1. COOPERATIVE MRKETING OF POULTRY PRODUCTS IN THE SOUTHER^I SAIJ JOAQUIN VALLEY: STATUS AND POSSIBILITIES OF EXPANSION 1 E. A. Stokdyk Foreword This study was conducted at the request of the Boards of Directors of the Porterville Poultry Association, the Tulare Poultry Association, the Poultry De- partment of the Fresno County Farm Bureau and the Poultry Department of the Kern County Farm Bureau, The purposesof the study v/ere to determine: (l) the status of the cooper- ative marketing of poultry products in the southern San Joaquin Valley, (2) whether it is advisable to attempt to expand cooperative marketing activities in this area at the present time, and (3) the methads and procedure to follow if ex- pansion is advisable. Data were obtained from the records of the Porterville Poultry Association, the Tulare Poultry Association, from questionnaires, by personal interview mth poultrymen and dealers, and from similar studies by the Giannini Foundation of Agricultural Economics of the University of California, Summary and Conclusions The poultry industry in the southern San Joaquin Valley is fairly well established, although with the majority of producers poultry production is a side line. Between February 1 and July 1, production is in excess of current con- sumption mthin the area; from July 1 to October 1, production and consumption are about in balance, while from October 1 to February 1, consumption exceeds production. The trade channels for eggs in the southern San Joaquin Valley are similar to those in southern California, A considerable number of poultrymen dispose of the whole or a part of their production to consuraers and retailers. During the season of flush production, however, those who are not members of cooperative associations have difficulty in obtaining satisfactory outlets for their eggs. An analysis of the financial and operating statements of the Porterville Poultry Association showed that it v/as in a sound financial condition. It also 1 Dr. J. M, Tinley, Associate in Agricultural Economics, and Mr, M, A, Lindsay, formerly Assistant Farm Advisor of Tulare County, assisted in an anal- ysis of the business of the Tulare and Porterville Poultry Associations. Mr, A. F, Gillette, Assistant Farm Advisor of Fresno County, and Mr, H. T. Strong, Assistant Farm Advisor of Kern County, were responsible for the collection of data from producers in the Fresno and Bakersfield areas, respectively, Mr, N, P. Lohse, Agricultural Secretary of the Fresno Chamber of Comanerce, rendered valuable assistance in the collection of data from producers and dealers. Mr, W. B. Roby, Manager of the Porterville Poultry Association and Mr. Lawrence Jones, Manager of the Tulare Poultry Association made available the records of the two organizations and assisted in interpretation of these records. ■■i 2. shov/ed that the Tolume of business, the gross profits and net profits have in- creased since 192S, A siinilar analysis of the Tulare Poultry Association showed a raarked de- cline in financial position since 1926. The volume of business has decreased and in only tvro years of six were net profits made. Producers ovming approximately 56,000 hens in the area near Fresno, and 18,000 hens in the area near Bakersfield indicated that they were interested in the formation of cooperative poultry associations in their territory. The size of flocks, the length of time poultrymen have been in business, the af- filiations of poultrymen viith other cooperative associations and the present sales connections of producers are favorable for cooperative endeavor in the Fresno area but not in the Bakersfield area. The data obtained in this study indicate that at the present time (1931) there are not enough producers mth sufficient volume to justify the organiza- tion of independent cooperative poultry associations in either the Fresno or Bakersfield area. However, it appears that there is a sufficient number of pro- ducers mth sufficient volume interested in cooperative effort to establish a branch of some other cooperative poultry association in Fresno but not in Bakers field. The functions which a cooperative in Fresno may be expected to perform for its members are: (1) Assure a permanent outlet for poultry products* (2) Collect eggs in sufficient quantities to justify shipping them to other markets v/hen local production is in excess of local con- sumption and when prices in other markets are higher than they are locally. (3) Improve the quality and grade of eggs being sold at retail and pay the members according to quality and grade. (4) Furnish feeds of high and uniform quality at prices commensurate Y^rith costs. The conditions of production and marketing and the set-up of the tvro co- operatives, the Poultry Producers of Central California and the I^orterville Poultry Association which are operating in territories adjacent to Fresno, favor the establisliment of a branch station in Fresno by the Porterville Association rather than the Poultry Producers of Central California. The proximity of the Porterville Association to the territory of the Tulare Association and the mutual advantages which may be obtained through con-'; solidation v/arrants the absorption of the Tulare Association by the Porterville Association. It is recommended that the financing of the facilities necessary for the establishment of a branch in Fresno and the absorption of the Tulare Associa- tion should be done by the producers in the areas affected. These producers should subscribe a sufficient number of memberships and a sufficient amount of capital that mil be required to purchase the necessary fixed assets. General Marketing Conditions in the Southern San Joaquin Valley The southern San Joaquin Valley includes the counties of Fresno, Kern, Kings, Madera, and Tulare of the State of California. I i 4 ' i f ^ 1 3. I mportance of tho Poultry Industry .