Cooperative Grain Marketing:

Gb#q@q~timm.uw

Marc Warman

Agricultural Economist

This report discusses the various changes the cooperative grain marketing

industry has experienced during the past 2 decades. The different influences

and factors that led to these changes are analyzed. Issues currently affecting

grain marketing cooperatives and that will define the future environment in

which they operate are also discussed. Finally, some general directions that

cooperatives can follow to become more competitive are outlined.

Keywords: Farmer cooperatives, grain, marketing, policy, historical

ACS Research Report 123

April 1994
The U.S. grain marketing system has changed considerably during the

past 20 years. Various events and structural changes have had a tremendous

affect on farmer-owned cooperatives. Mergers, acquisitions, and bankruptcies

resulted in consolidation in the cooperative grain marketing sector. Changes in

Government policies and in trading practices have forced the entire grain industry, including cooperatives, to alter operating procedures. Adjustments are still

occurring.

This report is intended to stimulate debate about the future of U.S. grain

marketing cooperatives. The future success of many grain producers depends

on what direction cooperatives follow. Participants in this debate include producers; cooperative boards, management, and employees; grain users;

academia; and Government.

The report has three sections. The first discusses the development of the

cooperative grain marketing system and the events that affected its evolution.

The second section discusses some issues grains and oilseeds cooperatives

currently face and those that may arise in the future. The final section examines

alternative courses cooperatives can follow to increase their chance of success.

. . . 111
Contents

Highlights ........................................................................................................... V

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

Historical Background ........................................................................................ 1

Current issues ................................................................................................... 9

implications .............................................................................................. 11

Future Directions ............................................................................................. 12

Innovative Marketing .............................................................................. .12

Service Programs .................................................................................... 14

Vertical Integration ................................................................................... 14

Joint Ventures .......................................................................................... 15

Summary and Implications .............................................................................. 16

References ...................................................................................................... 17

iv
l U.S. grain marketing cooperatives have experienced major structural

and operational changes during the past 20 years. Adjustments are continuing.

l During the 197Os, cooperatives were part of an industry-wide decade of

expansion fueled by the growth in exports, low interest rates, and changes in

marketing practices.

l Consolidations marked the 1980s due to falling exports, high interest

rates, poor earnings, overexpansion, and changes in Government policies.

l The cooperative marketing component changed in step with or slightly

behind the U.S. grain marketing industry. Major restructuring occurred on the

cooperative side via mergers, acquisitions, and bankruptcies. Restructuring has

been especially painful for regional grain marketing cooperatives.

l Causes of this restructuring fall into three general categories-external

factors such as the evolution of grain marketing practices and general macroeconomic changes; internal factors such as the lack of coordination among

regional cooperatives; and the federated structure of grain marketing cooperatives.

l Grain cooperatives face a number of issues that affect their current

operations and will determine their future operating environment-globalization

of grain marketing, changes in the domestic marketing and regulatory environment, and changes on the demand side of grain marketing.

l In the 1990s cooperatives can move in at least four general directions

to compete more effectively in domestic and international markets-employ

innovative marketing techniques, develop comprehensive service programs for

members, integrate forward or backwards into other activities, and form joint

ventures.

l Cooperatives must decide on their appropriate roles in the grain marketing system, examine strengths and weaknesses to find competitive advantages,

and then translate these advantages into specific actions. This effort will require

teamwork and planning.
Cooperative Grain Marketing:

Changes, Issues, and Alternatives

Marc Warman

Agricultural Economist

INTRODUCTION

One of the greatest adjustments to changing

U.S. agricultural conditions during the past 20

years has occurred in the production and marketing of grains and oilseeds. After exports surged in

the late 197Os, the grains and oilseeds sector

encountered volatile prices, high interest rates,

unstable production, and erratic domestic and

international policy in the 1980s.

The 1980s began with wheat production

greater than market demand at economically

acceptable prices. Soybean production and prices

continued their historically volatile patterns. Feed

grain inventories fluctuated throughout the

decade, driven by a combination of Government

policy and weather. The period was also marked by

major structural adjustments for farmer-owned

grain marketing cooperatives. These changes are

ongoing.

The number of grains and oilseeds cooperatives declined 14.8 percent during 1973-82 (table 1)

and 28.1 percent further during 1982-92. Grains

and oilseeds cooperative membership peaked at

1.38 million in 1975, but dropped 36 percent, to

882,762, in 1992. Net business volume (in actual

dollars) by grains and oilseeds cooperatives peaked

at $20.6 billion in 1984, but then dollar volume

began to fall. Between 1984 and 1987, net business

volume declined 47.8 percent. By 1992, it had

rebounded 41.6 percent, to $15.2 billion.

Cooperatives’ share of the total value of grains and

soybeans marketed at the first handler level grew

from 29 percent in 1973 to 36 percent in 1983. That

share dropped to 30 percent in 1989, but by 1991

had rebounded to 38 percent (figure 1).

Several studies and articles have discussed

what has occurred in the grain industry in general

and cooperatives in particular. These reports noted

various industry problems such as interest rates

and transportation.

General problems associated with local grains

and oilseeds cooperatives included pricing policy,

inadequate equity, inadequate market information,

farmers bypassing the locals and going direct to

terminal markets, and competition with other

firms, including other cooperatives (Yager and

Hunley) .

A major focus concerning regional cooperatives has been the difficulty competing in export

markets and whether the federated structure is efficient in today’s cooperative marketing environment. This is illustrated by the lack of local cooperatives’ commitment to the federation and even to

competition with their regionals (Campbell).

This report briefly discusses the cooperative

grains (except rice) and oilseeds industry and the

problems confronting it. The intent is to stimulate

discussion about the future role of grain marketing

cooperatives. The paper focuses on three areas: historical background, current issues, and future

directions.

The historical section discusses the development and effects of economic changes on both local

and regional grains and oilseeds cooperatives. The

current issues section outlines the environment and

the various forces currently confronting cooperatives. The section on future directions presents

some alternatives cooperatives can follow to compete more effectively in grain markets.

HISTORICAL BACKGROUND

The early decades of this century saw the

major development of farmer- owned, local grain

marketing cooperatives throughout the Midwest.

