United States

Department of

Agriculture

Rural Business–

Cooperative

Service

RBS Research

Report 192

Problems and Issues

Facing Farmer

Cooperatives
Abstract Cooperative management mentioned low commodity prices, the agricultural economy,

operational issues, and increasing costs as the major problems facing their cooperatives over the past year and that they will continue to face in the near future. These

were some of the findings from two questions included in the 2000 survey of farmer

cooperatives. Problems identified by cooperative management were classified into 17

problem sets. The responses were analyzed for both the past year and the near future

(next 1-2 years) for all cooperatives, by type and size, and by region of the country.

Keywords: cooperatives, statistics, problems, issues, management, agriculture

Problems and Issues Facing Farmer Cooperatives

Thomas W. Gray, PhD and Charles A. Kraenzle, PhD

U.S. Department of Agriculture

Rural Development

Rural Business-Cooperative Service 

Research Report 192

September 2002

Acknowledgment: This report is dedicated to my co-author, Charles A. Kraenzle, who

died on August 15, 2002. Throughout the preparation of this report, Charlie never faltered. He allowed me, and others, to witness what we had come to know as a wonderful and endearing mixture of dedication, determination, courage, humor, and an open

and enduring kindness. We will miss him.—T. G.
Preface Farmer cooperatives are facing some very difficult times due to a changing global and

domestic world economy. Overproduction, increased imports, and low farm prices

have resulted in many cooperatives ending their business year with decreased revenues and earnings.

This study was conducted to provide important insight into what cooperative management considers the major problems and issues they faced during their fiscal year

ended in 2000 and what they consider to be the major problems and issues over the

next 1-2 years. This report summaries the responses from a survey of farmer cooperatives by principal product marketed, major function, size of cooperative, and region of

the country.

The information was collected from individual farmer and fishery cooperatives by

including additional questions in the annual survey of farmer cooperatives. A mail survey was conducted of nearly all organizations identified by USDA’s Rural BusinessCooperative Service (RBS) as a farmer or aquacultural cooperative. Information

obtained from individual cooperatives is combined or presented in a way to maintain

confidentiality.

The purpose of this study is to help management, cooperative leaders, researchers,

and educators identify the major problems and issues facing cooperatives so that joint

efforts can be used in helping cooperatives solve their problems.

The authors thank the cooperative managers who provided the information requested

and to the members of the RBS Statistics Staff, Celestine C. Adams, Katherine C.

DeVille, Jacqueline E. Penn and Ralph M. Richardson, for collecting the survey data.

i
Contents Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iv

Summary and conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Classification of problems and issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Problems and issues—past year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Cooperative function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Marketing cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Farm supply cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Related-service cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Type of cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Grain cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Fruit and vegetable cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Dairy, wool, and sugar cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Cotton ginning cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Size of cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Region of the country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Summary of problems identified—past year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Problems and issues—near future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

All cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Cooperative function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Marketing cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Farm supply cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Related-service cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Type of cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Grain cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Fruit and vegetable cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

ii
Contents Dairy cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Wool cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Cotton ginning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Size of cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Future problems identified by region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

Low prices and the agricultural economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

Comments beyond prices and the agricultural economy . . . . . . . . . . . . . . . . . . . . . . .32

iii
Highlights Information for this study was collected by adding two open-ended questions to Rural

Business-Cooperative Service’s (RBS’s) annual survey of farmer cooperatives. The

questions sought to identify problems and issues facing cooperative management both

in the near past and the near future (next 1-2 years). More cooperatives (1,147)

responded to the question concerning the past year than those (1,128) about the

future. However, the total responses for the future (1,565) were greater than for the

past (1,496).

Seventeen problem areas were identified for classifying past and future problems.

These included: accounts receivable, agricultural economy, competition, consolidation,

technology, genetically modified crops, Government regulation, Government programs,

increasing costs, labor, low commodity prices, operational, other, transportation,

weather, members, and low margins.

A two-tier methodology was used to report the findings. In the first tier, the minimum

number of problem areas that accounted for at least 50 percent of the responses were

reported. In the second tier, problems reported accounted for at least an additional 5

percent of the total responses in a specific category or included at least 10 responses. 

Among all cooperatives, low commodity prices, the agricultural economy, operational

difficulties, and increasing costs were the most frequently mentioned problems management faced the past year. Second-tier problems included labor, low margins, competition, and weather. In the near future, the agricultural economy, low commodity

prices, operational difficulties, and increasing costs were most frequently mentioned,

just as in the past, but with some shifting of emphasis. Competition, low margins, and

labor were included in the second tier. Weather was considered a problem less often.

In marketing cooperatives, low commodity prices, operational difficulties, the agricultural economy, and competition were mentioned the most frequently for the past year.

Labor, low margins, weather, and increasing costs were also frequently mentioned.

These same problems were identified for the near future except the agricultural economy and increasing costs were considered to be of greater concern.

Management of farm supply cooperatives identified the agricultural economy, low commodity prices, increasing costs, and low margins as the first-tier set of problems.

Second-tier problems for the past year included operational difficulties, labor, competition, weather, and accounts receivable. The problems identified for the near future, in

the first tier were the same. The second tier, however, included only labor, operational

difficulties, and competition.

Among related-service cooperatives for the past year, low commodity prices, weather,

increasing costs, and labor were mentioned most frequently. Other problem areas

included operational difficulties, the agricultural economy, and competition. In the near

future, the agricultural economy was of more concern and weather and competition of

less concern.

By selected type of cooperative, grain cooperatives cited operational difficulties, low

commodity prices, low margins, and the agricultural economy most frequently for the

past year. The agricultural economy, operational difficulties, low commodity prices,

increasing costs, and competition were the most frequent responses for the near

future. More concern was given to the agricultural economy and increasing costs and

less to low margins.

iv
Highlights Fruit and vegetable cooperatives mentioned low commodity prices, competition, operational difficulties, and the agricultural economy most frequently as the major problems

they faced the past year. These same problem areas were cited most frequently for the

near future, but in a different order.

The problem area mentioned most frequently by dairy cooperatives for the past year

was low commodity prices. “Members” was also a concern. For the near future, other

problem areas surfaced. Low commodity prices were still of major concern. However,

the agricultural economy, operational difficulties, and members were also frequently

mentioned problems or issues.

Wool cooperatives identified low commodity prices and competition as their major

problems for the past and coming years, but with more future emphasis on the agricultural economy and operational difficulties.

Cotton ginning cooperatives cited low commodity prices, weather, and labor most frequently as problems for the past year. Low commodity prices, increasing costs, weather, the agricultural economy, and labor were mentioned most frequently for the near

future. Weather was less of a concern.

Low commodity prices and the agricultural economy were among the most frequently

cited problems by size of cooperative for the past year. Only one size, cooperatives

with revenues of $500 million and more, did not show both of these problem areas

among their most frequently cited concerns. Larger-sized cooperatives cited operational problems and increasing costs more frequently.

Smaller cooperatives, with revenues less than $10 million, tended to show greater

prevalence of alternative problem sets. They less frequently cited operational difficulties and low margins than did all cooperatives. Increasing costs were more frequently

mentioned by the very smallest cooperatives, with less than $2 million in revenues and

$5 million to $9.9 million in revenues. “Weather” problems were increasingly cited by

cooperatives with revenues of less than $5 million but more than $1 million.

“Competition” was listed more often by cooperatives with revenues of $4 million to $4.9

million.

Cooperatives with revenues of $10 million and more showed less variability in

responses offered. Low commodity prices, agricultural economy, operational difficulties, and low margins tended to be the most prevalent response from larger organizations. However, “labor” was mentioned more often by cooperatives with $15 million to

$24.9 million in revenues. “Increasing costs” responses were more prevalent for cooperatives with $50 million to $99.9 million in revenues.

In the near future, the agricultural economy, low commodity prices, operational problems, and low margins were the most prevalent concerns for cooperatives with revenues in the mid-range sizes. For cooperatives with revenues between $25 million and

$49.9 million, the agricultural economy, low commodity prices, operational problems,

and low margins were prevalent. Cooperatives with revenues between $15 million and

$24.9 million identified these same four problem areas, plus increasing costs.

Different combinations of problems were reported from organizations larger and smaller than the mid-sized cooperatives. However, the agricultural economy and low commodity prices were the most anticipated problems for nearly all size categories. “Low

v
Highlights commodity prices” was among the most frequently cited for each size, except for those

cooperatives with $100 million to $499.9 million in revenues.

Problems facing cooperative management in the past and near future were also analyzed by region. Low commodity prices and the agricultural economy were among the

most cited in nearly every region. However, except for the Corn Belt, operational problems and low margins shifted down variously in each region, and at least one problem

set—labor, weather, competition, and increasing costs —shifted up.

Low commodity prices and the agricultural economy were among the most frequently

cited problems across each region. Operational problems, low margins, labor, weather,

competition, and increasing costs variously moved into and out of the first-tier problem

sets, depending upon the region.

In the Northern Plains, increasing costs were frequent concerns, particularly labor. In

the Pacific region, competition and operational difficulties were among the most often

mentioned. In the Southeast region, weather and operational difficulties were prime

concerns. In the Appalachian region, cooperatives cited operational difficulties more

often. Low margins were among the prime concerns in the Lake States region, weather in the Southern Plains, increasing costs in the Delta region, labor in the Mountain

States region, and competition in the Northeast.

vi
Summary and

Conclusions

The responses from cooperatives primarily dealt with two aspects of the agricultural

economy, the survival of farmers and farms, and the survival of cooperatives. The differences between “past year” responses and the “near future” primarily dealt with

emphasis. “Past year” responses cited immediate difficulties, while future responses

focused more on larger structural issues.

Survival of farmers and farms reflected various influences that affected producer profitability. Low commodity prices were understood as pervasive both in the past and

expected in the future and partly due to excess supply, driven by expansion of domestic commodities in some regions, as well as an increase in the importation of cheaply

produced foreign goods. Producers were faced with low commodity prices, and with

increasing costs of fertilizers, energy sources, and labor in some instances. In some

regions, weather conditions reduced local volumes. Under such conditions producer

profitability drops, and survival becomes more difficult.

Poor earnings forced some farmers to discontinue operations. Others quit due to

retirement, urbanization, and health problems. Some developed strategies to stay in

business. Many sought greater volumes by expanding both vertically and horizontally.

Some engaged in contract production or used other practices (Internet purchases and

sales) to improve the overall farm efficiency.

Many of these dynamics have direct impact on cooperative survivability. Fewer farmers

can result in reductions in local volumes, commodities sold, and supplies and services

purchased. Larger farmers with greater volumes may also bypass local cooperatives

and go direct to terminals. Others that do not bypass the local may want better deals

from their cooperatives. Those who contract with investor-owned firms (IOFs) drain

volume from cooperatives. Cooperatives themselves, must operate in an environment

of increasing costs coupled with reduced volumes, low prices, and increased costs,

each contributing to low margins.

Cooperatives have sought to respond with various operational adjustments—niche

marketing, improved financing, debt management, improved efficiency and growth—

aimed at boosting returns to farmer-members, helping them to stay in business, and

thereby preserving cooperative volumes. These conditions have forced some cooperatives to close. Others have made various organizational changes that have included:

● closing smaller branches;

● increasing the number of locations;

● forming mergers, joint ventures, and strategic alliances;

● developing value-added products to improve profitability;

● charging for previously free services;

● doing more with fewer people;

● creating new profit centers;

● finding demand for products;

vii
Summary and

Conclusions ● maintaining feed volumes to justify services and employment;

● staying focused on making a difference and moving from a production to a

marketing orientation;

● managing growth and expanding the producer base;

● maintaining profitability and retiring members’ equity;

● getting customers to pay their bills;

● getting products when they are needed;

● improving inventory management and purchasing to stay competitive in the

marketplace; and

● recognizing what is done well and becoming the best at it.

viii
Problems and Issues Facing 

Farmer Cooperatives

Thomas W. Gray and Charles A. Kraenzle

Rural Business-Cooperative Service

Introduction

A farmer cooperative is a business organization

owned and controlled by its members for their mutual

benefit. Members finance their cooperative through

equity investments. Control comes via membership

rights to vote for and become directors. The directors

hire the manager and establish the policy under which

the manager operates. While the manager and directors have little direct control over the external environment, they do have control over and the responsibility

for how the cooperative adjusts to a continuously

changing world environment. Cooperatives face many

problems and issues, both internally and externally, in

seeking to adjust to these national and global changes.

The objectives of this study are to identify: (1)

what management considered to be the major problem

facing the cooperative over the past year, (2) what

management sees as the most pressing future problems or issues facing their cooperative in the near

future (next 1-2 years), (3) if the current and future

problems differ, (4) and paths management identifies

for addressing some of these problems.

Information for this study was collected by

adding two open-ended questions to RBS annual survey of farmer cooperatives. “In the past year, what did

your management consider to be the major problem or

issue facing your cooperative?” And, “What does

your management see as the major problem or issue

facing your cooperative in the next year or two?”

Questionnaires were sent to 3,058 farmer cooperatives. More cooperatives (1,147) responded to the

question concerning the past year than those (1,128)

about the future. The response rate was 37.5 percent to

the first question and 36.9 percent to the second one.

Most of their responses were short, such as “accounts

receivable,” “decline in farmers,” “competition,” and

“low farm prices.” Some cooperatives identified more

than one problem or issue, such as “low farm income

and excessive government regulations” or “imports,

retail consolidation, prices.”

Classification of Problems and Issues

These responses were reviewed and a classification scheme was developed to summarize like

responses. If a cooperative reported more than one

problem, up to three were classified. As a result, the

number of responses exceeded the number of cooperatives responding. A total of 1,496 responses were

recorded for the current year and 1,565 responses for

the near future. More problems or issues were identified for the future by fewer cooperatives.

Seventeen problem areas or classifications were

identified. Here are the classifications used in the

study with some examples of problems reported by

cooperatives: 

Accounts Receivable—Includes high and/or overdue “accounts receivable,” “customers inability to pay

accounts,” “credit,” and “cash flow” problems.

Agricultural Economy—Includes “changes in agriculture structure,” “depressed farm economy,”

“declining number of farmers,” “decrease in production,” “losing the small family farms,” “encroachment

from development,” and “declining net income of

farmers. It puts pressure on them to cut back on input

usage.”

Competition—Includes cooperatives “competing

with large co-ops and processors,” “competing with

suppliers,” “competition from Internet vendors,”

“competition from large national dealers in the retail

business,” “contract selling by producers,” “direct sell1
ing of ag products to farmers,” “market for our product,” “fewer customers,” “price competition,” and

“worldwide excess inventory.

Consolidation—Includes “consolidation and integration of markets,” “consolidation of agriculture,”

“consolidation and regional ownership of locals,”

“retail consolidation,” and “mergers.” 

Technology—Involves “changing technology in

farming,” “adapting to Internet trading,” “concern

over e-business,” “brokers putting bids on internet and

by-passing the local co-op,” “dealing with Internet

trading,” “speed of changing technologies,” “transition to computer age,” and “meeting the demands of

newer technologies to service our customer.”

Genetically Modified Crops—considers “biotechnology,” “GMO (genetically modified organisms) grains,”

“Starlink corn,” “biotech grain,” “Non-GMO vs GMO

grain,” “segregating grains,” “marketing bio-tech

grain and dealing with buyer’s call programs,” and

“consumer acceptance of GMO grain.”

Government regulation—covers “Government regulations,” “compliance issues,” “more Government

intervention,” “fuel regulations,” “air pollution control

issues,” “EPA-DEO-OSHA,” “safety issues, EPA,” and

“keeping abreast of Government regulations.”

Government programs—includes problems such as

“a farm program that detours sales of farm inputs,”

“drop in volume due to CRP (Conservation Reserve

Program),” “loss of sales due to Federal Crop

Insurance program,” “conserving the tobacco program,” “U.S. sugar policy,” “Government programs

that idle agricultural land use,” and “farm policy for

the farm bill of 2002.”

Increasing costs—covers “high costs of fuels,” “rising labor costs,” “rising expenses,” “higher input

costs,” “prices causing cash flow problems,” and

“expense control.”

