Rural COOPERACOOPERAUSDA / Rural Development TIVESTIVESMay/June 2006 CHS:CHS: 7575 andand StillStill ShiningShining page 4 COMMENTARY 80th Anniversary of Cooperative Marketing Act On July 2, 1926, President Calvin Coolidge signed the cultural producers “engaged in cooperative marketing of agri- Cooperative Marketing Act into law, formally launching the cultural products, including processing, warehousing, manu- federal government’s role in assisting farmer-owned coopera- facturing, storage, cooperative purchasing of farm supplies, tives. Although USDA first assembled data on farmer co-ops credit, financing, insurance and other cooperative activities.” in 1901 and launched its first official cooperative project in The Act has seven subsections, which direct the following 1912, it was the 1926 Act that really got the show on the activities to be undertaken: road. The first of the program’s subsequent “homes” was the • Promoting knowledge of cooperatives principles and prac- Division of Cooperative Marketing within USDA’s Bureau of tices and cooperating with educational and marketing agen- Agricultural Economics. For six years in the 1930s, it was cies, cooperatives and others in promoting that knowledge; even housed in the Farm Credit Administration before • Making special studies in the United States and foreign returning to USDA. countries and acquiring and disseminating information and Rather than a regulatory program, the framers of the law findings useful in the development and practice of coopera- envisioned it as a program that would provide education, tives; research and technical assistance to help farmers help them- • Gathering, analyzing and disseminating economic, statisti- selves. Eighty years later, this mission continues, although cal and historical information about cooperative business Mr. Coolidge and Co. would certainly be amazed by the radi- methods; cal transformation of the nation’s rural (and urban, for that • Studying economic, legal, financial, social and other phases matter) areas. The number of farmers is, of course, greatly of cooperation and publishing the results; reduced, and the size of the average farm has greatly expand- • Surveying and analyzing accounts and business practices of ed. But the marketing and other challenges facing farmers are cooperative associations...and publishing summaries of more formidable and complex than ever, and hence the per- results to guide other cooperatives in developing methods formance of their cooperatives is still vital. of business and marketing analysis; To see how a co-op can evolve and grow along with the • Advising committees or producer groups seeking to organ- farm economy, just turn to the coverage on page 4 of this ize a cooperative and making an economic analysis... issue to read about CHS Inc. as it marks its 75th anniversary. • Employing qualified commodity marketing specialists to The history of CHS and its predecessor co-ops is, in many summarize and analyze the information and disseminate it respects, also the history of agriculture and co-ops in the to cooperatives and others. Midwest and Northwest. Examples of innovative medium and small size co-ops are, After 80 years, should the Act be updated? Some have sug- of course, also featured in every issue of this magazine and gested expanding the scope to include all types of coopera- demonstrate how flexible the co-op model is. Strategic tives, not just agricultural cooperatives. Should the role of the alliances and joint ventures among co-ops, new-generation program – now housed with USDA Rural Development – be co-ops, use of co-op subsidiaries, co-ops with international expanded to include other types of producer-owned agribusi- members and using outside equity to supplement farmers’ nesses (such as the producer-owned LLCs gaining popularity equity are examples of this flexibility. Co-ops are industry in the biofuels industry)? leaders in identity preservation, niche marketing, develop- These and other questions and issues concerning the ment of new products and services and other ways of provid- future of producer-owned and other types of cooperatives ing member support. will need to be resolved as co-ops position themselves to pro- Despite the passage of 80 years, the scope of activities vide the types of services their members need in order to Congress directed USDA to help farmers pursue through co- prosper. ■ ops still serves as a road map to the types of endeavors farmer co-ops are engaged in today. The Act directed service to be — Dan Campbell, Editor provided to associations, federations and subsidiaries of agri- 2 May/June 2006 / Rural Cooperatives Rural May/JuneCOOPERACOOPERA 2006 TIVESTIVESVolume 73 Number 3 FEATURES 4 CHS at 75: Looking back, looking forward By Dan Campbell Rural COOPERATIVES (1088-8845) is published bimonthly by Rural Business–Cooperative Service, U.S. Department of Agriculture, 1400 Independence 12 Montana forest fuel collection Ave. SW, Stop 0705, Washington, DC. 20250-0705. p. 4 The Secretary of Agriculture