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COOPERATIVESRura

lCOOPERATIVESUSDA / Rural Development September/October 2001USDA / Rural Development September/October 2001

E L U S I V E B A R G A I N :M a r k e t g l u t s p a r k s r a i s i n p r i c e d i s p u t e

E L U S I V E B A R G A I N :M a r k e t g l u t s p a r k s r a i s i n p r i c e d i s p u t e

2 September/October 2001 / Rural Cooperatives

Responsibility for seeing that coop-eratives are properly managed ulti-mately falls squarely on the shouldersof the cooperative’s board of directors.Key to this role is selection of a chiefexecutive officer or manager in whomthe board has confidence to run theday-to-day operations of the coop-erative business. The manager alsohas responsibility, with the board, tosee that operations are run on acooperative basis.

As user-owned, user-controlledand user-benefitted businesses,cooperatives implicitly have a dualcharacter as an association of peopleand as a common business under-taking. Both aspects of the organi-zation must be nourished to achieveorganizational strength and ultimatebusiness success. This makes man-agement of cooperatives uniqueamong other forms of businesses. Itis one source of their distinctivenessand strength.

As cooperatives become morecomplex organizations, both insize and scope of business activity,management must be sensitive tooperating the cooperative formembers’ benefit and continuingto meet their needs. Sensitivity tothose needs is a continuous challengegiven the increasing diversity amongcooperative members and the broadergeography represented in manyoperations.

Members must also be properlyeducated to understand their respon-sibilities to the organization. Thisincludes proper capitalization as user-owned businesses so that the streamof benefits continues to flow to them.

Capital-starved organizations can sel-dom perform at optimum levelsunder any circumstances. Controlfollows capital. If members want tocontrol their organizations, they haveto capitalize them.

Several recent changes in statecooperative laws attempt to allow forgreater amounts of non-member busi-ness than is customary in cooperatives,or to allow co-op equity to be ownedby non-members. These are oneroussigns of deterioration in the legal foun-dations for cooperative enterprise inthe country.

The North American cooperativecommunity was shocked recently whenAgricore, a Canadian regional cooper-

ative that resulted from the 1998merger of the Alberta Wheat Pool andthe Manitoba Pool Elevators, decidedto relinquish its status as a cooperativeby combining with United GrainGrowers, Ltd., a public company in

which a large investor-owned firmhas an interest. The action effec-tively displaces the remaininglarge grain marketing cooperativepresence in the region, and fol-lows the Saskatchewan WheatPool’s conversion in 1996 to apublicly-traded company.

Managing business operationsin a difficult climate for farmersduring the past several years hasnot been an easy task for coopera-tive management teams (directorsand managers). Nevertheless,cooperative business volume inthe United States increasedslightly in 2000.

A strong cooperative businesssector is important to maintainingmarket access for farm operatorsand their place in a rapidly restruc-turing food and fiber system.Board members need to remainvigilant that their organizations arekept member oriented and provid-

ing the marketing, farm supply andother services needed by them. Theyalso need to ensure that the legal foun-dations and capital requirements aremet, consistent with operating on acooperative basis.

Farmers can give away control oftheir cooperative businesses, but itcannot be taken away from them.

Randall Torgerson, deputy administratorRural Business-Cooperative Service

C O M M E N T A R Y

Directors share major role as part of cooperative management team

Capital-starved organizations can seldom perform at

optimum levels underany circumstances.

Control follows capital. Ifmembers want to controltheir organizations, theyhave to capitalize them.

Rural Cooperatives / September/October 2001 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 ofZDocuments, Government Printing Office,Washington, DC, 20402, at $3.50 domestic, $4.38 for-eign; or by annual subscription at $15.00 domestic,$18.75 foreign. Postmaster: send address change to:Rural Cooperatives, USDA/RBS, Stop 3255, Wash.,DC 20250-3255.

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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 United States Department of Agriculture (USDA)prohibits discrimination in all its programs and activities on the basis of race, color, national origin,sex, religion, age, disability, political beliefs, sexualorientation, and marital or family status. (Not all prohibited bases apply to all programs). Persons with disabilities who require alternative means forcommunication of program information (braille, largeprint, audiotape, etc.) should contact USDA’s TARGETCenter at (202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA,Director, Office of Civil Rights, Room 326-W, WhittenBuilding, 14th and Independence Avenue, SW,Washington, D.C. 20250-9410, or call (202) 720-5964(voice or TDD). USDA is an equal opportunityprovider and employer.

Ann Veneman, Secretary of Agriculture

Randall Torgerson, Deputy Administrator, USDARural Business-Cooperative Service

Dan Campbell, Managing Editor

Vision 2000/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.

United States Department of Agriculture

COOPERATIVESRura

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COOPERATIVESSeptember/October 2001 Volume 68 Number 5

O n t h e C o v e r :

Steve Kister, a third-generation raisin farmer and president of the RaisinBargaining Association, says the industry must learn to work together betterto survive the bitter price disputes of recent months. Story on page 13. USDAphoto by Catherine Merlo

F E A T U R E S

4 Co-op-USDA partnership still strong after 75 yearsBy Patrick Duffey

7 Need for change trumpeted at NICEFarm Bill Task Force proposes actions to reverse farm-incomedownward spiralBy Dan Campbell

13 Hazen selected top CEO communicatorBy Dan Campbell

14 Season of turmoilA price dispute between California’s raisin growers and packersdivides financially troubled industryBy Catherine Merlo

20 More than one wayDairy cooperatives pursue varied paths to structural changeBy Carolyn Liebrand

24 Communications linked to loyaltyIf you want your co-op messages heard, it’s still a face-to-face,hard-copy worldBy Dan Campbell

27 Selling it!Florida citrus industry boosts consumption with extensive,health-focused advertising and promotionBy Dan Campbell

D E P A R T M E N T S2 COMMENTARY

25 NEWSLINE


By Patrick DuffeyUSDA Rural Development

he 75-year partnershipbetween the nation’sfarmer-owned coopera-tives and USDA was cel-ebrated June 28 during a

special ceremony at USDA head-

quarters in Washington, D.C., markingthe anniversary of the CooperativeMarketing Act (CMA).The legislationlaunched USDA’s ongoing effort topromote the use of cooperativesthrough technical assistance, research,educational and information productsand statistical services.

Agriculture Secretary Ann Veneman

was joined by former secretary EarlButz and other farm leaders to markthe historic anniversary and to under-score the importance of cooperatives inthe nation’s rural economy.

“Our mission provides valuabletools in the food and agriculture indus-try’s toolbox to help it better competein today’s changing food system,”

C o o p e r a t i v e – U S D A p a r t n e r s h i ps t i l l s t r o n g a f t e r 7 5 y e a r s

T

Clockwise from above: American Farm BureauFederation’s Richard Newpher, NCFC President DavidGraves and U.S. Agriculture Secretary Ann Veneman.Each stressed the importance of USDA working withthe nation’s cooperatives to strengthen America’srural economy. USDA Photos by Bob Nichols


Veneman said. “Seventy-five yearsafter its creation, Cooperative Servicesrecognizes these changes, and ouremployees are playing a major role inhelping to promote the opportunitiesthat lie ahead in what promises to be aworld of opportunity.”

The combination of globalization,new technology and changing con-sumer demands has created a “moretightly connected food chain withstronger linkages among producers,processors and retailers,” she said. Thisrequires “new relationships and think-ing.” Many producers, she continued,“are finding ways to participate in thechanging market for food productswhile improving their bottom lines.”

Veneman cited Dakota GrowersPasta and U.S. Premium Beef as exam-ples of producer-owned cooperativeswhich have been successful in findingnew market opportunities for theirmembers.

America’s “best deal” For former Secretary Butz, now 92

years old, his return to the USDAcourtyard where the ceremony washeld triggered a flood of memories,including his first trip to Washingtonin 1930 as a delegate to the national4-H convention.

“We lived in tents on the Mall, butthe first evening it was raining so the

service was heldhere,” he said.

It was in vir-tually the samespot as he stoodthat Butz said hefirst laid eyes ona lovely girlstanding by thefountain whowas to becomehis wife. “Shepassed away fiveor six years ago,”he said, “but Istill have a warmspot in my heartfor this place.”

Butz said hiscareer had been

a fascinating one, taking him “from thecornfield to the Cabinet.”

Butz said he was “fed-up withattacks on our food system,” by thosewho claim our food is unsafe or pro-duced with cruelty. He prodded thosepresent to do a better job of “telling thestory” for U.S. agriculture. This shouldinclude hammering home the pointthat affordable food is the cornerstoneof the nation’s affluence. The averageU.S. consumer, Butz said, spends only11 to 15 percent of his or her incomeon food, creating a vast amount of dis-posable income that can be spent inother ways that fuelthe economy.

“Our cheap foodsupply is the bestdeal in America – itleaves 85 percent ofour income for allelse...And coopera-tives are one of thereasons it is the bestbargain.”

Butz recalledthat his father man-aged the NobleCounty FarmBureau Cooperativein Indiana at a timewhen a $100,000sales volume yearwas cause “for a big

party.” In those years, farmers typicallyraised only 25 or 30 pigs and three orfour sows, he said.

“They would load a half dozen pigsinto a horse-drawn wagon and haulthem to a railhead for shipment to Buf-falo, where the co-op would sell them.

“We’ve come a long way since then!”

Farm Bureau says USDA’s co-op role crucial

In the face of a rapid and dramatical-ly changing agricultural industry,America’s farmers and ranchers consid-er involvement and assistance byUSDA to be crucial, according toRichard Newpher, Washington officeexecutive director of the AmericanFarm Bureau Federation (AFBF). Hestressed Farm Bureau’s long history ofsupport for cooperative marketing andthe successes brought about by theCooperative Marketing Act.

“Farmers and ranchers have longknown those cooperative efforts havepaid them benefits that led to their suc-cess in American agriculture,” New-pher said.

Shortly after AFBF was formed in1919, it established a cooperative mar-keting department and later assisted increating the national enabling legisla-tion (CMA), Newpher said. AFBF, nowrepresenting 5 million member families,saw the need for “a strong organization

Earl Butz’s son, William Butz, views some of the historic photo displays prepared for the anniversary celebration.

Some of the many cooperative-owned food brands on display dur-ing the Cooperative Marketing Act 75th anniversary celebration.


to help them deal with the ‘marketingproblem’ of low prices, high handlingcosts and trade abuses.”

Newpher said that need continues“as does the need for a strong progres-sive arm in USDA devoted to promot-ing and spreading the benefits coopera-tives can provide.”

Early in the 20th century, AFBFassisted county and state Farm Bureausin developing and providing cooperativeservices to its members – from shipping4-H hogs to market by railto organizing carload ship-ments of limestone andphosphate. “Agriculturalproducers worked togetherto help themselves whilehelping each other” whereno local fertilizer dealer,farm supplier and marketfor livestock existed.

Early cooperative ven-tures purchased bulk fer-tilizers for distribution topurchasers in the counties.Trailblazers were Missis-sippi, Indiana, Ohio, Illi-nois and Missouri. Otherstates followed. Soon,petroleum products andother farm supplies and equipmentwere added to the inventories of coop-eratives. Farm Bureau also organizedmarketing cooperatives for grain, poul-try and livestock.

Not even in the early years did allfarmers support nationwide cooperativeplans, warning against “embracing thisdemon of commercial radicalism.” Butthe 75-year history of successful coop-erative efforts has “laid that demon torest,” Newpher said. “Still, the publicperception of the need for cooperativemarketing in agriculture ebbs andflows, especially when considering theneed for public expenditures.”

Producers look to the USDA forexpertise and assistance in keepingfarms alive and helping them thrive,Newpher stressed. “Benefits providedthrough implementation of the CMAwill move agriculture once again alongthe path to prosperity. We look to theUSDA to provide the governance

benefits that enable us to be the mostproductive, effective and efficientfarmers possible.”

Stronger co-op marketing alternative to subsidies

“Although there are notable excep-tions, farmers will never return to get-ting 45 percent to 47 percent of the con-sumer food dollar they saw in the 1940sand 1950s if they continue selling asthey are today and earning only 20 per-

cent of those dollars,” said DavidGraves, president of the National Coun-cil of Farmer Cooperatives (NCFC).

The problem, he said, is that farm-ers are marketing only about 30 per-cent of what they produce through acooperative. As a result, there is a lot tobe accomplished in the future of thesecooperatives.

“Cooperatives can help farmers earnmore of the consumer food dollar andrelieve Congress of having to assistproducers with a yearly subsidy. Thedifference between federal assistanceand marketing is a symptom of theincome shortage farmers and ranchersare experiencing in this countrytoday,” he said.

In comparing marketing to assis-tance, Graves noted that the govern-ment has spent more than $30 billionon agricultural subsidies in recentyears. “On the Hill today, there isgrowing anxiety that those dollars are

not solving the problem and merelytreating the symptoms of low incomefor the nation’s farmers and ranchers,”Graves said. “The dollars don’t addressthe possibility of investment producershave in the marketplace in attemptingto market their production.

“You can give farmers money thatserves their needs for one productioncycle,” Graves noted, “but if you areable to help them market profitably,you do them a favor and provide

assistance for theirentire careers.”

To address the situa-tion, NCFC formed atask force to ask coop-erative managers andfarmer-owners to identify the major chal-lenges these businessesface in helping farmersprofitably market theirproduction. They saidcooperatives need bet-ter access to capital inboth credit and invest-ment forms (see relatedstory, page 7).

Looking ahead,Graves said the farmers’

future “would be better served in themarketplace if they could move closerto the consumer in terms of marketingtheir products and services and increas-ing their share of the consumer dollarspent on food and natural fibers.” Theproblem, he said, is the tendency tolook at the price of commodities butfail to understand what happens to theconsumer.

Using a biscuit as an example, Gravessaid 50 to 60 years ago consumers wouldbuy a sack of flour derived from farm-grown wheat at the supermarket andreturn home to make biscuits fromscratch. By comparison, today’s biscuitsare purchased ready-made and oftenstuffed with a fried egg and sausage.

