NEWS LINE

Compiled by Dan Campbell



Southern States turn-around
continues with $68-million profit
Southern States Cooperative, Richmond, Va., continues to show financial improvement with a pre-tax profit of $68.5 million for the fiscal year that ended June 30. The cooperative’s overall results and its balance sheet benefited not only from improved operations, but also from debt restructuring that resulted in a gain of nearly $65 million, the co-op announced. The showing represents a major turn-around from losses in the previous three fiscal years, when the cooperative was involved in major restructuring efforts.

“In many ways, the recently completed fiscal year was the most successful in Southern States’ history,” said Thomas R. Scribner, president and CEO. “The year showed that efforts to focus on our core business of production agriculture, to reduce debt and operating expenses and to re-establish sound business principles have resulted in a successful turn-around.”

The co-op closed on a new, $265 million financing package in October, which will refinance all but a small piece of the coop’s long-term debt. In addition to paying off existing debt, the refinancing will provide one of the nation’s largest farmerowned co-ops with the capital it needs to focus on the future, Scribner said.

According to Scribner, progress was made in a number of key areas during the past year, including: Southern States also made its first acquisition in four years by exercising an option late in fiscal 2004 to buy out Agway’s 50 percent ownership of a livestock feed mill at Gettysburg, Pa. Southern States and Agway had operated the mill as a joint venture since 1999.

Southern States serves more than 300,000 producer-members with a range of farm inputs, including fertilizer, seed, feed and pet food, animal health supplies and petroleum products, as well as other items for the farm and home. The cooperative’s distribution network includes more than 1,200 retail outlets in an area that extends from Maine to the Gulf Coast and as far west as Kentucky.

NCB’s Top 100 Co-ops
had revenue of $117 billion
National Cooperative Bank (NCB) reported that the nation’s 100 highest revenue-earning cooperative businesses had more than $117.4 billion in sales in 2003. The list illustrates the vital role cooperatives play in the nation’s economy, says Charles E. Snyder, NCB president and CEO.

“As the nation continues to struggle and face challenges during this difficult economic period, cooperatives continue to enrich and empower Americans everyday, providing strong returns to its members,” Snyder said. “Americans are demanding dependable businesses in which they maintain a personal stake and an active role in the decision-making process.” The continued strong performance of cooperatives is especially notable, with these companies impressively rebounding from the recession and the difficult economic situations created by times of global conflict. Unlike investor-owned firms, cooperatives are controlled by their members, the individuals who use and benefit from the goods and services provided.

Cooperatives are organized to maximize economic returns for members, not top-ranking executives or distant investors.

According to the National Cooperative Business Association, there are 48,000 cooperatives in the United States. These entities exist in a number of industries including agriculture, grocery, hardware and lumber, finance, energy and housing. Many cooperatives on the NCB Co-op 100 list are such well-known household names as Ocean Spray, ShopRite and The Associated Press.

The entire NCB Co-op 100 report, as well as additional information on cooperatives, is available at www.co-op100.coop.

WestFarm Foods names
John Underwood as CEO
John Underwood has been named president and CEO of WestFarm Foods, the $1.3 billion dairy products manufacturing and marketing arm of Northwest Dairy Association (NDA), the fourth largest dairy co-op in the nation, with 700 dairy farm members in Washington, Oregon, Idaho and California. NDA Board Chairman Rod DeJong says Underwood’s knowledge of the company and industry, his leadership skills and his performance during his tenure as interim CEO were key factors in the 14-person board’s unanimous decision. “John exemplifies the leadership skills our members want running this company,” he said. “He has gained the confidence of the members, as well as our customers, suppliers and employees.”

Underwood has 22 years of experience with WestFarm Foods and served as Interim CEO since April 1, 2004. In his most recent prior position, as senior vice president of the Ingredients Division, he led worldwide sales and marketing initiatives for the company’s bulk cheese, bulk butter and milk powder products that generate nearly 60 percent of the company’s revenue.

Previously Mr. Underwood led operations at 12 milk processing facilities in four Western states; overseen multimillion dollar capital improvement projects, from initial design through startup; raised manufacturing efficiencies and productivity; and introduced state of-the-art manufacturing processes.

Improved milk prices
give boost to Dairylea
Dairylea Cooperative Inc. reported sales of $962 million for the fiscal year ending March 31, up 12.95 percent from the previous year. The Syracuse, N.Y.-based co-op paid its 2,500 members $846 million, up from $759 million the year before. Dairy lea reported $892,000 in after-tax profits in 2004, up from $696,000.

Co-op President and Chairman Clyde Rutherford said high milk prices for the first time in many years helped the co-op’s performance.

Dairy lea sells it members’ milk to a number of processors and provides a variety of services to them, from financing to insurance.

Michigan Sugar completes
purchase of Monitor Sugar
Michigan Sugar has completed the purchase of former rival Monitor Sugar for about $40 million. The company now becomes the nation’s third largest sugar beet cooperative, with sales of about $300 million annually.

