COOPERATIVES. Cooperatives are business organizations owned and controlled by the patrons of the business, their primary aim being service to patrons and not profit to stockholders. Each common stockholder is limited to one vote regardless of the number of shares he owns, any money left over after meeting business costs must be returned to the patrons in proportion to the amount of business each has done with the cooperative. The amount of interest paid on shares is limited by law to 8 percent and is usually held at 4 percent or less. Cooperatives with 85 percent farmer membership are exempt from federal income taxation, but all nonmember business is subject to taxation. In Texas cooperation has been a preponderantly rural activity, with the early farm cooperatives closely allied with general farm organizations. After the Grange was established in 1873, affiliated grocery and supply stores were organized, and by 1887 there were 150 stores doing an annual business of almost $2 million. Such cooperatives, however, had largely died out by 1890. For several years beginning in 1878, cotton was handled by the Grange on a commission basis through the Texas Co-operative Association.
From 1905 to 1914 the Farmers' Educational and Co-operative Union was active in sponsoring more than 100 cooperative cotton gins and warehouses and in organizing the cooperative buying of farm supplies. The Texas Farm Bureau Federation did the same sort of work in the early 1920s and in addition sponsored associations to market tomatoes and ribbon cane syrup in East Texas and watermelons in South Texas. Early cooperatives were incorporated under ordinary corporation law, however, most of those organized between 1920 and 1931 were incorporated under a law called the Society Act of 1917. This act, revised in 1925 and 1949 and called the Co-operative Marketing Act, regulated cooperatives as late as 1968. By around 1949 there were more than 1,000 cooperative associations in Texas, about half of which were cotton gins. The remainder included grain elevators and warehouses, cottonseed oil mills: marketing associations for citrus fruits, watermelons, tomatoes, pecans, mohair, cotton, and livestock, rural electrification cooperatives, grocery stores, bookstores, student housing, insurance companies, credit unions, and grain and feed supply stores. In addition there was one large wholesale concern, the Consumers' Co-operative Association of Amarillo and Dallas, which was owned cooperatively by about sixty local associations.
In 1966 there were more than 700 cooperative associations in Texas, about half of which were cotton gins. By 1994, the number of agricultural cooperatives had dropped to 400. Texas cooperatives in 1994 included cotton gins, grain elevators, marketing associations for fruits and vegetables, poultry, peanuts, and dairy and livestock products, rural electrification cooperatives, rural telephone cooperatives, production credit associations, credit unions, farm supply stores, college housing, bookstores, and grocery stores. Also included were cottonseed oil mills, cottonseed breeding associations, cotton compresses, cotton and grain marketing associations, and wholesale farm supply associations. Trade associations for cooperatives in the state included the Texas Federation of Cooperatives, the Texas Cotton Ginners Association, and the Texas Electric Cooperatives, Incorporated. These organizations were assisted in research, service, and educational activities by the Agricultural Cooperative Service of the United States Department of Agriculture, by the Texas Agricultural Experiment Station and the Texas Agricultural Extension Service of Texas A&M University, and by the Texas Credit Union League.
Stanley Hack, Legal Aspects of Small Business' Use of Cooperative Arrangements (Madison: University of Wisconsin, 1964). Texas Department of Agriculture, 1948 Cooperative Marketing Act: Chapter 8 Revised Statutes (Austin, 1968).
The following, adapted from the Chicago Manual of Style, 15th edition, is the preferred citation for this article."COOPERATIVES," Handbook of Texas Online (http://www.tshaonline.org/handbook/online/articles/dec01), accessed June 16, 2013. Published by the Texas State Historical Association.