NEWSLINE

Basin Electric forms
wind subsidiary
Basin Electric Power Cooperative has formed a subsidiary to build a 77- turbine wind farm south of Minot, N.D. The wind farm will cost about $240 million and generate 115 megawatts (MW) of electricity when operational in 2010. Construction is expected to start in early summer of 2009.

The co-op’s wind subsidiary is called PrairieWinds ND1 Inc. Although newly formed, its roots go back to 2002, when Basin Electric built and began operating four wind turbines — two near Minot, N.D., and two near Chamberlain, S.D. By 2010, Basin Electric will have added almost 140 wind turbines to the landscape of North Dakota.

Co-op officials say North Dakota has the best available wind resources in the nation, with South Dakota ranking second.

“We are evaluating the most efficient approach for operations and maintenance,” project manager Ron Rebenitsch says. “Options include using wind contractors specializing in operations and maintenance, or hiring staff workers.”

Amanda Wangler, project engineer for the Minot wind project, has been immersed in “micrositing” — the process of choosing exactly where each turbine will be located within an 8,000 to 12,000-acre area. Location affects power output.

“If we put the turbines too close together, we’ll get a lower efficiency, maybe 80 percent of what it should be,” Wangler says. “If we spread them too far apart, we’ll have 100 percent efficiency, but our wind farm will be spread all over. We’ll have longer roads, more cables. So it’s kind of a balancing act.”

Basin Electric has also constructed more than 1,500 megawatts of coal-based generating capacity in North Dakota. Another subsidiary, Dakota Gasification Co., owns and operates the Great Plains Synfuels Plant, which produces natural gas from coal. It’s the only plant of its kind in the United States.

Sales, income soar
for Land O’Lakes
Land O’Lakes had $8.9 billion in net sales in 2007, up 26 percent from 2006, and had net earnings of $162 million, up 83 percent. The co-op also returned $58 million in cash to members. The co-op saw improvement in most key financial ratios, including return on equity, return on invested capital and the company's long-term debt-tocapital.

“Over the past year, we achieved superior business performance and financial results nearly across the board, maintained a strong balance sheet and made significant strategic progress in shaping our organization for the future,” President and CEO Chris Policinski said at the co-op’s 87th annual meeting in Minneapolis.

Chief Financial Officer Dan Knutson said strong markets, brand strength, targeted marketing and aggressive costreduction efforts all contributed to the co-op’s 2007 performance.

“This past year, we delivered nearly $30 million in ‘best-cost’ savings, with a focus on both doing the basics even better and reshaping the organization to drive new efficiencies,” Policinski said. Cost-saving actions included: combining common “backroom” business-unit functions, such as accounting, human resources and information systems; centralizing purchasing in transportation, printing and contract labor; and bringing increased discipline to policies and processes in activities such as travel spending and meeting planning.

Other highlights for 2007 included: restructuring Land O’Lakes’ investment in agronomy and the alignment of the Seed and Crop Protection Products businesses under a new WinField Solutions marketing identity; the sale of Cheese & Protein International, the coop’s West Coast cheese and whey processing facility; and the expansion of the manufacturing capacity of Land O’Lakes Tulare, Calif., dairy processing plant, among others.

Record $11.1 billion
revenue for DFA
Dairy Farmers of America, Inc. (DFA) had record revenue and operating income in 2007, but because of one-time, non-cash charges of $144.8 million, the co-op recorded a net loss of $109.3 million for the year. The noncash charges were a result of plant closures and the re-valuation of DFA’s past investments.

“DFA’s financial outlook has never been better,” said Tom Camerlo, of Florence, Colo., chairman of DFA’s board. “We had record revenues and strong profits in most of our businesses. The non-cash charges will not affect our continuing operations, cash flow or member milk checks.”

Driven by record-high milk prices, DFA had record revenues of $11.1 billion in 2007, up $3.6 billion from 2006. DFA members received an average price of $19.38 per hundredweight, up $6.30 from 2006. DFA marketed a record 61.9 billion pounds of milk in 2007, and continues to grow its international business, increasing export sales to $211.4 million in 2007.

Operating income from DFA’s Dairy Food Products Group was very strong in 2007. Both Formulated Dairy Food Products and Keller’s Creamery butter divisions had record earnings. The Italian cheese division recorded very strong operating income, and the American cheese division improved from recent years. American Dairy Brands, the retail branded cheese division of DFA, had strong revenue and volume, though operating income was impacted by rising cheese markets.

