al r u r cooperatives - usda rural development...lac was formally incorporated on dec. 21, 2007,...

USDA / Rural Development July / August 2012

Rura

lCOOPERATIVESCOOPERATIVES

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NewLifefor aLifeline

By Lee Egerstrom, Minnesota 2020

Editor’s note: Egerstrom is a long-time writer on agriculturaland cooperative topics in the Upper Midwest. This guestcommentary is reprinted courtesy Minnesota 2020, a ruralissues think tank. It is slightly abridged from the originalversion, published last winter on the organization’s website(where the full version can be read): www.mn2020.org

ar from America’s money center,community-based, farmer-owned andconsumer-owned cooperative businesses inMinnesota are helping create jobs andwealth, and investing in their communities.

That became apparent in an event advisory sent by FrankMcDowell, general manager of New Vision Co-op, asouthwestern Minnesota regional agricultural co-op nowbased at Brewster.

“There is a lot of strength coming from agriculture forthe last three years or so, and it is good for the wholeeconomy,” McDowell said. The co-op is “retiring” (payingback) about $4 million in equity to original members whoformed New Vision in 1998, a merger of two large co-opsin the area.

About 3,000 farmers in southwest Minnesota andnearby border areas of Iowa and South Dakota will receivethese checks. “Our local merchants will be glad to see thismoney show up on Main Street,” McDowell said.

Such actions are expected as companies, of anyownership structure, prepare for the future and positionthemselves to cope with changing market conditions andbusiness opportunities.

In contrast, critics of big stock corporations and high-finance note that corporations now have about $3 trillionstashed away, not being reinvested in the economy. Whilethis stunts job growth and further holds back economicprogress, other critics warn that when corporations start“investing,” much of it will likely be in merger andacquisition (M&A) activity that won’t necessarily grow theeconomy or put people back to work.

More often than not, M&A activity creates“redundancies” and “synergies,” said Gerardo Espinoza,executive director of the Local Enterprise Assistance Fund(LEAF) at Brookline, Mass., in a recent interview. Theyusually lead to layoffs and more unemployment and

further weakening of the economy.That is a danger for America down the road. But that

isn’t the case with New Vision Co-op and a new mergerpartner, the Wilmont-Adrian ag co-op, which merged intoNew Vision on Sept. 1, or other co-ops based inMinnesota.

Back on Wall Street, another danger is the debt beingacquired by U.S. companies, according to Associated Pressbusiness writer Bernard Condon. In gleanings fromFederal Reserve data, Condon said companies have addedabout $358 billion in cash to their holdings since the startof the 2007-2008 Great Recession while debt increased by$428 billion in that time.

At this point, it’s unclear how big a threat corporatedebt might represent for the national economy and how itis being used by companies and industries. Some debtaccumulation may be nothing more than companiesresponding to low interest rates from Fed policy that willposition them for more aggressive business action in thefuture.

Regardless, the inactivity of Wall Street companies doesmake a striking contrast to what is visible from theMinnesota countryside. Let’s look at some recentdevelopments:• Growers and food consumers in the Red Wing area

announced before Thanksgiving that they’ve hiredSharon Becker to be general manager of the RiverbendMarket Cooperative, soon to open in the river city.

• The Good Food Co-op at Rochester is merging into the

2 July/August 2012 / Rural Cooperatives

Commentary

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continued on page 42

Construction work progresses on New Vision Cooperative’sMagnolia feed mill project, a $16 million elevator/feed mill slatedto begin operation in June 2013. It will create 12 jobs in its firstyear of operation. Photo courtesy New Vision Cooperative

What Main Streets have over Wall Street

Features

Rural Cooperatives / July/August 2012 3

Volume 79, Number 4July/August 2012

Rural Cooperatives (1088-8845) ispublished bimonthly by USDA RuralDevelopment, 1400 Independence Ave.SW, Stop 0705, Washington, DC. 20250-0705.

The Secretary of Agriculture hasdetermined that publication of thisperiodical is necessary in the transactionof public business required by law of theDepartment. Periodicals postage paid atWashington, DC. and additional mailingoffices. Copies may be obtained from theSuperintendent of Documents,Government Printing Office, Washington,DC, 20402, at $23 per year. Postmaster:send address change to: RuralCooperatives, USDA/RBS, Stop 3255,Wash., DC 20250-3255.

Mention in Rural Cooperatives ofcompany and brand names does notsignify endorsement over othercompanies’ products and services.

Unless otherwise stated, articles in thispublication are not copyrighted and maybe reprinted freely. Any opinions express-ed are those of the writers, and do notnecessarily reflect those of USDA or itsemployees.

The U.S. Department of Agriculture(USDA) prohibits discrimination in all itsprograms and activities on the basis ofrace, color, national origin, age, disabili-ty, and where applicable, sex, maritalstatus, familial status, parental status,religion, sexual orientation, geneticinformation, political beliefs, reprisal, orbecause all or part of an individual’sincome is derived from any publicassistance program. (Not all prohibitedbases apply to all programs.) Personswith disabilities who require alternativemeans for communication of programinformation (Braille, large print, audiotape,etc.) should contact USDA’s TARGETCenter at (202) 720-2600 (voice and TDD).To file a complaint of discrimination, writeto USDA, Director, Office of Civil Rights,1400 Independence Avenue, S.W.,Washington, D.C. 20250-9410, or call (800)795-3272 (voice), or (202) 720-6382 (TDD).USDA is an equal opportunity providerand employer.

Tom Vilsack, Secretary of Agriculture

Dallas Tonsager, Under Secretary,USDA Rural Development

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.

p. 4

04 Disasters spur co-op formationsLouisiana co-op association helps fishermen, farmers recover following hurricanes and oil spillBy Anne Todd

08 New life for a lifelineCooperative effort in Iowa keeps trains on the tracksBy Stephen Thompson

14 Co-op oil mills play vital role in sustaining cottonseed valueBy Bruce J. Reynolds

18 Creating a roadmap for food hub developmentBy James Matson, Martha Sullins and Chris Cook

22 Co-op leaders confer with White House officials

24 C-FARE meeting shows progress made in co-op goals, valuesBy Julie A. Hogeland

31 Can co-ops help drive global recovery?Quebec City to host international co-op conferencesBy Jane Livingston

32 CCA salutes those who excel at telling the co-op story

35 Midwest co-op centers share strategies at regional roundtableBy Alice Pickler

Departments02 COMMENTARY

12 IN THE SPOTLIGHT

27 CO-OPS & COMMUNITY

28 UTILITY CONNECTION

37 NEWSLINE

p. 28p. 14

ON THE COVER: When a major railway announced plans in 2009 toabandon 28 miles of a railroad line in northern Iowa, two local farmerco-ops and a telephone co-op joined forces with others (includingUSDA) to make the investments needed to maintain a vital link in thelocal economy. See story on page 8.

p. 32

By Anne Todd, Contributing [email protected]

espite hurricanes, drought, floods and oilspills in recent years, agriculture and fishingremain among Louisiana’s top-earningindustries, netting about $6.1 billion lastyear. More than half of the state’s producers

are small-scale farmers and fishermen, for whom thesenatural and man-made disasters have created an especiallyheavy burden, since even in the best of times, achieving

economic viability can be a challenge for them.According to the Louisiana Department of Agriculture

and Forestry, slightly more than 60 percent of the state’sproducers are classified as operating small farms, with lessthan $20,000 in annual sales. Besides low earnings, smallfarmers and fishermen face other barriers to sustaining theirbusinesses.

These barriers are especially prevalent for sociallydisadvantaged, often minority, producers. Challenges includehaving limited operating and investment capital and a lack ofaccess to credit. They also struggle more to tap state, federal


D

Louisiana co-op association helps farmers, fishermenrecover following hurricanes and oil spill

Disasters spurco-op formations

Tracy Gauff, a doctoral candidate at Louisiana State University, explains and demonstrates artificial insemination techniques used for goat breedingbefore a group of Louisiana Goat Cooperative (LGC) members and other goat producers. Former LGC President Bruce Langley is to the right of Gauff.Photos courtesy Louisiana Association of Cooperatives

and other support resources. Small, socially disadvantagedproducers also often lack the technical expertise, businessacumen and marketing skills needed to improve their incomeand overall chances of business success.

Harvey Reed III is a “man on a mission” to turn thingsaround for socially disadvantaged small farmers andfishermen in his home state. As the founder of the LouisianaAssociation of Cooperatives (LAC), Reed knows all too wellthe day-in, day-out hurdles that small and minority producersface. He’s seen those difficulties first-hand through more than20 years of direct experience with rural agriculturalproduction in Louisiana.

Reed, a graduate of Southern University and LouisianaState University’s Ag Leadership Program, specializes indevelopment of co-ops and also works in agribusiness andgeneral economic development.

Rebounding fromHurricane Katrina

On Aug. 29, 2005, Hurricane Katrina — one of the fivemost deadly hurricanes in U.S. history and the costliest oneto date — struck southeast Louisiana. It caused widespreaddestruction throughout the Gulf Coast region, but especiallyin Louisiana, where almost 1,600 people lost their lives.

The impact in New Orleans was cataclysmic. The stormsurge, coupled with scores of levee failures, put 80 percent ofthe city underwater and displaced hundreds of thousands ofpeople. The devastation extended over about 90,000 squaremiles of the Gulf Coast, from Louisiana to the FloridaPanhandle. The estimated damage from Hurricane Katrinawas more than $81 billion. Louisiana’s farm economy alone

suffered about $1.6 billion in losses.In the aftermath of Katrina, the situation was dire for

small farmers and fishermen of the Louisiana Gulf Coast.They were in a desperate struggle to survive the ecologicaland economic effects of the disaster and to keep theirbusinesses afloat.

Witnessing their plight led Reed to form the LouisianaAssociation of Cooperatives (LAC). His goals were to: engagein the Katrina recovery effort; reach out to disadvantagedsmall farmers and fishermen and provide them with technicalassistance and resources; and to help them form newcooperatives to collectively strengthen their operations. Hisvision was for a grassroots, highly mobile and rapid-responseorganization.

Reed was already deeply involved in Katrina recoverywork before the official incorporation of LAC. He initiallyworked with two groups of fishermen, located on oppositesides of the state, to assess their needs, help them secureresources and organize as co-ops.

“Recovery and relief — that was our main focus when wegot started,” Reed says. “We realized that after the hurricanethey couldn’t do any fishing because their boats were underwater, damaged or just lost. We asked them about forming aco-op and they agreed to do it.”

The two groups Reedinitially worked withorganized as the Gulf CoastFisheries Cooperative inHackberry, La., (see sidebar)and the South PlaqueminesUnited Fishing Cooperativein Pointe A La Hache, La. Atthe time that it organized,South Plaquemines Unitedincluded about 50commercial fishing familiesin Plaquemines Parish, southof New Orleans. However,the co-op is no longer active.

Reed also collaborated withthe Louisiana DisasterRecovery Foundation —today known as theFoundation for Louisiana —to mobilize emergencyassistance for his clients. The

foundation, a philanthropic organization, was established tofacilitate the delivery of resources for rebuilding efforts acrossthe state. Through Reed’s relationships with foundationmembers, he was able to provide immediate funding to helphis clients.

LAC was formally incorporated on Dec. 21, 2007, with Reedat the helm as executive director; its office is in Gretna, La.


These shrimp pontoon barges were floated up a ship channel by Gulf Coast Fisheries Cooperative members tosave them from an approaching hurricane.


On the road to successFrom the beginning, Reed was on the go, racking up miles

on his car as he traversed the Gulf Coast and moved inlandto meet with small fishermen and farmers. Early on, Reedmade a commitment that employees of the LouisianaAssociation of Cooperatives would work face to face withclients, as much as possible.

He believes that personal contact is essential to buildingtrust and solid relationships with clients and potential clients,especially in situations where cultural norms may differbetween producer groups of different ethnic or racialbackgrounds.

Today, LAC has a staff of nine working with co-ops allacross the state, focusing much of its effort on AfricanAmerican, Latino and Asian producers. The association also

recently began collaborating with two Native Americanproducer groups.

For a small cooperative association, LAC has a largepresence in the state: Reed and LAC have client relationshipsin 41 of Louisiana’s 64 parishes (counties).

Oil spill impactssmall fishermen

On April 20, 2010, just 41 miles from the Louisiana coast,there was an explosion on the Deepwater Horizon, anoffshore oil rig. The explosion triggered a massive oil spillthat wasn’t completely contained until five months later, onSept. 19. By that time, almost 5 million barrels of oil hadbeen released into the Gulf of Mexico.

The spill caused widespread damage to the marine ecologyof the region and to the fishing industry and workers thatwere dependent on it. A study commissioned for the state in

October 2010 estimated that short-term losses (defined asgross revenue losses from 2011 through 2013) to fisheries,the fishing industry and fishermen could be as high as $172million. The crisis also affected other parts of Louisiana’seconomy and workforce, including the tourism industry andfood processors and retailers.

Although the spill adversely affected all Gulf Coast fishingoperations, small fishermen were particularly hard hit.According to Reed, relief was initially directed to largeoperations; small fishermen had to wait longer for assistance.Another difficulty for small fishermen was that relief claimsgranted after the spill were partially calculated based onrecords of past years’ catches and related data. In some cases,small fishermen did not have formal records of their businessperformance in prior years, which delayed processing theirclaims.

“Not only the environment was damaged, families weredamaged,” Reed says of the oil spill. LAC staff mobilized tohelp provide small Gulf Coast fishermen with relief. In thefall of 2010, Reed met several times with representatives fromthe oil industry and other officials involved in the relief effortto help expedite small fishermen’s relief claims.

A small associationwith a big audience

LAC started a newsletter for members, the LouisianaAssociation of Cooperatives Weekly Update, which was distributedby e-mail. It covered a wide range of topics of interest toproducers, such as reminders of sign-up dates for USDAprograms, alerts about upcoming regional conferences andother ag events and cooperative extension activities. It alsocarried news about imports and exports, food recalls andinternational agricultural news.

The newsletter rapidly gained popularity. Members on thedistribution list began forwarding it to other small farmersand fishermen, friends, family, coworkers — all sorts ofpeople working in agricultural production in Louisiana. Thenewsletter even made its way to staff at the United Nations,where it gained faithful readers. Reed reports that theaudience for the newsletter eventually grew to about 20,000readers each week.

But producing a weekly publication began drawing awaytoo many resources from other important tasks for theassociation. So the newsletter was put on hiatus at the end of2011, to be retooled as a bimonthly publication. Reed saysproduction of the new publication is expected to start laterthis year.

Support from USDAThe Louisiana Association of Cooperatives has been

awarded several competitive grants from USDA RuralDevelopment through its Small Socially DisadvantagedProducer Grant (SSDPG) program. The grants help the

As part of its Recovery and Relief Initiatives, the Louisiana Associationof Cooperatives has been involved in many efforts to aid ruralcommunities following disasters. Here, Dillard University sciencegraduate students and a professor test soil for contaminates after floodwaters subsided.



The Gulf Coast Fisheries Cooperative is one of the originaltwo co-ops that joined the Louisiana Association ofCooperatives. The co-op is located in Hackberry, La., a smalltown of 1,700 people in Cameron Parish, in southwesternLouisiana, about 20 miles from the Gulf of MexicoEarning a living on the water is

a struggle for the members, soSusan Meaux, her husband andother fishers in Hackberry formedthe co-op in the hope that itwould strengthen theirbusinesses and increase theiraccess to resources. Providingimportant help in the formation ofthe co-op was Harvey Reed,founder of the LouisianaAssociation of Cooperatives(LAC).

“Harvey Reed helped us fromthe very beginning,” says Meaux,the co-op’s president. “In a smallcommunity like ours, with such asmall number of fishermen, it’shard to get resources. He helped us be heard and be seen.”The Gulf Coast Fisheries Cooperative has 39 members,

primarily comprised of husband/wife teams who run smallfishing operations. Many of them are teaching their childrenthe family business in the hope that they can earn their livingon the water. Meaux says she married into the business.The life of a small fisherman can be difficult; it is hard to

earn enough income to get by, Meaux says. “You can spend19 hours a day on the water, spinning your wheels fornothing.” Forming a cooperative — and through itsmembership in LAC — has helped Gulf Coast FisheriesCooperative members improve their income, she says.

