century. expense she equates with the cost of a photos and video footage, visit: As the cattle came together, the pace rental apartment. http://billingsgazette.com. quickened. Riders veered off to chase At the rope-and-drag and into-the- errant cows, loping away from the herd. fire branding in the Metcalf’s corrals, railed by lone riders, More riders turned the herd of about the ranch’s other paying guest, an ag the black Angus cattle 200 mother cows back in the right student from a farm in Tennessee, came together along the direction when they overshot the gate wrestled several calves to the ground grassy bench in slow- and moved them slowly down the road. while Ortjohann watched from the moving dribs and drabs. Among those riders was a lithe 32- sidelines. In the valley below, a creek, muddy year-old wearing a crisp white polo “I don’t really know how to do it,” with runoff, cuts through a band of shirt and tight jeans. For Christine she said. “I will keep on watching and brush and trees. A panorama of snow- Ortjohann, from Cologne, Germany, stay in the background a little bit.” capped mountains ringed the horizon, the chance to herd the ranch’s cattle at a But, a short time later, ranch owner the craggy Crazy Mountains to the late May branding fulfilled a life-long Remi Metcalf, who usually prefers to let northwest and the Beartooth and dream. his wife, Susan, and 20-year-old son, Absaroka ranges curling around from “I have a lot of good pictures in my Bret, take care of the ranch guests, the south and west. mind,” she said, her words nearly steadied Ortjohann’s hand as she The Metcalf Ranch, along Lower drowned out by calves bawling for their burned the Metcalf’s brand on three Deer Creek, sits a few miles south of mothers. calves. Interstate-90 off the Greycliff exit, east In Germany, Ortjohann sells After many years of taking in ranch

28 July/August 2009 / Rural Cooperatives Facing page: Rancher Remi Metcalf helps Christine Ortjohann of Germany brand a calf at the Metcalf vacation ranch in Big Timber, Mont. Below: Metcalf and Ortjohann round up cattle for branding. Lower: Kyrk Stenberg of Big Timber ropes calves prior to branding. Photos by David Grubbs, courtesy Billings Gazette

guests on their own, last year the The former director of a national The basics were hashed out around a Metcalfs joined Montana Bunkhouses center for cooperative business kitchen table by 10 Sweet Grass County Working Ranch Vacations, a development credited Searle as having ranchers, none of whom had ever cooperative of more than 20 cattle hosted guests. ranches. One common thread was the A handful of those ranches are authenticity of the ranches, Searle said. clustered around Big Timber, although “We started with ranches that had three of those ranches have temporarily been in families for generations,” she stopped taking guests, in the aftermath said. of the Derby fire. Some of the ranches To keep it real, they didn’t want are in decidedly less touristy spots, anyone to hire wranglers to care for including Harlowton and Musselshell. guests or to build a lodge to house The first 10 ranches banded together them. in 2002 to offer guests a realistic view put together the first agri-tourism The co-op’s members saw agri- of ranch life. cooperative of cattle ranches in the tourism as a way to help preserve family Karen Searle, the galvanizing force United States. ranches and to narrow the divide behind the cooperative, describes The co-op, which is actually a between ranch and city dwellers on land herself as a matchmaker, pairing ranch limited liability company, was formed use and wildlife issues. Those goals families and travelers. Searle, a former after Searle returned in 2002 from a have put them in the forefront of a hospital administrator in Livingston, World Congress on Rural Women and trend in the travel industry labeled earns a commission for handling the Rural Issues in Spain. It’s modeled “geo-tourism.” marketing booking and some along the lines of European farm The term describes travel that accounting chores. holiday programs. sustains or enhances the character of a

Rural Cooperatives / July/August 2009 29 place, helping to preserve its heritage, years starting in 1991. For Susan state agri-tourism cooperative. habitats and scenic beauty. It fosters Metcalf, who grew up on her father’s Montana Bunkhouses has a much small-scale operations that strengthen guest ranch at Augusta, taking care of better reach in the marketplace than local communities and tends to view guests was no big switch, but her would an individual ranch, he said. It family ranchers and farmers as stewards husband, Remi, found it nerve-wracking offers travelers more choices and allows of the land. at first. one person to promptly handle queries While eco-tourism uses tourism “It takes quite a bit of change to get and bookings. revenue to help promote conservation, used to having somebody tag along and Although bookings through Montana geo-tourism extends that conservation ask questions,” he said. Bunkhouse have fallen off significantly ethic to culture and history, Searle said. The Metcalfs bought the ranch on in the troubled economy, Searle sees In March, National Geographic Lower Deer Creek themselves, but encouraging signs for future growth, launched an interactive map their son, Bret, represents the fifth including the interactive map and a TV highlighting geo-tourism in the area generation on family ranches along the segment about the Padlock Ranch, surrounding Yellowstone National Park. Musselshell River, where they summer which should air this winter, on The map includes the Bunkhouse cows, and in the Bozeman area, where “America’s Heartland,” a weekly public Cooperative. they put up hay. television program. It’s an attempt to spread the spotlight “Ranching’s changing a lot. It’s Bryan sees a niche for working beyond the park’s boundaries to the tougher and tougher for each ranches among travelers who want an communities and lifestyles that help generation to hang on,” Remi Metcalf authentic, meaningful experience and forge the character of the place, Searle said. are trying to forge a connection to the said. This year, Bret put his “Lazy 4 Y” West. He describes those travelers as “The travel industry coined a word brand on cows he bought to start his looking for “transformational for something we’ve been doing own herd. The brand was passed down experiences,” profound experiences that forever,” Susan Metcalf said. “They just from his uncle, Elton “Shorty” Roberts, change their orientation to the world. kind of put into words what we’ve been of Roundup. Although such geo-travelers make up doing: trying to keep families on the Bret has wanted to ranch since he a tiny fraction of tourists, Montana’s ranches and trying to preserve the was old enough to walk, his father said. rural, agricultural base plays a large role integrity of the ranches and trying to “He’d make drawings of his ranch in attracting tourists to the state, said teach people about our way of life and when he was a little bitty kid, of the Victor Bjornberg, who directs the our viewpoint and struggles.” house and corrals, the whole bit.” tourism development and educational In addition to hosting guests, Agri-tourism is not a silver bullet program for the Montana Office of Metcalf works part-time as the Sweet that will keep family ranches going, said Tourism. Grass County superintendent of schools Bill Bryan, the director of the Rural “It’s those wide-open spaces,” and writes a column for the Western Ag Landscape Institute in Bozeman, an Bjornberg said. “We are the Alaska of Reporter. organization that examines agricultural the lower 48 states. What we have is the “You have to do every job you can to policy issues. most unspoiled, wide-open spaces, keep the ranch going,” she said. “Last For working ranches that depend on unspoiled landscapes.” fall, we had $4 fuel and 90-cent [a agriculture as their primary source of Agri-tourism fits into the branding pound] calves, and that just doesn’t pay income, tourism is not usually a large effort to market the state’s attributes. the bills. You gotta do it some other source of revenue, said Bryan, who has Bjornberg dates the current interest way.” been in the travel business for 24 years in agri-tourism to the mid-1990s, She has gotten used to juggling and co-founded the travel company Off triggered, as he sees it, by state- conflicting schedules. the Beaten Path. It may generate sponsored workshops on farm and After the branding, she gave out enough income to allow a ranch wife to ranch recreation businesses, the state’s diplomas at Greycliff School’s give up a part-time job in town or allow centennial in 1989 and the movie “City graduation, then went to Springdale a son or daughter to come back to the Slickers.” School’s picnic. The previous week, on ranch, Bryan said. Affordable liability Though the movie portrayal was a short notice, she entertained Anthony insurance is often a major stumbling far cry from the reality, city slickers Bourdain, the chef and notoriously block. seem to get a kick out of their up-close prickly host of the Travel Channel Having several ranches work taste of ranch life. series “No Reservations,” for a show together on a common marketing Travelers come to the ranches as focused on Livingston and scheduled to strategy helps, Bryan said, because guests, Searle said. They go home as air in late August. tapping into the right market can be advocates for family ranching. ■ The Metcalfs offered working ranch prohibitively expensive. Bryan has vacations on their own for about eight worked on the idea of forming a seven-

