Alpacas Magazine - 2010 Spring

86 / 148

petition among them. The cooperative
is the only seller. Working together also
empowers farmers to sell their fiber
directly to consumers as finished prod-
ucts. One seller and many buyers give
the cooperative product pricing and
design power. This power leads to
greater income.
Competition drives prices down and
constrains product design. Setting
prices and designs by agreement among
competitors, however, allows higher
prices and design freedom since there is
effectively only one seller. Cooperatives
increase the number of buyers by
selling member farm fiber in the manu-
factured state directly to consumers.
Farmers joining together to make
consumer products allows them to
sell to more buyers than when selling
their raw fiber to the few independent
product manufacturers.
Strength in Numbers – Greater income
arises when farmers combine capital and
resources to do what one farmer cannot
do alone – make and sell consumer
products. People working together for
their mutual benefit can achieve more
per person than on an individual basis.
Farms joining together in a cooperative
can manufacture and sell products in
profit enhancing ways individual farms
cannot afford and do not have expertise
and man power to use.
Economies of Scale – Greater income
arises when farmers pool their alpaca
fiber. Cooperative large volume process-
ing and marketing allows manpower
and machines to be used more effi-
ciently and to spread operating costs
over more product units. This lowers
product unit costs. Lower costs means
greater income.
For example, when I served on the
Alpaca Fiber Cooperative of North
America, Inc. Board of Directors,
I was part of the team building a large
volume fiber industry infrastructure.
Because of AFCNA’s large fiber
volume, we were able to move its yarn
spinning to a large textile industry
spinning mill. This lowered spinning
costs by over 50%.
Capture Consumer Value – Most agri-
cultural commodities (including alpaca
fiber) are worth more in the manufac-
tured state than raw. Cooperatives
empower farmers to capture the raw
commodity value plus the consumer
value added to their raw commodities
by production into consumer products.
Coopertives therefore provide greater
income to alpaca farmers than if they
merely sold raw fiber to independent
fiber product producers.
A prototype 100% alpaca throw
I oversaw as an AFCNA Director
weighed 2.4 lbs. It cost $32 to manu-
facture. The expected retail sales price
was $90. The $58 profit yields a
$24.17/lb. fiber value. This compares
favorably to a world raw fiber value in
the vicinity of $6.00/lb.
Cooperatives distribute their profits
to farmers based on the amount of
submitted raw commodity. This is how
alpaca farmers capture the consumer
value of their submitted fiber. Regular
businesses, on the other hand, distribute
profits based on the amount of capital
invested.
Service at Cost – The cooperative dis-
tribution of profits to farmers based on
amount of submitted raw commodity
(alpaca fiber) means farmers buy
consumer product manufacturing and
marketing services at cost. This is the
most favorable income increasing posi-
tion farmers can be in. Service at cost
also removes money, size, and influence
of a farm from the determination of a
farm’s profit share. In addition, service
at cost means only farmers benefit from
cooperatives. No entrepreneur or Wall
Street investor shares in cooperative
profits.
Every Farmer Wins – Cooperatives are
controlled by their member-owners on
a one member, one vote basis. As a
result, farm size, money, or influence
cannot alter cooperative benefits to
participating farmers. Participation in
cooperatives is also voluntary. Farmer
cooperatives cannot have member-
owners other than farm producers.
As a result, no entrepreneur, Wall Street
investor or independent product manu-
facturer can determine how a cooperative
operates or where its profits go.
Daryl W. Goodrich is a New Jersey attorney
who served many years as in-house counsel
for Fortune 500 companies General Electric
Company and Kidde, Inc. He is past President
and a past Director of the Alpaca Fiber
Cooperative of North America, Inc. Daryl and
his family own Angel Wood Alpaca Farm, LLC
in Hackettstown, NJ. He can be reached at
(908)852-7204 or .
Note: This article does not constitute legal or
financial advice.
86 Alpacas Magazine
The U.S. Department of Agriculture (USDA)
reports over 3,300 farmer cooperatives exist,
with nearly $100 billion in combined annual
gross business volume. Some of the more
familiar cooperatives are: Ocean Spray
cranberry juice, Sun-Maid raisins, and Florida’s
Natural orange juice.
Greater income arises when farmers combine capital
and resources to do what one farmer cannot do alone –
make and sell consumer products.