Beset by disastersIn 2008, the Hackberry area was devastated by Hurricane

Ike, which completely flooded the town, gutting all homesand other buildings. Recovery from Ike has been extremelydifficult, but family and community ties are strong in

Hackberry. Meaux says that the community always steps into help those who are in need.Reed and the LAC were also instrumental in directing

resources and assistance to the Gulf Coast FisheriesCooperative after Hurricane Ike to help members get their

businesses going again.The Gulf oil spill dealt another

blow to co-op members, as it didto other fishermen along theLouisiana Gulf Coast. “Eventhough it’s peak season forseafood, fishers are barelybreaking even this year,” Meauxreports.With technical assistance

from LAC and the Foundation forLouisiana, the co-op applied in2007 for a state grant to build aprocessing facility. The co-opwas awarded a $1.1 million grantin 2008 to replace value-addedseafood storage and processingequipment. Construction and

equipment installation were delayed due to Hurricane Ike,but work on these improvements is currently underway.

An eye toward the futureDespite the hardships that the Meauxs and other co-op

members have experienced, they are persevering and saythey intend to keep their fishing businesses going. Beingpart of a co-op and members of LAC have been two avenuesof support and resources.Once work on the processing facility is complete, it will

help increase members’ earnings, since they will not have topay for processing from outside sources. Co-op membershave benefited from financial resources and training thatthey likely would not have received as individual operators.“If we hadn’t formed a co-op, experiences could have

passed us by,” Meaux says. “By being in a co-op, we canget more done.” �

New processing facility shouldimprove outlook for fishing co-op

Co-op member Eddie LeJuine heads back to portwith his daily catch of black drum fish.


By Stephen Thompson, Assistant [email protected]

or many ruralcommunities,railroad service is alifeline. Commoditysellers and small

manufacturers need access toefficient, economical transport tomove their products to buyers.Trains, in most instances, are by farthe most efficient carriers.

So in 2009, when Union PacificRailroad (UP) gave notice of itsintent to abandon 28 miles of trackto the 4,100-population communityof Forest City, Iowa, it set off ashockwave. Local government,business owners, farmers and co-opleaders got together to find a way tokeep the line open. The result wasthe creation of a locally ownedlimited liability corporation (LLC)that purchased the property and

leased it to a local railway.The rail line survived, and a vital

building block of the prosperity ofthree Iowa counties was preserved.

Sparse rail trafficsparks crisis

From Union Pacific’s perspective,the problem was clear: there justwasn’t enough traffic on the line tojustify keeping it in operation. As thelargest railroad in the United States,with almost 32,000 miles of track,UP has traditionally used big,powerful locomotives and long trainsto achieve economies of scale. Smalltrains and lightly-used rail lines don’tfit its equipment or its businessmodel, and the Forest City line wassimply not economical for UP.

Many shippers along the routeweren’t able to take advantage of theline when it was open, explainsDavid Kingland, president of ForestCity Economic Development and

CEO of the local bank. “Major railcompanies want to work with aminimum 100 cars at a time, andthey don’t service the small shippersor receivers,” he says. “If you have asmall company on the line, say anelevator that has five cars of fertilizercoming in, the big shippers don’twant to deliver to that. Likewise, if asmaller co-op elevator wants to ship20 cars of grain out, they don’t wantto service that either. So, we had thisrail that for years had very littletraffic on it, just almost nothing.”

Even so, the news that therailroad had applied to the U.S.Department of Transportation(DOT) for permission to abandonthe track caused consternation.“Forest City is at the end of theline,” says Beth Bilyeu, the ForestCity Economic Development’sexecutive director. “We knew that ifit closed down, nobody was going tobuild another one.”

F

Cooperative effort in Iowa keeps trains on the tracks

Newlifefor a lifeline


Kingland makes the same point.“Railroads were established in the mid-1800s in this part of the country,” hesays. “You can’t establish a rail line now.For light use like ours in an agriculturalarea, you’d never get the right of way. Ifwe had lost this line, it would have beenlost forever. We’d never have railservice here again.”

Short-line railwayseen as alternative

Bilyeu saw a possible savior in theIowa Northern Railway, a short-line,Class III railroad founded in 1984 totake over part of the Rock IslandRailroad. Iowa Northern now operatesnearly 200 miles of track and connectswith six major railroads, including theUnion Pacific, and other smaller linesas well. It serves two ethanol producers,and its up-to-date terminal in Manly,Iowa, is designed to handle and storeethanol and the commodities used tomake it. And its main line comes close

enough to the Forest City line thatconnecting to it seemed feasible.

Having it buy Union Pacific’sunwanted rail line seemed the idealsolution.

When Bilyeu ran into IowaNorthern’s president, Dan Sabin, at aDOT conference, “I did what any goodlittle development person would do,”she chuckles. “I said to him, ‘why don’tyou buy this rail line?’”

Sabin was interested, but he had aproblem. Because traffic on the line wasso light, he wanted some assurancesthat his company would get enoughbusiness to make taking it over worththe risk. So he offered an alternative. Ifa group of local investors couldpurchase the line, Iowa Northern wouldlease it from them and operate it.

Sabin figured that if a local group,especially shippers, bought the line,they would be committed to using it.The railroad even offered to sweetenthe deal.

“What really made this work,” saysBilyeu, “is that Iowa Northern said ifwe could raise a portion of the moneyas investments, Iowa Northern wouldguarantee that the lease paymentswould cover the debt servicing. Well,now we have a ball game.”

Potential seen in‘orphaned’ rail line

Joshua Sabin, Dan’s son and theadministrative officer of the railroad,says that the company saw potential inthe rail line. “They had good customerswithout good rail service. We had goodservice and connections.” Moreover, therailroad had completed a similar dealseveral years before when it acquired abranch line to Oelwein, Iowa — a townsimilar to Forest City, although, saysSabin, that project was not as large or ascomplicated as the Forest Citypartnership turned out to be.

Short-line railroads can offer betterservice to small customers than the

The Iowa Northern Railway operates 200 miles of track, including 28 miles of rail serving Forest City, Iowa, that otherwise would have beenabandoned in 2009. USDA Rural Development contributed $600,000 through its Rural Economic Development Loan and Grant (REDLG) program tohelp maintain service on the rail line. Photo courtesy Iowa Northern Railway


giant, main-line companies, says Sabin.“The big, Class I railroads typicallyfocus on moving high volumes longdistances. That’s what they’re good atdoing. We can focus on a highlypersonalized plan — on moving thecustomer’s goods to where the marketoffers the best return. Our whole modelis serving the customer, making surethey’re happy and giving them theoptions to make money and ship more.That’s how we’ve become successful.”

Sabin says that his railroad’s goodworking relationship with UnionPacific, which connects with IowaNorthern at Manly, is another plus forhis customers. “We have synergies with

UP,” he says. “We have a partnershipwith them on transporting wind turbinecomponents, with a distribution site atthe terminal. That means it’s easy for usto put together transportation packagesto benefit our clients.”

Complex deal takes timeWhile it seemed to be a match made

in heaven, putting the deal together wasanything but smooth. Finding theinvestors took several months.

“We did a private placement only toqualified investors,” says Bilyeu. Toparticipate, an investor had to have anannual income of at least $250,000, or anet worth of at least $1 million.Participation was offered in $25,000

units, and letters invited potentialparticipants to presentations held jointlyby Forest City Economic Developmentand Iowa Northern.

The project soon raised $1 million inequity, against a total expected cost of$2 million. Two local cooperatives,MaxYield of West Bend, Iowa, andFarmers Cooperative Association ofForest City, were major investors, alongwith Winnebago Industries, whichmanufactures recreational vehicles inForest City. A nearby telephonecooperative, Communications One ofKanawha, Iowa, also invested, as didnine individuals, including farmers andbusiness owners.

It was the rest of the deal that causedheadaches. It required negotiating withtwo major railroads, shepherding twogovernment loan applications tocompletion and untangling thecomplicated web of land deeds andeasements that made up the right-of-way. That took two years. “I neverthought it would take this long,” saysBilyeu. “Not in my wildest dreams.”

Pivotal to the project was makingagreements with two giant railroads.Union Pacific owned the line, andCanadian Pacific Railway (CP) owned20 miles of track the trains would haveto use if they were to connect with IowaNorthern’s main line at Nora Springs.

“When you’re dealing with majorrailroads, they are so large and sobureaucratic that it’s difficult tonegotiate a deal with them,” saysKingland. “This transaction was verysmall and didn’t mean anything tothem. It was a very difficult thing tomaneuver; it probably would have beena lot easier for Union Pacific just toshut down the line. And to make ourrailroad viable, we had to get trackagerights with Canadian Pacific. It tookmany months to get an agreement withCP. So we had those two issues to dealwith.”

“Before the sale could be completed,title to the 28-mile-long right-of-wayhad to be established. “Title work isdifficult,” Kingland says, “because some

of the land involved is railroad property,and some of it is easements. And oftenthere are easements on the railroadright-of-way from utilities andtelephone companies, and so on, andyou have to really check those out.”

USDA, Iowa helpwith financing

Help with the massivedocumentation requirements wasprovided by a local business attorneyand CPA, both of whom agreed to deferbeing paid until the deal was finalized.“Finding the right attorney who didn’trepresent any of the entities we weredealing with was a problem,” admitsBilyeu. The local attorney alsorecommended a securities attorneybased in Minneapolis, Minn.

“Bootstrapping a project like this canbe difficult,” says Bilyeu. “It took aconsiderable amount of time andmoney. Forest City EconomicDevelopment fronted quite a bit ofmoney to keep this going.”

The total estimated price of the dealwas $2 million. Of that amount, $1.5million would go to purchase the right-of-way from Union Pacific, and another$500,000 was earmarked to construct aswitch connecting the track to theCanadian Pacific line. The remaining$1 million came from two, zero-percentinterest government loans: $400,000from the Iowa Department ofTransportation, and $600,000 through aUSDA Rural Development RuralEconomic Development Loan andGrant (REDLG).

The USDA loan was sponsored byForest City’s local telephone co-op,Winnebago Cooperative TelecomAssociation of Lake Mills, Iowa. Theco-op took responsibility for makingand servicing the loan (see sidebar).“That was a nice, brave step by theboard,” Bilyeu says.

“As wonderful as those governmentloans are, we knew that they take time,”says Bilyeu. “So we got a $1 million lineof credit with a local bank as a bridgeloan. We had to meet all the

“There’s a saying in economic developmentthat each project blows up a minimum ofthree times. This one blew up so many times Ilost count,” says Beth Bilyer, Forest CityEconomic Development’s executive director.


underwriting requirements.”It helped that David Kingland was

the president of that local bank(Manufacturers Bank and Trust) andthat Iowa Northern also guaranteed theline of credit. “The bank did the bridgeloan on the faith that we would get thefinancing,” says Kingland. “But westructured it so it could have served aspermanent financing, with a 10-yearamortization, if the loans didn’t comethrough.”

Under the terms of the agreement,Iowa Northern will purchase the railline at the end of 10 years, when thefinancing is paid off. The investors thenwill get their money back, plus 4percent interest.

“There’s a saying in economicdevelopment that each project blows upa minimum of three times,” says Bilyeu.“This one blew up so many times I lostcount.”

But persistence paid off. Theheadaches and frustrations all camegood on Nov. 21, 2011, when IowaGovernor Terry Branstad rode in anIowa Northern locomotive that cut theribbon inaugurating the new NorthCentral Iowa Rail Corridor.

Railroad attracts new businessThe new line has wasted no time

bringing new opportunities to localbusinesses. “Now that we bought the

line and have a short-line operatorthat’s willing to serve the customersalong the track, we’ve had more carsshipped in eight months than we hadshipped in the previous eight years,”says Kingland. “The freight rates aremuch better than what UP could offer.And, of course, the alternative istrucking — rail is so much moreeconomical.”

Harry Bormann, MaxYieldCooperative’s grain team leader, agrees.“We’ve been very impressed with theIowa Northern’s handling of that railline and the service we’ve received,” hesays. The line is already saving the co-op money, he adds, because it enables itto ship grain to the important CedarRapids market by rail, instead of truck.

The short line’s flexibility andwillingness to handle smaller trains is abig asset, Bormann says. “They’re ableto react much quicker; they’re muchmore nimble than the major carriers.It’s enabled us to take a location thathad a good 25-car rail siding and use itwithout having to expand it to 100 cars,like the UP and some of the othermajor railroads require.”

Bormann says that he was “skepticalat first” about the co-op’s investment,but now says: “We feel that the paybackwill be fairly rapid. Iowa Northern hasprovided us with good service and goodrates. We’ve moved almost 100 cars a

month since March on that line.”Kingland sees bigger possibilities for

the future. “It really gives us anopportunity to do some developmentalong the rail line,” he says. “It may beagriculture; it may not. Agribusiness isthe biggest thing around here, ofcourse, but there’s also a lot of windenergy in the area and other kinds ofindustry as well. At this point, it doesn’tlook like a huge deal in terms ofeconomic impact yet, but it sure has thepotential for it. It has the potential tobe a lot bigger.”

Iowa Northern’s Joshua Sabin ishappy with the outcome, too.

“We would have preferred it to movea little quicker,” he says. “But thebusinesses and communities up thereare really excited to see trains servingthe area, seeing the railroad back intown. And we’re happy to be thatpartner. It’s a really neat project, it justmakes sense. It’s fun to watch it growand mature. We’d definitely look atduplicating it in the future.”

Asked if he thinks it’s a model forother short-line railroads to pursue, hesays: “Absolutely!”

Kingland has some advice for othercommunities contemplating a similarproject: “Be very patient, and don’t giveup. We heard the word ‘no’ severaltimes. But we kept working. Andeventually, we got a deal.” �

USDA Rural Development’s REDLG (Rural EconomicDevelopment Loan & Grant) program provides funding torural projects through local utility cooperatives or otherutility organizations.Under the RED loan program, USDA provides zero-

interest loans to local utilities which, in turn, pass the fundson to local businesses for projects that will create and retainemployment in rural areas. The ultimate recipients repay thelending utility directly. The utility is responsible forrepayment to the agency.Under the RED grant program, USDA provides grant funds

to local utilities which use the funding to establish revolvingloan funds. Loans are made from the revolving loan fund forprojects that will create or retain rural jobs. When therevolving loan fund is terminated, the grant is repaid to theagency.For the North Central Iowa Rail Corridor, USDA provided a

$600,000 RED loan package to Winnebago CooperativeTelecom Association of Lake Mills, Iowa, which made andservices the loan to North Central Iowa Rail Corridor, LLC.REDLG lenders are prohibited from becoming investors inthe projects they finance. �

How a REDLG works

rian Henehan recentlyretired from hisposition as seniorextension associate andprogram leader of the

Cooperative Enterprise Program atCornell University. Henehan wasresponsible for developing anddelivering an educational program forsenior management, directors, membersand staff of cooperative businesses. Heconducted applied research oncooperative organizational behavior,marketing and decision making.

Henehan received nationalrecognition in 1995 for his work incooperative education from theNational Committee for CooperativeMonth. He has served as secretary ofthe Northeast Cooperative Council, anonprofit organization serving ruralcooperatives in New York and NewEngland since 1990. During his tenure,the Council developed a newsletter,Cooperative Notes, and designed the“Cooperative Means Business”educational program for co-opemployees. He also expandedprogramming for future leadersthrough Council members hosting aconference and by enhancingeducational programming for managersand directors through collaborationwith the Springfield Bank forCooperatives and, later, with CoBank.

Henehan encouraged CornellUniversity to host boards of directors ofcooperatives to meet on campus tolearn about current research relevant toa variety of farm and agriculturalbusinesses.

His involvement in nationalinitiatives included serving as a member

of the National Rural CooperativeDevelopment Task Force, which helpedto secure funding for rural cooperativedevelopment centers authorized in the1990 Farm Bill. As a founding memberof the eXtension Community ofPractice on cooperatives, he helpedcreate on-line educational resources ona range of topics related to cooperativesat: www.extension.org/cooperatives.

Question: What was most rewarding toyou about devoting your career toworking with cooperatives?Henehan: As an economist, I have beenimpressed with the variety of ways thatcooperatives can generate economicvalue for members that result inimproved conditions for them as well astheir communities.

Q. What was the most frustratingaspect of working with co-ops?

Henehan: Although democratic controlis one of the strengths of thecooperative model, group decision-making can be slow and tedious.Sometimes “hidden agendas” orpersonality conflicts can make the worka bit frustrating. However, I remainimpressed with the high level ofengagement, integrity and commitmentthat cooperative leaders exhibit.

