C0MMENTARY

Cooperatives: Getting the Job Done

America observed National Cooperative Month during October, a time when we pause to consider the impact of user-owned and controlled businesses on virtually every city, town and village across the nation. There are about 48,000 cooperatives in the United States generating more than $500 billion in annual economic activity. Whether it's a credit union providing consumer loans to members, a day-care cooperative providing affordable child care, a farmers' co-op that sells supplies or processes and markets its members' crops, or a rural utility co-op that meets the energy and telecommunications needs of rural communities, cooperatives are getting the job done.

The U.S. Department of Agriculture has been assisting rural Americans in forming and improving the operations of cooperatives for 74 years, and we continue in that role today under the banner of USDA Rural Development. In addition to USDA's traditional role supporting co-ops with technical assistance, research and educational materials, a major thrust of the past five years has been to expand USDA's rural business programs to help launch new cooperatives and to expand the operations of existing cooperatives. A major emphasis of this effort has been to help finance farmer co-ops that process their members' crops and live-stock, thus keeping more of the value-added profits at home in rural America. In 2000 alone, USDA provided nearly $100 million in financing for agricultural cooperatives. That's up from $29 million in 1998.

Farmers who transition from being producers of a commodity to being owners of a co-op that processes crops into value-added products stand a better chance of surviving the cyclical downturns in the farm economy that have mercilessly reduced the ranks of the nation's family-owned farms. Last May, Congress enacted the Agricultural Risk Protection Act, which includes provisions for a new grant program to provide assistance to producers in marketing value-added agricultural commodities. This legislation compliments USDA's efforts to bolster farmer-owned cooperatives. The Act also provides for a pilot project to develop a resource center to coordinate research, data, business, legal, financial and logistical operations involved in developing markets for new products. The latter is similar to the incubator concept that is being used widely in providing the foundation for new high technology business ventures. In enacting this provision, Congress recognizes that American producers are without parallel in the production of agricultural commodities, but frequently lack the experience and knowledge needed to successfully market their products. This is particularly true when developing new markets for new value-added products.

A strong rural infrastructure is also critical to the nation's future. USDA Rural Development provided about $2 billion last year to help finance the expansion and maintenance of the nation's rural electric systems, most of which operate as consumer-owned cooperatives. It provided about $1.5 billion to build rural water/wastewater and telecommunications systems. The later program now includes efforts to spread the Information Superhighway and Distance Learning and Telemedicine services throughout rural America. We are currently working with other lending institutions to provide more funds to speed the construction of combustion turbine generators to help meet peak energy demands in many parts of the nation. Rolling gray-outs and black-outs and sharp peaks in energy prices that impacted some areas last summer underscore the need for this effort. USDA is also working to finance more renewable energy sources including wind turbines and solar power to lessen the nation's dependence of expensive foreign oil. If you want to learn more how USDA can help your co-op, or help you form a co-op, call our national cooperative office at (202) 720-7558, or call (202) 720-4323, then press "1" to be connected to your USDA Rural Development state office. You can also visit our website at: www.rurdev.usda.gov, which includes more than 100 cooperative publications and past issues of "Rural Cooperatives" on-line.

Jill Long Thompson,
Under Secretary USDA Rural Development





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