has determined that business wins USDA grant publication of this periodical is necessary in the By Tyler Christensen transaction of public business required by law of the Department. Periodicals postage paid at Washington, DC. and additional mailing offices. Copies may be obtained from the Superintendent of 14 Bottling Hope in Africa Documents, Government Printing Office, Washington, DC, 20402, at $23 per year. Postmaster: Land O’Lakes providing boost to Ugandan dairy industry send address change to: Rural Cooperatives, p. 14 By Todd Thompson USDA/RBS, Stop 3255, Wash., DC 20250-3255. Mention in Rural COOPERATIVES of company and brand names does not signify endorsement over 17 Co-op Conversions other companies’ products and services. Extent of commitment to co-op values key factor in decisions Unless otherwise stated, contents of this publication are not copyrighted and may be reprinted freely. For By Julie Hogeland noncopyrighted articles, mention of source will be appreciated but is not required. p. 17 The U.S. Department of Agriculture (USDA) prohibits 22 A Movable Feast discrimination in all its programs and activities on N.D. farmers to add value and educate the basis of race, color, national origin, age, disabili- consumers with D.C. eatery ty, and where applicable, sex, marital status, familial status, parental status, religion, sexual orientation, By Sheri Aldapi genetic information, political beliefs, reprisal, or because all or part of an individual’s income is derived from any public assistance program. (Not all prohibited bases apply to all programs.) Persons p. 22 24 Agri-Mark, Allied Federation with disabilities who require alternative means for communication of program information (Braille, dairy co-ops join forces large print, audiotape, etc.) should contact USDA’s TARGET Center at (202) 720-2600 (voice and TDD). To file a complaint of discrimination, write to USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C. 20250-9410, or call (800) 795-3272 (voice), or (202) 720-6382 (TDD). USDA DEPARTMENTS is an equal opportunity provider and employer. 2 COMMENTARY Mike Johanns, Secretary of Agriculture 16 VALUE-ADDED CORNER Thomas C. Dorr, Under Secretary, USDA Rural Development, 21 LEGAL CORNER 25 NEWSLINE Jack Gleason, Acting Administrator, Rural Business-Cooperative Programs 33 PAGE FROM THE PAST Dan Campbell, Editor 35 INSIDE RURAL DEVELOPMENT Vision Integrated Marketing/KOTA, Design Have a cooperative-related question? On the Cover: Call (202) 720-6483, or Fax (202) 720-4641, Information Director, On the Cover: Looking a little like flickering birthday cake candles, is This publication was printed with vegetable oil-based ink. CHS Inc.’s petroleum refinery at Laurel, Mont., one of its two refineries. CHS leaders look at the past and future of the co-op on its 75th birthday. Photo by David Lundquist, courtesy CHS Rural Cooperatives / May/June 2006 3 CHSCHS atat 75:75: LookingLooking back,back, looking looking forwardforward By Dan Campbell, editor get the supplies they need to produce a crop, then adds value e-mail: [email protected] to those crops to help return more farm dollars to producers and their communities. taying power. That’s what it takes for any busi- CHS predecessor co-ops were founded during the Great ness to survive and thrive for 75 years. Depression, when farming was literally a life-or-death strug- CHS Inc. is observing its 75th anniversary gle for local co-ops and their producers. Farmers — then as S this year as much more than just a survivor. It is now — looked to their co-ops as crucial business partners a diverse and growing Fortune 200 agribusiness whose success or failure was inexorably linked to their own. with $11.8 billion in annual sales. It serves 1,100 local coop- The nation’s newly mechanized agriculture industry was eratives with 325,000 member-producers and is poised to increasingly looking for a dependable, fairly priced source of pursue promising new industries. fuel. Farmers also needed strong cooperatives to get their The success of CHS is testament to the power of what a grain to market and to return a good price for it. producer-owned agribusiness can accomplish with the right Cenex (or Farmers Union Central Exchange) was estab- business strategies and the support of its members. From the lished in St. Paul, Minn., in 1931 to supply farmers with fuel fuels it refines and supplies to member cooperatives, to the and other vital farm supplies. For grain handling, farmers grain it mills into flour and the oilseeds it processes into veg- formed North Pacific Grain Growers Inc. (NPGG) in 1929 etable oil-based foods, CHS strives to make sure producers in Lewiston, Idaho, and Farmers Union Grain Terminal 4 May/June 2006 / Rural Cooperatives Association (GTA) in 1938, also in St. Paul. These are the back to the members. three “rootstock” co-ops from which CHS sprouted. We operate on the co-op business model, which facilitates NPGG and GTA merged to create Harvest States CHS in returning more value to our members.