ACKNOWLEDGEMENTS

Project Director: Marc D. Bayard

Author: Michael Ahn Paarlberg is an Institute for Policy Studies Associate Fellow and assistant professor of political science at Virginia Commonwealth University, and formerly a postdoctoral research fellow at the Center for the Study of Ethnicity, Race, and Immigration at the University of Pennsylvania.

Report Advisor: Sarah Bobrow-Williams, Asset and Finance Development Director, Southern Rural Black Women's Initiative

Editor: Geri Coleman Tucker Graphic Designer: Kenneth Worles

We gratefully acknowledge John Cavanagh, IPS Director, and Sarah Anderson, IPS Global Economy Project Director, for their assistance in completing this project.

We would like to thank the members of the Mississippi Delta Southern Rural Black Women in Agriculture cooperative, the Southern Journeys LLC, and Southern Rural Black Women's Human Rights Commissions.

This report would not have been possible without the generous support of the Marguerite Casey Foundation. Executive Summary

Agricultural cooperatives are a promising area of economic opportunity for African American women in the rural South, who face some of the sharpest disparities in economic advancement. By increasing the local availability of quality food, these businesses also have the potential to improve health indicators in a region marked by disproportionately high rates of obesity, diabetes, and other related problems. Yet prevailing economic development models in these states are heavily skewed toward subsidizing large companies that offer few benefits for rural African American women.

Key Findings:

• Support for agricultural cooperatives mostly comes through the federal government, however such funding is dwarfed by state government subsidies for large corporations. Alabama, Mississippi, and Georgia have each offered massive tax breaks and other subsidies to attract large manufacturing facilities. Nissan is at the top end, with an estimated $1.3 billion in subsidies for its Canton, Mississippi, plant ($290,000 per job), but several other firms have received packages worth hundreds of millions of dollars. To put these figures in perspective, the U.S. Department of Agriculture’s Rural Business Enterprise Grant Program has awarded a total of just $2.3 million disbursed among all agricultural business development grantees in these three states since 2010, and another USDA grant program for specialty crop development amounted to less than $2 million in 2017 for all awarded applicants in these three states.

• In the Black Belt—a term originally signifying the dark fertile soil of the agricultural region of the rural South largely cultivated by enslaved Africans and in the present day made up of rural counties with large African American populations—most jobs remain in agriculture or are predominantly in the low-paying service sector, particularly since the exodus of industries from the region following the signing of the North American Free Trade Agreement in the 1990s. The service sector employs the majority of workers in the Black Belt counties of Alabama, Mississippi, and Georgia, which are largely untouched by the companies subsidized under current state economic development models. The average weekly wages in these counties are all lower than state averages, unemployment is higher, and the share of employment in manufacturing is under 15 percent in all three states. • Despite high barriers, African American farm co-ops are harnessing existing knowledge and entrepreneurialism that trace back generations and should be at the center of an alternative economic vision for the South.

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Case studies of four existing Black-owned cooperatives in Mississippi illustrate the challenges and opportunities of this economic model. Farmers report that their top challenge is financing. With modest increases in public investment in technical support and start-up capital, such cooperatives could greatly expand into new markets, employ significant numbers of people, and contribute healthier food to their communities.

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Challenges African American Women Face in the South

Many things are harder in the rural South to be affected by poverty than those headed than they are in other parts of the country, by White women.2 particularly for underserved communities. African American women in the South have Finding a job. Accessing healthcare. Taking long faced adverse conditions that stunt care of children and family members. their potential for economic empowerment Starting a business. Getting a loan. and independence. Jim Crow laws no No community in the rural South is more longer exist, but structural inequalities underserved than African American manifested through hiring discrimination; women. The day-to-day challenges African flaws in the criminal justice system; the lack American women face, just to provide for of infrastructure, investment, childcare and their families, point to the myriad ways the other social services for mothers; and anti- Southern economy falls short for all union legislation all hold back the poorest working people. These failings have ripple women who might otherwise lift effects across the region: increased health themselves out of poverty. Before we can and social welfare costs, population loss as search for solutions, we must identify the people move away, and the opportunity problem. This section looks at the socio- costs of economic activity that might be economic landscape of the South as it were it not for the conditions that prevent it. pertains to women, particularly African Thus, solutions to improve the economic American women.3 opportunities of the most vulnerable Poverty populations are solutions for all populations. • Poverty hits women harder in the South than anywhere else in the Several studies paint a stark picture for country: 16.4 percent of women in Southern Black women in terms of work, the South live below the poverty health, and family life. The South is line, compared to 13.7 percent of growing in population and economic women in the rest of the United activity, driven by both new immigration States. Black women have the and domestic migration to the South by highest poverty rate of all racial many who have family roots there. Women groups in the South, 25.5 percent.4 in the South are disproportionately African • Poverty hits women in rural areas American: Nearly 20 percent of all women the hardest: Women in rural in the South are Black, compared to 9 counties in Georgia, Alabama, and percent in the U.S. as a whole.1 In rural Mississippi have poverty rates counties in the South, households headed ranging from 39 to 50 percent, while by Black women are three times more likely poverty rates for women in those

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states as a whole range from 11 to 24 as much as men. Black women in the percent. South actually have a smaller gender • Poverty hits households headed by wage gap compared to other races: Black mothers the hardest. In rural they make 85.7 percent of what areas in the South, 61 percent live in Black men make, due in part to the poverty. Households headed by racial wage gap for Black vs. White Black mothers in the rural South are men.7 three times more likely to be in • There is a significant earnings poverty than households headed by advantage for Black women in the White mothers. South who are members of a union; they earn 34.5 percent more than Work their non-union counterparts. • Black women in the rural South However, union membership in the have a harder time finding full-time South is the lowest of any region in employment than other the U.S. The states with the lowest demographic groups. Black women rates of unionization are all in the surveyed in rural Southern areas South: South Carolina (1.6 percent), had an unemployment rate of 24 North Carolina (3.0 percent), percent—five times higher than Arkansas (3.9 percent), and Georgia White women in the same areas. (3.9 percent).8 • Women in the South earn $35,000 Health per year, on average, vs. $40,000 for women in other regions. Mississippi • Women in the South have a greater and Arkansas have the lowest incidence of many illnesses median earnings for women in the compared to the national average, country, just $30,000. Both states also including for heart disease, breast have the lowest median earnings for cancer, diabetes, and AIDS. Black women of all states in the • Lack of healthcare is especially acute country, $25,000.5 in rural areas. Just half of employees • The earnings gap between those in rural areas have employer- who live in the South vs. the rest of provided health insurance, lower the country is largest for Black than that in urban areas, and 40 women. Black women in the South percent of those who have health earn $8,000 less than Black women coverage receive it through public outside of the South, a difference far assistance programs, such as greater than that for White women Medicaid. Notably, the legislatures in the South ($3,000).6 in the three states studied in this • The earnings gap between women report, Alabama, Georgia, and and men is greater in the South than Mississippi, declined to expand in the U.S. as a whole. In this region, Medicaid to fill gaps in coverage. women earn just 79.5 percent of what men earn, whereas in the rest • Maternal mortality is extremely high of the U.S. women earn 80.5 percent in the South, especially for Black

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women: in Mississippi, 55 Black Family women per 1,000 die from • Four out of five, or 79.6 percent of all pregnancy or childbirth-related Black mothers in the South are their causes compared to 29 per 1,000 for families’ breadwinners, compared to White women. Nationally, the just half (48.8 percent) of White maternal mortality rate is 26 per mothers in the South.11 1.6 million 1,000.9 African American women in the • Infant mortality is also high for South are breadwinners, which is predominantly Black counties in the more than those in the entire rest of rural South, in some counties as the United States combined.12 much as five times the national • Early motherhood is more common average of 29 per 1,000. Obesity in rural areas and correlates with rates are highest in the South at lack of family planning services in more than 30 percent. African rural communities and proper sex Americans have the highest obesity education in schools. Mississippi, a rates of all races in the South, at 48 state which mandates abstinence- percent, and in some states, such as plus education, has the highest rate Mississippi, the obesity rate for of teen pregnancy in the South, 76 Black women can be above 50 per 1,000; and for Black teenage girls percent. in rural areas, the rate can be as high • In the South, Black women have the as 118 per 1,000. highest rate of diabetes, 15.5 percent.

Improper treatment of this disease • However, families headed by Black can lead to amputations of women in rural areas are no more extremities, a procedure that is more likely to rely on public assistance: common in Mississippi than any One-third of families surveyed in other state. rural areas reported reliance on • High obesity and diabetes rates are Supplemental Nutrition Assistance directly linked to lack of access to Program (SNAP) to make ends meet, nutritious and affordable food. This on par with the national average. is especially true in rural areas, due • Nationwide, African American to lack of transportation and food women are especially likely to deserts. report having to take time off work • Life expectancy is lower in rural to take care of a family member: 1 in areas: in many areas in the South it 4 reports doing so.13 is 77 or lower, compared to the • In the South, women are more likely national average of 81.3 years for to live with parents or other adults women.10 with disabilities and act as unpaid caregivers. In five Southern states— West Virginia, Mississippi,

Arkansas, Kentucky, and Alabama— nearly 1 in 5 women reports doing so.

