Co-ops are one of our shopping options -- Co-op Marketplace grocery stores, credit unions, Co-op Gas Bars and C-stores, Mountain Equipment Co-op -- and they are an important part of our economy. Co-ops were also once a major player in western Canada's grain handling industry. At the turn of the 21^st century, however, something changed. The grain handling co-ops across the Prairies - Saskatchewan Wheat Pool (SWP), Alberta Wheat Pool, Manitoba Pool Elevators, United Grain Growers - were forced to merge or to restructure into investor-owned firms (IOFs) to salvage their existence. The grain handling co-ops were not alone. Other agricultural co-ops across western Canada (e.g., Dairyworld, Lilydale) and the United States (e.g., Rice Growers Association, Tri Valley Growers, AgWay) also faced bankruptcy or converted to investor-owned firms during the same timeframe. The underlying financial pressures included mounting debt loads, fierce new competition, the need to access capital, the need to reduce member production and price risk, the need to grant members access to their equity and the need to realize the co-op's market value.

With several large agriculture co-ops facing the same issues at roughly the same timeframe, one has to ask -- are these isolated events or are they part of some larger pattern? What can be learned from these events that can be useful to other co-ops? To answer these questions the KIS project approached researchers throughout Canada and the United States to build upon their existing research on restructured agricultural co-operatives. The result is a book titled Co-operative Conversions, Failures and Restructurings featuring thirteen research cases by twenty-two researchers.

Aggregating the stories of thirteen agricultural co-ops provides a number of insights into the strengths and weaknesses of the co-operative business structure. First, some of the conversions were simply due to poor management, or to excessive control by management, problems that can affect all business enterprises. A case in point is the Saskatchewan Wheat Pool (watch the blog site for an upcoming entry on SWP).

Many of the co-operatives were affected by classic co-op problems, including:

·            lack of capital -- co-ops often cannot not raise, from their members, the funds required to expand operations

·            property right problems -- without clear ownership, co-op members do not have an incentive to provide capital or to exercise control

·            portfolio problems -- members were reluctant to put all their investment capital in their co-op, particularly when its fortunes rise and fall with that of their farm operation.

Another key driver for the structural change in many of the co-operatives was the so-called "industrialization of agriculture". The need to move their business further away from the farm gate and into processing and marketing requires capital that co-ops typically do not have; the transition to an IOF means access to capital that can be used for growth and expansion. As some of the co-ops found out (a good example is SWP), gaining access to capital can create another problem -- overspending and unmanageable debt.

In other instances, the role of the agricultural co-op appears to be no longer required. Co-ops often formed initially to provide competitive pressure in strongly oligopolistic markets. Over time, however, markets have evolved with changes in technology, consumer preferences, and policy reform. In this evolution, some agricultural co-ops became just another player in an increasingly competitive world market competing for member patronage (market share). As the co-ops took on new strategies for growth and expansion, they reached a point where maximizing earnings replaced co-op principles and the co-op began to operate like an IOF.

Adding to the dynamics of market evolution is the evolution of the individuals that own and operate the co-ops. While market forces and co-op structure certainly played a large role in the massive restructurings that took place, the members also had an impact. In some cases it was their commitment to the co-op that lapsed, while in other cases the members simply failed to carry out due diligence. In other cases it appears that the members -- and the boards they elected -- may not have had the tools and perspective to oversee the increasingly complex and capital intensive operations that were increasingly becoming the norm.

To read the ebook Cooperative Conversions, Failures and Restructurings or to purchase a paperback copy of the book, visit: http://www.kis.usask.ca/CoopBook.html

This blog entry was authored by Murray Fulton and Kathy Larson. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca

I was recently invited to participate in a foresight workshop sponsored by Agriculture and Agri-Food Canada (AAFC). The workshop was the third in a series of events designed to explore future paths of climate change impacts and agricultural adaptation in Canada.

I recently was invited to be a respondent at the National Agricultural Biotechnology Council 21^st Annual Conference (NABC 21) in Saskatoon. The overall theme of the conference was Adapting Agriculture to Climate Change. The three presenters in the session I was involved in shared their perspectives on the roles of ethics, policy and carbon markets in agriculture's adaptation to climate change.

Policy decisions in agriculture often beget other changes - be they in behaviour, in technology and/or in the way that things are organized and decisions are made. The Danish sugar industry is a good case in point.

Australia has a salinity problem - scientists there predict that one third of agricultural land in Western Australia will be affected by dry land salinity over the next century; currently the figure is about 10 percent. Australia has spent billions of dollars on their salinity problem over the last 20 years, yet progress remains slow (for a brief analysis of salinity programs, see Pannell and Ridley 2008). One reason (among many) for the lack of success was that the funds were spread thinly and non-strategically among farmers. Although the allocations were socially and politically attractive, they were not technically and economically efficient. In addition, there was a presumption that farmers would adopt land management options that could address salinity regardless of how those practices might affect their bottom line.

It is interesting to see how the current financial crisis is changing the way that we think about the world. This point was driven home for me when I had the opportunity to attend a symposium last week in Berkeley, CA entitled "Causes and Consequences of the Food Price Crisis" (click here for details). Sponsored by the Giannini Foundation, the symposium featured faculty from the agricultural and resource economics departments at the University of California, Berkeley and the University of California, Davis.

KIS has partnered with the Johnson-Shoyama Graduate School of Public Policy to host a one-day symposium on October 20th that will explore the current state of economic analysis in policy formation. Questions that will be addressed at this symposium include: Are economists and economic analysis being used in the policy process? If so, how? If not, why not? Are economists being trained in the correct manner to be effective in policy decision-making? What is the best way to use economics in policy creation? The symposium will be held at TCU Place in Saskatoon, SK.

I recently had the opportunity to consider what has made public policy on rural credit and agricultural extension in Canada effective over the years. This opportunity came when I participated in a seminar on agricultural technology extension and rural financing in Beijing and had the chance to compare policies in these two areas between Canada and China. Here are some of my observations and thoughts.