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price the consumer pays for first-grade butter varies
very little between one shop and another ; the advan-
tage is gained at an earlier stage in the marketing

The methods by which the business of a co-opera-
tive creamery is carried on are simple. The pre-
liminary steps of obtaining the necessary capital and
ensuring an adequate milk supply are the most
difficult. It is usually found necessary to success
that the milk of from 800 to 1,000 cows should be
available within a radius of five or six miles. To
erect a creamery to deal with this supply and turn
out good butter cost, before the war made all such
calculations fruitless, about 2,000, although no
doubt it was often done for less. Different methods
of financing this initial outlay have been adopted
in different countries, but generally speaking the
only methods possible are either the raising of share
capital or the obtaining of a loan from a bank on
the collective security of the members or the com-
mitteemen. As a rule a combination of the two
methods is adopted, but in Denmark there is no
share capital and all the members of the society



become liable for the overdraft. Where share capital
is desired it is usual to fix the number of shares to
be taken in proportion to the number of cows owned
by the member, but, as in the case of the agricul-
tural societies, the full amount of these shares is
often not called up on allotment.

Once the money for the provision of buildings and
machinery is secured, the question of the milk supply
becomes of paramount importance. Since the whole
success of the society depends upon the supply
remaining sufficient to maintain the necessary plant
and staff, it has been found advisable in many cases
to include in the rules a form of contract by which
the member who consents to the rules binds himself
to supply to the society all the milk from his cows
which is not used by his own household. Thus the
society is protected against possible disloyalty caused
by the bribes of competitors, and substantial damages
can be claimed for breach of this rule.

Once the capital and the milk supply are assured
the appointment of a manager and staff are the
next concern of the committee, and as dairying is
a well-established and standardized industry in most
countries this should not present great difficulties.
We cannot, however, too often emphasize the absolute
necessity of finding the right manager, for a large
part of the conduct of the society's affairs must
necessarily remain in his hands, no matter how
conscientious the committee may be. In some cases
a secretary is appointed in addition to the manager
to represent the interests of the committee and to
do the necessary clerical work ; there are obvious
advantages in this, but they must be set against the



disadvantages of added expense and of friction
caused by dual control.

The method of receiving and paying for milk
is largely standardized. Each supplier's milk is
sampled on arrival at the creamery, and the sample
is tested to establish its butter-fat content. Pay-
ment, which is usually made once a month, is based
on the pounds of butter-fat received and not on the
gross quantity of milk thus ensuring that quality
is properly rewarded. The rate of payment is deter-
mined by the price received for butter sold to cus-
tomers, less a margin to cover working expenses,
overhead charges and so forth, and to provide a
reserve against contingencies. It is in making this
calculation that the skill of the manager and
committee are largely shown ; if it is too large
the price paid for milk will compare unfavourably
with that ruling in neighbouring creameries, and
thus cause dissatisfaction, while if, on the other
hand, it is too small, it may lead to disaster
in a time of unforeseen stringency. If at the
end of the year any considerable surplus is accu-
mulated, the same rules are observed in the dis-
posal of it as in the case of agricultural societies
the dividend or bonus in this case being paid in
proportion to the milk supply instead of the goods
purchased. The rest of the rules governing the
conduct of the business of a creamery are similar
in all respects to those obtaining in other co-operative

It will be apparent that a creamery with an ener-
getic manager and committee has opportunities for
undertaking various other forms of business besides


that of actually making butter. The most obvious
developments are cheesemaking, which can be carried
on side by side with buttermaking and the collection
and sale of eggs for members. It is also natural
for the creamery to perform for its members many
of the functions of the agricultural society of the
type described in the previous chapter, by pur-
chasing the necessary manures, feeding-stuffs and
seeds in bulk. It may even go so far as to carry
on a general store business as a separate department.
For these reasons it is usually convenient in a dairy-
ing district to have only one society, which does
both the creamery work and the collective purchasing
though difficulties may arise in this connection
from the fact that local traders may be among the
most vigorous promoters oj: a creamery while they
have a strong objection to the co-operatizing of the
other business. Further developments, which depend
on the utilization of the surplus power of the creamery
engine, are the crushing of grain, milling, saw-mills,
and even laundry work.

Pig breeding and feeding on a large scale can also
be carried on economically with the help of by-
products, though the risk of epidemic is considerable,
and cow testing and other methods for the improve-
ment of the yield and quality of milk are of course
a normal part of the functions of a really well-
managed society.

