Research Report 203

Financial Profile of Dairy

Cooperatives, 2002

United States

Department of

Agriculture
Abstract Financial statements for U.S. dairy cooperatives in 2002 are presented. The nation's

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

(bargaining-only, commodity-manufacturing, niche-marketing, fluid-processing and

diversified) and according to size (net volume of milk handled). Balance sheets and

operating statements were presented on a per-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

$6.22 of assets per cwt to market member milk in 2002. One-third of the assets were

financed by member equity. Net margins before tax of $0.21 per cwt of milk handled

represented a 1.2 percent return on total sales.

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

Financial Profile of Dairy Cooperatives, 2002

Carolyn Liebrand

Agricultural Economist

Cooperative Service

Rural Business and Cooperative Development Service

U.S. Department of Agriculture

Research Report 203

September 2004

On the cover: (clockwise from upper left) “Katie” Olson, left, and her sister, Kelsey, on

their family’s Spring Valley, Minn., farm; a “640” block of cheddar cheese is cut into

natural chunks at AMPI’s Portage, Wis., plant; AMPI member Jerome “Joe” Hanson, of

Blair, Wis.; Gerrit Vanderbeek, Cheesemaker at AMPI’s Paynesville, Minn., plant, salts

cheese curds on an open table. Photos by Sheryl Meshke, courtesy AMPI
Preface Information for this report came from a 2003 survey of all U.S. dairy cooperatives that

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

2002. About 40 percent of the dairy cooperatives provided sufficient financial information that could be used in this study. However, these cooperatives represent nearly all

of the assets held and milk handled by all cooperatives. 

This report presents consolidated balance sheets, operating statements and standard

financial ratios for U.S. dairy cooperatives. For more focused analysis, 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 these 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Size categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Financial profile—per cwt basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Balance sheet by type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Balance sheet by size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Operating statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Operating statement by type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Operating statement by size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Common-sized financial profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Balance sheet by size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Operating statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Operating statement by size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Long-term solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Return on investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Comparison to 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

List of Figures

Fig. 1—Number of dairy cooperatives by type, 2002 . . . . . . . . . . . . . . . . . . . . . . 5

Fig. 2—Net volume of milk handled by dairy cooperatives, by type, 2002 . . . . . 6

Fig. 3—Operating type by size of dairy cooperatives, 2002 . . . . . . . . . . . . . . . . 7

ii
Contents Fig. 4—U.S. dairy cooperative assets per cwt, 2002 . . . . . . . . . . . . . . . . . . . . . . 9

Fig. 5—Assets, by size of cooperative, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Fig. 6—U.S. dairy cooperative revenues, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . 12

Fig. 7—Revenues per cwt, by size of cooperative, 2002 . . . . . . . . . . . . . . . . . . 13

Fig. 8—Dairy cooperative assets, 1997 and 2002 . . . . . . . . . . . . . . . . . . . . . . .22

Fig. 9—Sales and net margins, dairy cooperatives, 1997 and 2002 . . . . . . . . .22 

List of Tables

Table 1—Comparison of cooperatives in the financial profile study 

and all U.S. dairy cooperatives, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Table 2—Dairy cooperatives in the financial profile study compared 

with U.S. dairy cooperatives, by type and by size, 2002 . . . . . . . . . . . . . . . . 4

Table 3—Cooperatives in the financial profile study, by type and by size, 2002 . . . . . 6

Table 4—Dairy cooperatives’ consolidated balance sheet, per cwt 

of member milk handled, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

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

of dairy cooperative, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Table 6—Balance sheet per cwt of member milk, by size of

cooperative, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Table 7—Dairy cooperatives’ consolidated operating statement,

per cwt of total milk handled, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Table 8—Consolidated operating statement per cwt of total milk

handled, by type of dairy cooperative, 2002 . . . . . . . . . . . . . . . . . . . . . . . . 12

Table 9—Consolidated operating statement per cwt of total milk

handled, by size of dairy cooperative, 2002 . . . . . . . . . . . . . . . . . . . . . . . . 13

Table 10—Common-sized balance sheet, by type of dairy

cooperative, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Table 11—Common-sized balance sheet, by size of dairy

cooperative, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Table 12—Common-sized operating statement, by type of

dairy cooperative, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Table 13—Common-sized operating statement, by size of dairy 

cooperative, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

iii
Contents Table 14—Financial ratios, by type of dairy cooperative, 2002 . . . . . . . . . . . . . . . . . 17

Table 15—Financial ratios, by size of dairy cooperative, 2002 . . . . . . . . . . . . . . . . . . 18

Table 16—Average financial profile of dairy cooperatives, 18

by type, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Table 17—Comparison of financial profile dairy cooperatives 

per cwt, 1997 and 2002, by type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Appendix Tables

Appendix table 1—Consolidated financial statements, 

by type of dairy cooperative, 2002 . . . . . . . . . . . . . . . . . . . . . . . . 23

Appendix table 2—Consolidated financial statements, 

by size of dairy cooperative, 2002 . . . . . . . . . . . . . . . . . . . . . . . . 24

Appendix table 3—Average financial statements of dairy 

cooperatives, by type, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Appendix table 4—Consolidated financial statements, 

by type, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

iv
Highlights Most of the assets held and milk handled by U.S. dairy cooperatives were accounted

for by the 80 cooperatives for which there was complete financial information and that

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,

commodity-manufacturing, niche-marketing, fluid-processing and diversified. They

were also further categorized according to the net volume of milk they handled into

small, medium and large size groups.

Overall, dairy cooperatives employed $6.22 of assets per hundredweight (cwt) to market their members' milk in 2002. Current assets and property, plant and equipment

came to $2.81 and $2.90 per cwt of member milk, respectively. Total liabilities came to

$4.13 per cwt of which $2.39 were current liabilities representing mostly pending payments to members. Member equity amounted to $2.10 per cwt of milk. 

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

branded-cheese cooperatives used the most. Diversified and fluid-processing cooperatives used the next highest level of assets per cwt, while commodity-manufacturing

cooperatives fell in the middle.

Likewise, bargaining-only cooperatives had the fewest liabilities per cwt. Niche-marketing and diversified and fluid-processing cooperatives had significantly larger total

liabilities than the other two types.

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

milk—twice as high as diversified and fluid-processing cooperatives. Commodity-manufacturing cooperative members had the next to lowest investment per cwt in their

cooperatives, while bargaining-only cooperative members had the least, far below the

others.

Total assets per cwt of member milk increased as cooperative size group increased.

Similarly, total liabilities per cwt also increased with size. In contrast, equity decreased

as size increased, but the range was much narrower between the size groups than for

assets or liabilities. Some of the differences may be attributed to the differing proportions of the various operating types of cooperatives in each size group.

Milk and dairy product sales was the largest single income item, $15.73 per cwt of milk

handled, in 2002. Supply and other sales was the next largest item, $2.19 per cwt.

Total income was $18.27 per cwt, while net margins before tax came to 21 cents per

cwt of milk handled.

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

cwt, while bargaining-only cooperatives yielded the least. Niche-marketing, followed

by diversified and fluid-processing cooperatives’ supply sales were quite a bit larger

than the other two types. Thus, niche-marketing cooperatives had the highest total

income per cwt and bargaining-only cooperatives the lowest.

