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					               Canadian Agricultural Co-ops:
               Critical Success Factors in the
               21st Century
                  Daniel Côté
                  Murray Fulton and Julie Gibbings

                   Prepared for the Canadian Co-operative
Department
    Of             Association and le Conseil Canadien de la
Agricultural
Economics          Coopération
                                                                                     Profile of co-operatives
                                      Intensity of                                      Context diversity
                                   co-operative rules




               Values and legitimacy      +
                                                             A                   C
               Co-operative practices
               Democratic control              I                        IV

               User-owner
               Non-sharable reserve
               Surplus sharing             -                                     B


                                               II                       III
                          Non market                                                                 Intensity of
                                                         -                       +                   competitive
                         environment
                                  Co-operative rules                                                   forces

                                                                                     D
                                                    Demand solvency
Department                                          Intensity of market forces
    Of
                                                    Deregulation
Agricultural
Economics                                           Globalization
                                                                       Profile of co-operatives
                                     Intensity of                        Context diversity
                                  co-operative rules




                                          +        CUMA
                                                                   Agropur
                                                                   Appalaches
                                     VI       I               IV




                                          -                         Lactogal

                                              II           Irish dairy co-operatives
                                                               III
               Non-market world                                                            Intensity
                                                       -                               of market rules
                                              V
                                                                      ULN
Department
    Of
Agricultural
                                   Corporate rules
Economics
               Overview
                  Co-ops formed around a relatively
                   homogeneous group of farmers, often in
                   a common geographical area, with
                   common grievances and visions
                  These features have begun to erode at
                   the same time agriculture is becoming
Department
    Of
Agricultural
                   increasingly vertically integrated,
Economics
                   competitive & focused on R&D
               Recommendations

                  #1 – Regain Member Ownership and
                   Control
                  #2 – Increase Benefits of Membership
                  #3 – Cultivate Member Loyalty
                  #4 – Pay Attention to and Invest in
Department
    Of
Agricultural
                   Research
                   #5 – Co-operate with Retail Sector
Economics
               
               Recommendations

                  #6 – Document Best Practices in Co-ops
                  #7 – Share Ideas and Innovations
                  #8 – Sow the Ground for New Co-ops
                  #9 – Integrate Business Activities
                  #10 – Evaluate the Co-operative’s
Department
    Of
Agricultural
                   Strength
Economics
               Recommendations

                  #11 – Build Member Cohesion
                  #12 – Strengthen Democratic Structures
                  #13 – Educate Members and Managers
                  #14 – Government R&D and Trade
                   Support
Department
    Of
Agricultural
                  #15 – Government Partnerships in
Economics
                   Networking and Development
               Response and Adaptation
               Canadian Agricultural Co-operatives
               in the 21st Century



                  Murray Fulton and Julie Gibbings
                  Centre for the Study of Co-operatives,
Department
                   University of Saskatchewan
    Of
Agricultural
Economics
               Overview
                  Co-ops formed around a relatively
                   homogeneous group of farmers, often in
                   a common geographical area, with
                   common grievances and visions
                  These features have begun to erode at
                   the same time agriculture is becoming
Department
    Of
Agricultural
                   increasingly vertically integrated,
Economics
                   competitive & focused on R&D
               External Agricultural Environment


                                                   Co-op
                                                   Adaptation

                Internal Dynamics of Co-ops

Department
    Of
Agricultural
Economics
               Research Results

                  Based on set of case studies and a
                   review of the literature
                  Benefited from the experience of a
                   number of long-time observers of co-ops
                   – Brett Fairbairn and Mike Cook
Department
    Of
                  Thanks also to Brian Oleson and
Agricultural
Economics          Rochelle Smith
               Lessons

