al r u r cooperatives - usda rural development in rural cooperatives of company and brand ......

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lCOOPERATIVESCOOPERATIVES

GROWING A NEWGENERATIONOF CO-OPS

May/June 2017

The Buck Stops Here

Increased scrutiny of board actions is notalways accompanied by better informationabout exactly how directors should performtheir many duties. This series of articlesprovides a practical guide and underlyingprinciples for actions board members can taketo improve their service to cooperatives. ByJames Baarda; 16 pages.

n For free hard copies, e-mail: [email protected],or call (202) 720-7395, or write: USDA Co-op Info., Stop3254, 1400 Independence Ave. SW, Washington, D.C.20250. Indicate title and number of copies needed.

n To download:www.rd.usda.gov/publications/publications-cooperative.

The Circle of Responsibilities for Co-op Boards

USDA Cooperative Information Report (CIR) 61

Rural Cooperatives / May/June 2017 3

Volume 84, Number 3May/June 2017

Rural Cooperatives (1088-8845) is published bimonthlyby USDA Rural Development, 1400 Independence Ave.SW, Stop 3254, Washington, DC. 20250-0705.

The Secretary of Agriculture has determined thatpublication of this periodical is necessary in thetransaction of public business required by law of theDepartment. Periodicals postage paid at Washington,DC. and additional mailing offices. Copies may beobtained from the Superintendent of Documents,Government Printing Office, Washington, DC, 20402, at$23 per year. Postmaster: send address change to:Rural Cooperatives, USDA/RBS, Stop 3254, Wash., DC20250-3255.

Mention in Rural Cooperatives of company and brandnames does not signify endorsement over othercompanies’ products and services.

Unless otherwise stated, articles in this publication arenot copyrighted and may be reprinted freely. Anyopinions expressed are those of the writers, and do notnecessarily reflect those of USDA or its employees.

In accordance with Federal civil rights law and U.S.Department of Agriculture (USDA) civil rightsregulations and policies, the USDA, its Agencies,offices, and employees, and institutions participating inor administering USDA programs are prohibited fromdiscriminating based on race, color, national origin,religion, sex, gender identity (including genderexpression), sexual orientation, disability, age, maritalstatus, family/parental status, income derived from apublic assistance program, political beliefs, or reprisalor retaliation for prior civil rights activity, in anyprogram or activity conducted or funded by USDA (notall bases apply to all programs). Remedies andcomplaint filing deadlines vary by program or incident.

Persons with disabilities who require alternativemeans of communication for program information (e.g.,Braille, large print, audiotape, American Sign Language,etc.) should contact the responsible Agency or USDA'sTARGET Center at (202) 720-2600 (voice and TTY) orcontact USDA through the Federal Relay Service at(800) 877-8339. Additionally, program information may bemade available in languages other than English.

To file a program discrimination complaint, completethe USDA Program Discrimination Complaint Form, AD-3027, found online at How to File a ProgramDiscrimination Complaint and at any USDA office orwrite a letter addressed to USDA and provide in theletter all of the information requested in the form. Torequest a copy of the complaint form, call (866) 632-9992. Submit your completed form or letter to USDA by:(1) mail: U.S. Department of Agriculture, Office of theAssistant Secretary for Civil Rights, 1400 IndependenceAvenue, SW, Washington, D.C. 20250-9410; (2) fax: (202)690-7442; or (3) email: [email protected].

USDA is an equal opportunity provider, employer,and lender.

Sonny Perdue, Secretary of Agriculture

Dan Campbell, Editor

Stephen Hall / KOTA, Design

Have a cooperative-related question? Call (202) 720-6483, or email: [email protected] This publication was printed with vegetable oil-based ink.

04 Learning from Food Hub Closures Despite initial success, lack of a viable business model contributed to hub’s failure

By James Barham, Sasha Feldstein and James Matson

12 Saving the Last Grocery Store Galvanized by a blizzard, people of a rural Colorado town unite to reopen store

By Lorraine Armstrong

16 The co-op center that refused to die! California center reinvented itself as a nonprofit when state pulled funding cord

By Dan Campbell

21 Clean & Green Co-op provides workers with better pay, work conditions and chances to gain skills

By Dan Campbell

24 A Born Cooperator Co-op developer thinks Asian fruits and vegetables could be the ‘next sushi’

By Dan Campbell

Departments08 LEGAL CORNER28 MANAGEMENT TIP

31 UTILITY CO-OP CONNECTION33 NEWSLINE

p. 4

ON THE COVER: The California Center forCooperative Development (CCCD) is committed tocreating jobs and economic progress through theformation of co-ops. Clockwise from top: IsabelFernandez of Yolo Eco-Clean Cooperative at work;CCCD Director Kim Coontz explains co-op businesspractices during a workshop; touring the Santa Elenafarmworker housing cooperative during the “Co-opConvergence”; CCCD facilitator and farmer MaiNguyen pours grain onto an air-screen cleaner. Seepages 16-27.

p. 24 p. 31

Features

4 May/June 2017 / Rural Cooperatives

Closures

Despite initialsuccess, lack of a viable businessmodel contributed to hub’s failure

Learning from Food Hub

By James Barham, Sasha Feldsteinand James Matson

Editor’s note: Barham is a foodsystems specialist with the USDARural Business-CooperativeService; Feldstein was formerly aresearch fellow with USDA RuralBusiness-Cooperative Service; andMatson is a consultant at MatsonConsulting. This article isexcerpted from the upcoming report“Running a Food Hub, Volume 4:Learning from Food HubClosures.” Another case study willbe presented in the next issue ofRural Cooperatives.

Sorting bell peppers at the now-closed Pilot Mountain Pride food hub in North Carolina.Expanding the operation to include a retail business, for which its staff had little experience,contributed to the closure of the hub.


Many studies have been conducted that focuson successful food hubs. USDA is looking atthe other side of the coin to fill a knowledgegap by using national data and case studies todraw general lessons for why food hubs fail.

By identifying lessons learned from former food hubs, wehope this information will assist new and existing food hubsin addressing challenges, leading to success. Six food hub case studies were conducted across theUnited States to examine reasons for closure. In this article,we look at the case of Pilot Mountain Pride. USDA defines a food hub as a “business or organization

that actively manages the aggregation, distribution andmarketing of source-identified food products, primarily[coming] from local and regional producers…” The overallgoal is to “strengthen their ability to satisfy wholesale, retailand institutional demand.” Food hubs play an important rolein the food system by meeting the needs of small and “ag-of-

the-middle” farmers who lack the capacity to meet thespecific volume, quality and consistency requirements oflarger scale buyers, such as retailers, wholesale distributors,and institutions. An increasing number of individuals, organizations,nonprofits, businesses and cooperatives are seeking to occupythis space and meet the rapidly growing demand for localfood. There are more than 350 hubs in the United States,three-quarters of which were established during the pastdecade. It is important to note that four of the six hubs studied byUSDA opened their doors during the 2008 recession.

However, external factors were rarely the main reason forclosure. Instead, internal management and board governanceissues were far greater determinants of food hub success orfailure. Food hub leaders, as well as others who workedclosely with the food hub, provided much of the languageand information for the respective case studies. In addition to reflecting on their own lessons,representatives of each of the food hubs gathered to identifycommon themes. Therefore, this report not only providesinformation that is specific to the context of new and existingfood hubs, but it also provides general insights that may beapplied to a variety of cases. Building and sustaining a food hub is difficult. A successfulfood hub relies on several moving parts, includingcoordinating with producers, aggregating, processing andstoring product, then distributing it to buyers. If one piecefails, the whole operation can fail. Additionally, food hubs must constantly balance financialviability with other positive economic, social and/orenvironmental impacts within their communities.Maintaining that balance often leaves little room for error.Even though food hubs must be extremely meticulous, whichrequires rigid time management, the industry demonstratesvery high survival rates, which has been close to 90 percentsince 2005. While most of the food hubs studied for this report werenot incorporated as cooperatives, most can be viewed as“quasi cooperatives,” in that they share similar businessstructures, such as collective marketing and supply-chain

Pilot Mountain Pride LLC

Location: Pilot Mountain, N.C. Business structure: Not-for-profit LLCBusiness model:Wholesale distribution, retail space

and distribution to CSAsNo. of producers served: ~60Financing: Public and private grantsSales growth: $300,000 in 2010 to less than

$125,000 in 2013 Established: April 23, 2010Closed: January 2015

Pilot Mtn. Pride formed as producer-driven nonprofit

The food hub industry demonstrates very high survival rates, which have been close to 90 percent since 2005.


transparency, along with similar cooperative values, such asshared risk and the equitable distribution of benefits. Manyof the lessons learned in the course of this study may provebeneficial to co-ops and related small businesses.

Initial success surpasses expectations Pilot Mountain Pride was established to provide farmerswithin 50 miles of Winston-Salem, N.C., with access toretail, service and institutional food markets. It was fundedthrough the Surry County Economic DevelopmentFoundation. Pilot Mountain Pride was organized as aproducer-driven, not-for-profit LLC in 2010, primarily

focused on the aggregation, packing, storing and wholesaledistribution of fruits and vegetables to restaurants, collegesand grocery stores. Under the supervision of the foundation, Pilot Mountainwas led by a board of directors, with a staff of one salaried,full-time employee, one part-time worker and severaladditional workers and volunteers who assisted during peakseason with packing and moving product through the foodhub. Funds for Pilot Mountain Pride’s start-up were providedby Surry County and numerous other business partners, aswell as by local, state and federal government agencies thatprovided additional grants. In its first year, Pilot Mountainexpected to have $30,000 to $50,000 in sales. However, grosssales for 2010 soared to almost $300,000. To meet thisunexpected demand, Pilot Mountain quickly scrambled toupgrade its infrastructure and purchased additionalequipment for the large volume of produce. The food hub consisted of a 12,000-square-footwarehouse, including 6,000 square feet of forced-air coolerspace, and two 20x12-foot standing coolers. To handlesmaller scale local deliveries to customers, the facility owneda 27-foot refrigerated box truck, but it also worked with areatrucking companies to handle larger loads.

Challenges along the way The hub’s customer base grew to include three grocerystore chains, two colleges, several restaurants and an emaillist of 1,500 customers who received weekly informationabout the food hub’s product availability. The food hub alsoregularly supplied two CSAs (community supported

agriculture) and worked with another eight or nine CSAs ona more limited basis. Even though Pilot Mountain Pride had a wide and variedcustomer base, sales dropped to $250,000 in 2012 as the foodhub struggled to keep up with demand. Despite the slight drop in sales, the hub expanded to opena retail space in addition to distribution to customers.Unfortunately, the retail business lasted for less than a year,opening in June 2013 and closing in February 2014. Badweather contributed to the closure of the retail outlet, withNorth Carolina experiencing heavy rains early in the growingseason and temperatures that were unseasonably cold. Cropyield was poor that year, and there was not enough produce

The original business model — which called for Pilot Mountainto maximize farmer profits by returning 80 percent of revenue to the

producers — proved unsustainable.

One of the factors that contributed to the demise of Pilot MountainPride was an over-reliance on grants to finance its start-up costs.


coming in to keep the retail space stocked. Another reason it failed was poor preparation foroperating a retail business, which was an entirely newbusiness area for Pilot Mountain Pride’s leadership. As aresult, sales declined to $125,000 in 2013 and the storecreated additional expenses that could not be covered. Othercosts also mounted, leading to a continual decrease in salesand revenue. In the original business model, Pilot Mountain attemptedto maximize farmer profits by returning 80 percent ofrevenue to the producers, leaving only 20 percent to pay forlabor and other operational costs. Unexpected costs, however,made keeping operations within those allocation marginsvery difficult. Packaging costs alone were substantially higherthan expected, as much 250 percent above projections,according to some sources.

Decision to close Cost increases, combined with a decrease in sales,ultimately led Pilot Mountain Pride to close its doors. Thereliance on grant money and the lack of cash reserves by thesecond and third years of operation did not allow it to offsetthe sales slump nor the cost of operating a retail space. The hub had difficulty with some grant funders and thusdid not receive some money it had expected. The smallportion of revenue retained by the hub to cover its operationswas ultimately not enough to sustain the business. Pilot Mountain Pride decided to close in January 2015,before the start of that year’s season, to minimize losses andavoid leaving producers without a distributor midwaythrough the season.

