C O M M E N T A R Y
USDA marks 75th anniversary of service to cooperatives
Randall E. Torgerson
Deputy Administrator for Cooperative Services, RBS
When Congress enacted the Cooperative Marketing Act of 1926, it spelled out a federal program of services to associations of agricultural producers that is as fresh and useful today as when it was written 75 years ago. That these services continue to be carried out attests to the value the public and agricultural community place on business conducted cooperatively.
The value of producer-owned cooperatives as a critical dimension of market structure is derived from the virtue of people working together for their common good. The public interest is thereby served. Help through self-help is the bottom line. Programs providing the tools and encouraging people to help themselves have proven to be among the finest forms of governmental assistance available.
When Congress passed the 1926 Act, cooperatives were in their heyday, with thousands being organized and thousands more already in existence. Significantly, it was recognized that a federal source of assistance was necessary to document best principles, practices and structure that could serve farm interests. This enabled the Department of Agriculture (USDA) to identify what worked in different parts of the country and to help existing cooperatives—as well as newly organizing groups of producers— to benefit from this knowledge. It also enabled USDA to assist rural America in maintaining a standard of what constitutes operating on a cooperative basis.
“Cooperative Development and the State,” a series of case studies of the cooperative sector in various nations, was published in 2000 by Professor Brett Fairbairn, University of Saskatchewan. It concluded that the United States, through USDA, stands out among other countries in its support of cooperative development.
In that report, Fairbairn says of USDA’s Cooperative Services program: “Its effectiveness is related to several factors which include not only the size of its budgets and its networks of cooperative and third-party arrangements, but also – and perhaps most significantly – the fact that it has a dedicated agency whose mandate is to support cooperative development . . . This example appears to show that there can be a niche in a federal system for an active, cooperative-development role at the national level, and that having an agency dedicated to this role likely makes a practical difference both to the focusing and delivery of government resources, and to the actual results in development of cooperatives and communities.”
The success of USDA’s Cooperative Services program can be attributed to its service orientation of helping to facilitate cooperatives’ adjustments and changes to fast-moving industry conditions. By contrast, governmental programs in other countries usually have a regulatory element, if not an exclusive focus on regulation.
Despite recognition of this institutional presence and achievement in a worldwide context, it can be noted that program performance has been best when agency status was granted to Cooperative Services programs within USDA. It can also be noted that the existence of farm commodity programs have tended to weaken the incentive for farmers to effectively organize to represent their economic interests. As a result, the role of cooperatives in U.S. agricultural policy has been less than its potential.
Active engagement with cooperatives by USDA’s Cooperative Services staff over the years has evolved with the changing needs of farmers and other rural residents for different bundles of services. Group purchasing of carload lots of salt, binder twine, fertilizer and coal in earlier days has given way to sophisticated manufacturing and application of crop protectants, fertilizers, feeds and fuels. Related services, such as frozen food lockers, statewide insurance programs and county artificial breeding services have now been replaced by activities such as integrated pest management programs, use of satellite technology in field applications, genetic record keeping and propagation of crops and livestock, expanded farm credit services and regional electric and telecommunications programs.
Marketing, an early focus of cooperative efforts to enhance farmers’ marketing power, has evolved vertically into regional and nationally known branded products and private-label product distribution. Coordinated cooperative marketing efforts of locally owned cooperatives and regionals have extended the reach of farmers’ outputs to national and international markets. Many cooperative brands have developed a strong consumers franchise for their products and are looked upon with envy by competing national marketers.
Horizontal marketing efforts have also achieved new heights through negotiated pricing over contract terms by cooperative bargaining associations, and through joint use of marketing agencies-in-common for pricing and moving manufactured products into trade channels, as well as through the use of e-commerce technology as a means of lowering transaction costs.
What is remarkable is the resiliency and capacity for change demonstrated by many cooperatives. While some have failed due to faulty practices and weak financial management, survivors have demonstrated awareness of the need to stay involved in a global, hightech and consumer-driven environment. They have an acute sense of anticipating and knowing members’ needs, adapting to new technology and gearing their products to changing consumer desires. While adapting operations to emerging needs, huge opportunities challenge cooperative businesses and their leaders in terms of growth in the share of marketing activity, and of expanding horizons to fulfill unmet needs in rural America.
The goal of USDA’s Cooperative Services program is to expand knowledge—a form of intellectual capital—of the cooperative method of doing business. Consistent with the missions identified in the 1926 Act, Cooperative Services does this by collecting statistics, providing technical assistance, facilitating new cooperative starts, conducting cooperative-related research, and producing a wide variety of educational/ informational products to promote public understanding of cooperatives. Our nation has benefitted from this work for 75 years, and will continue to reap the rewards for decades to come in the form of a stronger rural economy.
