NEWS LINE

CoBank’s record earnings
support $193 million patronage
CoBank reported record 2006 yearend earnings of $335 million, an increase of $37 million from 2005. As a result, it is returning $193 million in patronage to customer-owners.

CoBank’s 2006 earnings represent a 12- percent increase over 2005 and the seventh consecutive year of earnings growth. The increase was largely due to an increase in net interest income, driven by higher loan volume across most market segments and a reduction in the provision for credit losses, reflecting continued strong credit quality for the year.

“CoBank was able to provide muchneeded capital to our agribusiness and rural utility customers during a time of market volatility,” says Robert B. Engel, CoBank president and CEO. Of the $193 million in patronage distributions for 2006, $126 million will be paid in cash and the remainder in CoBank stock.

Patronage distributions for 2006 represent an 18.2 percent return on average invested capital for customerowners. For the past five years, CoBank customer-owners received an average of $160 million per year in cash as a result of their investment in the cooperative bank.

Assets increased to $41.4 billion from $33.8 billion in 2005. Loans and leases outstanding to U.S. and international customers increased to $33.1 billion, from $26.3 billion in 2005. This growth was primarily due to increases in agribusiness loan volume, lending to Farm Credit Associations and loans to rural energy customer.

With $10 billion in loans outstanding, the Agribusiness Banking Group comprised 31 percent of the bank’s portfolio, an increase of $6.9 billion. The bank’s Strategic Relationships Division, which includes Farm Credit Association customers, had $10 billion in loans outstanding, or 30 percent of the portfolio, an increase of 28 percent. Of this total, $8.3 billion in loans were to CoBank’s five affiliated Farm Credit association customers, which serve 28,000 customers in 13 states in the Northeast and Northwest.

The Communications and Energy Banking Group had $7.7 billion in loans outstanding, an increase of $865 million. Energy and water sector loans totaled $5.3 billion, while communications sector loans reached $2.4 billion.

UPG forms joint venture to
operate potato dehydrator
United Potato Growers of Idaho has formed a joint venture that will create the nation’s second largest potato dehydrator, subject to government approvals. United, a cooperative of potato growers based in Idaho Falls, Idaho, joins with Idaho Fresh-Pak Corporation (also known as Idahoan) and the R.D. Offutt Co., together creating a broad network of potato processing plants with convenient access to markets and customers.

“Since forming two-and-half-years ago, United has proven its ability to manage fresh potato supplies, meet and match demand, and improve grower returns,” said Jerry Wright, United president and CEO. “This new venture will not only lead to a more stable dehydrator industry, but also serve as an important tool for growers to balance their fresh crop and fresh industry marketing pipelines, all with the objective of improving grower returns. As a result, potato growers, our communities and the entire industry will benefit.”

Under the terms of the agreement, United has formed United II, a new grower cooperative that will be involved in the new company with Idahoan and Offutt. Idaho potato growers who are members of United, or who join United, can opt to join United II. By investing in United II, UPG leaders say potato growers will have ownership of the new company, will receive dividends, and have a guaranteed market for their dehydrator-grade potatoes.

“This new venture is another in a series of strategic initiatives by United to improve potato grower returns,” says Wright. “The fresh and dehydrator industries work hand-in-hand. By maintaining a fair dehydrator price, fresh grower returns also improve. This new dehydrator company also provides United with an outlet for surplus potatoes. Through United, growers have access to market data and facts that are crucial to their marketing. Through United II, growers who invest will have the opportunity to earn dividends while having a reliable market for their dehydrator-grade potatoes.”

Members of United II will be the sole potato suppliers for the new company. “Potato growers will now be integrated vertically into the overall industry system,” says Wright. “Through United II, we will create efficiencies from the development of seed to production to marketing. We anticipate greater long-term stability and no more boom or bust cycles.”

AMPI earnings bounce back
Increased revenue and sharp cuts in expenses helped Associated Milk Producers Inc. (AMPI) record a significant financial turnaround in 2006. AMPI reported $4.6 million in earnings on sales of $1.1 billion for 2006, AMPI President and CEO Mark Furth said during the dairy cooperative’s annual meeting in Bloomington, Minn. The co-op handled 5.1 billion pounds of milk from its 3,400 members and made $8.2 million in equity payments.

