UNDERSTANDING COOPERATIVES UNIT 3 - The Structure of Cooperatives Slides for Unit 3

Cooperative Structure Types Financial Geographic area served Governance or control Functions performed Other arrangements S 3.1

Financial Structures Cooperatives are incorporated as stock or nonstock organizations. Stock Cooperatives Issue one share of common stock (voting) as evidence of ownership interest. S 3.2

Financial Structures Cooperatives are incorporated as stock or nonstock organizations. Nonstock Cooperatives Issue membership certificates as written proof of a right to vote. Many stock and nonstock cooperatives also raise member capital by retaining earnings. S 3.3

Structures by Geographic Territory Served Local Cooperatives Operate in relatively small geographic area, typically in a radius of 10 to 30 miles. Super Locals Operate in two or more counties with several branch facilities. Regional Cooperatives Large mixed, federated, and centralized cooperatives often serving multi-state areas. S 3.4

Structures by Geographic Territory Served Interregional or National Cooperatives Cover two or more regions, which may serve a major portion of the U.S. International Cooperatives Operating on an international basis with headquarters in the U.S. or other countries. S 3.5

Centralized Structure Cooperative Member Individuals are members of a cooperative. S 3.6

Federated Structure Cooperative Local Cooperative Member Local Cooperative Member Individuals are members of local cooperatives which are members of the federated cooperative. RBS, USDA S 3.7

Mixed Structure Cooperative Member Local Cooperative Member Both cooperatives and individuals are members S 3.8

Cooperative Functions Three Core Functions Marketing - extend control of members’ products through processing, distribution, and sale Purchasing - providing affordable supplies and goods Service - provide needed services S 3.9

Marketing Cooperatives Assist members in maximizing returns from goods they produce Handle, process, assemble, and sell Grade, transport, bargain Add value (new generation cooperative) Research-new product development S 3.10

Purchasing (Supply) Cooperatives Allow members to gain access to affordable production supplies and goods Purchase in bulk to reduce costs and increase purchasing power Provide direct ownership of refineries, plants, retail facilities, distribution chains, research facilities S 3.11

Rural Service Cooperatives Provide needed services Meet many needs Custom application of purchased supplies, transport of product, etc. Provide utilities, credit, insurance, housing, health care, technology, etc. Other selected services S 3.12

Other Structural Arrangements Subsidiary A corporation organized, owned, and controlled either totally, or partially by a parent cooperative Marketing Agency in Common Organized by two or more marketing cooperatives to market products or provide services for member cooperatives S 3.13

Other Structural Arrangements (continued) Joint Venture Association of two or more participants, persons, partnerships, corporations, or cooperatives to carry out a specific economic operation, enterprise, or venture Holding Company A corporate entity with a controlling ownership in one or more operating companies S 3.14

Other Structural Arrangements (continued) Contract Agent A county or community cooperative may organize, owning nothing but contracts, and an agent to handle the goods and keep patronage records turned over by the agent. Private Dealers As a franchise, the dealer keeps records. If the franchise makes money, patronage refunds are paid to the dealer’s customers. The dealer is paid a commission on sales. S 3.15

New Generation Cooperative A new generation cooperative is a type of marketing cooperative that adds value (e.g., processing) to an agricultural raw product with the purpose of marketing that finished product in order to increase benefits to a finite (closed) membership. Membership shares can appreciate/depreciate and can be traded. Members shares are closely associated with contracted delivery rights. S 3.16