Z BULLETIN 249 MARCH 1941 FARMER COOPERATION IN NORTHERN ALABAMA A Physical Inventory and Appraisal of Cooperative Endeavor in Sixteen Counties By L. C. SALTER and E. L. MORGAN AGRICULTURAL EXPERIMENT STATION OF THE ALABAMA POLYTECHNIC INSTITUTE M. J. FUNCHESS, Director AUBURN, ALA. IN COOPERATION WITH TENNESSEE VALLEY AUTHORITY DEPARTMENT OF AGRICULTURAL RELATIONS FARMER COOPERATION IN NORTHERN ALABAMA A Physical Inventory and Appraisal of Cooperative Endeavor in Sixteen Counties By L. C. SALTER, Chief and E. L. MORGAN, Assistant Cooperative Analyst Cooperative Research and Experiment Division Tennessee Valley Authority BULLETIN 249 MARCH 1941 Contents i. S U MM A R Y ------------------ -----------------3 - 5 I. INTRODUCTION -------------------------II. AGRICULTURAL BACKGROUND-6 1. Farming sections as defined by soil conditions-6 2. Number and size of farms, farm and crop acreage-3. Major crops and livestock - 4. Population, farm ownership and tenancy-9 5. Farmers' cash income --------6. Farmers' expenditures for feed and fertilizer III. AN ANALYSIS OF THE EXPERIENCE OF COOPERATIVES ------------------- 8 8 10 111 -12 15 16 20 22 23 26 36 IV. STATUS OF COOPERATIVES IN 1938 ------------1. Number, location, and types of enterprises --------2. Organizational structure ------------------------3. Educational program ---------------------------4. Financial structure -----------------------------5. Statistical and business analysis for fiscal year en ding in 1938 --------------------------------V. CONCLUSIONS AND RECOMMENDATIONS ------1. Favorable factors 2.Unfavorable factors 38 ----------------------------- 36-- 3. Possible future developments --------------------- 40 4. Cooperative education and business advisory service 43 VI. APPENDIX T4 -- SUMMARY The 18 cooperative associations active in northern Alabama (13 county exchanges, two strawberry marketing associations, two cotton gins, and a dry-mix fertilizer association) had 9,299 members, 8,123 of which were patrons. In addition there were 6,309 non-member patrons. Fifteen of these associations had kept records of their sales volume for 1938, which totaled $771,000. Eleven of the cooperatives that function chiefly as buying associations accounted for $657,000, or 85 per cent, of the total volume of business. The principal commodities bought for members were fertilizer, feed and seed, and the principal commodity marketed was strawberries. A small volume of poultry and hogs was handled. Balance sheets for 16 cooperatives showed total assets of $180,800, liabilities of $65,500, and an equity to the members of $115,300 in net worth. The New Orleans Bank for Cooperatives was the main source of finance. In the process of analysis, favorable and unfavorable factors were noted. Favorable factors: 1. Wholesale purchasing services of the Farmers' Marketing and Exchange Association were available to local associations. 2. A federation of ten member associations operated a drymix fertilizer plant, whose function was to dry-mix fertilizer materials bought at wholesale and to furnish its member associations with fertilizer. 3. Most of the active associations have operated on a profitable basis. 4. Some of the cooperatives had efficient management. 5. A few of the associations followed the cooperative practice of allocating on their books each member's prorata share of income retained by the association. 6. The directors served without compensation. 7. The few associations that operated on a "near-cash" or limited credit basis have found such a policy advantageous. 8. The trend was for the cooperatives to make more use of the Bank for Cooperatives as a source of credit. 9. Democratic control of all cooperatives was promoted by allowing only one vote per member. 10. The cooperatives have not over-invested in fixed assets. Unfavorable factors: 1. In most associations membership requirements did not include capital investment. 2. There was a tendency to operate on too small a margin. 3. There was no adequate educational program. 4. Accounting methods of several associations were unsatisfactory. 4 5. Adequate wholesale facilities were not available in northern Alabama. 6. Some of the boards of directors were not assuming their full responsibility. 7. Several associations failed to allocate on a patronage basis capital accumulated from earnings. 8. Some cooperatives' managers may have assumed too much control. 9. Several associations extended too much credit in proportion to their capital. 10. Limited effort was expended in interesting non-member patrons in becoming members. 11. The average annual patronage was too low in some cases. 12. Dishonest management was reported as the cause of fail= ure of two associations. 13. Disloyal membership contributed to some failures. 14. Competition between associations in the same trade area was harmful and caused some failures. 15. Some cooperatives failed because farmers stopped growing the crops they handled. Farmer Cooperation in Northern Alabama* A Physical Inventory and Appraisal of Cooperative Endeavor in Sixteen Counties THIS I. INTRODUCTION JOINT report by the Alabama Polytechnic Institute and Tennessee Valley Authority covers a study of farmers' cooperative associations in sixteen counties in Northern Colbert, Jackson, LauderAlabama. Five of these countiesdale, Limestone, and Madison - are wholly in the Tennessee Valley; ten - Blount, Cullman, DeKalb, Etowah, Franklin, are partly Lawrence, Marion, Marshall, Morgan and Winstonin the Valley; and Cherokee, which is outside the Valley, was included to complete the northern tier of counties. The study is a segment of an extensive examination of cooperatives in the entire Tennessee Valley area, which is being carried on by the Authority and the Land-Grant Institutions of the Valley states. The object of the study was to obtain information with which the Alabama Extension Service, the Tennessee Valley Authority, and other public agricultural institutions or agencies may more effectively plan and carry on activities having to do with the further development and efficient operation of cooperatives. The purposes of the study were to: (1) (2) (3) (4) (5) Make a physical inventory and appraisal of cooperatives and cooperative endeavor in northern Alabama. Determine the chief factors that have contributed to either the success or failure of farmers' cooperatives in the area. Determine the type of cooperative enterprises most likely to succeed in this part of the Tennessee Valley. Determine the need for educational and business advisory services in the area. Devise a method of getting to the individual associations information that will help them to more efficiently and effectively conduct their affairs. *ACKNOWLEDGMENTS: This study was undertaken and conducted as a tri-party arrangement between the Alabama Experiment Station, the Alabama Extension Service and the Tennessee Valley Authority. Acknowledgment is made of the contribution of J. D. Samford, Alabama Extension Service, in planning the study, and the assistance of B. T. Inman, Alabama Experiment Station, in preparation of the questionnaire and in collection of field data. Special credit is due John L. Liles, Jr., Alabama Extension Service, and B. F. Alvord and J. N. Mahan, Alabama Experiment Station, for many helpful suggestions in the arrangement and completion of the final draft of this publication. Recognition is herewith made of the cooperation of the Cooperative Research and Service Division, New Orleans Bank for Cooperatives, in consultation respecting the study and in furnishing information on out-of-business cooperatives. 6 Data used in the study, which covered the fiscal year ending in 1938, were obtained from the records and files of farmers' marketing, purchasing, and processing cooperatives that had been active for at least a year. Other cooperatives, such as the Alabama Cotton Association which has headquarters at Montgomery, county soil conservation associations, electric cooperatives, and credit associations were not included. To obtain the use of material already available, conferences were held with representatives of the Farm Credit Administration's cooperative division and its New Orleans Bank for Cooperatives. The collection and analysis of data and information, the drawing of conclusions and recommendations, and the preparation of this report represent the joint and collective opinion of representatives of the Institute and the Authority. II. AGRICULTURAL BACKGROUND Farmers' organizations, in general, represent the interests of the farmer as they relate to the development of agriculture and to improvement in rural life. Marketing and purchasing cooperatives, in particular, are farm enterprises extending farmers' efforts, usually focused on the land, into commerce and trade with the objective of improving farm income. In this light, the relation of cooperatives to types of farming, and even to soils and topography, becomes more apparent. Managers and directors, especially, ought to have a good understanding of the agriculture of their area. They should know their agriculture historically and statistically, by soils and by developments under way through programs of both government and private agencies. This knowledge is a basis for sound planning and operating for fitting the cooperative securely to the needs and opportunities of the area it serves. 1. Farming Sections as Defined by Soil Conditions* The agriculture of northern Alabama can be classified into four major farming sections, as defined by soil conditions (Figure 1). (1) Red and yellow "limestone" soils (identified as an association chiefly of Decatur-Dewey-Clarksville types) - These soils are characterized by a predominantly undulating to gently rolling surface which gives way in some parts to a hilly condition. The smooth land is comprised for the most part of reddish productive soils that are devoted extensively to cotton, corn, and to a less extent to hay and other general farm crops. The hilly areas have yellowish cherty soils, low in productivity which support a subsistence type of farming, except on the most cherty and steeply sloping portions. These cherty soils are occupied for *This section on Soils including accompanying map was prepared the Cooperative Soil Survey of the Tennessee Valley Authority. by the personnel of 7 TENNESSEE ® RED AND YELLOW LIMESTONE HIGHLAND RIM SOILS SOILS SANDY MOUNTAIN AND PLATEAU SOILS SOILS SAND AND CLAYCOASTALPLAIN FIGURE 1.-Farming sections as defined by soil conditions. the most part by forest. The red and yellow "limestone" soils are usually conducive to a prosperous type of agriculture. (2) Highland rim soils (identified as an association chiefly of Dickson and Baxter types) - These soils occur in extensive smooth plateau areas, deeply dissected in places by the drainage system. The smooth plateau portions are comprised predominantly of yellowish "hardpan" soils that have a moderate natural productivity. The steep, dissecting areas are occupied by cherty soils that have a low natural productivity. Subsistence and general farming with corn, cotton, and hay as the principal crops are common to this area. With good management most of this area is capable of supporting a prosperous agriculture, although its capabilities are less than for the red and yellow "limestone" soils section. (3) Sandy mountain and plateau soils (identified as an asAgriculsociation chiefly of Hartselle-Muskingum types) turally these soils may be divided into two major portions. The first part is comprised of undulating to gently rolling plateaulike areas occupied by yellowish sandy soils. Their' natural productivity is low, but, when properly managed, they are capable of supporting a fair to good agriculture. General farming with Scotton, corn, hay, and truck crops predominates. The second part consists of extensive stony, steep, rather mountainous slopes, a very large part of which is suited only to forest. (4) Sand and clay coastal plain soils (identified as an association chiefly of Susquehanna-Savannah-Ruston types) These soils are characterized by a gently rolling topography which grades to steeply rolling or rough. The acreage of smooth land is limited. The soils for the most part are of low fertility 8 and the most hilly parts are not farmed entensively. The smoothest areas are devoted extensively to cotton, and the less desirable farming areas support a subsistence type of farming. Cotton is the main cash crop, and corn and smaller acreages of hay, pctatoes, and other crops are raised mainly for subsistence purposes. The agricultural capabilities of this section, on the whole, are probably less than those of the other sections. Under proper management some portions are capable of supporting a prosperous agriculture. 