Lessons Learnedn Reliable income and cash reserves are necessary forgrowth and dealing with unexpected setbacks. While first year sales exceeded expectations and themajority of startup funding was provided by grants, PilotMountain Pride faced problems of inadequate cashreserves and planning for scale. After a successful firstyear, increased costs were incurred for additionalinfrastructure and the retail store front. When salesdropped, and lacking financial reserves, the added costscould not be met. Money that is “promised” through grants or othersources may not always come through, so more reliablesources of income are needed. The 20-percent sharetaken by Pilot Mountain Pride to cover operatingexpenses had to also pay for packaging and freight, a costwhich the farmers probably should have shared in.

n The food hub must be prepared for day-to-dayoperations and use a sustainable business model. Pilot Mountain Pride was established by a countyfoundation, not by farmers themselves, nor by anorganization familiar with the task of organizing theaggregation and distribution of produce. This left thefood hub ultimately unprepared for the inevitableproblems and challenges associated with production,growth and expenses. A business model with a larger percentage of salesgoing to the hub, or with other ways to offset shippingand packaging costs, may be needed for business

sustainability and growth. In addition, there must beclear procedures, responsibilities and guidelinesestablished at the beginning of operation for both theproducers and the hub so that all parties are aware oftheir roles and obligations to the project.

n Grant money is not always sufficient, or reliable, toguarantee sustainability. Pilot Mountain Pride depended heavily on grants tomeet startup costs. While buoyed by better-than-expected first year sales, the grant money base was notenough to offset the steep sales declines the next year orto provide for the move into the retail market. Problemscan arise when anticipated grants are not received andthus should not be relied on. Food hubs need to beprepared for an unexpected drop in grant funding.

n Greater product variety allows for more avenues ofincome throughout the year. The decrease in sales due to heavy rain and cold in2013, leading to poor crop yields, could have been offsetby more diversification in product lines, offering a widerrange of items for different seasons. Therefore, if onearea was impacted, the damage could be partially madeup during the rest of the year. Offering value-addedproducts and having the capacity to do limitedprocessing could increase the range of products andextend the growing season. n


By W. Todd Miller and Lucy Clippinger

Editor’s note: Miller and Clippinger areattorneys with the Baker & Miller PLLClaw office in Washington, D.C., whichfocuses on antitrust cases. The law officeprovides legal counsel to the Dairy Farmersof America cooperative in one of the casesdiscussed below. The views expressed in thisarticle are the authors’ own, and do notnecessarily reflect those of USDA or itsemployees. It should not be considered aslegal advice; cooperatives should consultwith legal counsel for questions aboutantitrust matters related to their business.

A large percentage ofthe agriculturalproducts produced byfarmers in the UnitedStates are marketed by,

or through, cooperatives. But becausecooperatives are combinations of whatmight be viewed as competitors in the

production and sale of agriculturalproducts, some may wonder how acooperative can operate in light of lawsthat prohibit competitors from workingtogether to set prices. The Capper Volstead Act (the “Act”)provides cooperatives with theirprimary exemption from federalantitrust laws, allowing agriculturalproducers to work together to improvetheir economic position. This articlediscusses the Act and explores how itremains relevant to agriculturalproducers today.

Overview of U.S. antitrust laws The principal U.S. antitrust lawswere established when Congress passedthe Sherman Act in 1890 and theClayton Act in 1914. These laws reflecta commitment to a free market. Theypromote independent action bybusinesses that compete with each otherby prohibiting agreements among

competitors to fix prices, to allocatemarkets or customers, or to boycottcustomers or suppliers. These laws reflect the belief thatmarkets in which businesses that arecompeting on price and quality ofservices will produce better productsand deals for consumers. In certaincircumstances, of course, competitorscan join together to create legitimatejoint ventures. The creation of the Visaand similar credit card networks aregood examples of such ventures, wherebanks, which are otherwise competitors,joined together in a joint venture tooffer a new product (credit cards). U.S. antitrust law also prohibitsmonopolization and attemptedmonopolization. Monopolization occurswhen a business with substantial marketpower engages in business practicesdesigned either to exclude competitionor to gain substantial market power inthe first instance. While gaining a very

Legal CornerDespite recent challenges, Capper-Volstead continuesto provide ag co-ops with antitrust protection

Still the Legal Bedrock


substantial share of the marketplacethrough invention or excellentmarketing is not illegal, the offense ofmonopolization focuses on unfairbusiness practices that unnaturally allowa competitor to gain or maintain such adominant market share. Antitrust laws allow legal actions bypeople allegedly injured by a violationof the laws, as well as challenges by thegovernment. Thus, as compared tomany other jurisdictions, there is astrong and long tradition ofenforcement of the laws by privateparties (usually customers or competingbusinesses) in addition to enforcementby the government.

Agricultural exemptions to antitrust laws The turn of this century broughtrenewed interest in the Capper-Volstead Act, which soon turns 95 yearsold, and the other agriculturalexemptions to antitrust laws. Much ofthis attention could be considerednegative to the Act. However, the Actremains strong and is an importantfeature of the U.S. agriculturallandscape. Before we turn to developments ofthe past decade, we will look at the legalframework. When Congress passed the ClaytonAct in 1914, it included a provision(Section 6) that specifically exemptedthe creation of farmer cooperatives and

labor unions and collective activities byfarmers and workers from the generaloperation of the antitrust laws. Section6 responded to some earlier SupremeCourt decisions holding that workersand farmers were illegally price-fixingunder the Sherman Act when theyjoined together to market their labor or

agricultural products. Section 6 ultimately represents abroad public policy statement: theSupreme Court has explained that, withregard to cooperatives, “[b]y allowingfarmers to join together in cooperatives,Congress hoped to bolster their marketstrength and improve their ability toweather adverse economic periods andto deal with processors anddistributors.” In recognition of some of theshortcomings of the Section 6exemption, in 1922 the exemption wasexpanded by the Capper-Volstead Act,allowing exemptions to apply tocooperatives formed as corporations.That Act specifically allows personsproducing agricultural products as“farmers, planters, ranchmen, dairymen,[or] nut or fruit growers” to “acttogether in associations” in “collectivelyprocessing, preparing for market,handling, and marketing . . . suchproducts.” Thus, the key questions generallybecome: (1) whether the cooperative isproperly made up of farmers; and (2)whether the cooperative is engaged inactivities permitted by the Act.

Membership considerations The Capper-Volstead Act requiresthat the cooperative’s members beengaged in the production ofagricultural products. Beyond that, theAct does not define “farmer,” “planter,”

“ranchman,” “dairyman” or “nut orfruit grower.” While it is widelythought the terms are to be readbroadly, one thing is abundantly clear:the Act is intended to excludeprocessors and distributors ofagricultural products from cooperativemembership. As the U.S. Supreme

Court has pointed out: “Congress didnot intend to extend the benefits of theAct to the processors and packers towhom the farmers sold their goods…” Of course, one may engage in mentalgymnastics in determining whether aperson is a “processor” as opposed to a“farmer.” Statements by the U.S.Department of Justice regardingCapper-Volstead immunity require thepotential member to bear “a substantialpart of the risk of loss traditional toagricultural production.” In a decisionthat focuses on the poultry industry(but has teachings that can be appliedmore broadly), the Supreme Courtexplained that even someone who holdstitle to a flock of broiler chickens doesnot qualify as a farmer if he does notown a breeder flock, hatchery or grow-out facility where the flock to which hehas title is raised. A more recent decision, whichappears to have Capper-Volstead Actproponents unduly alarmed, suggests —in discussing egg farmers who ownsome chickens — that one must own(or undoubtedly lease) a farm to qualifyas a farmer. However, that passingreference is intertwined within abroader discussion that found that theentity in question was really “focusedon sales and marketing and contractedwith third-party farmers to produceeggs on [the entity’s] behalf.” In theend, the chickens owned by the entitywere not enough to overcome the fact

that it was primarily a distributor ofeggs. Suffice it to say that this will remainan area of uncertainty, but any inquiryabout whether an entity is characterizedas an “agricultural producer” orsomething else will be fact intensive. Ofcourse, the greater the entity’s income

By allowing farmers to join together in cooperatives, Congress hoped to bolster theirmarket strength and improve their ability to weather adverse economic periods

and to deal with processors and distributors.


is dependent on traditional agriculturalproduction, as opposed to thedistribution or processing of suchproduction, the more likely it is that theentity would be found to be anagricultural producer.

Permissible activities The next major inquiry is whetherthe cooperative is engaged in activitiesthat are permissible under theexemptions. Not surprisingly, this isalso an area of some uncertainty. Section 6 of the Clayton Actprovides that the “operation” of thecooperative is not forbidden by theantitrust laws, but it leaves exactly whatthat means open to question. TheCapper-Volstead Act, however, providesthat agricultural producers could acttogether in “collectively processing,preparing for the market, handling andmarketing” the agricultural products ofthe producers. To be sure, the activitiesencompassed by these terms are broadand include a wide variety of functions,contracts and agreements to further thecooperative’s basic goal of helping itsmembers sell their production onfavorable terms. As one court has noted,the term “marketing” itself is verybroad and includes “among others,buying, selling, storing, transporting,standardizing, financing, risk bearingand supplying market information.” It isalso clear that it includes the setting ofprices. The Capper-Volstead litigation thathas dominated the industry during thepast decade is centered on the questionof the extent to which the cooperativescan engage in activities that may affectthe production of the agriculturalproduct. The cases involve the egg,mushroom, potato and dairy industries.Plaintiffs allege in each case that thecooperatives involved have engaged in

“production restraints,” which theplaintiffs contend are not “marketing”activities and are otherwise outside thescope of permissible activities under theCapper-Volstead Act. At this point, only the potatoes case— which revolved around a co-op thatattempted to improve depressed cropprices through reduced plantings — hasaddressed the scope of permissibleactivities under the Capper-VolsteadAct, but this litigation is now apparentlysettled. In this case, the court issued an“advisory” opinion that explained thatcoordination of pre-planting productvolumes is outside the scope ofpermissible “marketing” under the Act.

The opinion also suggested that acreagereductions, production restrictions andcollusive crop planning are outside theprotections of the Act. The conduct being challenged,however, involved an agreement toreduce overall supply by 10 percent;farmers who did not reduce productionwere penalized. This was monitoredthrough GPS and aerial photography.There were other “supplymanagement” techniques at issue,confirming that this was a wide-rangingprogram to ensure that farmers reducedthe overall supply of potatoes.

While we do not believe Capper-Volstead has been weakened by recentcourt decisions, some in the agriculturalcooperative community are concernedabout them — especially regarding theinstance of a cooperative that may noteven be aware that is has members whowould not qualify as “producers” underthe law, which could open it tolitigation from a competitor. Two federal judges in Pennsylvaniahave held in the last few years that evena cooperative’s good-faith belief that allof its members qualified under the Actdid not keep the cooperative fromlosing its exempt status where itincluded non-producer processor or

distributor members. However, the onlyfederal Court of Appeals to rule on thisissue held that, at least where the non-producer members were not processorsor distributors, a cooperative could stillqualify for immunity if it mistakenlyhad a small number of non-farmermembers. This underscores the needfor cooperatives to be vigilant on thiscritical issue. At a minimum, each cooperativeshould take care in signing up membersand make efforts on a regular basis tocheck on their producer status. Manycooperatives have bylaws or similar

Marketing agencies in commonA discussion about the Capper-Volstead Act would not be complete withouta mention of one of the more unusual features of the statute. The Actspecifically allows cooperatives to form “marketing agencies in common.”This allows cooperatives to join together to find ways to more effectivelymarket their members’ agricultural products. This extends to price and customer negotiations. Absent Capper-VolsteadAct protection, it would be difficult to defend such agencies from an antitrustchallenge. n

Capper-Volstead is grounded in a public policy that a farmer should not be placed inthe awkward, and perhaps economically untenable, position of having to compete

against a neighbor in order to sell the fruit of his or her labor.


rules that automatically expel frommembership any person who ceases tomaintain producer status. These effortsare important to protect, as much aspossible, the cooperative’s overall statusas a farmer organization.

Co-ops still free to set prices So where does that leave the scope ofthe activities protected by Capper-Volstead immunity? Putting aside production-side issues,the immunity remains fully intact andcooperatives remain free to set theprices for, and to otherwise engage in,the enumerated activities of theirmembers’ agricultural production.Regarding production issues, the basicquestion is: does the proposed conductreally constitute a “restraint” onproduction, or is it merely activity thatmay have an effect on production? The

former does create some risk ofattracting problematic litigation; thelatter, while it could still attractlitigation, should be defensible. But even the cooperative’sconsideration of the production issuesoffers continued reason for confidencein the durability of the Act. Obviously,merely labeling something as“production” or “marketing” does nottell the whole story. There are manymarketing decisions that will affectproduction — a cooperative’s decisionto emphasize the marketing of one ofits members’ crops (e.g., wheat) over

another (e.g., soybeans) may haveimplications for a member’s plantingdecisions. Thus, an appropriate litmus test —wholly consistent with the legislativehistory surrounding the Act — analyzeswhether the production decision is leftto the farmer or has been undertakenby the cooperative. If the farmer is freeto decide how much to produce, subjectto whatever appropriate incentives ordisincentives that may exist that mayimpact that decision, then it is hard tosee how one could properly sustain achallenge to that conduct.

A world without Capper-Volstead The Capper-Volstead Act remains animportant feature of the agriculturaleconomy. It helps ensure thatagricultural producers can join together

and improve their economic positionthrough cooperatives and helps lowertheir costs of operation because thosecooperatives can work together in waysto achieve efficiencies, all whileminimizing the risk of an antitrustlawsuit. But what would a world withoutCapper-Volstead look like? Under modern antitrust law, themere formation or operation of a full-service cooperative would not likely befound to be illegal. As compared to thetime when the Capper-Volstead Act waspassed, there is today a greater

recognition, and improved analysis, ofjoint ventures. Most full-servicecooperatives could be defended on theground that they represent a jointventure of the agricultural producers. But there are still key differencesbetween a world in which Capper-Volstead exists and a world without it. Itis widely recognized that a cooperativemay “obtain a complete monopoly, 100percent of the product involved,”provided that it does so by thevoluntary action of the agriculturalproducers. A joint venture without anantitrust exemption — such as Capper-Volstead — that includes allcompetitors would be challenged asbeing “over-inclusive.” Moreover, the Capper-Volstead Actprotection is not limited to “fullservice” cooperatives; somecooperatives only bargain for price.Without some other integration ofactivities by the members, the joiningtogether merely to set prices would,absent Capper-Volstead protection, be avery risky — perhaps criminal —proposition. And the protection extendsto marketing agencies in common,which are often used to help better theeconomic bargaining position of themember cooperatives (and, hence, theproducers who are members of thosecooperatives). As one contemplates the importanceof the Capper-Volstead Act and relatedagricultural exemptions, one shouldconsider that there was a strong publicpolicy reason for this treatment. Theexemption for agricultural cooperatives— much like the exemption for laborunions — was grounded in a publicpolicy decision that a person whooperates a farm for a living should notbe placed in the awkward, and perhapseconomically untenable, position ofhaving to compete against a neighbor inorder to sell the fruit of his or her labor.And while the Act has several areas ofuncertain application, this is common inalmost every area of the law and is not areason to abandon Capper-Volstead. n

Act does not offer “absolute immunity”While the Capper-Volstead Act provides broad protection, it is not anabsolute immunity from any antitrust challenge. The exemption may be lostwhere an otherwise exempt agricultural cooperative has entered into anunreasonable agreement with a non-protected party (e.g., a processor ordistributor) or engaged in predatory conduct. One court explained that such “predatory conduct or tactics” include“coerced membership, boycotts, picketing, bad faith harassment ordiscriminatory pricing.” n


By Lorraine Armstrong

Editor’s note: Armstrong is a graduating senior from EasternMennonite University in Harrisonburg, Va., who recentlycompleted an internship with the USDA Rural Business-Cooperative Service. This article is based on interviews conductedby the author and on information presented during a webinar,“When the Last Grocery Store Closes,” conducted by MarnieThompson, co-manager of the Fund for Democratic Communities(F4DC), and David Proctor, director of the Kansas StateUniversity Center for Engagement and Community Development.

