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lCOOPERATIVESUSDA / Rural Development March/April 2002USDA / Rural Development March/April 2002

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2 March/April 2002 / Rural Cooperatives

One good strategy—not fully rec-ognized or appreciated—for establish-ing cooperatives is to convert an exist-ing company to a farmer-ownedcooperative. It happens more oftenthan commonly realized. Many ofthese acquisitions have successfullyplaced cooperatives in position as val-ue-added marketers when farmers gainownership of physical facilities and anexisting marketing base.

There have been a number of exam-ples of this process in the past 30 years.One of the first during this period wasthe conversion of the American CrystalSugar Co. to a cooperative owned byRed River Valley sugar beet growers inMinnesota and North Dakota, who werethe major suppliers of sugar beets toAmerican Crystal in 1970. This pur-chase was followed in 1971 by the acqui-sition of the Stolkley-Van Camp canningplants in Lodi, Oroville and Santa Cruz,Calif., by the then newly organizedPacific Coast Producers (PCP) coopera-tive. In each of these cases, growersbelonging to associations already orga-nized for cooperative bargaining decidedto pursue ownership of value-addedplants as a means of preserving a homefor their raw products and the opportu-nity to gain additional income from mar-keting-derived margins for members.

More recently, sugar beet growers inMichigan and the eastern slope of theRocky Mountains have been negotiat-ing purchase or lease of facilities for-merly operated by the Tate and Lyleand Imperial Sugar (Holly) companies.

In 1996, Iowa Turkey GrowersCooperative was formed and pur-chased the former Oscar Mayer (thena Kraft subsidiary) turkey processingplant in West Liberty, Iowa, and has

run it quite successfully. Beef pro-ducers belonging to U.S. PremiumBeef cooperative have purchasedownership in Farmland NationalBeef processing.

Likewise, Dairy Farmers of Ameri-ca and Land O’Lakes jointly pur-chased a Kraft Foods cheese plant inMelrose, Minn. Pork producers inseveral states have acquired ownershipinterests in packing plants. And olivegrowers in California are in theprocess of purchasing the formerObertti olive plant, part of the liqui-dation of assets formerly owned bybankrupt Tri Valley Growers.

On the farm supply side, TerraResources was acquired by a consor-tium of regional cooperatives led byLand O’ Lakes and Cenex. Land O’Lakes this past year also purchased the

feed business of Ralston-Purina.These efforts require substantial

up-front capitalization by members.The strategy is also not without itspotential perils if plant and equipmentassets are worn out or not well main-tained. Similarly, the sometimes fickle,end-product market for value-addedproducts has changed dramaticallywith the growing concentration offood distributors and may not be assound as first anticipated.

The use of this acquisition strategyhas been encouraged by two recentCongressional actions. The TaxpayerRelief Act of 1997 provides a capitalgains tax break for company owners thatsell their facility to growers who hadbeen supplying their plant. This enablesgrowers to negotiate a better purchaseprice than might otherwise be possible.

Secondly, the 1996 farm billexpanded the Business and IndustryLoan Guarantee program to provideguarantees for stock purchase by farm-ers in newly created value-added coop-eratives. Current deliberations overthe 2002 version of the farm bill wouldextend this provision to owners ofexisting cooperatives that want toengage in value-added processing.

These examples demonstrate thatfarmers have been expanding theiroff-farm operations through coopera-tive ownership in an ever-expandingseries of acquisitions. This is a soundstrategy if: marketing feasibility canbe demonstrated; experienced man-agement is hired; proper capitaliza-tion is provided; and the acquisitionprice is right.

Randall Torgerson, Deputy AdministratorRural Business-Cooperative Service

C O M M E N T A R Y

Co-op growth through acquisition

The use of this acquisition

strategy has been

encouraged by two recent Congressional

actions.

Rural Cooperatives / March/April 2002 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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Ann Veneman, Secretary of Agriculture

Michael E. Neruda, Deputy Under Secretary, USDARural Development

John Rosso, Acting Administrator, Rural Business-Cooperative Service

Randall Torgerson, Deputy Administrator, USDARural Business-Cooperative Service

Dan Campbell, Editor

Vision 2000/KOTA, Design

Have a cooperative-related question?Call (202) 720-6483, orFax (202) 720-4641, Information Director,

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United States Department of Agriculture

COOPERATIVESRura

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COOPERATIVESMarch/April 2002 Volume 69 Number 2

O n t h e C o v e r :

The fresh apple market has been depressed in recent years, leading to thefailure of a number of packers. Tree Top, however, has used a well-honedmarketing strategy to achieve record sales of processed apple productsand has paid solid returns to its members. Story on page 8. Photo courtesy TreeTop and Abramowitz Studio Inc., Seattle

F E A T U R E S

4 Catch the windCo-op’s giant windmills work with Mother Nature to providepowerBy Steve Thompson

8 The Big AppleNew products, added plant capacity play major role in TreeTop’s sales strategyBy C. Lyon, C. Durham, S. Buccola

12 The long haulIs your co-op’s farm-to-plant milk hauling optimal? This casestudy shows factors that can impact efficiencyBy Peerapon Prasertsri, Richard L. Kilmer

15 The road upFree-market reforms fuel growth of Ethiopia’s co-opsBy Perry Letson

22 Benefits often key to keeping best employeesBy Beverly L. Rotan

24 Building commitment Sharpening you co-op communications can build member com-mitment and better reach select groups By David Trechter, Robert P. King

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

21 MANAGEMENT TIP

28 NEWSLINE


C a t c h t h e w i n dCo-op’s giant windmills work with Mother Nature to provide power

By Steve ThompsonUSDA Rural Development

ind is free. So is thesun. So why aren’tthese free, non-pollut-ing sources of energyin greater use as

sources of electric power? Althoughcost and other considerations still limitthe applicability of solar and wind pow-er, utility cooperatives are using themmore and more to fill power needs inimportant niche markets.

Harnessing the windWind has been used as a power

source for thousands of years. Perhapsits first use was powering ships andboats. Later, before the use of steampower, wind was used to power grainmills, oil presses, irrigation anddrainage pumps in areas such as Hol-land, where climate or geography pre-vented the use of water power.

Even today, across many remoteareas of the United States, wind-pow-ered pumps draw water from wells tofill livestock watering troughs. Thesefairly primitive wind turbines, littlechanged from100 years ago, are sym-bolic of American agriculture, particu-larly in the prairie states where wind isabundant. Across much of the GreatPlains, the annual average wind speedis about 13.4 miles per hour—the pointat which electrical power generation isconsidered economically feasible.

However, as a baseline (reliable) pow-er source, wind has major drawbacks.

First, it’s fickle—it doesn’t alwaysblow, and it sometimes blows whenyou don’t need it. Just as important,

areas with sufficient wind are often farfrom the potential market for theenergy they can produce, and far fromavailable transmission lines. For theseand other reasons – including a costpremium – the use of wind to produceelectricity is not widespread in theUnited States, either among electriccooperatives or other power utilities.

Despite these obstacles, wind poweris on the rise.

Basin Electric Power Cooperative, alarge power generation co-op head-quartered in Bismarck, N.D., thoughtthat wind power could serve as a sup-plemental source of “green” power forits operations. After looking at thecosts and available incentives, the co-op calculated that—with available newtechnology and the right location—wind generation would not be as cheapas conventionally produced power, but

would be “the most competitive of therenewable technologies,” says RonRebenitsch, an engineer at Basin.

“We have an advantage in thisrespect over many other co-ops,”Rebenitsch says, “because our uniquestatus as a not-for-profit, but taxable,cooperative allows us to take advantageof the 1.7-cent kilowatt-hour tax creditavailable for wind energy. There aresimilar incentives offered to untaxednonprofits, but they are renewed year-ly, and there’s always the chance thatthey won’t be available in the future.You can’t take that to the bank.”

Stepping up to the plateTo help launch the wind project,

one of Basin’s largest members, EastRiver Electric Cooperative, with mem-bers in South Dakota and westernMinnesota, stepped up to the plate. It

W

The South Dakota prairie provides an ideal location for these wind turbines, capable of generat-ing a combined 2.6 megawatts. The immense size of the windmills (facing page) is evident fromthis perspective. When wind speeds become too high, airfoil tips are rotated to act as air brakes.Photos courtesy Basin Electric Power Cooperative.


offered to take on the liability for theextra costs of one wind turbine.

“A general survey we took a few yearsago indicated quite a bit of interest ingreen power among our members,” saysScott Parsley, assistant general managerfor member services at East River. “Soin early 2000, we took another surveyspecifically to find out if enough of themwould be willing to pay a premium forwind-generated power. We got an over-whelming [positive] response.”

As the initial sponsoring member,East River put out a request for propos-als and got eight responses from windturbine vendors. Fortunately, the vendorwith the best proposal was able to offer aproject in a location that was able toobtain power transmission approval.

“The problem is that power transmis-sion infrastructure is not being built rightnow,” says Rebenitsch. Current federalrequirements make it risky for power firmsto build transmission lines, because othershave the right to apply to use unusedcapacity. If the builder is counting on thatunused capacity for future needs, this canput a serious crimp in the business plan.

“Transmission approval is difficult tofind nowadays, and not being able toguarantee it could stop most projects,”Rebenitsch says.

The Prairie Winds Project, as it wasnamed, found an excellent location inSouth Dakota, reasonably close totransmission lines and with an averagewind velocity of more than 16 milesper hour. With the proposed equip-ment, the site promised to generateelectricity at full capacity 32 percent ofthe time. “That’s the best performanceanyone’s been able to achieve so far inthe United States,” says Parsley.

USDA provides financing Financing for the $2.9 million cost of

two turbines, and connecting lines to apower substation, was provided byUSDA Rural Development’s Rural Utili-ties Service (RUS). “We’re glad to be apart of Prairie Winds,” says RUSAdministrator Hilda Legg. “It’s a goodexample of how green technology canwork for the individual members of pow-er cooperatives.” Legg says RUS encour-ages utility cooperatives looking toexploit wind and other green sources ofpower to apply for financial assistance.

Land was leased for the project, withroyalties for the landowner that areexpected to be in the range of $2,000 to$3,000 per turbine each year— a wel-come income supplement. Two tur-bines were installed: one is dedicated toproduction for East River, the other’soutput is available to a number of otherBasin member distribution co-ops.

The wind turbines are built byNordex, a Danish company with a rep-utation for quality and reliability. Theturbines are immense —the biggestavailable when they were built late lastyear. Their rotors measure 60 meters indiameter—or almost 200 feet—andthey are mounted on tubular towers

Most of the 50 states have areas that might be suit-able for wind power. This mapshows wind resources in the UnitedStates categorized by wind powerclass, which is defined by a range ofannual average wind speeds mea-sured at 33 feet and 164 feet abovethe ground. Generally, wind poweris greater at the higher altitudebecause of the “boundary layer”effect – the natural tendency of amoving fluid to move more slowlynext to a surface. Buildings, vegeta-tion, hills, and other features canalso slow wind close to the ground.

The columns labeled “WindPower” estimate the potential windenergy in watts available per square meter of land,

making certain assumptions about turbine size andperformance. Wind turbines areconsidered feasible in Wind Power Classes 4 through 7.

Other considerations makedevelopment of wind resourcesproblematic in some areas.Although most of the westernstates and the Appalachianregion have areas offering excel-lent wind characteristics, the

best are usually located on mountain ridges,posing serious accessibility and transmissionproblems. In the Upper Midwest, exploiting thewind over the Great Lakes poses obvious dilem-mas. In much of the Great Plains, remote loca-tions and lack of nearby transmission capacity

also limit exploitation. ■

U.S. wind power resources

Map

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MPH

0 to 12.512.5-14.314.3-15.715.7-16.816.8-17.917.9-19.719.7-26.6

200 feet tall. Each can produce 1.3megawatts of power. They are twice asbig as any other commercially pro-duced wind turbines, which presented aproblem for Rebenitsch.

Nordex projected a useful life spanfor the turbines of 20 years, based onthe records of smaller models. But withno actual experience to back up thatprojection, Rebenitsch decided conser-vatism was the better part of valor. Heinitially set depreciation at 15 years,and all cost calculations were based onthat assumption.

Basin Electric projected power gen-eration costs at 5.5 to 6 cents per kilo-watt hour. After subtracting the taxcredit and market-rate revenue, theywere left with a shortfall. Part of theproblem is that the area enjoys the low-

est-cost power in the nation. Firm, orbaseline, power is available for only 3cents per kilowatt hour. Non-firmpower, available intermittently, wasestimated at about 1.8 cents. Thatamount, plus the 1.7-cent tax credit,gave the co-op 3.5 cents per kilowatthour, leaving a deficit of 2.5 cents, or(adding a safe cushion) 3 cents.