Q. What is lacking in cooperativeeducation today, and how can the needbe met? Are we losing or gainingground at university level?Henehan: I fear that that as federal andstate governments face tough economictimes, the level of budget cuts forpublically funded education andgovernment agencies may cause us tolose some ground. Cooperatives and theagricultural-industry have relied heavilyon the land grant university system and


In The Spotl ightBrian HenehanSenior Extension Associate, Cornell University

B

Brain Henehan (left) discusses co-op issues with Ed Schoen, a director withDairy Farmers of America, and Dan Wolf (center), board chairman ofUpstate-Niagara Cooperative, during a recent Northeast CooperativeCouncil annual meeting.

USDA to produce talentedstudents/employees, to conduct relevantapplied research and to provideoutreach to farmers and industry at avery low cost to end-users. However,the taxpayers have spoken, and all pub-lically funded activities are under the gun.

Most of the recent endowmentsbeing received by universities to replacesome of the lost public funding aregenerated by gifts from wealthyindividuals. Cooperatives can be at adisadvantage in this regard, in that bydesign, they are not created to generatea high level of individual wealth.Although a number of cooperativesthrough foundations or other strategiesare helping to support cooperativeeducation and research.

Q. You wrote a paper: “Questions co-opdirectors should be asking manage-ment.” Which of those questions do youthink are most critical?Henehan: I was co-author of the paperwith Professor Bruce Anderson, mymentor at Cornell, who came up withthe idea for the paper. In our work withboards of directors, we often encour-aged directors to ask the “right” ques-tions in a productive manner. Finally,we decided to write a list of questionsand suggest how to best ask them.

It is difficult to single out one or twoquestions, but two areas come to mind.One is creating value for members,which can be addressed by asking: “Arewe the market of first choice formembers? If not, why not?” We alsoemphasized the importance ofeffectively communicating a well-defined vision, mission and measurableobjectives, as tested by this question:“Do employees and membersunderstand the cooperative’s vision,mission and objectives?”

Q. What lessons can co-op leaders learnfrom the failure of Agway (or otherlarge co-op failures)?Henehan: Professor Anderson and Iwrote a paper, “What Went Wrong atAgway.” Although it was never

published, it was circulated extensivelyonline. Some of the lessons I wouldsuggest are:• Make sure your cooperative’s delivery

system for serving the members oftoday (and tomorrow) is current andrelevant. To achieve this relevance,ongoing investment is needed and youmust understand how your members’operations are changing.

• Avoid having to spread outmanagement talent across a widerange of enterprises that may exceedyour “core competencies.”

• Don’t try to be the “safety net” for allproducers in your territory. Theprimary focus should be on yourcurrent members and members oftomorrow.

• Continue to ask these questions:“What business areas of yourcooperative will be obsolete in threeto five years? Is the cooperative beingaggressive enough in closing ordivesting from losing operations?”

Q. Are co-ops as relevant in today’seconomy as they were 50 years ago?Henehan: I believe the cooperativemodel is more relevant in today’seconomy. In tough economic times,with less public resources, the mutualself-help strategy of cooperativesbecomes very valuable and relevant.

Q. Are there consistent areas where youfeel co-ops are “missing the boat”?Henehan: Today’s cooperatives need todo a better job of explaining the valueof being a co-op member, as well asinvesting in a cooperative. The returnscan be more difficult to measure than inan investor-oriented firm.

Given the high rate of farmers andcooperative employees retiring over thenext 10 years, cooperatives will bechallenged (as will many ag-relatedbusinesses) to attract the needed talentat all levels of the organization: boards,management and staff. Farmercooperatives have traditionally beenprimarily led by white males; movingdiversity ahead at all levels can create a

wider pool of talent to draw from.

Q. What areas do you see as having thegreatest growth potential forcooperatives in the Northeast? Whatrole can the Northeast Co-op Councilor extension play in promoting new orexpanded co-ops?Henehan: Many changes are occurringin today’s food system. New products,innovative distribution channels,changing consumer demand can allpresent a number of opportunities forgroups of producers, manufactures andconsumers to cooperate for theirmutual benefit. The Council helpedstart the regional rural cooperativedevelopment center — the CooperativeDevelopment Institute — which workswith start-up cooperatives.

The Council can help stimulatediscussion and analysis about growthpotential for established cooperativesand encourage Cornell University andother universities to remain engaged inthe world of cooperative education andresearch. Cornell has a rich legacy ofworking with cooperatives dating backmore than 100 years to ProfessorLiberty Hyde Bailey’s work with theCountry Life Commission and ruralcooperative development.

It is important to continue to build aknowledgeable group of Extensioneducators familiar with howcooperatives succeed, as well asunderstanding the limits and the powerof the cooperative model.

Q. What are the most pressing issuesfacing cooperatives for the next fiveyears?Henehan: Generating adequate capitalto fund assets and resources remains apressing issue. Understanding andpracticing sustainability as climatechange becomes more critical is apressing issue for all of us, as isacquiring and retaining talented peopleat all levels — as cooperative directors,managers, staff and members. Coopera-tives have the capacity to successfullyaddress all of these issues. �



Bruce J. Reynolds, Ag EconomistCooperative ProgramsUSDA Rural [email protected]

ottonseed has long beena valuable byproductfor cotton producersand their cooperatives.From 2000-2009,

cottonseed contributed 15 percent toannual farm income derived fromcotton production. That was up from a12 percent average during the 20 yearsfrom 1980 to 1999 (Ash).

Cooperative cottonseed processorshandle about 30 to 35 percent of thecrop of upland cottonseed. Theirinvolvement has a market-wide impact

in sustaining the value of cottonseed,generating benefits that accrue tomembers as well as to all cottonfarmers. This article discusses themechanisms of the cooperative impactand how it has changed in thecottonseed industry.

Gaining market shareFarmers and cooperative cotton gins

began establishing oil mills for crushing(processing) cottonseed after theformation of the Federal Farm Creditsystem in 1933. By the 1950s, coopera-tive oil mills started to graduallyestablish a significant market share, asmeasured in 10-year intervals in Figure1. Reports of cooperative returns tomembers were disseminated to other

farmers and cotton gins (Burgess)(Perdue). This information-disseminating role of cooperatives wasconceived by E. G. Nourse as a“competitive yardstick,” that pressuresnon-cooperative agribusinesses to paycompetitive prices to farmers. Thesefirms would pay higher prices lest a newcooperative oil mill would be formed.

By the 1980s, the role of cooperativeoil mills began to change from thecompetitive yardstick to that ofsustaining the value of cottonseed.This change occurred because many ofthe farmers and cotton gins that in thepast had exclusively sold to oil millsbegan to increasingly sell to theemerging market for unprocessedcottonseed as a dairy feed.

C

in sustaining cottonseed valueCo-op oil mills play vital role

Cottonseed now contributes about 15 percent of annual farm income for cotton growers, thanks in large part to the increased share of the crop thatis processed by cooperatives. Opposite page: tanks of cotton oil outside Lubbock, Texas.


Cottonseed basicsCottonseed is a byproduct from

ginning harvested cotton to producemarketable bales of cotton fiber. About800 pounds of cottonseed are producedfrom a bale of cotton. Prior to the late19th century, about 2 percent of thecottonseed crop was needed for use asplanting seed; the remainder wasregarded as waste. Technologicalbreakthroughs in the 1890s enabledcottonseed to be processed into edibleoil and protein feed; other marketablecotton byproducts include seed hulls(also used for feed) and linters fiber(very short, fine fibers that are used inmaking stationary and other products).After 1890, hundreds of local oil millsoperated to make cottonseed the largestsource of edible oil in the UnitedStates, until losing that distinction tosoybean oil in the 1940s (Perdue).

The members of cooperative oilmills are cotton gins, many of which arealso cooperatives. The cotton ginsdistribute returns from cottonseed totheir farmer-patrons. Earnings ofcooperative oil mills may vary greatlyfrom one year to the next, not only dueto changes in demand for products andfor whole seed as a dairy feed, but alsobecause the annual production ofcottonseed is determined by the size ofthe cotton harvest. The annualcottonseed supply in recent years hasranged from about 5 million to 8million tons. As a byproduct,cottonseed lacks a supply response tomarket demand, so adjustments fallentirely on changes in prices.

Formation ofcooperative oil mills

Efforts were made in the early 20thcentury to establish cooperative oilmills, but the amount of borrowingnecessary to finance such projects was a

barrier. The machinery and equipmentis capital intensive and substantialseasonal loans are required forpurchasing cottonseed during theharvest period. By contrast, soybeanscan be procured throughout the yearfrom grain elevators.

The formation of the Federal FarmCredit System in 1933 was a turningpoint. Federal Farm Credit included anetwork of Banks for Cooperatives thatwere active lenders for oil mill start-upsand worked closely with thesecooperatives in on-going financialplanning for maintaining efficientoperations (see sidebar).

Steady expansion occurred, and by1940 seven cooperative oil mills wereoperating (Burgess), growing in numberto 13 by 1950 (Perdue). After that the

pace of start-ups slowed. By 1960, therewere 14 cooperative oil mills. From1970 to 1980, the number of co-op oilmills had stabilized at 17, as indicated infigure 1. This pattern of entry bycooperatives into a market, whicheventually slows and then levels off,conforms to the model predicted byNourse. As the “yardstick” increasescompetitive pressure to raise farmproduct prices, Nourse believed thatthe incentive for establishing morecooperatives diminishes.

By 1990, the competitive yardstickfrom cooperative processing was nolonger an operative market mechanism.Oil mills, including cooperatives, wereexiting the industry as the demand forcottonseed as a dairy feed expanded.

Industry downsizingIn the 1980s, dairy nutritionists

identified the benefits of using whole,unprocessed cottonseed as a cattle feed.Prior to the 1980s, about 95 percent ofcottonseed production was processed byoil mills. In Figure 2 (showing theyears 1980 to 2011) cottonseed supplyis the annual crop plus beginninginventory, less ending inventory. Forthe 1970-1979 time period, theinventory adjustments were notrecorded; instead, “sales of cotton-seed

to oil mills” wasthe reportedannual supply.

Figure 2shows that thefirst significantincrease in wholecottonseed as acattle feedoccurred in 1979.Prior to that year,the residualamount that wasnot crushed was

used as planting seed. By 1999, lessthan half of the cottonseed crop wascrushed and during the past decade ithas averaged about 40 percent.

The first oil mills to exit the industrywere those that had not stayed currentwith processing equipment and,therefore, had comparatively highoperating costs. Based on performancesurveys of cooperative oil mills, theleast efficient processors had about $15to $20 per ton higher manufacturingcosts than the most efficient mills

during the late 1980s (USDA). By 1990, the number ofcooperative oil mills had dropped to 10, down from 17 in1980.

Figure 1, however, shows that with the exception of 2000,non-cooperatives were exiting the cottonseed crushingindustry at a faster rate than were cooperative mills, asindicated by their share of the crush at each 10-year interval.

Cooperatives sustaining cottonseed valueThe value of cottonseed is now determined by both the

dairy feed and cottonseed product markets. The prices perton of cottonseed sold in these two markets tend to converge,but will typically vary due to changing market conditions.Payment for cottonseed works differently in a cooperativesystem. Instead of offering a spot-market price, co-opmembers receive an advance on delivery and a final payment

at the end of the fiscal year.Depending on market conditions, oil mills often sell some

cottonseed to dairy feed buyers. But, if none of thecottonseed crop were processed, prices would plummet. Onlya major expansion in the U.S. dairy herd could offset thelarge price decline that would occur without the marketdemand for processing cottonseed. Crushing provides acritical market balancing function that sustains the value ofcottonseed. While all active oil mills contribute to sustainingthe value of cottonseed, cooperatives have taken a larger rolein processing the annual crops.

The share of the crush performed by five cooperatives in2010 was about 60 percent (figure 1). However, this is anunderestimate. The total cottonseed crush data includes the

processing of pima cottonseed in California by a non-cooperative oil mill. This type of cottonseed lacks linterfibers and cannot be fed to dairy cows without specialprocessing. As a result, most of it is crushed.

Oil mills that crush upland cottonseed, by contrast, have aprice impact on the dairy feed market. If the volume of thepima crush were removed from the data, the cooperatives’share as indicated in Figure 1 for 2010 would be larger,possibly 65 percent or higher.

Impact of cooperativesThe involvement of cooperatives in the cottonseed

processing industry was an important milestone in improvingreturns to U.S. cotton farmers. Successful entry of a fewcooperatives during the 1930s encouraged more start-upsuntil the early 1980s. Their history is an example of the

Nourse model of how cooperatives provide additionalcompetition to the benefit of farmers.

The development of the dairy feed market for cottonseedbecame another avenue to boost earnings for farmers. Pricesfor cottonseed in the dairy feed market gain support from asuccessful, though smaller, oilseed milling industry.



Fig. 2 — Cottonseed supply and crush, 1970-2011

Cottonseed supply

Crush

Sources: USDA/Economic Research Service, Oil Crops Yearbook 2011

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Tons6,000

5,000

4,000

3,000

2,000

1,000

01950 1960 1970 1980 1990 2000 2010

U.S. crush Cooperative crush (2010 estimated)

45%

53%34%

27%17%

8%

60%*

17 mills 6 mills 5 mills10 mills

17 mills14 mills

13 mills

Fig. 1— Cooperative share of U.S. cottonseed crush,1950 to 2010

Tons

Sources: Perdue, Dunn and USDA


An independent business can gain perspective on itsown economic performance by participating incomparative performance studies with similarbusinesses. Conglomerate firms with multiple food-processing locations and retail chain stores have theirown internal comparative studies of all similar operatingunits.In contrast to conglomerates and chain-stores,

cooperatives often operate at a single or possibly a fewlocations and have no means of comparing operatingresults. Lacking multiple operating locations is notnecessarily a competitive disadvantage, but these co-opsoften lack data for comparative performance analysiswith other independent cooperatives.Cooperative oil mills are an example of a group of

businesses that benefited by having access tocomparative performance reports. During the early yearsof Farm Credit and the Banks for Cooperatives, bothcottonseed and soybean processing cooperativesparticipated in annual performance studies. The FarmerCooperative Service (FCS), as a part of Farm Credit until1953, maintained these annual reports, includingcomparative performance studies for cooperatives inother industries, such as dairy.Starting in 1948, the performance reports were

presented at annual meetings for cooperative cottonseedand soybean processors; a joint annual meeting ofoilseed processors was begun in 1955 (Perdue). Thesemeetings involved participants sharing ideas on whysome had, for example, higher or lower costs thanothers.In addition, the Banks for Cooperatives held periodic

meetings that focused on comparisons of financial datafor oil mills. Discussions about specific areas ofperformance evolved into a broader strategic dialogue asthe managers of the cooperative oil mills developedfamiliarity and trust in one another.The strategic dialogue resulted in some successful

joint projects. In 1962, several of the soybean andcottonseed oil mill cooperatives formed a commonmarketing agency for vegetable oil: Soy Cot Sales Inc.

They worked with Soy Cot to lease port facilities forexporting soybean and cottonseed oil.

Merger creates AGP Inc.By 1983, the structure of the soybean processing

industry had become sufficiently concentrated thatseveral cooperatives decided to merge, forming AGP Inc.The comparative performance reports were a usefulsource of information in planning this large-scale merger.USDA’s Cooperative Programs worked with a consultingfirm on the study to establish AGP.Soy Cot continued to provide marketing services for

the cottonseed processing cooperatives until the late1990s. The largest cooperative cottonseed processor,PYCO Industries Inc. in Lubbock, Texas, extended itsoperations to make a fully refined product that can besold directly to customers for cooking oil. With only a fewother cooperative oil mills in operation, Soy Cot closedand USDA’s comparative performance reports ended in1999.Oilseed processing was one of the earliest sectors

where cooperatives participated in comparativeperformance studies. Many other industry sectors canbenefit from such studies. For example, food retailingcooperatives and farmer-owned bio-energy businessesare participating in comparative performance studiesmanaged by CoopMetrics, a cooperative that specializesin this service.USDA Rural Development’s Cooperative Programs

maintains a series of benchmark financial ratios forcooperatives that are included in its annual co-opstatistical survey. Cooperative accounting firms are alsoa source for starting or participating in a comparativestudy of similar cooperatives.Comparative studies are not just an exercise in fact-

finding and analysis; when presented and discussed atmeetings, they provide a forum for strategic dialogue.On-going dialogue is the most effective way to utilizecomparative data and for cooperatives to develop asense of how to modify this or that “best-practice” to fittheir conditions and member priorities. �

Comparative performance reportshelp co-ops learn from peers


Creatinga roadmapfor foodhubdevelopment

Editor’s note: James Matson and MarthaSullins are consultants with MatsonConsulting, Aiken, S.C. Chris Cook isexecutive director of the VirginiaFoundation for Agriculture, Innovationand Rural Sustainability, Richmond, Va.This article is excerpted from aforthcoming USDA cooperative researchreport: “The Role of Food Hubs In LocalFood Marketing,” available from USDA’sCooperative Programs office by mid-August. To order a hard copy, send an e-mail to: [email protected], or call(202) 720-8381. It can also be downloadedfrom the Internet at www.rurdev.usda.gov. Financial support for this researchwas provided via a CooperativeDevelopment Research Grant from USDARural Development.

