The United Nations has declared 2012 “International Year of Co-operatives” to recognize the contribution of this business model to economic and social development. Co-operatives have been in Canada for over 100 years, with more than 9,000 co-operatives contributing to local and international economic development today.
The 2010 Canadian Co-operatives Secretariat annual report of Top 50 Non-Financial Co-operatives in Canada has agricultural co-operatives capturing the top four spots including Federated Co-operatives Limited (FCL) of Saskatchewan, two Quebec Co-ops, La Coop fédérée and Agropur, and United Farmers of Alberta Co-operative Ltd (UFA). These “Top 50” co-operatives generated $24.8 billion CDN in revenue, had 38,700 employees, represented 4.8 million members and managed $11 billion in assets.
Changing Landscape of Agricultural Co-operatives
In western Canada, agricultural co-operatives have a very long history. Agricultural retail co-operatives such as FCL are doing very well and financial co-operatives like credit unions are flourishing. However, the story is not so positive for prairie commodity grain co-operatives.
Dr. Murray Fulton, Professor, Johnson-Shoyama Graduate School of Public Policy at the University of Saskatchewan has been researching co-operatives for over 20 years. “On the prairies, agriculture co-operatives have unfortunately had a tough go of it over the past several years,” says Fulton. “Since 1995, western Canada has lost all of its grain co-operatives, plus a large dairy and a large chicken processing co-operative. The near future for producer grain loading facilities and independent producer terminals could also be difficult.”
The grain commodity industry lost the three big grain co-operatives, Saskatchewan Wheat Pool (SWP), Alberta and Manitoba Pools to private business. The grain industry continues to change with the recent removal of the Canadian Wheat Board and in March 2012, the takeover of Viterra by Glencore International of Switzerland.
“We have tried to determine the difference between successful retail co-operatives and the failed grain co-operatives,” explains Fulton. “In our research on SWP for example, the overconfidence by leadership and the failure of proper oversight by management were key factors, problems that can occur in both co-operatives and non-co-operatives, as well as government. These types of major failures happen because management either refuses to see the need to change or are not able to properly predict the cost of change.” Fulton published a paper in 2006 that includes lessons for co-operatives dealing with significant changes occurring in the economy and society that are still relevant today.
Fulton notes that FCL have had some challenges, but today are doing extremely well. “Unlike the grain co-operatives, retail co-operatives have always functioned in a more competitive environment,” says Fulton. “FCL has developed a strong reciprocal system where FCL investments have benefited local co-operatives, such as the investment in upgrading their fuel refinery, and FCL has benefited from local co-operative investments. They were able to capture something the grain co-operatives could not.”
New research is looking at farmer check-off organizations involved in research and development. Fulton is particularly interested in the decision making inside these collective organizations and what could help them seize the huge opportunities that are available.
“Like any industry, co-operatives also experience cycles, and for new emerging and specialty markets, or for organizations broadly referred to as social economy organizations (those providing needed services such as housing or elderly care) some sort of collective business arrangement or co-operative business structures can work well,” adds Fulton. “Across Canada, the US, China and in other parts of the world, positive things are happening. Some are co-operatives, others are not strictly co-operatives but all are doing some type of collective action that co-operatives are known for.”
Local Organic Food Co-operative Movement Grows in Ontario and Elsewhere
An area where collective action and co-operatives are expanding rapidly is in the local and organic food movement. Russ Christianson, Co-op Developer with the Ontario Co-operative Association completed a Baseline Market Research Study in 2010 “The State of Organic Food and Co-operatives”.
“In the past five years there has been an explosion of local food co-operatives in Ontario and other parts of Canada,” says Christianson. “Although the numbers aren’t officially tracked, there are almost four times as many today as in 2010 in Ontario, with at least 80 groups. And whether they are formal co-operative structures or not isn’t necessarily the most important thing, but it’s farmers working together. I believe those small family farms working together and doing some form of direct distribution to consumers or what they are calling ‘eaters’ is really the key.”
Farm income has declined over the past 30 or 40 years, with the percentage of the food dollar farmers are getting down to about 20 cents on the dollar today compared to 45 or 50 cents in the 70’s. “With these direct distribution co-operatives with eaters and producers, and sometimes others in the distribution chain, farmers are receiving about 60 cents on the dollar,” explains Christianson. “From a sustainability point of view, obviously the economics have to be there for rural communities and smaller sized farms to remain economically viable.”
Succession is another huge challenge facing the Canadian agriculture industry and other small businesses. Christianson believes co-operatives provide a very possible and positive solution to succession. Some farm families don’t have anyone prepared to take over the farm and there are lots of young people who would like to farm, many from urban areas. However they rarely have the capital or resources to take over a farm on their own.
“There are interesting ways to provide succession strategies using co-operative pooling of capital and skills, ability and knowledge through worker and multi-stakeholder co-operatives,” says Christianson. “One way or another people always find innovative and creative solutions by working together to accomplish something they couldn’t do on their own. I also think it would be very valuable for emerging local organic food co-ops to get together with established co-ops to share information and knowledge. They can always learn something from each other.” Watch for events across Canada to celebrate the International Year of Co-operatives.