These cooperative grain elevators evolved to challenge the economic power of the large grain corpo1
Table l-Grains and Oilseeds Cooperatives1

Year Total Co-ops Members Net Volume

______________________________ Number _____________________________ 1,000 dollars

1973 2,029 1,305,565 5,427,898

1974 2,012 1,300,615 9,645,767

1975 1,965 1,380,OOO 10,139,689

1976 1,986 1254,636 10,633,612

1977 1,793 1 ,188,464 11,852,416

1978 1,790 1 ,188,460 12,816,723

1979 1,804 1,188,915 14,948,459

1980 1,792 1 ,173,999 17,789,697

1981 1,777 1,154,965 19,777,374

1982 1,729 1,192,725 18,233,654

1983 1,673 1,074,768 16,217,999

1984 1,639 1 ,127,344 20,607,295

1985 1,623 1,070,605 15,673,750

1986 1,514 910,000 11,605,175

1987 1,446 900,059 10,747,500

1988 1,482 890,686 12,628,500

1989 1,400 900,784 14,189,186

1990 1,400 913,463 14,259,200

1991 1,287 871,872 14,471,817

1992 1,243 882,762 15,223,300

1 These numbers reflect cooperatives marketing grain, soybeans, or soybean products as their major business activity. Excludes rice and dry

edible bean associations. Source: Cooperative Historical Statistics, USDA’s Agricultural Cooperative Service (ACS), Cooperative Information

Report 1, Section 26, October 1967, and Farmer Cooperative Starktics, USDA’s ACS, various reports.

rations and the railroads serving the grain trade

(Dahl).

Grain marketing cooperatives enabled farmer

members to capture economies of size in one or

several marketing functions (assembly, storage,

and cleaning) and for purchase of farm supplies.

Each cooperative’s organization was based on the

unique marketing needs of the local area served.

These elevators purchased grain from their farmer

members and sold it in single rail car lots to terminal elevators and processors. Even with the mechanization of agriculture, this structure changed little

until the 1950s (Ginder).

In the 1950s and 196Os, surplus grain stocks

and Government programs began to dominate the

grain marketing system. New technologies-such

as improved seed varieties, inorganic fertilizer, and

2

increases in mechanization-produced greater volumes of harvested grain (Ginder and Baumel).

All grain marketing firms received

Government storage payments to help remove

market surpluses that were developing. In

response, many cooperatives increased their storage capacity. Local cooperatives captured size

economies while maintaining their original marketing areas (Ginder and Baumel).

The federated cooperative grain marketing

structure was initiated when the first regional was

organized in 1911 (Wineholt). Regional grains and

oilseeds cooperatives provided a variety of services

for their local cooperative members, although their

primary purpose was merchandising grain originated by country elevators. Other functions includ-
F@J~ i-Share of Grain Marketed by Cooperatives

Percent

50 _

0

1973

Pmt of total fwm-loval value marketed.

sowm: Ac!3-sTss

1983 1888 1991

ed operating terminal facilities, providing market

information, and acquiring transportation.

Much of the grain export business in the 1960s

was conducted under USDA’s PL-480 program.

Most grain exports were traded on an FOB basis in

relatively small lots. This enabled smaller firms to

compete with the larger international grain

exporters because importers assumed the shipping

risks and costs. The existence of representatives of

foreign companies in the U.S. also reduced sales

costs, allowing smaller firms to compete (Ginder

and Baumel).

Regional cooperatives responded to these circumstances with a concerted effort to enter export

marketing. The first interregional grain exporting

cooperative formed was Producers Export

Company at Amarillo, TX, in 1958 (Reynolds).

Major changes in the world and domestic

grain trade began to occur in the 1970s. Early in the

decade, reduced harvests throughout the world,

especially in the Soviet Union, increased the world

demand for American grain. U.S. grain exports in

1973 exceeded 3 billion bushels, up 67 percent from

1972. Grain prices climbed above price support levels.

Throughout the remainder of the decade, the

low value of the dollar, general world prosperity,

and the desire for improved diets worldwide kept

the demand high for U.S. grain. Grain exports

reached a record 5 billion bushels in 1979 (figure 2).

That year the U.S. had a record 60-percent share of

the world grain trade (Dahl).

During the 197Os, U.S. grain marketing coop

eratives wanted access to export markets and

3
Figure z--Grain and Soybean Exports

Million metric tons

140

80

80

40

20

I I I I I I I I I I II I I I I I I I l l I I I I I I l 0

1985 70 75 80 85 90

Source: ERS Situation and Outlook Reports

4
sought ownership of export storage and handling

facilities. Regional and interregional cooperatives

also invested heavily in additional terminal elevators, barges and rail cars to transport grain, and

river barge loading facilities. Many local cooperatives invested heavily to upgrade their facilities.

Low interest rates made leveraging cooperative

expansion activities attractive (Gunn and Cobia)

(figure 3). Many cooperatives borrowed heavily to

finance the acquisition of fixed assets. Directors

and managers often did not understand that their

highly leveraged operations required increased

export growth, continued low-cost capital, and

Figure +-Real Interest Rates

10

5

0 :=s<;< ~$$$$g

u-

::::::::::::::: .:.:.::::::::: . . . . . . . . . .A. gg#$$ ::::::::::::::: ::::::::::::::: ::::::::s: ::::::::.:.:.:. a$$$$:; ::::::::::::::: y::::::::::) :::::::::::: ::’ .:$$;;>,>,: . : .,.,.,.,.,.,.

r ~1

~$j& u

Real Interest Rate

::::::::::::::: ::::::m ::::::::::::::: V . . . . . . _ ::::z&:.:. ..:,:.:.,:;::: .,.,.,.,.,.....

.~$g# h

-5 I I I I I I I I I I I

1971 75 80 85

i a proxy for the rates mops receive.

Percent

20

15

The prime intereat rate ia

Source: Bureau of Labor Statistics

5
high inflation rates to survive (Ginder and

Baumel).

Much of the incentive to invest was due to

changes occurring in transportation. Competition

in grain movement by trucks and barges as well as

serious financial problems forced railroads to abandon many branch lines and to change their rate

structure. In some areas, railroads eliminated the

transit billing privilege and increased the use of

significantly lower unit-train (multiple car) rates.

Local cooperatives serviced by active rail lines

responded by investing in facilities to load unittrains and to increase their storage capacity.

However, cooperatives collectively upgraded more

facilities than economically justifiable, leading to

overcapacity (Gunn and Cobia). The existence of

too many unit-train shippers narrowed the spread

between multiple- and single-car rates.

A 1986 study illustrates the extent of overcapacity in three states. Researchers calculated ratios

between unit-train loadout capacity and interstate

rail and truck shipments of grain. The results indicated that Iowa had 5.83 bushels of unit-train loadout capacity for every bushel of major grain

shipped out of the State by rail or truck. Nebraska

had 5.34 and North Dakota had 2.32. (The ratios

were calculated using 1985 data.) The authors said

these ratios understated overcapacity because

many destinations could not accept unit-trains

(Cobia and others).