Michigan Sugar became a co-op in 2002, when producers organized to buy the operation from Texas-based Imperial sugar. Co-op leaders say the combined company will offer many improved operating efficiencies. The co-op will now have about 1,250 grower-members, 500 permanent employees and 1,800 seasonal workers.

AMPI members receiving
$11 million in patronage
Midwest dairy producers who market milk through Associated Milk Producers Inc. (AMPI), New Elm, Minn., will share $2.9 million in earnings. Fifty percent, or $1.45 million, is being paid in cash, while the balance will be allocated to member equity accounts.

AMPI’s annual revolvement of capital retains and previously allocated earnings are budgeted for November and December. The total earnings and equity that will be returned to owners this year is expected to be about $11 million.

“AMPI is assuring member-owners a fair return on equity,” said AMPI General Manager Mark Forth. “Sharing the profits is one of the benefits cooperative members expect from owning the business,” said AMPI President Paul Tuft, a dairy producer from Rice Lake, Wis.

LO’L changes name
of animal feed unit
Land O’Lakes Inc. has changed the name of its animal feed subsidiary from Land O’Lakes Farmland Feed, to Land O’Lakes Purina Feed. “Our new name leverages our existing brand equity and honors the heritage of our two leading brands,” says Robert M. DeGregorio, president, Land O’Lakes Purina Feed. “It also communicates the importance of both brands to our membership, the cooperative system and our customers.”

Land O’Lakes Purina Feed serves producers through 2,800 local cooperatives and independent dealerships across the United States. The company, in combination with its wholly owned subsidiary, Purina Mills LLC, is North America’s leading feed manufacturer.

Countrymark to reduce
emissions at Indiana refinery
Countrymark Co-op, Indianapolis, Ind., is investing $40 million to build an ultra-low sulfur diesel-fuel processing facility at the co-op’s refinery complex in Mt. Vernon, Ind. The project will save about 125 jobs and will meet U.S. Environmental Protection Agency’s 2006 requirements for cleaner diesel fuel, the co-op says.

“Countrymark is a Hoosier company that is keeping Hoosiers at work,” Gov. Joe Kernan said at the groundbreaking ceremony. “Not only is the investment for this complex good for the community and our environment, but it also reduces our dependency on foreign oil by using Indiana materials produced by Hoosier workers.”

Countrymark expects to hire 15 production workers and up to five more technical employees at the Mt. Vernon refinery as a result of the new complex. The Co-op currently has 230 workers in Posey County and supports an additional 70 jobs through its statewide member network in the management, sales and delivery of diesel fuel and gasoline.


Plug pulled on FCSA sale; Webster resigns as CEO


Bowing to a rising tide of opposition, the board of Omaha-based Farm Credit Services of America (FCSAmerica) in October announced that it was ending its proposal to sell the co-op bank to Netherlands-based Rabobank. That announcement was followed about two weeks later by the news that Jack Webster had resigned as CEO of FCSAmerica.

FCSAmerica has decided to go it alone at least for the time being, having also rejected a counter merger proposal from AgStar Bank of Minnesota. Some said that offer was preferable because it would have kept FCSAmerica as part of the Farm Credit System.

Webster, who had pushed for the sale to Rabobank, issued a statement saying that “For this company to move forward, the board and I felt it was in the best interest of this organization to continue to grow under new leadership.”

FCSAmerica Chairman Paul Folkerts said he believes the sale would have provided greater opportunities for farmers and ranchers, but that ultimately the board decided “that it was not in the best interests of FCSAmerica to move forward with the transaction.”

The proposed sale had sparked intense grassroots opposition from farmers and ranchers, which was spearheaded by a coalition of FCSAmerica stockholders who formed Farmers for Farm Credit (FFFC) to block the sale. A Congressional hearing was held Sept. 29 in Washington D.C. to examine the proposed sale and related issues (see page 13).

“This decision is a clear and important victory for stockholders,” said FFFC Chairman Myron Edleman, a South Dakota cattleman.

“They tried to sell our association for less than half its value, and farmers would have lost ownership and control,” added FFFC Co-Chairman Alan Dillman. “And at least 80 percent of our shareholders didn’t want their loans transferred to a foreign bank,” he added, referring to a poll of about 700 FCSAmerica stockholders.

Opposition was based both on the price being offered, which Rabobank had boosted from $600 million to $750 million, and on the potential impact it could have had on the rest of the nation’s Farm Credit System banks.

“We are disappointed by the decision of FCSAmerica’s board, given that we had significantly increased our offer in order to clearly demonstrate our commitment to completing the transaction,” said Cor Broekjuyse, head of Americas for Rabobank International. “We strongly believe our partnership would have offered tremendous benefits to FCSAmerica customers in terms of new products, improved services and, of course, a considerable financial payment to stockholders.” He said the board’s decision has denied stockholders the right to vote on the proposal (stockholders and the Farm Credit Administration board both would have had to approve the sale).



November/December Table of Contents