|Abstract or Summary
- In Oregon agricultural cooperatives perform an important part of the marketing of agricultural products and the distributing of farm supplies. The performance of these associations directly affects the financial returns of the many farmers who belong to these cooperatives. The purpose of this study is to examine capital structures of cooperatives with particular reference to the current role of borrowed funds and their importance in future growth. A personal interview was held with the manager or chief financial officer of 66 local cooperatives and information for the year 1963 was obtained. The cooperatives included in this survey represented over 90 percent of the total volume of Oregon local cooperatives. Four regional cooperatives were also included in the study. The marketing of farm products represented over three-fourths of the total volume of $181,727,644 of the local cooperatives. The
sale of farm supplies accounted for the remainder. The local cooperatives had $101,539,370 of assets. The regionals cooperatives had a volume of $94,112,365 and assets of $30,362,163. The proportion of equity capital varied among the different groups of cooperatives. But when the amount of certificates of indebtedness and marketing pool accounts due to the members were included with member equity, all commodity groups of local cooperatives had about comparable financial support from their members. Local cooperatives relied heavily on retained earnings and marketing retains for equity capital. Only five percent of members' equity was obtained from cash investment. The local cooperatives
paid dividends on less than one-fifth of their equity capital. Associations are gradually dropping the practice of paying dividends on their revolving funds.
Short-term borrowed funds were important to Oregon cooperatives. Large seasonal marketing inventories were the principal use of short-term credit. The Bank for Cooperatives supplied over 90 percent of these short-term loans. The average interest rate of the Bank for Cooperatives was 4.78 plus a required stock purchase. The average interest rate on commercial bank short-term loans to
local cooperatives was 5.60. The total long-term loans of the local cooperatives was 11.9 percent of total equities and liabilities. When an allowance was made for the required stock purchase of the Bank for Cooperatives
and the current rate of currently issued certificates of indebtedness was considered, there appeared to be no important differences between the interest rates of the various sources of long-term credit. The farm supply cooperatives' principal source of short and long-term credit was their suppliers. The Bank for Cooperatives supplied most of long and short-term loans of the grain and seed marketing firms and of the fruit, vegetable, and nut marketing firms. The
dairy cooperatives and the regional cooperatives used both the Bank for Cooperatives and commercial banks for the majority of their loans. Current federal regulations which require 20 percent of current earnings to be returned to the patrons and the highly competitive situation facing many associations may limit the amount of internally generated funds in Oregon In the future.
It is estimated that short-term borrowing may increase due mainly to the increased marketing of the fruit, vegetable, and nut marketing cooperatives. The need for long-term borrowed funds will depend to some extent on the amount of adjustment Oregon cooperatives make in the products and services offered their members. Rapid adjustment will require additional long-term borrowed funds. Some cooperatives have made liberal use of borrowed funds in the past; others have resisted using any long-term loans in their capital structure. Increased use of borrowed capital may better enable Oregon cooperatives to meet the challenges and opportunities of the future.