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COOPERATIVESUSDA / Rural Development May/June 2001

ALL BOGGED DOWN: Cranberry struggles to find balance COMMENTARY

New USDA program supports growth of value-added ventures

There is always great interest around the mium Beef, he said the co-op probably country when a new federal, state or local would have collapsed during the rough grant program is announced. The Agri- first year of operation. These are words cultural Risk Protection Act of 2000, that should be heeded carefully by any- signed into law in June 2000, includes a one starting a . section that provides $20 million in fed- Other presentations were made at eral grants during 2001 for market devel- the Outlook Conference by Minnesota opment of value-added agricultural prod- pork producer Jim Lewis, representing ucts. The program was announced in the Pork America, Wyoming sheep grower Federal Register on March 6. Pat O’Toole, and Iowa Turkey Grow- Rural Development’s Rural Busi- ers Cooperative CEO Ken Rutledge. ness-Cooperative (RBS) was Their comments yielded valuable given responsibility for administering insights regarding how to launch a new the program. By the April 25 deadline cooperative. Similar investments are for the first round of $10 million in Randall Torgerson sorts through some of the being made in the , crop grants, the agency had received 211 211 applications for valued-added market and sectors. applications requesting a total of more development grants received by USDA Rural Why are these well-planned efforts than $56 million. This is an indication Development. USDA PHOTO BY KEN HAMMOND meeting with success? Lee Egerstrom, of the soaring interest among producer Knight-Ridder business/farm reporter groups in value-added businesses. believing that grants are a substitute for and contributor to the “A Cooper- Grants of up to $500,000 can be producers putting their own capital at ative Approach to Local Economic used for defraying costs of feasibility risk. They have sought grant after grant, Development,” says value-added, new- studies for value- added projects, for and when the source of grant funds generation will spread developing business plans and for ini- dried up, the cooperatives collapsed. because farmers can invest in them at a tial working capital. They cannot be View a grant as an early boost, not fraction of the cost of spreading hori- used for “bricks and ,” nor for a crutch. zontally by buying out neighbors’ farms. studies. A dollar-for-dollar USDA’s Agricultural Outlook Furthermore, this expansion vertically match is required. Applications are Forum 2001, held in February, featured in the market buys farmers a measure of reviewed and scored competitively. a session on new value-added coopera- risk- protection. Investing Applications for the second round of tive development in the and horizontally in more land does not $10 million in grants are due on June poultry industries. An article highlight- reduce a producer’s risk exposure. 27 (for more information, e-: ing presentations at that session is These reasons, along with the fact [email protected]). found on page 14 of this issue. Steve that farmers retain their independence Lessons learned from previous expe- Hunt, CEO of U.S. Premium Beef, and have more control over their eco- rience gained by USDA/RBS co-op discusses the achievements of this new nomic destiny through cooperative own- technical assistance staff suggest that cooperative and much of its ership, suggest that these new value- producer groups should judiciously use success to members’ willingness to step added efforts are assured of a future that grant money. Over-reliance on grants up to the plate with up-front equity will continue to merit the support of the has been fatal for a number of new investments in their cooperative. In public and Congress. cooperatives. They are not a be-all and Hunt’s words, “true commitment to a end-all to the cooperative development cooperative only comes about through Randall Torgerson, Deputy Administrator process. In the past, some producer .” Had members not made a USDA Rural Business-Cooperative groups have fallen into the trap of major financial investment in U.S. Pre- Service

2 May/June 2001 / Rural Cooperatives Rural May/JuneCOOPERATIVES 2001 Volume 68 Number 3

Rural COOPERATIVES (1088-8845) is published bimonthly by Rural Business–Cooperative Service, U.S. Department of , 1400 Independence FEATURES Ave. SW, Stop 0705, Washington, DC. 20250-0705. The Secretary of Agriculture has determined that publication of this periodical is necessary in the transaction of public business required by law of 4 All ag, all the time the Department. Periodicals postage paid at Farmer-owned radio station has served rural Nebraska Washington, DC. and additional mailing offices. Copies may be obtained from the Superintendent of for 50 years ZDocuments, Government Office, By Paul Hammel Washington, DC, 20402, at $3.50 domestic, $4.38 for- eign; or by annual subscription at $15.00 domestic, $18.75 foreign. Postmaster: send address change to: Rural Cooperatives, USDA/RBS, Stop 3255, Wash., DC 20250-3255. 6 All bogged down Mention in Rural COOPERATIVES of company and Record cranberry crops, soft markets force industry to eye brand names does not signify endorsement over other companies’ products and services. order

Unless otherwise stated, contents of this publication By Pamela J. Karg are not copyrighted and may be reprinted freely. For noncopyrighted articles, mention of source will be appreciated but is not required.

The United States Department of Agriculture (USDA) 11 Local co-ops embrace high-tech agronomy systems prohibits discrimination in all its programs and By E. Eldon Eversull activities on the basis of race, color, national origin, sex, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs). Persons with disabilities who require alternative means for communication of program information (braille, large 14 Hang on to the ranch print, audiotape, etc.) should contact USDA’s TARGET Young livestock and poultry co-ops share goal to strengthen Center at (202) 720-2600 (voice and TDD). producers’ role in marketplace. To file a complaint of discrimination, write USDA, By Dan Campbell Director, Office of Civil Rights, Room 326-W, Whitten , 14th and Independence Avenue, SW, Washington, D.C. 20250-9410, or call (202) 720-5964 (voice or TDD). USDA is an equal opportunity provider and employer. 23 Local cooperatives’ role in identity-preserved Ann Veneman, Secretary of Agriculture grain industry Randall Torgerson, Deputy Administrator, USDA By Julie A. Hogeland Rural Business-Cooperative Service

Dan Campbell, Managing Editor

Vision 2000/KOTA, DEPARTMENTS

Have a cooperative-related question? 2 COMMENTARY Call (202) 720-6483, or 21 MANAGEMENT TIP Fax (202) 720-4641, Information Director, 25 NEWSLINE This publication was printed with -based . On the Cover: The surging size of the U.S. cranberry crop has caused prices to plummet. Growers hope new product development and a new marketing order will bring the industry back into balance. Here the crop is harvested in Washington. See article on page 6. USDA PHOTO United States Department of Agriculture

Rural Cooperatives / May/June 2001 3 All ag, all the time Farmer-owned radio station has served rural Nebraska for 50 years

By Paul Hammel, KRVN—it would take away time for was worth a lot,” said Gov. Mike World-Herald Staff Writer constant news about pork bellies and Johanns during a special broadcast on Copyright Omaha World Herald; corn futures, black baldie calves and Feb. 1 to celebrate the station’s 50th reprinted by permission farm legislation. anniversary. “It’s all ag, all the time,” said Pro- KRVN has been able to stick to its exington, Neb.—Folks gram Manager Craig Larson. “We mission of serving farmers and ranch- said it would be a cold joke that some stations have a ‘song of ers because of its unique ownership and day when a bunch of the day.’ Well, we really have a song of mission, said Eric Brown, the station’s L farmers started a radio the day.” general manager since 1979 and Max station. Built with donations of as little as Brown’s son. They were right: It was about 20 $10—each solicited over kitchen tables “We’re not like other commercial degrees below zero on the frigid Feb- across Nebraska—KRVN stands as the stations. I don’t have to have a 30 per- ruary day in 1951 when the “Rural nation’s only farmer- and rancher- cent return on investment in this quar- Voice of Nebraska”—KRVN—crackled owned radio station. ter,” Eric Brown said. “We say that to life. With its sister stations, KNEB in people get their dividends when they “People didn’t think we’d last a Scottsbluff and KTIC in West Point, turn on the radio.” year,” said Max Brown, the station’s KRVN is the only Nebraska station The station was born of necessity. first general manager. with a statewide reach during daytime Farmers and ranchers felt they weren’t Now, 50 years later, that unique hours. At night, KRVN’s signal is getting enough news about the live- farmer/rancher ownership has built a pointed west. The signal regularly stock and grain prices to make smart station with an unmatched focus on the reaches former Nebraskans eating decisions on where to sell. business of agriculture and one that has breakfast in California and Arizona. There were no statewide weather avoided the topsy-turvy trends and KRVN listeners can recite the date forecasts 50 years ago, leaving folks whims of commercial radio. and circumstances when their initials vulnerable to bad weather. Just as it has from the beginning, were called on the station’s longtime By 1947, Nebraska agricultural KRVN broadcasts an almost constant “Monogram Money” contest. A wheel groups had enlisted Max Brown, a for- barrage of weather forecasts, farm with letters on it is spun to select three mer ag professor, to check out a project reports and livestock auc- letters. If a listener’s initials match up by the Ohio Farm Bureau to launch a tion updates, as well as regular com- with the letters, they have two minutes radio station. mentary from 16 different agricultural to call the station and claim the prize It led to a campaign in Nebraska groups. Its three farm reporters file live money, which starts at $8.80. that enlisted donations from 4,755 reports from ag conventions from Stories about furious sprints from farmers and ranchers from every Orlando to Arizona and Lincoln to tractor to telephone to call in to the county in the state. Each “member” Lexington. contest are not uncommon. gets one vote in the Nebraska Rural While other radio stations change The strong signal, a fanatical dedi- Radio Association, which is run like a ownership, swap talk-show hosts cation to farm news and a veteran staff farm cooperative, with a board of and tinker with their musical format (the station has had only two general directors and an annual business with every new listener survey, managers in its history and has three meeting. KRVN has stood as a solid rock at announcers with more than 20 years of Lexington became KRVN’s home 880 on the AM dial. service), have helped make the station a because of its central location. Station Only when time permits does a Nebraska institution. profits are plowed back into radio country-music song sneak on air. Rush “I always felt as a candidate that if I operations or donated to agricultural Limbaugh will never bring his act to could land an interview on KRVN that research or . Only farmers

4 May/June 2001 / Rural Cooperatives tion’s dial position from its original 1010 to 880. Only one other station in the nation is at 880 on the dial, WCBS in New York City. KRVN’s daytime signal stretches from Omaha to the Panhandle and from the Sand Hills to almost the Kansas-Oklahoma border. Although Brown had no radio expe- rience, his staff did. The station’s up- to-date market and weather informa- tion pulled in listeners, whose bottom line could be improved by thousands of dollars by timing the market or by choosing the higher-paying grain ele- vator or livestock . Today, KRVN provides weekly reports from 16 farm as well as several rural state senators. Mar- ket and auction reports are broadcast every few minutes throughout the day. On a recent weekday, the station was abuzz with activity. It’s prime time for annual meetings of farm organiza- tions; advertisements for herbicides, seed corn and bull flood the air- waves; and the Nebraska Legislature’s session is in full swing. All that means plenty of programming and little room for music. Plus, a snowstorm had caught cen- tral Nebraska by surprise, dumping up to a foot of snow in some areas when only an inch had been forecast. “Let’s play that disclaimer again: KRVN remains the nation’s only farmer- and rancher-owned radio station. Here afternoon KRVN is not responsible for more announcer Don Colvin hits the airwaves with the latest farm and ranch news. Mike LePorte than an inch of snow,” joked afternoon announcer Don Colvin. (background) is the the station’s farm service director and one of three reporters whose While the radio industry has seen a total focus is agriculture reporting. PHOTO BY JEFF BUNDY, COPYRIGHT OMAHA WORLD HERALD storm of mergers and programming changes, KRVN’s future seems secure. and ranchers can become members. major farm markets of the day, which Because of its unique ownership, it “Our bosses are the guys out there included the Omaha Stockyards and isn’t likely to be purchased by a larger who listen,” said Mike LePorte, the the Omaha Grain Exchange. chain. Despite a declining number of station’s farm service director and one The station almost went broke in its farmers and ranchers, the station still of three reporters whose total focus is early days, Max Brown said. has the highest pull of any farm sta- agriculture reporting. It lost several thousand dollars after tion in the country—more than 50 “Our reason for existence is to serve buying Omaha’s KOIL in 1952. The percent of ag listeners in its area. The farmers and ranchers,” LePorte said. station was quickly sold after farmers, need for up-to-date information on “That’s why we take it so seriously.” due to a drop in prices, had to renege farm markets and weather is as strong KRVN pioneered the first statewide on pledges to finance the purchase. as ever. weather forecasts, paying for daily The struggle to expand KRVN’s “If you’re serious about agriculture,” telegrams from Scottsbluff, Lincoln reach statewide led to a costly said program director Larson, “you and Omaha to put them together. It $500,000, 10-year campaign, which need to listen to us, or else you’re also arranged for daily reports from the culminated in 1972, to change the sta- going to miss something.” ■

Rural Cooperatives / January/February 2001 5 All bogged down Record cranberry crops, soft markets force industry to eye marketing order