“There are a lot of goods and serviceswithin that chain of events from whichfarmers don’t benefit,” Graves said.“Farmers have no hope of returning tothat 45 percent share if they continueselling at what they do today.” ■

Farm Bureau Executive Officer Richard Newpher, USDA Rural Business-Coop-erative Service Deputy Administrator Randall Torgerson, former AgricultureSecretary Earl Butz and NCFC President David Graves.


By Dan Campbell, editor

n meeting rooms, hotelhallways and aroundbanquet room diningtables, the relentlesstopic discussed through-

out this year’s National Institute onCooperative Education (NICE) inAtlanta was what role cooperativesshould play in pursuing major changesto help restore the farm sector’s fiscalhealth. A young farmer from Mon-tana, noting the large size of the checkfrom USDA he’ll be getting as part ofan emergency aid payment, said thatmoney will keep him in business, buthe looks at the aid as a type of welfareand wonders if there is a future infarming the way things are going.

He’s not alone. Half of all U.S. netfarm income will come from governmentpayments this year. Small wonder, whenyou look at what has happened to thefarmers’ slice of the average “food dollar”spent by consumers, says Dan Kelley,GROWMARK board chairman. Thefarmer’s share is down to 20 percent, thelowest level ever and down from morethan 37 percent of the food dollar asrecently as 1973, Kelley said during anaddress at NICE.

“Farmers need greater opportunity togenerate income from the marketplace,”Kelley said while presenting the findingsof the National Council of FarmerCooperatives’s (NCFC) Farm Bill TaskForce. Increasing the farmers’ share ofthe food dollar by just one cent—to 21cents—would generate an additional $6billion in total income for farmers, hestressed. And an increase of 3 to 4 centswould offset all the government assis-

tance paid to farmers, he added. NCFC is supporting the Farmer Busi-

ness and Income Opportunity Act of2001 as a means to help farmers bettermanage their risk and improve incomederived from the marketplace. Kelleysaid it will help farmers compete moreeffectively in the global marketplace andbetter capitalize on market opportunities.

NCFC developed its recommenda-tions during a series of meetingsattended by cooperative leaders fromaround the nation. Some of the ses-sions were standing-room-only affairs,underscoring the urgency of the needto boost farm income.

The key is to improve access to cap-ital and other programs that enhancecooperative efforts, Kelley said.

To improve access to capital, NCFCrecommends:

• Raising the $25 million loan limit

on USDA’s Business & IndustryLoan Guarantee Program. Kelleynoted that Plains Cotton Cooper-ative built its Texas denim plantfor $25 million in the mid-1970s,but today that plant would costmore than $100 million to build.

• Clarifying lending authority underthe 1996 Farm Bill so that tradi-tional cooperatives would have thesame ability to qualify for certainUSDA loan programs as do new-generation cooperatives.

• Eliminating the triple tax on co-opdividends.

• Providing co-ops with new taxincentives.

• Establishing new sources for equitycapital; this is needed becausefinancially strapped farmers areoften unable to invest in projectsdesperately needed to develop new

N e e d f o r c h a n g e t r u m p e t e d a t N I C E Farm Bill Task Force proposes actions to reverse farm-income downward spiral

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GROWMARK Chairman Dan Kelley, seen here on his Illinois farm, says farmer-ownedcooperatives need greater access to investment capital to help members regain a largera slice of the consumer food dollar. Photo courtesy GROWMARK


Connecting at NICE

Clockwise from top/left: Students participate in agame designed to build team skills; Sotero AgootJr. of the Kona Pacific Farmers Cooperative (farright) discusses small co-op marketing strategieswith Deaconess Edna Umoete, a Nigerian coopera-tive development specialist, and two of her coun-trymen; Dennis Mullen, CEO of Agrilink Foods,works the audience during his lively keynoteaddress; the youth color guard enters the mainmeeting hall for a general session; Ohio State’sBernard Erven demonstrates how not to conduct amanager interview. USDA photos by Dan Campbell


products or open new markets;new venture capital funds forcooperatives are thus needed.

Other provisions within the billwould seek to revitalize USDA’s coop-erative programs by establishing theFarmer Cooperative Business Serviceas a separate agency and maintainingfunding for USDA technical assis-tance grants for cooperatives. A Senseof Congress Resolution is also beingsought to reaffirm congressional sup-port for federal programs that en-courage and enhance the ability offarmers to join together in coopera-tive self-help efforts.

“This may be our last opportunity(to enact needed changes),” Kelley said.“Farmers must work together to findways to enhance their income.”

Don’t procrastinate, innovate!In his lively NICE keynote

address, Dennis Mullen, CEO ofAgrilink Foods, also sounded the callto action. He used the example of aone-pound bag of corn to point outthe crisis facing farmers. In 1991,that bag of corn cost 57 cents. Tenyears later, the cost is 56.5 cents.“That is actual deflation,” he said.“Dairy, cheese, oats, beans—thetrend has been much the same.”

Mullen said Agrilink has also seenthe price for small ears of corn-on-the-cob it supplies to fast food outlets, suchas KFC, remain stagnant for nearly adecade. And some apple producers hadto sell their crop for 8 cents a poundthis year.

“People get raises, electricity and gascosts go way up, but our (farm) pricesdon’t keep up,” Mullen said. “We shouldband together to fight this,” he said.

Innovation in the face of rapidlychanging technology will be the answerfor many successful cooperatives,Mullen said.

“Innovation is needed to provideproducts when and where consumerswant them—you must provide cus-tomers with service that sets youapart.” He projected that in 10 years,“Walmart will dominate where webuy food, because it is the world’s

best distribution company—it getsproducts to stores better and fasterthan anyone.”

Another food trend to watch is thegrowth in percentage of older Ameri-cans, which will drive increaseddemand for food perceived to behealthier and more nutritious. Mullenalso noted that 70 percent of con-sumers believe organic foods are betterfor their health.

A decadeago, shoppersspent an aver-age of 40 min-utes in thegrocery store,but today it isdown to 18minutes.“Today, mealsare assembledrather thancooked, anddining cantake placeanywhere. Ijust saw an adfor a minivanwith 17 cupholders!” Mullen said.

Agrilink, Mullen said, wants toredefine the word “commodity” bybringing growers and managementtogether to find ways to add value totheir products. Strategic thrusts forAgrilink include being the lowest-costproducer of products and services thatmeet customers needs through a pro-gram of relentless improvement,investment in innovation and develop-ing new supplier partnerships.

Total customer service, developmentof a totally effective workforce and pur-suit of profitable growth are goals dri-ving Agrilink as it pursues its visionstatement: “To be widely recognizedfor leadership and accomplishment as afood processing and marketing cooper-ative by using all of its members’ andemployees talents.”

Are cooperatives getting too big? In one of several sessions at NICE

dealing with concentration, CharlesBeckendorf, board vice chairman of

Dairy Farmers of America (DFA), andJohn Reifsteck, board vice chairman ofGROWMARK, talked about why theircooperatives have seen the necessity togrow to survive during a time whenfood companies are consolidating evenmore rapidly.

“The vast majority of growers sayagribusiness is too large, said Reif-steck, who is also president of his localcooperative, Illini FS Inc. “But when

we ask them if co-ops should be largeenough to meet the competition, theyalso say yes.” This creates a majordilemma for cooperatives dealing withhuge companies that may do morethan $200 billion (such as Walmart) insales annually, he said.

“We need efficiency to compete,but members are very concernedabout concentration. Producers musthave a competitive marketplace,”Reifsteck said.

GROWMARK has grown from asingle-state operation in Illinois into amulti-state, international cooperative.But a “wave of proposed legislationand regulations” could threatenfuture co-op mergers, and will—atthe very least—make it much moretime-consuming and expensive for co-ops to pursue mergers, Reifsteck said.Some of these proposed new ruleswould trigger reviews at the attorneygeneral level if a merged co-op wouldresult in a new business with morethan $100 million in annual sales.

A wide array of cooperative literature was available at USDA’s booth.


Of all the jobs a co-op board must perform, none aremore important than selecting a CEO or manager toguide the business. Bernard Erven and Chris Bruynis ofThe Ohio State University led participants in a NICEmanagement seminar through a series of exercisesdesigned to help improve their odds for picking a winner.

“If the board makes the right decision, it will benefitthe cooperative for many years,” Erven said. But if theboard makes a mistake and picks a weak CEO, the boardwon’t be able to compensate for it inother ways.

“It’s similar to marriage: the alterdoes not correct what a person waswhen he or she walked down theaisle,” Erven said. You can’t motivatea misfit into being a good CEO, norwill on-thejob training make it right,he noted. The challenge is thus to findthe right person the first time. Whatthe cooperative needs, rather thanwhat the applicant would like to do,should guide the hiring process.

If a board lacks confidence that itcan do a good job of finding the rightperson for the job, it should get out-side help. The best candidates for the job will expect agood , thorough interview process.

Erven and Bruynis suggested following these steps: 1. Determine the co-op’s labor and management

needs; do a careful analysis to make sure the candidatewill fit the needs of the entire organization. This will takea significant amount of the board’s time.

2. Develop a written, up-to-date job description. 3. Build a pool of candidates – the more the better. If

you can’t develop a pool, stop the process until you can.Internal applications should be allowed unless a formaldecision is made not to. But it is advisable not to dis-criminate against your own employees.

4. Review the applications and select those you wishto interview.

5. Conduct the interviews. But first decide who will beon the interview team, whether it will be a formal orinformal interview, what questions will be asked, howevaluations will be recorded and where the interviewwill be conducted.

6. Check references. 7. Make a selection.

8. Hire selected applicant.Volunteers from the audience par-

ticipated in mock interviews todemonstrate effective interviewtechniques. These include: askingquestions that cannot be answeredwith a yes or no; encouraging appli-cants to talk about themselves andcovering a variety of topics, includingsome “what if” situations.

“You want to determine how can-didates bring their own knowledgeinto play, perhaps eventually leadingto a situation where they must admitthey don’t know the answer. You arenot so much looking for right

answers to these questions, but to how the applicantwill behave when faced with a tough situation,” Ervensaid. “Will the person get angry if he or she feelstrapped?”

Ask only questions that are job related and willgive insight into a candidate’s ability to perform the job.It is best to have four or even five board members par-ticipate in the interview, and they should practice doinginterviews before the real ones are held. Do not use theprevious CEO to help interview. Also encourage theapplicant to ask questions.

Your new leader should be able to inspire efforts ofothers through his leadership style, Bruynis said. ■

Good interview process crucial to selecting top-notch CEO

Bernard Erven of The Ohio StateUniversity practices job candidate inter-viewing techniques with Mel Machado ofBlue Diamond Growers.

But many local co-ops—includinghis own—are approaching $100 millionin sales, he said. And these locals haveeven fewer resources than do regionalco-ops to deal with a more cumber-some review process.

“Had these regulations been in placein the past, I don’t think we would beas good a co-op as we are today,” Reif-steck said. He noted that his father and

grandfather were both co-op presi-dents, but said that if those co-ops hadnot grown over the years, there is noway they would be able to meet thefarm supply needs of today’s sophisti-cated farms.

“It (adoption of the proposed laws)would be like closing the door on ourco-op fingers as we struggle to com-pete. Why should we let legislators in

Washington tell us what is good forour future? Who pays for it? We will,”he said.

“We’ve been through much consoli-dation, but it has all been done for thebest interest of our farmers,” Reifstecksaid. “At the end of the day, we direc-tors go home and must deal with oursharpest critics, our neighbors andfriends in agriculture.”


Why DFA pursued growth through mergers

Beckendorf described how DFAbecame the nation’s largest dairy co-opthrough a series of mergers. The gene-sis of DFA occurred in October 1996,he said, “when we lost 30 percent ofour milk price in one week.” Beck-endorf traced the price plunge back tothe concentration among food compa-nies and the dramatic drop in the num-ber of large cheese manufacturers thatresulted. Suffering the pinch of higher-than-anticipated milk prices for theirraw ingredient, the large manufacturerssimply sold off enough of their inven-tories of cheese to drive down thecheese market, on which farm milkprices are based.

He said the industry had also seen thenumber of milk processing plants dropfrom 2,800 to 500 during the pastdecade. “All this concentration left dairyfarmers at a disadvantage because we hadmany more cooperatives competing tosell to fewer buyers,” Beckendorf said.

“We (the original four member co-ops)met at the Chicago airport that Decem-ber, and we asked, what can we do? Wecan’t take price volatility like this.”

Another writing-on-the-wall eventoccurred about six years ago when aPepsico official spoke at the NationalMilk Producers’ Federation meeting.Beckendorf said the beverage giantthen had 28 suppliers, but said itwanted to pare down to just eight.“We weren’t big enough individually,as separate co-ops, to handle thesetypes of national accounts,” Beck-endorf said.

The eyes of co-op leaders were alsoopened on a trip to Holland in 1996,where “we saw that they were 20 yearsahead of us in product development.”

DFA is now nearly four years old,and it just downsized its board from119 members to 48 after a three-yeartransition period. “Members are stillconcerned that dairy farmers not gothe same way as poultry and hog pro-ducers,” said Beckendorf, who, with hisbrother, milks 250 Holsteins inTomball, Texas. “They don’t want to bepiece workers nor to depend on gov-

ernment payments” to survive. DFA has done substantial streamlin-

ing since its formation, closing 22,mostly older processing plants andconsolidating 40 offices. Several thou-sand jobs were lost in the process, “butit was our dollars at risk,” he said. Hepoints to the $33 million in earningsthe co-op had last year, adding, “risingwater raises all boats.”

Is DFA still fighting for survival?“Yes,” he said, but its odds are greatlyimproved thanks to the mergers.“Before, four of us, as large regional co-ops, were going to the same customers,each trying to undercut the other in themarket.” DFA member co-ops (nowseven in number) are no longer runningparallel milk runs and there is less over-lap (and therefore greater efficiency) inits processing plants.

