Co-op developments, coast to coast

SDWG launches
$66 million project

South Dakota Wheat Growers (SDWG) has begun work on a $66- million project to add grain drying, storage and receiving capacity at 11 of its facilities in South Dakota and North Dakota. The project will double the cooperative’s system-wide drying capacity, increase its storage capacity by 12 million bushels (or 21 percent) and increase its grain-receiving capacity by 2 million bushels per day (or 30 percent).

The project will also create two new shuttle-loading facilities in Roscoe and Andover, S.D. The new shuttle loaders will relieve pressure on SDWG’s existing shuttle loaders, reduce producer costs and provide better access to grain markets, says Roger Hansen, vice-president of business development for the cooperative.

All construction is expected to be completed in time for row crop harvest this year.

South Dakota Wheat Growers has plans to add capacity at Highmore and Melette, build a new shuttle loader at Tulare and add more bin storage at Wolsey in 2011 or 2012. South Dakota Wheat Growers is the nation’s 12th largest grain handler and has more than 5,000 active members.

Southern States reports
sales of $1.8 billion

“Not many companies will look back on 2009 as a year they care to remember. But for Southern States, it is a year we will reflect on with pride,” Southern States CEO Thomas Scribner and Chairman John East said in the coop’s 2009 annual report. While Southern States sales dropped from $2.1 billion in 2008 to $1.8 billion in 2009, they lauded the co-op’s employees for making the best of what was a very stressful year for agriculture as the economic recession played havoc with many markets.

The drop in sales for the regional farm supply and services cooperative was primarily the result of decreased sales of fertilizer and dramatic increases in petroleum prices. But the co-op’s other major divisions — retail, feed, farm and home, and Agway — generally maintained sales at near 2008 levels.

Earnings before taxes, depreciation and amortization dropped from $82.5 million in 2008 to $44.3 million for 2009. Devaluation of fertilizer was the major reasons for the decline. Fertilizer sales volume dropped from 1.2 billion tons in 2008 to 846 million tons. Feed sales dropped from 979 million tons in 2008 to 838 million tons, and petroleum sales slipped from 290,000 gallons to 282,000 gallons.

Some of the highlights of the year cited in the report include: Ag co-ops have billion-dollar
impact in Texas, study finds

A Texas AgriLife Extension Service study that sampled 96 agricultural cooperatives across the state found that the co-ops generate $1.7 billion in annual sales and create 20,000 jobs. Agricultural cooperatives, which provide everything from livestock feed to apparel, are vital to rural economies, says Dr. John Park, AgriLife Extension Service economist, and Roy B. Davis, professor of agricultural cooperation. The economic values co-ops generate would be higher “if you considered more than the operational activities” that support the selling of goods and services, Park notes.

“People don’t realize how valuable that little [co-op] is out there on the highway, selling feed and other supplies to a local, rural economy,” Park says. “I really believe the cooperative structure will be the last thing in rural Texas to go away.”

“They [co-ops] are the backbone of rural Texas,” adds Jonathan Baros, Extension program specialist, who coauthored the study with Park and Dr. Rebekka Dudensing, AgriLife Extension economist.

The Texas Agricultural Cooperative Council commissioned AgriLife Extension to conduct the study. “We initiated this study so that we could do a better job of telling our story,” said Tommy Engelke, president of the Texas Agricultural Cooperative Council. “Many don’t realize the multiplier effect an agricultural cooperative has. Not only do agricultural cooperatives provide goods and services to produce food and fiber, but they also have tremendous spinoff effects in term of job creation.”

Of the 20,000 Texas jobs supported by ag cooperatives, every two of those jobs in turn support five more jobs in the economy, according to the study. When considering only retail sales, warehousing and store-front activities, the cooperatives in the study accounted for more than $631 million in additional sales across the economy for 2007.

“These sales increased the region’s value-added or gross domestic product component by $233 million, income by $117 million and employment by 2,001 jobs for 2007,” Park says. The study also found that 30 cooperatives were among the top three property taxpaying entities in their counties.

Park says the study found that cooperatives provide an additional 9.2 percent to total output when compared to non-cooperative businesses. “Also, we found an additional 11.6 percent in value added to the economy and an additional 82.8 percent to personal income when compared to a traditional corporate structure that is less likely to retain its income at a local level.”