By Pamela J. Karg success directly impacts member- Field Editor growers and independents alike. Like many other agricultural com- here Ocean Spray modities, the cranberry industry is Cranberries goes, so bogged down with over-production goes the entire because of increased acreage and W industry. These days good weather. Research and devel- Ocean Spray and opment of new products also slowed the cranberry industry are both in a in recent years as the financial strains severe slump. A glut of fruit has started up. In response to the tur- depressed prices to levels that have moil plaguing the industry, Ocean many growers hovering on the brink Spray has changed its top managers of bankruptcy. and has promised to roll out nearly In only a few years, the price of a 50 new products in the next two barrel of cranberries has plunged years. It’s going to take time, says from a high of $80 to lows of near Chris Phillips, Ocean Spray commu- $11. A grower needs to make about nications director. Meanwhile, finan- $35 a barrel just to break even. cial woes abound. Ocean Spray has for many years Ocean Spray reported last fall been a poster child of success for that its sales rose slightly, from farmers who want to add value to $1.36 billion to $1.4 billion. But net their crop by processing and mar- income declined 45 percent, to keting it themselves. Indeed, many $73.5 million, a chasm away from Ocean Spray for making the industry. But the market the $280 million earned in fiscal 1998. It was the second has become so precarious that earlier this year some grow- year in a row the co-op reported weak financial results. ers—for the second time in two years—forced a referendum Ocean Spray’s disappointing numbers came as no sur- that could have made the cooperative sell its assets to a prise. Phillips said the co-op had been predicting serious giant beverage company. That effort failed, and now the problems for several years. Wisconsin co-op member cooperative is helping lead the fight to stabilize the market William G. Hatch concurs. “However, the problem was that and enable growers to survive the downturn. they had been ‘crying wolf’ for so many years that no one believed them,” Hatch says. “ I just think everything was so Co-op boosts entire industry good for so long, now we have enough blame to go around “Ocean Spray has really done a lot to benefit the entire the entire industry.” cranberry industry,” notes Nodji VanWychen. She and her So who is to blame for the challenges facing growers and family are independent growers near Warrens, Wis., the co-op alike in an industry that has been around since America gateway to the state’s cranberry country. itself? It depends on who is speaking. A three-generation farm operation, the VanWychens grow, Phillips says the industry has expanded faster than consump- harvest, pack and market their own line of cranberries under tion has risen. Some of that expansion was by the cooperative. two labels they own. As independent growers, they also mar- Independent growers also expanded. In Wisconsin, for exam- ket fruit for the private label business. That’s in direct compe- ple, in 1989 there were 150 farmers with 10,000 acres of cran- tition with Ocean Spray, the nation’s largest cranberry mar- . Today, 260 growers farm 18,000 acres of cranberries. keting headquartered in Lakeville-Middleboro, Under a new Ocean Spray management team, surveys Mass. Yet VanWychen freely admits that the cooperative’s showed that consumers associated the co-op brand with

6 May/June 2001 / Rural Cooperatives Support grows for market order Jeff Kapell is an Ocean Spray member who has grown cranberries near Ply- mouth, Mass., since the 1970s. He says this is the worst economic crunch the industry has ever faced during all his years in the business. “I was not able to cover my cost of production last year,” says Kapell. “Folks who have capital reserves and aren’t heavily mortgaged will probably be able to come out of this OK. But growers who don’t have much in reserve and are carrying a big mortgage will be hard pressed to survive.” Does he think the cooperative is taking the right to turn the situation around? “Only hindsight will tell for sure. But if it does turn around, Ocean Spray should be in a good position to continue to be of major value to its growers in the future.” Regarding the cranberry industry’s rapid plunge from boom to bust, Kapell says “there were subtle indications earlier of looming problems on the horizon. This is a relatively small industry and it is very sensitive to even small shifts in sup- ply and demand. Right now we are look- ing at more than a small shift—we have a significant surplus to deal with.” He feels an industry-backed market- ing order is the best way to manage the surplus. Hatch walks the line between inde- pendent grower and Ocean Spray mem- ber. He and his father, William, have 360 acres of cranberries, which makes them large growers. When the co-op was looking to expand acreage, the Hatches Left: Cranberries are harvested in Wisconsin, which leads the nation in cranberry production. had some acres they placed into co-op PHOTO COURTESY OF WISCONSIN. Above: Cranberry prices have plunged from a high of membership. And they also have some $80 per barrel to lows near $11. Growers typically need $35 per barrel just to break even. acres which remained out of co-op mem- USDA PHOTO bership, the fruit from which is contracted to an independent handler. The younger high-quality products, but also higher prices. At the same Hatch also serves as president of the Wisconsin State Cran- time, supermarket consolidations and shifts in the food Growers Association (WSCGA). industry meant processors were contracting production, “If you read the Stressline (an on-line cranberry news packaging a range of foods under private labels. Those labels ) you hear from lots of growers, anonymously, about were cheaper and still had perceived value with consumers. what’s happening,” Hatch says. “And some of our own sur- And when grower prices were starting to head south veys with just our (WSCGA) members show that growers are about two years ago, the Ocean Spray board voted to pay divided [over how to deal with the glutted market]. The only members a little more money. That left the co-op with less thing we know for sure right now is that growers have agreed to invest in and for new product they want a marketing order in place this year.” introductions. That’s a big step. A little more than a year ago, growers

Rural Cooperatives / May/June 2001 7 could not agree on that vital issue. A around how much to reduce produc- resources into maintaining growing WGCGA survey showed that more tion to ease the surplus. those plants until they bear fruit.” than 90 percent of its membership sup- At a meeting in early March in A marketing order that would limit ported a marketing order to help the Wisconsin Rapids, Wis., the Cranber- the 2001 crop to 4.7 million barrels, industry achieve greater balance. The ry Marketing Committee (CMC) excluding fresh fruit, was recom- crux of the dispute is whether the agreed to cut the surplus by 32 per- mended to USDA by CMC. Such a industry should be producing about 4.7 cent this year. The CMC represents move would be expected to reduce the million or 4 million barrels each year, growers and handlers and makes rec- surplus to 2.5-3.5 million barrels, says Hatch. ommendations to USDA, the only officials said. Tom Lochner, WSCGA executive power that can mandate production Dick Ducklow and Gary Jensen, director, agrees that this is the key cuts. The committee hoped Agricul- members of CMC, voted against this issue, adding that about three-fourths ture Secretary Ann Veneman would recommendation during the March of the membership supported eliminat- accept the plan by the end of March, meeting because it does not eliminate ing the surplus in one year. “The in time to affect this year’s crop. the surplus in one year or raise grower debate right now is what is the right However, no decision had been returns sufficiently. number?” he says. “As a board, we announced by mid-April and growers Ed Jesse, ag economist from the agreed that our association is going to such as Van Wychen and Hatch were University of Wisconsin-Madison, rec- urge USDA to enact a regulation. But getting nervous about how to manage ommended a 4-million-barrel limit to we don’t have a consensus on what that their cranberry marsh beds. CMC. He said it would reduce the 4.4- regulation should be,” adds Lochner. “It’s not like a corn or soybean million-barrel surplus to 2 million bar- grower who finds out he doesn’t need rels, which is considered a normal How much is enough? to plant this year,” says Hatch. “We carryover. Eliminating the surplus in So the industry finds itself divided already had plants in the ground, mon- one year, some growers contend, would once again. The question centers ey tied up in taxes and even more bring grower returns in line with the

Ocean Spray opens China market for cranberry juice products

Cranberry fruit from North American growers will be ments in place in the United Kingdom, Australia, New used for beverages to be sold in China via an agreement Zealand and several Latin American countries. Many of between the Ocean Spray cooperative and Beijing the member- growers have been suffering through the Huiyuan Beverage Group, China’s largest juice company. third straight year of depressed market prices that are The goal is to introduce Ocean Spray juices in China lat- below production cost. Pressure to sell the cooperative er this year, starting with Beijing, Shanghai, Guangzhou to private interests has been resisted by the board of and in other major markets within the next three years. directors (see cover story). Ocean Spray, owned by 804 cranberry and 126 grape- Rob Hawthorne, the cooperative’s chief executive fruit growers, said it officer, said he expects the Chinese juice market to will grant a 10-year become the largest in the world in the next 20 years. to Huiyuan to It has the potential of using hundreds of thousands of manufacture, market barrels of cranberries. Opening the Chinese market is and distribute Ocean an example of Hawthorne’s plans for other market ini- Spray products. tiatives aimed at increased demand and higher prices Ocean Spray already for the growers. But lack of demand for the current 5- has similar agree- million-barrel crop may force some growers to quit the business. However, the Chi- nese market provides a breath of The Ocean Spray cooperative has led efforts to fresh air at a time the cooperative increase consumption of the fruit by developing and its grower-owners could use a a wide variety of cranberry beverages and new home for their cranberries. other foods. USDA PHOTO The cooperative’s $220 million international division has tripled in size in the past four years. ■

8 May/June 2001 / Rural Cooperatives Cranberry production cycle revolves around water Cranberry bogs use unique growing systems that include achusetts’ rural areas, growers have sold off some of wetlands, uplands, ditches, flumes, ponds and other water their acreage so that Wisconsin is now number one in bodies. An entire cranberry wetland system can provide cranberry production. diverse habitats to many rare animal and plant species. Commercial cranberry production in the Badger In winter, bogs are covered with water that freezes and State began in about 1860. Simply digging ditches provides insulation from frost. As the snow melts and spring around stands of native vines and encouraging their arrives, the bogs are drained and cranberry vines awaken. growth helped early marsh development. Cranberries Soon after spring, light pink blossoms which resemble the are also Wisconsin’s leading fruit crop both in terms of head and neck of the sandhill crane begin to appear. As acreage and value. In 1996, cranberries were produced flowers bloom, honeybees and bumblebees diligently on about 13,600 acres in 19 of Wisconsin’s 72 counties. to pollinate flowers, ensuring a good crop. In mid-July, The farmgate value was about $75 million. That has petals fall from the flowers leaving tiny green nodes which plummeted this year in all cranberry regions. after weeks of summer sun, become red, ripe cranberries. USDA’s National Agricultural Statistical Service estimat- Considered the life blood of cranberries, water is used ed in its August 2000 cranberry report that the total cran- throughout the year for irrigation and to protect vines berry harvest would be 5.84 million barrels, down 8 percent from weather damage in winter and frost in spring and from 1999 but 7 percent above 1998 levels. Of the five major fall. As fall approaches, water becomes essential to the cranberry- producing states, Washington (153,000 barrels) harvesting process. and Oregon (410,000 barrels) expected increases while During harvest, many growers flood their bogs caus- New Jersey (550,000), Massachusetts (1.8 million barrels) ing cranberries, which have small air pockets in the cen- and Wisconsin (2.9 million barrels) predicted decreases. ter, to rise. Growers then use water-reel harvesting The 2000 harvest followed on the heels of record- machines to loosen cranberries from their vine causing high production in 1999 which totaled 6.37 million bar- them to float on top of the water. These machines look rels. The 1999 area harvested was a record high 37,300 like miniature combines with cylindrical spool-shaped acres. The average yield of 170.9 barrels per acre was metal beaters attached to the front. After floating to the 22.2 barrels above 1998. The average price per barrel top, berries are corralled onto conveyers to waiting for 1999 was $17, a decrease of $21.80 per barrel from trucks which take them to receiving stations and eventu- the 1998 crop year. The steep reduction in the price per ally processing plants, where they are used for juice, barrel drove the sauce, and other processed foods. value of pro- Delivered to fresh fruit receiving stations, cranberries duction down are graded and screened based on their color and ability to $109 million, to bounce (soft berries will not bounce). a 49 percent In Massachusetts, 500 growers produce 38 percent of drop from the nation’s cranberry supply, making the fruit that state’s 1998, NASS number one food crop. As urban sprawl overtakes Mass- reported. ■

$35 per barrel cost of production. But handlers supported carrying Currently, the price is hovering at over a larger surplus. Ocean Spray, for $10-$15 per barrel. The 4-million- example, recommended a market order barrel plan would get the grower that sets the crop at 4.8 million barrels. price up to cover production costs “Any more and it cuts into new product sooner, proponents say. They want to development and new market expan- eliminate all the pain in one year, sion,” says Phillips. “We need enough eliminating nearly all the projected fruit to grow demand. We can control 2.3- million-barrel surplus so good supply in the short term, but we still times can roll again. They also worry need enough fruit to meet new product Growers use water-reel harvesters to loosen there won’t be enough demand for development and market expansion.” cranberries from the vine, causing them to the 5 million barrels that still would Either cutback would be considerably float on top of the water. USDA PHOTO be produced. more than last year’s 15 percent with-