                  I – Structure Matters
                  II – Declining Member Commitment
                  III – Increasing Member Heterogeneity
                  IV – Capital Acquisition Linked to
                   Member Ownership
Department
    Of
Agricultural
                  V – Member Ownership and Control
Economics
               Lessons
                  VI – A Co-op is a Set of Relationships
                  VII – Adaptation and Failure
                  VIII – Understanding Adaptation
                  IX – Adaptation is Alive in Co-ops
                  X – Member and Manager Education
Department
    Of
Agricultural
                   Critical
Economics
               I - Structure Matters
                  Co-ops have traditionally had similar
                   characteristics to the environment of
                   which they are part. As the structure of
                   agriculture changes, so too do co-ops
                  While successful co-ops have adopted
                   some common structures, the most
Department
    Of             appropriate structures differ from co-op
Agricultural
Economics
                   to co-op
               Common Structures

                  For large co-ops, concentration on a
                   core set of activities is critical to success
                  For smaller co-ops, success is linked to
                   undertaking a set of activities that are
                   closely linked or are narrowly focused
Department
    Of
                  Co-ops tend to be more successful the
Agricultural
Economics          more homogeneous is the membership
               Common Structures
                  Co-ops tend to be more successful the
                   more they provide immediate and
                   significant benefits to their members
                  Co-ops are increasingly using delivery
                   rights and closed membership to raise
                   capital and to ensure a constant supply
Department
    Of
Agricultural
                  These features are correlated with
Economics
                   greater member ownership & control
               Emergence of New Structures

                  Super-locals - E.g., Naicam Co-op
                  New model emerging – the umbrella or
                   multiple string co-op. Combines
                   elements of NGCs and networks
                      CUMA machinery co-ops
Department
    Of
                      United Country Brands
Agricultural
Economics             MD Foods
Department
    Of
Agricultural
Economics      Umbrella Structure
               II – Declining Member
               Commitment

                  Waning member commitment is a result
                   of a perceived lack of connection
                   between member success and co-
                   operative success, combined with the
                   inability of the co-operative to
Department
                   differentiate itself from other
    Of
Agricultural
Economics
                   organizational or business forms
               Co-op Differentiation
                  Co-op ideology less important
                  Ownership and control can be important
                  Other differentiating features
                      Ability for farmers to share in profits
                      Ability to network with other farmers
                      Common goal - often economic
Department
    Of
Agricultural
                  Strong sense of co-op identity if
Economics
                   differentiation linked to co-op principles
               III – Increasing Member
               Heterogeneity

                  Member heterogeneity increasing
                  Leads to a loss of a sense of ownership
                   and a fall in member commitment
                  In response, co-ops are focusing their
                   activities and/or are adopting an
Department
    Of
                   umbrella or multiple string structure
Agricultural
Economics
                  Geographical location less important
               IV – Capital Acquisition Linked
               to Member Ownership
                  Capital acquisition is a problem when
                   member ownership is low, co-op
                   ideology is waning, member diversity is
                   high, membership is aging, and
                   modernization is needed
                  Tackling capital acquisition problem
Department
    Of
Agricultural
                   directly, without tackling other issues, is
Economics
                   usually not successful
               V – Member Ownership and
               Control
                  No one factor explains ownership
                  Values and ideology
                  Member education
                  The sense of common goals among
Department
    Of
                   members (which is influenced by
Agricultural
Economics          member heterogeneity)
               Factors Influencing Member
               Ownership and Control
                  The structure of the co-op (e.g., tradable
                   delivery rights, closed or open
                   membership, umbrella structure)
                  The size of and the nature of the
                   activities carried out by the co-op
Department
    Of
                  The type of management and
Agricultural
Economics          governance regimes in place.
               VI – A Co-op is a Set of
               Relationships

                  How do we view a co-op?
                  As a fixed structure; as it would be drawn
                   on a organizational chart?
                  As a fluid structure; as a set of
                   relationships?
Department
    Of
Agricultural
Economics
Department
    Of
Agricultural
Economics
               A Co-op is a Set of
               Relationships

                  The strength of a co-op depends on the
                   strength of the relationships among
                   members, among the activities of the co-
                   op, and between the members and the
                   activities
Department        When these relationships change, the
    Of
Agricultural
Economics
                   co-operative must adapt
               Activities




