Financial Profile of 

Dairy Cooperatives, 2007

Research 

Report 219

U.S. Department 

of Agriculture

Rural BusinessCooperative Service
Abstract Financial statements for U.S. dairy cooperatives in 2007 are presented. The Nation's

dairy cooperatives were categorized into groups based on their primary function and

according to size (volume of milk handled). Balance sheets and operating statements

were presented on per hundredweight (cwt), per cooperative, and common-size basis

for U.S. dairy cooperatives by operating type and by size category. Financial ratios are

also presented for each type and size group. Dairy cooperatives employed $12 billion

of assets to market member milk in 2007. Member equity made up 27.6 percent of

dairy cooperative assets. Net margins before tax were $0.25 per cwt of total milk handled, which represented a 0.9-percent return on total sales.

Key words: Cooperatives, financial statements, financial structure, milk dairy.

Financial Profile of Dairy Cooperatives, 2007

Carolyn Betts Liebrand

USDA Rural Development

Rural Business and Cooperative Programs

Research Report 219

April 2010

On the Cover (clockwise, from upper left): A new whey dryer at AMPI’s plant in

Paynesville, Minn.; a Land O’Lakes butter-packaging line; the Duprey family, members

of Our Family Farms of Western Massachusetts; packaging shredded cheese at a

Dairy Farmers of America plant. Photos courtesy pictured co-ops. Brown Swiss cow

photo (center) by Nate Lemire, courtesy Lemire and Accelerated Genetics a livestock-
Preface Information for this report came from a 2008 survey of all U.S. dairy cooperatives that

gathered financial and marketing data for cooperatives' fiscal years ending in calendar

2007. About 61 percent of the dairy cooperatives provided sufficient financial information that could be used in this study. However, those cooperatives represent 98.5 percent of the assets held and 93.6 percent of the net milk volume handled by all dairy

cooperatives. 

This report presents consolidated balance sheets, operating statements, and standard

financial ratios for U.S. dairy cooperatives. Dairy cooperatives vary in size and functions performed in marketing members' milk. Thus, financial profiles according to functional type and size (based on net volume of milk handled) are also presented. 

The consolidated financial statements are both "common sized" and calculated on a

per cwt of milk and per cooperative basis. This may make it easier for an individual

dairy cooperative to compare its financial structure with the profiled cooperatives and

to facilitate comparisons between cooperatives of different size and scope.

Relationships between various items in the balance sheet and operating statement are

also used to analyze comparative dairy cooperative performance.

i
Contents Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

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

Functional types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Size categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Financial profile—per cwt basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Operating statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Common-sized financial profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Operating statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Long-term solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Return on investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Comparison to 1997 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

List of Tables

Table 1—Comparison of cooperatives in the financial profile study and all 

U.S. dairy cooperatives, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Table 2—Dairy cooperatives in the financial profile study compared with 

U.S. dairy cooperatives, by type and by size, 2007 . . . . . . . . . . . . 3

Table 3—Cooperatives in the financial profile study, by type and by size,

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Table 4—Consolidated balance sheet per cwt of member milk, overall and 

by type of dairy cooperative, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . 5

Table 5—Consolidated balance sheet per cwt of member milk, by size of 

dairy cooperative, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ii
Table 6—Dairy cooperatives' consolidated operating statement, per cwt of

total milk handled, overall and by type, 2007 . . . . . . . . . . . . . . . . . 8

Table 7—Consolidated operating statement per cwt of total milk handled, by 

size of dairy cooperative, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Table 8—Common-sized balance sheet, overall and by type of dairy cooperative, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Table 9—Common-sized balance sheet, by size of dairy cooperative, 

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Table 10—Common-sized operating statement, overall and by type of dairy 

cooperative, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Table 11—Common-sized operating statement, by size of dairy cooperative, 

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Table 12—Forms of equity used by dairy cooperatives, by type and by size, 

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Table 13—Dairy cooperative equity per cwt and proportion, 2007 . . . . . . . 13

Table 14—Financial ratios, overall and by type of dairy cooperative, 2007 . 13

Table 15—Financial ratios, by size of dairy cooperative, 2007 . . . . . . . . . . 14

Table 16—Average financial profile of dairy cooperatives, overall and by 

type, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Table 17—Comparison of financial profile dairy cooperatives per cwt, overall 

and by type,1997, 2002 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . 17

List of Figures

Fig. 1—Operating types of U.S. dairy cooperative, by size, 2007 . . . . . . . . . 4

Fig. 2—US dairy cooperative assets per cwt, by type, 2007 . . . . . . . . . . . . . 5

Fig. 3—US dairy cooperative assets per cwt, by size, 2007 . . . . . . . . . . . . . 7

Fig. 4—US dairy cooperative assets per cwt, 1997, 2002, and 2007 . . . . . 18

Fig. 5—US dairy cooperative total sales per cwt, 1997, 2002, and 2007 . . 18

Appendix Tables

Appendix table 1—Consolidated financial statements, overall and by type 

of dairy cooperative, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Appendix table 2—Consolidated financial statements, by size of dairy 

cooperative, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

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Appendix table 3—Average financial statements of dairy cooperatives, by 

type, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Appendix table 4—Consolidated financial statements, by type, 2002 . . . . . 22

Appendix table 5—Consolidated financial statements, by type, 1997 . . . . . 23

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Functional Types of Dairy Cooperatives

Bargaining only

The largest group of dairy cooperatives (representing 70 percent of

the nation’s 155 dairy co-ops);

Operate at the first-handler level, and (in most cases) do not own

plants;

Relatively few assets because they (generally) own few, or no, facilities;

Few of these co-ops handled 1 billion pounds of milk or more;

Handled nearly one-fourth of U.S. cooperative milk volume. 

Niche marketing

This group represents 12 percent of all U.S. dairy co-ops and handles

just 1 percent of the net volume of co-op milk;

Most (84.2 percent) handled less than 50 million pounds each;

Typically, they process all of their members’ milk in the cooperative’s

plants;

Manufacture specialty or branded dairy products in their own plants,

or by arrangement with others. 

Fluid processing

The smallest group, representing 3 percent of U.S. dairy coops and 1

percent of co-op milk volume;

Typically process all of their members’ milk in their plants, primarily as

bottled fluid milk;

May also make products such as ice cream, sour cream, cottage

cheese, yogurt and/or butter. 

Diversified

Perform all, or most, of the functions that other types of dairy cooperatives perform;

Manufacture a variety of products in their own large plants from member milk;

Some may sell a large portion of their raw milk supply to other handlers;

Second largest group (15 percent of all U.S. dairy cooperatives);

Handled 75 percent of the net cooperative milk volume;

Three out of four of these co-ops handled 1 billion or more pounds of

milk; none handled less than 50 million pounds
Highlights More than 90 percent of the assets held and milk handled by U.S. dairy cooperatives

were accounted for by the 94 cooperatives for which there was complete financial

information, and thus are included in this report. They were categorized according to

the type of operations in which they engaged to market a majority of their members'

milk: bargaining-only, niche-marketing, fluid-processing, and diversified.

The cooperatives were also categorized according to the volume of milk they handled

into small-, medium-, and large-size groups.

Overall, dairy cooperatives employed $8.41 of assets per hundredweight (cwt) to market their members' milk in 2007. Current assets and property, plant, and equipment

came to $5.08 and $3.23 per cwt of member milk, respectively. Total liabilities were

$6.09 per cwt, of which $4.40 were current liabilities—which may include pending payments to members for their milk. Member equity amounted to $2.32 per cwt of milk.

Bargaining-only cooperatives used the least assets to market a cwt of milk, while

niche-marketing cooperatives used the most. Likewise, bargaining-only cooperatives

had the fewest liabilities per cwt. Niche-marketing and diversified and fluid-processing

cooperatives had much larger total liabilities.

Niche-marketing cooperative members had the highest equity per cwt of their milk—

more than 1.5 times the equity per cwt of diversified and fluid-processing cooperatives.

Bargaining-only cooperative members had a relatively small amount of equity in their

cooperatives, one-tenth that of niche-marketing cooperatives' members.