Rural Cooperatives / May/June 2001 9 holding, and those who forged the agreement say it shows the industry can work together. But some growers still The history of crane-berries lobby for deeper cuts that would make a bigger dent in the surplus. Native Americans in the Great Lakes regions first called the fruit crane- berries because sandhill and other cranes feasted on this native species. In Grower/handler split New England, Native Americans referred to them as sassamanash and made Some growers say the handlers, cakes prepared with lean, dried strips of meat pounded into paste and mixed who buy and sell berries, care more with animal fat, grains and cranberries. Later used to make dyes and poul- about keeping prices down than about tices by the Pilgrims, cranberries soon become a vital source of vitamin C for protecting growers, some of whom are whalers and a valuable resource to New England residents. certain to fold if prices don’t increase. Cranberries actually grow wild from the Carolinas to the Canadian Mar- That criticism also goes against Ocean itime Provinces. However, they prefer sandy soil, an abundant fresh water Spray, which controls about 70 per- supply and a growing season that lasts from April to November. That makes cent of the U.S. cranberry market. places such as southeastern Massachusetts, central and northern Wiscon- Like everyone else in the cranberry sin and pockets of Oregon some of the more abundant growing areas. industry, Phillips says there’s enough The Cape Cod Cranberry Growers’ Association is one of the oldest farmer blame to go around. Low prices also organizations in the country and probably the oldest cranberry association. It hurt the co-op because it does not was established in 1888 to standardize the measure—100-pound barrels— have the financial resources to market used to sell berries. ■ the fruit, he adds. “They all want cheap fruit. And what happens with cheap fruit? That means the growers are going to be sacrificed,” plans to roll out as many as 21 new itself to a giant beverage . counters Hal Brown, who runs the products this year and 32 next year. For the past two years, some growers grower “cranberrystressline” website. “You’ve got to have new product intro- have tried to force the issue onto the Hatch admits poor prices have ductions to keep consumers interested,” co-op’s annual meeting agenda. impacted his operation. Farming near Phillips says. For all intents and purposes, Ocean Necedah, in the central sands region Meanwhile, in the cooperative’s last Spray shares have a fixed value of $25. of Wisconsin, Hatch has released 50 annual report, Ocean Spray’s new CEO But if Ocean Spray were sold, those percent of his workforce. All growers H. Robert Hawthorne and Chairman shares could be worth far more, some are spending less in town, and “people Sherwood J. Johnson express hope that growers contend, citing studies by are just trying to survive; we’re just better days are ahead. “We do expect Ocean Spray’s own consultants. trying to lose as little money as possi- proceeds to turn upward this fiscal In 1999, Ocean Spray’s board weighed ble and cutting back wherever we year,” they wrote. a number of strategic options, including a can,” he says. Phillips adds that initiatives the co- sale. In the end, a decision was made to “A lot of growers will probably go op put in place this past year will stim- remain a cooperative, to hire a new CEO out of business if this marketing order ulate demand and reduce the surplus. and to focus on reorganizing operations. is implemented the way they’ve written Besides introducing new products, the Efforts at both the 1999 and 2000 annual it,” Doanne Andreisson, a grower from co-op plans to re- vamp its familiar meetings by members who wanted to sell Duxbury, Mass., recently told the blue-tidal-wave label, will implement were not successful. Boston Globe. $76 million worth of cost-cutting mea- The Ocean Spray sale appeared as The loyalties are complicated, howev- sures and will narrow the price-gap though it could provide growers with er. Ocean Spray, which has four seats on between Ocean Spray and store-brand enough money to hang on until barrel the eight-seat CMC, is the largest han- cranberry juices. Ocean Spray also has prices rebound. But when it was turned dler, but also represents 70 percent of created a new network for down in 1999, a group of growers filed the growers and is obligated to defend its single-serve products, and it vows a lawsuit to force Ocean Spray to their interests. Phillips says the 4-mil- to improve marketing efforts as it reconsider a sale. The matter was final- lion-barrel-agreement is a good deal in brings its new products to market ly put to rest when it was defeated at the long term for growers. “It was an these next two years. the co-op’s 2000 annual meeting in San important decision, not a popular deci- Diego in December. sion with everyone, to be sure,” he says. Co-op’s sale still supported by some “We believe the turnaround strategy Ocean Spray needs the fruit because Nevertheless, some growers still we’ve set in motion is the right strategy its revamped marketing plan should think Ocean Spray should be aggres- for recovery,” Hawthorne and Johnson increase demand, it claims. The co-op sively exploring opportunities to sell conclude in the annual report. ■

10 May/June 2001 / Rural Cooperatives Local co-ops embrace high-tech agronomy systems

E. Eldon Eversull Agricultural Economist USDA Rural Business-Cooperative Service

ocal cooperatives are rapidly adapting to the technological revolution L in agronomy practices. How fast? In just three years, local cooperatives more than doubled their adoption of high-tech agronomy systems, according to a USDA study. In 1996, only about 24 percent of the local cooperatives reported having application equipment that used global positioning system (GPS) and global information system (GIS) . Three years later, that per- centage more than doubled—to 57 per- cent—among the same respondents. Sixty-eight percent of local co-ops are now able to prepare field maps with the aid of GPS and almost half can com- bine the maps with crop protectant application for record-keeping purpos- es. And an additional 16 percent want to add GPS services. This information is from a recent survey of local co-ops conducted by Farmers can use the global positioning system (note the GPS marker behind them) for their USDA’s Rural Business-Cooperative pest control programs. Local co-ops have doubled their use of this high-tech equipment in Service. Cooperatives were asked just the past three years. PHOTO COURTESY GROWMARK about their crop protectant sales, sup- ply sources, competitors, type of a pending study, Crop Protectant Oper- using less and crop protec- competition and what services they ations of Local Farm Supply and Mar- tants. Interest in technology increased offer. Almost 400 local farm supply keting Cooperatives.1 during the 1990s. Technology permit- and marketing cooperatives respond- The crop protection industry has ted crop protectants to be applied in ed. These co-ops have combined crop undergone many changes during the precise amounts and locations. protectant sales of $830 million, or past two decades. Increased input costs, GPS technology pinpoints within sev- 40 percent of local agricultural coop- environmental concerns and low crop eral yards the location of crop protectant eratives’ crop protectant sales. The prices in the 1980s placed more application equipment in a farmer’s field. results of this survey are discussed in emphasis on sustainable agriculture, GIS maps can then be made that com-

Rural Cooperatives / May/June 2001 11 bine the location within the field with soil al photos, farmers still have many decision many of these local cooperatives. The samples, scouting reports on pest and and interpretation problems. Farmer- other 198 cooperatives have looser ties weed damage and yield monitor results. owned cooperatives, recognizing the need with regionals, purchasing only about More recently, genetically modified for better information and analysis, have 58 percent of their crop protectants organisms (GMOs) have gained atten- been on the forefront in providing from them. tion. Some GMOs allow the farmer to crop/agronomy specialists to interpret the Almost 100 percent of the GPS/GIS use less crop protectants by planting technology and help with recommenda- cooperatives employ crop/agronomy insect-resistant varieties, such as Bt tions on crop protectant application, field specialists to help farmers choose the corn and Bt cotton. Other GMOs are mapping and record keeping. correct crop protectant and scout fields resistant to popular broad-spectrum for pests and weed damage (table 1). herbicides so they need less crop pro- Cooperatives leading the way While all of the GPS/GIS cooperatives tectant treatments and because of the The 185 surveyed cooperatives that make field maps, half of the other coop- reduction in weed pressure on the crop, provide GPS/GIS field maps are larger eratives would like to do so in the promote no- or minimum-till practices. than the average survey respondent. future. Almost 80 percent of the Scientists, as well as farmers, have Their crop protectant sales average $3.1 GPS/GIS cooperatives have crop pro- broadly embraced the benefits of GMOs million, compared with $1.3 million for tection application equipment that can and supported their use. Some suggest the 198 survey cooperatives that do not be guided by GPS units. Only 10 per- GMOs may provide the opportunity for provide GPS/GIS maps. The GPS/GIS cent of the other cooperatives have farmers to produce enough food to over- cooperatives purchase about 73 percent GPS-guided application equipment, but come world hunger. Some consumers of their herbicides and insecticides from 43 percent would like to. Keeping and/or consumer groups will continue to regional cooperatives, the most com- records of farmers’ fields can be done by object to GMOs until they can be shown mon sources (in this study) being CHS 69 percent of the GPS/GIS cooperatives to be safe and directly benefit con- Cooperatives (Cenex Harvest States)/ while about 3 percent of the other coop- sumers, such as GMO crops that help Land O’Lakes, Farmland and Grow- eratives are capable of doing so. Again, fight disease. mark. These same regionals are most about 43 percent of the other coopera- Even with this new technology that likely supplying both crop protectants tives would like to be able to do this. uses field maps, scouting reports and aeri- and promoting agronomy technology to Regional comparisons There are large regional differences among cooperatives in their use of A co-op agronomy specialist agronomy technology. Ten standard uses CPS equipment to take farm production regions2 are used to soil samples that will be analyze responses in a regional format. used to develop grid maps. Because of the small number of respon- COURTESY CHS–LAND O’ LAKES dents in four regions, the Northeast and Appalachian, and Southeast and Delta

Table 1—Crop protectant services that GPS/GIS field-mapping cooperatives and all others offer, or would like to offer, weighted by sales

Currently Would like Currently Would like Services offer to offer Services offer to offer

- - - - Percent ------Percent - - - - Crop/agronomy specialists—recommendations & scouting Application equipment with GPS units GPS/GIS cooperatives 98.85 0.47 GPS/GIS cooperatives 78.22 12.19 All other cooperatives 80.78 4.76 All other cooperatives 9.99 42.81

Field mapping/recommendations using GPS/GIS Record keeping with GPS/GIS GPS/GIS cooperatives 100.00 — GPS/GIS cooperatives 69.02 16.99 All other cooperatives — 49.77 All other cooperatives 3.26 42.53

— = Not available.

12 May/June 2001 / Rural Cooperatives Table 2—Crop protectant services that cooperatives offer, or would like to offer, by regions, weighted by sales

Currently Would like Currently Would like Services offer to offer Services offer to offer

- - - - Percent ------Percent - - - - Crop/agronomy specialists—recommendations & scouting Application equipment with GPS units Northeast and Appalachian 94.42 — Northeast and Appalachian 61.56 18.41 Southeast and Delta States 100.00 — Southeast and Delta States 76.20 — Southern Plains 71.87 1.62 Southern Plains 53.53 14.72 Corn Belt 96.15 0.78 Corn Belt 68.98 13.59 Lake States 94.30 0.48 Lake States 47.49 28.19 Northern Plains 85.40 8.11 Northern Plains 38.46 33.25 Mountain 99.45 — Mountain 43.25 51.96 Pacific 71.35 — Pacific — 47.13

Field mapping/recommendations using GPS/GIS Record keeping with GPS/GIS Northeast and Appalachian 73.83 6.75 Northeast and Appalachian 24.46 19.23 Southeast and Delta States 46.63 — Southeast and Delta States 30.52 — Southern Plains — 36.91 Southern Plains — 36.91 Corn Belt 84.94 6.38 Corn Belt 65.82 15.20 Lake States 65.85 18.38 Lake States 40.72 30.65 Northern Plains 48.11 26.06 Northern Plains 31.53 40.17 Mountain 40.68 54.53 Mountain 28.06 59.65 Pacific 17.52 64.86 Pacific — 48.73

—= Not available.

