Economic and Marketing Information
FOR INDIANA  FARMERS
Prepared by the Agricultural Staff of Purdue University, Lafayette, Indiana  
November 30, 1966
What is the State of COOPERATIVES?
by R. L. Kohls, Agricultural Economics
What is the state of the cooperative movement in the
United States today? Does it show vigor and growth? Does
it show the will and the means to play a major role in the
nation's  food  business  in  the  year ahead?
A recent study by the Fanner's Cooperative Service of
cooperative business in the years since WWII concluded
that cooperatives were doing about the same portion of
the total agricultural purchasing and marketing volume as
was done after the war. However, just keeping pace
during these dynamic years does not indicate a highly
enthusiastic, pace-setting, innovational situation.
Continuous announcements of cooperative mergers is a
belated recognition that the new agribusiness competition
is one of giant business concerns serving regional and
national markets. It is also a recognition that small, local
businesses and co-ops can serve only small, limited
purposes.
If cooperatives are to become an innovating and controlling force in tomorrow's agriculture, their leaders must
again be willing to throw open the windows to fresh
thought and ideas. They must seek answers to the difficult
questions concerning the viability of the present forms and
concepts which were evolved to serve the world of 40 and
100 years ago.
Areas of Cooperative Success
Cooperatives have had their greatest success in four
major  areas:
1. Where they have had direct mandate and help from
government such as credit, electricity and other specialized
areas in which Congress has placed the financial and
institutional aid of the government behind the cooperative
movement.
2. In the purchase of farm supplies they have had
considerable success. Particularly where they have become
highly involved in the manufacturing processes such as
feed,  fertilizer and  petroleum.
3. In the first steps of marketing—that of livestock buying agencies, grain elevators, cotton gins, fruit packing and
others.
4. As bargaining organizations in very limited roles
where legal aid of either state or local government has
given them a very special status and power under some
sort of marketing order structure. Dairy cooperatives under
federal marketing orders and fruit and vegetable bargaining
cooperatives under special state orders are the major
examples.
It is very important to note that the success areas have
dealt with situations in which there has been very little
necessary coordinating relationship with the farmer and his
production  activities.   Certainly  in  our manufacture  and
* This article was taken from a speech given by Dr. Kohls at the
Hoosier Cooperative Clinic in February, 1966.
sale of inputs such as fertilizer and feed, we treat the
farmer as an independent customer to be wooed for his
business. And most of the time in the elementary marketing activities, the fanner's production is taken as given
to be worked with in the best way possible. The other
areas in which cooperatives have been very successful are
those in which they have had the added force and power
of government recognition and government help.
Challenge of the Future
Greatest problem areas of the future include the decentralization of our markets and their ability to effectively
and equitably price the products of the farms and close
coordination of farm production with food manufacturing
and distribution. Certainly, farm production and marketing have very definite mutual interests. Coordination
among these interdependent agencies will be achieved
somehow or other. And, since food manufacturing and
distribution establishments have gotten larger and larger,
the age-old question of whether small farmers dealing in
an atmosphere of big businesses can get equitable treatment has  taken on  new meaning.
All of this indicates that the greatest challenge for serving farmers is in the areas of food manufacturing and
distribution. It is important to acknowledge that these are
considered major areas of challenge not because the firms
in these areas are operationally inefficient units or even
because profits are abnormally large, but because activities
by these firms play key roles in determining what kind
of farming will be done and controlled and how the
returns will be allocated among the parts of the marketing
and production process. It is not technological inefficiency
which pulls farmers toward participation in marketing and
distribution. It is the fact that in these areas is the major
hand on the control switch which vitally affects the future
of tomorrow's farmers and their operation.
If marketing is the greatest challenge, we must admit,
unfortunately, that it is also the area of least successful
penetration by cooperatives.
Major Cooperative Problems
There are three key needs of cooperatives who are to
make an effective entry into this giant scale area of marketing and distribution. 1. Ways must be devised to control
and police the behavior of farmer members. 2. Methods of
tapping sources of adequate capital must be discovered.
3. A system to encourage the development of competent
and effective management must be evolved.
The Control Problem—Traditional principles of cooperation have held that entry should be free into a cooperative and members should be free to exit when they please.
They have held that each member should share at equal
rates in whatever patronage refunds are made. These
operating rules inhibit the development of closely controlled and disciplined membership.