usda / rural development september/october 2003michigan and new york shows how growers in the former...

Rura

lCOOPERATIVESCOOPERATIVESUSDA / Rural Development September/October 2003

Apples & Oranges:pg. 4 - Sunkist’s new global

strategy

pg. 6 - Why apple growers value co-op

Apples & Oranges:pg. 4 - Sunkist’s new global

strategy

pg. 6 - Why apple growers value co-op

USDA / Rural Development September/October 2003

2 September/October 2003 / Rural Cooperatives

In the past few years, some large andwell-known farmer cooperatives andother smaller ones have been forcedinto bankruptcy. Although these busi-ness failures do not compare in scopeand impact to other businesses thathave failed in other sectors of the econ-omy, and despite the fact that the greatmajority of all cooperatives are healthybusinesses, the failures naturally drawattention to the role of farmer coopera-tives in rural America. These coopera-tive failures, however, require a newlook at the vitality and flexibility ofcooperative businesses in today's glob-al, dynamic economy.

In response to challenges, we musttry to understand what makes coopera-tives particularly strong organizationsand yet susceptible to economic stress.As in any business, a search for causesof failure leads in several directions.We must look at both successes andfailures, and then carefully identifyproblems and devise solutions.

Some observers have identifiedcooperatives' restricted sources of capi-tal as a subject of concern. Cooperativesdepend on member equity for the capi-tal needed to make the investmentsrequired of successful businesses. Theconcern is that farmers and other ruralresidents, who benefit from strongcooperatives, often lack the assets tomake the investments for neededimprovements. And even if they areable to invest, they are discouragedfrom doing so by a capital structure thatoften makes it difficult for them to gettheir money back and does not providethe opportunity to realize a capital gainon their investment. Investments in acooperative compete with those neededfor members' own farming operations.

Capital requirements are nearly uni-versal among all businesses and somewould argue that cooperatives for themost part are in no worse position thanother businesses. They point to themany successful cooperatives, rangingin size from national marketing entitiesto local farm supply stores, that aredoing just fine. They argue that outsideinvestors will take over cooperativesthey fund and undermine the coopera-tive's reason for existing: to benefitpatrons on the basis of use rather thaninvestors on the basis of investment.They further respond that farmers andother member-users have the resourcesto fund their cooperatives and will doso as long as they believe the associa-tions will meet their needs.

In the years ahead, cooperatives, likemuch of rural America, will face seriouschallenges. The companies they buyfrom and sell to are becoming larger,fewer in number and more sophisticat-ed at passing costs and risks off ontoothers in their lines of business. Inno-vations in areas such as biotechnology,information services and transportationare making cooperative facilities andequipment obsolete. Foreign countriesare using our technology to becomelower cost producers of the same basicfarm products we produce in ruralareas. They are becoming competitorsrather than customers.

As farmers and rural residentsrespond to these and other challenges, itis safe to assume that some of themwould benefit from cooperatives withadditional equity. This applies whetherthey are starting a new cooperative orbroadening the services of an existingone. For example, one strategy for pro-tecting and enhancing rural economies is

for producers to engage in value-addedprocessing and marketing of the prod-ucts they produce (selling pasta ratherthan wheat, ethanol rather than corn). Inthis way, farmers and rural communitiescapture the returns of the entire processrather than settle for commodity sales.The facilities to do the manufacturingand the people needed to operate theplants and market the products will takemoney. The as yet unanswered questionis, "Where will the money come from?"

As in any business, equity capital willonly be made available if an equity hold-er realizes returns justifying the capitalinvestment. Cooperatives, too, mustproduce net income and generate bene-fits to members as a return for the equityinvested. Member equity in the coopera-tive is built from member investmentsdirectly and through retained refunds,the cooperative version of retainedincome that provides most of the equityfor other businesses. This type of equityhas funded most cooperatives, includingmany value-added operations with highcapital requirements.

It is time to explore, with objectivethoughtfulness, other possible sourcesof equity capital for cooperatives. A fewcooperatives have taken this approach.Cooperatives can, and do, offer non-voting preferred interests. Recently, alarge regional farmer cooperative sold$90 million in non-voting preferredstock that pays a dividend of 8 percentper year. The shares are publicallytraded and listed on the NASDAQstock exchange. While this means a siz-able portion of the cooperative's futureearnings will go to investors based oninvestment, few will challenge the"cooperative" nature of the association.

C O M M E N T A R Y

Shaping tomorrow’s cooperatives today

continued on page 29

Rural Cooperatives / September/October 2003 3

Rural COOPERATIVES (1088-8845) is publishedbimonthly by Rural Business–Cooperative Service,U.S. Department of Agriculture, 1400 IndependenceAve. SW, Stop 0705, Washington, DC. 20250-0705.The Secretary of Agriculture has determined thatpublication of this periodical is necessary in thetransaction of public business required by law of the Department. Periodicals postage paid atWashington, DC. and additional mailing offices.Copies may be obtained from the Superintendent ofDocuments, Government Printing Office, Washington,DC, 20402, at $21 per year. Postmaster: send addresschange to: Rural Cooperatives, USDA/RBS, Stop3255, Wash., DC 20250-3255.

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Ann Veneman, Secretary of Agriculture

Thomas C. Dorr, Under Secretary, USDA RuralDevelopment

John Rosso, Administrator, Rural Business-Cooperative Service

James Haskell, Acting Deputy Administrator,USDA Rural Business-Cooperative Service

Dan Campbell, Editor

Vision Integrated Marketing/KOTA, Design

Have a cooperative-related question?Call (202) 720-6483, orFax (202) 720-4641, Information Director,

This publication was printed with vegetable oil-based ink.

United States Department of Agriculture

.Rural

COOPERATIVESCOOPERATIVESSeptember/October 2003 Volume 70 Number 5

O n t h e C o v e r :

For the first time, Sunkist Growers is putting its brand on some foreign-grown fruit inorder to better meet market demand for a year-round citrus supply. Story on page 4.Orange photo courtesy Sunkist. A new study that compares the apple markets inMichigan and New York shows how growers in the former benefit from the exis-tence of a bargaining cooperative. Story on page 6. Apple photo by Ken Hammond, USDA

F E A T U R E S4 New global strategy

Year-round citrus demand has Sunkist tapping foreign market suppliesBy Claire Smith

6 Apple industry study shows value of producerbargaining associationsBy Shelly Grow, Amy Guptill, Thomas A. Lyson, Rick Welsh

8 Southern hospitalityWalton Electric Co-op makes a positive difference for GeorgiaBy Steve Thompson

14 More than milkDairylea’s scope of farmer services moves beyond milk marketingBy Pamela J. Karg

18 Minnesota leads the nation in co-op business volumeBy Eldon Eversull

20 Wisonsin’s Westby, ‘Little Creamery ThatCould,’ marks 100th anniversaryBy Patrick Duffey

23 Top co-op communicators honored in Madison

25 Back to SchoolNICE marks 75th anniversary with return to campus as co-opyouth education programBy Jim Wadsworth and Craig Scroggs

27 GROWMARK certification program preparesdirectors for new challenges

D E P A R T M E N T S2 COMMENTARY

12 VALUE-ADDED CORNER28 NEWSLINE


New globa l s t ra tegy Year-round citrus demand has Sunkist tapping foreign market supplies

By Claire SmithSunkist, Public Affairs Director

aced with mount-

ing competition

from lower cost

offshore citrus and increas-

ing customer demand for

specialty varieties and year-

round supplies from cus-

tomers, Sunkist Growers has

begun sourcing fruit from

foreign producers. This step

is being taken to strengthen

its leadership position in the

evolving global

marketplace.

This summer, Sunkist beganimporting citrus from offshore sourcesto complement the citrus produced byits 6,000 grower-owners in Californiaand Arizona. Lemons and grapefruitfrom South Africa and Chile bearingthe Sunkist label are being shipped toJapan and Hong Kong, where sales ofthe cooperative’s first non-U.S.-grownfruit is being test-marketed.

Customers demandingyear-round fruit supply

While the decision to handle for-eign fruit was not an easy one, main-taining its position as the fresh citrusmarket leader meant Sunkist had torespond to its customers’ demand for asingle, year-round supply of citrus.“We had no choice,” says Jeff Gargiulo,Sunkist’s president and CEO. “Weoperate in a global marketplace. U.S.politics promote it; economists supportit; retail customers demand it; and con-sumers want great citrus, year round.

“Sunkist has always been supportiveof liberalized trade,” he continues, “but

the free-trade agreements we’re seeingnow are one-way streets, benefitingforeign producers, but not Americangrowers.”

Almost half the produce sold in theUnited States today is grown outsideits borders. American producers faceincreasing competition as the domesticmarkets are opened to more imports.Those low-cost products, entering virtually duty free, put American pro-ducers at a substantial competitive disadvantage, says Gargiulo.

Sunkist lemons grown in Californiaand Arizona, for example, commandabout $16.50 per 40-pound boxwholesale, while lemons transportedfrom Chile earn about $13.50 perbox. The major reason for the differ-ence is the average hourly cost forfarm and packinghouse labor. InChile, it’s less than $1 vs. $16 inSunkist country.

Couple this increasing domesticcompetition with stagnant exportopportunities due to foreign tariffbarriers, and American fresh citrusgrowers face enormous competitivechallenges.

“Our customers tell us they aregoing to buy the best product for thelowest price, and they don’t care whereit comes from,” Gargiulo says.

Category managers Today’s large, international retail-

ers require a comprehensive packageof services. To increase efficiency,they want their suppliers to become‘category managers’ and to meet alltheir needs for a specific product area.

While Sunkist’s 6,000-plus membersown more than 175,000 acres of groves

F

Photos courtesy Sunkist

across some of the richest agriculturalland in the world and harvest a varietyof citrus, they are limited by seasonali-ty. “Our customers expect us to provideall kinds of citrus all year-round,” saidGargiulo. “With this change, Sunkist isacknowledging that our growers can’talways supply what our customerswant.”

The changes being made at Sunkistare evolutionary, not revolutionary.Over its 110-year history, Sunkist hascontinually analyzed its processes andimplemented ways to compete moreeffectively in a changing marketplace.It has developed a comprehensive,worldwide marketing strategy, andnow it will source product where themarket demands, where the opportu-nity exists and, in the end, return theprofits to its grower-owners.

Sunkist is currently formulating anoperational structure and exploring dif-ferent options for offshore sourcing.The final organization could involvepartnerships, export/import subsidiarycompanies or licensing agreements.Arrangements may differ from countryto country.

This new marketing strategy mayalso enable the cooperative to recoverits prominence in the European mar-ket, where the Sunkist name is stillhighly regarded but where the Euro-pean Community’s tariff practices andhigh transportation costs have kept itscitrus out. Sunkist will soon be in aposition to overcome those obstaclesand outsource fruit into that marketunder the Sunkist name.

Vigorous internal debate“Would we rather not have to make

the change? Yes,” says Gargiulo. “Dowe feel we have a choice? No.”

During the past decade, Sunkist andits growers have vigorously debated“going global.” The Sunkist name is onhundreds of licensed products such asjuices, beverages and confections in 45countries. However, except for someshort-lived experiments, it has soldonly the fresh citrus produced in theUnited States by its grower-members.

The change, though long in coming,was inevitable, says Gargiulo. Exportsales began reflecting the effects ofhigh-quality, low-cost foreign competi-tion on Sunkist’s share of key Asianmarkets. Domestic sales reflected theretailers’ growing interest in exotic newitems and their use of imports to bringyear-round supplies to American con-sumers.

In today’s global marketplace, noth-

ing is “out of season.” Consumers cannow choose from among more than600 produce items available every day,all year long. Now that consumers areused to the variety and availability offoreign fruit, Sunkist has little choice.If it doesn’t market it, someone elsewill, says Gargiulo.

While the imports will increase thecooperative’s revenues at certain timesof year, they will no doubt also com-pete with California and Arizona cit-rus. Sunkist’s western-grown Valenciaoranges already share shelf space withAustralian-grown navels during themid-to-late summer. And Sunkist’swestern-produced navel orangesalready face heavy competition fromimported Spanish clementines duringthe winter. The only difference is thatnow the Australian and Spanish fruitmight also be wearing the Sunkistname.

