Co-ops like CHS at tipping point

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In the world of agricultural cooperatives, there’s none bigger than Minnesota-based CHS Inc.

According to U.S. Department of Agriculture data, the energy, grain, food, and farm supply giant did $42.9 billion in business in its fiscal year 2014. That makes the mighty CHS bigger than Deere & Co., DuPont, and Tyson Foods, and far bigger than the number two ag co-op, Dairy Farmers of America, with its almost-puny-by-comparison $17.9 billion in sales.

CHS’s power, however, will be challenged at the co-op’s annual meeting Dec. 4 when members vote on changes to its articles and bylaws.

Business structure

The changes, argue CHS bosses, are needed to keep the co-op growing and “to reinforce CHS’s commitment to its member cooperatives, agricultural producers and cooperative business structure.” In short, CHS management believes its 20th century business structure needs some 21st century tweaking. Many its “member cooperatives,” however, disagree.

“This feels more like a corporate takeover,” says Rugby, N.D., co-op manager Steve Dockter, who sees the proposed changes moving power from CHS’s 1,100 member “locals” — an essential tenet of cooperative structure — to CHS. “It boils down to who’s the boss? We are; we own them.”

He’s right; local CHS co-ops own what they call the “mother ship,” CHS, Inc., an overarching regional cooperative that stitches the locals’ into a single, coherent business structure. For CHS, that’s 625,000 farmers and ranchers in 25 states.

Like most ag-centered co-ops, however, CHS’s very size and its changing customer base — a dwindling number of “voting” farmer and rancher “members” and a growing number of “non-voting” consumer customers — is a big driver behind the proposed changes in the co-op’s rules. For CHS to remain true to its heritage, it explains, CHS, Inc. needs to update bylaws to ensure locals “operate on a cooperative basis or be an organization primarily owned and controlled by a member cooperative, as determined by the CHS board of directors.”

That “as determined by the CHS board of directors” part sticks in the craw of co-op members like Mark Watne, president of the North Dakota Farmers Union.

“The locals are the owners here,” he says. “If anyone has a problem with non-members voting at the local level, the locals can address that, CHS doesn’t need the power to do it.”

Co-op foundation

Like many, Watne wonders if CHS managers understand just what their proposed changes to the co-op’s bylaws mean.

“Most of these folks came from corporations and their ideas have the feel of ‘corporate’ bylaws. Maybe they don’t appreciate just how deep in most members’ bones is the idea of local control.”

That principle cooperative element is embodied in the Capper-Volstead Act, the 1922 law that is the Magna Carta of the U.S. ag co-op movement because it allowed ag producers to organize and collectively approach the market as either buyers or sellers without violating federal antitrust law.

(One of its namesake authors, Minnesota Congressman Andrew Volstead, had another law named after him, The Volstead Act, that wasn’t as successful: in 1919 it ushered in Prohibition.)

If Watne is right, CHS managers and the co-op’s board of producer-directors will get a new appreciation of that deeply-held belief Dec. 4 because another proposal to be voted on that day has the co-op dropping any reference to Capper-Volstead. The reason, claims CHS, is that “Given the nature of CHS business, we do not benefit from potential protections offered under Capper-Volstead.”

Maybe not, says co-op manager Docktor, but removal of any reference to this underpinning law is akin to changing the Ten Commandments.

“It basically lays the groundwork for a reversal of roles and I don’t think people want that.”

What members want today and what CHS managers think they need for tomorrow can be the same thing, Dockter explains.

“But the one thing everyone needs to know now is ‘Who’s the boss?’ We know: It’s us.”

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Alan Guebert was raised on an 800-acre, 100-cow southern Illinois dairy farm. After graduation from the University of Illinois in 1980, he served as a writer and editor at Professional Farmers of America, Successful Farming magazine and Farm Journal magazine. His syndicated agricultural column, The Farm and Food File, began in June, 1993, and now appears weekly in more than 70 publications throughout the U.S. and Canada. He and spouse Catherine, a social worker, have two adult children. farmandfoodfile.com

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