As part of its focus on improved profitability and long-term growth, DFA closed two cheese plants in 2007, resulting in the one-time, non-cash charges. Closing the plants in Lovington, N.M., and Corona, Calif., will improve DFA’s profitability.

Record milk prices negatively impacted a number of DFA’s fluid milk joint ventures. The businesses were not always able to pass higher milk costs to the marketplace, resulting in reduced profits and, in some cases, devaluation of assets.

CRI revenue tops $125 million
Cooperative Resources International (CRI), Shawano, Wis., reported pre-tax income of just under $4.08 million, a 3.3 percent return on total revenue of more than $125 million. Speaking at the co-op’s 15th annual meetings (held in Stevens Point, Wis., Bloomington, Minn., Albany, N.Y., and Harrisburg, Pa.), CEO Doug Wilson said, “The cooperative’s growth in revenue is commendable. Although the entire purpose of creating CRI was growth through an efficient structure, we have likely surpassed our founders’ expectations.”

Highlights for the co-op’s major subsidiaries included: AMPI’s Furth to retire following year of record income
Mark Furth, president and chief executive officer of Associated Milk Producers Inc. (AMPI), New Ulm, Minn., has announced he will retire from the milk-marketing cooperative in 2008. Furth made the announcement at the co-op’s annual meeting in Bloomington in March, where it was also announced that AMPI had record earnings of $24.8 million in 2007.

AMPI’s board of directors has begun a search for a successor. “AMPI is strong, not just financially, but strongly focused on purpose,” Furth said at the co-op’s annual meeting. “This milk marketing business has what it takes to continue being a leading milk marketing cooperative – committed owners and employees.”

Furth began his career at AMPI in 1970, shortly after the cooperative was formed. He held positions in accounting, marketing and membership and was named assistant manager in 1985. In 1989 he became general manager of AMPI’s former North Central Region and, later, AMPI.

The restructuring of AMPI in the late 1990s was a turning point for the cooperative, Furth said. The North Central Region — comprised of six Upper Midwest states — retained the AMPI name.

NCGA promotes
bulk-buying options
Purchasing products from bulk bins allows consumers to reduce the amount of packaging that ends up in landfills while getting their favorite foods, typically at lower prices and in exactly the amount they need. The National Cooperative Grocers Association (NCGA), a business services cooperative representing 109 food coops nationwide, encourages shoppers to “give bulk a chance.”

“Co-ops have a long history of offering products in bulk,” says Robynn Shrader, chief executive officer of NCGA. “Buying in bulk is a simple and easy way to shop, giving consumers more choices at affordable prices while having a positive impact on the environment.”

According to the Environmental Protection Agency (EPA), nearly 80 million tons of waste is generated from packaging and containers annually — nearly a third of annual municipal solid waste. Purchasing products in bulk and storing food in reusable containers can help eliminate that waste.

In most cases, buying in bulk is as simple as weighing the quantity needed and writing down the item’s bin number. Most bulk bin aisles include beans, cereals, flours, grains, herbs and spices, nut butters, oils, pastas, sweeteners, tea, coffee, pet food and household and toiletry items, such as soaps.

Co-op plans to buy
N.D. hog plant
A co-op of Midwest and Canadian hog producers plans to buy a majority interest in a North Dakota slaughter plant. Cloverdale Growers’ Alliance Cooperative, a group of about 60 hog farmers in North Dakota, Montana and Minnesota, has supplied the Mandanbased Cloverdale Foods Co. for the past decade. The farmers’ alliance has signed a letter of intent to buy a controlling interest in Cloverdale’s Minot plant, according to newspaper reports.

The co-op is putting together a business plan and soon will begin a push to sign up more farmers in its current area and in South Dakota and Canada. Financial terms of the deal are not being disclosed.

Landmark Co-op to build
soy-crushing plant
Wisconsin Governor Jim Doyle has announced the awarding of a $4 million grant for the construction of the state’s first soybean-crushing facility, which will create soybean oil for biodiesel. Landmark Services Cooperative, a farmer-owned co-op, was awarded the grant to build a plant with the capacity to process 20 million bushels of soybeans annually.

“The soybeans Wisconsin grows so well will stay here in the state, get processed in Evansville and may end up fueling the tractors along these roads,” Governor Doyle said. “This facility offers us a way to create jobs, free us from big oil companies and advance our commitment to renewable energy.”

Currently, most of the state’s soybean crop is processed in other states and sold back to Wisconsin farmers for feed. Last year, the state’s first largescale commercial biodiesel plant opened in DeForest, with the capacity of producing 20 million gallons of biodiesel annually from a variety of feedstock sources, including soybean oil.