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Promising Indicators: Local Business Ownership

These are the challenges faced by Black The high growth of Black women-owned women: lack of good jobs, greater family businesses may be a response to the lack of responsibilities, health disparities opportunity in other types of work in the exacerbated by poor infrastructure, and Southern economy, as reflected by the wide lack of access to affordable nutritious food. gender wage gap. This trend may also Nevertheless, there are opportunities for reflect frustration with workplace gender progress by African American women in and race discrimination and the desire to be the South, particularly in business: one’s own boss. A 2014 survey by PayPal of women in business found most are • The South performs better than the motivated to own businesses as a way to rest of the U.S. in terms of women- better balance work with family owned businesses. Nine of the 14 responsibilities, such as child care and elder Southern states have higher rates of care, which hit Black women in the South women business ownership than the the hardest.14 national average. Georgia has an especially high rate: 40.5 percent of For myriad reasons, more and more Black businesses there are owned by women in the South are opening their own women. businesses. Yet these business owners face • The rate of growth of women-owned similar challenges as others in the labor businesses in the South surpassed market. Women-owned businesses earn just that of men-owned businesses in 23 percent of what businesses owned by every state in the South between men earn nationally. Women-owned 2002 and 2012, with especially high businesses tend to be in less remunerative growth rates in Georgia, Mississippi, areas of the service economy, such as Texas, and Florida. healthcare; they tend to be smaller; have • African American women have fewer employees; and have a lower volume especially high rates of business of sales.15 ownership compared to other Women-owned businesses face significant women. Between 1997 and 2012, the start-up obstacles: They are less likely than number of businesses nationwide men-owned businesses to have access to owned by women of color grew 17 capital or obtain loans from banks.16 Thus percent. As for 2012, nearly 60 their rate of survival is significantly lower: percent of all Black-owned 78.2 percent compared to 83.4 percent for businesses were owned by women, men-owned businesses in 2007.17 nearly double (33 percent) the percentage of White-owned businesses owned by women.

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Challenges, but Also Opportunities for Economic Advancement

What do these indicators tell us about the One area with tremendous potential socioeconomic situation of African benefits for economic empowerment of American women in the South? There are Southern Black women, particularly in rural enormous challenges and legacies of areas, is cooperative agriculture. As in the historical and institutional inequalities. But rest of the country, the region’s traditional there are also avenues for economic economic base has been farming and there advancement with improved policies. continues to be a great deal of expertise in African American women face the highest this area. Additionally, cooperatives offer rates of poverty and wage discrimination the added value of pooling resources and and take on breadwinner and caregiver enabling participants to reach economies of responsibilities at rates unseen among other scale that they would not otherwise be able demographic groups. They face some of the to do on their own. Cooperative agricultural worst health challenges in the South and the economic activity also helps address the nation. However, the South—with a poor health indicators in the South by growing population and overall robust level expanding access to quality food. But as of economic activity—is an increasingly explained in more detail in the following attractive region for business growth. section, realizing the full potential of cooperative farming will require a There is a great entrepreneurial spirit ready reorientation of the predominant economic to make an impact in some of the country’s development model in most Southern most economically distressed areas. Black states, which is currently focused on the women are participating in business at a publicly financed recruitment of large greater rate than any other group and own corporations and heavy industry. Instead, a greater share of businesses in the South the economic development model must than Black men. Yet obstacles, such as shift to cultivating entrepreneurship within discrimination in the labor market, persist the existing local agricultural workforce. in the business market—principally in the form of lack of access to credit and capital— stifling the opportunity to grow.

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Shortcoming of Current Economic Development Models

The Economic Development Industry

Promoting economic development is a nonprofits, professional and industry growth market; and policies that result from associations, law firms, public relations it can lose sight of the people they are firms, and universities.18 As such, the scope intended to benefit. As former policy and goals of state and local economic advisor to Governor Phil Bryant of development plans have grown to Mississippi, Tray Hairston notes in the encompass a wide range of policies Mississippi College Law Review, economic designed to stimulate business activity, development is no longer simply a attract investment, and spur job growth, government policy platform but a “full- with many of those policies informed by the fledged industry” involving government interests and lobbying efforts of those partnerships with private businesses, partners.

The Failure of Existing Plans

Existing economic development plans fail empower the most historically underserved marginalized populations in the South populations to take part fully in the because those groups—particularly African economy and to shape a vision for what an Americans, women, and small farmers— inclusive economic development plan have long been denied a seat at the table. would look like. What is needed is a vision that aims to

Corporate Welfare

Today, many states—especially Southern bonds, or cash grants. These subsidies cost states—rely on a narrow vision of economic taxpayers an estimated $60 billion per development that prioritizes certain sectors year.19 Southern states compete against one dominated by large employers at great another, undercutting neighbors and expense to taxpayers. Much of what is lowering standards in the hopes of termed economic development is essentially attracting large investments in industry that corporate welfare: government-funded will spill over into broader economic giveaways to well-heeled companies, activity. Often this approach has the including tax credits or abatements, tax- opposite effect: Subsidies can artificially increment financing, enterprise zones, land inflate the profitability of the targeted price write-downs, industrial revenue businesses and put locally owned

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businesses at a competitive disadvantage. In Good Jobs First, have documented wasteful addition, state elected officials often take on and costly giveaways that many states use the role of disciplining local communities in the name of economic development. A on behalf of rich, out-of-state or foreign summary of these initiatives in some of the companies, such as actively campaigning Deep South states where poverty is most against Mississippi auto workers seeking to entrenched speaks volumes about the unionize. priorities these and other states set ahead of working people. Several researchers, particularly the government accountability advocacy group

Alabama

Along with its neighbors, Alabama has The current economic development plan gone all-in on auto manufacturing as the has moved from a bond to a tax-financing linchpin to its economic development model that shifts the costs onto taxpayers. model. Mercedes-Benz, Honda, and More than half (51.5 percent as of 2015) of Hyundai were courted to the state in the all taxes in the state come from sales taxes late 1990s and early 2000s. Other targets of and gross receipts, making for a highly manufacturing expansion include aerospace regressive tax structure that hits poorer and home appliance manufacturers, such as citizens the hardest. Due to tax abatements Airbus and Remington, promoted by the and credits for investment costs and other state’s Accelerate Alabama plan in 2012. It is subsidies aimed at promoting investment, an expensive endeavor for the state, which corporations in Alabama pay almost no had a $500 million budget deficit the year effective corporate taxes and the state picks the plan was unveiled, and is facing another up much of the cost of workforce training. budget shortfall in 2018. Raising the Despite being the third-largest producer of borrowing limit on its Capital Improvement cars and auto parts in the country, Alabama Trust Fund ballooned its debt by hundreds has the fourth-highest poverty rate in the of millions of dollars. U.S. and poverty remains stubbornly high.

Georgia

A relatively richer state than Alabama, funded by Regional Economic Business Georgia has used tax cuts, loans, and other Assistance to secure investment deals. economic development subsidies to lure Other tax credit schemes—including the companies to relocate to the state, including Quality Jobs Tax Credit, Mega Project Tax packages worth more than $400 million to Credit, and the Job Tax Credit—all allow Kia Motors and $100 million to National companies to keep their own employees’ Cash Register. The Economic Development, personal income tax payments. Georgia has Growth, and Expansion program run by also aggressively courted Hollywood and Georgia’s Department of Community television producers to film in the state with Affairs offers grants and low-interest loans its Film, Television, and Digital

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Entertainment Tax Credit, costing the state $1.1 billion from 2016 to 2018, according to a $925 million from 2009 to 2014, and another study by Georgia State.20

Mississippi

Mississippi is perhaps the most extreme startup KiOR defaulted on a $75 million example of a development model enriching loan from the state and laid off employees. large corporations at the expense of its Auto workers in Mississippi earn an citizens. The poorest state in the country, 22 average of just over $50,000—above the percent of Mississippians live below the state median wage, but well below that of poverty line. Nevertheless, Mississippi unionized auto workers in other states.21 spent nearly $300 million to lure Nissan to As a whole, these subsidies make up a the state in 2000, and the same for Toyota in costly vision of economic development that 2007. Subsidies continued after they set up creates jobs concentrated in certain shop: the Nissan auto plant in Canton had industries and areas at great cost to received $1.3 billion in subsidies alone, or taxpayers, but to the primary benefit of $290,000 per job created, according to the large out-of-state corporations. There is Mississippi Alliance for Fairness at Nissan. little in these development plans that The Jobs Tax Credit and Advantage Jobs provides for poorer populations in rural Incentive Program, together costing $13 areas who cannot move to take a job at an million as of 2013, which provide auto plant or spend as much as 40 percent companies with corporate income tax of their salary on commuting to a job in the credits, are especially lucrative, along with Mississippi Delta region.22 For people living other subsidies. These giveaways have been in primarily farming communities, an risky. Two companies given millions in alternative model for jobs and economic subsidies went under: Twin Creeks solar independence must be available. panels went out of business; while biofuels

What is the Economic Reality in the Rural South?