The result is a $3-dollar premiumfor a 100-kilowatt-hour block of power.These are marketed as sponsorships:each household pays $3 monthly. Inreturn, 100 kilowatt-hours of theirpower consumption for the month isgenerated by wind.

Blades the size of jet wingsThe groundbreaking for the turbine

installations took place last Sept. 7, and

both turbines were dedicated less thantwo months later. The constructionwent quickly because, except for thefoundations, the parts, including thetowers, were prefabricated. Says Pars-ley, “It would have taken less time thanthat, except that the wind slowedthings down.” On some days, highwinds made it unsafe to operate thehuge cranes lifting the tower sections,generator assembly, and fiberglass tur-bine blades—each the length of a Boe-ing 747 wing—into place.

The turbines are far more sophisti-cated than the typical prairie waterpump. The mechanicals, including thegenerator and transmission, are hiddenin a sleek fiberglass housing, which piv-ots on the top of a giant steel tubemaking up the tower. Unlike the old


Though the vast majority of rural Americans have beensupplied with electric power for decades, a small minoritystill don’t have access. This is mostly because they live inareas too remote and sparsely settled (as seen below) tomake power transmission to their homes practical. Someof these areas belong to the Navajo Nation, on a vastreservation taking up parts of Col-orado, New Mexico, Arizona and Utah.

Traditionally, Navajos have lived inwidely scattered dwellings. Whilemany today have moved to towns andvillages, a large number of familiesand individuals still live far from eachother and from paved roads. Withpower transmission lines costing anaverage $30,000 a mile, many of thesehouseholds make do without any kindof electric power. A few use gasolinegenerators to power lights and small appliances.

So in 1994, when the Department of Energy offered agrant through the Western Power Administration to pro-vide a small number of individual solar power genera-tors, the Navajo Tribal Utility Association (NTUA) tookthe chance to offer electricity to households that hadnever had it before.

The grant was enough to pay for the purchase andmaintenance of 40 small photovoltaic generators, eachproducing only 200 watts. This is only about enough to

power a light bulb or two and a small transistor radio –not much more. Even so, a number of isolated home-steads found it worth the $40 monthly fee.

When it comes to solar power, the Navajos have anadvantage because the vast majority of their days havesunshine – often without a cloud in the sky.

The program was successfulenough that in 1999, the managementboard of the utility decided to autho-rize the purchase of 100 new, largerunits, using $1 million of the co-op’sown money. The tribal utility co-oppurchased 100 units built by Kyocera,each producing 640 watts – muchmore than the previous units, but stillnot a lot of power by the standards ofmost American households.

Simple devicesThe units are quite simple. A horizontal rectangular

metal frame provides a base on which are mounted apanel of photovoltaic cells, a box holding eight, 12-voltlead- acid batteries, and another box holding a controllerand an inverter. The later device converts the low-volt-age direct current put out by the batteries into 120-voltalternating house current. The photovoltaic (solar) cellsare mounted so as to face the sun in the middle of theday. They convert sunlight directly into electricity,

Isolated Navajos tap solar power

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prairie “windmills,” they do not use aweathervane-like tail to turn them intothe wind. Instead, hydraulics turn theturbine assembly, obeying a computerusing information from a small windvane mounted on top of the housing.

The same computer also takes con-stant note of the current wind speed,from an anemometer mounted next tothe wind vane. It adjusts the angle ofattack of the rotor blades for efficiencyand to keep the speed of rotation withinsafe limits. If rotational speed goes high-er than 19.2 rpm, centrifugally-operatedairbrakes automatically deploy from theends of the rotor blades. Should theymalfunction or prove insufficient to slowthe rotor in high winds, a large diskbrake mounted on the generator shaftcan smoothly bring the turbine to a halt.

The turbines are remotely monitoredusing telemetry that transmits windspeed, temperature, hydraulic pressures,rotational speed, and other importantdata, allowing their operators to keepconstant tabs on them without being onsite. They are built to survive windspeeds of up to 145 miles per hour withthe rotor stationary. The windmills beginproducing electricity at 6 miles per hourand reach their peak output at 33.5 mph.

While it’s too early to declare totalsuccess for the project, both Parsleyand Rebenitsch are optimistic. So farthe turbines have performed at, orabove, expectations. “It’s been anexciting project, and a lot of fun,”Parsley says. “One thing I enjoy ispeople’s reactions when they first seethe turbines. Often they don’t realize

the size of these things until they seethem in person.”

Meanwhile, wind technology ismarching on. Nordex is now takingorders for a monster wind generator withtwice the power output of each of thePrairie Winds turbines. Its rotor diame-ter will be half again as big: 300 feet.

Other wind turbine manufacturersare offering similar products. Increasesin economies of scale and other devel-opments in this rapidly advancing fieldpromise that costs will continue todecline, albeit gradually. Add theenthusiasm of many power customersand the Bush administration’s policy ofencouraging the use of renewable ener-gy sources, and it seems that wind tur-bines may be an increasingly commonsight in much of America. ■

which is collected and stored in the batteries. The generators are limited in size not only by cost –

photovoltaic cells are very expensive for their poweroutput – but by the need for portability. The roads overwhich they must be hauled are rudimentary, and theyare loaded on 16-foot trailers towed by four-wheel drivevehicles for the trips to the installation sites.

Despite these challenges, the new generators wereup and running by 2001.

NTUA charges a $95 per monthflat fee for the use of each 640-watt solar generator. So far, theyhave proven reliable, much liketheir smaller predecessors, ofwhich about 24 are still in use (thecompany that made the smallerunits has gone out of business,and parts are no longer available).

However, not all customers arehappy with them. Some complainof the cost — most of the users areon public assistance, and for them $95 a month is a steepprice to pay. Says Paul Denetclaw, who runs the pro-gram, “Some folks really like it, some think it’s too expen-sive. The ones that seem to appreciate it the most arethose who had a generator before, and had to keep itgassed up and serviced.”

Denetclaw says that young people who have livedwhere electricity is available are often disappointed whenthey find that the generator can’t supply enough power forall the appliances and electronics they are used to.

Overload problemsThe biggest problem with the units, says Denetclaw, is

that users sometimes overload them. When this happens,the batteries discharge faster than they can be rechargedby the photocells. Most service calls center around thisissue, even though the users are supplied with an indoormonitor that reveals the state of charge. “All we can do inthose cases is turn off the power and let the batteries

charge for a few days,” he says.Another problem stems from the

use of an inverter that supplies alter-nating current in square waves, ratherthan the rounded, sine waves pro-duced by conventional generatingequipment. Some modern electronicgadgets don’t function well on this kindof current. Light bulbs, on the otherhand, take either type current. NTUAprovides customers with informationon models of appliances that operatewell on the power from the solar units.

Despite the inherent limitations of the solar genera-tors, NTUA believes that their advantages outweigh theproblems in providing a necessary service for people whootherwise couldn’t have electric power. USDA Rural Utili-ties Service encouraged the co-op to apply for a low-interest loan to pay for more of the 640-watt generatorsand maintain them for 15 years. On Dec. 21, 2001, RUSapproved a loan of $4.8 million. Initially, NTUA plans todraw on $1.6 million to put new generators into service. ■

—Steve Thompson


By Carmi Lyon, Cathy Durham,Steve BuccolaOregon State University

Editor’s Note: The authors are agriculturaleconomists. Lyon is a former staff memberand Durham is the Markets and Trade Eco-nomics program leader at Oregon StateUniversity’s Food Innovation Center Experi-ment Station. Steve Buccola is a professor inthe Department of Agricultural andResource Economics at Oregon State Uni-versity. This article is the result of a researchproject funded by USDA’s Rural Business-Cooperative Service to explore issues relatedto exporting and importing high-valuedproducts by cooperatives.

ree Top, a Washington-based fruit processingcooperative, is pursuinga multi-faceted market-ing strategy that increas-

ingly is focusing on new technology,both as a marketing tool and means todevelop unique, value-added fruitproducts for the food ingredientsindustry. These and other efforts toincrease returns to the 2,000 grower-members who own the cooperativehave proven especially important dur-ing the past five years, as juice andpeeler market apple prices havedeclined sharply.

Much of Tree Top’s marketing suc-cess is the result of a state-of-the-artresearch and development (R&D) facil-ity, staffed with creative technicianswho work to develop specialty productsthat expand possible uses for fruit. TreeTop’s R&D employees often move lat-erally to other parts of the organiza-tion, such as sales, spreading a “prod-

uct-development mentality” through-out the cooperative. Richard Bailey,Tree Top’s chief financial officer, saysthe pilot plant at its headquarters inSelah, Wash., is state-of-the-art. TreeTop’s R&D unit has developed uniquemethods for drying and quality controland many special fruit ingredients usedby their further-processing customers.

The cooperative, established in1960, sells products across the entirerange of food product buyers: retail,Hotel-Restaurant-Institutional (H.I.),and other food processors, includingcereal-maker Kelloggs and the

Orowheat bread company. Tree Toppacks juices and applesauce in ready-to-consume form for retail and institu-tional distribution, concentrates forH.I. and other juice bottlers, and awide range of ingredients for furtherprocessing.

One of the co-op’s more ambitiousrecent product introductions is TreeTop packaged fresh apple slices for theretail market. The co-op introducedthe apple slices in a retail test market inJune 2001. However, at the request ofits member fresh-apple warehouses, thedistribution process was changed in

T h e B i g A p p l eNew products, added plant capacity play major role in Tree Top’s sales strategy

T

Apple juice is Tree Top’s best known product, but its state-of-the-art research and developmentfacility turns out a wide variety of other products, including fruit ingredients for the cereal andbaking industries. Photo courtesy Tree Top


January. Tree Top is now selling theslices directly to member warehouses.They, in turn, make the slices availableto their customers. Since both productsrequire refrigeration, Tree Top slicesare a perfect “traveling companion” forfresh apple shipments out of the PacificNorthwest.

Tree Top’s management is brokendown into a consumer packagedgoods division, which focuses onjuices for retail sale, and the ingredi-ent division, which provides special-ized processed apple products to oth-er food processors.

Tree Top’s members are primarilyapple producers that pack first for thefresh market and use the cooperative asan outlet for culls. Known to the publicfor its Tree Top fruit juices and apple-sauce, the company is the largestprovider of apple juice west of the Mis-

sissippi. It also produces a range ofproducts for further processing.

Tree Top earnings risedespite depressed market

The past five years have been a timeof struggle for the U.S. apple industry.Grower returns significantly decreasedfrom 1996 through 2001 due to severe-ly depressed tree fruit prices. In 1995-96, grower returns on juice and peelerapples were $193.80 and 209.63 perton, respectively, and $91.77 per tonfor processed pears. In the 2000/01processing year, juice and peeler applereturns were $61.73 and $91.08 perton, respectively, and processed pearreturns were $47.51 per ton. Theseprecipitous drops in grower returns aresolely due to the dramatic decline incommodity prices.

While coping with fluctuating sup-

plies and depressedprices, Tree Top man-aged to increase its prof-its per ton from $10.86for juice apples and$4.34 for pears in 1996to $18.80 and $7.52 in2001, an increase of 73percent for both com-modities in 5 years.Improved profits areattributed to a number offactors, including anability to maintain pricesfor its premium juiceproducts and increasedcategory sales due topromotions and overalllower prices. The abilityto achieve higher plantefficiencies due toincreased scale, andincreased productionallowing the company tore-enter world marketsfor bulk concentrate alsohelped it boost prof-itability.

Tree Top is maximiz-ing the efficiency of itsplants by processing morenon-member fruit prod-ucts, such as cherries, for

use in yogurt and other products. Theearnings of non-member business havebeen sufficient to satisfy the financingneeds of the cooperative. This hasenabled Tree Top to distribute all of itsgrower earnings in cash for the pastnine years.

Increasingly, international marketsare proving to be a major factor in howthe U.S. industry fares. Tree Top hasshipped apple products into more than50 countries in the past 20 years.While the domestic market is definitelyTree Top’s primary target, internationalsales have traditionally been viewed asa way to maintain and increase marketshare and increase sales quantities.

Chinese exports triggerU.S. trade action

Critical changes in internationalapple product markets have led Tree

Tree Top’s 2,000 grower-members depend on the fresh apple market for the majority of their income, with peeler and juice apples shipped to Tree Top providing an important secondary source of income. USDA Photo by Ken Hammond


Top to adjust its international salesfocus in recent years. World productionof, and trade in, apple juice and applejuice concentrate has expanded dramat-ically. A major force behind this trend isthe expansion of apple production inChina and that nation’s entrance intothe juice concentrate market.

In 1991, China surpassed the UnitedStates to become theworld’s second largest pro-ducer of apple concentrate(the Soviet Union was thenfirst). While U.S. produc-tion has remained fairlysteady and the UnitedStates is still the No. 2 pro-ducer, Chinese productionpassed the 20-million-met-ric-ton mark in 1999, morethan four times larger thanU.S. production.