By James Matson, Martha Sullins and Chris Cook

Food hubs and growing demandfor local foods are making itpossible for more new farmers toget started and more co-ops tolaunch. Photo courtesy Agricultureand Land-Based TrainingAssociation.


round the country, foodhubs are buildingbridges to help connectproducers of local foodswith a growing base of

consumers seeking home-grown foods.Food hubs are developing scaleefficiency and improving distribution togeographically dispersed consumers,including households, retailers andwholesalers.

USDA’s working definition of a foodhub is: “A business or organization thatactively manages the aggregation,distribution and marketing of source-identified food products, primarily fromlocal and regional producers, tostrengthen their ability to satisfywholesale, retail, and institutionaldemand.”

A recent Good Food Networkwebinar defined a food hub as “small orlarge warehouses that aggregate foodand facilitate sales to wholesalecustomers or directly to consumers.”Although these definitions focus on thephysical movement of goods, USDAdoes note that a food hub can also bedefined by market efficiency functions,in addition to more abstract goals ofbuilding a diversified food culture.

It is worthwhile to consider abroader definition of food hubs, interms of function rather than form, fortwo reasons:

1. Many hubs have evolved from aneducational or social mission to bringconsumers and producers together inthe marketplace. While selling localfoods to consumers is one function,these hubs may also seek to educatetheir buyers about the importance ofretaining food dollars in the localeconomy or keeping workingagricultural lands in production.

2. Second, some very functional hubsexist that do not consist of brick andmortar facilities; rather, they “live”primarily in a virtual context and arethus able to transmit information

quickly among buyers and sellers oflocal and regional food products; this isparticularly pertinent in situationswhere lack of information is the keybarrier to greater market efficiency.

USDA’s Regional Food HubResource Guide (available online at:www.ams.usda.gov/foodhubs) provides aclear, practical example of this bysaying: “Food hubs are examples ofinnovative, value chain-based businessmodels that strive to achieve triplebottom-line (economic, social, andenvironmental) impacts within theircommunities. They do this by offeringa suite of services to producers, buyersand the wider community.”

Cooperative-structuredfood hubs

Many different ownership structuresare used to operate food hubs, includingthose formed as cooperatives, which can

be led by producers, retailers,consumers or a combination thereof.There are several advantages to thecooperative business structure thatmake it a good fit for an emerging foodhub. The cooperative structure is awell-known, established communityentity with strong roots in agriculturethat is owned and democratically

controlled by its members. Themembership fees provide working andinvestment capital for the food hub,with any surplus revenue returned tomembers.

A co-op is managed by a board ofdirectors elected by the members,which — in the case of a food hub —may be made up entirely of producerswho will manage the organization tomeet their members’ needs (providing afair return on products sold, arrangingtransportation of goods to endconsumers, promoting a certainproduction practice, or serving a certaingeographic area).

Many cooperatives — such as theOklahoma Food Cooperative (featuredin the May-June 2012 issue), the HighPlains Food Cooperative in Coloradoand the Weaver Street Market inCarrboro, N.C. — have evolved andcurrently operate as multi-stakeholder

cooperatives. This business structureincludes consumers, workers andproducers in the same business entity.An example of a more standard produceownership structure is La Montanita,based in Albuquerque, N.M. Each ofthese examples has achieved differentscales of impact on their respective localand regional food systems.

A


Other cooperatives with similaroperations to the Oklahoma FoodCooperative and High Plains FoodCooperative model include the IowaFood Cooperative (Iowa), CrosstimbersFood Cooperative (Texas),Idaho’s Bounty Cooperative,Massachusetts Local FoodCo-op, Nebraska FoodCooperative, Ottawa ValleyFood Co-op (Ontario,Canada), West MichiganCooperative and the WichitaFood Co-op (Kansas).

Weaver Street Marketbegan operations in 1988. Inaddition to its own bakeryand fresh food kitchen,Weaver Street Market offersa wide variety of natural andlocally grown products. Milkcomes from Maple ViewFarms, two miles up the road.Eggs are delivered fresh dailyfrom Latta’s Egg Ranch inHillsborough, N.C. Flourcomes from Lindley Mills inGraham, N.C. About a dozenlocal area farmers, who selltheir produce at the CarrboroFarmer’s Market, also sell toWeaver Street Market.Keeping the marketcommunity owned andoperated has proven to be avery popular idea. The 2011annual report indicates that thecooperative made a profit of about$250,000 and nearly half of its $26million in sales was sourced from localproducts with nearly 16,000 householdsas member/ owners.

Founded in 1976, La Montanitacurrently stocks and sells more than1,100 products from nearly 700 localgrowers in New Mexico and Colorado.Its 2008 sales were $2.8 million. LaMontanita is a cooperative that suppliesfour retail stores in New Mexico,distributing both local and nationalbrands through a co-op distributioncenter (the CDC).

The CDC, in turn, also sells to other

specialty retailers and restaurants. LaMontanita started a distribution armthrough the CDC in 2007 to extend theoperation and create greater marketaccess for the region’s producers.

Products are now sourced from within300 miles of Albuquerque (includingsouthern Colorado) and distributedacross New Mexico.

Roadmap to hub developmentThe development and evolution of

food hubs is usually highly localized anddepends on several factors. Even so,there are some lessons that can beapplied from reviewing examples fromacross the country. Some factors appearto contribute to success more thanothers, including:

1. Having a strategic plan with cleargoals and a vision for developing thefood system helps ensure that the hub’s

original intents are maintained (forexample: fair prices for farmers orpromoting sustainable agriculturalproduction methods).

2. Getting all stakeholders engagedearly on in the process anddefining their interests andareas of expertise. Thisinvolves:

a. Making sure there isa management or oversightteam that is inclusive andthat hears farmers’ concerns,as well as those of otherbusinesses and investors.

b. Ensuring that theteam has individuals withskills and proven experiencein financial management, theregulatory environment,marketing and packaging,inventory management andquality control, and that canengage meaningfully withfarmer/business owners.

c. Making sure that allparties are well-matched insize and scale, and operatewith similar goals and values.

d. Producer andmembers with previousexperience growing andsupplying food for localmarkets.

This limits some riskthat may arise in fulfilling

contracts with vendors and buyers. Thisprocess will also dramatically increasethe potential for success.

3. Understanding the location ofdifferent direct markets and how toaccess them.

a. If the market outlet isgeographically distant from theproduction unit, how willtransportation occur and how canproducts be priced to cover those costs?

b. Is backhauling feasible to generaterevenue on an otherwise empty returnload?

c. If the market is one with acustomer base that is less familiar withpurchasing and preparing fresh foods

USDA photo by Lance Cheung


(some urban or at-risk populations,schools without “scratch-cooking”experience), education may be vital tothe hub’s success.

4. An educational program may haveto be an integral part of the hubdevelopment. This may includepartnering with an outreach entity, suchas a university extension service or non-profit, that can deliver informationabout what the hub provides and whenthe product can be delivered to theconsumer. Producers may need trainingon post-farm business practices, such asquality control, packaging and delivery.Likewise, there may be a need fortraining in coordinated practices, suchas common production practices orseason-extension techniques.

5. The hub may have to reduce riskon the buyers’ side to access markets.Many end users require that GAP (goodagricultural practices) or HACCP(hazard analysis and critical controlpoints) plans be implemented byproducers or processors in order toreceive product. This may necessitateadditional costs in producer/businessowner training and the development ofspecific protocols and quality assuranceto meet the end user’s requirements.Another type of producer support thatmay be necessary is securing affordableproduct liability insurance for individualvendors, or umbrella insurancecoverage for vendors that can bepurchased through the hub, since this iscritical for hubs accessing institutionalmarkets, such as schools or hotels. Suchrequirements for accessing a directmarket may also cause some businessowners to withdraw from the supplypool.

6. Capital is required for supplychain infrastructure, such as vehicles,storage facilities, and retail locations.Capital availability can be a significantbarrier to starting local aggregation anddistribution businesses. A certain leveland type of infrastructure is necessaryto operate a food hub, including:

a. Technical infrastructure, such asbilling protocols, Internet management

systems and payment processes.b. Physical infrastructure may also be

essential (such as product warehousingor processing capability) in order toensure increased product quality andpackaging control across suppliers.

c. Hard work and enterprise canassist with hub development, but a lackof critical infrastructures can greatlyincrease the chance of failure.

7. Given the many uses for foodhubs, no one type of business structureis clearly the best fit for a food hub.Rather, the business structure must beone that helps the stakeholders meettheir goals for financial, marketing andproduction planning and growth. Itappears that a certain initial flexibility iskey, and the management team shouldidentify the point at which a particularbusiness structure constrains furtherinvestment. An alternative structure(such as incorporating one businessfunction or outsourcing distribution)may sometimes be the only way the hubcan maintain its market share or expandinto new markets.

8. Identify all sources of technicaland financial support, including thoseconsidered less conventional.

a. There are emerging areas ofpublic and private financial support forfood hubs, including micro-lenders,private investors, economicdevelopment entities and nonprofitcommunity-based organizations.

b. There are also businesses withtechnical expertise in processing,distribution or transportation withwhich a hub could contract to moreefficiently execute some of the morecomplex or cost-prohibitive functions ofdirect marketing through a hub. Atissue here is how comfortable thestakeholders are with alternative lendersor certain subcontractors. This sort of“comfort level” assessment is animportant component in developing astrategic business plan for a food hub.

c. Donated or shared equipment andfacilities can substantially reduce thecapital required to start and operate thefood hub.

d. It is essential that members have“skin in the game.” That is to say, thatall owners need to have a capital stakein the success of the venture.

9. Managing information efficientlyis critical to the success of a food hub.

a. Timely and accurate informationflow between producers and consumers,or between producers and wholesalers,helps to minimize or avoid risks, such asprice or marketing risk, production riskand some legal risks.

b. Information management —supported by dedicated staff andtechnology — impacts the hub’s abilityto manage orders accurately, to monitorproduct quality and to convey productattributes to consumers and othervendors.

c. Information is needed to remain incompliance with certain federal, stateand local food safety regulations, and tomaintain transparent workingrelationships across multiple partners ina value chain.

Value derives frombroader benefits

The success or failure of a food hubshould not be measured solely in termsof its aggregating function or in termsof total volume of product moved. Itshould also be valued in terms of theplaces its products go and the peoplewho benefit from it.

With growing demand for local orregional food products, manyconventional marketing channels are ill-equipped to supply local food whereand how people wish to purchase it.Food hubs can address this in a mannerthat is economically viable and stillserve its social and other communityfunctions.

Food hubs help producers andconsumers connect in a manner thatretains the valuable information as towhere a food item was produced andhow it was grown or processed. Thisserves the members and has thepossibility of creating a successfulalternative supply chain for localagricultural products. �


Editor’s note: This article combines excerptsfrom an article by David J. Thompson thatappeared in the May/June CooperativeBusiness Journal, and an article by DanaKelroy that appeared in the May 11 issue ofCooperative Network’s Contact newsletter.

eaders of 150 U.S.cooperatives gatheredat the White House onMay 4 for a nationaldialogue about the role

of cooperatives in communitydevelopment, job creation andeconomic opportunity. Also discussedwere the kind of policy and legalinitiatives needed to help cooperativesplay an even greater role in benefitting

their members and strengthening theAmerican economy.

The National Cooperative BusinessAssociation (NCBA) assembled the co-op delegation to “include the widestpossible swath of cooperators, as well asadvocates for cooperatives,” says LizBailey, interim president of NCBA.“Our goal was to have the event fosternew conversations and collaborationsamong the cooperative community,”says Bailey. “I think we succeeded inmeeting both of those goals.”

The event began with a briefing bysenior Obama administration officials,followed by breakout sessions wherecooperative leaders met with membersof the Administration to discuss small

business development, job creation,innovative agriculture programs andfinancial cooperatives.

Among a number of White Houseofficials who addressed the meetingwere Kyle Lierman of the Office ofPublic Engagement, and Jack Lew,President Obama’s White House chiefof staff. Lew credited co-ops for“building our American economy andcreating jobs,” and praised credit unionsfor being a fundamental source ofbanking services to many Americans.Judith Canales, acting deputy undersecretary for USDA Rural Develop-ment, also stressed the vital role co-opsplay and how USDA works with them.

Participants informed White House

Co-op leaders confer with White House officials

L


officials about the importance of severalpolicy initiatives, including: the newFarm Bill; legislation that would allowcredit unions to lend to smallbusinesses; and the need to fundprograms that support broadbanddeployment in rural areas. They alsodiscussed some of the regulatorybarriers that prevent cooperativebusinesses from making an even largercontribution to the nation’s economichealth and vitality.

In the auditorium for the briefingwas Chuck Snyder, CEO of NCB(National Cooperative Bank), whonoted that the nation’s 29,000cooperatives serve one in threeAmericans, do $652 billion in annual

sales and support over 2 million jobs.“Cooperatives grow local economies,promote community development, andoffer services and solutions because oftheir group buying power,” added BillOemichen, Cooperative Networkpresident and CEO.

Ralph Paige, executive director ofthe Southern Federation ofCooperatives, called attention to theimpact of cuts in social programbudgets that affect cooperatives servingthe poor, especially in the South.

When cooperative leaders broke intosmall groups, they met with officialsfrom USDA, the Small BusinessAdministration, the U.S. Department ofthe Treasury and the President’s

Domestic Policy Council to furtherdiscuss federal regulations affectingcooperatives. The back and forthbetween the White House presentersand the co-op participants was rapid-fire. The three-hour dialogue coveredevery co-op segment, with discussion ofissues about agricultural cooperatives,consumer cooperatives, credit unions,health and housing cooperatives, mutualinsurance, rural electric cooperativesand worker cooperatives.

International Co-operative AlliancePresident Dame Pauline Green fromGreat Britain said she was impressed byhow enthusiastically American cooper-ators rose to the occasion to tell theirstory at the White House meeting. �

Opposite page: some of the 150 co-opleaders invited to meet with White Houseofficials file up the steps of theEisenhower Executive Office Building,home to the majority of White House staffoffices. Clockwise from left: JudithCanales, acting deputy under secretaryfor USDA Rural Development, addressesthe gathering; breakout sessions wereheld to discuss specific co-op issues;National Association of HousingCooperatives President Vernon Oakesasks a question. Photos courtesy NationalCooperative Business Association


Julie A. Hogeland, Ag EconomistCooperative ProgramsUSDA Rural Development

ow far cooperativeshave come in recentdecades was evidentduring a meetingorganized by the

Council on Food, Agricultural and

Resource Economics (C-FARE) lastAugust in Washington D.C. C-FARE’smission includes helping food,agricultural and resource economistsidentify underdeveloped research topics.To that end, Phil Kenkel, Bill FitzwaterCooperative Chair at Oklahoma StateUniversity, served as project managerfor a multi-dimensional C-FAREproject: “Agricultural Cooperatives:

Economics, Opportunities andStructure in a New Era of Food, Fiberand Fuel.”

A panel of 15 cooperative expertsconvened by Kenkel kicked off the C-FARE project by identifying currentchallenges. The meeting was sponsoredprimarily by the CHS Foundation.Similar panels have been organizedevery decade since the 1970s.

