N E W S L I N E

Foremost sales top $1.3 billion; income steady at $10 million
Foremost Farms, Baraboo, Wis., saw sales rise from $1.1 billion in 2000 to $1.3 billion in 2001, although net income of $10.1 million remained virtually unchanged. “Commodity markets remained volatile, with strong prices for the first three quarters followed by steep drops during the final quarter of 2001,” said Duaine Kamenick, finance vice president. Average milk price climbed $3.35 per hundredweight (cwt) from $11.62 in 2000 to $14.97 in 2001.

President Dave Fuhrmann said the cooperative will distribute $10.1 million in patronage to members, or an average of 21 cents per cwt, with 25 percent of it in cash and the balance added to member equity accounts. The cooperative’s ownership ratio (total equities divided by total assets) interest was 46 cents to $1, compared with 49 cents to $1 for 2000. The co-op’s primary products are cheese, liquid and condensed milk products, and packaged milk products. Reinvestment for capital improvements to facilities, machinery, equipment and technology topped $44 million, up from $32 million in 2000. “There isn’t another company in the Midwest, private or cooperative, that has made the investments we have for the long haul,” said Fuhrmann.

2001 revenue & income
climb for Minn-Dak
Total net revenue for Minn-Dak Farmers Cooperative, Wahpeton, N.D., reached $177.9 million for fiscal 2001, up from $170.1 million in 2000. Sugar sales accounted for $167 million of the 2001 total, up $25.5 million from 2000. Net income was just under $5 million, up sharply from $316,000 in 2000. The cooperative harvested 2.06 million tons of beets from 94,900 acres and sliced 2 million tons.

David Roche, the cooperative’s new CEO, told members, “Our shareholders recently received their final payment of $89.6 million for the 2000 crop, the result of doing the right things right.” He said the cooperative needs to remain focused on its core business and to control costs.

Meanwhile, Tom McKenna, CEO of United Sugars Corp. the sugar marketing-agency-in-common of Minn-Dak, American Crystal Sugar Corp and Southern Minnesota Beet Sugar and cane sugar companies said NAFTA related trade issues with Mexico present a major challenge for the domestic sugar industry. United Sugars plans to market liquid sugar made by its member refinery in Florida. Its expansion will be completed this fall.

National Grape says
Welch’s not for sale
Whether it was just a long-term planning business exercise or a test of the financial market to see what someone might offer, the National Grape Cooperative has issued a strong “no thanks” in regard to the possibility of putting Welch’s Foods and its worldfamous brand grape products on the trading block. The board announced its unanimous decision in February that Welch’s is not for sale.

Speculation had gone so far as to suggest what interested grower-owners might net from a sale, based on their tonnage and acreage. Figures in the hundreds of thousands of dollars reaching more than $1 million in many cases were being discussed. The mere suggestion stirred deep emotions and long-held loyalties, traditions and family histories.

The board of directors, elected to represent the more than 1,400 growers in New York, Ohio, Pennsylvania, Washington State, Michigan and Ontario, met in Erie, Pa., and decided the sale was not in the best interest of the membership. President Fred Killian noted that discussions about the sale of Welch’s have occurred from time to time over the decades. But he quickly pointed out that the cooperative was neither on the market nor considering any offers. He said the board would not entertain any such ideas unless backed by a majority of the membership.

The cooperative has owned Welch’s since 1952, although the firm’s history goes back to 1869. The cooperative’s origins stretch back to the Great Depression, when Jack Kaplan, an eastern businessman, formed National Grape Corp. He helped create the present cooperative in 1945 by merging smaller cooperatives.

Welch’s owns processing plants in Michigan, New York, Pennsylvania and Washington. Financial pressures in the farming business have been taking a toll. Area growers suffered one of their worst seasons last year, when production fell 67 percent from 2000 due to wild temperature swings last May and June. Growers also are concerned about imports. They see the apple industry in a state of upheaval caused by 5 years of the Chinese dumping vast quantities of frozen apple juice concentrate on the market.

There are similar fears regarding grape juice from Argentina. Some felt the sale could spell the end of a prosperous U.S. Concord grape industry.

The cooperative guarantees it will buy members’ grapes. But in turn, members must meet Welch’s standards for grapes regarding sugar content and other qualities and must sell their grapes only to the cooperative.

Sales last year reached $650 million, up from $419 million a decade earlier. Last November, Welch’s cut 50 jobs when it closed its general offices and old corporate headquarters at Westfield, N.Y. The company employs more than 1,300 people.

