By Dan Campbell, editor
Editor’s note: The 75th anniversary retrospective of
“Rural Cooperatives” magazine that began in the
July-August issue continues on the following pages,
which provide excerpts from articles that ran from
1970 through the present.
Seven steps to meet
challenges of 70s
In the July 1970 issue of
“News for Farmer
Cooperatives,” Texas A&M
University economist William
Black outlines key challenges facing farmer coops
in the new decade:
“It won’t be called the ‘Serene 70s.’ Instead, it
will be known as the ‘Severe 70s,’ because agriculture will
experience a decade of severe change. Ag co-ops will survive
not by reacting to change, but by making change.
Their survival is less dependent on what happens on the
farm and ranch and more dependent on what happens
elsewhere. Without co-ops, we would remain a long way
from bringing about equality in trading between producer
and buyer. With co-ops, all farmers will be better off.
Strange as it may seem, agriculture will never be
controlled through production alone. Marketing will be the
critical lever over farming. Up until the present, people in
the market have exercised far more influence over the farmer
than the farm has exercised over the marketplace. The key in
the 70s will be integrated marketing.
How can cooperatives meet the challenges of the decade?
1. Provide Marketing Leadership; 2. Adopt Tougher Production
and Quality Policies; 3. Form Joint Ventures;
4. Work with Cash and Contract Markets; 5. Build New and
Expanded Markets; 6. Promote Research and Development;
7. Develop Strong Internal Leadership — none of the above can
take place without strong leadership in the management
office and board room. The key: select the best, and keep
them trained.”
Beware fair-weather members
From the March 1971 issuse:
“In our country we have too many fair weather co-op
members. These are farmers who will trade at the co-op
when the price of fertilizer is lowest, or the price of corn is
highest. They are the ‘inners and outers.’ Members like this
can spell only one thing, and that thing is trouble.
No truer words were spoken than those of Benjamin
Franklin at the signing of the Declaration of Independence,
when he said: ‘We must all hang together, or assuredly will
all hang separately.’ Farmers need to determine who their
friends are...and not work
against the best interests
of each other.”
USDA pledges
support for co-ops
In April 1971, Clifford
M. Hardin, U.S.
Secretary of Agriculture,
assures co-ops of USDA’s
continued support and
sees a growing role for coops:
“The Department
of Agriculture has pledged
to help farmers help
themselves through
cooperatives. We feel that the present policy, stated in
memorandum last May, is working well. To bring the
agricultural industry up to par with other types of business
and [raise farm income] is our goal.
Ag exports promise to be a growth area in which co-ops
can play a particularly significant part. In this administration,
we are placing heavy emphasis on a continued expansion in
sales of farm products abroad. The whole subject of trade —
developments to come in Europe in particular — is one in
which co-ops have a great stake. It will be important that we
pool our efforts to reach an understanding that can bring
trade cooperation, instead of trade chaos.”
Farm Credit managers must confront future
Donald Roark, deputy governor of the Farm Credit
Administration, December 1971:
“Memo to tomorrow’s managers of ag credit institutions:
The gap that separates the well prepared from the poorly
prepared will never be greater. Staying on course will be a
real challenge amidst the turbulence, tension, proliferating
technology and diversification of tastes.
The knowledge explosion places a premium upon every
business decision — capital investment, product mix or
market potential — to the point that a businessman cannot
overlook glimpsing into the future. Executives who set their
long-range goals in terms of today’s population mix may be in
for some rude shocks. Population shifts and growth will
surely result in a dispersion of business activity and of
internal markets.”
What young farmers think about co-ops
In November 1972, Editor Gene Ingalsbe writes that co-ops
must do a better job of connecting with young farmers:
“Young farmers are perhaps less inclined to use co-ops
than are farmers generally. At least two reasons are emerging,
and both are disturbing. Young farmers want to ‘have their
cake and eat it to,’ as the saying goes, concerning their
relationship to co-ops. Some local co-ops just aren’t
performing as well as their competitors. One unfortunate
conclusion is that both may find themselves out of business
unless they change their ways.
These observations come from listening to discussions of
young farmers at this summer’s session of the American
Institute of Cooperatives [and from several other sources].
Some
young
farmers see
co-ops as
“just
another
business,”
not
competitive
in price, not
living up to
promises,
over staffed,
unprepared to serve modern farmers, competing with each
other instead of working together, and so on.
On the other hand, many young farmers just haven’t
grasped — as is also true of older farmers — that the
cooperative is theirs, and when something is not to their
liking, it is their responsibility to do something about it. The
sense of ownership and responsibility is missing.”
Executive compensation: how co-ops compare
Richard Larson, A.T. Kearney Inc., writes in the April 1976
issue:
Cooperative CEO compensation is a little closer to that
paid by other comparable businesses than it was four years
ago, according to a study conducted for the National Council
of Farmer Cooperatives (NCFC). The top co-op CEO is still
making only 70 percent of his counterpart’s share in other
comparable corporations. But that’s up from 66 percent in
1972.
