We are running a little bit late and if anyone feels comfortable to move up since we're a small group, please feel free to do that. We have as our presenter today, Ardith Duwall (sp?) and the workshop itself is "Outlining the Advantages of Using the Cooperative Approach to Add Value to Crops and Increase Profit Margin". The only thing I am going to ask you to do as a moderator, as you know each session is being recorded, its being recorded through the microphones. The tapes are available for purchase and I believe its $8.00 a cassette tape which will be available at the end of the day at the registration desk. So if there are going to be questions, I know we'll have a question and answer period, I'll be coming around with the mike and handing that to you. So please when you ask your questions talk into the microphone, okay? Thank you.

Thank you and good afternoon. Again, I am Ardith Duwall (sp?) from Shannon, Illinois, USA. I am located in the midwest in Northwestern Illinois which is about 130 miles west of Chicago, so that gives you kind of an idea of our exact location. My husband and I own a dairy farm and we milk registered Holstein cows. Our prefix for our farm is Shenendoah Holsteins with registered cattle and in the cattle industry many times you name your farm. We also raise corn, soybeans and alfalfa.

Just to give you a little background on myself, I have served on various boards, oh, probably for the last twenty five years. And I'm presently serving on the "Foremost Farms, USA Milk Marketing Cooperative Board". There's two women on our Board of Directors with thirty four men so we are a little outnumbered. But, its a great educational experience and I'm real interested in the dairy industry and in this aspect of it. I formerly served on the "Morning Glory Farms Region of Associated Milk Producers" Board of Directors and that was also a milk marketing board. But because of declining numbers of dairy farms within the United States there's just a lot of mergers taking place within the dairy industry, just in general, there's just an awful lot of mergers and cooperatives going together as well as many other companies. I also represent our milk marketing board on the Dairy Council of Wisconsin, which is an educational arm and we do a lot of educating of consumers and school children. I also represent our cooperative on the Illinois Milk Promotion Board, Illinois Milk Producers Board, American Dairy Association of Illinois and I am a Charter Member of the National Dairy Board which was organized in 1983 and was one of four women appointed to that board several years ago. And we devoted our efforts to promotion, education and research projects.

From my interest in promoting the dairy industry and the agricultural industry it led to my involvement in American Agri-Women and I served as President of American Agri-Women a few years ago and am a part of the A.W. Delegation at this international conference. Before I begin with my overheads, I would just like to ask everyone to introduce themselves and where they are from just to get an idea of your location. So we'll start down front and we'll just work around the room.

Dorothy Barker, Oxford, North Carolina, we are vegetable farmers former dairy farmers and community activists. My name is Mosella Trotter and I'm with USDA in Washington, DC with the Office of Communications. I'm Jenny Warden from Middleburg, Virginia, I'm an activist in land preservation. I'm Ruth Pedersen from Tasmania, Australia, we grow vegetables and my off farm income is as Project Officer for Tasmanian Women in Agriculture. Joyce Bowling, I'm a veterinarian I'm with the US Department of Agriculture here in Washington. I'm Betsy Heffner from Nashville, Tennessee, I'm with USDA Farm Service Agency. I'm Cathy Kleary, I'm a dairy farmer from New South Wales, in Australia. I'm Corinthia Fire with the US Forest Service International Programs Office here in Washington, DC. Jean Pettibone, I live and farm in Northwest Kansas Eastern Colorado, grains and edible beans. Mary Peabody from Burlington, Vermont in the United States and I'm here with the Women's Agricultural Network. Angela Riden I'm from Western Colorado, I'm a cattle rancher and an Emu raiser and I'm with the Colorado Farm Bureau. Bridgette Getsey from Oregon I'm here with the Pondynamics Agriculture Crisp which is a research program that does fish farming research and developing work mainly and I'm also a goat farmer. Trifinia Mative from South Africa I'm a coordinator for Northwest Department of Agriculture, coordinator for _______ agriculture. My name is Teria Sanders I work for the USDA from Chicago, Illinois. I'm Ann Jorgenson I'm a farmer from Iowa who is now serving on the board for Farm Credit Administration and Cobank is one of the major lenders to cooperatives and I very interested in the formation of new cooperatives. Claire Bonn from Northern Churchery of Australia family owned and operated probably 100,000 acres and off farm income from Melankay coordinator and diversifying as much as we can out of burman cattle into things as wild as crocodiles harvesting from the wild or forestry. I'm Maneketia from Guinea West Africa I'm the Executive Director of Guinea __________ Marketing and ___________ Foundation. We help farmers, mostly women, in marketing their produce training them in quality improvements and accessing to original market. I'm Katherine Hill from the Office of Communications, USDA Department and I just got back from Europe myself. I'm Annie Peffier from Queensland Australia we have beef cattle and grow grain but I'm also developing my own sunflower oil.