In his Report on Agricultural Co-operation in
Germany Mr. J. R. Cahill gives the following account
of the subsidiary activities of creameries affiliated to
the Imperial Federation in 1910. " There were
179 with grist and crushing mills, 36 with bath estab-



lishments, 20 with flour-milling machinery, n with
bakeries, 3 with combined mills and bakeries, 25
with potato steamers, 14 with wood-chopping plants,
28 with egg-selling stations, 5 with corn-threshing
machines, 6 with electric power stations, 32 producing
fattening for pigs, 5 with public weighing machines,
and a few others which had distilling plant, ice
machinery, etc." He goes on to say and the
comment is of general usefulness for the ^promoters
of creameries "Some dairy experts engaged in
German co-operative work strongly recommend that
at the time of establishment provision should be made
for the carrying on of by-industries either by the
dairies or by independent societies. The same
mechanical power and the same skilled staff required
for its operation can be more fully utilized at little,
if any, extra cost, especially as in most dairies proper
dairy work is finished early in the afternoon, and
the dairy wagons and carriers may also be brought
into requisition for subsidiary services. Thus,
carriers might collect eggs simultaneously with
milk, or deliver cattle cake, seeds, etc., at the same
time as the milk-cans are returned. The additional
space or building necessary can be also provided
on comparatively more advantageous conditions
when the main establishment is being built. It
seems without doubt that dairies might be utilized
very frequently as the headquarters of egg and
poultry societies, of societies for the sale of farming
requirements and of cattle-selling societies, if the
dairy society itself is unwilling to add any of their
responsibilities to its own business ; while many
other activities of a more restricted kind and in-


volving little departure from the scope of their
operations . . . may become a source of profit/'

In the matter of federation creameries have con-
siderable possibilities. In so far as they purchase
goods for their members they will probably find it
advantageous to belong to a general trade federation
such as is described in the previous chapter. The
special requirement? of their own trade dairy
machinery, boxes, parchment and other equipment
may also be supplied by such a federation through
a special department, as is the case in Ireland, or
they may elect to form a federation of creamery
societies only, for this particular purpose. Still
more important is the problem of the collective sale
of their butter. In countries such as Ireland, where
an easy and profitable market is available for every
creamery which produces good butter, the spirit of
individualism lingers and is undoubtedly fostered
by creamery managers who pride themselves on
their salesmanship and are sought after for this
quality. As a consequence the federations which
exist for the purpose of selling the produce of the
creameries do not receive undivided support, and
even those societies which do business with them
are apt to send them butter only of a quality or
at a time which makes it hard to find ready sale
elsewhere. To guard against this danger federations
in many countries enforce a " binding rule " of
exclusive dealing, and do their selling on a commission

The advantages of such a federation when well
supported or properly conducted may be very great,
and they are fully appreciated in such countries as



Denmark, Finland and Siberia, which, being some-
what remote from their principal market, depend
on the constant delivery of a standard article and
the establishment of friendly and lasting relations
with the buyers. The Union of Siberian Creameries
has established an agency in London, and the same
is done by the Finnish butter-exporting federation
' Valio." The elimination of unnecessary competi-
tion, the maintenance of the standard and thereby
of the price, the ensuring of an even distribution
throughout the year, the cheap advertising of the
produce, and the lifting of a considerable burden
of work and anxiety from the shoulders of the indi-
vidual creamery manager, are the chief advantages
which may be expected to result from such societies.

Apart from purely trading federations, creameries
may either affiliate with a general supervisory and
propagandist central body or may create such a
body to deal with their own problems alone. In
addition to auditing and legal assistance they will
require a large amount of technical advice, particu-
larly at the outset in the erection and equipment
of buildings. A scheme of " control " also exists,
in Denmark, Holland, and Ireland, under which
butter which passes a certain test receives a particular
distinguishing mark. Such schemes are often assisted
by the State, working in conjunction with a co-
operative federation.

The principle of federation has been carried to
the highest possible efficiency by the Danish
creameries, and as we shall describe them in detail
in a later chapter we need not dwell further on the
matter here.



Other types of society which manufacture and
sell the produce of their members are in general
carried on on the same lines as creameries. _Chief
among them are bacon factories and abattoirs ;
these are costly undertakings which require a large
and loyal membership for success, but may be very
profitable if well managed and supported. While in
the case of creameries nine out of every ten districts
have little alternative except to make butter, in the
case of pigs and cattle the question must be decided
whether it is better to sell them as live-stock through
an association or to erect a factory to deal with them.
Live-stock shipping associations are numerous in
America and also in Germany and Austria, but in
the former country at least they are gradually being
replaced by co-operative abattoirs. Here again we
may take as our guiding principle the maxim that
it is to the farmer's interest to keep his produce in
his own hands through as many stages as possible.
The success of the local shipping association can be
only a very partial one, for in the long run the bulk
of the profits must go to the commission agent who
buys on the market.