2. Number and Sizes of Farms, Farm and Crop Acreage In 19351 there were 80,017 farms, consisting of 5,262,350 acres, in the sixteen counties of northern Alabama included in this study (Appendix A). They comprised 29.3 per cent of the farms and 26.8 per cent of the farm land in the State. The value of these farms and buildings was $129,558,971, or 35.2 per cent of the total value of all farm land and buildings in the State. The average size farm for the State was 71.9 acres as compared to 65.8 acres for northern Alabama. During 1934 a total of 2,143,068 acres of cropland was harvested in northern Alabama. This was 29.6 per cent of the total cropland harvested in the State that year. 3. Major Crops and Livestock Cotton was the most important cash crop (see Figures 2 and 3). For the period 1928-37 the average yearly production for this area was 454,000 bales, or 37.7 per cent of the average for the State. (Appendix B.) This was produced on an average of 923,680 acres, or 31.1 per cent of the ten-year average cotton acreage for the State. The area had a higher average yield per acre of cotton for the period than the State. The ten-year average annual production of cotton varied from 10,020 bales in Winston County to 50,250 bales in Madison County. (Appendix B.) Corn was the second most important crop. In 1934, 15,742,696 bushels were harvested from 1,048,154 acres, or 28.9 per cent of the total corn land harvested in the State yielded 35.5 per cent of the total production. Most of this corn was consumed on farms. County production varied from 382,604 bushels in Winston County to 1,623,742 bushels in Madison County. Hay, which was grown primarily for home consumption, was probably the third most important crop. This area produced 257,208 tons on 309,299 acres, or 39.1 per cent of the State production on 34.1 per cent of the total land in hay, during 1934. Other crops of less importance were Irish potatoes, sweet potatoes, strawberries and other truck crops. With the exception of the territory centering around Cullman, most of the truck crops were raised for local consumption. 1Source: U. S. Department of Agriculture, 1935. Commerce, Bureau of Census, United States Census of 2a Z BlounCherokee Cobed Cu/man De Ka/b -e: ... 4o 60% 80, 1 /00% i .......... :::; ;2 .: ' ". .. :i.- ;::.::....:.: :''C;':: .:: .. .. .. ~..... - ... --...-.. -m um:::::'''::;'~'::;''';; ..... :.:: , .::::: :::::::: :: Etowah frank/in MBOMOU..;;~..~-.''~~' .... :.. .. ::::: :: :: -------------- Jackson Lauderdale Lawrence Lies tone Madison Marshall Marion Morgan Wins ton cottonseed E:~ o/ton mnc!. Crops other than co/Ifon 111111 forest products Livestock and livestock products from major FIGURE 2.-Per cent of agricultural cash income received sources, 1929, counties of northern Alabama. Cuilman was the center of strawberry production for this area. In 1934, Culiman County produced 42.4 per cent and the area 61.0 per cent of all strawberries produced in the State. During the same period Blount County harvested 31.4 per cent of Alabama's total acreage of tomatoes for sale. This area produced 34.1 per cent of the milk and 39.7 per cent of the butter churned on the farms in the State during 1934. While this area did not dominate poultry production, it produced 36.9 per cent of the eggs and raised 33.5 per cent of the chickens for the State during 1934. 4. Population, Farm Ownership and Tenancy The population of northern Alabama on April 1, 1930 was 581,771 persons, of whom 81.8 per cent were classified as rural (Appendix D). Of the rural population, 391,815 or 82.3 per cent were classified as farm. By January 1, 1935 the farm population had increased to 403,484 persons, of whom 88.7 per cent were classified as white and 11.3 per cent as colored. Appendix 10 0 20% : 40. ................. .. . .: 60% . ....... 0% l,,, v o B/ount Cherokee Co/bert Cullman De /a/b fowah Prank/in Jackson Lauderdale L a wrence Limes tone M1'adison M-farsha/ A-aion /Morg an Wins ton L ~ i ... .. :..............:, .. . ................ C j I C >P .... ~ .:.. 1.......................~. .......... ............... .. ............ .... . ...... ... .. .. ....... ... ....... ;';. ... ... . .. . .. . .,............... ~. .. . ........... . ... .... .. ... . ... . .. .. . .. . . . . ... ...... . . .. .. .. . .. .:. .. .. .. .. . . .. .. .. . . . .. .. 1 . .. . . . . . .... ....... .. ,......-........... ..... . ; . : : :: : ; ;.. :.:::: " ......... .. . ....... :: : "." :.:' :1:::: " "." " "............."""~ " "" "" " . .. .. . .... ... . . .. . . . . .. .... .................. .... . . ~ ~... ~ . -..... ..... ...... . . .... .......... ; .: .. ..... .....- ~ ..'......... ... .... ...'. . ... ... ' ..... . . . . ............. \RJ ....... M W ,\R 1 "S .... . ..... . ...... .. ..... . ...... ........ ........................ ........ ......... .. .. .. "". . . .... . ...... ............ . ............ ... ............ Co tton nci 'cottonseed =Crops other, than cot/on FIGURE L ives tock and livestock Products Fores5t products cash income* received from major 3.-Per cent of agricultural sources, 1935, counties of northern Alabama. E). The four centers of population were relatively small. They were : Gadsden, a steel center, with 24,000 people ; the Florence, Sheffield and Tuscumbia Tni-Cities area at Muscle Shoals with a textile city, with 11,500. On January 1, 1935, 34.2 per cent of the 80,017 farmers in the area, or a total of 27,345, owned all of the land they 22,500; Decatur, a trade center, with 15,500; and Huntsville, operated; 81 were creased from over fifty-six five million Tenants represented 60.3 per cent of all farm operators. 5. Farmers' Cash Income The agricultural cash income for northern Alabama had managers; 4,369 owned some land but rented the and 48,222 were tenants (Appendix remainder; C). in 1935 (Appendix G). In 1929 over 82 per cent of the Agricultural cash income was from cotton and cottonseed and about *Includes rental, benefit and price adjustment payments. "Income in counties of Alabama, 1929 and 1935, by W. Adamson, Research, University of Alabama, pages 40 and 58. million in 1929' to less than thirty- de- M Bureau of Business 11 11 per cent from livestock and livestock products. However, by 1935 only 76.4 per cent of the Agricultural cash income was from cotton and cottonseed and 14.2 per cent from livestock and livestock products. Cash income from crops other than cotton had increased from 5.5 per cent in 1929 to 7.9 per cent in 1935. The percentage of the total cash income from forestry products was about the same for each year. Figures 2 and 3 show the variation of cash income by counties, by major sources, for the years 1929 and 1935. 6. Farmers' Expenditures for Feed and Fertilizer Expenditures by farmers in northern Alabama for feed and fertilizer in 1929 are shown by counties in Figures 4 and 5. For the entire area, total expenditures for feed by operators of 24,009 farms amounted to $1,935,0761, or an average of approximately $81 for each reporting farm, as compared to the State average of $93; and expenditures for fertilizer totaled $6,891,0561 for 69,976 farms, or an average of approximately $98 for each reporting farm, as compared to the State average of $105. The largest expenditures for feed were in Madison, Etowah, and Morgan Counties, the averages per reporting farm being $138, $137, and $92, respectively. Only one county in the area spent in excess of $225,000 for feed (Figure 4). Marshall and Cullman Counties each spent in excess of $75,000 in 1929 for fertilizer (Figure 5). The average expenditures TENNESSEE LAUDERDALE LIMEST ONE MADISON JACKSON .::::: . :'...:'::ETOWAH BLOUNT ,x249,999 or less $500,000 to /749, /750,000 or over 999 ALABAMA 1$250,000 to 1499,999 FIGURE 4.-Total farm expenditures for feed in northern Alabama by counties, 1929. 1U. S. Department of Commerce, Bureau of Census; Fifteenth States, 1930; Agriculture Second Series, pages 30-35. Census of the United 12 I / 74,999 or less /50,000 to 4224,999 LIE ALABAMA Alabama 475,000 to 4/d9,999 425,o000 or more 2 for fertilizer in northern FIGURE 5.-Total farm expenditures by counties, 1929. per reporting farm were $131 and $125, respectively in the two counties. III. AN ANALYSIS OF THE EXPERIENCE OF COOPERATIVES From shortly after the turn of the present century to the close of 1938, some 44 farmers' cooperatives are known to have been organized in northern Alabama'. There have been one or more associations in each county as shown by Figure 6. More associations have been organized in Cullman County than in any other county and most of these have been fruit and vegetable marketing associations. The development and activities of farmers' cooperatives in this area have been influenced by the Alabama Polytechnic Institute, the one-time Federal Farm Board, the Farm Credit Administration through its New Orleans Bank for Cooperatives and Cooperative Research and Service Division, Alabama Farm Bureau Federation, local county farm bureaus and Farmers' Educational and Cooperative Union of America. The influence of the Alabama Polytechnic Institute has been mainly through its extension specialists and county agents. In general, one or more specialists of the Extension Division's staff have devoted part of their time working with farmers' cooperative associations. In some instances, county agents have assisted groups of farmers in organizing associations. 'Out-of-business associations, Farm Credit Administration files. 13 TENNESSEE LAUDERDALE LIMESTONE MADISON JACKSON Florence* fo e Tuscumbia FRANKLIN Russellville V) R* LAWRENCE Athens ® Huntsville COLBERT ®4 Scot'f5boro + + 4 * DecaturMR N MARSHALL Ft. Payne DE KALB 0 (- Moulton * +*+ WINSTON CULLMAN GuntersvIl V) MARION 2 ,++o Q Hamilton , O Springs 4. Cullman. +nOneonta * ETOWAH Cen* Gadsden + + . CHEROKEE BLOUNT 26 + /8 * Out of business Act/ive 2 A Branch warehouses County seat ALABAMA FIGURE 6.-Location of active and out-of-business associations* in northern Alabama, December 31, 1938. The Farm Credit Administration replaced the Federal Farm Board in 1933, and its cooperative Division has provided advisory services for cooperatives that are borrowers from the New Orleans Bank for Cooperatives. The Bank provides assistance to borrowing associations with respect to records, accounting and some advice on operations; and in some cases, it has participated even in organizational work where sizable loans were expected for purchasing facilities. The Farmers' Educational and Cooperative Union of America' was the first general organization to foster the development of farmer cooperatives in northern Alabama. Beginning in 1906 it encouraged general cooperative purchasing, cooperative marketing of various farm products, and cooperative cotton warehousing and ginning. In the past, the Alabama Farm Bureau Federation has encouraged farmers to form cooperatives. It was instrumental in the organization of the Alabama Cotton Cooperative Association and the Farmers' Marketing and Exchange Association. The Alabama Cotton Cooperative, with headquarters in Montgomery, is a state-wide centralized association whose function is the marketing of cotton. The Farmers' Marketing and Exchange Association, with headquarters also in Montgomery, is a federation of local county cooperative exchanges. At present the Alabama Farm Bureau Federation offers only a nominal sponsorship of farmers' cooperatives and does not offer business and advisory services. 1 *Source: Out-of-business associations, Farm Credit Administration files. Farm Credit Administration files. 14 Yea r of orgdnizdtiorn FIGURE 7.-Years of organization of associations in northern Alabama which were active and out of business December 31, 1938. NOTE:--In addition to the above, there are four other inactive the dates of organization are not available. associations for which The 44 associations that have been organized have been reduced to 18 active associations. Figure 7 shows that there have been three major periods of organizational efforts. The first period was from 1906 through 1909, during, which time the Farmers' Educational and Cooperative Union of America was active in this part of Alabama and fostered the development of cooperatives. The second period was from 1920 to 1923, when the Farm Bureau Federation was becoming active and encouraged cooperative marketing and purchasing. The third period, which started in 1932, marked the elimination by many county Farm Bureaus of their marketing and purchasing activities, which resulted in the organization of cooperatives to perform these functions. Furthermore, in 1933 the Farm Credit Administration and its New Orleans Bank for Cooperatives made loans to several cooperatives in this area, and its resultant supervision has had an influence over such associations. The service of the Bank may have indirectly influenced other associations. All three periods have been years of economic distress or just following years of economic distress in agriculture. All of the associations organized prior to 1927 have become inactive (Figure 7) but it was possible to determine the number of years of operation for 13 of the 26 known inactive associations: 1U. S. Department of Agriculture,. Bureau of Agricultural Economics. 