States are combined into two regions. Crop protectants are applied based their fungicides, and 50 percent of all The Corn Belt, with 143, has the most on pests and weed pressure, soil tests, other crop protectant products from respondents, followed by the Lake infrared, satellite and aerial photo- regional cooperatives. States and Northern Plains, both with graphy, and field scouting. Additional Their primary competitors for these 89. The Corn Belt also has some large analysis of GPS/GIS information is sales to farmers are private suppliers, respondents, resulting in crop protec- only as good as its interpretation. Many followed by other cooperatives. Crop tant sales averaging almost $3.2 million. farmers rely on outside help to scout protectant price is the strongest com- Cooperatives in most regions have a their fields for crop protection. In the petitive tool, but advisory scouting and high incidence of offering crop/agrono- Corn Belt and Lake States, where 85 other services is also important. my specialists for recommendations and percent and 66 percent of the respon- Most cooperatives apply crop protec- field scouting (table 2). The use of dents, respectively, provide field map- tants for farmers. Crop/agronomy spe- GPS/GIS technology is centered in the ping, cooperatives also employ cialists are often employed by local coop- Corn Belt, where the cooperatives are crop/agronomy specialists more than eratives to assist the farmer in making some of the largest respondents and corn 94 percent of the time. crop protection decisions. Many cooper- and soybeans are the predominant crops. atives also provide a record service to Almost 69 percent of the Corn Belt Strong sales growth track the farmers’ use of crop protectants. cooperatives have application equipment Local cooperatives studied generally The use of GPS/GIS technology is with GPS units; field mapping can be have experienced strong growth in being championed by local agricultur- made with GPS/GIS technology by 85 crop protectant sales, with an average al cooperatives. Field mapping is avail- percent of the cooperatives, and record annual increase of about 11 percent able to 68 percent of the crop protec- keeping with this technology by 66 per- from 1991 through 1999. These coop- tant volume. The GPS/GIS cent. The use of GPS/GIS technology eratives support the cooperative agri- technology is expensive, so larger falls as cooperative size decreases and cultural inputs system, purchasing cooperatives are more likely to offer it. when the predominant crops are not more than 68 percent of their herbi- Many of the respondents not offering corn and soybeans. cides and insecticides, 48 percent of continued on page 30

Rural Cooperatives / May/June 2001 13 Hang on to the ranch Young livestock & poultry co-ops share goal to strengthen producers’ role in marketplace

By Dan Campbell Editor

nce they were “Marlboro Men” (cigarettes option- O al), riding free and easy in the saddle (or ATV) as they kept watch over their herds and flocks. They were self-reliant loners who stood up to whatever fate dished out. They bounced back up when they got knocked down and they learned to survive in conditions in which most of us would wilt under the strain. But globalization of agricul- ture and concentration in the meat packing and food retailing industries has proven to be a big- ger challenge than drought, dis- ease or coyotes ever did. As their ranks thinned and their profits plummeted, many livestock and poultry producers have gradually come to the conclusion that— gulp—maybe that guy over on the next ranch or farm could be an ally rather than a competitor. Thus, there has been a surge Kelly Giles, a board member of U.S. Premium Beef, says the survival of his cow-calf stocker operation hinges during the past five years of new, on the ability of the co-op to add value to his cattle through processing and marketing. So far, the co-op has producer-owned livestock and done just that by working with Farmland Industries to create value-added products such as Farmland’s Ground poultry cooperatives. They are & Browned packaged beef (at right). USDA PHOTO BY BOB NICHOLS. BEEF PRODUCT: PHOTO COURTESY FARMLAND INDUSTRIES being formed by ranchers and farmers who see group action as the best way to retain owner- traditionally siphoned off by middlemen. ship of their livestock and to process and market it themselves. The new beef and poultry co-ops represented at the Representatives of the four major livestock sectors—beef, meeting are already considered to be successes, although pork, poultry and lamb—gathered in Washington, D.C., their track records are still short. The new pork and lamb recently for a mini-summit held as part of USDA’s annual cooperatives hope to emulate the success of the beef and Agricultural Outlook Forum. They shared their experiences turkey co-ops. in helping launch a grassroots co-op revolution, the goal of “Cooperatives give producers marketing power so that which is to help livestock producers keep more of the dollars they can compete with the corporate interests that are

14 May/June 2001 / Rural Cooperatives attempting to dominate agriculture, as well as an opportunity Hunt listed three principals that have been keys to the co- to improve their product quality and consistency to meet the op’s success: rising demands of consumers,” said Randall Torgerson, 1) Cattle are marketed in a system that pays based on the deputy administrator for USDA’s Rural Business-Cooperative quality of the carcass, not just the weight; Service and the session organizer and moderator. He was one 2) Producers get detailed grading data from the co-op to of several speakers to use the “Marlboro man” as a symbol for help them improve the quality of their product; the stockman of old—producers who now realize that they 3) Producer commitment—producers must not only are “at the 11th hour” to make needed structural changes. commit to meeting the co-op’s quality standards, but invest Otherwise, most of them could wind up as little more than a significant amount of capital in the co-op. True commit- “piece-wage producers” working for huge food corporations, ment to a co-op “only comes about through ownership,” if they survive at all, he warned. Hunt said. When it was being launched, many observers advised the Selling meat & meals, not cattle fledgling co-op not to get involved in “brick and mortar” Kansas cattleman Steven Hunt said there was no secret ownership. But the economic analysis performed for the fea- about the motivation for U.S. Premium Beef: fear! sibility study said the co-op needed an ownership stake in a In the mid-1990s, young producers such as himself could see processing facility. the end of their ranching way of life fast approaching. “A lot The economic analysis also showed that cattle producers, of us who had invested a vast amount of capital into our live- on average, invest from $2,000 to $3,000 per animal unit stock businesses realized that if we didn’t make a drastic (which includes the cost of livestock and all their other change, we would have to get out of the business.” overhead expenses). But the overhead investment to process The system was broken and had to be fixed, he said. The beef is only $100 to $200 per animal unit, Hunt said. “So problem was similar to an industrial model in which General when you look at the economics of , is it Motors sells Cadillacs and Chevrolets for the same price.“If more likely that a processor will go out and invest up to that was true, how much longer do you think General Motors $3,000 per animal unit (to produce cattle), or would a pro- would make Cadillacs?” Hunt asked. ducer be more likely to invest $100 to $200 per animal unit Yet that is the system in which the cattle industry has tradi- (to process it into beef)? This was the point when we in tionally operated, he said. “We group our cattle in feedlots and U.S. Premium Beef said not only can we do this [launch a sell them for one price. It’s a system that rewards mediocrity. It’s co-op], but we have to.” a marketing system that led us to a situation where our industry As a new-generation co-op, the amount of stock the mem- produces too many Chevrolets and not enough Cadillacs.” bers buy in the co-op establishes their delivery right (and This realization helped lead to the formation of U.S. Pre- obligation). Producers originally invested $55 per head of mium Beef, a producer-owned marketing and processing cattle. For a producer who bought 1,000 shares in the co-op, cooperative that has been highly successful so far in imple- the investment would have been $55,000, giving him the menting its strategy to “sell meat and meals, not cattle.” right to deliver 1,000 head annually to the co-op. Membership in the co-op, of which Hunt is now CEO, By the time U.S. Premium Beef closed its membership has grown from 200 producers at inception in 1997 to 1,400 drive in November 1997, it had raised $38 million from ranchers, backgrounders and feedlot operators in 38 states members and secured an additional $38 million in debt. today. The co-op now holds a 29 percent interest in Farm- land National Beef, Know your limitations the nation’s fourth Hunt said a key to success in a value-added venture is to largest beef processor know your limitations. “We were producers—pretty smart and marketer. Its pro- producers, we liked to think, and we had varied backgrounds gram to pay premiums [he, for example, had worked as an ag lender]. But we weren’t for high-quality car- experienced marketers or processors.” casses has helped So the co-op leaders felt it was essential to partner with a members earn signifi- successful beef processor and marketer. cantly better payments In this search, they talked with the nation’s six largest beef than the industry aver- processors. “If you walk into a packer’s office with nearly a age. The co-op’s pre- million cattle to offer, you will get an audience,” Hunt said. miums-for-quality “But when you start to talk about ownership and governance program has also stim- structure, the crowd thins out pretty fast. But a couple of ulated some of the them stuck around, and we ended up with an agreement with competition to imple- another cooperative: Farmland Industries.” ment a quality-grid Farmland was not chosen because it is a cooperative, payment system. Hunt said, but because Farmland National Beef leads the

Rural Cooperatives / May/June 2001 15 Up-front capital key to surviving a slow start

U.S. Premium Beef’s premium payment program got off the need for additional capital from members, “although to a slow start. “We soon found out that not all of us pro- some forgot what we told them and we had to show them duce the best animals,” Steven Hunt said. In the first six the (marketing) presentation again. If we had not required weeks of operation, the co-op’s producers earned less than a big financial commitment up front, I would not be stand- the industry average. For all of 1998, members averaged just ing here today.” When things got rough, members “would $7 per head in premiums. “It was not a fun year,” he said. have walked away.” “No, they didn’t trust the plant. No, they didn’t trust our Three years later, members are smiling much more company. Fingers pointed everywhere, but nobody was broadly today as they average nearly $20 per head in pre- looking in the mirror.” The co-op supplied members the miums. The top 50 percent of the co-op’s producers are carcass grading data and other information they needed earning over $30 in premiums. The top 25 percent are to improve their programs, and soon the premium pay- earning $40 over the market. ments began climbing. For any producers who would like to buy into the co-op Despite the rough start, few members quit. Hunt cred- with some of those $55 shares, forget it. They last traded its that in large part to the fact that co-op promoters for $90 a share, but none are currently for sale. The over- “underpromised and overdelivered. I’m an old banker, and all return on investment from the beginning is now over we realized the need to capitalize aggressively up front, 200 percent. assuming we would have a tough start. We told members Ken Rutledge said six of the initial 47 members of the Iowa not to expect a lot of money out of the company for the Turkey Growers Cooperative dropped out during the rough first three years, and not to be surprised if their cattle did first 18 months of the co-op’s life. Most of them left when the not grade as well as they thought.” co- op had to request additional equity investments to keep The co-op survived the painful start-up phase without the operation afloat. “It was pretty tough times.” ■

industry in number of value-added beef products. More packing operation, boosting total employment to 4,500. But than 30 percent of its revenue comes from value-added that was never a stated goal in the feasibility study. products, and more than 16 percent of its products are sold U.S. Premium Beef closed the deal with Farmland on Dec. 1, overseas, he noted. 1997, and by the following week it had delivered the first 10,000 “And as the fourth largest beef processor, we also felt it cattle to the processing plants in Dodge City and Liberal, Kan. was about the right size—that we could buy a large enough In a little more than three years, U.S. Premium Beef has piece of it that we could look our members in the eye and tell processed 1.8 million cattle, paid out premiums of $24 million, them they had some control in this company.” has $36 million in earnings and more $1.5 billion in sales (that’s Convincing producers that they would have to give up a just its share of the processing operation). Not surprisingly, it is little independence at first in order to gain independence for looking to expand, possibly into a multi-species livestock co-op. the long-haul was the biggest hurdle U.S. Premium Beef had to clear, Hunt said. “Yes, it was difficult to bring more than Quitting, cold turkey $70 million in capital together, and yes, it was hard to negoti- If anything, Iowa ate a deal with processors. But the single most difficult thing Turkey Growers Coop- to do was to bring together independent cattle producers erative was formed under from all over the country.” even greater duress than Hunt advises others to focus on doing what it takes to U.S. Premium Beef. Ken create a successful business, with consideration of the co- Rutledge, the co-op’s op’s impact on local economies being secondary. “What president and CEO, said scares me is when economic development goals drive a pro- the alarm sounded in ject—where the motivation is to employ people and May 1996 when Oscar increase the tax base. That is not a bad thing, but the priori- Mayer (then a division of ty should be on putting together a project that will generate Kraft Foods, which was Processed turkey rolls through the earnings for the owners. Then the rest [the jobs, increased in turn a division of Gen- Iowa Turkey Grower Cooperative’s tax base, etc.] will come.” eral Foods which was in plant in West Liberty, Iowa. PHOTO COUR- He noted that an additional 1,000 employees have been turn a division of Phillip TESY IOWA TURKEY GROWERS COOPERATIVE hired since the co-op took partial ownership of the meat- Morris) announced that

16 May/June 2001 / Rural Cooperatives it would be closing its turkey process- June of 1998. The normal break-even Rutledge noted that in 1998 the co- ing plant in West Liberty, Iowa. That point for turkey breast meat is about op ranked 157th among the nation’s could have spelled the end for the $1.60 a pound, but during this period, meat processors, and estimated that the turkey producers who supplied the the market dropped as low as $1.07. co-op will climb to 75th by 2000, a plant, as there were no other plants The co-op’s management team had year in which it reported $135 million in the area that could handle their been formed in November 1996, which in sales. volume. Rutledge said “was much too late. A By the next month, 47 growers sales program was non-existent [at the Bringing home the bacon banded together to form a new coop- outset]. The only commitment on Jim Lewis, a hog producer from erative under the motto “strive to sur- hand was from Kraft to take a portion Welcome, Minn., and vice chairman of vive.” The task before them was of the product.” Pork America, said his co-op was also daunting: they had to find another way But then, the worm turned. born in a time of crisis. With hog to continue to produce turkeys, “or “Sometimes it’s good to be in the numbers building and processing else convert their to boat right spot at the right time—and we capacity falling, the pork market storage, which is not a very attractive happened to be there” when supply plunged in 1994. That turned out to option if you know much about central and demand came back into balance, “be a shot over the bow,” Lewis said. Iowa,” Rutledge said. “They found Rutledge said. Two of the co-op’s The real crunch came in 1998, they would have to mortgage all they major competitors either closed their brought on by the closure of a major owned in order to continue to produce plants or converted to chicken. And, pork processor and increased imports turkeys, taking a risk few others would after a year and a half of struggling to from Canada, which caused the hog be willing to take.” survive, the co-op’s sales and marketing supply to exceed U.S. processing But they were determined, and got programs began to bear fruit. capacity on some days. help from USDA Rural Development, Strategic alliances were put into “Actual prices fell lower than in the the state of Iowa and others to launch place, including a deal that saw the co- Great Depression—it was devastating,” their co-op. In December 1997, Kraft’s op become the supplier for a private Lewis said. Hog producers lost facilities in Iowa were transferred to label line of deli products with the between $4 and $5 billion in equity. the Iowa Turkey Growers Cooperative. largest retailer in the United States. A Producers knew they had to go The co-op processed its first birds similar deal was sealed with a mid-size after the pork business beyond the sale in January 1997, but the timing for retailer. A large-volume co-manufactur- of live hogs, he said. “Some producers ing agreement was also may still be under the delusion that concluded with one of they can produce their way to profits— largest food companies but we don’t think they can.” Those in the world and a pro- producers who hope to survive on the gram with Oscar May- profits from production alone are in a er was strengthened “death spiral,” Lewis said. and continued beyond “We must unify with others and an initial two-year move up through the marketing chain. period. The West Lib- Pork America is not out to fix the erty plant also began entire industry, but we can help our production of beef, shareholders,” he said, thanking USDA pork and chicken (as did the other speakers) for its assis- products. tance in establishing their cooperative. Today, the co-op’s Another concern of producers is the plant is the largest dramatic increase in hogs being pro- producer of deli items duced under contract to meat proces- Cooperatives have traditionally not played a major role in the for two of the largest sors. In 1994, Lewis said about 71 per- poultry industry, but the success of the Iowa Turkey Growers sandwich shop chains cent of hogs were sold on the open Cooperative has generated renewed interest in them. USDA PHOTO in the nation: Subway market, but by January 2001, that shared Sandwich Shops and had declined to only 17.3 percent. launching the operation could not have Schlotzsky’s. The co-op has received “So the question is: do we really have been worse. Turkey production was at numerous awards for product excel- an open market?” Ag lenders are a major a record level and prices soon plunged lence and the Iowa Governor’s Award force driving this trend, he said. “With to the lowest level in the modern histo- of Excellence for 2000 for being an huge losses in equity and capital, lenders ry of the U.S. turkey business. The innovative producer of value-added are pushing growers to sign contracts.” depressed market continued through food products. But with plants running at near capacity,