- In this area, the num,ber of poultry is not so large as in some areas in the state, yet in parts of the area, parti- cularly in Fresno and Tulare counties, the industry is fairly well established (table 1), 2-.- TABLE 1 Number of Farms Reporting Chickens, January 1, 1925. Chickens on Hand, January 1, 1925; Average number of Chickens per Farm; Chickens Raised in 1924; and Chicken Eggs Produced in 1924, in the Southern San Joaquin Valley* Number of Chickens Average Chickens Chicken farms report- on hand number of raised in eggs pro- C ounty ing chickens January 1 chickens 1924 duced in 1925 per farm** number 1924 dozen Fresno 6,955 313,788 45 390,352 1,835,974 Kern 1,859 160,017 86 202,582 872,093 King s 1,739 112,175 64 144,257 764,473 Madera 1,178" 79,530 68 101,719 446,959 Tulare 4,817 359,873 75 401,618 2,170,034 Total 16,548 1 ,025,383 1 ,240,528 6,089,533 * Data from Census of Agriculture, 1925. Part III, The V^e stern State pp. 464-491. ** Calculated by the author. Within the area, the poultry industry is concentrated around the several cities and toiAms. V/ith the majority of producers poultry production is a side- line, yet ViTith some it is the principal farm enterprise. (See page 14). Production and Consumption of Eggs.- During a part of the year, from about February 1 to July 1, production of eggs is usually in excess of current con- sumption."^ Some of the excess is shipped to other areas including Los Angeles and San Francisco, and some are stored locally. The bulk of the shipm.ents go to Los Angeles. Between July 1 and October 1, production and consumption of eggs are about in balance. Small quantities are shipped into the northern part of the area and small quantities are shipped from the central portion of the area. From Octo- ber 1 to February 1, however, considerable quantities of eggs are procured from other areas, particularly in the area around the city of Fresno, 2 See: Voorhies, E. C. The California poultry industry: A statistical study. California Agr. Exp. Sta. Bui. 413: 160, 161, and 162, November, 1926. 3 Five dealers shipped 28,237 cases of eggs out of Fresno in February, March, April, May, and June in 1930. This situation is quite the opposite from that which prevails in the northern San Joaquin and Sacramento valleys where production during the entire year is in excess of local consumption. This same situation has an important bearing on the functions and setup of cooperative associations in the southern San Joaquin Valley, (See pages 22-23). Trade Chaimels forEggs. - The trade channels for eggs in the southern San Joaquin Valley were found to be similar with those found in a study made of the marketing of eggs in the Los Angeles area. These are shovm in figure 1. A considerable number of poultrymen dispose of the whole or a part of their production directly to consumers. Many sell to retailers, particularly those located near cities and tovras. Others sell to wholesalers, packers, feed dealers, and hucksters, some of v/hom collect the eggs from producers and return to them the empty cases. Many belong to the Porterville Poultry Association and the Tulare Poultry Association, During the greater part of the year the handling margin is narrow, ovidng to the fact that production is closely in balance with or less than consumption. However, during a part of the year when produc-^ion is in excess of consumption and prior to the into-storage movement, many producers, particularly those who are not members of cooperative associations, have difficulty in obtaining sat- isfactory outlets for their eggs. Pri ce Structure. " Prices for eggs in the southern San Joaquin Valley during the greater part of the year tend to follow the Los Angeles wholesale quotation. At times, however, San Francisco quotations are followed. The tendency is to follow v/hichever price is the higher. Figure 2 shows the re- lationship between New York, San Francisco and Los Angeles egg prices. It will be noted that since 1926, Los Angeles prices have been higher than San Francisco prices during a greater part of the year, but that at times the San Francisco market is the higher. The fact that the southern San Joaquin Valley is geo- graphically located between the two markets permits eggs to move in either direc- tion. Producers in the area receive prices based on the wholesale quotations in Los Angeles or San Francisco. Several reported that during the period from February 1 to July 1 they receive a discount in relation to the quoted price ^ from July 1 to October 1 the quoted price, and from October 1 to February 1, a premium in relation to the quoted price. This reflects the production and consumption relation referred to above (page 3 ), Progress and Status of Cooperatives in the Southern San Joaquin Valley With the foregoing description of general marketing conditions in the southern San Joaquin Valley in mind, the operations of cooperative associations will be better appreciated. Porterville Poultr y As sociation.