This Week In Ag #137
October is National Cooperative Month. These organizations are often the backbone of rural communities, providing electricity, phone/internet service, insurance, milk, financing and farm supplies. In some fashion, 3 out of every 4 rural residents are served by a cooperative.
So what is a cooperative? It’s a business owned by its customers. The model itself dates back to the time of Benjamin Franklin, who set up a mutual fire insurance company in colonial Philadelphia. One of the oldest and most famous agricultural cooperatives is the Farm Credit system, the nation’s largest farm lending organization, formed as part of the Federal Farm Loan Act of 1916.
The big advantage for cooperative members includes having a voice in how they are managed (by electing officers) and patronage dividends. Since coops operate as nonprofits, many coops return the majority of their profits to their member customers in the form of cash payments.
Nationally, coops have a major impact on agriculture: 25% of all ag products are marketed through coops, including grain elevators, produce distributors and dairies. In addition, 30% of the water used in irrigation systems is managed via coops. And 25% of all farm supplies and crop inputs are sold through coops. This includes products sold by Huma. Cooperatives such as CHS, Growmark, GreenPoint Ag and Winfield United are massive players in the US ag marketplace.
Not all cooperatives are huge organizations. For example, there are many farmer-owned, local ethanol plants that function as cooperatives. Collectively, they account for 38% of total US ethanol production. These coops should be especially profitable once 45z clean fuel production tax credits become reality, as farmer owners will keep in the entire tax benefits.
I’ve had the pleasure of not only being a member of a cooperative when I farmed (through grain sales and fuel and crop input purchases), but I’ve also worked for them in a marketing capacity. One of my all-time favorite campaigns (for one of my favorite clients) was “Together We’re Better” for Capital Farm Credit (the largest ag lender in Texas) which captured the essence of their cooperative spirit.
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