The share of patronage refunds retained by an agricultural cooperative is modeled as arising from the portfolio decision of its median member. The member is viewed as maximizing expected utility by allocating wealth between investments in farming assets and equity in the cooperative. Determinants of the share of patronage refunds retained are the expected rates of return on these two investments, their variances, their covariance, and the expected future share of patronage and its variance. Empirical examinations of aggregate cooperative data and cross-section analysis of seventeen regional supply cooperatives are found to be consistent with the model.

Understanding Retained Patronage Refunds in Agricultural Cooperatives

A large majority of farms in the Netherlands, Italy, Canada, and the United States are family owned businesses. National census and survey data extend information about the extent of multiple households and owners engaged in farm businesses. Multiple owners are relatively common in each of the countries. Even among farms structured as proprietorships two or more owners may be part of a farm’s ownership structure. Households and owners of farms also may not completely overlap. Examination of recent data reveals that many farms are structured so that a wide range of owners also interact with a variety of persons or entities to make farm business decisions. Expansion of farm governance structures to include additional parties may affect claims on farm output and income. The message is that agriculture is dominated by far more complex business arrangements than traditional models of business development would suggest. A result is that data collection and income measurement, both for farms and farm households, has become more complex. When household estimates of income are developed from farm-based surveys, care must be used to first correctly measure a farm’s income and then to correctly distribute it to stakeholders engaged in the business.

Of the handbook on rural household, livelihood and well-being: statistics on rural development and agriculture household income.

Over the past decade, widespread interest has developed among consumers in the formation of cooperatives, raising the question of how economically viable these cooperatives will be over time. This paper presents an analysis which shows that the potential for growth of consumer cooperatives will depend on the success of cooperatives in increasing management efficiency and in developing a range of more sophisticated financial instruments, including reorganizing as capital stock cooperatives and using borrowed capital. In addition, federation, consolidation and vertical integration may be needed. These conclusions are derived from analysis of the cost functions of the cooperative firm and from comparative analysis of the structural evolution of producer marketing cooperatives and consumer cooperatives.

The Potential for Growth of Consumer Cooperatives: A Comparison with Producer Cooperatives

A comparative ratio analysis using nonparametric statistical methods provides no evidence to support the hypothesis that US farmer cooperatives generally are financially weaker than other firms Although some cooperative groups had lower current ratios than industry standards, most of these groups consisted of marketing associations for which differences may be explained largely by the unique business relationships between the associations and their patrons Comparisons of debt/equity ratios indicate that, except for regional grain and farm supply associations, cooperatives generally are less leveraged than other firms The overall financial strength of cooperatives appears better than during the early 1980s

A Comparative Financial Ratio Analysis of U.S. Farmer Cooperatives Using Nonparametric Statistics

Vermont agricultural cooperatives were surveyed to investigate key factors contributing to cooperative success. Most of the cooperatives were formed within the last 15 years. Financial, organizational, and operational data were collected for selected years from 1974-1984. Average annual changes in gross sales were used to divide cooperatives into low-growth and high-growth groups. Selected variables were identified to classify individual cooperatives into low- or high-performance groups with discriminant analysis. Management experience and adoption of multi-year plans were the two factors found to have the most significant influence on cooperative sales growth.

/pdf/the-use-of-discriminant-analysis-in-measuring-cooperative-q194l491d8.pdf

William J. Monroe

Papers

The Changing Financial Structure of Farmer Cooperatives

The Changing Financial Structure of Farmer Cooperatives