NEWS LINE

Compiled by Patrick Duffey

Organic co-op plans new
HQ as sales soar
Despite growing success, the nation’s largest organic farmers cooperative will stick to its home base at LaFarge, a community of 780 residents in western Wisconsin. Organic Valley Family of Farms, which now has more than 500 members in 17 states, from Maine to California, plans to build a $4 million headquarters at LaFarge this year. “It’s proof of our dedication to the rural community,” said CEO George Simeon. “Part of our mission is to be true to rural development and rural towns.” The cooperative was created 15 years ago by a half dozen family farms.

Sales for 2002 jumped more than $25 million, to $125 million. By 2005, sales are projected to hit $215 million. Co-op leaders credit its success to its ability to provide a stable, equitable and sustainable level of pay for farmermembers. Organic Valley farmers produce more than 130 organic foods, such as milk, butter, cheese, creams, eggs, produce, juice and meats sold in food cooperatives, natural food stores and supermarkets.

“They’ve done a great job,” said Bob Cropp, retired dairy economist with the University of Wisconsin. “It’s a great success story achieved through unorthodox methods under the leadership of an unorthodox executive.”

NORPAC buying Simplot’s
vegetable processing plant
Consolidation in the vegetable packing industry has resulted in fewer and larger customers, prompting NORPAC Foods, Oregon’s largest fruit and vegetable processor to look to expanding its production capacity and marketing muscle.

This spring, the Stayton, Ore.-based cooperative expects to close on a purchase of a vegetable processing plant and several brand names owned by J.R. Simplot Co. at Quincy, Wash. The Simplot plant packs frozen vegetables that are sold primarily to food service and ingredient markets.

The plant, built in 1990, employs 450 full-time and 350 seasonal workers. In an alliance with Simplot, NORPAC plans to buy the license to market several vegetable brands that would also be sold and distributed to other customers through Simplot’s marketing network. NORPAC’s last expansion was in the 1980s, when it built a plant at Hemiston, Ore. At its four plants, NORPAC has a workforce of 1,000 year-round employees and adds another 3,500 seasonal workers at peak processing season.

DFA boosts net margins;
Camerlo succeeds Brubaker
Just as its dairy-farmer members have cut production costs, so too has their marketing arm, Dairy Farmers of America (DFA), trimmed its operating costs, resulting in greater returns to the membership in 2002. Longterm, interestbearing debt was cut $78 million, and member equity jumped $8 million, to $631 million. DFA paid $49 million in patronage and equity retirement, in 2002.

The nation’s largest dairy cooperative marketed a record 47.8 billion pounds of milk, up nearly 5 percent. Although declining milk prices cut DFA’s revenues to $6.4 billion, it still generated $85.9 million in earnings from its joint ventures, $27.5 million more than in 2001. The American Dairy Brands division, which manufactures Borden brand cheese products, exceeded budgeted earnings (before interest and taxes) by 41 percent.

The recent annual meeting marked a historic change of the 51-member board, with the election of Tom Camerlo, a veteran dairy cooperator from Florence, Colo., as chairman. He succeeds Herman Brubaker of West Alexandria, Ohio, who had spent five years at the helm. Brubaker commended DFA’s members and staff for their “courage and dedication in unifying the dairy industry though cooperative principles. We have built a new co-op model that is member driven and a leading food company. The greatest challenge ahead will be for us to keep pace and take the risks required by a demanding and competitive marketplace.” While many things have changed, he said, “the right of farmers to cooperatively market their milk is the same as it was in 1922 when Capper- Volstead was enacted. ” He urged members to never loose sight of their “cooperative vision.” Brubaker had earlier been chairman of Milk Marketing Inc. in Ohio, one of DFA’s predecessor cooperatives.

Meanwhile, a pair of efforts to expand its markets in the Northeast are coming under state and federal scrutiny. The proposed merger between H.P. Hood, New England’s largest independent dairy, and National Dairy Holdings (half owned by DFA) would create the nation’s second largest dairy processor. DFA would become the exclusive supplier to Hood under a long-term contract. The merger would create a new entity that would have annual sales of about $3 billion, control about 90 percent of New England’s milk and market Hood’s popular brand-name products.

