VALLEY SETTLER
Published every Friday at Palmer
Alaska, by the Matanuska Valley
Farmer'3 Cooperating, Association
for the purpose of giving, news of
the Association’s work, problems,
accomplishments, and local news.
Subscript’on rates: Yearly
Local .$1.00
By Fail 1.75
Single Copy ,10
3v-C,R.Rasmussen.
CAPITAL AND RESERVE FUNDS FOR
COOPERATIVES.
Last week the steps necessary to
,art a fanner's Cooperative was
outlined from the financial stand
point. However, the question of
capital needed for buildings and
land needed, that should be placed
on a long term basi3, was not anal
ized, for usually the budding Coop
erative rents or leases these facil
ities to begin with. However, as
the business increases and the fin-'
incial set-up becomes more stable,
it is usually better to purchase
land and build, or purchase build
ings already in use. To secure this
amount of fvmds to pay cash would
lot be possible for the average Co
operative, so borrowing becomes ne
cessary, and in such u large amount
that the members could not provide
it without crippling the production
credit necessary to carry on.
Thanks to the improved facilities
provided by the U.S, Government,
through the Farm Credit Administra
tion and the F.S.A. V/e are able to
oorrow money to purchase buildings
and equipment at low rates of int-.
erest and on long time terms. But
fore this can he done the members
3t indicate that they have the a
oility to produce the prodaicts for
processing and distribution that
will enable the management and the
employees of the Cooperative to con
duct the business at a profit in
competetion with private business
and other Cooperatives. For the
repayment of the loans mu3t be made
ey this method and should this meth
od fail, then the Cooperative will
fail to meet it’s obligations and
prabably will be foreclosed for un
paid obligations.
During good times when prices are
high and the demand for the produced
goods satisfactory, then it is not 1
usually difficult to meet p.r yments
on interest nnd principle on loans,
but history shows that we have a
cycle of high prices and then again
there are times when prices are low
and sales become difficult, ’when
this occurs, it effects the whole ■
structure of the Cooperative, and
the organization and its members
both have to do with less financial
returns until higher prices return.
Frequently Cooperatives as well
as private business, become finan
cially embarrassed during those '’
times, and are unable to get enough
funds to carry on the business nnd
finance the members and still have
enough money to pay the sums re
quired to meet the loan payments.
So, after a great deal of exper
ience with conditions of this kind,
a plan was worked out to provide
funds to meet these payments when
they became due, regardless of the
business condition at that time.
Corporations, Cooperatives nnd
private businesses use the same
formula. It is the accumulr'ion of
a reserve fund, to take euro of the
needed funds when they become due,
and legislation providing for the
incorporation of Cooperatives pro
vided legal means of securing and
holding reserve funds, by placing
part of the net profit in funds that
can be used for that purpose alone.
These ftinds do not have to be Inact
ive, however, but may be used for
various purposes where they are ad
equately protected.
Our Association has a large debt
to meet In the years to com.. , and
we should begin to think abort it
before the time draws too near.
Reserves have been acquired and will
be available when the time comes,
during the meantime we must contin
ue to conduct the business in a pro
fitable manner and still give good
service to our members. All of
these activities must be co-ordinat
ed and If anyone fails then the
whole organization will be in dan»
febr.
A reserve fund should not be tak
en from the business in such a man
ner that it will cripple Its facil
ities, but on the other hand, It
should be sufficiently large to meet
the purposes for which it is intend
ed. Nor should the reserve fund be
taken so fast that it will hurt the
members financially or place an un
bearable load upon their shoulders.
When the members, v/ho are the pa
trons and producers, arc penalized
too heavily, then, "we kill the
goose that lays the golden egg,"
Anytime that a reserve fund is built
up at the expense of the producing
(continued on page 4)