Momentum continued through sixarticles in the on-line magazine Choiceswhich addressed key aspects of thecooperative business model, including:external challenges; strategy; finance;governance and the cooperative lifecycle; new cooperative development;and communicating the value package(the articles are online at:www.choicesmagazine.org). Next,eXtension hosted a national webinar onCommunicating the Cooperative ValuePackage. In November, the 2011Farmers Cooperative Conference andthe NCERA-210 Cooperative ResearchCommittee provided a venue for re-visiting the issues and themes firstraised by cooperative experts in August.

This article draws on expert paneldiscussion from the initial C-FAREmeeting, plus Choices articles, tocontrast the goals and aspirations ofcontemporary co-ops with their 20thcentury counterparts.

Where we’ve beenIt is difficult to realize how far

cooperatives have come withoutknowing where they have been. Formost of the 20th century, manycooperatives were preoccupied withalleviating the impact of agriculturalindustrialization on producer-members.During this turbulent and painful era,producers lost competition and marketaccess as corporate-led integration andindustrialization transformed themarketing and production of keyagricultural commodities: beef,processing vegetables, broilers, pork,dairy and grains. These externalchanges prompted cooperatives tobuffer and strengthen producers againststructural transformation by increasingcompetition or modernizing production

H

C-FARE meeting shows progressmade in co-op goals, values

Farmer cooperatives have long played a key role in helping their members process, market andtransport their crops, whether Florida potatoes in the 1930s (top and facing page) or Californiaraisins in the 1990s (bottom). Managerial choices are more crucial than ever for firms navigatingtoday’s volatile markets.


practices.Toward the end of the century,

integrated production and marketing —leading to the development of themodern supply chain — directedcooperative attention inward. Tocompete within highly capitalized andindustrialized food chains, cooperativesneeded more capital. This realizationprompted cooperatives to clarify and

strengthen their property rights to bemore competitive with other investmentchoices available to producers.

Today’s cooperative environment isincreasingly complex compared with thepast. Critical issues — such as marketinstability, managerial succession andcooperative profitability — areintertwined. Surveyed cooperativesidentified abrupt and extreme globalmarket fluctuations as the most criticalissue facing them.

“When the pace of change has reallyaccelerated, strategy becomes an on-going process,” said Greg McKee,director of the Quentin Burdick Centerfor Cooperatives at North Dakota StateUniversity.

Managerial choice can be crucial forfirms navigating volatile markets.Studies suggest that leaders experiencedwith dynamic and uncertainenvironments can prepare a firm forfuture economic instability better thancandidates from more stable,predictable settings. Turbulent anduncertain economic environmentsconfront cooperatives with much that is

beyond their control.Outcomes will be at least partially in

the control of other firms, industries,interest groups or nations. Managersskilled in managing such interdepend-encies and constraints heighten thelikelihood of outcomes favorable tocooperatives.

Cooperatives in the 20th centurytended to look within themselves to

define and resolve problems. By the endof the century, cooperatives beganchallenging themselves to “think out ofthe box.” Indeed, the C-FAREconference revealed that cooperativeshave become more receptive tooutside influences and informationexchange.

“Best practices are outsidecooperatives as much as inside them,”observed Barry Kriebel, president of theSun-Maid raisin growers’ co-op.Evidence that thinking “out of the box”has become an integral part ofcooperative culture is demonstrated bythe entrepreneurial nature of manycooperatives, said Dave Barton ofKansas State University.

Measuring competitiveperformance

A long-established aspect ofcooperative culture has been the stresson cooperative performance relative tocompetitors. Cooperatives frequentlyself-identify as “competitive yardsticks,”committed to matching or exceedingthe competition. Kriebel noted that the

tendency is to measure “cooperative vs.cooperatives,” an approach which doesnot capture cooperatives’ performancewithin their own industry.

A more accurate reading ofcooperative strength would result fromcomparing how well cooperatives haveperformed relative to non-cooperativeswithin the same industry. A related issueis how companies manage resources touphold their value proposition. “Docooperatives approach strategydifferently than non-cooperatives?”McKee asked.

In the 20th century, cooperativeswere often ambivalent about profitsattained by more than a favorable turnof a commodity price cycle. Challengesto cooperative integrity and survivaloccurred when members perceived thatcooperatives were retaining too muchprofit.

Further, although members are quickto seek out the benefits of thecooperative business model, they can bereluctant to assume the responsibilitiesof ownership and control. The failureof prominent cooperatives within thepast two decades has reinforced themessage that debt can no longersubstitute for a sound financial plan.Cooperatives in volatile industries needrobust balance sheets becausecommodity price increases demand arapid increase in cooperative equity.

Operating with thin margins is morethe rule than the exception in the co-opcommunity. Perhaps for that reason, C-FARE participants indicatedcooperatives should maximize the profitdistributed, with residual cash, topatron owners. This is a fine line.Kriebel noted that paying “excess”profits to members could causecooperatives to lose ground if, at thesame time, they fail to matchcompetitors’ capital improvements inplant and equipment.

Alternatively, cooperatives may be sowell-positioned in the marketplace thatcommodity-hungry competitors mayuse outside equity in an attempt todemutualize them. Greater opennesstoward non-cooperatives does noteliminate the need for cooperatives to


protect their marketing networks andinfrastructures.

How will cooperatives earn moreprofits? Nearly a third of the C-FAREpanel ranked consumer preferences asextremely important. The 20th centuryview that consumers or retailers wereadversaries intent on driving down foodprices or producer incomes was nolonger evident. Contemporarycooperatives are clearly market driven.

Respondingto change

Another priority identified by C-FARE participants was keeping pacewith the potentially profound changesat the member level predicted by thecooperative life cycle. During the initialstage of the business life cycle,producers have a common interest inresolving a marketing problem, whichprovides economic justification forforming a cooperative.

In the second stage, the problem isconfronted through a uniqueorganizational design. As growthoccurs, the beginning of differences, orheterogeneity, among producer-members appears (stage 3).Heterogeneity is revealed by markeddiscrepancies in member equitycontributions relative to cooperativeuse, or differences in memberproduction costs fostering differentexpectations for prices. That is, someproducer-members get more benefit outof the cooperative than others.

To Carl Casale, CEO of CHS Inc.,an effective response to heterogeneitybegins with the local solutions providedby employees — from CHS membercooperatives or company-owned retailfacilities — who personally know theneeds and goals of producer-owners.Barton concurred: “The number onesuccess factor for cooperatives is tocompete on human resources.”

Heterogeneity is often associatedwith the question raised by Rod Kelsay,executive director, Mid-AmericaCooperative Council: “Does the valuethat the founding fathers saw in thecooperative still exist?”

Select Sires, a livestock genetics/

breeding cooperative, starts by asking:“What is the market the co-op is tryingto fit?” Heterogeneity often suggests aneed to redesign the cooperative, evento the extent of cooperative conversion.A similar identity crisis may occur whenboards have been led by the same leaderfor a long time.

Yet, there are many underlyingreasons for collective marketing. Con-temporary values — such as a commit-ment to sustainable practices or being alow-cost provider — could provide anew rationale for cooperation and anantidote to member heterogeneity.

Both Kriebel and Jeff Stroburg,president and CEO of Iowa’s WestCentral Cooperative, noted thatcooperatives (other than new-generation co-ops) do not buy and selltheir equity. Consequently, producerslack an exit strategy, such as a pool thatmarkets co-op stock without necessarilyinvolving the co-op; this observationwarrants further institutional design.

The 20th century cooperative legacyof designing and ordering markets bycreating rules of exchange has given co-ops a unique ability to intervene insituations of uncertainty where the“rules of the game” aren’t clear. Socialand economic justice finds newexpression in cooperatives respondingto natural disasters, or the recentdissolution of some federal or statemarketing orders.

In his position as program directorof the Federation of SouthernCooperatives, C-FARE panelist (andlong-time cooperative developer) JohnZippert finds that disasters push peopleto want something different than theyhad. His team provides technicalexpertise and helps bring potentialmembers together by challenging thestatus quo.

New cooperatives, such as the SouthPlaquemines United Fisheries Co-op(also see page 4) grew out of theresponse to Hurricane Katrina. Severallocal fishery cooperatives areconsidering a regional marketingsystem that will facilitate directshipment of seafood to distantconsumers.

Managerial succession issuesManagerial succession was another

critical issue broached by C-FAREparticipants. Seemingly overnight, co-ops large and small can lose asignificant number of managers orwork-teams through retirements orattrition. Fortunately, evidence suggestsprogress is being made to develop thenext generation of producers,cooperative leaders, board members andlong-term committed employees.

Ensuring that young farmers andranchers understand the value of beinga cooperative customer and owner is thefoundation for a smooth transition tonew generations of leaders, includingmanagement, said Casale of CHS.Robust young producer programs,supplemented by scholarships andinternships, will encourage youngpeople to pursue careers withcooperatives. “Most aggressive co-opsgo after intern programs and do itwell,” Barton observed.

Indeed, West Central’s Stroburgnoted that the cooperative has a 20-person internship program that includesexposure to the new field ofbiogenetics.

C-FARE panelists concurred thatcooperative communications have tounderscore the value membershipbrings to the individual. Yet, only abouthalf of the C-FARE survey respondentsindicate that their cooperative tailorsthe communication mix to accom-modate member heterogeneity. Forexample, young farmer/youngcooperator programs often provideorganizational background informationless likely to be useful to long-termmembers.

Methods used to educate externalstakeholders on the value of thecooperative business model andmember concerns have fallen short ofwhat is needed, even to the point ofbeing “pretty inadequate at present.”Panelist Chuck Conner, CEO of theNational Council of FarmerCooperatives, said: “Anticipatingmember and constituent needs andresponding appropriately is one of thebiggest challenges facing leaders.” �


Co-ops & CommunityCoBank program will help co-opsbuild stronger communities

Editor’s note: This article was provided byCoBank. The “Co-ops & Community” pagespotlights co-op efforts that fulfill themission of “commitment to community.”Regardless of whether these efforts make aco-op’s home town a better place to live andwork, or are helping people on the other sideof the world, co-ops are reaching out tomake a difference. If you know of a co-op, aco-op member or co-op employee whoseefforts deserve to be recognized on this page,please contact: [email protected] articles from co-op publications arewelcome.

oBank in Juneannounced the creationof a $3 millioncharitable funddesigned to benefit

cooperatives and charitable groups theysupport throughout rural America.

Under the bank’s new “SharingSuccess” program, CoBank will matchcontributions by its cooperativecustomers to nonprofit organizations oftheir choice. Contributions madeduring the remainder of 2012 will bematched on a dollar-for-dollar basis,from a minimum of $1,000 up to amaximum of $5,000.

“Shared success is a hallmark of thecooperative business model, so we’reabsolutely delighted to be announcingthis new program,” says Robert B.Engel, president and chief executiveofficer of CoBank, a cooperative bankserving agribusinesses, rural infra-structure providers and Farm Creditassociations throughout the UnitedStates.

“Throughout rural America,cooperatives of all sizes are working notonly to provide value to their members,

but to improve the quality of life intheir local communities,” he continues.“We hope all our cooperative customerswill take advantage of this new fund,and use it to leverage the support theyprovide to worthy causes in the areasthey serve.”

Effort in spirit of 2012Year of Cooperatives

The launch of CoBank’s SharingSuccess program coincides with theUnited Nations’ “International Year ofCooperatives” in 2012. Throughout theyear, the United Nations andcooperative organizations are usingprograms and special events to celebratethe many contributions of co-ops andthe strength of the cooperative model.

“I commend CoBank for itsgenerous decision to establish thisfund,” says Wilson Beebe, chairman ofthe National Cooperative BusinessAssociation. “I can think of no betterway for a cooperative to take part in theInternational Year of Cooperatives thanby participating in the Sharing Successinitiative.”

The “Sharing Success” grantprogram is designed to highlight therole that cooperatives play in the U.S.,notes Arthur Hodges, senior vicepresident of corporate communications

at CoBank. Agribusiness cooperativesare a critical part of the nation’s overallagricultural value chain, and electriccooperatives deliver affordable, reliablepower to millions of homes andbusinesses around the country.

Member-owned water andcommunications service providers arealso vital to the quality of life in ruralcommunities. “These businesses, all ofwhich are served by CoBank, togetherform the backbone of America’s ruraleconomy,” Hodges says.

Application windowopens Aug. 1

All of CoBank’s cooperativecustomers are eligible to participate inthe program, and each customer iseligible for a single grant. Theorganizations that receive the fundsmust have a 501(C)(3) designation. Thismeans that the types of charities orgroups that can receive funding varyfrom a local food bank to an importantuniversity program. It will be up toeach customer to decide who they wantto partner with in their community.

CoBank will begin formallyaccepting applications for funding fromcooperatives on Aug. 1, 2012. Theprogram will run through Dec. 31,2012, or when the $3 million matchingfund is exhausted, whichever comesfirst. Cooperative customers interestedin participating should contact theirCoBank relationship manager for anapplication and detailed programrequirements.

Additional information about theSharing Success program is available at:www.cobank.com/sharingsuccess. �

C

By Anne MayberryRural Utilities ProgramsUSDA Rural Development

bout 50 million peoplelive in rural com-munities. Reliableaccess to water isnecessary for these

communities to grow and prosper.Most rural consumers get their waterfrom one of the thousands ofcommunity water systems nationwide,the majority of which provide servicefor communities with populations ofless than 10,000.

Challenges facing these smallsystems include finding sufficientrevenue to ensure that they have thecapacity to meet community needs andrespond to growth while still keepingrates affordable. Other challengesinclude complying with environmentalrequirements and finding and retainingtechnical staff to operate and maintainthe systems.

The absence of clean water is notjust an obstacle to growth and eco-nomic development, but a threat to thevery survival of rural communities.Despite — or possibly because of —these challenges, rural water systemscan play a key role in economic growthof their communities.

Co-op capitalizeson opportunities

The Breezy Hill Water and SewerCo. in Graniteville, S.C., is amongthose small rural water systems thathave succeeded in delivering clean,affordable water to their customers,while simultaneously looking ahead tofuture needs. Charles Hilton, thegeneral manager, came to Breezy Hill

in 1988. Breezy Hill, organized as acooperative, at that time served 2,500residential customers, only 300 ofwhom had sewer service. This low-income area of the system had manyseptic tank issues, so with a grant fromthe U. S. Department of Housing andUrban Development (HUD), a sewer

system was installed, thereby elimin-ating the health concerns of the area.

The town has several smallcommercial establishments and atechnical college. Hilton noted that thesystem needed to increase revenue andwas under a Health DepartmentConsent Order to improve waterquality. Hilton soon realized thatimproved cash flow, as well as

expanding the co-op’s commercial base,would be needed to make the utilityfinancially healthy once again.

Two years later, when a cardealership requested water service,Hilton saw an investment opportunity.Breezy Hill and the car dealership splitthe cost of a new water main that would

be large enough to meet futuredevelopment needs. The return on thatinvestment was commercial growth thatcontinues today. “They just built 150new apartments on that road, on a linethat was installed with a joint venture; itcontinues to pay off 20 years later,” saysHilton. That set a pattern in which theco-op continued to look at innovativeways to that ensure infrastructure was


Uti l i ty Co-op Connect ion

A

Carolina water co-op plays key rolein driving economic development

Construction work progresses on the Breezy Hill Water plant and transmission line,which will have the capacity to handle 5 million gallons of water per day. The project hasreceived more than $7 million in loans and nearly $2 million in grants in Recovery Actfunding from the Rural Utilities Programs of USDA Rural Development. The project willhelp the community continue to attract new business and create jobs.

in place to meet the needs of thecommunity.

Planning for the future was one ofHilton’s priorities. During the early1990s, he told the cooperative boardthe co-op needed to construct a systemthat would use more surface water as asource. Breezy Hill’s groundwatersystem had limited potential. Aiken

County, where Breezy Hill is located, isan area with “a thin water table,”meaning that the aquifer could notsupply the necessary amount of water tomake the area viable for futureinvestment from developers andindustrial clients.

“Drilling wells here and there forwater for existing growth patterns ofindividual homes within the systemwasn’t a problem at the time, but long-

term prospects of a permanent watersource had to be found if we were tomaintain our rate of growth in thefuture,” Hilton says.

Textile industrydecline triggers need

Up until the 1990s, the community’seconomic development had been tied to

the growth of the textile industry. In the1800s, the textile companies had boughthuge tracts of land to protect theirwater shed, which powered plantgeneration and was a key part of theirmanufacturing process.