Sales record set by
Diamond Walnut
Diamond of California, a walnutgrowers’ cooperative at Pleasanton, Calif., reported a banner performance for 2001 with its third consecutive year of double-digit growth. Record gross sales of $307 million were recorded, up 15 percent from 2000. Net proceeds were $133 million, up from $125 million.

Earnings for grower-owners increased 32 percent, on a price-per-pound basis, from fiscal 2000. Factors contributing to the strong performance were expanded product offerings and marketing initiatives that helped to build demand.

Diamond has introduced new items in its Harvest Reserve line of nuts, including pecan halves and whole almonds. The co-op says the product line features premium nuts with superior color, texture and flavor. Diamond is expanding its product line to include even more premium nuts suited for home meals, baked goods and on-the-go snacking.

In other news, Diamond of California Chairman John J. Gilbert received one of two director of the year awards from the National Council of Farmer Cooperatives, presented during its annual meeting in Orlando. His award was for a director with more than 2 years experience.

CHS opens stock offering
A rare public stock sale by a prominent agricultural cooperative is underway in the Upper Midwest under the auspices of CHS, Inner Grove Heights, Minn. CHS, recognized in many rural communities by its red and white bowtie logo, seeks to raise $50 million by selling preferred, non-voting stock at $1 per share ($1,000 minimum) at 8 percent annual interest. This is the first time in the cooperative’s history that it has gone outside the membership or cooperative system to raise capital. Most often, cooperatives generate capital by holding member equity for later payment or borrowing from CoBank. The money will be used to pay down shortterm debt and make cash available for growth and other uses. Eventually, the cooperative may use changes in the federal law which permit it to convert member equity into preferred stock.

Last year, CHS had sales of $8 billion and net income of $178 million. It provides 1,200 member co-ops owned by 350,000 farmers with farm production supplies, grain marketing and food processing services.

Agway to sell four divisions
With an eye toward improving profitability by concentrating on its core business, Syracuse-based Agway Inc. has announced plans to sell four divisions not directly related to its farm production supply business. The businesses are: Telemark (leasing), Agway Insurance, Seedway and its agronomy business. Spinning off the agronomy and seed businesses are an aftermath of Agway shifting many retail farm stores to Southern States in recent years.

Being retained are animal feed and nutrition, energy products, fresh produce and agricultural technology units. “These businesses have combined annual sales exceeding $1 billion (75 percent of the co-op’s total annual sales) and they have a clear history and connection to our farm and cooperative heritage,” said Agway CEO Donald Cardarelli.

Farmer co-ops registering
.coop Internet names
Corner Stone Farmers Cooperative (see page 14 for more on this co-op) is one of a number of ag cooperatives staking out addresses on the Internet’s new “.coop” domain. Corn-er Stone, a farmer-owned ethanol co-op in southwestern Minnesota, has registered a number of generic names, including: ethanol.coop, corn.coop and wind.coop., as well as cornerstone.coop. Corn-er Stone manager David Kolsrud, who says he believes the Internet is a good way to increase the visibility of value-added processing cooperative ventures, acted quickly to register the names.

The National Cooperative Business Association, which oversees the .coop domain, reports that other ag cooperatives that have registered .coop names include: Ag Processing Inc., Agway, Cabot Creamery, CHS, Growmark, Sunkist, Grainland Cooperative, Minn- Dak Farmers Cooperative, Knouse Foods, National Co-op Refinery Association and West Central Cooperative. More than 40 percent of the 1,200 U.S. rural utility cooperatives and some 800 credit unions were among the early registrants. NCBA estimates that, worldwide, 750,000 cooperatives serving about 760 million members are eligible for the .coop Web address.

It costs $80 per year to register a .coop name, with an initial 2-year minimum purchase required. The fee enables NCBA to ensure that only true co-ops register as such. To buy .coop names, go to www.coop. If you have questions or need registration assistance, e-mail the dotCoop Operations Center at: support@communicate.coop, or call (toll free) (866) 288-3154.


DFA grows in bold moves
“A fourth consecutive year of strong financial performance coupled with strategic moves positions Dairy Farmers of America (DFA) to continue to grow and serve dairy farmers,” CEO Gary Hanman told delegates at the recent annual meeting in Kansas City. In one bold move, he said, DFA sold its largest asset, a 33.8 percent share in Suiza Food Group, reinvesting the proceeds into a 50-percent share in the new National Dairy Holdings (NDH).

By year end, NDH had grown to be the nation’s largest privately held fluid milk operation, with 28 bottling plants. The equity interest in NDH “gives us even wider market opportunities and a tremendous growth vehicle.” DFA remains a major supplier of the new Dean Foods Co.

