AGRICULTURE CO-OPS

Agricultural cooperatives have affected food systems around the world for generations. You may hear others refer to them as farm co-ops. When you start an agricultural cooperative, you bring farmers together to combine their resources to maximize growth. Producers can leverage their collective assets to benefit all participants and their communities.

Farmers in a co-op make decisions together and share profits among all members, rather than with outside investors. Income from farmer-owned co-ops can either be reinvested into the business or returned to the members. In rural communities, farm co-ops are essential to support local communities and their economies.

Advantages of Agriculture Co-ops

One of the primary advantages of agricultural cooperatives is their organizational structure, which allows for operational visibility and democratic member participation. Yet, numerous other immediate and long-term benefits, ranging from social to economic, can be gained from farm co-ops.

Improved Rural Development

In most rural areas, farm co-ops are often the sole source of agricultural goods. These businesses provide essential produce to markets that big producers don’t serve. They help create local jobs and improve food security in their neighborhoods.

Farm co-ops also support nearby member-owned entities, such as utility cooperatives. This interaction supports a more robust local economy and a higher quality of life for everyone in the area.

COMPETITIVE ADVANTAGE

Agricultural co-ops enable farmers to be stronger together. Their pooled resources and experience can help each producer achieve higher crop yields and better market prices. Through economies of scale, growers can realize lower input expenses to enhance their profitability.

Banding together also lets agriculturists use their strong relationships to secure favorable financing on tools and equipment. In turn, the quality of their products improves, allowing them to command higher prices and compete with larger growers.

Key Facts About Agricultural Co-ops

Every year, animal, dairy and produce farms choose to forego traditional ownership and adopt a cooperative business model. Here are a few key statistics on agricultural cooperatives:

Two million farmers are members of more than 2,100 co-ops in the U.S.
There are more than 1.2 million agricultural co-ops across the globe.
Farm co-ops generate about $6.5 billion in net income each year.
Farmer-owned co-ops also employ more than 250,000 people.
Most of the top agricultural cooperatives are in the Midwest, especially Iowa and Minnesota.

Examples of thriving farm co-ops in the country include:

Florida’s Natural: A Florida co-op of citrus growers founded in 1933.
Land O’Lakes: A united team of over 1,200 dairy and 500 agricultural producers.
Ocean Spray: A collective of over 700 farmers producing cranberry-centered products.
Blue Diamond: An award-winning co-op comprising almond growers in California.
Organic Valley: Nationwide co-op of organic vegetable, egg and dairy producers.

How Agricultural Co-ops Work

A farm cooperative involves a network of member farmers who reap many benefits of doing business as a unit. Individual farms work together to buy necessary supplies and services, as well as distribute, market and sell their products. Farmers save costs and access goods and services otherwise unavailable to them.

A Brief History of Farm Co-ops

Agricultural co-ops have existed for as long as people have been farming, although their needs have evolved with technological advancement. Early farmers needed to secure land and supplies to start their businesses. In a cooperative, members would pool their financial resources and expertise to support each other’s farms.

The concept first gained traction in the United States following the Civil War. Many of these organizations adopted the principles and values of the Rochdale Pioneers, one of the U.K.’s first and best-known co-ops. Groups like the Grange, the National Farmers Union and the Farmers Union Central Exchange (CENEX) nurtured co-op growth until antitrust legislation put a damper on the activities in the 1890s. As a result of many court rulings, co-ops became illegal, and farmers engaging in collective actions that influenced the market were subject to prosecution.

That changed in 1922 with the passing of the Capper-Volstead Act, which generally guaranteed growers’ rights to form co-ops and act in unison.

Today, as more independent farms function collectively, they can achieve significant long-term success.

The Importance of Agricultural Co-ops

In a farmer-owned co-op, like-minded food producers help build a better local economy in the communities they serve. Farm co-ops continue to play a pivotal role in agricultural production at many levels. Common types of modern organizations and their cooperative-supporting activities include:

Credit co-ops: These entities are typically financial services institutions in the Farm Credit System. They help growers secure competitive financing for many activities, including crop exports.
Supply co-ops: These organizations manufacture, distribute or sell essential farming supplies such as fuel and fertilizer. They strive to provide competitive pricing that individual farmers may not be able to get on their own.
Marketing co-ops: These cooperative associations handle all promotional activities on behalf of their members. Their negotiating power can help growers receive better prices.