Total assets per cwt of member milk were highest for the large cooperatives and lowest for the medium-size group. Total liabilities per cwt likewise were highest for the

large group, but smallest for the small group. Accordingly, equity per cwt was lowest

for the large group and highest for the small group. The range in the amount of equity

per cwt of member milk was much narrower between the size groups than that for

assets or liabilities.

Milk and dairy product sales was the largest single sales and income item, at $23.68

per cwt of milk handled, in 2007. Supply and other sales was the next largest item at

$3.13 per cwt. Total sales and income was $27.03 per cwt, while net margins before

tax came to 25 cents per cwt of total milk handled by the 94 cooperatives.

Niche-marketing cooperatives generated the largest milk and dairy product sales per

cwt of total milk handled, while bargaining-only cooperatives yielded the least.

Diversified and fluid-processing cooperatives' supply sales were quite a bit larger than

those of the other two types, but niche marketing cooperatives still had the largest total

sales and income per cwt for 2007.

Niche-marketing cooperatives' net margins-before-tax were $0.66 per cwt. Diversified

and fluid-processing cooperatives' net margins averaged $0.05 per cwt, less than onehalf those of the niche marketing and bargaining only cooperatives.

Small cooperatives reported the highest total sales and income—$29.77 per cwt of

milk handled—and also the highest expenses: $29.36 per cwt. In contrast, mediumsize cooperatives reported the lowest total sales and income, $26.30 per cwt, and lowest expenses, $25.87 per cwt. However, net margins for these two size groups of

v
cooperatives were within $0.01 of each other, $0.42 and $0.43 per cwt, respectively—

both well above those of the large cooperatives: $0.24 per cwt.

Most of the cooperatives used allocated equity, while a little more than one-half also

reported retained earnings in 2007. Allocated equity made up the bulk of member equity—82.1 percent of total equity—while retained earnings represented 10.8 percent.

Common stock was issued by 37.2 percent of the cooperatives. Even fewer, 13.8 percent, issued preferred stock.

A majority of niche-marketing cooperatives had common stock. In contrast, less than

one-half of the bargaining only and diversified and fluid processing cooperatives

reported common stock. Niche-marketing cooperatives were also more likely to have

preferred stock than the other types, though it was a small proportion for all three

types. Bargaining-only cooperatives were less likely to have unallocated equity than

the other two types, where more than three-fourths reported retained earnings or unallocated equity.

Various ratios were calculated to measure dairy cooperative operations. Dairy cooperatives averaged $1.15 in current assets for each $1 of current debt in 2007. Current

liabilities represented just over one-half of total dairy cooperative assets. (Current liabilities may include milk payments owed to members).

Long-term debt averaged 73 percent of total equity in 2007. Diversified and fluid-processing cooperatives had the highest level of long-term debt compared with member

equity, while bargaining-only and niche-marketing cooperatives had sharply lower

long-term debt-to-equity ratios.

The proportion of assets financed by long-term and total debt capital was successively

larger from the small to the large size groups.

Return on equity before taxes was 12.2 percent for dairy cooperatives in 2007. The

rate of return to equity ranged from 12.1 for diversified and fluid processing cooperatives to 13.8 for niche-marketing cooperatives.

Return on assets employed in marketing milk was 3.4 percent for all dairy cooperatives. Niche-marketing cooperatives had the highest return-to-total-assets compared to

bargaining-only or diversified and fluid-processing cooperatives. There was somewhat

greater variation in returns among different size groups than among different types.

The medium-size group achieved the highest level of return both to equity and to

assets. Conversely, small cooperatives had the lowest return on equity while large

cooperatives had the lowest return on assets.

vi
Financial Profile of Dairy Cooperatives, 2007

Carolyn Betts Liebrand

Agricultural Economist

USDA Rural Development

Rural Business and Cooperative Programs

Introduction

Farmer cooperative statistics are collected annually by the U.S. Department of Agriculture (USDA)

Rural Development to provide information on the

growth and development of cooperatives. In 2008,

dairy cooperatives were surveyed by mail for details

about their marketing operations during 2007. This

data was used to develop financial statistics specific to

dairy cooperatives for this report. The 2007 marketing

operations of all U.S. dairy marketing cooperatives

were discussed in Research Report 218.

In 2007, the United States had 155 cooperatives

predominantly engaged in marketing milk from dairy

cows. A majority (60.6 percent) provided financial

information in sufficient detail to be included in this

report. However, these 94 cooperatives represent 98.5

percent of the combined total assets of all dairy cooperatives and handled 93.6 percent of the net milk volume handled by all U.S. dairy cooperatives (table 1).

Functional Types—Dairy cooperatives

perform a variety of functions for their members and

have taken different approaches to ensure a market for

their members' milk. Each cooperative's operations are

unique, due to the characteristics of its memberowners and the marketing environment in which it

operates. That said, there are similarities among dairy

cooperative operations. Broadly, they focus on

marketing milk at the first-handler level, while some

also own and operate plants to make at least a portion

of their members' milk into various products.

For this report, dairy cooperatives were broadly

classified into four groups: bargaining-only, niche-marketing, fluid-processing, and diversified dairy cooperatives (see box on Page iv). Those cooperatives that

operate at the first-handler level only are known as

“bargaining-only” cooperatives. They assist members

in the marketplace by negotiating prices, facilitating

arrangements between milk buyer and seller, ensuring

accurate milk weights and tests, and so forth. They

may or may not take title to the milk. Most do not own

plants, however, some operate milk shipping and

receiving stations. A few operate plants for processing

small volumes of raw milk for balancing purposes or

to facilitate shipping by removing some of the water

from raw milk via ultra filtration or reverse osmosis.

Dairy cooperatives that operate plants to further

process their members' milk have been grouped

according to the type(s) of products they make or market.

Cooperatives that typically use most or all of

their members' milk to make specialty dairy products

are called, for lack of a better term, “niche-marketing”

cooperatives. Included in this category are cooperatives that make artisan or branded cheese. It also

includes those few that market organic or specialty

products on the basis of how the milk was produced.

In a few cases, rather than owning and operating production facilities the cooperatives contract with milk

plants to have the niche products made from the members' uniquely produced milk.

Cooperatives that focus operations on the fluid

beverage market are classified as “fluid-processing”

cooperatives. This category is reserved for the few

cooperatives that typically package most or all member milk into fluid milk products. In some cases they

may also make “soft” products (such as yogurt, sour

cream, ice cream/ice cream mix) and butter.

The “diversified” cooperatives own and operate

plants to make a variety of commodity and/or differentiated products, while also selling a portion as bulk

raw milk. They typically make some hard products

1
such as butter, dried dairy products, and/or cheese,

and some also make packaged fluid milk and soft

products like sour cream, dips, yogurt, cottage cheese,

and ice cream.

The cooperatives in this study well represent

each of the four types (table 2). Sufficient data was

obtained from a majority (55.6 percent) of the bargaining-only dairy cooperatives in the United States, while

47.4 percent of the niche-marketing cooperatives were

represented. However, cooperatives in those two categories represent four-fifths of milk handled by each of

the two types of cooperatives in 2007.

Three fourths of the fluid-processing cooperatives provided data and represented 99.0 percent of all

U.S. fluid-processing cooperatives. Likewise, 91.7 percent of the diversified cooperatives participated, representing 98.0 percent of the net milk volume handled by

all such cooperatives in the United States.

Appendix table 1 shows the 2007 consolidated

financial statements for all dairy cooperatives, by type

of cooperative, with fluid processing and diversified

cooperatives combined. The fluid-processing cooperatives and diversified cooperatives are combined for the

financial results because there were too few fluid processing cooperatives to show their results separately.

Also, fluid processing cooperatives are more similar to

diversified cooperatives in their complexities than to

niche or bargaining-only cooperatives.

Size Categories—The data were also

categorized into three size groups according to the

volume of milk handle—small (less than 50 million

pounds of milk), medium (50 to 999 million pounds),

and large (1 billion pounds or more). The cooperatives

in this study represented 89.7 percent of the large U.S.

dairy cooperatives in 2007, and 63.3 percent of the

medium-size dairy cooperatives. Less than one-half

(45.5 percent) of the small cooperatives were

represented.

More than three-fourths (76.7 percent) of the

small cooperatives functioned as bargaining-only

cooperatives, and the remaining small cooperatives

were niche marketers (table 3 and figure 1). Similarly,

76.3 percent of the medium-size cooperatives functioned as bargaining-only cooperatives. However, 18.4

percent of the medium-size cooperatives were diversified or fluid-processing cooperatives, and just a handful were niche marketers (5.3 percent).

