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Co-op developments, coast to coast



Record sales,
income for Riceland
Higher grain prices during the 2007- 08 marketing year resulted in record sales and record distributions to members of Riceland Foods Inc., a farmer-owned cooperative.

Co-op President/CEO Danny Kennedy told farmers at Riceland’s 88th annual membership meeting in Jonesboro, Ark., that total sales in fiscal 2008 reached a record $1.2 billion, up nearly 30 percent from the previous year and the first time co-op sales have topped the billion-dollar mark.

Income before distributions to Riceland’s farmer-members was a record $707 million, an increase of $158 million over the previous year, Kennedy said. More than 97 percent of those earnings were returned to Riceland farmers in the form of seasonal pool settlements or cash payments for grain.

He credited the record year to the rise in commodity prices — unlike anything the industry had experienced in 35 years — and to Riceland’s sales team “staying on top of the market” and all co-op offices managing costs.

However, Kennedy said excitement over grain prices was tempered by rising productions costs, including higher prices farmers paid for fuel, fertilizer and other crop inputs. Riceland also had to contend with increased fuel costs to dry, transport and process grain.

Riceland’s 2007-08 long-grain rice marketing pool paid farmers an average of $5.98 per bushel, 92 cents per bushel more than the average price received by farmers who self-priced their long grain rice, the co-op reported. Last year’s payment was $4.38 per bushel. The coop’s medium-grain rice pool paid an average of $5.75 per bushel, compared to $5.28 per bushel a year ago.

Kennedy said it was also “a tremendous year” for the co-op in the soybean and wheat markets. The performance of the rice and grain markets for the 2007 crop year and the cooperative’s seasonal marketing pools illustrate the purpose and benefits of pool marketing, Kennedy said.

Riceland’s balance sheet shows total assets stand at a record $721 million, and permanent assets at $267 million. Members’ equity, including capital and retained earnings from taxable business, increased to $213 million, up from $205 million the previous year. Long-term debt was reduced by $4 million, dropping to $54 million while working capital increased to $66 million, up from $59 million.

“The tagline on Riceland’s logo means exactly what it says: ‘A Farmer- Owned Cooperative.’ You own these facilities and benefit from them by having a reliable market and by receiving competitive returns for your grain,” Kennedy added.

Tree Top buys Oregon
fruit puree company
Tree Top Inc. has purchased Sabroso Co., a Medford, Ore.-based maker of fruit purees, for an undisclosed amount. The grower-owned cooperative is expanding product lines and outlets for fruit grown by its members, according to the Yakima Herald-Republic.

With $90 million in annual sales, Sabroso is the nation’s leading manufacturer and seller of fruit purees. The firm also manufactures dried fruit flakes and other products for the ingredient and food-service markets. Sabroso has plants in Medford and Woodburn, Ore., and Oxnard, Calif.

Sharon Miracle, communications manager for Tree Top, said Sabroso will be a wholly owned subsidiary of Selahbased Tree Top. Miracle told the Herald-Republic the two companies have been discussing the purchase for about a year. “It rounds out our offerings to our customers. It also provides an outlet for our growers.”

DFA pays $12 million
to settle with CFTC
Dairy Farmers of America on Dec. 16 announced settlement with the Commodity Futures Trading Commission (CFTC) over charges that the co-op manipulated Class III milk futures contracts and exceeded a speculative position limit. The settlement ends the CFTC’s investigation into DFA’s trading activities on the Chicago Mercantile Exchange (CME) in 2004.

Kansas City-based DFA is one of America’s leading milk marketing cooperatives and is owned by 18,000 dairy farmers nationwide.

Without admitting or denying the CFTC’s findings in the administrative order, DFA and two of its former officers — former CEO Gary Hanman and former Chief Financial Officer Gerald Bos — agreed to pay a penalty of $12 million. The cooperative also agreed to not engage in speculative trading in milk futures contracts for two years and to retain a monitor to review its trading activities on the CME during that period.

In DFA’s announcement, co-op President/CEO Rick Smith said that agreeing to the settlement was in the best interests of the cooperative and its members. The long-pending probe was expensive and diverted time and resources from DFA’s main mission of serving its members, he said.

