NEWS LINE
Compiled by Patrick Duffey
Utah Co-op Alliance formed
With members that includes such
well-established ag cooperatives as
turkey marketer Norbest and the
Moroni Feed co-op, the new Utah
Cooperative Alliance was formed this
fall. It will share information, help
member co-ops network and generally
promote cooperatives operating in
Utah. The alliance represents: 77 agricultural
cooperatives, 10 rural electric
co-ops, 4 telecommunications co-ops,
134 consumer cooperatives and 21 coops
affiliated with Associated Foods.
Chris Falco, alliance president, said
the fact that cooperatives operate
under a “user-benefit” principle means
that the customers have more input
and control over the business or organization’s
operations. At the same time,
he said, the cooperative’s design
ensures more attention to the needs of
members. “They’re formed for a specific
purpose, either to market or provide
services to its members.”
For Leonard Blackman and his
sons, that means a five-decade history
of raising turkeys in Moroni, thanks to
a pair of cooperatives represented by
the new alliance. Utah’s Moroni Feed
Co. allows about 100 farmers in Sanpete
County and Nebraska to benefit
from group purchases of feed, veterinary
services, processing and gasoline.
Norbest Inc., of Midvale, affords
farmer-members the benefits of marketing
turkeys and developing new
products.
“The only reason we all survive is
because of co-ops,” Blackman said of
his 100,000-turkey operation and
dozens of others scattered around the
county. “They enable us to join forces
and compete with the big companies.”
Associated Foods, another Utah cooperative,
serves independent grocery
stores and helps them compete with
larger grocery chains. Desert Power
serves six rural electric power cooperatives
which, in turn, serve residents of
rural areas.
Scribner CEO at Southern States;
SSC, Perdue forge new grain pact
In the midst of spinning off chunks
of its Mid-Atlantic operations to stabilize
its financial situation, the board of
directors of Southern States Cooperative
(SSC) at Richmond, Va., has unanimously
appointed Tom Scribner as president
and chief executive officer (CEO).
Scribner has been the co-op’s chief merchandiser.
He succeeds Wayne Boutwell
who resigned after 5 years at the helm.
Boutwell had earlier been CEO of the
National Council of Farmer Cooperatives
in Washington, D.C.
Scribner joined SSC in 1988 and
earlier had worked for Countrymark
Inc., in Indianapolis, Ind. In late
October, Scribner announced the
cutback of about 120 staffers, mostly
at Richmond, including 23 positions
recently vacated or planned under
the budget. Some were offered jobs
elsewhere in the cooperative. He
advised employees that the combination
of drought, lower sales and the
troubled agricultural economy made
it “essential that we concentrate on
our core business activities and in
making those operations as efficient
as possible.”
SSC sells farm production supplies
and services and lawn and garden products
through a chain of 1,300 retail
stores stretching from Maine to Florida.
Last year, the cooperative hired an
Arkansas consulting firm to guide a
restructuring program and deal with
changes in
agriculture.
Most recently,
SSC eliminated
its truck fleet,
which covered
8 million miles
per year but
operated only
three-fifths
full. The cooperative
contracted
with a Richmond firm to provide
its needed transportation services.
To further tighten operations, changes
were made in the assortment of products,
services were improved and sales
people trained with better product
knowledge. Scribner said SSC was
using its buying power to negotiate
better prices with venders. In the
future, SSC plans to organize its stores
around crop centers in a hub-andspoke
arrangement that will require
every store in a region to carry a full
line of products.
Meanwhile, faced with drought conditions
in the East this season and a
general agricultural malaise among
many of its farmer customers, SSC
agreed to a long-term lease of its 13
grain elevators in seven states to Perdue
Farms, a major poultry producer
and marketer based in Salisbury, Md.
SSC also plans to sell its Wetsel seed
subsidiary at Harrisonburg, Va., to a
subsidiary of The Anderson Group, an
investment firm at Bloomfield Hills,
Mich. Wetsel was a leading distributor
of turf, horticultural and lawn and garden
products in the East.
Debt-laden Agway files for
Chapter 11, reorganizing
The national agricultural malaise has
caught up with the Northeast. Saddled
with heavy debts of $478 million and
short on cash, Agway Inc., of DeWitt,
N.Y., filed for Chapter 11 reorganization
Oct. 1. It is seeking protection of
the U.S. Bankruptcy Court for the
Northern District of New York at Utica
while it attempts to continue operations
while reorganizing the business. Agway
serves 69,000 farmer-members.