Lower unit-train rates enabled local elevators

to ship grain directly to final users (port or mill)

without going through terminal markets. Local

cooperatives were encouraged to become more

active in managing their grain merchandising and

managers had to obtain trading and logistical

skills. Cooperatives also had to increase their operating capital to originate larger grain supplies.

Thus, local cooperatives found themselves competing directly with the traditional merchandising role

of the regional grain cooperatives (Ginder and

Baumel).

Cash grain purchases by importing countries

increased significantly during the 1970s and had

major impacts on all grain firms. One impact was

the change in the terms of trade. Most exports in

the 1960s were on an FOB basis, but a large percentage in the 1970s were made on a CIF (cargo,

insurance, and freight) or a CF (cargo and freight)

basis. This change meant exporters assumed ship

ping risks associated with ocean freight.

Grain exporters also began to ship more of

their grain in larger vessels to capture savings from

lower per-unit shipping costs. This change

increased the amount of grain needed for an export

shipment and correspondingly the price risk associated with export activities (Ginder and Baumel).

(The shift from FOB to CIF exports is a commonly held view. However, the actual circumstances of this change have not been well documented. Also, Union Equity Cooperative Exchange

made indirect export sales on an FOB basis at its

export facility on the Texas Gulf. When Union

Equity sold grain for export to another exporter,

the cooperative owned and controlled the grain

until it was loaded on a boat for shipment. At this

point, the other exporter took title.)

Another change in world grain marketing

during the 1970s was the rise of multiple-origin

trading, where grain can be originated from different areas, including different countries. Multinational firms can originate grain from other countries and benefit from cheaper prices, reduced price

risk, and transportation savings. Multiple-origin

trading allows these firms to take advantage of

changes in market prices, freight costs, and

exchange rates that can occur between the sales

agreement and delivery. It also allows firms to fulfill commitments despite events such as strikes,

natural disasters, and embargoes (Cobia 1992).

Firms in position to capture the efficiencies

from these various changes benefitted.

Cooperatives, however, were placed at a disadvantage. For example, U.S. grain cooperatives could

not engage in multiple-origin trading because it

results in the sale of foreign grain. As user-driven

businesses, cooperatives felt they were limited to

selling only U.S.-produced grain. Cooperatives also

had some difficulty selling grain on a CIF basis,

due in part to the inherent risks involved and the

difficulty of merchandising transportation.

Major problems and disruptions occurred in

the 1980s. It started with an embargo on grain

exports to the Soviet Union. The long worldwide

6
recession caused grain exports to fall; other countries increased their production and exports of

grain in response to a strong US. dollar; U.S. price

supports acted as price floor for grain worldwide;

exports fell to a low of 3 billion bushels in 1986;

and the U.S. share of the world grain market fell to

35 percent.

By the mid-19809, handling and storing of

grain for the Government was again a major function of the U.S. grain system, despite large acreages

being removed from production. Inventories

reached 204 million bushels by the end of the 1986

marketing year. Income from handling and storing

Government grain helped slow the decline in revenue due to reduced exports and falling marketing

margins for all grain companies (Dahl).

Low cost and easily accessible credit during

the high inflation of the 1970s became more difficult to obtain after the Federal Reserve tightened

the money supply in 1981. Many local and regional

cooperatives had trouble meeting their repayment

obligations. High debt loads from the 1970s hampered obtaining additional credit, forced cooperatives to use working capital to pay long-term debt,

and created an overall difficult business environment (Ginder and Baumel).

Local cooperatives also faced other problems.

Excess storage and unit-train capacity, high-cost

facilities, and low margins were constant threats to

the financial health of many locals. Many cooperatives struggled with the merchandising activities

they began in the 1970s. Some cooperatives were

confronted by the loss of rail service in segments,

or even all, of their territories. These conditions

prompted many local cooperatives to consolidate

or merge with other locals or liquidate (GUM and

Cobia).

Some locals began sourcing grain for private

exporters and processors on a contract basis. These

cooperatives assembled and stored grain for a fee.

This service assured a short-term steady income

and reduced the need to merchandise grain

(Ginder and Baumel).

Regional grain cooperatives also faced additional problems in the 1980s. Regional9 had difficulty capitalizing on the changing structure of

grain marketing, specifically CIF sales and multiple-origin trading. Meanwhile, shrinking export

markets forced a major restructuring of the regional and interregional cooperative grain system. It

began with the demise of Farmers Export

Company, a major interregional grain cooperative.

Many regional and interregional grain cooperatives

were either liquidated, created joint ventures with

investor-owned firms (IOFs), or merged with other

regionals.

The declining influence of regional grain

cooperatives during the 1980s is illustrated by the

drop in their share of total export elevator storage

capacity. In 1980, cooperatives controlled over 21

percent of this capacity. By 1989, that share

dropped to 15.3 percent (figure 4). The share controlled by major multi-national grain companies

also dropped during this period but at a much

lower rate (Dahl).

Prof. Roger Ginder, Iowa State University

agricultural economist, breaks down the causes of

the cooperative system’s restructuring into internal

and external factors. (“Restructuring the Grain

Industry and Cooperatives’ Role,” American

Cooperation 1988, American Institute of

Cooperation, Washington, DC, 1988.)

Ginder said external factors included the evolution of grain industry practices and general

macroeconomic changes. Lack of coordination

among regional cooperatives was the basic internal

factor. Instead of coordination, regionals often were

rivals, competing with one another to capture both

domestic and foreign markets. They often undercut

each other and their own interregionals.

Perhaps the biggest disappointment is that

throughout the process many of these regional

cooperatives were routinely meeting as members of

the same interregionals. The opportunity for communication and rational planning was there.

Lacking was the commitment to find a joint solution to the problems at hand.

At least some of the blame for that lack of

commitment and inability of cooperatives to adjust

to changing industry practices can be attributed to

the structure of the cooperative grain marketing

system. The relationship of regional grain marketing cooperatives to local cooperatives is such that

regionals must compete with other buyers for grain

7
Figure d-Total Export Elevator Capaclty

Percent

6 0

5 0

4 0

3 0

2 0

10

0

Major

Multinationals

1981 1989

Other indudes public elevators and elevators operated by port authorities.

Source: Dahl

originated by affiliated locals. This reflects the fact

that most regional grain marketing cooperatives

are federations of local cooperatives. This form of

vertical organization allows direct control of local

facilities and operations by local boards of directors

(Campbell).