The large cooperatives were diversified or fluidprocessing (69.2 percent) and bargaining-only (30.8

percent) cooperatives. Because each size group contains differing proportions of the four operating types,

some of the differences in the financial structure

between size groups may be due in part to variances

related to the type of operation.

See Appendix Table 2 for the consolidated financial statements by size of dairy cooperative.

Financial Profile—Per Cwt Basis

The consolidated financial statements were

expressed in terms of dollars per cwt of milk. This presentation may be familiar to dairy farmers and cooperative managers because milk prices are typically

expressed in terms of dollars per cwt. It is also a form

of common sizing—allowing comparison across different-sized organizations.

2

Table 1—Comparison of cooperatives in the financial profile study and all U.S. dairy cooperatives, 2007

Financial U.S. Profile cooperatives

profile dairy as a percent of

Item cooperatives cooperatives1/ all U.S. cooperatives

---- Number ----- - Percent -

Cooperatives 94 155 60.6

---- Million dollars ----- - Percent -

Total assets 12,021 12,205 98.5

---- Billion pounds ----- - Percent -

Net milk volume handled2/ 145.9 155.8 93.6

1/ Cooperatives with more than 50 percent of net sales from milk and dairy products; excludes goat dairy cooperatives. Total assets from

Cooperative Statistics 2007, Service Report 68, USDA Rural Development, November 2008.

2/ Total milk handled by cooperatives less inter-cooperative transfers.
3

Table 2—Cooperatives in the study compared with all U.S. dairy cooperatives, by type and by size, 2007

Financial U.S. Share of U.S.

Primary function profile Cooperatives represented

 Number of cooperatives 

Type - - - Number - - - Percent

Bargaining-only 60 108 55.6

Niche-marketing 9 19 47.4

Fluid-processing 3 4 75.0

Diversified 22 24 91.7

Net milk volume1/

- - - Million pounds - - - Percent

Bargaining-only 29,139 36,341 80.2

Niche-marketing 1,039 1,293 80.4

Fluid-processing 1,857 1,875 99.0

Diversified 113,901 116,276 98.0 

 Number of cooperatives 

Size category - - - Number - - - Percent

Small2/ 30 66 45.5

Medium3/ 38 60 63.3

Large4/ 26 29 89.7

Net milk volume1/

- - - Million pounds - - - Percent

Small 587 1,271 46.2

Medium 9,225 13,448 68.6

Large 136,124 141,066 96.5

1/ Total milk handled by cooperatives less intercooperative transfers

Table 3—Cooperatives in the study, by type and by size, 2007

Size category

______________________________________________________________________

Primary function Small1/ Medium2/ Large3/ Total

Percent

Bargaining-only 76.7 76.3 30.8 63.8

Niche-marketing 23.3 5.3 0.0 9.6

Diversified and fluid-processing 0.0 18.4 69.2 26.6

100.0 100.0 100.0 100.0

1/ Cooperatives that handled less than 50 million pounds of milk 2/ Cooperatives that handled 50 to 1 billion pounds of milk 3/ Cooperatives that handled 1 billion pounds of milk or more
Balance Sheet—Balance sheet items were

calculated on a per cwt of member milk basis to show

the capital required to market members' milk (table 4

and figure 2). Overall, dairy cooperatives had $8.41 in

assets for each cwt of milk that members sold through

them in 2007.

Dairy cooperatives held $5.08 in current assets,

$3.23 in fixed assets (net of investments in other cooperatives), and just $0.11 per cwt of member milk in

investments in other cooperatives in 2007.

On the other side of the ledger, total liabilities

came to $6.09 per cwt in 2007. The bulk were current

liabilities, $4.40 per cwt, which may include pending

payments to members for their delivered milk. Total

member equity amounted to $2.32 for each cwt of milk

they marketed through their cooperatives.

Balance Sheet by Type—The structure of the balance sheet varied according to the operational type of

dairy cooperative. Among the three groups of cooperatives, bargaining-only cooperatives have relatively low

capital requirements because they, for the most part,

do not own plants. Niche-marketing cooperatives, on

the other hand, have relatively high capital requirements. In contrast, diversified and fluid-processing

cooperatives often operate extensive manufacturing

facilities and are able to capture some economies of

size. Both niche-marketing and diversified and fluidprocessing cooperatives use additional capital to support their sales of supplies and other products.

Thus, bargaining-only cooperatives required the

fewest assets to market milk, $1.74 per cwt of member

milk. Niche-marketing cooperatives required the most

assets, $12.54 per cwt, while diversified and fluid-processing cooperatives used about $2.50 fewer in

assets—$10.09 per cwt of member milk.

Current assets per cwt of member milk showed the

widest range between operating types—ranging from

just $1.41 for bargaining-only cooperatives to $8.84 for

niche-marketing cooperatives. Property, plant, and

equipment and other assets totaled $0.22 per cwt for

bargaining-only cooperatives, while niche- and diversified and fluid-processing cooperatives used $3.60

and $3.99, respectively. Investment in other cooperatives was similar among the three groups of operating

4
5

Table 4—Consolidated balance sheet per cwt of member milk, overall and by type of dairy cooperative, 2007

Type of cooperative

__________________________________________________________________________

Bargaining- Niche- Diversified &

Item All only marketing fluid-processing

Dollars per cwt of member milk

Current assets 5.08 1.41 8.84 5.98

Net PP&E1/ and other assets 3.23 0.22 3.60 3.99

Investments in other co-ops 0.11 0.10 .10 .11

Total assets 8.41 1.74 12.54 10.09

Current liabilities 4.40 1.25 5.95 5.20

Long-term liabilities 1.69 0.06 1.74 2.10

Liabilities not categorized 0.00 0.00 0.06 0.00

Total liabilities 6.09 1.31 7.76 7.30

Total equity 2.32 0.42 4.78 2.79

Total liabilities and equity 8.41 1.74 12.54 10.09

Member milk (million pounds) 142,865 28,902 1,034 112,929

Notes: Totals may not add due to rounding. CWT = hundredweight. 1/ Property, plant, and equipment.
types—$0.10 to $0.11 per cwt. Investment in other

cooperatives may include investment in a cooperative

bank as part of a loan requirement.

Niche-marketing cooperatives had the highest

total liabilities per cwt, $7.76, followed closely by diversified and fluid processing cooperatives—$7.30.

Bargaining-only cooperatives had relatively low liabilities, $1.31 per cwt.

Accordingly, current liabilities were lowest for bargaining-only cooperatives, $1.25 per cwt. Niche-marketing cooperatives had $5.95 in current liabilities per

cwt, with diversified and fluid processing cooperatives' a bit lower—$5.20 per cwt.

Reflecting the nature of their operations, bargaining-only cooperatives had few long-term liabilities,

$0.06 per cwt, while niche-marketing and diversified

and fluid-processing cooperatives had higher levels of

long-term liabilities—$1.74 and $2.10 per cwt, respectively.

Members of niche-marketing cooperatives had

the highest investment in their cooperatives on a per

cwt basis. Members had $4.78 of equity for each cwt of

milk they marketed through their cooperatives. In contrast, bargaining-only cooperative members had just

$0.42 per cwt in member equity. Diversified and fluidprocessing cooperatives' member equity was $2.79 per

cwt.

Balance Sheet by Size—While there was a $10.80

range in total assets per cwt between the different

operating types of cooperatives, the range was much

narrower, just $1.48, between the three size groups

(table 5 and figure 3). Total assets employed per cwt of

member milk ranged from $7.03 for medium-size

cooperatives to $8.51 for the large cooperatives, and

small cooperatives averaged $7.40 per cwt. Total liabilities increased as size increased, ranging from $3.53 for

small cooperatives to $6.21 for the large cooperatives.

In contrast, total member equity decreased as size

increased, dropping from $3.86 per cwt of member for

the small cooperatives down to $2.30 per cwt for large

cooperatives.

