Currently, the U.S. agro-food sector is in the midst of transformation process so-called 'Industrialization.' Under this structural change, it is increasingly critical for farmers and their cooperatives to get involved forward into value-adding stages in the commodity chains. Rapid development of the new generation cooperatives (NGCs) in the 1990's can be recognized as one of the possible alternatives to cope with this challenge. The NGCs are apparently different from conventional farmers' marketing and/or supply cooperatives, with the most characteristic and critical system of 'delivery right share.' A unit of delivery right share represents (1) the legal right and duty to deliver a defined amount of agricultural product to the cooperative, (2) the right to receive cash dividends in proportion simultaneously both to the patronage and to the equity investment. And (3) it is transferable, with appreciated or depreciated price reflecting the value of the cooperative as a business entity. With this system, the NGCs can successfully address the free-rider problem, horizon problem, and portfolio problem. These problems are among the critical reasons why the members of conventional cooperatives hesitate to increase their equity investment, and consequently the cooperatives suffer from the lack of sufficient capital necessary to enter value-adding activities. Among the main conclusions from the case study on some NGCs' in the grain producing area are as follows. The value-adding activities on agricultural raw products by NGCs, particularly in the special commodities and/or niche markets, are effective as means to retain more value in the hands of farmers, as well as to revitalize the rural economies. On the other hand, the NGCs, activities in the more generic commodities and/or oligopolistic markets, where they must compete with the huge multinational agri-food businesses, are somewhat complicated. Because of the scale-economy, tough competition, and relatively generic character of the farm products, it is difficult to remain the delivery right share system, and then the NGCs are faced to the likeliness to transform into the large regional cooperative approach, or even to the invester-oriented firm approach.
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