Rural Cooperatives / May/June 2001 17 some growers are also worried about study was performed which noted that buy one of these plants at a discount.” finding a home for their hogs. many old packing plants will soon have Indeed, the co-op hopes to sign a con- There is also good news: demand to be replaced, creating an opportunity tract for a plant that will enable it to for pork is climbing. New price for the new cooperative,” Lewis said. recoup its investment in only one year. records were set in each of the first sev- The study found that the cooperative It is also looking into possible partner- en months of 2000, and the United could not succeed on a small scale, and ships and co-marketing ventures. States has been a net exporter of pork that supporters of the concept would Many pork processors, he said, are for the past five years, a situation that have to think big, with the goal of in a similar situation as producers. last occurred in the 1950s. becoming one of the top three proces- “They are very successful, family- “Producers are more efficient than sors within five years. owned businesses, but are also being ever; but they face bigger risks and Members include producers, co-ops squeezed by consolidation,” he said, smaller rewards than ever. We do not and groups of producers; all must bear adding that such a processor could want to continue on this road,” Lewis the risk of producing their own pigs. make a good partner for the co-op. said. For those who want to reduce Pork America will be an umbrella orga- “We don’t think anything on the their risk, Lewis said there is nothing nization that will help members share scale of Pork America has ever been wrong with entering into contracts. information, coordinate marketing and tried before coming out of the blocks,” But many others still want the chance provide other services. It also plans to Lewis said. for greater rewards and are willing to invest in a processing facility. take some risk. “We didn’t intend to get into own- Guarding their flocks To help these producers, the ership of bricks and mortar at the start,” Patrick O’Toole, co-chairman of National Pork Producers Council Lewis said. “But it looks like our best the new Mountain States Lamb formed a task force in 1999 to look option at this point. We think we can Cooperative, said lamb producers into new opportunities for producers. Taking inspiration from U.S. Premium Beef, the council appointed a task force of producers to research these Food trends bode well for co-ops opportunities. The task force gave its report to a group of 53 producers, who Ken Rutledge said there are three main trends in the which represented 20 million hogs, who vot- the Iowa Turkey Growers Cooperative will be pursuing, and he advised other ed unanimously to form a steering co-op value-added food ventures to pay close attention to them as well: committee to pursue a national pork ■ Brand marketing—major food companies will look for strategic alliance co-op. By the end of 1999, Pork Amer- partners to grow, slaughter and process product. “This is already happening ica was incorporated. at our co-op, with four separate co- agreements with four of the “Through funds from USDA’s Rural largest food companies in the country.” He said Nike athletic wear is the “ulti- Business-Cooperative Service and an mate brand marketing program—it owns no production facilities. All of its agreement with the National Pork Pro- products are co- manufactured. This trend bodes well for cooperative food ducers Council, a major feasibility processors.” ■ Private label market—this sector of food production is today very differ- ent from the old, generic-label product formerly seen in grocery stores. “Major retailers today want to place their names on upper-end, high-quality products that will compete against the major brands,” Rutledge said. The private label business in 2000 grew at a rate of more than 9 percent, while brand sales were flat. “Because most food brands do not want to produce private label prod- ucts, this situation creates a continuing opportunity for co-ops,” he said. ■ Food safety—Rutledge called this the most important trend and “the issue of the millennium for food processors. If you are planning to open a food- production facility, you have a golden opportunity to build a state-of- the-art facility with food safety as the integral part. If you expect to be chosen as a major food processor for a food company...you better provide it with reason to select your company.” Hog farmers hope to limit the impact of Rutledge concluded by stressing how different the frame of reference and market plunges, such as the one that the demands of today’s young consumers are from those of their parents’ gen- occurred in 1998, by uniting under the umbrella of the new, Pork America eration. Quoting Carol Christiansen of the Dairy Deli Bakery Association: ■ cooperative. USDA PHOTO “Their idea of home cooking will be take-out like mom used to buy.”

18 May/June 2001 / Rural Cooperatives population has plunged by half. The industry has also been shrink- ing under pressure from an onslaught of imported lamb from Australia and New Zealand. This trend has been accelerated in recent years by the strong U.S. dollar, which makes imports much cheaper. “The mission of our cooperative is to find a way to stabilize a very good industry,” O’Toole said. Like the other successful cooperatives, they hope to manage this by uniting producers who will invest in their own processing and marketing ventures. The co-op includes predominantly sheep ranchers from six western states: Wyoming, Colorado, Utah, Idaho, Montana and South Dakota. Part of the initial strategy is to market a supe- rior product which he said is already widely perceived to be “the best lamb in the world.” The fact that nearly half of the co-op’s lambs can be raised mostly on grass and without antibiotics “is a definite selling point.” Co-op officials have visited virtually every major sheep marketer in the nation. They have formed a genetic/ technical committee which is working with experts from major to help focus the cooperative on uniform The Mountain States Lamb Cooperative hopes to sign up producers with more than health, carcass standards and market 350,000 lambs to help pull the industry out of a steep recession. PHOTO COURTESY AMERICAN strategies. The co-op is also considering SHEEP INDUSTRY ASSOCIATION a with an existing packer, or buying its own plant. hope to rally their sagging industry moved out of livestock production and While other meat industries have with a venture similar to U.S. Premi- into residential and resort develop- made progress in moving to a system of um Beef and the Iowa Turkey Grow- ment, it has a big impact on open paying producers for high quality car- ers Co-op. There is no time to waste. spaces and wildlife, he noted. “We lose casses, O’Toole said the sheep industry The U.S. sheep population has much more than farms when we lose has not kept pace. However, he said plunged to 8.5 million head, the low- family farms,” O’Toole said. this provides a void for the cooperative est level since USDA began keeping Things started to get extremely to fill, and the co-op members hope to records in 1867. The industry peaked hairy for producers about a emulate the role U.S. Premium Beef is at 56 million head in 1947. decade ago, when congress eliminat- playing in this area for its members. Carbon County, Wyo., where ed the support programs for wool and The co-op is also interested in produc- O’Toole ranches, once had more sheep honey. “The buzz word then was ing for the kosher market. O’Toole’s than any other county in the nation— deficit reduction,” O’Toole said, and own lambs kosher at more than 90 per- 360,000 in the early 1950s. Today, he these two industries became sacrifi- cent, an indication of the quality and is one of the last full-time sheep ranch- cial lambs. He recalls a visit to then- health of co-op lambs. ers in the county. Where sheep once Senator Alan Simpson of Wyoming, The co-op has tentatively sched- grazed the mountain valleys in this who told him the industry would suf- uled an equity drive which will charge region, today the land sprouts expen- fer severely as a result of the action. members $10 a head. It has held 25 sive subdivisions and “trophy homes” His blunt warning proved prophetic. meetings so far, and has signed up of the nouveau-rich. As ranch land is Since that day, Wyoming’s sheep more than 100 members in all six

Rural Cooperatives / May/June 2001 19 Veneman cites cooperatives as to help growers add value to products In her first formal speech as secretary of agriculture, their bottom lines. These farmers are taking the lead in delivered at USDA’s annual Agricultural Outlook Forum in more efficiently synchronizing farm production with market February, Ann Veneman cited several farmer-owned demand by recognizing higher value production and value- cooperatives—including U.S. Premium Beef—as exam- added processing businesses.” This trend is being seen ples of the types of operations growers will need for suc- both among large farmers and smaller farmers who band cess in the 21st century. She stressed that farmers must together in alliances, she noted. As successful examples produce based on the needs of consumers, and said of the later, she mentioned Dakota Growers Pasta cooper- small-scale farmers seeking to add value to their prod- ative, U.S. Premium Beef and Tennessee Pork Producers. ucts may benefit from group action. Veneman said her initial focus at USDA will be on “Consolidation and mergers in the food sector are expanding trade opportunities for U.S. agriculture, support- forcing new strategies for operations and production in ing development and the adoption of new technology to pro- all sectors of the food chain,” Veneman said. “The ever- mote increased production and new products—such as demanding consumers drive the market today. They want ethanol and bio-diesel fuels—and exploring ways to ease simplified, tailored solutions that bring convenience and regulatory, burdens on farmers, making sure regulations are help improve their lives.” “based on sound science and common sense.” She’s also The combination of globalization, technology and focusing on USDA’s food safety and disease prevention pro- changing consumer demands means “a more tightly con- grams and ways to improve farm safety-net programs. nected food chain with stronger linkages among produc- Quoting Ken Blanchard’s book “Mission Possible,” ers, processors and retailers,” Veneman said. “Evolution of Veneman said, “If you are not involved today in creating the new food system may be viewed in different ways, but tomorrow’s markets, or knowledgeable about what’s hap- ultimately, requires new relationships and new thinking.” pening in these markets, you are unlikely to find your- Structural changes in the grain and meatpacking indus- selves competing in them.” ■ tries have left many farmers feeling vulnerable about their ability to benefit from the changes, she said. But many Editor’s note: Secretary Veneman’s entire Outlook Con- farmers, large and small, are “finding ways to participate ference speech can be read at the following web site: in the changing market for food products, while improving http://www.usda.gov/news/releases/2001/02/0031.htm

states it plans to operate in. “This farmer-owned, value-added coopera- established a set aside in the B&I pro- task would have been much easier a tives such as these, and is supporting gram, reserving $100 million to $200 decade ago, but since then, the them through various technical assis- million annually for use by farmer- depressed market has eaten up the tance, loan and grant programs offered owned cooperatives. equity in their operations,” O’Toole through the Rural Business-Coopera- USDA is also supporting Coopera- said. The co-op is well on its way to tive Service (RBS) of USDA Rural tive Development Centers to provide signing up producers with 350,0000 Development. The 1996 Farm Bill another source of technical assistance lambs as an initial base. extended USDA’s Business and Indus- for co-op start-ups throughout Rural try (B&I) Loan Guarantee program to America. As part of the Agricultural USDA’s role include producer loan guarantees for Risk Protection Act of 2000, Congress USDA’s Torgerson noted that Con- stock purchase in new, value-added established a value-added product gress has recognized the need for new, cooperatives. USDA/RBS has also marketing grant program to further promote this type of business activity. Steve Hunt of U.S. Premium Beef shares his The cooperatives that participated experiences during the USDA Agricultural in the forum all benefitted in one way Outlook Conference. To the right are: Jim or another from these USDA pro- Lewis of Pork America, Patrick O’Toole of grams. Torgerson noted: “These new Mountain States Lamb Cooperative and Ken initiatives represent examples of proac- Rutledge of Iowa Turkey Growers tive efforts to fight concentration in Cooperative. USDA PHOTO BY DAN CAMPBELL their industries and to provide mem- bers with continued market access.” ■

20 May/June 2001 / Rural Cooperatives MANAGEMENT TIP

How does your local farm supply co-op rate?

