NEWS LINE

Scope of co-op law
project expanded
For nearly two years, the National Conference of Commissioners on Uniform State Laws (NCCUSL) has been preparing a model state agricultural cooperative law. The draft is based on laws recently enacted in four states that authorize entities called “cooperatives” that may have substantial non-patron voting and which distribute most of their earnings on the basis of investment, rather than patronage.

In late July, NCCUSL voted to expand the scope of the project to include all types of cooperatives, with unspecified appropriate exclusions. The draft law has been renamed the “Uniform Cooperative Association Act.” Representatives of several nonag cooperative groups (rural electrics, telephone, credit unions, housing and non-ag business cooperatives) urged NCCUSL, to no avail, not to broaden the scope of the effort to include nonag co-ops.

Implementation decisions, including which types of cooperatives to exclude, will likely be taken up by the working group drafting the model law at its next meeting on Oct. 21-23 in Chicago.

NCFC surveying co-op structure
The National Council of Farmer Cooperatives (NCFC) has distributed two surveys to members to gauge their views on cooperative structure. The first survey focuses on “big picture” issues, and is directed at cooperative CEOs. It covers where CEOs see their organizations going in the future, the nature of the competition they expect and the challenges they see in continuing to operate as a farmer-owned organization. NCFC President Jean-Mari Peltier and NCFC Chief Economist Terry Barr have begun the process of interviewing CEOs as part of the survey.

The second survey, developed by NCFC’s Legal, Tax and Accounting (LTA) committee, will be directed at cooperative CFOs and counsels. This questionnaire asks very detailed questions about structure, use of cooperative tax provisions and, in particular, detailed questions related to Capper- Volstead.

The surveys are important to help NCFC formulate its policy agenda and its response to the review of Capper- Volstead by the Antitrust Modernization Commission. It will also help guide NCFC’s work with the National Conference of Commissioners on Uniform State Laws (NCCUSL), which is in the process of drafting uniform cooperative statutes that states can enact.

At its June meeting, the NCFC Council approved the surveys as part of the work being done by the Cooperative Business Advisory Group (CBAG), which is chaired by Jack Gherty, CEO of Land O’Lakes Inc.

In other NCFC news, Ag Secretary Mike Johanns has appointed Peltier to the Agriculture Policy Committee for Trade (APAC). “There is a great deal at stake for American Agriculture in the upcoming World Trade Organization (WTO) negotiations,” she said. “The farmer cooperative community is committed to playing a constructive role in the process while strongly standing up for the interests of members: this country’s 2 million farmers and ranchers.”

Wisconsin law would allow
outside investment in co-ops
Backers of a proposal to encourage outside investment in Wisconsin agricultural cooperatives say it could give co-ops a badly needed financial boost as the number of farms dwindles in the state. But Sue Beitlich, president of the Wisconsin Farmers Union, thinks the idea would destroy cooperatives by putting outside investors’ needs before those of farmer members, according to the Baraboo News Republic.

State Rep. John Ainsworth and Beitlich, a farmer in rural Stoddard, Wis., recently offered contrasting testimony on Assembly Bill 327, which would create a new business organization form known as an “unincorporated cooperative association” (UCA). The bill, introduced by Ainsworth, could affect the way cooperatives are formed to create and market products ranging from organic food and lowcost housing to health care.

Country Today, a Wisconsin farm journal, ran an editorial opposing the new law, saying it would blur the difference between co-ops and investorowned businesses: “The legislation would allow cooperatives to have as much as 70 percent control from nonmember investors. Allowing nonmember investor control of cooperatives goes against the nature of what a cooperative is all about.”

Under the bill, outside investors would be allowed to sit on a cooperative’s board of directors, and investors could be guaranteed a percentage of the profit, Robert Cropp, interim director of the University of Wisconsin Center for Cooperatives, told the News Republic. Current law allows outside investment in cooperatives through a preferred stock option, but return on investment is limited to 8 percent, and the option is rarely used, Cropp said. Although the bill affords outside investors some voting rights, majority control would remain in the hands of user members, also known as patrons, under the bill, Cropp said. It’s unlikely existing agricultural cooperatives would convert to UCAs because of potential federal tax liabilities, the paper notes.

The bill would essentially strip some of the safeguards that help protect cooperative members, who might have spent the better part of a lifetime investing in a cooperative, Beitlich said.