Operating Statement—Operating

statements are presented on a basis of per cwt of total

milk handled. This shows the revenues, expenses, and

margins generated by the total volume of milk going

6

Table 5—Balance sheet per cwt of member milk, by size of cooperative, 2007

Size Group

______________________________________________________________________

Item Small1/ Medium2/ Large3/

Dollars per cwt of member milk

Current assets 4.33 4.63 5.11

Net PP&E4/ and other assets 1.35 2.21 3.30

Investments in other co-ops 1.72 0.19 0.09

Total assets 7.40 7.03 8.51

Current liabilities 3.06 2.89 4.51

Long-term liabilities 0.36 1.54 1.70

Liabilities not categorized 0.11 0.00 0.00

Total liabilities 3.53 4.43 6.21

Total equity 3.86 2.60 2.30

Total liabilities and equity 7.40 7.03 8.51

______________________________________________________________________________________________________

Member milk (million pounds) 582 8,661 133,621

Notes: Totals may not add due to rounding. CWT = hundredweight. 1/ Cooperatives that handled less than 50 million pounds of total milk 2/ Cooperatives that handled 50 million to 1 billion pounds of total milk 3/ Cooperatives that handled 1 billion pounds of total milk or more 4/ Property, plant, and equipment.
through the cooperatives.

Dairy cooperatives included in this study generated $23.68 in milk- and dairy-product sales per cwt of

milk handled in 2007 (table 6). Supply and other sales

were the next largest item, $3.13 per cwt. Total sales and

income was $27.03 per cwt handled by the cooperatives. After expenses of $26.78 per cwt, dairy cooperatives realized net margins before tax of $0.25 per cwt.

Operating Statement by Type—Milk- and dairyproduct sales per cwt of total milk handled were lowest for bargaining-only cooperatives, $18.40, and highest for niche-marketing cooperatives, $48.22 (table 6).

This may reflect the “value-added” focus of the nichemarketing cooperatives—where they aim to command

higher prices by the uniqueness of their products.

Conversely, bargaining-only cooperatives add little

“value” to members' milk, focusing primarily on finding markets for it. Diversified and fluid-processing

cooperatives, which sell a substantial portion of their

milk at the first-handler level while also making some

bulk and value-added products, had the second-highest dairy product sales, $24.71 per cwt.

Diversified and fluid-processing cooperatives

had markedly higher supply and other sales, $3.70 per

cwt, than the bargaining-only or niche-marketing

cooperatives which had $0.79 and $0.00, respectively.

Similarly, service receipts and other income per cwt

were highest for diversified and fluid-processing cooperatives—$0.23, and much lower for the bargainingonly and niche-marketing cooperatives: $0.08 and

$0.07, respectively. Patronage refunds received were $0.01

for bargaining-only cooperatives and amounted to less

than $0.01 per cwt for niche-marketing and diversified

and fluid-processing cooperatives.

Total sales and income varied by $29.03 per cwt

between the different types of cooperatives. Nichemarketing cooperatives had the highest total sales and

income per cwt, $48.30, followed by diversified and

fluid-processing cooperatives at $28.65. Bargainingonly cooperatives had the lowest total sales and

income, $19.27 per cwt.

Net margins before tax followed the same pattern—

bargaining-only cooperatives had the smallest, $0.05

7
per cwt, and niche-marketing cooperatives the largest,

$0.66 per cwt. Diversified and fluid-processing cooperatives had net margins of $0.29 per cwt.

Operating Statement by Size—As seen with the

balance sheets by type and by size, the structure of the

operating statement varied among the different size

groups (table 7). Milk and dairy product sales per cwt

of total milk handled were lowest for the small cooperatives, $21.08, and highest for the medium-size cooperatives, $25.34. Small cooperatives also had the highest

supply and other sales, $7.54 per cwt, far exceeding

those of medium-size cooperatives with the lowest,

$0.68 per cwt. Small cooperatives also showed the

highest service receipts and other income, $0.94 per cwt,

and patronage refunds received, $0.21 per cwt. As a

result, small cooperatives had the highest total sales

8

Table 7—Consolidated operating statement per cwt of total milk handled, by size of cooperative, 2007

Size Group

______________________________________________________________________

Item Small1/ Medium2/ Large3/

Dollars per cwt

Milk and dairy product sales 21.08 25.34 23.59

Supply and other sales 7.54 0.68 3.26

Service receipts and other income 0.94 0.25 0.20

Patronage refunds received 0.21 0.03 0.00

Total sales and income 29.77 26.30 27.06

Total costs and expenses4/ 29.36 25.87 26.82

Net margins before tax 0.42 0.43 0.24

Total milk handled (million pounds) 587 9,289 153,807

Notes: Totals may not add due to rounding. CWT = hundredweight. 1/ Cooperatives that handled less than 50 million pounds of milk 2/ Cooperatives that handled 50 million to 1 billion pounds of milk 3/ Cooperatives that handled 1 billion pounds of milk or more 4/ Includes non-recurring losses, cost of goods sold

Table 6—Dairy cooperatives' consolidated operating statement, per cwt of total milk handled, overall and by

type, 2007

Type of cooperative

_____________________________________________________

All Bargaining- Niche- Diversified &

Item only marketing fluid-processing

Dollars per cwt

Milk and dairy product sales 23.68 18.40 48.22 24.71

Supply and other sales 3.13 0.79 0.00 3.70

Service receipts and other income 0.20 0.08 0.07 0.23

Patronage refunds received 0.01 0.01 0.00 0.00

Total sales and income 27.03 19.27 48.30 28.65

Total cost and expenses1/ 26.78 19.22 47.64 28.36

Net margins before tax 0.25 0.05 0.66 0.29

______________________________________________________________________________________________________

Milk volume (million pounds) 163,683 30,507 1,039 132,137

Notes: Totals may not add due to rounding. CWT = hundredweight. 1/ Includes non-recurring losses, cost of goods sold
9

and income, $29.36 per cwt, and medium-size cooperatives, the lowest—$25.87. The large cooperatives' milk

and dairy product sales, $23.59 per cwt, were between

the small and medium-size cooperatives', as were the

large cooperatives' supply and other sales, $3.26 per

cwt, and total sales and income, $27.06.

Net margins before tax per cwt were similar for

the small and medium-size cooperatives, $0.42 and

$0.43, respectively. The large cooperatives' net margins

before taxes of $0.24 per cwt were the lowest.

Common-Sized Financial Profile

In the previous section, consolidated financial

statements were common-sized on a per cwt basis by

dividing the balance sheet and operating statement

items by the volume of milk handled. This part follows

the more conventional approach in using total assets

(balance sheet) or total sales and income (operating statement) as the common denominator. This method facilitates comparison of different types and sizes of cooperatives, providing an additional means for an

individual dairy cooperative to compare its financial

structure with the profiled cooperatives.

Balance Sheet—The balance sheet elements

are expressed as a percentage of total assets in table 8.

Overall, current assets made up more than 60.4 percent

of dairy cooperatives' total assets. Net property, plant,

and equipment (PPE) and other fixed assets constituted

38.4 percent. Investments in other cooperatives came to

1.3 percent of total assets. On the debt side, total

liabilities came to 72.4 percent of total assets. Current

liabilities were 52.3 percent of total assets, while longterm liabilities made up 20.0 percent. Member equity

represented 27.6 percent of the total assets used by

cooperatives to market member milk.

Balance Sheet by Type—There were differences in

the financial structure of the dairy cooperatives

depending upon their operating type. Bargaining-only

cooperatives had the largest proportion of total assets

represented by current assets, 81.5 percent, among the

three types. Current assets made up 59.3 percent of the

diversified and fluid processing assets, and 70.5 percent of total assets for the niche-marketing cooperatives. And accordingly, bargaining-only cooperatives

had a lower rate of investment in PP&E and fixed

assets—12.9 percent—than did the other types, reflecting their lack of facilities. In contrast, 39.6 percent of

the diversified and fluid processing cooperatives'

assets and 28.7 percent of the niche-marketing cooperatives' assets were made up of PP&E and fixed assets.

Investment in other cooperatives was just 5.6 percent of total assets for bargaining-only cooperatives,

and around 1 percent of total assets for the niche marketing cooperatives (0.8 percent) and diversified and

fluid processing cooperatives (1.1 percent). A dozen

small and medium-size bargaining-only cooperatives

reported that more than 25 percent of their assets were

Table 8—Common-sized balance sheet, overall and by type of dairy cooperative, 2007

Bargaining- Niche- Diversified &

Item All only marketing fluid-proc.