“In a true merger, “ Beckendorfsaid, “all obligations of the membersare retained.” DFA, he said, honoredall equity owed by its member co-ops,dollar for dollar. “Not one of ourdairy farmers has lost any equity. Themerger strengthened our equity base.”

Agribusiness still comparatively small

In another session dealing withconcentration, Steve Sonka, Universi-ty of Illinois ag economist, said recentlarge mergers—such as SuizaFoods/Dean Foods, Cargill/Conti-nental Grain, Dupont/Pio-neer Seeds and TysonsMeats’ ongoing effort toacquire IBP meat packing—have made them all bigger,but they are still small frycompared to their cousinsin heavy industry, petrole-um and electronics. ConA-gra today is a $12 billioncompany, ADM $9 billion,Tysons $4 billion andDean/Suiza $3 billion. Butconsider that General Elec-tric does $420 billion inbusiness annually, Exxon/Mobile $300 billion andMicrosoft $300 billion.

“Wall Street continues

to think most food companies are toosmall,” and that they are paying toomuch for their capital, Sonka said,adding that “agribusiness did notgrow fast enough in the last half ofthe 1990s.”

“Why don’t we have 20 meat pack-ers today? Because they would not beas efficient” [as the four or five thatdominate the industry], he said. Today,there is much talk about the “evil ver-tical integrators” who have taken overpork production in the Southeast,Sonka said. “But when I was growingup [on a farm in Iowa], I was taughtthat corn farmers who also grew hogswere evil vertical integrators.”

The cost of analyzing data andcommunicating is dropping rapidly,Sonka said. “The world has changed.Walls came down. Information flowsmore freely today.” Less expensivetechnology makes vertical coordina-tion better than vertical integration,Sonka said. He noted that Nike ownsno bricks and mortar, and Microsoftowns little in the way of plants. Com-modity returns, he said, are “justenough to keep you in business. Is thatfair? Who cares? Not the market.”

Co-ops, Sonka said, need to lookmore to brand development, knowledgeaccumulation and risk taking, all ofwhich have high value in today’s market.

Co-ops should focus on how to getproducers involved in the world of

Economist Steve Sonka: “Farmers should look to theauto industry model of the 1950s—buy a system andrun it and see what comes out the other end. If it’sbad, fix it.”


“Without a clear vision, mission, set of values anddefined ways to measure success, a cooperative’s com-munications efforts are an unnecessary investment,” saidMaury Miller, recently retired vice president of memberservices at CHS Cooperatives (Cenex Harvest States).

This philosophy helped guide the communications effortsof the co-op during the past 25 years as it grew and diversi-fied through a series of mergers, Miller said.,including a major unification of CENEX and Har-vest States Cooperatives in 1998. That historicmerger came together more quicky than manythat had preceded it, in large part because ofthe excellent buy- in that existed among bothorganizations regarding their new mission.

CENEX and Land O’ Lakes formed a jointventure in 1987 to market their farm supplyproducts, including an agronomy operation ofwhich each owned 50 percent. Just 10 yearslater, the joint profitability of the two coopera-tives was more than $200 million, and the jointventure is widely considered as a model ofsuccess. Mergers such as this create “overwhelming com-munications challenges” needed to blend differing “corpo-rate” cultures, Miller noted.

Consolidations, Miller said, are not so much exercisesin economics as in human relations, which makes com-munications critical to the success of the effort. In amerger, some will have to give up things they may holddearly. Compromise becomes the order of the day inorder to build a stronger, unified organization. “That’s notan easy thing to do when dealing with directors and man-agers who are highly driven and have strong views ofwhat they want to do,” Miller said.

Effective communications requires clear understand-ing of the co-op’s:

1. Vision—what does the co-op want to be? In the

case of CHS, the vision was to build “an integrated agsupply and grain-based foods system.”

2. Mission—what is the co-op’s purpose? For CHS, itwas “improving the cooperative’s and producers’ prof-itability and value.”

3. Values—What core values will guide the way inwhich the co-op does business? Integrity/honesty, profes-

sionalism, quality of goods and services andrespect for all were the key values CHSchose.

4. Measurements of success—growth,financial and customer success were the per-formance yardstick CHS selected.

The bottom line for every decision the CHSboard makes is, “Did we help our farmers suc-ceed by this action?” Miller said, “If not, wedidn’t do so well. Helping producers and localco-ops succeed and serving local communi-ties are why CHS exists, he said.

Miller stressed than an informed memberis a more loyal member, and that about the

last thing CHS would ever do is eliminate its membermagazine (“Partners”), its primary tool for communicatingwith 350,000 producer-members. While Miller said heforesees a big role for the Internet in cooperative commu-nications programs, he stressed that “it is not even close”to being a replacement for print communications withmembers.

Miller said he feels the farm media will usually try to helpyou tell your story if you are open and honest with them.Most communications, he added, should be framed forreaders who will be thinking: “how does this impact me.”

CHS has maintained a strong communications programin large part, Miller said, because it staffs the office withcommunications professionals, and does not use it as “adumping ground for people who can’t do real jobs.” ■

Clear sense of vision & mission critical to co-ops facing mergers

Maury Miller says co-opconsolidations present“overwhelming communi-cations challenges.”

knowledge. If farmers would stop pur-chasing corn varieties that rank in thelowest 25 percent for yield, they couldearn an extra $28 per acre, he said.“That’s easy money – more thanenough to buy a jacket for the friendwho sells you that low-yield seed.”

Sonka said co-ops are strugglingto find successful value-added activi-ty, but that “90 brands fail for every10 that are successful. But the valueof the10 that win will far exceed the

value of the 90 that fail.” Concentration is likely to continue

and could even intensify, Sonka said.“It is valid to have concerns and emo-tions about this trend, but the realissue is performance. For co-ops, andfor the rest of ag sector, the key willbe boosting intangible assets.”

In response to questions about theethics of co-ops competing with produc-ers (in areas such as hog feeding), Sonkaresponded that producers should look at

these co-ops as businesses they ownwhich generate profits that they canshare in. Learn why this activity is suc-cessful and bring that knowledge gainedto your own operation,” he urged.

How co-ops rate on accumulation ofknowledge, and willingness to share it,will be a key in the future. “Theyshould look to the auto industry modelof the 1950s—buy a system and run itand see what comes out the other end.If it’s bad, fix it.” ■


ince his first day on thejob as CEO of theNational CooperativeBusiness Association(NCBA), Paul Hazen has

been an ardent practitioner of the art ofcommunications and has supported andexpanded the association’s communica-tions and education programs.

Whether providing support to pro-duce NCBA’s award-winning video,“The Spirit of Cooperation,” making aspeech about the advantages of coopera-tives before a major conference, or lead-ing the charge to establish the new“.coop” Internet domain, Hazen hasbeen a tireless champion of effectivecooperative communications. In recog-nition of this commitment, Hazen hasbeen selected as the CEO Communica-tor of the Year for 2001 by the Coopera-tive Communicators Association (CCA).

In announcing his selection, out-going CCA President Lani Jordan ofCENEX Harvest States saluted Hazenfor “providing leadership to integratecommunications into the planning andmanagement process of NCBA, forsupporting its communications staffand conveying cooperative ideas withskill and enthusiasm.”

Accepting the award before an audi-ence of more than 150 at the annualcommunications institute of the Cooper-ative Communicators Association inOrlando, Fla., Hazen said that coopera-tives rarely have the kind of big budgetsfor advertising and public affairs pro-grams that are common among large,investor-owned companies. So they must

compensate with creativity and innova-tion to make sure they get their mes-sages across to the public, Hazen said.

He also noted that cooperatives areoften so focused on internal [member/employee] communications that theyoverlook the importance of externalcommunications.

“If we talk only to each other, we aredoomed as a sector,” said Hazen. “Wemust go beyond our own sector of theeconomy to reach the media, the publicand lawmakers with messages about thebreadth and economic strength ofcooperatives, he said, noting that sur-veys have shown that the majority ofAmerican consumers have a favorableimpression of cooperatives.

Hazen urged cooperatives to empha-size their cooperative status and princi-ples when communicating with the pub-lic. “We tend to apologize for beingco-ops, as though we’ve grown success-ful businesses in spite of our cooperativestatus, not because of it. That’s wrong,and it will get us nowhere.” When talk-ing to the media, Hazen said co-opsshould talk about why cooperatives arebetter than other types of business.

“Only through strong, clear com-munications will more people come torecognize and embrace the cooperativebusiness structure.”

Sees huge potential for “.coop”One major communications feat

which helped Hazen win the CCA hon-or—creation of the “.coop” Internetdomain—can also help cooperatives dif-ferentiate themselves in a “crowded butextremely important marketplace.” Henoted that the Internet has the power to

someday “eclipse television in populari-ty,” at a fraction of the cost of TV adver-tising. The new, .coop Web address isthus a powerful marketing and brandingtool for the 400 million people world-wide with Internet access (of which 167million live in the United States).

“Cooperatives now own a monopolyon the Internet, which is a strange posi-tion for cooperatives. I have never likedmonopolies, but now that we own one,I guess they are OK,” Hazen joked.

“In four letters, you can tell con-sumers who you are, how you do busi-ness and what you value. In a worldwhere consumers seem to have shorterand shorter attention spans, you can’tfind a communications message moreefficient than that.”

Hazen said .coop will create a“fresh, modern image” for co-ops,especially with young consumers, manyof whom would “rather give up theirTV than their Internet connection.”He envisions students in classroomsraising their hands to ask teachers what“.coop” stands for, triggering a discus-sion about what a cooperative is.

“I believe .coop will do more to pro-mote cooperatives than any other sin-gle initiative could have,” Hazen said.He concluded by challenging each ofthe communicators present to “go backto your CEOs and IT people and getthem thinking about what new namesyour cooperative needs for its new,.coop web address...it’s your job toencourage them to make use of thispowerful medium.” ■


H a z e n s e l e c t e d t o pC E O c o m m u n i c a t o rSays innovation and “.coop” can compensate for tight budget

SPaul Hazen


By Catherine Merlo

n a normal year, raisingrower Steve Kister pre-pares his vineyards nearFresno, Calif., for a latesummer harvest. In Sep-

tember, he picks the Thompson seedlessgrapes hanging lush and heavy on hisvines and lays them to dry under the hotCalifornia sun. In October, when thegrapes have shriveled to raisins, Kistersends them off to a packer for process-

ing and marketing. He always knows bythen what price he can expect for hisraisin crop, and by November, he typi-cally realizes a profitable cash return.

The past year, however, has beenanything but normal for Kister andCalifornia’s 5,000 raisin growers, whoproduce virtually all of the nation’sraisins. Along with the state’s 16 majorpackers, they have been strugglingthrough a season of turmoil, dissent andfinancial hardship. Shaken by bearishsupply-demand forces and a protracted

price dispute that disrupted the season’snormal progress and divided growersand packers, the industry is reeling.

“This season has been the toughestdownturn our industry has ever faced,”says Kister, whose family has grownraisin grapes in the Fresno area sincethe 1930s. “Not all growers are goingto survive.”

Kister, 47, has held a front-row seatto the season’s raisin drama. His fami-ly farms 400 acres of raisin grapes, alarge-scale operation compared to the

S e a s o n o f t u r m o i lA price dispute between California’s raisin growers and packers divides a financially troubled industry

I

Raisins bask in the warm California sun while growers fume over prices that have plunged to levels that could drive 20 percent of the state’s growers outof business. Photo courtesy California Raisin Marketing Board

industry average of 40 acres. He is sec-retary of the commodity-promotingCalifornia Raisin Marketing Board.He is a member of the Raisin Admin-istrative Committee that oversees theindustry’s federal marketing order.

But nothing has put Kister closer tothe center of the industry’s fray than hisrole as president of the Fresno-basedRaisin Bargaining Association (RBA),the nation’s largest, and this year’s mostembattled, bargaining association.

Inside RBA and the raisin industry Grower-owned and grower-con-

trolled RBA was formed in 1966 tonegotiate with packers for an annualfield price for members’ raisins. That

negotiated price becomes the pricingstandard for the industry.

With 2,000 members, RBA todayrepresents 40 percent of the industry’sraisin volume. Another 30 percent ofgrowers belong to Sun-Maid Growers,the well-known raisin-processingcooperative. The remaining raisin pro-ducers are independents. Together,California growers farm about 270,000acres of raisin varieties, producing 40percent of the world’s raisin supply. Inall, the farm-gate value of Californiaraisins has generally reached about$320 million a year.

Last October, against a backdrop ofthe largest raisin crop in Californiahistory and declining industry sales,

RBA did as it always does. After exam-ining all economic supply and demanddata, it offered its seasonal raisin priceto packers.

RBA was well aware the price situa-tion wasn’t optimistic. Even thoughraisin prices had been elevated for thepast couple of years, the supply-demandscenario did not favor continued highprices. Estimates put the 2000 raisincrop at a record 440,000 tons, anincrease of nearly 47 percent over theprevious year. It far exceeded the350,000 tons the industry generally pro-duces each year. The bumper crop alsosharply surpassed the 280,000 tons theindustry annually sells.

To make matters worse, both


“We’ve worked hardfor our membersand carried thewater for a lot of independent

growers who don’tbelong to RBA or

Sun Maid.”—Vaughn Koligian


domestic and export sales had droppedto 15-year lows. Some say sales werehurt by the record prices growers hadbeen receiving. In 1998, RBA growersreceived $1,290 per ton. The followingyear, growers bargained for, and got,$1,425 a ton.

“We may have priced ourselves outof the market,” says Jerry Rebensdorf,president of Fresno CooperativeRaisin Growers, a packer with 35grower-members.

Sales losses also were blamed inpart on increased raisin imports, par-ticularly from Chile, Mexico andAfghanistan, where labor and otherproduction costs are lower. In addi-tion, increased amounts of Californiawine grapes found their way into juiceconcentrate channels, taking moremarket from the raisin-producingThompson seedless grapes. Moreover,dried fruit consumption has declinedas part of a long-term trend.

“We knew we were entering newterritory,” says Vaughn Koligian, RBA’schief executive officer since 1989. “Weknew a price adjustment was in orderbut there was no need to take prices tothe unnecessarily low levels proposedby some packers.”

