Dairy Marketing

1
Dairy Marketing

• Dr. Roger Ginder
• Econ 338
• Fall 2005
• Lecture 24

2
(No Transcript)
3
NUMBER OF DAIRY COOPERATIVES AND FARM LEVEL
MARKET SHARE
Year Number of Cooperatives Market
Share 1950-51 2,072 53 1960-61 1,609
61 1969-70 971 73 1974-75 631
75 1985-86 394 78 1990-91 264
82 1994-96 237 87 2000-01
204 891 ______ ______
-90.0 68
1 1999 figure. Sources Co-ops share of farm
market, major case expenditures down in 99,
Rural Cooperative Magazine, Jan/Feb 2001 USDA
Rural Development press release, Farmer Co-op
Sales, Incomes Climb in 2001, Oct. 22, 2002.
4
U.S. Dairy Cooperatives
5
Top Dairy Coops, U.S., 1992
Member Milk Rank Coop-State Volume (bil.
lbs.) 1 AMPI, San Antonio, TX 16.50 2 Mid-Amer
ica Dairymen, Springfield, MO 8.61 3 California
Milk Producers, Artesia, CA 5.76 4 Farmers
Union Milk Mkg. Coop, Madison, WI 5.64 5 Dairgold
Farms, Seattle, WA 4.92 6 Land OLakes,
Minneapolis, MN 4.20 7 Milk Mkg. Inc.,
Strongsville, OH 3.81 8 Dairymen, Inc.,
Louisville, KY 3.62 9 Atlantic Dairy Coop,
Southhampton, PA 3.53 10 Dairymens Coop
Creamery Assn, Tulare, CA
3.50 25 Swiss Valley Farms Co., Davenport, IA
1.41 Source Hoards Dairyman, October 10,
1993
6
Top Dairy Coops, U.S., 2000
Member Milk Rank Coop-State Volume (bil.
lbs.) 1 Dairy Farmers of America, Kansas City,
MP 36.40 2 California Dairies, Inc., Artesia,
CA 13.60 3 Land OLakes, Minneapolis, MN
12.00 4 Northwest Dairy Assoc., Seattle,
WA 5.91 5 Dairylea Cooperative, Inc., E.
Syracuse, NY 5.50 6 Foremost Farms, USA,
Baraboo, WI 5.33 7 Associated Milk Producers,
New Ulm, MN 5.25 8 Family Dairies, USA,
Madison, WI 5.10 9 Manitowoc Milk Prod. Coop,
Manitowoc, WI 3.57 10 MD VA Milk Producers
Coop, Reston, VA 3.10 16 Swiss Valley
Farms Co., Davenport, IA 1.70 Source Hoards
Dairyman, October 10, 2001
7
Top Dairy Coops, U.S., 2001
Source National Cooperative Bank Co-op 100,
www.co-op100.com
8
Top Dairy Coops, U.S., 2004
Source National Cooperative Bank Co-op 100,
www.co-op100.com
9
Utilization of Milk Handled by Dairy
Cooperatives, 1997
10
Volume of Butter Marketed by Co-ops, 1992 1997
11
Volume of Natural Cheese Marketed by Co-ops
12
Volume of Packaged Milk Marketed by Co-ops, 1992
1997
Now declining
13
Cooperatives Need to Generate a Positive Net
Margin or Profit
WHY DO COOPERATIVES NEED PROFITS???? 1.
Cooperatives use resources in the economy (e.g.
Capital Labor) 2. If there is a loss the
cooperative has ended up with fewer resources
than it started with---resources have been used
up unproductively 3. In an open market/ free
enterprise economy resources are placed in the
hands of private individuals and must be managed
so as to receive a positive return 4. In a
centrally planned economy they are not
14
COOPERATIVE FINANCIAL STATEMENTS
The Balance Sheet Lists the Resources that the
Cooperative Owns and Specifies Who Has Claims
Against the Resources. Members Creditors
15
Balance Sheet Lists Resources/Claims Assets Debt
(Property and (Lenders Claims) other items of
on the assets value owned and Equity controlled
by the (Owners Claims) company on the assets
16
Balance Sheet
Current Assets Current Liabilities Cash
Payables Inventory Notes due
Accounts receivable Long term payment Fixed
Assets Long Term Liabilities Land Long
Term debt Buildings Contracts
Equipment Other Assets Equity Regional
equity Per unit retains Minority
interest withheld from check in
joint ventures Allocated to member
from profits Common stock
17
BALANCE SHEET VS. OPERATING STATEMENT
The Balance Sheet Lists the Resources that the
Cooperative Owns and Specifies Who Has Claims
Against the Resources At a Given Moment in Time.
The Operating Statement (PL, Income
Statement)---Summarizes Business Activity Sales
Income and Expenses Over Some Period of Time.
(Month, Quarter, Year) Matches Income With
Expenses for Some Specified Period of Time to
Determine Whether the Firm Has Made a Profit or a
Loss.
18

• Income Statement or
• Operating Statement or
• Profit/Loss Statements
• Sales
• Less Cost of good sold
• Gross Margin
• Plus Service and Other Income
• Less Expenses (including)
• Salaries, wages, benefits
• Depreciation
• Insurance
• Utilities
• Advertising
• Taxes/Licenses
• Net savings or profits (Losses)

19
Balance Sheet Debt Assets Equity Clai
ms must equal assets - the balance sheet balances
20
Balance Sheet Debt Assets Equity Clai
ms must equal assets - the balance sheet balances
21
Balance Sheet Debt Assets Equity Clai
ms must equal assets - the balance sheet balances
The loss reduces Equity
22
PRIVILEGES OF QUALIFIED DIARY COOPERATIVES UNDER
FEDERAL MILK MARKETING ORDERS
1. The cooperative is entitled to block vote for
its members on most order provisions. 2. The
cooperative is entitled to blend or pool the
proceeds from the sale of member milk. IOF must
pay at least the minimum class prices and blend
prices under FMMO. BUT still there are limits on
how a coop uses this right. Producers must agree.
The coop MUST be competitive. 3. The cooperative
may collect proceeds for its members from
handlers from the sale of member milk. 4.
Members of cooperatives that perform marketing
services for members are exempt from market
services charged non-members. 5. Cooperatives
may move or direct milk in a manner not permitted
proprietary handlers. Again the coop is farmer
controlled.
23
CRITERIA FOR QUALIFICATIONS AS A CO-OP
1. File its articles of incorporation and bylaws
with dairy division to show that it is an
association of agric producers marketing milk and
operating for mutual benefit of
members. 2. Majority in the board must be active
dairy farmers. 3. Provide member-producers a
monthly market information bulletin. 4. At least
50 of business done must be with members.
24
REASONS DAIRY FARMERS BELONG TO A COOPERATIVE
1. To be guaranteed a market outlet and a
price. 2. To have the best terms possible
bargained for in the marketplace. 3. To have milk
marketed efficiently from a producer perspective,
i.e., balancing, diversion, and assembly. 4. To
have the highest quality producer milk possible
be shipped to the market. 5. To be effectively
represented in legislative, regulatory, and
public relations areas. 6. To receive other
benefits such as insurance, field services, or
market information. 7. To gain information about
costs, returns, processes, and industry practices
at other levels in the channel.