15 Years of operation' No. of associations' 4 5 11 12 13 16 20 24 Total associations 13 The enterprises once engaged in by the 26 associations now out of business are indicated by the following tabulation: Enterprise No. of associations Marketing fruits and vegetables Marketing seed Marketing and purchasing 10 1 5 Purchasing Cotton ginning and purchasing 8 1 Cotton warehousing Total associations 1 26 Information pertaining to the reasons for failure was available for only 12 of the 26 inactive associations 2. No. of associations 2 2 2 2 1 1 1 1 Reasons for failure Dishonest management Disloyal membership Competition with other associations Merged with other associations Inefficient management Lack of capital and inefficient management Disloyal membership and inefficient management Discontinuance of the crop in the area and dissatisfied members Poor management seemed to be an important factor contributing to the failure of five of the associations. Lack of membership loyalty contributed to the failure of three of the associations. IV. STATUS OF COOPERATIVES IN 1938 A rather detailed description and analysis of the cooperative associations is given to present pertinent facts that this report may be of maximum aid in improving the effectiveness and efficiency of existing or future associations in the area. Farm Credit Administration files. =Farm Credit Administration files. Most of this information was assembled by mail, and it is believed that many of the reasons given were greatly influenced by the attitude of the person furnishing the information; undoubtedly all of the reasons were not given. 'Source: 16 1. Number, Location and Types of Enterprise The eighteen' cooperative associations consisted of 13 county exchanges, two strawberry marketing associations, two cotton gin associations, and a dry-mix fertilizer association. Serving the county exchanges was the Farmers' Marketing and Exchange Association, a state-wide federation of local associations, with headquarters in Montgomery. Also, the Alabama Cotton Cooperative Association, a centralized state-wide organization, received all the cotton sold cooperatively. However, an analysis of the Alabama Cotton Cooperative Association and the Farmers' Marketing and Exchange Association was not included in this study because they were not entirely within the area and their inclusion in the study would have required a study for the entire State. The eighteen associations were fairly well distributed over the area, with the greatest concentration of business in the vicinity of Decatur (Figure 8). The county exchanges were, as their names indicate, local associations serving farmers in and TENNESSEE LAUDERDALE LIMESTONE MADISON JACKSON OLBERT LA RENCE FRANKLIN ' ORA MARSHALL DE KAL - Volume of fBusiness &j ) MARION W ON TN CULLMA c1Qo 25000 O ,o50,000 75, \ TOarkei M" ng O $S,000to 00,o000 Informati/on not available, or no business Purchasing Federation (Montgomery) ® wholesale Over 9/00,000 Purchasing -re/ai 1 Cot/on gins FIGURE 8.-Existing cooperative associations in northern Alabama showing volume of business by enterprises and affiliations, 1938. near by the county of their location. Membership of the exchanges consisted of farmers who utilized the exchanges mostly for the purchase of farm supplies, including feeds, seeds, and fertilizers. These associations were primarily purchasing organizations; however, they were set up so that they might engage in marketing. Two associations marketed hogs and poultry for their members. One of the 13 exchanges 'This information deals with all 18 associations in the area. 17 was in the process of reorganization, and two others did not have sufficient records to permit an analysis of their operations. Each of the active exchanges was under the supervision of a board of directors and had a warehouse store under the direction of a manager. The exchanges were members of the Farmers' Marketing and Exchange Association, from which they received some wholesale purchasing services. Ten were also members of the dry-mix fertilizer association. The fertilizer association, Tennessee Valley Fertilizer Cooperative, is a federated organization. Voting stock was held by ten active county exchanges, two county exchanges whose cooperative status was questionable, and the farmers' Marketing and Exchange Association. Representative delegates from the member cooperatives formed the board of directors, who in turn hired a manager. The function of this association was to buy fertilizer materials in wholesale quantities and mix them in required formula for the county exchanges. A major portion of the plant's output was trucked to exchanges within a fifty-mile radius. The exchanges in turn distributed the fertilizers from their stores to their farmer members. The two strawberry marketing associations were the only commodity marketing associations located within the area. These were typical local marketing cooperatives functioning on a seaTABLE 1.-Number of Farmers' Cooperative Associations in Northern Alabama by Kind of Enterprise and Volume of Sales, Fiscal Year Ending 1938. (A) No. of associations 1 8 3 1 21 152 No. of associations 1 8 3 1 2 152 1 Kind of enterprise Marketing Purchasing (exchange) Marketing-purchasing Purchasing-processing Processing and marketing Total Volume of business (rounded to $1.000) $ 6,000 473,000 146,000 127,000 19,000 $771,000 (B) Marketing $ 6,000 89,000 19,000 $114.000 Purchasine $ 473,000 57,000 127,000 $ Total 6,000 473,000 146,000 127,000 19,000 A67 .000 $771.000 Cooperative gins received incomes from ginning (processing) totaling $16,508 not included as sales. 2 0f the 18 associations in the area, one county exchange, functioning as a collective bargaining association, arranged through an agent or dealer for group buying of $9,869 worth of farm supply items (not included above) ; and two other associations, whose records were inadequate, were trying by some means to exist as cooperatives; one of these had a local dealer arrangement, and the other was in the process of reorganization. 18 sonal basis. The smaller association performed no function other than marketing. The other association, considerably larger, made cooperative purchases of crates and spray materials for its members. The two cooperative cotton gin associations were of the local centralized type, farmer membership and control being direct. The gins served a limited area and handled an appreciable portion of the cotton. However, this was a very small fraction of the total produced in northern Alabama. The gins also marketed cottonseed, either as a service to farmer members or as a result of accepting seed in payment for ginning. From the foregoing it may be readily discerned that the principal business of the 15 active associations in the area was cooperative purchasing, with marketing and processing following. Table 1 shows the comparison between marketing and purchasing, the number of associations engaged in each operation, and the volume of business by kind of enterprise. The purchasing of seed, feed, and fertilizer was by far the most important function of the associations as a group. The sales to farmers by ten associations handling these three commodities, plus the volume of business of the dry-mix fertilizer plant, accounted for about 85.2 per cent of the total volume of cooperative business (See Table 2). TABLE 2.-Number of Farmers' Cooperative Associations and Volume of Business in Northern Alabama by Major Commodity, Fiscal Year Ending 1938. Major commodity Cottonseed (gins) Miscellaneonus fruits and vegetables Fertilizer, feed, and seed Fertilizer, dry-mix plant Totals Number of cooperatives 2 2 10 1 15 Volume of business (rounded to $1,000) $ 19,000 95,000 530,000 127,000 $771,000 A limiting factor in cooperative purchasing has been inadequate wholesale facilities. Other than fertilizer from the cooperative plant and a few items available from the Farmers' Marketing and Exchange Association, the local county exchanges have been making their own wholesale purchases in carload or job lots here and there whenever it seemed advantageous. The Farmers' Marketing and Exchange Association had no manufacturing facilities and maintained no warehouse in the area from which merchandise could be redistributed. Consequently, the State Exchange had a rather limited number of items from which the locals could draw. Seeds of legumes, grasses and field crops constituted the main volume of purchases from the state association, and this volume was usually limited to "first" orders at the beginning 19 of a season. Late purchases were often made from other wholesalers, since the State Exchange did not carry large supplies. All requirements for basic slag were supplied through the State Exchange, which contracts with mills at Birmingham. Other fertilizer requirements were supplied by the dry-mix association at Decatur, with the exception of nitrates bought in carlots through the state association. Associations outside trucking distance from the dry-mix plant arrange at times for fertilizer through the state association. Locals which were not members of the dry-mix association obtained fertilizers either through the state association on a brokerage basis or from commercial manufacturers. Feeds could be bought from the state association on a brokerage basis; however, some associations made such arrangements as they could with commercial feed companies and wholesale or jobbing houses, while others bought part of their requirements through the state association. There was not sufficient cohesiveness among local exchanges to afford adequate wholesale services. Fertilizer and feed purchased cooperatively for the fiscal year ending in 1938 were compared with totals of fertilizer and feed purchased by all farmers in the area during 19291 (See Figure 9). Farmers in the area were cooperating in purchasing only a small portion of their total feed and fertilizer requirements. 1000 cooperative retail [1/938feed and fertilizer purchase 70 of 7600 and fertilizer for /929 farm expend/itures feed 200 /i2n 7 County code 9 i4i6 /0 numbeis /2 /3 /4 IS /6 FIGURE 9.-Farm expenditures by counties for feed and fertilizer during 1929 and cooperative retail purchasing of feed and fertilizer during 1938 in sixteen northern Alabama counties. The principal commodities marketed cooperatively were cotton, strawberries, poultry, hogs, and cottonseed. Strawberries were sold cooperatively through the two com1U. S. Department of Commerce, Bureau of the Census, Fifteenth (Census United States Agriculture, for the year 1929, the last year for which statistics are available for these items on a county basis. 20 modity marketing associations located within the area. The smaller of the two strawberry associations was reported to have handled about 90 per cent of the strawberries produced in its service area; whereas, the larger association estimated that its volume was about 60 per cent of the strawberries produced in its vicinity. Marketing was engaged in by two of the county exchanges, whose major function was purchasing. One of these handled some $4,200 worth of hogs and the other $7,200 worth of poultry during the year studied. An analysis of the statistics of the 1935 Agricultural Census indicates that there was a limited production of products for market, especially in volume that may be expected to be marketed cooperatively. Therefore, any increase in cooperative marketing might be expected to be developed by existing associations or by new associations set up to perform dual functions of marketing and purchasing. The only cooperative processing of agricultural products in the area was the ginning of cotton. The two cooperative gin associations ginned some 4,094 bales of cotton during their fiscal year ending in 1938. The 1937 cotton crop for the area was 602,800 bales. This contrast is used merely to show the growth and development which may be possible in cooperative ginning. Along with cooperative cotton ginning would probably come one or more cooperative cottonseed oil mills. Cooperative ginning was new to this area, but the success of one of the associations appears to justify further development. The association from which information was available charged prevailing fees for its services and saved farmers $1.48 per bale, or 34.9 per cent of its ginning charge; also, it realized a saving to farmers of $2.72 per ton, or 10 per cent on the cottonseed it sold. 2. Organizational Structure Fifteen of the 18 associations in the area were incorporated under the Alabama Cooperative Act. Two of the unincorporated associations indicated that the limited services being performed did not justify incorporating. The membership of the third unincorporated association preferred not to incorporate. The 18 associations had a total membership of 9,299, of which 8,123 patronized the associations during the fiscal year ending in 1938. In addition, there were 6,309 non-member patrons during the same period. Membership requirements were rather nominal; however, little effort was expended to increase the membership. Nine associations with 2,625 non-member patrons made no effort to get them to join. Another group of five associations with 3,601 non-member patrons reported that some effort had been made through their employees to increase membership, but without plans or program. Farmers' original capital investment in cooperative enterprises of the area was rather meager. Membership requirements in 13 associations did not include any financial investment on 21 the part of the prospective member. Four associations required fees or stock purchase for membership. One charged one dollar, two charged five dollars, and one charged ten dollars. The fertilizer association required $100 of its member exchanges. For the most part, eligibility for membership in some 14 associations consisted of being a farmer and agreeing to abide by the by-laws. An ineffective requirement of two associations was that members patronize their organization. Sixteen associations claimed that 99 per cent of their members were producers of agricultural products. Cooperative principles of democratic control seemed to prevail in the group of associations. Voting was on the basis of one vote per member, regardless of the amount of stock or membership capital held in the association. Two associations permitted proxy voting. /0/ /0 2 /03 /04 /05 /06 /07 /08 /09 //0 I/I 1/2 //5 1/3 /16 /17 /18 /19 numbers code Association FIGURE 10.