1. COOPERATIVES
AGEC 364

2. WHAT IS A COOPERATIVE?
Cooperatives are legal, practical means by which a group of self selected, selfish capitalists seek to improve their individual economic position in a competitive society. H.E. Babcock
A business voluntarily owned and controlled by its member patrons and operated for them on a nonprofit or cost basis.
The cooperative organizations were adopted by the farmer as a possible solution for the problems that they face with selling their products cheap and having to buy the products high.
Most cooperatives in the U.S. are farm cooperatives.
These cooperatives are a important factor in the Agricultural Economy

3. 2 aspects of Cooperatives
A Cooperative is a legal, institutionalized entity that permits group action that can compete within the framework of other types of business organization.
Cooperatives are voluntary organization set up to serve and benefit those who are going to use them.

4. 3 distinctive Concepts of Cooperatives
Ownership and control of the enterprise must be in the hands of those who utilize its service
business operation shall be conducted so as to approach a cost basis
return on the owner’s invested capital shall be limited

5. TYPES OF COOPERATIVE BUSINESS
MARKETING COOPERATIVE
PURCHASING COOPERATIVE
SERVICE COOPERTIVES
PROCESSING COOPERATIVES

6. MARKETING COOPERATIVES
Marketing Cooperatives sell farmers products.
These products may collect member’s products for sale, grade, package, and perform other functions.
The objective of such organizations is to secure the greatest possible amount for the products of their farmer-owners.

7. PURCHASING COOPERATIVES
Purchasing Cooperatives sell supplies to farmers.
The objective of such organizations is to provide savings for the farmer on purchases.
The principal source of such savings will usually come from lower prices or from higher-quality and better-adapted supplies and equipment.

8. SERVICE COOPERATIVES
Service Cooperatives provide their members with improved services or with services they cannot otherwise obtain.
These services include credit, insurance, electric power, telephone, drainage, hospitals, and mortuaries.

9. PROCESSING COOPERTIVES
Processing Cooperatives engages in the packing and processing of the farmers products
This is a form of vertical integration and value adding

10. TYPES OF COOPERATIVE ORGANIZATION
INDEPENDENT LOCAL ASSOCIATION
FEDERATED ASSOCIATION
CENTRAILZED COOPERATIVE ASSOCATION
MIXED ASSOCIATION

11. INDEPENDENT LOCAL ASSOCIATIONS
People hold direct membership and are able to participate in the affairs of the cooperative.
Limited in tasks they can accomplish because of their size

12. FEDERATED ASSOCIATION
Composed of several local associations that operate together as an integrated unit.
Bands together to secure greater power and efficiency.

13. CENTRALIZED COOPERATIVE ASSOCIATION
The patron is direct member of the central organization and exercises control through delegates sent from the different areas to the annual meeting.
Savings are distributed directly from the central association to the menbers.

14. MIXED ASSOCIATION
Many of the large organizations are neither totally centralized nor totally federated but a mixture of the two.
Both the federated and centralized characteristics help gain bargaining power and control of the cooperation.

15. HISTORY AND STATUS OF COOPERATIVES

16. ACTIVE PERIOD
Capper-Volstead Act was passes in 1922 which gave official sanction to cooperatives as a way of restoring in maintaining reasonable competition in the marketing and purchasing of Agricultural products and supplies.

17. CONSOLIDATION PERIOD 1930-1950
In order to gain economic strength many small independent cooperatives consolidated into the large federated associations.
The number of cooperatives declined, but purchasing cooperatives grew in number and membership.

18. PERIOD OF GROWTH
This was a time of cooperative restructuring, mergers, and international growth.
Cooperatives grew in membership and dollar volume and continued to find new places in the market.

19. PURPOSES OF COOPERATIVES
Enable farmers to accomplish more than they can independently.
Reduces farmers costs
provides farmers with products and services
stabilizes the expanding markets
enables farmers to move into supply, assembly, and processing markets.

20. REASONS FOR COOPERATIVE FAILURE
Lack of sufficient capital
Inadequate membership support
ineffective management

21. Problems of modern Cooperatives
Financing
Management

22. FINANCING
Difficult for cooperatives to make a sufficient amount of money because it is not allowed to share additional shares to the investing public.
Obtains equity by selling preferred stock to members.

23. MANAGEMENT Three groups involved in the management
Members- exercise their control through their elected directors.
Board of directors- formulate general operating policies and obtain manager.
Managers- responsible for operating the cooperative

24. Difficult to find members to fill the positions and have to maintain a competitive price.

25. Membership Relations Most important aspect of each cooperative.
Membership interest decline when the size of the cooperative increases.
It is important that the members are informed in order to gain their support.

26. Relations with the General Public
The public has mixed emotions about the cooperatives.

27. Consumer Food Cooperatives
Consumers form them in order to lower food costs and participate more fully in food retail decisions.
Faces same problems as other cooperatives such as hiring difficulties, providing unique services, and difficulties securing capital.