30 July/August 2009 / Rural Cooperatives Five cooperative business leaders were creating sustainability, growth and effective competition in recognized at the annual Cooperative Hall of the marketplace. Greenberg, who died in 2007, was inducted Fame dinner and induction ceremony at posthumously. Washington’s National Press Club in May. The Hall of Fame, the cooperative ■ James R. Jones, NASCO, Inter-Cooperative Council, community’s highest honor, recognizes those who have made is a co-op educator, mentor and developer. He built heroic contributions to cooperative enterprise. NASCO’s organizational capacity and financial sustainability This year’s inductees are cooperative entrepreneurs and increased NASCO Properties’ portfolio nearly three- Howard Brodsky and Alan Greenberg, student housing icon fold. Under his leadership, the Inter-Cooperative Council at James Jones, Minnesota agricultural educator Edward the University of Michigan became one of the largest student Slettom and Mississippi co-op developer Melbah Smith. housing co-ops in the country. He has helped create dozens “The profiles of these individuals reflect lifetimes of of student co-ops and inspired thousands of students and achievement as leaders, educators, advisors, innovators, and non-students to become involved with cooperatives. advocates for cooperative development, but particularly in their given sectors,” says Steven Thomas, executive director ■ Edward E. Slettom, Minnesota Association of of the Cooperative Development Foundation, which Cooperatives, is an educator and co-op champion. He administers the Hall of Fame. served as secretary of the “The contributions of these five Cooperative Foundation and as individuals provide solutions on Minnesota Deputy Commissioner how to succeed in any economic of Agriculture and led the era, any region of the country, and Minnesota Association of any economic sector — which is Cooperatives (MAC) for 30 years. especially instructive in a down His volunteer work integrated a economy.” cooperative perspective into each Hall of Fame nominations are activity or organization. Under received from throughout the Slettom’s leadership, MAC was cooperative community and are expanded to more co-op sectors, screened by two committees of became involved in legislation national co-op leaders. The final Co-op Hall of Fame inductees include (from left): Ed pertaining to cooperatives and Slettom, Howard Brodsky, Melbah Smith and Jim Jones. selection is made by the board of started education and public the National Cooperative Business relations initiatives. Association (NCBA). “The 2009 Hall of Fame class will join the 134 ■ Melbah M. Smith, Mississippi Association of cooperative heroes already in the Cooperative Hall of Fame, Cooperatives, Federation of Southern whose lives and accomplishments provide historical examples Cooperatives/Land Assistance Fund (FSC/LAF), was for the cooperative community and serve as a guide for the recognized for being a “visionary, cooperative developer, and direction of future cooperators in all sectors,” Thomas says. leader.” With FSC/LAF, she worked as a community This year’s inductees: organizer and co-op developer to bring healthcare, economic development and social justice to rural people in some of the ■ Howard Brodsky and Alan Greenberg, CCA Global poorest areas of the country. As executive director of the Partners, were called “visionaries, leaders and teachers” who Mississippi Association of Cooperatives, she continued this devoted their careers to making cooperative entrepreneurship work, helping to develop more than 25 co-ops in Mississippi a prosperous endeavor that offers small business owners the and bringing both immediate assistance and long-term co-op same advantages enjoyed by their national chain competitors. education and development to areas devastated by Hurricane They created a co-op business model that is flexible and Katrina. adaptable across industries, markets and countries and that The Cooperative Hall of Fame was established in 1974 by fully integrates ethical and environmental responsibility. The NCBA and is housed in NCBA’s offices in Washington, D.C. organization they founded, CCA Global Partners, provides It can also be visited on the Web at: www.heroes.coop, or its member co-ops with tools for their entire business, www.cdf.coop. ■

Rural Cooperatives / July/August 2009 31 Co-op Development Action Succession planning critical to future of small Iowa meat-processing plants

By Madeline Schultz Iowa Alliance for Cooperative Business Development

he Iowa Alliance for Cooperative Business Development (IACBD) is introducing the cooperative succession model as a creative solution for dealing with the declining numbers of small meat-processing operations in Iowa. Cooperative succession involves selling or otherwise transferring ownership and management to employees and presents a strategy to maintain the longevity and vitality of small businesses that are crucial to the prosperity of rural communities. The Small Meat Processors Working Group (SMPWG), The co-op business model may be able to help stem the decline in established by the Leopold Center for Sustainable the number of small meat-processing plants in Iowa. Above, Agriculture at Iowa State University, identified succession Spillville Locker employees (from left) Matt Kulish, Bill Kuntz and planning as one of the key challenges facing the industry. Brian Scheidel prepare to go to work on a side of beef. Photo by There were 550 small meat processors in Iowa 40 years ago. Arion Thiboumery, courtesy Spillville Locker Today, there are just 140 meat-processing businesses in the state. These processors are economically vital to their local communities because they provide much-needed services to planning goals. niche marketers, local food producers and consumers. The training included a panel of meat-processing business Dr. Joseph Cordray, meat specialist at Iowa State owners who shared their experiences working through the University Extension, works closely with the SMPWG and succession and business transfer process. Bill Dayton of the Iowa Meat Processors Association (IMPA) to help small Dayton Meats is the second generation of his family to meat processors produce quality products and operate manage and own the business and is looking for ways to successful businesses. transfer assets and management to a third generation. Reg Clause and Madeline Schultz, Extension Value-Added “You’ve got to let the younger generation know they Agriculture Program team members and participants in the matter or they won’t be interested,” Dayton said. SMPWG and IACBD, presented a three-part succession Clint Smith, owner of Stanhope Locker, bought his meat- planning workshop and training for meat-processing business processing business outright from the previous owners. owners and industry professionals during the 73rd annual Smith, who formerly owned an auto parts store, told the meeting of IMPA, Feb. 20-21. More than 200 people audience: “Parts are parts; I knew I could manage a business, attended the convention, including representatives from 41 but I relied heavily on trusted employees for their meat- meat plants and 36 supplier companies. processing expertise.” Business owners have many different goals when planning John Tiefenthaler, owner of Food Locker Service, started for succession. Allowing plenty of time to develop and working for the previous owner while he was still in high implement succession strategies in a meat-processing business school. During the 1980s, the previous owner knew he would can alleviate stress, benefit the owners financially and have a hard time selling the business to an outside buyer, so generate greater long-term success for the business. Speakers he began a gradual transfer of the business to Tiefenthaler. used several worksheets developed by the Ohio Employee “He was ahead of his time,” said Tiefenthaler. “I never could Ownership Center to guide the business owners through the have done this without his mentoring.” process of understanding and documenting their succession To complete the succession-planning workshop, Doug