Niche-marketing and diversified and fluid-processing cooperatives had the largest net

margins before tax per cwt. Net margins for commodity-manufacturing cooperatives

were less than one-half of those of niche-marketing cooperatives. Net margins for bargaining-only cooperatives were well below those of any of the other types.

v
Highlights Milk and dairy product sales per cwt of total milk handled for small cooperatives were

well below those of the medium and large groups. Conversely, supply and other sales

for the small group were twice as large as for the large group. The medium group had

minimal supply and other sales. In the end, total income per cwt was highest for the

small cooperatives and lowest for the medium. Net margins per cwt were similar

between the medium and large groups, while small cooperatives’ net margins were

somewhat lower. Again, the results by size are in part due to the mix of operating

types in each size group.

Various ratios were calculated to measure dairy cooperative operations. Overall, dairy

cooperatives had $1.18 in current assets for each $1 of current debt in 2002. Nichemarketing cooperatives had the largest current ratio and bargaining-only cooperatives

the lowest. Almost two-thirds of total dairy cooperative assets were provided by liabilities (which may include milk payments owed to members). 

Long-term debt came to 83 percent of total equity in 2002. Diversified and fluid-processing cooperatives had the highest level of long-term debt compared with member

equity, while bargaining-only cooperatives had the lowest. 

By most measures of capitalization, the proportion of assets financed by debt capital

grew as cooperative size increased.

Return on equity was 11.7 percent for dairy cooperatives in 2002. Bargaining-only

cooperatives had the highest rate of return to equity by this measure and niche-marketing cooperatives the lowest. 

Return to the assets employed in marketing milk was 5.3 percent for all dairy cooperatives. Commodity-manufacturing cooperatives generated the highest return to assets,

followed by diversified and fluid marketing cooperatives. Niche-marketing cooperatives included in this study yielded the lowest return to assets.

By all measures of profitability, the medium group had the highest level of return, and

small cooperatives the lowest.

vi
Financial Profile of Dairy Cooperatives, 2002

Carolyn Liebrand

RBS Agricultural Economist

Introduction

Farmer cooperative statistics are collected annually by the Rural Business-Cooperative Service (RBS)

to provide information on the growth and development of cooperatives. The information is collected

from individual farmer cooperatives by a mail survey.

The 2003 survey (collecting 2002 data) requested additional details about marketing operations of dairy

cooperatives. This data on dairy cooperatives was

used to develop financial statistics specific to dairy

cooperatives for this report. The marketing operations

of all U.S. dairy marketing cooperatives in 2002 were

discussed in RBS Research Report 201.

In 2002, the United States had 196 cooperatives

predominantly engaged in dairy marketing (excluding

dairy goat cooperatives). Eighty of them (40.8 percent)

provided financial information in sufficient detail to be

included in this report. However, these 80 cooperatives represent 98.3 percent of the combined total

assets of all dairy cooperatives (table 1). The dairy

cooperatives included in this study handled 96.7 percent of the net milk volume handled by all U.S. dairy

cooperatives.

Functional Types

Dairy cooperatives perform a variety of functions

for their members and have taken diverse routes to

ensure a market for their members' milk. As such, they

may be classified according to the method they

employ in marketing a majority (50 percent or more)

of their members’ milk. The structure and operations

differ among the various types of dairy cooperatives.

For this report, dairy cooperatives were broadly classified into 5 groups: bargaining-only, commodity-manufacturing, niche-marketing, fluid-processing and

diversified dairy cooperatives (see box). Cooperatives

that were classified as bargaining-balancing or hardproduct manufacturing in 1997 were grouped together

under the label "commodity-manufacturing" for this

report because their numbers have declined. Nichemarketing cooperatives were identified as "brandedcheese" in the 1997 report, since most of these cooperatives produced specialty cheeses. However, a more

comprehensive label was used for this report because

some of the newer niche-marketing cooperatives produced other products such as branded fluid milk. As

in 1997, fluid-processing and diversified dairy cooperatives were grouped together due to the small number

of fluid-processing cooperatives.

The cooperatives in this study adequately represent each of the five types (table 2, figures 1 and 2).

Niche-marketing cooperatives were the least represented (22.2 percent). However, the niche-marketing

cooperatives in this study accounted for a majority of

the milk marketed by all niche-marketing cooperatives

in 2002 (59.4 percent). Similarly, while sufficient data

was obtained from just 34.2 percent of the bargainingonly dairy cooperatives in the U.S., these represented

90.0 percent of the net milk volume handled by all bargaining-only cooperatives.

All of the U.S. commodity-manufacturing cooperatives in existence in 2002 were included in this

study. The combined grouping of diversified and

fluid-processing cooperatives represented 72.7 percent

of all U.S. diversified and fluid-processing cooperatives, and nearly all of the net milk volume handled

(99.0 percent) by all such cooperatives in the U.S.

Appendix table 1 shows the 2002 consolidated

financial statements for all dairy cooperatives and by

type of dairy cooperative.

1
2

FUNCTIONAL TYPES OF DAIRY COOPERATIVES

Bargaining-only cooperatives are the most numerous type of dairy cooperative-- representing

almost three-fourths of all 196 U.S. dairy cooperatives in 2002. They operate at the first-handler

level in seeking to secure the most profitable outlets for their members' milk, and do not own

plants. So, further processing and sales of dairy products are left to other handlers. In 2002, 68.5

percent of these cooperatives each handled less than 50 million pounds of member milk and only

6.8 percent handled 1 billion pounds or more. Bargaining-only cooperatives collectively handled

about one-fourth of net U.S. cooperative milk volume.

Commodity-manufacturing cooperatives manufacture members’ milk into bulk dairy products

(such as butter, powder and cheese). Some function like bargaining-only cooperatives, but also

have plant facilities to accommodate handlers' needs and/or to balance milk supplies. Others use

most of their members' milk in their own manufacturing plants to make undifferentiated, commodity dairy products. Just 10 cooperatives were in this category in 2002, but they handled 8.9 percent

of the net milk volume of all U.S. dairy cooperatives.

Niche-marketing cooperatives typically process most of their members' milk in the cooperative's

plants, manufacturing and marketing specialty or branded dairy products for particular market

niches. A few do not have their own manufacturing facilities, but have arrangements with a

processor to make their specialized products. These typically "buy back" a portion of their members’ milk from other handlers to make the specialized products. Most are small--more than threefourths handled less than 50 million pounds each, and none handled more than 1 billion pounds of

member milk in 2002. They represented 9.2 percent of all U.S. dairy cooperatives (the second most

common type of dairy cooperative) in 2002. However, as a group they handled less than 1 percent

of U.S. cooperative milk volume.

Fluid-processing cooperatives typically process most of their members’ milk in their plants, primarily as bottled fluid milk. Many of these cooperatives also make products such as ice cream, sour

cream, cottage cheese and/or yogurt. Most handled less than 1 billion pounds of member milk

each. In 2002, only 3.6 percent of the dairy cooperatives in the U.S. were fluid processing cooperatives, and these accounted for just 1.5 percent of the milk handled by U.S. dairy cooperatives. 