The bargaining association made

two price offers in October: the first at$1,100 per ton for Natural Seedless,and, when that was quickly rejected,another at $1,025 per ton, a 28 percentdecrease from the previous year. Pack-ers rejected RBA’s second offer as well.“Growers have always got what RBAasked for,” says Dennis Housepian,vice president of sales for CaruthersRaisin Packing Co., a medium-sizedpacker just outside of Fresno. “Thistime, reality set in. We could not con-

tinue to accept their pricesbecause the reality of the market-place would not allow us to dothat. Compared to demand andwhere the market was, their offerswere unrealistically high.”

Growers and packers deadlock over prices

With the packers’ rejection ofRBA’s second offer, two courseswere now open to resolve theprice dispute: conciliation andarbitration. RBA sought concilia-tion, which is overseen by Cali-fornia’s Department of Food andAgriculture (CDFA).

“Conciliation is much moreexpeditious,” Koligian says. “Itprovides an opportunity to settlethe price in a matter of days, whilearbitration takes months.”

The packers also agreed to

conciliation. CDFA ordered concilia-tion to take place Dec. 8-10 in Fresno.When it concluded, no resolution hadbeen reached.

“There was too much divisionbetween the two sides,” says Koligian.

On Dec. 11, RBA filed notice to goto binding arbitration to resolve theprice dispute. It was the first time inRBA’s 34-year history that arbitrationwas needed to settle price.

“We had come close a couple oftimes before but the industry had com-promised and agreement had beenreached,” Koligian says.

As 2001 began, the split betweengrowers and packers grew more con-tentious. Packer representativesaccused RBA of purposely delaying apricing settlement to create an artifi-cial shortage of raisins in the market-place. RBA denied the charge, sayingit had no interest in delaying paymentsto its members.

RBA called for a three-memberarbitration panel. The bargaining asso-ciation and packers argued over whoshould comprise the third, and neutral,arbitrator. RBA already had chosenDave Zollinger, former president ofthe California Tomato Growers Asso-ciation, as its representative. The pack-ers had selected Daniel F. Quinn, aStockton attorney, to represent them.

Finally, in February, the two sides

In late July—several months earlier than prices are typically announced—the Raisin Bargaining Association (RBA) agreed to a price of $880 per ton forthe 2001 crop, angering some growers who say they need at least $1,000 perton just to break even. RBA CEO Vaughn Koligian told the Fresno Bee newspa-per that RBA directors were not pleased with the price, but that the majorityfelt it was necessary to ease out of the market glut that is plaguing the industry.

Koligian said the price should stimulate sales momentum and help theindustry “get out of this mess as quickly as possible,” the newspaper reported.However, some observers say the low price for a second consecutive yearcould drive some growers to a new bargaining association. ■

2001 crop price leaves growers unhappy

Vaughn Koligian, CEO of the Raisin BargainingAssociation, says that while the group is disap-pointed with low prices growers received, he ispleased the major raisin buyers, such as Kellogg’s,have responded by using 25 percent moreCalifornia raisins. USDA photo by Catherine Merlo


agreed upon Eugene Lynch, a retiredSan Francisco judge, as the neutral arbi-trator. But another setback arose inMarch when it was learned that, becauseof a busy schedule, Lynch would not beable to meet with Zollinger and Quinnuntil April 30. RBA appealed to packersto find another judge who could hearthe case sooner. Packer representativessaid no. Disappointed, RBA had to pro-ceed with Lynch.

It was now the height of the raisin-marketing season, which runs Aug. 1to July 31, and there was still no pricein sight. The waiting process draggedon. “It was a calamity unfolding,”says Koligian. “The price delay wasaffecting growers both financially andemotionally.”

The mood was tense at RBA’s annualmeeting March 3, attended by anunusually large crowd of nearly 900.Koligian discussed the season’s toughfinancial challenges and the grower-packer division. He also remindedmembers that RBA had performedexceptionally well over the past decade,and called on them to stand strong withthe association.

In a question-and-answer sessionnear the meeting’s end, frustratedgrowers commented on the pricingdeadlock, packers and on-the-farmfinancial troubles. There was even acall not to renew Koligian’s contract.That led nowhere, and several growersrallied to Koligian’s defense.

Growers were not the only ones

affected by the pricing uncertainty.“The situation created havoc in themarketplace from the unknown factorof not having the price settled,” saysHousepian.

Packers filled orders from the previ-ous year’s inventory of raisins, boughtat a price of $1,425 per ton. “We had toget rid of that inventory or take atremendous loss,” Housepian says. “Wewere out in the marketplace withoutknowing our cost of production. Butwe had to hold our place in the market.That uncertainty led prices to continuedropping like a rock.”

Arbitration price “devastating”The six-month pricing deadlock was

broken May 2 after three days of binding

RBA was formed in 1966 to help California’s raisingrowers fare better economically. Of the 5,000 raisingrowers in the industry at that time, some 2,000 weremembers of Sun-Maid Growers and the rest were inde-pendent growers. Each year, these non-cooperativemembers had to negotiate individual sales contractswith their packers.

“Those open-price contracts could be compared tobuying an airplane ticket without knowing where youwere flying,” says Vaughn Koligian, RBA president.“Packers were able to play large growers against smallgrowers and even take advantage of the operator whowasn’t a good negotiator.

Some packers were consistent and paid all of theirgrowers the same fair price, while others held out andpaid a range of prices. Damage incurred from rains orsimilar occurrences made the negotiations that muchtougher at times. There was also a great deal of work tobe done to sign pricing contracts with so many growers.

“When you compound this problem with the fact thatthere were about 20 packers at the time, you can seethe task was quite difficult,” Koligian says.

Under the leadership of grower Ernie Bedrosian,RBA’s initial members put up the capital to start theassociation. Support for the bargaining group grewrapidly, although there was still some reluctance bymany in the industry.

“Keep in mind,” says Koligian, “that growers were

essentially paid by their packer at a price that couldfluctuate from farmer to farmer. If they joined RBA,would there be repercussions?”

RBA offered its first contract in 1967. The first compa-ny to sign an RBA contract was Enoch Packing Compa-ny, established in 1919 and still operating today underthe grandchildren of its founder.

The original master contract has been modifiedslightly over the years but its original foundation remainsintact. RBA signs with a packer to deliver the productsof its members. If a packer does not sign, RBA will divertits members’ tonnage to another signatory packer.

“The strength of the contract comes from the factthat the grower passes title of his product to RBA inconsideration for the marketing of that product,” Koli-gian says. “Taking title gives us control over the raisinsand separates RBA from a number of other bargainingassociations. It also places a greater burden on us toensure our members have a home for their products.”

RBA members typically deliver about 140,000 tons ofraisins a year with a value of approximately $140 million.Its 33-member board of raisin producers sets the policyfor RBA’s five-member staff. In addition to price negotia-tions, RBA represents growers on labor issues, air quali-ty, legal matters and support in Washington, D.C. andSacramento. RBA also holds 13 of the 47 seats on theRaisin Administrative Committee, which oversees theindustry’s federal marketing order. ■

How the Raisin Bargaining Association got its start

arbitration in San Francisco. Arbitratorsdetermined the free tonnage price forthe year’s raisins would be $877.50 perton on the free tonnage, or 53 percent of

the crop.(Under a for-mula used forthe industry’sfederal market-ing order, partof the raisincrop is put intoreserve and theremaining ton-nage is freed formarketing. Seesidebar on stateand federalmarketingorders.)

When theresult wasannounced,

Koligian says the RBA “was devastated.”“We couldn’t believe the price wouldbe this low,” he says.

RBA had fought for a price of

$1,100 per ton throughout the arbi-tration. The $877.50 price on 53-per-cent free tonnage put growers’ netprice for the season at about $465 perton. That compared to the previousyear’s price of $1,425 on 85 percentfree tonnage, or a net of $1,211. Mostraisin growers must net somewhere inthe range of $750 per ton to meetproduction costs.

“I was hoping for at least $900 perton on the arbitration price,” saysRebensdorf. “At this price level,we’re going to lose money on thecrop and I’m not happy about that.But this had to be done to increaseindustry sales.”

Although arbitration resolved theprice dispute, the industry’s woundslinger.

“It’s the worst split I’ve ever seen inthis industry,” says Pete Penner, along-time raisin grower and former


California’s raisin industry operates under both a fed-eral and a state marketing order.

State marketing order Thanks to the state marketing order funded by growers

to promote their sweet, dried commodity, California’s danc-ing raisins have returned. Growers reinstated the statemarketing order in 1998 after a four-year disappearance.The previous marketing order had been discontinued in1994 after pressure from industry packers, says Pete Pen-ner, chairman of the California Raisin Marketing Board(CRMB), which oversees the marketing order’s activities.

Domestic raisin sales declined 3 percent a year after1994, says Kathy Moulthrop, CRMB’s communicationsadministrator. “Because of that downturn, growers real-ized we needed generic promotion of raisins,” she says.

Growers not only voted to reinstate the state market-ing order in 1998 but, in May of this year, overwhelminglyapproved a five-year continuance of the program. A per-ton assessment to growers funds the program.

Today, the program promotes raisins through a printadvertising campaign, “Look Who’s Cooking With Califor-nia Raisins.” The campaign features several prominent

chefs. CRMB also sponsors health and nutrition research. Most recently, the program has gone to “a full court

press,” Penner says. It recently granted licensing agree-ments to Hardee’s Restaurants, Hershey’s Creamery Co.and Brach’s Candy Co., to use the dancing raisin imagesin various promotions, including television commercials.

Federal marketing order The federal marketing order was designed to provide

for the orderly buying and selling of raisins, to increasesales and to improve returns to growers.

The Raisin Administrative Committee, a board com-prised of growers and packers, oversees the order. TheRAC sets grades and standards for incoming andprocessed raisins and oversees the disposition ofreserve tonnage.

The industry uses a formula to determine its “free”and “reserve” tonnage. Here’s how it works: Growersdeliver their crop to a packer, who pays them directly forwhat is called free tonnage, as determined by the formu-la. Those raisins not acquired by the processor areplaced into a pool as reserve tonnage. Growers share inan undivided interest in the reserve pool. ■

State and federal marketing orders direct dancing raisins and market supply

“It’s been a season of turmoil and chaos,” says Dennis Housepian ofCaruthers Raisin Packing Co., one of the industry’s 16 major packers.He believes growers and packers “must sit down and understandeach other.” USDA photo by Catherine Merlo

chairman of the board of Sun-MaidGrowers of California.

Trying to surviveThe industry’s problems have not

disappeared. Although the lower priceshave recently spurred raisin sales andthe upcoming crop will be smaller, thesituation in the vineyards is close todesperate. Production costs are high.Water is in short supply. Land valueshave plummeted. Many growers arestruggling to stay afloat.

“Most raisin growers have lost about$500 an acre where they might normal-ly net $500 to $1,000,” says Penner,who remains a Sun-Maid director.

“I would estimate that 20 percent ofthe state’s raisin growers will go brokethis year,” Rebensdorf says.

Changes are needed, growers andpackers agree. But opinions vary onwhat those changes should be.

“We need to get to a level where wecan start selling raisins and get ourmarkets back,” says Rebensdorf. “Theonly way we’re going to do that is toreduce production. Our problem isover-supply.”

Housepian believes the quality ofCalifornia’s raisin crop must improve tobetter meet world competition.

Penner says the industry must do abetter marketing job to increase raisin

consumption.Better understanding is needed

between growers and packers, saysAlan Kasparian, a raisin farmer andgrower relations manager for a Fres-no packer. “This year amplifiedproblems that have been there for along time,” he says. “Growers andpackers have more in common thanthey think.”

There has been criticism by packersover the federal marketing order andcalls to modify its provisions,although RBA’s Kister believes theorder has served raisin growers well.

Some growers believe packersshould support the Fresno-based Cal-ifornia Raisin Marketing Board(CRMB), which has a $5-millionannual budget to raise awareness forraisins with the goal of raisingdemand and increasing sales.

A small group of growers, unhappywith the arbitration outcome andRBA, have formed a rival bargainingassociation called the California

Raisin Reform Association. But manygrowers and packers alike believe theindustry can support only one bargain-ing association. Most, including non-members like Penner and Rebensdorf,continue to endorse RBA.

“RBA and the marketing order havekept us in business for the past 34years,” Rebensdorf maintains.

“I would rue the day if we ever lostRBA,” Penner says.

Koligian staunchly defends RBA.“It’s shortsighted of people to judgethis association by the 2000-01 season,”he says. “We’ve worked hard for ourmembers and carried the water for a lotof independent growers who don’tbelong to RBA or Sun Maid.”

Industry changes are coming, saysKister, but the process will be painful.“Our problems are real and they can-not be addressed or fixed quickly,” hesays, already anticipating a packedmeeting schedule.

But first, he says, the divisionbetween raisin packers and growersmust end. “In tough times, we mustpull together,” he says. “We have towork as one industry to survive.Maybe now, people can see the valueof that.” ■


Sun Maid, a grower-owned cooperative, isthe industry’s largest processor. Photo cour-tesy Sun Maid

Many of Steve Kister’s Thompson seedless grape vineyards are 60 years old. Raisin’s areKister’s only crop. USDA photo by Catherine Merlo


By Carolyn Liebrand, Agricultural EconomistUSDA/RBS/Cooperative Services

Editor’s note: This article is based onUSDA/RBS Research Report187, “StructuralChanges in the Dairy Co-op Sector, 1992-2000,”which presents a detailed look at the changes inthe U.S. dairy cooperative sector and documentsthe structural changes that occurred in the finaldecade of the 20th century.

s the 20th century drew to aclose, the dairy industry con-tinued to adapt to dynamicmarket conditions such asadvances in production tech-

nology (both on the farm and in the milkplant), consolidation and growth of retailfood chains, and vertical and horizontal inte-gration in milk manufacturing/processingsectors. Other changes include new trade rules and practicesand changes in government dairy programs.

