COMMENTARY
Setting up the forms
Issues vital to the future of the
nation’s producer-owned cooperatives
were closely examined during a hearing
conducted by the House Ag Committee
on Oct. 16 (see page 9). While no
firm answers or course of action was
decided upon, it was obvious that the
state of the co-op sector is front and
center on the agenda of the House
Ag Committee. As Rep. Charles
Stenholm said, this was not a day
for pouring concrete, but for setting
up the forms.
How those forms are filled during
coming months may well
determine the future of the
nation’s farmer cooperatives. All
those with a vested interest in
cooperatives should monitor this
process and be prepared to provide
their input.
Ultimately, the question appears
to be not whether change is needed,
but how much change. Some
feel a minor tune-up will suffice,
while others say an engine overhaul is
closer to the target. As you can read in
our coverage of the hearing, there is
some strong feeling that the new state
co-op laws in Minnesota and Wyoming
go too far in broadening the co-op
model, while others feel those are the
type of changes needed to keep co-ops
alive and well in the 21st century.
Much of the testimony related to
how a number of new generation cooperatives
whose leaders are committed
to the concept of producer ownership
and control have converted their
business structure to LLCs in order to
secure tax benefits and outside equity
to invest in value-added efforts. Others
warned that this outside equity comes
with strings attached strings that
could potentially lead to some loss of
producer control to outside interests.
Similar differences of opinion exist
over whether the closely related issue
of CoBank’s charter should be expanded
so that it can finance a broader array
of cooperatives, and even continue to
lend for a period of five years to some
non-cooperatives that convert to other
business structures.
Clearly, Congress and the co-op
community have their work cut out for
them. The stakes are high: cooperatives
typically account for around $100 billion
in farm sales and they are often the
most important source of jobs and tax
revenue in rural towns where every job
and tax dollar is desperately needed.
They provide quality, affordable supplies
and services in rural areas where
they otherwise might not be available.
Even those farmers who do not belong
to a cooperative benefit from their ability
to favorably impact prices and terms
of delivery and through their market
expansion efforts.
Most of the testimony underscored
that successful ag marketing co-ops
in the future will increasingly be
involved in some stage of value-added
processing of their members’ crops
and livestock. But turning wheat into
pizza is a much more expensive
undertaking than storing it and shipping
out of town in railcars, as Keith
Kisling, a wheat farmer from
Oklahoma, testified. How to help
producers get that needed capital
while still keeping the operations
under the control of farmers is the
bottom line.
A number of questions were
raised about whether existing financial
assistance programs at USDA
could be better used by co-ops if
changes were made. Related suggestion
ranged from upping the
limits on USDA’s B&I loan guarantees
to making changes that will
increase use of our Co-op Stock
Purchase Program. As Rural Development
Under Secretary Thomas
Dorr pointed out, a major co-op program
review is being launched to evaluate
these programs, which hopefully
will lead to improvements.
Regardless of where you stand on
this debate, we should all be encouraged
to see the strong interest of
Congress in cooperatives and to
know that Congressional leaders realize
the crucial role co-ops play in the
nation’s rural economy. One thing
everyone seemed to agree on: if we
take steps to strengthen producerowned
cooperatives, we also
strengthen the nation.
James Haskell,
Acting Deputy Administrator
USDA Rural Business-Cooperative Service
How to help producers get needed capital while still keeping the operations under the control of farmers
is the bottom line.