Diversified cooperatives perform all or most of the functions that other types of dairy cooperatives

perform. A large portion of their milk supply is sold to other handlers, while maintaining a steady

volume at their own processing or manufacturing plants to make a variety of products. In 2002, 7.7

percent of all dairy cooperatives were diversified, but these handled 64.4 percent of the total cooperative milk volume. Two-thirds of the diversified dairy cooperatives each handled 1 billion or

more pounds of member milk in 2002 and none handled less than 50 million pounds per year.
Size Categories

The data were also categorized according to the

net volume of milk the cooperatives handled into three

size groups—small (less than 50 million pounds of

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

large (1 billion or more pounds of milk). The cooperatives in this study represented nearly all (96.0 percent)

of the large U.S. dairy cooperatives in 2002. And, a

majority of the medium dairy cooperatives were represented (55.7 percent). However, just 19.8 percent of the

small cooperatives were represented.

Bargaining-only cooperatives made up the bulk

of the small (86.4 percent) and medium (64.7 percent)

size groups (table 3 and figure 3). The large group was

made up of a mixture of diversified and fluid-processing cooperatives (41.7 percent), bargaining-only (37.5

percent) and commodity-manufacturing cooperatives

(20.8 percent). There were no large niche-marketing

cooperatives; nor were there any small commoditymanufacturing cooperatives. Because each size group

contains differing proportions of the four operating

types, some of the differences between size groups

may be in part due to variance 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.

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). Overall, cooperatives

had $6.22 in assets for each cwt of milk members sold

through their dairy cooperatives in 2002.

Fixed assets (net of investments in other cooperatives) made up the largest single item of cooperative

assets ($2.90 per cwt), while current assets were the

next largest ($2.81 per cwt). Investments in other cooperatives amounted to $0.51 per cwt.

On the other side of the ledger, total liabilities

were $4.13 per cwt. The bulk were current liabilities,

$2.39 per cwt, mostly consisting of pending payments

to members for their delivered milk. Total member

equity amounted to $2.10 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 (table 5

and figure 4). Among the 4 groups of cooperatives,

bargaining-only cooperatives have relatively low capital requirements for their operations because they do

not own plants. Commodity-manufacturing cooperatives require more capital to operate plants, but are

3

Table 1—Comparison of cooperatives in the financial profile study and all U.S. dairy cooperatives, 2002

Financial 4 U.S. Profile cooperatives

profile dairy as a percent of

Item cooperatives cooperatives 1 all U.S. cooperatives

Number Percent

Cooperatives 80 196 40.8

Million dollars Percent

Total assets 8,365.5 8,511.2 98.3

Net milk and dairy product sales 2 21,742.5 23,037.7 94.4

Billion pounds Percent

Net milk volume handled 3 139.6 144.3 96.7

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

2 Sales of milk and dairy products, less inter-cooperative transfers.

3 Milk handled by cooperatives less inter-cooperative transfers.

4 Includes cooperatives that provided financial data to USDA.
able to capture some economies of size in their highvolume plants. Niche-marketing cooperatives, on the

other hand, have relatively high capital requirements

in part because they manufacture relatively low or

moderate volumes of specialized products, reducing

their ability to capitalize on economies of size.

Diversified and fluid-processing cooperatives often

operate extensive manufacturing facilities with the

related capital requirements. While they are able to

capture some economies of size, their complexity of

product mix and marketing strategies may increase

their capital requirements. In addition, both nichemarketing and diversified and fluid-processing cooperatives also use additional capital to support their

sales of supplies and other products.

Thus, bargaining-only cooperatives required the

least assets to market milk ($1.02 per cwt of member

milk), followed by commodity-manufacturing cooperatives ($3.41 per cwt). Niche-marketing cooperatives

required the most assets ($10.03 per cwt). Diversified

and fluid-processing cooperatives had the next highest

level of asset use on a per-cwt basis, $8.44.

Current assets per cwt of member milk ranged

from $0.76 for bargaining-only cooperatives to $3.68

4

Table 2—Cooperatives in the study compared with all U.S. dairy cooperatives, by type and by size, 2002

Financial U.S. Share of U.S.

Primary function profile Cooperatives represented

Number of cooperatives

Type ---------------------------Number------------------------- Percent

Bargaining-only 50 146 34.2

Commodity-manufacturing 1 10 10 100.0

Niche-marketing 2 4 18 22.2

Diversified and fluid-processing 16 22 72.7

Net milk volume 3

------------------------Million pounds-------------------- Percent

Bargaining-only 32,200 35,787 90.0

Commodity-manufacturing 12,855 12,855 100.0

Niche-marketing 344 579 59.4

Diversified and fluid-processing 94,196 95,128 99.0 

Number of cooperatives

Size category ---------------------------Number------------------------- Percent

Small 4 22 111 19.8

Medium 5 34 61 55.7

Large 6 24 25 96.0

Net milk volume 3

-----------------------Million pounds--------------------- Percent

Small 411 1,023 40.2

Medium 11,568 14,650 79.0

Large 127,616 128,676 99.2

1 These were categorized as "bargaining-balancing" or "hard product manufacturing" cooperatives in 1997.

2 These were referred to as "branded cheese" cooperatives in 1997.

3 Milk handled by cooperatives less inter-cooperative transfers.

4 Cooperatives that handled less than 50 million pounds of milk

5 Cooperatives that handled 50 to 1 billion pounds of milk

6 Cooperatives that handled 1 billion pounds of milk or more
for diversified and fluid-processing cooperatives.

Property, plant and equipment, and other assets

showed the widest range between operating types—

ranging from just $0.20 per cwt for bargaining-only

cooperatives to $6.70 for niche-marketing cooperatives.

Diversified and fluid-processing cooperatives had the

next highest level of capital used for property, plant,

equipment and other assets ($4.03 per cwt) followed

by commodity-manufacturing cooperatives ($1.54 per

cwt).

Compared with other types, niche-marketing and

diversified and fluid-processing cooperatives had

much higher investment in other cooperatives ($0.83

and $.73 per cwt, respectively). In contrast, bargainingonly and commodity-manufacturing cooperatives just

had $0.06 and $0.07 per cwt, respectively, invested in

other cooperatives. Investment in other cooperatives

may include investments in a cooperative bank as part

of a loan agreement.

Diversified and fluid-processing cooperatives

had the highest total liabilities per cwt ($5.64), followed by niche-marketing cooperatives ($4.23).

Commodity-manufacturing cooperatives had lower

liabilities per cwt ($1.81), but not as low as bargainingonly cooperatives ($0.75).

Current liabilities ranged from $0.69 per cwt for

bargaining-only cooperatives to $3.13 per cwt for

diversified and fluid-processing cooperatives. Nichemarketing cooperatives had $1.82 in current liabilities

per cwt, followed by commodity-manufacturing cooperatives ($1.39 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 much higher

levels of long-term liabilities ($2.41 and $2.51 per cwt,

respectively). Commodity-manufacturing cooperatives’ long-term liabilities were relatively low ($0.42

per cwt).

Members of niche-marketing cooperatives had

the highest stake in their cooperatives on a per-cwt

basis. Members had invested $5.80 for each cwt of milk

they marketed through their cooperatives. In contrast,

bargaining-only cooperative members had just $0.27

per cwt invested in their cooperatives. Diversified and

fluid-processing cooperatives’ member equity of $2.80

per cwt was the second highest level of equity, followed by commodity-manufacturing cooperatives

($1.60 per cwt).

