Tape #327 - Issues About Cooperatives

 

?:  Good afternoon and welcome to this afternoon's breakout session - Issues About cooperatives.  First we'll have a brief overview of cooperatives by Dr. Kate Smith.  Dr. Smith is currently Vice President of Consultants Incorporated in Morristown, New Jersey.  Before joining she was on the Agricultural Economic faculty at the Pennsylvania State University.  At Penn State she was Director of the Cooperative Business Education and Research Program.  This program provided educational and research support to rural-based cooperatives in the northeastern United States.  She grew up on a dairy farm in Iowa where her family was a long-time member of the dairy marketing cooperative. 

 

Next we'll have a model of the value added cooperative approach and this has been successful for a group of African-American women.  The presenter is Shirley Chaurd (spelling?).  Shirley Chaurd is the Georgia Director for the Federation of Southern Cooperatives Land Assistance fund.  The Federation is a nonprofit organization that has been organized for nearly 31 years.  The Federation works in rural areas of the southern United States, primarily with African-Americans.  They work on black land issues, training and economic development, some of them more than 100 cooperatives they have helped to organize, have operated for nearly 30 years.

 

We will next, also have a specialist in the area of cooperatives.  Her name is Audrey Maylan (spelling?) with the Rocky Mount Farmers Union in Wyoming.  She's worked with cooperatives for the last 11 years.  She's established cooperatives in helping new cooperatives get started.  She's co-authored three publications on cooperative development and starting new cooperatives. 

 

You'll know hear from Dr. Smith.

 

Dr. Kate Smith:  Thank you very much.  Um, I, my role, can everyone hear me.  Is this okay all the way in the back?  My role is to get everyone in the audience on the same page with respect to what a cooperative is.  I'm sure some of you have worked in and with cooperatives as long as I have but for those of you who haven't cooperatives are a very special form of business.  It's a member-owned company and, um, it's a way for people to come together and provide themselves services.  I, um, the, um modern cooperatives, the cooperatives of today have their roots, their philosophical roots in, um the mid-1800's in England.  The, ah, Rochdale, England, is credited with the birthplace of modern cooperatives.  It was a group of weavers who got together and formed a store to provide themselves with sugar and flour and some of the basic essentials of live and it, it was very successful and they distilled principles from their success which are know as the Rochdale Principles and most of the modern cooperatives still adhere to the Rochdale Principles.  Um, a couple of the more, I guess I've got four of the more important ones.  The, the first is the democratic control.  A cooperative, most cooperatives are controlled in a democratic fashion with one member, one vote.  That would be different than an investor-owned firm where the number of votes you have depend on the number of shares, of equity shares that you own in the business, but for a cooperative it doesn't matter if you're the member using 80 percent of the cooperative's business.  You still just have one vote, so it's a democratic form of ownership.

 

Ah, the other is the, the distribution of profits is distinctly different than other corporations and other investor-owned firms.  The profit is distributed to the members according to how much they use the cooperative.  It's not how many share you own, how much equity you have, but it is how much you have used the services of the cooperative that determine how much of the profits you get. 

 

And, in the Rochdale Principles was also, they recognize the duty to educate that it, for the cooperative to remain successful and to remain sustainability that there is a duty to continually educate the members and the new members as to the philosophy of the cooperative, why the cooperative was formed and how the members con . . ., how the members can contribute to the sustainability of the cooperative. 

 

And interestingly enough, one of the principles was also a quality of sex, of the sexes.. In mid, mid-1800's in England they believed that the men and women should have equal rights in a cooperative.

 

In the United States, the first cooperative was, is, is attributed to have been formed, ah, with Ben Franklin's help in Philadelphia.  I'm from Philadelphia so I feel a special kinship to that.  It was a fire insurance cooperative.  And, today, cooperatives are incredibly diversed.  There are many that are on the Fortune 500 list.  Ocean Spray is a cooperative.  Welch's is owned by a farmer cooperative.  Land O' Lakes.  Credit Unions are cooperatives.  Ah, throughout the agricultural economy cooperatives are major players.  75 percent of the milk in the United States is marketed through dairy marketing cooperatives.  

 

So, cooperatives are a way for people, are an organizational forum for people to come together and add value to their products or provide themselves with services and make their life, overall, better, and I'm now going to turn the program over to Shirley.  Shirley.

 

Shirley Chaurd:   Good afternoon.  I'll talk to you about a model that, ah, organized way back in the 1960's in Alabama in the southern U.S.  Ah, in case you didn't get my name earlier, I'm Shirley Chaurd and I'm with the Federation of Southern Cooperatives.

 

Back during the 60's in Alabama when a lot of black people lived on plantations or on other farms, ah, working as day laborers or sharecroppers, um, the civil rights movement, ah, began during some of those years, early 60's.  Because individuals participate in the civil rights movement, attended mass meetings, exercising their rights, their right to vote and other rights that they had, ah, a number of them were asked to leave the farm they were living on or were dismissed as workers on the farm.

 

 Now, that was happening in Wilicox County, Alabama where SCLC.  Many of you are familiar with the Southern Christian Leadership Network or probably more familiar Dr. Martin Luther King - that was his organization.  In Wilcox, Alabama, half of the families earned less than $1,550 a year in 1966.  As SCLC worked with families in that community and SNCC also, the Student Nonviolent Coordinating Committee, and as they had to deal more and more with the problem of, of individuals who were, who had no place to live because they were exercising their rights. they needed to try to come up with some answers.  One thing that was noticed was that women had a lot of quilts so quilting was one thing that they could do.  Someone came up with the idea of trying to sell the quilts the women were making.  At that time they were getting about $5.00 per quilt.  Um, the quilts were taken into places like New York and other places in the north and sold and, ah, that income was brought back to women who were living in the rural areas of Alabama, more in particular in Wilcox County, Alabama. 