Use of incentive compensation plans is only half that used
by other corporations. Salaries for CEOs of co-ops with 500
or more employees ranged from $200,000 to $50,000. For
those heading co-ops with 75 to 500 employees, the range
was about $125,000 to $25,000. For 75 or fewer employees,
the range was $75,000 to $24,000.
Co-op fragmentation in Northeast hurts farmers
Randall Torgerson, acting deputy director for USDA’s
Economics Statistics and Cooperatives Service, addresses the
Northeastern Dairy Conference, as quoted in the June 1978
issue:
“Nowhere in the country do we find the practice of
cooperation in such disarray as in the Northeast…
Cooperative structure in the region is highly fragmented.
Excluding Virginia, about 150 dairy co-ops are operating in
this region. Although about 70 of these are affiliated with
three or four co-ops, this is still a large number for a region
of this size.”
Several major co-op bankruptcies have occurred in the
region in recent years, and five of the largest co-ops have
suffered losses. Co-op educational programs at land grant
universities in the Northeast are not being maintained, he
says, and buyers are effectively playing off handlers against
each other. He lays some of the blame for the disarray on the
“egos of co-op organizations and leaders,” and calls for
mergers leading to the organization of a “dominant regional
dairy co-op” as one of several options to improve the
situation.
Ag Secretary Bergland testifies
before antitrust panel
From James Baarda’s September 1978 “Legal Corner”
column:
During a hearing before National Commission for the
Review of Antitrust Laws and Procedures, Agriculture
Secretary Bob Bergland made a strong defense of farmer
cooperatives and the marketing order system. “My own view,
well supported by history, experience and research, is that the
Capper Volstead Act and our marketing order system are in
no need of statutory modification…Individual farmers acting
alone lack bargaining power in dealing with those who
purchase their product. Historically and increasingly, farmers
must sell to relatively few buyers that do their processing and
distribution of raw ag commodities.”
Women getting ahead in co-ops
From the May 1980 issue:
Women are getting more active in co-op
enterprises. Willadean Chapman has served
for five years as manager of Mt. Vernon
Farmers’ Cooperative in Missouri. When
the need arose to open a co-op outlet in Mt. Vernon, the
manager at Monette asked Chapman to “keep things together
until he could hire someone.” But when she showed her
managerial skills, the fill-in job became permanent. “We
started at zero, but this year we hope to hit $1 million in
sales,” says Chapman.
Darlene Nordenhagen is a nine-year member of the board
at Farmers Union Oil Co. in Opheim, Mont. The co-op was
about to close because of poor management when it voted in
its first woman member. The first year was the hardest, when
she worked closely for four months with a new bookkeeper to
bring some order to the co-op’s records. Then she went door
to door collecting unpaid bills in her town of 260 people.
Because of her efforts, a new bookkeeping system was
introduced that has helped the co-op realize gross sales of
$1.5 million in 1980, up from less than $100,000 when she
joined the board nine years earlier.
Why are they attacking Capper-Volstead?
Lee Kolmer, dean of Iowa State University’s College of
Agriculture, spoke at the Graduate Institute of Cooperative
Leadership in Columbia, Mo. From the August 1980 issue:
“The Capper-Volstead Act is under siege. The intensity of
the battle varies as the attackers marshal new allies, or lose
old allies, and as the defenders are partially or temporarily
successful in fending off the legal thrusts of the opponents.
Why has the battle become so intense over the last decade?
Opponents see co-ops assuming large-scale processing,
wholesaling and retailing…they see large co-ops
merging…and see more and more co-ops selling branded
products at the retail level. They think co-ops are becoming
indistinguishable from their corporate competitors.
Cooperatives counter that farmer ownership is unique
because the objective is to enhance the income derived from
farming activities of these farmer-owners. The corporate
objective, conversely, is to earn a return on the investment of
a diverse set of stockholders.”
Secretary Block meets with
cross-sector of co-ops
Phil Mills Jr. of MFA Inc. contributes an article in
August 1982 about Secretary Block holding a five-hour
roundtable discussion with 31 co-op leaders near Knoxville,
Ill.:
Ag exports and high interest rates dominated the
discussion. “Probably the strongest message may have been
that we need to find markets for our products and protect
existing markets,” Secretary Block says during a briefing for
the co-op farm press after the meeting.
“Washington does not realize the impact of high interest
rates on agriculture,” says Ralph Hofstad, president of Land
O’ Lakes (LOL) Inc. “Unless budget deficits are faced,
interest rates will stay high,” he stresses.
“This is one of the really profitable things the cooperative
movement has done,” Stanley Greathouse, director with
Wayne White Electric Co-op and the National Rural
Electric Cooperative Association, says of the meeting. “Many
times we don’t get our act together as a group.”
