Embrace farmer co-ops: RIRDC

05 Aug, 2015 02:00 AM
In Australia's deregulated marketplace farmers are invariably competing with each other

MID-sized farming enterprises frustrated by their diminishing marketing clout and the effort required to chase a fair price for their crops or livestock should look to co-operatives to help achieve their goals.

Co-ops formed specifically to bargain with buyers could provide greater peace of mind, more marketing efficiency and more reliable farmgate returns from the value chain says a study released today by the Rural Industries Research and Development Corporation (RIRDC).

Co-author and Bond University competition lecturer, Professor William van Caenegem noted regional or national farmer co-ops were a strong force in the North American, Europe and New Zealand farm sector - and not just as traditional processors or rural supplies groups.

In Australia, however, family farms typically struggled to match the scale or skills of the buyers they negotiated with, or those of rival corporate-sized farm enterprises.

Professor van Caenegem said in Australia's deregulated marketplace farmers were invariably competing with each other rather than pooling their resources.

They tended to have, strangely, abandoned the advantages of a co-operative culture and collective bargaining tactics which existed across much of the industry last century.

He said co-ops could flexibly service agriculture in any way farmers needed them to work, not just in the traditional manufacturing roles once widely common to the dairy, sugar or horticulture processing sectors.

Benefits of collective bargaining

Medium-sized farms stood to benefit from a return to more collaborative bargaining groups organised as co-operatives which would by-pass the Australian Competition and Consumer Commission's (ACCC) need for special consent to negotiate deals directly with buyers.

Such farmer groups would be better placed to employ professional marketing help, and better educate members on how best to unify their negotiations with commodity traders, retailers, and processors.

Retailers and processors would also benefit from the assurance of consistent quality and reliability of supply which producers working together could guarantee.

The RIRDC's report on collective bargaining is set to help guide a pilot programme to boost farmer competitiveness in the marketplace - a priority flagged in the federal government's Agricultural Competitiveness White Paper.

The RIRDC pilot will be designed to assist farmers with information and materials on co-ops, collective bargaining and innovative business models which may lift primary producer productivity.

Professor van Caenegem said some new co-ops and collective bargaining groups already represented regional producer groups in marketing talks with supermarkets, exporters and processors, notably in the dairy and fruit sectors.

More broadacre enterprises such as graingrowers or lamb producers could improve their bargaining firepower on a regional, or larger, co-op scale, too.

"We should have a close look at how modern co-ops operate overseas," he said.

"The US has a lot of big and competitive agricultural players, and yet it also has a lot of co-operatives who hold their ground in the marketplace - in some cases are very big players in their own right.

"NZ has some very successful agricultural export commodity co-operatives, particularly in its horticultural and dairy industries, which have been helped by flexible government legislation."

While Australian farmers were competitive business operators, he said many mid-sized businesses were disillusioned with their returns and the time and effort required to achieve what appeared to be "a declining percentage of returns from the commodity value chain".

Although most of Australia's agricultural output came from the top 25pc of farms, there was a "real untapped opportunity for medium-sized farms to collaborate and increase the importance of their contribution to the industry".

The University of South Australia's Dr Jen Cleary, who also co-authored the report noted particular forms of collective bargaining may work better in particular industries and regions.

There was no one-size-fits-all formula.

Professor van Caenegem, an intellectual property and competition law specialist was also involved in a RIRDC study into helping farmer returns by marketing the provenance of Australian food.

He pointed to potential advantages to regional development from legislating and protecting "geographical indications" for food and beverages originating from specific regional backgrounds.

Also released this week is research supporting farm productivity through smarter decision making, drawing on insights into some of Australia's most effective farmers, as nominated by industry peers.

It found regardless of a farm's size, information, planning and family were common priorities for the successful farmers studied, as was aligning growth strategies to business goals and improving financial literacy.

Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media
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Jock Munro
5/08/2015 4:37:48 AM

At long last the wheel is turning after a prolonged period of farmers seeing their industries deregulated and their equity in the market place diminish. Unfortunately the urban elite zealots that run this Nation have wrecked havoc with many industry structures including the wheat single desk and it will take a real effort to reinstate them.
5/08/2015 6:39:51 AM

Prof van Caenegem will not progress up the tenured food chain of Australian agri politics with comments and findings like these. "In Australia's deregulated marketplace farmers are invariably competing against one another"..... What an understatement, there are a fair few of us out here that have been in the grains industry for more than a couple of years who could've providing that gem of information free of charge! Com'n D8 , sharpen your typing finger!
angry australian
5/08/2015 7:19:25 AM

Really they got paid for this! A clear case of research for the sake of research paid for by COMPULSORY levies.Firstly comparing us with a host of other nations including the US,NZ and Europe. Did the researchers compare the labour costs? What about the compliance costs? What about the costs of marketing from one of the most regulated and remote countries in the world? Co-ops have a shocking history in Australia, for every successful one how many have fallen over? Where are all the dairy co-ops that seemed to be in every town? Or fish,sugar co-ops? Want to rethink this fellas?
5/08/2015 7:41:27 AM

Should producers voluntarily associate or should it be mandated that they do so. Now which idea would jock support.
angry australian
5/08/2015 7:55:30 AM

Let me also add if co-ops were the way to go, why have most of the successful ones been "flogged off" by their original owners? Didn't Wesfarmers, Bega, Safcol,Warrnambool,MG and all start off as co-ops? When I see the likes of Prof.van Caenegem and Dr Cleary stump up there own funds to test and prove their theories in the business world I operate in. then I may take notice. But until that day occurs I will remain extremely cynical.
5/08/2015 8:11:59 AM

Well HELOOOO!. Some 'expert' has come up with a brilliant Idea. I recall some time in the past organisations called AWB, Grain pool of WA, the list goes on. These were all abandoned because some 'experts" thought they were a bad idea. History repeating!! and some wish to corporatize CBH which would set it on the same path as the others. The yanks were keen to rid us of our AWB & now they are inventing the same thing. WAKE UP AUSTRALIAN Farmers you are being screwed by 'experts' & the rest of the world!!
5/08/2015 8:28:33 AM

Lots of negatives here from the replies.....so what structures do you all think should be looked at or is it easier to sit behind a screen and be an expert without ever actually trying to improve?
5/08/2015 12:35:32 PM

A lot of co-ops have gone it's true, mostly because they failed to evolve. Many production based co-ops failed to adapt to a world that requires a marketing approach. As far as AWB goes, it was a failure of governance that ended its days, nothing else. Pictures of the Chairman in his Y fronts with a six shooter does nothing for anyone, neither do bags of money. The market will listen to farmers who are organised, delivering good product and not dependent on legislation. Pollies can change legislation but you can't legislate away well organised groups of focused people!
Jeremy Lomman
5/08/2015 4:07:22 PM

The 2014 World Cooperative Monitor demonstrates the strength of the collaborative business model for food producers. Of the world’s top 300 cooperative businesses, 27 per cent operate in the agriculture and food industry sector, second-only to the insurance sector at 46 per cent. These are highly-adapted food producers successfully competing for and gaining global market share. Australian farmers aren't just competing against each other. They are competing against their well-organised counterparts from all over the globe.
Jock Munro
6/08/2015 5:09:31 AM

Mr, If AWB Ltd was so corrupt then why did multi merchant Cargil retain the name AWB and tell us that they did so because it was such a good recognisable brand? The Chairman in his Y fronts was treated very poorly and the man who trained the AWB personnel to use weapons in war torn Iraq said so publicly.
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