- This association operates in the ter- ritory Tndlcat'¥d™rn~fTgure It" is a non-stock, non-profit cooperative or- ganized under the Cooperative Marketing Act of the State of California, The progress and status of this organization is indicated by a summary of the annual financial and operating statements. Table 2 shov/s the former and table 3 the latter. TRAOt CHAWweLS FOR £ C 6 S o s A M G c I. E s Fig. 1.- Trade channels for eggs in the southern San Joaquin Valley are similar to those in the Los Angeles area. 6. Table 2 sliows several items which are considered of importance in judging the financial standing of an organization. The upper portion shov^rs the amounts under each heading as of December 31 of each year. These are listed as current assets, current liabilities, net worth, capital, fixed assets, and notes and ac- counts receivable. A word of explanation of the foregoing items may be in order. The term curr-mt assets means those items which are either in the form of cash or can be turned into cash quickly. Current liabilities mean those bills which are due or payable within the year. Capital is the money furnished by the ovraers of the organization. Net worth is the capital a.nd surplus of the organization. Fixed assets are the more permanent investments of the association, such as land, build' ings, and furniture and fixtures. Notes and accounts receivable are, as the term implies, those accounts which are due the organization. An examination of table 2 shov^rs that the Porterville Association has made substantial progress and is in a sound financial condition. The lower portion of the table gives in terms of ratios a. simplified measure of the progress and status of the organization. The ratio of most importance, that of current assets to current liabil- ities, shows an upivard trend since 1928. This is a ratio which bankers watch closely in determining whether or not to grant loans to a business. There is no rule of thumb by which one can say what this ratio should be for a particu- lar business. Most organizations like to have this ratio between 200 and 300. The ratio of 228, as of December 31, 1930, appears satisfactory for this associa- tion. The ratio of net vrorth to capital shovvs what the business is worth in comparison with the investment of its owners. It also indicates the reserves which the business holds. The ratio of net worth to capital has increased since 1928 even though the amount of capital has increased considerably. At the close of 1930, the ratio of net v/orth to capital v\ras 134, or it may be said that the book value of the Association v/as $134 for every |100 which members had invest- ed. The ratio of fixed assets to net vrorth gives an idea of the proportion of the book value which is in fixed assets. It is the aim of most businesses to decrease this re^tio. In this respect the Porterville Association has made marked progress, having decreased this ratio from 475.0 in 1925 to 49.2 in 1930. The ratio of notes and accounts receivable to net worth is, perhaps, not as important as the other ratios. Hov>rever, in times of stress it is im- portant to keep this ratio small. When a business expands, the absolute amount, in accomits receivable usually becomes larger, but every business must be on the alert that this item does not become so large in proportion to its size as to jeopardize its position. The present ratio of 26.5 appears satisfactory. From table 3 it vfill be noted that the volume of business has increased si?ice 19 25, in fact, in 1930 the volume of business was o.lmost three times as large as in 1925. Gross profits have shov/n a constant increase and net pro- fits also show an upi'Tard trend. In shor-b, the Porterville Poultry Association has made substantial pro- gress and is in a sound financial condition. •si ..I &V :o DAV fltXlOOS 193 3- 91$ Fig. 2.- Prices of eggs to producers in the southern San Joaquin Valley are based on the Los Angeles or the San Francisco v/holesale quota- tion, whichever is the higher. These follow the major fluctuations in New York prices. 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Tulare Poultry Association.