Increasing size and productivity of production units andreduction in the number of production plants have becomethe tell-tale signs of change. Dairy cooperatives have likewisefollowed this pattern: fewer cooperatives were handling anincreasing volume of milk, as the waning years of the centurysaw another wave of rapid consolidation in the dairy sector.

Dairy cooperative adjustmentThe number of dairy cooperatives in the United States fell

almost 20 percent between 1992 and the end of 2000. How-ever, the adjustment was more dynamic than the net loss of52 cooperatives indicates. A closer look reveals that 84 coop-eratives went out of existence (or, 32 percent of the 1992dairy cooperative numbers) during the nine-year period.

Some dairy co-ops disappearedDairy cooperatives exited the industry in a variety of man-

ners. Many of the exiting cooperatives dissolved, going out ofbusiness and leaving no successor organization (table 1). For-mer members then joined other cooperatives, formed new

cooperatives or resorted to selling their milk directly to milkplants independent of a co-op. A small number of dairy coop-eratives were acquired by other dairy firms not operating on acooperative basis (“investor-owned firms”). A few co-ops hadtheir milk sales decline to less than one-half of their totalsales, thus were no longer classified as predominately dairycooperatives. This reorientation to other operations, usuallyfeed or supplies, sometimes was the result of a merger with asupply cooperative. Finally, another large segment exited bymerging with other dairy cooperatives.

Cooperatives combined with other dairy cooperatives forvarious reasons such as: to take advantage of scale economies;to better configure and utilize a system of manufacturingplants and to reduce operating overhead; to foster marketingclout; and to secure milk supplies, often eliminating overlap-ping activities, such as milk pick-up routes. Another drivingforce behind the mergers was to keep pace with consolidationin the retail sector, thereby allowing the unified cooperativesto supply larger volumes and meet customer product require-ments through horizontal integration.

Also, the increased ability to transport milk due toimprovements in trucking, milk quality and milk handling–

M o r e t h a n o n e w a y …Dairy co-ops pursue varied paths to structural change

ASilos—including the state’s tallest—tower over Gary Kline, a field representative for DairyFarmers of America on the farm of Gerald Garber south of Harrisonburg, Va. Garber’s previousco-op, Valley of Virginia Milk Producers Association, became the seventh co-op to join DFAwhen it merged with the larger co-op in February, 2000. Photo by Raymond Crouch, courtesy DFA


as well as advanced packaging technology—may have facili-tated this consolidation between dairy cooperatives. Further-more, the increased merger activity the last three years of thecentury may have, in part, been a result of cooperatives antic-ipating and reacting to the new, consolidated Federal MilkMarketing Orders (FMMO), which went into effect Jan. 1,2000. The mergers expanded the geographical reach andmarket power of the surviving/emerging organizations andby 2000 some dairy cooperatives’ memberships spanned mul-tiple regions or were even nationwide, while the number ofstates housing dairy cooperative headquarters shrunk.

When dairy cooperatives exited the industry by merger,either the exiting cooperative’s operations were consolidatedinto an ongoing dairy cooperative that maintained its identi-ty, or a new dairy cooperative was formed and the unifyingcooperatives lost their identities. Indeed, 26 of the 36 dairycooperatives exiting through merger between 1992 and theend of 2000 eventually became part of six new cooperativesformed by consolidation in this time period. Four of these sixnew cooperatives handled more than 1 billion pounds of milkper year. Just 10 cooperatives that exited via unification wereabsorbed into ongoing concerns.

Formation of new dairy co-opsIn contrast to the overall trend of shrinking dairy coopera-

tive numbers, 32 dairy cooperatives were newly organizedbetween 1992 and the end of 2000. This means that 15 per-cent of the nation’s present dairycooperatives were formed duringthe past nine years. Six coopera-tives were created by dairy coop-erative unification, as mentionedpreviously, but most were formedby newly organized groups of pro-ducers (table 2). So, despite theheadline-making consolidationtaking place in the dairy coopera-tive sector during the 1990s, othertrends were also afoot.

All but one of the 26 coopera-tives organized by these newgroups of farmers seeking alterna-tive marketing avenues for theirmilk handled less than 1 billionpounds of milk annually, and themajority of these handled lessthan 50 million pounds. Thesenew groups of producers bandedtogether for a variety of reasons.Some formed to capture market-ing margins by further processingtheir milk, focusing on a particu-lar market niche. Commonly, themarket niche was specialty cheese— a unique variety or product

with distinguishing characteristics (perceived or real) such as“organic,” “rBST-free,” “locally produced,” etc. One groupformed with the intention of processing branded fluid milkand capitalizing on similar types of attributes.

Additionally, some dairy farmers may have been seekingother alternatives to “mega-cooperatives” for their marketingneeds in forming a few of these new organizations. Otherswere formed by groups of new dairy operations that weresimilarly situated. Several of the new dairy cooperatives mayhave been, in essence, successors to cooperatives that hadgone out of business for a time.

Adjustment in dairy co-op operationsThe type of marketing operations a dairy cooperative

engages in on behalf of its members varies from cooperativeto cooperative. Between 1992 and 2000, there was adjust-ment in the numbers of dairy cooperatives engaging in vari-ous marketing activities. In addition to entries and exits,some cooperatives altered the focus of their operations toadapt to changing market conditions, which put them into adifferent operational group.

A large portion of U.S. dairy cooperatives do not own oroperate milk manufacturing or processing facilities, but theydo provide producers a voice in the marketplace, meetingsuch needs as negotiating milk price and terms of trade,ensuring the accuracy of weights and tests in computing pro-ducer milk checks, and providing representation in govern-

ment policy matters. These “bar-gaining-only” cooperatives werethe most numerous type in 1992and, by 2000, represented an evenlarger share of U.S. cooperatives(table 3). Many of the new bar-gaining-only cooperatives wereformed by new groups of produc-ers (as opposed to being the resultof cooperative consolidation).

A handful of cooperativesclosed their aging manufacturingfacilities during this time periodbut continued their bargainingactivities. These co-ops wereregrouped into USDA’s “bar-gaining-only” designation. Thus,bargaining-only cooperativenumbers dropped off at a slowerpace than the other operatingtypes over the nine-year period.

Another subset of the nation’sdairy cooperatives, in addition totheir bargaining activities, manu-factures milk into commodity, orundifferentiated, dairy products,such as butter, powder and bulkcheese. Some of this activityPh

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occurs on a small scale for market-bal-ancing purposes, and others on a largescale to capture economies of size. Thiscommodity manufacturing groupdeclined by more than one-halffrom1992 through 2000, a higher ratethan the other operating types.

Maintaining small, under-utilized andold balancing plants is costly, while build-ing new, large-scale plants is also expen-sive, particularly for small cooperatives.On the other hand, for those that manu-factured commodity products on a largescale, the limited flexibility of a narrowproduct line probably left them more vul-nerable to inventory losses arising fromthe volatile milk prices of the 1990s than amore diversified product line would have.Accordingly, no new cooperatives wereorganized to focus solely on these types ofoperations, an indication of the commod-ity manufacturing cooperatives’ decliningprofitability in the marketplace.

Many of the commodity manufac-turing cooperatives that exited between1992 and 2000 did so by merging withdiversified cooperatives — cooperativesthat own a system of plants to make avariety of products — both differentiat-ed and commodity, while at the sametime selling a large portion of their milksupply to other handlers and perform-ing the requisite bargaining services.The consolidation of commodity man-

ufacturing cooperatives with (or into)diversified cooperatives improved flexi-bility in product mix and efficiencyfrom a more rationalized system ofplants. Some plants were closed whenthey could not be utilized efficientlywithin the new system of plants. Theseplant closures alarmed some producerswho formerly had their milk shipped tothese local plants, even though theirmilk still had a marketing outlet withthe cooperative.

Diversified cooperatives are theleast numerous of the operating types—these 14 cooperatives represent just6.6 percent of all U.S. dairy coopera-tives in 2000. However, they accountfor over one-half of all milk handledby the nation’s dairy cooperatives.Their shrinking numbers truly reflect

the fewer-but-larger co-op trend andrepresent increasing horizontal, aswell as vertical, coordination. An indi-cation of their vitality is that none ofthe exiting diversified cooperativesdissolved or went out of operation.Instead, all but one merged withanother cooperative.

These cooperatives expanded (pre-dominantly through mergers) inresponse to the changing market con-ditions. Indeed, by 2000, there were nodiversified cooperatives that handledless than 50 million pounds of milkannually. Their large volumes, wideproduct mixes and geographical reachposition them to be suppliers of choiceto the large, national food companies.Moreover, some are sophisticated mar-keters of consumer products as well.

This vertical integra-tion extends the dairyproducer members’operations up the foodchain, returning moreof the marketing mar-gins back to the farmer.

Taking an alterna-tive approach, somecooperatives manufac-ture selected productson a smaller scale fora particular marketniche—typicallycheese. For this arti-cle, these “branded-cheese” cooperativesand the cooperativesthat package fluidmilk are groupedtogether. Both aim to


Table 1—What happened to the 84 cooperatives exiting between1992 and 2000?

Action: Number Percent Dissolved or out of operation 36 42.9 Merged into another dairy cooperative 36 42.9 Acquired by a non-cooperative dairy firm 8 9.5 Merged or refocused into non-dairy cooperative 4 4.8 Total, all dairy cooperative exits 84 100.0

Note: Totals may not add due to rounding.

An AMPI truck makes a milk run in Wisconsin. The elimination of duplicate milk routes is a major cost-savingfactor in some co-op mergers. Photo by Sheryl Doering Meshke, courtesy AMPI


move their members closer to theconsumer. In fact, some of thesedairy cooperatives market productsmade from member milk directly toconsumers.

The specialty cheese cooperativesmust compete with other cheesemakerson the basis of the quality and unique-ness of their product, as they lack thesize and scale to compete on price withthe large commodity cheesemakers.(Almost by definition, these specialtycheese-making cooperatives are pre-dominately small, handling less than 50million pounds of milk annually.)These smaller cooperatives must findand develop a niche for their specialtyproduct. For those unable to do so, themarket is unforgiving.

Stiff competition also faces fluidprocessing cooperatives. The mature,highly competitive fluid processingsector has faced perhaps the most con-solidation by investor-owned firms

(IOF) and only a handful of dairycooperatives continue to thrive in thefluid business. Yet one cooperative hasbeen rather successful and grew towhere it handled over 1 billion poundsof milk in 2000.

Regardless of the intense marketcompetition, fluid and branded-cheesecooperatives are the second mostcommon type of dairy cooperative inthe United States and represent anever-so-slightly larger share of totaldairy cooperative numbers in 2000compared to 1992. Thirty percent ofthe fluid and branded-cheese coopera-tives were formed since 1992, a fasterpace than for the other operatingtypes. All of these newly formedbranded-cheese and fluid processingcooperatives were small.

Dairy co-ops remain viableDairy cooperatives have taken

diverse roads to address their specific

marketing needs, but each has its mer-its. Thus, the role of cooperatives inthe dairy industry remains a dominantone as the 21st century begins.

Dairy cooperatives in the UnitedStates have demonstrated an ability tosuccessfully adapt to changing marketconditions. While the trend appearsto be away from operating small bal-ancing plants, others are findingopportunity in capturing niche mar-kets on a small scale. Alternatively,some cooperatives have eliminatedtheir unprofitable manufacturingoperations and focus their attentionon gaining power at the bargainingtable and providing services to theirmembers.

Finally, representing the majorityof total cooperative milk volume,diversified cooperatives offer milk anddairy product buyers a full range ofservices while securing marketingmargins and security for their mem-bers. Many of the high-volume hardproduct manufacturing cooperativeshave been folded into the plant sys-tems operated by the diverse coopera-tives. Thus it seems dairy producerswill continue to have a variety ofcooperative avenues to meet theirneeds and preferences in marketingtheir milk. ■

Table 3—Distribution of dairy cooperatives, exits and entries 1992-2000, by type

Type Type of cooperative 1992 Exits Percent Entries Percent change1/ Net change 2000

No. No. % of ’92 No. % of ’00 No. No. % of ’92 No.Bargaining-only 179 48 -26.8 21 +13.4 +5 -22 -12.3 157 Commodity2/ 35 18 -51.4 0 +0.0 -2 -20 -57.1 15

manufacturingDiversified 19 8 -42.1 3 +21.4 0 -5 -26.3 14 Fluid, branded 32 10 -31.3 8 +29.6 -3 -5 -15.6 27

-cheese3/

Totals 265 84 -31.7 32 +15.0 0 -52 -19.6 2131/ Cooperatives that remained in operation from 1992 through 2000 but changed the focus of their operations from one operatingtype to another.2/ Includes bargaining-balancing cooperatives (cooperatives that operate plants to manufacture milk into commodity products tobalance milk supplies) and hard product manufacturing cooperatives (cooperatives that operate manufacturing plants at highcapacity making undifferentiated products such as butter, powder and cheese).3/ Includes both cooperatives that primarily package fluid milk products and those cooperatives manufacturing “branded”cheese and other specialty products for niche markets.

Table 2—Origin of dairy cooperatives formed between 1992 and 2000

Source: Number Percent Merger of existing cooperatives 6 18.7 New group of producers 26 81.3Total, all new dairy cooperatives 32 100.0



Editor’s note: a more detailed report onthe findings of Trechter’s study will beincluded in an upcoming issue of “RuralCooperatives.”

well-informedcooperativemember tends to

be a more loyal member—but don’t rely too heavilyon e-mail or a Web site tokeep members up-to-dateon cooperative happenings.Cooperative employees anda hard copy of a co-opnewsletter are still rankedby members as their pre-ferred sources for coopera-tive news, according toresults of a survey fundedby USDA Cooperative Services. Electronic com-munications rated dead lastin order of preference, says David Trechter, associate professor ofagriculture economics atthe University of Wisconsin-River Falls.