Labor—includes problems associated with “hiring

employees,” “attracting and retaining quality personnel,” “employee issues,” “finding competent labor,”

“labor availability,” “labor costs,” “good quality

employees who want to work the hours required,” and

“personnel problems.”

Low commodity prices—includes problems such as

“low commodity prices,” “cheap grain prices,” “low

milk prices,” “low prices for fresh fruits,” “low sugar

prices,” “low farm prices,” “volatile prices,” and “sustainability in the face of depressed prices”.

Operational—views a wide variety of problems

associated with the internal operations of a cooperative. Included are such items as “business survival and

profitability,” “cash flow,” “financing,” “debt management,” “equity management,” “getting more efficient,”

“keeping co-op solvent,” “lack of income producing

sales,” “survival,” “working through merger,” and

“focus on direction for the future.”

Other—includes responses such as “No,” “none,”

“unknown,” “no major problems,” and “read annual

report.”

Transportation—considers “transportation issues,”

“truck shortage and high fuel costs,” “adequate number of rail cars to ship grain,” “railroad abandonment,”

and “timeliness of rail service.”

Weather—includes problems related to “drought,”

“crop failure due to drought,” “lack of moisture,”

“quality of produce,” and “poor quality grain due to

wet weather conditions.”

Members—problems associated with “membership retention,” “attracting new members,” “lack of

participation,” “non-loyalty of members,” “loss of

members,” “smaller membership,” and “poor membership support.”

Low margins—Involves problems and issues such

as “cash flow,” “declining margins,” ”profitability,”

“availability of funds,” “generating net income,” “lack

of earnings in the agricultural industry,” and “getting

through another year with minimum losses financially.”

The classification system was used for responses

to both questions. This was done to facilitate comparisons between problems identified for the past year

and for the near future.

A two-tier methodology is used to report the

findings. In the first tier, those problems that account

for at least 50 percent of the responses are reported. In

the second tier, problems that account for at least an

additional 5 percent of the total responses in a specific

category are reported. In some cases, when total number of responses in a specific category is small,

absolute numbers, rather than percentages, are provided, but only if 10 or more responses are given.

Relationships among the problem areas are revealed as

well and are described in a summary at the end of each

section. Various relationships are illustrated in figure 1.

Problems—Past Year—All Cooperatives

Low commodity prices, the agricultural economy,

operational problems, and increasing costs were the

most frequently mentioned problems cooperative

management faced over the past year (52.1 percent,

table 1). Three of these four problem areas—excluding

increasing costs—were the most frequently cited by

2
3

 Figure 1-- Cooperative Problems Identified

Cheaply producedforeign commodities

Expansion of

foreign imports

Overall domesticexpansion of supply Excess supply High costs of fertilizer,

energy sources andlabor (grains)

Low commodityprices

Producer profitabilitydown Fewer

 farms,larger farms Reduction in local

volumes

Local conditions: Drought Too much rain Insect damage

Less volume in localmarkets, fewer purchasesof supplies and services

Cooperativesurvivabilitychallenged

Operational problems:

marketing, finance, debtmanagement, improving

efficiency and growth

Increasing costs, especiallylabor; labor availabilityand qualifications down

Low

margins

Cooperatives

out of business

Cooperatives seekorganizational changes

Increase scale,consolidation, buildstorage facilities, closesmaller branches,increase number oflocations

Inter-organizationalrelationships

Seek new members,improve returns tofarmer members

Retain and expandvolume/business

Cooperatives IOFs

Contracting

Producer survivabilitymore difficult

Farmers go outof business

Strategiesforsurvival

Purchases:dot.com business

Increasefarm size

Urbanization,aging farmers

Large volumesable to by-pass

local co-op

Terminals

Wantbetterdealsfromco-ops

Mergers,joint ventures,strategicalliances Competitive concerns Market concentration concerns, vertically

d h i t ll

Fewer farms, larger farms
cooperative managers nationally regardless of their

principal product, major function, size of cooperative,

or location.

Among the four, low commodity prices, with

nearly 20 percent of the responses, was the most often

cited. This included low prices for cotton, cottonseed,

sweet potatoes, almonds, apples, pears, fresh fruit,

milk, sugar, grains, and eggs.

The agricultural economy was the second most

often cited problem (13.3 percent). Management was

concerned about the “depressed farm economy,” “loss

of acreage and farmers,” “the number of dairy farmers

quitting business and leaving the farm,” “producer

profitability,” “size of farms getting bigger, farmers

bypassing local co-op for supplies and sales,” “shrinking agricultural market,” and “too many big farmers.”

As a result of the changing structure of agriculture,

many cooperatives found their sales and profitability

declining.

Cooperative operational problems were the third

most frequently cited (nearly 11 percent). Among them

were “working capital,” “financing,” “debt management,” “equity management,“ “increasing sales,”

“marketing,” “acquisition of another company and

adding its operations to ours,” “working through

merger,” “loss of feed customers,” “reducing our

expenses by closing smaller branches to meet larger

farmer needs more competitively,” “understanding

and responding to our strengths and weaknesses,” and

“identifying and persuading directors to pursue non

traditional income opportunities.”

The fourth most often cited problem was increasing costs (9 percent). Nearly one-third mentioned the

rising costs of fuel. Others cited increased cost of doing

business due to rising labor costs, insurance, supplies

and other expenses. Examples of responses included

“rising costs, particularly energy,” “high fuel prices

causing cash flow problems,” “rising labor costs!” “rising overhead—insurance, health insurance, utilities,

etc,” “increasing costs of operations; labor, repairs,

depreciation,” and “construction costs.”

Four additional problem areas—labor, low margins, competition, and weather—were cited but with

decreasing frequencies. Labor (8.2 percent) was the

fifth most frequently mentioned problem, and in particular “finding and keeping quality employees.”

Other labor concerns were “qualified employees that

stay and do not expect everything,” “lack of seasonal

4

Table 1—Problems cooperative management faced the past year, 2000-01

Problem or issue Cooperatives Responses1

Number Number Percent

Low commodity prices 225 281 18.8

Agricultural economy 157 199 13.3

Operational 141 165 11.0

Increasing costs 76 135 9.0

Labor 95 124 8.3

Low margins 97 118 7.9

Competition 81 116 7.8

Weather 78 98 6.6

Accounts receivable 32 48 3.2

Government regulations 32 47 3.1

Other 32 35 2.3

Government programs 21 30 2.0

Members 22 28 1.9

Genetically modified crops 17 20 1.3

Technology 12 19 1.3

Transportation 16 17 1.1

Consolidation 13 16 1.1 ——— ——— ———

Total 2 1,147 1,496 100.0 

1 A number of cooperatives reported more than one problem. The second and third problems listed were included in the total responses. The

cooperatives were not asked to give any priority or ranking to the problems reported.

2 May not add due to rounding.
employees and rising labor cost,” “employment

issues,” “finding qualified employees in rural areas to

handle the technical needs of our patrons,” and “effectively managing people to maintain profits.”

Low margins was the sixth most frequently mentioned problem (7.9 percent). Many called the problem

one of “shrinking” or “declining margins,” “profitability,” “energy price fluctuations and the negative

impact on margins,” and “getting through another

year with minimum losses financially.”

A number of cooperatives (7.8 percent of the

responses) mentioned competition. This included competition from other cooperatives, from large conglomerates, and from other countries. Responses included

“intense competition,” “ foreign importation of cottonseed,” “competition from Eastern Canada at very low

delivered prices,” “over-supply of imports,” “lower

price of import and russet potatoes which resulted in

below cost of production return to our growers,” “ability to compete with the conglomerates. Cargill has saturated our area,” “farmers buying and selling direct,”

“no large number of wool buyers,” “direct selling of

agricultural products to farmers,” and “contracting.” 

Weather (6.6 percent of responses) was the eighth

most frequently cited problem. Some cooperatives

were faced with drought while others encountered

excess moisture. As a result, crop production and/or

quality were down. Weather responses cited “drought

and hail—less cotton to gin,” ”farmers plant good

quality seed but rain did not come,” “dry years put

farmers and gin in hard times,” “poor-quality grain

due to wet weather conditions,” “wet fall, poor crop,

hard-to-collect accounts,” “slow sales of heating fuel

due to warm winter” and “warm/dry winter (resulting in) dry corn at harvest time,” and “reduced LP gas

sales and grain drying income.”

None of the other problem areas was cited more

than 5 percent of the time. Accounts receivable, for

example, was mentioned in only 3.2 percent of the

responses. One would have expected this to be higher

considering the depressed agricultural economy.

However, farmer’s income was supported by payments made through Federal Government programs.

Although Government regulations (3.1 percent)

and programs (2 percent) were mentioned as problems, they were cited less frequently. Genetically modified crops (1.3) and technology (1.3 percent) were seldom mentioned by management.

Cooperative Function

RBS classifies cooperatives according to the primary function performed. Function is based upon

sales handled by the cooperative, such as commodity

marketing or farm supplies. Cooperatives that provide

services such as trucking, ginning, and storage are

called related-service cooperatives.

Marketing Cooperatives

Among marketing cooperatives, “low commodity

prices,” “operational problems,” “the agricultural

economy,” and “competition” were most frequently

mentioned (54 percent, table 2). “Low commodity

prices” was the most frequently cited (21.4 percent).

Operational problems was second followed by the

“agricultural economy” and “competition. Four additional problem areas—labor, low margins, weather,

and increasing costs—were cited more than 5 percent

of the time. These eight problem areas—low commodity prices, operational difficulties, competition, agricultural economy, competition, labor, low margins, and

weather—are essentially the same problem areas identified by all cooperatives. However, when the focus is

tightened to marketing, “competition” emerges as a

more prevalent difficulty, shifting from the seventh

(7.8 percent of responses) to the fourth (9.6 percent of

responses) most prevalent problem.

There were other minor shifts in positions. For

example, “increasing costs” moved down into the second tier of identified problems. “Members” received

3.4 percent of the responses compared with only 1.9

percent for all cooperatives. However, most noteworthy, “low commodity prices,” “operational difficulties,” and the “agricultural economy,” remained at the

top of the list of problems, and of these “low commodity prices,” was predominant.

Relationships Among Problems: Marketing

Marketing cooperatives most often cited “low

commodity prices” (table 2), but also gave focus to

such specific comments as low market prices for

“sweet potatoes, almonds, citrus, apples, pears, fresh

fruit, sugar, honey, milk and other dairy products, cotton, oil seed, breaker eggs, grain, small grains, livestock, and wool.”

Managers understand low prices, as due to an

over-supply of commodities, variously attributed to

expanded domestic production, and increased cheaply

produced foreign imports. Low prices, in turn, make

survival for producers difficult, particularly when cou5
pled with increasing costs for fertilizer, fuel, other

energy, and other farm inputs. Also contributing were

areas of drought, too much rain, and insect damage.

Each contributed to a reduction in volumes. Farmers

go out of business under such conditions, further

reducing volumes delivered to individual cooperatives, and on a more permanent basis.

The theme of farmers going out of business is carried into responses on the agricultural economy. These

responses focused on the reduction in the number of

farmers, farmland, and local production and the

reduced volume of farm products that local cooperatives handle. These concerns are perhaps best captured

in the statement: “If the farmers don’t survive, neither

will the co-op.” Managers acknowledged that farm

sizes have grown larger and with it increased volumes

per farm (as numbers of farms have decline). This

trend of fewer and larger farms continues the problem

of “farmers bypassing local cooperatives for supplies

and sales” and going directly to terminals and manufacturers. These dynamics put competitive pressures

directly upon cooperatives. At least one manager commented: “being a single location cooperative is too

small.”

The power and economy of large scale, either in

volume or organizational size and geographic reach,

was present in nearly all the responses concerning

“competition.” Managers commented on the difficulty

of maintaining competitive prices and “loss of market

share.” They attributed this not only to “patrons going

out of business,” but also to farmers “selling direct to

terminals and bypassing the local cooperative,” “selling to 110 car (unit-train) shipping stations,” “contracting production,” and losing sales to the internet, and

“dot.com businesses.”

This competition is understood and experienced

in an environment of consolidations (mergers, acquisitions, and joint ventures). Managers identified as

major problems over the past year: “competition

because of mergers and consolidations going on

around us,” “the ability to compete with the conglomerates—Cargill has saturated our area,” “competition

from large commercial grain firms—ADM, Cargill,

etc,” ”regionalization and multi-national takeovers,”

and “multi-national companies gaining market share.” 

Cooperatives themselves are not exempt from

these concerns. Managers cited: “competition by bigger co-ops,” and “competing with larger consolidated

6

Table 2—Problems cooperative management of marketing cooperatives 1 faced the past year, 2000-01 

Problem or issue Cooperatives Responses 2

Number Number Percent

Low commodity prices 126 150 21.4

Operational 85 94 13.4

Agricultural economy 52 67 9.6

Competition 52 67 9.6

Labor 38 55 7.8

Low margins 35 43 6.1

Weather 34 42 6.0

Increasing costs 17 36 5.1

Members 20 24 3.4

Other 19 20 2.9

Genetically modified crops 17 20 2.9

Government regulations 12 19 2.7

Transportation 16 17 2.4

Government programs 11 17 2.4

Accounts receivable 8 12 1.7

Consolidation 8 11 1.6

Technology 6 7 1.0 ——— ——— ———

Total 556 701 100.0

1 A cooperative was classified as marketing if 50 percent or more of its marketing and farm supply sales was derived from marketing of one or

more farm commodities.

2 A number of cooperatives reported more than one problem or issue. The second and third problems listed were included in the total

responses. The cooperatives were not asked to give any priority or ranking to the problems reported.
co-ops.” Market power at the retail level comes into

play as well, with “retail consolidation,” “dealing

with 4 or 5 major buyers (mergers in produce/supermarkets),” and “customers requiring better quality and

pay less.” Globalization tends to deepen competitive

intensity. Major problems identified included: “over

supply of imports,” “southern hemisphere products at

prices below domestic producer costs,” “worldwide

excess inventory,” “out of country competition,” “competition from Eastern Canada at very low delivered

prices,” and “worldwide economy and global market.”

“Low commodity prices,” “the farm economy,”

and “competition” are part of the context in which

business operations occur. Many of the problems cited

were standard “operational” concerns of any business—sales volume, marketing, finance, debt management, operating capital, improving efficiency, equity,

and growth management. Others were more specific

and reflected managers struggling daily with more

encompassing, and contextual problems. 

The demands of scale and changing market structure, efficiency, growth, and profitability were evident.

For example, organizational scale and market structure

changes were present in such “operational” responses

as: “making small companies profitable,” “getting

more efficient, we closed a feed mill to consolidate

grinding and seasonalized a facility,” “reducing

expenses by closing smaller branches to meet larger

farmer needs more competitively.” Some cooperatives

linked responses more generally to the farm economy:

“to remain profitable in a drought-stricken area with

the current struggling farm economy,” and “building

storage facilities too costly in this kind of economic

environment.” 

Storage needs within a larger environment of

excess supply and low prices were particularly evident: “lack of storage space,” “carryover of old crop

grain creating storage problems,” “not enough elevator capacity,” and “expansion of storage facilities.”

Others struggled with the operational consequences of

lack of volume: “lack of drying income,” and “creating

volume to produce income.” Improving efficiency and

growth emerged frequently given this context; “seeking financial means to expand physical facilities,”

“improving efficiency,” “growth—need more members,” and “elimination of inefficient business entities.” 

Many linked organizational, financial success,

and cooperative survival to the ability to maintain or

improve member returns: “business survival and profitability,” “to stay profitable while providing value to

the farmers we serve,” “keeping cooperative solvent,”

“providing a good return for our members’ milk

sales,” and “maintaining profitable returns for our

member/owners.” These responses echo the previous

statement: “If the farmers don’t survive, neither will

the co-op.”

Farm Supply Cooperatives

“The agricultural economy,” “low commodity

prices,” “increasing costs,” and “low margins” were

the most frequently cited problems, accounting for 56

percent of the farm-supply cooperative responses

(table 3). Five additional problem areas—operational,

labor, competition, weather, and accounts receivable—

each accounted for at least 5 percent of the responses.

These nine identified problems were similar to those

identified by all cooperatives and by marketing cooperatives, but with some notable exceptions.

