1. Cooperatives in the food industry
Types of cooperatives
History and status
Relative importance
Coop problems

2. What is a cooperative
a business voluntarily owned and controlled by its member-patrons and operated for them on a nonprofit or cost basis.

3. Cooperatives Legal entity that permits group action
Set up to serve and benefit those that use them
Stockholders are members

4. Requirements of a coop
Ownership and control of the enterprise must be in the hands of those who utilize its services.

5. Requirements of a coop
Business operations shall be conducted so as to approach a cost basis

6. Requirements of a coop
Return on the owner’s invested capital shall be limited.

7. Coop v. Stockholder owned
Cooperative
One member - one vote
Coop returns go to the users
Stockholder owned
Stockholders vote by shares owned
Firms maximize return to stockholders

8. Purpose of coops Do what you can’t do alone
Act as a competitive yardstick

9. Purpose of coops Provide products Stabilize expanding markets
Allow farmers to move up and down the food chain

10. Purpose of coops Enhance returns Reduce cost Increased efficiency
Improved market coordination
Greater bargaining power
Reduce cost

11. What coops cannot do Set price without supply control
Eliminate middlemen
Ignore customer/member
Membership is voluntary

12. Types of cooperatives
Marketing
Purchasing
Service
Processing

13. Marketing coop Perform marketing functions
assembly, grading, packaging
36% of farm receipts in 1995
Milk 100%
Grain 41%
Fruit and veg 37%
Livestock 9%

14. Purchasing cooperatives
Sell inputs to farmers
28% of farm expenditures, 1995
Petroleum 48%
Fertilizer 42%
Feed 21%
Seed 11%

15. Service cooperatives Common in the 1930-40s
Provide what may not otherwise be provided
REC
Telephones
Farm Credit

16. Processing cooperatives
Farmer owned vertical integration
Sunkist oranges, Ocean-Spray
Sun-Maid raisins, LOL dairy products
Farmland meats
US Premium Beef
Iowa Quality Beef
Iowa Premium Pork

17. Consumer cooperatives
Many of the same motivations
Cost savings
Provide what wouldn’t otherwise exist
Control the input
Examples
Food (organic), housing, daycare

18. Problems of coops Issues of control Financing Vote by member or volume
Leadership
Financing
Can’t sell more shares

19. Reasons for coop failure
Lack of sufficient capital
Less than efficient size adds to cost
Inadequate membership support
Variability in volume
Ineffective management
Competitive market for managers

20. New Age Closed Coop Limited membership Investment and commitment
Cash and product
Stock appreciates in value
Can be sold

21. Value added processor Members buy shares to raise equity
Members required to make or take delivery
Paid the current market price
Profits paid on a unit basis

22. New Age cooperatives Value added closed coops Ethanol production
Turkey processor
Pork production
Ethanol and beef
Eggs

23. New Age Closed Coop Advantage over open coop Disadvantage to open coop
Stock retains value
Dividends not diluted
Disadvantage to open coop
Must patronize
Higher equity requirement