The Voice of Canadian Credit Unions
Sustainability /  •

Feed the world

Agricultural cooperatives in Canada could play a vital role in fighting world hunger, but first they must face their own challenges

wheat poolsCanadian agricultural cooperatives are playing a role in the ongoing effort to feed the world’s growing population.

Those numbers could reach nine billion by 2050, according to the study, World Map of the Agricultural Cooperative Movement and its Critical Issues, released last year by professional services firm PricewaterhouseCoopers.

Cooperatives that have an agricultural division or farming affiliation, and one all-dairy cooperative, capture the top four spots of the largest non-financial co-operatives in Canada by revenue, according to The 2010 Top 50 Non-Financial Cooperatives in Canada survey issued by the House of Commons.

Federated Cooperatives Ltd. (FCL) of Saskatchewan, which has an agro-product operating division, tops this list. FCL is followed by La Coop fédérée, which provides agricultural producers with the goods and services they need to operate their businesses, such as oil products, hardware and agricultural machinery. Then follows Canadian dairy cooperative Agropur in Quebec and the United Farmers of Alberta Cooperative Ltd. (UFA), which is a leading provider of farm and ranch supplies, as well as petroleum products.

Claude Gauthier, Ontario region manager for Growmark, Inc. and past president of the Canadian Cooperative Association agrees that Canadian agricultural cooperatives will play an important part in feeding our increasing population.

Canadian agricultural cooperatives will play an important part in feeding our increasing population. Federations such as FCL and UFA are also integral to the future sustainability of the agricultural sector as their members help supply farmers with the tools they need to meet the growing food demand

However, Gauthier adds that federations such as FCL and UFA are also integral to the future sustainability of the agricultural sector as the members associated with these organizations help supply farmers with the tools they need to meet the growing food demand.

Gauthier estimates that 40 percent of farmers receive inputs (such as machinery, pesticides and fuel) from cooperatives affiliated with these federations, while 50 percent of finished agricultural products are produced by them.

Falling numbers

Despite these combined efforts to strengthen the sector, the number of agricultural cooperatives in Canada has fallen dramatically over the past 15 years, most notably in Western Canada, according to Dr. Murray Fulton, a professor with the Johnson-Shoyama Graduate School of Public Policy at the University of Saskatchewan.

“We’ve seen the demise of the so-called prairie wheat pools – Manitoba, Alberta, and Saskatchewan, [as well as] Dairyworld, a large dairy cooperative, and Lilydale, a poultry processing cooperative,” explains Fulton.

Gauthier adds that the decline in the number of agricultural cooperatives is also due to consolidation of activities at the farm-gate and a super consolidation of duties at the business level.

“We are seeing much larger business units serving fewer cooperative members and operating much larger farms,” says Gauthier. “Our average farm size is closer to 600 acres, but we have many members that are operating up to 20,000 acres.”

Fulton agrees and adds that the size of farms that grow wheat (in Western Canada) went from averages of 2,500 acres 30 years ago to current averages of between 10,000 and 30,000 acres. While he says it is too early to fully understand the impact that these larger farms are having on the sector, the fact that they use less labour and more advanced technology is enabling farmers to increase their output.

Youth farmers

Ensuring that Canada has sufficient farmers means ensuring young people are brought into the industry. A House of Commons study found the average age of a farmer rose from 48 to 52 between 1996 and 2008. Fulton says this is a major concern, but adds, “there is little attempt to try and bring young people in. In the West, because we’ve lost many of our cooperatives, there isn’t much being done by these organizations specifically.”

The Commons Committee recognized that young farmers are essential to the revitalization of the sector and that, based on 2008 data, close to eight percent of farms are young farmer enterprises. The study also observed that Canada must now capitalize on the entrepreneurial spirit of young farmers entering the sector and their innovative ideas and new ways of doing business if the country is to achieve a prosperous and profitable future for the agricultural and agri-food sector.

Gauthier is also concerned, but notes that the data does not reflect that, while the lead farmer and “absolute owner of the farm” may be in his 60s and 70s, there are often a couple of sons in their 40s also involved in the farm. However, this is not always the case. Gauthier cites his own family’s situation as an example. “I left the farm in 1994. My two brothers continued, and now the farm is down to one brother and he is in his early 40s.”

