Marketing and processing co-operatives use a number of different methods to account for the products delivered to their facilities by their members. Two types of co-operative marketing arrangements include marketing pools and call marketing.

In co-operative marketing pools, producers of a specific commodity jointly pool their production to be marketed and/or processed by their co-op. Under this practice, owner- ship of the harvested commodity is transferred to the co-op and the co-operative's management determines the best time to sell, where to sell, and whether to subject the raw commodity to further processing. In return, producers agree to accept the average return earned by the pool during the marketing season. In a typical pool, producers receive advance payments at the time their harvests are delivered to the co-op. The co-op then makes a series of progress payments as the product is marketed. A final settlement payment is made when all costs and revenues for the marketing season have been established. The final return paid to participants is adjusted according to the relative quality of the delivered commodity.

Pooling can provide real advantages to producers by placing the commodity in the hands of marketing specialists to be sold for the highest price available on any given day. Being in the market every day reduces the risks of failing to sell at the highest price offered by the market or selling all production at the market's low point for the year. Risk is further reduced by spreading it over a group of members instead of concentrating it in the production of one grower. No one participating in the marketing pool receives the highest price offered for a given commodity in a given year, but on an individual basis, each one is protected from selling at the bottom of the market.

Participating in pools also carries some disadvantages. Some growers feel a real discomfort when they surrender control of the decisions regarding when to sell their production. They are willing to sacrifice the relative security of weighted average prices for the opportunity to control the sales of their crops according to their understanding of market conditions. Also, because the pool cannot be closed until the end of the marketing season, there are some delays in making the final settlement payments. These payments are normally a small portion of the total payments to producers participating in co-operative marketing pools and can be managed to prevent significant disruptions of cash flows to producers individual business operations.

In a co-operative with a call marketing arrangement, ownership of the product delivered to the co-op remains with the member who produced it. At any time during the marketing season, the individual members decide when and how much of their production to sell. The co-operative's function is to sell its members' products and to guarantee the collection of the proceeds. The co-op may also allow members to set a minimum price at which the commodity may be sold. After the sale is completed a portion of the proceeds is withheld to cover the co-op's operating costs and to provide a contribution to equity capital. The remaining funds are paid to the member.

Co-operatives with a call marketing arrangement provide members with the right to determine the time of sale and essentially function as a broker between buyers and sellers. The co-op typically provides a marketplace where transactions between buyers and sellers are conducted in public. This serves to provide information on the most recent transactions to all members, thus giving members increased market power in the form of information about supply and demand, as well as the impact of the market situation on the prices being offered to producers for their commodities. (For an example of a co-operative which operates using a call marketing arrangement, see page 5.)

Adapted from Starting an Agricultural Marketing Cooperative, Center for Cooperatives, University of California, Davis.