Rural

COOPERAUSDAUSDA // RuralRural DevelopmentDevelopment TIVES March/April 2001

Co-opsCo-ops copecope withwith powerpower crisiscrisis COMMENTARY

Research key to expanding co-op knowledge and understanding

Research on cooperatives has dimin- identifying keys to successful opera- basic nature of cooperatives. What ished, as noted in the article by legal tion of cooperatives and understand- may appear to be the idea of the scholar James Baarda on page 21. New ing the causes of cooperative failures. moment or just “keeping up with the efforts are needed to invigorate It is also important to shedding light Joneses” can end up costing members thought and understanding about on how changes in various means of their equity and market presence. Just major forces impacting the operations observe what has happened to Tri- of cooperatives and how they adapt Valley Growers and the Saskatchewan structurally and functionally to them. Wheat Pool. Could unwise courses of Baarda shows the opportunity to draw Research is action have been averted by better on new, cutting-edge developments in understanding the nature of the coop- disciplines such as legal theory, eco- erative business itself? nomics, sociology, political science and important for USDA’s cooperative research pro- behavior management and how to gram involves in-house efforts and apply them to cooperatives. Such an coordination with university scholars interdisciplinary approach to address- identifying keys through agreements that augment ing these issues has the potential to work on mutually agreed-upon pro- enrich understanding of the role coop- jects. This effort needs to be elevated eratives play and better promote coop- to successful to meet the critical needs identified in erative development in the United the Baarda article and to avert a crisis States and worldwide. operation of in cooperative knowledge. Results can Sound far-fetched? Building intel- assist cooperative boards of directors lectual capital about cooperative and management in strategic planning, methods of operation, practices and cooperatives and identification of best practices, and principles is one of the missions of shed light on issues inherent in the USDA’s Cooperative Services pro- increasingly complex organizations gram, first authorized in the Cooper- understanding required for responding to global com- ative Marketing Act of 1926. At a petition. They can also assist producers time of increasing concentration in the causes of and other rural residents with food manufacturing and distribution, economies in transition from central- cooperative approaches to marketing ized government to more democrati- are being looked to increasingly by cooperative cally run and market-oriented ones. Congress as a means for farmers and The opportunity for application of other rural residents to access markets the cooperative idea and its use has and to gain a modicum of control in failures. never been greater. It is through the market chain, rather than being research and education that the coop- subservient to outside interests. It is erative idea expands and is nurtured. ironic that – at a time of renewed finance can affect member control interest in value-added marketing and and influence in their cooperatively Randall Torgerson, Deputy Administrator improved rules for negotiated pricing owned businesses. Seldom do long- USDA Rural Business-Cooperative Service over contract terms – research sup- term consequences of deviations from port for work on these important conventional cooperative practices areas is lacking. merit the in-depth assessment Such research is important for required to determine if they alter the

2 March/April 2001 / Rural Cooperatives Rural March/AprilCOOPERA 2001 TIVESVolume 68 Number 2

Rural COOPERATIVES (1088-8845) is published bimonthly by Rural Business–Cooperative Service, U.S. Department of Agriculture, 1400 Independence FEATURES Ave. SW, Stop 0705, Washington, DC. 20250-0705. The Secretary of Agriculture has determined that publication of this periodical is necessary in the transaction of public business required by law of 4 On the sea of grass the Department. Periodicals postage paid at Colorado ranchers band together to cut cattle-grazing costs Washington, DC. and additional mailing offices. Copies may be obtained from the Superintendent of By Coleman Cornelius ZDocuments, Government Printing Office, Washington, DC, 20402, at $3.50 domestic, $4.38 for- eign; or by annual subscription at $15.00 domestic, 6 Earnings, sales dip for local cooperatives $18.75 foreign. Postmaster: send address change to: Rural Cooperatives, USDA/RBS, Stop 3255, Wash., By Beverly L. Rotan DC 20250-3255. Mention in Rural COOPERATIVES of company and 8 Minnesota leads nation in co-op business volume brand names does not signify endorsement over other companies’ products and services. By Charles A. Kraenzle

Unless otherwise stated, contents of this publication are not copyrighted and may be reprinted freely. For 12 Power in peril noncopyrighted articles, mention of source will be appreciated but is not required. California co-ops struggle to cope with the state’s energy crisis

The United States Department of Agriculture (USDA) By Catherine Merlo prohibits discrimination in all its programs and activities on the basis of race, color, national origin, sex, religion, age, disability, political beliefs, sexual 17 Neighborhoods warm to bargaining power orientation, and marital or family status. (Not all prohibited bases apply to all programs). Persons of co-ops with disabilities who require alternative means for By Tux Turkel communication of program information (braille, large print, audiotape, etc.) should contact USDA’s TARGET Center at (202) 720-2600 (voice and TDD). 19 Keep the co-op candle burning To file a complaint of discrimination, write USDA, Effective member relations essential to keeping co-op spirit alive Director, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, By James Wadsworth Washington, D.C. 20250-9410, or call (202) 720-5964 (voice or TDD). USDA is an equal opportunity provider and employer. 21 Critical need seen to broaden, invigorate Ann Veneman, Secretary of Agriculture current approach to cooperative research Randall Torgerson, Deputy Administrator, USDA By James Baarda Rural Business-Cooperative Service

Dan Campbell, Managing Editor

Pamela J. Karg, Field Editor DEPARTMENTS

Vision 2000/KOTA, Design 2 COMMENTARY 11 IN THE SPOTLIGHT Have a cooperative-related question? Call (202) 720-6483, or 25 A CLOSER LOOK Fax (202) 720-4641, Information Director, 26 NEWSLINE This publication was printed with vegetable oil-based ink. On the Cover: Alan Pierson contemplates the grim energy picture facing California as he stands outside milk- storage silos at the Land O’ Lakes processing plant in Tulare. The plant has experienced numerous power outages, forcing some United States Department of Agriculture members to divert milk to animal feed. Story on page 12. Photo by Josh Yoshimoto

Rural Cooperatives / March/April 2001 3 On the sea of grass Colorado ranchers band together to cut cattle-grazing costs

By Coleman Cornelius, Strength in unity Denver Post The Logan County group formed in Northern Colorado Bureau 1965 with a simple idea: by pooling their money, small-scale farmers and Copyright Denver Post; reprinted ranchers could buy more land for cattle by permission grazing than they could afford individ- ually, giving each a firmer financial ogan County, Colo. — foothold. The sprawling prairie The grazing association is the owned by the Chimney largest of its kind in the state and is the L Canyon Grazing Associa- biggest landowner in Logan County, tion harbors all of human according to county assessors. history on the Eastern Plains. The group owns nearly 32,000 This arid landscape — where cattle acres in northwestern Logan County; grazing is managed at a ratio of just one with additional holdings in adjacent animal per 15 acres — has its own deso- Weld County, the ranchers control late beauty, and many of its features about 37,000 acres. The northern have remained unchanged over time. Colorado property amounts to about Atop a sweeping mesa, there are tepee 58 square miles. rings left from Plains Indian ceremonies. “In order for the small farmer to com- From here, native people could see for- pete, he had to get organized with other bidding canyons coursing through dis- small farmers. That way we could buy tant chalk cliffs, the canyons for which land, because large-unit costs were a lot the grazing association is named. less,” said Joe Cucarola, 80, the group’s A stone-buttressed dugout, not founder and an ongoing member. much bigger than desktop, hints at the The association has allowed the hardships of an early homesteader who small farmer to be more diversified, sought meager shelter on the land and through diversification, they were where he staked claim. able to stay in business, said Cucarola, A collection of immaculately pre- who lives near Sterling. served stone buildings and barns is all The idea of a grazing cooperative that’s left of a ranch once controlled by retains its appeal for many strug- John W. Iliff, one of Colorado’s leg- gling in an agricultural economy endary cattle kings in the late 1800s, that is almost perpetually in the pits. whose family later founded the Iliff In this economy — where produc- School of Theology in Denver. tion costs routinely outstrip com- In the Iliff tradition, the Chimney modity prices — the Chimney Canyon Grazing Associations’ 35 Canyon Grazing Association has members — 31 men and four women afforded its members a measure of — make a living raising crops and cat- financial stability, and has even for 100 cows today? It’s almost tle. They banded together to improve helped some to dramatically expand unheard of,” said Jerry Meisner, the their chances of success in a harsh their operations, members say. group’s secretary-treasurer. “I don’t landscape, in a harsh economic climate. “How would you go buy acreage think a grazing association can be beat

4 March/April 2001 / Rural Cooperatives for a smaller operator.” their private land. At that time, calves Grazing associations sprang are weaned and steers head for feed- up in Colorado during the lots to be fattened for slaughter. 1960s with encouragement from the federal government. Babysitting the cattle The Chimney Canyon Graz- During the summertime grazing ing Association secured pri- season, ranch manager Dick Rogers vate funding for its land, and a and his wife, Lynn, watch over some government agency had 4,500 head of cattle. In pickups and administered the loans. on horseback, they keep tabs on The grazing association about 150 miles of fence line and bought its first parcels for make sure electric pumps and wind- about $35 an acre at an inter- mills are working to draw water for est rate of 5 percent, officers grazing cattle. said. The land is worth per- While the couple tend the cattle, haps $100 an acre today. most association members are raising Ranchers join by buying crops, including alfalfa, feed corn and membership in the associa- wheat on their farmland. The tion. In addition, members arrangement allows association mem- pay annual fees. bers to focus on farming while their These days, the yearly fee cattle graze under someone else’s is $55 per ‘animal unit,’ watchful eyes. meaning a cow-calf pair, bull While the grazing association has or steer. On average, associa- improved profit margins for its mem- tion members graze 80 ani- bers, their interest in the shared land is mal units on the land, mak- not all money-driven. ing the average annual A decade or so ago, when many of membership fee $4,400 — a the farmers and ranchers could have sizable cash outlay for many used the cash, a group of investors small-scale farmers and offered to buy grassland from the ranchers, but still less than it Chimney Canyon Grazing Associa- would cost to individually tion to convert it to dryland wheat lease or buy grazing land, the production. association’s officers said. But the members didn’t want to see The fees cover land pay- the windblown grassland plowed up, ments, taxes, insurance, and they knew the long-term benefits equipment and the salary of a of association ownership outweighed full-time ranch manager, short-term cash gains. So they declined among other costs. the offer. In just a few years, the Though the members are mostly association will retire its people of few words, they quietly admit loans and will own its land. a pride of ownership and a sense of That will reduce annual fees responsibility for their shared land. In and should boost cattle prof- private conversations, they recalled its, members said. sunsets viewed from prairie bluffs on The five-month grazing their communal property and agreed season begins in May, when that the grazing association has offered association members move a sense of hope during tough times for their cattle onto the hardy and agriculture. nutritious buffalo and blue “We hope it will keep operating grama grassland. the way it has for the past 35 years,” Jerry Meisner, left, secretary-treasurer of the Grazing continues through Meisner said. Chimney Canyon Grazing Association, discusses the October, when ranchers collect Added association president Basil grazing outlook with ranch manager Dick Rogers. The association manages nearly 32,000 acres for its their cattle and move the ani- Stieb: “We don’t plan on selling to ■ members in Logan County, Colo. mals to wintertime plots on anybody.”

