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  • Making Cooperatives More Relevant and Exciting

    Making Cooperatives More Relevant and Exciting

    I truly enjoyed Phil Kenkel’s Southern Ag Today’s Article “Why Don’t We Start More Cooperatives?” The points and questions he raised got me thinking about cooperative formation opportunities and challenges faced by today’s business owners and society in general. 

    Recently, Phil’s article again came to mind when someone interviewed me about what it meant to run a cooperative development center: what were the challenges and opportunities? My answer to this question was that we must make cooperatives more relevant and exciting. 

    Relevance

    Certainly, the successful cooperatives we have in the United States are prime examples of relevance: credit unions, mutual insurance companies, cotton gins, peanut shellers, dairy processors, and many more.  By relevance, I mean a general awareness of cooperative organization being an option for incorporation.  

    I also believe we may be on the cusp of a cooperative resurgence.  Over 200 years ago, the cooperative movement was largely credited as society’s reaction to the Industrial Revolution, when the workforce had to adjust to mechanized production processes. At the same time, the manufacturing and transportation industries were consolidating into very large firms.  

    Today, we are amid the Digital Revolution, where society is grappling with information technology and artificial intelligence during a period of consolidation and rapid growth of technology firms, which has immensely changed commerce.  Cooperatives may yet again provide society with a response to these trends.   

    Excitement

    How does one get excited about a business structure? Well, a cooperative does have the word “cooperate” embedded in it, so that helps.  Also, in its most basic form, cooperative membership equates to one member, one vote, meaning equal voting representation for all its members.  So, a cooperative structure also embodies the principles of democracy.

    However, my take is that corporate by-laws (although important) are not an exciting rallying point.  Rather, what is the purpose of groups coming together? To address common social, economic, or cultural needs, as defined by the National Cooperative Business Association? How about gaining additional power and independence in an economic system where smaller actors are having an increasingly difficult time? All the above reasons seem compelling to me!

    The local foods movement has provided plenty of excitement and challenges to this space. A “food hub” is a relatively new business model that encompasses the aggregation, distribution, and marketing of local/regionally produced food products (Bartham, 2010).  This definition is remarkably similar to that of a farmers’ cooperative, aside from the fact that some food hubs are non-profit corporations (or other entities) not owned and controlled by farmers. 

    At the South Carolina Center for Cooperative and Enterprise Development, we have had good results generating excitement about cooperatives focusing on these current trends. Within the past 4 years, we have started eight new cooperatives, each addressing issues important to their members.  Some examples:

    Once started, of course, the work does not end.  Keeping cooperatives running smoothly and efficiently is also necessary.  Thankfully, there are many sources of support.

    Assistance for Cooperative Development

    Like the SC Center for Cooperative Development at Clemson University, many land-grant universities have cooperative centers that help train new board members and develop current board members. There is also CooperationWorks!, a non-profit that supports both land-grant and non-land-grant cooperative development centers. A map of development centers can be found on their website, along with many good supporting materials. 

    The USDA Rural Development encourages cooperative development and helps fund cooperative development through its Rural Cooperative Development Grants, gives priority points to cooperatives on its Value-Added Producer Grants, and provides direct assistance to minority-owned cooperatives through its Socially Disadvantaged Groups Grant.  

    Returning to Phil Kenkel’s article with his last line quoted, “Perhaps we just need to recycle some good old ideas!” seems appropriate to repeat. Maybe I would modify it just slightly to “recycle and repackage.” 

    Resources and References

    Bartham, J. (2010). Getting to Scale with Regional Food Hubs.  USDA Rural Development website accessed 7.17.2024. https://www.usda.gov/media/blog/2010/12/14/getting-scale-regional-food-hubs

    CooperationWorks! The National Cooperative Development Network.  Cooperative Development Locations.  Website accessed 7.17.2024. https://cooperationworks.coop/member-locator/#search

    Kenkel, P. (2024). Why Don’t We Start More Cooperatives? Southern Ag Today.  https://southernagtoday.org/2024/05/17/why-dont-we-start-more-cooperatives/

    National Cooperative Business Association. (2024). What is a Coop?  NCBA website accessed 7.17.2024 https://ncbaclusa.coop/resources/what-is-a-co-op/

    South Carolina Center for Cooperative and Enterprise Development (2024). Website accessed 7.17.2024. https://coopcentersc.org/

    South Carolina Department of Agriculture (2022). New Beef Co-op Seeks to Expand Processing, Create SC Beef Product.  SC Department of Agriculture News Release. https://agriculture.sc.gov/new-beef-co-op-aims-to-expand-processing-create-sc-beef-product/

    South Carolina Department of Agriculture (2024). New Cut Flower Co-op Working to Market South Carolina Blooms. SC Department of Agriculture News Release. https://cooperationworks.coop/success_stories/new-cut-flower-co-op-working-to-market-wholesale-south-carolina-blooms/

    United States Department of Agriculture, National Institute of Food and Agriculture. Land Grant Colleges and Universities (2019).  Website accessed 7.17.2024. https://www.nifa.usda.gov/sites/default/files/resource/LGU-Map-03-18-19.pdf  

