To know what the farm owns in its co-op and whether it voted, keep a membership record: one page, one row per membership, with five facts copied from paper. A patronage refund is the part of the co-op’s profit paid back to members in proportion to the business each one did with it. On a $10,000 refund, federal tax law requires only $2,000 in cash, and the cooperative typically reinvests the rest as the farm’s capital. A farm that does not track that balance can hold up to $8,000 it never counts. Write the page, and call the entity for the fact the farm’s own paper lacks.
The five facts are the entity, the membership number, the yearly dues and the capital the farm holds there. The fifth is the date of the last general meeting, with a yes or no for the farm’s vote.
What does a membership give the farm besides a discount?
Three things at once: a place to buy and sell, capital the farm owns on the cooperative’s books, and a vote. The International Co-operative Alliance, the worldwide body of cooperatives, wrote the last two into its 1995 statement of cooperative identity. Members actively participate in setting their policies and making decisions, with equal voting rights (one member, one vote) in a primary cooperative. They also contribute equitably to, and democratically control, the capital of their cooperative.
The example in this article is a hypothetical Wisconsin dairy farm. It ships milk to a dairy cooperative, buys feed at a supply cooperative and shares a forage harvester with two neighbors. Ask anyone on that farm what the feed discount is worth and the answer comes in seconds. Ask what the farm holds in the dairy cooperative and someone goes to look for last year’s statement in a drawer.
The first of the three is the one a farm already follows. What it sells through the cooperative counts in the volume already priced, the running total of production already sold or contracted. The capital and the vote appear on no other paper the farm keeps.
Write the three on separate lines of the page, so the discount does not stand in for the other two.
Why does the capital balance surprise people?
Because two of the three ways it grows never involve a check from the farm. The USDA cooperative handbook lists them together: members supply operating capital through direct investment, retained margins, and per-unit capital retains. Direct investment is the one everybody remembers, the cash paid for a membership certificate or for stock.
Retained margins arrive at the close of the fiscal year. The member receives a patronage refund, and the board decides how much of it to reinvest. Federal tax law requires that at least 20 percent of the refund be paid in cash, so the board can reinvest the rest. Per-unit retains arrive on every delivery: the cooperative holds back a set amount for each pound, bushel or carton, and retains are accumulated and then revolved back to members over a period of years.
The handbook heads this subject “Control Follows Finance”. It argues that “a high level of member equity capital provides for greater member control and commitment”. The balance is farm capital, like the machinery, and in farm management it counts the same way. Read it on the latest statement and write the statement’s date beside it.
Where do the five facts come from?
From the cooperative, which already keeps them. The handbook says it is incumbent on cooperatives to provide members with important cooperative documents, among them the articles of incorporation and the bylaws.
For the rest, a Wisconsin member can ask in writing. The University of Wisconsin Center for Cooperatives summarizes the state’s cooperative law as changed in 2017. A member who sends written notice stating the purpose may examine, for a proper purpose, the cooperative’s records and its financial books covering the current or preceding 5 fiscal years. The cooperative may ask the member to reimburse the reasonable cost of producing or copying them. The reader’s lawyer confirms the text now in force.
When the farm asks for its membership number and its balance, it asks for a copy of something the cooperative already keeps for its own books.
| Column | What goes in it | Where to find it |
|---|---|---|
| Entity | The legal name as it stands in the bylaws, not the name on the sign | The articles of incorporation and the bylaws |
| Membership number | The number that identifies this farm inside that entity | The latest statement, or a written request to the cooperative |
| Yearly dues | What left the farm’s bank account in twelve months for this membership | The farm’s own bank statements and ledger |
| Capital held | What the farm owns inside the entity, with the date of the statement | The latest statement; a written request if it has not come |
| Last meeting, and who voted | The date of the last general meeting and a yes or no for the farm’s vote | The meeting notice or minutes, or a call to the cooperative |
Of the five, the capital column is the only one the farm cannot fill from its own files. Write the name of the person who will ask for it.
What happens at the annual meeting if nobody from the farm goes?
Others decide. The handbook puts it in one line: “Members must participate in governance activities of their cooperative or accept the decisions made by others”. At the annual meeting, members make decisions such as nominating and electing directors, amending the bylaws, accepting the audit report, voting on major actions or policies proposed by the board and management.
In Wisconsin each member is generally entitled to one vote at a member meeting, regardless of the member’s degree of financial interest. The farm’s vote weighs the same as that of the largest member, and it counts only if someone casts it.
Staying away is easy when the cooperative seems to be doing well. In sixteen farm cooperatives in the Brazilian state of Paraná, with data from 1999, Bialoskorski Neto found that the better the economic performance of the cooperative, the lower the participation at the annual meeting. It is one state and one year, and it shows two things moving together, not one causing the other. He also ties part of the gap to the cost of the member’s own time.
The cooperative’s bylaws require an annual meeting, so the farm can learn its month a year ahead. Ask the entity for it and write it on the calendar.
Which memberships get a row, and what goes down first?
Every entity that charges the farm dues or gives it a vote, whether or not it calls itself a cooperative. On the example farm that means the state farm organization that debits the account every month and a commodity group whose yearly fee appears in the ledger. It also means the machinery group that shares the forage harvester, and a membership opened once for a single application and never closed. Each one is a cost, a possible balance or a vote.
Sometimes a university or research institute runs a trial on one of the farm’s fields under a signed partnership agreement. That is the written terms of who does what on that field and until when, and the agreement gets a row too. It costs nothing and carries no vote, but for a set period someone from outside decides something on the farm. Its row carries the start and end dates in place of the yearly dues.
Money that left the farm without buying a membership, such as a donation or a sponsorship, goes in the community support record. That is a separate list of what the farm gave to its community and who approved each gift.
Allow two hours with the folder of statements open and the bank app on the table, plus one call or letter for each membership whose statement did not turn up. Most of it is copying.
The blank in the capital column is not like the others. The dues come out of the bank records in ten minutes, and the balance is the one figure only the entity can hand over. Write its answer beside the figure, with the date.
Whether to keep delivering through a cooperative can be settled ahead of the cooperative’s call. Use a written selling plan, the page where the farm sets out before the season who it will sell to and how.