“Our biggest problem is that cooperatives just don’t get
together and come across as being united,” says Glen
Gearing, a Wisconsin dairy farmer and chairman of MSI
Insurance.
Farm supply co-ops are not credit institutions
From Ag Co-op Service Administrator Torgerson’s
commentary, September 1982:
“A common complaint heard across the country this year
is the difficulty experienced in collecting accounts receivable.
Most co-ops by now have sound credit policies; those that do
not desperately need them.
Local supply co-ops are not credit banks and should not
be used as such. Excessive outstanding credit through unpaid
bills brings inequity among patrons in a co-op. Those who
don’t pay up increase the costs for all others. Uneven
managing of credit policy also creates ill will and serves as a
disruptive force within the organization.”
Keep distance between politics, world trade
Dennis Colleran, president and general manager of Tree
Top Inc., addresses key trade issues for his apple-processing
co-op in June 1984:
“When I pick up a newspaper and read where politicians
are threatening to cut off trade of farm goods to a foreign
country, I become distressed. Agriculture is not a political
ploy. If used as such, we will all lose! The world is shrinking.
What is cut off by United States’ economic sanctions can be
purchased elsewhere…I firmly believe politics and world
trade should be kept just as independent of each other as
church and state.”
Grain co-op policy on risk management
V. James Rhodes, University of Missouri ag economist, based
this October 1984 article on interviews with grain traders
and finance officers at large regional co-ops and on a survey
of 42 Midwest grain co-ops:
“The manager of Co-op X knows the annual audit will
reveal a terrible secret. He has abruptly left town, leaving
behind a note that says he meant well but can’t face his
members. (This is a true story, but the name has obviously
been changed). The auditors find a loss of $2 million in the
grain business — enough to bankrupt it. The manager had
not taken a penny. But he held a large grain inventory,
hoping for rising prices in a falling market. The more he got
behind, the longer he waited for the market to rescue him.
Could that happen at your co-op? How would you face
your membership? Unfortunately, one or more variations of
this story occur every year.”
Rhodes goes on to discuss strategies such as
diversification, pooling and hedging. “There are two basic
rules for your manager to follow in managing risk: thou shall
not speculate in the futures market and thou shall not
maintain open net positions for each commodity beyond
specific bushel and dollar limits agreed upon.
Co-ops should strive to minimize large open positions,
which are risky. In open positions, the co-op either holds a
large inventory or has made sales of grain not yet purchased,
and has no offsetting position in the futures market. Your
goal is the management of price risk, rather than its
elimination. Whatever strategy is used, the buck stops with
the board.”
New law encourages merger of co-op banks
Ron Erickson of the Farm Credit Administration provides
this update in February 1988:
“In January, President Ronald Reagan signed legislation
paving the way for a multibillion dollar plan to aid the
financially stressed Farm Credit System, which posted $4.8
billion in net operating losses from Jan. 1 1985 to Sept. 31
1987. But while the system as a whole wallowed in red ink,
the Banks for Cooperatives operated in the black. They
would have had net earnings of $211 million for the period
had it not been for the financial assistance they provided to
troubled institutions. That assistance will be repaid, under
the terms of the new law.
And even though they were not part of the problem,
solutions embodied in the Ag Credit Act of 1987 hold the
prospect of change for the Bank for Cooperatives, as well as
other parts of the Farm Credit System. If stockholders of
eight or more of the district Banks for Cooperatives approve
a merger plan, those banks and the Central Bank for
Cooperatives will be merged into a single bank called the
National Bank for Cooperatives.” Such a bank would also
better be able to serve the needs of borrowers who have
“outgrown” the present system, according to a study
commissioned by the National Council of Farmer
Cooperatives (NCFC).
CoBank looks to build momentum
W.M. “Malcom” Harding, CEO of CoBank, discusses the
newly created co-op bank he leads in the May 1989 issue:
“The new CoBank (National Bank for Cooperatives)
began operations Jan. 1 on a solid base with more than $12
billion in assets, $9 billion in outstanding loans and a capital
base of $803 million. The bank represents the consolidation
of 11 financial organizations. The merger took place in less
than six months.
Five fundamental standards will guide the bank:
Commitment, Competency, Consistency, Competitive and
Customer Focused.” CoBank will be a more efficient
organization than were the separate banks, he says.
Co-ops’ share of farm business
stabilizes at 25 percent
Charles Kraenzle, director of ACS
Statistics and Technical Services staff,
writes in March 1990:
“The co-op share of farm marketing and farm production
supply expenditures in 1988 remained 25 percent, unchanged
from 1987. The shares, however, were down from 30 percent
in 1982. Co-ops’ net sales for farm products in 1988 was
$49.1 billion. Co-ops held 76 percent of the milk market, 41
percent of the cotton market, 30 percent of grain and 24
percent of fruits and vegetables marketed.
