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Performance of U.S. Agricultural Cooperatives: Size and Industry Effects

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  • Lerman, Zvi
  • Parliament, Claudia

Abstract

The objective of this study is to determine if there are important size and industry effects on financial performance of agricultural cooperatives. The performance of 43 dairy, food, grain, and farm supply cooperatives in the US was analyzed over the period 1970-1987 using financial ratios derived from accounting data. The analysis revealed significant size and industry effects. Large regional cooperatives are more efficient in utilizing their assets to generate sales, while small regional cooperatives have higher profitability. The findings suggest that the emphasis on growth may not always produce beneficial results among agricultural cooperatives. Among the four industries studied, the dairy regional cooperatives appear to be the strongest performers, while the food marketing cooperatives lowest performance measures. Since both dairy and food cooperatives engage in are characterized by the value-added processing, this difference in performance makes it difficult to reach clear conclusions about possible advantages of disadvantages of vertical integration relative to traditional cooperative activities. Trend analysis indicates that the profitability of the agricultural cooperatives in all industry and size categories declined in response to the downturn in US agriculture after 1980. While the decline in profitability was at similar rates for both large and small cooperatives, the variation of efficiency and leverage was in opposite directions. Large cooperatives may be expected to continue improving their asset utilization without relative improvement in profitability, and increasing the level of their debt in relation to equity.

Suggested Citation

  • Lerman, Zvi & Parliament, Claudia, 1990. "Performance of U.S. Agricultural Cooperatives: Size and Industry Effects," Working Papers 232667, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    • Handle: RePEc:ags:huaewp:232667
    DOI: 10.22004/ag.econ.232667
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    References listed on IDEAS

    as
    1. Parliament, Claudia & Taitt, Jodi, 1989. "Mergers, Consolidations, Acquisitions: Effect On Performance Of Agricultural Cooperatives," Staff Papers 13384, University of Minnesota, Department of Applied Economics.
    2. Zvi Lerman & Claudia Parliament, 1990. "Comparative performance of cooperatives and investor-owned firms in US food industries," Agribusiness, John Wiley & Sons, Ltd., vol. 6(6), pages 527-540.
    3. Babb, Emerson M. & Lang, Mahlon G., 1985. "Implications of Comparative Performance of Cooperatives and Investor Owned Firms," North Central Region Archives 303324, North Central Region - North Central Cooperative Extension Association (NCCEA).
    4. Lerman, Zvi & Parliament, Claudia, 1990. "Comparative Performance of Food-Processing Cooperatives and Investor-Owned Firms in the U.S," Working Papers 232668, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    5. Parliament, Claudia & Lerman, Zvi & Fulton, Joan R., 1990. "Performance of Cooperatives and Investor-Owned Firms in the Dairy Industry," Journal of Agricultural Cooperation, National Council of Farmer Cooperatives, vol. 5, pages 1-16.
    6. Kwo-Shin Chen & Emerson M. Babb & Lee F. Schrader, 1985. "Growth of large cooperative and proprietary firms in the US food sector," Agribusiness, John Wiley & Sons, Ltd., vol. 1(2), pages 201-210.
    7. Lerman, Zvi & Parliament, Claudia, 1990. "Comparative Performance Of Food-Processing Cooperatives And Investor-Owned Firms," Staff Papers 13455, University of Minnesota, Department of Applied Economics.
    8. Lerman, Zvi & Parliament, Claudia, 1990. "Estimating The Profitability Of Pool Cooperatives," Staff Papers 13788, University of Minnesota, Department of Applied Economics.
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