LIBRARY OF THE UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAICN G30.7 . -204 - N.O.N CIRCULATING CHECK FOR UNROUND ClRCi UNIVERSITY OF ILLINOIS Agricultural Experiment Station BULLETIN No. 331 PRACTICES AND PROBLEMS OF COOPERATIVE LIVESTOCK SHIPPING ASSOCIATIONS IN ILLINOIS Hv K. C, ASHBY I'HHANA, ILLINOIS, JUNK, 1929 CONTENTS PAGE ACCOMPLISHMENTS OF COOPERATIVE ASSOCIATIONS 352 VOLUME OF BUSINESS DONE BY COOPERATIVES 354 OPERATION AND MANAGEMENT 358 ASSOCIATION PROBLEMS 367 C( INCLUSION 371 SUMMARY.. 371 PRACTICES AM) PROBLEMS OF COOPERATIVE LIVESTOCK SHIPPING ASSOCIATIONS IN ILLINOIS BY R. C. ASHHY, Associate Chief in Livestock Marketing Iii tlu' livestock marketing field both condition-; and practices arc changing rapidly. Operation of successful coopcrai ive livestock ship- ping associations is a different problem today from what it was five years ago. How arc such associations faring in Illinois? Are their volumes of business large enough to permit good service? I )o their methods of operation develop efficiency? What problems cause dilli- cnlty? Have they working programs looking to the development of a broad and efficient livestock marketing service? These and similar questions prompted the study reported in thi< bulletin. J hiring the six years from 191S to \(Y2',) some five hundred co- operative livestock shipping associations were organized in Illinois. Their volume of shipments reaching terminal markets in subsequent years indicated that they were an important factor in marketing the state's livestock. But definite information was not available as to their volume of business, their methods, or their problems. It seemed, therefore, that an extensive study of these associations should accom- plish three objectives: ill indicate (lie services being rendered by them in the livestock marketing field; (2) permit an analysis of prob- lems confronting them and limiting their usefulness; and to) dis- close a cross-sect ion of certain livestock marketing practice- and problem- on a state-wide basis. It was decided that a study til the shipping associations might properly be made the first project m the enlarged field of livestock marketing investigation which the Purnell Act had enabled the Illi- nois Agricultural Kxperiment Station to undertake, altho il may be pointed out that marketing mve.-t igat ion is not a new phase of live- stock work at this Station. Over twenty-five years ago historic studies in market classes and grades of livestock were begun, the results form- ing a basis on which our national live-lock market reporting service was later largely developed. 1 Other aspects of the marketing work have followed. This first project was intended to uncover the im- portant problems in connection with the marketing of Illinois live- stock. It was reali/ed that final answer to some of the questions resulting would require more detailed attention than would be pos- sible in this studv. ['. S. I). Bn.i.KTiN No. From July to December, 1926, the writer visited 328 organizations that were shipping livestock cooperatively in Illinois. Managers or director.- of 252 association:- were interviewed. Including information obtained by mail from 182 others. 434 organizations in all reported regarding 1925 operation. Of these. 20 were known as county flip- ping associations, 32 were elevators shipping livestock cooperatively, and the remainder were local shipping associations. Figure 1 shows locations of organizations report- ing; Table 1 shows summarized data for the ten leading counties; and Fig. 2 shows similar informa- tion graphically. ACCOMPLISHMENTS OF CO- OPERATIVE ASSOCIATIONS As a result of this study one may say that cooperative live- stock shipping associations have produced definite benefits, among which the following may be men- tioned: Savings. About a million dol- lars was apparently made for members and patrons of Illinois livestock shipping associations in 1925 alone. As shown below, the associations shipped 25.950 cars of livestock in that year. Allowing 18.000 pounds as the net weight per car, the total would be 4.671.- 000 hundredweight. Estimating >avings in marketing expense thru the associations as only 25 cents per hundredweight, the total was 81.167,750: the equivalent of 82.690. for each of 434 associa- tions or 814 per member, estimat- ing 190 members per association. Reduced Number of Local Buyers. Shipping association- have partially replaced local buy- ers. A>.