Walsh is a small farming and ranchingcommunity on the high plains ofsoutheastern Colorado. As with many ruraltowns, it has for many years been strugglingwith a declining and aging population. In

2010, the U.S. Census counted 546 residents, down from 723in 2000. So when the town’s only grocery shop — the WalshCommunity Grocery Store, built in 1928 — closed in 2006,

it was a severe blow to the future of the community. Thestore’s closure meant people had to travel at least 35 milesone way to buy groceries and other essentials. In addition to being the only place in town to buygroceries, the store had also been an important communitygathering place and a source of tax dollars. “Rural grocery stores function as an anchor of communitylife through creating identity, diversity and socialrelationships,” says David Proctor of the Center forEngagement and Community Development at Kansas StateUniversity. Without these core sustaining functions, ruralcommunities usually experience a sharp decline, socially andeconomically, he notes. The community then becomes a lessdesirable place to live, and many residents become depressedabout their future. When a severe blizzard hit Colorado in December 2006-January 2007, the commute to buy food became impossiblefor days on end as huge snow drifts caused prolonged roadclosures. That was the last straw for people who had alreadygrown weary of the long commute for food. This crisisunderscored how, for rural people, having a local grocery

Savingthe Last GroceryStore

Galvanized by a blizzard, people of a rural Colorado town unite to reopen store


store is not only a great convenience, but can be a necessity. “The snowstorm really made our residents realize howmuch a store was needed,” says Judy Bezona, a foundingboard member of the Walsh Community Grocery Store.

Bottom-up development Walsh residents banded together to find a way to reopenthe store. After conducting a business feasibility study, acommittee of townspeople held conversations with ColoradoState Bank, Southeast Colorado Power Co., the U.S. SmallBusiness Administration and U.S. Department of Agricultureto discuss the benefits of forming a corporation — in whichcommunity members would own the majority of shares — tooperate the grocery store. A community stock drive was launched, offering shares inthe store for $50. Community members rallied behind thenew business, investing about $200,000 within just a fewmonths. At the end of 2016, the store had 4,060 shares and312 shareholders. The Southeast Colorado Power Association also provideda zero-interest, 10-year loan for $140,000. Shareholders weremotivated to invest in a business that was not only critical tothe town’s future, but was structured to meet the specificneeds and desires of the people of the area. The store re-opened in June 2007. Being undercommunity ownership created a strong sense ofaccountability to the shareholders, and the store was soonable to attract a strong customer base, generating $1 millionin sales in its first year. The store’s board of directors consists entirely ofcommunity members, but each comes from a different walkof life. One is the owner of a parts/feed/farm supply store,one is a kindergarten teacher, one is a farmer, one is retiredfrom a baking background while the other director works atthe county clerk’s office. Each one brings his or her own

unique perspective to the store.Because of its remote location, the

people of Walsh “realize the importanceof their neighbors, because while ourneighbors might need us today, we are allwell aware that we may need themtomorrow,” says store General ManagerDonald Rutherford. “So we have aculture of helping others.”

The store draws business from a largearea around Walsh. “Farmers drive 20miles or more to get to Walsh,” says

Rutherford. “Driving to the next town over would be a hugeburden.” When small towns create their own resources without thehelp of large investors or big corporate entities, it is “bottom-up development,” says Anil Rupasingha of the FederalReserve Bank of Atlanta. When people favor a locally ownedrural businesses over big, outside corporations, Rupasinghasays it “leads to a diversified economic structure, which keepseconomic and political power in the local community,”creating an improved quality of life.

Finding enough good workers to staff the store has been a majorchallenge, says store Manager Donald Rutherford (left), seen here atwork in the meat department with Jamie Lowe, a shift leader and meatcutter. Lower: A spring snow storm in late April creates a slushy parkinglot at the store. Photos courtesy Walsh Community Grocery Store


2 Operation costs

The Walsh Community Grocery Storeunderstands the importance of cost controlthrough the use of sound business practices.For example, it requires the same amount ofelectricity to power the store on a high-salesday as on a slow-sales day. The storecounters this challenge by controlling costsin other areas, such as “reducing capital inexcessive inventory,” says Rutherford. Thisreduces staff hours needed to manageinventory and reduces losses to spoilage anddamage.

3 Labor Issues

Labor has been a big concern in such asmall community with an aging population.“Labor has been the biggest struggle I havehad to face,” says Rutherford. The availablepool of workers is limited, and workers areaware of that, making it harder to motivatesome of them. “I try to minimize issues with labor bybeing flexible while having the leastminimum employee coverage needed,”Rutherford says. He offers “more positiveencouragement for a job well done ratherthan consistently reprimanding for a jobpoorly done.” Workers get more days offthan the industry average and qualify foremployee discounts. “The current team is great and hasbecome community focused whileunderstanding that their work is vital” to thetown’s survival, Rutherford adds.

4 Lack of Community Support

About 3,252 people are needed in acommunity to maintain a successful ruralgrocery store, Jon Bailey writes in “The RuralGrocery Stores: Importance and Challenges.”Currently, the Walsh community only hasabout 16 percent of that “necessary”population. Based on that calculation alone,the Walsh Community Grocery Store wouldsurely falter. But there are many other factorsthat keep rural stores afloat. Rutherford saysthat about 70 percent of the community’sgrocery needs are being purchased at thestore, which helps to compensate for thesmall population base. “As long we continueto encourage customer input, do our best toprovide quality products at a reasonable priceand seek improvements, we will continue toreceive community support.”

Rutherford agrees. “Not only does the grocery storesupply the community with food, but also with tax revenue.”Those tax dollars provide the community with funds neededto repair water lines and streets as well as financing manyother civic needs. But the store still faces many challenges.

Challenges facing rural grocery stores There are seven major challenges facing rural grocerystores, according to surveys compiled by the Center forEngagement & Community Development at Kansas StateUniversity as part of its Rural Grocery Initiative (RGI).Below is how the Walsh grocery deals with them.

1 Competition with “big box” discount stores

Walsh area residents say they wouldprefer to commute 15 miles for fresh, localproduce — even though it might cost a bitmore — rather than driving 50-70 miles toget the most “bang for their buck” at a bigbox store. “Some people think they can be[more frugal] at larger stores, but whencomparing [all the costs], that is not alwaystrue,” says Judy Bezona, of the Walsh store’sboard. Shoppers need to also calculate costssuch as their mileage, wear and tear on theirvehicle and the value of their own time. This is perhaps one area whereremoteness helps. “One advantage we havein regard to competition with big box storesis our remoteness,” adds Rutherford. Quitesimply, it lacks the population base requiredto attract a big box store.

“Our neighbors might need us today[and] we may need them tomorrow. Sowe have a culture of helping others.”


Sparking social and economic change Without the grocery store, Walsh would likely be avanishing rural town. “The big difference [whencomparing Walsh to other stores] is that we balance theneed for profit with the need of the community to haveaccess to affordable groceries,” Rutherford says. “A soleproprietor might not be content with the small profits wehave. As long as we have enough profits to continueproviding groceries to the community for the long run,we can be content in the short run.” The emphasis on community service has guided thestore when dealing with all of the challenges. WalshCommunity Grocery Store is playing a vital role inhelping to save the town, based on its commitment tocivic duty rather than financial gain. “It would be sad indeed if the people who invested somuch in the community in the past decades were forcedto leave their homes because the community failed toprovide basic groceries.” As to the store’s future: “I see a lot of potential,” saysRutherford. “I took the job because the communitymatters to me and I want to see the store succeed. Withsupport of the community and our team, along with a lotof hard work, we will create substantial improvements.” n6 Governmental regulations

and taxes

“Some businesses create unnecessaryhassle and expense by quibbling over detailswith government regulators,” Rutherfordsays. Getting into disputes in these areastakes time away from the services thegrocery store needs to provide to thecommunity. Even though some regulationsare burdensome for a business, Rutherfordbelieves they were enacted with the bestinterest of the community at heart. Bycomplying with them, he says it serves thebest interests of the members.

5 Low sales value

Because the entire town is dependent onone grocery store, sales may seem to bebooming. However, attaining profitabilitycontinues to be a challenge. “Since a portionof all sales goes to cover fixed costs, we dohave a bare minimum sales level [to meet],and we are not much over that.” Because of the small size of thecommunity, Rutherford stresses the need tonot “get frustrated with low sales,” whilestriving “to find ways to increase sales andprofit margins without inflicting harm to ourcustomer base.” Being aware of supplierdiscounts and passing on a portion of thediscounts to members encourages customersto buy greater volumes, he says.

7 Meeting minimum supplier buyingrequirements

“Thus far, this not been a problem forus,” Rutherford says. Creating partnershipswith suppliers has helped. “One of oursuppliers reduces its sale requirement to halfduring the winter months…so this is how ithelps us.”

Rutherford helps load groceries for customer Julie Tate.

By Dan Campbell, Editor [email protected]

In 2004, when statefunding was eliminatedfor the University ofCalifornia CooperativeDevelopment Center

(UCCC), it appeared to be the end ofthe road for a noble endeavor todevelop new cooperatives as a way tocreate jobs and economic advancementfor people struggling for a betterquality of life.

And it probably would have endedthere had it not been for thedetermination and hard work of E. KimCoontz, then a cooperative facilitatorwith UCCC, and Leland Ruth, then thepresident of the Agricultural Council ofCalifornia, a statewide legislative andeducation association for agriculturalcooperatives. Together, they led theeffort to re-create the university centeras the California Center forCooperative Development (CCCD) as anonprofit co-op center after its ties tothe University of California (UC)

Cooperative Extension Service ended.

Center launched with high hopes The university’ co-op center wasfounded in 1988 by an act of the statelegislature with high hopes of sparkinga revival of cooperative development ina state that is home to some of thenation’s oldest and strongest ag co-ops.It was especially hoped that these newco-ops would serve the needs in thestate for small-scale farming, housingand child care services.


E. Kim Coontz, director of the California Center for Cooperative Development (CCCD), leads a workshop on co-op fundamentals.She says demand is especially rising in California for new worker and housing co-ops. Photos courtesy CCCD

California center reinvented

itself as a nonprofit after loss

of state funding

THE CO-OPCENTER THATREFUSEDTO DIE!


The center was located on theUniversity of California-Davis campus,where its small staff worked in an officethat was part of the UC CooperativeExtension Service. Its mission called forthe center to divide its efforts equallybetween agriculture and the broader co-op sector. Staff was selected based onexperience in either agriculture,housing, food/grocery or child care co-ops. Coontz, the current CCCDdirector, is the only remaining stafferwho was involved with the centerduring those first years. “I applied forthe child care co-op position, based onexperience I had, and later I expandedinto working with other types of co-ops,” Coontz recalls. Despite the fact that staff had plentyof co-op work to do, “there were alwaysquestions from the campus side: ‘whatare you guys supposed to be doing?’”Although staff did do some appliedresearch and education work, “therewere feelings that our work was ‘tooapplied’ [overly centered on technicalassistance, rather than on research andeducation], even though Extension issupposed to do applied work.” The center was then getting about$350,000 annually from the state, whichonly enabled staff to work half time. “Ifwe wanted to work more than that, wehad to raise our own money [fromproject work],” Coontz says. Thisusually involved seeking grants thatcould support co-op development work. CCCD was one of the first recipientsof a USDA Rural CooperativeDevelopment Grant (RCDG), whichhelps to fund dozens of co-opdevelopment centers around the nation.“The RCDG program has alwaysprovided very valuable support for thework we do,” Coontz says.

One plug pulled, another found The University Center forCooperatives experienced numerousdirector and staffing changes in those

early years, which no doubt hurt itsstability and may have further erodedsupport from the university. When thedecision was made by the university atthe end of 2004 to close the center,Coontz wasted no time going to workto try and save it. This entailed working with a coupleof people who had been on the center’sadvisory board. “But I mostly workedwith Lee Ruth. Together, we puttogether a new board and succeeded inre-launching the center as a nonprofitin 2007.” CCCD no longer has formal links tothe university, although its projectsfrequently involve working withuniversity staff. “We modeled thecenter after our original UC Extensionoffice, using many of the same kinds ofsystems — but we don’t do research.”

