Author: Phil Kenkel

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A Unique Partnership

Phil Kenkel

Bill Fitzwater Cooperative Chair

Agricultural cooperatives rapidly developed in the U.S. after the passage of the Capper Volstead Act.  A 1924 USDA survey reported over 10,000 agricultural cooperatives.  That period of cooperative formation coincided with the development of the Land Grant University System.  At one time, many Land Grant Universities had cooperative specialists, often in Departments of Agricultural Economics.  As agricultural cooperatives matured, they became larger and more diversified.  The number of cooperative specialists at Land Grant Universities …

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Strategic Decisions Involving Section 199A

Phil Kenkel

Bill Fitzwater Cooperative Chair

While Section 199A, which was part of the 2017 Tax Cuts and Job Act, has faded from the news, many questions remain as to the exact implementation and guidance.  Despite the saying that “the devil is in the details” it is useful for cooperative CEO and board members to take a high level look at the basic structure of the new tax provision.  That “30,000 foot” view of Section 199A reveals some key strategic …

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A New Dimension of Member Diversity

Phil Kenkel

Bill Fitzwater Cooperative Chair

Mature cooperatives are always challenged to meet the needs of a diverse membership.  Cooperative leaders are used to considering differences in age and time perspective, farm size, services required and even interest in being involved with the cooperative.  Tax reform has created another possible area of member heterogeneity and that dimension relates to farm level W-2 wages.  Under Section 199A producers, marketing through a cooperative face a tax disadvantage (reduction in a pass through …

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Understanding the Closed Cooperative Model

Phil Kenkel

Bill Fitzwater Cooperative Chair, Oklahoma State University

A cooperative is a for profit business that is owned by its users and distributes profits or losses in proportion to use.  Cooperative businesses are organized as corporations but are incorporated under separate statues.  The system of distributing profits and losses in proportion to use is fundamentally different from that of investor owned firms where profit and loss is allocated in proportion to ownership.  The profit distribution system, which is unique …

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Understanding Hybrid Member-Investor and Multi-Stakeholder Cooperatives

Phil Kenkel

Bill Fitzwater Cooperative Chair, Oklahoma State University

Most cooperatives are focused on a single group of user and distribute benefits to those users.  Examples would include agricultural cooperative owned by farmers, retail cooperatives owned by consumers or taxi cab cooperatives owned by workers.  In recent years, two new modified cooperative structures have emerged: the member-investor cooperative and the multi=stakeholder cooperative.  The goal of these structures is to address limitations of traditional cooperative structures and/or extend the purpose of …

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Understanding Cooperative Returns

Phil Kenkel

Bill Fitzwater Cooperative Chair, Oklahoma State University

One of the fundamental characteristics of a cooperative that distinguishes it from other forms of business is that the customers (patrons) are also the owners of the firm.  Members are really making a joint decision to invest in the cooperative as owners and to patronize the cooperative firm.  That creates the possibility that the member can benefit at both the farm level and at the cooperative level.  Farm level returns could …

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The New Role of Agricultural Cooperatives in Pooling and Distributing Tax Deductions

Phil Kenkel, Greg McKee, Mike Boland and Keri Jacobs

U.S. Agricultural cooperatives create unique benefits for their producer members (USDA- RBCS, 1990).  Cooperatives create economies of scale and scope in procuring inputs and marketing and processing commodities (Sexton 1990). Those scale economies also help to provide access to markets.  Cooperatives provide an unseen and often unappreciated benefit in offsetting market power and maintaining the competitive environment. Agricultural cooperatives are unique in that they are an extension of the farm or …

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Managing Capital Structure

Phil Kenkel

Bill Fitzwater Cooperative Chair, Oklahoma State University

All of the assets in a cooperative must be financed by some forms of debt and equity.  Those assets include the fixed assets such as the plant, building, equipment and rolling stock as well as the short term assets such as accounts receivable and inventories.  When we discuss capital structure we are referring to the choices that the cooperative made in creating the capital to fund all of its assets.  Capital …

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Managing a Cooperative

Phil Kenkel

Bill Fitzwater Cooperative Chair, Oklahoma State University

Management Defined

There are many alternative definitions of management.  One definition is “The process of designing and maintaining an environment in which individuals can work with others efficiently and effectively to accomplish set goals.”   Other definitions of management might include phrases such as “Interacting with people to achieve results”, “Using resources to achieve objectives” or “Balancing tradeoffs”.   Commons themes across the various definitions of the term “management” are the concept of …

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