When the focus is tightened from all cooperatives

to farm supply cooperatives, “increasing costs”

emerged as a more prevalent concern (shifting from 9

percent of all cooperative responses to 12.3 percent of

farm supply cooperatives) and to the third most frequent response group. “Operational difficulties” shifts

down from 11 percent, and the third most prevalent

concern, to 8.8 percent, and into the second tier of

problems. Such concerns as “high costs of fuels, rising

labor costs, rising expenses, higher input costs, prices

causing cash flow problems, and expense control,”

were cited with greater frequency by farm supply

managers, than managers from all cooperatives generally. Such “operational difficulties” as “business survival and profitability,” “cash flow,” “financing,” “debt

management,” “getting more efficient,” “keeping coop solvent,” and “equity management” were cited less

frequently than was found from managers from all

cooperatives.

Other changes were less dramatic and represented only minor re-orderings, but “agricultural economy,” “low commodity prices,” and “low margins,”

remained among the most frequently cited problems—

although “agricultural economy,” and “low commodity prices,” reversed positions in predominance.

Respondents in supply cooperatives cited the agricultural economy more often as a problem they had to

face in the past year, than any other problem. While

“low commodity prices” was the second most often

cited, such problems as “declining farm numbers,

depressed farm economy, low farm income, and profitability in agricultural production,” were more predominant and first in frequency.

“Labor,” and “weather” recurred in the second

tier of both all cooperatives, and farm supply coopera7
tives. However, accounts receivable was cited more

frequently by farm supply managers (increasing from

3.2 to 5.3 percent) while “competition” declined (from

7.8 to 6.4 percent).

When comparing farm supply cooperatives with

marketing cooperatives, the differences are greater

than when comparing farm supply or marketing to all

cooperatives generally. “Operational problems,” and

“competition,” the second and third most cited problems by marketing cooperatives, shifted down to second -tier concerns in supply cooperatives. Supply

cooperative emphases were more often on “low margins” and “increasing costs” difficulties. Farm supply

cooperatives also cited “accounts receivable” in 5.5

percent of their responses, or as the 9th most frequently mentioned problem. However, marketing cooperatives only cited “accounts receivable” in 1.7 percent of

their responses, or as the 15th most frequently cited

problem. 

Marketing and farm supply cooperatives operate

in differing markets. Farm supply cooperatives provide feed, seed, fertilizer, crop protectants, petroleum,

and other farm production supplies directly to farmers. Marketing cooperatives, on the other hand, market

farm-produced commodities to processors, wholesalers, and retailers. They face very stiff competition

and how well they do depends on how effective and

efficient management operates the cooperative.

Difference in the prevalence of “accounts receivable”

may be particularly noteworthy between supply and

demand responses. Members sell products to their

marketing cooperatives, which in turn pay the members. Farm supply cooperatives sell farm inputs and

other service to their members. The members pay their

cooperative for services provided. If these farmermembers are not doing well financially, their cooperatives are more likely to have problems with accounts

receivable.

Relationships Among Problems: 

Farm Supply Cooperatives

Managers of farm supply cooperatives—similar

to marketing managers—highlighted the relationship

between low prices and the agricultural economy:

“fewer farmers, commodity prices are depressed,”

“low farm income, producers exiting the business,”

“farmers going out of business.” Other problems were

expressed. The increasing consolidation of farm units

was identified—“larger and fewer farmers,” with “bigger operations wanting better deals,” and “bigger

8

Table 3—Problems cooperative management of farm supply cooperatives1 faced the past year, 2000-01

Problem or issue Cooperatives Responses 2

Number Number Percent

Agricultural economy 97 121 18.0

Low commodity prices 78 103 15.3

Increasing costs 49 83 12.3

Low margins 57 70 10.4

Operational 47 59 8.8

Labor 44 54 8.0

Competition 24 43 6.4

Weather 31 39 5.8

Accounts receivable 24 36 5.3

Government regulations 17 24 3.6

Technology 6 12 1.8

Government programs 8 11 1.6

Other 9 11 1.6

Consolidation 5 5 0.7

Members 1 2 0.3

Genetically modified crops - - -

Transportation - - - ——— ——— ———

Total 497 673 100.0

1 A cooperative was classified as farm supply if 50 percent or more of its sales was derived from the sale of farm inputs such as feed, seed,

fertilizer, crop protectants, and petroleum.

2 May not add due to rounding.
farmers going direct.” “Competition is tight” was

mentioned as well, both from “other cooperatives,”

and from “IOF competition”—both competing for a

smaller number of larger farm customers. However,

loss of farmland and farming units was also attributed

to urbanization—”loss of farmland to housing and

blacktop”—as well as to an aging farm population.

“Increasing costs” was a much more evident

comment from farm supply managers. This was

understood as a problem for both cooperatives and

their farmer-patrons—particularly costs from petroleum and other energy products. Comments were frequently linked to farmer survival: “low crop prices,

high fuel prices, farmers selling out.” Scale of market

organization (market concentration) and “fuel business

competition from big box stores such as Costco,

Walmart, and others” was also mentioned.

Many of these problems have become manifest

within the cooperative as “tight and shrinking margins

and profitability.” Lack of earnings in the agricultural

industry,” “loss of farmers,” “problems with accounts

receivable,” “loss of sales,” and “high cost of products

for resale” can shrink margins and compromise financial health of the organization. These pressures are felt

throughout the cooperative system. Local cooperatives

may have to struggle with a double impact of managing their own financial difficulties, plus dealing with

“no patronage refunds from GROWMARK,” “poor

investments in CENEX,” or the poor financial performance of their regionals.

Related-Service Cooperatives

Service cooperatives assist in marketing farm

products and the sale of farm supplies, and include

such activities as cotton ginning, trucking, storage, and

transportation. Problems cited were similar to those

identified by farm supply and marketing cooperatives—”low commodity prices, weather, increasing

costs, labor, operational difficulties, the agricultural

economy, and competition. However, they were cited

in a much different order of frequency—although “low

commodity prices” was again predominant, and

accounted for 23 percent of the responses (table 4).

Much more prevalent were responses on “weather”

(13.9 percent)—”weather conditions, drought, wet

weather conditions”—and “labor” (12.3 percent) —

“hiring employees, employee issues, labor availability.” Increasing costs was third with 13.1 percent.

9

Table 4—Problems cooperative management of related-service 1 cooperatives faced the past year, 2000-01

Problem or issue Cooperatives Responses 2

Number Number Percent

Low commodity prices 21 28 23.0

Weather 13 17 13.9

Increasing costs 10 16 13.1

Labor 13 15 12.3

Operational 9 12 9.8

Agricultural economy 8 11 9.0

Competition 5 6 4.9

Low margins 5 5 4.1

Government regulations 3 4 3.3

Other 4 4 3.3

Government programs 2 2 1.6

Members 1 2 1.6

Accounts receivable - - -

Consolidation - - -

Technology - - -

Genetically modified crops - - -

Transportation - - - ——— ——— ———

Total 94 122 100.0

1 Service cooperatives provide services related to the marketing of farm products and the sale of farm supplies. Cooperatives providing cotton

ginning, artificial insemination, trucking, storage, and transportation were classified as service cooperatives.

2 May not add due to rounding.
These four problem areas—low commodity prices,

weather, increasing costs, and labor—accounted for

62.3 percent of the responses from related-service

cooperatives. “Agricultural economy,” “operational

difficulties” and “low margins” shifted down in frequency. Due to a much smaller number of service

cooperatives generally, very few responses were

offered—less than 10—for each of these categories.

Relationships Among Problems: 

Related-Service Cooperatives 

The most frequently cited “low price” problems

were for “cotton seed,” “cotton,” and “milk prices,”

although “low commodity prices” was also offered.

The “weather” problems generally related to

“drought.” “Labor” referred to costs and availability,

as well as qualifications. Various relationships among

problem areas were implied. Relationships were most

explicit in problem sets: “falling revenues due to

drought, low commodity prices, rising energy prices

both for gins and producers,” “low commodity prices

forcing cutbacks in patrons expenditures,” and “commodity prices, foreign competition, and weather.”

Low commodity prices to patrons, in part driven by

foreign competition, lack of volume for local cooperatives due to inclement weather, rising costs (mostly

energy) expenditures of patrons, and service volumes

to cooperatives. Lack of labor availability deepens

cooperative difficulty to deliver low cost service to

patrons.

Type of Cooperative

This section examines marketing and related-service cooperatives more closely in assessing how managers responded to the question: “In the past year,

what did your management consider to be the major

problem or issues facing your cooperative?” The presentation is limited to those types of cooperatives and

problems that included at least 10 responses. This criterion limits the discussion to six types of cooperatives: grain, fruit and vegetable, dairy, wool, sugar, and

cotton ginning.

Grain Cooperatives

The four major problem areas—“operational difficulties, low commodity prices, low margins, and the

agricultural economy”—accounted for 50.4 percent of

the 411 responses offered (tables 5 & 6). An additional

three problem areas—weather, labor, and competition—each accounted for less than 10 percent but more

than 5 percent of the responses. These seven problem

areas were the most prevalent, and are the same as

those identified by marketing cooperatives generally.

However, “labor” was more frequently cited (8.8 percent of the time) and “competition” proportionately

less so (6.6 percent of the time) by grain cooperatives.

Responses suggest labor availability may be a

more frequent problem in areas where grain is produced than in locales specialized in other commodities. These problems included “finding qualified

employees in rural areas to handle the technical needs

of our patrons,” and “retention of qualified employees.” These shortages may in turn produce conditions

for “high labor costs.”

Problems related to “competition” were similar to

those for all marketing cooperatives. Scale issues were

evident, referring to both farm and market: “large

farmers going direct,” and “the ability to compete with

conglomerates.” However—unlike marketing cooperatives generally—responses on such issues as “oversupply of imports,” and “out of country competition”

were absent. While competition was a frequently cited

by grain cooperatives, they tended not to identify

issues concerning foreign competition nearly as often

as marketing cooperatives.

Fruit and Vegetable Cooperatives

Three problem areas—“low commodity prices,

competition, and operational difficulties”—accounted

for 56.9 percent of the 93 problems identified by fruit

and vegetable cooperatives (tables 5 & 6).

“Agricultural economy” was cited in an additional 9.7

percent of the comments. These areas plus the “agricultural economy”—were also the most frequently

identified problems by marketing cooperatives. Many

specific responses within each of these categories were

parallel to those offered by all marketing cooperatives.

“Low prices” was predominant along with links to

farmer and cooperative survivability: “low prices for

fruit are driving farmers out of business,” and “no

farmers—no co-op!” Such comments as —”loss of

acreage and farmers, “loss of volume,” and “worldwide economy”—were repeated as well.

Specific differences occurred between comments

on “competition” in grain, and “competition” in fruit

and vegetable marketing. Evident in fruit and vegetable responses were concerns about foreign competition: “unfair imports,” “competition form Eastern

Canada at very low delivered prices,” “oversupply of

imports,” “out of the country competition,” and “foreign imports.” These themes were rare in the grain

responses.

10
11

Table 5—Problems reported by selected type of cooperative in the past year, 2000-01

Type of cooperative

Fruit &

Problem or issue Dairy vegetable Grain Wool Sugar Cotton gin Total

Number

Low commodity prices 44 19 56 18 14 20 171

Operational 5 15 59 1 2 5 87

Weather - 6 38 - 2 19 65

Agricultural economy 4 9 44 - - 4 61

Competition 3 19 27 4 1 5 59

Low margins 2 2 48 2 - 3 57

Labor 2 3 36 - - 13 54

Increasing costs 3 3 19 - - 3 28

Transportation - 2 20 - - - 22

Members 10 6 5 1 - - 22

Genetically modified crops - - 17 - - - 17

Other 3 4 6 2 - 2 17

Government regulations - - 11 - - 4 15

Consolidation 1 5 5 - - - 11

Accounts receivable - - 8 - - - 8

Government programs 1 - 5 - 1 1 8

Technology - - 7 - - - 7 —— —— —— —— —— —— ——

Total 78 93 411 28 20 79 709

Table 6—Problems reported by selected type of cooperative for the past year, 2000-01

Type of cooperative

————————————————-—————————————————————————————

Fruit & Cotton

Problem or issue Dairy vegetable Grain Wool Sugar gin

Percent

Low commodity prices 56.4 20.4 13.6 64.3 70.0 25.3

Operational 6.4 16.1 14.4 3.6 10.0 6.3

Weather - 6.5 9.2 - 10.0 24.1

Agricultural economy 5.1 9.7 10.7 - - 5.1

Competition 3.8 20.4 6.6 14.3 5.0 6.3

Low margins 2.6 2.2 11.7 7.1 - 3.8

Labor 2.6 3.2 8.8 - - 16.5

Increasing costs 3.8 3.2 4.6 - - 3.8

Transportation - 2.2 4.9 - - -

Members 12.8 6.5 1.2 3.6 - - 

Genetically modified crops - - 4.1 - - - 

Other 3.8 4.3 1.5 7.1 - 2.5 

Government regulations - - 2.7 - - 5.1

Consolidation 1.3 5.4 1.2 - - -

Accounts receivable - - 1.9 - - -

Government programs 1.3 - 1.2 - 5.0 1.3

Technology - - 1.7 - - - ——— ——— ——— ——

Total 100.0 100.0 100.0 100.0 100.0 100.0
“Operational” problems identified, were typical

of other areas such as “working capital,” “increasing

sales,” “marketing,” “and growth.”

Dairy, Wool and Sugar Cooperatives

These were the only other marketing cooperatives that provided more than 10 responses in any category (tables 5 & 6). The central issue was “low commodity prices.” In dairy, wool, and sugar, the

predominant comment was “low prices.” However,

these comments also contained references to larger

contextual issues: “lack of patrons selling milk due to

the milk price staying so low all year,” “depressed

sugar prices and state of agriculture in general,” and

“low prices (wool) and producers selling out.”

“Members” was also an issue among dairy cooperatives. Nearly 13 percent of the dairy responses cited

problems with loss of members or attracting new

members.

Cotton Ginning Cooperatives

Of the 122 responses from related-service cooperatives, 82 or 67.2 percent were from cotton ginning

cooperatives (tables 5 & 6). No other service cooperatives—storage, transportation, livestock shipper, rice

drier, and artificial insemination—reported more than

nine problems. Predominant cotton ginning responses

concerned “low commodity prices,” “weather,” and

“labor,” and paralleled those reported for service cooperatives generally.

Relationships among these problem areas were

evident. Farmers were less profitable due to low

prices. Some go out of business reducing volumes to

the gin, as do drought and inclement weather. High

labor costs cut into financial returns, compromising

survivability for farmer and cooperative alike. These

themes are evident in such comments as: “low volumes loss to drought, and insects, falling revenues, rising costs of labor, low prices,” “dry years put farmers

and the gin in hard times,” and “low commodity

prices forcing cutbacks in patron expenditures.”

Relationships Among Problems: 

Type of Cooperative

When type of cooperative is highlighted—excluding farm supply—some aspects of the various relationships in figure 1 become more obvious. “Low commodity prices” is evident as a central problem for all

types of cooperatives. However, the impact of foreign

competition is more focused among fruit and vegetable cooperatives. Competition from cheaply produced foreign fruits and vegetables likely adds to

excess supply, reduces commodity prices, dampens

producer profitability, and likely cuts into the market

share of domestic cooperatives. However, grain cooperatives tend to be much less concerned with imports.

Comments on “labor” are more prevalent. Labor costs,

availability, and qualifications are identified as problematic, in that they increase costs and challenge both

producer and cooperative survivability. Cotton ginning responses highlighted the impacts of “weather”

on the reduction of local volumes, likely dampening

producer profitability, and cooperative survivability.

“Labor” problems have similar impacts on cotton ginning and grain marketing.

Size of Cooperative

The problems currently faced by management

were analyzed by size of cooperative, based on marketing and farm supply sales plus service receipts and

other income. This total is referred to as revenues.

For all cooperatives, the problem areas identified

most often were low commodity prices, the agricultural economy, operational problems, and increasing costs

(52.1 percent). Four additional areas—labor, low margins, competition, and weather—each accounted for at

least 5 percent of the responses.

