Turning Soft Wool Into Hard Cash COMMENTARY

Rural

COOPERATIVESUSDA / Rural Development March/April 2000

Turning soft wool into hard cash COMMENTARY

Borders are no longer barriers for co-ops

As we begin this century of increased income. Rural unemployment continues global interaction and communication, to decline, to historically low levels. we recognize the need to work toward However, challenges remain. Even with improving the technological infrastruc- double-digit percentage growth in the ture of rural America. Increasing the amount of jobs, the incomes remain sig- level of agricultural trade with foreign nificantly lower in rural areas relative to nations will do much to improve the urban areas. economic vitality of rural America and In June of 1998, when I hosted the the rural cooperatives which are so vital Second International Conference on to its well-being. Women in Agriculture, more than 1,000 There are several articles in this mag- participants from 50 countries came azine that detail trade programs and together to discuss issues facing women technical assistance efforts between in agriculture and to facilitate the the United States and our international exchange of information. During the partners. Some of these initiatives, such conference, we established that in rural providing many advantages to rural elec- as our effort to create cooperative village communities around the world, we have tric and telephone cooperatives to banks in South Africa, will help those similar challenges, many of which can be receive funding for the purpose of who are disenfranchised by poverty. We addressed by cooperatives. Creating val- putting these new technologies to work are also committed to working with our ue-added cooperatives can do much to for rural residents. We are also working international partners whose future eco- generate additional income for rural to create opportunities with current and nomic development will create market- people, as shown by the cover story in potential trading partners around the ing opportunities for rural Americans. this issue about how rural women in globe. Communities will revitalize USDA Rural Development has bilat- Alaska are earning income by knitting themselves when opportunities exist for eral programs to help countries in this musk ox wool into beautiful garments. entrepreneurial initiatives, small business hemisphere with their agricultural devel- In June of 1999, we successfully expansion and job training — all of opment efforts. We expect to continue brought together leaders from several which offer upward mobility without offering our assistance in a range of dis- countries to create cooperative relation- community members having to move to ciplines, from production techniques, to ships to strengthen our nations’ rural urban areas to find employment. marketing, extension, pest and disease areas and increase the channels of com- In closing, rural economic develop- eradication, and food safety, among oth- munication between rural Latin America ment and poverty alleviation strategies ers. and rural United States. Again, we shared between countries and rural com- In the United States, agricultural found that we share similar concerns, munities will ultimately lead to enriched cooperatives remain a key component of such as overcoming limited technologi- families, empowered communities, and rural economies. While “rural” is more cal alternatives. developed nations. than agriculture, the future success of With President Clinton and Vice our nation’s small farms and their coop- President Gore’s leadership, we are eratives is critically linked to the success working to build partnerships and devel- of economies of rural communities to op a comprehensive approach to closing which they are interconnected. the digital divide and bringing digital Our rural economy has strengthened opportunity to all Americans. Bringing Jill Long Thompson and is growing, but remains fragile and advanced telecommunications technolo- Under Secretary, USDA Rural Development uneven. Rural earnings, after a decade gy to rural America has made significant of decline, are rising at rates similar to impacts on people’s lives. Through our urban rates in some areas, as is per capita various programs, Rural Development is

2 March/April 2000 / Rural Cooperatives Rural March/AprilCOOPERATIVES 2000 Volume 67 Number 2

RURAL COOPERATIVES (1088-8845) is published bimonthly by Rural Business–Cooperative Service, U.S. Department of Agriculture, Washington, DC. FEATURES The Secretary of Agriculture has determined that publication of this periodical is necessary in the transaction of public business required by law of the Department. Periodicals postage paid at 4 Boosting the 3 Bs Washington, DC. Copies may be obtained from the England’s Plunkett Foundation promotes “the furtherance of Superintendent of Documents, Government Printing Office, Washington, DC, 20402, at $3.50 domestic, rural cooperation” $4.38 foreign; or by annual subscription at $15.00 Eliza Banks domestic, $18.75 foreign. Postmaster: send address change to: Rural Cooperatives, USDA/RBS, Stop 3255, Wash., DC 20250-3255. 7 Fingers and needles Mention in RURAL COOPERATIVES of company and Alaskan co-op turns cashmere-soft musk ox wool into hard cash brand names does not signify endorsement over other companies’ products and services. Pamela J. Karg

Unless otherwise stated, contents of this publication are not copyrighted and may be reprinted 12 Strength through unity freely. For noncopyrighted articles, mention of Bulgarian honey producers sweeten their future through source will be appreciated but is not required. cooperation The United States Department of Agriculture (USDA) prohibits discrimination in all its programs and James Matson activities on the basis of race, color, national origin, sex, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all 15 Foreign affairs prohibited bases apply to all programs). Persons USDA Foreign Agricultural Service promotes U.S. agriculture with disabilities who require alternative means for communication of program information (braille, large abroad print, audiotape, etc.) should contact USDA’s TARGET Karl Hampton Center at (202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-W, Whitten 18 Going global Building, 14th and Independence Avenue, SW, Export certificates a valuable tool helping co-ops tap overseas Washington, D.C. 20250-9410, or call (202) 720-5964 (voice or TDD). USDA is an equal opportunity markets provider and employer. Alan Borst Dan Glickman, Secretary of Agriculture 23 Why U.S. agriculture should support foreign aid Jill Long Thompson, Under Secretary, Rural Development Perry Letson

Dayton J. Watkins, Administrator, Rural Business–Cooperative Service

Gladys Rodriguez, Director of Public Affairs DEPARTMENTS

Dan Campbell, Managing Editor 2 COMMENTARY USDA Design Center, Design 22 A CLOSER LOOK AT… Have a cooperative-related question? Call (202) 720-6483, or 25 MANAGEMENT TIP Fax (202) 720-4641, Information Director, 27 NEWSLINE This publication was printed with vegetable oil-based ink.

On the Cover: Once extinct in Alaska, the musk ox has made a major comeback. A cooperative of Alaskan Eskimo women are transforming its soft wool into high-fashion United States Department of Agriculture accessories and earning much-needed income for their poor, rural communities. Story on Page 7. Photo copyright Musk Ox Farm

Rural Cooperatives / March/April 2000 3 Boosting the 3 Bs

England’s Plunkett Foundation promotes “The furtherance of rural cooperation”

By Eliza Banks ment and agricultural education. After repeated failures, Plunkett established n America, hardly a coop- his first cooperative “creamery” in erative celebration goes by 1891. Three years later, he founded the I when those English crafts- country’s apex organization for the bur- men who formed the geoning number of agricultural coop- Rochdale Equitable Pioneers Society eratives. His diaries, kept in the aren’t feted for their foresight. So it Foundation’s unique cooperative ref- may come as a surprise that there’s erence library, describe the exhaust- often a perceptible lack of enthusi- ing work of organizing co-ops in asm toward cooperatives in the the face of stern opposition from very country credited with their local moneylenders, traders, and creation. other vested interests. But that’s the situation in Still a frequent visitor to Ameri- some sectors of the United King- ca, and now Ireland’s equivalent to dom today. Despite this skepti- the Secretary of Agriculture, Plun- cism, however, for 80 years there kett became a close associate and has been one voice encouraging, confidant of President Theodore cajoling, and supporting coopera- Roosevelt and his apostle of conser- tives and the people who want to vation, Gifford Pinchot, sharing start them. At the Plunkett Founda- ideas on rural development and, in tion, near Oxford in south-central 1910, publishing The Rural Life Prob- England, a team of dedicated cooper- lem of the U.S. ative advocates acts as a driving force “By golly,” Roosevelt is quoted as behind the growth of UK rural cooper- booming to Plunkett, “I wish you were atives and other member-controlled an American and either in the Senate businesses. or my Cabinet!” Plunkett’s American Through its accumulated experi- connections didn’t end there, and he ence, extensive network of consultants, subsequently shared his enthusiasm for and a reference library approaching HORACE PLUNKETT empowering farmers with Presidents 40,000 books, journals and articles, the Taft and Wilson. Plunkett Foundation strives to offer Living”), Plunkett and a small band of appropriate support and sign-posting influential, but rigorously non-politi- Reluctance persists to all types of cooperatives both in the cal, associates inspired the creation of So, after all this time, why aren’t UK UK and around the world. literally hundreds of cooperatives, farmers more aware of the benefits of first in Ireland and then around the co-ops? And why do UK farmers har- An “Anglo-American Irishman” globe. bor resistance to collaboration, even Established in 1919, the Plunkett In the 1880s, Plunkett spent part of though cooperative involvement is Foundation bears the name of its each year as a Wyoming cattle rancher strong in many sectors and is arguably founder, the cooperative organizer, and shrewd observer of rural progress, vital to competing in a global market? agriculturalist and statesman Sir including the growth of the National The reasons are largely historical. Horace Plunkett (1854-1932). In pur- Grange movement. Returning to Ire- First, England’s smaller geographic suit of his famous “Three Bs” (Better land in 1889, he soon set about a non- area, greater population density, and Farming, Better Business, Better stop program of cooperative develop- village trading infrastructure meant

4 March/April 2000 / Rural Cooperatives that, for most of rural England — and nation’s curriculum (and sometimes Tradition and individuality unlike Ireland or the United States — even in major schools of agriculture). In contrast to America’s ready there were few compelling reasons to And there have been no significant acceptance of expansion and innova- “circle the wagons” in cooperation. injections of government capital or a tion, the UK agricultural industry has Second, in the mid-20th century this designated body to promote the devel- always taken pride in its long tradi- island nation’s need to sustain core agri- opment of cooperative enterprise. tion, as well as its individuality. From cultural productivity was exacerbated by Taken together, these factors have her perspective, though, Targett war. Unfortunately, the support pricing perpetuated a reluctance to embrace believes that UK cooperators could and capital grants for this purpose were cooperation. It is this gap that the profitably take on board some lessons only made available to individual farms, Plunkett Foundation seeks to fill with a from their counterparts across the thus creating no incentive for coopera- combination of information, advice, Atlantic. “At the moment,” she says, tion. Ironically, the converse of this was seminars, study tours and advocacy. “the United Kingdom probably has happening in Continental Europe, The current dire straits in UK agricul- more to learn from America than it where agricultural economies were being ture would appear to be generating a can teach the United States, although rebuilt using cooperation as one of the re-appraisal of cooperation and its it has to be remembered that the situ- foundation stones. potential, notes Information Services ations are by no means parallel, par- Third, there is the legacy of statuto- Manager Kate Targett. Necessity, she ticularly in terms of scale and public ry marketing boards in commodities observes, has often been the mother of policy.” such as milk, wool and potatoes. Until cooperatives as well as invention. Having observed the English scene recently, that meant individual produc- A native of Michigan, Targett has for 15 years, she suggests that abilities ers did not have control over this link been working recently to extend the to change may constitute a further dif- in the chain. Foundation’s reach still wider by ference. “Whereas Americans will And finally, even today, there is uploading the library’s key-worded often default to ‘Why not?’ the British widespread lack of knowledge about index onto the Internet, a project made attitude is sometimes ‘Rather not,’” she co-ops and how they work. The subject possible by a grant from the Dublin- notes. For example, UK cooperatives receives little, if any, attention in the and Boston-based Ireland Funds. have been slow to adopt vertical inte-

The Plunkett Foundation is used as a resource by cooperatives worldwide, including this women’s dairy cooperative in Egypt. Photos courtesy the Plunkett Foundation.