Photo by John Epperson, copyright the Denver Post Rural Cooperatives / March/April 2001 5 Earnings, sales dip for local cooperatives

Beverly L. Rotan, Ag Economist important farm supply item sold. Feed ued to play a vital role for farmers, USDA Rural Development was the second most important farm supplying them with both production supply item sold, although there was a goods and marketing their crops and ocal cooperatives han- 6-percent decrease from 1998. Surpris- livestock. These co-ops are also dling farm supplies ingly, seed, tires, batteries and acces- important to rural communities, experienced a slight sories and “other” farm supplies where they are often one of the L decrease in earnings showed some growth, but these gains largest employers. These co- ops during 1999, with net were offset by a steep drop of about 20 generate considerable tax revenues income averaging almost $327,000. percent for other farm supplies sold by for rural towns. Sales were also down slightly, averag- local co-ops. Service income was up The expense for a single employee ing just over $13 million. About 26 about 10 percent. averaged $34,493, and the local co-ops percent of the cooperatives in this Crop marketing sales also suffered employed an average of 29 people, up study suffered losses. sharp declines, with grain sales off the about 4 percent from 1998. Although patronage refunds were most, sliding 9 percent, to just over $5 Directors’ fees and expenses were a down from 1998, they were still an million per co-op, on average. small part of total costs. However, important source of revenues. These Cost of goods sold and total sales director compensation was an impor- refunds allowed 19 (out of 77) coopera- (including farm supplies, grain, etc.) tant factor in getting farmers to re- tives that suffered losses on their local almost offset each other, with cost of channel time normally spent on their farm supply operations to post a gain in goods sold falling about 7 percent own operations to helping to guide net income. and total sales falling 6 percent. Cost their cooperatives. Board expenses Current assets of local co-ops that of goods sold averaged more than 85 were rather modest, averaging $896 market farm supplies declined, but percent of net sales. Total expenses per director annually. The co-ops sur- total assets increased 7 percent from were up from 1998, increasing about veyed averaged 10 board members. 1998 to 1999. Investment in plant, 7 percent. Production and prices for most property and equipment (PP&E), grain Agricultural cooperatives contin- grains and oilseeds decreased greatly and oilseed inventories, farm supply inventories, and accounts receivable for farm supply sales grew slightly. Table 1—Size and type definitions used for respondent cooperatives Current liabilities declined 0.6 per- cent in the two-year period, with patrons’ credit balances and “other” Cooperative Definition Number liabilities having the largest decrease. Small up to $5 million in total sales 122 Current term and seasonal short- term Medium $5 million to $10 million 75 debt used for financing operating Large $10 million to $20 million 59 expenses grew in double digits. Also Super $20 million and more 35 increasing were accrued expenses, long-term debt, cash patronage Cooperative type refunds and dividends. Long-term Farm supply total net sales from farm supplies 180 debt increased by 10 percent from Mixed farm supply from 50 to 99 percent 49 1998 to 1999. Mixed marketing from 25 to 49 percent 48 Farm supply sales followed the Marketing less than 25 percent downtrend, posting a 3-percent decrease. Petroleum was the most

6 March/April 2001 / Rural Cooperatives in 1999 and most inventories were million. Cooperatives were grouped ings used in this report were the same probably stored until cooperatives into four sizes by sales volume, using as in similar USDA studies and, for could capture higher prices. actual figures. No attempt was made the 291 cooperatives, sizes and types Because co-ops are owned by their to deflate these values. Sales group- used are summarized in table 1. ■ farmer/member/patrons, and as long as those farmers want to own a busi- ness where they can purchase their supplies and market their products, Most financial ratios confirm downtrend cooperatives will continue to adapt to changing economic conditions. Local Most financial ratios used for this study have both a financial and opera- cooperatives cannot depend on large tional impact and measure various performance levels of cooperative opera- patronage refunds to generate net tions. To ensure a complete and accurate financial analysis, it is important to earnings. During the past two look at a group of financial ratios over a period of time and/or evaluate other decades, consolidation reflected an cooperatives or companies with similar sales and functions in the geographi- attempt to maintain an adequate size cal area. from which to provide their members Highlights of the impact of ratio include: with expanded products and markets. • Liquidity ratios – the current ratio (current assets/current liabilities) was With numerous local co-ops losing fairly steady, around 1.5 between 1990 and 1999, with a slight downturn in money, further consolidation may be 1995. The quick ratio (current assets-inventory/current liabilities) mimic- necessary in the future. ked the current ratio’s trend; Information for this article was • Leverage ratios – debt ratio was at a high of 0.47 in 1996. After 1996, the compiled from a study that collected ratio starts to decline, with the sharpest downturn in 1997; detailed financial information from • Activity ratios – total-asset-turnover ratio fell from 2.13 in 1998 to 1.92 in 291 cooperatives. Most respondents 1999 because total sales decreased 6 percent while assets increased only were small farm supply cooperatives, 5 percent; much of the increase was in inventories; with sales averaging less than $2.5 • Profitability ratios – return on total assets ratio fell from 7.88 in 1998 to 6.53 in 1999 because total assets increased while net income decreased (13 percent). ■

Growmark, TFC to study possible merger

The boards of directors of Growmark Inc. and Tennessee Farmers Cooperative (TFC) have approved a study that will examine the potential combination of the two regional agricultural cooperatives. Dan Kelley, chairman of Growmark, and David Rieben, chairman of TFC, said, “We are both federated cooperatives owned by our local member organizations. We share a deep com- mitment to serving the needs of our members. Given our geographic proximity and similar busi- ness philosophy, it makes sense to look at how we can work together more closely to benefit our member-owners.” Preliminary discussions have focused on potential benefits in the following key areas: (1) build- ing on mutual strengths to enhance and strengthen product and service offerings to members; (2) utilizing each cooperative’s areas of expertise for the overall benefit of a combined organization, and (3) utilizing the human resources of each organization to support future expansion opportuni- ties. No timetable was announced for the study, but management indicated a combination could occur by early 2002 if the study results are positive and members support a plan of consolidation.

Rural Cooperatives / March/April 2001 7 Minnesota leads nation in co-op business volume

Charles A. Kraenzle, Director, Figure 1 Co-ops’ total net business volume by function, ten leading states, 1999 Statistics Staff USDA Rural Business-Cooperative 10 Service ■ Service ■ Farm Supply ■ Marketing Editor’s note: Information was collected 8 by statistics staff members Celestine C. Adams, Katherine C. DeVille, Jacqueline E. Penn and Ralph M. Richardson 6

espite dwindling num- $ billion 4 bers of farms, Upper Midwest agricultural 2 D cooperatives - paced by Minnesota – led the nation in co-op business volume, 0 MN WI IA CA IL MO KS NE TX WA according to data compiled by the U.S. Department of Agriculture’s Rural Business-Cooperative Service. oilseeds, and a decreased volume of of all co-ops in 1999, compared with Minnesota cooperatives, with $9.3 farm supplies combined to drop Iowa 53 percent of memberships and 57.5 billion in net business volume in 1999, to third place. Decreased marketings of percent of co-ops in 1997. led all states for the first time since milk, cotton, fruits and vegetables and Marketing sales (derived from sales USDA began tracking co-op perfor- other commodities, as well as lower of crops and livestock) accounted for mance by state in 1951. Wisconsin sales of farm supplies, caused Califor- 76.1 percent of the business volume ranked second among all states, with $8 nia to slip to fourth place in the state handled by co-ops in the top 10 co-op billion in co-op business volume, while rankings. states in 1999, up from 75.3 percent in Iowa (the leading state in 1997) Wisconsin co-ops, with increased 1997. Minnesota co-ops, with $7.1 dropped to third place, with $7.9 bil- sales of milk, livestock and farm sup- billion in 1999, led all states in farm lion in co-op business volume. Califor- plies, moved up into second place. marketing, followed by California nia co-ops placed fourth with $7.8 bil- Wisconsin co-ops increased their net ($6.8 billion) and Wisconsin ($6.5 bil- lion. California co-ops led the nation business volume to $8 billion in 1999 lion). Co-op marketing in Minnesota from 1951 through 1977 and again (table 1) from $6.5 billion in 1997. accounted for 76.1 percent of their from 1987 to1995. Iowa was the Cooperatives in these 10 states total net business volume, up from nation’s leading farmer co-op state accounted for $59.2 billion, or 59.7 75.2 percent in 1997. from 1979 to 1985 and again in 1997. percent, of the $99.1 billion in total net In California, marketing accounted The 10 leading states ranked by net business volume handled by the for 86.9 percent and sales of farm sup- business volume are shown in fig. 1. nation’s 3,466 agricultural cooperatives plies accounted for only 8.9 percent of Total net business volume of co-ops in 1999. This compares with $62.1 bil- the total business volume in 1999. Ser- in Minnesota was down in 1999 com- lion (58.2 percent) of the $106.7 billion vice revenues and other income account- pared to 1997 (USDA compiles state- generated by the nation’s co-ops in ed for the remaining 4.2 percent. by-state data for co-ops only in every 1997. The 10 leading co-op states also Iowa led all states in volume of other year). Decreased marketings of accounted for 53.8 percent of the total farm supplies sold, followed by Min- farm products, especially grains and co-op memberships and 56.5 percent nesota and Illinois, the same as in

8 March/April 2001 / Rural Cooperatives Table 1—Farmer cooperative numbers,1 memberships, and net business volume by State, 19992

Cooperatives Member Net Cooperatives Member Net State headquartered ships business State headquartered ships business in State in State3 volume4 in State in State3 volume4

————Number——— Mil. dol. ———Number——— Mil. dol. Alabama 63 53,886 1,170 North Carolina 26 98,404 826 Alaska 9 1,815 76 North Dakota 268 118,435 3,041 Arizona 9 3,376 930 Ohio 83 55,970 2,277 Arkansas 53 56,038 1,643 Oklahoma 94 68,611 1,386 California 181 53,604 7,824 Oregon 35 24,638 1,717 Colorado 47 32,613 929 Pennsylvania 56 45,008 1,353 Connecticut. 4 2,728 176 South Carolina 6 3,458 247 Delaware 3 43,422 90 South Dakota 136 107,046 2,451 Florida 39 26,050 2,419 Tennessee 79 139,124 730 Georgia 16 26,673 2,007 Texas 251 118,064 3,401 Hawaii. 28 2,768 104 Utah 17 10,013 461 Idaho 40 18,583 1,332 Vermont 5 5,981 472 Illinois 189 195,258 5,316 Virginia 59 174,308 997 Indiana 55 75,409 1,931 Washington 84 33,903 3,325 Iowa 189 180,168 7,932 West Virginia 27 75,083 89 Kansas 137 133,269 4,659 Wisconsin 191 205,690 8,018 Kentucky 41 231,862 773 Wyoming 13 5,145 259 Louisiana 48 12,294 564 Other States 4 30,121 96 Maine 24 8,348 203 Foreign - 4,789 490 Maryland 21 71,953 352 United States 3,466 3,173,323 99,064 Massachusetts 13 5,551 628 1 Michigan 62 29,788 1,925 Includes centralized and federated cooperatives and those with mixed organizational structures. 2 Data cover- Minnesota 305 186,902 9,306 ing operations of cooperatives ending their business Mississippi 76 105,239 949 years during 1999. Data for states with fewer than three Missouri 71 142,771 4,860 cooperatives or where disclosure is a problem are includ- Montana 73 28,720 686 ed with other states. Totals may not add due to rounding. Nebraska 110 92,353 4,543 3 Includes farmer members (those entitled to vote for New Jersey 18 7,347 313 directors), but not nonvoting patrons. Duplication in these membership numbers occurs because many farmers New Mexico 10 2,974 555 belong to more than one cooperative. 4 Excludes inter- New York 98 17,770 3,235 cooperative business.

1997. Cooperative supply sales in Leaders in number of co-ops from 2,180 co-ops and 57.5 percent in Iowa totaled more than $2.3 billion, Minnesota, North Dakota and 1997. Among the 10 leading states, $1.9 billion in Minnesota and $1.5 bil- Texas were the leading states in num- Minnesota and South Dakota had lion in Illinois. Iowa was the leading ber of cooperatives (as determined by about an equal number of marketing state in cooperative sales of feed, crop co-op headquarters locations), the and farm supply cooperatives. Texas protectants and fertilizer. Illinois co- same rankings as reported in 1997 and had the largest number and propor- ops led all states in seed sales, Min- 1995. The top 10 co-op states were tion of service co-ops (mainly cotton nesota led for petroleum sales and home to 1,957 (56.5 percent) of the ginning) and Wisconsin the largest Wisconsin in other farm supply sales. nation’s co-ops in 1999 (fig. 2), down proportion of farm supply coopera-

Rural Cooperatives / March/April 2001 9 tives. Minnesota, however, had the was the leader for memberships in Iowa ($44,026) and Wisconsin largest number of farm supply co-ops. related-service cooperatives (those that ($38,981). Kentucky ranked tenth Illinois and Iowa had about the same perform services such as livestock with $3,334 per membership. Among proportion of marketing and farm breeding, trucking, storage, etc.). the 10 leading states in net business supply co-ops. Overall, 52.1 percent of the total mem- volume, California accounted for 296 Among the top 10 co-op states, berships in the top 10 states were in memberships per co-op and $145,951 Minnesota (35) and Wisconsin (30) led farm supply cooperatives. per membership. The net business in the number of dairy cooperatives. Among the 10 leading states in co- volume per membership in California California, with 67 fruit and vegetable op memberships, Kentucky had the was nearly triple of that reported for cooperatives, accounted for 29 percent highest number of memberships per Minnesota. of the nation’s 231 fruit and vegetable co-op, with 5,655. Virginia was sec- Total net business volume cooperatives. North Dakota had the ond with 2,954 and Missouri ranked (excluding business done between largest number of grain cooperatives third with 2,011. North Dakota cooperatives) in 1999 was $99.1 bil- (119), followed by Kansas (113), Illi- ranked 10th with 442. lion, down from $106.7 billion in nois (110) and Iowa (106). These four Net business volume per member- 1997 and $104.7 billion in 1998. states accounted for 63.7 percent of all ship among the 10 leading states in This includes marketing (the value grain cooperatives in the top 10 co-op total memberships was highest in of products sold, bargained for or states and 50 percent of the 896 U.S. Minnesota ($49,791) followed by handled on a commission basis), grain cooperatives. Figure 2 Number of co-ops by function, ten leading states, 1999 ■ Service Leaders in co-op memberships ■ Farm Supply ■ Marketing Kentucky led all states in number of 350 cooperative memberships with 231,862. Memberships in the 10 leading states 300 totaled 1,707,787 and accounted for 53.8 percent of the total U.S. coopera- 250 tive memberships in 1999 (fig. 3), up from 53 percent in 1997. Among these 200 states, Kansas (87.2 percent), followed 150 by Illinois (59.9 percent), had the Number largest percentage of memberships in 100 marketing cooperatives. Virginia (81.6 percent) and Missouri 50 (76.5 percent) had the largest percent- 0 age of memberships in farm supply MN ND TX WI IL IA CA KS SD NE cooperatives. Wisconsin (10.4 percent)

farm supplies (sales of fertilizer, crop Figure 3 Co-ops’ memberships by function, ten leading states, 1999 ■ Service ■ Farm Supply protectants, petroleum, feed and ■ Marketing other supplies to members and 250 patrons) and receipts from services, such as trucking, storage, ginning, 200 drying and artificial insemination, and other income. Information on farmer coopera- 150 tive activity in individual states is col- lected every other year through

thousands 100 USDA’s annual survey of farmer cooperatives. Data requested are on memberships by state, origin of farm 50 products marketed and destination of supplies and equipment. These data 0 are tabulated to show memberships KY WI IL MN IA VA MO TN KS ND and commodity business volumes at the state level. ■