Beverly L. Rotan, Ag Economist etc.? Comparisons with other cooperatives—including trend USDA Rural Business-Cooperative Service lines and industry-norms—may help to determine how well your cooperative is doing. ow does your cooperative’s performance com- The two tables below contain average financial data pare with cooperatives with similar functions? compiled from a survey of 291 cooperatives for 1998 and Was it higher, lower or about the same as the 1999. Fill in the blanks and compare these benchmarks H average of a cross section of local farm cooper- with your cooperative’s financial data. How’s your coopera- atives for such factors as sales, product mix, tive doing? ■

Table 1—Compare your local farm supply cooperative with industry averages1 Size (1998) 2, 3 Size (1999) 2, 3 Your Measure/Item Unit Small Medium Large Super Small Medium Large Super cooperative

Sell farm supplies only Percent 85 38 26 5 85 38 26 5 ____ Total assets Mil. dol. 1.6 4.4 7.7 14.2 1.8 4.8 8.3 14.9 ____ Long-term debt Thou. dol. 76.8 420.9 827.0 1,982.1 70.2 438.5 919.0 2,112.7 ____ Total liabilities Thou. dol. 390.9 1,413.2 3,029.9 5,999.3 393.9 1,660.0 3,392.1 6,204.4 ____ Total sales Mil. dol. 2.5 6.6 13.1 24.9 2.5 6.6 13.2 23.6 ____ Total service revenue Thou. dol. 65.5 236.1 322.7 718.3 84.7 227.1 348.4 743.0 ____ Total revenue Mil. dol. 2.7 7.0 13.8 26.3 2.7 7.1 14.0 25.0 ____ Net income (losses) Thou. dol. 100.0 334.1 501.7 900.3 89.4 263.6 461.2 820.0 ____ Labor of total expenses Percent 54.1 52.0 54.2 53.0 54.1 52.0 54.7 53.5 ____ Patronage refunds received Thou. dol. 70.5 194.0 281.9 531.8 61.2 173.9 275.0 484.7 ____ Liquidity ratios Current Ratio 2.50 1.84 1.37 1.34 2.35 1.90 1.40 1.41 ____ Quick Ratio 1.49 1.00 0.70 0.77 1.38 1.05 0.75 0.63 ____ Leverage ratios Debt Ratio 0.24 0.32 0.39 0.42 0.09 0.12 0.17 0.19 ____ Debt-to-equity Ratio 0.32 0.47 0.65 0.73 0.07 0.12 0.15 0.13 ____ Times interest earned Ratio 7.28 6.46 4.64 4.63 5.87 6.83 5.37 5.88 ____ Activity ratios Fixed asset turnover Ratio 7.23 5.49 5.24 5.03 6.62 5.97 5.02 5.79 ____ Total asset turnover Ratio 1.56 1.49 1.70 1.75 1.57 1.57 1.60 1.68 ____ Profitability ratio Gross profit margins Percent 17.41 17.93 20.19 17.08 17.86 18.15 19.56 15.88 ____ Return on total assets before interest and taxes Percent 7.11 8.97 8.32 8.07 8.76 8.30 8.85 ____ Return on total equity Percent 10.36 13.37 13.34 14.47 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 / May/June 2001 21 Table 2—Compare your mixed farm supply cooperative with industry averages1 Size (1998) 2, 3 Size (1999) 2, 3 Your Measure/Item Unit Small Medium Large Super Small Medium Large Super cooperative

Sell farm supplies only Percent 85 38 26 5 85 38 26 5 ______Market farm products and sell farm supplies Percent 6 16 13 16 6 16 13 16 ______Total assets Mil. dol. 1.2 3.9 7.5 16.4 1.3 3.8 8.3 17.4 ______Long-term debt Thou. dol. 21.7 616.3 808.0 1,899.9 62.9 438.8 1,417.4 2,180.3 ______Total liabilities Thou. dol. 390.9 1,4 59.8 2,782.4 7,436.1 379.0 1,390.8 3,544.0 7,556.7 ______Total sales Mil. dol. 2.7 7.2 13.8 32.9 2.7 6.9 13.3 31.2 ______Total service revenue Thou. dol. 64.1 349.6 568.7 1,241.2 80.8 402.8 626.8 1,563.3 ______Total revenue Mil. dol. 2.8 7.8 14.8 35.0 2.9 7.5 14.4 33.6 ______Net income (losses) Thou. dol. 10.7 259.2 414.3 1,041.4 50.9 202.4 318.9 994.1 ______Labor of total expenses Percent 50.9 48.1 51.3 48.8 53.4 48.8 51.0 50.0 ______Patronage refunds received Thou. dol. 35.4 135.3 319.4 639.1 34.5 109.7 253.0 548.0 ______Liquidity ratios Current Ratio 2.05 1.67 1.41 1.35 1.71 1.56 1.39 1.38 ______Quick Ratio 1.31 0.97 0.70 0.64 0.83 0.86 0.70 0.69 ______Leverage ratios Debt Ratio 0.27 0.38 0.37 0.45 0.30 0.37 0.43 0.43 ______Debt to equity Ratio 0.37 0.61 0.59 0.82 0.43 0.58 0.74 0.77 ______Times interest earned Ratio 1.55 4.60 3.96 3.75 3.54 4.10 3.11 3.74 ______Activity ratios Fixed asset turnover Ratio 18.55 5.63 5.87 7.03 10.55 5.75 4.79 6.11 ______Total asset turnover Ratio 2.21 1.86 1.84 2.00 2.16 1.83 1.60 1.79 ______Profitability ratio Gross profit margins Percent 9.44 13.36 14.96 15.10 11.62 14.30 16.03 16.27 ______Return on total assets before interest and taxes Percent 2.51 8.56 7.38 8.63 5.60 7.07 5.66 7.79 ______Return on total equity Percent 1.37 14.48 10.58 13.36 7.58 11.97 8.12 11.44 ______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.

New olive co-op buys TVG cannery Olive growers have formed a cooperative that has to a new subsidiary of the John Hancock Life purchased a Madera, Calif., olive cannery from bankrupt Co., which was the co-op’s largest creditor. Tri Valley Growers (TVG). According to the Modesto Bee The Madera olive cannery site is saddled with envi- newspaper, California Olive Growers bought the cannery ronmental problems. Production of black olives over the for only $1, but committed to spending $9.5 million on years has left a chloride residue in the groundwater environmental cleanup around the plant. underneath the cannery. Even though evaporation ponds The new co-op hopes to have the plant ready by Sep- were used, chemicals leached into the soil and affected tember to process this year’s crop. When production water quality. The growers have reached an agreement resumes, the cooperative will focus on frozen black with the Central Valley Walter Quality Control Board olives for the food-service industry. The deal includes which gives them 25 years to complete the cleanup. The the popular Oberti olive brand. cooperative will continue pumping and cleansing The U.S. Bankruptcy Court also recently approved the groundwater as part of the cleanup. TVG closed the sale of nine other TVG canneries and most of its assets plant in 1999 due to the water quality problems.

22 May/June 2001 / Rural Cooperatives Local cooperatives’ role in identity-preserved grain industry

Julie A. Hogeland, Ag Economist a. We value being “first” with new products, markets and tech- USDA Rural Business-Cooperative Service nologies, even though not all efforts prove to be profitable. We typi- cally respond rapidly to early signals about areas of opportunity. dentity-preserved grains have generated a b. We seldom are “first” with new products. However, we moni- small revolution in the marketplace and offer a tor our major competitors to see if we can be second with a more case study on how and why local cooperatives cost-efficient, perhaps more innovative product. I choose to innovate. c. We try to maintain a secure niche in a relatively stable prod- Like the grain industry in general, local co- uct or area. We try to protect our domain by offering higher quali- ops are oriented toward mass marketing, buying in bulk from ty, superior service, lower prices, etc. We tend to ignore industry many producers, co-mingling and blending lots for an average changes that have no direct influence on current areas of operation (No. 2) quality. Such grain is then re-sold to a variety of users. or commodity priorities. It has been up to users to adapt the grains to their specific Those who chose the first category were classified as processing requirements. But improvements in processing “Innovators”; the second, “Followers”; and the third, characteristics or nutrient value recently introduced by “Status Quo.” genetic engineering and advanced plant breeding techniques It was expected that most would consider themselves Sta- have begun to shift the burden of adjustment back to the tus Quo. Cooperatives are often considered to be conserva- grain elevator and feed mill. tive organizations, reflecting the orientation of producer- Capturing the greater inherent value of these grains members buffeted by weather and a constantly changing requires specially dedicated elevators or grain bins for political landscape. Change within cooperatives is seldom identity preservation (IP). Mill cleaning between runs and fast because operational and structural changes are carefully testing to assure purity of incoming and outgoing grain are deliberated to determine the impact on the organization’s also required. Re-valuations of other established prac- future course. The service orientation of cooperatives, cou- tices—including market development, contracting with pled with industry overcapacity in feed mills and elevators, growers, specialized facilities and grower education—may means members may be reluctant to upgrade facilities or also be required. Recent news reports about specialized invest in new ones. feed grains filtering into the food chain suggest that han- Success in the grain industry has generally depended on dling margins may not cover the cost of segregation or maximizing facility turnover and maximizing the spread, other adjustments. the difference between the buying and resale prices for In mid-1999, just before controversy about health and grain. Cooperatives that have been successful by this stan- safety issues exploded in the European Union, USDA/RBS dard may see no reason to jeopardize that success by conducted a survey of local cooperatives’ interest in and investing in an that requires a lot of add-ons to experience with such identity preserved grains. Respon- make it work. dents surveyed were local cooperatives with at least $15 In the course of seeking the highest resale price for million in annual sales (with about 40 percent from total members’ grain, such locals may regard their regional coop- grain sales). erative as just another bidder. This may be an outgrowth of The survey offered a window on how cooperative cul- grain producers’ willingness to sell anywhere that earns an ture—including priorities and established ways of doing extra penny per bushel. But minimal producer commitment business—influenced local cooperatives’ response to IP at the local level can reduce a local cooperative’s commit- grain. Respondents, who included general managers or ment to its regional cooperative, lowering coordination feed or grain department managers, picked one of the fol- within the system as a whole. Nevertheless, competition lowing three choices to describe the operating style of between regionals and locals appears to be the norm in their cooperative: cooperative grain marketing.

Rural Cooperatives / May/June 2001 23 Local co-ops cope with the constant possibility of member groups felt the same. Fourteen percent of the Status Quo turnover by striving for a loyal customer base. The result group acknowledged they didn’t know the extent of farmer may be a niche of relatively small, often older, diversified adoption in their territory, compared with 4 percent of family farmers. The link between local and producer is a Innovators and 7 percent of the Follower group. trust based on familiarity (“We grew up together,” was a Slightly over 40 percent of all respondents saw common comment). Established loyalties may mean that if increased planting of IP-grains from 1998 to 1999, coin- the cooperative doesn’t get new customers, neither does it ciding with industry observations. Sixty percent of Inno- lose established vators observed ones. Unlike more increased planti- aggressive suppli- ng, compared ers, such coopera- with 36 percent tives are often of Followers and particularly sensi- 26 percent of tive to farmers Status Quo. Sim- other suppliers ilarly, Status might write off as Quo respondents inefficient. These were the least cooperatives may likely to know expend their what size of pro- financial resources ducers were by not building or adopting IP upgrading facili- grains. ties, but by Here again, extending credit Innovators were to a clientele the most knowl- viewed as edgeable. Status neighbors. Quo locals pic- Although the tured themselves 222 respondents were evenly split between the three cate- being an industry in-and-outer according to grain prices, gories, the “Follower” category seemed to closely resemble, whereas Innovators were more likely to commit to a specific in volume and attitudes, the “Status Quo” group. The con- role using IP grain, such as feeding livestock. A “wait and trasts between Innovators and the Status Quo and Follower see” attitude was common among Status Quo locals. groups suggests that the small revolution triggered by IP These results demonstrate the truth in the observation grains portends a cultural divide among local cooperatives. that organizational environments are not given realities; Respondents from the “Innovator” group handled a much they are created through a process of attention and interpre- greater volume of IP grain than the Follower and Status Quo tation. Status Quo and, to a lesser degree, Follower local co- groups, replicating the volume-driven commodity market ops preferred to get the best prices for grain by continuing within an IP context. Interdependence demonstrated through to focus on traditional marketing practices. Theirs was a partnering with regional cooperatives and investor-owned narrowly honed strategy. In contrast, Innovator co-ops oper- firms (IOFs) appeared to underwrite Innovators’ willingness ated in a multi- dimensional world where many avenues, and to bet on new products. The more traditional and indepen- perhaps some money-losing detours, could ultimately dent Status Quo/Follower cooperatives were more likely to achieve a similar end. regard regionals as competitors. These survey results suggest that a new cooperative The Follower and Status Quo groups appeared to resist culture appears to be emerging alongside the established change, and, not surprisingly, they saw less evidence of framework that includes managers who continually scan producers adopting IP grains in their marketing territory the environment for new opportunities, spread risk by than did Innovators. Sixteen percent of Innovators saw IP partnering, and are psychologically at ease with the time grains making substantial inroads in their marketing terri- required for new investments to mature. While continued tories, measured by farm numbers or sizes, compared with controversy over IP grain may justify a conservative 7 percent of the Follower and 1 percent of Status Quo approach, survey results suggest some two-thirds of local groups. Twelve percent of the Status Quo group did not cooperative elevators—and perhaps their members as expect IP grains to affect producers in their area in the well—may change only when forced to do so by industry future. Only 5 percent each of Follower and Innovator conditions. ■