C o m m u n i c a t i o n s l i n k e d t o l o y a l t yIf you want your co-op messages heard, it’s still a face-to-face, hard-copy world

A

Visual aid: Joe Huffine, market-ing director for TennesseeFarmers Cooperative, got helpgaining everyone’s attentionfrom his 18-month-old daughter,Madison. His humor-laced pre-sentation made very seriouspoints about the huge differ-ences that exist between differ-ent generations of Americans,their wants and how they per-ceive the world. Co-op marketingand communications effortsmust take these differences intoaccount, he said.

Ann Wylie led a workshop that helped co-op communicators explore new ways to tap theircreativity. USDA Photos by Dan Campbell


Presenting survey highlights at theCooperative Communicators Associa-tion’s annual institute in Florida,Trechter said the Upper Midweststudy involved two surveys, one of co-op managers and the other of co-opmembers. The response from man-agers was low enough to cast doubt onthat set of findings, but the 759responses from members were a good,

statistically solid return rate, he said. Members were asked to rank their

level of commitment to their co-op,using a scale of 0-100. “A 100 meansyou would walk over hot coals for yourco-op,” Trechter said. “A zero means ifyour truck was running on fumes, andyou were passing a CENEX filling sta-tion, you would probably hop out andpush it to the next Standard station.”

Those findings of loyalty were corre-lated to the communications prefer-ence of the members.

Trechter says he was surprised that“face time with co-op employees andmanagers ranked first and second on alist of 10 communications preferences.“So informal communications channelsare still hugely important,” he said.

A hard copy of a co-op newsletterrated third in popularity, followed bypress coverage in local newspapers.Annual meetings ranked fifth as asource of co-op information. Only 15percent of the members rated electron-ic communications as important orvery important.

“That’s not to say that electroniccommunications are not important, butit is a distinct minority of people whoare living in an e-world, at least amongthe farm population in the Upper Mid-west,” Trechter said. “And I suspect itis much the same in the rest of thecountry.”

Since co-op employees are viewed assuch an important source of co-opinformation, internal communicationsthat keep your staff well-informed are“hugely important,” Trechter said.

Leta Mach of NCBA (right) works on an exercise with Jamie Gasper, a Michigan StateUniversity ag major and member of the Agricultural Communicators of Tomorrow duringthe CCA institute.

Doug Graham, director of sponsor communications andadministration for Nationwide Insurance, Columbus, Ohio,has been honored by the Cooperative CommunicatorsAssociation with the Klinefelter Award, the asso-ciation’s top career service award. It is award-ed annually to an individual who helps raisethe standards of cooperative communica-tions and who furthers the cooperative sys-tem and spirit.

Graham, a 20-year veteran of co-op com-munications and former CCA president, plansand produces all communication programs thatpromote Nationwide (a mutual, or member- owned,insurance company). He writes articles – on topics such asfarm safety, real estate planning and protecting personalassets – for member publications. He also produces Nation-wide videos.

Other top awards presented at CCA’s annual communica-tions institute in Orlando, Fla. included:

• Writer of the year – Richard Biever, Indiana StatewideAssociation of Rural Electric Cooperatives;

• Photographer of the year – DavidLundquist, CHS Cooperatives;

• Publication of the year – Lani Jordan,CHS Cooperatives (for a CHS brochure);

•Special project of the year – Leta Mach,National Cooperative Business Association

(for NCBA’s Co-op 101 educational program). “Power in Peril,” the cover story of the

March/April 2001 issue of “Rural Cooperatives”magazine, won a second place news-feature award. Thearticle, written by regular contributor Catherine Merlo ofBakersfield, Calif., examined the impact of California’senergy crisis on cooperatives and their members. ■

Graham wins top CCA honor

Appeal of annual meetingsAnnual meetings are best for

“preaching to the choir,” Trechter said.They appeal most to members whohave served on the board or a co-opcommittee. The higher the level ofeducation, the less important annual

meetings tend to be with members. Soannual meetings tend to be good forcommunicating with committed mem-bers, while newsletters are moreimportant for reaching less-committedmembers.

Among other noteworthy surveyresults:

• Commitment to acooperative increasedamong members who hadserved on a co- op board orcommittee, or who had co-op training.

• Supply co-op memberstended to be more loyalthan marketing co-opmembers. (Trechter notedthat 1997-99 were badyears for many commodityprices, which may havedampened co-op loyaltyamong marketing co-opmembers surveyed.)

• The smaller, more localand more homogenous aco-op’s membership was,the more loyal the memberstend to be.

• Co-ops that have not gonethrough a merger tend to have moreloyal members. “Change is scary formany people and change does not nec-essarily build member commitment,”Trechter said.

• The more a member has investedin his or her co-op, the stronger themember’s loyalty to it. Financial per-formance of a co-op also has animpact: the more solvent a co-op isand the lower the co-op’s debt to equi-ty, the stronger the commitment of themembership.

• Members preferred co-ops thatpublish newsletters more frequently,feeling that the news is fresher andmore up to date.

• Managers with long tenure at a co-op give greater credibility to thenewsletter as a source of information. ■


CCA: building better co-ops through communications

The Cooperative Communicators Association (CCA) is an organization of 350communications professionals dedicated to the concept that a strong communi-cations program helps build stronger, more effective co-ops. The membershipincludes communicators from the full spectrum of cooperatives: agricultural,rural utility, housing, credit and consumer.

Since its founding in 1953, CCA has been dedicated to improving the communi-cations skills of its members and helping them more effectively spread the mes-sages of their cooperatives. The focal point of CCA’s activity is its annual commu-nications institute, held in mid-to-late June each year. This year’s conference washeld in Orlando, Fla. The 2002 event will move to Burlington, Vt., June 22-25.

“There are a number of good professional associations for communicationsand public affairs specialists, but cooperatives face so many unique challengesthat they need an organization like CCA that is dedicated to focusing on theissues facing cooperatives,” says CCA President Heather Berry, a member of theeditorial staff of “Rural Missouri,” the publication of the Association of MissouriElectric Cooperatives.

For more information on CCA, visit the organization’s website at www.Coop-Comm.com, or call (806) 795-2783. ■

(Ranking, with “1” being thehighest rated source for co-opinformation, based on a Univer-sity of Wisconsin survey of co-op members in Minnesota andWisconsin.)

1. Communications with co-op employees

2. Communications with co-op manager

3. Co-op newsletter4. Newspaper articles5. Annual meeting6. Communications with

board members7. Communications with

other members8. Member surveys9. Focus groups

10. Electronic com-munications ■

Co-op members’preferred communicationschannels

David Trechter was surprised that “face time with co-opemployees and managers” topped the list of co-opcommunications methods preferred by co-op membersin the Upper Midwest.



he Florida citrus industry has long been a foodindustry leader in promoting its juices and oth-er products as key components in a healthydiet. These promotional and educationalefforts have played a significant role in helping

to boost the average per capita consumption of orange juicein the United States from 5.4 gallons per person in the mid-1990s, to six gallons at present. This rise in consumption hascome despite higher consumer prices.

Eric Boomhower, marketing communicationsdirector for the Florida Department of Citrus(Florida Citrus), shared insight on the strategiesused to keep consumers coming back for moreFlorida OJ.

In 1996, Florida Citrus launched what it termedits “triple crown campaign,” which helped spreadthe word about recent scientific research linkingcitrus products to good health. Florida Citrusworked closely with the American Cancer Society,the American Heart Association and the March ofDimes in creating a series of new television com-mercials and print ads that trumpet these findings.

“We had to deliver a serious message about dis-ease prevention in a way that would not turn offconsumers,” Boomhower said. “We did thisthrough a series of television advertisements,including one of the most popular TV spots weever produced.”

Boomhower showed clips of the commercials,in which the narrator says that “The AmericanCancer Society says a healthy diet, includingFlorida orange juice, can reduce the risk of somecancers.” Having a well-respected third party asthe source for the health message lends muchgreater credibility to it, he noted.

In another TV ad from the campaign, the nar-

rator says: “The American Heart Association has certifiedthat Florida grapefruit and orange juice are part of a heart-healthy diet.” The key message in another commercial isthat: “The March of Dimes has found that the folic acid inorange juice can help prevent certain birth defects.”

This multi-million dollar advertising campaign was alsosupplemented by a series of three, 15- or 30-second publicservice announcements (PSAs) which stress the impact of dieton good health. Although a PSA “looks and feels like a TVcommercial, they are different in several key ways,”

S e l l i n g i t !Florida citrus industry boosts consumption with extensive, health-focused advertising & promotion

T

The Florida Department of Citrus teamed with the Marchof Dimes to produce this ad campaign.


Boomhower said. Any commercial message in a PSA must bevery subtle, with the weight of the message promoting somepublic good, such as disease prevention.

Florida Citrus secured the services of three, health-con-scious celebrities who donated their services for the cam-paign: super-model Cheryl Tiegs, actress Lauren Bacall andtennis ace Pete Sampras. In each PSA, these celebrityspokesmen stress the need for a healthy diet as a way tohelp reduce your odds of falling victim to cancer. In two ofthe spots, the only link to orange juice is a visual productplacement.

Cost for production and distribution per PSA was about$100,000. “It would cost more than that just for one 30-second commercial during prime time,” Boomhower noted.The American Cancer Society has also helped distributethe PSAs through its own channels. Health organizationsquoted in the TV ads and PSAs are asked by Florida Citrusto review and approve them before they are aired.

While many of the airings for PSAsoccur “in the wee hours of the night”or early morning, Boomhower saidthey have also received prime-timeairings. This campaign also hasinvolved consumer brochures and theside panels of orange juice and milkcartons, which Boomhower said are“like mini billboards in the store andon your table.”

Be ready to pounce on good newsWhen the scientific community pro-

duces a report that is favorable to yourproduct, be ready to pounce.

Florida Citrus was aware that a 1999Harvard University study found thatdrinking a glass of grapefruit or orangejuice daily can reduce the risk strokeby 25 percent. So the same day thestudy results were announced in theJournal of the American Medical Asso-ciation, Florida Citrus launched anintegrated media campaign, startingwith a TV commercial produced inpartnership with the American HeartAssociation. The next day, print adsbegan appearing in major newspapers;a week later, print ads were appearingin national magazines.

Florida Citrus also did a major “PRblitz,” sending out print and videonews releases that trumpeted the Har-vard study findings to media in allmajor markets.

“This generated some big time TVplacements for us,” Boomhower said.

Coverage of the story was carried on the Today Show, CNNNews, Fox News and other major news programs.Boomhower traveled to New York with one of the scientistswho did the research. They met with the editorial staffs of anumber of major health and lifestyle magazines, including“Family Circle” and “Women’s Day,” to talk about the rolecitrus juice can play in reducing stroke.

This PR effort generated more than 400 broadcast airings,with an estimated audience of 125 million. This helped drivea 21 percent increase in consumer recognition of the strokereduction benefits of orange juice.

Another way to promote your story with the media isthrough a “satellite media tour.” Florida Citrus used thisstrategy when a University of Florida study showed the ben-efits of citrus juice in the diet. “For a satellite tour, your rentstudio time and the media comes to you,” Boomhower said.“This is a neat, low-cost way to take your message out intothe heart of the market,” Boomhower said.

Print ads such as this and TV commercials drive home the good health messages aboutorange juice.


Cooperatives and others in the food industry caught-up in the debate over food bio-technology—an “emo-tional and controversial” issue for some—need todevelop a careful communications strate-gy based on solid science, says CherylToner, associate director for health com-munications for the International FoodInformation Council (IFIC).

“Be sensitive to the words you useand how they can impact your mes-sage,” Toner said. For example, the pub-lic tends to react negatively to the words“genetically engineered or geneticallymodified,” she said. However, describingthe process as “food or agriculturalbiotechnology” elicits a more positive orneutral response from consumers.“When people hear the phrase ‘bioengi-neering,’ they think of food that has gonedirectly from the petri dish to their dinnerplate, and that such food is just not nat-ural,” Toner said.

“We must make the public understandthat seeds are modified and planted inthe ground by farmers, then grown andharvested just like other crops. It’s stillagriculture.”

It is also a good idea to remind con-sumers that oversight of our food is provided by multiple, reliable governmentagencies, including USDA, FDA and EPA,Toner said.

“The ultimate issue in the minds ofmost consumers is: What does this meanfor me at my dinner table?”

Stress the benefitsIt is important for co-ops that use biotechnology

to explain the purpose and benefits of this new foodtechnology, Toner said. “You can explainthat biotech is an evolution of tradition-al agricultural practice, which has gonefrom using yeast in brewing and breadmaking, to advanced plant-breedingtechniques to today’s biotechnology,which uses tools of genetics to add orextract select genes to achieve desiredtraits in plants.

“Keep the emphasis on the farmer’srole,” Toner stressed. She also urgedcommunicators to cite specific examplesof the benefits and goals of foodbiotechnology, such as:

• cooking oils that contain less satu-rated fats;

• safer animal feeds; • better tasting, fresher foods;• foods with enhanced nutrients; • crops grown with less impact on the

land due to reduced use of pesticidesand more flexible weed controls;

• improved water quality protectionand soil conservation.

While claims of absolute safety cannever be made, food industry representa-tives can communicate accurate, up-to-date scientific information that emphasizesthe years of exhaustive research that havegone in to developing biotechnology.

She noted that this technology can be avaluable tool in the effort to fight global hunger. ■

Better eating through biotechnology? Tips shared for communicating about biotech food issues

This brochure on foodbiotechnology is availablefrom the International FoodInformation Council. For acopy, e-mail [email protected], orfax (202) 296-6547

Event sponsorshipEvent sponsorship can also be used to

publicize your product. Florida Citrus didthis recently by sponsoring a cross-coun-try bike ride by Bob Green, talk showhostess Oprah Winfrey’s personal fitnesstrainer. During media interviews as hepedaled his way across the nation, Greenwould tout the importance of a good diet– including orange juice – on health.

The sponsors reaped an unexpectedmedia bonanza when Green was pedal-ing into Chicago for an appearance on

the Oprah show. At one point in theirconversation, Oprah exclaimed “I loveFlorida orange juice!” Boomhower saidthat hiring Oprah as a spokespersonwould be beyond his budget, but theystill got a lucky endorsement by work-ing with Green.