Looking at rural counties in the South, one These counties are among the poorest in the can easily see the shortcomings of the South, indeed in the country. They are standard economic development recipe of largely excluded from the types of industry tax breaks and subsidies. The businesses the existing development model seeks to receiving taxpayer subsidized largesse often attract, with a workforce largely employed fail to invest in or make a difference for the in low-paying service work and in areas in greatest need of quality jobs. The agriculture. The counties have among the following section highlights the dire lowest indicators in the region for economic situation in the Black Belt, rural education, healthcare, and nutrition. They counties with historically largely African are woefully underserved by commercial American populations that have been left businesses, such as grocery stores, and behind by the dominant development public services such as bus transportation, model. clinics, and programs for families with

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children—which exacerbate already low Alabama, Georgia, and Mississippi were indicators for healthcare and nutrition. The 3.7, 4.5, and 4.5 percent, respectively. following tables illustrate the wages and However, unemployment rates in Black Belt dominant sectors in the rural Black Belt.23 counties are consistently and significantly Wages, sectors, and industry employment higher than statewide averages: 8.8 percent data below reflect numbers for employed in Webster County, Georgia, 14.7 percent in workers in selected counties. These Wilcox County, Alabama, and 14.9 percent numbers alone do not tell the complete in Jefferson County, Mississippi. For those story of living standards. As of February without work, earnings are far lower than 2018, state unemployment rates for what wage data reflect.

Alabama Black Belt Counties: Wages and Top Sectors and Industries County Average Top % of all Top industry % of all weekly sector employees employees wage Barbour $683 services 45% manufacturing 29% Bullock $634 services 41% manufacturing 27% Butler $635 services 59% manufacturing 21% Choctaw $864 services 44% retail 12% Crenshaw $680 services 47% manufacturing 32% Dallas $678 services 52% manufacturing 24% Greene $683 services 34% manufacturing 25% Hale $676 services 37% manufacturing 19% Lowndes $862 goods 39% manufacturing 39% Macon $801 services 33% healthcare 18% Marengo $720 services 49% manufacturing 19% Montgomery $840 services 60% manufacturing 10% Perry $602 services 51% manufacturing 23% Pickens $692 services 38% manufacturing 22% Pike $762 services 57% manufacturing 18% Russell $681 services 53% manufacturing 22% Sumter $745 services 46% manufacturing 12% Wilcox $783 goods 37% manufacturing 31% Black Belt $786 services 54% manufacturing 15% average Alabama $858 services 62% manufacturing 14% average

Source: Bureau of Labor Statistics’ Quarterly Census of Employment and Wages

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Alabama is a manufacturing-heavy state dwarfs the goods-producing sector (which historically, and the top industry (defined includes manufacturing and agricultural by the Department of Labor more narrowly production): Sixty-two percent of employees than sector) in most Alabama counties, as in the state, and 54 percent in Black Belt well as the state as the whole, is counties, work in services, a typically low- manufacturing. Nevertheless, across both paying sector. Workers living in Black Belt the state and Black Belt counties, counties make less than those in the rest of manufacturing employs no more than 15 the state: The average weekly wage for percent of the total workforce. Looking at a workers in Black Belt counties is $72 lower higher level, by sector, the service sector than the state average wage.

Georgia Black Belt Counties: Wages and Top Sectors and Industries County Average Top % of all Top industry % of all weekly sector employees employees wage Baker $666 services 50% crop production 9% Calhoun $558 services 40% retail 14% Colquitt $634 services 47% manufacturing 18% Decatur $644 services 50% retail 16% Dougherty $775 services 68% healthcare 16% Early $775 services 44% manufacturing 18% Grady $666 services 48% manufacturing 18% Lee $680 services 59% admin and waste 18% Mitchell $612 goods 41% manufacturing 32% Seminole $624 services 58% healthcare 16% Stewart $768 services 62% healthcare 28% Terrell $604 services 50% manufacturing 18% Thomas $760 services 65% healthcare 17% Webster $718 goods 46% retail 13% Worth $647 services 47% education 16% Black Belt $717 services 57% healthcare 9% average Georgia $956 services 71% retail 11% average

Source: Bureau of Labor Statistics’ Quarterly Census of Employment and Wages

Georgia displays a more diverse workforce administration and waste management to by industry than Alabama, with top healthcare, which is the top overall industry industries in Black Belt counties ranging in those counties. In the state, the top from retail to education to manufacturing to industry measured by workforce is retail.

12 Like Alabama, a majority of workers in workers in the Black Belt and the state Georgia are in the service sector: 71 percent overall is the greatest: Black Belt workers statewide and 57 percent in the Black Belt. make $239 less per week than the Georgia Manufacturing makes up a far smaller state average, illustrating stark inequalities portion of the workforce. It is in Georgia for rural and African American workers. that the discrepancy in wages between

Mississippi Black Belt Counties: Wages and Top Sectors and Industries County Average Top % of all Top industry % of all weekly sector employees employees wage Bolivar $665 services 61% healthcare 15% Claiborne $968 services 58% food services 5% Coahoma $645 services 64% healthcare 20% Holmes $615 services 41% public schools 15% Humphreys $534 goods 39% manufacturing 29% Issaquena $450 services 42% crop production 10% Jefferson $642 services 52% healthcare 13% Leflore $623 services 49% manufacturing 16% Madison $829 services 71% manufacturing 17% Panola $679 services 62% retail 16% Quitman $598 services 50% education 20% services Sharkey $530 services 44% agriculture 16% Sunflower $600 services 49% transportation 11% Tallahatchie $625 services 59% retail 8% Tunica $625 services 80% accommodations 63% Warren $787 services 62% accommodations 16% Washington $626 services 66% retail 15% Yazoo $717 services 48% public 13% administration Black Belt $721 services 62% manufacturing 7% average Mississippi $762 services 61% manufacturing 13% average

Source: Bureau of Labor Statistics’ Quarterly Census of Employment and Wages

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Like Alabama, Mississippi is a Taken together, these jobs figures illustrate manufacturing state, though this top a Southern economy in which the industry employs just 13 percent of the traditional manufacturing base is being workforce. Other major industries include overshadowed by the service sector, which hotel accommodations, retail, is characterized by low wage, precarious transportation, and agriculture services and work, and a lack of benefits or job security. crop production. Similarly, the vast Industries are diversifying into a variety of majority of workers are employed in the other fields, many of which pay poorly: service sector, both statewide and in the retail, food services, administration, home Black Belt. Mississippi is the only state the care, and child care. In rural parts of the Deep South in which wages for workers in South, particularly for African American the Black Belt approach those of workers workers, the disparities are stark: Most elsewhere in the state. Mississippi’s relative workers in these areas earn just over $700 a wage parity compared to Georgia can week, often less. For them and many other nevertheless be attributed to the overall low workers, the current economic development pay in the state. In 2017, Mississippi had the model holds little promise of stable, well- lowest average wage of all states—just $762 paying employment. per week.

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Agricultural Co-ops: An Alternative Vision

How else might a model of economic excluded from the industry-focused development in the rural South look? One development model—in areas where there built on businesses that meet unmet needs is an acute need for affordable and and serve underserved communities; one nutritious food. African Americans, women, that harnesses the personal initiative, and small farmers are among those already cooperation, and knowledge of working the at the forefront of this community-based land of the people already living here? We business model and who stand to see the can look to agricultural co-ops, which greatest gains in economic independence already exist across the South and are being from an expansion of co-ops. run as successful businesses—by people

What are Co-ops?

Cooperatives, or co-ops, are independent Associated Press. Within agriculture, some businesses jointly owned by their members, better-known co-op brands include Land O who come together to meet a common Lakes, Ocean Spray, Organic Valley, and social and economic need, and who run the Florida’s Natural, all run on a cooperative businesses in a democratic and voluntary business model. The largest co-op in the basis. Co-ops operate in many sectors of the U.S. is agricultural giant CHS Inc., a $30 economy, including farming, retail grocery, billion, Fortune 100 company with 12,000 transportation, energy, and banking. They employees, which supplies fertilizer, can be small scale and local, consisting of livestock feed, and energy and is owned by only a few members, or large, international member farmers and ranchers.24 Co-ops businesses. Co-ops include some well- collectively account for $500 billion in known businesses such as State Farm annual revenue in the U.S., according to the Insurance, Ace Hardware, REI, and the International Cooperative Alliance.25

What is the Co-op Business Structure?