- This association is one of the oldest co- ope rati ve^'ouItr^TTsTocTa^^ state. The territory in which it oper- ates is indicated in figure 4, Tables 4 and 5 show data comparable to tables 2 and 3 for the Tulare Association. Here it will be noted that this organization has shown a mar]:ed decline in its financial position since 1926. The voluine of business has also decreased and in only tvro years of the six were net profits made. Contrast in Porterville ' s and T ulare's ,Status_._ - It is apparent from the foregoing analysis^ of the trend and status of the business of the two associa- tions that their present position is in marked contrast. One of the fundamental reasons for the lack of progress of the Tulare Association is that it has not engaged in the mixing and grinding of poultry feeds. The Porterville Association, on the other hand, mixes and grinds feeds. As was pointed out above (page 5 ), the handling of poultry products in the south- ern San Joaquin Valley is highly competitive. An analysis of the operating statements of the two associations showed that the margin of profit on poultry products was small and that if an organization attempted to operate by handling poultry products alone, it could not expect to succeed. The same situation ap- pears to prevail in the handling of feeds. The jobbing margin is small and with- out a considerable volume an organization cannot expect to make progress. On the other hand, the competitive margins in grinding and mixing feeds are large enough to permit a cooperative association that has sufficient volume to make substan-s- tial profits. The margins realized by the Tulare Association, which does not mix and grind feeds, and those realized by the Porterville Association which or- ganization does m.ix and grind feeds, are presented in the upper portion of table 6. These margins are shown as the ratios of gross profits from trading to gross sales . The margins realized are, of course, only one side of the business op- erations. The other side is the relation of the expenses of the business to the gross margins or gross profits from trading. The lovrer portion of table 6 shows that Porterville ' s expenses have always been less than gross profits, while Tulare's expenses in four years of six exceeded gross profits. Here management, methods of financing, volume of business, and business setup play- ed an important part. The decline in the volume of business has been a serious handicap to Tulare. The combined effect of small margins and decreasing volume of business results in a vicious circle. If margins and profits are small, producers do not support the association. Volume of business then declines and per unit costs increase. This reduces profits further and the circle is completed. Advisability of Expanding Cooperative Effort Letters were sent to all the poultr^nnen listed by various agencies in the areas in the southern San Joaquin Valley near Fresno and Bakersfield by the Agricultural Department of the Fresno Chamber of Commerce, the Poultry Depart- ment of the Fresno County Farm Bureau, and the Poultry Department of the Kern County Farm Bureau to ascertain (l) whether or not they were interested in the formation of a cooperative poultry association, and (2) the number of hens own- ed by those vj-ho were thus concerned. Inter est in the Expansion in Cooperative Effort,- Sixty-two poultrymen owning approximately 56,000 hens in the area around. 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O ?5 O CD -H CM EH P' Cij d CD !^ pc; p-'-iJ p 14. replies to the above mentioned letters that they were interested in the forma- tion of a cooperative poultry association in that territory. See figure 4 for area represented. In the Bakersfield area thirty-tvro poultrymen representing approximately 18,000 hens made similar replies. Details of Production _and Mar keting Activities in the Fresno and Bakers - field A^reas.- Questionnaires were circulated among poultrymen in the areas near Fresno and Bakersfield by the Extension Service of these counties request- ing detailed information on production and marketing activities. A total of twenty-six 7fere answered in the Fresno district and nineteen in the Bakersfield district. Mr. A. F. Gillette, Assistant Farm Advisor of Fresno County, and Mr, H. T. Strong, Assistant Farm Advisor of Bakersfield, vrho assisted in the analysis of the questionnaires stated that the replies were indicative of the general situation and were in their opinion unbiased, except in one respect. The exception is that probably those who replied were more likely to be inter- ested in the formation of a cooperative association in their territory than those who did not reply. The size of flocks as indicated by poultrymen replying to questionnaires in the Bakersfield and Fresno areas is shown in table 7. In the former area, the flocks are small, mostly 500 birds or less, virhile in the latter area, a considerable number of flocks contain 500 birds or more. This is of importance in connection lAdth cooperative endeavor. Those with small flocks have a small volume of business to transact, yet the time consumed in the transaction is nearly the same as in a larger transaction. Furthermore, those v/ith small flocks can seldom afford to subscribe the necessary capital in a cooperative association. TABLE 7 Size of Poultry Flocks in the Bakersfield and Fresno Area as Indicated by Poultrymen Replying to Questionnaires Size of flocks Bakersfield area Fresno area Number of hens Number Per cent Number Per cent 1-500 12 64 10 38 501-1,000 4 21 10 38 1,001-1,500 1 5 4 16 1,501-2,000 1 5 0 0 2,001+ 1 5 2 8 Total 19 100 26 100 The length of time the poultrymen in the Fresno and Bakersfield area have been in business is indicated in table 8. This is