1. Cooperatives in the food industry l Types of cooperatives l History and status l Relative importance l Coop problems

2. What is a cooperative l a business voluntarily owned and controlled by its member- patrons and operated for them on a nonprofit or cost basis.

3. Cooperatives l Legal entity that permits group action l Set up to serve and benefit those that use them l Stockholders are members

4. Requirements of a coop l Ownership and control of the enterprise must be in the hands of those who utilize its services.

5. Requirements of a coop l Business operations shall be conducted so as to approach a cost basis

6. Requirements of a coop l Return on the owner’s invested capital shall be limited.

7. Coop v. Stockholder owned l Cooperative »One member - one vote »Coop returns go to the users l Stockholder owned »Stockholders vote by shares owned »Firms maximize return to stockholders

8. Purpose of coops l Do what you can’t do alone l Act as a competitive yardstick

9. Purpose of coops l Provide products l Stabilize expanding markets l Allow farmers to move up and down the food chain

10. Purpose of coops l Enhance returns »Increased efficiency »Improved market coordination »Greater bargaining power l Reduce cost

11. What coops cannot do l Set price without supply control l Eliminate middlemen l Ignore customer/member »Membership is voluntary

12. Types of cooperatives l Marketing l Purchasing l Service l Processing

13. Marketing coop l Perform marketing functions »assembly, grading, packaging l 36% of farm receipts in 1995 Milk100% Grain41% Fruit and veg37% Livestock9%

14. Purchasing cooperatives l Sell inputs to farmers l 28% of farm expenditures, 1995 Petroleum48% Fertilizer 42% Feed 21% Seed 11%

15. Service cooperatives l Common in the 1930-40s l Provide what may not otherwise be provided »REC »Telephones »Farm Credit

16. Processing cooperatives l Farmer owned vertical integration »Sunkist oranges, Ocean-Spray »Sun-Maid raisins, LOL dairy products »Farmland meats

17. Consumer cooperatives l Many of the same motivations »Cost savings »Provide what wouldn’t otherwise exist »Control the input l Examples »Food (organic), housing, daycare

18. Regions and commodities l Leading coop states »CA, WS, MN, Iowa l Percent of coop sales »Dairy 34% »Grains and oilseeds27% »Fruits and vegs.13% l Percent of supplies »Fuel27% »Feed24% »Fertilizer19%

19. Types of organizations l Independent local associations »Relatively small and focused l Federate associations »Coop of local coops l Both build on strength in numbers and common needs

20. Types of organizations l Centralized associations »Control at top by members and direction given to the locals l Mixed associations

21. History and Status l Active period1910-1930 l Consolidation1930-1950 »Formed federations l Growth1950-1990 »Increased membership »Increased sales

22. Problems of coops l Issues of control »Vote by member or volume »Leadership l Financing »Can’t sell more shares

23. Reasons for coop failure l Lack of sufficient capital »Less than efficient size adds to cost l Inadequate membership support »Variability in volume l Ineffective management »Competitive market for managers

24. New Age cooperatives l Value added closed coops »Ethanol production »Turkey processor »Pork production »Ethanol and beef »Eggs

25. New Age Closed l Limited membership l Investment and commitment »Cash and product l Stock appreciates in value »Can be sold

26. New age example l Value added corn processor »Farrow to finish hog production »2500 sows »8 nurseries »18 finishers »$7.5 million for facilities and operation

27. Value added corn processor l Requirements »40% equity = $3 million »600,000 bu of corn/year l 100 shares »$30,000/share »6,000 bu corn/year

28. Value added corn processor l Members required to deliver corn l Paid the current market price l Profits paid on a bushel basis

29. Iowa Initiatives l Ethanol plants l Iowa Cattlemens Association l Iowa Premium Pork