Co-op share of farm supplies sold in 1988 totaled $15.4
billion. This included 40 percent of fertilizer, 39 percent of
petroleum, 28 percent of farm chemicals, 17 percent of seed
and 18 percent of feed.”
Co-ops ideal vehicle to promote
rural revitalization
Editor Patrick Duffey highlights a new report, “Co-ops and
Rural Development” in the March 1990 issue:
“Cooperatives are a natural vehicle for meeting the needs
of rural America. But despite two centuries of use, they are
not widely known in the United States outside certain
sectors. Current conditions in rural areas suggest now may be
the time for cooperative activities to meet a broader scope of
needs.
Traditional rural economic activities — such as farming,
forestry, mining and manufacturing — are generating fewer
new jobs. Much of the rural infrastructure built to support
those activities — roads, bridges, telecommunication
networks, water and sewer systems — is worn out and
obsolete. Many young people are leaving rural areas to
pursue more promising opportunities. While rural areas must
face competitive disadvantages,
co-ops can organize local people
into stable organizations to solve
local problems.”
Saving the black farmer
In the May 1993 issue, Editor
Dan Campbell examines ways in
which co-ops may help to secure
a future in agriculture for black
farmers, whose numbers have
plummeted:
“A $100,000 investment for a
new packing shed may not
represent a major investment in
the annals of farm lending, but it
is a huge step forward for the
Indian Springs Farmers
Association in southern
Mississippi. The 40-member
vegetable growers’ co-op
currently field packs or rents
space in a state-owned packing
facility. With a packing shed of
its own, the co-op expects
current annual sales of $200,000 to double in its first year,
rising to $1 million in three years and creating three to seven
new jobs.
In this way, growers who join the co-op hope to avoid
joining the ranks of black farmers who have left the land.
Once a basic part of the rural landscape in the south, black
farmers today are an “endangered species.” In 1910, there
were 1 million black farmers in the United States who owned
15 million acres, mostly in the South. By the 1960s, the ag
census showed that black farmers owned just 6 million acres.
Today, there are just 20,000 who own only about 2 million
acres.
‘There is no government program that will return this
wealth to us, or help us
protect the land and
other resources that
remain. We must do this
job for ourselves, with
the sympathetic
supporters and allies that
we can find,’ says Ralph
Paige, executive director
of the Federation for
Southern Cooperatives.”
Ignorance kills
co-ops
From the June 1993
issue:
“According to one
estimate, 55 percent of
all Americans belong to
a cooperative. Yet 90
percent of them
probably don’t realize it.
Even if they are aware of
it, the majority have
little real understanding
of what a co-op is or how it functions. So much for the state
of co-op education in America.
At a time when the need for co-op education is as great, or
greater, than it has even been, the trend is going in the
opposite direction — toward a reduction in the level of co-op
literacy nationwide. In high school and colleges the general
decline in ag courses has been paralleled by a decline in
cooperative education.”
Changing tides
Campbell addresses how the “rural shakeout” is affecting
farmer co-ops in Kansas:
“Rarely has so little yielded so much. With a miserly sky
that drops an average of only 19 inches of rain per year, the
farmers of western Kansas produce one of the greatest
bounties of food harvested anywhere on earth. Dryland wheat
fills huge white grain elevators that seem to rise up like
clockwork every 10 or 12 miles across the High Plains.
The rural infrastructure of western Kansas is an odd mix
of feast and famine. Some regional trade centers, such as
Dodge City and Garden City, are experiencing explosive
growth and scrambling to cope with overcrowded schools
and housing shortages. Meanwhile, many of the surrounding
towns are struggling just to hang on to their last store or café.
Indeed, if anyone ever discoverers a market for boarded-up
store fronts, they could get rich in the small towns of western
Kansas.
The declining farm population, combined with the trend
toward greater concentration of business in regional trade
centers, has siphoned away business from small town
merchants. As a result, “plywood curtains” covering
storefronts give stark evidence of the shakeout in the rural
economy.”
Breaching the fortress
Gene Ingalsbe, recently retired from ACS, reports on his
trip to Albania as part of a team from Volunteers in
Overseas Cooperative Assistance (VOCA):
“Only the shell of a processing and manufacturing sector
remains in Albania. The skeletons of closed and partially
dismantled manufacturing plants can be seen everywhere —
monuments to the failure of the centrally planned economy.
Perhaps most striking is evidence of an all-consuming fear
that gnawed at the nation’s communist leaders. Some 700,000
domes, reinforced-concrete military bunkers, dot the
countryside. Vineyards contain concrete posts tipped with
iron spikes, meant to skewer paratroopers — all built in fear
of an invasion by American troops.
The Americans have finally arrived, but instead of coming
with guns, they are extending the hand of friendship.
