Mergers, Consolidations Change Look of U.S. Cooperatives
Mergers Hit Major Regionals
Financial conditions during the 1980s are fueling a string of mergers
among the major regional cooperatives. The new GROWMARK Inc. Cooperative, formed through
the merger of FS Services and Illinois Grain cooperative, is now led by Glenn Webb, who
had been vice president of the board. The cooperative's net margins in 1980 were $43.8
million on sales of nearly $1.5 billion. GROWMARK owns six grain terminals on the Illinois
River, an inland terminal at Paxton, Ill., and an interest in Farmers Export Co., an
interregional cooperative based near New Orleans.
In the Minneapolis- St. Paul area, Midland Cooperatives has merged with Land O'Lakes Inc. (LOL) to form the second largest cooperative in the nation. Midland's 1980 sales were $523.5 million, while LOL had $3.3 billion in sales. LOL President Ralph Hofstad says the new organizations could save nearly $7 million in administrative and operating costs. The bankrupt status of Energy Cooperative Inc., one of three interregionals in which the two Minnesota cooperatives had common membership, was a factor in the merger.
In another major co-op unification, Farmers Union Central Exchange (CENEX) has purchased the assets of Western Farmers Association (WFA) of Seattle, Wash., and consolidated the operations of Idah-Best, based in Caldwell, Idaho. CENEX is now an Idaho feed supplier. WFA had been under federal bankruptcy act reorganization for two years. Its member cooperatives were eventually purchased by CENEX members.
California's Tri Valley Growers has assumed responsibility for the bankrupt California Canners and Growers' (CCG) marketing inventories, leasing four facilities and adding 300 CCA growers. William Allewelt, Jr., Tri Valley president, says he is looking forward to an improved marketing picture, thanks in part to adverse weather that helped eliminate the canned fruit surplus that plagued markets in the past three years. Tri Valley sought to avoid liquidation of CCG's inventory and to provide market outlets for growers left without a home for their crop.
Members of both Ohio Farmers Grain and Supply and Landmark Inc., have approved unification of their regional coops to form Countrymark Inc., with sales of nearly $1 billion and assets exceeding $240 million. The action had no effect on the corporate status of the new cooperative's 136 locally owned and controlled member cooperatives in Ohio, Michigan and Indiana. Don Benschneider, former Landmark chairman, headed the new Countrymark board.
This artwork illustrated the trend toward more farm mergers.
Members of Southern States Cooperative gather at one of 10 outlying locations to view a satellite-transmitted annual meeting program from its headquarters at Richmond, Va. Producers were able to quiz a management panel about aspects of the cooperative's activities.
Vertical lntergration Key to Moroni
Moroni Feed Co. of Canpete County, Utah, is one of the few fully integrated turkey producing and marketing cooperatives in the United States. It has a turkey breeding farm, hatchery and feed mill plus a processing, packaging and freezing plant, fertilizer department and a disease diagnostic laboratory. Growers have maintained a profitable cooperative even though they are located between the mountains in the desert, which causes higher production costs, higher freight costs and lower turkey prices than competitors in most parts of the country. Turkeys are marketed through Norbest Inc., another Utah cooperative.
Poultry Producers Seek Collective Bargaining
In response to many years of being caught in the "vice" between an increasingly concentrated processing industry and rising production costs, broiler producers on the Mid-Atlantic's Delmarva peninsula have formed the Peninsula Poultry Growers Association (PPGA). Producers expected PPGA to enable them to collectively bargain with the processors. The number of processors in the region declined from more than 100 in the 1930s to the current 10. Nationwide, 20 of the 60 processors produce 60 percent of all dressed poultry.
'Those Who Show Up' Control Co-op
A Wisconsin dairy farmer and president of Consolidated Badger Cooperative tells delegates at the co-op's annual meeting that the world and all organizations are run by those who are interested and committed - or "by those who show up. Our business of producing and marketing milk is very competitive," says John Malcheski. Despite our efficiency, that will not guarantee us a fair share of the income we need to keep us free and in control of our destiny. This can only be done when we, as farmers, involve ourselves beyond our farms. As we look to the future, needed changes will be made by those who show up."
California Fruit, Nut Co-ops Form Sun-Diamond
Three California cooperatives have formed a common marketing cooperative: SunDiamond Growers. Members are Diamond Walnut Growers, Sun-Maid Growers (raisins) and Sunsweet Growers (prunes). The marketing agreement is expected to improve grower members' crop returns through savings and efficiency in selling a diversified line of dried fruits and nuts. "Challenges from giant conglomerates entering the food processing field places stresses on the limited resources of our farmer enterprises," says William Dabney, Sun-Diamond's president.