10 March/April 2001 / Rural Cooperatives IN THE SPOTLIGHT Robert A. Cropp Agricultural Economist University of Wisconsin-Madison Center for Co-ops & UW-Extension

Personal background: Born on a Marketing Board, Wisconsin 4-H Wisconsin dairy farm, Cropp remembers and FFA, Alpha Gamma Rho (ag attending with his dad a Pure Milk Asso- fraternity), Wisconsin Farm Bureau, ciation meeting, at which the little tyke GROWMARK, Farmers Union was bored. But as he grew, so did his Milk Marketing Co-op and Acceler- interest in agriculture. A bout with polio ated Genetics. exempted him from military service and Why such a commitment to co- he headed to the University of Wiscon- ops? “It consumes you. I think peo- sin-Platteville to study agriculture educa- ple who work in the co-op arena tion. While working at UW-Madison on share the same philosophy of sup- his master’s degree and Ph.D. in agricul- porting a system of self-help to cre- Robert Cropp says today’s complex business envi- tural economics, with thesis work in milk ate a better bottom line for mem- ronment increases the need for more specialized marketing, he had to teach a co-op class. bers. We have a soft spot for farmers training for co-op board members. That’s now a responsibility he relishes and rural communities and, through Photo by Pamela J. Karg, courtesy Foremost Farms USA teaching every fall semester. a cooperative, you see the benefits Education posts: For nearly 20 going back to those people. I’d like to changes in how they operate. Other- years, Cropp taught ag-economics at think that I’m of some use, that what I wise, I fear they might not be around in his alma mater. He then served as do is of some value and that I’ve made a another five years.” executive director to a special task difference while working with people. Where do you think co-ops are force studying the future of America’s And that’s the part of my job that I like headed? “Director education is more dairyland and coupled that assignment the best. I think I’ve learned more from important than ever because of their with duties in the UW Cooperative working with co-op boards and members responsibilities to be visionary and do Extension Service. Then, after serving than I’ve been able to help them learn.” long-range planning in a more complex as dean of the UW- Platteville College What co-op lessons do you find business environment. And we find our- of Agriculture, Cropp accepted new yourself continually teaching? “We selves doing more specialized training responsibilities as director of the UW know that when farmers aren’t doing with individual co-op boards. That’s Center for Cooperatives in 1990. He well, the co-ops aren’t doing well because directors today represent a more now splits time between the Center either. So it gets frustrating when you heterogeneous membership. We have for Cooperatives and the UW-Madi- have good, hard working farm families differentiated services, a shrinking farm son Agricultural and Applied Econom- that are looking to their co-ops to do population whose operations are getting ics Department, where he is a dairy things for them. But it’s difficult to larger at the same time we have consoli- marketing and policy specialist. understand the complex changes going dations on the other side of the market- Co-op honors: Cropp received the on throughout agriculture that are ing equation with our customer base. Distinguished Extension Program impacting members and co-ops. And it There is more technology on the farm award from the American Agricultural can become difficult to demonstrate and in the co-op. Business structures can Economics Association in August 2000. the value of cooperatives during times be more complex as co-ops bring in non- In 30 years, recognitions have come like these. So we spend a lot of time at member investments. So the answers from the American Institute of Cooper- the Center working with boards to get become more critical to questions of ation, Association of Co-op Educators, them to think about where they are how we structure the co-op, who our St. Paul Bank for Co-ops, Wisconsin now, what trends are impacting their customers are, what their needs are, how Federation of Co-op, UW-Platteville co-op and how they need to respond to and if we’re going to serve them, and and Extension, Wisconsin Association them. Frankly, there are some co-ops how we’re going to finance all of this at a of County Ag Agents, Wisconsin Milk out there that need to make some time when farm income is depressed.” ■

Rural Cooperatives / March/April 2001 11 Power in peril California co-ops struggle to cope with the state’s energy crisis

By Catherine Merlo

he telephone call – and the T realization that a serious crisis was at hand – came on Jan. 16. Land O’ Lakes officials were told they would lose all energy in 30 minutes at their milk processing plant in Tulare, Calif. The call came from Southern California Edison, the plant’s power provider and one of California’s two largest utilities. At first, no one was greatly alarmed. Despite a few brief power interruptions in late 2000, the plant had never experienced a serious energy loss in its 10 years. This time, however, was different....

12 March/April 2001 / Rural Cooperatives On Jan. 16, as California’s energy reserves fell to less than Beek says. “Yesterday (March 20) the farm itself was hit by a 1.5 percent – creating a stage-three (crisis situation) alert – power outage for the first time, which lasted about an hour. power to the Land O’Lakes plant was cut for 10 consecutive It slowed us down a bit, but we’re afraid the power situation hours. The following day, power was shut off for 17 hours. is going to get worse this summer.” On Jan. 18, after the plant had been without power for more From Jan. 1 to Feb. 28, the Land O’ Lakes plant sustained than 10 straight hours, Land O’Lakes officials made an ago- 19 power outages. Each time, the plant, which sits in the nizing decision. heart of California’s $4.3 billion dairy industry, was forced to “We had to keep the plant running,” says Alan Pierson, stop its processing operations for hours. Lights, phone ser- vice president of finance and vice and computers were useless. administration for Land “We had never experienced power interruptions like that O’Lakes’ Western Division. before,” says Pierson. “It was literally a nightmare.” “So we chose to pay premium rates in exchange for keeping Power shock the power on. We had no Land O’Lakes power problems may be among the worst, choice.” but the milk processor is certainly not the only California co- Land O’Lakes paid a high op hit hard by energy troubles these days. price for its dilemma. To Across the Golden State, agricultural co-ops of all kinds -– process the 11 million gallons from fruit and nut, to cotton, plant nursery and dairy – are of milk it was receiving daily, caught in an unprecedented energy crisis. They are wrestling the plant incurred extra costs not just with power blackouts and the threat of more to of $70,000 an hour to keep come, but with skyrocketing energy prices for electricity, nat- the power on. That week, its ural gas and diesel. Many co-ops have seen a five-fold losses soared to more than $1 increase in monthly power bills. million. Many of its 220 “The energy crisis has been disastrous for California agri- members were forced to culture,” says Bob Graf, executive vice president of field divert millions of gallons of operations for Pacific Coast Producers, a fruit processing and milk – much of it to calf-feed- marketing co-op in Lodi, Calif. ing operations – because they All this could not come at a worse time. Certainly, Califor- had no way to store or nia has faced crises before. But now, the state’s farming woes process their highly perish- have come together all at once in a “perfect storm” that has able commodity. created a situation of emergency proportions. That was the case at the Prices for nearly every agricultural commodity in the state Van Beek Bros. Dairy farm are down. It’s been a drier-than-normal winter, and water near Tulare, one of three may be in short supply. On top of that, the economy appears large dairy farms operated by headed for a slowdown, a further blow to the state’s already Bill Van Beek and his two beleaguered agricultural industry. brothers. Although they have “We’ve always had issues and challenges to deal with in back-up generators to keep California,” says Rich Ghilarducci, CEO of Humboldt their milking machines run- Creamery Association, a 75-member dairy marketing cooper- ning during a power outage, ative in northern California. the Van Beeks had to sell “But if it’s industry specific, you have the knowledge and milk for only pennies on the experience to take care of it,” Ghilarducci says. “The energy gallon to a calf-feeding farm situation is out of our control. It’s hard to make decisions to when the Land O’ Lakes take care of this challenge.” plant shut down. Worst of all, this winter’s energy crisis may be just the “We lost close to $1.50 a beginning. Fears of what looms on the horizon are wide- gallon on more than 5,000 spread, especially with the approach of California’s triple-dig- gallons of milk,” Bill Van it summer temperatures. Power demands are expected to rise

Doug, left, and Bill Van Beek had to divert more than 5,000 gallons of milk to animal feed recently when power outages shut down the Land O’ Lakes dairy plant in Tulare,Calif. They say environmental and other regulations which discourage construction of new power plants bear much of the blame for the crisis. Photo by Josh Yoshimoto

Rural Cooperatives / March/April 2001 13 even higher when the state’s residents turn on their air condi- “After this winter’s power interruptions, our first reaction tioners, increasing the threat of more blackouts. was to get off the interruptible system,” says Pierson. “But At the same time, growers and processors will be faced with then we realized rolling blackouts, which come without the harvest demands of many of the state’s perishable food warning, are more devastating. At least, under the current crops. Will there be power, they ask? And if so, at what cost? system, we have some warning.” Co-ops, consumers and utilities alike are bracing for the worst. “The magnitude of this problem has not sunk in for most Interruptible power — an iffy situation people,” says Pierson. “This summer will be worse than any- But there are many businesses on the interruptible pow- thing we’ve gone through so far.” er system that are deeply unhappy with it. Fruit Growers The consequences of California’s energy problems are far- Supply Co., the supply arm of the Sunkist Growers citrus reaching. California has the world’s sixth largest economy, is cooperative, tried to get out of its interruptible power con- the nation’s most populous state, and, with a $27 billion farm- tract with Southern California Edison when it came up for ing industry, is the No. 1 agricultural producer in the United renewal in late 2000. Although its contract assured no States. more than 150 hours of outages a year, the co-op was con- What caused California’s energy crisis cerned. It had already sustained a few is open to heated debate. Critics point to outages at its carton-making plant in the state’s flawed energy deregulation Ontario, Calif., and feared the situa- policy. Others cite the lack of new power tion would get worse. But Fruit Grow- plants, caused in part by what they say is ers Supply was not allowed out of its too much bureaucratic red tape and an contract. over- zealous environmental regulation In January, at the peak of carton-mak- which “handcuffs” energy development ing operations, the Fruit Growers Sup- efforts. Everyone is pointing fingers ply plant sustained repeated outages. “In these days. one week in mid-January, we had 45 What matters now, though, is just get- hours of interruptions,” says Vice Presi- ting through the crisis. And for the state’s dent Fielding Thompson, who heads up agricultural co-ops, that hasn’t been easy. the co-op’s supply division. As operations fell behind, Fruit Uneasy aftermath Growers Supply incurred unusually high Today, the Land O’Lakes plant in “The magnitude of this problem has not overtime costs to keep employees work- Tulare is running with bated breath. By sunk in for most people,” says Alan Pierson, ing through the weekend to catch up on early March, the blackouts had dimin- outside the huge dairy plant in Tulare that he order commitments. manages for Land O’ Lakes. ished. Still, its employees keep the lights “In late January, as reported through Photo by Josh Yoshimoto and the thermostat turned down. All Southern California Edison, the Public available power goes to production to Utilities Commission (PUC) announced make butter, cheese, whole milk, non-fat powders and fluid there would be no more fines for those on interruptible pow- milk. While the plant has not had to resort to layoffs, it has er who chose to keep their power on,” Thompson says. curtailed employee hours. “Frankly, we are concerned about their credibility, especially “The Public Utilities Commission has temporarily waived when it comes to saying there won’t be any fines,” he says. the fees we incurred during this winter’s power interrup- tions,” says Pierson. “But the issue is not resolved.” Power bills skyrocket Land O’Lakes – like many industrial businesses in Califor- While many co-ops did not experience power interrup- nia – operates on an interruptible power contract with South- tions during the January-February crunch, the energy crisis ern California Edison. Under its agreement, the plant agrees has been a nightmare for them all the same. to curtail energy use for up to 6 hours at a time whenever At Humboldt Creamery Association, soaring natural gas California’s power reserves are threatened. prices have increased the dairy co-op’s monthly energy bills In return, the plant receives a 15-percent discount on its by a whopping $100,000 per month since Dec. 1, 2000. power rates. If it chooses not to lose power during those peak “On top of that, Pacific Gas & Electric (PG&E) imple- energy times, it keeps its energy but pays severe fines. Janu- mented a new 15-percent surcharge that started in February,” ary’s outages, which lasted more than 6 hours at a stretch, says Ghilarducci. “That new surcharge alone costs us $15,000 remain a point of contention for Land O’Lakes. At issue is a month.” whether the utility had the right to implement back-to-back PG&E is one of the state’s three major utilities, along with interruptions with no break in between. While it works to Southern California Edison and San Diego Gas & Electric. resolve its differences with Southern California Edison, Land Though subject to rolling blackouts, Pacific Coast Pro- O’Lakes has remained on its interruptible contract. ducers of Lodi, Calif., has not suffered any power outages

