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Farmer co-ops may win right to finance exports directly

The US farmer cooperative movement -- which dates back to the period of the American Revolution -- may be about to get authority from Congress to finance directly the marketing of its goods abroad.

At issue here, in what has become a legislative brouhaha between commercial banking groups (which now finance most US agricultural exports) and US farmer cooperatives, are proposed changes in the landmark Farm Credit Act of 1971.

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Under the modifications, co-ops would be authorized to finance directly the sale and marketing of products abroad. At present, commercial banks take over the financing of most co-op products for overseas sales. In many cases, marketing is undertaken by "middlemen," or third parties, rather than the co-ops.

Enactment of the changes, argues Paul Weller, an official of the National Council of Farmer Cooperatives, the main trade arm for the 6800 or so farmer co-ops in the US, would add up to an important victory for co-ops, since they would have greater financial control over their products from the production stage right through the marketing process to sale.

Ironically, the somewhat complicated export financing issue comes at a time when the farmer cooperative movement, for the first time in many years in the United States, is quiescent. "There are no major areas for concern" facing the co-op movement today, notes Kenneth D. Naden, president of the co-op council.

While co-ops are still facing difficult questions of obtaining adequate bank financing during this period of recession, as well as plummeting profit margins in such troubled agricultural areas as poultry production, on the whole the cooperative movement is perhaps "stronger" than at any time in recent years, Mr. Naden says.

Cooperatives, which are controlled by their members, enable groups of farmers to act together in associations to market their products. Although farmer co-ops go back to the earliest days of America, they were not really given congressional authorization until 1922.

While co-ops often tend to be huge business entities, most Americans are believed to be unaware of their existence. Yet they range from highly publicized ventures like Sunkist, in the Western US, to a large-scale enterprises such as Farmland Industries, the largest US co-op, in Kansas City, Mo., and the San Antonio-based Associated Milk Producers, believed to be the second-largest US co-op.

As many as 85 to 90 percent of all US farmers belong to one or more co-ops. There are around 6,800 coops in the US, a number that "continues to fall," says Dr. Jack Armstrong, assistant deputy director of the cooperative marketing and purchasing division of the US Department of Agriculture.

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Mergers, mainly for financial reasons, have become commonplace, he says. One of the most recent involved Land O Lakes and Dawson Mills in Minnesota.

Congressional supporters of co-ops argue taht enabling the associations to finance their own exports would add up to enlarged clout at a time when the entire economy is financially hard pressed.

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