“Settling this matter will allow us to focus wholly on serving our members and moving the cooperative forward,” said Smith, who took the helm of the cooperative in 2006, two years after the trading activity in question. “The transactions addressed by the settlement took place over a one-month period more than four years ago,” Smith continued. “We have fully cooperated with the CFTC’s investigation and wanted to put this matter behind us.”

Prior to reaching the settlement agreement, DFA management voluntarily developed and implemented new policies and procedures designed to ensure that all trading complies with both the spirit and the letter of the law, Smith said. The DFA board and management follow corporate values that stress openness, transparency and integrity, he added.

DFA’s actions constituted a “manipulative scheme,” CFTC Acting Director of Enforcement Stephen J. Obie said in a press release. “Given the severity of the past misconduct, we are pleased that DFA has committed to reform its trading practices.”

The commission contends that from May 21 through June 23, 2004, DFA, Hanman and Bos attempted to manipulate the price of the Class III milk futures contracts through purchases of block cheddar cheese on the CME cheese spot-call market. The order finds that the pricing relationship between the CME block-cheese market and the Class III milk futures market is well known throughout the industry, and the CME block-cheese market price plays a significant part in establishing Class III milk futures prices.

Additionally, the DFA order finds that on several days in 2004, DFA’s speculative Class III milk futures contracts exceeded the CME’s speculative position limit, in violation of the Commodity Exchange Act.

In addition to imposing civil penalties, the DFA order bars Hanman and Bos from trading futures for five years. It also bars DFA from engaging in speculative trading for two years and orders DFA to: 1) retain a monitor to ensure that DFA does not engage in speculative trading and that DFA’s Cheese spot call market cheese purchases are made for legitimate business purposes; 2) implementing a compliance and ethics program; and 3) providing future cooperation to the CFTC.

As part of a separate order, Frank Otis, former CEO of a DFA subsidiary, will pay $60,000, and Glenn Millar, former executive vice president of the subsidiary, will pay $90,000 for directing trading of Class III milk futures in an internal sub-account designated for a DFA subsidiary, the CFTC news release said.

Blue Diamond says confidence
key to future market stability
Building and maintaining market confidence is key to maintaining California almond industry success, according to Blue Diamond President and CEO Doug Youngdahl. Record industry almond shipments in 2007-08 exceeded the previous year by 18 percent, helping Blue Diamond achieve record sales of $711 million, Youngdahl told the cooperative’s grower-owners at their 98th annual meeting.

Total global consumption rose by 50 percent in the Middle East; 32 percent in Eastern Europe; 24 percent in Western Europe; 20 percent in Asia; and 7 percent in the United States, the largest single almond market. California almonds are the state’s largest food export valued at nearly $3 billion.

Blue Diamond’s share of the record 2007-08 crop grew faster than the industry as a whole, allowing the cooperative to meet its tonnage objective ahead of schedule. The co-op also gained in market share. Its branded retail business has doubled in three years, tripled in five years and quadrupled in six years.

“Our Blue Diamond brand has driven U.S. snack nut business growth over the last six years, averaging over 25 percent [growth] annually,” Youngdahl said. “With 21 percent of all meals being labeled as snacks, snacking is fast becoming America's ‘fourth meal’ of the day,” he adds.

Blue Diamond’s natural foods business is also booming, with Almond Breeze leading the non-dairy almond milk sales category. The 2007 sales for Almond Breeze increased by 32 percent compared to the previous year. A new refrigerated line of almond milk products is expected to add to this success in 2009. The product is currently sold in aseptic packaging that does not require refrigeration until opened.

Blue Diamond partly attributes the growth of global almond consumption to the favorable nutritional profile of almonds.

Looking ahead to a third record crop of an estimated 1.5 billion pounds (9 percent above previous year) in 2008- 09, California almond consumption is expected to continue to climb. However, this prediction comes with caveats that include a water shortage that could affect future crop size and kernel sizes that will require creative new market development. A strengthening dollar could also affect global buying power as it costs customers more to convert their currency to dollars to purchase almonds.

In other Blue Diamond news: WFC-MAC now
Cooperative Network
The Wisconsin Federation of Cooperatives (WFC) and Minnesota Association of Cooperatives (MAC) have changed their name to “Cooperative Network,” effective Jan. 1, 2009. Since 2004, WFC-MAC has been operating as a unified, two-state organization, sharing staff, program ideas, education offerings and hosting a joint annual meeting.

