Rur Coop Nov05 V4 - USDA Rural Development · PDF filethe 1,700-page document, issues rang-ing...

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Stepping up biofuels production

Stepping up biofuels productionpage 10

USDA / Rural Development November/December 2005

2 November/December 2005 / Rural Cooperatives

Editor’s note: Guest commentary is byWilliam A. Steel, president of theNational Grange. The opinions expressedare his own, and do not necessarily reflectthose of USDA or its employees.

When Congress passes a bill, a lotcan be lost in the numbers. Dollarsigns and pages sometime overwhelmthe actual text of a bill, causing thepeople who are directly affected to losesight of why legislation was actuallypassed in the first place. The mam-moth Energy Policy Act of 2005,recently passed by Congress, fits com-fortably into this description. Withinthe 1,700-page document, issues rang-ing from daylight savings time to taxbreaks are thrown together and even-tually lost in the magnitude of the text.

The greatest criticism of this legis-lation is that it does little to immedi-ately address the short-term problemof rapidly escalating prices for gaso-line, diesel fuel, home heating oil,propane and natural gas. However,what should not be lost are the posi-tive, long-term effects it will have onfarmers and those living in rural com-munities.

Many of the provisions — directlyor indirectly — benefit rural areas, apart of the country that is sometimesoverlooked when it is time to set con-structive federal policies. One of themost significant benefits is the newRenewable Fuels Standard establishedin the new energy bill. By federal man-date, renewable fuels use will increaseto 7.5 billion gallons by the year 2012.This mandate will increase the demandfor corn (ethanol) and soybeans(biodiesel), driving up the price ofthese commodities and creating a bet-

ter market forfarmers.

Both largeand small pro-ducers will ben-efit from thismandate, with abiodiesel taxcredit of up to 10 cents per gallon,with up to 15 million gallons of pro-duction given to small producers tohelp balance competition. Many ofAmerica’s families, especially those onfixed incomes, struggle to pay theirnatural gas and electricity bills. Highnatural gas prices also translate intohuge costs for the typical farmer.

The domestic exploration and pro-duction of natural gas is another provi-sion designed to help farmers. For thefirst time in decades, the federal gov-ernment will be authorized to do acomprehensive survey of natural gasdeposits that lie off our nation’s coasts.

Current government estimates pre-dict that there is a 15-year supply ofnatural gas beneath our coastal waters,but no one knows for sure. In addition,special tax provisions will help pay fordevelopment of new supplies of naturalgas derived from abundant deposits ofcoal, as well as for new facilities tostore liquefied natural gas.

Input prices for fertilizer and other[crop inputs] are directly linked to theprice of natural gas. This expansion ofdomestic supplies of natural gas willdrive down costs for things like fertil-izer, saving farmers money while bet-ter using an already proven naturalresource.

Rural communities will benefit fromthe $800 million earmarked in therecently passed energy bill for an inno-

vative new bond authority created tohelp in the financing of renewableelectricity projects by rural electriccooperatives, municipal governments,and tribal investments.

This provision allows consumer-owned electric companies to issuebonds with zero percent interest. The“interest” paid on the bond comes,instead, in the form of federal tax cred-its to the investor. This new, creativesource of financing will increaseinvestment in consumer-owned electriccompanies and will directly benefit therural areas where these companies arepredominantly found.

Although some publications haveerroneously reported that the energybill provides few rewards for farmers,the National Grange strongly supportsthe passage of the Energy Policy Act of2005 and its solid investment in thefuture of rural America. It helps tosolidify renewable fuels as a staple ofAmerica’s energy use, while also reduc-ing costs of natural gas and makinginvestments in consumer-owned elec-tric companies more appealing. All ofthese provisions directly benefit farm-ers and rural communities, and theywill continue to steer rural Americatoward a positive and prosperousfuture. ■

— William A. “Bill” Steel,PresidentNational Grange

C O M M E N T A R Y

Energizing Rural America: How the energy bill helps us all

Cornfields flank a Midwest ethanol plant. USDA photo by Stephen Thompson

Rural Cooperatives / November/December 2005 3

Rural COOPERATIVES (1088-8845) is publishedbimonthly by Rural Business–Cooperative Service,U.S. Department of Agriculture, 1400 IndependenceAve. SW, Stop 0705, Washington, DC. 20250-0705.The Secretary of Agriculture has determined thatpublication of this periodical is necessary in thetransaction of public business required by law of the Department. Periodicals postage paid atWashington, DC. and additional mailing offices.Copies may be obtained from the Superintendent ofDocuments, Government Printing Office, Washington,DC, 20402, at $23 per year. Postmaster: send addresschange to: Rural Cooperatives, USDA/RBS, Stop3255, Wash., DC 20250-3255.

Mention in Rural COOPERATIVES of company andbrand names does not signify endorsement overother companies’ products and services.

Unless otherwise stated, contents of this publicationare not copyrighted and may be reprinted freely. Fornoncopyrighted articles, mention of source will beappreciated but is not required.

The U.S. Department of Agriculture (USDA) prohibitsdiscrimination in all its programs and activities onthe basis of race, color, national origin, age, disabili-ty, and where applicable, sex, marital status, familialstatus, parental status, religion, sexual orientation,genetic information, political beliefs, reprisal, orbecause all or part of an individual’s income isderived from any public assistance program. (Not all prohibited bases apply to all programs.) Personswith disabilities who require alternative means forcommunication of program information (Braille,large print, audiotape, etc.) should contact USDA’sTARGET Center at (202) 720-2600 (voice and TDD). To file a complaint of discrimination, write to USDA,Director, Office of Civil Rights, 1400 IndependenceAvenue, S.W., Washington, D.C. 20250-9410, or call(800) 795-3272 (voice), or (202) 720-6382 (TDD). USDAis an equal opportunity provider and employer.

Mike Johanns, Secretary of Agriculture

Thomas C. Dorr, Under Secretary,USDA Rural Development,

Peter Thomas, Administrator, Rural Business-Cooperative Service

Roberta D. Purcell, Deputy Administrator,USDA Rural Business-Cooperative Service

Dan Campbell, Editor

Vision Integrated Marketing/KOTA, Design

Have a cooperative-related question?Call (202) 720-6483, orFax (202) 720-4641, Information Director,This publication was printed with vegetable oil-based ink.

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COOPERATIVESCOOPERATIVESNovember/December 2005 Volume 72 Number 6

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F E A T U R E S

4 Picking up the PiecesCo-op aid helping other co-ops recover from ravages of Hurricane KatrinaBy Donna Abernathy

10 Prairie ProsperityFrom biofuels to buffalo bullion, Minnesota town cooperates to boost rural businessBy Stephen Thompson

15 IT having major impact on farmer-owned ethanol plants By Anthony Crooks and John Dunn

20 Do bigger ethanol plants mean fewer farmer benefits? By David Morris

25 Expanded database vital for future co-op research By Dan Campbell

30 Sales and net income climb for local co-ops in 2004By Beverly L. Rotan

D E P A R T M E N T S

2 COMMENTARY23 VALUE-ADDED CORNER 32 NEWSLINE38 2005 ARTICLE INDEX47 INSIDE RURAL DEVELOPMENT

O n t h e C o v e r :

Stairways spiral up and around fuel tanks at the SoyMor biodiesel plant, nearAlbert Lea, Minn., which is also home to an ethanol plant. The biofuels indus-try continues to expand throughout the nation’s corn- and soybean-belt. Seepages 10, 15 and 20 of this issue. USDA photo by Stephen Thompson


By Donna Abernathy

Editor’s note: Abernathy is a cooperative communications consul-tant based in Murfreesboro, Tenn.

t age 54, Ben Burkett has lived through fourmajor hurricanes in his native Mississippi. Hehunkered down with his family when 1969’sHurricane Camille cut a path of destructionand death through the state. But even that

experience did not prepare the produce grower for the rav-ages of Katrina.

In mid-October, the Mississippi Association ofCooperatives leader was among the hundreds of thousandswho were still picking up pieces of shattered lives and liveli-

hoods in the wake ofwhat is called theworst natural disasterin U.S. history. Withwinds in excess of150 miles per hourand tides of morethan 20 feet,Hurricane Katrinasmashed into the Gulf Coast on Aug. 29, pummeling 90,000square miles of Louisiana, Mississippi and Alabama.

While much of the nation’s attention was focused on NewOrleans in Katrina’s aftermath, a compelling story with ruralcooperative roots was unfolding across the storm-ravagedlandscape. From Burkett’s 38-member Indian Springs

Pick ing up the P iecesCo-op aid helping other co-ops recoverfrom ravages of Hurricane Katrina

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Fire and water: daysafter Hurricane Katrinapounded the GulfCoast, a home inBiloxi, Miss., burns.Remaining communityresources werestretched thin. USDAphoto by Bob Nichols

Below: Line repaircrews make their waythrough countrysidelittered with lives andlivelihoods blownaway by Katrina. Photoby Bret Curry, courtesyArkansas ElectricCooperatives Inc.


Farmers Association to the nation’s largestco-ops, CHS Inc. and Dairy Farmers ofAmerica, the storm wreaked havoc on thepeople and assets associated with member-owned businesses.

The homes of many co-op membersand employees were destroyed. Farmerco-op members had barns, equipment andcrops blown away. Electric cooperativeslost thousands of power poles thatsnapped like matchsticks in the storm.

As these coastal cooperatives struggledto recover, the sting of loss diminished ashelp and hope began arriving from co-opsacross the country. An employee of hard-hit Coast Electric Power Associationdescribed it as a tale of “cooperative spiritat its best.”

Direct hit“It was catastrophic. There are no

words to describe what I saw. We were atground zero,” said Coast Electric employ-ee Melissa Bryant, struggling to explainwhat she witnessed in the hours after

USDA hurricane-relief teams active on multiple fronts

Editor’s note: Since press deadline for this magazine in mid-October,Hurricane Wilma caused severe damage in southern Florida. USDA’sresponse to that disaster is not reflected in the following article.

From efforts to keep grain shipments rolling, to finding emergencyhousing for hurricane evacuees and rescuing people and abandonedpets and livestock, more than 4,000 USDA employees engaged in hurri-cane-relief efforts in the Gulf Coast region have been delivering vital ser-vices.

USDA RuralDevelopment hasled the federaleffort to providehousing for hurri-cane evacuees, hasgranted extensionson payments tohome borrowersand is assistingrural utilities inrebuilding electri-cal, telecommunications and water systems. As of mid-October, RuralDevelopment had placed about 5,000 evacuees in more than 1,500 hous-ing units in 19 states and provided nearly 23,000 families with temporaryloan-forbearance agreements on mortgage payments.

Rural Development loan specialists have helped staff FederalEmergency Management Agency (FEMA) emergency response centers.To speed the process of helping victims, staff members were dispatchedto the field with wireless, laptop-computers to access the Internet toassist victims with completing the FEMA benefits application process.

As with Hurricane Katrina, USDA Rural Development prepared a com-plete inventory of USDA-financed housing and other facilities impactedby Hurricane Rita. This includes properties financed through USDA’sCommunity Facilities, Housing and Business & Cooperative programs.Additionally, USDA has worked with numerous partners — includingelectrical co-ops, telecommunications providers and rural water associa-tions — to implement existing disaster-recovery plans (which USDArequires to be in place for its borrowers).

USDA has taken numerous steps to reduce stress on the grain trans-portation system caused by Hurricane Katrina. These actions includeassisting with the movement of barges of damaged corn from NewOrleans; providing incentives for alternative grain storage; encouragingalternative shipping patterns to relieve pressure on New Orleans, andallowing producers to store USDA-owned corn on the farm with theoption to purchase it.

Following are some examples of how some other USDA agencies areresponding to the most deadly and costly hurricane season in the nation’shistory: • USDA Forest Service staff has been managing evacuation centers and

USDA Forest Service staff assist members of theSt. Alphonsus Catholic Church in locating a siteto set up a kitchen. USDA photo by Bob Nichols

continued on page 6continued on page 7


base camps, providing logistical support, clearing road-ways, operating mobilization centers and trailer stagingareas. Forest Service Incident Management Teams havehelped provide more than 600,000 people with commodities;2.7 million meals, 4 million gallons of water and 40 millionpounds of ice have been shipped.

• USDA’s Animal and Plant Health Inspection Service(APHIS) sent nearly 50 veterinarians, wildlife specialistsand quarantine experts to assist with recovery efforts.From rescuing people stranded by flood waters, to rescuingand recovering pets, livestock and zoo animals, APHIS hasplayed a critical role in the aftermath of the storm. Morethan 300 people were transported to safety in New Orleansby APHIS employees and close to 10,000 animals havebeen rescued and sheltered as a direct result of federal,state and private efforts. Many of these animals have beentreated by USDA/APHIS veterinarians, who provided med-ical care while the pets await the return of their owners atlocal shelters. APHIS veterinarians assisted with efforts torescue eight dolphins from the waters surrounding Biloxi,Miss. The animals had been swept out of their pools intothe Gulf of Mexico. USDA/APHIS employees have ensuredthat any surviving livestock in Mississippi and Louisianahave fresh water and dry ground for grazing or new balesof hay. APHIS staff even helped rescue laboratory mice atTulane University, which are vital to cancer research andthe culmination of years of work by scientists.

• USDA Natural Resources Conservation Service (NRCS)maps have been used by first responders to assess groundconditions during the search and rescue for survivors.

Current satellite and airborne imagery was used to locatepossible dangers, such as fires, and the safest route to res-cue survivors. Through the use of NRCS soil survey data,USDA located the best areas for animal debris disposal andburial while protecting water sources. “Before and after”satellite images of the hurricane-affected areas will helpUSDA and other federal agencies measure damages andassess new coastlines. NRCS soils and imagery data areavailable to the public at http://datagateway.nrcs.usda.gov.NRCS continues working with other agencies to assist withpost-disaster cleanup and restoration projects. It has pro-vided approximately $17.4 million in Emergency WatershedProtection Program funds for hurricane relief efforts. FEMAprovided authority and $10 million to NRCS for the disposalof hundreds of animal carcasses. In Mississippi, more thansix million birds have been buried with assistance fromNRCS.

• USDA’s Farm Service Agency (FSA) has made $170 millionin emergency assistance available to agricultural produc-ers. Of this amount, $150 million is available through theEmergency Loan Program for assistance if there is a 30-percent reduction in crop production or physical losses tobuildings or livestock. Another $20 million is availablethrough the Emergency Conservation Program for repairingland damage and cost-share assistance for up to 75 per-cent of the cost.

Additional information and updates about USDA’s hurri-cane-relief efforts are posted daily on the Web at:http://www.usda.gov. ■

With limited barge traffic on the Mississippi River in New Orleans following the hurricane, seaworthy barges were moved to grainelevators along the river to have their cargo transferred to ships. USDA Photo by Bob Nichols

USDA hurricane-relief teams active on multiple fronts continued from page 5


Katrina. The co-op’s three-county service area is thesouthwest Mississippi regionthat received the brunt ofKatrina’s fury.

Coast Electric servesapproximately 60,000 memberson more than 5,900miles of power line.Following the storm,some 30,000 polesand 10,000 trans-formers had to bereplaced. Co-opmanagement initiallyestimated it wouldtake at least sixweeks of work torestore power tomost members.

Just three weekslater, 29,000 poleshad been replacedand power wasrestored to 99 per-cent of memberswho were able toreceive electric ser-vice. This “miracle”was performed by acrew of 3,200 co-opemployees who rep-resent 19 states and 125 electric co-op companies.

The feat was even greater considering that nearly 60Coast Electric employees lost their own homes and belong-ings in the storm. Thirty had all of their personal vehiclesdestroyed, leaving them with no way to get to work. “Wehad linemen reporting for work who had literally nothingleft but the shirts on their backs,” said a still-emotionalBryant, a communications specialist.

“This horrible situ-ation and the greatsuccess we achieved inrebuilding our systemin just three weeksgave me an opportu-nity to tell the worldabout the power ofco-ops,” Bryant saidas she reeled off along list of donationsand human supportsister cooperatives hadprovided. “This iscooperative principlenumber six in action:

cooperatives helping cooperatives.” The cooperative spirit that accomplished work so quickly

in the Coast Electric service area is now the subject of aTouchstone Energy Cooperative television commercial thatis running nationwide.

A sobering thought remains, however. Nearly 10,000Coast Electric members were still without power at pressdeadline for this publication (Oct. 17) because homes and

Clockwise from upper right: USDA personnelreview weather data at the IncidentCommand Post in Gautier, Miss. USDA RuralDevelopment staff discuss the housing loanapplication process with Undersecretary forRural Development Thomas Dorr at a FEMACenter in Baton Rouge. USDA photos by Bob

Nichols; An expression of grati-tude for the efforts of CoastElectric Power Co-op. Reliefcrews were housed in a giant“circus” tent dubbed “HotelKatrina” at Coast Electric’sGulfport, Miss., office. Photo byBret Curry, courtesy ArkansasElectric Co-ops Inc.


buildings were either completelydestroyed or too damaged to acceptelectricity. The co-op is building newlines to areas with the most severedamage. The cost to rebuild is stagger-ing. The co-op spent $3 million a dayfor personnel and materials to restorepower. The total cost for systemrestoration is projected at $100 mil-lion.

Down, but not outPetal, Miss., is some 70 miles from

the Gulf Coast. That’s normally a safedistance from the worst a Gulf Coasthurricane can dish out. But not thistime. Several weeks after the storm,Petal-based IndianSprings FarmersAssociation’s onlyproduce packing-house remained heav-ily damaged andwithout electricity tooperate cold storageequipment. Membersof this small fruit andvegetable marketingcooperative lostfreshly picked inven-tory stored in thepacking facility aswell as crops in thefield.

Nearly half of theco-op members are“completely wiped out,” said memberBen Burkett. “Fifty acres of watermel-ons are gone. Eggplants and jalapenosare stripped — all of it gone.” Worsethan the damage to the building,Katrina blew away 65 percent ofIndian Springs’ direct and commercialmarkets. New Orleans outlets and casi-nos in the Biloxi, Miss., area were pri-mary customers.

Two weeks after the storm, mem-bers were left struggling to find waysto plant their next crop, essential toassuring the survival of their individuallivelihoods as well as their member-owned business. “This is the optimumtime to plant our squash, bell peppersand cucumbers, but we can’t get theinputs,” Burkett explained.

When word spread about of thedesperate need for fuel, some Iowa co-op members came to the aid of IndianSprings members and other Mississippigrowers. West Central Cooperativedonated 15,000 gallons of soy biodieselfuel to help their fellow farmers plantfall crops on time. Until its cold stor-age is again operational,Indian Springs memberswere trucking theirremaining produce to afarmers’ market inMemphis, where anotherfarmer co-op is sharing itsspace.

Farmer cooperatives

from across the nation have stepped upto provide relief to those in hurricane-blasted areas. They have donated food,livestock feed, generators, fuel suppliesand transportation. Farmer coopera-tives, their employees and farmermembers have directly contributedmore than $1.2 million in hurricanerelief, the National Council for FarmerCooperatives reports.

Dairy devastationMore than 300 Dairy Farmers of

America (DFA) members with about25,000 cows in Louisiana’s “Floridaparishes” (east of Baton Rouge, alongInterstate 12) were severely crippledfollowing Katrina’s landfall. Poweroutages, feed deficiencies, blocked

roadways, structural destruction andinadequate milk storage amounted toan estimated $40 million in damages inthe dairying area north of LakePontchartrain, according to DFA offi-cials. The dairy co-op markets rawmilk for an estimated 90 percent of theproducers in the area.

Fellow DFA members and person-nel came to the rescue of these dairyfarmers. A cooperative-owned plant inFranklinton, La., became a crisis cen-ter, where members could turn forrelief supplies. DFA members outsidethe hurricane-affected region spranginto action, securing cattle feed, deliv-ering generators and arranging trans-portation for supplies.

Milk haulers carried chain saws,cutting their way through blockedroads. In the first two weeks followingthe disaster, DFA delivered approxi-mately 100 industrial generators capa-ble of powering members’ milking par-lors and coolers.

The co-op also coordinated anddelivered six loads of fuel to keep thosegenerators running. Four weeks afterthe storm, 10 percent of the affected

USDA/APHIS staff rescued thousands of strandedpets and helped establish an intensive-care unit atthe Louisiana State University Veterinary School,where faculty and students operated on injuredpets. Rhonda Bonds (above, right) retrieved hercat, Mittens, 21 days after being forced to flee herapartment. Despite being malnourished, the catwas otherwise fine. USDA photos by Bob Nichols

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griculture Secretary MikeJohanns has announcedthe selection of 171 appli-cations from 42 states toreceive over $14.6 million

under USDA Rural Development’sValue Added Producer Grant (VAPG)program. “These grants will create jobsand improve financial returns for grow-ers and farm families across ruralAmerica,” said Johanns. “These fundsassist agricultural producers in market-ing their products and enhance oppor-tunities for the development of alterna-tive fuels from renewable energysources, part of President Bush’s com-prehensive national energy policy.”

