Farmer Cooperatives as Systems of Attributes: An Analysis of Ownership and Investment Complementarities

Abstract

The long-term economic viability of the farmer cooperative mode of organization is often assumed to be jeopardized by an equity constraint. To inform possible solutions, the farmer cooperative is conceptualized as an independent firm comprising a system of attributes, thus facilitating a better understanding of the dual function of organized farm producers as both patrons and capitalists. We place emphasis on the hybrid assignment and configuration of claim rights to find possible complementarities between ownership and investment so as to loosen the equity constraint. Based on survey data on US farmer cooperatives, we analyze multiple configurations of membership access, ownership transferability, equity redeemability, preferred stock provision and ownership, and upfront capital contribution in relation to the desire to patronize and the obligation to capitalize the cooperative. Thus, we inform constitutional responses to rapid developments in the agri-food industry, which force farmer cooperatives to find additional equity for necessary growth in scale and scope.