32 July/August 2009 / Rural Cooperatives Gross, attorney with BrownWinick of Des Moines, Iowa, Dallas Tonsager and a former Iowa gubernatorial candidate, helped the continued from page 23 business owners understand the legal and tax implications of business transfer. Gross discussed the steps required for transfer of assets and methods of sale for sole proprietorship, general partnership, corporation, ESOPs (employee stock- practical and cautious. Hopefully, the same will prove true owned plan), cooperatives and other legal entities. for these other financial sectors that are currently struggling. He also talked about the distribution of assets, capital gains, preferential tax treatment and other tax and finance Q. Of course, co-op programs are just one part of the huge issues. “Structuring the deal is important to meeting the agency you will now be administering. These programs business owner’s goals,” Gross said. He detailed the touch just about every aspect of rural America: they fund differences between an entity sale and an asset sale. He also rural electric, water and sewer systems, help rural people reviewed the pros and cons of lump sum vs. installment buy and build homes, build rural hospitals and fire stations, payments. etc. Gross highlighted the unique aspects of selling the We have about 40 program areas, which truly reflect the business to co-owners or employees, and making gifts. He theme that Secretary Vilsack is using: “USDA touches encouraged business owners to develop succession strategies people’s lives everyday, in everyway.” We try to work with that will help maintain strong meat-processing businesses in virtually every sector of rural America, from those who live small-town Iowa. ■ fairly close to urban areas, to those who live in the most remote and impoverished rural areas. We have a wide variety of tools that can help. The 502 direct rural housing loan program allows us to work with people in rural areas facing Webinar examines starting significant challenges and allows people of limited incomes to worker-owned cooperatives get into a home. We also have programs that can help create jobs that are CooperationWorks! — a national network of co-op based on generating sustainable income. We can help a development specialists – recently sponsored a four-part venture create more wealth from something grown in rural webinar series on the key aspects of starting a worker- America. I really see farming and the rest of the rural owned cooperative. Worker cooperatives present an economy being integrated, because so many non-farm jobs important business and job creation strategy that are in some way connected to what is grown by producers. promotes job-stability and satisfaction. The creation of the ethanol industry — all the jobs and The program is designed for cooperative business wealth created that has stayed in rural America because development practitioners, community economic farmers and other rural people invested in it — is exactly the development organizations and individuals/groups type of rural economic development model we want to interested in starting worker-owned businesses. replicate. We need to do it in all kinds of ways, be it with The series was led by Tim Huet, an expert on livestock, forestry, or farming — a wide variety of ventures developing new worker-owned cooperatives in the that create rural wealth. United States. Cathy Smith, executive director of the Keystone Development Center, and Audrey Malan, Q. If you could change one thing about the American coordinator of the CooperationWorks! training programs, farmer, what would it be? participated in the program. I would want them to take better care of themselves. The program addressed the key aspects of worker Farmers tend to work extremely hard and devote themselves cooperative start-ups, including: entirely to their farms and families — so much so that I • Worker co-op structure and legal models; worry about their physical health. Most farmers I know • Development strategies, including new start-ups, (including myself) have bad backs, bad knees and may have business conversions, and innovative incubation serious allergies from exposure to corn and hay molds. Some approaches; have lost a finger or two in machinery accidents. • Feasibility analysis and business planning; Farmers need to take care of themselves physically in • Co-op capitalization and finance. order to make sure they can continue to participate in this great endeavor of farming. We want them to live a long time, For program highlights, see: in good health. Most producers farm because they love it and www.cooperationworks.coop. For more information on will do just about anything to maintain that way of life, CooperationWorks! programs and services, call Malan at despite the hard work. They just need to be cognizant of the 307-655-9162, or e-mail her at [email protected]. impact the work has on themselves and their families. ■

Rural Cooperatives / July/August 2009 33 Thomas W. Gray, Ph.D. the local population, Ioari found that community acceptance Rural Sociologist of the biofuel plant was mixed. USDA Rural Development, Cooperative Programs More than 75 percent of those surveyed said the ethanol plant was important, or very important, for the local Editor’s note: The author welcomes feedback from readers on the economy. The facility was credited for creating new jobs and tradeoffs of a multifunctional agriculture and how cooperatives may helping to boost prices for local grain farmers. It was valued be affected by these changes. Their thoughts may be used in future as well for helping reduce dependency on foreign oil. articles, and can be e-mailed to: [email protected]. However, some of those opposed to the plant argued that ethanol is not as energy efficient as fossil fuels. uring the past decade, understanding the The most contentious issues revolved around the multifunctional nature of agriculture has environmental impact. Those in support of ethanol saw it as emerged in scientific and farm policy debates. environmentally friendly. However, nearly 60 percent of New language and new terms are emerging. those surveyed said they had moderate-to-high levels of

