C O M M E N T A R Y
Good time to assess role of cooperatives
As farmers across the country complete
the 2001 harvest and the crop
pipeline is filled to capacity in many
commodity sectors, it is a good time to
assess major events and developments
affecting agriculture in the past year.
We should also consider what the
cooperative system has accomplished
and how it has performed. Changes
have included major mergers and consolidations
among food industry
processors and distributors, a recessionary
economy—exacerbated by the
Sept. 11 attacks and subsequent declaration
of war against terrorism—
debate over a new Farm Bill, and
efforts to open a new round of trade
negotiations.
The routine of managing cooperative
business activities is clearly
impacted by these events, some in
ways that are not yet entirely
manifested. Cooperative boards and
management are being challenged to
make decisions regarding those elements
they can control, and to be sensitive
to the changes in the external
environment that can have a significant
influence on their operations.
The year has been characterized by
continuing pressure in commodity
markets due to large inventories and
bumper crops, a partial recovery in
export markets for farm commodities
and value-added products, and shifts in
the makeup of customers. As buyers at
the retail and processor levels continue
to consolidate, farmer cooperatives are
challenged to meet the demands of bigger
orders for their products, or to
develop market channels more directly
linked to consumers.
Even the largest of cooperatives pale
in size compared to national and international
market players, according to
Dr. Larry Hamm of Michigan State
University, who stresses (see article on
p. 21 ) that this size issue is exactly why
the Capper-Volstead Act was passed.
The Act enables farmers to use cooperatives
as a preferred marketing tool to
gain influence in the marketplace when
dealing with much larger customers.
A number of new efforts this past
year bear witness to the desire of producers
to find new cooperative marketing
strategies. For example, sugarbeet
producers in several states have
attempted to lease or purchase sugar
factories in an attempt to secure their
markets. Livestock producers are
undertaking organizational initiatives
to establish themselves as marketers of
animal products. And grain and oilseed
producers are examining expanded
roles in producing biofuels.
While producers continue to explore
many new, value-added ventures, they
are also carefully examining the benefits
of horizontal associations for marketing
identity-preserved crops and negotiating
contract terms with buyers.
Despite momentum on these fronts,
well-publicized failures of two large
local cooperatives in the grain industry
in Kansas and Iowa and of a livestock
venture in Missouri indicate the need
for improvement by boards of directors
and cooperative management in discharging
their respective fiduciary
responsibilities. These failures highlight
the need for intensified board and
management educational efforts that
increase the proficiency of board members
and personnel to oversee the management
of more complex operations.
Several years ago, a multi-agency task
force at USDA issued a report on a proposed
cooperative-based farm policy.
One of the recommendations was that
other sectors could follow the lead of
cotton, rice and grain cooperatives in
providing farm program-related services
to their members. An article in the next
issue of Rural Cooperatives will highlight
the expanding use of cooperative marketing
associations by the Farm Service
Agency as a means of providing these
services. In many cases, these services
can be delivered more efficiently by
cooperatives than through the county
committee system. Using cooperative
agreements with members and pooling
are required for such program activity.
This role merits examination by other
cooperative sectors for its potential to
expand services to the farm community.
Randall Torgerson, Deputy Administrator
Rural Business-Cooperative Service
