E. A. STOKDYK, Deputy Governor, In Charge of Research Cooperative Research and Service Division T. G. STITTS, Chief, W. W. FETROW, Associate Chief Page The Cooperative Research and Service supplies and services; publishes the results UNITED STATES OF AMERICA NOV 21 39 Crushing Cottonseed Cooperatively by John S. Burgess, Jr. Associate Agricultural Economist OTTON farmers are interested in cooperative cottonseed-oil mills Сотт as a means of increasing their total returns from the production of cotton. Cash receipts from cottonseed in most areas of the Cotton Belt exceed those from any other crop with the exception of lint cotton. The total farm value of cottonseed produced in the United States averaged $145,333,000 annually during the 5 years 1933-37, or 21 percent of the farm value of lint cotton. During this period approximately 78 percent of the cottonseed produced was crushed. The value of the cottonseed products (oil, cake and meal, hulls, and linters) obtained from the seed crushed averaged $179,757,600 annually during the 5-year period.1 Data available indicate that the spreads or margins between the farm prices of cottonseed and the prices of the manufactured cottonseed products in many instances are much greater than the costs necessary to transport and process the seed and to sell the products. Information on five cooperative cottonseed-oil mills now in operation indicates that a substantial proportion of these margins could be returned to growers by organizing and operating efficient cooperative cottonseed-oil mills. It has already been demonstrated that a cottonseed-oil-mill business can be operated profitably by farmers on a cooperative basis. The operations of five farmers' cooperative oil mills have consistently resulted in increased returns for cottonseed to their patrons. The facilities of one of these associations appear in figures 1 and 2. The names, the locations, and the dates of organization of these associations are: 1 U. S. Department of Commerce, Bureau of the Census. COTTON PRODUCTION AND DISTRIBUTION. Bulls. 174 and 175. 2051 465 A175 FIGURE 1.-SEED HOUSES, DELTA PRODUCTS Co., WILSON, ARK. Ample space is available for storing 20,000 tons of seed or more. In addition to these five active cooperative cottonseed-oil mills, two more associations have been organized but as yet have not begun crushing operations. One of these associations, however, the Acala Cooperative Oil Mill, Inc., Tulare, Calif., which was organized in May 1938, operated as a bargaining agency in the marketing of its members' seed during the 1938-39 season. The other association, the Netex Cooperative Gins Co., Greenville, Tex.. was organized in the spring of 1939. This association plans to purchase facilities and to begin crushing operations during the 1939-40 season. Groups of farmers in a number of other areas also either have begun or are seriously considering the organization and operation of cooperative mills. Some of the possibilities of and limitations to the organization and operation of cooperative cottonseed-oil mills are indicated in this circular. Specifically the purposes of the circular are (1) to point out certain definite conditions that should exist before the establishment of a cooperative cottonseed-oil mill; (2) to indicate the most desirable organizational structure to be adopted under various local conditions; and (3) to call attention to the more important operating policies and practices that contribute to success. In developing these purposes, considerable use will be made of information regarding organization and operation of cooperative oil mills already in existence. TH BASIS FOR ORGANIZATION HERE are certain conditions that should exist before the organization of a cooperative cottonseed-oil mill should be attempted. The most important of these are an economic need for the organization, and (2) prospective members who recognize this need and are willing and able to support the organization by furnishing an adequate amount of capital and a suficient volume of cottonseed to permit efficient operation. ECONOMIC NEED To succeed, a cooperative oil-mill association, like any other cooperative organization or commercial business, must render a needed service efficiently. If the members cannot obtain relatively higher returns for cottonseed through a cooperative mill than through existing agencies, no useful purpose will be served in organizing the cooperative. The first consideration, then, before attempting to organize a cooperative cottonseed-oil mill is to determine whether or not a real need exists for such an organization. That such a need does exist for cooperative oil mills, at least in some localities, is indicated by data showing that the spread between the price received by farmers for cottonseed and the value of the products (oil, cake and meal, hulls, linters) obtained from cottonseed after the costs involved in processing have been deducted, is substantially greater than the necessary costs involved. The average spread between the value of products obtained per ton of seed crushed and the price received by farmers for cottonseed for the United States as a whole was $14.05 per ton for the 1937-38 season, $17.68 per ton for the 1936-37 season, and $12.61 per ton for the 1935-36 season (table 1 and fig. 3). The average spread for most of the cotton-producing States is also shown in table 1. These spreads include all costs of assembling, transporting, and processing, together with the profits of seed merchants (ginners for the most part) and oil mills. That these average spreads were great enough to enable farmers to operate cottonseed-oil mills at substantial savings is indicated by the average per ton expenses of the existing cooperative mills, including transportation charges on seed from the members' local shipping points to the mill. The average expenses of the cooperative mills amounted to $7 per ton for the 1937-38 season, $6.93 for the 1936-37 season, and $6.89 for the 1935-36 season (table 2). On the basis of these average per ton expenses, and on the assumption that spreads FIGURE 2.-MILL FACILITIES, DELTA PRODUCTS Co., WILSON, ARK. In these facilities cottonseed is cleaned, delinted, and hulled, and the meats are cooked and crushed. TABLE 1.-AVERAGE VALUE OF COTTONSEED PRODUCTS PRODUCED PER TON OF COTTONSEED, Farm PRICE OF COTTONSEED, AND SPREAD BETWEEN FARM PRICE AND TOTAL VALUE OF PRODUCTS, BY STATES, SEASONS 1935-36 TO 1937-38 2 Includes data for States other than those listed. Source of data: U. S. Department of Commerce, Bureau of the Census. Bulls. 173, 174, and 175. TABLE 2.-AVERAGE EXPENSES PER TON OF SEED CRUSHED AT COOPERATIVE COTTONSEED-OIL MILLS, SEASONS 1935-36 TO 1937-38 1 Includes all operating (labor, power, depreciation, repairs, insurance, taxes, etc.), administrative (manager's salary, office salaries, etc.), and selling (brokerage, etc.) expenses, but not interest on borrowed capital or dividends on invested capital. between value of products and farm price of cottonseed equal those for the United States as a whole, a cooperative oil mill would have available for payment of interest on borrowed operating capital, dividends on the capital investment, and patronage dividends or refunds to members, an average of $7.05 per ton for the 1937-38 season, $10.75 for the 1936-37 season, and $5.72 for the 1935-36 As shown by the operations of the existing mills, a 6-percent return on the total invested capital, whether borrowed or furnished by members, together with interest on all borrowed operating capital, would have required about $1 per ton. This would have left for patronage dividends over and above the average price received by farmers for cottonseed about $6 per ton in 1937-38, $9.75 in 1936-37, season. |