Shift to multifunctional agriculture complicates biofuels development

Talk about MFA at farm meetings these days may not be concern about the environmental impact of the local facility. referencing the Missouri Farmers Association, but rather a Nearly 90 percent said they believed biofuel production multifunctional agriculture (MFA). had already contributed to poor water quality. Others No longer is agriculture solely about food and fiber expressed concern about the diversion of water needed for production. While food prices have dropped recently, the alternative uses both inside and outside the city. Concern was price spikes of 2008 were at least partially influenced by also expressed about odors, air pollution, wear on local roads agriculture’s emergence as a developing source of energy. (due to truck traffic), increased traffic congestion and Mitigation of global warming, rural development and increases in local food prices. conservation of resources are other demands. In a recent conference in Atlanta, a “Biofuels Symposium” Rural development and competing was held in connection with the 2009 annual meetings of the international interests Southern Association of Agricultural Scientists. A series of Theresa Selfa, sociology professor at Kansas State presentations was made on topics such as biofuels and rural University, discussed the findings of her study: “Biofueling development, anaerobic digestion, financial crises and Rural Development: Prospects and Challenges, Locally and biofuels, and shifts in emphases in farm bill legislation from Globally.” Selfa’s work parallels Ioari’s in documenting the trade to biofuels. This article presents some of the highlights positive impacts of biofuels development on rural of the symposium. employment and farm incomes. In a study of two rural Kansas communities, nearly 70 Rural development and the environment percent of those surveyed said jobs at the ethanol plant were Albert Iaori, a sociologist at Kansas State University, better than most, or among the best jobs available in the area. presented a case study on an ethanol plant in Russel, Kan., a Biofuel facilities were seen as having secondary effects as rural community of less than 5,000 people. From a survey of well, improving economic diversification in rural areas and

34 July/August 2009 / Rural Cooperatives generating additional jobs and incomes from supporting refiner in North America, has since acquired seven of these businesses. plants). Further consolidation in the industry is expected. However, future implications of biofuels’ impact on food Biodiesel production facilities are currently operating at production and food prices are not clear. Brazil was the top only 25 percent of capacity. Their further development will producer and consumer of biofuels until 2006, when it was be affected by competing prices for petroleum, alternative displaced by the United States. More than 20 industrial and uses of vegetable oils, availability of various tax credit developing countries have announced some type of biofuels programs, resolution of technical problems concerning incentive program. Brazil, Canada and the United States have biodiesel’s tendency to degrade rubber and plastic and mandated future biofuels consumption. China, India and the political stability in the Middle East. EU have set targets on consumption to be realized by 2022. “On a much brighter note, cellulosic ethanol may have These pressures will have direct implications on what finally turned the corner,” Crooks said, adding that several products are produced — food and/or fuel, for example — cellulosic plants were currently slated to come on-line. where products are produced, and who the beneficiaries will Funding from the U.S. Department of Energy and USDA

Shift to multifunctional agriculture complicates biofuels development

be. Global pressures may push production away from fuels Rural Development has helped with the development of that compete directly with food production (sugarcane, corn, these facilities. Patent and intellectual property rights on the wheat, barley, sorghum) and toward second-generation products used in processing may also provide some market bioethanol and biodiesel production derived from biomass protection, adding to the optimism for cellulosic biofuel gasification (such as forestry products, grass and organic development. wastes). However, Crooks noted that total development costs are relatively high for these plants, and may only be affordable by Recession’s impact on biofuel solvency larger corporations. And the vagaries affecting corn ethanol Anthony Crooks, an ag economist with USDA Rural and biodiesel fuel — i.e., prices and demand for competing Development, presented highlights from his study: products, and international relations – will influence “Renewable Energy and the Financial Crisis.” He provided a cellulosic development as well. historical analysis of the interrelationships among the price of petroleum; commodity prices; vegetable oils; ethanol Anaerobic digestion investment-stock prices and how they are coupled to Carolyn Liebrand, an ag economist with the Cooperative commodity hedging; financial markets; and the collapse of Programs of USDA Rural Development, presented a paper mortgage-linked, derivative markets. on “Cooperative Approaches to Facilitate the Use of The coming together of these various factors with the Anaerobic Digesters on Dairy Farms.” The report documents collapse of major banks created what Crooks referred to as a the outputs of anaerobic digestion (decomposition of manure “perfect storm” of financial pressure on the solvency of by microbes that thrive in oxygen-limited environments) as biofuels plants. VeraSun, one of the largest corn ethanol biologically stabilized products (separated solids and liquid producers, and owner of 16 plants, filed for bankruptcy in fertilizer) and biogas. November 2008. (Valero Energy Corporation, the largest The solids produced can be used as bedding for livestock

Rural Cooperatives / July/August 2009 35 and for gardening products, while the liquid is a fertilizer negotiations, budgetary shortfalls and greater awareness of with fewer odor problems than raw manure. Biogas can be global warming issues. used for powering generators for electricity production and As an example of the shift, Leher referred to the for fueling other farm equipment. The capture and observations of Phillip Brasher of the Des Moines Register: destruction of methane gas (otherwise emitted into the “This was supposed to be the year that international trade atmosphere) may also qualify for carbon credits. concerns would shape the farm bill. They didn’t.” Biofuels Liebrand said obstacles to development may include: displaced the trade emphasis. The greater prominence of • Difficulties in adapting digesters to current manure- biofuels was supported, at least to some extent, by most farm management systems and connecting to utility grids; groups, including sustainable agriculture and environmental • Limits on time availability and farmer skills in the groups, general farm organizations, commodity groups and development and maintenance of digesters; agribusiness corporations. • A limited amount of available information on installing and Lehrer concluded that while policies can always shift in operating the systems, given that there are only 98 digesters unexpected ways, fuel concerns have nevertheless become a operating on U.S. dairy farms at this time; major component and shaper of policy and decision-making • Difficulties working with utility companies and negotiating processes. As such, agriculture policy can no longer be adequate buy-back rates for the electricity produced; considered as a sector only for food and fiber production, but • Limited knowledge among farmers about procedures for must instead also respond to fuel-related issues. marketing products: solids, gas, electricity and carbon credits. Co-ops within a complex environment Liebrand suggests that some of these obstacles might be Cooperatives were among the first organizations to overcome with cooperative organization. Given the develop biofuels. In so doing, they helped move agriculture membership base of cooperatives, they may be positioned to from an economic sphere of food and fiber production to one provide technical assistance, as well as such supporting of food, fiber and fuel. It is a complex, multifunctional field services as back-up equipment, manure hauling and digester with many aspects demanding consideration. management. Development of biofuels industries can improve the Co-ops could also serve as aggregators of manure and incomes and job alternatives of both farmers and other rural developers of centralized digesters and gas plants, as well as residents. However, while displacing petroleum products with marketers of “green electricity” and the solids produced. biofuels may reduce carbon emissions and ease global They might also serve as bargaining agents for farmers in warming, the production plants themselves can cause local securing fair prices and terms of trade with utility companies, environmental stressors in water use, air pollution, local digester firms and buyers of organic wastes, as well as for traffic congestion and road degradation. carbon credit trading. Corn for ethanol and various feedstocks for biodiesel compete for food production resources. How much this Farm bill vagaries and biofuels competition affects food prices is often debated, but ethical Nadine Lehrer, natural resource scientist at Washington questions are frequently raised in the face of events such as State University, highlighted the importance of the political food riots in some third world countries. As Crooks process in biofuels development. She noted that this trend documented, solvency and production feasibility questions can be seen in shifts in emphases from trade concerns to are not insulated from the stressors of the larger national and biofuels issues during the most recent farm bill debates. global economy. Drawing upon the themes of news articles, personal International demands for fuel in the emerging economies observations at farm bill conferences and interviews with key of Brazil, India and China — and for food globally — leave decisionmakers, Lehrer documented how debate emphases unanswered questions concerning which regions will have a changed during the most recent farm bill deliberations. Early comparative advantage for producing various products (such in the process, farm bill debate was dominated by topics such as food, corn-derived fuel, biodiesel fuels and cellulosic as: “Outcome of World Trade Organization (WTO) will ethanol and biogas from anaerobic digestion). influence U.S. farm policy,” “Trade provision may cause The coming together of these various factors will likely change in sugar program,” and “Ag Secretary Johanns warns effect future farm bill legislation. Just as past legislation has that farm bill writers can’t ignore WTO.” But after 2006, the affected these numerous political, economic and ecological emphasis on trade topics shifted to greater focus on biofuels, issues, future legislation will do likewise, potentially resulting and topics such as: “Ethanol will be the driving force writing in new pressures and further changes in emphases. Further the farm bill.” cooperative development in the biofuels area will need to Lehrer suggested that in the context of the 2006 mid-term consider this complex, multifunctional and dynamic context, elections (and subsequent effects), this shift from trade to as the speakers at this symposium indicated. ■ biofuels was driven by spikes in gasoline prices, demands to reduce reliance on foreign oil, the stalling of WTO