-Per cent of members attending annual membership meetings for 18 associations in northern Alabama. Membership interest as reflected by attendance at annual meetings is indicated by Figure 10. The Associations fall into two groups: (1) ten associations with attendance ranging from 8 to 23 per cent; and (2) five associations with attendance ranging from 55 to 83 per cent. 22 The management of the associations was vested in boards of directors elected by members. Thirteen of the associations nominated and elected the directors at the annual membership meeting. One association had not elected directors since 1936, another had not elected directors since 1934, while another had not elected directors since it was organized in 1933. One association, which was a federation, had its directors elected on the basis of one from each member association. Eight associations had five directors and five had seven directors. Thirteen associations required their directors to be members of the association, while three required the directors to be patronizing members, and the federated association required a director to be a member of the association that he represented. Only three boards of directors met monthly. Most of the others met irregularly. The major policies were determined by the directors in seven, by the executive committee in one, by the directors and manager in three, by the manager in three, by the president and county agent in two, and by the county agent and manager in one association. Most of the associations reimbursed their directors for nominal expenses incurred upon official business of the associations. The maximum was an allowance for mileage and a per diem of three dollars, including attendance at meetings. None of the associations had a large board of directors, but each had an executive committee. 3. Educational Program It is generally acceipted among cooperative leaders that definite educational programs are essential for effective and long-lived cooperative organizations. Six, or 33 per cent, of the cooperatives studied reported that they had no cooperative educational program and the remainder could hardly be said to have true programs. The programs of two, or 11 per cent of the associations, consisted only of annual meetings of the membership. Three, or 17 per cent, of the associations' educational programs consisted of activities related to agricultural programs directed by county agents. Two associations had only seasonal sales and quality-control meetings. Two associations' educational programs consisted of annual membership meetings, sales meetings, and the personal contacts of its managers. One association's educational program was the annual membership meeting and contacts of its employees. Only one association had made use of annual membership meetings and printed matter, such as circular letters, in its educational program. This definitely indicates that a large number of the farmers' cooperative associations in northern Alabama were expending too little effort on educational activities in keeping their membership informed. Effective cooperative educational programs should begin with the directors and employees, yet eight, or 44 per cent, of the associations did no cooperative educational work among their directors or employees. 23 4. Financial Structure An over-all picture of the financial structure of the cooperative movement in northern Alabama can best be shown by a TABLE 3.-Consolidated Balance Sheet for Sixteen' Farmers' Cooperative Associations in Northern Alabama at the Close of the Associations' Fiscal Year Ending 1938. ASSETS (Figures rounded to $100) Current assets: Cash Receivables, less reserves Inventory Other Fixed assets, less depreciation Other assets: Investments Prepaid expenses Total assets LIABILITIES AND NET WORTH $ 53,500 12,000 26,500 7,500 28,200 6,500 46,600 $180,800 $ 28,000 56,700 46,300 1,700 38,200 8,800 1,100 $180.800 Current liabilities Fixed liabilities Net worth: Capital stock Certificate of indebtedness or ownership Book credit Reserves not evidenced by certificate or credit Surplus Total liabilities and net worth in 'The records of two other associations were incomplete, and they could not be included the consolidated balance sheet. Income and Expense Statement TABLE 4.-Consolidated Farmers' Cooperative Associations in Northern Alabama Associations' Fiscal Year Ending 1938. for Fifteen' for the (Figures rounded to $100) Net sales Less: cost of goods sold Gross income Less: operating. expenses Net operating income Add: other income Less: other expenses Net income $771,600' 700,600' 71,000 48,300 22,700 16,400 39,100 9,400 $ 29,700 'Three other associations of the area were either in process of reorganization or were operating through agent or dealer. 2 Two associations with incomplete operating statements, whose sales were $32,200 and whose cost of goods sold were $32,200, are included. 24 /0/ /02 /03 /04 /05 /06 /07 /08 /09 //0 /I1 1/2 Association code numbers 113 116 /17 /19/3 FIGURE 11.-Variations in the assets and liabilities of sixteen individual farmers' cooperative associations in northern Alabama. consolidated balance sheet (Table 3) and a consolidated income and expense statement (Table 4). The 16 associations for which balance sheets were available had assets in the amount of $180,800. Against these assets they 0 ~0 0 C J /0/ /0? /03 /04 /05 /06 /07 /08 /09 //0 // Association code numbers /12 /13 116. /17 1/9 FIGURE 12.-Analysis of net worth of sixteen farmers' cooperative associations in northern Alabama. 25 owed $65,500. Only four associations had assets in excess of $20,000; nine had assets of less than $10,000; and only three associations had liabilities of over $10,000, as shown in Figure 11. The capital stock of the cooperatives was $26,500, as indicated in the consolidated balance sheet. Only three of these associations issued capital stock to their members (Figure 12). Seven of the associations issued certificates of indebtedness or gave book credit so as to show definitely each individual member's equity in the association. Only two of the associations had raised initial capital by the sale of stock, the balance of the net worth for the group of associations being an accumulation of earnings. Seven of the associations, however, that had accumulated their net worth from earnings, had made no attempt to credit individual members with their prorata shares. The active farmers' cooperatives in northern Alabama as a whole operated on a profitable basis during their fiscal year ending 1938, as indicated by Table 4. Two of the associations, however, accounted for about half of the net income as shown by Figure 13. Only six of the associations had net incomes of $2,000 or more. /0 9 7 o2J /0/ /02 /03 /04 /05 /06 /07 /08 /09 //0 Associat ion code numbers /I/ /12 //3 FIGURE 13.-Variation in the individual net income of thirteen farmers' cooperative associations in northern Alabama. 26 During 1938, eleven associations in northern Alabama had peak borrowings of $126,900. Of this, $112,900, or 89.0 per cent, was borrowed by seven associations from the New Orleans Bank for Cooperatives. During 1936, five of the same associations had peak borrowings of $45,600. Of this, $22,600, or only 49.6 per cent, was borrowed from the New Orleans Bank for Cooperatives by two associations (Figure 14). The associations 53 45 40 35 I New Orleans Bank for Cooperatives Commercial Bank SO Si30 /0/ /02 10 /04 /05 //O /06 /07 /0 /09 Associoion code numbers /// //2 /13 16 /17 1/9 FIGURE 14.-Peak borrowings for three years for sixteen individual farmer cooperative associations in northern Alabama by source. in the area appear to be using the Bank for Cooperatives as a source of credit more and more each year. 5. Statistical and Business Analysis of Associations for Fiscal Year Ending 1938 by Types of Enterprises Similarity of operations and comparable sizes are important in making contrasts or comparisons. The treatment of various elements is often influenced by size of the operating unit, and, therefore, in considering the elements, size should be kept in mind. Volume of business is an important factor in judging past or possible future success of a cooperative business enterprise. The county exchanges were dealt with first. These were divided into two groups of associations comparable in size within each group. These groups were treated separately, comparison and contrasts being made in terms of the group. Four of the 13 county exchanges did not have sufficient records to be included in the analysis. The remaining nine associations fell in two groups, one above and the other below a $50,000 annual volume of business. There were five in the former group and four in the latter. 27 Group I--(Volume of business over $50,000).-The current ratio of assets to liabilities indicates the position of the association with respect to its probable ability to meet its current obligations. An examination of the balance sheets of the associations in this group of exchanges showed that three of the five had ratios of current assets to current liabilities of less than 2 to 1. The highest ratio was 22.1 to 1; the lowest, 1.6 to 1; and the median 1.8 to 1 (See Table 5). TABLE 5.-Analysis of Working Capital, Fixed Capital, Membership and Exchanges in Group I, Patronage of Five County Cooperative Fiscal Year Ending 1938. Association Item 101 102 108 109 110 Working Capital Analysis Ratio of current assets to current liabilities 1.7:1 Per cent receivables was of current assets 68.6 No. of days' sales in receivables 50 Fixed Capital Analysis Ratio of net worth to fixed assets Ratio of sales to fixed assets 2. 57.4 29 1 1:1 23.6 9.7 1.8:1 58.0 53 1.6:1 6.8 2 137.1:1 13.8:1 15.0:1 27.1:1 8.8:1 101.1:1 100.8:1 110.7:1 198.5:1 145.9:1 $12.21 $33.92 $90.12 $32.23 $ 3.23 $32.30 $ 5.51 $68.86 Membership and Patronage Analysis Average net worth per member $10.15 Average sales per patron $30.84 A desirable ratio should be at least 2 to 1. Even then the strength of such a position depends upon the nature of the current assets and the character of the accounts receivable. In this group of associations, three of the five had 57 per cent or more of their current assets tied up in accounts and notes receivable, and in two of these cases the current ratio was less than 2 to 1. Thus, less than 43 per cent of the current working capital of these associations was available to maintain an inventory with which to serve their members. Two of the associations with current ratios of less than 2 to 1 had an average of 50 or more days' sales tied up in receivables. Such a situation usually forces an association to use credit in buying, causes it to be unable to obtain cash discounts, and otherwise places the association in disadvantageous positions. The third association with a current ratio of less than 2 to 1 was the youngest of the group. An examination of the fixed capital shows that the five exchanges had a ratio of net worth to fixed assets ranging from 137.1 to 1 to 8.8 to 1. A desirable ratio should be at least 1 to 1. The favorable position of the associations in this respect is accounted for by the fact that none of the associations had investments in buildings or real estate, as they rented the premises they occupied. Similarly, the ratio of sales to fixed assets was favorable - ranging from 100.8 to 1 to 198.5 to 1. 