NEWS LINE

Compiled by Dan Campbell

Record-breaking year for DFA
Dairy Farmers of America (DFA) payments to members increased 29 percent, to a record $5.8 billion in 2004, up from $4.5 billion in 2003. DFA also reported a record $8.49 billion in sales, up from $6.93 billion in 2003, for an increase of 23 percent. DFA marketed 57.2 billion pounds of milk for member and non-member dairy farmers in 2004.

For the sixth consecutive year, DFA’s members shared in its earnings. Members received $25.1 million in patronage, with $6.6 million of it paid in cash to 16,501 farmers. The financial results for 2004 “demonstrate that we have the right strategy in place, and that it is being solidly executed by our talented, farmer-focused management team,” DFA Chairman Tom Camerlo told delegates attending the co-op’s annual meeting Kansas City.

Other financial highlights include: Camerlo challenged dairy farmers to tackle three new bridge-building projects in the coming years. The first is understanding and meeting the needs of the diverse DFA membership. He also challenged dairy farmers to lead the industry in creating alternative ways to price milk, acknowledging that this is a controversial issue. He expressed concern over the role world trade multilateral agreements will play in the way milk is priced and products marketed.

Cheese sales drive
record AMPI revenue
Cheese sales drove a record $1.3 billion in total revenue for the member- owners of Associated Milk Producers Inc. (AMPI) in 2004. AMPI produced a record volume of natural cheese, AMPI General Manager Mark Furth said. “That volume, coupled with a record-setting cheese market, resulted in strong milk prices for our members — the highest ever,” he told more than 500 AMPI member-delegates at the co-op’s annual meeting in Bloomington, Minn.

The cooperative earned $4 million and revolved $10.6 million in equity, according to the audited financial statement. Earnings were impacted by a Dec. 1, 2004, fire that shut down the cooperative’s butter processing and packaging plant in New Ulm, Minn. Construction of an improved facility on the same site is expected to begin this spring. The butter plant is one of 13 manufacturing facilities across the Midwest owned by AMPI members. The cooperative manufactures 80 percent of its members’ milk and markets a growing share of it in consumer packages.

“We know the work to secure strong milk prices doesn’t stop with dairy products,” said AMPI President Paul Toft, a dairy producer from Rice Lake, Wis. “AMPI is active in the dairy policy arena. Curbing milk protein imports and securing a better dairy price safety net are top priorities.”

Cairo Co-op building new elevator
Cairo Co-op Equity Exchange is building a new, 300,000-bushel grain elevator about seven miles north of Zenda, Kan. Co-op Manager Ed Laing says the new facility should be operating by July 1. It replaces an older elevator, the Cairo Co-op Calista facility, about seven miles further north.

“The old facility was on the edge of grass country, whereas the new one is right in the heart of wheat country,” Laing says. “We’re very excited about it. It’s a fantastic place for an elevator.” The new location is closer to Cairo Co-op customers, and can facilitate getting grain trucks back into the fields faster.

The elevator will handle wheat and corn and can load 15,000 bushels per hour. It will employ five during harvest season. The new facility will bring the Cairo co-op’s total storage capacity to 3.7 million bushels. Its elevators handle wheat, corn, soybeans, milo and sunflowers. The Cairo co-op has about 1,400 members and does about $25 million in annual sales. It operates in three counties in Kansas.

Dakota Prairie Beef to dissolve
Hampered by drought and the impact of the Canadian border closure on the calf market, the Dakota Prairie Beef Cooperative feedlot in Gascoyne, N.D., is dissolving, according to Agweek magazine. It reported that Lance Larsen, a board member from Dunn Center, N.D., confirmed that the membership voted unanimously to dissolve the cooperative in a Feb. 23 annual meeting. The 6,500-head capacity feedlot was launched to feed cattle with local feed, thus keeping more value in North Dakota, rather than shipping cattle to the Corn Belt for fattening. About 130 members bought some 8,000 shares at about $60 a share.

