- -   AGRICULTURE CORE CURRICULUM   - -

(CLF1000)  Advanced Core Cluster:  AGRICULTURAL BUSINESS MANAGEMENT

    (CLF1500)  Unit Title:  COOPERATIVES

______________________________________________________________________________
    (CLF1505)  Topic:  ORGANIZING AND OPERATING          Time          Year(s)
                       A COOPERATIVE                   2 Hours           3 / 4
______________________________________________________________________________

           Topic Objectives:  Upon completion of this lesson the student
                              will be able to:

           Learning Outcome #:

                 (M-3) - Explain how local and regional cooperatives are 
                         organized and operated to serve members.

           Special Materials and Equipment:  

           References:  Agricultural Council of California.  EXPLORING 
                          FARMER COOPERATIVES (Chapters 5 and 6).

           Evaluation:  Unit Exam

TOPIC PRESENTATION: ORGANIZING AND OPERATING A COOPERATIVE

A.  Organizing a Cooperative

    1.  There must be a clear-cut, widely recognized, and sufficiently urgent 
        economic need for the service.

    2.  Developing a new cooperative is an uphill battle.

    3.  Preliminary steps:

        a.  Sign up the required number of members.

        b.  Obtain the pledged capital and arrange for capital loans.

        c.  Have an attorney draft the legal organization papers which usually 
            include articles of incorporation, bylaws, marketing agreement, 
            membership application, stock certificate, revolving fund 
            certificate, etc.

    4.  File the articles of incorporation with the state Secretary of State.

    5.  Arrange the first meeting of the original members.

    6.  Elect a board of directors from charter members.


B.  Operating an Agricultural Cooperative

    1.  Purpose

        a.  Because profits are distributed to members who pay taxes on them, 
            cooperatives are often called "nonprofit."

    2.  Ownership

        a.  Cooperatives are owned by their members and exist solely for the 
            purpose of serving their members, unlike a regular corporation 
            which operates to serve its investors.

    3.  Revolving Fund

        a.  New cooperatives obtain initial capital through assessments on 
            members based on their expected use of the cooperative.

        b.  Retains are specified amounts of money per unit of commodity sold, 
            for example, 25 cents per 100 lbs. of rice.

        c.  Marketing cooperatives deduct retains from gross sales.

        d.  The amount withheld for the revolving capital fund is returned in 
            full after a period of years, thus a "revolving fund."

        e.  Capital investment retains are returned to the members year by 
            year in the order in which they went into the fund, the oldest 
            being paid back first.

        f.  Each grower who uses the cooperative in a given year contributes 
            to the revolving fund in proportion to the use of the cooperative.

        g.  The length of the revolving fund cycle varies considerably from 
            one cooperative to another.

    4.  Patronage Refunds

        a.  Most purchasing cooperatives price their products to members at or 
            near competitive levels. 

        b.  Savings made during the year are totaled and at year's end are 
            returned to each member in proportion to patronage.

    5.  Marketing Contracts

        a.  A marketing contract is a mutual agreement specifying that the 
            grower will deliver all of the commodity produced to the 
            cooperative.

        b.  The cooperative will receive, process, and sell for the producer 
            all of the commodity delivered.

        c.  Marketing contracts outline the methods of capitalization and 
            deductions from gross sales for all association expenses.

        d.  Thus, the producer has a home for his product and the processor 
            has an assured supply of product.
    6.  Pooling

        a.  Pooling is the averaging of net returns to producers for a 
            particular grade variety of product delivered during a specified 
            interval of time.

        b.  Each member's deliveries are graded and credited to his or her 
            account.


        c.  All those products with the same grade for the pool period are 
            marketed together.

        d.  Members are paid the average price received by the pool.

        e.  Pooling gives the highest return to those who produce the best 
            quality; it also spreads the risk of fluctuating prices among 
            everyone in the pool.







11/26/91 CM/ch


#%&C