Co-op Development Training Center Opens
Nineteen students are participating in the first, one-week classes opening the National Cooperative Development Training Center at the University of Georgia in Athens in 1981. The center is an adjunct to the cooperative development division in USDAs Agricultural Cooperative Service(ACS). The ACS program assists new cooperative directors and managers to develop successful businesses.
Farmers Export Revamps After Losses
Suffering from financial losses estimated at $40.9 million in 1981, Farmers Export Co., the export marketing arm of Midwest regional grain cooperatives, has reorganized. It has sold the Galveston elevator to Far-Mar-Co, sold lease holdings in Philadelphia, lost six of its 12 member cooperatives, scaled down its headquarters staff and closed offices in Portland, Ore. and Tokyo.
Reluctance to Unite a Major Flaw
"We aren't as big as the major corporations with whom we must
compete, but if we don't grow, we can't provide the benefits our members expect,"
says Sigved Sampson, recently retired president of Midland Cooperatives, headquartered in
Minneapolis-St. Paul. Based on his 41 years with Midland, he contends that a major flaw of
cooperatives is their reluctance to unite to find solutions to their problems. He urges
haste in unifying the nation's too-fragmented network of cooperatives.
Sampson also is concerned about transferring ownership of a cooperative from one generation to another. "No farm supply cooperative in the country has fully resolved it. And as co-ops become larger and more capital intensive, and farmers become fewer in number but larger in size, this ownership transfer problem will become more acute, burdensome and complicated. We've got to figure out how to transfer ownership from the generation that is retiring to the one now using the co-op."
Cover art from "The Next Greatest Thing," a photo history book produced to mark the 50th anniversary of U.S. rural electric cooperatives. Here, the joyous day arrives when a High Plains farm family is "hooked up" with electric power.
Knutson: "Commit to Co-ops or Loose Control"
Young farmers have only two choices today. Join the corporate structure
and "relinquish all control," or commit to the cooperative system, cautions
Ronald Knutson, professor of marketing and policy at Texas A & M University. Take an
activist role in cooperatives or neither of you will survive the 1980s, he told 228 young
farmers from across the nation who are attending the 1982 National Institute on
Also addressing the institute, Ken Baer, chief executive officer of GROWMARK Inc., at Bloomington, Ill., says the time has come to deal with the reality that farmers account for only 3 percent of the population and many of their cooperatives have fallen on hard times. "After many years of financial growth through the use of debt, farmers may face the need to write some checks and infuse added equity to preserve their cooperatives."
Consumer Co-op Bank Gains Independence
The National Consumer Cooperative Bank of Washington, D.C., has been privatized by new legislation passed by Congress and approved by the president. Government equity has been converted to a loan to the bank and ownership turned over to members. Directors, elected by member cooperatives, have replaced government-appointed board members. The president will continue to appoint a small business representative and two other directors to the 15-member board.
A tank lid seems to float over one of three, 700,000-gallon grape juice storage tanks being constructed for Welch foods in Pennsylvania prior to the 1983 season.
Gold Kists Gaston Boosts Co-op Exports
"There may be no tomorrow for co-ops in exports unless we pull
together," warns William Gaston, president of Gold Kist Inc., Atlanta, Ga. Speaking
during the international development program at the 1983 National Institute on Cooperative
Education, Gaston says, "Make no mistake, cooperatives have lost ground in recent
years, if not in volume, certainly in prestige."
Speaking also as chairman of Toepfer International, a North American and European cooperative-owned trading company, Gaston urges other commodity cooperatives to join Toepfer and expand their marketing programs via exports. "If we make up our minds today that we are all going to do something to improve our international trade efforts, we can make it happen. Our cooperatives will be stronger for it, and so will our patrons."
Involve Young Farmers in Co-op Activities
Educating young farmers and young farm couples on cooperative principles and practices is vital to bolster their support of cooperatives, a University of Georgia study shows. An educational program should emphasize two-way communication between cooperative officers and young farmer-members and needs to be developed at the grassroots level.
This dove was used to symbolize the Food for Peace program using PL 480 funds to foster humanitarian aid and developing long-term export markets.