Wisconsin ranked 14th in the nation in soybean production in 2007 with 51.9 million bushels. It is the only topproducing soybean state without a large-scale soybean-crushing facility.

In March, Governor Doyle launched Clean Energy Wisconsin, a comprehensive plan to move the state forward by promoting renewable energy, creating new jobs, increasing energy security and efficiency, and improving the environment.

Foremost reopens
Waumandee cheese plant
Foremost Farms USA has announced the reopening of its Waumandee, Wis., cheese plant. The plant, which historically has produced Italian and American styles of cheese and whey products, has been converted to produce 640-pound blocks of cheddar cheese for aging. This is the variety of cheese that captured the Grand Champion and Best-of-Class awards for Foremost Farms at the 2007 National Milk Producers Federation Championship Cheese Contest, and which won its class at the 2007 World Dairy Expo Championship Dairy Products Contest.

“The Waumandee plant was idled at the beginning of 2007 with the intent of bringing back a profitable product mix,” says Dave Fuhrmann, the co-op president. “The plant has an impressive infrastructure and skilled cheesemakers and employees. It is a very valuable asset to the cooperative and the milkshed in the Waumandee Valley.”

U.S. Premium Beef selling
National Beef to JBS-Swift
U.S. Premium Beef LLC (USPB) and National Beef Packing Co. LLC have announced that they have entered into a purchase agreement with JBS S.A., under which JBS will acquire all of the outstanding membership interests of National Beef — the company formed from the former Farmland beef division. Under the terms of the agreement, JBS will pay the members of National Beef about $465 million cash and $95 million in JBS common stock. In addition, JBS will assume all of National Beef’s debt and other liabilities at closing.

The sale will combine all of National Beef’s operations and facilities, including National Carriers Inc. and its ownership in Kansas City Steak Co. LLC, with JBS-Swift’s beef operations. National Beef President Tim M. Klein will become president and CEO of the joint National Beef/JBS-Swift beef operations.

“This transaction will enable our company to become a part of a leading multi-national food company,” Steve Hunt, CEO of USPB, said in making the announcement. “Being able to diversify through JBS will put our company in a position to compete long term in an increasingly competitive environment.”

CHS buys Provista Renewable
Fuels, Spokane’s Zip Trip
CHS Inc. has acquired full ownership of Provista Renewable Fuels Marketing, which markets more than 550 million gallons of ethanol annually. CHS purchased the 50-percent interest in Provista owned by US BioEnergy Corp., an ethanol manufacturing firm. US BioEnergy merged with VeraSun Corp. in April, giving it 100 percent ownership.

In a separate deal, CHS has signed a purchase agreement to acquire 33 Zip Trip convenience stores in the Spokane, Wash., area from Jopo Inc. and Jo-By Enterprises LLC.

Terms of the transactions were not announced.

CHS says it will operate Provista under its present name and leadership.

“As sole owner of this successful renewable fuels marketing and distribution operation, CHS looks forward to new opportunities to connect biofuels producers and blenders quickly and efficiently as the alternative fuels industry continues to grow,” says Leon Westbrock, CHS executive vice president and chief operating officer for energy. CHS will operate Zip Trip locations under its Cenex energy brand.

The re-identification of the locations to the Cenex brand is expected to be complete by mid-summer 2008.

There currently are 1,600 Cenexbranded retail operations in the United States, including 800 convenience stores, most of which are operated by cooperatives and independent retailers.

Tri-State joins
renewable energy co-op
Tri-State Generation and Transmission Association is among the first to join a national organization focused on the development and deployment of renewable energy by electric cooperatives. At its March meeting, the association’s board of directors approved the membership subscription agreement with the National Renewables Cooperative Organization (NRCO).

NRCO is a banding together of electric co-ops nationwide that are jointly working to meet their renewable power legal requirements and portfolio goals. Currently, more than half the states in the nation have adopted renewable portfolio standards (RPS), including Colorado and New Mexico, where Tri-State serves member co-ops. These RPS standards require utilities to meet a set renewable energy megawatt quantity or precise percentage by a specific date. The federal government is also considering a national renewable standard.

With an initial annual budget of nearly $1 million, NRCO requires a commitment of $100,000 for the first year of the program from a minimum of 10 members. Generation and transmission cooperatives (such as Tri- State), unaffiliated distribution cooperatives and “partial requirements” cooperatives (with legal ability to participate in the wholesale market) are eligible for membership.

According to Tri-State executive vice president/general manager J.M. Shafer, “NRCO offers cooperatives a way to pool our resources and efforts into a single national program that shows support for renewables and will put coops in a proactive position if a national standard for renewable energy becomes law.”

