University of Wisconsin Center for Cooperatives
The notes that follow are from overheads used by Dr. Robert Cropp in his presentation to the New Generation Cooperatives Conference held April 1, 1996 in Stevens Point, Wisconsin.

New Generation Cooperatives Defined

By Dr. Robert Cropp
University of Wisconsin Center for Cooperatives
230 Taylor Hall
427 Lorch Street
Madison WI 53706-1503

WHAT IS A NEW GENERATION COOPERATIVE?

The term has been applied to the 50 or so cooperatives that have emerged in North Dakota and Minnesota in the last four or five years. They represent the newest generation of cooperatives. Their major focus is on "Value-Added" rather than "Commodities."

TWO POLICIES DISTINGUISH NEW GENERATION COOPERATIVES FROM TRADITIONAL COOPERATIVES:

  1. Delivery rights:
    Each share entitles the member to deliver one unit of product.

  2. Restricted or closed membership

MEMBERSHIP SHARES (MARKETING RIGHTS)

  • Initial price:
    Total amount of capital co-op wishes to raise; divide by number of units of product that can be absorbed by the facility.

  • Membership shares may change in value:
    • Market determines value of shares.
    • Value goes up/down with co-op's performance.

  • Membership shares can be sold:
    • Usually with board approval.
    • Need not wait for redemption by co-op.

NEW GENERATION COOPERATIVES RETAIN TRADITIONAL COOPERATIVE PRINCIPLES

    Democratic control
    Through a one member, one vote policy.

    Excess earnings
    Distributed among members as patronage refunds (dividends). May receive all or most of patronage as cash.

    Board of directors
    Elected from the membership, by the membership.

VALUE-ADDED CO-OP ACTIVITY

  • alfalfa/biomass
  • aquaculture
  • bison slaughter and processing
  • carrot processing
  • cattle feed lot
  • cattle slaughter and processing
  • corn processing (ethanol; corn sweetener)
  • dry edible bean processing
  • organic dairy products
  • organic fruits and vegetables
  • pasta production
  • soy processing
  • specialty cheeses
  • straw/base particle board
  • sugar beet processing
  • swine production
  • venison processing

FINANCING

  • Since members invest capital up-front, all, or almost all, net earnings are returned to members at end of year.

  • Future expansion is financed in the same way as original equity: members invest through purchase of shares (delivery rights).

  • Preferred shares may be offered to the community or general public; this allows communities to support the project while keeping control in hands of members

  • However, there is an 8% limit on dividends.

ADVANTAGES OF NEW GENERATION COOPERATIVES

  • Producers can react quickly to opportunities.

  • People work collectively to respond to problems or opportunities.

  • Creates wealth within the community, and local ownership keeps it there.

  • Restricted membership provides stability for producers and efficiency for the plant.

  • A diverse set of stakeholders insures the interests of the community are considered.

  • Producers and processors are committed to the quality of the product.

KEYS TO SUCCESS OF NEW GENERATION COOPERATIVES

  • Motivated, determined, committed group of producers is most important.

  • Public policy (local, state, national) that supports (or at least doesn't hinder) cooperative formation.

  • Financial institutions willing to finance cooperatives.

  • Consultants/facilitators to help producer groups through aspects of the process.

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