Where is the value for the next generation when it comes to the cooperative system?
Carl Dickinson, CEO of Central Valley Ag Cooperative, looks ahead 5-10 years.
Cooperatives have been around for a long time. Most have been successful. This long-term success sometimes causes people to ask if they have run their course, or more importantly to ask what value cooperatives will bring in the future.
To answer this question, it is important to remember why cooperatives were formed. Cooperatives were formed in agriculture primarily because farmers were being taken advantage of. Individually, a farmer does not have a lot of power in the marketplace either to purchase their inputs or to sell what they produced. This has not changed. Even though we have fewer and larger farmers, as a general rule they still do not have very much marketplace presence as individuals. Therefore, it is to their advantage to work together, to win together. A secondary reason that cooperatives were formed was in many cases there was not a good enough return on investment for private investor-based business to develop the business. If you look at rural electric cooperative, rural water districts, or rural telephone, they are great examples where it takes a large capital investment in assets to serve a market. In many rural areas there just are not enough customers to justify the investment. So, the members put up the capital to serve themselves.
By understanding the reason we have cooperatives, you can see areas in which co-ops have the opportunity to add value to the next generation.
INPUT ACCESS. Consolidation in the fertilizer, seed, chemical and feed industry continues. Large private investor companies produce most of the products we need to grow a crop. To get access to what they produce, farmers will need to work through cooperative to keep a seat at the table.
GRAIN MARKET ACCESS. The same as on the supply side, the grain supply chain is and will continue to consolidate. Additionally, multi-national grain companies are exiting the country elevator business due to poor returns. It will be imperative that farmer-owned cooperatives continue to invest in facilities, so their members have the ability to sell their crop and have access to profitable markets.
TECHNOLOGY. Technology is moving at dizzying pace. Similar to assets, working together to invest in or create technology and spreading those costs across more members simply makes sense. Coupled with the risk of innovative technologies, not working it also reduces risk.
DATA COLLECTION, STORAGE AND PROTECTION. This is an important value that cooperatives can bring to their members. Who are you going to trust your data to? An
investor-based business that traditionally has used data to gain an advantage in the marketplace, or a member-owned cooperative whose only goal is to serve its membership. The answer is apparent.
LABOR/SUBJECT MATTER EXPERTS. Two issues, but they are wrapped up to together. It is a well-known fact that farms continue to consolidate. Few and larger. This reduces the population in rural areas. Making less people available to get the work done. A cooperative works as an extension of the farm providing services, thus reducing the need for more labor on the farm. In the same way, cooperatives can employ subject matter experts in areas like agronomy, nutrition, technology, and IT to name a few. They can then spread the costs over their membership versus individual members trying to employ their own.
PRODUCING FOOD. Cooperatives are in a unique position to bring farmers together using all the advantages listed above to help their members get a bigger share of the food dollar. As technology allows supply chains to consolidate, cooperatives will help their members grow the highest quality, least expensive, and safest food.
Cooperatives must continue to evolve if they are going to continue to add more value than cost. They will need to invest in people, assets, and technology. They must find new and different markets for their members. The cooperative business model has been successful for over one hundred years and I expect it will continue to be successful in adding value to its membership.