l United States

f Department of

Agriculture

Agricultural

Cooperative

Service

Advising People

About Cooperatives

Cooperative

Information

Report Number 29
Advising People About Cooperatives

Cooperative Information Report 29

issued as Program Aid 1147 in 1976.

Revised and superseded by Cooperative Information Report 29

in 1983. Revised 1987, November 1991.
Preface

A few individuals or a larger group of people may believe that

forming a cooperative is the answer to their problems or

needs. They expect you to appraise their problem objectively,

make practical suggestions, and give professional assistance.

Their interest may be in the more common agricultural marketing, purchasing, or service cooperatives or in special cooperatives such as buying clubs, child care, crafts, credit unions,

fishing, food purchasing, forestry, housing, health, recreation,

sewer, student, water, etc.

Much has been written about cooperatives, but it would

be unrealistic to expect anyone to have all the information

available. This publication is intended to provide background

and references for educational programs on cooperatives. A

list of organizations and their bulletins, books, visuals, and

periodicals is given at the end of this publication. These will

provide ready reference for developing, organizing, financing,

and operating cooperatives. This publication is not intended

to duplicate material or references available in other forms. It

will be brief in some areas of major concern. And it is not a

substitute for professional assistance from Agricultural

Cooperative Service, Cooperative State Extension Services,

State cooperative councils, State departments of agriculture,

Farm Credit Banks, regional cooperatives, and other professional groups and organizations working with cooperatives.

Periodicals and news releases, including those on new publications, provide new and additional material.
COOPERATIVES ARE BUSINESS CORPORATIONS.. ....... .

COOPERATIVE PRINCIPLES ............................................... 2

AN IMPORTANT PRACTICE ................................................. 2

TYPES OF COOPERATIVES ................................................ 3

Agricultural Cooperatives ................................................ 3

Consumer Cooperatives ................................................ 11

PROFESSIONAL WORKERS’ APPROACH

TO ORGANIZING COOPERATIVES ............................ 16

Reacting to Requests ........................................................... 17

Steps to Organize ........................................................ 19

Leadership and Advisers ............................................. 20

Financing ...................................................................... 21

ANSWERING QUESTIONS................................................. 22

SOURCES OF ADDITIONAL INFORMATION .................... 26

Cooperative Organizations ................................................... 26

Governmental Agencies ................................................ 32

STATE-LEVEL ASSISTANCE .............................................. 36

COOPERATIVE EDUCATION AND TRAINING ................. .37

GETTING INFORMATION ABOUT COOPERATIVES . . . . . ...38

OTHER ADDRESSES TO WRITE FOR INFORMATION . ...53

BOOKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

. . .

III
Advising People

About

Cooperatives

COOPERATIVES

A cooperative is a user-owned and user-controlled business

from which benefits are derived and distributed equitably on

the basis of use. Each year, income received from providing

goods and services to members, less expenses and reasonable

reserve, is returned to members on the basis of the value or

quantity of business transacted with the cooperative.

People form cooperatives to obtain services that they

cannot get as economically, efficiently, or effectively as individuals. The cooperative provides a structure within which

people can voluntarily act or operate by joining resourcesphysical or mental, man-made or natural, and material,

including financial-to achieve an end. This grassroots concept enables people to work together in collective efforts to

solve problems or obtain a variety of services; to manufacture

and purchase supplies; to produce, process, and market products; and to generate sufficient volumes of business to

improve bargaining power and competitive position relative

to other businesses.

COOPERATIVES ARE BUSINESS CORPORATIONS

Three basic types of business organizations comprise our

American business system: Individually owned business

firms, partnerships, and corporate forms. Corporate forms

may be either for profit or nonprofit and investor owned or,

like cooperatives, member-user owned. (1,7,8*) In certain

l Numbers refer to alphabetical list of organizations, their publications,

and other books and comprise the last three sections of this report.

1
respects, cooperatives resemble other businesses. They have

similar physical facilities and must follow sound business

practices. They usually incorporate under State laws. They are

governed by bylaws and other necessary legal papers.

Members elect a board of directors. The board sets policy and

hires a manager to run the day-to-day operations.

In other ways, cooperatives are distinctively different

from other businesses. These differences are found in the

cooperative’s purpose, its ownership and control, and how its

benefits are distributed. (1,3,7,8)

COOPERATIVE PRINCIPLES

Cooperatives operate according to principles that define or

identify their distinctive characteristics. Three fundamental

principles for the cooperative enterprise are:

1. The User-Owner Principle -The people who own and

finance the cooperative are those who use the cooperative.

2. The User-Control Principle-The people who control

the cooperative are those who use the cooperative.

3. The User-Benefits Principle-The cooperative’s sole

purpose is to provide and distribute benefits to its users on

the basis of use.

AN IMPORTANT PRACTICE

In addition to operating under these distinctive principles, an

important practice for all cooperatives is to conduct continuing member education. Keeping owners educated on what’s

happening is important for any business, but it is vital in a

cooperative for at least three reasons:

1. Democratic control, exercised through majority rule,

requires that the entire ownership be informed and involved

to ensure enlightened decisionmaking.

2
2. The cooperative can be responsive to members’ needs

only if members express those needs and recognize they must

bear the financial burden to fulfill those needs.

3. The rarity of the cooperative form of business in this

country means that our education system doesn’t give much

instruction about cooperatives in business and economic

courses and, therefore, the cooperative must be the educational institution for itself.

TYPES OF COOPERATIVES

Historically, cooperatives perform one or more of three functions: marketing products, purchasing production supplies,

and providing services.

Brief descriptions of the more common types of cooperatives operating in the United States follow.

Agricultural Cooperatives

Marketing

The need to meet consumer demands and expand markets for

products presents an increasing problem for farmers acting

independently. Few farmers produce in quantities needed to

deal directly with large wholesalers or retailers. The marketing cooperatives as quantity assemblers provide an increasing

variety of off-farm processing and marketing services for

about one-fourth of all products that farmers produce.

Marketing cooperatives help farmers produce and process quality products to market specification. Early cooperative marketing included the operation of grain elevators, milk

plants, wool pools, cotton gins, livestock markets, vegetable

markets, and fruit packing plants. Modern marketing includes

the coordination of processing, canning, drying, blending,

concentrating, extracting, freezing, or consumer packaging of

animal and animal products, such as dairy, fish, meat, and

3
poultry and the same for fruit, nut, and vegetable products,

and many other products in integrated organizations.

Marketing cooperatives enable farmer members to

extend control of their products as long as the cooperative

retains physical or legal title to a commodity handled through

processing, distribution, and sale. (1,3,7,8,18,19)

Bargaining

Bargaining cooperatives are a variation of marketing cooperatives. Producers join to gain strength in negotiating terms for

such items as price, quality, quantity, and delivery with processors and other buyers. Producers delegate authority to

their bargaining associations to establish common quality,

common price, and rules on marketing their product.

Bargaining cooperatives do not take possession of products or assemble, process, or distribute them. They also differ

from usual marketing cooperatives in that their facilities are

limited generally to an office and perhaps a testing laboratory

Some cooperatives perform both bargaining and marketing functions. One example is dairy cooperatives that start as

bargaining organizations but subsequently add processing

facilities. (13,8,18)

Purchasing

Farmers first turned to cooperatives as economic tools to gain

advantage of quality and quantity in supply purchases such as

feed, fertilizer, and seed. These early efforts often became corporations having full-time managers and warehouses, to handle other production supplies and services such as petroleum

products, farm chemicals, animal health products, fencing,

building supplies, construction contracting, automotive accessories, etc.

Most cooperatives have affiliated with other cooperatives, often through regional and interregional cooperatives.

4
These efforts reduce farmer costs and strengthen purchasing

power through owning large-scale facilities such as petroleum

refineries; phosphate, potash, and nitrogen manufacturing

plants; feed mills; research farms; and laboratories.

Purchasing cooperatives’ objectives include savings for

members through quantity purchasing, manufacturing, and

distributing, procuring quality products, and providing related services as needed. Distribution to producer members is a

major concern at the local level because added services are

needed.

Many cooperatives now perform both marketing and

purchasing functions, although they started as single-function

organizations. (1,3,7,8,18,19)

Service

Agricultural service cooperatives provide services related to

the production and marketing of farm commodities, or they

may provide general services.

Related service cooperatives offer unlimited possibilities

and are used in ever-widening circles to solve mutual problems and provide specialized services that affect the location,

form, or quality of farm products or supplies for members.