“Low commodity prices” and the “agricultural

economy” were among the most frequently cited problems areas across size categories (tables 7 & 8). Only

cooperatives with revenues of $500 million and more

did not show both of these problem areas among their

most frequently cited concerns. Instead, they cited

“operational problems” (14.3 percent) and “increasing

costs” (10.7 percent) more frequently.

Cooperatives with revenues less than $10 million

showed greater prevalence of alternative problem sets.

“Increasing costs” responses were more frequent for

the very smallest cooperatives, less than $2 million in

revenue and those with $5 million to $9.9 million in

revenues. “Weather” was frequently cited by cooperatives with revenues of less than $5 million, but more

than $1 million. “Competition” responses were more

frequent for cooperatives with revenues of $4 million

to $4.9 million.

Cooperatives with revenues of $10 million or

greater showed less variability in responses offered.

“Low commodity prices,” “agricultural economy,”

“operational difficulties,” and “low margins” in some

combination were the most prevalent responses from

these larger organizations. However, “labor” responses were more prevalent for cooperatives with $15 mil12
13

Table 7—Co-ops' response to what management considered to be the major problem or issue facing their co-op the past year, by size of co-op,

2000-01

Major problem or issue

Cooperative sizeMillion dollars Number

Less than 1 - 13 11 1 - 1 1 5 14 4 37 19 6 1 8 7 3 131

1 - 1.9 6 20 6 - - - 1 5 19 6 25 8 5 - 16 2 7 1262 - 3.9 8 25 13 - 2 - 8 3 19 19 38 19 6 2 20 4 8 1944 - 4.9 3 18 11 - 2 - 6 3 5 6 23 8 2 - 12 1 3 1035 - 9.9 15 48 27 - 4 4 15 8 30 18 39 29 4 2 16 2 29 290

10 - 14.9 9 22 14 4 2 5 3 - 9 16 22 17 1 4 3 1 20 15215 - 24.9 3 20 10 1 5 7 7 3 14 20 35 17 4 4 11 2 19 18225 - 49.9 4 16 16 5 3 2 - 3 14 15 29 23 3 2 9 3 21 16850 - 99.9 - 9 3 3 1 - 3 - 6 17 10 13 1 1 2 3 5 77

100 - 499.9 - 6 3 - - 1 1 - 2 3 15 8 1 1 1 1 2 45500 and more - 2 2 2 - - 2 - 3 - 8 4 2 - - 2 1 28

—— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— ——

Total 48 199 116 16 19 20 47 30 135 124 281 165 35 17 98 28 118 1,496

Accounts receivable Agricultural economy Competition Consolidation Technology Genetically Modified crops Government regulations Government programs Increasing costs Labor Low commodity prices Operational Other Transportation Weather Members Low Margins Total
14 Table 8—Co-ops' total response to what management considered to be the major problem or issue facing their co-op the past year, by region of

the U.S., 2000-01

Major problem or issue

Cooperative sizeMillion dollars Number

Less than 1 - 9.9 8.4 0.8 - 0.8 0.8 3.8 10.7 3.1 28.2 14.5 4.6 0.8 6.1 5.3 2.3 100.0 

1 - 1.9 4.8 15.9 4.8 - - - 0.8 4.0 15.1 4.8 19.8 6.3 4.0 - 12.7 1.6 5.6 100.02 - 3.9 4.1 12.9 6.7 - 1.0 - 4.1 1.5 9.8 9.8 19.6 9.8 3.1 1.0 10.3 2.1 4.1 100.04 - 4.9 2.9 17.5 10.7 - 1.9 - 5.8 2.9 4.9 5.8 22.3 7.8 1.9 - 11.7 1.0 2.9 100.05 - 9.9 5.2 16.6 9.3 - 1.4 1.4 5.2 2.8 10.3 6.2 13.4 10.0 1.4 0.7 5.5 0.7 10.0 100.0

10 - 14.9 5.9 14.5 9.2 2.6 1.3 3.3 2.0 - 5.9 10.5 14.5 11.2 0.7 2.6 2.0 0.7 13.2 100.015 - 24.9 1.6 11.0 5.5 0.5 2.7 3.8 3.8 1.6 7.7 11.0 19.2 9.3 2.2 2.2 6.0 1.1 10.4 100.025 - 49.9 2.4 9.5 9.5 3.0 1.8 1.2 - 1.8 8.3 8.9 17.3 13.7 1.8 1.2 5.4 1.8 12.5 100.050 - 99.9 - 11.7 3.9 3.9 1.3 - 3.9 - 7.8 22.1 13.0 16.9 1.3 1.3 2.6 3.9 6.5 100.0

100 - 499.9 - 13.3 6.7 - - 2.2 2.2 - 4.4 6.7 33.3 17.8 2.2 2.2 2.2 2.2 4.4 100.0500 and more - 7.1 7.1 7.1 - - 7.1 - 10.7 - 28.6 14.3 7.1 - - 7.1 3.6 100.0

—— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— ——

Total 3.2 13.3 7.8 1.1 1.3 1.3 3.1 2.0 9.0 8.3 18.8 11.0 2.3 1.1 6.6 1.9 7.9 100.0

Accounts receivable Agricultural economy Competition Consolidation Technology Genetically Modified crops Government regulations Government programs Increasing costs Labor Low commodity prices Operational Other Transportation WeatherMembers Low Margins Total
lion to $24.9 million in revenues. “Increasing costs”

were cited with increased frequency by cooperatives

with $50 million to $99.9 million, and those with more

than $1 billion in revenues.

When these alternative problem sets—“increasing costs, weather, competition, and labor”— were

mentioned more frequently, such problems as “operational difficulties,” and/or “low margins” tended to

shift down. “Increasing cost” tended to shift up most

often, followed by “weather,” “competition,” and

“labor.” 

Relationships Among Problems: 

Size of Cooperative

“Low margins,” “increasing costs,” “low commodity prices,” and size of cooperative are all interrelated. If a cooperative is struggling with low margins,

margins can sometimes be improved by increasing

prices and/or lowering costs. Two of the most prevalent problems mentioned generally were “low commodity prices” and “low margins.” In a market of

pervasively low prices and thin margins, a rise in costs

can be particularly problematic. The cooperative can

not raise prices and will likely find it difficult to cut

costs in a larger climate of increasing costs. Even

maintaining margins may be difficult. These difficulties may be more ominous for smaller cooperatives. A

larger-size cooperative, struggling with low margins,

may be able to spread increasing costs over it’s greater

volume, thereby maintaining or improving its survivability. Smaller cooperatives have less room by volume

to spread costs, and in an environment of declining

prices, may find it more difficult to maintain margins.

“Weather” was also cited more frequently in the

smaller cooperatives. Weather problems reduced volumes, which compound difficulties of maintaining

margins. The “competition” problems of smaller cooperatives may only deepen these dynamics of size and

the disadvantages of smaller cooperatives.

Region of the Country

Problems faced by cooperative during the past

year were analyzed within 10 regions of the country—

Appalachian, Corn Belt, Delta States, Lake States,

Mountain, Northeast, Northern Plains, Pacific,

Southeast, and Southern Plains. The States included in

each region are shown as a footnote in tables 9 and 10.

The problem areas identified most often by all

cooperatives were “low commodity prices, the agricultural economy, operational problems, and increasing

costs.” Four additional areas—”labor, low margins,

competition, and weather”—were also cited.

With some reordering in frequency, these eight

problem areas were also found the most often cited

within each region. “Low commodity prices” and “the

agricultural economy” were among the most frequently mentioned in each region. However, “operational

problems” and “increasing costs” shifted down variously in each region, and at least one problem set—

”labor, weather, competition, and low margins”—shifted up in emphasis.

In the Corn Belt—”low commodity prices, the

agricultural economy, operational difficulties, and low

margins”—were the most frequently cited (49.9 percent of 303 responses). Price comments cited “low

grain, milk, and commodity prices,” and “low prices”

generally. “Agricultural economy” comments highlighted loss of volume due to reduced farm income,

farmers going out business, or farmers selling direct.

The impact of “low prices” and “agricultural economy” were reflected in “low margins” statements as—

”profitability, shrinking margins, total profitability of

business and customers, smaller market—cash flow.”

Comments about “operational difficulties” reflected

problems concerning survival strategies, e.g. “business

survival and profitability, merging two companies, to

stay profitable while providing value to the farmers

we serve, updating agronomy and grain services and

reducing our expenses by closing smaller branches to

meet larger farmer needs more competitively.” 

“Low margins” dropped in frequency, and out of

the first tier of problems cited, in the Northern Plains,

Pacific, Southeast, and the Appalachian regions.

For example, in the Northern Plains, both

“increasing costs,” and “labor,” replaced problems of

“low margins.” “Low commodity prices,” “agricultural economy,” “increasing costs,” and labor accounted

for 57.4 percent of the 328 problems cited. “Low

prices” and “agricultural economy” involved problems

similar to those cited in the Corn Belt region—

although problems with sugar prices were more evident, while milk prices were less so. The “increasing

costs” problem set predominantly involved “high

energy prices and high petroleum prices.” “Labor”

problems generally referred to availability of reliable

and qualified help, although cost of labor was also

cited. “Operational difficulties” were similar to Corn

Belt responses and referred to survival e.g.—“staying

profitable, finding home for poor quality grain, and

identifying and urging directors to pursue nontradi15
16 Table 9—Co-ops' total response to what management considered to be the major problem or issue facing their co-op the past year, by region of

the U.S., 2000-01

Major problem or issue

Region 1

Number

Appalachian 1 11 4 - - - - 5 2 7 10 11 1 - 5 3 2 62Corn Belt 11 39 23 6 7 18 8 - 22 31 32 43 7 4 14 1 37 303Delta States 3 8 6 - 2 - - 2 11 2 20 6 2 1 4 - 2 69Lake States 10 45 13 - 5 1 4 3 24 15 52 20 5 - 5 4 34 240Mountain 2 12 8 3 2 - 2 2 10 11 27 9 3 - - 3 5 99Northeast 1 8 9 1 - - 2 - 4 7 24 4 2 - 3 6 1 72Northern Plains 14 37 27 2 3 1 19 9 31 30 53 36 5 10 24 3 23 327Pacific 2 22 19 3 - - 6 6 17 7 25 23 4 2 5 6 5 152Southeast 2 4 3 1 - - - 1 3 1 6 4 2 - 8 2 2 39Southern Plains 2 13 4 - - - 6 2 11 13 32 9 4 - 30 - 7 133

—— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— ——

Total 48 199 116 16 19 20 47 30 135 124 281 165 35 17 98 28 118 1,496

1 Region and the States included:

Northeast ME, NH, VT, NY, MA, RI, Appalachian VA, WV, KY, TN, and NC

CT, PA, NJ, DE, MD, and DC Delta States MS, LA, and AR

Lake States MI, WI, and MN Southern Plains OK and TXCorn Belt OH, IN, IL, IA, and MO Mountain MT, ID, WY, CO, UT, NV,Northern Plains ND, SD, NE, and KS AZ, and NMSoutheast SC, GA, AL, and FL Pacific WA, OR, CA, HI, and AK

Accounts receivable Agricultural economy Competition Consolidation Technology Genetically Modified crops Government regulations Government programs Increasing costs Labor Low commodity prices Operational Other Transportation Weather Members Low Margins Total
17

Table 10—Co-ops' total response to what management considered to be the major problem or issue facing their co-op the past year, by region of

the U.S., 2000-01 

Major problem or issue

Region 

Percent of total

Appalachian 1.6 17.7 6.5 - - - - 8.1 3.2 11.3 16.1 17.7 1.6 - 8.1 4.8 3.2 100Corn Belt 3.6 12.9 7.6 2.0 2.3 5.9 2.6 - 7.3 10.2 10.6 14.2 2.3 1.3 4.6 0.3 12.2 100Delta States 4.3 11.6 8.7 - 2.9 - - 2.9 15.9 2.9 29.0 8.7 2.9 1.4 5.8 - 2.9 100Lake States 4.2 18.8 5.4 - 2.1 0.4 1.7 1.3 10.0 6.3 21.7 8.3 2.1 - 2.1 1.7 14.2 100Mountain 2.0 12.1 8.1 3.0 2.0 - 2.0 2.0 10.1 11.1 27.3 9.1 3.0 - - 3.0 5.1 100Northeast 1.4 11.1 12.5 1.4 - - 2.8 - 5.6 9.7 33.3 5.6 2.8 - 4.2 8.3 1.4 100Northern Plains 4.3 11.3 8.3 0.6 0.9 0.3 5.8 2.8 9.5 9.2 16.2 11.0 1.5 3.1 7.3 0.9 7.0 100Pacific 1.3 14.5 12.5 2.0 - - 3.9 3.9 11.2 4.6 16.4 15.1 2.6 1.3 3.3 3.9 3.3 100Southeast 5.1 10.3 7.7 2.6 - - - 2.6 7.7 2.6 15.4 10.3 5.1 - 20.5 5.1 5.1 100Southern Plains 1.5 9.8 3.0 - - - 4.5 1.5 8.3 9.8 24.1 6.8 3.0 - 22.6 - 5.3 100

—— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— ——

Total 3.2 13.3 7.8 1.1 1.3 1.3 3.1 2.0 9.0 8.3 18.8 11.0 2.3 1.1 6.6 1.9 7.9 100

Accounts receivable Agricultural economy Competition Consolidation Technology Genetically Modified crops Government regulations Government programs Increasing costs Labor Low commodity prices Operational Other Transportation Weather Members Low Margins Total
tional income opportunities.” However, unlike Corn

Belt concerns, comments about mergers and farmers

going out of business were less prevalent.

In the Pacific region “competition” replaced

“low margins” as one of the most prevalent comment

areas. “Low commodity prices,” “operational difficulties,” “agricultural economy,” and “competition”

accounted for 58.5 percent of the 158 responses. “Low

prices” in general and specifically for “almonds, sugar,

cotton, and grain” were cited. However, the predominant comment was on prices of various kinds of fruit.

Comments in the agricultural economy included

citations on “loss of local production,” “less farmers,”

“lack of disposable income from farmers,” and problems in the “worldwide economy. “Operational difficulties” tended to be generalized comments that

included: “working capital,” “poor management of coop,” “increasing sales,” “growth,” and “unstable interest rates,” plus “improving the return to member

growers.” “Competition” comments predominantly

involved import issues, and included such comments

as “foreign importation of cotton seed,” “the domestic

sales of Southern Hemisphere pears,” “flower

imports,” “competition from other countries,” plus

“market competition” and “competition from large

national dealers in the retail business.” There were

only five comments on “low margins” and two of

these referred to competition—“declining margins due

to increased competition.” 

In the Southeast region, “weather” (drought)

replaced “low margins” as one of the areas of greatest

concern. “Weather,” “low commodity prices,” “agricultural economy,” and “operational difficulties” accounted for 56.5 percent of the 39 responses. However, no

single problem area—including “weather”—garnered

more than 8 responses.

In the Appalachian region, “the agricultural

economy,” “operational difficulties,” and “low commodity prices,” accounted for 51.5 percent of the 62

responses. Price comments referred to “low commodity prices” generally, but also low prices for grain, milk,

beef, and wool. “Agricultural economy” comments

were similar to those from other regions and included:

“declining cow numbers,” “declining numbers of

dairymen and hog producers,” “loss of farmland to

development,” and “shrinking farm economy.”

“Operational” problems related to cooperative survival—“seeking financial means to expand physical

facilities,” “equity management, growth management,” “market challenges created due to industry

consolidation,” and “lack of income producing

sales/service growth.” No other problem area

accounted for more than 7 responses.

In the Lake States, “operational difficulties”

dropped in frequency and out of the first tier of problems cited. “Low commodity prices,” “agricultural

economy,” and “low margins,” accounted for 54.7 percent of the 240 responses. “Increasing costs,” was a

fourth problem, garnering an additional 10.1 percent

of the responses.

As in other regions, “low prices” was offered

generally as a problem, although “low milk prices”

predominated. There were also low prices comments

for “sugar, apples, and grain.”

Responses on the “agricultural economy” were

similar to other regions—“farmers going out of business,” “low farm income,” “decreasing farm numbers

and a consolidating industry, thus resulting in a significant loss in our customer base.” “Low margins” was

offered more frequently, than “operational” or

“increasing costs” issues. Although “increasing costs”

concerns were more evident than “operational concerns” and predominantly reflected problems with

“high energy” and “high fuel prices.”