Agway’s creditors will meet Dec. 11
to review the cooperative’s assets, liabilities
and related matters. The largest
creditor, the company’s 401 (k) securities
fund, which contains retirees’
retirement investments, is owed about
$35 million. Creditors won’t know how
much they’ll recoup until the bankruptcy
court and creditors approve a
reorganization plan.
Agway reported losses of $98.2 million
for fiscal 2002, which ended June
30, with $85.4 million directly related
to the sale of discontinued operations.
Revenue was $899 million, down 21
percent from 2001, due partly to a
mild winter and lower petroleum commodity
prices.
Agway had net losses of $8.9 million
in fiscal 2001 and a $9.4 million loss in
2000. The regional cooperative has
already sold some operations and two
others should be completed by the end
of the year. The 550 independent
Agway dealer stores throughout the
Northeast were not included in the
bankruptcy filing.
The court has approved the cooperative’s
request to pay its 3,600 employees
and maintain their medical and other
benefits after Agway gained access to
$125 million debtor-in-possession
financing. Also covered were vendors
and suppliers of services received since
the Oct. 1 bankruptcy action.
Wholly owned subsidiaries exempt
from the bankruptcy action include:
Agway Energy Products LLC, Agway
Energy Services Inc., Agway Energy
Services-PA Inc. and Cooperative
Milling, a feed mill at Gettysburg, Pa.,
run as a joint venture with Southern
States Cooperative, Richmond, Va.
Subsidiaries covered in the bankruptcy
are: Agway Feed and Nutrition,
Agway Agronomy, Seedway, Feed
Commodities International, Country
Best Produce, CPG Nutrients, Agway
CPG Technologies and Agway General
Agency. Earlier this year Indiana
Farm Bureau purchased Agway’s
insurance business.
NCUA, USDA in rural pact
An agreement has been signed
between the National Credit Union
Association and USDA to make rural
economic development funds available
through the nation’s 3,300 state-chartered
credit unions for business, home
and community projects. Thomas C.
Dorr, USDA under secretary for rural
development, said the opening of new
markets “will bring credit unions more
flexibility in developing lending strategies
and stimulating further economic
development in historically underserved
areas. USDA and NCUA will
promote accessibility of resources
through USDA to assist the lowincome
population in communities
served by credit unions,” Dorr said.
Reeves elected Gold Kist chairman
Douglas Reeves Sr., a poultry producer
from Reevesville, S.C., is the new
chairman of Atlanta-based Gold Kist
Inc., a farmer-owned co-op that is the
nation’s second largest processor of
poultry products. Reeves, first appointed
to the board in 2000, is also chairman of
the Edisto Electric Cooperative, vice
chairman of the Central Electric Cooperative
and chairman of the South Carolina
Bank and Trust.
Three new directors have been elected
to the board, including Christopher
Fannon, a cattle and broiler producer
from Geraldine, Ala., who defeated Dan
Smalley, chairman of the board and a
director for 16 years. The other new
directors are Frederick W. Gretsch Jr. of
Crawford, Ga., and Billy G. Meeks of
Cullman, Ala.
“Successful Farming” magazine
reports that five of nine directors have
now been replaced on the board in the
past 3 years, which it attribute to growers
being “fed up with low returns and
demands to upgrade buildings.” In
what it says may have been the largest
write-in campaign in the regional
cooperative’s 69-year history, members
voted 169-161 for Fannon.
AGP stretching its scope to
West Coast, Texas Panhandle
From the West Coast to the Texas
Panhandle, Ag Processing Inc. (AGP),
of Omaha, the nation’s leading cooperative
soybean processor is expanding its
scope. Construction has started on a
new deep-water-vessel loading facility
at the Port of Grays Harbor at
Aberdeen, Wash., to facilitate trade
with Pacific Rim markets. It should be
ready for shipping by the end of next
summer. It will be supplied by grain
rail cars originating at Midwest local
cooperatives affiliated with AGP. The
facility will be served not only by the
Puget Sound and Pacific Railroad but
also have customized access to the
Burlington Northern Santa Fe and
Union Pacific Railroads.
Meanwhile, at 10 locations across the
Texas Panhandle, AGP Grain Cooperative
is increasing its presence and outlets
for Midwest grain by purchasing grain
elevators from Sherley-Anderson Grain
Co. The elevators represent a combined
storage capacity of 24 million bushels.