often an indicator of the degree of stability that a cooperative association may expect. In the Bakersfield area the majority of those reporting have been raising poultry for only 3 years or less, while in the Fresno area the m.ajority have been in the business for 4 years or more. 15. TABLE 8 Length of Time Producers in the Bakersfield and Fresno Areas Have Been in the Poultry Business Bakersfield area' Fresno area Number of years ITumber Per cent Number Per cent 1-3 11 61 10 38 4-6 4 22 • 7 27 7-10 2 11 3 12 10+ 1 6 6 23 'otal 18 100 26 100 A second indicator of the degree of stability a cooperative may expect is the tenure of the operators. In both areas the majority of poultry pro- ducers are ovmers. This is a favorable situation for cooperative effort bo- cause owners are more liliely to be interested in ovming a marketing institu- tion. However, an unfavorable factor in both these areas is that vAth the majority poultry raising is a side line. A third indicator is the producer's contact mth other cooperatives. Those who are members of other cooperatives know bettor what they may expect of such an organization than those who are not members. In the Fresno area many poultrymen are members of some coopera- tive,, while in the Bakersfield area few hold membership in them. The sales connections of poultrymen replying to questionnaires in the Fresno and Bakersfield areas for eggs and poultry are indicated in table 9, It mil be noted that in the Bakersfield area the bulk of egg sales are made to consumers and retailers, while in the Fresno area sales to retailers are most important, with sales to wholesale dealers and hucksters of more import- ance than sale to consmTiers. The sale of poultry in the two areas is quite similar, except that a larger portion is sold to wholesale dealers in the Fresno area, than in the Bakersfield area. The sales connections of producers are of significance with respect to the possibility of successful cooperative operations. Ylhen producers sell directly to consumers and retailers, a part of the price they receive for their products is vrages for the service of delivering them to their customers. A cooperative association which performs this service has difficulty in making a comparable price showing, for producers who deliver their products are not likely to attribute the higher return to wages. ^ In the Bakersfield area, the 5 The cost account records of poultr;^^1lGn in the Bakersfield area sho7J-ed that those who sold their market eggs to consumers and retailers received high- er prices than those -who sold to wholesale dealers. Statement of H. T. Strong, Assistant Farm Advisor of Kern County, 16. E-i CD ® •H (V-l W © o m (D !^ 0) -P • H W (D CO -P rH ;3 o CM cS hD •r—l a o •H to o -P • H CD (D -P I— I o "P 6 o !>> C3 I. J CD o Sh d CD m p; © CD 13 O o •r-i Sh PQ Ph >i O d) o 1 — 1 r—i 1 — 1 c3 Ch o Sh o (D ■H Sh P-i o (P CD nS O O • o Sh • H o od Sh Ph O w S-. 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W) d b/j hjO ^-s U) bi) hO CD hO Ph b.O bO f>s O CD rH CD 0 CD 0 P4 CD -P P- P. -P e • H (D CD O Qj CD rH P, rH O • H o O O O ■H o •H hO o O d rH P5 P< Pi PI Pi Pi P, Pi Pi q PI ^ CO CD Cj 4-> Hi d cj cJ CD cJ cj C) d Ci til C d CO CO p. 0=1 0:1 CM 22 factors making for quality in eggs. If a cooporativG is not able to obtain higher prices for its higher quality eggs because of lack of general adoption of egg standards, its quality program is likely to fail. Conclusions as to Advis abi lity of Expanding Cooperative Effort.- It appears that, at the present time^Xl9Sl7, there is not a sufficient number of poultrynien mth enough volumo interested in cooperative effort to justify the organization of independent GOoper;itive poultry associations in either the Fresno or Baker sfield areas. The mano.gers of successful cooperative poultry associations estimate that a volume of business vdiich is likely to bo obtained from members handling be- tween 150,000 and 200,000 hens is necessary to justify the expenditure of capit- al sufficient to purchase the necessary facilities and equipment to conduct a feed grinding and mixing business. Inasmuch as producers representing only 56,000 hens in the Fresno area and 18,000 hens in the Ba.kersfield area, indicat- ed by their replies to questionnaires that they were at the present time inter- ested in cooperative effort, an independent coopero.tive organization is out of the question. It is more than likely that even some of these would not actual- ly join a cooperative organization if one wore attempted because they wjuld not care to subscribe the necessary capital. However, it appears that there is sufficient interest in cooperative effort representing sufficient volume for a branch of another cooperative or- ganization to operate successfully in the Fresno area, but not in the Baker s- field area. Managers of cooperative associations estimate that a volimo of business I'/hich is likely to bo obtained from members handling 50,000 hens is sufficient to justify the expenditure of capital sufficient to purchase the necessary facilities and equipment to operate a branch station. Aside from the fact that there appears to be sufficient volume in the Fresno area