Abstract

Livestock, Wool, Poultry, and Meat Cooperatives:

Function, Marketing, and Services

T. Fred White, Jr.

ACS Agricultural Economist

This report provides a review of current functions and marketing methods

used by cooperatives handling livestock, wool, poultry, and meats. Data from

201 cooperatives were analyzed by commodity group and divisions within commodity group. Livestock and wool cooperatives were analyzed by sales volume

interval divisions. Poultry cooperatives were analyzed according to primary production: turkeys, eggs, and other processed poultry. The meat cooperatives

were analyzed for two divisions: locker and nonlocker cooperatives.

Functions, services offered by, and marketing techniques used by these

cooperatives are outlined in this report. Differences within and among commodity groups are also discussed. Both established and potential cooperatives may

use this report for performance evaluation or planning.

Keywords: Cooperatives, marketing methods, pooling, services

ACS Research Report No. 118

September 1993
Preface

Cooperatives handling livestock, poultry, and products resulting from their

production differ in the marketing alternatives and services they provide members. The survey data supported this finding. ACS surveyed 201 cooperatives

that market livestock, wool, poultry, and meats. Results of this research are presented in this manuscript.

Survey data, considered across primary commodity groups, reflect differences in the marketing methods used and the intensity of services provided.

Accepted marketing methods and the services producers need vary across,

and within, the livestock, wool, poultry, and meat industries. Marketing methods

used are partially sustained by the industry because of factors such as product

characteristics, producer volume, and producer concentration. Economies of

size and scale in both production and processing influence industry-accepted

marketing methods and the services producers need.

Cooperatives align their functions, marketing methods, and services with

their membership’s needs. This observation is substantiated by differences in

cooperative function, marketing methods, and services within cooperative commodity groups.

Commodities handled, marketing methods used, and services offered differed within the commodity groups. The industry served, cooperative sales volume, and desires of the membership dictate the breadth of services offered by

the cooperatives. Producers arrange all or some of the marketing, handling, and

technical services that cooperatives may offer. Others they gain through cooperative patronage. Cooperatives augment marketing, production, processing,

handling, and other services through offering them to their producer members.
Contents

. . . Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Research Methodology ...................................................................................... 2

Survey Composition ................................................................................ 2

Sampling Methodology ........................................................................... 2

Data Analyses and Usage ...................................................................... 2

Cooperative Stratification ........................................................................ 3

General Findings ................................................................................................ 4

Cooperative Integration ........................................................................... 5

Cooperative Function .............................................................................. 6

Livestock Cooperatives .................................................................................... 11

Functions and Services ......................................................................... 12

Sales Volume ........................................................................................ 19

Wool Cooperatives ........................................................................................... 20

Functions and Services ......................................................................... 21

Sales Volume ........................................................................................ 26

Poultry Cooperatives ....................................................................................... .26

Locations and Membership ................................................................... 26

Functions and Services ......................................................................... 27

Meat Cooperatives ........................................................................................... 30

Locker Cooperatives ............................................................................. 31

NonLocker Cooperatives ...................................................................... 32

Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Appendix ........................................................................................................... 35

Livestock, Wool, Poultry, and Meat Cooperative Survey ..................... .35

ii
Highlights

Analyses were performed on 201 respondent cooperatives according to

primary commodity sales for livestock (103 cooperatives), wool (77), poultry

(13), and meats (8). Some wool cooperatives were analyzed with the livestock

cooperatives because lamb pool sales were greater than wool sales. Some significant findings follow:

l Most cooperatives had only one business location and producer membership.

l Wool cooperatives were the most likely to have only one location and

producer membershif+they also reported the lowest membership eligible to

vote.

l Poultry and meat cooperatives provided the largest average sales volumes and were the most likely to exhibit signs of vertical integration. Wool

cooperatives had the lowest sales volumes and were the least vertically, or horizontally, integrated.

l Livestock cooperatives were the most diverse commodity group with

respect to functions, marketing techniques, and commodities handled.

The livestock and wool cooperatives were each divided into five sales volume divisions for further analyses. Also, poultry cooperatives were analyzed

according to primary production (turkeys, eggs, and other processed poultry).

Locker and nonlocker meat cooperatives were analyzed separately. The following findings generally apply across all commodity groups:

l Cooperatives with lower sales volumes reported lower numbers of business locations with producer members only and fewer members eligible to vote.

l Cooperatives with larger sales volumes generally used more marketing

techniques and offered more services to members.

The cooperatives in each commodity group differed with respect to sales

volume, production, and function. These differences are a reflection of their

members’ needs and financial base necessary to support member services.

Some significant findings within commodity groups follow:

l Larger livestock cooperatives handled more species, used more marketing techniques, and provided more services-especially for financing, risk management, and contractual arrangements.

l Most of the wool cooperatives were small wool pools which offered very

few services. Wool cooperatives with sales between $50,000 - $100,000 were

the least likely to offer member services.

l All of the poultry cooperatives handled processed product. These cooperatives generally were the most vertically integrated of all commodity groups.

The egg and turkey cooperatives were the smallest in terms of membership eligible to vote. The egg cooperatives were the smallest in sales volumes.

l The locker meat cooperatives were much smaller and more alike than

the nonlocker respondents. Very few member services were offered by the locker cooperatives.

l The nonlocker meat cooperatives were very specialized and had much

broader financial bases. Nonlocker cooperatives offered more expertise and

management alternatives to members than did lockers.

. . . 111
Livestock, Wool, Poultry, and Meat Cooperatives:

Function, Marketing, and Services

T. Fred White, Jr.

ACS Agricultural Economist

OVERVIEW

Cooperatives provide producers access to

buyers through marketing alternatives and marketing power that may not otherwise be available.

Some production possibilities and market outlets

might not be accessible to member producers without cooperatives. Many cooperatives also offer various services to producers. Many cooperative member producers do not have the base needed to

access certain marketing channels or to obtain services which may be afforded collectively by coopera tives.

Some marketing methods commonly used

today have only recently been employed. The form

and types of livestock marketed have also changed.

Livestock and poultry producers face a dynamic

industry. Producers must keep pace with industry

changes to remain viable. Auction and terminal

markets have been the predominant marketing

method used by livestock producers in recent

years. Innovative marketing methods, such as

satellite video sales and electronic marketing, have

displaced many sales previously made at auction

or terminal locations. Wool producers now commonly sell their clip by telephone or computer, and

the buyer does not have to be present at the wool

warehouse or auction site. Poultry rarely are sold

live by the cage but now are sold primarily in processed forms.

Many cooperatives offer production contracts

and financing, and quickly adopt new marketing

technologies to better serve their membership.

Others modify established methods to achieve

greater benefits for members.

With the livestock, wool, and poultry industries changing rapidly, it is necessary to find the

extent that marketing methods are used so that

cooperatives may remain abreast of industry adoption. Knowledge of new technologies used by

cooperatives can also provide future direction.

Cooperatives can apply the information in this

report when considering marketing and service

alternatives. This action will help them to remain

competitive and to prepare for the future.

Many producers turn to cooperatives or private companies for services they may need on their

operations. Cooperative services are tailored to

their membership’s unique needs and may vary

considerably from one cooperative to another.

Also, the number and breadth of services depend

on members’ needs and what the cooperative can

support. Some cooperatives may simply offer production equipment or supplies to members, but

others may provide expert advisement and riskmanagement options. Also, many cooperatives

educate their membership on current trends and

industry changes through educational programs

and seminars.

Cooperatives known or thought to market

livestock, wool, poultry, or meats were surveyed by

ACS. Of 369 cooperatives surveyed about the commodities handled, their function, member services,

and marketing techniques used, 201 cooperatives

are described in this report.

OBJECTIVES

The primary objective was to determine the

marketing methods used and the services provided

by cooperatives marketing livestock, wool, poultry,

or meat products.

Additionally, the survey was used to determine

1) the commodities handled by the selected cooperatives, 2) the functions they performed for their member and nonmember patrons, 3) necessary classifying or stratifying data, and 4) general administrative

data to be used for future ACS contact.

1
A second objective was to judge differences in

the cooperatives with respect to commodities handled and sales volume. The survey was designed so

that these differences would be apparent.

A third objective was to introduce ACS to the

cooperatives marketing livestock, wool, poultry, or

meat products.

RESEARCH METHODOLOGY

All cooperatives known or thought to market

livestock, wool, poultry, or meat products were surveyed. Survey data from this project and the ACS

annual survey were then used to stratify and analyze these cooperatives. Analyses were done for all

considered, by commodity handled, and by groups

within the commodities of livestock, wool, poultry,

and meat. Livestock and wool cooperatives each

were divided into five sales volume division

groups for further analyses. Turkey, egg, and other

poultry cooperatives were analyzed separately. The

meat cooperatives were split into lockers and nonlockers for additional analyses. A “followup”

report provided to each respondent outlined its

response versus a composite of similar cooperatives. This report describes survey findings.

Survey Composition

A survey was composed to 1) assess the commodities handled by the cooperatives and their

sales volumes, 2) discover what functions and services were offered to their member and nonmember patrons, 3) determine the services provided, 4)

identify the marketing methods used, and 5) gain

general administrative information. The survey

was designed so that a limited amount of current

ACS information also could be verified-i.e., cooperative name, address, phone number, general

manager, etc.

The survey was comprised of 10 questions

which addressed commodities handled, functions

served, services offered, marketing methods

employed, sales volumes, and general information

about the cooperative (see appendix). Survey data

were used to 1) create an extensive cooperative

database, 2) verify current records, and 3) confirm

sales volume estimates previously made by ACS.

Sampling Methodology

Cooperatives were initially identified as

potential candidates for this project by reviewing

ACS files. Cooperatives were chosen if they were

known or thought to market livestock, wool, poultry, or meats. The criteria used were:

1) livestock, poultry, or wool sales;

2) cooperative names that implied these commodi ties;

3) those judged to market meats; and

4) known handlers of livestock, wool, poultry,

or meats not meeting the above criteria.

The survey was mailed to all 369 cooperatives

that met these criteria. Additional surveys were

sent to those that did not respond-194 cooperatives-after 2 months. Phone surveys were conducted with 42 cooperatives after not receiving

mailed surveys. Data collected by mail and phone

were then entered into a data base and analyzed.

The overall response rate was 81 percent. Only

69 cooperatives did not return surveys or could not

be reached by phone. Data were estimated for two

of these nonrespondents from copies of their annual reports and other ACS surveys. These two cooperatives were included for analyses because of their

relatively substantial sales volumes. The remaining

nonrespondents (67) were dropped from consideration. Therefore, a total of 302 cooperatives (82 percent) were considered for analyses.

Data Analyses and Usage

The cooperatives were grouped by the highest

reported sales volume for livestock, wool, poultry,

or meats. These commodity groups were then separated into divisions within each commodity for further analyses. Once these divisions were defined,

survey data were summarized for each commodity

group, as a whole, and again for each division

within the commodity group.

The results of the analyses by divisions were

used to create confidential “followup” reports for

each respondent. These reports listed the coopera2
tive’s data (as provided on its survey) against the form sales volume, commodity, or functional divisummarized data for its division. This report was sions within each commodity group for secondary

designed so that cooperatives could compare its data analyses (see table 1). Analyses were performed by

to practices used by similar cooperatives in their divisions so that cooperatives with similar funcdivision. This direct comparison could then benefit tion, commodity(ies) handled, and marketing volthe cooperatives during evaluation or planning. ume could be compared.

