NEWS LINE

Compiled by Dan Campbell


Iowa hearing examines
key issues affecting co-ops
Iowa Senator Chuck Grassley, chairman of the Senate Committee on Finance, conducted a hearing in Sioux City, Iowa, on Aug. 25 to examine legislation that would increase tax incentives for rural communities and cooperatives. Grassley called the hearing to focus on his Heartland Investment and Rural Employment (HIRE) Act, introduced in July. The HIRE Act proposes a series of changes to benefit agricultural cooperatives, small businesses, and promote affordable housing in rural communities, among other goals.

The bill includes creating a commission to study the tax laws pertaining to cooperatives, including Subchapter T of the federal tax code, which governs agricultural cooperatives but has not been updated in more than 40 years. The commission would study: whether the subchapter should be modernized; the barriers to raising equity within a cooperative; and whether a new limited liability cooperative structure should be created for cooperatives that would benefit from being taxed and (for business purposes) be treated under the more flexible rules of a limited liability company.

As proposed, the commission would include cooperative experts from all over the country and would have one year to submit a report to the President and Congress with its findings and recommendations.

Updates for agricultural cooperatives include: "These changes need to happen so cooperatives can continue to compete effectively in the world-wide market," Grassley said.

U.S. Premium Beef converts to LLC;
begins test marketing natural beef
Shareholders of U.S. Premium Beef Ltd. (USPB) have voted to approve the conversion from a Kansas cooperative to a Delaware Limited Liability Co. (LLC), effective Aug. 29, 2004. "The LLC structure is a business platform that better positions U.S. Premium Beef to compete in a very dynamic industry," Steve Hunt, USPB CEO, said in announcing the conversion. "Our philosophy of financially rewarding producers who market high-quality grading cattle through our company will not change," Hunt added.

"Under the LLC structure, our unit holders, as well as producers who lease units to deliver cattle, will have the same opportunity to market their cattle through the company’s valuebased marketing system as before."

The LLC structure creates Class A and Class B units. The Class A units will carry delivery rights and obligations, just as USPB shares did under the cooperative structure. Class B units are "investor" units with no delivery rights. The restructuring will allow both beef producers who want to guarantee market access to deliver cattle and other non-producer investors to own units in U.S. Premium Beef, LLC.

U.S. Premium Beef Ltd. was organized as a Kansas cooperative in 1996. Today it is the majority owner of the nation’s fourth largest beef processor, National Beef Packing Co., LLC, (NPB) which processes approximately 10 percent of the U.S. fed-beef supply at its plants in Liberal and Dodge City, Kan. More than 1,900 producers from 36 states have joined USPB to market cattle on the company’s highquality grid.

In other news, National Beef has begun test marketing its first product line in the natural beef food category, with the introduction of Naturewell Natural Beef tm which comes from cattle given no antibiotics, hormones or steroids during the final 120 days in the finishing process. Cattle that qualify for the Naturewell brand are exclusively English and English cross-bred cattle. The beef is Grade A maturity only and has a "Slight 30" or higher marbling score. It is a blend of Choice and Select grade beef product.

"While our introduction of Naturewell is only in the test stage at this time, we are encouraged by the results of the extensive consumer research we’ve conducted to determine the potential market demand for natural beef products," Hunt says.

"Because it is a test market product, we’re working with a small number of USPB and NBP customer feedyards that can commit to deliver cattle on a weekly basis that fit the Naturewell specifications to our plants."

Riceland’s Richard Bell retires
in year of record sales, income
Richard Bell, 70, credited by many with transforming his co-op into the world’s leading rice miller and marketer, retired July 31 after nearly a quarter century at the helm of Riceland Foods Inc., in Stuttgart, Ark. He’s going out with a bang, as Riceland expects record sales of more than $950 million for the current marketing year, a 9-percent increase from the previous year. The co-op also expects to pay record earnings and payments to its members, up 22 percent from the previous year. Total assets and member equity will also set new records by year’s end.

