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 Global Market."

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 home 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 farms.

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 prices.

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 food system.

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 their cooperative financial institutions are on sound financial footing.

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 Rural 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 Cooperation.

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