In another regional development, Vermont’s St. Albans Cooperative Creamery has become DFA’s second member cooperative following a similar agreement with Dairylea Cooperative of Syracuse. St. Albans will invest in DFA’s equity program and gain one seat on the board of DFA, two on its Northeast council and three with Dairy Marketing Services (DMS). DMS was formed two years ago by DFA and Dairylea to handle daily activities associated with milk assembly and transportation for the cooperatives. St. Albans will retain its corporate identity and key customers. Last year, it marketed more than 1.5 billion pounds of milk for its 518 dairy farmer members in Vermont, New York and New Hampshire.

Chairman Brubaker said the agreement “strikes at the very heart of the age-old concept of cooperation. Capper-Volstead allows dairy farmers to work together for mutual benefit and that’s exactly what this co-op to co-op membership with St. Albans will do.”

GROWMARK, TruServ form
local retail pact in Ontario
In a cross-border alliance, TruServ Canada Cooperative of Winnipeg, which operates a chain of 600 member hardware stores, will now provide consumer supplies to GROWMARK’s 29 FS member companies and their 150 stores, including the Country Depot franchises in Ontario. Agricultural production supplies, such as fuel and fertilizer, for the local co-ops will still come from GROWMARK. Jim Hoyt, GROWMARK’s executive director for Canadian operations, will join the TruServ board.

In the deal, TruServ also acquires the Country Depot trademark associated with GROWMARK’s retail business n Ontario. Retail products range from work wear and lawn and garden supplies to hardware and pet foods. Hoyt said the pact would “form a strong retail presence in the Canadian marketplace.” The pact is similar to GROWMARK’s alliance with Land O’Lakes (LOL), which gives the FS member companies access to LOL livestock feeds.

Agway eyes sale
of remaining assets
Efforts to emerge from Chapter 11 bankruptcy continue to challenge Agway, New England’s regional farm supply and food marketing cooperative based at Syracuse, N.Y. A nationally known investment bank has been hired to evaluate whether to reorganize or sell Agway’s three remaining divisions: Country Products, Feed and Nutrition and Agway Energy. The energy division was not part of the Chapter 11 filing.

While Agway officials say they neither have plans to shut down the businesses nor liquidate them under a Chapter 7 bankruptcy, a controlled or orderly liquidation may be in the offing. Jeff Love, an attorney for the cooperative, said its goal was to derive the most value from the businesses for creditors. To strengthen that idea, Agway has asked the court to approve a complex plan of bonuses, capped at $6.4 million, for 50 to 80 key employees so they won’t bolt the company during this transition period.

Donald Cardarelli, Agway’s retiring chief executive officer, earlier received $1.6 million in severance pay plus extra compensation for his executive career transition service under a plan approved by the board, unsecured creditors’ committee and the bankruptcy court. Seven Agway employees who earlier shared bonuses totaling $546,000 for helping the cooperative prepare chapter 11 bankruptcy papers last fall, will have to repay them from future bonuses.

Alto Dairy trims 90 Jobs
Citing continued weak market conditions and shifting production from the traditional American cheeses to more Italian mozzarella to meet market demands, the 800-member Alto Dairy Cooperative at Waupun, Wis., is trimming about 16 percent, or 90 jobs, from its workforce of 550. Dean Sommer, vice president of operations, said prices paid to members have been down since the fall of 2001 and the cooperative is experiencing losses for the first half of fiscal 2003. Sales for fiscal 2002 reached $432 million. The cooperative produces 550,000 pounds of cheese a day and hopes the switch to mozzarella will better prepare it for the future.

Mtn. Lamb Co-op,
Rosen forge pact
Lamb marketing in the United States is being boosted through a pact between Mountain State Lamb Cooperative and B. Rosen & Sons Inc., a major fabricator and lamb and veal processor and distributor. The new venture will operate as Mountain States/Rosen LLC (MSR). The cooperative is owned by and serves producers in 11 western States. The venture will oversee all phases of the supply chain, from farm to fabrication and on to the retailer and other distribution channels, including restaurants and cruise lines. The management team will come from both businesses.