“She said it spontaneously – we hadno part in it,” Boomhower stressed.“We think we got a pretty big bang forour buck with this effort.” Total costwas $300,000.

Teenagers and children present spe-

cial communications challenges becausethey care little about health messages,Boomhower said. So Florida citrus createda TV ad aimed at the young which pro-motes the energy-enhancing aspects ofOJ, with the slogan: “Florida orange juicefor energy – are you drinking enough?”

Boomhower said he must strive toshow a balance of different Floridajuice brands in print and broadcast ads.“We have to walk a fine line to makesure we don’t promote one brand morethan another.” ■

30 January/February 2001 / Rural Cooperatives

LOL buys Purina Mills, expands feed business

North America’s largest farmer-owned animal feed business will growsubstantially with the planned purchaseby Minnesota-based Land O’ Lakes(LOL) of Purina Mills, based in St.Louis. The $230 million price repre-sents $23 per share in cash for 10 mil-lion shares of common stock. LOL alsoagreed to assume the firm’s $130 mil-lion debt load. Manufacturing, trans-portation and purchasing functions willbe combined.

Purina Mills, the nation’s thirdlargest livestock feed manufacturer, hadsales of $839.8 million last year. It willcontinue to operate as a separate com-pany out of St. Louis with its own salesand marketing team, product lines,brand, nationwide dealer network and2,300 employees. The firm also retainsits nationwide red-and-white checker-board logo which has appeared on thecompany’s feed sacks since the early1900s. Included in the deal was PurinaMills’ research and development centerat Gray Summit, Mo.

The cooperative’s portfolio of dairycow, swine and poultry feeds will beexpanded to include horse feed, forwhich Purina is a major distributor.LOL will blend Purina’s 42 mills withthe 70 from its joint feed venture withKansas City-based Farmland Indus-tries. When it was formed last Septem-ber, LOL Farmland, LLC, became thelargest animal feed company in NorthAmerica. It expects to post sales of $1.8billion from its first year of operation.Last year, LOL achieved sales of nearly$6 billion and margins of $103 million.

Among the benefits of the purchase,

said LOL President Jack Gherty, willbe increased efficiency in production,distribution and purchasing. It bringstogether two well-recognized brands indifferent product categories. “We arebuilding the economies of scale andcritical mass necessary to competenationally in the consolidating feedindustry. The transaction has positiveimplications for the long-term successof our farmer-owned feed system,” hesaid. “It will unite two strong brands, aswell as complimentary geography andproduct lines.”

Purina Mills includes Ralston Puri-na’s U.S. livestock feed business. Therest of Ralston Purina was purchasedearlier this year by Geneva-based Nes-tle SA for $11 billion. Ralston Purinastill distributes Purina Chow dog andcat foods.

Bekkers new Gold Kist CEO The board of directors of Atlanta-

based Gold Kist, Inc., the nation’slargest farmer-owned chicken proces-

sor, hasnamed JohnBekkers as itsnew presidentand chiefexecutiveofficer fol-lowing theretirement ofGaylordCoan, its pre-vious execu-tive and

chairman who had a 46-year careerwith the cooperative.

Bekkers’ Gold Kist career spans 16years. He had been president and chief

operating officer since 1995. He is theimmediate past chairman of theNational Chicken Council, a director ofFarm Credit Leasing of Minneapolis,and member of the advisory board ofRobobank in Holland. Gold Kist hadbeen one of his clients while he earlierserved as a management consultant.

Trio of dairy co-ops ends LOL merger study

The 1,600 members of Maryland &Virginia Milk Producers Cooperative atLaurel, Md., plus those of dairy cooper-atives in Arkansas and Texas have decid-ed to end merger talks with LandO’Lakes (LOL). Maryland and Virginiaco-op general manager Robert Shoresaid “a significant level of member con-cern” has been expressed regarding theproposed merger. However, he said thecooperatives would explore other waysof working together.

“Member response to the mergerproposal at 14 information meetingsvaried from “strong support to strongopposition,” Shore said. But the oppo-sition was strong enough that thecooperatives decided to cancel thestudy. If approved, the three co-opswould have been placed in an Easternfluid milk marketing division, alongwith LOL’s earlier holdings from amerger in the Philadelphia area.

The other co-ops involved areArkansas Dairy Cooperatives Associa-tion at Damascus and Lone Star MilkProducers, Inc., at Windhorst, Texas.

“We are exploring other ways tostrengthen marketing alliances withour Advantage partners,” Shore said.“Though this (merger) proposal willnot continue to be developed, the

N E W S L I N E

John Bekkers

Rural Cooperatives / January/February 2001 31

board and management will do its bestin maximizing income, market stabilityand service for all members.”

Catfish cooperative opens in Kentucky

Kentucky legislators were treated tofried catfish during a dedication of the state’s first cooperative catfish process-ing plant this summer. It will take twoyears for the plant to reach its produc-tion peak, employing 15 to 20 peopleto process a million pounds a year ofthe protein-fed channel catfish. Ken-tucky Agriculture Commissioner BillyRay Smith has cited “value adding”specialty crops such as catfish as a wayto breathe new life into the state’sfarming economy. Kentucky farmersare seeking alternate enterprises toreplace plummeting grain prices andthe decline of tobacco. Smith said claysoil and ample groundwater available inthe state were suited to catfish raised infarm ponds. Western Kentucky farmershave dominated applications for $4million in state cost-sharing funds tohelp people get started in aquaculture.

Ohio State honors Ron LongRon Long, vice president for sire pro-

curement for Select Sires Inc., PlainCity, Ohio, has been inducted into OhioState University’s Dairy Science Hall ofService. Long has been a dairy leader onstate, national and international levelsfor more than 40 years. Dairy producersthroughout the world have benefittedfrom Select Mating Service, a cattle mat-ing program pioneered by Long that hasgrown to include more than 50 profes-sionals who make more than 2 millionmatings annually. Long had also beenpresident of the National Shrine Club.

Universal buys Triton TireTriton Tire and Battery at Eagan,

Minn., has come under full ownershipof Universal Cooperatives. It had beena joint venture since 1997 with CHSCooperatives and Farmland Industries.Universal had been a managing partnerof the venture since 1998 and had pro-vided purchasing, warehousing and dis-tribution services.

Online procurement pilotsaves money for Roanoke EC

Roanoke Electric Cooperative atRich Square, N.C., recently saved itsmembers an estimated $200,000 byusing a web-based application thatfacilitates online procurement of con-struction work plan contractors. Therural electric cooperative (REC) usedthe online bidding process to select acontractor to provide labor for thisyear’s construction under its four-yearplan. The overall process, includingthe use of online web-based systems,is consistent with the Rural UtilitiesService (RUS) regulation governingprocurement. Anexception is a featurethat allows competi-tors to view the lowbid and change bidsduring the solicita-tion period.

Bidders droppedtheir quotes by morethan $206,000($620,152 to$413,829) during theprocess. The coop-erative expects tosave 30 percent overits anticipated costfor the project. “Theprocess creates a tru-ly competitive envi-ronment, whilebringing about anextremely efficientprocess,” said CurtisWynn, the cooperative’s chief execu-tive officer. “We are extremely satis-fied with the savings we are seeing byusing the system.

Although its regulations do notspecifically authorize online procure-ment, RUS gave Roanoke’s pilot pro-ject a waiver because RUS was satis-fied with how the bidding process was handled.

The agency has indicated it willconsider requests from other borrow-ers who wish to try this type of pro-cedure. Roanoke REC found thatmost bids were posted in the last |two hours.

Birds Eye launches brandedretail fresh vegetable line

Agrilink Foods, the fully owned sub-sidiary of Pro Fac Cooperative atRochester, N.Y., will soon debut acrossthe country with a line of brandedfresh vegetables under its popular BirdsEye brand. The product line is expect-ed to add millions to the company’sbottom line.

Donna Rippin, Agrilink’s businessdirector, business development, said itwanted to “make sure we had a con-sumer viable proposition in the testmarkets. Our plan was based on theBirds Eye brand being sold at a premi-

um... The products (a15-pound bag of russetpotatoes) sold at a pre-mium and actually out-sold the competition indouble-digit dollars.”

The competition, shesaid, includes key play-ers in the fresh producemarket. But transferringa brand’s equity into anew and different classof foods is not a simpletask. “Commodities areprice driven and brandshaven’t successfullyinfiltrated the territoryyet.” One of the biggestrisks is the potential toaffect other brandedproducts, she said.“With fresh produce,for example, damaged or

poor-quality product is readily visible.Consumers can see, feel, touch and smellthe product. Any negative experiencecould affect their perception of otherproducts carrying the brand name.”

Meanwhile, Agrilink has receiveda $500,000 grant from severalsources including the State of NewYork for use on a $1.2 million projectto move vegetable and frozen fruitlines from a recently closed Agri-Frozen facility in Washburn, Ore., toFulton, N.Y., and add 50 new jobs atFulton. The fruit line will added600,000 cases to the facility’s incre-mental volume.

This 15-pound bag of Russet pota-toes will bear Agrilink’s “Birds Eye”brand. Photo courtesy Agrilink

32 January/February 2001 / Rural Cooperatives

Supreme Court ruling cloudscommodity marketing promotion

A U.S. Supreme Court decision in acase dealing with a nationwide genericadvertising program promoting freshmushrooms puts in question a dozengeneric product marketing programswith a combined budget of about $500million to promote fruits, vegetables,meats and dairy products.

In a 6-3 vote, the justices sided withthose who opposed the mandatorycheckoff programs supported by amajority of producers of particular com-modities. The court said that growerscan’t be forced to pay for these govern-ment-sponsored advertising programs.The court majority agreed with dissi-dents who have long complained thatthe forced funding of generic advertis-ing violates their First Amendment freespeech rights. The suit was pursued by aTennessee company that grows freshmushrooms. Under a 1990 law, Con-gress authorized an industry board tocollect a one-cent-per-pound fee.

Attorney Kendall Manock, repre-senting several farm industry boardsthat support the checkoffs, said the pro-grams are involved in promoting tradeand opening markets in China and Mex-ico, not just sponsoring advertisements.A purely voluntary program wouldn’tsurvive because of free riders, he said.

Aside from federal programs, Cali-fornia has 51 cooperative ad programsthat will spend $140 million this fiscalyear on marketing. The largest promo-tions are for cheese, milk and tablegrapes followed by those for raisins,beef, wheat, kiwi, citrus fruits, cut flow-ers and strawberries. These, too, aresubject to a free-speech challenge fromgrowers who object to the assessments.

Farmland cuts long-term debt,but still has quarterly loss

The nation’s largest agriculturalcooperative made substantial strides instemming the continuing flow of redink and cut $200 million from its long-term debt, lowering it to $280 millionby the end of the third quarter of itscurrent fiscal year. Farmland Industriesof Kansas City reported a $42.4 million

quarterly loss despite sales of $3.2 bil-lion, up from $3 billion for the samequarter last year. The loss figureincluded one-time costs, restructuringand tax considerations.

Bob Honse, Farmland’s chief execu-tive officer, said the restructuring costscovered several transactions includingclosing two Farmland meat plants inIowa and a wheat gluten plant at Rus-sell, Kan. Excluding those, Farmlandhad a $27.1 million gain on $9.1 billionsales for the nine months vs. a $64 mil-lion loss on $8.8 billion sales for thesame period last year. While somegains came from higher petroleumsales, $30 million was derived fromreduced operating and administrativecosts at Farmland, Honse said.

The cooperative recently leased itsdomestic grain handling business toArcher Daniels Midland, earlier shuffledits feed business into a joint venturewith Land O’Lakes, and plans to sell itspetroleum refinery at Coffeyville, Kan.,and close its pork processing plant atTopeka, Kan., next year. Purchased in1996, the pork facility fell victim tochanging retail attitudes. The 190employees and 40 million pounds ofproduction will be absorbed elsewherein the Farmland system.

Meanwhile, Farmland Beef, a jointventure between Farmland Industriesand U.S. Premium Beef, has openedtwo case-ready plants (pre-packagedcuts of beef and pork sent directly fromthe processor to the retail shelf andeliminating the grocery store butcher).A third plant will open next spring inthe Kansas City area and employ 200workers. The cooperative said it wasmaking the transitions in its pork pro-cessing plants to improve efficiencies,grow its market share and expand theFarmland brand. Sales for Farmland’srefrigerated foods group are up $175million to $3.4 billion for the first threequarters from the same period last year.

In a subsequent move to reduce thenumber of enterprises in which it isinvolved, Farmland has announcedplans to sell its entire 40+ percent shareof stock in two Heartland Grain FuelsLP ethanol-producing plants in South

Dakota to its partner. Bill Paulsen,Heartland manager, didn’t rule out thepossibility of non-farmers buyingshares, but South Dakota WheatGrowers will continue to have control-ling interest in Heartland, which pro-duces 22 million gallons of ethanol ayear at plants in Huron and Aberdeen.Details on how to purchase shares willbe available later this year. Earlier thisyear, Williams Bio-Energy, Tulsa,Okla., a unit of Williams Companies,purchased a 5-percent interest in theoperations and agreed to market anddistribute the ethanol. The joint ven-ture began in 1993. The Huron plantopened in 2000.

Ottowa Co-op gains in saleof bankrupt FCA in Kansas

A U. S. bankruptcy court judge hasapproved the sale of properties ownedby Farmers Cooperative Association(FCA) of Lawrence, Kan., to a group ofinvestors headed by Overland Parkattorney Robert Laing for nearly $3.2million. The sale of grain elevators, fer-tilizer plants and other properties toLaing’s group had been recommendedby the cooperative’s board of directors.The purchase did not include the graininventory. FCA has liabilities of $20million, including $10 million owed toCoBank. FCA sought Chapter 11 bank-ruptcy protection last September. It wasthe largest local cooperative in Kansas.

Laing has since sold seven elevatorsto Ottowa (Kan.) Co-op, which willtriple its grain handling capacity, doubleits sales and require 10 more employees.The entire group of elevators will beconnected by a computerized networkwhich will track all transactions, scaleweights and loads. Experienced branchmanagers will operate the elevators.

