Newsline

Co-op developments, coast to coast

Charles Ling named USDA
Economist of the Year
Agriculture Secretary Tom Vilsack recently announced that USDA Rural Development agricultural economist Charles Ling has received the USDA Economist Group’s “Economist of the Year” award, which recognizes his outstanding work to foster greater understanding and use of dairy cooperatives.

“Dr. Ling exemplifies the ways in which USDA employees work tirelessly to help businesses and improve the lives of rural residents,” Vilsack said. “The technical assistance he has provided to cooperatives has helped them improve their economic well-being and service to their members.”

Ling received the award at a ceremony at USDA headquarters in Washington D.C. Ling provides the only source of comprehensive information on the marketing operations of the nation’s dairy cooperatives, information which has proven useful in policy and research analysis. Especially noteworthy is Ling’s work to calculate the cost of manufacturing cheese, butter and milk powder in cooperatively owned plants.

The award citation notes that Ling “is an unsung hero who has fostered understanding and use of dairy cooperatives. His wide-ranging research and technical assistance has provided exceptional information to U.S. dairy cooperatives to better serve their member-farmers. Producers, cooperatives, government agencies and policymakers often seek his advice.”

A database Ling created on dairy cooperatives, which is updated every five years, is frequently cited by the dairy industry. Ling has authored more than 22 research reports and 30 other research-related reports and conducted at least 64 technical assistance projects for farmer cooperatives during his more than 30-year tenure with USDA.

“I am just lucky to have the opportunity of working with the nicest people — dairy farmers, the staff of their cooperative organizations and colleagues in and outside of USDA,” Ling said.

The Economist of the Year award honors a current U.S. Department of Agriculture economist for excellence in economic research and analysis that contributes to the USDA mission regarding food, agriculture, natural resources and related issues. By highlighting the contributions of economic analysis to program and policy development and implementation, the USDA Economists Group encourages continued integration of economic analysis throughout USDA. Membership in the group is not limited to USDA economists.

LO’L reports record
net earnings
Land O'Lakes Inc. reported record net earnings in 2009, achieved in what company officials termed a difficult and volatile economic environment and marketplace. Financial 2009 highlights for the co-op include: “Despite a weak economy, Land O’Lakes delivered solid financial results — including record-high net earnings — because we met the needs of a changing marketplace,” President and CEO Chris Policinski said. “The strength of our brands, aggressive and targeted marketing and adjusting our product mix to meet customer and consumer preferences all contributed to our outstanding results.”

Earnings benefited from $37 million of unrealized hedging gains at the end of the year, which compares to $52 million in unrealized hedging losses at the end of 2008. Company officials noted that unrealized hedging is more an indicator of market conditions at a given time than of performance. If the impact of hedging were factored out, 2009’s net earnings would be second only to 2008. Policinski also cited: “What’s particularly good to see is that 9 percent of our 2009 dairy foods valueadded volume was generated by the new products category — which are products introduced over the past three years,” Policinski said. “We maintained or improved key financial measures, and total debt was down by $250 million, as compared with year end 2008. We also achieved nearly $70 million in cost savings, and we refinanced our publicly held debt at attractive interest rates.”

CooperationWorks! slates
spring training
The Cooperative Business Development Training Program conducted by CooperationWorks! is a rigorous course to help professionals develop skills in assisting groups to start new cooperative enterprises. The program has been designed to deliver to new practitioners the best of what has been learned in the field of cooperative business development.

The program consists of two intensive five-day training sessions, and a third (online) session focusing on coop finance. Session 2 (the courses can be taken in any order) will be held May 17-21 at the University of Wisconsin (UW) in Madison. Session leaders will include Bill Patrie of the Common Enterprise Development Corporation, Margaret Bau of USDA Rural Development and Anne Reynolds of the UW Center for Co-ops, among others. This session will examine the unique aspects of cooperatives and how to build effective group capacity for the long-term success of an enterprise. Break-out case studies will track four existing cooperative businesses. The course will also cover: co-op legal structures and taxation; co-op finance, equity and capitalization; co-op management and oversight, among other topics.

Participation in the program is limited; registrations will be accepted on a first-come, first-served basis. For more information, contact Audrey Malan at 307-655-9162 or cw@vcn.com.

USDA helping Dakota co-op
expand broadband service
In rural Burleigh County, N.D., the BEK Communications Cooperative has been selected to receive a $2 million grant and $2 million loan from USDA. Along with an additional $2 million in leveraged funds, the money will enable the co-op to expand its broadband system to serve more than 540 homes and anchor institutions that are currently under-served.