    United States Department of Agriculture, Rural Development (2022). Preserving Seafood Heritage by Bringing in Next Generation.  Rural Development Success Stories. Website accessed 7.17.2024. https://www.rd.usda.gov/newsroom/success-stories/preserving-seafood-heritage-bringing-next-generation

    United States Department of Agriculture, Rural Development (2022). Gullah Coop: Growing Food, Preserving Culture.  Rural Development Success Stories. Website accessed 7.17.2024. https://www.rd.usda.gov/newsroom/success-stories/gullah-co-op-growing-food-preserving-culture

    United States Department of Agriculture, Rural Development (2024). Website accessed 7.17.2024. Webpage resources:

    Service Center Locator https://www.rd.usda.gov/browse-state

    Rural Cooperative Development Grant https://www.rd.usda.gov/programs-services/business-programs/rural-cooperative-development-grant-program
    Value Added Producer Grant     https://www.rd.usda.gov/programs-services/business-programs/value-added-producer-grants
    Socially Disadvantaged Groups Grant https://www.rd.usda.gov/programs-services/business-programs/socially-disadvantaged-groups-grant

    Richards, Steven. “Making Cooperatives More Relevant and Exciting.” Southern Ag Today 4(33.5). August 16, 2024. Permalink

  • If It’s Not Time to Hit the Panic Button… We Are Getting Close

    If It’s Not Time to Hit the Panic Button… We Are Getting Close

    Over the past three years, we have written a lot of articles for Southern Ag Today about the need for a new farm bill that increases the support provided by the farm safety net.  While it was important three years ago, it is much more important now.  The steady decline in market prices has continued, with current price projections from USDA below the average cost of production for some crops (Table 1).  Why?  While costs for some inputs have decreased from their 2022 highs… commodity prices have fallen more.  While Marketing Year Average (MYA) prices in Table 1 don’t look very good, current futures prices at harvest look even worse.

    Some producers still have their 2023 crop in storage, holding on and not wanting to sell below their cost of production.  The 2024 harvest is not far away.  Using corn as an example, the USDA projected marketing year average price is $4.40/bu for the 2024/25 marketing year which is right around the U.S. average cost of production.  That would mean producers still holding their 2023 crop would be looking at two crops in a row not making any money.  Reports from Federal Reserve banks around farm country indicate loan delinquencies are on the rise.  What does all this mean?

    Either we see a farm bill this year or there will be loud calls for financial assistance for farmers.  Recall, in the last presidential election year (2020), record amounts of assistance were provided to agricultural producers due to short-term price declines when the pandemic almost broke the supply chain.  A strong farm bill would be much better than ad hoc assistance, but if Congress can’t come to an agreement… there will be pressure to help producers endure the current financial downturn. And, even if a new farm bill is put in place this Fall, the fact that it is not slated to kick in until the 2025 crop year – with support not arriving until Fall 2026 – will undoubtedly put tremendous pressure on Congress to help bridge the gap. 

    Table 1. Historical and Projected Marketing Year Average Prices for Major Commodities.

    Source:  Dr. Seth Meyer, USDA Chief Economist, July 2024.

    Outlaw, Joe, Bart L. Fischer, and Natalie Graff. “If It’s Not Time to Hit the Panic Button… We Are Getting Close.” Southern Ag Today 4(33.4). August 15, 2024. Permalink

  • Farmers’ Internet Access Improving but Still Lacking

    Farmers’ Internet Access Improving but Still Lacking

    The internet is an essential part of daily life for many Americans. For farmers, it allows them to get up-to-date prices, discover available farm programs, or get information from places like Southern Ag Today. Agriculture is seeing many technological advances with tools such as precision agriculture and autonomy. Reliable access to the internet is increasingly necessary to take full advantage of these newer technologies. To that end, there have been several government programs initiated to provide more access to the internet across the U.S. The Rural Digital Opportunity Fund (RDOF) was announced in 2019 and is focused on improving internet access for rural Americans with $20.4 billion in funding in a ten-year period. The Broadband Equity, Access, and Deployment (BEAD) Program has provided $42.45 billion to increase high-speed internet access across all 50 states in the upcoming years. Every state now has a state broadband office that deals solely with improving internet access in their state. For example, Mississippi has the Office of Broadband Expansion and Accessibility of Mississippi (BEAM). 

    Internet access for producers has seen modest improvements from 2017 to 2022 based on U.S. Census data (Table 1; Figure 1). Across the U.S., the percentage of farm operations or operator residences with internet access increased from 75.4% in 2017 to 78.7% in 2022. While many of the southeastern states still lag behind the U.S. average, most of the states had significant increases in producers’ internet access over this time period. Of the 14 southeastern states examined, 10 had a higher percentage increase than the U.S. average. Arkansas had the highest increase of 8.3%, followed by Louisiana with an increase of 7.5%, and then Mississippi with an increase of 7.3%. Even so, there is still a surprisingly large number of producers, 21.3%, who do not have access to the internet. This is important for government agencies and universities to understand and make sure that the information they provide is available to all producers.