Funding comes from many sources. “USDA’s RCDG program is stillreally important in helping to pay forour operations, even though it is just aportion of our budget. We also getfederal funding through SociallyDisadvantaged Group Grants (SDGG)[another program administered by

USDA’s Rural Business-CooperativeService]. The primary objective of SDGG isto fund technical assistance for sociallydisadvantaged groups, working throughcooperatives and cooperativedevelopment centers. This year, theprogram provided $3 million nationallyfor such work. “We also get project-based money.For example, Angelica Medina’s workwith Yolo Eco-Clean Cooperative (seepage 21) is funded with regional grantsand donations, as well as a generousgrant from the Catholic Campaign forHuman Development.”

Funding uncertainty creates challenges Federal grants and smallerfoundation grants must be applied forannually, which makes project planningand staffing more of a challenge,Coontz says. It is never certain in anygiven year that a co-op center will earnone of these competitive grants. The number of applicants forRCDG and SDGG funds almost alwaysoutstrips available funding. If suchgrants could be awarded on a two- orthree-year funding cycle, it would be anenormous help with planningoperations and projects, Coontz says. “We have built up a reserve fund —from donations, not from project work.But that still will only cover us forabout four-and-a-half months — and ithas taken a long time just to do that.” Coontz notes that the university co-op center was far from the only UCExtension office to feel the budget ax.Other state Extension offices have formany years been scaling backoperations due to shrinking budgets. “It is sad to see Extension peoplewith so much expertise — people whofarmers could call for help on so manyissues — now retiring and not beingreplaced.” On the bright side, some cities arestarting to fund more co-opdevelopment work, with Oakland being

California Connection

The series of articles on pages 16through 27 spotlight theCalifornia Center for CooperativeDevelopment (CCCD) and thewide range of co-op developmentprojects it is involved in, as well asa look back at the history of thecenter. CCCD is just one of anetwork of co-op developmentcenters nationwide that USDA’sRural Business-CooperativeService helps to support through itsRural Cooperative DevelopmentGrant (RCDG) program.


a recent example, notes CCCDAssistant Director Luis Sierra. “It isreally exciting to see that catching on.We are praying that someday theHousing and Urban Development sideof the government will have parallel

programs to some of the ruraldevelopment grant programs for co-ops.”

Need soars for worker and housing co-ops Over the years, CCCD has graduallyincreased the number of worker co-opprojects it has been involved in. Withinterest in this business model forworkers being on a steep rise — not justin California, but nationally — Coontz

and Sierra see this trend continuing. CCCD has always been involvedwith housing cooperatives, but thatsector will likely be an even biggerpriority in the years ahead. Housingprices in the Golden State have risen so

dramatically that it is makinghomeownership an impossible dreamfor a large percentage of thepopulation. Never has the need forhousing co-ops been greater, Coontzstresses. “It has been hard to get the state torecognize that the housing co-op modelis worth putting more money into,”Coontz says. While state legislation hasbeen passed to support development oflimited equity housing co-ops, it “lumps

co-ops in with condo associations andthe like,” says Coontz, adding that thisis not a good fit for co-ops. Morerecently, another state law was passedthat addresses some of the factors thathave been limiting the development ofhousing co-ops, she notes, “but it hasbeen a slow go.”

Issue not limited to California “For any state that has problemswith housing affordability, the questionis: why are we not using more co-ops tomeet the need? There are some greatstudies that show how much moregovernment dollars can accomplishwhen spent on developing housing co-ops versus one-off help for one personto buy a house. After a few years, thathome buyer may well turn around andsell the house for a much higher price,”helping to fuel the further housingprice inflation. “With a limited equity housing co-op, when you move, you will get someof the equity back, but the overallaffordability of the unit is maintained

for the next buyer. It is such a greatmodel — we just need to figure outhow to develop more of them.” For housing, farming, worker-ownedand all other co-ops sectors, Coontzsays CCCD “remains committed tofinding ways to use co-ops as aneffective economic development tool.Co-ops can be used by all economicgroups — it is a business model thatwill empower people who don’t havemany other resources.” n

“With a limited-equity housing co-op, when you move, you will get some of the equity back, but the overall affordability of the unit is maintained

for the next buyer. It is such a great model.”

Inspecting the playground at the Santa Elena housing cooperative. Members of three areahousing co-ops shared information about special turf grasses and playground equipment.


By Dan Campbell, editor

Editor’s note: This article is based on an interview conducted byUSDA photojournalist Lance Cheung. The Farm Labor HousingDirect Loans & Grants program of USDA Rural Developmentcan help develop housing for both year-round and migrantfarmworkers. Farmer associations and co-ops seeking to develophousing projects are eligible for funding. For more information,visit: www.rd.usda.gov and follow the links for “Multi-familyhousing programs.”

“NO FARMERS, NO FOOD,” is a popular bumpersticker in rural America. Even with mechanization taking onan ever-bigger role in U.S. agriculture, another apropos

bumper sticker could read: No Farmworkers, No Food.” With its need for a large seasonal and permanent farmworkforce, providing good quality housing for workers hasalways been a big challenge in California. This, too, is anarea in which the California Center for CooperativeDevelopment (CCCD) is actively engaged. CCCD Assistant Director Louis Sierra is heavily involvedwith providing technical assistance to farmworker housingco-ops, including several co-ops in the Salinas Valley. He alsohas extensive experience in developing agricultural marketingorganizations, including work training fruit and vegetablefarmers to organize their own cooperative. Sierra — who serves as board treasurer for the co-op hecalls home, Dos Pinos Limited Equity Housing Cooperativein Davis — also provides training and technical assistance tothree limited-equity farmworker housing cooperatives in theSalinas Valley. This area is often referred to as “America’sSalad Bowl,” because it produces such a huge amount of thenation’s fresh vegetables. If you have broccoli for dinnertonight, says Sierra, there is a very strong chance it wasgrown in a 10-mile strip of land near this co-op.

Doing work with co-ops that can “help turn people’s lives around” isone of the reasons Louis Sierra says he loves being a co-op facilitatorwith CCCD. USDA photo by Lance Cheung.

CO-OPSPROVIDEHOUSING ANDMORE FORFARMWORKERS

All of the Salinas co-ops Sierra works with — BuenaEsperanza Cooperative, Cooperativa Santa Elena and SanJerardo Housing Cooperative — were built in the 1970s asaffordable housing for farmworker families. “Many of theunits are now occupied by the second, or even the thirdgeneration of some of the original families. The manager ofSan Jerardo co-op was raised there,” Sierra says. Theyounger generations have, in many cases, moved up fromfarm field work to more professional agriculture jobs, or intonon-ag trades, such as construction work. These housing co-ops, as with other types of co-ops, offermembers ample opportunity to develop leadership skills asthey are elected to seats on the board or serve on committees.CCCD has used funding under USDA’s SociallyDisadvantaged Group Grant (SDGG) program to pay forboard training, including conflict resolution workshops, aswell as for technical assistance for updating organizationaldocuments, providing legal advice and completing financial-reserve studies.

Co-op deals with water quality crisis One of the Salinas housing co-ops, San Jerardo HousingCooperative, has had to deal with a serious challengeregarding the quality of water coming out of its taps. “Thisco-op is in a part of the Salinas Valley where everyone has toget water from wells,” Sierra says. “But there has beenpervasive use of pesticides and nitrogen fertilizers there overthe years, which has created problems in the water table.This situation represented both a crisis and an opportunity

for the co-op,” Sierra explains. Several solutions have been tried, including drilling a newwell that went horizontally under the fields into the nearbymountains to get clean water, Sierra says. Ultimately, thecounty built a water treatment facility to serve the 60-unithousing co-op, viewing this action as a short-term,emergency action. “Long term, the county did not want tooperate this plant,” Sierra says. Co-op members expressed interest in learning to run thewater plant, but others had doubts about whether co-opmembers had the required skills. “We helped show thatthrough 40 years of being a co-op, they did have the skillsand ability to run a multi-million-dollar water facility.” With help from the UC Hastings Law School and CCCD,the co-op has been weighing its options for buying the waterplant. One way to do so involves forming a separate, mutualutility water company to operate the plant. “You would havethe same members as the housing co-op, but it would be twoorganizations.” Sierra has also worked to bring the co-op’s governancebylaws into compliance with state law. “They had alreadybeen working that way [following democratic co-oppractices], but it needed to be better codified.” Sierra also worked with a farmworker housing co-opwhere he helped members enroll in a rental subsidy programthrough USDA. “That’s one of the really good feelings you get workinghere — when you do something like that which can turnpeople’s lives around.” n

Touring a farmworker housing co-op as part of the “Co-op Convergence,” organized by CCCD’s Louis Sierra. The event brought together leaders of three farmworker housing co-ops in the Salinas Valley to participate

in an education program, share information and build connections. Photo courtesy CCCD


CLEANAND GREEN

By Dan Campbell, editor

AFTER 400 HOURS of vacuuming,scrubbing, mopping, dusting and all theother tasks required to keep a homeship-shape and shining, IsabelFernandez has more than a paycheck toshow for her labors. She just qualifiedfor membership in the new Yolo Eco-Clean Cooperative. The co-op board,currently comprised of communityvolunteers, in late March voted her inas the first official worker-member ofthe co-op.

She won’t be the only full memberfor long. As of this writing, the co-ophas seven trainee members who willqualify for full membership afterworking 400 hours or six months,whichever comes first, for the co-op.The next two workers will likely haveearned co-op membership by the timeyou read this. Once they become members of theco-op — which uses only natural,“green” cleaning products — workersqualify for the co-op’s year-end profit-sharing program. This patronage is

based on the number of hours theyworked for the co-op during thepreceding year. Before applying to work at the co-op, prospective members get a crashcourse in co-op fundamentals andpractices by attending four workshops,taught in both Spanish and English. The 400-hour/six-month workrequirement for membership in the co-op provides the needed trial period todetermine if the worker and the co-opare a good fit for each other, explains E.Kim Coontz, CCCD director.

Co-op provides workers with better pay,

work conditions and chances to gain skills

Maria Fernandez cleans a customer’s home in Davis, Calif. Co-op members mix their own environmentally benign cleaning products. USDA photos by Lance Cheung

“This is a build-and-recruit modelco-op,” Coontz explains, in which pre-development and early-launch decisionsare made by a steering committee andtemporary board, composed of sixcommunity volunteers and CCCD staff.This board shepherds the businesswhile initial member-candidates gothrough the membership process.Volunteers leave the board as worker-members join it. By the end of the co-op’s first year, the board will becomposed entirely of worker-members.

Training workers to be managers Yolo Eco-Clean is currently beingmanaged by Angelica Medina, a co-opfacilitator with CCCD. Medina’s workincludes marketing the co-op, whichinvolves finding the cleaning jobs,arranging work contracts, etc. Longterm, Medina’s mission is to teach theworkers to master the moresophisticated business skills needed sothat they can run the co-op themselves.

CCCD facilitator AngelicaMedina (right) discusses theday’s jobs with co-op members.She is the co-op’s businessmanager at present, but isteaching co-op members toassume her duties. Right: DeliaGarcia will leave behind ashining, spotless kitchen whenshe finishes.


“Angelica’s goal here is basically towork herself out of a job!” says Coontz,with a laugh. “Not really though,because she will then move on toanother co-op project.” For the workers, all of whom areworking mothers who speak Spanish astheir primary language, the co-opprovides a better pay scale than istypical for housecleaning work. Inaddition to a chance to share in theprofits, the co-op is also an avenue formore steady work with flexible workinghours. The latter is very important for aworking mother who must balancework and family demands, Coontz says. According to a recent CCCDnewsletter, members of the co-op “haveopportunities to try on ‘new hats’ asthey engage in business strategy, publicrelations, accounting, marketing andleadership. Empowerment and socialcapital are natural outcomes of workercooperatives. The tangible personal andsocietal benefits include skilldevelopment, job satisfaction, increasedcivic engagement and even increased[worker] happiness.” “Our focus at CCCD is to developco-ops that create jobs for under-servedcommunity members, includingworker-ownership opportunities,”Medina says. Fernandez, the mother of threechildren, including one preschooler,says the co-op “gives you the

opportunity to grow as a person andprofessionally.” The schedule flexibility,she continues, allows her to work theneeded number of hours while alsoproviding the ability to spend time withher family. “It provides my family with a life ofbetter quality. It has also allows me tohelp my husband with the house bills.My family and I see this as a bet, andwe are betting on the success of [the co-op]. I am really proud to be a memberof Yolo Eco-Clean Co-op.”

Master mixers Yolo Eco-Clean not only uses“green” cleaning products, but it savesmoney by having workers mix theirown. They use common householdingredients, such as baking soda,vinegar and the essences of lemon,orange and peppermint. The latteringredients not only leave a pleasantscent behind, but some (such aspeppermint) help repel ants and someother insects. “We don’t use any bleach or othertoxic materials,” Medina stresses. Usingnatural cleaning ingredients has healthbenefits for humans (especially thosewho may suffer from asthma orallergies) and for their pets, she adds.They also create far less impact on theenvironment when washed down thedrain. “A lot of marketing goes into selling[commercial] green cleaning products,but no law says they have to list theingredients,” says Coontz. “A lot of thetime, you have to take their word for it[being green], and you pay a lot morefor it.” Most of these commercialgreen-cleaning products on the market,she adds, are made from the same basicingredients that the co-op mixes. Like any worker co-op, learning tocompromise and reach joint decisionstakes time and effort. Co-op memberscurrently gather for a business meetingevery two weeks. “Getting the members to cometogether and make decisions can behard some days, but overall they work

very well together,” Medina says. She isproud of the espirit de corps membershave developed. At present, the co-op’s work isprimarily cleaning homes, but it hasthree commercial clients and Medina isseeking additional commercial clients.