36 July/August 2009 / Rural Cooperatives Newsline Co-op developments, coast to coast

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as regular unleaded fuel. The Wisconsin office of the American Lung Association is paying for the production and installation of the signs, plus one year of rent under the state’s Specific Information Sign (SIS) program. “The blue highway signs do a great job of alerting those passing through the area that E85 is available,” explains Jackie Blackburn, clean fuels coordinator for the American Lung Association in Wisconsin. “Now, flex- fuel vehicle drivers can more easily incorporate E85 into their road trips.” E85 is an official Clean Air Choice of the American Lung Association in the Upper Midwest due to its proven role in reducing harmful emissions. It says motorists who use E85 reduce particulate and ozone-forming emissions by 20 percent.

Wisconsin co-op to link local farms and institutions The Producers & Buyers Co-op was launched June 12 with an event at the Eau Claire County Exposition Center in Wisconsin. The co-op, which links local farms with institutions, shared an information booth with its business partner, Sacred Heart Hospital. The co-op facilitates buying and selling for farmers in Eau Claire, Highway signs popping up in Wisconsin are helping to direct motorists to filling stations Chippewa, Barron, Dunn, Pepin, where they can pump E-85, which helps improve air quality. Photo courtesy American Trempealeau, Buffalo, Clark, Jackson, Lung Association/Wisconsin Chapter Polk, Pierce and St. Croix counties. Sacred Heart Hospital is a founding partner in the project and committed 10 E85 signs sprouting along signs, sponsored by the American Lung percent of its $2-million food budget to Wisconsin Interstates Association in Wisconsin, was installed purchasing local food products to help Drivers heading for one of May 14 along Interstate 90 near the the organization get off the ground. Wisconsin’s biggest fun spots may Wisconsin Dells. The signs alert “Having a stable market price allows notice a change along their route this motorists of retailers that offer E85 me to do more long-range planning summer. The first set of E85 highway (containing 85 percent ethanol), as well with my farm operation,” says Darrel

Rural Cooperatives / July/August 2009 37 Lorch of Lorcrest Farms Inc., in Blair, BLBW grant was awarded to River op President and CEO David Cramer. Wis. Lorch also serves as an ad hoc Country RC&D to pioneer the best “I know United Cooperative patron member of the co-op board. way to get local food to local members will use their cash refund to The co-op intends to bring new institutions. stimulate business in their local buyers on board as more products are After many planning meetings with communities, something much needed sourced. It serves institutions such as: local farmers, articles of incorporation in today’s tough economy,” he says. schools, universities and colleges, were filed last March, creating the For 2008, United Cooperative hospitals and businesses that provide Producers & Buyers Co-op. To date, refunded just over $4 on every $100 of the co-op facilitated the purchase over purchases by members. Overall, United 26,000 pounds of locally grown product paid more than $5.63 million to from over 14 local rural communities. members during the past year in “There have been profound changes patronage refunds, stock (equity) over the past century for farm families revolved, estates settled and dividends cafeteria services. The co-op is working and rural communities; in the 1990s paid on preferred stock. to facilitate the production and alone, Wisconsin lost almost 40 percent In other news, United Cooperative’s purchase of locally produced: meats of its dairy farms,” says Rick Beckler, agronomy facility in Pickett, Wis., has (beef, buffalo, pork, chicken and fish); co-op organizer and Sacred Heart been selected as the Wisconsin winner fruits and vegetables; dairy and eggs; Hospital’s director of hospitality for the Environmental Respect Award, other locally produced food and dry services. “It’s our responsibility to buy sponsored by DuPont Crop Protection. goods. local food to support our local United Cooperative, along with 19 “Co-op stocks are an opportunity to agriculture industry. We have had an winners from other states, was selected invest in the local community and to outpouring of warm compliments on on May 7. support sustainable products, local our food from patients, our “Meals-on- farms and jobs,” says co-op coordinator Wheels” patrons and employees.” USDA offers $25 million loan Mary C. Anderson, a value-added to reopen SoyMor Biodiesel farmer with extensive direct sales United Co-op returns Agriculture Secretary Tom Vilsack experience. “Support of the co-op also record $2.37 million in announced June 24 that USDA Rural helps rebuild the local processing cash to members Development has approved a $25 infrastructure (for processing meats, United Cooperative released a million loan to help a Minnesota dairy, etc.), and to expand local food record $2.37 million in cash to its biodiesel facility diversify its operations production by providing a stable patron members this spring. The and significantly expand the production market.” refund resulted from a successful year of advanced biofuels. “The investment The idea for the co-op began in that saw the co-op ring up $429 million announced today helps fulfill the January 2008, when representatives in sales and earn profits of almost $15 Obama administration’s goal of from River Country RC&D and Sacred million. United Cooperative is based in increasing production of biofuels while Heart Hospital met with area farmers at Beaver Dam, Wis., with locations securing jobs in the alternative fuels the Midwest Value Added Agricultural throughout south-central Wisconsin. industry,” Vilsack said. “This is great Conference and Wisconsin Local Food The “drastic climb in commodity news for a community that recently saw Summit. Barriers to purchasing local prices” during early 2008 and strong this company cease production of its food (including seasonal production, sales growth in many areas boosted the operations due to tough economic quantity, transportation, processing, co-op’s performance, according to co- conditions.” pricing and delivery) were discussed, and subsequent meetings focused on Stacy Workowski unloads grain at Ripon United Cooperative last fall. High grain prices how to overcome these barriers. helped the co-op return record cash patronage to members for 2008. Photo by Dori Lichty, In June 2008, Sacred Heart courtesy United Cooperative Hospital’s CEO Steve Ronstrom pledged to buy more local food for the hospital. A month later, Governor Jim Doyle visited Sacred Heart Hospital to announce the statewide “Buy Local, Buy Wisconsin” (BLBW) grant awards. Doyle chose Eau Claire to announce the grants due to the innovative local food partnership between the hospital and River Country RC&D Council. A