Bell’s successor is Daniel Kennedy, who had been the co-op’s executive vice president. Kennedy joined the co-op in 2000 after 16 years with Monsanto Co. He is a Louisiana native and holds a bachelor’s degree in agricultural economics from Mississippi State University and a master of business administration degree from Northwestern University outside Chicago.

Bell, an Illinois native, came to Riceland in early 1977 from Washington, D.C., where he served as assistant agriculture secretary for international affairs and commodity programs. He also served as president of USDA’s Commodity Credit Corporation and as chairman of the Federal Crop Insurance Corporation. His early career was spent as a foreign service officer at various American embassies.

Bell plans to remain active in the rice industry, including working as an advisor to Riceland on legislation, trade and crop research issues. He will also continue outside activities, including serving on the boards of Arkansas State University, the University of Arkansas for Medical Sciences Foundation Fund and various other civic, educational and charitable boards.

Riceland provides marketing services for rice, soybeans and wheat grown by its 9,000 farmer-members in Arkansas, Louisiana, Mississippi, Missouri and Texas.

Co-op buys cigarette plant
U.S. Flue-Cured Tobacco Growers Inc., an affiliate of the Flue-Cured Tobacco Stabilization Corp., is paying nearly $26 million for a cigarette manufacturing plant near Roxboro, N.C., which was formerly owned by Vector Tobacco.

The co-op, which has members in five states, will manufacture both its own brand of cigarettes, and will custom pack under other brands for its customers. Co-op members will be the preferred source for tobacco, but it will contract with other growers for leaf if demand requires it. Plant capacity is about 30 million pounds of leaf.

Lionel Edwards, general manager of the co-op, says the goal is to add value to members’ crop by producing a premium cigarette for a reasonable price.

Chesapeake farmers to
market low-carb bread
Chesapeake Fields Farmers, a farmer-owned LLC that includes a co-op in its membership, and the University of Maryland are ushering in a new generation of bread making. Together, they’ve created a low-carb, low-calorie, high-protein, artisan-quality bread, which they say is unlike anything found on today’s grocery shelves.

Slated to hit stores in September or October, Chesapeake Fields’ breads offer just six grams of carbohydrates per slice --with no added calories and no genetic modifications. "Most lean breads on the market have a reduced carb count of eight grams per slice, compared to 12 for traditional breads," says Y. Martin Lo, an associate professor of food bioprocess engineering at the University of Maryland. "The problem is, these new products pack on extra calories."

Lo, in conjunction with Chesapeake Fields, based in Chestertown, Md., tested over 60 strains of wheat and isolated those yielding the best dietfriendly qualities when baked. Those strains, narrowed down to two, are the core of the company’s all-natural, high-protein baked goods. The company is also working with Lo through the university’s Maryland Industrial Partnerships (MIP) program to add science to bread making.

"Customers want out-of-the-oven freshness," said Lo. "They want handmade bread that’s chewy, but doesn’t stick to your teeth. Our goal is to consistently deliver that quality, for longer times on the shelf, by understanding the interaction of proteins during the dough formation and baking processes."

Chesapeake Fields’ breads also offer product identity preservation. "We’ll be able to pick up a loaf of bread and tell you exactly which lot on which field it came from," says John Hall, president and executive director of Chesapeake Fields.

Chesapeake Fields plans to create 143 jobs and $52 million in revenue in just four years at multiple manufacturing sites near Chestertown. The company’s first products will initially hit 700 retail outlets in Delaware and eastern Maryland and Virginia. MIP provides funding -- matched by participating companies -- for universitybased research projects that help companies develop new products.

The farmers also received a $250,000 grant from USDA Rural Development.

The mission of Chesapeake Fields Institute is to strengthen the profitability of traditional agricultural markets for family farms, while conserving the region’s natural and cultural resources. For more information on Chesapeake Fields, visit www.chesapeakefields. com.

GROWMARK profits climb;
election reduces board size
Growmark had net income of $29.8 million for fiscal 2004, compared to $19 million in 2003. Sales climbed more than $350 million, topping $2 billion. Growmark also announced that it would be returning $25 million in patronage refunds to members.

