On & Off the Top 100
25 years of tracking the largest ag co-ops
By Bruce J. Reynolds
David S. Chesnick
USDA Rural Development
Ag Economists
bruce.reynolds@wdc.usda.gov,
david.chesnick@wdc.usda.gov
he January/February 2006
issue of this magazine
reported average financial
results for the Top 100
cooperatives for 2004,
which marked the 25th anniversary of
this important research program. The
annual ranking of businesses by size of
sales has been a popular performance
benchmark, beginning with publication
of the Fortune 500 list of America’s
largest firms in 1955.
In contrast to the Fortune 500 ranking,
USDA Cooperative Programs does
not release the names of the Top 100
agricultural cooperatives. The data are
summarized to show performance of
the leading cooperatives as an aggregate
and are grouped by major commodity
and service sectors in the agricultural
economy.
However, since 1991 the National
Cooperative Bank (NCB) has published
an annual ranking of the Top 100 cooperatives
from all economic sectors
(farm, food, hardware, housing, etc.) In
NCB’s 2004 ranking, the top three were
all agricultural cooperatives: CHS Inc.,
Dairy Farmers of America and Land
O’Lakes Inc. In all, 42 agricultural
cooperatives were in the NCB Top 100
(www.co-op100.coop).
During the 25-year period the list
has been maintained, there has been
significant movement on and off
USDA’s Top 100 agricultural
cooperatives list. Of these, 29
cooperatives have consistently
reported data, while several
other large cooperatives have
been inconsistently included
on the list because of intermittent
reporting of their data. A
few of these submitted data for
only a very brief period, about
2-5 years, and then became
classified as non-reporting.
Other cooperatives that
reported in 1980 no longer
exist as either a cooperative or
as a business of any kind. The
three major causes for cooperatives
being permanently
removed from USDA’s Top
100 list are: business failure,
conversion to a non-cooperative
entity and merger or consolidation.
A review of some
general financial measures for
those on-and-off the Top 100
offers some history of how large cooperatives
have fared since 1980.
Failed businesses
Cooperatives are a stable form of business,
generally not inclined toward highrisk
ventures. Nevertheless, since the
inception of the list, 16 Top100 cooperatives
have gone out of business. Three of
these cooperatives had closed by 1985,
while seven did not go out of business
until after 1998. An additional five federations
that were reported in the Top 100
in 1980 subsequently dissolved. However,
in most cases their members stayed in
business.
The solvency ratios of these co-ops
during the last three or four years of
operation gave strong indication of
their impending closure. Seven of these
cooperatives provided data right up to,
or within 12 months of their last complete
year of operation. The three-year
average debt-to-equity ratio for the coops
was 0.75 while return on equity was
minus 0.21.
Merging to stay in business
A major strategy for maintaining
farmer ownership of services and valueadded
business has been to consolidate
or merge two or more cooperatives.
Merging helps carry overhead costs with
more operating revenue and other
advantages to increase per unit earnings.
Twenty-four cooperatives exited the Top
100 through consolidations or mergers.
Data for solvency ratios were collected
up to the time of consolidation or
merger for 21 cooperatives. The threeyear
average debt-to-equity ratio for
these co-ops was 0.66 while return on
equity was 0.11. As would be expected,
the financial condition of these merged
businesses was generally stronger than
for cooperatives that went out of business.
Some were in a weak financial
condition, but their status was not
extreme because members of a surviving
cooperative will usually reject merger
proposals from a business that is on the
verge of failure.
Conversions
Cooperatives are sometimes acquired
by non-cooperative businesses or decide
to convert into investor-owned entities.
Of former Top 100 cooperatives, ten
converted to investor-owned status
either through acquisition or by a membership
vote to convert. While some
acquisitions were made of cooperatives
in weak financial condition, those that
converted into investor-owned entities
obviously had been experiencing good
returns. As expected, the acquisition
and conversion group of five that consistantly
reported had relatively low
average debt-to-assets of 0.49 and
decent return on equity of 0.23.
Staying on top
The cooperatives that have stayed in
the Top 100 over the 25-year period
include many that have been operating
for more than 60 years. Large cooperatives
still in business today have successfully
operated through periods of economic
recession and high energy costs.
There are 29 cooperatives that have
remained on the list in all 25 years due
to maintaining sound operations (and
because they faithfully completed
USDA’s annual survey each year).
Financial ratios for indicating solvency
have remained relatively sound for
these 29 cooperatives over the 25-year
period. They individually maintained a
debt-to-asset ratio below the three-year
average of the failed cooperatives over
both the 25-year period and for any
three-year period. Individually, with
only one exception, they also had a
higher return on equity in every threeyear
period than any of the seven cooperatives
that went out of business in the
last three years they reported.
A consistently high return on equity
is not a sufficient measure of a successful
cooperative. In fact, it may indicate
that a cooperative is not adequately
generating higher returns to members
in payments for delivered products or in
costs of supplies. The return on equity
for each of the five cooperatives that
reported up until their conversion to
investor-owned status was much higher
than the average for the 29 surviving
cooperatives (as a group).
Intermittent reporting
The Top 100 agricultural cooperatives
data base is determined by direct
collection and analysis of surveys and
annual reports, which is the primary
reason that the ranking of the organizations
is not published. Most publicized
rankings are collected from secondary
sources, where only the annual revenue
is needed. The cooperation of the business
entities in these cases is not needed.
As an analytical data base, USDA’s
Top 100 agricultural cooperatives list is
dependent upon annual reporting by
the cooperatives, which is not easily
accomplished. As an indication of this,
16 of the cooperatives that were on the
1980 list have subsequently reported
only intermittently.
Where they stand
The Top 100 reports provide large
agricultural cooperatives with benchmarks
and reference points to help
them navigate their way in a highly
competitive and often volatile economy.
Cooperatives face unique business challenges.
Member benefits are not only
contained in a dividend check, but by
significantly helping many independent
farm enterprises control their costs or
to improve their product sales.
Working to sustain the independence
of farmers is the core objective
that adds to the complexity of business
decisionmaking for cooperatives. For
this reason, they cannot rely on any
single set of performance measures or
simply compare their businesses with
non-cooperative corporations. USDA’s
Top 100 list and the accompanying
analysis has filled a nitch in business
performance information for 25 years
and counting.
