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Unit III. Co-op ID

Unit III. Co-op ID. Part B. Numbers, Business Volume, Market Shares, and ‘Combinations ’. Ag Co-op Numbers. Peak # in U.S. ~ 12,000 in 1930 The # has trended downward to ~ 2300 today due mainly to mergers/consolidations (80+% ) The approximate type of U.S. Ag Co-ops is:

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Unit III. Co-op ID

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  1. Unit III. Co-op ID Part B. Numbers, Business Volume, Market Shares, and ‘Combinations’

  2. Ag Co-op Numbers • Peak # in U.S. ~ 12,000 in 1930 • The # has trended downward to ~ 2300 today due mainly to mergers/consolidations (80+%) • The approximate type of U.S. Ag Co-ops is: • Marketing 50% (about ½ = grain) • Supply 38% • Service 12% • Same trend in IA: ~ 1000 in 1930 vs 100-120 today

  3. Ag Co-op Business Volume • $ value has been increasing to $170-200 bil./yr. despite declining co-op numbers • The 5 leading states are MN (11% of total), IA (10%), WI (8%), CA (7%) and IL (6%) • Marketing sales are > 2/3 of the total with dairy and grain accounting for nearly ½ • Co-ps’ MARKET SHARE is the best measure (vs co-op #s or $ sales) of their relative economic importance and this has averaged 25-30% over the past 30+ years for products sold and inputs bought by farmers.

  4. Estimates of Farmer Co-op Market Shares • U.S. Marketing Cranberries 90% Dairy 83% Cotton 42% Grains/oilseeds 38% Soybean processing 20% Fruits/vegs 19% Livestock 13% Total 28%

  5. Estimates of Farmer Co-op Market Shares • U.S. Supply Petroleum 46% Fertilizer 45% Crop protectants 34% Feed 15% Seed 13% Total 26%

  6. Estimates of Farmer Co-op Market Shares • Iowa Grain 75% Rural electricity 65%

  7. Co-op Unification Alternatives • Acquisition (A buys B) • Merger (A + B = A) • Consolidation (A + B = C) • Joint Venture or Alliance • Management Contract Note: Merger and consolidation terms often used interchangeably.

  8. Joint Venture or Alliance • An association of two or more firms to carry out a specific economic activity jointly sharing risks, costs, and profits. The participants remain separate entities keeping their original identities.

  9. Co-op Unification Legal Requirements • Acquisitions • Members of acquired co-op must approve • At least 50% of active members must vote • At least 2/3 of voting members must approve • Mergers and Consolidations • Members of both co-ops must approve • At least 50% of active members of each co-op must vote • At least 2/3 of voting members of each co-op must approve • Members who object in writing within 20 days must be paid back the value of: • Their stock within 90 days • Their deferred patronage refunds within 7 years

  10. Examples of Co-op MERGERS 1977 Farmland Industries + Farmarco = Farmland Industries 1992 Farmers Cooperative (Farnhamville) + Mid Iowa Cooperative = Farmers Cooperative 1993 Heartland + Mitchellville + Alleman = Heartland 1995 Mid America Dairymen + Dairymen Inc. = Mid America Dairymen 1996 Milk Marketing Inc. + Eastern Milk Producers = Milk Marketing Inc. 1997 Land O’Lakes + Atlantic Dairy = Land O’Lakes

  11. Examples of Co-op CONSOLIDATIONS 1968 31 Dairy Co-ops  Mid America Dairymen, Inc. 1969 111 Dairy Co-ops  Associated Milk Producers Inc. (AMPI) 1972 2 co-ops in N.E. Webster Co.  NEW Co-op 1980 Illinois Grain + FS Services = GROWMARK 1985 Ohio Farmers Grain & Supply + Landmark = Countrymark 1985 Gilbert-Story City Co-op + Roland – Nevada Co-op = Heart of Iowa Co-op 1997 AMPI (S. division) + Milk Marketing Inc. + Mid America Dairymen + Western Dairymen = Dairy Farmers of America 1998 CENEX + Harvest States = CENEX Harvest States

  12. Heart of Iowa Cooperative = 1985 consolidation of the Gilbert-Story City Co-op and the Roland-Nevada Co-op Notes: • The Gilbert-Story City Co-op was formed as the result of a 1963 consolidation involving the Gilbert Co-op and the Story City Co-op (reportedly one of the first local co-op consolidations in the state). • The Roland-Nevada Co-op had previously (in the 1980’s) acquired the Zearing-McCallsburg Co-op.

  13. Examples of Co-op ACQUISITIONS

  14. Examples of Co-op JOINT VENTURES

  15. Co-op Unification Considerations • Financial Condition of Co-ops • Asset Valuation • Business Volume in Trade Area • Rail Shipment Capabilities • Product Line Differences • Fixed Asset Differences • Managerial Skills • Advantages of Combined Operations

  16. Stumbling Blocks to Co-op Unification • Past community rivalries (e.g. schools) or concerns • Religious/ethnic differences • Past competition between co-ops • Philosophical differences w.r.t. board, management, or patrons • Resolving critical issues - location of head office - board composition - asset valuation - director districts - equity revolvement - brand of feed - location closing - product line discontinuance

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