Abstract This study is based on a survey of the financial characteristics of U.S. farmer cooperatives at the end of their 1997 fiscal years. Useful financial information is provided to

cooperative managers, directors, educators, and others interested in cooperatives'

financial performance and practices. Specifically, this report analyzes the distribution of

net income and losses, per-unit capital retain deductions, financial structure, composition of equity capital, and sources of borrowed capital. Financial ratio analysis is conducted to analyze the general financial condition of cooperatives. Cooperatives are

classified by principal product or service, asset size, and geographical location. A comparison is also made with data from prior financial profile studies which have been conducted periodically over the past 45 years.

Key words: Cooperatives, financial structure, balance sheet, equity capital, borrowed

capital, ratio analysis, net income, per-unit capital retains.

___________________________________________________________________________

Farmer Cooperatives' Financial Profile, 1997

Robert C. Rathbone and Roger A. Wissman, Agricultural Economists

Rural Business-Cooperative Service

U.S. Department of Agriculture

RBS Research Report 178

April 2000

Price: Domestic - $5.00

Foreign - $5.50



Contents 16. Selected financial ratios, by principal product or

service, fiscal 1997 .................................................................................................21

17. Selected financial ratios, by size of cooperative,

fiscal 1997 ... ....................................................................................... ..22

18. Selected financial ratios, by geographical region, fiscal 1997 .................................22

19. Frequency distribution of cooperatives and total assets

according to equity/total assets, by principal product or

service, fiscal 1997 .................................................................................................23

20. Frequency distribution of cooperatives and total assets

according to equity/assets, by size of cooperative, fiscal 1997 .................. .... ... 24

21. Frequency distribution of cooperatives and total assets

according to return on assets, by principal product or

service, fiscal 1997 .................................................................................................25

22. Frequency distribution of cooperatives and total assets

according to return on assets, by size of cooperative, fiscal 1997 .........................26

Figures

1. U.S. Farm Production Regions .................................................................................. .3

2. Financial Structure, by Fiscal Years .......................................................................... .4

3. Distribution of Net Income, by Fiscal Years ............................................................... .5

4. Sources of Borrowed Funds, by Fiscal Years ........................................................... .9

5. Frequency Distribution of Cooperatives, by Total Sales, Fiscal 1997 .......................10

6. Frequency Distribution of Cooperatives, by Total Assets, Fiscal 1997 .....................10

Appendix Tables

1. Frequency distribution of cooperatives and total assets

according to current ration, by principal product or service,

fiscal 1997 ..................................................................................................................29

2. Frequency distribution of cooperatives and total assets

according to current ratio, by size of cooperative, fiscal 1997 ...................................30
Highlights Information from a survey of agricultural cooperatives' fiscal 1997 financial practices

and performance is provided in this report. Information on net income distribution,

financial structure, balance sheet composition, sources of borrowed funds, and financial ratios is presented by cooperative type and size. Information by geographic region

is included for selected information.

General business conditions affect cooperatives as any other business organization.

Hindsight reveals the importance of the difficult periods of the 1980s on cooperative

financial practices. The 1987 financial study reported sharp changes in distribution of

net income from earlier studies. The 1987 study was conducted after a series of difficult years and reflected adjustments made in response to operating losses. Results of

the 1997 survey indicates a return to earlier trends.

The distribution of net income demonstrates the cooperative nature of these organizations. Seventy-eight percent of net income was distributed to users of cooperatives'

products and services as patronage refunds in 1997. Dividends paid on net worth were

only 1.7 percent of net income. Income taxes and additions to unallocated equity represented the remaining 20 percent of net income.

Federations formed by cooperatives are an important element of their structure. The

1997 net income of those surveyed showed about one-third was patronage refunds

from one cooperative level to another. When investments in Banks for Cooperatives

were included with other federated cooperatives, investments in other cooperatives

represented about 10 percent of total assets.

Equity was equal to 40.9 percent of total assets, but equity levels varied from less than

30 percent to more than 60 percent by cooperative type. Borrowed capital was 29.6

percent compared with total assets. Borrowed capital varied by cooperative size from

11.9 percent of assets for cooperatives with less than $1 million in assets to 33.8 percent for cooperatives with more than $1 billion in assets. Banks for Cooperatives provided 53.9 of the surveyed cooperatives' borrowed funds. Commercial banks, bonds

and notes, and other credit sources were used about equally for the remainder of borrowed funds. The larger cooperatives use a wider range of borrowing sources than

other cooperatives. Bonds and notes, commercial banks, Banks for Cooperatives, and

other sources were relatively equal credit sources for the largest cooperatives.
Farmer Cooperatives' Financial Profile, 1997

Robert C. Rathbone

Roger A. Wissman

Agricultural Economists

_________________________________________ statistics on the number, membership, and business

Introduction volume of farmer cooperatives, including net income

_________________________________________ and balance sheet information and selected financial

This report presents the results of a comprehen- ratios. Detailed reports analyzing financial data on

sive financial profile study of farmer cooperatives in grain marketing and farm supply cooperatives are also

the United States conducted by the Rural Business- published periodically.

Cooperative Service (RBS) of the United States This report updates previous financial profile

Department of Agriculture. Financial data was collect- studies, but differs from them in several important

ed from farmer cooperatives for their 1997 fiscal year. ways. Although previous studies collected data in a

This report seeks to help managers and boards of similar fashion, for this report no estimates were made

directors assess their cooperatives' financial perfor- for nonrespondents. Respondents for the 1997 study

mance compared with similar types and sizes of coop- were estimated to represent more than 80 percent of

eratives. The report provides researchers, educators, total assets and total business volume of all farmer

and others with information on how cooperatives are cooperatives.

financed and how financial activities have changed Basic net income and balance sheet data presentover time. Similar studies have been conducted in the ed are similar to those published in RBS' 1997 annual

past, the most recent based on 1987 information. When farmer cooperative statistics [6]. Differences occur

comparable, information from prior studies will be because this study is limited to actual cooperatives

presented to show changes. reporting (1,936 cooperatives versus 3,791 accounted

This report covers (1) distribution of net income, for in the annual statistics report). Cooperatives classi-

(2) distribution of net losses, (3) balance sheet compo- fied in the tobacco, wool, and storage categories were

sition, (4) sources of equity and borrowed capital, and excluded from the study because of the small number

(5) selected financial ratios. Where appropriate, this of cooperatives reporting. This brought down the

information is presented based on principal product or number of cooperatives represented in this report to

service of the cooperative, asset size, and/or geo- 1,929.

graphic region. Also, prior studies compared financial performance by Farm Credit District, but because of substanRelationship to Other Studies tial restructuring in the Farm Credit System since 1988,

Previous financial profile studies of U.S. farmer this type of comparison for 1997 data is not meaning

cooperatives were based on data for fiscal years 1954, ful. Also, previous studies involved a different catego1962,1970,1976, and 1987 [1-51.1 USDA's RBS, also pre- rization of cooperatives based on their principal prodpares annual financial profiles of the 100 largest farmer uct or service. Because of the changing financial profile

cooperatives. RBS also collects and publishes yearly of cooperatives, different asset size categories were

______ used and the ranges for ratio analysis were changed.

1 Numbers in brackets refer to publications cited in References

section
Cooperative Classifications assets of less than $500,000 and the largest asset size

RBS classifies cooperatives in 22 categories category was $500 million or more. The increase in size

according to their principal product or service. categories was necessary to get a representative group

Eighteen categories were used for this study, with of cooperatives in each category.

some classifications combined to correspond with the

treatment in the annual farmer cooperative statistics Geographical Regions

report. Artificial insemination, transportation, and rice Ten regions are used in this report to analyze geo

drying cooperatives were placed in "Other Services" graphical differences in financial performance. The

and fishery and dry beans and peas cooperatives in regions are referred to as "farm production regions"

"Miscellaneous Marketing." In addition, selected and were in general use by agencies of the U.S.

analysis is made of larger cooperatives, particularly in Department of Agriculture (USDA) such as the

the grain marketing, farm supply, and dairy categories, Economic Research Service (ERS) and the National

to differentiate the effect size has on certain financial Agricultural Statistics Service WASS) in 1997. The

relationships. regions and the States in each are listed below. The

map in figure 1 also depicts the regions.

Principal Product or Service

Fourteen classifications were used to group Northeast .................ME, NH, VT, NY, CT, MA,

cooperatives by principal product or service. Each RI, NJ, MD, DE, PA

includes cooperatives primarily involved in marketing Appalachia ..............VA, WV, NC, KY, TN

and/or processing the designated commodity(s) or, in Southeast ................SC, GA, AL, FL

the case of service cooperatives, identifies the

enterprise which generates the majority of business Lake States .............MI, WI, MN

volume: Corn Belt .................IA, IL, IN, OH, MO

Delta States .............AR, LA, MS

Cotton (cotton & cotton products) Northern Plains ........ND, SD, NE, KS

Cotton ginning Southern Plains .......OK, TX

Dairy Mountain .................MT, ID, WY, UT, NV, CO,

Fruit and vegetable NM, AZ

Grain and oilseed

Livestock Pacific .....................WA, OR, CA, AK, HI

Nuts

Poultry (chicken, eggs, turkeys, ratites, etc.) Methodology

Dry beans and peas (dry edible beans and peas) The 1997 RBS annual statistical survey of farmer

Rice cooperatives was used to collect detailed financial

Sugar (sugar beets, sugar cane, honey, and relat- information from selected cooperatives. Recipients

ed products) were sent questionnaires about financial data on distriMiscellaneous marketing (products not otherwise bution of net income or loss, patronage refunds

classified including aquatic) received from other cooperatives, sources of borrowed

Farm supply (distribution of fertilizer, fuel, seed, funds, per-unit capital retain deductions, and individfeed, and plant protection materials) ual balance sheet items. As an alternative or suppleOther services (storage, transportation, drying, ment to completing the financial profile section of the

artificial insemination, or similar services) questionnaire, cooperatives were asked to submit

annual or audit reports.

Total Assets Size Categories

Eight "total assets" size categories are used in ______________________________________________

this study. The breakdown is shown in the tables Long-term Trends

reporting financial characteristics by asset size. ______________________________________________

Cooperatives with total assets of less than $1million Before presenting a detailed analysis of 1997 data,

was the smallest size category used, while coopera- this section presents selected trends of agricultural

tives with total assets of $1 billion or more was the cooperative financial structures and practices based on

largest. This compares to the 1987 study in which the information collected for this study and for previous

smallest category included cooperatives with total survey years (1954, 1962, 1970, 1976, and 1987).

2
Figure I-US. Farm Productlon Regions

* Includes Alaska and Hawaii

Financial Structure

All organizations need financial resources to

operate. How they are assembled gives a business its

financial structure. Financial resources in a cooperative

consist of (1) equity capital which is derived primarily

from net income, (2) funds borrowed from specialized

and other lenders, and (3) obligations due suppliers

and others. Equity levels are influenced by decisions

of the board of directors on distribution of net income,

equity redemption, and the amount of assets financed

by debt versus equity capital. The amount of obligations due suppliers is influenced by the type of business conducted. For example, marketing cooperatives

that process cyclical commodities such as fruits and

vegetables may have large accounts payable outstanding for raw product and supplies during the processing season and low amounts the remainder of the year.

