N E W S L I N E
Farmland sells grain division to joint venture with ADM
A new joint venture between Farmland Industries and Archer Daniels Midland (ADM), being managed by ADM, completed takeover of Farmland’s grain division on June 1. ADM absorbed 280 of Farmland’s employees, but 175 were left unemployed or seeking relocation elsewhere in the cooperative’s system.
The joint venture gives ADM control over the bulk of Farmland’s grain operation of 24 elevators with a total capacity of 174 billion bushels. Included in the action was the cooperative’s brokerage arm, Atwood Commodities, and grain-testing laboratory at Bonner Springs, Kan. Both services are duplicated elsewhere by ADM’s operations. Profits from the new joint venture will be shared by ADM and Farmland.
The pact was the latest in restructuring steps Farmland has been taking to improve its financial standing. The co-op suffered a $29.25 million loss for fiscal 2000, its first loss since 1993. The rising price of natural gas, a major component in fertilizer manufacturing, has been a prime factor in its losses. The cooperative also plans to close its canned ham plant at Carroll, Iowa.
On the brighter side, Farmland’s operations for the first six months of fiscal 2001 are showing after-tax earnings of $5.4 million, up from a $48.6 million loss a year earlier. Total sales reached $6 billion, up from the $5.8 billion reported for the corresponding period in 2000.
Meanwhile, the cooperative has shut down its fertilizer plants at Lawrence, Kan., and Pollock, La., due to a weak fertilizer market and high gas costs. The plants produced urea ammonium nitrate and anhydrous ammonia. Operations at the fertilizer plant at Enid, Okla., have been reduced. Cooperatives can purchase and sell fertilizers brought in from the Gulf of Mexico cheaper than it costs to produce them at Lawrence. About 60 of its 158 employees were laid off.
Looking ahead, Farmland hopes to wean itself away from the high-cost of natural gas by buying energy from SynFuel Technologies, a growing young company in the alternate fuel industry.
Farmland and SynFuel will participate in an $800-million coal gasification plant adjacent to Farmland’s fertilizer manufacturing plant at Enid. Under a long-term supply agreement, Farmland will purchase steam and nitrogen from SynFuel for use at Enid.
This will be the first plant for the two-year-old firm, based at Glen Carbon, Ill. The plant should be ready in June of 2004 if necessary permits are obtained. Plant engineering has begun and construction could start in August of 2002.
The company also expects to sell gas to a power utility to generate electricity. The process also creates nitrogen that can be used to make fertilizers.
Farmland believes coal gasification could generate a savings of 40 percent below the current natural gas price. A similar technology is being used at Farmland’s new fertilizer plant at Coffeyville, Kan.
Agri-Mark has $1.9 million profitImproved butter markets and record sales of Cabot products were credited for $1.9 million in profits for Agri-Mark’s fiscal 2000 business year. The New England dairy cooperative’s branded products continued to grow, said President Paul Johnston. The new whey protein plant and other manufacturing facilities are operating well, he said. During the year, improvements were made in butter operations, cheese packaging and cultured products to keep pace with the growing demand. “The growth and success of our Cabot brand shows what dairy farmers can do if they belong to a cooperative like Agri- Mark and work together to market their milk,” said Chairman Carl Peterson, a dairy farmer from Delanson, N.Y. The board has allocated six cents per hundredweight to all members based on their milk production during fiscal 2000. Meanwhile, Cabot has introduced a Greek feta-cheddar cheese to the market. The new cheese is made exclusively by Cabot.
Wosje: ‘Stay alert, flexible & profit from opportunities
“We need to stay alert to changing conditions and pay attention to business every day,” Walt Wosje, general manager of Michigan Milk Producers Association told the cooperative’s members in his annual meeting report. “We have experienced some good fortune of market price increases when we have had large product inventories in our warehouses. But that is not going to happen every year,” he cautioned. “We need to be flexible, fleet footed and be able to change course in midstream when positive opportunities present themselves.”
In looking at the wave of dairy cooperative mergers and consolidations during the past 10 years, he observed, “Today, they (co-ops) market a larger percent of the milk supply than ever before,” even though the number of dairy cooperatives continues to decline. “Three cooperatives now market almost 50 percent of all the milk produced in the United States. Our organization handles and markets as much milk today as we ever have, even though we look smaller than other cooperatives.
