- - AGRICULTURE CORE CURRICULUM - - (CLF1000) Advanced Core Cluster: AGRICULTURAL BUSINESS MANAGEMENT (CLF1500) Unit Title: COOPERATIVES ____________________________________________________________________________ (CLF1504) Topic: CLASSES OF Time Year(s) COOPERATIVES 1 Hour 3 / 4 ____________________________________________________________________________ Topic Objectives: Upon completion of this lesson the student will be able to: Learning Outcome #: (M-2) - Describe how cooperatives have acted as pacesetters and power balancers in agribusiness. (M-3) - Explain how local and regional cooperatives are organized to serve members. Special Materials and Equipment: References: Agricultural Council of California. EXPLORING FARMER COOPERATIVES (Chapter 4). Evaluation: Unit Exam TOPIC PRESENTATION: CLASSES OF COOPERATIVES A. Cooperatives may be classified by size. 1. Most cooperatives are not as large as ordinary corporations in similar lines of business. 2. In total volume of cooperative business, the leading states are Iowa, California, and Minnesota. 3. In total numbers of cooperatives, the leading states are Minnesota, North Dakota, and Texas. 4. The largest agricultural cooperative in the world is Japan's Zen-noh, a rice growing and marketing cooperative which has more than 5 million members. B. Cooperatives may be classified as local, regional, or national, depending on the area they serve. C. Agricultural cooperatives are classified as centralized or federated, depending on their membership structure. 1. In a centralized cooperative, the members are individual farmers. 2. In a federated cooperative, the members are local cooperatives which themselves have individual farmers as their members. 3. Some cooperatives have both individual farmers and local cooperatives as members. These are referred to as having a "mixed" membership structure. D. Cooperatives are classified by function into one of four basic categories: marketing, bargaining, purchasing, or service. E. Marketing Cooperatives 1. Marketing refers to all the functions that must be performed in getting a product from the grower to the consumer. a. Examples of marketing functions are assembling, grading, standardizing, packaging, transporting, storing, processing, distributing, advertising, and selling. b. The trend is for cooperatives to increase the number of marketing services performed for their members. c. Many California marketing cooperatives process most of the commodities they sell. 2. Marketing cooperatives benefit farmers in several ways: a. They allow farmers to share in the profits of marketing their commodities through joint forward integration. b. They increase markets for agricultural products by paying on the basis of grade and quality, thus providing an incentive for quality products. c. They provide for orderly marketing of products through timing sales to avoid gluts and regulating the forms in which commodities are sold. d. They often increase returns to member producers because they minimize marketing costs by operating on a cost-of-doing-business basis. 3. Marketing cooperatives are especially important in California. a. About one third of California agriculture's total annual raw product value is marketed through cooperatives. b. Sunkist is the nation's largest agricultural marketing cooperative. F. Bargaining Cooperatives 1. Through bargaining cooperatives, farmers centralize and increase their market power by negotiating as a group rather than as individual growers. a. To be effective, a bargaining cooperative must represent enough tonnage to obtain processor recognition. b. Most bargaining cooperatives use membership agreements which require a member to market a specified amount of product through the cooperative. c. Bargaining cooperatives may negotiate not only price, but also quality, quantity, and delivery terms with buyers. 2. Bargaining cooperatives may benefit farmers in several ways: a. They may increase farmers' income by obtaining a better price for commodities. b. They provide for orderly marketing by setting uniform standards and procedures. c. They increase market stability by distributing economic and marketing information, and by helping producers adapt to changing consumer preferences. G. Supply (or Purchasing) Cooperatives 1. Supply cooperatives may operate in two ways: a. They may achieve lower prices for farm inputs by pooling the purchasing power of farmers to gain volume discounts. b. They sometimes manufacture farm inputs, lowering costs to members by operating on a cost-of-business basis. 2. Supply cooperatives benefit farmers in several ways: a. They may enable farmers to share in profits at the supply level of commodity sectors through backward integration. b. They may increase net returns to farmers by lowering farm production costs. c. They may arrange for the purchase of supplies designed and manufactured to farmers' needs through special standards or specifications. H. Service Cooperatives 1. Some examples of services provided by specialized service cooperatives are cotton ginning, grain drying, fertilizer and pesticide application, and artificial breeding. 2. The largest service cooperative in the U.S. is the Farm Credit System. ___________________________________________________________________ ACTIVITY: 1. Draw diagrams contrasting centralized and federated cooperatives. 2. Discuss in class what students learned from their interviews (see preceding lesson) about the types of cooperatives farmers in their area belong to and the functions these cooperatives serve. ___________________________________________________________________ 10/28/91 GB/sg #%&C