Percent of total assets

Current assets 60.4 81.5 70.5 59.3

Net PP&E1/ and other assets 38.4 12.9 28.7 39.6

Investment in other co-ops 1.3 5.6 0.8 1.1

Total assets 100.0 100.0 100.0 100.0

Current liabilities 52.3 72.1 47.5 51.5

Long-term liabilities 20.0 3.6 13.9 20.8

Liabilities not categorized 0.0 0.0 0.0 0.0

Total liabilities 72.4 75.6 61.9 72.4

Equity 27.6 24.4 38.1 27.6

Liabilities and equity 100.0 100.0 100.0 100.0

Note: Totals may not add due to rounding. 1/ Property, plant, and equipment.
investments in other cooperatives, while 75 percent of

the bargaining only cooperatives had no investments

in other cooperatives. The six diversified cooperatives

that reported investments in other cooperatives all had

less than 6 percent of total assets invested.

Similarly, current liabilities came to 72.1 percent

of total assets for bargaining-only cooperatives. In contrast, current liabilities were 47.5 and 51.5 percent of

total assets for niche-marketing and diversified and

fluid processing cooperatives, respectively. Long-term

liabilities (debt) were 3.6 percent of total assets for bargaining-only cooperatives. Long-term liabilities made

up a larger portion of total assets for the diversified

and fluid-processing and niche marketing cooperatives, 13.9 and 20.8 percent, respectively, reflecting

their greater investment in plants and facilities and

reliance on borrowed capital.

Total liabilities represented a majority of total

assets—from 61.9 percent for niche-marketing cooperatives to 75.6 percent for bargaining-only cooperatives.

Niche-marketing cooperatives had the largest portion

of total assets supported by member equity—38.1 percent. For bargaining only cooperatives, member equity

amounted to 24.4 percent, while member equity was

27.6 percent of total assets for diversified and fluidprocessing cooperatives. It should be noted, however,

that to the extent that most of the bargaining-only

cooperatives' current liabilities are for payments for

members' milk, bargaining-only members' claims on

assets may be higher than what the equity-to-assets

ratio indicates.

Balance Sheet by Size—Balance sheet items

expressed as a percentage of total assets are shown by

size of dairy cooperative in table 9. The structure of the

balance sheet varied less among the different size

groups than among the different types. Current assets

made up a similar proportion of total assets for small

and large cooperatives at 58.5 and 60.1 percent, respectively. They made up 65.9 percent of the medium-size

cooperatives' total assets. However, the proportions of

property, plant, and equipment, and other assets were

more similar for medium-size and large cooperatives—31.5 and 38.8 percent, respectively—than for the

small cooperatives, where they made up just 18.2 percent. Small cooperatives reported the highest level of

investments in other cooperatives, 23.3 percent, while

investments came to just 2.7 percent of total assets for

medium-size cooperatives and 1.1 percent for large

cooperatives.

Total liabilities made up a larger proportion of

total assets as the size group increased. They were a

majority of the total assets for medium-size and large

cooperatives—63.0 and 73.0 percent, respectively—but

were 47.8 percent of the small cooperatives' total

assets. The opposite pattern was seen for total member

equity, ranging from 27.0 percent of total assets for the

large cooperatives to 52.2 percent for the small ones.

Operating Statement—The operating

statement items for all dairy cooperatives by type are

expressed as a percent of total sales and income in

table 10. As might be expected, milk and dairy product

sales accounted for the bulk of total sales and income

at 87.6 percent overall. Net margins to income, which

reflect profit margins before paying income taxes,

came to 0.9 percent in 2007.

Operating Statement by Type—Just about all—99.8

percent—of the niche-marketing cooperatives' income

came from milk and dairy product sales. Diversified

and fluid-processing cooperatives' amounted to less:

86.3 percent. Milk and dairy product sales were a

smaller proportion of total sales and income for diversified and fluid-processing cooperatives because their

supply and other sales came to 12.9 percent of total

sales and income, whereas supply and other sales were

just 4.1 percent of total sales for bargaining-only cooperatives and almost nonexistent for niche-marketing

cooperatives.

Niche-marketing cooperatives realized the largest

net margins-to-sales ratio: 1.4 percent of total sales and

income. Diversified and fluid-processing cooperatives'

net margins came to 1.0 percent of total sales, while

bargaining-only cooperatives generated the lowest net

margins-to-sales ratio: 0.3 percent of total sales and

income.

Operating Statement by Size—Operating statements expressed as a percent of total sales and income

according to size of cooperative are shown in table 11.

Milk and dairy product sales made up 96.4 percent of

total sales and income for medium-size cooperatives.

Small cooperatives' milk and dairy product sales

accounted for just 70.8 percent of total sales and

income, while supply sales made up 25.3 percent.

Large cooperatives' milk and dairy product sales

amounted to 87.2 percent, with supply and other sales

representing 12.1 percent of total sales and income.

Medium-size cooperatives had the largest net

margins-to-sales ratio—1.6 percent—followed closely

by the small cooperatives, which had 1.4 percent for

2007. Large cooperatives' net margins before taxes

came to 0.9 percent of total sales and income, a bit

lower than the smaller size groups' returns.

10
Equity

Table 12 shows different forms of equity used by

dairy cooperatives. Equity represents the members'

ownership interest in the total assets of their cooperative. Equities can be grouped into four categories: common stock, preferred stock, allocated equities, and

retained earnings. Common stock is usually issued for

witnessing membership and carries minimal nominal

value. Preferred stock can be issued to raise capital

(but some cooperatives issue it to members for witnessing retained patronage refunds or for witnessing

members' additional investment in the cooperative).

Allocated equities are retained patronage refunds and

capital retains. Retained earnings are earnings largely

11

Table 9—Common-sized balance sheet, by size of dairy cooperative, 2007

Size Group

______________________________________________________________________

Item Small1/ Medium2/ Large3/

Percent of total assets

Current assets 58.5 65.9 60.1

Net PP&E4/ and other assets 18.2 31.5 38.8

Investments in other co-ops 23.3 2.7 1.1

Total assets 100.0 100.0 100.0

Current liabilities 41.4 41.1 53.0

Long-term liabilities 4.9 22.0 20.0

Liabilities not categorized 1.4 0.0 0.0

Total liabilities 47.8 63.0 73.0

Equity 52.2 37.0 27.0

Liabilities and equity 100.0 100.0 100.0

Note: Totals may not add due to rounding. 1/ Cooperatives that handled less than 50 million pounds of milk 2/ Cooperatives that handled 50 million to 1 billion pounds of milk 3/ Cooperatives that handled 1 billion pounds of milk or more 4/ Property, plant, and equipment. Includes assets not categorized.

Table 10—Common-sized operating statement, overall and by type of dairy cooperative, 2007

Bargaining- Niche- Diversified &

Item All only marketing fluid-proc.

Percent of total sales and income

Milk and dairy product sales 87.6 95.5 99.8 86.3

Supply and other sales. 11.6 4.1 0.0 12.9

Service receipts and other income1/ 0.7 0.4 0.2 0.8

Patronage refunds received 0.0 0.0 0.0 0.0

Total sales and income 100.0 100.0 100.0 100.0

Total costs and expenses2/ 99.1 99.7 98.6 99.0

Net margins before tax 0.9 0.3 1.4 1.0

Note: Totals may not add due to rounding. 1/ Includes non-recurring gains 2/ Includes non-recurring losses, cost of good sold
derived from non-member businesses and generally

are unallocated (not unassigned) to individual member equity accounts.

Most—89.4 percent—of the cooperatives reported

having allocated equity, while 53.2 percent reported

holding retained earnings in 2007. Those not reporting

allocated member equity were typically bargainingonly cooperatives, where for the most part all of the

cooperatives' assets likely represented payments owed

for milk sold or to be paid for member milk. Common

stock was issued by 37.2 percent of the cooperatives,

and even fewer—13.8 percent—had preferred stock.