14 March/April 2001 / Rural Cooperatives yet. But with its peak harvesting and canning season set to received notice that its power would be shut down in an hour. begin in June, the 150-member co-op is deeply concerned For a facility that processes 100,000 gallons of milk a day, about the energy situation. To process its fresh fruit and that’s too close for comfort. As a result, the co-op is looking at tomatoes, Pacific Coast Producers relies heavily on natural diverting milk away from energy-hungry operations like pow- gas to fuel its canning and evaporation operations. The co- der drying that rely on natural gas. Instead, Humboldt will op’s cold storage warehousing and shipping operations also process more milk in its ice- cream manufacturing facilities. use substantial amounts of energy. Humboldt Creamery also is considering the purchase of a “We cannot afford to lose power availability or experience powerful generator that could supply power during any delays during the harvest,” says Graf. “We would lose a con- future outages. The price tag for the new generator, says siderable amount of raw and canned product. We have to pay Ghilarducci, is a hefty $500,000. whatever it takes to keep our operations going. If we were to Likewise, Land O’Lakes has approved a $2.7 million capi- shut down, our losses would be even greater.” tal expenditure to buy a 6.5-megawatt generator to serve as a Like many other co-ops, Pacific Coast Producers says it is back-up for the Tulare plant. Fueled by natural gas, it will not that easy to pass on costs to customers. “Higher costs just provide 60- 70 percent of the plant’s energy needs. might be enough to make a consumer turn away from fruit to Saticoy Lemon Association, a 350-member co-op with eating a Twinkie instead,” Graf says. four packinghouses in Ventura County, has rented three gen- The situation is the same for Humboldt Creamery, where erators to provide back-up power during outages. Together, natural-gas price hikes have raised the co-op’s production costs the generators will raise the co-op’s expenses by $20,000 a by 5-6 cents a pound. The co-op is absorbing the increases. month. Saticoy, which also operates on an interruptible pow- “I can’t just go out and raise our prices,” Ghilarducci says. er system, experienced 14 power outages from December “Sixty percent of our sales are outside of California. My com- through February. petitors outside of California don’t have these problems or “Our biggest concern is what is going to happen this sum- these added costs.” mer, which is our busy season,” says Saticoy president Glenn Miller. “We may have to purchase one or two more genera- What’s being done tors. I’ve learned a lot about power in the last couple of Although Humboldt has not experienced any blackouts, it months. We can expect that there won’t be enough power has stood on the brink. More than once, the co-op has and there will be rolling blackouts.”

A lucky few unscathed by crisis

A few lucky co-ops in California have operations in provider, Sacramento Municipal Utility District. The co-op place that are helping them through the energy crisis. voluntarily reduces its power load when the utility’s ener- For example, Diamond Walnut, a 2,000-member walnut gy supply drops sharply. “In doing so, we shed, or con- processing and marketing co-op in Stockton, Calif., oper- tribute, 1 megawatt of power back into California’s grid ates a co-generating plant at its headquarters -— and system,” Carlone says. has since 1980. The 4.5-megawatt plant, fueled by walnut But Blue Diamond also has something else going for it. shells, produces enough power to run the walnut-pro- For years, the co-op has run a steam-producing boiler in cessing facility and generates excess capacity that the its almond processing plant. Fired by methane gas from a co-op sells to Pacific Gas & Electric, one of the state’s nearby landfill, the boiler warms the plant in the winter. two largest utilities. Mostly, however, the boiler is used to pre-condition, dry In Sacramento, Blue Diamond Growers fortunately has and roast the almonds. Not only does the boiler not rely missed the power outages, although the almond process- on electricity, natural gas or diesel, but cost of the ing and marketing co-op has seen its natural gas prices methane gas is just 20 cents per thermal unit (therm). jump five-fold. It’s also expecting a 15-percent increase in That compares to February’s natural gas prices of about its electricity costs by April. That’s no small amount of $1.40 per therm. money. “That boiler is a gold mine for us right now,” says “Our costs for electricity average $1.5 million to $2 mil- Carlone. lion per year,” says Joe Carlone, Blue Diamond’s director While Blue Diamond has worked to install more ener- for facilities and engineering. gy efficient equipment, it too is looking at acquiring a On the plus side, however, Blue Diamond has for many back-up generator to run its operations should the power years had a “good neighbor” policy with its power go out. ■

Rural Cooperatives / March/April 2001 15 Fruit Growers Supply has located a 1.5-megawatt generator to serve as a back-up power provider. But the co-op Farmers looking at hasn’t hooked it up yet. Cost to complete permitting and setup for the generator, back-up power systems says Thompson, is $70,000. Then anoth- er $12,500 a month would be spent to As farmers look for ways to ensure adequate lease the generator, with additional costs power for routine operations such as pumping for its diesel. By March, as the power water, some are considering the use of back-up blackouts came to a stop, Fruit Growers generators as insurance against future blackouts. Supply was still studying the ramifica- Gerry Rominger is an almond and alfalfa pro- Gerry Rominger is look- tions of installing the generator. ducer in Arbuckle, Calif., and a member of Blue ing at possible back-up “Legislation is being proposed that Diamond’s board of directors. He operates his power sources for his would limit blackouts to no more than own almond hulling and shelling operation from new almond-hulling six hours per day,” says Thompson. “If September through November. Concerned about plant. “It may get worse that were to be the case, we could his power costs for next fall, Rominger is looking before it gets better,” he schedule our operations around that. If into the possibility of renting a generator for the says. Photo by Gregg Rihl the generator is not needed, it’s not a season to assure availability of power. The cost good decision to spend that kind of would be more than $30,000 a month. And that’s not counting the diesel fuel money to hook it up. The problem is we costs, “which would be double that,” he says. don’t know what’s going to happen. If The price increases in natural gas, which is used to make fertilizer, are the energy situation gets worse, there being felt on his farm too. “Fertilizer for my trees has risen to $230 per ton won’t be any generators available when compared to $120 last year,” Rominger says. “Today, we’re getting about $1 we need them.” per pound for almonds. Three years ago, we were getting $1.50.” Rominger adds, “This is probably the worst crisis we’ve had because it Gloomy outlook comes at a time when we have low commodity price for everything and a Co-ops across the state are working water shortage too. We’re all competing for California’s limited resources. with state officials to find solutions to We’re on a collision course and there are no quick fixes.” ■ the crisis, particularly in the area of power availability, rate increases and the interruptible power system. Whatever solutions are developed must keep the long plants in the state. The “half-way” approach the state took term in mind, Thompson says. to power deregulation has also left California with some of “We need to make sure we get the energy system in Cali- the worst of both regulated and deregulated power sys- fornia under control without making mistakes now that will tems, he adds. cost us for many years to come,” he says. Environmental regulations are also frustrating Van Beek Many stress the importance of building more dams, which and his brothers as they pursue plans to build another, 2,700- would not only provide hydroelectric power but, at the same head dairy farm in the Tulare area. time, increase water-storage capacity — a critical issue in a “Environmental organizations from San Francisco are state where so much of the agriculture depends on irrigation. fighting us in the courts, even though the local community is And they believe the recent crisis has encouraged state offi- behind us,” Van Beek says. “Why should they be able to tell cials to be more receptive to new power generation. But they us we can’t build a new dairy farm in Tulare — where farm- recognize that such projects will not happen quickly. ing is the lifeblood of the economy — and create 30 new jobs “Building new power generation will take at least two and who knows how many indirect jobs in a county where we years,” says Saticoy’s Miller. have 16 percent unemployment? It just seems as though Faced with uncertainty and the threat of more blackouts, some of these organizations want to make it impossible to do most are not optimistic. business in California.” “The worst is yet to come,” says Humboldt Creamery’s Has he ever thought of moving his operation out of the state? Ghilarducci. “California’s power demand increases by 50 per- “No. This is where I grew up and where all my family is cent in the summer. If we can’t make it now, how are we — this is my home. It’s where I want to farm — if they don’t going to make it through the summer?” turn out the lights on us.” ■ Tulare County dairyman Bill Van Beek lays most of the blame for the power crisis on what he and many others Editor’s note: Merlo is a freelance writer based in Bakersfield, consider to be overly-stringent environmental regulations Calif., with extensive experience working for, and writing about, that have deterred construction of new power generating cooperatives.

16 March/April 2001/ Rural Cooperatives Neighborhoods warm to bargaining power of co-ops

By Tux Turkel, Staff Writer nies and government. Portland Press Herald Dealers can give a better price when Copyright 2000 Blethen Maine they deliver large Newspapers, Inc. Reprinted by permission volumes to a single group of commercial ot far from the stores and customers. traffic at busy Cook’s But residential, Corner, Maine, stand neighborhood co-ops N quiet neighborhoods of are a recent and clustered, cape-style growing trend, dri- homes, clad in weathered clapboards. ven by high energy At Coastal Estates II, a trained eye can prices. Dealers say spot metal vents sticking out from the they are getting wooden siding, an indicator that most more inquiries from occupants here warm their homes with organized groups of Jim Friedlander organized a consumers’ fuel cooperative in through-the-wall kerosene heaters. homeowners. Brunswick, Maine. The co-op negotiated a discount rate on Efficient and easy to install, kerosene That said, neigh- kerosene that saved its 41 members 25 percent on the retail price. Photo by Gordon Chibroski, copyright Portland Press Herald heaters have become a popular weapon borhood fuel-buying to battle the Maine winter. Too bad the co-ops aren’t easy to fuel isn’t less expensive. Last week organize and sustain, and they may not ly, most owners put kerosene heaters in kerosene was running $1.65 a gallon or be financially attractive to dealers. The their living or dining rooms, fed by so in the Brunswick area, roughly 25 one operated by the Coastal Estates II tanks installed in attached garages. cents more a gallon than heating oil. homeowners association, however, is Everyone fended for themselves But for 41 of the 50 homes in this an example of how some Maine resi- until last winter, buying from a variety planned development, kerosene is a dents can save money on heat by band- of oil dealers. But at a homeowners relative bargain. The residents have ing together. association meeting last year, Friedlan- organized a homeowners fuel-buying The co-op was conceived by Friedlan- der suggested putting a questionnaire cooperative that negotiated a discount der, who is retired and moved with his in the group’s monthly newsletter, to with a local dealer. In exchange for wife two years ago to the development. see if residents were interested in sav- handling one master bill and coordi- Friedlander had experience with cooper- ing money through collective purchas- nating delivery schedules, the owners ative fuel-buying for town governments ing. Forty-one owners said ‘yes.’ bought a total of 15,000 gallons of when he was director of the Greater Friedlander called six oil dealers and kerosene last year at roughly 25 per- Portland Council of Governments from sent out bids. The bids asked for the cent below the retail cash price. That 1979-1981. He also participated in a fuel lowest mark-up for delivery over the added up to an estimated savings of co-op with innkeepers in Freeport, wholesale price in Portland Harbor, about $100 a home. where he owns a bed and breakfast. He where oil products enter southern “In a cold winter, people could save wondered why a buying group wouldn’t Maine. Four replies came back. The much more,” said Jim Friedlander, a work at Coastal Estates II. lowest was from C.N. Brown. resident who helped organize the buy- The 15-year-old units in his devel- The association is staying this year ing group. opment are good candidates. The with C.N. Brown, which has offered a Cooperative fuel buying isn’t a new homes were originally heated with price of 17 cents per gallon above concept. It’s commonly used by compa- electricity. When that became too cost- wholesale, if the bill is paid within 30

