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Manufacturing

What is an Agricultural Cooperative?

By Ken Black
Updated May 17, 2024
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In general terms, a cooperative is a group of individuals who have come together to pool resources for a specific purpose. An agricultural cooperative, or farmers' co-op, does what all other cooperatives do, but it does so in a way that is specific to farmers. This may include pooling resources to buy seed, sell grain, store grain, or even help with marketing efforts. Often, an agricultural cooperative is involved in all of these matters.

To understand the usefulness of an agricultural cooperative, consider grain elevators. These are often used for storing or drying grain, but most small farmers do not have the resources or time to purchase and build one of these structures on their own. Therefore, they belong to an agricultural cooperative. The money they put in with their membership, which is used to build an elevator and store the grain for all the members.

When it comes time to buy seed, farmers may also use a local agricultural cooperative. In this case, the cooperative serves as a discount retailer. It buys seed in bulk, and then sells that seed to farmers as needed. The cooperative is a non-profit organization, and therefore does not need to charge any more than what the seed costs, along with a small up charge for administrative duties and facility upkeep.

When it comes time to sell the product the seed produces, agricultural cooperatives can also be a big benefit. The site may serve as the central location for farmers delivering their grains and beans. Once at the agricultural cooperative's location, the organization will then distribute the grain and beans based on contracts that have already been bought on the commodities market. Distribution may be done by truck, rail, or barge, depending on the location.

While these essential farming services are important, agricultural cooperatives often do even more for the membership. For example, some cooperatives offer gasoline and diesel fuel where farmers can go to not only fill up their farm machinery, but also their personal vehicles. Due to the fact that the cooperative is a non-profit organization, it may at times offer better deals than farmers could find at a traditional gas station.

Marketing may be done by an agricultural cooperative as well. Members are allowed to sell through a cooperatively owned brand name, and thus gain greater product recognition. While most such efforts are local, on occasion, such efforts are so successful that they result in product brands that receive national recognition, and which many consumers mistakenly assume are owned by major corporations.

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Discussion Comments

By anon332282 — On Apr 28, 2013

Is there any difference between a common initiative group and a cooperative?

By jcraig — On Jun 07, 2012

I was aware of the local co-ops where people can get vegetables and other things that have been grown in the area, but I didn't realize that these co-ops also included more industrial farms that grow things like silage.

In the town I grew up in, there was a lot of farming, and there was a company that had a bunch of grain elevators. I don't know if they were a cooperative or just a regular grain business, though.

From the article, it sounds like these co-ops usually have a person that is in charge of managing them. How is that person chosen? I could see there being a lot of debate between the different members, especially if someone had a relative that they thought should be put in that position. Also, you would have the problem of people having different sized farms. How is that dealt with. Do the farmers get different money allocations depending on the size of their farm and their crops?

By Izzy78 — On Jun 06, 2012

@JimmyT - That is an interesting point about the other countries. In America, farming is like a lot of other businesses where the general mindset is that the farm and equipment has to belong to one person rather than a whole group of people. I think it is good that co-ops are becoming more popular, because I think it benefits a lot of people.

One thing that I don't think was covered in the article is how non-farmers can enter into a co-op to receive fruits and vegetables from the member farmers. My city just recently started a co-op with some local farmers. I don't remember what the cost was per year, but we get regular supplies of different vegetables every two weeks.

Besides knowing that your food was locally grown, we get a wide selection of things that you don't always find at the store. One week in the fall, we got pawpaws, which are a local fruit that tastes like a banana.

By JimmyT — On Jun 06, 2012

@Emilski - Actually, I think agricultural co-ops are relatively new in the United States compared to some European countries. I know that England has a lot of local co-ops where farmers get together to sell their crops. In England, farming is more often one person just owning a few acres here and there. There aren't massive commercial farms growing thousands of acres of corn. If it weren't for some type of cooperation between the farmers, they wouldn't be able to get by.

I know there are similar systems in other countries, but I am not very familiar with their agricultural practices. Considering that a lot of Asian countries are much poorer than the US, I would be willing to assume that they have some sort of system in place that resembles a co-op. At least from what I have read, a lot of Asian farming communities look at farming as more of a group effort that benefits everyone rather than one person or family owning a farm.

By Emilski — On Jun 05, 2012

Interesting. I have heard of ag co-ops before, but didn't realize that there was so much sharing that went on behind the scenes. I thought it was mostly just farmers who got together to sell their crops.

Out of curiosity, are these types of co-ops a thing that is only done in the United States, or are there cooperatives in other countries, as well? Do they function in a similar manner, or do different countries operate differently?

The other thing I am wondering is who exactly organizes a cooperative between farmers? Is it typically one person who sees an opportunity and they approach local farmers to become involved in the practice, or is it usually the farmers who get together and decide that they could cut down their costs if they banded together with a co-op?

By lluviaporos — On Jun 05, 2012

I always try to buy from my local agricultural cooperative if I can. It's the way the family farmers will survive in modern times, when it's so difficult to get along with the massive farming companies.

It's also a way to encourage diversity. You might get people growing all kinds of things in a cooperative, while the equivalent in a big company is only growing one item.

Unfortunately, they can be quite difficult to organize, as you have to get lots of different people to agree and since they are non-profit there need to be a lot of volunteers to run the show.

But, the result is worth it. I hope these become a more and more important part of agricultural economics because they just make sense.

By browncoat — On Jun 04, 2012

@croydon - Well, that sounds like a good idea on paper, but you'd have to have some really nice neighbors in order for it to work, at least without a contract of some kind.

That's why agricultural cooperatives are formalized, so that there won't be bad feelings which can lead to costly litigation. And that can happen, even with a tractor. If you all need it on the same sunny day for harvesting, for example, who gets to have it? What about if it gets damaged on your property, do you have to pay for that yourself? What if it gets stolen? Where will it be stored?

It's definitely possible to do this on equal footing, don't get me wrong. But, I would personally feel better about a deal like this if all the different problems were worked out in advance, rather than waiting until they become big problems.

By croydon — On Jun 03, 2012

Even if all you have is a small farm, maybe growing produce for a vegetable stand or even just keeping a few cattle for your own use, it might be worth looking into some kind of co-operative with your neighbors. It doesn't need to be formalized, but a common kind of cooperative is simply purchasing a tractor for everyone to use.

Tractors, even second hand, are prohibitively expensive for the average smallholder. And they might not be needed all that often. But when they are needed, they make the work so much easier and faster.

Pitching in with the neighbors to buy one can be a better solution than renting one every time you need it. It will be right at hand every time you want to use it, without having to bear all the costs of buying and keeping it by yourself.

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