The 96 cooperatives studied provide services to members in an area of 130,435 square miles — nearly the size of Montana, Park says. “They have the potential to impact the lives of 8.2 million people or about every one of three Texans.” For more information, visit:

Farm Credit net income
tops $2.8 billion in 2009

The Farm Credit System (System) reported combined net income of $2.85 billion for 2009, down from $2.9 billion in 2008. The 2.3 percent decrease ($66 million) resulted from an increase in the provision for loan losses of $517 million, an increase in non-interest expense of $142 million and an increase in the provision for income taxes of $42 million, which was largely offset by an increase in net interest income.

Net interest income was $5.39 billion in 2009, an increase of $690 million (or 14.7 percent) compared to $4.70 billion in 2008. Average earning assets grew $8.62 billion (or 4.4 percent), to $203.45 billion for 2009.
B “The System’s ability to deliver a solid performance and maintain a strong financial position in this challenging environment reflects the System’s efforts to actively manage the credit quality of its loan portfolio and to follow conservative asset/liability management practices while continuing to strengthen its capital position,” says Jamie B. Stewart Jr., president and CEO of the Federal Farm Credit Banks Funding Corporation.

Capital as a percent of assets grew from 12.7 percent in 2008 to 13.9 percent in 2009. The net interest margin increased 24 basis points, to 2.65 percent for 2009, compared with 2.41 percent for 2008.

The Farm Credit System recognized provisions for loan losses of $925 million for 2009 and $408 million for 2008, reflecting the adverse impact of stress in the general economy on ag borrowers.

Robert Beasley remembered
Robert L. Beasley, 81, the first American to head the International Cooperative Alliance (ICA), the world’s second-oldest and largest nongovernmental organization (behind the International Red Cross and Crescent), died March 11 in Ohio, the Columbia Daily Tribune reported. Beasley was a graduate of the University of Missouri School of Journalism and worked for the Columbia Daily Tribune in the 1950s. He was a longtime executive at Farmland Industries in Kansas City, from which he took early retirement in 1984 to take the helm at ICA, which he continued to lead until 1988.

Because the ICA included cooperatives from both sides of the then-crumbling Iron Curtain, it was a stormy and difficult time for the organization, which began in the 19th century, according to the Tribune. By the time Beasley stepped down as director in 1988, the organization’s deficit had been reversed and the staff had become professional and skilled.

He was ICA’s director emeritus 1988-1989. Much of the year was spent at The World Bank in Washington where he worked to improve the bank’s cooperative policies and procedures.

While working for Farmland, he became a board member of the National Cooperative Business Association, twice serving as its chairman. He helped the association establish the National Cooperative Bank, which has become a vital force in modern cooperative development in the United States.

He was also vice chairman of the Kansas City Philharmonic Orchestra, served on the board of the Kansas City public television station and was on the boards of the Kansas City United Way and Kansas City’s first cable television company. Beasley was an adjunct professor in the University of Missouri Peace Studies program and retired in 2009. Tributes can be left online at: www.memorialfuneralhomeandcemetery .com.

USDA grants promote
rural development

Agriculture Under Secretary for Rural Development Dallas Tonsager in April announced that USDA is accepting applications for business and community development grants to help rural communities create wealth, attract more residents and become economically self-sustaining. The funding is being provided through USDA Rural Development’s Rural Business Opportunity Grant (RBOG) program, which provides grants for technical assistance and planning activities to improve economic conditions in rural cities or towns of 50,000 people or fewer. Cooperatives are among the eligible applicants.

“These grants can be the foundation for implementing the President’s vision of developing initiatives that emphasize expanding exports, linking farm production to local consumption, producing biofuels and renewable energy, capitalizing on broadband and innovatively using natural resources as wealth-building tools for rural places,” Tonsager said.

Funding under the RBOG program can be used to pay for economic planning, technical assistance and training for rural communities, entrepreneurs or economicdevelopment officials. The amount of funding available is $2.48 million. Applications are due June 28, 2010. More information on how to apply for an RBOG, visit: rbs/coops/rbog.htm

To be eligible for funding, an applicant must be a public body, nonprofit corporation, Indian Tribe or cooperative with members that are primarily rural residents. Applicants must also have significant expertise in the activities proposed and the financial strength to ensure the objectives of the proposed grant can be accomplished.

