US agri co-ops set records for income and revenue

US agri co-ops are celebrating record performances for the fourth year in a row with net income up 16.5% for 2014 and revenue rising 0.4% from 2013. Last month – National...

US agri co-ops are celebrating record performances for the fourth year in a row with net income up 16.5% for 2014 and revenue rising 0.4% from 2013.

Last month – National Cooperative Month – agriculture secretary Tom Vilsack announced a report showing that co-ops earned $6.5 billion in net income and generated $246.7bn in total revenue last year.

Employment in farmer, rancher and fishery co-ops increased 0.4% to 191,000 people in 2014, the report from the US Department of Agriculture (USDA) revealed. The number of full-time co-op employees dipped by 0.4%, while the number of part-time employees rose 2%.

The total number of agri co-ops fell from 2,186 in 2013 to 2,106 last year, a drop of nearly 4%. Despite this, co-op memberships grew by 1% to just under two million.

Many farmers and ranchers are members of more than one co-op. In addition to supplies and marketing services, co-ops provide telecommunications, energy and financial services.

Mr Vilsack also previewed USDA’s annual top 100 agri co-op rankings. CHS Inc – a fuel, supply, grain and food co-op based in Inver Grove Heights, Minnesota – is the nation’s largest, notching up $43bn revenue in 2014.

Second is Kansas City-based Dairy Farmers of America, with $18bn in total revenue. Land O’Lakes, headquartered in St Paul, Minnesota, is third with $15bn in revenue.

Fifteen of the top 100 co-ops are headquartered in Iowa. Minnesota is home to 12, followed by Nebraska with nine, Illinois with six and California and Wisconsin with five each. Indiana, Missouri and Ohio each has four top 100 co-ops, while Kansas has three.

For revenue, Minnesota ranks first, with $67.6bn, followed by Missouri ($21.4bn), and Illinois ($14.1bn).

“The nation’s co-ops are essential to the US economy and to rural America,” said Mr Vilsack. “The income they generate is reinvested or returned to members who spend it in their local communities. USDA is proud to continue its support of the co-operative movement.”

On October 14 US agriculture under secretary Lisa Mensah awarded 30 grants totalling $5.8m (£3.8m) to help rural co-ops create jobs and support business expansion. The funds are being provided through the Rural Cooperative Development Grant (RCDG) programme, which helps fund non-profit groups including rural co-operative development centres and higher education institutions.

Development centres can use these funds for feasibility studies, strategic planning, leadership and operations training and business plan development. Recipients are required to contribute matching funds that equal 25% of the total project costs.

Projects in 22 states are receiving RCDG funding. For example, the Latino Economic Development Center (LEDC) in Minneapolis, Minnesota, will receive a $200,000 (£130,000) technical assistance grant to help Latino farmers form co-ops to promote economic development.

LEDC has trained Latino farmers in co-operative organisation and management, including farm incubation equipment sharing, which enables them to move from migrant work to year-round positions, creating pathways for low-wage farmworkers to become farm owners.

Since the Obama administration took power, USDA has funded 230 co-operative grants totalling $44.4m (£30m) in 39 states.

World-renowned cranberry brand Ocean Spray is a US co-operative
World-renowned cranberry brand Ocean Spray is a US co-operative

US National Farmers Union (NFU) President Roger Johnson said co-ops were more important than ever in rural America, given that agriculture was increasingly highly concentrated in terms of both supply and demand.

“For Farmers Unions across this great nation, co-operatives are not only considered an effective business model – their founding principles go right to the heart of who we are as an organisation,” he said.

“Honestly, they’re one of the best tools we have to cope with and fight the continued economic concentration in agriculture.”

Farmers Union’s roots in co-ops go back to the NFU’s foundation in Point, Texas, in 1902. “Our organisation’s founders responded to sundry business practices that not only placed farmers and ranchers at a disadvantage, but actually pitted us against one another,” said Mr Johnson.

Farmers Union members went on to organise co-ops that focused on storage warehouses, supply and marketing, purchasing, rural electricity and credit unions. Today, they have expanded further and, in states like Michigan, have teamed up with schools to provide local, nutritious food for school lunches in the Farm to School programme.

In South Dakota, more than 3,000 young people attend education programmes sponsored by Farmers Unions each year, including district and state camps where they learn about how co-ops benefit local communities. Lake Area Technical Institute, South Dakota State University and other local post-secondary institutions offer classes on the co-operative business model. The NFU Foundation provides co-operative education in all its programmes, and in 2012 published a curriculum on co-ops, “Cooperatives: The Business of Teamwork”.

“Co-operatives to this day remain a vital cornerstone of rural American communities, forming the nexus of the rural economy and putting their money and efforts back into their communities,” said Mr Johnson. “We’re committed to ensure that this smart business and empowerment model continues to help bring increased strength and prosperity to rural America, and we’re delighted that the co-operative spirit is reaching further than ever into new areas and ideas.”

James Graham believes there are similar growth trends between US and European agri co-ops
James Graham believes there are similar growth trends between US and European agri co-ops

James Graham, chief executive of the Scottish Agricultural Organisation Society, believes the success of US agri co-ops resonates on this side of the Atlantic.

He said: “The growth trend among US farm co-ops clearly reflects continuing consolidation in agri-food supply chains, driven by globalisation. The USA stats confirm that co-ops are investing and growing to ensure their members have strong market and value opportunities in a rapidly changing world.

“They’re keeping up with plc competition and have the important advantage of a secure supply base of farm produce, combined with substantial buying power for the farm inputs their members require.”

There are similar trends in Europe, added Mr Graham.

“We’re seeing an equivalent trend of growth among EU farm co-ops, many with global aspirations. Our challenge is to broker mutually beneficial relationships between the mega-co-ops and the smaller local or regional farm co-ops, such as we have in Scotland, which have niche brands and capabilities.

“The feasibility of creating farm co-op partnerships across the globe both to share knowledge and transact business is growing every year.”

Ross Evans, agricultural manager at Co-operatives UK, said the USDA report underlined the increasing importance of agri co-ops at local and global level.

“Growth of this nature, which is fantastic to see, isn’t limited to the US,” he said. “Around half the UK’s farmers – some 155,000 – are members of farmer-controlled businesses.

“The sector has grown by a third since 2010 with an annual turnover of £6.2bn. Innovation within dairy processing, crop marketing and the exportation of fresh produce allows the sector to compete internationally while achieving tangible benefits for their UK farmer members.”

Mr Evans added there was a clear upward trend in both countries is clear, but UK farmer co-ops still faced challenges.

“Some, like the tough markets they trade in, are shared with others, both in the UK and internationally – as we’re seeing in the dairy industry,” he said. Some are specific to co-ops in the UK, such as a national policy framework that has resulted in fewer agricultural co-operatives when compared with other countries.

“Co-operatives UK’s new service for agricultural co-operatives aims to replicate some of the successes we’ve seen in the US and elsewhere. Working hand in hand with agricultural co-operatives, we will champion the role that farmer collaboration plays while helping to unlock barriers that might be impeding the growth of the sector.”

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