Co-op wants incentives for buyout
payments to fund value-added ag
Under the American Jobs Creation Act of 2004, some agricultural quotas will be involuntarily eliminated under a 10-year buyout program. Absent an incentive to continue engaging in agricultural production, many recipients of the quota buyout payments may simply use the after-tax proceeds of their buyout payments to retire or invest outside their rural communities. This would have adverse effects on jobs and economic development in rural communities already struggling to recover from reduced agricultural production, according to Wayne Sine, director of corporate taxation for Southern States Cooperative Inc., Richmond, Va.

However, with clarification of provisions in the Internal Revenue Code, many quota holders would consider reinvesting in agricultural ventures within their local communities. “This would preserve or expand job opportunities and economic development in those rural communities which the buyout program was designed to assist,” says Sine.

America’s farmers are diversifying and investing in alternative agricultural operations, establishing or expanding value-added and other agricultural cooperative enterprises. Co-ops, producer- owned LLCs and partnerships are building processing plants, establishing innovative marketing enterprises and alternative energy plants. This process would accelerate if more buyout funds can be devoted to such ventures, he says.

“This proposal would clarify involuntary conversion treatment when the recipient of quota buyout payments elects to reinvest such amounts directly in domestic, value-added agricultural enterprises or other agricultural cooperative associations,” says Sine. “Many former agricultural quota holders and producers would be interested in investing in such ventures should the capital gain tax on their involuntarily converted quotas be deferred.”

Contact Sine at (804) 281-1301 or at wayne.sine@sscoop.com for more information.

Minn. sugar co-op buying
Holly Sugar from Imperial
Southern Minnesota Beet Sugar Cooperative, Renville, Minn., has agreed to purchase Holly Sugar Corporation, a subsidiary of Imperial Sugar, for about $50 million. The sale was expected to be completed by the end of September, subject to completion of environmental, due diligence and customary regulatory approvals. Holly Sugar’s primary operations include two beet sugar factories, located in Brawley and Mendota, Calif., a distribution facility located in Tracy, Calif., and Holly Hybrids Inc., a beet seed processor and marketer located in Sheridan, Wyo.

Holly Sugar, which represents approximately 15 percent of Imperial’s production capacity, primarily services customers in the industrial and food service market segments. Imperial will continue to own the Holly brand.

Policinski to succeed Gherty
Land O’Lakes Inc. has named Chris Policinski the co-op’s president and chief executive officer, effective Oct. 1. Policinski will replace Jack Gherty, who is retiring after 35 years with Land O’Lakes, the last 16 years as president and CEO.

Policinski, currently Land O’Lakes executive vice president and chief operating officer for dairy foods, has held various leadership positions with the company since joining the national food and agricultural cooperative in 1997. He has more than 25 years of management experience and previously held leadership positions with General Foods, Kraft Foods, Bristol Meyers and Pillsbury Co.

“Chris has demonstrated his ability to implement strategic plans, drive performance and develop people and leaders within the company,” said LO’L Chairman Pete Kappelman. “He also understands the unique role of cooperatives and is committed to positioning Land O’Lakes to enhance member-owner value.”

Policinski has a master of business administration degree from New York University and a bachelors’ of business administration from the University of Notre Dame. He is a board member of the National Milk Producers Federation, serves on the President’s Council of the Grocery Manufacturers of America and is chairman of the nonprofit, charitable organization Prosperity Worldwide.

In other LO’L news, the co-op has completed the sale of its 38-percent equity interest in CF Industries, a domestic fertilizer manufacturing company. The co-op was initially slated to reduce its ownership position from 38 percent to approximately 8 percent in exchange for $252 million in cash. However, underwriters exercised their option to purchase LO’L’s remaining interest in CF, increasing the co-op’s total proceeds to $315 million.

Bruce Anderson honored
Bruce Anderson, who retired in June from the ag science faculty at Cornell University, was honored at the annual banquet of the Northeast Council of Cooperatives for 25 years of service to Northeast co-ops. Anderson developed a popular undergraduate course on cooperatives and served as a major professor for many graduate students who have gone to work for co-ops worldwide and in academia. A nationally recognized speaker on co-op enterprises and an advisor to many co-op boards, Anderson also helped to expand what started as the New York Council of Co-ops’ educational meeting into a regional event that has attracted thousands of co-op directors and managers over the years.

Riceland’s Bell named
Arkansas Ag Secretary
Retired Riceland Foods CEO Richard Bell has been selected by Arkansas Governor Mike Huckabee as the state’s first agriculture secretary. “If we looked from one end of the country to the other, we would not be able to find someone who has the experience, the expertise and, most of all, the love of Arkansas, that Dick Bell has,” Huckabee said. “Agriculture is the leading industry in our state, accounting for some $13 billion a year of economic activity, representing 20 percent of the gross state product.”