China’s influence onthe world apple market isprimarily in its export ofapple juice concentrate.In 1999, low prices forChinese concentrateexports led the U.S.Department of Com-merce and the U.S. Inter-national Trade Commis-sion to file an anti-dumping petitionagainst China. Tree Top and otherindustry leaders backed this effort.The successful petition resulted in theimposition of a retroactive importduty (up to 50 percent of importprice) on apple juice concentrateimported from China into the UnitedStates. However, the duty rate actual-ly imposed has reportedly been con-siderably less than 50 percent.

While production has continued torise, the rate of increase has droppedconsiderably and China’s reported pro-duction area began to decline after1996. But its influence on domestic U.S.apple juice markets is likely to be impor-tant in the near future. Chinese appleconcentrate is still being exported to theUnited States, which also impacts U.S.prices due to its effects on world supply.

These developments in the worldjuice and concentrate markets have led

Tree Top to focus on the domesticmarket, where it has an advantage inmarket knowledge, transportation andbrand name recognition. However, itcontinues to ship juice and concentrateto overseas markets where demandexists. Tree Top does the shipping forthese products but uses brokers tohandle the sales.

The cost of exporting juice is anunderlying factor in Tree Top’s licens-ing its juice brand in France. SinceFrance is a major producer of applesand apple juice, it is not possible forTree Top to competitively price its ownjuice there. The licensing agreementprovides an opportunity to gain someincome while increasing internationalrecognition of the Tree Top brand.

Web site revolutionizesinternational marketing

Tree Top marketing efforts includetaking advantage of the World WideWeb. Its Web site, http://www.tree-top.com, is a sophisticated marketingsite with links to product-specificrequest forms and even a credit appli-cation. This marketing tool is provingto be especially effective in internation-al marketing efforts. Indeed, JohnTwomey, the co-op’s ingredients sales

marketing manager, says the Internethas revolutionized Tree Top’s interna-tional marketing.

The Web site makes the companyvisible to buyers all over the world andhas led to inquiries from places TreeTop would otherwise not have reachedthrough trade shows, such as the Mid-dle East. On a typical day in his office

at the cooperative’sheadquarters, Twomeyfields over 20 inquiriesfrom all points aroundthe globe.

Twomey estimatesthat in 1997, 80 per-cent of his sales leadscame via fax and 20percent by e-mail. In2000, nearly all hiscommunications wereby e-mail, with manypotential customerscoming to himthrough the Tree Topcorporate Web site.Twomey has not donea formal study of theefficacy of the Website. However, hefeels it has had a sig-nificant impact on the

number and quality of leads hereceives.

The home page provides three mainlinks: to company information, to con-sumer packaged goods and to theingredient division. The latter pagesprovide information on product linesand a description of processing meth-ods. The consumer goods page links torecipes and frequently asked questions;the ingredient division page links todescriptions of how Tree Top’s prod-ucts can be used as ingredients in awide variety of processed foods.

The company has also adopted aUniform Communications Standard,implemented through Electronic DataInterchange (EDI) to allow for a moreefficient exchange of business docu-ments, such as orders and invoices, ben-efitting Tree Top as well as its customersby improving information exchange andreducing transaction costs.

Packaged apple slices are one of Tree Top’s newest branded products. Photocourtesy Tree Top


Baking products market requires special strategy

Tree Top’s sales strategy for its cereal and baking ingredients differs

markedly from that used for its juices.With ingredients, the company has atechnological advantage and it isn’tconstrained by the high transportation

costs and thecommodity-likenature of thejuice concentratemarket. Tree Tophas positioneditself in theinternationalbakery and cerealingredient mar-ket as a high-quality producerthat sells techni-cal service alongwith the physicalproduct.

Twomeyworked as super-intendent ofTree Top’sWenatchee,Wash., plantbefore becomingregionalsales/servicemanager in theingredient divi-sion. He says toprevent Tree

Top’s products from being viewed sole-ly as a commodity, technical service tocustomers is crucial. He routinelyworks with cereal manufacturers, bak-ers and others to develop specific prod-ucts that meet their individual require-ments. For example, he helped tocustomize a flavor formulation for afood processor in Russia, fashioningpineapple- and melon-flavored applepieces that are specifically targeted toRussian tastes.

The broad range of activities inwhich Tree Top is engaged – retail,H.I. and ingredient products, in bothdomestic and international markets –clearly follows from its strategy:“accommodating as much memberfruit as we can profitably sell, ” as stat-ed in the 1999 Tree Top annual report.Tree Top continues to adapt to therapidly changing domestic and interna-tional market by developing new prod-ucts and improving old ones, imple-menting new marketing andcommunications technologies andworking closely with customers. It hasfound success in developing productsthat are less vulnerable to commodityprice swings and achieve a better returnto members’ raw product and will con-tinue to pursue that strategy in theyears ahead. ■

Tree Top has recently followed an aggressiveexpansion path, buying three existing businesses toexpand its core processing base to seven plants. Inthe 2000-01 fruit year, Tree Top received 533,000 tonsof fruit at five plants in Washington and one plant inOregon. The seventh plant, in California, bottles juicefor the large Southwest market. Tree Top has a totalworkforce of 1,300.

With the three new plants, the co-op’s total assetsincreased by $46 million, to $218 million. The acquisi-tions were financed principally through long-term debt.The new plants provide Tree Top with additional capaci-ty to process juice, applesauce and frozen products.

Tree Top’s members (growers from Washington, Ore-gon and Idaho) had $51.9 million in equity invested in the

cooperative in 2000, accounting for 36.3 percent of itsassets. The Tree Top equity program provides for a 7-year retirement. In 2000, nearly $2.18 million in memberequity was retired.

For the past 9 years, all profits generated by Tree Tophave been returned to the growers. All allocation certifi-cates have now been repaid.

Tree Top’s board approves all capital acquisitions.Capital spending decisions are framed by the criteria of“very high returns” and those required by regulationsand prudent business practices. The board of directorsis made up of 12 member-growers elected by the mem-bership. The board oversees policy and grower rela-tions, compensation issues, investment and finance, andaudit issues. ■

Three new plants boost productionUS

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By Peerapon Prasertsri,Graduate Research AssistantRichard L. Kilmer, ProfessorUniversity of Florida, Gainesville

Editor’s Note: This article is based onresearch conducted by the University ofFlorida under a cooperative agreementwith the Rural Business-Cooperative Ser-vice of USDA Rural Development.

n 1992, firms in

food retailing

became aware of a

major new competitor: Wal-

Mart. Wal-Mart arrived on

the food-retailing scene with a

very cost-efficient inventory,

warehouse and trucking sys-

tem that allowed it to reduce

operation costs by 5-percent-

age points below the food

retailing industry average. In

reaction to Wal-Mart, super-

market chains (through their

trade associations) started an

initiative called “Efficient

Consumer Response” (ECR),

the objective of which was to

design a more efficient food-

delivery system.

The efficiency of this system is nowaffecting milk marketing cooperatives.Milk processors, milk marketing coop-eratives and dairy farmers need toimprove their cooperation. They alsoneed to be aware of how the action ofeach member of the vertical marketinfluences the business operation ofthe others.

A major function of a milk-market-ing cooperative is transferring and bal-ancing the supply and demand of fluidmilk from dairy farmers to milk proces-sors. Farmers and processors want milkcollected and delivered on a well-timedschedule. It is the cooperative’s task toensure that the milk routing and sched-uling are performed efficiently toimprove coordination among farmers,the cooperative and milk processors.

This study focused on a state wheremost milk production is shipped to thefluid market, going directly from farmto private bottling plants in tankertrucks. The only storage the coopera-tive provides is on the tanker, and thusthe logistics of operating a goodtanker-transportation network is evenmore critical than in most other states.Delivery routes and schedules havebeen honed to a fine science here. Butcould they be doing even better?

A case study of a dairy cooperative’smilk hauling operation was the basis forthis article. Data was gathered for thefarm-to-plant routing algorithm; themost efficient routing system for thecooperative was determined, as was thecost reduction from the most efficientrouting system with the current routesoperated by the cooperative. Sensitivityof the most efficient set of routes toimported milk procurement, changes in

the dairy farm pick-up schedule andchanges in the processing plant deliveryschedule were also examined.

Routing complexityRouting and scheduling are impor-

tant activities for distributing highlyperishable agricultural commodities inthe vertical-market system. This isespecially true for fluid milk, whichrequires virtually instantaneous trans-portation from producers to processingplants to maintain product quality.

The routing and scheduling prob-lem is very complex. As the number ofproducers and processors increase, sodo the possible ways to route andschedule trucks. The problem increasesin complexity when farm and process-ing plant time windows are added.Routing and scheduling software, suchas ArcLogistics Route 2 (ALR), havebeen developed to help solve the prob-lem. ALR seeks efficient routes byusing data about farms, trucks and pro-cessing plants in its street and road net-work database.

Truck-scheduling data were providedby the study cooperative for the periodof October 3-9, 1999. The benchmarkrun was the actual milk collection anddelivery routes used by the cooperative.The cooperative had a scheduled pick-up time for each farm and a deliverytime schedule for each plant. A plus-or-minus 30-minute processing plant timewindow was included in the benchmarkmodel, with no farm time window. Incontrast, the alternative run was routedand scheduled by ALR with a plus-or-minus 30-minute processing plant timewindow and a plus-or-minus 2-hourfarm time window.

T h e l o n g h a u lIs your co-op’s farm-to-plant milk hauling optimal? This case study shows factors that can impact efficiency

I


The number of miles and the num-ber of time window violations (a timewindow is violated if a truck visits afarm or processing plant before orafter its time window) are two keyresults examined. The number of milesis directly related to the cooperative’scost of scheduling and routing milesfrom producers to processors. Thenumber of time window violations(number and hours) implies the time-schedule performance of the coopera-tive’s dispatchers.

Fewer farm time violations improvethe satisfaction level of milk producers.The processing plant managers aremore satisfied with lower processingplant time window violations. Thebenchmark and alternative runs wereperformed and compared in all of thecooperative’s six service areas.

Plotting cost savingsThe total mileage reduction

between the benchmark and alternativeruns range from a low 0.74 percent forthe Service Area 1, to a high 14.01 per-cent for the Service Area 2. For all ser-vice areas, 3.36 percent (5,726 miles) oftotal mileage was eliminated by thealternative run when compared to thebenchmark run. Based on $1.29 permile, the cost savings corresponding to

mileage reduction in all service areaswas $7,387.26.

One reason for the differentmileage reductions might be thenature of the service areas. More mul-tiple-stop routes allow for more com-binations in the route constructionprocess, which has the potential formileage reduction. For example, mostfarms in Service Area 1 (96.9 percent)provided a full load of milk for eachtruck. Thus, more than 95 percent ofthe trucks in this area made only onestop. The mileage reduction betweenthe benchmark and the alternative runwas 0.74 percent.

For Service Area 2, which had thehighest mileage reduction (14.01 per-cent), only 53.2 percent of the totalroutes were one-stop routes. In otherwords, the more multiple-stop routes,the more potential mileage reductions.

However, these findings were mixedin Service Areas 5 and 6, where there isno direct milk-load delivery from dairyfarms to processing plants. All trucks inthe these two service areas returned totheir terminals after completing thepickup process; there were no timewindow restrictions, unlike with theprocessing plants. Service Area 5adhered to the correlation between themileage reduction percentage and the

percentage of multiple-stop routes;Service Area 6 did not.

Schedule violationsimpact efficiency

The hours of plant time windowviolations and the total number oftime window violations are importantcomponents of overall dispatchingefficiency for moving milk to milk-processing plants. The reduction inhours of plant time window violationsbetween the benchmark and alterna-tive runs was 83.71 percent for all ser-vice areas. The reduction in the num-ber of plant time window violationsbetween the benchmark and alterna-tive runs was 55.20 percent for all ser-vice areas.

The reduction in hours of farmtime window violations between thebenchmark and alternative runs was98 percent for all service areas.Meanwhile, the reduction in thenumber of farm window violationsbetween the benchmark and alterna-tive runs was 95.69 percent for allservice areas.

Sensitivity analysis shows how theresults change if some constraints arerelaxed. Results from sensitivity runswere compared with those from theoriginally constrained alternative run.

Timely milk pick up and delivery is a crucial cost factor for most cooperatives. USDA Photo by Ken Hammond

In the first case, the sensi-tivity analysis results involvingimported milk indicates littleeffect (less than a 0.4 percent-age reduction in all categories)on the transportation systemresulting from inclusion of theimported milk loads. In thesecond case, the reductionbetween the alternative andsensitivity runs was 3.25 per-cent for mileage and 69.49percent in hours of plant-timewindow violations.

