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Co-op role in rural development.

Agriculture Secretary Tom Vilsack has challenged USDA Rural Development to help build rural communities that "can create wealth, are self-sustaining, repopulating and thriving economically." To accomplish this, seven priority areas have been set: alternative energy; strategic partnerships; regional collaboration; broadband development and continuous business creation; capital markets; community building and regional food systems. Cooperatives can play a role in all of these efforts. They're not only effective tools for conducting business and securing needed services for their members, they also can play a role in community building and in all types of rural development efforts, ranging from the development of local food systems to broadband access.

Consider rural utility cooperatives, which work closely with the USDA Rural Utilities Service (part of USDA Rural Development). Electric co-ops reach more than 45 million customers. That's a huge capacity to affect change.

Through our Rural Business-Cooperative Service (RBS), we support farmer cooperatives, which play a key role in creating new business opportunities for rural America's 60 million people. Farm and rural economies are interdependent, and value-added agriculture drives sustainable development across the board.

While most farmer co-op leaders are well aware of the coop education, research and development work we do through our RBS Cooperative Programs office, you may not be as aware of some of our other business programs, which co-ops are encouraged to participate in. For example, our Rural Business Enterprise Grants (RBEG), Rural Economic Development Loans and Grants (REDLG) and the Intermediary Relending Program (IRP) can play a big part in reviving rural communities around the nation.

The RBEG program provides funds for small and emerging rural businesses, distance learning networks and employment-related adult education programs. The REDLG program provides zero-interest loans and grants to our electric and telephone borrowers for development and job creation projects. Under the IRP, 30-year loans are provided at 1 percent interest to local organizations to establish revolving loan funds.

A great example of these efforts can be seen in South Dakota and Minnesota, where the IRP and REDLG programs are supporting 21 electric cooperatives that have created a special fund to promote economic and community development. This fund helps provide electricity to co-op consumer-owners and stimulates economic growth through business development and expansion. It allows small cooperatives to share capital, common-credit policies, materials, processes and personnel to serve eastern South Dakota and western Minnesota, an area of about 500,000 people.

The fund is governed by a board that sets policy and serves as the loan-review committee. By pooling more than $1.9 million from their members, the fund has attracted more than $25 million in public and private investment loan capital.

This type of collaboration maximizes the fund's ability to leverage resources and expand its regional impact. To date, it has collaborated with more than 100 banks, 20 development corporations/loan funds and 15 government programs to achieve more than $315 million in project investments in the region. During the past 13 years, it has helped advance 194 projects, created 6,000 jobs and supported community development initiatives.

This is what rural cooperatives can do for economic development! Cooperatives are a great way to encourage community buy-in for development projects.

Farmer cooperatives should also be aware of Rural Development's Value-Added Producer Grant (VAPG) and Business & Industry Guaranteed Loan (B&I) programs. VAPG is a powerful, highly flexible tool that helps agricultural commodity producers to refine or enhance their products, increasing value to end-users and increasing the returns to producers (see page 13 of this issue for an example of a co-op that was helped with a VAPG). Since the program's inception in 2001, we've awarded more than 1,200 VAPGs for planning and working capital grants. In the current round of VAPGs, we encouraged applications that would focus on local foods and value chains, or food systems.

The B&I program can support cooperative ventures for locally grown agricultural products. These loans can be used for business conversion, repair, modernization or development. They can also help with purchasing or developing land or facilities.

Funds go to equipment, leasehold improvements, machinery, supplies and inventory.

To help improve the impact of our cooperative programs, we are establishing expert advisory panels with a cross-section of outside experts.

They'll explore equity issues and research needs, provide support for cooperative board members and co-op management and identify long-term issues that need to be addressed.

We're also creating ad hoc panels to examine emerging issues, such as cap-and-trade and local foods.

In keeping with the Secretary's rural wealth-building priority, we're establishing a discussion forum with the goal of encouraging all cooperative trade associations serving rural areas to come together and explore creative ways to target services and build communities.

We want to make our programs work for you, and in today's business environment.

The rural economy is struggling and lenders are reluctant to continue with existing credits, much less extend new credits, but Congress clearly defined our mission and we are fully committed to doing all we can to support the entrepreneurs that have the initiative and the drive to go out and compete in the marketplace.

Combining your experiences and strengths, we can address challenges facing your communities. Let's build rural America through mobilizing local leaders, capturing transfers of wealth, encouraging entrepreneurship and building stronger cooperatives. You are our leaders in the states, and I challenge you to consider the role that you can play.

Editor's note: The following is based on remarks Canales made at the Farmer Cooperative Conference in Minneapolis in November. Canales also served previously as Texas State Director for USDA Rural Development. For other conference highlights, see page 18 of this issue.

Judy Canales, Administrator

Rural Business & Cooperative Programs

USDA Rural Development
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Title Annotation:Commentary
Author:Canales, Judy
Publication:Rural Cooperatives
Date:Jan 1, 2010
Words:948
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