Livestock and wool commodity divisions were

based on sales volume. Poultry and meat divisions

were based on product and function, respectively.

The poultry cooperatives are divided according to

turkey, egg, or other poultry production. The meat

cooperative locker plants were analyzed separate

from those nonlocker meat processing cooperatives.

Cooperative Stratification

Only 201 out of 302 cooperatives that responded were appropriate for analyses. Some respondents were inactive, discontinued operating, or no

longer organized as a cooperative-13 cooperatives. Another eight respondents had merged into

other cooperatives or had duplicate records. Other

respondents did not provide sales volumes for, or

indicate handling, the commodities surveyed.

All appropriate responses (201) were examined to form commodity groups according to

reported sales volumes for each of the different

commodities. The records were again reviewed to

Table I-Divisions used for secondary analyses

Division Primary Co-ops in Division

number commodity division factor

Sales volume

1 Livestock 13 Less than $100,000

2 Livestock 34 $100,000 to $999,999

3 Livestock 30 $1 million to $9,999,999

4 Livestock 14 $10 million to $99,999,999

5 Livestock 12 Greater than $100 million

6 Wool

7 Wool

8 Wool

9 Wool

10 Wool

24 Less than $10,000

35 $10,000 to $49,999

9 $50,000 to $99,999

4 $100,000 to $999,999

5 Greater than $1 million

11 Poultry

12 Poultry

5 Turkey

4 E99

13 Poultry 4

14 Meats 4

15 Meats 4

Other poultry

Function

Locker

Nonlockers

The sales volumes used to stratify the livestock and wool cooperatives were not adjusted to a

constant time period or fiscal year. Fiscal year sales

volumes were reported for months ending in three

different calendar years. Of all respondents used

for analyses, data were reported for the fiscal years

ending in the calendar years 1990 (93 cooperatives),

1991 (lOl), and 1992 (5). One cooperative did not

provide a fiscal year ending date for their data.

Because sales volumes were used only to form

commodity divisions, the reported figures were

considered appropriate.

Some cooperatives provided sales volumes for

more than one commodity group (see table 2). They

were analyzed, however, only according to their

primary sales commodity and division within that

commodity.

Table 2-Sales volume reports, by primary

commodity

Primary co-ops

Sales volume reports for:

commodity’ in group Livestock Wool Poultry Meats2

Livestock 103 103 14 2 1

Wool 77 2 77 0 1

Poultry 13 1 0 13 0

Meats 8 0 1 0 8

‘Cooperatives could report sales volumes for more than one

selected commodity. Sales reported in each cooperative’s primary

commodity were greater than sales reported for other commodities.

2Meats commodity may include sales of animal byproducts such as

rendered items and hides,
Some respondents indicated that commodities

were handled but did not report sales volumesand vice versa. No estimates for commodities handled or sales volumes were made because of this

discrepancy.

GENERAL FINDINGS

After review of 302 respondent surveys from

the 369 solicited, there were 201 livestock, wool,

poultry, and meat marketing cooperatives that proTable s-Membership composition and number

of locations, by primary commodity

Item Livestock Wool Poultry Meats

Co-ops in survey 103 77 13 8

Percentage of cooperatives

Membership

composition:

Producers only 78.6 90.9 69.2 75.0

Producers and co-ops 14.6 5.2 23.1 0.0

Cooperatives only 4.9 2.6 7.7 12.5

Not reported 1.9 1.3 0 12.5

-- --

Total 100 100 100 100

Number of locations:

One 71.8 90.9 69.2 75.0

Two to five 9.7 6.5 15.4 12.5

More than five 18.4 2.6 15.4 12.5

----

Total 99.9 100 100 100

vided sales volumes and were in business when

surveyed.

More were livestock cooperatives (103) than

wool (77), poultry (13), and meat cooperatives (8)

combined. Across commodity groups, most cooperatives had only producer members and one location (see table 3). There was a big difference

between the number of respondents having only

producer members versus having some, or all,

cooperative membership. This disparity was also

true, but to a lesser extent, for those reporting one

versus mu1 tiple locations.

Membership eligible to vote was reported by

190 of the 201 analyzed respondents. The average

reported was 2,165 members. The reported data

that resulted in this average varied greatly. The

range in eligible reported memberships was from 3

to 90,000. Therefore, reported average membership

numbers should be considered relative to their

variability (see table 4). Livestock cooperatives provided the greatest average for voter eligibility. The

wool cooperatives were definitely the smallest in

voter eligibility.

The reported members eligible to vote varied

greatly within commodity groups (see figure 1).

Not all cooperatives use the same voting eligibility

guidelines-i.e., some cooperatives may go by one

share-one vote while others may award votes on a

patronage basis. Voter eligibility requirements were

not surveyed; therefore, no adjustments were made

to these averages for differing requirements. These

averages should be used only for comparative purposes.

Table s-Voter eligibility, by primary commodity

item Livestock Wool Poultry Meats All reporting

Co-ops in survey 103 77 13 8 201

Co-ops reporting voter eligibility 96 74 13 7 190

Members

Average 3,507 330 3,037 1,552 2,165

Minimum 5 4 3 45 3

Maximum 90,000 14,161 38,500 6,587 90,000

Standard deviation 11,503.o 1,637.6 10,237.g 2,173.6 8,805.l

4
Figure l- Distribution of Number of Members Eligible to Vote I

Over 10,000

Less than 50

Livestock Wool Poutry Meats

Percent of repotting Co-ops

1 Membership eligible to vote was reported by 90 livestock, 74 wool, 13 poultry, and 7 meat cooperatives.

80

60

40

20

0

Cooperative Integration

Most cooperatives sold only one commodityas indicated by reported sales volume. Only 22 of

the 201 respondents reported sales in 2, or more,

commodities (refer back to table 2). Livestock cooperatives were the most likely to handle more than

one species and more than one commodity. All

cooperatives, however, demonstrated a degree of

specificity. Poultry cooperatives were the least likely to handle more than one product. None of the

respondents were horizontally integrated across all

commodities, but some were completely vertically

integrated.

Integration can both increase diversity and

decrease risks of losses across production phases.

Although not a requirement, the likelihood and

extent of integration generally increases with relative sales volume.

Both vertical and horizontal integration were

shown by each commodity group. Vertical integration was most commonly coordination between

production phases from birth to the fabrication of

products directly used by the consumer. Horizontal

integration was usually the handling of other commodities or species.

Vertical integration for the livestock cooperatives was generally coordination between live animal production phases. The livestock cooperatives,

however, were the most likely to be horizontally

integrated across commodities-13.6 percent conducted wool pools.

The wool cooperatives were the least likely to

be vertically integrated; however, one respondent

was both horizontally and vertically integrated.

That cooperative slaughtered livestock, produced

meats, and marketed wool weavings. The only horizontal integration provided by the wool coopera5
tives was the handling of livestock or meat, in

addition to marketing wool. Most commonly, horizontal integration among the wool cooperatives

was provided through the offering of lamb pools.

Complete vertical integration from conception

to the entry of the consumer market (wholesale or

retail in a form used by the consumer) was not

prominent for any of the commodity groups. The

most likely groups to have this organization were

poultry, primarily, and nonlocker meat cooperatives, secondarily. The poultry and meat cooperatives demonstrated very little horizontal integration; however, all of these exhibited some degree of

vertical integration with respect to processing, marketing, and service.

Cooperative Function

The primary function of 87 percent of the

respondents (175 cooperatives) was to market commodities for members. Livestock or poultry were

slaughtered by 17 cooperatives. Most of those that

slaughtered livestock were either poultry or meat

cooperatives (see table 5).

Pooling, commonly used by cooperatives to

increase lot sizes, combines members’ production

in a single sale lot. These pooled lots result in larger and more homogeneous lots than possible individually. More than half (119 of 201) of the respondents used pooling. Pooling was used for both

production and marketing by five of these. Only

one used pooling exclusively for production (see

table 6).

Table S-Marketing and slaughtering functions,

by primary commodity

Primary Cooperatives Commodity Livestock or poultry Marketing

commodity reporting marketing Slaughter and slaughter’

Percentage of cooperatives

Livestock 103 84.5 1.0 1.0

Wool 77 96.1 1.3 1.3

Poultry 13 76.9 61.5 38.5

Meats 8 37.5 87.5 37.5

All used 201 86.6 8.5 5.0

Pooling was most commonly indicated by

wool cooperatives (57 of 77-74 percent). Livestock

cooperatives also widely used this technique (62 of

103-60 percent). Only 6 poultry and meat cooperatives (out of 21 respondents-29 percent) indicated

pooling; however, more of these were expected to

use this technique to assemble meat, poultry, or egg

product shipments.

There was a dramatic difference in the marketing methods employed by the commodity groups

(see table 7) with respect to the number, and specific marketing techniques. Livestock cooperatives

predominantly used auctions, commission companies at terminal locations, and special (or graded)

sales. Wool cooperatives, however, commonly used

special sales. Poultry and meat cooperatives rarely

used these sales techniques, but some meat proTable 6-POOtinCJ activity, by primary commodity

Primary Sale Production Production No Did not

commodity only only and sale pooling answer

Percentage of cooperatives

Livestock 55.3 1.0 3.9 35.0 4.9

Wool 72.7 0.0 1.3 10.4 15.6

Poultry 38.5 0.0 0.0 53.8 7.7

Meats 12.5 0.0 0.0 62.5 25.0

----

Total 59.2 0.5 2.5 27.9 10.0

Table T-Marketing techniques employed, by

primary commodity

Item Livestock Wool Poultry Meat Total’

Total in survey 103 77 13 8 201

Auction

Commission Co.

Special sales

Direct marketing

Central buying

stations

Order buy/sell

services

52 1 1 1 55

14 0 0 0 14

59 19 1 1 79

35 14 5 3 57

19 6 0 1 26

24 3 1 0 28

1 Data in this column are included in the two l&most columns. 1 Some respondents indicated more than one marketing technique.

h
cessing cooperatives might have used these means

to procure livestock for cooperative production.

Direct marketing provides several benefits to

both the seller and purchaser. Direct marketing can

result in 1) reduced transaction/procurement costs;

2) less handling and susceptibility to stress, disease, or deterioration; and 3) more opportunity for

premiums based on reputation, quality, and special

preparation. Direct marketing is becoming more

commonplace as larger lot sizes and special conditioning are demanded. Direct marketing techniques

increasingly apply as production becomes more

specialized or exclusive marketing arrangements

arise.

Direct marketing, central buying stations, and

order buying services were all more commonly

used by livestock cooperatives (table 7). Most meat

cooperatives, however, use some form of direct

marketing between sellers and buyers-often

through phone conversations.

Electronic marketing by phone, computer, or

television was used extensively by livestock and

wool cooperatives but was not indicated by their

poultry or meat counterparts (see table 8).

Livestock cooperatives were the only commodity

group to indicate using video-taped media for consignments. Satellite linkages were indicated by 1

poultry and 13 livestock cooperatives. This poultry

respondent probably used satellite sales for marketing eggs or egg products.