Inevitably, some traditional grow-ers will be unhappy. The bottom line,however, is that those Australiannavels and Spanish clementines aregoing to be in the markets anyway. Itis to Sunkist growers’ advantage,Gargiulo says, if their marketingcooperative can exert some manage-ment control of the situation. Byteaming up with quality foreign pro-ducers—instead of trying to competewith them—Sunkist believes it canbenefit its grower-members.

The key to Sunkist’s future lies inthe broad base of its marketingstrength and its ability to be the kind ofsupplier with the fruit varieties and thekinds of services today’s retailersdemand. In addition, Sunkist has thestrength of its brand, denoting quality,value, health and safety to consumersworldwide.

As a cooperative, Sunkist’s chargehas always been to sell the fruit itsmembers grow today. In the longterm, however, Sunkist must ensurethat it has the opportunity to sell itgrowers’ fruit in the future. “But asthe market changes and the produceindustry evolves,” Gargiulo promises,“Sunkist will never forget who itworks for.” ■

Sunkist CEO JeffGargiulo says the co-op would have pre-ferred not to startbranding foreign-grown fruit, but felt ithad no choice givenmarket trends.



By Shelly Grow, Henry A.Wallace Center; Amy Guptill,Cornell University; Thomas A.Lyson, Cornell University; andRick Welsh, ClarksonUniversity

Editor’s note: This article is based on“The Effect of Laws That Foster Agricul-tural Bargaining: The Case of AppleGrowers in Michigan and New YorkState,” available electronically atwww.winrock.org/GENERAL/Publica-tions/AgBargfinal.pdf. For a printed copy,contact the Wallace Center, (703) 525-9430, ext. 675. The study was funded by agrant from the Rural Business-CooperativeService of USDA Rural Development.

n agricultural bargainingassociation can providebetter prices and otherimportant benefits to itsmembers, according to a

new study of apple growers in two states.The study was conducted by researchersat the Henry A. Wallace Center forAgricultural & Environmental Policy atWinrock International, Cornell Univer-sity and Clarkson University.

Apple grower-members of theMichigan Agricultural CooperativeMarketing Association (MACMA), abargaining cooperative, indicate higherlevels of satisfaction compared to non-MACMA members and to New Yorkgrowers, which does not have a statecollective bargaining law. The studyfound that MACMA, on average, hasnegotiated higher apple prices forMichigan growers. This price differen-tial, however, appears to be diminish-ing over time due to intense competi-

tion, particularly from inter-national markets.

Mich., N.Y. laws contrastsharply

To establish a startingpoint for understanding thepotential impacts of strongcooperative bargaining lawsat the federal level, thisresearch examines theimpact bargaining can haveon prices producers receivefor their products, as well asother economic and socialbenefits bargaining can pro-vide. Apple growers inMichigan and New York were selectedfor study for these reasons:

■ Michigan has a strong law in sup-port of bargaining associations thatrequires binding arbitration and goodfaith bargaining. New York has nosuch law.

■ Michigan has a functioning bar-gaining cooperative for apples whileNew York has none (a previouslyformed cooperative in New York isnow defunct).

■ Apples are an important crop inboth states. Michigan ranks No. 3 in theUnited States in apple production, whileNew York ranks No. 2. Both statesprocess a significant portion of theirapple harvest and use similar processingmethods (canning, juice, freezing).

■ The apple commodity system fitsthe criteria outlined by earlier studiesfor potentially successful associations:limited ability for short-term entry intothe industry (perennial fruit crop) and aconcentrated processing sector. Inaddition, while Michigan and New

York are distinct markets for apples,growers in the two states share proces-sors. This reduces the chance that NewYork farmers may fear extremereprisals from processors should theyform a bargaining association, as theseprocessors have demonstrated theirwillingness to work with a bargainingassociation in Michigan.

Impact of priceThe effect of bargaining on prices

received by producers was measured bycomparing actual prices received bygrowers, according to processing type,from 1969 to 2001. Data were exam-ined for growers in Michigan, NewYork and nationwide. All prices wereconverted into January 2002 dollars.

This analysis shows that prices inMichigan for canned, juice and frozenapples were on average higher than theprices in New York and the overall U.S.price. This validates the importancebargaining plays in creating higher farmprices. But the data also reveal that: (1)

Apple indust ry s tudy shows va lueof p roducer barga in ing assoc ia t ions

A

Apple prices in Michigan were higher than both the aver-age New York and overall U.S. prices, which many growersin Michigan credit to the existence of the MACMA bargain-ing cooperative. USDA photo by Ken Hammond


real apple prices declined steadily for allgrowers over the time period studiedand that (2) the price differentialbetween Michigan and both New Yorkand the nation has diminished.

Growers blame imported apples andapple concentrate from China forfalling U.S. apple prices and the ero-sion of MACMA’s ability to favorablyaffect prices. This suggests that global-ization of agricultural markets poses asignificant challenge to domestic-onlybargaining associations.

Other benefitsBenefits other than price received,

particularly the degree of uniformityand quality of contract terms, are inmany ways the most important mea-sure of the success of bargaining associ-ations. However, these fringe benefitsare not easily quantifiable.

In this study, a short mail survey wassent to all known apple growers inMichigan and New York. Just over halfthe Michigan growers and just under halfof the New York growers returned validsurveys. The responses were divided intothree groups: (1) MACMA members; (2) growers in Michigan who are notMACMA members and (3) growers inNew York. Analysis focuses on both actual services available and the satisfac-tion of growers with their marketingopportunities. The responses reveal:

■ MACMA growers were morelikely to believe they have some influ-ence on the prices received for theirprocessed apple crop. For this group,26 percent either agreed or stronglyagreed with this view. Only 7 percentof Michigan non-MACMA and 8 per-cent of New York growers agreed orstrongly agreed with this view. In addi-tion, 18 percent of MACMA growers,10 percent of Michigan non-MACMAgrowers and 8 percent of New Yorkgrowers agreed or strongly agreed thatthey had some influence on the termsof trade for their processed apple crop.Clearly, more MACMA growers per-ceive they have some input into impor-tant aspects of the processed-applecontracts than other growers.

■ MACMA growers were also more

likely to believe they had input intopublic policy that might affect them.Almost 30 percent of MACMA grow-ers agreed or strongly agreed with thestatement that they had input intosuch state government policies. Lessthan 20 percent of the Michigan non-MACMA growers and about 25 per-cent of New York growers agreed withthe statement. Regarding input intofederal policies, 22 percent of MAC-MA growers, 17 percent of Michigannon-MACMA growers and 14 percentof New York growers at least agreedthat they had input.

■ MACMA growers were also morelikely than the other two growergroups to at least agree that they weregenerally satisfied with their marketingarrangements.

■ Almost 70 percent of MACMAgrowers support a new federal law thatrequires processing firms to bargainwith accredited grower bargainingcooperatives or associations. However,49 percent of Michigan non-MACMAand 56 percent of New York growersagreed with the statement.

■ Over 50 percent of MACMAgrowers agree or strongly agree withthe statement that they could find mar-keting assistance if they needed it,compared to only 17 percent of non-MAMCA Michigan growers and 13percent of New York growers.

■ Over 80 percent of MACMAgrowers and more than 50 percent ofthe growers in the other two groupsbelieve that grower bargaining unitsraise prices for all growers.

Satisfaction indexTo further investigate the potential

impact of membership in MACMA onattitudes and perceptions, researchersconstructed a “satisfaction” indexfrom the six survey items discussedabove. A statistical regression analysiswas performed using responses toother survey questions to ensure thefindings were valid.

The results indicate that member-ship in MACMA brings with it moresatisfaction as measured by the items inthe index. MACMA members: (1) feel

generally satisfied with marketingarrangements; (2) feel they can receivehelp in finding apple markets and (3)feel that they have input into contractterms and price, as well as input intostate and federal policies.

These results are not surprising con-sidering that MACMA actively lobbieson behalf of its member growers, repre-sents them in contract negotiationswith processors and maintains a mar-keting desk that will find outlets formembers’ apples as needed. The impor-tance of these findings is that the mem-bers surveyed realize such efforts arebeing made on their behalf, and theirperceptions differ from those of growers not in the organization.

Other factors that were found togenerate grower satisfaction includehigher numbers of processing firmsavailable as buyers, lower percentagesof the apple crop sold as processedapples, fewer times selling to process-ing firms without an agreed-uponprice, lower percentage of the freshapple crop from packing house cullsand membership in an apple processingcooperative that meets members’ marketing needs.

ConclusionThe histories of the New York and

Michigan apple industries indicate thatstate legislation that protects growers’ability to organize is essential for estab-lishing viable bargaining cooperatives.It is also clear that the presence of abargaining cooperative has enhancedthe welfare of Michigan growers, espe-cially MACMA members.

Comparisons of apple prices inMichigan, New York and the UnitedStates as a whole from 1969 to 2002show that Michigan growers receivedhigher prices for their apples throughmost of this period. The price benefitappears to be shrinking, however.Apple growers assign blame for fallingU.S. apple prices to imported applesand apple concentrate from China.

The results of the mail survey indi-cate that MACMA members tend to bemore satisfied than non-members.


By Steve Thompson, writer-editorUSDA Rural Development [email protected]

Editor’s note: this is the second of threearticles focusing on the community-build-ing efforts of electric cooperatives.

o most urban Ameri-cans, their electric power provider remainsout of sight and out ofmind—except during

power failures and when the electricbill comes due. But in rural Georgia,an electric distribution cooperativehas made a place for itself as a com-munity institution, through its effortsto make a positive impact on the livesof its members and their families andneighbors.

Walton Electric Membership Cor-poration is headquartered in Monroe,Ga., about 35 miles east of Atlanta. Itserves 100,000 electric subscribers inten counties, including parts of thegreater Atlanta area. The co-op workshard at fulfilling its prime mission ofproviding the energy needed to keepits service area thriving. Walton EMCaggressively rides herd on costs tokeep its electric rates stable, whilekeeping its infrastructure healthy andreturning $2 million in capital creditsto its members last year. The coopera-tive maintains a reputation for excel-lent customer service and has receivedseveral recognition awards for itscommunity outreach efforts.

Walton’s products are no longerlimited to electricity. Last December,Walton EMC Natural Gas, a new affil-

iate, began supplying mem-bers with gas priced up to 25percent less than other gasmarketers in the area. Anoth-er affiliate supplies securityequipment and services in theco-op service area andbeyond.

Co-op’s commitmentto community service

By most measures, thatkind of record would spellsuccess for an electric co-op.But Walton has gone farbeyond its business role tobecome a major force forcommunity service. As theresult of its efforts, firemenget funds for new equipment.Low-income patients on pre-scription medications get helpto defray the cost. A man wholost his job gets help with his

T

Southern hosp i ta l i tyWalton Electric Co-op makes a positive difference for Georgia


Walton EMC’s “Round Up” program gave $10,000 toRecording for the Blind and Dyslexic, which transfersbooks to audio cassettes and CDs for visually impairedstudents.

Students of Shiloh High School in Gwinnett County, Ga., cheer a classmate testing an electric-powered car they built. The project is sponsored by Walton EMC, which provides practicalexpertise and other resources. Photos courtesy Walton EMC

mortgage payment. And the co-op isactively involved in sponsoring educa-tional activities in local schools.

Ronnie Lee, president and CEO ofthe cooperative, says that communityinvolvement is nothing new for Wal-ton. “When I came here 25 years ago,the co-op already had a long-standingtradition of being heavily involved incommunity service,” he says. Lee

thinks the reason is theattitudes of the peoplewho work for the co-op.“We’re just more service-oriented. That’s the kindof employees we have.”

The centerpiece ofWalton’s communityactivities is OperationRound Up, a program inwhich members volun-tarily agree to have theamounts on their electricbills rounded up to thenearest dollar. Morethan 30,000 membersparticipate in the pro-gram. Contributing an

average of 50 cents per bill, the pro-gram amassed about $180,000 lastyear. The money is used for smallgrants to deserving organizationsand individuals.

The recipients are chosen by a 15-member board of co-op member vol-unteers, each one appointed by a mem-ber of the Walton board of directors.Says Lee, “They do an outstanding job.They consider every application forhelp that comes in.”