Co-ops are neither traditional for-profit and to earn a return for their members. But businesses nor are they nonprofits. They that success is a means to an end, meeting operate on a business model that places the an unmet community need—whether access mission of the co-op, the service it provides to healthcare, nutrition, energy, credit, or to the community as determined by its economic independence—that serves as the members, above maximizing profits. This is basis for the foundation of the co-op, while not to say co-ops do not operate free of circulating dollars in the local economy. Co- market forces or without profitability in ops also provide a means for business mind. Co-ops are meant to be successful owners with limited resources and access to

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credit to meet market-entry requirements also setting aside crops to sell collectively and business start-up requirements that with other co-op members. might otherwise be inaccessible. Co-ops may be organized as a stock Co-ops are not owned by investors or cooperative, in which founding documents stockholders. They are owned jointly by state the amount and types of stock to be their members, who may be producers distributed equally to members and the (such as farming co-ops), workers (such as voting rights of each member. There may transportation or marketing co-ops) or also be non-voting classes of stock of consumers (such as grocery co-ops). different value that a co-op can distribute in Members make decisions together about exchange for additional equity investments how the business will operate: what crops by members, beyond regular dues. Such to grow, for example, or what products to non-voting stock may pay dividends. order to stock the shelves for shoppers. Though eschewed by smaller and Thus, co-op members are the beneficiaries grassroots co-ops, an exception to the of the business, not only in the earnings members-only investment rule may be a co- generated but also the goods or services ops decision to offer preferred shares, provided. Typically, these goods and which may be distributed to outside services are ones lacking in the community investors, pay dividends, but not confer to where the co-ops operate, such as them voting rights. CHS and Organic Valley electricity, bank loans, or fresh and healthy operate under this model. Co-ops can food. sometimes form a limited liability company (LLC) to partner with other investors to According to Margaret Lund of the jointly build a new facility or develop a new University of Wisconsin Center for service. This model can be an attractive Cooperatives, “Only participants who have alternative to cooperative incorporation met the requirements for membership are because LLC structures are often more allowed to be owners. All cooperatives flexible than state cooperative incorporation operate on the principle of ‘one member, laws, yet still allow companies to operate on one vote,’ so control is allocated evenly the co-op model. among the users of the co-op without regard to how much money each has Because of the variety of co-ops and invested. Cooperatives operate for the industries in which they operate, business benefit of members, and those benefits are structures can vary widely. So too can co-op distributed in proportion to each member’s members’ obligations to the co-op in terms transactions with the cooperative.”26 They of both time and money. In farming co-ops, may also be reinvested in the co-op, based for example, members typically pay dues on the democratic decision-making of the and reinvest a certain amount of the members. Co-op members are free to proceeds from their sales into the co-op. engage in other activity, hold other jobs Contributing to a co-op can be full-time or and, in the case of farming co-ops, grow part-time work on the part of members, crops to sell to market individually while who may hold other jobs or run other, more traditional farms or businesses.

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Co-op Values

The shared principles of co-ops, as defined profit business. They exist by the International Cooperative Alliance, independent of any other businesses are sevenfold: and are controlled only by their members. 1. Voluntary and open membership: 5. Education, training, and Anyone who produces or uses the information: Co-ops aim to educate goods or services the co-op is both their members and the general founded to provide and is willing to public for the benefit of helping the undertake the responsibilities of co-op thrive. membership can be a member. 6. Cooperation among cooperatives: 2. Democratic member control: Co-ops should work together across Members make decisions among industries and sectors to support themselves collectively and one another. For example, credit democratically about how the unions, being cooperatively run business operates. financial institutions, should give 3. Member economic participation: preference to other co-ops seeking All members contribute equally to financing. the co-op and equally control 7. Concern for the community: Co-ops ownership of the co-op. are founded not only to serve the 4. Autonomy and independence: Co- needs of their members but also the ops cannot be part of another, for- broader community.

How are Co-ops Financed?

Financing is one of the key challenges to the can take the form of dues, shares, or other viability and success of co-ops. Unlike contributions. In the case of farming co-ops, investor-owned businesses, which can sell those contributions could be in kind, such stock to outside investors to finance as farming inputs, seed or fertilizer, or expansion, co-ops are member owned and crops. However, a significant obstacle is thus typically cannot give ownership to acquiring start-up capital for large-scale nonmembers.27 The very concept of expansions, such as purchasing expensive ownership is not based on investment but equipment that could be used by all rather member participation, a democratic members, such as a shared tractor. Because and equal arrangement for all. Returns are they cannot turn to outside investors, co- not allocated as dividends based on prior ops turn to banks for loans, or government investment, but rather in proportion to or private foundations for grants. Banks and services used. even credit unions, which should give special consideration to co-ops, often deny Like privately held businesses, co-ops can loans to smaller co-ops, due to lack of be financed through retained profits, as well collateral or the small size of the loans that as investment by its member-owners. These farming co-ops seek. The USDA is one of

17 the few consistent sources of substantial Co-ops can then buy back the issued stock startup and development capital for co-ops; at face value. Some co-ops organize as however, grant application processes can multi-stakeholder co-ops, with different often be daunting for new co-ops. Without levels of responsibility to provide equity more technical capacity, many potentially and different shares of net earnings or successful co-op businesses struggle to get profits. In these cases, certain members may off the ground. With sufficient initial contribute more capital to the co-op; and investment and smart business practices, though ownership may be equally however, co-ops can plow retained earnings distributed, some members may have back into their businesses, become more additional rights or earn more in returns. efficient and be able to produce at One such model is the Limited Cooperative increasing economies of scale. Association (LCA), which facilitates outside capital investment by offering some limited Due to the lack of outside investor control rights, such as the ability to be financing, and difficulty of acquiring elected to the board of the co-op. Laws private or public loans or grants, governing LCAs vary by state. Such agricultural co-ops, like all co-ops, rely arrangements can attract the support of heavily on member participation. non-business groups such as NGOs and Membership is a responsibility to make sure charities that share the community mission the business can start up, grow, and run of the co-op. Nevertheless, these smoothly and profitably. Members must arrangements can be controversial and are also make collective and democratic often avoided by grassroots co-ops due to decisions about how to make the business the weakening of the one-member-one-vote more profitable, by expanding into new principle. markets or with new products or services. Some larger agricultural marketing co-ops Debt financing, through loans, can be with multiple income sources self-finance difficult to access for smaller co-ops that by setting targeted member equity lack much collateral. For traditional investment requirements using what’s businesses, banks often expect owners to known as a base capital plan, under which have invested a certain amount of equity in the co-op board estimates the cost to the business before they will take on the successfully start up the business and sets risk of lending to the business. In the case of member contributions based on expected co-ops, where owners are members, there is use and the estimated annual gross income often a Catch-22: Farm co-ops sometimes do from goods or services produced by that co- not have equipment that would serve as op. collateral for a loan but cannot get a loan without the equipment as collateral in the For stock co-ops, shares may be allocated first place. Members themselves may also among members according to additional lend to their own co-ops, at a fixed rate of investment—or in some restricted cases to return—similar to a bank loan—with non-member investors—although voting returns sometimes delayed until a certain rights remain equally distributed among point of profitability of the co-op. members only. Certain types of non-voting stock may be issued to finance expansion.

18 Co-ops may also apply for financing from NCB is a major lender to urban housing co- financial services cooperatives, such as the ops and other banks. However, over the National Cooperative Bank (NCB), an years, it has increasingly focused its institution created by Congress in 1978 to financing on already successful co-op offer loans and technical assistance to co- businesses and has cut back on its mandate ops serving low-income communities. The for technical assistance.

Why Form a Co-op?

Co-ops operate in the same business buyers in arranging a regular purchasing environment as regular businesses and face deal. Many farmers producing the same additional hurdles for financing and crop can collectively produce enough to maintaining member participation. Co-ops meet the demands of markets, schools, and are, almost by definition, less profitable hospitals. And when farmers band together, than traditional businesses because profits they improve their bargaining clout and can are secondary to the co-op’s mission and are negotiate better prices from buyers. mostly reinvested to fulfill that mission. Members of co-ops may have access to Why, then, should individuals, particularly things that would be inaccessible to farmers, seek to form co-ops rather than sell individuals. A farm co-op could pool their products individually? money to buy tractors, fertilizer, or other The co-op model exists to meet a need that farming equipment and inputs that are is not met by currently existing markets. shared among members and increase the There may be no local production of food productivity of all. They could provide crops for consumption in an area due to the small loans within the co-op to members at preponderance of large scale industrial lower interest rates than offered by banks. farming of corn and soy. There may be no Purchasing inputs collectively can also net services to transport those crops to market group discounts for members. or market them to potential consumers, Co-ops also are themselves members of both individuals and institutional buyers larger federations or associations. Founded such as schools. Co-ops may exist within a in 1967, the Federation of Southern food desert, with no grocery store for miles Cooperatives (FSC) helps farmers, to serve a community. Co-ops form because particularly African American farmers, existing businesses fail to meet the needs of establish and maintain successful co-ops a given community and because they enable and offers financial support through its small scale growers to collectively access Land Assistance Fund (LAF). The National markets they could not otherwise. Cooperative Grocers Association Additionally, for producers, workers, or collectively negotiates discounts from food consumers, co-ops offer the possibility of vendors on behalf of their individual co-op producing or buying things at economies of members. This is especially important in scale in a way that would be unprofitable sectors with a high degree of individually. Many small-scale farmers monopolization by buyers or sellers that sit cannot produce enough to interest market

19 on the opposite side of the bargaining table The ability of co-ops to provide economies from co-ops. of scale, bargaining power, knowledge, and a financial cushion to their members has Co-ops and their federations also provide broader impacts on communities. Co-ops education and training to members to can fill the gap by providing goods and improve their own productivity and access services that may not be profitable for technology or market information that they individuals or traditional businesses to would not have on their own. They can deliver. Often, co-op goods and services offer financial education to diminish risk for cater to a niche consumer demand that was members who would otherwise have to previously unmet: for example, offering shoulder the burden of debt-financed certain healthy or rare foods that are not capital investment on their own. Co-ops sold in large, national supermarket chains. also facilitate networking, abiding by the Fundamentally, co-ops take profits principle of cooperation with other co-ops. seriously, but profit maximization is not Co-ops themselves may join up and share their primary goal. They prioritize the certain business functions, such as needs of the community and member administration, financial planning, and earnings above all. That makes co-ops an marketing; or they may share offices and especially attractive model for businesses in other facilities, freeing members to underserved areas of the South, concentrate only on the heart of their simultaneously addressing persistent business. problems of unemployment, entrenched poverty, and lack of nutrition.