    It should be noted that simply having access to the internet does not necessarily mean that the internet is reliable or has the speed to be effective for producers. For the measure described here, internet access can be obtained through 1) a Cellular data plan, 2) Satellite Internet, 3) Broadband (high-speed) Internet service such as cable, fiber optic, or DSL service, or 4) Dial-up Internet. Some of these options are not adequate to use for precision agriculture. The FCC’s Task Force for Reviewing the Connectivity and Technology Needs of Precision Agriculture in the United States recommends a minimum performance of 100 Mbps download and 20 Mbps upload to support precision agriculture. The percentage of farmers who have internet that can actually support precision ag technologies would be considerably less than that described above. However, programs, such as BEAD, are prioritizing the buildout of fiber optic internet to ensure reliable and fast connections. Fiber optic internet would meet the FCC performance recommendations and allow producers to more easily adopt new technologies and gain the efficiencies that come with them. Currently, many producers in the Southeast are still at a disadvantage, in terms of their internet access compared to other regions. This disadvantage could affect producers’ ability to easily access information and adopt new technologies to improve their operations. 

    Figure 1. Percentage Change in Farm Operations or Operator Residences Internet Access from 2017 to 2022. 

    References

    FCC. (2021). Task Force for Reviewing the Connectivity and Technology Needs of Precision Agriculture in the United States. Available at: https://www.fcc.gov/sites/default/files/precision-ag-report-11102021.pdfUSDA NASS Census Data. (2024). Percentage of Farm Operations or Operator Residences with Internet Access. Available at: https://quickstats.nass.usda.gov/

    Mills, Devon, and Brian E. Mills. “Farmers’ Internet Access Improving but Still Lacking.” Southern Ag Today 4(33.3). August 14, 2024. Permalink

  • Finding the GOAT

    Finding the GOAT

    In 2024 a GOAT is what they call the “Greatest Of All Time.” Despite all of the discussions of Olympians who may or may not be the greatest athletes of all time in their sport, it is also important to discuss the actual goat market. Goat production is big business in the Southern United States.

    Figure 1 contains 35-50 pound and 51-65 pound selection 1 goats in Tennessee from January 2020 through July 2024. The variability in prices throughout a year is evident in that prices have typically had a $150 to $200 per hundredweight price range in a given year. Most of this is simply due to seasonality of prices, which is driven by basic supply and demand. The bigger storyline is what appears to be a softening of goat prices from the high prices seen in early 2022. 

    The question at hand, what is causing the negative trendline in goat prices the past few years? It is difficult to blame lower goat prices on supply, because the January 1 inventory report for 2024 indicates there are 100,000 fewer goats than the same time in 2022. More specifically, all meat and other goats account for 90,000 head of that decline with the meat and other goat breeding herd down 68,600 head from 2022. This leaves the other side of the coin, which would be the demand side for goats and goat meat. There does not appear to be people leaving the domestic market that previously demanded goat meat. One logical explanation could be the softening economy and higher price of goat meat has rationed the product. It appears goat prices may continue to decline in the near term.

    Figure 1. Tennessee Goat Prices from January 2020 through July 2024.

    Griffith, Andrew P. “Finding the GOAT.” Southern Ag Today 4(33.2). August 13, 2024. Permalink

  • Storing corn or soybeans: what is the futures market incentivizing?

    Storing corn or soybeans: what is the futures market incentivizing?

    Storage is an important marketing and risk management tool that allows producers to extend the marketing interval and avoid seasonal low prices at harvest. As harvest rapidly approaches, producers will need to determine the amount of production that can be stored on-farm or in commercial storage and which commodities to store if limited space is available. Looking at current futures market price spreads provides an indication of whether the futures market is incentivizing storing corn or soybeans (Table 1 and 2). To compare the benefit of storage between commodities, we can look at the spread between the nearby and deferred futures contracts and the interest cost associated with carrying the commodity for sale at a later date. In this analysis, the interest rate is assumed to be 8.0%. This results in a monthly interest cost of $0.026/bu ($3.83/bu x 8% x 1/12 months) for corn and $0.067/bu/month ($10.08/bu x 8% x 1/12 months) for soybeans. 

    Comparing the May futures contract and interest cost for corn and soybeans indicates a benefit to storing corn over soybeans. The futures market spread between the September and May corn contract is $0.46/bu ($4.29/bu – $3.83/bu). The interest cost is $0.20/bu ($0.026/bu/month x 8 months). The spread less interest is $0.26/bu.  For soybeans, the September and May spread is $0.54/bu ($10.62/bu – $10.08/bu) with an interest cost of $0.54/bu ($0.067/bu/month x 8 months). This results in a soybean spread less interest of $0.00/bu. Examining other deferred contract months provides a similar result. Thus, the futures market is indicating a stronger incentive to store corn than soybeans. It is important to note that this analysis does not include changes in basis, which will vary by location and could change the storage preference between commodities.

    References

    Barchart.com. December Corn and Soybean Futures Prices. Accessed August 7, 2024 at: https://www.barchart.com/futures/grains?viewName=main. 

    Smith, Aaron. “Storing corn or soybeans: what is the futures market incentivizing?” Southern Ag Today 4(33.1). August 12, 2024. Permalink