Without a formal coordinating mechanism,

such as marketing agreements, federated regional

cooperatives have limited (or no) control over local

marketing decisions. This explains why intense

competition among local cooperatives is the rule

rather than the exception. This is in considerable

contrast to the direct control of local facilities and

local marketings by centralized regional cooperatives. (The centralized form of organization has

been practiced in some grain marketing cooperatives through the ownership of local line elevators.

Also, emerging super local cooperatives are centralized organizations.)

Regional grain marketing cooperatives

attempted to expand their vertical reach into the

world grain markets without control over their

8
members’ grain. They invested heavily in grain

export marketing infrastructure and were hurt

when financing costs reached record levels. They

estimated a growth rate for grain exports that did

not materialize. And, they did all of these at the

same time (Campbell).

There was also much restructuring among

local cooperatives-a long and painful process.

Many local grain marketing cooperatives grew in

size and scope of operations as they expanded

through internal growth, mergers, and consolidation. This increased size has been necessary for

local cooperatives (first-handlers) to originate grain

in sufficient volume to take advantage of direct

shipments and lower unit-train rail rates.

CURRENT ISSUES

The cooperative grain marketing system in the

1990s is quite different from the system that existed

even a decade ago when grain exports had peaked.

Today, grain marketing operations are much more

decentralized. Because of unit-train rates, more

grain is being marketed directly from first-handlers

to end-users and export terminals rather than

through terminal markets.

The Staggers Act of 1980, which deregulated

the railroad rate structure and allowed railroads to

negotiate rates with grain handlers, further encouraged the direct movement of grain from country

origination points to final destination. The result

has been a dramatic decrease in the number of buying and selling transactions between first-handlers

and end-users since the 1970s (Brannan).

However, the production and marketing of

grains and oilseeds are continuing to change and

evolve, both domestically and globally. Changes

occurring today may have a greater impact on the

cooperative grain marketing system than those

occurring in the past (Barr). The past 2 decades

have shown that exports are a key to growth. The

continuing globalization of the grain trade has several implications for grain handling cooperatives as

for others in the industry

First, changes in production and marketing

technology and the continuing formation of global

entities and institutions will force changes in grain

markets and the policies that govern those markets.

In general, the long-term competitive position of

the U.S. grains and oilseeds sectors depends on

improvements in the productivity and efficiency of

the system.

Technological advances will help improve the

production, marketing, and distribution of grain,

but they will also help competing nations. This presents a major challenge to the United States in coming years to maintain its advantage to efficiently

move large volumes of quality products that meet

the various requirements of customers worldwide.

Cooperatives must determine their roles in this

process.

Many institutions have evolved over the years

in the United States that facilitate the trade of products, including grain, through the various marketing systems. These systems are the result of statute

law and Government rules designed to influence

their structure and behavior and to monitor their

functioning.

A set of rules for trading products internationally is just as appropriate, and institutions are

emerging to facilitate world trade. The General

Agreement on Tariffs and Trade (GATT) has developed some rules concerning trading practices

between members. Other examples are the trading

blocks such as the European Community and the

emerging North American free trade area (formalized by the North American Free Trade Agreement

(NAFTA)). With globalization of trade, this trend

toward more formal trading structures will continue.

For the foreseeable future, major grain producing countries will continue to operate farm programs to error on the side of too much, rather than

too little, food production. As technology-driven

productivity gains are realized and grain supplies

exceed demand at economically acceptable prices,

budget pressures in all major grain producing

countries will force a reduction in the per-bushel

support levels for grain and/or a reduction in

planted acreage. More importantly, there will be

increased pressure for basic world wide policy

reform (Barr).

Second, worldwide changes in demand for

agricultural products will also affect policies con9
cerning the production and marketing of grain.

Growth in demand for agricultural products is

basically due to three factors: population growth,

income growth, and changing consumption patterns. Demand growth for grain-based food products has slowed in the Western, developed countries. Population growth has slowed and the

average age of the population has increased. This

decrease in demand growth is somewhat mitigated

by increased nutritional concerns.

Population growth continues in the less developed countries where most of the world’s population growth will occur during the next 50 years.

While many less developed nations are currently

experiencing political and economic instability,

these problems will be resolved sometime in the

future. Part of this resolution will occur because of

further development. This development will also

result in markets with tremendous growth potential as the incomes of the populace increase.

More immediately, incomes of some nonWestern countries will rise dramatically. For example, the annual economic growth for the Pacific

Rim countries has been estimated at 5 to 8 percent

per capita during the 1990s. With rising incomes,

these countries will not only purchase more wheatbased foods, but also demand more meat, which

also will increase the demand for feed grains and

oilseeds (Avery).

It is estimated that Asia’s 2.5 billion people

are currently consuming 11 grams of high-quality

protein per day. This compares with 72 grams in

the United States and 52 grams in Japan. One projection estimates that consumption of livestock and

poultry products will increase 500 percent by the

year 2010. In that same period, Europe’s animal

protein consumption is estimated to increase only

19 percent (Avery).

Finally, concern for the world’s environment

will result in additional pressures on agricultural

policies. Conservationists and environmentalists

want to keep additional lands from going into production and to restrict the use of chemicals and fertilizers prevalent in high yield agriculture. This

concern for wildlife, forests, grasslands, water, and

air will increase as more of the world’s population

becomes economically secure. While agricultural

production and environmentalism are not necessarily conflicting issues, there will be continued pressure to adopt environmentally sound agricultural

policies.

Within the global context, grain cooperatives

must address some specific issues. For example,

severe overcapacity problems must be resolved.

More important, however, is how cooperatives will

compete within the decentralized grain marketing

system and in the global economy.

Adopting technological advances in grain

handling, distribution, and marketing will certainly help efficiency, but these advances will also be

available to the competition. Care must be exercised when deciding what advances to adopt and

when to adopt them. Technology should not be

adopted for its own sake, but rather should fit into

the cooperative’s overall objectives.

The domestic marketing and regulatory environment also needs to be monitored. This is necessary since a variety of market and Governmental

forces will be working to reshape the way grain

handlers including cooperatives do business. For

example, a number of states have laws requiring

elevators to maintain balanced grain positions.

These are enforced through warehouse inspections

and violators face fines and imprisonment. Other

forces will be the result of global changes and positive or negative U.S. reaction to them. In any event,

grain marketing cooperatives must continue to

assess changing market conditions and react positively to them.

There are other general conditions that will

affect grain cooperatives’ future operations and

their current decisions about future options. First,

the grain industry had been facing a storage vs.

merchandising cycle (Barr). From 1985 through

1988, grain storage was driving net income. The

Government program paid cooperatives and others

to hold grain. Even inefficient cooperatives showed

positive net income because of the program’s regularity.

