Cooperative Regions of Organic Producer Pools

CROPP is a creatively structured producer cooperative based in La Farge, Wisconsin, not far from its founding farmers. The company is governed by producer groups, called “pools,” and an elected board of directors. Each producer pool has its own Executive Committee (EC). The largest pool is dairy, representing over 85% of the company’s annual sales. Other pools are produce, soy, eggs, poultry, pork, beef, and citrus. All together, the pools represent farmers in 32 states and one Canadian province.

The ECs are the key decision-making bodies, where member representatives routinely evaluate how the company’s policies and procedures are working. Most importantly, however, ECs determine the price their farmers will get for their products.

“We build from the basis that we want to pay our farmers a sustainable price,” says Jerry, “but then need to work with the prevailing marketplace reality. So it’s a somewhat negotiated discussion: management comes forward with a proposal for what it should look like over the coming year, the Executive Committee critiques it and recommends changes, and the final recommendation is taken to the Board, which approves for the next year.”

To join the cooperative, each farmer is required to invest 5.5% of his or her annual revenue into the company, and each receives up to 8% in profit share. This formula enables members to recoup their investments while continuing to build the company. “We wanted our producers to know we’re taking their investment seriously,” explains Jerry. “The money is at risk, so if the co-op were to get into a bind and look at bankruptcy, they probably wouldn’t get that money back. That’s where we depart from the norm in the co-op world.”
At this point, CROPP recruits members primarily via its website and word of mouth. Once a farmer joins, he or she receives technical assistance, including guidance in organic certification and access to affordable organic feed. The company also provides networking services, a retirement plan, a delivery program, and easy access to other CROPP products. Members find CROPP’s sophisticated marketing strategies—which have helped position Organic Valley as a leader in the dairy sector— particularly valuable.

CROPP also extends the opportunity for people to become shareholders in the cooperative. Class C stock was initially offered to family and friends between 1999 and 2003 to develop the “Freedom Fund,” a credit program for members. In 2004, CROPP began offering a wider round of Class E shares, which took advantage of a co-op law reform that allows the creation of preferred, nonvoting shares for outside investors. These $50 shares were designed to raise general operating revenue for the company. The response was remarkable. According to Mike Bedessem, CROPP’s chief financial officer, “We originally authorized twenty-five million dollars worth of Class E shares. We thought we would sell a total of between six and ten million dollars worth, but by the end of this year, we sold all twenty- five million. I believe it is an indication of a commitment to organics or family farmers.” The Board has since voted to extend another $40 million of Class E shares.

Like other successful businesses in the United States, CROPP has plowed some of its surplus revenue into advocacy. It launched Farmers Advocating for Organics, which funds various causes such as organic research, education, and advocacy. The Art Wedig Fund offers emergency grants to members, thereby ensuring that farmers can continue to thrive despite hardships.

CROPP also has been a good neighbor. In 2008 the company gave over $2 million back to the La Farge community, as well as to its farmers’ local communities. It built a headquarters qualifying under the high standards of Leadership in Energy and Environmental Design (LEED) by using local resources and renewable energy. It is one of the biggest employers in the region. An innovative recycling program was put in place to capture thousands of pounds of used milk cartons. The company also hosts open houses and local festivals for the public.

The year 2006 was a major turning point for the company. For the first time in 19 years of operation, CROPP was able to present dividends and profit-sharing checks to all its investors, members, and employees.