Just as any other business, cooperatives continue to adjust, merge, expand and compete in the marketplace. They are affected by local buying habits and global economics. Many Farmers Union cooperatives in North Dakota have been in business for 80-plus years. This proven business model has stood the test of time. In our state, cooperatives directly employ more than 10,000 people and generate more than $6 billion in total economic activity annually. In numerous communities, cooperatives remain committed to serving their communities long after other nationwide chains have left town.
Cooperatives do not equate success to gross profits alone. The primary measure of success is the co-op's ability to meet the needs of its members. Cooperatives are owned, operated and controlled by local members, so the board makes decisions to accommodate the best interests of the members. Local directors have a personal investment in assuring the cooperative is meeting the needs of the community.
Yes, just as any other business, cooperatives may apply for any programs, providing they meet the criteria for each specific program. Rural electric and telephone cooperatives have access to low-cost loans from the federal government, due to the low-density areas they serve. The cooperatives must pay back the loan with interest.
Cooperatives are a form of a corporation. A cooperative is a style of business operation that may complement or compete with investor-owned businesses which place higher emphasis on returning profits to stockholders. Cooperatives are managed much the same as any other businesses, in that they establish contracts, buy or sell in the marketplace, own property and assets, and adjust to the changing business climate.
Far from it. Cooperatives adhere to a unique business structure that gives people equal economic opportunity. They are created by individuals who want more self-control to meet their economic and social goals through a democratically controlled enterprise. Cooperatives embrace business values that comprise equal treatment of each member, openness, and community responsibility. In an era of corporate scandals, cooperatives follow a code of business ethics that puts people ahead of profits.
Due to the very nature of cooperatives, cooperatives will continue to serve members long after national chains have chosen to leave town. Cooperatives are dedicated to their hometown communities, not to out-of-state investors. In many situations, locally-owned cooperatives were formed precisely to provide competition to a business that dominated its market at the expense of local customers. Another point for consideration is this: locally-owned cooperatives in rural communities are usually in competition with neighboring cooperatives. More recently, some cooperatives have chosen to merge to lower overhead costs as a way to maintain viable business operations in shrinking rural communities.
Some cooperatives do require a membership fee. Other cooperatives base membership on the stock that accrues in each individual's account. An individual's ownership in the co-op is paid for from each member's share of the earnings. This ownership is held by the co-op to use as working capital until it is retired, or paid out in cash to the members, according to each co-op's business policies.
A mutual insurance company is owned by the policyholders, much as a cooperative is owned by the customers. Although the terms differ, such as policyholder instead of member, Farmers Union Mutual Insurance is owned by its "members" who are eligible to run for the board of directors and are encouraged to participate in the annual meeting. Rather than returning "profits" to members, a mutual insurance company uses its financial earnings to reduce rates for the benefit of all. However in 2002, the Farmers Union Mutual Insurance Company in North Dakota returned more than $1 million in dividends to policyholders.
When Farmers Union cooperatives first opened their doors, the members saw it as imperative that North Dakota Farmers Union would design and deliver educational programs on the cooperative way of doing business. The founders of these cooperatives also recognized the value of having a general farm organization monitor legislative activity that may impact the cooperatives and cooperative members. The bylaws of these cooperatives state that the membership dues to North Dakota Farmers Union be provided from the earnings accrued by members. This time-tested arrangement enables North Dakota Farmers Union to maintain its partnership with cooperatives.
In most cases, Farmers Union members originally organized and established local cooperatives in North Dakota. These member-owned cooperatives were structured to automatically, on an annual basis, assure their members were also members of North Dakota Farmers Union. Additionally, these cooperatives would, as earnings allowed, provide educational funds to North Dakota Farmers Union. These funds allow the farm organization to provide education to the public on the value of cooperatives. To this day, North Dakota Farmers Union is an equally committed partner, working for the success of cooperatives, our common members and communities.
North Dakota Farmers Union does not have a financial investment in locally-owned cooperatives across the state. North Dakota Farmers Union is a member of local cooperatives that the organization patronizes, much the same as an individual. North Dakota Farmers Union has directly invested in several value-added or "new generation" cooperatives but, for the most part, it is the members of the organization that have ownership in local cooperatives.
