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BA Deere
Honored Advisor

Re: Degeneration Of A Cooperative

i do business with 3 coops 1 with about 15 sites, 1 with about 80 sites and one with 3 sites.  I would have to say the best grain bids are at the smallest coop.  all 3 are great coops, but the secret of the smaller one`s success is they partnered up with a feed mill which helps their basis, they have the main feed site around the closest other coops just sort of gave up on feed and let them into their territory.  Same way with fuel, the smaller coop goes deep into the other`s territory..but the one with 80 sites, you`d probably have fuel coming 80 miles away and that just wouldn`t be competitive so they let the smaller coop have it.  The smaller coop has the cheapest fuel in town 6¢ off with their card deal and many non-farmers use it.

 

The elevator with 80 sites sells seed and they combine all the little guy`s orders and give them the maximum "Bigshot discount" they are so big you don`t have to have your order in until January, where as going to a local-yokel farmer dealer there is no way he could come close...and it`s DeKalb and Pararie Brand and Latham and all the good brands and they give out caps and coats and all the shiney trinkets that makes you part with your money.

 

But the small coop gives fuel profits to local charities and donates to all the local events and every month in the winter have a marketing meeting or agronomy and you get a steak and door prizes, that really helps when they`re community minded like that.

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ncwinn54
Frequent Contributor

Re: Degeneration Of A Cooperative

Jim, I have read the thread, but it all pretty much comes back to the bank not supporting this coop anymore, doesn't it?  

 

We see the end of all sorts of ag infrastructure in our region... Livestock auction points, peanut buying stations, tobacco warehouses...all pretty much gone the way of contract AG. 

 

There are some cattle, sheep, goat sales...but, that will be a matter of time, I think.  There were dozens of small hog packers in our region in our earlier years...not anymore.  

 

Niche ag aside, what's a farmer to do? 

 

I think it is all the same movement.  Everything ends up too big to fail, eventually. 

 

How many small anythings survive anymore?  It becomes a mega-church or an empty shrine.  Where's a neighborhood school?  Any small car dealers near you now?  

 

Our little farm supply in VA  used to be a Big Deal...now dangles by a thread, as Tractor Supply sets up around the corner.  The much bigger farm supply in NC sold out to Meherrin years ago.  

 

You tell me where it all ends. 

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hardnox
Advisor

Re: What's In It For Big COOP?

Jim,

 

Co-Bank, as the primary lender for most Co-ops, tends to be a big driver in those things.

 

They make a problem account go away by merging it into another client that has a strong enough balance sheet to absorb it.

 

And managers are generally rewarded by playing the game that protects "the system."

 

And boards typically, but not always, go along.

 

They usually end up closing some un or less profitable branches which would have been harder to do with a local board and it has a way of working out- even if working out means that big fish has to be fed to an even larger one.

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hardnox
Advisor

Re: Degeneration Of A Cooperative

Jim,

 

http://in.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19920515_0000025.SIN.htm/qx

 

FWIW, this is the case where the Indiana Supreme Court effectively ruled that "the system" supersedes the rights of the local coops and members, regardless what legalese is used to rationalize it.

 

It is only legally valid in Indiana but given a lack of other major co-op precedents is cited as supporting opinion in other states.

 

 

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hardnox
Advisor

Re: Degeneration Of A Cooperative

What happened next, and you can't make this stuff up, is that under the expert supervision of a Farmer/Owner Board of Directors the merged, tri-state entity proceeded to hire a hot shot from ADM to turn it around.

 

Said hotshot then proceeded to embezzle several $million from them (although I'm told he gave the board an excellent slide presentation on his climb of Mt. Everest).

 

Then it got "merged" into LoL/Cenex.

 

http://articles.latimes.com/2005/dec/25/news/adna-prison25

 

Swnason did mamage to go on the lam for quite some time but they finally tracked him down. His lawyers are still working but so far denied early release.

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Jim Meade / Iowa City
Senior Advisor

Re: Degeneration Of A Cooperative

Consumer's Cooperative of Iowa City voted to accept a merger with Heartland Coop effective 1 August.  80% of the members voted, and the vote was about 2:1 in favor.

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sw363535
Honored Advisor

Re: Degeneration Of A Cooperative

Doesn't this saga go on untill they are all combined into something called "Farmland Industries"..... or something like that

 

Then the whole thing gets real funny...

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bruce MN
Advisor

Re: Degeneration Of A Cooperative

You have no idea how funny/ironic that is right there.

 

 

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sw363535
Honored Advisor

Re: Degeneration Of A Cooperative

Didn't mean it to be a hurtful "ironic" but only to point out how short our memories become.

 

It seems to me that coops are like farmers who look at the neighbors corn and think the "other" guy always has better yields.

 

Like,,,,, the other coop is making a lot of money and can help turn us around.  

 

Actually I think coops are all about "not loosing money" rather than being profitable.  There is no room for risky mistakes.

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OKdon
Senior Contributor

Re: In the first place

Every co-operative should enact a mission statement to clarify what their objectives are. Of course, profits are an important factor as well as providing a good matket for their members both on inputs and commodities.

 

Some time i think board members forget what the mission statement is. Mostly to return dollars to their stockholders. I think owners deserve a profit share if anyone does. But that objective seems to be lost to most members and directors.

 

Most directors want to invest saings in new equipment and I agree with that. But first they ought to have a vote from their members and interest paid on the deferred savings. No bank will loan them money scott free but yet they expect their members to do so.

 

JUst how productive is a coop that has 5 million or more dollars borrowed from members free gratis\?  I think those businesses ought to be run like a real business. Like you and I have to do. Raise the money to finance your business or turn it over to somevbody that can.

 

So nthey next time you hear bragging about how much profit they made, ask them how many dollrs they got borroed interest free from their members.

 

Perhaps now you understand why I don't belong as a director in a coop.

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