Contracting operations sometimes increase

vertical coordination during production and marTable a--Electronic marketing techniques employed,

by primary commodity

Item Livestock Wool Poultry Meat Total’

Cooperatives

Total in survey 103 77 13 8 201

Electronic

marketing

Video tapes

Satellite

connections

30 28 2 1 61

12 0 0 0 12

13 0 1 0 14

keting. Also, contract purchasing agreements are

commonly found in membership agreements of

small cooperatives to ensure volume and reduced

competition. These agreements also may reduce

price variability when sales prices are incorporated

into contract terms. Contract production is gaining

popularity because it may offer greater product

control, the ability to increase production volume,

and the redistribution of production and price risks

(see table 9).

Most cooperatives acted as an agent during

transactions (139 of 201); however, ownership was

assumed by 28 (see table 10). It is conceivable that

cooperatives could take on both roles depending on

their policies. Ten livestock cooperatives acted both

as an agent only and assumed ownership during

transactions.

Another transaction role was bargaining.

Cooperatives bargained for both commodities (liveTable g-contracting, by primary commodity1

PtirK3-y Used production Offered production Provkted forward

Commodity /purchase kontracts to contracting

agreements rnemben arrangement/assistance

Cooperatives

Livestock 19 12 24

Wool 20 6 6

Poultry 4 5 0

Meats 3 1 1

Total 46 24 3 1

1 Some respondents provided more than one contracting means.

Table 1 o-Transaction role, by primary commodity

Primary

commodity

Acted as Assumed Agent and

agent ownership assumed Unknown

ownership’

Livestock 79

Wool 55

Poultry 2

Meats 3

Total 139

Cooperatives

17 10

6 0

4 0

1 0

28 10

17

16

7

4

44

1 Some respondents indicated more than one marketing technique. 1 Data are also included in two leftmost columns.

7
stock, wool, poultry, and meat) and supplies (see

table 11).

Cooperatives buy livestock, wool, poultry, or

meat for resale or production. This is another transaction role whereby the cooperative acts as the

buyer/seller rather than as an agent, negotiator, or

facilitator. Commodities were purchased for production by 26 respondents and for resale by 23.

Sales of cooperative-owned livestock were primarily indicated by livestock cooperatives (22 of 29

indications). These sales were also noted by 6 of 13

poultry cooperatives-probably for cull or replacement poultry stock. All meat cooperatives indicated meat sales. Also, 6 of 13 poultry cooperatives

indicated meat sales (see table 12).

Cooperatives also finance and invest in production (see table 13). This activity can be on behalf

of individual members or for the total membership

(all members as a whole). Financing member production or purchases is one method; another is

Table 1 I-Bargaining, by primary commodity

Primary

commodity

Livestock

Wool

Poultry

Meats

Total

Bargaining for:

Livestock, wool, Services and

poultry or meats supplies for members

Cooperatives

16 11

17 5

2 3

3 3

38 22

investing cooperative management or capital in

production. Seven livestock cooperatives, one poultry, and one meat cooperative did both financing

and investing in production. Larger volume cooperatives were the most likely to perform these functions.

Table 1 n-Cooperative-owned purchases and sales,

by primary commodity

Primary

commodity

Purchased for: Sales of:

Production Resale Livestock Meat

Livestock

Wool

Poultly

Meats

Total

Cooperatives

17 13 22 1

1 1 0 1

5 6 6 6

3 3 1 8

26 23 29 16

Table Is-Financing and investing, by primary

commodity

Primary

commodity

Financed invested Financed member

member capital or production and invested

production management capital or management

Cooperatives

Livestock 7 4 7

Wool 2 0 0

Poultry 1 3 1

Meats 0 0 1

Total 10 7 9

Table I 4-Management, advice, and educational programs, by primary commodity

Management provided for: Advice offered

Primary commodity

Co-op-owned production Member-owned production Managerial Nutritional

Cooperatives

Livestock 15 11 24 25

Wool 2 0 6 3

Poultry 3 4 4 5

Meats 2 1 2 2

Total 22 16 36 35

Educational

programs or

seminars

47

34

2

2

85

8
Larger cooperatives were more likely to provide management services and technical advice to

producers than small cooperatives. Cooperatives

indicated that management was provided for both

cooperative- and member-owned production.

Cooperatives also indicated that management and

nutritional advice were provided (see table 14).

Educational programs or seminars were more

commonly offered than technical advice. With the

exception of training programs (i.e., professional

and/or college courses), educational programs or

seminars are usually cheaper to provide than maintaining staff with, or contracting for, technical

expertise. Therefore, smaller cooperatives, particularly livestock and wool cooperatives, are more

likely to incorporate these types of programs into

annual or special meetings (table 14).

Risk management is another form of technical

assistance offered by cooperatives. Many marketing cooperatives reduce price risk through market

advice and marketing alternatives that allow prices

to be set during production. Futures market hedging is a commonly used alternative to reduce price

risks. Livestock cooperatives were the only commodity group to indicate appreciable futures market hedging as well as offering futures brokeraging

services to members. They also were the predominant group that indicated that futures transaction

services and cooperative hedging were performed

(see table 15). These activities, like investing and

technical services, tend to be used by larger volume

cooperatives.

Table 1 !+Futures market usage, by primary

commodity

Primary Service Used for Used for

commodity offered member cooperative

to members hedging hedging

Cooperatives

Livestock 12 11 11

Wool 0 1 0

Poultry 0 0 0

Meats 0 0 1

Total 12 12 12

When commodities are marketed, they are

generally evaluated by some means. This evaluation often influences or determines prices received.

Only 27 respondents (21 of these being livestock

cooperatives) indicated that livestock or poultry

evaluation was offered to members. Grading and

weighing are two common means of evaluation,

and many more respondents noted that livestock

were graded or weighed than noted livestock evaluation services (see table 16). Livestock, wool,

meat, poultry, and egg product prices are generally

determined by grade or some other characteristic.

Therefore, it is expected that many more cooperatives perform some type of evaluation service for

members than those which provided indications.

During marketing and processing, livestock

maintenance or care is commonly provided at the

sale site (if different from the producer’s farm).

Only 25 cooperatives indicated that these services

were offered to members (see table 17). Many small

Table 1 s-Livestock and poultry evaluation services,

by primary commodity

-

Primary

commodity Evaluation Grading Weighing

Cooperatives

-

Livestock 21 52 59

Wool 1 2 1

Poultry 3 3 3

Meats 2 1 1

Total 27 58 64

Table 17-Livestock, wool, poultry, and meat

handling services offered to members, by primary

commodity

Primary Maintenance

commodity or care

-

Commodity

transportation facilitated

Livestock

Wool

Poultry

Meats

Total

Cooperatives

20 28

2 23

2 3

1 2

25 56

-

9
producers of livestock and wool do not have haul- prefer to provide their own transportation to

ing trailers or find it difficult to negotiate trans- ensure deliveries and scheduling. Livestock or

portation for livestock, wool, or poultry. Also, poultry transportation was facilitated by 56 responmany cooperatives that process poultry or meats dents.

Table 1 s-Production supplies and equipment Table 1 s-Number of locations of livestock

offered to members, by primary commodity cooperatives, by membership type

Primary Production Production Feed supply

commodity supplies equipment or delivery

Cooperatives

Livestock 15 7 14

Wool 11 2 1

Poultry 4 2 5

Meats 1 0 1

Total 3 1 11 21

Number of

locations

Membership type

Producers Co-ops Total

only only Both Unknown

Percentage of cooperatives

1 65.0 0.0 4.9 1.9 71.8

2to 5 6.8 0.0 2.9 0.0 9.7

More than 5 6.8 4.9 6.8 0.0 18.5

-----

Total 78.6 4.9 14.6 1.9 100.0

Table 2o-Voter eligibility, sales volume reports, and average sales of livestock co-ops, by sales volume

Sales volume in thousands

Item Less than $100 to $1,000 to $10,000 to Greater than

$100 $999 $9,999 $99,999 $100,000

Total

Co-ops in survey

Voter eligibility:

Co-ops reporting

Minimum 25 5

Maximum 356 3,500

Average 105.6 367.6

Standard deviation 94.4 749.6

Reported sales of:

Livestock

Wool

Poultry

Meats’

Average sales:

Livestock

Wool

13

12

13 34

6 4

0 0

0 0

52.2 493.0 3‘416.4 33,101.6 488,530.5 62,579.8

15.1 18.7 38.1 0 N/A 20.2

34

33

30 14 12 103

29 13

Members

29 86

90,000 11,000

3,688.0 3,770.8

16,322.g 3,400.g

Sales volume reports

9 96

42 5

54,000 90,000

18,586.3 3,506.8

15,964.5 11,503.o

30 14 12 103

3 0 1 14

2 0 0 2

1 0 0 1

$1,000’s

1 Meat sales include revenues for hides and other rendered products.

10
Production supplies and equipment are commonly offered by cooperatives (see table 18).

Cooperatives offer these services to achieve

economies of size when purchasing production

inputs and also to make cooperative equipment

available to members that cannot afford their own.

LIVESTOCK COOPERATIVES

Some cooperatives included each eligible

shareholder of member cooperatives, and some

others included each cooperative member as having only one voting right. Therefore, quoted membership numbers in no way imply patronage or the

total number of shareholders-actual or indirect.

These values simply relate the number of members

that can vote at cooperative meetings.

Livestock sales were the primary commodity

volume for 103 cooperatives. Most of these (65 percent) had only producer members and one business

location (see table 19). No response was given for

membership type by two respondents, but they

probably have only producer membership.

Great volume differences existed among livestock cooperatives. Livestock sales volumes ranged

from less than $1,000 to more than $2 billion. Sales

values also were reported for wool (14 respondents), poultry (2), and hides (1) though they were

insignificant when compared to the sales volumes

for livestock (table 20).

Membership eligible to vote was reported by All cooperatives handled at least one livestock

96 respondents. The average number of members specie. Generally, the number of species handled

for these was 3,507 (see table 20). increased with sales volume (see table 21). Most of

Table 21-Species and commodities handled by livestock cooperatives, by sales volume

Sales volume in thousands

item Less than

5100

$100 to

5999

51,000 to

59,999

510,000 to Greater than Total

599,999 5100,000

Co-ops in division 13 34

Species handled:

Beef cattle

Dairy cattle

Goats

Hogs and pigs

Sheep

Horses

Number of livestock species handled:

One

Two

Three

Four

Five

Six

Other commodities handled:

Poultry

Wool

Meats

15.4 52.9 70.0 92.9 100.0 64.1

0 0 16.7 50.0 66.7 19.4

0 0 20.0 71.4 50.0 21.4

30.8 41.2 60.0 92.9 100.0 59.2

53.8 14.7 30.0 92.9 100.0 44.7

0 0 16.7 57.1 41.7 17.5

100.0 91.2 60.0 7.1 0 61.2

0 8.8 16.7 0 0 7.8

0 0 3.3 7.1 25.0 4.9

0 0 3.3 28.6 33.3 8.7

0 0 3.3 28.6 0 4.9

0 0 13.3 28.6 41.7 12.6

0 0 10.0 7.1 0 3.9

46.2 11.8 13.3 0 8.3 14.6

0 0 0 0 8.3 1.0

30 14

Percentage of cooperatives

12 103

11
the largest cooperatives handled at least three

species: beef cattle, hogs and pigs, and sheep. They

also were the most commonly handled among all of

the cooperatives. All those that handled dairy cattle

or goats also handled beef cattle. Only one cooperative exclusively handled horses. Wool, poultry, and

meats also were handled. One large cooperative

indicated livestock slaughter and carcass or other

wholesale meat sales.