Individual recipients of OperationRound Up funds include a man suffer-ing from cancer, whose current treat-ment is not covered by insurance. Anumber of people laid off from theirjobs or unable to work for one reasonor another, have been given help withtheir mortgage payments.

One elderly man received $1,500 forhearing aids he couldn’t otherwiseafford. A low-income family was given$1,000 for dental work for one of theirchildren. And a disabled man got fundsfor a ceiling lift to help his wife movehim in and out of his bed and theshower.

Organizations receive gifts fromOperation Round Up for even morevaried reasons. One, called Recordingfor the Blind and Dyslexic, was given$10,000 for transcribing books toaudio tape and CDs. A local chapterof Habitat for Humanity received$3,000 to install electric wiring in anew house. A group called Project

ReNeWal received $3,000 for furni-ture for a shelter for victims ofdomestic violence.

Local fire departments havereceived a number of grants for equip-ment and other purposes. And manyschools are beneficiaries of the pro-gram, having received grants for specialeducational equipment, furniture andspecial expenses.

Demand outpaces fundsThe main challenge with Operation

Round Up is that many more applica-tions are being received than the coop-erative has funds for. That means try-ing to get more members to participatein the program.

“It seems we’ve reached our satura-tion point,” said co-op spokesmanGreg Brooks. “When we began theprogram, we decided not to go with an‘opt-out’ sign-up, as many other co-opshave done.” With an opt-out option,co-op members are automaticallyenrolled in the Round Up programunless they call or send a postcard say-ing the want out.

Even though co-ops using an opt-out sign-up usually get higher partici-pation levels, Walton EMC felt thisoption would not be the best way toserve its members.

“Now it seems that we’re at aplateau,” Brooks continues. “But westill don’t regret not going the opt-out route. Besides providing a com-munity-service opportunity, Opera-tion Round Up is also a publicrelations opportunity and we didn’twant to create dissatisfaction andmake some members feel they wereforced into participation.”

Since the co-op has many moreapplications than funds, some verydeserving causes are not receivinggrants. “Our volunteer board frets andsweats over every application—it takesthis job very seriously—and it’s reallyheartbreaking to deny some of thelegitimate requests.”

As a side benefit, he notes, boardmembers see firsthand the good workthe co-op is doing and they’vebecome stauncher supporters of it.


Skilled linemen keep Walton’s infrastructure in good shape whileholding down service costs for co-op members.

The 2003 “Taste of Home” cooking school,co-sponsored by Walton, attracted 500 par-ticipants and raised $3,000 for a local Boysand Girls Club. The school has been present-ed annually for 50 years in the Walton ser-vice area.


Benefitting schools, youth groupsWalton’s support for education goes

beyond Operation Round Up. The co-op has a sponsor relationship with aschool in each of the 10 counties in itsservice area, participating in incentiveprograms for teaching excellence andhelping with expenses for teacherbreakfasts and other functions. Staffmembers also give presentations aboutelectrical safety and the history of thecooperative movement.

Every summer, the co-op sends adelegation of students to the GeorgiaCooperative Council Youth LeadershipConference, where they learn aboutcooperative associations and participatein exercises teaching teamwork andleadership skills.

The co-op also partners with thelocal Future Farmers of America(FFA) chapters in a career develop-ment program for students interestedin electrical work. One high-schoolphysics program got help for its elec-tric vehicle program, winning secondplace in the nationwide Electric Vehicle Congress.

Walton EMC employees areknown for their involvement in thecommunity as individuals, as well.Many volunteer at local schools,churches, and other community institutions. The employees areenthusiastic supporters of the Marchof Dimes and stage two golf tourna-ments every year to raise funds for thecharity. Lee says anyone is welcometo play, but most of the participantsare employees themselves.

Through the tournaments andother activities, such as a giantyard sale, co-op employees havewon top place in the local Marchof Dimes fundraiser four yearsrunning. And staff membersrecently began participating in“Relay for Life,” a 24-hour relaywalk-a-thon that raises moneyfor cancer research.

Having service-orientedemployees translates into highmorale and a willingness toexplore new ways to servemembers. The new natural-gasaffiliate is a good example. Co-op members were a drivingforce behind recent deregula-tion of the utilities industries inGeorgia, which made it possi-ble for electric co-ops to sellgas. It was Walton membersseeking improved gas servicewho asked cooperative manage-ment to enter the market.

“I was in the electric industry mywhole career, and natural gas is a littlebit different,” Lee says. “But we are anenergy company, and our customerswanted us to do it.” The new gas ser-vice started out with only eight cus-tomers last November. The number ofparticipants has grown to 15,000, andis expected to climb to 20,000 by thisfall. This growth has been achievedwith no advertising, other than in themember newsletter.

“It’s been mostly word-of-mouth,but we’ve gotten a really enthusiasticresponse,” says Lee. “Now I’m sure

we did the right thing.”Starting a security affiliate was

also in response to customer interest.The security business is differentfrom electric distribution, but, saysLee, “Customers know our name.”Walton got together with anotherelectric cooperative, Jackson EMC,to set up the new affiliate about fouryears ago.

Today, EMC Security is subsidiarywholly owned by Walton and JacksonEMCs. The venture has been success-ful, in part, because EMC offers a no-nonsense security product, sellingequipment separately from services,and not tying customers to onerousleases or monitoring contract require-ments like some competitors.

Monitoring fees are more than com-petitive. “There’s a six-month, 100percent money-back guarantee onevery system,” says EMC SecurityGeneral Manager Vince Raia. In aboutfour years, the customer base hasgrown to about 8,000, most of it in theAtlanta metropolitan area.

“It’s just another avenue we canserve,” says Lee. Though times havechanged, the Walton tradition of ser-vice is alive and growing. ■

Walton EMC was recently recognized with the first Samaritan BusinessEthics award, presented by the Covenant Counseling and Family ResourceCenter and the Gwinnett, Ga., Chamber of Commerce. The award recognizesbusinesses that are “doing the right thing” and which foster heightenedawareness of ethical business practices.

Covenant Board President Barbara Myers said Walton demonstratesstrong ethics and integrity toward customers, employees and the community.“Walton operates with the philosophy that the customer is given the benefit ofthe doubt,” she said. “Electric rates are structured to provide the most afford-able rates possible while recovering the cost of providing electric service.” ■

Walton saluted for business ethics

The Gwinnett County Golden Olympics, sponsoredby Walton EMC, is part of a statewide competition.Although medals are given, the main purpose of theevent is to encourage physical fitness amongseniors and to have fun.

By Karen Spatz, Co-op Development SpecialistUSDA Rural Development, California

hese are not your mother’s canned peachesanymore! A canned peach is not just a cannedpeach, it’s a fun, tasty food that fits today’slifestyles, thanks to innovative processorssuch as the Pacific Coast Producers (PCP)

cooperative in Lodi, Calif. One of the cooperative’s newestproducts is a single-serve fruit bowl which has the potentialto provide a significant boost to the long-stagnantprocessed fruit industry here.

How important is this new product? “It’s the life saver forthe industry,” says PCP President Larry Clay. PCP sees thepotential for 20 percent annual growth after its first yearmarketing the product. Clay credits the cooperative’s receiptof a USDA Producer Value-AddedGrant for helping PCP pursue thisnew market several years ahead ofthe timetable it could haveachieved on its own.

Finding success as a private-label packer

PCP is a processing and mar-keting cooperative formed in 1971,when there were few processorsand lots of fruit in the state look-ing for a home. This imbalancedrove down fruit prices for Cali-fornia growers, who responded byforming PCP.

Justin Micheli, a first-generationco-op member, says the market situ-ation in California today is similar tothat of the 1970s. “We really had noother choices but to join a coopera-tive, as no independent cannerswould buy our peaches. It is thesame today,” he says. Justin says that“the most important reason farmersjoin a cooperative is to secure ahome for their product. I would

never plant a tree if I did not have a home for my product.” TheMicheli family farm in Yuba City is headed by John Micheli,Justin’s son and vice chair of the PCP board of directors.

PCP’s operations have always differed markedly fromthose of most other canning cooperatives in that rather thandeveloping its own brand, the cooperative is focused onproducing for the private-label market. It began as a co-packer for Stokely Foods after purchasing three canningplants in California.

Until 1984, the co-op packed exclusively for Stokely,but then began packing 50 percent for private labels and50 percent as a co-packer. A decision was then made tomove toward 100 percent private-label packing, meaningthe cooperative puts its fruit in cans that bear the storebrand of various retailers. Today, it still packs all its fruitfor the private-label market. In the early 1980s, PCP

expanded production of tomatoproducts.

Today, PCP has 183 memberswho supply the cooperative withpeaches, tomatoes, pears, grapesand apricots. The cooperative stilloperates three plants, the newestof which is a tomato-canning plantin Woodland. Plants in Orovilleand Lodi process the co-op’s fruit.PCP added plastic-packagingcapacity in 1989.

USDA grant boosts fruit bowl plan

PCP was awarded a $450,000Value-Added Market DevelopmentGrant in 2002 by the Rural Busi-ness-Cooperative Service of USDARural Development. Grant fundswere used to pay for productionand marketing of single-serve fruitbowls under the private labels ofU.S. retailers.

The fruit bowls are 4 oz., single-serve plastic bowls manufacturedby a patented machine. It forms the


Advers i ty to Advantage Pacific Coast Producers uses USDA grant to develop single-serve fruit bowl market

T

V A L U E - A D D E D C O R N E R

Inside Pacific Coast Producers packing plant, where sin-gle-serve fruit bowls (below) are being produced for theprivate-label market. USDA photos by Karen Spatz


bowls, fills them with fruit and juice and then seals them.PCP’s fruit bowl packing line uses member-grown peachesand pears, which are mixed with juice, syrup or gel products.

As a private-label food processor and marketer, PCP doesnot have its own brand. In most cases, PCP follows markettrends, introducing new products to retailers after a brandedcompany has made inroads with a new product line.

PCP initially produced single-serve fruit bowls for DoleFood Co. under the Dole brand. But Dole cancelled its con-tract with PCP and began purchasing fruit bowls from a for-eign company.

Single-serve fruit bowls are fairly new in the cannedfruit aisle. Storebrands currently haveat least an equal market share with“brand-name” prod-ucts. So this is amajor potential mar-ket for a private-labelpacker, such as PCP.

Turning adversity into advantage

Finding opportuni-ty in adversity, PCPsaw this lost contractas an opportunity tocapture the emergingmarket in private-labelfruit bowls. It com-pleted a comprehensive marketing and feasibility study,which showed that there was an opportunity for the co-op inthis sector. A business plan was developed which defined howPCP could successfully compete against low-cost foreignproducers.

The PCP retail sales team made presentations to 51 retailstore chains, retail wholesalers and food service wholesalers. Itoriginally offered customers a line of six fruit bowl products,which has now been expanded to 14 products.

Among the customers PCP is packing fruit bowls for are:Albertson’s, Aldi, Unified Western Grocers, Fleming, Stop& Shop, Tops, Bilo, Giant, Brunos, Shaw’s, HannafordBrothers, Stater Bros., Western Family, Kroger, Fred Mey-er, Ralph’s, QFC, Food 4 Less and Smith’s. Also: Fry’s,King Soopers, Schnucks, K-VAT, Meijer, Shurefine Inter-national, White Rose, Nash Finch, Spartan Stores, TheSuter Co., Roundy’s, HEB Grocery Co., Publix, FarewayFoods and Amway. The co-op’s customer list also includes:Winn Dixie, Food Lion, Piggly Wiggly, Roche Brothers,Wegman’s, Great A&P, Weis Markets, Goya Foods, NuggetDistributing and Midland Foods.

PCP has shipped fruit bowls to 40 customers under 32different store brands. Those 40 customers have ordered 2million cases using over 70 tons of fruit. PCP hopes it will

add at least 10 more retail chains to its customer list in thenext year.

PCP leaders are positive about the long-term prospect ofthe fruit bowl market. External factors, however, couldhave significant impact upon it. In the initial introductionof the private-label fruit bowl product, two branded fruitleaders began discounting prices below those on whichPCP based its projections. This caused returns to dropbelow expectations.