No detailed description need be given of the
working of a bacon factory or abattoir nor of mills,
distilleries, and many other branches of industry
to which co-operation has been successfully applied.
The reader who has followed the general argument
so far and is interested in a particular industry can
easily work out the necessary modifications for

A brief consideration must be given to the collective
sale of unmanufactured produce. The chief articles



dealt with in this way are eggs, live-stock, grain,
vegetables, and fruit. As we have seen, the sale
of live-stock tends to be replaced in progressive
districts by the erection of factories. The marketing
of eggs is largely carried on through creameries and
supply societies and their federations, and wherever
these exist this seems to be the most convenient
method. In Denmark, however, as will be seen,
the egg business is carried on through a great number
of separate societies or " egg circles," with a large
and powerful exporting federation. There is no
doubt that in this matter lies one of the great oppor-
tunities for agricultural co-operators ; earnest atten-
tion to the standard and output of eggs will reveal
a hidden mine of wealth, which is too frequently
overlooked. Ho\v much may be lost or saved,
according to whether the egg trade is done well or
badly may be judged from the fact that in 1914
the value of the eggs exported from Ireland amounted
to 3,383,870 as against 2,188,104 in 1904. It is
safe to say that with the same number of hens in
the country, and better methods of grading, packing,
and marketing, combined with more scientific poultry-
keeping all of which might be brought about by
co-operative organization the figure might easily
be raised to 5,000,000.

The sale of grain is a problem which does not at
present much concern English or Irish readers, but
is of vital importance to the large grain-growers of
North America and also of Central Europe. The
normal method of selling grain on sample through
exchanges has resulted in giving a virtual monopoly
of the profits to the brokers, jobbers, and distributors



who control the machinery. The farmer is the chief
sufferer by this state of affairs, and he naturally
looks to collective action for relief. But while no
process of manufacturing is required, the sale of grain
involves very large storage facilities and a certain
amount of machinery for lifting, turning, drying, and
other operations incidental to storage. A skilled
grader must also be employed, and a very consider-
able amount of available capital is needed to tide
over the unremunerative period of storage. The
experience of Germany and Austria has shown that
collective sale of grain through large " Lagerhaus-
genossenschaften " is a hazardous undertaking, and
somewhat beyond the reach of the farmers who
make up the average society. Several large societies
of this type met with disaster in Germany, and
those in Austria which were originally established
with the aid of the surplus funds of a large central
credit society were only prevented from dissipating
their capital by the intervention of the State. Both
in Germany and in Austria these societies are now
carried on under official patronage, with the under-
standing that their facilities for the collection,
storage and distribution of large quantities of grain
are at the disposal of the military authorities in time
of war.

Greater success, as was to be expected, has attended
the efforts in this direction of Canadian and American
farmers, and the co-operative elevator is as common
a phenomenon in the grain-growing provinces and
States as the co-operative creamery in Denmark
and Ireland. In parts of the State of Minnesota
one of these structures is to be seen at practically



every country railway station, and in addition to
the sale of grain they usually purchase coal and
various forms of agricultural requirements. Central-
ization has enabled them to purchase seats on the
big grain exchanges, and the position of the grain-
growing farmer has been enormously improved
thereby. We shall have more to say of the details
of this business in the appropriate chapter dealing
with the developments of co-operation in the New

Closely allied in method with the co-operative
marketing of grain is that of fruit, potatoes, and
vegetables, and here again we find that the greatest
success has been achieved on the other sjde of the
Atlantic. An indispensable condition of successful
organization in this direction is that there shall be
a reasonable number of farmers who are growing
the same crop in the same way. Without this a
sufficient continuity of supply will not be assured.
The prosperity of the association must depend on
making itself known as a source from which produce
of stable quality can always be obtained. For this
purpose the members must give all possible assist-
ance towards standardization in order to allow of
the establishment of a brand which will command
respect. The most obvious difficulty to be got
over is the tendency of the farmer to regard his
neighbour as a competitor, and to rejoice in his
success if he gets a little more for his produce than
that competitor. He has to be taught that every
advance on the part of his neighbour helps him also ;
where a hundred farmers in a district are producing
fruit of the first grade the district commands a



reputation, and all the fruit shipped from it will
obtain top price on the market. But where ninety
of them are inefficient, the ten who are good, though
they will no doubt get more than their neighbours,
will certainly suffer for the general inadequacy of
the district.