 

Now, that increased their income considerably.  Um, at one point they were making about $3,000 a year when others have moved up to about $2,000 a year so it was decided to, to organize a cooperative and some of the early organizers of  the Federation of Southern Cooperatives worked with them to organize the Freedom Quilting Bee.  A few years after organizing the quilting bee, the quilting been decided to buy some land and build a manufacturing plant.  Now, some of that land, they were able to get 23 acres with some help with some foundations and some of that land was later sold to some of the individuals who were being put out the plantations to build homes and, of course, the assistance was, was, gathered to, to help them build places to live. 

 

The women have made a lot of quilts.  Some of their quilts, ah, have sold in some of the major department stores in New York.  With the money from quilts they have, ah, organized a day-care center and that has operated for quite a few years.  I don't remember how many at this point, but they have been, been able to bring childcare to an area where they would not have had it had it not been for the Freedom Quilting Bee.

 

Things were moving along for them kind of okay.  They were providing jobs for around 30 or more women depending upon the demand for quilts.  When our government gave the U.S. Quilt Pattern to China through the Smithsonian Institute and it just pulled the rug right from under them and we thought at one point the quilting bee would not be able to survive because quilts began coming into the United States in Wal-Mart and other stores.  I'm sure you've seen them.  Ah, $39.00 and that's, ah, the women cannot compete with that.  The quality of the quilts are not the same, but we have laws in the country in terms of hourly wages and so forth and there was just no competition.

 

 It was at that point where we had to try to figure out how this community could survive,. how these women could survive, because this had been the major income, the co-op had provided the major income for this community for quite some time.  Um, we finally, after really looking around, decided that one of the things this cooperative could do would be to make conference bags just by attending other conferences, working with other people, you know, where they were using booklets really from other countries to pick conference bags that was being held.  This was the United Methodist women, United Presbyterian. . . . well, it was the Presbyterian women.  Ah, and we suddenly got the idea that maybe the women at the Freedom Quilting Bee can make conference bags and I can report to you that they are doing that and that was the thing that has really saved them.  They have had contracts with the United Methodist.  They've made bags for farm aid, for the National Cooperative Business Association and I could go on and on.  They also make dolls.  Um, they make, um, gosh I'm drawing up a blank, but the pad where you pick up hot things in the kitchen.  Pot holders.  They make pot holders and other items, but the main money maker for them has been conference bags at this point.

 

Um, but, I guess the main point I need to make here is that I'm just not sure of what would have happened to most of the people in that community if they not, had not organized to form a cooperative and if they had not worked together since 199. . . , since 1966 to make their community better.  I, I would dare say if one of them were here today, they would tell you the only way to go is through cooperatives.  Thank you.

 

APPLAUSE

 

?:    Um, I just want to take a quick, how many people in the audience are members of cooperatives?  That's almost, what, that's 90 percent.  And how many people in the audience are farmers or ranchers, or . . .    Okay.   So you've very familiar with cooperatives and the role they play in agricultural communities and in rural life.

 

Um, just, I just want to say I was invited to join about ten minutes ago.  But, I'm just telling you the truth.  What we want to do is leave time for a lot of question and answer and interaction, but what I'd like to talk to you about today are farmer-owned value added cooperatives and, you know, we're familiar with, I'll, just a little history, the rural utilities, um, when the companies did not want to electrify rural America.  How did rural American get electricity.  We, we, came together as a community.  We received a loan from the government.  We brought our electricity in.  We slowly paid off that government loan overtime and we became the owner of the company that provided us electricity. 

 

Um, the same with credit unions.  Banks did not want to deal people who didn't have any money.  Consequently, normal people, most of the people were not able to take advantage of financial services and banks.  Again, people came together and they said we'll have our own financial institution.  We'll bring, we'll pool our money and we'll hire staff and we will elect a board of directors.  That board will hire the staff that will run the day-to-day operations of the credit union.  The management will be accountable to the board.  The board will be accountable to the members and in that way member ownership of that financial institution is exercised.

 

Ah, there's  another type of, well, as you all are familiar with supply cooperatives and marketing cooperatives.  If every wheat farmer takes their little bale of wheat out to the market they are competing against each other and this was the history of agriculture for a long time where farmer competed against farmer and neither one of them won. 

 

There's another type of co-op you all might not be familial with and that's a worker cooperative.  That's where the workers in the business are also the owners of that business and worker cooperatives, there are very many in the United States and actually all over the world and they're in absolutely every business you can think of. 

 

So, um, back to this, the important issue of farmer-owned value added cooperatives.  As we see more and more the producer of a commodity has very little control over the larger market in which that commodity's sold.  As markets are now global playing financial deals and commodities prices are very unpredictable.

 

Now, when you look at statistics of increase of commodity prices you'll see a pretty flat rate and as any producer in here knows, are you getting more for your product?  Have you been getting more for you product lately?  On the other hand, when you look at the increase in the consumption and the export and import of processed food, you see a steady, steady increase. 

 

Now, how can the individual farmer capture some of the profit for processed foods.  Again, we go back to the same model where one producer on your own are not able to amass the capital which is required to build the plant, to add value to your raw product.  But, as a cooperative you can achieve those economies of scale.

 

So, I'll give you a couple of examples.  Is there anyone here from North Dakota?  Are you familiar with pasta growers?  You could probably tell, North Dakota is a lot of these value added cooperatives and I'll talk briefly about the model.  Um, Durham wheat farmers, I think this was about eight years ago, it started getting one of the lowest prices for Durham wheat that they've ever gotten before and what they did is they pulled together and looked at what types of products could they make with their wheat and sell on the market.  And, they got a lot of money together and they did a feasibility study and we'll talk later on what some of the key pieces are that you must have if you are to embark on this glorious adventure on starting a new cooperative.