The co-op rebounded from a disappointing 2005, when its butter manufacturing facility — a good source of profits — was being rebuilt following a fire in late 2004. A return to pre-fire production levels at the butter plant figured significantly in the company exceeding budget expectations for 2006. Furth said the improved performance reflected the cooperative’s ability to increase energy surcharges and premiums on AMPI dairy products and reduce energy costs associated with milk hauling and manufacturing.

“They probably haven’t heard of us down on Wall Street, but if AMPI were a publicly traded company its stock would be rising,” Furth told delegates. AMPI was able to return to profitability for its dairy farmer-owners despite a milk market-downturn that characterized most of 2006.

“Our milk marketing company is a consistent performer in a volatile marketplace,” said AMPI Board Chairman Paul Toft, a dairy producer from Rice Lake, Wis. “We’re poised to grow in the Midwest — throughout AMPI country.”

Montana ranchers form
Organic Producers Co-op
Twenty-five organic livestock producers have joined together to form the Montana Organic Producers Co-op (MOPC). Its mission is to help organic producers achieve fair, stable pricing for their output, based on cost-of-production, plus a fair return.

Co-op leaders say organic producers face a number of challenges in obtaining a fair price, including: cheap offshore organic meats being sold to consumers without country-of-origin labeling; a lack of local certified organic processing facilities; limited transportation to inter- and intra-state markets, and a lack of information on cost-ofproduction and grading to help producers continually improve their herds and manage their pricing proactively.

"MOPC's purpose is to help organic producers market their products at a fair price regardless of the hurdles particular to organic production. We want to represent our members in those arenas which can affect infrastructure and legislation to the benefit of not only organic producers, but our agricultural community as a whole," says Clay McAlpine, MOPC chairperson.

MOPC was formed from the input of more than 70 organic producers who worked together to develop a unique co-op model. It orchestrates the growing, feeding and finishing of animals produced by its members, allowing profits of cow-calf and feed sales to remain within the group before finished animals are sold to national and regional buyers.

"Our pricing model has little to do with conventionally produced meats and commodity pricing because our animals are raised using a completely different production management system," says McAlpine. "MOPC's certified organic growers adhere to current organic law, but they take their commitment to sustainable farming practices one step further. Our animals are pasture-raised and grass finished, while commodity pricing levels are tied to corn prices and feedlot systems."

MOPC began negotiating sales contracts for potential members in 2005. Sales and shipments for 2006 jumped 338 percent and are anticipated to increase another 70 to 80 percent in 2007. MOPC coordinates all animal shipments of participating producers so that even the smallest producers may benefit from farm-gate prices generally reserved for volume contracts and full potload shipments.

"While our aim is to promote Montana certified organic products, we have attracted members from across Montana and several adjoining states,” says McAlpine. “Our current membership is comprised of ranchers from Montana as well as South Dakota, Nebraska and Idaho. We do not anticipate developing a MOPC brand, nor do we require that our members sell all of their production through the co-op. Of course, our hope is to do a good enough job for our members that they'll choose to sell most, if not all, of their production through MOPC."

MOPC's current focus is on beef, but it will also be marketing lamb, goats, pork and possibly bison.

Alto Dairy to close
liquid feed division
Atlo Dairy in Waupun, Wis., announced in April that operations of its Liquid Feed Division (LFD) in Black Creek, Wis., would cease on May 11, 2007. LFD is a leading manufacturer of liquid veal milk replacers, which use whey as one of the main ingredients.

“Due to current market conditions, including the high market price for whey, which is reflected in the price we pay for milk, we assessed our opportunities for pursuing highervalue-added uses for our whey stream. As a result, we have chosen to close LFD and exit the veal-feed business,” said Rich Scheuerman, Alto Dairy’s president and CEO. “This decision impacts our employees and customers and we are committed to treating everyone fairly and working to help them during this change of strategy for our cooperative.”

The current market price for whey is three times its 10-year average, and WPC prices are more than double their 10-year average. These higher prices, which exist industry-wide, have dramatically impacted the profitability of raising veal calves, with many veal producers choosing to reduce the size of their veal herd or deciding to stop producing veal altogether. This has resulted in reduced demand in LFD’s products.

Sunsweet marks 90th
anniversary
The year was 1917 — the first year women were allowed to vote in New York state and the beginning of a dried fruit company in California with products that would become famous throughout the world. Sunsweet Growers Inc., now the world's largest handler of dried tree fruits, is marking its 90th anniversary.