38 July/August 2009 / Rural Cooperatives its total production to 480 million gallons per year, making it the nation’s NCBA supports role for co-ops fourth largest ethanol producer. in national healthcare reform Carbon Green BioEnergy is buying the former VeraSun plant in Woodbury, As Congress debates what shape healthcare reform will take, the Mich., which can produce 40 million cooperative business model has entered prominently into the discussion, a gallons of ethanol annually. The development that the National Cooperative Business Association (NCBA) is purchase represents the first direct hailing. “Cooperatives save money for members by aggregating demand for ownership of ethanol production for specific services, whether it’s health insurance, pharmaceuticals or hospital Carbon Green, headquartered in supplies,” says NCBA President Paul Hazen. Chicago. For example, in a health insurance purchasing cooperative, consumers or AgStar and some other lenders businesses can band together to purchase private health insurance policies provided Green Plains with $123.5 in bulk, passing savings along to members, he notes. Cooperative healthcare million in financing for the acquisition, providers also save money for members because, in addition to buying in bulk, as well as a $16-million seasonal the not-for-profit cooperative does not answer to outside investors. revolving loan fund to help operate it. “The National Cooperative Business Association is a strong advocate for AgStar will also continue to lead a healthcare cooperatives, and we are now analyzing the specific proposals group of lenders financing Carbon Senator Conrad has put forth to Congress,” Hazen says. “ Green BioEnergy. Cooperatively owned businesses represent a major contribution to the U.S. “We believe the outlook for biofuels and world economy. Co-ops are businesses that are jointly owned and is solid and will improve over time,” democratically run. People form cooperatives to fill their needs for services says Paul DeBriyn, president and chief that, if obtained on an individual basis, would be unavailable or prohibitively financial officer of AgStar. A value- expensive.” added financial services cooperative, For more information about healthcare cooperatives, visit NCBA’s website: AgStar serves 69 counties in Minnesota www.ncba.coop. and northwest Wisconsin and is part of the Farm Credit System.

The USDA guaranteed loan will sources. The program provides loan Fishermen create new CSF: allow SoyMor to purchase equipment guarantees to develop, construct and Cape Ann Fresh Catch to convert multiple types of feedstocks, retrofit viable commercial-scale Cape Ann Fresh Catch, a new including an unrefined corn-oil waste biorefineries producing advanced community-supported fishery (CSF), product from nearby ethanol facilities, biofuels. was launched in June by a group of into biodiesel. In its current The maximum loan guarantee is Massachusetts fishermen. According to configuration, the plant only has the $250 million per project. The loan is an article in the Cape Ann Beacon, ability to process soybean oil. High contingent upon SoyMor meeting the about 750 shareholders living from feedstock costs forced SoyMor to conditions of the loan agreement. Jamaica Plain to Gloucester have signed suspend operations at its Albert Lea, up for fish deliveries from the co-op. Minn., facility in the spring of 2008. AgStar sells three The Gloucester Fishermen’s Wives The loan is the second one USDA ethanol plants Association, the Northeast Atlantic has made under the Section 9003 AgStar Financial Services of Marine Alliance and MIT SeaGrant Biorefinery Assistance Program, created Mankato, Minn., in May announced the helped to organize the CSF. The co-op in the 2008 Farm Bill. The funding will sale of three of the six ethanol plants it sold all of its shares and has 500 people have a significant impact on the nearby acquired last March through the on a waiting list. A share costs $360 for communities by restoring nearly 30 jobs bankruptcy of VeraSun Energy. Neither 10 pounds of fish delivered weekly and providing an additional value-added sale involves new ownership by farmer during a 12-week period, the newspaper opportunity for the ethanol industry cooperatives. reported. A half share costs $180, and is and bolstering the local economy. The Green Plains Renewable Energy, worth five pounds of fish each week. plant opened in 2005 and has an annual Omaha, Neb., has agreed to purchase Fish are delivered the day they are capacity of 30 million gallons. the production facilities located near caught, and come whole — cleaned, The Biorefinery Assistance Program Central City and Ord, Neb., which gutted and packed on ice. Brochures are promotes the development of new and have a combined annual production being distributed with recipes, and emerging technologies for the capacity of about 150 million gallons of demonstrations are being held at each production of fuels that are produced ethanol. Combined with its six other drop-off point on the art of filleting and from non-corn kernel starch biomass plants, Green Plains says this will boost cooking a whole fish.