28 Net worth of the associations in terms of average member equity in the cooperative enterprise ranged from $3.23 to $90.12 per member. The median was $10.15. This represented an accumulation of undivided earnings; however, no part of it was initial capital raised by the sale of stock or from membership dues or fees. As a matter of fact, the association with the highest average per member equity ($90.12) had only three per cent of its patrons as members during the fiscal year covered by the study. With reference to sales and patronage, the average sales per patron ranged from $30.84 to $68.86, with $32.30 as a median. In fact, in four of the five associations the per-patron sale was between $30 and $34. That one association could sell an average of $68.86 per patron suggests that the four other associations in this group were not supplying the same portion of the farm needs to their patrons. In analyzing the income and expense statements of this group of associations, it was found that gross income ranged from 10.4 to 8.4 per cent of sales, and the median was 9.3 per cent (Table 6). TABLE 6.-Income and Expense Statements Expressed in Percentages Five County Cooperative Exchanges in Group I, Fiscal Year Ending 1938. for Item Net sales Less: cost of goods sold Gross income Less: operating expenses Net operating income Add: other income Less: other expenses Net income 101 Per cent 100.0 91.3 8.7 5.5 3.2 0.4 3.6 0.1 3.5 102 Per cent 100.0 89.6 10.4 7.8 2.6 0.6 3.2 0.2 3.0 Association 108 Per cent 100.0 91.6 8.4 6.0 2.4 0.0 2.4 0.0 2.4 109 110 Per cent 100.0 90.7 9.3 7.4 1.9 0.1 2.0 0.2 1.8 Per cent 100.0 90.3 9.7 7.1 2.6 0.0 2.6 0.2 2.4 Basing efficiency of operations upon sales, the most efficient association (No. 101) had a gross income of 8.7 per cent, a net income of 3.5 per cent, and operating expenses of only 5.5 per cent. This same association also had the highest inventory turnover, which was 37.7 (Table 7). However, Association 101 expended 72.8 per cent of its total operating expenses for salaries and wages; whereas, 60 per cent was more nearly the optimum figure for this type of association. Furthermore, with reference to ratios, Association 101 had next to the lowest current position, 1.7 to 1, with more than 68 per cent of its current assets tied up in receivables, which represented 50 days' average sales. Although its net worth position was highest of 29 the group, its ratio of sales to fixed assets was next to the lowest. Its average sales per patron were lowest, and the average net worth per member was the median of the group. The least efficient association (No. 110), again based on sales, had the lowest inventory turnover, which was 11.6 times. It also had the lowest net income of only 1.8 per cent and next to the highest operating expenses, 7.4 per cent (Tables 6 and 7). This association, however, operated three warehouses in TABLE 7.-Analysis of the Operations of Five County Cooperative changes in Group I, Fiscal Year Ending 1938. Association Item Annual inventory turnover Percent that salaries and wages was of operating expenses Per cent that all other operating expenses was of total operating expenses Per cent produce sold for farmers was of sales Per cent supplies sold to farmers was of sales 101 37.7 72.8 27.2 102 14.1 61.2 38.8 108 28.9 60.0 40.0 109 22.3 60.6 39.4 110 11.6 62.6 37.4 Ex- 100.0 100.0 100.0 100.0 100.0 order to serve its members better, and other things being equal, it would be expected to have higher expense per unit of sales. On the other hand, it sold an average of $68.86 per patron, which was more than twice as much as any other association of the group. As it was the newest association of the group, it might be expected to increase the number of patrons at its several warehouses and thereby increase efficiency. Group II-(Volume of business less than $50,000) .- An analysis of the balance sheets for this group of county cooperative exchanges shows that two of the four have ratios of curTABLE 8.-Analysis of Working Capital, Fixed Capital, Membership, and Patronage, Cooperative Exchanges in Group II, Fiscal Year Ending 1938. Association Item Working Capital Analysis Ratio of current assets to current liabilities Per cent receivables was of current assets Number of days sales in receivables Fixed Capital Analysis Ratio of net worth to fixed assets Ratio of sales to fixed assets Membership and Patronage Analysis Average net worth per member Average sales per patron 105 106 111 113 2.1:1 70.5 30.8 4.9:1 39.9:1 $15.67 $77.93 1.6:1 47.4 40.3 5.2:1 35.5:1 $ 28.10 $191.79 3.9:1 31.3 9.37 15.1:1 213.1:1 $ 2.81 $39.57 1.3:1 30.3 37.2 7.1:1 65.2:1 $ 6.76 $61.99 30 rent assets to current liabilities of less than 2 to 1 (Table 8). The range was from 3.9 to 1 to 1.3 to 1. The two associations with low current ratios had averages of 40.3 and 37.2 days' sales tied up in accounts and notes receivable. One association had 70.5 per cent of its current assets invested in receivables, which amounts to an average of 30.8 days' sales. The association with the most unfavorable current ratio (1.3 to 1) had by far the smallest volume of business. An analysis of the fixed capital shows that these exchanges have a ratio of net worth to fixed assets ranging from 15.1 to 1, to 4.9 to 1 (Table 8). The ratio of sales to fixed assets ranged from 213.1 to 1, to 39.9 to 1. In all associations except No. 105, this favorable position in both of these situations was due to or influenced by the associations renting the buildings they occupied. The average net worth per member ranged from $2.81 to $28.10 (Table 8). Here, as in Group I, net worth, or members' equity, represents an accumulation of earnings, and no part of it was initial capital raised' by the sale of stock or obtained from membership dues and fees. All four associations were non-stock corporations. The association with the largest average membership equity, $28.10, also had the largest average sales per patron, which were $191.79 (Table 8). The income and expense statements of these exchanges show that they had a gross income ranging from 6.4 per cent to 11.9 per cent (calculations based on sales Table 9). Operating expenses varied from 4.0 to 8.0 per cent. The most'efficient of the group (Association 105) had the lowest operating expense of 4.0, a gross income of 6.4, and a net income of 4.5 per cent. TABLE 9.-Income and Expense Statement Expressed in County Cooperative Exchanges in Group II, Fiscal Year Ending 1938. Percentages, Item Net sales Less: cost of goods sold Gross income Less: operating expenses Net operating income Add: other income Less: other expenses Net income 105 Per cent 100.0 93.6 6.4 4.0 2.4 2.2 4.6 0.1 4.5 Association 106 111 Per cent 100.0 88.1 11.9 6.9 5.0 1.2 6.2 0.1 6.1 Per cent 100.0 91.7 8.3 7.4 0.9 0.0 0.9 0.2 0.7 113 Per cent 100.0 91.9 8.1 8.0 0.1 0.0 0.1 0.0 0.1 However, Association 106 had a higher operating expense, 6.9 per cent, but its gross income of 11.9 per cent enabled it to exceed Association 105 in net income - 6.1 against 4.5 per cent. 31 Three of the four associations within this group purchased farm supplies. The other association's volume of business was divided between sales of farm supplies to farmers (86 per cent) and the marketing of farm products (14 per cent) (Table 10). The association with the lowest annual inventory turnover had the highest operating expense and the lowest net income, and yet it expended practically as much for salaries and wages as did the most efficient association (Table 10). TABLE 10.-Analysis of Operations of County Cooperative Group II, Fiscal Year Ending 1938. Exchanges in Association Item Annual inventory turnover Per cent that salaries and wages was of operating expenses Per cent all other operating expenses was of operating expenses Per cent produce sold for farmers was of sales Per cent supplies sold to farmers was of sales 105 Per cent 41.7 70.6 29.4 14.0 86.0 106 Per cent 6.6 38.1 61.9 0.0 100.0 111 Per cent 38.0 44.0 56.0 0.0 100.0 113 Per cent 5.8 70.6 29.4 0.0 100.0 The per cent of operating expenses paid for salaries and wages varied from 38.1 per cent to 70.6 per cent. (Association 111 had a part-time manager and 44.0 per cent of its total expense was used for salaries and wages.) Dry-Mix Fertilizer Association (Tennessee Valley Fertilizer Cooperative).-This is an analysis of the federated fertilizer mixing association, the Tennessee Valley Fertilizer Cooperative at Decatur, Alabama. The membership of this association was composed of 12 county exchanges and the Farmers' Marketing and Exchange Association at Montgomery. Four of the 12 county organization members were not included in all phases of this study due to one having become inactive, supposedly in process of reorganization; the cooperative status of another being questionable; and inadequate records of two others. Three other county exchanges included in the study did not patronize the fertilizer association, although one of them was a member, because the distance from Decatur to their headquarters was too great for economical trucking operations (Figure 15). In 1937 and 1938 about 75.0 per cent of the association's sales were made to member associations whose headquarters were within a 40-mile radius of the plant. The balance was sold within an additional ten-mile radius, except about three per cent in 1938, which was sold outside the area. The experience of this association indicates that as long as it depends on the present truck distribution it must plan to dispose of threequarters of its output through member associations whose ware- 32 houses are located within a 40-mile radius, and all of its output through member associations whose warehouses are located within a 50-mile radius. An analysis of this association's balance sheet showed that it had a ratio of current assets to current liabilities of 33.5 to 1. Furthermore, only 30.5 per cent, or an average of 114 days' sales, was in receivables. This indicates that this cooperative was in a sound financial condition and will be able to meet its current obligations as they come due, but its services may be increased by extending operations throughout more of the year. The ratio L E2, 3AU LWR W N S OLN I 0ILEST M .Q Athens FIGUNhe5.- se eo yoae KOerene 198 J.96)_ dsd ofCUb1 R T 9r. assets as anixd ntwrh'rt iB" 38970F Hfnts 938 -x rtiizeAasocitio P C O L B D MC p artil e atu s-2s , 0Z7 Russellvtlle 931o37s1sl A FF RA K ,939' j 89.2 ating M R GA ARS Les:opouern N NATONAL FORES expenses4 AL Gntrsvll PanT\ fF l t W I~ Cullman - 7eyv.5ente Gasde SpNengtincome7 NDouble~i C -f 1; O N 4 IL __ TAL 1-noeadEpneatementExpressedoinsPercetaesfo t -fs B Oneonta ON FIGURE 15.-Territory in Decaturr served for the by cooperative years? 193r7 and dr-i 98nticldn etlze soito a o Add: otherincome 0. 33 be improved through increased sales of goods and service activities by member associations. An analysis of the income and expense statement shows that the association had a gross income from operations of 10.8 per cent (Table 11). Operating expenses amounted to 4.2 per cent, which indicates a very economical operation. The net income of 7.0 per cent appears to bid well for a relatively small cooperative fertilizer dry mixing plant supplying fertilizer to member associations in northern Alabama. Considered from the viewpoint of capital invested, it represents an earning of 61.3 per cent to the member associations. Salaries and wages were 51.2 per cent of the total operating expense. Two Cooperative Cotton Gin Associations.-The next group of associations to be analyzed consisted of two cooperative cotton gin associations. One of the associations, No. 104, operated two gins. An analysis of the balance sheet for the two cooperative cotton gin associations revealed that one of the associations had a current asset to current liability ratio of 2.8 to 1, and the other had no current liabilities. It would seem that these organizations should have no trouble in meeting their current obligations. One association had 13.6 per cent of its current assets in receivables, and the other had only 2.4 per cent. This indicates that they are operating approximately on a cash basis. Both associations had a ratio of net worth to fixed assets of 1.0 to 1 (Table 12). This indicates that the associations must borrow all of their operating capital. The ratio of gross income from ginning to fixed assets for Association No. 104 is 0.8 to 1 (See Table 12). The ratio of cottonseed sales to fixed assets for TABLE 12.-Analysis of Working Capital, Fixed Capital, Membership and Patronage of Two Cooperative Cotton Gin Associations, Fiscal Year Ending 1938. Association Item Working Capital Analysis 104 2.8:1 13.6 1.0:1 .8:1 .9:1 $355.62 $169.53 $184.24 116 2 2.4 1.0:1 Ratio of current assets to current liabilities Per cent receivables was of current assets Fixed Capital Analysis Ratio of net worth to fixed assets Ratio of gross income from ginning to fixed assets Ratio of cottonseed sales to fixed assets Membership and Patronage Analysis Average net worth per member Average gross income from ginning per patron Average seed sales per patron two gins. No current liabilities. .Information not available. 'Operates 2 $47.31 Association No. 104 is 0.9 to 1. The average net worth per member of this association was $355.62, and of Association No. 116, $47.31. The average gross income per patron from ginning was 34 $169.53 for Association No. 104, and the average seed sales per patron were $184.24. The cotton gin Association No. 104 (Table 13) earned 16.7 per cent on its ginning operations and 5.6 per cent on its trading operations. Ginning operations contributed 74.8 per cent of the TABLE and Expense Statements, Two Cooperative 13.