By the end of the decade, the Government had

drastically cut grain storage payments and cooperatives again had to depend on their ability to merchandise grain. Cooperatives needed to buy, sell,

and ship grain at the best prices and rates. Since

10
the 197Os, grain cycle stages have lasted from 3 to 5

years. The cycle was broken when the Government

quit the grain storage business. The cycle will

resume if there is a worldwide surplus of grain or

Government policy changes.

Second, cooperatives must also plan for variability because they face increased market-driven

fluctuations. For example, the large jump in U.S

wheat supply in the 1990-91 marketing season was

expected to outstrip demand and disrupt normal

seasonal patterns and expectations. However,

prices dropped during the first half of the 1990-91

marketing season, contrary to the normal seasonal

trend; imports of wheat increased; and exports fell

significantly. This again shows the impact of a

global market (in this case wheat) on the domestic

market.

With the Food, Agriculture, Conservation, and

Trade Act of 1990 viewed as more market oriented

than past programs, this variability will probably

not be dampened by Federal farm policies. It is not

clear now what the actual response will be to the

Federal programs. However, the agreement

reached in the Uruguay round of GATT will probably limit the ability of policy to dampen swings.

Additional Government regulations concerning the environment, worker safety, and other areas

also will affect cooperative operations. The entire

industry, including cooperatives, will be forced to

make more nonproductive investments in equip

ment and facility alterations.

Third, cooperatives must also recognize the

changing farm-level marketplace. A bimodal concentration of many small farms and a few large

farms is in place. Cooperatives need to service both

groups and pay attention to the needs of their producers or they will defect to another cooperative or

an IOF. (Individual cooperatives may decide to

specialize in serving one or the other.)

Many smaller-volume farmers will want the

same services traditionally provided by their coop

erative. Larger-volume farmers, who can often perform functions such as conditioning, storage, and

transportation arrangements on the farm, will

demand specialized marketing services such as

direct access to specific markets, risk protection

through futures hedging, and contractual sales

arrangements.

On the demand side, grain cooperative customers, who are informed buyers, will insist on

specific product attributes and quality. End-users

of grain will increasingly demand certain varieties

with qualities needed to produce the desired final

product. In some cases, end-users may contract for

the desired production. This could occur directly

between the end-user and producers or the endusers and a cooperative fulfilling the contractual

details.

Finally, while not contracting for the production, end-users may wish to purchase identity-preserved grain to know the conditions under which

that grain was produced and handled. This would

certainly be true for those who want organically

produced grain.

Implications

As a result of these various factors, cooperatives must reposition themselves in the grain markets by controlling costs, ensuring adequate capitalization, maximizing market power through the

use of membership agreements, and developing

good management skills to become more competitive and efficient. This will help provide the flexibility cooperatives need to succeed in the marketplace.

Cooperative members should view their cooperative as an investment (profit center), be willing

to make the investment, make a commitment to

market through it, and demand a return on that

investment. This would allow more cooperatives to

move into areas such as value-added activities.

Currently, many view cooperatives as only service

centers.

This is a controversial suggestion because it is

advocating that cooperatives diverge from their

historical paths. This issue is also part of the debate

over efficiency vs. democratic control in cooperatives. The essence of the debate is that it is not easy

to change the direction of a cooperative or curtail a

service when the customers have a vote in the process. (The board and management need to sell the

idea to members.)

11
Many people believe that efficiency and

democratic control are conflicting concepts and

cannot exist together in one organization. Others

believe these concepts support and complement

one another. Owner-members should want their

business to be efficient and the existence of a participating membership gives the business an

assured group of customers that makes it easier to

be efficient. The key is to keep both of these concepts in balance.

Any cooperative advantage in grain merchandising appears to lie at the origination level, not the

terminal or export levels. This is due to the

changed structure of the grain marketing system

and problems cooperatives face in export marketing. Regional cooperatives must position themselves for the future based on this reality. It will be

difficult for regional cooperatives to compete with

the multi-national firms in mass merchandising

grain. To compete in export markets, regionals

would have to develop a network of overseas

agents, buy and sell worldwide, and develop riskspreading (risk of merchandising losses) capabilities.

A group of 11 U.S., Canadian, and European

cooperatives has tried to overcome these disadvantages by investing in A.C. Toepfer International

through a cooperative called In-Trade.

Coopera lives have also developed some niches in

the bulk export market, and there will probably be

some opportunities to develop additional international niche markets. Despite these efforts, cooperatives are still facing the same problems.

This suggests that regional cooperatives

should carefully reevaluate their role in the cooperative grain marketing system. Opportunities

remain for grain marketing regionals, especially in

developing and serving niche markets. But, regionals will need member commitment in terms of both

volume and financing to reliably service these markets.

Local cooperatives will tend to become less

dependent on regionals because locals are no

longer captives of any one market. Super local

cooperatives will continue to emerge. Major operating decisions for these cooperatives will be made

at a central location to give them more control over

the grain they originate. Super locals and others

will continue to compete with regionals in grain

sales operations.

FUTURE DIRECTIONS

In the 199Os, cooperatives (regionals and

locals) can move in at least four general directions

that should help them compete more effectively in

the domestic and international grain markets-_(l)

employ innovative marketing techniques; (2)

develop a comprehensive service program for

members; (3) integrate forward or backward into

other activities; and (4) form joint ventures.

These options will offset the low margins of

grain merchandising operations and will help insulate cooperatives from the cyclical nature of the

business. Cooperatives that develop a balance

among these directions will have the best chance of

success. While many grain cooperatives have

already adopted some of these options, all need to

consider new activities and opportunities.

Innovative Marketing

Cooperatives can employ innovative marketing techniques to help improve their position in the

U.S. grains and oilseeds marketing system. Broadly

defined, innovative marketing techniques are

unique approaches to product marketing different

from traditional mass marketing techniques and

offer some distinct advantage to producers,

Pooling and attribute-specific/identity-preserved

marketing are examples.

A marketing pool is a device for combining

the crop volumes of many growers under the marketing skill of a central professional staff. Each producer then receives payment based on the weighted average of prices received for all product of like

quality in the particular pool. The specifics of the

acquisition process and the actual marketing techniques are unique to each pool. However, two general types emerge.

Some pools place all marketing decisions in

the hands of a central staff, without reservation.

Others allow growers to retain some degree of

authority over timing and/or price. The former is

12
frequently known as a seasonal pool, while the latter may called a contract, call, or purchase pool.