5

Figure 1—Number of dairy cooperatives by type, 2002

Number

0

20

40

60

80

100

120

140

160160

140

120

100

80

60

40

20

0

Bargaining only Commodity Niche Diversified & 

manufacturing marketing fluid Processing

All 

Financial profile group
6

Figure 2—Net volume of milk handled by dairy cooperatives, by type, 2002

Billion pounds

0

10

20

30

40

50

60

70

80

90

100100

90

80

70

60

50

40

30

20

10

0

Bargaining only Commodity Niche Diversified & 

manufacturing marketing fluid Processing

All Financial profile group

Table 3—Cooperatives in the study, by type and by size, 2002

Size category

Primary function Small 1 Medium 2 Large 3

Percent

Bargaining-only 86.4 64.7 37.5

Commodity-manufacturing 0.0 14.7 20.8

Niche-marketing 9.1 5.9 0.0

Diversified and fluid-processing 4.5 14.7 41.7 _____ ––––– –––––

100.0 100.0 100.0

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
7

Figure 3—Operating types by size of dairy cooperatives, 2002

Percent

0

10

20

30

40

50

60

70

80

90

100

100

90

80

70

60

50

30

40

20

10

0

Small Medium Large

Diversified &

fluid processing

Commodity

manufacturing

Bargaining only

Niche 

marketing

Table 4—Dairy cooperatives’ consolidated balance sheet, per cwt of member milk, 2002

Item Dollars per cwt

Current assets 2.81

Net property, plant and equipment and other assets 2.90

Investments in other cooperatives 0.51 ____

Total assets 6.22

Current liabilities 2.39

Long-term liabilities 1.74 ____

Total liabilities 4.13

Total member equity 2.10

Total liabilities and equity 6.22

Member milk (million pounds) 134,451

Note: Totals may not add due to rounding.
Balance Sheet by Size

While there was a $9.01 range in total assets per

cwt between the different operating types of cooperatives, the range was narrower between the three size

groups (table 6 and figure 5). Total assets employed

per cwt of member milk increased as the size group

increased, and ranged from $4.34 for small cooperatives to $6.33 for the large cooperatives. Liabilities

(current, long-term, and total) also increased as size

increased. In contrast, total member equity decreased

as size increased, ranging from $3.18 per cwt of member milk for small cooperatives to $2.09 per cwt for

large cooperatives.

Operating Statement

Operating statements are presented on a per-cwt

of total milk handled by the cooperatives basis. This

shows the revenues, expenses and margins generated

by the total volume of milk going through the cooperatives.

Dairy cooperatives included in this study generated $15.73 in milk and dairy product sales per cwt of

milk handled in 2002 (table 7). Supply and other sales

was the next largest item, $2.19 per cwt. Total income

was $18.27 per cwt handled by the cooperatives. After

expenses of $18.06 per cwt, dairy cooperatives realized

net margins before tax of $0.21 per cwt.

Operating Statement by Type

Milk and dairy product sales per cwt of total milk

handled were lowest for bargaining-only cooperatives,

$12.84, and highest for niche-marketing cooperatives,

$18.30 (table 8 and figure 6). This may reflect the

"value-added" focus of the niche-marketing cooperatives—where they aim to command higher prices by

the uniqueness of their milk (or milk products).

Conversely, bargaining-only cooperatives add little

"value" to members’ milk, focusing primarily on finding markets for it. Commodity-manufacturing cooperatives had the lowest milk and dairy product sales of

the types that had plants for further processing milk,

$15.36 per cwt. Diversified and fluid-processing cooperatives, with elements of all the operating types, had

the second-highest dairy product sales, $16.69 per cwt.

Niche-marketing cooperatives, along with diversified and fluid-processing cooperatives, had markedly

higher supply and other sales per cwt ($3.44 and $2.88,

respectively) than bargaining-only or commodity-manufacturing cooperatives ($0.68 and $0.62, respectively).

8

Table 5–Consolidated balance sheet per cwt of member milk, by type of dairy cooperative, 2002

Type of cooperative

Bargaining Commodity Niche Diversified &

Item only manufacturing marketing fuid-processing

Dollars per cwt of member milk

Current assets .76 1.80 2.50 3.68

Net PP&E 1 and other assets .20 1.54 6.70 4.03

Investments in other co-ops .06 .07 .83 .73 ___ ___ ____ ___

Total assets 1.02 3.41 10.03 8.44

Current liabilities .69 1.39 1.82 3.13

Long-term liabilities .06 .42 2.41 2.51 ___ ___ ____ ____

Total liabilities .75 1.81 4.23 5.64

Total equity .27 1.60 5.80 2.80

Total liabilities and equity 1.02 3.41 10.03 8.44

Member milk (million pounds) 31,772 12,535 344 89,800

Note: Totals may not add due to rounding.

1 Property, plant and equipment.
Service receipts and other income per cwt were

highest for diversified and fluid-processing cooperatives ($0.34) and lowest for the niche-marketing cooperatives ($0.13). Patronage income was similar

between the four types—ranging from $0.01 for bargaining-only cooperatives to $0.07 for niche-marketing

cooperatives.

Total income varied by more than $8 per cwt

between the different types of cooperatives. Nichemarketing cooperatives had the highest total income

per cwt, $21.94, followed by diversified and fluid-processing cooperatives at $19.96. Commodity-manufacturing had $16.25 in total income per cwt of milk handled. Bargaining-only cooperatives had the lowest

total income, $13.71 per cwt.

Net margins before tax followed the same pattern—bargaining-only cooperatives had the smallest,

$0.04 per cwt, and niche-marketing cooperatives the

largest, $0.32 per cwt. Diversified and fluid-processing

cooperatives had relatively high net margins, $0.27 per

cwt, while commodity-manufacturing cooperatives’

net margins ($0.15 per cwt) were about one-half those

of the niche-marketing or diversified and fluid-processing cooperatives (but were almost four times those

of bargaining-only cooperatives).

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 9 and figure 7).

Milk and dairy product sales per cwt of total milk handled was lowest for the small cooperatives, $13.13, and

highest for the medium cooperatives, $16.74. To the

contrary, small cooperatives had the highest supply

and other sales, $4.86 per cwt, far exceeding those of

medium cooperatives that had the lowest, $0.31 per

cwt. As a result, small cooperatives had the highest

total income, $18.53 per cwt, and medium cooperatives, the lowest—$17.23. The large cooperatives’ milk

and dairy product sales, $15.65 per cwt, were between

the small and medium cooperatives’, as were the large

cooperatives’ supply and other sales of $2.35 per cwt.

Net margins before tax per cwt were similar for

the medium ($0.23) and the large cooperatives ($0.21).

The small cooperatives’ net margins before taxes of

$0.16 per cwt were the lowest.

9

Figure 4—US dairy cooperative assets per cwt, 2002

$/cwt

0

2

4

6

8

10

12 12.00

10.00

8.00

6.00

4.00

2.00

0.00

All Bargaining Commodity Niche Diversified & fluid 

only manufacturing marketing Processing

Total assets

Total liabilities

Member equity
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 by using total assets

(balance sheet) or total 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 these profiled cooperatives.

Balance Sheet

The balance sheet elements are expressed as a

percent of total assets in table 10. Overall, current

assets made up 45.2 percent of dairy cooperatives' total

assets. Net property, plant and equipment (PPE) and

other fixed assets constituted 46.7 percent. Investments

in other cooperatives came to 8.2 percent of total

assets. On the debt side, total liabilities came to 66.3

percent of total assets. Current liabilities were 38.4 percent of total assets, while long-term liabilities made up

27.9 percent. Member equity represented 33.7 percent

of the total assets used by cooperatives to market

member milk.

