2 BULLETIN 690, U. S. DEPAET^ENT OF AGEICULTUEE. 



include primarily the tedmiGaland scie^tific methods of converting 

 the raw material purchased into various manufactured products. 

 The business practices relate particularly to the administrative or- 

 ganization, including the accounting methods for keeping records 

 of the finances, the products handled, supplies purchased and used, 

 and the investments in the business. The marketing practices are 

 concerned chiefly with the buying of the raw material from producers 

 and the marketing of the products produced. In a general way the 

 buying and selling policies or practices are usually closely related to 

 the business organization and management. 



For purposes of comparison from the standpoint of business organ- 

 ization in its relation to the marketing practices, creameries may be 

 divided into two classes; (1) cooperative; and (2) proprietary and 

 noncooperative stock company corporations. As a rule, cooperative 

 creameries, except when a form of patronage dividend is employed, 

 do not buy the milk or cream from the farmer. At most of the 

 cooperative creameries of Minnesota, and at many in Wisconsin, the 

 raw material is received and churned into butter and after the butter 

 is marketed, the cost of manufacturing, plus a small amount for a 

 sinking fund, is deducted from the net return from the sale of the 

 butter and the balance is prorated among the patrons in accordance 

 with the amount of butter fat each has delivered. The stock divi- 

 dends are usually limited to 6 per cent, and under the cooperative 

 law of Wisconsin enacted in 1911 the nonstockholder is allowed one- 

 half of the trade dividend paid to the stockholder. 



Proprietary and stock company creameries usually purchase the 

 butter fat from the farmers at a price based upon the quotations of 

 a recognized wholesale butter market. Some operate on a basis 

 which is practically cooperative by returning to the farmer the aver- 

 age price received for the butter, less a fixed charge for manufac- 

 turing, which varies from 2 to 4 cents per pound. Another basis 

 which is used to some extent is that of allowing the creamery the 

 " overrun " ^ as compensation for the cost of manufacturing. 



In creameries owned by an individual the marketing policies and 

 practices are determined by the proprietor, while in cooperative and 

 stock company creameries the board of directors usually selects a 

 business manager or delegates the duties of business manager to 

 one of the officers, or to the butter maker. In order to maintain the 

 operating expenses at as low a figure as possible, most cooperative 

 cerameries have generally limited the duties of the business manager 

 of the creamery to a minimum and, therefore, those practices have 

 been employed which require the least expenditure of time and ex- 

 pense. After the butter maker has been employed for the year and 



^ The " overrun " is the difference between the amount of butter fat paid for and butter 

 produced. 



