Marketing AgreementsCooperatives

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Marketing Agreements/Cooperatives

• United States Department of Agriculture, Rural
  Development

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USDA Rural Development

• Delivers over 40 programs that provide a variety
  of
• loans and loan guarantees,
• grant programs,
• technical assistance
• In the areas of
• business
• economic development
• cooperative development
• rural housing
• community facilities
• water and waste disposal
• electric power
• telecommunications (distance learning and
  telemedicine)

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Hawaii State Office

• Program Delivery
• State of Hawaii
• American Samoa
• Western Pacific
• Guam, CNMI, Republic of Palau, Federated States
  of the Micronesia, Republic of the Marshall
  Islands

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Cooperative Program

• Specialize in technical assistance to rural
  groups interested in organizing a cooperative,
  and to existing cooperatives.

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Cooperative

• A COOPERATIVE IS A FOR-PROFIT CORPORATION
• It has
• a corporate board of directors,
• a profit motivation,
• a service orientation,
• single tax treatment.

SERVICE
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What is a COOPERATIVE Business ?

• A cooperative is a user-owned and user-controlled
  corporate business in which benefits are received
  in proportion to use.

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A Type of Business Dependent On

• Who owns the business.
• Who controls the business.
• Who uses the business.
• Who gets the profits.

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What is a COOPERATIVE Business ?

• It is a fair way for producers to go into
  business together
• It is a locally owned and controlled corporation
• Its business purpose depends on its members

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Types of Cooperatives

• Producer-owned cooperatives
• are owned by farmers, producers or small
  businesses.
• Consumer-owned cooperatives
• enable consumers to secure a wide array of goods
  and services.
• Worker-owned cooperatives
• are businesses owned and controlled by their
  employees.

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Distinctive Features

• Service at cost
• Financial obligation benefits proportional to
  use
• Democratic control
• Limited return on equity capital

UNIQUE
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User-Owner Principle
The people who own and finance the cooperative
are those who use it.
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User-Control Principle

• The people who use the
• cooperative are those
• who control the cooperative.

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User-Benefit Principle

• The cooperatives sole purpose
• is to provide and distribute
• benefits to members on the
• basis of their use.

USDA Cooperative Services
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Participation Roles

• Cooperatives operate through the roles of
  principal parties
• Members
• Directors
• Manager
• Employees

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What Cooperatives Do

• Marketing
• Purchase supplies
• Provide services

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Marketing Cooperatives

• Market products
• acquire and sell commodities
• Kona Pacific Farmers Cooperative
• Maui Farmers Cooperative Exchange
• bargain for price, terms of sale
• Hawaii Banana Cooperative
• Hawaii Cattle Producers Cooperative Association

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Purchasing Cooperatives

• Purchase supplies
• operate farm supply store
• Farm Supply Cooperative
• Hikiola
• joint purchasing programs
• Kona Pacific Farmers Cooperative
• Maui Farmers Cooperative Exchange

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Service Cooperatives

• Provide needed member services
• Hamakua/North Hilo Agricultural Cooperative
• Maui Produce Processing Cooperative
• Hawaii Livestock Cooperative
• East Kauai Water Users Cooperative

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Steps to OrganizeSummary

• Hold exploratory meeting
• Form steering committee
• Conduct survey of potential members
• Analyze market
• Evaluate Feasibility
• Prepare business plan
• Prepare legal papers
• Implement the business plan

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Marketing Agreements

• A marketing agreement is a LEGAL DOCUMENT
  recording the rights and duties of farmers
  (members) and a marketing business (cooperative)
  with regards to marketing agricultural products.
• It is a CONTRACT between farmers and the
  marketing business.

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Marketing Agreements

• Are DIFFICULT to enforce unless tightly
  written--must be ENFORCED quickly and equitably.
• Have PROVISIONS for what happens when the contact
  is broken.
• Outlines LIQUIDATED DAMAGES that can be assessed
  for non-delivery.
• OUTLINES quality requirements.

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Energy Programs at USDA

• Section 9003 Biorefinery Assistance
• Section 9004 Repowering Assistance
• Section 9005 Bioenergy Program for Advanced
  Biofuels
• Section 9007 Rural Energy for America Program
  (REAP) Replaces Section 9006
• Section 9008 Biomass Research and Development
• Section 9009 Rural Energy Self-Sufficiency
• Section 9011 Biomass Crop Assistance Program

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Section 9007Rural Energy for America

• Enhancements from previous program
• More technologies available (now includes small
  hydro and wave energy)
• Increases loan guarantees from 10M to 25M
• Establishes an energy audit grant program
• Allows grants for feasibility studies
• Increases combined guaranteed loan/grant
  combination from 50 to 75 of project costs
  (subject to statutory limits)

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Section 9007Rural Energy for America

• Program can be used to purchase a renewable
  energy system AND/OR
• Make energy efficiency improvements.
• Maximum grant is 25 of project cost
• Not to exceed 500,000 for an energy system
• Not to exceed 250,000 for energy efficiency
• Rural small businesses and agricultural producers

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Section 9007Rural Energy for America

• Any renewable energy or energy efficiency project
  as defined in the law
• Biomass, Anaerobic Digester, Geothermal (electric
  generation and direct use), Hydrogen, Wind, Solar
  (photovoltaic and thermal) and small hydro and
  ocean energyadded 2008
• Energy Efficiency Improvements--improvements to a
  facility, building, or process that reduces
  energy consumption, or reduces energy consumed
  per square foot.

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Value-Added Producer Grants

• Program designed to assist producers to develop
  businesses that produce and market value-added
  agricultural products.
• Provides grants for planning or working capital
  purposes relating to the marketing of a
  value-added product.

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Value-Added Producer Grants

• Applicant Eligibility
• Independent producers
• Farmer or rancher cooperatives
• Agricultural producer groups
• Majority-controlled producer-based business
  ventures.

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Value-Added Producer Grants

• Purpose Eligibility
• Planning activities, such as conducting
  feasibility studies and developing business plans
  for processing and marketing value-added
  agricultural products.
• Working capital expenses for processing and
  marketing value-added agricultural products,
  including inventory, salaries, and office
  supplies.

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Value-Added Producer Grants

• What is NOT Eligible?
• Purchasing any processing equipment,
• Agricultural production expenses,
• Land purchases,
• Research and Development

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Small Minority Producer Grant

• What is NOT Eligible?
• For cooperatives to assist small, minority
  agricultural producers
• Governing board and/or membership is at least 75
  minority
• Provide technical assistance to small, minority
  agricultural producers--market research product
  and/or service improvement legal advice and
  assistance feasibility study, business plan, and
  marketing plan development and training.
• Maximum grant--175,000no matching required.

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Other USDA Programs

• Farm Labor Housing1 loan for up to 33 years
• Rural Business Opportunity GrantsTechnical
  assistance, leadership training, establishment of
  business support centers, economic development
  plans.
• Rural Business Enterprise Grants--for projects
  that finance/facilitate development of small and
  emerging rural businesses

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• Tim OConnell
• Assistant to the State Director/
• Cooperative Development Specialist
• 154 Waianuenue Ave., Room 303
• Hilo, HI 96720
• [phone] (F)8326
• tim.oconnell_at_hi.usda.gov