AGP sells CN Feed to ADM,buys Canadian operations

Omaha-based Ag Processing Inc.(AGP) has sold its U.S. half of Consoli-dated Nutrition (CN) feed venture toits partner, Archer Daniels Midland(ADM), and in turn acquired ADM’shalf of CN’s Canadian operation andthe “Master Feeds” brand. The joint

Rural Cooperatives / January/February 2001 33

Given continuing high energy prices and the searchfor alternate fuels, agricultural producers are continuingto form and operate cooperative ethanol plants that pri-marily use corn as their feedstock, although others areusing government surplus sugar or studying use of agri-cultural waste products.

With an eye toward increasing ethanol production, theU.S. Department of Agriculture will provide up to $150 millionin subsidies in 2001 and another $150 million in incentive pay-ments for 2002 for its bioenergy program. It provides higherpayments to small processors and cooperatives to encour-age expansion of domestic bioenergy pro-duction capacity. More than 5 percent ofthe nation’s corn production (567 millionbushels) is used for production of biofuelsand more than 50 ethanol plants are oper-ating in 20 states.

Last fall, USDA announced a two-yearprogram to subsidize companies – includ-ing cooperatives – that buy crops, princi-pally corn and soybeans, for use in produc-tion of bioenergy products such as ethanolor biodiesel. Payments are capped at $7.5million per company and range from 29percent to 40 percent of the cost of the crops, dependingupon the size of the company. Ethanol production is cur-rently subsidized by a 5.4-cent-per-gallon federal excise taxbreak and consumes about 600 million bushels of the annu-al U.S. crop of more than 9 billion bushels of corn.

Meanwhile, the Environmental Protection Agency(EPA) has denied California’s request to waive the federaloxygen content for reformulated gasoline. This is expect-ed to sharply expand the demand for ethanol in the state.While most Midwest ethanol plants use corn, Californianscan also use orchard clippings, wood chips from lumbermills, whey from cheese factories and lawn clippingsfrom urban areas. The state has the potential to produce200 million gallons of ethanol.

Here is a sampling of pending cooperative ethanolprojects:

■ The Rice Straw Cooperative at Gridley, Calif., hasbeen formed to convert straw stalks left from the riceharvest to ethanol. The $100 million refinery near Sacra-mento would open in 2003.

■ Maryland grain growers are exploring a barley-based ethanol facility. The state has a corn deficitbecause so much of it is consumed by its giant poultryindustry. The plant would produce between 15 millionand 25 million gallons of ethanol a year and cost

between $30 million and $50 million.■ Iowa’s Des Moines County supervisors have ear-

marked $10,000 for a study on a new ethanol plant operat-ed by Big River Resources. The cooperative hopes toraise $100,000 for a feasibility study and organizing effortaimed at developing a 15-million bushel plant with anannual payroll of $30,000 to $40,000.

■ At a more advanced stage, Quad County CornProcessors’ Cooperative, Galva, Iowa, has beenapproved by USDA for a $12.5 million loan guarantee forconstruction of an 18- million-gallon-a-year ethanol plant.

The 416 members have raised $8.5 mil-lion in equity capital for the plant that willuse 6.8 million bushels of corn per year.

■ About 80 farmers have formed Iro-quois Bio-Energy Cooperative in northwestIndiana with plans to develop a $60 millionethanol plant that would produce 40 milliongallons a year and use 14 million bushels ofcorn from more than 400 farmers.

■ Midwest Grain Processors Coopera-tive will open a new, 45-million-gallonethanol plant next fall at Lakota, Iowa. Theco-op’s 998 members raised $16 million in

start-up capital. Some 80 percent of Kossuth County voterspassed a referendum to issue $5 million in bonds to help buildthe plant. The co-op hopes the plant will generate $70 millionin annual revenue and create 30 jobs.

■ Near Minden, Neb., Kearney Area Ag ProducersAlliance is seeking to raise $18 million to finance an ethanolplant to produce 30 million gallons a year. Cattle feeders arebeing invited to invest $12,000 plus 8,000 bushels of corn(2,000 quarterly), agree to purchase 600 tons of distillers’grain annually and pay a $200 membership fee. The plantwould require 12 million bushels of corn annually.

■ Construction is underway at Big Stone City nearSioux Falls, S.D., for the Northern Growers Cooperativeethanol plant that will produce 40 million gallons a year.When the $45 million plant is completed next year, it willemploy 35 people.

■ Agra Resources Cooperative near Albert Lea,Minn., is tripling its capacity at a cost of $18 million toabout 45 million gallons of ethanol annually

■ Tall Corn Ethanol Cooperative at Coon Rapids, Iowa,plans to open its plant next August and produce 40 milliongallons of the fuel. The state has seven ethanol plantswith two under construction and eight more proposed,according to the Iowa Corn Growers Association.

—Patrick Duffey

Energy prices spark interest in ethanol co-ops

Corn, soybeans and other feed-stocks are being used to fuel newbioenergy plants. USDA photo byKen Hammond

venture had been operating since 1994. The transaction will allow AGP to

focus its resources on food and indus-trial products such as soy-based dieselfuel, solvents and additives thatenhance chemical performance,according to spokesman MikeMaranell. AGP is the world’s largestcooperative soybean processor and amajor processor of vegetable oils.

Calcot cotton farmers may facerepayment of earlier advances

Cotton producer-members of Cal-cot Ltd., a cotton-marketing coopera-tive based at Bakersfield, Calif., may beforced to return some of the cashadvances it received from Calcot.Growers have had to return advancesto Calcot only once previously in its 45years. Calcot will make a final settle-ment in September for last year’s har-vest. Last fall, cotton farmers wereadvanced cash based on futures prices.

PCP buys $9 million plantto suit tomato growers

Seeing an opportunity to expandtomato operations, grower-ownedcooperative Pacific Coast Producers(PCP), Lodi, Calif., is purchasing theDel Monte processing plant at Wood-

land, Calif., for $9 million. The 41-acresite includes the plant, three warehous-es and a processing area. The plant hadbeen closed after the 2000 season.

PCP will process 350,000 tons oftomatoes at its Lodi cannery and nextyear will process 525,00 tons at Wood-land. Ninety-five percent of PCP’stomato growers live within 20 miles ofWoodland. The cooperative expectsfreight savings of about $3.5 millionannually and will spend another $18million for new equipment and updat-ed facilities. The breakup of Tri ValleyGrowers and its tomato processingbusiness left a vacancy in the state.

Rocky Mountain Sugar Co-oppays $48 million for plants

Sugar beet growers in four westernstates, who formed a Rocky MountainSugar Growers Cooperative a yearago, have purchased Western SugarCo. from Tate & Lyle, the giantBritish sugar processor, for $48 mil-lion. The cooperative gains processingplants at Billings and Lovell, Wyo.;Fort Morgan and Greeley, Colo., andScottsbluff, Neb. Corporate officeswere in Denver.

Last year, Tate & Lyle had offeredto sell Western Sugar to its 1,100 sug-

ar growers for $78 million, or abouthalf its estimated liquidation value.Growers planted 130,000 acres thisspring. Growers will receive a letterfrom the cooperative which outlinesdetails of the purchase, includes aclosing balance sheet and informationon interest rates for loan financing. Amechanism provides for growers whodid not commit acres this year to buyinto the plant.

Dakota Beef Co-op buys Nebraska meatpacker

Dakota Beef Cooperative at Bis-mark, N.D., plans to buy a 60 percentinterest in Elkhorn Valley PackingCompany at Dodge, Neb., over thenext five years but continue pursuing agoal of building a future plant in theDakotas. Cooperative organizers willneed a minimum of 40,000 cattle ayear. A membership drive is planned.Elkhorn, which also has a slaughter-house in Wellington, Kan., marketsbeef in the United States and othercountries on both retail and wholesalelevels. Most of the firm’s cattle comefrom Kansas and Nebraska. DakotaBeef grew out of the failed NorthernPlains Premium Beef, which sought tobuild a slaughterhouse in westernSouth Dakota but was caught in a poorranch economy in the 1990s.

Ramey Co-op joins AMPIThe 150 members of Minnesota-

based Ramey Farmers CooperativeCreamery have voted to merge andmarket their milk with AssociatedMilk Producers Inc. (AMPI) of NewUlm, Minn. Ramey members market-ed 140 million pounds a year to Glen-coe Butter and Produce Association,also now a part of AMPI. The Rameycooperative, formed in 1913, will con-tinue providing farm production sup-plies to its members.

Texans form rice co-opAbout 27 Texas rice growers have

voted to form a new cooperative. Ithopes to handle members’ rice fromthe drier to the grocery shelf. The newboard of directors has been canvassing


Prompted by special freight rates for elevators that can load 110-car trainsin 15 hours, high-speed grain loading stations, including this one near Moc-casin on the Burlington Northern Santa Fe mainline, are being built in Mon-tana. Several are being built by CHS Cooperatives and joint venture part-ners to enhance export grain delivery to the West Coast. Mountain ViewCo-op’s new $6 million elevator near Collins is scheduled to open thisNovember, in time for the fall grain shipping season. (Photo courtesy CHS )


other rice growers with an eye towardincreasing membership. Minimumcommitment was set at 1.2 millionhundredweights of rice and a maximumof 2.5 million hundredweights. Thecooperative will seek to gain value-added profit for its currently low-priced long-grain rice.

German co-op banks mergeGermany’s two rival cooperative

banks have merged to become thelargest cooperative bank and sixthlargest bank in that nation in terms ofassets. DG and DZ banks will each own50 percent of the new firm operatingunder the DZ banner. It provides refi-nancing to agriculture which has beensuffering from crises including out-breaks of mad cow disease. The compa-ny will serve as the central clearingbank for about 1,500 local cooperatives.

Illinois fund boosts co-ops Illinois has allocated $3 million in

its fiscal 2002 agricultural budget foruse by producers developing value-added cooperatives. The fund can payfor up to 75 percent of the cost oftechnical assistance, including feasibil-ity studies. State Farm Bureau Presi-dent Ron Warfield said AgriFIRSTprogram funds for these projects “willgreatly enhance the ability of Illinoisfarmers to capitalize on new ways tocapture a bigger share of the con-sumer food dollar.”

Indiana’s Ag Plus FormsCapping discussions for the past two

years, two Indiana grain marketing andagronomy service cooperatives nearFort Wayne, Ind., have merged to formAg Plus Inc. Being blended are Farm-ers Elevator Co. of South Whitley andAllen County Co-op at Woodburn. JeffMize, manager of Farmers Elevator,will manage the new entity, whichcombines more than 1,700 membersand about 80 employees.

Undaunted by low prices,Ocean Spray eyes turnaround

Ocean Spray’s cranberry-growermembers are sticking with their coop-

erative as it pursues new marketingsdespite low prices that managementsays could extend another 2 to 5 years.The cooperative, which had sales of$1.36 billion last year, represents about900 growers, mostly in Massachusetts,New Jersey and Wisconsin.

Earlier this year, members votedby a 2-to-1 margin to back a turn-around plan and not sell the coopera-tive, the biggest player in the cran-berry business. Any sale wouldrequire support from a 75 percentmajority of the cooperative’s shares.Ocean Spray is pinning its hopes oneffective marketing and is spendinghalf of its $30 million advertisingbudget next year to promote a newwhite cranberry juice product. Thecooperative also is pursuing its newmarket in China.

Sugar beet growers seekhelp buying Holly plant

The Washakie Beet Growers Asso-ciation in Wyoming supplying theHolly Sugar Factory at Worland isplanning to sign a one-year lease ofthe factory from its bankrupt owner,Imperial Sugar, to allow more timefor purchase negotiations. PresidentDick McKamey said the factoryneeds about 20,000 acres of sugarbeets to stay afloat. Holly also oper-ates a refinery and seed research lab-oratory in Wyoming.

Tillamook opens cheese plantColumbia River Processing Inc., a

wholly owned subsidiary of TillamookCounty Creamery Association(TCCA) at Boardman, Ore., hasbegun operating a new cheese plantcapable of producing 58 millionpounds of cheese a year using 1.6 mil-lion pounds of milk per day. Its coldstorage facility can handle 30 days ofcheese production. The cheese will betrucked to TCCA’s flagship plant inTillamook for extended aging, stor-age, packaging and distribution. Wheywill be condensed through a reverseosmosis system and shipped to a plantoperated by a neighboring cooperativefor further processing.

Pork America buys Iowa packing plant

Pork America Inc. has purchased the former Ace hog slaughter and pro-cessing plant at Estherville, Iowa. Thecooperative facility was expected tobegin operating this summer. It wouldinitially process about 100 head per dayand operate with 12 employees. Intime, production is scheduled toincrease to 600 head per day whichwould require about 40 employees.

CHS ends incentive program,returns $14 million invested

An innovative five-year experimentaimed at raising farm income from itsprocessing business for members ofCHS Cooperatives has been shelvedby the Minnesota-based cooperative.CHS plans to return $14 million to the855 farmers who invested. The pro-gram sold shares in the new businessesknown as Equity Partnership Units.Investing farmers could expect greaterreturns from profits of those business-es that processed their grains oroilseed crops. However, CHS stillbelieves there is merit in the idea thatis fashioned after popular new-genera-tion cooperatives operating in theUpper Midwest. President John John-son said the program was doomedbecause a depressed flour milling market limited earnings. Meanwhile,the cooperative will continue toexplore ways for members to investdirectly in value-added businesses.

Golden Gem Growers ShutsLake Garfield Packing House

Citing a flat market for its specialtyoranges for the past several years pluscompetition from other tropicalfruits, Golden Gem Growers has shutits packing house at Lake Garfield,Fla. This and its larger house atUmatilla have been operating belowcapacity. Fresh fruit activities will beconcentrated at Umatilla which has acapacity for about 600,000 cartons.Golden Gem’s juice fruit will beprocessed at a plant at Lake Waleswhich has a long-term contract with aBrazilian citrus cooperative.


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