University of Wisconsin Center for Cooperatives
Year in Cooperation: A Cooperative Development Magazine
Published by the Minnesota Association of Cooperatives
Spring 1996 -- Vol. 2 No. 2
Taking the Pulse of Agriculture
By Lee Egerstrom, St. Paul Pioneer Press
On both sides of the Atlantic Ocean, directors and managers of
farmer-owned cooperative businesses are wrestling with strategies to gain niches or full-fledged
market power within the rapidly changing world food system.
The changes may be more evident in Europe where public policies are being
radically altered and where patterns of
trade give farmers opportunities to export higher-valued food products but not the commodities
produced and exported from American farms.
Regardless how obvious or urgent individual farmers and their cooperatives may see change, the
emergence of a truly international food system is reshaping markets and defining farm income
opportunities for decades to come.
Recognizing this, the Dutch completed
a year-long national study of the future of their agriculture during 1995. At year's end, the
Campina Melkunie dairy cooperative sponsored the publishing of a book in which U.S. and
European economists, business professors and trade observers comment
on the causes of change and suggest paths cooperatives may take to survive and growth within
the new food system.
The 1996 Regional Directors
Workshop in Minnesota picked up on
the Dutch book's themes and focused its conference on "Change and Growth in the
Excerpts from the book follow, but a quick and generalized look at
both Dutch and American agriculture helps explain why change is being discussed within co-ops
and on farms on both sides of the Atlantic.
For Dutch agriculture, change currently underway brings the worst of all worlds. It does,
however, have one of the world's strongest cooperative structures to guide it into the future.
On the one hand, Dutch agriculture must overcome several negatives and chief among them are
restraints on production. The European Union seeks to control surpluses of major farm
commodities by placing "caps," or quotas, on individual farms. While Dutch farmers can buy
quota rights to produce more milk or other commodities from neighbors, expansion comes with
many costs. They have high production costs resulting from scarce land resources, sprawling
population pressures and rigid environmental regulations that
are designed to protect water and nearby populations.
Dutch farmers are also facing farm income restraints. Farm income support programs from
Europe's Common Agriculture Policy (CAP) are being lowered, just as farm price supports are
coming down and being phased out in the United States and Canada. This means farm prices are
being lowered by public policy at the same time production is being limited.
But there are positives -- strengths -- in place to help Dutch farmers adjust to change and
overcome their production and price squeeze. Cooperatives already handle from 70 percent to 99
percent of all farm and garden commodities. Most large cooperatives, called "regionals" by
Americans and "nationals" by the Dutch, already have international experience and can expand
beyond national and European Union markets. Expansion of the European
Union to more nations, new markets in Eastern Europe, and more liberal trade and investment
policies worldwide are opening opportunities for Dutch cooperatives.
Through this expansion, Dutch cooperatives can support members' farm income growth both
internally and externally.
They can expand with more value-added processing and manufacturing at
and by international expansion to expatriate export earnings and net income from foreign
subsidiaries and joint ventures.
The American View
The condition of American agriculture isn't substantially different, although American farmers
may not share the
Dutch farmers' sense of urgency.
Tight global supplies of grain and oilseeds, and current trade advantages from the exchange rate
values of U.S. and Canadian dollars, may well support strong North American exports for the
next two to four years. In turn, higher nominal prices for farm commodities will squeeze North
American livestock and poultry profits and cause more conversions of animal farms into crop
Current farm program proposals in the U.S. Congress may actually encourage this diversion -- at
least for the next seven years while income support mechanisms are phased out. The danger in this
development means farmers -- individually or cooperative -- avoiding animal agriculture and the
first level of value-added production that can be done in rural communities. This leaves the
historically more profitable and socially beneficial side of agriculture to top-down, integrated
agribusiness companies while the farm economy becomes more dependent on world commodity
At the same time, another export grain boom may divert attention from the needs for cooperatives
to expand business and structures, or members may hold back their boards and managers from
making timely adjustments to the changing world
But American Agriculture Has Strengths, Too
The North American food industry -- including cooperatives -- has made most of the restructuring
moves, has redeployed assets and "downsized," to use the headline-grabbing business buzzwords
now sweeping through the consumer products and technology manufacturing industries. Dramatic
change of food and agribusiness continues, but it is focused at seizing opportunities in the
expanding global market.
These changes are opening doors for cooperatives -- regional, local and New Generation models
-- to expand into more value-added enterprises, to expand and diversify services, to form creative
joint ventures and strategic alliances with successful marketing companies, to form subsidiaries
with or without other partners, and to expand internationally.
There is an additional strength that needs to be mentioned: opportunities
for change, growth and expansion are occurring at a time when most regional cooperatives and
financial institutions are on sound
Themes of Change... and Cooperative Market Power
That is the setting, on both sides of the Atlantic, prompting Dutch and American farmers and
cooperatives to explore change and options. And it caused Campina Melkunie to sponsor the
research, writing and publishing of International Market Power of Cooperatives,
which was published in the Dutch language on Dec. 1. An English language edition of the book is
planned for release during 1996.
The book was written and edited by Professor Gert van Dijk, Dutch journalist Pieter Bos and
American journalist Lee Egerstrom. Each chapter profiles the thoughts and observations of
different economists, business professors or trade observers.
Click to the next page for synopsis of a few of the chapters included in
the book, International Market Power of Cooperatives.
Lee Egerstrom is a business writer covering food companies and agriculture for the
St. Paul Pioneer Press. He is author of Make No Small Plans: A Cooperative Revival for
America, which was published in. January, 1995, and co-author of International
Market Power of
Cooperatives, which was published in the Netherlands in December.
This material has been reproduced in electronic format with the permission of Year in