to operate a branch station, indications are that such a branch has a chance for success in Fresno, but not in Bakorsfield. The size of flocks, the length of time poultrj^nnen have been in the business, the exporien^.e of the poultrymen in cooperative associations, and the present sales connections of producers are favorable for cooperative effort in the Fresno area, but unfavor- able in the Baker sfield area. The functions which a branch of some other cooperative association in Fresno may be expected to perform for the members of such an organization are: (1) Assure a permanent outlet for poultry products. (2) Collect eggs in sufficient quantities to justify shipping to other markets v/hen local production is in excess of local con- sumption and prices in other marlcets are higher than they are locally. (3) Improve the quality and grade of eggs being sold at retail and pay the members according to quality and grade, (4) Furnish feeds of high o.nd uniform quality at prices coimensurate vrith costs. (This implies a patronage dividend at the end of the year). Methods and Pr.:cedure in Expansion of Cooperative Activity Two vmll established and successful cooper.. tivo poultry associations, the Poultry Producers of Central California, and the Porterville Poultry Associa- tion operate in areas adjacent to the Fresno area. It v/ould appear that either 23, one or the other might establish a branch in Fresno. However, in vievj- of the fact that the territory from Merced north, (Merced being the southern limit of operations of the Poultry Producers of Central California) is a surplus area during the greater part of the year, the location of a branch in Fresno by the Poultry Producers of Central California would be likely to present organization difficulties. The Poultry Producers of Central California is set up to handle poultry products from export areas. It requires contracts with growers and advance paying prices to producers are based on the San Francisco market. Producers in the Fresno area often receive prices higher than San Francisco prices because of the fact that the area is an import area part of the time. If these producers delivered their eggs on the same basis as other members of central California and received advance prices based on the San Francisco market, they would at times be tempted to break their contracts and sell in Fresno. This situation might be avoided by the handling of the eggs from, the Fresno area separately; but this vrould be likely to cause difficulty among the present membership of central California. On the other hand, the Porterville Poultry Association is set up to operate in an area which is a deficient area part of the time. It does not re- quire contracts with its members and handles poultry products as a subsidiary function. It appears, therefore, that the Porterville Association is the one which should establish a branch in Fresno. This procedure should work to the mutual advantage of producers in both the Fresno area and the Porterville area. Y/ith increased volume of busi- ness, unit costs of the Porterville Association are likely to decrease. In addition, at certain times during the year, the Fresno market should furnish an additional outlet for eggs from the Porterville area. At the same time, the producers in the Fresno area would obtain the experience of a well establish- ed organization. It also appears that the Porterville Association should absorb the Tulare Association. Figure 4 shows that the Porterville Association is op- erating in part of the territory covered by the Tulare Association, Its volume of business in the Tulare territory is, at present, small because the Porter- ville Association has not solicited membership in Tulare's territory. However, owing to the proximity of the territory of the two associations, it is apparent that the Porterville Association could handle the business in the Tulare terri- tory to the mutual advantage of the members of both associations. Two truck routes operated from Porterville could take care of the business in the Tulare territory. Methods of Financing Expansion. - The financing of the facilities ne- cessary for expansion should be done by the producers in the areas where ex- pansion is to take place. These producers must subscribe a sufficient number of memberships and a sufficient amount of capital to purchase the fixed assets that vd-ll be required to conduct a branch station. The Porterville Associa- tion should not jeopardize its position by increasing its fixed assets AArithout additional capital. This procedure has an added advantage in that it furnishes an im- portant test of the desire of producers to cooperate. If they feel the need of cooperative endeavor sufficiently to put their capital into an organization, they are likely to support such an organization with their business through the critical period of first operations. i i i ■V/ i J \ 24. The same recommendation applies to the possible absorption of the Tulare Association by the Porterville Association. A sufficient number of memberships and capital must be subscribed by producers in the Tulare area to finance the purchase of the fixed assets of the Tulare Association.