The Sunsweet Growers cooperative boasts a 320-member roster, focusing on farming, harvesting and manufacturing practices that help ensure the highest quality fruit and consistent products are delivered to supermarket shelves. The organization represents one-third of the world's prune supply and continues to build on its foundation of quality, innovation and healthy products. Headquartered in Yuba City, Calif., Sunsweet products include dried plums, apricots, cranberries and raisins. A grower-owned marketing cooperative, Sunsweet product innovations go back decades, to the introduction of the first pitted prunes and the popular fruitessence prunes. It is also pioneering new and exciting ideas with both packaging and products, including new Sunsweet Ones. These individually wrapped prunes are meant for the “busy consumer looking for a convenient, healthy food option.” In addition, Sunsweet now offers a wide range of products such as Jumbo Red raisins and a new line of premium dried fruit including blueberries, cherries, mangoes and berry blend. Sunsweet also offers a line of nutritious juices, including PlumSmart, which launched in 2006.

DFA to idle Lovington, N.M.,
cheese plant
Dairy Farmers of America Inc. (DFA) has announced that operations at its Lovington, N.M., cheese plant will be idled, with its cheddar production transferred to other DFA plants. The plant has been jointly owned and operated by DFA and the Greater Southwest Agency.

Open since 1995, the Lovington plant produces 40 million pounds of 40-pound-block cheddar cheese annually. The announcement comes after years of repeated efforts to stimulate successful operations, including periodic adjustments to the production schedule and an expansion to help the facility better accommodate increased volume. Despite these efforts, the plant has failed to become financially viable.

DFA members will experience minimal impact from the plant closure, he said. Milk formerly marketed to the Lovington plant will be absorbed at DFA’s other facilities, and no change to hauling rates for member dairy producers is planned. About 60 jobs will be impacted.

Co-op master's degree
application deadline
The Master of Management Cooperatives and Credit Unions (MMCCU) program was recently awarded $75,000 to help launch a Centre of Excellence in Accounting and Reporting for Cooperatives by the Canadian Institute of Chartered Accountants. The MMCCU is the only degree of its kind in English awarded by an accredited institution (St. Mary's University in Nova Scotia, Canada).

Drawing together an impressive community of faculty and students from around the world, each class meets once each August for an intense orientation week in Halifax, Nova Scotia. Degree candidates then return to their respective countries and sponsoring coops or cooperative organizations to pursue 12 courses of study that combine independent and group work, assisted by telecommunications technology.

Half-way through the program, the class meets for a 10-day study visit to a place where cooperatives dominate the economy, such as Mondragon in the Basque region of Spain, or the Emilia Romagna region of Italy. Non-students may apply to join the Study Visit. Applications for the Fall 2007 class were due May 31, 2007, but later applications may be considered. Contact Tom Webb at: tom.webb@smu.ca. To learn more, read student profiles and the MMCCU newsletter at: www.smu.ca/mmccu.

Foremost has $12.5 million loss;
closes juice plant; hires COO
Foremost Farms USA, Baraboo, Wis., had a $12.5 million loss for 2006, the first loss in its history. Co-op leaders say the loss was the result of federal milk marketing rules and competition from California. Last year, the co-op had earnings of $4.2 million, and two years ago it had record earnings. Press reports quoted a co-op official as saying Foremost Farms is still in a strong financial situation despite the loss, noting that for every dollar in liabilities the co-op has $1.38 in cash reserves.

Changes in marketing rules have already corrected some of the problem, Foremost Chairman Ed Brooks told the Baraboo News Republic. He added that management is working to cut costs, choose more profitable products and bring the co-op back into the black. He said the co-op's cost for milk and other products it uses to make cheese have increased, and, until February, a federal "make allowance" rule that had not been adjusted since 1999 did not take into account the co-op's rising costs for energy, insurance and labor. The “make allowance” is deducted from the price a co-op pays farmers for their milk.

Foremost has announced the closure of a fruit juice packaging plant it owns in Fitchburg, Wis., and a distribution center it leases in Windsor, Wis. About 77 salaried and hourly employees will be impacted. The juice facility represents less than 2 percent of the cooperative’s annual sales.

In another action, Foremost named Michael Doyle as its new vice president for finance/chief operating officer. Doyle was most recently the chief financial officer of Creekstone Farms Premium Beef LLC. Before joining Creekstone, Doyle spent more than 11 years with Land O’Lakes, where he rose to the rank of vice president for finance and operations for the Ag and Feed Division.