-ociation managers' reports showed that whereas 130 local buyer- were operating in 33 areas when the associations started, the number had been reduced to 73 by the end of 1925. Reduced Buyers' Margins. In 16 counties managers said defi- nitely that establishment and maintenance of shipping associations had reduced buvers' margins. Here, where extravagant statements Fi<;. 1. LOCATION OF ILLINOIS COOPERA- TIVE LIVESTOCK SHIPPING ASSOCIA- TIONS THAT REPORTED ON THEIH 1925 BUSINESS In all. 434 associations reported more or loss data mean linn their 192") operation-'. could easily have been made, managers were conservative, recognizing that Illinois associations were largely organized durin cents for the same grade of calves that 1 sold then. Then the buyers paid 1 ' L , cents a pound under Chicago hog price-; now I always net wit hm half a cent of ( 'hicago. I sell few cattle but on them the difference has been more than on hogs. It saves me easily S.")0 a year." What Have Associations Saved? While no conclusive data are available on this question, it i- one which associations may well a-k frequently, try to answer honestly, and to inform their pa- tron- accordingly. 1 Shipment of members' livestock at lower expense than buyers could afford to handle it ; reduc- tion of buyer-' margins on practi- sociation territories. including that ol non-members ; sale of each owner - animal- on a terminal market, returning to each the actual returns according to grade, quality, and condition; these are some oi the results achieved by livestock shipping associations in I llinois. 'I'" 1 Hichlainl County Association covered this uniquely. At each annual meetuiir association members were invited to state the quantiiv of livestock shipped thru tin association together with their estimates of svhal it had saved t hem in market mi: costs. LIT.LETIN No. 331 \.JlUlC, VOLUME OF BUSINESS DONE BY COOPERATIVES The 434 associations covered in this study shipped 25,950 cars of livestock having a net market value of about $45,266,000 during 1925 an average of 59.9 cars per association. Altho experienced managers say an association must ship out at least once a week to give service good enough to hold its business, at least 50 percent of the Illinois associations averaged less than one car a week in 1925. Eighty-five percent of all associations shipped less than 100 cars each during the rear. (Fig. 3) TABLE 1. THE TEX LKAIMM; ILLINOIS COUNTIES IN COOI-EKATIYL; SniPi'iNi; OF LIVESTOCK (Each rounly shipped cooperatively over one million dollars' worth of livestock in 1925) County Number of associations reporting Number of cars Total value Ilenrv 18 1 894 S3 423 852 Whiteside. . . 11 1 249 2 310 331 Stephenson 1(1 1 184 2 287 123 Ogle 15 1 017^ 1 776 444 Jo Daviess 7 1 092 1 714 841 Kock Island 9 789 1 564 620 Jvnox ... . ... 15 807 1 496 812 Bureau . 14 1 137 1 429 449 Carroll 9 875 1 404 586 McDonough . . 12 688 1 259 877 DeKalb s 712 1 225 403 Mercer 6 548 1 183 470 Adams County associ- 1 lancock .... ation 15 621 687 1 154 196 1 100 585 \\ arrcn Count v (and 3 locals) 584 1 009 219 As it is estimated that the total volume of meat animals sold from Illinois farms in 1925 was valued at some 199 million dollars, the associations apparently handled about 24 percent, of the total. The amount of livestock handled by county-wide shipping as- sociations, together with other information regarding their opera- tion is shown in Table 2. Twenty such associations reported ship- ments of 2,770 cars, or 10.77 percent of the total. This was an average of 138.5 cars per county association. Costs to Patrons. In Fig. 4 associations are compared on the basis of total home costs to members. Xo data are included on freight costs or terminal marketing expense. Only in a few instances were association records such that the readv summarizing of such cost X)QO Managers say an association must .-hip at least every week i:ive service that will attract and hold patrons. The fun ire many associations depends largely upon the possibility of reaseil volume of business. l:it;i would have been possible. Moreover, these items are beyond oiitrol of local associations except as (hey penalize themselves l>y hipping liirht loads or by incurring higher freight rates as a result Thi )' si i [in 'I to lie no clelinite re latioii I iet ween the amount of business hali'lleii and hoin.' expense cliari:e(|. A few .-mall i -social ions o] i rati . 1 at rehtt ively low i xpi use. \\ hile some hi rue as-ociat ion>' costs were compar a 1 1\ e|\- hiirli. 