 

Anyway, the Durham wheat farmer feasibility study came back and said that there was actually an opening in the pasta market, but not in the retail stores but in the restaurant industry, that the restaurant industry had very high standards for pasta and had a very difficult time finding a consistent supplier and so after much research they decided to build a pasta plant and so that did a capital fund drive where they sold shares to the new business, to the new cooperative and raised the 40 million dollars in capital they needed to buy and put together this factory. 

Now, the factory is up and running and doing very well and, and the members of  that cooperative, I wish one of them was here to talk to you.  They are much happier and their economic lives are much more stable now that they sell pasta, not a commodity of wheat on the market.

 

When I went to visit that pasta plant about five years ago I felt like crying.  I mean, hundreds and hundreds of years of farmers being on the lowest level as the least amount of power in the economic gain because they provide a raw product that someone else adds value to and retains the highest percent of that profit.  To be standing in a 40 million dollar pasta plant owned by farmers, I mean, this is a revolutionary step in agriculture, very, very moving. 

 

Now, just some of the technical pieces and these cooperatives have a lot of names, new generation cooperatives, clothes cooperatives, members buy share in the cooperative and they sign a contract with the cooperative that they will provide "x" amount of, of high quality wheat on a given day.  Now, if that member does not provide that wheat the co-op then must go out the open market and purchase it and charge the member for that wheat.  So it's a contract.  Also, the co-op is not open to anyone who wants to join because they sell so much product they can take in so much product, so you buy a share and that share reflects the value of that company.  You can then sell your share to another farmer for the increased value.  I think those shares had quadrupled in value, at least, by now.

 

Um, there's other, there's another cooperative up in North Dakota.  It's a buffalo cooperative and these are buffalo ranchers and, ah, they live in the middle of nowhere because they don't like people and yet these buffalo ranchers had a very difficult time selling their product, selling their buffalo to different brokers and different houses and so they decided to come together and build a slaughterhouse and packing plant which they did.  They now don't, they don't sell buffalo.  They sell little steaks and roast in vacuum-packed packages for quite a bit of money to markets all over the world.

 

Now, I just want to say that and as if any of you are members in cooperatives, I am not (inaudible) with the cooperative model, but I'm very dedicated to normal people having more control in this economic game that we're in and cooperatives are a tool.  Their one way that people, producers, normal people can have a little more control and power in this global economy. 

 

So, we're just open it up for questions now and, and, ah, that's that.

 

?:  Well Audrey let the, the cat out of the bag.  Shirley was walking through the hallway at eleven o'clock this morning and somebody asked her how the workshops in the Southern Federation was going.  She didn't know anything about it.  Her, the people that were supposed to, to give the workshop aren't here and I was, ah, happened to be walking by not long after and somebody said, well, Kate know a little bit about co-op so I enjoyed the effort and Audrey came up to say "hi" and we said would you like to be up here on the panel and she said are you kidding.  I said no.  So, it  has been a true cooperative effort up here. 

 

But, we'd like to open it up now for comments and questions like, ah, it's, because we're being tape recorded you have to go to the mike if you don't mind, yea. 

 

?:  I just wanted to say that there's more then what you described, um, different ways of, you know, or, of one model of a co-op, but it's, it's the co-op I belong to, um, which is, in other words, it's a two year old co-op.  It's a farmer, farmer ed  cooperative and we directly market the eggs that we process, um, we directly market them to the retail stores and we, it's all in bylaws.  It's all in how you, you know, create it, and, you know, it's, you know, whatever, you know, the group wants to do.  It's just not one way to do it.  There are many, many, many different ways of organizing a co-op and I just wanted to say that.

 

?:  You know, I'd, I'd  like to follow up with, there are many ways to organize a co-op, but most cooperatives, unless there's something unusual are businesses and, so, if you are interested in pursuing something like this, you know, I really encourage to talk to people who have done this before because what you want to do is minimize risk.  The pasta plant, when they opened, they weren't, there was no question on the level of business they expected to achieve.  They hired the best and the brightest and most experienced person they could find and they paid them well.  They played the business game well. 

 

The other piece that I really want to mention and, and because I've done so much cooperative development with different groups that are very interested in starting co-ops like this, most groups tend to be producer orientated.  They are thinking about what they want to see happen and for a successful co-op to get off the ground.  You really have to be market driven all the time.  You're not thinking about what you want.  You're thinking about what your customer wants and you know that customer so well.  You know where they eat.  You know where they sleep.  You know how many children they have.  You know how much money they have in the bank.  You know what their long-term goals are in life.  You know your customer.  You know your market.  This whole process is market driven and it actually can build a very rewarding relationship between producer and consumer and they can work together and hopefully, you know build a long-term, mutually, rewarding relationship, but that's one very common area, error.  People say, well, I think this product will sell. 

 

?:  I'm involved in a cooperative in Australia, a  rice growers' cooperative.  Um, we export through that cooperative 85 percent of our product on a world market.  We export, ah, (inaudible), but from our by-products we've also got a stock (inaudible) that takes a lot of the by-products from that so we have an, other activities bonus apart from the core product that we sell.  But the advantages that we are find, we're finding now is we've got, we've already got a strong selling cooperative, we've got a fairly strong buying group, too.  We are now buying fertilizers,  chemicals and other services such as telephones and electricity for our farmers.  So, it, it can be, you can get benefits both ways, not only from the things that you sell through the cooperative.

 

The cooperative has also formed it's own insurance, club insurance that is, is a division of that cooperative and we're looking at this stage purely and only, um, insuring (inaudible) crops in the next five years or so until we can get established enough to actually ensure whole farm, ah, insurance packages for everything that we own, so, it can be a two-way thing.

 

Um, (inaudible) and dividends, (inaudible) and equity are based on a per ton basis that go through that cooperative so that big farmers aren't subsidizing the small farmers and I was interested in, um, Audrey mentioned within the wheat cooperative, does that cooperative sell a quota to deliver that way.  Is, is the share (inaudible) also to get that the (inaudible) the quota that you can actually deliver to that cooperative?

