4 BULLETIN 109.5, U. S. DEPARTMENT OE AGRICULTURE. 



business policy may be doomed to failure. It is obvious that the 

 board should be composed of men with an understanding of sound 

 business principles. 



MARKETING CONTRACTS. 



In cooperative milk-marketing organizations it has been found 

 desirable for the business relations between the producers and the 

 organization to be clearly defined in a marketing contract. By the 

 terms of such contracts the producers agree to deliver to the organi- 

 zation all the milk produced on their farms, except that required for 

 farm or household use. The organization in turn agrees to sell and 

 distribute the producers' product and to make returns therefor in 

 accordance with specific provisions of the contract. Such contracts 

 tend to give greater stability and permanence to the organization. 



METHODS OF FINANCING. 



Eather large investment in buildings and equipment are required 

 in cooperative milk plants for the proper handling of milk and milk 

 products. Definite methods of financing must be worked out care- 

 fully and adapted to the form of organization to be employed. Co- 

 operative milk-marketing organizations may be financed either with 

 or without capital stock. In nonstock organizations the necessary 

 capital may be obtained from membership fees, cash payments for 

 certificates of indebtedness, or from loans made by the members, 

 while in organizations with capital stock the necessary capital is 

 secured by selling shares of stock. Cooperative milk-plant organiza- 

 tions usually have been formed with capital stock, as producers are 

 more familiar with this method. An equitable plan adopted by some 

 organizations requires each producer to purchase shares of capital 

 stock in proportion to the nimaber of cows milked or the amount of 

 dairy products to be marketed at the plant. 



In some organizations both common and preferred stock have been 

 issued. Preferred stock ordinarily is entitled to dividends before 

 any are paid on the common stock. The dividends on preferred 

 stock usually are cumulative, and it is customary to withhold voting 

 privileges from stock of this class. The plan of using both preferred 

 and common stock may be advantageous in some organizations, es- 

 pecially where it is necessary to sell stock to others than the mem- 

 bers and the producers wish to retain control of the organization 

 through ownership of common stock. However, it should be borne 

 in mind that all the preferred as well as the common stock of asso- 

 ciations that desire to come within the scope of the Capper- Volstead 

 Act must be held by producers. 