-Income Gin Associations, Fiscal Year Ending 1938. Cotton Association Item Operating Income 104' Per cent 47.9 31.2 16.7 52.1 46.1 6.0 .4 5.6 .02 22.3 116 Gross income from ginning Less: ginning expenses Net operating income Trading Income Incomplete records Seed sales Less: cost of goods sold Gross trading income Less: trading expenses Net trading income Add: other income Total net income 'Operates two gins. 'Less than .05 of 1 per cent. total net income and the trading operations (Table 14). TABLE 25.0 per cent Cotton Gin of Operations of Two Cooperative 14.-Analysis Associations, Fiscal Year Ending 1938. Association Item Per Per Per Per cent cent cent cent salaries and wages was of total expenses all other expenses was of total expenses operating income was of net income trading income was of net income 104' 23.1 76.9 74.8 25.0 116 No record 'Operates two gins. Cooperative Strawberry Marketing Associations.-The two cooperative strawberry marketing associations in northern Alabama assembled and shipped strawberries to terminal markets and made returns to the growers on a daily pool basis. One association had an assembling and shipping shed, and the other had no facilities. One association paid its manager five per cent of sales and the other paid a daily wage when the manager was actually engaged in work for the association. association closed its 1938 Table with current liabilities. Receivables were very small, fiscal year 15 indicates that neither 35 as the associations settled with growers after returns were received from shipments and thereby had an opportunity to deduct from growers' receipts the amounts owed the associations. Only one association had fixed assets, and this association had a ratio of net worth to fixed assets of 1.8 to 1. This association owned its facilities and probably had sufficient funds for its present operation (Table 15). The ratio of sales to fixed assets TABLE 15.-Analysis of Working Capital, Fixed Capital, Membership and Patronage, Two Strawberry Marketing Cooperatives, Fiscal Year Ending 1938. Association Item Working Capital Analysis Ratio of current assets to current liabilities Per cent receivables was of current assets Number of days' sales in receivables Fixed Capital Analysis Ratio of net worth to fixed assets Ratio of sales to fixed assets Membership and Patronage Analysis Average net worth per member Average sales per patron 107 1 112 0 0 0 0 $ 2.67 $420.00 5.3 0.4 1.8:1 36.2:1 $ 6.02 $137.04 1No current liabilities. was 36.2 to 1, which indicates that the association is making good use of its fixed assets. The average net worth per member was $2.67 in one and $6.02 in the other association. The association with fixed assets had the higher average net worth per member. Average sales per patron were $420 and $137.04 for Nos. 107 and 112, respectively. Operating expenses were 10.4 and 1.0 per cent, and net incomes were 0.4 and 2.3 per cent for Associations 107 and 112, respectively (Table 16). The association with the low operating TABLE 16.-Income and Expense Statements Expressed in Percentages, Two Strawberry Marketing Cooperatives, Fiscal Year Ending 1938. Association Item Net sales Less: cost of goods sold Gross income Less: operating expenses Net operating income Add: other income Total Less: other expenses Net income Irrrr r r 107 Per cent 100.0 96.7 3.3 1.0 2.3 0.0 2.3 0.0 2.3 112 Per cent 100.0 89.9 10.1 10.4 -0.3 (loss) 0.7 0.4 0.0 0.4 36 expenses and high net income was a small association whose members devote time without compensation. The other association had a more formal set up performing such functions as grading and pre-cooling before shipping. Sales of supplies to farmers amounted to 14.0 per cent of the larger association's total business. V. CONCLUSIONS AND RECOMMENDATIONS The early unsuccessful attempts at cooperation have almost been forgotten in northern Alabama. The farmers of this area have at work for them now a number of reasonably strong associations. These constitute a nucleus from which cooperation can grow in extent and service. In fact, it appears that prospects for the future of farmer cooperatives in this area are as bright as anywhere in the South. But sound growth will not come of itself. Guidance is needed, guidance that comes from the knowledge of past success and failure, from the correct appraisal of present situations, and from the applications of sound business and cooperative principles. This section of the report discusses both favorable and unfavorable factors of the past and present and indicates specifically some possible development for cooperatives in northern Alabama. It also calls attention to the need for guidance through cooperative education for members, directors and managers and for the establishment of business advisory services so that the various associations may function in an efficient and businesslike manner. 1. Favorable Factors The factors that have contributed to the success of cooperative enterprises in northern Alabama are potentially influential for increasing the effectiveness of existing associations. These favorable factors should be taken into consideration as new or additional cooperative services may be undertaken: (1) Wholesale purchasing services of the Farmers' Marketing and Exchange Association at Montgomery were available to the local purchasing associations which were members of the state federation. This organization has been helpful, especially in the purchasing of seeds, seed inoculations and basic slag for its member associations. Many of the member associations believed that additional functions and services should be performed by the state federation. Some adjustments may be necessary for that to be accomplished. It appears that the member associations must first demand and finance such additional services and functions, and then follow up with adequate patronage. (2) The association operating the dry-mix fertilizer plant was an asset to the area. Ten of the purchasing associations were 37 members of this federation, whose function was to purchase fertilizer materials at wholesale, to dry-mix them, and to furnish its member associations with the mixed fertilizer'. Since its beginning, this federation has operated to a decided advantage to its members. The success of this venture should encourage the local associations to attempt the manufacturing or processing of other supplies, possibly through this federation, the state-wide federation, or through some other organization designed to service cooperatives in the northern area. (3) Most of the active associations have operated on a profitable basis. The fact that some farmers' cooperatives can succeed should encourage other farmers to cooperate. Indeed, examples of successful cooperative operations have influenced less effective cooperatives to make the necessary stride and get on a "going concern" basis. (4) Some of the farmers' cooperative associations had efficient management. Efficient management must begin with directors interested in what the cooperative is set up to do and willing to supervise its activities. These board members must have sufficient business experience and appreciation of what is being undertaken to enable them to determine sound policies and employ capable managers. Without good management, membership patronage cannot be expected. (5) Some of the associations followed the good cooperative practice of allocating on their books each member's prorata share of net income retained by the association. (6) Directors of cooperatives in northern Alabama serve without direct compensation. These cooperatives follow the good practice of reimbursing their directors for expenses incurred on official business. There should be avoided, however, the danger of compensation becoming the directors' prime interest. The same principle applies to the officers. (7) Some of the associations operated almost on a cash basis. These examples encourage other associations to adopt a "cash", or limited credit, policy. When an association buys for cash, it can take advantage of discounts and reduce interest. And the manager with no credit worries can devote his full time toward building an organization and increasing the volume of business, which should lower operating costs. (8) The trend was for the cooperatives to make more use of the Bank for Cooperatives as a source of credit, as indicated by Figure 14. Lower rates of interest prevail, and the influences usually exercised by the Bank are conducive to the more efficient functioning of the borrowers. (9) Democratic control of all cooperatives is promoted by allowing only one vote per member. (10) The cooperatives have not invested too much of their capital in fixed assets. 'The two other local members have questionable cooperative status. 38 2. Unfavorable Factors The study also revealed factors that have contributed to the failure of cooperative enterprises in northern Alabama and factors which were retarding existing associations. Unless corrected, they may contribute to the failure of some of the cooperatives now active. These unfavorable factors are described below: (1) Two associations excepted, members have not been required to invest capital either upon entrance or subsequently. Since the association must have adequate capital to operate effectively, it is necessary to raise such capital through sale of stock, fees, borrowing, or deduction from margins. Therefore, the membership in particular and the patrons should clearly understand this situation for it will tend to increase their interest and avoid friction. (2) Most of the purchasing associations were operating on margins that were too small. Only two of the associations had as much as a ten per cent margin. Too small a margin, resulting often from price cutting, seriously handicaps an association in its operations, impairs its efficiency and eventually adversely affects membership and trade relations. (3) There was no adequate cooperative educational program. This was one of the more serious weaknesses of cooperative endeavor in the area. Without an understanding of the principles, objectives, and basic operations of cooperation, members soon look upon their cooperative as "just another business concern". The simplest and most universal form of membership education that can be employed is the annual membership meeting, but three associations did not even have membership meetings during the year studied. (4) The accounting records of several of the cooperatives were incomplete. Only nine of the thirteen county cooperative exchanges had records complete enough for an analysis of their operations. One cooperative gin did not have complete records. Members do not have confidence in cooperatives unless they keep records and make complete accounting to the membership of their operations and finances. Without adequate records efficient operation is impossible. (5) Adequate cooperative wholesale facilities are not available in northern Alabama. The dry-mix fertilizer plant is too far from several of the purchasing associations, as Figure 15 shows. There are no cooperative facilities for the manufacture of feed. The state-wide federation does not maintain a stock of seed conveniently located for its member associations in this part of Alabama. Cooperative purchasing associations often reach their maximum effectiveness only after they have control of simple processing and manufacturing facilities for the major items they handle. (6) Some of the boards of directors are not assuming their full responsibilities. Many of the boards do not meet at regular intervals to consider progress, or lack of progress, of their 39 associations. A few directors have permitted their managers to determine major policies, while other directors have left the matter of policy forming largely to a minority committee or to the local county agent and manager. In several cases, the directors have set managers' salaries so low that they have not been able to obtain efficient management. Associations with lowsalaried managers have not increased business according to reasonable expectations. This is a criticism of the boards of directors rather than the managers. A low salary cannot be depended upon to get the type of manager needed to produce results. A low salary, set to save money, usually results in an increased expense per unit volume of business. Various factors enter into the success of cooperatives, but good management is the one factor all cooperatives must have to be successful. Cooperative boards must be willing to pay for this talent and ability. It was found that poor management was responsible for the failure of five out of twelve associations on which information was available. The following contrast will illustrate in part the need for capable managers conducting the business of the farmers' organizations on fulltime basis: Association No. 101, organized in 1933, has had the continuous full-time service of the highest paid cooperative manager ($150 per month) in northern Alabama. Its