North Dakota Farmers Union is not a cooperative, although it is similar in operation. North Dakota Farmers Union is a grassroots organization whose main areas of focus are cooperation, legislation and education. NDFU advocates for farmers, ranchers and rural communities.
North Dakota Farmers Union is a general farm organization: Farmers Union oil and elevator companies are locally-owned business operations. The farm organization and cooperatives share a common heritage. The same people who were instrumental in organizing North Dakota Farmers Union also worked together to establish locally-owned cooperatives. Today, members of Farmers Union oil and elevator cooperatives are most likely members of North Dakota Farmers Union.
No, some cooperatives are actually owned by other cooperatives. For example, locally-owned Farmers Union cooperatives have ownership in a regional cooperative that provides services and products to local co-ops. In these instances local cooperatives (and not individual members) have a vote in the regional cooperative.
Yes. However, it depends on the type of cooperative and its bylaws. Cooperatives have different criteria to define a voting member. Most agricultural marketing and farm supply cooperatives are producer-owned and as such have bylaws that define a voting member as an agricultural producer.
Yes, various types of cooperatives may have different membership requirements. Some cooperative bylaws set a minimum on the level of business one must do to be able to vote.
Even if you personally do not receive a dividend, the cooperative's earnings and profits still stay in the community. Cooperatives generate tremendous economic activity locally and statewide. When business is done with a corporate entity whose owners may be a handful of stockholders, profits from your purchases leave your community.
In order to qualify for a dividend check you must first open an account with the cooperative so purchases may be accounted for. Otherwise, earnings from those sales are categorized as unallocated earnings. Providing the cooperative's year-end earnings are profitable, the co-op will disburse a percentage of earnings to members in the form of patronage refunds based on each individual's account information.
North Dakota cooperatives are locally owned by the members (also known as patrons or customers). Rather than pulling profits out of a community, cooperatives return those profits in the form of patronage refunds to members, based on each member's share of the annual business volume.
Cooperatives pay property taxes and income taxes, and collect sales taxes just as other businesses do. In addition, the cooperative pays income tax on earnings from income derived by non-members and on the earnings retained by the company. Profits returned to members are subject to each individual's income tax liability.
No. In order to continue serving members effectively and efficiently, cooperatives need to generate a profit. These earnings are used to cover the cost of doing business, from paying salaries and buying inventory to upgrading equipment and paying off debt. Cooperatives may retain some earning to provide working capital, while returning the balance of earnings to members. Cooperatives will consider which services and/or products are provided, based on the actual value to members rather than the gross profit margin for the co-op.
There are many different kinds of cooperatives, including marketing, supply, financial, housing, and service. Each is designed to best address the needs of its members. Most cooperatives focus on supply, marketing, or service business models. Supply cooperatives allow members to lower the costs of the products they buy. Farmers Union oil companies are supply cooperatives that allow the members who own the co-op to buy fertilizer and fuel in bulk prices and return the savings to the members. Marketing co-ops, such as Farmers Union grain elevators, allow farmers to pool their crops to obtain higher prices for their grain or other commodities, and to benefit from lower handling and shipping costs. Service co-ops are especially designed to deliver specific resources or utilities to members who share common concerns and needs. Electric and telephone cooperatives are the more common types of service cooperatives.
People set up cooperatives for many good reasons. Usually, a cooperative is formed to allow people with common interests to buy in bulk and share the savings, obtain needed services, and sell products together to obtain better marketing opportunities, while keeping business costs in check. The customers, or patrons, of a cooperative are also the members who own it. In North Dakota, Farmers Union oil and elevator cooperatives were formed by farmers and ranchers. The "oil" cooperatives allowed members to buy fertilizer, fuel and other products in bulk at lower prices. The "elevator" cooperatives provided farmers with more control over selling their grain at better prices, while also maintaining manageable business expenses. Electric and telephone cooperatives were formed to deliver essential services to farms, ranches, and rural communities. (At that time, for-profit companies would not invest in serving these areas, citing high initial costs and thin profit margins.) Today, cooperatives across North Dakota are investing in equipment to assure the best services and products possible for their members. And, the cooperative business structure encourages members to have a voice in the co-op's operations. Co-op members are able to vote on issues presented at the annual meeting, and members are able to run for the co-op's board of directors. Also, a cooperative's earnings are returned to the members in the form of patronage refunds, stock retirements, and/or lower prices for services and products.
