OPINION: THE agri-producer cooperative theme is rightfully gaining increasing attention in the public forum.
Additionally, the federal government’s recently released Agricultural Competitiveness White Paper provides for a $13.8 million funded two-year pilot program looking into the benefits and opportunities of cooperatives.
The Department of Agriculture has said the funding would go towards providing advice to farmers by external professionals with expertise in co-operatives, in areas like legal structures.
Among other farm sector-related initiatives, that funding gives a material boost to the agri-cooperative concept as a sustainable and value adding alternative to the conventional agribusiness intermediary and processing channels for agri-producers.
With this in mind, perhaps it is a timely opportunity to examine some of the opportunities and failings of the producer cooperative as an alternative to private enterprise models.
At the risk of sounding too dry, a formal definition of a co-operative is “an autonomous association of people who voluntarily cooperate for their mutual social, economic, and cultural benefit”.
The same definition may apply to the agri-producer cooperative model.
Producer cooperatives traditionally serve to consolidate a fragmented producer base for the purpose of collective marketing of agricultural production, purchasing of production inputs.
Often, a co-op’s purpose is also to provide other services and value-add to its members including product traceability, production finance, quality control, proprietary branding, and economies of scale through the supply chain.
Cooperatives often extend beyond intermediary type services to include asset investments providing value add and processing capabilities for members.
A well designed and mandated cooperative serves to capture a substantial share of the post-farm gate value of the producer members’ farm output.
Therefore, why if cooperatives offer such unique value to producers is the whole of our agricultural industry not intermediated through cooperatives?
The answer can perhaps be found in a mix of historical performances of cooperatives and issues surrounding the inertia of the status quo.
Cooperatives that are successful in the long run are so because they consistently operate within their original charter and always serve the direct needs of the members.
The cooperatives that struggle with performance and ultimately the support of their members are often ones that choose to move outside the original mandate and purpose for which they were established.
Arguably, the overarching reason for mixed cooperative success is cooperatives conducting themselves and their business affairs in an uneconomical manner.
A cooperative must compete in the open market and as such, must maintain an attitude of commercial competitiveness and cost thrift or their value add to the members is diminished if not destroyed.
As a side note, a cooperative is a legitimate cog in a free market economy, that is, membership to a cooperative or the intermediary rights of the cooperative should not or need to be legislated.
When producer groups are considering a cooperative structure as an alternative to the incumbent intermediaries and service providers, careful thought needs to go into what, exactly, is the need to be met and the cost benefit.
The ancillary benefits that a cooperative can provide members are broad but there should always be one or two core drivers that a cooperative enterprise can be constructed from where the value add to the members is material and clear.
Today there are several parts of agriculture and agribusiness where a cooperative would fit well.
With careful thought and planning, producers should be able to build and enjoy the benefits of their own cooperative for the long term.
Mark Allen is principal of strategic industry advisors, The Fifth Estate.