Commentary
Co-ops and the future of rural America
he future for rural America is a bright one,
studded with new economic opportunities.
Many of those opportunities stem from the
rapid development of renewable energy and
other value-added products from basic
agricultural materials, using both proven and
innovative, cutting-edge technologies.
While we have seen a significant increase in research,
development and production of value-added products in
recent years, the best is yet to come. New concepts are
evolving at a rapidly escalating pace. Promising new
technologies are on the drawing board, while others are just in
the conceptual stage.
But the reality is that all will require investment capital.
America’s cooperatives have a unique opportunity to play a
significant role in developing this growing economic sector.
In the energy arena — because of site selection and
feedstock requirements — wind, solar, ethanol, biodiesel and
geothermal are primarily rural resources. Expansion of this
sector offers the opportunity to harvest an increasing amount
of energy from renewable, inexhaustible sources.
Vast stretches of the American rural landscape are ripe for
solar projects. Wind energy is emerging as a potentially
significant source of electricity in much of the country.
Biofuels derived from corn and soybeans (and coming soon
from cellulosic sources, such as switchgrass) augment energy
refined from petroleum. There is no question that renewable
sources of power will continue to play an expanding role in
America’s energy picture for generations to come.
Other exciting value-added opportunities are developing as
well, ranging from agri-tourism to production of foodstuffs
that are in growing demand by consumers.
A good example of an investor-owned entity is the
Plymouth Energy Ethanol Plant and Plymouth Oil in Merrill,
Iowa. Now under construction, the ethanol plant will soon
produce 50 million gallons of ethanol from corn each year.
The plant has more than 300 local investors, mostly farmers.
Located near the ethanol plant is Plymouth Oil, which will
use byproducts from ethanol production to manufacture about
80 tons of corn oil per day for human consumption. It will
also produce feedstock for cattle. Most of the corn will come
from fields within 60 miles of the two plants. The oil plant
was financed with a bank loan guaranteed by USDA Rural
Development.
As consumer demand grows for high-value products, such
as energy and processed food, America’s cooperatives must
serve not just as an outlet for production, but as vehicles to
channel investments into worthwhile projects. In order to
fully capitalize on the new demand, the traditional cooperative
model is being complemented by other concepts, such as
“new-generation” cooperatives which provide greater liquidity
through tradable delivery rights. These co-ops also promote
formation of partnerships with outside entities and other
provisions that enable greater outside investment, along with
transparency, liquidity, transferability of ownership interest
and equal appreciation of asset value.
Where should rural Americans turn for the capital needed
to buy into these opportunities? An obvious investment source
for agricultural producers is their farm equity, which now
exceeds $2 trillion. By leveraging the value of their land,
producers can raise the investment capital they need to
participate in the new rural economy, not only for energy
development but for other value-added ventures that use new
technologies — such as broadband Internet — to market
processed goods directly to consumers. Responsible and
transparent leveraging of land and other assets will assist in
providing the equity needed to develop new high-value
opportunities which are of greater value than basic
commodities.
What does this mean for the 60 million people who call
rural America home? It presents them with the unprecedented
chance to generate wealth, job opportunities and a selfsupporting
rural economy that provides a high standard of
living. But in order for that to happen, a large subset of rural
residents will need the opportunity to participate — to
become owner-investors, providing the capital to encourage
development and then reaping a share of the profits to be
realized from the sale of high-value products.
Cooperatives are one potential investment vehicle available
to rural Americans, but they’re not the only vehicle. To
maintain and increase market share in a rapidly changing rural
environment, cooperative managers and members need to be
flexible, adaptable and willing to re-examine their business
models and change them as needed.
In the dynamic marketplace that is rural America,
investment will occur, whether through cooperatives or other
sources. In that light, it is important that our cooperatives —
which have served rural America for so long — position
themselves to participate fully in the new rural economy. This
will benefit not just the members, but will improve the
economic vitality of rural America as a whole.
By Thomas Dorr, Under Secretary
USDA Rural Development
