Securing the future of cooperatives Canterbury Farming, Canterbury/West Coast by Damien OConnor 01 Nov 2014 OConnor Comments Agriculture in New Zealand has been developed around the co-operative structures formed by farmers to ensure their viability. The KPMG agenda report released recently referred to cooperatives as `the original social enterprises. The participating shareholder owners were concerned with the viability of not only their farming operations but also understood the to their communities and the industries in which they were stakeholders. Those cooperative structures have evolved and law changes have offered security and flexibility for cooperatives in the modern international environment. Tax advantages have also incentivised individual business people in many areas of our economy to come together and work under cooperative structures. For the most part they have been successful, with some exceedingly so such as the dairy industry companies that grew and merged to eventually form the basis of Fonterra our single largest international and cooperative company. Others such as Alliance, Silver Fern Farms and Ravensdown have grown to serve the needs of their farmer shareholder owners. Commitment to these companies has varied depending on the exposure to risk by the participating shareholders. Dairy farmers have milk which is a liability after 48 hours and therefore need secure structures and systems to process their milk. Meat and wool farmers have a product that has longer life and value and therefore have reduced risk from delayed processing. The cultures that have evolved from these different risk profiles have led to variable levels of loyalty to our agribusiness cooperatives. In fact meat cooperatives have been known to offer greater incentives to the disloyal suppliers over their loyal and committed shareholders. These perverse outcomes have created disloyalty, distrust, and ultimately uncertainty for the meat company supply chain undermining the development of consistent and efficient processing systems. The dairy industry historically has been disciplined by the obligation to take all milk supplied, geographical dependence and consistent supply to a single company. With the deregulation of the dairy industry and the emergence of options for dairy farmers to supply different companies, pressure is developing on milk processing companies to ensure a loyal and consistent supply of milk. The ability to supply noncooperative companies without the need for share equity, the ability to supply Fonterra under contract without fully paid equity, and the emergence of fixed price contracts are all new systems of supply and reward for New Zealand dairy farmers. The issue of commitment and loyalty, or lack of, and processing, will be a challenge that cooperative dairy companies will need to face into the future.
Posted on: Thu, 27 Nov 2014 01:04:08 +0000
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