Rural Cooperatives / March/April 2000 5 gration as a means of capturing added came last summer when the government’s the former Soviet Union. Here, where value for the producer and keeping competition authorities published a cooperatives had become “top-down” pace with developments in European report highly critical of Milk Marque’s arms of state policy, the Foundation and American markets. Meanwhile, selling system. As a consequence, the found a lot of work combating the dis- cooperatives such as those in Denmark cooperative decided to split into three credited image of cooperation. It has and Sweden have forged ahead in pro- roughly equal regional cooperatives. met with notable success, Targett says. cessing and marketing products sup- Commenting on these developments In Poland, projects funded by the plied by co-op members. at a recent Plunkett Milk Groups Con- European Commission and the UK’s Department for International Develop- ment successfully encouraged farmers to diversify operations and keep rural communities viable. In one instance, Britain’s holiday tradition of “bed and breakfast inns” inspired Polish farm families to develop a niche market for agri-tourism. Recent study tours have been arranged for delegates from Aus- tralia and Zimbabwe. Earlier programs have influenced participants from Alba- nia, China, Grenada, Hungary, Italy, Japan, Lesotho, Moldova, St. Lucia, Uzbekistan and Zambia, among others. The Foundation’s Library and Infor- mation Service is open to all, and a limited amount of assistance and consulta- tion is provided free. Lists of publications concerning every aspect of The headquarters of the Plunkett Foundation, Oxford, England, where they are in the process of cooperative theory and practice are uploading their key-worded index onto the Internet so emerging and established user-controlled available on request, and should soon groups and businesses can learn more from this world-class cooperative resource. be accessible via the Internet. As an educational trust, the Founda- Cream rises . . . or sour milk? ference, the Foundation’s Chief Execu- tion is not, despite its name, a grant-mak- Yet there are small signs of change tive Simon Rawlinson noted, “It seems ing organization. Its income is generated afoot in some UK sectors, such as dairy- a travesty that, while the rest of the from memberships; project funding from ing, where there are examples of success- world seems to be reaping the benefits the European Commission, the UK’s ful processing subsidiaries. For the most of vertical integration and economies Department for International Develop- part, however, the dairy industry has of scale, the UK seems to be being ment, and a variety of NGOs and devel- evolved differently from the U.S. and forced to regroup and start again. No opment agencies; and the sale of publica- Europe. From the 1930s, the existence other dairy industry in a developed tions. Since 1927, it has published an of the Milk Marketing Board meant that country has attracted the same atten- annual anthology of international coop- the industry’s processing and manufac- tion from the competition authorities, erative know-how, now entitled The turing capacity developed privately. despite many others having a much World of Co-operative Enterprise, as well as However, farmers soon became con- larger market share.” being the only organization to compile cerned that they were missing out on any and publish an annual directory and sta- resulting “added value,” which eventual- Working around the world tistics of UK agricultural cooperatives. ly led to the formation of the Board’s The Plunkett Foundation’s achieve- For more information on the Plun- wholly owned subsidiary Dairy Crest. ments in the UK are rivaled only by its kett Foundation and its services, visit When the Milk Marketing Board was successes abroad, where it provides its website at www.co-op.co.uk./ deregulated in 1994, Dairy Crest was pri- support tailored to the conditions of ukcm/plunkett/index or email vatized (although farmers owned most of emerging user-controlled groups and [email protected]. ■ the shares). At the same time, Milk Mar- businesses. With a tradition of overseas que was formed and became the largest development going back decades, the Editor’s note: Raised on an Upper Mid- dairy cooperative in the European Union. Foundation recently has been heavily west family dairy farm that does business Initially, it was able to use its strength on involved with the emerging democra- through cooperatives, Eliza Banks is now a behalf of its members. But the crunch cies of Eastern and Central Europe and writer based in North Yorkshire, England.

6 March/April 2000 / Rural Cooperatives Fingers and needles

Alaskan co-op turns cashmere-soft musk ox wool into hard cash

Pamela J. Karg know little about this cousin to sheep Straits on a narrow land bridge to Field Editor and goats. But in the open tundra and North America nearly 2 million years well-vegetated terrain of Alaska, Cana- ago. By the 1850s, though, they had oft yet sturdy. Thin but da and Greenland, this short-legged, been hunted to extinction in Alaska. warm. That’s how Sigrun massively built animal with broad, In the mid-1950s, a Conneticut S Robertson describes the down-curving horns and an ankle- native set out to prove that musk oxen garments marketed by the length outer coat is well known. could be domesticated and raised sus- Oomingmak Musk Ox Producers’ Alaskan agriculture has helped the tainably. The late John J. Teal Jr. Cooperative. musk ox evolve into a sustainable returned from World War II as a deco- “Qiviut is similar to fine cashmere,” enterprise. But it wasn’t always that rated B-17 bomber command pilot in explains Robertson. She has been with way. the European campaign. He earned the cooperative since it began in 1969 bachelor’s and master’s degrees in and now serves as its executive director. Bringing the musk ox back anthropology from Harvard and Yale, “And our members love working with Musk oxen are neither oxen nor do respectively. Teal had a research fellow- this beautiful fiber to make beautiful they have glands to produce musk, and ship at McGill University in Montreal products. They’re artisans,” she adds. they resemble bison. While their fossils and was teaching at the University of Mention musk oxen to most people have been found as far south as Ohio Vermont when he established the Insti- in the lower 48 states, and their ques- and France, scientists believe musk tute of Northern Agricultural tioning eyebrows belie the fact they oxen wandered across the Bering Research, headquartered in Hunting-

Oomingmak members determine how much they want to knit and at what pace based solely on the amount of money they need for their families. Photo by Bill Bacon, courtesy Oomingmak Musk Ox Producers’ Cooperative.

Rural Cooperatives / March/April 2000 7 ton, Vt. The NAR’s primary garments could easily step into the fast project was to re-establish musk and fickle world of fashion,” Robertson oxen in the United States. Teal reported in a paper presented at the captured his first animals during First Arctic Ungulate Conference in a Canadian expedition in 1954. Nuuk, Greenland, in 1991. “Instead, Eventually, he established a herd the qiviut garments have found their for the University of Alaska, own particular market, one that can Fairbanks, and managed it for accept their peculiarities and appreciate many years. their very special qualities.” Teal’s premise was simple. Rather than introduce exotic animals such as cows or llamas to the Alaskan landscape, he wanted to develop a cottage industry around an animal or plant native Photo by Ron Eagle, courtesy Oomingmak Musk Ox Producers’ to the region. Cooperative. The ankle-length guard hairs take musk oxen four to six years to the delicate patterns also meant less grow and are essential in protecting the equipment and little financial invest- animals against temperatures that can ment, Robertson says. dip to 100 degrees below zero. But The patterns were adopted from tra- beneath that outer coat, Teal knew, is a ditional village life and Eskimo culture light brown, soft, dense undercoat — from 1,200-year-old artifacts to bead- known as qiviut (pronounced kiv-ee- work designs. The patterns were con- ute, meaning “down” or “underwool” verted into graphic instructions easily in the Inupiat Eskimo language). understood by the older women, most of Eight times warmer than sheep wool whom were not familiar with the com- by weight and very lightweight, qiviut plex written English instructions used in is one of the finest natural fibers known typical knitting patterns. Workshops to man and is often referred to as “the were held so members could learn how cashmere of the North.” By domesti- to read the patterns and complete the cating the animal, native people lace-like stitches. More importantly, learned the undercoat could be combed members learned how to handle qiviut. out, cleaned to capture the fine qiviut, “It’s spun much finer than what spun into yarn and used to knit gar- you’re used to with other yarns,” ments. Rather than raising musk oxen Robertson explains. for meat and hides, the animal could After the first year, 27 knitters from provide a renewable resource through- Mekoryuk turned the qiviut into 291 out their lives, Teal was convinced. scarves, stoles, tunics and nachaqs Photo by Gary Lackey, courtesy (which is now the cooperative’s special- Oomingmak Musk Ox Producers’ Cooperative. Co-op starts with 25 members ty item and means hat or hood in Eski- The domestication of the musk ox mo. The nachaq, also called a smoker- and the start-up of the Oomingmak ing, is a seamless, tubular garment that cooperative are tightly inter-woven. By can be worn as a hood or pulled down Over 200-members strong 1969, enough qiviut had been convert- around the neck like an over-stuffed, Originally, the plan was to wash and ed to yarn to put it into production. yet decorative, turtle-neck accessory). block garments in members’ homes or The first 25 knitters were all from Almost immediately, large retailers to start washing and blocking coopera- Mekoryuk, Alaska, located on Nunivak such as Nieman-Marcus featured qiviut tives in nearby villages. As it turned Island. They were encouraged to try garments. But the large orders, often out, sending the garments to the coop- the fiber and they enlisted as the coop- requiring special sizes and particular erative’s office and store in downtown erative’s founding members. Research colors in a short amount of time, Anchorage is a way to ensure quality. had shown qiviut was better suited to exceeded what the small cooperative Five employees, including Robertson, knitting than weaving, and knitting was could produce. wash and block garments, as well as a skill Eskimos had learned from mis- “In retrospect, perhaps it was overly inspect them to assure they are as per- sionaries. The fine needles required for ambitious to think that handknit qiviut fect as possible. They also work the

8 March/April 2000 / Rural Cooperatives retail store six days a week and fill Ox Development Corp. as a private sleeveless, open-sided tunic that comes orders received over the Internet nonprofit organization dedicated to the complete with a hand-braided qiviut (www.qiviut.com). The boldly painted development and domestication of the belt. Twenty-percent of the garments musk oxen adorning the storefront musk ox. The cooperative contracts are sold through a gift shop at the have made the cooperative a popular with a cashmere mill on the East Coast Musk Ox Farm. shopping stop for visitors. to wash, de-hair and spin the fine yarn. In fiscal 1999, the cooperative’s sales Today, over 200 knitter-members, Up to 600 pounds — or hair from were $600,000. After expenses, mem- ranging in age from pre-teens to about 100 musk oxen — are required bers receive a dividend check based on octogenarians, own Oomingmak. by the mill for each run. the number of garments they marketed through Oomingmak. “In spite of the co-op’s relative success, it probably has not made much of a dent in the many problems of the region,” Robertson says. “However, the co-op was created not to make great sweeping changes in the native culture (thereby creating new problems), but to help with problems within the traditional mode of life. This is not about making money hand-over-fist.”

Challenges and opportunities Problems facing Alaskan Natives are attributed to the introduction of European culture and its need for cash to buy ammunition, fuel, electricity, clothing, and even food, she explains. Before that, Eskimos led subsistence lifestyles and took or created from the natural resources everything they needed. Over 26 percent of the 50,000 rural Alaskan Natives have incomes below federal poverty levels, compared to only 9 percent of non-native Alaskans. The problem is perpetuated by Alaskan Natives’ isolation from the cash economy. While most Oomingmak members John J. Teal Jr. re-introduced the musk ox to Alaska and insisted they be used in a live in the Yukon Kuskokwim region, sustainable enterprise. As a result, 25 members started the Oomingmak co-op. which can be reached only by air, their Their knitted garments include symbols that celebrate their Eskimo culture. lifestyles now depend upon a blend of subsistence and capital enterprise. Many are related or are close friends Back in Alaska, the yarn is sent to Most people fish, hunt and collect who helped each other get started members. There are no quotas to fill. berries in season, and many men leave knitting and into the cooperative. All Members determine how much they heir communities for months at a time are women, though men have been want to knit and at what pace based to find jobs in larger cities. members in the past, and nearly all solely on the amount of money they Isolation makes running a coopera- the members are Alaskan Eskimos, need for their families. After the fin- tive challenging, too. The six-person who work from home in villages rang- ished garment is sent to Anchorage, the board meets quarterly, after which ing from 150 to 300 people. member is paid. Seventy-five percent members receive a newsletter with The cooperative buys most of its of the garments are sold directly from updates on board actions, calving, qiviut from the herd Teal helped estab- the cooperative to customers. Prices sales and what satisfied customers are lish, now kept in the Matanuska Valley range from $95 for a bell-shaped saying. Repeatedly, members have to near Palmer and operated by the Musk Cloche cap without a cuff to $495 for a be reminded that Oomingmak is their

