Family Farmers Need Cooperatives--But Some Issues Need To Be Resolved

CED-79-106: Published: Jul 26, 1979. Publicly Released: Jul 26, 1979.

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Farmers still face some of the same problems they faced in the 1920's and 1930's when legislation first allowed them to form cooperatives to compete more effectively in the agricultural system. The overall trend in American agriculture has been one of increasing concentration marked by a decrease in the number of farms and an increase in average farm size, a greater share of total gross farm income going to large farms and a larger portion of agricultural products handled by a smaller number of suppliers. Although cooperatives have grown in size and market share, they are still much smaller than some other businesses that compete with them in such markets as grains, fruits and vegetables, dairy products, poultry and eggs, and feed.

Cooperatives are an integral part of the agricultural structure. They provide farmers an alternative for marketing products and for procuring farm items and services. Most farmers responding to a questionnaire viewed cooperatives as increasing the income and promoting a better way of life for family farmers. According to law, Department of Agriculture (USDA) is responsible for making sure that cooperatives do not use their advantages to unduly enhance prices. USDA has done little to guard against undue price enhancement and other unfair practices. If USDA retains the regulatory function, it needs to establish a system to monitor cooperative activities and to take enforcement action where warranted. An emerging issue is corporate membership in cooperatives. Nonfamily farm corporations have joined cooperatives and enjoyed benefits Congress intended mainly for family farmers. Another issue of major concern to farmers is the failure of many cooperatives to retire systematically the retained earnings owed their members. The failure to retire retained equities in a timely manner can effect farmers' participation in cooperatives.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: If Congress decides to limit participation of nonfamily farm corporations, the following four options should be considered: (1) ban corporate membership in cooperatives; (2) limit corporate membership to a certain percent of the cooperative's volume of business to membership equities; (3) ban corporate representation on cooperative boards of directors; or (4) limit corporate membership to a certain percent of the cooperative's volume of business or membership equities and ban corporate representation on cooperatives' boards of directors.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should: (1) establish an enforcement and monitoring system so that cooperatives do not use monpolistic or other unfair trade practices to raise prices unduly; (2) develop a set of cooperative conduct principles with the Federal Trade Commission and the Department of Justice; (3) require that a national campaign be conducted to motivate cooperatives to adopt equity redemption programs that are fair to current and former members; and (4) require that plans for assisting new and developing cooperatives be coordinated among responsible agencies before additional field offices are established.

    Agency Affected:

 

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