Dairy marketing cooperatives, with a fairly steady

supply of product throughout the year, would not

have as much fluctuation in the amount due suppliers.

Farm supply cooperatives maintain relatively consistent year-round inventories, but experience some fluctuations during the planting and growing season

because of purchases of seed and fertilizer.

Figure 2 shows changes in financial structure for

the years covered by the financial surveys. Equity levels were highest in 1954 and 1962 at 58 percent of total

equity and liabilities. During the 197Os, equity levels

generally declined. Equity capital showed an increase

in 1987, but decreased again in 1997. The proportionate

use of borrowed funds increased until 1976, declined

in 1987, and increased slightly again in 1997. The one

component of financial structure that has increased

consistently since 1954 is the “Other Liabilities” category which consists primarily of obligations due suppliers. Several possible reasons may explain this

steady increase. First, many cooperative types have

developed more complex business operations such as

a trend to more processing that requires purchasing

more inputs. This steady increase may also indicate a

change over time in the use of more trade credit at the

expense of traditional borrowing sources. It may also

be an indication of a more competitive marketplace

wherein suppliers are offering more liberal payment

terms to garner business.

As indicated in the preceding paragraph, the use

of debt capital through the 1970s increased and equity

levels declined. The 1987 survey showed a reversal of

this trend and a fundamental change in many cooperatives’ financial structure occurred. The early- and mid1980s was a difficult period financially for many cooperatives. Low net income levels and accumulating

losses forced cooperatives to make adjustments that

significantly changed financial structure. These

changes will be discussed in the following section on

distribution of net income.

3
Figure 2-Financial Structure, by Fiscal Year

Percetn

1954 1962 1970 1976 1987 1997

Equity capital

Borrowed funds

Other liabilities

Distribution of Net Income

In an investor-owned firm, net income distribution is usually limited to some portion being paid as

stock dividends. The remainder stays in the business

as retained earnings. In a cooperative, however, distribution of net income is generally more complex and

distinguishes how they operate. Net income may be (1)

paid as dividends on equity, (2) allocated in the form

of cash and noncash patronage refunds, and/or (3)

retained as unallocated equity. For the survey years,

Figure 3 shows most net income was distributed as

cash and noncash patronage refunds. The percentage

ranged from a high of 86 percent in 1954 to a low of 63

percent in 1987. The highest percentage of cash distribution occurred in 1962 at 51 percent of net income, and

the lowest, 28 percent, was in 1954.

The amount of net income paid out as dividends

became relatively insignificant over the survey years.

Net income distributed as unallocated equity was a

relatively limited amount for all survey years except

for 1987. The change in 1987 is explained by the losses

experienced by many cooperatives prior to 1987. In

1986, for example, farm supply cooperatives collectively lost $60 million [7]. Total cooperative net income in

1986 was only $700 million for all cooperatives. In

1987, the amount doubled to $1.4 billion 181. In years

with high net income, following years of low net

income or losses, large portions of net income are distributed as unallocated equity to offset losses charged

against the unallocated account in previous years.

Table 1 lists the distribution of net income by

principal product or service for each survey year

except 1954. Survey information for the 1954 study on

net income distribution by product or service did not

provide comparable classification data. The product or

service classifications used for Table 1 differ from the

others in this report because different classification

systems were used for various survey years. In some

years, classifications were adjusted from survey to survey to reflect changes in organizational structure and

business activities or to focus on financial issues or

concerns at the time of the study. The classifications in

this table were chosen to provide the greatest amount

of continuity between studies given the classification

disparities between survey years.

Some survey classifications exhibit more continuity from year to year than others, such as those in cotton and cotton ginning, dairy, fruits and vegetables,

grain, and farm supply. Sugar cooperatives were not

classified separately until 1976, but were added

because of increased sugar processing and the associated large amount of assets required.

4
Figure 3-Distribution of Net Income, by Fiscal Years

Percent

60

1954 1962 1970 1976 1987 1997

Dividends

Cash patronage

NoncashPatronageL

Unallocated

Income taxes

Among cooperatives in diversified, livestock and

poultry, and miscellaneous marketing categories, definitions changed and different groupings were used

from survey to survey. These classifications are included in Table 1 to show their contribution to the overall

totals, but no meaningful survey-to-survey comparisons can be made because of the inconsistencies

between survey years.

The “diversified” classification included cooperatives with significant farm supply and marketing

operations. The survey category was originally added

to highlight the range of products and functions handled by these cooperatives, many of them the largest

in the country. Although these diverse cooperatives

still exist, the classification became arbitrary and variable and was not included in the 1997 survey.

Dividends Paid on Net Worth

From 1967 to 1997, the level of dividends paid on

net worth declined for most classifications (Table 1).

Except for isolated cooperatives, payment of dividends

on equity has reached a very low level. For the 1987

and 1997 survey years, only 1.5 percent of total net

income of cooperatives was distributed as dividends

on equity. A dividend increase between 1987 and 1997

in the cotton classification represented a major change

in distribution methods of a large cooperative. An

innovative arrangement relating members’ equity and

dividend payments to cooperative use was adopted.

This was a much different approach than the traditional method of paying dividends based solely on equity

held.

Patronage Refund Distribution

The distribution of patronage refunds may vary

greatly from year to year due to operating results,

changes in the business situation, and a cooperative’s

equity capital needs. In its fiduciary role, the board of

directors considers all of these factors when deciding

how to distribute net income, particularly the part

allocated as cash and noncash patronage refunds. This

variability is illustrated in Table 1, particularly as it

relates to allocation decisions made in 1987 because of

the difficult financial period that preceded it. In 1987,

farm supply and fruit and vegetable cooperatives allocated less than half of net income as patronage

refunds. Grain cooperatives allocated only 51 percent

of net income as patronage refunds. These low patronage refund levels were in contrast to higher levels in

all other survey years for these three cooperative types.

The patronage refunds allocated by a cooperative

to its members are important. They represent an

5
Table 1-Distribution of net income of cooperatives with net Income, by principal product or service, selected years

_________________________________________________________________________________________________

Dividends Cash Noncash Additions to Income

Product or paid on patronage patronage refund Unallocated taxes

service Year equity refunds allocations Equity

___________________________________________________________________________________________________________________

Percent

Cotton and 1962 3.6 36.2 59.1 0.7 0.4

Cotton 1970 2.7 54.0 43.0 0.2 0.1

Ginning 1976 0.6 70.2 24.9 2.9 1.4

1987 0.4 82.1 17.0 7.4 (6.9)

1997 9.9 57.6 29.0 2.8 0.7

Dairy 1962 5.2 31.5 55.8 6.7 0.8

1970 6.4 33.8 50.3 8.2 1.3

1976 1.3 28.6 57.0 10.1 3.0

1987 0.5 31.8 46.2 16.9 4.6

1997 0.3 35.9 39.3 13.9 10.6

Fruits and 1962 2.1 72.4 25.0 0.2 0.3

Vegetables 1970 5.7 71.0 20.5 1.9 0.9

1976 1.7 79.6 12.5 3.6 2.6

1987 2.6 31.6 11.0 33.4 21.4

1997 3.8 20.1 37.7 22.6 15.8

Grain 1962 7.9 20.6 56.5 8.6 6.4

1970 6.2 25.5 54.1 10.1 4.1

1976 1.9 26.6 53.9 11.3 6.3

1987 1.4 16.9 34.1 36.5 11.1

1997 0.4 23.4 48.1 18.3 9.8

Livestock 1962 7.7 14.5 73.1 3.0 1.7

And 1970 4.3 24.6 56.1 11.8 3.2

Poultry 1976 0.9 30.9 53.8 10.9 3.5

1987 0.7 45.1 39.7 9.2 5.3

1997 0.2 46.3 34.7 8.8 10.0

Sugar 1976 1.6 87.1 7.0 3.7 0.6

1987 - 11.3 63.2 8.5 17.0

1997 - 12.1 86.9 (5.3) 6.3

Diversified 1962 20.9 22.3 44.7 3.4 8.7

1970 12.5 23.1 45.2 9.0 10.2

1976 4.8 29.2 42.6 10.2 13.2

1987 3.2 23.8 42.8 14.3 15.9

Other 1962 8.1 53.0 38.1 0.5 0.3

Marketing 1970 9.1 68.6 19.1 1.1 2.1

1976 6.1 63.8 27.0 1.6 1.5

1987 0.8 42.7 1.4 89.9 15.2

1997 0.6 24.8 57.3 5.1 12.2

Continued

6
Table 1-Distribution of net income of cooperatives with net Income, by principal product or service, selected years

(continued)

___________________________________________________________________________________________________________________

Dividends Cash Noncash Additions to Income

Product or paid on patronage patronage refund Unallocated taxes

service Year equity refunds allocations Equity

____________________________________________________________________________________________________________________

Percent

Farm supply 1962 7.0 25.9 55.6 5.8 5.7

1970 6.0 40.2 37.2 9.5 7.1

1976 1.4 35.9 50.6 7.1 5.0

1987 2.6 20.4 28.4 38.3 10.3

1997 0.9 27.7 44.5 17.8 9.2

Other 1962 7.0 14.2 67.1 14.7 7.0

Services' 1987 1.0 19.8 43.7 25.2 10.3

1997 - 30.2 32.9 23.8 13.1

All products/ 1962 6.7 50.5 35.5 3.8 3.5

Services 1970 7.0 41.4 39.7 7.1 4.8

1976 2.1 39.3 44.5 8.4 5.7

1987 1.5 32.6 30.6 27.4 7.9

1997 1.5 31.3 42.4 15.2 9.5

_____________________________________________________________________________________________________

The "Other services classification was not used in the 1970 and 1976 studies.

important source of equity capital for the cooperative Fruit and vegetable and sugar cooperatives disin the form of retained patronage refunds, and the cash played similar patterns. Sugar cooperatives paid 90

and noncash portions taken together are a primary percent of allocated patronage refunds in cash in 1976

source of benefits to members. For the survey years and less than 20 percent in 1987 and 1997. From 1962

shown in Table 1, the percentage of allocated patron- through 1987, fruit and vegetable cooperatives mainage refunds paid in cash was as follows: tained an approximate 75 percent rate of cash payments as a percentage of allocated patronage refunds.

Percent of patronage In 1997, the cash payment rate fell to 35 percent.

Year refund paid in cash Other marketing cooperatives, such as cotton and

cotton ginning and dairy, showed increases from year

1962 59 to year in the percentage of allocated patronage

1970 51 refunds paid in cash. Grain cooperatives, on the other

1976 47 hand, maintained a steady cash patronage percentage

1987 52 of about one-third in each survey year.