Rural Cooperatives / March/April 2001 17 days. After that, the price differential doors or give the driver access on spe- hood associations are doing just that. rises to 27 cents per gallon. cific days. Those kind of logistics make Their agreements take different forms. For example: The wholesale price the company cautious about accepting Robert Tracy, a regional manager for kerosene at the middle of last week bids from less-organized homeowners. for Irving Oil, said the company has was around $1.27 a gallon. That means “This is a unique situation,” Cyr negotiated fixed-price contracts with a homeowners would pay C.N. Brown said. “It works for us.” dozen homeowner groups in southern $1.44 for kerosene that the company The association also needs to oper- Maine. Each homeowner is billed sepa- was selling retail for $ 1.70 a gallon, a ate like a small business. rately, but the efficiency comes by cash price that reflects transportation, One resident, who acts as the finance delivering large volumes of oil to one overhead and profit. manager, agreed to get the master bill place on scheduled days. C.N. Brown can offer a discount to and distribute individual bills to each In Freeport, for instance, homeown- the homeowners because of two home. He receives a 2-cents-a-gallon ers in the Bishop Farm Road subdivi- important economies of scale. First, stipend for his trouble. Last year, a sion were savvy enough to negotiate a the company sends one master bill to renter in one of the units skipped out fixed-price contract with Irving early the homeowners association. That without paying the final bill. This year, last summer, when oil prices were much saves on accounting expenses. Second, the association has taken a $ 100 down- lower. Irving was able to secure a supply C.N. Brown has arranged twice- payment from everyone. that will allow it to sell the homeowners monthly deliveries for all homes. That A successful co-op will also need oil this winter for 98 cents a gallon. saves big money. High diesel and someone like Friedlander, who has the “Homeowners are becoming very labor costs are pinching oil dealers, time and interest to oversee the bids sophisticated in this type of market,” who would rather not have their and organize homeowners. Tracy said. “They understand the trucks criss-crossing the countryside, “Someone’s got to take the bull by details of oil buying and they buy early dropping 100 gallons here and 200 the horns,” he said. to lock in prices.” gallons there. The association has also offered to At Coastal Estates II, Friedlander “We go up there and empty a whole help organize other groups. Paul Put- said he’s happy to hear from residents truck,” said Mark Cyr, heating oil sales nam, past president of the association, in condominiums or subdivisions who manager at C.N. Brown. has met with representatives from sev- want more information about how to Cyr said the cooperation of the en other planned developments in organize a fuel-buying co-op. (His e- homeowners group helps make the Brunswick. mail address is [email protected].) deal workable. For instance: The fill- “With all the news about oil prices “Falmouth and Portland are loaded up spigots for the kerosene tanks are you’d think everyone would want to with developments like this,” he said. inside garages at Coastal Estates II. get in on it,” Putnam said. “They have more opportunity to make Homeowners have to open their garage Elsewhere in Maine, other neighbor- something like this succeed.” ■ Tennessee Farmers’ sales top $408 million Fiscal 2000 sales were up $21 million from 1999, to hit $408.7 million for Tennessee Farmers Cooperative at La.Vergne. Pre-tax net savings reached $4.2 million while total assets rose to $156.2 million. Increased sales were reported in beef and horse feed, farm hardware, equine products, and seeds. Fertilizer sales hit a record 468,000 tons, and sales were also boosted by expanded tire lines, higher fuel sales (due in part to higher prices), and $26.2 million in sales (up $1 million from the previous year) for the home, lawn and specialty department. David Rieben of Decherd, Tenn., was elected new chairman of the board, replacing Gerald Caldwell. John- ny Daniel was elected to succeed Rieben as vice chairman. In other Tennessee Farmers news, the co-op presented its highest annual honor, the James Walker Coop- erative Spirit Award (named for a retired vice president of sales), to Kenneth Michael of Scotts Hill. Michael spent nearly 40 years in the cooperative’s system, including local cooperative management and most recently as an operations specialist in West Tennessee. In a letter to local cooperative managers at his retirement, Michael encouraged them to work together and support each other. “This federated cooperative is like a marriage – it must be built on trust and mutual respect to survive. The cooperative principles should never be compromised, but we must be ready to com- promise our method of accomplishing our objective.” ■

18 March/April 2001 / Rural Cooperatives Keep the co-op candle burning Effective member relations essential to keep co-op spirit alive & kicking

By Jim Wadsworth tions. Others are trying to fix their Continuous effort needed Education and Member Relations member relations program after their Cooperatives must work continu- USDA Rural Business-Cooperative cooperative culture has slipped. Others ously to strengthen member relations. Service choose to ignore this vital area until it This is critical for a strong cooperative is too late to correct it. culture and future success. Well devel- e just don’t feel our New cooperatives often concentrate oped and implemented member rela- cooperative is a coopera- hard on member relations. Lately, tions goals/strategies need to be out- tive anymore.” Sound we’ve heard much about new, new-gen- lined. Some important ones include: W familiar? eration or value-added cooperatives. • Communicate with members (a This disturbing With their closed- or limited- member- fundamental necessity); perception is becoming all-too com- ship policies, member relations in these • Educate members (a continuous mon among some cooperative mem- cooperatives are probably pretty need); bers. This feeling and similar ones — healthy. At the same time, we are also in • Promote the co-op (the coopera- such as, “I don’t feel my co-op has any an era of continuous structural change tive image); more interest in me than would an in cooperatives. Many cooperatives are • Motivate members (member investor-owned corporation,” etc. — restructuring their operations — large- responsibility, loyalty). provide stark evidence that a coopera- scale mergers, joint ventures and other Effective communication channels tive’s member relations efforts are lack- strategic measures have been consum- are necessary in cooperatives for dis- ing. Greater contact with members and mated. Global markets have evolved. seminating timely information to improved member communications Thus, many of today’s large cooper- members, to educate, promote and may be needed to reverse this negative atives have complex operations and/or motivate. Strong communication perception. If this type of perception expansive geographic membership builds a cooperative connection to spreads among your members and is regions. In these cases, it is quite likely members. Cooperatives that talk to not adequately addressed, your co-op’s that some members feel disconnected their members make them feel more future is not bright — regardless of from their cooperatives. Depressed connected and important and more apt where the markets go. markets for many farm commodities to be loyal. Without proper attention to mem- have also created economic turmoil and Communications with members ber relations, member loyalty will often even led to some co-op bankruptcies, should regularly include information deteriorate. Under these circumstances, which further hurts the cooperative about: members’ use, control and ownership of culture and image. • The cooperative’s background, the co-op will slip. While some mem- Many co-op leaders believe provid- objectives, organization and gen- bers may continue to be committed to ing quality services is their best mem- eral operations. their co-op, others may slip away. Most ber relations’ tool. Indeed, it is • Cooperative principles and prac- members need to be regularly reminded extremely important. But quality ser- tices and the benefits that mem- that they indeed are a critical asset to vice alone isn’t always enough to create bers receive from the co-op. their cooperatives. Their participation cooperative loyalty. Given the intense • Cooperative policies — especially in the co-op is the defining link to reap- competition they face, cooperatives when adopting new ones, or ing benefits and success. must do more. They need to be more changing old ones. Members must The need for enhanced work in assertive in building member relations know why policies are being devel- member relations’ area is well under- in other ways. Otherwise, members oped or changed. Members must stood, but is often overlooked. may become dissatisfied and the coop- be kept apprised of how policies Of course, some cooperatives are erative’s future may be endangered. affect them. doing a great job with member rela- • Products/commodities – where

Rural Cooperatives / March/April 2001 19 they come from, where they go education is a vital lifelong process. unique nature is a relationship-building and how they are handled. For cooperatives, with their unique tool that cooperatives cannot afford to • Services — what’s offered, what’s principles and business and governance ignore. They must commit to educa- new and what to expect. structure, education is their lifeblood tion and see that it is an intricate part • Cooperative plans — changes in and must be a continuing priority. If of their organizations. operation methods, equipment, members are to live by cooperative Promoting cooperative image is a services offered and overall strate- principles and practices to gain eco- goal often overlooked by cooperatives. gic direction. nomic benefit as an extension of their However, this goal appears to have • Future outlook — for business, farm operations, they must consistently been reborn, at least in some areas and agriculture in general, and for their be taught those very aspects of coopera- by some cooperatives. Two examples of commodity product in particular. tion. Members use, control, and benefit such image promotion include Blue • Cooperative finances — encom- from their cooperatives. They need to Diamond Growers with almonds and passing sales, savings and losses; Cabot Cooperative Creamery (owned overall budgets and future finan- Candling Cooperative Member Relations by AgriMark, Inc.) with Cabot cial plans; development of new cheese. These cooperatives not only

products/services, and equity Cooperative promote their brand products, but Membership Free Flowing position and redemption plans. (Shell) Information also are assertive in letting the public Member communication is accom- (Albumen) know that these products are derived Inform & plished through the annual meeting, Educate in cooperative businesses owned and local meetings, educational forums, Promote controlled by farmers. open houses, planned tours, newsletters, Cooperatives should let the world bulletin boards, informational leaflets, Communications know about their unique organiza- promotional activities and through elec- tions. They should heavily promote to Promote tronic means (i.e., radio, television, Image Cooperative all the farmer-ownership aspects, the (Yolk) Internet). Management, directors and Motivate quality of their products and services employees need to take an active role in associated with farmer-ownership, communications with members. and the unique principles of coopera- Cooperatives should communicate tives. This promotion not only helps information that tells members the business overall, but is a member- everything they should know on a relations tool as well. Member pride regular basis. No member should be and loyalty is most likely to swell if left in the dark about important aspects be reminded of it and hear it regularly. the impact of the cooperative business of their business. Talk to them in good The unique principles of coopera- is seen and felt by many. and bad times. Make them understand tion should be taught to members, Motivation of members is born from their cooperative’s unique principles youth and the general public. Directors strong member relations. Member iden- and practices and remind them of their need to be educated on any number of tification — where members are made responsibilities in those respects. important aspects to successfully meet to feel directly connected to their coop- Strong communication should be their responsibilities. Cooperative erative — is a strong motivational tool. the foremost goal for improving mem- employees also should be well- All three of the member relations’ ber relations in cooperatives. Coopera- schooled in cooperative principles and strategies discussed work to create tive relations benefits flow from good should be responsible for improving member cooperative identification. Suc- communication and well-informed member relations as part of their job. cessful co-ops must employ communi- members are usually more loyal and Educational activity must not only cations that points out how a coopera- conscientious toward their coopera- be directed at members, but members tive is working for members as an tives. Cooperatives must “talk” to their themselves also need to be active coop- extension of their farm businesses, and members and establish a relationship erative educational stewards to youth, how the co-op needs their support and that nurtures cooperative culture. potential future cooperators and the helps them overcome the obstacles they Education about cooperative princi- general public. face. This type of communication can ples, practices and benefits is extremely Members or potential members are provide a sense of fulfillment and pride important in cooperatives. “Education is educated through written materials, in members and thus, motivate them to a social process….Education is visuals, meetings, conferences and use and control their cooperatives. growth…. Education is not a prepara- workshops; by management, directors, Motivated members further help by tion for life; education is life itself.” other members and various programs instilling that same pride and loyalty in Those words, spoken by philosopher and school classes or programs. Fully other members, since many members and theorist John Dewey, convey that understanding cooperatives and their continued on page 30

20 March/April 2001 / Rural Cooperatives Critical need seen to broaden, invigorate current approach to cooperative research

By James Baarda losing touch not only with other disciplines, but with funda- mental changes throughout the agricultural sector that will Editor’s note: Baarda is a former legal affairs specialist with determine the future of cooperatives in the United States and USDA’s Agricultural Cooperative Service and former educational in significant portions of the rest of the world. program director for the National Council of Farmer Cooperatives. The time has come to break out from parochial views of He is currently an attorney with The Ackerson Group in Washing- cooperative theory and initiate a new campaign to revitalize ton, D.C. This article was inspired by his recent international expe- cooperative scholarship. riences dealing with cooperatives in former Soviet republics, by The three major issues I see are: (1) The overly restrict- trends with new-generation cooperatives, the recent failure of a ed scope of the current body of cooperative scholarship; (2) large U.S. cooperative, the restructuring of other cooperatives and consequences of this narrowness for cooperative scholarship member lawsuits that seek to force dissolution of their cooperatives. and cooperatives; and (3) the failure of institutions to “These events challenge the very existence and character of coopera- address important issues and possible solutions. tives as we know them; combined, they suggest that cooperatives are indeed at a crossroads,” says Baarda. I. Why traditional scholarship is failing to answer questions about co-ops reative thinking about cooperatives seems to There are five areas in which cooperative research and have flagged during the past 10 years. Cooper- scholarship does not adequately incorporate the full range of ative scholarship has become increasingly frag- relevant scholarship, or is not oriented toward events that C mented and, in some cases, irrelevant. Failure have the greatest significance to cooperatives. to bring the full range of scholarship, thought Integrating legal and economic theory for cooperatives and research to bear on cooperatives (in disciplines other Cooperative scholars have done a reasonably good job of than traditional agricultural economics) may lead to an isolat- borrowing from, and adapting corporate business theories. ed, inbred field of co-op scholarship. Failure to produce The work growing out of USDA Agricultural Cooperative meaningful research will ulti- Service’s cooperative theory project mately do irreparable harm to the about 15 years ago is one example. nation’s cooperative movement at More recently, scholarship at sever- a time when it is in critical need al U.S. and Canadian universities of sound scholarship. and others have continued to Useful research is being done explore the field. It appears to me, and excellent people are working however, that the well of creativity on important cooperative issues. is beginning to run dry and that However, for two reasons, I do recent work is more an exercise in not believe that the overall re-casting established ideas in new impact of this work is meeting its terms or refining unresolved, but potential. rather minor, problems. My first concern is that each This is not to say that econom- scholar/researcher is working in a ic theory has been applied ade- vacuum without appreciating and James Baarda tours the Makariv Service Cooperative in quately for cooperatives. Indeed, incorporating what other Kyiv Oblast, Ukraine, where he discusses rabbit produc- much research and methodology researchers and scholars are con- tion management with a young co-op member. His expe- in economics has not yet been riences working with overseas and U.S. co-ops helped tributing in other disciplines. explored sufficiently, and no one spark the accompanying article on the state of co-op Secondly, some cooperative seems to have successfully tackled research. Photo courtesy James Baarda scholars and researchers may be new frontiers.