In summary, agricultural co-ops enable producers to get more for less, increasing overall quality and profitability.

Challenges Agricultural Cooperatives Face

Although farm co-ops have many benefits, they face a few challenges, but not without solutions.

Lack of Strong Leadership

Many co-ops look to their members to form a leadership team. However, not all members have the skills and experience needed to manage large projects or grow co-ops. And a lack of strong leadership can sink your co-op.

Consider hiring a manager to lead your team. Pick a professional with years of experience supporting and scaling co-ops. The right individual can bring innovative growth strategies that make your co-op resilient to differing market climates.

Poor Marketing

Many co-ops hesitate to invest in marketing, especially if they are trying to cut costs. They view marketing as an unnecessary expense. However, co-ops cannot adequately position their products in larger markets without a good marketing strategy. Marketing is not a luxury left for big cooperatives or corporations. It is the life of every business.

Your team doesn’t have to start big. You can create a comprehensive marketing strategy that targets your specific market. Have a dedicated marketing budget and then tailor your plan to it. The good thing about a marketing budget is that it grows with your co-op.

Lack of Financing

Multiple traditional lender institutions still don’t understand the co-op model or find it unprofitable due to its unique ownership structure. Investors primarily interested in profits and control over impact may also not find the co-op model attractive.

The lack of awareness of what co-ops do results in fewer financing opportunities. But luckily, several government agencies, foundations and banks are dedicated to uplifting co-ops across the country. For example, the United States Department of Agriculture (USDA) offers millions of dollars in grants and loans through programs like the Rural Cooperative Development Grant.

We at NCBA CLUSA have been at the forefront of that battle, ensuring your voice is heard and your needs are met. Our team continues to advocate for better financing and accessibility for co-ops nationwide.

Environmental Risks

One thing farmers cannot easily avoid is the weather. Environmental conditions like excessive heat, floods or droughts can all affect crop yield rates and livestock. The rapid change in global climate conditions can further add pressure on farmers.

Although we cannot avoid climate change, we can adapt to it to ensure our farms are more resilient. Agricultural co-ops can educate their members on sustainable farming methods that protect their land, produce and livestock. There are countless resources available from government organizations and research facilities. You can also become a part of a robust network of co-ops that can share their adaptability tips.

Farmer co-ops can also pool their resources to purchase climate-resilient and crop monitoring equipment to ensure your team always has eyes on its crops even when not on the field.

CO-OP ASSOCIATIONS IN AGRICULTURE

Many organizations help advance America’s farmers and support cooperative business models in agriculture. Some agricultural cooperative examples of support include:

National Council of Farmer Cooperatives: The National Council of Farmer Cooperatives (NCFC) is an association representing nearly 1,600 farmer co-ops in the U.S. Its sole focus is to advance farmer co-ops and enterprises and ensure their economic success.
National Farmers Union: Since its founding in 1902, the National Farmers Union (NFU) has been fighting for fair market access for farmers nationwide.
International Cooperative Alliance: The International Cooperative Alliance (ICA) represents over 1 billion co-op members globally. Its mission is to unite global co-ops by enhancing cooperation among members.
Cooperatives for a Better World: Cooperatives for a Better World help increase co-op awareness nationally and globally.
Farmers Cooperative Association: The Farmers Cooperative Association (FCA) is a Maryland co-op that offers premium products, like feed, needed for daily operations at an affordable price.
Farmers Co-Op Society: The Farmers Co-Op Society (FCS) provides innovative business solutions to the agricultural industry.

Some regions have local organizations providing assistance, such as the Keystone Development Center (KDC) in Pennsylvania and the Neighboring Food Co-Op Association (NFCA) in New England and New York. Many localities also have government agencies that offer co-op support, like county extension offices and state farm bureaus.

NCBA CLUSA ADVOCATES FOR AGRICULTURE CO-OPS

At NCBA CLUSA, we envision a better world through cooperative enterprise. As the largest cooperative business association in the world, we advocate for communities across the globe. We believe in advancing and defending the cooperative business model so more people and communities can prosper.

NCBA CLUSA partners with co-ops in the U.S. and internationally. In 2017, we worked with more than 400,000 farmers worldwide to increase yields and access global markets.

As a member of NCBA CLUSA, your organization will be a part of our initiatives to promote advocacy, education and opportunity throughout the cooperative movement.

Become a member today and help us build a more inclusive global economy. Have a question or want to learn more? Contact us online.