Blackstock, P, Gallagher, R, Kula, E, O'Donohoe, S & Wall, S. (2003) Developing effective
market led grower co-operatives. COFORD Dublin
Executive Summary
The objective of this study was to identify the most suitable and cost effective support
structures for private forestry in Ireland. There was a particular emphasis on providing
market-led, co-operative support that would ensure that quality farm-grown timber can be
produced, brought to, and compete in, the Irish timber market.
A national survey of the key participants in the private forestry sector in Ireland was carried
out using email and postal questionnaires. This was supported by more detailed 'face-toface' interviews with selected stakeholders. Following the national survey, a workshop was
held at the Galway-Mayo Institute of technology. This workshop had the dual purpose of
disseminating interim results and eliciting further information from participants. These
surveys, interviews and workshop were designed to summarise the structure of the private
forestry sector in Ireland and its current involvement in the marketing of privately produced
timber. It was also designed to identify the concerns of this sector and to provide a
'baseline' against which proposals could be compared.
At the same time a survey of experts in farm forestry support organisations in other
European countries and elsewhere was carried out. This survey was supported by a detailed
desk review and was designed to identify the type of organisations that provided a range of
market related services to private woodland owners in other countries. Where possible, the
mechanisms employed to pay for these services were also identified. A fact-finding visit to
Jutland in Denmark was organised to provide a detailed review of an established cooperative support structure for forestry.
Finally, a financial appraisal of farm forestry and farm forestry co-operatives was undertaken
to identify the financial implications of providing these services in Ireland.
The national survey found that there was a general agreement amongst the key participants
in Ireland that co-operative or group marketing of privately grown timber was desirable.
However, there was also a recognition that such support structures must be initiated by the
farmers themselves and not be thrust upon them from above. Private woodland owners
should be encouraged to understand their significance to, and role in, the Irish forest
industry. They should be engaged and their participation elicited. They must also be
informed about the constraints within which the industry operates.
An extensive and comprehensive information gathering exercise was still required. Such a
survey should address the silvicultural, infrastructural and educational requirements of
private woodland owners and should define the private forestry resource in Ireland.
The international survey found that forestry co-operatives play a dominant role in the
marketing of sawlogs in most of the countries surveyed. They are also important in the
group purchase of forestry materials and services and, in conjunction with other
organisations, in providing advice on quality control and on the maintenance of the tree
crop. Representing grower's interests is usually carried out either by co-operatives or by
societies. Other marketing roles, such as timber promotion or the promotion of alternative
forest enterprises are usually carried out by a variety of organisational types including cooperatives.
The initial involvement of co-operatives in timber processing in other countries seems to
have been associated with periods of major market failures, with co-operatives either taking
over failing enterprises or providing processing facilities that were not elsewhere available.
The form and structure that develops within the farm forestry co-operative movement in any
given country is influenced by the services the co-ops provide, the frequency of farmer
usage of these co-ops, the degree of state intervention and the skills base within the farm
forestry community. In general, smaller scale co-operatives are better at motivating and
encouraging their members, particularly during the earlier years of forestry co-operatives,
while large-scale co-operatives are better at marketing. Federal co-operatives that combine
the benefits of these two scales have developed in some countries.
Most forestry co-operatives were financed through the sale of timber. This financial
arrangement was facilitated in many countries by traditional forestry practices that maintain
a 'continuous forestry cover'. In these situations, most forestry management operations
coincide with harvesting revenues. Such conditions do not generally apply to Irish farm
forestry.
The economic appraisal found that market imperfections in forestry enterprises, particularly
with relation to knowledge and bargaining power, were more pronounced for smaller sized
holdings. A co-operative that included large and small forest estate owners was more likely
to encounter difficulties in ownership, homogeneity of interest and other difficulties like
conflicts over flat-rate membership fees. Because of this, co-operative support should be
particularly geared to small-scale private woodland owners.
A number of models of co-operative support for farm forestry were assessed for their
suitability in Irish conditions. Those models that only provided support for timber marketing
were found to be un-suitable because they required very significant and on-going state
intervention for them to be successful. The expansion of the role of the co-operatives to
include professional support services improved the functioning of the private forestry sector
in general and created a mechanism whereby trust and reputation could be developed by
the co-operatives; features that will be essential if these co-operatives are to successfully
market timber.
A federal structure will help to ensure that co-operative policies reflect local interests and
concerns whilst simultaneously allowing small local co-operatives to benefit from scale
economies where they are significant – namely, in marketing, lobbying, education,
administration and insurance. Activities involving asymmetric information and smaller
economies of scale such as organising group planting, site preparation, planting, crop
management and site-specific sales preparation should be handled by the smaller local cooperatives.
