By Jake Stukenberg, NFU Intern
No farmer can start a cooperative alone. Cooperatives are the product of collaboration among many individuals with a shared goal of providing a needed service within an area or community. Once a group of producers comes together and creates a business plan, community members, producers, and investors provide the funds necessary to follow through on the plan. Grants and loans are common methods by which coops cover their initial startup costs.
After a coop has been established, it is up to all of its members to keep it running by not only producing their goods, but by providing financial support to keep the operation running.
Members of coops can provide equity in many ways:
- Direct investments are usually generated by cooperative dues, stocks in the coop, and various other forms of equity.
- Retained margins are percentages taken out of a farmer’s patronage refund to funnel back into the coop. By law, 20 percent of a patronage refund must be given as cash or check, but the board of directors may determine where the remaining 80 percent can go.
- Per-unit retains are units of produced goods withheld by the coop so that they can be redistributed to the members over time.
Have you ever wanted to start your own coop, but are unsure about how? Have you helped implement the creation of a coop and have advice for young and beginning farmers? Tell us more about your experiences in the comment section below.