Rural Cooperatives / July/August 2009 39 DFA launches Texas plant expansion Dairy Farmers of America Inc. CWT removes 101,000 cows; (DFA) has begun a $39.4-million NMPF launches new task force project to expand and install new In its most aggressive move yet to help bring milk supply and demand into equipment at its plant in Schulenburg, better balance, Cooperatives Working Together (CWT) in May and June Texas. A new packaging line will be removed 367 herds in 41 states. These herds were comprised of nearly 101,000 added, nearly doubling the plant’s cows that produced 1.96 billion pounds of milk. capacity. The plant also is upgrading CWT received 538 bids from 41 states during the bidding process in April. and adding equipment for its As was the case with previous herd-retirement rounds, most of the cows wastewater system. Construction, which removed were in the western regions of the country. This round also removed began in May, is slated for completion 818 bred heifers. in early 2010. “Even though this was by far the largest of CWT’s seven herd-retirement The Schulenburg plant is a leading efforts, we were able to move quickly in May and June to audit the manufacturer for shelf-stable cheese participating farms,” says Jim Tillison, CWT’s chief operating officer. “The dips and salsa. Originally built in 1929 national dairy herd will be noticeably smaller this summer as a result of CWT.” by Carnation Co., it was the first milk On July 10, CWT announced the second herd retirement of 2009, with a plant in the state of Texas. shortened time-window for submittal of bids (the deadline was July 24). The project also includes The National Milk Producers Federation (NMPF), which administers CWT, construction of a new warehouse, a has also launched a new task force to seek additional ways of addressing boiler area and product cooling tunnel, severely depressed on-farm milk prices. It voted in June to recommend expanded freezer space for raw available CWT funds be used to help CWT members access the Dairy Export materials storage and a processing Incentive Program (DEIP) to its fullest extent. During each DEIP marketing kitchen for raw material handling. year, the program has the potential to export the equivalent of more than 1.5 Docks and parking facilities also will be billion pounds of milk. The NMPF board immediately approved the expanded. The project will result in 70 recommendation. To address longer-term factors affecting price and volatility, the task force was to meet in Chicago during July with representatives from major dairy producer organizations with their own proposals on how to deal with the crisis. The objective is to engage in a detailed dialogue “to determine the economic and political feasibility of those plans, with the goal of achieving a common understanding of how best to tackle the problems of low milk prices and high input costs,” says NMPF President Jerry Kozak. NMPF has also issued a statement applauding USDA’s decision to apply the dairy promotion checkoff to imported dairy products, 25 years after the national 15-cent checkoff was first applied to U.S.-produced milk. Kozak praised Agriculture Secretary Tom Vilsack for moving quickly to implement the Project managers review blueprints for a assessment. DFA plant expansion in Texas. The proposal will assess the equivalent of 7.5 cents per hundredweight on all dairy-based imports, including cheese and butter products, as well as dry ingredients such as casein and milk protein concentrates. The money will be collected by the National Dairy Board to be used for nutrition research, new jobs at the plant, making DFA one consumer education, issues management, and other programs that build of the largest employers in the demand for dairy consumption. community. The City of Schulenburg contributed $3.2 million in utility, street communities it serves, and to delivering Association (PCCA) of Lubbock, Texas, and waste water system upgrades. City a strong return for our members,” says is purchasing key assets of Koramsa officials also worked to create an Art Farris, chief operating officer of Corporation in Guatemala City, Enterprise Zone City, which allows for DFA’s Ingredients and Contract Guatemala, where it will produce a lower sales tax rate on the project. Manufacturing division. fashion jeans under the auspices of a They also supported rezoning and new company: DENIMATRIX, LP. temporary variances for construction. PCCA forms new company “DENIMATRIX [represents] the “This expansion reinforces the to produce fashion jeans first fully-integrated, vertical supply cooperative’s commitment to the Plains Cotton Cooperative chain — from raw cotton to finished

40 July/August 2009 / Rural Cooperatives jeans — in the Western Hemisphere,” and Middle Eastern supply chains will problems. says Carlos Arias, president of provide tangible, measurable value for Broadband “is the interstate highway DENIMATRIX. “We are very excited apparel brands and retailers.” of the 21st century for small towns and about the opportunity to partner with PCCA is a producer-owned cotton rural communities, the vital connection PCCA’s American Cotton Growers marketing cooperative headquartered in to the broader nation and, increasingly, (ACG) denim mill. The synergies the center of the “world’s biggest cotton the global economy,” FCC Acting achieved by incorporating joint product patch,” representing 55 to 60 percent of Chairman Michael J. Copps says in the development and design — from raw U.S. cotton acreage in 2009. report. cotton all the way through finished Secretary of Agriculture Tom Vilsack apparel — will give us the flexibility to Report: broadband critical adds: “Providing broadband access to offer a broad range of quick-response to future of rural America rural communities will not only fashion jeans and other apparel to our The Federal Communications enhance farmers’ and ranchers’ ability customers.” Commission (FCC) issued a report in to market goods and enhance PCCA President and CEO Wally late May providing a starting point for production, it will help residents in Darneille echoed Arias’s sentiments. the development of policies to deliver rural communities obtain needed “Denimatrix will have the finest broadband to rural areas and restore medical care, gain access to higher education, and benefit from resulting economic activity and job growth.”

$1 billion in USDA electric loans to strengthen rural infrastructure Agriculture Secretary Tom Vilsack in June announced that 37 rural utilities and cooperatives in 29 states have been selected to receive more than $1 billion in loans to build and repair more than 10,000 miles of distribution and transmission lines and make system improvements that will benefit 60,000 rural customers. “President Obama is delivering on his commitment to invest in rural America’s infrastructure by funding Using double-needle sewing machines, workers in Guatemala City are producing fashion upgrades to rural utilities and jeans for a new venture of Plains Cotton Cooperative Association. Photo courtesy PCCA cooperatives,” Vilsack said. “Rural communities need affordable, up-to- date electric service in order to broaden combination of facilities and capabilities economic growth and opportunity in economic opportunities. These loans in this hemisphere,” he says. “Those rural America. will enable cooperatives to deliver assets, along with PCCA’s access to raw Recognizing that the need for improved service to more customers.” cotton, ACG’s 34 years of experience in broadband service in rural America is Rural electric cooperatives are producing denim fabrics for a wide becoming ever-more critical, Congress nationally recognized as leaders in variety of customers and Carlos Arias’s in the 2008 Farm Bill required the FCC energy efficiency and demand- team of creative and experienced people chairman, in coordination with the management practices, he noted. To will make Denimatrix a truly unique secretary of the Department of date, 402 rural electric cooperatives operation.” Agriculture, to submit a report to have used USDA Rural Development’s “We will continue to produce denim Congress describing a rural broadband Energy Resources Conservation at our Littlefield, Texas, facility in the strategy. “Bringing Broadband to Rural program to increase energy efficiency, heart of cotton country and will deliver America: Report on a Rural Broadband conservation and demand-management fabric to Guatemala,” Darneille Strategy” identifies common problems initiatives. continues. “This should allow us to affecting rural broadband, including shorten the supply chain further. Given technological challenges, lack of data Foster Farms bids on Humboldt today’s retail environment, the 60-90 and high network costs. It also offers Foster Farms Dairy, a privately held day advantage we will have over Asian recommendations to address those dairy company based in Modesto,