Since 2001, the Bush Administrationhas committed over $115 million to sup-port value-added agricultural invest-ments, including more than 110 energyrelated projects. Value-Added ProducerGrants may be used for planning activi-ties, such as feasibility studies or businessplans, or to provide working capital formarketing value-added agricultural prod-ucts and for farm-based renewable ener-gy projects.

Eligible applicants are independentproducers, farmer and rancher coopera-tives, agricultural producer groups, andmajority-controlled producer-based busi-ness ventures. Value-added products arecreated when a producer takes an agri-cultural commodity, like milk or vegeta-bles, and processes or prepares it in away that increases value to consumers.For example, in Nebraska, an on-farmdairy processing plant that manufacturesa Hispanic line of cheeses will receivefunding to prepare a marketing plan anddesign promotional materials and bi-lin-

Bioenergy, da i ry p roducers amongrec ip ients o f $14.6 mi l l ion in VAPGs

ACo-op recipients of 2005 VAPGs For complete list, visit “newsroom” at: www.rurdev.usda.gov

STATE NAME AMOUNTCalifornia Calcot, Ltd. $149,500California Olive Growers Council of California $100,000California Pacific Coast Producers $100,000California Sun-Maid Growers of California $75,000California Sunsweet Growers, Inc. $150,000Colorado Mountain View Harvest Cooperative $73,500Florida North-South Institute of Southwest Broward

Vegetable Growers Association $95,000Florida SunFresh of Florida Marketing Cooperative $100,000Iowa America’s Premium Pork DBA Allied Producers

Cooperative $105,275Iowa Farmers Cooperative $100,000Iowa Heartland Fish Cooperative $86,325Iowa Swiss Family Farms, Co. $75,000Kansas Frontier Equity Exchange $41,500Massachusetts National Grape Cooperative Association, Inc. $100,000Michigan Michigan Turkey Producers Cooperative, Inc. $150,000Minnesota Bongards Creameries Cooperatives $150,000Minnesota Central Minnesota Soybean Processors $40,000Minnesota Stickney Hill Dairy Inc. $150,000Mississippi Mississippi Fruit and Vegetable Association $150,000Mississippi Miss-Lou Blueberry Growers Association

Cooperative $150,000Missouri Alma’s Farm Fresh Meats $150,000Missouri MFA Incorporated $100,000Missouri Missouri Masa, Inc. $150,000Missouri Sho-Me Livestock Cooperative, Inc. $147,112Missouri Soy Labs, LLC $150,000Montana Western Montana Growers Cooperative $59,998Nebraska Farmers Cooperative Elevator Company $29,000Nebraska Nebraska Turkey Growers Cooperative $64,840North Carolina Old North State Winegrowers Cooperative

Association, Inc. $150,000North Dakota Fessenden Cooperative Association $150,000Ohio Mercer Landmark, Inc. $31,250Oregon Oregon Trail Beef Cooperative $150,000Oregon Oregon Woodland and Sales Cooperative $86,000Oregon Siskiyou Sustainable Cooperative $23,210Pennsylvania Northern Tier Sustainable Meats Co-op, Inc. $40,748Texas Rio Grande Valley Sugar Growers, Inc $100,000TOTAL $3,723,258continued on page 34


By Stephen Thompson,

Assistant Editor

community in southeast-ern Minnesota illustratesthe principles of coopera-tion to promote economicgrowth and prosperity in

the face of local economic setbacks.Community members of the town ofAlbert Lea have found that workingtogether, pooling resources and exploit-ing every opportunity are the keys toencouraging new growth. Since losing500 jobs in 2001 when a processingplant operated by Farmland Foodsburned down, Albert Lea and the sur-rounding Freeborn County (with a pop-ulation of about 33,000) have found newsources of income and expect to add 500new jobs in the next 18 months.

The local electric distribution co-op, Freeborn-Mower CooperativeServices, is part of this community

effort, and uses its resources to bringnew business to the area.

“Our membership isn’t growing innumbers very much,” says TimThompson, president and CEO of theco-op. “Our growth strategy is work-ing for economic development andimproving the overall quality of lifehere.” As well as providing businesseswith competitive rate packages andhelp in minimizing power usage, theco-op offers financing using two fund-ing sources: USDA Rural Develop-ment Rural Economic Developmentgrants and loans; and a program ofDairyLand Power Cooperative (Dairy-Land), a power-generation co-op thatprovides electricity to Freeborn-Mower.

Ethanol, biodiesel plantsboost rural community

Just outside the city stands one ofthe showpieces of Albert Lea’s eco-nomic growth effort. The profitable

Exol corn ethanol plant is 100-percentfarmer-owned through a new-genera-tion cooperative, Agra Resources. Itshares a site with a new soy biodieselplant run by SoyMor, another cooper-ative that shares many of its memberswith the ethanol co-op. By sharing thesite, both businesses save on infrastruc-ture costs, including utility hook-ups.

Exol began operation in 1999 with a13-million-gallon-per-year nominalcapacity. An expansion in 2002 tripledcapacity to 36 million gallons. Theplant is run and its products marketedthrough a contract with BroinCompanies, an investor-owned consor-tium that offers design and construc-tion of ethanol plants as well as mar-keting and management services. Broincurrently works with 15 Midwesternethanol plants, and markets DakotaGold distillers grains — the byproductof ethanol production used as animalfeed — as a premium product.

Pra i r ie Prosper i ty From biofuels to buffalo bullion & zamboni repair,Minnesota town cooperates to boost rural business

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The SoyMor biodiesel plant, above, is the resultof a cooperative effort that involved local co-opsand businesses, nonprofits, individuals andstate, national and local government. USDA photos by Stephen Thompson

The facility is now being upgradedonce again, this time to install Broin’snew proprietary “fractionating” tech-nology that removes part of the cornkernel before fermentation. The result,claims Exol general manager RickMummert, is higher-quality distillersgrains.

Freeborn-Mower and DairylandPower played a major rolein getting the Exol projectgoing. Dairyland saw anopportunity to add a sub-stantial, steady load to itssystem, thus improvingefficiency in off-peak hoursand lowering costs, says itschief financial officer,Robert Mueller. But evenmore important, the oper-ation had the potential tobenefit the entire area.

“What sold it to us wasthat it was all farmer-owned,” says Mueller.“This wasn’t an outsidegroup of investors thatwould take their profitsaway. It was members ofthe rural community — and the com-munity would reap the rewards of therisk they took.”

Freeborn County provided crucialfinancial and technical support for thedevelopment of the infrastructurerequired for the biofuels plants. Thissupport included a $4 million, low-interest loan “that helped get the ballrolling,” said Susan Miller, countyengineer. It also provided a $75,000,low-interest loan to develop a railroadspur to serve the plants.

Another $2 million in county andstate funds were used to build access

roads from the plants to Interstate 35and U.S. 65 that can support 10 tons ofweight from corn and soybean trucks.The county provided a $200,000, low-interest loan and did the design andconstruction on sanitary sewer linesthat carry waste from the plants toAlbert Lea’s water treatment plant.

Electric co-ops kick start stalled project

When the electric cooperatives firstgot involved, the Exol project was at astandstill. An overly ambitious businessplan had scared away potential sourcesof financing. Dairyland and FreebornMower kick started the project by pay-ing for a study by a reputable consult-ing firm.

The study found that starting oper-ations with a smaller plant with thecapability to upgrade later offered abetter solution. It also recommendedBroin over the original plan’s engineer-

ing and construction contractor.Dairyland donated the use of its ownairplane to fly ethanol co-op boardmembers to inspect Broin’s plants, andeven provided a 3-year repaymentguarantee to the small local bank issu-ing the construction loan.

Freeborn Mower took some risks aswell. The site chosen for the ethanol

plant was originally partof the local investor-owned electric compa-ny’s service area. Theelectricity distributionco-op offered to swapaccounts, handing overthe contract for AlbertLea’s sewage treatmentplant — an established,blue-chip customer —in exchange for theright to provide servicefor a start-up operation.In addition, the co-ophad to build a newpower substation just toserve the new plant, thecost of which it wouldhave to write off if the

ethanol plant failed. Dairyland helped out by agreeing to

shoulder half of the loss if the substa-tion had to be abandoned, and by giv-ing Freeborn Mower a 10-year guaran-teed rate plan for the power theethanol plant would consume. Underthe plan, the distribution co-op paysthe same discounted rate for 5 years,after which the rate increases by 2 per-cent each year for another 5 years. Thepower co-op also agreed to pick uptwo-thirds of any of the distributionco-op’s unpaid accounts receivable forthe ethanol plant.

Albert Lea, Minn., is benefiting not only from two new biofuels co-ops, but anumber of other new businesses started by a local business incubator. USDAphotos by Stephen Thompson



USDA funds biofuel plantsFreeborn Mower made its own

contribution to the plant’s con-struction to the tune of a$400,000 no-interest, 10-yearloan. The loan was made possibleby a Rural Economic Develop-ment Grant (REDG) from USDARural Development. REDGs aregiven to rural electric and tele-phone utilities to promote eco-nomic development and job cre-ation in their service areas.

Another organization thathelped the ethanol co-op get onits feet was the Albert LeaChamber of Commerce, whichdonated free office space andfacilities for meetings while thecooperative was being puttogether. “We don’t havethat many resources,”says Susie Petersen, thechamber’s executivedirector, “But we usewhat we have to help newenterprises, includingpromoting local supportand providing publicity.”

Exol is now a memberof the Chamber, as isSoyMor, the cooperativerunning the biodieselplant on the same site.

Like Exol, the SoyMorfacility is fully farmer-owned, with 500 mem-bers — half of whom livein nearby Iowa — and atotal investment of $110million. Also like Exol, itsoperations and marketingare managed by a contractor — in thiscase West Central Soy, another co-op.The plant — currently the largest inNorth America — began full produc-tion at an annual rate of 30 milliongallons earlier this year. Like the Exolplant, SoyMor received a $400,000REDG loan through Freeborn Mower.Tim Thompson points out that earlierloans made from the REDG fund arenow being paid back, allowing theelectric co-op to loan the money againto promising business ventures.

With the two operations next toeach other, and with similar capacities,the contrast between the two is strik-ing. The ethanol facility dwarfs thebiodiesel plant. This is, in part,because the ethanol plant has largestorage bins for the corn used as rawmaterial, while the soy operation cur-rently has its beans crushed elsewhereand the oil delivered. However, evenleaving out the bins, ethanol produc-tion requires a much more massivestructure, and the facility is far morecomplicated.

Biodiesel potentialcould loom larger thanethanol

SoyMor’s first ven-ture was a plant com-pleted last year thatmanufactures lecithin, avaluable soy extractused in foods, cosmet-ics, pharmaceuticalsand other products.Lecithin production forpharmaceutical usepromises good returns,says board memberGary Pestorious, afounding member ofboth the Exol and

SoyMor co-ops. The operation usesadvanced technology to produce thehighest quality product, he says, with-out unwanted chemicals such as hexanethat contaminate lower grades oflecithin. This enables the co-op to sellits product at a premium. Nevertheless,he thinks biodiesel is already beginningto come into its own, especially withpetroleum prices climbing.

“I now believe that there is moredemand than supply,” he says. “Peoplewant this fuel. They want it bad.”Pestorious thinks biodiesel production

Many rural Minnesotatowns are striving touse all availableresources to maintaingrowth and prosperity.

Steve Wenzel (right,rear), state director forUSDA RuralDevelopment inMinnesota, discussesefforts to build a ven-ture-capital fund withAlbert Lea civic lead-ers at the Freeborn-Mower CooperativeServices headquarters.


could be profitable even without gov-ernment incentives, and that demandfor the fuel will eventually outstrip thatfor ethanol. The reasons include notonly rising petroleum prices, but alsoSoyMor biodiesel’s high quality, whichresults in better mileage and lessengine maintenance. “Our product isthe best there is,” he declares.

Pestorious illustrates his point withan anecdote. One company bought200,000 gallons of SoyMor’s biodieselthe first year, he says, and came backasking for 3 million gallons the next.“That’s how it’s going to go.” He’ssimilarly optimistic about ethanol, andbelieves that its production could even-tually use 15 percent of the nation’sannual corn crop.

Sharing the site with the Exol plantbrings many advantages, includingcost-sharing for a rail loop facility thatwill be able to handle 280 railroad carswhen finished. Another is a ready sup-ply of a vital production factor.Biodiesel is produced from natural oilsand fats using a chemical reactioninvolving alcohol.

Most manufacturers use methanol,also known as wood alcohol, for thispurpose. But the SoyMor plant usesethanol supplied by its sister co-op.

Business incubator aids start-upsMeanwhile, across town a business

incubator is helping some much small-er ventures get started. The Albert LeaBusiness Development Center is run

by the Albert Lea EconomicDevelopment Agency. Built with thehelp of another REDG loan fromFreeborn Mower, it offers support tostart-up businesses that would other-

A tanker truck takes on a load of biodiesel at the Soy-Mor loading facility. The Exol ethanol plant can be seenin the background. The two plants share a site and infra-structure.

One companybought 200,000gallons of SoyMor’sbiodiesel the firstyear, and came backasking for 3 milliongallons the next.


wise have trouble getting off theground. The Center provides space ina modern business building suitable forwarehouses, small manufacturing oper-ations, food preparation and storage,and offices. Reception and other busi-ness services are included, as well aslegal, accounting, marketing, and busi-ness planning assistance.

To qualify to use the incubator,businesses must submit a validbusiness plan and other informa-tion supporting the viability ofthe proposed enterprise. There isan informal time limit of 5 yearsfor use of the facility, says RyanNolander, the agency’s businessdevelopment director, but thelength can sometimes be extend-ed, depending on the circum-stance. He points out that, whilethe businesses nurtured by theincubator are small, it is smallbusinesses as a group that providethe biggest single and fastest-growing source of jobs in theUnited States.

The Center currently housessix budding enterprises. One isDaisy Blue Naturals, a manufac-turer of all-natural lotions, soaps,shampoos and other cosmeticproducts. The business began inchemist Jena Thompson’s home,when her young son was found tobe allergic to the ingredients ofcommonly available baby oils andsoaps. Thompson tried to findnatural-based products, she said, but“according to federal governmentguidelines, only a portion of a productneeds to be natural in order for it to belabeled as such. And everything trulynatural was outrageously expensive.”So, she formulated her own soap andbaby oil.

Soon, Thompson’s neighbors werebuying her formulations, and her busi-ness grew using direct sales throughhouse parties. In July 2002, the busi-ness moved into a space in the incuba-tor facility, and has expanded into larg-er spaces there three times since. All ofDaisy Blue’s products are manufac-tured on the site, using only natural

ingredients. The company now employs 13 peo-

ple, including Galen Spinler, its chiefchemist. Spinler used to work in thedefense industry, but far prefers hiscurrent job, saying, “It’s a great bunchof people to work with.”

From wheelchair cushionsto dried buffalo bullion

The business incubator also housessix other enterprises, including a firmthat makes wheelchair cushions, acompany that manufactures a driedbouillon mix made from buffaloinstead of beef, an electrical whole-saler, a caterer and a company that ser-vices ice resurfacing machines used onskating rinks.

Nancy Jensen runs one of the small-er operations, Day Lily Enterprise Inc.,a shop that makes custom-printed dayplanners. Jensen ran her business outof her home for five years, until shewas given the opportunity to rent the

incubator space.“I quit my job and stepped out on

faith,” she says. With only oneemployee, the business is still small,but growing, says Jensen, who is grate-ful for the chance to get her dream offthe ground. She says the DevelopmentCenter gives her enterprise an ideal

venue for getting started. “I loveit here,” she says.

The agency offers help toother businesses as well, includingaid in locating financing and suit-able properties, and a revolvingloan fund that offers up to$50,000 to small businesses foracquisition of equipment. It alsooperates the Albert Lea SmallBusiness Development Center, ajoint effort by the Minnesota stategovernment, a local technical col-lege, and the Small BusinessAdministration that offers help inevaluating profitability, marketing,planning, loan application packag-ing, and related services.

The economic developmentcommunity in Albert Lea isn’tlooking back. Currently on theagenda is setting up a venturecapital fund to bring potentiallyhigh-income new ventures to thearea. Representatives of theChamber of Commerce, theAlbert Lea Development Agency,Freeborn Mower and other orga-nizations are currently exploringways to find funding for such an

initiative. On Sept. 27, they met in a confer-

ence room at the Freeborn Moweroffices with USDA Rural DevelopmentState Director Steve Wenzel to discussthe venture capital fund and otherdevelopment issues. Wenzel says he’sencouraged by the initiative shown bythe group. “I think cooperation andcoalition among government and non-government entities is the key to jobdevelopment in rural areas,” saysWenzel. “USDA takes a very activerole, but it’s the inventiveness andresourcefulness of members of thecommunity that’s going to make thedifference.” ■

One of the tenants of Albert Lea’s business incubator isGeorge Kessel’s Engineered Ice Systems, which servicesand repairs ice-resurfacing machines for skating rinks.Photo courtesy Albert Lea Economic Development Agency


By Anthony Crooks and John Dunn,

Ag Economists

USDA Rural Development

Editor’s note: This is the second of two articles focusing on theimpact that evolving information technology is having on theethanol industry. The first article appeared in the September/October 2005 issue, which is on-line at: www.rurdev.usda.gov/rbs/pub/openmag.htm . These articles are based on a forthcomingreport: “The Impact of Information Technology on Farmer-ownedEthanol Plants,” RR 209. Call (202) 720-6483 to order, ordownload at www.rurdev.usda.gov. Available in January 2006.

nformation technology (IT) is having a pro-found impact on the ethanol industry, especial-ly in the financing, construction and opera-tions of ethanol plants. It helps to strip costsout of ethanol plant systems, promotes stan-

dardization and mitigates production risks. In addition, IT:

• Gets plants up and running as much as 6 to 12 monthssooner than otherwise;

• Keeps plants running to increase production efficiency.This new technology reduces operational downtime andincreases the annual days of operation from 340 to asmany as 361.

• Facilitates the inflow of capital into the industry by help-ing to quantify the risks associated with plantinvestment/operations to prospective investors.

• Alters the nature of a firm by digitizing and decomposingon-site activities (breaking down large jobs into severalsmall jobs) that can be outsourced, off-shored and other-wise moved around. This changes the economics of plantlocation by impacting where various assets are deployed.

• Changes labor mobility by moving jobs to labor as wellas labor to jobs.

• Alters the skill sets needed for plant managementand labor.

• Further separates ownership from managementand allows firms to transform themselves faster.

• Alters a firm’s relationships to business and

industry because it supports a contract-based industrystructure that creates significant linkages/collaboration andenables coordination across enterprises, companies andspecialties.

• Gives rise to the ethanol franchise and uses the standard-ization of that model to reduce uncertainty.

Outside investors increasing stakeA better understanding of risks associated with

ethanol plants allows the financial communityto reduce lenders’ equity participationrequirements, to reduce interest ratesand the overall cost of capital andinvite participation among out-side investors. IT has alteredour view of the traditionalmarket structure.Economic power nowlies in aggregatinginformation assets,not in the physicalassets of plant andequipment asso-ciated withproduction.

IT hav ing major impact onfarmer-owned ethanol p lants

I

USDA photos by Stephen Thompson


With regard to IT and the futuredynamics of the industry, as IT appli-cations within the ethanol industrycontinue to evolve, competitive forceswill spur efficiencies and dynamicgrowth. Work activities will increas-ingly be dispersed across geography,institutions and dimensions as man-agers and decision makers ask: “Whatelse can be digitized, decomposed andoutsourced?”

The balance of economic powerwithin the industry shifts daily fromthe traditional aggregation of physicalasset ownership to the aggregation andintegration of information services.However, competitive advantage heldtoday is more easily eroded andreplaced. This understanding raises thequestion: “Will the emerging price-discovery mechanisms (futures marketand market transparencies) change thecomparative advantage of the informa-tion aggregators?”

The dynamic, intellectual-propertynature of IT continues to shape thecompetitive structure of the industry.Where will the talent to continue oper-ations in this environment come from?

Information technologyhas eroded and distributed themarket power once heldexclusively by global giants.Enhanced access to inputs andproduct markets among mid-sized fuel ethanol firms aris-ing from the adoption ofinformation technologies mayinspire similar developmentalopportunities in ruralAmerica.

The notion that firms mayachieve competitive advantagefrom an efficient, internalinformation system — in lieuof the high levels of verticaland horizontal coordinationtypically garnered solely froma large size operation — pro-vides both an encouragementfor the relative success ofmid-sized firms and a devel-opmental template for similarenterprises in rural areas.

Innovation related to newIT is leading to the development ofnew ethanol products innovation andcommercialization.

DDG product developmentLand-grant universities and private

corporations have worked together tosignificantly enhance the productvalue of distillers grains. Researchers,such as Vern Kelly and Jerry Shursonat the University of Minnesota, haveserved to not only expand existingmarkets for distillers grains as cattlefeed, but have also developed newopportunities in feeding hogs. So,instead of being an afterthought oreven a waste product, as distillersgrains were once considered, DDG isnow a significant component of aplant’s revenue stream.