Are Co-ops a Viable Business Model?

Co-ops are widespread as business models ‘better and smarter’ and production throughout the world. Research has shown organized more efficiently.”28 Due to their co-ops to be successful based on multiple structure, co-ops avoid some of the metrics of financial stability, efficiency, management-employee conflict endemic in productivity, and worker satisfaction. A individually owned and shareholder- recent Leeds Business School study owned companies, and make many costs of reviewing two decades of data on workforce training and discipline cooperatively owned and managed firms in unnecessary. Co-ops reserve more company Europe and the Americas finds worker co- assets for the financial integrity of the ops are often high-performing businesses. business, and deal with business failure In addition to providing workers with the better by recycling assets back into future independence to manage and reap the co-ops. In countries such as France, co-ops rewards for their own labor, report author represent a larger portion of startups than Virginie Pérotin finds that “worker non-co-op businesses, and vary in size, cooperatives are more productive than showing the co-op model able to scale up conventional businesses, with staff working from small firms to large factories.29

20 Can Co-ops Empower African American Women in the South?

The South has a rich and deep history of co- women who pooled money to buy land and ops run by African Americans and African set up a sewing factory. The quilts and American women in particular. Many of handicrafts that the members produced these are in the agricultural sector. As helped supplement their farm incomes. The Jessica Gordon Nembhard writes in the co-op expanded into other product lines definitive study of Black-owned and supplied large retailers, such as Sears cooperatives, Collective Courage, fostering and Bloomingdales. Member services soon and sustaining co-ops has been a conscious included daycare and after-school care for development strategy for Black leaders children. going back to W.E.B. Du Bois and A. Philip Other fabric and sewing co-ops were Randolph. Businesses run on a cooperative founded in North Carolina (the Workers’ membership model date to Black mutual Owned Sewing Company) and Georgia (the aid societies in the post-Civil War era, such Dawson Workers Owned Cooperative). as Virginia’s Independent Order of Saint Today, these include Southern Journeys—a Luke and Tennessee’s National Ex-Slave worker-owned fabric and sewing co-op Mutual Relief, Bounty, and Pension spanning the Alabama and Georgia Black Association. Many of these developed into Belt and the Mississippi Delta—which was insurance companies in Virginia and North established with assistance from the Carolina into the 20th Century and provided Southern Rural Black Women’s Initiative to a model for Black businesses later founded provide earning opportunities to self-taught by Marcus Garvey and the Universal Negro sewers and seamstresses who had seen local Improvement Association (UNIA) factories move overseas. The women who movement. organize and run these co-ops, today and in Black women have been pioneers in the the past, see them as an integral part of a cooperative business model. Among the civil rights struggle that extended beyond most prominent proponents and organizers voting rights and desegregation to of Black-owned co-ops are Nannie Helen encompass economic independence. Burroughs, Ella Jo Baker, Estelle In rural areas of the South, co-ops have been Witherspoon, and Fannie Lou Hamer. a key part of the economy for Black small Hamer, after establishing her name as a civil farmers, both through farming co-ops and rights leader, founded the Freedom Farms their associations, most notably the FSC, Cooperative in Mississippi in 1969, a 680- and financial co-ops such as the North acre farm that included a Head Start Carolina Council for Credit Unions and program, community garden, tool bank, pig Associations. Black-owned farming co-ops bank, garment factory, and sewing co-op. It in the South have a long history, going back also offered training and affordable housing to the National Federation of Colored for sharecroppers and tenant farmers in Farmers, which purchased farming inputs Sunflower County. collectively and provided member farmers In Alabama in 1967, Witherspoon founded access to credit that was denied them by the Freedom Quilting Bee, a group of White-owned banks in the 1930s. In

21 Arkansas, tenant cotton farmers who were or pushed off land as tenant farmers. being evicted from their farms formed the Freedom Farms in Mississippi became more Southern Tenant Farmers’ Union and than simply a farm, but also a provider of organized a co-op farm. The North Carolina social services, helping members acquire Council provided technical training for co- loans and mortgages and providing food ops, which led to the founding of dozens of and clothing to needy members. The FSC, credit unions, health associations, the single largest and most prominent machinery co-ops, and consumer co-ops by African American co-op organization in the the 1940s. More recent examples include the country, today supports dozens of co-ops North Bolivar County Farm Cooperative of throughout the region and even in Africa Mississippi, which was originally founded and the Caribbean, in multiple sectors of the by the North Bolivar County Health economy including credit unions, farming, Council and Tufts-Delta Health Center consumer co-ops, fisheries, livestock, and because of health concerns about home care. Its Rural Training and Research malnutrition and hunger in the Delta Center provides training in livestock and region. It started as a soybeans, cotton, and vegetable farming, construction of vegetable co-op farm but expanded greenhouses, and equipment repair and operations to include sewing and clothing welding. Other Black-led rural co-ops have co-ops, low-income housing, low-cost food provided members healthcare, affordable and food credit for members, and an housing, and low-interest loans, helping African American bookstore and library. In farmers keep their land and make a Louisiana, the South Plaquemines United sustainable living through farming. Fisheries Cooperative helps members buy This has had a positive effect on their own boats, market their catch. The co- demographic trends in the face of much op responded to Hurricane Katrina by migration from rural areas, which has not repairing boats and building a new docking gone unnoticed by the federal government. facility for the diverse community of The Office of Economic Opportunity Plaquemines Parish, which includes African prioritizes funding rural programs aimed at American, Native American, and reversing out-migration. Since the Johnson Vietnamese American fishers. administration’s War on Poverty in the Today, co-ops and co-op federations have 1960s, the USDA has encouraged rural co- been critical in the South by re-engaging ops in the South, noting that the flourishing African Americans with farming at a time of co-ops along with Black political when mechanization and the concentration enfranchisement has the effect of reducing of ownership into large farms is reducing poverty and increasing local African farming workforces and pushing many American populations.30 As Gordon small farmers out of the business, as well as Nembhard writes, “Agricultural and sparking migration out of rural areas of the marketing cooperatives, credit unions, and South altogether. Black farmers who have legal services provided by the FSC/LAF come together for co-op projects have decreased the economic insecurity and frequently been poor and displaced, laid off, exploitation imposed by the White

22

plantation bloc and helped to sustain Black communities on their own terms. The FSC/LAF has also helped to slow the loss of Black-owned land in the South.”31 An economic development plan that is inclusive of African Americans and women and allows them the opportunity to work and thrive in areas where they already live and embrace farming traditions they already know must have co-ops at the center.

23

Case Studies: African American Farm Co-ops in Rural Mississippi

More than 200 Black-owned co-ops in the entrepreneurial spirit that already exists in South have been started in the past 25 years, these communities. Helping small farmers including farming co-ops, consumer co-ops, sustain themselves and build successful clothing co-ops, and credit unions.32 While it enterprises is the most direct way to spur is impossible to profile all co-ops in the economic activity in these neglected rural region, the activities and experiences of areas. Several co-ops are doing exactly that. some are helpful in painting a picture of The following section details results from a how Black-owned co-ops operate, the goods series of interviews with members of and services they provide the community, several Black-owned farming co-ops and the challenges they face in the rural throughout Mississippi. The subjects South. interviewed represent a wide variety of Mississippi presents perhaps the best case business activity, organization, and output, for how agricultural co-ops can help the even within just one subset of the neediest communities. The poorest state in cooperative business sector: farming co-ops. the U.S. with the most entrenched poverty These examples include vegetable and concentrated among African Americans livestock co-ops; those organized by locality living in rural areas, Mississippi illustrates and by product; and, in one case, a co-op an economic development model that fails made up and run exclusively by African to harness the local knowledge and American women.

