Agricultural Cooperatives: Economics, Opportunities and Structure in a New Era of Food, Fiber and Fuel

Phil Kenkel
Bill Fitzwater Cooperative Chair, Oklahoma State University
Cooperative businesses are an important part of the U.S. economy and are particularly prevalent in the agricultural sector. Cooperatives operate under a business model that generates unique challenges in finance management, governance, strategy and communication. These unique challenges and the prevalence of cooperatives in U.S. agriculture have encouraged research and education efforts by agricultural economists since the early 1900’s. Cooperatives were included as a part of the mission of the Cooperative

External Issues Facing Cooperatives

Phil Kenkel

Bill Fitzwater Cooperative Chair, Oklahoma State University

In a recent national project, academic researchers, cooperative managers and members, USDA, agricultural foundations and other stakeholders collaborated to identify the critical issues facing agricultural cooperatives. A two-stage Delphi survey was conducted, followed by expert panel sessions in Washington, D.C. and Minneapolis, Minnesota. The material below summarizes some of the findings from the project.

Market Volantility
Wide spectrums of issues both external and internal to the firm impact the competitiveness, stability …

Communications

Phil Kenkel

Bill Fitzwater Cooperative Chair, Oklahoma State University

In a recent national project, academic researchers, cooperative managers and members, USDA, agricultural foundations and other stakeholders collaborated to identify the critical issues facing agricultural cooperatives. A two-stage Delphi survey was conducted, followed by expert panel sessions in Washington, D.C. and Minneapolis, Minnesota. The material below summarizes some of the findings from the project.

Cooperatives are owned and controlled by a diverse set of users. They also operate under a unique …

Human Resources

Phil Kenkel

Bill Fitzwater Cooperative Chair, Oklahoma State University

In a recent national project, academic researchers, cooperative managers and members, USDA, agricultural foundations and other stakeholders collaborated to identify the critical issues facing agricultural cooperatives. A two-stage Delphi survey was conducted, followed by expert panel sessions in Washington, D.C. and Minneapolis, Minnesota. The material below summarizes some of the findings from the project.

The quality and skills of cooperative managers and board members has been considered a critical issue for …

Characteristics of the Best Cooperatives

By Phil Kenkel, Vice Chair, Cooperatives CoP and Bill Fitzwater Cooperative Chair, Oklahoma State University, phil.kenkel@okstate.edu.

In a recent national project, academic researchers, cooperative managers and members, USDA, agricultural foundations and other stakeholders collaborated to identify the critical issues facing agricultural cooperatives. A two-stage Delphi survey was conducted, followed by expert panel sessions in Washington, D.C. and Minneapolis, Minnesota. The material below summarizes some of the findings from the project.

During the Critical Issues Pre-Conference of the Farmers Cooperative …

Critical Issues Facing Cooperatives

Phil Kenkel

Bill Fitzwater Cooperative Chair, Oklahoma State University

In a recent national project, academic researchers, cooperative managers and members, USDA, agricultural foundations and other stakeholders collaborated to identify the critical issues facing agricultural cooperatives. A two-stage Delphi survey was conducted, followed by expert panel sessions in Washington, D.C. and Minneapolis, Minnesota. Some of the findings from the project are summarized under the topics below.

Project Background

External Issues Facing Cooperatives

Need for Strategic Planning

Challenges for the Board of

Nonqualified Retains Equity

Authors: Greg McKee, North Dakota State University, gregory.mckee@ndsu.edu, and Donald Frederick,
Rural Business-Cooperative Service, USDA

Cooperatives may delay the pass-through of the tax obligation from the cooperative to the patron without jeopardizing single tax treatment of those moneys.

Any patronage-based allocation not meeting the requirements of the Code to be “qualified,” has “nonqualified” status. When a nonqualified allocation is made, the cooperative pays corporate income taxes on the funds retained. The patron has no tax obligation on these funds in …

Individually Owned Businesses

Authors: Greg McKee, North Dakota State University, gregory.mckee@ndsu.edu, and Donald Frederick,
Rural Business-Cooperative Service, USDA

The individually owned business is the oldest and most common form. One person owns, controls and conducts the business. Characteristics of individually owned businesses include:

  • Control. The owner is responsible for management, makes all the major operational decisions and sets the business policies.
  • Capital. The owner supplies the equity and is responsible for all debts.
  • Earnings. Profits belong to the owner.
  • Taxes. Profits are taxed

Traditional Cooperative Businesses

Authors: Greg McKee, North Dakota State University, gregory.mckee@ndsu.edu, and Donald Frederick,
Rural Business-Cooperative Service, USDA

Probably the most widely known and proven of collaborative business organizations are cooperatives. They are usually formed of many entities and are legally constituted, limited liability corporations controlled by their members.

Cooperative members are often in the same industry and have common economic interests that may involve joint marketing, purchasing of supplies and/or the providing of services.

Organizational Characteristics of Cooperatives

  • A separate, legal limited-liability