Albanians are literally leaping forward in adopting private
enterprise. Changes are visible almost daily. Yet “cooperative”
is a dirty word here. Cooperatives under the former Albanian
regime were state owned and controlled and often highly
inefficient. They did not resemble the private enterprise
cooperatives found in the United States.”
Fair trade prescription
In August 1984, USDA Ag Economist Alan Borst sees a
major role for co-ops in combating unfair trade practices:
“When the ship Pioneer Reefer unloaded 700,000 trays of
New Zealand-grown kiwifruit in Tacoma, Wash., in late
1990, it touched off a heated international trade dispute. It
caused a rising tide of imported fruit to swell into a glut. As a
result, U.S. kiwifruit prices plunged to $415 a ton, down
from more than $1,000 a ton three years earlier. During that
three-year period, N.Z. kiwi exports to the United States
tripled.
The industry’s two largest cooperative handlers of kiwi —
Blue Anchor and Calavo Growers — responded with an antidumping
petition, which eventually resulted in a 98.6 percent
anti-dumping duty on imported kiwifruit from New Zealand.
In an industry with a significant co-op presence, co-op
members often play a key role in state marketing orders and
commodity commissions. These institutions frequently
initiate anti-dumping or countervailing duty cases to help
avoid the “free rider” problem that can occur if one co-op
pays all the legal costs and takes all the risks while other firms
share in the benefits of a legal victory.”
Cheese co-op brings hope to Rio Grande farmers
In the February 1995 issue, USDA Ag Economist Jerry
Namken and Editor Dan Campbell report on an effort to
help low-income Hispanic farmers in the Big Bend area of
southwest Texas form a dairy goat co-op:
“Para los ninos [for the children]. That’s why we have
worked so hard to establish this cooperative,” says Sergio
Hernandez, gesturing toward a new goat cheese factory
which should be operational by this spring. For Hernandez
and 18 other members of
the Big Bend
International Dairy Goat
Association, the cheese
plant represents more
than a promising
economic development
project; it is the primary
hope for the future of the
village and the means by
which their children may
be able to break the cycle
of rural poverty endemic
to the area.
Two-thirds of the
families here exist below
the poverty level, with an
average annual income of
only about $4,000. Most
families receive food
stamps and commodity
distributions from USDA.
The median education
level is eighth grade.
Playing a key role in
the co-op formation has
been the Rev. Melvin La
Follette, assisted by USDA’s Rural Business and Cooperative
Development Service, which is providing technical expertise
and economic assistance to help the co-op clear the final
hurdles. The initial marketing plan calls for the co-op’s
cheese to be sold to retail outlets in nearby markets, such as
Presidio, Texas, and Ojinaga, Mexico.”
Goat cheese is a staple of the Hispanic diet, but as recently
as the 1970s, virtually all goat cheese in the United States was
imported. Dairy goats are ideal for small farmers because
they have a high-production yield in comparison to what they
consume.
Fuel for thought
In April 1995 David
Morris, vice president of the
Institute for Local Self-
Reliance (ISLR), discusses
“an emerging carbohydrate
economy,” and what it could
mean for cooperatives and
rural development:
“The carbohydrate
economy offers an organizing
principle that can bring
together those who focus on
rural development, those
interested in environmental
protection and those who
reduce government spending.
Bio-refineries (a term coined
by ISLR) are attractive for
several reasons. They tend to
be environmentally benign
because they are based on
renewable feedstocks and are
often based on biological
processes. In the ideal biorefinery,
the wastes of one
part of the production
process becomes food for the other part.
Bio-refineries are also attractive because they are locally
based. Plant matter is bulky and expensive to transport. The
plant matter will tend to be processed in the regions where it
is grown. The modest size of bio-refineries means that they
can become important engines of rural development. It also
means they lend themselves to cooperative ownership.
We are beginning to look with new eyes at our biological
resources. In so doing, we may be redesigning the shape of
our future economy and ushering in a renaissance in rural
America.”
In the crab’s claw
In November 1995, Campbell reports on a fishing village’s
hope that a new crab- meat packing co-op can revive the
economy of their Chesapeake Bay island:
“The town of Tylerton, Md., has been losing population
since the turn of the 20th century. Events of the last few
years have left people wondering if slow death is the only
future for Tylerton, one of three small communities on Smith
Island. The latest blow has been a threat by state health
inspectors to shut down Tylerton’s crab-meat packing
industry. It’s almost as if the town is trapped in a crab’s claw
that is slowly, steadily closing on it.
To save the crab-meat picking industry, women on the
island formed a co-op. After a three-year struggle, Smith
Island Crab Meat Co-op Inc. has secured funding for a
picking and packing facility, which should be in operation by
next summer’s harvest. ‘The co-op is the last gasp for this
island,’ says one member.”