Mississippi Delta Southern Rural Black Women in Agriculture

The Mississippi Delta Southern Rural Black well-paying jobs for women in the Delta Women in Agriculture Co-op (SRBWA), region. This is an area that once boasted established with technical assistance and factories producing carpets, ceiling tiles, training provided by the Southern Rural and fasteners. Since those factories were Black Women’s Initiative, is the first shuttered, the area has suffered from high agricultural co-op run entirely by women in unemployment and food deserts. Diets in the South. It is an Agriculture Association the region are often limited and unhealthy Liability (AAL) organization, a type of due to the high cost and great distances incorporated co-op, and was founded, needed to travel to buy food. The founding according to president Bobbi Miller and goals of the co-op are economic self- treasurer Hope Davenport, in response to a sufficiency for women and access to locally lack of both affordable, healthy food and grown healthy food for consumers in the

24 Delta region. According to co-op leaders, Currently, co-op members grow chemical- many members are the sole breadwinners in free produce and sell to a variety of their families, in part due to high rates of markets. Members collectively market their male incarceration in impoverished towns. own crops and set aside plots on their Like many co-ops, its membership—which personal farms to grow sweet potatoes, once stood at 30, but now numbers 15— harvest them, and then sell the potatoes and changes over time as members become greens in bulk. Of each member’s proceeds, inactive. It is a small co-op with an annual 20 percent is reinvested in the co-op, which budget of less than $20,000. Many of its pays for more farm inputs. With time and members hold other jobs and engage in better financing, the co-op hopes to farming part-time to supplement their purchase more equipment to share among incomes. Members include school teachers, members and expand to other vegetable butchers, nurses, and certified nursing crops they can sell to local schools and assistants. Often, members had no prior supermarkets. farming experience but realized they could Since its inception, the co-op has sold turn the extra land on their properties into vegetable crops to local groceries and small farms. With training and experience, restaurants and through farmers markets. an activity which started as a hobby for The co-op received a Value-Added many grew into a part-time to full-time job. Producer Grant (VAPG) from the USDA in As a co-op designed to serve women 2012 to promote and process sweet potato farmers, SRBWA’s membership is not products, particularly sweet greens and limited by geography. Its members reside in fries. A pilot program with local elementary towns throughout Mississippi, concentrated school students found the fries to be in the Delta region. This creates logistical positively received by students. challenges for some of the shared functions Subsequently the co-op partnered with a of the co-op, including sharing equipment nonprofit in Clarksdale, which serves such as a tractor or tiller, because many farmers in the region, to apply for a USDA members live 50 to 100 miles away from one Rural Business Enterprise Grant. The grant another. For this reason, running a single is earmarked to establish a commercial central farm is not financially feasible. kitchen and purchase equipment that will Instead, SRBWA members maintain their enable co-op members to process sweet own individual plots at home and reserve potatoes into sweet potato fries in bulk, space for certain vegetables that they then package and sell them to local schools. collectively decide to grow and sell With the goal of introducing local youth to together. Members collectively purchase the opportunities in agriculture, the co-op has plants and fertilizer. The co-op offers also sponsored interns and conducted field members revolving zero-interest loans and trips to successful agricultural projects in- stipends for farm skills training. Many state and in Arkansas. Additionally, members also hire extra workers for labor- members have obtained USDA certification intensive periods, such as harvesting, and for Good Agricultural Practices (GAP) and the co-op helps offset that cost. Good Handling Practices (GHP), with the help of prior training made available

25

through foundation grants to the Southern Rural Black Women’s Initiative.

Winston County Self Help Cooperative

The Winston County Self Help Cooperative on a rotating basis to reproduce and build (WCSHC) is a local co-op organized to up their own livestock and to start dairy bring together agricultural producers across and swine operations. Under current the sector in Winston and surrounding president Frank Taylor, the WCSHC has a counties. Founded in 1985 to help African holistic mission, including health, housing, American farmers buy and sell goods in and youth development. It has helped bulk, the co-op responded to a need for member families with land purchases and financing at a time when the USDA, under home ownership, and it runs a garden the Reagan administration, had little project aimed at promoting conservation. interest in serving Black farmers. The co-op The co-op also runs a hay project on a four- currently has 40 members engaged in a acre pasture it owns. Hay produced from variety of activities including dairy farming, the pasture is sold to members at cost and vegetable farming, and timber production. below market price. The WCSHC also runs Financing is mostly member-provided many community education initiatives: through dues, which are $140 per month. health seminars to raise awareness of Initial funding also came through the hypertension and diabetes in partnership Presbyterian Mission Agency Self- with local health departments and Wal- Development of People (SDOP) to construct Mart; homebuyer and foreclosure a feed-grinding mill. workshops; financial workshops with the Federal Deposit Insurance Corp.; and Like Fannie Lou Hamer’s pig bank, the co- canning workshops in partnership with op receives heifers and pigs through Heifers local churches and Boys & Girls Clubs of International and lends them to members America.

Unlimited Community Agricultural Cooperative

A newer co-op, Unlimited Community has been supported by member self- Agricultural Cooperative (UCAC), was financing through $125 initiation fees and founded in 2013 to serve the Golden $10 monthly dues. Though still young, Triangle area of Lowndes, Oktibbeha, and UCAC has more than 40 members and more Clay counties in Mississippi, with the than 200 farmers in its network as support of partners Alcorn State University, prospective members. Members engage in a Mississippi State University, the Mississippi range of activities, from vegetable farming Minority Farmers Alliance, the Winston to goat farming. County Self Help Cooperative, and the UCAC promotes community well-being in Mississippi Association of Cooperatives. the Golden Triangle area through Like SRBWA, UCAC is an AAL. The co-op development of local small farmers and

26 business owners, and based on the and the Supplemental Nutritional principle of pooling resources, according to Assistance Program. president Orlando Trainer, vice president An example of pooling resources is the co- Brad Spencer, and treasurer Curtis Snell. It op’s collective purchasing and sharing of offers farmers in the region farming and hay among members at significant discount business training, hands-on workforce to market prices. The co-op participates in development, real estate acquisition the Heifer International program and lends assistance, and estate planning. Its efforts to the animals to members four at a time. The expand farming have resulted in joint co-op also provides technical assistance to ventures with the Mississippi Minority help member farmers apply for USDA Farmers Alliance and Mississippi Farmers grants. With greater investment in Network. Additionally, UCAC has equipment and land improvement, the co- conducted outreach at farmers’ markets, on op hopes to produce vegetable crops both field days, and at Youth in Agriculture for sale at local supermarkets and for events, on issues related to food safety and export. security, sustainable farming,

Holmes Sustainable Agricultural Association

Located in Holmes County, the association improvements, and fence construction. includes farmers raising poultry, livestock, Members share heifers and farm inputs, and vegetables. There are currently 28 however they sell to markets individually. members, not all of whom were farmers The association currently lacks the funds or before, and the association has helped them collateral to buy equipment to share—such develop operations such as dairy farms as tractors, trucks to take goods to market, through USDA and Heifer International hay harvesting equipment, or a programs. Monthly dues are $5, and transportable slaughter trailer. With more members are expected to attend monthly private and USDA support, the association meetings. The association offers training on intends to get members GAP certified to sell subjects such as livestock care, land to local schools.

Challenges

Financing

Universally, the top challenge reported by network among established businesses and co-op farmers is financing. Many report commercial banks based on personal being unable to get loans from banks for relationships that makes it especially farming inputs, such as equipment and difficult for newer farms and businesses, fertilizer, because they lack collateral or particularly Black- and women-owned ones, their loan requests are too small to interest to get loans. Banks are more likely to lend to commercial banks. In many rural areas, large-scale farmers with hundreds of acres historically, there is also an old boys’ who grow row crops—soybeans, corn, and

27 wheat primarily—which are often pre-sold process. USDA has personnel in each state to large commercial buyers, insured by the to train prospective applicants on the grant government, and thus less risky for banks. process, but budget cuts have reduced the And for co-ops that do not own much land staff for this program to two for all of of their own but rather rely on individual Mississippi. members growing on their own property, Foundations such as Ford and Kellogg are having members put up their own land as also involved in farm training and collateral is too risky. This leaves small improvement. Some have partnered with farmers vulnerable to more exploitative public universities and nonprofit financing options, such as payday lending. intermediaries to provide production and Other sources of financing are members, marketing assistance and support government, and foundations. Member infrastructure to develop agriculture. In the dues are often quite low, and some case of universities, a portion of the money members cannot afford to pay consistently. often stays in the orbit of the university, The result is that income from dues often is which may run research or training farms. not enough to cover operating expenses, Nonprofit organizations, such as SRBWI, much less expand production. Different have stepped in to provide cooperative, government entities provide financial organizational, and resource-development support to co-ops, but none exclusively to assistance that has enabled co-ops such as small and Black-owned co-ops. The Farm SRBWA to incorporate; connect with other Services Agency provides loans to farm cooperatives, nonprofits and agricultural operators for labor and equipment. Most services; and access funding for grants come through the USDA, which infrastructure development and offers VAPGs. USDA also offers rural certification, production, and marketing development grants for emerging training. Additionally, small farmers today businesses. Often the application process is require small business development, difficult and obscure for small farmers, and marketing, and finance skills to access more prior grantees have an advantage in lucrative and diverse market opportunities. winning grants. Leaders of both the These markets—restaurants; specialty Unlimited Community Agricultural Co-op groceries; local institutional markets, such and Holmes Sustainable Agricultural as schools and hospitals—along with direct Association remarked that USDA loans markets, such as farmers markets and historically excluded African American public markets have very specific packaging farmers until a class-action lawsuit was and processing requirements and filed, and still effectively neglects many regulatory guidelines. They also typically through need for matching funds, through require related record-keeping processes, hard-to-obtain private grants, lack of targeted point-of-sales materials, and personnel, and a complicated application targeted promotional strategies.