 

?:  Do you mean does the producer still have to deliver what they agreed to deliver? 

 

?:  I'm, I'm sorry.  I couldn't hear you.

 

?:  Does the share, the share package that you have, is that, does that allow you deliver a certain amount?  Do you have to buy family shares?  Do you have to buy your quota, your tonnage quota to deliver?

 

?:  No.  It's a share in the business just like any other share in a business and in then, your, um, your quantity is negotiated between what the requirements are and, and, and that kind of thing, yea.  But, now, see, isn't this interesting, this membership contract because, now, a few years after the cooperative was started the price for durra wheat went up.  Now, without this contract, your members could say, shoot, I'm not taking my wheat here where I'm only getting "x" cents a pound.  I'm going to take it over here where I can get more.  But, when they do that they damage their own cooperative, do you see, so what this does it prevent and guarantee supply and the, the business is growing because it is such a high quality product, because these farmers are now part of the process.  They understand what is happening with their wheat.  They understand pasta.  They understand that what they need to look for in their product, in their crops and they're making an incredible product.

 

?:  I belong to a cooperative in (inaudible) Queensland, Australia,  (inaudible), and way the sign, we don't just get extra for the product we sell, but we get cheaper cotton, cheaper fertilizer.  If you are a member of the co-op you get rebates on all these things and we charge our growers 30 cents a carton to market their fruit.  We employ a marketing agent and we also employ field reps to go around to the various farms and we expect them to supply up to 80 percent of their product through us.  If they don't within 12 months we buy those share back, but, um, with that 30 cents that we charge, this year we've paid them back 33 cents, so, really, they're making a little bit extra, plus they're getting the cheaper things that they wouldn't get if they're not in the cooperative but everybody seems quite happy.  It's only been going four years and, ah, this year, we now we've put through 2 million cartons worth about 30 million dollars, so, we're growing.

 

?:  I have two quick comments before my question.  I happen to have a coat bag I bought that was made by the quilting group in Alabama with me today and you know how you get a lot of mailings on, what we call junk mail, I got a slick brochure for this buffalo meat - way out of my price range and very extravagant.  I'm not a meat eater, but if I was, I would certainly want to try this, but it was a, it was a beautiful slick full color brochure, I mean, delivered vacuum- packed in its own little ice, whatever, flown in, so you can tell that a lot of effort in the marketing went into that. 

 

I work for small farmers in North Carolina and, to me, the cooperative is the way to go.  I've been down to (inaudible) Alabama, for the training that they do on how to form cooperatives.  I'd like to hear from those of you in this room who have formed cooperatives, how you bring the people together and develop that commitment to work with the cooperative.  I understand that it's a long process and it takes time to build, but give me some ideas.  What kinds of things work, perform that cohesive force to make everybody profit from a cooperative effort.  Thank you.

 

?:  I would like to introduce Debbie Barton DuPree (spelling?).  Um, Debbie and I are both from Massachusetts and Debbie is actually the Treasurer of the Pinner Valley Milk Marketing Cooperative, a marketing cooperative that has been formed by six dairy farmers and is now up to seven dairy farmers who have come together to market their milk in a value added way, and what I would like to do is just add some comments when Debbie's done, but she's really good about describing, um, the product, the process of bringing this cooperative together that only began last September, began marketing its product last September, but began probably a year and a half ago in working this whole process out. 

 

?:  What's the product?

 

(Inaudible)  Milk. 

 

Debbie Barton DuPree:  And I was supposed to only be here to hold her hand.  Um, I'm Debbie Barton DuPree from (Inaudible) Massachusetts, and we have come together, six local dairy farms, small farms, I should say.  There's, we all milk about 50 cows and they're pasture fed and, um, (Inaudible)  Ah, we came together because there isn't demand for a quality milk in our area.  We are fortunate to have people that really care about their food systems and how their milk is produced and what they eat and drink.  We do have a, a local food co-op that does quite well with our milk, but we also market our own milk.  We go into stores.  We talk to store owners, store managers.  We stock shelves.  We talk to consumers.  I've gone to supermarkets and actually worn my co-op tee shirt and promoted milk right in the dairy aisles and picked up cartons and thanked people for buying our milk and, you just caught me off guard. 

 

?:  Is, is this organic.  Are you marketing organic milk?

 

DuPree:  It is not organic because we don't feed organic.  Um, we are (inaudible) and that is advertised on our cartons.  We don't have the, we just don't have the market for organic feed right now close by.

 

?:  What I wanted to say was a few things about how this came about.  We had started as part of the Kellogg Foundation's  IFFF projects in our local area under community involvement and sustaining agriculture and part of that the dairy action group got started.   There was a lot of training for dairy farmers and then the women's group came out of that, women and dairy farming and there began to be built a cohesive community within the dairy farming group and they spoke frequently about how they weren't getting enough for their milk.  They were in a cooperative, the large milk cooperative that was, in fact, not benefitting the farmers in any way and what they decided to do was explore to see whether they could find their own milk marketing cooperative and marketing is the key word because what they have done is they have marketed rather than having someone else do that and, as a result, they did a partnership with the Department Food and Agriculture in Massachusetts with the farm bureau and we ceased that in order to get enough money, about  $10,000 to do a business plan.    They followed up on a milk marketing research  project the DFA had financed and they set about farming their own cooperative.  They got their cartons designed.  They scoped out their markets.  One of the things that's unique about this is that the milk marketing cooperative is fairly risk free venture for these farmers that didn't have capital to put up.  They didn't have any other way to finance this whole process so that have subcontracted all of the different pieces.  They continue to get their regular milk check from Agramark (spelling?)  because Agramark continues to be the balancing.  They, then, Agramark sells the milk to the processor who then sells the milk back to the co-op members technically.  It is subcontracted and delivered by another company and, who else do we got, anybody else?

 

Inaudible

 

?:  Oh, and then we have the billing and , um . . .