Both “operational difficulties” and “low margins” dropped in frequency, and out of the first tier of

problems cited in the Southern Plains, Delta,

Mountain, and Northeast regions.

In the Southern Plains, “low commodity prices,”

“weather,” and “the agricultural economy” accounted

for 56.5 percent of the 133 responses. “Cotton” and

“cottonseed prices” were frequently mentioned, along

with “low grain prices.” “Weather” comments related

to “drought and low prices for commodities produced.” The “agricultural economy” comments were

similar to other regions, e.g.,“not enough profit to the

farmer” and “lack of farmer production”—although

there were fewer comments on farmers going out of

business. No other problem area drew more than 9

comments.

“Operational problems” and “low margins”

dropped in frequency, and from the first tier of cited

problems in Delta region. “Low commodity prices,”

“increasing costs,” and “agricultural economy”

accounted for 56.5 percent of the 69 responses.

However, the “agricultural economy” garnered just 8

responses. Concerns were typical of the other regions,

i.e. “farmers going out of business,” “decrease in production,” and “farm industry declining.” Among the

20 “low prices” comments, areas most commented on

were: “cottonseed prices,” “grain prices,” “low wool

prices,” and “poor prices” generally. “Increasing cost”

18
comments addressed such concerns as “cost of supplies,” “high fuel prices,” “increasing labor costs,” and

“holding down expenses.”

“Low commodity prices,” “the agricultural economy,” and “labor” accounted for 50.5 percent of the 99

Mountain region responses. “Increasing costs”

accounted for an additional 10 responses. Comments

on price included “low prices” and “low sugar, milk,

and wool prices.” The 12 “agricultural economy”

comments addressed “loss of acreage and farmers,”

“depressed state of the entire ag economy,” “customer’s cash flow problems.” Lack of qualified labor

also was a concern.

“Low prices,” “competition,” and the “agricultural economy” accounted for 55.5 percent of the 72

responses from the Northeast. Most comments cited

“low commodity prices” and “milk prices” as most

prevalent. “Competition” with 9 responses mentioned

“oversupply of imports,” “Canadian competition,”

“and the “lack of wool buyers.” No other problem

area garnered more than 9 responses.

Relationship Among Problems: Region

“Low commodity prices, and agricultural economy” were among the most frequently cited problems

across each region. “Operational problems, low margins, labor, weather, competition, and increasing costs

also were cited, depending upon the region. Pervasive

low commodity prices and a declining agricultural

economy (and declining volumes) set a continuing

context for most agricultural cooperatives in all

regions.

Cooperatives must maintain positive margins to

survive. “Margins” tend to reflect the culmination of

many forces impinging on the cooperative, both from

within as well as outside of the organization. When

businesses must accept low prices, they may decrease

costs, spread margins over greater volumes, improve

productivity, and make operational adjustments, e.g.,

develop other products, expand sales, merge and consolidate, control inventory, and/or improve efficiency.

How easily a firm may make some of these adjustments is in turn affected by its competition.

Beyond low prices and a declining agricultural

economy, Corn Belt respondents identified low margins and operational difficulties as frequent concerns.

Northern Plains respondents cited increasing costs and

the costs and productivity of labor. Competition and

operational difficulties were among the most often

mentioned in the Pacific region. In the Southeast

region, weather and operational difficulties were most

evident. In the Appalachian region, it was operational

difficulties, low margins were frequently cited in the

Lake States, weather in the Southern Plains, increasing

costs in the Delta region, labor in the Mountain States

region, and competition in the Northeast.

Summary of Problems

Identified—Past year

Cooperatives identified low commodity prices as

the predominant and major problem during their most

recent year of operation (2000.) Low commodity

prices were understood as due to excess supply from

domestic production as well as expansion of cheaply

produced foreign imports. Producer survivability was

understood as compromised by these low prices,

increasing costs, and reductions in local volumes due

to weather and insect damage.

These conditions force some farmers out of business, while others leave due to urbanization and retirement. Many seek to stay in farming by expanding the

size of their production units, buying over the internet,

contracting with cooperatives and investment firms,

seeking better deals from cooperatives, and selling

direct to terminals. These conditions challenge cooperative survivability. Cooperatives must contend with

low market prices in highly competitive markets,

increasing costs, and reduced local volumes due to

farmers going out of business, farmer contracting with

investment firms, and farmers bypassing local cooperatives and going direct to terminals.

This context contributes to various cooperative

operational problems—marketing, finance, debt,

improving efficiency and growth. Some cooperatives

attempt to survive by seeking to retain and expand

their business volumes, helping farmer-members stay

in business, seeking new members, and making organizational changes. Others may be forced to close.

Many cooperatives make organizational changes,

increase scale and build storage facilities. Some consolidate and/or close smaller branches, while others

increase the number of operating locations. Some seek

inter-organizational relationships via mergers, joint

ventures, and strategic alliances.

These dynamics are occurring within the context

of concentrating markets and the deepening power

and increasing scale of competing multinational firms.

Market shares become more precious as firms compete

for the volume and sales of a smaller number of larger

farms.

19
Problems and Issues—Near Future

There were 1,128 responses to the question (36.9

percent): “What does your management see as the

major problem or issue facing your cooperative in the

next year or two?” The same categories as in “past

year” were used. The character of the responses

changed little from “past year” to the “near future.”

What did change was the order of frequency in the

responses—“agricultural economy” became more

prevalent and “low commodity prices” were less

emphasized.

This section presents “near future” responses for

all cooperatives, and cooperatives sorted by principal

product, major function, size of cooperative, and

regional location. Comparisons are made to “past

year” responses.

All Cooperatives

The “agricultural economy, low commodity

prices, operational problems, and increasing costs”

were the most frequently mentioned problems managers see facing their cooperative in the near future

(nearly 53.4 percent of the 1,565 responses) (table 11).

The “agricultural economy” was identified most often

(17.8 percent) as the major problem cooperative management expected to face in the near future. Low commodity prices (15.5 percent), operational problems

(10.2 percent), and increasing costs (9.9 percent) were

next.

A second tier of major problem areas included

“competition, low margins, and labor” and ranged

from 8.7 percent to 7.2 percent of the comments. Other

comments cited were “weather, accounts receivable,

Government regulations, Government programs, and

members” but each accounted for less than 5 percent

of the total number of responses.

The character of responses offered for “the next

year or two” (the near future) varied little from those

given for “the past year.” However, the frequency of

responses offered shifted (table 1 and table 11).

“Low commodity prices” was cited less often,

moving from 18.8 percent to 15.5 percent of the

responses, while “the agricultural economy” shifted

up to 17.8 percent from 13.3 percent. Respondents may

have been hopeful of better prices in the future,

although continued to be aware of ongoing structural

concerns—“the continuing trend toward larger farmers,” “lack of production,” and “increase of large integrated livestock companies.” Similar to “prices,”

20

Table 11—Problems cooperative management sees facing them in the near future, 2001-02

Problem or issue Cooperatives Responses1

Number Number Percent

Agricultural economy 220 278 17.8

Low commodity prices 175 242 15.5

Operational 136 159 10.2

Increasing costs 89 155 9.9

Competition 99 136 8.7

Low margins 87 113 7.2

Labor 71 113 7.2

Weather 42 61 3.9

Technology 36 54 3.5

Government regulations 33 55 3.5

Government programs 21 36 2.3

Accounts receivable 21 35 2.2

Other 28 34 2.2

Members 22 32 2.0

Consolidation 17 25 1.6

Genetically modified crops 19 22 1.4

Transportation 12 15 1.0 ——— ——— ———

Total 1,128 1,565 100.0

1 A number of cooperatives reported more than one problem. The second and third problems listed were included in the total responses.

Respondents were not asked to give any priority or ranking to the problems reported.
respondents may be hopeful of better “weather.”

Weather concerns accounted for less than 5 percent of

the “near future” responses.

Respondents showed less frequent concern with

prices and the weather, more frequent acknowledgement of major structural difficulties of the agricultural

economy, and greater concern about “competition.”

However, “low commodity prices, agricultural economy, operational difficulties, increasing costs, labor, low

margins, competition,” and “weather problems” were

expected to continue in the “near future”—although

“weather” less so.

Cooperative Function

Near-future problems are presented for marketing, farm supply, and related-service cooperatives.

Marketing Cooperatives

Four problem sets—”low commodity prices, agricultural economy, operational difficulties, and competition”—accounted for 53.5 percent of the 733 responses (table 12). “Increasing costs,” “labor,” and “low

margins” were cited as additional problems areas

(each accounted for at least 5 percent of the responses).

These 7 problem sets were the same “near future”

problems identified by all cooperatives (table 11). They

were also similar to the “past year” concerns of marketing cooperatives, although “increasing costs” shifted to a much more frequent worry of the “near future”

(table 2, table 12). As with all cooperatives, concerns

with the “agricultural economy” gained greater prominence, although “low commodity prices” remained of

paramount concern.

When marketing-cooperative respondents shifted

their focus from “previous year concerns” to the “near

future,” they found the same general issues troublesome, but gave greater acknowledgement to the “agriculture economy” and “increasing costs.” These shifts

in focus have occurred in a context of “low commodity

prices.” “Low commodity prices” coupled with expectations of “increasing costs” may in turn contribute to

worries of “low margins.” These concerns are likely

deepened with worries about “competition,” and may

shift respondent focus to such concerns as “operational” strategies as “increase sales and decrease

expenses,” “keeping our market share,” “growth,”

“diversifying the cooperative,” and “improving efficiency.”

21

Table 12—Problems management sees facing marketing cooperatives in the near future, 2001-02

Problem or issue Cooperatives Responses1

Number Number Percent

Low commodity prices 94 122 16.6

Agricultural economy 71 101 13.8

Operational 81 91 12.4

Competition 60 76 10.7

Increasing costs 26 50 6.8

Labor 28 43 5.9

Low margins 33 40 5.5

Weather 21 32 4.4

Technology 20 28 3.8

Members 18 25 3.4

Government programs 15 23 3.1

Government regulations 15 22 3.0

Genetically modified crops 18 21 2.9

Other 19 20 2.7

Consolidation 12 16 2.2

Transportation 12 15 2.0

Accounts receivable 4 8 1.1 ——— ——— ———

Total 547 733 100.0

1 A number of cooperatives reported more than one problem. The second and third problems listed were included in the total responses.

Respondents were not asked to give any priority or ranking to the problems reported.
Farm Supply Cooperatives

“The agricultural economy,” “low commodity

prices,” “increasing costs,” and “low margins” were

the most frequently cited problems (57.1 percent of the

690 responses) on “near future” concerns (table 13).

The predominant concern was the “agricultural economy.” The character of the responses differed little from

those cited for “previous year,” e.g., “loss of farmland,

poor agricultural economy and shrinking market, the

way farming is quickly slipping away.” However,

more than one-quarter (26.2 percent) of the supplycooperative responses were of this problem area. The

second most prevalent area, “low commodity prices,”

accounted for just 12.9 percent. These cooperatives

were keenly aware of and frequently acknowledged

the structural difficulties of the larger agricultural

economy and anticipated that as a continuing problem.

Within the context of a “declining agricultural

economy,” continuing “low commodity prices,” as

well as “increasing input and energy costs,” these

cooperatives anticipated “low margins” and “operational difficulties.” Anticipated “competition” and

problems with “cost and availability of labor” would

likely deepen “low margins” and “operational” problems.

While emphases varied, and with the exception

of “weather” and “accounts receivable,” these results

differed little from “past year” responses (table 3).

“Weather” drew just 2 percent of “near future” problems, versus 5.8 percent of “past year” concerns.

“Accounts receivable” dropped from 5.3 percent of

“past year” comments, to 3.6 percent of the “near

future” ones. Better weather and fuller payments may

be anticipated.

The predominance of “agricultural economy”

comments, suggests these cooperatives anticipate

deepening and continuing structural problems. “Low

commodity prices” was mentioned less frequently as a

future problem (12.9 percent versus 15.3 percent).

“Low commodity prices” may seem of less direct concern—although important—when anticipating the

future than a continued decline in the number of

farmer-members capable of making purchases.

Related-Service Cooperatives

Five problem sets—“low commodity prices, agricultural economy, increasing costs, labor, and operational difficulties”—accounted for 59.9 percent of the

142 responses from service cooperatives (table 14). One

additional concern—”weather”—garnered 13 responses. The same problem areas were identified for both

22

Table 13—Problems management sees facing farm supply cooperatives in the near future, 2001-02

Problem or issue Cooperatives Responses1

Number Number Percent

Agricultural economy 133 154 22.3

Low commodity prices 60 89 12.9

Increasing costs 48 80 11.6

Low margins 52 71 10.3

Labor 34 58 8.4

Operational 46 56 8.1

Competition 35 55 8.0

Technology 16 26 3.8

Government regulations 15 26 3.8

Accounts receivable 16 25 3.6

Weather 10 14 2.0

Government programs 6 11 1.6

Other 7 11 1.6

Consolidation 5 9 1.3

Members 3 4 0.6

Genetically modified crops 1 1 0.1

Transportation - - - —— —— —-—

Total 487 690 100.0

1 A number of cooperatives reported more than one problem. The second and third problems listed were included in the total responses.

Respondents were not asked to give any priority or ranking to the problems reported.
past and future periods. However, the frequency of the

comments varied between past and future (table 14,

table 4).

“Low commodity prices” was predominant in

both periods. However the “agricultural economy”

shifted from 9 percent of “past year” comments to 16.2

percent of “near future comments. This is a shift from

the sixth most frequent comment, to second.

“Weather” dropped from 13.9 percent of the comments, to 9.2 percent, and is a shift from second to

sixth.

In providing daily services, cooperatives may be

most troubled by prices, disruptions of the weather

and labor difficulties. When they contemplate the

“near future,” impacts from, “decline in the number of

farmers and farmland,” “reductions in volume,” and

“low farm income” may seem more imminent and

troublesome.

Relationships Among Problems: 

Cooperative Function

“Near future” problems were similar to “past

year” concerns although they differed in order of frequency. While less prevalent, “low commodity prices”

continued to be a predominant problem for marketing,

farm supply, and related-service cooperatives. More

evident were concerns about the declining agricultural

economy, loss of farmers, farmland, and production.

Marketing cooperatives more frequently cited

“operational difficulties” and “competition.” In a context of low prices, declining numbers of farmers and

production, marketing cooperatives may plan to

expand sales and markets, recruit new and larger

members, or at a minimum, maintain current market

share. Intense competition from larger organizations,

such as ADM and Cargill, as well as large cooperatives, may make these plans difficult, and raise various

other “operational” questions for future survival.

As with marketing, farm supply cooperatives frequently identified “agricultural economy”, and “low

prices.” However, farm supply cooperatives commented on “low margins” more often, rather than on

“operational” and “competitive” concerns. With farmers going out of business, low prices, and farmers not

able to pay bills, many supply cooperatives may not be

able to maintain margins—“loss of sales, lacking of

earnings in the agricultural industry and high cost of

products for resale.” 

Related-service cooperative respondents also

identified “low prices,” and the “agricultural economy,” but also “increasing costs” as major problems.

With low prices and a history of declining volumes

due to poor weather, as well as losses in farming,

respondents may most often worry about increasing

costs.

With marketing and supply functions, various

tensions between the environment of the cooperative

and its organization become evident. With marketing

cooperatives, respondents identified “operational difficulties” (and adjustments) within a larger context of

the “agricultural economy,” “competition,” and “low

prices.” With farm supply cooperatives, respondents

23

Table 14—Problems management sees facing related-service cooperatives in the near future, 2001-02

Problem or issue Cooperatives Responses1

Number Number Percent

Low commodity prices 21 24 16.9

Agricultural economy 16 23 16.2

Increasing costs 15 19 13.4

Labor 9 19 13.4

Operational 9 18 12.7

Weather 11 13 9.2

Government regulations 3 7 4.9

Competition 4 5 3.5

Other 2 4 2.8

Members 1 4 2.8

Low margins 2 4 2.8

Accounts receivable 1 2 1.4 —— —— —-—

Total 94 142 100.0

1 A number of cooperatives reported more than one problem. The second and third problems listed were included in the total responses.