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

(74.6 percent) among the 4 types. Current assets made

up between 24.9 percent (niche-marketing cooperatives) and 52.8 percent (commodity-manufacturing

cooperatives) of total assets for the other types. And

accordingly, bargaining-only cooperatives had a lower

rate of investment in PP&E and fixed assets (19.7 percent) than did the other types, reflecting their lack of

facilities. In contrast, 66.8 percent of the niche-marketing cooperatives’ assets were made up of PP&E and

fixed assets, the only type where PP&E represented a

majority of total assets. Investment in other cooperatives was just over 8 percent of total assets for both

niche-marketing and diversified and fluid-processing

cooperatives. But investments in other cooperatives

10

Table 6—Balance sheet per cwt of member milk, by size of cooperative, 2002

Size Group

Item Small 1 Medium 2 Large 3

Dollars per cwt of member milk

Current assets 2.01 2.90 2.80

Net PP&E 4 and other assets 1.48 1.84 3.00

Investments in other co-ops .85 .35 .52 ____ ____ ____

Total assets 4.34 5.09 6.33

Current liabilities .93 2.24 2.41

Long-term liabilities .24 .69 1.84 ____ ____ ____

Total liabilities 1.16 2.93 4.24

Total equity 3.18 2.16 2.09

Total liabilities and equity 4.34 5.09 6.33

Member milk (million pounds) 411 11,603 122,978

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.
came to just 1.9 percent of total assets for the commodity-manufacturing cooperatives and 5.7 percent for

bargaining-only cooperatives.

In similar fashion, current liabilities came to 67.9

percent of total assets for bargaining-only cooperatives. In contrast, current liabilities ranged from 18.1

percent of total assets (niche-marketing) to 40.7 percent

(commodity-manufacturing) for the other types of

cooperatives. Long-term liabilities (debt) ranged from

6.0 percent (bargaining-only cooperatives) to 29.8 percent (diversified and fluid-processing cooperatives) of

total assets, reflecting differing levels of investment in

plants and facilities and reliance on borrowed capital.

Except for the niche-marketing cooperatives, total

liabilities represented a majority of total assets—from

53.0 percent (commodity-manufacturing cooperatives)

to 73.8 percent (bargaining-only cooperatives). For the

niche-marketing cooperatives, a majority of total assets

were supported by member equity (57.9 percent). For

the other types, member equity amounted to between

26.2 percent (bargaining-only cooperatives) and 47.0

percent (commodity-manufacturing cooperatives) of

total assets. It should be noted, however, that to the

extent that most of the bargaining-only cooperatives’

11

Figure 5—Assets, by size of cooperative, 2002

$/cwt

0

1

2

3

4

5

6

7.007

6.00

5.00

4.00

3.00

2.00

1.00

0.00

Small Medium Large

Total assets

Total 

liabilities

Member 

equity

Table 7—Dairy cooperatives’ consolidated operating

statement, per cwt of total milk handled, 2002

Item Dollars per cwt

Milk and dairy product sales 15.73

Supply and other sales 2.19

Service receipts and other income .31

Patronage income .03 _____

Total income 18.27

Estimated Expenses 18.06

Net margins before tax .21

Total milk handled 154,806

Note: Totals may not add due to rounding.
12

Table 8—Consolidated operating statement per cwt of total milk handled, by type of dairy cooperative, 2002

Type of cooperative

Bargaining Commodity Niche Diversified &

Item only manufacturing marketing fluid-processing

Dollars per cwt

Milk and dairy product sales 12.84 15.36 18.30 16.69

Supply and other sales .68 .62 3.44 2.88

Service receipts and other income .23 .24 .13 .34

Patronage income .01 .02 .07 .05 ____ ____ ____ ____

Total income 13.75 16.25 21.94 19.96

Total expenses 13.71 16.09 21.62 19.68

Net margins before tax .04 .15 .32 .27

Milk volume (million pounds) 33,856 13,857 344 106,748

Note: Totals may not add due to rounding.

Figure 6—US dairy cooperative revenues, 2002

$/cwt

0

5

10

15

20

25

25.00

20.00

15.00

10.00

5.00

0.00

All Bargaining Commodity Niche Diversified & fluid 

only manufacturing marketing processing

Other income

Supply and

other sales

Milk and dairy

products
13

Table 9—Consolidated operating statement per cwt of total milk handled, by size of cooperative, 2002

Size Group

Item Small 1 Medium 2 Large 3

Dollars per cwt

Milk and dairy product sales 13.13 16.74 15.65

Supply and other sales 4.86 .31 2.35

Service receipts and other income .41 .15 0.32

Patronage income .14 .03 .03 ____ ____ ____

Total income 18.53 17.23 18.36

Total expenses 18.38 17.00 18.15

Net margins before tax .16 .23 .21

Total milk handled (million pounds) 411 12,623 141,772

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 

Figure 7—Revenues per cwt,by size of cooperative, 2002

$/cwt

0

2

4

6

8

10

12

14

16

18

20.00 20

18.00

16.00

14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00

Small Medium Large

Other income

Supply and

other sales

Milk and dairy

products
current assets are for payments for member milk, bargaining-only members’ claim on assets may be higher

than for the other types of cooperatives.

Balance Sheet by Size

Balance sheet items expressed as a percent of

total assets are shown by size of dairy cooperative in

table 11. The structure of the balance sheet varied

among the different size groups. Current assets made

up a similar proportion of total assets for small (46.3

percent) and large cooperatives (44.3 percent) in contrast with the medium cooperatives (57.0 percent).

However, property, plant and equipment, and other

assets’ share of total assets were more similar for small

and medium cooperatives (34.0 and 36.1 percent,

respectively) than for the large cooperatives (47.5 percent). Small cooperatives reported the highest level of

investments in other cooperatives (19.7 percent), while

it was just 6.9 percent for medium cooperatives and 8.2

for large cooperatives.

Total liabilities made up a larger and larger proportion of total assets as the size group increased. The

range was relatively large (26.8 to 67.0 percent).

Accordingly, the reverse pattern was seen for total

member equity, ranging from 33.0 percent for the large

cooperatives to 73.2 percent for the small cooperatives.

Operating Statement

The operating statement items for all dairy cooperatives and by type were expressed as a percent of

total income in table 12. As could be expected, milk

and dairy product sales accounted for the bulk of total

income (86.1 percent, overall). Net margins to income,

which reflects the profit margin of the cooperative

(before paying income taxes), came to 1.2 percent,

overall, in 2002.

Most of the commodity-manufacturing cooperatives’ income came from milk and dairy product sales

(94.6 percent), while bargaining-only cooperatives’

amounted to slightly less (93.4 percent). Milk and

dairy product sales were a smaller proportion of total

income for niche-marketing cooperatives (83.4 percent)

and diversified and fluid-processing cooperatives (83.6

percent) because these two types had relatively higher

supply and other sales (15.7 and 14.4 percent, respectively).

Niche-marketing and diversified and fluid-processing cooperatives realized the highest profit margins (1.4 percent of total income, each). Bargainingonly cooperatives generated the lowest net margins to

sales ratio (0.3 percent of total income), while commodity-manufacturing cooperatives were in the middle (0.9 percent).