Functions and Services

Cooperatives serve their members through

functions designed to meet the members’ needs

and satisfy the cooperative’s goals and charter. The

vast majority of respondents indicated that livestock were marketed for members-87 out of 103.

Most cooperatives acted as an agent for members.

Some indicated, however, that ownership was

assumed during transactions (see figure 2).

Depending on the nature of the transaction, some

cooperatives performed both ownership roles.

Livestock volume needed by buyers and producers grows with farm, feedlot, and packer size.

Larger lots of livestock are preferred by these large

producers because transaction time and costs are

less per head. Also, buyers commonly pay premiums for larger more uniform lots than if the same

livestock were purchased individually.

Pooling livestock is a method commonly used

to assemble larger lots of uniform livestock for sale

or production. When livestock are pooled, relatively small lots of similar livestock from individual

producers are combined to make one large

homogenous lot. Ownership is proportionately

shared according to producer input.

Livestock pooling, as a general rule, becomes

less common for cooperatives as sales volume

increases (see table 22). This is partly due to the

increased labor and administrative requirements of

assembling the pools and bookkeeping. Livestock

pooling was indicated by several of the largest

respondents having cooperative members. These

pooling activities may have been performed by

some of their cooperative members.

More than half the cooperatives (62) indicated

that they pooled livestock. Most, 57 of 62, pooled

livestock for sale only. Pooling for both production

and sales was indicated by four and for production

only by one. Slightly more than one third of the

Figure 2- Livestock Ownership Role of Livestock Cooperatives During Transactions

Did not indicate assumed

ownership or acting as an

agent (16.5%)

Cooperative assumed

ownership (6.8%)

Cooperative assumed

ownership and acted as a

agent (9.7%)

Cooperative only acted as

agent (67.0%)

The numbers of cooperative respondents

are indicated by values in pie slices.

1 2
respondents, 36 of 103, indicated no livestock pooling while 5 did not respond to this question.

The most common livestock pooling characteristic was grade, followed by weight and sex.

Muscling and frame, two components of feeder cattle and pig grades, were also perceived as important characteristics. Breed and origin were considered less important than those just mentioned (see

table 23).

Pooling wool for sale was indicated by three

relatively small volume respondents. The most preferred wool characteristics provided by these three

were grade, weight, and type. One of these respondents also ranked grade as being the second most

preferred.

Some cooperatives buy and/or own livestock

during grazing or finishing. Also, it is not uncommon for livestock to be purchased so that a uniform

group is assembled for cooperative resale and/or

production. Livestock were purchased for both

cooperative production (16.5 percent of livestock

respondents) and resale (12.6 percent). Most of

those cooperatives which indicated buying livestock also indicated selling livestock. Sales of cooperative livestock were indicated by 21.4 percent of

the respondents-22 of 103.

Bargaining is a livestock term commonly used

for negotiating prices. Generally, this service is

done by cooperatives on behalf of the members.

Bargaining for livestock was performed by 16 cooperatives (15 percent of respondents). Supplies were

bargained for by 11. Of these, six bargained for

both livestock and supplies. The largest cooperatives were the most likely to bargain for livestock

(see table 24).

Increasing numbers of livestock appear to be

produced under contract to companies, including

cooperatives. Cooperative contract livestock production was specifically noted for hogs and pigs,

grass cattle, and feedlot cattle. Many of those cooperatives that bought livestock used production/purchasing agreements and offered other

Table x+-Livestock pooling preference profile

for reporting livestock cooperatives

Rank of preference’

Pooling characteristics

1 2 3 4 5 6 7

Preference repotis

Grade 30 8 5 4 3 2 0

Weight 17 20 10 4 2 0 0

Sex 16 6 8 1 5 4 2

Muscling 9 3 6’12 3 3 0

Frame 9 9 7 7 6 2 0

Breed 2 6 4 5 10 12 1

Origin 3 0 2 3 1 3 18

Volume 1 0 0 0 0 0 0

1 Preference rankings were given by 60 respondents. More than

one pooling characteristic could receive the same ranking. The

scale begins with 1 for most important and declines to 7, the

relatively least important characteristic. No differentiation was made

according to livestock specie.

Table 22-Livestock pooling by livestock cooperatives, by sales volume

Item Less than

$100

Sales volume in thousands

$100 to $1,000 to $10,000 to

$999 $9,999 $99,999

Cooperatives

Greater than

$100,000

Total

Pooling for sale

Pooling for production

Pooling for production

and for sale

No pooling performed

Unknown

Total

11 24 18 1 3 57

0 1 0 0 0 1

1 0 0 0 3 4

1 8 11 11 5 36

0 1 1 2 1 5

13 34 30 14 12 103

1 3
investment (or financing) services. The larger volume cooperatives were more apt to conduct or

facilitate contracts for sale or production. They also

were the most likely to finance or invest in production (see table 25).

Production contracts are used as a means to

ensure cooperative participation, volume, or to

reduce risk for the member and cooperative. These

contracts are diverse and are designed according to

the needs of the parties. Offering production contracts to members was indicated by 12 percent of

the livestock cooperatives (12 cooperatives). Most

of these cooperatives reported large sales volumes-half provided sales of at least $300 million.

Forward contracting establishes future production or marketing actions. Forward contracting

is often used to establish a price for livestock to be

delivered at a future date. Forward contracting

arrangement/assistance was noted by 24 respondents.

Table z&-Bargaining by livestock cooperatives, by sales volume

Sales volume in thousands

Item Less than

$100

$looto

$999

$1,000t0

$9,999

$10,000t0 Greater than Total

$99,999 $100,000

Co-ops in division

Bargained for livestock, poultry,

meat or wool

Bargained for services or supplies

13

15.4

7.7

34

2.9

8.8

30 14

Percentage of cooperatives

16.7 7.1

6.7 14.3

12 103

58.3 15.5

25.0 10.7

Table 25-Contracting, financing, and investing by livestock cooperatives, by sales volume

Sales volume in thousands

Item Less than

$100

$100 to

$999

$1,oooto

$9,999

$lo,oooto Greater than Total

$99,999 $100,000

Cooperatives

Total in division 13 34 30 14 12

Offered production contracts

to members

Arrange/assist members

with forward contracting

Used contract production/purchasing

agreements

Invested co-op management

or capital in production

Financed member production

0 3 2 1 6 12

1 2 6 3 12 24

1 4 5 2

0 1 3 2 5 11

0 1 2 3 8 14

103

7 19

Purchased livestock or poultry for:

Production

Resale

Sold co-op-owned livestock or poultry

0 7 3 1 6 17

0 1 4 2 6 13

0 9 4 2 7 22

14
Production/purchasing agreements sometimes require the member to use cooperativeowned livestock and/or other specific production

inputs (feed, supplies, facilities, etc.). These agreements may require the producer to perform contract production for the cooperative, to purchase

inputs, or to market with the cooperative. Often

cooperatives provide some financing or are an

exclusive purchaser of members’ production while

using production/purchasing agreements.

Production/purchasing agreements were used by

19 respondents. Many cooperatives employed a

combination of offering production contracts, forward contracting arrangement/assistance, and/or

production purchasing agreements (see figure 3).

Several cooperatives offer various programs

that serve a production financing function.

Management or capital was invested in cooperative

production by 11 cooperatives, financing member

production or purchases by 14, and both production investment and financing of member production by 7 of these respondents (see table 25).

Direct marketing involves the sale of livestock

directly to the purchaser without using a livestock

terminal or auction market facility. Often, these

arrangements call for livestock to go directly from

the farm to the buyer. Direct marketing may be by

an exclusive arrangement, auction, sealed bid, etc.

The important distinction is that the livestock are

less susceptible to stress or disease since they do

not have to be moved to a central sale site. Direct

marketing methods were used by about one-third

(35) of the cooperatives (see table 26).

Central buying stations are assembly sites

where livestock are purchased and shipped by one

or more purchasers. Central buying stations were

used by 19 cooperatives. All but one also indicated

direct marketing.

Order buyers and dealers fill requisitions

placed with them for specified lots of livestock.

They usually act as brokers; however, it is not

uncommon for them to assume livestock title during transactions. Some of the 24 cooperatives used

order buying/selling services as a marketing techFigure 3---Offering of Production Contracts, Forward Contracting Arrangement/Assistance, and

Production/Purchasing Agreements by Livestock Cooperatives

Agreements only (2.9%)

Forward contracting and

agreements (4.9%)

Forward contracting only

(9.7%)

9

3

Production contracts, forward

-contracting, and agreements

(8.7%)

....... .......... ,.:.,.:.:.,.::. .....

................ ..............

................... .................

..................... .i:‘::::‘:.:::‘::~~~~:

.... .ll//, ,.,.,.,

.............. ...... . , . , _Production contracts and

.......................... ........................ ........................ ...................... ti:.::::;:i:j:j:y agreements (1.9%)

........ ...... Y Production contracts only

(1 .O%)

Production contracts: Co-op offeredproduction contracts

Forward contracting: Co-op offered arrangement/assistance The numbers of cooperative respondents

Agreements: Co-op offeredproduction/purchasing agreements are indicated by values in pie slices.

1 5
nique. Some of these may have been subscribers to

order buyers not affiliated with their cooperative.

Special or graded sales and livestock auctions

were the two most popular marketing techniques

with more than half of the respondents-59 and 52

cooperatives, respectively-using them. Special or

graded sales were especially used by the smaller

cooperatives (table 26). Commission companies are

another form of public “auction” style market.

Commission companies operate at livestock terminals where sellers have the option of which company manages transactions and handles their livestock before sale. Commission companies were

used by only 14 respondents.

Many of the cooperatives used a combination

of special sales, auctions, and commission companies (see figure 4). The most common use of these

market outlets was the combination of special sales

and auctions by 33 cooperatives. Less common was

commission companies sponsoring special or graded sales than auctions (4 cooperatives). All three

outlets were used by four cooperatives.

Marketing technologies are being improved

and coming of age. Electronic marketing by phone,

computer, or television was used by 30 cooperatives; video-taped media for consignments by 12

cooperatives; and satellite marketing (using satellite linkages to broadcast sales) by 13 cooperatives-mostly for cattle. Both satellite and video

usage were more common among the larger cooperatives (table 26). All three techniques (electronic

marketing, video-taped media, and satellite sales)

were used by nine cooperatives. These marketing

techniques will gain popularity as this technology

becomes more accepted.

Risk management services were more commonly offered by cooperatives with larger financial

bases. Risk management was provided through market advice, access to futures and options brokeraging services, feeding/production agreements, and

insurance opportunities. Futures brokeraging was

indicated by 12 cooperatives. Most of these used

futures transaction services for members or for

cooperative hedging (see figure 5). Although futures

hedging opportunities exist for feeder and slaughter

cattle, data suggest that the futures market was

more commonly used to hedge hogs than cattle.

