needs of the association*. The
amount of permanent and operating
capital that will be sufficient
for any association will obviously
depend upon the program and needs
of that association. The board of
directors and manager should give
careful attention t-o determining
the amount of funds which will'
bo adequate for those purposes.
The association should have an
adequate surplus or reserve fund
to take care of any loss or unex
pected situation that might jeop
ardize thestability of the organ
ization, without the need of draw
ing upon the permanent -and oparat-,
ing funds. Such reserves provide
safeguards against afty event that
might tend to weaken the perman
ent financial structure of the..,
association.
A weakness of a great many pur
chasing coopordtives “has bean.
their lack ex' capital. This nay
bo excused in the beginning, but.,
the lack of a definite policy and
program that will provide"■ capital. .
is indicative of a most outstand
ing weakness and hazards' the -.future
success of such an organization.
I an firmly•convinced that coop
erative purchasing aSs'ociations
should obtain most of their per
manent and operating 'Capital out.
of their own operations. In this
way the members finance their own
association and come to have a
direct feeling of personal inter
est in its success. Vi/licn produc
ers feel this way, they are glad
to have a plan worked out whereby
they can directly assist in the
financing of their own association
The retention of savings or pat
ronage refunds, for this purpose,
is tho most common way to build up
•a-reserve..fund. In effect, this
process means' that the member
simply lends his patronage refunds
to' the association. In so doing,
he does not lose' any benefit accur.
ing to him from the operations of
the association. This benefit
Is'merely deferred to enable his
association to operate more effic
iently, and-he is .paid interest
for the use of his patronage div
idend until the fund3 so retain
ed arc returned 'to •hir.i,-..
The retention of savings by an
association on this basis mr.ke3
the active members the owners.
This is important, for producers •
are continually going in an d out
of the farming' business. If an
association should stop issuing
and retiring stock, a condition
would soon exist where the associ
ation might be owned and controlcd
by a number of people who had
gotten out of the farming business
Under the nretain" plan of fin
ancing, only the active members
finance the association. If a
member goes- out of the farming
business and ceases to bo a pat
ron, his capital Ooes back to him
within a reasonable time there
after. During this time he is
receiving c reasonable dividend
for the use of his funds. This
plan puts the financial burden
squarely on those who are making
use of the association. Every
member knows that he is contribut
ing in proportion to his patron
age, The soundness of this method
of operation has been demonstrat
ed by A number of associations
engaged in the purchase of farm
supplies.
In closing, I would like to state
that managers and directors have
riot performed their full duty
when they confined their atten
tion to the present problems of
their associations. It is also
their responsibility to look be
yond the immediate future to new
problems which may be in the mak
ing. In this way the coopertivo
can make adjustments before the
situation becomes acute. Cooper
atives cannot be operated by rule
of- thumb mothods. Each associ
ation has certain problems pecul
iar to its own operating conditions*
It is important for the management
readily to abandon old methods I
and adopt, new policies when im
provements in service to members
will result. Progressive manage
ment means progressive and effic
ient coopertives*. .