Bell is credited by many with transforming Riceland into the nation’s top marketer and miller of rice. He was with Riceland for 27 years, including 23 years as president and CEO, before retiring last year.

PastureLand artisan butter
wins tops honors from ACS
PastureLand’s Summer Gold salted butter won first place honors for the second year in a row in the prestigious American Cheese Society (ACS) competition. In addition, the co-op’s Summer Gold unsalted butter placed third in its category. Complete competition results are available on the ACS Web site:
www.cheesesociety.org.

PastureLand is a cooperative of three organically certified family farms in Southeastern Minnesota that has been marketing artisan butter and cheese since 2000.

The butter’s distinctive flavor and color reflect the quality of the cream from which it is made, says board President Dan French. PastureLand cows graze on carefully managed pastures rich in carotene, resulting in golden-yellow milk which is perfectly suited for butter making,” adds French.

French and his wife Muriel milk 140 cows on their third-generation family farm near Mantorville, Minn. “We are also lucky to have such a skilled butter maker in Gene Kruckeberg, who makes our butter at the Hope Creamery in Hope, Minn.

For more information about PastureLand, visit the co-op’s Web site: http://www.pastureland.coop.

PenLight celebrates 80 years
Peninsula Light Co.
(PenLight), Gig Harbor, Wash., is marking 80 years serving Gig Harbor and the Key Peninsula. PenLight was founded in 1925 when a small group of community leaders implemented their vision of bringing electricity to the area. This group of pioneers had only a vague idea of how to accomplish the task, because electricity was still a new commodity in rural communities.

Getting the organization off the ground took several months of preparation: raising capital, recruiting the know-how and choosing a form of government to oversee the utility. After numerous community meetings, they decided that it should be a cooperative-run business.

PenLight is committed to improving the quality of life of its members by providing reliable power and safe drinking water, and by supporting the social and economical development of the community. It is the second largest electric cooperative in the state, providing nonprofit electric service to 28,000 members over 880 miles of line. It offers a voluntary green power portfolio option to its members.

Rick Smith named
DFA president & COO
Rick Smith, a member of Dairy Farmers of America (DFA) management team since 2001, has been named president and chief operating officer for the Kansas City-based co-op. “We like the energy and the skills that Rick’s long track record in cooperatives, member services and management bring to our cooperative team,” said DFA CEO Gary Hanman. All of DFA’s operations will report to Smith.

In 2001, after Dairylea Cooperative Inc. became a cooperative member of DFA, Smith assumed the role of vice president and chief operating officer of DFA’s Northeast and Mideast milk marketing areas. That role was expanded in 2003 when he became president of DFA’s seven fluid milk marketing areas. Since January 2005, Smith has served as DFA’s chief operating officer with the added responsibility of oversight for the cooperative’s economic and marketing analysis; member, government and public relations; and human resources functions, as well as fluid marketing operations. In his new job, he will oversee all of DFA’s operations, including value-added manufacturing, accounting/treasury and legal and risk management functions.

Smith continues to serve as CEO of Dairylea Cooperative Inc., a dairy farmer-owned agricultural marketing and service cooperative based in Syracuse, N.Y. Dairylea markets milk for more than 2,500 member farms in the Northeast. He also heads up numerous businesses which provide services to farmers, including: insurance, dairy management, lending, livestock, information services, risk management and purchase programs for farm inputs. He joined Dairylea in 1982 as the cooperative’s vice president and general counsel.

Anderson elected chairman
of U.S. Grains Council
Davis Anderson, GROWMARK vice president of grain, was elected chairman of the United States Grains Council following its 45th Board of Delegates’ Meeting in Seattle, Wash., in July. The Grains Council is a private, nonprofit partnership of farmers and agribusinesses committed to building and expanding international markets for U.S. barley, corn, grain sorghum and products derived from them. The Council is headquartered in Washington, D.C., and has 10 international offices that oversee programs in nearly 80 countries. Support for the Council comes from its members and the U.S. Department of Agriculture.

CDF establishes hurricane
recovery fund
Citing the need to help the longterm recovery of rural areas of Louisiana, Mississippi and Alabama, the Cooperative Development Foundation in early September launched the Katrina Cooperative Recovery Fund. The fund will direct contributions specifically to individuals and cooperative businesses in the rural areas of the three hurricane-ravaged states.

