ILLINOIS CO-OP FUTURES DISSOLUTION VOTE SET

  The shareholders of Illinois
  Cooperative Futures Co., the futures trading arm of many
  Midwest farm cooperatives for more than 25 years, will vote
  Wednesday on its possible dissolution.
      The directors of the company called a special meeting and
  recommended its dissolution last month, citing falling volume
  and increasing costs.
      Sources close to the organization told Reuters the pullout
  of Growmark, Inc., which holds more than 70 pct of the capital
  stock, led to the call for dissolution.
      The possible demise of the cooperative has set clearing
  houses scrambling for the trading business of the 85 regional
  and local cooperatives that comprise its membership.
      Ironically, it was Growmark, at that time a regional farm
  cooperative with major river terminal elevators, that founded
  Illinois Cooperative Futures on December 1, 1960.
      But Growmark became affiliated last year with Archer
  Daniels Midland of Decatur, Ill., and markets its grain through
  a joint subsidiary of the two companies, ADM/Growmark.
      With that relationship, Growmark no longer needs to trade
  futures through the cooperative, said Tom Mulligan, president
  of the co-op.
      Membership in the company, which Mulligan termed a
  cooperative of cooperatives, has declined from 99 in 1982. A
  notable loss was AgriIndustries of Iowa, which became
  affiliated with Cargill, Inc.
      Illinois Co-op's other members include such regional
  cooperatives as Indiana Grain, based in Indianapolis, Goldkist,
  of Atlanta, Ga., Midstates in Toledo, Ohio, Farmland Industries
  in Kansas City, Mo., Farmers Commodities, Des Moines, and
  Harvest States in Minneapolis.
      Some observors said the demise of Illinois Cooperative
  Futures Co. is a serious blow to the cooperative system.
      Instead of banding together, the individual cooperatives
  are forced to go their own ways, said the floor manager of one
  cash house at the Chicago Board of Trade.
      Such a move would destroy the cohesiveness that gives farm
  cooperatives an advantage in the market at a time that a few
  major commercial companies are growing dominant, he said.
      Don Hanes, vice president for communications with the
  National Council of Farm Cooperatives, said 5,600 cooperatives
  exist today, down from 6,700 five years ago.
      "The period we've gone through in the past five years has
  been quite a crunch," he said. "There's been a lot of
  consolidation in the marketing co-ops."
      One problem, he said, is the co-ops sell the grain to the
  major commercials for export, rather than exporting it
  themselves, losing potential profits.
      But exporting grain requires heavy investments, and the
  multi-million-dollar loss posted six years ago by Farmers
  Export Co., a co-op set up to export grains, served "to make
  folks gun-shy," Hanes said.
      Mulligan said he believes the dissolution, if it is
  approved, is a result of change in the futures industry rather
  than a change in U.S. agricultural economics.
      A grain dealer at one member co-op said the futures arm
  "was a convenience, something that saved us a little bit of
  money. (Its dissolution) will force us to change our way of
  doing business."
      "We're sorry to see the co-op go by the wayside," he said.
  "But there are lot of people out there to do business with.
  There are plenty of capable firms."
      Steven W. Cavanaugh, vice president for grain marketing
  with Indiana Grain, said he would prefer to trade futures
  through a Chicago-based cooperative.
      "In terms of clearing our business as a unit as opposed to
  individuals, there would be economic savings," he said but
  added, "The times change and with changing times, come
  different opinions of what businesses ought to be around."
      Cavanaugh said the possible demise of the futures arm had
  nothing to do with its profitability. "I would guarantee you
  that this company is not in trouble. It is a sound, healthy
  organization."
      In the year ended February 28, 1986, the Illinois
  Cooperative reported income of 10.2 mln dlrs and members'
  equity, or net worth, of 8.3 mln dlrs. The annual report for
  the most recent year has not been filed.
      Under the cooperative system, income from operations is
  returned as "patronage refunds" to the members.
      Income and refunds in the past five years have been
  declining. In the year ended February 28, 1982, the co-op
  reported income of 17.4 mln dlrs and patronage refunds of 17.0
  mln dlrs. Patronage refunds in the year ended February 28,
  1986, totalled 9.5 mln dlrs.
      "You're dealing with substantially lower volume," Mulligan
  said. "Lower volume translates into higher costs."
      According to the company's 1986 annual report, Growmark
  owns 90 pct of the preferred shares and four pct of the common
  shares of Illinois Cooperative Futures Co.
      Mulligan declined to speculate on how much of the capital
  Growmark is entitled to. He said he could not determine the
  figure unless the shareholders decide in favor of dissolution.
  Equity is distributed according to each member's trading volume
  and, as a result, changes from year to year.
      However, Mulligan said the company could continue to meet
  minimum capital requirements to trade futures even if Growmark
  pulled out.
  

