Types Of Agricultural Co-operatives

Virtually any type of agri-business can be organized as a co-operative. Traditional types of agricultural co-operatives include supply, marketing and processing co-operatives. A relatively new type of agricultural co-operative is the New Generation Co-operative.

Supply Co-operatives

Purpose: To provide producers with inputs and services at competitive rates.
Members: The producers who purchase supplies and services from the co-op. That is, the customers or patrons.

Supply co-operatives sell a variety of goods to producers, including petroleum, feed and fertilizers. Services such as breeding, artificial insemination, and seed cleaning have also been organized on a co-operative basis. Depending on the needs of the producers involved, supply co-operatives can vary in complexity: ranging from simple buying clubs organized by producers to access bulk or volume discounts, to large wholesale and retail operations which provide a wide variety of goods and services to a broad range of customer-members. Supply co-operatives may choose to either charge market prices for the services and products offered by the business or they may choose to price at cost plus an operating margin. In either case, any profits generated by the business are typically returned to members at the end of the year in proportion to their patronage. The members of supply co-ops can also decide whether or not to sell goods or services to non-members. Allowing non-members to purchase supplies or services can often increase the level of profits generated by the co-operative.

Marketing and Processing Co-operatives

Purpose: To market and process goods.
Members: The producers who deliver their products to the co-operative.

Producers create marketing co-operatives to jointly market, distribute and process their products. By pooling their resources, producer-members can hire professional marketing specialists and have their products processed in plants in which they have an ownership stake. Many marketing co-operatives also facilitate producer investment in the development of brand names, market research and product development.

Co-operatives use many methods to account for, and track, the raw commodities delivered to their facilities by their members. Some co-operatives pay producers a market price upon delivery. Others pay producers a pooled price based on the average returns earned by the co-operative over a specified marketing period (see pg. 5). Still other co-operatives simply facilitate the transaction between the producers and the final buyer, charging the producer on a per-unit basis for this service and never retaining ownership of the product. In each case, members may receive additional payments at the end of the marketing season, based on the co-operative's earnings in excess of operating costs. Depending on their mandate, co-operatives may or may not market the product of nonmembers.

Many co-operatives use marketing agreements as a way of specifying the terms under which products will be accepted, processed or marketed by the co-op on behalf of its members. This enables the co-operative to operate on a more efficient basis. Processing co-ops, in particular, can save costs if they match the volume of their members' commodity production to their facilities' capacity.