28 Training

Many members of new farming co-ops member training is in grant writing and come into the business with little farming loan applications. Co-op members must experience. Many work jobs in the local know how to develop a business plan when retail and service sector, own property with applying for loans and how to apply for sizable plots of land, and form co-ops to put USDA programs, which involve the land to productive use. Those who have considerable red tape. Some government worked in farming often have had bad resources exist to help small farmers experiences being paid very little as farm navigate this cumbersome process. But with laborers, according to Miller of SRBWA. personnel cutbacks, the burden of application help falls largely on co-ops Most agricultural co-ops make training and themselves and the nonprofit organizations education a key part of their founding and regional associations that assist them, principles. They offer members training in such as SRBWI and FSC. The effort to farm improvement such as fencing, provide consistent support to farmers irrigation, and livestock breeding and care, across a large region with limited staff and and broader community education in expertise makes assistance and regular farming, personal finances, and maintaining follow-up challenging and expensive. healthy diets. Another critical area of

Good Agricultural Practices and Good Handling Practices Programs

The GAP and GHP certification programs auditors, who can charge approximately $75 set standards for agricultural production for per hour or more. The fee includes time farmers wishing to sell products to large traveling to and from the farm that is being purchasers, such as schools, restaurants, audited, which in rural areas can be and grocery stores. Certificates must be considerable. Co-op members have called renewed annually, and the process can be for improvements in this process to lower cumbersome and expensive for poorer costs and simplify the process, particularly small farmers. There is a fee for farm for small farmers without the means to pay certification, currently around $500, in for the certification and audits themselves. addition to money farmers must pay for

Opportunities

With more technical support and start-up enough to secure the financing to acquire capital, the co-ops featured here could more equipment. With tractors, trucks, hay greatly expand into new markets, help more balers and cutters, and irrigation member-farmers earn a living, and equipment, as well as non-equipment contribute healthier food to their inputs such as seed, fertilizer, and bulls for communities. Many newer co-ops are stuck dairy farms, the co-ops in this report would in a paradoxical situation of being unable to be able to grow and diversify their output, acquire the equipment needed to grow large produce and sell in bulk, transport goods to

29 market, and share resources among more range of value-added products and services farmers to cut down on their costs. Just one that could add to the production chain from tractor can make a critical difference in the farm to table: transportation, insurance, costs and productive capacity of all marketing, catering, and consumer co-op members of a co-op. Additionally, co-ops groceries. Some co-ops also sponsor need associated technology, such as farmers’ markets, which are especially computers and software, to track sales, critical in towns that lack a nearby develop marketing materials, and maintain supermarket. Taken together, these records. More avenues are needed for small businesses would ideally form a unified farmers who lack access to traditional infrastructure to support other cooperative sources of financing and credit to gain this ventures and decrease the cost of bringing start-up and ongoing business development products to market. According to the co-op assistance. principle of cooperation among cooperatives, a broadening of cooperative There are few areas into which co-ops could business activity within agriculture could not conceivably expand. Many other types result in a self-reinforcing and autonomous of co-ops exist in the South: financial cooperative economy sustaining people institutions such as Hope Credit Union, across many sectors and towns in the rural energy co-ops like Cooperative Energy, South. sewing co-ops such as Southern Journeys, and food product co-ops in areas such as canning and pickling. There are a wide

30 Policy Recommendations

Why are there not more co-ops? Despite the based model that serves community needs fact that co-ops provide often critical goods should not be a larger part of the economy. and services with major consumer A study by Peter Molk of Willamette demand—things like food, energy, and University argues that what co-ops do is personal banking—they remain a tiny share akin to providing a public good or service of the overall business market: just 1 that is necessary but unmet by either percent of total U.S. GDP.33 Profitability government or existing private markets. alone cannot answer the question, because Were co-ops treated as such and valued for there are a few high-profile examples of their social benefits of providing necessities, extremely profitable and nationally such as healthy food, to the public, they recognized co-ops brands in insurance would be incentivized through public (State Farm), media (AP), and especially investment, much as auto plants are agriculture (Florida’s Natural, Ocean subsidized through tax breaks and public Spray). Co-ops face hurdles traditional investment by state governments, or private businesses do not, but there is no insurance companies are subsidized by the fundamental reason why a cooperatively federal government through the Affordable and democratically managed, membership- Care Act.

Why Co-ops Need Support

Co-ops provide unique and necessary dues to monetarily support the co-op and services to the public but also face unique must be fully involved in its day-to-day challenges. They are harder to start up and operation and personally invested in its maintain than traditional, privately held or success. For already established, profitable investor-owned firms. Profits must be co-ops, this can be less of an issue. But for shared among multiple member-owners smaller co-ops just starting out—made up rather than kept by a single owner or of members who are maintaining other jobs institutional investors. Co-ops also can and coming into farming, or other struggle with coordination problems in industries, with little professional terms of decision-making about growing experience—being fully engaged can be a the business. challenge. But as co-ops become more successful, the possibility of quitting one’s There exist examples outside of agriculture day job and becoming a full-time co-op that point to solutions to these coordination member-owner becomes more viable. Thus, problems. The American Bar Association policy changes that foster new and smaller sets rules for law firms that require co-ops and allow them to become full- cooperative ownership and uses tax breaks, fledged businesses are critical to both grants, and other subsidies to achieve this. financial sustainability and better Member engagement is the first key factor coordination. in a co-op’s success: members must pay

31 Like any developing business, investment is establishing a new business in a market essential not only in the organization itself simultaneously extends the learning curve through co-op development but also in and the amount of start-up capital, research and development in the industry attention, and member involvement within which the co-op exists. This dual required at the beginning. challenge of growing a co-op and

Loan and Grant Policy

Aside from member self-financing, one of This can be a hurdle when they involve the main sources of start-up and sustaining long applications and credit checks, and capital for farm co-ops is the USDA and its often an unrealistic alternative, given that Farm Service Agency (FSA) and Natural some predatory lenders do offer loans but Resources Conservation Service (NRCS). at exorbitantly high interest rates. NRCS programs support the building of USDA grants provide sorely needed, and in farm improvements such as wells, fencing, many instances, the sole investment and livestock shelter. FSA loans available to opportunities in industry research and farmers include direct operating loans for development as well as production, equipment, fuel, and other inputs; marketing, and distribution infrastructure. microloans for smaller and specialty These sources of support include Rural farmers, youth loans, loans for beginning Business Enterprise or Opportunity Grants, farmers, and minority and women farmer Small Business Innovation Research Grants, loans. This last program is a relatively new Community Facilities Grants, VAPGs, Local development, in response to class-action Food Promotion Grants, and Specialty Crop lawsuits against the agency two decades Grants. Some of these USDA grants are ago in response to discrimination in matching funds programs, so farmers are USDA’s loan policy. expected to put up an amount equal to or While targeted loans for smaller and some portion of the grant, which prohibits minority farmers exist, co-op members large investments for small farmers. remark that loans and other subsidies often Foundations grants, in contrast, are often favor larger, row crop farms that do not sell not matching. But foundations often require goods for local consumption, and disfavor certain minimum operating budgets in the smaller vegetable farms, particularly for hundreds of thousands of dollars for African American farmers. Many factors grantees or offer smaller grants that cannot compound the problem: the difficulty of the meet the needs of start-up enterprises. loan application process, which gives Sometimes loans and grants to support advantage to those farms that have been farming go to large institutions, such as through the process and won loans before; universities engaging in agricultural and budget cuts, which have reduced the research, but do not end up going to number of USDA personnel available to farmers themselves, according to members help farmers apply for loans. Additionally, interviewed. Larger grants also go to to qualify for USDA loans, farmers must be intermediaries whose staffs and consultants turned down multiple times by banks.