350 BULLETIN No. 331 6 s a a E Managers' Commissions. N'early all Illinois associations paid their managers on a weight Ka-i- Inn rates varied widely. Forty- ninr associations charged 1 cent per hundredweight le-s for cattle than !or 1 MILL'S: 2S associations char_red 2 cent- less for cattle: and S associations charged ',) cent- le-- for cattle. lour associations al- lowed their managers 111 rent- a head on calves; 12 allowed 15 cents; HO-TS 38 !>.) UO 7.') .-) '.10 120 12 30 11 SO 22 2'. (17 f> 7 (53 1 54 > 9 40 1 1 1 ( >ne manager \vas paid 1 percent of the net returns on all livestock shipped; another received 1 ! . t percent of the net out of \vhich he covered all Josses from deads ,,r cripple:- . Three associations paid their managers a flat rate of So, S10, and S'Jo a car respectively. and 17 allowed 25 cents a head. On sheep .") associations allowed .") cent- a head: 12 allowed 15 cents; and 17 allowed 25 cents a head. l)eiailed information re^ardinu; managers' commissions and sinking funds mi cattle and on hogs, i- shown in Table ',}. Sinking Funds. Milking fund charge- dit't'ered greatly. Moreover. associations u.-ed their -inking fund- very differently. Some limited payments strictly to claim- on dead <>r crippled livestock. A few used the fund as a crutch, charLL'itiLL' any unu-ual expenses, adjust- ments, etc., to it. The range of deduction- for .-inking funds was as follows: In 21 associations, 1 cent per hundredweight was deducted; in 112 associations. 2 to .'> cents per hundredweight; in 1S5 associations, .'> to .") cents per hundredweight; in 14 associations, ' ._, to 1 percent 35S Bn.i.KTix No. 331 [June, of iH-t returns. In 1 association, $7 per car was taken out for the sinking fund: in 21 associations, no sinking fund coverage was pro- vided. while in 16 associations, commercial coverage was provided. The percentage method affords t\vo advantages ill convenience in calculating, and (2> increase or decrease of deductions directly as market prices vary and hence as risks change. OPERATION AND MANAGEMENT The Board of Directors. The success or failure of any associa- tion rests finally with its board of directors, since the board selects and employs the managers, is responsible for records and accounts, determines association policies and operations and cannot delegate those responsibilities. A live board usually means a working and a shipping association. Regularity and frequency of board meetings is a good indication of association efficiency. As to board meetings, these were the reports: Number of associations Board meetings 9 Do not meet at all 40 Irregularly 64 Once a year 14 Twice a year 34 Three or four times a year 23 Every month 6S Xo definite information 182 Xo information (mail reports) Business handled by association in 1925 Directors met S340.000 Mont hly 115.000 Yearly 240.000 Infrequently 150.000 Xot at all ' 790.000 Twice a year 300.000 Xot for 4 years 314.000 On call 125.000 Xo recent meet ins: 65.000 Xot always yearly 270.000 Quarterly 90.000 Did not know It seems that a 8150.000 business would be worth talking ovci once a month. A keen and successful fanner of many years' experience with farmers' organizations said recently: "Xo cooperative is a success unless .-omeone understood the program the ollicer- were attempting to work out. Selection of Consignee, in a nreai majority of associations man- a tiers said llie man with the most -lock in a load had the privi- leiie oi saying where n would go. A fairer system would seem to be for owners, or owner, having over half the load to say where 1 he- load should be shipped. Many Managers Not Bonded. Only 7.1 associations replied yes to the question whether or not the manager was bonded, lu 17.1 associations managers said they gave, no bonds. Managers bill out all stock, direct disposition of proceed.-, and in many instances draw sinkiim fund check- |o pay losses. Adequate bonds -hould he pro- vided: ihi- i- only nood bu-iness practice. The association should a r- ra nue .and | >a y lor a -u ret \- bond. Personal Buying bv Managers. Fortv-onc managers -aid the\ did no! buy. Mo-i oi them -aid n \va- dangerous io any asso(iation HI |)ei'l:iit a manager to bu\ and -hip on hi- own account. Scales and W-. ighing. Some as.-ociations owned excellenl sc;des. had them ie-ted I'e^ulafly, and kepi them up. Some scales were verv ini-at i-faci or\". There are two rea-on- for accurate scales: il' I irora ' 1 1 rj. o; -hritik- i- on home weights; n home scales ai'e inaccurale, the prorate will be incorrect; i2i ti'ood scales well kepi up increasi respeci for and conlidence in the association. A manatier expects hi- hook record:- to he accepted as correct: he -hould he equally par- ticular a hoi; | hi- weitihl -. 