Two co-ops semifinalists
for prestigious award
Harvard University’s John F. Kennedy School of Government has announced the top 50 programs for the 2005 Innovations in American Government Awards. The School of Government released the list of “50 of the most creative, forward thinking, results-driven government programs at the federal, state, county and city levels.”

The awards are often referred to as the “Oscars” of government prizes. Eighteen finalists will be chosen from the 50; on July 27 six winners will each be awarded $100,000 grants. Two cooperatives are among the 50 semifinalists, including the Teacher Professional Partnership in the Le Sueur-Henderson Independent School District, Minn. This is an unconventional program that challenges the traditional role of teachers as employees; it empowers teachers to organize and manage their school as a collegial group.

Cooperative Care, Waushara County, Wis., is a worker-owned home care cooperative that provides dependable, cost-effective care to the elderly and disabled while assuring the workers’ living wages and access to benefits. Margaret Bau, USDA Rural Development’s cooperative specialist in Wisconsin, has played a major role in the development of the cooperative.

USDA offers $22.8 million
for renewable energy projects
Agriculture Secretary Mike Johanns in March announced the availability of $22.8 million to support investments in renewable energy systems and energy efficiency improvements by agricultural producers and rural small businesses. “Enhancing our energy efficiency is a key goal of the Bush Administration,” said Johanns.

“Renewable energy is an exciting growth frontier for American agriculture. Implementing an innovative energy policy, which the President has proposed, provides an opportunity to strengthen both our national security and the rural economy.”

Section 9006 of the 2002 Farm Bill established the Renewable Energy Systems and Energy Efficiency Improvements loan and grant program to encourage agricultural producers and small rural businesses to create renewable and energy efficient systems. The funds will be available to support a wide range of technologies encompassing biomass (including anaerobic digesters), geothermal, hydrogen, solar, and wind energy, as well as energy efficiency improvements. To date, the Bush Administration has invested through this program nearly $45 million in 32 states.

The $22.8 million will be made available in two stages. One-half, $11.4 million, is available immediately for competitive grants. Renewable energy grant applications must be for a minimum of $2,500 and a maximum of $500,000. Energy efficiency grant applications may range from $2,500 to $250,000. The grant request may not exceed 25 percent of the eligible project cost. Applications must be submitted to the appropriate USDA Rural Development state office, postmarked no later than June 27, 2005. Detailed information about application and program requirements were included in the March 28, 2005 publication of the Federal Register.

The remaining $11.4 million will be set aside through Aug. 31, 2005, for renewable energy and energy efficiency guaranteed loans. Final details on how to apply for these funds will be published in the Federal Register later this year. Any funds not obligated under the guarantee loan program by August 31 will be reallocated to the competitive grant program as of that date. Further information on rural programs is available at local USDA Rural Development offices, or by visiting USDA’s Web site: http://www.rurdev.usda.gov.

Foremost sets sales/earnings record
Foremost Farms USA closed its tenth year of operations with record sales and earnings for fiscal 2004. Net income after taxes was $28.3 million, compared to $7.6 million in 2003. The Baraboo, Wis.-based dairy cooperative posted sales of $1.4 billion in 2004 compared to $1.2 billion in 2003.

Duaine Kamenick, vice presidentfinance, cited “unprecedented high market prices, a stronger economy and the business decisions of prior years,” as contributing the co-op’s strong showing. The cooperative’s current debt-to-asset ratio was $1.48 in assets to $1 in liabilities.

Foremost issued $23.9 million in 2005 patronage refunds, with $7.2 million in cash to member-owners who marketed milk through the cooperative in 2004. The remainder will be distributed in the form of allocated equity credits. The cash payments represent 30 percent of total patronage refunds. This year’s patronage allocation is 3.04 percent of gross milk receipts.