Rural Cooperatives / March/April 2000 9 cooperative and what that owner- “Expanding the membership will ship means. offer this same economic opportu- The education process will start nity to women living in other eco- anew this year because a new product nomically depressed communities line is being introduced. After in the state.” months of research, the cooperative Taking the loan to buy the Cana- will market garments from a luxuri- dian fiber was a big step for directors, ous fiber of 80 percent qiviut and 20 but necessary. When the 100-percent percent silk. For the first time since qiviut yarn is plentiful, members are 1976, a membership drive is planned encouraged to knit more garments A cousin to sheep and goats, the short-legged, in new communities in the Yukon and they respond, filling the shop massively built musk ox, with its broad down- Kuskokwim and Interior regions, and with plenty of goods. But then the curving horns, is neither an ox nor does it have St. Lawrence Island, where some of glands to produce musk. Photo copyright Musk Ox Farm. yarn supply runs low and the stocks the state’s highest unemployment drop. By starting up the qiviut-silk rates – 18 to 63 percent – exist. training on both the knitting and coop- line, the cooperative may be able to The cooperative took out a loan to erative ownership fronts. ease the problem, which occurs about buy Canadian qiviut for the new line. “The cooperative has successfully every four years. The mill the co-op uses will add silk been in business for 30 years, provid- “I’m not sure what tomorrow’s chal- from its existing stock. The cooperative ing rural Alaskans an opportunity to lenges will be,” she adds. “But I do applied for grants to cover staff recruit- work part time and earn cash income know they will center around fingers ■ ment time and travel, and new member for their families,” Robertson says. and needles,” she adds. The Musk Ox Farm continues Teal’s work In the 1940s and 50s, wild musk oxen were a disaster or two play designed to intimidate each other, including pawing at the away from extinction and the villages of coastal Alaska were ground, walking stiff-legged, and aggressively swinging their some of the most impoverished in the world. Where others massive horns. Following the displays, the bulls will face-off saw two utterly hopeless situations, John Teal’s eyes sparkled and back up about 100 feet before charging together at speeds and a vision was born. close to 35 miles per hour. The head smashing may continue In this windswept and inhospitable land, he saw an oppor- for up to a dozen times before one bull quits and submits to the tunity for Alaskan Natives to live together peaceably with this other. animal so both would thrive. After more than a decade of Several separate harems form in the fall. Each harem con- research, Teal started what came to be known as the Musk Ox sists of one bull and a selected group of cows. Breeding lines Project. Supported by funding from the W.K. Kellogg Founda- are chosen to promote qiviut production, tameness, health and tion, as well as assistance from the University of Alaska and to avoid inbreeding. Following six weeks in harem, the cows countless volunteers, the project started Alaska’s first domes- are moved to a separate pasture and monitored throughout tic musk ox farm in Fairbanks in 1964. their eight-month gestation. Calves are born any time from Today, the farm (www.muskoxfarm.org) is situated out- mid-April to early May, and can weigh up to 25 pounds. They side Palmer in the Matanuska Valley, about 50 miles from are born with a full coat of qiviut and boundless energy. The Anchorage. It’s managed by the Musk Ox Development calves are the main attraction on opening day — Mother’s Day Corp., a private nonprofit organization dedicated to the — at the farm. development and domestication of the musk ox, Ovibos Tour fees in combination with foundation grants and private moschatus. Teal’s youngest son, Lansing, oversees its oper- donations help the farm continue the mission John Teal began ations today, spending the greatest share of his days at the nearly 50 years ago. farm with the herd. “Perhaps the most meaningful support that the farm Every year, thousands of visitors stop by the farm during receives is the many entirely voluntary contributions made by regular tour times offered from Mother’s Day through late Sep- the Friends of the Musk Ox, the public membership arm of the tember. At the end of the summer, visitors anticipate the project,” explains Lance Teal. “A wide variety of people have impressive dominance displays of rutting bulls in preparing for contributed to the project. From ‘Herd Parent’ Alex Trebek of the breeding season. Jeopardy! fame to local volunteers lending a hand repairing The famous head smashing occurs between males vying for fences and fixing hay feeders, donors and volunteers have breeding privileges. Two males will engage in a ritualized dis- remained integral to the success of our work.” ■

10 March/April 2000 / Rural Cooperatives South African village banks receive World Bank funding

A South African financial services co-operative (“vil- development projects and to community members for lage bank”) was one of 44 projects to share in $5 million entrepreneurial and targeted investment activities. awarded during a World Bank competition for innovative The World Bank competition was modeled after a sim- community development proposals. The U.S. Department ilar competition in 1998 that awarded $3 million in start- of Agriculture’s Rural Business-Cooperative Service has up funds to World Bank staff. This year’s competition was been involved in a project under the auspices of the extended to organizations outside the bank. U.S./South African Bi-National Commission to assist in “It’s remarkable to see so many people from within the development of these so-called village banks. and outside the bank join in one very simple objective, The proposal, “Leveraging Local Savings for Local which is to see how we can do development better and Development,” received $60,000 in the competition. It address the issues of poverty,” said World Bank Presi- was selected from a group of 339 finalists from 60 coun- dent James Wolfensohn. “In the next 25 years, another 2 tries. The finalists were chosen from nearly 2,000 entries. billion people will share the world. Most of them will live Finalists set up booths in the atrium of the World Bank’s in poverty if we don’t take action now,” he said. “We headquarters in Washington, DC, and were asked to need ever more effective, innovative solutions to meet explain their projects to a panel of judges. this challenge. The development marketplace can help Wezi Ximaya, chief executive officer of the Financial bring our collective experience, knowledge and passion Services Association, a trade and financial services to bear in search for solutions.” association in South Africa, represented the project in Proposals offered ways to promote good government, the competition. According to Ms. Ximaya, the “local combat corruption, develop legal and judicial systems, savings for local development” proposal focuses on the strengthen financial and regulatory systems, and insulate role of a newly organized financial services cooperative the poor from crises. Ideas ranged from creating a center in an overall community development effort. The funds to train Moldova’s disabled children in crafts and special- will be used to conduct pilot community development ized enterprises to providing cultural sensitivity training projects in rural South African villages that already have for judges in indigenous areas affected by war in their own financial services cooperatives. Guatemala. Representing the development community The project was born out of rural South Africa’s deep- and private sector, jurors judged the proposals on origi- rooted mistrust of banks, and the unwillingness of com- nality, partnerships created, cost effectiveness, potential mercial banks to serve rural areas. Rural communities, for ownership for those who benefit the most and, above however, need funds for development projects and the all, expected impact on poverty. lack of financial services can thwart that effort. In addi- Susan Theiler, an agribusiness specialist on assign- tion, Ms. Ximaya indicated that community banking struc- ment to the bank from the U.S. Department of Agriculture, tures have tended to be institutionally weak and not inte- visited the event. “The visual impact of these displays is grated with local development priorities. really amazing,” she said. The solution was to redefine village banking to better For those who weren’t selected for awards, there is leverage local savings for local development priorities. still a chance for funding. “We’re keeping all proposals Working together, organizers, community leaders and on the Web and encouraging donors, foundations and residents created a sound, local institutional structure, a multilaterals to look at them to see if they can fund “village bank.” It also serves as a link to the formal finan- them,” said Mari Kuraaishi, one of the event’s key orga- cial sector. nizers. The village bank is operated by and for the community. Wolfensohn said he was working with the United It integrates the community’s development planning and Nations Development Program to try to link unfunded decision-making processes, and provides local deposit proposals with potential donors through Net Aid, the and withdrawal services for individuals. The bank also recently launched Website that acts as a clearinghouse makes loans to the community’s traditional authority for for donors and organizations. ■

Rural Cooperatives / March/April 2000 11 Strength through unity

Bulgarian honey producers sweeten their future through cooperation

By James Matson, early last century, but were con- Agricultural Marketing Specialist verted to collectives in the Soviet USDA Rural Development era. Traditionally, Bulgaria has a strong domestic honey market. ons of a medieval Bulgari- Foreign visitors to Bulgaria’s pop- an king debated who ular Black Sea resorts supple- S would rule after their mented domestic demand, which father’s death. The king has aided in the development of requested that a quiver of arrows be international markets. brought to him. He removed a single The 35,000 beekeepers arrow and causally snapped it in half. throughout Bulgaria make up the Then he removed the remaining arrows Bulgarian Beekeepers Union, from the quiver, held them out to his which tries to rectify deficiencies sons, and requested they break them. in the country’s beekeeping sys- The sons tried to break the bundle of tem. The Union functions as a arrows without success. The king then trade association, similar to Amer- told his sons that, individually, people, ica’s Beekeeper Federation or like the arrows, are easily broken, but National Corn Growers Associa- there is strength through unity. tion. The Beekeepers Union is Today, that lesson “Strength headquartered in the capital of Through Unity” is engraved in the Sofia, with regional representa- Cyrillic alphabet above the entrance to tives for its 1,700 local beekeeping the Bulgarian National Assembly in societies. Sofia. It’s become a time-tested phrase The years since the breakup of from Bulgarian history and one that’s the communist system in the early applicable across the cooperative 1990s have been tempestuous for world. Eastern Europe. The Bulgarian Bulgarian beekeepers, following this agricultural sector is no exception example, formed cooperatives to pur- to this turmoil. chase supplies and to market their honey During the communist era, production. In a country still undergoing collective farms, often larger than its transition to a market-driven econo- 20,000 acres, produced the major- my, individual producers work together ity of the country’s food. Com- to coordinate their efforts to create a mercialization and costs of pro- better situation for all the beekeeper- duction were not considered. zones in the south, to broad internal members. They’re learning the age-old Instead, central planners determined valleys, and then to mountainous ter- lesson of strength through unity. what would be produced and where it rain that covers 35 percent of the coun- would be shipped. In recent years, the try. As a result, farmers in different A traditional product collective farms were divided into regions produce many crops including Honey is a traditional Bulgarian smaller holdings, and private land own- fruits, vegetables and forest products. product. It has been produced in Bul- ership is being slowly re-established. This agricultural diversity results in garia for more than 3,000 years. Honey Bulgaria is characterized by micro- many varieties of honey. This range marketing cooperatives were created climates — from warm Mediterranean includes many specialty honeys, such as

12 March/April 2000 / Rural Cooperatives one produced from oak trees, that has a homes or in the dark, rich flavor, to other honey that neighboring coun- comes from bees that pollinate acacia tryside. Family and lime trees. members assist The Riga monastery is one of many architectural treasures found them with produc- in Bulgaria. Small-scale marketing tion activities. No Bulgarian beekeepers fall into two standard production Honey generates a substantial part general groups. Most producers man- practice or hive type is used, which leads of their income because inflation has age a small number of hives, though to a wide range of quality and volume eroded the value of their pensions. The there are a few large producers. differences. In addition, a single small number of hives managed by each pro- A typical small producer is more producer could have three different ducer is small, often 30 or less. The few than 65 years old, and usually a retired styles of hives in the same field. thousand dollars a small honey produc- white-collar professional such as a These small-scale producers market er can earn, however, has a large eco- schoolteacher or bookkeeper. Most of honey through personal contacts, home nomic impact in rural areas where these smaller producers have been bee- sales, and uncoordinated interaction annual income is even less than the keepers since their youth. Many with brokers. However, in rural com- national average of $4,000. recount how their first hive was given munities, more honey is produced than to them as a wedding present or how is demanded by local consumers. The Commercial-scale beekeepers they helped their parents with their excess honey is stored, sometimes for Large-scale or commercial produc- own bee management. years, in whatever containers the bee- ers typically manage between 150 and These producers live in smaller rural keeper has available until a broker 200 hives and production techniques communities and have hives at their shows up to buy it. are more standardized. They tend to know international production techniques and prices. On average, these large-scale producers are younger than small producers. Though production is more standardized among large producers, marketing practices vary. A few producers have developed markets and value-added products. Some are even trying to export their production. Yet, the majority of large-scale producers use the more informal marketing techniques practiced by small-scale producers. Differences between the two groups complicate the marketing situation for all producers. Key issues confronting the Bulgarian honey market are perceived differently by each group. On one hand, small producers are concerned with Many specialty honeys are produced in Bulgaria because of the country’s agricultural receiving a “fair” price and having access diversity, which ranges from warm Mediterranean zones to cool mountain ranges. to markets outside their local communi- Photos by James Matson. ties. On the other hand, large-scale pro-