In 2001, DFA sales climbed from $6.7 billion to $7.9 billion and assets from $1.9 billion to $2.1 billion. The cooperative marketed a record 28 percent of the nation’s milk, or 45.6 billion pounds, even while nationwide production declined. Average price paid to members was $15.22 per hundredweight, up $2.58 from 2000.

Meanwhile, DairiConcepts, a joint venture between DFA and NZMP, the ingredient business of New Zealand’s Fonterra Cooperative Group, is being expanded to produce an extensive range of ingredients at Portales, N.M. It will be the first commercial producer of milk protein concentrates (MPC) in the United States. It will also produce other dairy ingredients for many markets in the fast growing convenience food sector. DFA will provide the plant’s milk supply.

In other developments, DFA’s American Dairy Brands division has introduced Borden fresh shredded cheese and macaroni dinner, which will be found in the dairy case of supermarkets. It will be backed by an aggressive radio advertising campaign.

Wilson succeeds Lyon at CRI
R. Douglas Wilson has been named as new chief executive officer at Cooperative Resources International (CRI), Shawano, Wis. He succeeds Tom Lyon, who retired March 1. Chairman Roger Borgwardt said Wilson had considerable experience in the dairy and livestock industry and “proven leadership capabilities in the cooperative businesses.” Most recently, he had been chief operating officer of CRI’s cattle breeding subsidiary, Genex Cooperative.
Wilson credited Lyon with leading the co-op through “the most significant era this organization will experience. He was the architect and accepted the challenge of proving his worthiness to the cooperative world.”

Wilson served as president of the National Association of Animal Breeders, the artificial insemination industry’s trade association, for 3 years and held a similar post with the Wisconsin Federation of Cooperatives, which has honored him with its cooperative builder award. The World Dairy Expo named him its industry person of the year in 1993. He currently serves on the Wisconsin state fair park board and the food and environmental sciences advisory board of the University of Wisconsin-River Falls.

CF Industries honors
four watershed groups
The Conservation Fund has announced that four watershed groups are the recipients of the 2001 CF Industries National Watershed Awards. Each recipient has demonstrated effective, non-regulatory approaches to improving water quality. The winners are: “These recipients demonstrate that great things can be accomplished to improve our watersheds through leadership, cooperation, commitment and innovation,” said Robert Liuzzi, CF’s president and chief executive officer. The winners were recognized for stream and wetlands restoration, reductions in runoff pollution, building partnerships, community outreach and education. CF Industries, which is owned by nine regional cooperatives to which it distributes fertilizer products, originated the award in 1996. It annually recognizes three communities and one corporation for their water conservation efforts.

Ocean Spray, Nestle
in bottling venture
A cost-cutting, long-term bottling alliance has been formed by the Ocean Spray cranberry cooperative and the U.S. division of Nestle S. A., the Swiss beverage company. The cooperative will bottle two Nestle beverage lines and together the firms will buy packaging and ingredients and establish an economy of scale that will boost mutual profitability. An Ocean Spray spokesman said the pact should not be considered a prelude to the possible sale of Ocean Spray to Nestle. Members voted down a proposal in 2000 to sell the cooperative, which some members had suggested because a cranberry glut was depressing grower prices. Ocean Spray recently announced the sale of its Nantucket Nectars business, which it purchased in 1997, to Cadbury Schwepps so the cooperative can concentrate its attention on the cranberry juice business, particularly the new white cranberry juice.

Co-op buys Michigan Sugar
Sugarbeet growers more than 1,000 strong and organized as Michigan Sugar Beet Growers Inc. have completed purchase of Michigan Sugar Co. at Carrolton, Mich. The $64.5 million sale took 2 years of negotiations with the owner, Texas-based Imperial Sugar Co. Later this year, the cooperative’s 1,038 members from 11 counties will elect a new 11-member board of directors. Imperial was paid $29 million in cash, $24 million of it raised from the sale of stock to the grower-owners. The remaining cash came from a 5-year loan from the state of Michigan. The cooperative will still owe Imperial for a 10-year, $16 million loan at 8 percent interest and will begin repaying $18.5 million in Michigan Industrial Development Bonds at 6.5 percent interest in 2015.

Sugar produced by the cooperative under the Pioneer brand will be marketed by Imperial for the next 10 years. The pulp and molasses will be marketed by the cooperative. Processing facilities are centered in Michigan, Ohio and Ontario. Mark Flegenheimer is president and chief executive officer of the cooperative, which will hire 350 fulltime and 1,000 seasonal employees.

