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HWK #3: Structure and Scope of Cooperatives Fill in short answers to these questions. 1. My Cooperative operates in a large geographic area and is owned by local cooperatives that each purchased a share of membership stock. The cooperative purchases wheat from local cooperatives, wholesales fertilizer to the local cooperatives, and warehouses cotton bales. Local cooperatives can join My Cooperative at any time simply by purchasing a membership share of stock at a nominal price. My Cooperative returns a significant portion of its profits to the local cooperatives in the form of stock, redeemed on a ten-year revolving period. Fill in the answers to the following questions: a. What functional categories apply to My Cooperative? i. Supply, marketing service b. What geographic classification applies to My Cooperative? i. Regional c. Is My Cooperative a Centralized or Federated Cooperative? i. Federated d. Is My Cooperative a stock or non-stock cooperative? i. Stock e. Is My Cooperative an open membership or closed membership cooperative? i. Open 2. Using the examples of the cooperatives on the Top 100 list in the NCBA Top 100 Cooperative report, identify at least one cooperative for the following categories. Remember that many cooperatives can be classified into more than one category. You can find more information online if you are still familiar with the cooperatives. a. An agricultural supply cooperative i. CHS b. An agricultural marketing cooperative i. Land o Lakes c. A consumer cooperative i. REI d. A service cooperative i. Plains Cotton e. A processing cooperative i. DFA f. A financial service cooperative i. Navy Credit Union 3. As in many regional cooperatives, the Southern States, which began as a centralized cooperative, now has a combination structure. Go to the frequently asked questions, co-op membership section of the corporate information section of Southern States Cooperative website: Energy FAQs - SouthernStatesCoop Read the answers to “Who can own Southern States Common Stock?” and “What is the difference between Southern States common stock and a Member Cooperative common stock? Does Southern States' common stock seem closer to the system of a Centralized (producers are direct members of the cooperative) or Federated cooperative (members are local cooperatives, which are in turn owned by producers)? Are the “affiliated cooperatives” closer to the centralized or federated structure? a. The Southern States began as a centralized cooperative, and the Southern States Common stock reflects that centralized structure where the farmers are direct members. In recent

years, SS also gained some member cooperative affiliates, so the stock in the Southern States managed cooperatives is more like a federated structure. Like many regionals, SS now has a combination structure. 4. You are considering starting a cooperative selling OSU apparel to student members. The cooperative will take orders, collect money, order the goods in bulk, and distribute them to the members. Would a closed (defined membership) cooperative operating under the New Generation Cooperative structure or an open membership cooperative operating under the traditional form be more appropriate for this cooperative? Why? . a. There is no fixed capacity to be allocated, and the cooperative could quickly expand as it gains members. Also, I doubt that students would pay a hefty membership fee just to have the opportunity to use it. I would structure it as an open cooperative. It could have up to 50% non-member business, and the non-members would be incentivized to join to get patronage. 5. You are considering a cooperative that will process canola seed into biodiesel. The equipment can process 100,000 tons of seed and will cost $300,000. You would anticipate that the average producer will grow 100 tons of canola annually. Would a closed (defined membership) cooperative operating under the New Generation Cooperative structure or an open membership cooperative operating under the traditional form be more appropriate for this cooperative? Why? a. There is a fixed capacity and a relatively high upfront investment. You need an assured supply that is matched with processing capacity. I would structure it as a closed cooperative with a delivery right/obligation. That would incentivize members to provide the initial investment because their delivery rights could be appreciated. 6. Based on the material on the Economic Impact of Cooperatives from the Wisconsin Center for Cooperatives, are they reported in slide 44 of the Chapter 3 PowerPoint or the table in the Chapter 3 text? What percent of all cooperatives are agricultural cooperatives? What percent of all cooperative revenue do they account for? What percent of all collective members are agricultural producers? a. The table is in chapter 3, page 28; the table in the slide show is on slide 51 b. 5% of all cooperatives are ag coops c. 42% of revenue d. 0.16% of members are producers 7. The video of the Wisconsin grass-fed beef cooperative does not describe the cooperative structure. It also doesn’t describe whether the cooperative has processing facilities or whether the cattle are custom- processed through a third-party facility. If you were organizing a similar cooperative, would you organize it as an open or closed one? Why? How would information on how the cattle were processed impact your decision? a. Open because having outside support from people who are interested in a group like this can show their support and receive patronage. b. Personally, I disagree with/like grass-fed beef principles, so I wouldn’t be taking part in this coop 8. After viewing the videos on CHS and Land O’Lakes, how do you think these regional cooperatives assist their local cooperative owners in performing functions the local cooperative could not do independently? a. They allow things to be built by providing inputs that smaller coops could not cover 9. Based on the video on cooperative housing, what does the member of a housing cooperative own, a share in a cooperative corporation, or an actual piece of real estate? a. Members don’t own the real estate, but rather own shares of the coop housing corporation.

10. Based on the video of Farmers Grain Company of Pond Creek, how do the members benefit from the cooperative? a. Share the profits at the end of the year b. The market prices become more competitive when a coop comes into play

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