Hope for the Hmong
In a special issue in 1997, Field Editor Catherine Merlo
reports on how Hmong refugees from Laos hope to create a
better way of life in Central California, using a farmer coop:
“An estimated 100,000 Hmong, former refugees from
Southeast Asia, are now living in California’s San Joaquin
Valley. They are leaders in Fresno County’s strawberry and
cherry tomato industries, growing nearly 90 percent of those
two crops.
But something hasn’t been working for the Hmong. Most
of the Hmong have yet to step into the mainstream of
American life, with some 70 percent of Fresno County’s
Hmong receiving public assistance. They are studying a form
of business that could lead to economic self-sufficiency for
their people: a cooperative.
With the help of several organizations, including a
$60,000 grant from USDA’s Rural Business-Cooperative
Service, the organization has launched the Hmong Economic
Development Pilot Project. The new venture is exploring the
feasibility of forming a marketing co-op for Hmong-grown
fruits and vegetables.”
Co-op Share of Farm Market hits
30 percent
In the January/February 2000 issue,
Charles Kraenzle reports on the co-op
share of farm products marketed:
“Farmer co-op’s share of total farming marketings —
including crop, livestock and poultry sales — was 30 percent
in 1998. That’s up from 29 percent in 1997, but below the 32
percent level reported in 1996. Total co-op marketing
business volume for the year was $76.6 billion, down slightly
from the record of $79.4 billion set in 1996. A major factor
for the increase was cotton and cotton seed sales, which rose
to 43 percent of the market in 1998, up from 38 percent the
year before.
Co-ops’ market share of major farm production supplies
— feed, seed, fertilizer, crop protectants and petroleum —
was 29 percent in 1998, unchanged from 1997. Net sales of
farm supplies by co-ops was $24.6 billion, down slightly from
the record of $25.2 billion in 1997.”
Seeing the forest for the trees
In January/February 2000, Field Editor Pamela Karg
writes about co-ops promoting sustainable forestry and
tapping into “green” trends:
“We’re committed to managing our forest lands in a
sustainable way, logging them with discretion and building
efficiencies into how we prepare that lumber for the
marketplace,” says Tom Thieding, president of the
Sustainable Woods Cooperative in southwestern Wisconsin.
Almost three years old, the co-op includes 85 members who
own 10,000 acres of woodlands that stretch across some of
the same landscape that Frank Lloyd Wright and John Muir
called home.
Three hours away, a second sustainable forestry project is
taking shape in the
Mississippi River coulee
region north of LaCrosse,
Wis., and Winona, Minn.
Other woodlot owners
across the two states are
also discussing sustainable
forestry practices and the
formation of co-ops to
process and dry the
harvested wood.
Credited with helping to give birth to these new
cooperatives is Jim Birkemeier. “When I started talking about
sustainable forestry, all I did was get people irritated,” he
recalls. “The industry was making big money off the forests,
and the landowners didn’t think their timber was worth
managing.” But now the concept is steadily spreading.
Consolidation in the heartland
In the Nov./Dec. 2000 issue, USDA Ag Economist Anthony
Crooks takes a closer look at grain co-op mergers and
acquisitions during the mid 1990s:
“When the directors of two small cooperatives in North
Dakota approached USDA Rural Development in 1997 for
technical assistance regarding a possible merger, they
probably had little idea how large a trend they were joining.
About 95 other grain co-ops merged or were acquired in
1997. Both of these Dakota co-ops — one petroleum and
farm supply co-op with grain assets, the other a grain
elevator co-op — were seeking to strengthen their operations
and improve financial performance.
In addition to consolidating assets, these cooperatives
wanted to expand a rail load-out facility owned by one of the
co-ops and to add an agronomy center near another facility.
They also wanted to reduce grain shipping costs and generate
additional revenue from spring fertilizer sales.
Both co-ops and their plans were soon superseded by an
even bigger merger: that of Cenex and Harvest States. The
merger of two
giant regional
co-ops was the
biggest in a
recent tide of
mergers,
consolidations,
alliances, joint
ventures and
acquisitions that
swept over the
U.S. grain industry.” The small Dakota petroleum co-op was
an affiliate of Cenex and a competitor of Harvests States.
Thus, the merger and improvement plans of these two small
co-ops were placed on an indefinite hold because of the
merger of the two regional co-ops.”
Co-ops respond to terrorist attacks
with aid, calls for unity
In the Nov./Dec. 2001 issue, USDA’s Patrick Duffey
describes the response of co-ops to the Sept. 11 terrorist
attacks on America:
“Co-ops across the country were quick to respond to the
terrorist attacks with offers of assistance to victims and calls
for national unity. For example, West Central Cooperative in
Iowa donated 20,000 gallons of soydeisel to New York City
to help fuel equipment used in removing debris from the
disaster site. The National Milk Producers Federation in
Washington, D.C., working with Dairy Relief Inc.,
established a special fund for dairy farmers and other
interested parties to donate money to the victims of the Sept.