Services may be part of the operation, or they may be performed by separate cooperatives. Examples of services related

to handling farm supplies are applying fertilizer, lime, or pesticides; feed grinding or mixing; and harvesting. General service cooperatives provide a number of specialized services

assisting farmers in their business. (1,3,7,8,18)

Other examples of general agricultural service cooperatives include agronomy, artificial breeding, dairy herd

improvement, farm machinery, grazing, grove management,

irrigation, livestock feeding and production, pest management, and research. (1,3,5,6,8,18,19)
Farm Credif System

Agricultural credit is provided through the Farm Credit

System at the local level through Production Credit

Associations and Federal Land Bank Associations. In some

parts of the country, Federal Land Bank Associations and

Production Credit Associations have merged their associations into Agricultural Credit Associations. Rural electric and

telephone cooperatives provide utility services. The Farm

Credit System is a !§60-billion nationwide network of borrower-owned banks and associations that provide credit and

financially related services to U.S. farmers, ranchers, aquaculturalists, cooperatives, rural utilities, rural home buyers, and

other eIigible borrowers. The System is composed of the following:

1. Farm Credit Banks-These district banks provide loan

funds and services to System associations. The Farm Credit

Banks are located in Springfield, MA, Baltimore, MD,

Columbia, SC, Louisville, KY, St. Louis, MO, St. Paul, MN,

Omaha, NE, Wichita, KS, Austin, TX, Sacramento, CA, and

Spokane, WA.

2. Federal Land Bank Associations-These institutions

act as agents of the Farm Credit Banks and make long-term

loans primarily for the purchase of farm real estate and rural

homes. They also provide refinancing of existing mortgages

and other debts.

3. Federal Land Credit Associations-These associations

were formerly Federal Land Bank Associations that have

received a transfer of direct long-term real estate lending

authority from the district Farm Credit Banks.

4. Production Credit Associations-These institutions

make short- and intermediate-term loans for a variety of purposes, including loans for operating expenses, farm equip

ment, livestock, farm buildings, and other capital improvements that normally have maturities of less than 7 years.

5. Agricultural Credit Associations-In some part of the

country, Federal Land Bank Associations’ and Production

6
Credit Associations’ stockholders have voted to merge their

associations into Agricultural Credit Associations. These associations provide a full range of financing options and are

authorized by the Farm Credit Bank to make and participate

in long-term real estate mortgage loans.

6. National Bank for Cooperatives (COBa&-

Headquartered in Denver, CO, COBank is a part of the Farm

Credit System. COBank was formed on January 1,1989, as the

result of consolidation of eleven of the Nation’s thirteen Banks

for Cooperatives. The Banks had been in business for 55 years

when the customer-owners voted to merge and form COBank.

COBank’s customers are local, regional, and national agricultural cooperatives and rural utility systems. The agricultural

cooperatives process; market, transport, and export products

as diverse as fruits, vegetables, legumes, grains, and fish.

Others specialize in farm supply products such as feed, seed,

fertilizer, and petroleum-based products. COBank’s rural utility customers include electric, telecommunications, water, and

other utility systems.

COBank has banking centers in twelve U.S.

cities-Atlanta, GA, Austin, TX, Baltimore, MD, Columbia,

SC, Jackson, MS, Louisville, KY, Omaha, NE, Sacramento, CA,

St. Louis, MO, Salt Lake City, UT, Spokane, WA, Wichita, KS,

as well as a national office and banking center in Denver, CO.

Banks for Cooperatives at Springfield, MA, and .St. Paul, MN,

chose not to participate in the consolidation. COBank serves

as a bank of participation for these two locations.

7. Farm Credit Leasing Services CorporationHeadquartered in Minneapolis, MN, the Leasing Corporation

has off ices around the country that provide leasing for vehicles, agricultural field equipment and structures, computers,

and other equipment. (5)

8. Federal Farm Credit Banks Funding CorporationBased in New York City, this entity manages the marketing

and sale of System securities, which are the primary sources of

loan funds for System banks and associations. The Funding

7
Corporation also provides financial and advisory services and

supports System banks in the management of interest-rate

risk.

The regulatory agency of the system is the Farm Credit

Administration (FCA), an independent agency of the executive branch of the U.S. Government. Primary functions of FCA

are the regulation, examination, and supervision of Farm

Credit institutions and their service organizations. (4)

9. The Farm Credit Council - This Washington-based federated trade association represents the System and its borrowers before Congress, the Administration, and others. (8)

Rural Electric and Telephone Cooperative Associations

Rural Electric and Telephone Cooperative Associations exist

for the sole purpose of providing services for their membersowners in their respective operating territories. both electric

and telephone cooperatives have the exclusive right to serve

specified rural territories in most States. Anyone living in

those areas must become a member of the cooperative to

obtain electric or telephone service. These cooperatives differ

from others in that they use Government financing.

Rural Electrification Administration (REA), an agency of

USDA, makes loans to electric and telephone systems in rural

areas. In 1936, the Rural Electrification Act provided statutory

authority to establish REA as a lending agency for developing

a rural electrification program. A 1949 amendment authorized

REA to make loans to improve and extend telephone service

in rural areas.

In addition to providing loans for electric and telephone

service, REA provides technical assistance in engineering,

accounting, and management improvement.

Today, 990 electric borrowers and 1004 telephone borrowers serve 18.3 million people in 2,600 of the Nation’s 3,110

counties. Almost 100 percent of farms now have electricity,

and 96 percent have modern telephone service. REA-financed

8
electric systems serve 11 percent of the Nation’s consumers

and operate nearly half the distribution lines. (10,11,14)

Rural Telephone Bank, a USDA agency, provides supplemental financing for telephone systems. Bank loans bear interest at a rate consistent with the cost of money As a condition

for obtaining a loan cooperatives and companies must purchase stock in the bank. The bank is operated by REA and

other USDA agencies at no cost to the bank. The bank is capitalized by the U.S. Government through purchases of stock, in

amounts not exceeding $30 million annually, until purchases

equal $600 million. The Government’s investment is to be

retired as soon as practicable after September 30,1995. The

bank has made loans of $2.2 billion to 470 commercial telephone companies and 121 cooperatives. (15)

The National Rural Utilities Cooperative Finance

Corporation (CFC) was established in 1969. It is a nonprofit

cooperative whose primary function is to provide member

systems with an independent source of funds for loans as a

supplement to loans made by the REA. CFC loan programs

include long-term secured loans (usually concurrent with REA

loans), intermediate-term loans, line-of-credit loans, and letter-of-credit loans.

The principal source of long-term debt capital is the sale

of Collateral Trust Bonds to the public. CFC is owned by the

968 cooperatives it serves. (10,11,12,13,14).

Fishlng

The two major business activities are marketing and providing supplies and services. Marketing cooperatives receive and

market the catch, or perform some other functions such as

locating buyers and negotiating terms of trade. Supply and

service cooperatives may provide ice, fuel, and fishing gear, or

offer services such as boat repair, insurance, and representational functions. The supply and service cooperatives do not

9
perform a marketing function. Marketing cooperatives outnumber supply and service cooperatives.

In 1934, Congress passed the Fishery Cooperative

Marketing Act authorizing associations of persons engaged in

the fishery industry, as fishermen, catching, collecting, or cultivating aquatic products or as planters of aquatic products on

public or private beds. They may act together in associations,

corporate or otherwise, with or without capital stock, in collectively catching, producing, preparing for market, processing, handling, and marketing such products in interstate and

foreign commerce. (1,6,18)

Forestry

Forestry cooperatives offer certain potential advantages to

their membership. Many woodland owners do not have the

expertise necessary to select merchantable timber for harvest

or to obtain favorable stumpage prices. Often, effective harvesting and marketing of timber require professional guidance

and business practices. However, some woodland owners find

it difficult, on an individual basis, to regularly utilize the services of forestry consultants and professional forest managers.

Cooperative organization may allow owners of small

tracts easier access to professional management and marketing services. In addition, management of woodlots through

cooperatives may prove to be more gainful over the timbercutting cycle. Implementation of management plans can result

in small woodland owners’ assembling a uniform and highquality volume of lumber, thus attracting more favorable

prices. A cooperative structure allows members to pool equip

ment purchases and such capital requirements as compensation for managers and foresters and expenditures for office

needs. Cooperation among woodland owners can also give

rise to volume discounts on purchases of forestry supplies.

(1,6,18)

10
Cooperatives are particularly suited for certain labor-intensive

crops where potential exists for a group effort to be more than

the sum of its parts. Several persons or families of limited

means unite to individually farm small parcels of larger

acreages that are either owned or rented by the group. The

human labor each member-family can perform is often the

only resource they can pool in forming a cooperative. They

expect to be more productive as member-owners than as hired

laborers. With the whole family working, there are more direct

incentives to produce. They aspire to control the land on

which they work. (7,16,17,18)

Consumer Cooperatives

Increasing numbers of rural and urban consumer cooperatives

have developed. They include buying clubs and consumer

stores, computer services, day care/nursery, credit, furniture,

health maintenance organizations (HMOs), housing, hospitals,

legal services, memorial, migrant labor, mutual insurance,

optical clinics, pharmacies, preschools, recreation, retirement

centers, service stations, sewer, travel agencies, water, and

many others. Consumer cooperatives are corporate businesses, generally incorporated under State statutes or the District

of Columbia cooperative law. Members, often active in consumer groups, are concerned with the quality and quantity of

all merchandise, health, child care, and nutrition in food.