One of the goals for the name change was to create an organizational name that encompassed all members and that allowed for future growth.

At the organization’s annual meeting in November, members confirmed the new name and voted to restructure the organization’s board to better accommodate and represent members from both states.

“Under the new Cooperative Network name, we reiterate that we are one organization, acting in the best interest of our members and our communities throughout Minnesota and Wisconsin,” says Bill Oemichen, Cooperative Network president & CEO.

Cooperative Network serves more than 600 member-cooperatives, owned by more than 6.3 million Wisconsin and Minnesota residents.

It provides government relations, education, marketing and technical services for a wide variety of cooperatives. For more information, visit: www.cooperative network.coop.

Mooney to chair NMPF;
CWT to continue in ’09
The National Milk Producers Federation elected Randy Mooney as its new chairman during its 2008 annual meeting in Nashville, Tenn. Mooney had been serving as assistant secretary of the NMPF board. He, his wife and a partner operate a 250-cow dairy in Rogersville, Mo., where he has farmed since 1979. Mooney also has a beef cattle operation and is board vice chairman of Dairy Farmers of America.

Mooney replaces outgoing chairman Charles Beckendorf, who will remain on the board until March.

During the annual meeting it was also announced that Cooperatives Working Together (CWT) has received commitments from its members to continue to fund the program in 2009. “Now more than ever, CWT is the only answer to the question of what farmers can do to positively impact their milk price,” said Jerry Kozak, president and CEO of NMPF, which manages CWT. “Both world and U.S. dairy markets are sagging, and things look tough for 2009. Our members recognize that this program is the best way to help balance supply and demand and positively impact producers’ bottom line.”

CWT removed 184 herds, with 61,000 cows that produced 1.2 billion pounds of milk, through its second herd retirement of 2008. CWT’s first herd retirement of the year removed 25,000 cows that produced 430 million pounds of milk. In addition, its export assistance program has helped members sell more than two billion pounds of milk in 2008.

An independent economic analysis of CWT, conducted last fall by Dr. Scott Brown of the University of Missouri’s College of Agriculture, demonstrated that farmers’ return on investment in CWT has been 76 cents per hundredweight.

CHS notches fifth consecutive
year of record earnings in ‘08
CHS Inc. — the nation’s largest cooperative and a leader in the energy, grains and food sectors — reported record net income of $803 million for fiscal 2008, up from $756.7 million for fiscal 2007. Total revenue of $32.2 billion was also a record and was up 87 percent from $17.2 billion in fiscal 2007. The increase in revenue was largely attributed to higher values for the energy, grains, crop nutrients and other commodities the co-op handles, the co-op said in a news release.

The fiscal 2008 results mark a fifth consecutive year of record income and revenue for CHS. As a producer-owned cooperative, CHS returns a portion of its earnings to eligible owners. In 2008, based on 2007 performance, the company issued a record $340 million in cash patronage, equity redemptions, preferred stock and dividends. Based on 2008 earnings, CHS is expected to return about $340 million to owners during fiscal 2009.

The company’s 2008 earnings reflected strong performance within all business segments. The company’s Ag Business unit, which consists of crop nutrients, grain marketing and retail operations, led the way. It experienced strong global and domestic demand along with record values for CHS’ ag products. Ag Business earnings for fiscal 2008 also included a $91.7 million gain on the sale of the company’s remaining shares of CF Industries Holdings Inc., a crop nutrients manufacturer.

Energy earnings, while down from 2007 due to tighter refining margins, remained strong and reflected record performance from the company’s lubricants and propane businesses. Within the Processing segment, CHS reported strong results for its own oilseed-crushing and refining operations, as well as its ownership of Horizon Milling LLC, a flour miller. Earnings fell for Ventura Foods LLC, a vegetable-oil-based food manufacturer and packager, of which CHS owns 50 percent. Ventura felt the impact of both higher ingredient prices and the current economic downturn.

CHS recorded a $71.7 million ($55.3 million net of taxes) impairment on the value of its investment in VeraSun Energy Corp., an ethanol manufacturer which filed for reorganization under Chapter 11 bankruptcy statutes as a result of downturns in that industry. CHS owns approximately 8 percent of VeraSun.

