Planning Key to Forming Value-Added Cooperatives
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Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain
Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.
In a seminar for new and emerging cooperatives held earlier this year in Mandan, N.D., step-by-step instructions were given on how to start a cooperative.
Bill Patrie, North Dakota REC/RTC Rural Development Director, said that interested individuals need to identify the reason for starting a cooperative. This includes establishing a focus for a cooperative as well as long-term goals.
From there, a feasibility study must be outlined to determine costs, a time-line and milestones. Patrie says producers must agree on success standards, which include rate of return, level of investment, size of operation and anticipated marketshare.
A consultant is then selected to conduct the feasibility study, on which a decision may be made on whether or not to pursue a cooperative.
Next is drafting a budget, selecting accounting staff, writing a business plan and arranging financing, which will likely include the selling of equity shares. After the results of the equity drive are announced, the cooperative should acquire staff and facilities, initiate marketing and elect a board of directors.
According to Patrie, the keys to a successful cooperative are:
- A profitable market opportunity.
- Proficient board of directors.
- Quality management.
- Adequate beginning capital.
There are a number of risks in starting a cooperative. Those may include crop losses, cost overruns, poor management, farm program changes, insufficient equity and marketing the wrong product.
The key to minimize risk is planning, says Lee Estenson, vice president, St. Paul Bank for Cooperatives.
A panel of new cooperative founders urged participants to follow the game plan but to not be afraid to adjust it if necessary.
Kermit Bye, lawyer, and Joe Talley, accountant, both with the Golden Growers Cooperative project, agree that cooperatives need to hire competent, experienced accounting and legal staff to deal with laws, regulations, and tax issues.
For a cookbook approach to steps and procedures in organizing a cooperative, Patrie recommended the federal circular, "How to Start a Cooperative," CIR 7, free from the Agricultural Cooperative Service, USDA, PO Box 96576, Washington, DC, 20090-6576; phone 202-720-2556.