The Increasing Use of Unallocated Retained Earnings by Farmer Cooperatives

In the past, the primary source of equity capital in U.S. farmer cooperatives has been retained patronage refunds. Typically, a cooperative would allocate its net earnings to individual members on the basis of patronage and retain a share of those allocations to provide equity until eventually redeeming it in cash. Over time, however, unallocated retained earnings have become an increasingly important source of equity. In fact, in 2008, cooperatives kept a greater proportion of their net earnings as unallocated retained earnings than as retained patronage refunds, according to the most recent U.S. Department of Agriculture (USDA) financial profile of farmer cooperatives