CHS also saw record performance in its corporate business solutions operations, which include insurance, risk management and financial services businesses.

CCA speakers available to
address key co-op issues
The Speakers Bureau of the Cooperative Communicators Association (CCA) has more than a dozen speakers available nationwide who can address a wide range of topics of interest to co-op members. “In an association of communicators, it’s fair to say that topics such as writing, photography and video production, website design and communications strategies are among the Speakers Bureau’s long suits,” says Jim Erickson, chairman of the CCA Speakers Bureau Committee. “But the list of subjects that individual bureau’s members present goes well beyond what you might expect.”

Leadership, board and management development, cooperative-related education, use of specialized software and the “ins and outs” of working effectively with the news media are among other topics found on a lengthy list of Speakers Bureau presentations on the CCA website (www.communicators. coop). One-man dramatic presentations about author and humorist Mark Twain and Minnesota Congressman Andrew Volstead, who wrote legislation generally viewed as the most important act in U.S. co-op history, are offered as well.

Going to the CCA website and clicking on “Speakers Bureau” bring up the bureau’s introductory page. From there, click on links that provide the list of available presentations, names and photos of speakers, their background and contact information, guidelines for contacting and making arrangements with a speaker and a speaker request form. An evaluation form also is available.

Because Speakers Bureau participation is voluntary, a specific speaker may not always be available when requested. In such situations, Erickson urges those needing a speaker to contact the CCA office via the organization’s website, or to e-mail him: ericksonjim@att.net.

Also serving on the CCA Speakers Bureau Committee are Cathy Merlo of Bakersfield, Calif., and Jean Freeman of Fairfax, Va.

USDA program aims to help
African-American farmers
In December, USDA announced that it will provide $230,000 to help develop pilot programs that address the “heir property” issue, which has contributed to an ongoing, multi-generational trend of land loss by African-American farmers. In announcing the funding, a USDA spokesperson said the land-loss issue by black farmers is “an old, old problem, and we’re looking for constructive solutions. These funds will help develop creative approaches to clarifying clouded titles and stabilizing ownership before it becomes necessary to, literally, ‘sell the farm.’” Because of a variety of factors in the post Civil- War era, many African- American small farmers died intestate. In the absence of a will, property typically passed to multiple heirs with undivided interests (tenancy in common), leading over time to highly fractionated ownership patterns.

Fractionated ownership inhibits borrowing, raises barriers to expansion and modernization, and leads to systematic under-use of affected properties. Very often, these difficulties prompt the sale of heir properties, as this is the easiest way for multiple descendants to “cash out” their interests.

Consolidating title has therefore been identified as a key strategic goal by a number of African-American land-loss prevention organizations.

In January 2007, USDA Rural Development solicited comments on possible approaches to the problem from private, nonprofit communitybased organizations to develop concrete, measurable work plans to address the heir-property issue.

USDA is now moving forward with the next stage in that strategy, from research and analysis to implementation. This is considered an important step toward untangling a knot of ownership issues that have been passed along for generations. The ultimate goal is to put affected farmers in a position to compete more effectively in the future.

Brownlee to fill key USDA
communications role
Jim Brownlee, former information director for USDA’s Agricultural Cooperative Service (now the Cooperative Programs of USDA Rural Development), was recently named USDA assistant director of communications for public affairs. Brownlee will have the responsibility of providing communication leadership on food, agriculture, rural development, trade, energy, natural resources, science and related issues. He says his goal is to “use sound public affairs practices to ensure that the Department has an effective and coordinated voice on all matters pertaining to USDA.”

The Office of Communications is the public pulse of USDA, responsible for coordination and dissemination of USDA information via www.usda.gov, the Department’s acclaimed website. His office reviews all information issued by USDA and its 29 agencies and staff offices. It also coordinates media, constituent and stakeholder outreach.

Brownlee received the 2008 USDA Honor Award for his efforts to organize the Washington International Renewable Energy Conference, which drew participants from around the world and helped accelerate the drive to develop renewable energy. He also acts as an editorial consultant on USDA’s Rural Cooperatives magazine.