Thank you and welcome I'm so glad that you joined me this afternoon and that we just really have a good good cross section of the world. So thank you for coming. I have overheads with a lot of information on the overheads and as I give my presentation I'm going to look at the past, the present and the future of cooperatives with value added products. Okay, the topic of this session is Cooperatives Adding Value to Benefit Members and Customers. Why do we have cooperatives? Farmers form cooperatives because together they are able to accomplish more than they are able to accomplish by themselves. It would be financially impossible, for example for a dairy farmer to individually own a milk processing facility and develop a marketing and distribution system for his milk on his farm. But by working with other dairy farms, other farmers this challenge to the individual producer can become a reality. The Capper Volstead Act is the Magna Carta of Agricultural Cooperatives. This law allows farmers to form cooperatives without violating antitrust laws. And no matter how large or how small a farmer is he or she has one vote. This means cooperatives have a democratic system. Cooperatives must derive more that 50% of their sales from member business. They pay taxes just like other businesses and the income is taxed once. The taxes are either paid by the member or the cooperative. Cooperatives handle most of the US milk between 85-90% of the milk in the USA is handled by cooperatives. They have worked very very well in the US Industry. Well, I said between 85-90%, exactly 86% of all milk produced in the US is marketed through a cooperative. And that is up, as you can see on the overhead, its up 10% since 1976. The number of dairy plants in the US has dropped dramatically in the last 21 years. This slide shows all dairy plants not cooperatives. But the numbers are similar for coops. As plants merge and consolidate in response to competitive pressures and changes in the role of the Federal Government plays in supporting milk prices these numbers will continue to decline. In recent years you just almost had a cheese plant almost in every section, for example in the midwest and there's just been a steady decline, and just as I said earlier just a lot of mergers within the industry.

A little history, dairy cooperatives began forming around 1920 about the time that the Capper Volstead Act was passed. The push to organize cooperatives came about because farmers did not have stable markets for their milk. If milk buyers had adequate supplies of milk to manufacture their products they simply told the farmers their milk wasn't needed that day and they had to deal with it and probably feed it to their livestock or merely dump it. Market instability was financially devastating to dairy farmers and so they took matters into to their own hands and formed local milk marketing cooperatives. The first dairy cooperative served a very local population center unlike today's dairy cooperatives that market products around the world. Cooperatives also provided accurate weighing and testing services for their members so that the farmers were being paid for what they actually delivered to the coops. Prior to this it wasn't' always a real honest situation.

