The Advantage of Equity in Coops

Farmers benefit from equity that's built up through local cooperatives.

We recently visited the Tamora terminal, and talked with Carl Dickinson about the importance of equity. Dickinson is the President and CEO of the Central Valley Ag Cooperative. "When we talk about equity, there are two things that are really important," Dickinson said. "One is that the original equity in cooperatives was where farmers wrote checks, and they actually said 'hey we want to take control of our own destiny, and we want to take control of our own business'." Over time now, what has happened is that co-ops operate and have profits. "We share those profits with the owners, who are the farmers, and they get some of that profit in the form of cash every year, and some of that in the form of equity in the cooperative," Dickinson said. That equity is then deployed by the co-op management team on the farmers' behalf.

One example of how equity is used within a cooperative is the new storage facility for dry fertilizers at the Tamora terminal. "We get fertilizer from all over the world in this facility, and it comes in on rail. We store it in large quantities, and we can manage risk in the marketplace for the farmer," Dickinson said. "He doesn't necessarily have to buy all this fertilizer if he doesn't want to, we'll still have it here for him, and it allows us to leverage that equity into real product that's delivered to the farmer."

"Because of the equity and the deployment of the equity, we stay through the good and the bad. We are able to be consistent. Investor-based businesses have an obligation to their investors, that if they are not getting appropriate profits, they tend to get out. We are here through the good times and bad," Dickinson said. "It's important that people know these cooperatives are owned by farmers for the benefit of farmers, and that it's the only reason we exist. We get up everyday trying to help our farmers get better," Dickinson said.