11 terrorist attacks.
The Cooperative Development Fund in Washington also
set up a relief fund for the victims. The National Credit
Union Assoc. is providing grants of up to $15,000 to aid five
low-income credit unions in New York City. At Southern
States Co-op in Richmond, Va., $13,000 was collected from
employees for the American Red Cross relief efforts. The
CHS Foundation matched $30,000 from local co-ops and
CHS employees for the United Way’s Sept. 11 Fund.”
Making the grade
Brett Fairbairn, director for the study of co-ops at the
University of Saskatchewan, writes that all North American
co-ops will be in trouble without more attention to co-op
education:
“We must distinguish co-op training from co-op
education. Training imparts specific, predetermined facts,
procedures and skills. Education develops in people the
capacity to know what is important, how to do something
and how to find the information and skills they need.
Cooperatives have gotten by for decades by doing a great
deal of training — particularly of staff and elected leaders.
But in the new information age, they have to go back to
doing more education, especially member education. This
must be a new and innovative kind of education.
Grade for Board Education: B. Education of directors
improved dramatically in the 20th century, with emphasis on
helping directors understand their role as key decision
makers in setting policies that guide the co-op. But recent
co-op failures indicate a need to do more in this area.
Directors often need to serve as a counterweight to strong
managers.
Grade for Member Education: C. Too often, member
education programs do not convincingly show members why
their cooperatives are needed. In addition to co-op basics,
members need to be educated about the economy they are in.
If they understand this — including emerging trends and
where the economy is heading — they will understand why
they need co-ops.”
Taking it to the next level
The success of a small Florida vegetable co-op leads to a
network of similar co-ops. From the Sept./Oct. 2002 issue:
“New North Florida Cooperative is a new-generation coop
formed by small-scale vegetable and fruit farmers in the
Florida panhandle to create and expand marketing and
processing opportunities for its members. When they
operated individually, they were “price takers,” members say.
The co-op has enabled them to become “price makers,” by
taking greater control of their products and providing
member-growers with bargaining power in the marketplace.
From its initial success helping members sell collard
greens and other crops to a local school district, this Florida
co-op has now expanded its scope of operations to 15 school
districts in three states, added product lines and increased the
level of value-added preparation and packaging. It has also
created a network of similar co-ops which are working
together to expand value-added processing and marketing
opportunities for small-scale farmers.” USDA Rural
Development is helping the effort with a $327,000 Rural
Business Enterprise Grant.
Bargaining is big for small business
In the March/April 2003 issue, USDA Ag Economist Bruce
Reynolds examines resurgence in bargaining cooperatives:
“At least 250 purchasing co-ops currently operate in the
United States. About 50,000 businesses are members of
purchasing cooperatives, with membership having doubled in
the past decade.
The traditional practice of purchasing co-ops is to capture
discounts by buying in large volumes and providing cost
savings with wholesale distribution for their members’ retail
businesses. This modus operandi is frequently used by co-ops
whose members are in the grocery and hardware business.
Many recently formed purchasing co-ops operate instead
by negotiating a standard contract for members who then
make their own individual transactions according to the
negotiated terms. Members have the flexibility to address
contingencies not covered by, or in conflict with, the contract
negotiated by their purchasing co-ops.”
The closure dilemma
USDA rural sociologist Thomas Gray says conducting
business in a way that helps keep both members and the coop
in business can sometimes be a challenge. From
March/April 2003:
“Press coverage of member reaction to recent closures of
several local grain elevators by a regional co-op underscores
one of many dilemmas faced by co-ops in maintaining
business for member users. Changes in farm production
toward fewer, larger farms can pressure boards and
management to consolidate operations — particularly grain
and farm supply co-ops in Midwest and Plains states.
Closures of facilities can improve survivability of larger co-op
businesses, but may also compromise the survivability of local
farmers.
Negative reactions to the closures may be quite intense,
and loss of farmer loyalty and survival may further strain the
co-op. How to conduct a business for members in way that
helps keep both members and the co-op in business is
becoming a growing challenge in many parts of the nation.”
Greener pastures seen for bio-tech co-ops
In March/April 2004, Assistant Editor Stephen Thompson
writes that new bio-based products may only be scratching
the surface of the potential bio-products revolution:
“What do lubricating oils, diesel fuel, glues, plastics,
paints, solvents and packing
“peanuts” have in common? If
you thought “petroleum,” you’re
only partly right. Other raw
materials can also be used for
their production, including those
grown on farms. The
manufacture of new “bio-based”
products to replace or
supplement non-renewable materials may provide new
opportunities for farmer co-ops to add value to members’
crops.
The Farm Security Act of 2002 requires federal
government agencies to buy officially designated, bio-based
products whenever possible for purchases of $10,000 or
more. Production of ethanol and biodiesel for fuel additives
are the most common bio-products produced by co-ops.