A host of other cooperatives, many national in scope, are

jointly owned and operated by business organizations to provide service at cost. These include the Florist Telegraph

Delivery Association; the Associated Press (a news-gathering

service); the American Automobile Association; and food,

drug, or hardware retailer-owned wholesale cooperatives.

(7,9,17,18)

Credit for consumer cooperatives is provided through

two major cooperative systems-credit unions and the

1 1
National Cooperative Bank (NCB). Federal programs providing credit to business organizations change rapidly, so the

most recent issue of the Catalog of Federal Domestic

Assistance should be reviewed. (2,9,18)

Credit Unions

Credit unions are financial corporations chartered and supervised by either State or Federal Government through the

National Credit Union Administration. They are formed by

people with common bonds through business employment,

association, or other organizations within a well-defined

neighborhood, community, or rural district. Business organizations whose employees form credit unions often provide

office space on the premises. Persons become members by

applying and paying small membership fees. Credit unions

encourage family money management and wise credit use.

Credit unions make loans to members from funds saved

by other members. Credit committees are chosen from the

membership itself. The committees review loan applications

for approval. Repayments are made on mutually agreed

schedules and interest is charged on outstanding loan balances. Many credit unions refund part of the interest paid by

borrowers each year, thus operating on a cost-of- doing-business basis. Normally, credit unions do not require outside

financial support.

Most credit unions belong to State credit union leagues

that are affiliates of the Credit Union National Association

(CUNA), a national trade association of credit unions. (2,9)

National Cooperative Bank (NCB)

The National Cooperative Bank is a private, cooperatively

owned financial institution providing financial services

nationwide for rural and urban-based cooperatives and their

subsidiaries. NCB offers a full line of loan, leasing, and credit

12
services to a diversified cooperative business community

involved in joint- purchasing, housing, healthcare, retirement

communities, mobile home parks, childcare, consumer goods,

finance, shared services, economic development, employee

ownership, and franchising. The services of NCB and its sub

sidiaries include: (1) matching funds for feasibility and organizational costs of new cooperatives and (2) market rate loans

to existing and start-up cooperatives and user- owned businesses operating on a cooperative basis.

NCB has commercial loan offices in Washington, DC,

Atlanta, GA, Minneapolis, MN, and Seattle, WA. (18)

Buying CIubs

The increased cost of living has stimulated interest in a simple

form of consumer cooperative called the buying club.

Generally, buying clubs order merchandise for members on a

preorder and prepaid basis. They are operated by volunteer

labor, with members agreeing on basic commodities needed.

Sufficient markup is required to justify substantial investment

of member time and effort. Often, the club’s existence is limited, either because basic needs cease to exist or because the

clubs subsequently develop into consumer co-op stores.

V,17,18)

Crafts

Craft producers have found cooperatives to be advantageous

in such areas as marketing, production assistance, and obtaining technical assistance.

Marketing activities might include: identifying potential

customers and target markets; evaluating customers’ needs;

giving craftsmen feedback on the latest trends in color, design,

and competition; setting uniform quality standards, developing coordinated lines, and guaranteeing delivery to attract

wholesale buyers; providing retail and wholesale services

13
such as operating craft shops, selling at wholesale or gift craft

shows, sponsoring craft shows, publishing catalogs, providing

sales representatives, or acting as a wholesale merchant.

Production assistance can be obtained in the areas of

bulk purchase of materials at a reasonable cost and with uniform quality; joint purchase and use of machinery or equip

ment; continuous review of equipment, supplies, and technology; training; and help in product design and color selection.

Technical assistance can be provided in the areas of

design; production and business skills; government regulations; assistance in securing loans or needed services for members; and information about new books, seminars, periodicals,

and exhibitions that contribute to members’ professional

growth. (1,3,7,18)

Health

Members of health co-ops prepay medical costs through

monthly premiums to consumer-sponsored health plans. This

spreads costs and helps members prepare for the possibility of

serious illness. Physicians practicing in multi-specialty groups

emphasize keeping patient members well through preventive

medicine and outpatient care. Some health plans employ doctors or establish clinics or hospitals. (7,18)

Housing

“Cooperative” applied to housing means joint operation of a

housing development by those who live in it. Members own

membership certificates or stock in the corporation, carrying

exclusive right to occupy a dwelling unit and participate in

corporation operations. Cooperative housing corporations

own the total property.

Cooperative ownership permits individual dwelling unit

ownership within a total property estate, with undivided

interest in the common estate.

14
A common purpose of cooperative housing projects is to

obtain adequate housing at savings on mortgage rates.

Members may reduce building costs through self-help

approaches to home ownership. (7,181

Labor

Migrant workers form labor cooperatives to sell their services

to agricultural producers. Their manager contracts with farmers for services, and provides them transportation and supervision. Indications are that these workers work more days

than agricultural workers who are not organized. (3,7,17,18)

Legal Services

Concerns about drawing wills, settling estates, and other normal legal needs stimulate development of legal services cooperatives. They are organized like health service cooperatives

and help spread costs over many members. (7)

Memorial Associations

There are three types of memorial associations: those that only

recommend mortuaries to members, those that contract with

mortuaries for member services, and cooperative-operated

mortuaries supported by prepaid burial costs. (7)

Recfeatlon

Public demand for outdoor recreation increases annually as

more leisure time becomes available. Forming recreation cooperatives on private rural land shows potential for meeting

future needs and increasing landowner use.

Recreation cooperatives are classified as user controlled

and resource controlled.

15
User-controlled cooperatives are those where resources, such

as land or facilities, are controlled by users through lease or

purchase to provide co-op members and their families with

services or facilities for outdoor recreation. Examples include

camps, golf, flying, playgrounds, skiing, swimming, tennis,

trap shooting, or other facilities operated on a nonprofit basis.

In resource-controlled cooperatives, owners organize the

cooperative to develop and market recreational facilities and

services, or jointly purchase services and supplies used to produce recreation income. Resource-controlled cooperatives provide opportunity for adjacent landowners on a lake or stream

to develop a single unit for boating, swimming, fishing, camp

ing, or hunting under one management. Economies of scale

are attained in capital investment, promotion, and advertisement. (1,7,18)

Student

Housing, meal concerns, book needs, and other problems

bring students together in cooperatives. They pool funds and

labor and agree on methods of operation to fulfill their needs

as they study. (7)

PROFESSIONAL WORKERS’ APPROACH TO

ORGANIZING COOPERATIVES

It takes only a few people wanting to solve mutual problems

to generate interest in forming a cooperative business. These

people are usually leaders in specified areas working to get

others with similar interests involved in business solutions.

They call on professional workers, in whom they place confidence, for help in the cooperative-forming process, i.e., planning, organizing, financing, and managing. (1,3,7,18)

16
Reacting to Requests

Cooperatives won’t solve all the problems that their members

face; nor will they correct specific problems in all situations.

The cooperative approach should be used only when it

can be demonstrated that a cooperative can provide a needed

economic service not presently available, or that, by providing

a service, it can increase net returns to prospective members.

A cooperative should not be suggested if the service is readily

available from existing firms, at a reasonable cost, and particularly if one of those firms is a cooperative.

Here are some other prerequisites to consider before suggesting development of a new cooperative:

1. Producers in the area must feel an economic need for

the proposed cooperative’s services and be able to identify a

mutual objective. It is not enough for a third party to identify

an economic need.

2. A core of local producer leadership must carry on the

development effort.

3. Producers must be willing to work together and follow the basic principles of cooperation.

4. Producers must be willing and able to support a cooperative by making the required capital investment, and then

patronize and participate in its affairs.

Examples of questions to ask when groups request assistance to determine prerequisites are:

1. Why is a cooperative needed?

2. What type of cooperative is needed?

3. Who is urging the development of a cooperative and

why?

4. How many people are interested in this proposal?

How has this interest been determined?

17
5. How many have visited existing cooperatives?

6. What educational or discussion group meetings have

been held? Who conducted the meetings? Did the same people

attend each time?

7. Has outside help or advice been requested? If so, from

whom?

8. Where do people now get the products or services that

the proposed cooperative would supply?

9. What competition would the proposed cooperative

have?

10. What is the capital requirement? How much capital

are organizing members able and willing to invest? Where

will cooperators obtain credit?

11. How much business volume is expected the first

year? Second year? Third year? Is this seasonal volume?

12. If the cooperative were organized and started in business, what are the prospects of getting a qualified manager?

13. What existing cooperatives are interested in opening

a branch or taking in members as an alternative to forming a

new cooperative?

14. What are the greatest problems in organizing this

cooperative?

15. What are the greatest assets in getting a cooperative

started?

16. What long-range factors or trends should be considered to ensure the cooperative’s success?

Obviously, all these questions and others will not be

answered when first raised. But what is important is to determine the presence or absence of these prerequisites. If they are

present, it must still be determined if a cooperative would be

economically feasible before pursuing development.

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Steps to Organize

The following sequence of events for organizing a new cooperative should be suggested by the professional to the interested groups:

1. Hold a meeting of leading participants to discuss the

economic need that formation of a cooperative might fulfill.