“In the early ‘90s, a textile companycame to us wanting to buy potablewater. So we borrowed money from theU.S. Department of Agriculture(USDA) and began long-term construc-

tion of a system to move water toindustrial clients,” Hilton says.

Times changed, and the textileindustry closed plants. Because thetextile manufacturers no longer neededthe land, they sold it to developers. In1993, they sold property to AikenCounty, which wanted land to constructan industrial park. Breezy Hill had to

quickly decide whether to provide waterand wastewater facilities to the newpark, or relinquish that portion of itsservice territory. The co-op agreed toprovide the facilities and then learnedthat the first company to relocate wouldneed to have water and waste services inplace within one year.

“We didn’t have a water line withintwo miles of that park,” Hilton recalls.“The line we did have was far too small



to handle the required capacity — 2,000gallons per minute fire flow. There wasno sewer service in the area. Wemanaged to install two wells, tie theminto our system and build tanks to meetflow requirements.” Breezy Hill againlooked to USDA for financing to meetfuture infrastructure needs.

Co-op’s investment pays offBreezy Hill’s investment paid off. In

1995, a tire manufacturer built a largefacility on 500 acres, bringing 600 jobsto the area. “At this point, we hadcreated about 900 new jobs in total. Wecontinued to plan for the future,”Hilton says.

By 2000, Breezy Hill was serving4,500 taps and was anticipatingcontinued commercial growth. “We haddiscussed the need to look at additionalwater sources in the early ‘90s. Duringthe next several years we considered allpossibilities to increase our watersupply. We even looked at using the oldtextile water plants to meet growingwater and wastewater needs. Wedeveloped plans to build that surfacewater plant, but we were simply shortof funds to ‘cash flow’ the size ofproject that needed to be built.”

It was about this time that theAmerican Recovery and ReinvestmentAct of 2009 (Recovery Act) became law.Breezy Hill applied for, and wasawarded, a $2 million grant and $7million loan to construct a new waterplant and build a major high-servicedistribution line to serve as thebackbone of the water distributionsystem.

The project also provides backupcontingencies for any part of the servicearea. “One of the first things that anypotential industrial client would look atis the number of options we had to feeda site with water if a section of thesystem failed for any reason,” Hiltonexplains. “Most of these industriesrequire dual feed; through carefuldesign of the system, we have been ableto supply as many as four feeds toensure the industry’s ability to stay upand running should a portion of the

water system fail.”This project would also provide

capacity to meet future communitygrowth. The system is almost complete.“As soon as the new plant comes on line— as early as January 2013 — we willbe totally self sufficient in long-termwater supply needs,” Hilton says.

Because most industries use lesswater than they did 20 years ago,Hilton notes that the new Breezy Hillplant should meet the community’sneeds for at least 25 years. “Had it notbeen for USDA and other federalagencies, we could not have added thecapacity to support the economicgrowth we’ve seen in Aiken County.”The county has benefitted from theexpanding industrial base, which hasprovided new jobs and offset risingproperty taxes needed to fundcommunity needs.

Hilton credits a progressivecooperative board for looking to long-term needs and qualified staff to buildand maintain the utility. “Our board isfrom the community and interested inthe community. Their motivation toserve on our board is to improve thequality of life for Aiken Countyresidents; they do not have politicalmotivations or self-interests. I amblessed to work for a board that putsthe community first — period”

The county had requested assistancefrom urban areas in 1968 in supplyingwater, but were turned down, Hiltonnotes. The cooperative was formed as aresult, and USDA funding helped buildthe system.

Co-op opposes consolidation“Breezy Hill is financially sound,”

Hilton says. “It meets EPA (U.S.Environmental Protection Agency)requirements. We do a good job. Manymunicipal systems now want toconsolidate or take over these ruraldistricts because they are healthy. But alot of citizens — who remember thatwe had to build our own water andwastewater facilities 40 and 50 years agobecause these same municipal systemswould not bring services to these rural

areas — are opposed to consolidation.“There is also still a lot of

community pride in these systems.When no one would aid these ruralareas with water and sewer servicesyears ago, the folks stepped up to theplate and — with the help of the oldFmHA (Farmers Home Administration,now part of USDA Rural Development)— thousands of these systems werebuilt nationwide. Obviously, theinvestment has paid off — the defaultrate on these loans has been historicallyless than 0.5 percent. Plus, the federalgovernment has received the incomefrom the interest off these loans,bringing much needed cash back intothe federal coffers. This doesn’t includethe benefits at the local level ofincreased job opportunities and in-creased tax base for both the local andstate governments.”

Experienced staffmakes huge difference

Breezy Hill has also avoided some ofthe major challenges small systems face,in large part because it trains its ownstaff of 11. “We have good people andlittle turnover. If you have a two-mansystem and they’re both close toretirement, you have a problem.”

Breezy Hill’s industrial park isattractive to commercial and industrialfirms, Hilton says. “When we are askedto make a commitment to an interestedclient for relocation to the area, ourstandard answer is ‘bring it on.’ We cangenerally make that comment on thespot and these clients know from pasthistory that we can deliver. The key isto invest in capital improvements, butspend what you need on a level thatmakes sense and is affordable.

“We have been fortunate in ourrelationship with USDA’s Rural UtilitiesPrograms. Funding a system with 75percent grants is a thing of the past. Welook for cash flow. We watch our rates.We’re owned by our customers andwe’re here to serve them. That’s part ofwhat we are in rural America, and that’spart of being a cooperative.” �

By Jane Livingston,Cooperative communications [email protected]

n 2008, cooperativefinancial institutions inthe United States werehurt, but did notrequire the massive

bailouts that many private sectorlenders needed. Unlike some financialinstitutions that received bailouts butthen sharply cut back on lending, mostcooperative financial institutions aroundthe world kept right on lending.

Indeed, credit union and cooperativebank deposits grew — increasing theirability to lend — as people soughttrusted places for their savings.Cooperative share values did notcollapse because, in part, they are nottraded in marketplaces where the desireis for quick profits; rather, co-ops arefocused on long-term member andcommunity needs.

The fact that the cooperative sectorof the global economy has performedbetter than the investor-owned sectorduring the past four years should not besurprising. If the output of the world’scooperatives were represented by onecountry, that country would be amongthe G8 nations. The output of theworld’s 300 largest co-ops alone wouldcreate the ninth largest nationaleconomy.

This is a business model that worksall over the planet.

Waking the sleeping giantYet, the cooperative model is too

often a sleeping giant. How can wewake the giant? How can we gear upthe cooperative economy so that it canhelp more of the world’s people,

sooner? The need to spread knowledgeabout how cooperatives work is urgent,global and growing.

What do cooperative leaders need toknow about economics? What willreduce the likelihood of new or existingcooperatives from failing? What willspur cooperative economic growth?

These are the kinds of questions that

cooperative leaders from around theworld will face at the Imagine 2012International Conference on Co-operative Economics, this Oct. 6-7. Itwill be immediately followed by theInternational Summit on Cooperatives,Oct. 8-11; its theme is “The AmazingPower of Cooperatives.” Both eventstake place in Quebec City, Canada.Co-hosts are the International Co-operative Alliance, the DesjardinsGroup (Canada’s largest financial co-operative group) and the internationalMaster of Management, Co-operativesand Credit Unions (MMCCU)

program, based at Saint Mary’sUniversity in Halifax, Nova Scotia.

Imagine 2012 will host a globalconvergence of cooperative and creditunion directors, senior managers,officers, young leaders and otherparticipants. They will be exposed tothe work of 15 specialists on the cuttingedge of economics.

Many assumptions and beliefs aboutcooperative economics will bechallenged at the conference. New ideaswill surface; new questions will emerge.Participants from around the world willtake away concepts, analyses andobservations that can be developed intoa universally accepted discipline ofCooperative Economics.

Thomas Homer-Dixon, chair ofGlobal Systems for the Centre forInternational Governance Innovation atBalsillie School of International Affairsin Ontario, is one of the presenters atImagine 2012.

“In a world that now seemsperpetually on the edge of an economicabyss, nothing could be more importantthan this. Imagine 2012 will explorepractical and sorely needed alternativesto current conventional economicmodels, theories and practices thatthreaten our children’s future,” Homer-Dixon says.

Tools can help global recoverySuch a set of broadly accepted tools

could put cooperatives in the driver’sseat of a new global economy. For thisto happen, cooperative leaders muststep back and question many of theirmost deeply rooted assumptions andbeliefs about economics.

“Imagine 2012 could not have comeat a better time,” says Nelson Kuria,



I

Quebec City to host international co-op conferencesCanco-opshelpdriveglobal recovery?

Quebec City will host two major internationalcooperative conferences in October. Photocourtesy Roy Tennant


Editor’s note: This article is excerpted and adapted from severallonger articles that appeared in the CCA Communicator e-newsletter. Authors are: Marian Douglas of Flint Energies, ClaireSmith of Sunkist and Jason Jenkins of Rural Missouri.

ew cooperatives thrive over the long-termwithout effective communications programsthat keep their members informed abouttheir cooperative. For 59 years, theCooperative Communicators Association

(CCA) has been helping to strengthen the nation’scooperatives by improving the skills of their communicationsstaff members.

In June, CCA held its annual communications institute inTucson, Ariz., where several days of seminars were heldcovering a full gamut of communications topics. CCA also

saluted the best in co-op communications efforts of the pastyear and presented career awards to outstanding practitionersof the art of co-op communications.

CEO winner “runstoward the fire”

The Outstanding CEO Communicator award waspresented to Bob Frazee, CEO of MidAtlantic Farm Creditin Westminster, Md. He was recognized, in part, due to hisability and willingness to face even bad news situations “witha gung-ho attitude” and “stay and fight” determination.Frazee believes in the strength of a solid communicationsplan in times of crisis, which paid off when one of the co-op’sclients declared bankruptcy, pulling Farm Credit into afirestorm of controversy.

False reports began circulating about MidAtlantic —

F

CCAsalutes thosewhoexcelat telling theco-opstory

This photo of Dairy Farmers of America member Marlane Williams represented “a quantum leap” forward from run-of-the-mill cow photos, said oneof the judges who selected it as photo of the year. “It’s celebratory,” said another judge. Facing page: Associated Milk Producers Inc. wonPublication of the Year honors for its annual report titled “You.”


including that it was the client’s onlylender and that the cooperative heldmillions of dollars in loans that would notbe repaid.

In the earliest moments (over aweekend) of the crisis, Frazee assembled ateam of co-op employees — led by thecommunications director and including theclient’s loan officer, the chief credit officerand legislative affairs officer — to combatthe inaccurate and negative press coverage.

Not only did Frazee run toward thefire, he also fully embraced the socialmedia arm of the co-op’s communicationsplan. A public website dedicated to thecoverage of the bankruptcy was launchedwith a personal message board whereFrazee posted frequent updates. He madephone calls to community leaders to“gauge the temperature” of the situationand to direct them to the co-op’s websiteas a resource.

The firestorm was quicklyextinguished by the clear, up-to-dateinformation provided on the co-opwebsite, which helped stop the rumor millin its tracks. The media began to use thiswebsite as a resource and often quotedFrazee’s updates in their press coverage.MidAtlantic Farm Credit has sincereceived numerous requests to share thecommunications plan.

Frazee says hehas seen a lot ofchange in the banking

industry in 30 years. But those changesare small compared to the evolution intechnology he’s witnessed. He admits hemay not completely understand socialmedia, but he sees the benefit of beingable to communicate directly withpeople, and says the benefit far outweighsthe risk.

Klinefelter winner helpsdrive AGP’s success

The H.E. Klinefelter Award waspresented to James Rodenburg of AgProcessing Inc. (AGP) in Omaha, Neb.The award, CCA’s highest honor for acareer co-op communicator, is presented to a member whosework is considered by their peers to be outstanding.

One nominator called Rodenburg “a respected colleaguewhose contribution to our company’s success is driven by hislifelong understanding and knowledge of the importance of

cooperatives to U.S. agriculture.” Another said he is: “Theultimate communicator, who exemplifies the highest standardof professionalism and outstanding leadership incommunications.”

Rodenburg joined AGP’s Corporate and MemberRelations Department in 1996 as publications editor. Prior tothat, he had spent 20 years in the livestock industry, includingserving as executive secretary of the Omaha LivestockExchange and as communications manager for the Sioux CityStockyards. He is also a member of the National FarmBroadcasters Association.

Rodenburg not only has the cooperative spirit, but wasborn into it. He grew up in a cooperative farm family insouthwest Iowa. He earned his degree in journalism and masscommunications from Iowa State University.

“Jim is recognized by his peers and superiors as aprofessional in communications and public relations,” saysMike Maranell, AGP’s senior vice president of member andcorporate relations. “His broad understanding of our businessand the marketplace truly makes him one-of-a-kind. Weappreciate his talent and his value on our team.”

Straight Talk helpsearn Graznak Award

The 2012 Michael Graznak Award, which honors one ofthe nation’s brightest young (under the age of 35) co-opcommunicators, was presented to Megan McKoy-Noe of theNational Rural Electric Cooperative Association (NRECA).She was praised for her “passion for co-ops and the idealsthey were founded on,” and as someone who “promotes theco-op philosophy in all her work.”

McKoy-Noe is the associate editorNRECA’s Straight Talk Alert, anelectronic news resource. Each month,it contains editorial, graphic,audiovisual and other materials thatsupport more than 900 electricdistribution cooperatives and statewideco-op publications. McKoy-Noe servesas a writer and designer for consumer-focused content and maintains socialmedia outlets, including a YouTubechannel.

“Straight Talk has come in like anangel of mercy with a suitcase full ofrelevant, well-organized and easilyaccessible communications tools in avariety of media,” wrote CarolMoczygemba, executive editor of TexasCo-op Power, citing how invaluable the

materials are for co-op communicators who wear many hats.Before joining NRECA, McKoy-Noe was the assistant

director of communications for GreyStone Power inDouglasville, Ga. “Megan sets as high an example for co-opcommunicators as I have witnessed in my 23-year career with


electric cooperatives,” says PerryStambaugh, her supervisor at NRECA.She has become NRECA’s expert onhow electric co-ops should incorporatesocial media into their everydaypractices.

McKoy-Noe is a champion of the“cooperative difference” and hasworked to strengthen relationshipsamong all co-ops. She has receivednumerous awards of excellence inNRECA communications contests andwas CCA’s Writer of the Year in both2011 and 2012. She and her husband,Paul, live in Decatur, Ga.

Top Awards inCommunication Contest� Publication of the Year: 2010Annual Report, Associated MilkProducers Inc. (AMPI) — Calling it“an excellent example of design, writingand overall execution againstobjectives,” judges tapped AMPI’s 2010annual report as the Publication of theYear. The entry was also the first placewinner in the annual reports (smallshop) class. The report was designedand written in-house, and compared

very favorably with many otherpublications with greater resources.� Programs & Projects “Best ofShow”: “I’m Co-op” TennesseeFarmers Cooperative — The judgedescribed this as a “clever and creative”campaign which resonated with itstarget audience. The judge noted that

the use of real people and real stories inall elements of the campaign as reasonsit stood apart from others.� Writer of the Year: MeganMcKoy-Noe, National Rural ElectricCooperative Association(NRECA) — “Beautifulwriting!” gushed the judgewho tapped McKoy-Noefor Writer of the Year. Thejudge gave high marks toMcKoy-Noe’s portfolio ofarticles for effectivelyincorporating facts andfigures and quantifiablebenefits and costs into herwork. “She focuses onsharing the three coremessages for electriccooperatives: “we exist toprovide safe, reliable andaffordable power.”Whether she was writing aspeech or a feature story,she exhibited that focus inevery piece submitted, thejudge noted.� Photographer of the Year: JasonJenkins, Association of Missouri

ElectricCooperatives(AMEC) — A three-judge panel selectedRural Missouri stafferJason Jenkins’ photoportfolio as the year’sbest. He also won theaward in 2010. Thejudges said the photosin Jenkins’ portfoliowere consistently wellexposed and wellexecuted. They wereespecially drawn toseveral shots from thephotographer’s“Aircraft from

Another Era” photo essay and story.� Outstanding Leader Award — Thisspecial (non-contest) award waspresented to Nancy Jorgensen, afreelance writer and editor whocontributes to a number of cooperativepublications. She was recognized as“one of CCA’s brightest stars.” The

award is given annually to a memberwho demonstrates exceptionalleadership through his or her volunteeractivities within the organization. TheCCA board selected Jorgensen for her

work as the sponsorship chair for the2012 Communications Institute. Sheraised $30,000 in sponsorships, believedto be the most money ever donated insupport of the Institute.