Local co-ops approve mergers
Patrons of Farmers Co-op Grain of Britton, S.D., have approved a merger with Wheaton Dumont Cooperative Elevator, in Wheaton, Minn., according to a report in the Marshal County Journal. The merger, which became effective May 1, was approved on a vote of 117 to 3.

Approval of the merger opens the door for the possible construction of a 110-car rail-loading facility in Britton, with a loop track just southwest of Britton, assuming agreements can be reached with a railroad, the newspaper reported.

In Nebraska, Farmers Cooperative Association stockholders have approved a merger with Cooperative Producers Inc. in Hastings, according to the Associated Press. Farmers Cooperative has locations in Red Cloud, Franklin, Lawrence, Clay Center, Nelson, Superior and Blue Hill.

Mooney new chairman at DFA
Randy Mooney has been elected board chairman by the Dairy Farmers of America Inc. (DFA), filling the position formerly held by Tom Camerlo, who died in December. Mooney, of Rogersville, Mo., most recently served as first vice chairman of the DFA board.

Mooney is also a member of DFA’s Executive Committee and chairs the Southeast Area Council. In addition, Mooney is chair of National Milk Producers Federation and serves on the boards of the Missouri Dairy Association, Missouri State Milk, Southern Marketing Agency, Dairy Cooperative Marketing Association Inc., Milk Processor Education program and Dairy Promotion Inc.

“Randy has a strong history of leadership in the dairy industry, and I know that he will continue that tradition as he takes on this new role for the DFA board,” says Rick Smith, DFA president and chief executive officer.

The board has also named Wayne Palla, of Clovis, N.M., as first vice chairman. He previously served as vice chairman of DFA’s board.

UVEC celebrates
wind-power project

Unalakleet Valley Electric Cooperative (UVEC) celebrated the completion of its six-turbine wind power installation in Alaska through the launch of a Web portal that provides opportunities for the public to monitor the project’s energy production. UVEC’s 600 kilowatt wind-power installation was completed in November 2009 and is one of the first implemented through the financial support of Alaska’s Renewable Energy Fund, a $250 million grant program designed to support renewable energy projects.

UVEC’s wind farm, developed and constructed by Anchorage-based STG Inc., was built over a four-month period last summer. The project is expected to deliver 1.5 million kilowatt hours of wind-generated electricity to UVEC annually, which is about 35 percent of the community's electricity needs.

The six-turbine array is connected into UVEC’s existing distribution system and the utility’s diesel-powered generation facilities. The project has been online since November and has produced enough electricity to save 21,000 gallons of diesel fuel for the Unalakleet member-owned cooperative.

“Like most all rural Alaska utilities, we have seen a dramatic increase in the delivered price of our primary fuel source — diesel — over the past five years,” says Ike Towarak, general manager of UVEC. “The wind installation will help us be better prepared to manage ongoing operational costs at the utility.”

The wind project is fully operational but will be running at a reduced capacity until UVEC’s new power plant is completed later this year. The project used Northwind 100 wind turbines from Vermont-based Northern Power Systems.

The Web portal was launched primarily to support educational opportunities by illustrating how the wind-generated electricity from UVEC’s wind system is being used in the community. The portal will also support the implementation of handson and interactive curriculum designed to teach Unalakleet students about wind energy systems. The curriculum is under development but is being modeled after the National Renewable Energy Laboratory's Wind for Schools program.

Strong sales for Agri-Mark
boost member returns

Agri-Mark, a major Northeast dairy farmer cooperative, has announced a profit after taxes of $14.9 million for 2009. The co-op rang up $655 million for the sales of its milk and cheese last year, which include the Cabot and McCadam cheese brands.

The importance of Agri-Mark having its second best operating results ever — as well as $17.5 million in market premiums paid to members throughout the year — was crucial for members in a year that saw farmgate milk prices plunge, the co-op says.

“It was a terrible year on the farm, but fortunately 2009 was a very good year for Agri-Mark; we generated $14.9 million in year-end profits, from which we returned $5.6 million in cash back to our members,” says Agri-Mark CEO Paul P. Johnston. Because the business was profitable throughout the year, the co-op was able to make two cash payments to farmers even before yearend, during a time when farm families badly needed income.

Agri-Mark’s year-end profit allocation to its 1,250 dairy farmers from New England and New York is 45 cents per hundredweight, or roughly 3 cents per gallon for all of the milk each farm family marketed through the cooperative during the 2009 calendar year. This represents earnings of roughly $9,000 for the average Agri- Mark member milking 100 cows.

