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Re: Enabling rural cooperatives and producer organizations to thrive as sustainable business enterprises

Peter Steele Independent Consultant Agricultural Engineer, Italy
15.07.2012
Peter Steele

Colleagues,

Considering producer groups in the context of agro-industrialization of rural communities
Great subject - people focussed development is always challenging - but 'Agricultural cooperatives key to feeding the world'; that's almost a title too far. Not so much that collectivization of people is not important - wherever they may be within the value chain - but the contradictions between 'cooperatives' by definition and their role within 'feediing the world' quickly become apparent when you consider the worldwide social (-economic) trends of the current day - urbanization, industrialization, the scamble for natural resources, inequalities between countries, people and regions (and within these groups). Link this into global macro-issues of climate management, energy alternatives and expanding populations with people everywhere demanding higher living standards, and the role for 'cooperatives' becomes less easy to appreciate. 'Small is not always beautiful' and small producers remain highly vulnerable.

Then too, there are contradictions between 'cooperatives' and 'sustainable businesses' that are not always easy to understand, for example, with the former servicing members and promoting shared (even democtratic) principles of equality, and the latter servicing profits and shareholders. And, should you want to explore these issues further there is an excellent booklet published by FAO 'Mobilizing Capital in Agricultural Cooperatives' that dates from 2004; and was co-authored by one of the sponsors of the current discussion. If you had to summarize the booklet in a few words, it would be one whereby the more sustainable the business models within the cooperative, the greater the shift from 'cooperative'; with the cooperative becoming simply one more agro-business company (albiet a successful one). Whether cooperative or agro-business, the first principle of either entity must be one of making profits/surpluses that ensure continuity in that particular market sector.

Enterrprise longevity is always a challenge in the less well-informed rural communities - wherever they may be. This is refered to in the lead in to this discussion (this thing about external support from the public sector, NGOs, development agencies and others). Remain in the development business long enough and you are sure to come across cooperative societies that started well, received ever diminishing support (you name it - economic, technical, financial and more), became highjacked by cliques within the community and/or, worse still, became channels for political motivated development movements (sure you can mention a handful of countries, particularly from the period 1960-1990s).

The key issue is not so much that 'cooperatives' are inadequate per se, but that they may not necessary be the right kind of collective group required by that particular community/region/industry. Other groups may have equal value - and more so in the modern era with that earlier reference to 'competition for resource's. Search the Internet and follow the international and regional agro-industrial companies that are contracting for land in places where it may be plentiful, where rural people living on the same land have limited options and where national decision-makers can continue to make choices that focus on minority interests (usually, but not always, from self-interest).

Cooperatives in rural communities will typically focus upon agro-production; hoping to exploit markets for the crops, livestock and materials produced. There is that famous picture of several thousand turkeys all facing the same way and looking into the distance; with the caption 'Now that we are organized, what shall we do?' No point in starting mid-point in the value chain then - this is more a case of identifying markets and working back to the kinds of materials, standards, quantities, delivery schedules, competitors and more that will be essential before organizing the agro-producers concerned. Herein is the role of the entrepreneur with her/his information, contacts, access to resources (including finance and agro-producers) that will be essential. Sure, this can be done by groups of people - but small agro-producers, for example, are notorious for their lack of business acumen. Bring in that well-meaning public sector? Useful, true, and particularly if they are able to provide start-up finance, technical information, equipment and more at competitive/subsidized rates, but public servants typically stop work late afternoon and rarely work over the week-end. Not so good if you're in business.

Working with an industrial crop some years back we introduced what was called at the time an 'Authority'; combining the resources of the relevant ministries - typically 'Agriculture' and 'Cooperatives' together with a quazi-government marketing board. Existing cooperative societies responsible for individual processing centres and grower communities were dissolved; they had been defunct for a number of years, with the marketing board taking ever greater responsibilities (but coming up against contradicting mandates - of how best to support two competitive groups within the industry). The Authority took responsibility; managing existing field staff, established advisory groups of growers with community responsibilities, contracted for services including sales to the marketing board, and renovated factories and built new ones. Simple, but tranparent, systems of payment for processed crop were devised based on trends forecast for crop markets for later in the year; with a two tier system involved. First payment on delivery to factory, and second payment on receipt of prices in distant markets. Industry-wide, everyone knew who was in-charge.

The key to the level of the second payment was that of quality of crop sold; and this tended to vary between managent at the different factories. Everyone from manager to factory labourer was trained in the same way; but output quality varied on the basis of attention to detail - from the ripeness of the incoming crop, washing, fermenting, drying, sorting, bagging and more (even the newness of the bags and evenness of the stitches counted) . Cleanliness remained supreme; and then we published annual feedback from buyers as a result of samples tested from the individual factories, and factory managers/staff were able to compare their work/performance with others. The industry never looked back - as people became competitive, and quality and income climbed.

Management of the Authority was more autocratic than that possible from the earlier cooperatives responsible for production and quality, and the latter always lacked the resources to make a difference.

For an early contribution to this debate then, consider the role of the agro-producer group within the industrialization of the agro-communities involved. Working recently with agro-industrial planners in a small SE Asian country, we put together proposals for a road-map for industrializing agriculture. A statement concerning agro-producers summarized findings as:

'Working to establish rural communities as service providers for farmers, traders and factories, the key role of farmers groups will be established; and, further, these groups will be captured within contract farming practices that will service trading markets and processing networks'.

The approach to agro-industrialization in this particular case can be explored further should sufficient interest exist.

All strength to those involved with the wider issues of this potentially interesting debate.

Peter Steele

Rome