USDA writers honoredUSDA’s Rural Cooperatives magazine

won three awards in the writing contest.Assistant Editor Stephen Thompsonwon second place in the TechnicalWriting class for “Banking on Butanol,”about a Missouri cooperative’s butanolfuel project. Contributing Editor AnneTodd won second place in theSerious/Investigative Features class for“Forging Links,” about a local food co-op’s efforts to find new markets for itsmembers’ produce. Editor DanCampbell won the honorable mentionin that same category for “All the RightMoves,” about a successful Texas farmsupply co-op.

For a complete list of all awardwinners, visit: www.communicators.coop. �

Bob Frazee

Megan McKoy-Noe and James Rodenburg


Midwest co-opcenters sharestrategiesat regional roundtable

By Alice Pickler, Administrative AssistantMid America Cooperative Council

ooperatives can helpeach othertremendously bysharing experiences,including “what works”

success stories and “what doesn’t work”experiences. So, too, can the nation’scooperative development centers, whichassist in starting cooperatives and inhelping existing cooperatives developnew products or services. While thesecenters have much in common, each isalso engaged in unique endeavors.

The Mid America CooperativeCouncil — an association of 110cooperatives and supporters in Indiana,Illinois, Kentucky, Michigan and Ohio— is one of 32 state and regionalcooperative councils. The council’smission is to: “Promote, Foster andEnhance the Values of Cooperatives.” Itis engaged in an outreach effort toconnect other entities that work withcooperatives.

In April, six cooperative developmentcenters in four states (Indiana,

Kentucky, Michigan and Ohio) met inElizabethtown, Ky., to learn from eachother. By networking on a regionalbasis, the roundtable provided an op-portunity for cooperative professionalsto explore new partnerships, resourcesand opportunities to collaborate.

The event was coordinated by theMid America Cooperative Council(MACC). MACC’s educationalprograms are designed for emerging co-op leaders, including co-op employees,directors and students. This was theseventh meeting of its kind, since 2007.The meetings have proven to be veryproductive in sharing what developmentpractices work and how to improvethem.

“Each cooperative developmentcenter is involved in unique activities;therefore, we can share experiences andassist each other in our areas ofstrength,” says Roy Messing of theOhio Employee Ownership Center.The meeting objective is to raise theexposure level of each cooperativedevelopment center and provide anopportunity to network.

USDA Rural Development’s Rural

Cooperative Development Grant(RCDG) program is an importantsource of funds for the centers. Thegoal of the program is to improve theeconomic condition of rural areasthrough cooperative development.Grants are provided for theestablishment and operation of centersthat have the expertise, or can contractfor expertise, to help rural businesseslaunch, expand or make operationalimprovements, with the primary targetsbeing cooperatives or other mutually-owned businesses.

The following are brief overviews ofthe six co-op development centers thatparticipated in the roundtable.

� The Indiana CooperativeDevelopment Center is focused onassisting food cooperatives, farmersmarkets and networking with thebroader cooperative community at theannual Co-op Summit. Recent effortsinclude assisting with the start-up of anorganic dairy farm and working with abeer brewing cooperative and an artists’co-op. It partners with Bloomingfoodsto hold a well-attended food

Cooperative Development Center leaders from four states – members of the Mid AmericaCooperative Council – met in Elizabethtown, Ky., for roundtable discussions that helped identify

new resources and forge stronger working partnerships.

C


cooperative conference whereparticipants share experiences and learnhow to solve challenges. Food co-opexperts from around the countryaddress the conference, recognized as amodel for food co-op education.

� The Michigan CooperativeDevelopment Program providescomprehensive cooperative businessdevelopment services in rural Michigan.It is administered by the Michigan StateUniversity (MSU) Product Center forFood, Ag, and Bio, which has workedwith cooperatives since its inception in2004. Cooperative DevelopmentProgram clients include: 1) Legends ofthe Lakes Cooperative — several fisheries,including Native American-owned, thatbanded together to brand their wild-caught Whitefish fillets and createother value-added products for thewhitefish industry; 2) Farmers On theMove — comprised of Hispanic farmerswith small operations who have joinedforces to jointly pack and marketproducts; this organization also provideseducational services and food safetytraining for cooperative members; 3)Four Seasons Produce Cooperative — agroup of small producers growing inhoop houses who jointly pack andmarket vegetables from March toJanuary. Customers are primarilyinstitutional buyers in mid-Michigan; 4)Mother’s Milk Cooperative — a newlyformed co-op that aggregates humanmilk for high-value processed products,and to provide other services andbenefits to young mothers.

� Ohio State University’s OhioCooperative Development Center(OCDC) provides technical service fornew and emerging cooperatives in ruraland Appalachia communities in Ohio,West Virginia and adjacent states, aswell as national groups based in Ohioor West Virginia. Operating since 1997,OCDC assists about 40 groupsannually, of which six or seven usuallyincorporate each year. The center hasformed a formal partnership with localOhio and West Virginia Extension

educators to assist in providingincreased technical services capacity anda regional presence for improvednetworking. Thirty extension educatorshave committed to work with local foodand/or small farms related cooperativesin their area. The OCDC also worksclosely with the statewide Non-ProfitLocal Foods Network (NPLFN), themission of which is to improve theeconomic conditions and personalhealth of communities through“growing new growers.” It promotesdevelopment of co-op trainingprograms, sustainable incubator farms,business cooperative networks,community-support systems andapprenticeship/mentor trainingprograms. These regional efforts arelocated in rural areas near distressedcommunities to serve the unemployedand underemployed, part-time growers,local consumers and to increase theavailability of fresh food.

� Center for Cooperative ForestEnterprises (CCFE) works with forestproducts businesses interested in usingthe cooperative business model. Pricesfor forest products have fallen as theconstruction industry has declined inthe past few years. As a result, forestproduct-related businesses are lookingfor other products they can offer.Current opportunities appear strong inbundled firewood, typically soldthrough food stores. The CCFE is aprogram of The National Network ofForest Practitioners, which is based inAthens, Ohio, but it works on anational scale.

� The Ohio Employee OwnershipCenter, a nonprofit outreach center ofKent State University, supports thedevelopment of employee-ownedbusinesses across Ohio and around theworld through efforts that have provento save jobs, create wealth and grow theeconomy. OEOC’s work rests on asimple philosophy: broader ownershipof productive assets is a good thing foremployees, communities and ourcountry. Since being founded in 1987,

OEOC has assisted 91 companiesbecome employee owned. Thesecompanies represent some 15,000worker/owners, with well over $300million of equity in the businesses, inwhich they have shared ownership. TheCooperative Development Center atKent State University joined OEOC in2009 after receiving a USDA RuralCooperative Development Grant. Workunder this grant focuses in threeprimary areas: 1) Outreach andpromotion of employee/worker-ownedcooperatives; OEOC was involved inthe development and launch of theEvergreen Cooperative Laundry inCleveland as well as the conversion ofSelect Machine Co. from a privatebusiness to a worker cooperative. 2)Linking rural agricultural producers tourban users; OEOC worked with thedevelopment of the “Lake to RiverCooperative,” a multi-stakeholdercooperative in Ohio’s Mahoning Valley,which includes both producers andconsumers as members. 3) Generaloutreach and research on cooperativetopics; the center recently completed itsthird Ohio Cooperative Symposium,which provided cooperative training fora wide variety of attendees, and fundeddevelopment of a well-regarded manualfor multi-stakeholder co-ops, titled:“Solidarity as a Business Model.”

� The Kentucky Center forAgriculture and Rural Development(KCARD) is a nonprofit organizationestablished to facilitate agricultural andrural business development inKentucky. KCARD provides education,technical assistance and businesssupport services to new and existingagribusinesses across the common-wealth. KCARD staff consults withgroups on critical questions related toincorporating, financing, management,marketing, accounting and legal con-cerns. The organization networks withstate and national resources to assistwith all aspects of businessdevelopment. �


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

Co-op developments, coast to coast

FAO opens co-op officeIn an effort to further its

collaboration with cooperativesworldwide, the Food and AgricultureOrganization of the United Nations(FAO) has opened a new liaison officein Rome that will focus on promotingcooperatives and other producer-ownedorganizations. The office opened just afew days after the International Day ofCooperatives, celebrated on July 7.

“We are confident that this liaisonoffice will allow cooperatives andproducer organizations to have astronger voice as FAO’s key partners inending hunger and poverty,” FAODirector-General José Graziano daSilva said at the opening ceremony. Theevent was attended by representatives ofthe International Cooperative Allianceand the World Farmers Organization.

“Cooperatives and producerorganizations have a key role to play inbringing about a future withouthunger,” he continued. “Standing alone,a smallholder has fewer opportunities.”But by joining with other farmers incooperatives, he noted, they are betterable to negotiate better prices and togain access to more markets andservices.

FAO says it will continue toencourage governments to establishfavorable policies, legal frameworks,economic incentives and participatoryprocesses that will help strengthencooperatives and other producerorganizations. In 2011 alone, more than180 FAO programs and projects inmore than 100 countries helpedcooperatives and producer groups reachtheir goals.

FAO has revamped its website to

further this effort, which can be viewedat: www.fao.org/partnerships/partners-home/en/.

The United Nations is leadingefforts to observe 2012 InternationalYear of Cooperatives. It also ispromoting World Food Day, held eachyear on Oct. 16, which has adopted thetheme: Agricultural Cooperatives: Keyto Feeding the World.

DFA buildingNevada dairy plant

Dairy Farmers of America Inc.(DFA) in April broke ground on a newdairy ingredient plant in Fallon, Nev.The 110,000-square-foot plant is being

built on a 31-acre parcel in the NewRiver Business Park. The $85 millionfacility will produce dried dairyingredients, including whole-milkpowder, on an on-demand basis. Theplant can process 2 million pounds ofraw milk and produce about 250,000pounds of dried dairy ingredients daily,or 90 million pounds annually, for

domestic and global customers.“As a milk marketing cooperative

focused on our dairy farmer owners, wehave a responsibility and an obligationto explore new options to bring ourmembers greater returns,” says MarkKorsmeyer, DFA executive vicepresident and president of DFA’s GlobalDairy Products Group. He says theproject provides DFA the opportunityto enter a new market segment and tocontinue to leverage dairy farmer equityinto profitable investments.

In addition to the creation of at least40 full-time jobs at the facility,increased employment opportunities areexpected to occur in the community, on

member farms and in agriculturesupport industries. Construction isscheduled for completion during thesummer of 2013.

Land O’Lakes, Eggland’s Bestannounce egg joint venture

Land O’Lakes Inc. and Eggland’sBest Inc. recently announced the

An artist’s rendering of a 110,000-square-foot dairy ingredients plantbeing built in Fallon, Nev.


creation of a branded, specialty eggjoint venture, in which eachorganization will hold a 50 percentstake. Land O’Lakes, a federatedcooperative, is the national licensor ofLand O’ Lakes brand eggs. Eggland’sBest is a cooperative that manages theadvertising and marketing of Eggland’sBest brand eggs — the No. 1 brandedegg in the United States.

The new joint venture will licenseboth co-op brands. Former Eggland’sBest President and CEO Charles T.Lanktree is serving as president andCEO of the new company, calledEggland’s Best LLC. Land O’Lakes saysthe joint venture will expand itsparticipation in the growing brandedspecialty egg category.

Beef co-op leaderDoc Hatfield dies

Patrick “Doc” Hatfield, who alongwith his wife, Connie, was the guidingforce behind the Country Natural Beef

Cooperative in Oregon, died in Marchat age 74. He has been credited withhelping to create the natural-beefmarket.

According to a report in the Great

Bend Bulletin: “Despite the awards andacademic interest he and his wifeearned for the Country Natural Beefcooperative they developed, DocHatfield never set aside his cowboy hatand boots or lost his love for ice creambars.” For their efforts, the Hatfieldsearned the Oregon Governor’s GoldAward in 2007 and the Kerr Awardfrom the High Desert Museum in 2001.

“As charismatic leaders, theHatfields’ presence strongly affected theculture of the co-op and played acritical role in establishing closerelationships with the key customers ofthe co-op over the years,” according toa 2009 case study of the co-op byZhaohui Wu, an associate professor ofbusiness at Oregon State University.Wu said Country Natural Beef standsout for its style of decision-making,which gives a voice to all ranch familymembers, according to the Bulletinarticle. The co-op pioneered industryefforts to produce a consistent supply ofantibiotic- and hormone-free beef andbridged the culture gap betweenranchers and urban consumers, headded.

Hatfield graduated from ColoradoState University with a degree inveterinary medicine, hence the lifelongnickname “Doc.” He worked as aveterinarian until 1976, when he movedto Brothers, Ore., and went into cattleranching, a career in which hisveterinarian skills often proved helpful.

Hatfield’s legacy is ongoing, as thenatural beef produced by the co-op’s 70family ranches is for sale in 92 WholeFoods Markets in 10 states, in 53 othergrocery stores and in 136 restaurants.

NFU releases freeco-op curriculum

National Farmers Union (NFU) isintroducing a special co-op educationcurriculum as part of its observation of2012 International Year ofCooperatives. “Cooperation is at theheart of America, from its largest citiesto its smallest towns,” says NFUPresident Roger Johnson. “Schools,organizations and community leadersare invited to use these lessons. The co-

op curriculum is available to everyonefor free.”

The curriculum provides six separatelessons each for collegiate and adultstudents. The lessons are written tointroduce how cooperation works tohelp individuals accomplish as a groupwhat they could not on their own.

To download the curriculum, visit:www.nfu.org/education/education-materials. To learn more about ways touse the curriculum, contact NFUDirector of Education Maria Miller at:[email protected]. The curriculumwas developed with support from CHSFoundation, in cooperation with theNFU Foundation.

Farmers Union members havehelped organize hundreds of successfulcooperative businesses, some of whichare among the Fortune 500 companies.

Ocean Spray building newplant in Pennsylvania

Ocean Spray Cranberries Inc. andthe Pennsylvania Department ofCommunity and EconomicDevelopment held a groundbreakingceremony in April to celebrate the startof construction on the co-op’s new juicebottling plant in the Upper MacungieTownship, Pa. The $110 millioninvestment by Ocean Spray will bring165 good-paying, high-skilled jobs andtraining opportunities to thecommunity. The Lehigh ValleyBeverage Facility will be the co-op’sfirst manufacturing facility inPennsylvania.

The 315,000-square-foot-plant isbeing built on a 44-acre site and willproduce more than 32 million cases ofbeverages each year. The state-of-the-art facility will bottle both Ocean Sprayjuices and Nestle’s Juicy Juice products.The facility is slated for completionduring the fall of 2013.

“The positive impact of this projecton the community will be enormous,and one the commonwealth is proud tosupport,” Pennsylvania Department ofCommunity and EconomicDevelopment Secretary C. Alan Walkersaid. “Our agricultural roots run deep atOcean Spray, and we are excited to

Doc Hatfield puts on a natural beefcooking demonstration, which is oneway his co-op promotes its products.


bring good jobs and a commitment tocorporate citizenship to the LehighValley community,” said RandyPapadellis, Ocean Spray president andCEO.

In keeping with the co-op’scommitment to minimizing itsenvironmental impact, Ocean Sprayplans to pursue a Gold LEEDcertification for the building. OceanSpray will ensure that it is usingenvironmentally friendly methods andmaterials to build the facility andmanage construction waste. OceanSpray will conserve energy throughgreater efficiencies and smart buildingdesigns, such as a high-tech HVACsystem.

When the new facility goes intoproduction, it will replace a manu-facturing plant in Bordentown, N.J.During the transition, Ocean Spray saysit has offered its employees at theBordentown facility the most generousincentive, relocation and transitionpackages in the cooperative’s history.

Ocean spray is owned by 700 mostlysmall family farms — many of themfifth-generation growers who have beenharvesting cranberries for as long as 138years.

Accelerate Geneticssaluted for export success

Accelerated Genetics, a Baraboo,Wis.-based livestock breedingcooperative, has been awarded the 2011Governor’s Export Achievement Award.Wisconsin Governor Scott Walkerpresented the annual ExportAchievement Awards in May torecognize firms and organizations thathave achieved extraordinary results ininternational sales or have contributedto Wisconsin’s increased ability tocompete in a global market.

