Development of Alternatives to Cooperative Mergers and Federated
Structures
Bruce J. Reynolds USDA/Rural Development/Cooperative Programs
NCERA-210
Nov. 7, 2012
• Cooperative Programs surveyed in 2007 about “other ownership structures”
(http://www.rurdev.usda.gov/supportdocuments/CoopMag-nov08.pdf)
• Another survey in 2010 added joint venture participation with non-cooperatives
• Mailing problems & survey design problems in not identifying names of joint ventures
• Follow-up telephone survey in 2011 to produce a report
(http://www.rurdev.usda.gov/supportdocuments/RR226.pdf )
1
Table 1 -- Agricultural cooperative ownership of
ventures, 2010/11.
Cooperatives reporting
185
Ventures reported
382
Less:
Duplicates reported
48
Condominium grain storage
17
Net number of ventures
317
Wholly-owned subsidiaries
108
Total joint ventures
209
2
Table 2- Distribution of centralized cooperatives’ joint ventures and
subsidiaries, 2007
277
56
Co-ops Joint Ventures Co-ops Subsidiaries
124
1
39
1
27
2
5
2
14
3
1
3
1
4
1
4
5
5
1
6
2
7
1
11
Total*
175
46
333
Co-ops Total Ventures
144
1
29
2
21
3
3
4
5
5
1
6
2
7
1
11
206
•There are 206 centralized cooperatives with ventures. The sum of separate reporting of
joint ventures and subsidiaries is 221 cooperatives, indicating that 15 have both types of ventures.
3
Table 3 – Distribution of centralized cooperatives' joint ventures &
subsidiaries, 2010/11
219*
92
Co-ops Joint Ventures
Co-ops Subsidiaries
Co-ops Total Ventures
92
1
43
1
119
1
23
2
8
2
27
2
11
3
5
3
18
3
5
4
1
4
8
4
4
5
5
4
5
6
1
6
6
1
7
1
8
7
1
9
Total**
311*
136
59
7
8
1
8
9
2
9
180
* Duplicate joint ventures by reporting co-ops are included.
** There are 180 centralized co-ops reporting ventures. The sum of co-ops reporting joint ventures
and subsidiaries is 195, indicating 15 have both types of ventures.
4
Figure 1—Organizational form for separate business ventures, 2010/11
Limited
Liability
Partnership,
10
Partnership,6
Other, 5
Corporation,
54
Limited
Liability
Company,
240
5
Figure 2—Composition of joint venture partners with cooperatives, 2010/11
Both, 26
Other
cooperatives,
92
Noncooperatives,
57
6
Figure 3 - Percentage share of ownership by cooperatives in joint ventures, 2010/11
1 to 20%, 82
cooperatives
More than
49%, 107
cooperatives
21-49%, 64
cooperatives
7
Table 4 -- Participation in ventures by type of cooperatives, 2010/11.
Cooperatives
Joint
Wholly-owned
reporting
Ventures**
Ventures
Farm Supplies
70
135
41
Grains & oilseeds
71
104
13
Dairy
14
16
26
Fruits & vegetables
9
13
7
Livestock
5
1
6
Other*
16
11
15
Total
185
274
108
* Includes cooperatives in nuts, cotton, tobacco, sugar, dry beans, fish, and
services.
** Includes duplicate joint ventures and condo storage ventures.
8
Table 5 -- Joint ventures by type of business operation, 2010/11.
Processing
Agronomy
Fuel distribution
Feed mills
Marketing agent
Grain terminal
Farm supply purchasing*
Ethanol & biodiesel
Business combinations
30
29
21
21
21
19
17
16
6
Other
29
Total
209
* Purchasing agent for multiple types of farm supplies.
9
Figure 4 – Joint ventures by type of business operation
Other 29
Business
combination
6
Bio-energy
16
Marketing
agent 21
Supplies
purchasing
17
Processing 30
Agronomy 29
Grain
terminals 19
Fuel
Feed mills 21 distribution
21
10
Fig. 5 – Federated and Mixed Cooperatives, 1979-2010
225
200
175
Total
150
125
100
Federated
75
50
Mixed
25
0
1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
11
• There were 38 federated and 20 mixed cooperatives in 2010.
• By the 1980s multi-commodity and farm supply federated cooperatives
were “full service”– doing all things for all members.
• While federated co-ops have declined in number, they have expanded
their membership regions, and are focused on the things they do well.
• Centralized co-ops have increased their size from merging and
capturing business from exiting firms.
• Centralized co-ops form subsidiaries or joint ventures to address specific
weaknesses of one or two operating divisions.
• Joint ventures are a means of delaying or avoiding more mergers.
• More willingness to joint venture with non-cooperatives and the potential
for flexibility in partners is an attractive feature of using an LLC.
12