Earlier in his career, Brownlee was communications director for Union Equity cooperative in Enid, Okla., before going to work for USDA in 1992. He was president of the Cooperative Communicators Association in 1989-90, and received that organization’s Grazank Award in 1989, recognizing him as one of the nation’s outstanding young co-op communicators.

G&T co-ops support
Iowa wind farm
Six generation and transmission cooperatives across the United States are supporting a renewable energy project, culminating with the commercial operation of the 150- megawatt (MW) Story County Wind Energy Center in Story County, Iowa. The project is owned and operated by a subsidiary of FPL Energy and began commercial operation in November.

This is believed to be the first time several G&T cooperatives operating in different regions of the country have banded together to reap the benefits of a large-scale wind project.

Participating co-ops are: Buckeye Power Inc. (Ohio), PowerSouth Energy Cooperative (serving Alabama and Florida), Wabash Valley Power Association (serving several Midwest states, including Indiana), Hoosier Energy (serving Indiana and Illinois), Central Iowa Power Cooperative (CIPCO) and North Carolina Electric Membership Corporation.

Participating jointly gives each G&T co-op the ability to spread any risks associated with the project, and to participate on a pro-rata basis (taking only the megawatt quantity desired) in a sizeable and viable project with a highly regarded developer in a wind-rich region.

USDA funding
biorefinery projects
USDA Rural Development is accepting applications for the Section 9003 Biorefinery Assistance Program and seeking public comment on how best to implement it. The program is one of several renewable energy provisions contained in the 2008 Farm Bill.

The Biorefinery Assistance Program provides loan guarantees to develop, construct and retrofit commercial-scale biorefineries. The maximum loan guarantee is $250 million per project, subject to the availability of funds. Preference is given to projects where first-of-a-kind technology will be deployed on a commercial scale.

The deadline for completed applications was Dec. 31, 2008, for funding in the first half of fiscal 2009, and is April 30, 2009, for funding in the second half of the fiscal year. For more information, visit: www.rurdev.usda.gov.

‘Grower-owned’ key to
Musselman’s new applesauce
advertising campaign In its newest advertising campaign, which uses TV for the first time in three years, Musselman’s is repositioning itself to better compete in the applesauce category. Musselman’s is a division of growers’ cooperative Knouse Foods, based in Peach Glen, Pa. The cooperative’s new campaign — “Grower-Owned since 1949” — first aired in mid-November. The new campaign replaces Musselman’s previous “Healthy Snack Alternative” campaign.

Consumer research shows that “grower owned” also suggests quality and freshness, and is unique vs. what other brands in the category were communicating, according to Knouse Foods. Targeting moms with school-age kids, two television commercials and two outdoor billboards will run in five test markets, from Philadelphia to Minneapolis, each selected for high potential share growth.

Morning TV ads have been appearing on programs such as “Oprah,” “Good Morning America,” “Ellen” and “The View.” Cable TV ads will run on the Food Networks and the Learning Channel, among others. Outdoor billboard ads are being posted in high-traffic areas, close to food retail locations.

Lamb co-op buys out partner
Mountain States Lamb and Wool Cooperative, Douglas, Wyo., has purchased the remaining interest in Mountain States Rosen, according to a report in the “Casper Star-Tribune.” The cooperative markets lamb throughout the United States and in some foreign markets. It features producers from the region on packages of lamb.

The co-op, which has 140 family producers in 13 states, says Mountain States Rosen is the nation’s largest fullyintegrated lamb and veal company.

Montana co-ops to merge
Laurel Town & Country Supply has announced a merger with Farmers Union Association of Big Horn County, according to a report in the Laurel (Montana) Outlook. Big Horn County members approved the merger by the required two-thirds majority at a November meeting. The businesses will operate under the Town & Country Supply name. The merger will become effective Feb. 1.

Town & Country General Manager Wes Burley told the “Outlook” he believes the merger will allow the company to provide better service to its patrons in both trade areas because it will be able to purchase in larger volumes from suppliers and the businesses will be able to share equipment, staff and management personnel.

The merger will add another farm store, convenience store, agronomy plant and bulk fuel and propane plant to the Town & Country Supply operation. Besides its farm store in Laurel, it also operates a convenience store/casino and a bulk fuel and propane plant. It also has agronomy plants in Bridger and Edgar, a convenience store in Bridger, a convenience store in Billings and a farm store in Bridger.



