Understanding Retained Patronage Refunds in Agricultural Cooperatives: Reply

1985 ◽  
Vol 67 (1) ◽  
pp. 135-135
Author(s):  
Charles R. Knoeber ◽  
David L. Baumer
Keyword(s):  
Agricultural Cooperatives ◽  
Patronage Refunds

Financing agricultural cooperatives with retained earnings

2017 ◽  
Vol 77 (3) ◽  
pp. 393-411 ◽  
Author(s):  
Jeffrey Royer
Keyword(s):  
Cash Flow ◽  
Balance Sheet ◽  
Agricultural Cooperatives ◽  
Tax Rates ◽  
Present Value ◽  
Content Type ◽  
Marginal Tax Rates ◽  
Patronage Refunds ◽  
Parameter Values ◽  
Retained Earnings

Purpose The purpose of this paper is to explore the advantages equity capitalization programs based on retained earnings from patronage sources may provide cooperatives and their patrons that traditional equity financing methods do not offer. Design/methodology/approach The analysis is based on a model used to assess patron benefits from a cooperative that is financed by a combination of allocated equity acquired from noncash patronage refunds and unallocated equity acquired from retained earnings. The level of patron benefits is represented by the present value of the after-tax cash flow patrons receive from the cooperative, and the model is used to determine the combination of noncash patronage refunds and retained earnings that provides the greatest present value given the levels of those parameters that affect capitalization of the cooperative and the distribution of cash benefits to patrons. Findings The analysis demonstrates that only pure plans, i.e., plans based entirely on retained patronage refunds or entirely on retained earnings, will be associated with the greatest present value for any particular set of parameter values. Cooperatives that are characterized by low marginal tax rates and growth rates and whose patrons are characterized by high marginal tax rates and discount rates are those most likely to benefit from equity capitalization programs based on retained earnings. Research limitations/implications The model is based on the assumption of constant parameter values and does not account for the existence of nonpatronage income. Practical implications A useful extension of this work would be the development of a decision aid capable of generating basic operating statement and balance sheet data and enabling cooperative decision makers to conduct experiments concerning alternative financing strategies based on retained earnings. Originality/value The analysis contained in this paper is based on an explicit model and extends across a broad range of values for various parameters that affect the level, timing, and present value of cash distributions from cooperatives. Because the cash flow received by patrons is determined after the cooperative’s planned equity growth is met, cash flow comparisons are equivalent with respect to the capital provided the cooperative. In addition, the revolving period is endogenously determined.

Are cooperatives transitioning from cost minimizers to profit maximizers?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amanda Clymer ◽  
Whitney Bowman ◽  
Elizabeth A. Yeager ◽  
Brian C. Briggeman
Keyword(s):  
Cost Minimization ◽  
Profit Maximization ◽  
Primary Objective ◽  
Evaluation Framework ◽  
Agricultural Cooperatives ◽  
Firm Level ◽  
Agricultural Marketing ◽  
Content Type ◽  
Supply And Marketing Cooperatives ◽  
Patronage Refunds

PurposeThe purpose of this paper is to examine the optimizing behavior of agricultural supply and marketing cooperatives in the US Midwestern states.Design/methodology/approachThis paper uses firm-level data from CoBank, the primary lender to agricultural cooperatives, to evaluate optimizing behavior of 77 Midwestern agricultural marketing and supply cooperatives from 2014 through 2017. The study uses the data envelopment analysis (DEA) and the weak axioms of cost minimization and profit maximization to identify whether or not a cooperative is following a cost minimization and/or profit maximization objective.FindingsIn contrast to previous research, results provide stronger support for profit maximization as the behavioral objective of agricultural cooperatives instead of cost minimization, especially for larger cooperatives.Practical implicationsTraditional firm theory for investor-owned firms states that businesses seek to maximize profits. Agricultural cooperatives however, could aim to maximize profits so as to redistribute profits back to user-owners as patronage refunds. Or, they could minimize costs so as to lower cost of products sold and services provided to their user-owners. Given users-control the cooperative, knowing the primary objective of agricultural cooperatives will allow for better design of research and education programming.Originality/valueGiven recent changes and consolidation in the agricultural industry among farms and agricultural cooperatives, this study reexamines past work that evaluated the optimizing behavior of agricultural cooperatives. Changes in industry and the necessity to remain competitive from an agribusiness standpoint have resulted in an anticipated shift toward a profit maximizing objective. The value of this study is providing an evaluation framework, using a firm-level comprehensive dataset, that represents the cooperative system.