All of the diversified and fluid-processing cooperatives had allocated equity, and 80.0 percent reported retained earnings in 2007. Similarly, most of the

niche-marketing cooperatives used allocated equity

(88.9 percent) and nearly as many (77.8 percent) had

retained earnings. Niche-marketing cooperatives were

more likely to have common stock—55.6 percent—

compared to bargaining-only and diversified and

fluid-processing cooperatives: 31.7 and 44.0 percent,

respectively. Niche-marketing cooperatives were also

more likely to have preferred stock than other types;

even so, it was a small proportion: 22.2 percent. While

most bargaining-only cooperatives—85.0 percent—had

allocated equity, just 38.3 percent had retained earnings. Of the three types of dairy cooperatives, bargaining-only cooperatives were least likely to have

retained earnings.

Common stock is generally issued by dairy cooperatives to designate voting rights and only carries a

token value. Thus, it represented only 0.1 percent of

total equity in 2007 (table 13). In contrast, preferred

stock typically carries no voting rights, but often has a

set dividend, priority over common stock, and may

even be held by non-members. Preferred stock

12

Table 11—Common-sized operating statement, by size of dairy cooperative, 2007

Size Group

______________________________________________________________________

Item Small1/ Medium2/ Large3/

Percent of total sales and income

Milk and dairy product sales 70.8 96.4 87.2

Supply and other sales 25.3 2.6 12.1

Service receipts and other income4/ 3.2 0.9 0.7

Patronage refunds received 0.7 0.1 0.0

Total sales and income 100.0 100.0 100.0

Total costs and expenses5/ 98.6 98.4 99.1

Net margins before tax 1.4 1.6 0.9

Note: Totals may not add due to rounding. 1/ Cooperatives that handled less than 50 million pounds of milk 2/ Cooperatives that handled 50 million to 1 billion pounds of milk 3/ Cooperatives that handled 1 billion pounds of milk or more 4/ Includes non-recurring gains 5/ Includes non-recurring losses, cost of good sold

Table 12—Forms of equity used by dairy cooperatives, by type and by size, 2007

Bargaining- Niche- Diversified

Item All only marketing & fluid Small Medium Large

Percent1/

Common stock 37.2 31.7 55.6 44.0 40.0 42.1 26.9

Preferred stock 13.8 13.3 22.2 12.0 20.0 10.5 11.5

Allocated equity 89.4 85.0 88.9 100.0 90.0 86.8 92.3

Retained earnings 53.2 38.3 77.8 80.0 46.7 50.0 65.4

1/ Percent is the number of cooperatives having the form of equity divided by number of cooperatives for each type and size of cooperative
amounted to 7.0 percent of total cooperative equity in

2007. Allocated equity made up the bulk of member

equity—82.1 percent of total equity—while retained

earnings represented 10.8 percent in 2007.

Ratios

The relationships between various items in the

balance sheet and operating statement can be used to

analyze comparative dairy cooperative performance.

The ratios are shown overall and by type in table 14.

Those calculated according to size are presented in

table 15.

Liquidity—The ability to meet current

obligations can be evaluated by calculating the

cooperatives' current ratio—current assets divided by

current liabilities. Overall, dairy cooperatives had

$1.15 in current assets for each $1 of current liabilities.

Diversified and fluid-processing cooperatives also

showed a current ratio of 1.15. Bargaining-only

cooperatives had $1.13 to meet each $1 of current

obligations. In contrast, niche-marketing cooperatives

had $1.48 in current assets for every $1 of current

liabilities. Liquidity according to cooperative size was

more variable—ranging from 1.13 for the large

cooperatives to 1.60 for the medium-size cooperatives.

Another measure of short-term solvency is current liabilities divided by total assets. For all cooperatives, the ratio was 0.52, indicating that cooperatives

had 52 cents of current liabilities for each $1 of assets

held. Diversified and fluid processing cooperatives

had that same level of current liabilities in relation to

total assets. Bargaining-only cooperatives had a larger

ratio of current liabilities to total assets: 0.72. However,

niche-marketing cooperatives had only $0.47 in current liabilities for each $1 of assets. Current liabilities

13

Table 13—Dairy cooperative equity and proportion, 2007

Total Percent of 

Item ($1,000) total equity

Common stock 1,857 0.1

Preferred stock 232,595 7.0

Allocated equity 2,727,249 82.1

Retained earnings 358,473 10.8

Total equity 3,320,174 100.0

Table 14—Financial ratios, overall and by type of dairy cooperative, 2007

Bargaining- Niche- Diversified &

Item All only marketing fluid-processing

Ratio

Capitalization

Current ratio (working capital) 1.15 1.13 1.48 1.15

Current liabilities to total assets .52 .72 .47 .52

Long-term liabilities to equity .73 .15 .36 .75

Total liabilities to total assets .72 .76 .62 .72

Equity to total assets .28 .24 .38 .28

Equity to fixed assets and investments .70 1.31 1.29 .68

Ratio

Return on investment

Return1/ on equity 12.2 12.8 13.8 12.1

Return1/ on total assets 3.4 3.1 5.3 3.4

1/ Net margins before taxes used in calculation.
ranged from $0.41 per $1.00 of total assets for small

and medium-size cooperatives to $0.53 for the large

cooperatives.

Long-Term Solvency—Longer term

measures of financial health compare obligations with

assets or equity. Total long-term liabilities divided by

member equity shows the level at which members are

providing the cooperative's risk capital. Overall, longterm liabilities came to 73 percent of total equity in

2007. Relative to the other types, diversified and fluidprocessing cooperatives had a markedly higher level

of long-term liabilities ($0.75 of long-term liabilities for

each $1 of member equity). Bargaining-only

cooperatives reported the lowest ratio: $0.15 of longterm liabilities for each $1 of equity. Niche-marketing

cooperatives' long-tem liabilities-to-equity ratio was

0.36, between the other two types. The ratio improved

as the size group decreased—ranging from 0.74 for the

large cooperatives to 0.09 for the small cooperatives.

Total liabilities divided by total assets indicates the

portion of total assets financed by long- and shortterm creditors. Overall, dairy cooperatives had 72

cents of total liabilities (which may include milk payments owed to members) for each $1 of total assets. In

other words, members supplied 28 cents of each $1 of

capital employed by the cooperatives. This ratio was

similar for the diversified and fluid-processing and the

bargaining-only cooperatives: 0.72 and 0.76, respectively. Niche-marketing cooperatives had $0.62 of total

liabilities and $0.38 of equity per $1 of assets.

The level of liabilities in relation to assets showed

greater variation according to size than according to

type. Small cooperatives used the most member equity

in relation to total assets: 52 cents per $1 in assets. In

contrast, large cooperatives were financed by just 27

cents of member equity for each $1 they had in assets.

Fixed assets and investments are the most permanent assets owned by cooperatives. The ratio of member equity to fixed assets and investments indicates the

degree to which these permanent assets are financed

by the most permanent capital, member's equity.

Overall, cooperatives had 70 cents in equity for each $1

invested in fixed assets and investments. Bargainingonly and niche-marketing cooperatives had ratios of

1.31 and 1.29, respectively, indicating an ability to

finance all of their fixed assets and investments with

member capital. For diversified and fluid-processing

cooperatives, fixed assets and investments were supported by capital from outside sources, as these cooperatives had just $0.68 in member equity for each $1 of

fixed assets and investments.

The ratio of equity to fixed assets and investments dropped markedly as size category increased.

The ratio ranged from 1.26 for small cooperatives to

0.68 for large cooperatives. Medium-size cooperatives

had a ratio of 1.08.

14

Table 15—Financial ratios, by size of dairy cooperative, 2007

Size Group

______________________________________________________________________

Item Small1/ Medium2/ Large3/

Ratio

Capitalization

Current ratio (working capital) 1.41 1.60 1.13

Current liabilities to total assets .41 .41 .53

Long-term liabilities to equity .09 .59 .74

Total liabilities to total assets .48 .63 .73

Equity to total assets .52 .37 .27

Equity to fixed assets and investments 1.26 1.08 .68

Percent

Return on investment

Return4/ on equity 10.9 17.6 11.8

Return4/ on total assets 5.7 6.5 3.2

1/ Cooperatives that handled less than 50 million pounds of milk 2/ Cooperatives that handled 50 million to 1 billion pounds of milk 3/ Cooperatives that handled 1 billion pounds of milk or more 4/ Net margins before taxes used in calculation.
Return on Investment—Return to

members', lenders', or other's investment in a

cooperative can be measured in several ways. The

ratios calculated here indicate a cooperative's success

in providing a financial return on member investment.