Mileage reductions weresmall, while plant time windowreductions were large. Thisindicates that if the coopera-tive were allowed to pick upmilk loads without farm timewindow restrictions, the pro-cessing plant time window vio-lations would be reduced byalmost 70 percent. Moreover,results from the third sensitivi-ty run (no farm and plant timewindow constraints) showedlittle further improvementfrom the second sensitivity run (lessthan a 0.5 percentage reduction inmileage and total used time.).

Case study routes rated “efficient” This case study concluded that the

co-op’s current truck routes are effi-cient. The route mileage could only beimproved by 3.36 percent (5,726 miles)for a saving of $7,387.26. This is a lowsavings rate when the cooperative’sactual mileage is compared to the actualroute mileage (as determined by a soft-ware package that does not include allof the real-world uncertainties encoun-tered by the cooperative drivers).

Even though all service areas takentogether are efficient, Service Areas 2, 4,5 and 6 have routes that may be reorga-nized to reduce route mileage and routetime. They have the lowest percentageof one-stop routes and the largestreductions in route mileage between thebenchmark and alternative runs. Routesin these four areas need to be re-evaluat-ed and possibly reorganized.

Processing-plant time window viola-

tions and farm time window violationsfor the alternative runs in all serviceareas imply a disparity between whenmilk is available from the farm andwhen the processing plants need themilk. Processing-plant time windowviolations (56) represent 6.46 percentof all loads. This means that 6.46 per-cent of the loads were not on time.

For farm time window violations,1.38 percent of farm pick ups were noton time. These violations occurredwith time windows that were 1 hour(the scheduled time of delivery plus-or-minus 30 minutes) and four hours (thescheduled time of pick up plus-or-minus 2 hours) in length at the process-ing plant and the farm, respectively.

There is no way to meet all theplant-time window requirements andfarm-time window requirements withthe current time windows. To increasethe ability to pick up loads from farmsand deliver milk loads to plants with thecurrent delivery schedule would requirean adjustment in farm and processingplant time windows.

Adding the 4-hour timewindow to the scheduled farmpick-up time in the alternativerun significantly reduced thenumber of time window viola-tions (470 to 19 for farms and125 to 56 for processingplants) and the violation hours(427.40 to 7.71 hours forfarms and 287.33 to 46.81hours for processing plants)for farms and processingplants compared to the bench-mark run. An adjustment intime window length at thefarm level not only reducedthe time window violations atthe farm level, but also at theprocessing-plant level.

Increasing the time windowlength also reduced the totalroute time for all service areasby 4.88 percent, or $4,095.88,and the total route miles by3.39 percent (5,726.56 miles),or $7,387.26 for the seven-dayperiod.

Schedule modification could help in some areas

The implications point to schedul-ing as the over-riding problem, andthat modifications in the currentschedule could improve efficiency insome smaller service areas. Currentfarm-to-plant scheduling does notallow direct farm-to-plant deliverywithout delays.

An efficiently routed and scheduledtransportation system reduces mileageand route time. Adjusting the timewindows and/or the scheduled pickupand delivery times reduces the totalcost and time of moving milk fromthe farm to the processing plant.Areas with multiple-stop routes pos-sess the potential for more routeimprovements than areas with mainlyone-stop routes.

What is done at one level of the ver-tical market system has an impact onother levels of the system. To improvevertical coordination, processors, farm-ers and cooperatives must know howtheir actions influence each other. ■



By Perry Letson

Editor’s Note: Letson is assistant vice president for communi-cations at ACDI/VOCA, a nonprofit international economicdevelopment organization which is an arm of the U.S. farmercooperative community. For information on ACDI/VOCA, or tovolunteer for service overseas, go to www.acdivoca.org, wherecurrent volunteer assignments are listed and candidates canapply online, or call (800) 335-8622.

he U.S. foreign-assistance program empha-sizes cooperatives because its architectsunderstood the important role co-ops playedin developing rural America. Not only docooperatives enhance the bargaining power of

producers and increase farm efficiency and income, theymake important contributions to civil society. They influ-ence the self-help approach farmers take to problem-solv-ing, reinforce grassroots democracy and, ultimately, buildcommunities.

The East African nation of Ethiopia is benefit-ting from America’s international cooperativedevelopment work. More than 80 percent ofEthiopians work in agriculture and livemore than a day’s walk to the nearestroad. Farms here are small andmargins tight. Cooperatives canbe a valuable asset in provid-ing services and supplies tothese farmers.

Ethiopia is a likelyplace for a new visionof co-ops to take holdfor reasons otherthan demographics.Because of conflictswith neighboringstates as well as internaldisruption, Ethiopia’speople desperatelyneed the societal gluethat co-ops can helpprovide. Yet despite

the on-paper existence of 4,052 agricultural cooperatives inEthiopia, with a membership of 4.5 million people, small-holder farmers do not always enjoy the benefits of moderncooperatives. Ethiopian farmers are still largely under-served, exploited and marginalized.

Ethiopia’s checkered co-op historySelf-help cooperative community groups have been part of

Ethiopian peasant life for centuries. During the rule of HaileSelassie I in the 1960s, the government began promoting West-ern-style co-ops, but ran up against an unwieldy land tenuresystem and inadequate marketing and manpower resources.

After the revolution of 1974, cooperatives took on a social-ist cast. They became vehicles for farm collectivization andacted as extensions of the government, which set prices andestablished quotas. Many smallholder farmers had to buygrain on the parallel market at high prices and sell to the gov-ernment at lower, fixed prices. Corruption and mismanage-ment were standard features of the co-ops, which also

became a recruiting ground for soldiers to fight inEthiopia’s increasing internal conflicts and the

war with Somalia.It was not an era in which modern co-ops

could thrive. Werqu Mekasha,ACDI/VOCA’s country director in

Ethiopia, who holds a Bachelor’s degreefrom Purdue and a Master’s fromNebraska, spent 8 years in a commu-nist prison without ever beingcharged with a crime. He was sus-pected of sedition because he waseducated and worldly.

Faced with civil unrest and eco-nomic decline, a new “Mixed Eco-nomic Policy” was announced in1974 by the government, and withinweeks the cooperative structurecame crashing down. Offices werelooted and disbanded. Collectivelyowned land was redistributedamong peasants.

ACDI/VOCA’s Tewodros Fes-seha remembers the challenge:

The coffee beans harvested by this Ethiopian woman will be marketedthrough the Oromia Coffee Farmers Cooperative Union, which is adirect exporter of its members’ coffee. Photo courtesy ACDI/VOCA

T h e r o a d u pFree-market reforms fuel growth of Ethiopia’s co-ops

T


“The legislaturethought cooperativeswere communist, thefarmers thought theywere governmentalentities, and the pro-fessionals were con-vinced that they justwon’t work.”

Democracy revivescooperatives

Now, Ethiopia ismoving toward a moredecentralized and mar-ket-oriented economy.The government rec-ognizes the impor-tance of privatizingbusiness and rehabilitating agriculture. It is promoting busi-ness-oriented cooperatives, based on farmers’ needs andfounded on principles of voluntary participation, privateownership and democratic decision-making. As in the Unit-ed States, the government has created an enabling environ-ment for the development of modern, farmer-owned andfarmer-controlled cooperatives.

ACDI/VOCA, with funding from the U.S. Agency forInternational Development (USAID), is helping tobuild the capacity of Ethiopia’s farmer cooperatives.This Washington, D.C.-based, nonprofit interna-tional aid organization is an affiliate of the NationalCouncil of Farmer Cooperatives and the Farm CreditCouncil. It is working to empower the small farmersof Ethiopia to form competitive, profit-oriented andprofessionally managed input supply, marketing andcredit cooperatives.

Under the Farmer-to-Farmer program in the mid-1990s, ACDI/VOCA carried out training in coopera-tive management, credit, marketing and finance. As aresult, in the 1995-96 growing season, co-ops nearlydoubled their rate of short-term loan repayment toEthiopian banks, from 50 percent to 98.5 percent.And, best of all, dividends were paid to members forthe first time in Ethiopian cooperative history: 25,000farmers received an average of $10.44. While thatamount would be insignificant to a U.S. farmer, thefact that a dividend was paid at all to these poor farm-ers is extremely significant.

As one farmer who received a dividend put it,“Cooperative members in the past were forced to selltheir farm products at low prices on a quota systemand give their sons and daughters for the war in thenorth. But today you are giving us a dividend for theproduct we sold to the cooperative. According to ourtradition, we simply say to you, God bless you.”

Today, Ethiopia’s co-ops areoperating with varying degreesof efficiency. Their ability tomaximize member profits is lim-ited by their small size and lackof purchasing and marketingclout. They typically do not pos-sess the management skills andorganizational structures neces-sary to realize their full poten-tial, nor do they enjoy the pur-chasing and marketingadvantages or economies of scalethat could be realized throughthe integration of small-scale co-ops into larger business partner-ships. But, thanks to U.S. assis-tance, things are looking up.

CUP runneth overIn 1997, the USAID mission in Ethiopia approved a pro-

posal from ACDI/VOCA to launch the Cooperative UnionProject (CUP). The purpose of CUP was to test the premisethat primary cooperatives consolidated into unions wouldcreate the bargaining power, management capacity andeconomies of scale to solve market access and efficiencyproblems that primary cooperatives on their own could not.

Last summer, ACDI/VOCA hosted a group of Ethiopian cooperative leaders andlocal officials who came to the United States to gain a greater understandingof what makes some of our cooperatives successful. Here they are learningabout forage crop management from Pennsylvania dairy farmer Titus Martin.They also learned about co-op management structure, marketing strategiesand bookkeeping practices. Trainees returned home energized and armed withnew tools to build up their own cooperative system. Photo courtesy ACDI/VOCA

The Romanat Cooperative supplies farmers with consumer goods, fer-tilizer and chemicals. It also provides grain storage and processingservice. Photo by Galen Rapp


With ACDI/VOCA assis-tance, the newly formed LummeFarmers’ Cooperative Union inEast Shewa, the first of its kindin Ethiopia, initiated a competi-tive bidding process, whichreduced the price of fertilizer toall cooperatives in the district by$175,000. ACDI/VOCA alsoprovided advice on proceduralissues, accounting and recordkeeping. Co-ops in other dis-tricts subsequently formed buy-ing groups to replicate the bid-ding process used in Lumme. Asa result, the price paid by small-holders for fertilizer has beenreduced by $4 million. Lummealso introduced tractor service tomember co-ops initially purchas-ing two tractors from a localassembly plant.

The original Lumme Unionhas since expanded to includeanother district, Adama, and hasnow become the Lumme-Adama

ACDI/VOCA volunteer Ron Atkinson, far right, has been on seven ACDI/VOCA missions, includingone this past summer to Ethiopia, where he trained 20 extension agents, whom he says were“eager to learn.” Photo courtesy ACDI/VOCA

The U.S. government recently issued a plan thatemphasizes overseas cooperative development in orderto improve living conditions in impoverished nations.The plan was issued under the Support for OverseasCooperative Development Act.

“The plan is the most significant cooperativedevelopment event in 40 years,” says Ted Weihe,executive director for the U.S. Overseas CooperativeDevelopment Council (OCDC). The boost, he says,comes from the Bush administration and Congress,which want to “scale up and expand cooperative pro-grams to solve new problems in the post-Sept. 11world.” U.S. cooperatives are deeply engaged inassisting Islamic countries and introducing grass-roots democracy to counter extremist forces (a goalhighlighted by President George W. Bush in his Stateof the Union address).

Cooperatives can help bring stability, economicdevelopment and democracy to the post-Sept. 11world, according to Senator Chuck Hagel of Nebras-ka, a principal sponsor of the legislation. “USAIDcan tap cooperative methodologies to bridge ethnicand sectarian differences to build communities in

areas that are rife with conflict,” he said.About 20 years ago, U.S. cooperative development

programs were funded with about $23 million. Today,these programs are funded with $200 million to deliverservices in 62 countries.

The plan calls for U.S. cooperative developmentorganizations to:

• Test new cooperative solutions to help rebuild com-munities in East Africa devastated by the HIV/AIDSpandemic;

• Seek better understanding and methods to adaptWestern cooperative approaches to emerging-market countries;

• Target assistance to local co-ops to achieve greaterscale and impact;

• Strengthen networks of co-ops to solve multipleeconomic and social challenges and advance co-ops that specialize in agriculture, finance, and com-munity infrastructure and services;

• Develop new analytic tools for gauging the strengthsand weaknesses of co-ops to better promote themwith multilateral institutions to reach areas that can-not attract private investment capital. ■

Co-op development: a tool to promote democracy, self-reliance


Cooperative Union, serving 12,000 farmer members.Expanding from two to seven tractors, the union now pro-vides tractor service to a wider membership and to non-members on a fee basis in order to increase the businessbase. Also, four new district-level cereal cooperativeunions similar in size and scale to Lumme-Adama havebeen established.