1997 42

Unallocated Equity

While the tabulation depicts the average amount Distribution of net income as unallocated. equity

of the patronage refund paid in cash for all types of increased from 1962 to 1997 (Table 1) in most product

cooperatives, considerable variability existed. This or service classifications. The large 1987 increase was

variability was evidenced not only between different related to prior years' losses. Grain, farm supply, and

product or service categories, but also within some cat- other services classifications had the highest average

egories between survey years. This variability was percentage of net income added to unallocated. equity

most noticeable in certain marketing types. Care must for the survey years. The increase in additions to unalbe taken, however, in interpreting results of a limited located equity, particularly in certain classifications, is

number of years' observations as being representative related to the amount of non-member or non-patron

of a general change in payment practices. Distribution age business these categories conduct and the resulting

patterns of a few large cooperatives in a given product non-patronage net income.

or service category can strongly influence the results

reported in a given survey year.

7
Income Taxes needed and may not have been as readily available

There is normally a correlation between the from other sources in the amounts necessary to meet

amount of income taxes paid by cooperatives and the the challenges of that time.

net income distributed as unallocated equity (Table 1).

For most classifications, in the more recent survey

years, a larger percentage of net income has been dis- Detailed Analysis of 1997 Survey Data

tributed as unallocated. equity with a corresponding

increase in net income paid as income tax. This was The remainder of the report focuses specifically

particularly true in 1987 when larger amounts were on analyzing 1997 survey data collected on the 1,929

distributed to unallocated equity to restore the amount cooperatives in the study.

depleted by prior losses. The trend to more net income

being distributed as unallocated income continued for Cooperatives Included In Study

1997. Table 2 shows the number of cooperatives in each

of the 13 principal product or service categories. Total

Sources of Borrowed Funds sales and total asset amounts are actual data submitted

Figure 4 shows the sources of borrowed funds for by the 1,929 farmer cooperatives included in the study.

cooperatives for 1954 through 1997. Banks for coopera- The frequency distribution of total sales and total

tives have been the principal lenders to agricultural assets for these cooperatives is also shown in Figure 5

cooperatives for all survey years.2 The share of bor- and 6 respectively.

rowed funds provided by banks for cooperatives Farm supply and grain and oilseed cooperatives

ranged from 45 percent in 1954 to more than 60 percent dominate the numbers, total sales and total assets.

in 1970 and 1976. Combined they represent 76 percent of the cooperaIn early survey years, bonds and notes issued to tives in the study, 46 percent of total sales, and 48 permembers and others comprised the second largest cent of total assets. Dairy and livestock cooperatives,

source of borrowed funds. They were represented by a respectively, were next in total sales, but represented a

variety of certificate types some of which had charac- significantly lower percentage by number.

teristics of both equity and debt [2]. Use of bonds and Comparing the relationship between total sales

notes as a borrowing source has declined in recent sur- and total assets contrasts the differences between

vey years. product or service categories in terms of dollars of

Commercial banks provided the least amount of assets employed. For example, service cooperatives

borrowed funds from 1954 to 1987, but that proportion such as those in cotton ginning, artificial insemination,

increased in 1997 to about equal bonds and notes and transportation, and rice drying have a larger investthe "Other" category. The "Other" category consists ment in assets relative to sales. By contrast, marketing

primarily of loans from other cooperatives or their cooperatives in general had a lower investment relafinancing subsidiaries, the Small Business tive to sales. Among different types of marketing coopAdministration, and private party financing. The eratives, however, different relationships existed. Sales

"Other" category contained a small amount of cooper- by cooperatives performing extensive product processative borrowing until 1987. The increase that year was ing such as fruit and vegetable and nuts were almost

probably related to the financial difficulties coopera- double the amount of assets. Marketing cooperatives

tives experienced in the early and mid-1980s as men- which may perform less product processing, such as

tioned in the Distribution of Net Income section. Large dairy, had sales closer to four times asset values.

federated cooperatives either directly, or through their

finance subsidiaries, extended credit to their local Sources of Equity Capital

cooperatives during this difficult period when it was Cooperatives use a variety of methods for acquiring equity capital. Patrons may contribute to equity by

direct investment through the purchase of stock or

2 0ver the period of time covered by the survey years, there have other forms of equity, a portion of net income may be

been a series of consolidations among the banks for cooperatives kept in the business as retained (or noncash) allocated

of the Federal Farm Credit System. In 1997, the year of the most patronage refunds, or deductions may be made from

recent financial profile survey, there were two banks for sales proceeds in the form of per-unit capital retains.

cooperatives. In 1999, they merged. The National Bank for In addition, some net income may be retained as unalCooperatives (CoBank), ACB, headquartered in Denver, CO, is the

surviving entity.

8
Table 2-Number of cooperatives, sales, total assets, by principal product or Service, fiscal 1997

Principal product or service Cooperatives Total sales Total assets

Cotton

Cotton ginning

Dairy

Farm supply

Fruit & vegetable

Grain & oilseed

Livestock

Misc. marketing l

Nuts

Other services 2

Poultry

R ice

Sugar

’ All products/services

Number

14 2,950.8 790.2

126 449.0 312.2

67 19,386.7 4,155.6

859 22,117.4 11,254.5

110 9,173.2 4,590.l

609 24,847.6 6,409.4

22 12,394.4 3,030.4

20 3,747.7 1,651.6

8 1,040.g 477.4

51 277.5 233.7

6 3,555.6 1,233.2

6 1,262.7 544.7

11 1,666.6 l&33.5

1,929 102,869-g 36,516.4

-------Million dollars------

I Includes dry beans and peas, fishery, and miscellaneous products.

2 Includes artificial insemination, transportation, rice dryers, and other miscellaneous services.

Figure 4-Sources of Borrowed Funds, by Fiscal Year

Percent

Other

Bonds and notes

Commercial banks

Bank for

cooperatives

1954 1962 1970 1976 1987 1997

9
Figure 5-Frequency Distribution of Cooperatives by Total Sales, Fiscal 1997

Plumber of cooperatives

600

500

400

300

200

100

0

525

cl .o 100-499.9 500-999.9 1,000 or more

Total sales ($miliion)

Figure 6-Frequency Distribution of Cooperatives by Total Assets, Fiscal 1997

Plumher of cooperatives

1,000

800

600

400

200

0

cl .o l-4.9 5-9.9 1 o-24.9 25-99.9 100-499.9 500-999.9 1,000 or more

Total assets ($million)

10
located equity. This section examines the methods supply cooperative. Many grain and oilseed cooperaused by different types of cooperatives, including the tives also have major farm supply operations and

distribution of net income and net losses. receive a significant amount of patronage refunds from

other cooperatives with a flow of funds similar to farm

Distribution of Net Income and Losses supply cooperatives.

Patronage refunds received from other coopera- Table 4 shows the distribution of net income and

tives are an important component of net income. net losses by principal product or service. Patronage

Table 3 shows the total amount of net income reported refund allocations were the dominant distribution

by cooperatives included in the study. Of the $1.9 bil- method used, demonstrating the focus of cooperatives

lion in net income, $590 million or 31 percent was on distributing net income on use rather than on the

patronage refunds received from other cooperatives. level of investment. The combination of cash and non

Patronage refunds were particularly important to farm cash patronage refund distributions accounted for 73.7

supply, grain, and poultry cooperatives, comprising 41 percent of net income. The amount of net income dispercent, 49 percent, and 64 percent respectively, of net tributed as unallocated equity was 15.2 percent, but

income. amounts varied widely by type of cooperative. Those

The relationship that results in patronage refunds in the nuts, other services, poultry, and rice categories

being received from other cooperatives differs among reported the highest percentage of net income distribcooperatives. For example, local farm supply coopera- uted as unallocated equity.

tives receive much of the products they sell to mem- Twelve percent of the cooperatives reported lossbers from federated cooperatives. These federated es. Eighty-two percent of these losses were charged

cooperatives, in turn, may be members of cooperatives against unallocated equity, with only 16 percent offset

that manufacturer basic farm production inputs such against allocated equity accounts.

as fertilizer, chemicals, and petroleum products. Table 5 shows the number of cooperatives using

Patronage refunds flow from the manufacturing coop- each income distribution method. A total of 1,692

erative to the federated to the local cooperative. cooperatives in the survey reported net income in

Ultimately, at least some of these patronage refunds 1997. A total of 310, or 18.5 percent reported paying

are distributed to the farmer members of the local farm dividends on equity. This compares with only 1.5 per-

______________________________________________________________________________________________

Table 3--Net Income and patronage refunds received from other cooperatives, by principal product or service, fiscal 1997

________________________________________________________________________________________________________

Patronage refunds from Net income from

Principal product or service Net income other cooperatives own operations

_____________________________________________________________________________________________________________________

Thousand dollars

Cotton 63,858.8 2,672.8 61,186.0

Cotton ginning 88,648.6 19,631.9 69,016.7

Dairy 311,074.5 54,909.9 256,164.6

Farm supply 720,889.5 298,965.8 421,923.7

Fruit & vegetable 165,116.7 10,452.6 154,664.1

Grain & oilseed 356,448.9 175,672.9 180,775.9

Livestock 162,160.8 3,757.0 158,403.8

Misc. marketing 1 4,718.6 3,601.0 1,117.6

Nuts 10,493.3 744.1 9,749.2

Other serviceS2 20,655.2 841.3 19,813.9

Poultry 20,560.1 13,174.2 7,385.9

Rice 7,155.3 318.3 6,836.9

Sugar (2,721.6) 5,374.7 (8,096.4)

All products/services 1,929,058.5 590,116.6 1,338,941.9

_____________________________________________________________________________________________________

1 Includes dry beans and peas, fishery, and miscellaneous products.

2 Includes artificial insemination, transportation, rice dryers, and other miscellaneous services.
______________________________________________________________________________________________________________

Table 4-Distribution of net Income and net losses, by principal product or service, fiscal 1997

______________________________________________________________________________________________

Percentage of net income or losses distributed as

__________________________________________

Dividends Noncash

Principal paid on Cash patronage Additions to

product Net income net patronage refund unallocated Income

or service Cooperatives and (losses) worth refunds allocations equity taxes

___________________________________________________________________________________________________________

Number Dollars ----------------------------------Percent---------------------------------------------

Cotton

Net income 12 64,217,226 21.7 55.5 19.3 2.6 0.9

Net losses 2 (15,196) - - - - 100.0

Total 14 64,202,030 21.7 55.5 19.3 2.6 0.9

Cotton ginning

Net income 104 90,227,279 1.5 59.2 35.9 2.9 0.5

Net losses 22 (1,578,711) (0.1) (1.0) 8.8 91.5 0.7

Total 126 88,648,568 1.5 60.3 36.4 1.3 0.5

Dairy

Net income 77 316,014,197 0.3 35.9 39.3 13.9 10.6

Net losses 10 (4,939,699) - - 45.7 54.7 (0.5)