               A Co-op
               is a Set of
               Relationships
Department
    Of
Agricultural
Economics                   Members
               Traditional Agriculture       “New” Agriculture
                  Commodities; spot            Differentiated products;
                   markets                       negotiation, contracts
                  Farms carry out many         Specialization; separation
                   activities                    of production stages
                  Product chain stages         Focus on a system; stages
                   seen as independent           seen as interdependent
                  Price and production         Relationship risk; food
                   risk                          safety and health
                  Concerns about               Concerns about access to
                   monopoly pricing              information
Department        Money and assets             Information as prime
    Of
Agricultural       prime source of control       source of control
Economics
                                             Source: Adapted from Boehlje
               Traditional Agriculture       Traditional Co-ops
                  Commodities; spot            Sell generic products to
                   markets                       members on demand
                  Farms carry out many         Multi-purpose co-ops
                   activities                    serving diverse members
                  Product chain stages         Co-ops concentrated near
                   seen as independent           farm level
                  Price and production         Major supporters of price
                   risk                          supports
                  Concerns about               “Competitive yardstick”;
                   monopoly pricing              co-ops source of power
                  Money and assets             Investment in physical
Department
    Of             prime source of control       assets; little investment in
Agricultural
Economics                                        intellectual capital
               “New” Agriculture                “New” Co-ops
                  Negotiation; coordination;      Contractual relationship with
                   contracts                        members
                  Specialization; separation      Greater specialization; focus
                   of production stages             on niche products
                  Focus on a system; stages       Device for farmers to network
                   seen as interdependent           with rest of system
                  Relationship risk; food
                   safety and health               Vehicle for farmers to avoid
                                                    relationship risk
                  Concerns about access to
                   information                     More attention paid to
Department        Information as prime             providing farmers with
    Of
Agricultural       source of control                information and using the
Economics                                           information farmers possess
               VII – Adaptation and Failure

                  Adaptation is a matter of “reproduction”
                   and not “preservation”
                  To reproduce the values important to
                   people, should not try to “preserve” the
                   co-op, but rather allow the co-op to adapt
Department         so that it can help reproduce the values
    Of
Agricultural
Economics
               Adaptation and Failure

                  Preservation implies the avoidance of
                   failure; reproduction implies acceptance
                  Failure as a signal that some things are
                   not working; it is a way of indicating
                   which ideas work and which do not
Department
    Of
                  Failure and innovation – Type I versus
Agricultural
Economics          Type II errors
               VIII – The Adaptation Process

                  Co-ops adapt because key individuals –
                   innovators – push for change
                  Adaptation is always local and unique
                  Most co-ops wait to see which
                   innovations are successful; many
Department
    Of
                   innovations will fail
Agricultural
Economics
               The Adaptation Process: The
               Importance of New Co-ops

                  New co-ops are a very important form of
                   innovation
                  New co-ops face specific problems and
                   must be encouraged with development
                   assistance
Department
    Of
                  Co-ops that do adapt can face difficulties
Agricultural
Economics
               IX – Adaptation is Alive and
               Well in Co-ops
                  NGCs are a good example of the
                   adaptation process at work
                      First NGC was successful at addressing a
                       problem; model was then adopted and
                       modified by other groups
                  New model emerging – the umbrella or
Department
    Of             multiple string co-op.
Agricultural
Economics
                  Super-locals - e.g., Naicam Co-op
               What Co-ops Can Do To
               Encourage Adaptation
                  Promote the relationship view of a co-op
                  Recognize that adaptation is always
                   local and cannot be planned from above
                  Encourage innovation – Local co-ops
                   need autonomy and security
Department
    Of
                  Accept failure – it is vitally important
Agricultural
Economics
                  Promote research and education
               X – Member and Manager
               Education Critical

                  Education has always been important in
                   co-ops and is increasingly so
                  Education helps members see the
                   connection between their self-interest
                   and the interest of the group
Department
    Of
                  Creates a sense of ownership & control
Agricultural
Economics
                  Encourages innovation & adaptation

				
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