 

?:  Administrative

 

?:  Administrative and accounting procedures that go through another organization and all of those services are paid for, um on a regular basis.  They're making a profit at this point.  Um, it's only been since September.

 

?:  And the only way that co-op members are paid now is if they do marketing or if, um, they're going to meetings.  That is the only payment they receive so far.

 

?:  The cooperative is set up in such a way that all of the members are, um, voting members.  Is it per farm or per?

 

?:  Two per farm.

 

?:  Two per farm votes.  Ah, there is another subsection where people can invest in it but they do not become voting members so that the control is maintained by the farmers.  They make all of the decisions.  Ah, and they share all of the profits from it. 

 

One of the other interesting things about this is one of the reasons it was successful is that when it was launched, it was launched, launched in such a way that all of these, the dairy processors, the big department, or grocery stores that agreed to carry it, all of these people thought this idea is nuts.  It will never get off the ground but we'll give it a shot and as more and more people came on board, we publicized it, got a lot of media coverage and as a result, these people were and organizations went out (inaudible) so Argramark couldn't say, oh no, we changed our minds or other people at delivering it couldn't say, oh no, we're going to up our price.  It was such, organized in such a way that the, the community was really on it by the day it was launched and anybody who backed out or did something to screw up that process was going to be seen as a bad guy and, so they've all stayed in it and it's really continued to go well.  It's not only in one major grocery store.  Another one has approached us and its in there and its in many other stores as well.  And the three, three of the, no all of the officers on the cooperative are all women.

 

APPLAUSE

 

?:  So, um, now, why did you quit your marketing co-op to start your own co-op?

 

?:  We didn't quit.  We are a marketing co-op. 

 

?:  No, but . . .

 

?:  We quit, ah, well, we, we haven't quit our balancing co-op, Agramark.  We still belong to that co-op. 

 

?:  Ah, huh, but what made you want to start your own co-op?

 

(Inaudible)

 

?:  Yes, to make more money.

 

?:  And are you making more money?

 

?:  Well, we started it also to have some security.  Um, there are co-ops being bought out by bigger co-ops and this is our security down the future.  We have the newly  (inaudible) compact which helps all of the farmers whether they're in our co-op or not we, we believe in that.  We've got to have that and it's just our future and it gives us pride in what we're doing.  We're actually putting our product, which is a good product, which is fresh, local, on the shelves and that's what people want.  I remember going into a grocery store one day and seeing nothing but sale milk, milk on sale and I said where is our Family Farm's Milk, I, you know, there's no shelf space for it.  Where is it?  Is it out back and they put it on the shelf.  I need to have that on the shelf.  He said that's not the milk on sale.  I said but is it the milk people want and just then a little baby walked out I can't find our Family Farm's Milk and he looked at me and then just went out back instead of stocking shelves.

So it is milk people want and it is good milk.  Thank you.

 

?:  Congratulations.

 

APPLAUSE

 

Kay ?:  My name is Kay (inaudible) from New York State, dairy farmer.  Um, I agree with you and with everybody that we all need co-ops because before we go onto a dairy co-op, they say this is your butterfat but it really wasn't and they would say, well, you know, your (inaudible) and that wasn't right either and co-ops are honest and, but I can't help feeling now that we belong to a co-op called Agway.

 

CHANGE OF TAPE

Side 2

 

?:  (Inaudible) One way that all the people they form into a cooperative (inaudible).  The thing that I'm saying is the need has to be taken.  All the people have gathered together and they said that instead of middle man coming and marketing our products how about we women and youth forming into a group and marching our own products to the markets.  So that is all that they have formed into a group and they started marketing and once they went to the market they know that their, the products, ah, the latest technologies that needs to be used, what are the latest trends in the market.  They came back again.  They added (inaudible) and that is how each cooperative is (inaudible). 

 

I know an example I give you of, we women have, we women make, the tribal women make the (inaudible) which is used for making the carpets, the (inaudible) and many more things.  The women, again, the, the middle man came and exploited them by not weighing them properly.  They go to the markets.  They do not weigh properly and they just throw it off so the women got together to see what exactly can be done so we said how about having a weighing machine.  It's a very simple thing so they all formed into a group and the group, once (inaudible) it's a cooperative, but informal group, but they have (inaudible).  That is how they formed into a group and the market value which was just hundred thousand dollars from a tiny village which is otherwise would not even know (inaudible) never trace back.  From that village the hundred dollars market, ten thousand dollars market has gone to thrity-five thousand dollars and it has just, it has taken a long time, like there was opposition from the middle man.  They said that they will not buy your product so that they cannot take back all (inaudible) back to the hills so they used to sell it off.  Then next week, you know, they, they have a small weighing machine and they say, you see, can you see the number?  I think this is  (inaudible) or four kilos (inaudible) so they say ha, ha, ha. Oh, your having a weighing machine (inaudible) so they give it up. 

 

It takes a long, long time to form into it, but then it, the thing is it figures it has to come from the people.  Cooperatives only survive unlike the business.  Business is for the profit making so you start a business so I also start a business, but for the cooperative, if my need is not there and if I just (inaudible) it never survive because that is what we have found with our own experience because in six thousand villages where we work in, in 18 to 20 (inaudible) failed miserably because they just tried to copy from what others are doing it and it never worked with them and the cooperatives, again, it depends upon, like, it can grow, but then sometimes few members in it become very, very selfish.  I'm sure that's happened with everybody because we were discussing in the (inaudible) session we were discussing only about cooperatives so, there also we had the problem with other people.  A few selfish people come up and they think of only themselves and so the (inaudible) that this is cooperative but they take advantage of it being as a business and they start making money and that is where the cooperative starts failing it so is the point where we have to regulate ourselves and we see to it that our (inaudible)  Thank you. 