Block Vows to Protect Co-ops
Agriculture Secretary John Block says cooperatives are so important to
American agriculture that the USDA will work to protect them by "assuming a strong
policy making role concerning any government legislation or regulations" affecting
them. Speaking at the 1981 annual meeting of the Cooperative League of the USA, Block says
there are those who would attempt to "weaken" cooperatives. "But I pledge
to you ... that we will not allow them to be weakened. I will work to support them."
To fortify agriculture, "it is imperative we work to maintain and strengthen the financial base of our nation's agricultural cooperatives," Block says. He encourages farm and consumer cooperatives to work together to strengthen the free market. While farming in Illinois, Block was an active patron and director of his local Spoon River FS cooperative.
Minnesota Co-op Stretches Corn Value
Minnesota Corn Processors (MCP) has opened a $40 million corn wet
milling plant at Marshall that derived syrup, starch and feed byproducts from corn. St.
Paul Farm Credit Banks were the major lenders for the project. In later years, many will
point to this co-op as showing the way for a surge of new cooperatives formed to add value
to members' farm commodities.
President Richard Jurgenson notes that "for too long, we've depended upon government programs or some other outside help to keep us solvent. Having the opportunity to generate a better net return from each bushel of corn without government help just makes sense to me." In the initial equity drive, he recalls, the first $1.5 million was committed by producers in only three days. But the rest of the needed investments didn't come so easy. "We hit stonewalls often - but refused to quit." Nearly 2,100 producers for 18 counties initially agreed to a 5,000-bushel membership contract (at $21.41 per bushel). The plant handles about 11 million bushels annually, translating to 350 million pounds of products.
Bergland: "Commitment Means Staying Power"
"Commitment means staying power," says Bob Bergland,
president of the National Rural Electric Cooperative Association and keynote speaker at
the 1984 National Institute on Cooperative Education. "We have it. We have strong,
bright and dedicated young people. It's just a matter of putting it all together. What you
do with the power is up to you. The choice is yours."
He urges more cooperative involvement in the international scene. "You can't walk away from it. There is a tremendous opportunity for cooperatives to help developing countries get on their feet so they can pay their own way." In recalling his father's involvement in organizing Minnesota cooperatives, Bergland points to the need for change among existing organizations. Many small co-ops need to expand, merge or consolidate, he says.
Farmland Industries used its Co-op Video Network studio to prepare videotapes for use at farmer meetings.
Cooperation Restores Rail Line Service
When Illinois Central Gulf Railroad imposed a 70-ton-per-car limit on a
63-mile branch line in 1977, it effectively blocked use of efficient 100-ton hopper. That
sparked six shippers on the line, including four member cooperatives, to form the Bloomer
Line Connecting Railway Co., which bought and operates the rail line. Robert Graves,
director of traffic for FS Services (now GROWMARK) - to which the four co-ops belonged
advanced the case before the Interstate Commerce Commission.
A 32-mile rail line was opened for operation and interconnection with the Norfolk Southern Railroad in 1985, after extensive refurbishing. Federal and state funding sources were used in this effort. Further work that year opened an interconnection with the Santa Fe Railroad, followed by further refurbishing on the northern link and an interconnection with Illinois Central Gulf. About 90 percent of the annual loadings - including grain, fertilizer and miscellaneous products, such lumber are expected to come from the cooperatives.
"We couldn't possibly have accomplished this and at the price we did if starting today," says Leo Smith, line chairman and manager of Anchor Grain. He credits the success of the effort to lucky timing in protesting the service disruption and "the cooperative spirit among our members, which has made it possible to achieve our common goal: restoring rail service."
Andreas: Use Trade, Food Aid to Douse Prairie Fire
A tougher trade policy and a substantial increase in the Food for Peace
(PL 480) Program can help "end the depression sweeping like a prairie fire across the
nation's heartland," says Dwayne Andreas, chairman of Archer Daniels Midland,
Decatur, Ill. Addressing the 1986 annual meeting of the National Council of Farmer
Cooperatives, Andreas says the U.S. government must convince "mercantile
governments" that their policies of dumping surplus agricultural products in world
markets at below-cost prices "are not always in anyone's best interests."
Despite budget pressures, the government should double the $2.5 billion planned for the PL 480 program for the next five years, he says, because it would save $4.5 billion in price support expenditures and expand farm export markets. It will also "add jobs for workers in processing, trucking, shipping and related industries." That, in turn, would generate $300 million in new tax revenue, he says.
