Manitoba farmers generally know little about new generation co-operatives, which may explain why that form of enterprise has not been widely embraced in the province.
The ventures, also known as NGCs, have flourished in North Dakota and Minnesota, but are scarce on the Prairies.
Two reports prepared by researchers at the University of Manitoba attempt to explain why. The limited awareness of NGCs among Manitoba farmers and farm advisers was seen as one reason.
Another conclusion is that the Americans are far ahead in their efforts to accommodate those ventures through a range of different supports.
Read Also
Organic farmers urged to make better use of trade deals
Organic growers should be singing CUSMA’s praises, according to the Canadian Chamber of Commerce.
“It’s fair to say that the mechanisms for co-operative development just aren’t here as they are there,” said Jared Carlberg, an assistant professor in agribusiness and agricultural economics at the U of M.
“It seems like they had some early momentum and a lot of people onside with helping develop that. We haven’t quite got there yet.”
New generation co-operatives are intended to help producers add value to their raw commodities by joining together to establish a processing venture. NGCs have similarities with traditional co-operatives, but there are also differences.
NGCs are closed co-ops and an investment in one typically includes delivery rights and obligations. The closed structure means that once the original share offering has been purchased, new members are not allowed to join. By investing in a new generation co-op, producers gain the right to deliver a set amount of their commodity for processing, based on the number of shares they have bought.
Carlberg cited six things he considers especially important for understanding why NGCs has been slow to develop in Manitoba.
- Farmers and their advisers in Canada have limited knowledge of new generation co-operatives. “I wasn’t surprised by it, but I think it made it clear that this was a target for action, if action should be taken,” Carlberg said.
- American producers have more money to invest in an NGC than those in Canada. Comparing farm incomes and farm program payments in Manitoba, Minnesota and North Dakota showed American farmers typically fared better between 1980 and 2002.
- There is a greater network of mechanisms supporting the development of co-operatives in the United States. That support comes from government and quasi-government agencies, financial institutions and extension personnel, including university academics.
- There has been more effort in the U.S. to make securities regulations and taxation laws friendly to NGCs. “It would be difficult to overstate the importance of updating these mechanisms if there is to be any hope at all of stimulating investment in NGCs,” said one of the two reports prepared by Carlberg and fellow researcher Tasha Turko. “It is clear even to the casual observer that the regulatory mechanisms that have been put in place to foster NGCs in the U.S. far exceed any efforts made heretofore in Canada.”
- The U.S. had more early examples of successful value-added co-operatives. Several of those were formed in the 1990s, including Dakota Growers Pasta, which later converted to a corporation.
- Farmers with cash available are more willing to invest in NGCs, according to the findings. Larger farmers also are more willing to invest and the more farmers know about that business model, the more likely they are to invest.
“I think there is a willingness to invest provided that the business plan is good, provided that the opportunity makes sense and also noting the caveat that the money for investment has to be there,” Carlberg said.
The research also found that livestock producers were more willing to become part of an NGC than grain producers. However, Carlberg noted that the result might be biased, since the survey of producer opinions was done during the BSE period in Canada.
The reports were prepared for the Manitoba Rural Adaptation Council, or MRAC. Further funding was provided by the Canadian Wheat Board, the Co-operative Promotion Board of Manitoba, Credit Union Central of Manitoba and the U of M.
“I think we got the answers we were looking for,” said MRAC executive director Bob Hoffman, referring to the research findings.
It will be up to others, such as those in the co-operative community, to decide whether action should be taken to deal with issues raised in the report, he said. For now, it appears producers are more interested in other ways to gain more value from their commodities.
“I was hoping, having observed the successes of NGCs in the U.S., that we would be able to duplicate or emulate that in some fashion,” Hoffman said.
There are at least 100 new generation co-ops in the U.S., according to the U of M research. Minnesota and North Dakota are leaders in developing NGCs. By comparison, there were only 16 active NGCs in Canada as of May 2005. Carlberg said most of those gather product from their members and add value through collective marketing, rather than by processing raw commodities into products of higher value.
He and Turko also concluded that the wheat board is not a significant impediment to NGC development, despite criticisms to the contrary.