Additionally, imported product from Thailand andChina caused U.S. prices to drop. Production costs in for-eign countries, due primarily to low-cost labor or largegovernment subsidies, pose a threat to undercut the price

PCP needs if it is to turn a profit for its members. But all factors considered, PCP leaders believe the strong

acceptance of the fruit bowl products by customers in theinitial marketing phase bodes well for the future. Theyanticipate growth rates of 20 percent per year. Consumeracceptance of the single-serve fruit product has been soencouraging that PCP believes this product will invigoratethe processed fruit market.

PCP’s grower-members will benefit from the increasedfruit demand to produce this new product, and they will real-ize the benefit not only through increased deliveries to thecooperative, but also through increased returns and patronagepayments for this value-added effort.

“There was the grower demand to sell more of theircrops and, thanks to the grant, we had the resources andcapacity to provide the public with the finished product,”Andy Russick, vice president of retail sales for PCP,recently told the Oroville Mercury Register. “We couldn’thave done it without the USDA grant program.”

For more information about PCP, visit its Web site: http://www.pcoastp.com/. For more information on USDARural Development’s Producer Value-Added Grant Program,visit www.rurdev.usda.gov/ rbs/coops/vadg.htm or call GailThuner at (202) 690-2426. ■

PCP members’ peaches and other crops are processed into single-serve fruit bowls and other fruit products by the co-op. PCPPresident Larry Clay says this convenience food has the potential topump new life into the stagnant canned-fruit industry.

By Pamela J. Karg

Editor’s note: Karg is communications specialist based inBaraboo, Wis., with extensive experience working with cooperatives.

challenge the premise of the question ‘What isDairylea doing to survive?’” says Rick Smith,chief executive officer of the dairy cooperativebased in Syracuse, N.Y. “Who wants to justsurvive? We want to thrive and have our mem-

bers thrive. In doing that, we’re finding ways for our mem-bers to enhance their farm income.”

At a time when many food businesses are growing in thenumber of plants, suppliers and employees they encompass,Dairylea Cooperative Inc. has taken a different tack. Like awell-positioned Wall Street financier, the Northeast’s largestmilk-marketing organization has diversified its portfolio ofservices in response to a changing farm economy.

“I give credit to the organizations that have found ways tobe successful with dairy processing plants and brand names,but there’s not just one way of doing business. And neitherway is right or wrong. It’s a matter of what works for yourfarmers and your organization,” Smith explains.

A history of changeBut Dairylea’s current focus did not happen overnight. In

fact, the cooperative’s history and the Northeast dairy sceneare rife with change.

A group of Orange County, N.Y., dairy farmers united in1907 to increase their bargaining power, forming one of thefirst cooperatives in the country: The Dairymen’s League. Bythe 1930s, its membership had grown to more than 100,000farms. To guarantee a market for its members’ milk, theLeague began operating its own processing and manufactur-ing plants. And its Dairylea line of products became one ofthe best-established brands in the region.

In 1969, the League changed its name to its popular con-sumer brand name, Dairylea. But by 1988, Dairylea had soldits product lines and the last of its milk plants, and refocusedits resources on enhancing the overall profitability of itsmembership.

Dairy farming is the largest agricultural industry in

Dairylea’s home state of New York, providing more than 50percent of its agricultural income. In 2002, the state hadabout 7,100 dairy farms with almost 679,000 milking cows,making New York the third largest dairy state in America.But the majority of the dairy industry moved to the UpperMidwest a century ago and is shifting again to California,Texas, Washington, New Mexico and Idaho.

The Northeastern and Mid-Atlantic regions remainmajor milk-producing regions despite the decline in farmand cow numbers there. New York and Pennsylvaniaremain among the top milk-producing states in the coun-try. The region produces about the same amount of milkas California within a similarly sized geographic region.However, the region has almost 50 percent more con-sumers than does California. This makes it a prime loca-tion for dairying.

Today, Dairylea is a fast-growing, service-oriented andmulti-faceted organization. Since the early 1990s, Dairylea’smembership has grown substantially throughout the regionand the volume of raw milk that it markets has quadrupled. Atthe same time, Dairylea has greatly expanded its array of pro-grams and services to reflect what its members want from thecooperative. More than a marketer for its farmers’ milk,Dairylea and its subsidiaries are focused on maximizing theprofitability of each member’s farm operation, Smith explains.

“Our mission is to enhance our farmers’ profitability.Profitability has two major components: income and costs.Not only does Dairylea work hard to secure a competitiveprice for member milk, but it also provides programs and ser-vices that help make a farm business efficient and profitable,”Smith says.

Milk marketing partnerships“Many of the long-term, major dairy companies of the

past have exited the region, while others have merged,” saysDairylea President Clyde Rutherford, who operates a 500-acre dairy farm with his wife, Jeannette, and partners Elmerand Ann Johnson. “The number of milk plants in the regionhas declined. This will continue. In general, we are no longerdealing mainly with the family-owned businesses that weknew for generations. Many of the major dairy operations inthe East are part of diversified mega-corporations, manyinternational in scope.”

More than mi lkDairylea’s scope of farmer services moves beyond milk marketing

“I


On this sea of change, Dairylea has emerged as the largestmilk-marketing organization based in the Northeast. Lastyear, it sold 5.5 billion pounds of raw milk through a milk-marketing network that reaches from Maine to Ohio toMaryland. Sales have steadily increased and are now at $1billion. The cooperative also has investments in several dairycompanies in the region, as well as many long-term salesagreements.

“Dairylea has developed a strong yet flexible milk market-ing network throughout the Northeast. We maintain busi-

ness agreements and joint ventures withother cooperatives and proprietary com-panies, and are, therefore, free of depen-dency on any one plant, customer or rela-tionship,” Smith explains.

In September 1999, Dairylea formed apartnership with Dairy Farmers ofAmerica (DFA), Kansas City, Mo., thenation’s largest dairy cooperative. Thenew entity, Dairy Marketing Services(DMS) LLC, markets nearly 16 billionpounds of milk provided by more than9,500 dairy producers in the easternregion. It is supplying the milk require-ments of more than 90 processors andmanufacturers in the region.

As the retail industry continues to con-solidate, DMS has played a vital role inthe industry. Last year, DMS became anational company and has establishedmilk marketing relationships with indus-try giants such as Dean Foods, Land OLakes, Vermont-based cooperative St.Albans and others.

“We are excited about this venturewhich allows for increased savings for ourfarmers on milk hauling and supply distri-bution,” says Rutherford. “At the sametime, we are managing near 50 percent ofthe Northeast’s milk supply, which enablesus to provide superior service to our cus-tomers, particularly those large dairy com-panies with multiple plant operations.”

Before the formation of DMS, Dairyleaand DFA had a common investment inDietrich’s Milk Products in Pennsylvania,and had milk exchange arrangements withseveral of their common customers. Thecreation of DMS has improved the effi-ciency of serving the fluctuating needs ofall their customers, including major play-ers Dean Foods, Kraft Foods, Great LakesCheese, Leprino Foods, H.P. Hood andSorrento Cheese.

“For many, many years, farmers havebeen concerned about the lack of cost-effectiveness regard-ing several milk tankers going down the same roads andpicking up milk at different farms depending on whichcooperative the farmer belonged to,” adds Rutherford.“Additionally, milk supplies that were logical for a particu-lar plant often went to a more distant facility because thecooperative serving that customer did not market that localblock of milk. With the creation of Dairy Marketing Ser-vices, we have moved a giant step closer to maximizing theefficiency of milk assembly and distribution in our region.”


New York, home of Dairylea, has more than 679,000 dairy cattle, making it the third largestdairy state in the nation, lagging only California and Wisconsin. Grant-Heilman Photography

Beyond the milk truck“Dairy farmer-owned cooperatives have changed over the

years,” adds Rutherford. “Some have merged and some havegone out of business. At the same time, organizations thatprovide services for farmers have changed significantly inrecent years.”

The first issue that moves a farmer from one milk-marketingorganization to another is price. Dairy farmers will jump shipfor what seems like a few pennies for every 100 pounds market-ed, which can quickly add up to thousands of dollars annually.

But Dairylea has moved beyond just the assembling andmarketing of milk, and then paying farmers a competitiveprice for their raw supply. The approach seems to be payingoff in the cooperative’s ability to attract more people to itsmembership, which has grown steadilyover the past few years, says Smith. Hebelieves that growth comes from theadded services that fill a void and focuson helping farmers reduce their costs.

In addition to DMS, Dairylea’s othersubsidiaries include Agri-Edge Develop-ment, Agri-Services Agency, Eagle DairyDirect, Empire Livestock Marketing andAgri-Financial Services. It also maintainsa partnership with Dairy One—the for-mer Northeast Dairy Herd Improve-ment Association. Each entity adds valueto the membership a farmer holds in thecooperative.

“We continue to examine new waysof doing business. Some of our ideaswould be viewed as non-traditional for adairy cooperative,” admits Smith. “Inrecent years, Dairylea has evolved frombeing strictly a milk-marketing cooper-ative to becoming an agricultural ser-vice organization that focuses on milk marketing.”

Agri-Edge DevelopmentDairylea’s Agri-Edge subsidiary is a business- and develop-

ment-planning venture that focuses its efforts on problemsolving, sourcing solutions and mobilizing needed resourcesfor farm and non-farm agricultural businesses.

Agri-Edge Development has reviewed hundreds of farmand non-farm businesses since it started in 1998. It hasworked with a wide range of business types in their efforts toexpand operations, upgrade facilities, implement new tech-nology, start a new venture, enter into a joint venture, turn adifficult situation around, or simply improve profitability.

In one instance, Agri-Edge helped a young dairy farmerwho was milking 80 cows in a rented facility to implement aplan to buy a quality facility from an older farmer. Workingwith the young farmer’s primary lender, Agri-Edge helpedsource capital for the additional cows needed to make thepurchase provide sufficient cash flow. It even assisted with

sourcing of the animals. Additionally, a group of advisors wasbrought together to work with the young farmer in his start-up operation. A milk price risk management plan was devel-oped to provide support to the farmer and the lender in theface of price volatility.

This subsidiary is focused on delivering results for individ-ual agribusinesses to invigorate the region’s agriculturalindustry and rural economies, explains Tom Shephard ofAgri-Edge.

Agri-Service AgencyThis is the oldest of the services offered by Dairylea,

and it provides farmers and their employees across thecountry access to a wide variety of competitively priced

insurance programs.Coverages include medical, dental,

workers’ compensation, disability, lifeand long-term care insurances for farm-ers, their families and their employees.Most notably, its workers’ compensationcoverages provide up-front discounts, apotential dividend and the lowest netcost available in the marketplace. TheBlue Cross and Blue Shield network, along-time insurance leader, sponsors itsnational health plan.

Agri-Services Agency (ASA) also offersand administers the innovative FarmerFlex benefit plans that can save money foragribusinesses, farmers and their employ-ees. In addition, Medical Expense Reim-bursement Plans are available, which allowthe average family of four to save about$100 per month by allocating pre-tax dol-lars toward insurance-related expenses.This program allows participants to ear-

mark funds for the cost of insurance premiums, deductiblesand non-covered medical, dental and vision care expenses.

More than 60,000 farmers, agribusiness owners, theiremployees and families are covered by ASA insurance plans.The vast majority of its business is in the health-care andworkers’ compensation insurances.

In New York, ASA provides EMPACT—the Empire StateAgricultural Compensation Trust. Structured as an indepen-dent trust, EMPACT is able to offer substantial up-front pre-mium savings as well as year-end dividends.

ASA provides workers’ compensation coverage through itsAgri-Services Safety Group program in New York, Pennsyl-vania, New Jersey, Delaware, Maryland, Virginia, Connecti-cut, Massachusetts, Vermont, New Hampshire, Rhode Islandand Michigan. This group offers its members discountedrates and year-end dividends, resulting in significant savings.A bonus dividend is often available for those farms and busi-nesses with favorable safety records.

Additionally, ASA conducts an on-going farm safety pro-


“Dairylea has evolved from being a milk-marketing cooperative to becoming anagricultural service organization thatfocuses on milk marketing,” says DairyleaCEO Rick Smith. Photo courtesy Dairylea

gram for participants in its workers’ compensation programs. The goal of the safety program is to reduceemployee injuries by improving work practices and providingsafer work areas. Fewer injuries result in fewer claims, there-by lowering workers’ compensation premiums.