Board transition planned Co-op bylaws provide for thegradual transition from communityvolunteer directors to worker directors,as the latter gain knowledge and skills.Eventually, workers will comprise theboard majority. The bylaws stipulatethat there be a permanent board chairfor a “nonprofit director,” with aprimary role being to ensure that thebusiness remains a co-op, Coontzexplains. If there is ever an effort to de-mutualize the cooperative (so that itwould no longer be a co-op), the voteof the nonprofit director would berequired for the motion to pass, Coontzexplains. While the co-op’s business plan callsfor Yolo Eco-Clean to expand serviceinto other parts of the county, effortsare still made to concentrate jobs asmuch as possible in an area close to aworker’s home, minimizing their drive-time, which can be a major expense.The Yolo Eco-Clean business office iscurrently housed at the CCCD Davisoffice in Yolo County, west ofSacramento. Once Medina no longer needs todevote so much time to managing theYolo Eco-Clean Cooperative, her nextproject will likely be to help develop ahome health care co-op. Such a co-opwould provide the care needed to helpseniors and the disabled stay in theirown homes for as long as possible, saysCoontz. “It’s another huge area of needthat the worker co-op business modelcan help meet.”

Note: This article is based on interviewsconducted by USDA photojournalist LanceCheung and by the author. n

“Our focus at CCCD is to develop co-ops thatcreate jobs for under-served communitymembers, including worker-ownershipopportunities,” says Angelica Medina.


By Dan Campbell, [email protected]

Editor’s note: This article is based oninterviews conducted by USDAphotojournalist Lance Cheung, a USDA-sponsored panel talk on diversity within co-ops, and on subsequent interviews.

TO SOME PEOPLE, the LucerneValley in the high desert country of SanBernardino County, Calif., is “drive-through country” — an arid place tocross on the trip from Los Angeles toLas Vegas. But for a cooperative ofabout 80 farmers, most of whom areKorean immigrants, it’s the place wherethey are growing traditional East Asianfruits and vegetables — foods that areoften difficult to find in U.S. foodstores. The Hi Desert Jujube Cooperative’smain crop is jujubes, sometimes called

“Chinese dates” in America, which areused both as a food and a medicine.They are also growing ume plums, usedin a wide variety of Asian foods andsauces, among other crops. What was their attraction to thisdesert area? “The land was cheap andthese crops can be grown in an aridenvironment,” says Mai Nguyen, acooperative development associate withthe California Center for CooperativeDevelopment (CCCD). “Growing thesecrops in the high desert with very littlewater is highly relevant for California,”especially in times of drought. The farmers have “come together toincrease their power through theeconomy of scale. Together, they cancompete,” Nguyen (pronounced “new-en”) continues. While the co-op has “astrong board that is very responsive tothe membership and understands how aco-op business must operate…it faces

A BORNCOOPERATOR

Co-op developer

thinks Asian fruits and

vegetables could

be the ‘next sushi’

Dried jujubes are a value-added fruit produced by the Hi Desert Jujube Cooperative. Ume plumbs, seen here at blossom,are another traditional Asian fruit being grown by a cooperative, with assistance from CCCD. Photos courtesy CCCD


many business challenges, especially ingetting organic certification.” The organic regulations run to about150 pages, “much of it in very technicallanguage,” says Nguyen, who translatedthe regulations into Korean for them.But it’s not just a language issue. Tothese farmers from another land andculture, some of the rules just don’tmake any sense, namely why they mustfill out pages of paperwork and paythousands of dollars for a label to

indicate that they’re not putting anychemicals on their crops. Nguyen isthus helping them understand theorganic rules and procedures.

Little technical supportavailable for crops The co-op has been seeking financialsupport under some USDA programsfor beginning and sociallydisadvantaged farmers, although it hasnot yet been successful in the effort. It

has also been difficult to get technicalsupport for growing and marketingtheir crops. Even in a state known forits wide variety of specialty and niche-market crops, there isn’t much helpavailable for the Asian crops. Indeed, Nguyen says they’ve beenadvised not to grow the Asian cropsbecause “there isn’t enough of a marketfor them. But we know that there is.We meet so many people in LosAngeles and other places who areexcited that these crops are beinggrown close to them. It’s just been astruggle to find [advisors] who areknowledgeable about these specificcrops.” Nguyen encountered similarobstacles as a farmer. “Extension agentswould try to deter me from growing thecrops, for the same reasons.” Not enough attention has been paidto the East Asian demographic market,Nguyen says, adding that its potentialfor sales is greatly under appreciated.Co-op leaders think there is also a hugepotential “crossover” market if thebroader American public can beprompted to taste and try these foods.Today’s “exotic fruit” may becometomorrow’s staple. “You can make the analogy to sushias a healthy and tasty” Asian food,Nguyen continues. “Fifteen years ago,few people were eating sushi in America— most people found it ratherrepulsive. Now it’s wildly popular.” Among other farmer co-opdevelopment projects Nguyen isinvolved in is the Solidarity Farm Co-op in San Diego County. This co-op isgrowing organic produce which is beingmarketed in San Diego through acommunity supported agriculture(CSA) subscriber program (see theSept.-Oct. 2016 Rural Cooperatives, page 28).

A born cooperator Nguyen feels like “a borncooperator. My mom trained me in co-op principles from childhood.” After atreacherous escape from Viet Nam,

Mai Nguyen, a co-op facilitator with CCCD, on her farm near Petaluma, Calif., where she growsgarbanzo beans (seen here) and four varieties of heritage wheat. The varieties that thrive will beharvested for seed. USDA photo by Lance Cheung.


Nguyen’s parents arrived in the UnitedStates with very little. “It was the same for most of thepeople in the community I grew up in.Lacking prospects for good jobs orhousing, people had to work together.They formed lending circles — whichwere like informal credit unions — sothat they could afford to buy a homeoutside the [high crime] area they hadbeen resettled into. “I saw my mom alwaysasking others what issuesthey were facing, andlooking for ways they couldaddress their needs together— a democratic,participatory approach.Having lived through thefall of Saigon to communistrule, she really valued theright to free speech andfreedom to organize and forself-determination, becauseall that had been taken awayfrom her. My mom saw howthe power of cooperationenabled her to make a newlife in the U.S.” More formal exposure toU.S. cooperatives came afterNguyen joined a studenthousing co-op at theUniversity of California-Berkeley. That led tobecoming immersed innitty-gritty co-op issues,ranging from how to useRoberts Rules of Order torun a membership meeting,to finding a compromise asto what brand of honey to stock in thekitchen. “When you’ve got a bunch of 20-year-olds running a house, you reallyhave to learn to cooperate!” Nguyensays, with a laugh. In the years between college andgoing to work for CCCD, Nguyen hadwidely ranging experiences workingwith co-ops and international assistanceorganizations. Nguyen started the WestCoast Cooperatives Conference and

managed a co-op food waste-reductionproject, co-founded the TorontoSustainable Food Cooperative (a workerco-op that operated a café), and workedto help refugees in the United States,Canada and abroad throughorganizations such as the InternationalRescue Committee, the DemocraticAlliance for Burma and CultureLink. Nguyen also coordinated one of thenation’s first farmers’ market food

stamp-match programs and supportedrefugee farmer initiatives in San Diego. So, when a friend saw a jobdescription from CCCD looking forsomeone with farming experience andwho had worked with refugees and

immigrants — and who was excitedabout co-ops — guess who she thoughtof first?

Grain farming leads tomachine-sharing co-op

Nguyen also has a small farm in LakeCounty, Calif., where sustainable anddrought-tolerant farming methods areused. Initially it produced row crops,but after suffering some serious injuries

when hit by a truck whilemaking a delivery, it becamephysically hard to do thetype of labor needed for rowcrops. So Nguyen switchedto growing less labor-intensive heritage grainvarieties.

That decision was in partprompted by “a general voidof organic grains at farmers’markets in California. Wehave farmers markets thatare full of wonderful fruitsand vegetables. But grainsare also a huge staple of ourdiet.”

Some heritage grainvarieties are well suited todryland farming, Nguyennotes. “These grains areimportant for a bio-diversefarm sector. They storecarbon and produce onsitestraw that provides beddingmaterial.” This straw isimportant for drylandfarming, they explain,because it helps keepprecious moisture from rain

in the ground. “A big barrier for small-scale grainfarmers is getting appropriately scaledfarm equipment — like seed cleaners,gravity tables and augers.” For largemachines, like combines, the purchaseprice is often cost prohibitive for small-scale farmers, Nguyen says. To bridge the gap, Nguyen felt itwould make sense to work with othersto pool money to buy equipment thatcould be shared, since the gear is often

Mai Nguyen helps educate consumers aboutheritage grains. These grains were once indanger of disappearing, but are now finding amarket niche. Photo courtesy CCCD


only used for a limited time once eachyear. Working with a small group oflike-minded farmers, the Bandit SeedCo-op was formed. Members scouredclassified ads across the country to findused farm equipment, some of whichneeded restoration work but would bewell suited for their operations. To help market heritage grains,Nguyen created a special catalog.“People were lost about marketingheritage grains. They want to tell theirstories, but didn’t know how. So I waslike: ‘why don’t we just make acatalog?’” Nguyen designed and published thegrain catalog, which was well receivedat the Cascadia Grain Conference, ameeting of heritage grain growers. “Inour little world, the conference is a bigdeal, and they were very excited aboutthe catalog.” Nguyen was invited to be a guestspeaker at the most recent conferencein January 2017 in Olympia, Wash.The catalog project is seen assomething that will help buildcooperation among heritage grainfarmers and lends itself to supportingthe work and mission of CCCD. The plan is to update the catalogannually, as soon as growers have agood estimate of what heritage grainsand volumes they will be harvesting.Along with a directory of grain farmersand what they have for sale, the catalog“tells the story of these heritagegrains…and the effort to revitalizethem.” For example, Nguyen says theSonora variety “is one of the oldestwheats grown in the Americas. It wasCalifornia’s main crop in the 1800sbecause it can be dryland farmed. Bothsides ate it during the Civil War and itwas exported worldwide.” When newer varieties of wheat wereintroduced, Sonora faded away. “Then,one farmer started growing it again,”and its popularity is graduallyincreasing. “These types of stories aretold in the catalog — that there is a

Hwa Young Chung, president of the Hi Desert Jujube Cooperative, is ready to market the Asianfruits grown by his co-op at the Hi-Desert Festival.

To separate wheat from chaff – and to sift out weed seeds – Mai Nguyen pours organic grainonto an air-screen cleaner. Nguyen has also produced a heritage grain catalog to help marketthe crops and educate consumers about them. Photos courtesy CCCD

continued on page 39


By Meegan MoriartyLegal and Policy AnalystUSDA Rural Business-Cooperative Servicee-mail: [email protected]

President Trump iseager for tax reform,and Congress haspromised to pass taxlegislation before the

August recess. How would tax reformaffect cooperatives and farms? Tax experts provided some answersat an April 5 hearing before the HouseCommittee on Agriculture. Thehearing addressed proposed changes inthe House Ways and MeansCommittee’s June 2016 “Blueprint,”officially titled “A Better Way for TaxReform.” Witnesses stressed the uniquenature of cooperatives and agriculture,the tight margins under which farmsand ranches operate, and the fluctuatingnature of farm income in which years ofprosperity can be followed by yearswith low commodity prices or weatherdisasters. Experts focused on tax rate cuts, theproposed border adjustability tax, thededuction for domestic productionactivities, the estate tax, like-kindexchanges, the interest expensededuction and a miscellany ofprovisions that facilitate tax planningfor farmers. The National Council ofFarmer Cooperatives (NCFC) weighedin through testimony submitted for therecord.

Tax rates According to 2015 USDAAgricultural Resource ManagementSurvey data, 97 percent of U.S. farmsare subject to taxation at individualrates. President Trump and the

Blueprint call for a reduction of thenumber of tax brackets and the rate oftax for individuals. Currently,individuals are subject to seven taxbrackets, with a top individual rate of39.6 percent. Under the Blueprint,individual income would be taxed at 12,25 or 33 percent. The President’s planwould provide three tax brackets, at 10,25 and 35 percent. Under both plans, the new standarddeduction would be higher than thecurrent law’s standard deduction.Further, many individual exemptions,deductions and credits are proposed tobe eliminated, but the mortgage interestand charitable contribution deductionswould remain. The President’s planwould double the standard deduction,but does not address whether personalexemptions would be kept. The Trumpplan would also eliminate the deductionfor state and local taxes. Although the Blueprint contemplatesthat taxpayers currently in the 10-percent bracket would pay less in taxesthan under current law, Patricia A.Wolff with the American Farm BureauFederation cautioned that the effort toflatten the tax rate structure and reducethe number of deductions could resultin a tax increase for farmers andranchers. The Blueprint would create a newbusiness tax rate of 25 percent for soleproprietorships or pass-through entitieson “active business income” withowners’ “reasonable compensation”passed through and subject to thethree-tiered individual rates. ThePresident’s plan would permit pass-through entities to be taxed at 15percent, the rate that he has alsoproposed for the corporate tax.Concerned that cooperatives would be

at a disadvantage compared with otherpass-through entities, the NCFC hasrequested in testimony that patronagedistribution be subject to the new 25-percent pass-through rate, rather thanto individual rates, as is the case undercurrent law. The Blueprint would allowindividuals to deduct 50 percent of netcapital gains, dividends and interestincome (depending on the tax bracket,at 6, 12.5 or 16.5 percent). ThePresident wants a 15-percent tax ratefor C-corporations (which would alsoapply for cooperative earnings notpassed through as patronage); theBlueprint calls for a 20-percentcorporate tax. Under the Blueprint,both the individual and corporatealternative minimum tax would berepealed to help simplify the tax code.

