To survive, traditional co-ops must focus their activities and forge stronger relationships with the members, says the head of agricultural economics at the University of Saskatchewan.
“Co-ops, like many organizations these days, need to be thinking very much about innovation and adaptation,” said Murray Fulton at the U of S.
His research into adaptation of agricultural co-operatives was the focus of a seminar of the Canadian Co-operative Association in Saskatoon Nov. 27.
Fulton said many co-ops are struggling as they try to adapt to concentrated competitors and markets.
Read Also
Agriculture ministers agree to AgriStability changes
federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
Traditional co-ops that aren’t focused “on a set of core activities that are highly integrated” haven’t been successful.
“Large co-ops appear to be successful if they’re able to focus their activities,” said Fulton.
He said it’s important for each member of a co-op to understand the benefits he or she receives.
Co-ops also are more successful if the members have similar interests and goals.
For example, if one farmer is growing pulse crops and the others grain, it is hard to bring them together under one co-operative.
In response, Fulton suggested co-ops look at different structures, like an umbrella model or a new generation co-op.
The umbrella model allows a larger co-op to operate smaller departments that concentrate on “specific activities, while at the same time allowing common services to be shared.” For example, a general co-op could have a livestock component that suits a rancher-member without his needing to understand how other components benefit him in the long run.
“So they came up with this umbrella approach to be able to, in part, give that individual and each member a better sense of control and ownership of a particular element of the co-op that’s important to them.”
He also said that forming new co-ops is critical “because they form this pool of new ideas that people can pick up and adapt.”
As new co-ops are organized, many are using the new generation model. Unlike general membership co-ops, the new generation co-ops, or NGCs, have tradable delivery rights and limited memberships. Producers buy a membership equity position in return for the right to deliver their raw product to the co-op’s processing plant.
This model has been successful in the United States, where it has offered solutions to farm and rural economic problems.
“The development of the NGC American Crystal proved to be successful at addressing the problems facing sugar beet farmers,” said Fulton in his summary.
The Saskatchewan government has passed legislation to enable the development of NGCs. The Manitoba provincial government has produced a guidebook about co-ops and their structures.
“In new generation co-ops, your interest in the co-op isn’t only for it to provide a home for what you’re producing, but it also processes and sells it for you. And then you get a share of the manufacturing and marketing profits, as well as pretty much market price for your raw products when you deliver it,” said David Kerr, a consultant with the Manitoba government’s co-operative development services.
A producer might grow grain but end up selling pasta in a new generation model, he said. The goal is to move up the food chain and take advantage of the potential profits in manufacturing and marketing.
A traditional co-op always has trouble raising capital. A new generation co-op solves this by tying investment to the right to deliver to the plant, said Kerr.
Jake Kasdorf, president of the Egg Producers Co-op Ltd. in Winnipeg, which used the new generation model, said he likes this type because the members have the same interests.
“A new generation co-op’s shareholders are much more homogenous. In other words, we’re all egg producers and it’s those egg producers that want to be in it,” said Kasdorf.
Fulton said change is inevitable whether traditional co-ops adopt a new generation model or try to change within.
“Some will try and change and it won’t work. Some of them will try and move too fast,” said Fulton. But adaptation is necessary.