Nutrition and production advice by field representatives is a common form of management

assistance (see table 27). Many of the smaller cooperatives do not have the financial base to provide

these services. Many smaller cooperatives, however, obtain this technical servicing through their

local Cooperative Extension Service representative

or university experiment stations. The service of

providing nutrition advice was indicated by 25

Table 26-Marketing techniques of livestock cooperatives, by sales volume

Sales volume in thousands

Item Less than $looto $1,oooto $10,000 to

$100 $999 $9,999 $99,999

Cooperatives

Greater than

$100,000

Total

Total in division 13 34 30 14 12 103

Direct marketing services 3 11 9 2 10 35

Central buying stations 0 3 6 1 9 19

Order buying/selling services 0 1 6 6 11 24

Special or graded sales 10 19 12 8 10 59

Livestock auction 3 14 15 10 10 52

Commission company 0 2 2 6 4 14

Electronic marketing 4 6 6 4 10 30

Video-tape media for consignments 0 1 0 4 7 12

Satellite linkages for marketing 0 1 2 3 7 13

16
Figure 4-- Use of Special (or Graded), Auction, and Commission Co. Sales by Livestock

Cooperatives

Special & auction (32%)

Commission Co. only (4.9%)

Special only (20.4%)

Auction & Commission Co.

The numbers of cooperative respondents are indicated by values in pie slices.

Figure 5- Futures Contract Use by Livestock Cooperatives

Hedging for cooperative (4)

Futures brokeraging and

hedging for cooperative (1)

Futures brokeraging (2)

Futures brokeraging and

hedging for members (4)

Hedging for cooperative and

b hedging for members (1)

-Hedging for members (1)

Futures brokerage, hedging

for cooperative, and hedging

for members (5)

17
cooperatives and other management advice by 24.

Of these, 17 provided both nutrition and management advisement. In addition, actual management

was provided by 11 cooperatives for memberowned production, and 15 provided management

for cooperative production.

Many livestock terminals, auctions, and special (or graded) sales offer feed, water, and pens for

consignors to use when patronizing a sale. Only 20

cooperatives, however, marked that they offered

livestock maintenance or care to members. Most of

them also offered a combination of other advisement services. One cooperative indicated that stable services were provided.

Most livestock sales provide livestock handling and veterinary diagnostic services (blood

testing, palpation, age, etc.) during sales. Only one

respondent noted providing assistance during liveTable 27-Futures market, advice, and management services of livestock cooperatives, by sales volume

Item

Co-ops in division

Less than

$100

13

Sales volume in thousands

$100 to $1,000 to $10,000 to

$999 $9,999 $99,999

34 30 14

Percentage of cooperatives

Greater than

$100,000

12

Total

103

Futures brokeraging for members

Futures transactions used for:

Co-op hedging

Member hedging

Advice for:

Nutrition

Management

Livestock maintenance or care

0 5.9 0 14.3 66.7 11.7

0 8.8 6.7 7.1 41.7 10.7

0 2.9 3.3 14.3 58.3 10.7

15.4 17.6 26.7 21.4 50.0 24.3

0 5.9 36.7 21.4 66.7 23.3

15.4 17.6 13.3 7.1 58.3 19.4

Provided management for

production owned by:

Cooperative

Members

0 14.7 13.3 14.3 33.3 14.6

15.4 5.9 6.7 7.1 33.3 10.7

Table 28-Evaluation services of livestock cooperatives, by sales volume

Sales volume in thousands

Item Less than $100 to $1,000 to $10,000 to Greater than

$100 $999 $9,999 $99,999 $100,000

Total

Co-ops in division 13 34

Livestock/poultry evaluation 7.7 8.8

Livestock grading 53.8 47.1

Livestock weighing 46.2 50.0

30 14

Percentage of cooperatives

26.7 21.4

46.7 50.0

60.0 57.1

12 103

50.0 20.4

66.7 50.5

83.3 57.3

18
stock loading. These are common services provided pigs. Seven cooperatives offered production equipat livestock markets that many respondents proba- ment to members, 14 supplied or delivered feed,

bly offer, but did not note on the survey. and 15 offered production supplies to members.

Livestock evaluation is a means of assessing an

animal’s condition, quality, and value (see table 28).

This service was a function that some cooperatives

performed through livestock tests (i.e., bull tests and

feeding trials) and on-farm appraisals. Livestock

grading and weighing were two common services

used by cooperatives-often used in tandem. One

smaller cooperative mentioned the availability of

portable scales for members’ use. Facilitation of

packer feedback on livestock production was noted

by one respondent as an evaluation service.

Often, transportation is arranged, rather than

provided, by livestock cooperatives. Transportation

services were indicated by 28 cooperatives (27 percent). Trailer rentals and livestock deliveries were

examples of this service.

Sales Volume

Many cooperatives assist members through

information and seminars by the Cooperative

Extension Service. This is a method commonly

used to entice members to participate in meetings

and maintain involvement. Many larger cooperatives publish periodic newsletters and market

reports. These keep members informed on industry

changes and active within the cooperative.

Educational programs or seminars were provided

by 47 respondents.

The livestock cooperatives (103) were divided

into five divisions by sales volume (table 20).

Analyses were performed for all livestock cooperatives and by each division so that sales volume

characteristics could be identified.

Average membership eligible to vote

increased dramatically as livestock sales volume

increased more than $1 million and again as volume increased more than $100 million.

Production equipment and supplies, including

feed, are commonly offered to members of farm

supply cooperatives. Some livestock marketing

cooperatives also offer these services to members

(see table 29). Examples of supplies and equipment

offered by the cooperatives were veterinary supplies, wool bags and ties, trailers, scales, and feeder

The number of locations also increased as

sales volumes increased, particularly for the largest

cooperatives where all but one had more than five

locations. Smaller cooperatives, reporting $100,000

to $99,999,999, may have included some central

buying stations or assembly points when reporting

the number of business locations. These location

types generally do not provide as much sales volume, per site, as other types of locations such as

auctions or commission companies more commonly found with larger cooperatives.

Table 29-Other services by livestock cooperatives, by sales volume

Sales volume in thousands

Item Less than

$100

$100 to

$999

$1,000 to

$9,999

$10,000 to

$99,999

Greater than

$100,000

Total

Co-ops in division 13 34

Production equipment 0 5.9

Production supplies 15.4 20.6

Feed supply/delivery 0 17.6

Provided or arranged transportation 23.1 14.7

Educational or seminars programs 69.2 41.2

30 14

Percentage of cooperatives

6.7 14.3

10.0 7.1

45.1 14.3

30.0 21.4

33.3 21.4

12 103

8.3 6.8

16.7 14.6

0 13.6

66.7 27.2

91.7 45.6

1 9
All but 3 of the 47 smallest cooperatives exclusively handled one specie. The number of livestock

species handled increased substantially as sales

volumes rose more than $1 million (table 21). The

number of species handled continued to increase to

the largest division (sales volumes of $100 million

or more). Primarily, the cooperatives that handled

wool were small-most reported less than $1 million in livestock sales. Reported wool sales were

generally small and probably were only annual or

seasonal. Although some cooperatives also handled

poultry (4) or meats (l), this service was probably a

substantial activity for only one respondent.

Livestock pooling decreased as sales volumes

increased, except for the largest cooperatives (table

22). Half of the cooperatives reporting $100 million

or more in sales also reported livestock pooling.

Because most of the largest cooperatives had some

cooperative members, some of the pooling indications may have resulted from their cooperative

members’ pooling activities.

Generally, each division’s livestock pooling

preference profiles were similar to the profile for all

livestock cooperatives combined. The division profiles were not expected to exactly follow the cumulative profile because 1) no differentiation was

made among species and 2) the specie mix of

pooled livestock differed within division.

Commonly a cooperative’s financial base

increases with sales volume. A greater financial

base allows the larger cooperatives to use contract

production, investment, and financing. Also the

marketing methods used become more extensive,

specialized, and innovative. This was especially

true for the largest cooperatives (tables 25 and 26).

The ability to provide risk management opportunities and technical assistance or advice increased

with sales volume. This was especially evident for

the largest cooperative division (table 27).

Livestock evaluation and services such as livestock grading and weighing were offered by cooperatives in every division (table 28). These services

are used for practically all livestock sales with the

exception of those sold on a dollars-per-head

basis-very young animals (i.e., feeder pigs and

calves), breeding stock, cow-calf pairs, and horses.

A greater proportion of the very small and the

very large cooperatives provided educational programs or seminars (table 29). The smaller respondents probably incorporate these programs into

annual or seasonal meetings while the larger are

more apt to provide newsletters, fliers, or magazines. Also the smaller respondents may maintain

closer contact with the Cooperative Extension

Service or producer associations that lend speakers

or arrange seminars in conjunction with, or in addition to, these cooperatives.

The extent of marketing services, marketing

alternatives, and production possibilities increased

with financial base and livestock sales volume.

Smaller cooperatives tended to market livestock via

less sophisticated methods and were more narrowly focused. Most of these employed a single market

alternative and handled a single specie.

WOOL COOPERATIVES

Wool was the primary commodity for 77 cooperatives. Most had only producer membership and

one location (see table 30). Five respondents had

two to five locations-the three largest volume

cooperatives are included in these five. Only two

indicated having more than five locations. One of

these two accounted for wool pooling member

locations, and the other probably included assembly points. One cooperative did not indicate membership composition, but it’s believed it had only

producer members.

Membership eligible to vote was reported by

74 respondents (see table 31). The average number

Table so-Number of locations of wool cooperatives,

by membership type

Membership type

Number of

locations Producers Co-ops Total

only only Both Unknown

Percentage of cooperatives

1 87.0 0 2.6 1.3 90.9

2to 5 2.6 2.6 1.3 0 6.5

More than 5 1.3 0 1.3 0 2.6

----

Total 90.9 2.6 5.2 1.3 100

20
of members for these was 330, and only 3 reported

membership greater than 500. One reported more

than 10,000. Without these 3 cooperatives, the average for the other 71 reporting became only 101

members-a more realistic membership number for

typical wool cooperatives.

Sales volume differences among these cooperatives were large.1 Sales volumes for wool ranged

from one 1,000 to millions of dollars (table 31). The

average wool sales volume was $340,857. Only 6 of

77 cooperatives had sales volumes greater than this

average. Most cooperatives (68 of 77) had wool

sales volumes less than $100,000. Sheep marketings

were indicated by five cooperatives, but only two

respondents reported sheep sales volumes, one of

which also marketed meats.

1 No sales volume adjustment was made according to fiscal

year sales volume reported. Wool prices were significantly

greater in 1991 and 1992 than in 1990. Reported sales volumes

for 1990 (37 reported) and 1991 (37 reported) were evenly distributed throughout the sales volume range. Only three

reported sales volumes for fiscal 1992.

Functions and Services

The vast majority of these cooperatives are

small with respect to membership number and

sales volumes. The most common function was to

market wool-74 of 77 indicated that they marketed wool for members. It is expected that all of these

cooperatives perform some marketing function

because all reported positive sales volumes.

Production and marketing supplies and services

are sometimes offered to members by wool cooperatives. Education about current topics in the wool

industry also is usually provided at meetings.

Much less diversity is seen among wool cooperatives than among livestock cooperatives.

