[Congressional Record (Bound Edition), Volume 145 (1999), Part 17]
[House]
[Pages 23882-23885]
[From the U.S. Government Publishing Office, www.gpo.gov]



                     THE IMPORTANCE OF COOPERATIVES

  The SPEAKER pro tempore (Mr. Weldon of Florida). Under a previous 
order of the House, the gentleman from North Dakota (Mr. Pomeroy) is 
recognized for 5 minutes.
  Mr. POMEROY. Mr. Speaker, October is National Co-op Month, and 
throughout the month of October cooperatives, whether agricultural, 
consumer, electrical or child care, from all over the Nation will 
celebrate the importance of cooperatives. Across the United States more 
than 100 million Americans benefited by 48,000 cooperatives that will 
generate $100 billion annually to our Nation's economy.
  Tonight, I would like to highlight the importance of cooperatives to 
my home State, North Dakota. Throughout their history cooperatives have 
been a symbol of rural America just like the wind mill, the old country 
barn, and the four bottom plow. Cooperatives represent the very fiber 
of American ingenuity and community that have made this country great.
  From the first successful cooperative organized in the United States 
by Benjamin Franklin to the 1990's cooperatives, like housing and baby-
sitting cooperatives, cooperatives were created with the belief that 
individuals joining together in cooperative efforts can best market the 
product they produce. Cooperatives are associations of people uniting 
voluntarily to meet their common economic, social, and cultural needs 
through a jointly owned, democratically controlled organization.
  Cooperatives are based on the values of self-help, self-
responsibility, democracy, equality, equity, and solidarity. In the 
tradition of their founders, cooperative members believe the ethical 
values of honesty, openness, and social responsibility in caring for 
others.
  In the 1920s, the country witnessed the growth of the dairy 
cooperatives; in the 1930s country grain elevators were created; in the 
1940s oil and gas cooperatives; and in the 1950s, electrical and 
telephone cooperatives were created. Each of these co-ops provided the 
basic essential, providing quality

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products for consumers and producers at the most cost-efficient 
beneficial means. Over the past 20 years cooperatives have entered a 
new and exciting phase. We have begun to observe a new wave of 
cooperation such as the North Dakota examples I will speak about 
tonight.
  Specifically in responding to consolidation and concentration in 
agriculture occurring at an alarming rate, cooperatives have helped 
provide an avenue for farmers joining together. In North Dakota 
cooperatives have become, it seems, our State's newest best strategy in 
bringing to farmers a value-added component of marketing their 
products. North Dakota is a leader in cooperative development.
  All the necessary ingredients are there, the long history of 
progressive prairie populism, its rural population used to pulling 
together to meet trying times. Now our heavy dependence on agriculture 
has made the ability to produce the value-added component to the 
product very, very important.
  Since 1990, nearly $800 million in value-added facilities have been 
creating 600 new jobs in North Dakota. Some of the examples, the 
American Sugar Crystal Cooperative, one of the most recognizable 
cooperatives in North Dakota founded in 1972, and now with literally 
hundreds of growers, it has been a very, very successful marriage 
between the grower and the producer through this shared cooperative 
experience.
  The Dakota Pasta Growers, one of the most fascinating cooperatives in 
North Dakota. The Dakota Pasta Growers, founded in the late 1980s by 
durum farmers who believed they could pull together and get themselves 
a better market for their product by actually producing the seminola 
flour and the pasta products itself; and Dakota pasta has succeeded in 
the face of many skeptics in Carrington, North Dakota, by hard work, 
ingenuity and producing a very top quality product. Today they will 
increase storage capacity from 120,000 to 370,000 bushels doubling 
milling capacity, all in all an outstanding success.
  The North American Bison Cooperative, an excellent example of how 
farmers can band together to try new products. The prairie bison, now 
jointly slaughtered in this cooperative slaughtering plant. Five years 
ago, the co-op got off to a terrific start, and every year its product 
marketing continues to grow. This past year they slaughtered 8,000 
bison in this 5-year-old cooperative, to give you an idea of how things 
have grown.
  Now clearly as we look at the cooperatives in total, the government 
at all levels has a role in cooperative development and maintenance. It 
is important they work. They bring economic opportunity to people, and 
they have as a result different tax statuses, different contracts and, 
most importantly, nonprofit philosophies.
  As a Federal law maker when it comes to cooperatives, I believe it is 
my role to maintain and preserve the opportunity for development of 
cooperatives so especially essential to our rural communities.
  The 1996 farm bill increased the risk of production agriculture on 
the family farmer. It is more important than ever therefore to have the 
farmer be able to pull together and create new economic opportunities 
in the value-added piece, in the wonderful examples of the North Dakota 
cooperatives that we have demonstrated.
  The development of rural business today is just as vital today as it 
was 50 or 75 years ago. As I mentioned before, the smaller business 
owner, the farmer and the rancher is going to continue to be squeezed 
in the marketplace in light of the concentration that we are seeing; 
and their best shot at being able to preserve their ongoing place in 
production agriculture and in the value-added component is by teaming 
together through the cooperative philosophy, banding together to 
achieve collectively what it would be impossible for them to achieve 
individually. That is the miracle of cooperatives.
  We certainly are proud to recognize them tonight and wish farmers and 
others all across the country thinking about how they might achieve a 
different dimension of success, to urge them to look at the cooperative 
way. It works as North Dakota examples have shown.