The Lumme-Adama union has also bought and storedgrain from primary cooperative members. Extensive trainingin cooperative management has been given to union managersand staff, and to local cooperative members. All four unions, aswell as 24 primary societies, have hired professional managers

ACE projectOnce the cooperative union concept proved successful,

USAID approved a 5-year plan to expand it to the country’sfour major production regions. ACDI/VOCA’s current pro-ject, called Agricultural Cooperatives in Ethiopia (ACE),was launched in September 1999. It seeks to increase pro-

ductivity, reduce food insecurity and enhance rural incomesthrough the establishment of competitive, profit-orientedand professionally managed cooperatives.

Activities include: ■ strengthening the capacity of regional cooperative

offices and bureaus;■ increasing the bargaining power of cooperatives;■ increasing the membership and participation of women

in cooperatives;■ increasing environmental awareness and improving nat-

ural resource management at the farm level;■ upgrading the skills of cooperative members and man-

agement, the staff of the cooperative promotionbureaus, educators and support professionals enablingthem to develop, manage and support sustainable orga-nizations, and

■ diversifying and broadening services and products.The focus is on smallholder farmers in the Oromia,

Tigray, South and Amhara regions. Besides working with

By Galen Rapp

Editor’s Note: The author recently retired from hispost as a cooperative education and development spe-cialist with USDA Rural Business-Cooperative Service.Prior to that, he was a business and management con-sultant for local grain and farm supply cooperatives.

Despite language obsta-cles and a changing legalsystem, a budding group ofAfrican cooperators nowhave a stronger educationalfoundation on which to buildcooperatives that can helpfeed a hungry, impoverishednation. Helping them in thiseffort are volunteers withACDI/VOCA.

I made my first visit toEthiopia and other Africannations last year on a co-opdevelopment mission forACDI/VOCA, although I’dbeen on other foreign mis-sions with USDA. The taskthere is daunting and theneeds of the people are great. Ethiopia is one of thepoorest countries in the world. As many as 4.6 millionpeople need food assistance annually. Less than 15 per-

cent of its land is suitable for cultivation. Eighty-fivepercent of the population lives in rural areas.

Ethiopia’s agricultural sector suffers from droughtand poor cultivation practices as well as lack of organi-zation. Soils that were tilled by oxen for centuries haveresponded with increased yields from tractor-poweredplowing. The limited number of tractors are primarily

owned by regional coopera-tives, which should help toplace more acres into pro-duction in coming years.

Crash course in cooperativebasics

I participated in a 3-weektraining mission for 21 gov-ernment co-op specialists ata school near Mekele. StevenJohnson, corporate attorneyfor Norbest Cooperative ofMidvale, Utah, focused oncooperative organization.Rich Perline, a technical advi-sor for ACDI/VOCA, coveredrural finance and credit whileI taught marketing and pur-chasing.

Most of the students stayed at the school, whichincluded a computer center. Some traveled 4 days toreach the school. They were chosen for leadership

Ethiopian co-ops help farmers transition from ox-power to tractor-power

Ox power is still common in Ethiopia. The limited numberof tractors available in much of the country are largelyowned by regional cooperatives, which are using them tohelp their members put more acres into production. Photoby Galen Rapp

primary co-ops, ACE is assisting in theestablishment of 27 secondary level com-modity-specific unions. They will allowmembers to take advantage of economiesof scale in purchasing and marketing andwill provide focal points for organiza-tional activities, particularly training.

This is a large-scale effort. Workingwith nearly 400,000 farmers, ACEfocuses on training at all levels of thecooperative community, from farm own-ers, cooperative directors and managersto government and union managementstaff. Training and technical assistancewill be provided to 285 primary cooper-atives to strengthen their operations,and nearly 2,000 cooperative boardmembers and staff will receive manage-ment training. Personnel of the regional

skills, education and geographical location. All had lim-ited English conversation skills, so it took four of themwith advanced training to act as interpreters. To sup-port the program, students received an array of coop-erative booklets published by the USDA Rural Busi-ness-Cooperative Service. Other copies of thesepublications were supplied to regional libraries asresource materials.

Recent changes in Ethiopia’s cooperative lawmade it necessary to educate the governmentemployees about the new law and cooperative basics.Although patterned after similar U.S. legislation, theEthiopian law significantly differs in the area of gover-nance. It provides for committees to exercise certaincontrols vs. the more direct control exercised bycooperative boards in the United States. So trainingdirectors there in U.S.-style cooperatives didn’t nec-essarily meet the tenor of the Ethiopian cooperativelaw, but it did provide basic background in coopera-tives and their operation.

Marketing and purchasing in a competitive economy,as in the United States, offers different strategies than acommand economy. Teams were assigned to four classprojects focused on developing a strategic marketingplan. Despite language difficulties and the introductionof new terms, the plans they developed were excellent.

Long- and short-term goalsThe immediate need in Ethiopia is to help organize

local farmer cooperatives and, subsequently, region-al co-ops so that they conform with the 1998 law.They also need assistance in the recovery of short-

ages and farmer debts owed to the cooperatives.The long-term strategy is to enable these regionalsto provide additional agribusiness services and pro-cessing facilities and strengthen the locals and theirfarmer members.

The Tigray Regional Cooperative Promotion Bureauhas 128 employees, 39 of them involved in cooperativedevelopment. It trains farmer directors, offers manage-ment improvement techniques and supports the devel-opment of cooperatives. Each employee is assigned aspecific area in each region. Tigray is the northernmostof the 11 semi- autonomous regions in Ethopia. Lessthan 20 percent of its 31,000 square miles are tillablebecause of the rocky terrain.

The Romanat Cooperative, near Mekele, is a localcooperative that serves farmer members in a seven-mileradius with consumer goods, fertilizer and chemicals. Italso provides grain storage and processing services. Anew grain-storage facility was recently completed.Grain is stored in 100-kilo bags, which move from thefarm to the cooperative on donkeys and from there bytrucks to urban markets. Export sales are limitedbecause Red Sea shipping ports were lost during a bor-der conflict with Eritrea.

The challenge facing Ethiopian farmers is huge,and—given the economic conditions there – organizingcooperatives is a difficult and complex undertaking.But the people we worked with seem committed tobuilding a cooperative foundation that can offer betterfuture for Ethiopians. I found the experience rewarding,and urge others to consider volunteering for anACDI/VOCA mission. ■

The Oromia Coffee Farmers’ Cooperative Union, launched in June 1999,received permission from the government to become a direct exporter of itsmembers’ coffee, bypassing the central auction and giving more control andmarket share to producers. With ACDI/VOCA assistance the union – whichrepresents 21,891 coffee growers – last year exported 144 tons of coffee andis developing partnerships with key players in the specialty and gourmetcoffee markets.

For ACDI/VOCA’s Werqu Mekasha, the greatest experience of his lifetimeof work in Ethiopian agriculture is “to see, for the first time in Ethiopia, thedirect export of smallholder-grown specialty coffee to Europe and Americawithout exploitation by coffee merchants.” ■

Co-op finds success in gourmet coffee market


agricultural cooperativebureaus will acquire the skillsto extend improved manage-ment techniques to unions andcooperatives.

Until now, farmers have hadlittle access to credit to fundcrop marketing activities, butwith USAID support the ACEprogram has enticed a privatecommercial bank to enter intoa loan guarantee program.Using USAID funds to guaran-tee 50 percent of net losses, theBank of Abyssinia has made$625,000 in local currencyavailable to cooperative unionsto purchase grain from theirmember cooperatives for latersale. This has boosted the bar-gaining power of the unions,which can now pay dividends totheir member cooperatives.ACE will also help set up 27saving and credit cooperativesand, eventually, a national fed-eration of cooperatives.

“The bureau, supported byACDI/VOCA and withUSAID funding, is revolu-tionizing the cooperativemovement in Ethiopia,” says Zerihun Alemayehu, head ofthe cooperative promotion bureau in the prime minister’soffice. “Cooperatives under the previous regime werecharacterized by mismanagement, corruption and embez-zlement. Farmers were exploited and marginalized fromtheir efforts. The new model cooperatives currently beingpromoted by the government and ACDI/VOCA aredemocratic, business-oriented and professionally managedwith increased income to member farmers as the primaryobjective.”

U.S. volunteers keyMuch of ACE’s work will be carried out by 175 U.S. vol-

unteers on short-term ACDI/VOCA assignments. (SeeGalen Rapp’s account of his volunteer service in an accompa-nying article.) Many ACDI/VOCA volunteers are membersor employees of U.S. agricultural cooperatives and farmcredit banks. Beyond applying their practical skills revolvingaround organization and information, they are demonstratingtheir personal concern and are injecting hope and a valuablecooperative spirit.

One of them is farm management specialist Ron Atkin-son, a veteran of six ACDI/VOCA assignments, whotrained 20 extensionists in Ethiopia this past summer. “I felt

better about this assignmentthan just about any of my oth-ers because the participantswere so eager to learn,” he says.“They were attentive, showedup on time and couldn’t wait totackle the case studies.” The 20trainees will in turn train othersin order to multiply Atkinson’scontribution.

He reflected, “These farmersface a challenge because of thescale of their farms. About theonly way they can make it is bybanding together to createsome sort of volume. Theyseem eager to do that whenprices are low, such as in today’scoffee market. The trick will beto keep the union going whenprices improve.”

The 2001 Cooperative Agri-culture International VolunteerAward, presented by theNational Council of FarmerCooperatives and ACDI/VOCA, was won by ProfessorDoug Bishop of Bozeman,Mont. Since his retirementfrom Montana State University,Bishop has engaged in what

seems like a regular commute to Ethiopia, going eighttimes to develop curriculum and teach cooperative organi-zation and management. His manual on co-op structureand management (developed in part with materials fromUSDA’s Rural Business-Cooperative Service) is the essen-tial text for Ethiopia’s cooperative promoters. He has alsohelped to revise the curriculum at Ethiopia’s CooperativeInstitute, which will be a critical resource base for sustain-ing the cooperative movement.

Bishop’s contributions have gone beyond the terms of his2-3 week assignments. After each visit, he remains in contactwith the host organization in Ethiopia and he has sent hun-dreds of documents, videos and books to reinforce his work.ACDI/VOCA’s Werqu has described Bishop as “being com-pletely in tune with the culture of the country.” In fact, Bish-op’s son adopted an Ethiopian baby, and now the fate of a far-away nation has become a family affair.

ACDI/VOCA’s project has given Americans the oppor-tunity to take co-op reform and development in Ethiopiapersonally and to share our success. Ethiopia, a nationwith a recent history of difficulty, but one blessed withextraordinary beauty and talent, has made an important,and so far rewarding, commitment to the cooperative formof business. ■

A display of Ethiopian coffee varieties at a trade show. Photocourtesy ACDI/VOCA



Editor’s Note: Upon reaching milestone anniversary, many coopera-tives commemorate the event by publishing a history of the cooperative.Blue Diamond Growers, a Sacramento, Calif.-based cooperative ofabout 4,000 almond growers, recently published an award-winninghistory book. The following article discusses the project and may provideideas for other co-ops considering such an undertaking.

ackground on co-op and history project: Incelebration of its 90th anniversary, Blue Dia-mond Growers—one of California’s most suc-cessful farmer-owned cooperatives—decided topublish a pictorial and narrative history of the

cooperative and the industry that it helped build. The two-year project produced “The Almond People,” a 200-page, four-color book that was presented to members who attended thecooperative’s 90th annual meeting in Novem-ber 2000. Copies were also sent to the newsmedia, customers, suppliers, government offi-cials and friends in the almond industry.

The board of directors approved the projectin 1998. “This first-ever history of our coopera-tive tells a fascinating story of vision, courageand determination,” says Board ChairmanHoward Isom, an almond grower who also runsan accounting business near Chico, Calif. “Thatstory began in 1910, when a small group ofalmond growers formed a cooperative to wrestcontrol of their crops from unscrupulous buyerswho for years had denied them a fair return.They succeeded in spite of difficult odds andbuilt not only one of the world’s most successful farmer-ownedcooperative, but also an important new industry in America.

Why produce a co-op history? Isom says today’s grow-ers sometimes lose sight of the important roles that process-ing and marketing cooperatives play in the farm economy.“We tend to forget the reasons behind the formation of ourestablished institutions,” he notes. “And when we do, weinvite history to repeat itself, often to the detriment of thegrower. We hope that in reviewing how Blue Diamondworked for better grower returns, developed new productsand markets, and gave almond growers an effective voice ingovernment and the media, younger members will better

understand the importance of cooperative marketing to theirlivelihoods.”