All have access to major highways and
are served by the Burlington Northern
Santa Fe Railroad. Mike Knobbe, group
vice president for grain, cited the
growth of livestock feeding and dairy
production in the area. “The Texas Panhandle
is a key domestic designation
market and fits our strategic growth
plan to serve our members,” he said.
Marty Reagan, AGP’s CEO, said the
link between the facilities and customers
they serve with AGP members, as
“enhancing our ability to add value to
Midwest grain production.”
Major upgrades and expansions also
were underway this summer at AGP
facilities in Sheldon and Mason City,
Iowa, and Hastings, Neb., with the aim
of making AGP the least-cost producer
in the industry.
Farmland tops Co-op 100 list
Farmland Industries, with revenue of
$11.8 billion, was the
nation’s largest cooperative
in 2001, according
the annual Co-op 100
report issued by the
National Cooperative
Bank (NCB), Washington,
D.C. Farmland,
which is currently seeking
to restructure its business
under a Chapter 11 Bankruptcy Court
filing, was one of 40 agricultural cooperatives
to make the Co-op 100 list. Those
40 ag co-ops had aggregate 2001 revenue
of $60 billion, or just under 60 percent
of the nation’s total ag co-op business
volume (see related item, page 32).
The list also includes 20 grocery coops
with a total of $28.9 billion in 2001
revenue, 13 finance co-ops with $11.6
billion in revenue, 6 hardware and
lumber co-ops with $8.8 billion of
revenue, 14 energy and telecommunications
co-ops with $8.1 billion of
revenue and seven miscellaneous
co-ops with $5.9 billion in revenue.
Three other agricultural cooperatives
Dairy Farmers of America, CHS
Cooperatives and Land O’Lakes are
included in the top 10. For the second
consecutive year, cooperatives in the
list earned more than $130 billion in
combined revenue, demonstrating the
important role cooperatives play in the
nation’s economy.
“When I look at the revenues
reflected in this year’s NCB Co-op 100,
I can’t help but be impressed by the
growth of U.S. cooperatives,” said
Charles Snyder, NCB president. “From
their beginnings more than 100 years
ago, American cooperatives have not
only survived, but also flourished. They
have prevailed through adversity and
economic downturns and have brought
economic stability and prosperity to
millions of people,” Snyder said.
The entire list and related information
is available on the Internet at
www.co-op100.coop , or via e-mail at
marcom@ncb.coop, or fax at 202-
336-7730.
Thiara new Sunsweet chairman
Gary Thiara, a member since 1980
of Sunsweet Growers at Yuba City,
Calif., has been elected its new
chairman. Before returning to
the farm, he served 5 years as an
agricultural banker and now
manages a fruit orchard with his
brother. He also grows almonds.
Sunsweet is the nation’s leading
marketer of dried plums.
Swiss Valley to relocate
to new Davenport site
The Iowa-based dairy cooperative
Swiss Valley plans to move its headquarters
from Mount Joy to a new facility
on a three-acre site at north Davenport.
The cooperative will spend about
$5 million to build a two-story, 37,000-
square-foot office. Financial and training
incentives are pending from city,
state and community college sources.
Construction could begin this year with
completion expected by next fall.
Eugene Quast, the cooperative’s
chief executive officer, said it plans to
add 30 employees to tie in with anticipated
growth of 15 percent annually
during the next 5 years. The cooperative
is owned by 3,600 dairy farmers in
Iowa, Illinois, Wisconsin and Minnesota.
It employs 800 people in the
making of cheese, dips, milk and other
dairy products. Annual sales are about
$500 million.
Quast said future growth was expected
partly from increased sales of its
award-winning cheeses to a large retail
store chain. The cooperative recently
paid members $1.1 million in 1993
deferred allocated earnings. Adding this
to earlier payments this year brings the
total to $4.1 million. It marked the 38th
year of continuous patronage revolvement
payments to members.
In another futuristic move looking
at the teenage market, Swiss Valley
Farms is participating in a national
pilot test by installing and using vending
machines to promote milk, cheese
and yogurt in 19 Iowa and Illinois
middle and high schools in the Quad
Cities area (where the two states
meet). The cooperative is participating
with Midwest Dairy Association and
Dairy Management Inc.
This is the first test using dairy
products other than milk in the vending
machines. During the school year,
data will be collected to measure the
effectiveness of the campaign with an
eye toward expanding the program
nationwide. A five-month, milk-only
vending test completed last year indicated
a strong interest from students.