                       I. OVERVIEW AND BACKGROUND

  Mr. Speaker, October is ``National Co-op Month.'' Throughout the 
month of October, cooperatives--whether agricultural, consumer, 
electrical, or child care--from all over the nation will celebrate the 
importance of cooperatives. Across the United States, more than 100 
million Americans benefit by 48,000 cooperatives that generate $100 
billion annually to our nation's economy.
  Tonight, colleagues from across the United States and from all sides 
of the political spectrum will join me in highlighting the importance 
of cooperatives to our constituents.


                          A. Historical Roots

  Throughout their history, cooperatives have been a symbol of rural 
America--just like the windmill, the old country barn, and the four 
bottom plow. Cooperatives represent the very fiber of American 
ingenuity and community that have made this country great. From the 
first successful cooperative organized in the United States by Ben 
Franklin to 1990's cooperatives like housing and baby sitting 
cooperatives, cooperatives were created with the belief that 
individuals joining together in cooperative efforts can best market the 
product they produce.
  Cooperatives are autonomous associations of people uniting 
voluntarily to meet their common economic, social, and cultural needs 
and aspirations through a jointly owned democratically controlled 
enterprise. Cooperatives are based on the values of self-help, self-
responsibility, democracy, equality, equity, and solidarity. In the 
tradition of their founders, cooperative members believe the ethical 
values of honesty, openness, social responsibility and caring for 
others.
  The contemporary cooperative as we know it was created in the 1920's 
as a reaction to the rapidly growing, unchecked corporate, business 
climate on Wall Street. Also, in 1922, Congress passed the Capper-
Volstead Act which allowed farmers to act together to market their 
products without being in violation of antitrust laws.
  In the 1920's, the country witnessed the growth of the dairy 
cooperatives, in the 1930's, country grain elevators were created, in 
the 1940's oil and gas cooperatives, and in the 1950's electrical and 
telephone cooperatives were created. Each of these cooperatives 
provided the same basic essential providing quality products for 
consumers and producers at the most cost-effective, beneficial means.
  Over the past 20 years, cooperatives have entered a new and exciting 
phase. We have begun to observe new wave cooperatives such as the North 
Dakota examples that I will speak about tonight.
  The growth of cooperatives can be compared to the game of football. 
From their modern-day inception in the 1920's through the 1950's, 
cooperatives were created in an act of defense. Defense to protect the 
smaller producers and vulnerable rural communities from the 
unregulated, massive corporate companies.
  Cooperatives have evolved throughout history seeming to continue to 
be one step ahead of contemporary society by meeting the ever changing 
needs of consumers.


         b. The Impacts of Market Concentration on Cooperatives

  As you all know, concentration is occurring at a very rapid rate in 
nearly all aspects of our economy. In the past five years, mergers have 
occurred in the oil, technological, chemical and seed, automobile, and 
agriculture sectors.
  Specifically in agriculture, 4 meat packers control 80 percent of the 
beef and lamb processing industry compared to 36 percent in 1980, 5 
meat packers control 65 percent of the hog industry, four firms control 
59 percent of port facilities, 62 percent of flour milling, 74 percent 
of wet corn milling, and 76 percent of soybean crushing. Moreover, in 
1980, the farmer got 37 cents of every dollar consumers spent on food 
compared to 23 cents in 1997.
  Obviously, with market concentration occurring at such a rapid rate 
in all aspects of our economy, the role of cooperatives as a means to 
market a product become more important for producers' economic 
livelihoods.
  Cooperatives, as we head into the 21st Century, must be prepared to 
meet the complex challenges of meeting the diverse needs of the 
American consumers while at the same time continuing their role of a 
producer-driven cooperative.

    II. THE ``NORTH DAKOTA EXPERIMENT''--COOPERATIVES AT THEIR BEST


            A. WHY COOPERATIVES ARE WORKING IN NORTH DAKOTA?

  In North Dakota, cooperatives have become, it seems, our State's 
newest obsession. North Dakota is one of the leaders in the nation on 
cooperative development.