“That shouldn’t give us any sense of inferiority as long as we concentrate on the basics of our business and operate the company in a very controlled manner. We can successfully fulfill our mission objective,” he said. “Our relative size causes us to be more intense in running the business. We concentrate more intently on servicing our customers who purchase our milk and dairy products. Our performance in terms of customer service and product quality has never been higher.”
Livestock certification to help reassure public that beef is OK
A Wisconsin livestock marketing cooperative has instituted a producersigned certification program aimed at assuring consumers of the safety of beef supplies. Greg Beck, president and chief executive officer of Equity Livestock Cooperative Sales Association, Baraboo, instituted the program April 1.
“We know that our patrons produce the safest, most wholesome beef in the world and we are proud to certify that to the consuming public,” Beck said. The move was in part prompted by letters the cooperative received from every major packer indicating they wouldn’t purchase livestock without the certification. “This certification is a direct result of the outbreak of Bovine Spongiform Encephalopathy (BSE, or “mad cow” disease) in Europe and the subsequent worldwide media attention on food safety,” said Beck.
Specifically, he said, “All slaughter cattle marketed through or to Equity must be accompanied by a signed producer certificate, which indicates that to the best of the producer’s knowledge, the cattle have not been fed any feed containing protein derived from mammalian tissues – meat or bone meal – and that none of the cattle have an illegal level of drug residue.”
Beck pointed out that even though the feeding requirement has been on the books since 1997, the U.S. cattle industry – producers, marketers, packers and retailers – “is taking the proactive step to assure meat consumers (and world export markets) that the U.S. food supply is the safest in the world.” Certificates must be signed prior to marketing and will be held on file by the cooperative. Beck said that while the certification may inconvenience the cooperative’s 60,000 patrons, it “is small compared with the benefits of reassuring the beef-consuming public.”
Marketer for Idaho potatoes favors statewide planning
The marketing director for an Idaho seed potato cooperative believes growers must cut back acreage this year to reduce the surplus that is depressing prices. Dan Margraves, who represents Teton Seed Marketing Association, is quoted in press reports as saying the state needs better planning in the amount of acres grown in Idaho.
Margraves would like to see a reduction of about 80,000 acres of fall potatoes this year, which would be about a 10- to 15-percent reduction from last year. He said the state’s biggest problem was the failure to develop a statewide potato marketing plan.
Teton Seed, which markets Idaho seed potatoes in the Northwest, had 16 growers who supplied the cooperative when it formed four years ago. Today, only eight remain, but during that time the cooperative has expanded its market by about 15 percent. The cooperative shipped 3,000 semi-truck loads of seed potatoes this season, which represents its entire crop.
A federal program pays growers $1.50 per hundredweight to divert quality potatoes from the market, even though the producer’s cost is about $7.50. Margraves said only 2 of the past 12 seasons have been successful for producers and he is worried about how many growers will survive a 13th losing season.
Many growers are heavily mortgaged and have reduced equity in their farms, which makes them less attractive to lenders. He fears that unless growers develop a statewide marketing plan that emphasizes the fame of Idaho potatoes, industry fortunes won’t change. And worse yet, some growers may increase their plantings this year and hope to cash in while many others are cutting their acreage. On the other hand, a sharp cutback could boost industry morale, Margraves said.
Sunkist taps Gargiulo as new president
California-based Sunkist Inc., the nation’s oldest and largest citrus marketing cooperative, has named Jeffrey D. Gargiulo, at one time one of the state’s largest producers of fresh fruit and vegetables, as its new president and chief executive officer. James Mast, Sunkist’s former chairman, had been acting president during the interim.
Gargiulo is currently chairman and president of Gargiulo Landco, a diversified company that deals in agricultural land and real estate development, owns a wine grape vineyard in Napa and is a wholesaler and distributor of fine wines in Florida. Sunkist chairman Al Williams said Gargiulo is recognized throughout the industry and knows the growing, packing and export markets.