Farmers Union turns 100
“still fighting for producers”
The National Farmers Union, founded in 1902 as the Farmers Educational Cooperative Union of America, is marking its100th birthday in the same way it started out: working to enhance the competitive status of its 300,000 members in 24 states. It recently announced it will ask Congress to investigate whether big investors and multinational companies are manipulating grain and livestock markets to the detriment of producers. Farmers Union says it wants to know why grain markets don’t seem to rise when supplies tighten, which it blames on large investors who can cause the market to rise and fall in a short time period. It is also seeking a moratorium on patents for new, genetically modified organisms.

When Farmers Union started, it was illegal to form a union for negotiating commodity prices, so it pushed for new laws to protect the nation’s small farmers and rural communities. One of the organization’s priorities is to promote development of cooperatives and communications technology.

At its recent, 100th annual meeting in Irving, Texas, members elected David Frederickson, a former state senator from Roseville, Minn., as its new president. He succeeds Leland Swenson, a long-term advocate of cooperatives during his years as president. Some 20 buses were used to take those attending the meeting to Point, Texas, to visit the organization’s first meeting place. There they installed a plaque at the cemetery where some of its founders are buried.

The words of Farmers Union founding member Newt Gresham, quoted in a 1902 newspaper article, were recalled during the event: “With their bare, calloused hands and strong backs, the farmers converted the countryside from a wilderness into fertile farmland. Now the farmer is hurting, and being manipulated. We need a voice. We need an organization to fight for the rights and survival of family farmers. That’s why we founded Farmers Union. This is just the beginning.”

Mandan co-op gets
new lease on life
The slide started a couple years ago when grain being stored at Mandan (N.D.) Farmers Elevator spoiled. The cooperative lost a load of money, and its bonding and warehouse license was lost in May 2000. A summer stock sale meant to rescue the co-op fell short. The Main Street fixture was put up for sale, but nobody would buy it, and members voted to dissolve the cooperative.

Later, however, they recanted and conducted another stock drive that raised $97,000. The Mandan city commission approved a $25,000 loan from its growth fund in December and another $13,000 in January. Farm Credit Services of Mandan offered a line of credit. The financing and grants enabled the cooperative to regain its license. The co-op’s grain and feed business have now both resumed. Jeff McGregor, credited for turning around another elevator, has been hired as the new general manager.

Kansas co-op leader
honored for service
The Kansas Society of Association Executives has honored Joe Lieber, president of the Kansas Co-op Council since 1986, as its association executive of the year. Lieber was cited for his excellence in leadership and participation in association activities. He served on the society’s board for 10 years and as its president in 1999. In 2001, he was selected as Kansas association executive of the year. Lieber serves on the board of directors’ executive committee for both the National Council of Farmer Cooperatives and National Cooperative Business Association; advisory committee of the Arthur Capper Cooperative Center at Kansas State University; charter member of the national Rural Cooperative Task Force; past president of the Council of State Cooperative Councils and Kansas Cooperative Alliance; and a director of the Kansas Chamber of Commerce and Industry, for which he has conducted more than 600 radio interviews on the council’s AgByline program.

Co-op Hall of Fame
inducts three
A prominent cooperative attorney, a farm organization executive who promoted cooperative development and the chief executive officer of an interregional farm supply cooperative were inducted into the national Cooperative Hall of Fame in Washington, D.C., April 24. The Cooperative Development Foundation administers the program. Honorees, whose contributions to cooperatives were considered “genuinely heroic” include: Ralph K. Morris, who died in February 2002. The nation’s leading cooperative attorney, he served as legal counsel for three decades for Cooperative Resources International (CRI) at Shawano, Wis., the first holding cooperative in the United States, which he developed. He also helped create numerous newgeneration cooperatives and was pivotal in restructuring countless cooperatives to improve their operations.

C. William Swank is the former executive vice president of the Ohio Farm Bureau Federation who spent 40 years strengthening the economic vitality of farmers through cooperative action. He was a tireless educator who extolled the virtues of cooperatives and encouraged others to embrace them, teaching directors, youth and farmers alike. He also helped found Cooperative Business International, which provides international trade opportunities for U.S. cooperatives.

Francis L. Lair helped found Universal Cooperatives, an interregional farm supply cooperative, and was its first chief executive officer. Lair devoted more than 40 years to cooperatives, served on the board of MSI Insurance and National Cooperative Business Association and worked closely with the Minnesota Association of Cooperatives and Group Health Mutual Insurance Co.