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  All the necessary ingredients for cooperatives is in North Dakota. 
North Dakota has a long history or progressive, prairie populism, its 
rural population does not want to fall victim to corporate greed, and 
its farmers are tired of receiving low prices for the bountiful 
products they produce.
  North Dakota's heavy dependence on agriculture (nearly 40 percent of 
the entire state's economy) has made the ability to produce value-added 
a foremost concern for producers. With producers experiencing extremely 
low commodity prices in recent years, many have decided to form 
cooperatives because of their communal marketing advantages to sell the 
product.
  Since 1990, nearly $800 million in value-added facilities creating 
more than 600 new jobs in North Dakota. Clearly, the cooperative spirit 
has had an impact in North Dakota.


                b. cooperative examples in north dakota

  American Crystal Sugar.--One of the most recognizable cooperatives in 
North Dakota is American Crystal Sugar in the Red River Valley. The 
American Crystal Sugar cooperative was formed in the spring of 1972, 
when sugar beet growers from throughout the Red River Valley decided to 
purchase the processing facility of American Crystal Sugar Company. 
With over 70 percent of the vote (1,065 to 443), the Red River Valley 
Sugar Beet Growers decided to purchase American Crystal and begin what 
has been a very prosperous 27 year marriage between the grower and the 
processor.
  Dakota Pasta Growers--Carrington, ND.--One of the most fascinating 
cooperatives North Dakota has seen in recent years is the Dakota Pasta 
Growers in Carrington, ND. The Dakota Pasta Growers began due to the 
ideas of local durum wheat farmers in the late 1980's. The durum 
farmers were tired of the low prices they were receiving for the high 
quality, unique product (75 percent of the nation's durum is grown in 
North Dakota) and were not receiving nearly the benefits of their 
product they felt they deserved.
  In 1993, the Dakota Pasta Growers were born. It is the world's first 
and only grower-owned, fully-integrated pasta manufacturing company 
with 1,080 drurum producers who serve as the owners. In only four 
years, the Dakota Pasta Growers doubled its rollstands to 28, increased 
storage capacity from 120,000 to 370,000 bushels, doubled milling 
capacity to 20,000 bushels, and increased the size of the plant from 
110,000 to 160,000 square feet. Currently, Dakota Pasta Growers 
producers 470 million pounds of pasta annually with more than 75 shapes 
and flavors for retail, food service and industrial segments. The 
Dakota Pasta Growers now has three manufacturing facilities in 
Carrington, Minneapolis and New Hope, Minnesota .
  Clearly, the Dakota Pasta Growers seems to have perfected its very 
own method of spinning wheat into gold.
  North American Bison Cooperative--New Rockford, ND.--The North 
American Bison Cooperative is an excellent example of a cooperative 
that is facing a serious at-risk financial situation. The North 
American Bison Cooperative is an example of how the community 
cooperative spirit is alive and well, but the complex, intricacies of 
successfully marketing the cooperative's product have not been met.
  Five years ago the bixon cooperative got off to a terrific start. 
Every year, it has grown every year by selling a substantial amount of 
bison in Europe. But, that growth has brought new challenges. To meet 
the growing demand for the steaks and roasts, more bison had to be 
slaughtered. It was real easy to market all of the meat when you only 
slaughtered a thousand head a year, but it's very different issue when 
you've increased your production to more than 8,000 animals.
  While this cooperative has had excellent markets for every bison 
steak and roast, it has extreme difficulty in marketing the other half 
of the animal that is ground up into burgers. Those trim products built 
up in the freezer while new products and markets were developed. Yes, 
the cooperative has developed several products--sausages, jerky, and 
ravioli--and those products are in a whole lot of stores throughout the 
Dakotas, Minnesota, and Montana. But that has not been enough. The 
cooperative has developed a strategic marketing relationship with a 
private firm in Denver, Colorado. This firm also developed new value-
added bison products.
  But every new product takes time to develop. Therefore, USDA has had 
to get involved the past two years to assist in the purchase of bison 
trim to move the Bison Cooperative's product. Clearly, USDA has 
recognized that this cooperative needs a financial shove and is willing 
to ante up to allow the Bison Cooperative to survive in its infant 
phase.


            c. north dakota--more than just ag cooperatives

  Even though, North Dakota is a predominantly rural state, it has more 
than just agriculture cooperatives. North Dakota because of its rural 
communities has electric, credit unions, housing, and telephone 
cooperatives to name a few.

