COOPERATIVES

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.

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. 1910-1930 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. ACTIVE PERIOD

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 • 1950-1990 • 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.