Characteristics Structure People Finance

1. Introduction to Farm Cooperatives Characteristics Structure People Finance

2. Cooperative Principles • Voluntary and Open Membership • Democratic Member Control • Member Economic Participation • Autonomy and Independence • Education, Training and Information • Cooperation Among Cooperatives • Concern for Community

3. What is a Cooperative? • A business owned and democratically controlled by the people who use its services and whose benefits are derived and distributed equitably on the basis of use. The user-owners are called members. Members receive services from the cooperative and they earn annual income based on how much business they do with the cooperative. Cooperatives are similar to other businesses but differ in terms of purpose, ownership, control and the distribution of benefits.

4. Types of Cooperatives • Financial Cooperatives (credit unions) • Consumer Service Cooperatives (housing/health) • Business Cooperatives (retail goods) • Farmer Cooperatives (marketing / production)

5. Farmer Cooperatives in the U.S. • Over 4,000 Farmer Co-ops in the U.S. • Over 3.7 million farmer-members • Farm Co-ops generate over $112 billion in gross receipts and $3 billion in net profits. • Some rural cooperatives produce and sell electricity and telephone services to members.

6. Benefits of Cooperation • Access to quality supplies and services at reasonable cost. • Increased clout in the marketplace. • Share in the earnings. • Political action and organizing. • Enhancing and protecting local economy.

7. Cooperative Business Structure • Management is controlled by a board of directors who are elected by the members. • Equity (capital) comes from the members rather than outside investors. • Earnings (or losses) are allocated to the members on the basis of their use of co-op over a year. • Members can join or resign without disrupting ongoing operations.

8. Geographic Territory Served • Local co-ops operate within a 20-60 kilometer range in a single district or village. • Super local co-ops have multiple locations in several districts or villages. • Regional co-ops operate on a larger basis such as an entire Oblast. • National / International co-ops serve one or more countries.

9. Governance System of Co-ops • Centralized co-ops have both individuals and businesses as members; one central office; one board of directors; and one manager. • Federated co-ops have other coops as members. Many local coops band together to do complex and expensive tasks. • Mixed co-ops have both individuals and other cooperatives as members.

10. 3 Core Functions of Co-ops • Marketing: assist members in maximizing the return they receive for good they produce by negotiating prices; assembling volume sales or processing more valuable products for higher profits. • Purchasing: help farmers gain access to affordable, quality production supplies (feed, fuel, fertilizer, seed). • Service: provide farm services to farmers such as applying fertilizer and chemicals, feed processing and crop harvesting (also credit/electricity/phone).

11. Co-op Members • Members are the foundation of any cooperative. They organize it. Their needs are the reason for its existence. Their support, through patronage and capital investment, keeps it economically healthy. The members changing needs shape the goals and objectives of the cooperative.

12. Member Responsibilities • Patronize the cooperative • Be informed about the cooperative • Be conscientious when selecting and evaluating the board of directors • Provide necessary capital • Evaluate the performance of cooperative

13. Director Responsibilities • Hire a competent manager, determine the salary, outline duties/authority and review performance at least annually. • Adopt broad, general policies to guide the manager. • Develop and adopt long-range business strategies. • Require written monthly financial reports.

14. Director Responsibilities(continued) • Approve operating budget each year. • Employ a qualified auditor to review books. • Determine member refund and retain levels. • Assure competent legal counsel. • Keep a complete record of board actions.

15. Cooperative Officers • President: presides at all meetings and serves as main communication link between hired manager and other directors/members. • Vice-president: takes place of president in case of absence or disability. • Secretary: maintains record of board meetings and secures seal, bylaws and co-op records. • Treasurer: oversees bookkeeping and is responsible for presenting periodic financial reports.

16. Cooperative Manager • Supervise and coordinate the business activities of co-op (under board direction) • Hire, fire, train, supervise and set salaries for employees. • Oversee daily operations of co-op business. • Maintain and revise bookkeeping and accounting system; prepare and present the annual budget.

17. Cooperative Manager(continued) • Furnish information on co-op needed for long-range planning • Positively represent co-op in the community. • Encourage membership and active patronage of existing members. • Communicate with board and members. • Understand legal requirements of co-op.

18. Cooperative Employees • Understand the purpose and objectives of the cooperative. • Fully perform duties. • Understand the relationship to member-owners. • Favorably represent the co-op with customers and members.

19. Equity and Financial Planning • Direct Investment by members when they join the cooperative (1 share). • Retained Margins (business profits) that board decides how to distribute or use for investment in co-op. • Per-unit Capital Retains (% of member sales) are deducted from sales proceeds due to the members of the cooperative.