Cooperative Agribusiness – Challenge & Opportunity

Thursday, February 25th, 2010 admin

Cooperative Agribusiness – Challenge and Opportunity

Opportunity exists today to significantly increase global food production by accelerating the pace of agricultural innovation while, at the same time, reducing long-term trends that have resulted in worldwide social upheaval. If comprehensive support for small farming is offered and approached as a full systems solution, the innovations can extend from farming and production through marketing to retailing.

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Need

“Global population is expected to increase from 6.5 billion in 2005 to 9.1 billion by 2050. … At the same time, incomes … are expected to continue to grow in countries that have recently enjoyed industrialization. … general food consumption patterns [will] … shift … put[ting] strains on these developing nations’ agricultural production industry.

k3839-3According to such forecasts for global population and income growth, in order to feed the world, by 2050, food production must double. At the same time, the industry is being challenged to deal with other matters. Along with steady and growing demands for economic, ecological and environmental sustainability practices, it will have to deal also with social sustainability.

The world food economy needs to be shifted from its current global level of supply to local diversity in food security systems focused on producing at least staple foodstuffs locally wherever possible. Local produce is usually fresher and accommodating of local diet and culture. Specialty foods can be imported but a goal might be to do so only where the local resources cannot fulfill demand.

No doubt, corporate agribusiness will be able to capture a portion of the upcoming incremental demand for food production, for a number of reasons. However, agribusiness (e.g., in Africa) cannot/should not be built on Western models but rather molded out of local tradition, preserving as much as possible. Of course, global agricultural concerns will continue to have a place at the world’s table but food security is too important to turn over everything agricultural in exclusive fashion. Distributed schemes help to mitigate risk.

Among its other direct benefits, sustainable local agriculture would serve to stem the exodus of traditional farmers into the cities, in search of work that rarely can be found. The explosion of HIV infections can be largely tempered when the need for inter-city long-distance trucking will have been restored to more balanced levels with cycles of local food production and consumption.

Challenge

Indian behavioral economist and MacArthur winner Sendhil Mullainathan suggests that, as in so many other circumstances where technological solutions are at hand but execution is failing, solving food production and related social problems almost totally will involve solving “the fundamental challenge of the last mile” and turning it into “opportunity.” Village and rural people, life and culture govern the last mile for local agricultural production. Hence, the stage is set to revisit the idea of agricultural cooperatives. Their potential value often is overlooked in the world’s infatuation with the West’s capitalistic model.

The tasks and challenges facing food production are known. In addition to such items as land preparation and management, pest management, storage techniques and related maters, they include corollary goals of using the modern tools of “Agricultural Knowledge, Science and Technology (AKST) … to:

To accomplish these goals, there must be two prongs: To use the language of Big Oil, the downstream activities (seed selection and cultivation, best farming practices, affordable irrigation, etc.) will be structured around local and regional cooperatives that can provide necessary expertise to farmers. Monitoring can gather real-time data for computer modeling and analysis. Wider community well-being matters similarly can be monitored and administrated. Upstream, real-time market (i.e., of demand and pricing) will be essential.

Transparency throughout all processes of food growing and distribution can reduce the excesses of market speculation. By virtue of integration of all agricultural activities, farmers-even (perhaps especially) those in developing nations-(increasingly) can share in more of the profit stream. Over time, they should even be able ultimately to gain access to agricultural niche markets (e.g., essential oils and specialty crops) and enjoy resulting higher profits.

Food production starts with seeds to be planted. Therefore, sustainable farming requires partnerships beginning with the global seed banks and proceeding through the entire agricultural and food distribution channels. The need for cooperation and support is particularly sensitive given the circumstances of many of the world’s seed banks

Food security is closely linked with and key to solving many pressing social problems. In conjunction with activities of local cooperatives, local partnerships and community efforts should be enlisted.

Local communities (e.g., in Africa) can become self-sufficient and grow to supply the global market. However, this can only be achieved with global support (e.g., with real-time market and supply chain monitoring and control systems, microfinance partnerships, training in best practices, etc.).

Local farmers and their communities will not be the only beneficiaries. Few consumers worldwide are fully aware of the packaging, shipping, storage, distribution and transportation costs for the food items they consume today as a result of agribusiness globalization. Nor is there widespread appreciation for the impacts of agribusiness practices on our well-being, such as the serious environmental impacts and land degradation stemming from large-scale monoculture farming and the unnecessary long-distance transport of food. In both developing and industrialized countries, the situation is worsening as many farmers abandon farming and sell their land to large corporations.