Target audiences: “The Almond People” reaches out toaudiences beyond the cooperative’s membership, says SusanBrauner, the co-op’s public affairs director, who initiated andoversaw the project. “The book does more than preserve andcelebrate Blue Diamond’s history among our growers. It alsoinforms and motivates our employees and gives our customersand suppliers new appreciation of our long-term value tothem,” she says. “We believe that as government officials, oth-er almond industry representatives and the news media readabout the cycles that this industry has experienced over ninedecades and the role that Blue Diamond played in stabilizingprices and markets, they will better appreciate the value of a

strong cooperative in a commodity business.”In short, “The Almond People” serves as

another effective tool in Blue Diamond’slong-term program of building greaterunderstanding and appreciation of the impor-tance of farmer-owned cooperatives in Amer-ica’s economy, says Brauner. It serves as back-ground and as a reminder, and as a valuedresource for future generations.

How the project was conducted: The his-tory project got underway in 1998 whenBrauner contracted with Gray Allen, localwriter and photographer, to develop a produc-tion plan and budget. Research and writing

began immediately after the board approved the expense, andcontinued through most of 2000. Allen scoured company files,local libraries and archives for early-day photos of almond pro-duction. He also interviewed Blue Diamond officials (past andpresent), toured facilities, and obtained copies of companyrecords. He advertised in the co-op’s member magazine forgrower reminisces, and received several batches of notes andphotographs from the early days of the cooperative. He wove inhistorical references to the origin of the almond, its uses androle in the diets of ancient societies. A historical time-line runsthroughout the book to place Blue Diamond’s growth anddevelopment in the context of world history.

C o - o p h i s t o r y b o o k s s h o u l dt a r g e t b o t h m e m b e r s a n d p u b l i c

B

M A N A G E M E N T T I P

continued on page 31


By Beverly L. RotanUSDA/RBS Agricultural Economist

Editor’s Note: This article is excerpted fromRBS Research Report 189, available on lineat www.rurdev.usda.gov, or in hard copy for$5 (order by calling (202) 720-8381).

n today’s economy, manycompanies are downsiz-ing their labor force, cre-ating a greater need tokeep the most productive

employees on board. In order to retainthe best employees, cooperatives try tokeep pace with the salaries and benefitpackages offered by other employers,while still keeping their costs down.

One way to do this is to evaluate ben-efit plans. Look at employee needs,expectations and eligibility, cost escala-tion, tax considerations, benefit qualityand the benefits packages offered bycompetitors. Interview employees, con-sult government agencies, read variousbenefit publications, compare benefitsof like-businesses and monitor benefitactivities of other businesses in the area.What benefits are essential and how willthey be financed? Will they be paid forby the cooperative or the employee? Orwill the cost be shared? In this article,references to “benefits” include retire-ment benefits; health, life and disabilityinsurance, and educational assistance.

The study included the following jobcategories: 1) chief executive officer(CEO), president or general manager; 2)office manager, accountant or controller;3) division manager; 4) field representa-tive; and 5) sales representative. Mostbenefits were extended across all job cate-gories. Differences in how cooperatives

finance their benefits are examined, basedon cooperative type, region and size.

Benefits by cooperative typeMany cooperatives of all types paid for

life and disability insurance and education-al assistance, while health insurance andretirement cost was covered by both thecooperative and employee for all employ-ee groups (table 1). The exceptions weredairy and “other” cooperatives. In thesecases, the cooperative paid solely for theretirement of general managers, officemanagers, field representatives and salesreps. This trend has remained unchangedfor a number of years. The largest per-centage of cooperatives paid retirementinsurance for general managers, officemanagers and sales representatives.

“Other” benefits usually offered werepaid vacations and sick days, first-classtravel, use of a company car and mileagereimbursement (private car when oncooperative business). The availability ofthese benefits were more broadly spreadacross all cooperative types and jobgroups. By cooperative type, at leastone-fourth or more indicated generaland office managers were paid for vaca-tions and sick days. First-class travel wasoffered only to general managers.

Mileage reimbursement for allemployees in grain and farm supplycooperatives were more evenly distrib-uted, but responses were limited.

Benefits by regionMost cooperatives in all regions said

retirement was paid by both the employ-ee and cooperative. Health insurance per-centages were almost evenly distributedbetween the cooperative paying all bene-fits to being shared by both. Education

assistance was more likely paid for by thecooperative in the Great Lakes states.Life and disability insurance was usuallypaid for by cooperatives in all regions.

Other benefits or “perks,” such aspaid vacations/holidays and sick days,were paid by the cooperative. Paidtraining or mileage (private car) wasthe next largest percentage in allemployee groups. First-class travelprivileges were quite limited.

With a few exceptions, large majori-ties of co-ops in all sales size groups(small, medium, large and super) paidthe entire cost for life and disabilityinsurance. Smaller majorities in mostsize groups also shouldered the cost foreducational assistance. A majority of co-ops paid the entire cost of health insur-ance in all but the super-sized group(see table 19 in the on-line version ofthis article). Retirement cost was largelyshared by co-ops and employees in allfive job categories and all sizes groups.

Rethinking benefit payments From a financial standpoint, cooper-

atives may need to rethink how benefitsare paid. Trends show that benefit costsonce paid solely by the cooperative arenow usually being shared with theemployee. Conversely, some coopera-tives that previously shared-costs arenow covering it all. In other cases, somesaid co-ops that in the past shared thecost with staff for benefits have nowbeen shifted entirely to employees.

Cooperative leaders must look atinternal and external influences when set-ting salaries and benefits and use all avail-able resources. Look at today’s society.Try keeping pace with other businesses’salaries and benefit packages, avoid

B e n e f i t s o f t e n k e y t o k e e p i n g b e s t e m p l o y e e s

I


employee turnover, and adapt salaries andbenefits to remain competitive.

Here are some significant surveyfindings:

■ Most employees in the five jobcategories surveyed had bachelor’sor associate’s degrees.

■ Job responsibility was ranked asthe most important factor for set-ting salary by a majority ofrespondents for all job categories.Performance ranked next.

■ Thirty-four percent of the co-opssurveyed said all of their employ-ees received bonuses, usuallybased on the financial perfor-mance of the cooperative.

■ Cooperatives were more likely topay for life and disability insuranceand educational assistance for thegeneral and office managers. Retire-ment benefits were usually shared bythe employee and the cooperative.More responses indicated that pro-

grams of locals were tied to theirregional’s retirement plan.

■ Directors were usually paid perdiem for travel while on coopera-tive business along with a fee forattending board meetings. Annualexpenses for directors rangedfrom $1,200 to $6,000.

■ The East/South Central regionhad the highest salaries for all jobcategories, except for sales repre-sentatives in the West. ■

Table 1—Benefits and how paid, for specified employees, by cooperative type, 19991, 2

Health Life Disability EducationalType and Retirement insurance insurance insurance assistancejob category C E S C E S C E S C E S C E S

PercentDairy

General manager 57 14 29 29 14 57 80 0 20 83 0 17 75 25 0Office manager 57 14 29 29 14 57 75 0 25 83 0 17 75 25 0Division manager 40 20 40 20 20 60 75 0 25 80 0 20 75 25 0Field representative 50 25 25 25 0 75 75 0 25 75 0 25 75 25 0Sales representative 60 20 20 40 0 60 75 0 25 72 0 25 75 25 0

Fruit and vegetablesGeneral manager 32 11 58 45 0 55 82 6 12 100 0 0 45 9 45Office manager 32 11 58 48 4 48 85 6 12 100 0 0 50 8 42Division manager 23 15 62 47 6 47 85 8 8 100 0 0 63 13 25Field representative 11 0 89 56 0 44 86 0 14 100 0 0 40 0 60Sales representative 29 0 71 56 0 44 75 0 25 100 0 0 40 0 60

GrainGeneral manager 30 4 67 64 2 34 80 4 17 89 2 9 71 3 26Office manager 30 4 67 63 2 36 79 4 17 90 0 10 74 3 23Division manager 26 3 72 56 0 44 76 5 19 94 0 6 74 3 23Field representative 29 0 71 56 0 44 77 3 20 93 0 7 73 4 23Sales representative 26 0 74 54 0 46 80 6 14 94 0 6 79 0 21

Farm SupplyGeneral manager 19 4 77 49 0 51 51 15 34 76 3 22 50 15 35Office manager 19 6 75 47 2 51 49 19 33 78 5 16 48 15 37Division manager 15 6 79 33 0 67 45 13 42 71 11 18 48 13 39Field representative 5 5 90 33 0 67 45 10 45 65 12 24 56 19 25Sales representative 23 3 74 40 3 57 42 18 39 79 7 14 39 17 43

Other3

General manager 57 0 43 33 0 67 71 0 29 54 21 25 73 0 27Office manager 47 0 53 35 0 65 71 0 29 83 6 11 50 0 50Division manager 57 0 43 38 0 62 69 0 31 83 8 8 100 0 0Field representative 57 0 43 10 0 90 78 0 22 75 13 13 50 0 50Sales representative 56 0 44 17 0 83 73 0 27 73 9 18 100 0 0

1/ Total may not add due to rounding.2/ C = cooperative pays only; E = employee pays only, and S = cooperative and employee pays.3/ Other includes marketing cooperatives–cotton, livestock, poultry, dry beans and peas, rice, sugar, fishing, and miscellaneous–with low responses.


By David Trechterand Robert P. King

Editor’s Note: Trechter is a professor of agricultural economics atthe University of Wisconsin-River Falls. King a professor of appliedeconomics at the University of Minnesota. They received fundingfrom USDA Rural Development’s Rural Business-CooperativeService to look into the communication practices of cooperatives inMinnesota and Wisconsin. Based on their survey of 37 cooperativesand 759 members, they have gained new insights into the impact ofcommunications on member loyalty and the preferences of membersfor different types of communications. Highlights from a talkTrechter gave on this subject were also included in the Sept.-Oct.2001 issue of “Rural Cooperatives.”

ost businessesactively try toenhance the com-mitment or loyaltyof customers to their

products. Airlines offer frequent fly-er programs, Amazon.com developsa sophisticated customer profile thathelps customers find other booksthey are likely to enjoy, and motelchains offer discounts and specialprivileges to repeat customers.

Cooperatives, too, expend agood deal of effort trying toincrease their members’ commit-ment. Indeed, cooperatives proba-bly have an advantage in thisregard. Cooperatives are member-owned, meaning that their cus-tomers have an investment in thebusiness. Thus, because a portionof a member’s wealth is linked tothe on-going well-being of thecooperative, they may be morecommitted to it. In addition, thedemocratic nature of cooperatives(one person-one vote) and the voice

that members have in the running of the business (throughthe board of directors) are likely to lead to greater patroncommitment.

Committed cooperative patrons are likely to be importantfor a variety of reasons. First, members who are committedto the cooperative are more likely to stick with the coopera-tive during difficult times. They are also more likely to electa strong board of directors to help guide the cooperative.Committed members are more likely to be demanding.Demanding members are beneficial to cooperatives becausethey push the business to constantly improve on goods, ser-vices and pricing. In short, demanding members help keepcooperatives on the cutting edge.

Finally, agriculture is an industry in the midst of massive

B u i l d i n g c o m m i t m e n tSharpening your co-op communications can build member commitment and better reach select groups

M

A highlight of CHS’ most recent annual meeting in Portland, Ore., was a tour for members throughthe United Harvest shipping facility in Vancouver, Wash. Annual meetings can be an importantcommunications conduit, particularly for members who have been active in the co-op, serving oncommittees and the board. Photo by David Lundquist, courtesy CHS


restructuring. We see this in terms of the ever-increasingfarm size and in the wave of mergers and consolidations thathave created large-scale supply chains. Committed membersare more likely to understand these trends and the implica-tions for their cooperative.

This article identifies how cooperatives can use com-munications to build member commitment and the factorsthat influence preferences for some key communicationoptions.

The studyTable 1 summarizes some of the key financial character-

istics over the 1997–1999 time period for the 37 coopera-tives that participated in this study. The sample includedroughly equal numbers of cooperatives that attained rela-tively high standards of financial performance (determinedby local return on investment (ROE) greater than 10 per-cent, debt-to-equity ratio of less than 0.25,revolving equity in less than 15 years, and issuingmore than 40 percent of patronage refunds ascash) and low levels of performance (negativeROE, debt-to-equity of greater than 1, equityrevolvement greater than 75 years, and less than20 percent cash patronage refunds).

Table 2 provides a breakdown of characteristicsof the 759 cooperative members who participatedin this study. The table shows that, typical of thefarm population as a whole, the respondents wereprimarily middle aged or older. The members inthis sample did have a relatively high level of edu-cation, with 50 percent having at least some col-lege education.