Early on, some plants were fortu-nate to have Farmland Industries asone of their investors. Farmland’s feeddivision helped to market DDG.Farmland also sponsored and conduct-ed research on how best to use dis-tillers grains. Farmland’s feed divisionhas since been absorbed by Land O’Lakes, which markets DDG and is

continuing to do research at its ownfacilities and in collaboration with uni-versities. Such research is needed,because the ethanol industry redirectsabout 10 percent of the nation’s corncrop away from the livestock-feedingindustry. Every opportunity for dis-tillers grains to be included in animalrations — in substitution for eitherenergy or protein — relieves some ofthe upward pressure on corn prices asit increases the value of distillersgrains. Inclusion rates for DDG infeed have increased for cattle (up to 25percent), swine (10 percent) and poul-try (5 percent), but there is still anexcess supply and the price is trackingdownward again.

Feed researchers and developmentgroups continue to educate the indus-try and develop its customer base.However, the product remains a bar-gain relative to corn, which in turnencourages feeders to pursue substitu-tion opportunities.

Initially, almost 100 percent of thedistillers grains that were sold wenttoward dairy rations. Plant managerssoon discovered that drying the wetgrains would not only increase theproduct’s shelf life, but would alsoimprove consistency and quality.Local feeders pressured plants to sellquickly and at a discount. Sometimesthe best offer most plants receivedfrom feeders early on was paying thefreight to haul it off. But now — afteryears of research, some technologicaldevelopments and a lot of education— feeders know precisely the value ofDDG.

Bio-refineries promise range of products

The bio-refineries concept is similarto the petroleum refinery concept.Feedstock (biomass, in the case of abio-refinery) is converted into a widerange of products, based on marketconsideration and contractual arrange-ments. The biomass feedstock is typi-cally fractionated into its various com-ponents. Those components are thenprocessed into intermediate and finalproducts.

Grain from Minnesota corn bins such as these is fuel-ing the expansion of the ethanol industry. Farmer-own-ers of ethanol plants have averaged significant gainsper bushel of corn.


What does a medium-sized ethanol plant need tosurvive a two-year period of low prices? With record-high fuel prices, that is obviously not a problem at pre-sent. But the market is cyclical, and some day theworm will turn again. Experience shows that thebiggest key to surviving a low-price cycle is a strongCEO or, lacking that, a strong board of directors — andpreferably both.

The board must be able to draw on its managers toobtain the needed information to run the plant. Theyneed a business plan that is updated each year. Theyneed to have a professional marketer for ethanol andfeed. The marketer must understand the customers’needs (particularly for DDG) so that they can helpdevelop the market.

The board needs a risk-management plan that helpshedge the co-op’s corn and natural gas. It needs tocontract the sale of its ethanol and DDG with a built-in“crush margin.” The people developing the risk-man-agement plan should be working to provide a programthat will estimate the volatile factors that the plantfaces and indicate whether the expected return isenough to validate the risk.

Perfect hedges are not available, but risk-manage-ment plans can make use of the new ethanol contractand hedge DDG based on corn and the natural gascontract prices (although a number of plants are pur-suing renewable and other energy alternatives to nat-ural gas).

Long-term ethanol purchase contracts are becom-ing more common. One example is a three-year con-tract with the first-year basis being the cost of unlead-ed gasoline, while the basis for the next two years is

crude oil price. However, anyone using these contractswould need to be prepared to meet substantial margincalls and have access to adequate capital.

Plants need programs for both preventive and pre-dictive maintenance and to carefully manage theirspare parts inventory. An unplanned plant shutdownsoon creates cash-flow problems. Maintenance ofplants built 5 and 10 years ago is quickly becoming afirst priority. Furthermore, facilities looking to cut costssoon realize that maintenance/repair is a significantportion of plant operating expenses.

Many plants now employ IT solutions to take a moreproactive stance on their maintenance program. A pre-dictive maintenance program is based on a plant’s his-tory of operating requirements and is derived from astatistically-based estimate of life span (or failure rate)and priority ranking (importance to operations) for eachpiece of equipment and machinery in the plant. Thesoftware dictates the priority of all maintenance work,schedules any required materials/equipment for just-in-time delivery, and documents the entire process.

What factors will expand the market for ethanol?Taking out the mandatory uses, an estimated 30 to 40percent of current use is discretionary blending. Somemarket analysts forecast an over-supply and lowerprices for the next two to three years. However, ifAtlanta were to ban MTBE and if California were tomandate a 5-percent Reformulated Fuel Standard(RFS), mandatory demand would increase in each ofthese areas by 250 million and 950 million gallons,respectively. An adoption of a 10-percent, mandatoryRFS in California could increase demand by as muchas 1.9 billion gallons per year. ■

Surviving in a low-price cycle

Intermediate products may be com-bined to produce additional products.The basic concept incorporates multi-ple products and possibly multiplefeedstocks. Flexibility to meet marketdemands is an important element ofthe bio-refinery concept.

Bio-refinery feedstocks may includeagricultural crops and agriculturalresidues, trees, grasses, animal wastesand municipal solid waste, organicmaterials that capture and store solarenergy. They may also use variouscombinations of processing technolo-gies including mechanical, thermal,chemical and biological processes. The

products produced are nearly limitless.They include fuels, electric power andheat energy, food and feed, and a hostof chemicals including plastics, sol-vents, adhesives, fatty acids, organicacids, paints, dyes, inks, detergents andmore.

The extended view of this conceptis to develop bio-refinery complexes or“bio-refinery parks” that produce awide range of products and which useproducts produced by others in thepark. This concept would aid in theeconomic efficiencies of collection,storage and handling of feed stocks,production of energy, as well as help

support the required transportationand distribution infrastructure.

Further improvements in technolo-gy may play an important role inincreasing efficiency of ethanol plants.New “up front” technologies that frac-tionate the grain into starch, pericarp,germ and protein may enable ethanolplants to produce a wider set ofbyproducts and to increase the marketvalue of the byproducts. This change isexpected to increase the energy effi-ciency of the ethanol plant and reduceother processing costs per gallon ofethanol.



While today’s ethanol industry is fragmented, not longago it was much more concentrated. In 1990, three majorplayers dominated fuel ethanol production. ADM held 60percent of the market, Pekin Energy (now Aventine, by wayof Williams Bio Energy) and New Energy Co. of Indiana,each held 10 percent.

The entire industry was then comprised of about 20 firmsthat produced about 1 billion gallons annually. At that time,construction costs were around $2.50 per gallon, conversionefficiency was closer to two gallons per bushel of corn andthe average-sized plant required a workforce of about 50.

Structurally, today’s situation is almost a mirror image ofthe past. The top three firms produce only about 31 percentof the nation’s ethanol and 44 of the remaining 68 firms arefarmer-owned. Over 4 billion gallons of fuel ethanol will beproduced this year. Construction costs are about 98 centsper gallon. Fuel conversion efficiency is now 2.85 gallons perbushel of corn. A plant requires only 35 full-time staff and isoperational for 360 days per year.

The transition from a highly concentrated to a fragment-ed industry was brought about by several key drivers,including: federal and state policies; natural progression ofthe industry; classic “production-push” agriculture; farmerownership; crude oil price spike; low-priced corn; develop-ment of venture capital interests; and the formation of tradeassociations. Each of these factors is examined below.

Federal and state policiesFederal and state policies contribute substantially to the

viability of the fuel ethanol industry. As one industry repre-sentative commented, “state and federal incentives cover alot of mistakes. They provide a safety-net.”

Ethanol’s exemption/credit against the federal excise taxon motor fuels is a long-standing industry cornerstone.Programs created under the Clean Air Act Amendments of1990 enhanced demand for ethanol. These included theOxygenated Fuels Program, implemented in 1992 to reduceemissions of carbon monoxide, and the ReformulatedGasoline (RFG) Program, which took effect in 1995 to reduceground-level ozone (i.e., smog). The federal BioenergyProgram (CCC-850), established by executive order in 1999under the Clinton administration, is a key incentive for newfacilities because it offsets part of the feedstock costsincurred to start up or expand biofuels production.

The long-term extension of the excise tax credit in theJOBS Act of 2004, together with the Clean Air Act programs,reduced the “policy risk” associated with establishing andoperating an ethanol facility. State policies also have hadmajor impacts on the industry. However, state productionincentives tend to be capped at a certain capacity level,

which contributes to a fragmented industry structure. The fuel ethanol industry’s rapid growth is due in large

part to the finding that methyl tertiary butyl ether (MTBE) iscarcinogenic. This eased political fighting between theoil/energy sectors and agriculture. The MTBE phase-out putboth parties on the same side of the issue. The Minnesotarequirement that gasoline be blended with 10 percentethanol is regarded as a model state policy. State bans ofMTBE, a competing additive used to boost oxygen content ingasoline, expanded ethanol use in recent years. Presently,20 states have implemented or announced bans of MTBE.Bans in California and New York took effect at the beginningof 2004.

Last August, after more than 5 years of heated congres-sional negotiations, the Energy Policy Act of 2005 set arenewable fuels standard (RFS) of 7.5 billion gallons by theyear 2012. While the implication of the Act will involve anextensive change to fuel regulations, petroleum-refining andfuel marketing, the full economic and environmental effectswill only be revealed in time.

Natural progression of industry To some extent, fuel ethanol is experiencing the “natural

progression” of an industry. It has stalled and re-startedseveral times over the years. Several times it was on theverge of death, only to be reborn. The fundamental differ-ence now is the world’s increasing demand for energy.

Those involved in this business for 25 years still have thesame dream as the preceding generation that launched theindustry. The scope of the uphill battle fought in the indus-try’s early days probably wasn’t clearly understood.Nevertheless, they witnessed the emergence of a real bio-fuels industry.

More than a fuel Ethanol is being viewed as more than a commodity in

many rural areas of the nation, where there is emotionalzeal about the potential of biofuel to strengthen the ruraleconomy. There is even a sense of patriotism about the partbiofuel may play in helping to reduce the nation’s depen-dence on foreign oil. These strong beliefs may have helpedthe industry survive difficult straights, when it continued toexpand production with only a small clue as to how it wouldbe sold.

The consensus was, “It’s a good idea.” But few had anyreal vision of the industry’s future. In no small way, ethanol isclassic “production-push” agriculture, in which farmersplant seeds without knowing their ultimate yield and pay.Their philosophy has been: “If we build it, they will come.”

Realistically, the industry is not going away. But what will

Fuel ethanol industry structure, past & present


it look like? The consensus is that there will be a substantial,long-term positive growth phase. The only real distinctionamong ethanol plants in the past 5 years has been betweenthose that made a “nice” return on investment vs. those thatmade a “fantastic” return.

Farmer ownership The emergence of “new-generation” cooperatives and

farmer-owned ethanol plants in the early 1990s played a crit-ical role in the development of the industry. The cooperativestructure provides farmers with the opportunity to collec-tively raise money to build facilities. Cooperatives also dis-tribute the investment risk over the entire group of investors,thereby reducing the risk to any individual investor.

In addition, because cooperative membership is tied to aright and an obligation to deliver corn to the cooperative, thecorn delivery agreements may have helped the cooperativesurvive market fluctuations better than a privately ownedplant faced with purchasing corn in a volatile, open market.

However, it is harder to put together a co-op todaybecause most farmer groups within a 40- to 60-mile grain-hauling radius of a plant (the distance considered economi-cal for procuring feedstock for ethanol) lack sufficient capi-tal to invest the needed equity. Within a 60-mile radius, a co-op can typically raise about $12 million to $18 million throughlocal equity drives for a plant that will cost $45 million to $60million. Nevertheless, some farmer groups are getting moresophisticated in raising capital; one recent success storyinvolves a co-op that raised $28 million.

Generally, farmers exhaust their ability to raise equity fora new plant, then look to plant builders, ethanol marketers orother outside investors as necessary partners to raise therest of the needed capital. Recently, a few Wall Streetinvestors have entered the picture to finish the equity drivein some form of partnership arrangement, or to subordinatethe debt. In recent cases, farmer-investor groups haveassumed more of a minority ownership position in the com-pany.

Crude oil price spike The most recent boost to the industry has been crude oil

costing more than $60 a barrel. Still, there has been a per-ception that the viability of the industry is based on subsi-dies. About three years ago, it was difficult to get New Yorkinvestors to even discuss ethanol. Morgan Stanley was oneexception. It was forward-looking enough to pursue someethanol investments, but virtually all other major investmentfirms declined to do so.

The only real change since then has been the spike incrude oil price. Now the institutional investors and money-center banks seem to believe in the long-term viability ofethanol as an energy source.

Low-priced corn Most producers pursued ethanol plants to boost local

corn prices. Many ethanol plants were financed on thatbasis, not the economics of the grain margin going forward.The driving motivation is simply that a $20,000 investment ina local ethanol plant can improve a producer’s corn basis —it becomes a de facto annuity that returns an additional 6 to12.5 cents per bushel, in perpetuity. This idea drove thefinancing and building of the 20- to 40-million-gallon plants.

Development of venture capital interestsFarmers recognized the economic incentives and experi-

enced what was called the “backyard syndrome.” Whatcommunity doesn’t want 5 or 10 cents per bushel more forits corn? Most weren’t sophisticated enough at that time tounderstand the risk-management issues involved or theoperating margins.

Nor was the possibility considered that there might be abetter place to locate a plant other than in their hometown,or that perhaps it should be built by somebody other than ageneral contractor. Basically, the sole consideration was thedesire to increase the corn-price basis. The industry pro-duction standard grew from 15-20 million gallon plants to 45-50 million gallons, then 55-60 million gallons and now 100million gallons.

The success of those plants fueled the enthusiasm tobuild. Most of the plants now being built in Iowa are notfarmer investments. Moreover, most investment plans todayinclude intentions to build two or three additional facilities.The flow of investment money from outside agriculture issubstantial and increased significantly after the price of oilexceeded $50 a barrel.

Formation of trade associations The information explosion was also a driving force behind

the formation of ethanol trade associations. As more produc-ers became interested in ethanol production during the late‘90s, they started organizing into groups.

The trade associations recognized benefits of bringing thegroups together to provide them with the necessary informa-tion. This included production technology, different legalstructures, sources and availability of financing, etc.

The trade associations met monthly with several produc-er groups and watched each evolve through the develop-mental stages of fund raising, groundbreaking, etc., to fullproduction.

The ability to share information was a prerequisite to adistributed and fragmented model. In order to have multiplefacilities and many companies forming, each had to have anunderstanding about what to do, how to, and when. ■— By Anthony Crooks and John Dunn


By David Morris

Editor’s note: Morris is an economist withthe Institute for Local Self Reliance. Theviews expressed are the author’s own anddo not necessarily reflect those of USDA.

he structure of theethanol industry influ-ences the degree towhich its growth benefitsfarmers and rural areas.

An industry dominated by small- andmedium-sized farmer-owned plantscreates more wealth for farmers and

their communities than does one char-acterized by a smaller number of largefacilities owned by national and inter-national investment groups.

Between 1979 and 2005, the ethanolindustry has experienced four majorstructural upheavals. In the beginning,it consisted of a vast number of tinyproduction units. The doubling of oilprices in 1979–1980 inspired farmersto build such plants. The availability ofa federal 100-percent loan guaranteefor plants with production capacitiesless than 1 million gallons a yearallowed them to finance such plants.

This “stills-on-a-hill” era peaked in1984, with 163 very small ethanolplants in operation (some sources esti-mate as many as 176). The industrythen violently contracted, a result ofcrude oil prices falling to $8 a barreland a successful, concerted negativepublicity effort by major oil compa-nies.

In a single year, 1985, almost half ofall ethanol plants (but only a small frac-tion of production capacity) went out

Do b igger e thanol p lantsmean fewer fa rmer benef i ts?

USDA photos by Stephen Thompson

T


of business. By 1990, only 56 plantsremained. More than half producedless than 5 million gallons a year.

In the late 1980s and early 1990s,the ethanol industry was dominated by100-140-million-gallon-a-year wetmills. These were built primarily toserve the expanding high fructose cornsweetener market. Archer DanielMidland (ADM) dominated the HCFSmarket. As a result, ADM dominatedthe ethanol market, accounting forabout 75 percent of the ethanol indus-try’s output in 1990. Indeed, in theearly 1990s, the words ethanol andADM became virtually synonymous.

Rise of farmer-owned plantsThe 1990s witnessed the next struc-

tural shift in the industry: the rise offarmer-owned plants. By the late1990s, the vast majority of new ethanolplants were farmer-owned. By 2002,these were producing, collectively,more ethanol than ADM. Some 25,000farmers nationwide had become share-holders in ethanol facilities.

The average size of new plants grewfrom 15 million gallons a year in themid-1990s to 30 million gallons a yearby 2002. States such as Wyoming andMinnesota redesigned their coopera-tive laws to enable more outsideinvestment while retaining farmer con-trol. Many farmers chose the limitedliability corporate (LLC) form as a wayto access the capital required.

In 2004, a new era dawned on theethanol industry when the nation’sfirst 100-million-gallon dry millopened in South Dakota. Within ayear, at least 15 more 100-million-gal-lon dry mills were under constructionor planned. A doubling of oil prices,an extension of ethanol’s generous fed-eral financial incentives and the pas-sage by Congress of a mandated dou-bling of the ethanol market by 2012all combined to make ethanol anattractive investment. It is likely thatin the next 3 years, 75 percent of newethanol production will come fromlarge, non-farmer-owned plants.

Some farmers view absentee-ownedplants as an inevitable — and even a

welcome — development. SouthDakotan Dan Endres, who had ownedshares in two farmer-owned ethanolplants and became a principal owner ofa company building several 100-mil-lion-gallon plants, comments:“VeraSun’s experience indicates thatthe farm-ownership model may need

to adapt as the ethanol industry gravi-tates to large plants. Such operationsare increasingly financed by six toeight principal investors, without theneed to deal with hundreds of small-scale farm-investors.”

In mid-2005, several leading firmsin plant construction, engineering andmarketing formed a new entity, USBioenergy, a holding company that willpurchase and provide services to anumber of ethanol plants. The mini-mum investment for shares in theholding company is $5 million.Investors anticipate making a signifi-cant profit in 2 to 3 years when thecompany goes public.

Industry evolution poses challengesThe evolution of the ethanol indus-

try into one dominated by large plantswhere investors profit not from thesale of ethanol, but from receiving theappreciated value of the plants whenthey are sold, challenges policy makerswho are trying to address agricultural,as well as energy, objectives.

Expanded ethanol production, ofcourse, benefits farmers and rural areasin the same as will any new crop-pro-cessing facility. Supporters argue that amore concentrated structure is neces-sary to raise the billions of dollarsrequired to significantly expand

ethanol production. Larger plants canproduce and transport ethanol morecheaply. And larger increments incapacity allow the industry to expandmore quickly.

These are valid points. But there isanother side to the rise of large absen-tee-owned plants that concerns many.They significantly restrict the possibil-ity of widespread farmer ownershipand control. That begins to sever thelink between ethanol production as anenergy strategy and ethanol productionas an agricultural strategy.

Bigger plants do indeed lower unitproduction costs. But while the savingsare considerable when the size of thefacility increases from 10 to 30 milliongallons a year, the additional reduc-tions from increasing the size of thefacility from 30 to 100 million gallonsare modest. Capital savings may be onthe order of 2-3 cents per gallon; laborsavings are about the same. Reducedtransportation costs from using unittrains might be about a nickel a gallon.

Large plants do not, of course,guarantee lower costs. There are disec-onomies of scale. A large plant canstrain local suppliers. Reporter PeterRohde of Inside Fuels and Vehiclesreports that a new 100-million-gallonethanol plant in South Dakota raisedthe basis price of local corn by 30 centsper bushel. This increased feedstockcost wiped out any savings generatedfrom reduced capital, labor and trans-port costs.

But let’s say that making ethanol ina 100-million-gallon facility doesreduce the cost by 10 cents a gallonless than that of a 40-million-gallonfacility. We know from experience thatthis savings will not show up at thepump. The consumer will not benefit.The question is, will the farmer or therural area benefit? Or, to pose thequestion more pertinently, will theybenefit as much as if there were threesmaller facilities rather than one largefacility?

Advantages of smaller plantsAs noted above, farmers and rural

areas benefit when more manufactur-

Large absentee-ownedplants . . . restrict thepossibility of wide-spread farmer owner-ship and control.


ing and processing facilities move in orwhen the demand for a specific cropincreases. Farmers who do not own ashare in an ethanol plant benefit fromthe increased selling price of theircrop. Studies indicate that increasedlocal ethanol production raises theprice of corn by about 10 cents perbushel. Farmer-owners of ethanolplants, on the other hand, havereceived as a dividend, over the years,30-40 cents per bushel.

For farmer-owners, the ethanolplant becomes a hedge. When cornprices decline, the produc-tion costs of ethanoldecline. Thus, at least aportion of the income lostto the farmer on the sale ofthe raw material is made upfrom the increased profits inthe sale of the processedmaterial.

A 100-million-gallon,absentee-owned ethanolplant will return to thefarmers in the area aroundthe plant about $13 millionless than three farmer-owned plants each produc-ing 33 million gallons peryear.

