The Role of Agricultural Cooperatives in Supporting Local Farmers

As one of the oldest occupations, farming is still vital to the global economy and supply chain. Many farmers describe running a family farm as a way of life, but one that’s rarely easy.

Despite their setbacks, small family businesses make up 89% of all American farms. And yet, they generated just 18% of the country’s total production value in 2021. This disparity isn’t due to lack of effort or ability — it’s because small farms increasingly struggle to compete with the resources and advantages large ones enjoy.

Many small farmers join agricultural cooperatives to balance the scales.

What Is an Agricultural Cooperative?

An agricultural cooperative is a member-owned organization where farmers pool their produce and resources. By operating as a single organization, small farmers who often only grow one food type can increase their market power and more effectively compete with larger organizations.

Profit-sharing among members is a leading advantage of agricultural cooperatives. The more labor, resources or sales a member contributes, the higher their share of the earnings will be. This structure encourages active participation, ensuring everyone has a stake in the cooperative’s success. A democratically elected board of directors guides policy, manages budgets and promotes member engagement to keep the organization running smoothly and equitably.

There were 1,647 agricultural cooperatives in the U.S. in 2023. These organizations can serve different purposes.

Marketing

Marketing cooperatives sell their members’ products under a single brand. Shared assembly, packing and processing give investors access to new, larger markets that are typically inaccessible to smaller sellers. Members are more likely to sell their products at favorable prices without having to find and negotiate with a buyer. Marketing cooperatives also assist farmers with local requirements, quality controls and food safety regulations.

Supply

Supply cooperatives bring members together to purchase services and products in bulk. Farmers often benefit from discounted prices when purchasing commodities such as seed, machinery and fertilizer.

Members of supply cooperatives also benefit from more consistent quality thanks to their increased influence. Because cooperatives are more valuable buyers than individual farmers, they have the power to demand a specific quality. This desire to please a larger customer can also lead to more timely deliveries by the provider.

Service

Service cooperatives provide members with specialized services that are typically only available to larger farms, further balancing the scales. These can include:

Dairy herd management
Horticultural advice
Insurance
Financial support and products

How Co-Ops Benefit Local Farmers

Agricultural cooperatives are primarily responsible for providing economic support for farmers, though their methods vary. Whichever cooperative a farmer joins, they can expect to enjoy the advantages of being part of a larger organization.

Better prices: From seed to packaging, logistics to professional advice, an organization holds more purchasing power than a small farmer and can secure lower prices.
Access to new markets: Cooperatives’ increased buying power and resources enable small farmers to access previously out-of-reach markets.
Economic resilience: If one farmer experiences a challenging year, the cooperative’s profits mitigate their financial losses.
Knowledge sharing: While contributions result in rewards, a more successful organization benefits everyone. That’s why members are happy to share their expertise.

The Impact of Agricultural Cooperatives on Rural Communities

Thanks to their effects on local farmers, agricultural cooperatives can profoundly benefit rural communities with farm co-op success stories.

First, they can translate into widespread economic stability. Farmers supported by cooperatives are more resilient in adverse circumstances. The ability to weather challenging times allows farmers to keep their livelihoods and contributes to a more stable local employment rate.

Cooperatives often create new jobs, too. While farmers run cooperatives, these organizations require plenty of external support. From cleaning operatives who care for the headquarters to the manufacturers delivering machines to farmers who previously couldn’t afford them, a cooperative can massively benefit the local economy.

Cooperatives can also affect farming operations. Many agricultural cooperatives partner with environmental organizations who offer incentives to farmers who use more sustainable methods. While many of these schemes are open to individual farmers, they often don’t have the time or resources to apply. Through their cooperative, farmers can learn how to farm sustainably and enjoy the rewards of doing so.

Challenges Faced by Agricultural Cooperatives

Agricultural cooperatives ease many concerns small farmers deal with daily — but like any business, they can experience hurdles. From financial constraints to governance issues, cooperatives must overcome obstacles to remain effective and sustainable.

Inadequate capital: Since much of a cooperative’s earnings go to its members, many struggle to retain the funds they need to grow.
Poor management: The farmers who run cooperatives may lack experience managing a large organization.
Uncommitted members: Cooperatives rely heavily on member contributions. The cooperative can struggle without these.

How to Join an Agricultural Cooperative

The membership criteria for local farmer cooperatives differ among organizations, but you’ll likely need to make an upfront payment to demonstrate your commitment.

If you can’t find a cooperative you’d like to join, consider starting one from scratch. After determining the economic viability, find a like-minded group of farmers and prepare all the legal documents. You’ll need to define membership criteria and establish a structure to guide decision-making. You should also consult with legal and financial advisors to ensure compliance with local regulations and set up sustainable funding. A well-planned co-op driven by a shared vision can be a powerful source of economic resilience.

Supporting Cooperatives for Over a Century

Joining an agricultural cooperative has been many small farmers’ secret to success. Cooperatives can provide economic, social and operational benefits, from creating new opportunities to helping family farms through challenging times.

NCBA CLUSA’s mission is to support agricultural cooperatives for local farmers nationwide. We’re passionate believers in the work these cooperatives do for small family farmers in the U.S., which is why we’ve supported them for over a century.

Get in touch with us today to learn more about the benefits of joining an agricultural cooperative.