No ‘Quick Fix’ Seen for Ailing Rice Growers : Head of Co-Op Promises Cost Cuts, New Strategy
“I wonder if we can get food stamps,” quipped a member of troubled Rice Growers Assn. of California on Thursday as he waited to hear the cooperative’s new management explain how it plans to turn around the firm, the state’s largest rice marketer.
Chief Executive Michael Cook offered no pie-in-the-sky solution at RGA’s 64th annual meeting. “I’d be very irresponsible if I told you there was a quick fix,” Cook told a standing-room-only crowd of more than 900 rice-grower members and their families.
RGA’s 1,600 member-growers were stunned late last month when many of them received bills instead of checks for the final settlement of the 1984-85 crop. Even worse, members of cross-town rival Farmers Rice Cooperative earned $1.50 more per 100-pound sack of rice than RGA’s growers.
The members were told that the cooperative’s earnings last year declined to $89 million from $102 million. Moreover, RGA’s auditor, Price Waterhouse, will qualify its review of the firm’s financial statement because of two major unresolved legal questions with potential financial impact.
Antitrust Case
One stems from a federal judge’s decision that RGA’s 1984 purchase of Pacific International Rice Mills Inc. violated antitrust laws. In the absence of a final court order, however, the accountants said they could not assess the financial impact. RGA awaits that order before deciding whether to appeal the decision or sell Pacific International, for which they paid $12 million.
The other unresolved legal question concerns a lawsuit by rival Farmers Rice over division of a settlement involving a leased rice transport shared by the two firms for shipping rice to Puerto Rico.
Cook told the growers that the first step toward a turnaround involves “slashing costs” and careful analysis of the firm’s organization and marketing strategy over the next four months.
“Change will come,” he said. “The challenge is how to manage it--not to flee or hide from it.”
To emphasize his intention, Cook said he will announce a major staff reorganization on Monday.
Earlier in the day, RGA’s board accepted the voluntary resignation of President Ron Harrington on the condition that the job be given to Cook. Harrington said his motive was to give Cook professional parity in his dealings with other heads of cooperatives. Farmers Rice, for example, is led by President and Chief Executive Ralph Newman.
The board also named a committee of growers and directors to recommend changes in the governance of the association--changes that will be put to a vote of the membership early next year.
Over the last two years, an intense rivalry has developed between the state’s two largest milling cooperatives, once the closest of allies but with dominant RGA pretty much calling the shots.
But Farmers Rice Cooperative brought in new leadership in Newman, who learned the rice business in Texas and quickly broke with RGA at the height of a bitter dispute between the two cooperatives on the one side and their leading customer, South Korea, on the other. Newman quickly cut a separate deal for Farmers Rice with the Koreans, reasoning that the sales dispute was a no-win situation for the sellers, and RGA has been playing catch-up ball ever since.
In announcing his resignation as president, Harrington warned the members that, if they leave RGA for Farmers Rice, they will abandon what he called a large investment in developing domestic rice markets and recognized names such as RGA’s Hinodi brand. (Farmers Rice earlier said it will accept new members this season. At least 75 RGA members have already applied.)
“If you choose to take a walk, those of us who stay are going to benefit from the investment you left behind,” Harrington said.
