With the ever-increasing size of farming operations, concentration of marketing and processing of agricultural commodities, and consolidation of the banking industry, the traditional economic ties of the farm sector and rural communities have been changed.
Larger farms are less dependent on local implement dealers and farm suppliers. Because of their large size, these farms can sometimes negotiate better prices with larger, but more distant suppliers. They are also less dependent on local lending institutions.
As a result, less of the capital generated by agricultural production is remaining in rural communities. This trend has a negative impact on local businesses. Agricultural production still generates a significant portion of the income in rural economies and loss of that capital weakens the fabric of rural communities.
I believe, as do the authors of the articles in this issue of Rural Cooperatives, that cooperatives can play a key role in ensuring that more of the capital generated by agriculture remains in local areas and supports other businesses in rural communities.
Managing a farming operation will never be an easy task. However, participation in a cooperative can make it easier and more profitable. As I have noted before, cooperatives that process their commodities into value-added products earn higher profits for their members.
For example, a cooperatively owned and operated soybean processing plant that recently began production in a Midwest state means an extra 40 cents per bushel to its members. In this particular case, this is 40 cents per bushel that was leaving the state because the processing was taking place in a neighboring state. I predict that the number of valueadded cooperatives will increase significantly in the near future, as will the number of cooperatives serving small producers of fruits, nuts and vegetables. These cooperatives will provide primary processing operations such as cleaning and bagging for local farmer's markets.
I also believe that we will see a similar increase in marketing cooperatives that have the potential to provide more equity in the distribution of economic power in the food chain. However, farmers must also make the decision to become more entrepreneurial through the use of marketing cooperatives. There are slightly more than 2 million farmers today selling to a handful of buyers. The result is that farmers are price takers. Marketing cooperatives will be even more important in the future because the advances in technology and globalization, as one author notes, are becoming the defining pressures on agriculture. Individual producers may not have the where-with-all to adapt to rapid changes in global markets, whereas cooperatives could perform those functions for them.
Traditional federal farm policies have inadvertently discouraged "pooling" or marketing cooperatives because of subsidies directed to individual farmers. These policies need to be changed to give producers a more level playing field and an opportunity to cam more of the food dollar. In the same way health care purchasing cooperatives use the power of numbers to obtain better and less expensive health care, farmers who pool their commodities could enjoy a better position in the market and be less reliant on the government. And the additional income would help strengthen rural communities and rural economics.