Rural Cooperatives / March/April 2000 13 inputs and then markets the honey products. As with many start-up businesses, the cooperative has worked hard to improve its bookkeeping systems. It has also instituted production and quality standards. But designing a marketing plan that generates sufficient income for members and the capital necessary for future expansion is a major problem it confronts. Other issues management faces include the guarantee of a consis- tent, quality production and a focus on the right value-added products. Some producers also view the cooperative as a purchaser of last resort. To confront this problem, Agropchel is instituting marketing agreements with producers. In addition, a regional ware- The typical Bulgarian beekeeper is usually a retired, white-collar professional. house collection system and market segmentation for certifiable organic ducers complain of a lack of credit, a lack Seeking international expertise honey are being considered. of quality standards and a lack of markets Against this backdrop, the Bulgarian Bulgarian beekeepers face many chal- for their larger volumes. Beekeepers Union has sought the assis- lenges in their transition to a consumer- tance of international agencies such as driven market system. In their response, Regulatory and credit systems the USDA or ACDI/VOCA (a non- they are heeding the wisdom of their hamper business profit development organization). Rep- medieval king. By uniting to improve Nonetheless, all producers face the resentatives of these agencies have pro- the situation for the industry as a whole issues of low prices, the theft of hives, vided advice on ways to improve the and joining together to form commer- access to more markets opportunities, Bulgarian legal and financial frame- cial cooperatives, they are creating for accurate and timely market informa- work. And they coordinate their work themselves a sweeter future. ■ tion, bear control, and an inadequate with the Bulgarian government officials legal framework. Bulgaria as an to implement necessary local and emerging market-oriented economy is national changes. still creating the legal structure need- The producers recognize that an ed to foster business transactions. In improvement in the institutional addition, regulations only establish a framework represents only a partial minimum quality for honey, but do solution. The margin between the not distinguish between quality farmgate price and the price paid by grades. There are no mechanisms to the final honey consumer is quite wide. financially punish producers or bro- Consumer prices often are as much as kers that deliberately adulterate hon- five times higher than the farmgate ey, which negatively impacts the whole price. honey industry. In an attempt to retain more income Another challenge facing beekeepers for producers, the Beekeepers Union — especially large-scale producers — is assisted in the formation of the cooper- access to adequate credit. Agricultural ative Agropchel SA. It is a separate enterprises are regarded as old-fashioned commercial entity that operates on by urban Bulgarian lenders. A farm cred- behalf of its 700 members across the it system, where lenders are familiar with country. This supply and marketing production practices, does not exist. The cooperative for producers of honey and few producers who can obtain credit pay related products was organized in 1997 back more than 150 percent of the and was capitalized with 50,000 stock amount borrowed annually. shares. Agropchel sells production

14 March/April 2000 / Rural Cooperatives Foreign affairs

USDA Foreign Agricultural Service promotes U.S. agriculture abroad

By Karl Hampton export programs. creates another $1.28 in supporting USDA Foreign Agricultural Service Under the terms of a recent memo- activities to process, package, ship and randum of understanding, FAS will also finance products. This means that agri- re U.S. agricultural inter- be working closely with the USDA cultural exports currently generate ests represented overseas? Rural Business-Cooperative Service to $112 billion in total economic activity. A Does it matter whether help develop export marketing plans About 750,000 jobs are tied to agricul- they are or not? The for cooperatives that wish to sell agri- tural exports as well. answer to both questions is a resound- cultural goods overseas (see sidebar, ing “yes,” says Timothy J. Galvin, page 16). Market development administrator of USDA’s Foreign Agri- FAS programs help U.S. exporters cultural Service (FAS). “FAS represents Why U.S. exports matter develop and maintain markets overseas the diverse interests of U.S. agribusi- Established in 1953, FAS has for hundreds of food and agricultural ness — from farmers to food manufac- employees in about 70 overseas offices products, ranging from bulk commodi- turers — abroad,” Galvin says. It also covering more than 130 countries. ties to brand-name supermarket items. collects, analyzes and disseminates These offices link foreign buyers with Promotional activities are done primar- information about global supply and potential suppliers in the United States. ily in cooperation with nonprofit agri- demand, trade trends and emerging They also assist U.S. exporters in cultural trade associations, companies market opportunities. launching products in overseas markets that agree to plan, manage and con- The goal of FAS is to improve mar- that are often characterized by different tribute support staff and money. The ket access for U.S. products. To do this, food preferences, social customs and largest of FAS’ promotional programs the agency implements programs marketing systems. are the Foreign Market Development designed to build new markets and to In 1999, U.S. agricultural exports Cooperator program (FMD) and the maintain the competitive position of totaled $49 billion. A slight increase in Market Access Program U.S. products in the global market- export value is expected this year. (MAP). In addition, place. FAS also carries out food aid and Overseas markets account for one- FAS sponsors the market-related technical assistance pro- quarter of farm cash receipts. United States’ partici- grams, as well as operates a variety of According to USDA’s Economic pation in several Congressionally mandated import and Research Service, each export dollar major trade shows and a num-

Rural Cooperatives / March/April 2000 15 ber of industry exhibitions overseas each year.

International trade policy FAS coordinates and directs USDA’s international trade agreement programs and negotiations, working closely with the U.S. Trade Representative’s office. International trade policy experts within FAS help identify — and work to reduce — foreign trade practices that discourage U.S. farm exports.

Statistics and market information FAS collects global crop and livestock production data and import/export information from its attaches, ag traders, remote sensing systems and other sources. FAS uses this information to prepare production forecasts and assess export marketing opportunities, as well as track changes in policies affecting U.S. agricultural exports and imports. FAS publishes nearly 200 commodity reports per year that present a world picture of production, consumption and trade flows for about 100 crop and livestock commodities. These reports and much more information are just a click away through the FAS homepage at www.fas.usda.gov

Commercial export financing FAS provides exporters with short- Overseas markets account for a quarter of farm cash receipts in the United States and and intermediate-term commercial about 750,000 U.S. jobs are tied to agricultural exports. financing support through Commodity Credit Corporation export credit guar- USDA extends more help to small farms “There is no higher priority for USDA than working to farms. Under USDA’s Sustainable Agriculture Research and ensure the long-term survival and economic well-being of Education Program, the University of Vermont, University of America’s small- and medium-size family farms,” Agriculture Nebraska, University of Georgia and Utah State University will Secretary Dan Glickman said while announcing two new steps select and assist specific new marketing projects that will to help small farmers and ranchers find better ways to market benefit smaller farms. and export their products. “Expanded export opportunities and In addition, USDA will offer technical assistance to help improved marketing offer tremendous opportunities to boost small farmers and ranchers form cooperatives to export crops small-farm incomes during this time of depressed prices.” and livestock to international markets. Loans are available to USDA will provide $500,000 to help small farmers develop help finance the development of value-added processing at new ways to market their products, including direct selling to existing cooperatives. ■ restaurants and institutions, agri-tourism and pick-your-own

16 March/April 2000 / Rural Cooperatives antee programs. These programs pro- with USAID, other government agen- and its multi-faceted programs, visit its tect U.S. exporters or financial institu- cies, foreign governments, international website at: www.fas.usda.gov, or con- tions against risk if an importer’s for- organizations, universities and the pri- tact the Office of Outreach at 202-720- eign bank fails to make payment. The vate sector to achieve these goals. 7420, fax 202-205-9728 or e-mail at GSM-102/103 programs are designed For more information about FAS [email protected]. ■ to expand and maintain foreign markets for U.S. agricultural commodities, and may help developing nations make the transition from concessional financing to cash purchases. The Supplier Credit Guarantee Program guarantees payments on promissory notes from importers for a percentage of the face value up to 180 days. And the Facility Guarantee Program provides payment guarantees to facilitate the financing of manufactured goods and services exported from the United States to improve or establish agriculture- related facilities in emerging markets.

Concessional sales The United States is one of the world’s largest food-aid donors. Over the years, donated U.S. food has often meant life or death to victims of earth- quakes, floods, droughts and civil strife. The administration of U.S. food aid programs is shared by the U.S. Depart- ment of Agriculture (USDA) and the Agency for International Development (USAID). USDA has available three channels for providing food aid: the Public Law 480, Title I program, the Food for Progress program (FFP), and the Section 416(b) program.

Agricultural linkages International cooperation and development activities enhance the competitiveness of U.S. agriculture and preserve natural resource systems. These efforts help U.S. agriculture gain access to emerging technologies and international research, both of which are critical to creating new products, practices and markets. FAS also shares U.S. agricultural knowledge and assists low- and middle- income countries in building stable economies to battle hunger and pover- A global marketplace means consumers anywhere want products from everywhere. USDA’s Foreign ty while increasing their imports of U.S. Agricultural Service publishes nearly 200 commodity reports per year that present a world picture of agricultural products. FAS collaborates production, consumption and trade flows for about 100 crops and livestock commodities.

Rural Cooperatives / March/April 2000 17 Going global

Export certificates a valuable tool helping co-ops tap overseas markets

Alan Borst case is weak, because the lawsuits are approved export conduct. (It is impor- Ag Economist among the most costly. Cooperative tant to note that the COR program USDA Rural Development executives must consider the time and does not protect holders from foreign Rural Business-Cooperative Service resources that could be tied up and the antitrust litigation.) In addition, certi- prospect of paying triple damages if fied exporters receive the following hat tools allow busi- they are unsuccessful in defending a procedural advantages related to pri- nesses – in particular, lawsuit. Nearly all antitrust cases are vate antitrust actions. W cooperatives – to work filed by private plaintiffs. • There is a presumption that certi- together to market fied export conduct complies with products overseas? As businesses Export trade certificate of review U.S. antitrust laws. Plaintiffs bear increasingly compete in a global econ- U.S. policy makers have long recog- the burden of proving either that omy, it’s critical they understand the nized the benefits of horizontal export the agencies erred in their initial “ins” and “outs” of U.S. regulations coordination on member export earn- issuance of the certificate or that that can help them avoid antitrust liti- ings and competitiveness, and they conditions have changed so that an gation and capture higher export earn- have promoted it through the granting originally correct certificate is no ings. of limited antitrust exemptions — longer correct. Agricultural cooperatives have notably the Webb-Pomerene Act • If a certificate holder is found joined with cooperative- and investor- (WPA) of 1918. Agricultural coopera- liable, its liability is reduced from owned competitors to form joint tive members are also covered by the treble to single damages for dam- exporting groups throughout the past Capper-Volstead Act (CVA) of 1922, ages resulting from the certified 100 years. These export groups have which grants limited protections export conduct. been able to capture economies of size, against antitrust litigation in both • If the certificate holder prevails, to spread export marketing risks and domestic and foreign joint marketing it may recover attorney’s fees. costs across all members, and to operations. By the early 1980s, U.S. • Finally, there is a shorter increase each group’s ability to deal policy makers had concluded that the statute of limitations with foreign importers which are fre- WPA protections were inadequate, and within which plaintiffs quently organized as buyer cartels or thus passed the Export Trade Certifi- can bring an state trading enterprises. However, cate of Review (COR) antitrust pre- antitrust action such cooperative efforts may be cur- clearance program as Title III of the (relative to that tailed or not even undertaken because Export Trading Company Act of 1982. found in other of the threat of costly antitrust litiga- The COR program is administered U.S. antitrust tion. by the U.S. Department of Com- laws). Possible antitrust plaintiffs can merce’s Office of Export Trading Com- include competitors who are outside pany Affairs. Certificates are issued by the group, farmers who supply either the Secretary of Commerce, with the member or non-member firms, trading concurrence of the Attorney General. companies or other marketing interme- This program allows U.S. exporters to diaries which have some commercial submit specific joint export plans to relationship with the group, state attor- Commerce and the U.S. Department neys general, Federal antitrust regula- of Justice’s Antitrust Division. Certified tors, or even disgruntled firms from firms or associations are provided with within the group. The threat of immunity from federal and state gov- antitrust litigation is serious, even if the ernment antitrust suits with regard to