operation has been the most efficient in the area. It created a surplus while using an eight per cent mark-up. On the other hand, Association No. 113, organized in 1930, paid the lowest salary ($50 per month) for a part-time manager who had served two years. This association had the lowest volume of business and the least efficient management found in the group, and, although operating on a similar margin, it was barely able to keep out of debt. (7) Several cooperatives that had accumulated capital from operations had not made proper allocations of each individual member's prorata share, based on patronage. When a member is not conscious that he has helped to finance his cooperative, he does not have the interest in the association he would have otherwise. Unless the member is issued some type of certificate as evidence of this allocation of retained capital, he is likely to feel that he has had no part in financing the association. (8) A few of the cooperatives may have been too much in the control of their managers. At least one supposedly farmers' cooperative was excluded from this study because it was understood that this organization no longer had cooperative features, but was practically in the control of the former manager and was being operated as his private business. (9) In view of their limited capital, several associations had extended too much credit. Five of the nine purchasing associations had a ratio of current assets to liabilities of less than 2 to 1. In its mildest form, credit is an item of expense. Therefore, associations with unfavorable ratios are unable to make 40 further extension of credit and continue to operate on a sound business basis. (10) Many of the associations had non-member patrons whom they were not attempting to interest in membership. In one association, only three per cent of the total number of patrons were members. (11) In some associations, average annual patronage was too low. In five associations the figure was less than $40, the lowest being $30.84. However, in three associations the average was about $70, and in one, annual sales to each patron averaged $191.79. Hence, according to what some associations have done, others could do better. Perhaps they should carry a greater variety of items, offer additional services or do a better job of merchandising. (12) Dishonest management was given as the cause for failure of two of the associations. Adequate audits would probably have avoided failure from this cause by bringing an impending situation to the attention of the board of directors in time for them to change managers before the association was completely wrecked. (13) Disloyal membership is often caused by inadequate educational programs, inefficient management, associations prematurely started, associations started where there is no economic need, and a lack of investment in the enterprise by members. Disloyal membership was given as the direct cause for failure of two cooperatives in the area and a contributory cause for the failure of others. (14) Competition with other cooperatives in the same area has caused the failure of a few associations in northern Alabama. Where there are two similar associations organized to perform the same function in the same general trade area, the result usually is the failure of one or both. (15) The discontinuing of a particular crop has caused the failure of a few cooperatives. For example, in Madison County farmers started growing cantaloupes for distant markets and formed an association to market them. The crop proved unprofitable, growing stopped and the marketing cooperative discontinued operation. In Marshall County, strawberry growing, which had been carried on for years, dwindled away because it became unprofitable, and the marketing cooperative went out of existence. A well-established, efficient organization of value to a community in other respects may be lost through the failure of a single commodity. The effort and costs of establishing a cooperative may justify several services to help assure its permanency to the community. 3. Possible Future Developments As Related to Marketing.-In northern Alabama which produces many different kinds of agricultural products in small quantities, there are limitations on the development of single- 41 commodity marketing associations. The small volume of products available and the seasonal character of production usually have not enabled associations to maintain adequate personnel and carry overhead expense throughout the year. There is a strong indication that the quantity produced or the quantity that may be reasonably expected to be marketed through cooperatives in northern Alabama, with the possible exception of the territory in and around Cullman and Blount Counties, is not great enough to support new marketing associations. Consequently, unless the possibility of their being able to attract a satisfactory volume of business can be demonstrated new cooperatives should not be organized. Existing cooperatives might well expand their activities to care for apparent additional cooperative needs. Existing associations can usually perform additional services without a great increase in overhead expenses and with less capital and equipment than a new organization would require. In fact, the purchasing associations now in this area should be able to market most any commodity in this region more effectively than new ones set up to do marketing alone. There is a possible exception in the case of cotton. Purchasing associations are more numerous and generally more successful than marketing associations in northern Alabama. Dual purpose associations should be encouraged, for they are the type likely to withstand the tests and rigors of competition, seasonal fluctuations in volume, crop failures, poor markets, management costs, and overhead expenses. A dual functioning organization was Association No. 105. Though primarily a purchasing organization, it appeared to be rendering an effective service in marketing hogs. Likewise, No. 118 was a purchasing association engaged in marketing poultry. The Cullman Strawberry Marketing Association handled effectively a satisfactory volume of berries and also purchased crates and insecticides for its members. If the present substantial production of commercial Irish and sweet potatoes should expand enough to create marketing problems, the existing association could extend its activities to take care of the cooperative needs of the producers. An additional service might lie in the cooperative marketing of cottonseed through the further development of cooperative cotton gins. This possibility is discussed in the section on processing services. Although the proximity of Birmingham may not warrant it, consideration might be given to the possibilities of cold storage and quick freezing facilities in this northern Alabama area. With Regard to Purchasing.-More wholesale purchasing services are needed. Developments in wholesale purchasing could come through increased activity of the State Federation at Montgomery. Of course, the elements necessary for success must be present. Another possible center for new cooperative whole- 42 sale functions is the dry-mix fertilizer plant at Decatur. Again, caution should be exercised to determine whether over-all services can be made available to local associations most effectively by this approach. As the needs arise, counties without cooperative exchanges probably will organize them at county seat towns or trading centers. And as these exchanges attempt to extend their activities, additional wholesale and processing services will be required of some over-all organization. It appears appropriate, therefore, that local cooperatives in the area give serious thought to bettering and extending their services to their farmers by jointly providing improved channels for wholesale purchases. If enlargement cannot be worked out satisfactorily with the existing wholesale set-up, then the associations in this area should provide other arrangements. Possibilities include enlarging and expanding the federation, which heads up in the mixed fertilizer plant at Decatur, for service in the section west of the mountains. Decatur is a logical point for the storing and warehousing of reserve supplies and for the location of a small feed mill to serve county exchanges in this section. It is available to truck, rail and water transportation, and it is within a 50-mile radius of most of the purchasing associations. Year-round use of personnel of the fertilizer plant, and other doubling up, would keep overhead down. Additional purchasing functions will probably be added by the county exchanges as the effectiveness of their present operations demonstrates ability to meet needs in other lines. Experience and confidence breed increased activity. For example, purchasing Association No. 109 was selling baby chicks and was considering the addition of a hatchery. The purchasing associations need new and varied functions to help them smooth out seasonal fluctuations. With the development of water transportation, the cooperative distribution of petroleum products becomes a likely addition to services now being performed by the purchasing associations. Gasoline and oil probably could be sold the same distance from Decatur that fertilizer is distributed by truck. With Regard to Processing.-The part processing in the vicinity of production might play in the development of markets and a diversified agriculture in the South could be given more attention by agricultural leaders, engineers, and technicians of the institutions of the South. This subject is worthy of consideration for northern Alabama. This report, however, cannot cover all possibilities. Cold storage and quick freezing are mentioned above as possibilities in relation to markets and to marketing fruits and vegetables. Refrigeration should also be considered in connection with livestock marketing. Cooperative cotton ginning is a major processing service that is likely to develop in northern Alabama. Two cooperative gin 43 associations in the area appear to be going along satisfactorily. With adequate business and technical advisory services, these cooperative cotton gins should not experience serious economic difficulties. In view of the world cotton market condition, it would appear that cooperative ginning might be given consideration by the cotton marketing associations of the South. If cooperative ginning is not taken up this way in northern Alabama, it would be logical for local cooperative cotton gins and one or more cooperative cottonseed oil mills to be developed jointly by such organizations as the county exchanges and the existing cooperative gins. Establishment of cooperative cottonseed oil mills located in rural areas should follow the development of cooperative gins. Mills located in or adjacent to areas producing livestock offer particular advantages'. A cooperative cottonseed oil mill should be in a federated form of association with cooperative gins as members. Cooperative Educational and Advisory Business Services The problems revealed in this report are, for the most part, due to lack of understanding of the cooperative way of doing business. This appears to be the outstanding weakness of cooperative endeavor in the area. Many of these difficulties and handicaps can be overcome if proper educational and advisory services are rendered. Without an understanding of the principles, objectives, and basic operations peculiar to cooperatives, farmers should not be expected to convert their desires and efforts into healthful business enterprise, and their cooperatives will continue to make needless mistakes. in a trial and error approach to success. This understanding may be obtained from two sources: (1) From experience; (2) from agencies in a position to inform farmers about the conduct of farm business by cooperatives. In many sections of our country, farmers have long experienced cooperation in farm business organizations. The rough trail of trial and error may be paved with encouragement if farmers are told about the experiences of older associations and are shown proved methods of successful enterprises. Cooperation as a form of business enterprise is not generally understood by farmers in the South. They are not familiar with the various types of cooperative organizations and the many laws pertaining thereto. In many instances, the people have not understood how to organize and finance a cooperative enterprise. Early experiences with cooperative pooling of annual crops, largely cotton, proved unsuccessful. Early efforts to market fruits and vegetables and to purchase farm supplies cooperatively were not successful, but now many farmers are showing a new interest in the possibilities of cooperative enterprises. 'University of Tennessee Engineering Experiment Station, Knoxville, Tenn. 4. 44 The problems outlined in this report can be classified under three heads: (1) General problems of organization and operation; (2) problems of the membership, directorate and officers; and (3) specific problems of management, including business methods and procedures. General Problems of Organization and Operations.