A towboat steers a fertilizer-laden barge toward dock at a Midwest storage warehouse owned by CF Industries, an inter-regional manufacturing and distributing cooperative.
Pressure Seen to Merge, Consolidate Co-ops
Given the restructuring in agriculture and agribusiness, cooperatives
must seriously consider merger or consolidation, Don Sands, president of Gold Kist Inc.
says in keynote remarks at the 1986 Eastern Member Relations Conference. He says
restructuring "will bring about more changes in the next three to five years than we
have seen in the past 20. Change not only can be challenging, exciting and rewarding, but
also frightening, extremely stressful and even depressing."
Sands tells the conferees: "Consolidation or merger should be pursued in most parts of the United States. There is no justification for the intricate web of more than 5,000 farmer cooperatives existing today .. History tells us co-ops merge only when participants are on their death bed. Rather than merge small, sick companies to create one large, sick cooperative, why not explore consolidation where all partners are relatively strong?
Mergers and consolidations in the Farm Credit System were discussed for five years, he says, "but nothing happened until the entire system nearly collapsed under the greatest losses in banking industry history. I don't think members' interests were being served," he says. "It will be many years before the system regains its strength." As an indication of impending changes, he cites a Congressional Office of Technology study that says by the year 2000, animal and plant production will be revolutionized by biotech and infotech.
FCS Losses Down, Still Heavy
Although combined results for the Farm Credit System (FCS) in fiscal 1986 showed a net loss of $1.913 billion, the crisis showed some easing compared with 1985 losses of $2.689 billion. New loans are also down from $66.6 billion to $54.6 billion. Other property, primarily from foreclosures, has increased to $1.101 billion, up from $928 million. The system's total capital dropped $2.7 billion, to $5.6 billion.
|A bountiful fall corn crop is harvested near Aurora, Neb. against the backdrop of a CF Industries anhydrous ammonia storage terminal.||The USDA Agricultural Cooperative Service booth attracts attention at the 1987 National Institute on Cooperative Education.|
Acceptance of Co-op Business Growing
The future for cooperative activity in both domestic and international arenas is strong and growing, says Robert Scherer, new president of the National Cooperative Business Association (NCBA), in his first report to the membership. Given the new emphasis on cooperative business, Scherer says NCBA must be prepared to network with the entire business community. "We are proud to be called cooperatives. They are being formed by businesses long thought of as being anti-cooperative .... We should be proud of that trend."
Torgerson Sees Return to Early Co-op Zeal
"Despite being in the most economically disruptive period in a
half century, family farmers and their cooperatives remain a major force in agriculture
(and) ... are positioned well to exploit their future in the years ahead," observes
Randall Torgerson, administrator for USDAs Agricultural Cooperative Service, in
remarks to the 1987 Eastern Member Relations Conference.
He urges the conferees to "take a hard look at cooperative education and training programs in view of the aloof and doubtful attitude of many young farm couples toward cooperatives. "We need to reemphasize public and private roles of teaching about cooperatives as unique institutions and the responsibilities of all participants, including chief executive officers, staff, directors and members."
Torgerson called for a "return to the early zeal that led to the formation of cooperatives. "Let's build the fervor and excitement that accompanies the discovery of mutual interest; use the cooperative business form to enhance members' competitiveness in domestic and international markets and emphasize the positive in our outlook and discussions."
Manage Industry or Face Price Cuts
Either work together in solving industry problems or risk having someone else do it who is less interested in your wellbeing, Jim Barr, chief executive officer of the National Milk Producers Federation, tells delegates at its 71st annual convention. "We must choose whether we want to manage our production as an industry or whether we want it managed for us through price cuts. If we fail to choose, the decision will be made for us."
Co-ops lncrease Clout in Processing Soybeans
Soybean processing plants in the upper Midwest owned by Farmland Industries Inc., Land O'Lakes Inc., and Boone Valley Cooperative Processing Association have combined into a new cooperative, Ag Processing Inc., based at Omaha, Neb. The combined organization represents about 9 percent of the nation's soybean processing capacity. It has assets of about $160 million and a sales base exceeding $1 billion.
Strong Family Farms, Co-ops on Horizon: NCFC's Naden
Stronger family farms, maybe organized as corporations, will emerge
from the present trend toward specialization on the farm, higher cash cost and fewer
cooperative members in the next 20 years. This will trigger a need for stronger
cooperatives, predicts Kenneth Naden on the eve of his retirement after 19 years at the
helm of the National Council of Farmer Cooperatives.
