Reported by Bill Kelly, STATEWIDE Correspondent

The Stromsburg Grain Co-op had been the rock in the community. Thirty one people on the payroll...25 million dollars in sales. Just a few years ago it had joined forces with the oldest grain elevator in Nebraska in Benedict.
   For years part of the dividends earned by farmers were rolled back into the co-op... part of a member's responsibility. In return they hope to get back a share of the co-op's net-worth years later. In Stromsburg some of the old-timers started wondering if something was wrong when they were told they would not be paid out their equity.
   [Co-op member:] "We didn't think anything like this could happen."
   The rumors started when the co-op delayed the annual meeting while auditors unscrambled the books.
   "We knew there was a problem."
   At the annual meeting, the news hit hard: The Great Plains Co-op lost $1.8 million.
   "I think people were still a little bit in a state of shock."
   Three months later, they announced the total losses had passed three million.
[Bob Liedtke:] "Probably everything that the board ascribed for went up in smoke in just two years here. That kind of makes you feel bad."
   [Bill Kelly:] "And you're out a couple dollars."
   [Liedtke:] "Yes, of what I should have."
   Bob Liedtke fears he lost a bundle. There are never guarentees, but after years of loyal membership he could have been paid thousands of dollars in equith. He'd been a member of the Great Plains Co-op and served on the board of directors for two terms. Liedtke claims that the worst of poor business practice and lax over-sight have cost him and other seniors a nice nest egg.
   "Yeah, I had plans for it. Just like the Mayor of Stromsburg. I visited with him about it. He said that's an important business here. He said I wished those farmers had gotten their equity out of there, because one farmer told me he was going to buy a house in town when he got that equity."
   [Bill Kelly:] "That's one less taxpayer in Stromsburg now."
   [Liedtke:] "That's quite an impact on the community."
   So what happened in Stromsburg at the Great Plains Co-op? The first hint on the public record showed up in the files of the Public Service Commission where documents show the elevator had less grain on hand for a time than it had promised its buyers. A letter from the manager blames the oversight on a grain trader named Herman Gerdes, stating: "Herman has admitted several mistakes in trading and pool grain accounting." State regulators made it clear it was time to shape up.
   But much more was wrong at Great Plains. A series of bad grain deals sapped money out of Great Plains with increasing speed. That's what the president of the Great Plains board of directors told the patrons.
   [Bill Kelly:] Was this just a series of mistakes on his part?
[Kent Allen, President, Great Plains Co-op:] "No."
   [Bill Kelly:] Then what happened?
   [Allen:] "It was the result of one mistake than trying to cover up that mistake."
   At a meeting in July the producers who are both the customers and owners of the co-op were told that Herman Gerdes continued a cycle of bad trades that put the elevator in a tailspin. We weren't allowed in the annual meeting, but reporter Donna Rhodes of the York News Times was there. She also happens to be a shareholder in the co-op.
   [Donna Rhodes:] "They couldn't understand how it got to that point. I think they were frustrated that it had gotten to that point. They were frustrated that circumstances had gotten to that point and all they could do was lose money."

[Bill Kelly:] "So what did you end up hearing from them?"
   [Disgruntled coop member:] "A lot of.... a lot of no good stuff."
   Many co-op members left that meeting believing the board of directors was extraordinarily negligent in not keeping close watch over the routine business of the elevator.
   [Co-op member:] "When they knew he was having trouble before they even hired him, and then this has been going on all this time and they didn't stop him. The board is responsible for that. But they didn't stop it. The board's responsible for that. They didn't take the responsibility."
   [Bill Kelly:] "They were not keeping close enough track of what was going on."
   [Member:] "That's for sure. That's for sure."
   The only defense from the Board and its President: 'We were lied to so we could not have known.' Kent Allen said the Co-op could weather the storm.
   [Bill Kelly:] "That's a huge loss."
   [Kent Allen:] "That's true. There are very few co-ops who could absorb that loss and still survive."
   [Bill Kelly:] "Have you lost the trust of your membership because of this?"
   [Allen:] "I think there's certainly going to be some doubts. The changes that we're making are going to elevate those doubts and try to earn that trust back."
   If there was trust, it was short lived. The Great Plains Board had to return to its members and announce there was an additional 1.5 million dollars in losses. At another meeting this fall the mood was testier, according to Donna Rhodes:
   "There were more questions about, 'Why isn't somebody in jail over this?' Or, 'Why isn't somebody being charged?' Or, 'Who is to blame?' There was a lot of frustration. They just want a whipping boy. They want a dog they can kick."
   In her article Rhodes quoted the Co-op's accountant as say: "We can't even say the bleeding has stopped." Their banker... CoBank of Omaha... called the situation "ugly, damn ugly," and said they planned to end their business relationship with Great Plains.
   [Dan Hoffman, Co-op Member:] "We knew there was a problem, but the problem is going to be magnified if everybody bails out of them and nobody does any business up there."
   Dan Hoffman has taken most of his beans and corn to Great Plains to be marketed. But he worries that there may not be cash on hand later for the grain he's loading up today. So this year is different. He's sending some to Stromsburg, selling some elsewhere, and storing more than usual in his own bins.
   [Bill Kelly:] "So What do you do?"
   [Dan Hoffman:] "I'm doing a little business. Let's say I'm cautiously optimistic."
   [Bill Kelly:] "But still cautious."
   [Hoffman:] "Yes. Very cautious."
   Almost everyone in Stromsburg agrees on this: there's a lesson for the people who join and put their trust in the local co-operative.
   [Bill Kelly:] "Does that tell you it could happen any where?
   [Bob Liedtke:] "It could. It could. But its all up to that board of directors and that manager."

