Cooperatives - Farmers Working Together
Target Grade Level / Age Range:
Students will learn about cooperatives. They will discuss the pros and cons to forming a cooperative based on experience and will evaluate how economic decisions affect the wellbeing of individuals, business, and society.
- 10 Styrofoam cups
- 6 pens/markers
- A list of the five different types of cooperatives for each group
- 5x7 notecards (optional)
Essential Files (maps, charts, pictures, or documents)
- Word document "Five Types of Co-ops"
- file (iowaagliteracy.org) Iowa Ag Today Social Studies edition – page 7
- Buying in bulk: the process of buying large quantities of an item all at once time.
- Capital: Wealth in the form of money or other assets owned by a person or organization or available or contributed for a particular purpose such as starting a company or investing.
- Cooperative: Private organization owned/managed by individuals for their own benefit who pursue a common economic goal.
- Patronage refund: Profits shared with members based on the activity of the member that year usually paid in cash and equity
- Transaction costs: any cost involved in making an economic transaction. For example, when buying a good or buying foreign exchange, there will be some transaction costs (in addition to the price of the good). The transaction cost could be financial, extra time or inconvenience.
- Vertical integration: The combination in one company of two or more stages of production normally operated by separate companies.
Background – Agricultural Connections
The International Co-Operative Alliance defines a cooperative, or co-op, as “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically controlled enterprise.” In other words, cooperatives are created by people who have a specific need and who are willing to work together to operate and organize a company that will meet that need.
People who join cooperatives or who are among the founding members of a co-op often have the same shared values, meaning they are willing to work together towards a common goal. One of those goals is to create a better world by working together and by shifting the focus of the business to place people over profit to build a more inclusive economy.
Cooperatives often elect a board of directors. The responsibilities of the board of a co-op include ensuring that the cooperative is working towards achieving its mission, setting up operational policies for the co-op and hiring any outside managers or other employees.
Ownership of co-ops are limited and unique. One of the core reasons co-ops exist is to help reduce the cost of doing business and to mitigate risks for member owners. To reduce transaction costs , like when you buy in bulk at the store. You purchase a lot of something for less money than it would take to purchase individual items at lesser quantities. Packaging, shelf space, and transportation all play a role in determining if products can be purchased in bulk, and where they can be purchased.
Co-ops can forgo profit maximation, engage with members to make sure the members receive the most benefit. They are user controlled, user owned and overall benefits the user. If co-ops do profit, excess profitability is returned to members. A patronage refund payment is provided and based proportional to use. Members of cooperatives share in the economic loss as well; equity stake goes down.
Interest Approach – Engagement
- Owned and managed by members. (True)
- Members are employees and customers. (True)
- Goal of a cooperative is to serve the needs of its members. (True)
- Focus of a cooperative is on shared responsibilities and the welfare of all members. (True)
- Point is cooperation, not competition. (True)
- Ask students, “is it good to cooperate?” Have them give examples of why or why not. Some could include:
- Lifting heavy items
- Taking turns doing chores
- Getting work done faster
- Sharing a vehicle
- Taking turns
- Tell students that farmers join cooperatives in order to reduce the cost of doing business.
- Pass out copies of the Iowa Ag Today or display the digital copy. Ask students to read page 7 and the article “ What is a Family Farm”? Discuss the article. What challenges might the family farm face? Answers will vary. Through discussion, identify having a place to buy inputs and a place to sell their products as a challenge to operation. Cooperatives are a type of business in which farmers can band together to collectively sell their commodities or collectively purchase inputs like seed and fertilizer.
- Have the students watch the video What is a Cooperative?
- Tell the students we are going to complete an activity that helps to learn about the benefits of cooperatives.
- Write the words Marketing, Supply, Consumer, Service, Worker on a dry erase or smart board.
- Ask for six student volunteers.
- Place five students on one team who will challenge the remaining individual student.
- Pass out five cups to the five students. Give five cups to the one student.
- Pass out a pen or marker to each of the six students
- Have five different student volunteers read the description of each type of co-op. (This can be done by passing out five notecards, emailing the document to students, or projecting the text on a screen.)