18 March/April 2000 / Rural Cooperatives Additional COR advantages ing toward negative on exclusive The COR program is voluntary and Cooperative exporters seeking pro- contracting arrangements; COR there are no application fees. Although tection or clarity regarding antitrust could immunize them. many applicants use legal counsel, the exposure have various options from • WPA is a general exemption; application form is intended to be easy which to choose, including the WPA, COR immunizes specific joint to complete by the applicant, and the the CVA, and the Business Review Let- export activities through a pre- Office of Export Trading Company ter (BRL) programs at the Justice clearance procedure, which pro- Affairs is available to provide pre-appli- Department and the Federal Trade vides greater certainty. cation counseling to interested appli- Commission. Depending on the • WPA, CVA, and BRL do not pro- cants at no cost. Decisions on certifica- exporters’ needs, the COR program vide any of the procedural advan- tion are done, except in extraordinary may provide the following additional tages allowed for in COR cover- circumstances, within 90 days from the advantages over some of the other age. day a completed application is accept- alternatives. • BRL is a specific but non-binding ed. Analysts, economists, and attorneys • WPA only covers joint exporters statement of the Department of from both the Commerce and Justice of goods; COR allows for coverage Justice’s position on reviewed con- Departments review and process the of both goods and services. duct; COR pre-clearance is bind- applications, with Commerce being the • WPA is limited to export associa- ing on the Justice Department and contact point for the applicant. The tions; COR immunizes one or other potential public plaintiffs process is intended to be user-friendly more firms in any organizational (unless circumstances have and additional information from appli- configuration. changed). cants is normally sought through con- • WPA associations are limited to • CVA covers only joint marketing ference calls. exporting; COR exporters may activity of farmers; COR potentially conduct import or domestic busi- covers any exporting firm, including Protection at a modest cost ness, though only their export investor-owned co-op competitors The COR program has been criti- business is covered. and other related channel cized for failing to meet inflated expec- • WPA is ambigu- members. tations regarding its macroeconomic ous lean- impact that surrounded its 1982 pas- sage by Congress. But, critics are mis- guided if they assess the program’s success or value by whether it has had an impact on the trade deficit or U.S. unemployment rates. It is best to consider

Illustration courtesy Exlaw.com.

Rural Cooperatives / March/April 2000 19 this program as one useful tool, among inasmuch as the CVA requires all mem- after start-up or have operated many, available to U.S. exporters. The bers of a cooperative to be agricultural sporadically and at the mar- success of any export venture depends producers. For example, courts have gin, with very limited sales on business realities and the efforts held that a nonproducer processor is volumes. A few of the certified export partners put into the venture. not an eligible agricultural producer groups, however, have been Nevertheless, if the threat of antitrust within the meaning of the CVA.... By very successful in their joint liability is of any concern, the COR using Title III certification, coopera- exporting activities. These are program offers some certainty and pro- tives can obtain immunity for their groups which, not coinciden- tection at a relatively modest cost. It export activities with noncooperatives, tally, have heavily used their should be noted that the costs to the while still retaining the CVA exemp- certification. The threat of government for running this program tion for domestic (and foreign) cooper- antitrust litigation tends to be are, likewise, modest (particularly when ative activities.” proportional to the potential compared with the potential liability to market power the exporters exporters using it). In addition, obtain- Co-ops use antitrust pre-clearance could collectively exercise ing a COR sometimes serves as a cata- It should also be noted that, in the through the group. The lyst for renewed export activities by 1996 Farm Bill, Congress encouraged greater the potential market certificate holders. the U.S. dairy industry to “establish power, the greater the poten- Congress made agricultural and maintain one or more export trad- tial damages to be won exporters a major target group for this ing companies under the [ETC Act]” through antitrust litigation. program. In Title I, Section 102 (a) (5) and authorized the Secretary of Agri- There are natural checks to of the Export Trading Company Act of culture to provide his advice and assis- the exercise of joint export 1982 Congress stated: tance as necessary. market power among certified “The Congress finds that...although Agricultural marketing cooperatives U.S. firms. Certification has the United States is the world’s leading have used the Export Trade Certificate almost always been sought for agricultural exporting nation, many of Review antitrust pre-clearance pro- joint exporting to new or unde- farm products are not marketed as gram for many purposes. Over 40 veloped markets. There are also widely and effectively abroad as they cooperatives have been certified in 18 the strong vertical market links could be through export trading com- different export groups since the first between these established U.S. panies.” certificate was issued in 1983. Much exporters and their importing partners, An important target sub-group of has been written about the potential who do not wish to confront horizon- these agribusinesses were agricultural benefits which COR offers to prospec- tally coordinated U.S. exporters. No marketing cooperatives. In 1986, Janice tive joint exporters, while little has examples were found of competing Payt, attorney advisor at the Com- been said about the experiences which exporters initiating horizontal coordi- merce Department’s Office of the certified firms have had with this pro- nation with respect to established Assistant General Counsel for Trade gram. export markets. Further, once vertical Development, made the case in the A series of interviews were conduct- relationships were developed between Journal of Agricultural Taxation & Law ed with executives from cooperative individual U.S. exporters and foreign that cooperatives could benefit from members of a majority of certified joint importers, horizontal coordination the COR program to strengthen their export marketing groups with coopera- tended to decline. market power: tive membership. Questions were asked “It may be advantageous to organize about how COR pre-clearance influ- Business relationships important an ETC [export trading company] as a enced their export grouping activities, A large proportion of the certified cooperative, and cooperatives can, as and what limits existed to undertaking joint exporting activities faced little members, form or otherwise participate the certified conduct. Some coopera- actual threat from potential antitrust in ETCs. Generally, cooperatives can tives reported that certification played a litigation. Nevertheless, there were use the ETC Act to obtain antitrust central role in enabling their export- industries with painful memories of protection not available under the CVA grouping venture by resolving serious past antitrust actions, and others with- alone and can combine the two statutes antitrust threats which would have oth- out a history of antitrust litigation, per to obtain optimum protection for erwise stopped the venture. Others se, but where relations among competi- export activities.... To obtain optimum reported that the certification was valu- tors were otherwise strained and litiga- benefits from joint exporting, coopera- able as inexpensive legal insurance, but tion of other sorts had been threatened tives may desire to enter into arrange- not absolutely needed for their ven- or taken. In these situations, certifica- ments with nonproducers. Such ture’s joint exporting activities. tion enabled even low-risk joint mar- arrangements fail to qualify for the Most of the certified groups with keting activities by providing assurance CVA [Capper-Volstead Act] exemption, cooperative membership failed shortly to highly risk-averse exporters.

20 March/April 2000 / Rural Cooperatives facilitate horizontal coordination from outside the industry. These ventures were typically less successful in promoting joint exporting than were certificates directly sought by exporters.

Overall satisfaction with COR The COR program is a tool which has been used to free several cooperatives from antitrust fears. Some cooperatives have been protected from the active threat of non-member farmer lawsuits, while others have been freed from the threat of litigation from other sub-sector stakeholders from outside the group. However, antitrust litigation was treat- ended in one instance when a certificate holder used its certificate to protect its joint exporting arrangement with a disgruntled cooperative supplier that had earlier threatened the holder with antitrust legal action. Over 40 cooperatives have been certified in 18 different export groups under the COR antitrust Most cooperative and ETC execu- pre-clearance program. Research shows they are generally satisfied with the protection it provides against antitrust litigation and how that enables higher export earnings. tives reported receiving certification for almost all of their joint exporting plans, although a few compromises were nec- Most of the respondents reported One area in particular where certifica- essary. All expressed appreciation for that the importers with whom they tion has proved useful is in legitimating Commerce’s COR staff, and they had dealt were also horizontally coordinat- political relationships between U.S. com- no complaints about the overall process ed, either as state trading enterprises modity associations and foreign govern- of obtaining and maintaining their cer- with some measure of publicly con- ments. Certification helped U.S. com- tification. Respondents valued the role ferred authority, or as buyer cartels that modity groups to: 1) administer tariff of Commerce, which they perceived as presented a united marketing front. export quotas granted by a foreign eco- being business-friendly and as the main Thus certification enabled the exercise nomic union; 2) negotiate a suspension contact point in the process. They also of countervailing power against coordi- agreement to terminate an anti-dumping view Commerce as the liaison for inter- nated importers. investigation brought by a foreign gov- actions with Justice, which is perceived The business culture among the joint ernment; and 3) implement phyto-sani- as less business-friendly because it is an exporters was another determinant of tary requirements imposed by importing- enforcement agency. their capacity to actually undertake the country agricultural officials. This has In summary, cooperatives and the activities for which they were certified. allowed commodity groups to take active certified export marketing groups to The potential efficiencies some certified and coordinated roles in governing their which they belong have been generally groups possessed went unused when dis- export markets on important issues. satisfied with the protections provided trust and suspicion fueled rivalry over Several cooperative executives by the COR program against the threat cooperation. Conversely, where reported that certified joint exporting of potential antitrust litigation. A major- exporters knew and trusted each other was undertaken in conjunction with oth- ity of cooperative exporters have not well, some export activities were success- er horizontal coordination, as exercised sought certification, and many of those fully implemented. under Federal marketing orders, infor- who obtained it have never effectively Most of the certified export groups mation-sharing cooperatives, and bar- used it. But for those who have used were coordinated by a commodity asso- gaining cooperatives. Some of these oth- their certification to resolve active ciation, which usually established a dis- er entities provided financing and other antitrust threats or to assure otherwise tinct entity to administer the joint mar- support for the joint exporting efforts. anxious competitors, and who have sub- keting activities. This served the Some COR program applicants sequently engaged in joint export mar- purpose of preserving the commodity were third parties, such as economic keting activities, the COR program can association’s eligibility to receive export development specialists or trade associ- be fairly credited with having enabled promotion funds and services. ation staffers, who were seeking to their higher export earnings. ■

Rural Cooperatives / March/April 2000 21 A CLOSER LOOK AT... Mt. Pride Cooperative Inc. Mt. Lake Park, MD

Co-op type: Founded in 1997, Mt. shares are $50 each. lets under the cooperative’s own label. Pride is the home of USDA-inspected Geographic area: There are many The rabbit meat has been sold in about rabbit, goat and lamb growers. members in the cooperative stretching 400 Shop N Save, Foodland, Country from Maryland, Virginia and North Market and SuperValu supermarkets in Service provided: With the help of Carolina west to West Virginia and the membership region, as well as some local cooperative extension agents, Pennsylvania. However, fewer than 50 Ohio stores. members are especially developing growers supply the majority of meat rabbit production practices, processed at Recent developments: experimenting with new products, and Country Pride James I. McNitt, a coordinating their efforts to supply Meats, noted rabbit over 1,500 pounds of rabbit fryers to Friendsville, researcher at major supermarket chains. Md., one of only Southern three USDA- University, Baton Production Coordinator: Paige inspected rabbit Rouge, La., has Dopson, program assistant, Garrett processors in found that consumers County Cooperative Extension Service, the country. want rabbit parts while Maryland, who also serves as treasurer. only whole rabbits are usually available. Even Board: A 10-member board of small Product highlights: Rabbit production though whole fryers are the mainstay, producers governs the co-op. Its hit an all-time high in the war years of Mt. Pride members are considering officers include President Barbara the 1940s. With meat scarce, families in other types of value-added products as Harvey, Moatsville, W.V.; Vice rural and urban areas supplemented their rabbit supplies increase. Extension President Charlotte Koontz, Philippi, diets with home-grown rabbit. In the agents Ron Swope, Marion County, W.V.; and Secretary Ieda Darnell, late 1940s and early 50s, domestic rabbit W.V.; Jim Simms, Garrett County, Bruceton Mills, W.V. Membership was common in meat departments in Md.; and Melanie Barkley, Bedford certain areas of the County, Penn.; are helping develop United States and it basic rabbit production practices. sold for about the same Members and their processor are price as chicken. While exploring both smoked and marinated the poultry industry rabbit; experimenting with products moved ahead in such as “rabbit wings,” using the production and foreleg in a sauce; and studying the marketing techniques, possibility of rabbit sausage. The co- the rabbit industry op is also networking with the meat lagged. Now Mt. Pride goat industry to organize a channel members are marketing for direct marketing of goats and whole fryers, taken at lambs to processors so more money 4.5 to 6 pounds, live can be returned to farmers. weight. Cooperative mem- For more information: Mt. Pride In-store food sampling by co-op members relates to consumers bers also market goat Cooperative, Inc., 1916 Maryland Hwy. that rabbit is USDA inspected, 95 percent fat-free, versatile and and lamb. However, Suite A, Mt. Lake Park, MD 21550; has an exceptional gourmet flavor. that meat isn’t marketed (301) 334-6960; fax 334-6961; or Photos courtesy Mt. Pride Cooperative Inc. through retail store out- www.mtnpride.com.