Total 87 311,074,498 0.3 36.5 39.2 13.3 10.7

Farm Supply

Net income 769 756,811,149 0.9 27.7 44.5 17.8 9.2

Net losses 90 (35,921,606) (1.3) (0.8) 33.9 55.8 12.4

Total 859 720,889,543 1.0 29.1 45.0 15.9 9.0

Fruit and vegetable

Net income 86 166,927,364 3.8 20.1 37.7 22.6 15.8

Net losses 24 (1,807,672) (26.6) 0.7 29.3 73.5 23.0

Total 110 165,119,692 4.1 20.3 37.8 22.1 15.7

Grain & oilseed

Net income 539 378,519,236 0.4 23.4 48.1 18.3 9.8

Net losses 70 (22,070,376) (0.1) (1.7) 29.1 67.2 5.5

Total 609 356,448,860 0.4 25.0 49.3 15.2 10.1

Livestock

Net income 20 162,385,886 0.2 47.3 37.6 1.6 13.2

Net losses 2 (225,102) - - - 60.2 39.8

Total 22 162,160,784 0.2 47.4 37.7 1.5 13.2

Misc. marketing I

Net income 12 65,930,727 - 26.9 69.1 (6.3) 10.2

Net losses 8 (51,212,175) - - - 100.1 (0.1)

Total 20 4,718,552 - 319.4 819.6 (1,161.3) 121.9

Nuts

Net income 7 10,811,522 - 30.2 32.9 23.8 13.1

Net losses 1 (318,205) - - - 100.0 -

Total 8 10,493,317 - 31.1 33.9 21.5 13.5

Continued

12
______________________________________________________________________________________________________

Table 4--Distribution of net Income and net losses, by principal product or service, fiscal 1997 (continued)

___________________________________________________________________________________________________________________________

Percentage of net income or losses distributed as

______________________________________________________

Dividends Noncash

Principal paid on Cash patronage Additions to

product Net income net patronage refund unallocated. Income

service or Cooperatives and (losses) worth refunds allocations equity taxes

____________________________________________________________________________________________________________

Number Dollars -------------------------------------------Percent--------------------------------

Other services 2

Net income 46 22,163,378 - 35.1 32.2 29.3 3.4

Net losses 5 (1,508,189) - - 27.7 71.2 1.1

Total 51 20,655,189 - 37.7 32.5 26.2 3.6

Poultry

Net income 6 20,560,100 - 38.2 11.4 66.0 (15.5)

Net losses - - - - - -

Total 6 20,560,100 - 38.2 11.4 66.0 (15.5)

Rice

Net income 6 7,155,264 6.6 0.3 0.7 65.8 26.7

Net losses - - - - - - -

Total 6 7,155,264 6.6 0.3 0.7 65.8 26.7

Sugar

Net income 8 15,868,366 - 12.1 86.9 (5.3) 6.3

Net losses 3 (18,589,998) - - 109.3 (9.3)

Total 11 (2,721,632) - (70.6) (506.5) 777.5 (100.5)

All products/services

Net income 1692 2,067,591,694 1.5 31.3 42.4 15.2 9.5

Net losses 237 (138,186,929) (0.7) (0.5) 15.9 82.1 3.2

Total 1929 1,929,404,765 1.7 33.6 44.3 10.4 10.0

___________________________________________________________________________________________________________

1Includes dry beans and peas, fishery, and miscellaneous products.

2 Includes artificial insemination, transportation, rice dryers, and other miscellaneous services.

cent of net income being paid out in dividends as eratives operating in their local service area and pro

shown in Table 4. Cash patronage refunds were paid viding a range of products and services to member

by 80 percent of cooperatives with non-cash patronage and non-member patrons. The distribution methods

refund allocations distributed by 73 percent. Eighty- used reflect this diverse clientele and the existence of

five percent of cooperatives made additions to unallocated equity, although only 15 percent of net income Percent of Cooperatives

was distributed in such a fashion (Table 4). Income tax with net income

was paid by 81 percent of cooperatives that had net Grain and All other

income. farm supply types

From Table 5, the following tabulation combines

the distribution methods used by the grain and oilseed Dividends on equity 21 10

and farm supply classifications and compares them Cash patronage refunds 83 70

with all other product or service categories as a group.

The grain and oilseed and farm supply classifica- Non-cash patronage refunds 80 57

tions include a range of associations from large feder- Additions to unallocated equity 92 61

ated cooperatives to small local cooperatives. Income taxes 89 57

Numerically, more in this group are the smaller coop13
_______________________________________________________________________________________________________________

Table 5---Methods used to distribute net income, by principal product or service, fiscal 1997

_______________________________________________________________________________________________

Cooperatives with. net income distributed as

________________________________________________________________

Noncash

Principle Dividends Cash patronage Additions to

Product Cooperatives on patrons' patronage refunds unallocated

or service net income equity refunds allocation equity

________________________________________________________________________________________________________________

- -------- - - - ----- - ----------------- - ------- Number ------- - ----- - ----- - ----- - ----------- - ------

Cotton 12 2 8 6 8

Cotton ginning 104 15 94 69 42

Dairy 77 5 56 48 55

Farm supply 769 173 627 594 686

Fruit & vegetable 86 8 49 36 63

Grain & oilseed 539 99 453 425 611

Livestock 20 4 8 9 13

Misc. marketing 1 12 2 11 6 8

Nuts 7 - 3 2 3

Other services 2 46 1 29 29 34

Poultry 6 - 4 4 6

Rice 6 1 1 2 3

Sugar 8 - 5 6 1

All products/services 1,692 310 1,348 1,236 1,432

__________________________________________________________________________________________________________

1 Includes dry beans and peas, fishery, and miscellaneous products.

2 Includes artificial insemination, transportation, rice dryers, and other miscellaneous services.

________________________________________________________

Table 6-Per-unit capital retains deducted, by principal non-member business, the net income from which is

product or service, fiscal 1997 added to unallocated equity after income taxes have

_____________________________________________ been paid.

Cooperatives Cooperatives in the other group tended to pro

Deducting per- vide more specialized services, primarily to member

Principal unit capital Per-unit patrons, so there was less use of the range of distribuproduct or capital retains tion methods. Also, per-unit capital retains are used by

service Total retains deducted some marketing cooperatives as an equity source.

------- Number - ----- $1,000

Cotton 14 7 50,451.0 Per-Unit Capital Retains

Cotton ginning 126 4 930.0 Use of the per-unit capital retain is a distinctive

Dairy 87 8 10,244.5 cooperative method of accumulating equity through a

Farm supply 859 6 280.2 direct investment by members. Bylaw provisions or

Fruit & vegetable 110 32 27,165.6 member marketing agreements establish the authority

Grain & oilseed 609 8 1,156.0 for the cooperative to deduct the retain from product

Livestock 22 2 846.2 payment. The per-unit capital retains are deducted

Misc. marketing 1 20 3 1,432.8 either as an amount per quantity of product delivered

Nuts 8 3 20,230.0 or as a percentage of the value of the product.

Other services 2 51 2 636.7 Table 6 shows the number of surveyed cooperaPoultry 6 2 794.6 tives that used per-unit capital retains to accumulate

Rice 6 1 2,352.0 equity capital. Only 4 percent of surveyed cooperatives

Sugar 11 5 24,898.8 used this method. Per-unit capital retains were used

All products/

services 1,929 83 141,418.2 almost exclusively by marketing cooperatives. Only

____________________________________________ about 1 percent of farm supply, service, and grain and

Includes dry beans and peas, fishery, and miscellaneous oilseed marketing cooperatives used per-unit capital

products.

2 Includes artificial insemination, transportation, rice dryers, and retains. Excluding grain marketing cooperatives, 22

other miscellaneous services. percent of marketing cooperatives used diem.

14
For those cooperatives using per-unit capital tive investments shown, cooperatives in the study also

retains, they accounted for more retained equity in had an additional $559 million invested in banks for

1997 than those same cooperatives acquired from cooperatives in 1997.

retained patronage refunds. Also, these cooperatives, On average, the cotton, miscellaneous marketing,

on average, paid a greater percentage of net income as rice, and sugar classifications had less than 1 percent

cash patronage refunds than other cooperatives. of total assets in intercooperative investments. In contrast, cotton ginning, farm supply, grain and oilseed

Intercooperative Investments cooperatives on average held more than 10 percent of

Table 7 reports total assets, total equity capital, total assets as investments in other cooperatives.

intercooperative investments, net assets, and net equity capital by principal product or service. Net assets Condensed Balance Sheets

and net equity capital were obtained by subtracting Table 8 presents condensed balance sheet inforintercooperative investments from total assets and mation by principal product or service group. Table 9

total equity to eliminate the double counting of assets shows condensed balance sheet information by the

and equity that occurs when intercooperative invest- eight size categories selected for the study.

ments are included in both the assets of one set of Balance sheet composition by principal product

cooperatives and as equity capital of another. or service (Table 8) demonstrates that the mix between

Table 7 shows intercooperative investments for balance sheet categories is a function of the business

the 1,929 cooperatives included in the study were $3.2 function performed. For example, in marketing coop

billion, or about 8.6 percent of total assets. The propor- eratives, current assets as a percentage of total assets

tion of assets represented by intercooperative invest- are generally higher than in other types of cooperaments varied widely between product or service classi- tives because of a larger investment in inventories and

fications, but some investment in other cooperatives accounts receivables.

existed in all groups. In addition to the intercoopera- In 1997, current assets averaged 51.4 percent. of

total assets for all cooperatives in the survey.