"Cooperatives can achieve growth in share of market and market power by improving all phases of their operations, finances and member relations. They can gain a greater share if more existing members use their cooperatives and still others join a cooperative ... (to) gain a greater share of the market," he says.
Encouraging more farmers to buy their supplies and market their products through cooperatives and providing much needed capital is tied to "finding a program that works to implement basic cooperative principles. Among recent legislative gains, Naden cites a cooperative amendment to the Federal Trade Commission (FTC) authorization bill banning FTC investigations of agricultural marketing orders and conference language reaffirming authority of the Capper-Volstead Act. Another legislative victory he cites is passage of the Farm Credit Act amendments that provide financing of cooperative exports, more liberal lending policies for young farmers, and re-establishing the Agricultural Cooperatives Service as a separate USDA agency.
Antitrust Commission Eyes Modifications to Volstead Act
Two modifications regarding the Capper-Volstead Act have been recommended to the National Commission for Review of Antitrust Laws and Procedures. The first proposal is that agreements among cooperatives - such as mergers and marketing agencies in common - should not be allowed if competition is substantially decreased. The other proposal would redefine the "undue price enhancement" term in the Act and make enforcement separate from USDA cooperative promotional responsibilities.
Farmland Foods Among Top 10 Hog Processors
Farmland Foods, a subsidiary of Farmland Industries Inc., at Kansas City, Mo., is now among the nation's top 10 hog processors. Chairman Gordon Leith reports that sales topped $647 million. Savings of nearly $14 million resulted in refunds, averaging $4.69 a head for hogs and $4.92 a head for cattle for the 11,000 hog and cattle producer-members.
Ag Co-op Earnings Up Dramatically
Reflecting the general trend of agriculture in the mid-to-late 1980s,
the nation's major agricultural cooperatives are striving to use their resources more
efficiently, are eliminating operational duplication and redeploying assets. The
Agricultural Cooperative Service's annual survey of the nation's 100 largest cooperatives
also shows that they are consolidating to improve plant operating efficiency, provide
less-costly farm supplies or enhance marketing services for members. Management staffs are
being reduced, personnel pruned and unprofitable departments closed. Overhead and
operating expenses are being slashed and tighter control is being maintained over
Total revenue for the top 100 co-ops rose 1.6 percent, to $43 billion; net margins before losses increased 60.4 percent, to $756 million; net losses dropped dramatically from $272.4 million to $38.7 million; total assets climbed 2.4 percent, to $15.9 million; and member equity increased 6.6 percent, to $6 billion. Five of the nine cooperative commodity groups had higher revenues in 1987, the largest gains being in the fruit/vegetable and dairy groups. The poultry and livestock groups showed the largest drop in revenues.
National Bank for Co-ops Formed
A new National Bank for Cooperatives has been formed, resulting from the combination of 8 of 12 district banks and the Central Bank for Cooperatives (CBC). The bank, formed in 1989, has authority to serve agricultural cooperatives, rural utility systems and eligible associations throughout the United States. W Malcom Harding, former CBC president, has been chosen new chief executive officer and Douglas Sims, president of the St. Louis Farm Credit Board, as chief operating officer. The merger plan was developed by a special committee after Congress approved the Agriculture Credit Act of 1987.
Watch Activity in Five Areas, Leaders Caution
Speakers at the 1989 annual meeting of the National Council of Farmer Cooperatives are cautioning cooperative leaders to carefully follow activity in five areas with the potential to have detrimental or beneficial impacts on their organizations. These include: 1) new attempts to reduce the federal deficit; 2) implications of leveraged buyouts occurring with increasing frequency in the business world; 3) resolution of issues and problems in international trade; 4) changing consumer attitudes and preferences; and 5) rural economic development initiatives. New leadership in the nation's Capitol is expected to develop new solution alternatives, speakers advised. And the impact of those alternatives on agriculture and cooperatives needs to be carefully assessed.
CoBank Formation Proves Fruitful
In its first year of operation, CoBank formed through the merger of 11 of the 13 district banks for cooperatives, proved fruitful. It has improved operations, to the benefit of member cooperatives and their farmer-owners, says W M. Harding, bank president. "We reduced costs, assured rural America of the existence of a strong cooperative bank and strengthened member control." Net income for 1989 of $92.95 million was up 35 percent from 1988.
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