In a dairy cooperative, “profit” may be an elusive

term, and depends largely on the cooperative's pricing

policy. Profits may be lower if a cooperative's board

decides to pay higher milk prices, premiums, etc., but

in that case, the membership may benefit from the

relatively higher prices received for their milk.

Return on equity measures profitability relative to

member investment after all claims on those returns

are accounted for. Net margin divided by total member equity was 12.2 percent for dairy cooperatives

overall in 2007. Ideally, return to member equity (or in

other words, the opportunity cost of investing in the

cooperative) should equal or exceed what members

could earn if the capital were invested elsewhere.

(Insufficient data was obtained to calculate the net

margin after taxes.) Return on equity ranged from 12.1

percent for the diversified and fluid-processing cooperatives to 13.8 percent for niche-marketing cooperatives in 2007.

By size, return on equity ranged from 10.9 percent for small cooperatives to 17.6 percent for the

medium-size cooperatives. Large cooperatives averaged 11.8 percent return on member equity invested in

the cooperative for 2007.

Return on total assets (net margins before taxes

divided by total assets) measures the effectiveness of

the cooperative in employing its assets to generate

profits. It averaged 3.4 percent for all dairy cooperatives. Niche-marketing cooperatives generated the

highest return on assets—5.3 percent—followed by

diversified and fluid-processing cooperatives: 3.4 percent. Bargaining-only cooperatives showed a 3.1-percent return on the assets employed in marketing milk.

Medium-size cooperatives showed the highest return,

6.5 percent of total assets. Small cooperatives averaged

the next-largest return on total assets—5.7 percent—

while the large cooperatives' net margins were just 3.2

percent of total assets in 2007.

Average

Computing the average (per cooperative) financial statement for each type of cooperative highlights

the differences in magnitude between the various

types (table 16 and appendix table 3). It is readily

apparent that diversified and fluid-processing cooperatives were the largest cooperatives on average, in

terms of total assets, milk and dairy product sales, net

margins, and volume of milk handled. On average, a

diversified and fluid-processing cooperative employed

$455.6 million in assets in 2007. That is more than 50

times the assets of bargaining-only cooperatives on

average, which were $8.3 million per cooperative—the

lowest of the operating types. Niche-marketing cooperatives were also relatively small in terms of assets—

$14.4 million per cooperative. However, they handled

the smallest net volume of milk, 115 million pounds.

Diversified and fluid-processing cooperatives'

milk and dairy product sales averaged $1.3 billion per

cooperative in 2007, far exceeding those of the other

15

Table 16—Average financial profile of dairy cooperatives, overall and by type, 2007

Bargaining- Niche- Diversified &

Item All only marketing fluid-processing

Million dollars per cooperative

Total assets 127.9 8.3 14.4 455.6

Total liabilities 92.6 6.3 8.9 329.6

Total equity 35.3 2.0 5.5 125.9

Milk and dairy-product sales 412.4 93.5 55.7 1,306.1

Net margins before tax 4.3 0.3 0.8 15.3

(million pounds)

Milk handled per cooperative 1,741 508 115 5,285

Note: Totals may not add due to rounding.
types. Accordingly, they handled the largest volume of

milk, averaging 5.2 billion pounds per cooperative.

Bargaining-only cooperatives had the next largest milk

and dairy product sales, $93.5 million per cooperative.

Niche-marketing cooperatives had the lowest average

milk and dairy product sales: $55.7 million per cooperative.

Diversified and fluid-processing cooperatives

had the highest average net margins at $15.3 million

per cooperative. Niche-marketing and bargaining-only

cooperatives had far lower net margins before tax on a

per cooperative basis: $300,000 and $800,000 per cooperative, respectively.

Comparison to 1997 and 2002

Comparison can be made with the results from

the 2002 report (table 17 and appendix tables 4 and 5).

However, the categories have changed because the

manufacturing/processing cooperatives' operations

have changed over time and cooperatives have consolidated. In 2002 there was a category identified as

“commodity manufacturing,” which included those

cooperatives that made bulk dairy products such as

butter, powder, and cheese. Some cooperatives that

were categorized as “niche” have expanded their operations and now fall in the “diversified” group. Finally,

it must be kept in mind that there were differences in

the sets of cooperatives included in each study. For

example, twice as many niche-marketing cooperatives

(called “branded cheese” in 1997) provided financial

data in 2007 and 1997 than in 2002. And, there was a

fourth group of cooperatives, “commodity manufacturing,” in 2002 and 1997. To the extent that existing

cooperatives' operating practices changed between

survey years, they would have been reclassified

accordingly.

Total assets per cwt of member milk was higher

in each successive survey year, from $5.25 in 1997 to

$8.41 in 2007 (figure 4). Total liabilities increased similarly: from $3.18 in 1997 to $6.09 in 2007. Member equity per cwt was fairly similar between the 3 years, ranging from $2.07 in 1997 to $2.32 in 2007. As a result,

total liabilities made up successively larger proportions of total assets from 1997 to 2007.

Milk and dairy product sales at $23.68 per cwt of

total milk handled were considerably higher in 2007 as

compared to 2002 and 1997—$15.73 and $18.75, respectively—a result of record-high milk prices in 2007 relative to 2002 and 1997 (fig. 5). Total sales and income

followed the same pattern. Net margins before tax,

however, remained fairly consistent between the 3 survey years, ranging from $0.21 per cwt in 2002 to $0.28

per cwt in 1997.

Comparisons between the 3 survey years by

operating type of cooperative are also shown in table

17. All three types used more assets per cwt of member milk in 2007 than in 1997 or 2002. The same pattern

was seen for total liabilities. However, in contrast to

bargaining-only cooperatives, niche-marketing cooperatives used less equity per cwt of member milk in 2007

than in 2002. Diversified and fluid processing cooperatives used about the same amount of equity per cwt all

3 years: ranging from $2.78 in 1997 to $2.80 in 2002.

For all three types of cooperatives, milk and

dairy product sales and total sales and income were

highest in 2007, compared to 2002 and 1997. However,

net margins per cwt of milk handled were highest in

1997 and lowest in 2002 for all the operating types.

16
17

Table 17—Comparison of financial profile dairy cooperatives per cwt, overall and by type, 1997, 2002, 2007

Bargaining- Niche- Diversified &

Item All only marketing1/ fluid-processing

$ per cwt of member milk

Total assets

2007 8.41 1.74 12.54 10.09

2002 6.22 1.02 10.03 8.44

1997 5.25 1.21 10.07 6.96

Total liabilities

2007 6.09 1.31 7.76 7.30

2002 4.13 0.76 4.23 5.64

1997 3.18 0.84 5.60 4.18

Equity

2007 2.32 0.42 4.78 2.79

2002 2.10 0.27 5.80 2.80

1997 2.07 0.37 4.48 2.78

Member milk (million pounds)

2007 142,865 28,902 1,034 112,929

2002 134,451 31,772 344 89,800

1997 112,228 19,538 1,263 70,093

$ per cwt of total milk handled

Milk & dairy-product sales

2007 23.68 18.40 48.22 24.71

2002 15.73 12.84 18.30 16.69

1997 18.75 14.63 23.16 21.09

Total sales and income

2007 27.03 19.27 48.30 28.65

2002 18.27 13.75 21.94 19.96

1997 21.25 16.71 24.04 24.36

Net margins before tax

2007 0.25 0.05 0.66 0.29

2002 0.21 0.04 0.32 0.27

1997 0.28 0.06 0.87 0.34

Number of cooperatives

2007 94 60 9 25

2002 80 50 4 16

1997 88 45 9 20

Total milk handled (million pounds)

2007 163,683 30,507 1,039 132,137

2002 154,806 33,856 344 106,748

1997 121,157 21,443 1,420 75,495

Note: Totals may not add due to rounding. Not shown: commodity manufacturing cooperatives' 1997 and 2002 data.