____________________________________________________________________________________________

Table 7-Net assets, net equity capital, and intercooperative investments, by principal product or service, fiscal 1997

______________________________________________________________________________________________________

Principal product Total Total equity Intercooperative Net Net equity

or service Cooperatives assets capital investments assets capital

_________________________________________________________________________________________________________________

Number -----------------------------------$1'000---------------------------

Cotton 14 790,219.4 366,807.0 3,067.2 787,152.1 363,739.8

Cotton ginning 126 312,152.8 193,928.2 44,050.7 268,102.1 149,877.5

Dairy 87 4,155,606.8 1,672,467.4 377,875.6 3,777,731.2 1,294,591.8

Farm supply 859 11,254,456.2 5,249,796.2 1,543,140.1 9,711,316.1 3,706,656.1

Fruit & vegetable 110 4,590,107.7 1,454,921.2 63,578.4 4,526,529.3 1,391,342.8

Grain & oilseed 609 6,409,439.4 2,955,240.6 822,399.8 5,587,039.6 2,132,840.8

Livestock 22 3,030,386.2 898,674.3 224,444.3 2,805,941.9 674,230.0

Misc. marketing 20 1,651,631.0 664,976.2 5,714.7 1,645,916.3 659,261.6

Nuts 8 477,424.0 203,984.6 14,593.5 462,830.5 189,391.1

Other serviceS2 51 233,661.6 160,368.1 9,364.4 224,297.2 151,003.6

Poultry 6 1,233,190.4 389,315.9 31,725.0 1,201,465.4 357,590.9

Rice 6 544,688.8 225,173.1 2.4 544,686.4 225,170.6

Sugar 11 1,833,460.5 515,414.4 12,372.4 1,821,088.1 503,042.0

All products/services 1,929 36,516,424.8 14,951,067.0 3,152,328.5 33,364,096.3 11,798,738.5

_______________________________________________________________________________________________________

1 Includes dry beans and peas, fishery, and miscellaneous products.

2 Includes artificial insemination, transportation, rice dryers, and other miscellaneous services.

15
___________________________________________________________________________________________________________________

Table 8--Condensed balance sheet data, by principal product or service, fiscal 1997

____________________________________________________________________________________________

Percentage of total assets represented by

Principal _____________________________________________________________________________

product or Total Current Fixed Other Current Long-term Equity

service Cooperatives assets assets assets assets liabilities liabilities capital

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

Cotton 14 790.2 65.1 28.2 6.7 40.8 12.8 46.4

Cotton ginning 126 312.2 43.2 40.4 16.4 29.1 8.7 62.1

Dairy 87 4,155.6 57.5 26.9 15.5 44.4 15.4 40.2

Farm supply 859 11,254.5 46.8 30.1 23.1 32.2 21.1 46.6

Fruit & vegetable 110 4,590.1 57.5 30.2 12.3 41.7 26.6 31.7

Grain & oilseed 609 6,409.4 55.3 26.4 18.3 43.9 10.0 46.1

Livestock 22 3,030.4 55.8 27.2 17.0 46.3 24.0 29.7

Misc. marketing 1 20 1,651.6 33.5 55.5 11.0 47.3 12.4 40.3

Nuts 8 477.4 66.9 19.1 14.0 34.1 23.1 42.7

Other serviceS2 51 233.7 45.0 40.2 14.7 20.3 11.1 68.6

Poultry 6 1,233.2 57.5 27.2 15.3 39.3 29.2 31.6

Rice 6 544.7 59.6 33.8 6.6 46.3 12.3 41.3

Sugar 11 1,833.5 32.4 47.5 20.0 28.5 43.4 28.1

All products/

services 1929 36,516.4 51.4 30.8 17.7 39.1 20.0 40.9

_______________________________________________________________________________________________________

1 Includes dry beans and peas, fishery, and miscellaneous products.

2 Includes artificial insemination, transportation, rice dryers, and other miscellaneous services.

Cooperatives marketing cotton, dairy, fruit and veg- Financial Structure

etable, grain and oilseed, livestock, nuts, and rice, had Financial structure shows the relative amount of

current assets that exceeded the average. Farm supply equity capital, borrowed capital, and other liabilities.

cooperatives had a much higher than average invest- Comparisons are made by principal product or service

ment in other assets because they are normally part of (Table 10) and asset size (Table 11).

a federated structure and have a large investment in Borrowed capital for all cooperatives surveyed

their federated cooperatives. For presentation purpos- was 29.6 percent of total assets. In Table 10, cotton gines, this investment is included as part of other assets. ning and other services cooperatives had the lowest

Equity capital in the survey averaged 41 percent, level of borrowed funds at 13.3 percent and 11.1 per

but varied significantly between cooperative types. cent of total assets respectively. Five classifications of

The relationship between equity capital and long-term marketing cooperatives-fruits and vegetables, live

liabilities also should be noted. Higher than average stock, poultry, rice, and sugar-reported average borequity capital levels generally resulted in lower than rowed capital that exceeded average equity capital.

average long-term liabilities. Cooperatives in the fruit Two classifications of marketing cooperatives, dairy

and vegetable, livestock, sugar, and poultry classifica- and grain and oilseed, had borrowed capital levels

tions had the lowest equity capital levels and the high- well below the average for all cooperatives in the

est long-term liabilities. study despite reporting among the highest levels of

In Table 9, comparisons by size resulted in less total assets for all marketing cooperative classificaoverall variation for most balance sheet components. tions.

The exception is in the equity capital and long-term Financial structure by size in Table 11 parallels

liabilities categories. As cooperative size increased, information in Table 9 which showed consolidated balequity capital as a percent of total assets decreased. ance sheet components. Specifically, the level of borInversely, the percentage of long-term liabilities rowed funds as a percent of total assets increased with

increased as cooperative size increased. cooperative size. Other liabilities generally increased

with size as reported in Table 9, while equity capital as

a percent of total assets declined as size increased.

16
Cooperative Equity uct or service categories was significant. The sugar

Cooperatives distributed most of their net income classification was highest with 100 percent, while those

as patronage refunds. The noncash portion provides in cotton ginning, livestock, and miscellaneous marthe principal source of allocated equity. For coopera- keting cooperatives exceeded 90 percent. The lowest

tives in the study, the proportion of allocated and unal- was poultry with only 60.3 percent. Those in farm sup

located equity is shown by principal product or service ply, grain and oilseed, and other services had below

in Table 12. Allocated equity for all cooperatives was average allocated equity.

76.5 percent, but the variation between different prod-

_____________________________________________________________________________________________

Table 9--Condensed balance sheet data, by size of cooperative, fiscal 1997

_____________________________________________________________________________________________

Percentage of total assets represented by

________________________________________________________________

Size Total Current Fixed Other Current Long-term Equity

(total assets) Cooperatives assets assets assets assets liabilities liabilities capital

_____________________________________________________________________________________________________________

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

Less than 1.0 295 156.7 55.1 25.6 19.3 26.4 6.0 67.6

1-4.9 886 2,335.6 50.7 28.0 21.2 30.3 6.9 62.8

5-9.9 344 2,409.7 50.5 28.4 21.1 35.9 8.5 55.6

10-24.9 256 3,876.2 54.2 27.9 17.9 41.1 9.6 49.2

25-99.9 94 4,128.1 57.9 29.2 12.9 47.6 13.3 39.1

100-499.9 39 7,528.9 55.8 30.1 14.1 41.1 19.0 39.9

500-999.9 9 6,459.1 44.1 35.7 20.2 38.9 28.8 32.3

1,000 and over 6 9,622.2 49.4 31.3 19.3 36.3 28.1 35.6

All sizes 1,929 36,516.4 51.4 30.8 17.7 39.1 20.0 40.9

________________________________________________________________________________________________________

________________________________________________________________________________________________________

Table 10-Financial structure, by principal product or service, fiscal 1997

______________________________________________________________________________________________

Percentage of total assets represented by

_________________________________________________

Principal product Total Borrowed Other Equity

or service Cooperatives assets capital liabilities capital

____________________________________________________________________________________________________________________

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

Cotton 14 790.2 30.1 23.5 46.4

Cotton ginning 126 312.2 13.3 24.6 62.1

Dairy 87 4,155.6 20.9 38.8 40.2

Farm supply 859 11,254.5 27.0 25.5 46.6

Fruit & vegetable 110 4,590.1 34.8 33.5 31.7

Grain & oilseed 609 6,409.4 20.5 33.4 46.1

Livestock 22 3,030.4 40.7 29.7 29.7

Misc. marketing 1 20 1,651.6 38.8 20.9 40.3

Nuts 8 477.4 33.8 23.5 42.7

Other serviceS2 51 233.7 11.1 20.2 68.6

Poultry 6 1,233.2 43.8 24.6 31.6

Rice 6 544.7 46.0 12.7 41.3

Sugar 11 1,833.5 42.2 29.7 28.1

All products/services 1,929 36,516.4 29.6 29.4 40.9

_______________________________________________________________________________________________________

1 Includes dry beans and peas, fishery, and miscellaneous products.

2 Includes artificial insemination, transportation, rice dryers, and other miscellaneous services.

17
Table 13 shows a breakdown of allocated and members are other cooperatives; and (4) mixed memunallocated. equity by size of cooperative. In general, bership cooperatives that serve both producer patrons

the level of allocated equity was much higher in the and other cooperatives.

larger-sized cooperatives compared to those with total This tabulation also relates to Table 12, which

assets of less than $500 million. This size distinction is shows the breakdown of allocated and unallocated

further illustrated by organizational structure. This equity by principal product or service. Certain product

structure breakdown serves as a proxy for asset size or service classifications dominate the organizational

and clearly shows why the proportion of allocated type in which they are classified and influence the

equity increases as size increases. The four organiza- relationship between allocated and unallocated equity

tional types are: (1) centralized local cooperatives that for that type. The following tabulation shows the per

serve producer patrons in their surrounding area; (2) cent of total assets represented by the predominant

centralized regional cooperatives that operate in a product or service classifications in each organization

multi-state territory; (3) federated cooperatives whose al type.

Average Principal Type's share

assets Allo- Unallo- Organizational product organizational

coopera- cated cated type or service of type assets

Organizational Number tive equity equity ____________________________

____________________________ Percent

Million Percent of Centralized local Farm supply,

dollars total equity grain and

Centralized oilseed 77

local 1,732 6.4 71.6 28.4 Centralized regional Dairy, fruit &

Centralized vegetable, 60

regional 120 69.7 77.1 22.9 and sugar

Federated Farm supply 68

Federated 39 134.3 81.0 19.0 Dairy, farm

supply, and

Mixed member

ship 36 338.6 80.3 19.7 Mixed membership livestock 74

________________________________________________________________________________________________________________________

Table 11-Financial structure, by size of cooperative, fiscal 1997

_____________________________________________________________________________________________________

Percent of total assets represented by

_____________________________________________

Size Total Borrowed Other Equity

(total assets) Cooperatives assets capital liabilities capital

________________________________________________________________________________________________________________________

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

Less than 1.0 295 156.7 11.9 20.5 67.6

1-4.9 886 2,335.6 14.0 23.2 62.8

5-9.9 344 2,409.7 18.8 25.7 55.6

10-24.9 256 3,876.2 21.1 29.7 49.2

25-99.9 94 4,128.1 26.1 34.8 39.1

100-499.9 39 7,528.9 32.0 28.1 39.9

500-999.9 9 6,459.1 38.2 29.5 32.3

1,000 and over 6 9,622.2 33.8 30.6 35.6

All sizes 1,929 36,516.4 29.6 29.4 40.9

__________________________________________________________________________________________________________

18
Sources of Borrowed Funds Table 14 shows sources of borrowed funds by

Cooperatives in the survey reported total bor- asset size. While banks for cooperatives on average

rowed funds of $10.8 billion of which 54 percent was provided the majority of loan funds, this was not true

provided by banks for cooperatives (see footnote #2 on for the smallest cooperatives (total assets of less than

page 8). Commercial banks, bonds and notes issued by $1 million) or the largest cooperatives (total assets of

cooperatives, and other sources provided the remain- $1 billion or more). The smallest cooperatives used

der in almost equal shares. A great deal of variability commercial banks as their main source of borrowed

existed, however, when each of these sources was funds, providing 53.7 percent. Banks for cooperatives

examined by cooperative size and by principal product and other sources provided most of the rest. Other

or service classifications. sources for smaller cooperatives were the Small

__________________________________________________________________________________________________________________

Table 12-Allocated and unallocated equity capital, by principal product or service, fiscal 1997

