The next time you're at a grocery store, let the cashier ring up the sale. Then try to bargain for a better deal. Sounds ridiculous, doesn't it? After all, just a handful of retailers sell more than half of all the groceries in the United States, and an individual shopper has very little power to negotiate.
That same imbalance of power is a real problem for farmers and ranchers in the United States. Farmers are proud of their independence, but having millions of growers bartering separately puts them at a real disadvantage in the marketplace. That is why they banded together to form farmer-owned cooperatives.
The premise of a cooperative is simple: It is a democratically controlled business that is operated to benefit those who use its services. Farmer cooperatives were first organized in the United States in the early 1800s and really flourished later in the 19th century as a response to the lack of competitive markets for farmers. Too often merchants took advantage of farmers, and cooperatives offered them an alternative place to buy inputs and sell the production from their farms.
In 1890, the Sherman Antitrust Act was passed as a result of the anti-competitive activities of many of the large companies that dominated the U.S. economy. The act had the unintended consequence of possibly making the activities of some farmer-owned cooperatives illegal. In response, Congress passed the Capper-Volstead Act of 1922. Capper-Volstead gave farmers a limited ability to band together to process and market products. Sen. Arthur Capper was quoted as saying that the bill was designed "to give to the farmer the same right to bargain collectively that is already enjoyed by corporations."
Cooperatives started small to solve local problems - perhaps to help farmers purchase petroleum in bulk or to construct a processing facility that would not be economical for a single grower to build. Over time, the variety of goods and services provided by cooperatives grew, and today many of the best-known brands in the United States are products of farmer-owned cooperatives. The cooperatives that served our fathers and grandfathers were good, but they could not meet the needs of today's farmers. As agriculture has changed and grown, so have farmers' cooperatives.
Cooperatives have to be run as businesses, but there are differences. If you listened to the discussion in a cooperative's board meeting, you would hear many of the same financial terms that would be used in a corporate meeting, but used in a different context. Profit and return on investment are important, but just as relevant is the service cooperatives provide to their members. Income is distributed to the users or is invested for the future of the co-op.
Farmers aren't the only beneficiaries. In many small towns, cooperatives are the largest employers, the biggest taxpayers and even social centers.
There is no question that farmers have a unique partnership with their cooperatives. That is why it is disconcerting to see the Department of Justice questioning the relevance of the Capper-Volstead Act.
When Americans are struggling to keep their jobs and pay their bills, it makes no sense to target areas of the U.S. economy that continue to work well for both producers and consumers. Today, roughly 3,000 farmer cooperatives employ more than 180,000 people. They supply much of America's food. And they help every sector of the industry, from big-time growers to small organic farmers who need to band together to survive.
With cooperatives possibly under attack from Washington, the people who understand and appreciate their value must rally around them. Throughout 2010, the Departments of Justice and Agriculture are holding joint workshops on competition in the farm industry. A meeting in Iowa this month will focus on seeds. Future meetings will take place in Alabama (on poultry), Wisconsin (dairy), Colorado (livestock), and Washington, D.C. (consumer prices).
Cooperatives demonstrate the principle of strength in numbers. Saving them from this new threat, however, will require the efforts of individuals. Farmers and ranchers must turn out at these meetings and make sure their voices are heard.
For generations, farmers and ranchers have benefited from cooperatives - and so have all Americans, who enjoy more food security than anybody else in the world. How would agriculture and rural communities fare without cooperatives? If they vanished, what would replace them?
John Reifsteck is a corn-and-soybean producer in Illinois. He serves as vice chairman of the board of directors of Growmark, a farm supply and marketing cooperative, and is a board member of Truth About Trade & Technology.