Enabling the Growth of Co-operatives in the Agricultural Economy

18 May 2015

In 2012-2013, the contribution of agriculture to GDP was 12 per cent or $155 billion (including all economic activities supporting farm production). Agricultural produce provides 93% of Australia’s daily domestic food supply, while agricultural producers are still able to export 60% of what they produce. Agriculture is a key and significant player in the economy with huge potential for growth. Within agriculture however, there is one business model in particular that could play an even greater role in the sector’s growth.

Co-operatives are businesses that are formed to benefit their members. The members have an equal say in what the business does and an equitable share in the profits. Their influence is felt worldwide. For example, Champagne is predominately produced by co-operatives in France while 90 per cent of Italian parmesan cheese is produced by dairy co-operative members.

Co-operatives have much to contribute

Agricultural co-operatives have a strong and proud history and demonstrate that they have much to contribute to the competitiveness and sustainability of agriculture in Australia. As well as providing a market for farmer members, most agricultural co-operatives, such as Co-operative Bulk Handling Ltd, operate bulk purchasing activities for members to reduce input costs. Co-operative Bulk Handing (CBD) in grain and Murray Goulburn Co-operative (dairy) each with revenue of $2.5 billion are also the largest two co-operatives in Australia by revenue in any sector.

The key role of co-operatives has recently been referenced in the Federal Government’s Agricultural Competitiveness Green Paper. In the paper, it is recognised that co-operatives bring much needed competitiveness and fairness from farm to fork. In the words of Barnaby Joyce, Federal Minister for Agriculture, “The most successful rural organisations in Australia are co-operatives. It allows people the capacity to reach further down the supply chain”.

Grain, dairy and fruit

Examples of large well know agricultural co-operatives include, CBH Group, Australia’s largest exporter of grain, shipping on average forty percent of Australia’s grain harvest every year and Devondale Murray Goulburn which processes a third of Australia’s milk supply and is our largest dairy exporter, exporting 336,000 tonnes of product in 2013. Norco Dairy Co-operative, consisting of 347 members on 225 farms, became the first Australian company to secure a deal to export fresh milk to China.

Smaller co-operatives also play a significant role. For example, the Oz Group packages 35 per cent of Australia’s blueberry crop and the Northern Co-operative Meat Company, which employs 1,100 people, is the largest employer in the NSW electorate of Page. The world’s largest exporter of rock lobster is Geraldton Fisherman’s Co-operative in WA.

Barriers to co-operative development

The barriers and opportunities facing agricultural co-operatives are diverse. Firstly, legislation covering co-operatives is decided by State and Territory governments, with federal rules also applicable on occasion. This has led to an inconsistent legislative framework nationally meaning co-operatives often suffer from duplicative regulatory requirements. This in turn is not only a financial and time impost on businesses, but also restricts free trade across states and territories hampering the local and national economy. To counter this, our sector calls on all States and Territories to adopt and commence the Co-operatives National Law to harmonise the rules and regulations nationally.

Although part of the Australian economy for decades, there is a widespread lack of knowledge about the sector and the benefits that come with it including the fact that co-operatives reinvest all their profits here in Australia. There is a need for greater awareness among the public, policymakers and professionals on the sector and for more focussed research on the value of our sector to agriculture. In this vein, government must ensure that the co-operative business model is integrated into mainstream higher education, especially in the fields of law, accounting, business and commerce.

Untapped resource

The contribution of co-operatives in the agriculture is substantial but still an untapped resource. With this in mind, the Federal Senate in March voted to hold an inquiry into the operation of co-operatives and mutuals in the Australian economy. This is a fantastic opportunity for agricultural co-operatives to put forward their stall and showcase the benefits of their business model to policymakers and the wider public. It is both the responsibility of governments and co-operatives themselves to ensure a more accommodating space for our sector in the agricultural economy. Once all of the above is achieved, then the true power of agricultural co-operatives will be realised.

Melina Morrison will be speaking about the ‘Opportunities presented by the co-operative business model’ at the upcoming Maximising Agribusiness Competitiveness Conference taking place in Sydney on June 30th – July 1st.