Fading Fortune
Investor-owned growth spurt
pushes co-ops off Fortune 500
Bruce J. Reynolds & David S. Chesnick
USDA Rural Development Ag Economists
bruce.reynolds@wdc.usda.gov
david.chesnick@wdc.usda.gov
Editor’s note: The authors also wrote a related article, about
changes during the past 25 years in the ranks of the nation’s top
100 agricultural cooperatives, for the July–August 2006 issue
of this publication. It can be accessed on the Internet at:
www.rurdev.usda.gov/rbs/pub/openmag.htm.
he goal of cooperatives is to serve members by
providing favorable prices and other benefits.
Revenue growth over time is tied to their service
to members and has not been a primary
goal. Nevertheless, some of the largest agricultural
cooperatives were for many decades comparable in size
to firms regarded as “big business” in the United States, as
measured by annual revenue. At various times their growth
has inspired critics to question whether the limited exemptions
from antitrust laws contained in the Capper-Volstead
Act are warranted. Yet, U.S. business went on a huge growth
spurt after 1994 that only a very few agricultural cooperatives
also experienced — and even those to a much more limited
extent.
The biggest U.S. firms are often ranked by their annual
revenue. During the economic expansion in 1995–2000, many
U.S. firms greatly increased in size while others either downsized
or didn’t significantly change. Some firms regarded as
“big” before 1995 hardly warrant that designation any more.
The annual listing of the 500 largest companies by Fortune
magazine, “the Fortune 500,” confers status to businesses
that are listed over that fairly wide range. Firms at the top
end get most of the publicity. Inclusion on the list can be useful,
for example, when a company is introducing itself to a
potential foreign customer or business partner and is able to
say “we are a Fortune 500 company.”
Fortune magazine’s web page includes a search capability
for firms in the top 500 from 1955 through 2005, and since
2003, even for rankings up to 1,000
(http://money.cnn.com/magazines/fortune/fortune500_archiv
e/full/1955/). A firm’s ranking and revenue are reported for
every year it was on the list.
Just as most data series are rarely all-inclusive, the Fortune
500 leaves out some cooperatives and private companies that,
if included, would push others out of the ranking. In fact,
prior to 1995, in addition to those listed in the Fortune
500, a few other agricultural cooperatives in the USDA
Cooperative Programs’ Top 100 had annual revenue that
would have placed them in the Fortune 500. Yet, an allinclusive
ranking since the 1955 would also include a few
non-cooperative firms that were, likewise, not reported but
were large enough to have been ranked.
Despite missing a few cooperatives and firms, the Fortune
500 data base can be used to show that in the period since
1995, many U.S. firms have expanded in size, as measured by
revenue, to a far greater extent than have most of the large
cooperatives.
Some co-op history
The Capper-Volstead Act granted agricultural cooperatives
limited exemptions from anti-trust laws. Discussions
about the large cooperatives in the media have usually been
of two kinds. There has been the “gee-whiz” reaction, when
news about big co-ops is greeted by surprise that farmers
could build such big businesses.
The other is a negative reaction where the inaccurate historical
claim is made that when Congress passed the Capper-
Volstead Act, it never intended for farmer cooperatives to
become large businesses. Yet, for more than 20 years before
the passage of the Act in 1922, large agricultural cooperatives
had been in operation. (Bruce J. Reynolds, “Many Early Coops
Had Clout,” Farmer Cooperatives, USDA, Jan–Feb 1980.)
Co-ops in the Fortune 500
When Fortune magazine began reporting in 1955 the
largest 500 firms by revenue in the United States, it only
reported one agricultural cooperative, ranked at 122. Several
more cooperatives would have been ranked in the earliest
years of the Fortune 500, but information about their business
revenues may not have been as widely disseminated in
the general business media as it is today.
By the early 1960s, more cooperatives may have reported
their annual revenue to the media or may have sent it to
Fortune magazine so that they would be included. The
Figure 1 stacked bar graph shows for the period 1955–2005
the number of cooperatives in three ranges of the Fortune
500: its top 100, the 101–250, and the 251–500 range. The
top of each bar marks the total number of agricultural cooperatives
in the Fortune 500 for each year.