The biggest obstacle Swiss Valley
encountered was in obtaining enough
vending machines, which have been in
high demand nationwide.
“We’re excited to be involved in this
pioneering test that provides a healthy
vending alternative in schools,” said
Quant. “We hope healthy, dairy vending
will become a way of life at these
and other schools across the nation.”
Like other dairy cooperatives nationwide,
Swiss Valley has been a longtime
provider of milk for school districts in
its trade territory.
California Dairies joins NMPF
The newest cooperative to join
National Milk Producers Federation
(NMPF) is California Dairies Inc.,
headquartered at Artesia, Calif. The
cooperative, with nearly 700 member
dairy producers, ranks second in the
nation for milk volume. It is also a
major processor of butter and nonfat
dry milk. The cooperative also is a
member of the Alliance of Western
Milk Producers, a trade association
headed by Jim Tillison, who will now
become vice president for special projects
and will report to Jerry Kozak,
NMPF president.
Five dairy co-ops form
Southeast Marketing agency
The new Southeast Marketing
Agency (SMA) has been formed by
five dairy cooperatives serving the
Southeast. Members include Dairy
Farmers of America (DFA), Maryland
and Virginia Milk Producers, Lone
Star Milk Producers, Southeast Milk
Inc. and Arkansas Dairy Cooperative
Association.
SMA is marketing 8.9 billion
pounds of milk annually for 6,500
dairy producers. It is one of 11 marketing
agencies-in-common operating
in the United States. Administrator
Jeff Sims said after its first
quarter of operation, SMA had
“already witnessed cost savings from
driving efficiencies into the marketing
process and working together to
supply common customers.”
Calcot’s Tom Smith departs
In his swan song annual meeting,
marking the cooperative’s 75th
anniversary, Calcot President Tom
Smith said the co-op returned nearly
$450 million to its cotton growers
despite a difficult year. Smith retired
Oct. 1 after 25 years at the helm and 45
years with Calcot, Bakersfield, Calif.
David Farley, Australian cotton executive
who has succeeded Smith, praised
him for his integrity on selling premium
cotton and the fairness by which he
treated the cooperative’s members.
Chairman Bruce Heiden, a grower
from Buckeye, Ariz., described the
cooperative as “good and getting better.”
He said a thorny issue facing the
cooperative was repayment of $25.3
million in advances to growers. He said
it was time for a different look and different
structure. Officials said the new
season would be improved in part by
the financial support to growers contained
in the new farm bill.
Marketing Resource Center
Website eyes value-added ag
The Agricultural Marketing
Resource Center, a three-state university
effort to enhance value-added agriculture,
has launched a new website to
provide education and research to producers
about related business development
and marketing. The site,
www.AgMRC.org, contains contacts
and directories, as well as new business
development and commodity-specific
information designed to help build successful
value-added agricultural enterprises.
The center works with leading
agricultural economists and business
professionals across the United States
to provide applicable research and
analysis on marketing and economic
issues facing value-added business ventures.
Co-directors are Mary Holz-
Clause and Don Hofstrand.
“Beginning a new farming venture
was overwhelming for our 24-member
farmer cooperative,” said Chris Henning-
Cooke of the Greene Bean project
at Jefferson, Iowa. “We wanted to
grow specialty beans and needed product
and market and production information.
This value-added site was
invaluable to us in our information
search. They also provided training
and outreach to producer groups like
ours in communicating information
about marketing our products and honing
our communication skills,” she
said. The center is funded through a
grant to Iowa State University, Kansas
State University and the University of
California from USDA’s Rural Business-Cooperative Service. The center
also may be a contacted toll free at
866-277-5567 or by email at
agmrc@iastate.edu.
Court gives Farmland brief
breather on reorganization
The deadline for a bankruptcy reorganization
plan due from Farmland
Industries in September has been
extended to late November by U.S.
Bankruptcy Judge Jerry Venters. Meanwhile,
the cooperative in trying to
restructure its fertilizer assets, the primary
component of its crops production
division, which lost $57.6 million
in fiscal 2001 on sales of $745 million.
The division represented 6.3 percent of
Farmland’s total sales of $11.8 billion.
CEO Robert Terry said selling or
repositioning the fertilizer business
would allow Farmland to significantly
reduce its debt “and reduce or eliminate
the cyclical business risk inherent
in the fertilizer industry” so that the
cooperative could concentrate more
resources on its successful processed
food business. Farmland owns 7 nitrogen
fertilizer manufacturing plants
and 19 fertilizer distribution terminals
and has 531 employees in its crops
sector. Additionally, the cooperative is
a partner in phosphate manufacturing
ventures in Wyoming and Utah. It is
also joint owner (with Mississippi
Chemical Corp.) of a nitrogen fertilizer
manufacturing plant in Trinidad
and Tobago.