Today cooperatives have grown into regional and national businesses. You can use the "Dairy Farmers of America" or "Land O Lakes" as examples of dairy cooperatives that have members from coast to coast. Dairy Farmers of America have for example 22,000 members and this is an example of four dairy coops that have merged together into one large cooperative. As cooperatives get bigger the demands of the members change too. Cooperatives first provided field service as well as frequent milk testing and regular reporting of test results. Some cooperatives also sell the equipment and they sell supplies to the farmer members. Then we come to the advent of regional cooperatives. Some cooperatives also have their own feed service so members can purchase the animal feed from their milk marketer. Another service performed by cooperatives in the 60's and 70's was political representation at the State and National levels. Today this has been changed because the Government's role in milk pricing is diminishing. Some cooperatives are also providing members with planning services to guide their decisions on how best to position their dairy operations in the future and we hear a lot about the future's marketing. Farmers are looking to their cooperatives to provide educational and market advice on using risk management tools to remove some of the volatility from the milk pricing system. In the past many cooperatives just marketed their raw milk to fluid milk bottlers. Today, cooperatives handle the milk from the farm to the store shelf and many cooperatives have their own brands. For you ladies in the United States you're probably familiar with "Land O Lakes", "Golden Guernsey", in the midwest we have "Morning Glory Farms", there's just any number of brands that you probably are familiar with.

With an emphasis on milk or dairy cooperatives I would just like to [you can change the overhead] give you a little history on the "Foremost Farms USA Milk Marketing Coop". Its pretty self explanatory, it was formed January 1 of 1995, so Foremost is a young cooperative. But it consolidated at that time with "Wisconsin Dairies" and "Golden Guernsey" and then in December of that year "Morning Glory Farms" region of AMPI merged with these two coops and its now called "Foremost Farms USA" and with so much overlapping of areas hauling routes for hauling the producers milk it just saved a lot of money and was more economical to merge together and save the producers money and get a better price for our product. And we're going to see more and more of this happening because there are fewer farms, there are larger herds producing a greater percent of the milk. Its just more economical to go this route. It expands our trade opportunities. We can become much more efficient and continually improve our performance and be able to offer our members more by going together and sharing this ownership. And we are able to offer more products to the consumers and hopefully have a greater return for our farmer members.

Our cooperative is a bit smaller than the example I told about earlier. We have 6,500 members and it [slide] shows our employees, our milk haulers our milk volume in 97 was 5.4 billion pounds and sales was 1.2 billion pounds. I might add that our milk marketing covers the area of Iowa, Minnesota, Wisconsin, Michigan, Illinois, Ohio, Kentucky, Indiana; so we cover a large portion of the midwest. But there are other competing cooperatives in that area also and when I say competing, there is a lot of competition for the milk. In some areas you might have several milk trucks going by your place which means there's that many milk marketing coops competing for your milk in your area. This overhead indicates the complete line of fluid products as I indicated, we have "Golden Guernsey", "Morning Glory" and you've probably heard a lot about the upgrading of our packaging which has been very very positive and I'll go into that a little bit later. We manufacture and market 28 kinds of specialty whey fractions for major markets. Pharmaceutical industry is a very large part of that marketing perspective. Infant formula industry is very good and many other food manufacturers. I might add cooperatives are a large part of the food processing chain network that market products produced by their members. I think one of the real challenges facing cooperatives today is to balance the feel and the need for the grass roots control and that's was so important and effective with the cooperative. Is to parallel the need to develop a committed system to compete effectively in our agribusiness growth. In this system the members do enjoy the benefit of an organization that can muster the talent and resources to compete with the biggest and the best and still remain responsive to the differing needs of the members. So we can compete in the large business arena by having a cooperative.