Rural Cooperatives / March/April 2001 21 At the same time that economic theory has developed, no and the assumed consequences, challenges assumptions of share- body of legal theory has been developed for cooperatives that holder value maximization objectives in corporations and the parallels corporate theory. Thus, the enormous deepening and assumed consequences, and adds the important elements of per- broadening of ideas that exist in corporate legal theory, for sonal motivations. Corporate structure and operation is far more example, have not progressed for cooperatives. This is not to complex than anything that can be totally explained by simple say that cooperative legal analysis is lacking. But the funda- theories as they now exist. This all rings true for cooperatives. mental rationale for cooperative law and economics has not Cooperatives actually have more of an interest and far been developed as well as legal theory and economics for cor- more at stake in the issues and answers discussed in corporate porations, partnerships, inter-firm arrangements and other law theory than do corporations. Indeed, some of the chal- forms of business organization. lenges to standard corporate theory and the economic analy- Rich world of scholarship beyond cooperatives sis of the firm are the very reasons why cooperatives were I believe the most serious failing of cooperative research is created, why they continue to exist and why they distinguish that economic and business (or “firm”) theory for coopera- themselves from other businesses even though cooperatives, tives is restricted to basic economics and is further largely too, are corporations. restricted to traditional economics with traditional underly- Yet all this has gone almost totally unexplored because ing assumptions. The cooperative theory at this relationship between point has no mechanism in cooperative vs. corporate which to address the legal theory is almost issues. Corporate legal nonexistent, as are the theory provides just such a cross-linkages between mechanism. The results of corporate law and coop- such scholarship and the erative theory — and lessons that can be learned cooperative law and non- may be appropriated for cooperative theory. This cooperatives through fun- situation leaves funda- damental research so long mental questions unex- as the breadth of such plored that are of critical research is adequate. interest to cooperatives. Fundamental changes Nowhere is this more in agriculture evident than in corpo- James Baarda (left) discusses cooperative law and taxation with Edward It appears that there is a rate legal theory. Cur- Pikaloff, attorney for the Makariv Service Cooperative in Kyiv Oblast, scarcity of careful and in- rent scholarship in cor- Ukraine. Also with him is translator Nadia Potabenko. Ukraine adopted a depth consideration of how porate law theory is new cooperative law in 1997, and many co-ops there are now operating for three important “sea extraordinarily rich in the first time under a modern law. changes” in agriculture may ideas that are directly relate to cooperatives. The applicable to cooperatives. Needless to say, the theory of first is that of the increasing prevalence of contract agriculture, business organizations has been extensively explored in the industrialization of agriculture and the resulting changes corporate legal theory. Corporate legal scholarship has facing production agriculture, which is the foundation of progressed far beyond that, however, to address and chal- farmer cooperation. lenge some of the foundations of corporate existence, The second shortage of interconnected scholarship is structure and behavior. related to biotechnology. This is similar to the industrializa- Examples include corporation contract theories, theories tion issue, but addresses yet another process in the diminish- based on public policy and public good, theories based on the ing independence of farmers and their economic position as sharing of responsibilities among participants, theories based producers. on stakeholder obligations and fiduciary principles, and theo- Third, the economic and social impacts of concentration ries that challenge the “rationality” assumptions upon which have not received enough attention in cooperative scholar- economic theories are founded. ship. This includes concentration not only in the supply and Contributions of research on individual and group motiva- marketing chains, but in the production subsector itself. tion, the role of institutions, social consciousness, historical pat- While others have written about these issues, no one is terns and political science are incorporated into corporation investigating the deeper meanings and foundations of such legal theory far more than they have been for cooperatives. Cor- phenomena and relating them to theories of cooperatives to porate legal scholarship challenges the foundations of the reach conclusions about cooperatives and their future. This assumptions of pure rationality upon which neoclassical eco- needs to be based on scholarship and research rather than on nomics is based, challenges assumptions of profit maximization opinion or casual observation.

22 March/April 2001 / Rural Cooperatives Cooperative lessons throughout the world Information and analytical tools Better understanding of international cooperatives is also Interdisciplinary scholarship would establish a basis for a needed to develop a deeper understanding of cooperatives, deeper understanding of cooperatives and their role in a pro- both in theory and in practice. My experiences in several for- foundly changing agricultural system, as well as a dramatical- mer Soviet Union republics and other Eastern European ly changing world economy. The tools for analysis growing countries have been extraordinarily enlightening regarding out of the new body of thought would be more powerful to issues facing cooperatives in rapidly changing agricultural sec- explain cooperatives and predict the economic ecology in tors. Not only are the changes rapid, but they are also directly which they will exist in the next few decades, and would fur- connected to the most basic cooperative characteristics. ther enhance the tool kit that might be used to look into the The enormous challenges facing cooperatives in the future. Results of interdisciplinary research and scholarship national economies and agricultural sectors of economies in would provide a significantly greater set of guides to cooper- transition, the varied and conflicting opinions of what coop- atives and those using cooperatives to respond to changing eratives are and what roles they play, and the massive changes forces in agriculture and the economy as a whole. in legal and economic forces at work all paint vivid pictures An academic community of interest of every aspect of cooperatives. They cast an entirely new Unfortunately, no broad-based community of scholars and light on cooperatives as businesses that are operated by and researchers exists outside of agricultural economics in acade- for farmers. mia, government or cooperatives. As a consequence, the ben- Public discourse in other countries is serious and impor- efits of interdisciplinary exchanges are lost, as is the benefit tant, addressing issues as fundamental as: “What is a true of additional work contributed by those in other professional cooperative?” Because every issue is just as important for disciplines. They do not know or appreciate cooperatives or contemporary U.S. cooperatives as for cooperatives else- cooperative- oriented research. Needless to say, if coopera- where, exchanges between U. S. and foreign cooperative tive researchers and scholars reach into other disciplines to scholars can be extraordinarily beneficial to both. Hard and draw from them what is useful for cooperatives, the breadth painful lessons learned elsewhere may offer lessons we in this of available knowledge will be increased. country cannot ignore. A quantum leap in the total “intellectual” power devoted to Unification, leverage and multipliers cooperatives would occur if researchers and scholars from many Finally, I do not see a concerted effort to integrate and use other disciplines began to produce articles, books, presentations the results of all research and thinking done on cooperatives. and other products about cooperatives. This will not occur until Many research projects are, by their nature, rather narrow in those who set the agendas and produce the research in other dis- application and cannot add much to a deeper understanding ciplines realize that cooperative business is a subject worthy of of cooperatives. Other projects are used only for the superfi- their talents, time and professional career development. cial results, but their broader implications are not appreciated I firmly believe that if an interdisciplinary approach to when considered in isolation. cooperatives mentioned in the first section were to be carried In some instances, follow-up projects or a concerted out effectively in the near future, and the commensurate pro- effort to draw the fullest implications from existing results fessional results became part of the literature, many others would greatly magnify the usefulness of the research. This would see the connection to their own disciplines and would includes the failure to fully appreciate the interrelationships eagerly turn attention to cooperatives. of different kinds of cooperatives. Two additional benefits could realistically be expected. In the United States, agricultural cooperatives too often First, students would become interested through the influ- have tended to consider themselves the true representatives ence of faculty and because cooperatives are inherently inter- of business cooperatives while other types of cooperatives are esting. This would most certainly lead to graduate work and more the products of social, ideological and non-economical- writing on cooperatives, would contribute to cooperative lit- ly oriented ideologies. If the fundamentals of cooperatives erature and would bolster the dwindling number of individu- and the distinctions between cooperatives and other kinds of als who have at least a passing understanding of cooperatives. businesses are to be fully appreciated, however, cooperatives Second, and of equal importance, those who teach of every type should be studied and the essence of coopera- would find that cooperatives provide an interesting and tion drawn from comparisons and contrasts. important addition to the topic taught. A cooperative ele- In short, a big-picture attitude toward cooperatives is ment – or at least a mention – could be added to classes in needed; the scope of research and scholarship should be law, economics, business and business management, designed to reflect this perspective. finance, accounting, public policy, sociology, ethics, eco- nomic planning, community development, rural develop- II. Consequences ment, international development, international trade, The focus of any assessment or critique should naturally government, political science and many others. This will be on those things that lead to solutions and specific plans of not occur, however, until a professor’s interest is peaked action. I see three primary consequences. sufficiently or the topic is included in textbooks or other

Rural Cooperatives / March/April 2001 23 publications upon which the professor relies. Several locations can be considered for the initiation of inter- Guidance and coordination disciplinary projects. A university would seem to be well suited Because cooperative scholars and researchers have not for this purpose, but universities face several drawbacks. Limita- successfully established the kind of research and linkages tions include the specific interests of individual faculty members mentioned earlier, little guidance exists for those who wish and the typical independence of faculty to pursue those interests, to explore new topics in cooperatives and no mechanism limitations on most university commitment to cooperatives, exists to show in what way effective research can or should pressures on faculty to publish in their own profession, and be coordinated. The only coordination that would offer teaching and administrative burdens preventing scholars from any cohesiveness is the individualized interest of devoting the time and resources that it will take to be effective. researchers and students. These observations apply to law schools and as well to If, for example, a single research project identified a topic agricultural economics departments. As noted above, I don’t of substantial interest to multiple disciplines, projects to find see much possibility that any of the cooperative centers will, solutions to the issues presented in each discipline would be a or can, take on this task. And no national organization is method of “passive” coordination, much like Adam Smith’s capable of this work, nor would they be likely to allocate suf- “invisible hand.” The self- fulfilling actions of many ficient resources to such a project. researchers and scholars would naturally lead to a growing Clearly, USDA should be considered as a possible center body of knowledge on cooperative issues but only if the core of such broad-based, creative and interdisciplinary scholar- research is done very well. ship. The advantages of such an arrangement are that a focus on cooperatives and a long-term commitment to the III.Responsibilities and solutions idea of farmer cooperatives now exists at USDA’s Rural Busi- At present, I do not see an organization or individual ness-Cooperative service. In addition, it is a center where that has, or is prepared, to take the interdisciplinary, public funding has been dedicated to improving cooperative focused approach to research that is needed. None of the businesses and public understanding of cooperatives. cooperative centers conduct the research required of the Unfortunately, USDA faces some serious obstacles. type of work suggested. Similarly, no universities appear to Although USDA has a team of researchers who understand have the full complement of faculty, students and commit- various aspects of cooperatives, no individual “faculty” mem- ment to engage in this effort. No national organization is ber there is in a position to engage in the concentrated work in a position to provide the leadership and coordination needed to initiate the interdisciplinary work required by the needed, let alone the professional capabilities to actually above-mentioned issues or to carry it forward as an integral engage in the work. part of USDA’s cooperative mission. Neither is there any mechanism – through funding or Neither can the allocation of research project funding on a research project control – that can provide specific coordina- piecemeal basis, even if such funding exists, effectively gener- tion and leadership to achieve a sustained and effective ate the results required. This is primarily because contracted attack on the issues presented above. Rather, the only effec- projects are neither long-term nor typically granted to those tive “coordination” appears to be provided by the leadership who are already sufficiently knowledgeable about cooperatives of one or more scholars who address the issues so effectively to make efficient use of the funds rather than expend substan- that they establish a focal point around which others wish to tial resources learning the basics. gather in a scholarly community of shared interests. If the I am convinced from my current research and general true creativity and extraordinary professional interest in observations that this effort is badly needed. The rewards to these topics exist and can be communicated well, I believe cooperatives will be immense, and the failure to explore scholars in other professions will take up the cause. interdisciplinary research and scholarship will place coopera- To initiate this process, it will fall heavily on one or more tives in a very bad position when they are seriously chal- scholars who are now steeped in cooperatives but who are lenged as they will be in the future. also able and willing to conduct research suitable for publi- New and creative scholarship based on fresh ideas is crit- cation in journals written for other disciplines. For example, ically needed by cooperatives immediately, and little to engage members of the legal profession who specialize in focused leadership appears to be in the wings to revive corporate legal theory in activities related to cooperative cooperative scholarship and appropriate research. I strongly theory, someone “in cooperatives” will need to conduct recommend that USDA assert aggressive leadership to seek research of such a kind that it can be published in law a solution to the lack of research, writing and thinking reviews or other specialized journals that are read by those about critical cooperative issues that can only succeed by who write and conduct research in corporate law theory. initiating a dialogue with other professions that will eventu- The greater the volume and extent of such publications by ally yield information, analytical frameworks and a commu- the cooperative researcher, the greater will be the response nity of interest in cooperatives, unrestrained by boundaries and the enhanced interest from outside the agricultural eco- of professional disciplines and that is not limited by tradi- nomics profession. tional methods. ■