The second necessity is absolute loyalty on the
part of the members. There is no form of society
in which it is so easy for competitors to cause trouble
by putting temptations in the way of the members.
A buyer can be sent down to visit each member
individually and give him every facility for selling
his crop straight off the farm at a higher price than
the society can afford to pay. It will easily be worth
while for a large firm to pursue these tactics for the
whole of a season they can recoup themselves by
offering lower prices in another district where no
organization exists, and if they succeed in detaching
any considerable number of co-operators by their
inducements they will strike a death-blow to the
society which will enable them to return at once to
low prices.

For these reasons an association of this kind
cannot afford to leave the matter of its members'
support to chance or even to the workings of the
co-operative spirit, and we find that in successful
societies the usual thing is for each member to sign
on admission a form of contract binding himself to
sell his entire crop through the Society for a period
of one, two, or five years, after which the contract
may be either renewed or cancelled.

The most striking instances of success in this form
of organization are to be found in California, where


the growers of oranges and lemons, nuts, raisins,
peaches, and other fruits, have created huge societies
to do their marketing for them. We shall describe
one of these associations later. It will suffice to
point out in concluding this chapter that in these
as in other forms of co-operation the most powerful
stimulus has always been the pressure of actual
hardship or necessity. The closing of the German
market for grain saw the rise of creameries in Den-
mark, the flooding of Europe with cheap produce
from the New World marked the beginnings of
modern agricultural co-operation, and the fall of the
price of oranges below the cost of production brought
about the birth of the California Citrus Fruit Growers'

97 H


THE structure and methods of co-operative
credit societies present more variety and com-
plexity than those of either of the other types, for
the handling of the people's money on however small
a scale needs careful adaptation to local circumstances.
From the earliest day of agricultural organization
the need of fluid capital for the farmer has been
strongly felt. Many a sacrifice of crops or stock
might have been averted if a little ready money
had been forthcoming to tide over the hard times ;
many a farm might have been bought, stocked,
improved and made profitable, if the initial outlay
had been rendered possible. So we find that credit
societies have made their appearance in most
countries very early in the history of the movement.
We must also take into consideration the fact that
such a society provides the easiest transition from
purely philanthropic assistance to a system of organ-
ized self-help, so that the original impulse often
came, as in the case of Raiffeisen and Schulze, from
men whose first interest in the plight of their poorer
neighbours was brought about by an instinctive
leaning towards charity, which their own modest



means made it almost impossible for them to

Agricultural credit falls naturally into two divisions
corresponding to the distinct purposes which we
have hinted at above. On the one hand, there is
the demand for a fairly large sum repayable over
a considerable period, for the purpose of buying,
stocking, and equipping land what may be called
initial capital ; on the other hand, farmers require
comparatively small loans extending over not more
than a year to enable them to carry on economically
their seasonal operations in the raising of stock and
crops in other words, working capital. The former
need is met by " real," "-mortgage," or " long-
term " credit, the latter by " personal " or " short-
term " credit. While in some rare cases the two
operations are combined in the functions of one
society, experience has shown that they require
different forms of organization, different spheres of
operation, and different capacities of management.

Mortgage credit is obviously the harder under-
taking, and consequently we find it less widespread.
It is intimately bound up with the problem of State
purchase and the creation of small- holdings ; thus
in Ireland where the transfer of land from tenancy to
small ownership has been carried out entirely by the
Government we find neither the possibility nor the
need of mortgage credit societies. In Scandinavia
such societies have been created on a national scale
under Government patronage for the purpose of
giving direct assistance to the land policy of the
State. The model, however, for this as for other
forms of credit is derived from Germany, where a



Prussian merchant named Biiring first laid the idea
before Frederick the Great during a period of depres-
sion in 1767. Out of the suggestion came the estab-
lishment of what are generally known as Landschaften,
or land-mortgage banks. Five of them were founded
before the end of the eighteenth century, and these
were compulsory associations embracing the estates
of all large landowners in the province covered.
The later societies, however, were voluntary bodies
in which only the property of those landowners who
required loans was pledged.

Mr. Cahill thus describes the Landschaften :
' These institutions ... are not co-operative credit
associations in the ordinary sense ; apart from being
non-profit-seeking, they have no share capital (except
in two cases) and the assets which they accumulate
in course of time are destined not for lending, but
to cover possible deficits. All these associations may
be regarded as highly organized associations of
borrowers, with collective guarantee, for obtaining
capital from third persons : by issuing bonds secured
by mortgages on the properties of all the members
they create a security realizable at any time, and
far superior therefore to a mere individual mortgage

There are at the present time over twenty of these
Landschaften in the German Empire, and with
unimportant exceptions they work on the same plan.
A landowner wishing to obtain a loan becomes a
member on application, with the payment of a small
fee. His property is then valued by experts appointed

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Online LibraryLionel Eldred Pottinger Smith-GordonCo-operation for farmers → online text (page 7 of 17)