2. Hold an exploratory meeting. Vote whether to continue. If affirmative, select a steering committee.

3. Conduct a survey as a basis for determining cooperative feasibility.

4. Hold a second general meeting to discuss results of

the survey. Vote on whether to proceed.

The following events in the sequence will require additional expertise and reference available from such individuals

as State extension specialists at land-grant universities, district

Banks for Cooperatives, regional cooperatives, State

Cooperative councils, established local cooperatives, and,

when requested, the USDA Agricultural Cooperative Service:

1. Conduct a market or supply-and-cost analysis.

2. Hold a third general meeting to discuss the results of

the market or supply-and-cost analysis. Vote whether to proceed this time by secret ballot.

3. Conduct a financial analysis and develop a business

plan.

4. Hold a fourth general meeting to hear results of the

financial analysis. Vote again on whether to proceed. If affirmative, vote a second time on whether the steering committee

should remain intact or changes should be made.

5. Draw up necessary legal papers and incorporate.

6. Call a meeting of charter members to adopt the

bylaws. (It’s a good idea to invite all potential membership to

ratify the bylaws.) Elect a board of directors.

7. Call the first meeting of the board of directors and

elect officers. Assign responsibilities to implement the business plan.

8. Conduct a membership drive.

19
9. Acquire capital, and include the development of a

loan application package.

10. Hire the manager.

11. Acquire facilities.

12. Start up operations.

Leadership and Advisers

The types of specialized help needed and their functions are:

Organization and Legal Counsel

Each State has one or more statutes under which corporations

are incorporated. Agricultural and nonagricultural cooperative corporation statutes may be specified. In some States,

only agricultural cooperatives may organize. In some cases,

incorporation may be more feasible under nonprofit or general business incorporation laws of the State, and the cooperative then establishes bylaws for operation. An attorney familiar with State cooperative statutes is needed to draw up the

articles of incorporation, bylaws, and membership agreements, to draw up or review contracts for purchase of property or construction, loan agreements, capitalization plans, or

any other legal instrument needed to start the cooperative.

Not all attorneys are familiar with cooperative law. References

for finding qualified individuals may be obtained from the

district Bank for Cooperatives, State cooperative council,

existing local or regional cooperatives, and State extension

specialists who work with cooperatives.

A continuous qualified legal counsel is important to

ensure compliance with laws applying to cooperative business.

Additional information on organizing, including sample

legal documents, can be obtained from “How To Start a

Cooperative,” Cooperative Information Report (CIR) 7;

“Sample Legal Documents/ CIR 40; and “State Incorporation

20
Statutes for Farmer Cooperatives,” CIR 30, published by the

Agricultural Cooperative Service.

Financial Planning And Counsel

Feasibility studies, membership capitalization, methods for

establishing and repaying long-term and operating capital are

important planning steps. The design and installation of an

accurate bookkeeping system, tax records, and support

accounts are necessary for the cooperative’s success. Resource

people for these areas included an accountant or auditing firm

familiar with cooperative accounting, the district Bank for

Cooperatives, agents of the lending institution, State extension

specialists who work with cooperatives, the State cooperative

council, and local and regional cooperatives. Accurate records

and an ongoing program of financial planning help ensure the

success of the business for the benefit of its member owners.

Technical Advice

Specialists in the area of operations and marketing must be

involved in the early stages of the cooperative’s planning and

formation. Resource persons from equipment and machinery

suppliers, commodity handlers, State Extension specialists in

marketing, as well as those listed as resource persons in legal

and financial areas, could supply information and ideas for

the cooperative’s success.

Financing

Capital needs depend on the type and size of operations. All

standard methods, and some designed for cooperatives, are

used by members in financing. (1,2,6,7,9,15,18)

Sufficient member investment is needed to demonstrate a

commitment to provide capital to operate the business and to

persuade credit sources to lend additional funds to the coop

erative. Member investment is attained through fees, dues, or

21
assessments, or by issuing stock at the outset and using

revolving funds after operation starts. Stock is usually not

sold outside the membership because cooperative investment

does not offer growth possibilities or returns like other investments.

Facts and figures useful in preparing talks, news releases, and

reports concerning cooperative business operations constantly

change. The most recent available statistics can be obtained

from various organizations listed at the end of this publication. For example, the Agricultural Cooperative Service

updates and publishes “Cooperative Facts,” CIR 2. The

Capper-Volstead Act, giving producers of agricultural products the right to join in cooperatives to market their products

without violating antitrust laws, is reproduced in “Managing

Cooperative Antitrust Risk,” CIR 38, and “Understanding

Capper-Volstead,” CIR 35. Films from the Education Division

of the National Council of Farmer Cooperatives (formerly the

American Institute of Cooperation, AIC) also cover the topic.

The questions and answers that follow are not a complete

list or substitute for information from cooperative specialists.

Many answers to semitechnical questions are in layman’s language and may not be complete. The answer may vary with

State laws. Consult State extension services, State cooperative

councils, the State department of agriculture that has specialists on cooperatives, cooperative associations, or legal counsel

familiar with State cooperative statutes for specific answers to

local questions. “State Incorporation Statutes for Farmer

Cooperatives,” CIR 30, contains State statutes that may be

used to form farmer cooperatives.

Q: Can nonmembers use the services of cooperatives?

22
A: To maintain its status as a farmer cooperative under the

Capper-Volstead Act, a cooperative cannot transact more business with nonmembers than with members. Special restrictions affect the cooperative’s tax status. Many service cooperatives, such as farm credit, electric, telephone, and credit union,

require membership to obtain service. However, in most agricultural cooperatives, a certain amount of nonmember business is conducted. Consumer cooperatives generally serve

members and nonmembers.

Q: Do members pay annual dues?

A: Dues are not required in most cooperatives. However, a

one-time membership fee is required generally by cooperatives organized on a membership basis. If the cooperative is

authorized to issue capital stock, a member may have to buy a

share of voting stock.

Q: What financial liability does a person assume when joining

a cooperative?

A: Incorporated cooperatives normally limit financial liability

on any individual to the amount of money invested in the

cooperative in subscriptions to capital stock or membership.

Q: Do cooperatives require contracts with members?

A: Many agricultural marketing cooperatives do require

members to sign marketing agreements. This is the one way

that members can be sure their packing or processing plant

will have enough volume to operate efficiently. Various service cooperatives may require members to sign contracts. This

is not generally true with purchasing cooperatives, although

short-term contracts may often be required. Most consumer

cooperatives do not require contracts.

23
Q: How are cooperatives financed?

A: At least part of the capital comes from members. Sources

for borrowed capital were discussed earlier. Capital also

comes from members after the cooperative is operating.

Members provide capital by agreeing that net income may be

retained by the cooperative as capital. However, by Federal

law, 20 percent must be paid in cash. This capital is allocated

and returned to members on a revolving fund basis. ‘Members

may also provide loan capital. More detail is found in

“Cooperative Finance and Taxation,” CIR 1, Sec. 9; and

“Cooperatives in Agribusiness,” CIR 5.

Q: Will farmers earn dividends on investments in cooperatives?

A: Cooperatives may pay dividends on stock, but this is usually limited by law to the legal rate of interest in the State of

incorporation, or 8 percent, whichever is greater.

Q: Can members withdraw investments in cooperatives?

A: Many cooperatives permit members to redeem investments under certain conditions, such as retiring from farming,

leaving the cooperative trade area, or settlement of an estate.

In addition, many cooperatives systematically revolve members’ investments at stated intervals.

Q: Who is responsible for management of the cooperative?

A: The responsibility of cooperative management is three

tiered: members, board of directors, and hired professional

management. Each plays a different role in the management

function.

24
In many cases, members must approve certain issues, such as

merging with another organization or liquidating the cooperative. For operating purposes, the management function is performed by the board of directors. The board is elected by the

membership. It is the board’s responsibility to employ a manager and delegate day-to- day management of business operations. The board of directors is responsible for sound financial

cooperative business operations and for long-range growthand-development planning according to stated objectives.

Q: Why can’t cooperatives price products purchased for

members at cost?

A: Cooperatives must have income to pay fixed costs, such as

insurance premiums or the purchase price of land, buildings,

or equipment, and operating costs, many of which aren’t

known exactly until the year’s end.

Q: Do cooperatives fail?

A: Just as many other businesses fail, cooperatives can fail

because of insufficient capital, failure of members to support

the business with needed volume, poor management, or operation under other unsound business practices.

Q: What taxes do cooperatives pay?

A: Cooperatives pay all taxes required by law. These include

those property taxes usually imposed on all properties by

States, counties, and school districts. They pay excise, unemployment, social security, and transportation taxes, various

license fees, and many more as levied on investor- owned corpora tions.

Contrary to popular belief, cooperative organizations are

not exempt from Federal income taxes. However, they can

deduct from taxable income qualified net income allocated to

25
patrons. Farmer cooperatives meeting requirements of section

521 of the Internal Revenue Code can also deduct amounts

paid as dividends on stock and earnings from nonpatronage

income distributed to patrons. Agricultural cooperatives must

apply for section 521 tax status. Tax matters can become quite

technical. If asked about them, contact an accountant, attorney, or other qualified expert in tax matters.