An equity management and planning tool for cooperatives

2015 ◽  
Vol 75 (2) ◽  
pp. 267-281 ◽  
Author(s):  
Jeffrey Royer
Keyword(s):  
Mathematical Model ◽  
Rate Of Return ◽  
Agricultural Cooperatives ◽  
Planning Tool ◽  
Content Type ◽  
Return On Equity ◽  
Patronage Refunds ◽  
Lending Institutions ◽  
Equity Management ◽  
Equity Position

Purpose – The purpose of this paper is to describe an equity management and planning tool used by rural electric cooperatives (RECs) and based on the times-interest-earned ratio (TIER). The objectives of the paper are to construct a mathematical model that provides a rigorous foundation for the TIER approach, modify the approach so the rate of return on equity is a function of the cooperative’s equity position, demonstrate how elements of the model can be used by RECs in setting electric rates that will enable them to accelerate the retirement of member equity, and derive a generalized form of the “modified Goodwin formula” that can be used by both RECs and agricultural cooperatives. Design/methodology/approach – Mathematical and graphical expressions of the TIER approach are developed. Simulations are used to demonstrate how RECs can set electric rates according to a target revolving period. The modified Goodwin formula is generalized to include the payment of cash patronage refunds through use of a growth model of an agricultural cooperative developed in Royer (1993). Findings – This paper demonstrates how TIER analysis and the modified Goodwin formula can be used by cooperatives to aid their decisions regarding debt and equity financing and their choices regarding cash patronage refunds, equity retirement, and growth. The paper demonstrates that cooperatives that fail to recognize the functional relationship between the rate of return on equity and the equity position may substantially underestimate the equity position necessary to meet interest coverage requirements and overestimate their ability to grow and retire equity. It also shows that RECs may be able to make substantial improvements in equity revolvement with only modest increases in electric rates. Research limitations/implications – The model developed in this paper has been simplified to focus on fundamental financial relationships. To apply this model, cooperatives may need to modify it to accommodate the complexities of their business operations. Practical implications – TIER analysis can provide a useful equity management and planning tool for both RECs and agricultural cooperatives. It also can be used by lending institutions to assess the financial health of individual cooperative organizations. Originality/value – Constructing a mathematical model that provides a foundation for TIER analysis, modifying the approach so that the rate of return on equity is a function of the equity position, demonstrating how RECs can use the model to set electric rates according to a target revolving period, and generalizing the modified Goodwin formula so it can be used by agricultural cooperatives are all original contributions.

Tata kelola internal dan eksternal untuk mengatasi permasalahan pangan di Indonesia

2018 ◽  
Vol 13 (1) ◽  
Author(s):  
Reza Hendriyantore
Keyword(s):  
Good Governance ◽  
National Level ◽  
Open Government ◽  
Agricultural Cooperatives ◽  
Methodological Framework ◽  
Agricultural Cooperative ◽  
The Reformation ◽  
The Government ◽  
Good Access ◽  
Descriptive Method

The effort to put good governance in development in Indonesia is basically not new. Since the Reformation, the transformation of closed government into an open government (inclusive) has begun to be pursued. Highlighting the conflicts in the land sector that tend to strengthen lately, there are some issues that have intensified conflicts in the field, such as the lack of guaranteed land rights in various legal and policy products. In this paper, a descriptive method is considered important in identifying the applicable issue and methodological framework for addressing governance issues in Indonesia. To reduce such agrarian conflicts between farmers and the government, and as an effort to increase farmers' income, all farmers are incorporated into agricultural cooperatives. Agricultural cooperatives are structured down to the National Level. Thus, farmers participate in good access to the marketing of agricultural produce.Keywords:good governance, agrarian conflict, agricultural cooperative

scholarly journals Economic and financial position of agricultural enterprises in the period before the accession to the European Union

2012 ◽  
Vol 50 (No. 11) ◽  
pp. 486-494
Author(s):  
Z. Chrastinová
Keyword(s):  
European Union ◽  
Agricultural Sector ◽  
Agricultural Land ◽  
Agricultural Products ◽  
Cold Weather ◽  
Business Success ◽  
Agricultural Cooperatives ◽  
The European Union ◽  
Adverse Weather ◽  
Legal Entities

In the year before the accession to the European Union, the Slovak agricultural sector reported a loss of SKK 2.4 billion and following a profitable year, the earnings were reduced by SKK 2.8 billion. The situation was caused by a number of reasons, namely reduced sales of agricultural products, damage resulting from adverse weather effects (cold weather, hail, drought and  swine fever), as well as widening of the price gap compared to the year before (increasing input prices in agriculture and decreasing purchase prices of agricultural products, especially in livestock production). Legal entities and natural persons experienced mixed business success. While 51% of legal entities made profit, the figure rose to 76% in the group of natural persons. Both the agricultural cooperatives and trading companies performed with a loss. The loss per hectare of agricultural land (a.l.) was substantially lower in the case of business companies. Natural persons - private farmers were profitable over the period. The gap between the profitable and loss-making enterprises has widened. Some 60% of profitable enterprises owned by legal entities made only a small profit below SKK 0.5 million. The loss-making performance was typical for more productive areas of Slovakia. This was related to stronger effects of adverse climate in 2003.

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