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UNDERSTANDING COOPERATIVES
UNIT 3 - The Structure of Cooperatives
Slides for Unit 3
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Cooperative Structure Types
• Financial• Geographic area served• Governance or control• Functions performed• Other arrangements
S 3.1
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Financial Structures
Cooperatives are incorporated as stock or nonstock organizations.
Stock Cooperatives• Issue one share of common stock (voting) as
evidence of ownership interest.
S 3.2
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Financial Structures
Cooperatives are incorporated as stock or nonstock organizations.
Nonstock Cooperatives• Issue membership certificates as written proof of a
right to vote. Many stock and nonstock cooperatives also raise member capital by retaining earnings.
S 3.3
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Structures by Geographic Territory Served
Local Cooperatives• Operate in relatively small geographic area,
typically in a radius of 10 to 30 miles.
Super Locals• Operate in two or more counties with several branch
facilities.
Regional Cooperatives• Large mixed, federated, and centralized
cooperatives often serving multi-state areas.
S 3.4
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Structures by Geographic Territory Served
Interregional or National Cooperatives• Cover two or more regions, which may serve a
major portion of the U.S.
International Cooperatives• Operating on an international basis with
headquarters in the U.S. or other countries.
S 3.5
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Centralized Structure
Cooperative
Member MemberMember
Individuals are members of a cooperative.S 3.6
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Federated Structure
Cooperative
LocalCooperative
MemberMember
LocalCooperative
Member Member
Individuals are members of local cooperatives which are members of the federated cooperative.
RBS, USDA S 3.7
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Mixed Structure
Cooperative
MemberMember
LocalCooperative
MemberMember
Member
Both cooperatives and individuals are membersS 3.8
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Cooperative Functions
Three Core Functions• Marketing - extend control of
members’ products through processing, distribution, and sale
• Purchasing - providing affordable supplies and goods
• Service - provide needed services
S 3.9
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Marketing Cooperatives
Assist members in maximizing returns from goods they produce
• Handle, process, assemble, and sell• Grade, transport, bargain• Add value (new generation cooperative)• Research-new product development
S 3.10
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Purchasing (Supply) Cooperatives
Allow members to gain access to affordable production supplies and goods
• Purchase in bulk to reduce costs and increase purchasing power
• Provide direct ownership of refineries, plants, retail facilities, distribution chains, research facilities
S 3.11
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Rural Service Cooperatives
Provide needed services• Meet many needs• Custom application of purchased supplies,
transport of product, etc.• Provide utilities, credit, insurance, housing,
health care, technology, etc.• Other selected services
S 3.12
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Other Structural Arrangements
Subsidiary• A corporation organized, owned, and controlled
either totally, or partially by a parent cooperative
Marketing Agency in Common• Organized by two or more marketing cooperatives
to market products or provide services for member cooperatives
S 3.13
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Other Structural Arrangements (continued)
Joint Venture• Association of two or more participants, persons,
partnerships, corporations, or cooperatives to carry out a specific economic operation, enterprise, or venture
Holding Company• A corporate entity with a controlling ownership in
one or more operating companies
S 3.14
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Other Structural Arrangements (continued)
Contract Agent
• A county or community cooperative may organize, owning nothing but contracts, and an agent to handle the goods and keep patronage records turned over by the agent.
Private Dealers
• As a franchise, the dealer keeps records. If the franchise makes money, patronage refunds are paid to the dealer’s customers. The dealer is paid a commission on sales.
S 3.15
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New Generation Cooperative
A new generation cooperative is a type of marketing cooperative that adds value (e.g., processing) to an agricultural raw product with the purpose of marketing that finished product in order to increase benefits to a finite (closed) membership.
Membership shares can appreciate/depreciate and can be traded. Members shares are closely associated with contracted delivery rights.
S 3.16