How co-operatives are good

How co-operatives are good for Aussie farmers, fishers and foresters

For many farmers, the only dependable way of underpinning and building the value of their basic business – the family farm – is through ownership and control of the inputs, supply, processing and marketing of their farm products through a co-operative. This has been important for producers, particularly wholesale traders in perishable commodities such as fruit, fish and fresh milk or where prices or markets are volatile. The co-operative helps maintain farm profitability, adjusts production to demand, provides healthy competition for processors and helps farmers ride out adverse trading conditions in commodity markets.

By eliminating intermediaries from the economic cycle and providing a dependable vehicle for the distribution of produce to markets, co-operatives have given farmers a greater sense of security and confidence, especially in periods of gluts, economic downturn or drought and flood.

Co-ops also help farmers exercise quality control and to achieve crop variety and herd improvements, thereby enhancing productivity. Processing and manufacturing co-operatives enable farmers to add value to commodities through the supply chain, and to keep the benefits within the farming community.

Supply co-operatives help protect individual farmers against market forces as a ‘price-taker’. They positively influence post farm-gate prices by encouraging open markets so that other traders and processors compete for supplies and cannot set prices independently. In this way, co-ops deliver effective competition and keep markets functioning fairly.

Co-operatives provide a mechanism for small producers to hedge against risks associated with farming such as crop failure due to circumstances such as drought, fires and floods.

Co-operatives enable independent Australian farmers to compete by providing access to markets

Agricultural co-operatives are groups of independent small businesses that work together in order to access markets in ways that they cannot alone. This type of co-operation includes groups of farmers or fishers collaborating on activities such as processing, logistics, transportation, infrastructure, storage and marketing of their produce. By co-operating, farmers lower the costs of production and increase their profitability.

Individual farm businesses remain privately owned, often by families who have operated the same farms for generations. Membership of the co-operative makes it possible for these independent businesses to be able to compete both domestically and internationally.

Co-operatives facilitate economies of scale by enabling individual businesses to jointly own and control their supply chain

Family-owned farms and fishers invest in road, rail, sea and air transportation operated through their co-operative to ensure that their produce gets to market in a cost-effective manner. One of the main issues faced by farmers and fishers is the long marketing chain that involves multiple actors and intermediaries. The objective of these intermediaries is to maximise their profit by controlling the supply chain and ultimately impacting market prices. Co-operatives ensure that control of the supply chain remains with farmers as far as possible, ensuring that they have the best price for their produce, and that profits are not taken by ‘middle-men’ traders.

Co-operatives enable smaller farmers and fishers to stay in business and remain independent

When independent businesses co-operate in this way, they can meet global competition from large corporates head on. Through their co-operative membership farmers and fishers gain significant opportunities, in particular access to national and global markets from which they would otherwise very likely be excluded or would have difficulty accessing.

Agricultural co-op members also derive a range of specific benefits from membership, including storage, transportation and handling expertise, marketing and trading expertise, and produce value maximisation technologies.

Co-operatives spread wealth back to farmers through produce rebates and profit sharing. Co-operatives are set up to share wealth equitably among their farmer-members in proportion to their contribution to the co-op. Agricultural co-operatives across Australia pay their growers and producers for their product. On top of this, growers can usually expect to receive a share of the profits or surplus as a rebate in proportion to the amount they have traded with the co-op. In a co-op, the more farmers grow, the more value they receive, adding value to their land and their farming operations.

How co-operatives are good for regional Australia

A third of Australia’s wealth is generated outside the major cities. Co-operative agriculture is central to tackling key challenges in regional Australia, from economic development, unemployment and skills shortages to a changing workforce and the need for world-class infrastructure renewal.

Co-operatives spread benefits to regional towns, through direct employment and the economic multiplier of keeping money local. Co-operative agriculture helps to maintain a regional way of life and has great potential to grow the local economy through an expansion of co-operatively owned food manufacturing and processing facilities.

Maintain a traditional way of life whilst providing economic growth to strengthen Australia’s regions

Individual farm businesses all contribute to their regional way of life, maintaining business presence and contributing taxes through the success they generate from their co-operative membership. In many cases, family-owned farms have existed for generations, and the co-operative structure enables the continuation of a way of life that would be unsupported by mass farming projects owned by a listed company where the value created leaves the community.

The gross added value contribution of co-operatives is key to regional economic growth. This value not only benefits members of the co-operative, but it also makes regional Australia more prosperous as the money is spent locally across a range of local businesses and services. This circular benefit stands in contrast to agri-conglomerates where the value created soon departs the region, often benefiting distant shareholders.

Co-operative investment in transport networks and other infrastructure directly benefits rural communities.

Australian co-operatives can be mobilised to grow the manufacturing sector

Co-operative agricultural business is key to the effort to grow a successful, sustainable and domestically owned manufacturing sector. This can be achieved by assisting small producers to work together to grow existing medium-sized firms and create new ones. In agriculture, fishery and food production, vertically-integrated co-operatives enable significant businesses to be created.

