Farmers Co-ops Still Serve Cities

In the backyard of the world’s largest retailer, there are stores with aisles that smell of veterinarian supplies and chain saw oil. The manager can even tell you when it’s the best time to plant radishes.

A one-time fixture on Arkansas “Main Streets,” Farmers Cooperatives are now only in five Northwest Arkansas cities: Bentonville, Siloam Springs, Gentry, Van Buren and Fayetteville. And there are really only three since the Siloam Springs operation owns the Gentry co-op, and the Van Buren business owns the Fayetteville entity.

The cooperatives, owned by three groups and consisting of 12 stores in Arkansas and Oklahoma, had a combined revenue of more than $46.5 million last year. Gene Bruick, the CEO of the Van Buren/Fayetteville Farmers Cooperative, said he expects his group of eight stores to reach $40 million in 2004 sales.

But managers caution that big dollar figures don’t necessarily translate into major growth. They say they are surviving, not thriving.

Farmers Cooperatives started in the 1940s as a way for farmers to create centralized buying power and markets for one another’s products.

Board members vote on business practices and the amounts of dividends paid back to farmer-owners based on profit margin. The co-op may keep up to 80 percent of the dividend in any year, to be paid out another year, giving the co-op operating capital and members equity in the business.

Unfortunately, local co-ops sometimes end up with equity in their cooperative suppliers. Such was the case with all of Northwest Arkansas’ co-ops and Kansas City-based Farmland Industries, a supplier to many local level co-ops, which filed for Chapter 11 bankruptcy protection in May 2002. They left many local co-ops without patronage checks.

Shirleen Booth, the chief financial officer of the eight-branch Van Buren co-op group, said the entities lost $2 million in equity last year due to the bankruptcy.

Booth said that in 2001, the co-op paid out $477,500 in cash dividends and only $360,000 in 2003. The cash amount for the current year patronage, the amount members would be reimbursed for that year’s profits, was $134,000 for 2001 and $76,000 in 2003, a 56 percent decrease. She attributed the decrease to the loss of equity in Farmland.

Bruick, CEO of the same co-op, is upbeat. He said his group is on track to meet the $40 million this year. They collected $35 million in sales last year, up 68 percent from $23.9 million in 1997.

Jim Kelso, manager of the Siloam Springs group, said his operation lost money, too. He said the loss is just now showing up and the value of equity in his co-op with asset-to-debt ratio went from 2.9 to 1 in 2002 to 2.6 to 1 in 2003.

Jim Patterson, manager of the Farmers Exchange in Bentonville, said he doesn’t know yet what the Farmland bankruptcy fallout will be for his books. His co-op did $3.5 million in sales last year, he said.

Gerald Southern, manger of the Fayetteville co-op, said 60 percent of his branch’s revenue comes from feed sales. He describes the business as selling mostly feed, seed and fertilizers to farmers and ranchers. But, he said, miscellaneous sales have been growing. He attributes this to lawn-and-garden customers.

Southern said he believes the reason people keep coming back is because they know the money stays in Arkansas.

Patterson said his co-op has lost sales from the dairy farm business but grew a lot of lawn-and-garden business as well.

Even with the struggles in his co-op’s finances, Kelso is optimistic. He said that farmers and ranchers have always had hard times. “It’s our responsibility to pass the Farmers Cooperative on to future generations,” he said.