Border adjustability tax Under current law, the United Statestaxes the worldwide income ofcorporations; many of its tradingpartners (including the EuropeanUnion) instead impose a value-addedtax (VAT). Under a VAT, inputs toproduced goods are taxed as they areadded along the value chain. TheAtlantic magazine provides thefollowing simplified example for how a10-percent VAT would work: A farmer sells wheat to a baker for 20cents. The baker pays the farmer 22 centsand the farmer sends a 2-cent VAT tax tothe government. The baker sells a loaf ofbread to a supermarket for 60 cents. Thesupermarket pays the baker 66 cents andthe baker sends the government 4 cents andgets a 2-cent credit for the tax already paid.The store sells the loaf for $1. Theconsumer pays $1.10. The store sends thegovernment 4 cents total, the 10 cents it

Management TipHow would proposed tax reforms impact farmer co-ops?


collected in the VAT on its sales, minus the6 cents it paid to the baker, which it getsback as a credit. The government hasreceived 2 cents from the farmer, 4 centsfrom the baker and 4 cents from the store,for a total of 10 cents on the final sale of $1for a 10-percent VAT. (For more, see TheAtlantic, March 1, 2010,https://www.theatlantic.com/business/archive/2010/03/how-does-a-value-added-tax-work-anyway/36834/. Under World Trade Organization(WTO) rules, a country with adestination-based VAT system can makea “border adjustment” when goods areexported. This “border adjustment”allows the country where the item wasmade to exempt the exported item fromtaxes. The assumption is that the itemwill be taxed in the trading partnercountry where it is imported and

consumed. Goods imported from thetrading partner country will also betaxed in the country where the goodsare consumed. In this way, cross-bordertransactions between two countries thatboth have VAT taxes involve equaltreatment of goods. Under current law, the cost of goodsexported from the United Statesimplicitly includes a portion of theamount that was paid by U.S.companies as income tax. No borderadjustment is allowed under WTOrules for goods from countries withtraditional corporate income taxsystems. But goods imported from VATcountries do not have that implicit taxcost, making U.S. goods moreexpensive and adding to a tradeimbalance. The Blueprint would move toward a

consumption-based system, where a“border adjustment” would makeexports tax-free and would disallow thebusiness expense deduction forimported goods. The result could be aboon to exporters, including the manyagricultural producers who sell theirgoods abroad. However, NCFCexpressed concern, in testimonysubmitted for the record, that theborder adjustability tax would imposewhat would amount to a 20-percentcorporate tax rate on goods needed byagricultural organizations, includingimported retail products, machinery,fertilizer and fuel. The President’s plan does notinclude a border adjustability provision.Instead, it proposes a “territorial” taxsystem, in which the United States doesnot tax foreign income of U.S.

companies. Instead, the income is taxedin the jurisdiction where the incomewas earned. The President’s plan doesnot describe taxation of U.S. earningsthat have remained in foreignjurisdictions and have not yet beensubject to tax in the United States. While economists argue that theeconomic effects of the borderadjustability tax would be to cause anincrease in the value of the dollarabroad, NCFC is concerned that thedollar may not strengthen against othercurrencies and, if it does, tradingpartners may impose retaliatory tariffson exports. Witness Doug Claussenwith K-Coe Isom LLP, a certifiedpublic accounting firm, said that thereare complex problems with trackingwhich farmers’ products in the valuechain are being exported and are due

border adjustment credits, sincecommodities are pooled.

Domestic production activities deduction This deduction, provided for byInternal Revenue Code Section 199, hasbeen helpful for cooperative taxplanning because cooperatives have theoption of passing it through to theirmembers or keeping it at thecooperative level. The deductionapplies to proceeds from a range ofcooperative agricultural products,including dairy, crops, livestock andeven oil and gas refining. The Blueprintproposes to repeal the deductionbecause it would raise revenue thatCongress can use to offset the cost ofproposed rate reduction and othersimplification measures. NCFC believes

that Congress should retain thededuction, saying that section 199“benefits are returned to the economythrough job creation, increasedspending on agricultural productionand increased spending in ruralcommunities.”

Estate tax Former House AgricultureCommittee member and current Waysand Means Committee member Rep.Kristi Noem of South Dakota, alongwith other agriculture tax experts at thehearing, advocated repeal of the estatetax, as proposed in the Blueprint. Noemsaid her father died at age 49 in a farmaccident, requiring her to leave collegeand help run the family farm. Shortlyafter her father’s death, the familyreceived a bill for the estate tax. To pay

Farm Bureau expressed support for current law provisions…that allow for accelerated cost recovery for business expenses, including write-offs

of equipment, production supplies and pre-productive costs.


it, the family had to mortgage the farm,diminishing investment in the farmduring the term of the loan. For 2017, generally, estates with afair market value of $5,490,000 and upmust file the estate tax return. Many ofthe witnesses at the hearing, as well asseveral of the Agriculture Committeemembers, expressed support for thetax’s repeal. However, Rep. Darren Sotoof Florida expressed concern that, whilethere is sympathy for repealing theestate tax for farmers’ families, there isless sympathy for repealing the tax forwealthy survivors of, for example, hedgefund managers. President Trump’s planwould repeal the estate tax.

Stepped-up basis Farm Bureau’s Wolff applauded theproposed reduction in the capital gainstax rates and discussed how capital gainstaxes apply when individuals inherit realestate. Individuals are not required topay tax as the fair market value of theirland increases. Landowners retain a“basis” in the land —– generally, the

amount at which the land was acquired.When the land is transferred, thedifference between the basis and theamount for which the land is transferredis taxed at capital gains rates. When land is inherited, however, thebasis is “stepped up” to the fair marketvalue of the property, and the differencebetween the basis and the stepped-upvalue is not taxed. Wolf said that thecurrent law rules, with respect toinherited property and stepped-upbasis, should not be repealed under taxreform. Claussen noted thatdiscontinuing the stepped-up basis ininherited land could create significanttax liability on sale, creating a

disincentive for land transfers.

Like-kind exchanges Witnesses agreed that tax reformshould preserve the availability ofInternal Revenue Code Section 1031like-kind exchanges. Like-kindexchanges are an effective means forfarmers to exchange similar propertyfor similar property and defer tax bykeeping a basis in the new property atthe same level as the basis in the oldproperty. Like-kind exchanges arepermitted for land, buildings,equipment and breeding andproduction livestock, and allow farmersto make necessary improvementswithout incurring additional debt to paytaxes.

Interest deduction The Blueprint would eliminate thededuction for interest payments as abusiness expense, except to offsetinterest income. Since farmers havelimited access to equity financing,eliminating the deduction for interest

would make it more difficult to financeland and farm equipment acquisitions,witnesses agreed. The Trumpadministration is aware that certainindustries are concerned about theeffects of losing the interest deduction,Treasury Secretary Steven Mnuchinsaid on April 26 (Wall Street Journal,April 27).

Tax planning for producers Volatility can result in dramaticchanges in farm income from year toyear. Under a graduated tax system,farmers are likely to pay more in taxesthan individuals with steadier incomes,according to hearing witness James

Williamson, economist for USDA’sEconomic Research Service. Witnessestestified that it is especially importantfor farmers to have access to flexible taxprovisions that help with stabilizingincome.

Other tax issues Cash vs. accrual accounting —Although not part of the Blueprint, in2013 the Ways and Means Committeeproposed eliminating cash accountingfor certain taxpayers. Members of theCommittee seemed sympathetic towitness requests that Congress preservefarmer access to cash accounting. Withcash accounting, a tax is due when thetaxpayer actually receives payment. Incontrast, with the accrual method ofaccounting, the tax is due when theobligation to pay is incurred. LIFO — Cooperatives shouldcontinue to have access to the last-in,first-out (LIFO) accounting method,according to NCFC. Under LIFOaccounting, goods last acquired arepresumed to be sold first. According to

NCFC, taxpayers who use the first in,first out (FIFO) accounting method aretaxed as if all inventory had been sold,even though the farmer had received nocash to pay the tax on the deemed sale. Installment method — An incomestabilizing provision favored by theFarm Bureau is the installment method,which permits farmers and ranchers toreport sales of crops and livestock andrecognize income when payment isreceived in a subsequent year. NOL carry forwards and backs —Another income “smoothing” provisionallows taxpayers to carry forward andback certain net operating losses

NCFC believes that Congress should retain the domestic production activitiesdeduction because it creates jobs, increases spending on ag production and

boosts spending in rural communities.



By Anne Mayberry, Legislative and Public Affairs Advisor USDA Rural Utilities Service

“We’re more thanelectricity — we’reservice.” That’s the motto ofSawnee Electric

Membership Corporation, a ruralelectric cooperative utility servingnorth-central Georgia. What SawneeEMC does is similar to what the other1,000 rural electric co-operative utilitiesacross the United States do in theirservice territories: Focus on communityneeds. Like most other rural electric co-ops,“Sawnee works to improve the localquality of life by assisting ourcommunities and keeping electric ratesaffordable,” says Blake House, vicepresident of member services for Sawnee. Co-ops have a history of being morethan just a source of electric power forhomes and businesses. According to theNational Rural Electric CooperativeAssociation, because concern forcommunity is a core principal of thecooperative business model, typicalcooperative-sponsored economicdevelopment initiatives includecommunity revitalization projects, jobcreation, improvement of water andsewer systems, and assistance in deliveryof health care and educational services.In short, co-ops seek to improve thequality of life for their members andtheir communities. Most rural electric co-ops sponsoryouth scholarship programs that sendhigh school students to Washington,D.C., to see their federal government at

work. These trips often inspire studentsto pursue future careers in public service.

Capital credits a plus for co-op members Cooperatives are supported bymembers, many of whom see a returnon their investment through capitalcredit or patronage capital programs.Under these programs, dollarsgenerated in excess of the utility’soperating costs are returned toconsumer-members. “Our newer customers, who oftendon’t know what a co-op is, also don’tknow what patronage capital is,” Housesays. “But once they find out, theyprefer getting their power from co-ops.The cooperative business model is eyeopening for those who have never beena member of a cooperative.” Rural electric cooperatives also

sponsor Operation Round-Upprograms to provide support for thosein need. Co-op customers round uptheir electric bills to the nearest dollar;the cumulative, donated funds are thendonated for a variety of communityprograms. Sawnee’s Round-Up programprovided $2 million for charitableorganizations during the past decade. While co-ops’ commitment tocommunity — one of the sevencooperative principles — is a coreprincipal of the cooperative businessmodel, it is also as much a part of thehistory of cooperatives as is providingelectricity to rural America. Georgia played a key role in theearly history of the electric cooperativemovement. President FranklinRoosevelt’s trips to Warm Springs, Ga.,are credited for helping to elicit hissupport for rural electrification, as it

Uti l i ty Co-op Connect ionFor Georgia’s Sawnee EMC, serving growing memberbase means more than supplying electricity

Students study in the library of Lanier Technical College, one of several colleges that have builtfacilities in Sawnee’s service area and are bringing new jobs to the community while helpingresidents gain skills needed for career development. Photo by Dave Parrish, courtesy LanierTechnical College.


was on these trips that he discoveredthe difficulty of life in rural Americawithout electricity.

Overcoming the “privilege of geography” Author of Light Up Our Land, HankMcQuade, notes in his 1990 book thatwhile the economy may havecontributed to rural hardship in the1930s, there was another obstacle torural economic growth: “Despite the grinding poverty,hunger and desperation that millions ofAmericans faced, the farmers and smallbusiness people of America’s rural areaswere convinced there was one privilegethey were being denied that was not theresult of the economic debacle. Rather,that privilege was based simply ongeography. Rural residents werecontinuously and emphatically told they

simply lived too far from the utilitylines of the private power companies toreceive electricity in their homes andtowns.” Georgia worked quickly to takeadvantage of the new RuralElectrification Act, approved byCongress in May of 1936. On March30, 1937, the Georgia General

Assembly approved the ElectricMembership Corporation Act, whichopened the door to providing electricityto rural Georgia. By July 16, 1938, community leadersin Georgia’s Forsyth Countyincorporated the Forsyth CountyElectric Membership Corporation,which used 163 miles of line to provideelectricity to 750 rural homes. By 1950,Forsyth County EMC became SawneeElectric Membership Corporation, sonamed because the co-op’s headquarters

was located in the foothills of SawneeMountain, named for a CherokeeIndian chief. Today, Sawnee serves one of thefastest growing regions in the nation,according to data from the 2010Census. The cooperative utilityprovides electricity to more than154,000 residential and 16,000commercial and industrial customersacross seven counties, bordered by LakeLanier and the Sawnee foothills.

Avoiding out-migration crisis For the most part, Sawnee hasavoided the out-migration problem thathas caused so much economicstagnation in other rural areas. Itsproximity to Atlanta and the scenicquality of the service territory have nodoubt helped the Sawnee area avoid“losing its best and brightest.” “We are blessed with both thebenefits and challenges of growth,”notes House. “Growth is a blessing. Itprovides you with the funds to do many

of the things your members need.” Sawnee’s support of education in itsservice territory may be another factorin the area’s growth. USDA’s newreport, “Rural Education at a Glance,2017 Edition,” notes that education isclosely linked to economic outcomes.Thus, one of Sawnee’s priorities is toprovide reliable electric service to the51 schools and colleges in its servicearea, including several new schools builtduring the past two years to supportrapid population growth.