14

Table 10—Common-sized balance sheet, by type of dairy cooperative, 2002

Bargaining Commodity Niche Diversified

Item only manufacturing marketing & fluid-processing All

Percent of total assets

Current assets 74.6 52.8 24.9 43.6 45.2

Net PP&E 1 and other assets 19.7 45.3 66.8 47.8 46.7

Investment in other co-ops 5.7 1.9 8.3 8.6 8.2 _____ _____ _____ _____ _____

Total assets 100.0 100.0 100.0 100.0 100.0

Current liabilities 67.9 40.7 18.1 37.1 38.4

Long-term liabilities 6.0 12.4 24.0 29.8 27.9 _____ _____ _____ _____ _____

Total liabilities 73.8 53.0 42.1 66.8 66.3

Total equity 26.2 47.0 57.9 33.2 33.7

Liabilities and equity 100.0 100.0 100.0 100.0 100.0

Note: Totals may not add due to rounding.

1 Property, plant and equipment. 
Operating Statement by Size

Operating statements expressed as a percent of

total income according to size of cooperative are

shown in table 13. Milk and dairy product sales made

up the bulk of total income for medium cooperatives

(97.1 percent). Small cooperatives’ milk and dairy

product sales accounted for just 70.8 percent of total

income, while supply sales made up 26.2 percent.

Large cooperatives’ supply and other sales came to

12.8 percent of total income, while milk and dairy

product sales amounted to 85.2 percent.

Small cooperatives had the lowest net-marginsbefore-taxes-to-sales ratio (0.8 percent of total income),

which was about one-half that of the medium and

large cooperatives (1.4 and 1.2 percent, respectively).

Ratios

The relationships between various items in the

balance sheet and operating statement can be used to

analyze comparative dairy cooperative performance.

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

while 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, cooperatives had $1.18 in current assets for

each $1 of current liabilities. Niche-marketing cooperatives and commodity-manufacturing cooperatives

appeared to be in the best position to meet current

obligations (current ratios of 1.38 and 1.30, respectively). Bargaining-only cooperatives and diversified and

fluid-processing cooperatives had $1.10 and $1.18,

respectively, to meet each $1 of current obligations.

The ability to meet current obligations appeared to

weaken as the size of cooperative increased—from 2.17

for small cooperatives to 1.17 for large cooperatives.

Another measure of short-term solvency is current liabilities divided by total assets. For all cooperatives, the ratio was 0.38, indicating that cooperatives

had 38 cents of current liabilities for each $1 of assets

held. Bargaining-only cooperatives' ratio was the

largest among the different types of dairy cooperatives

(0.68). In comparison, niche-marketing cooperatives

had the lowest level of current liabilities in relation to

total assets (0.18). Commodity-manufacturing and

diversified and fluid-processing cooperatives were in

15

Table 11—Common-sized balance sheet, by size of dairy cooperative, 2002

Size Group

Item Small 1 Medium 2 Large 3

Percent of total assets

Current assets 46.3 57.0 44.3

Net PP&E 4 and other assets 34.0 36.1 47.5

Investments in other co-ops 19.7 6.9 8.2

____ ____ ____

Total assets 100.0 100.0 100.0

Current liabilities 21.4 44.0 38.0 

Long term liabilities 5.5 13.5 29.0 ____ ____ ____

Total liabilities 26.8 57.6 67.0

Total equity 73.2 42.4 33.0

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. 
the middle with short-term solvency positions of 41

cents and 37 cents of current liabilities per $1 of assets,

respectively. Current liabilities ranged from 21 percent

of total assets for small cooperatives to 44 percent for

medium cooperatives. The ratio was 0.38 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

which members are providing the cooperative's risk

capital. Overall, long-term liabilities came to 83 percent of total equity in 2002. Relative to the other types,

diversified and fluid-processing cooperatives had a

markedly higher level of long-term liabilities compared with member equity (90 cents of long-term liabilities for each $1 of member equity). Bargaining-only

cooperatives had the lowest ratio (23 cents per $1 of

equity), followed closely by commodity-manufacturing cooperatives (26 cents). Niche-marketing cooperatives reported 41 cents of long-term liabilities for each

16

Table 12—Common-sized operating statement, by type of dairy cooperative, 2002

Bargaining Commodity Niche Diversified

Item only manufacturing marketing & fluid-processing All

Percent of total income

Milk and dairy product sales 93.4 94.6 83.4 83.6 86.1

Supply and other sales. 4.9 3.8 15.7 14.4 12.0

Service receipts and other income 1.6 1.5 0.6 1.7 1.7

Patronage refunds 0.0 0.1 0.3 0.2 0.2 ____ ____ ____ ____ ____

Total income 100.0 100.0 100.0 100.0 100.0

Total expenses 99.7 99.1 98.6 98.6 98.8

Net margins before tax 0.3 0.9 1.4 1.4 1.2

Note: Totals may not add due to rounding.

Table 13—Common-sized operating statement, by size of dairy cooperative, 2002

Size Group

__________________________________________________________________

Item Small 1 Medium 2 Large 3 

Percent of total income

Milk and dairy product sales 70.8 97.1 85.2

Supply and other sales 26.2 1.8 12.8

Service receipts and other income 2.2 0.9 1.7

Patronage refunds 0.7 0.2 0.2 ____ ____ ____

Total income 100.0 100.0 100.0

Total expenses 99.2 98.6 98.8

Net margins before tax 0.8 1.4 1.2

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
$1 of equity. The ratio improved as the size group

decreased—ranging from 0.88 for the large cooperatives to 0.07 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 66

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

other words, members supplied 34 cents of each $1 of

capital employed by the cooperatives. Bargaining-only

cooperatives had the highest ratio of total liabilities to

total assets (0.74); however, most of the bargainingonly cooperatives' liabilities are current obligations

(the bulk of which are to members for milk).

Diversified and fluid-processing cooperatives had a

ratio of 0.67 while commodity-manufacturing cooperatives’ total liabilities to total assets was 0.53. Nichemarketing cooperatives had the lowest ratio (0.42), and

correspondingly had the most capital supplied by

members (58 cents of equity for each $1 of assets).

The level of liabilities in relation to assets

increased as size increased. Correspondingly, small

cooperatives used the most member equity in relation

to total assets, 73 cents per $1 assets, while large cooperatives were financed by just 33 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 61 cents in equity for each $1

invested in fixed assets and investments. Bargainingonly and commodity-manufacturing cooperatives had

ratios of 1.03 and 1.00, respectively, indicating an ability to finance all of their fixed assets and investments

with member capital. For niche-marketing and diversified and fluid-processing cooperatives, fixed assets

and investments were supported by capital from outside sources (77 and 59 cents of member equity for

each $1 of fixed assets and investments, respectively).

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

ratio for small cooperatives (1.36) was more than twice

that of large cooperatives (0.59). Medium cooperatives

had a ratio of 0.99.

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).

17

Table 14—Financial ratios, by type of dairy cooperative, 2002

Bargaining Commodity Niche Diversified &

Item only manufacturing marketing fluid-processing All

Ratio

Capitalization

Current ratio (working capital) 1.10 1.30 1.38 1.18 1.18

Current liabilities to total assets .68 .41 .18 .37 .38

Long-term liabilities to equity .23 .26 .41 .90 .83

Total liabilities to total assets .74 .53 .42 .67 .66

Equity to total assets .26 .47 .58 .33 .34

Equity to fixed assets and investments 1.03 1.00 .77 .59 .61

Percent

Profitability

Return 1 on equity 17.2 10.5 5.5 11.7 11.7

Return 2 on fixed assets 18.5 14.1 5.0 9.4 9.7

Return 2 on total assets 4.7 6.7 3.7 5.3 5.3

1 Net margins after interest expense used in calculation. 2 Net margins before taxes and interest expense used in calculation.
Return on equity measures profitability relative

to member investment after all claims on those returns

are accounted for. Net margin after interest expense

(creditor’s claim) divided by total member equity was

11.7 percent for dairy cooperatives overall. Ideally,

return to member equity (the opportunity cost of

investing in the cooperative) should equal or exceed

what they could earn if the capital were invested elsewhere. (Insufficient data was obtained to calculate the

net margin after taxes). Return on equity ranged from

5.5 percent for niche-marketing cooperatives to 17.2

percent for bargaining-only cooperatives in 2002.