22 March/April 2000 / Rural Cooperatives Why U.S. agriculture should support foreign aid

By Perry Letson United States must pursue foreign assis- Assistant Vice President of tance that conforms to the demographic Communications realities. To the extent the aid is agricul- ACDI/VOCA ture-oriented, it will be more effective at accomplishing broad-based economic oreign aid” is a term development and more likely to cultivate “ that often provokes new customers for U.S. farm products. F intense debate. How- ever, besides benefit- Agricultural aid in decline ing the needy, U.S. foreign assistance is Yet agricultural aid from all industri- a wise investment in our own economic José Artigas of Farmers Commodities alized nations plummeted almost 50 per- fortune. This is especially true when the Corporation in Egypt on an ACDI/VOCA cent in real terms over 1986-96. The aid is devoted to agricultural develop- project to strengthen Egypt’s grain indus- United States is leading the decline. ment. American agriculture must look try. The Des Moines co-op discovered Fifty years ago, the United States beyond current difficulties and support opportunities in its field of agricultural risk provided almost two-thirds of all the strategic agricultural aid overseas. management and today has a thriving foreign assistance in the world. Now It is well established, though coun- office in Cairo. Photo courtesy ACDI/VOCA. we rank last among the 21 industrial- terintuitive, that broad-based agricul- ized nations (according to the Orga- tural growth in developing countries picture. While large global supplies nization for Economic Cooperation boosts ag imports from the United and weak import demand have in and Development) in percentage of States. When people in developing recent years hurt U.S. farm exports, the GNP per capita devoted to humani- nations earn disposable income, they Food and Agricultural Policy Research tarian assistance abroad. In actual spend it on improving their diets. Institute projects that over the next 10 donations, we rank behind Japan, According to the International Food years the value of exports will increase Germany and France – nations with Policy Research Institute, each dollar by more than 40 percent. In 1998 Sec- much smaller populations than the increase in developing-country farm retary Glickman put it succinctly: United States. There has been a 40 output leads, on average, to 73 cents in “Without world markets, the U.S. farm percent erosion in U.S. aid (in real imports from the United States, economy goes in the tank.” dollars) over the last decade, and including 24 cents of agricultural Wayne Boutwell, former president of we’ve closed 28 missions of the U.S. imports from the United States. the National Council of Farmer Coop- Agency for International Develop- Agriculture is a critical engine for a eratives and now president of Southern ment (USAID) since 1993. nation’s economy because, on average, States Cooperative, said in 1996 that From an agricultural marketing a $1 increase in ag production gener- “over the next 50 years, 94 percent of the standpoint, this is folly! Other nations ates $2.32 worth of growth in the over- growth in population-based food – our competitors – are becoming all economy. And agricultural assis- demand will occur outside the industrial- more generous and more strategic with tance works: U.S. investments in better ized countries. This is where the battle their aid programs as we shrink from seeds and farming techniques have will be fought for world markets.” our rightful role as world leader. helped feed an extra billion people in While our traditional agricultural The actual amount of the federal the developing world since the early markets in Europe and Japan are matur- budget devoted to foreign aid is less 1960s. ing, developing countries offer accelerat- than 1 percent. According to a Univer- ed population and economic growth. sity of Maryland poll, a majority of Exports: key to U.S. ag success China’s economy alone is expected to Americans believe the United States Today, agriculture is the bright spot triple in seven years! Unless we want to spends 15 percent or more of the fed- in a gloomy U.S. balance of payments be left behind in global competition, the eral budget on foreign aid. The same

Rural Cooperatives / March/April 2000 23 respondents believe the proper amount by approximately 80 million per year. future in which diseases more easily should be about 6 percent. U.S. farm cooperatives and farm cred- become pandemics; a future in which Congressional support for foreign it banks have a proud history of help- we’ll eventually discover that an enor- aid has ebbed in recent years. Too ing those in need overseas. CARE, mous amount of the world’s vital many Americans misunderstand the ACDI/VOCA and its predecessor genetic diversity is reposed across our win-win aspect of international eco- organizations – Agricultural Coopera- border in remote rain forests or on nomic development and are cynical tive Development International and mountain terraces. because past aid in certain cases Volunteers in Cooperative Assistance propped up dictators. In general, we – as well as NCBC, NRECA and oth- More than money Americans say we support the idea of er organizations have carried the Seat-of-the-pants economists may development and humanitarian assis- co-op banner to the far corners of the say that private investment in the tance, and we tend to be generous world, creating prosperity and inject- developing world has soared in the past when disaster strikes. However, citizen ing the democratic values and effi- few years from $30 billion in 1987 to support for aid is more a latent value ciency of co-ops where they are most near $200 billion today and that this than an urgent, activist concern, and needed. Today, with world markets massive infusion of money will make all Capitol Hill has consequently treated it beckoning, U.S. farmers can’t afford the difference. Right? Unfortunately, as a low priority. to be isolationist; they must support no. In most cases, it only makes the strategic foreign aid. rich richer. The vast majority of this A history of success There are many ways of looking at private investment went to a mere There’s no denying that U.S. for- foreign assistance. It’s investing in handful of nations – less than three eign assistance has had remarkable people so that they can join the global percent went to all sub-Saharan Africa. success. Since the inception of the information and economic order. It’s Private investment will not bring about Marshall Plan in 1947, America has leveraging the limited resources of broad-based global economic prosperi- provided vital resources, development governments to build indigenous ty. There must be government and civil models (including cooperative forms skills and promote private initiative. society intervention to make aid equi- of business and banking), and critical Ultimately, it’s a process of making table. know-how around the globe. From friends and creating customers over- Whether it’s helping to organize France, Italy, Germany, Spain and seas in stable political environments – smallholder farmers in Malawi to cap- Japan in the post-war era, to Thai- customers who have money to spend ture market share from colonial-style land, Chile and Costa Rica in more and look to America as a worthy help- plantations, or teaching marketing to recent years, foreign aid has brought mate and a reliable supplier of quality bakers in Romania, or bringing cooper- tremendous gains. goods. ative banking back to Poland, In the 1950s and early 1960s, the Ted Turner says, “We cannot save people-to-people, private four developing countries that the United States in the long haul enterprise-based development assis- received the most U.S. aid were without saving the whole world. We tance is inexpensive in the long run Brazil, Korea, Taiwan and Turkey. cannot throw up walls at our borders especially if it helps avert crises. The Today, we have over $100 billion in or set tariffs on imports. We cannot prosperity it brings will pay off mani- trade with each. Now South Korea escape environmental degradation of fold for market-hungry American agri- each year buys U.S. goods that are our foreign neighbors. Why create culture. worth more than all the assistance refugees when we can cultivate buy- We, as a people, must not miss the provided to that nation since 1962. ers?” opportunity to be good leaders, to be In addition, there have been Howard Shultz, CEO of Starbucks, good businessmen and to be good astounding benefits to American agri- adds, “Supporting global development period. If we’re serious about finding culture: Wheat varieties with dwarf- is not charity – it’s an investment. new markets, about creating new ing genes found in Asia as part of a And, it’s the right thing to do.” business opportunities for American USAID program are now grown on The new world economy is based companies in this competitive envi- almost two-thirds of the area under on democracy and trade: currently, ronment, we must recognize that we wheat cultivation in the United American foreign aid, what there is of have a vested interest in helping the States. it, is becoming more business-orient- developing world – especially in agri- ed, and trade barriers are inevitably culture. ■ Co-ops: a natural at international coming down. The United States economic development must be engaged overseas to prepare Opinions expressed by guest columnists Even with the gains, 800 million for a future in which more and more in Rural Cooperatives magazine do not people are still chronically hungry, customers will have names that are necessarily represent those of the U.S. and the world population is increasing harder and harder to pronounce. A Department of Agriculture.

24 March/April 2000 / Rural Cooperatives MANAGEMENT TIP How Does Your Local Farm Supply Cooperative Rate?

By Beverly L. Rotan financially strong marketing and supply during the past year. Was its perfor- Economist cooperatives to add some certainty to mance higher, lower or about the same USDA Rural Development an uncertain world. But a cooperative is as the average of a cross section of local Rural Business-Cooperative Service not a panacea, and managers and direc- farm cooperatives with similar factors? tors need to constantly monitor all The two tables below contain aver- ith farm commodity aspects of the cooperative operation to age financial data compiled from a sur- prices severely make certain it is returning a good val- vey of 329 cooperatives for 1997 and W depressed and thou- ue to its members. 1998. These include trend and industry sands of producers all One way to measure the success of norm comparisons. Fill in the blanks across the nation struggling for their your farm supply cooperative is to and compare these benchmarks with economic survival, most farmers could compare it with the performance of your cooperative’s financial data. improve their odds by belonging to cooperatives with similar functions So how is your cooperative doing? ■ Table 1—Compare your farm supply cooperative 1/ with averages for cooperatives with similar functions.

Size (1997) 2, 3/ Size (1998) 2, 3/ Your Measure/Item Unit Small Medium Large Super Small Medium Large Super cooperative Sell farm supplies only Percent 85 60 41 10 85 60 41 10 Total assets Mil. dol. 1.6 4.1 7.4 14.0 1.6 4.3 7.9 15.4 Long-term debt Thou. dol. 90.0 342.0 661.2 786.3 88.1 361.7 759.4 1,284.4 Total liabilities Thou. dol. 404.6 1,287.0 2,646.5 5,544.1 405.6 1,324.3 2,937.2 6,055.9 Total sales Mil. dol. 2.9 7.2 13.3 24.9 2.6 7.0 12.7 26.0 Total service revenue Thou. dol. 48.1 204.1 320.1 665.9 56.2 201.7 321.7 686.5 Total revenue Mil. dol. 2.9 7.7 14.1 26.5 2.7 7.2 13.5 27.6 Net income (losses) Thou. dol. 115.4 335.5 642.2 1,159.2 85.7 300.3 506.8 1,049.4 Labor of total expenses Percent 54 51 53 54 54 51 53 55 Patronage refunds received Thou. dol. 67.1 184.9 319.5 761.6 70.5 184.2 333.3 790.2 Liquidity ratios Current Ratio 2.39 1.90 1.51 1.42 2.35 1.90 1.40 1.41 Quick Ratio 1.42 1.05 0.80 0.71 1.38 1.05 0.75 0.63 Leverage ratios Debt to asset Ratio 0.11 0.13 0.16 0.18 0.09 0.12 0.17 0.19 Debt to equity Ratio 0.08 0.12 0.14 0.09 0.07 0.12 0.15 0.13 Times interest earned Ratio 7.37 7.47 6.27 7.30 5.87 6.83 5.37 5.88 Activity ratios Fixed asset turnover Ratio 7.87 6.81 5.86 6.68 6.62 5.97 5.02 5.79 Total asset turnover Ratio 1.78 1.76 1.80 1.78 1.57 1.57 1.60 1.68 Profitability ratio Gross profit margins Percent 16.99 16.64 18.65 16.12 17.86 18.15 19.56 15.88 Return on total assets before interest and taxes Percent 9.12 10.01 10.97 10.57 6.81 8.76 8.30 8.85 Return on total equity Percent 10.05 11.87 13.49 13.68 7.20 10.21 10.13 11.22

1/ 100 percent of sales were generated from farm supply sales. 2/ Small = Sales are $5 million or less; medium = over $5 million to $10 million; large = over $10 million to $20 million; and super = over $20 million. 3/ There were 329 cooperatives surveyed in both years.

Rural Cooperatives / March/April 2000 25 Table 2—Compare your mixed farm supply cooperative 1/ with averages for cooperatives with similar functions.