Seasonal pools provide the greatest flexibility

for professional management to move large crop

volumes when market conditions seem most favorable. Because crop volume alone can offer an

advantage in marketing, this aspect should not be

underestimated. All authority over decisions as to

price, terms of sale, extent of processing, and market timing is left to professional management.

Upon delivery, the marketing pool pays an

advance to each grower, based on perceived market

conditions. As the year progresses and actual sales

are booked, progress payments are paid to reflect

market conditions. All producers receive the same

per-unit payments, adjusted for quality and variety

differences. When the pool has been closed, a final

payment is made with the cost of pool operations

deducted.

Successful marketing pools often have a special feature that provides a unique edge in the marketplace. None rely exclusively on their ability to

outguess the market more successfully than individual members. These special features are not

unique to cooperative pooling programs. Rather,

they are sound professional processing and marketing techniques used to enhance the basic pooling concept.

Examples of special features include

improved quality control, elimination of cost centers through the elimination of redundant functions, gaining the ability to service large-volume

customers, and integrating forward into processing

activities.

Another example of innovative marketing that

cooperatives might consider is attributespecific/identity-preserved marketing. This is most

often associated with the new varieties of “designer” grains that have significant attribute differences

from the common varieties of grain currently produced. Under these circumstances, marketing services are very narrow for specialized niche markets. This type of marketing can be applied to

common varieties if the end-users of that grain

require specific quality attributes.

This type of marketing is also quality oriented

and requires three specific components to obtain

positive results. First, cooperatives must identify

the exact requirements and specifications needed

by individual end-users. This includes identifying

the exact variety, protein level, moisture content,

and other important attributes that result in the

commodity best suited for producing the final

product wanted by the end-user.

Second, cooperatives must take responsibility

for buying the identified commodity from membergrowers currently producing product with the

desired characteristics or by contracting with member growers to produce the crop.

Third, cooperatives must maintain the integrity of the commodity during storage, handling, and

s&ipment to end-users. This includes conditioning

and grading the commodity, A successful attributespecific marketing program will also require procedures that guarantee the quality of the grain

through a system that certifies producers and elevators.

An innovative procedure that can be combined with attribute-specific/identity-preserved

marketing (or any marketing program) to enhance

product appeal for buyers is the concept of Hazard

Analysis and Critical Control Points (HACCP).

HACCP is a continuous quality control and assurance program designed to prevent problems rather

than react to them (Handy). While HACCP was

designed to address food safety problems, it can

also be applied to general quality problems.

The HACCP procedure begins with an analysis to determine where problems such as contamination or loss of quality could occur. Once these

critical points are identified, standards to ensure

minimum quality are developed and a monitoring

system is designed. If the standards are violated,

actions to correct the problem can be taken immediately. This would enable cooperatives to assure

buyers of a safe and high quality product.

Cooperatives may need to establish HACCP

programs if they are to remain competitive in the

future. In some food industries, processors are

requiring their suppliers to establish HACCP programs if they wish to remain a supplier. Also,

USDA’s Food Safety and Inspection Service (FSIS)

is considering implementing HACCP programs in

U.S. meat and poultry plants. If FSIS initiates such

13
a program, this may impact cooperatives’ need to

establish HACCP programs.

Service Programs

Cooperatives can also move toward development of comprehensive service programs. Most

likely it will be a revision of current programs.

First, the needs of the cooperative’s members must

be determined. This is important in all cases, but

especially in a cooperative where members have

differing needs. Under some circumstances, a cooperative may wish to offer a bundle of related and

complimentary services that uniquely benefit members. In other instances, a cooperative may wish to

offer only certain stand-alone services.

Bundled services can be offered by regionals

directly to producer members or indirectly to producers through the locals. Locals may also offer

bundled services on their own.

Service bundles should focus on a single,

well-defined activity and cover all aspects of it.

Cooperatives can develop service bundles for a

number of activities such as marketing, financial

and accounting matters, production assistance, and

risk management. Producers (or local cooperatives)

should not be able to obtain the same type, mix,

and quality of services from any other single

source. By providing a comprehensive service

package, a cooperative will help members reduce

their marketing risk and, in turn, increase their

returns.

It may be in the best interest of some cooperatives to move in the direction of unbundled services. For example, a cooperative that specializes in

serving large producers may only need to offer certain services those producers can’t do for themselves. Also, some cooperatives may want to specialize in one type of marketing service, such as

pooling, and not offer the full range of marketing

services.

One service cooperatives may perform is related to attribute-specific/identity-preserved marketing. If there is a potential of securing higher returns

for members by the production and marketing of

certain grains, then cooperatives can coordinate

and facilitate these activities. Cooperatives can

work with producers on the cultivation techniques

for the desired varieties and cooperatives can handle the marketing and distribution of the product

to end-users. In this instance, the cooperative

would handle all the details associated with the

process as a service to its members.

Similarly, regional and local grain cooperatives can provide HACCP services to members.

Regionals could offer training programs and support to local cooperatives to help them establish

and maintain HACCP programs. Local cooperatives could help producers establish HACCP programs for their farming operations.

Vertical Integration

Vertically integrating forward into valueadded activities or backwards into production is

the third general direction cooperatives should

consider. The technical definition of vertical integration is the coordination of technically separable

activities in the vertical sequence of production and

distribution of products under the control of an

organization by ownership or contract (Reynolds

and Spatz).

In terms of grain cooperatives, vertical integration should be considered the coordination or

performance of two or more sequential stages or

functions in the marketing channel within a single

cooperative. Assembly is the primary function of

grain cooperatives and the first step in vertical

integration within grains and oilseeds marketing.

Thus, for cooperatives the term vertical integration

refers to marketing activities beyond the assembly

function.

One reason for cooperatives to seek vertical

integration is to capture more returns associated

with the value-added process of a particular food

or industrial product on its way to the consumer.

The cooperative may also realize a higher return

due to improved coordination of supply with

demand.

Decisions are made internally through contracts or management edicts rather than through

markets prone to uncertainty and variability. The

cooperative benefits from the effectiveness of

improved coordination and by the additional

14
return from performing value-added functions. A

cooperative may also be able to get an improved

flow of product and maintain better inventory control as welI as stricter quality and merchandising

control to meet the needs of a market niche. Finally,

integration may also place a cooperative in a more

advantageous bargaining position where it can use

its power to affect prices to its advantage.

Cooperatives can also benefit from integration

because of its income stabilizing effects.

Cooperatives that have specialized in only traditional elevator activities may suffer financially

from changes in weather, Government policy, and

numerous other factors.