According to Iowa StateUniversity (ISU), the 5–yearaverage after-tax return for atypical ethanol dry mill is 23percent. In comparison, ISUestimates that 70 percent ofIowa’s counties averagedreturns on farmland of 2.5percent or less (in 2002). Infact, one community bankerin Minnesota told a National CornGrowers Association task force he con-siders financing stock purchases byfarmers in processing plants a far lessrisky and potentially much more prof-itable investment than lending money tofarmers to buy land.

With regard to the impact on thenon-farm community, large plants,especially when they are part of a chainowned by one corporation, spend asmaller portion of their money locallyon purchasing and management, on

accounting and legal services and onadvertising.

Possible alternativesWhat should be done? To date, pub-

lic policy, at least at the federal level,has rarely taken into account the size orownership structure of ethanol plants. Iam aware of two exceptions. A programthat gave free surplus grain to ethanolproducers who were expanding orbeginning production, rewarded smallproducers more than larger producers.And since the early 1990s, there has

been an additional 10-cent-per-gallonsmall producers credit that has beenlimited to facilities with capacities ofless than 30 million gallons per year.

The 2005 energy bill, however,increased the definition of “small” to 60million gallons, a ceiling that qualifiesabout 90 percent of all ethanol facilities.

The federal biofuels incentive, ofcourse, has no ceiling. Moreover, it tar-gets the consumer and the intermediarysupplier, not the ethanol producer.

So what should be done? One con-

crete step would be for the govern-ment to convert the federal excise taxexemption into a direct producer pay-ment. This was done at the state levelby Minnesota in the late 1980s. Thatpayment could be limited to plantsunder a certain size and a higherincentive would be given to farmer-owned facilities.

To date, the issues of scale and own-ership — at least at the federal level —have not been addressed. One reasonmay be that, until recently, farmer-owned, modestly scaled biofuels

refineries seemed to have become thenorm. That is no longer true.

The remarkably rapid growth oflarge scale, non-farmer and distantlyowned plants should lead policy mak-ers to engage the question and make aconscious decision. The questionbefore them is how to design a strategythat not only maximizes the use of bio-fuels but also maximizes the benefit ofthat expanded use to the cultivator andthe community in which the cultiva-tion and harvesting occurs. ■

Iowa State University estimates that the 5-year average, after-tax returns for a typical dry-mill ethanolplant is 23 percent. Here, trucks load with biodiesel.


Type of Business:Appalachian Spring Cooperative is a

100 percent, producer-owned coopera-tive that markets value-added fruit andvegetable products. It offers more than

48 different jellies, sauces, relishes,herbal salves and other farm

and food products.

Businessobjective:

To help mem-bers start and strengthen value-addedfarm and food product businesses byproviding an array of collaborativemarketing and other services.

Annual revenue:Appalachian Spring Cooperative is

a very young cooperative, and theprocess of developing and finding mar-kets for a value-added farm or foodproduct is lengthy. So far, 24 members

have developed a product for com-mercial sale, most quite recently.

Other members are still inthe farm/food-product

development process.Annual revenue to

the cooperativein 2004 —

derivedfrom a

percentage of member sales and grants— was $148,485.

Number of members & employees:Appalachian Spring Cooperative has

80 members currently residing in 14counties of east Tennessee. Of these,34 produce honey through a projectthat is re-introducing honeybees intothe region; another 24 members pro-duce a value-added product for com-mercial sale while others are still in theproduct-development stage. The coop-erative has two full-time employeesand one part-time worker.

Description of business activity:Locally grown fruits and vegetables

are processed in a nonprofit, shared-use commercial kitchen into a varietyof value-added products. Theseinclude: tomato sauce, pasta sauce,salsa (5 brands), barbecue sauce (3brands), hot sauce (2 brands), habanero

pepper extract, strawberry jelly, rasp-berry jelly (2 brands), blackberry

jelly, grape jelly, pumpkin but-ter, sweet potato butter,

honey, creamed honey,habanero-flavored

honey and flavoredmarinades. Also:flavored mustards,cucumber relish,corn relish, zucchi-

ni relish, pepperrelish, chow-chow,bread-and-butterpickles, vegetable

V A L U E - A D D E D C O R N E R

Appalach ian Spr ing Cooperat iveTreadway, Tennessee

Appalachian Spring Co-op (ASC) members process locally grown fruits and vegetables into a wide variety ofvalue-added food products using the Clinch Powell Community Kitchen. Photos courtesy ASC


soup starter, beer cheese, herbal skinsalves, herbal lip balms, and more.Members’ products are marketedthrough a variety of channels, includ-ing wholesale to area food stores, retailfrom the cooperative website(www.apspringcoop.com), retail giftbaskets promoted to corporations,churches and civic groups, and retailfrom the cooperative store.

How co-op was developed/financed:Realizing that new producers of

value-added farm and food productsneeded help in marketing, JubileeProject — a nonprofit communitydevelopment organization — helpedlocal farmers organize the AppalachianSpring Cooperative, which held itsfounding annual meeting in 2002 as amarketing cooperative for value-addedfood products. It quickly added theHoneybee Project, using a grant fromHeifer Project International to intro-duce honeybees on 34 farms in the eastTennessee area. In addition to theHeifer Project grant, the cooperativehas received federal, foundation andchurch grants directly and throughJubilee Project, which operates theshared-use kitchen used by cooperative

members (Clinch Powell CommunityKitchens, www.clinchkitchens.org).The Honeybee Project was set up so asto pass 10 percent of the honey pro-duced back to the cooperative; mem-bers selling value-added productsthrough the cooperative also pay 10-20percent to the cooperative.

How USDA helped:Appalachian Spring Cooperative has

benefited from several USDA fundingprograms, including: an initial USDACommunity Food Project Grant of$182,000 over three years, a Value-Added Producer Grant of $39,800 forone year and a SARE SustainableCommunity Initiative Grant of $6,436.In addition, the cooperative received aSARE Producer grant of $10,000 in itssecond year. Jubilee Project has helpedthe cooperative find matching fundsfor all these grants.

Leader’s comment:“At a time when farmers in the east

Tennessee area are looking for newsources of income, the combination ofJubilee’s processing kitchenand our marketing coopera-tive offer an alternativeenabling local farmers, andlocal entrepreneurs buyingfrom them, to increase farmincome by producing high-quality value-added foodand body-care products.”— Dianne Levy, generalmanager, AppalachianSpring Cooperative.

The results:Today, 24 cooperative

members are producingmore than 48 products forcommercial sale, withgrowing sales through theInternet and plans forincreased gift basket salesand establishment of a localretail store.

Market outlook:The demand for specialty

foods, including gourmet,

natural and organic food products, hascontinued to grow at a faster pace thanoverall food sales. At the same time,more than 70 percent of the publicexpress a preference for buying localfood. Appalachian Spring Cooperativeexpects to grow member sales by capi-talizing on both of these promisingtrends.

Major challenge/opportunity facing co-op:

A major challenge for the coopera-tive is that members starting foodproduct businesses are producing at asmall enough scale that they cannotkeep their per unit costs low enough toafford producing for many wholesalemarkets in the area. A major opportu-nity is that local and state officials arewilling to help open retail outlets forlocally produced food.

Contacts:Phone: (423) 733-2095; e-mail:

[email protected]; website: www.apspringcoop.com. ■

“The combination ofJubilee’s processingkitchen and ourmarketing coopera-tive offer an alter-native enabling localfarmers to increasefarm income…”

—Dianne Levy

A gift selection from Pure Mountain Herbs, a member ofAppalachian Spring Co-op. Members also produce avariety of jellies, tomato sauces, five brands of salsa, twobrands of hot sauce and cheese, among many others.


By Dan Campbell, Editor

Editor’s Note: The complete text of testimo-ny presented at USDA’s public hearing onco-op research is posted on the Internet at:http://www.rurdev.usda.gov/rbs/pub/ResearchPublicMeetingTranscript.doc. The Web site includes comments from co-oporganizations that were not present to testi-fy (and are not reflected below). Anyoneneeding a printed text of the testimonyshould e-mail: [email protected] .

ou can’t tell where youshould be going if youdon’t know where youare (or where you’vebeen).

That, in essence, was a major mes-sage delivered by a broad array ofnational co-op leaders when USDARural Development held a public hear-ing in October to gather ideas onwhere to focus its co-op researchefforts. A new database is critical to thefuture of the nation’s cooperatives andfor showing their impact on the ruraland national economy. Such a databasewill become the foundation for futureco-op research, they said.

A number of speakers stressed thatthis co-op database should cover theentire cooperative sector, not justagricultural co-ops. Others, however,countered that USDA’s CooperativePrograms office has its hands full justtrying to maintain an up-to-date,accurate database on farmer coopera-tives, and stressed that more resourceswould be needed if its mandate isbroadened to include all types of co-ops.

Other common themes heard dur-

ing the day-and-a half of testimony atUSDA headquarters in Washington,D.C., included calls for more researchinto how co-op members can accesstheir co-op equity, ways to finance newor expanded co-ops, demutualization(or co-op conversion) trends and waysto promote more collaborativeresearch between USDA, universities,co-op trade organizations and co-opfoundations.

Many speakers cited the need formore case studies that document real-life lessons regarding what businessand member strategies are, and aren’t,working for co-ops. Still othersstressed the need to devote moreresources to cooperative developmentand the study of international cooper-atives.

Seize the opportunity In his opening remarks, Under

Secretary for Rural DevelopmentThomas Dorr stressed that the part-nership between cooperatives andUSDA remains strong, but that thegovernment’s co-op research programmust better reflect the needs of the co-ops it serves.

“Cooperatives and USDA have trulygrown up together,” Dorr said. “Thispartnership has been one of the foun-dations of the rural economy for gen-erations, and it’s evident to me that ifrural America is going to continue tobe involved in a strong economicrevival — and I would submit to youthat in many areas, there is a strongeconomic revival going on in ruralAmerica — it is important that we

Expanded da tabase v i ta l f o r f u tu re co-op reseach

NCFC President Jean-Mari Peltier addresses USDA Rural Development officials during ahearing on the research needs of the nation’s cooperatives. USDA photo by Pete Manzelli

Y


understand the modern basis for theserelationships.”

Dorr said research should befocused “where there will be real-world payoffs for rural America.” Withso much change occurring, he contin-ued, “the challenge is going to be howto anticipate, prepare for and profitfrom change.”

Cooperatives need to understandhow to “best leverage their memberequity, their traditions and their mis-takes into new, strong and viable busi-ness models,” Dorr continued. Co-opresearch should help co-ops “createnew markets with value-added orbranded products, and exploit emerg-ing technologies in bio-agriculture andalternative fuels, or leverage broadbandtechnology to level the playing fieldfor rural businesses.

“We want to build a research pro-gram that helps cooperatives uncoverand take advantage of these opportuni-ties, and we are looking for ways tobuild businesses and increase profitswhile simultaneously serving the othersocial needs that cooperatives canclearly help fulfill,” Dorr said, addingthat USDA also has “a very specialinterest in using cooperatives toaddress the problems faced by smallfarmers in historically disadvantagedgroups.”

Following are excerpts from the tes-timony:

Paul Hazen, President, National Cooperative BusinessAssociation (NCBA)

“This country needs national dataon the impact of cooperatives on theU.S. economy…This data needs toinclude: (1) the number of jobs createdby cooperatives, both directly and indi-rectly; (2) the level of economic activi-ty created by cooperatives; (3) the taxrevenue generated by the level of eco-nomic activity; (4) a definitive censuson the number of cooperatives and thetypes of goods and services that arebeing offered; (5) the amount ofpatronage refunds that are returned tothe members from their cooperatives,and (6) the extent of the social welfare

benefit where cooperatives are meetingthe needs of communities that wouldnot adequately be met by other typesof businesses.

“A competent, government-sanc-tioned, cross-sector, multi-disciplineeconomic-impact study led by arespected academic institution willprovide enormous benefits for allcooperatives. The database that thisstudy will create will allow and encour-age continuing research. This willincrease awareness of the cooperativeform of business, which, in turn, willgenerate new business which will allowcooperatives to attract new membersand investors.

“This is a phenomenal opportunityto reinvigorate [USDA’s CooperativePrograms] and continue a tradition ofa public/private partnership that willtruly provide lasting benefits for allcooperative members.”

Jean-Mari Peltier, President,National Council of FarmerCooperatives (NCFC)

Peltier said NCFC is undertaking acomprehensive review of the existingbusiness structures of farmer coopera-tives to help identify structural chal-lenges confronting the farmer cooper-ative business model. The goal is to“provide a new menu of strategicoptions to give farmers and farmer-owned businesses the flexibility need-ed to organize and finance a businessthat can effectively compete in theglobal marketplace.

“All of this work is generating lit-erally a mountain of data — a moun-tain of data that’s going to be able tobe analyzed by both geography” andtype of cooperative. “We’ll be able toanalyze the changing demographicsof their membership and theimpact….” Another key issue is lackof access to sufficient capital forfarmers to fund their organizations,Peltier said. “The question is not somuch access to capital, as it is accessto equity capital, rather than takingon long-term debt.” Farmer coopera-tives are also “struggling with beingable to provide a vehicle for their

members to access the value of thecooperative without selling off thevalue of that enterprise.

“Obviously, it’s going to take a lot ofwork to review all of this data…wedefinitely will be looking for partner-ships to help us sift through this dataand analyze what its long-term impactswill be.”

Peltier noted that USDA’s legislativemandate is to operate a co-op programthat focuses on farmer cooperatives.“We hate to see that diluted,” she said.

Deb Conley, Executive Director Indiana Co-op Development Center

Conley urged that more researchbe conducted into international co-ops — how they are structured andfunction. “Are they more or less effec-tive in enhancing quality of life andeconomic developments than in theU.S.?” Other key research topics, shesaid, should include: “How much docooperatives impact our states’economies? How many cooperativesare there? Where do co-ops accesscapital? In what areas are co-ops moresuccessful, and in what areas are theyproving not to be?

“Expanded research should includeco-ops in all sectors; identify the sec-tors in rural areas which show themost potential for growth for cooper-ative businesses; compare the sustain-ability of cooperative businesses toother forms of business; measure theeconomic impact of cooperatives ineach state; develop a measure for non-economic benefits of cooperatives,community cohesiveness, citizen par-ticipation, growth in other sectors andcommunity improvement.”

Other priorities should be theeffect of gentrification in co-ops andto identify the resources leveraged perdollar invested in co-ops and the rateof growth or decline in each co-opsector. “Identify how co-ops accesscapital. And how do we compareinternationally?” Research shouldexamine what types of co-ops areincorporating under new statestatutes, similar to Minnesota’s, shecontinued.


Bill Patrie, Rural DevelopmentDirector, North Dakota Association of Rural Electric Cooperatives

Patrie stressed the need for morecase studies, including co-op conver-sions to non-co-op business structures.He cited Dakota Growers PastaCooperative and the SaskatchewanWheat Pool as two prime examples.Both conversions were, and remain,controversial, he said. “What havebeen the consequences? What werethe motives of those conversions?What were the mechanics of thoseconversions? What is the aftermath? Isthe stock more liquid now? Whatabout access to equity investmentsfrom others? Has that improved orgotten worse or about the same?”

Another case study could look atconversions that went the other way,from corporations to co-ops.“American Crystal Sugar has beenstudied, but it would be interesting tosee what has been the long-term effectof those sugarbeet growers buyingACS and what they went through.What is the performance history?”

Likewise, the conversion of U.S.West telephone into a cooperativewould make a fascinating case study, hesaid. “We can learn a lot, because wehave operating history before and after.What happened to the cost of service?Did they in fact reduce the cost of ser-vice to the subscribers? Is the technol-ogy better or worse than when U.S.West operated those companies?” Twoother case studies involve major co-opfailures: Spring Wheat Bakers Coop-erative and the North American BisonCooperative (although the later recent-ly emerged from bankruptcy).

“A seventh study that would be veryuseful is to understand the psychologyof human cooperation,” he said.

Paul Darby, Co-op DevelopmentDirector, Southern StatesCooperative Foundation

Darby said a top research topicshould be how producers can “trulyaccess the equity in their farms forvalue-added business developmentwithout selling out. That is an issue

that we bump up against every singleday. Equity capital is absolutely a sig-nificant issue. It’s not capital, it’s equitycapital. For a group of producers in astart-up enterprise, it’s even more diffi-cult, even though each of these indi-viduals very likely is successful in their

farming operations. Many of them aresmall, but many of them have devel-oped a niche market and are very suc-cessful. They may have millions andmillions of dollars in assets on thatfarm, and yet — because they eitherhave a loan with a commercial bank orFarm Credit, and those assets are partof the collateral — they’re not able totouch those.

“A second issue is: why are coopera-tives converting to stock corps. andLLCs.” He too said the pasta co-opconversion in North Dakota “would bea phenomenal case study. A third one:why are new value-added enterprisesbeing developed outside the co-opmodel.” A good example, he said,would be Atlantic Bioenergy, abiodiesel project in North Carolinathat his foundation has spent yearsworking with. “The leadership of that

project, from day one, wanted it to bea cooperative. But there was roadblockafter roadblock that prevented it frombeing a cooperative…There wereagribusiness investors in NorthCarolina that wanted to be a part ofthat ownership structure. They could-n’t be involved…so that group had togo to an LLC structure.”

The new Virginia Poultry GrowersCo-op would be another good casestudy, Darby said, including the impactof the co-op having three non-mem-bers — a banker, an educator and arepresentative from a value-addedproduct partner — on its board. Thatvalue-added foods company “made amulti-million-dollar equity investmentin that cooperative. They couldn’t be aClass-A member. They had to buy pre-ferred stock, but because of a provisionin state law, they could be a part of thegovernance structure. And that really isthe key for a lot of companies andindividuals that want to invest.

“We think there is certainly value inUSDA not simply going to a university[for research], but bringing in peoplewith boots on the ground from thecenters to collaborate on a bigger pro-ject, working with the trade groupsthat represent cooperatives; reallymake this a fairly broad-focusedeffort.”

Mike Boland, Professor, Kansas State University(representing NCERA-194)

Boland said NCERA-194 (an orga-nization of land grant university facultymembers doing research on co-ops)members believe that more study isneeded on existing equity managementprograms used by cooperatives. “AsMr. Dorr has spoken at length over thelast several years, there’s a lot ofuntapped equity in rural America thatwe just don’t have access to.”

Information is needed on co-opfinance, governance and strategicthinking, he said. To improve theresponse rates on its surveys of cooper-atives, Boland said USDA could builda broad coalition with others — suchas the Dept. of Commerce. “We need

“I envision thisresearch as the foun-dation of a new andexpanded cooperativedevelopment agenda.Research is the yeastthat makes thebread rise. ”

—Liz Bailey


some baseline information on howmany cooperatives access outside equi-ty, the changes in governance andorganizational structure, and how thiscapital is being used.”

He said NCERA-194 members feelstrongly that co-op research fundsshould be awarded on a competitivebasis. “There are a lot of new facul-ty…and they’re eager to do researchon cooperatives.”

Boland said a revolving internshipor fellowship program that wouldbring university research economists toUSDA for a 6– to 12–month assign-ment would prove popular. “Most peo-ple like going to D.C. for six monthsto a year.”

Randall Torgerson,former deputy administrator, USDA Cooperative Programs

Torgerson said commodity-specificstudies are needed to understand thestructural adjustments and economicsof new, value-added initiatives andtheir impact on commodity marketing.As an example, he cited the burgeoningalternative fuels industry, which he saidhas “greatly altered the patterns of tra-ditional commodity markets and atten-dant infrastructure needs. How arecooperatives adjusting to these changes,and what strategies are needed forremaining viable businesses servingfarmer members?”

Red-meat processing co-ops alsoneed study, he said. “Some, likeOregon Natural Beef Cooperative andthe pork cooperative at Rantoul, Ill.,have become successful,” while othershave failed. “What have been the keysto success or the mistakes made thathave led to these different outcomesfor livestock producers?

“What has been the experience ofcooperatives generally in supply con-trol? Does the CWT (dairy marketbalancing program) provide any guid-ance for potential success in thisendeavor? Bargaining cooperativesrepresent grower members and con-tract negotiations with processors…Are national legislative remediesrequired to augment the bargaining

process?Organic and natural foods producer

co-ops also merit further study. “Whathave been the ingredients for theirsuccess? What relationships exist orcan be developed between niche mar-keting groups and established coopera-tives? The structure of the dairy indus-try continues to change with morecommodity and ingredient productionconcentrated in western states and pro-duction of finished products in theMidwest and East. How can they bestlink? How can they coordinate? Whatare the alternatives to going publicwhen dealing with equity redemptionand other restructuring issues?”

Audrey Malan, Executive Director,Cooperation Works!

Malan recommended that USDAengage in research that facilitatesstrategic, sector-based systematicapproaches to co-op development. “For example, municipal co-ops are aproven strategy for county and stategovernments to reduce costs withoutreducing services…But we lack theresearch required to build an effectiveimplementation strategy.