1/ In 1997 “niche-marketing” cooperatives were identified as “branded cheese” cooperatives.
18
Appendix table 1—Consolidated financial statements overall and by type of dairy cooperative, 2007

Type of cooperative

__________________________________________________________________________________

All financial profile Bargaining- Niche- Diversified &

Item dairy cooperatives only marketing fluid-processing

Balance sheet $1,000

Current assets 7,258,423 408,550 91,383 6,758,489

Net PP&E1/ and other assets 4,610,329 64,700 37,248 4,508,382

Investment in other co-ops 152,067 28,288 1,021 122,757

Total assets 12,020,819 501,538 129,653 11,389,628

Current liabilities 6,290,839 361,499 61,568 5,867,772

Long-term liabilities 2,409,129 17,814 18,033 2,373,282

Liabilities not categorized 677 55 622 0

Total liabilities 8,700,645 379,368 80,223 8,241,054

Equity 3,320,174 122,170 49,430 3,148,574

Liabilities and equity 12,020,819 501,538 129,653 11,389,628

Sales and Income

Milk & dairy-product sales 38,765,715 5,612,560 501,020 32,652,135

Supply and other sales 5,128,272 240,741 2 4,887,529

Service receipts & other income2/ 334,613 24,211 757 309,645

Patronage refunds received 8,377 2,460 10 5,907

Total sales and income 44,236,977 5,879,972 501,789 37,855,216

Total costs and expenses4/ 43,832,687 5,864,282 494,967 37,473,439

Net margins before tax 404,290 15,690 6,822 381,777

Number of cooperatives 94 60 9 25

Milk handled (million pounds)3/ 145,936 29,139 1,039 115,758

Note: Totals may not add due to rounding. 1/ Property, plant, and equipment. 2/ Includes non-recurring gains. 3/ Total milk volume handled by cooperatives, net of intercooperative transfers. 4/ Includes non-recurring losses, cost of goods sold.

19
20

Appendix table 2—Consolidated financial statements, by size of dairy cooperative, 2007

Size Group

__________________________________________________________________

Item Small1/ Medium2/ Large3/

Balance sheet $1,000

Current assets 25,192 401,100 6,832,131

Net PP&E4/ and other assets 7,835 191,603 4,410,891

Investment in other co-ops 10,031 16,201 125,835

Total assets 43,058 608,904 11,368,857

Current liabilities 17,822 250,012 6,023,005

Long-term liabilities 2,121 133,665 2,273,343

Total liabilities 20,565 383,677 8,296,403

Total equity 22,493 225,226 3,072,454

Liabilities and equity 43,058 608,904 11,368,857

Sales and Income

Milk and dairy-product sales 123,755 2,353,959 36,288,001

Supply and other sales 44,255 63,474 5,020,543

Service receipts and other income 5,507 23,022 306,084

Patronage refunds 1,261 2,532 4,584

Total sales and income 174,778 2,442,987 41,619,212

Total costs and expenses 172,332 2,403,281 41,257,075

Net margins after tax 2,446 39,706 362,137

Number of cooperatives 30 38 26

Milk handled (million lbs)5/ 587 9,225 136,124

Note: Totals may not add due to rounding. 1/ Cooperatives that handled less than 50 million pounds of milk 2/ Cooperatives that handled 50 million to 1 billion pounds of milk 3/ Cooperatives that handled 1 billion pounds of milk or more 4/ Property, plant, and equipment. 5/ Volume of milk handled by cooperative, net of intercooperative transfers.
21

Appendix table 3—Average financial statements of dairy cooperatives, by type, 2007

Type of cooperative

__________________________________________________________________________________

All financial profile Bargaining- Niche- Diversified &

Item dairy cooperatives only marketing fluid-processing

$1,000 per cooperative

Balance sheet

Current assets 77,217 6,809 10,154 270,340

Net PP&E1/ and other assets 49,046 1,078 4,139 180,335

Investment in other co-ops 1,618 471 113 4,910

Total assets 127,881 8,359 14,406 455,585

Current liabilities 66,924 6,025 6,841 234,711

Long-term liabilities 25,629 297 2,004 94,931

Liabilities not categorized 7 1 69 0

Total liabilities 92,560 6,323 8,914 329,642

Total equity 35,321 2,036 5,492 125,943

Liabilities and equity 127,881 8,359 14,406 455,585

Sales and Income

Milk and dairy-product sales 412,401 93,543 55,669 1,306,085

Supply and other sales 54,556 4,012 0 195,501

Service receipts and other income 3,560 404 84 12,386

Patronage refunds received 89 41 1 236

Total sales and income 470,606 98,000 55,754 1,514,209

Total costs and expenses 466,305 97,738 54,996 1,498,938

Net margins before tax 4,301 262 758 15,271

Milk handled per cooperative 

(million pounds)2/ 1,741 508 115 5,285

Note: Totals may not add due to rounding. 1/ Property, plant, and equipment. 2/ Average milk volume handled per cooperative.
22

Appendix table 4—Consolidated financial statements by type of dairy cooperative, 2002

Type of cooperative

__________________________________________________________________________________

All financial profile Bargaining- Commodity- Niche- Diversified &

Item dairy cooperatives only manufacturing marketing fluid-processing

Balance sheet $1,000

Current assets 3,778,832 242,467 225,550 8,605 3,302,211

Net PP&E1/ and other assets 3,903,003 64,153 193,275 23,033 3,622,543

Investment in other co-ops 683,622 18,402 8,252 2,858 654,109

Total assets 8,365,457 325,022 427,077 34,496 7,578,863

Current liabilities 3,210,600 220,658 173,629 6,257 2,810,056

Long-term liabilities 2,335,951 19,366 52,878 8,278 2,255,429

Total liabilities 5,546,551 240,024 226,507 14,535 5,065,485

Equity 2,818,906 84,998 200,570 19,961 2,513,378

Liabilities and equity 8,365,457 325,022 427,077 34,496 7,578,863

Sales and Income

Milk & dairy-product sales 24,358,409 4,347,010 2,128,958 62,956 17,819,484

Supply and other sales 3,397,319 229,490 86,090 11,827 3,069,915

Service receipts & other income 475,269 76,631 33,046 449 365,142

Patronage refunds received 53,881 1,983 3,065 234 48,598

Total sales and income 28,284,878 4,655,114 2,251,159 75,466 21,303,139

Total costs and expenses 27,954,774 4,640,474 2,230,012 74,376 21,009,912

Net margins before tax 330,104 14,640 21,147 1,090 293,227

Number of cooperatives 80 50 10 4 16

Milk handled (million pounds)2/ 139,595 32,200 12,855 344 94,196

Note: Totals may not add due to rounding. 1/ Property, plant, and equipment. 2/ Total milk volume handled by cooperatives, net of intercooperative transfers.
23

Appendix table 5—Consolidated financial statements by type of dairy cooperative, 1997

Type of cooperative

__________________________________________________________________________________

All financial profile Bargaining- Commodity- Branded- Diversified &

Item dairy cooperatives only manufacturing cheese fluid-processing

$1,000

Balance sheet

Current assets 3,245,673 178,222 392,410 83,735 2,591,306

Net PP&E1/ 2,012,928 33,014 236,090 38,631 1,705,193

Invest. in other co-ops 636,507 25,055 24,355 4,843 582,254

Total assets 5,895,107 236,291 652,855 127,209 4,878,753

Current liabilities 2,536,557 156,075 323,281 59,251 1,997,950

Long-term liabilities 1,029,960 7,231 76,093 11,432 935,204

Total liabilities 3,566,517 163,306 399,374 70,683 2,933,154

Equity 2,328,590 72,985 253,481 56,526 1,945,599

Liabilities and equity 5,895,107 236,291 652,855 127,209 4,878,753

Million dollars

Sales and Income

Milk & dairy-product sales 22,718.9 3,137.7 3,367.6 292.9 15,920.6

Supply and other sales 2,716.2 387.5 35.3 9.8 2,283.5

Service receipts & other inc. 232.7 56.3 56.1 0.9 119.5

Patronage refunds received 74.2 2.2 5.8 0.4 65.8

Total sales and income 25,741.9 3,583.7 3,464.8 304.0 18,389.4

Total costs and expenses 25,398.6 3,571.3 3,404.9 291.6 18,130.9

Net margins before tax 343.3 12.4 59.9 12.4 258.5

Number of cooperatives 88 45 14 9 20

Milk handled

(million pounds)2/ 114,432 19,632 21,909 1,265 71,627

Note: Totals may not add due to rounding. 1/ Property, plant, and equipment. 2/ Total milk volume handled by cooperatives, net of intercooperative transfers.
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