A greater number of buyers and sometimes

higher prices, through buyer competition, can be

gained through greater lot sizes or total offerings of

wool. Pooling wool before sale is a way to capture

some of these potential premiums. Typically, when

wool is pooled, the cooperative groups members’

wool together according to grade, type, or some

Table 31-Voter eligibility, sales volume reports, and average sales of wool cooperatives, by sales volume

Sales volume in thousands

Item Less than $10 to $50 to $100 to Greater than

$10 649 $99 $999 $l,O~ Total

Co-ops in survey 24 35 9 4 5 77

Voter eligibility:

Co-ops reporting 21 35 9 4 5 74

Members

Minimum 10 12 26 55 4 4

Maximum 254 450 200 1550 14,161 14,161

Average 66.7 114.9 121.6 440.3 3201 .O 329.6

Standard deviation 64.5 101.2 52.5 640.9 5507.5 1637.6

Sales volume reports

Repot-ted sales of:

Wool 24 35 9 4 5 77

Livestock 1 1 0 0 0 2

Poultry 0 0 0 0 0 0

Thousand dollars

Average wool sales 4.6 21.5 70.1 210.8 4,786.0 341.1

21
other characteristic. Lots of wool are sold and the

proceeds are then distributed to the owners of the

pool in proportion to their share when the wool

was pooled. The cooperative collects the proceeds

and then 1) deducts any administrative and commission costs, 2) divides the gross returns according to each producer’s wool contribution, and 3)

distributes the net returns.

The survey specifically asked about pooling

Table 32-Wool pooling preference profile

for reporting wool cooperatives

Pooling characteristics

Rank of preference1

1 2 3 4 5 6 7

Coopefafives

Grade 18 4 1 0 0 0 0

Type 9 0 0 0 0 0 0

Weight 6300000

Breed 1 2 1 0 0 0 0

Yield 1 1 0 0 0 0 0

Length 0101000

Origin 0 0 2 0 0 0 0

Contamination 0010000

Condition 0010000

1 Preference rankings for wool pooling characteristics were given

by 32 respondents. More than one pooling characteristic could

receive the same ranking. The scale begins with 1 for most

important and declines to 7, the relatively least important

characteristic. Values shown are after adjustment for sheep pooling

responses.

livestock, not about pooling wool. Because of the

confusion caused by the question, no numbers are

reported here on the number who pool. It is expected, however, that the vast majority of the cooperatives pooled wool for sales. Pooling for both production and sale was indicated by one cooperative.

Wool pooling characteristic preferences were

provided by 32 cooperatives, and sheep pooling

characteristics by 2. The most preferred wool pooling characteristics were grade followed by type and

weight (see table 32).

Livestock or wool were purchased by only one

respondent for both cooperative production and

resale. One respondent added value to wool and

lambs through merchandising and slaughter. They

cooperatively produced wool weavings and added

value by making and selling lamb sausage. None of

the respondents indicated sales of cooperativeowned livestock.

Most cooperatives (55 of 77) simply acted as

an agent and did not assume an ownership role

during transactions. Sometimes wool is purchased

from the members by the cooperative before marketing (cooperative resale) or production (i.e., further processing or craft manufacture). Five respondents indicated that they assumed wool ownership

during transactions.

Many membership agreements include production/purchasing agreements. Production/purchasing agreements are contracts that help to

ensure member participation in the cooperative

Table 33-Contracting by wool cooperatives, by sales volume

Sales volume in thousands

Item Less than $10 to $50 to blO0 to Greater than

$10 $49 $99 $999 $1,000

Total

Co-ops in division 24 35 9 4

Percentage of cooperatives

5 77

Used contract production/purchasing

agreements

Offered production contracts

to members

Arrange/assist members in forward

contracting

20.8 31.4 22.2 0 40.0 26.0

8.3 8.6 11.1 0 0 7.8

0 5.7 0 0 80.0 7.8

22
and sales volume. These agreements were used by Direct marketing methods (bypassing public

20 respondents as a marketing technique. Most of auctions or sales) were used by 14 cooperatives.

these were probably agreements to purchase mem- Several respondents used telephone sales techbers’ wool rather than contracts to produce wool niques (see table 34). Often telephone sales are

for the cooperative. made with conference calls.

Contract production is not common among

wool pools. Production contracts were offered to

members by only six cooperatives-7.8 percent. All

but one of those offering production contracts also

indicated that production/purchasing agreements

were used (see table 33).

Forward contracting is a means to establish a

marketing arrangement to be satisfied at a later

date. These arrangements allow producers to lock

in prices, production plans, and marketing alternatives. Forward contracting arrangement/assistance

was provided by six respondents (7.8 percent)-

three also used production/purchasing agreements, and one also offered production contracts to

members (see figure 6).

Some producers consign production or place

requisitions with order buyers to reduce management needs or to gain marketing expertise not

available on their farm. These services are more

commonly used for livestock than for wool. Order

buying/selling techniques were used by only three

respondents. Central buying stations were used by

six cooperatives; however, several of these and

more may have used central assembly points.

Some respondents provided wool storage and

warehousing to enable wool sales at a future time

or forward contracts for delivery at a date when

prices are greater.

Special or graded auctions or sales were used

by 19 wool cooperatives (table 34). It was not discernable from the data whether these sales were for

1) consigned lots that were graded for marketing,

2) sheep or wool sales, or 3) if the sales were seasonal, for special product, or were for production

animal sales. Only one respondent indicated that

auctions were used for rams as a special sale.

Several respondents noted using sealed bids for

pool sales. Because of the nature of wool marketFigure 6- Offering of Production Contracts, Forward Contracting Arrangement/Assistance, and

Production/Purchasing Agreements by Wool Cooperatives

Production contracts and

agreements (6.5%)

Production contracts and

forward contracting (1.3%)

Agreements only (15.0%)

Forward contracting only

(2.8%)

Forward contracting and

agreements (3.9%)

Production contracts: Co-op offeredproduction contracts

Forward contracting: Co-op offered arrangement/assistance

Agreements: Co-op offered production/purchasing agreements

The numbers of cooperative respondents

are indicated by values in pie slices.

23
ing, the respondents did not use commission companies at a terminal location.

Marketing technologies are being improved

and coming of age. Electronic marketing by phone,

computer, or television was the most popular marketing technique (see table 34). Electronic marketing was used by 28 of 77 cooperatives. Some of the

respondents wrote in comments explaining the

medium used-telephone, computer, or television.

The comments implied that telephones were more

commonly used for marketing than computers or

television. While some did use computer marketing, televised wool sales were probably not used.

This is partially supported by the fact that no indications for using video-taped media or satellite

linkages during marketing were made.

Only two cooperatives indicated that they

financed member production/purchases. At least

one of these used advances to members on product

marketed through the cooperative. No respondents

indicated investment of cooperative management

and/or capital in production. One cooperative indicated that they assisted members when obtaining

grazing leases.

Often cooperatives will bargain for prices of

wool, products, or services for members.

Bargaining for livestock or wool was noted by 17

respondents. Only five bargained for services or

supplies, and only three bargained for both commodities and services or supplies (see table 35).

Because many wool cooperatives use central

assembly points, it is common for them to provide

wool transportation to a sale site, packaging (i.e.,

baling) point, or warehouse facility. Twenty-three

cooperatives provided or arranged commodity

transportation. Commodity transportation was priTable %+-Marketing techniques of wool cooperatives, by sales volume

Sales volume in thousands

Item Less than $10 to $50 to $100 to Greater than Total

$10 $49 $99 $999 $1,000

Cooperatives

Total in division 24 35 9 4 5 77

Direct marketing services 2 6 2 1 3 14

Order buying/selling services 0 0 1 0 2 3

Central buying stations 3 1 0 0 2 6

Special or graded sales 6 6 2 2 3 19

Electronic marketing 11 14 0 3 0 26

Table %-Bargaining and transportation services by wool cooperatives, by sales volume

Sales volume in thousands

Item Less than $10 to $50 to $100 to Greater than

$10 $49 $99 $999 $1,000

Co-ops in division 24 35 9 4 5

Percentage of cooperatives

Bargained for livestock,

poultry, meat, or wool 20.8 22.9 0 25 60

Bargained for services or supplies 4.2 2.9 0 25 40

Provided or arranged transportation 33.3 22.9 22.2 25 60

Total

77

22.1

6.5

29.9

24
marily provided by lower volume cooperatives (see

table 35).

Risk management, through futures transaction

services for members, was provided by only one

respondent. This cooperative, however, did not

indicate that futures brokeraging services were

offered. Since wool is not traded on the futures

exchange, hedging services would not be expected.

None of the cooperatives indicated that futures

transactions were used for cooperative hedging.

Management was provided by two cooperatives for cooperative-owned production. Both of

these cooperatives were small-management was

probably for wool preparation before marketing.

No cooperatives indicated that management was

provided for member-owned production.

Small cooperatives generally do not provide

expert technical advice or field representatives on a

routine basis because of administrative and cost

constraints (see table 36). Nutrition and production

advisement were not commonly offered by wool

cooperatives. Management advisement was offered

by six and nutrition advisement by only three

respondents. One respondent noted giving market

advice. Livestock maintenance or care was offered

by only two cooperatives. One unique respondent

offered nutrition advice, management advice, and

livestock maintenance or care-they also slaughtered sheep and sold meat.

Educational programs for members are a commonly used tool to keep members active.

Educational programs or seminars were provided

by 34 respondents (see table 36). One cooperative

noted participating in wool promotion, exhibitions,

and 4-H programs. Another noted that shearing

schools were sponsored. Lamb-tasting activities

were sponsored by one respondent.

Production equipment and supplies, including

feed, are commonly offered to members of farm

supply cooperatives, and some wool marketing

cooperatives also offer these products to members

(see table 37). Eleven respondents offered production supplies to members, and two of them offered

production equipment. Generally, equipment and

supplies include veterinary supplies, shearing

equipment, and wool bags and ties. Some respondents also indicated that sheep shearing was provided or coordinated. Only one cooperative indicated that feed was supplied or delivered.

Livestock evaluation was only indicated by

one cooperative. Ram testing and flock grading,

both means of livestock evaluation, however, were

noted by other respondents. Livestock grading was

offered by two respondents-one of these also

offered livestock weighing.

Wool evaluation was indicated by one respondent. Another noted that wool core samples were

taken of members’ clip for analysis. Two cooperatives noted that wool was graded. Probably more

than these two graded wool for marketing purposes. Wool weighing was also noted; however, it is

expected that all of these cooperatives weighed

members’ wool or obtained those weights from

another source.

Table as-Advice and management services by wool cooperatives, by sales volume

Sales volume in thousands

Item Less than $10 to $50 to $100 to Greater than

$10 $49 $99 $999 $1,000

Total

Co-ops in division 24 35

Nutrition advice 4.2 2.9

Management advice 8.3 0

Livestock maintenance or care 0 2.9

Educational or seminars programs 45.8 42.9

9 4

Percentage of cooperatives

0 25

0 25

0 25

33.3 75

5 77

0 3.9

60 7.8

0 2.6

40 44.2

25
Sales Volume

The 77 wool cooperatives were divided

according to 5 sales volume intervals. Analyses

were performed by division and for the complete

commodity group.

Grade was definitely the most preferred wool

pooling characteristic (table 32). Wool type (usually

in relation to white-face versus black-face) was the

second most popular. This was especially seen

among those with sales less than $50,000. Low volumes, potential small lot sizes, and less available

cooperative grading expertise all are possible reasons for pooling by type. Weight was also chosen

as an important characteristic; however, these

responses may have been intended to represent

sheep pooling preferences.

The primary function of these cooperatives is

to market wool for members-indicated by all but

three. Although services were offered by many

respondents, cooperatives reporting wool sales of

$50,000 to $99,999 offered few services. Livestock or

wool was bargained for by 17 respondents (table

35); however, this function most likely was only for

price negotiation. Most acted solely as an agent

during transactions (55 of 77), although ownership

was assumed by 6.

