Evolution of Agricultural Cooperative Organization

Structure in US

MICHAEL L. COOK

UNIVERSIT Y OF MISSOURI

USA

GRADUATE INSTITUTE OF COOPERATIVE LEADERSHIP

VALENCIA , SPAIN 2017

1860s – 1920: Rochdale (12)

1920 – 1987: Hard Core (3)

1987 – Present: User (3)

Evolution of Cooperative Principles in the US

User Own

User Control

User Benefit

Cooperative User Principles

•Marketing*

•Supply

•Multipurpose*

•Services

Generic Types of Agricultural Cooperatives in the US

$250 billion≈

Financial Services

Insurance

Utilities

Does Not Include:

Sapiro

Bargaining - Marketing

Nourse

Multipurpose

Founding Fathers

Centralized

Federated

Hybrids

Organization Form

Agricultural Cooperatives incorporated by states

110 state incorporation laws

Legal Structure

Ownership Rights

T

T

X

Umbrella

Bankruptcy

Convert

Equity Outside

Equity Inside

New Generation

Member Investor

Traditional

Liquidate

Patrons & Investors

Hybrid

R

R

R

R

X

Sp

C

O

C

O

C

O

C

O

C

O

Tinker

Spawn Exit

Reinvent

T

T

T

T

T

OR

Evolution of US Agricultural Cooperatives:First Decision

Ownership

Rights

Ownership

Rights

Evolution of Ownership Rights

Ownership

Rights

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Cooperative

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Cooperative

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Cooperative

Traditional Cooperatives

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Cooperative

Traditional Cooperatives

Traditional Cooperatives with

Vertical Investment

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Investment Cooperative

Traditional Cooperatives

Traditional Cooperatives with

Vertical InvestmentOwnership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Investment Cooperative