NMPF seeks voluntary plan
to balance supply, demand
The board of directors of National Milk Producers Federation (NMPF) has endorsed development of a threepart, voluntary program aimed at bringing U.S. milk production more in line with demand to stabilize and strengthen producer prices. Details are being developed by NMPF’s economic policy staff, subcommittees and representatives of member cooperatives. The plan features an assistance program to stimulate exports and clear inventory from the U.S. marketplace, a market reduction program with incentives to producers to reduce their milk marketings, and a herd/cow purchasing program aimed at reducing the number of dairy cows nationally. The plan is dubbed “Cooperatives Working Together.” Jerry Kozak, NMPF president and CEO, says “Our task is to construct a producer-led effort that pays dividends for many years to come.”

ND co-op plans
DC restaurant
The Ultimate Value-Added Cooperative, under the aegis of the North Dakota Farmers Union, is planning to open the “Agraria” restaurant in Washington, D.C., this summer. It will feature foods from family farms throughout the country, but mostly pasta, beef and breads from North Dakota. Bison will be featured as a specialty item. The restaurant’s menu will be used to educate urbanites about family farm products and a different farm family will be featured each month. Investors must be members of both the Farmers Union and the cooperative.

NC growers
market biodiesel
A grant from the Golden LEAF Foundation has enabled the North Carolina Grain Growers Cooperative at Rocky Mount, N.C., to launch a biodiesel fuel business. Valeria Lee, foundation president, said the opening shipment of 20,000 gallons of soy oil from West Central Soy Cooperative in Iowa was enough to produce almost 1 million gallons of biodiesel fuel when blended with petroleum. Sam Lee, the cooperative’s CEO, said the supply would allow the cooperative to test the market and build a $40 million processing plant, which will include a soybean extraction facility. The eastern North Carolina plant will be similar to West Central’s facility, which has a 15-million-gallon capacity. The foundation has agreed to invest $10 million in the cooperative’s $40 million facility. Although slightly more costly than diesel, proponents say biodiesel is a better lubricant, extends machinery life and reduces maintenance costs.

Olsen to lead
Tree-Top co-op
Dick Olsen has been elected chairman of Tree Top Inc., an apple-processing cooperative at Selah, Wash., owned by 1,200 member-growers. He and his brother operate Olsen Brothers Ranches Inc. near Processor. Fred Valentine has been elected vice chairman and Bruce Allen secretary-treasurer.

Mid-Missouri Energy
raises $17 million
Producers have agreed to invest nearly $17 million during the initial equity drive by the Mid-Missouri Energy (MME) ethanol cooperative.

“We are ecstatic over these results,” said Ryland Utlaut, MME president. “We are told that $15.3 million is the most any ethanol project in the nation has raised in its initial equity drive. For us to have surpassed that record is nothing short of amazing.”

The co-op needed $12 million in producer equity to be 51 percent farmer-owned, a state requirement to qualify for ethanol production incentives. MME Treasurer Ron Linneman said producer response “speaks to the potential out there.” Utlaut said this success has lead the board to believe the ethanol project can be a 100 percent farmer-owned cooperative.

The initial equity drive, which ended March 31, was extended for another 60 days to allow new investors to enlist, or existing ones to increase their investment . “We must comply with the Blue Sky Law in other states regarding the sale of equity,” said Patty Kinder, secretary and project coordinator. “Extending the offer also allowed time to meet requirements in various states from which we received producer interest.”

David Kolsrud, equity drive manager, said the effort “disproves the notion that farmers don’t have the money to invest. This says otherwise!”

Although several sites were under consideration, Carrollton was the preferred site for the 40-million-gallon-per-year plant, said Vice President Don Arth. The facility would tap the abundant supply of corn grown in the region. It would use nearly 15 million bushels of the approximately 70-plusmillion bushels grown in the area.