Accelerated Genetics, recognized forbeing a top agricultural exporter, doesabout half of its business outside thecountry. It made its first internationalsale in 1957. In 2008, AcceleratedGenetics constructed a 24-stall

European Union Qualified SireIsolation facility. During the past fewyears, it has also initiated cutting-edgemarketing techniques to promote itssires and has added team members whoare native to various countries it doesbusiness in, helping to “cross the bridgeinto the global community.”

Accelerated Genetics is celebratingits 70th Anniversary with the theme:“Celebrating 70 Years of Innovation.”

Oregon grain co-opspurchase Cargill terminal

Pendleton Grain Growers, MorrowCounty Grain Growers and the Port ofMorrow in Oregon signed anagreement in May to purchase a grainterminal on the Columbia Riverpreviously owned by Cargill Inc. Thethree purchasers will own the grainterminal as tenants in common. Theyhave entered into a lease agreementwith East Oregon Grain Growers LLC,a joint venture owned by PendletonGrain Growers and Morrow County

Hispanic and women farmers andranchers who believe that the U. S.Department of Agriculture (USDA)improperly denied them farm loan benefitsbetween 1981and 2000 because they areHispanic or female, may be eligible to applyfor compensation if:1) You sought a farm loan or farm-loan

servicing during that period;2) The loan was denied, provided late,

approved for a lesser amount thanrequested, approved with restrictiveconditions or USDA failed to provideappropriate loan service; and3) You believe these actions were based

on your being Hispanic or female.To receive a claims package, visit: www.farmerclaims

.gov, or call 1-888-508-4429. For further guidance, you maycontact a lawyer or other legal services provider in yourcommunity. USDA cannot provide legal advice. If you are

currently represented by counsel regarding allegations ofdiscrimination or in a lawsuit claiming discrimination, youshould contact your counsel regarding this claims process.�

Hispanic, women farmers may seek compensation

USDA photos by Bob Nichols


Grain Growers. East Oregon GrainGrowers will lease and operate thefacility.

The co-ops say this strategicpartnership provides Morrow CountyGrain Growers and Pendleton GrainGrowers part ownership and facilitymanagement of one of the mostefficient, high-capacity grain elevatorson the Columbia/Snake River System.This joint venture facilitates thelogistical needs of both cooperatives tobetter serve their members’ grainhandling and marketing needs, they say.

Both cooperatives reported strongfinancial results this past year and seetheir East Oregon Grain Growersventure as a strategic alliance tostrengthen their respective grainoperations and logistics. Pendleton

Grain Growers, headquartered inPendleton, Ore., and Morrow CountyGrain Growers, headquartered inLexington, Ore., are both farmer-owned cooperatives that have servedtheir members and communities forover 80 years.

Located in the heart of theNorthwest, the Port of Morrow isstrategically connected to the worldthrough Columbia River barges,railroads and Interstate freeways.

Feit to lead UnitedCranberry Co-op

Tim Feit has been named executivedirector of United Cranberry GrowersCooperative. He will be responsible forrunning the day-to-day operations ofthe Wausau, Wis.-based group, an

agricultural cooperative of independentcranberry growers formed in 2010,according to an article in Wisconsin AgConnection.

Feit was promotions director for thepast six years for the Wisconsin Potatoand Vegetable Growers Association; hehas over 20 years of experience inmarketing. He is a graduate of theUniversity of Wisconsin-Stevens Pointwith a degree in BusinessAdministration and an MBA from theUniversity of Wisconisn-Oshkosh

Montana food co-opbeing organized

Montana farmers and foodproducers have launched an effort tostart a Montana food cooperative. Thefocus will be on bringing together

Agriculture Secretary Tom Vilsack met in Des Moines,Iowa, in June with business and community leaders todiscuss how continuing demand for American food andagricultural products abroad has led to the three bestconsecutive years for U.S. farm exports in our nation’shistory. Vilsack said the success of American agriculture is apositive economic story that is creating jobs in rural Americaand benefitting people around the world.

“In 2010, President Obama committed to doubling U.S.exports in five years, and just two years later we are onpace to meet that goal,” Vilsack said. “Meanwhile, peoplearound the world continue to demand U.S. food andagricultural products, boosting American businesses andsupporting our rural communities. To ensure thesesuccesses continue, USDA has aggressively worked toexpand export opportunities and reduce barriers to trade.“Fewer restrictions abroad, stronger trade deals for U.S.

agriculture and greater export assistance for U.S.businesses supports more than 1 million Americans jobs inindustries from packing and shipping, to food processing, totransportation,” Vilsack continued. “This is an American-made success story worth sharing with our friends, familyand neighbors.”Vilsack pointed to Iowa’s low unemployment rate of 5.1

percent as proof of agriculture’s success. Last year, Iowaexported a record $7 billion in agricultural products, whichsupported nearly 60,000 jobs on and off the farm. Thus far in2012, the state’s farm exports show a 15-percent gain overlast year’s record total.Vilsack also highlighted a joint report released by the

White House Rural Council and USDA, which notes how thePresident’s National Export Initiative has opened newmarkets for U.S. agricultural products and services andcontributed to a historic level of agricultural exports. �

Vilsack: Farm exports creating jobs

The last three years have been the best on record for U.S.agricultural exports. Farmer cooperatives are among thenation’s major exporters. Photo courtesy Ag Processing Inc.


Agriculture Secretary Tom Vilsack in June announcedthat USDA has selected 450 renewable energy projectsnationwide for funding under the Rural Energy for AmericaProgram (REAP), authorized by the 2008 Farm Bill. Theannouncement was made in North Carolina, which is hometo 31 of the projects receiving USDA funding, includingprojects that: help agricultural producers and rural smallbusinesses reduce energy consumption and costs; userenewable energy technologies in their operation; and/orconduct feasibility studies for renewable energy projects.

“The Obama administration and USDA are helpingagricultural producers and rural small business ownersreduce their energy costs and consumption — and by doingso are helping to create jobs, preserve our naturalresources, protect the environment and strengthen thebottom line for businesses,” said Vilsack. “This is part of theadministration’s “all of the above” energy strategy. Stableenergy costs create an environment for sustainable jobgrowth in rural America.”REAP offers funds for farmers, ranchers and rural small

businesses to purchase and install renewable energysystems and make energy-efficiency improvements. Thesefederal funds leverage other funding sources forbusinesses. In all, USDA announced nearly $7.4 million inenergy grants.Vilsack made the announcement while touring Metrolina

Greenhouses, a family-owned plant and services companyin Huntersville, N.C., that has received a REAP guaranteedloan and three grants totaling over $1 million since 2007.Among the work Metrolina has undertaken with the funds isconstruction of a wood boiler heating system to supplementand replace the natural gas and fuel it uses at its 120-acrefacility. In addition to heating greenhouses, using woodchips in the boiler provides an additional market for locallumber mills and logging operations.Examples of some other funded projects include:

• Tennessee small business owner Rick Alexander is using aREAP grant and investing another $325,000 to create thefirst solar-powered business in Maury County, Tenn.Electricity is the largest expense for the climate-controlledstorage facility he built as a creative re-use of a former

furniture making plant.• Maurice Nichols received a grant to purchase an energy-efficient grain dryer for his farm in Mount Hope, Wis.,saving more than 42 percent in annual energy use.• Whispering Pines Poultry farm in Centre, Ala., will use aREAP grant to replace four propane heaters withrenewable biomass wood pellet heaters to improve heatingefficiency of its poultry houses, resulting in expectedenergy savings of more than $3,000 per barn annually.For a complete listing of Rural Energy for America

Program grant recipients announced, visit the Newsroom at:www.usda.gov. �

USDA funds renewable energy efforts

consumers and producers to create easyaccess to local, nutritious and affordablefood while promoting sustainableagriculture. A steering committee wasformed last spring during a meetingfacilitated by Karl Sutton, program

manager at the Mission Mountain FoodEnterprise and Co-op DevelopmentCenter in Ronan. The committeeresearched other co-ops in Idaho,Oklahoma and Madison, Wis.

The projected service area is western

Montana, from Eureka to Hamilton. Byworking with other producers, co-ops,businesses and farm-to-tableorganizations, the plan is to extendservice to the majority of the state inthe near future. People interested in

Solar-powered poultry houses are just one type of energy-saving project USDA is backing through its RenewableEnergy for America Program (REAP). This Pennsylvania farmreceived REAP funds in 2011. USDA photos by Lance Cheung


joining the co-op, as producers orconsumers, may contact Jason Moore at(406) 285-1149, or Lake CountyCommunity Development Corporation,407 Main St. S.W., Ronan, Mont.59864, or call (406) 676-5901. Formore information, visit: www.montanacoop.com.

Dairy: a $14.7 billionMichigan industry

Michigan’s dairy industry contributes$14.68 billion to the state’s economyeach year, according to a recentlyreleased Michigan State University(MSU) study. Ken Nobis, president ofthe Michigan Milk ProducersAssociation, says he wasn’t surprised bythe new statistics.

“Dairy has always been a substantialpart of Michigan’s economy, currentlygenerating almost 40,000 direct andindirect jobs,” Nobis says. “It is truly abright spot in our state’s economy,showcasing the innovation,commitment and tenacity of our state’sdairy farmers, processors, wholesalersand retailers.”

The study found that $2.33 billion isproduced by dairy farming, $7.97billion from milk processing and $4.37billion from wholesaling and retailing.

These numbers represent historichighs, caused by a rising number ofcows and milk production in the state.

Dairy farm cash recipients swellednearly 50 percent from 2006 to 2010,with 8.3 billion pounds of milkproduced in 2010, compared to 7.1billion pounds in 2006. Estimates arebased predominately on 2010 data, the

latest available. Processing data wasobtained from the 2007 economiccensus, which some industry expertsthink understates the current level ofdairy processing.

Michigan ranks eighth among thestates in milk production, with thenumber of dairy cows and the amountof milk produced in the state increasingsteadily.

Snokist assets go toPCP, Del Monte

The sale of the assets of bankruptSnokist Growers, Yakima, Wash., toDel Monte Foods, San Francisco,Calif., and Pacific Coast Producers,Lodi, Calif., was approved in May for$27.7 million by the bankruptcy court.Del Monte bid on the fixed assets andPacific Coast Producers, another fruitgrower cooperative, bid on theinventory, according to a report in theCapital Press.

The cooperative’s 150 grower-members are not part of the deal andmay sell their fruit to Del Monte orother processors. Snokist, a processorof apples and pears, filed for Chapter11 bankruptcy reorganization Dec. 7. Itlisted assets of $69.5 million and debtsof $49.5 million. �

The Michigan dairy industry creates40,000 direct or indirect jobs, says KenNobis, president of Michigan MilkProducers Association, seen here on hisfarm near St. Johns, Mich.

La Crosse-based People’s Food Co-op. Rather than create redundanciesand job losses from synergies, thismerger will lead to a doubling ofstore space in Rochester and morejobs.

• Two recent announcements fromthe farmers and their local co-opsthat own CHS Inc. has the InverGrove Heights co-op expanding itssoybean processing businesses. Itacquired Creston Bean ProcessingLLC, at Creston, Iowa, and willtransport soybean oil from Crestonto Mankato, where CHS willprocess it into food ingredients for

human consumption. More recently,the Minneapolis Star Tribunereported CHS is purchasing SolbarIndustries Ltd., an Israeli soyprotein processor, for $133 millionthat will add two processing plantsin Israel, one in China and one inNebraska to CHS operations. Itslast fiscal year was the mostprofitable ever for the co-op.

• First half results [2011] for ArdenHills-based Land O’Lakes, anothermajor farm co-op, found sales up 15percent, to $6.93 billion, and profitsup 75 percent, to $168 million.

• Across the metro area,Bloomington-based HealthPartnersInc., proudly announced it was thetop-ranked health plan in Minnesotafor the seventh consecutive year and

a national leader, based on NationalCommittee for Quality Assurancerankings for 2011-2012.Espinoza, whose LEAF organiza-

tion participates with Minneapolis-based Northcountry CooperativeDevelopment Fund and other groupsto finance cooperatives and employeeownership programs, said similar“ground up” development efforts arevisible in several parts of the country.

Unlike corporate profits thatconcentrate into a few hands at thetop, co-ops’ successes funnel back toworkers, farmers and customers.People are realizing the importance ofcommunity development, he said.The answers to our economicproblems “aren’t going to be foundon Wall Street.” �

Commentarycontinued from page 2


association carry out its mission toprovide technical assistance andresources to small farmers andfishermen. In 2009, LAC received a$175,000 SSDPG. It was awarded$200,000 grants — the maximumavailable under the program — in 2010and 2011.

Cooperative staff in USDA RuralDevelopment’s Louisiana state officehave worked closely with Reed andLAC over the years to support the workof the association, assist it with the

grant application and documentationprocesses, to inform LAC membersabout the availability of governmentassistance and offer other help.

The road aheadSince its “trial by fire” launch six

years ago, prompted by HurricaneKatrina, the Louisiana Association ofCooperatives has grown substantially.Today, more than 20 cooperatives areLAC members and the association is anadvocate not just for fishermen, but alsofor a wide variety of agricultural co-ops,including crop and livestock producers.

Even though the formation ofcooperatives is challenging inLouisiana, in part because there is no

state co-op law to guide their creation,Reed and LAC have to date helpedcreate 10 new cooperatives, primarilycomprised of small, sociallydisadvantaged Louisiana producers.Additional co-ops are in the early stagesof planning and development withLAC’s support and guidance.

Reed’s goals for LAC in the futureinclude helping more small andminority producers and fishermen inLouisiana develop co-ops and otheralliances, and to help them withresearch activities.

To learn more, contact the LouisianaAssociation of Cooperatives at:[email protected] or (504) 319-1085. �

Nourse had not considered this typeof supportive role for cooperatives. Hebelieved they need only gain a marketshare that is sufficient to affectcompetitive prices for farmers. Noursedid not extend his economic model toother sources of benefits that derivefrom farmer ownership and control ofvertically integrated businesses.

Cooperatives proved to be relativelymore adept at operating in a down-sizing cottonseed processing industrythan most other processors. Today, theymaintain the major share of the U.S.crush.

References• Ash, Mark, Economic Research Service/USDA.

e-mail communication, April 30, 2012.• Burgess, John S. Jr. 1939. Crushing Cottonseed

Cooperatively. Farm Credit Administration, Cir.C-114.

• Dunn, John R., et al. 1980. CooperativeInvolvement and Opportunities in Oilseeds.

Agricultural Cooperative Service, USDA, ACSResearch Report 13.

• Nourse, Edwin G., 1944. The Place of theCooperative in Our National Economy. AmericanCooperation: American Institute ofCooperation, 1942- 1945, pp. 33-39. Reprintedin the Journal of Agricultural Cooperation.1992. pp. 105-111.

• Perdue, Elmer and Daniel H. McVey. 1971.Growth of Cottonseed and Soybean ProcessingCooperatives. Farmer Cooperative Service,USDA, FCS Information 75.

• USDA/RBS, 1956 to 1999, unpublishedtechnical assistance reports for cooperativecottonseed processors. �

CEO of the 40-year-old CIC InsuranceGroup of Kenya. “For 50 years, theAfrican continent has been the guineapig for various types of economicmodels that have failed dismally. Theworld’s poor people don’t needsympathy and pity. Rather, they needthe type of empowerment that truecooperatives facilitate through bringingthe majority of the marginalizedpopulation into the mainstream ofeconomic activity.”

Coordinating the Imagine 2012

conference is Tom Webb, who retiredthis year from his post as programmanager of the MMCCU program (for

more information on it, visit:www.mmccu.coop). “Imagine the globalinfluence of a widespread understand-ing of economics focused on meetinghuman needs sustainably, not just onwealth creation,” Webb says. “Imagineworld-class economists mingling withleaders of the world’s ninth largesteconomy to shape better approaches tounderstanding and analyzing local,national and global economics. Imaginethis group of leaders coming togetherto identify ways to use the cooperativebusiness model to build a better world.”

For more information visit:www.imagine2012.coop.

Editor’s note: Tom Webb contributed tothis article. �

Disaster spurs co-opformationscontinued from page 6

Can co-ops help drive globalrecovery?continued from page 31

Co-op oil mills play vital rolein sustaining cottonseed valuecontinued from page 16

Tom Webb, coordinator of the upcomingImagine 2012 conference, confers withDame Pauline Green, president of theInternational Cooperative Alliance.

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