LEGAL PHASES OF COOPERATIVE ASSOCIATIONS 103 
on the basis of the volume, or of the value, of the product which 
each marketed through the association. 
It is apparent, therefore, that patronage dividends are a means of 
returning to members savings effected by cooperatives in marketing 
their products. Manifestly, this is fundamental to cooperation be- 
cause there would be less incentive to cooperate if the savings effected 
in marketing expenses, or otherwise, could not be returned to mem- 
bers. Patronage dividends are based primarily upon products 
delivered and sold, and not upon the dollars invested. 
The amount of the patronage dividends to which a member is 
entitled is ascertained, by some associations, in substantially the 
following manner : The total amount available for distribution among 
the member patrons at the end of the year or other period is deter- 
mined. This amount is then divided by the volume of business 
handled by the association in terms, for instance, of cars, bushels, 
pounds, head, or the value of the product handled in dollars, or the 
amount paid to the association as handling charges. The figure thus 
found, when multiplied by the number of cars, for example, handled 
for a given member, gives the amount of his patronage dividends. 31 
In other associations the patronage dividends are ascertained by 
dividing the total amount available for distribution by the total sale 
price of the products handled and then multiplying the price received 
for the products of each member by this percentage. 
Patronage dividends, it may be assumed, would not be paid in 
many instances, if at the time the members of an association delivered 
their products to it, or on their sale, the association knew the exact 
amount it would cost to market the products of its members and 
provide for expansion purposes. It is apparent that patronage divi- 
dends are the result of necessity, in many instances at least, and that 
they simply furnish a medium by which the undertaking of the 
association to operate on a cost basis, or as near thereto as possible, 
may be carried out. 
A novel case involving patronage dividends arose in Kansas 32 in 
which the plaintiff, who was not only a farmer and a stockholder in 
the defendant corporation but was also engaged in the grain business, 
was held not to be entitled to patronage dividends on grain that he 
had purchased from the corporation, but that the other shareholder 
patrons were entitled to the amount involved. The statute of Kan- 
sas under which the elevator company was incorporated, provided 
that after the payment of a fixed dividend upon stock, the remainder 
of its earnings should be prorated to its several stockholders upon 
the basis of their purchases or sales, or on both such sales and pur- 
chases. The court was of the opinion that the purchase by the 
plaintiff of grain from the elevator on a commercial basis was not 
such a purchase as was contemplated by the statute and, hence, that 
he was not entitled to patronage dividends. 
The Grain Futures Act of September 21, 1922, 33 provides that the 
Secretary of Agriculture may designate any board of trade as a 
" contract market," if among other things — 
the governing board thereof does not exclude from membership in, and all 
privileges on, such board of trade, any duly authorized representative of any 
31 Mooney v. Farmers' Mercantile & Elevator Co., 138 Minn. 199, 164 N. W. 804, 
82 McClure v. Co-operative Elevator & Supply Co., 105 Kan, 91, 181 P. 573, 
88 42 Stat. 998, 1000, 1001. 