Often, wool is offered to smaller groups of

buyers or to only selected buyers as compared to

livestock sales. Therefore, it is not surprising that

electronic marketing was the most indicated

method used, especially for smaller cooperatives

(table 34). Most indicating electronic marketing

reported less than $50,000 in wool sales-25 of 28.

Many of these commonly use telephone conference

calls when marketing wool.

Transportation services generally are for wool

assembly or delivery to buyers. Transportation services were indicated by 23 respondents.

Cooperatives with wool sales below $30,000 represented 16 of them (table 35).

Wool cooperatives are primarily geared to

marketing wool and not servicing members’ daily

production needs. Most are small, market seasonally, offer few services, and employ only one marketing technique. More than three-quarters of them

reported sales below $50,000 (table 31). The marketing methods were generally designed for seasonal

marketing when little or no capital is tied up in

facilities or annual salaries for marketing teams.

These cooperatives, like smaller livestock cooperatives, commonly employed only a single marketing

alternative for members. The largest cooperatives

(sales more than $1 million), however, generally

employed more marketing methods than the smaller ones (table 34).

POULTRY COOPERATIVES

Locations and Membership

All 13 cooperatives indicated that poultry was

handled except for one, which indicated handling

meats. Hogs and pigs were also handled by one

cooperative. Cooperative membership was primarily only made up of producers, and most had only

one business location (see table 38).

Table w-Production supply and equipment offerings to members by wool cooperatives, by sales volume

Sales volume in thousands

Item Less than $10 to $50 to $100 to Greater than

$10 $49 $99 $999 $1,000

Total

Co-ops in division

Feed supply/delivery

Production equipment

Production supplies

26

24 35

0 0

4.2 0

29.2 2.9

9 4

Percentage of cooperatives

0 25

0 0

0 0

5 77

0 1.3

20 2.6

60 14.3
All cooperatives reported membership numbers. Generally, these cooperatives have few members eligible to vote (see table 39). Sixty-nine percent (9 of 13) indicated less than 100 eligible

members. But one respondent reported those eligible to vote in the tens of thousands. This was the

only respondent reporting over 500 eligible members. The remaining three cooperatives reported

between 100 and 500 eligible members.

There is a tremendous range in reported sales

volume for these cooperatives. Sales volumes

ranged from 5- to P-digit values (table 39). Poultry

Table se--Number of locations of poultry

cooperatives, by membership type

Number of

locations

Membership type

Producers co-ops

Total

only only Both

Percentage of cooperatives

1 46.2 7.7 15.4 69.2

2to 5 7.7 0 7.7 15.4

More than 5 15.4 0 0 15.4

Total 69.2 7.7 23.1 100

Table 3s-Voter eligibility and average sales volume

of poultry co-ops, by primary product handled

Turkeys ESSs

Other

pouftry

Total

Co-ops in division 5

Voter eligibility:

Co-ops reporting 5

4

4

Members

4 13

4 13

Minimum 4 3 66 3

Maximum 107 111 38,500 38,500

Average 49.6 30.8 $778.3 3,037.2

Standard

deviation 35.0 46.3 16,583.3 10,237.S

Thousand dollars

Average poultry

sales 72,793.4 32,500.O 236,388.4 110,732.4

processing cooperatives must handle great volumes

to compete in a commodity industry that is very

concentrated. These higher volumes provide

economies of size and scale, which must be realized

for the cooperatives to remain viable. Thus, it is not

surprising that these cooperatives have such high

sales volumes. The average poultry sales volume

was $110,732,351. All of the cooperatives but one

had sales volumes more than $1 million. Only two

cooperatives had sales volumes more than the average, and one reported only a 5-digit sales volume.

Functions and Services

Three primary commodities were handled by

these cooperatives: turkeys, eggs, and other processed poultry (birds). The basic function of the

poultry cooperatives was to coordinate production,

processing, and marketing. The poultry cooperatives are much more vertically aligned than the

livestock or wool groups.

Slaughtering livestock and poultry or purveying meat was indicated by 8 of the 13 respondents;

1 federated turkey cooperative and the 4 egg marketing cooperatives did not slaughter. Those that

marketed eggs most probably performed some processing function ranging from washing and candling to adding value by producing processed egg

products.

All but one of the 13 cooperatives are expected

to market poultry for members; however, only 10

indicated this. The remaining cooperative probably

marketed poultry to members.

Commodity ownership was assumed during

normal transactions by four respondents. More

poultry cooperatives, however, probably took title

to product at some time during processing before

shipment. Two turkey marketing cooperatives

acted solely as an agent during transactions and

did not assume ownership. No ownership role during transactions was provided by the remaining

seven respondents (see table 40).

Few market niches exist in the turkey, broiler,

and egg industries. But one of the cooperatives in

this group is definitely geared toward a niche rather

than a commodity market. One respondent serves a

niche market with squabs and other game birds.

27
The survey specifically asked about pooling

livestock; however, five respondents indicated

pooling for sale (see table 41). No pooling was indicated by seven cooperatives, and one did not

respond to the question on pooling. The positive

responses to pooling livestock were assumed to be

meant for poultry and/or egg products.

Pooling preferences were reported by three for

turkeys, one for squabs, and two for eggs. One of

the two respondents that reported egg pooling

preferences indicated that pooling was not used,

and the other did not respond to the question on

pooling (see table 41).

Only grade, weight, and sex were provided as

turkey pooling preferences. Grade received two

Table 40-Poultry cooperative transaction role,

by primary product handled

Turkeys Eggs

Other

poultly Total

Co-ops in division 5 4 4 13

Percentage of cooperatives

Assumed ownership 40 25 25 30.8

Acted solely as an agent 40 0 0 15.4

Both 0 0 0 0

Unknown 20 75 75 53.8

Table 41-Pooling by poultry cooperatives,

by primary product handled

Turkeys Eggs

Other

poultry Total

Co-ops in division 5 4 4 13

Percentage of cooperatives

Pooling for:

Sale only 60 25 25 38.5

Production only 0 0 0 0

Production and sale 0 0 0 0

No pooling 40 50 75 53.8

Pooling unknown 0 25 0 7.7

Provided pooling

characteristic

preferences 60 50 25 46.2

most preferred marks. Weight received a first and

second order of preference. Sex was chosen as the

third most preferred by one cooperative. Grade

was the primary pooling preference given by the

two that pooled eggs.

Cooperative management or capital was

invested in production by four respondents.

Member production or purchases were financed by

two cooperatives. One of these both invested in

production and financed members. All that invested in production or financed members also purchased livestock or poultry for cooperative production (see table 42).

Six respondents purchased livestock or poultry for resale. All of these but one also sold coopera tive-owned lives tack or poultry One respondent

indicated that livestock or poultry were purchased

for cooperative production and that cooperativeowned livestock or poultry were sold; however,

they did not indicate purchases for resale.

Table 42-Investment, purchase, and sales by

poultry cooperatives, by primary product handled

Item Turkeys Eggs

Other

poultry Total

Co-ops in division 5

Invested co-op

management or

capital in production

Financed member

production

Purchased livestock

or poultry for co-op:

Production

Resale

Sold co-op-owned

Livestock or poultry

Sold carcasses or

other wholesale

meat products

Slaughtered livestock

or poultry, or

purveyed meat

40 2 5 2 5 30.8

2 0 0 2 5 15.4

40 2 5 5 0 38.5

40 7 5 2 5 46.2

40 5 0 5 0 46.2

6 0 0 7 5 46.2

8 0 0 100 61.5

4 4 13

Percentage of cooperatives

28
Carcasses or wholesale meat product sales

were indicated by six cooperatives-all of which

also slaughtered livestock or poultry. All but two

which sold meat also sold cooperative-owned livestock or poultry (table 42).

Many membership agreements include production/purchasing agreements between the cooperative and the member. Production/purchasing

agreements are contracts which help to ensure

member participation in the cooperative and sales

volume. Four respondents used these agreements

as a marketing technique; five respondents offered

production contracts to members; and three poultry

slaughterers used both contract production/purchasing agreements and production contracts (see

table 43). For these cooperatives, the agreements

probably were for contract production of cooperatively owned birds. Forward contracting arrangement/assistance was not provided by any of the

respondents.

Direct marketing methods were used by three

of the four egg marketing cooperatives and two of

the five turkey marketers-a total of five. One of

these used electronic and satellite technology for

marketing while another used special or graded

sales as a marketing technique (see table 44).

Electronic marketing was used by two cooperatives. Only one respondent used order

buying/selling services. Central buying stations or

commission companies were not used by these

cooperatives. Only one respondent indicated that

auctions were used and locker services were proTable 43-Contracting by poultry cooperatives,

by primary product handled

Turkeys Eggs

Other

poultry Total

Co-ops in division 5 4 4 13

Percentage of cooperatives

Used contract

production/purchasing

agreements 20 25 50 30.8

Offered production

contracts to members 60 0 50 38.5

vided; however, auction use could have been to satisfy their slaughtering activities.

Bargaining for services or supplies was noted

by three respondents. Two respondents bargained for

livestock or poultry. The bargaining performed by

these two cooperatives was most likely for replacement poultry or for price negotiation purposes.

Production supplies and equipment were

offered to members by four and two cooperatives,

respectively. Feed supply and delivery were offered

to members by five respondents. Transportation

was provided by three cooperatives-two of which

bargained for livestock or poultry (see table 45).

Because the poultry and egg industries typically

have large firms and are processor-driven, probably more also provide or arrange transportation.

Neither risk management nor futures market usage

were indicated by respondents.

Management was provided for memberowned production by four respondents and for

cooperative-owned production by three. Two provided management for both. Four respondents

indicated that management advice was offered to

members-all but one also indicated that management was provided for member- or cooperativeowned production (table 45).

Nutrition advisement was offered by five

respondents-three of these also offered feed supTable 44-Marketing techniques of poultry

cooperatives, by primary product handled

Item Turkeys Eggs

Other

poultry

Total

Co-ops in division

Direct marketing

services

Electronic

marketing

Satellite linkages

for marketing

Special or graded sales

Order buying/selling

services

Livestock auction

5 4 4 13

Percentage of cooperatives

0 38.5

0 25 25 15.4

0 25 0 7.7

0 25 0 7.7

0 25 0 7.7

0 0 25 7.7

29
ply or delivery and management advice. Livestock

maintenance or care was offered by only two cooperatives, both of which also offered management

advice and management for member-owned production (table 45).

Some of these cooperatives maintain close

production ties with their producers/members.

Three offered production supplies, management

advice, nutrition advice, and feed supply or delivery in combination. Production equipment was also

offered to members by two of these (table 45).

Livestock or poultry evaluation was offered to

members by three respondents. Two of these also

provided weighing and grading services (see table

46). Another cooperative indicated that weighing

and grading services were provided but did not

indicate livestock or poultry evaluation.

Educational programs or seminars were offered by

only two respondents.

