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Cooperative facilities provide a place where many small-scale farmers 

 can assemble their product and thereby enhance their marketing oppor- 

 tunities. In turn, the facilities simplify buying operations since 

 tobacco companies can obtain their supplies from a centralized source 

 and at a minimum of cost. 



As a group, cooperative auctions have stimulated competition on the 

 markets in which they are located and have made it possible for growers 

 to save in selling their tobacco. 



Problems 



The auction selling of tobacco by cooperative warehouses has not been 

 without problems. Ranking among the most critical experienced by these 

 associations were (1) an insufficient volume of business, and (2) in- 

 adequate finances. 



Volume 



The most common difficulty reported by these cooperatives was that the 

 volume of tobacco handled was too small. This problem confronted not 

 only some grower groups in their initial year of operation but also in 

 succeeding years. 



A small volume of business usually limited the number of services provided. 

 It also resulted in high operating expenses for each hundredweight of 

 tobacco handled. 



Growers considering organizing a cooperative auction warehouse should 

 therefore give careful consideration to the adequacy of existing facilities 

 in the market. To compete effectively, the volume handled must be large 

 enough to provide the services needed at a unit cost in line with those 

 of existing warehouses. 



In addition to emphasis on acquiring sufficient volume, cooperative 

 auction warehouses should stress to growers the benefits which can accrue 

 if high quality tobacco is delivered for sale. Not only will higher 

 prices usually be received on the auction floor, but the increased 

 commissions earned can, in effect, reduce average charges per sale lot 

 during the season for cooperative patrons. 



Finances 



Inadequate financing, particularly during the organizational phase, also 

 presented difficulties to some associations. This problem stemmed in 

 part from underestimating the amount required to acquire a warehouse and 

 to purchase equipment and other facilities needed for an efficient oper- 

 ation. Failure to require all members to invest in the fixed assets of 

 the association was also a contributing factor. 