Organic cooperative shapes national product rules
George Simeon, a Wisconsin organic farmer and chief executive officer of the nation’s largest organic cooperative, has been appointed to a five-year term on the National Organic Standards Board, which advises the U.S. Department of Agriculture on standards for organic products. Simeon is a former dairy farmer. He and his wife now raise chickens and horses at their farm near LaFarge, Wis. He has a national reputation as an advocate of organic foods.
In 1988, he and a group of neighbors formed Coulee Region Organic Produce Pool, more commonly known as CROPP. The cooperative sells a variety of products, ranging from milk to juice and meat to cheese. It has 450 members in 14 states, stretching from California to Florida to Maine. Annual sales this year exceeded $100 million. The cooperative has a list of 50 dairy producers waiting to join.
SSC to close 47 stores, cut staff in restructuring
Caught up in a slumping farm economy, Southern States Cooperative (SSC), based at Richmond, Va., plans to close 47 of its 233 retail stores in nine states. It will also close five other facilities involved in the manufacturing, marketing and distribution of farm supplies and services. The restructuring will cut 300 employees, or about 6 percent of the co-op’s workforce. The distribution center in Richmond is being closed in favor of larger centers near Roanoke, Va., and in Pennsylvania.
These actions represent the latest wave in SSC’s efforts to counter an economic crunch confronting much of the nation’s farm sector. SSC earlier cut 55 corporate employees in its restructuring. In March, SSC transferred its livestock marketing division to United Producers Inc., a Midwest livestock marketing and credit cooperative based at Columbus, Ohio. About 20 facilities and 190 jobs were involved.
Wayne Boutwell, SSC president and chief executive officer, said the decisions were “painful,” but necessary. “We must seize opportunities to consolidate for improved efficiency and to eliminate operations that generate more cost,” Boutwell said. “The reality of today’s farm economy and ongoing consolidations of farming operations is that the market won’t support as many local farm supply and other agribusiness facilities as in the past. Most industries, including every aspect of agriculture, are undergoing consolidation. Our actions are driven by our goal as a producerowned cooperative to provide goods and services to our member-customers as efficiently as possible,” he said.
The cutbacks won’t affect other SSC facilities associated with its annual 350-million- gallon petroleum business or its 34.5-million-bushel grain marketing operation. Contributing to the restructuring are depressed corn and soybean prices, severe floods and drought in some parts of the Mid- Atlantic trade territory, expansion through acquisitions in recent years and declining farm numbers.
Poor demand and costs associated with the closings are expected to produce losses for SSC this year. For fiscal 2000, net earnings were $4.96 million on revenues of $1.55 billion. SSC has about 5,000 employees in 25 states and serves 300,000 farmer-members. Meanwhile, SSC will continue to manage 85 local cooperative facilities and work with a distribution network that includes 1,000 independent cooperatives and dealers.
Bison farmers market directly via supermarket freezers
Bison ranchers in North Dakota have taken steps to directly market their meat products to customers. About 50 members of the North Dakota Buffalo Association are buying and stocking supermarket freezers themselves to increase demand for their bison meat. Their Adopt-AFreezer program brought more than 40 freezers to supermarkets throughout North Dakota, said Paul Thomas, executive director of the association. Three others are in Montana, four are in Minnesota and one is in South Dakota. Growing pains in the industry two years ago prompted the association to develop the program, Thomas said. Lagging demand was driving down prices, so members decided to take control and boost demand for their product themselves.
Each $2,000 freezer is owned by individual members. They are responsible for keeping the store stocked, advertising the product and conducting in-store promotions. Grocers clear about a 25 percent profit on sales in exchange for providing floor space, powering the freezers and keeping them full each day. Featured under the North American Bison Cooperative’s Buffalo Nickel brand are steaks, roasts, ground meat, patties and prepared chili. The cooperative has about 350 members across the Great Plains and operates a processing plant in New Rockford.
Some Canadian ranchers want to join the program and one association member is interested in placing 30 freezers in Minnesota supermarkets. Meanwhile, the North Dakota Agricultural Products Utilization Commission has awarded an $18,500 grant to the group to promote and market the freezer program.
