Introduction to Cooperatives Ag Business Ms. Senff

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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

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??

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

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

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

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

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

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”