Q: Can farmer cooperatives and other types of cooperatives

be organized under the same State statutes?

A: Many States have separate statutes for farmer cooperatives

and other cooperative business operations. Legal counsel

familiar with State cooperative statutes is needed to ensure

correct cooperative chartering under State statutes.

SOURCES OF ADDITIONAL INFORMATION

Cooperative Organizations

This is a confederation of the 52 credit union leagues (associations) serving every State, the District of Columbia, and

Puerto Rico. More than 90 percent of credit unions in the

United States are affiliated with CUNA through membership

in their leagues.

In cooperation with the State leagues, CUNA provides

national leadership, liaison with Congress and the various

Federal agencies, newsletters and magazines, market and

demographic research, economic analysis, public relations,

education, training, and other services to credit unions.

United with CUNA through a combined management

and leadership structure is CUNA Service Group (CSG), Inc.,

the association’s financial services affiliate. CSG develops and

markets consumer financial services to credit unions on a

26
national level. CSG’S programs allow credit unions to provide

members products like credit cards, automatic teller machine

access, share drafts, money orders, IRA’s, travelers checks,

etc., at a reasonable cost.

Another CUNA affiliate, U.S. Central Credit Union in

Overland Park, KS, provides investment, liquidity, and correspondent financial services to credit unions through a network of State or regional “corporate” credit unions+?ssentially credit unions for credit unions. U.S. Central is one of the

largest and strongest financial institutions in the nation, with

billions of dollars in deposits and assets. (2)

Farm Credit Leasing Services Corporation (FCL)

FCL specializes in equipment leasing to the agricultural

industry. As a part of the Farm Credit System, FCL provides

leasing and related services to eligible borrowers of the

System, including producers and cooperatives, rural electric

and telephone organizations, and Farm Credit System entities.

FCL provides lease services for virtually all types of

equipment, such as automobiles and trucks, agricultural production and processing equipment, material handling equip

ment, storage facilities, office equipment and computers, and

communication systems. FCL is also actively involved in the

syndication of large, multimillion-dollar lease projects. (5)

Federation Of Southern Cooperatives (FSC)

FSC provides technical services and a variety of support programs to its member cooperatives. Member cooperatives in

the rural South are agricultural, consumer, handicraft, and

credit unions organized by low-income people.

FSC, with the Tennessee-Tombigbee Construction Project,

founded the Rural Training and Research Institute to provide

a cooperative management training program, demonstration

farm, development and production materials, and job training

and experience. (17)

27
National Cooperative Buslness Association (NCBA)

Founded in 1916 as the Cooperative League of the USA

(CLUSA), NCBA is a national membership and trade association, representing the cooperative business community, that

focuses on the unique and mutual needs of various industries.

NCBA is the only national cross-sector trade association representing cooperatives. Through NCBA, cooperatives gain

strength by working together to form powerful coalitions.

NCBA uses the strength of the entire cooperative community

to promote and defend the cooperative way of doing business.

The program of the NCBA includes:

l supporting the development and expansion of cooperative businesses in the United States;

l representing the cooperative business community

before Congress, the Administration, government agencies,

and other national and world organizations;

l providing or facilitating communications, education,

and information about and for cooperatives and those interested in cooperatives;

l developing, building, and providing technical assistance to cooperatives in the lesser developed countries;

l representing American cooperatives to the world’s

cooperative business community through membership and

leadership in the International Cooperative Alliance (ICA), a

worldwide organization for cooperatives, headquartered in

Geneva, Switzerland, that promotes and develops international commerce, banking, insurance, trade, joint ventures, and

other business inter connections by, and among, the world’s

cooperatives.

Members of NCBA include cooperatives of farm supply,

agricultural marketing, insurance, banking, housing, health

care, consumer goods and services, students, credit unions,

workers, fisheries, and rural electrics and telephone associations. (7)

28
National Council Of Farmer Cooperatives (NCFC)

NCFC is a national association of cooperative businesses

owned and controlled by farmers. Its members market food or

fiber, provide credit services, or purchase production supplies

for farmers. Most member organizations are federated associations serving as central agencies for numerous local cooperatives. Thus, .through affiliations, NCFC represents about 90

percent of the total annual business volume of farmer cooperatives throughout the Nation. State councils of cooperatives

also are NCFC members, helping to form another link of unity

as cooperatives carry out legislative and regulatory activities.

In 1939, several regional grain-marketing cooperatives

organized the National Federation of Grain Cooperatives. It

became a division of the council in 1973. Farm Credit Council

was formed in 1983 as an affiliate to serve the legislative interests of the cooperative Farm Credit System. Agricultural

Cooperative Development International affiliated with NCFC

in 1984. The American Institute of Cooperation (AIC) became

an affiliate in 1984 and merged with NCFC in 1991, becoming

its educational division.

NCFC objectives are to promote actively and persistently

the interest of farmer cooperatives; impress on various

Government and other agencies the importance and potential

of cooperatives in agriculture; provide an avenue through

which cooperatives may be advised quickly of current developments significant to them; and serve as a forum to promote

better understanding. NCFC strives to meet these objectives

by representing farmer cooperatives before Congress and

Federal Government agencies. (8)

AK, now the education division of the National Council

of Farmer Cooperatives, has served the Nation’s agricultural

cooperatives and their farmer members since 1925. Its goal is

to promote better understanding of the cooperative way of

doing business. To meet its goals, NCFC’s educational division conducts educational workshops, conferences, seminars,

and institutes; produces and distributes educational materials;

29
provides special educational services to member cooperatives;

and maintains liaison with other national cooperative, agricultural, and educational organizations.

The highlight of NCFC’s educational activities is the

annual National Institute on Cooperative Education (NICE).

The summer institute is actually several meetings interwoven

into a week-long educational conference. In addition to a general program, special interest seminars and workshops are

conducted for youth, young farmer couples, university staff,

new cooperative employees, extension agents, agriculture

teachers, and others.

NCFC sponsors annual professional development seminars or workshops in several subject areas. They include

workshops in personnel and human resources management

and cooperative relations, and a leadership training seminar

for regional cooperative directors.

The institute produces and distributes a wide range of

educational resources materials for the general public for

cooperative members and employees and for elementary,

junior high, and high school classes.

NCFC’s materials help give its members and employees

a better understanding of how the cooperative system operates. NCFC has three series of publications for classroom use.

Each is for a different educational level, ranging from the

upper primary grades to high school students. The publications discuss business structure in America and point out the

unique role of cooperatives. Films and slide shows are a vital

part of many educational programs. (8)

National Milk Producers Federation (NMPF)

The NMPF, organized in 1919, represents dairy marketing

cooperatives throughout the United States. It the “granddad”

of commodity organizations. Soon after formation, NMPF formalized and focused efforts of several dairy leaders to secure

passage of legislation to be known as the Capper-Volstead

Act, the “Magna Charta” of farmer cooperatives. NMPF con30
tinues to provide the forum for dairy farmer involvement in

the formation of national public policy.

The federation provides an organization through which

dairy farmers and their cooperatives can develop policy positions and long-range objectives. These positions are represented to Congress, executive agencies, and regulatory bodies

affecting the dairy industry. NMPF tries to maintain and

improve the economic well-being of dairy farmers and their

cooperatives and to assure consumers an adequate supply of

wholesome milk and dairy products.

A majority of NMPF’s voting delegates, board of directors, and executive committee members are active dairy farmers.

Federation activities focus on legislative and regulatory

actions concerning Federal milk marketing orders, dairy price

support program, product standards and quality programs,

international trade, child nutrition programs, animal health,

and food safety. (19)

National Rural Electric Cooperative Association (NRECA)

NRECA represents most of the Nation’s rural electric and generating and transmission cooperatives and statewide associations of rural electric cooperatives. It provides members a

voice in national legislative and regulatory matters, numerous

management services, director and employee training programs, public relations and advertising activities, insurance

programs, and research effort.

Each year, NRECA conducts dozens of conferences, seminars, and workshops throughout the Nation. Individual sessions held in various regions deal with member services, data

processing, affirmative action, legal matters, director training,

right-of-way activities, insurance programs, and research

efforts.

NRECA maintains liaison with Congress and various

executive and regulatory agencies on the generation, trans31
mission, and utilization of electric power and environmental

matters. (10,12)

National Telephone Cooperative Association (NTCA)

‘The voice of rural telephony,” NTCA serves more than 450

small rural cooperative and commercial telephone systems.

NTCA represents its member’s interests in Washington,

DC, and with regulatory and legal agencies of the Federal

Government. It also loins other telecommunications associations on joint initiatives and shared concerns. NTCA offers

member services such as its annual meeting, annual legislative

conference, and extensive educational development through

dozens of seminars and workshops for employees and directors.