24 May/June 2001 / Rural Cooperatives NEWSLINE

‘Best of the best’ inducted into Inc., explained that the 2001 inductees Foundation, a national foundation Co-op Hall of Fame were selected by two committees of promoting self- help and mutual aid in John B. Gauci, David A. Hamil, national co-op leaders based on their community, economic and social and Otis and Mary Lee Molz have “genuinely heroic” contributions to development through cooperative received the highest honor bestowed cooperatives. “They truly are the best enterprise, administers the Coopera- by the cooperative community: induc- of the best,” said Sigelbaum. tive Hall of Fame. tion into the Cooperative Hall of John B. Gauci was recognized for his Fame. Hundreds gathered at a cere- life-long devotion to developing co-ops DFA sells interest in Suiza mony April 25 at the National Press throughout the world to help people for cash, six dairy plants Club in Washington, D.C., to honor improve their lives. In his acceptance On the heels of a merger between speech, Gauci empha- Suiza Foods of Dallas and Dean Foods sized the need for all of suburban Chicago, Dairy Farmers of cooperatives and co- America (DFA) has sold its nearly 34 op leaders to commit percent interest in Suiza. In return, themselves to ongoing DFA gained more than $165 million and new co-op devel- plus ownership in six dairy plants locat- opment initiatives. ed in: Miami and Winter Haven, Fla.; David A. Hamil Birmingham, Ala.; Cincinnati, Ohio; served as administra- Charleston, S.C.; and Lake City, tor of the Rural Elec- Utah. The plants represent areas trification Administra- where Suiza and Dean, the nation’s two tion for 14 years largest dairy processors, had overlap- under four presidents ping operations. The newest inductees into the Cooperative Hall of Fame were and was a driving Suiza paid $1.5 billion in cash and joined by some Hall of Fame alumni during the induction cere- force behind the cre- stock to buy Dean Foods and absorbed mony in Washington D.C. in April. Seated, from left, are: John ation of the National its $1 billion debt. The Associated Gauci, David Hamil and Mary Lee Molz (all three are new Rural Utilities Coop- Press and The Wall Street Journal inductees for 2001). Standing (from left): Henry Holloway, Gonze erative Finance Cor- report that the new company, which Twitty, Ed Jaenke, Roger Willcox, Stan Dreyer, David Smith, poration. He was visi- will carry the Dean name, will have an Glenn Webb, Otis Molz (new inductee) and Malcom Harding. bly touched by the estimated $10 billion in dairy and spe- PHOTO BY KEITH BARRACLOUGH, COURTESY COOPERATIVE DEVELOPMENT FOUNDATION honor bestowed upon cialty food sales. It will control a 30- to him. At age 92, he 35-percent share of the fluid milk mar- them and their outstanding contribu- thanked the group for remembering the ket, depending upon the outcome of tions to cooperatives. “old timers” and their efforts. some antitrust issues. The deal is To mark the 25th anniversary of the Otis and Mary Lee Molz were expected to be closed later this year. Cooperative Hall of Fame, a number honored for their years of volun- Suiza has completed 43 acquisitions in of past Hall of Fame inductees attend- teerism in cooperatives in the United its eight-year history. ed the event. The anniversary was also States and overseas. Otis acknowl- Meanwhile, DFA has placed its new marked by the launching of a new edged the support of others in their plants in a new company called National Cooperative Hall of Fame Web site, efforts while Mary Lee urged the Dairy Holdings, LP. It will share owner- www.coopheroes.org. young cooperators in the room to ship with three dairy entrepreneurs. The Master of Ceremonies Harvey devote themselves to co-ops. firm will also operate the Valley Rich Sigelbaum, co-CEO of MultiPlan The Cooperative Development plant at Roanoke, Va., which had been

Rural Cooperatives / May/June 2001 25 jointly owned by DFA and Allen Meyer, are: Tom Camerlo, Florence, Colo., from which it paid 12 cents per hun- one of the three entrepreneurs. first vice chairman,; Charles Beck- dredweight in cash (54.5 percent) and According to newspaper reports, endorf, Tomball, Texas, vice chair- the balance in stock. U.S. Sen. Patrick Leahy of Vermont man; Bill Siebenborn, Trenton, Mo., The year was marked by tremendous expressed reservations about the Suiza- vice chairman; and Randy Mooney, growth in market share, membership Dean merger. “The acquisition would Rogersville, Mo., secretary-treasurer. and growth in equity for the coopera- create a company with vast market DFA, the nation’s largest dairy tive, said Gene Quast, the cooperative’s power not only over consumers, but cooperative, last year processed and chief executive officer. The coopera- also over farmers who can expect to be marketed 45 million pounds of milk tive’s milk supply increased 37 percent. offered even lower prices for their for its 27,000 members. Plant expansion this summer at Min- labor and products,” he said. Last year, doro, Wis., will increase blue cheese Leahy had asked the Justice production. Production and storage Department to look into potential capacity has been expanded at the plant anti competitive activities of Suiza. in Cedar Rapids, Iowa, which will “It already controls or handles 70 increase the supply of cultured prod- percent of the fluid milk in New ucts, such as cottage cheese and yogurt. England, and regional retail milk In other news, the cooperative has prices already have risen because of totally revamped its website, www.swiss- the concentration.” valley.com, to offer members a myriad In other DFA news, its corporate of information about the dairy coopera- board of directors has been reduced tive. Each division has a site with infor- from 116 to 48, marking the end of mative pages linked from the main page. the cooperative’s initial restructuring To meet the growing demand for blue Members can also access extensive pro- period following its formation. The cheese, Swiss Valley Farms is increasing ducer information, including check his- new board was seated at the April 3 production of its Mindoro Blue. PHOTO tory and test results. Swiss Valley has annual meeting in Kansas City, Mo. COURTESY SWISS VALLEY FARMS 1,700 members farming in Iowa, Illi- The directors had been chosen earlier nois, Wisconsin and Minnesota. for a one-year term to represent a local district within DFA’s seven geo- Swiss Valley sets dividend Farmland, ADM launch grain graphic marketing areas in its 45-state The board of directors for Swiss joint venture territory. In the officer election, Her- Valley Farms, Davenport, Iowa, has When Bob Honse assumed the reins man Brubaker of West Alexandria, declared a 22-cent per hundredweight as CEO of Farmland Industries last Ohio, was re-named chairman of the dividend to members who delivered September, he faced an immediate chal- board, the post he has held since DFA milk to the cooperative in fiscal 2000. lenge to reduce the regional coopera- was formed in 1998. Other officers Swiss Valley earned a $6 million profit, tive’s level of borrowing. Several years of declining earnings and substantial losses from a depressed fertilizer market in 2000 sparked a top-to-bottom review of all the cooperative’s operations. Proactive measures to improve the bal- ance sheet were identified as part of this review. Staff reductions, sale of assets and possible joint ventures for some of its operations were all considered. One of the first results from the review is a new, grain-marketing joint venture with Archer Daniels Midland (ADM), a major investor-owned agri- Land O’ Lakes and Dairy Farmers of America have formed a joint venture— cultural processor. This joint venture Melrose Dairy Proteins LLC—to help stabilize local milk markets for Upper could generate potential savings of Midwest dairy farmers. As a key to this effort, the two co-ops have pur- about $10 million annually, the cooper- chased the Kraft Foods cheese plant in Melrose, Minn., which produces ative projects. Farmland’s internal cheddar and other hard natural cheeses. The plant purchases 1 billion review showed that its grain business pounds of milk annually from 850 Minnesota dairy farms. PHOTO COURTESY DFA borrowed the most but returned the least among its operating units. The

26 May/June 2001 / Rural Cooperatives new ADM/Farmland company will Northwest while ADM expands to the from $39 million to $53 million while lease and operate the cooperative’s 24 Great Plains wheat market. earnings before interest and taxes elevators and share the profits. In early May, Farmland announced increased 33 percent, from $3 million The Kansas City Star reports that that it was closing its canned-ham plant to $4 million. Diamond’s equity Farmland will receive $3 million annu- in Carroll, Iowa, which will cost the resources now total $54. ally in lease fees. All of the 400 elevator community 150 jobs. The 51-year-old Diamond completed it’s transition employees will retain their jobs while plant was aging, and the popularity of from the former Sun-Diamond Grow- another 100 employees at the co- op’s canned hams has also declined, the co- ers partnership and established separate headquarters will join the venture or be op noted. The cooperative has also idled resources for managing sales and distri- reassigned at Farmland. In addition to nitrogen fertilizer plants in Lawrence, bution, sales administration and infor- reducing the co-op’s debt, the pact will Kan., Pollock, La., and Enid, Okla. mation system functions. International enhance patronage-based earnings for retail sales volume climbed 300 percent the grain business, Honse said. Diamond sales top $244 Million in the past five years. Food service and The grain business is characterized Sales revenue from walnuts and oth- ingredient business grew 29 percent last by low margins and high capital er nuts increased 13 percent, to more year in the domestic market and 45 per- demands. Honse said the cooperative’s than $244 million, for Diamond of cent in the international market. Dia- only export facilities are on the Texas California in fiscal 2000. Diamond mond is not only America’s top walnut Gulf Coast. With the new venture, generated net earnings of $18 million, marketer, but also the leading brand in Farmland gains access to markets 17 percent higher than in 1999. Gross a variety of other nuts. Cooperative served through the Mississippi River, sales from Diamond Co., which President Michael Mendes noted, the Great Lakes region and the Pacific markets nuts other than walnuts, grew “This extraordinary level of awareness Plane crash stalls production at Foremost dairy plant A business jet that crashed into a cooler cooler space from a private firm in Green Bay. at the Morning Glory Dairy milk bottling plant at DePere, Wisconsin Gov. Scott McCallum flew to Green Bay near Green Bay, Wis., on April 2 killed the pilot and with cabinet members and advisers, and toured the caused several employees to be hospitalized with severe crash site to assess the damage. The explosion wiped burns. As of late April, two of the burn victims were still in out a supply of dairy products about to be shipped to critical condition at a Milwaukee burn center. food services, schools and grocery stores. The plant Cause of the accident is under investigation by the processed about 500,000 gallons of milk a week for retail, National Transportation Safety Board. The plant is owned food service and school customers and 1 million pounds by Foremost Farms USA, of sour cream a week for Baraboo, Wis. The crash hundreds of customers in sparked an explosion, northern Wisconsin and ammonia leak and fire in a upper Michigan. cooler and product storage During the week after area. Neither the dollar loss the accident, the cooper- nor amount of insurance ative diverted 25 percent coverage have been dis- of its production and dis- closed, said Joan Behr, tribution to Foremost’s Foremost Farm’s director of plant at Waukesha near employee relations and Milwaukee. Milk for some communication. The rebuilt The pilot was killed and heavy damage was done to this Foremost customers was briefly cooler won’t be back in ser- Farms USA milk bottling plant in DePere, Wis., when a small busi- sourced from Swiss Val- vice until Labor Day. ness jet crashed into it. PHOTO COURTESY FOREMOST FARMS USA. ley Farms and Land The accident occurred O’Lakes, neighboring during a late afternoon shift change when only 35-40 of the dairy cooperatives. Area counselors were engaged by 187 employees were in the plant. Employees followed an Foremost to assist the employees after the fire. Direc- evacuation plan, escaped the premises and reported to tors, employees and the media received daily updates designated gathering area so firemen could quickly fight and newsletters carried articles about the accident. the fire. Bottling and some other production resumed with- Milk pickup schedules at member farms were altered in 24 hours while other plant functions gradually returned. for only a day or two. “Support for the cooperative and Most employees returned to work within 48 hours. During employees from the community has been overwhelm- the interim, the cooperative is 23,500 square feet of ing,” Behr said.

