CooperativesAG BM 102

Namibia

• Mahenge cooperative

• Market access

• Lack of processing

• Lack of marketing services

Tuscarora Organic Growers• A few organic vegetable growers

• Market access problems

• Formed cooperative

• Jointly plan production

• Cooperative develops markets, makes deliveries, collects money

What is a cooperative?

A business voluntarily owned and controlled by its member-patrons and operated for them on a non-profit or cost recovery basis

Introduction

• Why are cooperatives helpful?

• How do cooperatives work?

• Examples of cooperatives

• What they mean for farmers

Why have a cooperative?

• Work together to meet common needs

• Access to quality supplies and services at reasonable cost

• Increased clout in marketplace

• Share in earnings of related business

• Political action

• Enhance local economy

How do cooperatives work?

• Farmers act as a group to solve a problem

• Each invests some money in the business

• Elect the Board of Directors

• Goods sold at regular retail prices

• Distribute earnings to members

• One member, one vote

What does this mean to farmers?

• Provides market access

• Provides more power in marketplace

• Helps them control their own destiny

• Helps them work as a group

• Helps them to consider new ideas

What a cooperative cannot do

• Make a bad idea into a good idea

• Survive without good management

• Survive if it is not run like a business

• Do well, if members do not share the dream

Examples of cooperatives• Farm inputs – Cumberland Valley Coop.• Marketing cooperatives – Land O’Lakes, Mt. Joy

Coop, Knouse Foods • Financial Services – AgChoice Farm Credit• Business Cooperatives – Ace Hardware

Cooperative principles• User benefits – provide services otherwise

not available, provide market access

• Members share benefits proportionately to their use of the cooperative’s services

• User owner – members own business

• User control

Related practices

• Patronage refund – profits shared on the basis of the volume of business done

• Limited return on equity capital

• Cooperation among cooperatives

Responsibilities of members• Patronize the coop

• Be informed

• Vote wisely

• Provide capital

• Evaluate performance of coop

Role of directors• Make broad decisions• Hire manager• Develop policy• Plan strategy • Monitor finances• Approve budget• Hire auditor• Hold annual meeting• Determine patronage refund and retained

earnings

Directors• Must work as group

• Must put individual interests aside

• Provide the officers– President– Vice president– Secretary– Treasurer

Manager• Must work with the Board on the goals of

the cooperative• Hire and supervise other employees• Provide Board with information necessary

to make strategic decisions, monitor performance

Employees• Must understand purpose and objective of

coop

• Must perform duties

• Must understand relationship to members/owners

• Must favorably represent the cooperative in business dealings

New cooperatives• Must have shared need and shared vision

• Should get help: USDA, Keystone Center

• Need a business plan

• Need leaders!

• Need enough members to gain some economies of size

Some failures• Lancaster County Mini–Dairy Coop

• Southwest Vegetable Coop

• Agway

When considering a new cooperative

• Will group action achieve a goal that individual action won’t?

• Can you work as a group?

• How will it be financed?

• Who will manage it?

New Generation Cooperatives

• Limited membership

• Greater capital requirements

• Try to act like a regular corporation

• Ability to control production

• Very market oriented

Dakota Growers Pasta Cooperative

• Wheat farmers trying to add value

• Started to organize in 1990

• Third largest pasta maker in America

• Now make pasta for some of the country’s biggest names

• Bought out by private firm in 2010 for $240 million

Conclusions - what is required for success?

• A shared dream!• Management – must be forward looking• Directors – must be willing to put cooperative’s

interests first• Members – members must share the vision &

patronize the cooperative• Member development – must groom next

generation of leaders• Must be run on sound business principles!