By integrating into processing activities, a

cooperative is usually entering a more stable market. Prices of grain sold by the elevator can vary

considerably even over short periods of time. This

price variability is usually greater than that of processed products, such as feed or flour. Thus, integration into more stable processed product or

industrial product markets enables a cooperative to

pass on a more consistent return to its members.

Forward integration will also reduce the costs

of search and negotiation for cooperatives. By having a constant outlet for some of its raw product,

cooperatives would be less concerned about the

competition of finding market outlets. Finally, forward integration would help cooperatives capture

economies in allocating labor, facilities, and other

inputs over more than one activity. Thus, if processing and storage were handled at one location,

labor and other inputs could be used for both activities, eliminating some or all of the nonproductive

use of these inputs.

A cooperative may also wish to vertically integrate backwards into production to secure supplies

of grain that meet the needs of the cooperative.

Most cooperatives will use production contracts

with producers to accomplish backward integration. Cooperatives can use this option to fulfill

attribute-specific marketing contracts. This is especially true if there is an opportunity to market a

specific variety that has not been produced in the

past by the cooperative’s membership.

It is important to understand that when a

cooperative integrates, it takes on all of the problems associated with that new activity. For example, integration into a value-added activity that has

a single origin of supply can result in serious supply problems if the area experiences a drought or

major quality problems. Thus, cooperatives must

be careful to understand all the new problems it

will encounter before integrating into that activity.

These problems should be addressed to the extent

possible and the potential benefits and costs analyzed before the integration actually occurs.

Joint Ventures

Joint ventures are agreements between two or

more parties to perform specific tasks or functions.

A joint venture is similar to vertical integration in

that performance depends on the detailed provisions of the agreement. There is no clearly established, legal definition of a joint venture. Any collective business conduct, including the formation

of a cooperative, involves a joint effort among the

participants (Reynolds and Spatz).

A more appropriate definition with respect to

grain cooperatives is that joint ventures are a separate entity owned and controlled by a small number of participants to carry on a specific, limited

economic operation. Participants share on an

agreed basis expenses, margins, losses, risks, and

control of the arrangement.

Thus, joint ventures involve the establishment

of a legal entity to facilitate business activities

between two or more partners. They can take a corporate or partnership form of structure and usually

involve an equity inves)ment. These investments

are usually far less than is required for establishing

wholly owned subsidiaries. Coventures are similar

but do not involve an equity investment, and in

some cases, avoid having to establish a separate

legal entity.

The distinguishing feature of this definition of

a joint venture is the restriction on the size and

purpose of the operation. These ventures help participants achieve specific objectives, but don’t

threaten the individual identities or autonomies of

the participants.

Cooperative joint ventures can take two basic

forms: a joint venture between two or more cooper15
atives or between a cooperative and an IOF. One of

the best examples of a successful joint venture

between two cooperatives was Harvest Equity, created by Harvest States Cooperatives and Union

Equity Cooperative Exchange. After Farmland

Industries, Inc., acquired Union Equity, this joint

venture was terminated. The ease of dissolution is

another attribute of joint ventures.

Serious issues must be considered before a

cooperative forms a joint venture with a noncooperative. One issue is who controls the joint venture.

To maintain control and identity, the cooperative

must have controlling interest. The cooperative

would need both more than 50 percent of the stock

and the majority of members on the joint venture’s

board of directors.

Another important issue is the cross-purpose

obligations of the parties involved. A cooperative’s

obligation is to obtain the highest returns for

farmer-members. The IOF’s goal is to maximize

returns to stockholders.

Depending on the nature of the joint venture

arrangement, these obligations may be incompatible. An example is where the two parties represent

two different stages in the marketing-processing

chain. If the cooperative provides the raw commodity, it wants to get the best price for its members. If the joint venture partner processes and/or

markets the final product, the partner wants to pay

the least amount to get a higher profit for stockholders.

A couple of joint ventures involving regional

grain cooperatives and IOFs currently exist. In one

of these joint ventures, all profits and losses are

divided 49 percent for the cooperative and 51 percent for the IOF. This corresponds to the original

capital contributions by the two organizations. The

cooperative has four people on the venture board

while the IOF has five. Member locals of the

regional cooperative sell their grain directly to the

joint venture rather than the regional.

The cooperative has no control of the joint

venture and only a minority ownership interest.

Renewal of the arrangement was at the discretion

of the majority partner. The joint venture, however,

has helped producers and local grain cooperatives

in the area served by the regional. The important

issue is the long-term viability of the venture and

the impact of any changes in the venture on cooperative members.

The cross-purpose obligations issue is not as

relevant (as control) in this case as long as an open

market exists parallel to the joint venture. The open

market acts as a check on the price paid local cooperatives by the joint venture. Simply, if member

locals of the regional are free to market outside the

joint venture, that venture must pay a competitive

price to the local cooperative.

Prices paid to the joint venture by the IOF and

its subsidiaries do not have that check. It is in the

best interest of the cooperative to have all profits

remain in the joint venture. However, it may be in

the IOF’s best interest if the joint venture sells at

lower prices to entities controlled by the IOF to

increase profits of those entities at the expense of

the joint venture. The point is not that this activity

occurs, but that no market check exists to prevent it

from occurring.

SUMMARY AND IMPLICATIONS

Over the past 2 decades, the U.S. grain marketing system has changed considerably. It operates in a global system and competes in many markets with other producing nations. The U.S. system

also operates on a much more decentralized basis.

First-handlers of ten market directly to end-users.

The role of terminal markets has diminished.

More grain is being bought and sold by forward cash contracts between country elevators and

buyers, replacing the merchandising of grain on a

sample or “back-to-back” basis. Regionals must

compete with other grain buyers daily to fulfill

their grain needs.

Changes in transportation have also contributed to the decentralization of U.S. markets.

Increased use of trucks and barges for grain shipments, multi-car railroad rates, and the elimination

of the railroad transit billing privilege have

allowed many local elevators and subterminals to

ship grain directly to port or mill, bypassing the

terminal markets. Thus, the larger local cooperatives with sufficient volume and unit-train loading

16
facilities have taken over the functions of the older

rail terminal elevators.

Along with changes in transportation policies,

current U.S. farm policies have a much stronger

market orientation than past policies. This is forcing grain producers and grain marketing cooperatives to respond more to market signals than

Government programs.