Agri-Mark’s CEO says the financial results are particularly satisfying because during the past three years the business has generated $45 million in year-end profits in periods of both high and low milk prices and in up and down economies. “The strength and diversity of our farmer-owned business is evident,” says Johnston.

USDA expands
support for broadband

Agriculture Secretary Tom Vilsack in March announced the selection of broadband infrastructure projects to give rural residents in eight states access to improved economic and educational opportunities. Funding for the projects is being provided through the American Recovery and Reinvestment Act of 2009 (ARRA). In all, $150 million will be invested in 12 projects through funding made available by Congress in the ARRA.

An additional $68.2 million in private investment will be provided in matching funds, bringing the total funds invested to $218.2 million. As of late March, $1.05 billion has been provided to construct 67 broadband projects in 30 states and one territory.

For example, in the Sonoran Desert of Arizona, the Tohono O’odham Utility Authority (TOUA) has been selected to receive a $3.6 million loan and a $3.6 million grant to design, engineer and construct a digital network to replace dial-up service. This project will provide services throughout the Tohono O'odham Reservation using fiber-to-the-premises (FTTP) and fixed wireless broadband.

In the rural towns of Madison and Lamont, Kan., Madison Telephone LLC (MTC) was selected to receive a $3.5 million loan and a $3.5 million grant to design, engineer and construct an FTTP network. This project will improve the existing copper-based network that currently limits average customer service speeds. MTC will upgrade this network to FTTP facilities and technologies, thereby eliminating this last mile limitation. More information about USDA’s Recovery Act efforts is available at:

Despite market challenges, AGP enjoys strong earnings

AGP’s extraction capacity at its soy-processing plant in Hastings, Neb., was expanded with an upgrade project last year. Photo courtesy AGP

Amid one of the most challenging operating environments in its 26-year history, Ag Processing Inc. (AGP) generated excellent cash flow in 2009, which turned out to be one of its top years for earnings, CEO Marty Reagan reported at the Omaha, Neb.-based co-op’s annual meeting in January.

AGP had $3.38 billion in sales in 2009, generating cash flow in excess of $127 million. Earnings from operations (before income taxes) were $66.8 million in fiscal 2009, with cash patronage of $21.8 million returned to members. Over the past five years, AGP has returned more than $221 million to its members. Due to a new interpretation of a ruling on Section 199 of the tax code, AGP was also able to pass through $32.4 million in tax deductions to members.

AGP is the world’s largest farmer-owned soybean-processing cooperative and is a leading supplier of refined vegetable oil. Its members include 184 local and five regional cooperatives representing more than 250,000 farmers throughout the United States and Canada.

Board Chairman Brad Davis said that this year’s earnings, patronage refunds, equity redemptions, cash flow and tax deductions represent a “great cooperative success story.” In his address at the annual meeting, Davis stressed sustainability and the importance of communication with members.

“Communication is not only informing you about the business of your cooperative, but—more importantly— listening to your expectations and what we can do to bring value back to your cooperative,” he said.

While the year started out strong, with excellent market conditions carried over from the summer of 2008, market fundamentals then began to shift for the worse as high prices hurt demand. The two sectors representing the majority of domestic soybean meal demand—the poultry and swine industries—were hit extremely hard, and dairy also suffered from falling milk prices and higher input costs.

Refined soy oil demand was down 15 to 20 percent due to lower biodiesel demand and a drop in the consumer “casual dining” sector, he reported. “AGP met the protein and soy oil demand challenges by adjusting crush and refining schedules to operate at a level that matched market demand,” said Meyer.

AGP is involved in ethanol and soy biodiesel production, and—along with the rest of the renewable fuels industry— it encountered extremely difficult market conditions in 2009. John Campbell, senior vice president for industrial products and government relations, noted that ethanol demand has grown, but plant capacity has grown faster, leading to poor margins, although they improved in the first quarter of fiscal 2010.

AGP completed a waste-water treatment facility, a corn oil-recovery system and a methane-recovery system at its corn-processing plant in Hastings, Neb. AGP’s biodiesel operation was well positioned early in the year to remain profitable and generate solid flow, Campbell said, noting that this was a major accomplishment, given the difficult market in 2009.

May/June Table of Contents