At least one agricultural cooperative was ranked among
Fortune’s largest 100 in 14 out of 51 years. In 1983 and 1986,
two cooperatives were in the top 100 of the list. In fact, the
1980s and early 1990s was the heyday for cooperatives in the
Fortune 500. Figure 1 shows that by the mid-1980s, there were
five or six cooperatives routinely in the top half of the Fortune
500, and between 13 to 15 cooperatives in the overall 500.
Corporate growth soars
The year 1995 was the beginning of a significant economic
expansion that is often labeled the “dot-com boom and bust”
because many of the firms that failed in the 2001 recession
were Internet related. But this designation distorts the reality
that in 1995, the average size of U.S. corporations — for revenue
generation — began to climb sharply. There has been no
reversal of this trend, even when the economy has cooled off.
Throughout the period 1980–1994 there were 10 to as many
as 15 cooperatives annually in the Fortune 500, but as shown in
Figure 1, they abruptly dropped to two or three from 1995 to
2005. There are actually three agricultural cooperatives that
should be annually included from 1995 to the present.
Figure 2 provides another way to view 1995 as a turning
point. This graph plots the annual revenue of the 25th
ranked cooperative from USDA’s Top 100 agricultural cooperatives
in comparison to the plots of the 250th and 500th
largest firms in the Fortune 500 for 1980–2004. The cooperative
in the 25th rank gives an approximate indication of how
many cooperatives may have made it in the Fortune 500 in
addition to those shown in Figure 1 for the years 1980–1994.
From 1980–1994, the cooperative that ranked 25th on
USDA’s Top 100 co-op list averaged about $68 million more
in revenue than that of the business ranked 500th on the
Fortune list. That pattern underwent a major reversal in
1995, with the 500th-ranked company on the Fortune list
having revenue of $1.5 billion more than the nation’s 25th
largest agricultural cooperative. The gap widens from that
year on, with only a slight dip in 2002 and 2003.
The firm ranked 250th on the Fortune 500 exceeded that
of the 25th largest cooperative on average by less than $1 billion
from 1980–1994. This difference would not be generally
regarded as establishing the former as an overwhelmingly
larger company than the latter. But in 1995, the gap soared to
more than $4 billion and rapidly rose to more than $7 billion.
It should be noted that inflation does not distort the
comparisons. However, a dollar in 2004 was worth
about 50 cents compared to a 1980 dollar (using the
GDP deflator).
The same shift occurred between the largest cooperative
in the USDA Top 100 Co-ops and the 125th
largest firm in the Fortune 500 for the period
1980–2004. During the early 1980s, the cooperative
had higher revenue, with 1995 marking a turning
point after which the 125th Fortune firm consistently
had higher revenue.
The firms ranked 125th, 250th and 500th on the
Fortune list provide a closer range for comparisons
of revenue with agricultural cooperatives than would
firms at higher rankings. But growth of Fortune’s No.
1 ranked business is interesting. Annual revenue for
the nation’s largest business averaged more than $115
billion in 1985–1994. The average soared to more
than $195 billion in 1995–2004, and topped $288 billion
in 2005. (Note that $115 billion in 1985 would be worth
about $185 billion in 2005 dollars.)
Growth of a firm’s annual revenue is just one of many
indicators of successful business performance. As mentioned
above, service to members is more important for cooperatives
than revenue growth. In addition, since the early 1990s,
many cooperatives have been adjusting their strategies from
emphasis on market share to also include building value into
their business operations. New strategies may involve
alliances with non-cooperatives or ownership of subsidiaries
in ancillary industries or in services related to their core
operations. These cooperatives are pursuing growth and stability
of earnings, with revenue expansion in support of
those goals.
The growth surge by many firms after 1994 explains why
several cooperatives dropped off the Fortune 500. In view of
this massive expansion in non-cooperative firm size, the concerns
about Capper-Volstead in regard to excessively big
cooperatives have likely dissipated, and if not, are sorely misplaced.