Organic Valley forms
grower pool to ensure feed
supply, price stability
In an effort to provide market stability to both crop growers and livestock producers, Organic Valley Family of Farms is opening its membership to organic crop growers with the introduction of its Grower Pool. With more than 1,200 member farms, Organic Valley is America’s largest cooperative of organic farmers and is one of the nation’s leading organic brands.

Growers joining the pool will benefit from a guaranteed floor price for their crops on a long-term contract basis and will be able to enroll all or portions of their crop acreage in the pool. Organic Valley will offer contracts for feedgrade grains, beans, oilseeds and hay beginning with the 2008-2010 cycle.

The Grower Pool’s prices will reflect differences in the co-op’s 15 grower regions. Members will form their own executive committee to develop policy and pricing guidelines. After one production year, any member can add a year to the contract at a newly set floor price, or can opt out of the pool.

“Our objective is to establish regional floor prices for crops that are clearly profitable for growers yet still affordable for our livestock producers,” says Lowell Rheinheimer, farm resources manager for Organic Valley.

Hanlin to succeed
Lindgren at Sunkist
Sunkist Growers’ board of directors has unanimously elected Russell L. Hanlin as executive vice president. Hanlin will assume the office of president and chief executive officer of the nation’s oldest and largest citrus marketing co-op Nov. 1, when current president and CEO Timothy J. Lindgren retires.

Board Chairman Nick Bozick praised Lindgren for “two years of exceptional service. We are fortunate that Tim was available to lead at Sunkist at a challenging time in our business. During his tenure, we not only weathered a freeze, we also realigned our operations to drive greater returns to our growers at lower costs.

“We are also fortunate to have in place the right individual to assume the presidency when President Lindgren retires,” Bozick added. Hanlin, a 30-year veteran of Sunkist, is currently senior vice president for sales and marketing. “Russ knows Sunkist. He has experience in every aspect of our sales and marketing operations,” says Bozick. “He also knows citrus. His expertise has made him a valued participant in industry groups.”






Michigan Turkey Cooperative Earns Product Center Award

Ten years ago, the future of the Michigan turkey industry looked grim after the state’s major live turkey processor, Sara Lee, announced that it no longer needed Michigan birds for Thanksgiving. So, a group of 15 turkey farmers committed to keeping the state’s turkey industry alive came together and formed the Michigan Turkey Producers Cooperative (MTPC).

“Growers had no place to take their turkeys,” recalls Dan Lennon, CEO and president of MTPC, who was a member of that initial group of producers. “They either had to build their own plant, or go out of business.”

Because of the group’s entrepreneurial actions and subsequent growth over the past decade, the Michigan Turkey Producers Cooperative was named the winner of the Michigan State University Product Center Award for the Most Successful Business Transition.

The cooperative has evolved from a single product line — selling live turkeys — to selling a wide array of turkey-based products. Buyers include companies such as Sysco, Gordon Foods and Superior Seafoods.

USDA Rural Development has provided financial support for the cooperative under several of its programs. In 2000, eight co-op members received loans under USDA’s Cooperative Stock Purchase Program to make their initial investment in the co-op start-up. In 2003, and again in 2005, MTPC received Value-Added Producer Grants from USDA, the first to pay for a project feasibility study, the second for working capital. (For more information on these and other USDA Rural Development programs, please visit: www.rurdev.usda.gov.)

Chris Peterson, director of the MSU Product Center, said it was important for the center to recognize its more inventive clients. “It was exciting to recognize some of our more innovative and interesting clients,” Peterson says. “Studies indicate that, particularly in rural communities, we (in Michigan) tend not to celebrate entrepreneurial successes, even though we are inclined to be fairly hard on entrepreneurial failures. When we had several clients really deserving of an award, it seemed particularly appropriate to recognize them in that way.”

Lennon says that adding valueadded products to the cooperative’s line-up had been planned since the company’s inception. The original production plant was an idle French fry facility that had been out of business for two years. After purchasing the building in June 1999, MTPC converted the brownfield site into a state-of-the-art, live processing and rawmeat plant that began operating in March 2000. By late 2001, the company had started producing its flavored raw boneless roasts, sausage and burgers.

“We knew from the beginning that we did not want to be a 100-percent commodity processing plant,” Lennon says.

The next step for the cooperative was to construct a new cooking facility. Built in 2005, the new plant creates ready-to-eat turkey products that are sold to a wide variety of food service and retail customers throughout the United States.





May/June Table of Contents