Helping the regional farm supply coop to the improved showing were sales of more than 1 billion gallons of gasoline, propane and distillates, due in part to marketing across a broader geographic area. "Member cooperatives continue to use the Home Grown Fuels campaign to promote both ethanol and soy biodiesel products," Vice President of Finance Jeff Solberg said during the co-op’s annual meeting in Chicago. "Approximately 70 percent of gasoline marketed by FS member cooperatives contain a 10-percent ethanol blend."

The fertilizer division reported sales up 3 percent, while crop protectant sales surged ahead 5 percent. The seed division also saw sales climb.

In the grain division, member volume fell 4 percent. Ethanol plants in Iowa and Missouri plus large rail shippers in Iowa, Missouri, and Illinois, continue to be strong competitors for grain volume.

MID-CO COMMODITIES, which offers commodity hedging and advisory services to member cooperatives and their producers, had earnings of $1.3 million and will return $650,000 in cash patronage.

GROWMARK members also elected 16 directors to its board, reflecting a recent bylaw change that reduces the board from 24 members. Fifteen of the 16 director were elected from six geographic zones covering all of North America. There are multiple directors per zone, who will serve staggered terms of one, two or three years. One director-at-large was selected to represent the Illinois, Iowa and Wisconsin Farm Bureaus (which are affiliated with GROWMARK). Dan Kelley, reelected to a three-year term, was also re-elected chairman.

"This board restructuring is part of an overall governance modification plan GROWMARK embarked on four years ago," says Kelley, from Normal, Ill. "Our governance zones represent our business base and provide for geographic expansion in the future."

Newly elected board members (each to a one-year term) were: Allen Tanner of Creston, Iowa; Matt Heitz of Farley, Iowa; John Eccles of Durham, Ontario. Newly elected to a three-tear term as the Farm Bureau director is Henry Kallal of Jerseyville, Ill. All other directors were re-elected.

Foremost Farms USA revolves
$4.2 million in member equity
Foremost Farms USA is revolving $4.2 million of allocated equity and allocated surplus back to its members. The payments are in addition to the cash portion of 2003 patronage, issued in April. In total, Foremost Farms has issued more than $6 million in cash payments to equity holders in 2004. The allocated equity payments will be mailed to past and present memberowners age 72 and older who are sole proprietors.

"Our bottom line and balance sheet, which look better this year for a number of reasons, allowed the board to revolve these dollars," said Foremost President Dave Fuhrmann. "Foremost Farms has not only benefited from a better dairy economy in the last year, but from cost-saving measures and operational improvements."

Dallas, Nielsen join
Co-op Foundation board
Cooperative leaders Terri Dallas and Jeff J. Nielsen were recently selected as new trustees of the Cooperative Foundation, which represents a diverse array of cooperatives in agriculture, housing, food, electric and credit unions in the Upper Midwest. Dallas, of Shawano, Wis., is vice president of information and public relations for Cooperative Resources International (CRI), one of the world’s largest artificial insemination organizations. CRI provides breed-leading dairy and beef genetics to farmers in 60 countries.

Nielsen has been the general manager of United Farmers Cooperative (UFC) since 1999. UFC, based in Lafayette, Minn., is a farmer-owned, diversified cooperative with nearly $70 million in current sales. He helped pioneer a new employee-owned, self-insurance group that not only stabilized the cost of health care for UFC’s employees, but served as the foundation for a new venture that will allow farmers to participate in a self-driven health care plan.

For more than 50 years, The Cooperative Foundation has supported innovative cooperative development and education projects. For more information, visit: www.coopfoundation.org.

Michigan Sugar to buy Monitor Sugar
Michigan Sugar, owned by 1,000 Michigan sugarbeet farmers, plans to buy Monitor Sugar Co., owned by Illovo Sugar Ltd. of Durban, South Africa, for $63 million. Monitor is supplied by about 600 farmers. The new company will operate under the name Michigan Sugar, but the co-op will continue to market under Monitor’s Big Chief Sugar brand, in addition to its own Pioneer Sugar brand.

"I think it’s a good thing for the growers here," Jack C. Frank, a member of the board of the Monitor Sugar Beet Growers, told the Bay City Times. "The industry has been here 103 years and it should stay here. For our industry to survive, we had to become a coop. That’s the trend."