 

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?:   Ah, some of the ah, I'm from one of  those dairy cooperatives that I hope has not gone to rot yet, small one in the northwest corner of Vermont.  Ah, been around since 1919 and there's only one year we haven't paid a substantial profit back to our membership, but there is tremendous pressure on the smaller cooperatives right now.  We have 600 members so I don't know if you consider that small or not but we still do. 

Some of the information that's available, NICE, National Institute of Cooperative Education, I'm, you're probably familiar with that if you've been trying start cooperatives. 

 

Ah, one of the things dairy cooperatives, especially, I think they're very mature.  Now being around since 1919 isn't that old, but it's very hard to keep members involved because, oh, the cooperative will take care of it which is, and we try very hard to keep young people involved.  There is a national program for cooperatives through the National Milk Producers Federation on Dairy Cooperatives for young people because if you don't keep training your young people and keep them involved your cooperative's gonna to expire.  There be no one else to come to the Board of Directors and, I think, ah, maybe, working with young people or younger farmers or younger people trying to do their own businesses or finding ways or interests where people are coming together like, for one, the milk or some product their trying to sell that's not working so well for them, ah, some ideas they have, but it is very difficult being a small cooperative right now.  There are some very large ones.

 

Ah, you mentioned earlier, Audrey, I believe about, ah, the business planning that the pasta company went through, a feasibility study, and you said you might allude to some other things that they did prior to, could you elaborate on any of those?  I think, because dairy cooperatives are so mature, ah, there maybe some things we have to start looking at  of something value added but how does one determine if that's a feasible route to go?

 

Audrey Maylan (spelling?):    Um, well, you know, first off, I think Kraft should be owned by the dairy producers.  I mean, and that might be an option.  You know, why don't producers own Kraft.  Why is this taking so long for the farmers to get close to the consumers?  Really.  In Europe, they, and, Italy, northern Italy, they're much, producers work, farmers over there do not sell the commodities  (inaudible.  They sell these little, beautiful tins, you know, very lovely label for a lot of money and that's what they sell.  They, but, yea, I think, it's, there's so many, I mean I've worked with so many groups and there are so many places where this can fail. 

 

You were mentioning together.  You know you can't make people want to do something.  If they are in an apathetic mood and if they want to lay down and die and I say, I have to say no one complains more than farmers sometimes.  I mean they like it.  Kinda of like a musical chant that we've had for hundreds of years so, you know, it's really a different mind-set and the other pieces that a lot, now you may, I'm curious if this is true in India but, in the United States for the value added cooperatives, in general, most of those members are farmers that are 30's, 40's 50's.  They're not getting ready to retire so they're really looking at their future.  But, the typical, there, when your doing cooperative development, there's kind of two pieces to it.  There's the basic business development which is true no matter what and that's during a good feasibility study.

 

Well, let me just back up.  There are two reasons why all businesses fail.  It doesn't matter  corporate business or private enterprise or cooperatives.  Lack of capital and lack of business expertise.  Those are the two main reasons.  Now, we know this so if we're organizing a co-op let's make sure that we don't fall into any of those two categories, that we have the capital, that we have the expertise.  Now just roughly, generally, you would pressure your association or your group to raise money to do a quality feasibility study and when you do that feasibility study you do a lot of research before you do the feasibility.  You want to know what is the best consultant or company if we're hiring someone to do this.  Who's familiar with the field?   What questions do we want to make sure they address?  And then talk to other groups that have done the same thing.  Other groups that have done feasibility studies or who have started cooperatives with similar products that you're looking at.  Network around the country - it's really painful for me to see groups kind of reinventing the wheel all over this country because if one group goes through this process, resources are so rare, you want to be able to learn the lessons that they've leaned and bring that back to your region and go to the next step, kind of.  So, but the feasibility is kind of the number one thing because that gives you information.  Everybody has ideas what they think will work but those ideas are just fantasies really without information that backs them up.  And then you would get back with your group and see if there's interest to proceed and then you would do a business plan and not a business plan to try to try to convince somebody, a real practical, down to earth business plan and then in that process bankers are like your best friend because bankers are so conservative and the capital drive and recruit management. 

 

But, I've co-authored a publication called "Steps to Starting a Marketing Cooperative" and there's a couple of other publications coming out so I'll give you some numbers where you could get those.  Call the National Cooperative Business Association and they're, ah, area code (202) 638-6222, 6222, oh 638-6222.  They're here in Washington, DC.  You could call me too if you want, it's Audrey Maylan, (307) 655-9162. 

 

Jule McKenzie (spelling?):  My name's Jule McKenzie.  I'm a dairy farmer from Australia, south Australia in particular.  I just thought I would like to tell my story or my family's story.  I've been a dairy farmer all my life.  My parents were, were dairy farmers and my husband and myself have now taken over that property.  We were, ah, we live in a community that has a number of dairy farmers close, within the close vicinity of each other.  We were faced with, ah, environmental regulations where we were forced to putting (inaudible) to, so that the (inaudible) wasn't allowed into go into any waterways in any form whatsoever.  Um, one of our, one of our neighbors is also a dairy farmer.  We live very close to each other.  We both were faced with the same problem living quite near a stream that flows all the way around to this, this fresh water going to everybody all the time.  Um, we were getting caught high in numbers of cows.  Um, we were both up to 300 to 400 cow in, in, in adequate theories so there was a need for both of us to get, get bigger in a short way of putting it.  Um, we both had to spend lots of money to put in this (inaudible) control.  We both got together and saw that it was a bit pointless, two farms being so close to each other, having to spend all this money to do this, um, um, to, to solve this problem, so we decided that, that my husband and I would, would build a dairy and we would milk our neighbor's cows and he, under a contract, um, that's a short, that's a short story.  But, ah, and that's what's happened and it'll be, the anniversary of that will be two years on the third of July.  It's very, it's been very successful.  It's was a lot of hard work to get to that point but, ah, um, I think the, um, the term, the term's that being used is asset sharing.  Um, where or milking our cows which at, we've got 500.  We also milk our neighbor's cost which, which he's got 400 so 900 cows going through the dairy twice a day.  Um, we do all the milking and the, the neighbor just has to bring his cws to our farm and take them away again.  He doesn't have any inputting into the milking and then that allows him time to um, to um, concentrate on, on his farming, in other words he's producing his grass for his cows.  We're both pasteurize based farms.  Um, and, and, the contract is he pays us 15 percent of his gross income and it's working very well.  He's happy and we're happy.  We, we, both supply a co-op which has recently been bought out by a bigger co-op. 