_________________________________________________________________________________________________

Percentage of equity represented by

______________________________________

Principal product Total equity Allocated Unallocated

or service Cooperatives capital equity equity

_______________________________________________________________________________________________________________________

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

Cotton 14 366.8 86.2 13.8

Cotton ginning 126 193.9 91.5 8.5

Dairy 87 1,672.5 78.1 21.9

Farm supply 859 5,249.8 72.7 27.3

Fruit & vegetable 110 1,454.9 77.1 22.9

Grain & oilseed 609 2,955.2 69.3 30.7

Livestock 22 898.7 96.1 3.9

Misc. marketing 1 20 665.0 92.4 7.6

Nuts 8 204.0 75.8 24.2

Other services 2 51 160.4 67.1 32.9

Poultry 6 389.3 60.3 39.7

Rice 6 225.2 71.3 28.7

Sugar 11 515.4 100.6 (0.6)

All products/services 1,929 14,951.1 76.5 23.5

___________________________________________________________________________________________________________

1 Includes dry beans and peas, fishery, and miscellaneous products.

2 Includes artificial insemination, transportation, rice dryers, and other miscellaneous services.

________________________________________________________________________________________________________________________

Table i3--Allocated and unallocated equity capital, by size of cooperative, fiscal 1997

________________________________________________________________________________________________

Percentage of equity represented by

__________________________________

Size Total equity Allocated Unallocated

(total assets) Cooperatives capital equity equity

_________________________________________________________________________________________________________________

Million dollars Number Million dollar -------------------------Percent------------------

Less than 1.0 295 106.0 70.5 29.5

1-4.9 886 1,467.9 67.5 32.5

5-9.9 344 1,338.9 70.1 29.9

10-24.9 256 1,908.5 69.8 30.2

25-99.9 94 1,613.5 75.3 24.7

100-499.9 39 3,005.0 74.3 25.7

500-999.9 9 2,085.3 86.2 13.8

1,000 and over 6 3,425.8 83.4 16.6

All sizes 1,929 14,951.1 76.5 23.5

___________________________________________________________________________________________________________

19
Business Administration, other cooperative financial to members and others for borrowed funds. Other

institutions, finance subsidiaries of regional coopera- sources was a major borrowing category for cotton

tives, and private sources. ginning, farm supply, other services, and sugar. For

The largest cooperatives relied in about equal farm supply cooperatives, the predominant other

shares on all four borrowing sources shown in Table sources of borrowed funds were the finance sub14. For the largest cooperatives, other sources consist- sidiaries of their regional cooperatives. For the other

ed primarily of insurance and leasing companies. The classifications of cooperatives, the other sources was a

Farm Credit Leasing Corporation was one of the major cross-section between the Small Business

lease financing sources. These largest cooperatives Administration, capitalized leases, and other cooperawere also the biggest issuers of bonds and notes to tive financial institutions.

members and others.

The rest of the surveyed cooperatives, with total Financial Ratios

asset sizes from $1 million to $999.9 million, were Three financial ratios-current ratio, net worth to

much bigger borrowers from banks for cooperatives at total assets, and return on a 8~sets-are analyzed in this

67 percent than the overall 53.9 percent average report- section. The current ratio-calculated by dividing cur

ed. Commercial banks provided about 11 percent of rent assets by current liabilities-is a standard measure

borrowed capital and other sources provided 13 per- of liquidity or an organization's ability to meet current

cent. obligations. Net worth to total assets is calculated by

Comparing borrowed funds sources by principal dividing a firm's total net worth by total assets. It meaproduct or service (Table 15) shows a more complex sures solvency and shows how much of the cooperapicture than the asset size comparison. Cooperatives in tive is owned by its members compared with its credisix product or service classifications borrowed a signif- tors. Return on assets is measured by dividing net

icantly higher percentage of funds from banks for income before taxes by total assets. It shows what type

cooperatives than the 53.9 percent average for all coop- of return is received on the assets used in the business.

eratives. They were the cotton, dairy, fruit and veg- Comparisons for each of these ratios are made by prinetable, grain and oilseed, miscellaneous marketing, cipal product or service, by asset size, and by geo

and rice categories. The cotton ginning, livestock, and graphical region.

poultry classifications were the smallest users of banks Table 16 shows the financial ratios by principal

for cooperatives. product or service classification. The average current

Cotton ginning, livestock, nuts, and poultry were ratio for all cooperatives in the study was 1.3.

the largest users of commercial banks. Livestock coop- Marketing-type cooperatives (cotton, dairy, fruit &

eratives also relied heavily on bonds and notes issued vegetable, grain and oilseed, livestock, miscellaneous

____________________________________________________________________________________________________________

Table 14-Sources of borrowed funds, b y size of cooperative, fiscal 1997

_________________________________________________________________________________________________

Percentage of borrowed funds represented by

_____________________________________________________________

Borrowed Borrowed Bonds

Total from from and notes

Size borrowed banks for commercial issued by Other

(total assets) Cooperatives funds cooperatives banks cooperatives sources

______________________________________________________________________________________________________________________

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

Less than 1.0 295 18.7 20.7 63.7 5.4 20.2

1-4.9 886 326.7 52.1 17.6 6.3 25.1

6-9.9 344 462.3 67.2 10.2 4.8 17.9

10-24.9 266 816.6 63.8 12.8 8.3 16.2

25-99.9 94 1,079.4 78.8 9.7 7.1 4.6

100-499.9 39 2,411.6 69.6 13.1 8.6 8.9

600-999.9 9 2,467.4 62.2 9.8 11.0 17.0

1,000 and over 6' 3,254.1 23.7 25.0 29.9 21.4

All sizes 1,929 10,826.6 63.9 15.6 16.1 16.4

___________________________________________________________________________________________________________

20
______________________________________________________________________________________________________________________

Table 15-Sources of borrowed funds, by principal product or service, fiscal 1997

_______________________________________________________________________________________________

Percentage of borrowed funds represented by

___________________________________________________

Borrowed Borrowed Bonds

Total from from and notes

Principal product borrowed banks for commercial issued by Other

or service Cooperatives funds cooperatives banks cooperatives sources

____________________________________________________________________________________________________________________

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

Cotton 14 237.9 74.5 22.9 0.7 1.9

Cotton ginning 126 41.6 35.1 31.0 10.0 24.0

Dairy 87 869.9 65.1 21.4 1.3 12.2

Farm supply 859 3,139.8 52.1 4.6 18.7 24.6

Fruit & vegetable 110 1,599.4 57.2 12.3 20.3 10.2

Grain & oilseed 609 1,312.5 73.6 9.1 9.5 7.9

Livestock 22 1,232.9 24.2 34.2 36.6 5.1

Misc. marketing 1 20 641.4 81.5 13.5 1.2 3.9

Nuts 8 161.1 48.8 32.2 12.2 6.8

Other services 2 51 26.1 46.9 28.2 - 25.1

Poultry 6 539.9 9.1 52.4 18.6 19.9

Rice 6 250.6 86.4 10.9 - 2.8

Sugar 11 773.6 49.2 13.2 0.2 37.4

All products/services 1,929 10,826.6 63.9 15.6 15.1 15.4

_________________________________________________________________________________________________________

1 Includes dry beans and peas, fishery, and miscellaneous products.

2 Includes artificial insemination, transportation, rice dryers, and other miscellaneous services

__________________________________________________

Table 1"elected financial ratios, by principal marketing, nuts, rice, and sugar) tended to have lower

product or service, fiscal 1997___________________ current ratios than farm supply and service cooperaPrincipal product Current Net worth to Return on tives. The highest average current ratio was in other

or service ratio total assets assets services, the lowest was miscellaneous marketing.

__________________________________________ Net worth to total assets averaged 40.9 percent

Number ------- Percent--------- (Table 16). Cotton ginning and other services cooperaCotton 1.6 46.4 8.1 tives had net worth to total assets well above the aver

Cotton ginning 1.5 62.1 28.4 age because they have less invested in fixed assets

Dairy 1.3 40.2 7.5 than other types. Also in many cases with cotton gin

Farm supply 1.5 46.6 6.4 ning cooperatives, these assets have also been significantly depreciated. This same situation explains why

Fruit & vegetable 1.4 31.7 3.6 cotton ginning cooperatives had a return on assets of

Grain & oilseed 1.3 46.1 5.6 28.4 percent compared to the average of 5.3 percent for

Livestock 1.2 29.7 5.4 all cooperatives in the study.

Misc. marketing 1 0.7 40.3 0.3 Table 17 presents the three ratios by total asset

Nuts 2.0 42.7 2.2 size of cooperatives in the study. Generally, the small

Other services 2 2.2 68.6 8.8 er-sized cooperatives demonstrated better ratio perforPoultry 1.5 31.6 1.7 mance than larger cooperatives for the current ratio

Rice 1.3 41.3 1.3 and net worth to total assets measurements. This is

Sugar 1.1 28.1 (0.1) consistent with the more conservative financial strucAll products/services 1.3 40.9 5.3 ture depicted in Table 11. The return-on-asset ratio did

__________________________________________ not show a consistent relationship between size cate1 Includes dry beans and peas, fishery, and miscellaneous gories. Return on assets is based on one year's results

products. and is more reflective of the cooperative product or

2 Includes artificial insemination, transportation, rice dryers, and Service types that make up each size group.

other miscellaneous services.

