When 2012 was proclaimed the International Year of Cooperatives by the United Nations General Assembly, many co-op members might not have noticed. But at least one Alabama couple has discovered why co-ops are such a big deal.
“I became a big fan of co-ops,” Andy Whitt of Ardmore, Ala., says of the Alabama Council of Cooperatives’ annual Co-op Couples Conference, which he attended with his wife, Jennifer, in July. “Co-op businesses are owned by the people they serve, and there is strength in numbers. It was eye-opening to see the numerous co-ops on hand, and how each benefits its members.”
The Whitts also experience the benefits firsthand. When they bought rural property in southern Tennessee, where they explore the woods, watch wildlife and hunt together as a family, they financed it through Alabama Farm Credit, a member-owned co-op and a conference sponsor.
“The purchase could not have gone any smoother,” says Andy, a commercial banker with First National Bank. “Alabama Farm Credit does a fantastic job, and I would highly recommend their services.”
At the conference, Andy and Jennifer learned that their lending co-op is part of a nationwide network of member-owned institutions, collectively known as the Farm Credit System. Some 500,000 farmers, ranchers, and rural residents and cooperatives own 86 Farm Credit local lending co-ops and banks that provide $174 billion in loans outstanding to agricultural producers, agribusiness firms and rural residents.
|Number of Rural Co-ops and Credit Unions in Our Region|
|Farm Credit Institutions||3||3||3||2||12|
|This table does not include housing, grocery, mutual insurance, health care and other co-op sectors.|
Sources: University of Wisconsin Center for Cooperatives; Credit Union National Association; National Rural Electric Cooperative Association; National Telecommunications Cooperative Association; Farm Credit Bank of Texas
|Top Co-ops in the Texas Farm Credit District|
|25||Plains Cotton Cooperative Association||TX||$1.8 billion||Ag|
|41||Affiliated Foods Inc.||TX||$1.3 billion||Grocery|
|54||Brazos Electric Power||TX||$1.0 billion||Energy|
|57||Staplcotn Inc.||MS||$946 million||Ag|
|66||Lone Star Milk Producers||TX||$876 million||Ag|
|69||Farm Credit Bank of Texas||TX||$871 million||Finance|
|76||South Mississippi Electric Power||MS||$761 million||Energy|
|84||VHA Inc.||TX||$697 million||Health care|
|88||Associated Grocers Inc.||LA||$685 million||Grocery|
|93||PowerSouth Energy Cooperative||AL||$640 million||Energy|
|99||Pedernales Electric Cooperative Inc.||TX||$588 million||Energy|
|Data as of 2011 gathered by National Cooperative Bank as part of the Co-op Top 100 List.|
The Whitts were among 25 couples who gathered information about all types of member-owned businesses, including these conference sponsors:
- Alabama Farmers Cooperative, one of more than 2,500 farmer-owned co-ops across the U.S.;
- Southern Pine Electric Cooperative, one of almost 900 rural electric co-ops serving 42 million Americans; and
- Farmers Telecommunications Cooperative, one of about 250 American telecom co-ops.
People with similar interests and needs establish co-ops to buy products and services at better prices and terms, or to market their own products and services more effectively. Founded, owned and operated by the people they serve, co-ops typically distribute excess earnings to their member-owners.
Like the Farm Credit System, a number of farmer-owned co-ops in the U.S. are nearing their 100th anniversaries. Marketing and supply co-ops account for about a third of both farm sector revenue and input purchases, according to a 2006 USDA study. Dairy co-ops process about 80 percent of all milk in the nation.
“When farmer-owned co-ops were created decades ago, it made an immediate difference in market prices,” says Brent Hueth, director of the University of Wisconsin Center for Cooperatives. “Farmer-owned co-ops continue to thrive today because they operate with farmers’ interests at their core, since farmer-members serve on their boards of directors.”
Some attending the Alabama conference were surprised to learn that farmer-owned co-ops are behind famous brands such as Blue Diamond almonds, Sunkist oranges, Ocean Spray juices, Sun-Maid raisins and Land O’Lakes butter.
Co-ops serve urban people, too, in industries ranging from credit unions and housing to day care and groceries. And they make a huge impact on the U.S. economy. Almost 30,000 co-ops operate in the United States and generate $500 billion in revenue and $25 billion in payroll annually, according to a 2009 study conducted by Hueth.
“The conference was fantastic,” Andy says. “It was a great learning experience, and we made many new friends.”
To learn about similar co-op events, contact your local Farm Credit association, the Alabama Council of Cooperatives at (334) 821-4261, or the Texas Agricultural Cooperative Council at (512) 450-0655.
Farm Credit Armenia Modeled on the U.S. System
Cooperatives are a major economic force around the world, and a new lending institution in Armenia is using the U.S. Farm Credit System as a model.
“The cooperative model appears to be extremely attractive to potential borrowers once they understand that they have an ownership interest,” says John Penson, a Texas A&M University agricultural economics professor who is advising the new cooperative, Farm Credit Armenia. He has traveled to Armenia six times since 2010 as an expert advisor with USDA’s Foreign Agricultural Service, and he says he was impressed with shareholders’ energy and interest when he attended the co-op’s most recent annual meeting.
In 2010, Farm Credit Armenia representatives visited Farm Credit Bank of Texas and other U.S. Farm Credit institutions to learn how the cooperative business model can be applied to agricultural financing.