-Although general in nature, these problems are of basic importance. For the most part they are caused by premature organization and inadequate preparation. Farmers planning to start a cooperative can minimize their problems by determining whether (1) there is a need for the services contemplated, (2) whether their performance by a cooperative association is economically feasible, and (3) by learning how an organization should be formed, financed, and operated. The information can then be made available at meetings and conferences of interested groups. Facts and findings should be presented by a person trained in the cooperative field. In existing associations, studies may be made of various aspects of organization or operation, and the findings made available to and discussed with the management of the association. Problems of the Membership, Directorate and Officers.These problems usually can be traced to a lack of understanding by members, directors, and officers of the principles of cooperative enterprise. The result is that these persons do not appreciate the privileges and responsibilities of their respective positions. Such problems may largely be solved with educational programs conducted through group discussions, membership meetings, and membership "co-op" schools, and by the use of printed material. Only a few of the associations studied made any pretense of having a membership educational program. Some of the associations have not even had annual membership meetings. Membership requirements in such instances are so easily fulfilled that being a member carried little significance or responsibility. Probably one of the greatest handicaps of cooperatives in northern Alabama is that directors do not learn about the weaknesses of their organizations in time to correct them. An independent analysis that goes further than the ordinary audit is helpful to directors in correcting situations that might prove destructive. In this area it is also true that directors and officers did not fully appreciate the nature and the seriousness of their duties and of the trust and responsibility placed in them. In many cases, directors have considered their duties completed when they had found a manager whom they thought capable of "running the business". In several instances, policies initiated by the directors have not been in keeping with good cooperative practices. Directors are frequently confused in the matter 45 of dividend payments, allocation of reserves, and interpreting financial statements. These situations can be alleviated by special schools for the directors, by consultations with directors in their meetings, by use of printed educational material prepared especially for directors and officers, and through the assistance and advice of some person trained in the fundamentals of cooperative enterprise. Specific Problems of Management.-There are several diverse problems of management, also growing out of lack of understanding of the conduct of cooperative business enterprise and the failure to observe good business practices: (a) Few of the managers seem to realize their responsibilities to the membership and directors. (b) There is a lack of understanding of the division between the duties of manager and directors. (c) Many managers assume responsibilities for policy making which should be reserved to the directors. (d) Frequently managers fail to inform the directors of membership grievances or misunderstandings. (e) Many managers, while excellent business men, fail to realize their responsibility for furnishing information to the membership and for helping members realize that the business belongs to them. (f) Many managers do not keep adequate records and are never sure of their standing. Schools for managers, at which the principles and methods of cooperation may be taught and standard business practices stressed, would be helpful in solving these problems. Managers are appreciative of pamphlets or other material pertaining to the conduct of the type of business they are managing. The need for advisory work with managers of cooperatives in northern Alabama is clearly revealed. Indicative of possible benefits is the success that has attended supervision given by the New Orleans Bank for Cooperatives to borrowers in this area. When the need for records was shown and a system of bookkeeping explained, managers were quick to respond. 46 VI. APPENDIX APPENDIX ANUMBER OF FARMS, SIZES AND VALUES Northern Alabama, January 1, 1935 Farms Total acres 329,116 282,051 219,825 Acres per farm 67.2 81.9 80.6 55.3 57.8 66.5 79.6 75.6 71.2 63.0 54.0 60.1 54.3 75.8 67.7 80.4 65.8 Land and buildings Total value 6,018,671 5,837,529 6,815,160 9,912,590 9,174,972 7,307,952 4,716,201 8,3 17,258 9,59 5,729 8,003,756 12,449,028 15,545,704 10,553,081 4,156,933 8,839,360 2,3 15,047 129,558,971 Number Blount Cherokee Colbert Cullman DeKalb Etowah Franklin Jackson Value per farm 1,229 1,696 2,500 1,344 1,373 1,747 1,261 1,508 1,856 1,649 1,987 2,210 1,671 957 1,800 906 1,619 Per cent Value of total per land in acre farms $18.29 20.70 31.00 24.32 23.75 26.29 15.84 19.93 26.08 26.18 36.81 36.76 30.76 12.63 26.59 11.28 24.62 18.73 79.2 76.8 55.6 83.5 76.8 80.0 71.9 57.2 82.8 68.2 88.7 81.5 89.11 69.2 88.5 50.9 4,897 3,442 2,726 7,376 6,684 4,182 3,741 4071 531 Lauderdale Lawrence Limestone Madison Marshall Marion Morgan Winston Northern Alabama State Percent of State in area 5,517 5,170 4,855 6,266 7,034 6, 316 4,345 4, 912 2,554 80,017 273,455 386,272 277,929 297,693 417,274 367,941 305,705 338,151 422,883 343,095 329,172 332,425 205,287 5,262,350 19,660,828 71.9 368,219,654 1,347 29.3 26.8 Commerce, 35.2 Bureau of Census, United States Census of U. S. Department of Agriculture, 1935. Source: 47 APPENDIX BESTIMATED ACREAGE, PRODUCTION, AND YIELD OF COTTON IN NORTHERN ALABAMA (Average 1928-1937). County Blount Cherokee Colbert Culman DeKaib Etowah Franklin Jackson Lauderdale Lawrence Limestone Madison Marshall Marion Morgan Winston Total area State total Per cent of State total Alabama. Acreage 42,280 49,360 46,920 70,340 65,140 43,220 35,670 48,690 67,230 68,800 90,150 109,500 69,900 34,410 61,520 20,550 923,680 2,966,600 31.1 Production (Bales) Yield (Pounds) 247 247 217 292 282 237 242 236 213 229 225 231 298 21,250 24,140 20,380 41,330 36,670 20,160 17,340 23,250 28,750 31,490 40,250 50,250 42,100 15,410 31,210 10,020 226 255 24~3 245 204 454,000 1,202,700 37.7 Source: Alabama Cotton 1928-1937, Office of the Agricultural Statistican, Montgomery, APPENDIX C - FARMS AND CROPLAND HARVESTED BY TENURE IN NORTHERN ALABAMA Farms, January 1, 1935 Cropland harvested, 1934 Full owner Acres 55,574 36,359 19,213 84,460 75,651 39,080 34,509 44,450 36,143 33,883 41,271 56,149 59,536 44,348 50,270 32,492 743,388 2,295,475 32.4 34.7 Part owner Acres 8,067 3,807 16, 542 County Blount Cherokee Colbert Cullman DeKalb Etowah Franklin Jackson Lauderdale Lawrence Limestone Madison Marshall Marion Morgan Winston Total farms 4,897 3,442 2,726 7,376 6,684 4,182 3,741 5,517 5,170 4,855 6,266 7,034 6,316 4,345 4,912 2,554 Full owner 2.062 1,084 617 3,343 2,937 1,607 1,344 1,847 1,435 1,071 1,424 1,543 2,354 1,758 1,594 1,325 27,345 81,624 33.5 34.2 29.8 Part owner 294 103 308 295 219 113 218 417 552 373 306 408 236 149 315 63 4,369 15,068 29.0 Manager 5 1 3 1 Tenant 2,536 2,254 1,798 3,523 2,455 2,179 3,250 3,408 4,521 5,058 3,725 2,436 2,996 1,166 48,222 176,247 27.4 60.3 Manager Acres 658 100 182 65 452 500 92 77 283 2,365 5,205 80 102 494 Tenant Acres 55,364 66,082 51,478 82,375 -86,865 60,542 49,431 88,489 84,721 95,385 117,383 141,644 93,769 51,483 79,737 23,096 1,227,844 4,342,250 28.3 5 7 3 3 3,737, 3 15 25 1 2 7 3,180 7,929 6,098 3,394 6,880 14,009 20,262 16,030 11,498 19,467 7,873 3,547 14,258 1,520 161,181 520,235 31.0 7.5 7.2 Area, northern Alabama 80,017 273,455 State Per cent of State represented by a:,rea Per cent of total 100.0 for area Per cent of total 100.0 for State 81 516 15.7 10,655 80,646 13.2 5.55.5 .1 .2 __ .5 1.1 57.3 60.0 64.5 Source: -.--- 31.7 U. S. Department of Commerce, Bureau of Census, United States Census of Agriculture, 1935. 49 POPULATION OF NORTHERN ALABAMA APPENDIX D BY COUNTIES - April 1, 1930 County Blount Cherokee Colbert Cullman DeKalb Etowah Franklin Jackson Lauderdale Lawrence Limestone Madison Marshall Marion Morgan Winston Area State Total population 28,020 20,219 29,860 41,051 40,104 63,399 25,372 36,881 41,130. 26,942 36,629 64,623 39,802 25,967 46,176 15,596 581,771 2,646,248 Rural population 28,020 20,219 19,106 38,265 36,729 26,228 22,226 36,881 29,401 26,942 32,391 53,069 34,260 25,967 30,583 15,596 475,883 1,901,975 25.0 71.9 100.0 100.0 81.8 100.0 82.3 17.7 1930. Rural farm 22,048 18,225 14,851 34,230 33,635 20,468 17,463 27,787 26,350 24,345 29,760 36,243 30,937 19,420 24,553 11,500 391,815 1,336,409 29.3 Rural non-farm 5,972 1,994 4,255 4,035 3,094 5,760 4,763 9,094 3,051 2,597 2,631 16,826 3,323 6,547 6,030 4,096 84,068 565,566 14.9 Per cent of State total in area 22.0 Per cent of total of State population 100.0 Per cent of total of State rural population Per cent of total of area population Per cent of total of area rural population Source: U. S. 70.3 29.7 Department of Commerce, Fifteenth Census of the United States, 50 APPENDIX E County Blount Cherokee Colbert Culman DeKalb Etowah Franklin - FARM POPULATION OF NORTHERN ALABAMA January 1, 1935 BY COUNTIESPersons 24,604 17,845 16,023 36,247 33,007 21,630 18,170 28,371 26,045 24,623 30,242 36,014 30,235 21,428 25,507 13,493 403,484 1,386,074 29.1 100.0 100.0 White 24,106 16,509 10,939 35,750 32,801 20,790 17,648 27,096 22,168 18,750 21,651 22,785 29,807 20,977 22,484 13,491 357,752 895,368 40.0 88.7 64.6 Colored 498 1,336 5,084 497 206 840 522 1,275 3,877 5,873 8,591 13,229 428 451 3,023 2 45,732 490,706 9.3 11.3 35.4 Jackson Lauderdale Lawrence Limestone Madison Marshall Marion Morgan Winston Area, northern Alabama State Per cent of State represented by ar( Per cent of total area Per cent of total for State 13. S. Department of Commerce, Bureau of Census, United States Census of Agriculture, 1935. Source: APPENDIX F - CASH INCOME FROM AGRICULTURAL PRODUCTION COUNTIES OF NORTHERN ALABAMA 1929 Cotton incl. cottonseed $ 2,125,317 2,516,284 2,295,854 4,115,348 3,859,181 1,981,093 1,799,631 2,278,622 3,280,570 3,372,269 4,080,439 4,448,847 4,304,912 1,658,950 3,077,299 969,147 $46,163,763 82.3 1929 and 1935, by W. M. Adamson; BY SOURCE, Livestock products $ 266,491 115,266 93,669 341,050 342,166 386,656 122,103 314,875 283,142 107,572 227,136 376,087 309,087 141,116 241,500 56,565 Forest products $ 54,794 36,614 17,751 81,190 72,594 45,905 37,954 67,842 39,172 24,881 52,749 34,342 51,553 69,924 42,842 36,123 $766,230 1.4 Alabama, page 40. County Blount Cherokee Colbert Cullman DeKalb Etowah Franklin Jackson Lauderdale Lawrence Limestone Madison Marshall Marion Morgan Winston Area total All agric. production $ 2,800,184 2,860,345 2,571,840 5,164,433 4,654,950 2,690,614 2,192,301 3,085,755 3,989,966 3,743,987 4,703,652 5,521,288 5,065,010 2,147,609 3,693,218 1,224,679 $56,109,831 Crops other than cotton $ 231,956 115,537 85,737 456,245 210,826 176,725 117,726 176,525 225,436 125,935 203,486 410,095 178,437 131,606 152,105 110,322 $3,108,699 5.5 Bureau of Livestock $ 121,626 76,644 78,829 170,600 170,183 100,235 114,887 247,891 161,646 113,330 139,842 251,917 221,021 146,013 179,472 52,522 $2,346,658 4.2 Business Research, $3,724,481 6.6 University of Per cent of area total income Source: Income in counties of Alabama, C. APPENDIX G - CASH INCOME FROM AGRICULTURAL PRODUCTION INCLUDING RENTAL PAYMENTS BY SOURCE, 1935 - COUNTIES OF NORTHERN ALABAMA All farm products $ 1,884,046 1,779,860 1,498,569 3,692,531 2,737,491 1,797,061 1,410,046 1,954,447 2,067,426 2,092,759 2,719,179 3,677,089 3,024,232 1,335,977 2,180,383 841,667 $34,692,763 Cotton incl. cottonseed $ 1,276,342 1,467,354 1,222,301 2,641,652 2,138,174 1,342,809 1,024,310 1,388,723 1,549,422 1,706,584 2,193,781 2,855,672 2,440,778 933,223 1,694,211 620,450 $26,495,786 76.4 , Crops other than cotton $ 204,835 99,007 70,237 531,457 183,092 133,829 98,022 148,494 153,779 113,006 157,059 324,845 196,743 117,319 153,052 55,553 $ Livestock 117,097 85,398 116,699 156,395 143,708 98,644 114,771 190,507 163,876 168,183 178,602 237,250 152,014 94,298 141,069 61,224 $ Livestock products AND BENEFIT Forest products $ 58,138 16,693 13,240 74,145 17,450 40,398 74,410 21,865 16,365 13,072 24,889 12,271 18,655 61,453 20,844 53,817 $537,705 1.5 page 58. County Blount Cherokee Colbert Cullman DeKalb Etowah Franklin Jackson Lauderdale Lawrence Limestone Madison Marshall Marion Morgan Winston Area total 227,634 111,408 76,092 288,882 255,067 181,381 98,533 204,858 183,984 91,914 164,848 247,051 216,042 129,684 171,207 50,623 $2,740,329 7.9 Bureau of $2,219,735 6.4 Business Research, $2,699,208 7.8 University Per cent of area total income Source: Income in counties of Alabama, 1929 and 1935, by W. M. Adamson, of Alabama,