EDMONTON – A group blazing a trail to create Alberta’s first new
generation co-op has been forced to a more traditional path by a
combination of drought, a banker’s cold feet and uneven investment.
Providence Grain Group bought two grain elevators from Agricore United
under a limited company structure and not as a new generation co-op,
said the company’s manager, Milt Miller.
“The new generation co-op looked like a really good idea. It looked
like a hybrid that held a lot of opportunity,” Miller told a workshop
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on new generation co-operatives.
In June, a group of farmers and local business investors were set to
buy the 11,000-tonne capacity metal elevator at Gaudin in the central
part of the province from AU. It was selling it to meet a condition
imposed by the federal competition bureau when Agricore and United
Grain Growers merged.
A smaller wooden elevator at Waskatenau was thrown into the deal when
the group heard it would be demolished anyway.
But as the summer progressed and moisture became more scarce, the idea
of a new generation co-op grain elevator started to evaporate.
New generation co-ops combine a traditional co-op structure with a
corporation that includes investors and a management team. In a new
generation co-op the one-member, one-vote concept is retained and there
is the ability to give investors a vote and a seat on the board of
directors.
The proposed new generation co-op was to have investor and member
shareholders. Investor shares were valued at $10,000 plus another
$1,000 if they wanted the ability to deliver grain. Membership shares
that allowed grain delivery were to cost $3,500.
The shareholder and investor money along with money from the bank was
what the group needed to start the grain company east of Edmonton.
But as the drought progressed, enthusiasm waned. Smaller shareholders
backed away, as did the bank.
“We flat ran out of money,” said Miller.
By the beginning of July the group had serious cash problems.
Investors and members were asked to throw in more money. Now the
investment ranged from $3,500 to $50,000, still with equal voting
privileges.
Some investors had put in more money than others but would not have
more say about how the company was run.
“That created a real uncomfortable feeling for the large investors. The
things that made it attractive started to make it uncomfortable for the
large investor.”
At the same time the paperwork to start the first new generation co-op
hit snags. More work was needed before the July 31 deadline to take
over the two elevators.
“It was chewing up time and time wasn’t on our side,” he said.
So the group abandoned the new generation co-op idea and switched to a
limited corporation. Today, the group has 60 members instead of the 150
initially hoped for. It has raised $1.2 million and the company has
survived what it hopes will be its toughest year.
“We’ve got a good balance sheet,” said Miller who had raced to the
workshop from an open house at Gaudin where the company hopes to entice
farmers to deliver grain to their elevator.
“This is a very competitive business. Nobody is going to take less
regardless of how much they want their own elevator. We do have to earn
our own way,” he said.
Miller said everyone involved still feels the new generation co-op was
a good idea, but it didn’t work for them.