I would like to talk just a little bit about the way products, as I indicated, there's just in years past whey was just kind of a forgotten product that there wasn't much use for and as I indicated the pharmaceutical industry has really been a big recipient, lactose is the x-cipient that carries the medication in a tablet and "Sudafed" would be an example of the recipient of the whey that this ingredient would go in. Also I have examples of value added products up here. In Carnation we make de mineralized whey which is used in the infant formula and Carnation is an example of that. Whey is also used in a variety of sandwich meats, crackers, snack foods, pudding, ice cream, candy and many many others. One thing that our product from Foremost goes into, I don't know if you are familiar with the "Little Debbie" snack products, I have an example of the snack cakes, and a lot of our product goes into to this "Little Debbie" line as I indicated. On, up on the screen you will see examples of the new packaging for our particular coop. We've talked about the round containers for several years and its taken a long time to develop this packaging. But we're finding that its very very worthwhile. Its easy to open and with the see through bottle also consumers are telling that its a better tasting product they don't have the cardboard taste they like milk much better out of the plastic bottle and we're seeing the increased demand for our fluid product through our new milk packaging. Its easy for children to hold, I have examples up here on the table and I certainly invite you to come up later to look at them. Or, why don't we pass them around? For example, with the chocolate milk we have realized a 300% increase in consumer demand for the product since the we've developed our new round containers. They are very good for traveling in the car they will fit in the soda compartment in the car and its just been real positive for the dairy industry. So, "taste the pride inside" is our logo and "grip it sip it" is our motto and for our industry its just been very very good for us. You might be familiar with the Dean's Milk Chugs that come in the little six pack pint containers, they come six in a pack, and they've been very very popular too.

Question [inaudible], answer "yes". Question [inaudible], answer "No, we put it in, we have a plastic container, milk bottle container.

There was a lot of time and effort and money that went into to this. Golden Guernsey in conjunction with the Wisconsin Milk Marketing Board did explore a lot of opportunities and just did a lot of research to check out and stimulate the interest in our packaging. It goes on to tell who they worked with on the with the research and it was Golden Guernsey Dairy that did transfer the findings into to this convenient new package. We also do market the orange drink, the lemonade drink and those products have been real profitable for our cooperatives. So we do expand beyond the dairy product.

We also make cheese for pizza manufacturers. Each manufacturer has their own specification. For example, for Browning [this is right] characteristics moisture content for the cheese we work one on one with our customers to meet exactly what their specific needs are and what their customers want and we receive additional premiums for those customers. Cojack Cheese is our own registered trademark. It is a very popular cheese and has returned a lot of dollars for the dairy farmers. Its been very very profitable for us. We manufacture cheese sticks. Are you familiar with the cheese sticks? They have, they're about the size of an adult finger. For a customer that breads them and distributes them, a lot of restaurants across the USA are wanting this product, the breaded cheese sticks, they are very popular. I would like to share some of the value added products that I do have up here on the table. I have some cheese spreads, the Swiss Almond and there's a Cheese with Bacon and adding these different flavors adds a lot of value to the product. Putting them in a spreadable type product adds a lot of value for snack foods. This has been very successful. Another successful cheese snack is a few crackers with a cheese spread in a smaller package, and for children [inaudible] and it all adds value to the product.

When we say value added products this is an example of adding value to the product, just another way to meet another level or age of consumers. Land O Lakes has their whipped butter. The whipped butter is very handy its convenient and that would be another example of adding value to the product. I don't know if you're familiar with the different milk drinks. Starbucks Coffee together with milk, the Frappachino, is gaining popularity. Its just a combination of coffee and milk and if you like coffee its good tasting. They are saying that teenagers they think its neat to drink coffee so they think that by marketing a product like this coffee and milk it will promote our industry. And then I have examples of Nabisco has the Oreo Cookie Crumbs and this is an example of the whey incorporated into this product as well as there is whey in the real cheesecake as well as other dairy product. So I just brought these samples along to share how the different products are incorporated and adding value for our industry. I also have some examples of some other cooperatives you have Diamond with the chopped walnuts. Chopping the walnuts putting them in that form is an example of adding value adding convenience and that's what everybody wants is something that's convenient easy to prepare. Ocean Spray has come out with the packaged dried fruit the cranberries the apricots they have added a lot of value and they have added a lot of economics and economy to their cooperative by promoting products like this. Libby's has come out with this new packaging with the small boxes of fruit juice for children its convenient its in a disposable container just more examples of adding value. Campbell's they have the Healthy Request Tomato Juice, Low Sodium Tomato Juice in a six pack convenient and small drinkable container. The small boxes of raisins for a snack food.