Size (1997) 2, 3/ Size (1998) 2, 3/ Your Measure/Item Unit Small Medium Large Super Small Medium Large Super cooperative Market farm products and sell farm supplies Percent 6 19 24 19 6 19 24 19 Total assets Mil. dol. 1.1 3.7 8.3 16.2 1.1 3.9 8.6 17.4 Long-term debt Thou. dol. 27.9 479.4 1,063.2 2,029.7 116.0 571.2 1,117.8 2,094.0 Total liabilities Thou. dol. 399.1 1,380.0 3,293.8 8,099.2 342.8 1,467.2 3,381.7 8,594.6 Total sales Mil. dol. 2.7 7.9 14.6 34.9 2.5 7.3 14.4 34.3 Total service revenue Thou. dol. 60.6 251.3 550.1 1,102.9 65.6 293.8 598.5 1,224.7 Total revenue Mil. dol. 2.9 8.4 15.6 36.9 2.6 7.8 15.5 36.4 Net income (losses) Thou. dol. 14.3 232.8 377.2 868.3 34.2 233.0 388.1 941.9 Labor of total expenses Percent 51 48 51 48 51 49 51 49 Patronage refunds received Thou. dol. 27.9 125.8 345.6 634.9 31.8 126.6 365.2 662.6 Liquidity ratios Current Ratio 1.54 1.74 1.44 1.36 2.33 1.70 1.30 1.32 Quick Ratio 0.80 1.07 0.81 0.64 1.18 0.94 0.68 0.59 Leverage ratios Debt to asset Ratio 0.14 0.17 0.20 0.25 0.20 0.19 0.20 0.25 Debt to equity Ratio 0.04 0.21 0.21 0.25 0.16 0.24 0.21 0.24 Times interest earned Ratio 1.70 4.47 3.61 3.20 2.53 4.68 3.37 3.32 Activity ratios Fixed asset turnover Ratio 11.83 7.39 5.80 7.98 10.29 5.72 5.06 7.19 Total asset turnover Ratio 2.49 2.17 1.76 2.15 2.31 1.87 1.66 1.97 Profitability ratio Gross profit margins Percent 11.17 12.37 14.51 13.45 12.47 13.31 15.58 15.10 Return on total assets before interest and taxes Percent 4.00 8.96 6.82 8.35 5.83 8.03 6.75 8.36 Return on total equity Percent 2.03 10.25 7.49 10.70 4.73 9.66 7.37 10.64

1/ 50 to 99 percent of sales were generated from farm supply sales. 2/ Small = Sales are $5 million or less; medium = over $5 million to $10 million; large = over $10 million to $20 million; and super = over $20 million. 3/ There were 329 cooperatives surveyed in both years.

Land O’Lakes buys butter business Land O’Lakes Inc., Arden Hills, Minn., recently announced its purchase of Madison Dairy, a 95-year-old, family-owned business in Wisconsin’s capital city. The butter plant is the city’s 18th largest business, employing 80 and tallying $290 million in revenues last year. Madison Dairy, owned by the Steinhauer family, produced 15 percent of the nation’s butter in 1999. Land O’Lakes controls about 33 percent of the U.S. butter market. The deal will allow the co-op to add a major production facility to its current roster of butter plants in Faribault, Minn.; Carlisle, Pa., Kent, Ohio; and Tulare, Calif. In other news involving LO’L: •LO’L and Alto Dairy Cooperative are studying whether to construct a jointly owned cheese plant in Wisconisn that would be the state’s largest. It could handle up to 6 million pounds of milk daily — or about 600,000 pounds of cheese a day. •LO’L and Cooperative Business International Inc. have formed Specialty Grains LLC, a partnership which will integrate seed contracting, and the marketing and delivery of specialty grains to overseas customers. The key to Specialty Grains will be an integrated, formalized contract production system. The original focus of the venture is expected to be identity preserved soybeans and white corn. •LO’L, Cenex Harvest States Cooperatives and Farmland Industries announced that Agriliance LLC will be the name of the agronomy marketing joint venture between the three regionals. It maintains marketing and sales offices in St. Paul, Minn., and Kansas City, Mo. Agriliance was originally proposed in anticipation of a unification between Cenex Harvest States and Farm- land which did not receive the necessary member approval. This alliance is not contingent on a Farmland and Cenex Harvest States unification. Agriliance will be the largest North American crop input provider; marketing approximately 15 million tons of crop nutrients, $1.7 billion of crop protection products, and $300 million of Croplan Genetics seed.

26 March/April 2000 / Rural Cooperatives NEWSLINE

Welch’s sales soar; advertising campaigns. Welch’s ads tar- through a combination of McLean Pokeman coming! get families and feature cute kids. New County Service and Woodford FS in For many ag co-ops, 1999 was a year market efforts include a sponsorship of Illinois. Farmer-members of the two they’d rather forget. One exception: I-Village, a Website that caters to Growmark Inc.-member cooperatives Welch Foods Inc. of Concord, Mass. women. And soon Pokemon characters elected Dan Kelley, Normal, board Thanks to new products, wider distrib- will be enlisted in a Welch’s promotion. president; Rick Dickinson, Congerville, ution and studies that tout the health Also stimulating demand is medical vice president; and Darwin Builta, Bell- benefits of grape juice, the marketing research that Welch’s has supported. flower, secretary-treasurer. Other arm of the National Grape Cooperative This research claims that white grape directors on the new board include Association Inc., recently out-per- juice may be the easiest juice for a Mark Newmann and Kent Hodel, both formed much of the industry. Over the young child to digest and that purple of Metamora; Irvin Bane, Bellflower; past eight months, Welch’s has seen grape juice is as good for the heart as Russel Johnson, Chenoa; Jerry Wisted, monthly sales running more than 20 red wine. McLean; Lynn Rader, Bloomington; percent above the previous year’s levels, What’s really impressive about last and Paul Duzan, Colfax. said Daniel P. Dillon, Welch president year, according to Dillon, is that about Evergreen FS serves 4,200 farmers, and CEO. one-third of sales came from new prod- providing them fuel, fertilizer, LP gas, Most members grow their grapes in ucts introduced within the past five agrifinancing, precision farming and Michigan, New York, Ohio, Pennsylva- years; in the early 1990s, new products grain marketing and storage services. nia, Washington state and Ontario. As accounted for about only 10 percent of The co-op employs 250 people, with its grapes thrive, many other farm prod- overall sales. main office in Bloomington. Woodford ucts are hurting. The co-op may be FS posted 1999 sales of more than $11 thriving because it’s doing a good job Merger creates Evergreen Co-op million. McLean County Service com- fulfilling its purpose: maximizing prof- McLean County Service Co. mem- pleted its third-best year with sales its and preserving the long-term liveli- bers recently attended their final annu- exceeding $77.8 million. Doug Oehler, hood of members by stimulating al meeting, followed by the first board former McLean County Service gener- demand through marketing efforts and meeting of Evergreen FS, created al manager, remains in that position,

Welch’s new Pokeman jelly jars are sure to be a big hit with the public. Photos courtesy Welch’s. Rural Cooperatives / March/April 2000 27 while Bob Eichelberger, former Wood- ford FS general manager, takes over as assistant manager of operations.

Ag Council salutes Steve Easter Minnesota power alliance established Steve Easter, who recently retired Minnkota Power Cooperative, Inc., will work with Minnesota Power, after a long career as vice president of member and government relations for Inc., and Great River Energy in an alliance to optimize about 4,000 Blue Diamond Growers, was honored megawatts of generation assets. The alliance will also combine the power with the Co-op Career Professional supply assets and customer loads for all three companies and will result in Award for 2000 during the 81st annual a larger resource base to help mitigate risk in volatile power markets. meeting of the Agricultural Council of MPEX, a division of Minnesota Power, will provide power trading, least California in Sacramento. Easter was cost supply and risk management services for the combined operations. saluted for his 32 years of service to The companies plan to complete alliance details by summer. agricultural cooperatives. He continues to serve as a director “This is the right thing to do in today’s energy marketplace,” said of the Almond Board of California and Dave Loer, president and CEO of Minnkota. It is a consumer-owned is past president of the Almond Hullers generation and transmission cooperative serving 12 distribution co-ops. and Processors Association. Easter is Its service area, approximately 35,000 square miles, is in northwestern also a former chairman of the Agricul- Minnesota and eastern North Dakota with a population of 300,000. Its tural Council of California and mem- generating facilities are among the lowest-cost producers of electric ener- ber of the Advisory Committee on Horticultural Trade to the Secretary of gy in the country. Agriculture and the U.S. Trade Repre- sentative. He also served as chairman of the American Institute of Cooperation. Viewer Improvement Act (SHVA). crafted a bill that not only offers signif- Bob Phillips, president and CEO of icant incentives to address the crisis, Rural Utilities sells debt securities the National Rural Telecommunica- but a bill that puts the right agency — National Rural Utilities Cooperative tions Cooperative (NRTC) hailed the Department of Agriculture’s Rural Finance Corp. (NRUCFC), Washing- approval of the “Rural Local Broadcast Utilities Service (RUS) — in charge of ton, D.C., filed to sell up to $300 mil- Signal Act” by the House Ag Commit- administering the local broadcast signal lion in debt securities. Combined with tee as “a major step toward bridging program,” he said. “The telecommuni- $100 million in previously registered the ‘digital divide’ looming in rural cations loan guarantee program admin- securities, the offering is worth $400 America.” Phillips’ comments came fol- istered by RUS has a 100 percent million, according to the self registra- lowing a 41-0 vote by the committee to repayment record – not one dime of tion filed with the Securities and approve the bill, which contains $1.25 taxpayer money has ever been used to Exchange Commission. billion in federal incentives to assist cover a loan default,” he said. The non-profit Herndon, Va.-based non-profit organizations in providing cooperative provides financing to sup- local broadcast television services to SD co-op plans egg production plant plement the loan program of the U.S. rural areas. Dakota Layers Cooperative received Agriculture Department’s Rural Utili- “The Committee sent a clear mes- a $48,000 grant to plan an egg-produc- ties Services. The proceeds from the sage – rural Americans are not second- tion plant that would house 750,000 offering will be added to NRUCFC class citizens and they deserve access to hens. The money comes from the general funds which will be used to the same news and information services South Dakota Governor’s Office of make loans to members, repay debt, as urban Americans,” Phillips said. Economic Development to study the refinance long-term debt and other “H.R. 3615 is the right bill at the right feasibility of a plant north of Flandreau, corporate purposes. time to address the lack of access to reports Scott Ramsdell, president and broadcast signals in vast areas of the founder of the farmer-owned coopera- NRTC praises House Ag Committee country,” he said. tive. for moving to close ‘digital divide’ Phillips praised the co-authors of The $41.5-million plant would cre- The U.S. House Agriculture Com- the legislation, Reps. Bob Goodlatte (R ate 15 jobs. It will use 650,000 bushels mittee voted in mid-February to bring -VA) and Rick Boucher (D -VA) along of corn and tons of soybeans. The co- the benefits of local satellite TV broad- with Rep. Charles Stenholm (D -TX) op has held a public meeting to discuss casts – and perhaps high-speed Internet for moving quickly to provide the the plan and has taken an option to buy service – to the half of America over- incentives. “They understand the plight a quarter section of land. The plant looked in last year’s Satellite Home of rural consumers, and they have would consist of 10 barns, and the site