“The nation has been horrified by the scenes from New Orleans, Biloxi and Gulfport,” said CDF Chair Terry Lewis, a vice president with the National Cooperative Bank. “We can only imagine the destruction that has also occurred in rural areas. The Katrina Cooperative Recovery Fund will direct contributions to individuals and cooperatives in rural areas that most need help.”

The fund will seek contributions from all sectors of the cooperative business community and the public. “This is all about co-ops helping coops,” said Lewis. “Our focus is on what will be necessary for recovery once disaster relief has met most immediate needs.”

CDF will partner on this fund drive with its colleagues in the cooperative community, both nationally and in the region, to assure the maximum possible impact. CDF will take no administrative fee for funds raised to assure that 100 percent of the funds donated reach the people and organizations that need help. CDF’s prime point of contact in the affected area will be the Federation of Southern Cooperatives/ Land Assistance Fund, which will help identify the needs of farmers and farm cooperatives and help CDF coordinate this effort with the wider cooperative community in the affected area.

For more information, visit: www.cdf.coop.

Reynolds receives Honored
Cooperator Award
Anne Reynolds, assistant director of the University of Wisconsin Center for Cooperatives, recently received the National Cooperative Business Association’s Honored Cooperator Award. Reynolds, of Madison, Wis., was honored at the Association of Cooperative Educators (ACE) Institute in Alexandria, Va. The award recognizes outstanding individuals who have worked to develop, advance and protect cooperatives.

At the UW Center for Cooperatives, Reynolds works with groups on new cooperative projects, particularly in the housing area. In addition, Reynolds has participated in research and cooperative development projects in the areas of member satisfaction and loyalty, education for emerging leaders, value-added agriculture, and rural housing. She also is responsible for the Center’s Internetbased services and serves as coordinator for the Midwest Cooperative Education, Research and Extension Consortium.

Before joining the Center for Cooperatives, Reynolds worked at the Credit Union National Association (CUNA).

Co-op celebrates 80 years
Celebrating its 80th anniversary is Peshastin Hi-Up Growers Inc., in Peshastin, Wash. In the early 1900s the co-op was known as the Brownie Warehouse and packed tree fruit under the Brownie label. The Hi-Up name was adopted to indicate the co-op’s fruit is grown in higher mountainous areas of the upper Wenatchee River Valley, according to the Capital-Press Agriculture Weekly. The Hi-Up label has been used since the 1920s. More than 100 growers are co-op members. The co-op will pack more than 1 million 44-pound boxes of pears, mostly winter varieties. The co-op also handles apples.

Struggling Kansas
local co-op dissolves
The board of the Sylvia Cooperative in Reno County, Kan., which first opened for business in the 1930s, has voted to dissolve. “It’s sad to say, but it’s gone,” said Derek Zongker, secretary of the co-op board, according to the Associated Press.

The co-op sold a grain elevator that could store 700,000 bushels of grain, as well as supplies, including seed, feed, fuel and farm chemicals. Board President Steve Yust said the grain, fuel and seed business failed to finish in the black the past 8 years. In June, stockholders approved a lease/purchase of the grain elevator by the Stafford County Flour Mill in Hudson. The lease gives the business until April to buy the elevator from the lien holder, Citizens Bank of Kansas.

Crop production in the area also has dropped as more acres are being enrolled in the Conservation Reserve Program, which pays farmers to set aside croplands. The wheat harvest this year brought in 310,000 bushels of grain, filling only half the elevator’s capacity. Members of the co-op board said a leak in an underground fuel storage tank, and the bankruptcy of the parent Farmland Industries Inc., which forced the co-op to write off $240,000 on its asset sheet, also contributed to the co-op’s decline.

New hotline for
sustainable ag pubs
The Sustainable Agriculture Network (SAN) has a new hotline that will help producers, researchers and educators quickly and easily order publications featuring cutting-edge research on sustainable farming. As the national outreach arm of USDA’s Sustainable Agriculture Research and Education (SARE) program, most SAN publications will continue to be available online at: www.sare.org/ publications.

For book orders and mixed orders of books and bulletins contact: Sustainable Agriculture Network, P.O. Box 753, Waldorf, MD 20604-0753; telephone: (301) 374-9696; Fax: (301) 843-0159. For bulletins only, please call (301) 504-5411. SAN bulletins are available in quantity at no cost to agricultural educators when ordered at least 3 weeks in advance. View SAN’s entire catalog online at the above Web site. Revised order forms are available at http://www.sare.org/ publications/order.htm.

