Critical Issues Facing Cooperatives
Phil Kenkel
Bill Fitzwater Cooperative Chair
As I mentioned in previous newsletters I am managing a national effort to identify critical issues and
opportunities for agricultural cooperatives. As part of the project we assembled a panel of
cooperative experts including industry, academics and USDA. The industry representatives
included all sectors of agricultural cooperatives including grain and farm supply, agricultural credit,
dairy, regional cooperatives, local foods, name brand consumer product and bioenergy. The panel is
convening this week in Washington D.C. The expert panel has already participated in a two stage
survey process which provides some interesting insights.
The cooperative leaders identified a wide spectrum of issues both external and internal to the
cooperative firm. Not surprisingly, market volatility topped the list of external issues. Almost 80%
of the expert panel ranked market volatility as and extremely important or very important issue. In
their written response the panel commented that the increasing volatility of commodity and input
markets has created the need for significant, sometimes unattainable increases in equity and
working capital. Market volatility increases interest expenses, and the cost of accounts receivables,
inventories, and grain payables. Cooperative members want the highest possible market prices and
lowest input costs, making it difficult to generate the margins needed to finance additional working
capital.
The issue receiving the second highest ratings for critical importance is not an issue highlighted in
previous surveys. Over 60% of the cooperative leaders identified competition from global
competitors and the ability of cooperatives to compete in global markets as a critical issue.
Increasing global demand for food and fiber provides opportunities for cooperatives and for U.S.
agriculture as a whole. At the same time cooperatives are increasingly impacted by global markets
with fertilizer prices providing an obvious example. The panel perceived that the preferences of
consumers outside the U.S., for example European attitudes toward GMO foods, will increasingly
impact U.S. cooperatives. Exchange rate risk and risks created by tariff, quota and import
restrictions were also perceived as becoming increasingly relevant to agricultural cooperatives.
The cooperative leaders also identified a wide range of issues specific to the cooperative firm. Most
of these related to finance, strategy, governance, communication and business development. I’ll
share the highlights on those issues in my next newsletters.
8-2-2011