An Analysis of Consolidation for the Farm Supply Sector

Changing fann numbers and a changing fann supply industry have prompted many regional cooperatives to consider consolidation of local branches as a means of remaining profitable. A behavioral model has been developed that would permit management of regional cooperatives to consider consolidation of product lines or complete branch closures. This model was used in an empirical analysis of a regional cooperative with an overinvestment in capital assets in its local branches. The results indicated that product line consolidation of major products would result in a greater savings than store closure. The number of agricultural supply cooperatives has fallen since the mid 1950s. The primary causes ofthis decline have been a decline in farm numbers, the changing nature of the industry, and consolidation ofcooperatives (Cropp and Ingalsbe). These dynamic forces in the agricultural supply sector have not dimmished the role of the cooperative. The percentage of total farm supplies purchased from cooperatives has increased from 19 percent in 1951 to 26 percent in 1985. This paper presents a model that regional cooperatives can use when considering the consolidation of local branches