In many countries, as a result of lobbying efforts, taxpayers contribute to food chain distortion with subsidies that allow the development of agribusiness to the detriment of local farmers.

A cornerstone of efforts should be environmental and health sensitivity. Use global tools wherever possible but develop local linkages to develop sustainable entities. Without these, agriculture will not flourish, since production is intertwined with farmers and the well-being of their families. Such matters as water purification and community health can be fostered, along with the agricultural innovations (seed selection, crop rotation, use of natural fertilizers and pesticides). In the process of seeking to enter the world market, local agriculture also will have to be equipped to confront, inter alia, political issues, energy stresses, water shortages and water management complexities and price volatility.

Candidates

The support system for agricultural cooperatives should be tightly integrated. Networks of cooperatives can reach individual farmers and assist them to contribute vitally (and profitably) to global food supply.

From where can such a support system emerge? Transnational banks and investment banks are both likely and unlikely candidates-likely, because they command the resources to put together such an undertaking; unlikely, because most are too closely wedded to corporate agribusiness.

A recent report by DB Climate Change Advisors (DBCCA), Deutsche Asset Management’s (DeAM) institutional climate change investment and research business echoes the opportunity:

… “long-term … the upward trend in agricultural prices will resume. The good news is that this should stimulate investment and will offer large investment opportunities across the agribusiness complex including, fertilizers, irrigation, mechanization, sustainable biofuels as well as management practices and infrastructure development.”

Other banking giants with substantial agricultural interests include Bank of America, Chase Manhattan Bank and Rabobank Nederland. Among these, perhaps, Rabobank would be the most likely candidate to develop such an innovative support system, given that it is farmer-owned and has a history of cooperation with and support for small and marginal farmers associations and grass root development and community organizations.

History

For five years, I served as chief executive officer of Greenbelt Consumer Services, Inc., at that time the second largest consumer cooperative in the U.S. During my tenure I had opportunity to meet, work with and observe a number of other cooperative leaders-both U.S. and international. In the process, I developed a sense of the power and strength of cooperatives, as well as both the limitations of “common bonds” and scalability.

“A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.”

Nowhere is a common bond stronger than in farming communities, where farmers share common economic and other problems. This common bond can serve as the foundation for forming and growing local and regional agricultural cooperatives.

Throughout history there have been cooperative efforts, including many in agriculture. The Babylonians practiced cooperative farming. In North America, clearing land to plant crops, threshing, beekeeping, and barn raisings all required cooperative efforts.

The modern cooperative structure is usually traced to the Rochdale Society of Equitable Pioneers, organized in 1844, which began as a cooperative store selling items such as flour and sugar to members but which quickly grew to include other enterprises. Among that cooperative’s governing rules were: democratic control by members, payment of limited interest on capital, and net margins distributed to members according to their patronage (i.e., not investment).  The Rochdale principles have emerged as a model for other cooperative efforts and distinguish cooperative from other business structures (such as the corporation).

Opportunity

rzepak2Given the right resources, new cooperatives in agriculture can compete effectively with agribusiness, while ameliorating many troubling aspects of social upheaval. While some new community-based agriculture cooperatives are springing up in many countries, they are unlikely to be sustainable without technological assistance and global reach.

Today, agribusiness dominates agricultural production worldwide. It has achieved this prominence through expert uses of agricultural science, technical and managerial knowhow, economies of scale, production, trade and logistics efficiencies and other practices perhaps less laudatory.

Successful farming has become a knowledge-intensive industry. Farmers need access to technical, market, financial, climatic, and regulatory information. As some experts have warned, the new information technologies can be used exclusively to expand the scope of agribusiness and increase its competitive advantages.

“Current advances in cyber-technology present technologically challenged countries in Africa with a major dilemma. Before now, the main challenge these countries faced was how to close the North-South technology gap. But now the challenge has shifted to a precarious level: how not to become irrelevant in the New World.”

The opportunity and challenge is to teach local farmers how to obtain, process and use such data to manage their farms. There is a wealth of information available globally, from government, public and private institutions. For example, monitoring crops during the growing season and estimating potential seasonal production are critically important for individual farmers, market development and indeed for global food security. Agricultural crop conditions can be assessed from satellite data, even for remote areas of developing countries. However, gaining knowledge about, accessing, integrating and using such information is challenging to farmers-particularly small-scale farmers.

This is where a service organization for agricultural cooperatives can find opportunity. With integrated information, training, microfinance and market and supply chain network and system, modern agricultural cooperatives can aggregate individual famers and assist them to compete with large-scale agribusiness. The result for farmers, farming communities and developing nations will be a larger (and sustainable) share of the agri-pie (so to speak).