In food manufacturing, co-operatives in Australia and across the world have led value-driven food production. Co-operatives handle and store 40 per cent of our grain, package and export 40 per cent of our blueberries, process and market 60 per cent of our almonds and process and export most of our Western Rock Lobster fishery. In dairy and meat processing, co-operatives represent the remaining Australian producer-owned firms. Appropriately enabled, they can grow to global scale manufacturing businesses. Land O’Lakes (USA), Fonterra (NZ), Arla (Sweden/Denmark) and Ocean Spray (USA) are examples of global scale co-operative manufacturers that operate without diluting domestic ownership.

Local employment

Co-operatives employ locally, for both seasonal and long-term work. This is important in rural and regional areas where jobs are scarce and workforces are changing. The proportion of people employed in agriculture in Australia has, like in other countries, fallen significantly over the past 50 years. Increased mechanisation, consolidation of property sizes and demographic drift to cities have all played their part. Yet agriculture remains central to the economic fortunes of regional Australia. Of the more than 300,000 people directly employed in Australian agriculture, forestry and fishing, a significant number are employed by co-operative member businesses, as well as directly by the co-operatives. Only a very small proportion of agricultural businesses employ more than 20 people (1.4 per cent). The growth of these mid-sized firms is key to quality jobs, regional prosperity and local advancement. The success of co-operatives has a dual effect on employment by shoring up primary jobs at the producer level as it makes them more secure, and creating new employment at the co-operative itself, as it potentially expands vertically. Co-operatives not only have manufacturing facilities that serve domestic and overseas markets, but also bring employment to local communities by owning stores that provide agricultural supplies. However, many of the well-known names and production capacity has been lost over the years as firms were sold or demutualised. This can be reversed to secure and expand this significant Australian asset.

How co-operatives are good for Australia

In terms of self-sufficiency, food imports only account for about 15 per cent of Australia’s daily food supply. Co-operatives and their members make a significant contribution to the strength of Australian output by increasing productivity and efficiency.

Domestic ownership of the means of food production, particularly through co-operatives, provides further security to the nation’s supply, ensuring that markets remain responsive to Australia’s needs and resilient to shocks to international demand and supply. This positive balance of trade means that Australian agriculture is a major export earner, with nearly 80 per cent of all produce sold overseas in 2018-19. High quality Australian produce reaches into many global markets and provides a major source of income to primary producers based all over the country. Key challenges to maintaining this positive balance include the encroachment of foreign ownership of production and processing, fluctuations in the international trade environment, and climate change.

Co-operatives can be part of positive policy that maintains Australian interests at the forefront.

Co-operatives help to maintain the domestic ownership of agriculture

As Australian co-operatives are domestically owned, they are therefore owned and operated in the interests of Australians, whereas their listed competitors may be bought by overseas investors. Listed corporations have multiple owners. Often the beneficial owners are hidden and the benefits of successful trading are not always enjoyed within Australia.

The corporatisation of agriculture is a challenge to continued domestic ownership. This is not a new phenomenon and has been increasing over many years. While investment in agriculture is desirable, the ownership of Australian farms and agribusiness supply chains by foreign states is arguably less desirable. Concern about foreign investment led the Federal Government to set up the Foreign Investment Review Board (FIRB) in the 1970s. The FIRB reviews major purchases of Australian agricultural business. Identifying the ultimate purchaser is important, particularly with international investors, who may be closely linked to, if not directly owned by, foreign governments.

Co-operatives increase food security for Australians

Ensuring a steady and continuous supply of food is vital to Australia’s national security, and in many overseas markets, food products are a steady export earner. Co-operative ownership ensures that the production of strategic food assets remain in the control of Australians.

Access to reliable food supplies depends on a wide range of environmental, economic and governance issues. Ownership will potentially impact food supply, quality and price. At times of global food commodity shortages, the domestic priorities of Australian co-operatives can focus on the food supply needs of Australia. Periodic food shortages (in any part of the world) or supply chain issues, such as those exposed during the COVID-19 pandemic, show the importance of maintaining a level of domestic control over food supply. Co-operative ownership provides some guarantees.

Co-operatives help to generate significant export earnings

Agriculture and fishery co-operatives are net exporters, making a positive contribution to Australia’s balance of trade.

Australia’s agricultural exports were forecast to earn AU$45 billion in 2019–20, representing around 14 per cent of the nation’s total goods and services exports.

Some of the best-known co-operatives are also the biggest export earners of their produce. Australian seafood, grain and meat producers are leading the way to ever-greater exports, marketing Aussie produce as some of the best the world can offer. Much of the added value in dairy produce has been transferred to foreign owners in recent years, and it is important that Australian producers are able to benefit in the same way, through their co-operatives. Milk and dairy product co-operatives, along with fruit and nut co-operatives, have potential to significantly increase exports and value-adding production.