By size, return on equity ranged from 4.9 percent

(small cooperatives) to 12.3 percent (medium cooperatives). Large cooperatives had an 11.7 percent return

on member equity invested in the cooperative.

Return on fixed assets measures return to cooperative investment in plant, property and equipment,

other assets and in other cooperatives. Net margins

before taxes and interest are used to show the return to

cooperative assets regardless of who has a claim on

those returns, i.e., before any claims on those returns

are made by government (taxes) or creditors (interest).

Return on fixed assets was 9.7 percent overall—lowest

for the niche-marketing cooperatives (5.0 percent) and

highest for the bargaining-only cooperatives (18.5 percent).

Return on total assets (net margins before taxes

and interest expense divided by total assets) measures

the effectiveness of the cooperative in employing its

assets to generate profits, and was 5.3 percent for all

dairy cooperatives. Commodity-manufacturing cooperatives generated the highest return on assets (6.7

percent), followed by diversified and fluid-processing

cooperatives (5.3 percent). Bargaining-only cooperatives realized a 4.7 percent return to the assets

employed in marketing milk, and niche-marketing

cooperatives yielded the lowest return to total assets

(3.7 percent). By all measures of profitability, the medium cooperatives had the highest returns, and small

cooperatives the lowest.

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 used

18

Table 15—Financial ratios, by size of dairy cooperative, 2002

Size Group

Item Small 1 Medium 2 Large 3

Ratio

Capitalization

Current ratio (working capital) 2.17 1.29 1.17

Current liabilities to total assets .21 .44 .38

Long-term liabilities to equity .07 .32 .88

Total liabilities to total assets .27 .58 .67

Equity to total assets .73 .42 .33

Equity to fixed assets and investments 1.36 .99 .59

Percent

Profitability

Return 4 on equity 4.9 12.3 11.7

Return 5 on fixed assets 7.2 13.5 9.5

Return 5 on total assets 3.9 5.8 5.3

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 after interest expense used in calculation. 5 Net margins before taxes and interest expense used in calculation.
$473.7 million in assets—more than 70 times the assets

used by bargaining-only cooperatives on average ($6.5

million per cooperative—the lowest of the operating

types). Niche-marketing cooperatives were also relatively small in terms of assets—$8.6 million per cooperative. However, they handled the smallest net volume of milk (86 million pounds). Commoditymanufacturing cooperatives were a distant second in

terms of assets ($42.7 million per cooperative) and

average milk volume handled (1.3 billion pounds).

Diversified and fluid-processing cooperatives’

average milk and dairy product sales averaged $1.1

billion per cooperative, far exceeding those of the

other types. Commodity-manufacturing had the next

largest milk and dairy product sales ($212.9 million

per cooperative). Niche-marketing cooperatives had

the lowest average milk and dairy product sales ($15.7

million), with bargaining-only cooperatives coming in

with $86.9 million per cooperative.

Diversified and fluid-processing cooperatives

had the highest average net margins ($18.3 million per

cooperative). Niche-marketing and bargaining-only

cooperatives had the same net margins before tax on a

per-cooperative basis ($300,000). Commodity-manufacturing cooperatives’ net margin averaged $2.1 million per cooperative.

Comparison to 1997

Comparison can be made with the results from

the 1997 report (appendix table 4). However, it must be

kept in mind that there were differences in the sets of

cooperatives used for each study. For example, twice

as many niche-marketing cooperatives ("branded

cheese" in 1997) provided financial data in 1997 than in

2002, representing 47.4 and 22.2 percent of all nichemarketing cooperatives in each year, respectively).

The balance sheet items per cwt were similar

between 1997 and 2002 (table 17 and figure 8). Total

asset use per cwt of member milk was nearly $1 per

cwt higher in 2002—$6.22 per cwt compared with

$5.25 per cwt in 1997. The increase can be attributed to

an increase in debt capital—from $3.18 in 1997 to $4.13

in 2002. Member equity per cwt was similar in 1997

and 2002 ($2.07 and $2.10, respectively).

Milk and dairy product sales per cwt of total milk

handled were considerably lower in 2002 ($15.73 verses $18.75 in 1997), a result of lower average milk prices

in 2002 relative to 1997 (figure 9). Net margins before

tax, however, were not markedly lower—$0.21 per cwt

in 2002 compared with $0.28 per cwt in 1997. And net

margins to sales were similar: 1.2 and 1.3 percent,

respectively, in 2002 and 1997.

Comparisons between 2002 and 1997 by operating type of cooperative are also shown in table 17.

Niche-marketing cooperatives used about the same

level of assets in 2002 as in 1997. Bargaining-only

cooperatives were the only operating type to report

fewer assets per cwt of milk in 2002, relative to 1997.

However, in both years niche-marketing cooperatives

had the highest level of total assets per cwt followed

by diversified and fluid-processing cooperatives, while

bargaining-only cooperatives had the lowest. The relative positions of the four operating types followed the

same pattern for total liabilities and equity per cwt,

also.

Commodity-manufacturing cooperatives were

the only operating type where milk and dairy product

sales were higher in 2002 than in 1997. Diversified and

fluid-processing cooperatives reported the highest

total income per cwt in 1997, while niche-marketing

cooperatives’ total income was highest in 2002. And

bargaining-only cooperatives had the lowest total

income in 2002, whereas commodity-manufacturing

cooperatives had the lowest in 1997.

Finally, net margins before tax per cwt were

lower in 2002 than in 1997 for all operating types. And

in both years, niche-marketing cooperatives had the

highest net margins before taxes, followed by diversified and fluid-processing cooperatives. Bargainingonly cooperatives had the lowest net margins both

years.

19
20

Table 16—Average financial profile of dairy cooperatives, by type, 2002

Bargaining Commodity Niche Diversified &

Item only manufacturing marketing fluid-processing All

Million dollars per cooperative

Total assets 6.5 42.7 8.6 473.7 104.6

Total liabilities 4.8 22.7 3.6 316.6 69.3

Total equity 1.7 20.0 5.0 157.1 35.2

Milk and dairy product sales 86.9 212.9 15.7 1,113.7 304.5

Net margins before tax .3 2.1 .3 18.3 4.1

Milk handled per cooperative 

(million pounds) 1 644 1,286 86 5,887 1,745

Note: Totals may not add due to rounding.