28 March/April 2000 / Rural Cooperatives would feature a processing plant to group purchasing. The businesses may buyers bargain reasonably and seriously grade, clean and package eggs. In addi- be trading on the good will that the with grower cooperatives they recently tion, a mill is being proposed to con- public has for cooperative businesses or had done business with. vert locally grown corn and soybeans may be ignorant of cooperative operat- into feed. Ron Wheeler, the state’s eco- ing principles. “Regardless of the rea- Tri Valley Growers sues Oracle nomic development commissioner, said sons for these false claims, NCBA’s mis- Tri Valley Growers of California the plant would be a boon to Flan- sion is to support and protect announced a lawsuit against Oracle dreau. Local businesses ranging from cooperative enterprise,” he said. Corp., alleging fraud, negligent mis- electric cooperatives to main street The association will rely on mem- representation, malpractice and breach business should see increased business, bers and other interested cooperators of contract because the Redwood City, he said. to keep it informed of potential prob- Calif., software developer allegedly lem businesses. Indeed, the new initia- failed to fulfill its promise to modernize Small Poultry Processor Co-op tive was prompted by a call to the asso- the food co-op’s production and man- Planned ciation about the status of a business agement systems. TVG is asking for Karen Machetta, a central Missouri promoting itself as a cooperative when more than $20 million in damages. The woman who uses organic methods to that was not the case. NCBA’s response lawsuit follows Oracle’s alleged refusal raise free-range chickens north of to such cases is a two-stage program. to accept responsibility for a failed ven- Columbia, says a poultry processing When a questionable business is identi- ture into enterprise resource planning plant would let small producers com- fied, NCBA will contact the business to (ERP) software. pete with large corporations. Farmers determine whether it is operating as a TVG retained Oracle in 1996 to would be able to bring birds in for pro- cooperative. If it is determined to be a install ERP software that would cessing and USDA inspection. Her non-cooperative, NCBA will first edu- enable the co-op to integrate and effort received a boost with a $7,180 cate the business about cooperatives computerize its operations – from raw grant for consultants’ services for the and help it truly become a cooperative. product delivery to finished goods project. The money came from the The initiative harkens back to the distribution. For TVG, this modern- Missouri Value-Added Grant Program beginnings of the association in 1916. ization of production and manage- of the state’s department of agriculture. At that time, James Peter Warbasse, ment meant computer systems at nine Last year, Machetta received association president, exposed a num- factories employing more than 9,500 $10,000 to study demand for the plant. ber of stores calling themselves cooper- workers, processing more than 1 mil- She had hoped the latest grant would atives that were not democratically lion tons of fruit and vegetables annu- be enough to build the plant, but pro- controlled or run, but were instead ally, and distributing and marketing gram manager Tony Stafford said capi- generating substantial profits for a few 15,000 Stock Keeping Units (skus), 24 tal expenses are ineligible. One possi- people. brands and thousands of private label bility is for farmers to organize a food products domestically and inter- cooperative. Larry Kieffer, a farmer in Tomato co-op files canner complaint nationally. Macon, has been working on such a The California Tomato Growers According to TVG’s lawsuit, Ora- project but said his efforts are in a very Association, a Stockton-based coopera- cle’s ERP solution never worked. early stage. Kieffer said the plant would tive of canning-tomato growers, filed Rather than correct the problem, admit be very important to small farmers. In a an unfair trade-practices complaint failure or provide the promised level of 1999 survey, nearly 300 farmers against Sun Garden-Gangi Canning support to make the system work, Ora- expressed interest in a processing plant Co. The Association claims that the cle blamed TVG’s computers and its and co-op that could help them market Riverbank canner has cut out every lack of technical expertise. The co-op birds. The survey showed farmers association grower and 100 percent of reports it abandoned the investment would produce 96,000 chickens, 4,500 their tonnage from Sun Garden-Gan- and retained another vendor. TVG pheasants and 14,000 ducks. gi’s contracted tonnage for the 2000 filed its lawsuit in California Superior crop year. Court. Founded in 1932, TVG NCBA to help ‘false’ co-ops become Facing lingering surpluses from last processes and markets nearly half of the real year’s bumper crop, Kevin Gangi said canned peaches, pears and apricots and The National Cooperative Business that a number of canners have cut back close to 10 percent of the canned toma- Association (NCBA) has announced an on contracts for the upcoming harvest. to products in the United States. initiative to address the problem of The Association, which gives growers businesses presenting themselves as more clout than if they bargained indi- Co-ops buying into ‘green’ power cooperatives when they are not cooper- vidually, claims that Sun Garden-Gan- California co-ops are voting for the atives. The problem, explained NCBA’s gi’s actions constitute a boycott, dis- environment with their electricity pur- Paul Hazen, has become more preva- crimination and a failure to bargain. chases. At least five co-ops have lent with the advent of e-business and California law requires that commodity switched to a green electricity provider

Rural Cooperatives / March/April 2000 29 for their stores. There is also an orga- housing cooperative – the largest in Imperial Sugar offers plants to co-op nized effort underway to get all 60,000 North America – owns 20 properties, Imperial Sugar Co., the largest members of all the state’s food co-ops all of which are now powered by U.S. marketer and processor of to purchase power from one of several green electricity. Co-opportunity refined sugar, has offered to sell its existing green power providers. Consumers Co-op, Santa Monica, plants in Tracy and Woodland, Calif., “The co-op movement was born out went with Commonwealth Energy, to the California Beet Growers Asso- of a frustration with the status quo way Tustin, Calif., providing power gener- ciation. Based in Sugar Land, Texas, of doing business,” said Steven Kelly, ated from geo-thermal steam coming Imperial Sugar markets its products executive director of the Renewable from Sonoma, Lake and Imperial under a variety of brands, including Energy Marketing Board. “It only counties. Both Isle Vista Food Coop- Spreckels, Holly and Dixie Crystals. makes sense for co-ops, which often erative, Santa Barbara, and People O. “We discussed the possibility of a offer more environmentally conscious B. Organic Food Co-op, Ocean Beach, grower cooperative buying both and superior products, to purchase switched to GreenMountain.com’s plants and the growers said they their electricity from non-polluting Wind For The Future. These co-ops would take the idea under considera- renewable sources such as solar, wind are paying about a 10 percent premi- tion,” said Bill Schwer, Imperial’s or geothermal steam power.” um to ensure that 25 percent of their executive vice president. “We talked Berkeley-based Missing Link, a work- electricity is generated at new wind in general terms, not specifics, so this er-owned bike co-op, is one of the most turbines installed in the San Gorgonio is the start of our discussions. We recent to switch to green power. The Pass, California’s wind farming site. offered to manage the plants and mar- store went to GreenMountain.com’s 100 The three food co-ops that have ket the sugar and by-products.” percent renewable energy product, already switched are part of a Imperial, which owns four Califor- which helps support construction of a statewide campaign organized by the nia plants, is the state’s only processor. new solar photo-voltaic power plant in Twin Pines Cooperative Foundation Sugar beet profits have largely soured Mendocino County and costs less than to get the 10 largest food co-op stores over the past decade, according to generic power. to purchase green power and then industry data. The value of the coun- Another Berkeley-based co-op, educate members to also switch to try’s sugar beet crop plummeted from University Students’ Cooperative green power. The education campaign $34 million in 1989 to less than $7 Association, switched to Green is funded by the California Energy million in 1998, the most recent fig- Mountain a year ago. The student Commission. ures available. Harvested acreage dropped. Other factors such as the emergence of a soil-borne virus, drought and growing popularity of substitutes for beet and cane sugar, also hammered yields and profits. Meanwhile, world expansion in plant- Glickman sets 2000 goals ed sugar beet acreage has produced a Calling 1999 “another extremely difficult year for America’s farm- record crop. And the possibility of ers,” USDA Secretary Dan Glickman said President Clinton’s fiscal significantly higher imports of Mexi- 2001 budget includes new proposals to strengthen the farm safety net can sugar into the U.S. market begin- and to help farmers weather difficult times. ning Oct. 1 – enabled by the North Glickman’s year 2000 priorities include: American Free Trade Agreement – may further push prices down. React- Supporting American farmers and ranchers: He will work with Con- ing to the news, refined bulk-sugar gress to improve the 1996 Farm Bill, providing a stronger and broader prices fell recently to 15-year lows. safety net and enhanced conservation programs. Helping farmers and rural America prosper: He will make signifi- American Crystal considers cant additional investments in research and rural economic develop- forfeiture of sugar ment, aggressively seek further opening of global markets, implement American Crystal Sugar Co., Moore- head, Minn., may forfeit sugar to the mandatory price reporting to help ensure fair competition for small government for the first time in more farmers and ranchers, and propose a national organic standard. than 20 years because of poor prices. In a Moving ahead together: Glickman pledged continued progress on member letter, President James Horvath civil rights, ensuring that fairness and inclusion are part of everything told the 900 growers that it must consid- USDA does. er the option. The USDA’s sugar program allows processors to put sugar up as collateral for nine-month loans. If

30 March/April 2000 / Rural Cooperatives DFA Cow gets rave reviews

Hundreds of cows recently promenaded through the streets of downtown

Chicago. No, it wasn’t the return of the stockyards. The bovine beauties were

life-sized fiberglass cows transformed by Chicago artists into enchanting

works of art. Chicago’s “Cows on Parade” were on display along Michigan

Avenue, in the Loop and River North, near museums, in Grant Park and on the

Moo-seum campus. Dairy Farmers of America’s “Uncle Sam Cow” was the

favorite of Chicago officials and tourists alike. For a statue, this cow really got

around. She was featured on a postcard the nation’s largest dairy cooperative

sent to members of Congress in Washington, D.C.

Photo courtesy Dairy Farmers of America.

prices remain under the loan rate, LLC in Illinois. Bloomington- based for specific types and qualities of prod- processors have the option of forfeiting Growmark bought the facilities for an uct and the co-op will try to market to the sugar to the government instead of undisclosed price from Minnesota-based those demands, Rosendahl said. repaying the loan in cash. farm cooperative Cenex-Land O’ Lakes “The goal is to be further into the Horvath blamed trade and domestic Agronomy Co., which bought the for- pork chain, closer to the consumer,” policies for pushing sugar prices to mer Terra Industries facilities last June. Rosendahl said. their lowest levels in some 15 years. “This purchase will complement the Among other factors, Horvath said, the excellent distribution system our member New pork co-op could hike profits United States is required to import cooperatives currently have,” said Grow- Jack Rundquist, a Butler County, Ill., 1.25 million tons of sugar annually. mark CEO Bill Davisson. “Ultimately, pork producer, has been elected chair- Canadian imports of stuffed molasses – adding these facilities into the Growmark man of Pork America, a closed coopera- a mixture of sugar and molasses – have system will mean better service to our tive marketing association which plans to displaced at least 100,000 tons of farmer-owners, which is our top priority. coordinate pork production, processing, domestic sugar, he claimed. This is a valuable opportunity to expand distribution and marketing for members. Mark Weber, executive director of the our ability to meet and exceed farmers’ With no funds to work with, revenue Red River Valley Sugarbeet Growers needs in an efficient manner.” initially must come from Pork America Association in Fargo, said forfeiting sugar memberships. Until April 15, producers also could give the industry a black eye. New Nebraska pork co-op planned who joined the co-op paid $500 for every The federal sugar program was designed Stan Rosendahl, Creston, Neb., 5,000 hogs they plan to market. Produc- to operate at no cost to the government. immediate past president of the ers who market fewer than 5,000 hogs “When we won the farm program on Nebraska Pork Producers, announced could combine forces with nearby pro- sugar, we only won by nine votes in the during the 27th annual Pork Expo at ducers to meet the commitment, House,” Weber said. “We’re going to Platte County Agricultural Park that a Rundquist said. Producers who join have have to build a program that’s economi- new pork co-op is being planned. He is both the right and obligation to deliver cally responsible, politically feasible and chairman of the steering committee hogs. provides a safety net for growers within developing Family Quality Pork Pro- Rundquist and seven other board the budget constraints of Congress.” ducers. Meetings are expected this members from six states have a target of spring to gauge interest and provide 2,000 memberships, after which they will Growmark adds facilities further details, including selection of a look for marketing opportunities. “We Growmark Inc. added 16 retail and project site. The plan tentatively calls may be able to cooperate with an existing eight wholesale Illinois agrichemical for producers to buy shares in the co- processor,” said Rundquist, citing a suc- facilities to its existing member company op. The co-op will not own livestock cessful effort by beef producers to buy network of fertilizer and agrichemical and all profits will go directly to pro- slaughter space with Farmland Industries plants by purchasing Agro Distribution ducers. Consumers have started to ask to market a special brand of beef.

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32 March/April 2000 / Rural Cooperatives