lil 



value products, semiprocessed as well as processed high- value 

 products. For example, last year we saw an explosion, if 1 can use 

 that word, of financing of barley malt. 



Mr. Penny. It appears that you are basically structured to pro- 

 vide financing commodities — either bulk or processed — that are 

 originated by your member institutions, other co-ops. 



Ms. Colon. Yes. 



Mr. Penny. And the GSM credits ai-e then requested by individ- 

 ual member co-ops and they make an application to CoBank. 

 CoBank in turn applies for the GSM credit or does the member co- 

 op make an application in both categories to you, but also to the 

 Department? 



Do you secure — in other words, you secure directly the GSM 

 credit for this sale on behalf of the member co-op that is trying to 

 make the sale, or does the member co-op sort of identify the market 

 and then work with both the GSM program and CoBank to secure 

 the financing. 



Ms. Colon. The GSM operates on a comm.ercial basis in that the 

 guarantee is given to the actual exporter. 



Mr. Penny. The exporter turns to CoBank for financing, 



Ms. Colon. The exporter, right. 



What they do is assign the guarantee that is given by the USDA 

 to them over to the financial institution. 



Mr. Penny. Do you see an increased interest on the part of your 

 co-op members in doing more to develop nonfood, nonfeed uses for 

 the commodities they grow? 



Ms. Colon. Yes. I am sure you are aware most of our coopera- 

 tives are in the raw or the production side of agriculture and very 

 few of them are on the processing side. We are seeing a trend of 

 co-ops going into the processing side. 



[Additional information submitted by Ms. Colon follows:] 



We think there is a lot of interest in this area. However, not many of our coopera- 

 tives have the equity capital to invest in research and development. Most of the in- 

 novations in this area seem to be coming from entrepreneurs or small companies 

 that appear to be in need of financing. CoBank intends to explore this area and de- 

 termine if there is a need we can meet consistent with our mission to serve agii- 

 culture and rural America. 



Mr. Penny. And you are also a financier for those expansions or 

 innovations in the industry. 



Ms. Colon. For example, ethanol plants. 



Mr. Penny. And statistics would bear out that CoBank is financ- 

 ing an increasing number of ventures in that regard? 



Ms. Colon. I would think so, on the domestic side. 



Mr. Penny. If you have some documentation in that area, I 

 would appreciate seeing that. We can put that in the comm.ittee 

 record. 



Ms. Colon. OK. 



Mr. Penny. I think we have covered enough ground this morn- 

 ing. I want to thank the witnesses and at some point, either be- 

 tween now £ind Christmas or early next year, we will try to have 

 a roundtable discussion with some of the industry leaders, sit down 

 with some of the people from the Department and we can kick 

 around the various recommendations that have been made for im- 

 proving and streamlining and refocusing the FAS programs. 