21
________________________________________________________ _____________________________________________________________

Table 17-Selected financial ratios, by size of Table 18.-Selected financial ratios by geographical

cooperative, fiscal 1997 region, fiscal 1997

_____________________________________________ _________________________________________________

Size Current Net worth to Return on Geographical Current Net worth toReturn

on

(total assets) ratio total assets assets region ratio total assets assets

________________________________________________________ ___________________________________________________________

Million dollars Number --------Percen--------------- Number --------------Percent------------

Less than 1.0 2.1 67.6 6.5 Appalachia 1.7 48.9 8.5

1-4.9 1.7 62.8 8.0 Corn belt 1.3 43.8 6.5

5-9.9 1.4 55.6 7.4 Delta states 1.4 42.4 1.3

10-24.9 1.3 49.2 7.1 Lake states 1.2 40.7 5.1

25-99.9 1.2 39.1 4.9 Mountain 1.2 30.1 4.2

100-499.9 1.4 39.9 4.3 Northeast 1.3 24.3 3.2

500-999.9 1.1 32.3 2.7 Northern plains 1.3 50.5 5.2

1,000 and over 1.4 35.6 6.1 Pacific 1.3 37.7 5.1

All sizes 1.3 40.9 5.3 Southeast 1.5 35.9 2.2

________________________________________________ Southern plains 1.8 61.3 11.9

All regions 1.3 40.9 5.3

_____________________________________________________

The geographical comparison of financial ratios

shown in Table 18 demonstrates the diversity of cooperative types within regions. The highest performing

regions, Appalachia and Southern Plains, reflect the Cooperatives in the two highest categories of equity

composition of cooperatives in those regions, such as to-assets ratios had more than two-thirds of the numcotton ginning, which showed the best performance ber of cooperatives, but only 24 percent of total assets.

for product or service categories. Also from Table 20, cooperatives with less than $1

Tables 19 through 22 show the distribution, by million in total assets had more than 50 percent of the

number of cooperatives and total assets, according to number of cooperatives and nearly 50 percent of total

the their equity-to-assets ratio and return on equity. In assets represented in the highest equity-to-assets ratio

Tables 19 and 21, these two ratios are shown by princi- category. In contrast, cooperatives with $1 billion or

pal product or service. Tables 20 and 22 depict these more in total assets had no cooperatives in the highest

ratios by total asset size. The purpose of these tables is equity-to-assets range.

to give individual cooperatives information for com- Cooperatives showed a wide variation in perforparison with their own operations. mance as measured by return on assets by principal

The equity-to-assets ratio by principal product or product or service (Table 21). For all cooperatives, the

service is shown in Table 19. Except for the Other largest proportion both by number of cooperatives and

Services category, every other cooperative type had the total assets fell in the 5 to 7.49-percent return on asset

largest percentage of assets in the 0.24 to 0.49 equity- level. Cotton ginning cooperatives had the largest perto-assets range. The distribution by number of cooper- centage by number of cooperatives and total assets in

atives was more varied across the range of ratio values the highest return on assets category, 15 percent or

than for total assets, but the largest percentage of coop- more. In contrast, the sugar category had more than 90

eratives by number fell in the 0.50 to 0.74 equity-to- percent of total assets held by cooperatives in the two

assets range. Smaller cooperatives generally had high- lowest return on assets levels. The performance of cot

er equity-to-assets ratios as evidenced by the larger ton cooperatives was mixed. Half of them reported

number represented in the higher equity-to-assets ratio return on assets of less than 2.5 percent, but more than

columns. Exceptions to this include cotton, fruit and 20 percent of total assets were in the 15 percent or

vegetable, nuts, and sugar because larger cooperatives higher asset return category. The major share of assets

dominate these product or service categories. of both grain marketing and farm supply cooperatives

Size of assets and equity levels were inversely fell in the 5 to 10 percent return on assets range.

related for cooperatives in this survey. This relation- Table 22 reports the frequency distribution of

ship is quantified in the total line of Table 20. cooperatives and total assets, by return on assets, by

Cooperatives in the lowest two equity-to-assets ratio size of cooperative. Those with less than $1 million in

categories represent less than one-third of the coopera- total assets showed the highest percentage, both by

tives in the survey, but held 75 percent of total assets. number of cooperatives and asset totals, in the classifi22
___________________________________________________________________________________________________________________

Table 19--Frequency distribution of cooperatives and total assets according to equity/total assets, by

principal product or service, fiscal 1997

____________________________________________________________________________________________

Equity to total assets ratio

________________________________________________________

Principal product

or service Less than .26 .25 to .49 .50 to .74 .75 to 1.0

___________________________________________________________________________________________________________________

Percent

Cotton

Cooperatives 35.7 28.6 28.6 7.1

Total assets 27.2 31.3 21.3 20.2

Cotton ginning

Cooperatives 4.0 20.6 39.7 35.7

Total assets 2.4 25.0 42.7 29.9

Dairy

Cooperatives 20.7 34.5 24.1 20.7

Total assets 4.3 82.0 13.1 0.6

Farm supply

Cooperatives 2.0 19.1 45.8 33.2

Total assets 13.6 44.7 35.3 6.4

Fruit & vegetable

Cooperatives 22.7 38.2 21.8 17.3

Total assets 26.8 67.4 5.0 0.8

Grain & oilseed

Cooperatives 4.6 35.8 44.8 14.8

Total assets 7.5 58.8 29.3 4.4

Livestock

Cooperatives 22.7 27.3 9.1 40.9

Total assets 10.1 89.5 0.1 0.3

Misc. marketing I

Cooperatives 15.0 40.0 30.0 15.0

Total assets 0.3 94.1 0.6 5.0

Nuts

Cooperatives 12.5 50.0 12.5 25.0

Total assets 0.2 98.9 0.5 0.4

Other services 2

Cooperatives 2.0 19.6 21.6 56.9

Total assets 0.4 22.4 18.7 58.4

Poultry

Cooperatives - 83.3 16.7 -

Total assets - 99.9 0.1 -

Rice

Cooperatives - 50.0 - 50.0

Total assets - 99.9 - 0.1

Sugar

Cooperatives 9.1 54.5 36.4 -

Total assets 38.5 52.6 8.8 -

All products/services

Cooperatives 5.7 27.3 41.0 26.1

Total assets 12.8 63.4 19.6 4.2

___________________________________________________________________________________________________________

Includes dry beans and peas, fishery, and miscellaneous products.

2 Includes artificial insemination, transportation, rice dryers, and other miscellaneous services.

23
________________________________________________________________________________________________________________

Table 20--Frequency distribution of cooperatives and total assets according to equity/total assets, by size of

cooperative, fiscal 1997

_______________________________________________________________________________________________

Equity to total assets ratio

_____________________________________________________________________________

Size

(total assets) Lessthan.25 .25 to .49 .50 to .74 .75 to 1.0

_________________________________________________________________________________________________________________

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

Less than 1.0

Cooperatives 8.1 14.2 25.1 52.5

Total assets 7.5 14.5 28.6 49.5

1-4.9

Cooperatives 4.0 18.6 44.8 32.6

Total assets 3.3 20.5 46.6 29.6

5-9.9

Cooperatives 2.9 29.9 55.5 11.6

Total assets 3.1 30.2 55.7 11.0

10-24.9

Cooperatives 6.3 44.5 43.0 6.3

Total assets 6.7 45.1 42.2 6.0

25-99.9

Cooperatives 14.9 69.1 12.8 3.2

Total assets 15.3 69.6 12.2 2.8

100-499.9

Cooperatives 17.9 66.7 12.8 2.6

Total assets 14.1 69.8 14.0 2.1

500-999.9

Cooperatives 22.2 77.8 0.0 0.0

Total assets 19.4 80.6 0.0 0.0

1,000 and over

Cooperatives 16.7 66.7 16.7 0.0

Total assets 13.5 71.1 15.4 0.0

All sizes

Cooperatives 5.7 27.3 41.0 26.1

Total assets 12.8 63.4 19.6 4.2

___________________________________________________________________________________________________

24
_________________________________________________________________________________________________

Table 21-Frequency distribution of cooperatives and total assets according to return on assets, by principal

product or service, fiscal 1997

_____________________________________________________________________________________________

Return on assets

Principal product ______________________________________________________________________________________________

or service Less than 0 0 to 2.49 2.5 to 4.99 5 to 7.49 7.5 to 9.99 10 tol 2.49 12.5 to 14.99 15 or more

____________________________________________________________________________________________________________________

Percent

Cotton

Cooperatives 7.1 42.9 7.1 - 14.3 7.1 7.1 14.3

Total assets 0.1 37.0 13.9 - 9.3 2.2 14.7 22.8

Cotton ginning

Cooperatives 17.5 7.9 3.2 4.0 3.2 4.8 4.8 64.8

Total assets 7.5 6.7 1.2 4.5 1.9 5.8 6.6 65.7

Dairy

Cooperatives 11.5 17.2 8.0 13.8 19.5 8.0 6.9 14.9

Total assets 2.0 22.5 1.8 43.1 10.6 1.3 7.1 11.6

Farm supply

Cooperatives 10.4 12.6 17.0 20.4 18.4 9.9 6.1 5.4

Total assets 7.6 15.8 8.7 20.6 25.5 16.8 3.1 1.9

Fruit & vegetable

Cooperatives 20.0 21.8 13.6 7.3 4.5 7.3 4.5 20.9

Total assets 2.3 23.0 59.7 8.1 2.4 1.8 0.7 2.1

Grain & oilseed

Cooperatives 11.5 14.0 19.2 23.2 17.9 7.6 4.8 2.0

Total assets 5.8 9.6 18.5 40.4 16.6 4.9 2.3 1.8

Livestock

Cooperatives 9.1 27.3 22.7 13.6 9.1 4.5 9.1 4.5

Total assets 0.6 10.1 0.8 87.5 0.8 0.1 3 - 3 -

Misc. marketing I

Cooperatives 25.0 15.0 15.0 15.0 5.0 5.0 - 20.0

Total assets 45.7 0.2 3.7 47.5 0.2 0.2 - 2.5

Nuts

Cooperatives 12.5 25.0 25.0 12.5 12.5 - - 12.5

Total assets 0.2 63.0 35.2 0.9 0.2 - - 0.5

Other services 2

Cooperatives 7.8 13.7 5.9 13.7 7.8 11.8 3.9 35.3

Total assets 11.9 24.4 5.6 18.9 1.1 6.7 11.2 20.2

Poultry

Cooperatives - 33.3 16.7 16.7 - - 33.3 -

Total assets - 90.9 0.7 2.7 - - 5.7 -

Rice

Cooperatives - 50.0 - 16.7 - - - 33.3

Total assets - 99.9 - 3- - - - 3

Sugar

Cooperatives 18.2 45.5 27.3 9.1 - - - -

Total assets 33.9 62.1 3.3 0.7 - - - -

All products/services

Cooperatives 11.8 14.3 15.9 18.6 15.7 8.3 5.4 9.9

Total assets 7.8 22.4 14.9 29.1 12.6 6.6 2.9 3.8

_________________________________________________________________________________________________________

1 Includes dry beans and peas, fishery, and miscellaneous products.

2 Includes artificial insemination, transportation, rice dryers, and other miscellaneous services.

3 Less than 0.1

25
________________________________________________________________________________________________________________________

Table 22-Frequency distribution of cooperatives and total assets according to return on assets, by size of

cooperative, fiscal 1997

______________________________________________________________________________________________________

Return on assets

___________________________________________________________________________________________________

Size

(total assets) Less than 0 0 to 2.49 2.5 to 4.99 5 to 7.49 7.5 to 9.99 10 to 12.49 12.5 to 14.9915 or

more

_______________________________________________________________________________________________________________________

Million dollars _____________________________________________Percent________________________________________