NTCA’s Services Management Corporation provides

member systems’ employees and directors with a wide array

of benefit plans, including medical, savings, and retirement. A

captive insurance company, National Telcom Corporation,

provides insurance for members’ equipment and plant. (11,13)

Government Agencies

Agricultural Cooperative Service (ACS)

ACS, an agency of USDA, is authorized by the Cooperative

Marketing Act of 1926 to help develop sound and efficient

cooperatives. It provides knowledge to improve the effectiveness and performance of farmers’ cooperative business in several ways.

The mission of ACS is to promote understanding and use

of the cooperative form of business as a viable option for agricultural producers and other rural residents.

Research is conducted to acquire and maintain the base

of information necessary for the agency to give farmers relevant and expert assistance on their cooperatives.

32
Technical assistance is given on business organization, opera ting efficiency, member control and responsibilities, merger,

feasibility of farmers building a cooperative processing or

manufacturing plant, etc. Requests may come directly from a

few farmers wanting to organize a cooperative or from a farmers’ elected board of directors of a cooperative or federation of

cooperatives.

History and-statistics are collected to detect growth

trends and changes in structure and operations. Data help

identify and support research and technical assistance activities.

Education and information are considered a distinct mission. ACS is assigned the responsibility “to promote the

knowledge of cooperative principles and practices and to

cooperate, in promoting such knowledge, with educational

and marketing agencies, cooperative associations, and others....” Research reports and educational publications are disseminated and cover basic principles of cooperation, key organizational and management elements, and findings of

research and technical assistance studies. A monthly magazine, Farmer Cooperatives, reports cooperative achievement,

leaders’ thinking, highlights of agency research, technical

assistance, and educational activities. (1)

Cooperative Extension System (CES)

USDA’s Extension Service is part of a three-way partnershipFederal, State, and county-known as the Cooperative

Extension System (CES). CES is USDA’s educational arm; it

has offices in most of the 3,138 counties in the Nation. State

specialists assist groups of farmers interested in forming cooperatives and participate in State and national conferences and

seminars for cooperative leaders.

County Extension agents provide education, information,

and advice on major agricultural production and marketing,

particularly stressing profitability instead of maximum yields

33
as sound financial management. It often uses factsheets and

publications. (3)

Farm Credit Administration (FCA)

The regulatory agency of the Farm Credit System, FCA is an

independent agency of the Executive Branch of the Federal

Government. FCA’s primary functions are regulation, examination, and supervision of the Farm Credit institutions and

their service organizations. Even though it is a Federal agency,

FCA is financed not by the Government but by the banks and

associations of the system. The Farm Credit System obtains its

loan funds through the sale of securities.

The system is discussed under agricultural credit cooperatives. (4)

Farmers Home Administration (FmHA)

The FmHA is a rural credit service of the U.S. Department of

Agriculture. It serves all rural areas of the country through 46

State offices, 300 district offices, and more than 1,900 county

offices. The agency provides financial assistance for farm purchase and operation, rural housing, community facilities, and

business/industrial development.

Loans for farm purposes, including disaster emergency

loans, are available to cooperatives primarily engaged in family-sized farming operations. In addition, applicants must be

unable to obtain credit from other sources to qualify for

FmHA financial assistance. Housing assistance is available to

cooperatives under the multi- family housing program. The

apartments financed through FmHA must be inhabited by

families meeting the agency’s low to moderate- income eligibility criteria. Community facility financing, including water

and waste disposal systems, also is available to cooperative

groups. The business and industry program and the “other”

community facilities program were added in 1972. (6)

34
The National Credit Union Administration (NCLJA)

NCUA is the Federal financial regulatory agency responsible

for chartering, supervising, and insuring member accounts at

the Nation’s nearly 10,000 Federal credit unions. The Agency

also insures member accounts in about 5,000 State-chartered

credit unions. NCUA is supported by the credit unions it regulates and insures and receives no Federal tax dollars. (9)

Rural EIectrification Administration (REA)

REA is an agency of USDA. It makes loans to rural electric

and telephone systems and provides technical assistance in

engineering, accounting, and management improvement.

Generation and transmission cooperatives funded by the

agency generate about 38 percent of the power required by

rural electric distribution cooperatives. A growing number of

these systems are beginning to share the cost of constructing

large-scale projects with neighboring utilities. The combined

efforts are helping assure adequate supplies of power for both

rural and urban people. About 90 percent of subscribers of

REA-financed telephone systems enjoy one-party service, and

95 percent of all new telephone lines are placed underground.

(12,14)

Rural Telephone Bank (RTB)

RTB is an agency of the U.S. Government. It provides supplemental financing for telephone systems. The Bank’s management is vested in a governor (administrator of the Rural

Electrification Administration) and a six-member board of

directors elected by the Bank’s stockholders-three from

among directors, managers, and employees of cooperative

stockholders and three from among managers, directors, and

employees of noncooperative stockholders.

RTB makes loans for the same purposes as REA, but RTB

loans bear interest at a rate consistent with the Bank’s cost of

35
money. Purchasing stock in the Bank is required as a condition

for obtaining a loan. (15)

STATE-LEVEL ASSISTANCE

Most States have one or more Extension specialists assigned to

cooperative work. This assistance can be requested through

local Extension Service offices. (3)

Cooperative trade associations called councils, associations, institutes, or committees are organized in about 40

States. The executive office may be contacted through local

cooperative organizations or local Extension Service offices.

(1,3)

General farm organizations-American Farm Bureau

Federation, Farmers Union, and National Grange-have sponsored and organized farmer cooperatives. State offices of these

farm organizations continue as potent sources of assistance.

These offices can be contacted through their local affiliates.

Statewide rural electric offices are organized in about 35

States. These may be contacted through local rural electric and

telephone associations of the REA. (10,14)

Credit union leagues operate in most States. These offices

may be contacted through local credit unions or the Credit

Union National Association. (2)

State departments of agriculture in some instances have

cooperative specialists working on cooperative organization.

Availability can be determined through the State department

of agriculture.

The Agricultural Cooperative Service provides assistance

from three state field offices-Hawaii, Ohio, and North

Carolina. (1)

Other cooperatives operating on a statewide or regional

basis have staffs that may assist.

36
COOPERATIVE EDUCATION AND TRAINING

Cooperative opportunities exist in broad fields of business

that may never occur to counselors. There are opportunities in

processing, marketing, sales, distribution, research, advertising, accounting, computer programming, housing, insurance,

electric service, public relations, law, specialized fields, etc.

Elementary teachers help youth discover cooperatives

using the multimedia presentation “Business in My Town.”

“Business in Our Community“ is an illustrated publication

written for junior and senior high school. “How We Organized

To Do Business in America,” a brochure recommended for

high school and junior college students, is written on a more

sophisticated level and is an excellent supplement to the film

“How People Do Business in Our Democracy.” These materials are available from the National Council of Farmer

Cooperatives.

Extension Service, farm organizations, and regional coop

eratives sponsoring programs for older youth could use

“Opportunities in Cooperatives” (ACS CIR 25) as a leaders

guide. Cooperative Educational agencies in many states use

“Cooperatives in Agribusiness” (ACS CIR 5) in youth programs, including camps, institutes, speaking contests, illustrated lectures, and club or chapter contests.

High school and postsecondary teachers use

“Understanding Cooperatives” (ACS CIR 61, which provides a

description of the self-contained teaching package and order

form. The basic teaching package contains an instructor’s

guide with 10 lesson plan units, all teacher and student references, and 2 separate software programs. The enhanced program includes all components of the basic package plus a fiveunit video series. Colored slides of the viewgraphs in the

lesson plans are available.

Young Farm Couples conferences on cooperatives sponsored by State cooperative councils, regional cooperatives,

and State extension services have proved informative and are

highly respected.

37
A number of land-grant universities conduct cooperative

courses or include cooperative information in other course

work.

Training for professional workers is offered by the State

cooperative councils in most States. Some of these training

opportunities are joint efforts among several State councils

and/or the State extension service. The National Institute on

Cooperative Education, held each summer and sponsored by

the National Council of Farmer Cooperatives (formerly AK)

and regional cooperatives, provides additional training opportunities.

The University Center for Cooperatives, University of

Wisconsin, provides a variety of continuing education programs and correspondence courses on all types of cooperatives appealing to national and international groups. The

Graduate Institute of Cooperative Leadership (GICL), sponsored by the University of Missouri, provides an educational

forum designed to reestablish cooperative philosophy through

a unique program of leadership development.

GETTING INFORMATION ABOUT COOPERATIVES

Organizations with pertinent publications, periodicals, 16mm

films, slides, and videos are now listed. Periodically, additional materials are produced.

1. Agricultural Cooperative Service

14 & Independence Ave., S.W.

P.O. Box 96576

Washington, DC 200906576

l Publications:

Cooperative Principles and Legal Foundations, CIR 1* (Sec.

l), reprinted 1983.26 pp.

38
Agricultu~ul Cooperatives: Pioneer to Modern,” CIR 1

(Sec. 2), revised 1983.42 pp.