Respondents were not asked to give any priority or ranking to the problems reported.
identified “low margins” within a larger context of the

“agricultural economy” and “low commodity prices.”

Related-service cooperative respondents cited low

prices, agricultural economy, and increasing costs. All

three are external to the firm, although the prevalence

of “increasing costs” suggests “costs” are particularly

worrisome for many respondents. When respondents

shifted focus to the “near future,” larger structural

comments became more prevalent.

Type of Cooperative

This section examines specific marketing and service cooperatives more closely in assessing how managers responded to the question: “What does your

management see as the major problem or issue facing

your cooperative in the next year or two (near

future)?” This presentation is limited to those types of

cooperatives —grain, fruit and vegetables, dairy, wool,

and cotton ginning—that offered at least 10 comments

in any problem area.

Grain Cooperatives

Five major problem areas were identified by 51.5

percent of the 431 respondents—“agricultural economy, operational difficulties, low commodity prices,

increasing costs, and competition” (table 15). Four

additional problem areas—“low margins, labor, technology, and weather”—each accounted for at least 5

percent of the responses. These are the same problem

areas that were identified in “the past year” grain comments, with the exception of “technology.” It accounted for 6.3 percent of the “near future” responses, versus just 1.9 percent of “past year” comments.

However, the order of frequency between “past

year” and “near future” comments differed.

“Operational difficulties” (11.8 percent) and “low commodity prices” (11.4 percent) were the most prevalent

comments in both periods (table 15, table 5, table 6).

“Low margins,” “labor,” and “weather” comments

shifted down in frequency when grain respondents

considered the “near future.” They accounted for 7.9,

7.7, and 5.6 percent, respectively, of the 431 “near

future” responses, and 9.5, 10.4, and 7.5 percent,

respectively, of the 412 “past year” responses. Having

survived a drought, respondents may be more hopeful

of better weather, or at least less immediately concerned about next year’s weather. “Low margins” may

follow a similar pattern. Grain respondents more often

expressed concerns about influences on future margins

(e.g., increasing costs) and less frequently on “mar24

Table 15—Problems management sees facing grain marketing cooperatives in the near future, 2001-02

Problem or issue Cooperatives Responses1

Number Number Percent

Agricultural economy 40 51 11.8

Operational 45 51 11.8

Low commodity prices 34 49 11.4

Increasing costs 18 36 8.4

Competition 26 35 8.1

Low margins 27 34 7.9

Labor 22 33 7.7

Technology 19 27 6.3

Weather 16 24 5.6

Genetically modified crops 18 21 4.9

Government regulations 9 15 3.5

Government programs 7 13 3.0

Transportation 10 13 3.0

Consolidation 6 9 2.1

Members 7 8 1.9

Accounts receivable 3 7 1.6

Other 5 5 1.2 —— —— —-—

Total 312 431 100.0

1 A number of cooperatives reported more than one problem. The second and third problems listed were included in the total responses.

Respondents were not asked to give any priority or ranking to the problems reported.
gins” themselves. Moving up in frequency, to accompany the continued prevalence of “low prices” and

“operational difficulties,” were the “agricultural economy,” “increasing costs,” and “competition.” They

accounted for 11.8, 8.4, and 8.1 percent, respectively, of

the “near future” responses, and 8.5, 6.1, and 7.3 percent, respectively, and “past year” responses.

Summary

In a market of pervasively low prices, increasing

costs can be particularly problematic for maintaining

or improving margins. Problems with “competition”—

“multi-national corporations gaining market share,”

“regionalization and multinational takeovers,” “farmers going direct,” “competition with larger commercial

grain firms (ADM, Cargill)”—can deepen these difficulties, as cooperatives struggle for market share and

the ability to “price goods and services competitively.” 

These dynamic problems occur in a context of an

agricultural economy of “bigger farms and fewer farmers, who don’t shop locally, declining net farm income,

and declining customer base due to farm consolidation.” Identified “operational problems” mention

“survival” and such strategies for survival as “capture

more nonmember business, diversifying the cooperative, finding demand, possible merger, and recognizing what we do well and being the best at it.” In anticipation of the “near future,” comments emerge such as

“keeping abreast of all new technology, adapting to

Internet trading, GMO segregation, and biotechnology.”

Fruit and Vegetable Cooperatives

Among fruit and vegetable cooperatives, ”operational difficulties, the agricultural economy, competition, and low commodity prices,” accounted for 65

percent of the 100 responses (table 16). No other problem area garnered more than 5 responses.

When asked to consider the “near future” rather

than “the previous year” (table 5), respondents identified the same four problem areas, but with some shifting in how often problem areas were cited. While “low

commodity prices” was most frequently mentioned for

“the past year” (20.4 percent of responses), it was less

predominant when respondents anticipated the “near

future”—accounting for 15 percent of the responses.

The “agricultural economy” was shifted upwards,

accounting for 17 percent of the anticipated problems,

but just 12.9 percent of “past year” problems.

Summary

Fruit and vegetable cooperatives cited “low commodity prices” as an anticipated concern in the near

future. However, such “agricultural economy” concerns as “loss of local production, holding onto

remaining farms and farmers, and continuing to balance the supply and demand for cherries” were more

25

Table 16—Problems management sees facing fruit and vegetable cooperatives in the near future, 2001-02

Problem or issue Cooperatives Responses1

Number Number Percent

Operational 17 18 18.0

Agricultural economy 9 17 17.0

Competition 14 15 15.0

Low commodity prices 8 15 15.0

Consolidation 4 5 5.0

Labor 2 5 5.0

Members 4 5 5.0

Increasing costs 2 4 4.0

Low margins 4 4 4.0

Government regulations 3 3 3.0

Other 3 3 3.0

Weather 3 3 3.0

Transportation 2 2 2.0

Government programs - 1 1.0 —— —— —-—

Total 75 100 100.0

1 A number of cooperatives reported more than one problem. The second and third problems listed were included in the total responses.

Respondents were not asked to give any priority or ranking to the problems reported.
frequently offered. “Near future” respondents considered the “agricultural economy” and “operational difficulties” more frequently than other concerns,

although “low commodity prices” and “competition”

continued to be frequent issues or worries.

Dairy Cooperatives

Two problem areas—“low commodity prices and

the agricultural economy”—accounted for 54 percent

of the 78 responses offered by dairy marketing cooperatives. “Low commodity prices” was the predominant

concern (29 responses or 37.2 percent of the citations).

The “agricultural economy” accounted for 11 or 14.1

percent of the responses. No other problem was mentioned more than 9 times. This represents a slight shift

for respondents when considering the “past year”

(table 5) versus the “near future” (table 17).

Summary

“Low commodity prices” was the predominant

concern for both sets of respondents. However, comments on the “agricultural economy,” e.g., “keeping

farmers in business,” were more evident. The immediate impact of “poor dairy prices” over the past year

likely left little room for other considerations.

Respondents contemplated “low prices” would continue, along with problems of a “declining agricultural

economy.”

Wool Cooperatives

Wool cooperatives were the only other marketing

cooperatives that provided more than 10 comments in

a single category. The predominant issue identified

was “low commodity prices” (table 18). Of the 33

responses, 13 or 39.4 percent were on “low wool commodity prices.” The predominant “price” comment

was “wool prices,” although some responses were

linked to larger structural concerns—“low prices and

producers selling out.”

Cotton Ginning

When cotton ginning cooperatives were asked to

consider the “near future” rather than “the previous

year,” they identified three problem areas—“low commodity prices, increasing costs, and weather” (56

responses or 55.7 percent of the 97 responses offered)

(table 19). The “agricultural economy” accounted for

an additional 12 responses (12.4 percent) and “labor,”

10 comments (10.3 percent of the 97 responses).

Past year responses (table 5) focused on “low

prices, weather, and labor,” with “low prices” the predominant concern. These same concerns were expected

to continue in the “near future,” particularly “low

commodity prices.” However, “increasing costs” and

the “agricultural economy” shifted up in prevalence.

Summary

Concerns of cotton ginning cooperatives were

focused on various difficulties related to low volumes,

as well as “increasing costs,” and “low prices,” both in

the “past year” and “near future.” A business can

compensate for “low prices” by minimizing costs

and/or expanding volume. “Weather” reduces volume, and “labor” concerns can increase costs

26

Table 17—Problems management sees facing dairy cooperatives in the near future, 2001-02

Problem or issue Cooperatives Responses1

Number Number Percent

Low commodity prices 26 29 37.2

Agricultural economy 8 11 14.1

Operational 8 9 11.5

Members 5 8 10.3

Competition 5 6 7.7

Increasing costs 3 6 7.7

Other 4 4 5.1

Government programs 3 3 3.8

Consolidation 2 2 2.6 —— —— —-—

Total 64 78 100.0

1 A number of cooperatives reported more than one problem. The second and third problems listed were included in the total responses.

Respondents were not asked to give any priority or ranking to the problems reported.
(although quality of labor was also an issue.) When

respondents turned to the “near future,” the issues of

the agricultural economy involved comments on volume—“decrease cotton acres, decrease in production,

and keeping farmers in business.” Anticipated

“increasing cost” concerns predominantly focused on

“fuel costs.” When respondent focus shifted from past

to future, problems of the agricultural economy (loss

of potential volume) became more prominent. And

fuel costs, as an “increasing cost” problem, became

more evident as well.

Relationships Among Problems: 

Cooperative Type

Various tensions between the cooperative environment and the cooperative organization become evident with these comments. When respondents shift

their focus from past to future, the fixity of some of

their concerns loosens, although other limits come into

greater focus. When grain cooperatives considered the

past year, they commented on the difficulties of “operations (and operational adjustments)” in a context of

27

Table 18—Problems management sees facing wool cooperatives in the near future, 2001-02

Problem or issue Cooperatives Responses 1

Number Number Percent

Low commodity prices 12 13 39.4 

Competition 4 8 24.2

Agricultural economy 2 5 15.2

Operational 3 3 9.1

Increasing costs - 1 3.0

Other 1 1 3.0

Weather - 1 3.0

Low margins 1 1 3.0 —— —— —-—

Total 23 33 100.0

1 A number of cooperatives reported more than one problem. The second and third problems listed were included in the total responses.

Respondents were not asked to give any priority or ranking to the problems reported.

Table 19—Problems management sees facing cotton ginning cooperatives in the near future, 2001-02

Problem or issue Cooperatives Responses 1

Number Number Percent

Low commodity prices 18 25 25.5

Increasing costs 8 17 17.3

Weather 10 14 14.3

Agricultural economy 8 13 13.3

Labor 7 10 10.2

Operational 6 8 8.2

Government regulations 3 4 4.1

Competition 1 2 2.0

Government programs - 2 2.0

Accounts receivable - 1 1.0

Other - 1 1.0

Low margins 1 1 1.0 —— —— —-—

Total 62 98 100.0

1 A number of cooperatives reported more than one problem. The second and third problems listed were included in the total responses.

Respondents were not asked to give any priority or ranking to the problems reported.
“low commodity prices,” and a lack of “quality labor,”

in a year ending in “low margins.” The margins of a

past year are fixed.

When focus shifted to the future, respondents

mentioned “low margins” less often and more frequently cited aspects of doing business that affect

“margins” directly, e.g., the worry of “increasing

costs.” “Operational considerations remain,” as does

an understanding of an environment with “low commodity prices.” 

Mentioned more frequently were the structural

considerations and limits represented by a declining

“agricultural economy” and increased “competition.”

Respondents focused on various “operational problems” and adjustments, within a context of “low commodity prices,” a declining “agricultural economy,” as

well as “increasing costs,” and greater “competition.”

Consequent “operational” adjustments included “marketing, finance, debt management, improving efficiency, seeking new members, improving returns to members” and such organizational changes as

“consolidation, merger, joint ventures, and strategic

alliances.”

Respondents from fruit and vegetable cooperatives followed a similar pattern. For the “past year”

considerations, they identified various “operational

difficulties” in a context of “low commodity prices”

and “competition.” For the “near future,” they augmented these latter considerations with structural

comments on the larger “agricultural economy.” Dairy

marketing cooperatives primarily mentioned past

“prices,” but broadened to the “agricultural economy”

when shifting to the future. “Weather” and “prices”

were primary considerations for cotton ginning cooperatives, both in the past and near future. However,

when focus shifted to the future, comments on the

“agricultural economy” as related to declining volumes, became more prominent.

Size of Cooperative

Near future problems faced by cooperatives were

analyzed by size of cooperatives. Size measures were

based on marketing or farm supply sales plus service

receipts and other income. This total will be referred to

as revenues.

For all cooperatives, problems most frequently

anticipated for the “near future” included “the agricultural economy, low commodity prices, operational

problems, and low margins” (54.2 percent of all “near

future” comments). Responses in three additional

areas were cited—“increasing costs, competition, and

labor”—and ranged from 8.8 percent for “increasing

costs,” to 6.7 percent for “labor.” “Weather, technology, Government regulations, accounts receivable, and

members” were also cited but each accounted for less

than 5 percent of the total number of responses.

These same problem areas—“the agricultural

economy, low commodity prices, operational problems, and low margins” were the most prevalent concerns for cooperatives with revenues in the mid-range

sizes (table 20 and 21). For cooperatives with revenues

between $25 million and $49.9 million, the “agricultural economy, low commodity prices, operational problems, and low margins” accounted for 92 citations, or

51.1 percent of the 180 responses offered in this category. Cooperatives with revenues between $15 million

and $24.9 million identified these same four problem

areas plus “increasing costs.” There were 194 responses from these latter cooperatives. “Agricultural economy, low commodity prices, operational problems, low

margins, and increasing costs” accounted for 106 statements, or 54.6 percent of the responses for that size

range.

Different combinations of problems were reported from organizations larger and smaller than these

mid-size cooperatives. However the “agricultural

economy” and “low commodity prices” were the most

anticipated problems for nearly all size categories

(table 21). “Low commodity prices” was among the

most frequently cited for each size, except cooperatives

with $100 million to $499.9 million and with $1 billion

or more in revenues. For cooperatives with revenues of

$100 million to $499.9 million, only 47 responses were

offered in total. With the exception of the “agricultural

economy,” no problem area drew more than 9 responses in this size category. For cooperatives with revenues

of $1 billion or more, only 10 responses were offered in

total, and no individual problem area drew more than

3 comments.

“Operational problems and low margins” were

not as consistently present across sizes, as were “low

prices” and “agricultural economy.” For the smallest

cooperatives (revenues of less than $1 million), “low

margins” garnered just 2 of the 136 responses. The

“agricultural economy, low commodity prices, and

operational difficulties” accounted for 82 statements,

or 53 percent of the responses. The fourth most often

anticipated problem was “competition,” garnering 16

statements or 11.8 percent of the responses.

For cooperatives with revenues between $1 million and $1.9 million, $2 million and $3.9 million, $4

million and $4.9 million, both “low margins and oper28
ational difficulties” shifted down in frequency, while

“increasing costs” shifted up. The “agricultural economy, low commodity prices, and increasing costs”

accounted for 51.6 percent of the 130 responses from

cooperatives with revenues from $1million to $1.9 million, 50.7 percent of the 203 responses from cooperatives with revenues from $2 million to $3.9 million,

and 56.6 percent of the 113 responses from cooperatives with revenues from $4 million to $4.9 million. 

Cooperatives with revenues between $5 million

and $9.9 million showed a similar response pattern.

The most often cited problems anticipated in the “near

future” were the “agricultural economy, low commodity prices, and increasing costs,” accompanied by “low

margins.” These traits accounted for 169 of the 301

responses, or 56.2 percent.

In smaller size categories ($1 million to $9.9 million) where “operational difficulties” and/or “low

margins” drew less attention, “increasing costs” problems gained more focus. In mid-size cooperatives ($10

million to $14.9 million), where “operational difficulties” and/or “low margins” again were of less concern,

“competition and labor” gained greater focus. The

“agricultural economy, competition, low commodity

prices, and labor” accounted for 82 of the 152 responses, or 54 percent. “Labor and competition” were more

often a concern than “operational difficulties and low

margins.”

“Labor” concerns were also cited more often for

cooperatives with revenues between $50 million and

$99.9 million (14 of 83 comments or 16.9 percent).

