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The History of Cooperation: Doing Together What We Cannot Do Alone

Ever since civilization began, people have seen mutual benefit in working together to achieve a common goal. In discussing the history of cooperatives it is difficult to distinguish between the concept of cooperation — combining efforts for a common goal — from that of forming a user-owned business.

“There are examples of businesses with many of the common characteristics of a cooperative in the 1600s and even earlier,” said Phil Kenkel, Bill Fitzwater Cooperative Chair at Oklahoma State University. “It is difficult to classify those examples as cooperatives since the legal structure for a cooperative, and even the legal structure for a corporation or partnership, did not formally exist.”

One of the first examples of a successful cooperative business was the Rochdale Society of Equitable Pioneers which was formed in England in 1844. The Rochdale founders also developed principles for a user-owned business which is now recognized as the first set of cooperative principles. 

The structure of U.S. agricultural cooperatives can be traced to the Capper-Volstead Act of 1922. Often referred to as the “Magna Carta of Cooperatives,” it led to the Cooperative Marketing Act of 1926 which was the legal framework for incorporating agricultural cooperatives.

One of the driving forces behind The Capper- Volstead Act was to correct the unintended consequences of another piece of legislation, The Sherman Anti-Trust Act of 1890.

“While the Sherman Act was intended to prohibit the anti-competitive practices of large businesses such as banks and railroads, it was interpreted to also prohibit the activities of farmers in jointly marketing their commodities,” Kenkel said.

In creating The Capper-Volstead Act, lawmakers realized that their goal was to allow agricultural producers to work together in collectively marketing and processing their commodities. That required the legislators to carefully define the types of farm associations and activities that would qualify. 

Our members’ benefits are the services we provide, including insurance, Together, as a whole, we have the opportunity to provide benefits to them that they could not get on an individual basis.

Terry Detrick, American Farmers & Ranchers

In defining the type of farm associations with anti- trust exemptions, the legislators looked to the concept of cooperatives and the principles developed by the Rochdale Pioneers.

The Capper-Volstead Act is often described as giving “limited immunity to anti-trust prosecution” since it explicitly authorized producers to work together but also places checks and balances to prevent them from unduly increasing prices to consumers.

More importantly, in terms of cooperative history, the Capper-Volstead Act described the organization structure for an association to qualify which included membership structure, profit distribution in proportion to use, limits on non-member business, voting structure and limitation on stock dividends.

“While the word ‘cooperative’ never appears in the Capper-Volstead Act, the legislation clearly created our current structure of agricultural cooperatives in the U.S.,” Kenkel said. 

The enabling legislation for U.S. agricultural cooperatives was influenced by the original set of principles proposed by the Rochdale weavers. All cooperatives in the United States and around the world are still guided by a similar set of principles.

The most recent version of those principles was developed by the International Cooperative Alliance and includes: voluntary and open membership; democratic member control; patronage in proportion to use; autonomy and independence; education, training and information; cooperation among cooperatives; and concern for community.

Those principles reflect many of the concepts and values of the Rochdale Pioneers and still ring true in cooperatives today.

American Farmers & Ranchers is an important part of Oklahoma’s cooperative history. It was organized as a membership services benefit cooperative two years before Oklahoma became a state.

“Our members’ benefits are the services we provide, including insurance,” said Terry Detrick, president of American Farmers & Ranchers. “Together, as a whole, we have the opportunity to provide benefits to them that they could not get on an individual basis.”

Detrick said the AFR insurance company evolved from the idea of helping one another if a disaster were to happen, showing the heart and soul of Oklahoma’s pioneers.

“We had a lot of members in our cooperative, and the idea came up that if each member would put a little money in a pot, and one of the others had a catastrophe of some sort, there would be some money there to help them out,” Detrick said.

Agricultural cooperatives were not far behind the insurance co-op in being established. Carrier Mill and Elevator, founded in 1904 and located in Carrier, Oklahoma, is just one of the many agricultural cooperatives still in existence today.

Lee Redman, general manager of Carrier Mill and Elevator, said he still remembers his grandfather telling him why co-ops were created.

“He told me that back then, it was really hard for a farmer to sell his wheat, because
a lot of companies wouldn’t offer
a bid every day,” Redman said.
“If a farmer needed money, he
would sell some wheat, but if the
company wasn’t buying wheat that
 day, he was out of luck. Farmers
 felt like they were being taken
 advantage of.”

The idea of owning part of a business and having control over how it was operated was an attractive concept to farmers at that time, Redman said.

“They wanted to be treated fairly,” he said.

Cooperatives are set up to be ran by their members and represented by a board of directors. Each member gets one vote, allowing for fair representation for large and small producers.

“Co-op members have the ability to elect their board of directors who decide the direction the company should take,” Redman said. “Each member only gets one vote, so no matter how large or small you are, you have an equal say in the cooperative.” 

I do business with my local co-op because I can imagine how inconvenient it would be if it were not there.

Terry Detrick, American Farmers & Ranchers

Cooperative businesses in rural Oklahoma are often the heart of the town, said Detrick who hails from Ames, Oklahoma. His hometown cooperative, Farmers Elevator Company, provides the services that no one else in town does.

If it weren’t for our cooperative, we just as well not have a town,” Detrick said. “They are our petroleum source where we get our gas, oil and diesel. They service our automobiles. We can buy our feed, seed, vet supplies — whatever is needed — there. They are what

keeps our community going.” Even in communities where farmers have a choice between doing business with a co-op or an independent company, cooperatives still keep the market fair, Redman said. But unless patrons remain loyal to the co-op, the fair market may be the first thing to go.

“If cooperatives are eventually pushed out of the equation, independent companies will go right back to where they were years ago taking advantage of farmers on prices,” Redman said. “They may bid five cents more than I do for wheat, but if the co-op wasn’t here, that bid would go down 20 to 30 cents because they aren’t competing with the co-op anymore.”

Detrick reiterated that statement.

“Loyalty is important to any co-op,” he said. “You have to want to see it stay. I do business with my local co-op because I can imagine how inconvenient it would be if it were not there.”

Cooperatives have proven time and again that they are here for the long haul, but as with any business structure that spans over centuries, diversification and evolvement is necessary.

“Ag co-ops were easy to run back then because everyone had the same needs,” Kenkel said. “Most of the farmers were the same age and needed the same things from the co-op.”

Now, as the age of producers spans over decades, the co-op has to offer more services to be relevant to all of its members. 

Grain marketing, agronomy services, energy, fuel sales, feed mills, farm supply stores and fertilizer plants are a number of the services agricultural cooperatives offer their members today. All of these services make the cooperative system even more relevant today than it was 100 years ago, Detrick said.

A portion of that relevancy come from the cooperative system encompassing so much more what it did years ago — a fact that Detrick said he had a hard time envisioning himself.

“To me, a co-op was a grain elevator and a gas station,” he said. “Today, there are food cooperatives, housing cooperatives, investment cooperatives —it blew my mind once I finally got past my own corral gate to see what’s happening around the United States with cooperatives and how important they are.”

It’s an importance, he says, that surfaces time and time again in rural communities.

The idea is ever-evolving, but the goal of cooperatives rings true today: doing together what we cannot do alone. 

View the full issue of AFR Today

Summer 2016

The History of Cooperation, Toby Keith Foundation, Scholarships, Youth Advisory Council, More