“The key is a commitment to devel-oping new cooperative businesses, andto do it in a strategic way. We’ve beenat this now for a long time. We knowwhat works in co-op development. Weknow what new businesses need to suc-ceed, and we know that we can bemore strategic with our resources…

“The home healthcare model ofcooperative care in Wisconsin…is dra-matically improving people’s lives. It’s improving seniors’ lives becausethey get consistent care rather thannew people coming in their houseevery day, and of course it’s improvedworking conditions for the womenwho are taking care of our elderly peo-ple, but we need research.”

Liz Bailey, Executive Director,Cooperative Development Foundation

“First, focus on research and educa-tion. We all know there’s a basic lackof understanding about cooperatives atall levels of government, in the busi-

ness community, in the academicworld, in my philanthropic world andamong the general public…We don’thave access to the kind of aggregatedeconomic data that is routinely used byeconomic and business analysts to mapU.S. economic activity and interpretthe data for those who make or influ-ence public policy. Rather, I envisionthis research as the foundation of anew and expanded cooperative devel-opment agenda.” Research, Bailey said,is the “yeast that makes the bread rise.”

Bailey said there may be “opportu-nities for collaborative funding propos-als with foundations outside the coop-erative world that focus on workforceissues, on healthcare issues or seniorissues.

“How do we capture the interests ofthese new potential players?...We needto be able to provide them with objec-tive data that they can use to validatethe economic impact of cooperatives.”

Ann Hoyt, Professor, University of Wisconsin-Madison& Chairperson, NCBA

“One of the major challenges facingco-ops is demutualization. Another ismember relations and how to maintainstrong member identification and sup-port when the cooperative needs togrow significantly to achieve economiesof scale. A third challenge is capitaliza-tion…and changes in taxation andaccounting policies. There is also thechallenge of low public awareness ofthe value and contributions of coopera-tive businesses, particularly their con-tributions to local economies.”

She too stressed the need to addressthe “absence of reliable, comparabledata on the U.S. cooperative move-ment, both rural and urban…We havereliable information on cooperatives inspecific industries — credit unions andrural electric cooperatives, for example— but limited information on purchas-ing cooperatives, worker-owned co-opsand the many types of cooperativesthat are owned by consumers.

NCBA usually cites the figures of47,000 U.S. co-ops with 120 million



ennesseeGovernorPhilBredesenwas one of

the dignitaries on hand tosalute Tennessee FarmersCooperative (TFC) and itspredecessors in an eventful60th anniversary celebra-tion in LaVergne Sept. 27,which he declared as “Co-op Heritage Day.” Theday also honored stateorganizations that wereinstrumental in helpingorganize TFC, namely theTennessee Farm BureauFederation and Universityof Tennessee Extension.

Gov. Bredesen described the feder-ated farm supply co-op as a “majorforce in Tennessee’s agricultural econo-my,” pointing to the competitive edgeit gives farmers by providing qualityproducts and services and the fact thatTFC is now one of the strongest fed-erated cooperative systems in thenation. “Because of the foresight of itsfounders, TFC has helped Tennessee’sfarm production grow and developinto the $2.5 billion industry that it istoday,” said Bredesen. “Tennessee is astate of long agricultural tradition, andwe owe a debt of gratitude to the menand women of the Tennessee FarmersCooperative for helping to shape theTennessee we know and enjoy today.”

As evidence of the vital roles co-opsplay in their communities, Bredesenacknowledged the recent efforts ofTFC and its member co-ops in gather-ing donations for hurricane victims

and serving as sources for school sys-tems to obtain diesel for school busesduring the fuel shortage caused byhurricane damage along the GulfCoast.

“Not only is the co-op important toour economy, over the years it hasbecome an integral part of Tennessee’srural landscape as a gathering place forfarmers and a well-known landmarkfor the community it serves,” Bredesensaid. “No matter where you are inTennessee, everyone knows wheretheir local co-op is.”

TFC CEO Vernon Glover said theco-op’s formation in 1945 began “awhole new era in Tennessee agricul-ture. TFC redefined the farm-supplybusiness in this state by giving farmerscooperative control over a reliable andidentifiable source of the products theyneed.”

“The fact that this mill behind us is

the tallest building in LaVergneis a symbol of our standing inthe community,” Glover contin-ued. “The same is true for com-munities all across the state. Ourmember co-ops stand tall intheir towns and are vital to thearea’s economy and the opera-tions of the producers theyserve.”

Tennessee AgricultureCommissioner Ken Givens andRep. Stratton Bone, vice chair of the House AgricultureCommittee, joined Bredesenand other state officials in hon-oring TFC as it reached thismilestone. “We couldn’t do whatwe do without the support ofthe people here today,” said

Givens, describing the audience as the“who’s who” of Tennessee agriculture.“It’s going to take all of us workingtogether to keep our competitive edgein the changing global marketplace.Part of that challenge goes back toproviding farm supplies and service ina timely and economical manner,which is exactly what the co-op does.”

Givens also referred to his member-ship in Hawkins Farmers Cooperativein Rogersville. The commissioner, abeef cattle and hay farmer, is amongthe 70,000 farmer-members who ownand control each independent TFCmember co-op. TFC provides prod-ucts and services to 63 member co-opsacross the state, which, in turn, servemore than half a million customersthrough nearly 150 retail outlets locat-ed in 84 of Tennessee’s 95 counties, aswell as several locations in neighboringstates. ■

Co-op Her i tage Day dec la redto mark TFC’s 60th ann iversary

T

CEO Vernon Glover serves up a piece of TFC’s 60th birthday cakefor longtime co-op truck driver Bud Eldridge. Photo courtesy TFC


By Beverly L. Rotan, Economist

USDA Rural [email protected]

Editor’s note: Cooperatives in this studywere classified by size: small, medium,large and super (table 1). The cooperativeswere further classified into four types basedon the percentage of their farm supply sales(see table 1 for the precise criteria).

ocal farm supply cooper-atives reaped higher salesand income during 2004,according to a USDAsurvey of the financial

statements of 263 co-ops. Average salesper local co-op were just under $18.07million in 2004, an increase of 3.2 per-cent from $15.96 million in 2003.

Farm supply sales (including feed,seed, fertilizer, chemicals and petrole-um) by co-ops increased 14.7 percent(table 2). Feed sales registered thestrongest gain, increasing about 20percent. Fertilizer sales shot up 18.3percent and petroleum sales climbedby almost 17 percent.

Grain sales —including corn, soy-beans, sorghum, oatsand wheat (winter,durum, spring, andrye) were strong in2004, increasing 11percent. Grain pro-duction was down(with the exception ofsorghum, springwheat and soybeans).Prices per bushelclimbed for corn andmost types of wheat.Prices for sorghumand soybeansdecreased during thetwo–year period.

Income jumps in 2004The average oper-

ating income (from commodity mar-keting, farm supplies and service) rosealmost 13 percent in 2004. Grains rep-resent almost 98 percent of total mar-keting sales by the local co-ops stud-ied.

Average net income per local co-opwas $296,810. This was a 45-percentincrease from $204,864 in 2003.

Total revenue was up 13 percent,although service income decreased 3percent. A sizable decrease in patron-age refunds was attributed to write-offof equity, due to the demise of someregional cooperatives in 2003. Thisphenomenon continued into 2004.

Patronage refunds were an impor-tant source of revenue and affected thenet income of some of the local co-ops(both positively and negatively).

A unique situation occurred in 2003that also affected the net income ofsome locals in 2004. Patronage refundswere up 140 percent in 2004 becauseof negative patronage refunds in 2003.In past years, patronage refunds creat-ed an opportunity for cooperativeswith losses to have a net gain.

Sales and net income c l imb fo r loca l fa rm co-ops in 2004

L

Table 1— Size and type definitions used for respondent cooperatives, 2004

Cooperative size definition NumberSmall up to $5 million in total sales 67Medium over $5 million to $10 million 61Large over $10 million to $20 million 65 Super over $20 million 70

Cooperative typeFarm supply total net sales from farm supplies 133Mixed farm supply from 50 to 99 percent 61Mixed marketing from 25 to 49 percent 49Marketing less than 25 percent 20

Table 2 — Average farm supplies sold and productsmarketed and change from 2003 to 2004

Change 2003 2004 2003 to 2004

Million dollars PercentFarm supplies sold: Feed 16.5 1.9 19.96Seed 3.7 4.3 14.80Fertilizer 1.6 1.9 18.28Crop protectants 1.3 1.4 6.00Petroleum products 3.2 3.7 16.81Other 1.3 1.3 6.70Total 9.3 10.7 14.68

Products marketed:Grains and oilseeds 6.5 7.2 10.78Other 1.3 .2 26.52Total 6.6 7.4 11.8

Discounts 3.1 3.0

Net sales 12.8 15.1 13.2


Patronage refunds saved 30 of 58cooperatives from having local losses.Seven percent of local cooperativesthat originally had positive netincomes ended up with losses becauseof negative patronage refunds. Theremaining 41 percent of cooperativesended up with net losses.

Cost of goods sold was up about 14percent. Cost of goods sold averagedabout 89 percent of total sales in 2004.

Co-op assets show gainsBoth current assets and total assets

were up slightly, 6 and 5 percent,respectively. All aspects of currentassets increased during the period of2003–2004. Farm inventory had thegreatest increase, at 14 percent.

Current liabilities jumped nearly 6percent, while revolving equityredeemed had the largest increase, 58percent. This was followed by divi-dends on equity (23 percent). Current

term-debt and short-term (seasonal) debtdecreased.

Total expenses werealso up about 6 percent,paced by a 5-percentincrease in wages, whichrepresent almost 50 per-cent of total expenses.Wage expense includedpayroll/salaries, employeebenefits (including retire-ment) and payroll taxes.

Co-ops in the studyhad an average of 39employees (part- andfull-time) in 2003 and38 employees in 2004.At the same time, salaries increased 5percent. Employees earned an averageannual salary of $26,187 in 2004.

Directors’ fees and expenses were asmall part of total expenses. However,director compensation is an important

factor that helps many cooperativesconvince producers to devote timeeach month to help guide their coop-erative. Co-op boards averaged 7members, who were paid an average of$905 per year. Directors’ fees were up7 percent.

Some performance factors are within the control ofcooperative management, but others are not. One way tomonitor the performance of your cooperative is throughfinancial statements and ratios. Ratios for the surveyedcooperatives remained relatively unchanged from 2003 to2004 (table 3).

Financial ratios that help assess your cooperative’s per-formance include:

• Liquidity ratios — focus on a company’s ability to paybills when due. If liquidity ratios remain relatively highfor a prolonged period, too much capital may be invest-ed in liquid assets, such as cash, short-term invest-ments, accounts receivable and inventory, while too lit-tle capital is devoted to increasing member equity.These ratios should equal one or more. On average,surveyed cooperatives had quick and current ratios ofslightly more than one.

• Leverage ratios — reveal a company’s use of bor-rowed funds (rather than members’ equity for invest-ment) to expand its business. The goal is to borrowfunds at a low interest rate and invest in businessactivity that produces a high rate of return, exceedingthe target rate of return for investment. Debt-to-equityratio measures the long-term solvency of a companyby comparing debt to net worth. A company with a high

debt-to-equity ratio could have trouble meeting fixedinterest/debt payments if business falters or does notgrow as planned. Most lenders would prefer this ratioto be 3 or lower

• Activity ratio turnover — also called “efficiencyratios,” measure activity or changes in certain assets.The inventory turnover ratio measures how quicklyinventory is sold and replaced each year. An inventoryturnover of 12 means inventory is turned over onceeach month. The times-interest-earned ratio measuresa company’s ability to make interest payments on debt.If the ratio does not exceed the interest rate on currentdebt, the business may not be making enough to payinterest expenses.

• Profitability ratios — vary from industry to industry andshould be compared to a company’s ratios for prioryears/periods. The return-on-total assets measure howwell a company is using its assets to generate net prof-its. The return-on-total equity ratio measures a compa-ny’s return on members’ money. Marketing coopera-tives’ gross margin was lower than cooperatives in thesurveyed group. This may be an indication of lowerdemand for their products or higher production of mar-keted products (crops). ■

Monitoring performance

Table 3 — Financial analysis ratios for all co-ops,2003–2004

Ratio 2003 2004Current 1.36 1.36Quick 0.66 0.67Debt 0.45 0.45Debt-to-total equity 0.82 0.83Times-interest-earned 3.49 4.26Total-asset turnover 2.14 2.31Fixed-asset turnover 8.07 8.81Gross profit margin 11.49 11.10Return-on-total assets beforeinterest & taxes 4.37 5.51Return-on-total equity 7.03 9.99


Ocean Spray marks 75th with integrated marketing campaign

Ocean Spray is marking its 75thanniversary by re-introducing the cran-berry to America through an integratedmarketing campaign called “straightfrom the cranberry bog.” Ocean Spraykicked off the effort by giving NewYork City its first-ever cranberry har-vest in Rockefeller Center, bringingtogether cranberry researchers fromaround the world for a special cranber-ry health summit, and launching a newadvertising campaign Oct. 17.

Ocean Spray flooded RockefellerCenter Channel Gardens with itsbright crimson berries for the BigApple Bog Oct. 4–7, bringing thebreathtaking beauty of a cranberryharvest to consumers. Most con-sumers are not aware of how cranber-ries are grown and harvested, the richhistory of the fruit, or the health ben-efits the little berry offers every family

member. At the same time, OceanSpray is continuing its focus on healthby bringing together research scien-tists to share the latest in cranberryhealth research and make public find-ings on how the nutrients in cranber-ries (called PACs) may play a role intotal body health. Ocean Spray part-nered with the Cranberry Institute forthe Cranberry Health Symposium atNew York Academy of Sciences onOct 5.

Ocean Spray is going back to itsroots with the “Straight from the Bog”ad campaign that celebrates its richheritage as an agricultural cooperative.Created by Arnold Worldwide, thecampaign features “cranberry growers”who tell the cranberry story as onlygrowers can. The series of ads featuretwo growers humorously touting themany taste and health attributes ofOcean Spray products, while hip-deepharvesting cranberries.

Ocean Spray is owned by more than650 cranberry growers in Massachu-setts, Wisconsin, New Jersey, andOregon, Washington, British Colum-bia and other parts of Canada as wellas more than 100 Florida grapefruitgrowers.

Sales, member paymentsup sharply for Dairylea

Dairylea, Syracuse, N.Y., and itssubsidiaries reported sales of $1.12 bil-lion in 2005, a 16.8 percent increasefrom 2004, members were told at theco-op’s annual meeting in Liverpool,N.Y. Dairylea General Manager GregWickham reported that the co-op alsoreturned more to members in 2005,$955.8 million, up 12.9 percent fromthe previous year. “There is onlyopportunity,” was the theme forDairylea’s 98th annual meeting, whichattracted more than 800 members, aswell as employees and industry guests.

Dairylea President Clyde Ruther-ford stressed that the co-op is workingin many ways to help improve theprofitability of its dairy farmers, anddiscussed Dairylea’s participating inDairy Marketing Services (DMS),along with Dairy Farmers of America,St. Albans and Land O’Lakes. In addi-tion, Rutherford recognized the manycustomer relationships that the coop-erative has established and continues tocultivate in the Northeast and beyond.

The co-op has more than 2,500members throughout the Northeast.Dairylea provides them with resourcessuch as insurance coverage, loan pro-grams, milk price risk-managementservices, business planning, livestockmarketing and investment and retire-ment planning through its holdingcompany, Agri-Services LLC.

N E W S L I N E

Send items to: [email protected]

Ocean Spray kicked off a new marketing campaign by turning the fountains at RockefellerSquare in New York City into a cranberry bog. Photo courtesy Ocean Spray


Cabot on leading edge ofcottage cheese technology

Cabot Creamery Cooperative(owned and operated by Agri-MarkInc.) is collaborating with CPSScherping, Winsted, Minn., to developprototype cottage cheese-making tech-nology using CPS’ horizontal cottagecheese vat (HCCV). The HCCVreplaces traditional open-vat cheese-making with an enclosed system thatautomates every step of the process.Lloyd Metzger of the University ofMinnesota helped develop and test theclosed-vat system in a pilot programsponsored by Dairy Management Inc.(which is funded by dairy farmers).

By automating the entire processwithin an enclosed system, the HCCVtechnology minimizes operator inter-vention, fluctuations in temperature,and exposures to the surroundingatmosphere. The result is an extremely

consistent and high-quality productevery time. The HCCV also automatesthe cleaning process between batches.The technology also allows greatercapacity and could add to the populari-ty of a traditional dairy product andmake it easier to meet demand. Thecooperative installed two HCCVmachines in a new room dedicated tocottage cheese production in 2004.

Tree Top grower returns soarTree Top Inc. returned $13.62 per

ton profit to its grower-owners for the2004 crop of processing fruit, a 78-percent increase over the $7.65returned for the 2003 crop. The co-op set a processing volume record forthe 2004 crop. The Selah, Wash.-based cooperative marked its 13thconsecutive profitable year in 2004.

“This was a challenging year for usin a number of ways,” Tom Stokes,

Tree Top CEO said. “We processed anenormous volume of fruit, while mak-ing process and equipment changes ina number of our facilities. At the sametime, employees continued to developand implement cost-saving and opera-

farms were still dependent on genera-tors for power.

Back in businessFor the most part, cooperative-

owned facilities in the disaster-strickenareas were spared heavy damage. Thenation’s largest nitrogen productionfacility — CF Industries’ (which wasrecently sold by its co-op owners)complex in Donaldsonville, La.— hadresumed normal operations at 80 per-cent of its plants two weeks after thestorm. In the same time frame, LandO’Lakes Purina Feed plants had powerrestored and mills were operatingaround the clock. CHS’ grain terminalin heavily flooded Myrtle Grove, La.,also escaped serious damage, but wasshut down for about four weeks whileawaiting the return of power andemployees.

Cooperative facilities operating ator near the Port of New Orleans havebeen slower to fully recover from theone-two punch of hurricanes Katrinaand Rita. Every year, about 50 percentof the corn and one-third of the soy-

beans exported by the United Statesfloat down the Mississippi River andits tributaries on barges, where it isoff-loaded onto oceangoing ships.Progress in returning the port to fulloperations has been gradual, but con-tinual. The Port of New Orleansannounced the intent to be fully opera-tional by Nov. 1.

Though damage to cooperativeplants was not excessive, employeewelfare continues to be a major con-cern for co-ops. A number of workersin both Louisiana and Mississippi losttheir homes and possessions. Many areseparated from families forced to evac-uate from the storm-ravaged area.Despite this, co-ops have reportedstory after story of employees whohave put aside their personal losses andworked day and night to help membersrecover.

Some co-ops are taking a directapproach to relief for these dedicatedindividuals. CHS Inc., which has morethan 100 employees working in theaffected area, has established a relieffund that is being equally disbursed

among employees who need to rebuildhomes and replace personal belongings.Through its DFA Cares program, DFAprovided generators for employees’homes as well as food and supplies.

As the horrors of Katrina ease withthe passing days, cooperative membersand employees are now shifting theirfocus from survival mode to rebuild-ing. Member-owned businesses willplay a significant role in the recoveryof this region where cooperative rootsrun deep. For Indian Springs membersand others like them who are strug-gling to get on with their lives andlivelihoods, a message on theCooperative Development FoundationWeb site says:

“Cooperatives are an importantbuilding block in the social and eco-nomic recovery. They provide infra-structure, access to credit and access tomarkets, all of which will be critical asthe rural economies of these threestates move from their dependence onthe initial relief efforts in the aftermathof this disaster to long-term sustain-able recovery.” ■

Picking up the pieces continued from page 8

Tree Top’s 2004 returns to growersincreased 78 percent from 2003. Photocourtesy Tree Top


tional efficiency measures into theirdaily work. Finally, the rising cost offuel had a significant impact on thisyear’s bottom line.”

Large crops in 2004 allowed the co-op to run plants at or near capacity,resulting in operating efficiencies com-pany-wide, Tree Top said. The co-opposted sales of $258.1 million for thefiscal year, with net proceeds of $29.9million on a record-high volume of535,000 tons of apples and pears. TreeTop has 1,460 members in Washing-ton, Oregon and Idaho, more than1,140 employees and a payroll of $42million. The co-op owns and operatesfive production plants in Washington,one in Milton-Freewater, Ore., andone in Rialto, Calif.

ACE honors outstanding cooperatorsSix individuals and organizations

received awards from the Associationof Cooperative Educators (ACE) foroutstanding contributions to coopera-tive education at ACE’s AnnualInstitute, held in Alexandria, Va., in August. The “OutstandingContribution to CooperativeEducation and Training” award wentto Bill Patrie, rural development direc-tor for the North DakotaAssociation of ElectricCooperatives, Mandan,N.D. He was honored forinfluence on cooperativedevelopment throughoutthe United States andCanada.

Dixie Watts Reaves,associate professor,Virginia Polytechnic andState University, receivedthe “Professional

Contribution by an ACE Member”award for her work with cooperativeeducation for youth. The “WilliamHlushko Award for Young CooperativeEducators” was awarded to LeslieSchuler, communications specialist,CHS Foundation and CHS-LandO’Lakes Member Services.

