New Generation Cooperatives:

1
New Generation Cooperatives

• The North Dakota Experience

2
North Dakota Association of Rural Electric
Cooperative

• A statewide association
• 2 generation and transmission coops
• 21 local cooperative utilities
• Services
• safety training
• governmental affairs (lobbying?)
• marketing
• rural development

3
Origins of the NDAREC Rural Development

• Energy Bust of the early 80s and out-migration
  from rural areas
• High interest rates, low prices, and drought
• Vision 2000
• USDA Funding for a Coop Development Center

4
Approach

• Add value to major North Dakota crops
• A disciplined approach to development
• build a sound organization
• understand the industry and the market
• conduct an objective feasibility analysis
• secure adequate equity
• retain competent management

5
The Success Stories

• Dakota Growers Pasta - 1991
• North American Bison Cooperative - 1992
• Golden Growers Cooperative - 1994
• Avico Potato Plant - 1996
• Western Dakota Pork - 1995
• United Spring Wheat Processors - 1997

6
Other Coop Experiences

• Drayton Grain - 1994
• Farmers Choice Pasta - 1995
• Walton Bean Cooperative - 1994
• Heart of the Valley Cooperative - 1995
• Agro Oils - 1996
• Northern Plains Premium Beef - 1997

7
Heart of the Valley Cooperative

• two local open cooperatives
• MayPort Farmers Cooperative
• Central Valley Bean Coop
• goals
• add value and profit to edible beans
• vertical integration in the bean industry

8
Chronology

• 1987 NDSU feasibility study
• 1992 Updated feasibility study
• 1992-4 Process development
• 1994-5 Business planning and offering
• 1995-7 Joint venture negotiations
• 1997 Joint venture agreement

9
Heart of the Valley Today

• Instant bean ingredients for food manufacturers
• Patent Pending Process
• Strategic Alliance
• Production capacity
• domestic and international marketing
• product development capacity

10
What wed do differently

• Less locality specific
• More initial grower investment
• More assertive in dealing with alliance partners
• A less incremental approach

11
Challenges

• Securing equity investment
• Retaining cooperative business advantages
• definition of corporate farming
• definition of farmer
• definition of cooperative marketing

12
Obstacles to recent equity drives

• General ag economy
• Ag finance limitations
• Difficulty in making informed decisions
• Guilt by association

13
Keys to success

• Secure enough seed money (contributions)
• Organize a capable board with credibility
• Provide flexibility in equity share purchase
• Hire the best professionals you can get, and
  listen to their advice
• Build a community of interest

14
Conclusion

• Potential for other cooperative food processing
• Manufacturing cooperatives
• International cooperatives
• the coop model may apply to other rural problems