University of Wisconsin Center for Cooperatives
Rural Cooperatives, May/June 1999, p. 2.
Published by the Rural Business and Cooperative Development Service
The 11th Hour for Structural Change
By Jill Long Thompson
We recently reported that so much dramatic structural change had occurred in the cooperative community in 1998 that it was not likely to soon be repeated. Yet— just halfway through 1999—we have already seen dramatic proposals for structural changes of equal or greater magnitude. Cooperative leaders are being challenged to respond to the unprecedented wave of consolidation in the food sector and the "corporate-ization" process which, if unchecked, could well displace conventional, family-farm producers or leave them as piece-wage growers who are paid by huge corporations.
This would be a tremendous loss for the nation and especially for our rural people and communities. When rural people lose control of their resources, more dollars are siphoned away from rural towns to corporate headquarters.
Cooperatives are a natural answer to the challenge of maintaining a dispersed ownership of our nation's precious agricultural resources. Cooperatives allow farmer-entrepreneurs to join together to increase their marketing and purchasing power in organizations that provide them market access. Co-ops allow rural farmers, craft-makers and others to practice self-determination through democratically controlled businesses.
As we prove with every issue of this publication, the cooperative business structure is certainly not outdated. Indeed, cooperatives are on the cutting edge of necessary change. But for many livestock and commodity sectors, we have reached the eleventh hour. Change must be forthcoming, or the opportunity to maintain producer control of some sectors of the economy may be lost forever.
Within the livestock industry, only the dairy sector has made extensive use of cooperatives to provide producers entry into certain markets and a voice that is heard in industry circles and in the halls of Congress. The Prairie Farms Dairy article in this issue (page 16) shows that it is possible for a farmer-owned cooperative to perform well in an industry typified by intense competition and by low profit margins.
The beef, pork and sheep subsectors have been slow to embrace cooperative marketing as a strategy that could bring them closer to the consuming public and generate the extra income that would result. As shown in the article on the hog industry (page 8), there are numerous ongoing attempts to build on existing cooperative pork marketing channels and to create new co-op business structures.
These are positive steps that address the industry's core problems. Others are being taken. In fact, some far-reaching proposals are being discussed that would bring further producer ownership and control of the livestock system closer to reality.
Recent proposals to merge Cenex/Harvest States and Farmland Industries, and the purchase of Terra Industries' crop nutrient and protectant distribution system by the Cenex/Land O'Lakes Agronomy Co., are just two examples of cooperative restructuring on the horizon. Each portends a re-visit to existing cooperative institutional relationships, including ownership in inter-regional cooperatives and joint ventures.
The Page from the Past feature (page 31 ) in this issue is also timely, describing the acquisition of Welch Foods by the National Grape Cooperative. This presents another approach to establishing a strong market presence for a farmer-owned cooperative. Similar conversions of investor-owned firms to cooperatives have been achieved by other co-ops.
In an era of rapid consolidation and deep public policy concerns about concentration in the food industry, cooperative ownership represents a choice that the farm sector needs to give further consideration and to actively pursue. But time is running out in some sectors.
Jill Long Thompson
-Under Secretary, USDA Rural Development