Another cooperative, Farmland Industries, they have the lean cubed turkey that's convenient for casseroles and other dishes its just its convenient and that's what people are looking for anyway in the United States, they want something fast, something convenient something that goes together real fast. I would like to mention too some of our packaging and I forgot this earlier, but in the Foremost Farms we do have on some of our cardboard panels there's a lot of nutrition information. For example, drink three glasses of milk a day and helps give you the calcium you need and there's just on the panels they're adding a lot of information like this that the consumer likes and does appreciate. I think you're just seeing an example of where cooperatives are going to be focusing on in the future in order to add a lot of value to their goods and services. So that their customers can be retained and additional dollars are generated for their members.

In the marketplace of tomorrow producers can no longer be content with trying to eek out slim margins from what the market gives. Now cooperatives must actively research the markets and search for the trend indicators as to which direction they need to go. To do that they are investing more dollars in the research and in product development areas. Carefully listening to what their resource people to what their consumers are saying. So that decisions can be based on that data that they are gathering together and this is very important not only for the dairy industry that I did focus on this afternoon but other cooperatives as well. Its very important that they go [inaudible] and the value added is certainly a new word to the industry and is going to be very profitable in the future.

If you have any questions I'll be happy to try and answer them.

Question. I have two questions. One, are cooperatives always for profit or nonprofit, what's the organizational framework? and Secondly, how do cooperatives contrast with manufacturers in terms of developing new foods and serving customers?

Answer. Cooperatives are for profit for their members and you can see with these products how they are really working with other food manufacturers to you know work together and develop a product and supplement a product and I know in the commodity areas the commodities are you know they're really working together to compliment each others products. I know the beef industry and the dairy industry you know you see they advertising for their cheeseburgers for example and there's just a lot of new products that they are experimenting with and they have to unite and work together to be profitable and see profitability for their customers.

Question. As far as control is the grower or the producer are they totally in control are they the members on the board and operate the cooperative or do you have a employee managers to coordinate and run the particular cooperative? Answer. For example, our cooperative the board has control of the cooperative and has the voting power and makes the decisions for giving direction to management and I think most of your coop boards operate in that manner. Did I answer your question?

So all the board members are producers? They're not ...

All the board members are producers.

Question. In the beginning you mentioned that the [inaudible] was declining. Could you provide some results for that, one? Second, since we are in a women's conference, how deep are women involved in cooperative organizations in this state and what is the market share of cooperatives in dairy milk?

Answer. [inaudible] I'm not sure [inaudible -- then a pause] I don't know let me check is your mike working? All right, is it working now? Okay.

Let's take one question at a time.

Okay, I have to ask three questions. The declining plant processing of dairy at the beginning you mentioned that I would like to know the results what are the reasons for this decline in the processing industries? The second question was [separate, why don't you ... okay, pause and mike thumping then testing, testing ... you can get this one]

Answer. To make sure I heard your question correctly, you were asking about the decline of the processing plants? Earlier there were a lot of processing plants. They were very small and its just more economical to combine to go together and grow into a larger plant and there just has been a growing decline of dairy farms. We just don't have the need of all these plants that we once had so I guess the bottom line feeling bigger is better. Did I answer your question?

Question. The second question is how deep are women involved in cooperatives here in the United States?

Answer. Women are I would say the last twenty years women are slowly becoming involved and being elected to these boards. Women are becoming more involved they're very active on their farms and they keep the books they're very involved in the production on their farms and are very knowledgeable and educated and are recognized and are elected to the coop boards.

Question. How do share holders who are the suppliers of your product how do they express their wants or dissatisfactions or needs to the coop? Especially if its so big. You've got 6,500 people 6,500 farms which is probably about 13,000 people it would seem to be fairly hard for them to get their message through to the board.