In the survey, co-op members were asked toindicate on a scale of 0 to 100 (0 = totallyuncommitted, 100 = totally committed) their

level of commitment to a specific cooperativeto which they belonged. Table 2 shows that themajority of members in this sample reported arelatively high level of commitment to theircooperative (in excess of 60 percent). However,nearly 20 percent of the sample indicated theywere 40 percent or less committed to theircooperative. In short, there was a widely vary-ing level of commitment to their cooperativeexpressed by these members. Members can getinformation about their cooperative in a widevariety of ways. Some communication channelsare informal, such as conversations with themanager, employees, board members or othermembers. Other communication channels aremore formal: newsletters, cooperative Websites, or press releases. Still other channels,while not necessarily explicitly designed ascommunication vehicles, may play an importantcommunications role. For example, the annual

meeting, focus groups with members, and member sur-veys have varying amounts of communications imbeddedin them.

Members were asked to rate ten channels by which theymight receive information about their cooperative. Theresults of this evaluation are summarized in Table 3. Themost important sources of information about the coopera-tive, as indicated by this survey, were informal conversationswith employees and with the manager. Only two other com-munication channels—newsletters and news articles—wererated as important or very important by more than half ofthe members in the sample.

Interestingly, the least important source of information,judged by the proportion of respondents who rated it asimportant or very important, was electronic communica-tions. Clearly, the majority of cooperative members are notyet living in an e-world.

Table 2—Selected characteristics of cooperative members in sample

Percent of Cooperatives per Category Age of Member < 30 31–40 41–50 51–60 60+

3 18 35 23 21

Educational Level < High High Some College School School College Degree

5 45 30 20

Level of 0–20% 21–40% 41–60% 61–80% 81–100% Commitment to 12 7 22 28 31Sample Co-op

Table 1—Selected financial characteristcs of sample cooperatives

Percent of Cooperatives per Category

Avg. Local ROE <0% 0%–2.5% 2.6%–5.0% 5.1%–10.% 10.1%+14 32 19 22 14

Debt/Equity Ratio <1.1+ .76–1.0 .51–.75 .26–.50 <.2522 22 30 19 8

51–75 26–50 16–25Equity/Equity 76 years years years years <15 yearsRevolved 11 22 38 16 14

% Cash Refunds <20% 21%-30% 31%–40% 40%+22 42 28 8


Building member commitmentthrough communications

Member commitment to a coopera-tive may stem from a broad array offactors. For instance, characteristics ofthe member (family history with thecooperative), characteristics of thecooperative itself (how big it is) or thecooperative’s financial performancemay influence member commitment.The cooperative’s efforts to communi-cate with its members might also affectmember commitment.

Communication strategies are a par-ticularly interesting factor in terms ofbuilding member commitment, bothbecause of the wide variety of mecha-nisms available for touching base withmembers and because communicationsare largely under the control of thecooperative. This contrasts sharplywith the other factors (member charac-teristics, cooperative characteristicsand the financial performance of thecooperative) that are likely to influencemember commitment, but are whollyor partially outside the control of thecooperative.

The survey results support the proposition that membercommitment can be influenced by the cooperative’s commu-nication strategy. In terms of specific communication toolsthat increase member commitment, informal communica-tions with the manager and press releases appear to have thegreatest impact. The importance that most members attachto informal communications with the manager and employ-ees indicates that cooperatives would be well served by mak-ing sure that employees who interact with members receivetraining in public relations and that the cooperative developmessage points they would like these employees to convey totheir members.

Co-op communications preference factors Trechter and King also looked at factors that are associat-

ed with greater appreciation of each different type of com-munication. Their results are summarized in Table 4. Theseresults in the Member Characteristics section of the tablesuggest that different communication tools appeal to distinct-ly different types of members. For instance, older membersand those with less formal education prefer news articles as asource of information about their cooperative. In contrast,members with more education would rather speak toemployees or use electronic communications to get informa-tion about the cooperative. Members who have served on theboard of directors or on a cooperative committee (whoseattachment to the cooperative is, perhaps, the strongest), the

annual meeting is an important source of information. Reading down the columns in table 4, the results also sug-

gest means by which the impact of a given communicationtool might be increased. Newsletters, for example, appear tohave more impact when they are issued more frequently (e.g.monthly newsletters seem to be more effective in buildingmember loyalty than do quarterly publications). Interestingly,newsletters are also enhanced if the cooperative has a Website (newsletters and Web sites complement each other) or ifit issues few press releases per year (newsletters and pressreleases are substitutes). In contrast, press releases are moreinfluential if they are relatively rare and the existence, or lackof, a Web site seems unrelated to their ability to enhancemember commitment.

Finally, the results for electronic communications reportedin table 4 present an interesting story. Recall that table 3 indi-cated that electronic communications were rated as the leastimportant of the ten communications channels considered.The results reported in table 4 are broadly consistent with thisresult, in that electronic communications are not important tothe average cooperative member. However, it is still probablyimportant for local cooperatives to consider having a presenceon the Web. Electronic communications appeal to the morehighly educated members of the cooperative, a segment that ishostile or neutral to traditional communication methods(annual meeting, newsletter, press releases). Electronic com-munications also appear to enhance the ability of cooperative

Table 3—Member evaluation of communication techniques

Percent of Members per Category Very Very

Unimportant Unimportant Neutral Important Important

Communications with employees 3% 4% 16% 44% 33%

Communications with manager 5% 9% 22% 38% 26%

Co-op Newsletter 5% 7% 31% 47% 11%

News Articles 6% 8% 32% 45% 9%

Annual Meeting 8% 11% 32% 30% 19%

Communications with board of directors 7% 11% 37% 32% 13%

Communications with Other Members 5% 9% 41% 36% 8%

Member Survey 11% 13% 45% 26% 5%

Focus Groups 15% 19% 47% 16% 3%

Electronic Communications 21% 25% 39% 11% 4%


newsletters to influence member commitment and extend theability of managers to communicate with members (substitut-ing for direct face-to-face contact).

ConclusionsCommitted members are important to cooperatives for a

variety of reasons. The communication strategy followed by acooperative in getting information about itself to its memberscan affect the level of member commitment. Given that thecooperative has much more control over its communicationstrategy than it does over other factors that would be expectedto influence member commitment, this is a very positive con-clusion. Specifically, managerial communications with themembers and the use of press releases showed a strong statis-tical relationship with higher levels of member commitment.

This research suggests that different types of membershave distinctly different preferences for communicationtools. Older, less-educated members seem to like to readabout their cooperative in their newspapers. More highly

educated members, in contrast, prefer electronic communica-tions and informal discussions with cooperative employees.

Several means were also identified by which differentforms of cooperative communications can be strengthened.Of particular interest to this discussion is the role of elec-tronic communications. While electronic communicationsare not important to the vast majority of cooperative mem-bers, they are important to a potentially influential segment(college educated members), complement some traditionalcommunication tools (newsletters), extend the ability of man-agers to communicate with members, and substitute for com-munication channels that are somewhat problematic forcooperatives (press releases).

Cooperatives should, it appears, take a buffet approach tocommunications: use a wide array of communication tools toappeal to different segments of the membership. Cooperativesshould not overlook the importance of informal channels ofcommunication, particularly the interactions between membersand the general manager and other cooperative employees. ■

Member Characteristics

CooperativeCharacteristics

Communica-tions Practices

Newsletter

Longer ManagerialTenure

More News-letters per Year

Fewer PressReleases

Co-op Website

Annual Meeting

BoardExperience

CommitteeExperience

Education

Less Education

Few BusinessSites

No RecentMergers

Non-MarketingCo-op

ManagerialCommunications

Average Member

Newer Manager

Non-ServiceCooperative

Few News-letters per Year

No Website

Employee Communications

Average Member

More Education

No Board Experience

Few News-letters per Year

News Articles

Older Members

Less Education

Few Years asMember

More BusinessSites

Marketing orService Co-op

Few PressReleases perYear

Electronic Communications

Unimportant toAverage Member

More FormalEducation

Longer ManagerialTenure

Marketing orService Co-op

No RecentJoint Ventures

Table 4—Factors having a positive impact on communication preferences


Earnings double for AGP Favorable market conditions which

gave the Ag Processing Inc. (AGP)cooperative of Omaha, Neb., a sub-stantial boost in earnings for fiscal2001 are expected to continue into2002, CEO Marty Reagan told dele-gates attending the cooperative’s annu-al meeting. The world’s largest cooper-ative soybean processor showed pre-taxearnings of $46 million, more thandouble the 2000 rate. Sales of $1.8 bil-lion were up 9 percent, not countingthe result of sold operations. After tax-es, net income reached $26.9 million,up 61 percent from $16.6 million in2000. AGP will also return $14 millionin cash patronage to its local andregional cooperative members.

Nebraska perch co-ophelping meet demand

Nebraska ranchers looking for newsources of income have combined someunproductive acres, abandoned hogfarms and a natural resource to go intothe fish business. Nebraska SandhillsYellow Perch Cooperative was formedabout 5 years ago to help satisfy anational, unmet demand for the smallpanfish, which are common in the shal-low lakes sprinkled throughout thestate’s Sand Hills. Perch can be raisedwith a little effort and limited expense incleaned, converted waste pits andlagoons of abandoned hog operations.The Nebraskans are following the pat-tern of Mississippi producers who 30years ago began digging pits to convertcotton acres into a catfish aquacultureindustry – led by the Delta Pride Catfishcooperative. This industry now produces

$3 billion each year in Mississippi.Although it’s aquaculture industry is

much smaller as this point, Nebraskahas good natural water resources andits young aquaculture industry is sup-ported by 50 fish farms. The perchcooperative grew from discussionsabout economic development optionsin the traditional Sand Hills ranchingareas. Pollution, overfishing and preda-tors have left the Great Lakes fishery,which used to provide 1 million fishper week, in dramatic decline. Produc-ers from Nebraska, Tennessee andNorth Carolina are part of the trend tosend fingerlings to Wisconsin andMichigan for fattening. The coopera-tive’s future plans include securing aprocessing plant to fillet the perch withless waste. It also plans to secureportable sorting tanks to separate fishby size for shipment.

Dairy industry aids victims of terrorist attacks

Victims of the Sept. 11 terroristattacks will benefit from $83,300 indairy industry contributions to theAmerican Red Cross Liberty Fund.Dairy farmers supported the reliefeffort via the National Milk ProducersFederation, in conjunction with DairyRelief Inc.

The largest contribution of$45,500 came from Dairy Farmers ofAmerica, followed by United Dairy-men of Arizona, $13,799, and Califor-nia Dairies with $10,000. Other co-ops have contributed many tens ofthousands of dollars through otherrelief funds.

Koligian resigns fromraisin association

Vaughn Koligian brought to an endhis 12-year reign as chief executiveofficer of the Raisin Bargaining Associ-ation based at Fresno, Calif., with hisresignation in late December. The res-ignation came even though the boardhad earlier extended his contract for 3years. Koligian had successfully negoti-ated annual prices with packers formore than a decade, but last year’snegotiations were extremely con-tentious, and binding arbitration wasinvoked for the first time in the associ-ation’s 34-year history. A world raisinsurplus has resulted in low prices, butmany in the industry have creditedKoligian for making the best of a diffi-cult situation.

Reports at press deadline for thisissue were that Glen Gotto has beenselected to replace Koligian. Gottoworks for a handler, Pacific Sourcing,and serves on the Raisin AdministrativeCommittee (RAC) as a medium-sizehandler member. He is also chairman ofthe RAC’s Reserve Sales Subcommittee.

Sen. Grassley launches ag marketing center

A new agricultural marketing centerat Iowa State University (ISU) in Amesdedicated to collecting and distributinginformation to promote value-addedagriculture was formally launched Jan.9 with the presentation of a $5 millioncheck from USDA Rural Develop-ment. Iowa Sen. Charles Grassley saidthe center will play a crucial role inhelping farmers earn more from theircrops and livestock.

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“Farmers know that to remain com-petitive, they must capture more incomethrough value-added processing of theircommodities,” Grassley said. “Timelyflow of information will be critical tothe success of such efforts, and this cen-ter promises to play an exciting part inthe exchange of crucial ideas.”

The center will be supported by amulti-state consortium that includesIowa State University, Kansas StateUniversity, Oklahoma State Universityand the University of California-Davis.Mary Holz-Claus of ISU Extension,will administer the grant. The partner-ship will provide resources to supportmarketing initiatives of value-addedcooperatives throughout the UnitedState, said Randall Torgerson, deputyadministrator of USDA’s Rural Busi-ness- Cooperative Service. Acceptingthe $5 million ceremonial check wasISU President Gregory Geoffroy.