Michigan sugarbeet growers produce about $115 million worth of sugarbeets a year, 3 percent of the state’s $3.8 billion in farm revenue. The industry employs 1,400 farmers and 2,300 workers at five processing plants, four owned by Michigan Sugar and one by Monitor Sugar.

Idaho wheat growers joining CHS
Latah County Grain Growers, a wheat co-op in Moscow, Idaho, has opted to merge into Primeland Cooperatives, the Lewiston-based division of CHS Inc. The merger will end 75 years of independent operation by the Latah growers. A co-op representative says the move was necessitated by the federal government’s accelerated export of stored wheat to poor nations and the popularity of the Conservation Reserve Program, which, when combined, siphoned off too much money.

The government’s decision to move millions of bushels of grain overseas during the past 18 months has cost the cooperative $200,000 in lost storage fees. At the same time, the increasing popularity of the land reserve program has idled 35,000 acres in the county and eliminated demand for items that cooperative provides, like seed and fertilizer.

Iowa meatpacking plant closes
Iowa Quality Beef has closed its packing plant in Tama, Iowa, and will layoff 540 workers. It hopes to reopen in a few months. It blames the decision to close on the impact mad cow disease had on beef exports. The Tama plant is a joint venture of the Iowa Quality Beef Supply Cooperative and American Foods Group of Green Bay, Wisconsin.

Wythe Willey of the beef co-op says the closing was necessary because American Foods Group decided not to buy cattle for the plant anymore. Carl Kuehne, owner and CEO of American Foods Group, says his company had been buying the cattle for the plant since February. He says he doesn’t know if his company will be part of the Tama operation when, and if, the plant reopens. The Tama plant, which opened in 2003, has the capacity to handle 1,200 hundred cattle a day.

Former Lt. Gov. Bradley
takes job with DFA
Former New Mexico Lt. Gov. Walter Bradley has been appointed director of government and industry relations for the Dairy Farmers of America in the Southwest region. The Kansas City, Mo.-based organization is the largest milk marketing cooperative in the United States, serving nearly 23,000 dairy farmers in 49 states. In the Southwest, the organization markets milk for 568 dairy farms, which supply more than 939,600 gallons of milk to local markets each year.

Bradley says he’s a big fan of dairy products. "This is an exciting opportunity for me and my family," he said. "New Mexico is the nation’s seventh largest milk producing state, and DFA’s dairy farmers produced more than 70 percent of that milk." He served as lieutenant governor from 1995 to 2002 under then-Gov. Gary Johnson.

USDA’s Tom Gray honored for public service to co-ops

Thomas W. Gray, Ph.D., rural sociologist with the Cooperative Services office of USDA Rural Development, is the recipient of the 2004 Rural Sociology Society award for excellence in public service. The award was presented at the annual professional meeting of the Rural Sociology Society (RSS), held in Sacramento, Calif., in August. The award is granted to those people who have distinguished themselves in their work roles with contributions that achieve the missions of the Society and their applications to rural America.

Dr. Gray was nominated, and competitively selected, for his lifetime contributions to the generation, dissemination and applications of knowledge to agricultural cooperatives across the United States at the university and community levels.

The RSS is a professional social science association oriented to enhancing the viability and quality of rural life, communities, and the environment. Gray was cited by the RSS for "creating an innovative agenda of research and technical assistance -- which did not exist (at USDA) before -- and built a multi-scaled approach that ranged from understanding micro-level factors influencing cooperatives, to their operation and challenges within a restructured global food system." Gray was also called the person most responsible for keeping an interest in co-ops alive among the nation's rural sociologists.

"Tom’s work helps us to never forget that cooperatives ultimately are organizations of people, created and operated for the benefit of the members and their communities," says John Dunn, director of the Resource Management Division at USDA Rural Development, of which Gray is a part. "There are myriad human and social issues that arise out of this unique form of business ownership, and Tom’s career has been devoted to examining these issues and stimulating others in the rural sociology profession to advance their understanding of the rich meanings of cooperative behavior."





September/October Table of Contents