Conner to head NCFC

Charles F. Conner has been named president and chief executive officer of the National Council of Farmer Cooperatives (NCFC), a Washington, D.C.- based trade association representing the interests of U.S. agricultural cooperatives. Conner brings more than 25 years of national and state government, agricultural and trade association experience to his new position. Conner has served as deputy secretary for the U.S. Department of Agriculture since May 2005.

“We were extremely impressed with Mr. Conner’s career accomplishments, the depth and breadth of his governmental and industry experience, as well as his keen understanding of agricultural policy, trade issues and the business challenges facing U.S. agriculture in general and agricultural cooperatives in particular,” said Bill Davisson, NCFC’s chairman and the chief executive officer of GROWMARK, who led the search committee. “He is uniquely qualified to lead NCFC at a critical time, when the needs of NCFC members are changing in a highly competitive global business environment.”

“Mr. Conner will bring a fresh perspective and dynamic leadership to NCFC,” Davisson continued. “He has a passion for agriculture and a strong commitment to the future success of agricultural cooperatives.” Conner was slated to begin his new position at NCFC on or about Feb. 1, 2009.

As Deputy Secretary at USDA, Conner served as chief operating officer, overseeing day-to-day operations, including development of a $95 billion budget for the 26 USDA agencies with 300 programs and more than 100,000 employees. He represented USDA on the President’s Management Council, providing executive expertise to proposed government-wide policy direction on key management initiatives.

Conner interacted directly with President George W. Bush and his senior staff to formulate domestic and international food, trade, security and energy policy. He led development of the Bush Administration’s $300 billion Farm Bill proposal and the strategy to educate and inform industry, constituents and Congress.

From August 2007 to January 2008, Conner served as Acting USDA Secretary and Deputy Secretary. He led an official delegation to Colombia and to a meeting of the Food and Agriculture Organization in Rome, Italy, to enhance the United States’ role in influencing global food and trade issues. In addition, he played a key role in developing the administration’s immigration policy, including important changes to the H2A program. His role in communicating USDA policy involved print and television media. Conner’s experience also includes the assignment of special assistant to the President, Executive Office of the President, from October 2001 to May 2005. In this role, he worked directly with President George W. Bush and his senior staff on the 2001/02 Farm Bill to develop the strategy behind the transfer of several USDA agency functions to the newly formed U.S. Department of Homeland Security.

From May 1997 to October 2001, Conner served as president of the Corn Refiners Association. He navigated and negotiated the interests of both large and small companies to gain consensus on the association’s budget and policy direction. In addition, he directed a successful World Trade Organization (WTO) and NAFTA trade case against the Government of Mexico.

Conner is a graduate of Purdue University, with a Bachelor’s of Science degree in ag economics and is the recipient of Purdue’s Distinguished Alumni Award.



‘Co-op 100’ revenues top $173 billion in ’07

The nation’s 100 highest revenue-earning cooperative businesses had record sales of more than $173 billion in 2007. That’s up $24 billion from 2006, according to NCB (formerly the National Cooperative Bank), which began compiling the NCB Co-op 100 in 1991. In the 17 years since the first list was compiled, the amount of revenue has more than doubled, from $81.4 billion in 1991.

“During this challenging economic time, the strength of the cooperative structure is even more evident for large and small businesses, in urban and rural settings,” said Charles E. Snyder, president and CEO of NCB. “Cooperatives are a driving force in today’s economy, generating nearly $250 billion in annual revenue,” he added, noting that total co-op assets nationwide surpass $1 trillion.

Cooperatives directly employ nearly 500,000 people across the country, and – when including indirect and induced effects – support more than 1.2 million jobs.

This year’s list saw both new and established cooperatives in the Co-op 100. One new entrant is Farmers Cooperative Co., an agricultural cooperative that increased its revenue to $592 million during 2007, up from the $384 million in 2006. That earned the co-op the No. 81 slot on the NCB Co-op 100.

Here are the top two revenue producers in each of the main sectors tracked by the Co-op 100:

Agriculture Co-ops: Grocery Co-ops: Hardware & Lumber Co-ops: Finance Co-ops: Healthcare Co-ops: Energy & Communications Co-ops:





January/February Table of Contents