COMPARATIVE PERFORMANCE OF COOPERATIVE AND PROPRIETARY GRAIN AND FARM SUPPLY FIRMS. (VOLUMES I AND II) (AGRIBUSINESS, MANAGEMENT, COST)

ROBERT CLEVELAND KEEN, Purdue University

Abstract

Public policies have encouraged the development of farmer cooperatives in the United States. Under these policies, cooperatives have been granted tax advantages and exemptions from anti-trust legislation. In recent years, cooperative performance and, the exemptions and immunities granted them, have been questioned. Whether public policy should continue to support the favored treatment of cooperatives depends on whether the expected performance, as compared with proprietary firms, has been realized. To address differences in performance, 170 grain elevator and farm supply businesses in four (4) midwestern states were analyzed. Ninety-eight of the firms were cooperatives and seventy-two were proprietary firms. Statistical procedures were used to analyze differences in characteristics and performance and to estimate cost functions. Findings from this study indicate more similarities than differences in the operating practices, characteristics and performance of cooperative and proprietary firms. On the other hand, the differences found may be far more important. The primary differences were related to size and diversity of operations. Cooperatives were 2 to 3 times larger and they offered a broader range of products and services. Financially, operating expenses for both the cooperative and proprietary firms were about the same. In addition, there appeared to be few economies of size to be gained. Based on these results, there was not a cost basis for expecting significantly different performance or industry domination from either cooperative or proprietary firms. However, gross margins and total sales for cooperatives were significantly higher. Additional findings of the study would indicate that the financial performance of cooperatives had been better over a longer period of time. Cooperatives had significantly higher net worth and liquidity and solvency ratios. A significant finding of this study was the differences in performance that existed between firms of the same organizational type. This wide variation suggests that performance of individual firms, and overall industry performance, could be markedly improved. Survival of an individual firm is therefore likely to be more a function of management and operational efficiency, rather than organizational type.

Degree

Ph.D.

Subject Area

Agricultural economics

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