[Dr. Mike Turner, Ag Economist UNL:] "The Stromsburg situation is not unique. It has happened again and again. in the 30 years since I've been in the State of Nebraska. It will continue to happen in the future."
   Mike Turner is a specialist in co-ops in the Agri-Business School at the University of Nebraska.
   "In some cases there are places making the assumption, gee, we hired a good person, a person we believed to be competent, so there isn't much we need to do to add controls to monitor our success. That's a mistake and it leads us to the kinds of problems that can devastate a company."
   That vigilance from a Co-op's Board of Directors and members may be get more difficult as the grain trading business becomes unbelievably complex. Bob Liedtke wishes the business of selling grain could return to simpler times.
   [Dale Rohrer, Midland Co-op, Funk, NE:] "I can remember when I started to farming and if corn was a dollar ten, I would wait until it got to a dollar twelve because I wanted two cents a pound. That's how much it fluctuated. Its a lot different now."
   Professional grain traders say not only are those days gone, but farmers who don't pay close attention to the kind of deals being made on their behalf at the local co-op may be asking for trouble.
   [Dale Rohrer] "There's still that attitude out there. That scares me. We do not do business that way. We turn around and sell it on the board of trade to minimize our risk. And we've got producers who think we buy, and maybe go along and sell it today and maybe sell it next year. Doesn't work that way. Frightening."
   [Lyle Weitzel, Heartland Co-op, Hastings, NE:] "They expect everybody else to do the understanding for them, but yet they don't want to be the responsible party when its not in their best interest."
Lyle Weitzel and Dale Rohrer both manage grain transactions for CPI ...Cooperative Producers Incorporated of Hastings. After merging several local elevators, they've become big player. It is their responsibility to be extremely cautious with their customers money in a grain market offering an exotic range of sales contract options betting on the rising and falling fortunes of a wild commodities market.
   [Dale:] "So we've got forward contracts, we got basis contracts, then we got into the options market, puts and calls, we've got minimum price contracts, we've got mini/maxi contracts."
   [Lyle:] "You have to be well disciplined. You have to have goals. You have to have discipline. You have to know what your costs are you have to know where you are at all time."
   Grain marketers can start running into trouble when they forget that most basic goal: to get a price for the grain that simply exceeds the cost it took to get it harvested. Lyle has seen it before, when a grain marketer lets it slip away.
   [Lyle:] "The greed factor is what normally gets him to the point when control is lost as far as the producer is concerned. Hope, Greed. Fear. You miss the high of the market, and the market goes down, and you're hoping it goes back up, and once it goes back up you get greedy and you miss that high price and then it stpers collapsing on you, and you think, 'Oh My God! I lost everything and its never going to come back up.' "
   There is a real irony and a real tragedy in the Stromsburg story. The irony: it appears that the money that was made in those out of whack grain trades actually gave a number of local producers higher prices than they might have deserved for their grain. Dan Hoffman was one of them.
   [Dan Hoffman, Co-op Member:] "I can't be too upset. I participated in the programs and I've gotten a better price for my product than I could have anyplace else. I couldn't figure out how they were doing it. Now I know. (laugh)"
   [Bill Kelly:] "And are paying for it now?"
   [Hoffman:] "Yeah. Taking out of one pocket and putting in the other one."