Monday, July 18, 2016

Are Co-ops Beneficial for Farmers?

Co-operatives (co-ops) are businesses that are owned and ran by its members. Co-ops can be distinguished from other types of businesses because they are member-owned and their singular purpose is to benefit the members. Co-ops are a recognized type of business under State law.

Advantages of Agricultural Co-ops

There are a myriad of reasons co-ops have become a popular form of organization. These include:

·         Stronger bargaining power in the marketplace

·         Strengthened access to competitive markets

·         Ability to capitalize on new market opportunities

·         Competitive pricing for needed products and services

·         Increased access to revenue pipelines

·         Reduced costs

·         Increased ability to manage risk

 Farmer Co-ops

 According to the National Council of Farmer Cooperatives, there are nearly 3,000 agricultural co-operatives in the United States, representing the majority of our country’s 2 million farmers and ranchers. There are five primary types of agriculture co-ops that exist today.

 1.    Agricultural Marketing Co-ops:  Agricultural marketing co-ops help bring to market virtually every commodity grown and produced in America.

 2.    Agricultural Bargaining Co-ops:  Agricultural bargaining co-ops work to negotiate reasonable prices for farm and ranch commodities produced in the country.

 3.    Farm Supply Co-ops:  Farm supply co-ops are manufacturers, sales and/or distributors of farm supplies and equipment, as well as energy-related products such as ethanol and biodiesel.

 4.    Credit Co-ops:  These are the agricultural financial partners, including banks and credit unions, that serve the agricultural industry. These include the associations of the Farm Credit System that provide farmers and their co-ops with a competitive lending opportunities and other financial services, such as export financing.

 5.    Farmer Co-ops:  Farmer co-ops exist for the mutual benefit of farmer members. By pooling the yield that each farmer contributes that is to be taken to market the co-op as a whole is able to reduce handling, processing, marketing and other sales costs while benefitting from the best prices for commodities sold in mass quantities.

 In addition to helping individual farmers leverage the power of the co-op, the co-op itself helps to strengthen the economic well-being of rural communities by generating jobs; agricultural co-ops account for as many as 300,00 jobs and a total payroll of over $8 billion per year in the U.S. (NCFC.org)

 Farmer co-ops govern themselves by electing a board of directors. In most co-ops everyone receives one vote, unlike other types of businesses in which votes are usually given on the basis of shares or percent of ownership. This gives everyone an equal voice in the co-op and ensures a unique level of accountability.

 Agricultural co-ops are generally beneficial to farmers because they are able to increase the individual farmer’s income through ownership in the co-op, ensuring that the producers of the commodities attain a more equitable return on their labor and investment.

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