              III. COOPERATIVES AND THE GOVERNMENT'S ROLE


                   a. background on government's role

  Clearly, the government at all levels has a role in cooperative 
development and maintenance. Cooperatives serve different functions 
than corporations or small businesses. They have different tax 
statuses, different contracts, and most importantly, have non-profit 
philosophies.
  As a federal lawmaker, I believe my role in cooperative development 
and maintenance is essential--especially in regard to agriculture 
cooperatives.
  As you may know, the 1996 Farm Bill changed the course of agriculture 
policy in the U.S. for the first time in sixty years (since the New 
Deal). No longer does the government provide a safety net for producers 
who have suffered from low prices and severe weather. Instead, the new 
farm bill leaves it up to the producer, through his own instincts, to 
market the product he produces. In my opinion, the farm bill has made 
the occupation of farming similar to rolling dice.


            b. cooperative components of the 1996 farm bill

  The 1996 Farm Bill did include provisions to promote value-added 
agriculture. It created the Rural Business Cooperative office of the 
USDA Rural Development Agency. The Rural Business Cooperative's mission 
is very simple: to enhance the quality of life for all Americans by 
providing leadership in building competitive businesses and 
cooperatives that can prosper in the global marketplace.
  The Rural Business Cooperative has many methods of providing credit 
for cooperatives to get started. The Business and Industry (B&I) 
Guarantee Loan Program helps create jobs and stimulates rural economies 
by providing financial backing for rural businesses. This program 
guarantees up to 80 percent of a loan made by a commercial lender. Loan 
proceeds may be used for working capital, machinery and equipment, 
buildings and real estate, and certain types of debt refinancing.
  The B&I Direct Loan Program provides loans to public entities and 
private parties who cannot obtain credit from other sources. This type 
of assistance is available in rural areas.
  The 1996 Farm Bill, in my opinion, needs to be reexamined because of 
its lack of a safety net, but I am a strong support of the efforts for 
value-added cooperatives.


                 c. cooperatives and the 106th congress

  It is important to me that Congress maintain its commitment to 
cooperative development by continuing funding for the Rural Cooperative 
Development Grant Program within the USDA's Rural Development.
  The dollars committed to this program have generated hundreds if not 
thousands of jobs and brought many producers back from the brink of 
economic disaster.
  It is very clear to me just how important this under funded and 
little recognized program has been to many of the organizations who 
have come together as part of the National Network of Centers for Rural 
Cooperative Development.

                      IV. COOPERATIVE DEVELOPMENT


                    A. About Cooperative Development

  The development of rural businesses today is just as vital as it was 
50 or 75 years ago.
  As mentioned before, the smaller business owner, farmer, and rancher 
will continue to be squeezed out of the marketplace by giant corporate 
conglomerates that are vertically integrated, beholden to Wall Street 
and its stockholders.
  Cooperatives represent the best hope that most rural communities, 
rural residents, rural business owners, and farmers have for ever 
hoping to control their destiny.
  Cooperatives require commitment and hard work, and I know that they 
are not always going to succeed.
  Of the eight Centers represented in the national network, I was proud 
to learn that at least half are involved in establishing value-added 
agricultural cooperatives.
  I'm particularly proud of my fellow North Dakotan--Bill Patrie. Bill 
has established a phenomenal number of value-added cooperatives in our 
state, and most have been very successful. But, Bill also knows the 
pain of witnessing a great idea not succeed.


               b. more people who are cooperative leaders

  Andy Ferguson in the Northeast who is breaking new ground to 
establish energy cooperatives; Rosemary Mahoney and E.G. Nadeau who are 
building value-added markets for organic products in the Upper Midwest; 
Gus Townes who is developing new value-added vegetable cooperatives and 
credit unions in the Southeast; Melbah Smith who is

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building partnerships with state agencies, universities, and private 
businesses to help small Mississippi sweet potato growers build a 
multi-million dollar cooperative enterprise; Annette Pagan who is 
working with poultry producers and small wood manufacturers in 
Arkansas; and Mahlon Lang and Karen Spatz who continue to with members 
of the Hmong in building a cooperative that strengthens their 
community.

                             V. CONCLUSION


            a. cooperatives as we head into a new millennium

  There are many challenges facing cooperatives as we head into the 
21st Century. Cooperatives will be faced with the struggling challenges 
of increased competition through market concentration, internal forces 
urging the cooperative to get bigger, and continuing to meet the 
producer-owners' interests. And, at the same time, meeting the very 
diverse needs of American consumers.
  Mr. Speaker, October is ``National Co-op Month'' and it is an 
excellent opportunity for the American consumer to recognize the 
importance of cooperatives in ``the American way of life.''

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