* Cooperative Information Report

Cooperative Benefits and Limitations, CIR 1 (Sec. 31,

reprinted 1983.22 pp.

Organizations Serving Cooperatives, CIR 1 (Sec. 5),

revised 1989.26 pp.

Cooperative Member Responsibilities and Control, CIR 1

(Sec. 7), reprinted 1983.26 pp.

Cooperative Management, CIR 1 (Sec. 8), reprinted 1987.

30 PP.

Cooperative Finance and Taxation, CIR 1 (Sec. 9),1991.

30 PP.

Cooperative Education and Training, CIR 1 (Sec. lo), 1983.

26 PP.

Cooperative Facts, CIR 2, revised 1989.23 pp.

Cooperative-Distinctive Business Corporations, CIR 3,

reprinted 1983.24 pp.

Farmer Cooperut ive Pu blicut ions, CIR 4, revised 1990.

54 PP.

Cooperatives in Agribusiness, CIR 5, revised 1989. 64 pp.

Understanding Cooperatives. CIR 6, revised 1990.4 pp.

(This brochure describes a self-contained teaching program.)

3 9
How To Start a Cooperative, CIR 7, revised 1987.43 pp.

What Are patronage Refunds?, CIR 9, revised 1984.

20 PPIs a Co-op in Your Future ?, CIR 10, reprinted 1987.

32 PP.

Members make Co-ops Go, CIR 12, reprinted 1987.

11 pp.(Also in Spanish.)

Measuring Co-op Directors CIR 15, reprinted 1981.

11 pp. (Also in Spanish.)

Manager Holds Important Key to Co-op Success, CIR 16,

reprinted 1987.11 pp. (Also in Spanish.)

Employees Help Co-op Serve, CIR 17, reprinted 1987.

15 PP.

Guidelines Co-op Employees Need, CIR 18, revised 1982.

18 PP.

Bookkeeping Forms Your Co-op Needs, CIR 19, revised

1978.11 pp.

Guides to Co-op Bookkeeping, CIR 20, reprinted 1987.

15 PP.

Organizing and Conducting Cooperatives’ Annual

Meetings, CIR 21, reprinted 1991.60 pp.

Opportunities in Cooperatives, CIR 25, revised 1983.

52 PP.
Agricultural Cooperative Service-What We Do, How We

Work, CIR 28, revised 1990.6 pp.

Cooperative Approach to Crafts, CIR 33, revised 1985.

34 PP.

Sample Policies of Cooperatives, CIR 39,199O. 46 pp.

Sample Legal Documents for Cooperatives, CIR 40,199O.

65 PP.

State Zncorporation Statutes of Farmer Cooperatives,

CIR 30, reprinted 1987.715 pp.

Cooperative Brands, SR 27,199O. 92 pp.

Positioning Farmer Cooperatives for the Future-A Report

to the Senate Agricultural Appropriations Subcommittee,

October, 1987.68 pp.

l Periodical:

Farmer Cooperatives, Published monthly. (For cooperatives, public institutions, and persons primarily concerned with helping farmers obtain a better living

through cooperatives.)

l Slide Scripts:

Understanding Cooperatives, CIR 6.

41
0 Personal Computer:

Financial Management Tutor for Cooperatives. (Diskette

and manual $40). Order from Ms. Patt Edwards,

Department of Agricultural Economics, Purdue

University, West Lafayette, IN 47907.

AGRIBIZIFINPLAN. (A Financial Planning Tool.

Diskettes and manual $595.) Order from Dr. David

Barton, Department of Agricultural Economics, Kansas

State University, Manhattan, Kansas 66506.

COOP ED. (An Educational Expert System for

Teaching about Farmer Cooperatives. Diskette. $25.)

Order from Agricultural Cooperative Service, P.O. Box

96576, Washington, DC 20090- 6576.

COOP ED. Financial. (A macro-driven Lotus Templet

for Teaching Budgeting and Cash Flow. Diskette. $25.)

Order from Agricultural Cooperative Service, P.O. Box

96576, Washington, DC 200906576.

CoopSim. (A Decision Support System to Assist Grain

Marketing and Farm Supply Cooperatives. $25.) Order

from Cooperative Extension Service, Oklahoma State

University, Stillwater, OK 74078.

The Cooperative Restructuring Simulator. (Designed to

assists managers and consultants assess possible

restructuring alternatives. $25.) Order from

Department of Agricultural Economics, Virginia

Polytechnic Institute & State University, Blacksburg,

VA 24061.

42
Cost-Al (A Lotus templet designed for “what-if” analysis of allocation of expenses.) Order from Department

of Agricultural Economics, Purdue University, West

Lafayette, IN 47907.

FPG-Facility Planning Guide. (Planning tool for emerging or expanding small vegetable marketing cooperatives. $30.) Order from Department of Agricultural

Economics, Virginia Polytechnic Institute & State

University, Blacksburg, VA 24061.

Vegmarc ZZ (A system for small, fresh vegetable marketing cooperatives to record deliveries of vegetables

grown by producer members and recording the cooperative’s sales of produce to buyers. $30.) Order from

Department of Agricultural Economics, Virginia

Polytechnic Institute & State University, Blacksburg,

VA 24061.

NSAC Electric Tax Libra y. ($250.) Order from National

Society of Accountants for Cooperatives, 6320 Augusta

Drive, Suite 802-C, Springfield, VA 22150.

Sample Legal Documents. (Diskette $25.) Order from:

Agricultural Cooperative Service, P.O. Box 96576,

Washington, DC 20090-6576.

Sample Policies. (Diskette $25.) Order from Agricultural

Cooperative Service, P.O. Box 96576, Washington, DC

20090- 6576, Diskette.

l Video:

Cooperatives: Partners In Trade. (A presentation to

encourage foreign buyers to consider products processed or marketed by U. S. farmer-owned coopera43
2.

tives. Color/sound, 10-l /2 min., 1 /Zinch VHS. 1987.

$15.) Order from Agricultural Cooperative Service,

PO. Box 96576, Washington, DC 200906576.

How to Start a Cooperative. (An electronic media version

of the popular publication “How to Start a

Cooperative,” CIR 7. The video moves step-by-step

through the organizational procedures by experienced

two groups of producers considering the organization

of a farmer cooperative. Color/sound, 28-l /2 min.,

l/2-inch VHS. 1991. $25.) Order from Agricultural

Cooperative Service, P.O. Box 96576, Washington, DC

20090- 6576.

ACS- Whut We Aye and Whut We Do. (A description of

the organizational and functional facets of the

Agricultural Cooperative Service and the types of programs and services it offers to producer cooperatives.

Color/sound. 17-l/2 min., 1 /Zinch VHS. 1991. $25.)

Order from Agricultural Cooperative Service, P.O. Box

96576, Washington, DC 200906576.

Credit Union National Association

P.O. Box 431

Madison, WI 53701

l Publications:

Credit: Use It to Your Advantage. 31 pp. ($2.42)

Credit Unions- What They Aye, How They Operate, How

To Join, How To Start One. 7 pp.

A Brief History of the Credit Union Movement. 14 pp.

44
l Periodical:

Credit Union Magazine . monthly. ($15.00 per year.)

3. USDA Extension Service

14 & Independence Ave., S.W.

Washington, DC 20250

a Publicationlfactsheets:

The Extension Service has resources materials such as

publications and factsheets at the State level. Contact

the Extension Editor of the Extension Service at the

State office of the State where information is desired,

or at the county Extension office in the county where

information about cooperatives is desired. State offices

are located at land- grant universities, and county

offices are listed under county government in the yellow pages of the telephone book.

4. Farm Credit Administration

1501 Farm Credit Drive

McLean, VA 22102

l Leaflet/Brochure:

The Farm Credit System. (Brochure, 1985.)

The Farm Credit System. (Leaflet, 1985.)

45
5. Farm Credit Leasing Services Corporation

10 Second Street NE, Suite 300

Minneapolis, MN 55413

l Publication:

7992 Vehicle Selection Guide . (Compares specifications

and operating costs for 1990 model automobiles, vans,

and light duty trucks.)

l Newsletters:

FCL Intercom, Published quarterly. (For FCL customers

and marketing contacts.)

Lease Lines, Published quarterly. (For FCL contacts

within the Farm Credit System.)

0 Brochures:

Farm Credit Leasing - Specialists in Equipment Leasing to

Agriculture. (Contains information about leasing concepts and benefits, and outlines Farm Credit Leasing

Services.)

Farm Finance Lease for 1987 - the Tax Opportunity of the

Year for Agriculture. (Answers questions commonly

asked about the guidelines and benefits of the Farm

Finance Lease.)

Fleet Maintenance - As Easy as Z-2-3. (Explains how to

use Farm Credit Leasing’s national accounts to buy

maintenance and repair services at fleet discount

prices.)
6. Farmers Home Administration

14 & Independence Ave., S.W.