Table 45-Production and marketing services of

poultry cooperatives, by primary product handled

Turkeys Eggs

Other

poultry Total

Co-ops in division 5 4 4 13

Percentage of cooperatives

Bargained for:

Livestock, poultry,

meat or wool 20

Services or supplies 20

Offered members:

Production supplies 40

Production equipment 0

Feed supply/ delivery 20

Provided or arranged

transportation 20

Management advice 40

Nutrition advice 20

Livestock maintenance

or care 40

Provided management for:

Co-op-owned

production 20

Member-owned

production 60

25.0

50.0

25

25

25

25

25

50

0

0

0

0 15.4

0 23.1

25 30.8

25 15.4

75 38.5

25 23.1

25 30.8

50 38.5

0 15.4

50 23.1

25 30.8

Poultry cooperatives are relatively large, by

design, in order to be competitive in their industry,

but some market niches exist. The main objective of

the cooperatives is to process and/or market poultry products. These cooperatives are more geared

to vertical integration than those of other commodity groups. This organizational structure is not

uncommon in the poultry industry and is one of

the factors enabling these cooperatives to remain

viable competitors.

MEAT COOPERATIVES

Of eight meat cooperatives, six had their

membership primarily made up of producers and

operated with only one location. One had only

cooperative members and more than five locations.

The remaining respondent did not reply to the

membership question though it is expected that

only producer members exist. This cooperative

indicated having from two to five locations.

Seven cooperatives reported membership

numbers; four of them reported 500 or fewer members eligible to vote (see table 47). The other three

cooperatives each reported 1,500 or more members.

Seven cooperatives indicated that meats were

handled and livestock were slaughtered. Every

respondent sold carcasses or other wholesale meat

products. All livestock species listed on the survey,

except horses, were handled by at least one of the

respondents. None handled poultry, but one handled wool (see table 48). Only three of the cooperaTable 46-Evaluation and educational services of

poultry cooperatives, by primary product handled

Item Turkeys Eggs Other

poultry Total

Co-ops in division 5 4 4 13

Percentage of cooperatives

Livestock/poultry

evaluation 60 0 0 23.1

Livestock grading 60 0 0 23.1

Livestock weighing 60 0 0 23.1

Educational programs

or seminars 20 25 0 15.4

30
tives indicated that commodities were marketed for

members, and at least four of those that did not

indicate marketing for members probably marketed

meat to their members.

The range in reported sales volumes was

tremendous. Sales volumes ranged from 5- to 9-

digit values. The average meat sales volume was

$108,275,469 (table 48). Only two cooperatives,

however, had sales volumes more than $1 million,

and only one cooperative had a 5-digit sales volume. No sales volumes were reported for livestock

or poultry.

Locker cooperatives made up half (4) of this

commodity group. They will be discussed separately from nonlocker cooperatives because they are so

similar in function and service.

Locker Cooperatives

Locker cooperatives slaughter and process

meats for sale and/or customers’ own use. They

Table &‘-Number of locations, membership type,

and voter eligibility, by meat cooperative type

Item Lockers Nonlockers Group

Total in division 4

Number of locations:

1

2to5

Over 5

4 2 6

0 1 1

0 1 1

Membership type:

Producers only

Producers and

co-ops

Co-ops only

4 2 6

0

0

Voter eligibility:

Co-ops reporting 3

Minimum NIA

Maximum NIA

Average 727.0

Standard deviation 561.9

Cooperatives

4

0

1

4

Members

45 45

6,587 6,587

2,171 .o 1,552.l

2,671.5 2,173.6

8

0

1

7

also provide locker services. These cooperatives

generally cater to a local area and are relatively

small in sales and service volumes. Livestock production services, if offered, are limited in scope (see

table 49).

The four locker cooperatives were similar in

function, service, and size. All had only one location and producer members. Only three reported

membership eligible to vote, ranging from 181 to

1,500. All the cooperatives reported sales and/or

service income between $100,000 and $200,000.

Their specific functions were custom processing, locker rentals, and retail meat sales. These

cooperatives slaughtered livestock, handled meats,

and sold carcasses or wholesale meat products, but

did not offer livestock management, care, equipment, or supplies.

Table 48-Commodities and number of species

handled of meat co-ops, marketing indications,

and sales volumes, by meat cooperative type

Item Lockers Nonlockers Group

Coopera ties

Total in division 4 4 8

Marketed commodities

for members 0 3 3

Species handled:

Beef cattle 2 0 2

Dairy cattle 1 0 1

Goats 1 0 1

Hogs and pigs 1 1 2

Sheep 1 0 1

Number of

species handled:

One 0 1 1

Two 1 0 1

Four 1 0 1

Other commodities

handled:

Wool 0 1 1

Meats 4 3 7

Thousand dollars

Average meat sales 141.3 216,409.6 108,275.5

31
Only two cooperatives indicated handling

beef cattle. One of these also handled hogs and

pigs, and the other also handled dairy cattle, sheep,

and goats (table 48). Because they all slaughtered

livestock, probably at least one of the livestock

species listed was handled by the two that did not

indicate specie(s) handled. No indications were

given for livestock pooling.

Livestock and/or poultry and services and/or

supplies were both bargained for by two respondents, probably to procure livestock for slaughter

and production equipment for the cooperative. One

Table 49-Pooling and transaction role of meat

cooperatives, by meat cooperative type

Item Lockers Nonlockers Group

Total in division 4

Livestock pooling:

For sale only

None

Unknown

0

2

2

Ownership during transactions:

Assumed ownership

Acted solely as an agent

Unknown

0

0

4

Purchased livestock or

poultry for co-op:

Production

Resale

1

Bargaining for:

Livestock, poultry, meat or wool

Services or supplies

2

2

Invested co-op management

or capital in production

Financed member production

Slaughtered livestock, poultry,

or Purveyed meat

Sold co-op-owned livestock

or poultry

Sold carcasses or other

wholesale meat products

Offered production supplies

to members

0

0

4

0

4

0

Cooperafives

4

1

3

0

1

3

0

2

2

1

1

1

1

3

1

4

1

8

1

5

2

1

3

4

3

3

3

3

1

1

7

1

8

1

cooperative indicated that livestock were purchased for cooperative production and resale.

Livestock auctions were used for procurement

purposes by one of the respondents. This was the

only livestock marketing means noted.

Nonlocker Cooperatives

Distinct differences existed among the four nonlocker meat cooperatives. One was a large meat company that slaughtered hogs, two were much smaller

and slaughtered lambs, and the remainder rendered

livestock and marketed the end products. They all

sold carcasses or wholesale meat products. The three

cooperatives that slaughtered livestock each acted as

an agent while marketing meats for members.

The lamb-slaughtering cooperatives each had

only producer members and one location. They

reported 50 or fewer members eligible to vote and

were the smallest cooperatives in terms of both size

and sales volume. The other two cooperatives

reported multiple locations (table 47). One of these

reported all cooperative members; however, each

reported over 2,000 members eligible to vote.

The meats industry is similar to the poultry

industry with respect to firm size and concentration, but more potential exists for niche markets

among red-meat purveyors. The lamb cooperatives

serve niche markets to some extent, but the other

two definitely serve commodity markets.

Therefore, the high sales volumes exhibited and the

range in sales volumes are not surprising. Meat and

meat product sales ranged from 6 to 9 digits. Each

of the lamb cooperatives had 6-digit sales, and the

others had 8- or 9-digit sales. One cooperative indicated that wool was handled but did not provide

the sales volume.

The survey specifically asked about pooling

livestock. One respondent indicated livestock pooling was used for sale and provided pooling preferences for sheep. The remaining three indicated that

livestock were not pooled for production or sale

(table 49). It is likely, however, that all of these

cooperatives assembled meat and meat products

from more than one producer member’s production before meat shipment or sale-before or after

the cooperative assumed ownership.

32
Only one cooperative invested cooperative

management or capital in production and financed

member production/purchases. Livestock or poultry were bought for cooperative production by two

respondents. Livestock or poultry were purchased

for cooperative resale by two respondents. One of

these respondents bought livestock for both cooperative production and resale. One respondent

indicated bargaining for livestock and services or

supplies and also indicated sales of cooperativeowned livestock (see table 49).

Contract production/purchasing agreements

were used as a marketing technique by three

respondents. One of these also indicated that production contracts were offered to members, and

another offered forward contracting arrangement/assistance (see table 50).

Management was provided for cooperativeowned production by two respondents. These

offered several management and technical services

to their members. Each of these offered management advice, nutrition advice, livestock evaluation,

and educational programs or seminars. One cooperative noted that genetic advisement was provided as a service. This advisement was used to coordinate production schedules. One of these

cooperatives also provided management for member-owned production (see table 51).

Livestock maintenance or care and weighing

were provided by one of the respondents. This

respondent also offered feed supply or delivery

and production supplies to members (see table 52).

Other services were risk management using futures

Table 5O-Contracting by meat cooperatives, by

meat cooperative type

Item Lockers Nonlockers Group

Cooperatives

Total in division 4 4 8

Used Contract production/

purchasing agreements 0 3 3

Offered production contracts

to members 0 1 1

Arrange/assist members

in forward contracting 0 1 1

transactions for cooperative hedging, custom processing, and livestock grading. Transportation was

provided or arranged by two cooperatives.

Direct marketing methods were used by three

respondents. Electronic marketing and central buying stations were used by the remaining respondent (see table 53).

SUMMARY AND CONCLUSIONS

The cooperatives differed dramatically across

commodity groups with respect to their function,

Table 5i-Management, advice, evaluation, and

education services of meat cooperatives, by meat

cooperative type

Item Lockers Nonlockers Group

Cooperatives

Total in division 4 4 8

Provided management for:

Co-op-owned production 0 2 2

Member-owned production 0 1 1

Offered advice for:

Management 0 2 2

Nutrition 0 2 2

Livestock/poultry evaluation 0 2 2

Offered educational programs

or seminars 0 2 2

Table 5z-Other services provided by meat

cooperatives, by meat cooperative type

Item Lockers Nonlockers Group

Cooperatives

Total in division 4 4 8

Livestock maintenance or care 0 1 1

Feed supply/delivery 0 1 1

Futures transactions

for hedging co-op 0 1 1

Provided or arranged

transportation 0 2 2

Livestock grading 0 1 1

Livestock weighing 0 1 1

33
Table !x-fvlarketing techniques of meat

cooperatives, by meat cooperative type

Item Lockers Nonlockers Group

Cooperatives

Total in division 4 4 8

Direct marketing services 0 3 3

Electronic marketing

and central buying stations 0 1 1

Auction 1 0 1

marketing methods used, and services offered.

Reported sales volumes ranged greatly within each

commodity group as did other aspects of cooperative organization and operations. Cooperative differences and unique features enable them to meet

their members’ needs while competing within their

industry.

Livestock cooperatives primarily marketed

livestock for members. This group was the most

diverse and contained a greater variety of cooperative operations than the other groups. Basically, the

wool cooperatives marketed members’ wool-usually through pooling. The wool cooperatives were

the most homogenous within commodity group

and were relatively small compared to the other

cooperatives considered.

Poultry and meat cooperatives were more apt

to perform processing functions than their livestock

and wool counterparts. They were relatively specific in function. Poultry and meat cooperatives were

either 1) very large in volume and served commodity markets or 2) relatively small (compared with

meat or poultry processors) and served niche markets. The locker cooperatives were very homogenous and did not offer many member services.

The diversity shown by the respondents

exhibits their attention to members’ needs, the

industries they serve, and the changes in today’s

agricultural marketplace. Their specialization was

demonstrated by the functions performed, marketing methods used, and services provided. These

cooperatives must continue to be cognizant of

member needs and industry changes. They must be

progressive to remain competitive in the future.

34
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 farmer

Cooperatives magazine. All programs and activities are conducted on a

nondiscriminatory basis, without regard to race, creed, color, sex, age, marital

status, handicap, or national origin.

_