America’s cooperatively owned Farm Credit System was established by Congress in 1916 to be a reliable source of credit to farmers and ranchers. Today, the System provides more than one-third of the credit needed by those who live and work in rural America. But until recently, producers in Armenia and other countries haven’t been so fortunate.
USDA’s Foreign Agricultural Service provided a start-up grant and other financial assistance to the Armenian credit cooperative, which also received substantial funding in 2011 from World Bank. Farm Credit Armenia now has 2,500 loans outstanding totaling $11 million. Owners expect assets to grow by 50 percent this year, and hope to achieve self-sufficiency by 2015.
The new co-op has boosted credit availability in Armenia, where farmers pay interest rates that are more than double the rates U.S. producers pay, Penson says. The former Soviet republic is bordered by Turkey, Iraq, Georgia and Azerbaijan, and tillable farmland is limited by the mountainous terrain. Major crops include fruits and vegetables, especially potatoes.
Brent Hueth, of the University of Wisconsin Center for Cooperatives, calls the U.S. Farm Credit System one of the world’s success stories and a model that developing nations can follow.
“The U.S. Farm Credit System addressed a market failure — there was no credit available for farmers. And it literally took an act of Congress to create it,” he says. “Fast-forward almost 100 years, and there is no doubt that the Farm Credit System continues to fulfill an important access and pro-competitive function.”
Interest in cooperatives of all types is growing, and organizations such as World Bank and the Food and Agriculture Organization of the United Nations look to co-ops to provide a way to exit poverty.
Perhaps the U.N. says it best with the theme for this year, the International Year of Cooperatives: “Cooperative enterprises build a better world.”
– Nancy Jorgenson
Champion for Cooperatives
Louisiana farmer and director knows co-ops make the world of difference on a local level.
On a September afternoon this fall, while cotton pickers were working full tilt on George LaCour Jr.’s farm northwest of Baton Rouge, La., he was representing the 7,300 members of Pointe Coupee Electric Membership Corporation at the co-op’s quarterly board meeting.
Some farmers might be tempted to play hooky from board meetings during harvest season. Not LaCour. As a director of five rural cooperatives and a committee member of a sixth, he believes it is important to contribute to the co-ops’ success, because they contribute to his.
Profit for Members
“We’re about profit for the member, not for the co-op,” says LaCour of Morganza, La., who belongs to seven cooperatives — eight, if you include Tri-Parish Gin, a limited liability corporation that operates like a co-op. “Co-ops are created out of need, not greed. The reason a co-op succeeds is that the people behind it believe in it and need it.”
LaCour points out how the co-ops he does business with serve needs that other companies don’t.
“When markets were down and nobody else would take grain, our little co-op elevator would take it, because it was in the best interest of our members,” he says. The electric co-op “is about getting power back on for our members as quickly as possible,” he explains, and the local farm supply co-op stocks items that most stores don’t and even opens early when necessary. As for the sugar marketing co-op, “there was a need for a sugar refinery, so members in Louisiana got together with Cargill and built a $200 million refinery.”
“Can’t” Isn’t an Option
Tri-Parish Gin in Lettworth, La., also was built out of necessity. In 1991, when LaCour was in his twenties, he and another farmer spearheaded the construction effort to encourage cotton production in this area along the Mississippi River, which had been decimated by the boll weevil 20 years earlier.
“You don’t tell George ‘can’t.’ It’s not in his vocabulary,” says Tri-Parish Gin Manager Peggy Grezaffi. One of the gin’s 12 founding members, LaCour is currently its vice president, as well as 2012 president of the Southern Cotton Ginners Association. In addition to cotton, he grows sugarcane, soybeans, wheat and corn.
“Co-ops don’t make special deals; we just give everybody the best deal.” – George LaCour Jr.
“He’s been a big asset to the agricultural industry here,” Grezaffi adds. “He really cares about other farmers in the community. He just wants to see everyone do well.”
For his financing needs, LaCour, a fifth-generation farmer, depends on another co-op. He turned to Farm Credit for his first operating loan at age 22. Later, when he and his sister, Gertrude Hawkins, purchased land in partnership, they financed it with Louisiana Land Bank, and still do.
“There was a time when nobody wanted to loan money on land; now everybody does. I want to be with the guy who’s going to stay with me. And that’s the Land Bank,” LaCour says. Today, Hawkins is a member of the Louisiana Land Bankboard, and LaCour serves on a committee for his first Farm Credit lender.
In his opinion, cooperatives reflect the spirit of rural communities, in which neighbors rely on neighbors in times of need. He also points out that members benefit from the way co-ops support each other. “The only reason Staplcotn exists is because of CoBank (Farm Credit’s funding bank for cooperatives),” says LaCour, who is a director of the cotton marketing co-op.
Members Are Equal Owners
LaCour believes cooperatives are most effective when members realize they are equal owners and have the right to have a say in the business.
“When people in the electric co-op call me and say, ‘You need to do something about a problem,’ I tell them, ‘You need to do something about it.’ There’s no y’all in the co-op world; it’s we,” he says. “I’m no better than any other member. I was just chosen to represent them.”
As a director, he is proud that co-ops treat everybody the same. “My sister and I have a rather large farm, but we’re treated the same as all the other members,” he says. “Co-ops don’t make special deals; we just give everybody the best deal.”