Bill expands health care co-ops
Wisconsin Governor Jim Doyle recently signed legislation that expands access to health care cooperatives in Wisconsin and makes it easier for farmers and small business owners to get quality and affordable health insurance. In June, the U.S. Senate Agriculture Appropriations bill was passed in committee that included a provision sponsored by Senator Herb Kohl and Congressman Dave Obey to provide $2.25 million for a Wisconsin farmer health care cooperative to increase access to affordable health benefit plans.

According to a study by the University of Wisconsin, 18 percent of Wisconsin farmers are uninsured, compared to 4 percent of the general population. In addition, 41 percent of those farmers who have insurance do not have insurance for every family member.

Isolated Alaksan villages
get USDA help for Internet
Akhiok – a remote fishing village of 51 people on the south end of Alaska’s Kodiak Island — may be wired for Broadband Internet service by next summer, thanks to a grant from USDA Rural Development. Ouzinkie and Old Harbor on Kodiak are also potential sites for Internet service. All three villages have phone lines, but the high cost of dial-up access limits use, according to the Kodiak Daily Mirror. Under the grant, USDA Rural Development pays about 75 percent of the cost. Residents still have to pay installation charges for their homes, but the cost would now be affordable. Jobs are scarce in the communities, and most residents rely on “native skills” to survive.

Co-op Month material on Web
October is Cooperative Month, when cooperatives are urged to undertake some special activities to create better public understanding of what co-ops are and do. Through a combination of media outreach, member education and interaction with policy makers, co-op month events help raise the visibility of cooperatives.

Research shows that when consumers know a business is a cooperative, they are more likely to do business with it. And with consumer trust in co-ops topping investor-owned companies, promoting your business as a cooperative is a win-win proposition.

A wide variety of Co-op Month promotional tools are available on the Internet at: www.coopmonth.coop. These include logos, advertisements, a co-op primer, co-op case studies and success stories, a co-op directory, Coop Month tool kit, etc. Even something as simple as posting a link on your co-op’s Web site to the Co-op Month Web site can help increase public awareness of what co-ops do.

“Cooperatives: Owned by our Members, Committed to our Communities,” is the Co-op Month theme, which reflects the commitment all types of cooperatives make to the seventh cooperative principle: concern for community. It is a principle that co-ops exercise every day as they serve their members and their communities. It also allows cooperatives to trumpet not just the economic support they provide to their members and communities by creating jobs, income and opportunity, but also their other community involvement, such as charitable contributions, educational activities, environmental efforts and many other ways in which cooperatives support the towns and cities in which they operate.

Co-op Foundation awards grants
The Cooperative Foundation recently approved the funding of three grants for cooperative education to: Consumer Cooperative Management Association (CCMA), CooperationWorks! and the Association of Cooperative Educators (ACE).

CCMA — a professional association for managers, staff and directors of retail food cooperatives — received a $3,750 grant to help Midwestern members attend an annual co-op conference. CooperationWorks! received a $5,000 grant for its cooperative business development training program, The Art and Sciences of Starting a Cooperative Business, where practitioners learn from expert- and case studybased sessions. The grant will serve as financial assistance for practitioners who may not be able to attend the training otherwise.

ACE was awarded a $3,500 grant to support 2005 ACE Institute scholarships for graduate students and junior faculty. ACE provides its members a forum to highlight programs and practices that increase understanding, innovation and professionalism in cooperative education. The St.Paulbased Cooperative Foundation (www.coopfoundation.org) has supported cooperative business development, education and research projects in the Upper Midwest for more than 50 years. Projects include all co-op business sectors.

Walton EMC sends crews
to storm-wracked Mississippi
Five electric crews from Walton Electric Membership Corporation (EMC) were dispatched to southwest Mississippi just a day after Hurricane Katrina to help restore power to victims. The crews assisted Southwestern Mississippi Electric Power Association (SMEPA), based in Lorman. SMEPA serves 25,000 customers in nine counties in the southwest corner of the state, all of whom lost power.

Since electric cooperatives follow the same power line construction standards, the Walton EMC crews went right in to Lorman, working side-byside with local crews or independently. Electric crews face many hazards after natural disasters. Fallen trees can put excess tension on wires and flooding can make access to repairs difficult. The rising waters can also displace poisonous snakes and make mosquito populations explode.

“There is also the hazard from incorrect use of standby generators,” said Greg Brooks, WEMC spokesperson. “Small generators can put several thousand volts back out on power lines if they are not correctly installed, presenting a hazard for line technicians or anyone else who may come in contact with them.”

Walton EMC is a customer-owned power company that serves 110,000 accounts between Atlanta and Athens. Learn more at: waltonemc.com. and southwestepa.com.



September/October Table of Contents