What Is A Cooperative?
Cooperatives are businesses owned and controlled by the people who use them. Cooperatives differ from other businesses because they are member owned and operate for the mutual benefit of members. Like other businesses, most cooperatives are incorporated under State law.
There are estimated to be over 40,000 cooperatives in the United States whose member owners include over 100 million Americans – nearly 1 out of 3. These include agriculture, child care, credit, health care, housing, insurance, telephone, and electric cooperatives to name a few.
Why Are Cooperatives Organized?
- Strengthen bargaining power
- Maintain access to competitive markets
- Capitalize on new market opportunities
- Obtain needed products and services on a competitive basis
- Improve income opportunities
- Reduce costs
- Manage risk
What Are Farmer Cooperatives?
In agriculture, there are nearly 3,000 farmer cooperatives whose members include a majority of our nation’s 2 million farmers and ranchers. These include:
- Marketing cooperatives – which handle, process and market virtually every commodity grown and produced in the United States.
- Bargaining cooperatives – which bargain to help their farmer members obtain reasonable prices for the commodities they produce.
- Farm supply cooperatives – those engaged in the manufacture, sale and/or distribution of farm supplies and inputs, as well as energy-related products, including ethanol and biodiesel.
- Credit cooperatives – include the banks and associations of the cooperative Farm Credit System that provide farmers and their cooperatives with a competitive source of credit and other financial services, including export financing.
Farmer cooperatives exist for the mutual benefit of their farmer members with earnings returned on a patronage basis. For example, a farmer member who accounts for 10 percent of the volume of corn delivered to the cooperative would receive 10 percent of the net earnings derived from the handling, processing, marketing and sale of that corn or related products. Such patronage dividends help boost the income of farmers directly or by reducing the effective cost of the goods and services provided.
Farmer cooperatives also help contribute in another way to the economic well being of local communities, particularly in rural areas where they are an important source of jobs and payrolls – accounting for as many as 300,000 jobs and a total payroll of over $8 billion.
Being farmer-owned and controlled, farmer cooperatives are governed by a board of directors elected by their farmer members – generally based on one member one vote rather than on the basis of shares or percent ownership as in other types of businesses. This provides for a unique accountability.
Farmer cooperatives are farmers.