32 provide technical assistance to emerging policies toward co-ops. The SBA excludes cooperatives. However, because they must most co-ops from qualifying for its lending demonstrate grant outcomes in monetary programs aimed at small businesses. terms, they are limited in the amount of Co-op members call for streamlining the funding that can be invested in building the FSA loan application process and for better capacity and expertise of co-op members funding of loan and support programs themselves. Members also note that loan aimed at small and minority farmers. They money is often delayed by FSA county would also like to see funding sources committees that disperse the funds. reserved for small and minority farmers Timeliness of financial support is critical for among other loan and grant programs, farming at certain times, such as planting including as set-asides for beginning season. Additionally, many USDA farmers, specialty crop block grants, development grants are allocated on a marketing improvement, crop and livestock reimbursement basis, so cooperatives must insurance, and rural development loans and generate the cash flow to expend grants. There should be fewer matching reimbursable expenses up front. This is not grants, or there should be a way for matches only problematic in and of itself, but to be in kind. Among the most acute needs becomes particularly disruptive when for small and minority farmers is better funding allocations are not timely. Other support for equipment purchases. loan programs, such as the U.S. Small Business Administration, have conflicting

Fiscal Policy

Under the current administration’s latest Cooperative Business Association has budget proposal, the USDA’s budget would estimated that 300 businesses and 4,000 jobs be cut drastically, putting many programs were created or saved by Rural Cooperative critical for co-ops and farmers at risk. Development Grants since 2008, and the Notably, for its FY 2019 budget proposal, association has lobbied to protect the the Trump administration seeks to eliminate program. all discretionary funds for the department’s Additionally, tax policy is critical to co-ops’ Rural Business-Cooperative Service (RBCS). success. Because co-op members are both These cuts would wipe out the Rural collective owners of a business and Business Development Grants program, as individual producers, it is important for tax well as the Rural Cooperative Development policy to recognize that co-ops, unlike other Grants, Business and Industry Loan businesses, are not founded to generate Guarantees, Appropriate Technology profits for the business itself but to increase Transfers for Rural Areas, and the Value- earnings for its member-owners. Added Producer Grants programs.34 The Accordingly, co-ops must be taxed in a RBCS is the only federal program dedicated manner different from regular businesses so to supporting co-ops on a national level, that member-owners avoid being taxed and gutting it would be a devastating blow twice. Currently this is accomplished by to cooperative farmers. The National allowing co-ops to deduct distributions and

33 allocations made to their owners, but many However, LLC members are taxed equally tax policies are specific to the sectors in across the board not based on their income which co-ops operate, such as farming, earned in the cooperative, which can be energy, and finance. It is important to problematic given potential earnings maintain the check on double taxation so as differentials among co-op members. not to put co-ops at an unfair competitive Ensuring fair taxation and uniform disadvantage. Double taxation and incorporation standards is in the interest inconsistencies in co-op laws by state both of state governments and co-op increasingly motivate co-ops to forgo members. incorporation and register as LLCs.

Conclusion

For too many workers, particularly workers diets and they see the logic in banding in rural areas neglected by large industries, together to sell goods and buy inputs in the existing economic development model bulk. There are already co-ops and has been a failure. Alabama, Georgia, and federations that offer technical training, Mississippi have long tried to revive areas farm inputs, and help with loan and grant suffering from chronic unemployment and applications. There are already federal economic stagnation with corporate subsidy programs to support the development of co- deals, mostly to auto and other ops. With sufficient access to credit and manufacturers, at enormous taxpayer cost capital to allow them to grow, many small relative to actual job creation. Rather than individual farmers could become successful well-paying, stable, skilled jobs in heavy collective business owners, creating industry, most new jobs are in the low-wage economic activity in neglected areas and service sector and lack healthcare, pensions, meeting nutritional needs in food deserts and any semblance of job security. The throughout the South. impact on historically marginalized Those who stand to benefit the most from workers—rural workers, African an expansion of the co-op economy live in Americans, and women—is clear: wage the poorest and most isolated areas of the disparities and poverty. In the meantime, farming, a traditional livelihood for workers South, far from the cities, manufacturing over generations, is largely neglected as a plants, universities, and hospitals that matter of development policy. anchor the economy in other parts of the South. African Americans in rural areas are As a sector that sustains a large part of the especially affected by their isolation from population in the most rural impoverished these economic hubs, with poverty and areas of the South, agriculture holds a key to self-sustainability for those who will not unemployment as a result. Women are see the gains from an industry-focused especially prone to struggle to support development model. Many already engage families as single heads of household in in small-scale farming to supplement their areas with few and low-paying jobs. And

34 rural areas are most likely to suffer from is little economic activity; and promote lack of healthy food, leading to poor diets healthier diets in areas suffering from and associated afflictions such as diabetes. chronic health problems. A thriving Greater support for co-ops and for building cooperative farming sector could be the a cooperative infrastructure would open crux to spreading the gains and fulfilling new opportunities for self-sufficiency for the promise of a new growing, but still those who stand to benefit the most; unequal, South. generate new business in areas where there

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End Notes

1 A note on geographic terminology: while this report focuses on the experience of residents of three states, Alabama, Georgia, and Mississippi, some figures cited here will refer to broader or narrower geographies. “The South” hereafter refers to the states of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Texas, Virginia, Washington, DC, and West Virginia. “Deep South” refers to Alabama, Georgia, Louisiana, Mississippi, and South Carolina.

Anderson, Julie et al. The Status of Women in the South. Report. Washington, DC: Institute for Women’s Policy Research, 2016 2 Mason, C. Nicole. Unequal Lives: The State of Black Women and Families in the Rural South. Report. Jackson, MS: Southern Rural Black Women’s Initiative, 2015. 3 All figures unless otherwise noted from Mason, Unequal Lives, 2015. 4 Anderson, The Status of Women, 2016. 5 Ibid. 6 Ibid. 7 Ibid. 8 U.S. Department of Labor, Bureau of Labor Statistics. “Union Members Summary.” 2017. https://www.bls.gov/news.release/union2.nr0.htm 9 Martin, Nina and Renee Montagne. “The Last Person You’d Expect to Die in Childbirth.” ProPublica/NPR, 2017. 10 Bishop, Bill and Roberto Gallardo. “The Lifespan of Rural Women in 2009.” Daily Yonder, 2012. 11 Breadwinner defined as either sole provider to all children younger than 18 in the household or earning at least 40 percent of a couple’s total earnings. 12 Anderson, The Status of Women, 2016. 13 Feinberg, Lynn Friss. Keeping Up with the Times: Supporting Family Caregivers with Workplace Leave Policies. Washington, DC: AARP Public Policy Institute, 2012. 14 Morgan, Brittney. “Most US Women Entrepreneurs Motivated by a Work-Life Balance.” Business Daily News 24 October 2014. https://www.businessnewsdaily.com/7341-women-entrepreneurs-motivation.html 15 Anderson, The Status of Women, 2016. 16 U.S. Department of Commerce. Women-owned Businesses in the 21st Century. https://www.commerce.gov/sites/commerce.gov/files/migrated/reports/women-owned-businesses.pdf 17 Ibid. 18 Tray Hairston. “The Future of Economic Development: Using Healthcare as an Economic Driver, Public-Private Partnerships as a Platform to Further Development, and Minority Participation as a Path Forward in a More Diverse Mississippi.” Mississippi College Law Review 35 (2016): 370. 19 Associated Press. “Strapped Cities Review Corporate Tax Breaks.” 2 January 2010. http://www.nbcnews.com/id/34665699/ns/us_news-life/t/strapped-cities-review-corporate-tax-breaks/ 20 Trubey, Scott. “Will New Tax Credits, Hollywood Changes Boost Georgia Film Spending?” Atlanta Journal- Constitution 4 January 2018. https://www.myajc.com/news/local-govt--politics/will-new-tax-credits-hollywood- changes-boost-georgia-film-spending/zA7bbGG8DPwsNvM8oVgkaN/ 21 Carey, Nick. “Auto Workers’ Union Rolls the Dice at Nissan’s Mississippi plant.” Reuters, August 2, 2017. 22 The Housing and Transportation Affordability Index, https://htaindex.cnt.org. 23 All data from Bureau of Labor Statistics’ Quarterly Census of Employment and Wages (QCEW) county-level data files as of most recent quarters available, q1 and q2, 2017. Top sector is identified by BLS domain, top industry is identified by North America Industry Classification System (NAICS) code. 24 Hadsfield, Miles. “USA’s Top 100 Cooperatives of the Year Named by National Cooperative Bank.” Coop News 6 October 2017. https://www.thenews.coop/122959/sector/usas-top-100-cooperatives-year-named-national- cooperative-bank/ 25 Peter Molk, “The Puzzling Lack of Cooperatives.” Tulane Law Review 88, no. 5 (2014): 899-959

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26 Lund, Margaret. 2013. Cooperative Equity and Ownership: An Introduction. University of Wisconsin Center for Cooperatives. April 2013. http://www.uwcc.wisc.edu/pdf/Cooperative Equity and Ownership.pdf. 27 With some exceptions in the case of co-ops with preferred shareholders, whose ownership is limited, typically to less than 10 percent of the co-op. still presents issues of power imbalances (might want to consult work of Frank Adams on this and other issues…perhaps inclusion of “Worker Owned” concept 28 Pérotin, Virginie. What Do We Really Know About Worker Cooperatives? Cooperatives UK. 9 February 9, 2016. https://www.uk.coop/sites/default/files/uploads/attachments/worker_co-op_report.pdf 29 Chen, Michelle. “Worker Cooperatives Are More Productive Than Normal Companies.” The Nation. March 28, 2016. 30 Gordon Nembhard, Jessica. Collective Courage: A History of African American Cooperative Economic Thought and Practice. University Park, PA: Penn State University Press, 2014. 196. 31 Ibid, 212. 32 This number includes only co-ops affiliated with the Federation of Southern Co-ops; the total number of co-ops is likely larger. Gordon Nembhard, Collective Courage, 194. 33 Molk, “The Puzzing Lack,” 902. 34 “President’s Budget Proposal Threatens Food, Farm, and Nutrition Programs” National Sustainable Agriculture Coalition Blog 15 Feb. 2018. http://sustainableagriculture.net/blog/fy19-budget-proposal/

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