Agri-Financial Services and Dairylease

Because today’s farmers are spending more time with con-sultants, bankers and others to help plan and implementshort- and long-term business strategies, Dairylea developedAgri-Financial Services and Dairylease cattle leasing program.

Whether a farmer is looking to purchase a new tractor,expand his or her herd, or make some much-needed updatesand repairs to facilities, theseprograms offer an additionalsource for funding for Dairyleamembers.

Besides a line of credit, Agri-Financial Services offers capitalloans. Both have maximum termsof five years.

In addition, the Dairylease cat-tle leasing program was initiatedin 1996 to give farmers anotheroption for financing cattle. Thetax benefits, along with the factthat a lease frees up capital forother areas of the business, areattractive to many Dairylea farmers. The premise that assetsdo not have to be owned to be successful holds true for cattle,as it does for equipment, vehicles and land.

This 36-month program provides the option for a buy-outat the end of the lease for a predetermined amount. Also, thefarmer keeps all offspring born to the leased cows whileagreeing to replace any leased cows that are sold or culled.There is a minimum of 20 cows required for a lease, and themaximum lease would be 50 percent of the farmer’s herd.

“The key to this program is that the farmer selects theanimals and negotiates the price,” explains Karen Cartier,who works with the Dairylease program.

Buying programs To help members reduce farm input costs, Dairylea has

developed several innovative buying programs through itssubsidiary, Eagle Supply Co. For members looking to savemoney on corn and forage seeds, fertilizer, chemicals, phar-maceuticals and a variety of other farm and milk house sup-plies, the Dairy Direct offers reduced pricing and direct-to-farm delivery.

Additionally, a large-scale buying program is in place forthose members who can take bulk delivery of products rang-ing from commodities to minerals to milk replacer to silageplastic. Purchasing products on-line through Eagle SupplyCompany’s e-commerce site will soon be possible.

Livestock marketing ventureIn 1999, Dairylea launched another marketing venture

when its Empire Livestock Marketing LLC (Empire Live-stock) subsidiary joined with L&L Livestock to create a newdirect marketing program. Empire Livestock is the largestfull-service marketer of livestock in the Northeast. It oper-ates nine regional markets and a direct marketing facility,commanding more than a 50 percent market share of all live-stock sales in its operating territory.

Empire Livestock offers a variety of enhanced services tohelp producers maximize income from the sale of livestock,equipment and facilities. When bovine spongiformencephalopathy (BSE) fears devastated the livestock indus-try in the United Kingdom two years ago, Empire Live-

stock played a leading role inaddressing public concerns aboutthe safety of domestic livestock.

Dairylea partners with Dairy One

Having access to a reliable andaccurate milk testing and informa-tion system is an extremely valuablemanagement tool for dairy farmers.Smith says that’s why Dairylea andthe Northeast Dairy HerdImprovement Association joinedforces several years ago to createDairy One—an information tech-

nology cooperative that provides farm management informationservices throughout the Northeast and Mid-Atlantic regions.

Since its formation, Dairy One has succeeded in expandingand improving laboratory testing and information reportingservices. In addition, it is better able to respond to the individ-ualized needs of the region’s farmers. Dairy One servicesinclude milk testing laboratories for DHIA analysis, producerpayment analysis and dairy research analysis; records servicetailored to the needs of individual farmers to help make prof-itable herd management decisions; dairy management soft-ware and support; and a feed and forage laboratory.

Where to next?“Controlling the expense side of the dairy operation, we

believe, is as important as enhancing the revenue side,”Rutherford says.

To that end, Dairylea turned to its members again to analyzetheir needs and determine how the cooperative could assist. OnApril 1, a new employment company was added to its portfolio tohelp place people on Northeast dairy farms. The new service willprovide employment screening, hiring, training, resource andsupporter materials, and “help bridge cultures,” explains Smith.

“No one across this geographical area is doing businesslike we are,” he adds. “We recognize a need in our membersand we determine if, and how, we can provide services. We’vebeen very proactive.” ■


New free-stall barns such as this one are a common sight inNew York, as dairy farmers follow the trend to modernize theiroperations and expand their herds. Photo courtesy Dairylea.


E. Eldon EversullAgricultural EconomistUSDA Rural Business-CooperativeService

Editor’s note: Information for thisarticle was collected by USDA/RBS co-opstatistics staff members Celestine C.Adams, Katherine C. DeVille and Jacqueline E. Penn.

ven with lower prices inmany agricultural sec-tors, net business volumefor the nation’s farmer-owned cooperatives

increased by almost 4 percent in 2001,to more than $103 billion. Leading theway once again was Minnesota with$9.9 billion in sales by farmer coopera-tives (table 1). Minnesota took over thetop spot for the first time in 1999.

Iowa, which was the leading state in1997, was second in 2001, with coopera-tive net business volume of $9.2 billion.Wisconsin, at $8.7 billion, fell from sec-ond to third place. USDA has been col-lecting statewide cooperative data everyother year since 1951 (figure 1).

Iowa had the largest gain in co-opsales since 1999, increasing $1.3 bil-lion. Of that amount, $1.2 billion wasfrom additional products marketed.Wisconsin had an additional $516 mil-lion in marketing sales while Minneso-ta’s gain of $590 million was almostequally divided between marketing andfarm supply sales. Cooperative salesincreased in 34 states and the Districtof Columbia, while 16 states experi-enced a sales decline.

A breakdown by sale of individualproducts shows the following high-

E

Minnesota leads the nat ion inco-op bus iness vo lume

Figure 1—Cooperatives’ total net business volume by function,ten leading states

10

8

6

4

2

0

MN IA WI CA IL KS NE MO TX WA

Billi

on $

Service Farm Supply Marketing

Figure 2—Number of cooperatives by function, ten leading states,2001

350

300

250

200

150

100

50

0

MN ND TX WI IL CA IA KS SD NE

Num

ber


lights for the leading co-op states from1999 to 2001:

■ Minnesota cooperatives increasedsales of milk/milk products by $263million; grains/oilseeds by $232 millionand petroleum by $256 million.

■ Wisconsin cooperatives increasedmilk/milk product sales by $356 million.

■ Iowa cooperatives increasedgrain/oilseed sales by $648 million;livestock/poultry by $346 million andmilk/milk products by $120 million.

Cooperatives in the 10 leadingstates increased their net business vol-

ume by about $2.5 billion in 2001compared with 1999. These coopera-tives account for 60 percent of totalnet cooperative business volume, 63percent of marketing volume, 51 per-cent of farm supplies sold and 66 per-cent of total service sales.

Minnesota was the top state formarketing cooperative products; Iowawas tops for selling farm supplies andCalifornia had the highest servicereceipts for cooperatives. Minnesotaled all states in cooperative marketingof sugar and in manufactured food

products and was second in milk/milkproducts and grains/oilseeds.

Iowa was the top state for coopera-tive marketing of dry beans/peas andgrains/oilseeds and was second for live-stock and manufactured food products.Wisconsin was first for cooperativemarketing of milk/milk products.

For cooperative farm supply sales,Minnesota was the leader for petrole-um and was second for feed and othermiscellaneous farm supplies. Iowa wasfirst for cooperative sales of feed, seed,


Table 1—Farmer cooperative numbers, memberships, and net business volume by State, 20011,2

Cooperatives Cooperativesheadquartered Memberships Net business headquartered Memberships Net business

State in state in state3 volume4 state in state in state3 volume4

Number Million $ Number Million $

Alabama 62 42,222 950 North Carolina 22 96,351 975Alaska 9 4,812 44 North Dakota 239 120,303 3,292Arizona 9 2,710 608 Ohio 73 53,407 2,792Arkansas 52 55,431 1,671 Oklahoma 81 65,640 1,562California 171 49,553 7,573 Oregon 33 27,043 1,704Colorado 47 29,122 1,119 Pennsylvania 54 33,442 1,441Connecticut 5 1,899 214 South Carolina 5 2,639 185Delaware 3 43,430 104 South Dakota 126 98,395 2,700Florida 40 29,753 2,414 Tennessee 79 137,805 809Georgia 17 21,748 1,677 Texas 238 109,926 3,876Hawaii 20 904 29 Utah 17 9,354 512Idaho 37 20,259 1,422 Vermont 5 4,557 523Illinois 175 175,871 5,470 Virginia 57 193,470 847Indiana 46 66,818 2,071 Washington 78 31,664 3,331Iowa 166 162,249 9,232 West Virginia 26 83,051 99Kansas 133 129,576 4,794 Wisconsin 175 186,490 8,738Kentucky 42 242,873 708 Wyoming 12 5,485 241Louisiana 47 13,032 736 Other States 4 2,440 111Maine 26 7,922 225 Foreign — 2,765 500Maryland 17 74,404 411Massachusetts 12 4,573 637 United States 3,229 3,033,907 103,269Michigan 62 28,660 2,198Minnesota 293 176,594 9,896 1 Includes cooperatives with centralized, federated,Mississippi 70 111,043 1,056 and mixed organizational structures.Missouri 66 109,134 4,611 2 Data for states with fewer than three cooperativesMontana 65 33,066 719 combined with other states. Totals may not add Nebraska 95 84,834 4,721 due to rounding.New Jersey 16 7,052 388 3 Includes farmer members entitled to vote for New Mexico 10 2,705 507 directors. There are more members than U.S. New York 92 37,431 2,826 farmers because many farmers belong to more

than one cooperative.4 Excludes inter-cooperative business.


By Patrick Duffey, writer-editorUSDA Rural Development

any parents have read the “Little Engine ThatCould” story to their children, but this mightbe called a tale of the “Little Creamery ThatCould.” Today’s small community business inthe southwestern Wisconsin village of West-

by, Wis., was started in 1903. Few thought surviving grand-children five generations later would still live to see it andenjoy its dairy products, which would eventually be differen-tiated as “farmer-certified rBGH-free.”

In many ways, little Westby Cooperative Creamery strivesamidst some of the nation’s major dairy cooperatives operat-ing in Wisconsin’s Dairyland. This year, Westby is celebrat-ing its 100th anniversary. The small community amidstscenic rolling hills unscathed by glacial flows of 10,000 yearsago is located just west of the state’s capital at Madison.

On Oct. 31, 1903, 300 Vernon County dairy farmers paid$10 each for a capital stock certificate and filed articles of incor-poration to form the cooperative. The typical farmer then hadabout 10 cows. Small farms dotted the landscape. Local farmers

brought cream by horse-drawn wagons to the factory, whichwas built for $1,225 on a parcel of land that cost $400.

In 1927, the Main Street factory was built and still stands,albeit with subsequent remodeling and additions. That firstyear, the cream from Vernon County dairy farms was madeinto 67,524 pounds of butter.

Demise of milk cansAlthough the first generation is gone, several second- and

third-generation patrons still recall the early days. CarlaOlson, 83, of Westby is a second-generation patron. “Cowswere milked by hand and milk was separated from creamwith a hand-cranked separator,” she says.

Her father-in-law, Arne Olson, traveled with his brotherfrom Norway in 1893 by steamship, settled in the Westbyarea and helped build the original creamery building. Inthose days, many made their own cheese and butter at thefarm, she recalled.

In time, Model T cars and trucks replaced the wagons andlater came even larger trucks that hauled the metal cans,which contained 100 pounds of milk. The old standby cansgave way to bulk tanks at the farms by 1969.


M

Wiscons in ’s Westby, ‘L i t t le C reameryThat Cou ld ,’ marks 100th ann iversary

A cooperative milk tanker, circa 1943. Right, sorting empty milk cans at the Westby Cooperative“new building” in the early 1940s. Photos courtesy Westby Cooperative


Today, Vernon County has only 600 surviving dairy farm-ers, and the milk feeding the cooperative comes from 120members in a half dozen surrounding counties. Westby oper-ates with a staff of 37.

As a farmer-owned cooperative, the Westby CooperativeCreamery takes pride in the traditions started a centuryago. Its hard cheeses are handcrafted in open vats byqualified cheesemakers, not machines. And its pure and

natural butter recipe hasn’t changed in 100 years.Its main products are cottage cheese, sour cream, butter

and a variety of cheeses made from about a third of the milkthe cooperative receives. The balance is sold to other dairyprocessors.

Cheddar cheesemaking at Westby Cooperative in Vernon County,Wis., during the 1940s.