- Marketing. In marketing cooperatives, members sell, or market, their products together. This is the most common type of co-op in agriculture. The co-op negotiates with processors for a better price for their members’ products. Some marketing co-ops grade, process, merchandise, or distribute members’ products, as well. Iowa meat processor, West Liberty Foods, is an example of a marketing cooperative. This farmer-owned co-op processes, markets, and distributes meat products to companies like Subway and Jimmy Johns.
- Supply. Supply cooperatives provide members with dependable supplies at competitive prices. Farmers often join supply co-ops to purchase feed, seed, fertilizer, and other necessary farm inputs. By purchasing items in bulk, a co-op is often able to obtain materials at a lower cost than individuals. Bulk purchasing also ensures a consistent supply is available to producers. This is especially important to livestock farmers purchasing feed. Agriland FS Inc. is an example of a supply co-op.
- Consumer. A consumer co-op provides access to certain products for their members. The central principle of consumer cooperatives is member control and participation. Grocery stores that are structured as a co-op rather than individual business are the most common type of consumer co-op. Credit unions are a type of consumer co-op.
- Service. As the name indicates, service co-ops exist to provide a specialized service to their members. Common types of service co-ops include finance, utility, insurance, housing, and healthcare. Electric companies like Rural Electric Co-op are examples of service co-ops. Farm Credit Services of America is a financial co-op that specializes in providing loans and other financial services to farmers and rural residents.
- Worker. There are about 300 worker co-ops in the US, mostly very small operations each involving perhaps 5 to 15 workers. Examples are farms, small restaurants, food markets, bicycle shops, auto repair shops, house cleaning services, commercial trash collection services, laundries, bakeries, computer software production or consulting co-ops are owned and self-managed by the people who work for the company. In the U.S. worker cooperatives tend to be primarily in the service and retail sectors.
- When they hear the word ‘Go’, the team and the individual will write the five different types of co-ops one on each Styrofoam cup. Once all words are written on the cups, the team or individual should stack them in a pyramid.
- See who can complete the task first.
- Discuss was it good to have more people?
- Discuss the advantages and disadvantages of being part of a cooperative.
- Students could create a T chart writing the pros on one side and cons on the other during class discussion.
Did you know? (Ag facts)
- There are more than 3,000 agricultural cooperatives in the U.S.
- Most of the America’s 2 million farmers are farmer co-op members providing 250,000 jobs and $8 billion in annual wages
- 1 billion people are members of cooperatives worldwide.
- Ask students to interview their parents or guardians to see if they belong to a cooperative? They may not even know they are members. Have a discussion to talk about the types of cooperatives listed below:
- Advisory and Education Co-ops
- Animal Health and Artificial Insemination Co-ops
- Artisan Foods and Beverage Co-ops
- Arts and Heritage Co-ops
- Breed Co-ops
- Community and Recreation Co-ops
- Country Markets
- Credit Unions
- Child Care Co-ops
- Energy Co-ops
- Fishing Co-ops
- Forestry Co-ops
- Group Water Schemes
- Housing Co-ops
- Language Co-ops
- Livestock Co-ops
- Multipurpose Dairy Co-ops
- Medical Co-ops
- Radio and Media Co-ops
- Recycling Co-ops
- Sporting Clubs
- Store, Trade and Wholesale Co-ops
- Transport Co-ops
- Telecommunications Co-ops
- Taxation and Accounting Co-ops
- Tourism Co-ops
Suggested Companion Resources
- (3) Co-op 101: How Cooperatives Differ - YouTube
- Agriculture 101: Cooperatives | Iowa Agriculture Literacy (wordpress.com)
- This lesson was developed with support from AgVA Foundation as well as the National Agriculture in the Classroom Organization and the CHS Foundation Educating Next Generation Agricultural Leaders Grant.
Agriculture Literacy Outcomes
- T5.6-8.a. Consider the economic value of agriculture in America
- T5.6-8.h. Identify farm ownership in relation to processor ownership (e.g., cooperatives, corporations, vertical integration)
Iowa Core Standards
- Social Studies
- SS.8.15. Evaluate how economic decisions affect the wellbeing of individuals, businesses, and society.