This is just one example of how USDA is using American Recovery and Reinvestment Act funds Congress allocated to it to extend broadband services to un-served and under-served parts of rural America. To date, $895.6 million has been provided to support 55 broadband projects in 29 states or territories.

The BEK co-op’s existing system provides service to 53 percent of the population in its service area. Among the current users, 22 percent derive household income from the Internet.

This expansion is expected to stimulate economic growth by bringing on new users.

BEK, founded in 1952 and headquartered in Steele, N.D., provides voice and data services to about 6,000 customers throughout six counties in south-central North Dakota. In addition to local and long distance telephone service, the co-op provides high-speed Internet access, digital TV, advanced intelligent network features, dedicated data circuits and more.

For a complete list of USDA broadband fund recipients, visit: www.rurdev.usda.gov/rd/newsroom/new s.htm.

CoBank reports record
earnings, issues $269 million
in patronage
CoBank, a leading cooperative bank serving agribusinesses and rural utilities throughout the United States, set new records for net interest income and net earnings for 2009. These gains were achieved despite lower average loan volume during the year.

Net income for fiscal 2009 was a record $565.4 million, up 6 percent from $533.4 million in 2008. Net interest income for the bank rose 10 percent, to $946 million, up from $862.6 million in 2008. Total assets were $58.2 billion, compared with $61.2 billion in 2008.

Although loan quality declined as a result of impacts from the global recession on the bank’s customer base, CoBank reports that its overall levels of capital and liquidity remained strong. In March, the bank was slated to pay $268.9 million in total patronage, including $183.8 million in cash and $85.1 million in common stock. For most customers, that represents 100 basis points of average loan volume, lowering their overall net cost of debt capital from CoBank.

“The strong patronage payout authorized by our board for 2009 underscores the strength of the cooperative model and the compelling value proposition that CoBank offers its customer-owners,” said Robert B. Engel, president and chief executive officer.

Total provisions for loan losses for 2009 and 2008 were $80 million and $55 million, respectively. “During a year that proved enormously difficult for many of the nation’s financial institutions, CoBank was successful in generating record levels of net income to fund patronage, build capital and cushion the bank from the negative impacts of the recession and credit crisis. Most importantly, we were able to stand by our customers and meet their needs for debt capital as their financial partner,” said Engel.

Average loan volume during 2009 was $44.5 billion, down 2 percent from the prior year, primarily due to lower seasonal financing requirements from agribusiness customers. Seasonal agribusiness lending was reduced due to the substantial drop in prices for grains and farm inputs from 2008’s exceptionally high levels. Offsetting that decline was growth in other areas of the business, including U.S. governmentguaranteed loans that support American agricultural exports, loans to energy customers and loans to (and participation with) affiliated associations and other partners across the Farm Credit System, the bank reported.

At year-end, 95.8 percent of the bank’s loan and lease portfolio was classified in the highest regulatory category used to grade creditworthiness. Capital and liquidity levels remain well in excess of regulatory minimums, with the bank holding about $12.7 billion in cash and investments at year end.

USDA, Navy sign
renewable energy agreement
USDA and the U.S. Navy in January signed a memorandum of understanding that encourages their cooperation in the development and use of advanced biofuels and other renewable energy systems. “USDA looks forward to working with the Navy and other public and private partners to advance the production of renewable energy by sharing technical, program management and financial expertise,” Agriculture Secretary Tom Vilsack said. “In order to secure the strategic energy future of the United States, create a more nimble and effective fighting force, and protect our planet from destabilizing climate changes, I have committed the Navy and Marine Corps to meet aggressive energy targets that go far beyond previous measures,” Navy Secretary Ray Mabus said. The objective is to reduce reliance on fossil fuels from volatile areas of the world.

Mabus announced five energy targets for the Navy and Marine Corps, with biofuels being a major component. These goals include: The agreement complements existing renewable energy programs and efforts of USDA, the Navy and Marine Corps. USDA has a variety of programs and services that support renewable energy development. To learn more about them, visit: www.rurdev.usda.gov.

Michigan Milk leader
Jack Barnes dies
Jack Barnes, who led Michigan Milk Producers Assoc. (MMPA) for 26 years, has died at 89. Barnes was remembered as “the man who helped shape modern Michigan milk marketing.” Barnes, who was employed by MMPA for 39 years, served the dairy farmers of his state during a time of great transition and modernization. He was instrumental in establishing premiums paid to farmers for their milk and streamlined the milkmarketing system by consolidating small cooperatives into the statewide association.