24 March/April 2001 / Rural Cooperatives A CLOSER LOOK AT... Yakama Power Tribal Utility

CEO/President — Lonnie Salam, chairman of the Yakama Tribal Council Board governance — The Tribal Council is in the process of selecting the utility board. The Yakama Nation — The Con- federated Tribes and Bands of the Yakama Indian Nation are descendents of 14 tribes and bands that are federally recognized under the Treaty of 1855. The Nation’s Cultural Heritage Center is located in Toppenish, Wash. `Geographic area served — The utility will serve approximately 15,000 people who reside on the 1.4-million- acre Yakama Reservation in central Washington along the eastern slopes of the Cascade Mountain Range. The reservation is 1 1/2 times larger than Preston Harrison, of the Yakama tribe’s economic development office, sees major benefits the state of Rhode Island. derived from tribal ownership of its utility system. Photo courtesy Yakama Tribal Council Background – The Energy Policy Act of 1992 deregulated the electricity industry. Bonneville Power Adminis- tomers to own an entire distribution reduce electricity costs for all the con- tration (BPA) —the federally spon- system to be eligible for service. But sumers on the Yakama Reservation. sored power marketing agency — rec- some Northwest tribes may have The new utility will provide jobs and ognized the Yakama Nation and other unique circumstances, given their promote economic development on the Pacific Northwest tribes in late 1999 as large, sparsely populated areas and Reservation. It will expand access to “public bodies” or “cooperatives.” The fragmented distribution facilities with- energy efficiency and low-income ruling allowed the Yakama Nation to in reservations. Therefore, it may not weatherization programs available to start forming its own tribal utility. Fed- make sense for them to own all the dis- residents on the Reservation. eral law then grants first priority to tribution facilities they will need to At what point is the Nation in public bodies — municipalities, public serve consumers. On a case-by-case putting together the tribal utility? The utility districts and cooperatives – that basis, the BPA is considering whether Yakama Nation has negotiated a power want to purchase power from the to waive full ownership requirements. sales contract with the BPA. Its next Columbia River Power System. Meanwhile, the U.S. Department of effort will be to begin discussions with Tribal and all other new utilities Energy also provided grants to tribes PacifiCorp regarding the purchase of had to meet certain requirements to to identify and study participation in a the distribution system. The Nation be eligible for service in the 2001-06 deregulated electrical industry. has also started to explore financing, contract period. Among the qualifica- Why did the Nation decide to form training and a number of other issues tions, districts had to be established a tribal utility? Through an extensive as it establishes its own tribal utility. and well on their way to acquiring dis- study and development of a business The anticipated timeline is for the tribution systems. plan, it was determined that purchasing Nation’s power to flow through its own As a rule, BPA requires utility cus- low-cost power from the BPA will system by late 2001. ■

Rural Cooperatives / March/April 2001 25 NEWSLINE

Farmland to expand branded-bread distribution To expand distribution of its branded breads, Farmland Industries of Kansas City, Mo., has formed United Bakeries International. The new business is a joint venture with Mountain View Har- vest Cooperative, and gives Farmland a stake in the Mountain View-owned Gerard’s Bakeries at Longmont, Colo. For members, Gerard’s represents another market outlet for their wheat. Mountain View was formed in 1997 by 225 grain producers who purchased Gerard’s and who grow grains that meet in the decline included poor fruit quali- bership. UPI serves 40,000 livestock- particular specifications for the bakery’s ty, retail consolidation and foreign producing members. breads. Gerard’s sells rolls and breads to competition. The cooperative also restaurants and hotels in 40 states. Last decided to quit marketing Argentine Calcot to end almond sales year, Farmland test-marketed its own lemons out of concern that it could The two-year-old almond marketing brand of breads (baked by Gerard’s) introduce harmful pests or diseases. division of Calcot, California’s cotton under the Farmland and Carando marketing cooperative at Bakersfield, is brands. Five bread products were first Ag stress prompts cutbacks being disbanded due to low grower test-marketed last fall: a multigrain loaf, at Southern States returns and soft prices. The almond sourdough loaf, sourdough dinner rolls, Reflecting the current stress in agri- business never generated the kind of deli sandwich rolls and potato rolls – all culture, Southern States Cooperative revenue the co-op had hoped when carry the Farmland brand. The Caran- (SSC) based at Richmond, Va., has launching the almond division in 1998, do brand is featured on focaccia bread begun reviewing its operations and trim- according to Calcot president Tom and an Italian loaf. ming its staff. The cooperative has about Smith. Of its 1,800 cotton members, “We are interested in helping con- 5,000 employees in 25 states, including 500 also grow almonds. Calcot handled sumers link Farmland bread to Farm- 750 employees at its headquarters. The about 11 million pounds of almonds last land beef and pork products,” says Ken cooperative’s 300,000-plus farmer mem- year and is expecting 10 million pounds Thomas, director of Farmland Grain bers have been hard hit by low commod- this year. Grower-members will have to processing. “When consumers put ity prices and cuts in tobacco quotas. find a new home for their almonds next Farmland’s beef or pork products on In line with that reduction, SSC has season. California’s largest almond their plates, they can now add our forged a marketing link with United processor and marketer is Sacramento- quality bread products too.” Producers, Inc. (UPI), at Columbus, based Blue Diamond Growers, also a Ohio, to provide livestock marketing grower-owned cooperative. Sunkist revenues down and credit services to livestock produc- Revenues for Sunkist, the California ers in the Midwest and Southeast. UPI USDA to award $25 million citrus marketing cooperative, dropped will lease and operate with the option to boost value-added ag about 2 percent, to about $847 million to buy selected SSC livestock market- USDA Rural Development is making last year. Payments to growers were ing facilities. Producers Credit Corpo- $25 million in grants available for the down 3 percent, to $682 million. Act- ration, a UPI subsidiary, will provide development of agricultural producer- ing President James Mast said factors livestock credit services to the mem- owned processing businesses. The new

26 March/April 2001 / Rural Cooperatives Value-Added Agricultural Product Mar- ACDI/VOCA seeking farm credit Farmers of America (DFA) have ket Development grants program is specialists for overseas missions formed a joint venture to own and designed to encourage producers of Loan officers, credit association man- operate a cheese plant at Melrose, agricultural commodities to process agers, and farm credit bank employees Minn., that LOL purchased from Kraft their raw products into marketable who would be willing to work for sever- Foods. Built in 1970, the plant process- goods, thereby increasing farm income. al weeks with financial institutions in es about 1 billion pounds of milk annu- Of the total amount, $20 million will developing nations are sorely needed for ally into bulk cheese which is then go to help associations of independent ACDI/VOCA missions. ACDI/VOCA shipped to other plants for further pro- producers establish value-added busi- is a nonprofit international development cessing and packaging. The 150 ness ventures. The remaining $5 mil- organization that helps farmers, rural employees were invited to continue in lion will be awarded to establish a pilot finance institutions, agribusinesses, their jobs. LOL members have long project known as the Agricultural Mar- cooperatives and private and govern- been a suppliers to the factory. Kraft keting Resource Center. Ventures in ment agencies abroad. Its members con- will continue purchasing cheese from which agricultural producers add value sist of leading U.S. agribusiness cooper- the plant. This will be the first partner- to their products by processing, packag- atives and farm credit banks. ship between the two dairy coopera- ing, or other means are eligible to apply ACDI/VOCA volunteers donate tives. DFA has 19,500 members in 45 for grants. Grants can be awarded for their time and talent to work side by states and processes nearly 37 billion such activities as conducting feasibility side with farmers and entrepreneurs pounds of milk a year. LOL produces analysis, developing business and mar- who are pushing for economic progress 600 dairy products and processes 12 keting plans, or as working capital while and democratic reforms around the billion pounds of milk annually. the venture develops cash flow. world. Some continue with long-term LOL is also developing a large Grant funds cannot be used for the assignments after that. There is growing cheese plant in South Dakota in a joint development or acquisition of build- demand for expertise in four categories: venture with Davisco Foods Interna- ings or other facilities, or to purchase, • Bank Management; tional and is considering construction rent, or install fixed equipment. The • Financial Planning and Management of a cheese plant in Wisconsin with maximum allowable grant amount is • Rural and Micro-Credit Alto Dairy Co-op at Waupun. $500,000, and grant recipients must • Agricultural Lending Jack Gherty, chief executive officer provide 1-to-1 matching funds. Volunteer assignments are for a of Land O’ Lakes has been elected Grant applications for this purpose period of two to four weeks, depending chairperson of the National Council of will be accepted in two rounds. Applica- on project needs and volunteer avail- Farmer Cooperatives during its annual tions for the first round must be received ability. Requests for specialists arrive meeting. Gherty succeeds Don Schriv- by 4 p.m. Eastern Time, April 23, 2001. regularly, with approximately six weeks’ er, executive vice president of Dairy The deadline for the second round is 4 lead time before a volunteer is needed Farmers of America. The council’s first p.m. Eastern Time, June 27, 2001. in the field. Paid assignments as inter- Director of the Year Award was pre- Nonprofit corporations and institu- national advisors can last from two sented to Jack Hardesty, president of tions of higher learning are eligible to weeks to three years. Maryland-Virginia Milk Producers apply to establish the Agricultural Mar- For more information, visit the web- Association at Reston, Va. keting Resource Center. The center site: www.acdivoca.org, or (800) 929- will collect and make available infor- 8622, fax: (202) 626-8726 or e-mail: CENEX Harvest States buys mation on value-added processing to [email protected] Rodriguez Food independent producers and processors. CENEX Harvest States (CHS) has It will also develop a strategy to estab- LOL earnings best since ‘96 acquired Rodriguez Festive Food Inc. lish a nationwide market information Land O’ Lakes Inc. (LOL) reported of Fort Worth, Texas, a manufacturer and coordination system. is strongest earnings in four years thanks of wheat and corn tortillas, tortilla chips The recipient of the $5 million grant to strategic moves in its dairy division, and a full-line of Mexican foods. The must supply an additional $5 million in stabilized cheese and butter prices and a purchase price was not announced. matching funds. All applications for this rebounding swine market this past year. Rodriguez Food represented a “strate- grant must be received by 4 p.m. East- Net earnings for fiscal 2000 reached gic fit [for CHS] as we continue to ern Time, April 30, 2001. This pro- $102.9 million while net sales topped expand our tortilla, chip and Mexican gram is administered by USDA’s Rural $5.8 billion. LOL’s dairy division posted food business,” said Joel Bachul, CHS Business Cooperative Service. Further earnings of $87.9 million on sales of $3.2 vice president and general manager. information is available at USDA Rural billion, but that reflected $44 million “The facilities at Fort Worth will help Development state offices, or at the fol- gained from selling its fluid dairy busi- us better serve our national and region- lowing Web address: http://www.rur- ness to Dean Foods. al customers.” CHS’ tortilla and Mexi- dev.usda.gov/rbs/coops/vadg.htm. In other news, LOL and Dairy can food sales now top $65 million

