SARE’s 20 th anniversary NEW AMERICAN F A R M CONFERENCE “Why CO-OP” By: Ben F. Burkett, Marketing Specialist Federation of Southern Cooperatives/Land Assistance Fund MARCH 25-27, 2008

Mississippi Association of Cooperatives A state association of the Federation of Southern Cooperatives/Land Assistance Fund (FSC/LAF) A state association of the Federation of Southern Cooperatives/Land Assistance Fund (FSC/LAF) Established in 1972 with a purpose to serve limited resource and minority cooperatives throughout the state Established in 1972 with a purpose to serve limited resource and minority cooperatives throughout the state

MAC Continued… Parent organization of the Mississippi Center for Cooperative Development Parent organization of the Mississippi Center for Cooperative Development Chartered in 1997 Chartered in 1997 Allows MAC to expand education, training, and technical assistance to participating cooperatives Allows MAC to expand education, training, and technical assistance to participating cooperatives

Regional Crops Watermelon Watermelon Assorted Greens Assorted Greens Squash Squash Culinary Herbs Culinary Herbs

WHAT ARE COOPERATIVES?

A cooperative is a business that is owned and controlled by the people who user it- its member- owners.

Who owns the business? Who owns the business? Who controls the business? Who controls the business? Who uses the business? Who uses the business? Who gets the profits? Who gets the profits? A Type of Business Dependent On

Who sparks the coop Idea? A compelling need and a few leaders can spark the idea of forming a cooperative.

What makes a successful coop? Successful cooperatives bring people together who: ( 1) have a common need or problem (2) want to do something to help themselves; (3)are willing to support the cooperative by supplying capital; and, (4) patronize the cooperative by using it when organized. In addition, a successful co-op must have competent management. Successful cooperatives bring people together who: ( 1) have a common need or problem (2) want to do something to help themselves; (3)are willing to support the cooperative by supplying capital; and, (4) patronize the cooperative by using it when organized. In addition, a successful co-op must have competent management.

What can cooperatives do for people? They market what people grow or produce They market what people grow or produce They obtain production supplies. They obtain production supplies.

What does the coop do for the members? Cooperatives help improve the quality and reduce the cost of supplies and services members use. Cooperatives help improve the quality and reduce the cost of supplies and services members use. Cooperatives help improve net returns to members from products they market and goods and services they provide. Cooperatives help improve net returns to members from products they market and goods and services they provide.

What members do for the coop: Members finance their cooperative. If the cooperative needs more money than the members can provide, the co-op may borrow at least part of it from outside sources, such as banks. Members finance their cooperative. If the cooperative needs more money than the members can provide, the co-op may borrow at least part of it from outside sources, such as banks. Members control their cooperative through a board of directors, that they elect. Directors set policy and hire a manager to supervise the day- to-day cooperative operation. Members control their cooperative through a board of directors, that they elect. Directors set policy and hire a manager to supervise the day- to-day cooperative operation.

Membership Members, are the reason the cooperative is organized. (owner-users). They justify the existence of the coop through their patronage, capital investment and decision making participation. They should show an interest in all the cooperative’s affairs, present ideas to improve performance and promote it to others who can benefit by using it. Members, are the reason the cooperative is organized. (owner-users). They justify the existence of the coop through their patronage, capital investment and decision making participation. They should show an interest in all the cooperative’s affairs, present ideas to improve performance and promote it to others who can benefit by using it.

Survival

Cooperatives Are a Type of Corporation Multiple owners who are user members Multiple owners who are user members Variety of goods and services Variety of goods and services Physical facilities Physical facilities State chartered State chartered Members are investors Members are investors Owned and controlled by members who use its services Owned and controlled by members who use its services

Cooperatives Are primarily controlled by a board of directors elected by and from members Are primarily controlled by a board of directors elected by and from members Derive equity from member owners Derive equity from member owners Operate for the benefit of member owners Operate for the benefit of member owners Allocate earnings to members based on use Allocate earnings to members based on use Earnings from member business is taxed once Earnings from member business is taxed once Have perpetual existence Have perpetual existence

The Cooperative Form of Business Is Prevalent 47,000 cooperatives in the United States 47,000 cooperatives in the United States Serve 100 million people, 40 percent of the population Serve 100 million people, 40 percent of the population There are several types of cooperatives serving many sectors There are several types of cooperatives serving many sectors

Types of Cooperatives Financial Financial Consumer Service Consumer Service Business Business

Cooperatives Have Unique Principles User - Owner User - Control User - Benefit

User-Owner Principle The people who own and finance the cooperative are those who use it.

User-Control Principle The people who use the cooperative are those who control the cooperative

Members Exercise Control By Voting at annual and membership meetings Voting at annual and membership meetings Electing Board of Directors Electing Board of Directors Making decisions on major cooperative issues Making decisions on major cooperative issues

User-Benefit Principle The cooperative’s sole purpose is to provide and distribute benefits to members on the basis of their use

User-Benefits Market Access Bargaining Power Reduced Costs Quality products and services Community Strength Economic Enhancement Competitive Yardstick Political Action

Cooperative Practices Implement and Facilitate Basic Principles Patronage Refunds - distribute earnings to members based on use Patronage Refunds - distribute earnings to members based on use Limited Return on Equity Capital - members form cooperatives for service, not for a monetary return on investment Limited Return on Equity Capital - members form cooperatives for service, not for a monetary return on investment Cooperative Cooperation - joint ventures, MAC’s, networks, alliances, working relationships, etc. Cooperative Cooperation - joint ventures, MAC’s, networks, alliances, working relationships, etc. Cooperative Education - promote the cooperative way of doing business and educate members, directors, and employees Cooperative Education - promote the cooperative way of doing business and educate members, directors, and employees

Cooperative Governance System Structure Based on membership structure and essentially defines who the members are and how the cooperative is organized to serve them. Centralized Structure - Individuals are direct members Centralized Structure - Individuals are direct members Federated Structure- Cooperatives are direct members Federated Structure- Cooperatives are direct members Mixed Structure - Individuals and cooperatives both are direct members Mixed Structure - Individuals and cooperatives both are direct members

Centralized Structure Centralized Structure Cooperative Member

Federated Structure Federated Structure Cooperative Local Cooperative Member Local Cooperative Member

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

Participation Roles Cooperatives operate through the roles of principal parties Members Members Directors Directors Manager Manager Employees Employees

Organizational Make-Up Members Board of Directors Manager Employees

CONTACT INFORMATION BEN BURKETT Marketing SPecialist Federation of Southern Cooperatives/ Land Assistance Fund Post Box Jackson, MS (601) OFFICE (601) FAX