The cooperative has also fundedcomputer labs and outdoor learningcenters. “These programs help our kids,our schools and tie us to thecommunity,” House says. “Students go where the jobs are,” hecontinues. “The lack of jobs is often areason that students elect not to returnto their rural area after college. Addingnew schools, and 250 or so newteachers, provides jobs for those whogrow up here and choose to return andfill those jobs.” Educational institutions,such as Gwinnett and Lanier TechnicalCollege, that have built facilities inSawnee’s territory are helping to bringjobs to the community and offeropportunities for people to enhancetheir academic, personal and careerdevelopment.

Growth generates more growth “Growth drives economicdevelopment, which in turn drives moregrowth,” House says. “Grocery stores

The Sawnee EMC cooperative not only keeps the electricity flowing to its members’ homes andbusinesses, but it is also focused on building stronger communities in its service area of north-central Georgia. Photo courtesy Sawnee EMC


It was during one of his trips to WarmsSprings, Ga., to soak in the therapeutic poolsthere, that President Franklin D. Roosevelt (incar) saw firsthand how desperate the needwas for a rural electrification program. Photocourtesy Franklin D. Roosevelt PresidentialLibrary


NewslineSend co-op news items to: [email protected]

Co-op developments, coast to coast

Co-op extends tree-planting program The Citrus World cooperative(better known as Florida’s Natural, afterit’s orange juice brand) is launching asecond, $10-million tree plantingprogram to help its members replaceorange and grapefruit groves ravaged bycitrus greening disease (see the March-

April issue of Rural Cooperatives for afull report on the situation). The Planting Incentive Program(PIP) began in 2014 when the co-opcommitted $10 million to helpmembers plant 1 million trees. Thissecond round for the PIP is expected toadd another 1 million trees and 2million boxes of citrus when the neworchards reach full bearing age. “The Planting Incentive Program

has drawn remarkable support from thevery beginning,” says Bob Behr, CEOof Florida’s Natural. “Despite thewidely publicized struggles of theFlorida citrus grower, we see theinterest in our incentive program as afocus for our future and the success ofour grower-members. It is exciting tosee the continued dedication and

resiliency of our grower members asthey look to the future.” Behr added that Citrus World’sfinancial position is strong and theinvestment with the growers enables thecontinued growth of the Florida’sNatural brand. Due to the success of the plantingprogram for orange and grapefruit, theboard has also approved the LemonPlanting Incentive Program to

stimulate the planting of 50,000 trees.

Three Farm Credit associations merging Three Farm Credit associations —based in Illinois, Minnesota andWisconsin — are merging, effectiveJuly 1. Members of 1st Farm CreditServices (Illinois), AgStar FinancialServices (Minnesota) and BadgerlandFinancial (Wisconsin) voted for themerger to create Compeer Financial.The new organization’s headquarterswill be in Sun Prairie, Wis. Eachorganization’s existing offices willcontinue to provide local service.Rod Hebrink, president and CEO forAgStar Financial since 2014, will leadthe merged organization. Hebrinkserved as AgStar’s chief financial officerfor nearly 30 years. The board of the mergedorganization will be comprised of 14member-elected directors and threeoutside appointed directors. There willbe equitable representation of boardmembers, in proportion to the numberof stockholders from each of the threeareas. The boards of the threeorganizations began exploring apotential merger in February 2016,leading to a unanimousrecommendation in August to moveforward. Stockholders received ballotsand detailed information about theproposal in March, after the FarmCredit Administration grantedpreliminary approval to proceed. Thefavorable vote for the merger wasannounced April 7. The new organization will operate in144 counties through 47 offices in partsof Illinois, Minnesota and Wisconsin. It

Many new citrus groves, such as this, will be planted in Florida thanks to the Citrus World(Florida’s Natural) cooperative’s decision to spend $10 million on a second round of its PlantingIncentive Program. The effort is helping to counter the devastation of citrus greening disease.Photo courtesy Ernst Peters of The Ledger


will have $18.6 billion in assets. Themerger provides expanded capital thatwill help Compeer Financial invest intechnology and other resources tosupport its client base. It also creates amore diverse portfolio that will createadditional stability and better positionthe organization to share its earningswith stockholders through a cashpatronage program.

Premier Co-op buys JBS grain elevators Premier Cooperative, Champaign,Ill., is purchasing three grain elevators— at Royal, Collison and Rossville —from JBS United Inc. of Sheridan, Ind.

The grain marketed through theadditional facilities is projected toincrease Premier's grain sales to about70-million bushels annually. The co-op says the new elevatorscomplement Premier’s existing facilitiesin Champaign, Vermillion, Ford andPiatt counties. The purchase alsoprovides access to markets not currentlyavailable to the co-op. Premier will nowhave facilities on four Class 1 railroads,opening more markets for its members. A 110-car shuttle train loader on theUnion Pacific Railroad at Royal willconnect Premier customers to theSouthwest United States and theMexican grain market. The 10-carloader on the CSX Railroad at Rossvilleships to the Eastern and SoutheasternUnited States. Premier provides more than 2,800members with grain and energyservices, and, through United Prairie

LLC, with agronomy products andservices. Premier Cooperative was formed in2009 with the unification of FisherFarmers Grain & Coal, Grain PrairieCo-op and Farmers Elevator Co. ofJamaica. Rising Farmers Grain Co.joined Premier in 2011. Through thepredecessor co-ops, Premier traces itsorigins back to the early 1900s.

Dairy groups urge action on Canadian trade issue U.S. dairy trade organizations areurging the Trump Administration tofight back against “protectionistCanadian trade policies that areslamming the door to American dairyexports in violation of existing tradecommitments between the twonations.” The National Milk ProducersFederation (NMPF), which representsmost U.S. dairy co-ops, the U.S. DairyExport Council (USDEC) and theInternational Dairy Foods Association(IDFA) called on the federalgovernment and governors of northernstates to take immediate action inresponse to what they see as “Canada’sviolation of its trade commitments tothe United States.” In a joint press release, the U.S.dairy groups said Canada’s new “Class7” pricing policy is “designed todisadvantage U.S. exports to Canadaand globally.” As a result, “multipledairy companies in Wisconsin and NewYork have been forced to inform manyof their supplying farmers that theCanadian market for their exports hasdried up. For some farmers, this meansthat the company processing their milkand shipping it to Canada can no longeraccept it starting in May.” Jim Mulhern, CEO of NMPF, says“Canada’s protectionist dairy policiesare having precisely the effect Canadaintended: cutting off U.S. dairy exportsof ultra-filtered milk to Canada despitelong-standing contracts with Americancompanies.” Tom Vilsack, president and CEO ofUSDEC, adds: “Our federal and state

governments cannot abide by Canada’sdisregard for its trade commitment tothe United States and its intentionaldecision to pursue policies that arechoking off sales of American-mademilk to the detriment of U.S. dairyfarmers.” Vilsack, former U.S. secretary ofagriculture, also noted that while farmfamilies in the Northeast and Midwestare suffering the immediateconsequences of the loss of Canadianmarkets, “thousands more will suffer ifCanada persists in using its programs todistort the global milk powder marketsso critical to tens of thousands ofAmerican dairy farmers.”

Dan Block new CEOat DairyAmerica DairyAmerica — a federated co-opthat is the world’s largest dried skimmilk marketer — has appointed DanBlock as CEO. Block joinedDairyAmerica in 2011, most recentlyserving as chief commercial officer andleading the company’s global salesstrategy.

“Dan has the vision, strategy andtrack record tohelp DairyAmericaand its memberscapitalize on theopportunities inthe globalmarketplace andcontinue tosuccessfully grow

our business,” says Board PresidentAndrei Mikhalevsky. Block has spent more than 20 yearsdriving growth for leading dairy andfood organizations in globalmarkets. Prior to joining DairyAmerica,he held key sales and leadershippositions with Glanbia NutritionalsInc., Hoogwegt U.S. Inc. and ArcherDaniels Midland. Block is a graduate ofthe University of Illinois-Urbana, witha bachelor’s degree in agriculture. “The opportunities forDairyAmerica are significant, and wehave a strong team in place toaccomplish our goals as well as traverse

One of Premier Cooperative’s grain facilities.The co-op is purchasing three more grainfacilities from JBS United Inc., pushing itsannual grain sales to about 70 million bushels.


the ever-changing market conditions weface globally,” says Block. DairyAmericamembers are: Agri-Mark Inc.,California Dairies Inc., O-AT-KA MilkProducers Inc. and United Dairymen of Arizona.

CoBank supports wildfire relief CoBank — a cooperative bankserving agribusinesses, ruralinfrastructure providers and FarmCredit associations — is launching a$150,000 charitable fund to supportwildfire relief efforts throughoutKansas, Oklahoma and Texas. Recentfires have impacted farming andranching communities in all threestates, burning hundreds of thousandsof acres, destroying property and killinglivestock. In Kansas, an estimated 700,000acres have burned throughout morethan 20 counties in the state’s southwestand central regions. In Oklahoma,about 400,000 acres have burned and astate of emergency has been declared in22 counties. An estimated 325,000 acreshave burned throughout the Texaspanhandle. “These wildfires have had adevastating impact,” says TomHalverson, CoBank's president andCEO. “CoBank is committed toworking with our customers, otherFarm Credit organizations and localrelief agencies to support farmers,ranchers and other victims of these fires.”

Former Sunkist CEO Russ Hanlin Sr. dies Russell Hanlin Sr., who waspresident and CEO of Sunkist Growersfor 20 years, has died at age 84. ThreeU.S. presidents — Jimmy Carter,Ronald Reagan and George H.W. Bush— tapped Hanlin for his experience inglobal trade. He was appointed to thePresident’s Advisory Committee forTrade Negotiation, the President’sExport Council and the President’sCommission on Executive Exchange. Hanlin’s commitment to global tradewas also honored abroad, according to

ACE Institute slated in Denver“Co-op Education for the Next Generation — passingalong a passion for democratic principles” is thetheme of the Association of Cooperative Educators(ACE) annual institute July 18-21 at Regis Universityin Denver, Colo. Registration is now open at:www.ace.coop.

In addition to exploring a wide variety of co-opeducation topics, the conference will include studyvisits to cooperatives in the Denver area, as well avisit to the state’s majestic Rocky Mountains.

Among topic “tracks” for the institute are: n Platform solutions— The internet has opened ways that people canwork together to offer services and goods. Does co-op education have aplace in helping people keep control of their work products? n Co-ops are no longer on the fringe— universities are introducing moreprograms to teach about co-op solutions. Explore these programs and theirpotential to expand co-op understanding and use. n Back to basics— Re-emphasizing education for members andemployees about democratic organizations and co-op principles is essential. n The GIGabyte economy and co-ops— Explore new ways co-opeducators and developers can help workers to navigate cooperativeownership. ACE is an organization of cooperative researchers, leaders, educators,practitioners and developers. Formed in 1952, the association bridgesgeopolitical, cultural and language barriers to unite cooperativeeducators throughout the United States, Canada and the Caribbean.

Attendees at a recent ACE Institute gather for a “selfie” photo. This year’s conference inDenver will explore a wide range of issues that should help advance the state of co-opeducation efforts in North America. Photo courtesy ACE


Sunkist. Hanlin was inducted into theWorld Trade Hall of Fame for his workin opening overseas markets toAmerican products and received theMaple Leaf award for promoting tradeand understanding between the UnitedStates and Canada. The Emperor of Japan awardedHanlin a national decoration formeritorious service and distinguishedachievement for his role in creating apositive business relationship betweenthe United States and Japan. Hechaired the Los Angeles VancouverSister City Committee and the JapanAmerica Society of Southern California. He served as chairman of theNational Council of AgriculturalCooperatives and of the United FreshFruit & Vegetable Association and wasa member of the U.S./Hong KongEconomic Council.

Record profit for DFA Dairy Farmers of America (DFA) hadnet income of $131.8 million for 2016,up from $94.1 million for 2015. Theincrease was attributed to higher salesvolumes, overall operating efficienciesand lower commodity input costs. Therecord earnings were also buoyed bythe acquisition of the remaining 50-percent equity interest inDairiConcepts, a manufacturer ofcheese, dairy ingredients and dairyflavor systems that operates eightfacilities. DFA’s net sales of $13.5 billion for2016 were down from $13.8 billionin 2015, primarily due to lower milkprices. The U.S. annual average all-milk price was $16.24 perhundredweight in 2016, comparedwith $17.12 per hundredweight in2015. “Being owned by dairy farmers,we are always working to strengthenour milk marketing business and tobring value to our dairy-farmermembers,” says Rick Smith, presidentand CEO. “While 2016 was a year ofchallenges for many of our farmers,DFA itself continues to grow andremains focused on continuing our

investments in new and existing plants,as well as progressing on our strategicinitiatives.” In 2016, DFA marketed 62.6 billionpounds of milk for both members andothers through the cooperative’sconsolidated businesses, whichrepresent about 29 percent of thenation’s total milk production. Theaverage 2016 price paid to members perhundredweight of milk was $16.22,compared to $17.18 in 2015. Cash distributed to members in 2016totaled $42 million, compared to $35million in 2015. Members received $21million in equity retirements and $21million of allocated patronagedividends. The co-op in 2016 announced plansto construct a new cheese plant inMichigan with Glanbia PLC. Thisproject is driven by Michigan’s growingmilk supply and an increasingworldwide demand for dairy products.Foremost Farms USA and MichiganMilk Producers Association co-ops arealso involved in the project.