 

?:    Good job. 

 

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?:    I know we're running out of time, but I did want to make a couple points on a cooperative.  My husband and I own and operate a dairy in California.  For 26, or actually 25 years we shipped to an independent and, ah, the owners of this independent originally were dying so the second generation came in and we didn't feel a self of well-being belonging to something.  The co-op, meanwhile, ah, it's about 60 miles from us, was coming around and they needed more milk for their plant so they offered an incentive for us to produce, not a quality, but an incentive, which our original, ah, independent plant was giving us a quality bonus for our milk.  Ah, that incentive was very, very appetizing.  We went to our independent and, ah, asked him, you know, you have over 300 shippers, ah, because cost of production was up why not include this as part of payment to the producers.  We would be much happier and we would stay with you.  Well, they, because they couldn't , the second generation, like I said, lost the reality of how important the producers are.  They would not give us an incentive program.  So, therefore, we moved to our cooperative. Well, since then, the independent that we used to ship to is now giving incentive bonus to their producers that stayed on.  In one day there was 19 thousand gallons that left the independent to a cooperative which was our dairy plus two other dairies. 

 

But, the cooperative movement in California, there's two of them that I really want to make some points on.  One of them, when you're elected to the board, you're elected by your membership and when you reach the age of 65 you can no longer serve the board and I think that's ideal because it brings in, someone made a point, younger, ah, women or me, to become part of the decision, the board and if someone stays on there until they're 80 or 90, I'm sorry, they're do not become creative and they're not up with the times that are needed to be in, um, marketing and in management.

 

Another one is the board meets once a month but the membership meets once a year.  It's like a one day convention.  So, therefore, the membership has an input about, you know, hey, this board member is maybe not up to par.  Maybe we should get somebody up there and there's no, no hurt feelings among each other.  It's just, it's management is what it is if you want to keep your cooperative productive and, ah, you need to be vocal and, ah, we have in California a very complex system in our pricing so it is very, very important that we keep up in tune of what's going on otherwise we, the producer, are losing. 

 

Um, I think that's about it.  Oh, there's one cooperative just began two years ago and there was a need for the Hispanic cheese.  A lot of the dairymen were selling their milk by five gallon buckets to the Hispanic people and they're making bathtub cheese.  Well, of course, you know, that's very dangerous and so there was a group of dairymen that got together, asked for 27 thousand dollars a share and they started, they bought an old plant, an milk plant,  processing plant and, of course, it took lots of money to bring it up to par and, ah, there was some management problems in the beginning.  Couple of the ladies that belong to the California Dairywoman that I'm the president of, got in there, bought some share, they turned it around and they're doing really, really well now.  But the market is there. The Hispanic cheese market so you have to find that niche and management, management, management.

 

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?:  Um, I have a question of Audrey.  I'm in an extension area sort of trying to help farmers that are usually in financial difficulty and cooperatives are often put up as a, you know, a way to go, to get more marketing clout, but the problem is when you get farmers looking at cooperatives often they're already in a bad financial way and to convince them to put more money out to start, start something new and to pay for experts which they absolutely dread the word, how do you get around making them see?  Now, I take your point that they have to want to, but can you make any suggestions about how to sell the idea?

 

 Maylan:   When they're already in financial trouble?

 

?:  Well, maybe not in financial trouble, but convincing them that this is a good investment when this, you know, they're, they're hard to convince of new ideas and this is something that, you know, they don't necessarily understand and so they're reluctant to, commit their money to it.

 

Maylan:   So established cooperatives.

 

?:  Yea.

 

 Maylan:  Bringing in some kind of training.  Well, you know, when we do in cooperative development and Kate mentioned that one of the fundamental cooperative principles is education of cooperative members because you might be top-notch dairy farmer, but not necessarily understand how to be on the board of your dairy cooperative.  That's a specific kind of training, so we try to build into the bylaws of  the cooperative as it begins, that there will be ongoing training because no one ever wants to do training.  There's never money for training and when you wait till there are very serious problems, it's almost impossible to dig your way out of it so the best thing is to have ongoing training where all board members are on the same page what their responsibilities and members are educated at what their responsibilities and it's ongoing.  That way if you have people that are cycling in and cycling out, you've got this consistency going on. 

 

But, no, I don't have a magical answer for that.  I've dealt with it myself and it's horrible.  I mean it's very painful to watch as an outsider to, we have someone . . .

 

(Inaudible)

 

?:  Did we come up with any strategy for the older co-ops who, like they say, have gotten totally out of control?  I belong to a large rice co-op and back in the 1920's and '30's it was, you know, local, and it was wonderful because there was no market.  Ah, the folks talk about getting 25 cents a bushel for rice so they formed this co-op and, they, ah, you know, got their national, international, ah, market, and that was great, but then we hired the, the biggest and the best, you know, to come in and help us continue to get the markets and, ah, consequently, you know, we had the big salaried people who forgot where they came from and they looked down on the dumb farmer, you know, ah, is, you know, they forgotten where they paycheck is coming from and they, they need to tell us what to do so they have all sorts of ways to keep us from, ah, voting and having any say-so ah, because, ah, a lot of this land belongs to people who have moved away inherited  so their in other parts of the country and they send their proxies in so the, ah, ah, the board and hierarchy have all the proxies they ever need to out vote the local people and, ah, a good example is in we made this drive to, and I don't even know what it was, but to vote against something that they were going to do and we wrote letters and we got everybody concerned, had our little town hall meetings to show up and vote against it and the day before the meeting they moved it to another part of the state where only, you know, the board members and very few could go.