The “Education Program Award”went to the Ontario Co-operative Association for itsCooperative InternshipProgram for cooperativeemployees. The “Outstand-ing Contribution to ACE byan Organization Award” waspresented to the Ralph K.Morris Foundation for itsfinancial support that hashelped numerous studentsand cooperators attend the

ACE Institute. Louis Doering, vicepresident of human resources andtraining/staff development, Twin CityCo-ops Federal Credit Union, receivedthe “Reginald J. Cressman Award” forhis outstanding commitment to staffdevelopment.

The ACE Institute attracted morethan 80 educators from the UnitedStates, Canada and the Caribbean. Itincluded a pre-conference workshop,which was entitled “updating the coop-erative educator’s toolbox.” The themewas: “Cooperative Education:Understanding Cooperation as aStrategic Business Asset.” Speakersincluded a diverse contingent of pro-fessional cooperative educators.Conference presentations can be found on the ACE Website: http://www.wisc.edu/uwcc/ace/05/pd.html.The 2006 ACE Institute will be heldin San Juan, Puerto Rico, August 2–5.

Duran to lead new globalsoybean exporting program

Almost every other row of U.S. soy-beans is exported, so the newly createdU.S. Soybean Export Council(USSEC) will play a key role inexpanding international markets forU.S. farmers. Leading the charge forUSSEC will be Dan Duran, the newlyhired chief executive officer. “Danbrings to the table a unique combina-tion of proven excellence in buildingexport markets with a commitment tode-commoditizing commodities,” saidMark Pietz, USSEC interim co-chair-man and a soybean farmer fromLakefield, Minn. “Considering howunbelievably competitive the globalmarket is, building brand preferencefor U.S. soybeans and soybean prod-

gual labels. A Mississippi cooperative will

receive a grant to process and marketfrozen, processed blueberries. TheWisconsin Soybean Marketing Boardwill receive a grant to determine theviability of marketing biodiesel made

by a producer-owned soybean pro-cessing plant. Businesses and produc-ers in California, Delaware, Illinois,Indiana, Iowa, Kansas, Mississippi,Missouri, Nebraska, Ohio, Oregon,Washington and Wisconsin willreceive grants to assess the feasibility

of marketing ethanol and biodiesel, or other types of renewable energy. A total of 32 energy-related grantswere awarded this year. A completelist of the grants is available on the USDA Web site at: http://www.rurdev.usda.gov/. ■

Bioenergy, dairy producers among Recipients of $14.6 million in VAPGs continued from page 9

Bill Patrie addressesthe ACE conference inAlexandria, Va.

Students at Paul Norton Elementary inBettendorf, Iowa, enjoy single-serve milkbottles from Swiss Valley. Kids and schoolfood-service staff love the plastic bottles.Photo by Nancy Feeney, courtesy Swiss Valley


ucts is the only way we are going toremain number one.”

Duran joins USSEC from GalahadInternational, a sales and marketingcompany based in Baton Rouge, La.,that specializes in building global dairymarkets. Prior to Galahad, Duranspent 16 years with Wells Dairy, thelargest family owned and operateddairy processor in the United States.During his tenure with Wells, he initi-ated the first sales to Mexico, eventual-ly growing the dairy’s internationalcustomer base to more than 30 coun-tries, the majority in developing mar-kets.

USSEC was jointly created by theUnited Soybean Board (USB) andAmerican Soybean Association (ASA)

earlier this year to implement interna-tional marketing and competitivenessactivities on behalf of the soybeancheckoff and USDA-FAS. In additionto farmer-leaders from ASA and USB,USSEC will be governed by a boardof exporters and allied industry part-ners.

USSEC will focus on a three-pronged approach to internationalmarketing of U.S. soybeans: buildingpreference for U.S. soybeans, buildingdemand by targeting specific marketsand addressing market-access issues.Duran will lead a team of professionalsbased in St. Louis and throughout theworld, all representing U.S. soybeanfarmers.

USDA provides $9 millionfor broadband grants

USDA Rural Development is pro-viding $9 million in broadband com-munity connect grants to 19 communi-ties in 14 states and Puerto Rico. Thefunds will connect essential communityfacilities in rural towns and communi-ties where no broadband services cur-rently exist.

One grant for $325,400 will beawarded to the community ofGlendora, Miss., for installation ofwireless technology to connect alibrary, clinic and public safety facili-ties. The village of Hughes, Alaska,will receive $278,871 to cover theentire community with overlappingwireless “hot spots.” A Web site will bedesigned to enable community busi-nesses to sell items over the Internet.Local residents will also earn incomeby providing data processing servicesand will use video-conferencing todeliver educational classes to homesand the community center. TimberLake, S.D., will receive a $393,300grant to create a community centerthat provides public access points, freebroadband, distance learning and an e-commerce incubator for small busi-nesses and residents of the community.

USDA received 111 communityconnect grant applications. Of the 19communities selected for funding, 16will employ wireless technologies andthe other three will provide serviceover fiber optic cable. Communities

A major concern, however, whendeveloping a new product is the neces-sity of simultaneously developing anew market. The balance between suf-ficient production to supply the market— but not so much as to ruin its prof-itability — is a delicate one. Informa-tion technology will be used increas-ingly to coordinate these activitiesamong the marketing firms and theirrepresented plants.

References Carr, N., Does IT Matter?

Information Technology and the Corrosionof Competitive Advantage, Boston:Harvard Business School Press, 2004.

Friedman, T., The World is Flat: ABrief History of the 21st Century, NewYork: Farrar, Straus and Giroux, 2005.

Hale, J.H. III and J. Brown, TheOnly Sustainable Edge: Why BusinessStrategy Depends on Productive Friction

and Dynamic Specialization, Boston:Harvard Business School Press, 2005.

Novozymes and BBI International,Fuel Ethanol: A Technological Revolution,BBI International Publishing, GrandForks, ND, June 2004.

Smith, H. and P. Fingar, IT Doesn’tMatter, Business Processes Do: A CriticalAnalysis of Nicolas Carr’s IT Article in theHarvard Business Review, Tampa:Meghan-Kiffer Press, 2003. ■

IT having major impact on farmer-owned ethanol plants continued from page 17

Illustration courtesy United Soybean Board


selected do not have access to broad-band technology for such essential ser-vices as police protection, fire service,hospitals, libraries and schools.

Since its inception four years ago,the Community Connect BroadbandGrant program has provided 109grants and invested over $39 million toprovide service to local communities.Each community is required to makeat least 10 computers available tomembers of the public. The Commun-ity Connect program supplementsUSDA Rural Development’s standard,high-speed telecommunications loanprogram. A complete list of the grantsis available on the USDA Web site:http://www.rurdev.usda.gov.

CDF grants reflect needs of rural seniors

Reflecting a new focus on coopera-tive development initiatives that willenhance the quality of life of seniorsliving in rural America, the MutualService Cooperative (MSC) Fund ofthe Cooperative DevelopmentFoundation has awarded $92,000 ingrants for initiatives to improveseniors’ access to affordable housing,home care and health care services inrural communities. “The new focus forthe fund is based on an assessment thatthe needs of the elderly will be one ofthe greatest challenges facing ruralcommunities over the next severaldecades,” said Gap Kovach, chairmanof the MSC Fund trustees.

The five technical assistance pro-jects include an innovative rural coop-erative housing initiative, expansion ofseveral existing educational programsfor seniors in rural cooperative hous-ing, a training program for a ruralhome care cooperative, and an innova-tive cooperative approach to meetingthe health care needs in a small ruralcommunity. Recipients include:Foundation for Rural Housing Inc.,Madison, Wis. ($20,000); MinnesotaAssociation of Cooperatives EducationFoundation, St. Paul, Minn. ($14,205);Senior Cooperative Foundation, St.Paul, Minn. ($4,600); CooperativeCare, Wautoma, Wis. ($11,977); Peace

United Methodist Church, Pipestone,Minn. ($20,000).

The MSC Fund has awarded morethan $1 million in grants to the coop-erative community over the past threedecades. The Cooperative Develop-ment Foundation is a 501(c)(3) non-profit organization promoting commu-nity, economic and social developmentthrough cooperative enterprises.

CWT program includes75 percent of milk supply

Cooperatives WorkingTogether (CWT), thedairy industry’s self-fund-ed market balancing pro-gram, has now enrolledcooperatives and produc-ers representing 75 per-cent of the nation’s milksupply. Under the industryself-help program, now inits third year, producerspay assessments used tocompensate other produc-ers to reduce their herdsizes. Nearly 50 dairycooperatives of all sizesand more than 300 inde-pendent farmers are pay-ing five cents her hun-dredweight of their milkproduction to fund the program,according to Jerry Kozak, presidentand CEO of the National MilkProducers Federation, which adminis-ters the CWT program.

The goal this year is to remove upto 70,000 cows, more than double thenumber retired in 2003, and 20,000higher than last year’s program. Kozaksaid he hopes the remaining co-opsand independent producers will joinCWT to make it even more effective.The program has been credited withplaying a major role in helping tosolidify producer milk prices the pasttwo years. Deadline for submittingbids was Sept. 16.

Breeding co-op markspassing of greatest sire

Accelerated Genetics and perhapseven his own highly extended family,

are marking the passing of the co-op’sgreatest sire: Barbee-M Juror ITO, atthe age of 10 years and 2 months.ITO’s impact on the next generation ofdairy cattle around the world will befelt for many years to come throughhis daughters and sons, the co-op saidin a press release. The Baraboo, Wisc.-based cooperative says ITO’s daughtersare known for their beautiful udders,quiet disposition, fast milk-out andcalving ease. ITO’s influence will also

live on through his sons, which arecurrently enrolled in the co-op’s youngsire program and other A.I. programs.

ITO is currently the all-time lead-ing sire of semen produced and soldfrom Accelerated Genetics. And whilehe may be gone, ITO left a littlesomething behind: his semen will beavailable from the co-op as long asremaining supplies last. AcceleratedGenetics will forever remember ITOwith a special marker that is beingplaced at the co-op’s production facili-ty in Westby, Wisc.

Hazen elected to international co-op association board

Paul Hazen, president and CEO ofthe National Cooperative BusinessAssociation, was elected to the boardof the International Co-operativeAlliance Sept. 23 at a meeting of the

Accelerated Genetics’ top sire, ITO, is gone, but hislegacy lives on. Photo courtesy Accelerated Genetics


organization’s general assembly inCartagena, Colombia. Hazen will bethe only U.S. representative on the 15-member ICA board.

The International Co-operativeAlliance represents cooperatives andcooperative organizations worldwide.Headquartered in Geneva, it has morethan 225 members from at least 90countries. Together, these organiza-tions represent more than 800 millionpeople. U.S. members, in addition toNCBA, are the National CooperativeBank, Credit Union NationalAssociation, CUNA Mutual, NationalRural Electric CooperativeAssociation, Nationwide Insurance,ACDI/VOCA and Land O’Lakes, Inc.

Eighty-seven countries were repre-sented at the meeting, attended byapproximately 1,000 delegates.

“We know that cooperatives canchange peoples’ lives and that, byworking together in co-ops, familiescan achieve their dreams,” Hazen said.“Food, shelter, healthcare and educa-tion through cooperatives will do moreto fight terrorism and promote peacethan any war we will ever fight.”

Bonnie Raitt hits the roadon cleaner-burning biodiesel

Blues singer/guitarist Bonnie Raitt’scurrent tour is being fueled bybiodiesel, which her road crew is usingin her two diesel-powered buses andtwo semi trucks. Raitt’s year–long tourkicked off Oct. 5 in Tulsa, Okla.

Raitt has endorsed cleaner burn-ing, environmentally friendlybiodiesel (B20). “I believe we shoulddo everything we can to minimize ourimpact on the planet, and usingbiodiesel is a simple step that goes along way,” says Raitt. “By using B20on my Souls Alike Tour, we arereducing pollution and putting a dentin imported petroleum. Biodiesel hascome so far in the last few years. It’swonderful to see it gaining momen-tum — we can all benefit from morebiodiesel use.”

By using biodiesel fuel and promot-ing its benefits during her tours, Raitthas helped to increase the visibility ofbiodiesel, said Joe Jobe, chief executiveofficer of the National Biodiesel Board(NBB). “Today, more than 500 majorfleets use biodiesel commercially, and600 retail filling stations make it avail-able to the public.” Raitt said she alsosupports biodiesel because it con-tributes to the family farm. Soybeanfarmers, through the soybean checkoff,have led the way in developing theU.S. biodiesel industry for more than15 years. ■

Blues guitarist/singer Bonnie Raitt is fuel-ing her current national tour on biodieseland promoting its use at concerts andother events.

NCFC testifies onhurricane recovery goals

Jean-Mari Peltier, president andCEO of the National Council ofFarmer Cooperatives (NCFC), toldthe Senate Finance committee inOctober that “farmer cooperatives,their employees, and their nearly 2million farmer members are commit-ted to working with Congress andthe Bush Administration to provideneeded hurricane recovery assistanceand to encourage redevelopment ofaffected areas.” The hearing wascalled to get agriculture’s perspectiveon the community rebuilding needsafter Hurricane Katrina, and on theeffectiveness of past proposals. Thehearing examined how tax relief andincentives can be used to promotethe recovery effort, and the effective-ness of similar efforts made after pastnatural disasters.

As part of a nationwide campaign,NCFC has urged its members tojoin together as part of a cooperativeeffort to help provide relief to thoseimpacted by the hurricanes. At thetime of the hearing, farmer coopera-tives, their employees and farmermembers had already directly con-tributed over $1.2 million in hurri-cane relief. In addition, many farmercooperatives have donated food,livestock feed, generators, fuel sup-plies, transportation and other items.

“Given the scale of devastation,”Peltier said, “we believe what isneeded is a combination of assis-tance that provides tax relief andother incentives to encouragerebuilding efforts, which would be inaddition to traditional disaster assis-tance for agriculture throughUSDA.”

NCFC outlined several recom-

mendations, including:• Ensuring that any new tax relief

provisions apply to agriculture,including farmers and their coop-eratives;

• Creation of new enterprise zones,with provisions allowing farmercooperatives to pass benefitsthrough to farmer members;

• Extension of the greater deduc-tions under Section 179 and accel-erated depreciation;

• Clarification to allow cooperativesto fully qualify for deductions forcharitable contributions and fooddonations;

• Allowing deductions for donationsmade to individual farmers andothers in the disaster region;

• Extension of the general net oper-ating loss (NOL) carry-back peri-od to five years (from two yearscurrently).


Information appearing in Rural Cooperatives magazine during calendar year 2005 has been indexed to help you findpast articles. Articles are indexed by month and page. Back issues can be found on-line at www.rurdev.usda.gov.

TITLE FEATURES Issue—Page A Fresh Advantage

Co-ops help small farms market produce to high-end restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May/June 24A Perfect Storm

Farmland trustee sues ex-officers, directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March/April 18Actions that help retain members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jan./Feb. 6Antitrust review reveals strong co-op support for Capper-Volstead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sept./Oct. 25Appalachian Spring Cooperative, Treadway, Tenn. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nov./Dec. 23Atlantic Tender Beef

Canadian co-ops expand market for home-grown meat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 8Bioenergy, dairy producers among recipients of $14.6 million in VAPGs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nov./Dec. 9Breeding and growing oysters — easy does it . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 24Bucking the Trend

Small dairy co-ops targeting niche markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 12Charley’s Angels

Co-ops show true colors sending aid to Hurricane Charley-ravaged Southern states . . . . . . . . . . . . . . . . . . . . . Jan./Feb. 22CoBank CEO: Gear co-ops to consumer demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jan./Feb. 28CoBank’s Schoniger named top co-op communicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 32Consolidation, expansion spark growth in co-op feed sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 29Consumers prefer locally produced foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 11Co-op Heritage Day declared to mark TFC’s 60th anniversary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nov./Dec. 29Co-op payments to patrons subject to self-employment tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May/June 10Co-op stock exchange

Why choice of trading rules matters for new-generation co-op stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . Jan./Feb. 12Cooperation Works! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 28Court of Preference

Minn. co-op helps manufactured home residents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March/April 23Cream of the CROPP

Demand outstripping supply as CROPP organic dairy products go prime time . . . . . . . . . . . . . . . . . . . . . . . . . May/June 15Dairy & tomato industries show some parallel trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 19Diversified rural economy goal for Under Secretary Dorr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sept./Oct. 17Do bigger ethanol plants mean fewer farmer benefits? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nov./Dec. 20Ethanol marketing/contracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sept./Oct. 11Executive committees key to CROPP governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May/June 18Expanded database vital for future co-op reseach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nov./Dec. 25Farmer co-op business volume nears $117 billion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March/April 11Farmer-owned ethanol and the role of information technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sept./Oct. 8Farmland faced classic co-op dilemma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March/April 22Flying the coop

Why members leave a co-op and ways to prevent it . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jan./Feb. 4Going with the Grain

New Mexico organic wheat co-op provides lift to farmers, rural economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May/June 12Hurdles to niche-markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 13How big are “middleman” profits? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 15How small farms benefit communities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May/June 23Innovation a necessity, not a choice, for 21st century co-ops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May/June 4IT having major impact on farmer-owned ethanol plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nov./Dec. 15Keys to success…and pitfalls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sept./Oct. 23Leaving home?

Reasons vary for co-op conversions; critics remain wary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jan./Feb. 8Livingston gives producers legislative tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jan./Feb. 31Local-based, alternative-marketing strategy could help save more small farms . . . . . . . . . . . . . . . . . . . . . . . . . . . . May/June 20Low-carb, High Hopes

Co-op’s slimmed-down, SunLite tubers may beef-up Florida’s potato industry . . . . . . . . . . . . . . . . . . . . . . . . March/April 8Measuring top 100 co-op performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March/April 28Micro co-op finding success in local markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 16Monitoring performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nov./Dec. 31New Technology: Opportunity and Challenge

Technology changes could turn milk plants into ‘dairy refineries’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 18No Shell Game

Oyster co-op hopes to revive Mystic’s faded shellfish industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July/Aug. 22Of necessity & invention

Conference shows diversity of responses by co-ops to changing market conditions . . . . . . . . . . . . . . . . . . . . . . . . . Jan./Feb. 17

2005 Ar t ic le Index


Organic Co-ops Taking Root . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 11Organic food sales growing at ‘breathtaking’ speed . . . . . . . . . . .May/June 13Paper or plastic?

For single-serve milk market, the answer is plastic . . . . . . . . . .Jan./Feb. 27Perils & Pleasures of Partnerships

Key issue of co-ops in business partnerships: Who do you trust? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March/April 30

Picking up the piecesCo-op aid helping other co-ops recover from ravages of Hurricane Katrina . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 4

Prairie ProsperityFrom biofuels to buffalo bullion & zamboni repair, Minn. town cooperatives to boost rural business . . . . . . . . . .Nov./Dec. 10

Price crisis prompts potato growers to form national co-op . . .March/April 4Retail co-ops advised to foster member identification,

not force conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Jan./Feb. 26Running on Empty?

‘Great ethanol debate’ waged at NCGA forum . . . . . . . . . . . .Sept./Oct. 4Sales and net income climb for local farm co-ops in 2004 . . . . .Nov./Dec. 30Slice of the market

Penns Corner, Tuscarora co-ops target growing restaurant trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 27

Soybean extruder opens new doors for Kansas co-op . . . . . . . . .May/June 36Study: co-op conversions rarely member-driven . . . . . . . . . . . . . .Jan./Feb. 11Taking Stock

Rural food cooperative case studies reveal critical retail success factors . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 19

Texas dairy farmer ‘puts joy into his work’ . . . . . . . . . . . . . . . . . .May/June 19The Inside Scoop on Outside Help

Outside co-op development specialists play crucial role for business launch . . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 26

The ultimate R&D challenge: financing new technology . . . . . .July/Aug. 20The United We Stand program . . . . . . . . . . . . . . . . . . . . . . . . .March/April 7Trading Places

Fortunes of California rice co-ops took opposite trajectories. . May/June 32Turning forest waste into energy . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 47Unflappable

Plant closure forces Virginia poultry cooperative launch onto fast-track . . . . . . . . . . . . . . . . . . . .March/April 14

Upswing ContinuesDespite loss of Farmland & Agway, revenue, income climb for top 100 co-ops . . . . . . . . . . . . . . . . . . . . .March/April 25

USDA helps Colorado farmers cook up profitability . . . . . . . . . .May/June 9USDA hurricane-relief teams active on multiple fronts . . . . . . . .Nov./Dec. 5USDA marks 70th anniversary of landmark rural legislation . . . . .July/Aug. 4USDA, MSU Extension help Crooked Bow beef take a bow . . . .Jan./Feb. 7USDA offers co-op development help . . . . . . . . . . . . . . . . . . . . .July/Aug. 27USDA providing $7 million for rural co-op development . . . . .Nov./Dec. 45USDA Rural Development offers hurricane-relief . . . . . . . . . . .Sept./Oct. 18When the sky falls

Advance planning key to crisis communications . . . . . . . . . . .Sept./Oct. 27Who you gonna call?