The Westby intakeroom in 1942, wheremilk was dumpedand weighed.

Westby label is bornWhen Tom Gronemus took over as manager in 1992,

Westby had lost a major market. For many years it madeand sold bulk cottage cheese to Dean Foods. But thatrelationship ended in 1992.

The creamery was making 500-pound barrel cheese

for Borden and 68-pound packs of butter for the federalgovernment. “We didn’t even have a label or logo,” herecalls. His 30 years with the cooperative makes him per-sonally familiar with the most recent third of its history.

When Gronemus moved into management, he and theboard jumped into marketing and developed the “Westby”label. They recruited a sales force, created and tried newproducts and now have developed a distribution system todeliver fresh products direct to the stores.

Fresh cheese curds have become a specialty. “During thesummer, we sell 30,000 to 40,000 pounds of them and ourlocal dairy store at the creamery is a popular stop for localcustomers and travelers,” Gronemus says. “We emphasizehigh-quality dairy products made with milk from smalldairy farms.

“All of our milk is farmer-certified rBGH-free, which alsoappeals to many people. Our dairy farmers believe hormonesused to enhance milk production stress their cows and there-by decrease the quality and wholesomeness of the milk.”

Official ‘Packers’ Cheese’Steve Holte, who milks 50 cows near Westby, heads the

board of seven directors as it embarks on its journey into thecooperative’s second century. The newest feather in thecooperative’s cap is the contract it signed last summer to pro-vide the Official Cheese of the Green Bay Packers, home ofthe “Cheeseheads.”

Manager Gronemus says the cooperative is “thrilled aboutthe new partnership. We started off with a new product linewith the ‘Official Cheese Curds of the Green Bay Packers’

and expanded the line duringthe season.”

When ABC’s Monday Night Football traveled to Lambeau Field last November,Westby capitalized on theopportunity, commissioningcheese carvings of ABC’s John Madden and Al Michaels.

Fans got a taste of the newproducts when the curdsreached most Wisconsin gro-cery stores last fall. Westby’sproducts can also be orderedonline at www.westbycream-ery.com.

The creamery launched thefirst of its many centennialcelebrations this spring withthe “World’s Largest OfficeParty,” sponsored by aLaCrosse area radio station. Itattracted nearly 5,000 partygoers who witnessed thecreamery’s cheese curd tossand sampled products.

Cheese carvings of the localradio personalities were madefrom young cheddar cheese

and later used in promotions at local grocery stores.

Curd Mobile debutsThe official birthday party, dubbed ‘The Ultimate

Cheesehead Challenge,’ was conducted in mid-May as partof the community’s annual Norwegian Syttende Mai cele-bration. In addition to celebrity appearances from GreenBay Packer Mark Tauscher and legendary farm broadcasterOrion Samuelson, the observance marked the long-antici-pated debut of the Westby Cooperative Creamery CurdMobile. Time ran out before Gronemus could train anyoneelse, so he was busy adding batter and frying curds for thelong line of eager customers.

It proved to be a popular place to promote the coopera-tive’s array of products, and a profit center. “It far surpassedmy expectations in terms of sales and interest,” he said.

Westby promotes the freshness of its dairy products. “Ourbutter, for instance, is made from fresh cream only a fewhours old,” Gronemus proudly proclaims. The cooperativeclaims this freshness gives its products a special flavor.

So what’s ahead for this “little creamery that could?” If itsperformance in the past 100 years is any barometer, Westbywill be digging deeper into its market with new and betterproducts for its customers, and reminding existing and newmembers that when you’re part of a cooperative, great thingscan be accomplished. ■


Even Westby dairy cows are fans of the Green Bay Packers,appropriate since the co-op has been designated as the official“Packers Cheese.”

HS Chief ExecutiveOfficer John Johnson,whose communicationsskills helped his coop-erative transition

through a major merger, is the 2003recipient of the CEO Communicatorof the Year Award, presented in Juneby the Cooperative CommunicatorsAssociation (CCA). CCA observed its50th anniversary in Madison, Wis.,marking a return to the city wherethe organization was launched in1953 to help strengthen the nation’scooperatives through improved communications.

Other top honors went to RuralCooperatives editor Dan Campbell,who received the Klinefelter Award,and Tennessee Cooperator editor AllisonMorgan, who earned the MichaelGraznak Award. Randall Torgerson,who recently retired after 28 yearsheading USDA’s cooperative pro-gram, won a special “Co-op Champion Award.”

Originally known as the CooperativeEditorial Association, the organizationtoday represents 300 communicationsprofessionals in the United States andseveral foreign nations who work forfarm, utility, credit, housing and othertypes of cooperatives.

Communications forgenew identity for CHS

Johnson’s communications effortsplayed a key role in successfully forg-ing a new identity for CHS, a multi-faceted cooperative with $8 billion inannual sales. CHS was formed by themerger of CENEX, an energy andagronomy supply co-op, and Harvest

States Cooperative, one of the nation’sleading grain marketing co-ops.

“In the five years since CHS Coop-eratives was established, John Johnsonhas proven himself a skilled leader atnot only setting direction for the newcompany, but in using communica-tions to build understanding and sup-

port among members, employees, cus-tomers and other stakeholders,” saysLani Jordan, CHS director of corpo-rate communications.

Although members of the two co-ops voted overwhelmingly in favorthe merger, the ride got a little rockyin the early days, making it essentialthat Johnson and his staff communi-cate effectively at all levels. Membersfrom both the grain and supply sidesof the organization struggled tounderstand the direction of the new

company, as did the employees ofboth cooperatives. If that wasn’tenough, another merger a year laterbetween CHS and Farmland Indus-tries was proposed, but was voteddown by the members, creating fur-ther communications challenges.

Johnson, who was originally presi-dent and general manager of CHS,assumed the CEO job in June 2000.He made communications and rela-tionship building a top priority fromthe first day, working tirelessly to buildtrust in CHS. That trust has translatedinto long-term support for the cooper-ative’s mission, vision and strategicactions to implement them.

Today, communications is a centralpart of the cooperative’s strategic visionand daily operation. Johnson spendsthree-quarters of his time communicat-ing formally and informally with CHSstakeholders.

USDA editor honoredDan Campbell, editor of USDA’s

Rural Cooperatives magazine and deputydirector of public affairs for USDARural Development, won the Klinefel-ter Award, CCA’s highest honor for acommunicator, for his “contributionsto furthering the cooperative systemand spirit and raising the standards ofcooperative communications.”

Campbell was cited for bringingnew ideas to the leaders of the nation’sco-ops and expanding the scope of themagazine to include a broader range ofcooperatives that can help improve thequality of life in rural areas.

“He is known for his creative writ-ing, insightful photography and hisexcellence in producing good, solid


C

Top co-op communicatorshonored in Madison

Dan Campbell

John Johnson

Allison Morgan

publications,” said award presenterLeta Mach of the National Coopera-tive Business Association.

A graduate of the University of Colorado with a degree in journalism,Campbell started his post-collegecareer at the bottom—literally—working 2,000 feet underground in amolybdenum mine high in the Col-orado Rockies. He then became newseditor for a twice-weekly newspaper inEstes Park, Colo., before moving onto the job of farm editor of a dailynewspaper and a monthly farm tabloidin Central California.

That was where he first began work-ing with ag cooperatives, leading himto a job as publications editor for BlueDiamond Almond Growers in Sacra-mento. That in turn led him to the edi-tor’s job at USDA in 1992.

Campbell is the 45th recipient ofthe honor, named for H.E. Klinefelter,an outstanding writer who joined thestaff of Missouri Farmer magazine in1931, now MFA Inc.’s Today’s Farmer.Klinefelter assumed the editorship in1939 and became well known for hisarticles advocating cooperatives. Hedied in 1956.

TFC editor gets Graznak Allison Morgan, communications

specialist with Tennessee FarmersCooperative (TFC), was awarded the2003 Michael Graznak award, presentedto an outstanding communicator underthe age of 36. She was selected for herexcellence in telling the co-op story inthe pages of The Tennessee Cooperatornewspaper, of which she is editor.

She was called “a complete commu-nicator,” and “a prolific writer, eagle-eyed editor, accomplished photograph-er and talented designer.” Morgan isalso proof that co-op youth programsyield dividends. As a high school junior,she wrote a prize-winning essay about atrip to Washington, D.C., as a partici-pant in the annual Youth Tour spon-sored by the National Rural ElectricCooperative Association.

Morgan joined TFC in 1996 aftergraduating from Middle TennesseeState University with a degree in mass

communications and expects to com-plete her master’s degree in the samearea of study at that university thisfall. She was CCA’s writer of the yearin 2002.

Michael Graznak was an outstandingco-op writer and photographer forFarmland Industries who died onassignment in 1976.

“Co-op Champion” namedThe Co-op Champion Award was

presented to Randall Torgerson inrecognition of his strong advocacy forcooperative communications duringhis distinguished career at USDA. In1974, he was tabbed by AgricultureSecretary Earl Butz to head what wasthen called the Farmer CooperativeService. Although he retired last year,Torgerson continues to be extremelyactive as a speaker and panelist in co-op meetings across the nation.

“We need people like this specialman,” CCA President Mark Bagbysaid of Torgerson. “In the past 30years, there has been no more forcefulspokesman, nor a more vigilantwatchdog for cooperatives. Whetherpointing the way to new opportunitiesfor cooperatives, sounding the alarmabout potential negative changes, orfighting for resources for USDA’scooperative education and researchprogram, Dr. Randall Torgerson hasbeen a relentless champion of thecooperative way of doing business.

“He is a champion and advocatebecause he believes cooperatives are farmore than a successful business model,but also a means to strengthen and pro-tect the soul of America’s rural life...Henot only lived by the co-op book, hehelped write it,” Bagby added. “Muchof the modern cooperative system inthe United States shows the influenceof his ideas.”

Top contest winnersTop award winners in CCA’s annual

communications competition were:■ Richard Biever, senior editor for

the Indiana Statewide Rural ElectricCooperatives Inc., earned “Writer ofthe Year” honors. This is the second

time Biever has claimed the award.■ Bob McEowen, field editor for the

Association of Missouri Electric Coop-eratives, was named “Photographer ofthe Year.” Contest judges said “Bob is areal photojournalist with a knack forcapturing the decisive moment.”

■ Lydia Botham of Land O’Lakeswon top honors in special projects forher campaign “Life’s SimpleMoments.” Her project was selected asthe top winner in its class of more than100 entries.

■ Cooperative Profiles Magazine,edited by Jessica Lamker of CHSCooperatives-Land O’Lakes, received“Publication of the Year” honors. Thecontest judge said, “This publication isattractive, highly readable and in allaspects supports its objectives. It ishighly unlikely to end up in the read-er’s circular file, but rather retained fora source of future reference.”

Rural Cooperatives and its contribu-tors won several awards, including second place for best member maga-zine. The judges said the magazine is“visually appealing, highly readablewith good content and use of designelements to support text and creativephotography.”

John Dunn and four USDA co-authors won first place in the coopera-tive education writing category for anarticle they authored on the challengescooperatives will face in the 21st Century, which was the cover story of the Jan.-Feb. 2003 issue of RuralCooperatives. In that same category,USDA’s James Baarda won secondplace for a series of three articles pro-viding an overview of the responsibili-ties of co-op directors.

Four new directors were elected tothe CCA board: Claire Smith ofSunkist Growers; Glen Liford of Ten-nessee Farmers Cooperative; LetaMach of the NCBA and Chuck Lay ofMFA Inc. Sheryl Meshke of AMPI isthe new CCA president.

The 2004 CCA CommunicationsInstitute will be held in Louisville, Ky.,June 12-15, and will conclude the year-long observation of the organization’s50th anniversary. ■


By Jim WadsworthProgram Leader, Co-op Educationand Member RelationsCraig Scroggs Co-op Development Specialist, Ga.USDA Rural Development

ack to school was

the order of the day

for the diamond

anniversary of the National

Institute of Cooperative Educa-

tion (NICE), held on the cam-

pus of Virginia Polytechnic

Institute and State University

(VaTech) in Blacksburg, Va.,

July 27—30. This marked the

first time since 1986 that the

conference was held on a

college campus. Colleges

were the traditional settings

before the mid-1980s for

the event, which has roots

that stretch back to the 1920s.

