Evolving Business Arrangements in Local Grain Marketing Cooperatives

This article explores how local grain marketing cooperatives use such grain marketing services as cash contracts and brokerage services to meet the challenges of today's changing business environment. A review of the changes in the grain marketing industry is presented with particular emphasis on industry concentration and economies of size in transportation. We analyze information obtained from interviews with managers of twenty cooperatives with respect to contractual agreements with farmer/members and informal and formal agreements with other businesses. The results suggest that managers see grain marketing contracts with farmers as profitable in the short and long run. In addition, informal and formal agreements between cooperatives are profitable when transportation can be coordinated, economies of size are captured, and risk can be diversified.