Traditional Cooperatives

Traditional Cooperatives

with Vertical Investment

Proportional Investment Cooperatives with

Vertical Investment

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Investment Cooperative

Traditional Cooperatives

Traditional Cooperatives with

Vertical Investment

Proportional Investment Cooperatives with

Vertical InvestmentBenefits to Investors Member-Investor Cooperatives

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Investment Cooperative

Traditional Cooperatives

Traditional Cooperatives

with Vertical Investment

Proportional Investment Cooperatives with

Vertical InvestmentBenefits to Investors Member-Investor Cooperatives

Member-Investor Cooperatives with Vertical Investment

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Investment Cooperative

Traditional Cooperatives

Traditional Cooperatives

with Vertical Investment

Proportional Investment Cooperatives with

Vertical InvestmentBenefits to Investors Member-Investor Cooperatives

Member-Investor Cooperatives with Vertical Investment

Non-Redeemable and

TransferableNew Generation Cooperatives

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Investment Cooperative

Traditional Cooperatives

Traditional Cooperatives

with Vertical Investment

Proportional Investment Cooperatives with

Vertical InvestmentBenefits to Investors Member-Investor Cooperatives

Member-Investor Cooperatives with Vertical Investment

Non-Redeemable and

TransferableNew Generation Cooperatives

Traditional Cooperatives

Transitioning to New Generation

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Investment Cooperative

Traditional Cooperatives

Traditional Cooperatives

with Vertical Investment

Proportional Investment Cooperatives with

Vertical InvestmentBenefits to Investors Member-Investor Cooperatives

Member-Investor Cooperatives with Vertical Investment

Non-Redeemable and

TransferableNew Generation Cooperatives

New Generation Cooperatives with Vertical Investment

Traditional Cooperatives

Transitioning to New Generation

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Investment Cooperative

Traditional Cooperatives

Traditional Cooperatives

with Vertical Investment

Proportional Investment Cooperatives with

Vertical InvestmentBenefits to Investors Member-Investor Cooperatives

Member-Investor Cooperatives with Vertical Investment

Non-Redeemable and

TransferableNew Generation Cooperatives

New Generation Cooperatives with Vertical Investment

Traditional Cooperatives

Transitioning to New Generation

New Generation Cooperatives Collaboration

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Investment Cooperative

Traditional Cooperatives

Traditional Cooperatives

with Vertical Investment

Proportional Investment Cooperatives with

Vertical InvestmentBenefits to Investors Member-Investor Cooperatives

Member-Investor Cooperatives with Vertical Investment

Non-Redeemable and

TransferableNew Generation Cooperatives

New Generation Cooperatives with Vertical Investment

Traditional Cooperatives

Transitioning to New Generation

New Generation Cooperatives Collaboration

Non-Conversion

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Investment Cooperative

Traditional Cooperatives

Traditional Cooperatives

with Vertical Investment

Proportional Investment Cooperatives with

Vertical InvestmentBenefits to Investors Member-Investor Cooperatives

Member-Investor Cooperatives with Vertical Investment

Non-Redeemable and

TransferableNew Generation Cooperatives

New Generation Cooperatives with Vertical Investment

Traditional Cooperatives

Transitioning to New Generation

New Generation Cooperatives Collaboration

Non-Conversion Outside Equity Not in CooperativeCooperatives with Capital Seeking

Companies

Ownership Rights

Ownership

Rights

Proportional Member

InvestmentProportional Investment Cooperative

Traditional Cooperatives

Traditional Cooperatives

with Vertical Investment

Proportional Investment Cooperatives with

Vertical InvestmentBenefits to Investors Member-Investor Cooperatives

Member-Investor Cooperatives with Vertical Investment

Non-Redeemable and

TransferableNew Generation Cooperatives

New Generation Cooperatives with Vertical Investment

Traditional Cooperatives

Transitioning to New Generation

New Generation Cooperatives Collaboration

Non-Conversion Outside Equity Not in CooperativeCooperatives with Capital Seeking

Companies

Investor-Share Cooperatives

Ownership Rights

Non-Redeemable and

Transferable

Benefits to Investors

Outside Equity Not in Cooperative

Ownership

Rights

Traditional Cooperatives

Proportional Member

InvestmentProportional Investment Cooperatives

Member-Investor Cooperatives

New Generation Cooperatives

Traditional Cooperatives

with Vertical Investment

Traditional Cooperatives

Transitioning to New Generation

Proportional Investment Cooperatives with

Vertical Investment

Member-Investor Cooperatives with Vertical Investment

New Generation Cooperatives with Vertical Investment

New Generation Cooperatives Collaboration

Non-Conversion

Investor-Oriented Firms

Cooperatives with Capital Seeking

Companies

Investor-Share Cooperatives

Ownership Rights

Bankruptcy

Convert

Equity Outside

Equity Inside

New Generation

Member Investor

Traditional

Liquidate

Patrons & Investor

Hybrid

OR

T

T

T

R

R

R

R

X

T

T

•From 12,500 in 1925 to currently

•2000+ agricultural cooperatives

•Membership becoming more heterogeneous

•Many continue traditional structure with a few LLCs

•Hybridization occurring rapidly

•Tension between cooperative – patron model and investor oriented model

Evolution of US Agricultural Cooperatives

•Agriculture/food sector smaller portion of economy

•Markets increasingly competitive

•Stress between patrons (principals) and agents

•Compromises between reality, and organizational legacy and altruism

•Cooperative market shares increasing

•Marketing cooperatives more vertically integrated

•Multipurpose becoming more knowledge oriented and transactional

Current Situation

•Increasing member heterogeneity

•Increasing consolidation

•Increasing complexity

•Increasing adaptability

•Increasing global alliances

•INCREASING HYBRIDIZATION

Current Organizational Situation

Many of these cooperative trends are

occurring in the advanced agricultural countries of the world.

Current Evolution

T

T

X

Umbrella

Bankruptcy

Convert

Equity Outside

Equity Inside

New Generation

Member Investor

Traditional

Liquidate

Patrons & Investors

Hybrid

R

R

R

R

X

Sp

C

O

C

O

C

O

C

O

C

O

Tinker

Spawn Exit

Reinvent

T

T

T

T

T

OR

•Because cooperatives keep REINVENTING themselves.

Why Am I Optimistic?

Health of Cooperative

Time

Thank You

MICHAEL L. COOK

UNIVERSIT Y OF MISSOURI

USA

GRADUATE INSTITUTE OF COOPERATIVE LEADERSHIP