Problems of “operational difficulties” drew 10 of 83

citations or 12 percent. No other problem area garnered more than 9 comments.

There were relatively few comments from the

very largest cooperatives, i.e., those with revenues of

$100 million or more. Of the 47 responses for cooperatives with revenues between $100 million and $499.9

million, 10 (21.3 percent) concerned the “agricultural

economy.” No other problem area in this size range

drew more than 9 comments. For cooperatives with

revenues of $500 million or more, no problem area

drew more than 3 comments.

Relationships Among Problems: Size

The frequency of citations for each category of

responses for the “near future” were similar to those

from the “past year.” 

Low margins, increasing costs, low commodity

prices, and size of cooperative are all closely interrelated. A cooperative struggling with low margins may

improve them by increasing prices and/or lowering

costs. Two of the most prevalent problems mentioned

generally were “low commodity prices” and “low

margins.” In a market of pervasively low prices and

thin margins, a rise in costs can be particularly problematic. The cooperative cannot raise prices and will

likely find it difficult to cuts costs in a larger climate of

increasing costs. Even maintaining margins may be

difficult. These difficulties may be more ominous for

smaller cooperatives. A larger size cooperative, struggling with low margins, may be able to spread increasing costs over a greater volume, thereby maintaining

or improving its survivability. Smaller cooperatives

have less room by volume to spread costs, and in an

environment of declining prices, may find it more difficult to maintain margins.

These relationships tended to be confirmed in the

revealed problems of cooperatives when considering

their size. “Operational” addresses the internal problems cooperatives face in trying to improve “margins”

in an environment of “low prices” and “increasing

costs.” With smaller cooperatives, those that find it

difficult to spread costs over larger volumes, “competition” emerges as a more frequently cited challenge.

Larger volume cooperatives identified labor more

often, although some of the smaller cooperatives also

cited labor. All size cooperatives saw the agricultural

economy as a problem area when focus was shifted to

the future. Regardless of the shifts in costs, margins,

size, growth, and/or consolidations, the loss of the

farming base represents fewer farmers and increased

competition for fewer numbers of larger-volume

farms.

Future Problems Identified by Region

Problems cooperatives anticipated facing in the

“near future” were analyzed in 10 regions of the country—Appalachian, Corn Belt, Delta States, Lakes

States, Mountain, Northeast, Northern Plains, Pacific,

Southeast, and Southern Plains. This section presents

comments in two sections: 1) low prices and the agricultural economy and 2) comments beyond prices and

the economy.

Low Prices and the Agricultural Economy

“Low commodity prices” and the “agricultural

economy” (tables 22 & 23) were the two most frequently identified concerns for the “near future” (tables 22 &

23). Except for the Corn Belt and Pacific regions, “low

commodity prices” was the first or second most often

anticipated problem. “Low commodity prices” was the

29
30 Table 20—Problems management sees facing cooperatives in the near future, by size of cooperative, 2000-01 

Major problem or issue

Cooperative size

Percent of total

Less than 1 1 25 16 - - 1 3 5 12 4 30 17 6 1 6 7 2 136

1 - 1.9 4 27 8 2 1 - 3 3 17 8 23 10 4 - 11 3 6 1302 - 3.9 4 34 18 1 3 - 9 4 28 16 41 19 4 2 10 3 7 2034 - 4.9 4 23 8 - 3 - 5 2 11 6 30 8 2 - 5 2 4 1135 - 9.9 12 65 24 1 9 6 12 6 36 21 40 24 - 2 11 4 28 301

10 - 14.9 4 31 21 6 1 5 5 3 12 15 15 14 1 3 2 1 13 15215 - 24.9 3 27 12 3 16 8 9 4 18 16 21 20 5 4 6 2 20 19425 - 49.9 2 21 20 6 13 2 4 4 9 10 25 23 6 1 8 2 22 17850 - 99.9 1 9 6 2 5 - 2 2 9 14 9 10 1 - 1 4 8 83

100 - 499.9 - 10 2 2 3 - 1 3 1 3 3 9 3 2 1 2 2 47500 and more - 6 1 2 - - 2 - 2 - 5 5 2 - - 2 1 28

—— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— ——

Total 35 278 136 25 54 22 55 36 155 113 242 159 34 15 61 32 113 1,565

Accounts receivable Agricultural economy Competition Consolidation Technology Genetically Modified crops Government regulations Government programs Increasing costs Labor Low commodity prices Operational Other Transportation WeatherMembers Low Margins Total
31

Table 21—Problems management sees facing cooperatives in the near future, by size of cooperative, 2000-01

Major problem or issue

Cooperativesize

Percent of total

Less than 1 0.7 18.4 11.8 - - 0.7 2.2 3.7 8.8 2.9 22.1 12.5 4.4 0.7 4.4 5.1 1.5 100

1 - 1.9 3.1 20.8 6.2 1.5 0.8 - 2.3 2.3 13.1 6.2 17.7 7.7 3.1 - 8.5 2.3 4.6 1002 - 3.9 2.0 16.7 8.9 0.5 1.5 - 4.4 2.0 13.8 7.9 20.2 9.4 2.0 1.0 4.9 1.5 3.4 1004 - 4.9 3.5 20.4 7.1 - 2.7 - 4.4 1.8 9.7 5.3 26.5 7.1 1.8 - 4.4 1.8 3.5 1005 - 9.9 4.0 21.6 8.0 0.3 3.0 2.0 4.0 2.0 12.0 7.0 13.3 8.0 - 0.7 3.7 1.3 9.3 100

10 - 14.9 2.6 20.4 13.8 3.9 0.7 3.3 3.3 2.0 7.9 9.9 9.9 9.2 0.7 2.0 1.3 0.7 8.6 10015 - 24.9 1.5 13.9 6.2 1.5 8.2 4.1 4.6 2.1 9.3 8.2 10.8 10.3 2.6 2.1 3.1 1.0 10.3 10025 - 49.9 1.1 11.8 11.2 3.4 7.3 1.1 2.2 2.2 5.1 5.6 14.0 12.9 3.4 0.6 4.5 1.1 12.4 10050 - 99.9 1.2 10.8 7.2 2.4 6.0 - 2.4 2.4 10.8 16.9 10.8 12.0 1.2 - 1.2 4.8 9.6 100

100 - 499.9 - 21.3 4.3 4.3 6.4 - 2.1 6.4 2.1 6.4 6.4 19.1 6.4 4.3 2.1 4.3 4.3 100500 and more - 21.4 3.6 7.1 - - 7.1 - 7.1 - 17.9 17.9 7.1 - - 7.1 3.6 100

—— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— ——

Total 2.2 17.8 8.7 1.6 3.5 1.4 3.5 2.3 9.9 7.2 15.5 10.2 2.2 1.0 3.9 2.0 7.2 100

Accounts receivable Agricultural economy Competition Consolidation Technology Genetically Modified crops Government regulations Government programs Increasing costs Labor Low commodity prices Operational Other Transportation Weather Members Low Margins Total
most frequently cited concern in the Southern Plains

(24.8 percent), Northeast (24.1 percent), Delta States

(27.3 percent), and Southeast (15.4 percent). “Low commodity prices” was the second most frequently cited

problem in the Northern Plains (14.0 percent), Lake

States (14.0 percent), and the Appalachian region (15.8

percent). Regions where “low commodity prices” was

the most frequent comment both for the “past year”

and “near future” were—Southern Plains, Northeast,

Delta, and Southeast.

The “agricultural economy” was most frequently

mentioned in the Northern Plains (16.1 percent), Lake

States (22.1 percent), and the Appalachian region (31.6

percent) and second in the Corn Belt (14.8 percent),

Southern Plains (18.3 percent), Mountain (17.3 percent), Northeast (12.7 percent), Delta States (16.7 percent), and Southeast (21.1 percent). 

In the Northern Plains, Lake States, Pacific,

Southern Plains, Northeast, Delta, and Southeast States

regions, the prevalence of “agricultural economy”

comments increased to the most, or second most often

cited concern with the shift in focus from “past to

“future.” Comments on “fewer farmers,” “reduced

farm income,” “slumping sales due to farmers exiting,” “lost agriculture base” increased in number.

“Price” concerns were pervasive as well whether

respondents considered the “past year” or the “near

future”—though the relative frequency of price comments decreased somewhat from “past” to “future” in

some regions. This shift was pronounced in the “Corn

Belt” where “price” was the fourth most frequent comment of the “past year,” and seventh in the “near

future,” and in the “Pacific” regions, where “price”

was the most frequent comment of “past year” problems, and the fifth most frequent for the “near future.” 

The structural problems of the “agricultural economy” may seem ever present for respondents, especially when focus is shifted to “the future.” “Prices”

are a continuing but also a daily struggle that respondents may give some less attention to when considering “future” concerns. Planning must involve “price”

considerations, but perhaps more troubling are the

considerations of a larger “declining agricultural economy.”

Comments Beyond Prices and Ag Economy

This section presents responses from each region,

with regions garnering the greatest number of responses presented first, and those with progressively fewer

responses presented in order after the first region. The

Corn Belt and the Pacific Region are exceptions. “Low

commodity prices” was not among the first or second

most often cited responses in these two areas—unlike

in the other eight regions. The Corn Belt and Pacific

region responses, therefore, follow the response from

the eight other regions.

Beyond “low commodity prices” and “the agricultural economy,” six other problem areas—“increasing costs, competition, low margins, labor, operational

difficulties, and weather”—were cited much more frequently than other areas. These six problem areas were

the most commonly cited, whether the focus was on

“past year” or “near future.”

Respondents suggested these six problem areas,

plus prices and the economy, have been critical to

cooperative operations over the past year and are

anticipated to continue in the near future.

“The agricultural economy” and “low prices” set

a background for cooperative operations across

regions, both as problems in the “past” and “near

future.” To offset “low prices” and loss of members

and volumes (due to a declining “agricultural economy”), cooperatives can seek to decrease costs,

although this is difficult in an environment of “increasing costs” (including “labor” costs). They can seek to

expand sales, although this is difficult in markets

where “competition” is intense. Trying to improve productivity is difficult with lack of qualified “labor.”

And “weather” problems can complicate any strategies

by reducing volumes. These six problem areas were

consistently identified across regions, but in varying

orders of prevalence.

Northern Plains

In the Northern Plains region, the agricultural

economy (16.1 percent), low commodity prices (14 percent), increasing costs (10.7 percent), and competition

(9.8 percent) were the most frequently cited (170

responses) for the “near future (table 23). Second-tier

problems, each accounting for at least 5 percent of the

responses, included “labor (9.2 percent), operational

(8.6 percent), and low margins (6.3 percent). With some

exceptions, these areas were similar to those identified

by respondents when considering “past year” difficulties, i.e., “low commodity prices (16.2 percent), agricultural economy (11.3 percent), operational (11 percent),

increasing costs (9.5 percent), labor (9.2 percent), competition (8.3 percent), weather (7.3 percent), low margins (7 percent), and Government regulations (5.8 percent).

Such “operational” problems as “keeping out

market share, maintaining our market share, remaining profitable in a depressed farm economy” dropped

from the third most frequent to sixth for the “near

32
33

Table 22—Co-ops' total response to what management considered to be the major problem or issue facing their co-op in the near future,by region

of the U.S., 2000 

Major problem or issue

Region 

Percent of total

Appalachian - 18 6 - - - 2 4 2 2 9 5 2 - 2 3 2 57Corn Belt 6 46 25 10 24 20 9 4 23 26 24 48 3 1 3 3 35 310Delta States 4 11 1 - 2 - - 1 8 3 18 10 1 1 4 - 2 66Lake States 8 57 25 2 7 1 7 7 26 19 36 16 4 - 2 5 36 258Mountain 2 19 10 3 3 - 5 2 11 9 26 7 2 - 3 3 5 110Northeast 1 10 9 1 - - 1 1 5 7 19 10 4 - 1 8 2 79Northern Plains 8 54 33 5 14 - 16 6 36 31 47 29 5 12 15 4 21 336Pacific 3 27 21 3 2 1 8 9 19 6 16 19 9 1 5 2 7 158Southeast 1 8 2 1 1 - 2 1 3 - 9 3 - - 3 3 1 38Southern Plains 2 28 4 - 1 - 5 1 22 10 38 12 4 - 23 1 2 153

—— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— ——

Total 35 278 136 25 54 22 55 36 155 113 242 159 34 15 61 32 113 1,565

Accounts receivable Agricultural economy Competition Consolidation Technology Genetically Modified crops Government regulations Government programs Increasing costs Labor Low commodity prices Operational Other Transportation Weather Members Low Margins Total
34

Table 23-—Co-ops' total response to what management considered to be the major problem or issue facing their co-op the near future,by region of

the U.S., 2000 

Major problem or issue

Region 

Percent of total

Appalachian - 31.6 10.5 - - - 3.5 7.0 3.5 3.5 15.8 8.8 3.5 - 3.5 5.3 3.5 100Corn Belt 1.9 14.8 8.1 3.2 7.7 6.5 2.9 1.3 7.4 8.4 7.7 15.5 1.0 0.3 1.0 1.0 11.3 100Delta States 6.1 16.7 1.5 - 3.0 - - 1.5 12.1 4.5 27.3 15.2 1.5 1.5 6.1 - 3.0 100Lake States 3.1 22.1 9.7 0.8 2.7 0.4 2.7 2.7 10.1 7.4 14.0 6.2 1.6 - 0.8 1.9 14.0 100Mountain 1.8 17.3 9.1 2.7 2.7 - 4.5 1.8 10.0 8.2 23.6 6.4 1.8 - 2.7 2.7 4.5 100Northeast 1.3 12.7 11.4 1.3 - - 1.3 1.3 6.3 8.9 24.1 12.7 5.1 - 1.3 10.1 2.5 100Northern Plains 2.4 16.1 9.8 1.5 4.2 - 4.8 1.8 10.7 9.2 14.0 8.6 1.5 3.6 4.5 1.2 6.3 100Pacific 1.9 17.1 13.3 1.9 1.3 0.6 5.1 5.7 12.0 3.8 10.1 12.0 5.7 0.6 3.2 1.3 4.4 100Southeast 2.6 21.1 5.3 2.6 2.6 - 5.3 2.6 7.9 - 23.7 7.9 - - 7.9 7.9 2.6 100Southern Plains 1.3 18.3 2.6 - 0.7 - 3.3 0.7 14.4 6.5 24.8 7.8 2.6 - 15.0 0.7 1.3 100Total 2.2 17.8 8.7 1.6 3.5 1.4 3.5 2.3 9.9 7.2 15.5 10.2 2.2 1.0 3.9 2.0 7.2 100

—— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— —— ——

Total 3.2 13.3 7.8 1.1 1.3 1.3 3.1 2.0 9.0 8.3 18.8 11.0 2.3 1.1 6.6 1.9 7.9 100

Accounts receivable Agricultural economy Competition Consolidation Technology Genetically Modified crops Government regulations Government programs Increasing costs Labor Low commodity prices Operational Other Transportation Weather Members Low Margins Total
future.” “Competition” shifted upward from sixth and

8.3 percent of the responses to fourth and 9.8 percent

of the responses. “Increasing costs”—following the

“agricultural economy” and “low prices”—remained

one of the most frequently mentioned problems.

In a context of “low prices” and a declining economy, Northern Plains respondents most frequently

anticipated “increasing costs” (primarily fuel) and

“competition” (“competition with private elevators,”

“need to be more competitive”) as “near future” problems. “Weather” and “Government regulations”

dropped to less than 5 percent of the comments (table

24).

When Northern Plains respondents considered

the “near future,” they cited the “agricultural economy,” “low commodity prices,” “increasing costs,” and

“competition” as their most often anticipated problems. Cooperative solvency may be maintained or

improved by—among other strategies—increasing

prices, expanding volume, reducing costs, and competing in the marketplace.