Answer. We have a very effective system. A director on our board represents around 250 farms. And then we have an annual meeting where all members anyone can come to the annual meeting which is held in the spring of the year. We have these meetings throughout the entire cooperative area. Then in the fall we go through a resolution process and delegates are elected to that meeting. One delegate represents ten farms so the grass roots members are involved and have every opportunity for their say as to their wants and needs. They have every opportunity to work up through the system and make their wants and needs known.

Question. I just wonder if you know why the decision was made to go to a throw away plastic bottle instead of a recyclable?

Answer. I guess I really can't answer that. I'm really not sure.

Question. There's a big new ethanol plant being built right now in Northwest Illinois and Southwest Wisconsin. They have already raised some money they don't want to sell stock to anybody but producers and that has a two fold purpose they'll be sure they get the corn to keep the plant going and they'll be sure to sell a product to these farmers because they have money invested. They'll sell to other people but they will control the operation of it and be on the board.

Answer. Thank you Doris. I guess that was more just a comment and that is an example of another [pardon] yes, that's the way they'll finance and in return sell the product. So this is just in the making but I know in the midwest we will be hearing a lot about this new ethanol plant.

Any other questions? Oh, excuse me

Question. My question is, as far as coops go how do you see the employment as far as more being unemployed or are you going to gain more people?

Answer. As the mergers take place we're probably going to see less, I mean employment. Through new technology they just aren't needing as many employees and I know in our coop we just did some restructuring and it will save us over a million dollars and through attrition employees will be eliminated. But it will mean, it will mean less but more in our case and I'm sure that's the situation with a lot of coops that are merging together.

Question. [inaudible] where they want women to produce their own food and stuff, is the coop opposite of what they're doing now as far as this micro credit goes as far as financing women to produce their own food and if they're going to do this micro credit would these women in effect get together to do their own coop? Is it opposite or is in going to help benefit along the way?

Answer. So you're asking if the women will go together and form their own coop? [inaudible question from audience] On a smaller scale you're looking at the micro credit. I guess I don't see a lot of these situations. Is anyone familiar with like a micro credit coop where a small group of people a small group of women will go together and form a coop? [inaudible question from audience] Its possible, I'm not familiar with a situation like that, is anyone familiar with a micro credit smaller type coop what where ten/twelve women would go together and form their business?

Response. We don't actually have a coop yet but there's a number of women or and a number of farmers that are looking to form a smaller coop in the region of ten to twenty maximum. And in that situation we see that there will be an increase in employment because there will need to be somebody employed to handle the marketing to handle the administration work of the actual cooperative. Because we've found that ourselves aren't able to handle all of the extra work so from that point of view in smaller cooperatives we see that there is an increase in employment as against to when you get to the size of 22,000 or something then you're actually losing employment services throughout so in our case smaller niche market type coops will add to employment.

Speaker. One comment I guess when we're looking at the large coop the 22,000 members and there probably will be a reduction of employees but the bottom line is better price for the producers and if they can save money on that side it means more money for the product and that's the bottom line, a better price for the producers. So, any other questions?

Question. Have any studies been done on the best size the most efficient size for a cooperative? Or are we just going on this bigger is better thesis? You know it just strikes me that there must be a stage where they get too big and too remote from the consumer and I just wonder if any research has been done on that.

Answer. I'm not familiar with any research being done. I really can't answer that. Does anyone else have any comments in regards to her question?

Response. I think that is a very important question especially for us who do not have [inaudible] ... of coops and we would like to, like women who would like to get into coops, as you said the bigger the better, one would ask whether women should be brought in large numbers and establish a coop or they should start small.

Answer. I don't want to leave the impression that bigger is better. I think that when you begin, when you start out you need to begin on a smaller scale and that's the most efficient way to go at that point. These that have expanded and merged together they have been formed for a long time. But when you are thinking of forming a coop you probably need to start out on a much smaller scale. Which will be more efficient and probably more economical at that point in time. Any other questions?