ATTRA output helps low-input agriculture expand its market niche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 30

Why wasn’t Farmland reorganized? . . . . . . . . . . . . . . . . . . . . .March/April 21

Magazine DepartmentsCOMMENTARY/EDITORIAL

Defending the cornerstone of cooperation . . . . . . . . . . . . . . . . . . .July/Aug. 2Energizing Rural America: How the energy bill helps us all . . . .Nov./Dec. 2Producers are natural leaders for rural communities . . . . . . . . .March/April 2Rural America’s role in the energy economy . . . . . . . . . . . . . . . . . .Jan./Feb. 2Shelter from the storm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 2Spreading the word . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 2

Inside Rural DevelopmentRenewable energy: the new frontier . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 39Turning forest waste into energy . . . . . . . . . . . . . . . . . . . . . . . . . .Nov/Dec 47USDA energy program promotes ‘cow power’ . . . . . . . . . . . . . .Sept./Oct. 39USDA B&I program supports growth of organic cooperatives . .May/June 43VAPG program creates rural jobs, boosts local economies . . .March/April 43

Legal CornerAntitrust developments; case against mushroom

growers’ co-op settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March/April 24Energy Tax Incentives Act includes cooperative provisions . . . .Sept./Oct. 14Get ready to claim your “QPAI deduction” . . . . . . . . . . . . . . . . .July/Aug. 21New tax law includes several cooperative provisions . . . . . . . . . .Jan./Feb. 20Web-based ag/co-op law library puts

valuable resources at fingertips . . . . . . . . . . . . . . . . . . . . . . . . .May/June 10

NewslineTFC’s $447-million sales year sets record; income also climbs . . .Jan./Feb. 34Humboldt Creamery acquires WestFarm’s ice cream divisionRecord crop returns for Blue Diamond membersUSDA awards $8.8 million in rural broadband grantsAMPI butter plant hit by fireCHS 2004 earnings a record $221 millionBison co-op optimistic about emerging from Chapter 11UW co-op reference book newly revisedSpecialty grain industry education network expandsCropp interim director of UW Center for Co-opsDotCoop launches directory; Paul Hazen to head OCDCNew funding source for rural economic developmentHanson gets co-op leadership honorDakota local co-ops mergeLamb Checkoff faces voteRecord beet payments for Minn-Dak membersUSDA Ag Outlook Forum provides insight on “front-burner” ag issuesCrop-based biofuels could add $5 billion to farm profits by 2025USDA-EPA partnership promotes renewable energyAnother $3 million going back to Walton EMC members

CWT Round II removing nearly 1-billion pounds of milk . . .March/April 33Southern States Co-op acquires Agway’s share of Co-op MillingBio-energy priority for USDA value-added grantsDFA acquires Keller’s CreameryHealth care co-ops get boost in Wis., Minn.LO’L sales top $7.7 billion; CEO Jack Gherty to retirePreserving rural heritage, culture goal of White House/USDA effortCoBank pays record patronage; smaller board approved in voteIsom, Toelle NCFC’s directors of the yearFCS America board election reflects anti-sale sentiment“Payback” new CHS feed brandMichigan cattle producers unite to pursue market opportunitiesGeorgia Co-op Center gets boost from USDA grantGROWMARK forms alliance to offer grain-risk servicesSoybean association joins crop insurance co-opCo-ops have $6-billion impact on North DakotaIowa, Illinois get new winery co-opsPreliminary settlement reached in MCP lawsuit

Record-breaking year for DFA . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 37Cheese sales drive record AMPI revenueCairo Co-op building new elevatorDakota Prairie Beef to dissolveTwo co-ops semifinalists for prestigious awardUSDA offers $22.8 million for renewable energy projectsForemost sets sales/earnings recordColorado local co-ops mergeCourt approves MCP settlementWalnut growers to vote on co-op conversionOcean Spray taps former Pepsi R&D chief to push innovationSunkist marks 111th year with higher sales, grower payACE Institute set for N. Virginia

Pennsylvania food-marketing co-op completes trade mission to China . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 33

Alto forms whey-marketing partnershipAurora Co-op buying Cargill’s Grand Island millBin collapse causes co-op to halt storageCalif. Dairy co-op buying Frito plantCF Industries plans stock saleCHS sells Mexican foods operationsCo-op conference slated in Minnesota$10,000 land stewardship prize offered by AFT


Dairy conference eyes national marketing agencyDiamond Walnut to convert

Scope of co-op law project expanded . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 29NCFC surveying co-op structureWisconsin law would allow outside investment in co-opsCo-op wants incentives for buyout payments to fund value-added agMinn. sugar co-op buying Holly Sugar from ImperialPolicinski to succeed GhertyBruce Anderson honoredRiceland’s Bell named Arkansas Ag SecretaryPastureland artisan butter wins top honors from ACSPenlight celebrates 80 yearsRick Smith named DFA president & COOAnderson elected chairman of U.S. Grains CouncilCDF establishes hurricane recovery fundReynolds receives Honored Cooperator AwardCo-op celebrates 80 yearsStruggling Kansas local co-op dissolvesNew hotline for sustainable ag pubsBill expands health care co-opsIsolated Alaskan villages get USDA help for InternetCo-op Month material on WebCo-op Foundation awards grantsWalton EMC sends crews to storm-wracked Mississippi

Sales, member payments up sharply for Dairylea . . . . . . . . . . . .Nov./Dec. 32Ocean Spray marks 75th with integrated marketing campaignCabot on Leading Edge of Cottage Cheese TechnologyTree Top grower returns soarACE honors outstanding cooperatorsDuran to lead new global soybean exporting programUSDA provides $9 million for broadband grantsCDF grants reflect needs of rural seniorsCWT program includes 75 percent of milk supplyBreeding co-op marks passing of greatest sireNCFC testifies on hurricane recovery goalsBonnie Raitt hits the road on cleaner-burning biodieselHazen elected to international co-op association boardSouth Dakota co-ops merge

Value-Added CornerAppalachian Spring Cooperative, Treadway, Tenn. . . . . . . . . . . .Nov./Dec. 23 Farmers Pride Cooperative, Newman Grove Branch, Nebraska Sept./Oct. 15Iowa cheese co-op helps preserve a way of life . . . . . . . . . . . . . . .Jan./Feb. 15No loafing

Booming business leads wheat cooperative to expand Gerard’s Bakery to East Coast . . . . . . . . . . . . . . . . . .May/June 7

Trading on TraditionHeartland Farm Foods uses country tradition to market members’ beef . . . . . . . . . . . . . . . . . . . . . . . . . . . .March/April 12

SUBJECTSAquaculture/FisheryBreeding and growing oysters — easy does it . . . . . . . . . . . . . . . .July/Aug. 24No Shell Game

Oyster co-op hopes to revive Mystic’s faded shellfish industry July/Aug. 22

Biofuels & ProductsBioenergy, dairy producers among recipients

of $14.6 million in VAPGs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 9Do bigger ethanol plants mean fewer farmer benefits? . . . . . . .Nov./Dec. 20Ethanol marketing/contracting . . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 11Farmer-owned ethanol and the role of information technology. . Sept./Oct. 8Fuel ethanol industry structure, past & present . . . . . . . . . . . . . .Nov./Dec. 18 IT having major impact on farmer-owned ethanol plants . . . . .Nov./Dec. 15Prairie ProsperityFrom biofuels to buffalo bullion & zamboni repair,

Minn. town cooperatives to boost rural business . . . . . . . . . .Nov./Dec. 10Running on Empty?

‘Great ethanol debate’ waged at NCGA forum . . . . . . . . . . . .Sept./Oct. 4Surviving in a low-price cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 16 Turning forest waste into energy . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 47USDA energy program promotes ‘cow power’ . . . . . . . . . . . . . .Sept./Oct. 39

CommunicationCoBank’s Schoniger named top co-op communicator . . . . . . . . .July/Aug. 32Flying the coop

Why members leave a co-op and ways to prevent it . . . . . . . . .Jan./Feb. 4When the sky falls

Advance planning key to crisis communications . . . . . . . . . . .Sept./Oct. 27

Consumer Co-opsAtlantic Tender Beef

Canadian co-ops expand market for home-grown meat . . . . . .July/Aug. 8Court of Preference

Minn. co-op helps manufactured home residents . . . . . . . .March/April 23Keys to success…and pitfalls (for retail food co-ops) . . . . . . . . .Sept./Oct. 23Retail co-ops advised for foster member identification,

not force conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Jan./Feb. 26Taking Stock


Co-op DevelopmentAppalachian Spring Cooperative, Treadway, Tenn. . . . . . . . . . . .Nov./Dec. 23Cooperation Works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 28No Shell Game

Oyster co-op hopes to revive Mystic’s faded shellfish industry. July/Aug. 22Price crisis prompts potato growers to form national co-op . . .March/April 4The Inside Scoop on Outside Help


Trading on TraditionHeartland Farm Foods uses country tradition to market members’ beef . . . . . . . . . . . . . . . . . . . . . . . . . . . .March/April 12

UnflappablePlant closure forces Virginia poultry cooperative launch onto fast-track . . . . . . . . . . . . . . . . . . . .March/April 14

USDA offers co-op development help . . . . . . . . . . . . . . . . . . . . .July/Aug. 27USDA providing $7 million for rural co-op development . . . . .Nov./Dec. 45

DairyBucking the Trend

Small dairy co-ops targeting niche markets . . . . . . . . . . . . . . .July/Aug. 12Cream of the CROPP

Demand outstripping supply as CROPP organic dairy products go prime time . . . . . . . . . . . . . . . . . . .May/June 15

Dairy & tomato industries show some parallel trends . . . . . . . . .July/Aug. 19Executive committees key to CROPP governance . . . . . . . . . . .May/June 18How big are “middleman” profits? . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 15Hurdles to niche-markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 13Iowa cheese co-op helps preserve a way of life . . . . . . . . . . . . . . .Jan./Feb. 15Micro co-op finding success in local markets . . . . . . . . . . . . . . . .July/Aug. 16New Technology: Opportunity and Challenge

Technology changes could turn milk plants into ‘dairy refineries’ . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 18

Paper or plastic?For single-serve milk market, the answer is plastic . . . . . . . . . .Jan./Feb. 27

Picking up the piecesCo-op aid helping other co-ops recover from ravages of Hurricane Katrina . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 4

Texas dairy farmer ‘puts joy into his work’ . . . . . . . . . . . . . . . . . .May/June 19The ultimate R&D challenge: financing new technology . . . . . .July/Aug. 20

Director Education and DevelopmentFlying the coop

Why members leave a co-op and ways to prevent it . . . . . . . . .Jan./Feb. 4

Disaster RecoveryPicking up the pieces

Co-op aid helping other co-ops recover from ravages of Hurricane Katrina . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 4

USDA hurricane-relief teams active on multiple fronts . . . . . . . .Nov./Dec. 5USDA Rural Development offers hurricane-relief . . . . . . . . . . .Sept./Oct. 18When the sky falls



EducationExpanded database vital for

future co-op reseach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 25Of Necessity & Invention

Conference shows diversity of responses by co-ops to changing market conditions . . . . . . . . . . . . . . . . . .Jan./Feb. 17

Paper or plastic?For single-serve milk market, the answer is plastic . . . . . . . . . .Jan./Feb. 27

The Inside Scoop on Outside HelpOutside co-op development specialists play crucial role for business launch . . . . . . . . . . . . . . . . . . . . .July/Aug. 26

Who you gonna call?ATTRA output helps low-input agriculture expand its market niche . . . . . . . . . . . . . . . . . . . . .May/June 30

EnvironmentCharley’s Angels

Co-ops show true colors sending aid to Hurricane Charley-ravaged Southern states . . . . . . . . . . . . . . .Jan./Feb. 22

Cream of the CROPPDemand outstripping supply as CROPP organic dairy products go prime time . . . . . . . . . . . . . . . . . . .May/June 15

Farm Supply, Agronomy & ServiceA Perfect Storm

Farmland trustee sues ex-officers, directors . . . . . . . . . . . .March/April 18Consolidation, expansion spark growth in co-op feed sales . . . . .July/Aug. 29Co-op Heritage Day declared to mark TFC’s 60th anniversary Nov./Dec. 29Farmer co-op business volume nears $117 billion . . . . . . . . . .March/April 11Measuring top 100 co-op performance . . . . . . . . . . . . . . . . . .March/April 28Monitoring performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 31Sales and net income climb for local farm co-ops in 2004 . . . . .Nov./Dec. 30Upswing Continues

Despite loss of Farmland & Agway, revenue, income climb for top 100 co-ops . . . . . . . . . . . . .March/April 25

FinanceA Perfect Storm

Farmland trustee sues ex-officers, directors . . . . . . . . . . . .March/April 18CoBank CEO: Gear co-ops to consumer demand . . . . . . . . . . . .Jan./Feb. 28Co-op payments to patrons subject to self-employment tax . . . .May/June 10Co-op stock exchange

Why choice of trading rules matters for new-generation co-op stockholders . . . . . . . . . . . . . . . . . . . . . .Jan./Feb. 12

Do bigger ethanol plants mean fewer farmer benefits? . . . . . . .Nov./Dec. 20Energy Tax Incentives Act includes cooperative provisions . . . .Sept./Oct. 14Farmland faced classic co-op dilemma . . . . . . . . . . . . . . . . . . .March/April 22Get ready to claim your “QPAI deduction” . . . . . . . . . . . . . . . . .July/Aug. 21How big are “middleman” profits? . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 15It having major impact on farmer-owned ethanol plants . . . . . .Nov./Dec. 15Measuring top 100 co-op performance . . . . . . . . . . . . . . . . . .March/April 28Monitoring performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 31Of Necessity & Invention

Conference shows diversity of responses by co-ops to changing market conditions . . . . . . . . . . . . . . . . .Jan./Feb. 17

Surviving in a low-price cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 16Trading Places

Fortunes of California rice co-ops took opposite trajectories . May/June 32USDA B&I program supports growth of organic cooperatives . .May/June 43Why wasn’t Farmland reorganized? . . . . . . . . . . . . . . . . . . . . .March/April 21

Fruits, Nuts, VegetablesA Fresh Advantage

Co-ops help small farms market produce to high-end restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 24

Innovation a necessity, not a choice, for 21st century co-ops . . . .May/June 4Low-carb, High Hopes

Co-op’s slimmed-down, SunLite tubers may beef-up Florida’s potato industry . . . . . . . . . . . . . . . . . .March/April 8

Perils & Pleasures of PartnershipsKey issue of co-ops in business partnerships: Who do you trust? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March/April 30

Picking up the piecesCo-op aid helping other co-ops recover from

ravages of Hurricane Katrina . . . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 4Price crisis prompts potato growers to form national co-op . . .March/April 4Slice of the market


The United We Stand program . . . . . . . . . . . . . . . . . . . . . . . . .March/April 7

Governance & StructureCo-op stock exchange


Executive committees key to CROPP governance . . . . . . . . . . .May/June 18Leaving home?

Reasons vary for co-op conversions; critics remain wary . . . . . .Jan./Feb. 8Perils & Pleasures of Partnerships

Key issue of co-ops in business partnerships: Who do you trust? . . . . . . . .March/April 30Study: co-op conversions rarely member-driven . . . . . . . . . . . . . .Jan./Feb. 11

Grains & OilseedsFarmer-owned ethanol and the role of information technology .Sept./Oct. 8Farmers Pride Cooperative, Newman Grove Branch, Nebraska Sept./Oct. 15Going with the Grain

New Mexico organic wheat co-op provides lift to farmers, rural economy . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 12

Leaving home?Reasons vary for co-op conversions; critics remain wary . . . . . .Jan./Feb. 8

No loafingBooming business leads wheat cooperative to expand Gerard’s Bakery to

East Coast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 7Perils & Pleasures of Partnerships

Key issue of co-ops in business partnerships: Who do you trust? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March/April 30

Running on Empty? ‘Great ethanol debate’ waged at NCGA forum . . . . . . . . . . . .Sept./Oct. 4

Soybean extruder opens new doors for Kansas co-op . . . . . . . . .May/June 36Trading Places

Fortunes of California rice co-ops took opposite trajectories .May/June 32USDA helps Colorado farmers cook up profitability . . . . . . . . . .May/June 9

Legislative and LegalA Perfect Storm

Farmland trustee sues ex-officers, directors . . . . . . . . . . . .March/April 18Antitrust developments; case against mushroom

growers’ co-op settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March/April 24Antitrust review reveals strong co-op support for

Capper-Volstead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 25Co-op payments to patrons subject to self-employment tax . . . .May/June 10Energy Tax Incentives Act includes cooperative provisions . . . .Sept./Oct. 14Farmland faced classic co-op dilemma . . . . . . . . . . . . . . . . . . .March/April 22Get ready to claim your “QPAI deduction” . . . . . . . . . . . . . . . . .July/Aug. 21Leaving home?

Reasons vary for co-op conversions; critics remain wary . . . . . .Jan./Feb. 8Livingston gives producers legislative tips . . . . . . . . . . . . . . . . . . .Jan./Feb. 31New tax law includes several cooperative provisions . . . . . . . . . .Jan./Feb. 20Paper or plastic?

For single-serve milk market, the answer is plastic . . . . . . . . . .Jan./Feb. 27Study: co-op conversions rarely member-driven . . . . . . . . . . . . . .Jan./Feb. 11USDA marks 70th anniversary of landmark rural legislation . . . . .July/Aug. 4Web-based ag/co-op law library puts valuable

resources at fingertips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 10Why wasn’t Farmland reorganized? . . . . . . . . . . . . . . . . . . . . .March/April 21

LivestockAtlantic Tender Beef

Canadian co-ops expand market for home-grown meat . . . . . .July/Aug. 8Leaving home?

Reasons vary for co-op conversions; critics remain wary . . . . . .Jan./Feb. 8Trading on Tradition

Heartland Farm Foods uses country tradition to market members’ beef . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March/April 12

USDA, MSU Extension help Crooked Bow beef take a bow . . . . .Jan./Feb. 7


ManagementFarmland faced classic co-op dilemma . . . . . . . . . . . . . . . . . . .March/April 22Innovation a necessity, not a choice, for 21st century co-ops . . . .May/June 4Keys to success…and pitfalls . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 23Perils & Pleasures of Partnerships


Taking StockRural food cooperative case studies reveal critical retail success factors . . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 19

Trading PlacesFortunes of California rice co-ops took opposite trajectories. . May/June 32

MarketingA Fresh Advantage

Co-ops help small farms market produce to high-end restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 24

Atlantic Tender BeefCanadian co-ops expand market for home-grown meat . . . . . .July/Aug. 8

Bucking the TrendSmall dairy co-ops targeting niche markets . . . . . . . . . . . . . . .July/Aug. 12

CoBank CEO: Gear co-ops to consumer demand . . . . . . . . . . . .Jan./Feb. 28Consumers prefer locally produced foods . . . . . . . . . . . . . . . . . . .July/Aug. 11Farmer co-op business volume nears $117 billion . . . . . . . . . .March/April 11How big are “middleman” profits? . . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 15Hurdles to niche-markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 13Innovation a necessity, not a choice, for 21st century co-ops . . . .May/June 4Local-based, alternative-marketing strategy

could help save more small farms . . . . . . . . . . . . . . . . . . . . . . .May/June 20Low-carb, High Hopes

Co-op’s tubers may beef-up Florida’s potato industry . . . . . .March/April 8Measuring top 100 co-op performance . . . . . . . . . . . . . . . . . .March/April 28Micro co-op finding success in local markets . . . . . . . . . . . . . . . .July/Aug. 16No loafing


No Shell GameOyster co-op hopes to revive Mystic’s faded shellfish industry. .July/Aug. 22

Of Necessity & InventionConference shows diversity of responses by co-ops to changing market conditions . . . . . . . . . . . . . . . . . . . .Jan./Feb. 17

Organic food sales growing at ‘breathtaking’ speed . . . . . . . . . . .May/June 13Paper or plastic?