Rural Cooperatives / May/June 2001 27 derives from the company’s investment Together, you own a farm-to-market work on developing the legal and busi- in the brand.” business that processes, packages and ness framework of the cooperative. markets your milk. In an age when pro- The new rice co-op has set a mini- AMPI leader urges more ducers everywhere are striving to move mum commitment of 1.2 million hun- member participation in co-op their products up the food chain, you dredweights of rice and a maximum of One of the basic tenets of coopera- are well on your way,” Furth reminded 2.5 million hundredweights—about tives is member participation, although the membership. one-fourth of the rice grown in the it’s not always emphasized the way it During fiscal 2000, AMPI achieved Texas area west of Houston. The con- should be. $1 billion in sales, had increased earn- cept is similar to Riceland Foods, an Mark Furth, ings of $9.8 million and revolved $8.9 Arkansas rice marketing cooperative. A general man- million back to members. Amidst an key to the plan will be to buy or lease a ager of Associ- environment of rising producer exits mill with established brands which earn ated Milk Pro- and retirements, more than 300 new more than bulk rice in domestic and ducers Inc. producers joined AMPI last year. The export markets. The cooperative already (AMPI), at cooperative’s record-breaking sales and has a small mill in mind to purchase. New Ulm, volume of packaged cheeses were the Rice acres hit a 30-year low last year, but Minn., feels so catalyst for a $3 million facility expan- the yield was up due to improved vari- strongly about sion at Portage, Wis. The building pro- eties and ideal growing conditions. the issue that ject will be completed later this year Mark Furth he made and increase the plant’s sales cooler Pork co-op faces obstacles PHOTOS COURTESY AMPI increased capacity. “Our consumer-packaging Despite opposition from a local member par- facilities are a long-term investment for group, Family Quality Pork Processors ticipation one our business,” Furth said. “New cus- Cooperative of northeastern Nebraska of his five-year tomer orders of aseptically packaged is taking steps to operate a $2.4 million goals for the products made in Dawson, Minn., and packing plant that can slaughter cooperative. cheese packaged in Portage resulted in 250,000 hogs per year. In the first step, Last on his list double digit sales growth.” the Boone County Planing Commis- was “growing In the officer election following the sion has approved a site east of Peters- new roots.” annual meeting, Paul Toft, Rice Lake, burg. The next step will be to obtain a Writing in Wis., former vice president of the board conditional-use permit to operate the the coopera- and a director for 14 years, was elected planned $2.4-million facility, which Paul Toft tive’s “Dairy- president. He succeeds Wayne Bok, would employ about 40 workers. The men’s Digest” Geddes, S.D., who is retiring from the cooperative seeks to expand its current magazine, Furth explained, “Although dairy industry. The board has been membership of 125 to 150. AMPI has experienced near-record downsized from 34 to 33 members. Toft Proponents say the facility will look growth in membership and milk vol- has been marketing milk through AMPI more like a farm than a factory and have ume, member involvement has to keep to its plant at Jim Fall, Wis., since 1973. less odor and runoff than traditional pace. In a cooperative, involvement His youngest son, Mark, returned to slaughter plants. Investors see the coop- should not be optional. You have an the dairy farm this spring. erative as a way of helping small pro- investment in this farm-to-market ducers stay in business. Members are business. It’s your company. Is it work- Texas rice co-op formed being asked to pay a fee of $12 for every ing for you?” The magazine included a A group of about 30 rice growers hog they want slaughtered at the plant listing of the cooperative’s elected near the Wharton County community each year. Membership investment was leaders. “This listing is a useful tool of Louise, Texas, have formed a new open to the first 149 producers who when wanting to propose a resolution, marketing cooperative to earn more wanted to invest up to $250 per person discuss an issue or learn more about from the long-grain rice market. Pro- to fund the business plan. your cooperative,” Furth continued. ducers are not only suffering from his- “Becoming involved may be as simple toric low prices, but also from the high Wisconsin co-op initiates as calling a fellow AMPI member cost of farm production supplies, par- semen research trial about a concern or as rewarding as ticularly fuel and fertilizer. The coop- Results are expected this summer aspiring to be on the corporate board erative hopes to handle members’ rice from a sexed-semen research trial being of directors. You decide. It’s your busi- from the dryer to the grocery shelf. conducted in collaboration with Accel- ness. Accept the challenge! The interim board will canvass other erated Genetics of Baraboo, Wis., XY “As an AMPI owner, 4,800 Midwest rice growers with an eye to increasing Inc. and Colorado State University. neighbors are your business partners. membership. Simultaneously, it will The goal is to introduce sexed semen

28 May/June 2001 / Rural Cooperatives Beet grower co-ops on brink of processing most U.S. sugar

Transactions are pending with three new grower-owned Rick Dorn, a third-generation Montana beet grower and sugar beet cooperatives to purchase the major processing president of the cooperative, said “This is not the growers’ plants currently owned by Imperial Sugar Co. of Sugar Land, burden alone.” Although prices have bottomed, coopera- Texas, its subsidiaries, and Western Sugar Co., owned by tive backers believe that’s why the deal is within reach of Tate & Lyle LLC of London. Imperial, the largest processor the growers. The cooperative is offering to lease shares to and marketer of refined sugar in the United States, filed for non-members at $70 per acre for two years; after that, pro- chapter 11 bankruptcy protection in January. ducers can buy shares for an extra $140 per acre. “Once Imperial sells Michigan Sugar and Western The lease will keep the plant open to handle this year’s Sugar sells its factories, 90 percent of the sugar beets beet crop. The agreement was reached just as farmers planted (nationwide this year) will be processed at coop- were about to sow the 2001 crop. The cooperative will erative factories,” said Dick McKamey, president of the have title to all the sugar produced. In an Associated Press Washakie Beet Growers Association at report, Washakie President Rick McCamey Worland, Wyo. “The growers needed to said, “The growers needed to take the risk take this risk not only for themselves, but not only for themselves, but also to support also for the community and the (factory) both the community and employees.” employees,” McKamey said. Meanwhile, Imperial has signed a letter The Washakie association has signed a of intent to sell the capital stock of Michi- one-year lease for the Holly Sugar factory. gan Sugar Co.’s four factories to Michigan The company, which had planned to close Sugar Beet Growers Inc., a new coopera- the plant unless growers leased it, will tive of 1,400 growers based at Saginaw. continue operating it and market the sugar. However, the cooperative recently learned Growers have been plagued with the it did not qualify for tax- exempt bonds to lowest prices in 20 years, a glut of sugar, finance and purchase the facilities. It is high energy costs and cheap imports from seeking low-interest financing elsewhere. Canada and Mexico. Plans have been postponed until The group needs to secure about $40 million plus an unde- June 30 by the Rocky Mountain Sugar Growers Coopera- termined line of credit to operate the processing plants. tive to purchase Western Sugar Company at Scotts Bluff, The cooperative expects to secure 125,000 acres, or Neb. The cooperative was formed last July when the the amount of sugar beets processed annually in the Western plants were offered for sale. Michigan plants. Richard Leach, its executive vice presi- The delay is expected to help the cooperative to solidify dent, said the only way growers will be paid for last year’s its financing. Also sidelined was a proposal by the Scotts crop is for members to contract with the cooperative. Bluff city council to commit $500,000 to a 10-year loan from The transaction is subject to the negotiation of a definitive the city’s sales tax proceeds to help the cooperative with agreement and approval of the company’s board of directors operating expenses. During the interim, the cooperative and resolution of Imperial’s Jan. 16 petition for relief to the will seek to increase its committed acres from 150,000 to U.S. Bankruptcy Court for the District of Delaware. 170,000, especially in Colorado and Nebraska. The plants Purchase terms include a cash payment of $55 mil- operate more efficiently at the 170,000-acre mark, although lion at closing, deferred payments of $10 million and the Western Sugar’s six factories can process up to 185,000 cooperative’s assumption of $18.3 million in industrial acres of sugar beets. development bonds. The cooperative faces an Oct. 1 Growers in Wyoming, Montana, Colorado and Nebras- financing deadline. If the deal is closed later, the com- ka are subscribing to the new cooperative at a rate of $185 pany will manage the four Michigan factories and mar- UGAR

S per acre. The $78 million agreement will give sugar beet ket the processed refined sugar under a lease and man- growers their first processing plant ownership stake in the agement agreement so the 2001 crop can be processed. RYSTAL

C 90-year history of the North Platte River Valley’s sugar Further, the cooperative will sign a sales and marketing industry. Hod Kosman, a Scottsbluff bankerer, volunteered agreement so the company will continue marketing the

MERICAN to assist the cooperative. If farmers don’t preserve the refined sugar processed by Michigan Sugar Co. after A region’s and buy Western Sugar, Kosman the sale. The cooperative has members in Michigan and says land values could drop up to 20 percent. “It’s [invest- Ontario, Canada. A membership drive will follow to sell ing] an excellent way for farmers to participate upstream, about 24-million shares at $200 each plus delivery of one

HOTO COURTESY and they don’t have that opportunity often,” he said. acre of production. P

Rural Cooperatives / May/June 2001 29 to the North American artificial insem- generated premiums and net savings and were followed by record prices in ination industry. It’s the first time an AI (since 1987) while requiring no capital 1998,” he said. The average milk price organization in the United States has equity retains from our members,” he for Foremost members in 2000 was conducted such a research trial. It will said. “We have operated without any $11.62 per hundredweight, vs. $13.93 inseminate 1,200 virgin heifers in a equity capital retain and relied on plant per hundredweight in 1999. Members concentrated number of dairy herds. operations, milk marketings and mem- received patronage refunds totaling The semen was collected from three ber dues to fund the cooperative.” $12.6 million, down $2.31 from the Accelerated Genetics’ sires housed at 1999 price of $13.93 per hundred- XY Inc., in Ft. Collins. The ultimate Foremost converts to mozzarella weight. Members marketed 5.3 million goal is to predetermine the sex of A $91,000 grant from the Wisconsin pounds of milk. As in past years, Fore- calves from specific matings with the Development Fund to Foremost Farms most will pay 25 percent of its patron- result to have faster gain within herds. is being used to retrain the 50 employ- age in cash and add the rest to mem- ees at its cheese production plant at bers’ equity accounts. MMPA returns $1.9 million in cash Richland Center, Wis., which will For the sixth consecutive year, switch from manufacturing cheddar to Record loan level for Michigan Milk Producers Association mozzarella cheese. The major conver- Texas FCBs (MMPA) has paid $1.9 million in cash sion comes on the heels of a tough year The Farm Credit of Texas and patronage refunds to its members. for the cooperative based at Baraboo. 23 local credit cooperatives in the five- The funds represent 30 percent of the Earnings for fiscal 2000 reached only state Tenth Farm Credit District end- $65.7 million allocated earnings gen- $10 million, down from $19 million a ed fiscal 2000 with record loan volume erated by the cooperative in fiscal year earlier. Similarly, revenues and strong earnings despite difficult 2000. The patronage includes all of dropped to $1.1 billion from $1.3 bil- weather and market conditions faced the farm supply earnings and 25 per- lion in 1999 due to lower cheese prices by many agricultural customers. Gross cent of the milk marketing profits. and higher energy costs. loan volume reached $5.2 billion, a Cash payments set a record because Patronage refunds for fiscal 2000 new record for the 84-year-old district the $4.1 million returned in 1988 and reached $12.6 million, or an average 23 and 9.1 percent higher than 1999. 1989 was paid in equities. cents per hundredweight for milk mar- Improvements in the livestock industry “The ability to make these cash pay- keted through the cooperative. Duaine contributed substantially to the strong ments and maintain a competitive pay Kamenick, Foremost’s finance vice demand for agricultural and equip- price is the essence of a strong cooper- president, said it had been a trying year ment loans. Expansion in the integrat- ative,” said MMPA President Eldwood for dairy farmers. “Milk prices were ed processing and marketing sector Kirkpatrick. “We have consistently lower than they had been in decades also were factors.

Local co-ops embracing high-tech agronomy systems continued from page 13 it want to offer GPS/GIS technology application and employing crop/agron- application units with another coopera- in the future. omy specialists, can help interpret or tive(s) and share the use and expenses. Compared with cooperative fertiliz- make field maps for farmers. Working These cooperatives might also consider er operations in 1996, there are many with regional cooperative personnel, setting up an agronomy subsidiary or similar responses. Local cooperatives locals provide agronomy record-keep- limited liability company to share the are still strongly supported by the ing programs and innovative ways to use and expenses of new technology, regional cooperative procurement and combine field maps, yield monitors, equipment and personnel. ■ distribution system. Private suppliers and fertilizer and crop protectant appli- 1 This study will soon be available for view- and other cooperatives are strong com- cation equipment. ing at www.rurdev.usda.gov/rbs/ pub/ petitors, especially on price. Use of GPS/GIS technology, newpub.htm. Cooperative crop protectant appli- crop/agronomy specialists and record 2 Standard farm production regions used, cation equipment with GPS/GIS keeping is expensive. Many of the Northeast: ME, NH, VT, NY, MA, RI, technology, combined with the farm- respondents that do not offer some or CT, PA, NJ, DE, MD, and DC. Lake ers’ use of yield monitors on harvest- all of these services want to offer them States: MI, WI, and MN. Corn Belt: OH, ing equipment, provides farmers with but may be unable to because of the IN, IL, IA, and MO. Northern Plains: ND, maps showing where crop protection high fixed costs and large volume of SD, NE, and KS. Appalachian: VA, WV, KY, TN, and NC. Southeast: SC, GA, AL, works and where pest damage crop protectants required. Smaller and FL. Delta States: MS, LA, and AR. lowers yields. cooperatives may be able to share a Southern Plains: OK and TX. Mountain: Local cooperatives, with long expe- crop/agronomy specialist with a nearby MT, ID, WY, CO, UT, NV, AZ, and NM. rience in fertilizer and crop protectant cooperative or purchase GPS/GIS Pacific: WA, OR, CA, HI, and AK.

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

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

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

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

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

To locate a breakdown of publications by subject matter:

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

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

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

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

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

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32 May/June 2001 / Rural Cooperatives