1. Introduction to Cooperatives
Ag Business
Ms. Senff

2. Overview of California Agribusiness
California agriculture directly or indirectly supports over 1 million jobs
Accounts for about 6% of the state’s total gross product

3. The American Private Enterprise System
Based on FREEDOM
Individuals and the business they own can decide what to produce, sell, buy, consume
Motivated by what each believes will bring the most benefit
Results in a NATURAL BALANCE between SUPPLY and DEMAND
Producers want to get as much as possible for what they sell
Consumers want to pay as little as possible

4. Downfalls to Private Enterprise System
Can suffer from:
Over or underproduction
Inflation
Recession
Monopolies
Severe unemployment
Abusive practices
Etc.

5. Business Activities Production of basic commodities
Manufacturing or processing of goods
Marketing
Services

6. Types of Business Ownership
All businesses require CAPITAL funds necessary to cover the costs of producing a product or providing a service.
Capital primarily comes from investment and borrowing
Businesses are classified by their OWNERSHIP

7. Types of Business Ownership (REVIEW)
Individually Owned (Sole Proprietorship)
Partnership
Corporation
LLC
Cooperative
Primary sources of capital – individuals personal resources and whatever they can borrow
If business fails, owner is responsible for all unpaid debts – business and personal property fair game for payment

8. Types of Business Ownership
Limited Liability Company (LLC)
Owners are protected from personal liability
Taxed only once
Governed by an agreement between the owners (“members”)
Also in CA, LLP – Limited Liability Partnership

9. Advantages of LLC’s Allow for flexibility
Owners have personal liability protection
Income taxed only once

10. Disadvantages of LLC’s
Departure of an LLC owner generally terminates the LLC
Do not have as many options for raising outside capital as general business corporations

11. Types of Business Ownership
Cooperative Business Corporation
Purpose is to provide economic benefits and policy control to its members
Members are both owners and customers
Co-op’s provide its member-owners with goods or services that would otherwise be purchased from private companies to earn a profit
Board of directors
Earnings (or losses) are called “MARGINS”
Allocated back to members in proportion to their use of the co-op’s services

12. Advantages of Co-Op’s
Increased power for producers by bringing together business volume and resources
Lower distribution costs
Group purchasing power
Members have more control

13. Disadvantages of Co-Op’s
May require extensive capital from members
They are more limited in ability to attract outside investment than general corporation
Membership may require producers to give up some independence

14. Farm Cooperatives
Joining a Co-Op gives farmers capability of tapping into “Value-Added” profits
Value-Added
Packing, processing, distribution advertising
Farmers can increase their net income in 2 ways:
Reduced farm production costs
Higher, value-added returns from crops

15. Farm Cooperative
An agricultural cooperative, also known as a farmers' co-op, is a cooperative where farmers pool their resources in certain areas of activity.

16. Cooperatives Not intended to make a profit
Owned and controlled by the member-patrons
Profits are returned to the members based on patronage

17. Types of Cooperatives Marketing Cooperative Purchasing Cooperatives
(Orange Juice, Dairy Products, Grain Elevators)
What is an example?
Purchasing Cooperatives
(feed, fuel, fertilizer) What is an example?
3. Service Cooperative
(apply fertilizer, pesticides) Example??
4. Processing Cooperative
(processing milk, sausage, etc) Example??
5. Credit Cooperative
( credit & Banking organizations) Examples??

18. Purposes of Cooperatives
Improve economic well-being of farmers
Securing higher market prices
Securing more favorable input prices
Provide new or improved services
Provide credit
Become involved in processing

19. Characteristics of Co-op
Owned by members who use them
Member control
each member has voice in business affairs
each member helps select board of directors
Non-profit basis
Mutual interest and needs of members

20. Characteristics of Co-op
Members share the risk in proportion to amount of business they do
Members select board of directors
responsible for management, policy, insuring that coop is managed according to the wishes of the majority of members

21. Monday, 10/26 - INDIVIDUALLY Research a Farm Cooperative
Find the What, When and Why of your cooperative…
When was the Co-op established?
What is their purpose? (marketing, purchasing, etc.)
Why did they begin?
What is their scope/size? How many farmers are members?
You will work on this assignment in class Monday, 10/26 and Wednesday 10/28. You will have laptops to use. Whatever you do not finish in class, is due for homework.
You will submit your findings in a typed written format on Friday, 10/30 in addition to presenting to your peers

22. Dairylea Cooperative Inc. Dairy Farmers of America Farm Credit
Blue Diamond Growers
Cabot Creamery
Diamond of California
Dairylea Cooperative Inc.
Dairy Farmers of America
Farm Credit
Farm Supply
Florida's Natural Growers
GreenStone Farm Credit Services
Humboldt Creamery
Land O'Lakes
Maine’s Own Organic Milk Company
Ocean Spray
Riceland Foods
Snokist Growers
Sunkist Growers, Incorporated
Sun-Maid
Sunsweet Growers Incorporated
Tillamook County Creamery Association
Lone Star Milk Producers
United Egg Producers

23. Tuesday, 11/3 - Create a Cooperative
In teams of three, you will create a fictional Cooperative.
First, determine what kind of Cooperative you will form (Marketing, Purchasing, Service, Processing or Credit)
Clearly state the following:
your purpose as a cooperative.
who will be your members
Create your Cooperative “Image”