Pearson to succeed Lockenat Wheat Growers Co-op Dale Locken, CEO of WheatGrowers (formerly South DakotaWheat Growers), will be retiring Aug.1. Locken has served almost 15 years atthe helm of the Aberdeen, S.D.-based

grain cooperative.He will be succeededby Chris Pearson,Wheat Growers’current chiefoperating officer.

Under Locken’sleadership, thecooperative expandedgrain storage,upgraded grain-handling facilities,added shuttle-loading facilities andexpanded itsagronomy servicecenters. WheatGrowers alsodeveloped a strong,

effective safety culture that today hasbecome a model for the agricultureindustry. Wheat Growers Board President HalClemensen credited Locken foradapting the cooperative to meet thecurrent and future needs of itsmembers, “assuring that the co-opremains innovative, progressive andrelevant for generations to come.” “I have been honored to work withthe tremendously talented, extremelydedicated Wheat Growers employeeteam, who strive every day to provideoutstanding service to our 5,100farmer-member owners,” Locken says.“It has been the most rewarding andinspiring period of my professionalcareer in agriculture.” Pearson was the board’s unanimouschoice as the new CEO. He joinedWheat Growers as senior vice presidentof operations in 2013 and waspromoted to chief operating officer lastyear. A native of Corning, Iowa,Pearson spent 14 years in local co-opsystems there, rising from an entry-leveljob to chief operating officer. He also serves as board president ofDakotaland Feeds and is a member ofJames Valley Grain Cooperative and theAgriculture Retailers Association,among other memberships. He has anundergraduate degree in agriculturestudies from Iowa State University. “Chris is passionate about farmersuccess, deeply knowledgeable in whatit takes to run a successful cooperativeand firmly committed to the employeeswho support our farmer-members,”Clemensen says. “In this challengingagriculture climate, we knew we neededa CEO to align with our strategy andculture.”

Fenske CEO at Co-op Grain & Supply Cooperative Grain and Supply,Hillsboro, Kan., has selected JerryFenske as its new CEO. Fenske hasmost recently been serving as generalmanager of the Leavenworth CountyCooperative Association in Lansing.Prior to that, he was manager of the co-

PEARSON

LOCKEN


op’s energy department. Fenske started his cooperative careerworking for the Farmers CooperativeAssociation, Manhattan. He is agraduate of the University of Kansas.He began the new job on April 1.

Keller to lead Accelerated Genetics Janet Keller has been hired aspresident and CEO of AcceleratedGenetics, a livestock breedingcooperative based in Baraboo, Wis.

Keller hadpreviously servedas the co-op’s vicepresident forcommunications,public relationsand advertising.Most recently, shewas employed byWorld Dairy Expo

as the communications and publicrelations manager. Keller brings more than 23 years ofindustry experience to her new job,including management, marketing, herdanalysis, photography, distribution,training, semen inventory managementand animal health product knowledge.The co-op believes that Keller’sextensive communication experience,along with her cooperative businessknowledge, will help move the companyforward. She will direct initiatives at the co-opto increase gross profits and sales whilereducing expenses and making thecooperative more member-focused,according to an article in the WisconsinState Farmer.

Green City Growers nears profitability Green City Growers, a worker-owned urban farming co-op inCleveland, is approaching profitability,according to a March article inCleveland Scene magazine. The co-opoperates one of the nation’s largesthydroponic greenhouses, covering 3.2acres in an economically depressed partof the city.

Opened in 2012, the co-op has yet tobe profitable. That should change thisyear, according to Jeremy Lisy, the co-op’s vice president for sales. “When I came here, we had 15people working and the greenhouse was60-percent empty,” he explains. “Theydidn’t know what to grow or who to sellit to. Some of the products they were

growing weren’t right for chefs,” hetold Cleveland Scene. Lisy talked to chefs around the cityto see what they wanted, then addeddifferent types of lettuces for the co-op’s packaged blends, and sales shotupward. This year the co-op expectssales to top $3 million, double the salesof two years ago and enough to pushthe operation into the black.

Grawe new CEO atConsolidated Ag Solutions Jeff Grawe has been named presidentand CEO of Consolidated Ag SolutionsInc. (CAS), where he succeeds RobertDude. CAS is a cooperative formed in2015 to create strategic advantages forthree ag cooperatives: Central Valley Agin York, Neb., Landus Cooperative inAmes, Iowa, and Wheat Growers(formerly South Dakota WheatGrowers) in Aberdeen, S.D. Grawe comes to CAS from Central

Valley Ag, where he was senior vicepresident of strategic projects. Beforethat he was vice president/relationshipmanager for CoBank and was the ownerof Heartland Strategies BusinessConsulting. Grawe’s “background and experiencewill be a valuable asset for CAS as wedevelop new opportunities for the three

cooperatives and their respectivemember-owners,” says Carl Dickinson,CAS board chairman. Grawe has a BA in financemanagement from Loras College inDubuque, Iowa, and an MBA inFinance from Rockhurst College inKansas City, Mo. He is also a graduateof the Land O’ Lakes ExecutiveDevelopment Program and the Institutefor Cooperative Leadership at theUniversity of Missouri in Columbia,Mo.

NFU opposesDow-DuPont merger Following European Union approvalof the proposed merger between DowChemical Co. and DuPont Co.,National Farmers Union (NFU) iscalling on the Trump Administration toblock the deal. The merger, if approvedby the U.S. Justice Department, wouldcreate the largest biotechnology and

Hydroponically grown crops thrive inside the giant greenhouse of the Green City Growerscooperative in Cleveland.

seed firm in the nation. “The reduction in competition thatwould be wrought by a Dow-DuPontmerger will result in less innovation,higher prices and less choice forfarmers,” says NFU President RogerJohnson in a letter to President Trump.“Given the damaging and lasting effectsthis merger will have on family farmersand rural America, we urge you tooppose this merger.” Johnson noted that the Dow-DuPont merger occurs amidst a massivewave of consolidation in the agriculturalinputs sector. The combination of thetwo companies, coupled with theconcurrently proposed mergers ofBayer-Monsanto and ChemChina-Syngenta, threatens to limit majorplayers in the agrichemical and seedsectors to just four companies. That isbad news for farmers who rely oncompetitive pricing for their inputs,Johnson says. “The merger of Dow and DuPont,the 4th and 5th largest firms, wouldgive the resulting company about 41percent of the market for corn seedsand 38 percent of the market forsoybean seeds,” says Johnson. “If theDow-DuPont and Bayer-Monsantomergers were both approved, therewould effectively be a duopoly in thecorn and soybean seed markets.”

Carolina to hold co-op youth camp Cooperative Leadership Camp,hosted by the Cooperative Council ofNorth Carolina (CCNC), will be heldJune 19-23 at the FFA Center in WhiteLake, N.C. The five-day residentcamping program features interactiveworkshops and presentations, team-building activities and recreation, plussmall group sessions with an emphasison how cooperatives operate. To be eligible for the camp, aparticipant must be a rising high schoolsophomore, junior or senior and have atleast one letter of recommendationfrom a co-op sponsor or school staffmember. The student must also besponsored by a CCNC member

cooperative or by 4-H (CCNC can helpconnect students with possiblesponsors). Campers must possess an interest indeveloping their leadership skills. Formore information, contact the CCNCoffice at (919)-834-5544, or e-mail:[email protected]. Registrations aredue June 1.

Organic farms show continued growth The organic food industry continuesto grow domestically and globally, with24,650 certified organic operations inthe United States and 37,032 aroundthe world, according to USDA. The2016 count of U.S. certified organicfarms and businesses reflects a 13-percent increase between 2015 and2016, continuing the trend of double-digit growth in the organic sector. Thenumber of certified operations hasincreased since the count began in2002; this is the highest growth ratesince 2008. Organic certification is an “opt-in”voluntary standard that is managedthrough a public-private partnership.USDA accredits and oversees about 80businesses and state governments thatdirectly certify organic farms andbusinesses. The complete list of certified organicfarms and business is available through

USDA’s Organic Integrity Database at:http://organic.ams.usda.gov/integrity/.Launched in 2015, the databasediscourages fraud by providing moreaccurate and timely information aboutoperations certified to use the USDAorganic seal.

Wisconsin supply co-ops pursue merger The boards of Country VisionsCooperative, Reedsville, Wis., andKettle Lakes Cooperative, RandomLake, Wis., have signed letters of intentto pursue a merger. Merger discussionsbegan after the co-ops first agreed toform a joint venture to build a new,state-of-the-art agronomy facility inPlymouth, Wis. Country Visions is a farm supplycooperative operating in easternWisconsin and in the Upper Peninsulaof Michigan. It has annual sales of $158million from divisions for agronomy,grain, petroleum, propane and retailstores. Country Visions is also a 60-percent owner of CP Feeds, whichmanufactures and sells more than $146million in feed to area farmers. Kettle Lakes Cooperative is a farmsupply co-op in eastern Wisconsincurrently operating just south ofCountry Visions trade area. KettleLakes annual sales of $40 million comefrom agronomy, grain, feed and retail.Kettle Lakes is also a 50-percent ownerof Co-Energy Alliance, which sellspetroleum and propane. Membership voting is scheduled inlate June. If approved by members, thejoint organization will begin businesson Sept. 1, says Country Visions CEOSteve Zutz. Member informationmeetings will be held prior to the vote. Co-op leaders say the merger willresult in better purchasing power forthe co-op and new joint operations thatdrive efficiencies for the business. n


Team-building exercises such as this will bepart of the Cooperative Leadership Camp,hosted in June by the Cooperative Council ofCarolina.

person behind these seeds, not just acompany.” Nguyen would like Californiafarmers markets to require that anywheat-based products sold include 20percent local, whole grains. “I got theidea from New York, where theyrequire 15 percent local grain contentin baked products; it has been veryhelpful for their grain farmers.” Nguyen is working with acommercial baker who uses wholegrains, with the goal of creating

technical information to share withcommercial bakers, because “there is alearning curve to incorporating thesewhole grains into their products.” In January, Nguyen visited sixfarmers markets in Los Angeles Countyto make the pitch for supportingproducts with local whole grains.“Places like Beverly Hills are starting toget the whole-grain gospel!”

Ultimate goal: solving problems With so many “oars in the water,”what is a good day like for Nguyen? “That would be when the phonerings about 6 a.m., and it’s a call from afarmer co-op I’m working with. The

caller is excited because the membersjust had a really good meeting and aremaking progress toward a goal, likeacquiring a shared-space facility. “Then I would get to interact withsome partners we are working with tocreate new jobs…and helping sociallydisadvantaged farmers, because thereare still so few resources for them.” Ultimately, Nguyen sees the core ofa co-op facilitator’s work as being aproblem solver. “I like brainstorming with people tohelp them find ways to solve problems.I want them to feel like they have thetools needed to make progress. Thatcomes from working together to shareknowledge.” n

A Born Cooperatorcontinued from page 27


(NOLs). Witnesses objected to theBlueprint’s proposal to limit theseprovisions. Deductions for business expenditures — The Blueprint wouldallow an immediate deduction for thecost of business investment inequipment, building and intangibleassets, but not land. On April 26,Mnuchen said that the administrationalso favors an immediate write-off forbusiness capital expenses (Wall StreetJournal, April 27). Farm Bureau expressed support for

current law provisions under InternalRevenue Code Section 168 that allowfor accelerated cost recovery forbusiness expenses, including write-offsof equipment, production supplies andpre-productive costs. This provision canbe coordinated with Internal RevenueCode Section 179, under which farmerscan choose to immediately deduct up to$510,000 (indexed for inflation) inexpenditures for equipment. Witnessesalso argued to keep provisions ofcurrent law that allow producers todeduct soil and water conservationexpenditures, the cost of raisinglivestock and the cost of raising crops. Other special rules for agriculture —Witness Christopher Hesse, of CliftonLarson Allen LLP, a certified public

accounting firm, called attention toadditional special provisions thatfarmers have under current law thatcould potentially be lost under taxreform. For example, farmers haveflexibility on when they can recognizethe receipt of crop insurance proceeds.Farmers also can take advantage offlexible taxation of Commodity CreditCorporation loans; they can pay tax ona loan when received, or treat the loanas a true loan. When a crop is sold, the farmer canrepay the loan and get a deduction. Ifthe loan is treated as a true loan but isforfeited, the farmer recognizes income.Further, special rules are availableunder current law to defer livestocksales. n

Management Tipcontinued from page 30

and shopping venues follow therooftops, which follow jobs. We’re alwaysplanning 10 years ahead in our area.” Sawnee’s territory has alsoexperienced a recent surge incommercial retail growth. As bothresidential and commercial facilitiesexpand in Sawnee EMC’s service area,

more labor is required to maintaindependable electric service — anespecially critical factor for businessoperations. Expanding facilities requireadditional labor to install and maintainthe system, bringing even more jobsinto the area. Ensuring that internet access isavailable is also vitally important allcustomers. “High speed broadbandtoday is somewhat comparable to elec-trification a century ago,” says House. Part of the reason why Sawnee is so

focused on providing reliable,affordable electricity to help sustain andgenerate growth is simply the result of a“co-op mindset.” House explains: “In many ways, wedon’t have customers — we haveowners. We need to do all we can toserve our owners, and that includes freeenergy audits, donations to civicorganizations and working locally tohelp one another. It’s ingrained in howwe were formed almost 80 years ago.It’s in our blood.” n

Utility Co-op Connectioncontinued from page 32

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