The court has approved Farmland’s
request to sell its half interest in Farmland
Hydro LP to Cargill Fertilizer
Inc. in Florida.
Farmland’s financial plight and the
drought were on the minds of more than
330 cooperative managers, directors,
their tax lawyers and accountants attending
a recent symposium on “Strategies
for Handling Losses,” sponsored by the
Arthur Capper Cooperative Center of
Kansas State University at Hutchinson.
The conference was considered the
largest cooperative educational meeting
in the state in at least 25 years. Local
cooperatives in Kansas are said to hold
$572 million in Farmland equity and
represent the largest group of nonsecured
creditors in the bankruptcy.
Due to many variables, such as fiscal
year ending dates, taxes and equity
redemption policies, it’s difficult to
measure the impact of Farmland’s condition
on local cooperatives. “This is
the worst year for local or operational
earnings in the past 20 years,” said
Dave Barton, director of the Capper
Center. His survey of local co-ops
seems to confirm that half the cooperatives
in Kansas would lose money this
year. Kansas Farmers Service Association
encouraged local cooperatives to
be prepared for the worst-case scenario,
namely total write down of
Farmland equities.
Official notice of the tax loss, however,
won’t come until next year. Some
cooperatives have suspended equity
redemption payments to retirees and
are pondering how to handle estates.
The heaviest burden may fall on local
cooperative boards of directors facing
unpopular decisions, said Barton.
“Whatever you do or however you
handle the situation, it won’t be popular
with some members.”
Former Countrymark CEO
faces $4 million fines, prison
David Swanson, 60, former chief
executive officer of the former Countrymark
Cooperative in Indianapolis,
was convicted Oct. 11 of 19 counts of
wire fraud, theft, money laundering
and tax evasion. Swanson was charged
with bilking Countrymark of $2.7 million
through a series of transactions
during the 20 months he headed the
cooperative from 1995-97. He was
accused of diverting money from
Countrymark’s 1996 purchase of Buckeye
Feed Company of Dalton, Ohio,
and Mexico-based Malta Clayton feed
company. He later repaid the cooperative
$450,000 of the $2.6 million it
wanted in a settlement over allegedly
improper expenses. At the time, Countrymark
served farmers in Indiana,
Ohio and Michigan.
Tree Top notches decade of profits
Despite a reduced apple crop, Tree
Top Inc., the apple processing cooperative
based at Selah, Wash., distributed
$10 million as the final payment
to members for the 2001-2 crop. The
payment marked the 10th consecutive
year of profitable operations. Tree
Top processed 452,000 tons of fruit in
fiscal 2002 vs. 533,000 tons in 2001.
Sales were essentially flat at $295.7
million, compared with $297.5 million
the previous year. Net proceeds
were $28 million on apple and pear
processing.
American Crystal Co-op pays
$34 million for sugar plants
Three sugar processing plants in
Torrington, Wyo., Sidney, Mont. and
Hereford, Texas, have been purchased
by American Crystal Sugar Co. of
Moorehead, Minn., for $34 million
from Imperial Sugar Co. The Torrington
plant will be leased to Western
Sugar Cooperative of Denver.
American Crystal will operate the Sidney
plant, while the Hereford factory,
idled since 1998, will not be immediately
reopened. Jim Horvath, American
Crystal president, said the additional
acreage and processing capacity
at Sidney “will add value to our cooperative’s
customers, shareholders and
the Sidney community alike.” About
11,800 acres are being harvested for
the Torrington plant this year vs.
30,000 acres 2 years ago. American
Crystal has two plants in North
Dakota and three in Minnesota.
Montgomery to FC Leasing
Steven Montgomery, executive
vice president and head of Co-Bank’s
agribusiness banking group, has been
named chief executive officer of Farm
Credit Leasing Services Corporation
(FCL) based in Minneapolis. The
firm provides leasing services to agriculture
and rural America and last
year had more than $12 billion in
leases outstanding. AgFirst Farm
Credit Bank and CoBank own FCL
and all three are part of the $101 billion
Farm Credit System. Montgomery
has 30 years experience in
the system and served on the FCL
board for 15 years, including several
years as chairman.