Lake States

In the Lake States region, the “agricultural economy (22.1 percent), low commodity prices (14 percent),

and low margins (14 percent)” were the most frequently cited “near future” problems (129 responses, table

24). Second-tier problems garnering at least 5 percent

of the comments, included “increasing costs (10.1 percent), competition (9.7 percent), labor (7.4 percent),

and operational difficulties (6.2 percent).” Past year

comments included “low commodity prices (21.7 percent), agricultural economy (18.8 percent), low margins (14.2 percent), increasing costs (10 percent), operational difficulties (8.3 percent), labor (6.3 percent), and

competition (5.4 percent).” “Low commodity prices

(21.7 percent), agricultural economy (18.8 percent), and

low margins (14.2 percent) accounted for 54.7 percent

of the past year comments (tables 22, 23).

These concerns changed little when respondents

shifted their focus from past to future. Beyond the

“agricultural economy and low prices,” “low margins”

was the most frequently mentioned concern both in

the past and in the near future. Concerns about “competition”—“regionalization and multi-nationalization,

small-town co-op competing against big business,

competitive factors in not being able to buy quality”—

shifted up from the seventh most frequent to the fifth

most often cited problem. Concerns about “operational

difficulties”—“sales, doing more with less, new

sources of income”—shifted down from fifth to seventh. When respondent focus moved to the future,

past-year problems continued to predominate,

although “operational” questions yielded other con35

Table 24—Rank order of problems identified for the past year and near future, Northern Plains

Past year response Near future response

——————————————————— ———————————————————

Percent Percent

Problem Number of total Rank Number of total Rank

Low commodity prices 53 16.2 1 47 14.0 2

Agricultural economy 37 11.3 2 54 16.1 1

Operational 36 11.0 3 29 8.6 6

Increasing costs 31 9.5 4 36 10.7 3

Labor 30 9.2 5 31 9.2 5 —— —— —— ——

Subtotal 188 57.2 197 58.6 

Competition 27 8.3 6 33 9.8 4

Weather 24 7.3 7 15 4.5 9

Low margins 23 7.0 8 21 6.3 7

Government regulations 19 5.8 9 16 4.8 8 —— —— —— ——

Subtotal 93 28.4 85 25.3 —— —— —— ——

Total 280 85.6 282 84.0 
cerns—“large corporations forcing smaller companies

out of business, profitability in our competitive environment, and being efficient to compete” (table 25).

Southern Plains 

In the Southern Plains region, “low commodity

prices (24.8 percent), agricultural economy (18.3 percent), and weather (15 percent)” were the most frequently cited problems (58.1 percent of responses,

table 25). A second tier of problems included:—

“increasing costs (14.4 percent), operational (7.8 percent), and labor (6.5 percent).” Past year responses

included “low commodity prices (24.1 percent), weather (22.6 percent), agricultural economy (9.8 percent),

labor (9.8 percent), and increasing costs (8.3 percent).

“Low commodity prices, weather, and the agricultural

economy” accounted for 56.5 of the “past year”

responses.

“Past year” and the “near future” concerns were

unchanged. “Weather” remained a primary worry

(reduced volume) only behind “low commodity

prices” and “the agricultural economy” when focus

shifted to the future. Other concerns were “increasing

costs” and “operational” strategies—“capture more

nonmember business, growth of the co-op, need to

replace equipment.” While these problem areas contribute to issues of “low margins,” of the 153 total

responses, it was cited just twice and “competition”

just seven times. In the Southern Plains, beyond the

agricultural economy and low prices, weather (volumes) was the most frequent concern, both in the past

and for the near future (table 26).

Mountain States

In the Mountains States region, “low commodity

prices, agricultural economy, and increasing costs”

were the most frequently cited (50.9 percent of the 110

responses) for the “near future” (table 26). Almost 10

percent saw “competition” as an additional problem.

No other problem area garnered more than 9 responses. “Past year” comments included “low commodity

prices (27.3 percent), agricultural economy (12.1 percent), labor (11.1 percent), and increasing costs (10.1

percent). “Low commodity prices, agricultural economy, and labor” accounted for 50.5 percent of the “past

year” responses (tables 22, 23).

When shifting from “past” to “near future,” the

“low commodity prices and agricultural economy”

concerns remained predominant. “Increasing costs”

concerns continued to involve around 10 percent of the

citations. “Labor” comments—”employee retention,

employment issues”—dropped to less than 10 comments, while “competition” shifted upwards to 10

comments.

Cooperative respondents most frequently identified increasing costs, beyond the anticipated problems

with the decline in the agricultural economy (the loss

of local volumes and increasing size of remaining

farms) and continued low prices. Problems with

36

Table 25—Rank order of problems identified for the past year and near future, Lake States

Past year response Near future response

——————————————————— ———————————————————

Percent Percent

Problem Number of total Rank Number of total Rank

Low commodity prices 52 21.7 1 36 14.0 2

Agricultural economy 45 18.8 2 57 22.1 1

Low margins 34 14.2 3 36 14.0 3 —— —— —— ——

Subtotal 131 54.7 129 50.1 

Increasing costs 24 10.0 4 26 10.1 4

Operational 20 8.3 5 16 6.2 7

Labor 15 6.3 6 19 7.4 6

Competition 13 5.4 7 25 9.7 5 —— —— —— ——

Subtotal 72 30.0 86 33.4 —— —— —— ——

Total 203 84.7 215 75.5 
increasing cost, declining volumes, and low prices narrow solvency options. A context of increasing costs can

eliminate internal organizational options to decrease

costs (table 27).

Northeast States

In the Northeast states, “low commodity prices

(24.1 percent), agricultural economy (12.7 percent), and

operational (12.7 percent)” accounted for 39 or 49.4

percent of the 79 responses on the “near future.” There

were no other comments from the Northeast that garnered more than 9 responses. “Competition” was the

fourth most frequent response on the “near future,”

drawing 9 responses. Past year comments included

“low prices (33.3 percent), competition (12.5 percent),

and agricultural economy (11.1 percent). However,

with the exception of “low commodity prices”—no

problem area garnered more than 9 responses.

When respondents shifted from the “past year”

to the “near future” such “operational” issues as “better inventory management, marketing, trying to

increase prices to members” were cited more frequently. However, worries concerning “low prices and the

agricultural economy” continued to predominate.

Delta States 

When respondents focused on the “near future,”

they predominantly identified three problem areas—

“low commodity prices (27.3 percent), agricultural

economy (16.7 percent), and operational difficulties

(15.2 percent).” They accounted for 39 of the 66

responses (59.1 percent) on the “near future.” No

other problem area garnered more than 8 citations.

Respondents identified “low commodity prices (29

percent) and increasing costs (15.9 percent) when

focusing on “past year” problems. The “agricultural

economy” accounted for an additional 11.6 percent of

the total responses, but just 8 responses (tables 22, 23).

When respondents shifted to the “near future,”

there was a tendency to give greater focus to “operational difficulties”—“increasing sales, decreasing

expenses, and marketing”–beyond “low commodity

prices and the “agricultural economy.” “Increasing

costs”—”cost of supplies, prices of raw materials, rising costs of fuel”—was less often cited. Respondents

may seek operational solutions when planning for the

“near future,” and identify “increasing costs” issues

less often.

Appalachian Region

In the Appalachian region, the “agricultural

economy” accounted for 18 of the 57 responses ( 31.6

percent) on the “near future.” There were no other

comments that garnered more than 9 responses. Of the

62 responses on “past year” problems, the “agricultural economy (17.7 percent), operational difficulties (17.7

percent), and low commodity prices (16.1 percent)”

accounted for 51.5 percent.

When respondents shifted their focus to the “near

future,” their most prevalent concerns were on the

37

Table 26-—Rank order of problems identified for the past year and near future, Southern Plains

Past year response Near future response

——————————————————— ———————————————————

Percent Percent

Problem Number of total Rank Number of total Rank

Low commodity prices 32 24.1 1 38 24.8 1

Weather 30 22.6 2 23 15.0 3

Agricultural economy 13 9.8 3 28 18.3 2

Labor 13 9.8 4 10 6.5 6 —— —— —— ——

Subtotal 88 66.3 99 64.6 

Increasing costs 11 8.3 5 22 14.4 4

Operational 9 6.8 6 12 7.8 5 —— —— —— ——

Subtotal 20 15.1 34 22.2 —— —— —— ——

Total 108 81.4 133 86.8
structural questions of the agricultural economy—

“continued loss of farm land and farmers, declining

cow numbers and tobacco farms and decline in the

agricultural economy” (tables 22, 23). 

Southeast States

There were only 38 comments on the “near

future” from the Southeast region. No problem area

garnered more than 9 comments. “Low commodity

prices” (9 responses) and the “agricultural economy”

(8 responses) were the most prevalent. The most

prevalent “past year” responses were on the “weather”

(8 responses). When respondents shifted their focus

from “past year” to “near future,” they tended to mention the problems of “weather” less frequently and

shifted to the more enduring structural concerns of the

“agricultural economy” and “prices” (tables 22, 23).

Corn Belt

“Operational difficulties (15.5 percent), agricultural economy (14.8 percent), low margins (11.3 percent), and labor (8.4 percent)” were the most frequently cited problems (50 responses) on the “near future”

(table 27). Second-tier problems included “competition

(8.1 percent), technology (7.7 percent), low commodity

prices (7.7 percent), increasing costs (7.4 percent), and

GMO issues (6.5 percent). These problem areas were

similar to those identified for “past year” concerns—

i.e., “operational difficulties,” “agricultural economy,”

“low margins,” and “low commodity prices” (49.9 percent of “past year” responses) (tables 22, 23).

When respondents considered the future, the

character of the comments changed little. Responses

about prices for example, were the same, e.g., “low

commodity prices, low grain prices.” However, there

were changes in the order of the frequency of responses. When respondent concerns shifted from past to

future concerns, “low prices” dropped from first-tier

concerns to seventh, from 10.6 percent to 7.7 percent of

the responses. “Technology” issues shifted from 12th

and only 2.3 percent of “past year” responses to the

sixth most frequently cited “near future” problem

(table 28).

When respondents in the Corn Belt shifted focus

from the “past year” to the “near future,” they anticipated many of the same difficulties, although “prices”

were mentioned less often. Technological issues—

“internet sales, changing technology in farming, keeping on top of plant genetic issues, and speed of changing technologies”—became more prevalent.

When respondent focus shifted to the “near

future,” the remembered difficulties of “low prices”

from “past year” were less prevalent relative to “near

future” problems. The concerns of “technology” and

its possible impacts on sales, farming, and production

were likely more of a concern for planning reasons.

“Operational difficulties,” “the agricultural economy,”

and “low margins” remained among the most often

cited. “Labor” was fifth most cited for “past year” concerns, and fourth for the “near future.” 

These responses reveal the continued concerns

for cooperative survival, whether as problems identi38

Table 27-—Rank order of problems identified for the past year and near future, Mountain States

Past year response Near future response

——————————————————— ———————————————————

Percent Percent

Problem Number of total Rank Number of total Rank

Low commodity prices 27 27.3 1 26 23.6 1

Agricultural economy 12 12.1 2 19 17.3 2

Labor 11 11.1 3 11 8.2 5 —— —— —— ——

Subtotal 50 50.5 56 49.1 

Increasing costs 10 10.1 4 11 10.0 3

Competition 8 8.1 6 10 9.1 4 —— —— —— ——

Subtotal 10 10.1 10 10.1 —— —— —— ——

Total 60 60.6 66 61.0 
fied in the “past year” or anticipated in the “near

future.” Respondents identified a declining agricultural economy (and declining volumes), low prices, labor

costs and labor quality, increasing costs, low margins,

and pressures from competitors as continued worries.

“Operational” problems in many instances spoke to

strategies that cooperatives might consider to overcome difficulties. Many were general in nature—

“improving efficiency, growth of profitability, finding

demand for our product, increasing sales, and inventory controls.”

More specific ones related to problems in the

environment—“ability to develop value-added products to improve member profitability, replacing volumes lost to efficiency and farming practice changes,

financing and creating other profit centers, pressure to

merge or sell.” “Past year” and “near future” responses were nearly the same, though “past year” responses

were more reflective of merger and organizational

changes—“merging two companies, the restructuring

and organizing of the company after the merger, and

surviving as a small cooperative in an age of consolidations and mergers.” The decline in the prevalence of

“price” comments may reflect respondent shift to more

frequent consideration of larger structural issues. The

increased presence of “technology” may be indicative

of a longer-run view that is focused on determinants of

change in the “near future.”

Pacific Region

“Agricultural economy (17.1 percent), competition (13.3 percent), increasing costs (12 percent), and

operational difficulties (12 percent)” were the most frequently cited “near future” problems (54.4 percent of

158 responses) (table 28). “Low commodity prices”

was a fifth area, and accounted for an additional 16

comments or 10.1 percent. These five areas were the

same problems identified by Pacific respondents considering “past year” difficulties (tables 22, 23).

There was little difference in the individual

responses between past and future comments.

However, there were changes in the ordered frequency

of the responses. As with the Corn Belt responses,

“low commodity prices” dropped in relative frequency.

Such structural difficulties as the “agricultural

economy” became more prominent when future problems were anticipated. While remaining among the

most frequently cited, “increasing costs” concerns and

“operational” difficulties shifted down slightly.

“Increasing costs” predominantly dealt with increasing

energy costs, “operational difficulties” with “improv39

Table 28-—Rank order of problems identified for the past year and near future, Corn Belt

Past year response Near future response

——————————————————— ———————————————————

Percent Percent

Problem Number of total Rank Number of total Rank

Operational 43 14.2 1 48 15.5 1

Agricultural economy 39 12.9 2 46 14.8 2

Low margins 37 12.2 3 35 11.3 3

Low commodity prices 32 10.6 4 24 7.7 7 —— —— —— ——

Subtotal 151 49.9 153 49.3

Labor 31 10.2 5 26 8.4 4

Competition 23 7.6 6 25 8.1 5

Increasing costs 22 7.3 7 23 7.4 8

Genetically modified crops 18 5.9 8 20 6.5 9

Technology 7 2.3 12 24 7.7 6 —— —— —— ——

Subtotal 101 33.3 118 38.1 —— —— —— ——

Total 252 80.9 271 87.4
ing sales, profits, efficiency, and capitalization.” In

both the Corn Belt and Pacific regions, “low commodity prices” was cited less frequently than in the other

regions, particularly when respondent focus shifted to

the “near future.” Respondents in these regions may

be hopeful of better prices and give greater focus to

volume, costs, and operational strategies (table 29).

40

Table 29-—Rank order of problems identified for the past year and near future, Pacific Region

Past year response Near future response

——————————————————— ———————————————————

Percent Percent

Problem Number of total Rank Number of total Rank

Low commodity prices 25 16.4 1 16 10.1 5

Operational 23 15.1 2 19 12.0 4

Agricultural economy 22 14.5 3 27 17.1 1

Competition 19 12.5 4 21 13.3 2

Increasing costs 17 11.2 5 19 12.0 3 —— —— —— ——

Total 106 69.7 102 64.5
U.S. Department of Agriculture

Rural Business–Cooperative Service

Stop 3250

Washington, D.C. 20250-3250

Rural Business–Cooperative Service (RBS) provides research,

management, and educational assistance to cooperatives to

strengthen the economic position of farmers and other rural

residents. It works directly with cooperative leaders and

Federal and State agencies to improve organization,

leadership, and operation of cooperatives and to give guidance

to further development.

The cooperative segment of RBS (1) helps farmers and other

rural residents develop cooperatives to obtain supplies and

services at lower cost and to get better prices for products they

sell; (2) advises rural residents on developing existing

resources through cooperative action to enhance rural living;

(3) helps cooperatives improve services and operating

efficiency; (4) informs members, directors, employees, and the

public on how cooperatives work and benefit their members

and their communities; and (5) encourages international

cooperative programs. RBS also publishes research and

educational materials and issues Rural Cooperatives magazine.

The U.S. Department of Agriculture (USDA) prohibits

discrimination in all its programs and activities on the basis of

race, color, national origin, gender, religion, age, disability,

political beliefs, sexual orientation, and marital or family

status. (Not all prohibited bases apply to all programs.)

Persons with disabilities who require alternative means for

communication of program information (braille, large print,

audiotape, etc.) should contact USDA’s TARGET Center at

(202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA, Director,

Office of Civil Rights, Room 326-W, Whitten Building, 14th and

Independence Avenue, SW, Washington, D.C. 20250-9410 or

call (202) 720-5964 (voice or TDD). USDA is an equal

opportunity provider and employer.