Eighty youth scholars fromArkansas, Kansas, Kentucky, NorthCarolina, Pennsylvania, South Dako-ta, Tennessee, Virginia and Wisconsinattended this unique national educa-tional forum that focused on thetheme: “Cooperatives: A Gem of aDeal.”

Dixie Watts Reaves, professor ofagricultural economics at VaTech,played the key role in getting NICEup and running again after it wasdiscontinued last year as a muchlarger conference that catered toyouth, young farmers, directors,educators and others. The objectivewas to ensure that the traditionalyouth development component of

NICE would continue.Given the tremendous amount

of enthusiasm exhibited by the youth scholars and rave reviews of allinvolved, it is clear that there remainsa strong need for a NICE youth conference.

Running the storeDanny Adams of Southern States

Cooperative discussed farm store busi-ness concepts and led the studentsthrough a cooperative business simula-tion exercise. Students in nine teamsused their newly acquired business acu-men for setting margins and salesgoals, controlling inventory and ana-lyzing financial data to direct theircooperative stores toward improvedperformance. The teams made a series


B

Back to SchoolNICE marks 75th anniversary with return to campus as co-op youth education program

Above, students gather for a general session at the75th NICE conference in Blacksburg, Va. Belowand next page, students learned more about coop-eratives through activities such as operating theirown purchasing cooperatives, analyzing coopera-tive case studies and various team-building exer-cises. USDA photos by Craig Scroggs


of four decisions, each involving 38variables.

Winning teams in each of the threemarket areas were crowned, basedupon their stores’ increased net worth.By the end of the simulation, theteams had learned a great deal aboutmanaging and directing a co-op farmsupply store.

Student teams also formed theirown purchasing cooperatives, whichthey operated throughout the insti-tute. They developed business plans,selected goods to sell or services toperform, set prices and marketedtheir goods or services to each other.T-shirts, water, candy, soda, visorsand various other goods were offered.Each student cooperative that earneda profit then contributed that moneyto a scholarship fund for the 2004NICE.

The teams competed in assessingand analyzing two cooperative casestudies where the students wererequired to effectively identify theproblems with the cases, propose pos-sible solutions and consequences, thenchoose the best solution. The compe-tition was close and the judging tight.Lionel Williamson and Patsy White-head of the Kentucky Council ofCooperatives scored the cases. Thewinners of each case study deliveredand defended their solutions to all theteams, resulting in vigorous debateand further enriching the learningexperience.

NICE participants took a Myers-Briggs Type Indicator (MBTI) survey(to assess personality traits) before theinstitute. Judith Jones of VaTech dis-cussed uses of the MBTI, handed out

individual results and did some aggre-gate assessments of the group.

Institute participants toured aSouthern States Cooperative region-al warehouse, attended a southern-style barbeque dinner in LongwoodPark in Salem, Va., and attended abaseball game in the crisp mountainair at the picturesque SalemAvalanche ballpark.

Working together Team-building challenge activities

were interwoven throughout the pro-gram, with students organized in vari-ous groups to learn the benefits ofmutual cooperation and trust. The lev-el of spirit generated by these activitiesenhanced camaraderie and relation-ships among students.

A cooperative education andemployment opportunities session was

added to the institute. Studentsgot an overview of job oppor-tunities in cooperatives andwere advised of what to expectwhen reaching college andconfronting the challenges ofselecting and pursuing minorand major courses of study.

A formal banquet on thefinal evening of the institutegave students an opportunityto dress up and socialize, take

group pictures, perform a skit andreceive recognition for individualachievements. An institute video pre-sentation capturing students involvedin different activities during the weekgenerated laughs. Following the banquet, a dance and karaoke partywas held.

After a cooperative history andgoverning principles lesson, studentsacted out the development and found-ing of the first consumer cooperative,started by a group of weavers inRochdale, England in 1844. This provided students with a unique perspective of the discussions andcooperation required to form a coop-erative business.

The competition to be named an“outstanding youth scholar”advanced through a series of inter-views conducted throughout theinstitute in front of a panel of adultleaders. The winners, announced atthe banquet, were: Janice Keeley ofOregon and Adam Wolking ofKansas. Runners-up were: LoriAndrews of Arkansas and DanielNead of North Carolina.

A number of sponsors helped make the 75th anniversary of NICE areality. Students expressed theirappreciation with displays of bannersand announcements. ■

The fun and enthusiastic learning reflected at this diamond anniversary ofNICE provided a strong foundation for continuation of the program. Adult lead-ers discussed committing to future plans to further advance the quest of edu-cating America’s youth on cooperatives on a national level. It was clear thatdeveloping even greater participation and increasing energy toward futurestrong national institutes is a reality well within reach.

The return to campus for this year’s NICE proved to be an ideal setting forthis event, now streamlined as a youth education program.

In the last issue of this magazine (see commentary on page 2, July/August2003 issue) James Haskell, acting deputy administrator for USDA/RBS, said“The need for cooperative education is greater today than at any time in mem-ory.” Programs such as this must continue.

Just as with various other educational programs around the country, thisyear’s NICE proved that some seeds of cooperative education remain firmlyplanted. With care and focus, they can continue to grow. ■

The future of NICE


oday’s cooperative direc-tor faces more chal-lenges than ever. Theknowledge and skillsneeded to be an effective

director continue to grow in numberand importance.

“Our local cooperative members arethree to ten times larger than they usedto be,” says Rick Wills, director of edu-cation and development for GROW-MARK, Bloomington, Ill. “Directorsused to make decisions affecting onecounty; now it could be for a quarter of astate. As this growth was occurring, themessage we kept hearing from directorswas the need for more training.”

To assist directors in attaining anddeveloping skills and knowledge,GROWMARK developed the Certi-fied Cooperative Director Program forits FS member cooperative directors.

The program is designed to improvethe abilities of board members to bettercarry out their individual and team

leadership roles by providing education,involvement and recognition processes.

“GROWMARK regional managersidentified the skills necessary for success-ful board members and the program wasdeveloped around the need to under-stand cooperative financing, legal andboard responsibilities as well as how toimprove leadership,” Wills says. “Boardmembers are finding that the same skillsare applicable to their own business andother board responsibilities.”

Program launched in CanadaA pilot program was launched in

Ontario beginning in late 2000 and wasbrought to the rest of GROWMARK’strade area in 2001. Currently, two-thirds of the FS directors are involvedin the process. More than 120 are certi-fied, and 425 are actively pursuing cer-tification, according to Wills.

“I am pleasantly surprised by direc-tors’ acceptance of the program. It asksfor extra time from busy people, but

the support has been over-whelming. They see theneed and value of certifica-tion. Some local co-ops aremaking it a requirement fornew directors,” Wills adds.

Group and individualdirector development plansinclude required and optionalactivities. These include par-ticipation in ongoing pro-grams sponsored and con-ducted by GROWMARK aswell as local and regionalactivities conducted by localmanagement, GROWMARKregional staff, GROW-MARK education and devel-

opment staff and/or outside providers.To become certified, a director must

earn at least 30 credits over a two-yearperiod. Required programs include:“New Director Orientation,” “Cooper-ative Finance 100,” and “DirectorResponsibilities.” There are currently15 additional programs, including top-ics dealing with fiduciary responsibility,understanding pricing, smart risk tak-ing and leading change.

Decertification required To keep the skill levels current,

directors must recertify every twoyears. To retain certification, directorsmust obtain an additional 30 creditsduring each two-year period.

“We are providing directors a higherlevel of knowledge and expertise tomake better decisions for more success-ful cooperatives,” Wills says. “Thisshould help farmers have increasedconfidence in their local boards. Theycan know that directors have the toolsto protect their investment and guidethe co-op to meet members’ needs.The more training we provide, themore the directors want.”

Cooperative directors who haveparticipated in the program say it hasgreat value.

Ron Weidner, president and boardchairman of CONSERV FS, based inWauconda, Ill., says 70 percent of hisboard is certified. “We recently wentthrough a merger, and this training wasbeneficial. People are reading about co-ops being dissolved, and members areconcerned. We owe our stakeholders(members, employees and the commu-nity) to keep up with the changes and to

GROWMARK cer t i f i ca t ion p rogramprepares d i rec to rs fo r new cha l lenges

T


GROWMARK Chairman Dan Kelly provides an overviewof what makes a good co-op director during a director-certification meeting. About two-thirds of FS co-opdirectors have been involved in the program since itwas launched in 2000. Photo courtesy GROWMARK.

Iowa Quality Beefopens Tama plant

Iowa has a third beef processingplant in operation with the re-openingof a now modernized plant in Tama.The plant is owned by 900 producer-members of the Iowa Quality BeefSupply Cooperative (see May-June2003 Rural Cooperatives for more onthis co-op). The opening was delayedfrom the original target date by con-struction snags and the need to raisesome additional funds. The $32 mil-lion project had been promoted by theIowa Cattlemen’s Association. Theplant will initially process 1,200 to1,500 cattle daily.

Indiana’s Countrymark offers metered biodiesel blending

The first metered soy biodiesel-blending system in the nation has beenintroduced at Countrymark Coopera-tive’s terminal at Jolietville near Indi-anapolis, Ind. The operation is consid-ered a significant step in making the

distribution process seamless. Most oth-ers use a splash blending system to getthe required mix. Joe Jobe, executivedirector of the National Biodiesel Board,says “having biodiesel available at largeregional distribution terminals would cuttransportation cost for biodiesel andlower the end price for consumers.”

Countrymark sees this as the firststep for its fuel distribution arm andplans to extend the service to its otherterminals if it proves successful. Grantsfrom the Indiana Soybean Boardhelped cover feasibility study costs andinfrastructure improvements.

Videos, brochures promote Co-op Month in October

Looking for an effective, entertain-ing way to show and tell all aboutcooperatives? National CooperativeBank’s (NCB) award-winning “Whatis a Co-op? You’d be Surprised”brochure and video can do just that.Produced as a cooperative educationproject, the brochure and video illus-

trates the many bene-fits and remarkablediversity of today’scooperatives.

Inside the brochure,a stylized map pops upto illustrate how coop-erative endeavors areinterwoven throughoutAmerican society. Theaccompanying textspotlights the principlesthat generally guide aco-op’s operation andoutlines the businessadvantages of coopera-tive ventures.

The lively 20-minute videodemonstrates how cooperativesacross the country are part of every-day life in the 21st century. Thevideo highlights child care, housing,credit union, agricultural, groceryand other cooperatives that helpbuild a community.

Both brochure and video are available at no charge. To obtaincopies, e-mail your request to [email protected].

Co-op Development Forumslated for Minneapolis

The National Cooperative BusinessAssociation’s 9th Annual CooperativeDevelopment Forum, to be held Nov.5-7 in Minneapolis, will bring togeth-er cooperative development profes-sionals to discuss the role of coopera-tives in rural and urban economicdevelopment.

Keynote speakers Paul Hazen, presi-dent and CEO of NCBA, and Jean-Yves Lord, executive director of theCanadian Cooperative Association, willdiscuss cooperative development intheir respective countries. Panel ses-sions will feature cooperatives that haveestablished other new co-ops and stepsto create a community culture forcooperative development.

In stakeholder sessions about hous-ing co-ops, sustainable forestry coop-eratives, value-added agriculturalcooperatives, urban cooperative devel-opment and coffee cooperatives, par-ticipants will explore issues and strate-gies for cooperative development. Aspecial pre-conference session address-es structural change and non-membercapital strategies. Following the con-


N E W S L I N ECompiled by Patrick Duffey

Countrymark Cooperative has opened the nation’s first meteredsoy biodiesel-blending system. Photo courtesy Countrymark

Wyoming and Minnesota recentlyaccepted the "outside equity" argumentand enacted new state laws permittingentities still called "cooperatives" tohave substantial non-user involvement.In both states, a "cooperative" can haveup to 85 percent of its earnings allocat-ed to investors on the basis of invest-ment. And up to 85 percent of the vot-ing control can be in the hands ofnon-patron members, although patronsare guaranteed the right to select direc-tors with at least 50 percent of the vot-ing power on the board.