Barnes guided farmers from a time of milk cans to bulk tanks on their dairy farms. He was remembered as a man who took pride in leading the cooperative through difficult times with a positive, results-oriented managerial style.

“His career was molded by his firm belief in the concepts of farmer cooperatives and family farms. He continued his commitment to dairy farmers his entire life,” MMPA General Manager John Dilland said. “He had a very strong interest in Michigan State University (MSU) and its educational foundations, and was one of its most active recruiters. His involvement, his enthusiasm and his positive outlook will be missed.”

Barnes’ leadership in the cooperative led to involvement in other agricultural organizations, including the Dairy Council of Michigan, the Michigan 4-H Foundation and the Michigan Dairy Memorial and Scholarship Foundation. He received numerous awards and honors, including: MSU’s Distinguished Service to Agriculture and Distinguished Alumnus awards; Michigan 4-H Distinguished Service and Emerald Clover Society; Future Farmers of America’s Honorary State Farmer award; and Michigan Farm Bureau’s Distinguished Service to Agriculture award.

In other MMPA news, the co-op recently announced that more than $1.7 million in cash patronage refunds are being sent to dairy farmer-members. This cash allocation represents about 29 percent of the $6 million allocated net earnings generated by the cooperative in fiscal year 2009. The cash patronage returned includes 100 percent of the farm supply earnings and 25 percent of the milk marketing earnings.

MMPA — with nearly 2,200 dairy farmers in Michigan, Indiana, Ohio and Wisconsin – also made cash payments in April 2009 to members of more than $4.6 million through retirement of the cooperative’s 2000 equities. In October 2009, MMPA members received $1.5 million in cash payments in the form of a “13th milk check.” With the current payment of $1.7 million, cash payments in the last 10 months exceed $7.8 million.

Blue Diamond CEO
to retire at end of ‘10
After serving 10 years as president and CEO of Blue Diamond Growers, Doug Youngdahl will retire at the end of the cooperative’s centennial year in 2010. In a letter to more than half of California’s almond growers who own the cooperative, Youngdahl said: “I’m proud of the results achieved by your Blue Diamond team during the past decade. It is a privilege to have had stewardship over a team that has demonstrated an ever-increasing talent and desire to succeed in support of our growers.”

Youngdahl is credited for his market leadership that brought confidence and optimism to an almond industry that was undervaluing the crop as its size continued to more than double over the last decade. His mantra became: “As almond supply becomes available, global consumption will readily follow.”

The co-op’s net sales and other revenue nearly doubled from 2001 to 2009, when sales topped $709 million; payments and allocations to growers more than doubled from 2001.

He attributes the co-op’s industryleading returns, in part, to a streamlined operation with cost reductions and improved efficiencies throughout. Last fiscal year, company equity reached a record high of $126 million, and retained grower earnings used to finance the cooperative stood at 3.5 percent, compared to 6 percent in the prior decade. Payments to growers have also been accelerated.

According to Board Chairman Clinton Shick, a grower from McFarland, Calif., “While Blue Diamond has excellent internal candidates, the board will fulfill its fiduciary responsibility to conduct an extensive executive search for a new CEO. An announcement will be made once the board completes its thorough search before the November annual meeting.”

Simmons to lead Oregon
bargaining association
Mark Simmons, former Oregon Speaker of the House and state director in Oregon for USDA Rural Development, has been named executive director of the Oregon Grass Seed Bargaining Association. Simmons succeeds Ralph Fisher, who is retiring from the position after five years leading the association.

Simmons, who also has worked as a lobbyist for the Oregon Association of Nurseries, started his new position Feb. 1. “Mark brings to the bargaining association a wealth of knowledge of association management and the issues that affect Oregon farmers,” says association President Ron Quiring. “We look forward to working with him as we continue to build, strengthen and see the bargaining process mature.

Simmons said his immediate goal is to make sure that as the economy recovers and prices improve, the growers’ contribution is appropriately recognized.

Morris Foundation receives
$10,000 rural leadership grant
The Ralph K. Morris Foundation has received a $10,000 grant from The Farm Credit System Foundation’s Douglas D. Sims Fund for Rural Leadership. This fund, created in honor of former CoBank CEO Douglas D. Sims, supports programs that focus on rural leadership development, with a special emphasis on those committed to making their communities better places to live.