300 Hri.i.KTix Xo. Ml Scale pits should he cleaned frequent ly. If scales arc tested by a competent mechanic they are likely to last longer and to give better service. Said one manager: "I cleaned our scale pit out two years atro took up the platform boards and took out a wagonload of dirt. Kxpect it ought to be cleaned out again rats get under there 1 and make a lot of muss.'' Scale pits sliould be readily accessible, should be inspected frequently, and should be kept clean. Shrinkage a. Troublesome Problem. Home feeding before de- livery to the local -hipping point was listed as a big factor in shrink- age. Where animal- were delivered "stuffed" or where they had come a long distance, several managers requested separate weighing at the market.' Conversation with managers indicated that several did not object to weighing stock "light" at home, explaining that this cost patrons nothing and they were pleased by the light shrinks apparently re- sulting. Such practice cannot be too strongly condemned. Market Outlets. Illinois livestock is usually consigned to the terminal markets altho some is shipped direct to packers. Some as- sociations, having two or more terminal markets available, were not marketing all of their livestock to the best advantage. The gen- eral movement of association shipments to market is indicated in Fig. 5. Direct Shipping. Up to 1926 there had been comparatively little direct shipping in Illinois. 2 possibly because of three terminal live- stock markets within the state and two others just beyond its borders. Sixteen counties reported direct shipment of 1.075 cars in 1925. or about 9.3 percent of the total livestock shipped from those counties, or 4.1 percent of the total cars marketed by all reporting associations. Preferential Rates. A number of associations were troubled by preferential rates. First, some associations felt they should reward those patrons who marketed all livestock thru the association, as against the man who shipped only occasionally. A simple but prac- tical plan to this end is followed by one large association. Those patrons who have marketed all of one kind of livestock thru the association may oci;it ions admitted to incmbcrsliij) only tarm bureau mcin- Ix'i's. charu'iim' an additional >cr\'ice fee to noiiineinber pati-oii-. 1'ni- poniMits ai'iiur llial So percent ot Illinois shipping associations \\'crc organized and put on their teet by lai'in bureausj that many as- sociations .-till receive much help I'rom farm bureaus and farm ad- visei's; that farm bureau member- pay the bdl for all those services; and that they are therefore entitled to a preference. 3G2 BULLETIN No. 331 [June, Nonmombcr service Number of charge per c\vt . in 11)2") count ies 1 cent 1 2 cents 1 5 cent s G 10 cents 3 2f> cents 1 2") and 30 cents 1 !> or 1% of market net 1 Records, Accounts, Audits. Some associations had excellent record:-: others had only a box of dusty master sheets and in many cases some of those were missing. Shipping association records, gen- erally speaking, were inadequate. Apparently many officials did not appreciate the value of good records. When asked about his busi- ness during the preceding year, one manager referred the inquirer to the local bank, stating that the cashier kept all the association records and wrote all the checks. It was a distinct surprise to find the cashier unable to tell either how many cars had been shipped or what volume of business had been handled. Records of the larger associations were usually more complete and better kept. Records alone don't make business. But good records properly analyzed and interpreted help a manager to keep current business and to get more. The Illinois Agricultural Association and the Agri- cultural Extension Service of the University of Illinois have done good work toward improvement of association records and farm advisers have helped much, (lood association records and accounts, uniform- ly kept, \vould increase the efficiency of associations using them and would, within a few years, furnish most valuable information for a study of livestock shipping operations on a state-wide basis. X'o association was using the flat-rate system of expense, so far as this survey disclosed, (iood records, carefully analyzed, assist in determining a sound basis for flat-rate charges. Following is a summary of audits as employed by Illinois as- sociations in 1925: Xo definite 1 report Xo audit made Directors audit hook- Local hanker audits book Illinois Agricultural Cooperative sociation Different Total -133 100 Si'Al.K TICKET MANLIUS SHIPPING ASSOCIATION CATTLE Weight CATTLE Weight Heifers Helfora Heifers Steers SHEEP Wc.gh Bucks Wethe o A card iiM-d liy Manager ('has. (Juiu, of the 1'ari- Association. n keep :i consecutive record of the individual shipment-; made by each iM'on ni' the aocia!ion i- sho\vn in Fiir. ti. The card is adaptable The form of scale ticket u>cd by the Manliu- Association is re- roduced in Fiii. 7. 