Rural Cooperatives / July/August 2009 41 Calif., has tendered an offer to the U.S. Commentary Bankruptcy Court in Santa Rosa, Calif., continued from page 2 for Humboldt Creamery’s facilities in Fernbridge and Stockton. Its offer was selected from a number of bids submitted to the court during an production has increased from 4,500 pounds per cow in 1930 to more than 20,000 auction in mid-June. today. The creamery is presently owned by This dramatic surge in productivity has been driven by the adoption of modern a cooperative of about 40 dairy farmers, production and business management practices on the farm, and the ongoing while Dairy Farmers of America holds development and implementation of new agricultural technology. These advances a 25-percent stake. Humboldt also has have allowed us to expand productivity while protecting the environment, a facility in Los Angeles, for which bids preserving precious resources for generations to come. are being sought. The company’s financial problems Telling our story became apparent when the former The story of American agricultural productivity is impressive, but ironically it CEO Rich Ghilarducci abruptly remains largely untold. American farmers are an independent and humble lot, not resigned last winter. It was then given to beating their own drum. The fact is, if we’d seen this same kind of discovered that the company had $60 progress in the auto industry, we’d all be getting 100 miles per gallon — and we’d million less than the board had have heard plenty about it. thought. One of the ironies is that as we have learned to do more with less; only about 2 According to an article in the Times- percent of the U.S. population is directly engaged in production agriculture. That Standard newspaper, the creamery's means there are fewer people to tell this story. It’s no wonder that there is a lack of bank could still bid on the assets using public understanding about the issues that are critical to our industry. credit it is owed, and had not agreed to Today, the discussion of agricultural issues is often driven by well-intentioned the sale to Foster Farms as of early July. people who allow opinion, emotion and even nostalgia to fill “the information ■ gap.” As a result, even safe, proven technologies have encountered opposition. Dr. Norman Borlaug, father of the green revolution and winner of the Nobel Wine Peace Prize, put the situation into perspective. Dr. Borlaug believes technology continued from page 20 can enable us to feed 10 billion people. But in his words: “The more pertinent question is whether farmers and ranchers will be permitted to use this technology.” This is a troubling observation, given that 70 percent of the needed increase in global food production will have to come from advancing technologies, according to the United Nations’ Food and Agricultural Organization (FAO). used as the main ingredient in Chianti. To protect the ability of producers to use safe, proven technologies, those of us “There’s nothing wrong with a involved in any aspect of agriculture — producers, cooperatives, agribusinesses, decent Chianti,” he says. “In any case, industry organizations, government agencies, academia — must work to educate we won’t be turning out wines in the the public and policymakers about our industry. $60- to-$70 range. More the $10- to As we work to realize the opportunities and meet the challenges ahead, I believe $20-a-bottle kind — fun wines.” the most important step we can take is to tell our story. Education and Much the same way the local Amish understanding can drive public opinion and policy decisions that directly affect farmers help each other out, the co-op producers. It’s our responsibility to ensure that these judgments are based on members take a communal approach to sound science and accurate data — not fads, emotion, politics or social agendas. ■ their business. Member Carolyn Baldwin, an experienced wine-grower, offers advice on disease prevention. When member Gerald Byrne planted a Hopefully they will buy some bottles of “more for publicity purposes,” he says. new vineyard, Baldwin, Fuller and other wine to take home. Schaller, McKay, and the local fellow members turned out to help. “I “We’re counting on selling 80 to 90 governments are betting that the had to be helped up at the end of the percent of our wine at the winery, and winery’s customers will also stop by to day,” chuckles Fuller. some more at local festivals and so enjoy local restaurants and patronize Fuller and his collaborators hope to forth,” he says. “For a winery of our other businesses in a revitalized see a picturesque winery in a gracious size, we wouldn’t be able to make Leonardtown and the surrounding area. park, where canoeists, boaters and enough profit selling our product at It may seem a modest goal, but if tourists can relax after seeing the sights wholesale prices, anyway.” He foresees successful, it could mean new life for an and enjoy a refreshing glass of wine. selling to a few local retail outlets, but old community. ■

42 July/August 2009 / Rural Cooperatives Traditions run 100-years deep the family dairy tradition to his son, Washington. But we’ll keep taking care at Tillamook County Creamery who is 34 and has two children of his of the farm for future generations, and continued from page 12 own. “It’s hard to think about it now, Tillamook is a well-run co-op. So I since things are tough right now,” he think so.” says. But he is optimistic about the For more information about TCCA, agriculture or forestry products. future of dairy farming in Oregon and its centennial activities and products, The foundation for this century of of his co-op. visit its Web site at www.tillamook success, of course, is the co-op’s farmer- Asked if he thinks Tillamook County cheese.com or contact them at 4175 owners, such as Hurliman. Creamery Association will still be Highway 101 North, Tillamook, Ore. “Farming gets into your blood; it’s around in another 100 years, Hurliman 97141, phone (503) 815-1300. ■ what I know. I wouldn’t know what else replies: “I hope so. I really hope so. A to do,” Hurliman says. He hopes to pass lot depends on the decisions made in

A conversation with Tillamook business. It is only distributed in  Some of your members have joined President/CEO Harolod Strunk Washington, Oregon and in some areas forces to operate a methane gas continued from page 13 of Northern California.” digester, to turn manure into renewable energy. How successful has  Like most co-ops, Tillamook has had that project been, and do you see the to wrestle with the use of bovine growth concept expanding to include more hormone, ultimately deciding a few farmers? Visitors can see our cheese being years ago to ban its use. Did you lose “Participation by some of our made and packaged, sample our cheese any members over that? members in the community methane and order meals prepared using our “Ultimately, we did not lose digester project is a good example of cheese. They can purchase any product members. However, it was a very our member dairy farmers working that we market, including fresh cheese controversial and emotional decision for proactively to address developing curds (which we only sell at the Visitors our cooperative. If you look at where industry issues. In this case, several of Center). Visitors can view our special the market is today, we made a sound our dairy farmers have partnered with exhibits to learn about the history of decision. It was the right decision to the Port of Tillamook Bay to develop the co-op and the brand. They can also make given the expectations our and operate an anaerobic digester that purchase branded merchandise that consumers have for our brand.” converts manure to energy. provides an on-going reminder of their The technology is working well, but Tillamook experience.  What is the turnover rate like the financial return to the participants is The popularity and success of the among your 550 fulltime employees? minimal. It is hoped that as the national Visitors Center is exemplified by the How do you attract and keep qualified cap and trade legislation develops these nearly 1 million visitors who pass workers? early adopters of green technology will through the center annually.” “It is difficult to recruit employees to benefit from the resulting carbon and our facilities in both Tillamook and greenhouse-gas markets. If the market  How is the cheese industry changing, Boardman. In both cases, we are located for carbon credits and greenhouse gas and how is Tillamook cheese poised to in rural areas with limited amenities, offsets mature to the point that change with it? What percent of your and TCCA is one of the larger participation in the methane gas milk goes to cheese vs. other dairy employers in the area. This means digester program is financially products? opportunities for a spouse to find work, sustainable, I expect to see more “The artisan and craft cheese other than with TCCA, are limited. farmers interested in participating in business is growing and consolidation of You are asking recruits to make a the program. the larger players is taking place. lifestyle change in moving to a small, In a related effort, TCCA staff is Tillamook Cheese is a true niche player rural community. Some are willing to working with the Port of Tillamook in the cheese category because we are a embrace that, others do not see it as a Bay to develop a business model that naturally aged cheese. It is a strong and benefit. will expand the operation of the existing growing segment of the market, which However, with that said, we have a digester to include additional feedstock positions us well for growth. relatively low turnover rate in the non- from non-dairy sources as well as About 85 percent of our business is manufacturing areas of both facilities. additional manure from more dairy cheese. We make ice cream at our Our highest turnover rate is in our farms.” ■ Tillamook facility, but ice cream packaging operation in Tillamook.” accounts for a very small portion of our

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