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Endnotes

[i][i] Clark, Benjamin Michael, “The Returns and Volatility of Agribusiness Stocks: How Do They Measure Up To Non-Agribusiness Stocks?” Thesis submitted to the Graduate Faculty of the Louisiana State University and Agricultural and Mechanical College …The Department of Agricultural Economics and Agribusiness (2010). <http://etd.lsu.edu/docs/available/etd-12162009-112641/unrestricted/Clark_Thesis.pdf> accessed 2/21/10 9:46 PM.

Ironically, the consumer-led “organic food” movement in the U.S., which promised an alternative to corporate agribusiness, may not have achieved that goal. Vide Guthman, Julie. “Agrarian Dreams: The Paradox of Organic Farming in California” (California Studies in Critical Human Geography, 11), University of California Press (2004).  Guthman suggests that much organic farming has replicated what it set out to oppose.

Sendhil Mullainathan: “Solving social problems with a nudge.” <http://www.ted.com/talks/sendhil_mullainathan.html> accessed 2/20/10 11:45 AM.

For an expanded discussion, vide Leakey, Roger, Coordinating lead Author. “Global Report on the International Assessment of Agricultural Science and Technology for Development (IAASTD).” <http://www.sciencealert.com.au/opinions/20082603-17100.html>, accessed 2/20/10 12:21 PM.

E.g., International Centre for Agricultural Research in the Dry Areas (ICARDA) at Aleppo in Syria.

“The world’s gene banks are in a parlous state, as …’Safeguarding the future of US agriculture’ … published jointly by 
the US Department of Agriculture and the University of California makes clear. Of the 1,460 gene banks around the world, only 35 meet international standards for long-term storage. …The FAO … says that nearly one-fifth of the 5.4 million seeds stored in gene banks are degenerating. The US report … urge[d] … support [for] the 
Global Crop Diversity Trust. …
[pointing out that] a $260-million 
endowment is a small price to pay to conserve the world’s 
agricultural heritage and to secure the future food supply.” <http://www.agbioworld.org/newsletter_wm/index.php?caseid=archive&newsid=2371>, accessed 2/20/10 12:40 PM.

See, e.g., Norberg-Hodge, Helena, Todd Merrifield and Steven Gorelick. “Bringing the Food Economy Home: Local Alternatives to Global Agribusiness.” Kumarian Press (2002).

“Investing in Agriculture: Far-Reaching Challenge, Significant Opportunity: An Asset Management Perspective.” <http://www.investorideas.com/News/062509b.asp>, accessed 2/20/10 2:41 PM.

Vide “Rabobank Foundation announces 10m INR in funding for AOFG India to boost capacity building of regional associations of organic cotton farmers.” <http://www.rabobank.com/content/global/office_pages/Asia/India/news/2009/2009.08.11_Rabo_AOFG.jsp> accessed 2/22/10 12:48 PM.

1971-1975 inclusive.

International Cooperative Alliance. “Statement on the Cooperative Identity.” <http://www.ica.coop/coop/principles.html>, accessed 2/21/10 8:13 PM.

Vide, e.g., “Rochdale Pioneers Equitable Society,” at the National [U.K.] Co-operative Archive <http://archive.co-op.ac.uk/pioneers.htm>, accessed 2/22/10 11:06 AM.

Sonaike, S. Adefemi. “The Internet and the Dilemma of Africa’s Development.” Department of Communication, Central Connecticut State University, 1615 Stanley Street, New Britain, CT 06050, <USAsonaike5491@hotmail.com>

Liu, Zhong, W. Teng, S. Kempler, H. Rui and E. Ocampo. “DEVELOPING A GLOBAL AGRICULTURE INFORMATION SYSTEM.” GSFC Earth Sciences Data and Information Services Center Distributed Active Archive Center (DAAC) NASA/Goddard Space Flight Center…. <http://www.google.com/search?client=safari&rls=en&q=DEVELOPING+A+GLOBAL+AGRICULTURE+INFORMATION+SYSTEM+Zhong+Liu*&ie=UTF-8&oe=UTF-8>, accessed 2/21/10 8:20 PM.

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Comments

By Shayn McCallum on September 21st, 2010 at 2:11 am

This is a brilliant article. It seems to me to have captured the essence of sustainable practice, based on the right principles, for a better future for all of us. The problem is exceedingly urgent but these are the kinds of solutions that offer hope.
I wish Technology Development Inc all the very best in developing and promoting brilliant and timely solutions such as those proposed in the article above.

 

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