Comparing the Performance of Cooperative Plans for Equity Accumulation and Retirement

Jeffrey S. Royer

No 413325, Cornhusker Economics from University of Nebraska-Lincoln, Department of Agricultural Economics

Abstract: Equity allocated to members plays a crucial role in financing agricultural cooperatives. Although retained earnings not allocated to members have become an increasingly important source of equity in recent years, U.S. Department of Agriculture (USDA) data show that allocated equity still accounted for 55.5 percent of the $47.5 billion in total equity held in U.S. cooperatives in 2020. [1] Allocated member equity differs from unallocated equity from retained earnings in that it is owned by individual members and there is an expectation that it will be redeemed in cash when it is eventually replaced by newer allocations. A recent study has examined the comparative performance of the revolving fund, percentage-of-all-equities, and base capital plans cooperatives use to systematically accumulate and retire equity as well as special plans for redeeming equity held by retired members and estates. [2] The plans, which are described in detail in the study, were compared using models of a typical cooperative and member based on several key economic variables and data from annual USDA reports of cooperative business statistics and the Census of Agriculture . The performance of the plans was assessed according to several criteria, including member cash flow, proportionality, and opportunity costs. Proportionality concerns the extent to which individual members provide equity in proportion to their use of the cooperative.

Keywords: Farm; Management (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nbaece:413325

DOI: 10.22004/ag.econ.413325

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