COMMENTARY

Commitment to cooperative systems

Cooperative leaders across America are coming to grips with the sweeping changes in the farm economy and structural changes in the ag processing and distribution sectors. The changes include a dwindling number of farms, an increased size of remaining farms, and concentration in food processing and retailing. Other challenges are posed by the burden of huge inventories of many crops that are causing depressed markets and by the effects of new technology, such as e-commerce, robotics and satellite communications systems.

The economics of farm operations clearly influences the vitality of growers' off-farm businesses - their cooperatives - as shown in the reports on cooperative share of marketing activity and the performance of the largest cooperatives found on page 7.

As cooperative boards of directors and managers deal with these issues, we should remind ourselves of the benefits of cooperatives working together as a strategy for the efficient use of member resources. Regional and national federations of cooperatives have operated successfully for many years, linking the basic manufacturing of farm supplies (fertilizer, petroleum, etc.) to distribution at the local level.

Similarly, farm credit associations own regional farm credit banks while rural electric distribution cooperatives own generation and transmission cooperatives. Livestock shipping associations have been linked to regional livestock marketing cooperatives. U.S. Premium Beef is linked through ownership in Farmland National Foods and cooperative grain elevators are linked to soybean processing and milling operations, such as Ag Processing Inc. and CHS Cooperatives.

Minnesota and North Dakota sugar beet cooperatives have developed a close working relationship through marketing agencies-in-common. These include Midwest Agri-Commodities for marketing sugar beet byproducts and United Sugars Co. for marketing refined sugar (see page 10). These combined marketing efforts offer a fine example of benefits to producer members from coordinated marketing activity.

Many more examples could be cited, but the point is that effective cooperative systems have been developed which serve farmer and rancher members well - and continue to serve them well - through cooperation among cooperatives. Farmers and ranchers have realized significant independence through their purchasing and marketing cooperatives. But the system is only as good as the support generated by continued commitment to working together for the common good.

A tendency exists in some quarters to align operations with investor-owned firms rather than remaining committed to developing strong cooperative systems. Many associated issues concerning farmer ownership and control are quite complex and require careful analysis to determine long-term implications.

During times of economic stress for the farm economy, as exist now, there are no "silver bullets" to secure financing, nor are there any "magic" business alignments that will solve long-term problems; we should not deviate from sound cooperative principles and practices. Continued progress through forward-looking cooperative strategies and cooperative education for boards and managers - and the farm sector at large - are called for if a vibrant cooperative system is to be a part of the rural scene in the future.

Randall Torgerson, Deputy Administrator
USDA Rural Business-Cooperative Service