The biggest policy change has been the move

away from Government ownership and storage of

grain. This was accomplished through a decrease in

the loan rates (encouraging less forfeiture of grain

to CCC), vigorous application of the Export

Enhancement Program, and payment-in-kind entitlements. This has contributed to the excess-capacity problem faced by the grain industry, including

grain cooperatives. Another Government policy

that has affected cooperatives is the Conservation

Reserve Program. It has reduced grains planting

and lowered the volume moving into the system

(Gunn and Cobia).

As the U.S. grain marketing system changed,

so did cooperative participation. A major restructuring of the cooperative system resulted. Through

mergers, acquisitions, and bankruptcies, the system

has downsized significantly. Cooperative numbers

and membership have fallen. Many of the cooperatives (including regionals) that have adjusted to the

structural changes are doing well. Other cooperatives are still struggling and further adjustments

and consolidations are expected.

Cooperatives face a global agricultural economy. Some traditional markets are saturated, but

new markets are emerging. They face informed

customers with specific demands and a changing

farm population that produces the grain and owns

the cooperative. This environment has several

implications.

First, cooperatives must decide on their

appropriate role in the grain marketing system by

carefully examining their strengths and weaknesses

to discover their advantages over competitors.

Second, cooperatives must translate those advantages into specific actions. Development of a committed marketing system is crucial. Innovative

marketing practices, joint ventures, integration,

and service programs are options that individual

cooperatives can employ to develop commitment.

The appropriate option or options will differ with

each cooperative’s circumstances.

Teamwork and planning are the main requirements to accomplish this task successfully. There

must be teamwork on the boards of cooperatives

and among cooperative boards and their members,

managers, and employees. Planning helps determine where the cooperative is and where it should

be in the future. Planning also matches current

resources of the cooperative with its objectives and

opportunities.

To build toward future success, cooperatives

must be willing to consider change, be imaginative

and creative, and take a leadership role.

Cooperatives must reexamine their traditional role

to determine what is unique and applicable today

and then seize marketplace opportunities.

REFERENCES

Avery, Dennis T., ‘The Global Growth Opportunity

for America’s Agriculture,” Focus, Volume 10,

Number 11, National Grain and Feed

Association, September 24,1992.

Barr, Terry N., National Council of Farmer

Cooperatives, personal communications, 1990.

Brannan, Maurice I’., “The United States Grain

Industry,” Paper presented at the 27th

International Grain Industry Program, May 25-

June 11,1992.

Breimyer, Harold F., “Agricultural Markets in

Turmoil,” address to the Agricultural Leadership

Development Seminar, Louisiana State

University, Baton Rouge, LA, February 9,1993.

Campbell, Gerald R., Vertical Coordination in the

Midwest Cooperatives Grain Marketing System,

unpublished paper, University of WisconsinMadison, November 1990.

Cobia, David W., North Dakota State University,

personal communications, 1992.

17
Cobia, David W., ed., Cooperatives in Agriculture,

New Jersey: Prentice Hall, 1989.

Cobia, David W. and others, Pricing Systems of

Trainloading County Elevator Cooperatives, Ag.

Econ. Report 214, Dept. of Ag. Econ., North

Dakota State University, December 1986.

Cummins, Davis E. and others, Cooperative

Involvement in Grain Marketing, ACS Research

Report 38, USDA, Agricultural Cooperative

Service, August 1984.

Cummins, David E., “Cooperatives Using UnitTrains Lead Corn Belt Recovery,” Farmer

Cooperatives, Volume 58, Number 5, USDA,

Agricultural Cooperative Service, August 1991.

Cooperative Historical Statistics, USDA, Agricultural

Cooperative Service, Cooperative Information

Report 1, Section 26, October 1987.

Dahl, Reynold P., “Structural Change and

Performance of Grain Marketing Cooperatives,”

Journal of Agricultural Cooperation, Volume 6,

1991.

Ellison, Edward L., “Board Report,” Harvest States

Cooperatives Annual Meeting, Portland, OR,

November 17,1992.

Farmer Cooperative Statistics, USDA, Agricultural

Cooperative Service, various ACS service

reports.

Ginder, Roger G., “Restructuring the Grain

Industry and Cooperatives’ Role,” American

Cooperation 2988, American Institute of

Cooperation, Washington, DC, 1988.

Ginder, Roger G. and Phillip C. Baumel,

“Cooperatives Past, Present and Future

Examined,” Feedstuffs, Volume 58, Number 31,

July 28,1986.

Econ. Misc. Report No. 122, Dept. of Ag. Econ.,

North Dakota State University, May 1989.

Handy, Charles R., USDA-ERS, personal communications, 1993.

Muirhead, Sarah, “Meat Safety Plan to Reach from

‘Plow to Plate’,” Feedstuffs, Volume 65, Number

48, November 22,1993.

Reynolds, Bruce J. and Karen J. Spatz, international

Business Arrangements Used by Cooperatives, ACS

Research Report 100, USDA, Agricultural

Cooperative Service, October 1991.

Rowen, Roy, “A Farm Co-op in the Hands of High

Rollers,” Fortune, April 20,1981.

Schrader, Lee F., “ADM Growmark,” Paper presented at NCR-140, St. Louis, MO, April 24,1986.

Torgerson, Randall E., “Cooperative Grain System:

A Time for Introspection,” Farmer Cooperatives,

Volume 59, Number 10, USDA, Agricultural

Cooperative Service, January 1993.

Wineholt, David A., Grain Cooperatives, Cooperative

Information Report 1, Section 15, USDA,

Agricultural Cooperative Service, September

1990.

Yager, Francis l? and Charles L. Hunley, Marketing

and Transportation of Grain by Local Cooperatives,

ACS Research Report 35, USDA, Agricultural

Cooperative Service, May 1984.

(The author also obtained information from annual

reports of regional cooperatives and newspaper

and trade journal articles.)

Gunn, Steven P. and David W. Cobia, Strategies for

Survival in the County Elevator lndust y, Ag.

18
U.S. Department of Agriculture

Agricultural Cooperative Service

P.O. Box 96576

Washington, D.C. 20090-6576

Agricultural Cooperative Service (ACS) 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 agency (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.

ACS publishes research and educational materials and issues Famer Cooperatives

magazine. The United States Department of Agriculture (USDA) prohibits discrimination

in its programs on the basis of race, color, national origin, sex, religion, age, disability,

political beliefs and marital or familial 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 the USDA Office

of Communications at (202) 720-7808 (TDD).

To file a complaint, write the Secretary of Agriculture, U.S. Department of Agriculture,

Washington, D.C. 20250, or call (202) 720-7327 (voice) or (202) 720-l 127 (TDD). USDA

is an equal employment opportunity employer.

* U.S. GOVERNMENT PRINTING OFFICE: 1994 300-098/00029