Jantzen to lead NCBA education unitJean Jantzen, former vice president of CHS Cooperatives at St. Paul and currently board chair for HealthPartners Inc., a Minnesota-based health plan, will head the new education committee for National Cooperative Business Association (NCBA) in Washington, D.C. The committee was formed in January to direct NCBA’s new strategic initiative on cooperative education. Jantzen has more than 36 years of experience in the cooperative sector. She is also vice chair of the Cooperative Foundation board of trustees. Meanwhile, Byron Henderson has been named a vice president and will head development of .coop, the new Internet domain approved for exclusive marketing use by cooperative organizations worldwide.
Leonard new ACDI/VOCA VP
Carl Leonard has joined ACDI/ VOCA as senior vice president of the Latin America and Global Programs division. He brings more than 30 years of USAID project management and leadership experience. As acting administrator of USAID, he directed programs in the Western Hemisphere, including 16 field missions and three regional programs.
Accelerated Genetics is 60
Accelerated Genetics, an innovative livestock breeding cooperative based at Baraboo, Wis., is marking its 60th year in the livestock breeding industry. Among its innovations: the first young sire program, one of the first to provide a mating program, working with World Wide Sires. Now, 30 years later , it is one of the new owners of a global marketing network, the first to use computerized freezing and a pioneer in genetic market research. President Roger Ripley said the cooperative’s future lies in vision and long-range planning and evaluating technologies and their potential applications on behalf of customers.
NCBA honors Sen. Kohl
U.S. Sen. Herb Kohl (Wis.) has been named an honored cooperator by National Cooperative Business Association (NCBA) for his continuing commitment to cooperative businesses. “Sen. Kohl has always been a champion of cooperatives as an ownership solution to some of the toughest challenges this country faces,” said Rod Nilsestuen, president of the Wisconsin Federation of Cooperatives, one of the award sponsors. Kohl was cited for supporting USDA’s rural cooperative development grants program. The program helped Wisconsin-based Cooperative Development Services (CDS) develop new forestry cooperatives that provide farmers with an additional long-term source of income. CDS has received nearly $1 million in grant assistance from the fund. The award was sponsored by 16 cooperatives, including five Midwest dairy cooperatives.
At its spring annual meeting, NCBA re-elected all its officers including Chairman Pete Creer, chief operating officer for Credit Union National Association and affiliates. During Creer’s first term, NCBA introduced the new Internet cooperative domain – .coop – exclusively for cooperatives. Other elected officers are: Charles Snyder, National Cooperative Bank, first vice chair; Ann Hoyt, University of Wisconsin, second vice chair, and Steven Cunningham, IMARK Group Inc., secretary-treasurer.
Meanwhile, NCBA has launched DotCooperation LLC, a wholly owned subsidiary that will provide domain name registration for .coop and other technology services starting this summer. NCBA President Paul Hazen said DotCooperation would help position cooperatives in online markets.
Co-op, army cut energy costs
Faced with a $7 million electric bill last year, the U.S. Army’s Fort Knox in Kentucky is joining forces with Nolin Rural Electric Co-op in nearby Elizabethtown to slash its energy costs. The energy conservation effort responds to an executive order to cut energy use in a half million federal facilities by 35 percent by 2010. The cooperative is one of three utilities serving Ft. Knox. The contract is open ended. Installing energyefficient lighting was the cooperative’s first project. Once these energy-efficient plans are approved, the cooperative will finance the project through the National Rural Utilities Finance Corp. Fort Knox will repay the loan over 10 years as part of its electric bill.
Agrilink recognizes farm partners
Diversification for New York State farm partners has proved the key to their successful operation that led to Agrilink Foods (owned by Pro-Fac Cooperative) citing them with its annual Hugh Cummins Cooperator of the Year Award. The award recognizes individuals who have made significant contributions to the agricultural industry through cooperative and civic pursuits. Craig Yunker and P.J. Riner of CY Farms in Elba, N.Y., operate 5,700 acres of cropland in west-central New York, where they grow 2,000 acres of snap beans and peas for the cooperative and operate a custom bean harvest unit for the cooperative, a dairy heifer enterprise in partnership with Agway and the Batavia Turf business, which provides instant lawns to customers across the state. “The award means a lot to us,” said Riner, “because Agrilink has been an integral part of our business. Without it, I don’t think we could have grown so quickly.” Yunker credited CY Farms success to the partnership with its 40 employees.