Farmer-owned ethanol plants — both as traditional co-ops
and LLCs that operate like co-ops — are springing up like
mushrooms across the Midwest.”
One bio-based cleaner advertises that it is “powerful
enough to clean battleships, yet mild enough for kittens,”
while better for worker and environmental safety.
Fueling a rural revival
Campbell reports on the impact of an ethanol plant on one
rural Minnesota town in the July/Aug. 2004 issue:
“It started as the dream of farmers and the managers
of the local electric co-op who were searching for ways to
add value to corn and help stabilize electric rates. The
Chippewa Valley Ethanol plant outside Benson, Minn.,
has not only accomplished that, it has also been the
sparkplug that ignited efforts to reverse the rural decline
Benson seemed locked into for a time.
“If you go back 15 years, Benson was facing a malaise
like that of so many other rural towns with slowly
declining populations, loss of jobs and eroding tax base,”
says plant manager Bill Lee. “The people of Benson are
survivors and have a very progressive business philosophy.
They were willing to vote with their pocketbooks — to
invest their money in the future of the community.”
In the years after the ethanol plant opened in 1995,
the business community launched a concerted effort to
keep a farm-manufacturing plant in town when it
appeared likely to move, and the plant soon expanded.
They raised $2.5 million to remodel the local
hospital…and attracted a biomass plant that will burn
turkey litter to generate 55 watts of electricity. The
success of Chippewa Valley and the town go hand in
hand and are indicative of “the power of people working
together in co-ops,” says Jan Lundebrek, president of a
local bank.
Price crisis prompts potato growers
to form national co-op
Stephen Thompson reports in the March/April 2005 issue:
“United Fresh Potato Growers of America was organized
March 3 in Washington, D.C., during the meeting of the
National Potato Council. The co-op hopes to become an
umbrella organization for a network of state co-ops that will
monitor the potato market and encourage farmers to take
voluntary action to limit potato production when required to
keep prices at, or above, a break-even level.
Whatever the cause in the slump in potato demand, the
impact on prices has been dramatic. Bulk prices for fresh
potatoes now hover around $2 per hundredweight — $2.50
below the price producers say they need to stay in business.”
A perfect storm
In March/April 2005, Campbell reports that the trustee for
Farmland is suing ex-officers and directors for “gross
negligence” in the co-ops’ collapse:
“In its final years, Farmland Industries was trapped in a
‘death spiral of debt,’ made worse by a series of business
blunders that provide evidence of reckless and negligent
behavior by the co-op’s managers and board,” according to a
lawsuit filed by the estate trustee for Farmland. The result
was the largest co-op bankruptcy in the nation’s history. The
board was little more than a rubber stamp for management’s
high-risk ventures, the lawsuit says, and directors repeatedly
failed to demand that obvious alternatives be explored.
The 34-page lawsuit reads bit like a “how-not-to-run-acooperative”
primer, complete with lessons in throwing good
money after bad. The lawsuit provides a detailed look into
how Farmland tried to grow its way out of debt by taking on
even more debt as it constructed major new facilities and
acquired another failing farm supply business. In the end,
Farmland succeeded only in swamping itself in an everdeepening
sea of red ink, which led to its bonds being
downgraded to “junk” status. That in turn led to a ‘run on
the bank’ by panicked bondholders when press reports picked
up on the co-op’s intensifying financial problems.”
Wind power energizing rural America
USDA Ag Economist Alan Borst, writing in the Nov.-Dec.
2007 issue:
“Wind energy is a bright spot on the rural economic
development horizon. Wind power projects across rural
America contribute to local and regional development. The
wind energy industry creates new jobs and new sources of
revenue for farmers and ranchers, and it increases the local
tax base of rural communities.
Wind turbines generate homegrown energy that helps
secure America’s energy future during uncertain times while
reducing pollution and conserving water resources. Wind
energy is the fastest growing energy source in the world, and
numerous rural communities are reaping the benefits.”
Co-ops get serious about renewable energy
Rural Development staff writer Lindsay Atwood reports on
formation of a new “super co-op,” in the July/August 2008
issue:
Electric co-ops across the nation are banding together to
do what co-ops do best: pool resources for the greater good
of everyone involved. In this case, they are joining to form
the National Renewable Cooperative Organization (NRCO),
essentially a “super cooperative” made up of many individual
rural electric co-op utilities. NRCO will identify viable
renewable energy projects and make them available to its
members to help co-ops diversify their portfolios. NRCO
provides the added benefit of helping co-ops in some states
meet the Renewable Portfolio Standards.
“As a generation and transmission co-op in central and
western Kansas, we realized that we have substantial wind
resources,” says Earl Watkins, CEO of Sunflower Electric
Co-op. The question is: “How can we help other G&Ts who
don’t have the resources in their back yard that we have in
our back yard?” The answer, he believes, is the NRCO.