“Our 2004 returns have allowed us to move more dollars into the hands of our present and past member-owners,” President Dave Fuhrmann said. “We will continue to put emphasis on producing the right mix of dairy products for the marketplace and growing the cooperative’s diverse business into the market of choice for dairy producers.” Foremost manufactures a wide variety of cheese (representing 54.2 percent of sales in 2004), fluid and condensed milk products (20.3 percent of sales), packaged milk products (15.8 percent) and whey and whey ingredients (6.3 percent). It also produces sour cream, butter and chilled, readyto- serve fruit juices.

The cooperative operates 20 manufacturing facilities and one milk transfer station for its 3,600 dairy farmermembers in Wisconsin, Minnesota, Iowa, Illinois, Indiana, Michigan and Ohio. Foremost employs 1,487 people.

Colorado local co-ops merge
M&M Cooperative Inc. and Horizon Co-op Inc. merged operations on April 1. The merger was approved by 89 percent of M&M members and 84 percent of Horizon members, according to the Brush (Colo.) News & Tribune. The paper quoted M&M executive Ben Weitzel as saying that many thousands of dollars in cost savings is expected to result from the merger, as well as additional marketing opportunities. He noted that the agriculture world continues to change, and that it is necessary to position the locally owned cooperatives beneficially to ensure its members with competitive prices and a more financially healthy company.

Court approves MCP settlement
A judge has approved a $5.75 million settlement of a class action lawsuit brought by farmers against executives of Minnesota Corn Processors, according to a report in the St. Paul Pioneer Press. The suit alleged the executives breached their responsibilities to the co-op’s shareholders and misled them regarding the worth of Marshall, Minn.-based ethanol co-op during its sale to Archer Daniels Midland in 2002. The suit alleged that shareholders were not provided full details of how eight executives would personally benefit from the sale. The executives agreed to pay $5.75 million to end the dispute. Nine farmers had filed objections to the settlement.

Walnut growers to vote
on co-op conversion
For 93 years, Diamond of California has been a processing and marketing co-op owned by California walnut growers. Today, its 1,800 members account for about half the state’s crop. Later this summer members will be asked to vote on a proposal to convert the co-op into a publicly traded corporation. Backers of the proposal hope it will raise $70 million to $85 million through the sale of more than 5.3 million shares of stock at $14 to $16 per share; members will be offered an additional 6.7 million shares.

Members will have to weigh the incentive of a payout in company stock, which they could sell to “cashout” of the co-op, vs. the prospect of having outside stockholders take control of a company they have directed for nearly a century. Filings with the SEC indicate that an estimated $18.6 million will go to growers who want cash rather than stock.

A letter to members from Board Chairman John Gilbert and CEO Michael Mendes says “the conversion to a corporation will allow Diamond to build a financially stronger company and issue equity to grower owners. It will enable Diamond to improve our ability to get the financial resources we need to meet the challenges of the future, to convert the ownership interests into transferable and marketable shares of stock in the new Diamond, and to provide cash to members.”

Papers filed with the Securities and Exchange Commission say proceeds from the possible stock sale would also provide funds to pay down debt, develop new products or acquire other companies.

Diamond reported sales of $359 million for its last full fiscal year. It recently launched the Emerald line of snack nuts, which it hopes can compete against Planters for a larger share of the snack nut market. The co-op recently settled one of the longest protracted labor disputes in California history by agreeing to certify the Teamsters union to present employees at its plant in Stockton, Calif.

A series of member meeting were held in April to explain the proposal to members. Press reports out of California show mixed reaction by coop members. The Stockton Record quotes Diamond member Kenny Watkins, of Linden, Calif., as saying “It is all going to come down to dollars and cents, and the faith the growers have in the leadership.” The Record also quotes Stockton producer Jon Brandstad as saying “I went up to Linden to the hardware store and there were about four growers outside talking about that, and every one of them was against it.”

The Fresno Bee quotes Richard Carstens of Fresno, a co-op member for more than 40 years, as saying “What bothers me about this whole thing is that if it happens, what say will the growers have? I’ll be a stockholder, but will they listen to me anymore?” Others have noted that the worse-case scenario would be growers losing control to outside investors who could choose to source walnuts from cheaper overseas suppliers, or even move the entire operation offshore.

