University of Wisconsin Center for Cooperatives
Rural Cooperatives, November/December 1997, pp. 32
Published by the Rural Business and Cooperative Development Service

Rural Co-ops/Family Farms Get $100 Million

Boost from USDA Rural Development

    The U.S. Department of Agriculture will allocate $100 million this year to support the creation or expansion of cooperatives in rural areas, Agriculture Secretary Dan Glickman has announced. Glickman said this action underscores the Clinton administration's belief that cooperatives will play an increasingly vital role in the nation's rural economy and that co-ops can help preserve the importance of family farmers in the 21st century.

    "For more than 200 years, Americans have worked together in cooperatives to meet challenges and solve problems that were too big for them to overcome as individuals," Glickman said. "Today, one of the major challenges facing farmers and other rural people is the need to make the transition from being producers of raw commodities to producers of value-added products, thereby keeping more of the profits from their labor at home. For many, the best way to accomplish this will be through a cooperative they own and direct. This will benefit not only producers, but the rural communities in which most of them live."

    Jill Long Thompson, USDA under secretary for rural development, announced details of the effort in an address to the annual meeting of the National Farmer's Union in Albuquerque, N.M. She cited several examples of small, value-added cooperatives USDA is working with farmers to develop. These projects include a cooperative of Texas dairy farmers who hope to produce their own specialty cheeses, a coop of Michigan farmers who want to process their own soybeans, and a co-op of Pennsylvania ranchers who hope to market their own premium, branded beef.

    "Not only will cooperatives grow in importance in agriculture as federal price support programs wind down, but I believe they will also grow in many non-farm rural sectors of the economy—from health care, to housing and credit," Long Thomson said. "Agriculture Secretary Glickman and I both see the cooperative way of doing business as a significant avenue to address the problems and challenges of agriculture and rural America."

    The $100 million is being allocated from USDA's $1 billion Business and Industry (B&I) Guaranteed Loan Program budget for 1998. This program works with the private sector to boost the nation's rural economy by supporting businesses that produce or preserve rural jobs. Borrowers first seek financing from a local lender in their area, and the lender in turn seeks a guarantee from USDA.

    USDA will guarantee up to 60 percent of a loan for more than $10 million to $25 million, 70 percent of a loan for more than $5 million to $10 million, and up to 80 percent for a loan of $5 million or less. Local lenders are more willing to finance rural business projects because their risk exposure is reduced when USDA guarantees a business loan, and they also have their lending limits extended, Long Thompson explained.

    Existing or new cooperatives in rural areas may use the B&I loan guarantees to invest in machinery and equipment, real estate or for working capital. Family farmers can use B&I loan guarantees to help pay for stock in a start-up cooperative that processes their agricultural commodity into a value-added product.

    Cooperatives must apply for a B&I loan guarantee and have them obligated by June 30. After that, any portion of the $100 million not used to finance a cooperative will revert to the national reserve of the B&I program and will then be available to any type of eligible rural business for the remainder of 1998.

    For more information on the program, contact your nearest USDA Rural Development office, or the national office of USDA's Rural Business-Cooperative Service in Washington, D.C. at (202) 720-0813.

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