The financial appraisal found that local forestry co-operatives could be profitable throughout
their life cycles if they serve about 300 private woodland owners who, between them, own
about 2,400 hectares of plantations. However, these co-operatives will remain vulnerable to
changes in their financial circumstances until they start to sell substantial volumes of timber.
Before this, they will have to rely on income generated through the planting of new farm
woods, and the income from the managing of existing woods, to remain viable. Once cooperatives start to market substantial amounts of timber, however, they will become much
more financially robust and will be able to withstand significant reductions in income while
still remaining viable.
Most of the costs associated with forestry co-operatives are associated with the employment
of forestry professionals. Consequentially, it is essential that the cost of this employment be
linked to productive output.
Certification of small-scale farm forestry will create a number of very significant difficulties
for individual private woodland owners unless they become involved in a group certification
project. The requirements of such certification will ensure that individual woodlands are
carefully monitored and managed throughout their life. Widespread certification of privately
owned woodlands was considered to be in the public interest.
For a farm forestry co-operative structure to function with financial independence it will be
essential that the farmer members pay a yearly management fee. However, there is no
incentive for this to happen at present. This report rejects the option of forcing private
woodland owners to obtain professional management of their crops as a pre-requisite to
obtaining premium payments and concludes that a more appropriate approach would be to
encourage group certification by providing financial support to the farmer. Such an approach
would create an incentive amongst private woodland owners to become involved in the
management of their timber crops and for them to set up organisational structures that can
then successfully market their timber when it becomes mature.
Capital requirements will be less onerous if these forestry co-operatives do not engage in
upstream handling and processing activities. This avoids large-scale investments in
equipment and the lag times between investment and return that have contributed to the
demise of many forestry co-operatives elsewhere.
The presence of a comprehensive farm forestry support structure will change the forestry
educational priorities amongst farmers. An educational system based on individual crop
'blueprints' that provides a basic understanding of crop management will ensure that private
woodland owners know enough about their forestry crops to oversee their management.
This report recommends that
1. The certification of privately owned woodlands should be encouraged by the payment of
a small yearly premium to those owners who achieve certification (or group certification)
status. Such payments should reflect some of the extra costs incurred in ensuring that
almost all Irish timber continues to be produced from a certified source. This small
premium will form the basis of an income stream for farm forest co-operatives and other
associations until significant supplies of privately grown timber become available for sale.
2. The organising of group certification should be facilitated by encouraging local farm
forestry groups to form local co-operatives or associations by providing financial support
for
 Initial consultations with private woodland owners
 The training of elected committee members, (including field trips and visits)
 The employment of a professional forester. This support should cover the start-up period
of the co-op and should be tailored to encourage the development of a commercial
ethos within the co-operative.
 A tailored educational package available to all members (co-ordinated by the new co-op
but provided by Teagasc and regional training centres)
 The database and inventory costs associated with group SFM certification
These local co-operatives or associations should serve a geographically distinct area and
should provide certification and allied support services to all small-scale private forest
owners within this area who wish to join. Such co-operatives or associations can expect
to be viable where they can obtain about three hundred members with over two
thousand hectares of forestry between them. This grant package should be made
available to all organisations provided that profits accruing from such support are
distributed equitably amongst all members and that such groups are open to all eligible
members within the geographical area serviced by the group.
3. Three federal timber-marketing co-operatives should be supported in the south-west,
the north-west and in the East. These federal co-operatives will be responsible for
providing back-up support and marketing facilities to at least ten local co-ops or
associations. They should be owned by the local co-operatives and should have a
strongly commercial ethos. Sales profits generated by these federal co-operatives should
be distributed to the local co-operatives in relation to the timber sales these local cooperatives generate. The federal co-operatives should not become involved in upstream
handling and processing activities unless there is a clear and urgent market imperative
to do so.
4. Training and instruction in farm forestry should concentrate on providing farmers with
the knowledge to oversee their forestry crop, rather than training them to carry out the
work themselves. In this regard forestry standard 'Blueprints' for growing the main
forestry species in Ireland should be published and these should form the basis of most
of the forestry training courses provided. The forestry co-operatives should have an
active role in organising these training courses and in disseminating information.
5. A 'Timber Promotion Agency', responsible for promoting locally grown timber and for
publicising timber standards, should be established This organisation should also have a
role in developing new uses for locally grown timber and for overseeing quality
definitions. It should fund and support research where this research is in the interests of
promoting locally grown timber or timber products.
6. Additional research into the socio-economic factors influencing farmer participation in
forestry management should be supported.
7. A national private forestry inventory that is made available to all interested parties
should be produced.