1. 1 Development of Alternatives to Cooperative Mergers and Federated Structures Bruce J. Reynolds USDA/Rural Development/Cooperative Programs NCERA-210 Nov. 7, 2012 Cooperative Programs surveyed in 2007 about “other ownership structures” (http://www.rurdev.usda.gov/supportdocuments/CoopMag-nov08.pdf)http://www.rurdev.usda.gov/supportdocuments/CoopMag-nov08.pdf Another survey in 2010 added joint venture participation with non-cooperatives Mailing problems & survey design problems in not identifying names of joint ventures Follow-up telephone survey in 2011 to produce a report (http://www.rurdev.usda.gov/supportdocuments/RR226.pdf )

2. Table 1 -- Agricultural cooperative ownership of ventures, 2010/11. Cooperatives reporting185 Ventures reported382 Less: Duplicates reported48 Condominium grain storage17 Net number of ventures317 Wholly-owned subsidiaries108 Total joint ventures209 2

3. 3 27756333 Co-opsJoint VenturesCo-opsSubsidiariesCo-opsTotal Ventures 12413911441 27252292 14313213 141434 5555 1616 2727 1111 Total*175 46 206 Table 2- Distribution of centralized cooperatives’ joint ventures and subsidiaries, 2007 There are 206 centralized cooperatives with ventures. The sum of separate reporting of joint ventures and subsidiaries is 221 cooperatives, indicating that 15 have both types of ventures.

4. 4 219*92311* Co-opsJoint VenturesCo-opsSubsidiariesCo-opsTotal Ventures 9214311191 23282272 11353183 541484 455 45 61616 777 181818 9929 Total**136 59 180 Table 3 – Distribution of centralized cooperatives' joint ventures & subsidiaries, 2010/11 * Duplicate joint ventures by reporting co-ops are included. ** There are 180 centralized co-ops reporting ventures. The sum of co-ops reporting joint ventures and subsidiaries is 195, indicating 15 have both types of ventures.

5. Figure 1—Organizational form for separate business ventures, 2010/11 5

6. Figure 2—Composition of joint venture partners with cooperatives, 2010/11 6

7. Figure 3 - Percentage share of ownership by cooperatives in joint ventures, 2010/11 7

8. Table 4 -- Participation in ventures by type of cooperatives, 2010/11. Cooperatives Joint Wholly-owned reporting Ventures** Ventures Farm Supplies7013541 Grains & oilseeds7110413 Dairy141626 Fruits & vegetables9137 Livestock516 Other*161115 Total185 274 108 * Includes cooperatives in nuts, cotton, tobacco, sugar, dry beans, fish, and services. ** Includes duplicate joint ventures and condo storage ventures. 8

9. Table 5 -- Joint ventures by type of business operation, 2010/11. Processing30 Agronomy29 Fuel distribution21 Feed mills21 Marketing agent21 Grain terminal19 Farm supply purchasing*17 Ethanol & biodiesel16 Business combinations6 Other29 Total 209 * Purchasing agent for multiple types of farm supplies. 9

10. 10 Figure 4 – Joint ventures by type of business operation

11. 11

12. 12 There were 38 federated and 20 mixed cooperatives in 2010. By the 1980s multi-commodity and farm supply federated cooperatives were “full service”– doing all things for all members. While federated co-ops have declined in number, they have expanded their membership regions, and are focused on the things they do well. Centralized co-ops have increased their size from merging and capturing business from exiting firms. Centralized co-ops form subsidiaries or joint ventures to address specific weaknesses of one or two operating divisions. Joint ventures are a means of delaying or avoiding more mergers. More willingness to joint venture with non-cooperatives and the potential for flexibility in partners is an attractive feature of using an LLC.