1 Net of inter-cooperative transfers.
21

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

Bargaining Commodity Niche Diversified &

Item only manufacturing marketing fluid-processing All

$ per cwt of member milk

Total assets

2002 1.02 3.41 10.03 8.44 6.22

1997 1.21 3.06 10.07 6.96 5.25

Total liabilities

2002 0.76 1.81 4.23 5.64 4.13

1997 0.84 1.87 5.60 4.18 3.18

Equity

2002 0.27 1.60 5.80 2.80 2.10

1997 0.37 1.19 4.48 2.78 2.07

(Million pounds)

Member milk

2002 31,772 12,535 344 89,800 134,451

1997 19,538 21,334 1,263 70,093 112,228

$ per cwt of total milk handled

Milk & dairy product sales

2002 12.84 15.36 18.30 16.69 15.73

1997 14.63 14.77 23.16 21.09 18.75

Total income

2002 13.75 16.25 21.94 19.96 18.27

1997 16.71 15.20 24.04 24.36 21.25

Net margins before tax

2002 0.04 0.15 0.32 0.27 0.21

1997 0.06 0.26 0.87 0.34 0.28

Number

Number of cooperatives

2002 50 10 4 16 80

1997 45 14 9 20 88

(million pounds)

Total milk handled

2002 33,856 13,857 344 106,748 154,806

1997 21,443 22,799 1,420 75,495 121,157

Note: Totals may not add due to rounding.
22

Figure 8—Dairy cooperative assets, 1997 and 2002

$/cwt

0

1

2

3

4

5

6

7.007

6.00

5.00

4.00

3.00

2.00

1.00

0.00

Total assets Total liabilities Member equity

Figure 9—Sales and net margins, dairy cooperatives, 1997 and 2002

$/cwt

0

5

10

15

20

25.00 25

20.00

15.00

10.00

5.00

0.00

Total sales Milk and dairy sales Supply and other sales Net margins

1997

2002

1997

2002
23

Appendix table 1—Consolidated financial statements by type of dairy cooperative, 2002

Type of cooperative

Bargaining Commodity Niche Diversified & All financial profile

Item only manufacturing marketing fluid-processing dairy cooperatives

$1,000

Balance sheet

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

Net PP&E 1 and other assets 64,153 193,275 23,033 3,622,543 3,903,003

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

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

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

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

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

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

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

Sales and Income

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

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

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

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

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

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

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

Number of cooperatives 50 10 4 16 80

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

Note: Totals may not add due to rounding.

1 Property, plant and equipment.

2 Total milk volume handled by cooperatives, net of inter-cooperative transfers.
24

Appendix table 2—Consolidated financial statements, by size of dairy cooperative, 2002

Size Group

Item Small1 Medium 2 Large 3

$1,000

Balance sheet

Current assets 8,260 321,336 3,449,236

Net PP&E 4 and other assets 6,063 203,375 3,693,565

Investment in other co-ops 3,507 38,933 641,182 ——— ———— —————

Total assets 17,830 563,644 7,783,983

Current liabilities 3,808 248,142 2,958,650

Long-term liabilities 972 76,242 2,258,736 ——— ———— —————

Total liabilities 4,780 324,384 5,217,386

Total equity 13,050 239,260 2,566,597

Liabilities and equity 17,830 563,644 7,783,983

Sales and Income

Milk and dairy product sales 53,944 2,113,020 22,191,445

Supply and other sales 19,981 39,489 3,337,849

Service receipts and other income 1,683 18,965 454,621

Patronage refunds 555 3,982 49,344 ——— ———— —————

Total income 76,163 2,175,456 26,033,259

Expenses 75,525 2,145,990 25,733,258

Net margins after tax 638 29,466 300,001

Number of cooperatives 22 34 24

Milk handled (million lbs) 5 411 11,568 127,616

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 inter-cooperative transfers.
25

Appendix table 3—Average financial statements of dairy cooperatives, by type, 2002

Type of cooperative

Bargaining Commodity Niche Diversified & All financial profile

Item only manufacturing marketing fluid-processing dairy cooperatives

$1,000 per cooperative

Balance sheet

Current assets 4,849 22,555 2,151 206,388 47,235

Net PP&E 1 and other assets 1,283 19,328 5,758 226,409 48,788

Investment in other co-ops 368 825 715 40,882 8,545 ——— ——— ——— ———— ————

Total assets 6,500 42,708 8,624 473,679 104,568

Current liabilities 4,413 17,363 1,564 175,629 40,133

Long-term liabilities 387 5,288 2,070 140,964 29,199 ——— ——— ——— ———— ————

Total liabilities 4,800 22,651 3,634 316,593 69,332

Total equity 1,700 20,057 4,990 157,086 35,236

Liabilities and equity 6,500 42,708 8,624 473,679 104,568

Sales and Income

Milk and dairy product sales 86,940 212,896 15,739 1,113,718 304,480

Supply and other sales 4,590 8,609 2,957 191,870 42,466

Service receipts and other income 1,533 3,305 112 22,821 5,941

Patronage refunds 40 307 59 3,037 674 ——— ——— ——— ———— ————

Total income 93,102 225,116 18,867 1,331,446 353,561

Expenses 92,809 223,001 18,594 1,313,120 349,435

Net margins before tax 293 2,115 273 18,327 4,126

Milk handled per cooperative 

(million pounds) 2 644 1,286 86 5,888 1,745

Note: Totals may not add due to rounding.

1 Property, plant and equipment.

2 Average milk volume handled per cooperative, net of inter-cooperative transfers.
26

Appendix table 4—Consolidated financial statements by type of dairy cooperative, 1997

Type of cooperative

Bargaining Commodity Niche Diversified & All financial profile

Item only manufacturing marketing fluid-processing dairy cooperatives

$1,000 per cooperative

Balance sheet

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

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

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

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

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

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

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

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

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

Million dollars

Sales and Income

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

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

Service receipts & other income 56.3 56.1 0.9 119.5 232.7

Patronage refunds 2.2 5.8 0.4 65.8 74.2 ——— ——— ——— ———— ————

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

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

Net margins before tax 12.4 59.9 12.4 258.5 343.3

Number of cooperatives 45 14 9 20 88

Milk handled 

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

Note: Totals may not add due to rounding.

1 Property, plant and equipment.

2 Total milk volume handled by cooperatives, net of inter-cooperative transfers
U.S. Department of Agriculture

Rural Business–Cooperative Service

Stop 3250

Washington, D.C. 20250-3250

Rural Business–Cooperative Service (RBS) provides research,

management, and educational assistance to cooperatives to

strengthen the economic position of farmers and other rural

residents. It works directly with cooperative leaders and

Federal and State agencies to improve organization,

leadership, and operation of cooperatives and to give guidance

to further development.

The cooperative segment of RBS (1) helps farmers and other

rural residents develop cooperatives to obtain supplies and

services at lower cost and to get better prices for products they

sell; (2) advises rural residents on developing existing

resources through cooperative action to enhance rural living;

(3) helps cooperatives improve services and operating

efficiency; (4) informs members, directors, employees, and the

public on how cooperatives work and benefit their members

and their communities; and (5) encourages international

cooperative programs. RBS also publishes research and

educational materials and issues Rural Cooperatives magazine.

The U.S. Department of Agriculture (USDA) prohibits

discrimination in all its programs and activities on the basis of

race, color, national origin, gender, religion, age, disability,

political beliefs, sexual orientation, and marital or family

status. (Not all prohibited bases apply to all programs.)

Persons with disabilities who require alternative means for

communication of program information (braille, large print,

audiotape, etc.) should contact USDA’s TARGET Center at

(202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA, Director,

Office of Civil Rights, Room 326-W, Whitten Building, 14th and

Independence Avenue, SW, Washington, D.C. 20250-9410 or

call (202) 720-5964 (voice or TDD). USDA is an equal

opportunity provider and employer.