For single-serve milk market, the answer is plastic . . . . . . . . . .Jan./Feb. 27Price crisis prompts potato growers to form national co-op . . .March/April 4Retail co-ops advised for foster member identification,

not force conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Jan./Feb. 26Slice of the market


The United We Stand program . . . . . . . . . . . . . . . . . . . . . . . . .March/April 7Trading Places

Fortunes of California rice co-ops took opposite trajectories . .May/June 32Unflappable

Plant closure forces Virginia poultry cooperative launch onto fast-track . .March/April 14Upswing Continues

Despite loss of Farmland & Agway, revenue, income climb for top 100 co-ops . . . . . . . . . . . . . . . . . . . . .March/April 25

Member RelationsActions that help retain members . . . . . . . . . . . . . . . . . . . . . . . . . . .Jan./Feb. 6Farmland faced classic co-op dilemma . . . . . . . . . . . . . . . . . . .March/April 22Flying the coop

Why members leave a co-op and ways to prevent it . . . . . . . . . .Jan./Feb. 4Keys to success…and pitfalls . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 23Taking Stock

Rural food cooperative case studies reveal critical retail success factors . . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 19

OrganicA Fresh Advantage

Co-op help small farms market produce to high-end restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 24

Cream of the CROPPDemand outstripping supply as CROPP organic dairy products go prime time . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 15

Going with the GrainNew Mexico organic wheat co-op provides lift to farmers, rural economy . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 12

Organic Co-ops Taking Root . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 11Organic food sales growing at ‘breathtaking’ speed . . . . . . . . . . .May/June 13Slice of the Market

Penns Corner, Tuscarora co-ops target growing restaurant trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 27

Texas dairy farmer ‘puts joy into his work’ . . . . . . . . . . . . . . . . . .May/June 19USDA B&I program supports growth of organic cooperatives . .May/June 43Web-based ag/co-op law library puts


PoultryUnflappable

Plant closure forces Virginia poultry cooperative launch onto fast-track . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March/April 14

VAPG program creates rural jobs, boosts local economies . . .March/April 43

Rural DevelopmentA Fresh Advantage

Co-ops help small farms market produce to high-end restaurants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 24

Appalachian Spring Cooperative, Treadway, Tenn. . . . . . . . . . . .Nov./Dec. 23Cream of the CROPP

Demand outstripping supply as CROPP organic dairy products go prime time . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 15

How small farms benefit communities . . . . . . . . . . . . . . . . . . . . .May/June 23Local-based, alternative-marketing strategy

could help save more small farms . . . . . . . . . . . . . . . . . . . . . . .May/June 20Prairie ProsperityFrom biofuels to buffalo bullion & zamboni repair,

Minn. town cooperatives to boost rural business . . . . . . . . . .Nov./Dec. 10Taking Stock


The Inside Scoop on Outside HelpOutside co-op development specialists play crucial role for business launch . . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 26

StatisticsConsolidation, expansion spark growth in co-op feed sales . . . . .July/Aug. 29Farmer co-op business volume nears $117 billion . . . . . . . . . .March/April 11Measuring top 100 co-op performance . . . . . . . . . . . . . . . . . .March/April 28Sales and net income climb for local farm co-ops in 2004 . . . . .Nov./Dec. 30Upswing Continues

Despite loss of Farmland & Agway, revenue, income climb for top 100 co-ops . . . . . . . . . . . . . . . . . . . . .March/April 25

TechnologyCourt of Preference

Minn. co-op helps manufactured home residents . . . . . . . .March/April 23IT having major impact on farmer-owned ethanol plants . . . . .Nov./Dec. 15Low-carb, High Hopes

Co-op’s slimmed-down, SunLite tubers may beef-up Florida’s potato industry . . . . . . . . . . . . . . . . . . . . . .March/April 8

New Technology: Opportunity and ChallengeTechnology changes could turn milk plants into ‘dairy refineries’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 18

The ultimate R&D challenge: financing new technology . . . . . . .July/Aug. 20Web-based ag/co-op law library puts valuable

resources at fingertips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 10Who you gonna call?

ATTRA output helps low-input agriculture expand its market niche . . . . . . . . . . . . . . . . . . . . .May/June 30

Trade New tax law includes several cooperative provisions . . . . . . . . . .Jan./Feb. 20


USDAAntitrust review reveals strong co-op support

for Capper-Volstead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 25Bioenergy, dairy producers among recipients

of $14.6 million in VAPGs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 9Expanded database vital for

future co-op reseach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 25Diversified rural economy goal for Under Secretary Dorr . . . . .Sept./Oct. 17Renewable energy: the new frontier . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 39USDA B&I program supports growth of organic cooperatives .May/June 43USDA helps Colorado farmers cook up profitability . . . . . . . . . .May/June 9USDA hurricane-relief teams active on multiple fronts . . . . . . . .Nov./Dec. 5USDA marks 70th anniversary of landmark rural legislation . . . . .July/Aug. 4USDA providing $7 million for rural co-op development . . . . .Nov./Dec. 45USDA Rural Development offers hurricane-relief . . . . . . . . . . .Sept./Oct. 18VAPG program creates rural jobs, boosts local economies . . .March/April 43

Utility Co-ops Charley’s Angels


Picking up the piecesCo-op aid helping other co-ops recover from ravages of Hurricane Katrina . . . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 4


USDA marks 70th anniversary of landmark rural legislation . . . . .July/Aug. 4

Value Added Appalachian Spring Cooperative, Treadway, Tenn. . . . . . . . . . . .Nov./Dec. 23Bioenergy, dairy producers among recipients

of $14.6 million in VAPGs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 9Bucking the Trend

Small dairy co-ops targeting niche markets . . . . . . . . . . . . . . .July/Aug. 12Co-op stock exchange


Ethanol marketing/contracting . . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 11Farmer-owned ethanol and the role of information technology . .Sept./Oct. 8Farmers Pride Cooperative,

Newman Grove Branch, Nebraska . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 15Going with the Grain

New Mexico organic wheat co-op provides lift to farmers, rural economy . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 12

Micro co-op finding success in local markets . . . . . . . . . . . . . . . .July/Aug. 16New Technology: Opportunity and Challenge

Technology changes could turn milk plants into ‘dairy refineries’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 18

No loafingBooming business leads wheat cooperative to expand Gerard’s Bakery to East Coast . . . . . . . . . . . . . . . . . .May/June 7

Prairie ProsperityFrom biofuels to buffalo bullion & zamboni repair,

Minn. town cooperatives to boost rural business . . . . . . . . . .Nov./Dec. 10Running on Empty?

‘Great ethanol debate’ waged at NCGA forum . . . . . . . . . . . .Sept./Oct. 4Soybean extruder opens new doors for Kansas co-op . . . . . . . . .May/June 36The ultimate R&D challenge: financing new technology . . . . . .July/Aug. 20Trading on Tradition

Heartland Farm Foods uses country tradition to market members’ beef . . . . . . . . . . . . . . . . . . . . . . . . . . . .March/April 12

UnflappablePlant closure forces Virginia poultry cooperative launch onto fast-track . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March/April 14

USDA helps Colorado farmers cook up profitability . . . . . . . . . . .May/June 9USDA, MSU Extension help Crooked Bow beef take a bow . . . . .Jan./Feb. 7VAPG program creates rural jobs, boosts local economies . . .March/April 43

AUTHORS Abernathy, DonnaPicking up the pieces

Co-op aid helping other co-ops recover from ravages of Hurricane Katrina . . . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 4

When the sky fallsAdvance planning key to crisis communications . . . . . . . . . . .Sept./Oct. 27

Borst, AlanAntitrust review reveals strong co-op

support for Capper-Volstead . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 25

Boukari, EllenLow-carb, High Hopes

Co-op’s slimmed-down, SunLite tubers may beef-up Florida’s potato industry . . . . . . . . . . . . . . . . . . . . . .March/April 8

Campbell, DanielA Perfect Storm

Farmland trustee sues ex-officers, directors . . . . . . . . . . . .March/April 18Cream of the CROPP

Demand outstripping supply as CROPP organic dairy products go prime time . . . . . . . . . . . . . . . . . . .May/June 15

CoBank CEO: Gear co-ops to consumer demand . . . . . . . . . . . . .Jan./Feb. 28Expanded database vital for future co-op reseach . . . . . . . . . . .Nov./Dec. 25Paper or Plastic?

For single-serve milk products, the answer is plastic . . . . . . . . .Jan./Feb. 27Retail co-ops advised to foster member identification,

not force conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Jan./Feb. 26Shelter from the storm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 2Spreading the word . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 2USDA marks 70th anniversary of landmark rural legislation . . . . .July/Aug. 4Why wasn’t Farmland reorganized? . . . . . . . . . . . . . . . . . . . . .March/April 21

Carson, MarlisAntitrust developments; case against

mushroom growers’ co-op settled . . . . . . . . . . . . . . . . . . . .March/April 24Energy Tax Incentives Act includes cooperative provisions . . . .Sept./Oct. 14

Carter, Colin A.Trading Places

Fortunes of California rice co-ops took opposite trajectories . .May/June 32

Chesnick, DavidMeasuring top 100 co-op performance . . . . . . . . . . . . . . . . . .March/April 28Upswing Continues

Despite loss of Farmland & Agway, revenue, income climb for top 100 co-ops . . . . . . . . . . . . . . . . . . . . . .March/April 25

Ciccone, JanetRetail co-ops advised for foster member Identification,

not force conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Jan./Feb. 26

Coble, EricaTrading on Tradition

Heartland Farm Foods uses country tradition to market members’ beef . . . . . . . . . . . . . . . . . . . . . . . . . . . .March/April 12

Crooks, AnthonyEthanol marketing/contracting . . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 11Farmer-owned ethanol and the role of information technology . .Sept./Oct. 8IT having major impact on farmer-owned ethanol plants . . . . .Nov./Dec. 15Fuel ethanol industry, past & present . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 18

Darby, PaulUnflappable

Plant closure forces Virginia poultry cooperative launch onto fast-track . . . . . . . . . . . . . . . . . . . .March/April 14

Dawson, AngelaCourt of Preference

Minn. co-op helps manufactured home residents . . . . . . . .March/April 23


DuMont, AmberWhen the sky falls


Dunn, JohnEthanol marketing/contracting . . . . . . . . . . . . . . . . . . . . . . . . . . .Sept./Oct. 11Farmer-owned ethanol and the role of information technology . .Sept./Oct. 8IT having major impact on farmer-owned ethanol plants . . . . .Nov./Dec. 15Fuel ethanol industry, past & present . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 18

Ely, GeraldThe Inside Scoop on Outside Help


Eversull, EldonConsolidation, expansion spark growth in co-op feed sales . . . . .July/Aug. 29Farmer co-op business volumes nears $117 billion . . . . . . . . .March/April 11

Frederick, Donald A.Antitrust developments; case against

mushroom growers’ co-op settled . . . . . . . . . . . . . . . . . . . .March/April 24Energy Tax Incentives Act includes cooperative provisions . . . . .Sept./Oct. 14Get ready to claim your “QPAI deduction” . . . . . . . . . . . . . . . . .July/Aug. 21New tax law includes several cooperative provisions . . . . . . . . . .Jan./Feb. 20Web-based ag/co-op law library puts


Gray, Thomas W.Local-based, alternative-marketing strategy

could help save more small farms . . . . . . . . . . . . . . . . . . . . . . .May/June 20

Holland, Steven J.Co-op stock exchange


Jensen, LynnProducers are natural leaders for rural communities . . . . . . . . .March/April 2

Jorgensen, NancyLeaving home?

Reasons vary for co-op conversions; critics remain wary . . . . . .Jan./Feb. 8

Karg, Pamela J.A Fresh Advantage

Co-ops help small farms market produce to high-end restaurants . . . . . . . . . . . . . . . . . . . . . . . .May/June 24

Soybean extruder opens new doors for Dakota co-op . . . . . . . . .May/June 36

Keeling, Jennifer J.Trading Places

Fortunes of California rice co-ops took opposite trajectories . May/June 32

Kindelspire, TonyNo loafing


King, RobertCo-op stock exchange


Lawless, GregTaking Stock


Liebrand, CarolynBucking the Trend

Small dairy co-ops targeting niche markets . . . . . . . . . . . . . . .July/Aug. 12Hurdles to niche-markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 13How big are ‘middleman’ profits? . . . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 15

Ling, CharlesNew Technology: Opportunity and Challenge

Technology changes could turn milk pants into ‘dairy refineries’ . . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 18

Merlo, CatherineFlying the coop

Why members leave co-ops and ways to prevent it . . . . . . . . . .Jan./Feb. 4Going with the Grain

New Mexico organic wheat co-op provides lift to farmers, rural economy . . . . . . . . . . . . . . . . . . .May/June 12

Morris, DavidDo bigger ethanol plants mean fewer farmer benefits? . . . . . . . .Nov./Dec. 20

Peltier, Jean-MariDefending the cornerstone of cooperation . . . . . . . . . . . . . . . . . . .July/Aug. 2

Rotan, Beverly L.Sales and net income climb for local farm co-ops in 2004 . . . . .Nov./Dec. 30

Reynolds, AnneTaking Stock


Steel, William A. “Bill”Energizing Rural America: How the energy bill helps us all . . . .Nov./Dec. 2

Thomas, Peter J.Renewable energy: the new frontier . . . . . . . . . . . . . . . . . . . . . . .July/Aug. 39Rural America’s role in the energy economy . . . . . . . . . . . . . . . . . .Jan./Feb. 2Turning forest waste into energy . . . . . . . . . . . . . . . . . . . . . . . . .Nov./Dec. 47USDA B&I program supports growth of organic cooperatives . .May/June 43USDA energy program promotes ‘cow power’ . . . . . . . . . . . . . .Sept./Oct. 39VAPG program creates rural jobs, boosts local economies . . .March/April 43

Thompson, StephenCharley’s Angels


No Shell GameOyster co-op hopes to revive Mystic’s faded shellfish industry . July/Aug. 22


Price crisis prompts potato growers to form national co-op . . .March/April 4Running on Empty?

‘Great ethanol debate’ waged at NCGA forum . . . . . . . . . . . .Sept./Oct. 4Slice of the market

Penns Corner, Tuscarora co-ops target growing restaurant trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .May/June 27

Turpin, JudyInnovation a necessity, not a choice, for 21st century co-ops . . . . .May/June 4

Webb. TomAtlantic Tender Beef

Canadian co-ops expand market for home-grown meat . . . . . .July/Aug. 8

Williams, PaulWho you gonna call?

ATTRA output helps low-input agriculture expand its market niche . . . . . . . . . . . . . . . . . . . . .May/June 30

Zeuli, KimberlyInnovation a necessity, not a choice, for 21st century co-ops . . . .May/June 4Of Necessity & Invention

Conference shows diversity of responses by co-ops to changing marketconditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Jan./Feb. 17Perils & Pleasures of Partnerships



SDA Rural Developmenthas awarded nearly $7.3million in grants tocooperative developmentcenters in 22 states.

The funds will be used to increaseeconomic opportunities in rural areas by assisting farmers and ruralbusinesses in developing cooperativeventures. “Cooperatives allowindividuals and small businesses topool their resources, achieveeconomies of scale, and develop more sophisticated technical andmanagement skills,” AgricultureSecretary Mike Johanns said inannouncing the grants. “Theseinvestments will help farmers, ranchersand rural small businesses obtain thetechnical support they need to expandtheir businesses.”

The Rural Cooperative Develop-ment Grant Program awards funds ona competitive basis to nonprofit coop-erative development centers, manyassociated with institutions of highereducation. These centers provide ruralresidents with education and technicalassistance in areas of cooperative startups, marketing and management, aswell as other self-help tools.

In Mississippi, for example, theMississippi Association of Cooperativeswill receive funds to help 15-20 coop-eratives develop and strengthen ser-vices to aid limited-resource producersand aid other rural residents in devel-oping successful cooperatives. The ser-vices provided will include early-stagetechnical assistance, director training,new product evaluation and identifica-tion of alternative funding sources.

Another recipient, the New

Hampshire Community Loan Fund,has provided technical assistance andaccess to capital to the owners of man-ufactured housing and created a

statewide system that enhances cooper-ative ownership as a solution to theproblems of owning a home on rentedland. ■

USDA prov id ing $7 mi l l ionfor ru ra l co-op development

URural Cooperative Development Grant Recipient List

State Recipient Funding

AR Arkansas Land and Farm Development Corporation $118,071AR Community Resources Group $150,000AZ Arizona State University $271,642CO Rocky Mountain Farmers Union

Educational & Charitable Found. $300,000GA Golden Triangle RC&D $294,897IA Iowa Agriculture Innovation Center $300,000IL Western Illinois University $287,780IN Indiana Rural Development Council $182,550MI Michigan State University $300,000MN Northcountry Co-op Foundation $300,000MO Missouri Enterprise Business Assistance Center $300,000MO Missouri Farmers Union Farm Opportunity Center $300,000MS Miss. Association of Co-ops $275,000MT Montana Co-op Develop. Center $300,000NH New Hampshire Community Loan Fund $300,000ND North Dakota Association of

Rural Electrical Cooperatives $300,000NJ Rutgers, State Univ. of N.J. $300,000OH Ohio Farmers Union Family Farm Center, Inc. $298,000OH Ohio State University Research Foundation $293,334PA Keystone Development Center Inc. $300,000SD Value-Added Agricultural Development Center $200,000TX Texas Cooperative Extension $298,416TX University of Texas-Pan American $228,536VA Southern States Co-op Foundation $266,783VA Virginia Foundation for Agriculture,

Innovation and Rural Sustainability $217,860WA Northwest Co-op Develop. Center $300,000WI Co-op Development Services Fund $300,000


members, she said, based on workfrom 1984. “[USDA] could make avital contribution to the cooperativecommunity and an important contri-bution to the country by focusing itsresearch efforts on establishing anongoing method to collect reliable datathat measures the economic impact ofcooperatives on rural communities…Ihope that you will consider establish-ing a research effort that includes all ofthe country’s cooperatives, both ruraland urban. It’s been nearly 50 yearssince the federal government devotedresources to collecting basic data on alltypes of American cooperatives.”

Chuck Snyder, PresidentNational Cooperative Bank (NCB)

Snyder said that co-op leaders oftentout the many ways their co-ops bene-fit their communities. “But it’s veryfrustrating because we don’t have theresearch to back up some of those sto-ries.” To help address this need, NCBannually produces the Co-op 100, alisting of the 100 largest cooperativesby revenue and assets.

When a cooperative fails, “themedia will often call me and say ‘gee,does that mean that cooperatives nolonger work?’ And that’s farthest fromthe truth. Like most corporations,

cooperatives have life cycles…If youlook at the Fortune 500 list today, com-pare it with that of 40 years ago, you’llsee the list is dramatically different;there’s nothing wrong with change.

“We need some basic researchwhich shows the vibrancy of the co-opsector, as well as some of the needs forimprovements. We need to understandthe role cooperatives play as directemployers….We need to understandthe role of cooperatives in developingand sustaining their immediate com-munities, with a special focus on thedifferential effect in retaining earningswithin those communities.” ■

Expanded database vital for future co-op reseach continued from page 28


By Peter Thomas, Administrator

Business and Co-op Programs

USDA Rural Development

In the last issue of Rural Cooperatives, I discussed some of the new energyprograms available at USDA RuralDevelopment. One of these programs,the Renewable Energy Systems andEnergy Efficiency ImprovementsProgram (also know as the Section9006 Program), was established by the2002 Farm Bill. This program is partof the larger initiative by the BushAdministration to focus on the coun-try’s energy needs with a new emphasison renewable energy.

We have all witnessed the devasta-tion as a result of Hurricanes Katrinaand Rita and the effect the aftermathhas had on energy costs. This recenttragedy highlights the need for a newenergy policy.

Although the Section 9006 Programhas been making grants for the pasttwo years, this year a guaranteed loanprogram has been added. Before theend of the fiscal year, two projectsqualified and received loans. One ofthese is a 20 megawatt, wood- firedbiomass plant purchased, refurbishedand relocated to a site leased by AbitibiConsolidated. The new plant, 17 mileswest of Snowflake, Ariz., will be adja-cent to an existing paper mill and willbe fueled by a combination of paperfiber from the paper mill’s recyclingoperation and wood waste obtainedthrough contracts with the USDAForest Service and other local millingoperations.

The partnership with the ForestService is part of the Healthy ForestInitiative. The power output from the

facility will be sold to Salt RiverProject and Arizona Public Service,two of Arizona’s utility companies. Theparties have entered into two, 10–yearpower purchase agreements and willpurchase 10 megawatts at 7.5 cents perkilowatt hour.

For this $23 million project, alocal bank submitted an application for$16 million to USDA Rural Develop-ment. The Section 9006 program isonly authorized to fund up to 50 per-

cent of the eligible project costs. Tomake the project a reality, a $10-mil-lion loan was guaranteed through theSection 9006 program while a $6-mil-lion loan was guaranteed throughUSDA’s Business & Industry (B&I)Guaranteed Loan program. The bal-ance was provided by the borrower.

In addition to producing renew-able energy, there is another benefit tothe community. About 460,000 acres ofponderosa pine trees from the 2002Rodeo-Chediski Fire in northernArizona and timber from local over-

grown forests will be burned by theplant. Overgrown forests are the resultof a forest having too many smalldiameter trees per acre. The extendeddrought in the region has created asimilar environment to the one theyfaced before the forest fires in 2002.This new plant will provide a use forthe unused trees and the timber fromthe overgrown forests, thus alleviatinga potential fire hazard.

Finally, the project will save existing

jobs and create new ones in the localcommunity. The positive impacts areendless.

USDA Rural Development willcontinue to look for ways to providefunding for projects which have a posi-tive financial impact on rural Americaand provide new sources of energy.Now, more then ever, we all need tofind ways to both conserve and usenew sources of energy. This isPresident Bush’s charge, and I amproud of the work Rural Developmentis doing to answer the call. ■

Turn ing fo rest waste in to energy

A biomass powerplant is being built adjacent to this papermill in Arizona. The biomassplant will produce 20 megawatts of electricity from mill and forest wastes.

I N S I D E R U R A L D E V E L O P M E N T


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