Major changes in agriculture raise big questions for nation's cooperatives - Industry Overview

Rural Cooperatives, Nov-Dec, 2002 by James Baarda

Editor's Note: The following article is based on a presentation the author made during the Cooperative Communicators Association annual institute in Burlington, Vt., this past summer.

Members look to their cooperatives for services and support in both difficult and good times. But cooperatives also look to their members for necessary support, patronage and direction. This reciprocal relationship between members and cooperatives means that whatever affects farming also affects cooperatives. And it means that whatever affects the business and economic environment in which cooperatives operate also affects farmer members. Restructuring by large and small cooperatives, several bankruptcy filings by well-known cooperatives, and significant transformation of the entire agricultural sector can lead to confusion and uncertainty among producers. This, in turn, may cause cooperative members and leadership to lose a clear sense of direction and purpose. But cooperative leadership cannot afford to succumb to these forces, regardless of the size of the problem.

The first step in facilitating positive, realistic responses to dramatic changes in agriculture is to identify the forces causing the changes that affect cooperative members. This identification process will, at the very least, reduce large-scale, invisible trends and concepts into a workable "short list" of factors that are hitting home on your co-op and your members' farms and ranches. Your task is to establish reasonable expectations of success, based on these forces. Then develop short- and long-term strategies, depending on how accurately the "big picture" is perceived. The 12 forces described in the first part of this article offer a basis for further discussion.

The next step is to assess the implications of these forces for farmers and their cooperative. The dozen questions in the second part of this article shift focus from the broad forces to address cooperative issues directly.

The remaining task for cooperatives, directors, management and members is to then establish--for each cooperative--meaningful connections between the forces and issues, then devise strategic plans that will lead to the cooperative's successful response and effective service to members.

12 forces changing the face of farming and farmer cooperatives

The following list summarizes major forces affecting U.S. farming and, consequently, farmer cooperatives and their members.

1. Globalization

The impacts of globalization are felt in three major ways:

* On markets--World market forces are reflected directly back to all levels of agribusiness and to U.S. farmers. Demand, supply, pricing and all other economic forces that determine farm income and affect farming decisions are now world issues, not local, regional, national or hemispheric issues.

* On production--Individual U.S. farmers do not produce for limited or well-defined markets. Every farmer is part of a competitive world system in production choices and costs, governmental support programs, market delivery systems, sources and pricing of inputs. Production trends may be inexorable on a world scale, leaving individual farmers unable to make meaningful production decisions.

* Non-agricultural environments--Farmers are now exposed to world financial markets where the economic systems are far different from the U.S. system. They also face international and transnational political forces, fluctuating exchange rates and new communications systems and technologies, all of which can change rapidly. These environments are ever-more important to agriculture, and, at the same time, are less and less sensitive to agriculture. Almost any production activity in any sector is expendable if "economics demands it."

2. New forces drive farming

* Economic forces--Broad micro- and macro-economic forces impinge on every aspect of the farming process. The forces are not only more pervasive but, in some regards, they are more volatile that ever before. Stability and predictability are rare commodities.

* Sources--More and more of the forces driving agriculture and affecting farming lie outside the control of farmers or the general agricultural sector--even outside the control or influence of the nation. The agenda is being set by others, not necessarily by design, but more by economic forces that are neutral in some sense, but not at all neutral toward those who cannot exert power.

* Social forces--Concerns about the environment, food safety, animal health and treatment, conservation, odor and pest nuisance, land use, food costs and labor conditions are among forces finding their way into laws and regulations that impose general social interests on farmers. An increasingly constrictive network of prohibitions and directives are part of every farming plan, decision and cost calculation.

3. Risk

* Levels of risk--Agriculture has always been a risky business, but the nature of risk is changing substantially. Some types of risk seem to be decreasing while others are increasing, and the impact of these risks is becoming more severe. Predictability and planning become ever more important as farming becomes a more sophisticated science. But risk can undermine the predictability required for planning, investment and efficiency.