Gold Kist fetes egg farmers
Atlanta-based Gold Kist Inc. recently presented its first annual producer of the year award to Brickle Egg Farm, owned by Thomas and Andy Brickle of Cope, S.C. Chairman Dan Smalley said the award was originated because the cooperative was refocusing on its poultry business and the importance of producer- members in it. The Brickle Egg Farm was chosen by the board’s member relations committee from nominees in Gold Kist’s nine divisions and more than 2,300 poultry producers. Award criteria included performance in the division, poultry housing conditions, community involvement, environmental management and support and advocacy of Gold Kist. The Brickles’ operation has a capacity of 27,000 hens producing 4 million eggs per flock. The award carries a $1,000 cash prize.

















Farmland to sell Tradigrain;
joins in wheat sale to Cuba
Citing the need to concentrate more on its core business, Farmland President Bob Honse has announced the sale or closing of Tradigrain, the cooperative’s international grain trading subsidiary. Less than a year ago, Farmland developed a joint grain venture partnership with Archer Daniels Midland (ADM), a major international grain marketer. Tradigrain has less than 100 employees in 11 countries, including an office in Memphis. Farmland purchased Tradigrain in 1993 and its investment was paid off in the first 5 years. Honse said Farmland wants to concentrate on serving its local cooperative owners through marketing joint ventures in farm production supplies and grain and developing its meat business.

In other Farmland news, the co-op recently participated with ADM in the $9.4 million sale of hard red wheat to Cuba. This was the second shipment since Jan. 1.

Farmland has also agreed to sell its feed phosphate operation in Joplin, Mo., to Potash Corp. of Saskatchewan (PCS), the world’s largest fertilizer company. Farmland had owned the Joplin plant for almost 50 years.

Dakota Growers Pasta
eyes conversion to C-corp.
Dakota Growers Pasta in Carrington, N.D., which has been looked to as a model new-generation cooperative, plans to ask its members to vote on whether to convert their cooperative into a privately held corporation. The co-op’s board, which voted to recommend the change to its more than 1,100 members, says the change is needed both to bring in more investment capital and because members’ ability to grow durum wheat has been reduced by poor weather and plant disease. As a result, members have increasingly been purchasing durum from a non-member wheat pool, threatening the cooperative status of the business (which, by law, must receive at least 51 percent of its input from members).

At press deadline for this magazine, the proposal was being reviewed by the Securities and Exchange Commission. The process for the conversionn if approved by the SEC and members fairly complex, involving the creation of three new subsidiaries, two of them registered in Colorado, which, unlike North Dakota, permits a co-op to convert into a corporation.

An article in the April 8 issue of “Ag Week” newspaper quotes co-op members and others who have concerns about the proposed conversion, including Roger Johnson, North Dakota agricultural commissioner. Johnson is quoted as saying he fears the change to a corporate business structure would undermine the goals of the new-generation co-op movement, which is to help producers offset low commodity prices with returns from processing their crop. “(In a corporation) the loyalty is to the stockholder, who is going to demand high rate of return. That will come at the expense of the price you’re able to pay for durum wheat,” he is quoted as saying. If the co-op goes corporate, “it’s going to be much harder to get producers to invest in another valueadded venture,” he told “Ag Week.”

Crestland co-op assets sold
By upping its earlier auction bid to $6.5 million for the bulk of Crestland Cooperative’s facilities in southwestern Iowa, DeBruce Grain of Kansas City quieted objections from five bondholders, who held part of Crestland’s debt of $16.5 million owed to major creditors. A recent auction raised only $10.5 million. Some of the northern tier facilities were purchased by local area cooperatives. An attempt by some former members to form a replacement cooperative to purchase some elevators failed to raise the needed money.

At one point, the 70-year-old Crestland cooperative had 225 employees, 17 business operation locations and 2,500 members. It had expanded beyond its original grain business into construction, a home improvement store, real estate and a $22 million soybean processing plant. The Iowa Indemnity Fund paid up to 90 percent of farmer claims for unpaid grain delivered to Crestland.

Trying, positive year for Tenn. Farmers
Fiscal 2001 was trying, but also positive for Tennessee Farmers Cooperative. It reported the first loss $7 million in the regional cooperative’s history. Overall sales topped $430 million, consistent with budgeted projections, said Chief Executive Officer Vernon The loss was largely due to accounting problems and replacement of a software program to better serve its member cooperatives. The program had been causing daily problems, he explained, and in the end it had to be replaced with a modification of the original system.

On the positive side, TFC returned $6.4 million in cash to members and sold near-record amounts of fertilizer. Its crop protection products sales volume grew with the introduction of more generic products. TFC also Glover.




May/June Table of Contents