EDMONTON – Farmers who want to become involved in new generation
co-operatives must ask tough questions, says the man who has been the
driving force behind many of the new style co-ops in the United States.
In any new generation co-op, investors must take a serious look at the
people leading the drive, said Bill Patrie of Mandan, North Dakota.
“Are they credible? Are they decent people? Do they pay their bills?”
The co-ops need good leaders. The people wanting to lead the charge
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aren’t necessarily the best leaders, Patrie told a group of farmers and
bureaucrats at a conference on new generation co-ops.
“Sometimes they are led by people more ambitious than they are honest.
You must say to yourself ‘do I want to get in business with that person
on that board of directors?’,” said Patrie who helped organize the
Dakota Growers Pasta Co.
“You’re going to need leaders who don’t have huge egos.”
In the U.S., changes to legislation allowed the development of new
generation co-ops, a hybrid between traditional co-ops and corporations
that assist producers to own an agriculture business that offers a way
to add value to their raw product. Saskatchewan passed legislation in
1999 and Alberta followed in 2002.
Four new generation co-ops have been established in Alberta since the
act changed in April: Westlock Terminal, a farmer-owned high throughput
grain terminal; Alberta Egg Producers Co-op formed an egg processing
co-op; AWAPCO, or Alberta Wapiti Products Co-op, an elk product
marketing co-op; and Alta. Value Chain Co-op, a bison marketer.
Jeff Orchard, an adviser with Meyers Norris Penny who is helping the
Alberta Egg Producers form a new generation co-op, said producers
wanted a way to add value to eggs. They formed a joint venture with
VanderPol Eggs of Abbotsford, B.C., to create more value out of liquid
and dry eggs.
“Alberta Egg Producers simply wanted to move up the value chain. They
wanted to go into processing,” said Orchard.
Patrie said there are several common mistakes that are repeated in new
generation co-ops.
n Make sure there is an accounting system that helps the board of
directors know where the company is. The directors must have a good
handle on its finances.
- Many start-up companies don’t conduct a thorough manager’s search.
Nothing indicates success like past managerial experience. Companies
need a competent person at the head, not just an enthusiastic one.
- There is a temptation to lie to yourself as a co-op member after
seeing the results of a negative feasibility study. Too often if the
feasibility comes back negative, the project goes forward anyway. If
your business plan says you need 40 percent equity and you only have 20
percent, don’t start the project.
- After a new project begins, the board of directors must back off
management decisions and become policy makers.
- Establish clear personnel policies. Make sure the legal and
accounting advice are independent and the advisers don’t have a vested
interest in the project.
- Don’t serve on the board if you don’t have time. New generation
co-ops need people on the board who want that business to survive, who
think about it all the time and want to make it work.
When Alberta producers are considering what value added business would
work, Patrie said they need to ask questions about the advantage to
cattle producers of owning their own processing and marketing facility.
Producers in North Dakota asked a similar question about durum
processing. That question led to Dakota Pasta Growers Co., now the
third largest pasta processor in the U.S.
