ILLINOIS CO-OP FUTURES DISSOLUTION VOTE SET
The shareholders of Illinois
Cooperative Futures Co., the futures trading arm of many
Midwest farm cooperatives for more than 25 years, will vote
Wednesday on its possible dissolution.
    The directors of the company called a special meeting and
recommended its dissolution last month, citing falling volume
and increasing costs.
    Sources close to the organization told Reuters the pullout
of Growmark, Inc., which holds more than 70 pct of the capital
stock, led to the call for dissolution.
    The possible demise of the cooperative has set clearing
houses scrambling for the trading business of the 85 regional
and local cooperatives that comprise its membership.
    Ironically, it was Growmark, at that time a regional farm
cooperative with major river terminal elevators, that founded
Illinois Cooperative Futures on December 1, 1960.
    But Growmark became affiliated last year with Archer
Daniels Midland of Decatur, Ill., and markets its grain through
a joint subsidiary of the two companies, ADM/Growmark.
    With that relationship, Growmark no longer needs to trade
futures through the cooperative, said Tom Mulligan, president
of the co-op.
    Membership in the company, which Mulligan termed a
cooperative of cooperatives, has declined from 99 in 1982. A
notable loss was AgriIndustries of Iowa, which became
affiliated with Cargill, Inc.
    Illinois Co-op's other members include such regional
cooperatives as Indiana Grain, based in Indianapolis, Goldkist,
of Atlanta, Ga., Midstates in Toledo, Ohio, Farmland Industries
in Kansas City, Mo., Farmers Commodities, Des Moines, and
Harvest States in Minneapolis.
    Some observors said the demise of Illinois Cooperative
Futures Co. is a serious blow to the cooperative system.
    Instead of banding together, the individual cooperatives
are forced to go their own ways, said the floor manager of one
cash house at the Chicago Board of Trade.
    Such a move would destroy the cohesiveness that gives farm
cooperatives an advantage in the market at a time that a few
major commercial companies are growing dominant, he said.
    Don Hanes, vice president for communications with the
National Council of Farm Cooperatives, said 5,600 cooperatives
exist today, down from 6,700 five years ago.
    "The period we've gone through in the past five years has
been quite a crunch," he said. "There's been a lot of
consolidation in the marketing co-ops."
    One problem, he said, is the co-ops sell the grain to the
major commercials for export, rather than exporting it
themselves, losing potential profits.
    But exporting grain requires heavy investments, and the
multi-million-dollar loss posted six years ago by Farmers
Export Co., a co-op set up to export grains, served "to make
folks gun-shy," Hanes said.
    Mulligan said he believes the dissolution, if it is
approved, is a result of change in the futures industry rather
than a change in U.S. agricultural economics.
    A grain dealer at one member co-op said the futures arm
"was a convenience, something that saved us a little bit of
money. (Its dissolution) will force us to change our way of
doing business."
    "We're sorry to see the co-op go by the wayside," he said.
"But there are lot of people out there to do business with.
There are plenty of capable firms."
    Steven W. Cavanaugh, vice president for grain marketing
with Indiana Grain, said he would prefer to trade futures
through a Chicago-based cooperative.
    "In terms of clearing our business as a unit as opposed to
individuals, there would be economic savings," he said but
added, "The times change and with changing times, come
different opinions of what businesses ought to be around."
    Cavanaugh said the possible demise of the futures arm had
nothing to do with its profitability. "I would guarantee you
that this company is not in trouble. It is a sound, healthy
organization."
    In the year ended February 28, 1986, the Illinois
Cooperative reported income of 10.2 mln dlrs and members'
equity, or net worth, of 8.3 mln dlrs. The annual report for
the most recent year has not been filed.
    Under the cooperative system, income from operations is
returned as "patronage refunds" to the members.
    Income and refunds in the past five years have been
declining. In the year ended February 28, 1982, the co-op
reported income of 17.4 mln dlrs and patronage refunds of 17.0
mln dlrs. Patronage refunds in the year ended February 28,
1986, totalled 9.5 mln dlrs.
    "You're dealing with substantially lower volume," Mulligan
said. "Lower volume translates into higher costs."
    According to the company's 1986 annual report, Growmark
owns 90 pct of the preferred shares and four pct of the common
shares of Illinois Cooperative Futures Co.
    Mulligan declined to speculate on how much of the capital
Growmark is entitled to. He said he could not determine the
figure unless the shareholders decide in favor of dissolution.
Equity is distributed according to each member's trading volume
and, as a result, changes from year to year.
    However, Mulligan said the company could continue to meet
minimum capital requirements to trade futures even if Growmark
pulled out.
 Reuter