Bad financial decisions

Fulton stresses the fall of the Western wheat pools was due to what he describes as self-inflicted wounds. “They made a series of bad decisions in the 1990s that essentially put them in positions where they could no longer continue financially and had to be bought out,” he says. (For more on this topic, read “The fall of the wheat pools.”)

Gauthier recognizes that all organizations and enterprises can make bad financial decisions, but that some of the cooperative member businesses have also made some decisions that resulted in negative outcomes. “We make big capital decisions and sometimes the economic environment changes on us. We don’t have perfect crystal balls. The errors that occurred should not only be attributed to or pointed to those who were in the boardroom at the time.”

When it comes to governance issues of agricultural cooperatives, Fulton says that major changes have occurred, especially in the West, as different models of ownership and management are being adopted in wake of the era of bad financial decisions.

“One lesson was the need to have a governing structure where there is real rigorous oversight by the boards,” he says. “It used to be the case that boards would be entirely made up of farmers. We’re now seeing outside board members come in and that’s a good thing. However, it can be taken too far — achieving the right balance is critical. Outsiders can sometimes see things that farmers are missing. But the farmer members are also important because they have a direct interest in the service that is provided.”

The other challenge, he explains, is dealing with much more complex issues and staying on top of them, asking, “How does one keep on top without getting swallowed up in all the details?”

Gauthier also recognizes the need for outside participation and having employees or business consultants with expertise in many dossiers. “It’s absolutely critical in a cooperative context,” he says. “You need good leadership at the governance level and you need really good leadership at the execution level, which is through the employees. If you don’t have both, you don’t have a working equation that will satisfy both their needs. The boards don’t make the daily decisions — this is delegated to the staff [who] do the best they can to follow the practice of the boards.”

He agrees with Fulton about the increasing complexity of the business world, saying that the continued consolidation of enterprises is creating much bigger entities that are attempting much bigger capital commitments and making much bigger decisions. This is putting more pressure on the boards to exercise good due diligence and to hire really good employees.

Working together

Established 10 years ago, Farmer Direct Cooperative Ltd. (FDC), an organic farming cooperative with 60 members (and a board of nine farmers) in Alberta, Manitoba and Saskatchewan, is a good example of farmers working together to address the challenges they were experiencing marketing their organic crops.

“We were the first agricultural cooperative to be incorporated in Saskatchewan in the last decade and our mission is to support, protect and promote the organic family farm by creating long-term sustainable markets for the crops they grow,” says Marla Carlson, FDC’s operations manager.

“Our members formed the cooperative because that is how you take ownership and control of your livelihood and have a shared vision. In 2011, we launched the Farmer Direct Cooperative brand, providing the opportunity to market directly to consumers and increase the percentage of the food dollar that goes back to the family farm. The FDC brand is the first and only 100 percent farmer-owned, 100 percent fair trade, 100 percent organic brand in North America.”

Bringing in young organic farmers is also important to FDC, as is preserving certified organic farmland. “A huge question in the organic community and among our membership is succession planning,” says Carlson. “In 2009/10, prices were so low that many organic farmers switched back to conventional farming or retired from farming. That has resulted in a reduction of acres farmed by around 30 percent.”

Currently, FDC members farm roughly 120,000 acres. Creating sustainable markets and returning fair prices to the farm-gate are essential to keeping young people on the farm.

The staff of seven employees work in partnership with the board to achieve this goal and they are seeing the benefits of working collectively to create a market that pays a fair price. “It’s that bringing together of farming and marketing expertise that has established a good working partnership,” explains Carlson.

She adds that finance, however, is key. “You have to keep your eye on the money at the end of the day and ensure that what you are doing is viable. Sometimes you get lost in that mission, but on the other hand, if you get overly concerned with or focused on money, then sometimes the vision may falter.”

“You have to keep your eye on the money at the end of the day and ensure that what you are doing is viable”

—Marla Carlson, operations manager, Farmer Direct Cooperative Ltd.

From a modest beginning, FDC is growing exponentially and maturing as a cooperative. But to truly transform the food system it is important for farmers to have ownership in the business that is marketing their products.

“Farmers, their families and their communities benefit when a bigger percentage of the return stays within the local area,” says Carlson. “In the case of Farmer Direct Cooperative, we are in business to serve our members and promote organic farming. Each of our members has a vote and a say in the strategic direction of the cooperative and they have the opportunity to participate in setting the price for their crops. The cooperative business model more easily aligns with the principles of fairness and integrity that form the foundation of the organic food movement.” ◊