The grant will be used to provide opportunities to men and women who wish to develop and strengthen their cooperative leadership and development skills by attending cooperative educational programs. In 2009, the Morris Foundation awarded 93 Cooperative Leadership Fund scholarships totaling more than $25,000. In addition, the Foundation awarded a $2,500 scholarship from the Elroy Webster Cooperative Studies Fund to a Kansas State University master’s degree student whose primary focus is agricultural studies.

NCFC: Workshops focus should
include how co-ops level
playing field for producers
Because farmer-owned co-ops play a vital role in promoting competition in agriculture, a prime focus of a series of workshops on agriculture competition and regulatory issues should be on the benefits that co-ops provide to farmers, rural communities and consumers, according to the National Council of Farmer Cooperatives (NCFC), which issued a statement prior to the first of five workshops in Ankeny, Iowa, March 12.

Future workshops will be held: May 21 in Normal, Ala.; June 7 in Madison, Wis.; Aug. 26 in Fort Collins, Colo., and December 8 in Washington, D.C. (For specifics on meeting locations and other information, visit: www.usdoj.gov/atr/events.) The workshops are being jointly sponsored by the U.S. Department of Justice and USDA.

“For more than 100 years, America’s farmer-owned co-ops have worked hand in hand with their members to ensure that individual producers can compete on a more even playing field with the large, globally integrated companies that dominate the agricultural sector,” NCFC President and CEO Chuck Conner said.

“Farmer co-ops allow individual producers — whether they grow 40 acres of peaches in California or 4,000 acres of wheat in Kansas — to have a combined market power much, much greater than any single farmer or rancher would have on his own,” Conner continued. “By doing this, coops help to preserve family farms and foster competition in the marketplace, which ensures the fairest price possible for consumers.”

NCFC staff and several members were slated to attend the Ankeny workshop (which was held after the deadline for this magazine) to monitor developments and provide information on the benefits of farmer co-ops. NCFC has also launched a “Farmer Co-ops: Providing for America” campaign to tell the story of how farmer co-ops benefit producers, rural communities and consumers to policy makers and other opinion leaders.

NMPF: USDA decision on
bottlers levels playing field
for dairy farmers
USDA’s decision to limit the pricing exemption used by large, verticallyintegrated farmer-owned bottling plants will close a loophole that had been employed by some of the largest producer-handler milk bottlers, according to statement issued by the National Milk Producers Federation (NMPF), which has long lobbied on the issue.

Under the rule changes, “producerhandler” definitions in all federal milkmarketing orders will be amended so that only farms with bottled milk sales of 3 million pounds or less per month remain exempt from the pooling provisions. Producer-handlers with sales of more than that will be treated the same as other bottling operations that don’t own farms, and they will have to pay Class I differentials into the sharedproducer revenue pool in their respective federal-order regions.

The new decision also tightens the requirements in the Arizona and Pacific Northwest Federal Order markets, which had allowed producer-handlers up to 3 million pounds of sales in separate marketing orders; the new rules allow up to 3 million pounds in total marketings.



United Nations declares 2012 International Year of Cooperatives

The United Nations General Assembly has declared 2012 as the International Year of Cooperatives, highlighting the contribution of cooperatives to socioeconomic development. In adopting the resolution in December, the General Assembly noted that cooperatives have a beneficial impact on poverty reduction, employment generation and social integration.

In a press release announcing the declaration, the United Nations notes: “A cooperative is an autonomous voluntary association of people who unite to meet common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. In general, they contribute to socioeconomic development.

“As self-help organizations that meet the needs of their members, cooperatives assist in generating employment and incomes throughout local communities. Cooperatives provide opportunities for social inclusion. In the informal economy, workers have formed shared-service cooperatives and associations to assist in their self-employment. In rural areas, savings and credit cooperatives provide access to banking services that are lacking in many communities and finance the formation of small and micro businesses.

“The cooperative sector worldwide has about 800 million members in over 100 countries and is estimated to account for more than 100 million jobs around the world. The strength and reach of cooperatives are illustrated in the following examples: “International Years are declared by the United Nations to draw attention to major issues and encourage action. To commemorate the Year, regional conferences will raise awareness of cooperatives and seek ways to leverage their contribution to socio-economic development and foster regulatory frameworks. A research agenda will be proposed and Member States are to form national committees that will serve as focal points for the Year’s activities.”

For more information, contact the Department of Economic and Social Affairs focal point on cooperatives, Felice Llamas, llamas@un.org, or call 1 (212) 9630-2924.




March/April Table of Contents