Lamb processor partners with Wyo. producer co-op

Wyoming’s Mountain States Lamband Wool Cooperative (MSL&W) hasannounced it is partnering with B.Rosen & Sons Inc. (Rosen), a leadingsupplier of fabricated lamb meats andproducts. Under the terms of an agree-ment, MSL&W and Rosen will joinforces as Mountain States/Rosen, LLC.MSL&W will supply its highest qualitylambs to existing Rosen processing anddistribution facilities in New York,N.Y., and Greeley, Colo.

The new entity will continue to useRosen’s labels and trademarks, includ-ing the “Cedar Springs” line of lambproducts. New product lines, capitaliz-ing on the “Mountain States” and“producer-owned” images will bedeveloped in the near future.

Golden Growers shows profitA North Dakota corn processing

cooperative, once on the brink ofbankruptcy, has extended its prof-itability record to 3 years, accordingto chairman Carl Larson. For fiscal2001, Golden Growers Cooperativereported earnings of $2.9 million.Shareholders, however, will not

receive dividend payments, althoughthe stock value increased about 19cents per share.

The co-op lost $16 million in itsfirst 2 years of operations due to plum-meting corn fructose prices. In 1997 itentered into a joint venture withCargill to manage its facility.

Golden Growers represents 1,900corn growers in North and SouthDakota and Minnesota. It joinedAmerican Crystal Sugar Co. andMinn-Dak Farmers Cooperative inbuilding the $261 million ProGoldprocessing plant near Wahpeton in1996. Current profits, said executivevice president Mark Dillon, representslease payments and plant improve-ments more than corn syrup sales.However, the processing plant hasincreased corn prices about 10 centsper bushel above local elevators in theregion to ensure a supply for the plantwhich consumes 85,000 bushels ofcorn every day.

West Liberty Foods expandsThe community of Mount Pleasant,

Iowa, will gain 225 jobs when a meat-processing plant owned by a poultrycooperative opens in 2003. West Lib-erty Foods is owned by Iowa TurkeyGrowers Cooperative, which supplies90-million pounds of meat to the foodindustry, including Subway Sandwich-es. The cooperative will invest $7 mil-lion to buy an existing building andadd an annex to suit the operation.The new plant will be named MountPleasant Foods. West Liberty Foodsalso operates Sigourney Foods.

Oregon farm supply cooperative to close

In a sign of further fallout fromtroubles in the Northwest fruit andvegetable processing industry, the 445-member Eugene (Ore.) Farmers Co-ophas opted to close. The 67-year-oldlocal supply cooperative hopes to gainsome limited return on a sale of assets.Factors contributing to the closurewere low crop prices being earned bymembers, fewer farmers and the earlierdemise of Agripac, a vegetable process-ing cooperative.

Pro-Fac co-op pays dividendA dividend of 43 cents per share was

paid in late October by Pro-Fac, the agri-cultural marketing cooperative based atRochester, N.Y., to its Class-A preferredstockholders. The cooperative has morethan 600 member-growers who processtheir fruit, vegetables and popcornthrough Agrilink Foods, Pro-Fac’s whol-ly owned subsidiary. The food coopera-tive, with $1.3 billion in annual sales,owns a number of nationally knownbrands, such as Birds-Eye and Veg- All.

LOL, DFA shiftingmilk to Kraft plant

Both Land O’ Lakes (LOL) andDairy Farmers of America (DFA) areshifting milk supplies to the formerKraft Foods cheese plant at Melrose,Minn., which they jointly purchasedlast year. The shift in supplies is result-ing in altering of operations at some ofthe two co-ops’ smaller plants. LOLclosed its cheese manufacturing opera-tions at Perham, Minn., in February

Semolina Specialties inCosby, N.D., is nowBushel 42 Pasta. Thename comes from thefact that 42 pounds ofpasta can be madefrom one bushel ofwheat. The co-op ismaking final prepara-tions for its springopening. It is owned by250 durum wheat growers from North Dakota and Montana.


while continuing to focus its operationson high-potential, high-value wheyproteins. Cheese production had earli-er been cut back at Perham due toreduced milk supply.

“The adjustments in product mixwill enable us to improve milk utiliza-tion in our Upper Midwest operations,”said Fernando Palacios, LOL vice pres-ident for dairy foods operations andsupply chain. DFA earlier stoppedcheese production but continued wheyoperations at Fergus Falls, Minn.

Welch’s shifts staff from Westfield

Welch’s, the standard bearer in thegrape processing industry, has ended atraditional presence in Westfield, N.Y.,which began more than 100 years agowhen the company founder moved theoperation there. In a move to save mon-ey and blend its corporate office opera-tion into its headquarters staff at Con-cord, Mass., Welch’s pulled its 93employees from Westfield, offeringsome an opportunity to relocate andothers telecommuting jobs. Welch’s par-ent firm, the National Grape Coopera-

tive, will retain a staff of 12 in Westfieldplus another 25 at a processing plant.

Concord and Niagara grapes used inthe operation are still grown in thearea. When Welch’s moved its corpo-rate offices to Concord in 1983, it had380 employees at Westfield. The origi-nal Welch’s plant, built in 1897, stillexists. During its tenure in the commu-nity, the company and its employeeswere deeply involved with local school,contributing both time and money. In2000, company employees founded aJunior Achievement chapter at themiddle school and last fall Welch Trea-surer Steve Robbins received the dis-trict’s Friend of Education award.

DFA gains plants from Suiza/Dean merger

Dairy Farmers of America (DFA)will increase its holdings as a result offacility spinoff required by the mergerof Dean Foods’ and Suiza Foods. Suizawas already the nation’s leading dairyprocessor and distributor prior to themerger, and the new company (tooperate under the “Dean” name) willhave annual sales of about $10 billion.

To satisfy Justice Department con-cerns about competition in particularareas, 11 dairy plants in eight states –Alabama, Florida, Indiana, Kentucky,Ohio, South Carolina, Virginia andUtah – are being sold to NationalDairy Holdings LP (NDH). The newlyformed partnership is half owned byDFA, which earlier joined with thesame three partners to purchase sixdairy plants in Southeast and Midwestareas where Dean and Suiza over-lapped. While DFA will not operateany of these new plants, its memberswill benefit from their sales.

Meanwhile, members of Minnesota-based Land O’Lakes (LOL) gainedabout $44 million from the sale of fivemilk processing plants in 2000 to DeanFoods. LOL members continued to sellmilk to Dean which, under a licensingagreement, markets milk, yogurt, sourcream and cottage cheese under theLOL brand. The two firms formed ajoint venture to develop and sell conve-nience-oriented dairy products, includ-ing the Grip n’ Go line of single-servemilk bottles.

New directory shows Wis. co-op diversity

Providing a useful snapshot andguide to the state’s diverse cooperativesector, the University of Wisconsin’sCenter for Cooperatives has publisheda 2001 co-op directory, the firstupdate since 1993. Dr. Robert Cropp,center director, says the state hasnearly 800 cooperatives which servealmost 2.7 million members, althoughmany people belong to more than onecooperative. Funding or the reportcame in part from the U.S. Depart-ment of Agriculture’s Rural Business-Cooperative Service.

In Wisconsin, “cooperative” mayonly be included in the name of com-panies incorporated under Chapter 185of the state’s statutes. During the1990s, the state saw the greatest resur-gence of cooperative developmentsince the 1920s. Despite the decliningnumber of farms and farmer coopera-tive members, significant growth iscoming from other areas, such as rural

Wisconsin co-op campfocus of TV documentary

Mae Johnson of Superior, Wis., (right) holds aphoto from her youth, which was spent growing upas part of a Finnish cooperative in Wisconsin. Sheis featured on “Camp Co-op,” a documentaryabout the history of cooperatives in Wisconsin thataired on Wisconsin Public Television Feb. 21 and24. The program marks the 50th anniversary ofKamp Kenwood, a summer camp sponsored by theWisconsin Farmers Union that teaches kids how torun co-ops. The program aired on the popular “Wisconsin Stories” series.

The program provides a glimpse into the lives of people who built thestate’s cooperative foundation. It also focuses on the self-proclaimed “Co-opCity” of Westby, home to one of the state’s oldest Norwegian dairy co-ops,the role of co-ops in bringing electricity to rural Wisconsin and the state ofcooperatives in Wisconsin today.

Impetus for the program came from the University of Wisconsin Center forCooperatives, which secured $100,000 in funding from the state historicalsociety for research and production of the program, which took six months.Photo courtesy WPT TV


electric and telephone service, naturalfood cooperatives and credit unions.Today, they are marketing themselvesas “financial cooperatives,” eventhough they are organized under different statutes.

“They still share the democraticcontrol principles and are user ownedand controlled,” said Cropp. “Theiridentification as cooperatives re-estab-lishes a link that was long neglected.”

The oldest cooperative, MountHoreb Farmers Co-op, still exists aspart of Premier Co- op. Eleven of the309 original telephone cooperatives in1912 still operate and serve more than44,000 members.

Today, 25 rural electric coopera-tives provide electricity to almost190,000 members and their families.In 1938, 89 years after Anne Pickettpooled her neighbors’ milk, a groupof Waukesha County farmers chippedin $50 per cow to form GoldenGuernsey Dairy. Today, the brand ismarketed by Foremost Farms, one ofthe regional dairy cooperatives whichtogether in 1999 generated $2 billionin sales in Wisconsin. Good EarthCo-op of Algoma, a food cooperativeincorporated in the summer of 2001,is the newest entry.

“As these events suggest, coopera-tive history is dynamic and continuesto be written,” said Cropp. Copies ofthe directory may be obtained fromthe University of Wisconsin Centerfor Cooperatives, Room 230 TaylorHall, 427 Lorch St., Madison, Wis.53706.

Soybean cooperatives on riseInterest in soybean processing

cooperatives is on the rise, fromKansas to Minnesota, and NorthCarolina to Wisconsin. In some cas-es, producers are turning to soybeansas a replacement for lost tobaccomarkets. In others, animal feed andoil for conversion to diesel fuel arethe goals.

Jim Dunphy, a soybean specialistwith North Carolina State University,helped a dozen Tar Heel grain farm-ers form Grain Growers Cooperative.The impetus came from nationaltobacco settlement funds. Small, thin-coated Nato soybeans are popular incertain areas in Japan. The hefty pre-miums they are willing to pay areattracting grower interest, althoughno contracts had been signed at thetime. Earl Hendrix, cooperative presi-dent, said farmers needed a number ofsimilar niche markets to replace losttobacco income.

Minnesota Soybean ProcessorsCooperative plans to build a 100,000-bushels-per-day crushing plant at Brew-ster. If construction begins this summer,production could start in 2003. Theplant will be managed by South DakotaSoybean Processors, which operates asuccessful plant at Volga. Since 1996, ithas paid more than $10 million in divi-dends to its members.

In Wisconsin, a steering commit-tee is using an updated 1998 feasi-bility study to explore developmentof a similar facility. Wisconsin isthe only major soybean-producing

state that lacks a major processingplant. Crushed soybeans therewould be used for livestock feed andthe oil would be converted tobiodiesel fuel.

At Grinnell, Kan., Co-Ag Coopera-tive is studying construction of a $1-million plant to extrude 760,000bushels of beans per year that could beoperational for the 2002 soybean har-vest. Co-Ag supplies feed for hogs ineastern Colorado and cattle and sheepin northwest Kansas.

Swiss Valley Farms wins NMPF honors

Both the Swiss cheese and Website of Swiss Valley Farms, in Daven-port, Iowa, were honored at theannual meeting of the National MilkProducers Federation. The coopera-tive’s wheel of Swiss Traditions Swisscheese was considered the most out-standing in the annual contest. Inaddition, the Web site launched lastspring was rated tops in the commu-nications competition.

New grain venture named Horizon Milling

CHS Cooperatives and Cargill Inc.have chosen Horizon Milling as thename of their wheat-milling jointventure. It will combine the capacityof five CHS mills and 16 Cargill millsto give the firm a leadership positionamong U.S. millers. It will offer abroader, more consistent and reliablesource of flour varieties. Cargill is themanaging partner.

Management Tip continued from page 21

Management reviewed the text and mock-ups, butlargely left the project to the author and designer, underMs. Brauner’s supervision. Layout and design were by Jen-ni Haas, free-lance designer of Blue Diamond’s membermagazine, Almond Facts, and annual report. A local printerhandled the presswork. A dozen case-bound copies and 4thousand soft-cover copies were bound by a plant in thenorthwest.

The completed books were delivered a couple of weeksbefore the annual meeting and readied for distribution.

Excerpts from the book text and photos were used in a his-torical display that was a highlight of the annual meeting, andan important event for many growers.

Reaction: Since the annual meeting, co-op staff has beentalking with various news media about basing future storieson the story of Blue Diamond. The book provides a tangiblefocal point for such discussions. Interest in the co-op isbuilding, says Brauner, and she looks forward to long-termpublic relations benefits from the project. ■


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