History
Cooperative
efforts have occurred throughout history. Since early man cooperated
with others to help kill large animals for survival, people have been cooperating
to achieve objectives that they could not reach if they acted individually.
Cooperation has occurred throughout the world. 
Ancient records show that Babylonians practiced cooperative farming and
that the Chinese developed savings and loan associations similar to those
in use today. In North America, clearing land in preparation for
the planting of crops, threshing bees, and barn raisings all required cooperative
efforts. In the United States, the first formal cooperative business
is assumed to have been established in 1752, almost a quarter-century before
the Declaration of Independence was signed. This cooperative, a mutual
insurance company called the Philadelphia Contributionship for the Insurance
of Houses from Loss by Fire, was organized by Benjamin Franklin and others,
and it is still in operation today (Cobia).
The cooperative
as a modern business structure originated in 19th century Britain.
The Industrial Revolution had a profound effect on the way business was
organized and on the working conditions and economic situations of many
people. In response to the depressed economic conditions brought
forth by industrialization, some people began to form cooperative businesses
to meet their needs. Among them was a group of 28 workers who were
dissatisfied with the merchants in their community. They formed a
consumer cooperative known as the Rochdale Society of Equitable Pioneers
in 1844. They began by opening a cooperative store that sold items
such as flour and sugar to members, and the Society quickly grew to include
other enterprises. The founders also established a unique combination
of written policies that governed the affairs of the cooperative.
Among these rules were: democratic control of members, payment of limited
interest on capital, and net margins distributed to members according to
level of patronage. Based on its success, the Rochdale set of policies
soon became a model for other cooperative endeavors, and became known as
the general principles that make a cooperative unique from other business
structures.
Agricultural Cooperatives
Agricultural cooperatives
are typically classified according to the three major functions they perform:
marketing, supply, and service. Many cooperatives combine all three
types of functions in their operations.
Marketing cooperatives
Marketing cooperatives
help to sell their members' farm products and maximize the return that
they receive for these goods. Their operations can be quite diversified
and complex. Some marketing cooperatives perform a limited number
of functions, while others vertically integrate their operations so that
they perform more functions that add value to their members' products as
they move from the farm to the consumer. Some cooperatives even sell
products in grocery stores under their own brand name; Land O' Lakes and
Ocean Spray are two prominent examples. Marketing cooperatives
can serve their members in many ways, including bargaining for better prices,
storing and selling members' grain, and processing farm products into more
consumer-ready goods. In the United States, agricultural cooperatives
handle about 30 percent of farmers' total farm marketing volume (Mather
et al.).
Supply cooperatives
Supply cooperatives
(sometimes referred to as purchasing cooperatives) sell farm supplies to
their members. Products include production supplies such as seed,
fertilizer, petroleum, chemicals, and farm equipment. American farmers
purchase about 28 percent of their supply needs through cooperatives (Mather
et al.).
Service cooperatives
Service cooperatives
provide various services to their members. For instance, cooperatives
may offer services such as pesticide applications, seed cleaning, and artificial
insemination. Service cooperatives also include organizations such
as the Farm Credit System, a network of borrower-owned lending institutions
that provide credit and other financial services to farmers, and rural
electric cooperatives, which provide electricity to rural areas.
The first formal
farmer cooperative to form in the United States occurred in 1810.
However, agricultural cooperatives were not really perceived as a viable
business organizational structure until after the Civil War (Cobia).
Several farm organizations helped to promote cooperative development.
The Grange, a farmer organization established to improve the economic and
social position of the nation's farm population (National Grange), began
to engage in cooperative marketing and purchasing. In 1875 it adopted
the Rochdale system in carrying out its cooperative activities. Other
farm organizations, including the Farmers Alliance and the Farmers Educational
and Cooperative Union of America (known as the National Farmers Union),
also began to promote cooperative development (Cobia). Farmers not
affiliated with any farm organization also began to establish cooperatives.
By 1900, at least 1,223 cooperatives were active in the United States (Mather
et al.).
By the early 1900s
the United States government began to pass laws that provided a favorable
environment for cooperative development. A commission established
in 1908 by President Roosevelt noted that the country lacked adequate credit
for the agriculture sector, and their findings helped lead to the passing
of the Federal Farm Loan Act in 1916, legislation that led to the creation
of the Farm Credit System. The Capper-Volstead Act of 1922 was crucial
for agricultural marketing cooperatives, as it provided limited antitrust
immunity for farmers and ranchers who join together in cooperative marketing
associations.
Government encouragement
for agricultural cooperatives was highest during the 1920s and 1930s.
Most state legislatures established agricultural cooperative acts during
this time. America's agricultural sector went through a difficult
period as prices collapsed after World War I ended. As part of the
response to the adverse economic conditions, Presidents Harding, Coolidge,
and Hoover all strongly endorsed the use of agricultural cooperatives.
The Agricultural Marketing Act of 1929, which included the establishment
of a fund for cooperative loans, also helped to strengthen the cooperative
movement (Cobia).
According to the
United States Department of Agriculture (USDA), the largest number of agricultural
cooperatives occurred during 1929-30. At that time, the USDA recorded
12,000 farmer cooperatives (Mather et al.). Although the number of
agricultural cooperatives has been decreasing since then, total business
volume has been rising. In its 1997 survey, the USDA reported that
3,791 farmer cooperatives generated a net business volume of $106 billion,
equal to the record high set in the previous year. The net income
was near the record high of $2.36 billion reported in 1995 (Richardson
et al.). The number of farmer cooperatives has decreased through
various activities including dissolution, mergers or consolidations, and
acquisitions as cooperatives, like other businesses, adjust to a changing
economic environment (Mather et al.).
References
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