Washington, DC 20250

l Publication:

Business and Industrial Loans. Program Aid 1101,1983.3

PP7. National Cooperative Business Association

1401 New York Avenue, N.W. Suite 1100

Washington, DC 20005

l Publications:

Publications and Gifts on Cooperatives. (A 30-page catalog providing descriptions and ordering information

on the materials available for purchase and/or rental.

Cooperative Business Journal. (A monthly newspaper for

and about cooperatives of ail types.)

8. National Council of Farmer Cooperatives

50 “F” Street, N.W. Suite 900

Washington, DC 20001

l Publications:

Cooperatives: What They Are. 10 pp. ($0.75.)

Cooperative Laws in the USA .50 pp. ($1.00.)

l Study Guides:

Business in Our Community,Z982.24 pp. ($1 .OO.)

47
Business in My Town: Everybody’s Business (includes

video, teacher’s guide, and activity master), 1981.25

pp. (25.00.)

Handbook on Cooperative Basics. (Especially for teachers

and agents.) 38 pp. ($2.00.)

How We Organize To Do Business in America, 1973.29

pp. ($1 JO; ask for quantity prices on all NCFC publications.)

l Video:

The Cooperative Story. (Five topics on one tape. Topics

are: The Cooperative Story, Cooperatives: Working for

All of Us, Cooperative Business, Why Cooperatives?

Cooperatives Today, Color/Sound l/2 inch VHS. 1987-

88. $35)

Windows on the World (Increases an awareness and

understanding of the developing world. Color/Sound

l/2 inch VHS. $24)

People Helping People (Emphasizes the importance of

cooperative education. Color/Sound l/2 inch VHS.

$20)

Capper-Volstead (Explains the historic role of the

Capper- Volstead Act. Color/Sound l/2 inch VHS.

$20) Making Things Happen (Highlights the evolution

of cooperative businesses. Color/Sound l/2 inch VHS.

$20)
9. National Credit Union Administration Office of

Administration

1776 “G” Street, N.W.

Washington, DC 20456

l Publications:

Volunteer Organizers’ Guide. 31 pp.

Chartering and Organizing Manual for Federal Credit

Unions, July 1985. (In packages of 10 for $2.25.)

10. National Rural Electric Cooperative Association

1800 Massachusetts Avenue, N.W.

Washington, DC 20036

l PamphletslBrochures:

RuruI Electric Financing Today, 1982. 10 pp. $30.00 per

100.

Lanterns to Lightbulbs-The Rural Electric Coloring Book,

1981.22 pp. $75.00 per 100.

Facts About America’s Rural Electric System, 2-fold pamphlet, December 1981. $12.00 per 100.

People-Their Power, The Rural Electric Fact Book, 1980.

196 pp. $3.75.

Yesterday Today and Tomowow - The Farmer Takes a

Hand, (Marquis Childs, copyright 1952). 1980.178 pp.

$2.25.

49
l Periodicals and Newsletters:

11.

Rural Electrification Magazine, published monthly.

($14.00 per year.)

Rum2 Electric Nezusletter, published weekly, except

biweekly in October, November, December, and

January. (4 pp., $11.00 per year.)

l 16-mm Film:

Quiet Resolution. (Color/sound, 28-l /2 min., 1975.

$75.00 per copy; no charge for rental.)

l SlidelSound Presentation:

Rural Electric Financing Today. (Color, 8 min., 1982.

$20.00.)

l Video:

Rural electric Financing Today. (Color/sound,8 mm.,

1982.3/4 -or 1 /Zinch VHS. 1975. $75.00.)

Quiet Revolution. (Color/sound, 12 mm., 3/4 - or l/2-

inch VHS. 1975. $75.00.)

National Rural Telecommunications Cooperative

P.O. Box 9994

Washington, DC 20016

l Publication:

Uplink, available on request, monthly newsletter.
12. National Rural Utilities Cooperative Finance

Corporation

Woodland Park

2201 Cooperative Way

Hemdon, VA 22071-3025

l Publications:

CFC Report. (Monthly, available on request, 8-l 2 pp.)

CFC Power Review (A review of electric power issues

for rural utilities, quarterly, 8-12 pp.)

CFC Annual Report. (Available on request, published

September of each year.)

CFC Overview Brochure. (Available on request.)

CFC Financial Terms and Definitions. (Reference book.)

CFC Financing for Rural Electrification

l Videos:

Various general interest videos on CFC’s operations

and people.

13. National Telephone Cooperative Association

2626 Pennsylvania Avenue, N.W.

Washington, DC 20037

l Periodicals:

Washington Report, weekly. ($50.00 per year.)

Rural Telecommunications, quarterly. ($20.00 per year.)

Compensation & Benefits in the Independent Telephone

Industry, annually. ($80.00.)

51
Rural Telephone lob Descriptions, published 1986.

($25.00.)

l Video:

Video Connection, quarterly. (30-40 min. $350 per year.)

14. Rural Electrification Administration

14th & Independence Ave., S.W.

Washington, DC 20250

l Publications:

RuraZ Lines-USA: The Story of Cooperative Rural

Electrification. Miscellaneous Publication 821. (Revised

1981,44 pp.)

REA Loans and Loan Guarantees for Rural Electric and

Telephone Service, 1983.10 pp.

15. Rural Telephone Bank

14th & Independence Ave., S.W.

Washington, DC 20250

l Publication:

The Rural Telephone Bank, 1987.10 pp.

15th Annual Report of the Board of Directors Rural

Telephone Bank, 1987.18 pp.

52
16. Agricultural Cooperative Development International

50 F Street N.W.

Suite 900

Washington, DC 20001

17. Federation of Southern Cooperatives

P.O. Box 95

Epes, AL 35460

18. National Cooperative Bank

1630 Connecticut Ave., N.W.

Washington, DC 20009

l Publications:

How to organize II cooperative (Content similar to ACS

publication How to Start II Cooperative with material

revised for non farm cooperatives.)

Newsletters-Bunk Notes (of NCB), and Cooperative

Enterprise (NCB Development Corporation).

Factsheets on financing for different types of cooperatives.

19. National Milk Producers Federation

1840 Wilson Boulevard

Arlington, VA 22201

BOOKS

American Institute of Cooperation Yearbook, published

annually since 1925. (Usually 400 to 500 pp.)

The AIC Yearbook is a comprehensive book on

American agricultural cooperatives and cooperative

53
organizations. Each edition incorporates the results of

a year’s worth of research on action by cooperatives.

The main objective of this book is to provide a wellrounded picture of the current status of cooperatives.

The books are not directed to one specific group but

have value to management, members, and directors; to

educators and students; to educational institutions; to

libraries; and to anyone else who needs information

about U.S. agricultural cooperatives operations.

Contact NCFC for current year contents and price.

The Advance of American Cooperative Enterprise. Joseph

G. Knapp. The Interstate Printers and Publishers, Inc.,

19-27 North Jackson Street, Danville, IL. 61832.1973.

(646 pp. $9.95.) Tells how cooperative organizations

made great steps forward under the unique conditions

that prevailed in the United States from 1920 to 1975.

Cooperative Business Enterprise. Martin A. Abrahamsen.

McGraw Hill book Co. 1976. (491 pp. $15.00.) This is a

discussion of cooperatives in textbook format. It is all

inclusive in content, but oriented to the American

experience.

Cooperatives: Development, Principles, and Management.

El? Roy. The Interstate Printers and Publishers, Inc.,

19-27 North Jackson Street, Danville, IL 61832.1981.

(611 pp. $19.95) Covers all types of cooperatives.

Traces historical development; outlines principles,

issues, and daily operating policies.

The Rise of American Cooperative Enterprise., Joseph G.

Knapp. The Interstate Printers and Publishers, Inc., 19-

27 North Jackson Street, Danville, IL 61832.1969. (523

pp. $8.95) Reveals how cooperative organizations in

the United States gradually took form in distinctive
way as the Nation progressed from frontier conditions

to a strong national economy.

Cooperatives in Agriculture. David W. Cobia. Prentice

Hall, Englewood Cliffs, NJ 07632.1989. (447 pp. $35)

Many cooperatives are struggling through a wrenching adjustment. Traditional organizational linkages

have been destroyed and cooperative principles challenged. A new generation of participants is shaping

the role of cooperatives. It is hoped that the book will

help the reader understand, and even assist in, the

adjustment process.

Cooperative/Credit Union Dictionary and Reference. Jack

and Connie McLanahan. The Cooperative Alumni

Association, Inc., 250 Rainbow Lane, Richmond, KY,

40475.1990. (410 pp. $30) An encyclopedia of the coop

erative world: credit unions, banks for farmers and

consumer cooperatives, cooperative insurance, farm

supply and marketing, business, electric power, consumer goods and services, housing, child care, and

memorial societies.

7’he Fall of the Farm Credit Empire. Ben Sunbury, Iowa

State University Press, Ames, Iowa, 1990. (264 pp.

$34.95) Tells the story of how America‘s farmers built

and gained complete ownership and control of the

Nation’s largest agricultural credit resource and then

lost it, having to return to the U.S. Government for

financial assistance.

C U.S. Government Printing Office : 1991 - 31i-375/40624 55