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Ag cooperatives prove successful in rural South

Report finds agricultural cooperatives prove beneficial economic development model.

November 21, 2018

3 Min Read
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A new report by the Institute for Policy Studies titled "Agricultural Cooperatives: Opportunities & Challenges for African American Women in the South" found that co-ops can create a more beneficial economic development model in the rural South, especially for black women.

This report found that economic development models in the rural South are heavily skewed towards subsidizing large companies that offer few benefits for rural African American women and come at a large cost to taxpayers while putting locally owned businesses at a disadvantage. It gives examples in Alabama, Georgia and Mississippi where residents are suffering poverty wages and high unemployment despite state investments in large manufacturing corporations to those states.

“In these states where there’s virtually no infrastructure or viable economy that works for all of its people, we have an opportunity to create a cooperative economy, and this report shows examples of successful black women-owned coops that are doing it,” report author Michael Paarlberg said. “With more resources directed to local communities and innovations, we can help expand that success in some of the poorest parts of this country.”

The Trump Administration is seeking to cut the U.S. Department of Agriculture’s budget by eliminating funds for the Rural Business-Cooperative Service, the only federal program dedicated to supporting co-ops on a national level.

Support for agricultural cooperatives mostly comes through the federal government. However, such funding is dwarfed by state government subsidies for large corporations. Alabama, Mississippi and Georgia have each offered massive tax breaks and other subsidies to attract large manufacturing facilities. Nissan is at the top end, with an estimated $1.3 billion in subsidies for its Canton, Miss., plant ($290,000 per job).

Agricultural co-ops like the North Bolivar County Farm Cooperative of Mississippi and the South Plaquemines United Fisheries Cooperative provide key services like affordable food and repairing boats after Hurricane Katrina hit. The Farm Service Cooperative, the single largest African American co-op in the country, supports dozens of co-ops throughout the region in sectors like credit unions, farming and home care. More than 200 black-owned co-ops in the South have been started in the past 25 years.

Comparatively, USDA’s Rural Business Enterprise Grant Program has awarded a total of just $2.3 million disbursed among all agricultural business development grantees in these three states since 2010, and another USDA grant program for specialty crop development amounted to less than $2 million in 2017 for all awarded applicants in these three states.

In the Black Belt, most jobs remain in agriculture or are predominantly in the low-paying service sector. The service sector employs the majority of workers in the Black Belt counties of Alabama, Mississippi and Georgia, which are largely untouched by the companies subsidized under current state economic development models. The average weekly wages in these counties are all lower than state averages, unemployment is higher and the share of employment in manufacturing is under 15% in all three states.

Despite high barriers, African American farm co-ops are harnessing existing knowledge and entrepreneurialism that trace back generations and should be at the center of an alternative economic vision for the South.

Farmers report that their top challenge is financing. With modest increases in public investment in technical support and start-up capital, such cooperatives could greatly expand into new markets, employ significant numbers of people and contribute healthier food to their communities.

The report offers policy recommendations, which include streamlining the Farm Service Agency loan application process and better funding loan and support programs aimed at small and minority farmers. It also suggests better support for equipment purchases.

The institute further recommended that co-ops should be taxed in a different manner from regular businesses so their member-owners avoid being taxed twice.

Find the full report here.

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