PB1759-First Things First - Initial Steps for Developing Value-added Cooperative Farmer Ventures

Many Tennessee farmers have developed successful value-added ventures over the years. Although the use and defi nition of value-added agriculture varies, an acceptable description includes processing, packaging and marketing agriculture commodities and farm resources in ways that allow farmers to benefi t by receiving a greater share of the economic value returned to their farm commodities and resources. Adding value is the process of converting agricultural commodities and farm resources into products of greater value, increasing the economic value of an agricultural commodity or the process of increasing the consumer appeal of a commodity. Some peach and apple growers have developed value-added ventures by processing, packaging and marketing fruit cider, fruit jelly and fruit pies. Dairy farmers may add value by processing and bottling milk. Livestock operators may add value by composting farm wastes and marketing a packaged soil conditioner product.

Among other factors, farmers may ultimately decide to develop a cooperative in order to acquire substantial amounts of start-up capital. While this may be the primary motivation for a cooperative, to increase the chances of business success and sustainability, the initial phases of developing a cooperative venture must be based on sound business principles, not just the motive of raising capital. Cooperative farmer ventures can be legally structured in a number of ways, including partnerships, corporations, limited liability companies or cooperatives. The specifi c legal structure of a cooperative venture should be considered during the initial planning phases. The actual determination of the best legal business structure may result from the feasibility study.