 

So, any strategy on how to get control again?

 

?:  Somebody, someone over here just said "leave" and one of the things that I wanted to reiterate about the, ah, our Family Farms Milk Cooperative is that the farmers decided to do just that.  They decided they had lost enough control over what was happening to their product that they decided to work to form the cooperative themselves.  The other part of that is that I wanted to say in response to how do you get people to come together to form cooperatives.  I really think that the people want to be there, want to use this model and take control of their own product and, in some ways, take, take more control over the destiny of their lives and of their farms and in doing so they are able to make the rules, make the plans.  There's a lot of education that took place in the part of, in the beginning parts of getting this cooperative going so farmers had a lot of information before them, but what ended up happening is really an interesting process because the farmers had to decide how do they wanted to work together or whether they wanted to work together.  It started out as a group of farmers, probably 15 or 16 and whittled its way down to 6, but these are farmers and their whole families who are devoted to what they were about to start out, ah, to do.  So, it wasn't a matter of convincing them they needed to do this.  Anytime anybody felt like they were convinced, they left.  They just, they didn't want any part of it.

 

 So, if you, if you are going to have something that's really successful people have to be dedicated to what they're doing.  Some of what's happened with the large cooperatives is people have felt so distance from them that they don't end up getting what they need from the cooperative and it's always they at a distance are screwing us over in some way and what people are looking for is being able to take pride in their own product and saying that they know where their milk is going or where their producing, whatever they're producing and where it's going.

 

?:  I'd just like to say to the people that are having problems with the bigger cooperative, um, we have two levels of our, or there's actually three levels of our industry, but the two levels, the two (inaudible) levels are our association which is a political lobbying group.  Um, it's broken up into, um, seven branches which are geographical.  Um, the association has a central executive of 24.  Although that sounds quite large, it's based on numbers of members per geographical region and in this way, they come together every two months but they have, um, annual meetings and they're very dedicated to the cooperative.  These, these, the association members are also often, although they are, members of a, the shareholders of the cooperative.  So, I think the growers in dairy or whatever need to get an association of all dairy farmers that they can actually lobby their directors and make sure that their directors are doing the right thing for them and the strength is in your numbers.

 

Our association, we pay, we pay an annual fee.  We own the em. . . ., um, an executive director and two other staff and they do all the lobbying for us that we need to keep that cooperative in a manageable form that we want it to be.  But, we also have the opportunity to lobby our directors as well.  But, if the grower organization feels very strongly about a certain thing, we can get together and put a lot of pressure on, on directors and I know that with the dairy industry it's different because your geographical areas are just so large, but perhaps getting grower associations at the grass roots level might be a way of overcoming that. 

 

?:  Um, we're gonna have to, we're gonna have to close here.  Um.

 

?:  Well, there was one person who wanted to say, did you, is it a burning thing you needed to say?

 

?:  Well, I'm a dairy farmer in Australia and I supply dairy farmer's brand and we have the directors and two or three years ago we started communication group so I am a communication, a grass root communication person for my area and in that area there are about five areas joined together and we may represent 20 people and then that person, the district chairman, meets with the directors so I feel it's very important to have that grass root communication and the members must feel as if, um, whatever they've got to say, you know, it can be reached to the top.  We have to, empathy and, um, a feeling of, ah, a losing of control.  We, you have to realize your vote counts and your side counts.  So, it's really good that this communication system has worked and it's working well.  Thanks

 

?:  And I want to say that as we develop and work in smaller cooperatives, education and training, those two things are the key to the success we'll have.  Um, as, as you talk about trying to organize cooperatives, how do you get people to be a part of it.  It starts there with education, but also, I just wanted to give you one example of where a company, one company looked at the struggle African-Americans farmers were having in the south and said we want to try to help with the problem and that was Ben and Jerry's Ice Cream Company. You know, farmers, black farmers selling pecans at sometimes were getting 18 cent a pound.  I know you cannot buy pecans in this country for that.  They're more like three something a pound but at times they were getting as little as 18 cent.  Ben and Jerry said they wanted to do something to help with the problem of black land lose so I organized pecan growers in to a cooperative and Ben and Jerry's paid a premium for the because they bought from them.  Now, what I did, was ask the farmers to save half of that premium price toward building their own processing facility because they had a real big problem in getting the pecans processed and a lot of it was due to racism in the south.  Um, they saved half of their premium price and they acquired their own processing facility last year in March. 

 

So, sometimes it comes from just coming together, discussing the problem and then trying to do something about it.  But, other times it can also be fueled by someone from the outside saying I want to help and no one would know you need help unless you come together to begin discussing the problems that you have. 

 

I want to say thank you to everyone for coming and Audrey wanted to, okay, before I turn it over to Audrey I wanted to say a special thanks to Audrey and Kate for assisting us with this workshop.  Audrey. 

 

Maylan:  Um, I just wanted to make a couple points that, um, the cooperative, established cooperative is one of the last white male (inaudible) at least in this country.  I don't, and I think in Canada as well and so there's really a lack of female participation in most established co-ops and yet when I do cooperative development, women get cooperatives really fast.  I don't know, it comes to us naturally.  We work together and so I encourage you to get involved.  If your cooperative isn't meeting you need to leave and start your own cooperative and move yourself closer to your consumer.

 

The other thing is that in organizing people, I should say farmers don't complain enough, that farmers and producers tend to see the problem as their problem and it is not their problem.  It is not that they are not farming efficiently.  They are.  It's a bigger economic life that we are involved and I really encourage people, at least, exploring how to get more control in this global game because we can't trust major corporations to pass a fair wage and we can't trust that government will come in and help us and cooperatives are a way that we can organize and, and help ourselves.  So, that's what I . . .

 

?:  Thank you.

 

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