For more information on the ethanol project planned for west-central Missouri, contact the MME Web site at www.midmissouirenergy.com.

Wilson heads
co-op foundation
The board of trustees for the Cooperative Foundation at St. Paul, Minn., has chosen Patricia Keough-Wilson, director of communications for Minn-Dak Farmers Cooperative at Wahpeton, N.D., as its chair. Jean Jantzen, retired from CHS Cooperatives and former chair, continues as vice chair of the board. The foundation supports unique and innovative cooperative development and education projects throughout the Upper Midwest.

Farmland turns $29 million
profit for second quarter
Farmland Industries, seeking to emerge from Chapter 11 bankruptcy, reported $29 million in second quarter earnings, which compares to a loss of more than $49 million for the same period a year ago. It also reported sales of $1.6 billion for the first quarter, up percent from a year earlier. Farmland CEO Bob Terry says the reorganization is on course, and that cash flow now “significantly exceeds” what is required in its borrowing agreement. Since filing for reorganization under the bankruptcy court, Farmland has reduced debt by $130 million, to $270 million. According to recent press reports, the co-op will soon offer a plan to reorganize Farmland around its pork processing operation Farmland Foods which earned $8.7 million in the second quarter. Farmland National Beef which is not part of the bankruptcy filing earned $5.8 million in the quarter.

In other Farmland news, it has sold the bulk of its fertilizer assets in a court-approved auction to Wichitabased Koch Nitrogen Co., a subsidiary of Koch Industries Inc., for $293 million. Farmland anticipates the sale will be formalized later this spring. Farmland’s $1 billion fertilizer business once made it one of the largest manufacturers in the United States.

The deal included assets in Kansas, Iowa, Oklahoma and Nebraska. It also covers a dozen Midwest terminals plus Farmland’s half share in Farmland Miss Chem Ltd., which owns an ammonia plant in the Republic of Trinidad and Tobago. Koch also has a one-year option to buy Farmland’s fertilizer operation at Lawrence, Kan.

AMPI sales top
$1 billion for ‘02
Despite dairy markets hovering at 25-year lows, Associated Milk Producers Inc.’s (AMPI) fiscal 2002 sales hit the $1 billion mark, milk volume was up 3 percent, to 5.2 billion pounds, and the co-op returned $13.3 million in equity payments to members in 2002. The 4,600-member cooperative recorded $1 million in earnings from its 14 manufacturing plants in the Upper Midwest. “Our members must succeed in order for our business to succeed,” said President Paul Toft from Rice Lake, Wis. “Our strong commitment indicates we are a solidly built farm-to-market business that is here to stay.”

New board, CEO make
changes at Ocean Spray
Saddled with four years of belowcost industry returns and a glutted cranberry market, major changes have been made at Ocean Spray, the nation’s major cranberry marketing cooperative. First, a majority of growers voted to cut the board from 15 to 12 directors and to seat nine new directors and 3 incumbents.

Then, the new board chose Randy Papadellis, Ocean Spray’s President and Chief Operating Officer, as interim chief executive officer. He has begun a restructuring of the management team by laying off four of 14 vice presidents, eight other executive level managers and another 46 employees. Papadellis replaces Barbara Thomas, who was doubling as an outside director and interim CEO until she lost her seat on the board at the annual meeting. She had replaced Robert Hawthorne, CEO for three years before he resigned in November.

Due to the crop surplus, membership, which stands at 800 cranberry and 125 grapefruit growers, has been closed for the past two years. The cooperative’s sales have slipped, from $1.5 billion in 1997 to just over $1 billion in 2002, in part because Pepsi ended its agreement to distribute the cooperative’s single-serve bottles of juice. The cooperative has since implemented its own new distribution system. Earlier, the former board rejected an $800 million takeover bid from a Wisconsin competitor. The new board has announced it will explore several options for the future of the company.