Ocean Spray taps former Pepsi
R&D chief to push innovation
Ocean Spray has chosen one of the food and beverage industry’s leading product innovators — Dr. Geoffrey Woolford, who has held the top research and development posts at Pepsi-Cola and Mead Johnson Nutritionals — to help write its brand’s recipe for a new generation of healthy beverages and snacks. Woolford joined Ocean Spray as vice president of research and development.

Woolford, a native of Great Britain who began his career at Quaker Oats in the late 1970s, was a driving force behind Pepsi’s “total beverage company” strategy in the 1980s and ‘90s. He led the development of Aquafina, the nation’s No. 1 brand of bottled water and oversaw product innovations and introductions for Pepsi’s domestic brands, including Lipton Iced Tea. In 1999 he went to Mead Johnson Nutritionals, where he led a series of innovations in infant formulas, other nutritional products and specialty packaging.

Ocean Spray has been the top-selling brand name in the bottled juice category since 1981. The co-op, owned by 800 cranberry growers, posted fiscal 2004 sales of $1.4 billion.

Sunkist marks 111th year
with higher sales, grower pay
Citrus co-op Sunkist Growers’ total revenues in 2004 topped $975 million, up 3.5 percent from 2003. The co-op marketed 71 million cartons of fruit, down 3 million cartons from the previous year. Payments to grower-owners jumped more than 11 percent.

In 2004, returns for most citrus crops were substantially higher. “While Mother Nature helped, to my mind this accomplishment was largely due to the improved sales and marketing, accomplished by Sunkist management pulling the industry together,” Sunkist Chairman David W. Krause told the more than 800 Sunkist grower- owners attending the citrus cooperative’s 111th annual meeting in Visalia, Calif. “The success can be seen in grower returns; in record royalties for Sunkist licensed products; in a growing list of customers, and in extremely strong market shares in major export markets. The Sunkist brand is the centerpiece of our cooperative, the most valuable asset we own.”

Sunkist President and CEO Jeff Gargiulo cited four new initiatives the citrus marketing cooperative is implementing: more consistent product quality; uncompromised food safety systems; aligning growers, customers and end consumers, and uniting Sunkist and the industry to grow the citrus category.

“Radical changes in the retail business — globalization, consolidation, technology-driven innovations, shifting buyer-seller relationships — require new business models to seize competitive advantages,” Gargiulo said. “Sunkist is on the move with a new vision — making strategic changes to leverage its brand, expand global market share and increase grower returns.” “Long-term,” he said, “Sunkist is dealing with the political dynamics of our world. We have completed a study of citrus production in China and are developing ways to address the opportunities and challenges there. We are sourcing global product to keep our customers supplied year round.” 2004 saw the united effort of the California Citrus Growers Association (CCGA) benefit both the consumer and the industry, Gargiulo added. The California citrus industry cooperated in strategically marketing the season’s orange crops.

ACE Institute set for N. Virginia
“Cooperative Education: Understanding Cooperation as a Strategic Business and Community Asset,” is the theme for the 2005 Association of Cooperative Educators Annual Institute, to be held Aug, 3-6, in Alexandria, Va. The ACE Institute is the only annual conference dedicated solely to highlighting innovative programs in cooperative education.

The conference provides a unique opportunity to network with educators across cooperative sectors and national boundaries. The institute results in a synergistic sharing of programs, experiences and ideas in the cooperative education arena. The event will include workshops, study tours and an awards banquet.

The Institute is attended by about 100 cooperative educators and members; university faculty, researchers and graduate students as well as development specialists and government officials from Puerto Rico, Canada and the United States. The program is simultaneously translated in Spanish and English.

ACE is a membership organization that brings together educators and others across cooperative sectors as well as national boundaries. For more than 40 years, the resulting cross-pollination of ideas has enhanced cooperative development, strengthened cooperatives, promoted professionalism and improved public understanding.

For more information about ACE and attending the 2005 Institute go to: http://www.wisc.edu/uwcc/ace/ace.html





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