Co-ops continue to thrive under 100-year-old law

Late last month, I celebrated my five-year anniversary with MFA. When June rolls around, I will have spent 26 total years working for agri­cultural cooperatives.

And I have a century-old law to thank for it.

The Capper-Volstead Act, which is often called the “Magna Carta” of cooperatives, will turn 100 on Feb. 18. It was signed by President Warren Harding in 1922 to legally protect collective action by farmers to market, price and sell their products. Without this exemption, agricultural cooperatives would find it difficult— if not impossible—to operate under antitrust laws that guard against monopolistic business practices.

In other words, if there were no Capper-Volstead Act, there may very well be no MFA—nor any other farmer-owned co-op that buys grain, markets farm products, supplies inputs or provides financial services.

To understand the importance of this legislation, you first have to un­derstand its historical context. In the early 1900s, the United States was transforming from an agrarian society to a more industrialized economy. There was a growing divide among farmers, who were still relatively small, and the much larger com­panies that bought their products or supplied their inputs. Farmers weren’t receiving fair prices, and those who tried to band together to create a more level playing field were in danger of violating antitrust laws.

Capper-Volstead—named for its sponsors, Sen. Arthur Capper of Kansas and Rep. Andrew Volstead of Minnesota—was intended to correct this imbalance by allowing farmers to form cooperative associations and strengthen their bargaining power. Under this statute, farmer co-ops are mostly immune from antitrust restrictions, but the U.S. Secretary of Agriculture has power to prevent them from achieving and maintaining monopolies.

Over the past 100 years, the Cap­per-Volstead Act has allowed cooper­atives to flourish under its protection and evolve to effectively serve their members. At MFA, for example, our mission has grown well beyond pooling orders for better buying power to providing members with an expansive selection of value-added products, services and expertise.

However, as co-ops have grown bigger and more complex, they have become prime targets for antitrust scrutiny. Over the past 10 to 15 years, lawsuits involving egg, cran­berry, mushroom, potato and dairy cooperatives have centered on just how far Capper-Volstead’s exemp­tions should apply to large, modern agricultural operations. While courts found some actions of these co-ops were not protected by the act’s provi­sions, Capper-Volstead has ultimately continued to survive these legal tests. The pandemic could raise those questions again, having exposed the fragility of America’s consolidated food-supply chain.

The relevance of farmer coopera­tives today was discussion point at the Emerging Leaders in Agriculture conference hosted last month by MFA Incorporated and MFA Oil. Some 75 young farmers and ranch­ers participated in this inaugural event, which was, in part, designed to strengthen their knowledge about cooperative businesses and address issues and challenges facing agricul­ture and rural America.

Dr. Keri Jacobs, who holds the MFA Chair in Agribusiness and is a Graduate Institute of Cooperative Leadership Fellow, spoke to the group about the importance of the co-op business model. Without cooperatives, Jacobs said, American farmers would be at the mercy of the market in an economy dominated by large corporations.

“Do we really need cooperatives today?” she asked. “One field of thought is that no, we don’t. Farmers are big enough to sustain their opera­tions without them. But I think that’s exactly wrong. Now more than ever, we need cooperatives. Consolida­tion in the ag industry means fewer choices, and I worry that we would step back to the early 1900s in terms of the market power producers have.”

The danger to cooperatives today is not only scrutiny of their business practices, but also lack of support and loyalty among younger genera­tions. Jacobs encouraged conference attendees to get involved with MFA and other cooperatives that serve their farming operations. Developing the next generation of co-op mem­bers grows more important every year as the average age of principal farm operators climbs higher.

“Much like we say a church is not the building, it’s the people, a coop­erative is really not the organization, it’s the collection of people that it’s representing,” she said.

The milestone anniversary of the Capper-Volstead Act underscores the need for more cooperative education, understanding, connection and en­gagement among farmers of all ages and career stages—both men and women. The statute does no good if members don’t take full advantage of the cooperative benefits the law serves to protect.

As Jacobs told participants at the Emerging Leaders conference, when it comes to your co-op’s future, you either “use it or lose it.”