1' permits definite lii'aditiLi.' of livestock as it i- 'ei'^lied and \vhili the o\vnevs are present. This lessens complaints at el'. Association Reports. Ke\v a--ociation niaiiau:ers could furnish a npy MI their ' :.:. i; . re iort. T\vo ditliciiltie- are apparent reiiard- _ prepai'at i< in o] repurf-: 'I 1 records and accounts often do not Tini' ready prepai'ation m' a thnrn report; 1 2 1 many manal liov\ n pn i; n a repol't thai i- brie] bill complete nd interest inu..' \\liili- ti e annual report should lie printed or mimeo- ei| and a copy [tin i:, : " the hand- of every member and patron i .- i a-->ni'iat in] . the v I'Her found only t \vo a~-ociat inn< (imnu' so. iie mnfe the member-- know abiiut an eflicient association, the ',]:. .; > I'- -i ' ;] rn; |i - nf tin In : > "4 associations. Thirteen associations reported a total ol \)2(\ members durum' their tir-t year ol operation as compared with ,'->.(>87 in 192.") an increase of nearly fourfold. ASSOCIATION PROBLEMS Thus far we have dealt with material drawn directly from the schedules u-ed in this study. The following discussion is a re-ult of both tield observations and of conversations with informed association officials. The problem- confronting shipping association managements are both real and numerous. Since practically every type of problem i- beiim' met successfully by some cooperative oru'ani/.al ion. there is stroim probability that any vigorous association may meet it- prob- lems successfully, provided that it- management i- aggressive ami that it has the necessary membership support. 3GS Xo. 331 1. Volume of busine.-. how to increase it _'. The trucking question )>. Direct buying how to deal with it 1. Increase of small stockyards .">. How to obtain and to maintain effective membership contact (i. Development of better records and accounts 7. The question <>f preferential rates S. Membership contracts The first step in solving any problem is to get clearly in mind just what the problem is and what it involves. Board;? of director Fie. S. SMALL ASSOCIATIONS USUALLY MEAN iNKRicqrKNT SHIPMENTS According to the above chart 360 cars were dis- tributed among 12 associations, an average of 30 cars per association or 1 car every 12 days. Fre- quency of shipments is vital to association success. would find it helpful to devote some meetings to the dismission of local association problems, setting them out on a blackboard in the order of their importance 1 and later setting down their ideas for deal- ing with each. If a board met quarterly and discussed thoroly one of the above problems at each meeting, two years would be required to cover the eight topics. Boards meeting only once or twice a year "because there is no business requiring attention if they do meet oftener." might consider this phase of the matter. LIVKSTOCK SHIITIM; ASSOCIATIONS IN ILLINOIS Volume of Business. Associations shipping less than a hundred cars a year can scarcely expect to meet truck competition, to give good service at a reasonable charge, and to continue successful oper- ation. Volume of business makes possible better management, ade- quate records and accounts, avoidance of light loads and mixed loads, 1 and better service. Large associations are usually able to reduce costs and are in better position to bargain for trucking; service where it is needed. How May Volume Be Increased? Some say increased volume must come thru fewer but stronger and better managed associations. FII;. !). T.\K<;KK ASSOCIATIONS MKAN Moiuo FKKQl'KV]' Sll H'.MKNTS IU" 'In 1 organization indicated above I he 3f>0 cars would lie handled by f> associations, an average of 72 -cars each or 1 car every ."