Less than 1.0

Cooperatives 29.5 15.6 14.9 9.2 7.5 4.7 4.1 14.6

Total assets 23.0 16.1 16.9 11.4 8.2 5.3 5.6 13.6

1-4.9

Cooperatives 13.8 13.3 19.1 16.9 9.0 6.2 11.1

Total assets 9.4 13.3 13.6 18.9 17.7 9.4 6.7 11.0

5-9.9

Cooperatives 11.3 19.8 20.6 17.2 10.2 5.8 7.8

Total assets 7.3 11.5 19.7 20.3 17.4 10.1 5.9 7.8

10-24.9

Cooperatives 10.9 20.3 24.6 19.1 11.7 3.5 6.3

Total assets 3.5 10.7 20.7 24.9 19.2 10.7 3.6 6.6

25-99.9

Cooperatives 22.3 16.0 19.1 20.2 1.1 6.4 5.3

Total assets 8.8 25.3 14.7 20.3 19.4 0.8 6.0 4.7

100-499.9

Cooperatives 43.6 17.9 12.8 7.7 - 7.7 5.1

Total assets 9.1 39.5 16.1 15.2 9.3 - 4.8 6.1

500-999.9

Cooperatives 11.1 33.3 33.3 - - - -

Total assets 19.4 10.9 30.8 38.9 - - - -

1,000 and over

Cooperatives - 33.3 - 33.3 16.7 16.7 0.0 0.0

Total assets - 25.2 - 43.8 15.7 15.4 0.0 0.0

All sizes

Cooperatives 14.3 15.9 18.6 15.7 8.3 5.4 9.9

Total assets 7.8 22.4 14.9 29.1 12.6 6.6 2.9 3.8

___________________________________________________________________________________________________________

26
cation with negative returns. At the same time, this nificant role in the financial structure and operating

size category had the highest percentage in the 15 per- results for local cooperatives, primarily those in the

cent or more return on assets category. The return on grain and farm supply categories.

assets of the smallest asset class extends over all return Differences in financial structure were evidenced

levels, but as size increases, the proportion of number between different product or service categories and

of cooperatives and total assets tends to move away between cooperatives of different size. This was most

from the extremes of the return on assets level and to apparent in equity capital levels. For instance, market

aggregate toward the middle. In the three size cate- ing-type cooperatives generally had lower equity levgories from $5 million to $99.9 million, more than 50 els as a percent of total assets compared to farm supply

percent of cooperative numbers and total assets fell in and service types. Smaller cooperatives generally had

the return on asset range of 2.5 percent to 9.9 percent. higher equity levels than large cooperatives. As coop

erative size increased, equity as a percent of total

assets decreased and long-term liabilities increased.

Conclusion Cooperatives in general received the majority of

borrowed funds from banks for cooperatives-on

This report marks the sixth survey of financial average 54 percent. Commercial banks, bonds and

practices and performance of agricultural coopera- notes issued by cooperatives, and other sources were

tives. The first survey was conducted based on fiscal evenly split in providing the remainder. Considerable

1954 data. In this report, information is presented that variability existed between size and product or service

compares previous studies with data collected for this categories, however. For the smallest cooperatives,

survey. Many changes have taken place in the inter- commercial banks were the predominant source. For

vening years as agricultural cooperatives have dimin- the largest size category, bonds and notes provided the

ished in numbers and grown in size as the result of most borrowed funds.

consolidations. By product or service category, cotton, grain and

Comparison of data from all six studies shows oil seed, and rice were the largest users of banks for

that some trends in financial structure have continued cooperatives. The cotton ginning, poultry, and live

and some have reversed, particularly when 1987 and stock categories were the smallest users.

1997 data are highlighted. For example, prior to 1987, Three financial ratios were compared for this

equity capital had shown a steady decline, increased in study-current ratio, equity to assets, and return on

1987, but continued the decline in 1997. Similarly, the assets. These comparisons were made by product or

use of borrowed funds exhibited a steady increase service category, size, and geographical region. The

until 1987 when a decline occurred, but the upward average current ratio for all cooperatives in the study

trend continued in 1997. Other liabilities, on the other was 1.3 to 1. Equity to total assets averaged 40.9 per

hand, increased in each of the survey years. Fiscal 1987 cent and return on assets was 5.3 percent. As with

saw some fundamental structural changes occur for other financial comparisons in this study, considerable

agricultural cooperatives as specific responses to the variability existed between commodity types and size.

financial difficulties experienced in the late 1970s into Geographical comparisons tended to reflect the pre

the mid-1980s. For the most part, 1997 data exhibited a dominant product or service types in the region. The

return to more normal patterns. most contrast existed when size differences were com

Distribution of net income practices was also pared. Small cooperatives, on average, reported signifcompared from survey to survey. Many product or ser- icantly higher current ratios and equity to asset relavice categories exhibited continuity in distribution tionships. Frequency distribution tables were used to

practices throughout the survey years. Other cate- reflect the variability in these ratios among commodity

gories, such as fruit and vegetable and sugar showed a types and size ranges.

significant change in the pattern of cash patronage

refund payments. In addition, most categories in 1997

continued the practice established in 1987 of distributing a greater percentage of net income as unallocated

equity.

A detailed analysis of 1997 data indicated that

investment in other cooperatives and patronage

refunds received from other cooperatives plays a sig27
References

1. Hulbert, Helim H., Nelda Griffin, and Kelsey B. Gardner. Methods of Financing Farmer

Cooperatives. FCS General Report 32, USDA, Washington, DC, June 1957.

2. Griffin, Nelda, and Roger A. Wissman. Financial Structure of Farmer Cooperatives. FCS Research Report 10, USDA,

Washington, DC, March 1970.

3. Griffin, Nelda. A Financial Profile of Farmer

Cooperatives in the United States. FCS Research

Report 23, USDA, Washington, DC, October 1972.

4. Griffin, Nelda et al. The Changing Financial

Structure of Farmer Cooperatives. ESCS Farmer Cooperative Research Report 17, USDA,

Washington, DC, March 1980.

5. Royer, Jeffrey S., Roger A. Wissman, and Charles A. Kraenzle. Farmer Cooperative Financial Profile,

1987. ACS Research Report 91, USDA, Washington, DC, September 1990.

6. Richardson, Ralph M. et al. Farmer Cooperative Statistics, 1997. RBS Service Report 56, USDA,

Washington, DC, December 1998.

7. Richardson, Ralph M. et al. Farmer Cooperative Statistics, 1986. ACS Service Report 19, USDA,

Washington, DC, December 1987.

8. Richardson, Ralph M. et al. Farmer Cooperative Statistics, 1987, ACS Service Report 24, USDA,

Washington, DC, April 1989.

28
______________________________________________________________________________________________

Appendix table 1-Frequency distribution of cooperatives and total assets according to current ratio, by principal

product or service, fiscal 1997

______________________________________________________________________________________________

Return on assets

Principal product _______________________________________________________________________________________________

or service Less than 1.0 1 to 1.24 1.25 to 1.49 1.50 to 1.99 2.0 to 2.99 3.00 to 4.99 5.0 or more

____________________________________________________________________________________________________________________

-------------------------------------------------------------------Percent-----------------------------------------------------------------------

Cotton

Cooperatives - 36.7 7.1 28.6 14.3 14.3 -

Total assets - 38.8 2.3 21.3 17.3 20.3 -

Cotton ginning

Cooperatives 18.3 21.4 10.3 13.5 11.1 10.3 15.1

Total assets 17.9 27.7 8.5 16.2 15.8 7.7 6.3

Dairy

Cooperatives 9.2 31.0 18.4 13.8 10.3 3.4 13.8

Total assets 3.3 29.6 54.7 1.9 10.3 0.1 0.1

Farm supply

Cooperatives 5.5 14.2 18.4 19.9 17.7 13.4 10.9

Total assets 1.1 46.7 17.8 12.6 18.1 2.3 1.3

Fruit & vegetable

Cooperatives 19.1 30.9 16.4 11.8 6.4 3.6 11.8

Total assets 2.5 29.0 12.3 54.2 0.4 0.1 1.4

Grain & oilseed

Cooperatives 1.8 35.3 25.3 19.0 8.0 5.1 5.4

Total assets 1.5 62.9 19.0 11.2 2.7 1.7 1.0

Livestock

Cooperatives - 40.9 13.6 - - - 45.5

Total assets - 95.6 4.1 - - - 0.4

Misc. marketing I

Cooperatives 25.0 20.0 15.0 15.0 15.0 5.0 5.0

Total assets 40.9 3.5 50.0 0.3 0.3 2.3 2.7

Nuts

Cooperatives 12.5 12.5 12.5 37.5 - 12.5 12.5

Total assets 0.2 0.5 25.4 38.7 - 35.0 0.2

Other services 2

Cooperatives 3.9 3.9 19.6 11.8 21.6 9.8 29.4

Total assets 0.7 2.4 16.5 19.7 36.2 17.0 7.7

Poultry

Cooperatives - 16.7 66.7 16.7 - - -

Total assets - 2.0 97.9 0.1 - - -

Rice

Cooperatives - 33.3 16.7 - - - 50.0

Total assets - 36.6 63.3 - - - 0.1

Sugar

Cooperatives

Total assets 9.1 46.5 18.2 27.3 - - -

38.5 46.8 11.7 2.9 - - -

All products/services

Cooperatives 6.2 23.5 19.9 18.1 12.8 9.1 10.4

Total assets 5.2 44.6 24.6 14.3 8.0 2.2 1.0

__________________________________________________________________________________________________________

1. Includes dry beans and peas, fishery, and miscellaneous products.

2 Includes artificial insemination, transportation, rice dryers, and other miscellaneous services.

29
_________________________________________________________________________________________________________________________

Appendix table 2-Frequency distribution of cooperatives and total assets according to current ratio, by size of

cooperative, fiscal 1997

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Current ratio

Size ____________________________________________________________________________________________________

(total assets) Less than 1. 1 to 1.24 1.25 to 1.49 1.50 to 1.99 2.0 to 2.99 3.00 to 4.99 5.0 or more

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

Less than 1.0

Cooperatives 12.1 6.4 9.2 12.4 13.1 15.6 31.2

Total assets 13.4 5.8 9.7 14.3 14.5 17.0 25.3

1-4.9

Cooperatives 6.5 15.7 17.8 19.9 17.3 12.3 10.5

Total assets 6.0 17.5 19.8 21.2 16.5 10.8 8.2

5-9.9

Cooperatives 3.8 29.4 29.9 23.0 9.6 3.5 0.9

Total assets 3.6 29.5 30.6 23.1 9.2 3.1 0.9

10-24.9

Cooperatives 2.7 45.3 25.0 16.4 7.0 2.7 0.8

Total assets 2.7 46.1 25.2 16.2 6.8 2.4 0.6

25-99.9

Cooperatives 5.3 59.6 21.3 7.4 3.2 1.1 2.1

Total assets 4.4 60.5 22.1 6.5 3.4 0.9 2.2

100-499.9

Cooperatives - 46.2 25.6 17.9 5.1 5.1 -

Total assets - 41.1 32.3 16.7 5.6 4.3 -

500-999.9

Cooperatives 22.2 33.3 11.1 33.3 - - -

Total assets 21.3 36.1 11.8 30.8 - - -

1,000 and over

Cooperatives - 50.0 33.3 - 16.7 - -

Total assets - 56.7 27.9 - 15.4 - -

All sizes

Cooperatives 6.2 23.7 20.0 18.2 12.9 9.1 9.8

Total assets 6.2 44.6 24.6 14.3 8.0 2.2 1.0

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_____________________________________________________

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, sex, religion, age, disability,

 political beliefs, sexual orientation or 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.

_______________________________________________________