Eggstravaganza in Minnesota
The tanker truckloads of liquid eggs being shipped from Golden Oval Eggs to the fast food market, the baking industry and companies that make processed eggs for grocery stores might be termed an “eggstravaganza.” But it’s routine business for the new-generation egg cooperative formed at Renville, Minn., in 1991. The cooperative is planning to open its ninth barn of a planned 2.7-million-bird egg plant later this year. The stock offering in Iowa last year expanded the cooperation to about 250 members.
TFC, GROWMARK will not consolidate
There will be no consolidation of Tennessee Farmers Cooperative (TFC) of LaVergne and GROWMARK, Inc., of Bloomington, Ill., after the TFC Board of Directors voted July 9 to end a feasibility study launched on March 26. The board voted to halt the study process after determining that consolidation of the two regional cooperatives “would not be in the best interest” of TFC, its 70 member co-ops across the state and some 73,000 farmers who own the farm supply cooperative system, said Vernon L. Glover, TFC president and chief executive officer.
“From the very start of the study, TFC’s directors have stressed that the well-being of members and how they would benefit would be foremost in anything that is decided,” said board chairman David Rieben of Franklin County, Tenn. “One of the concerns we had was low projected cost savings to our member co-ops as a direct result of consolidation.” Glover stressed that the vote was “by no means a vote against GROWMARK.”
“The feasibility process was a positive and beneficial exercise for everyone involved,” he said. “TFC directors and employees as well as managers of some of our member co-ops have visited with counterparts at GROWMARK.” Additionally, Glover said, each cooperative studied closely the internal operations of the other, noting similarities and differences and working to determine how consolidated efforts could be beneficial.
“While our board recognized that TFC and its members could potentially derive some benefit from the consolidation, it felt that this was not the proper time to present the issue to the membership for a vote,” Glover said.
Roche takes helm as Minn-Dak CEO
It didn’t take David Roche, the new CEO at Minn- Dak Farmers Cooperative, a Wahpeton, N.D.-based sugarbeet cooperative, long to learn the difference between being president of a large publicly held company and CEO of a cooperative. As an officer of a billion-dollar, investor-owned company, it was highly unlikely that Roche would ever bump into one of the company’s directors or large stockholders while he was pumping gas or shopping for groceries. However, as the new CEO of Minn-Dak Farmers Cooperative, Roche has those chance encounters with stockholders and directors on a regular basis.Outgoing by nature, Roche welcomes these conversations, noting that there is something very positive that happens in informal, unplanned meetings with members and staff. “I enjoy the spirit of community I’ve found in the Red River Valley,” he says. “There are many opportunities for me to interact with the people in informal settings. I find that refreshing.”
After four months on the job, Roche is fitting comfortably into his new post as Minn- Dak’s CEO. From the beginning, he made it a priority to get out to meet as many of the cooperative’s stockholder/growers as possible, and within weeks he had done just that. In addition to three grower/stockholder meetings held across the region, he has also visited with growers on their farms and as they picked up seed for the new crop.
“I want to have an open-door policy with growers and employees,” Roche says. “I give them my office number and encourage them to call whenever they have a concern.”
Roche says that Minn-Dak directors have a strong direct interest in the success of the overall operation because they are all active growers of sugarbeets and have a better understanding of operation, production and even local politics.
Roche’s own experience and knowledge of the sugar industry also runs deep. In fact, it dates back to his childhood when his father worked at Michigan Sugar. Although Roche didn’t set out to make his career in the sugar industry, it didn’t take long for him to join the ranks. After earning his MBA with an accounting emphasis, he worked for five years in one of the largest public accounting firms in the nation.
After that he accepted the position of controller at Michigan Sugar, which was bought by Savannah Foods and Industries in 1985. He rose steadily through the company’s ranks until he was named president of Michigan Sugar in 1994. Eventually, Roche went on to serve as president of a subsidiary, Savannah Foods Industrial, and then was named managing director and senior vice president at Imperial Sugar Co. after it bought out Savannah Foods and Industries.
