New Zealand has approximately 330 co-operatives but Fonterra tends to dominate the news, Dr Jacqueline Rowarth writes.
New Zealand has approximately 330 co-operatives but Fonterra tends to dominate the news, Dr Jacqueline Rowarth writes.
Dr Jacqueline Rowarth is an adjunct professor at Lincoln University, and on the board of directors of two levy bodies and one co-operative. The farms in which she is involved pay levies to four bodies, membership to Federated Farmers of NZ and have shares in six co-operatives.
OPINION
Co-operatives are doing together what nobody can do alone, writes Dr Jacqueline Rowarth.
Societies, associations, levy bodies and co-operatives work for their members through the power of the membership.
Societies and associations tend to have a particular focus. In the primary sector the foci of the NZ Grassland Association (founded in 1931), Society for Animal Production (1941) and Soil Science Society (1952) are clear. Like Federated Farmers of NZ (1944) they are organisations run by their members for the good of the members and their discipline.
Where it is difficult to limit the benefits of activities such as agricultural research and extension to those that pay for them, concern about “free riders” results in lower investment than is socially optimal. Levy bodies can invest for all because all have contributed.
Agricultural co-operatives include processors (for milk and meat, for instance) and service providers (agrichemicals and insurance, for instance).
The concept is that a co-operative can find a better price, either selling or buying, than an individual farmer can achieve.
In 2021, MPI published research indicating that “farmers now retain about 26 per cent more of the international price for milk than what would be expected based on the previous (prior to Fonterra) historical relationships between the New Zealand farmgate price and farmgate prices in other countries”.
Without a strong co-operative, New Zealand farmers are peasants.
Dr Jacqueline Rowarth.
These words originated from a speech by John Luxton in 1998, when he was the National MP for Karapiro,to Parliament when the Dairy Board was being established.
“If we as farmers don’t want to be peasants… we need to look forward towards the next 50 years and prepare our industry to be more able to maximise opportunities and to convert them into cash in your bank accounts, in more ways than by lowering processing costs.
“We need to ensure that we build a profitable future from the current base to enhance the interests of all dairy farmers.”
Fonterra was formed in 2001. Although New Zealand has approximately 330 co-operatives, with 75 per cent in the primary sector, it tends to be Fonterra that dominates the news because of its significance in the export economy.
Sometimes forgotten is that a century earlier there were approximately 600 dairy factories of which 85 per cent were co-operatives. These merged with each other to achieve economies of scale as technologies and transport improved.
Co-operatives do not feature in other countries in the same way as they do in New Zealand.
In the UK, for instance, it has been estimated that only half of all farmers belong to a co-operative.
In the report commissioned by the UK Government in preparation for Brexit, authors pointed to the benefits of co-operatives, including “greater profitability, efficiency and resilience for the farmers involved, the knock-on advantages this gives their wider industry, and the public benefits that follow from communities working together”.
Dairy prices in the EU were recorded to be higher in the regions where co-ops had more market share.
Further, “where co-ops protect farm gate prices, this benefits farmers across the sectors and regions concerned, not just co-op members”.
The same has been apparent in New Zealand: Fonterra sets the milk price for private companies.
UK farmers were asked why they didn’t join a co-operative. They cited examples of better prices from independents and entrepreneurs.
The bigger picture indicated, however, that co-ops are almost twice as likely to survive their first five years than other UK companies, with 80 per cent of co-operatives lasting even longer.
Co-ops have also been more resilient through economic recessions.
The better prices might work in the short term for a few, but society does not benefit as a whole.
Nobody in the UK reflected on the influence of subsidies on maintaining the status quo.
In contrast, the removal of subsidies here has been touted as the making of New Zealand farming because of innovation and market orientation.
In none of the congratulatory New Zealand material has the importance of co-operatives been mentioned, nor of levy bodies, societies and associations.
Yet these components of the industry have created a fabric of co-operation that has enabled New Zealand to be categorised as a first-world country from the farming of natural resources.
Until recently, it would have been difficult to find a farmer here who isn’t involved in a co-operative in some way.
Now the fabric is under threat from start-up companies and lassitude.
To be strong any group requires enthusiastic membership involvement to create a convincing mandate to continue. From a strong membership, good governance enables positive outcomes.
Anybody wanting an improved outcome for New Zealand farmers can read the research and see that getting involved in the current organisations, whether societies, associations, levy bodies or co-operatives is the way to add strength.
The Agricultural and Marketing Research and Development Trust’s report on governance emphasises the need for the sector to work better together to supercharge efforts and make the most of opportunities ahead.