Dividend allocation
rule focus of legislation
Legislation to clarify the dividend allocation rule is being supported by several cooperative trade associations, including the National Council of Farmer Cooperatives (NCFC). Senators Charles Grassley (Iowa), chairman of the Senate Finance Committee, and Max Baucus (Mont.), ranking minority member, are part of a bipartisan group of senators and congressmen who favor eliminating the "triple tax" now imposed on stock dividends paid by cooperatives. This tax treatment penalizes cooperatives compared to other businesses and limits the ability of cooperatives to raise equity capital needed to modernize their operations, take advantage of value-added market opportunities and compete globally, says NCFC President David Graves.

"Eliminating the tax would strengthen the ability of farmers to join in cooperative self-help efforts to improve their income from the marketplace, better manage risk, take advantage of potential new market opportunities, maintain their independence and compete more effectively in a changing global economy," says Graves.

Foremost sales
reflect dairy ills
Low dairy commodity and milk prices for its 4,300 dairy-farmer members was reflected in Foremost Farms’ sales for fiscal 2002, which declined from $1.33 billion in 2001 to $1.16 billion for 2002. The Wisconsin cooperative, based at Baraboo, showed an operating loss of $3.7 million, but that was offset by tax credits, resulting in a net income of $2.2 million vs. $10 million in 2001. The cooperative operates 24 manufacturing facilities and serves dairy farmers in seven Upper Midwest states.

Iowa hog co-op set to
open processing plants
A two-year-old value-added cooperative formed by 1,400 Iowa hog producers hopes to begin operating three processing plants and a trucking business this summer. It is hoped these businesses will help shore up sliding prices members have been receiving. Majestic Food Group LLC, a wholly owned subsidiary of Iowa Premium Pork, will purchase Pinnacle Food Group’s two Iowa Packing Co. pork processing plants in Des Moines, the Rosewood Farms pro cessing facility at St. Joseph, Mo., and the ForSure Transport trucking operation in Des Moines. Roger Coon, cooperative president from Lohrville, said the plants will suit the needs of the members in their attempts to bring their pork products closer to consumers. The facilities can butcher about 3,600 market hogs and 1,400 breeding hogs a day.

Calcot makes
progress payment
Calcot sent an encouraging early spring message to its 1,700 California and Arizona cotton growers in the form of progress payments for the 2002 crop. The checks totaling $20.5 million were in sharp contrast to two years ago, when the Bakersfield cooperative’s board had to ask members to return season-opening advance payments. President David Farley said the board unanimously approved the payment because of the cooperative’s improved market.

MMPA members get
$1.9 million patronage
“The essence of our strong cooperative is reflected in the ability to make cash payments and maintain a competitive pay price,” President Elwood Kirkpatrick of Michigan Milk Producers Association told members in announcing $1.9 million in cash patronage refunds. This is the eighth consecutive year for making patronage payments of at least $1.8 million. The cash represents 28 percent of the $6.8 million allocated taxable net earnings generated by the cooperative in fiscal 2002. The return represents 100 percent from farm supply earnings and 25 percent of milk marketing earnings.

SW Farm Credit
loans climb in ‘02
For the eighth consecutive year, fiscal gross loan volume for the Tenth Farm Credit District, based at Austin, Texas, set a new record in 2002. The bank serves 22 financing cooperatives in five Southwestern states and loaned nearly $6.8 billion, up 13 percent from 2001 and nearly 30 percent more than in fiscal 2000. All of the volume growth was in the district’s mortgage portfolio and triggered in part by low interest rates.


David Holm to lead
Iowa Institute for Co-ops
The Iowa Institute for Cooperatives, Cooperatives, the statewide co-op council at Ames, has selected David Holm as its new executive director. He replaces Larry Kallem, who recently retired. Holm has been with the Institute for the past eight years, having served most recently as its cooperative development director.

Correction
In production of the last issue of “Rural Cooperatives,” a photo was misplaced in a Newsline item about John Dilland succeeding Walt Wosje as the new general manager of Michigan Milk producers Association. The correct photo appears here. Dilland joined the co-op in 1975 and had been the co-op’s director of finance.





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