> days. Larger associa- tions can give liettei 1 service by shipping out more ofti n. Thev are ti'e()uently in better position to provide an ctlicient truck-in service. Associations may cooperate, combine, or disband. Increased use of truck-in service by the stronger associations will be a factor in solv- ing this problem. By way of illustrating this idea, assume a county having IS associations shipping a total of ;>(>() cars a year. That is 150 cars per year per association, or about 1 car each 12 days. Imagine 370 BULLETIN No. 331 [June, the same volume of business handled by 5 associations shipping 72 ears per association, or 1 car each f> days. Assume that the o organi- zations later combine into one association, establishing a county-wide truck-in service. Then the one association handles 360 cars, or over one car a day. That indicates one angle of better service by larger associations. Naturally with fewer associations, farther apart, the cost of bringing the livestock together becomes more of a factor. A graphic presentation of this imaginary proposition is given in Figs. 8 and 9. Increased volume means handling a larger portion of livestock within a given area or else of expanding the area served. It is worth while to know how much livestock moves out of an area and what proportion of it goes thru associations. A good example of such in- formation is given in Table 3 prepared by the Henry County Farm Bureau for use by shipping associations in that county. Trucking. The problem of trucking by shipping associations is discussed in Circular 331 of this Station. One sentence is repeated here: ''Apparently associations must learn how and where to employ trucking or face it as a destructive competitor." Several successful managers have said that only associations furnishing some form of trucking service will be in operation two years hence. Direct Packer Buying. Difficult competition for associations is furnished by direct packer buying. Membership support (effective contact between management and members) demonstrates its value in dealing with this problem. The importance of local associations being associated with and committed to a broad and practical live- stock marketing program then appears. Should direct marketing ex- pand to a point where it replaces the terminal markets, local asso- ciations would be even more 1 important than now. since they might well be the only medium to which the individual could look for assistance in selling operations. Small Stockyards. The producer has usually received no in- creased return for his livestock delivered to small stockyards. By enabling the grower to deliver his stock to the yard, watch it go over the scale, and take the check home, the producer may have a feeling that he is marketing his livestock in a most direct and effec- tive way, but in reality these yards more often are just an additional way station between producer and consumer. Membership Contact. This problem has not received enough attention. Active directors, well-planned annual meetings witli effec- tive programs, and purposeful livestock marketing committees should bring much improvement in ihis direction. Records and Accounts. Tin --e are a problem in i hem-el\ -e-. While man}' associations aiv utilizing imperfectly tin- record form- and methods now available. attention -hoiild lie uiveii to the po-.-ihility oi' further simplification and standardixation of record forms and meth- ods. and to the instruction of association officials in their more et'fec- tivc u-c. Preferential Rates. No su.miestion- as to the matter of prefer- ential rate- are attempted, a- there wa- im opportunity for the -tud\ of that question. Membership Contracts. These merit attention by associations. ('nly one Illmoi- association ha- lieen operating on a definite and lama fide contract ba-i-. Before their contract was adopted it was considered for several weeks by the board of director-. Later the plan was pre-ented at the annual meeting and carefully explained to the member-. Il was adopted, to become effective when an agreed percentage of the member- had signed. The director-, in team- of two, calleil mi every member or patron of the association, explained and di-cu--ed all phases of the proposition, and solicited signatures. It was reported that -oine C^i percent -itined up on the lirst round. A successful contract plan must be based on () car- of livestock, worth approximately S45, 2(50. 000 were -hippeil by Illinois associations. ( 'nly 14 percent of the associations -hipped over 100 cars in 192"): .")" percent shipped less than .")() car-. To u'ive u'ood service shipments must be frequent. 1172 BCI.I.KTIN No. 3:51 Managers' commissions varied widely. The success of any association rests finally with its board of directors. Membership relations are most important and deserve much at- tention. Shipping association records were inadequate. Animal reports may be made a valuable asset. The membership contract is worth studying. Association problems should be outlined by the board of directors: their definite consideration may well be made a part of every board meeting. UNIVERSITY OF ILLINOIS-URBANA