Rural Cooperatives / March/April 2001 27 annually. Its Mexican food brands (DFA) and has begun manufacturing hundredweight dividend in cash and include: La Canasta and Arizona Brand cheese and dairy-based ingredients for stock. Farmers will receive a 12-cent- tortilla chips, Paradisio tortillas and El sophisticated food applications. The per-hundredweight cash payment Gran Deli, among others. It operates joint venture between DFA and the (54.5 percent of the declared divi- additional Mexican food processing New Zealand Dairy Board is called dend) for every 100 pounds of milk plants in Minneapolis, Minn., and DairiConcepts and is based at Spring- marketed with Swiss Valley. The Phoenix, Ariz. field, Mo. The limited partnership fea- cooperative’s milk production In other CHS news, the St. Paul- tures equal ownership. The firm has increased 37 percent during the year Minn.-based co-op has joined a new, production facilities at Hummelstown, due to unifications. The extra supply on-line agricultural commodity mar- Pa.., Bruce, Wis., Zumbrota, Minn., helped the cooperative achieve an ketplace – Pradium – headquartered and Eldorado Springs, Mo. increased market share. at Annapolis, Md. Pradium will be . Two expansion projects will come on an on- line, business-to-business New Minn-Dak CEO stream this year: a major expansion and marketplace. David Roche is the new chief execu- renovation at Mindoro to meet an tive officer of Minn-Dak Farmers increased demand for blue cheese and a Tri-Valley sells S&W brand; Cooperative at Wahpeton, N.D. He renovation at the Cedar Rapids cul- Sale of canneries imminent has extensive experience in the sugar tured products plant to increase pro- Bankrupt Tri-Valley Growers has industry, according to cooperative duction and storage for cottage cheese, agreed to sell its S&W food brand to chairman Victor Krabbenhoft. Roche yogurt, sour cream and dips. Del Monte for $39 million. Del Monte replaces Larry Steward who retired last says it plans to contract with Tri-Val- September. Mullen heads food processors ley’s successor to produce S&W fruit Dennis Mullen, president and and vegetable products for this season, Cabot offers organic cheddar chief executive officer at Agrilink, a but will then move production to its Cabot (Vt) Creamery Cooperative, fruit and vegetable processing coop- own facilities in California. The S&W owned by Agri-Mark, has introduced a erative at Rochester, N.Y., was named brand was the “jewel” in Tri-Valley’s chairman of the National Food product line. Processors Association (NFPA) board At press deadline for this issue in of directors at its 93rd annual meet- mid-March, a final sales agreement was ing in Chicago. The scientific trade expected any day that will likely trans- association represents the $460 bil- fer ownership of the co-op’s huge fruit lion food processing industry. With packing canneries in Central California three laboratory centers, to Signature Fruit LLC, a new compa- NFPA is the leading authority on food ny formed by John Hancock Life science and safety. Insurance, Tri-Valley’s largest creditor. In marketing news, Agrilink is look- Separate sales are being pursued for the ing at growth opportunities in Canada co-op’s tomato processing business. via a reintroduction of its Birds Eye Some $20 million in federal disas- brand products after a long absence ter payments from USDA will also be from store shelves. made to the cooperative’s 500 mem- A team developed distribution plans bers — mostly tomato, peach, pear line of organic cheddar cheeses. and redesigned packaging to meet Cana- and apricot growers — who lost mon- Cabot’s facility is now a certified dian requirements. Agrilink also exhibit- ey on Tri-Valley contracts when the organic plant. The new line is sold ed at the Toronto Royal Winter Fair. co-op cut back production of canned throughout the natural foods commu- fruits and tomato products due to its nity and was developed out of con- Beef co-op opens marketing deteriorated financial condition. cerns over food safety and animal wel- The new Consolidated Beef Produc- Members may be able to collect up to fare. Cabot has dramatically pushed up ers co-op, Amarillo, Texas, completed half their losses. sales of hormone-free milk and organ- its first cattle sale in February, reports ic milk in Maine. Gary Kaplan, the co-op’s chief execu- DFA reopens Dakota plant tive officer. Members pay an initial After lying dormant for six months Swiss Valley pays dividend $3,000 fee, commit cattle on a weekly during refitting for new technology A $6 million profit earned this past basis for sale to packers, and agree to and product lines, a cheesemaking year year by Swiss Valley Farms, Dav- sell at least 5,000 head of cattle through plant at Pollock, S.D., has been enport, Iowa, will result in coopera- the consortium. The co-op will negoti- reopened by Dairy Farmers of America tive members receiving a 22-cent-per- ate with the packers.

28 March/April 2001 / Rural Cooperatives Dot what? Dot coop! New Internet name for cooperatives provides new marketing, membership opportunities

By Paul Hazen, President and CEO, National .coop provides new membership opportunities for Cooperative Business Association agricultural and other producer cooperatives. Since the domain name emphasizes the difference between co- A little-known international body that yields tremen- ops and investor-owned businesses, .coop can help dous power over the Internet and e-commerce attract and keep new members by promoting the mem- announced on November 16, 2000 its selection of .coop ber-ownership benefits of co-ops. Cooperatives can also as one of only seven new top-level domains (TLD) that use the new .coop TLD for their members-only site. will join .com and .org at the end of Internet addresses And even producer cooperatives that have long- later this year. relied on .com for their consumer identity may wish to This new dedicated Internet suffix begin using .coop to market the will give co-ops a unique online iden- farmer-income benefits of co-ops to tity and the opportunity to differenti- those consumers who value an eco- ate themselves in e-commerce — a nomically vibrant rural America. privilege many other sectors sought, More and more, co- ops are finding but failed to achieve, when the Inter- that their values and principles sell. net Corporation for Assigned Names Perhaps most exciting, .coop can and Numbers (ICANN) began help increase public awareness of accepting applications for new top- cooperatives. In just four letters, level domains last fall. cooperatives have the opportunity to In a highly competitive process, educate not just their own members, cooperatives beat out lawyers who but the general public about what wanted .law, financial groups that cooperatives are, why they matter wanted .fin, telephone companies that wanted .mobile, and how they contribute to the global economy. As ubiq- and many other sector-specific groups. ICANN received uitous as the Internet has become in daily life, there is 47 applications for some 180 proposed new names. The simply no question that .coop will give cooperatives National Cooperative Business Association’s (NCBA) greater public recognition and a competitive edge. application for .coop was among only a handful of appli- Of course, cooperatives don’t have to use .coop. But cations by nonprofit organizations. they’ll probably want to reserve that option for the NCBA beat the competition because we had a solid future by registering for .coop later this year. application and strong grassroots support from coop- eratives in the U.S. and overseas. What happened to the hyphen? In the end, ICANN put .coop in the elite group of the NCBA applied for both .coop and .co-op. Many in the well-known .com, .org, and .net, and now, .info, .biz , U.S. preferred the hyphen, but others who don’t use the .name, .museum, .aero, and .pro – the other new names. hyphen, such as those in Spanish-speaking countries, did not. In the end, ICANN rejected the hyphen in order How can we use it? to make the new TLD as globally applicable as possible. .coop presents new marketing and membership opportunities. Many co-ops already have websites Now what? under .com and .org. Co-ops can choose to register NCBA, as the new owner of the .coop TLD, is their name under .coop in order to increase their Inter- negotiating a contract with ICANN and Poptel, a net exposure, while keeping their .com or .org address- worker-owned cooperative Internet service provider es. Internet addresses using different top-level in the U.K. that will serve as the registry operator and domains can point to the same website. registrar. We should be able to begin registration .coop can help consumer cooperatives emphasize sometime this summer. For now, co-ops can go to our their values and commitment to their consumer-mem- website at www.ncba.org and click on the blue .coop bers, providing an edge over other sellers of goods and button. From there, go to “How to Register,” where services. And more importantly, .coop will help con- you’ll be able to put your name on an e-mail list for sumers find the co-ops they trust online. updates on registration details.

Rural Cooperatives / March/April 2001 29 ProGold resumes operations; Farmland sets sales record but still sidiary will expand its operations to Growers ponder crop options records loss for 2000 Moultrie, Ga., by investing $8 million Production of corn sweeteners In his first annual meeting as chief to rehabilitate an old plant there. resumed March 11 at the co-op- executive officer, Farmland Industries’ owned ProGold corn- milling plant in Robert Honse reported record sales of Court rejects initial AGP bid for FCA Wahpeton, N.D. The plant had been $12.2 billion for fiscal 2000, but the Ag Processing (AGP) Inc.’s proposed idle for two months due to high ener- depressed farm economy continued to purchase of the bankrupt Farmers gy costs and sluggish demand for corn drag on the cooperative’s profitability. Cooperative Association (FCA) – a large, fructose sweeteners. The $260-million Farmland’s net-after-tax losses contin- local grain marketing co-op in facility processes 85,000 bushels of ued at $29.2 million, with the nitrogen Lawrence, Kan. – for $11.7 million was corn daily and pays farmers about 10 fertilizer business causing a special rejected March 13 by U.S. Bankruptcy cents per bushel more than most local drain on earnings. After a decade of Judge John Flannagan. He ruled that elevators. Despite the closure, Cargill growing and diversifying to compete FCA will have to devise a plan for met an obligation to buy corn for the with large multinational companies, accepting and reviewing competing bids, plant – including 500 million bushels Honse said Farmland would refocus on including offers from Archer Daniels in January. Plant workers remained on profitability: attaining investment grade Midland Co. and Bunge Corp., among the job during the shutdown, per- status among financial analysts to lower others. Omaha, Neb.-based AGP — the forming maintenance and servicing interest costs. only cooperative seeking to buy FCA — customers from existing inventory. “We must find ways to rely less on may still have the best offer, but the The plant has been leased and others’ money to run our business,” he judge says he wants more time to make operated since 1997 by Cargill Inc. of said. A key to that is building the sure. FCA had hoped to complete the Minneapolis, Minn. The company Farmland brand, in which the coopera- sale to AGP, a grower-owned soybean has not ruled out further shutdowns tive has heavily invested, Honse processing co-op, by April 1, in time for if economic conditions worsen. stressed, by building the brand’s value growers to prepare for spring planting. Uncertainty over the plant’s status and expanding its reach so in time it AGP’s offer was for most of FCA’s inven- has left many corn growers ponder- reaches national recognition. Contin- tories and all but three of its facilities. ing a switch from corn to soybeans or ued reliance is planned on joint food In other AGP news, the co-op has some other crop. Sharp rises in nat- ventures: Farmland National Beef, just completed another successful year. ural gas costs could prompt the plant Farmland Springwater Farms Catfish Fiscal 2000 results showed the coopera- to switch to fuel oil or another ener- (the second largest catfish processor in tive had pre-tax earnings of $20.9 mil- gy source. ProGold is owned by the nation), and Farmland Pork, plus lion on sales of nearly $2 billion. The Golden Growers Cooperative (49 wholly owned divisions to provide farm slight decline from 1999 reflected lower percent), Minn- Dak Farmers Coop- production supplies. commodity prices. It was the first annual erative (5 percent) and American It has also been announced that the meeting with Marty Reagan at the helm, Crystal Sugar Co. (46 percent). co-op’s Farmland National Beef sub- having succeeded Jim Lindsay.

Keep the co-op candle burning continued from page 20 tend to “follow the pack.” The result of the core of the cooperative “yolk” with of it and cooperatives will likely find their this should show members that they communications. Communication members gaining a “non-cooperative” are better off serving themselves efforts in information, education, pro- perception that can be very difficult to through their cooperatives than by motion and motivation flow freely overcome. Conversely, making commu- doing business with others (e.g., non- through the cooperative’s “albumen,” nication a core function of the organiza- cooperatives). Communication aimed reaching and nourishing the coopera- tion — to implement important goals at member identification creates the tive “shell.” The cooperative member- and strategies such as those discussed — foundation for greater member motiva- ship makes up the “shell” of the coop- will go a long way toward thickening the tion in cooperatives. Cooperatives must erative “egg,” providing a loyal membership shell of the cooperative. work continuously to create this quality nurturing environment that helps the Indeed, to be cooperatives in every that engages members to be active par- “egg” to thrive. The lit candle indicates sense of their distinct principles and ticipants in their cooperative. the need to keep member relations structures, a strong effort on behalf of burning within the cooperative. While member relations is required. Cooper- Candling member relations this exhibit provides some fun, it offers atives need to commit and remain The egg-shaped exhibit depicting a serious message as well. committed to keeping the member effective member relations shows that Building member relations begins and relations “candle” lit within their orga- building member relations begins at ends with communication. Show a lack nizations. ■

30 March/April 2001 / Rural Cooperatives It’s easy to read and/or download USDA publications about cooperatives from the Internet

The Rural Business Cooperative Service has more than 150 cooperative reports (as well as past issues of this magazine) available on the Internet for viewing or downloading. These titles cover a vast array of topics, ranging from the general, such as “How to Start a Cooperative” or “Cooperatives 101,” to technical subjects, such “Tax Treatment for Cooperatives” or “Managing Cooperative Antitrust Risk.”

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

1. Go to the USDA Rural Development home page, “http://www.rurdev.usda.gov” 2. Click on “Publications” in the lower blue bar at the top of the page 3. Click either “Rural Cooperatives magazine” or “Business/Cooperative Publications” 4. If you chose “Business/Cooperative Publications” in step 3, you can then click either “Cooperative Information Reports,” “Research Reports,” “Service Reports” or “Miscellaneous Reports.”

Or, to go straight to the Library of Publications, access: http://www.rurdev.usda.gov/rbs/pub/newpub.htm If you know the title or publication number of the report you want, scan down the list until you come to it.

To locate a breakdown of publications by subject matter:

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

2. Access our catalog by clicking on “Rural Cooperative Publications” in the first line of the second paragraph on the screen that appears (regardless of the type of “reports” accessed).

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

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

. The Business and Industry (B&I) Loan Guarantee Program provides government backing for commercial loans to cooperatives and other businesses in rural areas and also guarantees loans to producers to pay for stock in new value-added cooperatives. See http://www.rurdev.usda.gov/rbs/busp/b&i_gar.htm . Rural Cooperative Development Grants are made to nonprofit organizations and institutions of higher learning to establish and oper- ate centers for cooperative development. See http://www.rurdev.usda.gov/rbs/coops/rcdg.htm . Under the Market Access Program, Commodity Credit Corporation (CCC) funds are used to partially reimburse cooperatives and nonprofit regional and national agricultural trade organizations, among others, for the cost of conducting market development pro- jects for eligible products in specific countries. See http://www.fas.usda.gov/mos/programs/mapprog.html . In fiscal 2001 and 2002, USDA will use CCC funds to make cash payments of up to $150 million to bioenergy companies, including cooperatives, that increase their purchases of corn, soybeans, and other commodities to expand production of ethanol and biodiesel in the United States from products grown in the United States. See http://www.fsa.usda.gov/daco/bioenergy/bioenergy.htm

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32 March/April 2001 / Rural Cooperatives