Whether entities, which choose to

have this large non-patron presence,should be truly considered "coopera-tives" is doubtful. This holds true evenif a good portion of the non-patroninterests are held by users. What dis-tinguishes a cooperative from otherforms of business is not "who" ownsand controls it and is entitled to theearnings but "how" these attributes areallocated. In a cooperative, it is basedon use, not investment.

The task of cooperative leaders,members, directors and advisors—as isour's here at USDA—is to take a care-ful look at where cooperatives are,

where they are going and what theyneed to maintain their critical role forfarmers and rural America. The essen-tial character and strengths of coopera-tives must be preserved while respond-ing to new economic and businessforces. The challenge for the coopera-tive community will be to makeinformed and wise decisions with posi-tive and lasting impacts on coopera-tives, farmers and rural communities.

James Haskell, Acting Deputy Adminis-trator, USDA Rural Business-CooperativeService

ference, participants can join tours ofMinneapolis cooperatives.

A limited number of scholarshipsare also available. The conference hotelis the Crowne Plaza Northstar. Formore conference information, contactLeta Mach (202) 638-6222; e-mail:[email protected]. Or visit the confer-ence Web site: http://www.ncba.coop/whatnew.cfm#conf.

Minnesota law opens co-opmembership to new investors

Minnesota’s Cooperative Associa-tions Act has been modified to com-bine portions of the state’s traditionalcooperative law with portions of thelimited liability statute to create anew business entity for cooperatives.The new law allows all forms of coop-eratives in the state to take oninvestor-members, in addition to tra-ditional patron members. Investorsmay not necessarily purchase fromthe cooperative but may join it toearn a profit on their investment andto provide capital funds for coopera-

tive expansion. The measure wasendorsed by the Minnesota Associa-tion of Cooperatives and was basedon a similar legislation approved inWyoming in 2002.

Michigan Sugar 4th co-op inMidwest Agri-Commodities

Saginaw-based Michigan Sugar Co.has become the fourth cooperativemember of Midwest Agri-Commodi-ties, a marketing arm formed in 1979.Midwest globally markets more than12.3 million tons of beet pulp, beetmolasses and desugared beet molassesto the livestock, dairy and poultryindustries. The addition of MichiganSugar should push the marketing vol-ume to 1.5 million tons.

Chuck Hufford, president of Mid-west, called the arrangement a “win-win situation” for both the marketerand its cooperative members. “Domes-tically, Michigan Sugar provides uswith important access to eastern Unit-ed States customers and globally givesa transportation alternative to service

European agri-product clients.”Thomas Zimmer, Michigan Sugar’s

chairman, said the organizations were“mutually compatible with commonobjectives and commitment to successin the agri-products marketplace.”Other owners are American CrystalSugar Co., Minn-Dak Farmers Coop-erative and Southern Minnesota BeetSugar Cooperative.

Breeding to headKansas Co-op Council

Patrick Breeding, former vice chair-man of the Kansas Cooperative Coun-cil, had been named the organization’schairman following the resignation ofDave Andra, Danville Co-op, due toillness. Andra, a director since 1988,had been re-elected chairman at theannual meeting in March. The councilis studying an alliance with KansasFarmers Service Association to securemanagerial, operational and secretarialservices following the death of JoeLieber, who had been the council’sexecutive officer.


Commentary continued from page 2

Holding a number of control variablesconstant, the survey analysis showedthat MACMA members appear to reapsubstantial fringe benefits from theirmembership in the bargaining cooper-

ative. These benefits include havinginput into contract terms and publicpolicy that affects them, as well as find-ing marketing assistance if needed.

Overall, the researchers conclude that

strong laws that enable the establishmentof bargaining cooperatives, although notpanaceas, help growers to maintain theiroperations in the face of structuralchange in the apple industry. ■

Apple industry continued from page 7

Bailey to head Co-opDevelopment Foundation

The Cooperative DevelopmentFoundation in Washington, D.C., hasa new executive director: ElizabethBailey, who served in the administra-tions of three former Wisconsin governors and was former director fordevelopment for the National GuardAssociation of the USA. She replacesJudy Ziewacz, who earlier this yearbecame deputy secretary of the Wis-consin Department of Agriculture,Trade and Consumer Protection.

Court OKs ADM buyingMCP, spinoff venture

The disputed sale of MinnesotaCorn Processors (MCP) in Marshall,

Minn., to Archer Daniels Midland(ADM) of Decatur, Ill., has cleared itsfinal hurdle with approval of the dealby a federal judge in Washington,D.C. Despite objections from a groupof law professors and economists, Dis-trict Judge John Bates said the modi-fied agreement met U. S. JusticeDepartment objections and the salewas in the public interest. To easemarket-concentration concerns, thepact requires MCP to dissolve its jointventure with Corn Products Interna-tional to market corn syrup and high-fructose corn syrup. The conditionshad been met at the end of 2002.ADM had gained a strong share in thesyrup and ethanol markets from pur-chasing MCP and its joint venture.

ADM has been operating MCP sincelast September.

Calcot, Ocean Spray amongco-ops with new leaders

Marketing cooperatives operating indifferent geographical areas of thenation have made leadership changes.New leaders include:

■ David Farley’s tenure as chiefexecutive officer at Calcot, the WestCoast’s largest cotton marketing coop-erative, lasted only eight months. Hehas been replaced by Robert Norris,the co-op’s executive vice president anda 30-year employee of Calcot.

■ Ocean Spray, the Massachusetts-based cranberry marketer, confirmedits earlier interim choice of Randy


Minnesota leads the nation continued from page 19

fertilizer and crop protectants. Wis-consin was the top cooperative state forsales of miscellaneous farm suppliesand was second for petroleum.

Leaders in number of cooperativesMinnesota was home to the largest

number of cooperative headquarters,with 293, followed by North Dakotawith 239 and Texas with 238 (figure2). The same three states also had themost cooperatives in 1999, 1997 and1995. The top 10 states had 56 per-cent of all cooperative headquarters,57 percent of all marketing coopera-

tives, 51 percent of farm supply coop-eratives and 68 percent of servicecooperatives.

Minnesota and North Dakota bothhad about the same number of market-ing and farm supply cooperatives. Texasby far had the most service cooperatives.

By individual products, NorthDakota had the most dry bean/pea,grain/oilseed and livestock coopera-tives. Texas had the most cotton andrice cooperatives. California had themost fresh fruit/vegetable, nut, andpoultry cooperatives. Minnesota hadthe most farm supply cooperatives.

Co-op membership leadersKentucky led the nation with

242,873 farmers with cooperative mem-berships, followed by Virginia and Wis-consin. The top 10 states for coopera-tive memberships are shown in figure 3.For the top 10 states, 54 percent of allcooperative memberships are in thesestates, 58 percent of all cooperativemarketing memberships, 51 percent offarm supply and 48 percent of service.

Kentucky led all states in tobaccocooperative memberships. Virginia hadthe most nut cooperative membershipsand was second in farm supply mem-bers. Wisconsin had the most milk/milkproducts and livestock memberships.

Individual state data for farmercooperatives are collected every otheryear by USDA Rural Business-Cooper-ative Service. The survey asks formembership, sales and marketing databy state. The data from the 2001 sur-vey were used to develop this report. Acomplete summary of state-by-statecooperative activity is available in thenew USDA publication, Farmer Coop-erative Statistics, 2001, RBS ServiceReport 61. To order, call (202) 720-8381, or e-mail [email protected] ordownload at www.rurdev.usda.gov/rbs/pub/sr61.pdf. ■

Figure 3—Cooperatives’ memberships by function, ten leadingstates, 2001

250

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0KY VA WI MN IL IA TN KS ND MS

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Papadellis as its permanent CEO andpresident.

■ At Alto Dairy, based at Waupun,Wis., the board has selected RichScheuerman, a 15-year veteran of thedairy industry, to be its new president.

■ Select Sires at Plain City, Ohio,has hired Steve Crea as its chief finan-cial officer to manage its business,finance, human resources and manage-ment information systems development.

■ Kevin Hall, a Nebraska farmer-rancher, is the new chairman of theboard of Western Sugar Cooperative,replacing Rick Dorn of Billings, Mont.,who steered the formation of the sugarcooperative and its purchase of theWestern Sugar Company assets.

Bongards Creameries buysLOL’s Perham operation

Bongards Creameries, with exten-sive experience in manufacturing nat-ural and processed cheese in Minneso-ta, has purchased Land O’Lakes’cheese manufacturing facility at Per-ham, Minn. LOL had earlierannounced plans to close the plant.Roger Engleman, Bongards generalmanager, said he was excited about theopportunity to reopen the plant notedfor its cheese and whey products and toretain jobs in the community. Bongardshad $163 million in sales last year tothe consumer, food service and indus-trial cheese and whey markets.

Bushel 42 Pasta closes Lacking a partner, Bushel 42 Pasta

at Crosby, N.D., which is owned by227 durum wheat growers in NorthDakota and eastern Montana, closedin late July and laid off 50 employees.Company officials said it would seekto sell or lease the plant. CEO KeithOlson said the cooperative would

seek ways to get a return for theshareholders.

Agway energy firmoffers green power

Customers of Agway Energy Prod-ucts in upstate New York will beoffered the option of buying greenpower in the service territories ofNiagara Mohawk and New York StateElectric & Gas, where it alreadyoperates as an energy supplier. Agwayhas become a partner with SterlingPlanet of Alphretta, Ga., one of thethree green marketers participatingin Niagara Mohawk’s renewableenergy program. Agway will offerenergy derived from wind, water andbiomass to customers willing to pay1.5 cents per kilowatt-hour in addi-tion to regular electrical charges.Agway filed for Chapter 11 bank-ruptcy reorganization last Octoberbut the energy division was not partof the filing.

LOL Farmland Feed eyes ethanol co-products market

Land O’Lakes Farmland FeedLLC is working with corn and live-stock producers and numerous mar-keting initiatives to enhance prof-itability through marketing and saleof ethanol co-products. Distillersdried grain with solubles and wet dis-tillers grain have been recognized aspractical and cost-efficient feed sup-plements for cattle, swine and poultry.The market has materialized in thepast three years. Ethanol productionis expected to increase dramaticallyover the next 5 to 10 years.

In another development, the feedfirm is planning to build a new, 300-cow dairy research facility at its centernear Gray Summit, Mo. “It will go a

long way in ensuring that we sustainour leadership in research and develop-ment,” said Bob DeGregorio, presidentof the feed company. Constructionshould be completed by year’s end. Itwill replace an existing dairy researchunit at Gray Summit plus facilities atFort Dodge, Iowa.

Sun-Maid, Licente Join for Canadian Juice Line

The Sun-Maid brand behind thepopular California marketing coopera-tive’s raisins and dried fruit products willbegin to appear on a Canadian firm’snew line of fruit juice drinks beingintroduced late this summer. A. LicenteInc., based in Rougemont, Quebec, is aCanadian leader in the production ofpure fruit drinks. It has signed a licens-ing agreement with California’s Sun-Maid Growers to produce and marketthe new line under the cooperative’sbrand in Canada. The firm is the mainsubsidiary of Licente Industries, Inc.,which markets its products under a vari-ety of trademarks, including Sunkist.

Riceland Foods, Cargill inlecithin marketing alliance

A strategic alliance to manufacture,market and sell lecithin products tofood, pharmaceutical and technical cus-tomers worldwide has been formed byRiceland Foods of Stuttgart, Ark., andCargill, Minneapolis, Minn. Theagreement was to take effect Sept. 1.Riceland will continue producing de-oiled lecithin, as it has for the past 25years, and Cargill will market and dis-tribute it. Riceland President RichardBell said the deal would allow thecooperative to operate its facilitiesmore efficiently and provide a sourceof conventional (non-GM) crudelecithin for processing.


continue our education. Dysfunctionalcompanies have dysfunctional directors.Directors have to know the conse-quences of their decisions.”

Board education doesn’t only meanbetter decisions, according to Weidner.

It helps the board function as a team.“We can’t have different agendas.”

Lynn Haseley, board chairman andpresident of Ag-Land FS Inc., basedin Pekin, Ill., says “We expect ourcrops people, fuel and LP-gas drivers

to pursue certification. Director certi-fication is one more way we can showpatrons and employees our dedicationand care.” Haseley expects all 12members of his board to be certifiedby September. ■

GROWMARK certification continued from page 27


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