The domestic sugar industry was going through major changes associated with difficult economic times in the industry and, in October 2000, Roche resigned from Imperial Sugar Co. and considered leaving the industry. But when the CEO position at Minn-Dak Farmers Cooperative became available, he applied.
“Minn-Dak is known as a cooperative owned by productive, efficient farmers and the employee team is recognized as top notch,” Roche explains. That reputation made the job opening attractive to Roche.
“The cooperative is well focused and in equilibrium in an industry that had lost its equilibrium, experiencing bankruptcies, closures, sales and reduced financial returns. This co-op is coping well in tumultuous times, and I wanted to be a part of that.”
As for the future, Roche believes Minn-Dak will need to contribute in every way possible to help the sugar industry reach some stability. Otherwise, he feels outside factors could eventually put Minn- Dak’s continued success at risk.
“The problems hitting the sugar industry are complex,” Roche says. “But I believe that being a strong cooperative gives Minn-Dak an edge. From day one, I could see that Minn-Dak keeps its focus on the right things, providing a good return to our grower/owners and a good working environment for our employees. This is a cooperative that operates under the assumption that everyone involved will put forth the best effort possible. And they really do just that, year after year. I am thoroughly honored to be a part of that kind of team effort.”
2001 USDA co-op survey on the way
Every year, the Rural Business-Cooperative Service (RBS) of USDA Rural Development collects key data about the cooperative sector through a mail survey. A questionnaire is sent to each cooperative two to three months after the end of their business year. Questionnaires focus on the type of cooperative and dollar sales of farm products marketed and farm supplies sold, basic financial items, number of members, full-and part-time employees and wages and benefits. Questionnaires for the 2001 survey will soon be mailed.Each cooperative is also asked to provide a copy of its annual, or audit, report. Information from the annual report is used to complete the questionnaire, verify the information reported and gather additional data. Every other year, questions are added to the questionnaires to gather information on cooperative sales and memberships by state.
RBS expands the data collected to represent all farmer and fishery cooperatives and publishes preliminary findings. In the fall, USDA publishes an annual report summarizing progress, changes and trends. This year’ report, Farmer Cooperative Statistics, 2000 will be placed on the Internet, as were the 1999 results (Service Report 59). See: www.rurdev.usda.gov/rbs/pub/layout-s.pdf.
Other data uses include the development of cooperatives’ market share estimates at the first-handler level. In 1999, cooperatives’ share of U.S. farm marketings was 27 percent, down from 30 percent in 1998. The co-op share of major U.S. farm production expenditures was 27 percent, down from 29 percent in 1998. Market share estimates are published in USDA’s Rural Cooperatives magazine.
Farmer cooperative statistics are also published in the magazine, Agricultural Statistics, Statistical Abstract of the United States and American Cooperation. Selected summary data are provided to the Bureau of Economic Analysis in the Department of Commerce and to USDA’s Economic Research Service for use in their Economic Indicators of the Farm Sector.
Data are also used to update a Directory of Farmer Cooperatives, which can be found on the Internet at www.rurdev.usda.gov/rbs/pub/sr22.htm and Cooperative Historical Statistics at www.rurdev.usda.gov/rbs/pub/cir/s26.pdf.
Cooperative leaders, educators, researchers and policy makers, among others, also use farmer cooperative statistics. Cooperative Services staff frequently use the data for important studies and presentations. Educational materials, from pamphlets to college textbooks, rely heavily on collected cooperative statistics. Foreign visitors also contact RBS for information about the structure and operation of U.S. farmer cooperatives.
Specific information about individual farmer cooperatives collected by RBS is kept strictly confidential. Information published is combined to avoid disclosure of individual cooperatives. RBS is willing to work with persons seeking aggregated data where no individual cooperative can be identified.
For questions regarding farmer cooperative statistics, please call, e-mail or write Charles A. Kraenzle at (202) 720-3189, or charles.kraenzle@usda.gov, or USDA/RBS/Statistics, STOP 3256, 1400 Independence Ave., SW, Washington, D.C. 20250-3256.