CHS distributes record
$258 million to members
CHS Inc. owners in 47 states are sharing in a $258 million disbursement as a result of the energy and grainbased foods cooperative’s record fiscal 2006 earnings. It marks the third consecutive record return to owners by CHS and is the largest ever made by a U.S. cooperative.

The distribution consists of cash patronage, equity redemption and CHS preferred stock issued as equity redemption. Patronage refunds also include a record 14.8 cents per gallon paid to eligible customers who purchased gasoline, diesel and other refined fuels from CHS during its fiscal 2006, a total of $99 million in cash on refined fuels purchases. CHS is the nation's largest member-owned energy company.

"This record return represents one of the most important ways we can deliver on our CHS mission of adding value for all of our stakeholders," said Michael Toelle, CHS board chairman. CHS net income for its fiscal year ending Aug. 31, 2006, was $490.3 million. During 2007, distributions are being made to 1,325 member companies and more than 37,000 individuals.

In other CHS news, the co-op has signed an agreement to buy Nor-Lakes Service Midwest, Hugo, Minn., and the Farm-Oyl Co. of St. Paul, Minn. Nor-Lakes is a lubricants manufacturer, founded in 1988 to produce privatelabel lubricants and greases, including the Farm-Oyl brand. Farm- Oyl has been marketing heavy-duty lubricants to Upper Midwest customers since 1929.

CHS has also announced it has formed a partnership with Sunrise Ag Service Co. to enhance specialty and bulk grain-handling access via the Illinois River. The 50/50, limited liability partnership is to build and operate a new river grain terminal at Havana, Ill. At the same time, the two companies have entered into a separate agreement with Clarkson Grain for another LLC to manage truck-to-barge access through two belts at the Beardstown, Ill., river terminal.

MMPA elects new president
St. Johns, Mich., dairy farmer Ken Nobis has been elected president of Michigan Milk Producers Association. Nobis was first elected to the MMPA board of directors in 1992 and has served as vicepresident. He and his brother, Larry, operate an 800-cow dairy and farm 3,000 acres near St. Johns. They were recognized as Michigan State University’s “Dairy Farmers of the Year” in 2006.

Nobis serves as treasurer of the National Milk Producers Federation (NMPF) board of directors and is a member of NMPF’s Environmental Committee. He serves on the United Dairy Industry of Michigan board and the Michigan Dairy Market Committee.

Bob Kran, of Freesoil, Mich., was elected vice-president. To honor retired President Elwood Kirkpatrick’s 26 years of service to MMPA, the co-op board has designated him as president emeritus of MMPA.

MMPA is a member owned and controlled milk-marketing cooperative serving about 2,400 dairy farmers in Michigan, Wisconsin, Ohio and Indiana.

NH to host conference
The New Hampshire Cooperative Enterprise Conference will be held June 15, 2007, at Southern New Hampshire University. Economic Development professionals and nationally respected co-op leaders will explore how cooperatively structured businesses can advance economic and community development goals. For more information visit: www.cdi.coop, or email: info@cdi.coop.



USDA awards $415,000
for early-warning broadcasts

Agriculture Secretary Mike Johanns in March announced the award of more than $415,000 in grants for weather radio transmitters to extend the coverage of the National Oceanic and Atmospheric Administration Weather Radio All Hazards (NWR) early warning system to seven more rural communities. "With the tragedy of tornadoes, we have heard national broadcasters saying everyone should have a NOAA Weather radio," Johanns said. "These seven grants to rural communities who do not have coverage from NOAA Weather Radio Transmitters will help save lives."

The NWR is a nationwide network of radio stations broadcasting 24 hours a day from National Weather Service offices to alert people of approaching dangerous weather and other emergencies, including natural, environmental and public safety alerts. Thousands of people die or lose property annually because they did not know soon enough about hazards, disasters or emergencies.

The NWR covers all major metropolitan areas and many smaller cities and towns. The Weather Radio Transmitter grant program helps provide coverage to those rural areas that do not have NWR coverage or are poorly covered. The grants are funded using residual funds from grant projects that were completed under budget. Today's award brings to 91 the total number of grants awarded to electric and telecommunications cooperatives, nonprofit groups and state and local governments covering 100 sites in 26 states and Puerto Rico.

Details of the grant recipients and projects and further information on Rural Development programs are available at: http://www.rurdev.usda.gov or at local USDA Rural Development offices.






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