The Rural Voice, 2001-04, Page 38At a time of
some of the
biggest
changes in the history
of agriculture,
farming is at a
crossroads, says Jim
LeCureux, Co-op
Extension Officer for
Michigan State
University.
"We can be
independent farmers
and survive, or we
can be interdependent
farmers and seek
opportunities,"
LeCureux told 80
people attending a
conference called
"Take Back Your
Livelihood:
Opportunities through
Co-operative
Development" in
Formosa, March 3.
"Survival of the
family -sized farm is
going to depend on
finding more money," he said. In
some cases this may come from
ventures to allow farmers to capture
more of the consumer dollar by
taking their food farther down the
processing chain.
LeCureux, who has been involved
in starting up several new -generation
co-ops in the U.S. said vertical
integration is one of the principles of
this period of change. "We have to
reinvent the industry," he said.
Between 1988 and 1998 the
agrifood industry was turned on its
head, he said. The consumer now
drives the process. The rather simple
value chain of 1988 has become a
wildly interconnected map with large
companies merging and entering
more than one area in the chain such
as chemical companies becoming
involved in seed and in plant
genetics. Independents have often
been cut out of the chain.
There are benefits to this vertical
integration, he said — for instance it
facilitates a quick response to
consumer changes. But farmers who
aren't part of one of these vertical
chains can end up without a market
for their products and this trend will
continue as the vertical co-ordination
develops.
34 THE RURAL VOICE
TAKING A BIGGER
BITE
Vertical integration doesn't have to work from the top
down. Farmers too can take a bigger chunk of the
consumer dollar by investing in further processing
By Keith Roulston
lay, Kim LeCureu and Gord Surgeoner
. -
new opportunities for farmers
The market is dictating there will
be vertical co-ordination, LeCureux
said, but it doesn't determine if that
integration will come from the top
down, or the bottom up. He's
working with one group of 800
growers who are looking at investing
in a company further processing their
crop through a new -generation co-
operative. "They will get a 15-20 per
cent return without doing any more
work," LeCureux said.
As producers of undifferentiated
commodities, farmers have always
been price takers not price setters.
They are an inactive part of the value
chain. As such, their focus has
always been on trying to cut costs,
LeCureux said. He cast doubt on the
future of farmers trying to maintain
the status quo as producers of
commodities. "I don't think you can
get along concentrating on
efficiencies," he said.
LeCureux quoted one of his
favourite sayings: "If we keep doing
what we're doing, we'll keep getting
what we're getting."
In the value chain of the future the
producer wants to share in the whole
market, not just in producing the raw
material, 'he said.
But to take advantage of getting
more of the
consumers food
dollar, farmers must
be willing to change
some of their
traditional attitudes.
For one thing they
must become
interdependent instead
of independent. They
must be willing to
work with friends and
neighbours instead of
thinking of them as
competitors.
To create a value-
added mind -set
farmers must first of
all accept the need for
change, LeCureux
said. Farmers must
develop a customer -
oriented way of
thinking. They must
be willing to build a
"value system". They
must be willing to
create a win-win
scenario.
Potential participants in a new -
generation co-op must be willing to
do strategic planning and to develop
a marketing plan and review it. They
must be able to "think outside the
box".
They also must be willing to make
a financial commitment. Unlike
traditional co-operatives where there
is a small initial investment, new -
generation co-ops require a larger
upfront investment. And LeCureux
doesn't apologize. "Signatures on
cheques tell me somebody is
serious," he says. "You can have
good ideas but if you don't have
commitment you won't succeed."
But that higher investment in new
generation co-ops brings extra
benefits. While traditional co-ops are
often strapped for cash needed for
expansion, new -generation co-ops
can offer new stock if they need
money. Because they don't have to
hold back profits for expansion
needs, they can give a higher current
return to co-op members. The shares
can also be transferred.
The new -generation co-ops also
bring rights and obligations that are
important in the current marketplace.
Shares bring the right to supply
product to the company and
1